Special Report
Hong Kong - A Cautionary Tale Of Two Summary Judgment Applications.

September 2017

 

Hong Kong - A Cautionary Tale Of Two Summary Judgment Applications.

 

Summary judgment is a shrewd tactical device in the “lawyer tool belt,” used to entirely or partially avoid the litigation of a case or issue.  Recently, in a consolidated action for Skillsoft Asia Pacific Pty Ltd v Ambow Education Holding Ltd the High Court rejected the Plaintiff’s application for summary judgment, rationalising that it is generally undesirable for litigants to fragment their cases and litigate in parts as they please by filing for partial summary judgment for only certain parts of a claim over the course of two separate applications.[2]  The Court further commented that it also may be an improper deployment of the Court’s scarce resources.  The question that now arises is whether the Court was raising a general objection to the way it was employed in the Skillsoft cases or rather carving out a specific limitation to its use in future cases.       

 

 

We had a chance to speak with the commercial litigation team at Hill Dickinson Hong Kong about summary judgment as a strategical move, the Skillsoft consolidated action and its impact on the use of partial summary judgments in future cases, and here is what they had to say.

 

Conventus Law:  First, can you briefly explain what is summary judgment and how it is tactically employed by parties to a lawsuit?

 

 

Hill Dickinson: In most actions begun by Writ[3] and only after the Defendant has given notice of intention to defend, summary judgment provides a mechanism whereby a Plaintiff may obtain a “quick” judgment against a Defendant on the basis that the Defendant has no proper defence to the claim (or part of the claim). The onus then shifts to the Defendant to “show cause” by demonstrating that there are triable issues or he has an arguable defence.

 

In the usual case, summary judgment is a very effective tool for a Plaintiff to obtain a final judgment for the whole claim at an early stage of the proceedings and avoid enduring the delay, expense and risk of proceeding to a full trial. A trial will usually require extensive discovery of documents, preparing witness statements, making interlocutory applications, instructing Senior and Junior Counsel, preparing factual witness for cross-examination, instructing an expert witness to give expert opinion and prepare him for cross-examination. Unfortunately, that all involves a lot of unavoidable costs some of which will be unrecoverable even if you are successful.

 

However, the summary judgment procedure should only be used in limited circumstances where on the facts, which ideally should be straightforward, the Defendant clearly has no proper defence to the claim (or part of the claim) and there are no triable issues – the burden on the Defendant is not high as he only has to show that he has an arguable defence as opposed to a defence with merit.

 

An application for summary judgment is made by summons with a supporting affidavit pursuant to Order 14 of the Rules of the High Court. It is generally preferable to ensure the supporting evidence is relatively brief and simple as the Court will not want to have to delve into complicated factual and legal issues as part of a summary judgment application. The classic strategy of a Defendant facing a summary judgment application is to file lengthy affidavit evidence with voluminous exhibits to try and create “smoke and mirrors” to persuade the Judge that there are many triable issues and the case is far too complicated factually and legally for summary judgment.

 

In terms of timing, the summary judgment hearing firstly takes place before a Master and is usually about 6 months after the application is filed depending on the Court diary. After the first hearing, the losing party has an automatic right to appeal to a Judge by way of re-hearing and the Judge is not bound by the findings of the Master.  This will usually be another 4 to 6 months after the first hearing. The hearing before the Judge is a hearing ‘de novo’ which basically means the Judge hears everything from scratch or afresh (further evidence will not be allowed) and the Judge is not bound by the findings of the Master. As such, it is not really an ‘appeal’ in the usual sense – just another bite at the apple before a more senior judge.

 

Practically, the entire process (hearings before a Master and then a Judge) can take about 12 to 18 months and this excludes additional time for any potential appeal to the Court of Appeal. This time will arguably be ‘lost time’ as the main action will usually be put on hold by consent pending the determination of the summary judgment. There will also be significant additional costs for the losing party.

 

If you believe you have a very good case on the merits but perhaps not to the very high threshold for summary judgment, it may actually be a better strategy and more cost effective to proceed to a trial as quickly as possible and not be distracted by going down the summary judgment route.  

 

 

CL: Can you briefly explain the relevant facts and procedural history in the Skillsoft cases that are germane to the summary judgment issue?

 

HD: Yes, I will start with Skillsoft Asia Pacific Pty Ltd v Ambow Education Holding Ltd (No 2) (“Skillsoft 2”).

 

 

Features of Skillsoft 2

 

It is important to note that in Skillsoft 2, the Plaintiff applied for summary judgment for part of its claim in consolidated proceedings for HCCL 19/2013, HCCL 20/2013 and HCCL 31/2013. This was an unusual case for summary judgment.

 

The Plaintiff had previously sought summary judgment in HCCL 19/2013 for two payments it claimed were due from the Defendant under the terms of a distribution agreement for the Plaintiff’s products (the “Agreement”). The Plaintiff was partially successful in HCCL 19/2013 as the Court found in favour of the Plaintiff in respect of one of the two payments. For the other payment, the Court granted unconditional leave to defend on the basis the Defendant had an arguable case as to whether the Plaintiff had a right to receive payment from the Defendant (which hinged on the issue of whether and, if so, when, the Agreement was terminated). Subsequently, the three actions were consolidated.

 

The application in Skillsoft 2 involved the Plaintiff’s rights under the Agreement to require the Defendant to provide sales reports for a certain period and the right to inspect and audit certain of the Defendant’s internal records. These rights were different from the rights which were the subject of the partial summary judgment application in HCCL 19/2013 (i.e. the right to receive certain payments).

 

Importantly, although the two summary judgment applications concerned the enforcement of different sets of rights under the Agreement, the Judge in Skillsoft 2 would be required to make factual findings on when the Agreement was terminated which was an issue the Court had already ruled in HCCL 19/2013 should be left for argument at trial.  The Judge was concerned that any finding on fact might be inconsistent with the trial judge’s finding on the same issue.

 

In summary, the Judge refused the partial summary judgment application in Skillsoft 2 for the following reasons:-

 

  1. Risk of inconsistent judgments – the Court would need to make a finding on the issue of when the Agreement was terminated in order to decide the partial summary judgment application. The Judge was concerned that the eventual trial judge for the remainder of the claim would also need to make a finding on this issue which may result in inconsistent findings. In particular, this may constitute issue estoppel (which prohibits an issue previously decided by the Court from being argued again.)

 

  1. Procedural economy – the Judge also considered that it is generally undesirable for litigants to fragment their cases into parts for summary judgment and other parts for determination at trial. He stated that it is not conducive to the proper use of the Court’s scarce resources and he made these observations:

 

  1. This was an unusual application for summary judgment for only part of a claim and a trial would still need to take place; and

 

  1. Following the Civil Justice Reform, the Court is mandated to deal with as many aspects of the case as practicable on the same occasion (Order 1A, r4(2)(i) of the RHC).

 

Given the above, it is clear that the Judge was signalling to practitioners that it can be undesirable for litigants to fragment their cases into parts and to advance them on a piecemeal basis.

 

CL: Will this decision have an impact on how and when lawyer’s will choose to employ summary judgment in future cases?

 

 

HD: Practitioners always need to be cautious when deploying the summary judgment procedure and particularly for part of a claim, where there may be no strong justification for dealing with part of a claim summarily instead of dealing with all issues relating to the claim together at trial. The Court may consider such applications as “a misuse of its resources”, especially after the Civil Justice Reform and there will be costs consequence for the client (see below).

 

Having said that, Skillsoft 2 will be less relevant to clear cut cases where there is no good reason why the Plaintiff should be prevented from obtaining judgment for part of his claim. This would include cases where the Defendant disputes only part of a money claim and where the balance is undisputed, and where there is no risk of inconsistent findings.

 

 

CL: How influential will this decision be for the courts in deciding whether to accept or deny applications for partial summary judgment in future cases? 

 

 

HD: The summary judgment process is available to prevent a Defendant from delaying the Plaintiff from obtaining judgment where he clearly has no defence to the claim[4].

 

Following Skillsoft 2 (which is not strictly binding authority but persuasive), the Hong Kong Courts may be even more alive to the competing policy considerations of (i) ensuring a plaintiff is not wrongfully deprived of his right to obtain a "quick" judgment in appropriate cases and (ii) ensuring the Court's resources are not misused by the litigants.

 

We would expect that the Hong Kong Courts will consider each case on its own facts and circumstances as these types of cases tend to be very ‘fact sensitive’ and there is usually plenty of ‘wriggle room’ for the Court to exercise its discretion.

 

CL: While the law does not currently disallow filing for multiple applications for partial summary judgment (so long as it is not possible to file for summary judgment as to all parts and claims), is there a lesson that should be learned from this case?

 

HD: An application for summary judgment for part of a claim is fairly unusual compared to the typical scenario where a Plaintiff applies for final judgment for the whole claim which then obviates the need for a trial.

 

Following Skillsoft 2, parties may be advised to adopt a more cautious approach when considering whether to apply for summary judgment for part of a claim where there will still need to be a trial to determine the remainder of the claim. You would have to be confident that an application for summary judgment for part of a claim is indefensible, there are no triable issues and there is no risk of inconsistent findings. Otherwise, the Court will, quite properly, dismiss the application and send the case to trial and the application for summary judgment will have resulted in wasted costs and delays.  

 

This is more likely to happen where the Court takes the view that a finding of fact at the hearing of the partial summary judgment application could potentially result in inconsistent findings on fact or constitute an issue estoppel at the trial.

   

Clients need to be warned that an adverse costs order may be made against them if the Court considers the summary judgment application was misconceived and has caused delays and increased costs compared to proceeding straight to trial so that all of the issues can be heard together at the same time.

 

[1] Consolidated from HCCL 19/2013, HCCL 20/2013 and HCCL 31/2013

[2] By way of quick procedural history, Skillsoft filed three separate cases against Ambow Education (HCCL 19/2013, HCCL 20/2013 and HCCL 31/2013).  Summary judgment was granted in one of the actions (HCCL 19/2013). The cases were later consolidated, and the Court rejected Skillsoft’s subsequent application for partial summary judgment when it was applied for in the consolidated action.

[3] Except claims for libel, slander, malicious prosecution, false imprisonment, sedition, fraud or an admiralty action in rem.

[4] Man Earn Ltd v Wing Ting Fong [1996] 1 HKC 25 (Godfrey JA)

 

 

For further information, please contact:  

 

Damien Laracy, Partner, Hill Dickinson Hong Kong

damien.laracy@hilldickinson.com

 

Bryan O'Hare, Partner, Hill Dickinson Hong Kong

bryan.o'hare@hilldickinson.com