CHENG, HENRY v. IMPERIAL SIERRA GROUP HOLDINGS LTD AND ANOTHER

DCCJ 5318/2019

[2020] HKDC 605

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5318 OF 2019

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DECISION

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INTRODUCTION

1.  This is an appeal brought by the 1^st defendant (“D1”) against a master’s decision. 

2.  The appeal was originally fixed for hearing before me on 21 July 2020.  However, due to the General Adjournment Period announced on 19 July 2020, the case was adjourned.

3.  By an application made on 22 July 2020, the parties invited the court to deal with the appeal by way of paper disposal.  The court considers that this is an appropriate case to do so and hence has acceded to the request.

BACKGROUND

4.  This is a case where the plaintiff (“P”) and D1 have locked into a bitter dispute.  In short, the latest episode is that P had taken out a statutory demand against D1 on rather flimsy grounds in July 2019.  D1 applied to set aside the statutory demand in the High Court under HCSD 37/2019 in August 2019 (“the HCSD Action”).  P then wrote to the court to apply to withdraw the statutory demand and asked for the hearing to be vacated.  D1 proposed that the statutory demand be set aside with costs to be assessed on paper.  P did not reply to the proposal which led to a hearing before Deputy High Court Judge Leung (“DHCJ Leung”) on 23 October 2019.   Unsurprisingly, DHCJ Leung while allowing P to withdraw the statutory demand at the hearing, ordered P to pay D1’s costs which was summarily assessed at HK$45,000.  P was ordered to pay it within 14 days (“DHCJ Leung’s Order”).

5.  In the meantime, P has issued the writ of summons in the present proceedings in the District Court on 27 September 2019 but did not file the statement of claim until D1 issued a summons to dismiss the claim. The statement of claim was only filed on 15 November 2019 after further extension of time was granted by the court.   

6.  On 19 May 2020, D1, together with the 2^nd defendant (“D2” and collectively as “Ds”), issued 2 separate summonses to apply to strike out P’s action and seeking security for costs from P (“P’s Striking Out and Security for Costs Summonses”).

7.  On 25 May 2020, Registrar Lui adjourned the hearing of those 2 summonses to 3 August 2020 before Master B Mak for full argument with 3 hours reserved.

8.  P did not pay the assessed costs within 14 days as ordered by DHCJ Leung.  Despite repeated demands from D1’s solicitors, P has failed to pay the costs for a period of over 7 months.

9.  However, in the meantime, D1 applied under the HCSD Action for a charging order against a property situated in a luxurious development owned by P in Hong Kong.  A charging order nisi was granted by Master J Wong in the High Court on 11 March 2020.  P was ordered to show cause as to why the charging order should not be made absolute before Master Kot in the High Court on 15 June 2020.  The charging order was made absolute before Master Kot on that occasion with fixed costs of $9,100 awarded against P.  P did not appear at the hearing in person or by legal representative.        

10.  Despite having secured the charging order nisi against P in March 2020 and having fixed a hearing before Master Kok to make the order nisi to become absolute on 15 June 2020, on 9 June 2020, Ds took out a 3-minute summons for a Hadkinson Order to be imposed on P, ie unless P pays the costs and interest of the HK$45,000 ordered by DHCJ Leung, P be barred from being heard at the hearing on 3 August 2020 (“the Hadkinson Summons”).

11.  On 23 June 2020, Master B Mak dismissed the Hadkinson Summons.  In his oral reasons for the ruling, the learned Master held that Ds having made an application to impose a charge on P’s property forcing P to satisfy the costs order of DHCJ Leung, there was no compliance issue as far as payment of the High Court proceedings is concerned.  Further, as P by this action is making a claim against Ds, P should be entitled to have his day in court.  For those reasons, the master considered that P should not be barred from proceeding his claim in this court.       

12.  D1 now appeals against Master B Mak’s decision.

DISCUSSION

(i) What is a Hadkinson Order?

13.  This is a draconian measure seldom used in modern day litigation.  It originated from a 1952 matrimonial case in Hadkinson v Hadkinson [1952] 2 ALL ER 567 where the English Court of Appeal laid down the rule that a person who has committed a contempt should not be heard or entertained by the court until he had purged his contempt.  Lord Denning, who was one of the justices of appeal in that case, specifically stated that the court would only refuse to hear a party to a cause when the contempt impeded the course of justice by making it more difficult for the court to ascertain the truth or to enforce its order and there was no other effective means of securing his compliance.  The court might then in its discretion refuse to hear him until the impediment was removed or good reason was shown why it should not be removed: per Denning LJ (as he then was) at 575B.                

14.  There is no major dispute as to the legal principles involved in a Hadkinson Order in this case.  However, I wish to note here that in almost all the cases cited by the parties involving a Hadkinson Order, they are in the context of matrimonial proceedings.  They are seldom found or used in general civil litigation.  At least I have not come across any.  However, that of course does not mean they cannot be used in such cases.       

15.  Perhaps it is important to bear in mind that in the very case which laid down the rule, the court stated that “it is a strong thing for a court to refuse to hear a party to a cause” and a Hadkinson sanction is “only to be justified by grave considerations of public policy”: Hadkinson v Hadkinson, supra at 574H, per Lord Denning.

16.  Further, it has been stated by our own Court of Appeal that “the Hadkinson sanction should be a last resort and the exercise of the power is to be guided by asking whether in the circumstances, the interest of justice is best served by hearing or refusing to hear a party in contempt, bearing in mind that the paramount importance of orders of the court being observed”: THY v CHFR, unreported, HCMP 1755/2015 (23 September 2015; Lam VP and Barma JA), at §6, per Lam VP.

17.  In M v M (Maintenance Pending Suit: Enforcement on Dismissal of Suit) [2009] 1 FLR 790, Bodey J observed, at §52:-

“Any Hadkinson application needs to be approached with circumspection since, whilst the concept may, of course, be justified to meet the needs of a particular case, there is always the risk that it will not succeed and will be a mere distraction. Such an order is a remedy of last resort, for use where the circumstances are such that adequate justice cannot be done to the aggrieved party whilst the defaulter remains in breach.” [Emphasis added]

18.  Given the above, in my judgment, one must treat the Hadkinson sanction as the last resort and must not lose sight of whether the interest of justice will be best served by barring a party in contempt his right to be heard.

(ii) Criteria to be met in a Hadkinson Order

19.  As said, the parties have no substantial dispute over the criteria required.  

20.  In an application for a Hadkinson Order, the court would consider the following questions:-

(a)  Is the offending party in contempt?

(b)  Is there an impediment to the course of justice?

(c)  Is there any other effective means of securing compliance with the court’s orders?

(d)  Should the court exercise its discretion to impose conditions having regard to the question?

(e)  Is the contempt wilful?

(f)  Are the conditions proportionate?

See: Hadkinson v Hadkinson, supra. See also Mubarak v Mubarik (No 2) [2007] 1 WLR 271; DS v HR [2019] EWHC 2452 (Fam).

(iii) Findings of the court

Is P in contempt? Is the contempt wilful?

21.  In my view, these 2 criteria can be considered together. 

22.  Mr Simon So for D1 submits that the mere fact of a non-compliance of a money order is a contempt.  The court does not need to consider whether P’s non-compliance was wilful and/or contumelious. He cited what Bodey J has stated in Mubarak v Mubarik (No 2), supra at §56 to support his argument in this regard.

23.  D1 further relies on the fact that P has, through his solicitors, replied to the defendants’ “demand letters” to say that he “would not pay”.  However, the only letter produced by D1 from P’s solicitors dated 11 November 2019 does not say that.  It merely stated that what P is claiming in the present proceedings is much more than the costs he was ordered to pay by DHCJ Leung in the HCSD Action.  That in my view of course is not a good reason for not complying with a court order.       

24.  P chose not to make any submissions in respect of this part of D1’s submissions.  This is not surprising as I do not think they have any valid answer to it. 

25.  It has not been suggested by P or his solicitors that he could not afford to pay the $45,000 assessed costs.  The only reason they gave is that the claims he made in the present proceedings against Ds are much greater than that sum.  In fact, he had instructed solicitors and counsel to contest all the proceedings, including at least 2 3-minute summonses.  Hence, it does not appear that it was due to the lack of funds that P had caused him to fail to pay the assessed costs and paid it on time.  Rather, if one were to read P’s counsel submissions, there was no denial that there was a breach of the court order.  However, no apology or explanation was rendered by P for the breach. 

26.  In my judgment, there is no doubt that P was in breach of DHCJ Leung’s Order, which required him to pay the assessed costs of HK$45,000 and within 14 days from the date of the Order.  In my view, the non-payment of the amount of costs ordered by DHCJ Leung within the time specified would amount to a contempt.  Further, I find the contempt was a deliberate and willful one.

Is there an impediment to the course of justice?

27.  Lord Denning in Hadkinson v Hadkinson, supra at 298, defined an impediment to the course of justice as “by making it more difficult for the court to ascertain the truth or to enforce the orders which it may make”.  D1 by citing what Deputy District Judge KK Pang (as he then was) in TYM v WSP, unreported, FCMP 309/2014 (19 October 2016) said at §26 submits that there was no impediment to the course of justice in this case:-

“The 1st Respondent argued that typical examples of impediment to the course of justice was where a litigant fails to comply with an order for specific discovery, or a party to a matrimonial proceeding refusing to file his Form E. The contempt of those litigants would impede the course of justice in the sense that it would make it more difficult for the court to carry out its functions in resolving the dispute between the parties. … After having carefully considered, I accept the 1st Respondent’s argument that there is no impediment of the course of justice involved in the present case.” [Emphasis added]

28.  One salient fact I find in this case is that Ds had wasted no time in trying to secure the $45,000 assessed costs owed by P once they found out that he owns a property in Hong Kong.  They applied to the court under the HCSD Action to impose a charging order against P’s property in order to satisfy the judgment debt.  According to the charging order nisi made by Master J Wong in the High Court on 11 March 2020, the application relied on affidavit evidence filed as early as on 27 December 2019.  That was within a few weeks after the 14-day deadline imposed by DHCJ Leung had expired.       

29.  Yet, just a few days before that hearing before Master Kot on 15 June 2020, D1 chose to issue the Hadkinson Summons to be heard before Master B Mak on 23 June 2020. To me, this was a rather unnecessary and aggressive move to make. It certainly could not be considered as the last resort for D1 to secure the judgment debt.

30.  In my judgment, D1’s claim for the assessed costs ordered by DHCJ Leung (plus interest for the judgment debt and the fixed costs for securing the charging order) have been secured in the charging order absolute imposed by Master Kot on the property.  By the time of the hearing before Master B Mak on 23 June 2020, I agree with the master that there was no compliance issue as far as the payment of the costs of the HCSD Action is concerned.  That payment was secured by the charging order.

31.  On the other hand, both P’s claim against Ds under the statement of claim and D1’s applications under the Striking Out and Security for Costs Summonses are based on totally different causes of action and/or grounds.  I do not see how the failure on the part of P to pay the assessed costs under DHCJ Leung’s Order within the time limit imposed will somehow able to impede the course of justice in the present proceedings. In my judgment, it will not make it more difficult for the court to ascertain the truth or to enforce the orders which it may make in this case.

Is there any other effective means of securing compliance with the court’s orders?

32.  P submits that D1 has other effective means of securing compliance of the court’s order in this case in that D1 has already secured a charging order against a residential property in a luxurious development owned by P.

33.  Mr Y L Zhu for P submits that a charging order on the property or assets of the debtors is one of the modes of enforcement of a judgment or order for the payment of money to the creditor.  However, he concedes that this is not a direct mode of enforcement in the sense that the creditor can immediately proceed to recover the fruits of his judgment, but is rather an indirect mode of enforcement in the sense that it provides the creditor with security, in whole or in part, over the property of the debtor.  It makes the creditor a secured creditor, who having obtained his charging order must proceed, as may be necessary according to the nature of the property, to enforce his charge in order to obtain the actual proceeds of his charge to satisfy his judgment, in whole or in part: See Hong Kong Civil Procedure 2020, Vol 1, §50/9A/17.    

34.  Thus, P submits that the charging order, which D1 has charged to P’s property, is a mode of enforcement of the judgment debt and that judgment debt P owes to D1 is secured by the operation of the charging order.   

35.  I agree. 

36.  In my view, D1, having secured a charging order against a property owned by P, has already found an effective means of securing P’s compliance of DHCJ Leung’s Order in the HCSD Action.  The Hadkinson Order it now seeks for therefore will be superfluous and cannot be regarded as the last resort.

Are the conditions proportionate?

37.  Having already secured a charging order against P’s property, D1’s proposed order under the Hadkinson Summons to bar P from being heard at the hearing on 3 August 2020 in my view represents a totally disproportionate means to achieve its ends.  It is like using a sledgehammer to crack a nut.  In my judgment, whether P’s claims in the present proceedings consist of any merits at all, he has a right to be heard.  Equally, if D1’s applications for the striking out and security for costs have any merits at all, P is entitled to have his day in court to defend himself.

Should the Court exercise discretion to impose conditions?

38.  In the aforesaid premises, I do not consider the interest of justice will be best served by barring P from appearing at the hearing of the Hagkinson Summons scheduled before on 3 August 2020.   

Procedural matters

39.  P tries to argue that the Hadkinson Summons involves with case management direction only and hence the written transcript of the master’s reasons should be produced.  P cited Li Kai Yin v Atta-Trans Ltd and Another (unreported, HCPI 196/2009, 18 July 2011), per Bharwaney J at §29 to support his argument.

40.  With respect, I consider this is a desperate attempt on the part of P to frustrate D1’s appeal.  First, I do not agree that the hearing before the learned master on 23 June 2020 was merely a case management direction hearing.  If D1 succeeded in the Hadkinson Summons, it will clearly affect the substantive rights of P.  Second, I can understand where there is an appeal against a master’s decision involving substantial arguments (like the one in Li Kai Yin, supra), transcript should be obtained so that the judge hearing the appeal would not have to “spend a considerable amount of time to listen to the audio recording of those reasons”: at §29.  However, this appeal concerns a 3-minute summons. The judge hearing the appeal can easily listen to the audio recording of the hearing in order to find out what took place before the master if he/she wishes to.  I do not see why transcript would be necessary under such circumstances.

41.  Of course, my view on the above procedural matters will not affect my decision on the appeal itself.

CONCLUSION

42.  Based on the above discussions, I am of the view that it will not be appropriate to grant a Hadkinson Order in this case.   

43.  I therefore would dismiss D1’s appeal and affirm the learned master’s order made on 23 June 2020.  

44.  Costs should follow the event.  I make an order nisi that D1 do pay the costs of the appeal, such costs to be summarily assessed, with certificate for counsel.  Unless there is any application from the parties to vary the same within 14 days, the costs order will become absolute.

45.  For the purpose of the summary assessment, I further direct that P to lodge a statement of costs within 7 days from the expiry of the 14 day period mentioned in the preceding paragraph with copy served on D1 and D1 to lodge its statement of objection within 7 days thereafter with copy served on P.