TANG WAI HUNG v. GLORY SKY PRECIOUS METALS LTD

DCCJ 852/2019

[2022] HKDC 952

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 852 OF 2019

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REASONS FOR DECISION

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1.  There are 2 matters before the court:-

(1)  By a Notice of Appeal dated 5 May 2022, the defendant seeks to appeal against the costs order made by Master June Cheung on 26 April 2022 (the “Costs Appeal”); and

(2)  By summons dated 3 August 2022 (the “Stay Application”), the plaintiff applies to stay all further proceedings in this action pending the final determination of DCCJ 2961/2022 (the “New Action”).

2.  It is convenient to first deal with the Stay Application.

Background facts leading to the Stay Application

3.  In this action which was commenced in 2019, the plaintiff claims to be a victim of certain wrongful conduct committed by the defendant’s staff members regarding what is commonly known as “London gold trading”.

4.  The plaintiff alleges that by a letter dated 25 August 2021 from Messrs Ching & Co (“CC”), solicitors for the defendant, the defendant offered “to pay a sum of HK$200,000 all inclusive, in full and final [settlement of] all possible claims between the parties including but not limited to all the claims in this action, interest thereon, and costs”[1]. This settlement offer was said to be accepted by the plaintiff through his solicitors’ letter dated 27 August 2021[2] (the “Settlement Agreement”).

5.  It is then said that the defendant retraced from and repudiated the Settlement Agreement by insisting on additional terms being inserted into the settlement. The plaintiff therefore commenced the New Action on 2 August 2022, essentially for specific performance of the Settlement Agreement. The Stay Application was taken out the next day.

Analysis of the Stay Application

6.  In my view, it is clear that this action should be stayed pending the final determination of the New Action.

7.  At this stage I am unable to form a conclusive view as to the underlying merits of the New Action. I simply observe that in various letters from CC sent in December 2021 and January 2022, a caveat was inserted which appeared to indicate the defendant’s acknowledgement that the Settlement Agreement had been concluded[3]. Accordingly, the plaintiff’s claim in the New Action cannot be dismissed out of hand.

8.  As submitted by Mr Cheung, counsel for the plaintiff, if in the New Action the Settlement Agreement is found to exist (which at least is reasonably arguable as I have held above), this action should necessarily come to an end; the underlying dispute herein has been fully and finally settled. From a case management perspective, it is plainly desirable for this action to be stayed in the meantime, thereby saving costs and judicial resources.

9.  I further note that the defendant does not have a counterclaim in this action. A stay brings no real prejudice to the defendant.

10.  As I understand from Mr Ching who appears for the defendant, he is not seriously objecting to the Stay Application. His real complaint is about delay: the plaintiff should have started the New Action and applied for a stay much earlier. But I do not think this argument affects the overall analysis. As I postulated at the hearing, if the plaintiff had commenced the New Action and applied for a stay earlier (ie with reasonable diligence soon after he realised that the defendant was not honouring the Settlement Agreement), Mr Ching accepts that the defendant would have no real difficulty in consenting to a stay of this action. I do not see how the defendant’s position would now be different simply because the application was taken out a few months later.

11.  I will therefore accede to the Stay Application. I also vacate the hearing of the case management summons on 16 September 2022 at 9:30 am.

Should I entertain the Costs Appeal in light of the stay?

12.  I raised with the parties at the hearing whether, if I am minded to grant a stay, I should still proceed to hear the Costs Appeal. My concern is that, depending on the findings in the New Action, the proper construction of the terms of the Settlement Agreement may have the effect (and I do not rule on this issue one way or the other) of settling and extinguishing all past and future costs orders as between the parties[4]. If that turns out to be the case, the Costs Appeal is wholly academic and irrelevant.

13.  To err on the side of caution, I invited the parties to fully address me on the Costs Appeal on a provisional basis. After consideration, and not without some hesitation, I am prepared to rule on the Costs Appeal notwithstanding the stay. It seems to me that this is the most cost-effective way of handling the matter, especially if it is found in the New Action that the Settlement Agreement was not concluded or the terms do not cover future costs orders on a proper construction. After all, I have heard full submissions on the Costs Appeal and the parties had expected me to deal with the question.

Background facts leading to the Costs Appeal

14.  By 2 separate summonses dated 27 July 2021 and 3 August 2021, the defendant sought further and better particulars of the Statement of Claim and the Reply. The summonses were returnable on 25 August 2021. The requests for particulars were preceded by correspondences but the plaintiff provided no response.

15.  By a letter from the plaintiff’s solicitors Messrs Kelvin Cheung & Co (“KCC”) dated 20 August 2021 (but CC said they only received on 24 August 2021), the plaintiff basically agreed to provide all the particulars sought but proposed costs to be in the cause. The costs provision was not agreeable to the defendant and therefore the hearing went ahead on 25 August 2021 before Master Maurice Lam.

16.  What happened at that hearing is in dispute. The defendant says that the plaintiff changed its stance at the hearing by not agreeing to provide the particulars sought. But the terms of the order eventually made by the learned Master are not in dispute between the parties. He adjourned the summonses for substantive argument together with directions for the filing of affirmations. He also reserved costs.

17.  The substantive argument hearing was scheduled on 11 January 2022.

18.  By KCC’s letter dated 28 December 2021, the plaintiff indicated (again) that particulars would be provided within 28 days and proposed costs in the sum of HK$1,500 be to the defendant. The defendant found the costs provision unacceptable. Further correspondences ensued between the parties but eventually no agreement was reached (and no consent summons was signed, whether substantively relating to the provision of particulars by the plaintiff or on costs).

19.  By a court note dated 10 January 2022, Master June Cheung vacated the hearing on 11 January 2022 and directed the parties to jointly report to the court as to their agreements and disagreements such that the summonses would be dealt with by paper disposal. This led to a joint letter dated 13 January 2022 from the parties to the court. The agreed items were (i) for the plaintiff to provide the particulars sought and (ii) for the plaintiff to pay the defendant’s costs of the summonses to be summarily assessed. The disputed items were (i) whether costs shall be assessed on an indemnity basis, (ii) how and when the costs were to be summarily assessed, and (iii) how costs of the call-over hearing on 25 August 2021 and the 2 affirmations filed by the defendant on 8 September 2021 and 10 January 2022 should be addressed. The last disputed item (ie item (iii)[5]) was stated in the joint letter to be “proposed by the Plaintiff only” (the “Plaintiff’s Proposed Item”).

20.  The plaintiff provided the particulars sought on 4 February 2022.

21.  On 13 April 2022, Master June Cheung ordered costs of the summonses to be paid by the plaintiff to the defendant on a party and party basis to be summarily assessed on paper. Directions were also given for the lodging of a statement of costs and a statement of objections.

22.  Pausing here, one of the defendant’s argument in the Costs Appeal is the costs order made by the learned Master on 13 April 2022 was a rejection of the Plaintiff’s Proposed Item. As I understand it, the argument is that by not specifically addressing the costs matters stated in the Plaintiff’s Proposed Item, the learned Master ruled that those costs are payable by the plaintiff as part of the costs of the summonses (with quantum to be subsequently assessed). I will have to return to the argument below.

23.  The defendant lodged a statement of costs on 14 April 2022 seeking costs of the summonses at HK$111,875. The plaintiff lodged his statement of objections on 21 April 2022 only allowing costs in the sum of HK$1,400, reflecting the usual costs of attending the call-over hearing at HK$700 for each of the summonses.

24.  On 26 April 2022, Master June Cheung summarily assessed costs of the summonses at HK$1,400. No written reasons were given for the summary assessment. This is the order which is the subject of the Costs Appeal. The defendant contends that the assessed figure is unreasonably low.

The Costs Appeal – applicable legal principles

25.  Parties have no dispute on the applicable legal principles. This is an appeal against a costs order made by a master, and hence it will not be dealt with by an actual rehearing of the matter: White Book 2022 §58/1/6.

26.  Rather, as stated in Paul Y-ITC Constructions Ltd v Kin Shing Co Ltd [1999] 1 HKC 511 at 515A (emphasis added):-

“As this is an appeal as to costs only from the discretion of the Master, such application should not be allowed unless it can be shown that the order made by the Master was unreasonable or erred in law ie, if he either failed to take into account proper matters or took into account matters that should not have been taken into account.”

27.  The same principles apply in respect of a costs order made by way of summary assessment: see 廖煒基 訴 楊日昇 (unreported, HCPI 379/2015, 16 May 2017) per Lok J; Ho Pui Lan v Sham Yick Chun Gary (unreported, HCMP 707/2014, 6 August 2014) per Deputy High Court Judge Kent Yee.

Analysis of the Costs Appeal

28.  The Costs Appeal does not get off the ground, for the simple reason that the defendant is unable to pinpoint how the learned Master erred in law or failed to take into account relevant matters (or taking irrelevant matters into account).

29.  The difficulty I have is that I do not have the benefit of the learned Master’s reasons in making the costs order as she did. Accordingly, there is no way for me to in effect assume or speculate, as Mr Ching urges me to do, what went through the mind of the learned Master and whether on that assumed state of mind she has erred.

30.  Mr Ching has confirmed that the defendant has not requested the learned Master to provide reasons leading to the costs order that she made.

31.  The defendant has therefore singularly failed to overcome the hurdle that is applicable in the Costs Appeal. Obviously, given the applicable legal principles cited above, even if I would personally have summarily assessed a higher figure, it is not a reason for me to disturb the costs order made by the learned Master.

32.  That is sufficient to dispose of the Costs Appeal. But for the sake of completeness, I will deal with some of the major points raised by Mr Ching on behalf of the defendant.

33.  First, the defendant argues that the plaintiff changed his stance at the 25 August 2021 hearing (see paragraph 16 above) and intended to oppose the 2 summonses. This necessitates the preparation of various affirmations and documents in anticipation of a full-blown substantive argument, and the Master should therefore have allowed some costs for those items.

34.  I am unable to accept this argument. Its fallacy is to assume that the learned Master summarily assessed costs at HK$1,400 on an identical basis as submitted by the plaintiff in the statement of objections. But this is not necessarily the case; they are infinite permutations as to what items the learned Master has allowed and for how much. The learned Master was also entitled to take into account (it being one of the considerations that is relevant) the fact that the plaintiff had already agreed to provide the particulars sought before the 25 August 2021 call-over hearing, and on that basis costs of the subsequent affirmations and documents should only be minimal (e.g. the affirmations should only exhibit the letter showing the plaintiff’s agreement to provide particulars, as opposed to a justification as to why the particulars sought are relevant and necessary).

35.  A related argument is this. Mr Ching urges me to ascertain for myself whether the plaintiff in fact changed its stance at the 25 August 2021 hearing, by listening to the court audio recording or locating the hearing notes of Master Maurice Lam. This completely misses the point: the question is not whether the plaintiff changed its stance at that hearing, but rather whether the learned Master has taken that into account in carrying out the summary assessment. There is no material upon which I can conclude that she erred in this regard.

36.  Second, the defendant argues that, by making the costs order as the learned Master did on 13 April 2022, she has accepted in principle that the costs of the call-over hearing on 25 August 2021 and the 2 affirmations filed by the defendant on 8 September 2021 and 10 January 2022 shall be payable by the plaintiff (see paragraph 22 above). As the argument runs, it was then incorrect for the learned Master to go back and disallow the same items in the summary assessment process 2 weeks later.

37.  I confess to have some difficulty in understanding the argument. By making the costs order on 13 April 2022, I do not think the learned Master in fact ruled on what items should be allowed and what should not be allowed. It was merely a general order identifying the scope of the plaintiff’s costs liability such that the statement of costs may be prepared on that basis, and it is the summary assessment process that decides what is and is not allowed. I am unable to see anything wrong in that approach at all.

38.  Third, the defendant complains that the learned Master failed to give reasons for her summary assessment, particularly in view of a material dispute as to whether the plaintiff changed his stance at the 25 August 2021 hearing. This is a bad argument. As a matter of practice, summary assessments are commonly conducted by the court without the master or the judge giving reasons; the whole point of summary assessment is to avoid a line-to-line taxation process and is designed to be broad-brushed. Further, if the defendant feels aggrieved by the assessed figure and brings an appeal, given the applicable legal principles cited above, it is incumbent for the defendant to write to the learned Master to request for reasons in carrying out the assessment. By not doing so, the defendant runs the risk that the appellate court has no legal basis to overturn the subject costs order.

39.  For these reasons, the Costs Appeal is dismissed.

Disposition and costs

40.  Accordingly, I accede to the Stay Application and dismiss the Costs Appeal.

41.  On a nisi basis, I make the following costs orders:-

(1)  Costs of the Stay Application be reserved;

(2)  Costs of the Costs Appeal shall follow the event, ie to be paid by the defendant to the plaintiff to be taxed if not agreed with certificate for counsel.

42.  In view of the matters set out in paragraph 12 above, I also order that execution of the costs order in paragraph 41(2) above be stayed pending the final determination of the New Action.