LAW KA YEE v. QUALITY DRIVER TRAINING CENTRE LTD

DCPI 3929/2021

[2026] HKDC 1370

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

PERSONAL INJURIES ACTION NO 3929 OF 2021

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BETWEEN

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DECISION

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A. INTRODUCTION

1.  This is the plaintiff’s appeal against a Master’s refusal to award to the plaintiff’s costs of an examination conducted under O 48 of the Rules of the District Court (Cap 336H) (“RDC”).

B. BACKGROUND & PROCEDURAL HISTORY

2.  On 17 January 2019, whilst attending a motorcycle lesson provided by the defendant, an operator of a driving school, the plaintiff sustained injuries after she fell from the motorcycle.

3.  Interlocutory judgment was entered on 14 June 2022. By an assessment of damages dated 12 August 2024[1] (the “Judgment”), His Honour Judge Andrew Li awarded to the plaintiff a sum of $788,436 with interest against the defendant.

4.  Upon the plaintiff’s application, on 21 February 2026, Master Charmaine Lo ordered that, amongst others, Mr Law Sing Hong (“Mr Law”), director of the defendant, to attend court to be orally examined pursuant to RDC O 48 (the “Examination”).

5.  By order of Master David Chan dated 13 March 2025, Mr Law was ordered to produce, as far as possible, the defendant’s books and records including accounts, bank statements for the last 6 years (the “Disclosure Order”).

6.  The Examination was conducted on 19 and 27 March 2026 before a Master. During the Examination, Mr Law was questioned at length about the defendant’s assets and financial activities over the past years in relation to the books and record produced.

7.  At the conclusion of the Examination, the plaintiff’s counsel asked for the costs of the Examination against the defendant. The request was refused by the learned Master who made no order as to costs (the “Costs Order”).

8.  By a Notice of Appeal dated 9 April 2026, the plaintiff seeks to set aside the Costs Order and substitute the same with an order that the defendant do pay the plaintiff’s costs of the Examination.

9.  The matter first came before me on 26 May 2026. However, as the transcripts of the Examination (the “Transcripts”) were only made available to the parties shortly before the hearing, I adjourned the matter to 29 May 2026 for full argument to give the parties the opportunity to review the Transcripts and to lodge their written submissions in respect of the present appeal.

C. APPEALS FROM MASTER’S DECISIONS ON COSTS

10.  Although appeals from masters’ decisions are dealt with by way of rehearing. In an appeal against a master’s decision on costs, a judge will not generally allow the appeal unless the costs order below is unreasonable or that the master erred in law or that the master had either failed to take into account proper matters or took into account matters that should not have been taken into account, see: Hong Kong Civil Procedure 2026 (“HKCP”), vol 1, §58/1/6.

D. ANALYSIS

D1. The Master’s reasons for the Costs Order

11.  As can be seen from the Transcripts:-

(1) In support of the plaintiff’s application for costs of the Examination, Mr Leung, counsel for the plaintiff, relied upon the following matters which were said to be discovered through the Disclosure Order and the Examination[2]:-

(i) The defendant has waived certain loans to shareholders without any board resolution evidencing the authorisation of such waiver.

(ii) The defendant had made substantial payments to an affiliate purportedly as rent under a lease agreement, despite having no business or operation which justified such lease of premises.

(2) The learned Master rejected the plaintiff’s application for costs because she was of the view that there was insufficient evidence at that stage to find that Mr Law or the defendant had deceptively or deliberately transferred the defendant’s assets to frustrate execution of the Judgment (the “1^st Reason”)[3]. In making the Costs Order, she also appeared to take into account that the transactions discovered above pre-date the Judgment (the “2^nd Reason”)[4].

D2. Exercise of discretion on costs in O 48 examinations

12.  At the outset, I must emphasise that at the time when the Costs Order was made, the learned Master did not have the benefit of the extensive legal submissions which are now before me.

13.  The principles on the award of costs of an O.48 examination were stated in the commentary on the corresponding rule under the Rules of the High Court (Cap 4A) (“RHC”) in HKCP, vol 1 at §48/3/10:-

“…Adding the costs to the judgment was justified if the examination had produced some fruitful information or the disclosure of some income, property or assets on which enforcement process could usefully be issued. If the examination proves abortive or does not yield any useful information or material, the general practice, by analogy with an abortive execution, is that no costs will be awarded…”

14.  The above passage was cited with approval by Deputy High Court Judge KC Chan in Chan Ka Ho Abraham v Mass Choice Limited [2024] HKCFI 3396 at §39(b). The same principles also apply to decisions on costs in examination under O 49B[5]. This is because O 48 and O 49B share the common purpose of finding out whether the judgment debtor has any means of satisfying the liability under the judgment in aid of enforcement[6].

15.  In considering what amounts to “fruitful information” for the above purpose, the question may have to be approached by reference of the overriding purposes of the O 48 examination procedure, which are to:-

(1) ascertain whether the persons bound to pay the judgment debt are withholding assets or means to pay the debt or have disposed of assets they had so as to put them in a position where they cannot pay the debt; and

(2) enable a judgment creditor to come to an informed decision as to how best to enforce the judgment which he has obtained.

See: Bloomsbury International Ltd v Nouvelle Foods (Hong Kong) Ltd [2005] 2 HKLRD 65 at §107 (Reyes J); Asia Credit Co Ltd v CS Asia Opportunities Master Fund [2024] HKCFI 2005 (Deputy High Court Judge Le Pichon) at §14.

16.  The importance of enabling the judgment creditor to make an informed choice through the O.48 examination procedure was explained by Reyes J in Bloomsbury (supra) at §§35 and 71 in relation to potential claims by the judgment debtor against third parties:-

(1) The learned Judge held that it was properly within the remit of the O 48 procedure for a judgment debtor to be examined on its potential rights of action against third parties so as to allow the judgment creditor to consider whether the rights of action could be viably used to satisfy judgment through some other enforcement procedure open to the creditor, including appointment of an equitable receiver.

(2) Allowing the judgment creditor to examine the judgment debtor on these matters is useful because it helps the creditor to get a correct picture as to the prospects of enforcing against a particular asset. Otherwise, the creditor might embark on proceedings which ultimately fail, with the undesirable result of wasting time and money.

17.  By its nature, an examination under O 48 is not a direct mode of enforcement of judgment[7] but acts as a means to discover assets for further execution. As costs are usually decided at the end of the examination, the presiding master would not be in position to know whether such information would ultimately facilitate further execution or whether such further execution would be successful.

18.  Therefore, when deciding costs, the court must form a preliminary view on the likelihood and extent to which the obtained information fulfils the overriding purposes of the O 48 procedure. Where the examination proceedings yield sufficiently useful information (in the sense as described above), the judgment creditor is typically entitled to the costs of the examination.

D3. The 1^st Reason

19.  In light of the above analysis, there is no justification to adopt a more restrictive approach (as per the 1^st Reason) in requiring the judgment creditor to show that the judgment debtor had committed some kind of misconduct (which the learned Master accepted to be a high threshold) such as concealing assets or transferring assets out of the reach of the judgment creditor. With respect, this stringent approach takes an unnecessarily narrow view of the purpose of O 48 examination regime which I have set out in §15 above.

20.  The 1^st Reason is also inconsistent with Trading Consultants Ltd (supra), a case concerning examination under RDC O 49B:-

(1) In that case, Acting Registrar Simon Kwang[8], found that the judgment creditor had failed to prove that the judgment debtor had wilfully failed to make full disclosure of assets or disposed of his assets (§42).

(2) Nevertheless, applying the principles set out in §13 above:-

(i) The court ordered the judgment debtor to pay the judgment creditor’s costs up to document production stage on the basis that the judgment creditor was justified to make the application for examination in order to ascertain the financial means of the judgment debtor given the judgment debtor’s failure to pay the judgment debt (§§46-48).

(ii) However, the court made no order as to costs for the subsequent hearings because no further fruitful information was elicited to show any means of the judgment debtor to pay the judgment debt (§49).

21.  In my view, the existence of deception or misconduct on the part of a judgment debtor in putting assets out of reach of the judgment creditor may amount to an aggravating feature which justifies awarding costs on a higher scale. As an example, in Hung Kai Finance Company Limited CACV118/1988 (unreported, 11 November 1988), the Court of Appeal affirmed a master’s order against the judgment debtor to pay the costs of his examination under O 49B on the indemnity basis because the judgment debtor had lied and had wilfully failed to make full disclosure of his assets.

22.  However, the absence of such features should not, without more, be a reason to deprive a judgment creditor of the costs to which he is otherwise entitled where he has obtained useful information for execution in the course of an examination.

23.  Accordingly, I find the 1^st Reason to be incorrect as a matter of law.

D4. The 2^nd Reason

24.  With respect to the learned Master, I also disagree with the 2^nd Reason, ie. that the relevant transactions which were discovered occurred before the Judgment.

25.  For the purpose of aiding execution, I am unable to discern any meaningful justification for drawing a distinction between transactions which took place before and after judgment.

26.  In this regard, I note that the standard directions for production of documents before examination under O 48 and under O 49B[9] do not provide for such distinction. In the present case, the Disclosure Order required Mr Law to produce the books and records of the defendant in the past 6 years up to 2019, ie 5 years before the Judgment.

27.  More importantly, drawing a distinction between transactions which occurred before and after judgment is inconsistent with the overriding purposes of O 48. After all, O 48 is a way of obtaining discovery against the judgment debtor as to his assets for discharging a judgment debt. As the debtor has committed a wrong in failing to pay, the Court must not be overly solicitous in his favour and should take a robust approach, see: Bloomsbury (supra) at §107.

28.  As rightly submitted by Mr Kelvin Leung, counsel for the plaintiff, assets which were disposed of by the defendant before Judgment may nevertheless be made available for execution if such disposals are liable to be set aside, eg where the transaction is unenforceable or that it is liable to be set aside under s 60 of the Conveyancing and Property Ordinance (Cap 219).

29.  In Bloomsbury (supra), even though the relevant award which gave rise to the judgment debt was made in December 2002, Reyes J allowed questions to be asked in the O 48 examination on topics concerning the judgment debtor’s current assets and expenses as at March 2001 on the basis that if monies or assets were wrongly paid out or given away, the judgment debtor may have claims for repayment or restitution that may in turn be available for execution (§§159-164).

30.  As explained by Li J (as he then was) in Richard Lau Hon Wang v Feld International Industries Ltd HCA 2710/1977 (unreported, 23 July 1979)[10] at p 4, in the context of examination in aid of enforcement, there is no reason to draw such a distinction, as a devious defendant may, after a claim has arisen, take steps to conceal his assets to frustrate in anticipation of an adverse judgment:-

“I am more doubtful if concealment, transfer, removal of property or acts of bad faith committed after the cause of action for the debt has arisen but before judgment may not defeat an application for release after judgment. Had it been otherwise, the provisions in Rule 6(3) are no more than dead letters. To give an example, any debtor can, as soon as his creditor issues a writ, conceal and remove property prior to judgment….The timing of the judgment debtor's fraudulent acts should not have any bearing on the effect of Rule 6(3) provided it is clear that the concealment, transfer, removal or acts of bad faith are for the purpose of avoiding payment of the eventual judgment debt be they committed before or after judgment” (emphasis added).

31.  Accordingly, I also find the 2^nd Reason to be flawed.

E. EXERCISING THE DECISION ON COSTS AFRESH

32.  As I have reached the conclusion that learned Master has erred in relying on the 1^st Reason and/or 2^nd Reason, this warrants appellate intervention to exercise the discretion on costs afresh.

33.  I am satisfied that the Examination has resulted in the production of fruitful information in aid of enforcement.

34.  The relevant circumstances were summarised by Deputy District Judge Patrick Siu in his decision dated 27 February 2026[11]:-

(1) Pursuant to the Disclosure Order, Mr Law had disclosed the books and records of the defendant which showed that the defendant had made various payments to 24 of its then shareholders in the total sum of $10,230,000 which were booked as loans to shareholders.

(2) According to the purported audited financial statements[12] of the defendant for the year ended 31 December 2019, loans to shareholders in the total sum of $18,457,920 were said to be waived.

(3) This apparently conflicts with the purported unaudited balance sheet dated 31 December 2019 which recorded a loan to shareholders in the sum of $18,028,920.

(4) Mr Law has not been able to produce any resolution or supporting document showing that the above loans to shareholders have been waived and he did not offer explanation as to why the loans to shareholders remained on the unaudited balance sheet if the loans have indeed been waived.

35.  The learned Judge concluded that the plaintiff has established a prima facie case that the loans to 22 of the former shareholders remain due and owing to the defendant (the “Loans”). He further held that, even if these Loans were indeed waived, such waiver may not be valid as there was no evidence that such waiver was executed by deed or otherwise supported by consideration. Accordingly, the learned Judge made a garnishee order nisi in respect of the Loans (the “Garnishee Order nisi”).

36.  In my view, the very fact that the learned Judge made the Garnishee Order nisi demonstrates that the Disclosure Order has resulted in the disclosure of useful information about the Loans which had led to further execution on assets of the defendant.

37.  I have also considered the Examination which took place thereafter on 19 and 27 March 2026 to yield useful information about the Loans. During the Examination, Mr Law was given the opportunity to explain how the Loans and the alleged waivers came about and the rationale for the waivers. For example:-

(1) Mr Law confirmed that the defendant did not have in its possession loan agreements in respect of the loans to shareholders[13].

(2) He was also asked about the alleged write-off of the said loans to shareholders as recorded in the defendant’s audited financial statements and the circumstances of the write-off. He also confirmed that there was no board resolution authorising any write-off or waivers of loans to shareholders[14].

38.  The above evidence from Mr Law reinforces the plaintiff’s case that the Loans may be available for execution despite the alleged waivers. In turn, this will assist the plaintiff to make an informed choice as to whether to continue with the garnishee order proceedings.

39.  In the present circumstances, applying the general principles[15], the plaintiff should be prima facie entitled to the costs of the Examination.

40.  In the submissions made by Mr Law on behalf of the defendant, it is argued that the defendant should not be ordered to bear the costs of the Examination on the following grounds:-

(1) Mr Law was cooperative with the plaintiff and did not refuse to answer any question or refuse to provide any documents requested by the Applicant.

(2) Mr Law also alleged that the plaintiff’s legal representative had made unauthorised recordings of the Examination proceedings on 19 March 2026.

41.  In my view, even if I were to assume in favour of Mr Law that he had tried his best to respond to the plaintiff’s requests and questions, I do not regard such cooperation as being sufficient to displace the general rule. After all, the Examination was necessitated by the defendant’s failure to pay the judgment debt and it is also the defendant’s obligation to comply with the court’s orders to disclose documents and to answer questions at the Examination.

42.  As to the alleged unauthorised recording:-

(1) I note from the Transcripts that Mr Law made a complaint to the learned Master on 19 March 2026. At the time, the learned Master noted that the allegation is a serious one and invited Mr Law to consider whether to make an application for contempt of court[16].

(2) As noted by the learned Master on the second day of the Examination (27 March 2026), a complaint letter was written to the Judiciary on the alleged unauthorised recording and the matter was under investigation[17].

(3) I have not been informed of the result of the investigation. In any event, it does not appear that the matter has any direct material bearing on the question of costs which is the subject matter of the present appeal.

43.  In light of the circumstances, the costs of the Examination should be borne by the defendant.

F. DISPOSITION

44.  Accordingly:-

(1) The appeal is allowed. The Costs Order is set aside and is substituted with an order that the defendant do pay to the plaintiff the costs of the Examination, to be taxed if not agreed.

(2) I make an order nisi that the costs of the appeal be paid by the defendant to the plaintiff, with certificate for counsel. Unless there is an application for variation of the costs order nisi made by summons within 14 days after this decision is handed down, the costs order nisi shall become absolute.

(3) The costs of the appeal are to be summarily assessed as follows:-

(i) The plaintiff do lodge and serve her statement of costs of the appeal within 7 days from the date on which the costs order nisi above is made absolute.

(ii) The defendant do lodge and serve its statement of objections to the plaintiff’s statement of costs within 14 days thereafter.

(iii) The plaintiff do lodge and serve her statement of reply within 7 days thereafter.

(iv) The costs are to be summarily assessed on paper.