TEAM EASE LTD. v. LAW SHEK PO

IN THE COURT OF APPEAL OF THE HIGH COURT

1997, No. 95
(Civil)

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J U D G M E N T

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Liu, J.A.:

1. By writ the plaintiff claimed against the defendant for possession of premises and other relief. The plaintiff's claim was grounded on forfeiture for non-payment of rent and other breaches of covenants.

2. The plaintiff applied for summary judgment for possession and mesne profits. The master gave unconditional leave to defend. Pleadings were filed. In the counter-claim, the defendant applied for relief against forfeiture ex abundante cautela. After close of pleadings, the plaintiff applied for interim payments of mesne profits/rent at the rate of $42,000 per month payable in advance. The plaintiff's application was granted and interim payments were to be made by the defendant until further order. The defendant appealed against the order for interim payments but his appeal was dismissed by Yam, J.

3. The defendant was persistently dilatory in making his interim payments as ordered by the court. He was late from 21 days to over 2 months. It was open to the plaintiff to execute on the order for interim payments but the plaintiff chose to apply for the defence and counter-claim to be struck out before the Registrar. When its application came before the Registrar, the plaintiff focused not on striking out but on its impromptu application for an "unless" order with reference to the ordered interim payment of mesne profits. The Registrar dismissed the plaintiff's application on both limbs, and from the Registrar's decision, the plaintiff appealed to Pang, J. before whom the plaintiff's submission was rehearsed with emphasis on an "unless" order. Pang, J. dismissed the appeal but gave costs to the unsuccessful plaintiff. In between the Registrar's decision and the hearing of the appeal, the defendant was repeatedly late in his interim payments. The plaintiff must have been driven to exasperation.

4. Pursuant to leave granted by Pang J., the defendant appeals against the costs order made against him.

5. The order for costs was awarded on account of (1) the plaintiff's utter frustration caused by the dilatory payments of the defendant's ; (2) the defendant's implausible allegation that he had a cash-flow problem ; (3) the court's duty to come to the plaintiff's aid in a case of persistent delay to obey or disobedience of a court order to make interim payments ; and (4) sufficient overall circumstances for marking the court's displeasure by mulcting the defendant in costs. The judge had concluded that the plaintiff company should have executed on the order for interim payments and that its summons for striking out was misconceived. It was, so the judge ruled, "an incorrect remedy". The judge also held that the "unless" order application was as well unfounded as it was premature. What was more crucial seems to be this: rightly or wrongly, the judge reserved an "unless" order exclusively for "litigants who [were] deliberately delaying the proceedings". There was clearly not the case before him. The premises were about to be returned. The proposed imminent surrender was disclosed to the judge. The bone of contention virtually became extinct. What remained were costs and a dispute over half a month's rent in February. These outstanding questions were peripheral. There were really no substantive proceedings to be delayed. To the judge, he could not even begin to consider granting the plaintiff's application for an "unless" order.

6. It was not open to the court to come to the plaintiff's rescue, whose suffering must have been exacerbated by the further delay pending appeal. In the judge's rationale, the basic grounds for the plaintiff's application simply did not engage the court's jurisdiction in striking out or granting an "unless" order.

7. This was, in sum, what the judge decided, from which there is no appeal and there is no Respondent's Notice with reference to the stance taken by the judge. There was no proper application in both limbs before the court, which the judge could entertain. The whole exercise was futile. The plaintiff wholly failed in its attempt to invoke the court's jurisdiction for striking out or for making the "unless" order on the basic allegations it made, and the judge could not proceed on the misconceived application to grant either of the orders sought.

8. Whatever conduct unbecoming of the defendant must be a circumstance extrinsic to the procedural difficulty which the plaintiff failed to overcome. In effect, the judge could not but take the view that as a matter of law the plaintiff's application and hence the appeal could not have been brought about by the conduct of the defendant. The defendant's shortfall, if any, in decorum did not relate and was irrelevant to the juridical issues the judge had to decide in the interlocutory application on appeal.

9. In conclusion, on the views taken by the judge, nothing which could be held against the defendant was relevant to the outcome of his decision, and the judge could not properly take them into account in his consideration of costs. On the basis the judge decided the appeal, the usual rule for costs to follow the events was not displaced. In the way the issues were approached by the judge, from which there is no appeal, nothing may be said to be so relevant or exceptional as to warrant a departure. It was plainly wrong to set aside the order for costs made by the Registrar and to order the costs of the appeal before the judge against the successful defendant.

10. I would allow the appeal, set aside the judge's order for costs, restore the costs order of the Registrar and make an order nisi that the plaintiff to pay the costs of the defendant here and below.

Yeung, J.:

11. The order was made on 3rd of January 1995 requiring the defendant to pay interim payments to the plaintiff at the rate of $42,000 per month payable in advance on the 1st day of every calendar month until further order.

12. There had been persistent delay in the payment of the interim payments over a period of more than two years. Such delay ranged from 21 days to over 2 months. On no less than 5 occasions, the plaintiff had to instruct its solicitors to write to the defendant before payments were made.

13. In May 1996, the defendant was again in arrears for 3 months. After the solicitors for the plaintiff demanded payment, $42,000 was paid. The plaintiff then issue a Writ of Fieri Facias to levy execution against the defendant and before the Writ was executed, the defendant paid up the arrears.

14. It is fair to say that the wilful disregard of the order for interim payments had caused considerable inconvenience and anxiety to the plaintiff. There was no acceptable explanation for such wilful default. The conduct of the defendant can properly be described as contumelious.

15. Mr. Lee, on behalf of the defendant argued that the plaintiff could have enforced the order for interim payments under Order 45 of the Rules of the High Court and the plaintiff's application to strike out the defence and counterclaim on the basis that the defendant's conduct was an abuse of the court's process was misconceived. Mr. Lee suggested that the plaintiff had chosen the "wrong weapons".

16. The court has inherent jurisdiction to make such orders as may be necessary to prevent the abuse of the court's process.

17. On the facts as found by the judge, the defendant had ignored the order of the court. His conduct might well be contumelious. He might well be taking advantage of the inaction on the part of the plaintiff or the procedural loopholes. But such conduct was not an abuse of the process of the court.

18. On the non-payment of the interim payments on the 1st day of every month, the plaintiff could have issued a writ of fi.fa. immediately as a matter of course, without leave and without the necessity for prior notice to, or for prior service of the order upon the defendant. The defendant would be liable for interest and costs in connection with such enforcement action. The due process of the court could be attained.

19. The "misconduct" on the part of the defendant was unrelated to any due process of the court. The defendant did not and could not have abused the process of the court by failing to comply with the order for interim payments.

20. The jurisdiction to "drive a plaintiff from the judgment seat or to bar a defendant from defending the claim" can only be exercised upon the plainest of grounds. (per Fletcher-Moulton LJ in Dyson v. A.G. [1911] 1 K.B. 410 at 418-9)

21. I agree with the submission that the application to strike out the defence and counterclaim of the defendant was misconceived.

22. If the conduct of the defendant justified the taking out of the application to strike out the defence and counterclaim on the ground of an abuse of the court's process, the court could, in suitable circumstances make such an order. The court could also take a more benevolent approach by refusing to strike out, but nevertheless make an unless order or simply an order of costs against the defendant in the exercise of its inherent jurisdiction.

23. If the judge had dealt with the matter in accordance with the aforesaid approach and made an order for costs against the defendant, perhaps the defendant could not have any valid complain.

24. But the judge had made express findings that "the proper remedy for the plaintiff to seek was to take steps to enforce the relevant order under Order 45......just like any other final money judgment." Such findings indicate that the judge had rejected the application to strike out. The master made the same decision when the matter first went before him.

25. The plaintiff had not appealed against the findings of the judge.

26. There was in fact no basis upon which the judge could have made an order of costs against the defendant on his findings. The exercise of the discretion to award costs to the plaintiff was wrongly made.

27. For the above reasons and those given by Liu J., I too would allow the appeal and make the same orders as proposed by [JA1]Liu J.

Nazareth, V.-P.:

28. I agree with Liu JA.

29. The principles upon which a successful party may, in the present sort of circumstances not only be denied his costs but be ordered to pay his opponent's costs are set out in the well-known 10 propositions listed by Buckley LJ in the Court of Appeal decision in Scherer v Counting Instructions Ltd [1986] 2 All ER 529; 536 e-g. It is proposition (8) that is particularly relied upon by Mr Martin Lee SC who, with Mr Chan Chi-hung, appeared for the appellant/defendant:

"(8) If a party invokes the jurisdiction of the court to grant him some discretionary relief and establishes the basic grounds therefor but the relief sought is denied in the exercise of discretion, as in Dutton v Spink & Beeching (Sales) Ltd and Ottway v Jones, the opposing party may properly be ordered to pay his costs. But where the party who invokes the court's jurisdiction wholly fails to establish one or more of the ingredients necessary to entitle him to the relief claimed, whether discretionary or not, it is difficult to envisage a ground on which the opposing party could properly be ordered to pay his costs. Indeed, in Ottway v Jones [1955] 2 All ER 585 at 591, [1955] 1 WLR 706 at 715 Parker LJ said that such an order would be judicially impossible, and Evershed MR said that such an order would not be a proper judicial exercise of the discretion, although later he expressed himself in more qualified language."

30. As Liu JA has demonstrated, the plaintiff failed to establish the basic grounds for an unless order; it had simply not applied for the appropriate relief.

31. But the door has not been totally shut against an order for costs in favour of the plaintiff even in such a case if exceptional reasons can be shown. They would have to be most exceptional; Parker LJ, as stated above, thought that such an order would be judicially impossible.

32. Nevertheless, to slip the plaintiff through that chink, Sir John Swaine SC, who with Mr Alexander Wong, appeared for it, relied upon the defendant's persistent delay in paying the rent as a reason that was exceptional. Not only did it constitute disobedience of the court's order, he said, but it was contumelious and contumacious. He ultimately relied upon such delay on two levels.

33. First that it justified the judge's exercise of discretion in making his costs order. Second that, if for whatever reason the order was flawed, the exercise of discretion would fall to this Court to exercise and in that context the delay would warrant a similar order.

34. The short answer to such reliance, in both of its aspects, is that the judge himself did not rely upon the delay in payment of rent. The plaintiff therefore could only seek to sustain the order of the judge upon such additional ground if it had served a respondent's notice (or indeed a notice of cross appeal, as some of the use sought to be made of the point of delay runs counter to the stance adopted by the judge). To meet the point Sir John indicated that he might make an application for leave to put in a respondent's notice, but in the event he did not do so. In my view, therefore, he cannot rely upon delay in the way he sought to. I would add that even absent that obstacle, I cannot see how the delay here could be regarded as an exceptional reason, moreover so exceptional as to warrant an order that the defendant pay the plaintiff's costs when the plaintiff could plainly not establish its case for an unless order.

35. In the result, notwithstanding the defendant's delay, I do not find it possible to reflect by means of a costs order the due condemnation it should receive. I would concur in the orders proposed by Liu JA.

36. The appeal is accordingly allowed, the judge's order for costs set aside and the Registrar's costs order restored. There will also be an order nisi that the plaintiff is to pay the defendant's costs of the appeal and before the judge.