W.M. CONTRACTOR LTD formerly known as W.M. FOUNDATION COMPANY LTD v. CHAN SIU HUNG

HCCT 45/2022

[2025] HKCFI 6114

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO. 45 OF 2022

(TRANSFERRED FROM HIGH COURT ACTION NO. 1613 OF 2019)

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BETWEEN

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REASONS FOR DECISION

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1.  The trial of this action was fixed to be heard on 2 December 2025 with 4 days reserved. On 18 November 2025, the Plaintiff issued a summons seeking leave to discontinue the action. The Defendant did not object to the application to discontinue, but as the parties could not agree on the incidence of costs of the application and the action, they were directed to attend before this Court on 2 December 2025.

2.  On 2 December 2025, after hearing the parties’ submissions, I ordered that:

(1) HCCT 45 of 2022 be discontinued and the Plaintiff shall not commence proceedings in Hong Kong seeking the same or substantially the same relief against the Defendant; and

(2) the Plaintiff do pay the Defendant’s costs of the summons dated 18 November 2025 and of the entire action, which costs will be assessed on a gross sum basis by this Court on 5 Decsember 2025[1].

3.  These are the reasons for my decision.

THE FACTS

4.  The Plaintiff is a company that carries on the business of a construction contractor and is part of a group of companies headed by W.M Construction Limited (“WM Parent”). It appears that the WM Parent group undertook (inter alia) site foundation or formation works.

5.  The Defendant was a former employee of the Plaintiff and acted as its site agent until June or September 2014.[2]

6.  There is another company that features in this case, Ming Lee Foundation Company Limited (“Ming Lee”), which during the time when the Defendant was employed by the Plaintiff, was engaged by the Plaintiff from time to time as its subcontractor. After the Defendant left the Plaintiff’s employ, he became employed by Ming Lee. It is common ground that the Defendant left Ming Lee’s employ on 31 December 2022.

7.  This action was commenced by the Plaintiff against the Defendant in 2019, on essentially two causes of action:

(1) First, for breach of employment contract, in that the Defendant was alleged to have obtained the Plaintiff’s confidential information and had used it without the Plaintiff’s authorization, namely the Defendant had in his possession a letter attaching an invoice issued by the Plaintiff to another subcontractor, Chuang’s Consortium International Limited (“Chuang’s”), dated 1 June 2017 (“2017 Documents”), which he forwarded to Chuang’s by email on 22 July 2019 to chase Chuang’s to make payment to the Plaintiff.

(2) Second, for breach of fiduciary duties and/or unlawful act conspiracy in combination with Ming Lee in that whilst employed as site agent of the Plaintiff, the Defendant had (i) authorized release of certified interim payments to Ming Lee (qua the Plaintiff’s subcontractor) before the Plaintiff itself got paid by the employer, and (ii) certified interim payments for variation works done by Ming Lee which the architect ultimately refused to certify for the Plaintiff. The equitable compensation or damages for this claim was quantified as HK$1,536,340.80.

8.  In addition, there were parallel proceedings commenced by the Plaintiff against Ming Lee, namely DCCJ 4419/2018 and DCCJ 948/2019, which were transferred to HCA 46 and 1484/2019, were then consolidated, and thereafter transferred to HCCT 17/2022 (“HCCT17”). Ming Lee counterclaimed against the Plaintiff and WM Parent in HCCT17. Thus, the parties in HCCT17 were the Plaintiff, WM Paret and Ming Lee.

9.  It is the Plaintiff’s own case that the claims it advanced in HCCT17 included (inter alia) the HK$1,536,340.80 referred to in paragraph 7(2) above and overlapped with it completely.

10.  HCCT17 was settled on 9 February 2024, by Ming Lee accepting a sanctioned payment of HK$9,300,000 from the Plaintiff and WM Parent, which the Plaintiff explains was calculated after setting off the HK$1,536,340.80 in paragraph 9 above.

11.  I am told that there were other proceedings between the Plaintiff (or the Plaintiff’s related companies) and Ming Lee, including DCCJ 1038/2023, although I have not been provided with any information beyond that.

12.  Coming back to this action:

(1) On 2 July 2024, the Plaintiff made a sanctioned offer to the Defendant, which was not accepted.

(2) On 18 June 2025, the Plaintiff’s director, Kwok Tung Keung (“Mr Kwok”), sent a WhatsApp message to the general manager of Ming Lee, Ling Chi Fai (“Mr Ling”), proposing that they should stop fighting in court and resolve all outstanding problems, saying that it was the Plaintiff’s “useless” lawyers who got them into fighting.

(3) In response, Mr Ling said he would arrange a time with Mr Kwok, and indicated that Ming Lee had incurred HK$1.6 million of legal costs for the outstanding legal battles, and there was also the issue of reputational damage to the Defendant.

(4) On 7 July 2025, Mr Ling followed up with Mr Kwok that he had already spoke to the Plaintiff’s former solicitors, the consent summons needed to be signed, and time was of the essence since they wanted to bundle up two consent summons and the parties were due to file opening submissions in DCCJ 1038/2023 on that day. The rest of the messages on that day suggested that the consent summonses had been signed.

(5) Thereafter, on 18 August 2025, a representative of the Plaintiff sent a WhatsApp message to the Plaintiff’s former solicitors inquiring with progress on the Defendant’s case (i.e. this action).

(6) On 29 August 2025, the Plaintiff’s former solicitors sent a “without prejudice save as to costs” letter to the Defendant’s solicitors stating they were instructed by the Plaintiff that “the parties have reached a settlement agreement where the Plaintiff would discontinue the captioned action against the Defendant with no order as to costs of the action”.

(7) It was clear that such assertion was not accepted by the Defendant; his solicitors wrote back to the Plaintiff on 16 October 2025 making a Calderbank offer to settle the claim upon the Plaintiff’s payment of a substantial sum and costs of the whole action.

(8) On 22 October 2025, the pre-trial review of this action took place before Deputy High Court Judge Grace Chow. In the checklist filed on behalf of the Plaintiff, the Plaintiff confirmed that the trial dates of 2 to 5 December 2025 continued to stand. The draft of that checklist (inter alia) was sent to the Plaintiff (including Mr Kwok) by the Plaintiff’s former solicitors on 18 October 2025, who expressed his apology to the Plaintiff for “[his] poor management and conduct of this action leading to the difficult and urgent situation”.

(9) On 7 November 2025, the current solicitors for the Plaintiff came on board, and wrote to the Defendant’s solicitors that (a) the Plaintiff has already successfully recovered its loss and damage from the Defendant in respect of prayers (iii) to (v) in the Re-Amended Statement of Claim herein (namely, the second cause of action in paragraph 7(2) above) and the only remaining claims are prayers (i) and (ii) (namely, the first cause action in paragraph 7(1) above); (b) the Plaintiff would seek leave to discontinue the action; and (c) the Defendant should pay the Plaintiff costs of this action up to 9 February 2024, thereafter by the Plaintiff to the Defendant.

(10) That costs proposal was rejected; hence the question of costs falls to be determined by this Court.

APPLICABLE PRINCIPLES

13.  There is no dispute between the parties on the applicable principles. Under Order 21, rule 3 of the Rules of the High Court, the court has a wide discretion in granting leave to discontinue an action to impose terms as to costs.

14.  The starting point is that the discontinuing or withdrawing party will be required to pay the costs of the other party. The burden of persuading the court to depart from the general rule rests on the party who seeks to discontinue or withdraw. Good reason must be shown.

15.  If the matter in dispute between the parties has become academic, this may be a reason for, though it does not of itself justify, departure from the aforesaid starting point.

16.  In such a case, the court has a wide discretion on how to approach the issue of liability to inform its decision on costs, the ultimate objective is to do justice between the parties without incurring unnecessary court time and consequently additional costs. Thus, in a simple case where the issue of liability is clear on the face of the pleadings or existing affidavit materials already filed, the court can determine the issue of costs without receiving further evidence; where the issue of liability is not so clear, the court may direct evidence to be filed and the witnesses be cross-examined; and where it is impossible for court to say what the likely outcome would be on the existing materials, the court may, in appropriate circumstances, make no order as to costs.

ANALYSIS

17.  In this case, Mr Tommy Cheung, counsel for the Plaintiff, fairly accepted that the starting point is that the Plaintiff has to pay costs. He advanced two points as constituting good reason to justify a departure therefrom.

18.  First, he submitted that a settlement agreement had been reached between the Plaintiff and the Defendant on or after 18 June 2025, alternatively the parties had conducted themselves in a such way as to indicate they were both moving towards a settlement. He submitted that the Court should take these into account and direct that there be no order as to costs.

19.  It is difficult to see, in light of the chronology set out in paragraph 12 above (based on contemporaneous documents and not disputed by the Plaintiff), how it could be said that a settlement had been reached between the Plaintiff and the Defendant.

(1) The only direct communication was between the Plaintiff and Ming Lee, and while the Defendant’s name was mentioned by Mr Ling of Ming Lee, it is common ground that by then the Defendant had already left Ming Lee and no factual basis has been identified as to how it can be said that Ming Lee or Mr Ling had authority to represent the Defendant.

(2) On the other hand, the communication between solicitors for the Plaintiff and the Defendant was clear that the Defendant denied having settled with the Plainitff, and made his own proposal as to settlement terms. Those terms were never agreed to by the Plaintiff.

(3) In any event, it is doubtful that any settlement agreement had been reached between Mr Kwok and Mr Ling in June and July 2025 (neither of whom is a deponent to the affirmation evidence directed by this Court and nowhere is any suggestion that the deponent has been informed by either of them as to the terms of any orally concluded settlement agreement), which were not embodied in the consent summonses referred to in the exchange on 7 July 2025, which consent summonses were clearly not referable to this action.

20.  Nor do I see how the parties had engaged in some settlement discussions (see paragraph 12(7) above) would constitute of itself a good reason to depart from the starting point. The fact remains that no settlement has been reached. The Plaintiff has not suggested (and for the avoidance of doubt I do not see any basis to suggest) that the Defendant had acted unreasonably in conducting the settlement discussions.

21.  Second, Mr Cheung submitted that the nature of this dispute, being a construction-related matter and whether or not Ming Lee ought to have been certified for payment, is difficult for the Court to come to a clear view on liability, such that the appropriate course should be to order no order as to costs.

22.  I do not accept this submission.

(1) As can be seen from paragraphs 7 and 12(9) above, the Plaintiff advances two causes of action against the Defendant, and accepts that the second cause of action (breach of fiduciary duty and/or unlawful act conspiracy) completely overlaps with HCCT17 and it has already successfully recovered the same in the settlement thereunder.

(2) The only cause of action left is that of breach of employment contract by keeping and using alleged confidential information belonging to the Plaintiff, namely the 2017 Documents. Prayers (i) and (ii) in the Re-Amended Statement of Claim are for an injunction to restrain the Defendant from using the Plaintiff’s confidential information and for the Defendant to disclose and deliver up the Plaintiff’s confidential information.

(3) This cause of action, as pleaded, is premised solely on the Defendant being an employee of the Plaintiff.

(4) However, the 2017 Documents came into existence only in 2017, long after the Defendant ceased to be employed by the Plaintiff (which was 30 September 2014, on the Plaintiff’s own case). As such, it is difficult to see how it can be said that by 2017 (or 2019, when the 2017 Documents were said to have been used), the Defendant would owe the Plaintiff any duty qua employee.

(5) For completeness, there was no plea of a free-standing claim on confidentiality (the 2017 Documents were by their nature confidential; they were imparted to the Defendant in circumstances of confidentiality; the Defendant knew that they were confidential).

(6) Thus, the first cause of action is demurrable and liable to be struck out.

23.  In the premises, I find that there is no good reason to depart from the starting point that the Plaintiff as the discontinuing party should bear the costs of the Defendant.