WING HAN TRADING CO. LTD. v. TANG YAN KIT AND ANOTHER

[When the parties want the court to make a consent order to which the provisions of order 45 rule 5A apply, the issue of a "consent summons" and the placing of such a summons before the master or a judge is unnecessary. All that is required is the presentation of the consent order to the Registrar for entry, in a form endorsed by the solicitors acting for the parties. The present practice is wrong and should be. discontinued]

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is the plaintiff's appeal from the refusal of Master Jones, on 23rd October 1990, to grant it leave to amend its Statement of Claim.

2. The background is as follows.

3. The plaintiff, an export and import trader, employed the 1st defendant as its merchandising manager. On 31st May 1988, his employment terminated. He has now entered into competition with the plaintiff through the medium of the 2nd defendant, a company under his control. The plaintiff says that while the lst defendant was still employed by the plaintiff he induced one of the plaintiff's customers, an American company called Oriental trading Co. Inc. ("OTC") to deal with him instead and that he has diverted OTC's custom to himself. The plaintiff has instituted this action against the defendants accordingly. The plaintiff's claim is a claim for damages for breach of contract, the alleged breach being a breach of the 1st defendant's duty of fidelity to his employer whilst still in its employment.

4. The 1st defendant has admitted the alleged dealings with OTC. He says, however, that he was entitled to deal with OTC (which did not want to continue to deal further with the plaintiff in any event) and committed no wrong in doing so. And he says that, if he is liable for damages, these are limited to the damage done to the plaintiff because of his "pre-termination" dealings with OTC.

5. There were some interlocutory skirmishes, and some solicitors' correspondence; and on 14th March 1990, an order was made on the application of the solicitors for the plaintiff and of the solicitors for the defendants following an arrangement which had been made between them in the correspondence. The order granted leave to the plaintiff to enter judgment against the defendants for damages to be assessed, and provided for the costs to date. The order recited, correctly, that it was made by consent. I do not, however, find it possible to spell out of the correspondence a real contract between the parties. Rather, as it seems to me, it evidences that the defendants were prepared to submit to judgment being entered against them for damages to be assessed. The "consent order" was accordingly an order of a character similar to that which the Court of Appeal in England and Wales had to consider in Siebe Gorman and Co. Ltd v. Pneupac Ltd [1982]1 W.L.R. 185; it was simply an order which, to save time and costs, was made without objection.

6. The plaintiff says that, since the date of this order, it has discovered facts which would support a claim against the defendants for exemplary damages. It now applies for leave to amend its Statement of Claim to plead these facts and to claim exemplary damages accordingly. Against this background, should it be permitted to do so?

7. The court has power, at any stage of the proceedings, to allow any party to amend its pleading : see Order 20, rule 5(17 of the Rules of the Supreme Court. It is unlikely to exercise this power after entry of final judgment; but there seems to be no good reason why, assuming that in the interests of justice leave to amend ought otherwise to be given, an application for leave to amend ought to be refused in a case in which there has been no entry of final judgment, nor even of interlocutory judgment, but only an order made without objection giving leave to enter an interlocutory judgment for damages to be assessed.

8. The facts on which the plaintiff wishes to rely in support of its claim for exemplary damages must be specifically pleaded : see Order 18, rule 8(3). Does justice require that it now be given leave to do so?

9. If the facts which the plaintiff now wishes to plead were known to it when it consented to the order of 14th March 1990, it will be estopped by reason of that consent from now asserting a claim for exemplary damages. On that basis, it had a choice between consenting to an order based on a statement of claim asserting no such claim, or, rather than consenting to such an order, to apply for leave to amend its statement of claim to assert its claim for exemplary damages. Having elected to consent to the order, it could not go back on that election.

10. If the facts which the plaintiff now wishes to plead were not known to it when it consented to the order of. 14th March 1990, it cannot be estopped by reason of that consent from now asserting the claim for exemplary damages. The consent operated in effect as a release from any claim for exemplary damages; but a release is only effective in relation to matters known at the date of the release to the party giving it.

11. The question whether the facts which the plaintiff now wishes to plead were or were not known to the plaintiff when it consented to the order of 14th March 1990 is not a question I can decide now. The plaintiff accepts that, if it is to be granted leave to amend its statement of Claim to plead the facts on which it now wishes to rely, it must submit to an order setting aside the consent order, so that the action. can proceed to trial. This issue would then fall to be dealt with as one of the issues in the action.

12. I conclude that there are materials before me on which I would be entitled, in the interests of justice, to exercise in favour of the plaintiff my discretion to grant or refuse leave to make this amendment. If I grant leave to amend as asked, the defendants will be able to contend that the plaintiff should not be held entitled to exemplary damages, among other reasons because of the estoppel which they may be able to assert against the plaintiff. On the other hand, if I refuse leave to amend, the plaintiff will be shut out altogether from a claim which it says it did not, and perhaps could not, have known that it had when it consented to the order of 14th March 1990.

13. But, that said, there are cogent reasons why, again in the interests of justice, I should exercise my discretion in favour of the defendants. First, there is a very important public interest in the finality of litigation. The defendants were prepared to submit and did submit to an order under which, on the basis of the allegations then contained in the Statement of Claim, the plaintiff was at liberty to enter judgment against them for damages to be assessed. If the plaintiff is now, in effect, given leave to reopen the whole matter and claim exemplary damages, the defendants will be deprived of the benefit of the arrangement they thought they were making when 9 months ago, they agreed to submit to the order of 14th March 1990 and will have legitimate cause for complaining that that would be to do them an injustice. Secondly, the claim for exemplary damages for breach of contract, that is to say, the alleged breach of the 1st defendant's contractual duty of fidelity owed by him as an employee to his employor, is an entirely novel claim I know of no breach of contract case, either in this or any other field, in which exemplary damages have been awarded to plaintiff, and none was cited to me. There are, I know, suggestions in some of the textbooks that it maybe possible in certain circumstances for a claim for exemplary damages for breach of contract to succeed. But no such claim has ever been advanced, so far as I am aware, and certainly no such claim has ever succeeded; and I regard the plaintiff's chances of success in this claim, if it is allowed to assert it, as remote in the extreme.

14. Furthermore, although this may not be a case of election in the true sense (since that can arise only where the party said to have made the election is aware of the true facts) it is the general rule that where a party to litigation represents to the other party litigant his intention to adopt one of two alternative and inconsistent positions, with the result that the latter is thereby encouraged to adopt or persevere in a line of conduct which he otherwise would have abandoned or modified, the first party is estopped as against his antagonist from resorting afterwards to the course of attitude which, of his free choice, he has waived or discarded : see Spence Bower arid Turner, Estoppel by Representation, 3rd Edition, at p.333, paragraph 322. In the present case, the defendants may well have decided to object to an order in the form of the order made on the 14th March 1990 to which they in fact submitted, had they known that such an order would involve them in an assessment of exemplary damages.

15. Weighing these competing considerations, I have come to the conclusion that the scales of justice come down in favour of the defendants. There is no doubt that I have a discretion to grant or refuse leave to make this amendment and the interests of justice will be, in my judgment, better served, by a decision to refuse it. For these reasons, I propose to dismiss this appeal.

16. Before parting with the case, I should draw attention to a point of practice which is consistently misapprehended by practitioners in Hong Kong. It concerns the consent order of 14th March 1990. This was obtained as often happens by the plaintiff taking out what is called a "consent summons" seeking the order required; and placing that before a master (in this case, Master Woolley) for him to make an order in the terms of the summons; the practice is wrong and involves a quite unnecessary waste of money and of judicial time. The relevant rule is Order 42 rule 5A. Under the provisions of this rule, a party who wishes to obtain a consent order in a case to which the rule applies may do so simply by presenting it to the Registrar for entry : see rule 5A(1) and rule 5(2). It must be endorsed by the solicitors for the parties , see rule 5A(3). But it is quite unnecessary to place it before any judge or master. I have drawn the attention of practitioners to the proper practice on other occasions, but so far, without result. I wish it to be known that in future I shall myself refuse to make any order by consent which could equally well have been dealt with by the procedure which I have outlined. (Reference may usefully be made to the notes to Order 45, rule 5A in the Supreme Court Practice, 1991, particularly at 42/5A/3.) I have delivered this judgment in chambers, but I shall release it for publication, in the hope that its contents as to this point of practice may reach the profession.

17. As I have said, I will dismiss this appeal. The plaintiff must pay the defendants' costs of the appeal.