KCK ENERGY CONSERVATION SYSTEM LTD v. CHAU KEE HOLDINGS CO LTD AND OTHERS

DCCJ 97/2020

[2021] HKDC 895

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 97 OF 2020

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DECISION

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THE APPEAL

1.  This is an appeal brought by the 2^nd and 3^rd defendants by virtue of a Notice of Appeal filed on 20 November 2020 against Master B. Mak’s order made on 6 November 2020 pursuant to which the costs of the summons filed by the 2^nd and 3^rd defendants on 19 March 2020 (“the Striking-Out Summons”) were summarily assessed at $40,000. 

CHRONOLOGY

2.  For the purpose of this appeal, the following events are relevant:

7 January 2020	Writ of Summons with Statement of Claim indorsed
19 March 2020	The Striking-Out Summons with supporting affirmation
9 April 2020	Amended Statement of Claim
8 May 2020	The plaintiff’s affirmation in opposition
27 May 2020	The 2nd and 3rd defendants’ affirmation in reply
8 June 2020	The 2nd and 3rd defendants’ summons to withdraw the Striking-Out Summons
6 November 2020	Master’s summary assessment of the costs of the Striking-Out Summons payable by the plaintiff
20 November 2020	Notice of Appeal
17 March 2021	Parties were directed by this court to obtain reasons for assessment from the learned Master
26 March 2021	The learned Master’s reasons for assessment of costs

LEGAL PRINCIPLES

3.  While this is an appeal from a decision of Master, this appeal is not dealt with by an actual rehearing of the matter, for it is trite (and undisputed) that a judge in chambers will not allow an appeal from a Master’s costs order unless it is unreasonable or the Master had erred in law.[1]

A PRELIMINARY POINT

4.  Before I deal with the grounds of appeal relied on by the 2^nd and 3^rd defendants, I should first of all consider the plaintiff’s preliminary point that the present appeal should be dismissed outright because, it was said, the 2^nd and 3^rd defendants did not set out their grounds of appeal in their Notice of Appeal.

5.  With greatest respect to Mr Ma, counsel for the plaintiff, this argument is totally unmeritorious.

6.  First of all, this appeal is made pursuant to Order 58 rule 1 of the Rules of the District Court (Cap.336H) (“RDC”).  Since generally speaking an appeal from a Master’s decision to a Judge in Chambers is conducted by way of rehearing, there is no requirement in Order 58 for any grounds of appeal to be inserted in the notice of appeal.  It is because of this that no space has been provided for the insertion of any grounds of appeal in either the proposed form provided in paragraph 58/1/8 of volume 1 of Hong Kong Civil Procedure 2021 or in the Form entitled “Notice of Appeal to Judge in Chambers (Order 58) – Appeal against Master’s Decision” as provided in the Judiciary website.

7.  As mentioned in the earlier part of this Decision, an appeal against a costs order made by Master is not conducted by way of rehearing, and the Master’s decision would not be overturned unless such a decision is considered unreasonable or the Master has erred in law.  However, in my view, while it must be a good practice for the grounds of appeal to be included in the notice of appeal in an appeal as to costs (if the circumstances permit – see the following paragraph), it is not a compulsory requirement, and the failure to do so would not render the notice of appeal liable to be struck out.

8.  Mr Ma’s argument has been made even weaker in the circumstances of the present case, because by the time when the notice of appeal was filed on 20 November 2020 (that was the last day of the 14-day appeal period stipulated under Order 58 rule 1(3) of the RDC), the learned Master has not yet provided his reasons for the costs assessment done on 6 November 2020 (the learned Master was not obliged to do so at that stage – see paragraph 6 of Yuan Chu Chen & Others v Chen Min Chun & Others (supra)).  It was for the above reason that this court directed the 2^nd and 3^rd defendants on 17 March 2021 to write to the learned Master and request for reasons for the summary assessment conducted on 6 November 2020.  The learned Master then provided such reasons on 26 March 2021 (“the Reasons for Assessment”), and subsequently the 2^nd and 3^rd defendants had lodged and served their written submissions and set out therein their grounds of appeal.    Hence, it is simply not open to Mr Ma to make the submissions as he did.

THE GROUNDS OF APPEAL

9.  The 2^nd and 3^rd defendants relied on the following grounds of appeal:

(1)   The learned Master had failed to take into account the written offer dated 22 May 2020 made by the 2^nd and 3^rd defendants (“the Written Offer Ground”);

(2)   The learned Master had failed to take into account the plaintiff’s unreasonableness in contesting the Striking-Out Summons (“the Conduct Ground”);

(3)   The learned Master was unreasonable in his assessment of costs (“the Quantum Ground”).

The Written Offer Ground and the Conduct Ground

10.  Mr Yu for the 2^nd and 3^rd defendants complained that the learned Master had failed to take into account the written offer which the 2^nd and 3^rd defendants made on 22 May 2020[2].  He also alleged that the learned Master did not consider the plaintiff’s unreasonable conduct in resisting the Striking-Out Summons.  Further, he criticised the learned Master for failing to mention these matters in the Reasons for Assessment.

11.  With greatest respect, I do not understand what Mr Yu could complain for, and how these grounds could assist him further, as the learned Master had made a costs order against the plaintiff.  The 2^nd and 3^rd defendants had already got what they wanted as far as “liability of the costs of the Striking-Out Summons” is concerned.

12.  In fact, Mr Yu had stated in the very first paragraph of his written submissions that:

“[…] The 2^nd and 3^rd defendants essentially disagree with the learned master’s assessment on quantum, which was summarily assessed in the sum of HK$40,000.00.”

13.  That being the case, I do not think it is necessary to consider Mr Yu’s submissions on these 2 grounds further.

The Quantum Ground

14.  Before I go into the 2^nd and 3^rd defendants’ complaints under this ground, it is worthwhile to set out the Reasons for Assessment in full first:

“1. On the face of the initial statement of claim, it was obvious that there was a lack of cause of action against the 2^nd and 3^rd defendants.

2. The supporting affirmation of the 3^rd defendant was for the purpose of exhibiting the 3 cheques showing that they were all drawn against the account of the 1^st defendant only.

3. The striking out application was indeed a simple and straightforward one. The engagement of counsel is not necessary.

4. The Affirmation of the 3^rd defendant in reply filed on 27 May 2020 added nothing to substantiate the striking out application and was therefore prepared unnecessarily.

5. The claim that the Legal Executive spent 14 hours in attending the matter is unreasonably excessive. In any event, the costs claimable for filing and serving of documents is not on hourly basis: see item 2 of Part 1 of Schedule 1 of Order 62, The Rules of the District Court.

6. Adopting a broad brush approach, I am of the view that the time required for the handling solicitor to deal with the striking out application including the argument on the question of costs should not exceed 9 hours and therefore a sum of $40,000 was awarded to the 2^nd and 3^rd defendants.”

15.  The 2^nd and 3^rd defendants’ complaints under this ground are that it is unreasonable for the learned Master to hold that:

(1)   the 2^nd and 3^rd defendants’ engagement of counsel was not necessary;

(2)   the filing of the 2^nd and 3^rd defendants’ affirmation in reply on 27 May 2020 was not necessary;

(3)   the time spent by the 2^nd and 3^rd defendants’ solicitors on the matter should not exceed 9 hours.

Engagement of counsel

16.  Mr Yu submitted that it is reasonable and necessary for the 2^nd and 3^rd defendants to engage counsel and advise on two questions of law, namely, (a) whether the plaintiff had properly brought personal claims against the 2^nd and 3^rd defendants; and (b) whether sections 26 and 26A of the Bills of Exchange Ordinance (Cao.19, Laws of Hong Kong) were applicable as a defence.

17.  This submission is rejected. 

18.  I totally agree with what the learned Master stated in paragraphs 1 and 3 of the Reasons of Assessment.  The learned Master’s view was not unreasonable, nor had he erred in law.  In the Statement of Claim, the only material facts which were related to the 2^nd and 3^rd defendants were that:

(1)   They were and are the directors of the 1^st defendant at all material times;

(2)   The 1^st defendant sent the plaintiff certain purchase orders for LED lights by email which were signed by the 2^nd defendant on behalf of the 1^st defendant;

(3)   The 2^nd defendant gave the plaintiff 3 cheques to settle the purchase price of LED lights owed by the 1^st defendant and two of those cheques were signed by the 2^nd and 3^rd defendants;

(4)   The aforesaid cheques were dishonoured, and the 2^nd and 3^rd defendants had failed and/or refused to pay the total sum of the dishonoured cheques.

19.  There is no dispute that the aforesaid dishonoured cheques were cheques drawn against the bank accounts of the 1^st defendant.  That being the case, I do not think there can be any doubt that the plaintiff had no reasonable cause of action against the 2^nd and 3^rd defendants.  The matter is so straight-forward that engagement of counsel, in my view, is unnecessary.

Affirmation in reply

20.  The learned Master took the view that the 2^nd and 3^rd defendants’ affirmation in reply “added nothing to substantiate the striking out application and was therefore prepared unnecessarily”.

21.  The 2^nd and 3^rd defendants disagreed.  Mr Yu submitted that:

“The learned Master failed to appreciate the true purpose of the affirmation was to address [the plaintiff’s] specific allegations made in paragraphs 54 to 60 of the [plaintiff’s affirmation in opposition] and to outline the thinking/planning involved before making a formal striking out application. It was proper for [the 2^nd and 3^rd defendants] to cover these matters in the affirmation to protect its costs position, following their intended withdrawal of the application.”[3]

22.  In a gist, in paragraphs 54 to 60 of the plaintiff’s affirmation in opposition, the plaintiff:

(1)   set out the procedural history of the present action;

(2)   exhibited some letters sent by solicitors of the respective parties on:

(i)  the service of the Writ;

(ii)  the 2^nd and 3^rd defendants’ request for time to file and serve their Defence; and

(iii)  the striking out application;

(3)   asserted that the 2^nd and 3^rd defendants, despite the aforesaid extension of time, did not file and serve their Defence, but took out the Striking-Out Summons;

(4)   explained that, having sought counsel’s advice upon the 2^nd and 3^rd defendants’ application for striking out, the Amended Statement of Claim was filed.

23.  I totally agree with the learned Master that there was no need for the 2^nd and 3^rd defendants to file any further affirmation in reply, because the matters referred to in paragraphs 54 to 60 of the plaintiff’s affirmation in opposition simply did not worth replying at all.  In fact, it is quite clear from such an affirmation that the plaintiff did not seek to argue that the Statement of Claim in its original form could survive the striking out application without amendment, and it was indeed upon counsel’s advice that the plaintiff decided to amend the Statement of Claim in the light of the striking out application. 

24.  Therefore, I do not accept the argument that the learned Master was unreasonable or that he had made any error in law.

Overall time spent

25.  Mr Yu argued that it was unreasonable for the learned Master to allow only 9 hours of work on the part of the 2^nd and 3^rd defendants’ solicitors when he assessed the amount of costs payable by the plaintiff. 

26.  As agreed by Mr Yu, the 2^nd and 3^rd defendants have the burden to show in this appeal that “the costs order of the learned Master was unreasonable and/or that the learned Master had erred in law in that he had failed to take into account proper matters or had taken into account irrelevant matters”[4].  In other words, this court is not doing the summary assessment afresh, and will not interfere with the learned Master’s assessment save on limited grounds referred to above.

27.  In the present case, by reference to the Reasons for Assessment, the learned Master had apparently taken the following matters into account when he made the assessment:

(1)   The Statement of Claim had obviously disclosed no reasonable cause of action against the 2^nd and 3^rd defendants;

(2)   The striking out application was simple and straight-forward;

(3)   There was no need to engage counsel in the striking out application;

(4)   The supporting affirmation was for the purpose of exhibiting 3 cheques only so as to show that they were drawn against the 1^st defendant’s bank account rather than the personal accounts of the 2^nd and 3^rd defendants;

(5)   There was no need to file and serve the affirmation in reply.

28.  The above matters are apparently relevant matters which the learned Master was entitled to consider.  I am not persuaded at all that the learned Master’s assessment was unreasonable or that he had failed to take into account any other relevant matters.

29.  This ground is therefore rejected.

CONCLUSION

30.  By reasons of the aforesaid, I dismiss the appeal brought by the 2^nd and 3^rd defendants.

COSTS

31.  I make a costs order nisi that the 2^nd and 3^rd defendants shall bear the costs of the appeal, and that, without disrespect, I do not certify the necessity of engaging counsel in the present appeal, which is a simple matter. 

32.  The above order nisi shall become absolute in the absence of application to vary within 14 days hereof.

33.  The plaintiff’s costs of the appeal shall be summarily assessed.  The plaintiff has already lodged and served its statement of costs on 4 June 2021.  Unless any application for variation of the aforesaid costs order nisi is made within time, the 2^nd and 3^rd defendants shall lodge and serve their statement of objection within 7 days after the expiry of the said 14-day period.  Summary assessment of the costs of the appeal will be conducted on paper (no matter whether any statement of objection is lodged by the 2^nd and 3^rd defendants within time) thereafter.  The costs assessed shall be payable by the 2^nd and 3^rd defendants within 14 days after assessment.