TO WAI CHAN HENRY v. AON SERVICES HONG KONG LTD

HCA 427/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 427 OF 2014

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D E C I S I O N

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1. I have before me a summons to withdraw an appeal against a master’s decision. The appeal was originally fixed for hearing today but the plaintiff has indicated for over two months that he intended to withdraw the appeal. The withdrawal itself is uncontentious. The only issue between the parties is the costs of the appeal and application for withdrawal. The matter has arisen in this way.

2. On 13 March 2014, the plaintiff issued the writ of summons in this action.  In the statement of claim endorsed in the writ, the plaintiff says that he was an employee of the defendant and entered into a settlement agreement on or about 12 January 2012 with the defendant in order to provide for the terms on which the employment relationship was to be terminated.  The plaintiff says that a total sum of US$475,000 was payable by the defendant to him under that agreement and that, except for the first instalment of US$141,600 paid in January 2013, the defendant has failed and refused to pay the balance totalling US$333,200.

3. On 2 April 2014, the plaintiff filed a summons for summary judgment under Order 14 and a supporting affirmation made by himself.

4. On 9 May 2014, the defendant filed an affidavit of Mr Andrew Bellers in opposition to the plaintiff’s application for summary judgment.

5. On 23 May 2014, the plaintiff filed an affirmation in reply.

6. The summons was heard before Master M Wong on 18 August 2014.  At the end of the hearing, the master gave his decision, which has been reduced into writing and placed before me.  At paragraph 2 of his decision, the master rejected a technical ground of objection raised by the defendant about service of the statement of claim.  In paragraph 5 of the decision, the master commented that there was no mention of any specific clause in either the defendant’s affirmation or the draft defence put forward that was said to have been breached by the plaintiff.  The result was that, the master said, no one could really fully appreciate which clause or clauses the defendant was relying on. In paragraph 6 of his decision, the master criticised the defendant’s case for lacking in particulars and stated:

“on this evidence, I am of the view that they are clearly insufficient to raise a serious allegation against the plaintiff.”

The master further said in paragraphs 12 to 13 of his decision:

“12. But as I said, whether there is sufficient credible or believable evidence is in doubt here. So I am not prepared to give unconditional leave to the defendant to defend but rather that I think the defendant should be given conditional leave to defend. I think the case law is clear that if I am tempted to enter final judgment at this stage, I am entitled to give conditional leave to defend. And I think this is a case that I find that there is insufficient evidence, at this stage, to support the defendant’s allegation. So I am actually tempted to enter final judgment, but as I said, I am not sure whether, at this stage, it is the situation that the defendant either has been advised not to give full details of their evidence, or whether they are not able to provide full details of their evidence at this stage. So, it could be a case that may be later on, when the defendant is properly advised or when they are given the opportunity to gather further evidence, there might be a situation that they could substantiate the defence later on.

13.  So in all fairness to the defendant, I think they should be given a chance to defend, but that will be on condition. And the condition is that they should pay the full payment of the claimed amount into court.”

7. Accordingly, the master gave conditional leave to the defendant to defend on condition that it paid the amount claimed into court.  He ordered that the costs of the application for summary judgment be in the cause of the action.

8. On 20 August 2014, the plaintiff filed a notice of appeal to a judge in chambers against the master’s decision, seeking summary judgment in his favour.

9. On 26 August 2014, the defendant made payment into court of the sum of US$333,200.

10. On 15 September 2014, the defendant filed its defence and counterclaim which is a substantially revised and ‘beefed up’ form of the draft defence and counterclaim used at the Order 14 hearing.  The changes made, including, for example, particulars given about meetings with named individuals, have been helpfully summarised in Mr To’s skeleton before me today.

11. Faced with the revised and particularised case of the defendant, on 8 October 2014 the plaintiff indicated he was prepared to withdraw the appeal on condition that the defendant pay his costs forthwith. This demand was ambitious, but perhaps understandable as an “opening shot”.

12. On 13 October 2014, the defendant retorted that it would agree to the appeal being withdrawn on the basis that the plaintiff paid the defendant’s costs forthwith.

13. On 23 October 2014, the plaintiff offered to withdraw the appeal with no order as to costs.  

14. The parties’ costs on the appeal would have been minimal at that stage.  In fact that was pointed out in the plaintiff’s letter dated 23 October 2014.  The defendant never dissented from that estimate and, indeed, relied on that statement subsequently in asking the plaintiff to agree to pay the defendant’s costs.  The defendant has not suggested, even now, that it had incurred more than minimal costs up to 23 October 2014 in relation to the plaintiff’s appeal.

15. In those circumstances, I would have thought a sensible way of disposing of the matter at that time was for the appeal to be withdrawn with no order as to costs.

16. As at 20 August 2014, the position was that the master was tempted to enter judgment, but had decided to give conditional leave to defend for the reasons he gave.  The plaintiff had just filed an appeal.  It was, to my mind, an arguable appeal based on the materials before the master - there being no suggestion in the correspondence that it was a hopeless appeal on the basis of the defendant’s case at that time.  There was of course a risk that the plaintiff might not succeed, but there was also a real possibility that the plaintiff might prevail in the appeal.

17. The defendant then filed a defence and counterclaim in mid‑September which substantially revised and augmented its case at the Order 14 hearing and expanded upon the draft defence and counterclaim used at the hearing before the master.  It should be borne in mind however that the defence and counterclaim is not evidence.  Under Order 58, rule 1, as amended pursuant to the Civil Justice Reform, no further evidence would be received on an appeal from a master to a judge in chambers, “except on special grounds”.  It would have been up to the defendant to justify any attempt to adduce further evidence for the purpose of the appeal.  Even if the court allowed new materials to be used on appeal, there might be cost implications.

18. At this stage, therefore, once the plaintiff agreed to withdraw the appeal it would in my view have been sensible for the parties to agree that the appeal be withdrawn with no order as to costs.  This was offered by the plaintiff and, had it been accepted, further time and costs would have been saved for both parties, but, as I shall explain, it was not accepted by the defendant.

19. What is more, on 30 October 2014, the defendant made clear that it had a cross-appeal, although no formal notice of cross-appeal had been filed, and that the defendant had an interest in the appeal proceeding so that it could obtain an order for unconditional leave to defend.  In response to the plaintiff’s offer, the defendant agreed for the appeal to be withdrawn with no order as to costs, but only on condition that the condition imposed by the master on leave to defend was discharged and the payment into court was returned to the defendant.

20. The plaintiff thereupon indicated that given its offer of withdrawal of the appeal with no order as to costs was refused by the defendant, the plaintiff would seek an order for withdrawal of the appeal with costs against the defendant. 

21. However, on 1 December 2014, the defendant indicated it would no longer pursue its cross-appeal and would not challenge the order of the master.  It also dropped its demand for discharge of the condition of payment into court.  It declared, however, that it would appear at the hearing today and seek an order for the defendant’s costs to be paid forthwith by the plaintiff.

22. Having asserted a cross-appeal, and decided in the end to abandon it or to refrain from pursuing it, it seems to me all the more unreasonable for the defendant to insist on the plaintiff paying the defendant all its costs.

23. Further, the defendant tried in late November and early December 2014 to tie the costs of the withdrawal of the appeal with a wholly separate application it made earlier for the case to be transferred to the Commercial List.  That application was found by Bharwaney J to be premature in April 2014 and adjourned with costs to the plaintiff assessed at $10,000.  I fail to see any connection that that application has with the appeal.

24. There is no doubt that as a general rule, an applicant or appellant has to pay the other side’s costs if he decides to withdraw an application or appeal.

25. Mr Humphrey relied on the decision of Chung J in Best Joint Investments Limited v Kagani Limited, (unreported, HCA 2608/2006, 20 June 2008), but it seems to me that it is a quite different case.  There the case of the person who was applying to be joined as a party to the action was made known to the plaintiff, who nevertheless applied for inspection and production of documents.  The affirmation filed by the applicant in response to the plaintiff’s application simply maintained the stance set out in earlier correspondence.  In those circumstances the court held that there was no justification for departing from the usual rule on costs when the plaintiff decided to abandon its summons for production and inspection. 

26. Here, however, the plaintiff withdrew the appeal because the defendant sought to particularise and add further prongs to its case after the hearing before the master.  The defendant would have to show “special grounds” in order to adduce the new matters as further evidence on the appeal.  Furthermore, the defendant had a cross-appeal which it had a separate interest in pursuing and which it decided, of its own motion, to abandon.  The proper outcome, at an earlier point of time in the case, would have been for the parties to bear their own costs.  That was offered by the plaintiff but, in my view, unreasonably refused by the defendant.

27. For these reasons I think that the defendant should be responsible for the costs relating to the plaintiff’s appeal and the withdrawal application from 30 October 2014 onwards, which had been quite unnecessarily incurred.  I consider, however, that the defendant’s conduct has marginally fallen short of the threshold for ordering costs on an indemnity basis.  I would therefore order: 

(1)  Leave be given to the plaintiff to withdraw the Notice of Appeal to Judge in Chambers dated 20 August 2014;

(2)  There be no order as to the costs of the plaintiff’s appeal up to and including 30 October 2014; and

(3)  The defendant do pay the plaintiff the costs relating to the appeal after 30 October 2014 and the withdrawal application (except the costs of issuing the summons itself), on a party and party basis.

28. I will now hear the parties on the costs of the hearing today.

(Submissions on costs)

29. As to costs of today, I think it should follow the event.  So the plaintiff will have the costs forthwith on a party and party basis.