LCC v. LTLA

FCMC 10000/2017

[2019] HKFC 112

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATROMONIAL CAUSES NO. 10000 OF 2017

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Decision
(leave to appeal out of time)

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1.   This is the Respondent’s application for leave to appeal out of time against the Costs Order made on 14 December 2018 whereby the Respondent was ordered to pay the Petitioner’s costs of the Financial Dispute Resolution (“FDR”) hearing (“the Costs Order”). The Respondent also seeks stay of execution of the Costs Order pending determination of appeal.

2.   Section 63A of the District Court Ordinance Cap 336 provides that leave to appeal shall not be granted unless the court is satisfied that the appeal has a reasonable prospect of success or there are some other reasons in the interests of justice that the appeal should be heard.  It is trite that the duty of showing reasonable prospect of success falls upon the applicant for leave to appeal.

3.   The relevant test for determining whether the appeal has a reasonable prospect of success is whether the applicant for leave can show that he or she has an arguable case with reasonable chances of success on appeal.  A reasonable prospect of success means an appeal with prospects that are more than “fanciful” but which do not need to be shown to be “probable” (see: KNM v HTF[2010] HKEC 1210)

4.   In determining whether leave to appeal out of time should be granted, the following factors have to be considered:-

(a) the length of the delay;

(b) the reasons for the delay;

(c) the prospects of success;

(d) the extent of prejudice that would be caused to the other party if leave is granted.

(see : Norwich and Peterborough Building Society v Steed [1991] WLR 449 followed in Birkenhead Properties & Investments Ltd v Leung Yiu & Ors [1998] 1 HKLRD 527)

Grounds of Appeal

5.   According to the Draft Grounds of Appeal, the grounds of the intended appeal in gist is that a FDR judge is not permitted to make adverse costs order upon a failed FDR because it is contrary to the principle behind the FDR process.

6.   In reliance on Myerson v Myerson [2008] EWCA Civ 1376, the Respondent submitted that a FDR Judge who has been armed to conciliate by the provision of all the privileged communications can only do one of three things: set up a further FDR appointment, make a consent order or give directions for trial.  Making adverse costs order is not permitted.

7.   It is further submitted that since the objective behind the FDR process is to encourage settlement and in particular to protect without prejudice communications, it is therefore profoundly wrong to make the Costs Order “based on privileged discussion”.

Discussion

8.   First of all, a judge conducting a FDR hearing has the power to award costs against a party. Paragraph 13 of Practice Direction provides as follows:

“13. General provision as to costs

In addition to having the power to make an order for costs under Paragraph 5(a)(ix) above, the judge hearing the First Appointment or conducting the FDR hearing, without prejudice to any other power that he may have to award costs against any of the parties before him, may also make such order as to costs as he considers appropriate having regard to all the circumstances including a party’s failure to comply with any of the terms of this Practice Direction.” 

9.   Secondly, the making of the Costs Order was not based on any privileged discussion. The Respondent was penalized on costs because of his unreasonable conduct which has jeopardized the whole system and spirit of dispute resolution.

10.  The following is the relevant background:

(a)  In preparation for the FDR hearing, the two legal teams have attempted to agree on the valuation of properties which was the very foundation of their negotiation. Agreement was only reached a couple of days before the FDR hearing. An agreed schedule of properties with agreed valuation (“the Agreed Schedule”) was lodged with the Court a day before the FDR hearing.

(b)  At the beginning of the FDR hearing, parties confirmed that they were ready to proceed on the Agreed Schedule.

(c)  Having heard the Court’s observation and indication on the issues in dispute, parties proceeded to negotiation outside courtroom.

(d)  When parties returned to report on the progress of negotiation, the Court was informed by the Respondent’s counsel that the Respondent disagreed with the valuation despite the Agreed Schedule. Despite that the valuation was just agreed a few days ago, the Respondent reneged on the agreement and asserted that the property market has dropped.

(e)  As a result, the FDR hearing could not proceed and the cost of FDR was wasted. As the Respondent had reneged his agreement on the valuation, there had not been and could not be an effective and viable FDR hearing.

(f)  Having regard to the circumstances and the Respondent’s unreasonable conduct, I therefore exercise my discretion to award costs against the Respondent.

11.  Among the authorities relied on by the Respondent, two of them  deal with the limitation of function and power of a FDR judge. However, I do not think they are of assistance to his application.

(a)  The quote from Myerson v Myerson (supra) as to what a FDR judge can do after a failed FDR is echoed in Paragraph 8 of Practice Direction 15.11, but it does not preclude the power to make a cost order which is permitted under Paragraph 13 of Practice Direction 15.11.  

(b)  In the case of ABW v MAW [2016] HKCA 580, it was held that the Judge should not deal with the reserved costs issue of two prior interlocutory applications heard by her before the FDR because she had heard privileged and confidential information during the FDR hearing. The present case is distinguishable; it only dealt with the cost of the FDR hearing with regard to conduct as opposed to privileged and confidential information.

12.  While cost is at the discretion of the Court, the Respondent has failed to demonstrate how the discretionary power is wrongly exercised. I do not think the intended appeal has a reasonable prospect of success; neither do I see other reasons in the interests of justice that the appeal should be heard. 

13.  By reason of the aforesaid, I refuse to grant leave to appeal.

Conclusion

14.  The Respondent’s Summons dated 12 February 2019 is dismissed.

15.  I make a costs order nisi that the Respondent do pay the Petitioner forth withcosts of the application, summarily assessed at HK$45,000.

16.  Unless there is an application within 14 days to vary, the nisi order shall become absolute.