LEE JOANNE v. THE INCORPORATED OWNERS OF DRAGON CENTRE AND ANOTHER

DCCJ 3591/2020

[2021] HKDC 705

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3591 OF 2020

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DECISION ON COSTS

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Introduction

1.  This is the decision on costs in respect of the plaintiff’s summons dated 28 September 2020 for default judgment against the 1^st and 2^nd defendants (“Default Judgment Summons”).

2.  The parties agree that the question on costs is to be disposed of on paper.  As directed, the parties lodged their respective written submissions.

Procedural history

3.  In this action, the plaintiff claims against the defendants for, inter alia, damages to be assessed and an injunction requiring them to engage contractors to carry out all necessary repair works to the roof and water proofing structure as a result of an alleged water seepage affecting the plaintiff’s premises.

4.  On 14 July 2020, the writ of summons was issued.

5.  On 28 August 2020, the parties entered into a consent summons for extension of time of 28 days from 25 August 2020 for the defendants to file their Defence.  On 4 September 2020, the court granted an order in terms of the said consent summons (“1^st EoT Order”).  The defendants should have filed their Defence on or before 22 September 2020.

6.  On 28 September 2020, the plaintiff issued the Default Judgment Summons which was fixed to be heard on 16 December 2020.

7.  On the same day, the defendants via their solicitors, Messrs SK Lam, Alfred Chan & Co (“SKLAC”), made a request to the plaintiff’s solicitors, Messrs King & Co (“K&C”), by way of letter for a second extension of time of 14 days to file their Defence.

8.  It is worth to note that in the said letter, SKLAC alleged that according to their computation, their clients were due to file their Defence by 5 October 2020.  The defendants’ computation is clearly incorrect.  In the Consent Summons, the parties agreed that time be extended for the defendants to file and serve their Defence within 28 days “from the date hereof”, not “from the date of the order to be made”.  In any event, counsel for the defendants now accepts that the defendants got an extension of time of 28 days from 25 August 2020 (ie the date of the Consent Summons) to file their Defence[1].

9.  The plaintiff refused to give consent for the second time extension.  In K&C’s letter dated 29 September 2020, the plaintiff stressed that she was entitled to take out the Default Judgment Summons, but was willing to consent to a time extension until 13 October 2020 on an unless order basis and the Default Judgment Summons be withdrawn with fixed costs of HK$10,000 to the plaintiff.

10.  The defendants thereafter took out a Time Summons on 30 September 2020 (“Time Summons”) seeking further extension of time to file the Defence within 14 days from the date of the order to be made.  The Time Summons was fixed to be heard on 29 October 2020.

11.  By a letter dated 9 October 2020 from SKLAC to K&C, SKLAC claimed that the time limit for the defendants to file and serve their Defence has yet to expire until 5 October 2020 because the phrase “28 days from the date hereof” as agreed under the consent summons is to be taken as that of from the date of the 1^st EoT Order.  SKLAC therefore alleged that the Default Judgment Application was premature.  SKLAC also claimed that the Default Judgment Application was improper as there was no written notice of intention to enter interlocutory judgment under Order 19 Rule 8A of Rules of District Court, Cap 336H being served.

12.  By a letter dated 21 October 2020 from K&C to SKLAC, the plaintiff refuted SKLAC’s allegations and offered to deal with the Default Judgment Application and the Time Summons by way of consent summons to the effect that the defendants be granted leave to file and serve their Defence by 30 October 2020 on an unless order basis and costs of HK$20,000 be to the plaintiff to be paid forthwith.

13.  On 23 October 2020, SKLAC sent a without prejudice letter to K&C. While insisting on the said two allegations, SKLAC agreed to the terms proposed in K&C’s letter dated 21 October 2020 except for the proposed costs in the sum of HK$20,000.  SKLAC said the defendants were agreeable to settle the Time Summons at the usual costs of HK$700.  It is noted that there was no proposal from the defendants in respect of the costs of the Default Judgment Application.

14.  On the same day, K&C replied offering costs of the Time Summons and the costs of the Default Judgment Application be to the plaintiff to be taxed if not agreed.

15.  On 27 October 2020, SKLAC sent a without prejudice letter to K&C proposing, inter alia, leave for the defendants to file and serve their Defence by 30 October 2020 on an unless order basis and costs of the Default Judgment Summons be to the plaintiff in any event to be taxed if not agreed.

16.  K&C replied on the same day agreeing with the above save and except that the defendants should pay the plaintiff’s costs forthwith.

17.  The Time Summons was heard on 29 October 2020 whereby Deputy District Judge George Lam ordered that unless the defendants filed and served their Defence within 7 days, the defendants be barred from doing so.  The defendants were ordered to bear the costs of the Time Summons to be taxed if not agreed.

18.  On 29 October 2020, the defendants filed and served their Defence.

19.  On 1 December 2020, the plaintiff filed a Skeleton Submissions for the Default Judgment Application stating that the only outstanding issue to be dealt with is costs.  The plaintiff asked for costs of the Default Judgment Application.

20.  On 4 December 2020, SKLAC issued a without prejudice letter to K&C stating that the defendants agreed to a consent summons to be filed to allow the plaintiff to withdraw Default Judgment Application and vacate the hearing on 16 December 2020 with no order as to costs.

21.  K&C replied on the same day stating that the plaintiff would agree to the defendants bearing her costs of the Default Judgment Application to be taxed if not agreed.

22.  On 8 December 2020, SKLAC issued a further without prejudice letter to K&C making a final offer of a sum of HK$15,000 to be paid by the defendants to the plaintiff in full and final settlement of both the Default Judgment Application and the Time Summons.

23.  On 9 December 2020, K&C, by way of letter, counter-proposed 3 options:-

(1)  Option A: the plaintiff would accept a total amount of HK$50,000 to be paid forthwith to dispose of the Default Judgment Application and the costs for the Time Summons;

(2)  Option B: the plaintiff would accept HK$20,000 as costs of the Default Judgment Application to be paid forthwith and the costs of the Time Summons to be determined by taxing master;

(3)  Option C: the defendants pay costs of the Default Judgment Application to be taxed if not agreed and the costs of the Time Summons to be determined by taxing master.

24.  In the defendants’ Skeleton Submission filed on 15 December 2020, Mr Wong, counsel for the defendants submitted that:-

(1)  the defendants’ primary position is that the plaintiff should pay the defendants’ costs of the Default Judgment Application;

(2)  in the alternative and as a fallback, the court is invited to make no order as to costs for the Default Judgment Application;

(3)  as a further fallback, if the court is minded to award the costs of the Default Judgment Summons to the plaintiff, the defendants would invite this court to disallow the plaintiff’s costs in relation to the Default Judgment Summons from 27 October 2020 onwards as those costs were the result of the plaintiff’s unreasonable refusal to accept the defendants’ reasonable settlement terms set out in P’s 27 October 2020 WP Letter.

25.  The plaintiff filed her reply submissions on 17 December 2020 asking that costs of the Default Judgment Application be to the plaintiff on an indemnity basis to be paid forthwith and further invites this court to consider a wasted costs order against SKLAC due to their failure to expeditiously address the matters in dispute and to minimise the costs incurred to the plaintiff while they have ample opportunity to do so.

Parties’ respective arguments on costs

26.  The plaintiff’s case on costs is that the defendants were in breach of the 1^st EoT Order by failing to file and serve their Defence by 22 September 2020.  The plaintiff’s Default Judgment Application was rightfully taken out on 28 September 2020.  Under Order 19 Rule 8A(2) of the Rules of District Court (“RDC”), the requirement for serving notice to enter judgment on the party against whom judgment is sought does not apply where the court has made an order prescribing or extending the time for service of defence.  No notice of intention to enter judgment needed be served on the defendants. The plaintiff should therefore be entitled to costs.

27.  The defendants argued that the plaintiff has failed to obtain any of the reliefs sought under the Default Judgment Summons.  It should have been clear to plaintiff that her default judgment application was hopeless and doomed to fail as there was no reason for the plaintiff to assume that the defendants would not file a Defence and simply give up the action, especially when the defendants are all along legally represented.  The defendants claimed that the Default Judgment Summons was first come to attention of handling solicitors of SKLAC by close of business on 28 September 2020, after their said second time extension request letter was issued.  The defendants also complained of the lack of prior notice, in the form of pre-action letter, from the plaintiff before taking out the Default Judgment Summons.  The defendants said that all costs subsequent to the filing of the Default Judgment Summons stem from the plaintiff’s unwillingness to put forward and/or agree on reasonable terms.

Discussions

28.  The whole incident arose from the defendants’ misinterpretation of the 1^st EoT Order (See paragraph 8 above).  The defendants were in breach of the 1^st EoT Order by failing to file and serve their Defence by 22 September 2020.  The requirement of giving notice to enter judgment under Order 19 Rule 8A has no application in the present case as Order 19 Rule 8A(2)(a) expressly excepted the application where an order (ie the 1^st EoT Order) was made prescribing or extending the time for service of defence.

29.  A court order is meant to be complied with.  The plaintiff has no obligation to remind the defendants of the time limit to file and serve their Defence or to give the defendants any chaser, whether by way of pre-action letter or otherwise.  The defendants’ argument of lack of pre-action letter is misconceived.

30.  It is not disputed that the Default Judgment Summons was served on the defendants’ solicitors firm before the defendants sent out their letter asking for an extension of time.  With no indication for any further extension of time application from the defendants, the plaintiff was clearly entitled to take out the Default Judgment Summons on 28 September 2020.  But for the defendants’ default, the plaintiff would not take out the Default Judgment Summons.  In all fairness, the defendants should prima facie be ordered to bear the costs of the Default Judgment Summons.

31.  The next question is whether the parties’ various proposals to dispose of the Default Judgment Summons would affect the costs order to be made.  The relevant proposals and the parties responses are summarised as follows:-

(1)  The first meaningful offer came from the plaintiff on 23 October 2020 whereby the plaintiff proposed, inter alia, that the defendants be given leave to file and serve their Defence by 30 October 2020 on an unless order basis and costs of occasioned by the by the Default Judgment Summons and the Time Summons be to the plaintiff, to be taxed if not agreed.

(2)  On 27 and 28 October 2020, the defendants on a without prejudice basis agreed that costs of the Default Judgment be to the plaintiff to be taxed if not agreed.  The plaintiff stressed that the costs should be paid forthwith but the defendant did not agree.

(3)  There being no further discussion, the plaintiff filed its skeleton submissions hereof on 1 December 2020 seeking costs against the defendants.

(4)  By another without prejudice letter dated 4 December 2020, the defendants asked the plaintiff to withdraw the Default Judgment Summons with no order as to costs.

(5)  By a further without prejudice letter dated 8 December 2020, the defendants offered a sum of HK$15,000 be paid to the plaintiff in full and final settlement of the plaintiff’s costs of both the Default Judgment Summons and the Time Summons.

(6)  The plaintiff replied on 9 December 2020 counter-proposing 3 options:-

Option A:  the plaintiff would accept a total amount of HK$50,000 to be paid forthwith to dispose of the Default Judgment Application and the costs for the Time Summons;

Option B:  the plaintiff would accept HK$20,000 as costs of the Default Judgment Application to be paid forthwith and the costs of the Time Summons to be determined by taxing master;

Option C:  the defendants pay costs of the Default Judgment Application to be taxed if not agreed and the costs of the Time Summons to be determined by taxing master.

(7)  Without addressing any of the above proposed options, the defendants filed the Affidavit of Cheung Kam Chi on 11 December 2020.  It is noted that in Paragraph 29(e) of the said Affidavit, Mr Cheung referred to the above letter dated 9 December 2020 from the plaintiff saying that the said offers of settlement “are excessive in the circumstances”.

(8)  On 15 December 2020, the defendants filed their Skeleton Submissions arguing that (i) the plaintiff should pay the defendants’ costs of the Default Judgment Summons; (ii) alternatively and as a fallback, this court should make no order as to costs for the Default Judgment Summons; (iii) as a further fallback, if this court is minded to award the costs of the Default Judgment Summons to the plaintiff, the plaintiff’s costs in relation to the Default Judgment Summons from 27 October 2020 onwards should be disallowed by reason of the plaintiff’s unreasonable refusal to accept the defendants’ settlement terms set out in SKLAC’s letter dated 27 October 2020.

32.  As can be seen from the above, the parties were close to reaching a settlement on the issue of costs on 27 and 28 October 2020.  By virtue of my analysis in paragraphs 28 to 30 above, there is simply no basis for the defendants to insist on taxed costs not being paid forthwith.  I also find it unreasonable for the defendants not to accept any of the three options, in particular Option C, set out in the Plaintiff’s letter dated 4 December 2020.  The defendants even argued at length in their skeleton submissions that the plaintiff should bear the defendants’ costs.

33.  Having considered all the circumstances, I accept the plaintiff’s submissions that the defendants have acted unreasonably such that unnecessary costs have incurred and accumulated which are not commensurate with the nature of the subject matter in dispute.  I conclude that it is appropriate to order taxation of the costs of this action on an indemnity basis.

34.  The plaintiff also asks for wasted costs order against SKLAC due to their failure to expeditiously address the matters in dispute and to minimize the costs incurred to the plaintiff while they have had ample opportunity to do so.  Based on the information available, I am unable to come to the conclusion that the whole approach that the defendants’ side engaged was caused by SKLAC, and not the defendants.  I am not going to make any wasted costs order against SKLAC as such.

35.  The plaintiff has lodged its statement of costs dated 17 December 2020 for summary assessment.  It has not covered the costs incurred in relation to the further written submissions filed by the parties on 6 January 2021 and 13 January 2021 respectively.  I therefore consider it more appropriate for the plaintiff’s costs to be taxed if not agreed.

36.  In the premises, I order that the plaintiff’s costs of and occasioned by the Default Judgment be borne by the defendants to be taxed if not agreed on an indemnity basis.