K CASH EXPRESS LTD (formerly known as KONEW FINANCIAL EXPRESS LTD) v. CHAN CHING WAI

DCMP 349/2022

[2023] HKDC 1527

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 349 OF 2022

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DECISION

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1.  On 31 August 2023, I handed down my Decision dismissing the defendant’s appeals against two Master’s decisions with costs orders nisi that costs should be paid by the defendant to the plaintiff forthwith, to be taxed if not agreed.

2.  There are two applications before me at this hearing:-

(1)  The plaintiff’s summons to vary the costs orders nisi, ie to ask for indemnity costs against the defendant; and

(2)  The defendant’s summons for leave to appeal to the Court of Appeal.

3.  The factual background had been set out in the Decision, and I do not consider it necessary for me to repeat it here.

THE COSTS ORDERS

4.  Mr Li, solicitor appearing for the plaintiff, submits that all costs should be assessed on a full indemnity basis.  He refers to Clause 11 of both of the Loan Agreements:-

“若果借款人不履行此合約之任何責任，貸款人有權向借款人採取任何法律行動，訴訟之一切費用（按完全彌償基準），全部由借款人負責。”

“If the Borrower fails to fulfill any of its obligations under this Agreement, the Lender shall have the right to take any legal action against the Borrower, and all costs of such action (on a full indemnity basis) shall be borne entirely by the Borrower.” (translation agreed by the plaintiff)

5.  Mr Li submits that where the parties had entered into an agreement on a certain basis for costs, it shall be treated as the starting point for the court’s consideration, and the court should be slow to disturb the parties’ agreement, unless the circumstances were such as to cause the court in the exercise of its discretion to intervene.  Reliance was placed on Vember Lord Limited v The Swatch Group (Hong Kong) Ltd [2023] HKCA 471.

6.  I agree with Mr Li’s submission on the authorities.  However, it should be stressed that the question of costs remains at the unfettered discretion of the court.  The parties’ agreement as to the basis of costs is only a starting point for the discretionary exercise.  This applicable principle is clearly stated in the judgment of Ribeiro PJ in Bank of China (Hong Kong) Ltd v Twin Profit Ltd (2012) 15 HKCFAR 560, at para 21, which was cited by the Court of Appeal in Vember Lord Limited.  In Bank of China, Ribeiro PJ held that:-

“As with all questions of costs, the Court has a discretion which it exercises judicially. No one suggests that the discretion is fettered, Yuen JA having expressly noted the contrary. The parties’ agreement as to how costs should be dealt with provides the starting point for the discretionary exercise. No change is warranted. It would be counter-productive, were it possible, to try to lay down any less flexible ‘legal principles’ as invited by the formulated question.”

7.  We now come back to the starting point – Clause 11 of the Loan Agreements.  I do not consider that such clause was wide enough to cover any costs of the appeal, other than the costs of the action.  The costs of the appeal and the costs of the action are two distinct sets of costs.  On a plain reading of this clause (Clause 11), it is of my view that the phrase “all costs of such action …” was qualified by the two preceding phrases: “If the Borrower fails to fulfill any of its obligations under this Agreement” and hence “the Lender shall have the right to take any legal action.”  These phrases are all connected by commas and were not separate sentences in their own right.  As for the phrase “to take any legal action”, I understood it to mean all proceedings for enforcement, such as any writ action or money lenders’ action for entering final judgment, followed by the application for a charging order, and the action by way of originating summons for an order for sale of the property.  At any rate, I do not consider the defendant’s appeal to be part of the legal action taken by the plaintiff. Therefore, I do not find that Clause 11 has encompassed any appeal proceedings (taken by the other party).

8.  If I were wrong in the above interpretation, I would exercise my discretion that this is still an appropriate case for costs on a party and party basis.  The parties’ right to appeal is a statutory right and should not be fettered or threatened with indemnity costs.  I would accept that the defendant might have agreed to pay costs on an indemnity basis if it was understood between the parties that it would cause trouble and inconvenience to the plaintiff for taking enforcement action against the defendant when he was in default of repayments.  That I can understand.  But as far as the costs of the appeal are concerned, if Mr Li’s interpretation is correct, it would mean that the defendant had agreed to concede on indemnity costs of any subsequent appeals, whether to the same court, the Court of Appeal, or even the Court of Final Appeal, with merits or not, before he even thought of filing any notice of appeal.  This is far too draconian.  I had taken into account that the plaintiff was a commercial money lender and the defendant was an ordinary individual who needed to borrow money, with unequal bargaining positions between the parties.  Had it been necessary, I would have held that such part of the term was unconscionable and thus unenforceable.

9.  In the exercise of my discretion, I ordered the defendant to pay the plaintiff the costs of the appeals on a party and party basis.  Neither the defendant was mala fides in pursuing the appeals against the two Master’s decisions, nor was there any abuse of the process of the court.  Having considered all the circumstances of the case, I did not find it just to award any costs on an indemnity basis.  I affirm the costs order nisi that I made in my Decision.

10.  Accordingly, the plaintiff’s summons for variation of the costs orders nisi is dismissed with costs, to be taxed if not agreed.

APPLICATION FOR LEAVE TO APPEAL

11.  In the defendant’s summons dated 15 September 2023, the defendant asks for leave to appeal against my Decision.  In his affirmation filed in support of the application, the defendant clarifies that he is in fact seeking the following three reliefs from this court:-

(1)  To set aside the default judgments entered in DCCJ 5961/2018 and DCCJ 241/2019 (“the other proceedings”) in July 2019 or to order a re-hearing of those proceedings;

(2)  To set aside or to stay the charging orders nisi the plaintiff obtained under the other proceedings in August 2019 and the charging orders absolute obtained thereunder in October 2019; and

(3)  Costs of this application.

12.  I am afraid to say that this court has no jurisdiction to deal with any intended application or appeal in the other proceedings.  And I shall refrain from dealing with the merits of those intended applications, other than to note that the defendant repeats the points that the plaintiff should not have granted him the loans when he had no proof of income and that the plaintiff was trying to take over the Property illegitimately.  I believe that I have sufficiently dealt with these points in paragraphs 42 to 46 of my Decision.  Further, at the last hearing, the appeal was conducted on the basis that the defendant would not challenge the judgments and the Charging Orders made in the other proceedings.

13.  Having said that, I think that the defendant has mentioned one point in his affirmation which I believe is relevant to this hearing.  The defendant said that he disagreed with my finding that the Charging Orders were not prohibited by s 17B and s 27A of the Housing Ordinance. 

14.  At this hearing, the defendant no longer relied on his previous contention that the imposition of the Charging Orders was contrary to the original intent of those sections of the Ordinance.  He switched to relying on a slightly different argument, namely that the Charging Orders were obtained based on the default judgments entered in the other proceedings which the court had previously granted based on the Loan Agreements.  He contends that since the plaintiff obtained the Loan Agreements by unlawful means, ie there was collusion between the parties to the Loan Agreements that one party would intentionally default in repayments and the other would obtain the Charging Orders in court and proceed with enforcement proceedings to effectuate a sale of the Property, such collusion constituted a violation of the sections of the Ordinance.

15.  I do not see any logicality in the defendant’s submission.  Perhaps the defendant should be reminded that the only party in default of repayments was the defendant himself.  The so-called collusion he alleged could have been avoided if he had made the repayments.  Ironically, the more submissions the defendant has made, the more he has shown a tendency that there might be an abuse of the process of the court by making various unsubstantiated allegations in order to delay the plaintiff’s enforcement.  I will leave it to the defendant to decide whether he should continue to proceed with the filing of an appeal against the orders of the court made in the other proceedings.

16.  Insofar as the present hearing is concerned, the defendant’s application is devoid of merit.

17.  In the circumstances, the defendant’s application for leave to appeal is dismissed.  Costs to be paid by the defendant to the plaintiff forthwith, to be taxed if not agreed.