YOUNG CRYSTAL LTD AND OTHERS v. HANG SENG BANK LTD

HCA 1710/2021

[2022] HKCFI 1589

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1710 OF 2021

____________

____________

_____________

D E C I S I O N

_____________

A. INTRODUCTION

1.  By a notice of appeal dated 3 January 2022, the Plaintiffs seek to appeal against the decision of Master Rita So of 29 December 2021 which granted an extension of time to the Defendant to file and serve its Defence (“the Appeal”).

2.  The Defendant had applied by a summons of 22 November 2021 for the extension of time (“the Summons”). As this is an appeal under RHC O.58 r.1, what is before me is a rehearing of the Summons.

3.  The originally scheduled hearing of the Appeal was adjourned by reason of the general adjournment of proceedings announced by the Judiciary by reason of public health considerations. The parties consented to the determination of the Appeal on the papers instead.

B.  THE CHRONOLOGY

4.  On 11 November 2021, the Plaintiffs issued the Writ of Summons in these proceedings, endorsed with a Statement of Claim. The same was served on the Defendant on 12 November 2021.

5.  On 19 November 2021, the Defendant filed its Acknowledgment of Service (“the AS”), indicating its intention to contest the proceedings.

6.  On 22 November 2021, the Defendant issued the Summons, applying for an extension of time for it to file its Defence by 28 days from 23 December 2021. There is a dispute as to whether this was done before or after the deadline under the rules of court for filing the Defence, to which I return below.

7.  On 29 November 2021, the Summons was heard by the Master.

8.  After a further extension of time, the Defendant eventually filed its Defence on 17 February 2022.

C.  THE DEADLINE FOR FILING THE DEFENCE

9.  As a preliminary matter, there is a dispute between the parties as to when the Defence ought to have been filed.

10.  The Plaintiffs’ stance is that the deadline for filing the Defence was 17 December 2021, which is 28 days after the Defendant filed the AS. The Defendant’s stance is that the deadline was 23 December 2021, which is 28 days after the (14 day) deadline for acknowledging service of the Writ.

11.  RHC O.18 r.2(1) provides that a defendant who gives notice of intention to defend an action must serve his defence “before the expiration of 28 days after the time limited for acknowledging service of the writ or after the service of the statement of claim is served on him, whichever is the later”.

12.  From the words “after the time limited for acknowledging service of the writ”, it should be clear that the deadline for service of a defence is 28 days after the deadline by which the acknowledgement of service should be filed. Thus, as explained in note 18/2/1 of the Hong Kong Civil Procedure 2022, the rule “has the effect of fixing the time for the service of the defence as being 42 days from the service of the writ [where the statement of claim is endorsed thereon], i.e. 14 days for giving notice of intention to defend … plus 28 days thereafter, and this is so irrespective of the date on which the defendant gives notice of intention to defend”. (Emphasis added.)

13.  Before the Master, the Plaintiffs’ solicitors had accepted that the Summons was filed before the expiry of time for filing the Defence, calculated in accordance with the preceding paragraph, as the transcript of the hearing shows.

14.  Yet the Plaintiffs’ stance on the Appeal is that the deadline for filing the Defence was 28 days from the filing of the AS. The reasons as set out in paragraphs 2 and 3 of the Plaintiffs’ reply submissions are that Form 14 in RHC Appendix A (“Form 14”), which sets out the form for an acknowledgment of service of a writ of summons, provides that “the Defence must be filed and served within 28 days after the time for acknowledging service of the Writ”.

15.  I do not see that Form 14 provides for a deadline that differs from that set out in O.18 r.2(1). As a simple matter of language, the deadline falls 28 days after the time for acknowledging service of the Writ, not 28 days after the time of acknowledging service of the Writ.

16.  Insofar as the Plaintiffs are arguing that the Defendant failed to issue the Summons after the expiry of time for filing the Defence and that therefore the only route open to it was to apply for relief from sanctions,[1] the calculation of time is incorrect as a matter of fact, so that the argument fails. Insofar as the Plaintiffs are arguing that the Defendant failed to file the Defence within time so that no matter when the Summons was issued, it was procedurally incorrect as the Defendant needed to seek relief from sanctions rather than an extension of time, it is not clear what point the Plaintiffs seek to derive from the insistence on their calculation of time, since the Defendant did not file its Defence until 17 February 2022 in any event, beyond either party’s calculated deadline.

D.  WHETHER FORM 14 CONSTITUTES AN “UNLESS” ORDER

17.  The Plaintiffs argue that:

17.1  the Defendant was obliged to seek relief from sanctions under RHC O.2 r.4 and 5 before it could file a Defence, rather than simply apply for an application for an extension of time under O.3 r.5;

17.2  the Master had no jurisdiction to deal with the Defendant’s application for an extension of time pursuant to the Summons;

17.3  the Plaintiffs were entitled to enter judgment in default of defence by 28 December 2021.

18.  The basis of the Plaintiffs’ argument is that Form 14 “amounts to “the common form of peremptory order known as an ‘unless’ order”, specified with additional requirements of sanction”, within the meaning of paragraph 2 of Practice Direction 16.5. It appears that the Plaintiffs rely on the following part of paragraph 2 of Form 14:

“…If a Statement of Claim is indorsed on the Writ … the Defence must be filed and served within 28 days after the time for acknowledging service of the Writ, unless in the meantime a summons for judgment is served on the Defendant…

If the Defendant fails to file and serve his defence within the appropriate time, the Plaintiff may enter judgment against him without further notice….”

19.  Practice Direction 16.5 provides, in part, as follows.

“1. For clarity, the nature and forms of peremptory orders in terms of R.S.C., O.42 r.2 are define[d].

2. The common form of peremptory order known as an “unless” order should prescribe the period within which an act is to be done, failing which the ordered consequences will follow…

3. The other form of peremptory order in common use does not carry within its wording the sanction for disobedience…

An order of this nature is only preliminary to an “unless” order and on disobedience a supplementary order in “unless” form, setting out the sanction, should be obtained. Until then the earlier order cannot be enforced.”

20.  I have difficulty in understanding the argument. I cannot accept it, for the following reasons.

20.1  Paragraph 2 of Form 14 is not an order of the court. Practice Direction 16.5 seeks to define peremptory orders under O.42 r.2. O.42 r.2 refers to judgments or orders which require a person to do an act. Paragraph 2 of Form 14 is clearly neither a judgment nor order.

20.2  Paragraph 2 of Form 14 does not provide for any “ordered consequence” which will “follow” on the failure to do an act.

20.2.1  First, it is not a judgment or order of the court, so there can be no “ordered consequence”.

20.2.2  Second, no consequence is contained in paragraph 2 of Form 14. The Plaintiffs argue that the “specified…sanction” is that the Plaintiffs may enter judgment in default of defence. However, this is not an automatic sanction; nothing would happen unless and until the Plaintiffs take further action. See Schenker International (HK) Ltd v Natural Dairy (NZ) Holdings Ltd [2014] 1 HKLRD 274 at [19] to [20], per DHCJ Le Pichon. It is therefore not a “unless order” type within paragraph 2 of Practice Direction 16.5, and the provisions of O.2 r.4 for applying for relief from sanctions do not apply: Guangdong Yinggao Shipping Limited v Secretary for Justice [2022] HKCFI 305 at [15] to [17], per DHCJ Le Pichon.

E.  FRESH EXERCISE OF DISCRETION

21.  As this a rehearing of the Summons, the court’s discretion is to be exercised afresh.

22.  The Plaintiffs have not advanced any other reasons against the Master’s exercise of discretion. The Defendant’s Summons was taken out before the Defence was due to be filed, and was the first application for an extension of time. In these circumstances, I grant the extension of time as originally sought by the Defendants and granted by the Master.

F.  DISPOSITION

23.  I dismiss the Appeal.

24.  I further make an order nisi that the Plaintiffs pay to the Defendant the costs of and occasioned by the Appeal on an indemnity basis, to be summarily assessed and paid forthwith. The Appeal is wholly unmeritorious. Some weeks before any submissions were filed for the Appeal, the Defendant’s solicitors had written to the Plaintiffs’ solicitors, inviting them to withdraw the appeal, on the grounds that the AS did not contain any peremptory order which gave rise to an automatic sanction. Attention was drawn to the fact that similar arguments had been advanced in the Guangdong Yinggao Shipping Limited (supra) and had failed. The Defendant’s solicitors also noted that the plaintiff in Guangdong Yinggao Shipping Limited had been represented by the Plaintiffs’ solicitors. The Plaintiffs’ solicitors did not even reply to indicate why it was said that, despite this authority, there was merit in the appeal. In the circumstances, I consider that the conduct of the Appeal was unreasonable.

25.  I further direct as follows.

25.1  In the event that any party seeks to vary the costs order nisi, the application should be made within 14 days of this decision; any objection thereto should be made within 7 days thereafter; and any reply within 7 days thereafter.

25.2  The Defendant has already lodged a statement of costs. The Plaintiffs are to lodge their list of objections, if any, within 14 days of this decision, and the Defendant is to lodge its reply, if any, within 7 days thereafter.

25.3  Issues relating to costs will thereafter be disposed of on the papers in the absence of any objection raised, with reasons, for such a course.