YUE WAH CHUK RICHARD AND ANOTHER v. MCKEON BRENDAN HUGH

DCCJ 7088/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. DCCJ 7088 OF 2003

____________

____________

_______________

D E C I S I O N

_______________

Introduction

1.  This is the Defendant’s application for leave to appeal against my order made on 24 August 2004, (1) granting the Defendant leave to defend upon payment into Court within 14 days of the amount of $80,000 with costs to the Plaintiff, (2) allowing the Defendant’s appeal against the First Prohibition Order made against the Defendant and discharging the First Prohibition Order with no order as to costs and (3) dismissing the Defendant’s appeal against the Second Prohibition Order made against the Defendant with costs to the Plaintiff and certificate for counsel.  The facts are sufficiently outlined in my Decision dated 24 August 2004.

Appeal against conditional leave to defend and costs order

2.  The Defendant’s intended appeal is not against the grant of conditional leave to the Defendant to defend, but against the condition I imposed and against my order for costs against the Defendant.  Firstly, Mr. Cook argues that a sum of $67,000 instead of $80,000 should have been ordered to be paid.  In granting conditional leave to defend, the Court has discretion to impose such conditions as it thinks fit.  It is always proper for the court to impose conditions, including compensating the plaintiff for all costs which but for the default of the defendant he would not have incurred.  Accordingly, I ordered $80,000 which would allow for all reasonable costs thrown away in the course of enforcing the judgment to be set aside.  Mr. Cook argues that $67,000 was all that should have been ordered taking into account the fixed costs in a default judgment and the Defendant’s offer.  He argues that no enforcement costs should have been allowed as the garnishee order was dismissed with no order as to costs.  I dismiss such argument.  Obviously, the garnishee order was dismissed with no order as to costs because there was no money in the bank account.  But that does not mean the Plaintiff should not be compensated for such costs thrown away.  The amount of $67,000 has been shown to be inadequate to cover the judgment debt, fixed costs and interest as at the date of the offer and as at the date of my order.  I consider $80,000 an appropriate amount to be ordered which would allow a safe margin after providing for security in respect of the amount of claim, costs thrown away and interests. 

3.  Mr. Cook argues that conditional leave to defend was granted because I considered the Defendant has a good defence.  He emphasised time and again that the Defendant was successful in having been granted leave to defend and I should have awarded costs in his favour or should have made a costs order nisi for the parties to address me on the issue of costs.  The Defendant’s ability to show a good defence is a basic requirement for granting leave to defend.  I think Mr. Cook has completely overlooked and deliberately avoided to recognise the fact that the default judgment obtained by the Plaintiff was a regular judgment and the Defendant failed to offer any explanation for the delay in filing a defence and in making an application to have it set aside.  Granting leave to defend under such circumstances is an indulgence and not a right.  The Plaintiff was utterly without fault.  There is no reason why the Plaintiff should not be compensated for the costs thrown away as a result of the Defendant’s default.

4.  Next, Mr. Cook argues that in considering the condition and equally in denying the Defendant of his costs, I should not have considered the Plaintiff’s possible claim under the doctrine of estoppel by convention which has not been pleaded.  I disagree.  At the interlocutory stage, the Defendant has not filed any defence and the Plaintiff has not filed any reply.  Just as I am entitled to consider the Defendant’s possible defence in the absence of a properly drawn up defence, I may consider the overall merits of the parties’ case in deciding how I should exercise my discretion as regards the condition to be imposed and the costs order to be made. 

5.  I consider the condition I imposed and the costs order I made are consistent with established legal principles.  It is well established principle that the Court of Appeal will not lightly interfere with the exercise of discretion by the court below, unless it has been shown that the court below erred in law in exercising its discretion.  In an application for leave to appeal, the appellant bears the burden of proving he has a good chance of success.  I consider the Defendant has failed to show that I may have erred in law in the way I exercised my discretion as regards both the condition I imposed and the costs order I made.  Accordingly, leave to appeal against this part of my Decision is refused.

Appeal against costs order in discharging the First Prohibition Order

6.  The Defendant seeks leave to appeal against my order depriving him of his costs in having successfully challenged the First Prohibition Order.  In depriving him of his costs, I held at paragraph 54 of my Decision:

“The general rule is that where an ex-parte order is discharged for material non-disclosure, the applicant of the order has to pay the respondent’s costs to be taxed on an indemnity basis.  As the application for the First Prohibition Order was occasioned by the Defendant’s deliberate act to allow a judgment to be made against him by default and bearing in mind his conduct in the litigation (see below in relation to the Second Prohibition Order), I consider that he should be deprived of his costs, despite his success in this appeal.  Accordingly, I allow this appeal but make no order as to costs.”

7.  Mr. Cook argues that it was wrong to assume that the entering of a default judgment will necessarily result in an application for a prohibition order.  I disagree.  The Defendant is an expatriate with no roots or family ties in Hong Kong.   He withdrew all money from his bank accounts known to the Plaintiffs.  His conduct has put suspicion on himself.  In the circumstances, it is not unreasonable for the Plaintiffs to seek a prohibition order and to do so promptly. 

8.  Mr. Cook argues that I erred in law in making a finding of fact that the Defendant deliberately allowed the default judgment to be entered against him and had not made a request for extension of time to file the defence.  The Defendant failed to offer any credible explanation for his delay in filing defence and in making an application for leave to file defence out of time.  In the circumstances, it is open to me to conclude that the Defendant deliberately allowed the default judgment to be entered against him.

9.  Mr. Cook says that I was wrong to reject the Defendant’s allegation that he had written to the Plaintiff’s solicitors for extension of time to file defence on the basis of the Plaintiff’s solicitors’ denial to that effect.  As explained in my Decision, I think it is open to me to reach the conclusion which I did.  In any event, the Defendant failed to explain his delay in making the application to court to file a defence out of time until after the Plaintiff has taken the various steps in enforcement judgment.

10.  The proposed appeal is against my costs order which is a matter for my discretion and which the appellate court will not lightly interfere, unless I have been shown to have erred in law.  The First Prohibition Order was set aside for material non-disclosure.  The non-disclosure was the Plaintiff’s solicitors’ innocently highlighting a piece of information which turned out to be incorrect.    Hence, it is open to me to take into account the Defendant’s deliberate act to allow a judgment to be made against him and his conduct in exercising my discretion. Mr Cook has failed to advance any credible challenge to the basis on which I exercised my discretion.  I do not think Mr. Cook has proved a good chance of a successful appeal.  Accordingly, I refuse the Defendant leave to appeal against this costs order.

The appeal against the Second Prohibition Order

11.  Mr. Cook seeks to challenge my Decision on the basis that I erred in law in failing to consider Avco Financial Services (Asia) Ltd v Topman Electronics Ltd & Ors [1999] 4 HKC 193.  He also submits that I erred in law in making certain finding of facts and in failing to take into account the fact that the Plaintiffs have tendered no evidence that but for the prohibition order the enforcement of the judgment would be impeded in some significant way and my failing to appreciate the effect of the Defendant’s offer to pay $67,000 into Court.  

12.  All these points have been canvassed fully in my Decision.  The principle in Avco Financial Services (Asia) Ltd v Topman Electronics Ltd & Ors have been encapsulated in my analysis of the law in paragraphs 42 to 46 of my Decision.  Mr Cook disagrees with the inferences I drew but has failed to establish the basis on which his challenges are made.  He argues that the appeal will be a hearing de novo and the Court of Appeal will be free to draw inferences and make its finding of facts.  That is of course correct if the appeal should go to the Court of Appeal, but Mr. Cook has quite failed in the first place to pass the threshold of showing a good chance of success by establishing the basis on which his challenges could properly be made.  Accordingly, I refuse the Defendant leave to appeal against the Second Prohibition Order.

Conclusion

13.  For the above reasons, I refuse to grant the Defendant leave to appeal to the Court of Appeal with costs to the Plaintiff and certificate for counsel.