WELLFINE PROPERTIES LTD v. BERGER, ROGER M

DCCJ14889/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 14889 OF 2000

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D E C I S I O N

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1. This was originally an application by the defendant to set aside a default judgment entered by the plaintiff against him back on 24 November 2000 based on a dishonoured cheque. But this morning, Mr Peaker, who received instructions according to him only yesterday afternoon to represent the defendant, who had been acting in person, made an application on behalf of his client to seek an adjournment of his client's application to set aside the default judgment.

2. As I have said, the judgment related to a dishonoured cheque issued by the defendant to the plaintiff. Pursuant to the default judgment so obtained, bankruptcy proceedings were commenced by the plaintiff against the defendant. In the meantime, there was no application to set aside the default judgment. It was only towards the summer of this year, when the bankruptcy proceedings were at a very advanced stage, that it would appear that the defendant first indicated an intention to those manning the bankruptcy court that he was disputing or going to dispute the dishonoured cheque based on which the default judgment was entered against him. And eventually, according to the materials before me, Madam Justice Kwan, on 9 July 2001, told the defendant - no doubt in no uncertain terms - that if he did not immediately make an application to set aside the default judgment he would be adjudicated bankrupt in the bankruptcy proceedings before her Ladyship.

3. This apparently had some effect because shortly after that was mentioned - and that was done on 9 July - on 20 July, the defendant took out an application to set aside the default judgment and, as a result, three days later the bankruptcy court adjourned the bankruptcy petition pending the outcome of the setting aside application. That forms the background to today's hearing and, more particularly, the application to adjourn.

4. The application to set aside came before a master of this court in the usual way. Directions were given for the filing of evidence by both parties in relation to the setting aside application and, more particularly, the plaintiff was given leave to file an affirmation in reply to an affirmation filed by the defendant in support of his application done on 26 July. The defendant was given leave to file a further affirmation in reply within seven days thereafter. There was, however, I note, no direction prohibiting the parties from filing further evidence in support of or in opposition to the application in question and the application was fixed to be heard by me today.

5. As I have said, Mr Peaker was approached by the defendant yesterday asking him to represent him today with a specific purpose, namely to ask for an adjournment. The background to this is like this: on 5 October 2001, those representing the plaintiff wrote to Mr Berger, the defendant, who was then acting in person, offering to adjourn today's hearing to a later date to be fixed. On 8 October, Mr Berger, the defendant, wrote back saying that provided that the plaintiff undertook not to take any steps in the bankruptcy proceedings until after the final determination of his summons to be heard by me today, he should consent to the adjournment proposed by the other side. Then, on 11 October, the plaintiff's solicitors came back saying that they no longer wanted an adjournment and telling Mr Berger, the defendant, to proceed with his application to set aside as scheduled. Then on the following day, 12 October, the plaintiff, having filed a first affirmation of a Madam Tse in opposition to the application to set aside pursuant to the master's direction, filed and served a second affirmation of Madam Tse in further opposition to the application to set aside.

6. Today, the application for adjournment was made to me on a number of separate or cumulative grounds, the first ground being that there had been reached an agreement between the parties to adjourn today's hearing as per the letter of the 5th and the letter of the 8th. Mr Kat, counsel for the plaintiff, argued that there was no such agreement because the reply of the defendant on the 8th was not a straightforward one but instead imposed a condition, i.e. the imposition of an undertaking to be given by his client. So based on first-year contract law there was an offer made followed by a counter offer and therefore no contract was made or concluded. Mr Peaker sought to counter that by saying that the condition, i.e. the undertaking required, was really implicit in the offer itself. After all, the application to set aside the default judgment was taken out against the background of the bankruptcy proceedings and particularly what Madam Justice Kwan had told the defendant on 9 July this year. So, Mr Peaker argued that in fact his client did not raise anything new or that was not contained in the original offer and therefore there was offer and acceptance, and thus a binding agreement.

7. I agree with Mr Kat. In my judgment, Mr Kat was correct in saying that what Mr Berger, the defendant, proposed in his letter of the 8th amounted to something new in the sense that it was not contained or implied necessarily in the offer made on the 5th by the plaintiff, particularly when an undertaking was required to be given which would of course have the effect of a court order that the plaintiff would not take any steps until the final determination of the summons. That might well be too wide even bearing in mind Mr Peaker's common sense approach to the offer in question. For example, what about future delay on the part of the defendant in the prosecution of his application to set aside after this adjournment mentioned by the plaintiff? Would the plaintiff be bound by its undertaking not to take any steps until after the final determination of his summons? And after all, what is "final determination"? So, for all these reasons I am not with Mr Peaker in relation to the binding agreement for an adjournment point.

8. Mr Peaker also sought to argue that whilst that might technically be correct, but to a layman like the defendant he might not appreciate the fine distinctions made by the law and he might have some "legitimate expectation", as they say in public law, that there would be an adjournment. That may well have been so, but whatever expectation, legitimate or otherwise, that the defendant may have had in the meantime would have been gone by the time the defendant received the letter of 11 October when the plaintiff clearly said that at least, according to them, there had been no agreement for an adjournment and Mr Berger, the defendant, must proceed with his application. On the materials before me and so far as I can see, there was no prejudice suffered by the defendant between 8 October and 11 October arising from this legitimate (or otherwise) expectation on his part, that there would be an adjournment; so I do not consider that as a good ground for adjourning the present application.

9. I then come to this argument or ground relied on heavily by Mr Peaker on behalf of his client, namely this late filing of a second affirmation of Miss Tse. This affirmation is important even according to Mr Kat because the plaintiff's case is that a cheque issued in payment of outstanding rent had been dishonoured by the defendant upon presentation and that forms the subject matter of this action. Mr Berger, the defendant, accepted that his cheque had bounced but argued that that did not matter because several days later, after the bouncing of the cheque, he gave another cheque, a replacement cheque, to the plaintiff of the same amount which had been honoured. So he was essentially saying that there was no more consideration for this cheque; and Mr Peaker, in his submission this morning, also hinted at another argument, i.e. that in any event the cheque was issued for the payment of rent due not by Mr Berger but by a company in which he owned the shares and which rented the premises giving rise to the outstanding rent.

10. The second affirmation was filed to tell this court that when the first and second cheques were received by the plaintiff, the plaintiff appropriated the two different cheques to discharge two different debts arising from two different months' rent respectively, and therefore the second cheque did not, as it were, discharge the first cheque or the indebtedness which the first cheque had been appropriated to discharge, there having been deposed to in the first affirmation of Miss Tse that when the two cheques were sent to the plaintiff, the defendant himself did not make any appropriation. That, in my judgment, highlights the importance of the second affirmation.

11. At one stage this morning it was suggested that Mr Kat's client needed to apply for leave in order to rely on this second affirmation. Mr Kat pointed out - and, in my judgment, quite rightly - that for one reason or another the order made by the master below did not restrict the filing of further evidence in this application. His client therefore did not strictly speaking need the leave of the court for the filing of the affirmation in the first place. But that did not deal adequately with the more important point implicit in Mr Peaker's argument in this regard, i.e. that within a few days of this hearing an important affirmation was filed by the plaintiff in opposition to the defendant's application.

12. Mr Kat argued that the contents of the second affirmation dealt exclusively with matters within the peculiar knowledge of the plaintiff and there was nothing which the defendant could reply to by way of an affidavit in reply. That might be so, but the filing of evidence in reply is just one of the matters which a litigant faced with a late piece of evidence might want to apply his mind on. A very important consideration is that such a litigant should be afforded an adequate opportunity to consider the contents, the implications and the legal consequences of the late evidence put in by the other side. Mr Kat said that since the second affirmation was filed and served on the 12th, a week before today's hearing, the defendant's side ought to have ample opportunity to consider the affirmation and the legal implications thereof and so forth. But as Mr Kat very fairly reminded me on more than one occasion this morning, we are dealing with a litigant in person, although I do take into account that quite obviously the defendant must have been receiving some informal legal advice for the purpose of these proceedings as well as other proceedings in which he is involved. Be that as it may, we are talking about a litigant in person, faced with an affirmation filed within seven days of his application to set aside was due to be heard and I think in all fairness he should be afforded a chance to consider the affirmation and perhaps to seek legal advice in relation to the implications of the second affirmation to his present application.

13. I also take into account Mr Peaker's other points, i.e. the alleged financial difficulties of Mr Berger, his health condition as revealed in a medical report made in July this year which was placed before me and the fact that Mr Peaker was only instructed in the last minute. In relation to this last point, I must say that I have some suspicions relating to the bona fides of the late instruction of solicitors which would seem to me to be designed to provide a ground for applying for an adjournment this morning. I bear that in mind and I also bear in mind what Mr Peaker told me from the Bar table about Mr Berger's participation in a legal care plan which apparently would provide legal service to those who participated in the plan.

14. I bear all this in mind. In my judgment, there should be an adjournment, but not an open-ended one as at one stage suggested by Mr Peaker. In my judgment, in fairness to the plaintiff, they have waited for a long, long time and there must be an end to their waiting, and that must be achieved by a proper court procedure. In fact, during submission, Mr Peaker, in anticipation of my anxiety, gave an undertaking on behalf of his client to apply for legal aid in relation to the present action, something which he had mentioned during the course of his submission, by the close of business tomorrow. That at least alleviated part of my worry in this case, so that if I was to grant the adjournment, there would be no last minute application by the defendant for legal aid thereby triggering the automatic stay of 42 days and causing an inevitable adjournment of the next hearing. That undertaking, which I require as the basis for my granting an adjournment today, would at least ensure that the matter of legal aid would be disposed of one way or another expeditiously and that at the next hearing the application to set aside the default judgment can be heard and adjudicated upon eventually.

15. For all these reasons I am granting an adjournment but I need the parties' representatives' assistance in my giving directions designed to achieve the objective which I have already mentioned and to ensure that when the next time the parties appear before the court the application to set aside will be heard and decided.

16. So I will hear the parties on the directions to be given relating to the adjournment and of course I will deal with the question of costs after I give the directions.

(Submissions re directions)

17. This is what I am ordering:

Upon the undertaking by the defendant through his solicitor that if he applies for legal aid in connection with this action, such application shall be made no later than 4 pm on 19 October 2001. It is ordered that:

(1) The hearing of the defendant's application to set aside the default judgment be adjourned to 14 January 2002, 9.30 am, court No. 8, for hearing by a judge, with liberty to the parties to apply for an earlier date of hearing. Estimated time: whole morning (31/2 hours).

(2) Leave to the defendant to file an affidavit in reply to the first and second affirmations of Tse Lai-man, Edith, to be filed herein (a) within 21 days from the date hereof, or (b) if an application for legal aid is made by the defendant as aforesaid, within 21 days of the discharge or expiry of the automatic stay; whichever shall be the later.

(3) No further affidavit or affirmation be filed by either party without leave of the court.

 

(Submissions re costs and miscellaneous matters)

18. I shall not rehearse again the reasons or grounds for my decision to adjourn this hearing today. Suffice it to say, I granted the adjournment because I considered that the defendant, as a litigant in person up to this morning, required extra time to digest the second affirmation of Madam Tse, including its contents and legal implications, and I also took into account the personal circumstances of the defendant as well as the fact that Mr Peaker was only instructed at the last minute. These were all matters peculiar to the defendant himself. The only real criticism that could be mounted against the plaintiff is that the second affirmation of Madam Tse was filed on the 12th of this month, six days before today's hearing, and was therefore late, generally speaking.

19. I have to balance all matters in the exercise of my discretion on costs. I bear in mind all these matters and I come to the conclusion that it is right for me to order that the costs of and occasioned by this adjournment be paid by the defendant to the plaintiff, to be taxed if not agreed, in any event.

20. I should also add that in the exercise of my discretion I have taken into account that the defendant relied on several grounds in support of the application for an adjournment, some of which failed this morning before me and took up time for argument, and I have borne all those matters in mind.

(Submissions re whether costs should be payable forthwith or in any event)

21. Having heard further arguments from the parties relating to whether costs should be payable in any event or forthwith and bearing particularly in mind Mr Peaker's point about his client having made an offer this morning for an adjournment with costs reserved, which I thought I had dealt with during Mr Peaker's submission and that was why I did not mention it when I gave the reasons for the costs order I have already made, I am of the view that the adjournment itself is quite a separate event and there is no good reason for delaying the payment of the costs by the defendant to the plaintiff occasioned by the adjournment which he successfully got before me today. It is quite a separate matter from the substantive hearing itself, i.e. the setting aside of the default judgment, or, assuming that he is successful in his application, from the future defence of this action by the plaintiff against him; and in fact assuming that he is successful in his application to set aside, the action will have to go on and if I were to make an order that the costs should only be payable in any event, that would quite unfairly delay the payment of the costs occasioned by this adjournment.

22. So bearing all this in mind, I am persuaded by Mr Kat and I make an order that the costs of and occasioned by this adjournment be paid by the defendant to the plaintiff forthwith (so as to avoid any misunderstanding or doubt), to be taxed if not agreed with a certificate for counsel.

(Submissions re certificate for counsel)

23. I have heard further arguments on whether there should be a certificate for counsel as part of the costs of and occasioned by the adjournment. Mr Peaker said that this action is concerned with $60,000-odd, and retaining of counsel may not have been necessary. A quick look at Mr Kat's very detailed skeleton submission with reference to the law involved, particularly the law in relation to antecedent debt and appropriation, would tell anybody experienced in this area of the law that the issues raised, despite the relatively humble amount in dispute, are involved and require the service of a good lawyer to assist the court in the resolution of the dispute. In fact, I have tried cases before dealing with section 27 of the Bills of Exchange Ordinance and involving the Court of Appeal case cited to me by Mr Kat in his skeleton argument and they are by no means easy questions.

24. So, in my judgment, it was perfectly proper for the plaintiff to instruct counsel to appear before me on the substantive hearing. Now that the substantive hearing had been adjourned, the costs of instructing counsel to appear for the substantive hearing had been incurred and used. So for those reasons and, moreover, so far as the adjournment itself was concerned, it raised many points and entailed arguments of almost two hours, I cannot see why I should not grant a certificate for counsel. Certificate for counsel.