RE YU MAN

CACV 380/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL 380 of 2003

(ON APPEAL FROM HCB No. 14971 OF 2003)

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REASONS FOR JUDGMENT

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Hon. Woo JA: 

1.  I agree with the judgment and observations of both of my colleagues.

Hon. Yeung JA:

2.  I have read the draft judgment of Yuen JA and I agree with it. I only wish to add the following.

3.  Whatever were the true meaning and effect of the costs order made by Registrar Chan on 5 March 2003, it was varied by his order of 21 March 2004.

4.  When Chan Bing Foon issued a statutory demand with a view to bankrupt Yu Man based on Registrar Chan’s order of 5 March 2003, it was incumbent upon the solicitors acting for him to refer to the varied order of 21 March 2004 and not just the order of 5 March 2003.

5.  Regrettably Chan Bing Foon’s solicitors failed to do so. If it was a deliberate decision, such failure must be condemned, as it was an attempt to mislead the court. If the failure was the result of inadvertence, steps should be taken to ensure that the mistake would not be repeated.

6.  There can be no doubt that the costs order of 21 March 2003 is not a gross sum order.  It only confirms Yu Man’s liability to pay the costs of the hearing of 5 March 2003 and that such costs are to be taxed if not agreed.  It is not susceptible to any other interpretation, certainly not those advanced by Mr Wu.

Hon. Yuen JA:

7.  This judgment is given in English as all parties to the appeal were legally represented.

8.  On 9 December 2004, this court heard Mr Yu Man’s appeal from Deputy Judge To’s order given on 10 November 2003 making a bankruptcy order against him. 

9.  At the conclusion of the hearing, this court allowed the appeal, set aside the Bankruptcy Order and ordered that Yu Man’s costs and the Official Receiver’s costs of the appeal and the bankruptcy proceedings be borne by the petitioner Mr Chan Bing Foon, to be taxed if not agreed, Yu Man’s own costs to be taxed in accordance with Legal Aid Regulations.  This court indicated that the reasons for the judgment would be reduced into writing and handed down in due course. 

10.  The history of the proceedings between Yu Man and Chan Bing Foon is lengthy and complex.  The following sets out only that part of the background that is relevant to this appeal. 

HCA 8334/1991 - Action by Yu Man

11.  In 1991, Yu Man commenced an action (HCA 8334/1991) in which he sued Chan Bing Foon as 1^st Defendant, and Mr Tse Kei and Mr Chan Chuen as 2^nd Defendants.

12.  In 1994, Yu Man’s action was dismissed and he was ordered to pay costs to Chan Bing Foon ,Tse Kei and Chan Chuen.

13.  In 1995, the costs were assessed by the taxing master at $227,766.  

Charging Order

14.  Yu Man did not pay those costs.  Consequently on 21 April 1995, Chan Bing Foon, Tse Kei and Chan Chuen obtained a charging order absolute, charging Yu Man’s flat in Tung Fong Building with the payment of $227,766, interest on that sum at the statutory rate and the costs of the application for the charging order ("the Charging Order"). 

HCMP 7741/1999 - execution proceedings by Chan, Chan & Tse

15.  On the basis of the Charging Order, Chan Bing Foon as 1^st Plaintiff, and Tse Kei and Chan Chuen as 2^nd Plaintiffs, commenced HCMP 7741/1999 for an order for the sale of the Tung Fong Building flat.

Order for Sale of Tung Fong Building flat

16.  On 7 June 2000, Registrar Christopher Chan made an order, amongst others, that unless the Charging Order is redeemed and costs paid, the Tung Fong Building flat be sold at a reserve price of $800,000.

Death of Tse Kei

17.  On 11 October 2001, one of the 2^nd Plaintiffs, Tse Kei, died. 

Summons for variation of reserve price

18.  On 21 February 2003, a summons was issued by Tang and So as solicitors representing "the plaintiffs" in HCMP 7741/1999 which, on the face of it, would be understood to refer to Chan Bing Foon, Chan Chuen, and Tse Kei as well, even though he had died the previous year.  The summons was for an order that the reserve price be reduced to $500,000. 

19.  An affirmation was filed by Mr Liu Chung Yin, a solicitor of Tang and So, exhibiting valuation evidence in support of a reduction in the reserve price.  There was no reference to Tse Kei’s death in the affirmation.

20.  The summons was heard by Registrar Chan on 5 March 2003.  Yu Man was absent. 

Registrar Chan’s Order of 5/3/2003 - gross sum order

21.  Registrar Chan made an order that the reserve price be reduced to $500,000. 

22.  More importantly for present purposes, he ordered Yu Man to pay the 1^st and 2^nd plaintiffs the costs of that application "assessed at $12,000". 

23.  The order was not expressed as a gross sum in lieu of taxed costs under Order 62 rule 9(4)(b) Rules of the High Court, but since an exact sum of costs was specifically ordered to be paid without the process of taxation, it is reasonable to think that it was a "gross sum" order.  This was common ground between Mr Thomas Au counsel for Yu Man, and Mr Paul Wu counsel for Chan Bing Foon. 

Yu Man’s Summons to set aside 5/3/2003 Order

24.  On 12 March 2003, Yu Man issued a summons to set aside the order of 5 March 2003. 

Registrar Chan’s Order of 21/3/2003 - costs to be taxed if not agreed

25.  The summons was heard by Registrar Chan on 21 March 2003.  The Registrar set aside paragraph 1 of the order he made on 5 March 2003 and gave directions for the summons to be heard. 

26.  As for paragraph 2 of the order he made on 5 March 2003, he ordered in paragraph 4 of the order of 21 March 2003:

"被告人須要向原告人繳付在2003年3月5日陳爵司法常務官的命令第二段訟費如雙方不同意，由法庭審核；".

27.  The construction of that order is important.  Was that a gross sum order?  Or was it an order for costs to be taxed if not agreed?  I shall revert to this in the later part of this judgment.

28.  On 25 March 2003, Yu Man issued a summons "to set aside all costs orders pending determination of all appeals".  On 8 September 2003, Yu Man also issued a summons for an extension of time "to overturn, set aside or dismiss costs of 5 March 2003 $12,000". 

Statutory demand

29.  Meanwhile, on 28 June 2003, Chan Bing Foon issued a statutory demand against Yu Man for the sum of $12,000 purportedly as a judgment debt together with interest thereon.  No payment was made.

Bankruptcy Petition

30.  On 7 August 2003, Chan Bing Foon presented a Petition based on the non-payment of the said sum of $12,000.  In support of the Petition, Mr Liu filed an affirmation referring to Registrar Chan’s costs order of 5 March 2003 which was the basis of the Petition, but did not refer to his order of 21 March 2003.  Although 3 other affirmations were filed in support of the Bankruptcy Petition, it has not been suggested by Mr Wu that the order of 21 March 2003 had been referred to in any of them.

31.  On 10 November 2003, Deputy Judge To heard the Bankruptcy Petition.   Deputy Judge To’s judgment also did not refer to Registrar Chan’s order of 21 March 2003.  Clearly therefore, Deputy Judge To made the Bankruptcy Order in ignorance of the order of 21 March 2003.

No debt for liquidated sum

32.  In my view, if Deputy Judge To has been made aware of Registrar Chan’s Order of 21 March 2003, he would not have made the Bankruptcy Order.  Although Registrar Chan’s Order of 5 March 2003 was a gross sum order, by making the Order of 21 March 2003 he set that aside and replaced it with an order for costs to be taxed if not agreed.  As no agreement or taxation had occurred by the time of the Statutory Demand or Petition, there was no debt for a liquidated sum for which the Petition could be presented.  It is well-established that costs awarded to a litigant are not liquidated until taxed and made the subject of an allocatur (Re a Debtor, ex p Debtor v Scott [1954] 1 WLR 1190, at 1198, C.A.)

33.  I do not agree with Mr Wu’s submission that the Order of 21 March 2003 meant that Yu Man was to pay the gross sum of $12,000 subject to taxation if he did not agree to it.  That could not have been what the Registrar meant.  The Rules of the High Court simply do not allow or permit a procedure of taxation of a gross sum.  It is unlikely that Registrar Chan would not have been aware of that.  Further although Registrar Chan referred to paragraph 2 of his Order of 5 March 2003, the sum of $12,000 was not referred to.

34.  Nor do I agree with Mr Wu’s submission that what Registrar Chan meant was that if Yu Man did not agree with the gross sum, he could appeal.  Such an argument was simply not open to him on the wording of the Order of 21 March 2003.

35.  Therefore the only reasonable construction of paragraph 4 of the Order of 21 March 2003 was that the Registrar maintained paragraph 2 of his Order of 5 March 2003 in that Yu Man was liable to pay the costs of the hearing on that day, but in place of the gross sum of $12,000, he was to pay costs to be taxed if not agreed.

36.  As for Mr Wu’s submission that Yu Man must be taken to have agreed the sum of $12,000 because he did not indicate his disagreement thereafter, that contention ignores the summons of 8 September 2003 referred to in paragraph 28 above. 

37.  It is clear therefore that there was no debt for a liquidated sum and the Bankruptcy Order was made in error.  That was sufficient for the appeal to be allowed.  It was therefore not necessary for us to consider Mr Au’s second ground which was based on the effect of  Tse Kei’s death on Tang and So’s retainer.