CHENG, HENRY v. IMPERIAL SIERRA GROUP HOLDINGS LTD AND ANOTHER

DCCJ 5318/2019

[2020] HKDC 1027

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5318 OF 2019

---------------------------

---------------------------

---------------------------------

DECISION ON COSTS

---------------------------------

1.  This is a decision on costs following a summons dated 5 August 2020 whereby the 1^st defendant applied to vary the costs order nisi in the decision I made on 29 July 2020 (“the Decision”) to the extent that it submits there should be no order as to costs following the Decision (“the Variation Summons”).

2.  The hearing for the Variation Summons was fixed before me on 10 September 2020.  However, by a letter dated 20 August 2020, with the consent of the plaintiff, the 1^st defendant applied to the court requesting the Variation Summons to be dealt with by way of paper disposal. The court acceded to the request and gave directions to lodge written submissions with the court.

3.  However, the 1^st defendant has not served on the plaintiff or lodged with court any skeleton argument for the hearing on 10 September 2020 in accordance with the Practice Direction 5.4. The 1^st defendant’s solicitors only lodged a one-page submission on 22 September 2020.

DISCUSSION

Legal principles on costs in interlocutory proceedings

4.  Mr YL Zhu, counsel for the plaintiff, has helpfully summarised the legal principles governing the court’s discretion on costs.  I can do no better than repeating his summary here which I agree as an accurate reflection of the legal principals involved.

5.  It is trite law that costs are in the court’s discretion, to be exercised judicially: see section 53(1) of the District Court Ordinance (Cap 336) and Order 62 rule 2(4) of the Rules of the District Court (Cap 336H).

6.  Following the Civil Justice Reform, costs of interlocutory proceedings are dealt with in Order 62 rule 3(2A), which states:-

“If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit.”

7.  The relevant legal principles have been succinctly summarised by To J in Melvin Waxman v Li Fei Yu (unrep, HCA 1972/2012, 11 September 2013), at §§19-20:-

“19.   Summing up on the post-CJR position, I think the court has much wider discretion as to costs in interlocutory proceedings. Unlike other proceedings, the general rule of costs following the events do not apply. The court is entitled to take into account all the circumstances of the case, including those set out in rule 5, to make such order as it thinks fit. In the exercise of its discretion, the court may take the issue-based approach or may take into account merit of the parties’ case or the possible outcome of the action. The circumstances of interlocutory proceedings are so numerous that it is impossible to make any general rule. Costs to follow the event and costs be to the successful party’s costs in the cause are obvious options.

20.  As for the onus of proof, I think it is the same post-CJR as it was pre-CJR.  It must be the successful party’s burden to satisfy the court as to the type of costs order it is entitled.  To begin with, the successful party is assisted by the general rule of costs to follow the event.  By the mere fact of being successful, the successful party has discharged the evidential burden of showing it is entitled to costs.  Thus, effectively, the evidential burden is on the unsuccessful party to adduce sufficient evidence or argument that some other or lesser order is appropriate, such as no order as to costs, costs be to the successful party’s costs in the cause or costs to the unsuccessful party.  In the absence of evidence or convincing argument to the contrary, the successful party would also have discharged the legal burden.  Costs to follow the event would be the appropriate order to make.  If the unsuccessful party is able to discharge that evidential burden, it will be the legal burden of the successful party to show that he is entitled to the costs order which he seeks.  In reality, having heard the interlocutory application, it would be quite obvious to the court what costs order would best serve the justice between the parties without relying on the burden of proof.”

8.  This is endorsed by Lisa Wong J in Daimler AG v Leiduck (re expert evidence) (No 3) [2018] 1 HKLRD 1188, at §7.  See also Hong Kong Civil Procedure 2020, Vol 1, §62/3/3B at 1279.

9.  Order 62 rule 5(1) sets out matters that the court shall take into account when exercising its discretion on costs.

10.  Further, Order 62 rule 5(2) sets out matters that the court shall consider with regards to “the conduct of the parties”.

Costs order in Hadkinson application

11.  Again, Mr Zhu has helpfully summarised some case law on how the court will exercise its discretion on costs when a Hadkinson application is being dismissed.  I agree that although each case turns on its own facts, the following cases provide useful guidelines on how the court would exercise its discretion on the issue of the costs when such an application is being dismissed.

12.  In China Construction Reality Ltd v Lucky Dragon Ltd and others (unrep, HCA 1237/2012, 14 July 2014), the 4^th defendant was in breach of an injunction order of the court. The plaintiff applied for a Hadkinson order that the 4^th defendant be debarred from being heard in court.  The application was dismissed by Registrar KW Lung, but the learned Registrar decided that there should be no order as to costs in respect of the Hadkinson application.  The learned Registrar gave his reasons as follows, at §12:-

“In the assessment of the costs for the Hadkinson Order application, it is not disputed that the 4^th defendant was in breach of the Injunction Order of the Court and up to date, it has not purged the breach. It is analogous to the situation where in an application for striking out of the plaintiff’s claim for inordinate and inexcusable delay on an application by the defendant and the Court, having found that the plaintiff was guilty of inordinate delay, however, refused to exercise its power to strike out the plaintiff’s claim. In the circumstances. although the defendant had lost its application, the Court might disallow the plaintiff's costs and ordered that each party should pay its own costs.”

13.  On appeal from the learned Registrar's decision China Construction Realty Ltd, supra, Louis Chan J ruled in favour of the 4^th defendant (the successful party) and ordered that the plaintiff do pay the 4^th defendant's costs for the Hadkinson application.  The learned Judge observed, at §§94-96:-

“94.   Mr Yan submitted that an application to strike out for delay is to remedy the prejudice to the defendant because of the impossibility of a fair trial as may be occasioned by inordinate delay. Hence, even if the application should fail, the court may still deprive the successful respondent of its cost because of its delay.

95.  However, the Hadkinson principle does not exist simply to punish a contemnor and punishment is for contempt proceedings. Therefore, the Registrar should not have penalised the 4^th defendant on costs for the Hadkinson issue because of the 4^th defendant's breaches of the injunction. It is open to the plaintiff to launch contempt proceedings to punish the 4^th defendant for those breaches. Hence, Mr Yan submitted that the Registrar should have ordered costs in favour of the 4^th defendant as costs in this instance should follow the event. I agree with Mr Yan’s reasoning. I agree that the Registrar has erred in law in this instance by drawing the said analogy and made no order as to costs.

96.  I therefore allow the 4^th defendant's appeal and order that the costs before the Registrar for the Hadkinson issue be to the 4^th defendant to be taxed and paid forthwith.  I also make a costs order nisi that the 4^th defendant should have the costs of this appeal to be taxed and paid forthwith with certificate for two counsel.”

14.  In TYM v WSP (unrep, FCMP 309/2014, 19 December 2016) , the applicants applied to vary the costs order nisi that they pay the 1^st respondent’s costs as their Hadkinson application against the 1^st respondent was dismissed.  In dismissing the application to vary the costs order nisi, Deputy District Judge KK Pang (as he then was) made the following observations:-

“9. The Applicants accept that they are the losing party and that prima facie costs should follow the event. However, the Applicants proceed to suggest that the 1^st Respondent should be deprived of her costs in the Hadkinson Application even though the 1^st Respondent was successful in resisting the Hadkinson Application. The Applicants’ contention is that the 1^st Respondent has brought the litigation on herself because she has breached the Consent Order. I accept that the 1^st Respondent’s submission cannot be right, and that were they right, it would mean that in each and every contempt application (brought on the strength of a breach of an order), the applicant would always be shielded from any adverse costs order even if, ultimately, the application is ruled as unmeritorious. Such a proposition would have the effect of encouraging a court order), which goes against the spirit of CJR. This is particularly so in the present case where the Applicants have failed to even establish contempt on the 1^st Respondent’s part.

….

11.  In my view, the Hadkinson Application should never have been brought at all.

….

13.  In my view, it is unreasonable for the Applicants to pursue the Hadkinson Application and there is therefore no basis to deprive the 1^st Respondent of costs.  The Applicants’ application by the Summons dated 2 November 2016 for varying the Costs Order Nisi must fail.”

The court’s finding on costs

15.  In exercising my discretion on costs in this matter, I reminded myself that the 1^st defendant’s Hadkinson application was dismissed because I found there was no impediment to the course of justice and there were, in the circumstances of this particular case, other effective means of compliance with the court order.  In the Decision, I had specifically made the finding that the Hadkinson application made by the 1^st defendant’s “was a rather unnecessary and aggressive move to make”.  I further found that “it certainly could not be considered as the last resort for D1 to secure the judgment debt.”: (see §29 of the Decision).  In addition, I found that the defendant, having secured a charging order against the plaintiff’s property, the Hadkinson application would be “superfluous” and cannot be regarded as the “last resort”: (see §36 of the Decision).  I also made the comment in the Decision that the application was “totally disproportionate” and “like using a sledgehammer to crack a nut” (see §37).

16.  In my judgment, the defendant’s Hadkinson application was totally devoid of any merits.  It should never had been taken out in the first place.  When taken out, it should never have been pursued.  Therefore, the plaintiff being the successful party in that application, should be awarded the costs as they are normally entitled to as a successful party.

17.  I further agree with Mr Zhu that even the plaintiff was found to have failed to comply with the court order, the correct forum for penalisation of their non-compliance is by way of contempt proceedings rather than a Hadkinson application. 

18.  Lastly, I also agree with Mr Zhu that the non-compliance with court order should not be a basis for rejecting his entitlement to costs on a Hadkinson application which was made, as I found in the Decision, totally without any merits and was an unnecessary aggressive move which should have never been brought in the first place.

19.  I further find the 1^st defendant’s one page skeleton submissions lodged with the court on 22 September 2020 by its solicitors on the costs issue totally unhelpful; lack of any substance and therefore should be disregarded.

CONCLUSION

20.  In the aforestated premises, I therefore would dismiss the 1^st defendant’s Variation Summons with costs to the plaintiff with certificate for counsel.  Such costs will be summarily assessed by me on paper.  In this regard, I hereby direct that the plaintiff do lodge an updated statement of costs with this court within 7 days from the handing down of this decision and the 1^st defendant do lodge their list of objection, if any, within 7 days thereafter.  The parties will be informed of the assessed amount in due course.

Mr YL Zhu, instructed by Wai & Co, for the plaintiff

Chan & Associates, Solicitors for the 1^st defendant

DCCJ 5318/2019

[2020] HKDC 977

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5318 OF 2019

--------------------

--------------------

--------------------

DECISION

--------------------

1.  By Notice of Appeal dated 17 August 2020, the 1^st defendant seeks to appeal against the decision of Master B Mak on its summons for security for costs dated 19 May 2020. The master refused to order the plaintiff to give any security for costs and ordered the 1^st defendant to pay him his costs. The master’s reasons appear in the transcript provided to this court.

2.  It is agreed that an appeal from the master is to be dealt with way of an actual rehearing of the application: see Hong Kong Civil Procedure 2021 Vol. 1 para 58/1/2.  Hence, I am entitled to exercise my discretion under Order 23 r.1(1) afresh.

3.  The 1^st defendant relies on the indisputable fact that the plaintiff put in an incorrect address in the writ issued on 27 September 2019. The address wrongfully stated is Unit 805, 139-141 Wai Yip Street, Kwun Tong, Hong Kong (“the Kwun Tong Address”).

4.  Mr So, counsel for the 1^st defendant, argued that security for costs should be ordered against the plaintiff pursuant to either Order 23 r.1(1)(c) or (1)(d), Rules of the District Court.

5.  Order 23 r.1(1)(c) provides that subject to paragraph (2) of Order 23 r.1, when it appears to the court that the plaintiff’s address is incorrectly stated in the writ, that if, having regard to all the circumstances of the case, the court thinks it just to do so, it may order the plaintiff to give such security as it thinks just.

6.  Paragraph 2 provides that the court shall not require a plaintiff to give security by reason only of paragraph (1)(c) if he satisfies the court that the failure to state his address or the misstatement thereof was made innocently and without intention to deceive.

7.  Order 23 r.1(d) provides another situation which gives rise to the court’s discretion to order security. It is when the plaintiff has changed his address during the course of the proceedings with a view to evading the consequences of the litigation.

8.  The 1^st defendant relies on the fact that the plaintiff provided another address in in other litigation involving the same parties under HCSD 37 of 2019. There, the plaintiff stated his address to be 4/F, 14-16 Wo Fung Street, Fanling, New Territories (“the Fanling Address”). It says the plaintiff has changed his address in these proceedings from the Fanling Address to the Kwun Tong Address. This can hardly fulfill the requirements of r.1(1)(d). Mr So fairly abandons this limb in this appeal.

9.  The controversy between the parties revolves around the Kwun Tong Address and the purported reasons of its use given by one Mr Jim on behalf of the plaintiff, who is allegedly being grounded in the Mainland China because of the Covid-19 situation.

10.  The master, among other things, accepted the explanation given by Mr Jim. Mr Jim was a former partner of Jim & Co., which was intervened by the Law Society on 20 June 2019. As a result, Mr Jim could no longer handle the litigation of the plaintiff and could only refer the same to the plaintiff’s present solicitors. He, however, continues to assist the plaintiff and give instructions to the plaintiff’s present solicitors on behalf of the plaintiff, who is very often in the Mainland China.

11.  Mr Jim alleges that he has known the plaintiff since late 2013 and had handled certain conveyancing matters for him and his related company. In such matters, the plaintiff used the Kwun Tong Address.

12.  At the commencement of these proceedings, Mr Jim simply used the Kwun Tong Address without any confirmation or enquiries made with the plaintiff on the assumption that it remained valid. He only came to realise that plaintiff had changed his address when this was raised by the 1^st defendant in its affirmation. Therefore, it was only an innocent oversight without any intention to deceive.

13.  The master indicated that he saw no reason to disbelieve Mr Jim. The 1^st defendant does not share this observation. It continued to make enquiries with the present occupier of the Kwun Tong Address, namely, Great Top Engineering Ltd (“the Company”), after the master dismissed its application. For the purpose of this appeal, it applied to adduce the evidence of its enquiries by way of an affirmation exhibiting a letter of the Company dated 6 August 2020. By the said letter, the Company confirmed that it had started to occupy the Kwun Tong Address since 12 September 2014 and it did not know the plaintiff at all, let alone allowing the plaintiff to use or stay in its premises.

14.  The plaintiff did not oppose the application to adduce this piece of new evidence. This court allowed the application accordingly and granted leave to the plaintiff to file evidence in reply. Eventually, Mr Jim made his second affirmation dated 22 October 2020.  

15.  Mr Jim came up with the following explanations in his second affirmation. He alleges that the plaintiff’s partner Mr Pau Kam Man Angelo allowed the plaintiff to use the Kwun Tong Address for the plaintiff’s company Glory Bright Enterprises Limited (“Glory Bright”). Mr Pau is the minority shareholder of Glory Bright whereas the plaintiff is the controlling shareholder. Mr Pau told the plaintiff that he owned the premises and could make it available for the use of the plaintiff.  Thus, Mr Jim used this address in his handling of the plaintiff’s legal matters. He gives two examples.

16.  First, he exhibited a writ of summons issued by Glory Bright in another civil action against another individual under DCCJ 918/2019 (“the Other Action”) where the Kwun Tong Address was used by the plaintiff. The writ of summons was dated 22 February 2019.

17.  Second, he exhibited the letters and notices dated 20 January 2020 sent by the Planning Department to Glory Bright at the Kwun Tong Address (“the Letters/Notices”). He alleges that they show that the plaintiff could still receive letters from the Planning Department up to the said date.

18.  Mr Jim went on to say that Mr Pau did not tell the plaintiff that he had subsequently sold the premises and hence the plaintiff continued to use the Kwun Tong Address even after the sale.

19.  Mr So has made a forceful submission on the inadequacy of the evidence of the plaintiff. I accept his submission.

20.  First and foremost, I agree that the plaintiff should have made an affirmation himself. The 14-day mandatory quarantine could not be a valid reason why the plaintiff has been unable to return to Hong Kong if he takes a serious view of this matter. Even if he is being grounded for whatever reason in the Mainland, there is no reason why he could not have made a statement duly notarized in the Mainland for the present purposes.

21.  There is also no reason why Mr Pau did not give supportive evidence. Allegedly he was the owner of the Kwun Tong Address. However, in the land search record, which for unknown reasons is not exhibited to the evidence of Mr Jim, his name does not appear. The latest assignment recorded is one dated 12 September 2014 whereby one Madam Choi assigned the premises to E-mate Engineering Solutions Limited.

22.  I do not intend to surmise the relationship between Mr Pau and Madam Choi. It is the duty of the plaintiff to make good the allegations of Mr Jim with cogent evidence. The plaintiff should have produced the land search record in the first place and properly explained the material transaction.

23.  Equally alarming is the failure of Mr Jim to exhibit any conveyancing documents in which the plaintiff used the Kwun Tong Address as his or his company’s correspondence address as alleged in his first affirmation. He did not mention such alleged conveyancing cases in the second affirmation.

24.  The fact that the plaintiff used the Kwun Tong Address in the Other Action is neither here nor there. Two wrongs do not make a right and can be no evidence of innocence.

25.  Moreover, the Letters/Notices could not show that the plaintiff could receive mails at the Kwun Tong Address on or around 20 January 2020.  They were actually sent to two different addresses of Glory Bright. One was the Kwun Tong Address and the other one was the registered address of Glory Bright. There is also no reason why the plaintiff could still have access to the Kwun Tong Address after the change of ownership of the property thereat.

26.  All in all, I am not satisfied by the plaintiff’s evidence that he has any reasonable explanation for his use of an incorrect address in the writ of summons though it is clear that he had also used the Kwun Tong Address elsewhere.  

27.  However, I do not think that an order for security for costs is intended to be a sanction against the use of an incorrect address without a proper explanation. There should be an element of deception in the mis-statement in order to justify an order for security for costs. This is why the plaintiff can avoid giving security by showing that he did not have the intention to deceive under r.1(2).

28.  I cannot see how the incorrect address could serve any deceptive purposes. As mentioned above, the parties have been engaged in different litigations. The plaintiff served a statutory demand dated 29 July 2019 on the 1^st defendant in respect of an amount which the plaintiff says is due arising from the same transaction in the present action. In the statutory demand, the plaintiff used the Fanling Address.

29.  The 1^st defendant applied to set aside the statutory demand in the High Court under HCSD 37/2019. The plaintiff then applied to withdraw the statutory demand. His application was granted but he was ordered to pay costs summarily assessed at HK$45,000 to the 1^st defendant on 23 October 2019 within 14 days therefrom (“the HCSD Costs Order”).

30.  The plaintiff refused to pay the HCSD Costs Order. The 1^st defendant eventually obtained a charging order absolute against a luxurious property located on Tai Lam Reservoir Road registered in the name of the plaintiff (“the Tai Lam Property”) on the strength of the HCSD Costs Order.

31.  Mr Zhu, counsel for the plaintiff, draws to the attention of this court that the 1^st defendant made an O.88 application in the High Court under HCMP1433/2020 to sell the Tai Lam Property to enforce the HCSD Costs Order on 11 September 2020.

32.  There is no evidence as to how and when the 1^st defendant managed to identify the Tai Lam Property. There is no allegation that the plaintiff has ever concealed his ownership of the Tai Lam Property. I further note that the 1^st defendant did not challenge the validity of the Fanling Address.  If the plaintiff did not state an incorrect address in his statutory demand and did not hide the Tai Lam Property, I see no reason why he wanted to deceive the 1^st defendant by the use of the Kwun Tong Address in the present action. More likely than not, the mis-statement was a mistake albeit a reckless one on the part of Mr Jim.

33.  Mr So urges this court to take into account the unreasonable refusal of the plaintiff to comply with the HCSD Costs Order and the potential difficulties in obtaining an order for sale by reason of the relatively modest amount being due in contrast to the substantial value of the Tai Lam Property. Mr So confirms that he takes no issue with the worthiness of the Tai Lam Property.

34.  In my view, the plaintiff’s refusal to pay the HCSD Costs Order cannot be equated with any prima facie evidence of his attempt to evade liability to pay any costs order in these proceedings by his use of the Kwun Tong Address.  One has to look at the overall picture. 

35.  The purported potential difficulties in the 1^st defendant’s application for an order for sale is, with respect, quite irrelevant. The purpose of an order for security under Order 23 r.1(1)(c) is not to facilitate enforcement of judgments. It is targeted at deceitful plaintiffs only and not those who do not have assets readily amenable to easy execution.

36.  I, thus, come to the conclusion that there was no deception in the mis-statement of the Kwun Tong Address in the writ of summons and it was merely a grave mistake. I do not believe that discretion should be exercise in favour of a grant of an order for security for costs. The master was right in refusing the application of the 1^st defendant and I uphold the master’s decision in this regard.

37.  On the question of costs, I have heard the parties’ submissions. Mr So impresses upon me that in case that I conclude that an order for security should not be granted by the master, at least the 1^st defendant should not be ordered to pay all the costs of the plaintiff because of the accepted incorrectness of the Kwun Tong Address. He relies on Re Like Grand Holdings Ltd, unreported, HCCW603/2001, 11.7.2003 in which Kwan J (as she then was) only allowed the petitioners half of their costs in the application in light of her finding that both parties were indeed at fault.

38.  The situation here is not dissimilar in that the plaintiff has failed to give a proper explanation for his mis-stated address. The evidence adduced by the plaintiff is unsatisfactory and somewhat misleading. However, against the background of this case, the 1^st defendant could hardly make a complaint of deception and should not have made the application and this appeal. It appears to me to be a sheer tactical move premised on a bad mistake of the plaintiff. The lame excuses put up by the plaintiff subsequently cannot justify the application.

39.  To mark my disapproval of the conduct of the plaintiff in the application and the appeal, I depart from the general principle of costs following the event. The master did not have the full picture before him when he made the costs order. I order that the 1^st defendant do forthwith pay to the plaintiff one quarter of his costs of the application before the master and this appeal, to be taxed if not agreed, with certificate for counsel. The appeal is only allowed to this extent.

40.  Lastly, I thank Mr Zhu and Mr So for their assistance rendered to this court.

DCCJ 5318/2019

[2020] HKDC 605

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5318 OF 2019

---------------------------

---------------------------

--------------------------

DECISION

--------------------------

INTRODUCTION

1.  This is an appeal brought by the 1^st defendant (“D1”) against a master’s decision. 

2.  The appeal was originally fixed for hearing before me on 21 July 2020.  However, due to the General Adjournment Period announced on 19 July 2020, the case was adjourned.

3.  By an application made on 22 July 2020, the parties invited the court to deal with the appeal by way of paper disposal.  The court considers that this is an appropriate case to do so and hence has acceded to the request.

BACKGROUND

4.  This is a case where the plaintiff (“P”) and D1 have locked into a bitter dispute.  In short, the latest episode is that P had taken out a statutory demand against D1 on rather flimsy grounds in July 2019.  D1 applied to set aside the statutory demand in the High Court under HCSD 37/2019 in August 2019 (“the HCSD Action”).  P then wrote to the court to apply to withdraw the statutory demand and asked for the hearing to be vacated.  D1 proposed that the statutory demand be set aside with costs to be assessed on paper.  P did not reply to the proposal which led to a hearing before Deputy High Court Judge Leung (“DHCJ Leung”) on 23 October 2019.   Unsurprisingly, DHCJ Leung while allowing P to withdraw the statutory demand at the hearing, ordered P to pay D1’s costs which was summarily assessed at HK$45,000.  P was ordered to pay it within 14 days (“DHCJ Leung’s Order”).

5.  In the meantime, P has issued the writ of summons in the present proceedings in the District Court on 27 September 2019 but did not file the statement of claim until D1 issued a summons to dismiss the claim. The statement of claim was only filed on 15 November 2019 after further extension of time was granted by the court.   

6.  On 19 May 2020, D1, together with the 2^nd defendant (“D2” and collectively as “Ds”), issued 2 separate summonses to apply to strike out P’s action and seeking security for costs from P (“P’s Striking Out and Security for Costs Summonses”).

7.  On 25 May 2020, Registrar Lui adjourned the hearing of those 2 summonses to 3 August 2020 before Master B Mak for full argument with 3 hours reserved.

8.  P did not pay the assessed costs within 14 days as ordered by DHCJ Leung.  Despite repeated demands from D1’s solicitors, P has failed to pay the costs for a period of over 7 months.

9.  However, in the meantime, D1 applied under the HCSD Action for a charging order against a property situated in a luxurious development owned by P in Hong Kong.  A charging order nisi was granted by Master J Wong in the High Court on 11 March 2020.  P was ordered to show cause as to why the charging order should not be made absolute before Master Kot in the High Court on 15 June 2020.  The charging order was made absolute before Master Kot on that occasion with fixed costs of $9,100 awarded against P.  P did not appear at the hearing in person or by legal representative.        

10.  Despite having secured the charging order nisi against P in March 2020 and having fixed a hearing before Master Kok to make the order nisi to become absolute on 15 June 2020, on 9 June 2020, Ds took out a 3-minute summons for a Hadkinson Order to be imposed on P, ie unless P pays the costs and interest of the HK$45,000 ordered by DHCJ Leung, P be barred from being heard at the hearing on 3 August 2020 (“the Hadkinson Summons”).

11.  On 23 June 2020, Master B Mak dismissed the Hadkinson Summons.  In his oral reasons for the ruling, the learned Master held that Ds having made an application to impose a charge on P’s property forcing P to satisfy the costs order of DHCJ Leung, there was no compliance issue as far as payment of the High Court proceedings is concerned.  Further, as P by this action is making a claim against Ds, P should be entitled to have his day in court.  For those reasons, the master considered that P should not be barred from proceeding his claim in this court.       

12.  D1 now appeals against Master B Mak’s decision.

DISCUSSION

(i) What is a Hadkinson Order?

13.  This is a draconian measure seldom used in modern day litigation.  It originated from a 1952 matrimonial case in Hadkinson v Hadkinson [1952] 2 ALL ER 567 where the English Court of Appeal laid down the rule that a person who has committed a contempt should not be heard or entertained by the court until he had purged his contempt.  Lord Denning, who was one of the justices of appeal in that case, specifically stated that the court would only refuse to hear a party to a cause when the contempt impeded the course of justice by making it more difficult for the court to ascertain the truth or to enforce its order and there was no other effective means of securing his compliance.  The court might then in its discretion refuse to hear him until the impediment was removed or good reason was shown why it should not be removed: per Denning LJ (as he then was) at 575B.                

14.  There is no major dispute as to the legal principles involved in a Hadkinson Order in this case.  However, I wish to note here that in almost all the cases cited by the parties involving a Hadkinson Order, they are in the context of matrimonial proceedings.  They are seldom found or used in general civil litigation.  At least I have not come across any.  However, that of course does not mean they cannot be used in such cases.       

15.  Perhaps it is important to bear in mind that in the very case which laid down the rule, the court stated that “it is a strong thing for a court to refuse to hear a party to a cause” and a Hadkinson sanction is “only to be justified by grave considerations of public policy”: Hadkinson v Hadkinson, supra at 574H, per Lord Denning.

16.  Further, it has been stated by our own Court of Appeal that “the Hadkinson sanction should be a last resort and the exercise of the power is to be guided by asking whether in the circumstances, the interest of justice is best served by hearing or refusing to hear a party in contempt, bearing in mind that the paramount importance of orders of the court being observed”: THY v CHFR, unreported, HCMP 1755/2015 (23 September 2015; Lam VP and Barma JA), at §6, per Lam VP.

17.  In M v M (Maintenance Pending Suit: Enforcement on Dismissal of Suit) [2009] 1 FLR 790, Bodey J observed, at §52:-

“Any Hadkinson application needs to be approached with circumspection since, whilst the concept may, of course, be justified to meet the needs of a particular case, there is always the risk that it will not succeed and will be a mere distraction. Such an order is a remedy of last resort, for use where the circumstances are such that adequate justice cannot be done to the aggrieved party whilst the defaulter remains in breach.” [Emphasis added]

18.  Given the above, in my judgment, one must treat the Hadkinson sanction as the last resort and must not lose sight of whether the interest of justice will be best served by barring a party in contempt his right to be heard.

(ii) Criteria to be met in a Hadkinson Order

19.  As said, the parties have no substantial dispute over the criteria required.  

20.  In an application for a Hadkinson Order, the court would consider the following questions:-

(a)  Is the offending party in contempt?

(b)  Is there an impediment to the course of justice?

(c)  Is there any other effective means of securing compliance with the court’s orders?

(d)  Should the court exercise its discretion to impose conditions having regard to the question?

(e)  Is the contempt wilful?

(f)  Are the conditions proportionate?

See: Hadkinson v Hadkinson, supra. See also Mubarak v Mubarik (No 2) [2007] 1 WLR 271; DS v HR [2019] EWHC 2452 (Fam).

(iii) Findings of the court

Is P in contempt? Is the contempt wilful?

21.  In my view, these 2 criteria can be considered together. 

22.  Mr Simon So for D1 submits that the mere fact of a non-compliance of a money order is a contempt.  The court does not need to consider whether P’s non-compliance was wilful and/or contumelious. He cited what Bodey J has stated in Mubarak v Mubarik (No 2), supra at §56 to support his argument in this regard.

23.  D1 further relies on the fact that P has, through his solicitors, replied to the defendants’ “demand letters” to say that he “would not pay”.  However, the only letter produced by D1 from P’s solicitors dated 11 November 2019 does not say that.  It merely stated that what P is claiming in the present proceedings is much more than the costs he was ordered to pay by DHCJ Leung in the HCSD Action.  That in my view of course is not a good reason for not complying with a court order.       

24.  P chose not to make any submissions in respect of this part of D1’s submissions.  This is not surprising as I do not think they have any valid answer to it. 

25.  It has not been suggested by P or his solicitors that he could not afford to pay the $45,000 assessed costs.  The only reason they gave is that the claims he made in the present proceedings against Ds are much greater than that sum.  In fact, he had instructed solicitors and counsel to contest all the proceedings, including at least 2 3-minute summonses.  Hence, it does not appear that it was due to the lack of funds that P had caused him to fail to pay the assessed costs and paid it on time.  Rather, if one were to read P’s counsel submissions, there was no denial that there was a breach of the court order.  However, no apology or explanation was rendered by P for the breach. 

26.  In my judgment, there is no doubt that P was in breach of DHCJ Leung’s Order, which required him to pay the assessed costs of HK$45,000 and within 14 days from the date of the Order.  In my view, the non-payment of the amount of costs ordered by DHCJ Leung within the time specified would amount to a contempt.  Further, I find the contempt was a deliberate and willful one.

Is there an impediment to the course of justice?

27.  Lord Denning in Hadkinson v Hadkinson,supra at 298, defined an impediment to the course of justice as “by making it more difficult for the court to ascertain the truth or to enforce the orders which it may make”.  D1 by citing what Deputy District Judge KK Pang (as he then was) in TYM v WSP, unreported, FCMP 309/2014 (19 October 2016) said at §26 submits that there was no impediment to the course of justice in this case:-

“The 1st Respondent argued that typical examples of impediment to the course of justice was where a litigant fails to comply with an order for specific discovery, or a party to a matrimonial proceeding refusing to file his Form E. The contempt of those litigants would impede the course of justice in the sense that it would make it more difficult for the court to carry out its functions in resolving the dispute between the parties. … After having carefully considered, I accept the 1st Respondent’s argument that there is no impediment of the course of justice involved in the present case.” [Emphasis added]

28.  One salient fact I find in this case is that Ds had wasted no time in trying to secure the $45,000 assessed costs owed by P once they found out that he owns a property in Hong Kong.  They applied to the court under the HCSD Action to impose a charging order against P’s property in order to satisfy the judgment debt.  According to the charging order nisi made by Master J Wong in the High Court on 11 March 2020, the application relied on affidavit evidence filed as early as on 27 December 2019.  That was within a few weeks after the 14-day deadline imposed by DHCJ Leung had expired.       

29.  Yet, just a few days before that hearing before Master Kot on 15 June 2020, D1 chose to issue the Hadkinson Summons to be heard before Master B Mak on 23 June 2020. To me, this was a rather unnecessary and aggressive move to make. It certainly could not be considered as the last resort for D1 to secure the judgment debt.

30.  In my judgment, D1’s claim for the assessed costs ordered by DHCJ Leung (plus interest for the judgment debt and the fixed costs for securing the charging order) have been secured in the charging order absolute imposed by Master Kot on the property.  By the time of the hearing before Master B Mak on 23 June 2020, I agree with the master that there was no compliance issue as far as the payment of the costs of the HCSD Action is concerned.  That payment was secured by the charging order.

31.  On the other hand, both P’s claim against Ds under the statement of claim and D1’s applications under the Striking Out and Security for Costs Summonses are based on totally different causes of action and/or grounds.  I do not see how the failure on the part of P to pay the assessed costs under DHCJ Leung’s Order within the time limit imposed will somehow able to impede the course of justice in the present proceedings. In my judgment, it will not make it more difficult for the court to ascertain the truth or to enforce the orders which it may make in this case.

Is there any other effective means of securing compliance with the court’s orders?

32.  P submits that D1 has other effective means of securing compliance of the court’s order in this case in that D1 has already secured a charging order against a residential property in a luxurious development owned by P.

33.  Mr Y L Zhu for P submits that a charging order on the property or assets of the debtors is one of the modes of enforcement of a judgment or order for the payment of money to the creditor.  However, he concedes that this is not a direct mode of enforcement in the sense that the creditor can immediately proceed to recover the fruits of his judgment, but is rather an indirect mode of enforcement in the sense that it provides the creditor with security, in whole or in part, over the property of the debtor.  It makes the creditor a secured creditor, who having obtained his charging order must proceed, as may be necessary according to the nature of the property, to enforce his charge in order to obtain the actual proceeds of his charge to satisfy his judgment, in whole or in part: See Hong Kong Civil Procedure 2020, Vol 1, §50/9A/17.    

34.  Thus, P submits that the charging order, which D1 has charged to P’s property, is a mode of enforcement of the judgment debt and that judgment debt P owes to D1 is secured by the operation of the charging order.   

35.  I agree. 

36.  In my view, D1, having secured a charging order against a property owned by P, has already found an effective means of securing P’s compliance of DHCJ Leung’s Order in the HCSD Action.  The Hadkinson Order it now seeks for therefore will be superfluous and cannot be regarded as the last resort.

Are the conditions proportionate?

37.  Having already secured a charging order against P’s property, D1’s proposed order under the Hadkinson Summons to bar P from being heard at the hearing on 3 August 2020 in my view represents a totally disproportionate means to achieve its ends.  It is like using a sledgehammer to crack a nut.  In my judgment, whether P’s claims in the present proceedings consist of any merits at all, he has a right to be heard.  Equally, if D1’s applications for the striking out and security for costs have any merits at all, P is entitled to have his day in court to defend himself.

Should the Court exercise discretion to impose conditions?

38.  In the aforesaid premises, I do not consider the interest of justice will be best served by barring P from appearing at the hearing of the Hagkinson Summons scheduled before on 3 August 2020.   

Procedural matters

39.  P tries to argue that the Hadkinson Summons involves with case management direction only and hence the written transcript of the master’s reasons should be produced.  P cited Li Kai Yin v Atta-Trans Ltd and Another (unreported, HCPI 196/2009, 18 July 2011), per Bharwaney J at §29 to support his argument.

40.  With respect, I consider this is a desperate attempt on the part of P to frustrate D1’s appeal.  First, I do not agree that the hearing before the learned master on 23 June 2020 was merely a case management direction hearing.  If D1 succeeded in the Hadkinson Summons, it will clearly affect the substantive rights of P.  Second, I can understand where there is an appeal against a master’s decision involving substantial arguments (like the one in Li Kai Yin, supra), transcript should be obtained so that the judge hearing the appeal would not have to “spend a considerable amount of time to listen to the audio recording of those reasons”: at §29.  However, this appeal concerns a 3-minute summons. The judge hearing the appeal can easily listen to the audio recording of the hearing in order to find out what took place before the master if he/she wishes to.  I do not see why transcript would be necessary under such circumstances.

41.  Of course, my view on the above procedural matters will not affect my decision on the appeal itself.

CONCLUSION

42.  Based on the above discussions, I am of the view that it will not be appropriate to grant a Hadkinson Order in this case.   

43.  I therefore would dismiss D1’s appeal and affirm the learned master’s order made on 23 June 2020.  

44.  Costs should follow the event.  I make an order nisi that D1 do pay the costs of the appeal, such costs to be summarily assessed, with certificate for counsel.  Unless there is any application from the parties to vary the same within 14 days, the costs order will become absolute.

45.  For the purpose of the summary assessment, I further direct that P to lodge a statement of costs within 7 days from the expiry of the 14 day period mentioned in the preceding paragraph with copy served on D1 and D1 to lodge its statement of objection within 7 days thereafter with copy served on P.