MILLION INTECH DEVELOPMENT LTD v. LEE KIN WO AND OTHERS

DCCJ 5564/2018

[2022] HKDC 290

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5564 OF 2018

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BETWEEN

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DECISION

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1.  On 14 October 2019, the 1^st defendant (“D1”) took out a summons (“the Summons”) to seek an order requiring the plaintiff (“P”) to provide security for the costs of D1 in this action in the sum of HK$200,000 or in such sum as may be deemed fit by the court. The Summons is supported by an affirmation made by D1’s solicitors filed on the date of the Summons (“the Supporting Affirmation”).

2.  On 5 December 2019, P filed an affirmation made by its sole director and beneficial owner, Mr Wong Ka Ching (“Mr William Wong”), in opposition to the Summons (“Wong’s Affirmation”). In that affirmation, Mr William Wong offered an undertaking (“the Undertaking”) that he will personally pay the costs which P may be liable to D1 if D1 succeeds in the defence against P’s claim.

3.  There is no affirmation in reply from D1.

4.  On 17 December 2021, upon the Undertaking given by Mr William Wong, Master June Cheung (“the Master”) dismissed the Summons. The Master ordered that costs of and occasioned by the Summons up to and including 5 December 2019 be paid by P to D1, and the costs of and occasioned by the Summons after 5 December 2019 be paid by D1 to P (“the Costs Order”).

5.  On 6 January 2022, D1 filed a notice of appeal against the Master’s decision, in which D1 also sought leave to lodge the appeal out of time.

Background

6.  Briefly, P’s pleaded case is as follows:-

(1) P is a company limited incorporated in Hong Kong. Its sole director and sole beneficial owner is Mr William Wong. P is a company with a paid up capital of HK$1, and was incorporated by Mr William Wong on 10 February 2017 solely for the purpose of executing the relevant contract and dealing with the defendants (“Ds”) in relation to a project (“the Project Development Contract”).

(2) D1 represented and held himself out as the beneficial owner of the 3^rd defendant (“D3”). Induced by certain representations made by D1, P entered into the Project Development Contract with D3 and paid HK$1 million to D3. However, those representations are false and untrue.

(3) D1 has a close relationship with the 2^nd defendant (“D2”), and D1 has repeatedly told Mr William Wong that D2 was merely D1’s nominee holding the shares of D3 for and on behalf of D1.

(4) D3 in fact does not have the expertise to perform the task specified in the Project Development Contract. P claims that D3 has breached the contract.

(5) Ds have wrongfully and with intent to injure P by unlawful means, and they conspired and combined together to defraud P. As a result, P has suffered a loss of HK$1 million.

(6) Ds have also been unjustly enriched as a result of the receipt of the HK$1 million.

7.  Ds deny that they are liable to P as claimed by P. Only D3 has raised a counterclaim against P. D3 claims that P is the party in breach of the Project Development Contract, and D3 has terminated the contract by accepting P’s repudiation. D3 claims that P is liable to pay a reasonable fee to D3 for the work done by D3 under the Project Development Contract before the termination of the same, and the amount should be HK$1 million.

8.  In the Supporting Affirmation, apart from the matters set out in [6(1)] above, the following are also mentioned:-

(1) P does not carry on any business other than the Project Development Contract.

(2) P does not have any valuable asset in Hong Kong.

9.  In Wong’s Affirmation, Mr William Wong did not deny the matters mentioned in the Supporting Affirmation as summarized in [8] above. However, Mr William Wong offered the Undertaking. At [8] of Wong’s Affirmation, Mr William Wong said:-

“In any event, in order to avoid any protracted arguments on the matter, I, as the sole director and beneficial owner of [P], am willing to offer an undertaking to pay the costs which [P] may be liable to [D1] if the latter succeeds in the defence. I am a Hong Kong permanent resident and am a person of strong financial means.”

10.  In the same affirmation, Mr William Wong also mentioned the following:-

(1) He purchased a residential property in Hong Kong (“the Residential Property”) in his sole name in September 2019 with a consideration of HK$7.8 million. The outstanding mortgage with the bank (“the Mortgage”) is in the sum of around HK$3.87 million. The net value of the Residential Property is therefore about HK$3.93 million.

(2) He also has a 1/3 interest in a commercial property in Hong Kong (“the Commercial Property”). That property was purchased by Mr Wong’s father in 1986 at HK$705,000. By an assignment dated 16 September 2005 (“the Assignment”), Mr Wong’s father assigned 1/3 interest in the property to Mr Wong. The Commercial Property is not subject to any mortgage. By the most conservative estimate, the current market value of the Commercial Property is at least over HK$10 million.

11.  As set in the above, D1 has not filed any affirmation in reply. That means the valuation of the two properties put forward by Mr William Wong in Wong’s Affirmation is not challenged by D1.

12.  There has been some correspondence passing between the parties before the hearing on 17 December 2021. However, eventually the parties could not reach any agreement to dispose of the Summons, and the hearing on 17 December 2021 took place as scheduled. In the hearing before the Master, counsel for D1 (not the counsel representing D1 in this appeal hearing) pursued the application for security for costs and argued that the Undertaking would not be sufficient to protect D1’s position on costs. The Master refused to accept those submissions and dismissed the Summons upon the Undertaking offered by Mr William Wong. The Master also made the Costs Order.

No extension of time

13.  The Master dismissed the Summons and made the Costs Order on 17 December 2021. The time to issue a notice of appeal against the decision expired on 31 December 2021.[1] D1 only issued the notice of appeal on 6 January 2022. Since 1 and 2 January 2022 are public holidays, D1 is therefore out of time for 4 days.

14.  In respect of extending the appeal time, in Hady v Bazar[2], DHCJ Peter Ng SC (as he then was) said:-

“45. In considering whether to extend time to appeal, this court has to consider all relevant factors, particularly:

(1) the length of the delay;

(2) the reasons for the delay;

(3) the merits of the proposed appeal;

(4) the degree of prejudice to the other party.

Postwell Ltd v Cheng Kap Sang [2004] 2 HKLRD 355 at para. 33; Menno Leendert Vos v Global Fair Industrial Ltd & Ors unrep.; HCMP796 of 2010; 21 June 2010; Cheung and Kwan JJA; para. 16

46. Now that we are in the post-CJR era, it is incumbent on this court to give effect to the underlying objectives of the Rules of the High Court when exercising any of its powers: RHC Order 1A rr 1 & 2. In particular, this court must always recognize that the primary aim in exercising the powers of the court is to secure the just resolution of disputes in accordance with the substantive rights of the parties: RHC Order 1A r 2(2).

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49. …… the (lack of) reasons for the delay is only one factor to be taken into account in the exercise of my discretion. It must be acknowledged that the Plaintiff’s delay is a mere 8 days and there is no conceivable prejudice to the Defendant as a result. In these circumstances, I consider the primary consideration in the exercise of my discretion is to secure the just resolution of the disputes between the parties in the appeal. For reasons to be explained later in this judgment, I consider the Plaintiff’s appeal is meritorious.”

15.  D1 has not provided any reason for the delay by affidavit or affirmation. However, D1 is only out of time for 4 days. There is also no evidence showing any conceivable prejudice to P as a result of the 4-day delay. In my view, in these circumstances, whether an extension of time should be granted to D1 depends upon whether D1’s appeal is meritorious. For the reasons set out below, I am of the view that there is no merit in D1’s appeal. Accordingly, I would exercise my discretion against D1 and refuse to grant leave to appeal out of time to D1.

Unmeritorious appeal

16.  The parties have jointly prepared an agreed appeal bundle (“Bundle A”) and an agreed supplemental appeal bundle (“Bundle B”). Some of the documents in Bundle A, and all the documents in Bundle B, are documents which have not been placed before the Master in the hearing on 17 December 2021. In other words, these are new documents. Most of the new documents are some “without prejudice save as to costs” correspondence. Notwithstanding the provision in the Rules of the District Court, Order 58 rule 1(4), the parties have agreed that I may take the new documents into account in this appeal hearing. In view of the agreement between the parties, and since this appeal is only targeting the Costs Order made by the Master (see [17] and [18] below), I have taken those documents into account.

17.  Mr Lai Ming, counsel for D1 in this appeal hearing, stated in his written submissions dated 31 March 2022 that:-

“46. Since [Mr William Wong] confirmed the Undertaking in the last appearance, the [application for security for costs] should be dismissed.”

18.  Mr Lai’s stance is the Master’s decision dismissing the Summons upon the Undertaking offered by Mr William Wong is correct. According to Mr Lai, what should be revisited is the Costs Order made by the Master. Hence, D1’s appeal is an appeal targeting the Costs Order made by the Master only. Regarding an appeal as to costs only, a judge in chambers will not allow the appeal unless it is unreasonable or the master erred in law.[3] As said by Sakhrani J in Paul Y-ITC Construction Ltd v Kin Shing Co. Ltd[4]:-

“As this is an appeal as to costs only from the discretion of the master, such application should not be allowed unless it can be shown that the order made by the master was unreasonable or erred in law, ie, if he either failed to take into account proper matters or took into account matters that should not have been taken into account”.

19.  As far as I can understand, Mr Lai’s points in support of the appeal are as follows:-

(1) In Wong’s Affirmation, Mr William Wong only expressed his willingness to offer the Undertaking, but has not actually offered the Undertaking. In the circumstances, D1 could not withdraw the Summons. The Undertaking was only actually offered by Mr William Wong in the hearing on 17 December 2021. In the circumstances, costs of the Summons up to 17 December 2021 should be paid by P to D1.

(2) Alternatively, the Undertaking has been accepted by D1 on 12 December 2019. Accordingly, costs incurred thereafter should not be D1’s responsibility.

20.  With respect, there is no merit in these submissions.

(1) The Undertaking has been clearly and unequivocally set out in Wong’s Affirmation filed on 5 December 2019. Having seen the Undertaking, if D1 is of the view that the Undertaking is acceptable, what D1 should do is to accept the Undertaking, and to seek leave to withdraw the Summons upon the Undertaking offered by Mr William Wong.

(2) On 12 December 2019, D1’s solicitors wrote to P’s solicitors, in which D1’s solicitors said that “we would file a consent summons to incorporate [Mr William Wong]’s undertaking to the Court to pay the costs which [P] may be liable to [D1] in case [D1] succeeds in his defence in a court order and our client’s application for security for costs be withdrawn.” In the same letter, D1’s solicitors also asked that P should be responsible for the costs of D1’s application in the sum of HK$28,000. From this letter, it is clear that D1 has taken the view that (a) the Undertaking would be sufficient for the purpose of protecting D1 on costs; (b) the Undertaking has actually been offered by Mr William Wong; and (c) D1 could incorporate the Undertaking into a consent order, and by that consent order, leave could be granted to D1 to withdraw the Summons. The only remaining issue to be discussed is the costs of D1’s application. D1 proposed that those costs be paid by P, and the proposed amount is HK$28,000.

(3) P did not regard the HK$28,000 proposed by D1 as acceptable. On 20 December 2019, D1 reduced the proposed amount to HK$21,000. P maintained its disagreement to D1’s proposal. On 30 December 2019, P counter-proposed that costs of the Summons be dealt with in the way that costs of that summons up to 5 December 2019 be paid by P to D1, to be taxed if not agreed. P’s counter-proposal was not accepted by D1.

(4) Before the hearing on 17 December 2021, the parties were not able to reach an agreement to dispose of everything concerning the Summons. In the absence of an agreement between the parties, D1 has pursued his application for security for costs with full force in the hearing before the Master and strenuously argued that the Undertaking could not satisfactorily address D1’s concern on costs. D1 lost in the hearing before the Master. The Master also accepted that the proposal as to costs made by P’s solicitors in their letter dated 30 December 2019 is a reasonable proposal. In the circumstances, there is no reason why D1 should not bear the costs of the Summons incurred after 5 December 2019.

(5) Since the Undertaking was offered by Mr William Wong in his affirmation filed on 5 December 2019, I am of the view that the Costs Order made by the Master is proper and reasonable.

21.  In my view, Mr Lai has failed to show that the Costs Order is unreasonable, or the Master has erred in law in any aspect in making that order. There is no merit in D1’s appeal.

Deposition

22.  For the reasons above, I refuse to grant leave to appeal out of time to D1, and I dismiss the appeal.

23.  Costs should follow the event. I order that costs of this appeal be paid by D1 to P forthwith, with a certificate for counsel. Those costs be summarily assessed at HK$65,000.

24.  I thank counsel for the assistance rendered to the court.