YEUNG SHU LAM WILSON t/a WILSON YEUNG & CO v. CHAN SUI TING AND ANOTHER

HCA 284/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 284 OF 2002

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J U D G M E N T

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I.  Introduction

1.  On 16 January 2002 Chan Sui Ting complained to the Law Society about Wilson Yeung & Co. (WYC), solicitors.  On 24 January 2002 WYC sued Chan in this action alleging that his complaint was defamatory.  On 7 February 2003 WYC obtained interlocutory judgment from Master Bharwaney against Chan. This was for his failure to supply a verifying affidavit with a list of documents despite an unless order.  No one appeared for Chan at the hearing, although Chan had a solicitor on record.  On 6 June 2004 WYC petitioned for Chan's bankruptcy.  The ground was that Chan had not paid WYC's taxed costs of $125,493 for the interlocutory judgment.  On 30 July 2004 Chan was made bankrupt. 

2.  The most drastic consequences have befallen Chan merely for writing a letter to the Law Society.  This has been purely as a result of procedural pitfalls.  This action has never proceeded beyond initial discovery.  The merits of Chan's complaint or WYC's action in defamation have never been substantively determined.

3.  At first blush, the primary question before me appears to be a narrow one.  That question is whether Quan (Chan's solicitor) was correctly made to pay WYC's costs of an adjournment granted by Master Levy in the course of Chan's abortive application to set aside the interlocutory judgment. 

4.  But the question must be looked at against the backdrop of the events which I have just summarised.  On closer analysis, the determination of the question requires consideration of the following sub-questions:-

(1)	whether the unless order was rightly made;
(2)	whether the interlocutory judgment was rightly granted;
(3)	whether the setting aside application was rightly refused; and,
(4)	whether it was necessary to adjourn the setting aside application in all the circumstances.

5.  A subsidiary issue arises if Quan was rightly made to pay WYC's costs of adjournment.  That is whether the taxation of WYC's costs can be reviewed by a master, despite issue of an allocatur.

6.  The matters in this case come to me by way of late Notices of Appeal.  Accordingly, I must also decide whether to give leave to appeal out of time.

II.  Background

7.  Quan is the proprietor of Quan & Co. (QC).  QC ceased to represent Chan in this action upon Chan's bankruptcy.  QC is now (and has for some time been) solely acting on Quan's behalf.

8.  Chan, who was a client of WYC, wrote to the Law Society on 16 January 2002 in the following terms:-

“再者，我亦希望香港律師會知道楊澍琳律師的操守問題Ref: DC/MT/VL/ml/2000221,我朋友曾就楊澍琳律師在接受香港律師會停牌期間向他收取2萬元以作為取回我朋友法律文件，事情可以問徐伯鳴律師樓劉律師因為當時是由他代表律師會的 當時給楊澍琳的兩張支票每張一萬元，及后當我們知道被楊澍琳騙后，我馬上stop了一萬的支票 后來楊出信說我欠他一萬并申請我產破，我當時在想如果要和他爭論這問題，訴頌費可能會更多，所以我沒有再投訴。”

9.  WYC's Statement of Claim pleads that the letter was defamatory with "the ulterior and malicious motive to disparage the reputation and characters of [WYC]".  The claim seeks "[d]amages, including aggravation and exemplary damages" as well as an injunction.

10.  Chan's Defence filed on 28 March 2002 simply denies that the words are defamatory.

11.  On 10 September 2002 Master Levy made an unless order requiring Chan to file a list of documents and verifying affidavit in this action within 7 days.  The order specified that, in default of compliance, the Defence would be struck out and judgment entered in the Plaintiff's favour.

12.  QC filed a list on 17 September 2002 but omitted to include an affidavit.  The list stated that it was filed pursuant to Master Levy's order.  It was in the usual form with a standard declaration (in its §5) that, apart from the documents mentioned in the list, neither Chan nor his solicitors had any other material relevant to this action.

13.  By fax dated 23 September 2002 WYC pressed QC for a verifying affidavit.

14.  On 10 January 2003 WYC issued a summons against Chan for further and better discovery.  The application was to be heard on 23 January 2003.

15.  On 23 January 2003 Master Woolley ordered that Chan verify and serve a further and better list of documents within 14 days.  QC did not attend the hearing.  The order was not sealed and filed until 29 March 2003.

16.  By fax dated 23 January 2003 WYC informed QC of the terms of Master Woolley's order.  The fax concluded:-

"Please ... make full disclosure within the next 5 days, failing which we will apply for an unless order with costs against your client without further notice."

17.  On 29 January 2003 WYC issued another summons against Chan.  This time WYC asked that judgment be entered against Chan in WYC's favour in default of compliance with Master Levy's order of 10 September 2002.  The summons (although dated with a "29 JAN 2003" chop on its second page) wrongly stipulated a hearing date of 7 February 2002, instead of 7 February 2003, in its body.

18.   QC's office received the summons on the day of its issue.  But, for some unknown reason, the hearing was not marked on Quan's diary.  Quan suggests that this may have been because QC's clerks were misled by the date "7 February 2002" into thinking that the summons was stale and could be ignored.

19.  The result was that no one on Chan's behalf attended the hearing on 7 February 2003 at which Master Bharwaney granted interlocutory judgment.  The judgment was sealed and filed on 19 February 2003.

20.  On the date of the judgment WYC faxed QC as follows:-

"We refer to the Order of Master Bharwaney of today whereby it was ordered that Judgment be entered into against your client for damages to be assessed.

Please be informed that our clerk will attend at the office of Listing Officer, High Court, LG1 at Room 108A at High Court Building, Hong Kong on Tuesday, the 11th February 2003 at 10:30 a.m. for the purpose of fixing the hearing of the Appointment for Assessment before Master with an estimated length of one (1) hour.

Please attend the court for fixing date accordingly, failing which a date will be fixed in your absence."

21.  QC replied on 8 February 2003 as follows:-

"We are surprised that an order has been entered against our client when we have not received any summons to appear in court on our client's behalf.  We will conduct a search of the court's file on Monday and all our client's rights in this matter is hereby reserved."

22.  On 21 July 2003 WYC took out an appointment to tax its bill of costs for obtaining interlocutory judgment.

23.  On 2 December an allocatur (the 1st allocatur) for $125,493 was issued in WYC's favour, covering the taxed costs of obtaining interlocutory judgment.

24.  Chan applied on 8 December 2003 to set aside Master Bharwaney's judgment and strike-out WYC's claim.  The strike-out application contended that Chan's statement to the Law Society had been made on an occasion of qualified or absolute privilege.

25.  At the hearing of Chan's application on 21 April 2004, Master Levy refused to set aside the interlocutory judgment in the absence of affidavit evidence.  She gave leave for QC to file an affirmation "restricted to explain the failure to file affirmation to verify he List of Documents".  She adjourned the further hearing of the summons.  She also ordered that, subject to showing cause, QC pay the costs thrown away by the adjournment on an indemnity basis.

26.  On 23 April 2004 Quan filed an affirmation which stated the following:-

"3.  Pursuant to the said [unless] order [of Master Levy], I duly prepared the Defendant's List of Documents and the same was filed with court on the 17th of September 2002 which was within the time as stipulated in the said order.  Partly because of my 'unintentional oversight' and partly because of the wordings in Paragraph 5 of the Defendant's List of Documents, I did not prepare the affidavit to verify the said list....  The omission to file the affidavit to verify the said List was never intentional or contumelious and there was never and there never has been any intention on my part to ignore or flout the order made by the Learned Master."

27.  On the resumption of the hearing on 11 June 2004, Master Levy dismissed the setting aside application.  She confirmed that Quan was to be held personally liable to pay the costs thrown away by the adjournment on an indemnity basis.

28.  On 15 June 2004 Chan filed a Notice of Appeal against the dismissal of the setting aside application.  That was to have been heard by Chu J on 6 October 2004.  Chan’s appeal currently appears to be in limbo.

29.  By fax dated 2 July 2004 to QC, WYC invited Chan to bring forward the hearing date of 6 October to 30 July 2004.  If that had been done, the hearing of the appeal against Master Levy would have coincided with the substantive hearing of the bankruptcy petition against Chan.  It is unclear from the evidence before me whether Chan rejected the invitation or even whether the Court was amenable to the appeal and petition being heard together.

30.  On 21 July 2004 an allocatur (the 2nd allocatur) in the sum of $85,329.33 for the wasted costs thrown away by the adjournment on 21 April 2004 was issued.  Quan not having paid that sum, WYC issued a bankruptcy petition against Quan on 1 September 2004.

31.  On 30 July 2004 Deputy High Court Judge K. Y. Chan refused to stay the bankruptcy proceedings pending the appeal against Master Levy's order.  He then made a bankruptcy order against Chan. 

32.  Judge K. Y. Chan held as follows:-

"	11.	If Mr. Quan should have unintentionally overlooked the need to file the [verifying] affidavit [to the original list of documents].  He should have become fully aware of his default by July 2003 when the Plaintiff served his bill of costs with an appointment for taxation.  There is no explanation on why the affidavit has still not been filed up to today.  In light of this continued failure to comply with an unless order of this court, I have no option but to dismiss the application to stay, regardless of how strong may be the Defendant's case in striking out the statement of claim.  I do so with an order of costs against the Defendant.
	12.	The debt [due on the 1st allocatur] has been due and payable for sometime as the petition was filed on 6 January 2004.  I cannot see any reason to delay the making of the bankruptcy order.  I make the usual order of bankruptcy with costs against the debtor.  And I further advise the debtor through his lawyers to notify the Official Receiver about the bankruptcy order as the Official Receiver may have a say on how or whether to go ahead with the appeal scheduled on 6 October 2004.  The Official Receiver may take over it and decide whether to go ahead with it.  alternatively, the Official Receiver may say that it is something personal and would allow the bankrupt to decide what to do with it."

33.  On 13 September 2004 Quan's application for a review of the taxed costs of $85,329.33 was dismissed by Master De Souza.  The ground was that the issue of the 2nd allocatur precluded any review.

34.  On 15 November 2004 the petition against Quan was dismissed by me upon payment by him of the sum due under the allocatur plus interest.  I also gave leave for Quan to be joined as a party to this action.

35.  Quan now appeals out of time, by 2 notices dated 16 November 2004, against that part of Master Levy's order making him personally liable for costs thrown away and against Master De Souza's dismissal of his application to review the taxation of those costs.

III.  Discussion

A.  Was Quan was rightly made to pay wasted costs

36.  Ms. Gwilt (appearing for Quan) says that, on the material available to her, Master Levy should have allowed the setting aside application on 21 April 2004.  There was no need to adjourn the hearing to 11 June 2004 for the filing of an affidavit by Quan.

37.  There was no need to adjourn (Ms. Gwilt contends) because it ought to have been apparent to Master Levy (as it should have been to Master Bharwaney earlier) that:-

(1)	there had been substantive compliance with the unless order;
(2)	Chan had no contumelious intention to flout an order of Court;
(3)	the penalty sought to be imposed (the striking out of the Defence and entering of judgment) was not commensurate with the default (failure to verify a list); and,
(4)	in any event, the requirement of an affidavit to verify the original list filed had effectively been superseded by Master Woolley's order for the filing of a further and better list and affidavit.

38.  Ms. Gwilt had argued before Master Levy that she could decide the matter without need for further adjournment.  But Master Levy refused.  Ms. Gwilt reasons that, had Master Levy set aside the interlocutory judgment on 21 April 2004 as she ought to have, there would have been no costs thrown away attributable to Quan. 

39.  Implicit in Ms. Gwilt's argument is the submission that, as far as Chan's setting aside application is concerned, there was no dereliction on Quan's part in not filing affidavit evidence for the 21 April 2004 hearing.  Such was unnecessary.

40.  In order, therefore, to do justice to Quan's argument, I must examine a wider canvas than might have initially been apparent.

A.1  Whether the unless order was rightly made

41.  It is convenient to take the unless order as a starting point.  I find the order difficult to understand.

42.  If a defendant fails to file a list of documents, one might have thought that, absent special circumstances, a sufficient and appropriate sanction would generally be that the defendant should be barred from adducing evidence at the trial.  Depending on the nature of the case, the bar might be against the defendant adducing of oral or documentary evidence or both.  In the last situation, the defendant's role at trial would effectively be limited to cross-examining the plaintiff's witnesses and making submissions on the quality and logic of the plaintiff's case.

43.  If relevant documents in the defendant's possession cannot be produced at trial by reason of the defendant's failure to make disclosure, the Court can be bold and presume the worst against the defendant in relation to the missing document.

44.  Here, the master saw fit to specify that the entire Defence would be struck out and judgment would be entered against Chan.  But it is unclear why.  The "punishment" does not fit the "crime" of failing to file a list and verifying affidavit.  It is far too draconian.

A.2  Whether the interlocutory judgment was rightly made

45.  The sanction to an unless order should not normally be executed, if there has been substantial compliance and the party in breach had no contumelious intention to flout the order.

46.  Given the following facts:-

(1)	a list of documents had been filed on time;
(2)	the list stated that it contained all documents believed by Chan and his solicitors to be relevant; and,
(3)	the only complaint was that there had been no affidavit verifying what the list stated,

then on any view there was substantial compliance with the unless order.  It is hard to see in the circumstances how there could have been any contumelious intent.  The sanction to the unless order, itself already draconian, clearly should not have been executed.

47.  There was the complication that Quan did not appear before Master Bharwaney.  Quan says that was because of the mix-up over the date of the hearing.  His clerks may have taken the erroneous "7 February 2002" date at face value and ignored the summons.  It is unclear whether the Court (as it usually does when a solicitor fails to appear) attempted to contact Quan. 

48.  But whatever the reason for Quan's absence, the Court is not a rubber stamp.  It remained incumbent on the master to look critically at the substance of the application before him and assess whether the order sought was appropriate.  In this case, for the reasons I have given, it should have been obvious that interlocutory judgment was not justified.

49.  I have so far assumed that, when granting the interlocutory judgment, Master Bharwaney was unaware of Master Woolley's order of 23 January 2003.  Had his attention been drawn to the order, the case for refusing interlocutory judgment would have been even more evident.

50.  It was contradictory for WYC to insist on a verifying affidavit for the original list filed by QC, when WYC had just obtained an order for a further and better list to be verified by another affidavit.  Insisting on compliance with Master Levy's order was to elevate form over substance. 

51.  The making of Master Woolley's order for a new list with its own affidavit had effectively superseded the requirement of an affidavit to verify the old list.  To have sworn an affidavit for the original list by February 2003 would have been to swear for appearance's sake.  Such affidavit could have no practical utility in light of the events that had transpired.

A.3  Whether the setting aside application was rightly refused

52.  What applied before Master Bharwaney would have been equally applicable at the hearing before Master Levy.

53.  I do not understand why there was a need to adjourn the 21 April 2004 hearing.  The following material should have made it obvious that the interlocutory judgment had been inappropriate from the outset:-

(1)	the original list of documents filed; and,
(2)	Master Woolley's order.

54.  For tidiness' sake, it may have been appropriate to ask QC to swear an affidavit explaining why the original list was not verified.  But that would hardly have necessitated an adjournment.  The filing of an explanatory affidavit could easily have been made a condition to the setting aside of the judgment.  The initial lack of explanation from solicitors did not render the interlocutory judgment less unjust.

55.  Strangely, even when Quan's explanatory affirmation was tendered for the 11 June 2004 hearing, Master Levy refused to set aside the interlocutory judgment.  In this, I believe that she was clearly wrong.  The affirmation pointed out, what should already have been self-evident, that there had never been a deliberate intention to disobey the unless order.  Consequently, the case for setting aside on 11 June 2004 should have been overwhelming.

A.4  Whether adjournment of the setting aside hearing was needed

56.  I have dealt with this issue in Section A.3.  I do not think that an adjournment was needed before the master could set aside the interlocutory judgment.

A.5  WYC's submission on Quan's liability for the adjournment costs

57.  Mr. Anthony Chan SC (appearing for WYC) has argued that Quan can only be heard on the narrow issue of "the wasted costs order".  He submits that "the success or otherwise of the substantive appeal against Master Levy's order (setting aside the Interlocutory Judgment) does not bear upon that order". 

58.  For the reasons canvassed above, I disagree.

59.  Mr. Anthony Chan suggests that the failure to file an explanatory affidavit for the 21 April 2004 hearing was Chan's responsibility.  It was that lack of evidence that occasioned adjournment. 

60.  I disagree.  On a proper analysis, in all the circumstances of this case, the lack of an explanatory affidavit could hardly have been determinative as to whether the interlocutory judgment was justified.

61.  Mr. Anthony Chan argues that there has never been compliance, even today with the requirement of a verifying affidavit.  This is despite the fact of the 23 September 2002 fax whereby WYC asked for a verifying affidavit.  The Court (he says) should not lightly overlook non-compliance.

62.  The Court certainly should not condone non-compliance.  But neither should the Court order an unjust sanction, which is not proportionate to a party's fault.  The issue here is not whether there has been non-compliance.  There plainly has been.  That is not disputed.  The real question is what is a proper sanction.

63.  It may be, in some cases, that no sanction is justified.  This would have been the situation where there was no contumelious intention and where, by Master Woolley's order (post-dating the 23 September 2002 fax), events had rendered verification of the old list obsolete.  However, that there is no drastic sanction cannot be taken to mean that the Court condones non-compliance.

64.  Mr. Anthony Chan points out that Chan's side asked for the adjournment.  It would therefore be wrong (Mr. Anthony Chan says) to undo the costs order and visit the wasted costs on WYC.

65.  I am not persuaded by this submission. 

66.  Faced with the master's adamant stance that there could be no setting aside without an explanatory affidavit, Chan's lawyers had little option but to ask for an adjournment.  The alternative was to fail then and there.  It would be cold comfort to Chan as client for his lawyers to refuse to file an affidavit on principle, and thereby lose the application straightaway, when there still remained a chance of persuading the master to set aside at a later hearing.

67.  As for visiting the costs of the master's wrong decision on WYC, when a master or first instance judge is overturned on appeal, it is commonplace for the ultimate loser to bear both the costs of hearing below and the appeal hearing.  I do not see why the Court's approach to the costs before Master Levy should differ markedly from the norm.

68.  Mr. Anthony Chan submits that Quan's reason for failing to appear before Master Bharwaney is unconvincing.  It should have been apparent that "7 February 2002" was a typographical error.  Mr. Anthony Chan goes so far as to  suggest that, on the evidence, Quan has habitually not turned up at hearings.  It is thus likely that he did not show up before Master Bharwaney, because he chose not to do so.

69.  Further, why (Mr. Anthony Chan asks) was nothing done about the interlocutory judgment until so late?  WYC faxed Quan about the interlocutory judgment on the day it was obtained.  Despite this, no application to set aside was mounted until 8 December 2003?

70.  The point sought to be made by these submissions is that it is far too late now to re-open the making of the unless order and the interlocutory judgment or to query the wasted costs order against Mr. Quan.

71.  If that is the point being made, it simply affects whether I should grant leave to appeal out of time.  A consideration in deciding the question of granting leave, is whether the merits of the appeal are strong.  As I have made clear, in my view the merits are considerable. 

72.  The problem in this case so far has been that there has been too much rigid adherence to the minutiae of procedure, without consideration of a wider perspective and the interests of justice.  Despite the time that has elapsed, I do not think that Mr. Anthony Chan's contentions on lateness preclude me from now examining the real substance of this case.

A.6  Whether leave to appeal against the wasted costs order should be granted out of time

73.  Ms. Gwilt fairly accepts that there is scant material to explain Quan's delay in appealing against Master Levy's wasted costs order.

74.  She notes that Chan appealed against Master Levy within time.  But the appeal is in abeyance as a result of Chan's bankruptcy in July 2004.  At that stage, it would have been open to Quan as a party affected, to have pursued the appeal, as he has now belatedly done.  There is no truly satisfactory explanation why he could not and did not do so earlier.

75.  That being said, the injustice of the situation cries out for redress.  Chan is now bankrupt on the basis of a judgment which ought not to have been granted.  Quan, his solicitor, is made to pay the bill for an adjournment which was wholly unnecessary on the material before the master. 

76.  The merits being strong, the Court retains a discretion to grant leave out of time.  The prejudice to WYC does not appear substantive when set against the injustice to others.  This therefore appears to be an appropriate case in which to exercise the discretion to grant leave to appeal out of time.

A.6  Conclusion on wasted costs

77.  It follows from my analysis that Master Levy was wrong to hold that she could not set aside the interlocutory judgment without further affidavit evidence.  The case for setting aside was clear on 21 April 2004.  There was no glaring gap in Chan's case which needed a last minute affidavit to make good.  There was no basis for blaming Quan for the adjournment and requiring him to pay costs personally. 

B.  Whether the 2nd allocatur precluded review of the taxed wasted costs order

78.  It follows from my conclusion in Section III.A of this Judgment that the taxation against Quan was wrong in the first place.  Master De Souza's order must therefore be set aside. 

79.  The correctness of Master De Souza's dismissal of a review on the basis that it was precluded by the 2nd allocatur falls away as an issue.  But, in deference to counsel's argument, I briefly state my view on the question of the 2nd allocatur and review.

80.  RHC Order 62, Rule 33 provides that a review of a taxing master's decision "may be made at any time within 14 days after that decision or such shorter period as may be fixed by the taxing master".  The rule is qualified by a proviso that:-

"no application ... for review of a decision in respect of any item may be made after the signing of the taxing master's certificate [allocatur] dealing finally with that item".

81.  The wasted costs were initially taxed by Master De Souza on 9 July 2004.

82.  On 12 July 2004 WYC wrote to David Au & Tony Chan (DATC), Quan's law costs draughtsmen, as follow:-

"Pursuant to the Master's direction given under Practice Direction 14.3 and on behalf of the Plaintiff, we write to seek confirmation of your agreement that the followings are the correct figures for the Allocatur to be issued.

Profit Costs:	HK$53,499.33
Disbursements:	HK$27,000.00
Taxing Fee:	HK$ 4,830.00
	-----------------
	HK$85,329.33

Kindly confirm by counter-signing and returning to me a copy of this letter.

Please note that if we cannot have your reply within the next 3 days, we shall apply to the Court for the issue of an Allocatur without further notice."

83.  At the bottom of the letter, WYC had typed the following paragraph (the confirmation) for signature by DATC:-

"We agree that the figures set out in this letter are in line with our calculations"

84.  DATC signed as instructed and returned a copy by fax on 12 July 2004.

85.  On 21 July 2004 WYC caused the 2nd allocatur to be signed by Master De Souza without further reference to QC.

86.  On 23 July 2004, within the 14 day time limit prescribed by the rules, Quan applied for a review.

87.  The issue is whether DATC's signature on the 12 July 2004 letter signified agreement to the original taxation and to the issue of the 2nd allocatur.  Mr. Anthony Chan argues that the signature plainly does.

88.  I disagree. 

89.  All the confirmation said was that DATC agreed that Master De Souza's taxation yielded the figures in WYC's letter.  Nothing in the letter, not even the reference to Practice Direction 14.3 (concerning the procedure of taxation), could conceivably have led DATC to regard the confirmation as authorisation for issuing an allocatur on the basis of the figures agreed.

90.  It is hard to imagine that QC would agree to the issue of an allocatur, when the time for seeking review had not yet elapsed and QC was contemplating a review.

91.  If WYC intended to bind QC by the confirmation to the issue of an allocatur along the lines of the original taxation, it ought to have so stated in clearer words.  The words of the confirmation having been proffered by WYC, any ambiguity in its wording must be construed against WYC.

92.  It follows that the 2nd allocatur was wrongly issued.

93.  In Browne and another v. Youde [1967] 1 WLR 1544 Chapman J set aside an allocatur on the following basis:-

"As to the application to set aside the certificate of taxation, RSC Ord.62, r.33, contemplates that an opportunity to apply for review will be open.  I find it surprising that the certificate was signed immediately after taxation, which is certainly not the practice in London.  In my judgment the registrar should not do that unless he has made it absolutely clear to the parties that is what he is minded to do and they have consented to his doing so  That is particularly important where, as here, the solicitors attending on one side are agents for London solicitors who would have to consider whether they desire to apply for review.  It should be done only with the consent of the parties because they should have ample opportunity to consider the matter, seeing that all right of appeal will be precluded once the certificate is signed.

It would be contrary to justice to allow the certificate to stand and the case falls within the principle laid down in In re Furber [(1898)42 Sol Jo. 613, CA)]"

94.  For similar reasons, I would also set aside the 2nd allocatur and allow the appeal out of time against Master De Souza's order.

95.  On the specific question of leave to appeal out of time against Master De Souza's order, I would grant leave based on the strong merits of the appeal. 

96.  I note that there is again no truly satisfactory reason for Quan's delay in appeal.  Ms. Gwilt says that Quan thought, on the basis of initial objections by WYC's then counsel, that he had no locus.  But this reason is unconvincing.  As an affected party, Quan would have had a right to be heard on the quantum of taxed costs. 

97.  Nonetheless, I believe that the merits are so overwhelming as to outweigh the factor of significant delay.  I do not believe that WYC would be seriously prejudiced by the grant of leave.

IV.  Conclusion

98.  The order of Master Levy dated 11 June 2004 is set aside insofar as it made Quan personally liable for the costs thrown away by the adjournment.

99.  The order of Master De Souza dated 13 September 2004 is also set aside.

100.  WYC is to repay all sums received from Quan on account of Master Levy's wasted costs order within 14 days from the date of this Judgment.  After 14 days, interest is to run on the sums to be repaid at 1% over Hong Kong prime.  Given the lateness of Quan's application for leave to appeal, I do not believe that it would be just to order any further interest to be paid.

101.  I make an order nisi that WYC is to pay the costs of Quan's appeals, such costs to be taxed if not agreed. 

102.  In view of the lateness of Quan's appeals, I do not think that it is appropriate to order Quan to have his costs of showing cause before Master Levy or his costs of the review application before Master De Souza.  In respect of those 2 sets of costs, there will be an order nisi that there be no order as to costs.

103.  There will be a general liberty to apply for the purposes of working out any orders or directions consequential on this Judgment.

104.  It will be readily apparent that the reasoning in this Judgment casts serious doubt on the validity of one or more of the following:-

(1)	the interlocutory judgment;
(2)	Master Levy's orders of 21 April and 11 June 2004, insofar as those rejected Chan's application to set aside the interlocutory judgment;
(3)	the 1st allocatur which was based on the interlocutory judgment; and,
(4)	the bankruptcy order against Chan based on non-payment of the taxed costs evidenced by the 1st allocatur.

105.  The parties to the appeal hearing were Quan and WYC.  Strictly, the Court's order in the appeals only binds those parties before it.

106.  But the reasoning of this Judgment may have repercussions for Chan. 

107.  At the hearing of WYC's bankruptcy petition against Quan on 15 November 2004, I invited the Official Receiver as Chan's trustee-in-bankruptcy to attend the hearing of Quan's appeals as the outcome of the latter could affect Chan.  For example, if Quan is not personally liable for the costs of the adjournment before Master Levy, Chan becomes liable for the costs to the extent that the rest of Master Levy's orders of 21 April and 11 June 2004 continue in force.

108.  At 10.00 am on 24 November 2004, the day of the hearing of Quan's appeals, I received the following letter from the Official Receiver:-

"I refer to a remark made by Mr. Justice Reyes in the bankruptcy petition hearing for Quan Bing Kay Derek in HCB 8652 of 2004 on 15 November 2004 with regard to a hearing which was scheduled at 2:30 pm 24 November 2004 for appeal against Master's decision in HCA No.284 of 2002 in which the Bankrupt is the 1st Defendant.

Up to this morning, the Official Receiver has not been served with any document of the proceedings for HCA N.284 of 2002, therefore the Official Receiver does not intend to attend the hearing on 24 November 2004 unless the court directs otherwise."

109.  I do not understand the letter.  If the Official Receiver had not received a hearing bundle, he should immediately have requested one from WYC or Quan.  It is unclear why non-receipt of a bundle should affect the Official Receiver's assessment of how best to safeguard the bankrupt's interest.  It is also unclear why the matter of a bundle should only be raised with the Court by fax at the 11th hour.

110.  The Official Receiver as trustee should now consider the ramifications of this Judgment for Chan and his appeal against Master Levy's refusal to set aside.  The Official Receiver can then take such consequential steps as he considers appropriate.