GLORY SKY FINANCE LTD v. CHEN JIANHUA AND ANOTHER

HCMP 2482/2014

[2022] HKCFI 2652

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2482 OF 2014

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D E C I S I O N

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A. INTRODUCTION

1.  This is the plaintiff’s (“P”) appeal against the decision of Master Hui (“Master”) dated 27 September 2021 (“Decision”) made in taxation proceedings in respect of the costs of P’s claim and the defendants’ (“Ds”) counterclaim.

2.  By the Decision, the Master dismissed P’s 3 Summonses with costs.  Whilst P’s 3 Summonses seek various orders, they may be broadly summarised as follows:

(a)  P’s Summons dated 11 November 2020 under O 3 r 5 of the Rules of High Court (“RHC”) for an order that the time to apply to the taxing master to review the taxation of Ds’ Bill of Costs filed on 12 August 2020 (“Ds’ Bill”) pursuant to O 62 r 33 of RHC be extended for 28 days (“1^st Summons”);

(b)  P’s Summons dated 20 November 2020 under O 62 r 17B of RHC for an order that the decision of the taxing master made at the taxation call-over hearing on 20 October 2020 against P (“Taxation Decision”) be set aside or varied, and for leave to P to file and serve a List of Objections to Ds’ Bill within 28 days (“2^nd Summons”); and

(c)  P’s Summons dated 5 January 2021 under O.62 r.17A of RHC for an order that the allocatur (i.e. final certificate of the taxing master) issued on 14 December 2020 (“Allocatur”) be set aside (“3^rd Summons”).

3.  I should also mention that P’s Notice of Appeal against the Decision (“NoA”), albeit dated 11 October 2021, was filed on 12 October 2021.  As the time limit for P to appeal is 14 days from the date of the Decision, the NoA is 1 day late.  Thus, P requires leave to appeal out of time.  For such purpose, P has issued a Summons for leave to file the 3^rd Affirmation of Ching Ming Yu (“Mr Ching”) to explain the delay.  I grant leave for such 3^rd Affirmation to be filed.

4.  In my view, P’s delay is entirely avoidable. Indeed, P has been duly reminded by a reply letter from Ds’ solicitors dated 5 October 2021 that “any appeal should be made within the Court’s stipulated time limit”.  That said, the delay is short (1 day) and there is no material prejudice to Ds.  In Re Jagseer Singh[2022] HKCA 14, the Court of Appeal emphasised at §15 that, while a delay of 7 days may not be regarded as significant, the prospect of success of the intended appeal is important and the court will not grant extension for a hopeless appeal to be pursued.  Therefore, whether leave is to be granted would, ultimately, turn on the prospect of success of P’s appeal.

B.     BRIEF BACKGROUND

5.  P is a licensed money lender.  Ds are husband and wife and tenants-in-common of a property at Grand Promenade, Tai Hong Street (“Property”).  Ds are based in the Mainland.  In gist, P’s claim is that it has made to Ds two loans secured by two charges on the Property in the total sum of HK$17,000,000, which loans Ds have defaulted in repayment.  Ds claim in defence that they are victims of a fraud, that the borrowers were in fact not them but fraudsters who impersonated them, so that they should not be held responsible for the loans or the charges.  Ds also counterclaim for declaratory relief and vacation of registrations of the two mortgages against the Property in the Land Registry.

6.  Due to P’s regular flouting of peremptory orders, it was ordered by Deputy High Court Judge Keith Yeung SC (as he then was) on 11 May 2018 that, unless P pays the sum of HK$1,500,000 into court by 4pm on 18 May 2018, P’s claim be dismissed without further order.  P did not pay such sum, and P’s claim was dismissed with costs on 18 May 2018.

7.  Further, by the Order of Master Hui dated 19 July 2019, P’s Amended Reply and Defence to Counterclaim was struck out for non-compliance with the Order of Master Lui dated 26 June 2019, and judgment was entered against P on Ds’ counterclaim with costs.

8.  On 12 August 2020, Ds filed the Notice of Commencement of Taxation (“NOCT”) which was served to P’s registered address under the cover of a letter from Ds’ solicitors dated 12 August 2020 (“12 Aug 2020 Letter”).  Such registered address was provided to P by Mastercorp Services Limited (“Mastercorp”).

9.  On 12 August 2020, Ds filed Ds’ Bill which was also served to P’s registered address, under the cover of the 12 Aug 2020 Letter.

10.  P did not raise any objection to Ds’ Bill within the time limit by 17 September 2020.

11.  On 23 September 2020, Ds filed the Application to Set a Bill Down for Taxation (“Setting Down Application”) which was served to P’s registered address under the cover of a letter from Ds’ solicitors dated 23 September 2020 (“23 Sept 2020 Letter”).  A call-over hearing was fixed for 20 October 2020 at 11am.

12.  On 20 October 2020, Master Hui allowed Ds’ Bill as drawn (except 2 items in Section C) in the absence of the parties (i.e. the Taxation Decision) and issued a Notice of Taxation Call-over Hearing to the parties on the same day informing them of the Taxation Decision.

13.  P did not apply for review of the Taxation Decision within the time limit of 14 days by 3 November 2020.

14.  On 6 November 2020, Ds’ solicitors wrote to P seeking the latter’s confirmation of its agreement to the taxed costs with breakdowns, in the total amount of HK$2,608,135.50.

15.  On 9 November 2020, P’s solicitors wrote to Ds’ solicitors claiming that they have received instructions from P to participate in the taxation of the costs as claimed in Ds’ Bill.  On the next day, P’s solicitors filed a Notice to Act.

16.  On 11 November 2020, P filed the 1^st Summons.

17.  On 20 November 2020, P filed the 2^nd Summons.

18.  On 23 November 2020, Master Phoebe Man ordered that the 1^st Summons be adjourned to be heard together with the 2^nd Summons, scheduled for 12 January 2021 at 10:30am.

19.  On 14 December 2020, notwithstanding the foregoing and pending the hearing of the 1^st and 2^nd Summonses, Master Hui issued the Allocatur in favour of Ds against P for the amount of HK$2,608.135.50.

20.  On 5 January 2021, P filed the 3^rd Summons, returnable on 12 January 2021 at 10:30am.

21.  On 12 January 2021, Master Hui adjourned the hearing of P’s 3 Summonses for disposal on paper.  He gave directions and granted stay of execution of the Allocatur pending the disposal of P’s 3 Summonses.

22.  On 27 September 2021, Master Hui gave his ruling, dismissing P’s 3 Summonses with costs (i.e. the Decision).

23.  On 12 October 2021, P filed the NoA, 1 day out of time.

24.  On 3 December 2021, Master Hui summarily assessed the costs of P’s 3 Summonses at HK$42,000, payable forthwith by P to Ds.  I understand that such assessed costs were eventually paid by P to Ds.

C.     SUMMARY OF THE PARTIES’ POSITION

25.  P relies on the Submissions made to the Master.

26.  In gist, P claims that, due to miscommunication, P only picked up the 12 Aug 2020 Letter from Mastercorp in November 2020 (see Affirmation of Mr Ching, §7), and P was not aware of the 23 Sept 2020 Letter (see Affirmation of Wong Kwun Ho (“Mr Wong”), §§4-7).  As a result, P was not aware of the NOCT, Ds’ Bill and the Setting Down Application at the time.  This is the reason why no list of objections was ever filed by P.

27.  P prays in aid the decision of Saw J in A Solicitors v Law Society of Hong Kong [2007] 4 HKC 165.  In that case, the appellant alleged that, due to misunderstanding, he did not appear in the taxation call-over hearing and in the absence of objection, one of the bills was taxed as drawn.  The appellant further requested the master to withhold the approval of the allocatur, but the master indicated that the application should be made by inter-partes summons within 14 days of his order and eventually sealed the allocatur.  The appellant later took out an inter-partes summons seeking leave to review but the master dismissed such application with costs. Saw J allowed the appeal, and attached great weight to the fact that the appellant was ignorant of the taxation proceedings at the time (at §§22, 25-27).

28.  Whilst P acknowledges that Saw J’s decision is pre-Civil Justice Reform (“CJR”), P argues that his decision, particularly on what constitutes “good reasons”, remains good law after the CJR.

29.  P also relies on the decision of Deputy High Court Judge Lok (as he then was) in Lie Han Ji v The Registrar of Hong Kong Institute of Certified Public Accountants, CACV 265/2009 (7 October 2013), where he opined that if the paying party has had the opportunity to argue his objections in the taxation hearing, he has to establish a strong reason before the master would exercise the discretion under O.62 r.16(1)(b) to extend the time for review after the issuance of the allocatur.  P contends that, since P did not have the opportunity to argue his objections in the taxation hearing, no such “strong reason” need to be established.  P also submitted that time should be extended having regard to (1) the length of the delay; (2) the reasons for the delay; (3) the chances of the review succeeding if time is extended; and (4) the degree of prejudice to Ds if time is extended.

30.  In addition, P now argues that the Master erred in law in allowing Ds’ Bill as drawn because, even in the absence of any objections from the paying party for whatever reasons, the Master should still exercise its discretion judicially, to tax each of the items of Ds’ Bill using the “necessary or proper” test applicable in a party and party taxation.

31.  On the other hand, Ds emphasise that P has regularly flouted court orders and procedures, since the commencement of action 8 years ago in 2014.  Further, Ds contend that P’s appeal should be dismissed on 3 main grounds:

(a)     P’s own neglect is plainly not a “good reason” to set aside the Taxation Decision and the Allocatur under O 62 rr 17A & 17B of the RHC.

(b)     No application for review of the Taxation Decision may be made without setting aside the Allocatur.  As the 3^rd Summons (to set aside the Allocatur) is doomed to fail, the 1^st Summons (to extend time for applying for review) must also fail.

(c)     The Taxation Decision was made in proper exercise of the Master’s discretion.  The Master was entitled to allow Ds’ Bill as drawn if he is satisfied that (i) the NOCT and Ds’ Bill have been duly served and (ii) P has failed to file a list of objections.  The Court would not interfere with the exercise of discretion by the Master without exceptional circumstances.

D.     ANALYSIS

D1.   P’s Neglect

32.  In my view, if P allegedly had no notice of the taxation proceedings, it was due to P’s neglect, carelessness or oversight.

33.  It is not in dispute that the NOCT and Ds’ Bill were duly served on P at its registered address on 12 August 2020.  The NOCT specifically provided that P was “required to file and serve a list of objections within 28 days of the service” of the NOCT.  It further provided, inter alia, that: -

“…If you do not file the list of objections as stated above, we will apply to the Taxing Master for the appropriate directions, including an order for the bill to be taxed as drawn with costs of the taxation against you. …”^[1]

34.  P’s case is that it did not have notice of the above at the relevant times.  It is however clear that P acted with neglect.  According to P’s own evidence in Mr Ching’s Affirmation at §7: -

“… even though the Plaintiff had been informed by [Mastercorp] that a letter (which was the letter from [Ds’ solicitors] dated 12^th August 2020 which enclosed the Notice of Commencement of Taxation filed on 12^th August 2020 and the said Bill of Taxation) had been received at the Registered office of the Plaintiff, the Plaintiff only arranged pick-up of this letter in November 2020.” [emphasis added]

35.  P has not explained when it was informed by Mastercorp of the 12 Aug 2020 Letter.  Irrespective of the foregoing, there is no reasonable excuse why P did not act promptly to pick up the 12 Aug 2020 Letter, once it was informed by Mastercorp of the same.

36.  Indeed, if Mastercorp had taken the trouble to inform P that a letter was received, it seems likely that it would have at least told P that it was a letter from a solicitors’ firm (which represent Ds).  In these circumstances, P must be expected to act expeditiously to pick up the letter as it was sent by a law firm in an existing legal action in which P took part. Having been ordered by the Court to pay costs to Ds, P must have expected Ds to commence the taxation proceedings at some point in time.  Receipt of a letter from Ds’ solicitors should have alerted P, and if P chose not to pick up such letter, P was indeed acting recklessly or turning a blind eye to the real possibility of taxation proceedings.

37.  In the circumstances, I accept the submission of Mr Ng for Ds that there is no alleged miscommunication or misunderstanding of the service of the NOCT, because P ignored the letter which contained the NOCT despite being informed of the service of the same.  P’s failure to raise objections to Ds’ Bill is attributable to P’s own carelessness and oversight, if not recklessness.

38.  Further, it is also not in dispute that the 23 Sept Letter containing the Setting Down Application was duly served on P at its registered address.  On P’s evidence, the letter containing the Application “had indeed been received” at its registered address but “due to miscommunication, the Plaintiff was not informed of the receipt of the letter before 20^th October 2020”: Mr Wong’s Affirmation, §3.  P has not explained what precisely the miscommunication was.  In any case, P must be under a duty to communicate properly with Mastercorp to ensure that it would receive any letter served on P’s registered address.  That P did not receive such letter also points to P’s neglect.

39.  All in all, there was plainly neglect, carelessness or oversight on the part of P.  There can be no denial that P ought to have followed up with Mastercorp and acted diligently and that had P done so, P should have acquired notice of the taxation proceedings.

D2.   P’s Deliberate Conduct

40.  Apart from neglect, Ds also contend that P’s explanation should be disbelieved.

41.  Ds rely on the fact that P did receive and was fully aware of the letter from Inland Revenue Department on Profits Tax (“IRD Letter”) issued on 12 August 2020, the same day when the NOCT was served.  Ds contend that it is inherently improbable that P was aware of the IRD Letter but not the NOCT.

42.  Further, Ds argue that the excuse given in P’s affirmations are mere assertions not supported by contemporaneous documentary evidence.  Indeed, as noted by the Master, “there is no explanation as to why there was no record of having received the Papers on the one hand and P was somehow informed of having received the same on the other hand”.  Ds further submit that P’s explanation must be viewed against P’s long history of regularly flouting court orders and procedure.

43.  I can see the force of Ds’ submission.  To some extent, this is borne out by my observations above that, despite being informed of the receipt of the 12 Aug 2020 Letter, P (on P’s own evidence) chose not to pick up the same until November 2020, thereby acting recklessly or turning a blind eye to the real possibility of taxation proceedings.

44.  Having said that, the suggestion that P in fact received and considered the contents of the 12 Aug 2020 Letter and the 23 Sept 2020 Letter, but deliberately chose not to participate in the taxation and told blatant lies now to cover up the same, constitutes a serious allegation.  It amounts to an accusation that P’s deponents were lying on oath.  For present purposes, I consider it sufficient to proceed on the basis that P acted recklessly or negligently, without expressing any conclusive view as to whether P deliberately disregarded court documents or orders.

D3.   Statutory Regime

45.  For present purposes, there are a few statutory provisions which are relevant.

46.  First of all, a party may apply to a taxing master for review under O 62 r 33 of RHC which provides as follows:

“33. Application to taxing master for review (O 62, r 33)

(1) Any party to any taxation proceedings who is dissatisfied with the allowance or disallowance in whole or in part of any item by a taxing master, or with the amount allowed by a taxing master in respect of any item —

(a) may apply to the taxing master to review his decision in respect of that item; and

(b) may not apply to a judge for an order to review the decision until after its review by the taxing master.

(2) An application under this rule for review of a taxing master’s decision may be made at any time within 14 days after the conclusion of the taxation in which that decision was made or such shorter period as may be fixed by the taxing master:

Provided that no application under this rule for review of a decision in respect of any item may be made after the signing of the taxing master’s final certificate dealing with that item.

(3) Every applicant for review under this rule must at the time of making his application deliver to the taxing master objections in writing specifying by a list the items or parts of items the allowance or disallowance of which or the amount allowed in respect of which, is objected to and stating concisely the nature and grounds of the objection in each case, and must deliver a copy of the objections to each other party (if any) who attended on the taxation of those items or to whom the taxing master directs that a copy of the objections shall be delivered.

(3A) If an applicant fails to comply with paragraph (3), the taxing master may dismiss the application.

(4) Any party to whom a copy of the objections is delivered under this rule may, within 14 days after delivery of the copy to him or such shorter period as may be fixed by the taxing master, deliver to the taxing master answers in writing to the objections stating concisely the grounds on which he will oppose the objections, and shall at the same time deliver a copy of the answers to the party applying for review and to each other party (if any) to whom a copy of the objections has been delivered or to whom the taxing master directs that a copy of the answers shall be delivered.

(5) An application under this rule for review of the taxing master’s decision in respect of any item shall not prejudice the power of the taxing master under rule 17 to issue an interim certificate in respect of items his decision as to which is not objected to.”

47.  Although O 62 r 33(2) provides that “no application under this rule for review of a decision in respect of any item may be made after the signing of the taxing master’s final certificate dealing with that item”, this is not absolute, and must be read in conjunction with O 62 r 16 which provides as follows:

“16. Extension etc., of time (O 62, r 16)

(1) A taxing master may—(a) extend the period within which a party is required by or under this Order to begin proceedings for taxation or to do anything in or in connection with proceedings before that master; (b) extend the period provided by rule 33(2) beyond the signing of the taxing officer’s certificate by setting the certificate aside; (c) where no period is specified by or under this Order or by the Court for the doing of anything in or in connection with such proceedings, specify the period within which the thing is to be done.

(2) Where an order of the Court specifies a period within which anything is to be done by or before a taxing master, then unless the Court otherwise directs, the taxing master may from time to time extend the period so specified on such terms (if any) as he thinks just.

(3) A taxing master may extend any such period as is referred to in the foregoing provisions of this rule although the application for extension is not made until after the expiration of that period.” [emphasis added]

48.  Therefore, notwithstanding the issuance of an allocator, the Court still has power to set aside the allocatur and extend the time limit for review beyond the date of the allocatur.  It may be noted that the above provisions exist before the CJR, and they do not expressly refer to the need to demonstrate “good reasons”.  Of course, the position could well be different after the CJR, as these provisions should now be read in conjunction with post-CJR provisions.

49.  Second, there is a new post-CJR provision which empowers the court to set aside an allocatur.  This is O 62 r 17A which provides as follows:

“17A. Final certificate (O 62, r 17A)

(1) A taxing master shall, after the conclusion of taxation proceedings before him, issue a final certificate specifying the amount of taxed costs and the amount of money payable under rule 32B.

(2) A taxing master shall not issue a final certificate unless the period within which an application for review of his decision may be made under rule 33(2) has expired.

(3) A taxing master may set aside a final certificate for good reasons and on such terms as he thinks fit.” [emphasis added]

50.  Unlike pre-CJR provisions, O 62 r 17A(3) requires “good reasons” before a taxing master may set aside an allocatur.

51.  Third, there is also a new post-CJR provision which empowers the court to set aside a taxing decision.  This is O 62 r 17B which provides as follows:

“17B. Taxing master may set aside his own decision (O 62, r 17B)

If a party entitled to be heard on taxation fails to raise any objection to a bill of costs or to appear at a hearing set down under rule 21B(4) or 21C(1), a decision of a taxing master made against that party may be set aside or varied by the taxing master for good reasons and on such terms as he thinks fit.” [emphasis added]

52.  Again, O 62 r 17B requires “good reasons” before a taxing master may set aside or vary his taxing decision.

53.  In the present case, given that the Allocatur was already issued, prima facie P must establish “good reasons” in order to persuade the court to invoke the power under O 62 r 17A(3).

54.  On behalf of P, Mr Ching submits that, even putting aside the circumstances concerning P’s notice of the taxation proceedings, there are good reasons to set aside the Allocatur because the Master should not have issued it in view of pending applications for extension of time of review and setting aside of the Taxation Decision (i.e. the 1^st and 2^nd Summons).

55.  There is some force in Mr Ching’s argument.  O 62 r 17A(2) of RHC provides that “A taxing master shall not issue a final certificate unless the period within which an application for review of his decision may be made under rule 33(2) has expired”.  The clear legislative intent is that a final certificate or allocatur should not be issued, if the time limit for seeking review has not yet lapsed.  In the present case, it is true that the time limit of 14 days under O 62 r.33(2) has already expired.  However, P has taken out the 1^st Summons to extend time for review which, if successful, would culminate in an extant application for review.  As a matter of principle, the court should not issue a final certificate in these circumstances, particularly if the legal consequence of doing so is to impose a more stringent threshold for any prospective challenge or review, despite the fact that a pending application for extension is yet to be heard.  In short, the court should not prejudge the outcome of P’s application for extension of time under the 1^st Summons.

56.  In response, Mr Ng for Ds rely on the dicta of Lam VP (as Lam PJ then was) in Global Medical Solutions Hong Kong Ltd v Ma Man Lung, HCMP 717/2017 (12 June 2017) at §11: “[a]fter the issue of the Allocatur, there cannot be any review.  A review is only possible if the master deems fit to set aside the Allocatur under Order 62 Rule 16(1)(b).  And Order 62 Rule 17A(3) provides that the taxing master may only set aside the Allocatur for good reasons.”  With respect, this is not a sufficient answer because, if the Master should not have issued the Allocatur pending the determination of an application for extension of time to review, that could well constitute “good reasons” to set aside the Allocatur.

57.  Having said that, on reflection, whether P could demonstrate “good reasons” to set aside the Allocatur in this case seems to be academic because, irrespective of that, it remains necessary for P to establish “good reasons” to persuade the court to invoke the powers under O 62 r 17B to set aside the underlying Taxation Decision.  Another way of putting is that, if there are no “good reasons” to set aside the underlying Taxation Decision to which the Allocatur relates, it would be pointless (and there are thus no “good reasons” ultimately) to set aside the Allocatur.

58.  In this regard, Mr Ching for P submits that it is not strictly necessary for P to rely on O 62 r 17B and, insofar as P seeks extension of time under O 62 r 16, “good reasons” need not be demonstrated.  In my view, irrespective of whether this may be the position pre-CJR (for which I need not express any conclusive view), the court should construe O 62 r 16 in conjunction with the new provisions of O 62 rr 17A & 17B after the CJR.  It is trite that (i) the court should read all of the relevant provisions together and in the context of whole statute as a purposive unity in its appropriate legal and social setting: Medical Council of Hong Kong v Chow Shiu Shek (2000) 3 HKCFAR 144 at 154B-C; and (ii) the context of a statutory provision should be taken in its widest sense and certainly includes the other provisions of the statute and the existing state of the law: Town Planning Board v Society for the Protection of the Harbour Limited (2004) 7 HKCFAR 1 at 13I-J.

59.  Therefore, at least in circumstances where an extension of time for review, if granted, would achieve a similar effect as the setting aside or variation of a taxing decision, “good reasons” must be demonstrated by an applicant.  It could not have been the legislative intention that in these circumstances, an applicant can cherry pick a particular route, thereby enjoying a different or more lenient test.  Moreover, the statutory provisions ought to be construed in a coherent manner, and not in a way which would render other statutory provisions (e.g. O 62 r 17B) superfluous or nugatory.  In the present case, the purpose of the 1^st Summons is to enable the court to re-open the matter and, in effect, set aside the Taxing Decision, such that P could be allowed to submit a list of objections to Ds’ Bill for the court to carry out the taxation exercise afresh.  Therefore, it is necessary for P to establish “good reasons”.

60.  If, however, I am wrong to conclude that P has to establish “good reasons”, it would remain necessary for P to persuade the court that extension of time should be granted having regard to the following factors: (1) the length of the delay; (2) the reasons for the delay; (3) the chances of the review succeeding if time is extended; and (4) the degree of prejudice to Ds if time is extended.

D4.   Relevant Test, and Application to the Present Case

61.  In view of the above, it is necessary for P to establish “good reasons” for setting aside the Taxation Decision.

62.  It is not in dispute that O 62 rr 17A & 17B of the RHC were added under the CJR: see Hong Kong Civil Procedure 2022, §§62/17A/1, 62/17B/1.  These rules should be construed in line with the underlying objectives provided in O.1A r.1 of the RHC, namely:

“The underlying objectives of these rules are ––

(a) to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court;

(b) to ensure that a case is dealt with as expeditiously as is reasonably practicable;

(c) to promote a sense of reasonable proportion and procedural economy in the conduct of the proceedings;

(d) to ensure fairness between the parties;

(e) to facilitate the settlement of disputes;

(f) to ensure that the resources of the Court are distributed fairly.”

63.  Therefore, among others, the underlying objectives include (i) increasing cost-effectiveness; (ii) ensuring that a case is dealt with as expeditiously as practicable; (iii) promoting a sense of reasonable proportion and procedural economy; (iv) ensuring fairness between the parties; and (v) ensuring fair distribution of court resources.

64.  Given that O 62 r 17B expressly refers to the situation where a party fails to raise any objection to a bill of costs or to appear at a taxation hearing, it seems clear that “good reasons” must be established in the context of such failure of the party.  In line with the underlying objectives set out above, it seems to me that there would be good reasons to re-open the matter if a party’s failure to raise any objection is not attributable to the party’s fault, or is caused by factors beyond the party’s control.  The corollary is that “good reasons” should not, in principle, cover a party’s failure to raise any objection due to such party’s neglect, carelessness or oversight (let alone recklessness).  Should it be otherwise, then almost every taxing decision made in default of raising objections to a bill of costs by a party may be set aside and re-argued afresh.  This cannot be the case, as it runs contrary to the purposes of the provision and the underlying objectives of the RHC to increase cost-effectiveness, deal with a case expeditiously, promote procedural economy, ensure fairness between parties, and fairly distribute judicial resources.

65.  In line with the foregoing, as submitted by Mr Ng for Ds, in considering what constitute “good reasons” in the context of O 62 r 17B, the court may draw analogy from other rules in the RHC.  For instance: -

(a)     In the context of an application to extend the validity of the writ, carelessness, oversight, or pre-occupation were held not to be “good reasons” for allowing the extension: Hong Kong Civil Procedure 2022, §6/8/3.

(b)     In the context of setting aside a regular default judgment, the defendant must show that he has “a real prospect of success” on his case. However, the lack of an acceptable explanation by the defendant for allowing judgment to go by default and for delaying in making the application may lead the court to decline to set aside the regular default judgment: Hong Kong Civil Procedure 2022, §§13/9/13, 13/9/14.

66.  In this regard, I do not think that the decision of A Solicitor points to the adoption of a different test post-CJR.

67.  First, A Solicitor was decided before the CJR, and did not concern O 62, rr 17A & 17B of the RHC, which were added after the CJR.

68.  Second, under O 62, rr 17A & 17B of the RHC, the exercise of discretion to set aside a taxation decision or allocatur requires the presence of “good reasons”.  There was no such requirement when A Solicitor was decided.  Therefore, the decision could not be read as providing guidance on what constituted “good reasons”.

69.  Third, A Solicitor is distinguishable from the present case on the facts.  In that case, Saw J did express some reservations on the appellant’s account at §27: “There is no doubt in my mind that the appellant has not conducted himself with expedition and that I have serious reservations as to the circumstance surrounding the non-appearance on the date the bill was taxed.”.  However, Saw J has not expressed any conclusive view, nor did he reject the appellant’s explanation.  It seems to me that, whilst having serious reservations, Saw J was prepared to give the appellant the benefit of doubt and proceeded on the basis that the appellant’s non-appearance was attributable to a misunderstanding.  In contrast, in the present case, there can be no question that P acted with neglect (if not recklessness), even based on P’s evidence alone.  There was no misunderstanding or miscommunication as such in respect of the service of the NOCT.  It follows that, the mere fact that Saw J saw fit to grant extension of time on the facts in A Solicitor does not, without more, mean that there are “good reasons” to do so on the facts of the present case.

70.  On the other hand, the decision of Lie Han Ji seems to bring in some uncertainty.  In particular, Mr Ching for P relies on the dicta of Deputy High Court Judge Lok (as Lok J then was) at §18, where he opined that “if the paying party has had the opportunity to argue his objections in the taxation hearing, he has to establish a strong reason before the master would exercise the discretion under r 16(1)(b) to extend the time for review after the issuance of the allocatur”.  It also appears that in considering the application for extension of time for review before him, he was essentially applying the principles for extension of time for appealing by considering the 4 factors set out in Hong Kong Civil Procedureat §54/4/9 (see similarly Tang Chai On v Tang Sing Ki[2016] 5 HKLRD 104 at §9).

71.  On reflection, I do not think Lie Han Ji would affect my analysis above.

72.  First of all, Deputy High Court Judge Lok (as Lok J then was) merely suggested that “strong reason” has to be shown if the paying party has had the opportunity to argue his objections in the taxation hearing. This seems to be a more stringent threshold than “good reasons”.  Hence, his dicta could not be taken to mean that, where the paying party did not have the opportunity to argue his objections in the taxation hearing, “good reasons” (as opposed to “strong reasons”) need not be established at all.  Indeed, this is unlikely to be his view because it would contradict the express language of O 62 r 17B of the RHC which requires “good reasons” to be shown, even in situations where “a party entitled to be heard on taxation fails to raise any objection to a bill of costs or to appear at a hearing set down under rule 21B(4) or 21C(1)”.

73.  Second, whilst Deputy High Court Judge Lok (as Lok J then was) has considered the 4 factors normally taken into account in deciding whether to grant an extension of time for appealing, he did make it clear at the outset at §19 that “It is not possible for the court to lay down any rigid guideline as to what amounts to a strong reason, and the master has to consider the facts and merits of each individual case in determining whether to extend the time for review after the issuance of the allocatur”.  Hence, he did not purport to lay down any definitive test as to what amounts to a “strong reason” (and similarly as to what amounts to “good reasons”).

74.  Accordingly, proceeding on the premise that “good reasons” do not cover a party’s neglect, carelessness and oversight (let alone recklessness) in failing to raise objections and apply for review within time, I come to the conclusion that P has failed to demonstrate “good reasons” to set aside or vary the Taxation Decision under O 62 r 17B of the RHC.  For such reasons, I also consider it inappropriate to grant extension of time to P under O 62 r 16 of the RHC.

75.  Further and in any event, I would have refused time extension upon considering the 4 factors which are normally taken into account in in deciding whether to grant an extension of time for appealing.  This is particularly apposite in the present because, not only does P require extension of time for seeking review, P also requires extension of time for pursuing the present appeal against the Decision of the Master.

76.  First, the 14-day time limit for P to apply for review of the Taxation Decision lapsed on 3 November 2020.  As the 1^st Summons was taken out on 11 November 2020, there was a delay of 8 days.  Whilst the delay is not excessive, it cannot be said to be insubstantial either.

77.  Second, I do not accept there is satisfactory explanation of the delay in seeking review.  The delay on the part of P is attributed to its neglect, carelessness or oversight (if not recklessness).  In addition, there is also no satisfactory explanation of the delay (albeit of 1 day only) in filing the NoA.  As explained above, such delay is entirely avoidable.

78.  Third, as to the merits of the review, a key argument advanced by P is that the Master erred in law in allowing Ds’ Bill as drawn because, even in the absence of any objections from the paying party for whatever reasons, the Master should still exercise its discretion judicially, to tax each of the items of Ds’ Bill using the “necessary or proper” test applicable in a party and party taxation.  Whilst I would deal with such argument in the next section, it suffices to say that, in the absence of such objections, Ds’ Bill prima facie stands and the Master could not be faulted for allowing Ds’ Bill as drawn in accordance with practice direction.

79.  P further argues that, “if there are objections filed, the court would NOT normally allow the full amounts of the costs claimed, but rather, and more likely, that, a certain percentage thereof, ranging from 50%-80% on average, would be taxed off, depending on the individual bill. As such, the chance of success would be high.  If only 20 % had been taxed off, the amount that would have been deducted, or saved, would be more than HK$500,000.”

80.  Whilst this may be an attractive proposition, I do not accept this is how the matter should be approached.  If P were right, then whenever a party entitled to be heard on taxation fails to raise any objection to a bill of costs, such party could almost invariably establish a high chance of success of review because, had a list of objections been lodged, it is almost certain that some deductions would have been made by the court in the course of taxation.  On such reading, the paying party can simply ignore a NOCT and delay the taxation proceedings, and apply subsequently for extension of time to review, on the ground that the paying party would necessarily has high chance of success of review.  This seems to run contrary to the underlying objectives of the RHC.  Therefore, unless P can point to any error of law or facts in the Taxation Decision, I do not consider it sufficient for P to merely point to the likelihood of taxing down Ds’ Bill had P lodged a list of objections, because it wrongly presupposes that P was indeed entitled to put in such list of objections afresh.

81.  Alternatively, if, contrary to my view, merits can be shown simply on the basis of likelihood of taxing down Ds’ Bill had P lodged a list of objections, this would reinforce my primary view that the court should not merely consider the 4 factors normally taken into account in deciding whether to grant an extension of time for appealing.  Instead, the Applicant has to establish “good reasons” as required under O 62 rr 17A & 17B of the RHC.

82.  Fourth, I am of the view that material prejudice will be caused to Ds if the application is granted.  The Taxation Decision and the Allocatur were made on 20 October 2020 and 14 December 2020 respectively.  As a result of P’s application and appeal, there has been substantial delay in the enforcement of the Allocatur against P.  If the appeal is allowed and P is given leave to lodge a list of objections to Ds’ Bill, there will be further delay which is likely to be substantial, as the taxation proceedings would take time to complete.  Ds may have to wait for a long time for the recovery of their costs which would not be fair: see similarly Lie Han Ji at §29.

83.  Further, it is significant that P does not purport to be in a position to pay Ds’ costs.  To the contrary, it is argued in P’s submissions filed before the Master (which is adopted by P in this appeal) as follows:

“58.     Firstly, as explained in the 2nd Affirmation of CHING Ming Yu, the Audited Financial Statements are the best evidence available. Explanation has also been given as to why no more Audited Financial Statements have been prepared. It is because of the letter from the Inland Revenue Department dated 12th August 2020 (Exhibit marked “C” to the 2nd Affirmation of CHING Ming Yu).

59.     Secondly, the evidence is overwhelming that the Paying Party was running at substantial losses of HK$819,081 in 2018 and HK$2,086,835 in 2019 and suffering from Capital Deficiency of HK$6,934,563 in 2018 and HK$9,021,398 in 2019.

60.     It is submitted that having due regard to the financial positions of the Paying Party as disclosed, particularly, in the Audited Financial Statements of the Paying Party dated 31st March 2019, it would stifle the right of the Paying Party to taxation afresh, or a review of taxation, if a condition such as payment into court, would be imposed by the court.” [emphasis added]

84.  If it is P’s stance that it is not in a position to make any payment into court of a percentage of the total costs of HK$2,608,135.50 claimed by Ds, it must follow that P is not in a position to pay the entirety of such total costs to Ds.  The position may get worse given that P is running at substantial losses.  To say the least, there is a real likelihood that P is or will become insolvent, due to P’s inability to pay Ds’ costs.  In these circumstances, any delay in enforcement would likely prejudice the position of Ds, including the possibility of presenting winding-up petition against P expeditiously, as well as the prospects of recovery against P by taking enforcement actions as early as practicable.  Any further delay could prejudice the recovery by Ds due to P’s running at substantial losses and the depletion of P’s assets as time goes by.

85.  Moreover, if P is allowed to re-open the taxation process, substantial further costs will be incurred for the review hearing.  Hence, Ds would be exposed to additional costs, which Ds may not recover against P in the light of the poor financial position of P as alleged.

86.  For completeness, although the relevant factors focus on the prejudice to the respondent, I would also consider and balance this against the prejudice which may be suffered by P.  At first blush, it may be said that P would also suffer substantial prejudice if it is deprived of an opportunity to lodge a list of objections to Ds’ Bill which could potentially reduce the total amount substantially upon taxation.  Nevertheless, as I have pointed out to Mr Ching during oral submissions, given P’s position that it is unable to pay even a proportion (say 50%) of the total costs claimed by Ds, it does not seem to matter that much to P if, at the end of the day, it need only pay a substantially taxed down amount of costs.

87.  For all these reasons, I am not minded to grant time extension to P under the 1^st Summons in any event, even if (contrary to my view) it is not necessary for P to establish “good reasons” for setting aside the Taxation Decision (if not also “good reasons” for setting aside the Allocatur).

D5.    Additional Challenge of Master’s Taxing Decision

88.  P argues that the Master erred in law in allowing Ds’ Bill as drawn because, even in the absence of any objections from the paying party for whatever reasons, the Master should still exercise its discretion judicially, to tax each of the items of Ds’ Bill using the “necessary or proper” test applicable in a party and party taxation.

89.  In my view, P’s argument is misconceived for the following reasons.

90.  First, the Master was entitled to allow Ds’ Bill as drawn if he is satisfied that (i) the NOCT and Ds’ Bill have been duly served and (ii) P has failed to file a list of objections: see Practice Direction 14.3, §26(1) and O.62 r.24(1) of the RHC.

91.  Second, the Master’s approach cannot be faulted. In the absence of any objections raised, the items in Ds’ Bill prima facie stand and there is no reason why the Master should go through the files in details to scrutinize each and every item in Ds’ Bill.

92.  Third, it is well established that the Court would not interfere with the exercise of discretion by the Master without exceptional circumstances: Re Wing Fai Construction Co Ltd (Costs: Taxation) (2012) 15 HKCFAR 657 at §16, per Chan PJ.

D6.   Conditions of Payment into Court

93.  In the circumstances, like the Master, I would also dismiss P’s 1^st, 2^nd and 3^rd Summonses. Therefore, it is not strictly necessary for me to consider whether conditions should be imposed.

94.  For completeness, even if I do not dismiss P’s 3 Summonses, I would have imposed conditions against P.

95.  To start with, it is clear that O 62 rr 17A & 17B empower the court to set aside the Allocatur and the Taxing Decision “on such terms as [the court] thinks fit”.  In a similar vein, O 62 r 16(2) provides that a taxing master may from time to time extend the period specified by an order of the court “on such terms (if any) as he thinks fit”.  Whilst it may be argued that the 14-day time limit for review is not a period specified by an order of the court (as it is specified by O 62 r 33(2) instead), to the extent the court grants extension of time by setting aside the Allocatur under O 62 r 16(1)(b), the court must have power to set aside the Allocatur on such terms as the court thinks fit.  There can thus be no dispute as to the Court’s jurisdiction to impose terms or conditions.

96.  In view of the prejudice which would be caused to Ds in acceding to P’s Summonses, even if I am to allow P’s Summonses, I would be minded to impose the condition of payment into court by P of at least 50% of the total costs claimed by Ds.  It appears to me that, on a party and party basis, it would be fanciful to suggest that P could expect more than 50% of the costs to be taxed off.  As such, even if P is to succeed in having Ds’ costs substantially taxed off, it seems reasonable to say that P would at least have to pay 50% (if not more) of Ds’ costs.  To address the prejudice of non-recovery of costs caused by any further delay, it seems fair and just to require P to make payment into court (say within 28 days) of at least such sum (which P is obliged to pay in any case) as a condition for setting aside the Taxation Decision and the Allocatur, and extending time for P to review.

E.     CONCLUSION

97.  For all these reasons, I refused to grant leave to P to appeal against the Decision out of time.  Alternatively, even if leave is to be granted, I would have dismissed P’s appeal.

98.  I further order that costs of the appeal (including the costs of P’s application for leave to appeal out of time) be paid by P to Ds.  Having considered Ds’ Statement of Costs for Summary Assessment and P’s objections thereto, it appears to me that the costs claimed on account of the solicitors are excessive particularly because (i) counsel has been engaged and (ii) the arguments advanced are similar to those put forth before the Master.  On a broad-brushed basis, I summarily assessed the costs payable by P to Ds at HK$120,000.

99.  It remains for me to thank Mr Ching for P and Mr Ng for Ds, for their submissions and assistance rendered to the court.

Mr Ching Ming Yu of Ching & Co., for the plaintiff

Mr Michael Ng, instructed by Holman Fenwick Willan, for the 1^st and 2^nd defendants

HCMP 2482/2014

[2018] HKCFI 1690

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2482 OF 2014

______________

______________

______________

DECISION

______________

The applications

1.  By my judgment dated 15 March 2018 (the “Judgment”), I ordered the plaintiff to within 14 days from the date of the judgment pay into court the sum of HK$1,500,000 pursuant to Order 2, rule 3 of the Rules of the High Court.

2.  By summons dated 28 March 2018 (“Summons for Leave to Appeal and Stay”), the plaintiff seeks leave to appeal against the Judgment, and a stay of execution of the Judgment pending final determination of the application for leave, and if leave be granted, of the appeal.  No payment-in was made in compliance of the Judgment in the meantime, and no order for any stay was obtained before the deadline for compliance.

3.  By summons dated 4 April 2018 returnable before a Master, the defendants sought an unless order that unless by 4 pm on 18 April 2018(which date will have to be adjusted if I am to grant it) the plaintiff do make the payment-in, the plaintiff’s claim be dismissed with costs.

4.  By another summons dated 11 April 2018 returnable before another Master, the plaintiff sought an order that the time for compliance of the Judgment be extended until the determination of the plaintiff’s application for leave to appeal against the Judgment, or should leave be granted, the appeal.

5.  The two summonses of 4 April and 11 April 2018 came before me on 11 May 2018.  After the hearing and on the same day, I dismissed the plaintiff’s summons for time and allowed the defendants’ application for an unless order (the “11-5-18 Unless Order”). The deadline for the plaintiff to effect the payment-in was set to be 4:00 pm on 18 May 2018.

6.  As things turned out, the plaintiff failed to make the payment- in before the deadline.  Instead, on 18 May 2018, a time summons (the “Summons for Further Time”) returnable before me on 21 June 2018 was taken out for an Order that the time for compliance of the 11-5-18 Unless Order be “further extended until the determination of [the Summons for Leave to Appeal and Stay] returnable on 21^st June 2018 or further order for stay of execution and leave to appeal”.  I note immediately that that was exactly the application which I dismissed on 11 May 2018.

7.  Upon failure on the part of the plaintiff to comply with the 11-5-18 Unless Order, and by Order dated 18 May 2018, the plaintiff’s claim herein was dismissed.

8.  The plaintiff’s Summons for Leave to Appeal and Stay and Summons for Further Time came before me on 21 June 2018 for determination.

The grounds of appeal upon which leave is sought

9.  In the Summons for Leave to Appeal and Stay, quite a number of grounds are set out.  During the hearing on 21 June 2018, Mr Ching informed me that he decided to advance the application on much narrower grounds based on his interpretation of the transcript (the “Transcript”) of the audio recording of the hearing before Master K Lo on 27 April 2017 (when Master Lo’s Order was made).  I will come back to the contents of the Transcript.  Mr Ching further informed me that for the purpose of the present application, he would only rely on Grounds of Appeal 1.a., 1.b, and 1.e. set out in the Summons for Leave to Appeal and Stay.  They read as follows:

“1. leave be granted to the Plaintiff to appeal against the Judgment given by Deputy High Court Judge Keith Yeung SC in Chambers dated 15^th March 2018 on the grounds including but not limited to the following, pursuant to Order 59 rules 2B of the High Court Ordinance, Cap.4A;

a. the learned Judge erred in finding that the Order of Master K Lo Dated 27^th April 2017 was not irregular and thus not liable to be set aside;

b. further or in the alternative, the learned Judge erred in finding that the Order of Master K Lo dated 27^th April 2017 ought not to have been amended for irregularity or otherwise;

…

e. learned Judge erred in finding that the Plaintiff’s Irregularity Summons and the Amendment Summons ought to have been dismissed.”

Test for granting leave

10.  The test to apply when considering whether leave to appeal should be granted is set out in section 14AA of the High Court Ordinance Cap 4, that:

“(4) Leave to appeal for the purpose of subsection (1) shall not be granted unless the court hearing the application for leave is satisfied that—

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appeal should be heard.”

11.  In so far as the threshold test set out in subsection 14AA(4)(a) is concerned, Le Pichon JA in SMSE v KL [2009] 4 HKLR 125 explained that:

“17. Leave to appeal under Order 59 rule 2B is not lightly granted. The relevant test appears in section 14AA(4) of the High Court Ordinance. In granting leave, the judge must have considered that the test set out in section 14AA(4) had been met. The section requires that the court be satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard before granting leave. Reasonable prospects of success involves the notion that the prospects of succeeding must be ‘reasonable’ and therefore more than ‘fanciful’, without having to be ‘probable’.”

In Ho Yuen Ki Winnie v Ho Hung Sun Stanley (unreported, HCMP 1009/2009), Her Ladyship reiterated at paragraph 16 that:

“As a preliminary matter, it is relevant to bear in mind that the leave requirement was introduced largely to address satellite litigation on interlocutory issues (often of only marginal significance to the outcome of the litigation) which almost invariably gives rise to major delay and expense. See the Final Report on Civil Justice Reform (§643). For leave to be granted, this court must be satisfied that the appeal has ‘reasonable prospects of success’. Merely showing that the appeal is ‘arguable’ and ‘not fanciful’ would not be sufficient. In my view, ‘reasonable prospects’ requires something more and, in that regard, some assistance may be derived from the test applied when setting aside a default judgment.”

The Transcript

12.  During the hearing on 30 January 2018 (which resulted in the Judgment), the Transcript was not placed before me.  Now for the purpose of the Summons for Leave to Appeal and Stay, Mr Ching sought to rely on it. 

13.  The Transcript records as follows:

“MR CHEUK: Good morning, Master. I appear on behalf of the defendant, and this is an application for an unless order.

COURT: What about service on the other side?

MR CHEUK: Yes, we have served it, and actually, we received notice from my learned friend the plaintiff, that they asked for excuse of attendance at this hearing and they are …

COURT: You have a copy of the letter?

MR CHEUK: Yes, they wrote us a letter, however, we just received this morning at 9.35, they -- but I received the letter by my Blackberry, coming from our office …

COURT: So maybe you just read out the letter, the.

MR CHEUK: Yes, thank you, Master. It says:

‘We refer to the hearing of the 1^st and 2^nd defendants’ summons scheduled for 27 April 2017, at 9.30 am … (reads) to please excuse our absence at the hearing.’

COURT: ‘Unless the -- by consent, unless the plaintiff do exchange his witness … (reads) fact on the plaintiff’s solicitors on or before 4 pm on 4 May 2017.’

So both have the same deadline.

MR CHEUK: Yes.

COURT: ‘And the costs of the application be -- 1^st and 2^nd defendants forthwith, summarily assessed at 800 … (reads) from court attendant as solicitors on record.’

You don’t just tell your friend that you are not going to attend and ask the court to have that indulgence, unless you’ve got prior consent from the court.

MR CHEUK: Yes.

COURT: So that would be the order for today.

MR CHEUK: Okay, thank you, Master.”

Mr Ching’s interpretation of the Transcript, and his submissions arising

14.  Mr Ching pointed to the line “So both have the same deadline”attributed to Master K Lo.  He suggested that it was in fact a question from Master K Lo.  He suggested further that Master K Lo was there asking Mr Cheuk whether the parties had agreed on the same deadline.  Mr Ching then pointed to the “Yes” attributed to Mr Cheuk.  He suggested that it was an affirmative answer from Mr Cheuk. Mr Ching then submitted that Mr Cheuk had misled the Master into believing that the parties had actually agreed on the deadline for performance.  That being the case, and as Master Lo’s Order did not reflect the agreed terms, Mr Ching submitted that the parties should go back to Master K Lo for amendment or variation.

No reasonable prospect of success

15.  I have considered the Transcript and Mr Ching’s submissions.  I am of the view that Mr Ching’s interpretation is fanciful.  In my view, a reasonable reading of the Transcript is this, that Master K Lo, having made the Order, made the observation that both parties would have the same dead­line in exchanging witness statements.  It was not transcribed as a question.  The “Yes” attributed to Mr Cheuk was merely an acknowledgement to Master K Lo’s observation.  In my view, the Transcript adds nothing to the plaintiff’s case, and does not support the proposed appeal.

16.  In my view, and for the reasons I have set out in the Judgment, the proposed Grounds 1(a), 1(b) and 1(e), with or without the Transcript, have no reasonable prospect of success.

Some other reasons in the interests of justice to grant leave?

17.  At paragraph 40 of his written submissions, Mr Ching submitted that:

“Alternatively, the application for leave to appeal ought to be allowed on the limb that there are some other reasons in the interests of justice why the appeal should be heard. The Plaintiff submits that the affirmations filed by the Defendants herein are misleading as they did not give the full picture to the court. The issue of whether or not it was deliberation on the part of an officer of the court should be scrutinized by the court,and if it was, then there ought to be sanction. The Court of Appeal should be given the chance to do so, and leave to appeal ought to be granted to sfford [sic] the Court of Appeal such opportunity, in the interests of justice.”

18.  Mr Ching’s proposition is a bold one.  The effect of his submissions is that leave should be granted so that the Court of Appeal can have the opportunity to “scrutinize” certain alleged conduct of an officer of the court, not for the purpose of deciding any appeal, but for the purpose of imposing sanction on that officer.  Mr Ching has produced no authority in support of this limb of his submissions.  I have no hesitation in rejecting it.

Disposal

19.  I dismiss the Summons for Leave to Appeal and Stay.  I also dismiss the Summons for Further Time.

20.  I make an Order nisi that the plaintiff should bear the costs of and occasioned by both Summonses, to be taxed if not agreed.  Any submissions for variation of the Order nisi should be served and filed within 10 days of this Decision.

Mr Ching Ming Yu, of Ching & Co, for the plaintiff

Ms Bianca Yu, instructed by Holman Fenwick Willan, for the 1^st and 2^nd defendants

HCMP 2482/2014

[2018] HKCFI 1358

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2482 OF 2014

______________

______________

______________

____________________________

DECISION ON COSTS

____________________________

1.  During the hearing on 30 January 2018, I granted the plaintiff leave to withdraw its “cross-appeal”. Subsequently, by my Decision handed down on 15 March 2018, I:

(a)   allowed the plaintiff’s application under P’s Amendment Summons for amendment of P’s Irregularity Summons;

(b)   dismissed the plaintiff’s application under P’s Irregularity Summons as amended for an order to set aside or to amend Master Lo’s Order;

(c)   allowed the plaintiff’s application under P’s Irregularity Summons as amended for relief from sanction imposed for failure to comply with Master Lo’s Order;

(d)   dismissed the Removal Limb of Ds’ Summons, and

(e)   allowed the Payment-in Limb of Ds’ Summons.

In so far as (a) to (d) above were concerned, I in effect confirmed the decisions of Registrar Lung. It was in respect of (e) that I disagreed with the decision of Registrar Lung.  

2.  In my Decision, I invited parties to make submissions on costs.  I have since received (1) Ds’ written submissions dated 26 March 2018; (2) P’s written submissions dated 6 April 2018; (3) Ds’ written reply dated10 April 2018; and (4) P’s letter to Court dated 18 May 2018 (together with (i) the transcript of the hearing before Master K Lo on 27 April 2017 and (ii) a letter from the police dated 7 May 2018 concerning the forensic examination of two documents).  It is urged upon me on behalf of the defendants that “P (or P’s legal representative) ought to bear all costs of and occasioned by the various applications heard before Registrar Lung on 29 August 2017, and reheard before DHCJ Keith Yeung SC on 30 January 2018, and also the costs of Ds’ appeal by way of Notice dated 11 September 2017, on an indemnity basis.”  On behalf of the plaintiff, it is submitted that in connection with (a) to (d), Registrar Lung’s costs order that there be no order as to costs should not be disturbed; in respect of (e), there should also be no order as to costs.  I have considered all those submissions.

3.  In so far as (a) to (d) set out in paragraph 1 above are concerned, I have confirmed Registrar Lung’s decisions.  The related appeal has in effect been dismissed, and the Removal Limb of Ds’ Summons remained unsuccessful.  Costs following the event is one option.  However, it is also important to bear in mind that it is the plaintiff who was seeking an indulgence, having failed to comply with the Master Lo’s Order.  Having considered the overall fairness of the matter, and without going into detailson blames, I am of the view that the proper order is no order as to costs for both the hearing before Registrar Lung and this Court.

4.  In so far as the withdrawal of the “cross-appeal” is concerned, I do not believe that it has any extra costs implications.  I make no order as to costs in that regard.

5.  I have allowed the Payment-in Limb of Ds’ Summons.  Costsfollowing the event is one option.  I see no reason, whether in terms of the defendants’ conduct or otherwise, which justifies a different order.  I order that the costs of and incidental to that part of Ds’ Summons, both here and before Registrar Lung, be to the defendants.

6.  I am not prepared to order any enhanced basis or to make any wasted costs order.  I have factored everything in when allowing the Payment-in Limb of Ds’ Summons.  The order for payment-in which I have made is in my view an appropriate and sufficient order in all the circumstances of this case. 

7.  I therefore order that in respect of the Payment-in Limb of Ds’Summons, the costs of and incidental to the same both before Register Lungand this Court be borne by the plaintiff, to be taxed on a party to party basis if not agreed.  I made no order as to costs in respect of the balance of all other applications.

HCMP 2482/2014

[2018] HKCFI 1357

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2482 OF 2014

______________

______________

______________

______________

DECISION

______________

The summonses

1.  By my judgment dated 15 March 2018 (the “Judgment”), I ordered the plaintiff to within 14 days from the date of the judgment pay into court the sum of HK$1,500,000 pursuant to Order 2, rule 3 of the Rules of the High Court.

2.  By summons dated 28 March 2018, the plaintiff seeks leave to appeal against the Judgment, and a stay of execution of the Judgment pending final determination of the application for leave, and if leave be granted, of the appeal.  The plaintiff estimated the length of the hearing to be 3 hours.  The application was set down to be heard before me on 21 June 2018.  No payment-in was made in compliance of the Judgment in the meantime, and no order for any stay was obtained before the deadline for compliance.

3.  By summons dated 4 April 2018 returnable before a Master, the defendants seek an unless order that unless by 4 pm on 18 April 2018 (which date will have to be adjusted if I am to grant it) the plaintiff do make the payment-in, the plaintiff’s claim be dismissed with costs.

4.  By another summons dated 11 April 2018 returnable before another Master, the plaintiff seeks an order that the time for compliance of the Judgment be extended until the determination of the plaintiff’s application for leave to appeal against the Judgment, or should leave be granted, the appeal.

5.  The two summonses have been adjourned to be heard togetherbefore me.

The law

6.  The applicable legal principles are not controversial.  As can be gleaned from paragraph 59/13/1 of Hong Kong Civil Procedure 2018 and the authorities referred to therein:

(a)   whether or not to grant a stay is entirely in the discretion of the court.  Some of the relevant considerations when deciding how that discretion should be exercised are as follows;

(b)   the most important consideration in respect of whether a stay of execution should be granted is whether there are strong grounds of the proposed appeal.  That hurdle is higher than that of chances of success for considering whether leave to appeal should be granted.  Neither the court below nor the Court of Appeal will grant a stay unless satisfied that there are good reasons for doing so.  Unless a stay can be justified by good reasons, one will not be ordered;

(c)   the court is likely to grant a stay where the appeal would otherwise be rendered nugatory.  Hence, a stay may be granted when, in the case of a judgment for payment of damages, there will be no reasonable prospect of the defendant recovering the damages if no stay is ordered and in the event of the appeal succeeding; or the enforcement of the judgment under appeal would result in the appellant’s house being sold or his business being closed down;

(d)   a stay should only be granted where there are good reasons for departing from the starting principle that the successful party should not be deprived of the fruits of the judgment in his favour.  

The submissions, and my consideration

7.  Ms Bianca Yu appearing for the defendants submits that the filing of an application for leave to appeal does not operate as an automatic stay.  No evidence has been filed by the plaintiff in support of its application for stay or extension. The application should be rejected.  She submits further that in the light of the plaintiff’s history of flouting court procedures and orders (as I have set out in the Judgment), the application for an unless order should be granted. She refers me to paragraph 23/3/18 of Hong Kong Civil Procedure 2018 which explains the bases of the Court’s powers to so order.

8.  Mr Ching appears for the plaintiff.  No evidence has been filed in support of its application.  For reasons unknown to me, Mr Ching decided not to file any written submissions in the usual way but chose to issue a letter on his firm’s letterhead addressed to my clerk and asked the same to be placed before me.  I have considered the contents of the letter nonetheless. 

9.  Mr Ching submits that the application for stay of execution ought to be heard together with the application for leave to appeal set down to be heard on 21 June 2018, for the stay application will depend heavily on the merits of the leave application.

10.  I handed down the Judgment on 15 March 2018.  The 14‑day period started to run from that date.  No payment-in as ordered was effected.  No order for stay was obtained during that period.  It was incumbent upon the plaintiff to do that.  The mere taking out of the summons for leave to appeal did not operate as a stay.  The fact that the hearing for leave and stay will only take place on 21 June 2018 cannot stop the defendants from seeking to enforce the Judgment in the meantime, as they are entitled to.

11.  Mr Ching is correct in submitting that the merits of the appealis an important consideration.  No attempt has however been made during this hearing to demonstrate that there are strong grounds for the appeal.  Indeed, Mr Ching makes no submission in that regard save to assert that there has been no appellant authority on how the power to order payment-in under the relevant rules should be exercised.  This is hardly sufficient.

12.  Then Mr Ching submits that “The Plaintiff is obtaining transcripts of the hearing that took place on 27^th April 2017, and more importantly, confirmation and clarification of the scope and nature of the falsity of the title deeds as reported by the police, in writing” and “The information and documents that the Plaintiff is seeking may have significant bearing on the grounds of the leave application, as well as, the merits of the appeal.”  By implication, Mr Ching is indicating that the plaintiff may be seeking to adduce new evidence for the appeal.  No attempt has however been made to try to show that the criteria for the adducing of new evidence for appeal can be satisfied.  This is particularly so in respect of the transcript of the hearing on 27 April 2017.

13.  Then Mr Ching submits that the payment-in will stay in court, and the defendants will not be prejudiced by any stay.  That by itself is no good reason to order a stay.  If anything, it shows that any refusal of stay will not render any successful appeal nugatory, as the payment-in can simply be paid out back to the plaintiff if the need arises.

14.  Mr Ching further submits that “the evidence before the court is that, the Plaintiff is carrying on the business of a licensed Money Lender,the payment-in will have the effect of reducing the liquidity of the Plaintiff by a substantial amount, thereby reducing the actual or at least potential ‘profitability’ of the Plaintiff.”  As I have observed above, the plaintiff has filed no evidence in support of its application for a stay or extension.  Mr Ching cannot give evidence for it.  This is not a case, and has not been shown to be a case of, for example, the judgment debtor not being able to recover the damages paid over in the event of the appeal succeeding, or him being forced to sell his house or close his business.  I am not saying that these are the only cases where a stay will be ordered.  What I am saying is that there is no evidence from the plaintiff showing what the effect of any refusal of a stay or extension may have on it.

15.  Mr Ching then submits that “the sanction as sought in the Unless Order is not one provided by the Rules of the High Court.  If the action is dismissed, then the Plaintiff will not be able to proceed with the stay application and the leave application.”  The simple answer is that the plaintiff should comply with the Judgment.

16.  Mr Ching further submits, the matters raised in his letter having said, that “the Plaintiff is prepared to agree that these proceedings be stayed pending the determination of the stay application and leave application, with costs reserved.”  That may be what the plaintiff wants, but that is contrary to what the underlying objectives of the Rules of the High Court seek to achieve, namely “to ensure that a case is dealt with as expeditiously as is reasonably practicable”. 

Disposal

17.  Having considered parties’ submissions, and having balanced all relevant considerations, I dismiss the plaintiff’s summons for an extension. Having considered the history of the matter and the plaintiff’s conduct as I have set out in my Judgment, I allow the application for an unless order. I will proceed to hear submissions on its exact terms and the issue of costs.

HCMP 2482/2014

[2018] HKCFI 578

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2482 OF 2014

______________

______________

______________

DECISION

______________

The appeal

1.  There were before Registrar Lung on 29 August 2017 three summonses:

 (1) the plaintiff’s summons dated 5 May 2017 (“P’s Irregularity Summons”) to set aside the order of Master K Lo of 27 April 2017 (“Master Lo’s Order”) on the ground of irregularity, and alternatively for leave to amend Master Lo’s Order;

 (2) the defendants’ summons dated 22 August 2017 (“Ds’Summons”) for an order that the plaintiff do pay the defendants such sum of money into court as the court shall see fit pursuant to Order 2, rule 3 of the Rules of the High Court (“the Payment-in Limb of Ds’ Summons”), and the statement of Yeung Say Han Fanny (“Fanny Yeung”) filed on 9 May 2017 in support of the plaintiff’s case(“Yeung’s Statement”) be removed from the court record (“the RemovalLimb of Ds’ Summons”); and

 (3) the plaintiff’s further summons of 24 August 2017 (“P’sAmendment Summons”) for the amendment of P’s Irregularity Summons to the effect that, in the eventuality of the court refusing to set aside Master Lo’s Order:

 (a) the plaintiff be granted relief from sanction imposed for failure to comply with Master Lo’s Order, and

 (b) Yeung’s Statement, which was filed out of the time as prescribed in Master Lo’s Order, be allowed to stand.

2.  On 25 August 2017, the plaintiff took out a further summons (“P’s Remission Summons”).  This summons was returnable before Master K Lo on 18 September 2017.  The idea behind it was that the matter should be listed (or in the words of Mr Ching, solicitor acting for the plaintiff, be “remitted back”) before Master K Lo for re-consideration, so that either the Master Lo’s Order would be amended or varied by changing the dated from “4 May 2017” to “10 May 2017” “in order to reflect the manifest intention the court has in making the said Order”, or alternatively the same change be made by application of the slip rule pursuant to Order 20, rules 8 and 11. Before Registrar Lung on 29 August 2017, an application was hence made orally by Mr Ching on behalf of the plaintiff for an adjournment of all three summonses set out in paragraph 1 above so that P’s Remission Summons could be heard by Master K Lo on 18 September first.

3.  Having heard the parties, Registrar Lung on 29 August 2017 (1) refused the oral application for adjournment, set aside P’s Remission Summons, vacated the hearing date of 18 September 2017 and proceeded to hear the three summonses, (2) granted the plaintiff leave to amend P’s Irregularity Summons, (3) refused the plaintiff’s application to set aside Master Lo’s Order, but granted relief to the plaintiff from the sanction of that Order and granted it leave to file and serve Yeung’s Statement out of time; and (4) dismissed Ds’ Summons.

4.  The defendants now seek to appeal against that decision of Registrar Lung, for an order in its place that (1) P’s Irregularity and Amendment Summonses be dismissed, and (2) Ds’ Summons be allowed.

5.  The plaintiff has also lodged a what Mr Ching called a “cross-appeal”.  The plaintiff sought thereby an order that Master Lo’s Order “ought to have been amended or varied as per [P’s Remission Summons]”, or alternatively the same “ought to have been set aside, amended or varied asper [P’s Irregularity Summons] as amended by [P’s Amendment Summons]”.  Mr Ching explained in his written submissions filed before me his reason for filing this “cross-appeal”.  He said it was technical.  He was not cross-appealing the relief from sanction granted by Registrar Lung.  The plaintiff’s position was that despite the fact that Registrar Lung had allowed P’s Amendment Summons and granted the plaintiff relief from sanction, Registrar Lung was wrong in having gone down the relief from sanction route, but should have gone down the amendment or variation route; and had he done so, the plaintiff would not have been in breach of Master Lo’s Order, and that “the defendants would not and could not have been able to ‘hang their hat thereon’ to make the application for payment-in under Order 2, rule 3”—see paragraph 29 of Mr Ching’s written submissions.  The purpose of filing the “cross-appeal”, Mr Ching explained, was out of his concern that had he not done so, he would be prohibited from advancing the above submissions on behalf of the plaintiff in opposition of the defendants’ appeal.  During the hearing on 30 January 2018, upon confirmation from Ms Yu, counsel appearing for the defendants, that no objection in that regard would be raised, Mr Ching made an application for the withdrawal of the “cross-appeal”.  I granted the application.

The plaintiff’s claim and the defendants’ defence

6.  The plaintiff is a licensed money lender.  The defendants are husband and wife (“D1” and “D2” respectively) and tenants-in-common of a property at Grand Promenade, Tai Hong Street (“the Property”).  The defendants are based in the Mainland.  In gist, the plaintiff’s claim is that it has made to the defendants two loans secured by two charges on the Property in the total sum of HK$17,000,000, which loans the defendants have defaulted in repayment.  The defendants claim in defence that they are victims of a fraud, that the borrowers were in fact not them but fraudsters who impersonated them, so that they should not be held responsible for the loans or the charges. 

7.  The plaintiff claims that D1 first approached it on about 12 February 2014.  Apart from himself, D1 also acted for D2 on the strength of a Power of Attorney dated 10 January 2014 (“the Power of Attorney”).  D1 indicated that he and D2 wanted to raise a loan, and that the loan would be secured by a charge over the Property.  The terms of the loan (“the 1^st Loan”) were subsequently agreed.  It was for HK$10,000,000.  The loan agreement was executed on 12 February 2014.  The related legal charge was signed on 14 February 2014.  Both documents were signed by D1 (on his own behalf and on behalf of D2 pursuant to the Power of Attorney).  Messrs Ching & Co (“Ching & Co”) acted for the plaintiff in the transactions whilst Messrs Wong, Fung & Co (“WF & Co”) acted for the defendants.

8.  Things appeared to be fine and good after the 1^st Loan.  The plaintiff received two interest payments in the amount of HK$108,333 each on 13 March and 13 April 2014.

9.  The plaintiff claims that D1 approached it again on 28 April 2014. Following a similar course of events, a second loan secured by a second charge over the Property in the sum of HK$7,000,000 was granted (“the 2^nd Loan”).  The second loan agreement was executed on 7 May 2014, and the second charge one day later on 8 May 2014.  The documents were similarly signed by D1 on his own behalf and on behalf of D2.  The parties were similarly represented.

10.  The plaintiff continued to receive interest payments under the two loan agreements up to the month of June 2014.  The plaintiff claims that the defendants have since failed to make any further payment.  The present action was therefore started (originally by Originating Summons, subsequently ordered to be continued as if started by Writ) to enforce the two loans and mortgages.

11.  The defendants filed their Defence and Counterclaim on 7 April 2016. They aver that the person who approached the plaintiff was not D1, that the Power of Attorney was a forgery, that the original title deeds of the Property had been stolen by some fraudsters, and that D1 had never signed on any of the two sets of loan agreements or mortgage deeds.  Importantly, and supported by a Statement of Travel Records the defendants subsequently obtained from the Hong Kong Immigration Department, the defendants plead that D1 was not even physically in Hong Kong during any of the days when he was supposed to approach the plaintiff or sign those documents.

12.  However, as the defendants subsequently accepted, the averment in their Defence that the title deeds of the Property had been stolen was a mistake.  They had not been, and were at all times with them.  In her affirmation of 28 December 2017 filed in support of the defendants’ application to amend their Defence and Counterclaim, the 2^nd defendant explained that they had been searching for the title deeds at the wrong place,and that subsequent development in the case had caused them to look again more thoroughly. They successfully located them on 7 September 2017.  She said it was all a genuine mistake.

13.  On 11 July 2016, the plaintiff filed its Reply and Defence to Counterclaim. Amongst other things, it was pleaded that:

 (a) “ … the alleged theft of the title deeds and documents in respect of the property in question is suspicious unbelievable, and that despite the alleged reporting to the Hong Kong Police, there has been no updating of the progress of the investigation.  The possibility that the 1^st and 2^nd Defendants were involved in the alleged fraud and/or identity theft cannot be ruled out.”

 (b) “ … The Plaintiff further avers that the allegation that the 1^stand/or 2^nd Defendant that they or any of them was/were physically absent from Hong Kong at the material times is irrelevant and not conclusive insofar as the issue of whether or not they or any of them was/were involved in the alleged fraud and/or identity theft.” 

The conduct of the plaintiff in the prosecution of its claim

14.  On behalf of the defendants, Ms Yu drew to my attention what she submitted amounted to “P’s regular flouting of peremptory orders and most, if not all, of the requisite proper court procedures in the preparation of a case”.  She made the following elaborations:

 (a) the plaintiff’s failure to comply with the Order of Master Lai dated 28 December 2015 for it to file and serve a Statement of Claim within 28 days, and only did so on 10 March 2016 after an unless order on 25 February 2016;

 (b) the plaintiff’s failure to comply with the Order of Master Lai dated 28 December 2015 as extended by the Order of Master S Lo on 12 May 2016 to file its Reply and Defence to Counterclaim within 21 days, and only did so on 11 July 2016 after an unless order on 20 June 2016;

 (c) P’s failure to file and serve its timetabling questionnaire and mediation certificate, and its failure to issue a case management summons, such that the defendants had to themselves issue one returnable before Master Hui on 10 January 2017, and the plaintiff’s timetabling questionnaire was only faxed to the defendants on the morning of 10 January 2017;

 (d) P’s failure to comply with the Order of Master Hui dated 10 January 2017, including his directions for filing of the plaintiff’s mediation certificate within 7 days (which was only filed almost one year late on 6 December 2017), its List of Documents within 14 days (which the plaintiff only did on 24 February 2017 after an unless order dated 10 February 2017)and to exchange witness statements of facts (which failure was, as will be elaborated upon later, the immediate cause for the current series of summonses and applications);

 (e) P’s failure and refusal to comply with the Order of Master Hui dated 10 January 2017 that there be inspection of documents within 7 days after the time prescribed for filing and serving of lists of documents.  Inspection only commenced after complaint had been made to Registrar Lung on 29 August 2017, and after the Registrar’s Order that the plaintiff should allow inspection within 14 days;

 (f) P’s failure to disclose in its List of Documents of the following documents until ordered to do so by Master Ho on 17 November 2017: (1) copies of identity documents of the purported defendants taken by the plaintiff when approached for the two Loans, (2) the cheques the plaintiff issued to the purported 1^st defendant upon drawdown of the two Loans, and (3) the related evidence of bank transfers.  

The immediate cause for this series of applications before the Court

15.  As has been mentioned above, the immediate cause for the series of summonses and applications now before me was the plaintiff’s failure to exchange witness statements of facts in compliance with the Order of Master Hui dated 10 January 2017.  The events summarized below are taken mostly from the Relevant Procedural Chronology that Ms Yu helpfully prepared.  During the hearing on 30 January 2018, Mr Ching informed me that the contents of that chronology were agreed. 

16.  During the hearing of the case management summons on 10 January 2017, Master Hui directed, amongst other things, that “Parties do exchange signed witness statements within 35 days [after inspection]”.  The deadline for the exchange was, taking into accounts the dates when other steps were to take place, 9 March 2017.

17.  On 8 March 2017, Messrs Holman Fenwick Willan (“HFW”), solicitors for the defendants, wrote to Ching & Co and stated that the defendants were ready to exchange witness statements and requested for the plaintiff’s proposed time and venue for the exchange.

18.  On 3 April 2017, HFW wrote to Ching & Co further to arrange for exchange of witness statements on 7 April 2017.  There was no response from the plaintiff. 

19.  On 13 April 2017, the defendants issued and served on Ching & Co a summons for an order that unless within 7 days from the order to be made the plaintiff do exchange its signed witness statement(s) of fact with the defendants, the plaintiff be debarred from adducing evidence at the trial.  The summons was set down to be heard before a Master on 27 April 2017 at 9:30 am.

20.  On 26 April 2017 at 8:20 pm, which was the evening before the hearing for the unless order, Ching & Co faxed to HFW a letter saying that:

“… we consent to an order being made in terms of the Summons. With a view to saving costs, we shall be grateful if you will produce this letter to the learned Master hearing the Summons to signify our consent. In the circumstances, we would also askthe learned Master to please excuse our absence at the hearing.”

On the face of that letter, it was not copied to the court.

21.  The case handler of HFW did not receive that letter and was not notified of the same until his office did so at 9:36 on the morning of 27 April 2017.  He was by then waiting outside court for the hearing.  He was sent a softcopy of the same via his Blackberry.  Subsequently during the hearing of the summons, he was asked by Master K Lo to read out that letter from Ching & Co.  Master K Lo then made her Order (ie Master Lo’s Order mentioned in paragraph 1 above).  The Order provided that:

“ By consent, unless on or before 4 pm, on 4 May 2017 the Plaintiff do exchange its signed witness statement(s) of facts with the 1^st and 2^nd Defendants, the Plaintiff be debarred from adducing evidence at the trial herein ….”

That Order was not exactly the same as the Order sought.  The difference lay in the addition of an express deadline.  That addition in itself was entirely proper, and was in conformity with Practice Direction 16.5.  The issue was however that the express deadline of “4 pm on 4 May 2017”, which was 7 days from 27 April 2017, was reckoned without discounting the intervening “specified dates” (as defined in Order 3, rule 2, ie 1 and 3 May 2017 being Labour day and the Birthday of the Buddha, and 29 April,30 April, 6 May and 7 May 2017 being weekends).  If that period of 7 days were reckoned in accordance with Order 3, rule 2, the deadline should have been 10 May 2017.

22.  On 27 April 2017, HFW informed Ching & Co of Master Lo’s Order.  No reply or objection was received from Ching & Co.

23.  On 2 May 2017, HFW wrote to Ching & Co and proposed that witness statements be exchanged at 2:30 pm on 4 May 2017.  No reply was received from Ching & Co.

24.  At 4:08 pm on 4 May 2017, HFW wrote again to Ching & Co.  They stated that they had received no response to their letter of 2 May 2017, repeated the deadline for exchange, and said that in the absence of Ching & Co’s reply forthwith, they would file the defendants’ statements and would take it that the plaintiff would not adduce any witness statement at trial.  HFW further indicated that they would oppose to any subsequent filing of any statement by the plaintiff.

25.  At 4:21 pm on the same day, Ching & Co faxed to HFW a letter stating that there was an error contained in HFW’s letter of 27 April 2017, that Ching & Co agreed to exchange within 7 days from the Order, which deadline according to Order 3, rule 2 should be 10 May 2017, and that they had never consented to the deadline of 4 pm on 4 May 2017.  Ching & Co then confirmed that they could exchange witness statements “at about” 4 pm on 9 May 2017 at the High Court Registry.  They said that “As there was a mistake, please refrain from sealing the Order made on 27 April 2017 to save costs.”

26.  On 5 May 2017, HFW wrote back and said that they would not accept the late service of the plaintiff’s statements and would oppose the admission of such statements. 

27.  Also on 5 May 2017, the plaintiff issued P’s Irregularity Summons pursuant to Order 2, rule 2 for an order that:

“ (1) [Master Lo’s Order] made, by consent, be set aside for irregularity on the ground that the plaintiff never consented to exchange witness statements by 4:00 pm on 4^th May 2017,and that the court mistakenly believed, or was misled into believing, that the Plaintiff consented to exchange witness statements by 4:00 pm on 4^th May 2017 and that the Order made was incompatible with the provisions under Order 3, rule 2 of the Rules of the High Court;

(2) alternatively, leave be granted to amend [Master Lo’s Order] to provide for exchange of witness statement [sic] by 4:00 pm on 10^th May 2017 instead of 4^th May 2017, and the rest of the Order do stand.”

28.  On 9 May 2017, Ching & Co sought to serve on HFW a copy of the Yeung’s Statement.  Fanny Yeung is the General Manager employed by the plaintiff.  The main body of that statement comprised only six lines.  The proposed witness sought to adopt as her witness statement her first affirmation of 5 March 2015 filed in support of the Originating Summons, and her second affirmation of 15 October 2015 filed in answer to the affirmations of the 1^st and 2^nd defendants filed in opposition of the Originating Summons.

29.  On 9 May 2017, Master Lo’s Order was sealed.

30.  On 10 May 2017, Mr Ching filed his affirmation in support of P’s Irregularity Summons.  He deposed that Master Lo’s Order was not made with his consent, as he did not consent to not excluding weekends and general holidays when reckoning the 7-day period.  He deposed further that according to his calculation in accordance with Order 3, rule 2, the time allowed for performance should be up to and including 10 May 2017.  He also deposed that after the Master Lo’s Order had been made, and despite the various letters from HFW, he “did not realize that there was an error contain [sic] the terms of the order said to have been made by the court until 4^th May 2017.”

31.  On 22 August 2017, the defendants filed Ds’ Summons.  On 24 August 2017, apparently after receipt of the defendants’ written submissions in support of Ds’ Summons (which made the point that the plaintiff had not sought any relief from sanction for breach of Master Lo’s Order), the plaintiff took out P’s Amendment Summons and sought (the proposed amendments are underlined)”:

“ … an order that:–

1. [Master Lo’s Order] made, by consent, be set aside for irregularity on the ground that the plaintiff never consented to exchange witness statements by 4:00 pm on 4^th May 2017,and that the court mistakenly believed, or was misled into believing, or there was no evidence before the court, that the Plaintiff consented to exchange witness statements by 4:00 pm on 4^th May 2017 and that the Order made was not the resultof any consensus of the parties, and was incompatible with the provisions under, and was thus a failure to comply withthe requirements under, Order 3, rule 2(5) of the Rules of the High Court, and was in effect a purported exercise of the power to make an order pursuant to Order 3, rule 5 of the Rules of the High Court abridging the period of time within which the Plaintiff was required or authorized by the Rules of the High Court, namely, Order 3 rule 2(5) of the Rules of the High Court, to do an act in these proceedings but without actually and expressly making the order and/or without giving the Plaintiff the right to be heard before making the order;

2. alternatively, leave be granted to amend [Master Lo’s Order],pursuant to Order 2 rule 1(2) of the Rules of the High Court,to provide for exchange of witness statement by 4:00 pm on 10 May 2017 instead of 4^th May 2017, and the rest of the Order do stand”;

3. in the event that upon the final determination of paragraphs 1 and 2 of this Summons by this Court but without making an order being made by this Court in favour of the Plaintiff,relief be granted to the Plaintiff under Order 2, rules 4 and 5 of the Rules of the High Court;

4. [Yeung’s Statement] filed on 9^th May 2017 herein do stand;”

32.  On 25 August 2017, the plaintiff took out P’s Remission Summons.

Appeal by way of rehearing

33.  I remind myself of the following principles, which are trite and not disputed by the parties.  An appeal from the master to the judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time. The judge will give the weight it deserves to the previous decision of the master, but he is in no way bound by it.  The judge in chambers is in no way fettered by the previous exercise of the master’s decision, and on appeal from the judge in chambers, the Court of Appeal will treat the substantial discretion as that of the judge, and not of the master—Hong Kong Civil Procedure 2018, paragraph 58/1/2.

P’s Irregularity Summons, P’s Amendment Summons and the Removal Limb of Ds’ Summons

34.  P’s Irregularity Summons, P’s Amendment Summons and the Removal Limb of Ds’ Summons are closely related.  I will first consider the plaintiff’s application to amend P’s Irregularity Summons.  If I allow that application, I will then proceed to consider the merits of P’s Irregularity Summons as amended.  If I either allow the application to set aside or to amend Master Lo’s Order as requested, or alternatively dismiss that application but proceed to grant the plaintiff relief from sanction, the Removal Limb of Ds’ Summons will necessarily fail.  But if I am to refuse P’s Irregularity Summons as amended in its entirety, Yeung’s Statement will have to be removed from the court record, as it was filed in breach of Master Lo’s Order.

35.  Ms Yu’s submissions on behalf of the defendants may be summarized as follows.  As the basis of P’s Irregularity Summons was that Master K Lo had made a mistake, the plaintiff should have appealed.  P’s Irregularity Summons was therefore misconceived.  In any event, Master Lo’s Order stood until amended or set side.  The plaintiff was aware of the terms of the order, and Yeung’s Statement was filed in blatant breach of the same.  In respect of P’s Amendment Summons, Ms Yu submitted that on the facts of the case, given the delay in the making of the application, the plaintiff’s history of regularly flouting court orders and proper court procedure, and the fact that it had been “dragging its feet” in the prosecution of the action, the Court should exercise its discretion against relief.  Yeung’s Statement ought to be removed from the court record.

36.  Mr Ching’s position on behalf of the plaintiff was as follows.  As explained above, the plaintiff is not seeking to cross-appeal Registrar Lung’s decision to grant it relief against sanction.  A major part of Mr Ching’s submissions were directed towards the part of Ds’ Summons for payment-in, which I will come to.  In so far as P’s Amendment Summons was concerned, Mr Ching submitted that having regard to the specific facts of the case, there were good reasons for granting relief.  He pointed to the history that the action was originally commenced by Originating Summons supported by affirmatory evidence.  He submitted that as the contents of the affirmatory evidence were substantially the same as the pleadings subsequently required to be filed (after the case had been ordered to be continued as if started by writ):

“ … the impact, if any, of the incidents cited in the Defendants Submissions … for late filing of Statement of Claim, Reply and Defence to Counterclaim, and List of Documents, on the Defendants was much lesser and no real prejudice had been caused”,

and that:

“ Other incidents about mediation certificate or questionnaire are minor in nature by any standard”.

He also pointed to the defendants’ “change of story” relating to the title deeds, and the delay the defendants would cause as a result (the need to amend pleadings, consequential filing further witness statements, etc).  He submitted that in all the circumstances, the relief from sanction sought should be granted. 

Whether to allow the application to amend P’s Irregularity Summons as per P’s Amendment Summons

37.  The Court has power under Order 20, rule 8 to order at any stage a pleading (which includes a summons) to be amended.  “It is a guiding principle of cardinal importance on the question of amendment that,generally speaking, all such amendments ought to be made ‘for the purpose of determining the real question in controversy between the parties to any proceeding or of correcting any defect or error in any proceedings’”—see paragraph 20/8/6 of Hong Kong Civil Procedure 2018.

38.  When exercising my discretion under Order 20, rule 8, I also bear in mind the underlying objectives of the Rules of the High Court, that the primary aim in exercising the power is “to secure the just resolution of disputes in according with the substantive rights of the parties”—Order 1A, rule 2(2).

39.  The main purpose of P’s Amendment Summons is to add to P’s Irregularity Summons the alternative application for relief from sanction.  I am satisfied that the question of relief is a real one in controversy to be determined, and its addition helps secure the just resolution of disputes in according with the substantive rights of the parties.  I allow the application to amend P’s Irregularity Summons as per P’s Amendment Summons.

40.  I proceed to consider the merits of P’s Irregularity Summons as amended.  I will first of all consider whether Master Lo’s Order should be set aside or amended for irregularity.

The power to set aside or amend for irregularity

41.  Non-compliance with the Rules of the High Court is treated by Order 2, rule 1(1) as an “irregularity”.  Specifically, it provides that:

“ Where, in beginning or purporting to begin any proceedings or at any stage in the course of or in connection with any proceedings, there has, by reason of any thing done or left undone, been a failure to comply with the requirements of these rules, whether in respect of time, place, manner, form or content or in any other respect, the failure shall be treated as an irregularity and shall not nullify the proceedings, any step taken in the proceedings, or any document, judgment or order therein.”

42.  The Court is given certain powers under Order 2, rule 1(2) to deal with such non-compliances. Those powers include the power to set aside or amend the steps concerned.  But as is obvious from the express wording of Order 2, rule 1(2), those powers can only be invoked “on the ground that there has been such failure as is mentioned in paragraph (1)”, namely, the existence of an irregularity as defined.  “The power given to the court by O.2, r.1 is a power to cure irregularities consisting of failures to comply with the rules.  There is no power to remedy failures of a more fundamental kind”—see paragraph 2/1/2 of Hong Kong Civil Procedure 2018; and “The rule only applies to applications to set aside; ….  However,any alleged non-compliance with the rules by any tribunal or judge was an error in law and could only be corrected by an appeal to the appellant court(see Goh Kim Lay v. Versatile Advertising Co. Ltd & T.L. Ip. & Co. (applicant)(unrep., HCA A8090/1994, [1996] H.K.L.Y. 1079))”—see paragraph 2/2/1 of Hong Kong Civil Procedure 2018. 

43.  The core of the plaintiff’s complaint is that Master K Lo erred in granting Master Lo’s Order which the plaintiff had not consented.  That complaint, if substantiated, was not an irregularity, but an error of law.  The appropriate route is an appeal, but not an application under Order 2.

44.  In his Supplemental Submissions, Mr Ching referred me to Poon Ching Man v Lam Hoi Pun [2015] 3 HKLRD 57 and submitted that in four categories of cases, a court can revisit its previous order despite it having been sealed, namely (1) to reflect its original intention which is manifest as appearing from the body of the order or judgment; (2) in application of the slip rule to correct a clerical error or accidental slip, (3) under the express or implied “liberty to apply” provisions, and (4) where the court may do so pursuant to applicable rules of court.  I do not find the reference by Mr Ching to that case useful.  In my view, it is clear that none of those four categories applies in the present case.  There is no manifest intention that can be discerned from Master Lo’s Order; the slip rule clearly does not apply; any “liberty to apply” provision cannot confer jurisdiction upon a court which it otherwise does not have[1]; and any exercise of power pursuant to an applicable rule of court (for example to extend time) to revisit an order previously made involves a fresh exercise of power exercisable under and in accordance with that rule.

45.  In the circumstances, I dismiss the plaintiff’s application to set aside or amend for irregularity.

46.  I next consider whether the plaintiff should be granted relief from sanctions pursuant to Order 2, rule 5.

The power to grant relief from sanctions

47.  The plaintiff only filed and served Yeung’s Statement on 9 May 2017, 5 days after the express deadline of 4 pm on 4 May 2017.  Now that I have refused to set aside or amend Master Lo’s Order, the plaintiff was clearly in breach of Master Lo’s Order.

48.  Upon that breach, the sanction had effect, unless the plaintiff applied to the Court and obtained relief from the sanction within 14 days of the non-compliance—see Order 2, rule 4.  There was no need for the defendants to make further application to the Court.  It was for the plaintiff to seek relief—Marcan Shipping (London) Ltd v Kefalas [2007] 1 WLR 1864, paragraphs 28 – 36; and Daimler AG v Leiduck [2012] 3 HKLRD 119, at paragraphs 47 – 48.

49.  The plaintiff did not take out P’s Amendment Summons until 24 August 2017.  Ms Yu referred me to China Metal Recycling (Holdings) Ltd & Anor v Chun Chi Wai & Ors (unreported, HCA 1412/2013, 25 June 2014, per Deputy Judge Saunders at paragraph 83) and submitted that it is open to the court to refuse relief simply because of the delay.  I note however “whether the application for relief has been made promptly” is only one of the 10 individual circumstances which the Court shall consider on an application for relief—see Order 2, rule 5.  I do not believe that it accords with that rule to focus only upon delay (or any other single circumstance for that matter), except perhaps when the delay has been extreme (but when delay has been so extreme, other circumstances would also have come into play). 

50.  In determining whether or not relief should be granted, the Court shall undertake a weighing exercise and consider all the circumstances including the 10 individual circumstances set out in Order 2, rule 5.  When doing so, a weighty factor is the question of proportionality of the sanction in the circumstances in the case—see Daimler AG v Leiduck [2012] 3 HKLRD 119, at paragraphs 47 – 48.  Although intentional and contumelious disregard of a court’s peremptory order may be the most usual circumstance leading to the refusal of an extension of time to comply with a peremptory order, the exercise of the discretion to refuse an extension or to relieve a party from sanctions is not limited to those cases.  Failure to comply with one or a number of orders through negligence, incompetence or sheer indolence may be such as to lead the court to conclude there is an existence and degree of fault which warrants a refusal of an extension of time—see Top One International (China) Property Group Co Ltd v Top One Property Group Ltd [2011] 1 HKLRD 606, per Fok J (as he then was) at paragraph 41.

51.  Where non-compliance of an unless order is involved, the Court may also take into account the philosophy underlying the approach adopted by the courts in dealing with applications for extension, which Ward LJ encapsulated in Hytec Ltd v Coventry City Council [1997] 1 WLR 1666 (CA) at 1674 – 1675:

“ (1) An unless order is an order of last resort. It is not made unless there is a history of failure to comply with other orders. It is the party’s last chance to put his case in order. (2) Because that was his last chance, a failure to comply will ordinarily result in the sanction being imposed. (3) This sanction is a necessary forensic weapon which the broader interests of the administration of justice require to be deployed unless the most compelling reason is advanced to exempt his failure. (4) It seems axiomatic that if a party intentionally or deliberately (if the synonym is preferred) flouts the order then he can expect no mercy. (5) A sufficient exoneration will almost inevitably require that he satisfies the court that something beyond his control has caused his failure to comply with the order. (6) The judge exercises his judicial discretion in deciding whether or not to excuse. A discretion judicially exercised on the facts and circumstances of each case on its own merits depends on the circumstances of that case; at the core is service to justice. (7) The interests of justice require that justice be shown to the injured party for the procedural inefficiencies caused by the twin scourges of delay and wasted costs. The public interest in the administration of justice to contain those two blights upon it also weighs very heavily. Any injustice to the defaulting party, though never to be ignored, comes a long way behind the other two.”

52.  I see no contradiction between the observation made by the Court of Appeal in Daimler AG v Leiduck (that a weighty factor is the question of proportionality of the sanction in the circumstances in the case) and point (7) in the encapsulation by Ward LJ.  Whilst by the nature of things any injustice to the defaulting party may be subordinate to that suffered by the injured party, the Court ought not, when considering the injustice to the defaulting party, ignore the question of proportionality. Doing so may lead to the imposition of disproportionate sanctions.  That in turn will impact adversely on the wider interests of the administration of justice, which is the first individual circumstance which Order 2, rule 5 directs the Court to consider.  

Consideration of the plaintiff’s application for relief

53.  I approach the plaintiff’s application for relief with the abovementioned considerations and principles in mind.

54.  Master Lo’s Order is an unless order.  The philosophy encapsulated by Ward LJ in Hytec is engaged.  A failure to comply with an unless order will ordinarily result in the sanction being imposed.  But the circumstances leading to, and the reason for, the non-compliance will still have to be considered.  The application will have to be considered on its own merits.

Order 2, rule 5(1)(b)—
whether the application for relief has been made promptly:

55.  The application for relief was not specifically sought until P’s Amendment Summons was taken out on 24 August 2017.  Strictly speaking it was more than three months after the non-compliance and was out of time.  But it was made by way of an amendment to P’s Irregularity Summons taken out on 5 May 2017, which was within time and only one day after the non-compliance.  As I have allowed the application for amendment, the application for relief can technically be regarded as having been made on 5 May 2017.  In any event, and without being too technical on the matter, the plaintiff had on 5 May 2017 by way of P’s Irregularity Summons taken steps to rectify the situation.  It might not have taken out the correct application.  But at the same time the plaintiff had not simply sat on the matter.  Yeung’s Statement was then filed and served on 9 May 2017.  The effects of any delay by itself are in my view not serious.

Order 2, rules 5(1)(c) and 5(1)(d)—
whether the failure to comply was intentional, and whether
good explanation:

Order 2, rule 5(1)(e)—
the extent to which the party in default has complied with other rules and court orders:

57.  I have set out above the history of other non-compliances by the plaintiff. This is one factor against the grant of relief.

Order 2, rule 5(1)(f)—
whether the failure to comply was caused by the party in default or his legal representative:

58.  In respect of the failure to comply with Master Lo’s Order, I am of the view that on the evidence, between Ching & Co and their lay client (ie the plaintiff), no fault can be attributed to the plaintiff. 

Order 2, rule 5(1)(h)—
whether the trial date or the likely trial date can still be met if relief is granted:

59.  No trial date has been fixed, and in the light of the defendants’ application to amend their Defence and Counterclaim to correct the incorrectly pleaded facts relating to the title deeds, the trial will be sometime ahead.

Order 2, rules 5(1)(i) and 5(1)(j)—
the effect which the failure to comply had, and which the granting of relief would have, on each party:

Order 2, rule 5(1)(a)—the interests of the administration of justice:

Conclusion on the plaintiff’s application for relief

62. Having undertaken the weighing exercise required of me, and for the reasons set out above, I have decided that my discretion should be exercised in favor of allowing the plaintiff’s application for relief from the sanction for non-compliance of Master Lo’s Order.  I further order that Yeung’s Statement may remain in the court record.  I accordingly dismiss the Removal Limb of Ds’ Summons.

The Payment-in Limb of Ds’ Summons

The power to order payment-in

63.  The Court is empowered by Order 2, rule 3 to order payment-in in the circumstances as specified.  The rule provides that:

“ (1) The Court may order a party to pay a sum of money into court if that party has, without good reason, failed to comply with a rule or court order.

(2) When exercising its power under paragraph (1), the Court shall have regard to –

(a) the amount in dispute; and

(b)   the costs which the parties have incurred or which they may incur.”

64. Order 2, rule 3 is materially the same as Rules 3.1(5) – (6A) of the Civil Procedure Rules (“CPR”).  Ms Yu has drawn my attention to a number of relevant English authorities, which included Mealey Horgan plc v Horgan & Anor, Times, 6 July 1999 (and Official Transcript); Olatawurav Abiloye [2002] 4 All ER 903; Ali v Hudson (t/a Hudson Freeman Berg) [2004] CP Rep 15; Huscroft v P & O Ferries Ltd [2011] 2 All ER 762 and Allen v Bloomsbury PublishingLtd [2011] FSR 22, 597.  My attention has also been drawn to the decision of Deputy Judge M Ng in Chu Kwok Kee Kookie v Ming Chor Pao & Anor (unreported, HCMP 704/2015, 12 June 2015).  I have considered them.  I set out below the principles, in so far as relevant here, which I gathered from those authorities.

The power is a free standing discretion:

65. The power to order a payment into court under Order 2, rule 3 is a free-standing one, to be exercised according to the terms of the Order.  It is a wide discretion to ensure that justice is done in any particular case.  Its application is not confined to the power to order security for costs under Order 23—see Olatawura paragraphs [18] – [19] and Allen v Bloomsbury paragraph 32(iv).

The main purpose is to punish, but may also be beneficial to the future conduct of the proceedings:

Access to the court is a prime consideration:

“ … it would only be in an exceptional case (if ever) that a court would order security for costs if the order would stifle a claim or an appeal”.

Punishment is not the norm:

The strength of a party’s case is a relevant consideration:

Application of the principles

70. I proceed to consider the Payment-in Limb of Ds’ Summons in the light of the legal principles discussed above.

71. That the Court has the power to make the order is not in dispute.  The issue is how I should exercise my discretion, and if I am to order the plaintiff to make a payment-in, the amount.

72. On 10 May 2017, Cheuk Yuk Tak, a solicitor with HFW, filed his first affirmation on behalf of the defendants in opposition of P’s Irregularity Summons.  He raised therein, amongst other things, his belief that it was appropriate for the Court to, pursuant to Order 2, rule 3, order the plaintiff to pay into Court the defendants’ costs.  He then gave a breakdown of the defendants’ costs estimates down to the conclusion of the trial.  The estimated amount was HK$3 – 3.5 million.  The defendants subsequently filed Ds’ Summons on 22 August 2017.  Mr Cheuk filed his third affirmation on the same date in support thereof, and specifically adopted the parts of his first affirmation discussed above.  Despite the issue of payment-in having been raised and the evidence adduced, the plaintiff chose not to file any evidence in reply.  I also note that the plaintiff is a licensed money lender. I therefore draw the inference that the plaintiff will have no financial difficulty in meeting an order for payment-in. The issue of access to the Court, or the risk of an order for payment-in stifling the plaintiff’s case, does not arise.

73. The plaintiff has been regularly flouting proper court procedures and orders.  I have set out the relevant history above.  I am in particular not impressed by the plaintiff’s failure to disclose in its List of Documents copies of all identity documents of the purported 1^st and 2^nd defendants and the cheques which the plaintiff issued to them upon drawdown.  Those documents go to the heart of the main issue, namely whether the persons who approached the plaintiff for the Loans were the defendants.  The plaintiff ultimately disclosed those documents on 30 November 2017, but only after a contested application by the defendants for specific disclosure of inter alia those documents.  As recorded by Master Ho who heard the application at paragraph 36 of his Decision dated 17 November 2017:

“ Mr Ching however submits that the identity documents are not necessary as WF have already disclosed them in response to the earlier third party discovery summons taken out by the defendants. I cannot accept such argument because the plaintiff has its own primary obligation of disclosure to discharge.”

I entirely agree that those sort of arguments have to be rejected. 

74. No proper explanation has been tendered by the plaintiff for those incidents of non-compliances.  I do not accept the submissions made by Mr Ching’s which I have summarized in paragraph 36 above (that as the action was originally commenced by Originating Summons supported by affirmatory evidence, “… the impact, if any, of the incidents cited in the Defendants Submissions … for late filing of Statement of Claim, Reply and Defence to Counterclaim, and List of Documents, on the Defendants was much lesser and no real prejudice had been caused”, and that “Other incidents about mediation certificate or questionnaire are minor in nature by any standard.”)  I specifically reject his submissions that “Other incidents about mediation certificate or questionnaire are minor in nature by any standard”.  Those submissions completely ignore the underlying objectives of the Rules of the High Court, and in particular the one set out at Order 1A, rule 1(b), ie “to ensure that a case is dealt with as expeditiously as is reasonably practical”.

75. I have also considered the plaintiff’s attitude as reflected in its pleadings and affirmations.  I have dealt with the Reply and Defence to Counterclaim above.  In the absence of pleaded facts, averments like “The possibility that the 1^st and 2^nd Defendants were involved in the alleged fraud and/or identity theft cannot be ruled out” have no place in any pleading. In the second affirmation of Fanny Yeung of 15 October 2015, she deposed that:

“ 6. Regarding the issue of forgery, the 1^st and 2^nd Defendants also produced some documents purporting to prove that at some important point or period of times, the 1^st and/or 2^nd Defendants was/were not in Hong Kong. However, the document produced in relation to this point shall not be taken on its face value as it is notorious that Chinese people often had different names at different times or even at the same time, and they may have different travel documents issued by same or different countries in different names. Therefore, the Plaintiff is undertaking investigation in this regard, particularly, in the Mainland China … The process undoubtedly needs some time if not a lot of time to finish as the investigation would not be under the direct control of the Plaintiff, and a lot of things and records have to be checked by the authorities.”

Such speculative remarks as underlined above similarly have no place in any affirmatory evidence.  They in turn reflect badly on the plaintiff as to whether it has the will to litigate its claim as economically and expeditiously as reasonably possible in accordance with the overriding objective. 

76. A major part of Mr Ching submissions went towards the development of his suggestion that Registrar Lung should have adjourned the three summonses so that the matter could be “remitted” back to Master K Lo for consideration, in which case “there would not have been any failure to comply with the Order of Master K Lo, at all, and the Defendants would not and could not have been able to ‘hang their hat thereon’, to make the application for payment-in”.  I reject the submissions.  The submissions proceeded upon the assumption that had the matter been “remitted” back, Master K Lo would have amended or varied Master Lo’s Order.  That assumption is not justified.  I have explained why.  The appropriate route for the plaintiff to challenge that Order, should the plaintiff want to, was to appeal.  Registrar Lung was correct in refusing the application for adjournment.  He was further correct in setting aside P’s Remission Summons. 

77. I have also considered the merits of the plaintiff’s case.  The plaintiff had a genuine cause of action.  The plaintiff is either an unpaid creditor and mortgagee (if the persons who approached it for the Loans were in fact the defendants), or the victim of a fraud (if those persons were not).  But at the moment, the evidence suggests that it was not the defendants or either of them who approached the plaintiff.  The defendants have on affirmations denied having received the Loans or having made any repayments. The photographs on the identification documents concerned do not resemble the defendants.  The immigration records show that the 1^st defendant was not even in Hong Kong at the material times.  There is at this stage no evidence of any complicity on their part.  In any event, that is not the pleaded case of the plaintiff.  The change in the defendants’ pleaded case in respect of the title deeds cannot by itself be evidence of complicity, and does not alter the overall strength of the plaintiff’s case as it now stands.

78. As things now stand, I am of the view that the pleaded case of the plaintiff has no real prospect of succeeding.

79. For the reasons given above, I find that the plaintiff has regularly been flouting proper court procedures.  Given such conduct, and having considered the plaintiff’s pleadings and affirmations, I am of the view that the plaintiff has demonstrated a lack of will to litigate its claim as economically and expeditiously as reasonably possible in accordance with the overriding objective.  I emphasize that I have not found bad faith.  It was want of good faith as explained above.  But such conduct should not go unpunished.  The defendants should also be protected from such conduct.  I have also found, on the strength of the evidence disclosed, that the plaintiff’s pleaded case has no real prospect of succeeding.  I have weighed in the change in the defendants’ pleaded case in respect of the title deeds.  It does not provide any excuse to the plaintiff for any of its conduct in the past.  It may however be relevant to the issue of quantum, which I will come to.  In all the circumstances, and having undertaking the weighing exercise above, I am satisfied that this is one of those exceptional cases in which an order for payment-in ought to be made.

The amount to be paid in

80. I have dealt with Mr Cheuk’s first affirmation above.  He deposed that the defendants’ estimated cases down to trial will be about HK$3 to 3.5 million.  There is no evidence from the plaintiff that either it cannot afford it, or the estimates were otherwise objectionable.  On the other hand, I note the change in the defendants’ pleaded case in respect of the title deeds.  They will have to be responsible for any time and costs wasted.  On the issue of quantum, Ms Yu has brought to my attention Allen v Bloomsbury.  As observed by Kitchin J therein, the Court can only do the best one can.  Having considered the facts, and doing the best I can, I order that the plaintiff should within 14 days from the day hereof pay into court the sum of HK$1,500,000, which represent about 43% or 50% of the costs estimates, depending upon whether the sum of HK$3 million or HK$3.5 million is adopted.  In ordering that amount, I have also considered the amount in dispute, as I am required to do by Order 2, rule 3.  This sum of HK$1.5 million is not disproportionate to the amount in dispute.  I so order.

Costs

81. At the end of the hearing, I indicated that I will invite submissions before making any order for costs.  I direct that the defendants should file and serve their submissions on costs within 10 days from the date hereof, and the plaintiff within 10 days thereafter upon receipt.

HCMP 2482/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2482 OF 2014

_________________________

_________________________

_________________________

_________________

D E C I S I O N

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The applications

1.  By two summonses taken out on 16 March 2017 (“the 1^st summons”) and 22 June 2017 (“the 2^nd summons”) respectively, the 1^st and 2^nd defendants applied for specific discovery of certain documents[1].

2.  The plaintiff opposed both summonses.

Background

3.  According to the plaintiff’s case, it is a licensed moneylender carrying on moneylending business in Hong Kong.  It lent two loans of HK$10 million and HK$7 million to the 1^st defendant named as “Chen Jianhua” and the 2^nd defendant named as “Fan Hongwei” in February and May of 2014 respectively as secured by two mortgages of the property situated at Flat B, 41^st Floor with Balcony and Utility Platform of Tower 3 of Grand Promenade, No.38 Tai Hong Street, Hong Kong (“the subject property”) which is jointly owned by the two defendants as tenants-in-common with the 1^st defendant holding 99% share and the 2^nd defendant holding 1% share therein.

4.  Messrs Ching & Co., i.e. the plaintiff’s solicitors (“Ching & Co”), was acting for the plaintiff in preparing the mortgages in respect of the two loans whereas Messrs Wong Fung & Co. (“WF”) was acting as the independent legal advisor to the two defendants in the entering of the two mortgages.  On both occasions, it was the 1^st defendant who approached the plaintiff and the 1^st defendant had signed on the loan agreements and the mortgages on behalf of the 2^nd defendant with a power of attorney from the 2^nd defendant. 

5.  The plaintiff claims against the 1^st and 2^nd defendants for full repayment of the two mortgage loans together with interest and costs and possession of the subject property due to their default in repayment. 

6.  On the defendants’ side, they are a couple and they denied ever entering into the two loan transactions or the said two mortgages. In gist, they said that this is a case of identity theft.  The plaintiff had mistaken the identities of the persons who approached and entered into the two loan agreements and mortgages with the plaintiff.  According to their current pleaded case, all the title deeds (which had been placed in the drawer of the bedside table of the master room of the subject property) were stolen by some fraudsters[2]. They have misused the defendants’ identities, and forged their signatures on various documents.  It was these fraudsters who have approached the plaintiff and entered into the subject transaction with the plaintiff.  The 2^nd defendant also denied ever appointing the 1^st defendant as her attorney as alleged or executing the subject power of attorney.

7.  The defendants further aver that they could not have been the persons who entered into the mortgages with the plaintiff as the 1^st defendant was not physically present in Hong Kong on 12 February, 28 April and 8 May of 2014.  “12 February 2014” was the date when the 1^st defendant allegedly approached the plaintiff for borrowing the first loan.  “28 April 2014” was the date when the 1^st defendant allegedly approached the plaintiff for the second loan, and “8 May 2014” was the date when the 2^nd mortgage was dated and the second mortgage loan was drawn down.

8.  After the hearing of the two summonses, the defendants’ solicitors lodged their letter dated 21 September 2017 (“the defendants solicitors’ letter”) with the court informing that after the plaintiff made their oral submission at the hearing that certain title deeds in their possession were taken by the police, the defendants’ solicitors took up such matter with the police to verify the plaintiff’s submission, and the police orally confirmed that the title deeds obtained from the plaintiff are found to be not authentic.  After that, they then brought up the matter with their clients, who now said that they have found ‘what they believe to be the original title deeds’ in the safety deposit / secured cabinet of the office premises of the Hengli Group (of which the first and second defendants are Chairman and Vice-Chairman) situated in Suzhou City, Jiangsu Province, the PRC.  The defendants’ solicitors also in such letter sought leave for the defendants to file and serve further affirmation to depose on such matters.  I shall return later to deal with this belated application by the defendants to introduce new evidence/matter at the appropriate juncture below.

Documents sought

9.  Under the 1^st summons, the defendants sought for the following categories of documents:-

(1) Original of the title deeds of the subject property (“the 1^st category”).

(2) All and any documents in relation to client identification, verification and due diligence done by the plaintiff in respect of the alleged First and Second Mortgages and the alleged memoranda in writing of a loan agreement dated 12 February 2014 and 7 May 2014 respectively, including but not limited to:

(a) Copies of all identity documents of the alleged Mr Chen and/or Ms Fan; and

(b) Documents obtained / kept / produced by the plaintiff on customer due diligence in accordance with the Anti‑Money Laundering and Counter-Terrorist Financing Guideline issued by the Hong Kong Licensed Money Lenders Association Ltd (“the Guideline”)

(collectively called “the 2^nd category”).

(3) All and any bank records or receipts of financial transactions and dealings between the plaintiff and the alleged Mr Chen and/or Ms Fan, identifying the bank account number, payor, payee, paid amount and mode of payment, including the drawdown of the loans and/or repayments made under the alleged Loan Agreements and/or the First and Second Mortgages (“the 3^rd category”).

10.  Under the 2^nd summons, they further sought for :-

(1) All notes, memoranda, letters, facsimiles, emails or other documents relating to the correspondence between the plaintiff (whether through its solicitors, Ching & Co or otherwise) and WF relating to the alleged First Mortgage and Second Mortgage (“the 4^th category”).

(2) All notes, memoranda, letters, facsimiles, emails or other documents relating to the correspondence between the plaintiff and Ching & Co relating to the alleged First Mortgage and Second Mortgage (“the 5^th category”).

11.  None of the aforesaid documents sought have been disclosed in the plaintiff’s list of documents filed on 24 February 2017.[3]

The relevant rule and principles

12.  Order 24 rule 7 of the Rules of High Court (Cap.4A) (“RHC”) is the governing rule for specific discovery.  In short, the applicant bears the burden under the rule to demonstrate there is sufficient evidence or prima facie case that (a) the documents or classes of documents sought exist but which the other party has not disclosed; (b) such documents relate to a matter in issue in the action; and (c) they are in the possession, custody or power of the other party. Once the above three prerequisites for jurisdiction do exist, the court has a discretion whether or not to order discovery.   In particular, the court will not make an order unless the discovery sought is necessary either for disposing fairly of the cause or matter or for saving costs. (See : Paul’s Model Art GmbH & Co KG v UT Ltd [2006] 1 HKC 238, per Cheung JA at para 24; RHC, Order 24 rule 8)

13.  The Peruvian Guano test is the guiding test for relevance.  However, the exercise of specific discovery cannot be utilized as a fishing expedition in disguise seeking out possible claims or defences.  And the question of relevance of the documents under application is to be determined by pleadings. (See Hong Kong Civil Procedure 2018, para 24/7/2)

Application of the principles to the present case

The 1^st category

14.  The gist of the Defence is that both defendants have not entered into the Loan Agreements or the two mortgage deeds, and the plaintiff was deceived by a rogue pretending to be the 1^st defendant, and had authority from the 2^nd defendant using a false power of attorney. 

15.  As the heart of the pleadings, the real issue of controversy to be decided by the court is whether the defendants were indeed the same persons who actually entered into the loan agreements and the two mortgage deeds with the plaintiff.

16.  At the hearing, it was also undisputed that the original title deeds and documents had been passed on by WF to Ching & Co. for safe custody before the two loans were drawn down[4].  In these circumstances, it would be of no relevance for the determination of the plaintiff’s claim or defence as currently pleaded by referring to the contents of these title deeds and documents.  The loan documents, the power of attorney and two mortgage deeds had already been disclosed in the plaintiff’s list of documents before the two summonses were taken out.  No question of title dispute was involved in this case.  It is only the identity of the parties who entered into the contractual transactions in question with the plaintiff that is hotly contested. 

17.  Miss Bianca Yu, counsel representing the defendants, submits that the title deeds are clearly relevant because they are the subject matter of the counterclaim by which the defendants claim for inter alia the return of the title deeds.  With respect, I cannot accept such argument.  By reference to the current state of pleadings, the court is not required to rule on any matters in question as related to the contents of the title deeds or the title of the subject property in order to resolve the identity issue as explained above.  Neither can Miss Yu demonstrate or otherwise articulate what train of inquiry can be made out of these title documents to advance the defendants’ own case or damage their adversary.  I also agree with the submission of Mr Eric Ching (solicitor representing the plaintiff at the hearing) that if the court decides on defence of mistaken identity in the defendants’ favour at the end of the day, the loan agreements and mortgage transactions would not bind the defendants.  And subject to further investigation by the police, the title deeds and documents would be returned to the defendants.[5]

18.  Miss Yu also submits that there is a vague reference of fraud made in the Reply[6] and due to the seriousness of such allegations of impropriety made against the defendants, this deserves the subject discovery in order to properly defend such allegations.  But this is not the proper test for specific discovery, nor would it offer a blanket approval for specific discovery.  The fact remains that Miss Yu cannot demonstrate to this court any matters in question as arisen out of such allegations would turn on the title deeds.  In this regard, the observation made by Chu J (as Her Ladyship then was) in Re Estate of Ng Chan Wah (unrep., HCAP 5 of 2003, 5 March 2003) is pertinent here.  At para 16 Her Ladyship said:-

“16. It is not sufficient for the plaintiffs to say that because there is on the pleading allegation of improper conduct against the defendants as executors, they are entitled to test the basis of the estate accounts generally or to check the accuracy of the items presented in the estate accounts, irrespective of whether they are in issue. It is not the purpose of discovery to give the plaintiffs an opportunity to hunt around the documents in the hope that they will reveal some improprieties on the defendants’ part or will provide information for them to pursue more enquiries.”

19.  For completeness sake, the defendants’ handling solicitor also mentioned in his supporting affidavit that the defendants are entitled to know about the fact of the current whereabouts of the title deeds. With respect, that should be ascertained from the plaintiff by way of interrogatories instead, and specific discovery is not the appropriate method to pursue such information in the circumstances of this case.

The defendants’ late application for leave to adduce further evidence

20.  The defendants’ solicitors after the hearing raised for the first time the issue of the authenticity of the title deeds and sought leave for the defendants to file and serve further affirmation to introduce such new matters as highlighted in para 8 above for the present two summonses.  This is an exceptional application made belatedly, and I reject the same for the following reasons. 

21.  First, procedurally speaking, exceptional circumstances are expressly required in Order 32 rule 11A(4) of RHC, which is applicable here, to adduce further evidence for the determination of interlocutory application by way of adjourned hearing of the summons.

22.  Order 32 rule 11A(4) provides that:-

“4) Where the determination of the application is adjourned for the hearing of the summons, no further evidence may be adduced unless it appears to the Court that there are exceptional circumstances making it desirable that further evidence should be adduced”

23.  In this case, by way of Master Chow’s Order of 29 March 2017, the 1^st summons (by which the specific discovery for the original title deeds of the subject property is sought) was adjourned to a date to be fixed for argument.  In that order, the parties were also given direction to file and serve their affirmations, and para 3 thereof made it clear that no further affidavit/affirmation to be filed without leave of the Court.[7]

24.  In Jose Miranda Da Costa Junior & Anor v Lorenzo Yih & Ors (unrep. HCA 156/2010, 28 April 2014), DHCJ Le Pichon has carefully considered the rationale behind Order 32 rule 11A(4) in light of the CJR objectives.  At paras 9 to 12, Her Ladyship had the following to say:-

“9. The October order made it abundantly clear that no further affidavit was to be filed without the leave of the court. In the post-CJR era, it is inconceivable that leave would be granted in the absence of genuine extenuating circumstances, for example, that the evidence was not available at the date of the earlier affidavit or only came into existence after the date for the filing of that affidavit. In other words, they would be exceptions that normally would fall within the rule in Ladd v Marshall.

10. Further, in exercising the discretion to grant leave, the court is bound to have regard to the objectives of the CJR set out in O 1A, r 1 and to seek to promote the attainment of such objectives.

11. For those reasons, where a direction prohibiting further evidence to be adduced without leave has been given, it has to be read with RHC O 32, r 11A (4). That provides that where the determination of the application is adjourned for the hearing of the summons, no further evidence may be adduced unless it appears to the Court that there are exceptional circumstances making it desirable that further evidence should be adduced.

12. It will be seen that the rationale of O 32, r 11A (4) is to ensure that a case is dealt with as expeditiously as is reasonably practicable and to ensure fairness between the parties (those being the objectives of the CJR stated in O 1A, r 1 (b) and (d)): Fortune Assets Development Ltd v De Monsa Investments Ltd, HCA 167/2009, (unrep) 21 August 2009 at §§10-11 and the annotation in Hong Kong Civil Procedure 2014 at 32/11A/3 which states that the sort of “exceptional circumstances” envisaged are likely to be along the lines of the exceptions laid down in Ladd v Marshall [1954] 1WLR 1489. ” (emphasis added)

25.  A fortiori, if leave is sought to file and serve further affidavit evidence post hearing, in my judgment, the court should be even more vigilant in its exercise of discretion when dealing with such kind of application.

26.  Notwithstanding it was so said in the defendants’ solicitors’ letter that they discovered the authenticity issue of the title deeds only after the hearing by making further enquiry with the police, the fact remains that so far I see no genuine extenuating reason that can be offered by the defendants to explain why they could not have discovered much earlier what they believe to be the original title deeds in their Suzhou office.

27.  Not only that, the defendants’ account of their recent discovery of title deeds as related in their solicitors’ letter immediately causes one to raise one’s eyebrows when the defendants out of the blue can now somehow discover what they believe to be the original title deeds in their office in Suzhou City after being urged by their solicitors (following from their recent enquiry with the police) to search again thoroughly the whereabouts of the title deeds.  One must be mindful of the fact that the defendants had pleaded earlier in their Defence that they are both residents of Mainland China, and after becoming aware of the demand letter from the plaintiff as notified by their daughter on or about 3 November 2014, the 2^nd defendant came to Hong Kong on 4 November 2014 to investigate and discover that the title deeds originally placed in the drawer of the bedside table of the master bedroom of the subject property were missing[8].  On that basis, they pleaded that the original title deeds were stolen, and reported to the police about the matters of missing title deeds and some fraudsters misusing their identities to obtain loans from the plaintiff[9].  Whereas, now in fact (according to their solicitors’ recent letter) what they believe to be the original title deeds were actually kept in their office in Suzhou.  Or, if those title deeds were not in their Suzhou office when the 2^nd defendant conducted the search of the subject property on 4 November 2014, one would then rhetorically ask why such title deeds now miraculously re-appear in their office?

28.  In this light, leave to adduce further affidavit evidence as per the defendants’ belated application can be refused on this procedural ground alone.

29.  Second and more fundamentally, up to this moment there is no pleaded issue of authenticity of the title deeds raised.  And yet, the relevance of documents is to be decided by reference to pleadings.  By way of their letter dated 3 October 2017, the plaintiff’s solicitors responded to the defendants’ application for adducing further affidavit evidence and submitted to the effect that the defendants ought to have amended their Defence to properly plead their own case before they are allowed to file and serve any further affidavit evidence.  However, by their further letter dated 6 October 2017, the defendants’ solicitors submitted that the plaintiff should first amend its Statement of Claim so that they can know whether it is still the plaintiff’s case that it is holding the original title deeds and or otherwise maintaining that they are authentic.  Though, in passing, it is observed that the Statement of Claim does not actually make any reference to the title deeds, and in the Reply and Defence to Counterclaim, the plaintiff at para 2 thereof only made reference to the alleged theft of title deeds as pleaded in the Defence. So, strictly speaking, the plaintiff’s pleaded case does not actually touch on the authenticity of the title deeds.

30.  In my view, it is incumbent upon the defendants to keep their own house in order so as to properly make their applications of specific discovery.  If they chose not to amend their pleadings to raise any issue of authenticity of title deeds before the plaintiff does so, the court has the unfettered discretion not to wait for the defendants to amend their pleaded case to raise such issue, but can proceed to determine the present two summonses basing on the current pleadings as it saw fit.  This is especially the case here because, as pointed out in the preceding paragraph, the plaintiff’s pleaded case does not hinge on the authenticity of the title deeds, and the trial court can still hold the defendants liable if at the end of the day after hearing all the evidence accept the plaintiff’s current pleaded case that it was the two defendants themselves who actually entered into the two loan agreements and mortgages with the plaintiff.

31.  Apart from the aforesaid, it is also pertinent to recall that in the context of relevance, if a matter has not been identified in pleadings, it does not become an issue simply because it is hotly contested by way of materials from other sources such as affirmations in interlocutory proceedings, witness statements or expert reports.  See Bruce James Stinson v Gu Ming Gao, unrep HCA 2352 of 2012, 26 February 2016, per Au-Yeung J at para 56.

32.  Third, as a matter of case management and after balancing the different overriding CJR objectives, I do not see it appropriate under the circumstances of this case to hold up the determination of the two summonses which involves specific discovery of other categories of documents.  At this stage, I do not see anything to prevent the defendants from seeking discovery of such title deeds in the possession, custody or power of the plaintiff at a later time if such discovery exercise can be justified by a properly pleaded case to raise the issue of their authenticity after the amendment of pleadings.  Putting it another way, before the defendants have properly formulated their own pleaded case on such authenticity issue in the present setting, their application for specific discovery of the title deeds is premature in any event.

33.  In these premises, the defendants’ post hearing application to adduce further affidavit evidence is rejected, and the specific discovery of the 1^st category of documents is also refused.

The 2^nd category

34.  Plainly, the documents related to the identification of the Mr Chen and Ms Fan in question who entered into the loan and mortgage transactions with the plaintiff and the verification of such identities by the plaintiff are relevant for resolving the identity issue in this case.  There is no question that the plaintiff would keep these kinds of documents since the identity of customers should be in the forefront of their mind, particularly to ascertain whether the Mr Chen and Ms Fan in question to whom they lent money are in fact the owners of the subject property that served as security for the loans.  The real question lies in the proper scope of discovery only.

35.  In their letter dated 14 February 2017[10], the defendants’ solicitors foretold the plaintiff as to what they expected the plaintiff to include in their list of documents to be filed.  Among others, they mentioned about the “copies of ID documents of Mr Chen and Ms Fan as kept by the plaintiff when the loans were made”, and “copy application forms for the loans / mortgages kept by the plaintiff”.  According to the affidavit of Ms Lai Sau Lan (“Ms Lai’)[11], WF’s conveyancing clerk who attended the Mr Chen in question in signing the two mortgages, she had kept a copy of Mr Chen’s PRC ID card, and copies of PRC passport and PRC ID Card of the Ms Fan in question as provided to her by that Mr Chen.  In the course of making his oral submission, Mr Ching also admitted there are copies of such application forms for loans / mortgages (which in my view would likely contain information about the identities of the Mr Chen and Ms Fan in question).  Given the substantial loan amounts involved, and the two borrowers are apparently citizens of Mainland China, it would also be inherently probable for the plaintiff to ask for the address proof as a kind of due diligence check on their identities.

36.  Mr Ching however submits that the identity documents are not necessary as WF have already disclosed them in response to the earlier third party discovery summons taken out by the defendants.  I cannot accept such argument because the plaintiff has its own primary obligation of disclosure to discharge. 

37.  Further, in Matthews & Malek on Disclosure (5^th ed), the learned authors at para 8.22 dealing with “alternative sources for documents” stated that :-

“Similarly, the fact that the party seeking the disclosure can obtain the information elsewhere is not in itself an objection[12]. However, it is a factor to be taken into account by the court in deciding whether the disclosure sought would operate oppressively or whether confidential reports containing sensitive information should be disclosed.”

38.  I do not see any oppressiveness on the defendants’ part to seek discovery of these documents as mentioned in para 35 above because the steps taken by the plaintiff with respect to their client identification, verification and due diligence check could be different from those as done by WF.  Also, in the normal course of things, the documents to look for disclosure under this category by the plaintiff are unlikely to be voluminous.  Nor does it appear to be a tedious process.  To say the least, I heard no submission from Mr Ching to those effects.

Any documents obtained / kept / produced by P in accordance with the Guideline?

39.  The Guideline was published by an association called The Hong Kong S.A.R. Licensed Money Lenders Association Limited (“LMLA”) in March 2013 with reference to the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap.615) (“AMLO”).  The defendants’ supporting affirmations deposed nothing about the background of this association.  However, the “overview” section of the Guideline made it clear that money lenders (as defined under the Money Lenders Ordinance) are not one of the “authorized institutions” within the meaning of AMLO.  LMLA recommended its members to follow the Guideline with a view to maintaining, as far as applicable and practicable, the same regulatory standard against money laundering and terrorist financing.  Yet, there is no evidence that the plaintiff is one of its members, and Mr Ching submits that the Guideline is not applicable to the plaintiff. 

40.  Given that there is no clear evidence of mandatory obligation of any kind for the plaintiff to obtain, keep or produce documents with respect to the due diligence check on their customers’ identities in accordance with the Guideline, the requirements as spelt out therein on these matters would appear to be of referential value for the plaintiff (as a licensed money lender) at best.  At worst, the plaintiff may not even have made reference to such requirements on customer due diligence check as provided in the Guideline at all.  In these circumstances, this court cannot be satisfied there is sufficient evidence or prima facie case to show that the documents as mentioned in para 9(2)(b) above do exist.

41.  In the premises, I would allow specific discovery for the 2^nd category save and except for such class of documents as mentioned in para 9(2)(b) above.

The 3^rd category

42.  As for this category, I agree with Miss Yu’s submission to such extent that banking records in relation to the payments and repayments of the two mortgage loans sought would relate to the identities of the persons who entered into the loan and mortgage transactions with the plaintiff.  It is also undisputed or indisputable that these documents do exist and are under the plaintiff’s possession, custody or power. 

43.  In relation to the payments of the two mortgage loans, Ms Lai of WF exhibited in her 2^nd affirmation copies of the two cheques issued by the plaintiff in the respective sums of HK$9,994,650 and HK$6,993,000[13], being the plaintiff’s payments of the two mortgage loans in question (after deducting the relevant legal expenses charged by WF).  Copies of both cheques showed that the payee is “Chen Jianhua”.  It seems undisputed that these two cheques were sent by Ching & Co to WF on 14 February 2014 and 8 May 2014 respectively.[14]

44.  As explained in para 36 above, copies of these two cheques (with the plaintiff’s cheque account number printed thereon) should likewise have been disclosed by the plaintiff and the fact that the defendants have already obtained the same from WF would not per se disentitle them to seek specific discovery of such copies from the plaintiff.  In my view, it would not be oppressive to require the plaintiff to disclose them in this case either.  Further, the plaintiff’s bank statement for such cheque account would also reveal when the two cheques were cashed.

45.  In relation to the repayments of the two mortgage loans, it is plaintiff’s own case as supported by the affirmation of its general manager, Yeung Sau Han Fanny (“Ms Yeung”), that the 1^st and 2^nd defendants had made four interest repayments of HK$108,333 each month from 13 March 2014 to 13 June 2014 under the first mortgage, and one interest repayment of HK$116,667 on 7 June 2014 under the second mortgage.[15]  If any of such repayments was or were made by cheque(s), one should be able to trace for copy or copies of such cheque(s) according to the normal banking practice and the identity of the payor(s) of such cheque(s) can then be revealed.  If any of the repayments was or were made by way of bank transfer(s), the transferor(s)’ bank account(s) can then be traced and with further inquiry, the name(s) of such bank account holder(s)’ may also be revealed.  Viewed thus, I am satisfied that there is a prima facie case that the relevant bank statements of the plaintiff may contain the above information or through a train of enquiry lead to such information as related to the identity issue in this case.

46.  Apart from that, since both defendants contended that they never received the two loans or made repayment of interests as alleged[16], technically the plaintiff is also required to disclose the aforesaid documents or classes of documents which are relevant to establish its own claim.

47.  As such, the 3^rd category should in principle be allowed.  Having said that, I to a certain extent agree with Mr Ching’s observation that the description of this category is not too clear. However, if one reads such request together with the defendants’ supporting affidavit for the 1^st summons[17] and in light of the above discussion, the plaintiff should have no real difficulty in understanding the documents or classes of documents sought under this category.  Having said so, the defendants have the duty to identify with precision the documents or classes of documents as required to be disclosed, otherwise the plaintiff swearing the affidavit in relation to specific discovery of this category may find itself in serious trouble in swearing a false affidavit. See Paul’s Model Art case (supra), per Cheung JA at para 24(3). 

48.  As such, the plaintiff should be ordered to swear its affidavit as referred to in para 1 of the 1^st summons with reference to the following documents or classes of documents instead of those originally described in para 3 of the Schedule attached to such summons:

“Copies of the two cheques issued to “Chen Jianhua” in respect of the first and second mortgage loans respectively, and all bank statements showing the dates when these two cheques were cashed as well as all bank statements showing the interest repayments as described in paras 10 and 17 of Ms Yeung Sau Han Fanny’s affirmation filed on 5 March 2015[18].”

49.  By doing so, I see no unfairness to the defendants either for Miss Yu cannot draw my attention to the existence of any other documents or classes of documents as described in the 1^st summons under the 3^rd category which have not already been covered by such description as mentioned in the preceding paragraph.

The 4^th category

50.  In respect of the 4^th category, the defendants in my view cannot provide sufficient evidence to demonstrate there exist such correspondences as between the plaintiff (whether through Ching & Co or otherwise) and WF on the two mortgages which would be relevant to the identity issue or other matters in question.  In my view, such request of specific discovery is in truth a fishing expedition.

51.  Mr Fung Chi Man, the handling solicitor for the defendants, in his fourth affidavit (filed on 22 June 2017) deposed that the correspondences (under the 4^th category) “should contain evidence or information on whether the plaintiff had at any stage requested WF to provide identity proof of the alleged Mr Chen and Ms Fan and/or verified the identity of its customers with WF” prior to the execution of the two mortgages and the release of funds to them.  In other words, the defendants and their solicitors actually do not know whether the plaintiff had indeed made such requests or verifications.  It would be fishing for them under such circumstances to ask for the correspondences in question to see whether such requests or verifications were made or not and if yes, why and how they were made.

52.  In Ngan In Leng v Chu Yuet Wah (No.1) [2013] 1 HKLRD 717, Queeny Au-Yeung DHCJ (as Her Ladyship then was) also cited the case of Re Estate of Ng Chan Wah (supra) and emphasised that specific discovery should not be deployed as a tool for fishing expedition.  Her Ladyship at para 26 said:-

“26. Fishing expedition with a view to hunting around the documents in the hope that they will reveal some improprieties on the defendants' part or will provide information for them to pursue more enquiries is not permitted: Re Estate of Ng Chan Wah (unrep., HCAP 5/2003, [2003] HKEC 317), 5 March 2003, Chu J (as she then was), at [16]. However, this must be distinguished from onerous discovery causing inconvenience to a party: Man Won Co Ltd v Tay Vi Bing.” (emphasis added)

53.  Further, Miss Yu in her own skeleton submission in fact acknowledged that the plaintiff appeared to have vetted Mr Chen prior to its referral of him to WF, which in my view is likely for reasons as already discussed above under the heading of the 2^nd category.  The defendants cannot explain why the plaintiff on top of its own vetting, would still somehow ask WF to provide further information about the identity of the Mr Chen and Ms Fan in question.

54.  In these circumstances, the specific discovery on the 4^th category is refused.

The 5^th category

55.  For this category of documents, Miss Yu submits that Mr Ching being the handling solicitor for the plaintiff at the time should be alert of the risks involved in the subject mortgage transactions, especially the Law Society of Hong Kong had issued a circular to remind its members to beware of property fraud cases, and a practice direction to alert its members that the use of power of attorney in property transactions can be a suspicious transaction indicator under certain circumstances.

56.  However, with respect, Miss Yu cannot articulate or otherwise demonstrate to this court how these matters would necessarily justify the specific discovery.  Again, the defendants cannot pinpoint to any concrete evidence to suggest the plaintiff would necessarily instruct Ching & Co to advise on the power of attorney or any other matters as related to the identity of the Mr Chen and Ms Fan in question.

57.  In these circumstances, I am not satisfied that the defendants have made out a prima facie on the relevance of the subject correspondences sought.  The 5^th category is therefore disallowed.

Disposition

58.  Due to the above reasons, I make an order in terms of paras 1 and 2 of the 1^st summons for specific discovery with respect to the documents mentioned in paras 2(a) and 3 of the Schedule thereto[19] save that the description of documents under para 3 of the Schedule be amended to that as described in para 48 above.  Whereas, application for specific discovery of documents as mentioned in para 1 and (2)(b) of the Schedule[20] to the 1^st summons are dismissed.

59.  The 2^nd summons is dismissed in its entirety[21].

Costs

60.  Since the defendants lost in the 2^nd summons, I order that the defendants do pay the costs of the 2^nd summons to the plaintiff forthwith to be taxed if not agreed.

61.  As for the 1^st summons, the defendants only succeeded partially.  However, rather than adopting a mechanical score-sheet approach, I prefer to look at the matter as a whole having regard to the overall circumstances of this case in deciding on this costs issue. 

62.  Among other things, it is observed that the efforts as spent by the defendants in successfully seeking the discovery of the documents in question would roughly be the same as those of the plaintiff in opposing those documents sought but ultimately refused by this court under the 1^st summons. 

63.  Further, although the defendants have incurred additional fee by engaging counsel to represent them at the hearing whereas the plaintiff was only represented by their solicitor, Mr Ching, on the other hand the time spent by the parties in arguing over the 1^st category is the most substantial among the different categories sought under the 1^st summons but the defendants failed in the 1^st category.  Not only that, the defendants had also written several letters to the court after the hearing in relation to their application for seeking leave to adduce further affidavit evidence on matters about the authenticity of the title deeds.  This necessitated the plaintiff to write a letter in response, and the defendants also failed in such application.

64.  In these circumstances, it is just and fair to make no order as to costs of the 1^st summons.

65.  Lastly, it remains for me to thank Miss Yu and Mr Ching for their assistance rendered to the court.