K M CHEUNG & CO SOLICITORS (a firm) v. KUNG CHING

HCA 831/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 831 OF 2011

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BETWEEN

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D E C I S I O N

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Introduction

1.  This is the defendant’s appeal from a decision of Master J Chow of 25 June 2012 dismissing the defendant’s summons to strikeout the plaintiff’s claim with costs.

Procedural history

2.  The plaintiff, a firm of solicitors, filed a statement of claim on 7 July 2011 claiming the sum of $40,000 from the defendant for services rendered, plus interest and costs.

3.  The defendant filed her defence on 5 September 2011. This was followed on 9 September 2011 by a request for further and better particulars to be provided within 7 days.  The request was for particulars under paragraphs 2, 3, 7, 13, 15, 21 and 22 of the statement of claim.

4.  On 16 September 2011 the plaintiff requested and obtained from the defendant a 7-day extension for the filing and service of its answer.

5.  The next event on record is the issuance and service by the defendant on 23 November 2011 of an inter-partes summons (“the November summons”) for an ‘unless’ order returnable on 30 November 2011, requesting that the statement of claim be struck out unless the particulars were served and filed within 7 days.

6.  The application came before Master Ng who made an ‘unless’ order requiring the plaintiff to file and serve its answers to the request for particulars on or before 14 December 2011, giving the plaintiff 14 instead of 7 days to provide the particulars.

7.  The plaintiff filed and served the particulars requested within the stipulated time.

8.  The next event on record is the defendant's inter-partes summons taken out on 9 February 2012 and returnable on 17 February 2012 to strike out the plaintiff’s statement of claim for non-compliance with the ‘unless’ order.

9.  The defendant was apparently dissatisfied with the answer provided to its request under paragraph 2 of the statement of claim and took the view that the plaintiff had failed to comply with the ‘unless’ order.

10.  The request made under paragraph 2 and the plaintiff’s answer to it read:

“1. Under Paragraph 2

Of” ... the professional services rendered for the Defendant relating to the intended claim and/or legal action against Citibank (Hong Kong) Limited .....”

Request

Please state what services were allegedly rendered for which the Plaintiff now claims against the Defendant.

Answer

It has been stated clearly in the Paragraph 2 of Statement of Clam that the professional services rendered for the Defendant relating to the intended claim and/or legal action against Citibank (Hong Kong) Limited for subscription for the Lehman Brothers 1 year HKD Daily Accrual Coupon Auto ISIN YS0334923322 callable Multi Coupon.”

11.  The matter came before Master Chow on 13 June 2012. Although the Master considered the answer “insufficient and incomplete”, she did not consider that the plaintiff’s act fell within the “intentional and contumelious” category and was far from being a case of “non-compliance” with the unless order.  She made a costs order nisi in favour of the plaintiff and directed the plaintiff to provide further and better particulars to the request under paragraph 2 within 14 days from the date of her order.  Her judgment was given on 25 June 2012 and it is from that judgment that the defendant appeals.

12.  The defendant applied to vary the costs order nisi to an order in her favour and was successful in her application.  The plaintiff appeals the Master’s costs order of 11 July 2012.

The statement of claim

13.  Before considering the merits of this appeal, it is necessary to outline the salient parts of the statement of claim.

Paragraph 1 states that the plaintiff is a solicitors’ firm.

Paragraph 2 reads:

“The Plaintiff's claim is for the sum of HK$40,000.00 against the Defendant in respect of the professional services rendered for the Defendant relating to the intended claim and/or legal action against Citibank (Hong Kong) Limited for subscription for the Lehman Brothers 1 year HKD Daily Accrual Coupon Auto ISIN XSO334923322 Callable Multi-Coupon.”

14.  The remaining paragraphs of the statement of claim fall under specific headings including the following:

“Quotation”

Paragraphs 6 to 9 plead the communications that took place between the Plaintiff and the Defendant (acting through her agent) on 5, 6 and 19 May 2009 as well as in June 2009.  Mention was also made of demand letters sent to Citibank and an authorisation letter from the Defendant.

“Citibank Case”

Paragraphs 13-16 plead the events connected with the intended claim that took place between 4 September 2009 and 17 October 2009.  They include receiving instructions to seek counsel’s opinion on the intended claim, counsel’s fees and the legal fees of the plaintiff.

This appeal

15.  The substantive appeal relates to the correctness of the Master’s decision in refusing to strike out the statement of claim.  Mr Szeto, counsel for the defendant, characterised the central feature of the appeal as touching upon “the integrity of a court order”.

16.  Mr Szeto submitted that the answer given to the request made under paragraph 2 was obviously inadequate because it was nothing more than a repetition of the plea in respect of which particulars had been sought and ordered to be given.  It was said that as the plaintiff never appealed the ‘unless’ order, it was not open to it to say that the request was not necessary.  The plaintiff knew that it had to comply with the ‘unless’ order.

17.  Mr Szeto submitted that the Master correctly found the answer given to be inadequate and insufficient but erred in holding that it was not intentional and contumelious.  He contended that the way the answer was framed showed that it was intentional in that the plaintiff was insisting on its plea being adequate when it was not.

18.  Further, the particulars filed on 9 July 2012 in compliance with the order of Master Chow state that subsequent paragraphs of the statement of claim (i.e. paragraphs 3 to 9 and paragraphs 13 to 16) provide the answer to the request under paragraph 2.  It was submitted that that answer was inconsistent with the plaintiff’s earlier answer filed on 14 December 2011 which was a mere repetition of paragraph 2 of the statement of claim.

19.  Mr Szeto referred to the applicable principles stated by Sir Nicholas Browne-Wilkinson VC in Re Jokai Tea Holdings Limited (Note) [1992] 1 WLR 1196 at 1203 and by Ward LJ in Hytec Information Systems Limited v Coventry City Council [1997] 1 WLR 1666 at 1674.  Those passages are conveniently set out in the judgment of Ma J (as he then was) in Ping Kai Engineering Company Limited v Hong Kong Teakwood Works Limited, unrep., HCCT 2/2001, 6 February 2002 at §§ 20-21.

20.  In Jokai, the Vice Chancellor stated that:

“…in cases in which the court has to decide what are the consequences of a failure to comply with an ‘unless’ order, the relevant question is whether such failure is intentional and contumelious. The court should not be astute to find excuses for such failure since obedience to orders of the court is the foundation on which its authority is founded. But if a party can clearly demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances, such failure to obey is not to be treated as contumelious and therefore does not disentitle the litigant to rights which would otherwise have enjoyed.”

21.  Mr Szeto submitted that where there has been a failure to comply with an ‘unless’ order, the sanction stated in the order will be imposed unless the party in default adduces cogent and compelling evidence that the failure was not intentional or contumelious and was caused by circumstances beyond his control.  See Ping Kai at § 22.  As the plaintiff has not adduced any evidence, in the words of Ward LJ in Hytec “it can expect no mercy”. On that basis, it was said that the statement of claim must be struck out.

22.  Although Mr Szeto remarked on the plaintiff’s failure to appeal the ‘unless’ order, I do not consider that it warrants the inference that the plaintiff necessarily accepted that the ‘unless’ order was correctly made.  The fact that the plaintiff did not appeal Master Ng’s order is neutral.  In my view, it was a sensible decision on the plaintiff’s part.  An appeal would have meant embarking on unnecessary and wasteful satellite litigation when, plainly, particulars had to be provided.

23.  What I do find troubling is the fact that an ‘unless’ order was made at all.  In that connection, the following passage from the judgment of Ward LJ in Hytec (set out in § 21 of Ping Kai) is particularly relevant:

“(1) An unless order is an order of last resort. It is not made unless there is a history of failure to comply with other orders. It is the party’s last chance to put his case in order.” (emphasis added)

24.  In the present case, there is no ‘history of failure to comply’ with court orders.  No prior orders, whether for the provision of particulars or otherwise, have been made in the action.  The November summons was the first application for an order.  While the plaintiff failed to provide particulars after obtaining an extension of time from the defendant, equally, there was never any reminder or further request(s) from the defendant for the particulars which one would have expected in the normal course of events.    

25.  As Ward LJ observed, an ‘unless’ order is an order of last resort; it is the ultimate sanction.  It becomes meaningless if it is made on a first application for relief or as a matter of routine.  The Civil Justice Reform (“the CJR”) did not effect any change in that regard.  Nor (I might add) did it dispense with common courtesy.  In my view, an ‘unless’ order should not have been made on the November summons.  It was entirely inappropriate.

26.  That matter aside, I turn to the question whether Master Chow was correct in holding that the plaintiff's act did not constitute non-compliance.  The order required the plaintiff to provide answers to the request by the date and time stipulated in the order.  Had plaintiff not provided the answers as stipulated, that would have constituted non-compliance. But that did not happen.

27.  Rather, particulars were provided to all seven requests.  The defendant was dissatisfied with only one of the answers.  She considered that the answer to the request under paragraph 2 of the statement of claim to be insufficient.  What the defendant wanted was a narration of the items of work done in respect of which fees were being claimed but the defendant kept that to herself.  There was no request for further and letters particulars of the answer provided to the request under paragraph 2.

28.  Approximately 8 weeks later, the defendant issued the present summons to strike out the statement of claim.  In short, the defendant sought to stygmy the entire claim for remuneration for legal services rendered instead of resisting it on her substantive defence of lack of authority of the person who dealt with the plaintiff.

29.  I agree with the Master’s approach.  This is a simple case. The plaintiff is seeking fees for professional services rendered in relation to the defendant's potential claim against Citibank. Fairly read, paragraph 2 of the statement of claim gave an overview of the plaintiff's case.  Several of the ensuing paragraphs, in particular paragraphs 6-9 and 13-16, described work carried out on the defendant’s behalf in relation to potential claim pursuant to instructions received from the defendant through her agent.

30.  Arguably, it was not entirely clear whether “professional services” mentioned in paragraph 2 were limited to work as described in those paragraphs only or whether they covered other work not specifically pleaded and a sufficient answer would have resolved that ambiguity.  In that minor respect, the particulars required clarification. But that is a far cry from the defendant not being able to appreciate what the claim against her was from the pleaded case or that she was not in a position to know the case she had to meet at trial.

31.  Instead of seeking clarification, by appealing the Master’s decision, the defendant seeks to strike out the entire action when virtually all the particulars ordered had been provided.  In my view the defendant's approach is contrary to the spirit of the CJR and its underlying objectives: it fails to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings and to ensure fairness between the parties.

32.  The relief the defendant seeks is wholly disproportionate to any failure on the part of the plaintiff to provide a full answer to the request made under paragraph 2.  The course adopted by the defendant engages in precisely the kind of wasteful litigation that the CJR discourages.  In all probability, the costs of this appeal far exceed the amount in issue.  I do not consider that granting the relief sought would secure ‘the just resolution’ of this dispute in accordance with the substantive rights of the parties.

Costs

33.  As earlier stated, the Master varied her costs order nisi and awarded costs to the defendant.  Mr Cheung who appeared for the plaintiff submitted that costs should follow the event, the event before the Master being the application to strike out.  Accordingly, costs should not have been awarded to the defendant who failed to obtain the relief sought.

34.  It is apparent from the Master's order that the plaintiff provided further and better particulars to the request under paragraph 2 within 14 days and although the statement of claim was not struck out, something further had to be done by plaintiff. Thus, this was not a straightforward case of one of the parties being fully successful.  In those circumstances, I consider that the matter of costs fell within the Master's discretion and, unless it could be shown that the Master erred as a matter of law or had applied the wrong principles, this Court should not interfere with the exercise of that discretion and I do not propose to do so.

Order

35.  For the reasons stated, I would dismiss this appeal.  I make an order nisi that the costs of this appeal be to plaintiff, to be taxed if not agreed.