GEORGE CHU v. TAN GIONG SENG JOHNSON AND ANOTHER

CAMP 321 /2019

[2020] HKCA 531

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 321 OF 2019

(ON AN INTNENDED APPEAL FROM HCA NO 2213 OF 2018)

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.  This is the 1^st and 2^nd defendants’ renewed application for leave to appeal to the Court of Appeal against the judgment of Ng J on 25 October 2019 (“the Judgment”)^[1], by which the judge refused to grant relief from sanction contained in an unless order made by consent on 18 December 2018 (“the Unless Order”). It was provided in the Unless Order that unless by 5 pm on 15 January 2019, the 1^st and 2^nd defendants file and serve their defence and counterclaim, if any, the plaintiff be at liberty to apply for default judgment against the defendant with costs.

2.  The judge refused to grant leave to appeal against the Judgment on 18 December 2019.  He took the view that the intended appeal has no reasonable prospect of success, for the reasons given in the written submission of the plaintiff’s counsel^[2].

3.  The defendants issued the present summons on 30 December.  Apart from renewing the application for leave to appeal, they sought an order that the action and/or the Unless Order be stayed, pending the disposal of the appeal or further order^[3]. A draft notice of appeal with three substantive grounds of appeal was annexed to the summons.  They are the same as the grounds considered by the judge in the leave application before him.

4.  Having considered the papers and the submissions on both sides, we exercise our power under Order 59 rule 2A(5) to determine this summons on paper.

5.  For the background to the defendants’ application for relief against sanction for failure to comply with the Unless Order, we refer to §§2 to 9 of the Judgment.  For the legal principles in the exercise of the discretion to grant relief from sanctions pursuant to Order 2 rule 5 of the Rules of the High Court, we refer to §§16 to 19 of the Judgment^[4]. We do not propose to repeat them in this judgment.

6.  It is not in dispute that for leave to appeal to be granted, the defendants would need to establish reasonable prospect of success, and that this means the prospect of succeeding must be reasonable and more than fanciful, without having to be probable.  Furthermore, the intended appeal is against the exercise of discretion of the judge and the well-established principles apply.  The appeal court is not to exercise an independent discretion of its own.  Its initial function is one of review only. It may set aside the judge’s exercise of discretion if it can be shown that the judge did so under a mistake of law or in disregard of principle, or under a misunderstanding of the evidence, or had taken into account irrelevant matters, or failed to take into account relevant ones, or that the conclusion reached in the exercise of discretion is outside the generous ambit within which reasonable disagreement is possible.  It is only if the appeal court has reached the conclusion that the judge’s exercise of discretion must be set aside for one or more of the above reasons that it becomes entitled to exercise a discretion of its own.

7.  We turn to consider each of the three grounds of appeal.

Ground 1

8.  It is contended in ground 1 that the judge erred in finding that the defendants have no intention to file a defence and that it is “unnecessary and inappropriate” for them to file a defence until their summons issued on 14 January 2019 to stay this action in favour of arbitration has been dismissed.

9.  We do not consider this contention has any reasonable prospect of success.  The judge is entitled to infer on the evidence before him that the defendants had no intention of filing a defence in this action.

10.  The statement of claim was filed on 19 October 2018.  The defendants failed to serve a defence pursuant to Order 18 rule 2(1). The time for filing and serving a defence was extended twice by consent.  The 1^st defendant is a solicitor and should well understand the serious consequence of non-compliance of the Unless Order.  They have failed to satisfy the court that something beyond their control had caused their failure to comply with the Unless Order^[5].

11.  As for the summons to stay the action in favour of arbitration, this was issued the day before the deadline for complying with the Unless Order.  The defendants had more than sufficient time, within the time limited for service of a defence, to apply for a stay to arbitration pursuant to Order 12 rule 8(2) and seek necessary directions regarding the filing of the defence pending determination of the stay application but they had not done so.  Even after they had consented to and obtained the Unless Order, they could have filed a defence in compliance with the Unless Order indicating clearly that the defence was served with no intention to submit to the jurisdiction of the court and without prejudice to their challenge to jurisdiction^[6]. None of these viable options were taken.

12.  The judge had considered each of the circumstances set out in Order 2 rule 5(1)^[7]. There is nothing to suggest that he had erred in law or in fact in his evaluation.  Nor could it be said that his exercise of discretion was outside the generous ambit within which a reasonable disagreement is possible. There is no merit in this ground.

Ground 2

13.  The contention here is that the judge had failed to place weight on the disproportionality of the sanction in the Unless Order and the adverse impact on the wider interests of the administration of justice in Order 2 rule 5(1)(a).

14.  This is a repetition of the arguments made before the judge^[8] and was fully addressed in the Judgment^[9].  There is no valid basis for the appeal court to interfere with his exercise of discretion.

Ground 3

15.  The complaint is that the judge did not place weight on the progress of settlement negotiations, which constituted good explanation for the failure to comply with the Unless Order.

16.  This was raised before the judge^[10] and addressed properly in the Judgment^[11]. Again, we see no basis to interfere with the judge’s exercise of discretion on the well-established principles.

Conclusion and costs

17.  None of the proposed grounds of appeal are of merit.  We refuse to give leave to appeal.

18.  As this application is wholly without merit, we make an order under Order 59 rule 2A(8) that no party may request the determination to be considered at an oral hearing inter partes.

19.  We order the defendants to pay the plaintiff’s costs of this application and assess the plaintiff’s costs summarily.  We note that amount claimed in the plaintiff’s statement of costs for this application ($75,374) is less than half of the amount they sought at the leave application before the judge and which he taxed down to $150,000.  As mentioned above, the grounds of appeal relied on by the defendants are the same as those placed before the judge.  In the circumstances, we will allow the plaintiff the full amount claimed at $75,374.

20.  The costs order and gross sum assessment are orders nisi.  If there is no application to vary within 14 days of the handing down of this judgment, they will be made absolute.