DMITRY YANISHEVSKIY v. MAXIM MOSKALEV

HCA 1840/2019

[2022] HKCFI 1452

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1840 OF 2019

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BETWEEN

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J U D G M E N T

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A. INTRODUCTION

1.  By a notice of appeal of 29th September 2021 (“the Notice of Appeal”), the Defendant seeks to appeal against the decision of Master Cruden of 15th September 2021 (“Decision”). By the Decision, Master Cruden:

1.1 set aside the judgment granted against the Defendant in default of notice of intention to defend of 24th August 2020 (“the Default Judgment”) on the ground that the Defendant had good arguable defences on the merits to the Plaintiff’s claims;

1.2 dismissed the Defendant’s application to discharge the order of Master SP Yip of 5th May 2020 (“the Service Out Order”), granting leave to the Plaintiff on an ex parte basis to issue the concurrent writ of summons in this action against the Defendant and to serve a copy of the same on the Defendant out of the jurisdiction; and

1.3 ordered that the Defendant pay the Plaintiff costs of and incidental to his application (“the Costs Order”).

2.  By the time of the appeal, the Defendant no longer sought to pursue the appeal relating to the Service Out Order, as he had already submitted to the court’s jurisdiction and filed a Defence on 25th November 2021.

3.  At the hearing, the parties agreed that I should first consider whether I should hear the appeal, the Plaintiff’s stance being that it was academic and the Defendant had not shown the exceptional circumstances justifying an exercise of discretion in favour of entertaining the appeal. Only if I decided that I should hear the appeal then should I go on to consider it by reference to the merits.

B. THE HISTORY OF THE PROCEEDINGS

4.  The Plaintiff issued the writ in these proceedings on 4th October 2019. Pursuant to the Service Out Order of 5th May 2020, a concurrent writ was issued on 19th May 2020.

5.  The Plaintiff’s process server inserted an envelope containing the concurrent writ through the slit in the main entrance door of 44 Cadogan Square, London, United Kingdom. The Defendant’s stance is that this was irregular service, the Service Out Order having granted leave to the Plaintiff to serve the concurrent writ on the Defendant at Flat 4, 44 Cadogan Square, London, United Kingdom or elsewhere in the United Kingdom.

6.  The Plaintiff obtained the Default Judgment on 24th August 2020.

7.  On 26th November 2020, the Defendant applied to set aside the Default Judgment and discharge the Service Out Order.

8.  Master Cruden set aside the Default Judgment on 15th September 2021, giving leave to the Defendant to file his Defence within 35 days. The terms of the order as drawn up by the Defendant’s solicitors (“the Order”) stated that:

“IT IS ORDERED that:

1. The Final and Interlocutory Judgment dated 24th August 2020 in this action granted against the Defendant in default of notice of intention to defend… be set aside … on the ground that the Defendant has good arguable defences on the merits…”

9.  On 30th September 2021, Master Cruden summarily assessed the Plaintiff’s costs at $988,600.

10.  The Defendant filed his Defence on 25th November 2021. The Plaintiff amended his Statement of Claim in December 2021 and re-amended it in March 2022. The Defendant filed his Amended Defence on 14th April 2022.

C. WHETHER THE APPEAL OUGHT TO BE ENTERTAINED

C1. The parties’ stances

11.  The Defendant has already succeeded in setting aside the Default Judgment and is currently actively defending the Plaintiff’s claim. The question therefore arises as to why he seeks to appeal against the decision to set aside the Default Judgment. It is not seriously denied that the real reason for doing so is for the purpose of supporting the challenge to the Costs Order: the Defendant seeks to argue that the Default Judgment was irregular and that this ought to be reflected in the Costs Order. That being the case, the Plaintiff objects to the appeal on the grounds that the appeal is academic and ought not to be entertained by the court.

12.  The stance of Mr Michael Lok, counsel for the Defendant, was that the issue of whether the appeal was academic was itself an academic one, given that in correspondence some time prior to the hearing, the Plaintiff’s solicitors had invited the Defendant to withdraw or discontinue his appeal against the setting aside of the Default Judgment on the basis that he would thereafter still be at liberty to argue that the Costs Order should be overturned on the ground that service was (allegedly) irregular. It was said, therefore, that the issue of irregularity would have to be determined in any event, in relation to the Defendant’s appeal against the Costs Order.

13.  However, in the course of his oral submissions at the hearing, Mr Abraham Chan SC, counsel for the Plaintiff, indicated that the Plaintiff now took the stance that it was not open to the Defendant to appeal against the Costs Order as of right; the appeal being an academic one, the Defendant would first need to persuade the court that it should exercise its discretion in favour of hearing the appeal, and the court ought not to exercise such discretion unless exceptional circumstances were shown.

C2. The principles

14.  In Re CY Foundation Group Ltd (2014) 17 HKCFAR 863 at [26], Ribeiro PJ reiterated that the Court’s approach to academic appeals was as stated in Po Fun Chan v Winnie Cheung (2007) 10 HKCFAR 676 at [18]:

“Rarely and exceptionally, the public interest in having a particular point of law decided can be so great as to warrant leave to pursue an application or appeal even though the case has become academic as between the parties save perhaps as to costs. Normally, however, a case should proceed no further…”

15.  An appeal lies against the order made in the court below, and not against the reasons for it. Where the order under appeal was correctly made, even though some of the bases for the making of the order were not accepted, the appeal is academic. Such appeals are not normally entertained: Lau Yue Kui and others v Philip Chan & Co, unreported, CACV 120/2013, 19th September 2013, at [9] per Barma JA.

16.  Where there is no issue between the parties as to the substantive relief to which the appellant is entitled, then even if the costs order would have been different had the court below held in favour of the appellant (that is, in the way contended for by the appellant on appeal), the court would not normally entertain the appeal: Tele-Art Inc v Tam King Ching Kenny and Shum Lap Chi, The Joint and Several Liquidators of Tele-Art Limited (In Liquidation), unreported, CACV 234/2007, 19th March 2008, at [20] to [22], [30], per Rogers VP.

17.  The court retains a discretion as to whether to entertain the appeal: Tele-Art Inc, supra, at [31]. However, it would do so only in rare and exceptional cases: Re CY Foundation Group Ltd, supra, at [18].

18.  The above decisions were in the context of appeals to the Court of Appeal or Court of Final Appeal. It is not, however, suggested that the approach in the present case should be a different one. Mr Lok fairly and frankly acknowledged that whilst an appeal under O.58 is a hearing de novo, there is a prior question of whether the court should exercise its discretion to hear the appeal at all, if the appeal is an academic one.

C3. Whether the appeal is academic

19.  In the present case, I agree with Mr Chan that the appeal is an academic one. Although the Order stated that the Default Judgment was set aside on the ground that the Defendant had good arguable defences on the merits, the mere fact that the reason was expressly stated in the Order does not alter the question of whether the Defendant would be able to obtain substantive relief on an appeal against the Order. The result of the Decision remains that the Default Judgment was set aside: a result in favour of the Defendant and of which he cannot, and does not, complain.

C4. Whether there are exceptional circumstances justifying hearing the appeal

20.  The next question is whether there are exceptional circumstances which justify an exercise of discretion in favour of hearing the appeal. Mr Lok relied on the following matters in this regard: (1) the costs at stake are substantial, (2) there were material non-disclosures by the Plaintiff, (3) the regularity of the Default Judgment is not a “one-off” issue, and (4) the same substantive arguments would have to be ventilated on the appeal, given the Plaintiff’s stance in correspondence that the Defendant could raise the issue of irregularity of the Default Judgment on his appeal against the Costs Order.

C4.1 Amount of costs at stake

21.  An argument that the Costs Order is wrong cannot in itself be an exceptional circumstance which justifies the hearing of an academic appeal, since a complaint that the court erred in its award of costs will underlie most, if not all, attempts to advance an appeal which is academic save as to costs.

22.  The Plaintiff submitted that in any event, even where a judgment entered in default is irregular, it is not inevitable that the defendant would obtain an award of costs in his favour, citing Kwan Kam Wah v Chan Wai Ming [2000] 2 HKC 378 and Liu Chong Hing Bank Ltd v Union World (HK) Ltd [2004] 1 HKC 622 as examples where costs were ordered to be in the cause.

23.  The Defendant has instead pointed to the amount of costs at stake in the present case as being the feature which justified the exercise of the court’s discretion in his favour to hear his appeal. However, whilst the amount of the costs is substantial, it is not disputed that part of the costs relates to the Defendant’s application to discharge the Service Out Order, which failed before the Master and which is not challenged on appeal. No evidence was placed before me to what portion of the costs were attributable to the Defendant’s application to set aside the Default Judgment.

24.  Mr Lok further submitted that the amount of the Costs Order should exceed the reasonable costs of the half-day hearing before the court, the suggestion being that an appeal would therefore not be a disproportionate use of court time. However, it was also the Defendant’s stance that insofar as the Plaintiff wished to place certain material before the court which related to the issue of costs, this could not be done until the court had first determined whether or not the appeal could be entertained. I make no criticism of this stance, which resulted from the nature of the Plaintiff’s material, but it undermines the argument as to proportionality: two separate hearings and determinations would be necessary for the Defendant’s intended appeal.

C4.2 Non-disclosures by Plaintiff

25.  As to (2), the Defendant submitted that there were material non-disclosures as to service (in that the Plaintiff had failed to properly draw attention to the fact that the writ had been inserted through the slit in the main entrance door of 44 Cadogan Square rather than that of Flat 4) and as to whether the Defendant might have good defences to the Plaintiff’s claim on the merits.

26.  Mr Chan submitted that even though the Plaintiff had a duty of disclosure as regards service, the issue of whether the Plaintiff had properly discharged this was simply part and parcel of the argument as to whether service was properly effected in the present case. The Plaintiff had exhibited an affidavit of service from the process server in London, in which the server described how he was unable to gain access into the lobby of the townhouse at 44 Cadogan Square and eventually came to simply post the writ “through the letterbox of the property”. I agree with Mr Chan’s submission that no separate issue of material non-disclosure arises which somehow forms an exceptional feature justifying the court hearing an appeal as to the regularity of the service of the writ; the contents of the Plaintiff’s evidence as to service is simply an aspect of the dispute over the regularity of service.

27.  As to the alleged non-disclosure regarding the Defendant’s potential defences, Mr Lok submitted that there were defects in the Statement of Claim going to the existence or validity of the promissory note which founds the Plaintiff’s claim, and that these ought to have been disclosed when obtaining the Default Judgment. Mr Chan submitted that there was no authority to support the proposition that a material non-disclosure could constitute a ground to set aside a default judgment, save in the case of a judgment granting declaratory relief. Given the essentially ex parte nature of an application for default judgment, I do not consider it appropriate to say that no material non-disclosure could ever be relevant (cf. Sky Joy Investment Limited v Zheng Dunmu and another, unreported, HCA 395/2016, 16th August 2017, at [49] to [50]). In the present case, however, it seems to me that the arguments simply go to the merits of whether or not the Default Judgment should have been set aside for irregularity. In other words, these are simply arguments as to the merits of the appeal, rather than exceptional features which justify the exercise of discretion to hear the appeal in the first place.

C4.3 Regularity of the Default Judgment not a one-off

28.  As to (3), it was said that the question of the regularity of the Default Judgment was not a “one-off”, and the court’s decision could “contribute to the discussion sparked by the recent English authorities cited by D Expert”.[1]

29.  The relevance or utility of a decision is a relevant consideration to take into account when deciding whether to entertain an appeal which is academic save as to costs: Chit Fai Motors Co Ltd v Commissioner for Transport [2004] 1 HKC 465 at [20(3)]. As Ma CHJC (as he then was) went on to say, this may be easier to demonstrate in the sphere of public law rather than in relation to private rights. In the present case, whether service of the writ was properly effected is fact-sensitive. Indeed, Mr Lok’s submissions as to the irregularity of the service relied on matters such as the fact that another process server on another occasion was able to gain access to the interior of the townhouse at 44 Cadogan Square, the fact that there was no letterbox behind the slit in the main entrance door, and on the Defendant’s evidence as to how mail was usually handled at 44 Cadogan Square. I do not agree that a decision as to the regularity of the Default Judgment would provide any particular jurisprudential contribution.

C4.4 Plaintiff’s stance

30.  As to (4), it was said[2] that “crucially, in the present case, the same substantive arguments can and will be ventilated in this appeal in any event”, given that the Plaintiff had indicated that the Defendant would be at liberty to challenge the Costs Order on the ground that the Default Judgment was irregularly obtained. Mr Lok relied heavily on this for his submission that the time and costs which would be required for argument would be the same whether or not the appeal was academic.

31.  However, as noted above, Mr Chan resiled from this position at the hearing. I agree with Mr Chan’s submission that in the event that I find that the appeal is academic (save as to costs), and that there are no exceptional circumstances justifying the hearing of the appeal, there is no room for the Defendant to nevertheless separately advance an appeal as to the Costs Order only by reference to paragraph 2 of the Notice of Appeal. This is because the Defendant’s challenge to the Costs Order is predicated on the challenge to the setting aside of the Default Judgment. It is not being said, for example, that the Costs Order was excessive even if the Master’s decision as to the setting aside of the Default Judgment stands. Accordingly, it is not the case that the issue of the regularity of the Default Judgment would have to be determined in any event.

C4.5 No exceptional circumstances made out

32.  I therefore do not consider that the Defendant has made out any exceptional circumstance which justifies hearing his appeal against the Decision.

D. DISPOSITION

33.  I therefore dismiss the appeal. I further make a costs order nisi that the Defendant should pay the Plaintiff the costs of and occasioned by the appeal, with certificate for two counsel, to be taxed if not agreed.