TOTAL LUBRICANTS HONG KONG LTD AND OTHERS v. CHRISTOPHE DE LA CROPTE DE CHANTERAC AND OTHERS

FAMV No. 41 of 2013

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 41 OF 2013 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM CACV NO. 37 OF 2012)

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REASONS FOR DETERMINATION

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Mr Justice Fok PJ :

1. In this application for leave to appeal, the two applicants were 5^th and 6^th defendants (D5 and D6 respectively) in the underlying action.[1]  At the conclusion of the hearing, we dismissed the application for leave without calling on the respondents (Ps in the underlying action), indicating that our reasons would be handed down in due course.  These are our reasons.

The application for leave to appeal

2. The claim arises out of the activities of the 1^st to 4^th defendants (respectively D1 to D4), former officers and employees of the plaintiffs (Ps), who are alleged to have defected and launched, in 2008, D5 (a subsidiary of D6) as a competitor.  The original claims were made against D1 to D4 for breach of contractual, fiduciary and equitable duties.

3. Ps applied to amend their statement of claim to plead a cause of action against D5 and D6 of unlawful means conspiracy.  That plea and the proposed plea in the amended statement of claim were struck out by a judgment of J. Poon J dated 15 December 2009 Judgment (the 2009 Judgment).

4. There was a dispute about the effect of that judgment and so the Judge ruled in a judgment dated 24 February 2010 (the 2010 Judgment) that all the claims against D5 and D6 were struck out so the action against them was dismissed.[2]

5. Ps subsequently sought to raise a properly formulated plea of unlawful means conspiracy against D5 and D6 by way of re-amended statement of claim.  By his Judgment dated 7 February 2012 (the 2012 Judgment), the Judge granted leave to re-amend.  He did so notwithstanding that he had ordered, by the 2010 judgment, that the action against D5 and D6 was dismissed.

6. D5 and D6 appealed from the 2012 Judgment to the Court of Appeal on the grounds that the conspiracy claim was the subject of cause of action estoppel and was an abuse and/or the judge was functus officio.  The Court of Appeal held[3] that there was no cause of action estoppel because there was no final judgment on the merits of the claim in conspiracy and no abuse.[4]  For the same reason, the CA held that D5 and D6’s functus officio objection also failed.[5]

7. By its further judgment dated 13 September 2013, the Court of Appeal refused leave to appeal.  The application was made on the basis that the appeal involved two questions of great general or public importance, namely (in summary): first, whether the dismissal of an action against a defendant on an application to strike out the statement of claim confers a right not to be sued again in the same action on the basis of res judicata; secondly, whether in those circumstances the Court of First Instance is functus officio in relation to an application to re-introduce in that same dismissed action a plea of the same cause of action against the same defendant.

8. The application to this Committee for leave to appeal was renewed on the same basis.

Appeal not reasonably arguable

9. In our view, the Court of Appeal was entirely correct to conclude that there was no res judicata in the present case.  We did not accept Mr Barlow’s submission that the Court of Appeal confused the two classes of res judicata, namely cause of action estoppel and issue estoppel, and reduced them to the latter category only.  The Court of Appeal applied well-trodden law and rightly focused on the nature and effect of the 2010 Judgment.[6] All that the earlier judgment had determined was that the original formulations of the conspiracy plea were bad.  That was a different issue to the issue determined in the 2012 judgment, namely whether the new pleading was sufficient.  Plainly, there was no final judgment on the merits of the claim against D5 and D6 for conspiracy; this being an essential element of the cause of action estoppel relied on by Ps.

10. The decision that there was no abuse (res judicata in the wider Henderson v Henderson sense) was an exercise of judicial discretion applying well-established principles and, in any event, cannot be said to be plainly wrong.

11. Similarly, we were satisfied that there was no reasonably arguable appeal against the Court of Appeal’s conclusion, again applying well-established legal principles, that the Judge was not functus officio in relation to the application to re-amend the pleading to advance a properly formulated plea of conspiracy against D5 and D6.

Mere procedural irregularity does not assist D5 and D6

12. A question that was not raised by Ps, either before the courts below or before this Committee, was whether, where an action has been dismissed against a defendant, it is open to a plaintiff to put forward a further pleading against that defendant in the same action with the effect of bringing that defendant back into the action as a party, or whether such a claim can only be made in a fresh action.

13. This question arises because, by the 2010 Judgment, in striking out the proposed amended statement of claim, J. Poon J dismissed the action.  He did not take the course of giving Ps an opportunity to reformulate their pleading to put forward a viable claim for conspiracy, as he might have done.  That being the case, the application to re-amend the statement of claim involved an application to bring D5 and D6 back into an action which had already been dismissed against them.

14. In those circumstances, it might have been argued by D5 and D6 that the conspiracy claim against them could only have been made in a new action by way of fresh writ, which Ps had not issued.  Ps might then have sought to argue that the issue of any such fresh writ would be an abuse, relying on res judicata in the wider Henderson v Henderson sense.

15. However, the objection based on the Judge’s dismissal of the 2010 Judgment would have been a purely technical one and could have been overcome quite simply either by Ps’ issue of a fresh writ containing the viable conspiracy pleading against D5 and D6 which could have been consolidated with the underlying action, or by Ps’ inclusion in the re-amendment application of an application to add D5 and D6 back into the underlying action as additional parties pursuant to Order 15 rule 6 of the Rules of the High Court (Cap.4A) (the RHC).

16. Of the two alternatives, the latter would have been procedurally the most straightforward and would have been entirely consistent with the underlying objectives of the Civil Justice Reform, specifically the increase in the cost-effectiveness of the proceedings as well as the promotion of a sense of reasonable proportion and procedural economy in the conduct of proceedings.[7] Under Order 2 rule 1(1) of the RHC, a failure to comply with the requirements of the rules in beginning any proceedings or in connection with them is to be treated as an irregularity and shall not nullify the proceedings.  Further, under Order 2 rule 1(2) of the RHC, where there has been an irregularity as mentioned in rule 1(1), the court may exercise powers under the rules to allow such amendments to be made or to make such order dealing with the proceedings as it thinks fit.  The obvious solution to the technical objection of D5 and D6 would have been to treat the re-amendment application as including an application to add D5 and D6 back into the underlying action as additional parties and to allow such an application and make such joinder order.

17. There would have been no res judicata in the wider sense in respect of the fresh writ or the application to join D5 and D6 as additional parties for the same reasons which led the Judge and Court of Appeal to reach the conclusion that there was no such abuse in the 2012 Judgment.  In any event, Ps’ failure to issue a fresh writ would only have gone to the question of costs on the application to re-amend the statement of claim.

18. For these reasons, there is no substance in the technical objection that might have been, but was not, taken by D5 and D6 either below or before this Committee.

Conclusion

19. For these reasons, we dismissed the application for leave to appeal.