LEUNG SHIU CHEONG AND ANOTHER v. 868 LTD AND OTHERS

HCA 307/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 307 OF 2006

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J U D G M E N T

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The Defendants applied to set aside the judgment entered on 18 April 2006 against them on the ground that it was irregular.

2. The undisputed facts are: the 2^nd Defendant applied for legal aid on 27 March 2006, a memorandum of notification of the application was filed with court on 31 March 2006 and there was a stay of all proceedings for 42 days.

3. I heard the summons on 10 May 2006; as the period of stay had not expired, the Defendants also applied for lifting the stay for the sake of hearing the application to set aside.  I had no doubt that I had the power to lift the stay.  As the parties were anxious that I dealt with the application at that time, I granted leave to lift the stay and to hear the application without delay.

4. The Defendants’ main argument is that the judgment is irregular.  It was entered during the period of stay: the application for judgment in default of defence was first lodged with the court on 14 March 2006, 17 days before the Memorandum of Notification of the application by the 2^nd Defendant for legal aid was filed pursuant to Section 15 of the Legal Aid Ordinance (Cap. 91).  After filing of the Memorandum, subsection (4) which is set out below took effect:

“Where any memorandum is so filed, then, unless otherwise ordered by the Court in which the memorandum is filed, all proceedings in the action or in the appeal or in both the action and the appeal shall, by virtue of this section, be stayed for such period, being not less than 14 days, as may be prescribed, and during such period (unless otherwise ordered by any such court) time fixed by or under any law or otherwise for the doing of any act or the taking of any step in the proceedings shall not run.”

5. The Subsection is silent whether the phrase “all proceedings in the action or in the appeal or in both the action and the appeal” refers to the proceedings concerning the applicant for legal aid only.  Should it be extended to other parties as well?  In this case, stay has been argued by the Plaintiffs that it should not cover the proceedings against the 1^st Defendant because only the 2^nd Defendant applied for legal aid.  The application for legal aid does not concern the 1^st Defendant: why should it be given such advantage?  As a reply, the 1^st Defendant simply relies on the construction of subsection 4.

6. I accept that the application for legal aid relates to the applicant, the 2^nd Defendant in this action only.  However, the wording in that subsection (4) is very clear and unambiguous: all proceedings in the action shall be stayed.  The stay should cover all proceedings, including the proceeding against the 1^st Defendant in this action.  If the Plaintiffs find the stay not reasonable, they should have applied for uplift of the stay but they have not done so.

7. There is another point raised on that sub-section: when does the stay begin to run?  With the opening phrase in that Subsection “Where any memorandum if so filed”, it is very obvious that it will not take effect until it is filed.  I believe that the Director will not file such memorandum and cause any investigation if the application can be refused off hand.

8. I construe the Sub-section together with Regulation 7A of the Legal Aid Regulations (Cap. 91A) to mean the following:

(a)   That the effect of the stay is in respect of all proceedings including the proceeding against the 1^st Defendant;

and    (b)   That the stay period of 42 days starts to run from the date of filing of the memorandum.

9. The Plaintiffs argued that they made the application for judgment on 14 March 2006, long before the Memorandum was served on them.  But, because the Defendants had on the same day applied for extension of time for 28 days and later by consent 14 days were granted, the application for judgment was refused by the High Court Registry with an explanatory note “extension of time of 28 days granted……” (which, I must say, is a mistake of the Registry and the time should be 14 days).  On 30 March 2006, a day before the memorandum of notification of the application for legal aid was filed, the Plaintiffs made another application for judgment which was entered on 18 April 2006.

10. The Plaintiffs argued that the date of application for judgment should be taken as the judgment date and it was the court’s delay in granting judgment that the proceeding was stayed.  I do not agree with such argument.  The process of application needs time.  The filing of the Memorandum produces an effect of staying the proceeding including the processing of an application for judgment.  I conclude that the judgment entered against both Defendants during the period of stay is irregular and should be set aside.

11. The orders I make are as follows:

(a) The judgment entered against both Defendants on 18 April 2006 be set aside;

(b) Without prejudice to the Plaintiff’s right to apply for summary judgment under Order 14, the Defendants file and serve his defence and counterclaim, if any, within 14 days after receipt of this judgment;

and (c) The Plaintiffs shall file and serve their Reply and defence to counterclaim within 14 days thereafter.

15. As to costs, I make an order nisi under Order 42 rule 5B(6) as follows:

(a) That the costs in respect of the application (including those reserved) be costs in the cause; and

(b) That this order shall become absolute 14 days after the date of this Judgment unless a written application has been made to vary this order within the said 14 days.