NG WAI YEE v. CHUNG MA LAI

DCCJ 2435/2024

[2026] HKDC 816

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2435 OF 2024

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DECISION

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1.  There are two applications before this court:

a.  The plaintiff’s appeal against a costs order by Master Andrea Yu dated 17 March 2025 (the “Appeal Summons”);

b.  The defendant’s application to join a third party, namely, Metrotex Knitters Limited (“Metrotex”), for the purposes of a non-party costs order under Order 62 rule 6A of the Rules of the District Court (Cap. 336H) (the “Joinder Summons”).

The Appeal Summons

Background

2.  This is a tenancy dispute case. The plaintiff was the registered owner of the relevant property (the “Property”) and the defendant entered into a Tenancy Agreement on 1 March 2023.

3.  The agreed method of payment for the 1^st year of tenancy was by way of the defendant issuing 12 post-dated cheques issued by “Lung Wah Hotel Ltd” (“Lung Wah Cheques”) passed to the plaintiff.

4.  When the time came for the second year of rental, there was a series of WhatsApp communications between the defendant and a representative for the plaintiff (the “Representative”).

5.  On 2 February 2024, the Representative asked for the same arrangement for 12 post-dated Lung Wah Cheques. On 3 February 2024, the defendant agreed to the same.

6.  However, on 5 February 2024, the Representative changed his mind and said the plaintiff would not accept Lung Wah Cheques. (The plaintiff now claimed that her reasons were that there was one incident of a bounced Lung Wah Cheque in 2023 and also that she had read a newspaper article about a court action claiming against Lung Wah Hotel.)

7.  In any case, on that same day, the defendant suggested that she could offer other means of payment like arranging for direct bank transfer. The Representative wrote back agreeing to the arrangement and stating that he would provide the bank account number the next day.

8.  However, the Representative did not provide the bank account number the next day or at all, and the defendant did not pay further rent.

9.  Then, on 7 May 2024, the plaintiff issued the writ for the current action seeking the outstanding rent for March to May 2024.

10.  It was not disputed that the plaintiff has never gave any formal (or informal) notice or demand before issuing the writ, and the defendant has never expressed any refusal to pay rent.

11.  The plaintiff took out an Order 14 summons on 5 June 2024 and an Order 29 summons (for interim payments) on 9 July 2024.

12.  The parties then came to an agreement and, on 19 July 2024, an Order by consent was made that, inter alia, the defendant paid the 5 months’ outstanding rent and that the Order 14 summons, Order 29 summons and the action be discontinued with costs be reserved for argument.

13.  On 17 March 2025, Master Andrea Yu, after hearing the arguments, ordered, inter alia, that:

a.  the plaintiff pays the defendant’s costs of the action, including the Order 14 summons, on an indemnity basis, summarily assessed at HK$109,600; and

b.  There be no order as to costs for the Order 29 summons.

14.  The plaintiff is appealing against the learned Master’s costs order a) above.

Legal Principles

15.  It is trite that an appeal against a costs order (which is an exercise of discretion by the master) faces a high threshold:

“…such application should not be allowed unless it can be shown that the order made by the master was unreasonable or erred in law ie, if he either failed to take into account proper matters or took into matters that should not have been taken into account…” (Paul Y-ITC Construction Ltd v Kin Shing Co Ltd [1999] 1 HKC 511)

“Judge in chambers hearing an appeal from a master as to costs only should decline to exercise his discretion afresh unless the master’s exercise of discretion had so demonstrably miscarried that the matter had to be approached afresh.” (China Venturetechno International Company Limited V New Century Chain Development Company Limited trading as Century Chain Property Agency CACV 20/1996)

The plaintiff’s arguments

16.  As I understand it, Mr. Richard Leung, counsel for the plaintiff (“Mr. Leung”), argued that the learned Master has erred in law in ordering costs on an indemnity basis because the threshold for ordering such was high, and the principles were as follows:

“5.1…the receiving party must show that the case has some special or unusual feature…

5.2…the threshold is high. The losing party’s conduct must be “unreasonable to a high degree” and not mere wrong in hindsight…

5.3 Insofar as the merits of the case is concerned, even… “severely adverse findings” …does not ipso factor justify an indemnity order…

5.4 Advancing a case which is difficult, unlikely to success or which in fact fails, or without foundation in law or fact, or devoid of merits, is not necessary in itself a sufficient reason for an award of indemnity costs…

5.5 The conduct of the losing party must be of a more venal kind and the conduct of the litigation has in some sense been wicked….

…

5.8 Further, the threshold required is high for seeking indemnity costs on the alleged basis of “ulterior motive”. If the court finds there could well be other less sinister reasons for commencing proceedings, this is insufficient…”

(Wong Sai Chung v The Joint and Several Liquidators of China Properties Group Ltd [2025] HKCFI 2094)

17.  Mr. Leung admitted that the plaintiff was at fault for failing to provide a bank account, but the defendant was also at fault for not contacting the representative to make other arrangements for payment and thus had breached Clauses 1 and 3 of the Tenancy Agreement regarding the obligation of the tenant to pay rent in advance on the first day of each month failure of which “it shall be lawful for the (plaintiff) at any time thereafter to re-enter the property whereupon the Tenancy Agreement shall absolutely determine.”

18.  Mr. Leung also argued that there was no cogent and compelling evidence that the plaintiff has commenced the current action with “ulterior motive” (regarding the allegation of the defendant that the Representative had asked for the transfer of the business of Lung Wah Hotel etc.)

19.  As such, Mr. Leung argued that, when both parties are at fault, the proper cost order should be no order as to costs (Hillhead Ltd v Sean Eric Mclean Hotung HCMP 2757/2005 (unreported, 30 March 2007) etc.)

Consideration

20.  First of all, the learned Master never mentioned any findings of “ulterior motive” in her decision. Thus, I agree with Mr. Jackson Chow, counsel for the defendant, that her decision for imposing an indemnity costs order was not based in any way on a finding of “ulterior motive” on part of the plaintiff.

21.  Instead, from the transcript of the hearing, it was clear that the learned Master found that (Hearing Bundle p.252):

“…the plaintiff’s conduct of the proceedings was unreasonable and oppressive” because “(i) the plaintiff could have simply terminated the tenancy agreement by serving one month notice under the break clause…and (ii) the plaintiff could have easily provided alternative payment methods to the defendant but did not choose to do so, and instead decided to institute the present action without ever issuing any formal notice to the defendant prior to starting the action. As a result of the plaintiff’s unreasonable action, unnecessary and avoidable costs were incurred…”

22.  I cannot see any fault in that decision, either in the finding of facts or in law, and cannot see how the learned Master was unreasonable in the exercise of her discretion.

23.  Indeed, the conduct of the plaintiff was clearly “unreasonable to a high degree” in initiating action without any notice, given that the plaintiff admitted that she herself was at fault in the first place. I would think that, under the circumstances, a simple follow-up WhatsApp message might have likely solved the issue without incurring costs irrationally and unnecessarily by commencing action:

“The power to order taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose. Litigants who conduct their cases…in an improper or oppressive manner, or who cause costs to be incurred irrationally or out of proportion as to what is at stake, may also expect to be ordered to pay costs on an indemnity basis…” (Choy Yee Chun (The representative of the estate of Chan Pui Yiu) v Bond Star Development Ltd [1997] HKLRD 1327)

24.  Mr. Leung also argued that there was no pre-action protocol in tenancy disputes so there was no requirement for a formal demand.

25.  I am of the view that the conduct of the party is not only determined by whether there is a protocol that needed to be complied with. The fact that there was no protocol requiring the plaintiff to issue a formal demand did not distract from the fact of this case that she was herself at fault in the first place and yet she initiated legal action without any notice nor attempt to solve the issue by quicker and cheaper means. That conduct alone, in my view, would be enough to cross the high threshold.

26.  Further, Mr. Leung raised an argument that the plaintiff was the “effective winner” (HKFS Fund Limited v 羅芷澄 and Ors DCCJ 3030/2023 [2026] HKDC 507).

27.  I am of the view that the analogy in the HKFS case does not apply to the current case. Here, the conduct of the plaintiff was in question: there was never a need to incur costs to find the “effective winner” since the dispute was never raised: there was no evidence that the defendant was unwillingness to pay rent.

28.  As such, I find that costs on an indemnity basis is justified.

29.  However, I note from the transcript that the learned Master has inadvertently omitted to invite the plaintiff to give submissions on costs before she made the assessment summarily. On this point, I would allow the appeal of the plaintiff only on the issue of the sum assessed, and would invite the plaintiff to file and serve a summarily list of objections accordingly.

The Joinder Summons

30.  The legal title of the relevant property was transferred to Metrotex shortly before the determination of costs and the defendant was concerned that the transfer was effected for the purpose of insulating assets against potential adverse costs consequence.

31.  I need not go into details but the defendant also submitted evidence that suggested that the plaintiff and Metrotex were nominees controlled by the same person and / or company.

32.  There was also some confusion as to whether S.K. Wong & Co. (“SKW”), the solicitors for the plaintiff, has accepted service for Metrotex regarding the Joinder Summons.

33.  Mr. Leung stated in the Plaintiff’s Skeleton Submission (p.13) that:

“…for the avoidance of doubt, neither P’s solicitors nor counsel received any instructions from (Metrotex) to act for it, and these submissions are only advanced from an angle of fairness. It is further noted from the Summons (for the Joinder)….was apparently not served on (Metrotex) but on P’s solicitors only.”

34.  However, I note that in a letter dated 11 April 2025, SKW expressed stated “We act for Metrotex Knitters Limited”. (Hearing Bundle p.204)

35.  The Joinder Summons was served on SKW as “Solicitors for Metrotex Knitters Limited” 4 days later on 15 April 2025 (Hearing Bundle p.6) and the receipt chop from SKW stated that the summons was received on 7 May 2025.

36.  However, as above, Mr. Leung, despite apparently having no instruction to act for Metrotex, now suggested that the summons was not served on Metrotex. Further, Mr. Leung also submitted (“from an angle of fairness”) that the Joinder Summons “appears to be premature as there is nothing to demonstrate that P is unable to pay costs” and thus should be dismissed, and should the court think otherwise, “it appears fair and just to grant leave to (Metrotex) to file and serve affirmation…in opposition…and a substantive argument before a Judge on another occasion with 3 hours reserved.” (Skeleton Submissions of the Plaintiff, p. 13)

37.  This is a very confusing situation.

38.  On further questioning by the court, as far as the issue of proper service is concerned, Mr. Leung confirmed that the Summons has actually been brought to the attention of Metrotex by SKW so there should not be any dispute of non-service.

39.  On reliance of that apparent reassurance, I informed Mr. Leung that the court would not be willing to drag out the proceedings to have a further round of affirmations and hearing for the Joinder Summons. Thus, if Mr. Leung has no instructions to act for Metrotex, the court would deem that Metrotex has failed to attend the hearing and would proceed in its absence.

40.  I allowed an adjournment for Mr. Leung (and SKW) to seek instructions (if possible). However, after the adjournment, Mr. Leung informed the court that he still has no instruction to act for Metrotex but the plaintiff was willing to give an undertaking to pay costs to address the defendant’s concern.

41.  The court was again adjourned and the parties have come to an agreement that, upon the undertaking to pay costs given by the plaintiff, the defendant is prepared to adjourn the Joinder Summons sine die.

Order

42.  In view of the above considerations, I will give the following order:

a.  The Appeal Summons be dismissed except on the issue of the amount of costs assessed by Master Andrea Yu;

b.  The defendant shall serve and lodge its summary bill of costs for the costs of the action including the Order 14 Summons (but excluding the Order 29 Summons) within 7 days of this Decision and the plaintiff shall serve and lodge its summary list of objections within 7 days thereafter. The court will summarily assess the costs on an indemnity basis by way of paper disposal;

c.  As for the costs of the Appeal Summons, the plaintiff shall pay 50% of the defendant’s costs (with certificate for counsel granted) to be summarily assessed on a party and party basis. The defendant shall serve and lodge its summary bill of costs within 7 days of this Decision and the plaintiff shall serve and lodge its summary list of objections within 7 days thereafter. The court will summarily assess costs by way of paper disposal; and

d.  The Joinder Summons be adjourned sine die with liberty to apply, with costs be reserved.