CHI YUM BUDDHIST HALL ASSOCIATION LTD v. YU LIK WAI WILLIAM AND OTHERS

DCCJ 642/2019

[2022] HKDC 1169

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 642 OF 2019

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BETWEEN

(By Original Action)

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AND BETWEEN

(By Counterclaim)

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DECISION

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1.   Introduction

1.1  There are two applications before me.

1.2  The first is an application by a summons dated 13 May 2022 by the Named Defendants[1] for leave to appeal against the Judgment dated 14 April 2022 and for a stay of the Judgment pending the outcome of the leave application (“1^st Application”). The 1^st Application was issued whilst the Named Defendants were not legally represented.

1.3  The 1^st Application was to be heard on 20 July 2022. Due to medical reasons on the part of Yu and Kong, the hearing was adjourned to 31 August 2022.

1.4  On 24 August 2022, solicitors for the Named Defendants issued another summons seeking to set aside the Judgment (“2^nd Application”).

1.5  At the adjourned hearing on 31 August 2022, Mr Dickson Chan and Mr Neal Clough[2] appeared respectively for the plaintiff and the Named Defendants. In the light of its (lack of) merits, Mr Clough confirmed that the Named Defendants no longer pursued the 1^st Application.

1.6  The trial was conducted in the absence of the Named Defendants. At Judgment §§7-24, I recapped the decisions made by other judges (1) refusing the Named Defendants’ informal applications to adjourn the pre-trial review and (2) ordering the Named Defendants’ counterclaim be provisionally struck out. I also set out the reasons for my dismissal on the first day of the trial (on 13 September 2021) of yet another informal application by Kong and Yu made on 6 September 2021 to adjourn the trial. As may be gleaned from the identified paragraphs of the Judgment, Kong and Yu had consistently alleged that they were stranded in Malaysia because of the measures which the Malaysian government had put in place in response to COVID-19, and as a result, were not able to attend the trial.

2.   The applicable principles

2.1  As set out at Karla Otto Limited v Bulent Eren Bayram Karla Otto Limited, HCA 821 of 2011, 18 May 2017 §§2-3, RDC Order 35, rule 2 gives the court a discretionary power to order a retrial where a party was absent at the trial. The application must be made within 7 days after the trial but the court has discretion to extend time. In the exercise of the court’s discretion, the relevant considerations include the following factors:-

(1) where a party with notice of proceedings has disregarded the opportunity of appearing at and participating in the trial, he will normally be bound by the decision;

(2) where judgement has been given after a trial, it is the explanation for the absence of the absent party that is most important: and that the absence was not deliberate but was due to accident or mistake, the court will be unlikely to allow a rehearing;

(3) Where the setting aside of judgement would entail a complete retrial on matters of fact which have already been investigated by the court, the application will not be granted unless there are very strong reasons for doing so;

(4) The court will not consider setting aside judgement regularly obtained unless the party applying enjoy real prospects of success;

(5) delay in applying to set aside is relevant, particularly if during the period of delay, the successful party has acted on the judgement, or third parties have acquired rights by reference to it;

(6) in considering justice between parties, the conduct of the person applying to set aside the judgement has to be considered: where he has failed to comply with orders of the court, the court will be less ready to exercise its discretion in his favor;

(7) a material consideration is whether very successful party would be prejudiced by the judgement being set aside, especially if you cannot be protected against the financial consequences; and

(8) there is a public interest in there being an end to litigation and in not having the time of the court occupied by two trials, particularly if neither is short.

2.2  As I understand the submissions of Mr Clough, his focus is placed on factors 1, 2, 4 and 5.

3.   The Named Defendants’ evidence

3.1  The (1^st) and 2^nd Applications are supported by the affirmations of Yu and Kong filed respectively on 26 and 29 August 2022. The plaintiff decided to proceed without filing an evidence in opposition. As summarized in Mr Clough’s written submissions, the evidence deals with:-

(1) the facts in relation to the Named Defendants not attending the pre-trial review and the trial and not making an application for video link;

(2) the facts in relation to the Named Defendants’ legal representation, in particular on how it came about that they came to be acting in person and how the retained their current legal team;

(3) the reasons for the delay in making the application to set aside the Judgment; and

(4) the underlying merits.

3.2  The evidence of Kong and Yu may be summarized as follows:-

(1) As set out at Judgment §§9-10, I made reference to a letter of the plaintiff’s solicitors dated 9 June 2021 (“June 2021 Letter”) objecting to the Named Defendant’s informal application made on 12 May 2021 for an adjournment of the pre-trial review and the trial. Kong now asserts that the Named Defendants never received the June 2021 Letter to explain why the Named Defendants did not consider an application for VCF.

(2) As set out at Judgment §9, Yu and Kong filed their Notices to Act in Person in May 2021.[3] The Named Defendants were previously represented by Mr Michael Bough (“MB”) of Messrs Bough & Company. Kong explains that around Christmas of 2020, MB’s secretary told Kong that MB had suffered a stroke. In the months leading up to the filing of the Notices to Act in Person, MB started to mention more concrete plans about closing his office and for that reason he would need the Named Defendants to file Notices to Act in Person. The Named Defendants did not immediately engage new solicitors as Kong and Yu were in Malaysia and would need to come back to meet prospective solicitors before retaining them.

(3) Yu and Kong first spoke to their current solicitors on 7 July 2022. The handling solicitor contracted COVID-19 on 11 July 2022 and Yu and Kong also did so at various points in July 2022 which slowed the engagement process. The Named Defendants first met their current counsel team on 23 August 2022 and the current solicitors filed their Notice to Act on 24 August 2022. On counsel’s advice, the 2^nd Application was issued on the same day.

(4) Kong and Yu went to Malaysia for business reasons. It is fair to say that the businesses they were conducting were of a sizeable scale. Kong entered Malaysia on 8 February 2020 and did not return to Hong Kong until 8 June 2022. Yu entered Malaysia on 4 March 2022 and returned to Hong Kong on 26 January 2021. He left Hong Kong for Malaysia on 14 May 2021 and did not return to Hong Kong until, as in the case of Kong, 8 June 2022.

(5) Kong and Yu explained that as they were not of Malaysian nationality, there were only allowed to legally stay in Malaysia for an approved duration. In the case of Kong, as she is a holder of a British passport, she was allowed to stay in Malaysia for 90 days. As for Yu, as he was a holder of a HKSAR passport, he was allowed to stay in Malaysia for 30 days.

(6) During the period which Kong and Yu were allegedly stranded in Malaysia, they had to obtain special passes to extend their stay in Malaysia. In the case of Kong, the last such special pass was valid until 22 January 2021, and in the case of Yu, 20 February 2021.

(7) Kong explains that as she had overstayed, she was unable to exit Malaysia at all without risking imprisonment and/or a fine. Through her attempts (including engaging solicitors and barristers in Malaysia and paying visits to both the Chinese embassy and the British embassy), she eventually obtained a special pass on 24 May 2022. As stated above, she returned to Hong Kong on 8 June 2022.

(8) In the case of Yu, in mid-January 2021, through the assistance of a business associate with some influence, he obtained multiple entry visas to exit and return to Malaysia. It was on that basis that he was about to return to Hong Kong in January 2021. However, when he returned to Malaysia, this channel no longer worked and he was not even able to obtain a special pass to stay in Malaysia. As a result, similar to Kong, Yu ran the risk of imprisonment and/or a fine should he decide to return to Hong Kong. Through Kong’s channel, he was able to obtain a special pass on 2 June 2022 and he returned to Hong Kong on 8 June 2022.

(9) On the issue of merits, Mr Clough very fairly accepted at the hearing that the case now contained in the affirmations of Kong and Yu are largely unpleaded issues and put forward previously undisclosed evidence.

4.   Analysis

4.1  In my view, the 2^nd Application should be dismissed by reason of issues (1) and (2) identified at §2.1 above. The Named Defendants disregarded the opportunity of appearing at and participating in the trial and I am not satisfied that their evidence shows that their absence was not deliberate.

4.2  The evidence of Kong and Yu is primarily targeted at the observations made at Judgment §20, namely that the Named Defendants did not address or adequately address the plaintiff’s challenged that the MCO did not have the effect of preventing Kong and Yu from returning to Hong Kong, and even if it did, there was no or no proper explanation by the Named Defendants as to why it was impracticable for them to attend the trial by VCF or as to why no application for the same was considered or made.

4.3  It seems to me that the evidence of Kong and Yu fails on both fronts. Indeed, I am bound to say that their evidence simply highlights that fact that their previous applications for adjournment were disingenuously pursued.

4.4  At Judgment §9, I referred to the letters sent by Kong and Yu to the Registry on 12 May 2021 seeking an adjournment of the pre-trial review and the trial. Kong’s letter gave the following reasons:-

(1) She was unable to give proper and full instructions to her lawyers and to remit fees to her solicitors in Hong Kong as she was severely hampered by the Emergency Movement Control Order (“MCO”) which was in place in Malaysia.

(2) She was prevented by the government of Malaysia from leaving and/or entering Malaysia.

4.5  Neither of the above two explanations is consistent with the stance adopted by the Named Defendants at the hearing.[4] As to the first, Messrs Bough & Company’s involvement in the case did not stop because of any issues over fees. As to the second, as set out a §4.12 below, Kong’s focus has shifted away from the contention that she was prevented by the government of Malaysia from leaving the country.

4.6  In Yu’s letter of 12 May 2021 (which was beguilingly not exhibited and not dealt with in his affirmation), he adopted the contents of Kong’s letter of the same date and stated that he was making a similar application to adjourn the pre-trial review and the trial pending his arrival in Hong Kong.

4.7  However, as stated at §3.2(4) above, Yu was in fact in Hong Kong between 26 January and 14 May 2021. Quite apart from the fact that the content of Yu’s letter gave the impression he was stranded in Malaysia (when he was not), Yu was in fact in Hong Kong when he signed the Notice to Act in Person on 12 May 2021. Where it is Kong’s evidence that MB had in the months prior to May 2021 indicated that he would close his office and no longer be able to represent the Named Defendants, there is no evidence that Yu even attempted to make alternative arrangements for a replacement solicitor during his rather lengthy stay in Hong Kong.

4.8  Perhaps more importantly, the letters of Kong and Yu of 12 May 2021 were sent on the basis that there was a risk that they might not be able to return to Hong Kong because of the MCO. Yet, when Yu was in Hong Kong, there is no evidence that he sought any advice from solicitors as to what alternative arrangements (such as the use of VCF) might be put in place to cater for that eventuality.

4.9  I also do not accept Kong’s assertion that the Named Defendants did not receive the June 2021 Letter. As set out at Judgment §§9, 11 to 13, Kong and Yu were clearly engaged in correspondence with the clerk of DDJ Tara Liao. I have difficulty in accepting that the Kong and Yu received letters from the court but somehow did not receive the June 2021 Letter. In any event, Kong and Yu did not assert that they did not receive the letter sent by the plaintiff’s solicitors on 7 July 2021 referred to a Judgment §14 where the possibility of using VCF was again canvassed. Mr Clough submitted that the Named Defendants should not be penalized for their lack of knowledge of the available alternatives (whilst they acted in person), one must bear in mind that a litigant acting in person should bear responsibility for the proper preparation of his or her own case in accordance with the rules and procedures of the court: AXA China Region Insurance v Leong Fong Cheng [2016] 6 HKC 220 at §47. In the AXA case, the Court of Appeal held that the litigants acting in person should not shift the responsibility for the preparation of their case to the court. It seems to me that it is a fortiori that the Named Defendants cannot shift the responsibility to the plaintiff on the basis that they did not receive the June 2021 Letter (even if true).

4.10  The evidence of Kong and Yu also did not address Judgment §15, where a reference was made to the fact that Messrs Bough & Company, on the instructions of the Named Defendants made an inquiry with DYC on 27 July 2021 of the outcome of the pre-trial review heard on 12 July 2021. Where, as here, the Named Defendants were clearly aware that their counterclaim had been provisionally struck out, it is incumbent for them to provide an explanation what steps were taken by them to restore their counterclaim as part of their attempt to demonstrate genuine intention to defend the trial. None was forthcoming apart from an assertion that the Named Defendants did not immediately engage new solicitors as Kong and Yu were in Malaysia and would need to come back to meet prospective solicitors before retaining them.

4.11  However, as pointed out by Mr Chan (and accepted by Mr Clough), the Named Defendants did engage another firm of solicitors whilst Yu and Kong were in Malaysia. Shortly after the Judgment was handed down on 14 April 2022, Messrs Eric Cheung & Lau issued a letter dated 28 April 2022 on behalf of the Named Defendants to DYC warning the plaintiff to refrain from removing or handling the Named Defendants’ properties left on the Property. Whilst I accept Mr Clough’s observation that different considerations apply when engaging a firm of solicitors for trial (as opposed to engaging one to issue a warning letter), I note that the Named Defendants’ pleadings were settled by counsel and the evidence of Kong and Yu has not condescended upon any particulars as to what difficulties they would encounter in engaging new solicitors to replace MB. In any event, one would have thought that even solicitors without intimate knowledge would have been in a position to advise on the possibility of using VCF (if justified on the evidence).

4.12  The Named Defendants have shifted their contention away from one that the MCO prevented Kong and Yu from leaving Malaysia. The present contention is that Kong and Yu were prevented from leaving Malaysia because they had overstayed and their departure from Malaysia exposed them to a risk of criminal consequences. To that end, Kong and Yu rely on a letter dated 12 May 2022 from their Malaysian lawyers, Messrs Hock & Associates.

4.13  There are at least two problems with the present contention. First, as set out at §3.2(6) above, both Kong and Yu did manage to obtain special passes until January and February 2021. Once the prospects of obtaining further special passes were not promising, there was nothing preventing Kong and Yu from leaving Malaysia legally prior to the expiry of the special passes. The choice of overstaying in Malaysia seems to me to be a deliberate decision. Secondly, in the case of Yu, as stated at §3.2(8) above, his focus was on his ability to return to Malaysia. As I understand the evidence, it seems to me quite clear that Kong and Yu were more focused on their ability to either stay in or return to Malaysia. In other words, but for such priority, there was in fact nothing to prevent them from returning to Hong Kong, albeit arguably earlier than necessary for the purpose of this litigation (ie in January or February 2021). For example, in the case of Yu, he obtained special passes for the period of 6 May to 4 June 2020, 5 June to 4 July 2020, and 22 January to 20 February 2021.[5] In other words, there was a period between 5 July 2020 to 21 January 2021 during which he did not have a special pass and had therefore overstayed. Yet, he was not prosecuted for the “vacuum” period for which he had overstayed when he departed Malaysia on 26 January 2021.

4.14  That Yu was not held accountable for the “vacuum” period is inimical to the contention of Yu and Kong that they were liable to be criminally prosecuted for overstaying. The letter of Messrs Hock & Associates simply referred to the possibility and there is no evidence that any foreigner was in fact prosecuted for overstaying because of COVID-19 related reasons or that such cases would not be dealt with leniently.

4.15  For the above reasons, I am of the view that the 2^nd Application should be dismissed, as I am not satisfied with their explanation for their absence at the trial (whether appearing in person or remotely).

4.16  In so far as necessary, I am also of the view that the 2^nd Application should be refused on the basis of delay and lack of merits.

4.17  On the issue of delay, where, as here, the Named Defendants had already engaged Messrs Eric Cheung & Lau by 28 April 2022 (whilst Kong and Yu were in Malaysia), I am not satisfied that concrete steps should have been taken only upon their return to Hong Kong. Further, where both Kong and Yu returned to Hong Kong on 6 June 2022 and was subject to a 7-day quarantine thereafter, there is no explanation as to why they only contacted their current solicitors on 7 July 2022. But for the fortuitous adjournment of the original substantive hearing 20 July 2022, the 2^nd Application would not have been taken out.

4.18  On the issue of merits, as stated at §3.2(9) above, Mr Clough accepted that matters identified in his written submissions do not give rise to a defence with real prospects of success.

5.   Conclusion

5.1  For the above reasons, I dismiss the 1^st and 2^nd Applications.

5.2  As regards the 1^st Application, the plaintiff in his Skeleton Submissions seeks costs on an indemnity basis on the basis that it is devoid of merits. I am inclined to agree with Mr Chan, as is evidenced by Mr Clough’s concession at the hearing that it was no longer pursued. However, as I have not heard any submissions from Mr Clough on the issue of costs generally, the costs order which I make below is on a nisi basis.

5.3  The costs order that I will make is therefore as follows. On a nisi basis, the Named Defendants are to pay to the plaintiff the costs of and occasioned by the 1^st Application (on an indemnity basis) and the 2^nd Application with a certificate for counsel to be summarily assessed. Absent any application to vary, the plaintiff is to lodge its statement of costs within 7 days after the expiry of the 14-day period for the Named Defendants to take out an application for variation and the Named Defendants are to lodge their comments within 7 days thereafter.

5.4  I thank all counsel for their helpful assistance.