LEE YUK TSAN AND ANOTHER v. SO KWAI CHUNG AND ANOTHER

HCA 2581/2018

[2022] HKCFI 2235

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2581 OF 2018

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BETWEEN

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D E C I S I O N

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A. INTRODUCTION: THE PLAINTIFFS’ APPLICATION TO RESTORE THE ACTION ONLY FOR THE ISSUE OF COSTS

1.  The Plaintiffs were absent at the pre-trial review of these proceedings on 27 January 2022. Therefore, pursuant to Order 25, rule 1C(1), Mr Justice Coleman ordered that their claim under this action be provisionally struck out. On 26 April 2022, the Plaintiffs took out a Summons applying for “leave to unconditionally restore the action limited to the issue of costs” (the “Summons”). The Defendants oppose.

2.  The relevant part of Order 25, rule 1C provides as follows:

“Failure to appear at … pre trial review (O 25, r 1C)

(1) Where the plaintiff does not appear at the … pre-trial review, the Court shall provisionally strike out the plaintiff’s claim.

(2) …

(3) Where the Court has provisionally struck out a claim … under paragraph (1) …, the plaintiff … may, before the expiry of 3 months from the date of the … pre-trial review … apply to the Court for restoration of the claim … .

(4) The Court may restore the claim … subject to such conditions as it thinks fit or refuse to restore it.

(5) The Court shall not restore the claim … unless good reasons have been shown to the satisfaction of the Court.

(6) If the plaintiff does not apply under paragraph (3) or his application under that paragraph is refused, then —

(a) the plaintiff’s claim … stands dismissed upon the expiry of 3 months from the date of the … pre-trial review, as the case may be; and

(b) (i) in the case of the plaintiff’s claim, the defendant is entitled to his costs of the claim; … .”

3.  The Summons was issued on the last day before the expiry of 3 months under Order 25, rule 1C(3).

4.  In the Summons, the Plaintiffs did not apply for restoration of the action but restoration of the action “limited to the issue of costs”. As a preliminary issue, the Defendants challenge whether the Court has power under Order 25 rule 1C to grant such order.

5.  If the Court finds that it has the power to do so, three questions should then be considered:

(1) Whether the Plaintiffs have first met the threshold of showing “good reason” as specified in rule 1C(5). If no “good reason” can be shown, it is not necessary to move forward to consider the next two questions.

(2) Whether the Court should exercise its discretion to grant the restoration.

(3) If the Court decides to restore the claim, whether it should impose any, and if so what condition(s).

World Chinese Business Investment Foundation Ltd & ors v Shine Rainbow Marketing Ltd & ors [2010] 2 HKC 294, paragraph 8, per Registrar Au-Yeung (as she then was).

6.  I shall first set out the Plaintiff’s claim, the cost issues which they intend to restore and their reason for applying to restore the cost issues only. I shall then go to whether the Court has jurisdiction to restore the Plaintiffs’ claim for costs only and the three questions in the preceding paragraph.

B. THE PLAINTIFFS’ CLAIM

7.  In a nutshell, the subject matter of this case is easement: whether a right of way exists.

8.  The 1^st Plaintiff and the 2^nd Plaintiff are husband and wife. They used to live in a 3-storied house erected on Section F of Lot No.2221 in Demarcation District 120 in Yuen Long, New Territories (the “Property”). They were the registered owners of the Property. In their Amended Statement of Claim dated 9 November 2018, they said they were entitled to a right of way from the Property through the adjoining land known as the Remaining Portion of Lot 2230 in Demarcation District 120 (“Lot 2230 RP”) at all times since they purchased the Property in 2012 for the purpose of passing, repassing whether by vehicular or human traffic or otherwise for the Plaintiffs’ reasonable and lawful enjoyment of the Property, namely to access the public highway Shap Pat Heung Road (the “Right of Way”).

9.  Lot 2230 RP was co-owned by the 1^st Defendant and the 2^nd Defendant as tenants in common.

10.  The Plaintiffs relied on two grounds in establishing the existence of the Right of Way: Firstly, the Plaintiffs said the 2^nd Defendant was estopped from denying the Plaintiffs’ use of the Right of Way because of his representation to the Plaintiffs that he owned Lot 2230 RP and there would be no problem for the Plaintiffs to drive through or walk through it as it was the only access route between the Property and the main road. In reliance of the 2^nd Defendant’s representation, the Plaintiffs purchased the Property. Secondly, the Plaintiffs said the Right of Way was implied by necessity, or otherwise the Property would be landlocked.

11.  The Plaintiffs further claimed that in two occasions on 15 October 2018 and 30 October 2018, the 1^st Defendant placed a total of 6 concrete blocks in front of the Property blocking the front gate of the Plaintiffs’ home (the “Blockade”). Consequently, the Plaintiffs’ vehicle access to the Property was completely denied.

12.  The Plaintiffs pleaded that the Defendants have greatly disturbed their reasonable enjoyment of the Right of Way and have suffered loss and damages.

13.  In the prayer of the Amended Statement of Claim, the Plaintiffs claim for: (a) a declaration of the Plaintiffs’ entitlement to the Right of Way, (b) an injunction restraining the 1^st Defendant from interfering with the Plaintiffs’ exercise of the Right of Way, (c) an order of removal of the Blockade by the 1^st Defendant, (d) damages to be assessed, (e) exemplary damages for interfering with the Right of Way, (f) further or other relief, and (g) costs.

14.  In essence, both Defendants deny the existence of the Right of Way. In his Defence, the 2^nd Defendant denies he assured the Plaintiffs that he owned Lot 2230 RP and there would be no problem for the Plaintiffs to drive through or walk through Lot 2230 RP. He also adds that as a matter of fact, the Plaintiffs have access to and egress from the Property through the Government land on the south-west side of the Property and/or the Remaining Portion of Lot 2221 in Demarcation District 120 on the north-east side of the Property.

15.  I should mention that after the Blockade, on 1 November 2018, the Plaintiffs obtained ex parte from Mr Justice L. Chan an order to remove the Blockade and an interlocutory injunction to restrain the 1^st Defendant from interfering with the Plaintiffs’ use and enjoyment of the Right of Way until trial or further order (the “Ex Parte Injunction”).

16.  It should be clear that although the Ex Parte Injunction referred to the Right of Way, whether it did exist remained a claim to be proved by the Plaintiffs and an issue to be tried by the Court at trial.

17.  The Ex Parte Injunction did not provide for a return date. After the Blockade had been removed, the Defendants did not apply for variation or discharge of the Ex Parte Injunction. As such, the injunction, as it so states, should last “until trial or further order”.

18.  Also, by the Order of Master Kot dated 4 January 2021, leave was given to the parties to set down this action together with HCA 2580/2018 for trial with 9 days reserved to be heard before the same judge either together or one after the other as may be directed by the trial judge.

19.  As is clear from the Summons, the application for restoration is limited to the issue of costs. The Plaintiffs no longer pursue the claims against the Defendants in relation to the Right of Way, although, as the Plaintiffs’ counsel submitted, this does not mean the Plaintiffs did not have a meritorious claim when they commenced the action.

C. THE COST ISSUES WHICH THE PLAINTIFFS INTEND TO RESTORE

20.  The Plaintiffs’ counsel submitted that there are 3 items of costs which ought to be dealt with: firstly, costs of the Ex Parte Injunction, which have been reserved; secondly, costs of the pre-trial review on 27 January 2022, which have also been reserved; and thirdly, costs of the proceedings. Their position is the Defendants should pay their costs of and occasioned by the Ex Parte Injunction as well as costs of the proceedings, whereas they would concede and pay the Defendants costs of the pre-trial review.

D. THE PLAINTIFFS’ REASON FOR APPLYING TO RESTORE THE COST ISSUES ONLY

21.  The Plaintiffs informed the Court that the Property has already been foreclosed by the Hongkong and Shanghai Banking Corporation Limited, the Plaintiffs’ mortgagee (“HSBC”). As shown in the Land Registry’s record, on 11 February 2022, HSBC has entered into an agreement for sale and purchase agreement with a third party as purchaser. According to their affirmations, both Plaintiffs respectively vacated and moved out of the Property in November 2021.

22.  Therefore, the Plaintiffs’ counsel submitted that whether the Right of Way was still in subsistence has become academic to the Plaintiffs, but since they were justified in commencing the proceedings because of the Blockade, they should be given an opportunity to argue on costs.

E. WHETHER THE COURT HAS JURISDICTION TO RESTORE THE PLAINTIFFS’ CLAIM FOR COSTS ONLY

23.  The 1^st Defendant accepts that the Court has the power to restore only a part of a claim or counterclaim which has been provisionally struck out. However, the 1^st Defendant’s counsel submitted that despite “costs” are a part of the relief sought by the Plaintiffs, “costs” cannot be regarded as a “claim”, except in a costs-only proceedings. According to him, the issue of “costs” is a matter of discretion pursuant to s.52A of the High Court Ordinance, Cap. 4, and except in a costs-only proceedings, the issue of “costs” does not exist on its own but must be attached to a claim or counterclaim in a proceedings. He further drew an analogy of setting aside a default judgment and submitted that a default judgment cannot be set aside for argument on costs only. Therefore, in his submissions, it does not fall within the Court’s power to restore the issue of costs only under Order 25 rule 1C(4).

24.  In my view, the Court has power to restore a claim or counterclaim for costs only under Order 25 rule 1C.

25.  Costs do constitute a part of the Plaintiffs’ claim. Literally, it is one of the reliefs expressly sought in the Amended Statement of Claim.

26.  Against the backdrop of the present case, after the Plaintiffs’ claim has been provisionally struck out under Order 25 rule 1C(1), the Plaintiffs have two options for restoration:

(1) They could apply under rule 1C(3) for restoration of the whole claim, i.e. all the reliefs sought in the Amended Statement of Claim. If the Court accedes to the application, the whole claim, which includes the issues in relation to the Right of Way, the Blockade as well as costs, would proceed to trial. If the Court refuses the application, rule 1C(6) shall take effect and it follows that the Plaintiffs’ claim has stood dismissed upon the expiry of 3 months from the date of the pre-trial review, i.e. as from 27 April 2022, and the Defendants are entitled to their costs of the Plaintiffs’ claim.

(2) Given the change in circumstances, that HSBC has foreclosed and sold the Property, the Plaintiffs see themselves having no standing, indeed there being no practical purpose to serve, in continuing with their claims in relation to the Right of Way. However, they consider themselves justified in commencing the action and applying for the Ex Parte Injunction, and hence should be entitled to recover costs of the proceedings as well as the Ex Parte Injunction against the Defendants. The Plaintiffs may apply for restoration of the claim in relation to costs only. If the Court accedes to the application, the Court may give directions on how to proceed with the arguments on costs as it sees fit. If the Court refuses the application, rule 1C(6) again mandates that the Plaintiffs’ claim (including costs) has stood dismissed as from 27 April 2022, and the Defendants are entitled to their costs of the Plaintiffs’ claim. The Plaintiffs have chosen this option.

27.  There was some discussion during the hearing that since the Plaintiffs did not apply for restoration of their claims in relation to the Right of Way, those claims have fallen away, and have “stood dismissed” under rule 1C(6) as from 27 April 2022. As such, the Defendants would have been entitled to their costs of the Plaintiffs’ claim. It might give born to an argument that as the consequence on cost has already been provided for in rule 1C(6)(b), an order from the Court to restore the issue of costs only would be inconsistent, explicitly or implicitly, with rule 1C(6)(b). Hence the Court is precluded by rule 1C(6)(b) from making such order. Therefore, the second option in the preceding paragraph does not exist.

28.  I do not consider the said argument to be valid because, in my view, once an application for restoration was made under rule 1C(3), albeit for costs only in the present case, the cost consequence spelt out in rule 1C(6)(b)(i) would not be triggered unless and until the application for restoration for costs has been determined. If the application is refused by the Court, then following the express wording of rule 1C(6)(b)(i), the Defendants are entitled to their costs of the Plaintiffs’ claim. If however the application is granted by the Court and the claim restored for arguments on costs, then naturally costs would follow the result of those arguments. In my view, it would not be correct to apply the cost consequence in rule 1C(6)(b)(i) when the restoration application is limited to the issues of costs. To do so would amount to ignoring the restoration application (albeit for costs only) altogether, and making applications of this kind wholly futile.

29.  I therefore hold that an application for restoration of the claim or counterclaim under Order 25 rule 1C(3) may be limited to for costs only. In other words, subject to good reasons having been shown to the satisfaction of the Court under rule 1C(5), the Court has power under rule 1C(4) to exercise its discretion, with or without conditions as it thinks fit, to restore a claim or counterclaim only for arguments on the entitlement to costs of the claim and/or other interlocutory matters.

30.  I see no disharmony or inconsistency between my holding in the preceding paragraph and the various principles and procedures which the 1^st Defendant’s counsel referred the Court to in his submissions:

(1) Costs-only proceedings. This is not relevant to the application for restoration. Costs-only proceedings happen when the parties, who have reached settlement on a substantive dispute and agreed on who in principle should pay the costs but cannot agree on the amount of such costs, apply for their costs to be taxed by the Court, paragraph 62/11A/1, Hong Kong Civil Procedure 2022. In the application for restoration on costs, the question is not on the amount of costs but whether the question of liability on costs should be restored for arguments instead of following the cost consequence set out in rule 1C(6)(b).

(2) Discretion pursuant to s.52A of the High Court Ordinance. S.52A(1) ingrains the principle that subject to specific provisions of the rules of the Court, the Court shall have full power to determine by whom and to what extent the costs are to be fixed. It appears to me that this principle resonates with the ruling stated in the preceding paragraph. The discretion must of course be exercised judicially and judiciously.

(3) Costs as a stand-alone issue for determination. The 1^st Defendant’s counsel submitted that except in a costs-only proceedings, the issue of “costs” does not exist on its own but must be attached to a claim or counterclaim in a proceedings. He appears to suggest that (other than costs-only proceedings) the issue of costs cannot be dealt with by the Court “on its own” but must be dealt with together with other substantive issues in (“attached to”) the claim or counterclaim, e.g. the Right of Way in the present case. This is not a correct proposition. Whilst it always depends on the circumstances of each case, and although there is no hard and fast rule, time and time again the Court has determined costs as a stand-alone issue. The most notable example is where the substantive issues between the parties have been resolved but the parties cannot agree on the liability on costs, i.e. who should pay the costs, and they ask the Court to make an order in terms of the draft consent order recording the settlement on the substantive issues and to assist the parties by resolving the issue of costs without determining the substantive issues. See Graham M. Morley v Kwan Wo San & ors, paragraphs 17-38, per Mr Recorder Jat SC, HCA 4366/2003, 30 December 2009. In so far as costs are concerned, this situation is akin to the situation in the present application where it has become futile for the Plaintiffs to apply for restoration of the substantive claims on the Right of Way but where they find themselves meritorious to seek costs on restoration.

(4) Costs on setting aside default judgment. The 1^st Defendant’s analogy of setting aside a default judgment but on costs only is inapt. Whilst it would be strange in normal circumstances for a defendant to apply to set aside the cost order in a default judgment only, there is no bar in Order 13 rule 9 for the Court, on such terms as it thinks just, in exercising its discretion to set aside or vary wholly or in part (including the cost order therein) of any judgment entered. It depends on the circumstances of each case, e.g. whether the default judgment entered is regular, whether the defence is meritorious, or whether the claim is an abuse of process

I therefore disagree with the 1^st Defendant’s counsel’s submissions.

F. WHETHER THERE ARE “GOOD REASONS” FOR RESTORATION FOR COSTS

31.  In his second Affirmation, the 1^st Plaintiff provided the reasons for his absence at the pre-trial review, as follows:

(1) He was going through major life changes, both professionally and personally: that he resigned from the directorship of the company where he worked due to family dispute; that he was encountering marital problems with the 2^nd Plaintiff; that he faced cash flow problem because of his departure from the company; and that the Property was foreclosed.

(2) He was receiving many anonymous phone calls, which made him fear for the safety and mental wellness of his family. As such, he registered for a new mobile phone number on or around 20 November 2021. Although he did not deregister his previous mobile phone number, he no longer uses that number.

(3) As he had left the company, he also stopped checking his emails because he had been busy with handling the foreclosure and vacating the Property, and it did not occur to him that he would receive any e-mails of significance since he stopped working at the company, which was his primary reason for using e-mail.

(4) In the above circumstances, he did not keep the present action in mind.

32.  In the 2^nd Plaintiff’s Affirmation, her reasons for absence are as follows:

(1) She had been receiving many anonymous phone calls, which caused her great stress, as such she stopped answering phone calls from unknown numbers.

(2) As the 1^st Plaintiff had been the person handling the present proceedings, she did not save the telephone number of the Plaintiffs’ then solicitors, K.C. Ho & Fong (“KCHF”) in her telephone. Therefore, she suspected that was the reason KCHF had been unable to contact her.

(3) It was not until around February 2022 that she, through the Mail Redirect Service of the Post Office, received a letter from KCHF that she came to be aware that the Plaintiffs needed to contact KCHF regarding the present action.

(4) As they were going through marital problems, the 2^nd Plaintiff did not wish to speak to the 1^st Plaintiff. Therefore, it was not until around 18 April 2022 that the 1^st Plaintiff was able to locate the 2^nd Plaintiff through the Plaintiffs’ current solicitors.

33.  I am not satisfied that they are good reasons for the Plaintiffs’ absence at the pre-trial review or for restoration of their claim for costs.

34.  In respect of the 1^st Plaintiff, all in all, he gave only one reason: that he was going through major life changes. It appears to me that not only that he “did not keep the action in mind” as he said, he simply ignored it completely. He did not contact KCHF, nor did he enable KCHF to contact him by phone or by e-mail. Although he received the notice of hearing from KCHF, he admitted that he did not pay due attention to it. In my view, this means it did not occur to him that as a plaintiff to these proceedings, he was under a duty to prepare for and attend the pre-trial review hearing. Although his absence at the hearing and in the proceedings might not be intentional or contumelious as he stated in his 2^nd Affirmation, a complete disregard of the obligation to comply with the Court’s requirement to attend the pre-trial review is something close to being contumelious and more, being disrespectful to the court proceedings in the least. Going through major life changes may be difficult, but certainly it provides no excuse, not to mention good reason, for disregarding the ongoing court proceedings and the milestone requirement by the Court of attendance at the pre-trial review.

35.  As mentioned above, as early as in January 2021, this action had been ordered to be tried together with HCA 2580/2018 or one after the other with 9 days reserved. The 9-day estimation must have been taken account of the estimated trial length of the present proceedings, and the consolidated trial was scheduled to commence on 6 June 2022. It was only until 26 April 2022 when the Plaintiffs took out the Summons that the Court and the parties learnt of the Plaintiffs’ intention not going for the trial but applying for restoration for the purpose of cost only. As such, the trial of the present action did not proceed, whereas the trial of HCA 2580/2018 proceeded during the 9-day time slot as scheduled. Because of the Plaintiffs’ failure, the Court’s time and resources have been wasted. Taking into account such wastage, all the more I am not satisfied that going through life changes provides the 1^st Plaintiff good reason for his absence at the pre-trial review or for restoration of the Plaintiffs’ claim for cost.

36.  In respect of the 2^nd Plaintiff, she stated in her Affirmation that throughout the entire process since the commencement of these proceedings, she had left the decision making and communications with their solicitors to the 1^st Plaintiff. Since I have found above that the 1^st Plaintiff did not provide good reasons for the Plaintiffs’ absence at the pre-trial review or for restoration of their claim for costs, the same finding is applicable to the 2^nd Plaintiff. It appears to me that same as the 1^st Plaintiff, she has completely disregarded the present proceedings and was wholly ignorant of what was happening. Her explanations of anonymous phone calls and marital problems with the 1^st Plaintiff by themselves are too futile to constitute good reasons for the Plaintiffs’ absence or for restoration.

37.  I therefore conclude that the Plaintiffs have not been able to show good reasons to the Court’s satisfaction for the restoration as per the Summons. This is sufficient to dispose of the Plaintiffs’ application. But for completeness, I shall briefly deal with the second question on the Court’s discretion.

G. WHETHER THE COURT SHOULD EXERCISE ITS DISCRETION TO GRANT THE RESTORATION

38.  The Plaintiffs’ counsel submitted that in considering the exercise of discretion, the Court ought to look at the merits of the Plaintiffs’ claim in respect of costs. She submitted that although the Plaintiffs no longer have standing to continue prosecuting the substantive claim for the Right of Way, they were “the effective winner”, having obtained substantively the reliefs which they sought in their Amended Statement of Claim. This is because after the Ex Parte Injunction, the Defendants did not seek to discharge or vary it, and instead only filed Defences of bare denial which in her submission was not credible. She further submitted that the Plaintiffs were reasonable in commencing the action. But for the commencement, and the granting of the Ex Parte Injunction, the 1^st Defendant would not have removed the Blockade.

39.  I do not accept that the Plaintiffs were the effective winner of the present proceedings. This cannot be determined without a proper trial.

40.  The obtaining of the Ex Parte Injunction was premised on the existence of the Right of Way. As mentioned in paragraph 16 above, whether it does exist has not yet been proved. It can be said having obtained the Ex Parte Injunction, whether the Right of Way exists is a serious issue to be tried. But by no means it can be so stated as if a declaration of its existence (which was one of the reliefs prayed for in the Amended Statement of Claim) has been made by the Court.

41.  The 2^nd Defendant’s Defence is not a bare denial defence. As mentioned in paragraph 14 above, he raised certain factual disputes.

42.  The fact that the Defendants did not apply for variation or seek discharge of the Ex Parte Injunction cannot be the ground for the submission that the Plaintiffs are the effective winner. There could be reasons which explained the Defendants’ inaction, e.g. the Defendants are entitled to take the view that since there are factual disputes, instead of engaging in interlocutory skirmishes, it would be most time and cost efficient or saving to go to trial direct and have the dispute resolved in one go. In my view, the inference (that the Plaintiffs have effectively won because the Defendants did not seek variation or discharge of the Ex Parte Injunction) is too far to be able to be drawn.

43.  To say the Plaintiffs have substantially got what they want, i.e. the Ex Parte Injunction and removal of the Blockade, is equally building castle on the sand. The Ex Parte Injunction is from the start interlocutory in nature. It can only last till trial, and at trial premised on the successful proof of the existence of the Right of Way. Since there would be no trial for the Plaintiffs’ claim now, it falls away when the claim stands dismissed under Order 25 rule 1C(6)(a) as explained above.

44.  All in all, without going through the trial, I cannot tell whether the Plaintiffs have already succeeded.

45.  In the circumstances of this case, what happened however leans against the Plaintiffs. Because of their absence at the pre-trial review, and because of their dilatory indication at the eleventh hour before the scheduled trial that the Property have been foreclosed and they no longer have standing to continue with the claim, in exercise of the Court’s discretion, it is quite one-sided that the Court will not grant the restoration, even for costs only.

46.  I would add that for the same reasons expounded in this section, if the restoration is allowed for costs only as per the Summons, it would be very difficult for the Court to decide which party should pay the costs of the proceedings and which party should pay the reserved costs of the Ex Parte Injunction if the Court does not go into the substantive merits of each party’s case, which involve factual disputes. As explained above, the Ex Parte Injunction is premised on the proof of the Right of Way at trial. This is another factor militating against exercising the discretion for restoration.

H. WHETHER THE COURT SHOULD EXERCISE ITS DISCRETION TO GRANT THE RESTORATION

47.  For the above reasons, the Plaintiffs’ Summons are dismissed. The Plaintiffs should bear the consequence of their own default.

48.  Costs of the Summons should follow the result of the argument. I make an order nisi that costs of the Summons be paid by the Plaintiffs to the Defendants, which shall become absolute after 14 days of this order, unless either party applies for variation or setting aside.

49.  Lastly, I thank counsel for their assistance.