CHAN SAI LUN, HENRY v. CHAN WAI WAH, LILY-ANN

CACV96/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL APPEAL NO.96 OF 1997

(ON APPEAL FROM HIGH COURT ACTION NO.P2/93)

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REASONS FOR JUDGMENT

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Leave to appeal out of time

1. This is an application by the Director of Legal Aid ("DLA") for leave to appeal against the decision of Master Jones out of time. The decision was given by the Master on 12 February 1999 and the present application was issued on 19 April 2000. At the conclusion of the hearing, I refused the application. These are my reasons.

Background

2. The plaintiff and the 2nd defendant are brother and sister and were engaged in a litigation concerning their father's will. Legal aid was granted to the 2nd defendant on 5 May 1997. Prior to the granting of legal aid, the plaintiff had obtained costs orders against the 2nd defendant. The plaintiff further obtained a costs order against the 2nd defendant on the costs of the hearing on 8 May 1997 which was adjourned by Patrick Chan J (as he then was) and the costs of the resumed hearing which lasted for 28 days.

3. The 2nd defendant, on the other hand, obtained a costs order against the plaintiff in respect of the interlocutory appeal against the decision of Chan J in adjourning the hearing. The appeal was dismissed. The taxed cost was $90,820.50.

4. The 2nd defendant is without means. It is confirmed by the DLA that no contribution was required from the 2nd defendant. Apart from a minor portion of the costs amounting to $81,542, the plaintiff had not proceeded to tax the costs that were awarded in his favour. Understandably, there was no point to do so. A rough estimate of the costs incurred by the plaintiff is about $3 million, about $1 million was spent on the 28-day trial.

5. On 12 February 1999, the 2nd defendant's taxation of costs against the plaintiff was listed for a call-over hearing. The assigned solicitor, Messrs Miller Peart De Witt ("Miller") did not attend due to their own mistake. The plaintiff had issued a summons returnable on the same date. The summons was served by the plaintiff both on DLA and Miller. Miller stated that they were directed by the DLA not to attend the hearing of the summons. On 12 February 1999, the Master granted an order in the following terms :

"The issue of a certificate for the costs the Respondent is entitled to be paid pursuant to the Order dated 9th May 1997 made by the Court of Appeal be delayed until the Respondent has paid or tendered the sum of HK$81,542.00 she is liable to pay under the Allocatur dated 26th September 1994 and the costs which she is liable to pay pursuant to the Orders as set out in the Schedule annexed hereto to be taxed;"

6. The schedule of costs referred to in the order covered those awarded in the plaintiff's favour but did not include the costs of the hearing of the action. A law clerk of the DLA was present at the hearing before the Master although it is said that she was not called upon to address the court.

7. The order made by the Master was discovered by the DLA in September 1999 when Miller informed the DLA that the court had refused to seal the allocatur in relation to the costs of $90,820.50 due to the order of the Master. Enquiries were then made and the present application was taken out on 19 April 2000.

The principles

8. The principles on granting extension of time to appeal are fully set out by Keith J in Chiu Sin Chung v. Yu Yan Yan & Another [1993] 1 HKLR 225. The relevant factors to be considered are :

1. length for the delay;

2. reasons for the delay;

3. degree of prejudice; and

4. merits.

Length for the delay

9. The delay is substantial, a period of 14 months.

Reasons for the delay

10. I am not satisfied that a good explanation had been given for the delay in bringing the application. The failure to attend the hearing of 12 February 1999 was due entirely to the mistake of the DLA and Miller. This is accepted by the DLA. By September 1999, the DLA was aware of the order of the Master. Even if time should be given to the DLA to make enquiries, to take out an application only on 19 April 2000 is beyond all reasonable limits. As a matter of fact, the DLA should have been aware of the order at a much earlier stage. A law clerk of the DLA was present at the hearing. The matter should be immediately reported to the handling solicitor who should then take appropriate steps to deal with this matter.

Prejudice

11. The plaintiff's application is based on Order 62, rule 18 of the Rules of the High Court, which provides that :

" Where a party entitled to be paid costs is also liable to pay costs, the taxing master may -

(a) tax the costs which that party is liable to pay and set off the amount allowed against the amount he is entitled to be paid and direct payment of any balance, or

(b) delay the issue of a certificate for the costs he is entitled to be paid until he has paid or tendered the amount he is liable to pay."

12. Irrespective of whether the order should be made, the plaintiff's application is one authorized by the Rules.

13. On the question of prejudice, two matters were relied upon by the plaintiff. First, because the order had already been made by the Master, it did not attend the taxation of the 2nd defendant's costs in August 1999. It had not challenged the quantum. The answer by the DLA is that under Order 62, the plaintiff can apply for a review of the taxation. It will raise no objection to the review being brought out of time. Hence, this is not a prejudice to the plaintiff.

14. Second, if the condition imposed by the Master is now set aside, it would mean that the DLA would be able to enforce the costs order in favour of the 2nd defendant against the plaintiff when he, in fact, for all practical purposes, would not have any prospect of recovering the substantial amount of costs that had been ordered in his favour. These costs far exceeded the costs recovered by the 2nd defendant. The plaintiff's costs covered the period both before and after legal aid was granted to the 2nd defendant. In respect of the costs after the DLA came into the picture, the plaintiff had the additional problem of enforcing the costs order because of the effect of section 19(1) and section 16C of the Legal Aid Ordinance ("the Ordinance"). Mr Lam, counsel for the DLA, submitted that this prejudice would be present irrespective of any delay in bringing the appeal against the Master's decision.

15. In my view, as pointed out in Re Adhiguna Meranti [1988] 1 HKLR 410 (referred to in Chiu Sin Chung), although the existence of prejudice to a would be respondent is a ground for refusing an extension of time, the absence of prejudice to a respondent is not a ground for extending the time.

Merits

16. On merits, the gist of the DLA's argument is that the costs payable by the plaintiff to the 2nd defendant beneficially belonged to the DLA. As such, the plaintiff is not entitled to set off such costs against the costs that the 2nd defendant herself is liable to the plaintiff. This argument is based on sections 19A and 19B of the Ordinance and Regulation 9(6A) of the Legal Aid Regulation ("the Regulation").

17. Section 19A provides that :

"(1) All moneys which may become payable to an aided person -

(a) by virtue of an order, including an order of the Court of Final Appeal, made in connection with the proceedings to which his legal aid certificate relates ...

shall be paid or repaid, as the case may be, to the Director unless the Director by notice in writing to the person responsible for payment and to the aided person directs otherwise.

...

(4) Only the Director shall be capable of giving a good discharge for moneys which may become payable to the Director under this section.

(5) In this section reference to an 'aided person' includes an aided person whose legal aid certificate has been revoked or discharged."

Section 19B provides that :

"(1) Upon receipt of all moneys paid to him pursuant to section 19 or 19A, the Director shall -

(a) retain -

(i) any sum paid by virtue of an order or agreement for costs made in the aided person's favour ..."

Regulation 9(6A) provides that :

"The Director has the right to enforce an order for costs in favour of an aided person made in proceedings for which the Director has issued a certificate, whether the certificate has been discharged or revoked, and the Director may bring proceedings in his official name in a court of competent jurisdiction to recover the costs ordered." (emphasis added)

18. These provisions required money payable to the aided person to be paid to the DLA and it is only the DLA who could give a good discharge for the money payable to him. The DLA is entitled to retain the money paid and he can enforce the order for costs in favour of the aided person and to recover costs in his own name. The Explanatory Note in LN No.5 of 1995 stated that :

"This Regulation makes clear the Director's right to recover costs where an order for costs is made in favour of an aided person."

19. There are merits in the DLA's argument that the right of set-off does not exist. Certainly there are cases in England where the courts on similar provisions came to the view that no set-off of costs could be made : Anderson v. Hills Automobiles (Woodford) Ltd [1965] 1 WLR 745 and In re a Debtor (No.5883 of 1979), The Debtor v. The Law Society, The Times, 20/2/1981 (transcript from LEXIS). There are, on the other hand, different views as well : Carr v. Boxall [1960] 1 WLR 314; Cook v. Swinfen [1967] 1 WLR 457; Currie v. The Law Society [1977] QB 990; Lockley v. Blood Transfusion Service [1992] 1 WLR 492 and Brookes v. Harris [1995] 1 WLR 918.

20. Scott LJ in Lockley stated that :

"The point referred to by Lord Upjohn (in Anderson) was the effect of regulation 17(1) of the Legal Aid (General) Regulations 1962 (SI 1962 No 148) which required moneys payable to an assisted person, whether in respect of damages or costs, to be paid to his solicitor or, in lieu of solicitor, to the Law Society. Lord Upjohn obviously took the view that this provision was inconsistent with the operation of a set-off. The case has been referred to, both in The Supreme Court Practice 1991, paragraph 62/33/2 and by may J in Currie & co v The Law Society [1977] QB 990, as having been decided per incuriam. There is, I understand, no provision in the current Regulations similar to regulation 17(1) of the Regulations of 1962 and it may be possible, therefore, to regard the Anderson case [1965] 1 WLR 745 as, for that reason, no longer of binding effect." (emphasis added)

21. It is not necessary for me to reach a concluded view on this matter because for the purpose of the application for leave to appeal out of time, it is sufficient if the applicant can show that there are merits in the appeal. In my view, there are merits in the DLA's argument because in Hong Kong, we still have similar statutory provisions which arguably would prevent a set-off of the costs of the 2nd defendant.

Exercise of discretion

22. Merits, however, is only one of the factors to be taken into account. There is a long and inexcusable delay in bringing this application. Overall, I should not exercise the discretion in favour of the DLA. Once the time for appealing has elapsed, a party who was successful in a court below is entitled to regard the judgment in his favour as being final. To deprive him of this entitlement, it must be on the basis of a discretionary balancing exercise. In the context of this case, it would be unjust and unfair to grant leave to the DLA when the plaintiff has no real prospect of recovering his costs against the 2nd defendant. The costs far exceed those that the plaintiff is liable. While public money was spent, the costs are referable solely to the litigation between the parties.

Conclusion

23. Accordingly, the application was refused with costs to be paid to the plaintiff by the DLA.