YEUNG SHU LAM WILSON t/a WILSON YEUNG & CO v. CHAN SUI TING AND ANOTHER

cacv 391/2004

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 391 of 2004

(on appeal from HCA NO. 284 of 2002)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This is an appeal from an order of Mr Justice Reyes following a judgment given on 7 December 2004.  The judge below had extended time to the 2^nd defendant to appeal orders of Master Levy dated 11 June 2004 and Master De Souza dated 13 September 2004.  He allowed the appeal against the order of Master Levy in so far as it made the 2^nd defendant personally liable for the costs thrown away by an adjournment of the hearing before the master and he also set aside the order of Master De Souza dated 13 September 2004.  In doing so he also set aside an allocatur dated 21 July 2004 and ordered that the plaintiff should repay all sums received from the 2^nd defendant on account of Master Levy’s wasted costs order and that the costs of the appeal before the judge should be to the 2^nd defendant. 

Background

2.  This action is a libel action.  It arose out of a complaint made by the 1^st defendant to the Law Society about the conduct of the plaintiff.  That complaint was made on 16 January 2002.  From the list of documents filed by the plaintiff it appears that that complaint was forwarded to the plaintiff by the Law Society by letter dated 19 January 2002.  When it is appreciated that 19 January 2002 was a Saturday it can be seen that the plaintiff wasted no time at all in issuing the writ in this action on 24 January 2002.  Indeed it would seem that the plaintiff was more anxious to issue this writ than he was to answer the Law Society, which again from his list of documents can be seen was done on 2 February 2002.  A perusal of the court files in the High Court Actions referred to herein below, but not referred to in the course of argument, may lead to the impression that the plaintiff regarded this complaint as a particularly aggravating continuation of a saga which had involved him in a considerable amount of work for which he neither received appreciation nor adequate recompense but on the contrary had also involved him in answering what he, at any rate, considered to be a totally unjustified complaint.

3.  Unfortunately, what has happened is that the merits of this action have never been tried.  The headlong rush to litigation, seemingly without so much as a letter before action, has lead to what would appear to be pointless litigation.  Within four months of the commencement the plaintiff abandoned his claim to an injunction.  Perhaps, that was an indication that even the plaintiff was not concerned that there might be any repetition of any supposed libel.  Although the plaintiff secured an order for an assessment of damages, it defies the imagination to perceive what damage could have been occasioned to the plaintiff other than the obvious vexation occasioned to a professional person.  In any event, the plaintiff has not pursued any such assessment. 

4.  This litigation has been pursued, so it would seem, for the purpose of recovery of costs and has degenerated into quite unnecessary satellite litigation.  The recovery aspect, in itself, would also appear to have been a failure.  The 1^st defendant has been made bankrupt in the process and it must be doubtful, to put it at its most favourable, whether any costs would ever be recovered from the 1^st defendant by the plaintiff.  It would seem that part, at least, of the difficulties in this action have been caused by the unexplained and, seemingly, inexplicable inaction on the part of the 2^nd defendant whilst acting both as solicitor of the 1^st defendant and even when acting on his own behalf.  That inaction enabled the plaintiff to commence bankruptcy proceedings against the 2^nd defendant.  Despite the best efforts of the judge below to introduce some measure of rationality, this satellite litigation has progressed to this court and, unless some sense prevails it would seem that even this appeal will not be the last appeal to this court in this action.  Whereas, I would at this stage at least, give the plaintiff credit for not abusing the legal process, it is difficult to avoid the conclusion that there is a great deal of sense in the old adage respecting the inadvisability of a lawyer representing himself.

5.  The matter arises in this way.  In the statement of claim the plaintiff pleaded that the 1^st defendant had been one of his clients.  He was the purchaser of premises on the fourth floor of 2B, Tak Shing Street, Kowloon and car parking spaces.  It is pleaded that the “whole procedure (including the registration of the deeds of assignment) was completed in late October 2000.  On 14 January 2002, a Bill of Costs and Disbursements No. 1260 for the total sum of HK$53,225.00 was delivered to the Defendant.”  It is not clear what relevance that has to the cause of action then pleaded by the plaintiff, namely libel contained in the letter of 16 January to the Hong Kong Law Society wherein the 1^st defendant alleged that the plaintiff had charged a friend of the 1^st defendant a sum of $20,000 at a time when the plaintiff was suspended from practice and that the sum had been charged for obtaining documents and that the plaintiff had cheated and misled the 1^st defendant and his friend.  There is an allegation in the statement of claim that the 1^st defendant’s publication of that letter was made with the ulterior and malicious motive to disparage the plaintiff’s reputation and character.  The prayer for relief in the writ claimed damages and an injunction as well as costs. 

6.  In the defence the 1^st defendant admits the conveyancing transaction and admitted that he had sent a complaint letter to the Law Society but alleged that the statements to the Law Society were statements of fact and did not bear any defamatory meaning.  By that it might be understood that the 1^st defendant was attempting, at any rate, to plead justification.  The defence also contained a general denial of the allegations in the statement of claim and hence the allegation of malice was disputed. 

7.  Amongst other matters, the plaintiff saw fit to request further and better particulars of the defence.  Part of those particulars related to the admission on the part of the 1^st defendant that the plaintiff had handled his conveyancing transaction for him.  This would appear to have been an unnecessary request.  Be that as it may, the plaintiff then went on to request particulars of how the 1^st defendant said that he had been cheated by the plaintiff.  That request was answered in a somewhat lengthy manner with reference to the fact that the plaintiff had previously acted for a Madam Lam and that the plaintiff had then ceased acting for her in two High Court actions but had demanded $20,000 for the return of documents and that the 1^st defendant had been told by another named solicitor from another named firm that the Law Society had taken over the firm with which the plaintiff had previously been associated and that Madam Lam was entitled to the return of any documents without payment.

8.  On 10 September 2002 the plaintiff obtained an order from Master Levy requiring the 1^st defendant to comply with the discovery obligations and also to make an affidavit verifying the list and in default the 1^st defendant’s defence would be struck out and judgment would be entered in favour of the plaintiff.  That order was filed on 16 September 2002 and on 17 September 2002 a list of documents was filed on behalf of the 1^st defendant.  That listed three categories of documents, none of which related to the allegations in the further and better particulars which were indeed not filed until 4 October 2002.  The list of documents contained the statement:

“	Neither the Defendant nor its solicitors nor any other person on his behalf, has now, or ever had, in their possession, custody or power any documents of any description whatever relating to any matter in question in this action, other than the documents enumerated in Schedules 1 and 2 hereto.”

9.  There is no dispute that no verifying affidavit was served or filed.  On 10 January 2003 the plaintiff issued a summons for further discovery seeking a further and better list of documents which was also to be verified on affidavit.  There was no supporting affidavit to support the summons and there is no written record of the proceedings before the master.  In common, we were told, with a number of the other summonses, the hearing on the return date was not attended by the 2^nd defendant as solicitor of the 1^st defendant nor anybody on his instructions.  Nevertheless, as has been pointed out above, there were allegations, particularly in the further and better particulars of the defence, which would seemingly give rise to the supposition that the 1^st defendant’s discovery was not complete.  Master Woolley made the order on that summons on 23 January 2003.

10.  The next step, which was a key step in relation to the issues now before this court, was the issuance of a summons on 29 January 2003 seeking judgment on the basis that the 1^st defendant had been in default in complying with the order of Master Levy of 10 September 2002.  The summons was said to be returnable on Friday 7 February 2002 at 9:30 in the forenoon.  Again, the 2^nd defendant, although the solicitor on the record for the 1^st defendant, did not appear.  There is no record on the court file of these proceedings save that endorsed on the summons is the note “Confirmation of service.  O.I.T.”  The affirmation of service appears to have been filed, according to the court file, at 11:15 am on the day of the hearing.  The difficulties in identifying the date continued because that affirmation is endorsed at the top “For hearing before the Master on 7^th January 2003 at 9:30 a.m.”

11.  It would thus appear that Master Bharwaney, when hearing this summons, did consider the question of whether the 1^st defendant had been properly served.  It can only be presumed from the endorsement and the subsequent filing of the affirmation of service that he was assured that service had been effected and that the affirmation was thereafter filed.  However, the first matter which must be recognised is that when entering judgment in default it is still necessary for the court to consider whether judgment should be entered.  In this case the master had before him a summons wherein the return date was incorrectly stated.  He had an application which was based upon an alleged failure to comply with an order which on the face of the matter had been complied with at least to the extent that the action could proceed.  There was no evidence before the master that any request had been made, still less in writing, for the provision of a confirmatory affidavit.  On that basis alone it would have been appropriate for the court to consider whether the order to strike out the defence and enter judgment in favour of the plaintiff was the correct order or whether the court should have simply made an order that an affidavit should have been provided. 

12.  However that is not the most important matter.  As already noted, Master Woolley had, in a summons returnable on 23 January 2003 made an order for a further and better list to be verified on affidavit.  There are two things which follow from that.  In the first place, no such order would have been appropriate unless there were grounds for asserting that the first list of documents was not complete.  If that were the case it would be pointless for any affidavit verifying the first list to be made because it would be an affidavit which would state that the list was complete when it was the plaintiff’s own averment that the list was not complete.  In the second place any failure to comply with the provision of the affidavit in compliance with the order made the previous September seems to me to have been overtaken by the order made by Master Woolley.  By proceeding with the action and by proceeding to demand further discovery the plaintiff has progressed well beyond the original discovery order and any failure to comply with it must be taken to have been taken into account by Master Woolley when he made the subsequent order.  In the light of that it appears to me that the issuance of the summons on 29 January 2003 seeking judgment on the basis of the default in filing the affidavit should have been doomed to failure from the start.  That is also the view expressed by Reyes J. 

13.  Coupled with that the Master was not only faced with a summons with the wrong date but an absence of the defendant’s solicitors in an action where there was an obvious defence of privilege.  It is unnecessary in this appeal to decide whether that defence is one of absolute privilege or qualified privilege.  Even on the assumption it was only qualified privilege the question of malice was something which would clearly have to be investigated.  The plaintiff might have been able to show malice, but bar the bald reference to it in the pleading, there was insufficient material on the face of the pleading to show malice.  It would have been appropriate as the judge suggested that the 1^st defendant’s solicitors should have been contacted to make inquiries as to why they were not at court.  That would have been all the more appropriate in the circumstances where it would appear that the 1^st defendant’s interests were probably not being properly looked after: it would have been appropriate for the court to raise the question of privilege with the 1^st defendant’s solicitors.  In those circumstances I have no hesitation in saying that the judge below came to the correct conclusion that the sanction of the unless order should not have been executed by the entering of the judgment by the master.

14.  The fact that the judgment had been entered was revealed to the 2^nd defendant, as the 1^st defendant’s solicitor, by fax of the same date.  Unfortunately it was not until 8 December 2003 that it was seen fit to take steps to set that judgment aside.  Instead the 2^nd defendant had let matters go by and allowed the plaintiff to tax the costs which had been done on 2 December 2003.  The taxed costs had come by then $125,493.

15.  The application to set aside the judgment is a matter which has given rise to this appeal.  When the application came on before Master Levy on 21 April 2004 the focus of the discussion was upon whether the 1^st defendant’s failure to provide an affidavit in support of the list of documents filed pursuant to Master Levy’s order of 2 September 2002 had been properly explained.  As Reyes J pointed out at page 29C of the transcript of the hearing, counsel appearing on behalf of the 1^st defendant applied for an adjournment because the master had indicated that there had been a “total lack of explanation being proffered by the defendant” and had made it clear that unless such explanation were provided judgment would be given against the 1^st defendant.

16.  As Reyes J also said that adjournment was unnecessary.  It should have been clear that the judgment fell to be set aside on the basis which has already been explained.  Again, as Reyes J held, once it has been decided that the adjournment was unnecessary it then becomes quite clear that it was wrong to visit the costs of that adjournment on the party that had to apply for it, still less should the costs of the adjournment be visited upon the solicitors.

17.  I should mention that Reyes J, in the court below, took into account a number of factors including the fact that a proper explanation for the 2^nd defendant’s not appearing at the hearing before Master Bharwaney had not been given.  Mr Chan SC who appeared on behalf of the plaintiff on this appeal argued that the judge had wrongly addressed the question of the failure to provide discovery in paragraphs 42 to 44 of the judgment in so far as he only looked at the aspect on the basis of the relevant party failing to give discovery of documents which were in that party’s favour.  However, what the judge was there considering was whether a peremptory order should have been made, i.e. one which provided that if there had been a failure to comply with the order which was made there would have been an automatic strike out of that party’s pleading and judgment against that party.  It is unnecessary to consider the full aspect of peremptory orders.  It is sufficient to say that it is highly unusual for a peremptory order to be made on the first application for an order of, for example, discovery.  When a court makes a peremptory order providing for judgment for failure to be observe the order, the court is necessarily put in a position where it has to consider whether each and every instance of failure, no matter what respect, should attract that penalty.  Reyes J was simply giving examples where in some cases it may not be appropriate even if full discovery has not be given for a defaulting party’s pleading to be struck out and judgment to be given against it.  In this case, if there were any failure to give discovery, it would, as far as can be determined, be a failure to give discovery of documents which were in the 1^st defendant’s favour or at any rate documents which went to support the 1^st defendant’s pleading in the further and better particulars.  In those circumstances the penalties suggested by Reyes J would be appropriate.  Furthermore if full discovery has in fact been given and the only failure was a failure to provide a confirmatory affidavit it would, it seems to me, be wholly out of proportion to enter judgment against that party without giving that party a further opportunity to file the affidavit, albeit the costs of any such application would have to be borne by the party in default.

Master De Souza’s refusal to review the taxation

18.  A further matter argued on this appeal was that Reyes J was wrong in extending time to appeal the order of Master De Souza dated 13 September 2004 and setting that order aside.  That order was a dismissal of the application by the 2^nd defendant to review the costs taxation which had been taxed on 9 July 2004.  The judge came to the conclusion that it was open to him to set aside the allocatur signed on 21 July 2004.  That conclusion appears to me to be correct.  It was founded upon the decision of Chapman J in Browne and another v Youde [1967] 1 WLR 1544.  The allocatur had been signed within the period which was allowed for review.  The review had been applied for within 14 days allowed for review of the taxation and, therefore, the issue of the allocatur should not be held to bar any review. 

19.  On this appeal Mr Chan sought to argue that it was not open to the 2^nd defendant to seek a review of that taxation because at the time that the review was sought the 2^nd defendant was not a party to these proceedings and had not taken part in the taxation as a party to it.  In my view that submission must be wrong.  The 2^nd defendant had been ordered to pay the costs which were the subject of that taxation.  It took part in the taxation as solicitor for the 1^st defendant.  I see no reason at all why a party who is condemned to pay costs directly should not take part in the review thereof specifically when he had conducted the original taxation on behalf of his client.

20.  Finally Mr Chan sought leave to amend the notice of appeal in order to be able to argue that the plaintiff should be entitled to keep the costs of the taxation relevant to the 2^nd defendant’s liability for costs.  This matter had been dealt with by Reyes J and was the subject of an order made by him on 6 January 2005.  In paragraph 2(2) of that order it was ordered that the plaintiff was not entitled to retain HK$15,204.33 or to deduct the same from the sum ordered to be repaid on 7 December 2004.  Quite apart from the fact that it was quite open to the judge to make that order which would seem sensible in the circumstances, it would be quite wrong in this case to permit yet further satellite litigation directed to such a minimal amount in relation to the costs of arguing it.  The application was therefore refused.

Hon Le Pichon JA:

21.  I agree.