BLESS SKY LTD v. SUN FINE LAND DEVELOPMENT LTD

DCCJ1063/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1063 OF 2014

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D E C I S I O N

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Introduction

1. These proceedings concern an aborted sale and purchase of a property described as Section F of Lot No 1554 in DD 221 Sai Kung (“Property”). By a provisional sale and purchase agreement dated 22 October 2013 (“Agreement”), the plaintiff, a limited company, agreed to purchase the Property from the defendant, also a limited company for a consideration of $1.8 million. The plaintiff had also paid $180,000 to the defendant as deposit for the purchase of the Property.

2. The plaintiff claims in the statement of claim for, among other reliefs, a declaration of its entitlement to rescind the Agreement and for the repayment of the deposit on the ground of the defendant’s alleged misrepresentations.

3. The defendant has never, until the hearing of the first pre-trial review discussed in §6 below, participated in these proceedings. The plaintiff, apparently because it was seeking declaratory relief, was unable to obtain a default judgment even though the defendant was in default in the filing of an acknowledgement of service and the serving of a defence.

4. The plaintiff therefore took steps to set the action down for trial, and was able to obtain an order on 8 April 2015 setting the action down for trial with 3 and 4 September 2015 having been fixed as the trial dates.

5. Since 3 September 2015 has been gazetted as a public holiday, the parties will need to be notified of the vacation of the hearing having been fixed for that day. Before notifying the parties of the vacation of the hearing date, I directed that a pre-trial review (“PTR”) be held on 23 July 2015, and further directed the plaintiff to serve the notice of the hearing on, in addition to its registered office address, Messrs David Y.W. Man & Co, solicitors who have been stated in the Agreement as the solicitors acting for the defendant in the conveyancing transaction.

6. At the first PTR hearing on 23 July 2015, the defendant’s director, Mr Chow, purportedly acting on behalf of the defendant, appeared in person. 

7. Since Mr Chow had not complied with O.5A r.2 of the Rules of the District Court (“RDC”)to enable him to act on behalf of the defendant, the court adjourned the first PTR to 31 July 2015, and allowed the defendant 7 days to file a summons for leave to file an acknowledgement of service giving notice of its intention to defend and serve a defence out of time.

8. At the second PTR on 31 July 2015, the defendant was absent.  I directed the 2 days’ trial to commence on 4 September.

APPLICATION

9. The defendant is now represented by David Y.W. Man & Co and on 5 August 2015 filed a summons to apply for, among other things, leave to file and serve an acknowledgement of service and the defence out of time.

PARTIES’ POSITIONS

10. At the hearing, the plaintiff was represented by counsel, Mr Chan, and the defendant’s counsel was Mr Leung.

11. The parties were able to reach an agreement on all matters relating to the granting of leave to the defendant to file and serve the acknowledgment of service as well as the serving of the defence and counterclaim.  The timetables for the various interlocutory steps leading to a case management conference (“CMC”) were also agreed.

12. The only contention was on costs.

13. Mr Leung asks for costs to be in the cause, but Mr Chan contends that the plaintiff is entitled to the following set of costs consequential on the defendant’s defaults:

(1)  Costs incidental of and arising from the case management summons (“CMS”), CMC and the PTR;

(2)  Costs thrown away, which are the costs for the preparation and vacation of the trial dates.

14. Mr Leung objects to these costs sought by the plaintiff on only one ground: the defendant was not at fault.  He however concedes that should the court find that the defendant was responsible for the defaults, the defendant should pay those costs Mr Chan has contended for.

WAS THE DEFENDANT AT FAULT?

15. The defendant’s reason for its default in defending the proceedings and absence from the CMS hearing and the CMC, according to the affirmation in support of the summons affirmed by the defendant’s director, Mr Chow, was allegedly the alleged bad or irregular service of the proceedings on the defendant (“由於原告人送達本案文件予被告人公司因送達地址問題而出現欠缺通知或不符合規定之處”).

16. Mr Chow averred that the first time the defendant became aware of these proceedings was around July 2015 when the plaintiff served documents of these proceedings on No. 112, Tai Kei Leng, Yuen Long, NT (“Present Address”), which has, since 20 May 2014, been the defendant’s registered office address. It was further averred that Mr Chow contacted the court and learnt of the hearing date for the first PTR.

17. Mr Chow further averred that when he was at the first PTR hearing, he had difficulty in fully understanding the explanation of the court proceedings, which hearing was conducted in Cantonese, and not in his native Chiu Chow dialect.

18. It was also alleged that on 29 July 2015, Mr Chow had allegedly made telephone inquiries about the proceedings from a court staff but he was not able to fully understand what the court staff had told him. On 30 July 2015, he instructed David Y.W. Man to handle the proceedings.

DISCUSSION  

19. The defendant’s default can be categorized into two kinds. The first kind relates to the defendant’s non-participation before the first PTR hearing.

20. The second type concerns the defendant’s absence from the second PTR after Mr Chow of the defendant appeared at the first PTR.

Reason for the default before the first PTR

21. The defendant’s given reason for the default and the absence from the hearings is the alleged bad or irregular service of the proceedings on the defendant.

22. According to the plaintiff’s evidence of service, there is little dispute that the services of the writ and the subsequent documents in these proceedings have been regular.

23. Before 20 May 2014, the defendant’s registered office address was at Ground Floor, 70 Au Tsai Tsuen, Nam Wai, Sai Kung, New Territories (“Former Address”).  Thus, there can be no dispute that the plaintiff’s service on 8 April 2014 of the writ of summons together with its statement of claim on the Former Address was regular.

24. After the defendant changed its registered office address to the Present Address on 20 May 2014, the plaintiff had on nine different occasions served the defendant on the Present Address. Although the last occasion concerned the service of the notice of hearing of the first PTR by registered post (as I had directed) in addition to service by ordinary post, there is no evidence that the service by ordinary posts in the past was not successful. 

25. Absence any contrary evidence such as the post having been returned, the service is deemed to have been regular.  The defendant’s allegation of the bad service, in my judgment, is only based on Mr Chow’s bare assertion in his affirmation and cannot be substantiated.

26. Thus, I reject the defendant’s reason for its defaults before the first PTR hearing.

Reason for absence from the second PTR

27. Mr Chow’s explanation for the defendant’s absence from the second PTR on the ground of his insufficient understanding of the Cantonese dialect is, in my view, wholly unbelievable. I reject it.

28. Being acutely aware that Mr Chow was acting in person and had never made any appearance in any of the previous hearings in these proceedings, I therefore used Cantonese in the first PTR and took great care in ensuring that Mr Chow understood the explanations and the directions I gave at the hearing. I had explained to him that it was imperative for him to without delay either engage solicitors or to comply with the requirement of RDC O.5A r.2 should he wish to appear on behalf of the defendant without legal representation. I had further drawn to his attention the importance of filing an application for leave to defend the proceedings within the tight time table that I had imposed.

29. Not only had I taken time in explaining to Mr Chow the proceedings involved, I had granted a short adjournment of about 10 minutes to enable him to discuss with Mr Chan, who also appeared for the plaintiff at the first PTR, the possibility of a settlement and to agree to directions for the future conduct of the case.  At no time during the hearing that lasted a total of about 50 minutes did I discern any sign that Mr Chow had difficulty in understanding Cantonese due to the difference in dialect.

30. Even if I were to accept that Mr Chow, as a layman, might not have understood all the matters that were discussed at the hearing, it is  plain in my view that Mr Chow clearly knew that the second PTR was to be heard on 31 July 2015, and the adverse consequences of the defendant’s absence from that hearing. 

31. Ascertaining the date of the hearing for the second PTR is a straight-forward matter. Mr Chow’s assertion made in his affirmation in relation to the futility of the telephone inquiries from the court’s staff on 29 July 2015 is evasive at best.

32. Thus, in my judgment, the defendant has completely failed to provide any credible explanation to properly explain its absence from the second PTR hearing.  I find that the defendant’s absence from the second PTR is the defendant’s own fault.

Conclusion

33. For the reasons above, I reject the defendant’s explanation for its defaults on the ground of bad service before the first PTR.  I further find that the defendant’s absence from the second PTR is likely to have been a deliberate act.  In conclusion therefore I find that the defendant is solely at fault for its default in defending the action and the absence from the hearings.

COSTS LIABILITY

34. Although the defendant does not dispute the extent of the plaintiff’s costs should the court find the defendant responsible for the default, I can only deal with costs in relation to the costs of the first PTR and the costs thrown away as the costs of the CMS, the CMC and the second PTR have been ordered to be “costs in the cause”[1].

35. Therefore, the only costs I am concerned with are the reserved costs of the first PTR and the costs thrown away.

36. As for the costs of the first PTR, I consider that it is just that the defendant should pay the plaintiff’s costs notwithstanding Mr Chow’s attendance.  This is because procedurally, the defendant was still deemed to have been absent from the hearing as the defendant had failed to comply with RDC O.5A r.2 by either engaging legal representation or the filing of the requisite affirmation by the director to appear on behalf of the defendant. Thus, that hearing could be said to have been unnecessarily wasted.

37. Concerning the costs thrown away, the defendant should also pay the plaintiff’s costs, which include the preparation and vacation of the trial dates.  As for the costs of the preparation for trial, Mr Chan has fairly conceded that not all the costs such as the preparation of hearing bundles would have been totally wasted. He suggested a reasonable deduction of around 20% of the costs.

38.  Due to the defendant’s default, two dates allotted for the trial have now been aborted.  As the trial was only vacated two days before the hearing of this summons, the plaintiff must have substantially completed its trial preparation.  Mr Chan’s suggested a reduction by 20% of the costs in relation to the preparation for trial is reasonable and I so order.

ORDER

39. For the above reasons, I order that the defendant do pay the plaintiff forthwith:

(1)  The costs incidental to and arising from the first PTR on 23 July 2015, with certificate for counsel.

(2)  Costs thrown away  as follows:

(i)  80% of the costs for the preparation of trial; and

(ii)  the costs of and incidental to the vacation of trial, with certificate for counsel.

40. All the above costs are to be taxed if not agreed. 

41. As for the costs of the summons, I further order the defendant do pay the plaintiff’s costs forthwith with certificate for counsel, which costs are to be taxed if not agreed.  This costs order shall be nisi but become absolute if no application is made to vary this nisi order within 14 days of the handing down of this judgment.