XCHRX HONNIN DEVELOPMENT LTD. v. KWAN FUNG KAM

HCA 16376/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 16376 OF 1999

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J U D G M E N T

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Introduction

1. The present actions arose out of the respective sale and purchase agreement for the 1st floor and the 2nd floor with the roof of a 3-storey building known as Sheung Tsun House Lot No.299, Yuen Long. The facts and issues involved in the actions are largely the same and may, for the purpose of this appeal, be conveniently dealt with together. Unless indicated otherwise, the follow summary applies to both actions.

2. Under the agreement, the plaintiff was the vendor and the defendant, the purchaser. Unlike other ordinary transactions, completion was scheduled to take place some 10 years after the signing of the agreement. In the case of the 1st floor, completion was in April 2015 and in the case of the 2nd floor with the roof, in January 2014. The defendant had paid certain deposits. It is the plaintiff's case that pursuant to the agreement, the defendant entered into possession of the property by paying a monthly license fee. The defendant contends that the license fee was in fact monthly mortgage installments. Irrespective of the nature of the monthly payments, the defendant in HCA No. 16379 of 1999 stopped paying the same in May 1999, and the defendant in HCA No. 17153 of 1999, in January 1999. The plaintiff then commenced proceedings, claiming for, inter alia, a declaration that it is entitled to re-enter and re-possess the property ("the Declaration"). Relying on a number of matters including misrepresentation, the defendant denies that the plaintiff is entitled to any of the relief claimed, including the Declaration, and counterclaims, inter alia, for a declaration that the agreement had been rescinded or alternatively for rescission of the agreement.

3. The plaintiff applied for summary judgment for vacant possession of the property ("the Possession order"), a relief not prayed for in the statement of claim. The matter duly came before the master. On 18 August 2000, at the very end of a two days hearing, the plaintiff applied to amend the Order 14 summons by replacing the Possession order with the Declaration. The defendants did not oppose the application nor seek an adjournment. The learned master gave summary judgment on the Declaration but, after hearing the parties on costs, ordered costs against the plaintiff with counsel certificate.

4. The plaintiff now appeals against the costs order.

Leave required?

5. When appealing against a master's order on costs only, the appellant would usually obtain leave from the master first. Here the plaintiff has not obtained leave from the learned master. The defendants therefore take the preliminary point that in the absence of leave, I do not have jurisdiction to hear this appeal and must dismiss it accordingly.

6. Counsel for the defendants, who also appeared below, relies on section 14(3)(e) of the High Court Ordinance, which provides that:

"No appeal shall lie -

...

(e) without the leave of the court or tribunal in question or of the Court of Appeal, from an order of the Court of First Instance or any other court of tribunal relating only to costs which are by law left to the discretion of the court or tribunal;"

He submits that section 14(3)(e) is not limited to appeals to the Court of Appeal. It applies to appeals from master to judge in chambers as well. In this connection, he relies on Purcell v. F.C. Trigell Ltd [1970] 3 All ER 671, CA. There, the English Court of Appeal was dealing with section 31(1)(h) of the Supreme Court of Judicature (Consolidation) Act 1925, which provided that "no appeal shall lie without leave of the court or judge making the order, from an order of the High Court or any judge thereof made with the consent of the parties or as to costs only which by law are left to the discretion of the court". It was held that that the words 'judge' and 'court' in section 31(1)(h) included a master when he was exercising the powers exercisable by a High Court judge in chambers. Thus leave to appeal from a master to a judge in chambers on those orders was necessary. Counsel further submits that the leave requirement serves to filter away unmeritorious appeals.

7. Counsel for the plaintiff, who did not appear below, submits that section 14(3)(e) only applies to appeals to the Court of Appeal. Leave from the master is not required when appealing against his costs order to a judge in chambers. In support, he relies on Shing Top Trading Company (a firm) v. Kuk Hing Wah trading as Star Sea Trading Centre HCA No. 14907 of 1983 (unreported) and Thiam Joc (HK) Ltd & Ors v. Sanday Investment Ltd [1985] 1 HKC 298, CA.

8. In the first case, Mantell J. was dealing with section 14(3)(e) of the Supreme Court Ordinance which provided, inter alia, that no appeal shall lie without leave of the High Court or the Court of Appeal from an order as to costs of the Court. His Lordship refused to follow Purcell and took the view that the section did not apply to appeals other than from the High Court to the Court of Appeal. After referring to section 14(1) and (3) of the Supreme Court Ordinance, his Lordship said at pp.1 and 2:

"I cannot read the section as biting upon appeals other than from the High Court to the Court of Appeal unless it be in those cases where appeal lies directly to the Court of Appeal from a Maser of Registrar. Section 18 of the English Act is even clearer in its terms being introduced by the words "no appeal shall lie to the Court of Appeal". In that it differs from its precursor, section 31 of the 1925 Judicature Act which simply begins "no appeal shall lie". I was referred to a decision of the English Court of Appeal in Purcell v. FC Trigell Ltd & another, which is clear authority firstly for the proposition that "court" in this context includes a Master exercising the powers of the High Court Judge in chambers and secondly, that under section 31(1)(h) of the 1925 Act, leave was necessary to appeal to the judge from a decision of the Master on costs. The second of those two propositions would not seem to hold good any longer in England by reason of the different wording of the 1981 Act and, in my judgment, it never did in Hong Kong. In my judgment, the question is disposed of by Order 58 rule 1...."

Accordingly, Mantell J. held that leave was unnecessary for an appeal from the master on a question of costs alone.

9. In the second case, the Court of Appeal was concerned with section 14(3)(b) of the Supreme Court Ordinance which provided that no appeal shall lie from an order of the High Court giving unconditional leave to defend an action. Holding that section 14(3) as a whole related only to appeals from the High Court to the Court of Appeal and had no application to appeals to a judge in chambers against the master's order of granting unconditional leave, Mantell J., sitting in the Court of Appeal, said at p.300:

"It is said that the decisions of the masters in this case were decisions of the High Court, see Purcell v. FC Trigell Ltd & another [1971] 1 QB 358 and, therefore, notwithstanding the long established practice in Hong Kong, Liu J. had no jurisdiction to entertain these appeals. It seems to us that two questions arise: (1) as to what appeals section 14(3) of the Supreme Court Ordinance apply; and (2) what is meant by 'High Court' in the context of the section.

That sub-ss 1 and 2 of s 14 only apply to appeals to the Court of Appeal is clear from the terms. In our judgment the words introducing the six categories set out under sub-ss 3 'no appeal shall lie' hark back to and should be read as following the introductory words to sub-s 1, namely:

Subject to subsection 3 an appeal shall lie as of right to the Court of Appeal.

The six cases under sub-s 3 are therefore to be seen as exceptions to the general principle. It was so held in the unreported decision of Shing Top Trading Company (a firm) v. Kuk Hing Wah trading as Star Sea Trading Centre (a firm) (A14907/83, unreported) in relation to an appeal from the master on the question of costs under sub-s 3(e). We take the view that s 14(3) as a whole relates only to appeals from the High Court to the Court of Appeal and has no application to the present case.

In those circumstances it is not really necessary for us to go on to consider what is meant by the words 'High Court' in the context of s 14, but having regard to the definition of 'High Court' contained in s 4 of the Ordinance, we are by no means sure that the reasoning in Purcell's case would lead us to a similar conclusion."

10. Counsel recognises that in practice leave from the master is often sought when appealing against his costs order only. But he submits that it is done merely out of prudence. There is simply no legal requirement for the leave to be obtained.

11. In reply, counsel for the defendants contends that Shing Top Trading Company (a firm) v. Kuk Hing Wah trading as Star Sea Trading Centre and Thiam Joc (HK) Ltd & Ors v. Sanday Investment Ltd. were only in relation to section 14(3) of the Supreme Court Ordinance, which had already been repealed. Thus they are not applicable here and the proposition in Purcell should be adopted.

12. Incidentally, I note that the learned editors of Halsbury's Law of Hong Kong also adopt Purcell and suggest that leave from the master is necessary for an appeal against his costs order only: see Vol. 5(2) (2000 Issue), para. 90.1206, note 3. There is, however, no discussion on the Hong Kong cases.

13. In my view, whether leave from the master is necessary depends on the proper interpretation of section 14(3)(e) of the High Court Ordinance. Shing Top Trading Company (a firm) v. Kuk Hing Wah trading as Star Sea Trading Centre and Thiam Joc (HK) Ltd & Ors v. Sanday Investment Ltd. are clear authority that on a proper interpretation of its predecessor, namely, section 14(3)(e) of the Supreme Court Ordinance, leave was unnecessary. Is the current position the same?

14. Before 1987, section 14 of the Supreme Court Ordinance only concerned with appeals from the High Court to the Court of Appeal. This was apparent from its terms. Subsection (3)(e) was no exception. It read:

"(e) without leave of the High Court or the Court of Appeal, from an order ... as to costs only which by law are left to the discretion of the Court".

15. In 1987, subsection (3)(e) was amended to read:

"(e) without the leave of the court of tribunal in question or of the Court of Appeal, from an order of the High Court of any other court or tribunal ... relating to costs which are by law left to the discretion of the court or tribunal".

Some other amendments were also introduced at the same time, including the repeal of subsections (2) and (3)(b) and the addition of subsection (4) and (5). But the effect of the entire section 14, leaving aside paragraph (e) for the time being, remains the same: the provisions there are concerned with appeals to the Court of appeal only. Again, it is apparent from their terms. In 1998, the references of "the High Court" in the provisions were replaced by "the Court of the First Instance". This results in the present section 14 of the High Court Ordinance. Given the legislative history, has the 1987 amendment, as contended by counsel for the defendants, widened the scope of subsection (3)(e) to include appeals from master to judge in chambers?

16. In my view, the answer is no. The 1987 amendment merely extends the scope of subsection (3)(e) to appeals from other court or tribunal to the Court of Appeal. I do not think, in the absence of clear and express wording, the amendment is intended to include appeals from master to judge in chambers, an entirely different subject matter from that which the rest of section 14 addresses. Indeed, to arrive at such a construction on subsection(3)(e), one has to detach it from its context and give it a meaning of its own without reference to the rest of section 14. This is clearly not permissible: see e.g. Craies on Statue Law (7th edn.) at pp.99 to 100.

17. For the above reasons, I accept that the proposition and reasoning in Shing Top Trading Company (a firm) v. Kuk Hing Wah trading as Star Sea Trading Centre and Thiam Joc (HK) Ltd & Ors v. Sanday Investment Ltd. still hold good when construing section 14(3)(e) of the High Court Ordinance. Accordingly, I would hold that the subsection does not apply to appeals from master to judge in chambers. The position remains to be governed by Order 58 rule 1 of the Rules of the High Court. Contrary to the practice of some practitioners hitherto, leave from the master is unnecessary.

18. The above is sufficient to dispose of the preliminary point. However, since much reliance has been placed on Purcell, I wish to add this. The position in England on the question whether leave to appeal against a master's costs order only was necessary had gone through some twists over the years. One begins with Foster v. Edwards (1879) 48 LJQB 767. There, section 49 of the Judicature Act 1873 provided that no order by the High Court or any Judge thereof as to costs only which by law were left to the discretion of the Court should be subject to any appeal except with leave of the Court or the Judge making the order. It was held that the section did not apply to an appeal from the costs order of the master to judge in chambers. The 1873 Act was then replaced by the Supreme Court of Judicature (Consolidation) Act 1925. As noted, in Purcell, it was held that section 31(1)(h) of the 1925 Act applied to appeals from master to judge in chambers and accordingly leave to appeal from the master was necessary. Finally came the Supreme Court Act 1981. Section 18 of the 1981 Act replaced section 31 of the 1925 Act. Section 18(1) begins with "no appeal shall lie to the Court of Appeal", making it clear that the restrictions to appeal there, including the leave requirement for appeals against costs orders made by any court or tribunal under paragraph (1)(f), only applied to appeals to the Court of Appeal. This is a crucial change to section 31(1) of the 1925 Act which said "no appeal shall lie". It has been suggested that the change would seem to have effect of statutorily negativing Purcell: see The Supreme Court Practice 1999, Vol. 2 paragraph 17A-22 at p.1461-2. It is therefore not surprising that in Hoddle v. CCF Construction Ltd [1992] 2 All ER 550, Morland J. accepted that no leave was required from a master when appealing to a judge in chambers against his costs order only. Thus even in England, Purcell no longer represents the correct position on the question of leave.

Appeal proper

19. I now turn to the substance of the appeal.

20. It is well settled that the costs order of a master should not be intervened on appeal by a judge in chambers unless it can be shown by the appellant that the master demonstrably erred in the exercise of his discretion in the order that he made. Unless it can be shown that the order made was unreasonable or erred in law or either failed to take into account proper matters or took into account matters that should not have been taken into account: Hoddle v. CCF Construction Ltd, supra; adopted in China Venturetachno International Co. Ltd v. New Century China Development, Civil Appeal No, 20 of 1996; and The Bank of East Asia Ltd v. Yeung Lam Wilson & Ors, HCMP No. 4077 of 1998.

21. In order to ascertain if the costs order of the learned master should be intervened, it is necessary to know why the order was made.

22. As noted above, the plaintiff initially sought in the Order 14 summons the Possession order, a relief not prayed for in the statements of claim. Though rather obvious, the defect in the summons was not discovered by the parties or the learned master throughout the proceedings. Without the requisite amendment, the plaintiff could not have succeeded in obtaining summary judgment on the Declaration. However, I am told that this was not the primary consideration behind the application for amendment. The application was made to deal with the defendants' contention that the application for summary judgment should have been brought under Order 86 and not Order 14. In any event, counsel for the defendants did not oppose the application for amendment. Nor did he apply for an adjournment. He, however, applied for costs of the proceedings. He submitted that had the plaintiff applied for the Declaration in the first place, the defendants might have taken another stance in the Order 14 application. The defendants opposed the Possession order because they did not want to become homeless. If the plaintiff was only interested in obtaining the Declaration, the defendants might not wish to contest the application for summary judgment. Counsel complained that the amendment simply came too late and the defendants had been deprived of the chance to consider the matter properly. He did not apply for an adjournment because damage had been caused already. Counsel was referring to the time and costs already incurred. The learned master, I am told, accepted his submissions and awarded the defendants costs of the proceedings.

23. Counsel for the plaintiff submits that the costs order was wrong. Costs should have followed the event: see Order 62 rule 3(2). And it was not a judicial exercise of discretion by the learned master to have ordered costs against the plaintiff, a successful party against whom no misconduct was alleged: In Kierson v. Joseph Thomson & Sons Ltd [1913] 1 KB 587, at p.589. Counsel concedes that the plaintiff could not have obtained summary judgment on the Declaration without the amendment. However, he submits that the amendment was merely technical and in any event unopposed. No adjournment was sought. In the circumstances, the defendants had not suffered any real prejudice. They would have opposed the application for the Declaration any way. Alternatively, counsel accepts that there should be no order as to costs for the proceedings below.

24. Counsel for the defendants supports the costs order. Basically, he relies on the same arguments advanced before the learned master. He explains further that he was under the impression that the plaintiff would not seek to enforce the Declaration. In other words, he thought that the defendants would remain in possession of the Property despite the Declaration. There is some debate before me as to whether counsel for the plaintiff below had somehow represented that the plaintiff would not seek to enforce the Declaration. Having heard the parties and read the relevant correspondence between the solicitors, I do not think it is fair to say that he had done so. Lastly, counsel does not accept that there should be no order as to costs for the proceedings below.

25. The amendment to the Order 14 summons no doubt had an important bearing on the proceedings before the learned master. When it only came at the very end, the plaintiff could not complain if costs of the proceedings were not awarded in its favour. But does it then follow that the plaintiff should also bear the defendants' costs?

26. Strong reasons must exist before costs can be ordered against a successful party. I first note that there is no allegation of misconduct on the plaintiff's part. Further, I do not find any substance in counsel's submission that the defendants had been deprived of the chance to make an informed decision, which might or might not render the substantive part of the summary judgment proceedings unnecessary. Counsel submits that there is a material distinction between the Declaration and the Possession order. The Declaration, being a declaratory relief, would not have the immediate effect of dispossessing the defendants, as the Possession order does. There may well be a distinction. But I do not accept that the defendants, if given the chance to consider the matter, might have opted not to oppose an application for summary judgment on the Declaration. In their defence and counterclaim, the defendants deny that the plaintiff is entitled to the Declaration. The grounds and materials relied on by them are essentially the same that they had put forward in opposing the original Order 14 summons. In other words, whether the application was for the Declaration or the Possession order, the stance of the defendants would have been just the same. They would rely on the same grounds and materials to oppose the application. Moreover, the defendants have all along maintained that in equity they have a lien on the property and are entitled to remain in possession. They are willing to deliver vacant possession only if the plaintiff fully compensates the loss and damage they had suffered. In the circumstances, how would the defendants possibly not oppose the application for summary judgment on the Declaration, which, if granted, would effectively defeat their competing claim for entitlement to remain in possession?

Conclusion

27. For the above reasons, with respect to the learned master, I think she had erred in accepting the defendants' submission that they had suffered prejudice by being deprived of a chance to make the so-called informed decision. Accordingly, I will allow the appeal, set aside her costs order and substitute it by an order that there shall be no order as to costs for the summary judgment proceedings below. This applies to both actions.

28. On the question of costs of the appeals, I see no reason why costs should not follow the event. The plaintiff accepts that there should be no order as to costs but the defendants do not. Accordingly, the plaintiff should have the costs of the appeals. I will make an order nisi that costs of the appeals be to the plaintiff, to be taxed if not agreed, to be made absolute within 14 days after handing down.