TED OHYA v. ABDO A. OSMAN ABDELHANNED OSMAN

DCCJ4042/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4042 OF 2005

R U L I N G

1.  This is an application by the plaintiff seeking to lift the automatic stay of proceedings that arose as a result of the defendant’s application for legal aid which was duly notified to the court by a memorandum issued by the Legal Aid Department dated 20 March 2006 (hereinafter called “Memorandum”).

2.  Very briefly, the history of these proceedings is that a dispute arose out of the promissory note given by the defendant to the plaintiff.  The plaintiff claimed that the defendant failed and/or refused to pay the sum under the promissory note to the plaintiff upon demand.

3.  The plaintiff commenced legal proceedings on the promissory note on 19 August 2005.  The defendant’s solicitors, Messrs Oldham, Li & Nie (hereinafter called “OLN”) entered an acknowledge of service on his behalf on 30 August 2005. 

4.  On 5 September 2005 the plaintiff issued an Order 14 summons, with supporting affirmation, seeking summary judgment against the defendant.  The defendant, through OLN, filed two affidavits in opposition on 23 and 28 September 2005 respectively.  On 26 September 2005, Registrar Yu gave directions and adjourned the Order 14 summons for argument before a District Judge in chambers on 18 November 2005.  The plaintiff filed his affirmation in reply on 5 October 2005.

5.    By a summons filed on 11 November 2005, the defendant, through OLN, applied to adjourn the hearing on 18 November 2005 on the ground of ill health.  Such application was supported by the affidavit of Mr Hooley, a solicitor of OLN, filed on the same day.  Mr Hooley’s affidavit deposed to the defendant’s deteriorating health and sought an adjournment of the hearing of the Order 14 summons until a time when the health condition of the defendant improved sufficiently to give instructions to OLN and counsel to defend the plaintiff’s claim.  Mr Hooley filed a second affidavit on 16 November 2005 advising that the defendant’s surgery in the United States was scheduled for 13 December 2005.

6.    The defendant filed a Notice to Act in Person.  He appeared in person on 18 November 2005 before His Honour Deputy Judge E. Yip and applied to adjourn the hearing of the Order 14 summons.  The learned judge vacated the hearing of the Order 14 summons and refixed it before me on 5 December 2005.  The learned judge acceded to the defendant’s application for adjournment because he was not in a position to challenge the defendant’s medical evidence that his physical condition on 18 November 2005 was subnormal following preparation for medical tests at 9.30 am that morning. 

7.  At the hearing before me on 5 December 2005, the defendant, still acting in person, applied for a further adjournment of the Order 14 summons on the ground of his deteriorating medical condition.  I refused the application on the ground that the medical materials provided to me did not show his health would so impair his physical and mental conditions that he would not be able to deal with the hearing of the summary judgment application that day, which was before the scheduled surgery.  The hearing of the Order 14 summons therefore proceeded before me on 5 December 2005.  I handed down judgment in favour of the plaintiff on 5 January 2006. 

8.  On 27 January 2006 the plaintiff issued garnishee proceedings against the defendant and a garnishee order nisi was granted on 3 February 2006.  On the same day, the defendant’s new solicitors, Messrs Kelvin Cheung & Co. (hereinafter called “KCC”) filed a Notice to Act. 

9.  By a summons dated 3 February 2006, the defendant, through KCC, applied for leave to appeal against my judgment dated 5 January 2006 and for stay of execution in all proceedings pending determination of the appeal.  The summons was fixed to be heard before me today, i.e., 23 March 2006.

10.  At the hearing to show cause on 8 February 2006, the plaintiff’s application for garnishee order absolute was withdrawn since the Hongkong and Shanghai Banking Corporation Limited (hereinafter called “Hongkong Bank”) confirmed it was not indebted to the defendant. 

11.  The plaintiff opposed the defendant’s application for leave to appeal.  By a summons dated 23 February 2006 the plaintiff applied (a) for an order that the defendant to pay the judgment sum into court and to give security for the plaintiff’s costs of the appeal to the satisfaction of the court should the court grant leave to the defendant to appeal, and (b) for an order that until such payment is made into court and security be given the defendant’s appeal be stayed.

12.  On 18 March 2006, the defendant approach the Legal Aid Department (hereinafter called “the Department”) to apply for legal aid.  A meeting was arranged on 20 March 2006 for the defendant to submit relevant papers and documents.  As noted above, the Memorandum was issued on the same day, i.e., 20 March 2006.  A further appointment was made for a meeting on 30 March 2006 for first processing of the means test on the defendant’s eligibility. 

13.  On 22 March 2006 the defendant filed Notice to Act in Person.  He also filed an affidavit on the same day to oppose the plaintiff’s application to lift the automatic stay. 

14.  The defendant claimed that ever since the service of the plaintiff’s summons of 23 February 2006 he had, for the last few weeks, tried hard to raise the necessary cash to finance the plaintiff’s demand and the cost of his own legal representatives.  However, as his money and business were tied up in Karzakhstan since he and the plaintiff fell out, it was difficult for him to arrange for the necessary finance. 

15.  The defendant further claimed that his present bank accounts with the Hongkong Bank and DBS Hong Kong Limited had credit balances of $1,900 and $1,600 respectively.  The defendant also owed a substantial amount in legal fees which had yet to be cleared.  He claimed that his financial situation was very difficult.  In such circumstances, his solicitors advised him to seek legal aid assistance.  The defendant urged for a stay of the present proceedings pending the Department’s decision to grant him assistance.  He denied that he had adopted any delaying tactic.

16.  Under section 15 of the Legal Aid Ordinance and its regulations, there is a stay of proceedings of 42 days following an application for legal aid unless otherwise ordered by the court.  The plaintiff applied to lift the stay and to proceed with the defendant’s application for leave to appeal against my judgment of 5 January 2006 pursuant to such proviso.  The plaintiff has not filed any evidence in support of such application.

17.  Mr Recorder Kwok, S.C., in Bank of China ( Hong Kong) Ltd v Fu Ming Kong Michael and Anor HCA 7769 and 3909 of 2000 unreported, 24 June 2005, stated that:

“The purpose of the statutory stay under section 15 of the Legal Aid Ordinance is to allow sufficient time:-  (a) for the Director to process an application for legal aid; and (b) in the event of legal aid being granted, for the assigned lawyer(s) to effectively represent the assigned client, and, where appropriate, to apply for more time.  The statutory stay is in aid in, not an obstacle to the administration of justice…..” 

18.  The Court of Appeal in Lee Shiu Ming v Yeo Hiap Seng (Hong Kong) Ltd CACV 39 of 1993, unreported, set out the principles for the court’s guidance when considering whether to lift the legal aid automatic stay.  The guiding principle is to do what is fair and just between the parties.  Yuen J, as she then was, in Re Ip Lai Fan and Ip Lam On HCSD 10 of 2000 and 11 of 2000 (unreported), 3 November 2000, summarised Nazareth JA’s guidance in the Lee Shiu Ming case as follows:

“….. the court should be slow to lift a stay before an application for legal aid is determined, especially if a point of law had to be dealt with by a layman.  However, if a court was satisfied that the application for legal aid was an abuse of process, then the court should exercise its discretion to lift the stay.” 

19.  I do not see the above principles as any different from those cited by the plaintiff’s solicitor, namely the case of Leader Cream Ltd v Herbert Tsoi & Partners, referred to in Hong Kong Civil Procedure 2006 volume 2, paragraph O1/15/1 at page 1055 and the case of The China State Bank Limited v Wong Chun Ying trading as Wing Fung Hong Company HCA 10825 of 1999, Waung J (unreported), 4 April 2000. 

20.  I proceed to consider whether there is any reason or justification for the application for legal aid.

21.  The defendant said he is a Hong Kong citizen living in Hong Kong for more than 20 years.  He submitted that he should not be deprived of legal aid assistance because of his present financial difficulty and it should not be readily assumed that his exercise of such right was only for delaying proceedings. 

22.  On the other hand, the plaintiff complained that the sole purpose of the defendant’s late application for legal aid was to delay the proceedings.  The plaintiff’s solicitors reminded that the defendant had been intermittently represented by different solicitors and suggested that if the defendant truly intended to apply for legal aid, such application should have been made long ago.  The plaintiff’s solicitor argued that the defendant failed to explain why he waited until March 2006 to apply for legal aid.

23.    I note that the defendant was previously represented by OLN before acting in person.  He later instructed KCC and now acts in person.  For the period when he was represented by OLN I do not see any basis for suggesting there was unreasonable delay.  OLN filed the affirmations in opposition to the Order 14 summons on the defendant’s behalf and instructed counsel to act for him.

24.  It was suggested that the defendant has previously asked for adjournments without success.  Insofar as the defendant applied for an adjournment of the hearing for argument of the Order 14 summons for the first time, it was allowed on medical grounds.  Although a fresh application for adjournment was made before me on 5 December 2005, also on medical grounds, I refused the application and the matter proceeded without delay.

25.  The defendant previously advised that he was due for surgery in the United States on 13 December 2005.  However, the defendant informed me this morning that after the hearing on 5 December 2005 he was ill and missed the scheduled surgery.  He had, in fact, spent the time to travel to the United States and London to try to raise finance and to liquidate his property.  Due to the current proceedings he had not had time to reschedule the surgery. 

26.  There is no suggestion that the application for leave to appeal was not made within time.  In such circumstances, it cannot be said that the defendant delayed in engaging KCC and filing the summons for leave to appeal in early February 2006.  Plainly, the defendant had hoped to be represented by private lawyers.  However, according to him, as a result of his parlous financial situation, and his futile efforts to raise finance for legal costs, he had to apply for legal aid on 18 March 2006.

27.  The plaintiff’s solicitors challenged there is no evidence of the defendant owing his solicitors monies other than the bare assertion in his affirmation.  The defendant did refer to the fact that he owed his lawyers substantial amounts in his affidavit.  He informed the court by submission that he owed OLN more than $300,000 for which OLN had taken out legal action against him for recovery and he owed KCC about $200,000.  He said he was unable to meet KCC’s demand for funds and he so told KCC on 17 March 2006, whereupon they advised him to apply for legal aid, and in fact he did so on 18 March 2006.

28.  The plaintiff’s solicitors pointed out that the defendant was not up front with the court about the fact that he is a United States citizen with a property in Arizona.  The defendant’s reply is that he resided in Hong Kong for much longer periods than he did in the United States and he is presently liquidating his sole property in Arizona to pay his lawyers.  He said that the Department was aware of such fact.  In the circumstances, the defendant denies any delaying tactic.

29.  I am, of course, aware of the shortness of time between the defendant’s application for legal aid and the hearing today.  However, I have to consider the prejudice that might be suffered by either party if the stay were to be lifted. 

30.  The defendant is a layman presently without the benefit of legal representation.  In respect of the application for leave to appeal, he would have to deal with the legal submissions on the draft grounds of appeal set out in the summons dated 3 February 2006 prepared by KCC on his behalf, including the effect of past consideration on the promissory note, the question of waiver by the holder of the promissory note and the implications of cross-claims vis-à-vis the promissory note.

31.  The plaintiff’s solicitor suggests that the merits of the applications for leave to appeal and for stay of execution are weak.  In considering whether to grant leave to appeal the court will only refuse leave if satisfied that the applicant has no realistic prospect of success.  But this is not the appropriate forum to argue the application for leave to appeal, especially when matters of law have been raised and need to be dealt with by a layman.  However, I hasten to add that it is not for this court to form any view on the Department’s deliberations under any merits test.

32.  In respect of the plaintiff, the fact that the defendant had applied for legal aid meant that the automatic stay would postpone the hearing of the defendant’s application for leave to appeal and of the plaintiff’s summons, which was also returnable today.  This would, of course, affect the timing of the resolution of the application for leave to appeal and for the execution of my judgment on 5 January 2006.  But I would have thought it would be the defendant rather than the plaintiff who would be anxious to pursue his application for leave to appeal.

33.  As regards execution of the judgment, the garnishee application has failed and I am unaware of any other current steps for execution of my judgment of 5 January 2006 by the plaintiff.  The plaintiff’s solicitors submitted that “it is obvious to all concerned that [the defendant] has assets outside the jurisdiction.”  If that were the case, local execution proceedings may well not take the plaintiff’s position very far.  The plaintiff’s solicitor suggested that any stay would delay, say, bankruptcy proceedings that may be pursued to pressure the defendant to make payment.  I am not satisfied that, apart from an assertion of delay due to the automatic stay, which is statutorily provided for laudable purposes, there is any other substantial prejudice suffered by the plaintiff.

34.  Since the Department is presently considering this matter and will be unable to come to any conclusion any time before 30 March 2006, and upon weighing the prejudices that may be suffered by either party in these proceedings, and upon consideration of all the circumstances, I consider it would not be right for me to uplift the stay and proceed to deal with the application for leave to appeal without giving the defendant a chance of legal representation as the Department may eventually allow him.  The plaintiff’s application to lift the stay is dismissed.

(Discussion re formal order in relation to summons)

35.  Both the defendant’s application by way of summons filed on 3 February 2006 and the plaintiff’s application by way of summons filed on 23 February 2006, be adjourned to a date to be fixed with one and a half hours reserved, not before 42 days from 20 March 2006 before myself in chambers (open to the public).

(Discussion re costs)

36.  The costs of the plaintiff’s application to lift the legal aid automatic stay be costs in the cause of the defendant’s application for leave to appeal by way of summons filed herein on 3 February 2006.