CHINA CITIC BANK INTERNATIONAL LTD v. DURRANT SIMON PATRICK MICHAEL

HCMP 3196/2013

[2018] HKCFI 396

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3196 OF 2013

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DECISION

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Introduction

1.  This is the first call-over hearing of the defendant’s summons filed on 1 August 2017, seeking a wasted costs order against Chan Ning Chun Charles (“Chan”), the then solicitor acting for the plaintiff in these proceedings.  The claim was made pursuant to section 52A of the High Court Ordinance, Cap 4 and Order 62, rule 8 of the Rules of the High Court (“RHC”), Cap 4A.  Mr Lam, counsel for Chan, submitted that the defendant’s application was frivolous, vexatious and an abuse of legal process.  He requested that it be heard and struck out forthwith.  Having made some preliminary enquiries with the defendant and with his agreement, I entertained Mr Lam’s request to hear the merits of the defendant’s summons at this hearing.

The law

2.  Order 62, rule 8B(1) sets out the relevant procedure for considering a wasted costs order application.  It provides that:

“ The Court shall consider whether to make a wasted costs order in 2 stages—

(a) in the first stage, the Court must be satisfied that—

(i) it has before it evidence or other material which, if unanswered, would be likely to lead to a wasted costs order being made; and

(ii) the wasted costs proceedings are justified notwithstanding the likely costs involved; and

(b) in the second stage (even if the Court is satisfied under sub-paragraph (a)), the Court shall consider, after giving the legal representative an opportunity to give reasons whythe Court should not make a wasted costs order, whether it is appropriate to make the order in accordance with rule 8.”

3.  In Ma So So v Chin Yuk Lun [1], the Court of Final Appeal set out the approach in considering the exercise of the jurisdiction under Order 62, rule 8B.  The court should approach the matter by dealing with the following questions:

(a)   whether the solicitor was responsible for (i) acting improperly or without reasonable cause or (ii) for undue delay or any other misconduct or default in any proceedings;

(b)   whether such conduct of the solicitor caused costs to be incurred or wasted.  This is a question of causation.  The causal link between the solicitor’s conduct and the extent of costs incurred or wasted must be established; and

(c)   whether the court should exercise its discretion to make an order.

Background

4.  The defendant’s summons is an off-shoot from a simple mortgagee action.  He defaulted in repayment of two mortgage loans of $1,000,000 and $3,080,000 secured against his property.  On 26 November 2013, the plaintiff (the “Bank”) commenced proceedings by originating summons against him pursuant to Order 88 to enforce the mortgage.  

5.  The first hearing of the originating summons took place on 14 January 2014 before Master Chow, which was adjourned to 11 February 2014 before Master Leong for the Bank to re-serve the complete set of court documents on the defendant, who intimated that the package of documents initially served on him had been damaged.

6.  The defendant did not file any affidavit in opposition to the Bank’s application.  At the hearing on 11 February 2014 before Master Leong, the defendant repeated his defence that he was unable to obtain re-finance by mortgaging the property because the Bank had provided incorrect information about him to other financing institutions.  Master Leong did not consider that an arguable defence, refused the defendant’s request for time to file affidavit in opposition and entered the usual judgment for payment of sums due under the mortgage; delivery up of vacant possession of the mortgaged property within 56 days; and redelivery of possession and release upon full payment of the all sums due and costs (the “Order 88 Judgment”).  The defendant appealed.

7.  One day before he was due to file his further evidence in support of his appeal, the defendant issued a summons seeking an order that the Bank do provide documents supporting the amounts and interest stated in the its first supporting affidavit filed in December 2013 (the “1^st Summons”).  On 17 April 2014, Deputy High Court Judge Poon dismissed the 1^st Summons and made an unless order against him for the filing of further evidence in support of his appeal against the Order 88 Judgment.  On 24 April 2014, the defendant filed his further affirmation.  The Bank filed its affidavit in reply on 2 May 2014.

8.  On 5 May 2014, three days before the adjourned appeal hearing, the defendant issued a summons to dismiss the originating summons on the ground that the Bank was in contempt of court by filing an affidavit containing inaccurate records and statements regarding repayment of the loans (the “2^nd Summons”). 

9.  On 7 May 2014, the defendant issued another summons applying for an order that Deputy High Court Judge Poon recuse himself from hearing the appeal against the Order 88 Judgment (the “3^rd Summons”).  At the appeal hearing on 8 May 2014, Deputy High Court Judge Poon dismissed the 3^rd Summons.  The appeal and the 2^nd Summons were adjourned part- heard to 26 May 2014. 

10.  On 23 May 2014, the Bank filed a third affidavit (“the plaintiff’sthird affidavit”) in further reply to the defendant’s affirmations, to which two tables setting out the monthly arrears of instalments and the principals and interest due under the Loans were exhibited.  In the same afternoon, the defendant issued a summons to dismiss the Bank’s claim on the ground of misrepresentation and knowing deceit by the Bank (the “4^th Summons”).  

11.  On 23 June 2014, Deputy High Court Judge Poon handed down his decision dismissing the defendant’s appeal against the Order 88 Judgment and the 2^nd and 4^th Summonses with costs.  For the purpose of this hearing, the following paragraphs of Deputy Judge Poon’s decision are relevant:

“ 4. In the appeal, the Defendant put forward an additional defence.  This time he seeks to challenge the accuracy of the Plaintiff’s account on the outstanding amounts.  The Defendant complains that the supporting affidavits of the Plaintiff do not give sufficient information as to how the Plaintiff arrived at the final figures.

5. Before hearing the appeal, the Defendant issued several other summonses including:

(a)   a summons to order the Plaintiff to supply supporting documents with regard to the amounts and interest claimed by the Plaintiff in its supporting affidavit and for an extension of time to file his affidavit in support of the appeal;

(b)   a summons to dismiss the Plaintiff’s Originating Summons for the Plaintiff being in contempt of the court in filing inaccurate affidavits;

(c)   a summons for recusal of myself to deal with this matter;and

(d)   a summons, again, to dismiss the Plaintiff’s Originating Summons for the Plaintiff’s misrepresentation of the facts and knowingly deceiving the Defendant.

6. I have dismissed (a) and (c) above with oral reasons given.  It was not until the time specified ² for the Defendant to file his affidavit in support has expired that he issued the summons requesting those documents.  Since after the Plaintiffhas demanded payment from him the Defendant has never queriedthe Plaintiff’s account.  I considered the Defendant’s summons requesting documents a mere delaying tactic and therefore gave an unless order against the Defendant for filing of his affidavit in support of the appeal. 

…

8. Regarding (b) and (d), they are actually identical in substance but framed in different wordings.  Whilst inaccuracy in evidence may be relevant to the merits of the case, it is not in itself a ground for dismissal of the whole action.  The summonses of the Defendant are totally without merit and thus liable to be dismissed. 

…

18. Putting together the annual statements and the 2 tables inthe Plaintiff’s further affidavit, I have no difficulties in arriving at the outstanding loan amount stated under the Plaintiff’s first affidavit by simple arithmetic.  The payments of the Defendant between 1 April 2011 and 1 June 2012 have in fact been taken into account.   

19. No query has been raised at any time by the Defendant against the correctness of the annual statements he received.  In fact, the first time when the Defendant queried the accuracy of the Plaintiff’s account was in this appeal, after Master Leong has entered judgment against him.  The complaints of the Defendant were based solely on the different figures shown on several isolated documents of the Plaintiff sent to the Defendant at different time.  These differences are inevitable as extra interests would be incurred as time passed.  When the Plaintiff now putting in all the details of the loan accounts, one can immediately see that there is really no substance in the Defendant’scomplaints.

20. The Defendant has failed to show any specific defect of the Plaintiff’s version of the accounts.  I am satisfied that the Plaintiff’s evidence reflected accurately the states of the 2 subject mortgage loan accounts.”

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²  Pursuant to the order of Deputy High Court Judge Burrell dated 13 March 2014.

12.  On 24 June 2014, the defendant commenced the appeal to the Court of Appeal against Deputy High Court Judge Poon’s dismissal of his appeal against the Order 88 Judgment.  In the Court of Appeal, he repeatedthe same arguments rehearsed before Deputy Judge Poon.  On 23 June 2016, the Court of Appeal delivered judgment dismissing the defendant’s appeal.  For the purpose of the present hearing, the following passages from that judgment are pertinent:

“ 23.   The defendant submitted that in Tse’s 1^st affidavit, no bank or account statements had been exhibited to support the state of accounts of the two mortgage loans deposed to by Tse in paragraphs 14 and 15 or the total amount asserted in paragraph 16as remaining due under the mortgage as at the date of the affidavit,being a sum of $3,413,056.42.  He claimed it is impossible to verify the accuracy of the plaintiff’s claim when no bank or account statements had been exhibited.  The plaintiff had failed to prove that the money claimed is due and payable, as required by Order 88 rules 5(3) and (6) and Master Leong should have thrown out the originating summons.

24.   We reject the defendant’s submission.  Rule 5(6) requires the supporting affidavit to prove that the money is due and payable and give the particulars mentioned in rule 5(3).  Tse had given the particulars mentioned in rule 5(3) in paragraphs 14 and 15 of his 1^st affidavit, having deposed that he made the affidavit from the facts within his own knowledge as an officer of the plaintiff and from information obtained by investigation of the books, accounts and documents of the plaintiff.  Rule 5(6) does not specify that proof is to be furnished only by exhibiting abank or account statement.  And there is no prohibition that theevidence provided in the first affidavit may not be supplemented by subsequent affidavits.

25.   Whether the court would regard the affidavit or affidavitsbefore it as amounting to satisfactory proof required by rule 5(6) must depend on the circumstances of each case.  This must be approached with common sense.  Prior to the issue of the originating summons in a mortgage action where a defendant is in default of instalment payments, it is usual to find that the financial institution would have issued periodic statements to theborrower followed by a letter of demand, so it is not likely that theborrower would be kept in the dark of the amount claimed to bedue and payable.  And if there is a genuine dispute of the amountdue and payable, one would have expected the borrower to raise it with the financial institution when he received the periodic statements, the letter of demand, or, at the latest, the first supporting affidavit in the mortgage action.  We do not regard this as putting the onus on the defendant to prove that the sum claimed is inaccurate.

26.   In this case, there is no or no credible evidence that prior to the judgment entered by Master Leong, the defendant had disputed or challenged the accuracy of the amounts claimed.  As noted by the judge in paragraph 19 of his decision, no query has been raised at any time by the defendant against the correctness of the annual statements he received.  His contention that he is unable to verify the accuracy of the amounts claimed is disingenuous, to say the least.  At the hearing before Master Leong, there is nothing to suggest that the state of accounts of the two mortgage loans deposed to by Tse would be challenged.  As recorded in paragraph 2 of the judge’s decision, the defence that the defendant sought to advance before Master Leong orallywas that the plaintiff had provided inaccurate credit information of the defendant to financial institutions and thereby obstructed him from applying for further credit facilities.  It was only when he appealed the master’s judgment that he filed affirmations disputing the accuracy of the amounts claimed, and in answer to which the plaintiff filed two further affidavits by Tse.  The judge did not err in law in taking into account all the affidavits filed by the plaintiff in holding that the evidence before him reflected accurately the states of the two mortgage loan accounts.

27.   We reject also the argument that the judge was in error in refusing the defendant’s application for the plaintiff to produce supporting documents including bank statement, repayment history and source of interest.  It is in the discretion of the court to refuse to order discovery where it is not satisfied that it is necessary for disposing fairly of the cause or matter or for saving costs.There is no basis for us to interfere with the judge’s exercise of his discretion.

…

36.   Regarding the challenge of the accuracy of the sums claimed by the plaintiff, the judge rightly pointed out that the complaints were based solely on the different figures shown on several isolated documents of the plaintiff sent to the defendant at different times.  And differences are inevitable, as extra interests would be incurred with time and the 3-month HIBOR (adopted for the 2^nd instalment loan contract rate) had been fluctuating from time to time.  The judge was satisfied there is really no substance in the defendant’s complaints, and so are we.

37.   There is no merit in any of the grounds of appeal advanced by the defendant.  We therefore dismiss his appeal.”

13.  The defendant then applied for leave to appeal to the Court of Final Appeal.  His application was dismissed by the Court of Appeal on 27 July 2016.  In the meantime, he made four applications for stay of execution pending his various appeals.  Those applications were all dismissed.

14.  Insofar as discernible, the defendant advanced four grounds in support of his application for wasted costs against Chan.  These grounds are dealt with separately in the following subsections.

Failure to produce bank statements or accounts

15.  The defendant alleged that Chan had failed to exhibit or produce bank statements and/or accounts to explain or prove certain calculations of the outstanding sums under the loans.  From the background set out above, it can be seen that the defendant never disputed the amount outstanding at the hearing before Master Leong.  His only defence then was that the Bank published misleading information about his financial affairs or credit worthiness.  It was only until a day before he was due to file his further evidence in support of his appeal against the Order 88 Judgment that he raised the issue about bank statements or accounts.  That application had been considered by Deputy Judge Poon who dismissed it.  The defendant’s appeal against that decision was also dismissed by the Court of Appeal.

16.  In paragraphs 6 and 19 of his decision, quoted in paragraph 11 above, Deputy Judge Poon gave reasons for his dismissing the defendant’s application for books and records.  He considered the application was a mere delaying tactic.  That decision was upheld by the Court of Appeal in paragraph 26 of the Court of Appeal decision quoted in paragraph 12 above.  Kwan JA commented that the defendant’s contention “that he is unable to verify the accuracy of the amounts claimed is disingenuous, to say the least.”  The request was a delaying tactic.  The reason for the request was disingenuous. 

17.  As the defendant had never queried the correctness of the amounts claimed prior to the hearing before Master Leong, there was no need for the Bank to produce the statements and records at that stage.  His subsequent request for production prior to the appeal hearing before Deputy Judge Poon was not justified.  Chan’s failure to produce them cannot be said to be improper and can hardly form any basis of a wasted costs order.

Chan’s misconduct in relying on the “conclusive evidence clause”

18.  As outlined in paragraph 10 above, in response to the defendant’s third affidavit filed in connection with the appeal against the Order 88 Judgment, the Bank filed two tables setting out the monthly arrears of instalments and principals and interest due under the loans.  When challenged about the accuracy of the tables, Chan relied on the conclusive evidence clause of the mortgage agreement.  That argument was rejected by the learned judge and resulted in an adjournment to enable Chan to produce legal authorities in support of his argument.  But at the adjourned hearing, Chan apparently abandoned his argument and produced an affidavit setting out the outstanding amounts.  Deputy Judge Poon dealt with that issue in paragraphs 9 to 11 of his decision as follows:

“ 9.   Mr Chan, solicitors for the Plaintiff, initially relied on clause 15.01 of the mortgage agreement for proving the outstanding sum of the loans, which provides that:

‘ Any statement of account purporting to show an amount due from the Mortgager to the Bank under this Deed and signed as correct by a duly authorised officer of the Bank shall, in the absence of manifest error, be conclusive evidence amount so due.’

10.   Mr Chan submitted that as paragraphs 14 to 16 of the Plaintiff’s supporting affidavit are statements purporting to show the amount due under the loans, those paragraphs are within the meaning of ‘Any statement of account’ under clause 15.01 and therefore they are conclusive evidence for the amount due.

11.   I queried Mr Chan’s interpretation of clause 15.01 and requested Mr Chan to submit relevant legal authorities for consideration.At the adjourned hearing, Mr Chan withdrew his initial position and indicated that he would no longer rely on clause 15.01 to prove the Plaintiff’s case.  Instead, a further affidavit was filed by the Plaintiff to fill in the evidential gap on the final sums.”

19.  Thus, the learned judge rejected Chan’s argument relying on the conclusive evidence clause and then went on to deal with the defendant’s argument relating to that further affidavit filed by the Bank during the adjournment.  After considering the parties’ argument, he concluded:

“ 18. Putting together the annual statements and the 2 tables in the Plaintiff’s further affidavit, I have no difficulties in arriving at the outstanding loan amount stated under the Plaintiff’s first affidavit by simple arithmetic. The payments of the Defendant between 1 April 2011 and 1 June 2012 have in fact been taken into account.”

The learned judge had no difficulties in arriving at the outstanding amount and was satisfied that the Bank’s evidence reflected accurately the outstanding amount.  He then dismissed the appeal.

20.  The gist of the defendant’s complaint is that as a solicitor acting for the plaintiff Bank, Chan should be well prepared for the hearing.  He should have armed himself with the necessary authorities and should not advance any legal argument which was unsustainable.  As it was his failure which occasioned the adjournment, he as the Bank’s solicitor, should pay wasted costs, and not the Bank as the unsuccessful party in a particular issue.

21.  The court very seldom makes a wasted costs order on that basis.  It must also be borne in mind that a wasted costs order is directed at a non-party or the legal representative of a party.  A successful litigant should look to his opponent for costs rather than a non-party or the opponent’s legal representative.  The circumstances when such an order would be made are very rare.  The court would only do so in very exceptional circumstances, such as those involving blatant abuse of legal process which was directed at wasting the opponent’s costs or which would most likely result in the successful party being unable to recover its costs against its opponent.  Even frivolous and vexatious arguments or delay as such would be insufficient to provoke the court to take such an exceptional course.  

22.  It should be noted that throughout the decision of Deputy Judge Poon, there was no criticism of any misconduct by Chan in putting forward the argument based on the conclusive evidence clause, which the learned judge rejected.  I agree that Chan’s argument was unsustainable.  It is not uncommon for counsel to raise propositions of law which the court found were erroneous or inapplicable.  Such shortcomings, without more, cannot be labelled as misconduct or improper conduct. 

23.  If a legal representative of a party has wasted the opponent’s costs, the opponent should look to that party for costs.  Costs are the discretion of the trial judge.  The starting point, of course, is that costs should be in the cause.  The major consideration is which is the successful party.  The judge may make such costs order as he considered appropriate having regard to all the circumstances, including the conduct of the proceedings.  Here, Deputy Judge Poon was alert to Chan’s failure.  The defendant should have asked for costs of the adjournment if he felt aggrieved. Even if he had not, as a professional judge, the learned judge must have taken the adjournment into account when making his costs order at the end of the day.  Having regard to the defendant’s unmeritorious challenge of the accuracy of the outstanding loan, it would not be inappropriate for the learned judge to simply order costs in the cause, which was what he did.  If the defendant could not even obtain the costs of the adjournment against the Bank, his claim for wasted costs against the Bank’s solicitor could not even get off the ground.  His claim for a wasted costs order to recover the costs of the adjournment or part of the costs of that appeal tantamount to an appeal against the learned judge’s order, which the Court of Appeal has upheld.  I have no jurisdiction to revisit the learned judge’s costs order, let alone that Chan could not be said to have acted improperly.  The defendant’s claim for wasted costs order based on this ground is wholly unmeritorious.

Deprivation of his chance of settlement

24.  The defendant complained that but for Chan’s misconduct, he would have been able to check the accuracy of the amount of the Bank’s claim and settled the matter at the hearing before Master Leong such that allcosts which he was ordered to pay in this action would not have been incurred and wasted.  This argument is disingenuous.  His challenge about the accuracy was only raised after Master Leong had entered the Order 88 Judgment.  As Deputy Judge Poon held, his request for statements and records was just a delaying tactic and that the calculations were correct.  These findings were all upheld on appeal.  His conduct throughout these proceedings indicated that his sole intention behind his request for bank statements and records was to delay the legal process with his repeated unmeritorious appeals and applications to stay.  He had no intention to pay.  His argument that had he been given the statements and records he would have settled the action is artificial and disingenuous.  The legal costs he sought to recover under the wasted costs order were costs he was ordered to pay for his losing the action. He only had himself to blame for taking such an obstinate course.  Those costs fall outside the scope of the wasted costs. 

Claim for wasted costs interest

25.  The defendant claims the difference between interest on the outstanding amount calculated at judgment rate and the contractual rate.  He has not advanced any ground for this claim.  In any event, it is outside thescope of the wasted costs order provisions.  There is no issue about Chan’s conduct which justifies the court’s exercise of its wasted costs jurisdiction.

Conclusion

26.  For the above reasons, there is no evidence that Chan acted improperly or was guilty of misconduct in the prosecution of the proceedings.  The defendant has failed even to satisfy the court that he has passed first stage required for the court to consider exercising the wasted costs order jurisdiction.  His wasted costs order application is bound to fail.  Suffice it is to say that to insist to pursue a cause of action which is bound to fail is a clear abuse of proceedings.  The defendant’s summons should therefore be struck out as an abuse of the process of the court and with costs to Chan Ning Chun Charles on indemnity basis.