CHAN LUEN v. CHAN KWONG CHI AND OTHERS

HCA 1038/2018

[2020] HKCFI 954

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1038 OF 2018

_____________

BETWEEN

_____________

_____________

R U L I N G

_____________

A. INTRODUCTION

1.  This matter comes before the Court on the plaintiff’s summons dated 10 March 2020.  It arises out of, and is consequential upon, the Decision dated 20 November 2019 of Recorder Stewart Wong SC (“Decision”).

2.  The summons was originally listed to be dealt with at a hearing on 6 April 2020, but that date fell within the General Adjournment of Proceedings.  With the consent of both the plaintiff and the defendants, DHCJ Burns SC directed that the matter would be determined on paper, in accordance with a timetable for written submissions which he set.

3.  The written submissions having been filed and exchanged, the matter was allotted to me for determination.  This is my Ruling.

4.  It is necessary first to identify the context within which the current matter arises.

5.  On 12 April 2019, Master J Wong made an Unless Order, providing that unless the defendants file and serve Answers to the Request for Further and Better Particulars of the Defence and Counterclaim dated 23 November 2018 by 4pm on 29 April 2019, the Amended Defence and Counterclaim dated 18 March 2019 (“ADCC”) would be struck out.

6.  On 26 April 2019, the defendants filed and served a document titled “Answers to Plaintiff’s Request for Further and Better Particulars of the Defence and Counterclaim” (“Answers”).  But, in relation to 16 out of the 41 requests made (being requests 5, 6, 15, 16, 17, 18, 21, 22, 30, 33, 34, 35, 38, 39, 40 and 41), the defendants’ answers were materially the same, being the suggestion that the requests were for evidence, so that the plaintiff was not entitled to an answer. 

7.  In the Decision – by which Recorder Stewart Wong SC decided the plaintiff’s summons dated 4 June 2019 seeking an order that judgment be entered against the defendants for failure to have complied with the Unless Order – he termed those the “Nil Answers” and termed the 16 requests the “Relevant Requests”.

8.  In the Decision (§42), the Recorder concluded that the defendants had failed to comply with the Unless Order in so far as the Relevant Requests were concerned.  However, he did not accept that the consequence of non-compliance was that judgment should be entered against the defendants.  This was because there had been only partial non-compliance.  He took the view (§47) that the proper and fairer way to read the Unless Order is that where there is only partial non-compliance because the defendants have failed to provide answers to some of the requests, that is they have failed to provide particulars of the relevant averments, it is those averments that should be struck out.  As he put it, that applies by operation of the Unless Order itself.

9.  The result (§55) was that certain parts of the ADCC relevant to the Relevant Requests are, or are to be, struck out. The Recorder therefore directed Counsel for the plaintiff and the defendants to agree which parts of the Amended Defence and Counterclaim are to be considered to be struck out, and to do so within 28 days.  But he gave liberty to apply in case the parties could not agree.

10.  The parties could not agree – at least, not completely.  Hence, by its summons dated 10 March 2020, the plaintiff now seeks a ruling as to which parts of the ADCC should be struck out.

11.  Having exchanged drafts and comments, some of the proposed parts of the ADCC to be struck out have been agreed.  But it seemed that there were disputed parts relating to: (1) paragraph 5(4); (2) paragraph 28(2)(a); and paragraph 28(4).

12.  As at the hearing before the Recorder, the plaintiff had been represented by Mr Alex Fan of Counsel and the defendants by Ms Yvonne Fong of Counsel.  As a result of the exchange of written submissions, agreement appears now to have been reached in relation to paragraph 28(2)(a) – that the deletion should be made as proposed by the plaintiff – so that the only remaining disputed parts are as to paragraphs 5(4) and 28(4).

13.  There is also common ground between the parties that paragraph 21(2) of the ADCC also needs to be amended to ensure correct syntax in the light of deletions which have been agreed.

B. THE ACTION

14.  For present purposes, only a brief identification of the parties’ respective cases need be set out.  Therefore, I gratefully adopt and repeat the summary given by the Recorder in the Decision.

15.  The plaintiff is the father of the 1^st and 2^nd defendants, born out of the marriage between the plaintiff and Madam Chan Law Dai (“Madam Chan”).  The 3^rd defendant is a company 4,000, 3,000 and 3,000 shares of which were registered in the names of the plaintiff, the 1^st and the 2^nd defendants respectively until sometime in late 2017 or early 2018 when, following an allotment of shares, the registered holdings became 4,000, 198,000 and 198,000 shares respectively.  The plaintiff, the 1^st and the 2^nd defendants were the directors of the 3^rd defendant until about the same time when, according to documents filed with the Companies Registry, the plaintiff ceased to be a director with the reason being “resignation/others”.

16.  The claims made by the plaintiff against the defendants can be divided into four heads:

(1) The plaintiff purchased four properties, three of which are registered in the names of the 1^st and the 2^nd defendants jointly, and one in the names of the 1^st defendant and Madam Chan jointly.  They hold the properties on trust for him.

(2) The plaintiff holds six bank accounts jointly with the 1^st and the 2^nd defendants (“the Joint Accounts”).  The monies in the Joint Accounts were solely deposited or caused to be deposited, or otherwise solely credited, into those accounts by the plaintiff. The monies in the Joint Accounts are held on trust for the plaintiff as sole beneficial owner and the 1^st and the 2^nd defendants are liable for sums they misappropriated therefrom.

(3) The 1^st and the 2^nd defendants did not pay for the shares of the 3^rd defendant and hold them as mere nominees of, and on trust for, the plaintiff.  Allegations of breach of fiduciary duties are made regarding the removal of the plaintiff as a director of the 3^rd defendant and the allotment of shares.

(4) The plaintiff purchased three properties in the name of the 3^rd defendant, which holds the properties on trust for him.

17.  The plaintiff seeks declarations that the properties, the monies in the Joint Accounts and the shares in the 3^rd defendant are held on trust for him absolutely, orders for transfer of the properties and shares to him, remedies relating to the sums allegedly misappropriated from the Joint Accounts, and remedies relating to his removal as a director of the 3^rd defendant and the allotment of shares.

18.  The defendants deny the plaintiff’s claims:

(1) For the properties in the names of the 1^st and/or the 2^nd defendants and Madam Chan, it is averred that the purchase prices (initial deposits and mortgage repayments) were contributed solely by the respective registered owners, and there was no common intention or agreement that the properties were to be held on trust for the plaintiff.  The properties had been occupied by the parties but three of them had been rented out since and the registered owners received the rents.  The 1^st and the 2^nd defendants had also paid for the renovations, repairs and upkeep of the properties as well as management fees, government rents and rates.  If and in so far as the plaintiff did contribute to the purchase prices, the contributions were gifts.

(2) The funds from the Joint Accounts came from an unincorporated business called Conoilic which was a de facto partnership of the plaintiff, the 1^st and the 2^nd defendants.  The Joint Accounts were opened and owned by the three of them jointly and it is denied that there is any trust in favour of the plaintiff.

(3) As for the shares in the 3^rd defendant, the 1^st and the 2^nd defendants did pay for them, and they deny any nominee or trust arrangements.  The removal of the plaintiff as a director and the allotment are also explained.

(4) As for the properties held in the name of the 3^rd defendant, there was no common intention or agreement that the properties were to be held on trust for the plaintiff.  The purchase prices were funded by the 1^st and the 2^nd defendants and Madam Chan.  One property had been used by Conoilic and had since been rented out by the 3^rd defendant.  One property was and still is being used by Conoilic and/or the 3^rd defendant.  The third property has been rented out by the 3^rd defendant at all material times.  The 3^rd defendant had also paid for the renovations, repairs and upkeep of the properties as well as management fees, government rents and rates.

C. THE ANALYSIS

19.  There is some small disagreement between Mr Fan and Ms Fong as to what was or was not said by them to the Recorder in the context of what might be the consequences of his decision (albeit at the end of argument before the Recorder reserved, so as later to hand down his Decision).  But I do not think I need to resolve that disagreement, as it seems to me to be appropriate simply to proceed from what the Recorder said in the Decision.

20.  In that regard, I see no difficulty in the intended approach.  The logic behind the disposition adopted in the Decision is clear. Insofar as an averment has not been particularised, in breach of the Unless Order, that averment falls to be struck out.  It seems to me to be obvious that if a material such averment is made twice in the ADCC, the averment falls to be struck out on both the occasions it is made.  This is so, even if a particular request for F&BPs was made of only one place where the averment was made.

21.  As Mr Fan submits, in my view correctly, what matters is the substance of the subject matter of the averment, not the paragraph or the number(s) of the paragraph in which the averment was made and which simply identify where it is made.  That approach does not, to my mind, in any way offend the usual principles that striking out of pleadings is a Draconian measure not to be exercised lightly.  It makes no sense to think that an averment which makes the same plea as another averment struck out should somehow remain in the pleading.

22.  Therefore, I think that the primary objection taken by Ms Fong – namely that no individual request for F&BPs was made of either paragraphs 5(4) or 28(4), so that there was no averment which now falls to be struck out – has no merit.  Instead, it will be necessary to consider the other arguments put forward.

23.  As to paragraph 5(4), the plaintiff proposes to strike out the entirety of that paragraph.  The paragraph reads as follows:

“ The 1^st and 2^nd Defendants have rented out the Manning 7A Property and Telford 411 Property as landlords and have received the rents and paying property taxes thereon. The respective rental agreements were signed by the respective registered owners and the rental income have been paid into the 1^st and 2^nd Defendants’ joint bank account.”

24.  Mr Fan, whilst accepting that no Relevant Request was made specifically directed against that paragraph, submits that it should be consequentially struck out because the defendants provided a Nil Answer to Relevant Requests 5 and 6, which sought details of the letting out of the Manning 7A Property and Telford 411 Property respectively.  He also points out that the defendants have already agreed to strike out the relevant parts in paragraph 4(1) of the ADCC in relation to the 1^st and 2^nd defendants letting out the Manning 7A Property, and the relevant parts in paragraphs 4(2) and 4(4) in relation to the defendants letting out the Telford 411 Property.  Those are the paragraphs in the ADCC of which Relevant Requests 5 and 6 were made.

25.  Mr Fan submits that there is no reason why paragraph 5(4) should not also therefore be consequentially struck out.

26.  Ms Fong’s submission – other than her primary argument, which I have found to be bad – is that it can be seen from the evidence filed for the defendants that the defendants were all along trying hard to look for the documents to provide the Answers.  Because the Recorder held in the Decision (§31) that it would have been open to the defendants to have objected to the proprietary of any requests in correspondence or before the Registrar, Ms Fong submits that the defendants were ordered to strike out the relevant parts of the ADCC due to their procedural error.

27.  However, I see no procedural error.  The averments are to be struck out because of the failure to have complied with the Unless Order.  Further, insofar as that submission appears to be an attempt to re-litigate the matters leading to the Decision, that is obviously not permissible at this stage.  Indeed, it seems to me that the submission only identifies why the plea in paragraph 5(4) falls to be struck out.  In the time granted, including the extensions of time and that available pursuant to the terms of the Unless Order, the defendants failed to provide the particulars ordered.  It does not matter for present purposes whether that failure was born of inability, unwillingness or simple intransigence.  Once the particulars have not been provided as required under the Unless Order, the consequence is that the averment is to be struck out.

28.  The defendants have correctly agreed to the consequential striking out of the relevant parts of paragraphs 4(1), 4(2) and 4(4) which concern the same subject matter averment that the 1^st and 2^nd defendants let out the Properties as landlords.  For the avoidance of doubt, I reject Ms Fong’s submission that those averments are “totally unrelated”.

29.  I have no hesitation in agreeing with Mr Fan’s submission that it is only the logical consequence that paragraph 5(4) should also be struck out.

30.  As to paragraph 28(4), the plaintiff again proposes to strike out the entirety of that paragraph.  The paragraph reads as follows:

“ Conifex has rented out the Conifex Properties as the landlord and has received the rents and paying property taxes thereon”.

31.  Mr Fan, whilst again accepting that no Relevant Request was specifically directed against that paragraph, submits that it should be consequentially struck out because the defendants provided Nil Answers to Relevant Requests 35 and 38.  Those Relevant Requests were in relation to Conifex letting out the Manning 9D Property and the Workshop 8 Property respectively, as pleaded in paragraphs 28(2)(a) and 28(2)(b) respectively.

32.  Indeed, the defendants have already agreed to strike out the relevant parts in those two sub-paragraphs. So, Mr Fan submits that there is no reason why paragraph 28(4) should not also consequentially be struck out

33.  In response on behalf of the defendants, Ms Fong repeats the arguments made in respect of paragraph 5(4).  For similar reasons, I would also repeat my analysis of those submissions, which in my view have no merit.

D. DISPOSITION

34.  Therefore,  I make an order in the terms of the draft Order provided to me under cover of Mr Fan’s written submissions.

35.  The order provides that such parts of the ADCC as highlighted and underlined in green as per the draft attached should be struck out.  The relevant draft includes those matters previously agreed between the parties, including the syntactical change to paragraph 21(2), and the changes which this Ruling decides.

36.  The defendants are to file and serve the Re-Amended Defence and Counterclaim giving effect of those amendments within 7 days.

37.  I also accede to the plaintiff’s request that the defendants should pay the costs of the application to be summarily assessed. I see no reason why costs should not follow the event, and a summary assessment is entirely applicable to a relatively discrete, self-contained argument.

38.  The plaintiff has put in a Statement of Costs seeking a total sum, including disbursements, of $138,400.  It may be of interest – and it is at least of some relevance to assessment of the plaintiff’s costs – to note that the defendants put in a Statement of Costs to cover the possibility that costs would be awarded in their favour, which sought the amount of $168,300.

39.  Though I have not received specific comments or objections relating to the plaintiff’s Statement of Costs from the defendants, I think with the benefit of the two statements, and by the application of common sense and experience, it is possible to make a summary assessment. I do so on the usual two-stage approach, looking first at the overall figure and then at some of the individual figures, and taking into account matters of proportionality by reference to the complexity and importance of the matters in dispute.  Also, it is appropriate to adopt a relatively broad brush approach.

40.  My assessment is that the appropriate amount of costs for which the defendants must be liable on this application is $120,000. That is to be paid forthwith.

Mr Alex Fan, instructed by Hon & Co, for the plaintiff

Ms Yvonne Fong, instructed by C F Lee & Co, for the 1^st to 3^rd defendants

HCA 1038/2018

[2020] HKCFI 485

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1038 OF 2018

_____________

_____________

______________________________________________

DECISION ON VARIATION OF COSTS ORDER NISI

AND SUMMARY ASSESSMENT OF COSTS

______________________________________________

1.  On 20 November 2019, I handed down a decision[1] striking out parts of the Amended Defence and Counterclaim because the defendants had failed to comply with an unless order to provide further and better particulars thereof, but dismissed the plaintiff’s summons to enter judgment (“the Judgment Summons”). I also made an order nisi that the defendants are to pay the costs of the plaintiff for the Judgment Summons including the hearing before me, to be taxed if not agreed.

2.  By Summons dated 29 November 2019, the plaintiff applies for a variation of the costs order nisi by replacing the order for costs to be taxed with an order for the summary assessment of the costs of the plaintiff, to be paid forthwith by the defendants.

3.  The plaintiff submits a statement of costs which, together with disbursements, amount to a total of HK$228,000.

4.  By a document dated 24 January 2020 titled “Ground for Objection to Plaintiff’s Statement of Costs for Summary Assessment”, the defendants object to various items in the plaintiff’s statement. They do not object to summary assessment by me and I agree that it is appropriate for me to do so.

5.  The plaintiff has replied to the defendants’ objections by a document dated 5 February 2020.  He also submits a statement for additional costs for this application for variation for HK$57,500.

6.  In Re Silver Faith Holdings Ltd[2], DHCJ Marlene Ng (as she then was), said:

“19. The proper approach to summary assessment of costs had been laid down by the Court of Appeal in Poon Shu Fan v Wong Tin Yan.[3] For the present purpose, it is sufficient to refer to the useful summary in the headnote of the reported judgment at pp 512-514 as follows:

‘(2) As in an ordinary taxation, under O.62 r.28(2) of the Rules of the High Court (Cap.4A) (the RHC), in a summary assessment, party‑and‑party costs were allowed only if they were “necessary or proper” for the attainment of justice or for enforcing or defending the rights of the receiving party. Pursuant to Practice Direction 14.3, the court adopted a broad‑brush approach to ensure the final figure assessed was not disproportionate and/or unreasonable having regard to the nature and circumstances of the application or matter and the underlying objectives stated in O.1A of the RHC, even if there was no challenge to individual items. ......

(3) A summary assessment required a two-stage approach. If total costs claimed appeared proportionate, then all that was normally required was that each item should have been reasonably incurred and the cost reasonable. If the overall costs appeared disproportionate, then the court would have to be satisfied that each item was necessary and its costs was reasonable. A sensible standard of necessity should be adopted allowing fully for the different judgments which those responsible for the litigation could sensibly come to as to what was required. While the threshold was higher than that of reasonableness, it should be achievable by a competent practitioner without undue difficulty. The conduct of the other party was relevant, since a cooperative party could reduce costs, but an uncooperative party could render necessary costs which would otherwise be unnecessary. ......

(6) Since Civil Justice Reform in 2009, taxation of counsel’s fees under a party-and-party taxation was no different from taxation of costs and expenses. The test of ‘necessary or proper’ applied and must take into account the matters set out in para.1(2) of Part II of the First Schedule to O.62 of the RHC, as well as the requirement of reasonable proportionality. Accordingly, paras.62/App/28(5) (p.1172) and 62/App/28A of Hong Kong Civil Procedure 2012 (p.1172), which referred to the previous pre-CJR “excessive and unreasonable” test under the former para.2(5) of Part II of the First Schedule to O.62 of the RHC, should no longer be followed, ......”

21. For the purpose of the summary assessment herein, I shall adopt a broad-brush approach pursuant to paragraph 13 of Practice Direction 14.3 as it is inappropriate to conduct any mini-taxation.”

7.  I therefore would also adopt the two-stage approach. On this basis, it does appear to me that the figure of HK$228,000 is disproportionate for a matter such as the present, and the same applies to the figure of HK$57,500 for the variation application.

8.  I have considered carefully all of the aforesaid documents and the submissions on both sides.  It would appear to me that the main reasons for the rather high amounts are: (i) the involvement of two partners in the firm of solicitors acting for the plaintiff and (ii) the level of counsel’s fees having regard to the nature of the application and his seniority. To instruct counsel to reply on costs also appears to me to be unnecessary.  While I note the submissions of the plaintiff that there was no duplication of work between the two partners, the overall amount of time spent by them in total also appears to me to be excessive.

9.  Having considered the submissions carefully, and without undertaking a mini-taxation, I allow a sum of HK$160,000 in total being the costs of the Judgment Summons and the variation, to be paid by the defendants forthwith.

HCA 1038/2018

[2019] HKCFI 2829

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1038 OF 2018

________________________

________________________

________________________

D E C I S I O N

________________________

A. INTRODUCTION

1.  On 12 April 2019, Master J Wong made the following order (“the Unless Order”):

“Unless the 1^st to 3^rd Defendants do file and serve their Answers of the Request for Further and Better Particulars of the Defence and Counterclaim dated 23^rd November 2018 by 4:00 pm on 29^th April 2019, the 1^st to 3^rd Defendants’ Amended Defence and Counterclaim dated 18^th March 2019 be struck out.”

2.  On 26 April 2019, the defendants filed and served a document titled “Answers to Plaintiff’s Request for Further and Better Particulars of the Defence and Counterclaim” (“the Answers”).  In relation to 16 out of the 41 requests made (being requests 5, 6, 15, 16, 17, 18, 21, 22, 30, 33, 34, 35, 38, 39, 40 and 41 in the Request for Further and Better Particulars of the Defence and Counterclaim (“the Request”) sent by letter dated 23 November 2018), the defendants’ answers were materially the same, being either:

“Not entitled, as the Request is for evidence”,

or

“Not entitled, as the Request is a matter of evidence”.

These are called the “Nil Answers” and I shall adopt this term as a matter of convenience.  I shall call those 16 requests “the Relevant Requests”.

3.  The plaintiff takes the view that the defendants have failed to comply with the Unless Order in so far as the Relevant Requests are concerned.  By summons dated 4 June 2019 (“the Judgment Summons”), the plaintiff applies for the following order:

“Judgment be entered against the 1^st to 3^rd defendants in terms of the draft judgment annexed hereto, with costs of this action to the Plaintiff, to be taxed if not agreed.”

4.  This is the hearing of the Judgment Summons.

B.  THE ACTION

5.  The plaintiff is the father of the 1^st and 2^nd defendants, born out of the marriage between the plaintiff and Madam Chan Law Dai (“Madam Chan”).  The 3^rd defendant is a company 4,000, 3,000 and 3,000 shares of which were registered in the names of the plaintiff, the 1^st and the 2^nd defendants respectively until sometime in late 2017 or early 2018 when, following an allotment of shares, the registered holdings became 4,000, 198,000 and 198,000 shares respectively.  The plaintiff, the 1^st and the 2^nd defendants were the directors of the 3^rd defendant until about the same time when, according to documents filed with the Companies Registry, the plaintiff ceased to be a director with the reason being “resignation/others”.

6.  The claims made by the plaintiff against the defendants can be divided into four heads:

(1)  The plaintiff purchased four properties, three of which are registered in the names of the 1^st and the 2^nd defendants jointly, and one in the names of the 1^st defendant and Madam Chan jointly.  They hold the properties on trust for him.

(2)  The plaintiff holds six bank accounts jointly with the 1^st and the 2^nd defendants (“the Joint Accounts”).  The monies in the Joint Accounts were solely deposited or caused to be deposited, or otherwise solely credited, into those accounts by the plaintiff. The monies in the Joint Accounts are held on trust for the plaintiff as sole beneficial owner and the 1^st and the 2^nd defendants are liable for sums they misappropriated therefrom.

(3)  The 1^st and the 2^nd defendants did not pay for the shares of the 3^rd defendant and hold them as mere nominees of, and on trust for, the plaintiff.  Allegations of breach of fiduciary duties are made regarding the removal of the plaintiff as a director of the 3^rd defendant and the allotment of shares.

(4)  The plaintiff purchased three properties in the name of the 3^rd defendant, which holds the properties on trust for him.

7.  The plaintiff seeks declarations that the properties, the monies in the Joint Accounts and the shares in the 3^rd defendant are held on trust for him absolutely, orders for transfer of the properties and shares to him, remedies relating to the sums allegedly misappropriated from the Joint Accounts, and remedies relating to his removal as a director of the 3^rd defendant and the allotment of shares.

8.  The defendants deny the plaintiff’s claims:

(1)  For the properties in the names of the 1^st and/or the 2^nd defendants and Madam Chan, it is averred that the purchase prices (initial deposits and mortgage repayments) were contributed solely by the respective registered owners, and there was no common intention or agreement that the properties were to be held on trust for the plaintiff.  The properties had been occupied by the parties but three of them had been rented out since and the registered owners received the rents.  The 1^st and the 2^nd defendants had also paid for the renovations, repairs and upkeep of the properties as well as management fees, government rents and rates.  If and in so far as the plaintiff did contribute to the purchase prices, the contributions were gifts.

(2)  The funds from the Joint Accounts came from an unincorporated business called Conoilic which was a de facto partnership of the plaintiff, the 1^st and the 2^nd defendants.  The Joint Accounts were opened and owned by the three of them jointly and it is denied that there is any trust in favour of the plaintiff.

(3)  As for the shares in the 3^rd defendant, the 1^st and the 2^nd defendants did pay for them, and they deny any nominee or trust arrangements.  The removal of the plaintiff as a director and the allotment are also explained.

(4)  As for the properties held in the name of the 3^rd defendant, there was no common intention or agreement that the properties were to be held on trust for the plaintiff.  The purchase prices were funded by the 1^st and the 2^nd defendants and Madam Chan.  One property had been used by Conoilic and had since been rented out by the 3^rd defendant.  One property was and still is being used by Conoilic and/or the 3^rd defendant.  The third property has been rented out by the 3^rd defendant at all material times.  The 3^rd defendant had also paid for the renovations, repairs and upkeep of the properties as well as management fees, government rents and rates.

C.  THE PROCEDURAL HISTORY

9.  The procedural history of this matter, leading to the present hearing before me, is as follows.

10.  By letter dated 23 November 2018, Hon & Co (“HC”), solicitors for the plaintiff, served on C F Lee & Co (“CFL”), solicitors for the defendants, the Request, asking the same be answered within 14 days. There are 41 requests in total.

11.  On 19 December 2018, Mr Kwan Chi Hung, a legal executive of CFL, called Ms Carmen Lau of HC.  During the telephone conversation, according to an affirmation of Mr Kam Fai of HC who was so informed by Ms Lau:

“Mr. Kwan said that the Defendants agreed to provide answers to the Request but needed more time to do so. Ms. Lau, upon the Plaintiff’s instructions, agreed Mr. Kwan’s proposal that a time extension of 28 days be granted to the Defendants to provide answers to the Request so that the Defendants would serve answers to the Request by 4^th January 2019.”

The parties also agreed that the time for the plaintiff to file and serve his Reply and Defence to Counterclaim be extended to 7 days after the defendants had answered. 

12.  On 3 January 2019, Mr Kwan had a telephone conversation with Mr Kam.  According to Mr Kam, during the call:

“Mr. Kwan said that the Defendants agreed to provide answers to the Request but needed more time to do so. Accordingly, Mr. Kwan proposed that a further time extension of 28 days was needed for the Defendants to serve answers to the Request. While I, upon the Plaintiff’s instructions, rejected CFL’s proposal, I on behalf of our client agreed to extend the time to such extent that the Defendants’ answers to the Request shall reach us by close of business on 7^th January 2019”.

13.  The defendants did not file and serve any answers to the Request on or before 7 January 2019.

14.  On 23 January 2019, the plaintiff took out a summons seeking an order that the defendants do serve answers to the Request within 7 days (“the FBP Summons”).

15.  The FBP Summons was heard on 1 February 2019 by the Registrar.  According to Mr Kam, who appeared on behalf of the plaintiff,at that hearing:

“Mr. Kwan on behalf of the Defendants agreed that the Defendants would serve answers to the Request but more time was needed. In particular, the Defendants did not substantively dispute or challenge any of the specific requests under the Request. Under these circumstances, [the Registrar] did not need to adjourn the FBP Summons for substantive arguments but made an order that the Defendants do serve answers to the Request within 28 days.”

16.  The sealed order of the Registrar dated 1 February 2019 (“FBP Order”), from which there is no appeal, provides as follows:

“The 1^st to 3^rd Defendants do within 28 days from the date hereof serve the answers of the Request for Further and Better Particulars of the Defence and Counterclaim dated 23^rd November 2018, a copy of which was annexed to the Summons.”

17.  On 8 March 2019, Master Au-Yeung, on the application of the defendants, made on order extending the time for them to file and serve their answers to the Request to 8 April 2019.

18.  In the meantime, on 18 March 2019, the Defence and Counterclaim was amended.

19.  On 10 April 2019, the defendants issued another summons for extension of time.  On 12 April 2019, Master J Wong made the Unless Order.

20.  As stated above, on 26 April 2019, the defendants filed and served the Answers, including the Nil Answers.

21.  Requests 5, 6, 35 and 38 concern details of the alleged leasing out of four of the properties by the defendants.  Requests 15, 16, 17, 18, 39, 40 and 41 concern details of the alleged repair and renovations of the seven properties and the payments therefor as well as other alleged outgoings made by the 1^st and the 2^nd defendants. Requests 21 and 22 concern the source of funds in the Joint Accounts.  Request 30 concerns the names of some “accountant friends” who had allegedly given some advice on stamp duty in relation to the allotment of shares.  Requests 33 and 34 concern how much the 1^st and the 2^nd defendants had paid for the properties in the name of the 3^rd defendant.

22.  On 30 April 2019, a consent order was made that the time for the plaintiff to file and serve his Reply and Defence to Counterclaim be extended to 31 May 2019.  However, the plaintiff did not do so by that date.  Instead, he took out the Judgment Summons on 4 June 2019.[1]

23.  The only affirmation filed on behalf of the defendants in opposition to the Judgment Summons is one made by Mr Kwan.  He does not dispute what Mr Kam says in relation to the telephone conversations between him and Ms Lau and Mr Kam, or what happened at the hearing before the Registrar.  In particular, Mr Kam does not say that at any time,whether in conversation with HC or at any hearing, the defendants took any objection, or reserved any right to object, to any of the questions in the Request.

24.  In his affirmation, all Mr Kwan says as to why the defendants did not provide any answers to the Request, and had to ask for extensions of time from HC and the Court, is that they needed more time to prepare the answers.  Mr Kwan does not refer to any view taken by, or advice given to, the defendants at any time at all that some of the requests made are or may be objectionable.

D.  DISCUSSION

D1.  Have the defendants complied with the Unless Order

25.  The first question I have to deal with is whether the defendants have complied with the Unless Order by filing the Nil Answers.  No issue is taken on the other answers.

26.  At the hearing, some time is spent to consider if the Unless Order is a mere “time order” or an order which prescribes the mode of compliance.  As far as I understand, the difference between the two is, relevantly for present purposes, whether the defendants are entitled, as they have, to take an objection, in the Answers, to the propriety of the Relevant Requests.  That is, if it is a mere time order, ie where the mode of compliance is not specified, all the defendants need to do by the time stipulated in the Unless Order is to give a response, in relation to each of the questions, either by answering substantively or to take an objection (ie by giving the Nil Answers).  If, however, the Unless Order prescribes the mode of compliance, ie by requiring the defendants to answer the questions substantively and they cannot decline to answer by taking an objection, then by giving the Nil Answers the defendants have failed to comply with the Unless Order in so far as the Relevant Requests are concerned.

27.  Obviously, Mr Alex Fan, for the plaintiff, submits that the Nil Answers are not in compliance with the Unless Order, and Ms Yvonne Fong, for the defendants, submits otherwise.

28.  Instead of being bogged down with labels such as “time order”, in my judgment it is a matter of construction of the Unless Order in the light of its terms and in the context of all the relevant background and circumstances, including the making and terms of the original FBP Order by the Registrar, and what happened during the telephone conversations between the legal representatives and at the hearing on 1 February 2019 (in relation to which I accept Mr Kam’s evidence which is not disputed by Mr Kwan), whether the Unless Order allows the defendants to provide the Nil Answers, and thereby in effect raises, for the first time, the question of the propriety of the Relevant Requests.[2]

29.  So construed, it is in my judgment clear that the answer is no.

30.  The Unless Order, as well as the FBP Order which the former is extending in terms of the time for compliance, states clearly and unambiguously that what is required is to provide “answers” to the Request,and not merely a “response” to the Request[3]. There is no express, nor do I see any basis to suggest that there is any implied, reservation that the defendants do not need to answer any requests which they consider improper.

31.  The propriety of the Request or some of the questions therein can of course be objected to by the defendants in correspondence or before the Registrar.  Yet this was not done at all.  There was not even a reservation by the defendants that they might object at any time.The Registrar accordingly, without the need to hear any arguments on the propriety of any questions in the Request, made the FBP Order which requires answers to be given to the Request.  He did not direct any of them to be argued as to their propriety, which would certainly have happened had the defendants indicated any objection to any of the requests.[4]  The Unless Order, which extends the time to comply with the FBP Order but with a stated consequence, is of the same effect.  Both orders prescribe the mode of compliance, ie by giving substantive answers, and not by taking objections.This is not an appeal from either of those orders and I am as bound by them as the parties.  I cannot go into the propriety of any of the Relevant Requests, and neither can the defendants, as the defendants are ordered to answer them.

32.  In such circumstances, as stated by Barma JA in Moulin Global [5], concerning an order in rather similar terms, and which I find to be apposite here:

“ The order required the plaintiff to deliver its answers to the defendant’s request by the date indicated. A response to the effect that the defendant is not entitled to make the request and that the plaintiff will therefore not provide a substantive answer to it cannot in our view be properly described as an answer to the request.”

33.  Moulin Global was followed and applied in Wah Sun Hong Ltd v Wong Lee Yuk Ping Agnes [6] by DHCJ Wilson Chan (as he then was) where he held that the defendant was not entitled to reopen the propriety of the requests, and they had not answered the requests by saying that the plaintiff was not entitled to the particulars or that they were irrelevant, when the defendant had been ordered to:

“ file and serve the further and better particulars of the Defence‌… sought by the plaintiff in [the Request] within 28 days from the date hereof”.[7]

34.  Leave to appeal from Wah Sun Hong was refused by the learned Judge[8] and by the Court of Appeal[9], which held that the learned Judge was entirely correct in his construction of the order.

35.  Ms Fong argues that Moulin Global and Wah Sun Hong are distinguishable as they were not concerned with the enforcement of an unless order already made (as in the present case), but rather with whether an unless order should be made.  However, those cases dealt with the question of whether a party which had been ordered to provide answers to a request for further and better particulars had complied with the order by taking an objection in the “answers”, which is precisely the issue here. I do not think that any of the authorities cited by Ms Fong[10]is of assistance.

36.  Ms Fong also relies on the judgment of Madam Recorder Linda Chan SC in Noble Group Ltd v Arnaud Vagner[11], where her Ladyship held that in that case the defendants were entitled to answer requests which were not proper by stating that the plaintiff was not entitled thereto.[12]  However, like DHCJ Wilson Chan in Wah Sun Hong[13], I take the view that that decision is distinguishable.  I respectfully adopt his words which I find apposite and applicable:

“ In that case, there was nothing in the order which required the defendants there to file and serve further particulars on all the requests set out in the plaintiff’s request. Indeed, the order in that case did not even refer to the plaintiff’s request, still less all the requests contained therein”.

37.  Relying on a number of authorities[14], Ms Fong also argues that the defendants have acted in good faith by providing the Answers,including the Nil Answers.  They have, she submits, answered 25 of the 41 requests substantively and are genuinely of the view that the other 16 are improper requests.  The Answers cannot be said to be illusory.  My understanding of her argument is that since the defendants have acted in good faith and the Answers (including the Nil Answers) are not illusory,there is adequate compliance.

38.  With respect, I do not agree.  Where there is an unless order requiring a party to do something, the party must have done something which can fairly be capable of being described as the thing required to be done on a proper construction of the order.  That is, there must be some “compliance” to speak of.  If not, there is simply no compliance.  But where something has been done which can fairly be said to be the thing required to be done by the order, then there is compliance even if the compliance is inadequate unless such compliance is not made in good faith or illusory.  As Lok J said in Top Point Ltd [15]:

“ Having considered these authorities, it is clear that an unless order even requiring specific discovery of certain kinds of documents should be construed as a time order, and the issue will therefore turn upon whether the deadline has been met and not on the adequacy of compliance, unless it can be said that the compliance is not made in good faith or illusory.” (emphasis added)

39.  Top Point Ltd was cited with approval by Kwan JA (as she then was) in Bruce James Stinson v Gu Ming Gao[16]:

“ the issue of default of an unless order will turn upon whether the deadline has been met and not on the adequacy of compliance, unless it can said that the compliance is not made in good faith or is illusory.” (emphasis added)

This means that there must some compliance in the first place even if it is inadequate.

40.  In Reiss v Woolf [17], Somervell LJ (as he then was) cited with approval what the judge below[18]said:

“ The order does fix a time very precisely, and I think it can and should fairly be construed as a time order. So construed, ‘default’ refers to default in the delivery of a document within the specified time. I do not, of course, mean that any documentwith writing on it will do. It must be a document made in good faith and which can fairly be entitled ‘particulars.’ It must not be illusory ….” (emphasis added)

41.  Thus, in a case concerning particulars of pleadings, even one concerning a time order, there must be something delivered which can fairly be described as particulars, even though it may be inadequate.  If there is no such delivery, there is simply no compliance at all.  But if there is, then there is compliance unless the court is satisfied that the compliance is not made in good faith or is illusory.[19]  The position is a fortiori for an order which specifies the mode of compliance.  For reasons above, the Nil Answers are simply not answers to the Relevant Requests and the issue of good faith and illusion does not arise.

42.  In my judgment, the defendants have failed to comply with the Unless Order in so far as the Relevant Requests are concerned.

D2.  Consequence of non-compliance

43.  In Daimler AG v Leiduck [20], Fok JA (as he then was) said:

“ [Counsel] submitted, in reliance on Marcan Shipping (London) Ltd v Kefalas [2007] 1 WLR 1864, paras. 28 – 36, that, under the new procedural regime, it is not for the party seeking to take advantage of a default to apply to the Court in order to render a sanction for that default effective. Instead, the sanction takes effect immediately and it is for the party in default to apply for relief from the sanction. Only if there is an application for relief from the sanction is the Court required to consider whether, in all the circumstances, it is just to make an order granting relief from the consequences that would otherwise follow.

We would accept those submissions as an accurate summary of the effect of O.2 r.4 and O.2 r.5.”

44.  The question therefore is, what is the automatic sanction provided for in the Unless Order as a matter of construction, and whether there should be any relief therefrom, before I can consider whether I should accede to the Judgment Summons.

45.  The Unless Order provides for the striking out of the Amended Defence and Counterclaim upon failure to provide answers to the Request. However, in this case, there is no complete, or substantial, failure to provide answers.  The defendants do provide 25 of the 41 requests and there is no suggestion that for those 25 requests there has been no compliance or that such compliance is not made in good faith or is illusory.

46.  The question then is, what should happen when there is partial non-compliance? In my judgment, it cannot have been the intention of the Unless Order that the stated consequence of striking out the Amended Defence and Counterclaim will apply unless there is full compliance, no matter how trivial or insignificant the non-compliance is.  What if, for the sake of argument, only one of the 41 requests is not answered?  It cannot be the intention that the entire pleading is then struck out, no matter how important or otherwise the unanswered request is.

47.  In my judgment, the proper and fairer way to read the Unless Order is that where there is only partial non-compliance because the defendants have failed to provide answers to some of the requests, ie they have failed to provide particulars of the relevant averments, it is those averments that should be struck out. That applies by the operation of the Unless Order itself.

D3.  Relief from sanction

48.  In case I am wrong on the construction of the Unless Order above and the entire Amended Defence and Counterclaim is to be struck out upon non-compliance, then the question of relief from sanction arises.

49.  As made clear by Order 2, rule 4, it is for the party in default to apply for relief from sanction within 14 days.  Such an application must be supported by evidence: see Order 2, rule 5(2).

50.  Despite the fact that the plaintiff took out the Judgment Summons on 4 June 2019, no application has been made by the defendants for relief from sanction until this is mentioned as an alternative in the skeleton submissions filed on their behalf on 8 November 2019, ie four days before the hearing.  There is, however, no evidence filed in support.

51.  Mr Fan fairly accepts that I still have jurisdiction to consider such an application because I do have the power to extend the time under Order 3, rule 5.  As for the failure to file evidence, I also have the jurisdiction to waive this under Order 2, rule 1.

52.  I exercise my discretion to entertain, and allow, the application for relief from sanction, by relieving the defendants from the sanction of having the entire Amended Defence and Counterclaim struck out, by ordering that only averments therein which relate to the Relevant Request be struck out, for the following reasons:

(1)  The primary consideration, in my judgment, is the disproportionate effect of the striking out of the entire Amended Defence and Counterclaim, rendering the entry of judgment against the defendants without a full and proper trial of the disputes between the parties very likely, if not a virtual certainty. 

(2)  If judgment is entered as fully claimed, the amount involved will be very substantial.  The original purchase prices of the seven properties as pleaded totaled HK$15,571,375 but most of them were purchased in the 1980’s or 1990’s (with one in 2009 and one in 2010).  Their total present value must be much higher. As for the Joint Accounts, the total of the sums therein is pleaded by the plaintiff as US$4,153,382.05.  The value of the shares in the 3^rd defendant is unclear.  Thus, a judgment as fully claimed is by any standard very substantial.

(3)  I have set out what each of the Relevant Requests is concerned with at §21 above.  Apart from possibly requests 21 and 22, in my judgment they all concern with issues which although relevant are not the primary or core issues, but are rather matters which if established are arguably supportive of the defendants’ case.  It is disproportionate if the entire defence of the defendants is then struck out because of the failure to provide particulars of such averments.

(4)  This is particularly so for the third head of claim because, of all the Relevant Requests, only request 30 is related thereto, and request 30 asks for the names of persons said to have provided some advice leading to the allotment.  To strike out the defence of the defendants in relation to this head of claim entirely because of this failure is disproportionate in the extreme.  (I say nothing about the propriety of this request as a matter of law since I have ruled that this question cannot now be raised.) 

(5)  The question of proportionality of the sanction is a “weighty factor”: see Daimler AG v Leiduck at [57] per Fok JA.  See also Order 2, rule 5(1)(a), (i) and (j).

(6)  As stated by DHCJ Keith Yeung SC (as he then was) in Glory Sky Finance Ltd v Chen Jianhua [21]:

“ 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.”

(7)  As the learned Judge said, the first consideration under Order 2, rule 5, regarding relief from sanction, is the interests of the administration of justice.  It is in the interests of the administration of justice that serious matters ought to be resolved by a fair and proper trial (if not settled), and not in the interests of the administration of justice that disproportionate sanctions are imposed on procedural defaults.  This is not to say that procedural fairness and compliance are not important matters: it is all a matter of balance in each individual case.

(8)  The failure to support the application for relief by evidence means that there is no explanation by way of evidence before me for the failure to comply with the Unless Order in so far as the Relevant Requests are concerned.  I do not want to, and cannot, speculate as to the reasons for the failure (in particular by reference to the alleged difficulties in finding information and documents as stated by Mr Kwan as that is not the response given in the Nil Answers).  This is a factor against the defendant which I shall take into account: see Order 2, rule 5(1)(c) and (d).  I also cannot apply Order 2, rule 5(1)(f) in the defendants’ favour as a result.  In my judgment this is how I should consider the relevance of the lack of evidence, rather than as a ground to shut out the application for relief.

(9)  The application is not made promptly: indeed it is made at the eleventh hour: see Order 2, rule 5(1)(b).  There is again no explanation by way of evidence and is another factor against the defendants.

(10)  I note that the defendants have answered 25 out of the 41 requests: cf Order 2, rule 5(1)(e).

(11)  Mr Fan also argues that there is prejudice to the plaintiff because of the delay caused to the progress of this action by reason of the defendants’ default: the Request was first served almost a year ago.  While expeditious progress and disposal of court proceedings is clearly a relevant consideration, I do not regard the delay here to be is particularly serious (a substantial part of the delay is because of the time between the Judgment Summons and this hearing) and which the plaintiff can be remedied by costs and interest (if he eventually prevails) if necessary.  The same applies to the delay in applying for sanctions.

(12)  Of course, the 10 factors listed in Order 2, rule 5(1) are not exhaustive and one is not to tick each off and see what the score is as between the parties.  What I have to do is to have regard to all the circumstances including the listed factors in considering the application for relief from sanction.  In all the circumstances, taking into account the matters I referred to above, but most particularly the disproportionate effect of the sanction, in my judgment it is right that there is relief from sanction as I indicated.

53.  Another possible way to relieve the defendants from sanction canvassed at the hearing is to give the defendants one last final chance to provide substantive answers to the Relevant Requests.  However, having apparently tried for many months without success, there is no reason, or evidence, for me to suppose that by giving more time (56 days is what Ms Fong suggests) the defendants can now find the answers.  I decline to go down this route.

54.  I add that Ms Fong also argues that the plaintiff has waived his rights arising from the non-compliance with the Unless Order by agreeing, after the provision of the Answers, to the extension of time for him to file the Reply and Defence to Counterclaim.  However, since the effect of a non-compliance with the Unless Order is “self-executing”, there is no question of any waiver.  In any event, as submitted by Mr Fan, any waiver of rights has to be clear and unequivocal, and I do not regard the fact that there was such an agreement, made during the 14-day period in which the defendants could have applied for a relief from sanction as provided for by Order 2, rule 4, is such a clear and unequivocal waiver.

E.  DISPOSITION

55.  For reasons stated in §47, or alternatively §52, above, the result is that those parts of the Amended Defence and Counterclaim relevant to the Relevant Request are, or are to be, struck out.  I direct counsel for the plaintiff and the defendants to agree which parts of the Amended Defence and Counterclaim are to be considered to be struck out within 28 days.  If there is an agreement, the parties are to, for the sake of proper case management, file a consent summons to effect the striking out formally.  I grant liberty to apply in case the parties cannot agree.

56.  Since only parts of the Amended Defence and Counterclaim are, or are to be struck out, it is clearly not appropriate to give any judgment to the plaintiff as prayed for in the Judgment Summons.  I dismiss the same.

57.  As to costs, although I dismiss the Judgment Summons, in all the circumstances, since it is the defendants that are in default requiring relief from sanction, I make an order nisi that the defendants are to pay the costs of the plaintiff for the Judgment Summons including this hearing, to be taxed if not agreed.

58.  I thank counsel for their assistance.

Mr Alex Fan, instructed by Hon & Co, for the plaintiff

Ms Yvonne Fong, instructed by C F Lee & Co, for the 1^st to 3^rd defendants