HONG KONG TELEPHONE CO. LTD. AND ANOTHER v. CITY TELECOM (H.K.) LTD.

HCA11409/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. A11409 OF 1998

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D E C I S I O N

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The Background

1. This is a hotly contested action between the Plaintiffs, well known providers of telecommunication services in Hong Kong, and the Defendant, a recently listed company which, consequent upon the removal of the monopolies formerly existing in the field of domestic and international telecommunication services, is now a competitor of the Plaintiff group, specifically in the area of calling cards and call-back services.

2. The broad shape of the present action is thus. The Plaintiffs sue for damages arising from what is alleged to be the wrongful use of the Plaintiffs' Datapak ISDN2 Service to operate and provide its own external public telephone service to subscribers to the Hong Kong Public Switched Telephone Network; in particular, the Plaintiffs run the twin allegations of breach of contract between the 1st Plaintiff and the Defendant relating to the provision of the Datapak ISDN2 Service by the Plaintiffs to the Defendant, and the tort of wrongful interference with the 2nd Plaintiff's trade or business. The Writ was issued on 13th July 1998 and the Amended Statement of Claim on 1st September 1998.

3. In response, by its Amended Defence and Counterclaim dated 18th November 1998, the Defendant denied the claim and itself counterclaimed for damages on the grounds that the action against it has been instituted as an abuse of process, that the Plaintiffs have unlawfully interfered with the lawful provision by the Defendant of its services to its subscribers, and finally that the Plaintiffs' unlawful anti-competitive practices have caused damage to the Defendant in the conduct of its business.

4. The foregoing thumbnail sketch fails adequately to convey the precise technical and legal aspects of this case, but that, at any rate, is the general state of play.

The Applications before the Court

5. On 22nd December 1998 the Plaintiffs issued a Summons for Directions. It is in standard and non-controversial form, although it cannot seriously have been intended that, in a case of this complexity, there should be mutual discovery within 14 days, which was one of the directions sought. Be that as it may. A hearing of this summons was designated for 27th January 1999 at 9.30 a.m.

6. On 20th January 1999 the Defendant issued a Notice for Directions under the Summons for Directions giving notice of its intention at the hearing thereof to apply for an order "that the question or issue of the liability of the Defendant to the 1st and/or 2nd Plaintiff(s) in this action be tried as a preliminary issue before the question or issue of damages, if any, and that, subject to the determination of the issue of liability in favour of the 1st and/or 2nd Plaintiff(s), the issue of damages be tried subsequently in such manner as may be directed by the trial Judge ... and that such further or other directions may be given for the trial of the issue of liability as may be necessary ..."

7. This application was followed by the Plaintiffs' own Notice for Directions dated 26th January 1999, wherein the Plaintiffs gave notice of their intention to apply at the following day's hearing of the Summons for Directions for an order "that the Defendant's counterclaim as pleaded in paragraphs 37-40 of the Amended Defence and Counterclaim be struck out".

8. In summary, therefore, there are cross-applications for procedural relief and, unsurprisingly, these applications could only be entertained on a date to be appointed. For reasons which remain unclear, but apparently pursuant to agreement between the parties, these applications were removed from a Master in the general High Court List, and were placed within the Commercial List, wherein diary constraints resulted in the hearing of the respective applications taking place over two separate hearings over a span of ten days. With, I believe, the agreement of Counsel, this Court took the view that the most appropriate course was to hear both applications in their entirety prior to rendering its decision upon each.

9. This, then, is the decision on the two applications before this Court. These applications have been heavily documented in terms both of the hearing bundle, containing pleadings and affidavits, and also in terms of the detailed skeleton arguments placed before the Court by Counsel on each side, to all of which material the Court has paid regard in arriving at its decision in each instance.

(1) The Defendant's Application for a Split Trial

10. The Defendant's application for there to be a trial on the issue of liability prior to consideration of the issue of damages is predicated solely upon its assertion that the action herein instituted by the Plaintiffs is an abuse of process, brought with the aim of obtaining discovery of documents containing "confidential and sensitive business information".

11. For their part, the Plaintiffs deny this allegation, and point to the assumption implicit in the application, an assumption which is strenuously disputed, to the effect that the Plaintiffs intend to breach the usual implied undertakings not to use any disclosed document otherwise than for the purpose of these proceedings.

12. The normal approach to applications for separate trials of the issues of liability and quantum is that the Court will only make such orders where there is, and can be seen to be, a clear line of demarcation between such issues, and that orders of this type are by way of exception to the general rule of procedure that liability and quantum should be tried together. At the end of the day, of course, the matter is one for the discretion of the Court.

13. After considering all the relevant material, I reject this application. I do so for the following main reasons. I am far from satisfied that there is a clear line of demarcation between these issues. Aside from the preliminary point that proof of damage is an integral ingredient of the tort, so that the liability for the tort asserted is dependent upon the establishment of damage, in any event I do not consider that this is a case in which the requirements of discovery can be so neatly 'pigeonholed'. To the contrary. In the circumstances of this case I think it highly likely that there will be a distinct overlap between documents referable to the issue of liability and documents referable to the issue of quantum. In fact, I am inclined to think that if a Court were to be persuaded into making the order presently sought, the normal process of discovery would be rendered fraught with difficulty, and would be attended by further extensive (and wholly undesirable) interlocutory argument. I further take the point that it is at least arguable that the documents sought to be confined to the quantum issue may themselves prove material in the determination of the Plaintiffs' primary allegation as to this litigation constituting an abuse of process.

14. Nor does the suggestion that, if the Court declines to make the order sought, utilisation of the Court's normal procedure will facilitate the very abuse of process anticipated and complained of, sit happily in the context of this argument. Whatever the perceptions of the Defendant as to the Plaintiffs' motives in bringing this action, the fact is that the Court is well able to regulate its own procedure in the manner it thinks just and convenient, both in terms of the mechanics of discovery and in terms of punishment for breach of the undertakings necessarily attendant upon this exercise.

15. In all the circumstances, I dismiss the Defendant's application for a split trial. I make an order nisi that the Plaintiffs are to have the costs of and occasioned by the application, to be taxed if not agreed.

(2) The Plaintiffs' Application to Strike Out that Part of the Counterclaim Based Upon Anti-Competitive Practices

16. Pursuant to the provisions of Order 15 rule 5(2), the Plaintiffs assert that part of the Defendant's counterclaim for damages flowing from alleged unlawful "anti-competitive practices" intended to damage the Defendant's trade and business be struck out and disposed of by a separate action (or alternatively be tried separately) because it has been improperly joined with and/or will unduly delay the trial of the present action.

17. I have no doubt that it is considered by those advising the Plaintiffs that it would be signally more convenient for this course to be adopted, not least because, if I may say so, the Defendant's counterclaim in this regard is less than compellingly pleaded.

18. However, after considering all the available material, in the circumstances of this case I am not persuaded that I should exercise my discretion to make the order sought, which in any event is strongly resisted by the Defendant (albeit the Defendant has adopted the position that if an order were to be made separating liability and quantum, it then would not resist this application to hive off this element of the counterclaim).

19. Had this application been acceded to, I accept that the only practical course would have been to order that this part of the counterclaim be disposed of by separate action, but in the particular circumstances I am not convinced that this would be either just or convenient. Nor am I prepared to hold that this is an instance of 'misjoinder' in the technical sense. In fact, notwithstanding the Plaintiffs' confident assertions to the contrary, I am not inclined fully to accept that there will be no element of overlap, whether such be in terms of law or fact, and whether between the various issues arising on the counterclaim (including the allegation of anti-competitive practices), or between the anti-competitive practices element of the counterclaim and the Plaintiffs' own claims of unlawful interference with their trade or business.

20. And whilst I have not overlooked the Plaintiffs' arguments as to delay and the increased discovery obligations, after putting all relevant factors into the discretionary 'mix', I have concluded that all the matters raised on these pleadings between these parties should be tried out at the same time before one judge at one trial, with the manifest advantages that generally attend such a course.

21. Accordingly, the Plaintiffs' strike out application is dismissed. I make an Order nisi that the costs of and occasioned by this application be to the Defendant, to be taxed if not agreed.

Consequential Directions

22. As earlier indicated, it is unclear why this Court has been selected as the forum to referee these particular procedural disputes in a case which has not been placed in the Commercial List. It would, no doubt, have been explicable for a judge to have been assigned to deal throughout with a case of this complex nature, from interlocutory applications to trial, in order to facilitate the accretion of background knowledge, in particular as to the technical aspects, and further to maintain consistency of decision and, if appropriate, to provide some degree of case management. However, this is not the case here. To the contrary. I am told that the Defendant does not wish any judge to be so assigned, and accordingly I can see no good reason why normal High Court procedures should not be followed. I order that this action henceforth be remitted to a Master for necessary procedural directions consequent upon the decisions herein.