THE BANK OF EAST ASIA, LTD v. CHAN WING HUNG AND ANOTHER

DCMP 1816/2017

[2018] HKDC 271

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 1816 OF 2017

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DECISION

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BACKGROUND

1.  This is an application by the plaintiff, The Bank of East Asia, Limited (the “plaintiff”), against Mr Chan Wing Hung (the “1^st defendant”) and Ms Ng Cho Chu Judy (the “2^nd defendant”), under Order 88, rule 1 of the Rules of the District Court, Cap 336H (the “RDC”).

2.  The 1^st defendant and the 2^nd defendant were cohabitees since 2004.  In July 2007, they moved into a property known as Flat B together with its Flat Roof on 1/F of Cheong Wing Court, No 5 Water Street, Hong Kong (the “Property”).  The 1^st defendant has been registered as the sole owner of the Property since 31 July 2007.

3.  The relationship between the 1^st and 2^nd defendants then turned sour, leading to their break-up and the 2^nd defendant moving out of the Property in July 2014.

The legal charge

4.  Shortly after their break-up, the 1^st defendant obtained a loan of HK$1,000,000 (the “Loan”) from the plaintiff by a facility letter dated 8 August 2014 (the “Facility Letter”).^[1]  As per the Facility Letter, the Loan was to be repaid, together with interest, by 120 monthly instalments in the sum of HK$9,166 each.  The instalments were payable on the 15^th day of each month until full repayment.

5.  To secure on the repayment of the Loan, the plaintiff and the 1^st defendant also entered into a legal charge, signed by the 1^st defendant on 15 August 2014 (the “Legal Charge”).^[2]  The Legal Charge is created over the Property and registered with the Lands Registry by Memorial Number 14082501640044.

DCMP 2498/2014

6.  In the meantime, the 2^nd defendant brought an action against the 1^st defendant in the case of DCMP 2498/2014, under which she successfully obtained declaratory relief against the 1^st defendant concerning the Property.  Deputy District Judge W Tsui (as she then was) declared that the 1^st defendant has been holding the Property on trust for the 2^nd defendant and himself as joint tenants since 31 July 2007.  In addition, the 2^nd defendant is a beneficial owner of the Property, and she is entitled to a half-share of the proceeds of sale in the event of the Property being sold, subject to payment of costs of such sale and the discharge of any prior encumbrances (the “DC Judgment”).^[3]

7.  The 1^st defendant’s appeal against the DC Judgment was dismissed by the Court of Appeal (“CA Judgment”).^[4]  The subsequent application by the 1^st defendant for leave to appeal to the Court of Final Appeal was also dismissed by the Court of Appeal.^[5]

The present proceedings

8.  In-between the DC Judgment and CA Judgment, the 1^st defendant had defaulted in the repayment of the 25^th, 26^th and 27^th instalments due on 15 September 2016, 15 October 2016 and 15 November 2016 respectively under the Facility Letter. Demand letters issued by the plaintiff  to the 1^st defendant bore no fruit.

9.  In addition, the 1^st defendant had failed to take out fire insurance policy for the Property, as required under the Legal Charge.  The plaintiff  had to do the same for the 1^st defendant out of its own pocket.

10.  For these reasons, by its Originating Summons filed on 23 June 2017 (the “Originating Summons”), the plaintiff seeks monetary judgment against the 1^st defendant, including the outstanding principal of the Loan, interest accrued on the outstanding principal, late charge, fire insurance premium and other charges.^[6]  Failing payment of the same, the plaintiff  would seek vacant possession of the Property against the 1^st and 2^nd defendants^[7] pursuant to the Legal Charge and the DC Judgment (the “Present Proceedings”).

11.  The 1^st defendant has failed to file any acknowledgment of service of the Originating Summons, thus giving no intention to defend the Present Proceedings.  The 2^nd defendant, in her acknowledgement of service, contested the plaintiff ’s claims.  By way of a consent summons made by the plaintiff and the 2^nd defendant, I gave directions that the 2^nd defendant was to file her affirmation in opposition, and the plaintiff  was to file its affirmation in reply.  A hearing was also fixed before me to receive the substantive arguments of the parties.^[8]

HCA 1461/2017

12.  Pausing here, a few days prior to the commencement of the Present Proceedings, the 2^nd defendant took out another action in the High Court under HCA 1461/2017 against the 1^st defendant.  In HCA 1461/2017, the 2^nd defendant sought, and successfully obtained by way of a summary judgment, a declaration that she is entitled to the equity of exoneration, and that: (1) a charge over the share and interest of the 1^st defendant in the Property to the extent that the 1^st defendant’s debt due to the plaintiff under the Legal Charge of the Property are paid out of the share and interest of the 2^nd defendant in the Property; and (2) a charge over the share and interest of the 1^st defendant in the Property to the extent and effect of fully indemnifying the 2^nd defendant, of all costs and the 2^nd defendant’s own costs in the Present Proceedings (the “HC Order”). ^[9]

The 2^nd defendant’s summons dated 6 November 2017

13.  Before the substantive hearing fixed for 10 November 2017, the 2^nd defendant took out a Summons dated 6 November 2017, returnable on the date of this substantive hearing, seeking from me the following orders:-

(1) The 1^st defendant do provide to the 2^nd defendant access to the Property.

(2) Upon the 1^st defendant’s failure to comply with the preceding order, the 2^nd defendant be at liberty to break open the gate and main door of the Property, so that she could gain access to the same (the “D2’s Summons”).

THE PLAINTIFF’S CASE

14.  At the substantive hearing, the plaintiff was represented by Counsel Mr Lawrence Ng (“Mr Ng”).  The plaintiff ’s case is quite straight forward.  There had been non-payment of the aforesaid instalments, and non-compliance of the other term (ie failing to take out fire insurance for the Property) by the 1^st defendant.  It is therefore entitled to bring the Present Proceedings against the 1^st defendant. The monetary claim against the 1^st defendant amounted to HK$844,107.37 as at 2 November 2017.^[10]  Upon his failure to pay the outstanding debt, vacant possession of the Property should be given by both the 1^st and 2^nd defendants to the plaintiff.

15.  With the 1^st defendant having failed to contest the Present Proceedings, the plaintiff  seeks a default judgment against him under O 88, r 4 of the RDC.

16.  As to the 2^nd defendant, in light of her notice of intention to defend and her affirmation in opposition, the plaintiff is in essence seeking a summary determination of the matter against her under O 28, r 4 of the RDC.  As she is a joint tenant having beneficial interest in the Property pursuant to the DC Judgment, she must be made a party to the Present Proceedings for the claim of vacant possession of the Property, despite that she is not a contracting party under the Facility Letter and the Legal Charge.

17.  The plaintiff ’s case against the 2^nd defendant is that, the plaintiff  was a bona fide purchaser for value without actual or constructive notice of her beneficial interest at the time when the Facility Letter and Legal Charge were executed.  In support, the plaintiff referred to the mortgage loan application dated 22 July 2014, under which the 1^st defendant declared that the Property was used and occupied and would continue to be used and occupied by the 1^st defendant.  No disclosure of the 2^nd defendant’s interest in the Property was made therein.^[11]  As such, the plaintiff is entitled to enforce the Legal Charge free of the 2^nd defendant’s interest.

THE 1^ST DEFENDANT’S CASE

18.  The 1^st defendant attended the hearing on 10 November 2017.  He confirmed that he has received all the documents from the plaintiff, and has no objection to the plaintiff’s application for default judgment to be entered against him.

THE 2^ND DEFENDANT’S CASE

19.  At the hearing, the 2^nd defendant was represented by Mr Eric Ching of Messrs Ching & Co (“Mr Ching”).

20.  From the 2^nd defendant’s affirmation, there is no dispute as to the existence or validity of the Legal Charge and Facility Letter.  There is also no dispute as to the sum claimed by the plaintiff against the 1^st defendant.  In fact, the 2^nd defendant, in her affirmation, does not even deny that the plaintiff was a bona fide purchaser for value without actual or constructive notice of her beneficial interest in the Property.  Instead, she focuses on how she obtained the DC Judgment and HC Order, and blames the 1^st defendant for not informing her or getting her consent before entering into the Facility Letter and Legal Charge.  She complains about the 1^st defendant’s non-compliance of the Facility Letter and Legal Charge.  She also chastises the 1^st defendant for the inconsistent reasons for obtaining the Loan that he gave under DCMP 2498/2014.  The 2^nd defendant concludes by mentioning in her affirmation that the 1^st defendant was at the time seeking leave to appeal against the CA Judgment.^[12]

21.  In his submissions, Mr Ching started off by accepting that the plaintiff might not have notice of the 2^nd defendant’s interest in the Property, as the same was registered under the sole name of 1^st defendant.  Mr Ching explained that the 2^nd defendant wanted to keep the Property for her occupation, and to prevent the sale of the same by the plaintiff.  In support, Mr Ching referred again to the inconsistent reasons given by the 1^st defendant for obtaining the Loan, and queried why the 1^st defendant had stopped his repayment of the Loan.

22.  Furthermore, Mr Ching referred to D2’s Summons, and sought to obtain explanation from the 1^st defendant as to the whereabouts of the Loan.  He also sought access to the Property by the 2^nd defendant, and asked for the adjournment of the Present Proceedings for 60 days.

DISCUSSIONS

Default judgment application against the 1^st defendant

23.  As highlighted in the above, the 1^st defendant has neither filed an acknowledgement of service nor given any intention to defend.  The requirements under O 88, r 4 of the RDC have been complied with by the plaintiff.  The 1^st defendant, having received all the relevant documents from the plaintiff, agreed at the hearing to a judgment being entered against him in terms of the Originating Summons.  In the circumstances, default judgment should be entered against the 1^st defendant in terms of paragraphs 1 and 2 of the Originating Summons.

Jurisdiction issue

24.  Regarding the case against the 2^nd defendant, before I proceed to analyze the parties’ respective cases, I had during the hearing, as a preliminary point, asked Mr Ng and Mr Ching to address me on whether I have the jurisdiction to preside over such application.  My concern stemmed from the wordings used in O 88, r 4 and O 28, r 3A of the RDC, and paragraph 3(4) of PD 14.2.

25.  As per paragraph 3(4) of PD 14.2, an application for entry of default judgment under O 88 shall be placed in the first instance before a Master in Chambers (open to public), notwithstanding O 28, r 3A.  And O  88, r 4(1) provides that this rule should apply where the defendant has failed to file an acknowledgement of service of the originating summons.  It follows that in a case where a defendant has filed his acknowledgement of service giving notice of intention to defend, this is no longer a case under O 88, r 4 of the RDC for default judgment. 

26.  In the Present Proceedings, as the 2^nd defendant has not only filed her acknowledgment of service but also her opposition in affirmation, the plaintiff’s application against her is for summary determination under O 28, r 4. O 28, r 3A provides that hearings under O 28 should be dealt with in open court, unless the court otherwise directs.

27.  At the hearing, both Mr Ng and Mr Ching gave their brief verbal submissions on this issue.  In gist, Mr Ng submitted that a master should have jurisdiction to preside over summary determination of the matter under O 28, r 4, whilst Mr Ching argued to the contrary.  At the end of the hearing, I had directed both parties to file supplemental written submissions on this point.[13]

The plaintiff ’s submissions

28.  In Mr Ng’s supplemental submissions, he first referred to O  32, r 16 of the RDC, in particular r 16(1), which provides as follows:-

“(1) The Registrar and any master shall have power to hear and determine all interlocutory applications and transact all such business and exercise all such authority and jurisdiction as under any Ordinance or by these Rules may be transacted and exercised by a judge in chambers, except in respect of the following matters and proceedings, that is to say-

(a) matters relating to criminal proceedings other than matters relating to the conditions of admission to bail; (L.N. 153 of 2008)

(b) matters relating to the liberty of the subject other than orders for arrest and imprisonment to enforce, secure or pursue civil claims for the payment of money and orders prohibiting persons from leaving Hong Kong;

……

(d) subject to paragraph (2), proceedings for the grant of an injunction or other order under Part I of Order 29;

…….

(f) any other matter or proceeding which by any of these Rules is required to be heard only by a judge” (emphasis added)

29.  Mr Ng submitted that in relation to such power, authority and jurisdiction, O 32 r 16(1) equates masters with judge in chambers, save in respect of certain specified matters and proceedings expressly excepted and reserved thereunder.^[14]  There is no question that a judge does have jurisdiction to preside over a mortgagee action.^[15]  Despite that O 28, r 3A of the RDC provides for “[a]n originating summons must be heard in open court”, the rule does allow such action to be heard in chambers if the court “otherwise directs”.

30.  On this point, Mr Ng further referred to the case of Wing Hang Bank Limited v Liu Kam Ying [2002] 2 HKC 57, where Ma J (as he then was) held that substantive hearing of an originating summons can take place in chambers, where the plaintiff seeks a summary determination of the matter.  At paragraph 7 of his judgment, Ma J stated that:-

“7. While normally the substantive hearing of an originating summons should be in open court (see Hong Kong Civil Procedure 2002 at para 28/9/2), where, as in the present case, the plaintiff seeks a summary determination of the matter (akin to an application for summary judgment), the hearing can take place in chambers: see RHC, Order 28, rules 4(1), 9(1); International Bank of Asia Limited v Kewpaisal Waranuch, unreported, 4 March 1999, HCMP 1421/1998, Yuen J. The difference between an application for summary judgment under the originating summons procedure and an application for summary judgment under RHC, Order 14 is that the burden is not on the defendant in the case of the former: see International Bank of Asia Limited at pp 5S to 6A” (emphasis added).

31.  In International Bank of Asia Limited v Kewpaisal Waranuch, (unreported, HCMP 1421/1998, 4 March 1999, Yuen J), the plaintiff commenced action under O 88 of the RHC for monetary claim and possession of the property on the strength of a legal charge.  The matter went before a master, who gave summary judgment in favour of the plaintiff.  The defendants appealed against such decision, arguing, amongst others, that the matter should not be heard in chambers by a master. Yuen J (as she then was) stated that:-

“The Defendants’ arguments boiled down to the objection that the matter was heard in chambers by a master.

In this respect, it should be noted that a mortgage action may, under O 88, be commenced either by writ or by originating summons. If a mortgage action is commenced by originating summons (as in this case), it goes, in the first instance, for a first hearing before a master.

A first hearing of an originating summons (whether before a judge or a master) is conducted in chambers. In accordance with O 28 r 3 and 4, if the judge/master decides that the matter can be dealt with summarily, then an order disposing of the entire proceeding can be made. This is akin to an application for summary judgment under O 14, but with the difference that the burden is not cast upon the defendant, as in O 14.

If the judge/master decides that the matter could not or should not be dealt with summarily, he gives directions and orders a full hearing, which would be before a judge in open court (except for cases where it would be inappropriate to have the matter heard in public, e.g. applications for appointing receivers of mental patients).

……

If it is shown at the first hearing that there are material factual issues which need to be resolved, the judge/master would order that the proceeding continue as if begun by writ, and give directions for the fling of pleadings. Alternatively, even if the affirmations show that there were factual issues, but they are insubstantial or are restricted in scope, the judge/master may order that there be cross-examination at the full hearing on those issues only.

……

In conclusion, therefore, I do not see what is the objection that the Defendants have to the matter proceeding under O 88 and being heard by a master.” (emphasis added).

32.  The 2 cases above clearly showed that: (1) summary determination of a matter under O 28, r 4 could be heard in chambers; and (2) it could be heard by a master in chambers.^[16]

33.  I do note that O 28, r 3A was added to the RDC in 2008 after the 2 cited cases above.  Taking it to the highest, however, I agree with Mr Ng that it could probably only be argued that summary determination of the matter should be heard in open court.  Come what may, the rule provides for the court to “otherwise order”, which in my view includes hearing to be conducted in chambers if so directed.  And I did so direct.^[17]

34.  Furthermore, although paragraph 3(4) of PD 14.2 provides that an application for entry of default judgment under O 88 shall be heard before a master in chambers, I do not think that the procedures prescribed by the RHC and RDC, and carefully considered by the courts in previous cases, should and could be overridden by Practice Direction.

35.  In this regard, I have not lost sight of the fact that paragraph 3 of PD 14.2 was added after Wing Hang Bank Limited Case and International Bank of Asia Limited Case.^[18]  I, however, agree with Mr Ng’s submission that, on proper reading of the words used, paragraph 3 of PD 14.2 only makes it obligatory for the kinds of application commenced by originating summons that are listed in that paragraph to be placed in the first instance before a master in chambers.  Nothing therein restricts a master from further dealing with these kinds of application beyond the first hearing.  In fact, if such a narrow interpretation is given to the meaning of paragraph 3 of PD 14.2, a master could not even preside over an adjourned hearing for default judgment application, despite that the hearing was adjourned simply for the plaintiff to file supplemental affirmation, for example, to clarify on a point made in the original supporting affirmation, or to confirm service of the necessary notice of hearing to the defendant.  I do not think this could be the goal that paragraph 3 of PD 14.2 seeks to achieve.

The 2^nd defendant’s submissions

36.  I now turn to the supplemental submissions of Mr Ching.  He first made reference to section 35 of the District Court Ordinance, Cap 336 (“DCO”), which confers jurisdiction on the District Court to hear and determine any action for the recovery of land, where the annual rent or the rateable value of the land does not exceed HK$240,000.  Mr Ching submitted that none of the provisions in the DCO gave power or authority to a master to hear or adjudicate the cases under section 35. Sections 6(1) and (3) of the DCO further provide that the business of the court^[19] shall be heard and disposed of by a judge^[20] sitting alone in court unless this Ordinance, the rules of court or another enactment authorizes the matter to be heard and disposed of in chambers.  For these reasons, Mr Ching submitted that the application against the 2^nd defendant ought to be heard by a judge sitting alone in open court, unless the rules or other enactment provides otherwise.

37.  This argument could be easily disposed of.  As discussed in the above, the rule that one could rely on for the power or authority of a master to hear or adjudicate the cases, including cases under section 35, is O 32, r 16 of the RDC.  There is nothing in the DCO or RDC which restricts a master from presiding over this type of cases so long as the exceptions under O 32, r 16 of the RDC are not engaged.

38.  Mr Ching also placed emphasis on the point that summary determination under O 28, r 4 is not an interlocutory application.  Unlike O  32, r 11 of the RHC, O 32, r 16 of the RDC specifically added the words that a master could “hear and determine all interlocutory applications”.  Mr Ching argued that this would limit the power of a master in the District Court to only hear and determine interlocutory applications, unlike a master in the High Court, who is not subject to such limitation.  I do not agree with this submission.  A master in the District Court is also vested with the power to hear and determine a summary judgment application under O 14.  As explained in the DC Judgment, the International Bank of Asia Limited Case and the Wing Hang Bank Case, summary determination under O 28, r 4 of the RDC is akin to an application for summary judgment.  I do not see why a master in the District Court should be deprived of such power when it comes to an application under O 28, r 4 of the RDC.

39.  Finally, as to his submissions based on the provisions in PD 14.2, they have been sufficiently answered in paragraphs 34 and 35 above.

Conclusion on jurisdiction issue

40.  In light of the above discussions, I find that a master of the District Court does have jurisdiction to hear and determine in chambers an application for summary determination pursuant to O 28, r 4 of the RDC.

41.  With this issue out of the way, I will proceed to consider below the plaintiff ’s application against the 2^nd defendant.

Summary determination against the 2^nd defendant

42.  Regarding the plaintiff ’s application against the 2^nd defendant, the relevant principles to an application under O 28, r 4 of the RDC have been set out in the DC Judgment at paragraphs 120 to 122 and I shall not repeat the same herein.  Suffice to say I respectfully adopt them in this decision.

43.  After reading the Affirmations of Leung Kang Bor, I am satisfied that the plaintiff  has shown a prima facie case, which is premised on the Facility Letter and Legal Charge.  I am also satisfied, and this is not a point contested by the 2^nd defendant, that the 1^st defendant had failed to comply with the terms of the Facility Letter and Legal Charge, and that the plaintiff is entitled to exercise its right as a mortgagee to seek vacant possession of the Property.

44.  Furthermore, and again this is not contested by the 2^nd defendant, I am convinced that the plaintiff  was a bona fide purchaser for value without actual or constructive notice of 2^nd defendant’s beneficial interest at the time when the Facility Letter and Legal Charge were executed.  As stated in the above, the 1^st defendant had, in the mortgage loan application dated 22 July 2014, declared that the Property was used and occupied, and would continue to be used and occupied, by the 1^st defendant.  The 2^nd defendant’s interest in the Property was not disclosed.  In my view, even with further investigation by the plaintiff, the 2^nd defendant’s beneficial interest in the Property could not have been revealed, considering that the 1^st and 2^nd defendants had broken-up and the latter had moved out of the Property at the time of the mortgage application.

45.  Having been satisfied that there is a prima facie case for the plaintiff, the next question that I have to consider is the defence of the 2^nd defendant.

46.  But what is the 2^nd defendant’s defence to the present application?  As summarised in paragraphs 20 to 22 above, there does not seem to be a defence, save and except the possible reliance on the HC Order and D2’s Summons as her defences.  Mr Ching, however, had not in his written submissions clearly explained as to how the HC Order and D2’s Summons would and could be used to contest the plaintiff ’s claim.  At the hearing, apart from conceding that the plaintiff might not have notice of the 2^nd defendant’s beneficial interest in the Property, Mr Ching simply added that the 2^nd defendant’s main purpose is to delay a judgment to the plaintiff, so that she could use the time to gain access to the Property, and retrieve her personal belongings stored thereat.

47.  I must say I was taken aback by this candid answer from Mr Ching.  I must also say that if the purpose of going through all these motions is only to delay the inevitable, I disapproved it.

48.  Come what may, for completeness sake, I will deal with the HC Order and D2’s Summons briefly below as if they are defences relied upon by the 2^nd defendant in the Present Proceedings.

49.  First, I agree with Mr Ng that, notwithstanding the DC Judgment, the plaintiff, being a bona fide purchaser for value who obtained legal estate at the time of its purchase without notice actual or constructive of the 2^nd defendant’s prior equitable right in the Property, is entitled to priority in equity as well as at law: see Macmillan v Bishopsgate Investment Trust Plc (No 3) [1995] 1 WLR 978.

50.  Second, I also agree with Mr Ng that the HC Order, ie the equity of exoneration, does not alter the position.  Under the HC Order, the 2^nd defendant is merely entitled, as between her and the 1^st defendant, to have the indebtedness, as secured by the Legal Charge, discharged so far as possible out of the equitable interest of the 1^st defendant: see also Re Pittortou [1985] 1 WLR 58 at 61B-C, per Scott J, as to the principle of equity of exoneration.  In this regard, I do note from the internal valuation record issued by DTZ Cushman & Wakefield dated 24 August 2017 that the market value and forced sale value of the Property were HK$5,400,000 and HK$4,320,000 respectively.^[21]  Even as at the date of this decision, the 1^st defendant’s share in the proceeds of sale of the Property should be sufficient to pay off the secured indebtedness owed to the plaintiff , and the 2^nd defendant’s share of interest in the Property will highly unlikely be affected.  Nothing to the contrary had been said by the 2^nd defendant in her affirmation or by Mr Ching in his submissions.

51.  As to the D2’s Summons, the relief sought thereunder is in nature an injunctive relief.  It therefore falls within the exception under O  32, r 16(1)(d) of the RDC where a master has no jurisdiction to deal with, unless the parties to the proceedings agreed.^[22]  In the Present Proceedings, with the plaintiff not yet having obtained vacant possession of the Property, it is not in the position to enter into such agreement.  The intended injunctive relief is not even aimed at the plaintiff  but at the 1^st defendant.  On this point, there is, however, no proceedings (be it by way of third party proceedings or by way of counterclaim under O 15, r 3 of the RDC) between the 1^st and 2^nd defendants in the Present Proceedings.  The proper course should be for the 2^nd defendant to seek such order from a judge, and that it probably could have been sought under the DCMP  2498/2014.^[23]  In all circumstances, I do not see how the D2’s Summons afforded the 2^nd defendant any defence against the plaintiff ’s claim.

52.  Come what may, according to the supplemental written submissions of Mr Ching, the 1st defendant had agreed to allow the 2nd defendant access to the Property at a subsequent hearing before HH Judge W Tsui on 18 January 2018 under DCMP 2498/2014. The D2’s Summons, in the context of the Present Proceedings, have become redundant. I would therefore dismiss the D2’s Summons.

53.   In light of the above, I see no reason not to enter judgment against the 2^nd defendant in terms of paragraph 1 of the prayers in the Originating Summons.

COSTS

54.   Costs should follow the event.  Having obtained judgments against the 1^st and 2^nd defendants in the Present Proceedings, and with the D2’s Summons being dismissed, the plaintiff should be entitled to its costs.  Seeing that, prior to the hearing and before Mr Ching made his submissions, the defences that the 2^nd defendant intended to run were undefined and ambiguous, Mr Ng’s involvement is appropriate.  I would therefore also make an order that there be certificate to counsel.

55.   As per clause 17.2 of the Legal Charge and the Second Schedule, costs incurred by the plaintiff  in the enforcement of the Legal Charge should be reimbursed to the plaintiff  on indemnity basis.^[24]  The 1^st defendant is bound by such term.  The same could not be said about 2^nd defendant, as she is not a contractual party to the Facility Letter and Legal Charge.

56.   I have directed that the costs of the Present Proceedings shall be dealt with by way of summary assessment on paper.  An updated Statement of Account is attached to the supplemental skeleton submission filed by Mr Ng on 24 November 2017.  The plaintiff claims costs in the total sum of HK$224,670, inclusive of counsel’s fee. Mr Ching, in his supplemental submissions, argued that the costs claimed by, and the amount that should be awarded should be no more than 3 to 4 times of the fixed costs of HK$28,000 that would be allowed for O 88, r 4 cases under “solicitor and client basis”. I do not agree with Mr Ching’s submission. First, he had adopted the new reference figure of HK$28,000 which came into effect on from 1January 2018, which is not applicable to this application. Second, as stated in paragraph 60 below, costs should be borne by the 2^nd defendant on party and party basis. I see no ground for adopting the solicitor and client basis in this assessment. Third, the present application against the 2^nd defendant is not under O 88, r 4 but O 28, r 4. I do not see why the fixed costs applicable to the former should be adopted as the basis when assessing the costs that should be awarded in the latter.

57.   Having perused the updated Statement of Costs of the plaintiff, I have the following observations.

58.   For a usual application under O 88, r 4 of the RDC, a fixed costs of HK$19,200 under the old reference figure would be granted on indemnity basis.  The said costs would cover, inter alias:-

(1) the preparation of Originating Summons, affirmation(s) in support and the exhibits, certificate of no acknowledgement of service or defence, notice of appointment, notice to occupant(s), affirmation(s) of service of the said documents;

(2) service of the said documents on the defendant, and preparation of affirmation(s) to prove the same; and

(3) court attendance.

59.   As to the costs against the 1^st defendant, notwithstanding his appearance at the hearing, the plaintiff ’s application for default judgment is not contested.  I am of the view that the 1^st defendant should only be responsible for the fixed costs of HK$19,200.

60.   As to the remaining costs claimed by the plaintiff, they should relate only to the application against the 2^nd defendant and the D2’s Summons.  As such, these costs should be borne by her on part and party basis.  I do not intend to go through the items of costs one by one in this decision.  I will just say a few observations that I have and the corresponding discounts I have made.

61.   I do notice from the updated statement of costs that there are duplications of some works done by both senior and junior solicitors, which should be discounted.  In this regard, I would only allow costs incurred by one senior solicitor.  The hourly rates of the handling solicitors are within range but at the higher end of the District Court scale.  Thus, modest reductions have been made.  I have also taken into account, when assessing the costs payable by the 2^nd defendant, that some of the works undertaken by the plaintiff’s solicitors should have been covered in the fixed costs awarded against the 1^st defendant.  Finally, as to counsel’s fees, I am fully aware of Mr Ng’s seniority, and the fees charged by him, in my view, are reasonable.  A modest reduction is made only to reflect on the level of complexity of the issues involved in the Present Proceedings.

62.   For the reasons above, I have made a summary assessment of the costs between the plaintiff and the 2^nd defendant in the sum of HK$156,295, inclusive of counsel fees of HK$117,750.

63.   For clarity sake, the total amount of costs that the plaintiff  should receive from the 1^st and 2^nd defendants in the Present Proceedings should be HK$175,495 (HK$19,200 + HK$156,295).

CONCLUSION AND ORDERS

64.   For the above reasons, I conclude that the plaintiff is entitled to final judgment as sought in its Originating Summons against the 1^st and the 2^nd defendants, under O 88, r 4 and O 28, r 4 respectively. The D2’s Summons is dismissed.

65.   I also make an order nisi that costs of the Present Proceedings be to the plaintiff with certificate for counsel, to be paid by the 1^st and 2^nd defendants as follows:-

(1) the 1^st defendant shall forthwith pay to the plaintiff  costs on indemnity basis summarily assessed at HK$19,200; and

(2) the 2^nd defendant shall forthwith pay to the plaintiff  costs on party and party basis summarily assessed at HK$156,295.

66.   The cost order nisi will become absolute after 14 days from the date of this decision.