WEALTH GROWTH (HK) INVESTMENT LTD v. SI BUN BUN CARMEN CO LTD AND ANOTHER

DCCJ 3633/2014

[2021] HKDC 1363

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3633 OF 2014

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BETWEEN

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DECISION

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THE APPEAL

1.  This is an appeal brought by the 2^nd defendant by virtue of a Notice of Appeal filed on 25 June 2021 against a costs order made by Master Jocelyn Leung on 17 February 2021 pursuant to which the costs of and occasioned by the summons filed by the 2^nd defendant on 24 September 2020 (“the Inspection Summons”) were ordered to be paid by the plaintiff to the 2^nd defendant.

2.  The Notice of Appeal was filed out of time for nearly 4 months.

THE ACTION

3.  According to the Statement of Claim, at all material times, the plaintiff was a licenced money lender. The plaintiff sued the defendants herein to recover a loan allegedly made pursuant to a loan agreement dated 6 October 2008 entered into by the plaintiff as lender, the 1^st defendant as borrower and the 2^nd defendant as guarantor (“the Loan Agreement”).

CHRONOLOGY

4.  For the purpose of this appeal, the following events are relevant:

Late April 2020	The 2nd defendant was first informed of this action
Early May 2020	The 2nd defendant gave limited instruction to his solicitors, Messrs. Chan & Ho (“C & H”), to search the court file and make copy of the Writ and the Statement of Claim. No further document could be obtained because C & H was not the 2nd defendant’s legal representative in this case on record by then
14 July 2020	The 2nd defendant gave limited instructions to C & H for the purpose of serving on the plaintiff’s then solicitors, Messrs. Li & Associates (“L & A”), a notice under Order 24 rule 11A of the Rules of the District Court (“RDC”) for the production of a copy of the Loan Agreement
24 August 2020	C & H sent L & A a notice under Order 24 rule 10 of the RDC and requested to inspect the original copy of the Loan Agreement
24 September 2020	The 2nd defendant filed the Inspection Summons supported by his 1st Affirmation
12 October 2020	The plaintiff’s solicitors agreed to allow the inspection subject a costs order of “no order as to costs” on the Summons
14 October 2020	The plaintiff opposed the Inspection Summons at the call-over hearing
14 October 2020	The 2nd defendant’s solicitors obtained a copy of the Loan Agreement from the court file of this action
11 November 2020	The 2nd defendant filed his 2nd Affirmation
2 December 2020	The plaintiff’s solicitors issued a “without prejudice” letter, agreeing to allow the 2nd defendant’s inspection of the original copy of the Loan Agreement, subject to the condition, among other things, that the 2nd defendant shall report the matter to the police with the plaintiff if he insisted that he did not sign the Loan Agreement upon inspection of the original copy of the same
8 December 2020	By its solicitors’ letter, the plaintiff proposed that the following orders be made: 1. The plaintiff do produce the Loan Agreement for the 2nd defendant’s inspection within 7 days; 2. Costs be in the cause of the Inspection Summons
8 December 2020	The 2nd defendant’s solicitors asked the plaintiff’s solicitors for clarification on paragraph 2 above
22 December 2020	In reply, the plaintiff’s solicitors argued that the 2nd defendant should not have taken out Inspection Summons before obtaining a copy of the Loan Agreement and without providing any reason, and that therefore the 2nd defendant should bear the costs of the Inspection Summons
24 December 2020	By consent, an order for inspection of the original copy of the Loan Agreement was made, leaving costs of the Summons to be ruled on by the court
17 February 2021	Costs order made by Master

LEGAL PRINCIPLES

Appeal on costs

5.  While this is an appeal from a decision of Master, this appeal is not dealt with by an actual rehearing of the matter, for it is trite that a judge in chambers will not allow an appeal from a Master’s costs order unless it is unreasonable or the Master had erred in law.[1]

Appeal out of time

6.  In considering whether to extend time for the plaintiff to appeal against the costs order, the court has to consider the following factors:

(1) the length of the delay;

(2) the reasons for the delay, in terms of firstly why the original time limit was not complied with and, secondly, why the application for extension of time could not have been made earlier;

(3) the chances of the appeal succeeding if leave is given; and

(4) the prejudice to the other party if application is granted.

(see Postwell Limited v Cheng Kap Sang [2004] 2 HKLRD 355 at paragraph 33)

THE PLAINTIFF’S NEW AFFIRMATION

7.  Before I proceed to consider the plaintiff’s appeal, I should first deal with the 2^nd Affirmation of Chan Chung Chak Ben (“the New Affirmation”) which was filed into court by the plaintiff on 20 August 2021 without leave.

8.  No summons had been filed by the plaintiff to seek leave for the filing of the New Affirmation. In her written submission dated 20 August 2021, Ms Yeung for the plaintiff did not even mention about this affirmation at all.

9.  It is entirely inappropriate to file an affirmation without leave like this. It is also very disrespectful to the court and the procedures for the plaintiff to treat it as if it could file any affirmation at any time it pleased.

10.  In her written reply submissions, Ms Yeung even argued that the plaintiff should be allowed to file the New Affirmation without leave because the Ladd v Marshall conditions are satisfied. I am afraid this argument is totally misconceived.

11.  Since no proper application for leave to file an affirmation for use in the appeal is made, I will disregard the New Affirmation in this appeal.

12.  Even if an application for leave were made, I would have refused to grant leave.

13.  Order 58 rule 1(4) of the RDC provides that:

“No further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal under this rule except on special grounds.”

14.  As explained by Au-Yeung DHCJ (as her Ladyship then was) in Bank of China (Hong Kong) Limited v Certain Aim Ltd (HCMP 1272/2007, unreported, 4 October 2010):

“Order 58, rule 1(5) [of the Rules of the High Court (Cap.4A, Laws of Hong Kong)] was introduced to ‘curb the undesirable practice before the Civil Justice Reform when parties sought to adduce a further round(s) of evidence on appeal after an unfavourable decision from a Master. Rule 1(5) aims at effecting a change of culture so that parties should prepare their application properly at the earliest possible opportunity and lay all cards on the table prior to the hearing before a Master. The spirit of this rule will be defeated if a party is allowed to revert to the pre-CJR practice…”[2] (at paragraph 17)

15.  Under this new rule, new evidence would not be admitted unless “special grounds” can be shown. Given the same words “special grounds” are used in Order 58 rule 1(4) of the RDC and Order 59 rule 10(2) of the Rules of the High Court (Cap.4A, Laws of Hong Kong) (“RHC”), it is now well-established that the same test should be applicable to the aforesaid rules. In other words, before new evidence can be admitted in an appeal against Master’s decision, the criteria laid down in Ladd v Marshall [1954] 1 WLR 1489 have to be satisfied. Under those criteria, further evidence is admissible on appeal only when such evidence:

(1) could not have been obtained with reasonable diligence for use at the hearing below;

(2) would or might, if believed, have an important influence on the result of the case, though it need not be decisive; and

(3) is apparently credible though it need not be incontrovertible.

16.  In my view, it is obvious that the first criteria cannot be satisfied herein.

17.  The purpose of the New Affirmation is to assert that the director of the plaintiff was only informed by the plaintiff’s then solicitors on 9 October 2020 about the Inspection Summons that was filed on 24 September 2020 and the previous requests made by the 2^nd defendant for inspection of the Loan Agreement. As Ms Yeung put it in her reply submissions:

“[the New Affirmation] focus[es] on the reason for the initial lack of response from P when D2 requested for an inspection of the Loan Agreement. This is an important factor that the Court should consider as this will show P’s attitude and that P was not acting irresponsibly in not replying to D2’s request before the Inspection Summons had been served on [the plaintiff’s then solicitors].”[3]

18.  Apparently, this evidence could have been obtained long time ago.

19.  However, Ms Yeung submitted that:

“[…] it was not until after the first hearing on 17 February 2021 that [the plaintiff’s director] have doubts and was advised that his former solicitor firm DYA might have been conducting the present case not up to the professional standard as expected. This is not an evidence that comes into play and be obtained with reasonable diligence for use at the first hearing.”

20.  Insofar as it is the plaintiff’s argument that it did not realise the relevance of this evidence (explanation as to why there was inaction on the part of the plaintiff before 9 October 2020), this is rejected. Firstly, this is not a relevant matter to be taken into consideration as far as the Ladd v Marshall criteria are concerned. Furthermore, it is clear that the 2^nd defendant had, in his affirmation filed on 24 September 2020 in support of the Inspection Summons, complained about the plaintiff’s lack of response despite the 2^nd defendant’s issuance of 2 notices requesting for a copy of the Loan Agreement and inspection of the same respectively. When the issue on costs of the Inspection Summons was adjourned for argument, it was obvious that such lack of response might be relied on by the 2^nd defendant in justifying the taking out of the Summons. It is simply not open to the plaintiff to say “it did not know the explanation on lack of reply would become relevant”.

THE APPEAL OUT OF TIME

21.  I will now consider the 4 relevant factors referred to in Postwell Limited.

Length of the delay

22.  The costs order was made on 17 February 2021. There is no dispute that the time limit for lodging an appeal is 14 days. Hence, the last day for doing so fell on 3 March 2021. As the Notice of Appeal was only filed on 25 June 2021, the plaintiff had been late for nearly 4 months. This is not a short period of time.

Reason for the delay

23.  The plaintiff did not file any affirmation to explain why the appeal had been made so late.

24.  Ms Yeung for the plaintiff explained in her written reply submissions that the delay was caused by change of counsel, and time was “needed to take instructions and give legal advice”[4].

25.  It is trite that counsel should not give evidence from the Bar table.

26.  In any event, the reasons given by Ms Yeung are not valid excuses. Firstly, it was the plaintiff’s own decision to engage another counsel. It had to bear the consequence of not giving the new counsel enough time to advise on the matter. Secondly, the plaintiff had all along been legally represented by solicitors. As this appeal against costs order is a simple matter, its solicitors must be competent enough to advise on the appeal. Furthermore, I wonder what instructions had to be taken for the purpose of this appeal. As aforesaid, no further evidence would be admissible unless special grounds could be shown. For the sake of argument, even if the New Affirmation were admissible herein, given the substantive part of such an affirmation only took up half a page, it would not take long to have it drafted and finalised. I find that it is inexcusable that the original time limit was not complied with and there is no reason why the application for extension of time could not have been made earlier.

Merits of the appeal

27.  As mentioned, since this is an appeal against a costs order made by Master, the appeal is not a rehearing of the matter. This appeal will only be allowed if the learned Master had erred in law or if the costs order made is unreasonable.

28.  Unfortunately, the plaintiff’s counsel seemed not to be aware of the above well-established principle, and emphasised time and again in her written submissions that this is a rehearing of the determination of costs. As a result, she did not focus her argument on how it is alleged that the learned Master had erred in law or that the costs order is unreasonable.

29.  Be that as it may, I will consider the learned Master’s reasoning and Ms Yeung’s submissions accordingly.

30.  As the learned Master’s reasons for making the costs order dated 17 February 2021 were not very long, I would set them out in full below:

“This is my decision on the question of costs in relation to the Inspection Summons filed on 24 September 2020 by the 2^nd defendant.

The subject document for inspection was the Loan Agreement dated 6 October 2008 (“the Loan Agreement”) stated in paragraph 3 of the Statement of Claim dated 19 September 2014. It was the basis of the claim lodged by the plaintiff.

It clearly falls under those documents covered by Order 24 rule 10(1) of the Rules of the District Court (“the RDC”). According to Moulin Global Eyecare Holdings Ltd and Olivia Lee Sin Mei [2013] 3 HKLRD 72 at paras.31-35, the applicant for an order for production had a prima facie entitlement to see the document, unless the referring (sic) party showed good cause for refusing the order, such as privilege. The plaintiff did not show such cause for refusing the order. The plaintiff’s reliance on that a copy of the Loan Agreement was already in the Court file record was mischieved (sic). It is entirely a separate matter.

I also took into account of Order 24 rule 13(1) of the RDC which required the applicant to show that the order was necessary either for disposing fairly of the cause or matter or for saving costs. The authenticity of the Loan Agreement was questioned by the 2^nd defendant. The inspection of the Loan Agreement was plainly necessary for the 2^nd defendant to review his position and consider how to proceed with the present case. The inspection of the Loan Agreement met the requirement under Order 24 rule 13(1).

The request for inspection was first made by the 2^nd defendant in a letter dated 24 August 2020. No reply had been given by the plaintiff, nor its legal representatives. The taking out of the Inspection Summons was a reasonable course.

An early disposal of the matter could have been done following the proposal stated in the letter dated 12 October 2020 from the plaintiff’s legal representatives, except the question on costs. However, the change of the stance of the plaintiff in the hearing on 14 October 2020 prolonged the early disposal of the matter.

The consent as shown in paragraph 1 of the Order dated 24 December 2020 for production of the Loan Agreement for inspection was a sensible step which should have been given and confirmed by the plaintiff at an early stage.”

31.  Ms Yeung’s first argument was that the Inspection Summons was not necessary because a copy of the Loan Agreement had already been filed into court, and the original Loan Agreement had already been inspected by the court back in 2014 when the plaintiff applied for judgment.

32.  I agree with the learned Master that getting a copy of the Loan Agreement and having the chance to inspect the original copy of the same are 2 different matters. It is a very bad excuse for the plaintiff to say that given the 2^nd defendant had obtained a copy of the Loan Agreement already, there was no need for him to inspect the original thereof. It is even worse for the plaintiff to allege that inspection was not necessary given a court clerk had already checked the original Loan Agreement.

33.  In the present case, the plaintiff is suing the 2^nd defendant on the basis of the Loan Agreement. Under the discovery process, the Loan Agreement must as a matter of course be included by the plaintiff in its list of documents, and as a result, the 2^nd defendant would be entitled to inspect the original copy thereof as of right. I really do not understand how come the plaintiff’s legal advisers would be bold enough to allege that there was no need for the 2^nd defendant to inspect such an important document.

34.  Ms Yeung then seemed to accuse the 2^nd defendant for failing to put forward any reason in his affirmation filed in support of the Inspection Summons.

35.  In this regard, the learned Master had taken into account the fact that the Loan Agreement is the basis of the plaintiff’s claim herein. She has also considered the legal principles on the operation of Order 24 rules 10, 11 and 13 as set out by the Court of Appeal in Moulin Global Eyecare Holdings Ltd and Olivia Lee Sin Mei [2013] 3 HKLRD 72. I do not think she had erred in law at all. She had also taken the relevant matters into account.

36.  Ms Yeung then argued that the plaintiff’s former solicitors did not inform the plaintiff about the 2^nd defendant’s request for inspection of the Loan Agreement made by letter dated 24 August 2020. As there is no admissible evidence filed in support of this factual assertion, I would not consider this point.

37.  Ms Yeung’s next argument is that the plaintiff had acted reasonably, in that it had made a reasonable offer on 12 October 2020, which was shortly after it had been informed about the 2^nd defendant’s requests for inspection. Again, she is not entitled to make this argument, because there is no admissible evidence showing the time when the plaintiff had knowledge of the said requests.

38.  Furthermore, this argument cannot assist the plaintiff anyway because, as the learned Master pointed out, it had a change of stance 2 days later at the call-over hearing on 14 October 2020 in which the plaintiff opposed the Inspection Summons.

39.  For reasons of the aforesaid, I am of the view that the plaintiff’s appeal herein has no merits at all.

Prejudice to the 2^nd defendant

40.  The 2^nd defendant has not addressed on “prejudice”.

Conclusion

41.  Having considered the above factors, I refuse to grant leave to the plaintiff to appeal out of time.

COSTS

42.  I make a costs order nisi that the plaintiff shall bear the costs of the appeal; however, without disrespect, I do not certify the necessity of engaging counsel in the present appeal, which is a simple matter.

43.  The above order nisi shall become absolute in the absence of application to vary within 14 days hereof.

44.  The 2^nd defendant’s costs of the appeal shall be summarily assessed in lieu of taxation. For this purpose, unless any application for variation of the aforesaid costs order nisi is made within time, the 2^nd defendant shall lodge and serve his statement of costs within 7 days after the expiry of the said 14-day period, and the plaintiff shall lodge and serve its statement of objection within 7 days thereafter. Summary assessment of the costs of the appeal will then be conducted on paper (no matter whether any statement of objection is lodged by the plaintiff within time) thereafter. The costs assessed shall be payable by the plaintiff within 14 days after assessment.