KWOK HONG YEE JESSE t/a JESSE H.Y. KWOK & CO. v. TSO HON LEUNG AND ANOTHER

DCCJ 5354/2018

[2020] HKDC 696

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5354 OF 2018

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BETWEEN

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DECISION

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1.  On 3 April 2020, I handed down the decision in this action. I dismissed the 1^st and 2^nd defendants’ appeal against Master B Mak’s decision. I refused their application to set aside the default judgment entered against them and to strike out the writ of summons.

2.  By summons dated 29 April 2020, the 1^st and 2^nd defendants apply for leave to appeal against the decision.  I shall adopt below the defined terms used in the decision.

3.  Following the guidance laid down by the Court of Appeal in Tsang Wing Kwai v Tsang Wing Fai [2018] 5 HKLRD 350, [2018] HKCA 759 at para 24, I gave directions for the lodging of written submissions. Having read the submissions, I am satisfied that an oral hearing is not necessary and the summons is suitable for disposal on paper only.    

4.  In the draft notice of appeal, the defendants put forward six proposed grounds of appeal.    

Legal principles

5.  The principles governing the threshold for granting leave to appeal are not in dispute.  The applicant needs to show that the appeal has a “reasonable prospect of success” or there is some other reason in the interests of justice why the appeal should be heard: section 63A(2) of the District Court Ordinance, Cap 336.  A “reasonable prospect of success” means an appeal with prospects that are more than “fanciful”, without having to be “probable”: SMSE v KL [2009] 4 HKLRD 125 at para 17.

The first ground

6.  The first proposed ground contains 12 sub-paragraphs and runs to four pages.  It is set out in the form of submissions.  The content is substantially the same as the written submissions made on this ground by Mr Tim Wong, counsel for the defendants, save that the latter is slightly longer as it reproduces a number of passages from the authorities.  Furthermore, the drafting makes it difficult to distil with precision the actual ground or grounds of appeal.

7.  Practice Direction 4.1 sets out the requirements for a notice of appeal. It should be a concise document setting out clearly and succinctly the reasons why the Court of Appeal should interfere with the judgment of the court below. It must not be prolix, unfocused or canvass evidence or submissions at length: see paras 20 and 22.  The first proposed ground of appeal, as drafted, plainly falls short of these requirements. 

8.  Mr Wong appears to be making the following broad points under this ground:-

(a) I erred in law in holding at para 66 of the decision that the court has the power to allow the alteration of the first bill by the delivery of the second bill.

(b) Even if the court has the power to alter the first bill, the plaintiff ought to have sought leave to that effect in the second High Court action, and not in the present action in the District Court.  The plaintiff did not seek leave from the High Court.  In any event, he did not seek leave from me in the present action either.  As no leave was granted, he should not be allowed to amend the first bill by way of the second bill.

(c) The taxation proceedings in respect of the first bill were completed and the taxed amount was paid in full.  It is not open to the plaintiff to subsequently amend the first bill.

(d) I erred in holding that the first and second bills would together form the “final” bill (para 66).  If the plaintiff could add a subsequent bill to form the final bill, such bill would never be “final”.

(e) There was no basis for me to hold that the plaintiff had made a bona fide mistake by omitting to pay the Two Items when the first bill was issued. Hence I should not have exercised my discretion to allow the plaintiff to deliver the second bill, which practical effect was to amend the first bill by adding back in the Two Items.

9.  I do not consider that any of these points are reasonably arguable. 

10.  It is correct that the plaintiff did not seek leave to amend the first bill in the second High Court action.  He did not seek leave in the present action either.  As a result, no leave was granted in respect of the amendment. But the fact that no leave was granted is beside the point and would not affect the outcome of the defendants’ striking out and setting aside applications, given the procedural history of the matter.

11.  As noted in para 4 of the decision, the defendants lodged an acknowledgment of service but failed to file a defence.  Accordingly, judgment was entered in default of defence against them.  In their application to set aside the judgment, the defendants sought to argue that the statement of claim ought to be struck out altogether or, alternatively, they have a real prospect of success in their defence. 

12.  As explained in paras 70 and 71 of the decision, the burden is on the defendants to show that the plaintiff is bound to fail by operation of the “one bill” principle.  I held that they failed to do so as the “one bill” principle is not an absolute one and on the materials before me it is at least arguable that there are sufficient grounds on which the court ought to allow the delivery of the second bill.  Hence the defendants failed to surmount the “bound to fail” threshold in their striking out application. 

13.  Furthermore, since the defendants had allowed the judgment to be entered in default, the burden shifted to them to put forward materials now to demonstrate why they would have a real prospect of success in persuading the court to disallow the second bill.  The failed to do so.  Hence their setting aside application failed.  In the circumstances, there was no need for the plaintiff to seek any leave of the High Court to amend the first bill.  The judgment already entered against the defendants still stands, given that both of their applications to set it aside have failed.  For these reasons, the absence of leave is immaterial on the special facts of the case.

14.  As to the other points raised under the first ground, they are a rehash of the submissions made by the defendants at the hearing and they were dealt with in my decision. 

15.  As regards the submission in relation to the completion of taxation (see para 8(c) above), I dealt with it in paras 73 to 82 in which I analysed the two authorities, In the Estate of Segalov, Deceased [1952] P 241 and Moat Housing Group-South Ltd v Harris (No 2) [2008] 1 WLR 1578, which are heavily relied on by Mr Wong both at the original hearing and in the present application.

16.  As regards the “final bill” submission (see para 8(d) above), I dealt with it in paras 57 to 69 of the decision. 

17.  As regards the submission that there was no bona fide mistake on the part of the plaintiff (see para 8(e) above), I dealt with the evidence in paras 67 and 68 of the decision. 

18.  Mr Wong points out that the defendants had in fact earlier paid costs on account in the total sum of $2,460,186 but the plaintiff “only chose to use the monies in the client account that were only deposited by the Defendants for the purpose of paying legal fees to pay the settlement sum of HK$2,000,000.00 instead”.  The payment of the settlement sum by the plaintiff on behalf of the defendants were briefly touched on in the course of submissions at the original hearing.  But counsel of neither side attached much weight to it.  In any event, I fail to see how that fact would alter the conclusion I reached in paras 67 and 68.  Mr Wong has not even attempted to explain why that should be so in his written submissions.

19.  I remain of the view that the defendants’ submissions above have no merit.

20.  For the above reasons, the proposed ground has no reasonable prospect of success.

The second ground

21.  Under this ground, the defendants submit that I erred in law and in fact that there are sufficient grounds to allow taxation (if applied for) of the second bill.  Here, Mr Wong repeats the same submission that there was no basis for me to hold that the plaintiff had made a mistake by omitting to pay the Two Items.  He also reiterates the submissions he made at the original hearing on Re Segalov and Moat Housing.  He submits that the two authorities should apply.  Although they concern party and party taxation, they should equally apply to the present case of solicitor and own client taxation, as the latter type of taxation is more stringent.  Applying the two authorities to the present case, the plaintiff, Mr Wong submits, should not be allowed to re-open the taxation which had been completed.

22.  As noted above, I dealt with the two authorities in paras 73 to 82 of the decision.  Mr Wong’s present submission is the same as what he said at the hearing.  I do not agree with it.

23.  The proposed ground of appeal has no reasonable prospect of success.

The third ground

24.  Under this ground, the defendants complain that I erred in law and fact in deciding that the cause of action estoppel had not arisen as there was no formal judgment entered or formal order made in respect of the cause of action in the second High Court action.  Mr Wong submits that the first bill was taxed by Master Wong and decided by him. 

25.  This ground is factually incorrect as it involves a misreading of my reasoning.  In para 89 of the decision, I said that there was, strictly speaking, no formal judgment entered or formal order made in respect of the cause of action in the second High Court action and expressed my doubt whether this would preclude the alleged cause of action estoppel from arising in the first place. 

26.  I set out the reasons why I took the view that there was no formal judgment or order in paras 90 to 94.  However, in the end, I found it unnecessary to resolve the doubt.  That was because even if I answered that question in the defendants’ favour, I would still hold that there was no cause of action estoppel because of the second difficulty which I identified in paras 96 to 98.

27.  For that reason, this ground is not reasonably arguable as it is premised on an incorrect reading of the decision. 

The fourth ground

28.  Under this ground, the defendants argue that I erred in law and fact in deciding that the ground underlying Master Chow’s ruling ceased to exist and no longer applies in the present action and hence the cause of action estoppel could not arise (para 98). 

29.  Mr Wong submits as follows:-

“In the premises, it was decided by Master Chow on the basis that the Two Items had not been paid prior to the delivery of the first bill, not because the Two Items had not been paid. Accordingly, even if the Two Items were paid after the delivery of the first bill, the ground still existed.” (original underline)

30.  I do not fully understand this submission. 

31.  Insofar as counsel is saying that the fact that the Two Items had not been paid prior to the delivery of the first bill has never ceased to exist, I accept that that is true.  That fact occurred and no one can deny that it did.  But as far as the resolution of the present action is concerned, that fact is not material save that it forms part of the factual background of the matter.  The issue before this court is whether the Two Items are recoverable, given that they had been paid prior to the commencement of the present action.  This issue did not arise at all before Master Chow.  As I sought to explain in para 98, the ground which operated on Master Chow’s mind, namely that the Two Items had not been paid, no longer exists in the present action.  As a result, cause of action estoppel does not arise.

32.  The principle explained by the Court of Appeal in Total Lubricants HK Ltd v De Chanterac (No 2) [2013] 2 HKLRD 838 is directly against the defendants’ case, as explained in paras 97 and 98 of my decision.  In the present application, Mr Wong does not seek to address it at all. 

33.  In my view, the challenge under this proposed ground has no reasonable prospect of success.

The fifth ground

34.  Under this ground, the defendants contend that I erred in law and fact in deciding that Master Wong’s first ruling was made in the overall context of managing the taxation proceedings and was a procedural decision (para 103). 

35.  In his written submissions, Mr Wong simply repeats the proposed ground without any explanation.  He does not say why my ruling amounts to an error.   

36.  The defendants have simply failed to show that the proposed ground has any reasonable prospect of success.

The sixth ground

37.  Under this ground, the defendants say that I erred in holding that the costs of the action should be to the plaintiff. 

38.  In his written submissions, Mr Wong does not even mention this ground. It is not known whether he still wishes to pursue it or he is now abandoning it.

39.  This proposed ground has no reasonable prospect of success.

Conclusion

40.  None of the proposed grounds of appeal enjoy any reasonable prospect of success.  There being no other reason why the appeal should be heard, I dismiss the defendants’ application seeking leave to appeal. 

41.  I order that the plaintiff do have costs of the application, with certificate for counsel, summarily assessed at $70,000, payable by the defendants within 14 days of the handing down of this decision.