JOYFUL SPARKLE CO LTD v. NG PIK CHU t/a SHAN YAU CO

DCCJ 1881 of 2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL JURISDICTION

ACTION NO. 1881 OF 2008

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BETWEEN

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DECISION

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APPLICATIONS BEFORE THE COURT

1.  There are two summonses before me and both summonses were taken out by the Plaintiff.  The first summons was dated 12^th November 2011 in which the Plaintiff is seeking inter alia, orders to set aside the judgment given on 8^th July 2010 after trial (“the Judgment”).  The Judgment includes orders to dismiss the Plaintiff’s claim and the judgment on the Defendant’s counterclaim against the Plaintiff when the Plaintiff was absent at trial.  The second summons was dated 15^th December 2011 in which the Plaintiff is seeking leave to amend the Amended Statement of Claim.

2.  Counsel for both parties agreed that I should deal with the 1^st summons because if I refuse to set aside the judgment, the second summons should be dismissed consequently.    I agree and did so accordingly.

3.  The main issue for determination in this hearing is whether I should exercise my discretion to set aside the Judgment given on 8^th July 2010 after trial which was conducted in the Plaintiff’s absence. 

BACKGROUND LEADING TO THE JUDGMENT DATED  8^TH July 2010

4.  The Plaintiff was and still is the registered owner of the subject premises while the Defendant was its tenant between the period from 1^st April 2000 to 29^th February 2008.  Ms. Lau Lai Mei Elvia (“Ms. Lau”) and her husband Mr. Yee Kung Bok (“Mr. Yee”) used the Plaintiff company as the corporate vehicle to hold their interest in the said premises.  It is common ground that the Defendant gave vacant possession of the premises on 29^th February 2008.   The above tenancy period can be divided into 4 stages, the 1^st stage covers the period from 1^st April 2000 and 31^st March 2002 under the force of the 1^st written tenancy agreement.  The 2^nd stage covers the period from 1^st April 2002 and 31^st March 2004 during the renewed period after the expiry of the 1^st written tenancy agreement.  The 3^rd stage covers the period from 1^st April 2004 and 31^st March 2007 under the force of the 2^nd written tenancy agreement.  The 4^th stage covers the period from 1^st April 2007 and 29^th February 2008 after the expiry of the 2^nd written tenancy agreement until vacant possession was given.

5.  The main issue as at the trial date on 8^th July 2010 was whether there was a rent shortfall accumulated in the total sum of $283,700.  Counsel for the Plaintiff conceded in this hearing that the total shortfall should be $101,800, instead of $283,700 as pleaded originally.  The material questions flow from the main issue are, as contended by the Defendant, whether there were 2 oral agreements made in March 2002 and August 2002 between Mr. Yee and the Defendant in respect of the reduction of rent from $31,900 to $29,000 (for the period from April to August 2002) and from $31,900 to $27,000 (for the period from September 2002 to March 2004).   

6.  On or about 17^th June 2010, about 3 weeks before the trial, the District Court Registry received a batch of documents that include 3 pages of written document in Chinese dated 12^th June 2010 and bears the signature of Mr. Yee of the Plaintiff’s company and the company chop (“Note of absence”).   The said document reflects that the officers of the company were in the United States and they were preoccupied in personal affairs.  They would not attend the trial.  The sender also enclosed a copy of the Notice of Trial dated 11^th May 2010 issued by the Registry notifying the Parties of the trial dates fixed on 8^th July 2010. 

7.  As a result of the Note of absence, it is obvious that it was the Plaintiff’s deliberate decision to absent herself at trial.  Having failed to prove her case, I dismiss the Plaintiff’s claim and went on to hear the evidence from the Defendant regarding the counterclaim:  see Hong Kong Civil Procedure 2010 edition, Volume 1, paragraph 35/1/1:-

“On the other hand, if the plaintiff does not appear, but the defendant does appear at the trial, the defendant is entitled to judgment dismissing the claim, and if he has a counterclaim, he may prove such counterclaim, so far as the burden lies on him. The effect of this judgment is the same as if it were a judgment dismissing the action on the merits, i.e. the court will give the whole costs of the action and counterclaim to the defendant (Armour v Bale [1891] 2 Q.B. 233.)”

8.  I do not intend to repeat the evidence as I have summarized them in the written Judgment.    I found that the Defendant was an honest and reliable witness.  Her evidence was supported by contemporaneous documents.  I also found that the existence of the two oral agreements tallied with the subsequent conduct of the parties.  Consequently, I gave judgment for the Defendant on her counterclaim in the total sum of $83,000 that comprises of $70,000, being the rental deposit and $13,000, being the share of expenses on the fire prevention facilities paid by the Defendant on the Plaintiff’s behalf.

PLAINTIFF’S CONTENTIONS

9.  In gist, Counsel for the Plaintiff advanced 4 contentions.  Firstly, Mr. Yee’s couple did not know their attendance is necessary. They were under the mistaken belief that despite their absence, the Plaintiff’s case and merits would be taken into account.  Secondly, the Defendant failed to state any prejudice that may be caused to them had the Judgment been set aside.  Thirdly, the Plaintiff has a real prospect of success on at least the sum of $101,800 as the rent shortfall, on the assumption that the Defendant’s evidence on the two oral agreements was rejected.  Fourthly, although the Plaintiff did not apply to set aside the Judgment within 7 days after the trial as required under O.35, r.2(2), 15 months’ delay was excusable because the Plaintiff thought that they won the case when the charging order was described in the Plaintiff’s favour, albeit it was the Plaintiff’s premises that was charged.  

DEFENDANT’S CONTENTIONS

10.  In reply, the Defendant submitted that no matter how the Plaintiff advanced reasons for absence and the submissions on mistaken belief, they could not explain away the Note of absence.  The Note shows clearly that the absence was a deliberate decision and election.  Secondly, regarding “prejudice”, this Court has heard and accepted evidence of the Defendant, including the 2 oral agreements made as early as in 2002.  A retrial on the same matter would entail embarrassment and the Defendant would be incommoded by a retrial.  Further, evidence has to be adduced again in 2012 or 2013 the oral agreements made in 2002.  Thirdly, regarding real prospect of success, Counsel for the Defendant submitted had the Defendant owed the Plaintiff the rent shortfall as much as $101,800 in 2002, there was no reason why not a single piece of notice was given to the Defendant, let alone the fact that the Plaintiff was willing to enter into the 2^nd written tenancy agreement with the Defendant in early 2004. Fourthly, regarding delay in setting aside, the Plaintiff picked up one typing error in the charging order absolute (the amount due from the Defendant to the Plaintiff)to say that they thought they won the case.  The Plaintiff seems to have ignored the Judgment, sealed order, charging order nisi and various solicitors’ correspondence sent to them with obvious result.       

RELEVANT LEGAL PRINCIPLES

11.  Counsel for the Plaintiff asked me to follow the approach adopted in 1986 in the case of Hong Kong Magnetronic Co Ltd v Lau Wah CACV 53/1986 dated 6 June 1986 (“Lau Wah case”), the approach of “justice can be done by compensating the other party for any costs and trouble caused to him, then judgment should be set aside on terms as to the costs thereby thrown away”.  The said “costs compensation” approach is different from the approach adopted in subsequent cases, whether in UK or in Hong Kong.   I shall elaborate further. 

12.  I drew the parties’ attention to a relatively more recent case of the Court of Appeal in Lau Kam Chuen v Lee Ching [2003] 2 HKLRD 1019, Civ. App. No. 4139 of 2003 dated 23 and 30 January 2003 (“Lee Ching case”), which is not cited by both parties. In that case, the Court of Appeal expressly stated that it would follow the established guidelines in Shocked v Goldschmidt [1998] 1 All ER 372.   Counsel for the Plaintiff said that he was not aware of Lee Ching case.  Be that as it may, having afforded him with the opportunity to read the full judgment, he agreed that Shocked’s guidelines shall apply to the present case. 

13.  In Lee Ching case, the Court of Appeal cited and applied Shocked’s 8 legal propositions or Lord Wright called them “general indications” as follows:-

(i)   Where a party with notice of proceedings has disregarded the opportunity of appearing and participating in the trial, he will normally be bound by the decision;

(ii)   where judgment has been given after a trial, it is the explanation for the absence of the absent party that is most important: unless the absence was not deliberate but was due to accident or mistake, the court will be unlikely to allow a rehearing;

(iii)   where the setting aside of judgment would entail a complete retrial on matters of fact which have already been investigated by the court, the application will not be granted unless there are very strong reasons for doing so;

(iv)   the court will not consider setting aside judgment regularly obtained unless the party applying enjoys real prospects of success;

(v)   delay in applying to set aside is relevant, particularly if during the period of delay the successful party has acted on the judgment, or third parties have acquired rights by reference to it;

(vi)   in considering justice between parties, the conduct of the person applying to set aside the judgment has to be considered: where he has failed to comply with orders of the court, the court will be less ready to exercise its discretion in his favour;

(vii)   a material consideration is whether the successful party would be prejudiced by the judgment being set aside, especially if he cannot be protected against the financial consequences; and

(viii)   there is a public interest in there being an end to litigation and in not having the time of the court occupied by 2 trials, particularly if neither is short.”

14.  Cheung JA went on to say in paragraph 12 of Lee Ching case as follows:-

“Setting aside a default judgment under O.13 and O.19 is different from setting aside a judgment given after a trial. In respect of the former categories, the court is primarily concerned to see whether there is a defence on the merits, while in the latter category, the most important factor was the reason for the applicant’s absence at trial.”

15.  It is apparent that Cheung JA agreed with what Leggatt LJ said in Shocked case:-

“[At page 381] These authorities about setting aside judgment after a trial indicate that each case depends on its own facts and that the weight to be accorded to the relevant factors will alter accordingly, But from them I derive the following propositions or ‘general indications’ as Lord Wright might have called them.”

“Contrasting the cases in the two categories it seems to me that whereas in the first the court is primarily concerned to see whether there is a defence on the merits, in the second the predominant consideration is the reason why the party against whom judgment was given absented himself….

[At page 382] In so approaching the exercise of his discretion he [the judge below] erred in principle.  To equate judgments by default with judgments given after trial is heretical.  If it were correct, a party who chose not to be present at trial could afterwards change his mind, and provided he was prepared to pay the costs thrown away could always procure a rehearing of the matter, however much time of the court had been wasted by his decision, whatever the inconvenience to his opponent, and however little his own conduct merited indulgence.  That is not the law.  Because it is not, this court must exercise the discretion anew.”    

16.  I would respectfully adopt the guidelines of Shocked cases in accordance with Lee Ching case.

DISCUSSION

17.  To begin with, the ultimate question seems to be whether the absence was deliberate.  By virtue of the Note of absence dated 12^th June 2010, it is apparent that the Plaintiff’s absence was a deliberate choice.  I extract the 1^st page of the Note hereunder:-

“法官明鍳:

香港同學由香港寄來美國關於七月八日2010年審訊通知書, 我已於多日前轉寄給過往代表律師 Ken Chiu & Co Solicitors, 我公司雖再三要求此律師行完成此案, 但兩日前 WK To & Co 傳真美國告之Ken Chiu 終止辦理拒絕此案.

我目前身在美國, 此舖剛租出, 我亦等待款項修整六十年前所建舊房子, 我亦要盡快搬出租用APARTMENT, 日(目)前經濟及時間迫切, 我無法抽身到香港, 亦無法再花大量金錢另聘律師代表, 懇請原諒我缺席未能到庭聆訊, 在此附上有關文件, 懇請法官大人查閱.

我找錯律師, 錯信經紀, 找錯租客, 長年累月我們感到筋疲力盡, 及大量金錢損失, 精神損傷無法補償一言難盡.”

18.  The said document reflects that Mr. Yee’s couple was in the United States and they were preoccupied in personal affairs.  They alleged that they had financial problem.  They would not attend the trial.   In brief, the absence was deliberate, there was no accident.  They knew the trial date and they did not make any mistake on the trial date.  The mistaken belief that attendance is not necessary is not reasonable, out of common sense or self-induced, if not created after thought. It lies ill in the mouth of the Plaintiff and Mr. Yee’s couple to allege that they did not appreciate the need for its witness to give viva voce evidence at trial.

19.  Applying Shocked’s 1^st and 2^nd guidelines, it seems to me that the Plaintiff with notice of proceedings has disregarded the opportunity of appearing at and participating in the trial, the Plaintiff should be bound by the decision.  Further, the absence was deliberate, the court should be unlikely to allow a rehearing. 

20.  Regarding the 3^rd guideline, at trial, I have heard the evidence of the Defendant and accepted her evidence, including the two oral agreements.  If the Judgment is to be set aside, it would entail a complete retrial on matters of fact which have already been investigated by this court, the application to set aside should not be granted unless there are very strong reasons for doing so.  I am not satisfied that the contentions advanced by the Plaintiff amount to strong reasons. 

21.  Regarding the 4^th guideline, I do not agree that the Plaintiff has a real prospect of success on $101,800, which was mostly the Plaintiff’s alleged rent shortfall accumulated in 2002.  It is common ground that the Defendant has settled all the rent except the alleged rent shortfall accumulated in 2002 while the Defendant contended by relying on the oral agreements on reduction of rent.  Not only there was no single notice of rent shortfall issued by the Plaintiff before 2006, the Plaintiff was willing to enter into another written tenancy agreement with the Defendant in early 2004.  The parties’ subsequent conduct tallied more with the Defendant’s case.  Worse still, the main character of the oral agreements, Mr. Yee did not prepare witness statement as at the trial on 8^th July 2010 to refute the oral agreements.  Further, in this application, he did not prepare an affirmation to refute the allegations of reduction of rent in 2002.  The Plaintiff’s claim cannot be said to have a real prospect of success.  In brief, this is a regular Judgment, there is no real prospect of success and the court should not set aside the Judgment.

22.  In respect of 5^th guideline, after the Judgment, the Defendant has acted on it.  The Judgment was given on 8^th July 2010.  The Plaintiff’s summons to set aside the Judgment was taken out on 4^th November 2011.  There was about 15 months’ delay.  During the period of delay, the Defendant had proceeded to enforce the Judgment by obtaining the charging order absolute.     

23.  In respect of 6^th guideline, the trial was fixed early in advance and by legal definition, it is a “milestone date” and it shall not be varied unless there are exceptional circumstances: see Order 25, r3 of the Rules of the District Court.  There is no exceptional circumstances in this case.  In short, by its own conduct, the Plaintiff has brought the consequence to its head.  In these circumstances, the court should be less ready to exercise its discretion in its favour.

24.  Regarding the 7^th guideline, I agree with the Defendant’s submission.  This Court has heard and accepted evidence of the Defendant, including the 2 oral agreements made as early as in 2002.  Further, if the Judgment is to be set aside, evidence has to be adduced again in 2012 or 2013 the oral agreements made in 2002.    The Defendant would be incommoded by a retrial is a relevant factor.

25.  Regarding the 8^th guideline, there is certainly a public interest in there to bring an end to litigation and in not having the time of the court occupied by two trials.   Although the initial trial took only one day and the re-trial is estimated to take 3 days, the costs of the 1^st trial was summarily assessed in favour of the Plaintiff in the sum of $177,750.  The estimated extra costs of the re-trial would be about $100,000 for each side on the lower end, making a total extra cost of about $200,000.  Bearing in mind the amount of the claim is about $101,800 and the counterclaim amounts to $83,000, the costs incurred is disproportional to the amount of the claim.  Shocked case and Lee Ching case are decided before the Civil Justice Reform.  I venture to add the underlying objectives into the 8^th guideline, in particular, “costs effectiveness”, “to promote a sense of reasonable proportion”, and “to ensure that the resources of the Court are distributed fairly”, I have no hesitation to conclude that after weighing all relevant factors in this particular case, the Judgment should not be set aside. 

26.  The present case shares certain common features in the Shocked case.  In saying that the trial judge erred in setting aside the Judgment, Leggatt LJ concluded as follows:-

“When she buried [the application] her head in the sand, Ms. Shocked made an election by which she should be bound, in default of special circumstances. There are none. Her explanation for non-attendance show that it was deliberate; and even if she was in personal difficulties, she has not explained why no application was made for an adjournment. A retrial would require the court to spend a further ten days hearing these proceedings in addition to four days when judgment was first given, five days on the application to set aside, and one day in this court. So far from finding that Ms Shocked enjoyed real prospect of success in a retrial, the deputy judge found merely that ‘there must be a reasonable prospect of making some impact by way of defence’. It is true that the delay in applying to set aside was not excessive, but that does not count positively in favour of acceding to the application. Ms Shocked’s conduct both before and after judgment has been undeserving. On the other hand, the extent to which Mr Goldschmidt would be incommoded by a retrial is a relevant factor. Finally, the suggestion that in these circumstances the court should devote a further ten days to proceedings in which it has already been an adjudication is wholly contrary to the public interest.”

27.  The Plaintiff was embarking on a deliberate course to go to ground and avoid the consequences of the pursuit of the action.  By doing so, they abjured their responsibilities to assist the court in furthering the underlying objectives of the Rules of the District Court.  In my view, in the light of the CJR, that is an attitude which should not be countenanced by the court:  Top One International (China) Property Group Company Limited and others v Top One Group Limited and others HCA 1244/2009 dated 9^th December 2010 by Fok J.  

28.  I bear in mind that the court should always recognize that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties: see O.1A, r.2(2).  On the other hand, the interests of the administration of justice require that a case is dealt with expeditiously as is reasonably practicable.  I recognize that refusal to set aside the Judgment deprives the Plaintiff of the extra opportunity of calling witness or having their day in court.  But in light of my findings, the Plaintiff or Mr. Yee’s couple can be said to be the author of its misfortune, if any.  In essence, I am of the view that “deliberate absence”, “no real prospect of success” and “public interest” are the material factors tipping against setting aside the Judgment.

29.  By reason of the matters aforesaid, the overall justice of the case caused me not to extend the time for the Plaintiff to apply for setting aside the Judgment after trial: see O.35, r.2(2) and Nantong Angang Garments Co Ltd v Hellmann International Forwarders Ltd [2005] 4 HKC 86.

CONCLUSION

30.  All in all, the Plaintiff’s summons dated 12^th November 2011 be dismissed.    It follows that the Plaintiff’s another summons dated 15^th December 2011 to amend the pleadings is dismissed too.  I make the costs order nisi that the Plaintiff do pay the costs of and occasioned by the said summonses, with certificate for counsel, to be taxed if not agreed.  Any variation of the costs order nisi shall be made by way of summons within 14 days from the date of this judgment, failing which it shall become absolute.