SCHINDLER LIFTS (HONG KONG) LTD v. NIKKO SERVICES LTD

CACV 250/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 250 OF 2010

(ON APPEAL FROM DCCJ NO. 1569 OF 2008)

________________________

BETWEEN

	SCHINDLER LIFTS (HONG KONG) LTD	Plaintiff
	and
	NIKKO SERVICES LTD	Defendant

________________________

Before : Hon Lam VP, Kwan and Chu JJA in Chambers

Date of Decision on Costs: 3 November 2014

____________________

DECISION ON COSTS

____________________

 

Hon Lam VP (giving the Decision on Costs of the Court):

1.  In our judgment of 15 September 2014, we ordered costs in favour of the Plaintiff on indemnity basis. We gave directions for the lodging of skeleton bill by the Plaintiff and reply by the Defendant to facilitate gross sum assessment as follows:

(a) The Plaintiff shall lodge and serve its skeleton bill within 7 days from the handing down of this judgment;

(b) The Defendant shall lodge and serve its reply on the quantum as set out in the skeleton bill within 7 days after the service of the Plaintiff’s skeleton bill.

2.  The Plaintiff failed to lodge its skeleton bill within 7 days.  It was only lodged on 24 September.  It was also faxed to the Defendant on that date.  The Defendant disputed that it was not proper service.  In the covering letter, solicitors for the Plaintiff said it was not lodged on time due to a clerical error.  The amount claimed was $52,500.

3.  Mr Lau, a director of the Defendant, contended that the claim for costs by the Plaintiff should be rejected due to the non-compliance with our directions.  In a letter of 30 September 2014, the Defendant also contended that the hourly rate charged by the solicitor for the Plaintiff ($4,500 per hour) is excessive.  It also disputed that the matter was handled by Mr Shaw as claimed by the Plaintiff.  It alleged that the works were/could have been handled by a litigation clerk at an hourly rate of $150. It said that the total costs should only be $1,500 (based on 10 hours’ work).

4.  By an earlier letter of 24 September 2014, Mr Lau requested to undertake a search of the court file.  He also claimed for the costs for such exercise.  He asked for an hourly rate of $3,000 on the basis that he is an engineer by profession. 

5.  A search was then undertaken.  By a letter of 26 September 2014, Mr Lau reported to the court the result of his search.  He set out his objection to costs being awarded due to the expiration of the time limit for the lodging of skeleton bill by the Plaintiff.

6.  In respect of the objection of the Defendant based on the late lodging of skeleton bill by the Plaintiff, we respectfully adopt the approach set out in the judgment of another division of this court in HCMP 2034 of 2012:

“4. The non-compliance with the direction is a breach of the duty under Order 1A Rule 3 and it is a matter that the court can take into account under Order 62 Rule 5. However, we do not think it is appropriate in the present to bar the [defaulting party] entirely from asking the court to revise the quantum due to the non-compliance with that direction. That would not be a proportionate sanction to the default. As the English experience from Mitchell v New Group Newspapers [2014] 1 WLR 795 to Denton v TH White [2014] 4 Costs LR 752 illustrates, it would not be right to adopt a too mechanistic approach in case management.

5. But it does not mean that there should not be any consequence for such default. The direct consequence is that the court has to entertain further round of submissions which the direction is designed to avoid in light of the objective of efficient disposal of leave applications.  More costs are therefore incurred in the process and the [defaulting party] should be responsible for the same.  It would however be disproportionate and an invitation to unjustified satellite litigation if one were to inquire into the details as to how much has been incurred by way of additional costs.  This would wholly defeat the purpose of summary assessment.  In our judgment, a fair approach is that the court should do a global assessment of the situation taking this default into account.”

7.  We have considered the submissions of the Defendant on quantum.  Bearing in mind that we have awarded costs in favour of the Plaintiff on an indemnity basis, we are still of the view that the hourly rate of $4,500 charged by the solicitor for the Plaintiff is excessive.  We would only allow an hourly rate of $4,000.  We do not accept the criticism by Mr Lau that the works were/should have been undertaken by a litigation clerk.  But we also see room for reduction (even in the context of indemnity costs) of the time spent bearing in mind the complexity of the matter and its previous history.  We accept Mr Lau should be able to set off a notional sum representing costs against the claim of the Plaintiff due to the search on 24 September (necessitated by the Plaintiff’s default).  But we do not accept an hourly rate of $3,000 for Mr Lau.

8.  Taking all these matters into account, we assess the costs payable by the Defendant to the Plaintiff at $40,000.  It shall be payable forthwith.

(M H Lam) Vice President

(Susan Kwan) Justice of Appeal

(Carlye Chu) Justice of Appeal

Haley & Co for the plaintiff

Defendant: in person

CACV 250/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 250 OF 2010

(ON APPEAL FROM DCCJ NO. 1569 OF 2008)

________________________

BETWEEN

	SCHINDLER LIFTS (HONG KONG) LTD	Plaintiff
	and
	NIKKO SERVICES LTD	Defendant

Before :  Hon Lam VP, Kwan and Chu JJA in Chambers

Date of Written Submissions:  25 August 2014

Date of Judgment:  15 September 2014

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JUDGMENT

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Hon Lam VP (giving the judgment of the Court):

1.  On 21 November 2013, Lam VP stayed this appeal pending the final determination of a District Court action in which dispute about the enforceability of an agreement settling this appeal is being litigated. For the reasons set out in the Reasons for Judgment and Decision on Costs dated 29 November 2013, Lam VP ordered the Defendant pay the costs of the stay application, such costs were fixed (by way of order nisi) at $28,000.

2.  That order nisi was confirmed in the Decision on Gross Sum Assessment of 10 February 2014.

3.  The Defendant wrote to seek leave to appeal on 10 February 2014. Lam VP refused leave on 11 February 2014.

4.  The Defendant took out a Notice of Motion on 3 July 2014 seeking leave to appeal to the Court of Final Appeal.

5.  After some correspondence, parties agreed to have the matter dealt with on papers.  Directions were given on 11 August 2014 for the lodging of submissions.  Both parties have lodged their submissions to the court on 25 August 2014.  There was an omission by the Defendant to serve its submissions, which was rectified on 3 September 2014.

6.  After considering the application for leave and the submissions of the parties, we refuse leave and we strike out and dismiss the Notice of Motion of 3 July 2014. First, the proper avenue for appeal against a decision of a single judge of the Court of Appeal is by way of fresh application made within 10 days of the decision to the Court of Appeal, see Order 59 Rule 14(12) of the Rules of the High Court.  It is not open to a party to leapfrog and appeal to the Court of Final Appeal in respect of such decision.

7.  Second, the decision of 10 February 2014 is a decision on costs.  No appeal shall lie in respect of such decision without leave, see Section 14(3)(e) of the High Court Ordinance.  Leave had been refused on 11 February 2014.

8.  The application for leave to appeal to the Court of Final Appeal is completely misconceived and as such an abuse of the process.  The Defendant, acting by its director Mr Lau, has put forward arguments which were completely ill-focused and did not address the crucial issues as pinpointed above.  In so doing, it has caused substantial costs and court time to be wasted.

9.  We make a costs order nisi that the Defendant shall pay the costs of the Notice of Motion to the Plaintiff on indemnity basis, such costs are to be assessed by gross sum assessment according to the following directions:

(a) The Plaintiff shall lodge and serve its skeleton bill within 7 days from the handing down of this judgment; and

(b) The Defendant shall lodge and serve its reply on the quantum as set out in the skeleton bill within 7 days after the service of the Plaintiff’s skeleton bill.  

(M H Lam) Vice President

(Susan Kwan) Justice of Appeal

(Carlye Chu) Justice of Appeal

Written submissions by Haley & Co, for the plaintiff

Defendant: in person, written submissions by its director Lau Chun Ming

CACV 250/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 250 OF 2010

(ON APPEAL FROM DCCJ NO. 1569 OF 2008)

________________________

BETWEEN

	SCHINDLER LIFTS (HONG KONG) LTD	Plaintiff
	and
	NIKKO SERVICES LTD	Defendant

________________________

Before :

Hon Lam VP in Chambers

Date of Filing of Written Submission to   Vary the Gross Sum Assessment by the Plaintiff :	12 December 2013
Date of Filing of Written Submission to   Vary the Gross Sum Assessment by the Defendant :	6 December 2013
Date of Decision on Gross Sum Assessment :	10 February 2014

______________________________________

DECISION ON GROSS SUM ASSESSMENT

______________________________________

 

1.  In the Decision on Costs of 29 November 2013, this court ordered the Defendant to pay part of the costs of the stay application and the costs of the summons of 8 November 2013 to the Plaintiff. This court indicated that there will be a gross sum assessment and provisionally assessed it at $28,000. The costs were to be payable forthwith.

2.  On 6 December 2013, the Defendant through Mr Lau wrote to the court advancing submissions for variation of the costs order. However, none of the submissions addressed the quantum.

3.  On 12 December 2013, solicitors for the Plaintiff wrote to the court in response.

4.  The court had heard oral submissions on costs at the hearing of 21 November 2013.  The liberty to apply for variation given in the Decision of 29 November 2013 only confines to the quantum.  This court is not minded to entertain the submissions advanced by Mr Lau on topics other than those related to quantum.

5.  Since there is no submission on quantum by Mr Lau, the provisional assessment at $28,000 becomes the final assessment.  The Defendant shall pay the Plaintiff the sum of $28,000 by way of part of the costs of the stay application and the summons of 8 November 2013 forthwith.  

(M H Lam) Vice President

Haley & Co, for the Plaintiff

Defendant : In person, represented by Lau Chun Ming (Director)

CACV 250/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 250 OF 2010

(ON APPEAL FROM DCCJ NO. 1569 OF 2008)

________________________

BETWEEN

	SCHINDLER LIFTS (HONG KONG) LTD	Plaintiff (Respondent)
	And
	NIKKO SERVICES LTD	Defendant (Appellant)

________________________

Before: Hon Chu JA in Chambers

Date of Hearing: 16 August 2012

Date of Decision: 16 August 2012

________________________

DECISION

________________________

 

Introduction

1.  On 31 July 2012, upon the defendant’s application, I permitted the defendant’s appeal herein to be reinstated[1] on two conditions, namely,

(1)  The defendant shall by 4:00 pm on 31 July 2012 comply with paragraph 1 of the Order dated 22 March 2012 by paying $50,000 into court as security for the costs of the plaintiff in the appeal (“1^st Condition”); and

(2)  The defendant shall within 30 days from 31 July 2012 pay the plaintiff the costs of the summons and the costs thrown away by the non-compliance with the Order dated 22 March 2012, assessed at HK$23,500 on gross sum basis (“2^nd Condition”).

2.  The defendant had complied with the 1^st Condition on 31 July 2012, but has yet to comply with the 2^nd Condition.

3.  On 7 August 2012, the defendant issued the present summons seeking the following:

(1)  By paragraph 1 of the summons, extension of time for complying with the 2^nd Condition until 10 November 2012, which will be after the hearing of the appeal on 8 and 9 November 2012.

(2)  By paragraph 2 of the summons, “relief from sanction of the Order dated 22 March [2012]”.  Mr Lau, who appears for the defendant with leave of the Registrar, explains the defendant is seeking to remove the 2^nd Condition altogether.

(3)  By paragraph 3 of the summons, the costs of the application.

Grounds for the application

4.  In summary, the defendant’s reasons for the application, as appeared by its written submission and Mr Lau’s oral submissions, are: (1) The plaintiff’s submissions for the hearing on 31 July 2012 were inaccurate and unreasonable; (2) The plaintiff acted unreasonably in presenting a winding-up petition against the defendant in HCCW251/2010; (3) It is unreasonable to implement the 2^nd Condition before the hearing of the defendant’s appeal; (4) The defendant had a counterclaim for damages against the plaintiff; (5) The defendant was given leave to appeal against the District Court Judgment and a stay of execution pending appeal was also granted; and (6) The shareholder of the defendant was unwilling to pay the $23,500 ordered under the 2^nd Condition.

Decision

5.  None of the reasons put forward by the defendant is tenable.  In respect of the first to third reasons, it should be remembered that as a result of the defendant’s failure to provide by 21 May 2012 the $50,000 security for the plaintiff’s costs in the appeal (as provided by paragraph 1 of the Order dated 22 March 2012), the automatic sanction under paragraph 4 of the same Order took effect and the defendant’s appeal stood dismissed.  It matters not that the defendant indicated it was in a position to pay the amount into court a day later[2]. For reasons set out in the Reasons for Decision dated 3 August 2012, I permitted the appeal to be reinstated, but subject to two conditions.  The effect of my order is that the appeal remains dismissed and will only be reinstated until after full compliance of both conditions.  In seeking to defer the compliance of the 2^nd Condition until after the hearing of the appeal or to do away the 2^nd Condition, the defendant is effectively trying to re-open its last application and to overturn the order made on 31 July 2012. This is impermissible.  Finality is an important aspect of our legal system. An application becomes concluded once it has been heard and adjudicated upon. The order made upon the application then takes effect and should be fully observed and followed.  Any attempt to renew the application or to overturn or avoid the effect of the order made by means of further application is an abuse of the process of the court.

6.  Turning to the 4^th and 5^th reasons, they are entirely irrelevant.  The defendant’s last application (by summons dated 22 June 2012), the hearing on 31 July 2012 and the wasted costs incurred in HCCW251/2010 would not have been necessary had it not been for the defendant’s failure to comply with paragraph 1 of the Order dated 22 March 2012.  Further, in making the last application, the defendant was seeking the indulgence of the court.  Objectively viewed, there is nothing unfair or unreasonable in requiring the defendant to pay the plaintiff’s costs and thrown away as one of the conditions for the reinstatement of its appeal.  The condition is merely a consequence of the defendant’s failure to comply with the court order.  The strength or otherwise of the defendant’s case and/or that there was a counterclaim against the plaintiff are of no relevance; they cannot afford a basis for exempting the defendant from the consequences of its own failing.    

7.  Likewise, the unwillingness of the defendant’s shareholder to pay the costs is irrelevant.  If the shareholder wishes to reinstate the appeal, then he/she will have to see to it that the 2^nd Condition is duly complied with.  

Order on the defendant’s summons

8.  Accordingly, I dismiss the defendant’s summons.

9.  The plaintiff seeks costs of the application on indemnity basis. It is submitted by Mr Shaw that the application is vexatious and the attempt to re-argue the 2^nd Condition is an abuse of the process, such that the court ought to demonstrate its disapproval by a higher scale of costs. The defendant, through Mr Lau, says that costs should be in the cause of the appeal. It is said that when he presented the summons for filing, he was told the summons had to be referred to me before a hearing date would be given. By letter dated 9 August 2012, the plaintiff’s solicitors indicated it objected to the summons and also provided the available dates of Mr Shaw for the purpose of fixing a hearing date. In short, Mr Lau contends that the court could have refused to hear the summons and the costs of the hearing come about because of the court’s decision to list the summons for hearing. 

10.  I am bound to say this is an extraordinary argument, which must be rejected.  While the court has inherent power to prevent it from being vexed and abused by repeated interlocutory applications, it is an exceptional power that should be exercised sparingly and cautiously.  It is not the court’s ordinary business to dispose of summonses without a hearing, still less to refuse listing summonses for hearing. Further, the duty is on a litigant to deliberate carefully, including considering the costs implication, before making any court application.  It is not the court’s function to scrutinise summonses and to decide whether the summons is sufficiently meritorious to be listed for hearing.  There is, in short, no reason to depart from the usual rule of costs follow event.  The defendant’s summons having been dismissed, the defendant should pay the plaintiff the costs of the application.  

11.  As to the scale on which costs should be awarded, the defendant is coming very close to being vexatious and abusive. Discounting what went before the Registrar for Civil Appeal, this is the second time that the defendant seeks to re-litigate on a matter that had been argued and determined.  Previously, it had sought to re-open the issue of security for costs, notwithstanding the application had been heard and an order made.  On this occasion, it seeks to re-open the terms upon which the defendant’s appeal may be allowed to be reinstated, after the matter had been argued and adjudicated upon.  Having regard to the fact that the defendant is unrepresented, I will not make an indemnity costs order on this occasion, but the defendant and Mr Lau should take note that the court will not hesitate to impose indemnity costs order or other appropriate sanctions on future occasions.

12.  In respect of the plaintiff’s costs of this application, I assess it at $8,000 on gross sum basis. This is on account of two hours of Mr Shaw’s time (i.e. 0.5 hour on preparation and 1.5 hours on the hearing) at the hourly rate of $4,000.

13.  In summary, the order I make on the defendant’s summons is as follows:

(1)  The summons is dismissed.

(2)  The defendant pays the plaintiff the costs of the application assessed at HK$8,000.

Oral application to extend time

14.  Mr Lau makes an oral application to extend the time for complying with the 2^nd Condition.  He seeks an extension of two months.  Primarily, he says that the defendant is impecunious and two of the three shareholders, who are his family members, are unwilling to finance the defendant.  He, being the third shareholder, is hoping to persuade them to provide funds to the defendant and if unsuccessful he will provide money by raising a credit card loan.  For these reasons, he needs more time to deal with the 2^nd Condition.

15.  I accept, in appropriate cases, the court may grant time extension to enable a party to raise funds to meet a court order.  I am however not prepared to grant a two-month extension to the defendant. In the first place, Mr Lau should have proceeded promptly to arrange funds for the defendant to meet the 2^nd Condition as soon as he is aware the other shareholders are unwilling to put up funds.  Had he done so, the 30 days’ period provided by the 31 July 2012 order would have been sufficient.  Instead, the defendant chose unwittingly to issue the summons dated 7 August 2012. Secondly, although Mr Lau says the arrangement of credit card loan needs time, there are no materials to show that it requires the two months sought. Thirdly, the defendant’s appeal presently stands dismissed.  The plaintiff cannot be expected to incur costs to prepare and instruct counsel for the appeal until it is certain that it will be heard, namely, until such time when the defendant has met both conditions and the appeal is revived.  The two-month extension sought by the defendant (i.e. until 15 October 2012) means the plaintiff is put in a state of uncertainty until about three weeks before the date initially scheduled for the appeal.  This causes prejudice to the plaintiff in that it will have very limited time to prepare for the appeal or, alternatively, it will be put to the burden of making preparation and incurring costs which may well turn out to be futile.  There is, at the same time, inconvenience to the court’s dairy.  For these reasons, I will only grant a one-month extension. Accordingly, the time for complying with the 2^nd Condition is extended to 15 September 2012.

          

	(Carlye Chu)
	Justice of Appeal

Mr Geoffrey Shaw of Haley & Co for the plaintiff (respondent).

The defendant (appellant), unrepresented, appeared by its director, Mr Lau Chun Ming, with leave of Registrar, High Court.

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[1] The appeal was, pursuant to paragraph 4 of the Order dated 22 March 2012, dismissed consequential upon the defendant’s failure to provide security for the plaintiff’s costs in the appeal as ordered by paragraph 1 of the same order.

[2] See paragraph 5 of the Reasons for Decision dated 3 August 2012.

CACV 250/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 250 OF 2010

(ON APPEAL FROM DCCJ NO. 1569 OF 2008)

________________________

BETWEEN
	SCHINDLER LIFTS (HONG KONG) LTD	Plaintiff (Respondent)
	and
	NIKKO SERVICES LTD	Defendant (Appellant)

Before: Hon Chu JA in Chambers

Date of Hearing: 31 July 2012

Date of Judgment: 31 July 2012

Date of Handing Down Reasons for Decision: 3 August 2012

________________________

REASONS FOR DECISION

________________________

 

Introduction

1. On 22 March 2012, upon the plaintiff’s application, I ordered the defendant to provide security for the plaintiff’s costs in the appeal in the following terms (“22-3-2012 Order”):

(1)  The defendant shall on or before 21 May 2012 provide security for the plaintiff’s costs in the appeal in the amount of $50,000 either by way of payment into court or by a bank guarantee to the satisfaction of the plaintiff, or failing agreement, as approved by the Registrar, High Court.

(2)  If the security is provided by way of a bank guarantee,

(a)the defendant shall on or before 26 April 2012 provide the draft to the plaintiff’s solicitors for approval;

(b) the plaintiff’s solicitors shall on or before 3 May 2012 provide to the defendant their comments (if any); and

(c) where there is no agreement on the terms of the bank guarantee, the defendant shall on or before 10 May 2012 submit the draft to the Registrar for approval.

(3)  Pending the provision of the security, all further proceedings in the appeal are stayed.

(4)  In the event the defendant fails to provide the security by 21 May 2012, the appeal shall, without further order, stand dismissed with costs to the plaintiff to be taxed if not agreed.

2. The defendant did not provide the security for costs by 21 May 2012.  Pursuant to paragraph 4 of the 22-3-2012 Order, the defendant’s appeal stood dismissed with costs to the plaintiff.

3. On 22 June 2012, the defendant issued a summons applying for:

(1)  Extension of time to 30 July 2012 to comply with paragraph 1 of the 22-3-2012 Order;

(2)  Stay of execution of paragraph 4 of the 22-3-2012 Order;

(3)  Variation and discharge of paragraphs 19 and 20 of the Judgment dated 12 May 2010; and

(4)  “The relief that may be awarded to the appellant as the Court of Appeal considered applicable. Such as leave to adduce the fresh evidence.”

4. At the hearing of the summons, I reinstated the appeal on two conditions. My reasons for the decision appear below.

The defendant’s summons

5. One day after the deadline for complying with the order for security for costs (i.e. 22 May 2012), the defendant wrote to the court requesting permission to pay $50,000 into court notwithstanding that the time for so doing had expired.  In response, the court wrote to the parties enquiring whether the plaintiff agreed to the defendant’s request, failing which, the defendant was reminded that it would have to make a formal application by way of an inter-partes application.  The plaintiff did not agree to the defendant’s request.  Accordingly, the court wrote to the defendant on 24 May 2012 pointing out that it had to make an application.  The defendant did not issue any application.  By letter dated 14 June 2012, the court informed the parties that the hearing date for the defendant’s appeal (8 and 9 November 2012) would be vacated since pursuant to paragraph 4 of the 22-3-2012 Order, the defendant’s appeal stood dismissed with costs to the plaintiff.  The defendant wrote on 15 June 2012 indicating that “we are in the process of issuing the summons”.  On 18 June 2012, I directed that unless by 4:00 pm on 22 June 2012 the defendant issued the summons to seek rectification of the position, the hearing dates shall be vacated. 

6. On 22 June 2012, the defendant issued the present summons and filed a supporting affirmation.  The bulk of the contents of the affirmation and seven of the eight exhibits, however, are to advance the defendant arguments for the substantive appeal.  Then on 16 July 2012, the defendant lodged with the court a 12-page written submission.  On 26 July 2012, the plaintiff’s solicitors lodged a written submission in opposition to the application.  On the same day, the defendant lodged an amended submission that ran up to 16 pages together annexure that include transcripts of the District Court trial, all of which were not exhibits to the supporting affirmation.  Then on 30 July 2012, one day before the hearing of the summons, the defendant, by way of supplementary submission, lodged a chronology on the application for security for costs, accompanied by a hearing bundle containing documents that are not part of the evidence in support of the present application. 

7. It appears from the written submissions of Mr Lau, who was given leave to represent the defendant, that the defendant was seeking a wide range of relief.  The defendant sought, on the one hand, an extension of time to provide security for costs and, on the other hand, to set aside the 22-3-2012 Order for what was said to be a false statement made by Mr Shaw in an earlier affirmation filed in support of the plaintiff’s application for security against costs.  In addition, it applied for an order overturning the Judgment of the trial judge and further for leave to adduce new evidence. 

8. I had in my Reasons for Decision handed down on 30 March 2012, dealing with the plaintiff’s application to revoke the leave given to Mr Lau to represent the defendant (paragraphs 30-35), commented on Mr Lau’s approach and handling of the appeal and pointed out the importance of a disciplined approach to the conduct of litigation and a party’s obligation to abide by court directions and orders even though they are not in his favour.  Regrettably, none of these is heeded. 

9. There is, among other things, no justification for the wide ranging relief sought when the defendant’s appeal was on record dismissed and it was coming to the court for relief from the sanction.  The situation is aggravated by the fact that it is only in the written submissions that the defendant made plain that by paragraph 2 of the summons, it was seeking to set aside the 22-3-2012 Order and that by paragraph 4 of the summons, it is applying for leave to adduce fresh evidence.  The voluminous papers that the defendant put before the court shortly before the hearing serves to further aggravate the unsatisfactory state of affairs. 

10. In the circumstances, I indicated to Mr Lau at the outset of the hearing that the hearing should only focus on whether relief from the sanction imposed in paragraph 4 of the 22-3-2012 Order should be granted; and the other applications would not be considered.  Neither would I consider documents or matters that were not properly in evidence or submissions that are irrelevant to the subject matter of the hearing.

Relief from sanction

11. I turn to the issue of whether relief from the sanction imposed in paragraph 4 of the 22-3-2012 Order.  Order 2 rule 4 of the Rules of the High Court, Cap.4A, provides:

“Where a party has failed to comply with a rule or court order, any sanction for failure to comply imposed by the rule or court order has effect unless the party in default applies to the Court for and obtains relief from the sanction within 14 days of the failure.”

12. Hence, upon the defendant failing to provide security for costs by 21 May 2012 as ordered by paragraph 1of the 22-3-3012 Order, the sanction imposed by paragraph 4 of the same Order takes effect because the defendant had not applied for and obtained relief from the sanction within 14 days from 21 May 2012.  In this regard, the defendant’s summons was inadequate in that it merely asked for an extension of time to comply with paragraph 1 of the 22-3-2012 Order when it should have applied, in addition, for an order reinstating the appeal, being a relief from the sanction imposed by paragraph 4 of the 22-3-2012 Order.  The shortcoming in the defendant’s summons is a matter that is relevant to the issue of costs.

13. As to how the court should exercise its discretion, Order 2 rule 5(1) of the Rules of the High Court provides:

“(1) On an application for relief from any sanction imposed for a failure to comply with any rule or court order, the Court shall consider all the circumstances including-

(a) the interests of the administration of justice;

(b) whether the application for relief has been made promptly;

(c) whether the failure to comply was intentional;

(d) whether there is a good explanation for the failure to comply;

(e) the extent to which the party in default has complied with other rules and court orders;

(f) whether the failure to comply was caused by the party in default or his legal representative;

(g) in the case where the party in default is not legally represented, whether he was unaware of the rule or court order, or if he was aware of it, whether he was able to comply with it without legal assistance;

(h) whether the trial date or the likely trial date can still be met if relief is granted;

(i) the effect which the failure to comply had on each party; and

(j) the effect which the granting of relief would have on each party.”

Order 2 rule 5(2) further requires the application to be supported by evidence. Ultimately, what the court has to consider is whether, in all the circumstances of the case, it is just to make an order granting relief from the consequences that would otherwise flow.

14. In the present case, the defendant’s reason for failing to comply with the order is that although it had eventually obtained from its contributors $50,000, it had decided to provide a bank guarantee instead of making payment into court because in its previous dealing with the plaintiff, letters of credit were involved.  However, owing to financial constraints, including a pending winding-up petition presented by the plaintiff, the defendant had met with difficulties in procuring a bank guarantee.  It would also appear from the emails exhibited to Mr Lau’s affirmation that he had attempted to prepare the draft of the bank guarantee.  Not surprisingly, the draft he came up with was not in line with the usual bank guarantee and did not meet the agreement of the plaintiff.

15. Mr Shaw submitted that these do not amount to good explanations for the non-compliance.  I agree.  Plainly, the defendant, with the money from its shareholder(s), could have simply made a payment into court.  The proffered reason for using a bank guarantee and for insisting in this course, even after it encountered difficulties in procuring the bank(s) to issue it, is unacceptable.

16. That said, however, I am not prepared to conclude on the materials before the court that the defendant intentionally flouts the Order.  I am also conscious that the consequence for the non-compliance is drastic.  On the other hand, while there would be prejudice to the plaintiff if relief were to be granted, it is not irreparable and could be compensated by an appropriate costs order.  It is further to be noted that the hearing of the appeal is still some three months away.

17. In all the circumstances of the case, I am of the view that it is just to grant the defendant relief from the sanction.  I am further of the view that the relief should be granted on conditions.

Conditions for the grant of relief

18. Mr Shaw submitted that the conditions should consist of: (i) an order directing the defendant to provide the security for costs within a short period of time; (ii) an order directing the defendant to pay within 14 days the plaintiff’s costs of and thrown away by the non-compliance; and (iii) an order compelling the defendant to appoint a legal representative to act for it in these appeal proceedings.

19. I accept (i) and (ii) are appropriate conditions to be imposed.  I however do not consider it is appropriate to impose (iii) as a condition.  The plaintiff had previously applied by summons to revoke the leave granted to Mr Lau to represent the defendant relying, among other grounds, on the unsuitability of Mr Lau to be the defendant’s representative.  For the reasons stated in the Reasons for Decision dated 30 March 2012 (paragraphs 23 to 35), I had refused the application.  Condition (iii) is in effect seeking to revoke the leave granted to Mr Lau to represent the defendant in these appeal proceedings.  Although the way in which Mr Lau conducted the present application is unsatisfactory, it does not amount to a material change of circumstance justifying re-opening the issue of the defendant’s representation.

20. Returning to the conditions to be imposed on granting relief from the sanction, since Mr Lau informed the court that he had brought with him the money for the security for costs, the defendant should comply with paragraph 1 of the 22-3-2012 Order by 4:00 pm on the day of the hearing by paying into court $50,000 as security for the costs of the plaintiff in the appeal. 

21. As for the plaintiff’s costs, it has two aspects.  The first is the costs of the application.  The plaintiff claimed: (i) 3.5 hours of Mr Shaw’s time in the work and preparation leading to the hearing; (ii) 2.5 hours of an assistant solicitor in perusing and considering the Chinese written submissions and documents forwarded by the defendant; and (iii) 1.75 hours that Mr Shaw spent on attending the hearing.  The hourly rate of Mr Shaw, who was admitted to practice in Hong Kong in 1988, is HK$4,000 and that of the assistant solicitor, who was newly admitted for one to two years, is $2,000.  The amount claimed is therefore HK$26,000 ($4,000 x (3.5+1.75) hr + $2,000 x 2.5 hr). The second aspect is the costs wasted or thrown away by the non-compliance of the 22-3-2012 Order.  As mentioned above, the plaintiff had petitioned for the winding up of the defendant.  By reason of the defendant’s appeal, the proceedings were ordered to be adjourned to the first Monday after the disposal of the appeal.  Consequently, the petition was restored for hearing upon the dismissal of the appeal under paragraph 4 of the 22-3-2012 Order.  When the defendant issued the present summons, the plaintiff’s solicitors had to write to the Court to vacate the hearing.  All these are costs wasted or thrown away by the non-compliance with the 22-3-2012 Order.  The plaintiff claimed $3,600, represented by (i) 0.5 hour of Mr Shaw’s time ($4,000 x 0.5 hr) ; and (ii) $1,600 being the Official Receiver’s costs. In total, the plaintiff’s costs as claimed is $29,600.

22. On the costs of the application, the involvement of the assistant solicitor was necessitated by the Chinese submissions and documents lodged by the defendant.  Given, however, the costs are assessed on party-and-party basis and that both Chinese and English are official languages, I am of the view that the plaintiff should only be allowed the fee of one fee earner (i.e. Mr Shaw’s fee and not that of the assistant solicitor).  Taking a broad brush approach, the plaintiff’s costs of the application is assessed at $20,000; and the plaintiff’s costs thrown away by the non-compliance with the 22-3-2012 Order is assessed at $3,500, making a total of $23,500. The defendant will have 30 days within which to make payment.

Paragraphs 2 to 4 of the summons

23. For completeness sake, I will say a few words about paragraphs 2 to 4 of the summons, on which I will make no order. 

24. On paragraph 2 of the summons, although it makes reference to paragraph 4 of the 22-3-2012 Order, what the defendant seeks is an order setting aside the security for costs order contained in paragraph 1 of the same order.  There are three reasons why this must fail. Firstly, the plaintiff’s application for security for costs had been heard and determined against the defendant.  The order had also been sealed and filed. There is no proper basis for re-opening the application.  Secondly, insofar as the defendant says that the order should be set aside because it was obtained by reason of a false statement, it is misconceived.  The defendant’s complaint stems from paragraph 4 of Mr Shaw’s affidavit filed on 16 January 2012, which reads:

“4.  On 16 November 2010 I wrote to Nikko making a demand for security for costs. That letter reminded Nikko that during the trial Mr Lau had informed the judge that Nikko was no longer doing business. Now produced and shown to me marked “GIS-2” is a copy of that letter. Nikko did not reply to that letter.  In other words, it neither denied Mr Lau had made that admission to the judge nor disputed that in November 2010 Nikko was no longer doing business.”  (emphasis added)

On a proper reading of the paragraph, what Mr Shaw was saying is that the defendant did not deny it was not doing business or that its representative, Mr Lau, had at the trial told the judge this fact.  The paragraph does not, as Mr Lau suggested, say that the defendant did not respond to the plaintiff’s demand for security for costs.  Thirdly, in any event, whether the defendant had or had not responded to the demand for security for costs has no bearing on whether it should be ordered to provide security for costs.  Still less can it amount to a ground for invalidating the order made on 22 March 2012. 

25. On paragraph 3 of the summons, the court cannot at this interlocutory stage decide on the merits of the appeal, let alone overturning the trial judge’s findings and decision.

26. Finally on paragraph 4 of the summons, it is only in the written submissions that Mr Lau said it was meant to be an application to adduce fresh evidence at the hearing.  Neither the summons nor the affirmation identifies the fresh evidence sought to be adduced.  Although the written submission made reference to Ladd v. Marshall, the affirmation contains nothing to demonstrate how the three requirements are met.  Neither do the written submissions make good the defendant’s case on this. 

Order

27. In conclusion, the order I made is as follows:

(A)  The defendant’s appeal is reinstated on the following conditions:

(1)  The defendant shall by 4:00 pm on 31 July 2012 comply with paragraph 1 of the Order dated 22 March 2012 by paying $50,000 into court as security for the costs of the plaintiff in the appeal; and

(2)  The defendant shall within 30 days from the date of the order (i.e. 31 July 2012) pay the plaintiff the costs of the summons and the costs thrown away by the non-compliance with the Order dated 22 March 2012, assessed at HK$ 23,500 on gross sum basis. 

(B)  For the avoidance of doubt, time shall run during the vacation.   

	(Carlye Chu)
	Justice of Appeal

Mr Geoffrey Shaw of Haley & Co, for the plaintiff (respondent).

The defendant (appellant), unrepresented, appeared by its director, Mr Lau Chun Ming, with leave of the Registrar

CACV 250/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 250 OF 2010

(ON APPEAL FROM DCCJ NO. 1569 OF 2008)

________________________

BETWEEN

	SCHINDLER LIFTS (HONG KONG) LTD	Plaintiff (Respondent)
	and
	NIKKO SERVICES LTD	Defendant (Appellant)

________________________

Before: Hon Chu JA in Chambers

Date of Hearing: 22 March 2012

Date of Judgment: 22 March 2012

Date of Handing Down Reasons for Decision: 30 March 2012

________________________

REASONS FOR DECISION

________________________

 

Introduction

1.  The subject matter of this appeal is the Judgment of HH Judge Chow given on 12 May 2010 by which he gave judgment for the plaintiff in the sum of $166,825.70 together with interest and costs.

2.  On 20 August 2010, Master Ko gave leave for the defendant (appellant) to be represented by its director, Mr Lau Chun Ming, in applying for leave to appeal and to prosecute the appeal, if leave was granted.

3.  On 8 November 2010, the Court of Appeal under HCMP 1619 of 2010 granted the defendant leave to appeal against the Judgment out of time and further ordered a stay of execution of the Judgment. The Notice of Appeal was filed on 15 November 2010.  On 8 December 2011, the Registrar of Civil Appeals gave direction for the appeal to be set down for hearing.  On 15 December 2011, the defendant applied to fix the date of the hearing of the appeal.  The appeal is now scheduled to be heard on 8 and 9 November 2012.

Applications before the Court

4.  By summons filed on 28 December 2011, the plaintiff applied for: (1) security for costs of the appeal; and (2) an order revoking the leave given to Mr Lau to represent the defendant in this appeal.

5.  At the conclusion of submissions, I ordered the defendant to provide security of costs in the amount of $50,000 by 21 May 2012 with consequential directions and costs and dismissed the application to revoke the leave given to Mr Lau to represent the defendant with costs.  My reasons appear below.

Security for costs application

6.  Under Order 59 rule 10(5) of the Rules of the High Court, the Court of Appeal may, in special circumstances, order that such security shall be given for the costs of an appeal as may be just.

7.  The principles governing an application for security for costs were those set out in Chung Kau v. Hong Kong Housing Authority & Ors [2004] 2 HKLRD 650.  Special circumstances that may give rise to an order for security for costs include impecuniosity of an appellant or proof that the respondent will be likely to encounter undue delay or be put to undue expense in enforcing an order for costs of the appeal.  The court however retains a discretion and will consider other relevant facts such as the strength of the appeal in deciding whether it would be just to order that security for costs be provided.  Once the existence of special circumstances has been demonstrated, it is generally up to the party resisting the application to demonstrate countervailing factors militating against an order being made.

8.  In the present case, the plaintiff relied on what Mr Lau (who was also given leave to represent the defendant in the District Court) had informed the court at the commencement of the trial on 15 January 2010 and also the Registrar of Civil Appeals at one of the direction hearing on 24 January 2011.  The transcripts of the hearings recorded Mr Lau as saying that the defendant “was going to close” and “has ceased operation”.  In Mr Lau’s affidavit opposing the application, he had not sought to contradict these. In his oral submissions, he explained that as the defendant has to incur warehouse expenses for storing the goods in dispute, it has a liquidity problem and so as to be fair to customers, it has not entered into new contracts or conducted new business.  Mr Lau also said that the goods in dispute are an asset of the defendant and it was valued to be worth $400,000 odd in the audited report of 2008.  He added further that the defendant’s shareholders will support the company to continue with the litigation.  On the materials before the court, I am satisfied that the defendant is shown to be impecunious.

9.  In opposing the application, Mr Lau raised three matters.  The first is that the plaintiff had delayed in making the application.  The second is that the defendant had obtained leave to appeal and also a stay of execution of the judgment, which is demonstrative of a high chance of the appeal succeeding.  The third is that the court should exercise the discretion to dispense with the requirement of security.

10.  As a matter of principle, applications for security for costs should be made promptly.  It should be made as soon as possible after the appeal is set down: Hong Kong Civil Procedure 2012, vol. 1 para. 59/10/34. The present application was made on 28 December 2011, less than two weeks after the appeal had been set down.  It is not a late application.  Further, at the early stage of the appeal proceedings, on 16 November 2010, the plaintiff’s former solicitors had already written to the defendant to demand for security and also intimated that an application would be made if the defendant did not respond.  The defendant had therefore been forewarned.

11.  In addition, Mr Shaw referred to paragraph 42 of Practice Direction 4.1, which provides that: “All applications and appeals in which the applicant or appellant or respondent is acting in person will be set down in the first instance for a preliminary directions hearing before the Registrar of Civil Appeals, …” and paragraph 43, which provides that: “No application or appeal will be placed or listed before the Court of Appeal or any Judge thereof until such directions have been given and the Registrar of Civil Appeals has certified that those directions have been complied with.”  It was explained that the plaintiff had withheld making the application until after the Registrar of Civil Appeals had given leave for the appeal to be set down. This point had been alluded to in the letter dated 12 December 2011 from the plaintiff’s solicitors to the Registrar of Civil Appeals enquiring whether the Registrar had made the certification under paragraph 43 of the Practice Direction.

12.  Having regard to the submissions made on behalf of the plaintiff, I do not accept there had been delay in making the application and/or the timing of the application has in any way caused any prejudice to the defendant such that the court should exercise its discretion against the application.

13.  I turn next to consider Mr Lau’s arguments on the merits of the appeal and the exercise of the court’s discretion.  His point is that although the defendant has liquidity problem, it has assets (made up of the goods sold by the plaintiff to it) and its shareholder(s) has/have been supporting and will continue to support the appeal.  In the light of all these coupled with the very strong merits of the appeal, the court should exercise its discretion against the making of an order for security.

14.  In my view, the financial position of the defendant, including the reliance on the financial support of its shareholders, do not assist the defendant.  On the contrary, they afford grounds for ordering security.

15.  As to the merits of the appeal, the plaintiff’s claim in DCCJ 1569/2008 was for the unpaid balance of the price of goods sold and delivered under a contract made on 21 January 2007.  The goods in question were the component parts of elevators that were dismantled from a construction site.  The amount claimed by the plaintiff was $189,040.  The defendant counterclaimed against the plaintiff for damages for defective goods, short delivery and late delivery.  The trial judge found for the plaintiff on the claim.  After deducting the costs of 4 sets of car and counterweight buffer that had not been delivered ($2,214.30) and the appraised value of the damaged parts ($20,000), the trial judge entered judgment for the plaintiff in the sum of $166,825.70 together with interest and costs and dismissed the defendant’s counterclaim.

16.  In granting leave to appeal and staying the execution of the judgment, Cheung JA had regard to two of the contractual provisions.  The first is that the defendant was required to move away the goods within 14 days from receipt of the plaintiff’s notice.  The second is that the defendant could make a claim to the plaintiff within a reasonable time in respect of goods that did not comply with the contractual specifications.  Cheung JA observed that the trial judge did not appear to have dealt with these provisions when observing that the defendant should not have moved away the goods if indeed they did not conform to contractual stipulations and there was no opportunity for inspecting the goods at the site.  His Lordship considered that the defendant’s acts in moving away the goods and making part payment did not necessarily mean that the goods were in order.

17.  For the purpose of amounting to countervailing factors that would militate against the making of an order for security, it has to be demonstrated that the intended appeal has strong merits.  This is a higher threshold than that for giving leave to appeal, which is that the intended appeal should have a reasonable prospect of success: see section 63A(2) of the District Court Ordinance, Cap. 336.  I, however, accept that the court will have to be satisfied that the appeal has a real prospect of success before it will stay the execution of a judgment and this is not an easy threshold.

18.  At this interlocutory stage, when considering the merits of the appeal for the purpose of a security for costs application, the court should not embarked upon a detailed examination of the appeal.  It needs only form some sort of a preliminary, even instinctive, view: Chung Kau v. Hong Kong Housing Authority & Ors, op cit.

19.  I have considered the grounds of appeal put in by the defendant after leave to appeal was given.  They are wide ranging, unfocused and go much beyond the issues identified by the court when granting leave to appeal.  They even refer to material that came into existence after the trial: see paragraph 2(i) on page 4 of the Notice of Appeal.  I am not persuaded that the merits of the defendant’s appeal are so strong as to militate against the making of an order for security for costs.

20.  In short, I am satisfied that it is just to order security for costs be provided.

21.  As to quantum, the plaintiff’s skeleton bill is in the amount of $299,000.  Having regard to the relatively small amount involved in the appeal and in order not to stifle the appeal, I consider it is appropriate to order security for part of the plaintiff’s costs of the appeal in the sum of $50,000.

22.  The defendant will have until 21 May 2012 to provide the security either by way of payment into court or by furnishing a bank guarantee to the plaintiff’s satisfaction or, failing agreement between the parties, to be approved by Registrar, High Court.  Pending the provision of the security, all further proceedings in the appeal shall be stayed.  In the event the defendant fails to provide the security within the stipulated time, the appeal shall, without further order, stand dismissed with costs to the plaintiff to be taxed if not agreed.

The defendant’s representation

23.  The plaintiff’s application for revocation of the leave given to the defendant to be represented by Mr Lau in this appeal is made on three bases.  Firstly, the plaintiff raised doubts as to whether the Registrar’s jurisdiction under Order 5 rule 6 of the Rules of the High Court extends to appeal proceedings.  Secondly, it was said that because leave should as a matter of principle only be granted in exceptional circumstances, which are not apparent from the facts of this case, the leave given to Mr Lau should be revoked.  Thirdly, the plaintiff contended that Mr Lau was not a suitable or competent person to represent the defendant.

24.  Order 5 rule 6 provides that:

“Right to sue in person (O. 5, r. 6)

(1) Subject to paragraph (2) and to Order 80, rule 2, any person (whether or not he sues as a trustee or personal representative or in any other representative capacity) may begin and carry on proceedings in the High Court by a solicitor or in person.

(2) A body corporate may not begin or carry on any such proceedings in the Court otherwise than by a solicitor except-

(a) as expressly provided by or under any enactment; or

(b) where leave is given under paragraph (3) for it to be represented by one of its directors.

(3)     (a) An application by a body corporate for leave to be represented by one of its directors shall be made ex parte to a Registrar and supported by an affidavit, made by the director and filed with the application, stating and verifying the reasons why leave should be given for the body corporate to be represented by the director.

(b) The relevant resolution of the board of the body corporate authorizing the director to appear on its behalf if leave is granted shall be exhibited to the affidavit.

(4) No appeal shall lie from an order of the Registrar under paragraph (3) giving or refusing leave.

(5) Leave given by a Registrar under paragraph (3) may be revoked by the Court at any time.

(6)     No appeal shall lie from an order of the Court revoking leave given by a Registrar.”

25.  In Kone Elevator (HK) Ltd v. Senfield Ltd (Unreported) CACV 216/2002, 24 February 2003, the Court of Appeal held that it had no jurisdiction to entertain an application by the corporate defendant to be represented by its director in the appeal.  Woo JA (as he then was), giving the judgment of the Court, examined the meaning of the term “the Court” in rule 6(2), (5) and (6) and held that it should include both the Court of First Instance and the Court of Appeal (at paragraphs 5 to 7):

“5. Sub-rule (2) of Order 12, rule 1 of the RHC allows a defendant in an action begun by writ to acknowledge service of the writ and give notice of intention to defend by a person duly authorized to act on its behalf. However, sub-rules (2A), (2B), (2C) and (2D) of Order 12, rule 1 of the RHC are respectively in terms identical to those in sub-rules (3), (4), (5) and (6) of Order 5, rule 6 cited above. It is clear from these two rules of the RHC that a body corporate in any High Court proceedings cannot, unless with leave of a Registrar, bring or carry on proceedings except by a solicitor. The decision of the Registrar in such an application is not appealable, although if he grants leave, the Court can revoke the leave.

6. The term of “the Court” used in sub-rules (2), (5) and (6) of Order 5, rule 6 of the RHC, and similarly in sub-rules (2C) and (2D) of Order 12, rule 1, unless the context otherwise requires, means the Court of First Instance (see Order 1, rule 4(2) of the RHC). In view of the absence of any rule conferring power on the Court of Appeal on representation of a body corporate, we consider that the term should include both the Court of First Instance and the Court of Appeal. Some support of this construction can be found from the wording of sub-rule (1) of Order 5, rule 6 where the term “High Court” is used, and the use of the term “the Court” in the sub-rules that follow sub-rule (1) may therefore be referable to the High Court.

7.   There is no provision in the RHC allowing the Court of Appeal to review the decision of a Registrar where he has refused leave to allow a director to represent a body corporate.  The necessary implication, in the context of the two rules of the RHC, is that decisions on the subject of representation of a body corporate in proceedings in the High Court is to be decided by a Registrar.  It is only where he has granted leave that the Court of First Instance or the Court of Appeal may revoke such leave.  The Court of Appeal therefore does not have jurisdiction to entertain any application for such leave, or entertain any appeal from a Registrar’s refusal of such leave.”

26.  Mr Shaw however relied on Hondon Development Ltd & Another v. Powerise Investments Ltd & Others (Unreported) CACV 296/2003, 11 December 2003, in which Yuen JA raised doubts as to whether there is jurisdiction to grant leave to a body corporate to be represented by its director to conduct an appeal.  In that case, it was noted that whereas rule 6(1) refers to “the High Court” which consists of the Court of First Instance and the Court of Appeal (section 3(1) of High Court Ordinance, Cap. 4), rule 6(2) refers only to “the Court” which means the Court of First Instance only, unless the context otherwise requires (Order 1 rule 4(2) of Rules of the High Court). However, Yuen JA also accepted that since rule 6(2) follows rule 6(1), it may well be, as a matter of construction, the expression “the Court” in rule 6(2) should be read consistently with “the High Court” in rule 6(1).  On the other hand, it was pointed out that Order 5 governs the mode of beginning civil proceedings in the Court of First Instance while appeals to the Court of Appeal are governed by Order 59.  Accordingly, Yuen JA was of the view that “Order 5 rule 6 probably does not apply to appeals, with the result that the master probably did not have jurisdiction to grant leave.”

27.  For my part, I consider I am bound by the judgment of the full court in Kone Elevator (HK) Ltd v. Senfield Ltd.  Although Yuen JA had questioned whether Order 5 rule 6 gives the master jurisdiction to grant leave in appeal proceedings, she had expressly refrained from coming to a firm view on the issue and the observations are obiter.  It would also appear that the word “proceedings” in rule 6(2) is sufficiently wide to include appeal proceedings.  Further, I consider that in the absence of clear and explicit expressions, the court should be slow in concluding that the legislature intends that corporate litigant may only appeal by solicitors, having regard to the right of access to court inherent in Article 10 of the Hong Kong Bill of Rights, Cap. 383[1], which prima facie applies to a corporation[2], as much as it applies to a natural person.  Although the right of access to court is by its nature not absolute and may be subject to limitations, any restriction, including a requirement that corporate litigants have to be represented by solicitors in appeals, should only be in pursuance of a legitimate aim, proportionate to that aim and not such as to defeat the very essence of a corporate litigant’s right of access to court.

28.  I am therefore not persuaded that the leave granted to Mr Lau to represent the defendant should be revoked on the basis that it was given without jurisdiction in the first place.

29.  The second basis on which the plaintiff applied to revoke the leave was that there was no good reason to support the granting of leave.  Under Order 5 rule 6(3), when applying for leave to be represented by a director, a corporate litigant has to give reasons why leave should be given.  In Hondon Development Ltd & Another v. Powerise Investments Ltd & Others, at para. 18, it was held that lack of resources is per se not a good reason for the grant of leave.  In the present case, the grounds on which the defendant applied for leave are not known.  Mr Shaw had requested to inspect the affidavit and documents lodged in support of the leave application so as to understand the basis of the defendant’s leave application, but the request was refused by the Master. As the leave application was made in another proceeding, I have no information as to the grounds relied upon by the defendant. That being the position, I have to act on the basis that the Master was satisfied that leave should be given. It will not be right for me to speculate that the defendant’s application was not supported by proper reasons and to revoke the leave on such basis.

30.  I turn to the third basis of the revocation application, namely, the suitability of Mr Lau as the representative of the defendant.  Order 5 rule 6(5), in providing that the Court may revoke leave, has not specified the circumstances under which the jurisdiction may be exercised.  In my view, considerations that are relevant to the granting of leave will also be relevant factors for revoking leave.  These will include the financial ability of the corporation and whether the representative has been properly authorized.  Other factors that the court may take into account in deciding whether leave should be revoked include the competence and ability of the corporate representative to properly present the case of the corporation and discharge the duties of a litigant and whether, having regard to the nature of the action and the issues and their complexity, it will cause grave unfairness or injustice to the other party in the proceedings.  In Hondon Development Ltd & Another v. Powerise Investments Ltd & Others, op cit, the corporation was a one-property company.  Its financial statements show that it had made substantial advancement to a corporate director and it was unsecured, interest-free and with no fixed repayment terms.  The financial viability of the corporate director is unknown.  The corporation applied for leave to be represented by its director on the sole ground that its stringent financial condition prevented it from instructing lawyers to pursue an appeal.  Yuen JA considered that leave should not have been given by the Master and revoked the leave, observing that (at paragraph 18): “To permit a company with limited liability to purse proceedings without legal representation, at no financial risk to itself, its shareholders or directors, is inherently unfair to the other parties to the litigation.”  In the context of appeals, public interest will not be served if the leave procedure is mis-used by impoverished corporation to pursue unmeritorious or frivolous appeals so as to delay the enforcement of a judgment.  Where this is shown to be the case, leave may be revoked. Similarly, leave may be revoked to prevent abuse of process of the court.  An example will be where a natural person uses a corporate entity to circumvent a Restricted Proceedings Order.

31.  In the present case, Mr Shaw relied on the long and tedious process of preparing the appeal bundle as demonstrative of the unsuitability of Mr Lau to represent the defendant.  It was submitted that it would not be in the interest of justice for him to continue to have the conduct of the appeal on behalf of the defendant in that he would not be able to properly assist the court and that the appeal hearing would be unduly lengthened.  In opposing the application, Mr Lau referred to the fact that he is a registered lift and escalator engineer, a registered safety officer and also a member of the disciplinary board for inquiring into disputes between the Electrical and Mechanical Services Department and registered lift contractors.  He also referred to the “technical nature of the dispute”, by which I take it to mean that the dispute involves the technical specifications of lifts.

32.  As pointed out during the hearing, I do not question Mr Lau’s professional qualification and his expertise as a lift and elevator engineer.  It may also be that he had some experience of civil litigations as he said.  What is at the heart of the plaintiff’s complaint, however, is the approach adopted by Mr Lau in this appeal and whether he is able to properly discharge the duties of a litigant.

33.  In the first place, all litigants, whether legally represented or not, are expected to observe the rules and procedures and the directions of the court.  While courts are in general prepared to make allowance for unrepresented litigants because they are unfamiliar with the rules and procedures, this should not be at the expense of causing undue prejudice to the other party and undue delay to the proceedings.  In the present case, it was more than 15 months after the defendant obtained leave to appeal and a stay of the Judgment that the appeal was set down for hearing.  The bulk of the time was spent on sorting out the appeal bundles.  In addition to two lengthy direction hearings before the Registrar for Civil Appeals, voluminous correspondence had been exchanged between the parties and with the court over the issue of the appeal bundles.  The plaintiff has a legitimate concern over its costs position, which is made more acute by the small amount of its claim.  In my view, it is imperative that parties adopt a disciplined approach in the conduct of litigations; they must be prepared to abide by court directions even though they are not in their favour.  Equally, it is important that the court in the exercise of its case management powers ensures that the parties act expeditiously and move on with the case.

34.  Secondly, parties to civil litigation are not at war.  They are expected to act in the spirit of cooperation so that litigations are conducted fairly, efficiently and economically.  The hostility over, for example, the rescheduling of the direction hearing from 1 April to 5 May 2011 due to the unavailability of Mr Shaw is unnecessary.  Still less will it be necessary to resort to strong language and emotive words in correspondences.

35.  As said, I can understand the plaintiff’s concern over the defendant’s representation.  Mr Lau’s approach to the compilation of the appeal bundles has led to a period of delay and has caused costs to escalate.  I am, however, not prepared at this stage to revoke the leave granted to Mr Lau, due to two reasons. First, it does not appear from the materials presently before the court that Mr Lau was deliberately trying to prolong the proceedings.  The main problems over the preparation of the Appeal Bundle are as a result of Mr Lau not appreciating that an appeal is not a retrial and because of his distrust of the plaintiff.  Secondly, the appeal will be heard in about six months’ time and it is not envisaged that will be much activities in the interim period.

Orders

36.  In conclusion, the orders I made are as follows:

(1)     The defendant shall on or before 21 May 2012 provide security for the plaintiff’s costs in the appeal in the amount of $50,000 either by way of payment into court or by a bank guarantee to the satisfaction of the plaintiff, or failing agreement, as approved by the Registrar, High Court.

(2)     If the security is provided by way of a bank guarantee,

(a)   the defendant shall on or before 26April 2012 provide the draft to the plaintiff’s solicitors for approval;

(b)   the plaintiff’s solicitors shall on or before 3 May 2012 provide to the defendant their comments (if any); and

(c)   where there is no agreement on the terms of the bank guarantee, the defendant shall on or before 10 May 2012 submit the draft to the Registrar for approval.

(3)     Pending the provision of the security, all further proceedings in the appeal are stayed.

(4)     In the event the defendant fails to provide the security by 21 May 2012, the appeal shall, without further order, stand dismissed with costs to the plaintiff to be taxed if not agreed.

(5)     The costs of the application for security for costs shall be paid by the defendant to the plaintiff in any event, to be taxed if not agreed.

(6)     The application to revoke the leave given to Mr Lau to represent the defendant is dismissed.

(7)     The costs of the application to revoke leave shall be paid by the plaintiff to the defendant in any event, to be taxed if not agreed.

(8)     50% of the costs of the summons and of the hearing shall be apportioned to the application for security for costs with the remaining 50% to be the costs of the application to revoke leave.

	(Carlye Chu)
	Justice of Appeal

 

Mr Geoffrey Shaw of Haley & Co, for the plaintiff (respondent)

The defendant (appellant), unrepresented, appeared by its director, Mr Lau Chun Ming, with leave of the Registrar

---

[1] See A Solicitor v. The Law Society of Hong Kong [2006] 2 HKC 40 at para.81.

[2] In Otis Elevator Company (HK) Limited v. Director of Electrical and Mechanical Services [1995] 5 HKPLR 78, the Court of Appeal proceeded on the basis that the company’s right to a fair hearing was protected by Article 10 of HKBORO.