WONG WAI TIM v. SIU YUEN PING

HCA 1128/2019

[2019] HKCFI 2205

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1128 OF 2019

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DECISION ON COSTS

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1.  Three summonses taken out by the plaintiff were before me sitting as the Summons Judge on 12 July 2019. The parties managed to come to terms in disposal of the summonses and the entire action, except for costs. The parties agreed to leave the issue of costs of the present action to be argued, and disposed of by the court on paper. This is my ruling.

Background

2.  The dispute arose out of the development of a ting house in Yuen Long, New Territories.  The plaintiff (“Wong”) purchased the land in question in 2009 and subsequently obtained a licence to build the house there.  The defendant (“Siu”) claims to have lent a sum of HK$3,000,000 to Wong for such purpose through the intermediary of the latter’s attorney, Wong Yick Sing (“Sing”).

3.  According to Siu, he has been shown the relevant power of attorney executed by Wong in favour of Sing.  The loan agreement was contained in or evidenced by an IOU, an acknowledgement of loan and a deed of guarantee, all dated the same date and prepared by TK Tsui, solicitors, as well as signed by Sing as Wong’s attorney.  It was agreed that as security for the loan, the title deeds in respect of the land (“the Title Deeds”) would be deposited with Siu.  The loan was supposed to be repaid by February 2018.

4.  The construction of the house was eventually completed, and Wong entered into agreements to sell the three floors of the house respectively in April 2019.  In the same month, Siu, through his solicitors, demanded Wong for repayment of the loan.

5.  Due to the dispute between the parties, Wong had to postpone the completion of the sales of the house last to 15 July 2019.

6.  On 8 April 2019, Siu commenced HCA 612/2019 against Wong, as the 1^st defendant, to recover the loan.  Sing, as the 2^nd defendant, is sued as the guarantor of the loan.  On 30 May 2019, Siu obtained judgment, with interest and fixed costs, against Wong and Sing in default of notice of intention to defend.

7.  On 18 June 2019, Wong took out his application to set aside the judgment in HCA 612/2019.  Apart from challenging the regularity of the judgment, Wong denied any loan from Siu or knowledge about that.  He denied having executed the power of attorney in favour of Sing or authorized him or anyone to borrow from Siu.  He also questioned the authenticity of the other documentations in connection with the alleged loan.  He demanded the delivery up of the Title Deeds.

8.  On 24 June 2019, Wong commenced the present action against Siu, seeking a mandatory injunction for the delivery up of the Title Deeds and damages.  The facts pleaded are essentially repetition of those alleged in his application to set aside the judgment in HCA 612/2019.  On the same day, Wong took out a summons for an interlocutory injunction for the delivery up of the Title Deeds by Siu “upon such terms and conditions as the court shall think fit” (“the Injunction Summons”).

9.  The Injunction Summons was returnable before this court (as the Summons Judge) on 12 July 2019.  Three days before that, Wong took out two more summonses respectively:

(1) to amend the statement of claim in the present action to add his claim for the vacating of the pending registration at the Land Registry of the IOU and acknowledgement of loan mentioned above against the house (with abridgement of time for the service of the summons) (“the Amendment Summons”); and

(2) to apply for an order in terms of his claim as amended under (1) above (also with abridgement of time for the service of the summons) (“the Vacating Summons”).

10.  On 10 July 2019, Siu filed his affirmation in opposition of the summonses taken out by Wong.

11.  At the hearing on 12 July 2019, the parties informed this court that they managed to come to terms for the disposal of the summonses except for costs.  I indicated to the parties that the circumstances of this case were such that the issue of costs should not be let stand in the way of the parties’ compromise.  If necessary, the issue of costs might be left to be argued and decided by the court.

12.  Eventually, the parties agreed that Wong would discontinue the present action, including his three summonses, with the question of costs to be argued, and decided by this court on paper.  The consent was reached upon their mutual undertaking to file a consent summons in HCA 612/2019 in the following terms:

(1) Wong do pay into court a sum of HK$3,300,000 on or before 12 August 2019;

(2) Upon the service of the notice of payment into court pursuant to (1) above on Siu’s solicitors, Siu do release to Wong’s solicitors the originals of the Title Deeds within 3 working days;

(3) The sum in court pursuant to (1) above shall be paid out to Siu upon the determination of HCA 612/2019 in Siu’s favour either in the event of the dismissal of Wong’s summons to set aside the default judgment or alternatively, in the event that the default judgment is set aside, the entering of final judgment in favour of Siu in such sum and terms as may be ordered.

(4) Liberty to apply;

(5) Costs of the consent summons be in the cause of HCA 612/2019.

13.  The compromise was sensible.  Whilst Wong’s application to set aside the judgment in HCA 612/2019 is still pending, Wong manages to obtain the Title Deeds for the purpose of meeting his obligations to the purchasers of the house and Siu manages to have the amount of the judgment effectively secured before his release of the Title Deeds.

14.  The issue is that of the costs of the present action, including the summonses taken out by Wong.

HCA 612/2019 and the present action

15.  Wong is bound by the judgment obtained by Siu in HCA 612/2019.  Unless and until the judgment has been set aside, Wong has no locus to pursue any cause or lodge any claim against Siu on the basis of the same underlying facts, albeit his version, in that action, let alone by commencing another action.  Yet he did exactly that by commencing the present action.  The relief sought in the present action amounted to a direct affront to the judgment in HCA 612/2019 as it now stands.  In that sense, this infringed the principle of res judicata and was an abuse of process.

16.  It is argued on behalf of Wong that there was no issue of res judicata, as Siu’s cause in HCA 612/2019 was recovery of the alleged loan whereas Wong’s cause in the present action was for detinue in respect of the Title Deeds.  I do not agree. The pleaded case of Wong in HCA 612/2019 that the deposit of the Title Deeds as security was part and parcel of the terms of the loan.  It was on the basis of such pleaded case that the default judgment was entered.  But for the default, Wong would have been expected to deny the loan and to put forward his counterclaim for the delivery up of the Title Deeds on the basis of the same factual allegations in denial of the loan.  The claim for detinue could not exist independently from his defence to the claim on the loan.

17.  It is also argued that in view of the judgment in HCA 612/2019, Wong had no choice but to commence the present action.  I also do not agree.  I can well understand that for his purpose, Wong might feel unable to await the determination of the application to set aside the judgment.  However, that did not justify the commencement of the present action.  In my view, Wong could still have taken out an interlocutory application in HCA 612/2019 for the release of the Title Deeds pending the determination of the setting aside application.  Obviously, whether it was pending the setting aside of the judgment or alternatively after the setting aside of the judgment but before the substantive determination of the dispute in that action, Wong’s application for the release of the Title Deeds by Siu would have been virtually impossible unless on terms.

18.  Insofar as the present action is concerned, Wong was seeking by the Injunction Summons and the Vacating Summons what would have been the final relief.  The law is clear that the applying party shoulders the heavy burden of establishing a strong prima facie case, so that the court would feel a high degree of assurance that the interlocutory injunctive relief, if granted, would be considered at the trial to have been rightly granted: see Music Advance Ltd v Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041 at §12.  The court will consider the risk of injustice as a result of granting or not granting the relief at the interlocutory stage.

19.  Wong would be faced with breach of the sale and purchase agreements with his purchasers, if he did not have the Title Deeds to prove and pass title.  It would equally not be fair to expect Siu to just give up the Title Deeds when the judgment remains intact or even after the judgment has been set aside in HCA 612/2019.  Had Wong been allowed to proceed with his summonses in the present action, he would have expected an uphill, if not impossible battle.  Consideration of the allegations of the parties set out in their correspondence, and thus the serious dispute, only reinforces such observation.  Again, Wong would have found it impossible to secure the release of the Title Deeds at the interlocutory stage of the present action unless on terms.

20.  With the reservation about the propriety of the commencement of the present action at the back of my mind, I reminded the parties during the hearing that the terms of the intended compromise, as mentioned above, should really be matters in HCA 612/2019 pending the determination of Wong’s application to set aside the judgment.  The parties were requested to frame the consent terms accordingly.  The parties indeed came up with a signed draft consent order whereby they mutually undertook to file a consent summons in HCA 612/2019 setting out such terms, and upon such undertaking, Wong agreed to discontinue the present action.

The negotiation

21.  As to the terms, reference was made (on behalf of Siu) to O29, r6:

“Where the plaintiff, or the defendant by way of counterclaim, claims the recovery of specific property (other than land) and the party from whom recovery is sought does not dispute the title of the party making the claim but claims to be entitled to retain the property by virtue of a lien or otherwise as security for any sum of moneys, the Court, at any time after the claim to be so entitled appears from the pleadings (if any) or by affidavit or otherwise to its satisfaction, may order that the party seeking to recover the property be at liberty to pay into court, to abide the event of the action, the amount of money in respect of which the security is claimed and such further sum of money (if any) for interest and costs as the Court may direct and that, upon such payment being made, the property claimed be given up to the party claiming it.”

22.  The above rule provides an analogy in terms of what it would take for Wong to achieve what he intended, be it by his summonses in the present case or as a matter in HCA 612/2019.  It is clear to me that Wong was conscious of that.  Hence his offer of the sum of HK$3,300,000, representing the judgment sum plus accrued interest, as security in exchange for the Title Deeds prior to the hearing.

23.  It is relevant to consider the precise terms of the offers by Wong.  Amongst the parties’ correspondence prior to the hearing, which I have considered, the following ones are particularly relevant.

24.  By letter dated 15 June 2019, Wong’s solicitors first proposed that Siu released the Title Deeds upon their undertaking to stakehold the balance of the proceeds of the sale of the house receivable upon completion, net of costs and expenses, said to amount to about HK$3,300,000, pending release of the sum in any of the following manners:

(1) according to the settlement between the parties and the agreement between Wong and TK Tsui in respect of their costs;

(2) according to the order of the court in resolving the dispute between the parties and taxation of TK Tsui’s costs; or

(3) upon their interpleader and payment of the net outstanding balance of the sale proceeds into the court.

25.  By letter dated 17 June 2019, Siu through solicitors rejected the proposal, and asked for settlement of the judgment sum in HCA 612/2019.

26.  By letter dated 19 June 2019, Wong’s solicitors reiterated their proposal mentioned above but offered the alternative of allowing Siu’s solicitors to stakehold the net outstanding balance of the proceeds of the sale of the house to replace the Title Deeds as security.

27.  On 19 June 2019, Wong’s solicitors modified their previous proposal to that to undertake to:

(1) hold the net outstanding balance of the sale proceeds as stakeholder to be: (i) released according to the agreement between the parties; (ii) released according to the decision of the court; or (iii) paid into court pending the court’s decision; or

(2) return the Title Deeds to Siu, if the sales were not completed, without prejudice to Wong’s right to claim against Siu for loss and damage, if any damage.

28.  On 4 July 2019, Siu through solicitors rejected the abovementioned proposal, and questioned Wong’s assertion of his entitlement to the whole of the projected net outstanding balance of the proceeds of sale in the sum of HK$3,300,000.  Siu queried whether the actual amount that Wong would be in a position to receive sufficed to cover the judgment sum as alleged.  On 5 July 2019, Siu’s solicitors wrote further to question the lack of breakdown in Wong’s projection of the amount receivable.

29.  On 9 July 2019, Siu through his solicitors made an offer to Wong, essentially for upfront payment of the judgment sum by Wong before the release of the Title Deeds by Siu.  The terms of the offer were as follows:

(1) Wong shall pay to Siu or alternatively into court the sum of HK$3,000,000 plus interest (ie, interest on the judgment sum until payment in the sum of HK$122,000) and fixed costs of HK$6,500 on or before 12 July 2019 and pending the resolution of the dispute in HCA 612/2019;

(2) Upon compliance with (1) above, Siu would release the Title Deeds to Wong no later than 15 July 2019;

(3) The hearing on 12 July 2019 be vacated;

(4) Liberty to apply;

(5) Costs in the cause.

30.  It became clear that the above offer was not accepted by Siu until when the parties appeared before this court on 12 July 2019.  As mentioned, costs were still in the way of the parties, though they had reached consensus in respect of the other essential terms, namely that:

(1) Wong would pay into court a sum of HK$3,300,000 on or before 12 August 2019, upon which Siu would release the Title Deeds in 2 working days; and

(2) payment out of the above sum in court would depend on the determination in HCA 612/2019.

31.  The above correspondence show that the offer of Wong has always been for Siu to release the Title Deeds to him to enable him to complete and sale of the house before the outstanding balance of the proceeds of sale, net of costs and expenses, etc, would be received and held by either party’s solicitors as stakeholder or alternatively paid into court.  Even putting aside the merit of the queries by Siu as to the calculation of the amount receivable upon completion and the entitlement of Wong to receive the entire amount as alleged, Wong did not manage to achieve a compromise in terms as he had offered or in any better terms.  On the contrary, Siu was able to achieve a compromises in terms substantially reflective of those last offered by him prior to the hearing.

Conclusion and order

32.  Both in terms of the propriety of his commencement of the present action and the negotiation for settlement of his applications prior to the hearing on 12 July 2019, Wong was on the down side for the reasons explained above.  He therefore fails his argument on the costs, which was let stand in the way of the compromise.  In the circumstances, I see no reason why Wong should not be held liable for the costs of the present action, including the summonses and the argument on costs, and on an indemnity basis.

33.  I order that Wong shall pay Siu his costs of the present action, including the various summonses before this court and the argument on costs, to be taxed on an indemnity basis, if not agreed.