WONG KAR GEE MIMI v. APPLIED DEVELOPMENT HOLDINGS LTD

HCA 424/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 424 OF 2011

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BETWEEN

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DECISION

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1.  This is the application of the plaintiff by way of summons dated 20 May 2013 to restore the plaintiff’s claim under Order 25 rule 1C(3) RHC.

2.  Plaintiff’s claim was provisionally struck out by Register K W Lung on 20 February 2013 under Order 25 rule 1C(1) as she failed to appear at the 2^nd CMC.

Legal principles and authorities

3.  Order 25 rule 1C RHC reads: -

“……

(3) Where the Court has provisionally struck out a claim or counterclaim under paragraph (1) or (2), the plaintiff or the defendant may, before the expiry of 3 months from the date of the case management conference or pre-trial review, as the case may be, apply to the Court for restoration of the claim or counterclaim.

(4) The Court may restore the claim or counterclaim subject to such conditions as it thinks fit or refuse to restore it.

(5) The Court shall not restore the claim or counterclaim unless good reasons have been shown to the satisfaction of the Court.

……”

4.  Both parties refer this court to the case of World Chinese Business Investment Foundation Ltd & Ors v Shine Rainbow Marketing Ltd & Ors [2010] 2 HKC 294 where the learned Madam Registrar Au-Yeung (as she then was) said that “the Court will not lightly accede to the request of a defaulting party to restore an action without sufficient explanation and consideration of the merits.  This is to maintain the integrity of the timetable laid down by the Court or the rules and to ensure that a matter without merits should not continue to haunt an innocent party”.

5.  A 3-stage test was laid down in that case, that “a plaintiff should first meet the threshold of showing ‘good reasons’ and then the Court will consider whether, as a matter of discretion, it should grant the restoration. If it decides to restore the claim, the Court may consider conditions to be imposed.

Discussion

6.  It is not in dispute that: -

(a) the plaintiff acted in person in the present case at the time of the 2^nd CMC, and in fact since 3 January 2013 in place of her former solicitors;

(b) on 13 March 2013, plaintiff made enquiries with the defendant’s solicitors on progress of the present action and was informed that her claim was provisionally struck out on 20 February 2013 due to her failure to attend the 2^nd CMC; and

(c) that the defendant’s solicitors served the sealed order of 20 February 2013 on the plaintiff on 30 April 2013, ie 2 months and 10 days after the 2^nd CMC.

Good reasons

7.  In seeking to restore her claim, plaintiff admitted that when she chose to act in person in this action, in place of her former solicitors, her former solicitors had sent her a letter reminding her to settle their bills of costs and to comply with the order of Registrar Lung made at the 1^st CMC on 12 September 2012.  The order of 12 September 2012 stated that the date of the 2^nd CMC would be 20 February 2013.

8.  In her affirmations dated 20 May 2013 and 13 August 2013 filed in support of her present application, the plaintiff said she was engaged, at the material times, in numerous sets of court proceedings with the defendant in the present action and that of her former husband.

9.  She further produced a duplicate medical receipt dated 5 May 2013 which evidenced that on 22 February 2013, she had received medical consultation regarding ear inflammation.

10.  In fact in early January 2013, plaintiff said she was dissatisfied with the way the former solicitors conducted the other actions, ie HCMP 243/2011, HCMP 522/2011 and HCA 150/2013.  She also challenged their bills of costs.  The former solicitors commenced action against the plaintiff for payment of their bills of costs in January 2013 and the plaintiff had therefore instructed her present firm of solicitors to apply for a stay of the action pending taxation of the bills.  Lists of objections was filed on her behalf on 5 February 2013 and 20 February 2013.

11.  Mr Lawrence Ngai, counsel for the plaintiff that the plaintiff was also not advised of the serious consequence for not attending the 2^nd CMC.

12.  The plaintiff is a lady of 65 years old and according to paragraph 22 of her affirmation, she had health problems such as sleep apnea, infection of ear and high blood pressure.  She said having to handle several legal battles with the former husband and companies controlled by him had exhausted her.

13.  It was submitted that she was both mentally and physically very much exhausted and under these conditions, she had due to inadvertence, failed to attend the 2^nd CMC, which had slipped her attention.

14.  The defendant objected to such explanation of the plaintiff.  They said the plaintiff was able to go to the States for 10 days shortly before the 2^nd CMC and had also attended an interview, the same was published shortly before the 2^nd CMC.  They also threw doubt on the duplicate medical receipt and the physical as well as mental condition of the plaintiff as alleged.

15.  There is no evidence which indicates that she purposely not attend the 2^nd CMC.  In fact, there is no evidence that plaintiff had not been complying with court order in the past.  She had proceeded with the claim diligently and had attended the 1^st CMC.  Being engaged in various sets of litigation, including that with the one’s former solicitors clearly posed extreme pressure on a litigant.

16.  I am satisfied the explanation given by the plaintiff are “good reasons” in the circumstances as required under Order 25 rule 1C(5) RHC.

Exercise of discretion

17.  Having established “good reasons” for her failure to attend the 2^nd CMC, the court still needs to consider whether should exercise its discretion to restore the case.

18.  Mr R McLeish, counsel for the defendant said the plaintiff had three claims in the present action as pleaded in the Amended Statement of Claim dated 19 September 2012.

19.  He said plaintiff’s first claim is based on the allegation that while she held the positions of executive director and chairman of defendant from 31 May 2005 to 10 June 2010, she was an employee of defendant under an “implied contract of employment”.

20.  Plaintiff alleged defendant breached this alleged implied contract withholding payments due to her from October 2008, in respect of which she claims damages for the part not allegedly paid at all and interest for all alleged late payments at the rate of 10% per annum (based on another alleged agreement), alternatively 8% under section 25A of the Employment Ordinance (Cap 57) (the “Ordinance”).

21.  The pleaded case of the plaintiff was, inter alia, that the remuneration by the defendant to the plaintiff was consistently reported as “salaries and other benefits” in the defendant’s annual reports and that the plaintiff was charged salaries tax by the Inland Revenue Department.

22.  Defendant admitted that the annual reports of the defendant did state “salaries and other benefits”.

23.  As for the plaintiff’s pleaded case that she was charged salaries tax, the defendant’s stance is a non-admission.  It is submitted on behalf of the plaintiff that in fact a number of documents disclosed in the plaintiff’s list of documents support plaintiff’s case and therefore plaintiff does have a reasonable prospect of success in pursuing this claim.

24.  As for plaintiff’s claim on interest at 10% per annum, based on an oral agreement, the plaintiff says the pleaded case was evidenced by an email dated 25 September 2008, the existence of which is admitted by the defendant though the defendant pleaded that the agreement was not reached and that the same was only a proposal and there was no approval from the board of directors for its implementation.

25.  It is submitted by the plaintiff that the witness statements of both witnesses of the defendant are silent on this point.

26.  Further, Mr Ngai for the plaintiff submitted that defendant admitted that it did withhold payments from the plaintiff for period since October 2008 onwards and that on or about 11 August 2010, the defendant paid a sum of over HK$3 million to the plaintiff, being (allegedly) directors’ fees due to the plaintiff.

27.  Coming to the defendant’s submission that even if there was a contract of employment, which defendant denied, the defendant is fully entitled to terminate the same with immediate effect pursuant to section 9 of the Ordinance and/or common law in the case of employment contract because the plaintiff had abused her position as chairman and executive of the defendant by writing 2 letters purportedly on behalf of the defendant and as chairman in support of the visa applications of her dancing partner to accompany her on private trips.  I have reservations that this conduct alone was such as to warrant summary dismissal.

28.  Plaintiff’s second claim is for alleged non-payment of fees while she was a non-executive director of defendant from 10 June 2010 to 14 January 2011 in the total sum of HK$60,000.

29.  Defendant admits plaintiff was its non-executive director during the foregoing period, but denies liability for the sum claimed.

30.  Plaintiff’s third claim is for alleged breach of a so-called reimbursement agreement which she claims was made orally between her and her former husband, Mr Raymond Hung, “through” a member of defendant’s accounting staff.

31.  Plaintiff says that pursuant to this alleged oral reimbursement agreement she agreed to pay the salaries and related expenses of two employees of the Incorporated Owners of Severn Villa on behalf of SVL, the owner of 4 units at Severn Villa, and that defendant (the holding company of SVL) would reimburse her.

32.  Plaintiff alleged that, in breach of the alleged oral reimbursement agreement, defendant has failed to reimburse her the sum HK$313,690.81.  Later, plaintiff reduced the amount by 50% to HK$156,845.41, because under her claim for breach of the employment contract, she has already claimed such payments allegedly made in respect of the two units.

33.  Defendant accepts that SVL was liable to pay its pro-rata share (in respect of its 4 units and related property) the fees levied by the Incorporated Owners of Severn Villa for the management of the same.

34.  Defendant denied however that such expenses would include the salaries and related expenses of two employees of the Incorporated Owners, but even assuming the same formed overall expenses incurred by Incorporated Owners in managing Severn Villa, SVL would have been liable to pay only a pro-rata share of the same and not the whole of the salaries and related expenses of the two alleged employees.

35.  Although defendant said that alleged oral reimbursement agreement is inconsistent with plaintiff’s case that she was entitled to reimbursement of the management fees due to the Incorporated Owners in relation to Units 1A and 1B (and their related properties) under her alleged implied contract of employment, now that the plaintiff had reduced the original claim amount by 50%, the point is no longer a valid one.

36.  As for the issue estoppel point raised by the defendant, relying on paragraph 17 of the ruling of late Deputy High Court Judge Carlson in the consolidated action HCMP 522/2011, although this Court does not have the benefit of reading the pleadings of the case, the learned Judge had in paragraph 10 of the ruling set out the background of HCMP 243/2011 and HCMP 522/2011, which set out that initially the plaintiff claimed beneficial interest in the property at Severn Road and had later conceded to judgment against her, vacating from the property.

37.  The late learned judge described the removal of the Plaintiff from directorship as “valid and effective”.  This passing comment in my view at most amounts to an obiter and is not a finding that the removal was not wrongful. Issue estoppel does not arise here.

38.  Further, since the ruling on 22 May 2012, the defendant did not seek to amend his pleadings to include the issue estoppel point in their defence.

39.  Considering the different heads of plaintiff’s claim, and the submissions of the parties, there clearly is reasonable prospect of success in plaintiff’s claims.

40.  Defendant said they will suffer prejudice if the claim is restored as recovery of costs awarded to it would be delayed and further costs will be incurred which it may be unable to recover, I do not find sufficient basis for such submission.

41.  In fact, as pointed out by Mr Ngai, the defendant in their 2^nd Listing questionnaire had admitted the present case was not ready for setting down but rather the defendant intended to apply for transfer of DCCJ 445/2012 and consolidation of DCCJ 445/2012 and the present action.

42.  Further for reasons explained, there also appears to be some delay in the service of Registrar Lung’s order of 20 February 2013 on the plaintiff.  In fact the present application of the plaintiff, though filed at the eleventh hour, is made within 3 weeks after service of the order.

Conclusion

43.  It is noted that the plaintiff’s claim has been pursued without problems in the past, discovery, exchange of witness statements, amendments of pleadings etc had taken place.  To deny the plaintiff’s day in court because she had failed to attend the CMC and considering the merits of her case, whilst recognizing that the primary aim in exercising the powers of the court is to secure just resolution of disputes in accordance with substantive rights of the parties, I feel bound to exercise my discretion and restore the plaintiff’s claim with no conditions attached.

Costs

44.  I also make an order nisi that the plaintiff shall pay the defendant costs of the application up to 2 weeks after service of the affirmation in reply of the plaintiff and the defendant shall pay the plaintiff costs of the application thereafter, the same to be taxed if not agreed, with certificate for counsel.