LEE TAK KIU v. ALL UNKNOWN PERSONS IN OCCUPATION OF THE REMAINING PORTIONS OF LOT NO. 136 AND THE REMAINING PORTION OF LOT NO. 138 BOTH IN DEMARCATION DISTRICT NO. 5 TOGETHER WITH THE MESSUAGES ERECTIONS AND BUILDING THEREON, TAI PO, NEW TERRITORIES, HONG KONG AND ANOTHER

DCMP 3097/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 3097 OF 2009

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DECISION ON COSTS

1.  By summary proceedings, Madam Lee, the Plaintiff and the registered owner of the premises, obtained an order for possession against the unknown persons occupying the Premises (the 1^st Defendant). Writ of possession followed. SMC (the 2^nd Defendant) then applied to join as a party to these proceedings; and subsequently applied to have the order for possession and writ of possession set aside.

2.  The application to set aside was heard on 13 September 2010.  On 4 October 2010, I handed down my written decision (“the Decision”).  I set aside the order for possession and the writ of possession so that SMC may defend.  I also made various directions for the further conduct of this case.  As to costs, I make a nisi order that the costs of and occasioned by SMC’s application to set aside, including the hearing, to be to Madam Lee in any event.  The parties had 14 days to apply for variation of the costs order.

3.  SMC did apply by way of summons dated 15 October 2010.  She argues that the costs of and occasioned by her application to set aside should be in the cause of this action.

Discussion

4.  That the question of costs is a matter of discretion of the court is uncontroversial.  No doubt the discretion is to be exercised judicially depending on the circumstances of each case.  But the defendant who manages to set aside a regular judgment on the basis of a meritorious defence should generally bear the costs of the application to set aside, as the defendant is seeking the court’s indulgence.

5.  Mr Lung submitted that where there is no fault on either party, an order for the defendant to pay the plaintiff’s costs in any event would not be appropriate.  He referred to the message in Hong Kong Civil Procedure 2011 (Vol.1) (“HKCP”) at 13/9/16 to that effect; but without citing the 1981 English case cited there.  Both he and Mr Chow for Madam Lee described the report of that case to be too succinct to add anything useful.

6.  Mr Lung cited Shenzhen Luohu Runan Industrial Limited Co v Yuen King Hay Appointed to act for Un Kau Kung Tso, HCMP 2320/2000 (25 June 2002).  There the learned Deputy High Court Judge also referred to the same passage in the HKCP referred to above.  The peculiar feature of that case was that the defendant came forward to be appointed as manager, and then amended to be the representative, of the tso being sued, after judgment had been entered.  The merits of the case were not clearly stated; but I would not be surprised if the court considered that no fault ought to be attributed to the defendant for allowing the judgment to be entered.

7.  Mr Lung seemed to suggest that by fault, one should be referring to circumstances where the defendant has somehow knowingly turned a blind eye to the commencement of legal action or service of legal proceedings.  I am sure that would be fault; but I am not minded to limit the consideration of the circumstances of the case that way.

8.  Because of the nature of this application, the fault in question should relate to how judgment came to be entered in the first place; and the delay in taking out the application to set aside.  There would obviously be fault on the part of the plaintiff if he or she obtained the judgment by irregular means or without proper service.  Likewise, the defendant cannot deny fault if it was his or her circumstances that somehow allowed the judgment to be entered and the delay.  If those circumstances caused the defendant the need to apply to set aside a judgment regularly obtained, this would no doubt be a request for the court’s indulgence.  The court is entitled to order the defendant to bear the costs occasioned by such request, even if granted.

9.  This was what the Court of Appeal said in Ko Siu Yun v Chan Chuen [2007] 1 HKLRD 324, which Mr Lung also referred to.  The Court of Appeal stated the general rule that where a regular judgment was set aside because of a meritorious defence, the defendant should bear the costs of the application to set aside the default judgment.

10.  Indeed the Court of Appeal also said that the alternative would be to order the costs of the application to set aside to be in the cause.  But the appellate court made no elaboration of the circumstances under which such alternative costs order ought to be made.  I am not surprised, as the appellate court in Ko Siu Yun actually rejected the argument that the judgment there was irregular; and decided that the hearing judge was entitled to exercise the discretion in accordance with the general rule in the circumstances of that case (see paras.21-29; 34).

11.  Mr Lung also cited the recent case of Luxworld Limited v ETS Wolf SA & CIE (Asia) Limited, DCCJ 2478/2007 (19 November 2008).  The Deputy District Judge adopted the same general principle mentioned above as a starting point.  However, the circumstances of that case caused him to order the costs of the application to set aside to be in the cause.  To say the least, this was because of the early revelation of the merits of the defence.  But more significantly, it was the clear scepticism that the Deputy District Judge had about the merits of the claim (see paras.18-25; 31).

12.  In the present case, whilst SMC claimed her ignorance of the commencement of action until after the order for possession and writ of possession, she could not point to any one else to blame for that.  The evidence is that she chose to be out of the jurisdiction most of the relevant time; and left the premises be managed by her various followers and voluntary workers (see paras16-17 of the Decision).

13.  Those followers of SMC too claimed to be ignorant of this action until the arrival of the bailiff.  Serious allegations of dishonest practice on the part of Madam Lee and her legal representatives in effecting the service of legal proceedings were made.  The allegations were maintained even during the last hearing, though Mr Lung also conceded that he could not really substantiate them in the application.  In the circumstances, Madam Lee was entitled to, and had to, defend such allegations. I expressly rejected allegations in any event.

14.  Mr Lung further submitted that the application to set aside in June 2010 could have been saved in any event, but for Madam Lee’s refusal to acknowledge the merits of his client’s defence already revealed in the 1^st Affirmation of Lee Y Y filed in March 2010.

15.  I disagree.  It might have been different, had Madam Lee refused to have the orders set aside, despite SMC’s concession that the orders had been regularly obtained and that she would pay Madam Lee’s costs incurred and thus wasted upon the setting aside of the orders.  As Mr Lung confirmed, his client had taken no such initiative to save the application to set aside.  Quite to the contrary, both SMC and the deponents on her behalf had always maintained the stance that the judgment was obtained by dishonest practice and improper service.  As mentioned above, Madam Lee was entitled to and had to defend such contention.

16.  Mr Lung submitted that if Madam Lee is awarded costs of the application to set aside in any event, this would effectively encourage all future plaintiffs to contest any application to set aside with the expectation that costs would be ordered in their favour regardless of the result.

17.  I disagree with such generalisation.  The court should exercise the discretion as to costs in accordance with the circumstances of each case.  I never intend to do otherwise.  I have no reason to believe that my decision in the circumstances of the present case will have the ramification suggested by counsel.

Order

18.  SMC’s summons dated 15 October 2010 is dismissed; and the order nisi made on 4 October 2010 as to the costs of and occasioned by SMC’s summons dated 25 June 2010 is made absolute.  SMC shall pay Madam Lee’s costs occasioned by her present summons in any event.  I take this opportunity to add that SMC shall also pay Madam Lee’s costs of and occasioned by the obtaining of the order for possession and the writ of possession that are wasted in any event.  Costs shall be taxed, if not agreed, with certificate for counsel.