JOYFUL SPARKLE CO LTD v. NG PIK CHU t/a SHAN YAU CO

CACV 102/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 102 OF 2012

(ON APPEAL FROM DCCJ NO 1881 OF 2008)

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REASONS FOR JUDGMENT

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Hon Cheung JA:

1.  I agree with the Reasons for Judgment of Au J. I also agree with his order on costs.  Accordingly, there will be an order in terms of paragraph 56 herein.

Hon Kwan JA:

2.  I agree with the judgment of Au J.

Hon Au J:

A.  INTRODUCTION

3.  On 8 July 2010, Deputy District Judge C Lee (“the Judge”) granted judgment (“the Trial Judgment”) in DCCJ 1881/2008 after trial, dismissing the plaintiff’s claim and allowing the defendant’s counterclaim for $83,000 with costs.  The plaintiff did not attend the trial.

4.  On 11 November 2011 (ie, 15 months later), the plaintiff by way of summons (“the set aside summons”) applied to set aside the Trial Judgment.

5.  By his order (“the Order”) dated 13 February 2012, the Judge dismissed the set aside summons.

6.  The plaintiff appealed to this court against the Order.

7.  At the hearing of the appeal, we dismissed the appeal (or alternatively struck out the Notice of Appeal) with costs, with reasons to be handed down later.

8.  These are the reasons.

B.  BACKGROUND

B1. The action and the Trial Judgment

9.  The plaintiff is the registered owner of two shops and a show room (collectively “the premises”) near Sheung Wan.  Apparently, a Ms Lau and her husband Mr Yee used the plaintiff as the corporate vehicle to hold their interest in the premises.

10.  Between 1 April 2000 and 29 February 2008, the defendant rented the premises from the plaintiff.  The tenancy period can be divided into four stages: the 1^st stage covers the period from 1^st April 2000 to 31^st March 2002 under the force of the 1^st written tenancy agreement.  The 2^nd stage covers the period from 1^st April 2002 to 31^st March 2004 during the renewed period after the expiry of the 1^st written tenancy agreement.  The 3^rd stage covers the period from 1^st April 2004 to 31^st March 2007 under the force of the 2^nd written tenancy agreement.  The 4^th stage covers the period from 1^st April 2007 to 29^th February 2008 after the expiry of the 2^nd written tenancy agreement until vacant possession was given.

11.  By way of the action below (DCCJ 1881/2008) issued in May 2008, the plaintiff claimed against the defendant for $283,700[1] as accumulated shortfall in rental.  The defendant denied the claim on the basis that, by way of two oral agreements made respectively in March and August 2002, Mr Yee had agreed with the defendant to reduce the rent from April 2002 to March 2004.  The agreed reduced rent accounted for the alleged shortfall.  The defendant further counterclaimed for $83,000 as (a) the return of deposit ($70,000) and (b) the plaintiff’s share of the expenses paid by the defendant for various fire prevention facilities ($13,000).

12.  After exchange of witness statements in February 2010, the plaintiff’s solicitors (Ken Chiu & Co) had ceased to act.  Eventually, it was the defendant who applied to set down the case for trial.  The trial was then fixed to commence on 8 July 2010.

13.  There is no question that the plaintiff was aware of the trial date.  However, about 3 weeks before the trial, the plaintiff sent from United States a batch of documents to the District Court Registry, which included a 3-page document (“the Note”) written by Mr Yee and bearing the signature of Ms Lau and the plaintiff’s company chop.  The Note was to the effect of informing the court that the company’s officers were in the United States and were occupied with their personal affairs.  They would therefore not be able to attend the trial.  The 1^st page of the Note states:

“法官明鍳:

香港同學由香港寄來美國關於七月八日2010年審訊通知書,我已於多日前轉寄給過往代表律師Ken Chiu & Co Solicitors,我公司雖再三要求此律師行完成此案,但兩日前WK To & Co [the defendant’s solicitors]傳真美國告之Ken Chiu終止辦理拒絕此案。

我目前身在美國,此舖剛租出,我亦等待款項修整六十年前所建舊房子,我亦要盡快搬出租用APARTMENT,日(目)前經濟及時間迫切,我無法抽身到香港,亦無法再花大量金錢另聘律師代表,懇請原諒我缺席未能到庭聆訊,在此附上有關文件,懇請法官大人查閱。

我找錯律師,錯信經紀,找錯租客,長年累月我們感到筋疲力盡,及大量金錢損失,精神損傷無法補償一言難盡。”

14.  The plaintiff therefore did not appear at the trial.  The Judge proceeded with the trial in the plaintiff’s absence pursuant to O 35 r 1(2) of the District Court Rules (Cap 336).

15.  He dismissed the plaintiff’s claim in light of its absence, and allowed the defendant to prove her counterclaim[2].  The defendant gave evidence at the trial.  The Judge found her to be a reliable and honest witness and accepted her evidence.  The Judge also found that her evidence was supported by the contemporaneous documents.  He therefore allowed the counterclaim[3] and granted the Trial Judgment.

16.  Later, the defendant took various steps to enforce the Trial Judgment, including registering a charge against the premises.

17.  On 12 November 2011 (ie, some 15 months after the Trial Judgment), the plaintiff took out the set aside summons trying to set aside the Trial Judgment.  It also later took out another summons dated 15 December 2011 seeking to amend the Statement of Claim if the set aside summons was successful.  The plaintiff was legally represented by William K W Leung & Co (“WKWL”).

18.  By way of the Order, the Judge dismissed the set aside summons, and also thereby the amendment summons.  He set out his reasons in a written decision (“the Decision”) dated 13 February 2012.

B2.  The Decision

19.  In the Decision, the Judge considered the eight factors (“the 8 Factors”) laid down by Leggatt LJ in Shocked v Goldschmidt [1998] 1 All ER 372 at 381e to j as guidelines to determine whether the Trial Judgment should be set aside.  The 8 Factors approach was approved and adopted by this court in Lau Kam Chuen v Lee Ching [2003] 2 HKLRD 1018 at paragraph 11 per Cheung JA[4].

20.  The 8 Factors are:

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

(2) Where judgment has been given after a trial, it is the explanation for the absence of the absent party that is most important: unless 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 judgment 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 judgment regularly obtained unless the party applying enjoys 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 judgment, 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 judgment 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 favour;

(7) A material consideration is whether the successful party would be prejudiced by the judgment being set aside, especially if he 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 2 trials, particularly if neither is short.

21.  After considering all the circumstances of the present case, the Judge came to the view that all these factors pointed against the exercise of discretion to set aside the Trial Judgment[5].  In particular, the Judge was of the view that the plaintiff’s absence in the trial was a deliberate one, which was the predominant and ultimate consideration for the court to refuse to set aside a regular judgment[6].

22.  The Judge therefore made the Order and dismissed the set aside summons.

C. THE PRESENT APPEAL AND ITS PROCEDURAL HISTORY

23.  Dissatisfied with the Judge’s decision, the plaintiff applied for leave to appeal against the Order.  On 30 March 2012, the Judge refused the plaintiff’s application for leave[7].  The Plaintiff then applied to the Court of Appeal for leave by way of an Originating Summons dated 13 April 2012.

24.  A single judge of the Court of Appeal granted leave on 9 May 2012.  The plaintiff’s solicitors then filed the Notice of Appeal on 15 May 2012, and later a Notice of Setting Down on 19 May 2012.

25.  Nothing then happened in the appeal until January 2013.  During this period, the plaintiff had not taken any steps to prepare for the appeal or to fix a date for its hearing.

26.  On 9 January 2013, the defendant’s solicitors applied to fix a date for the hearing of the appeal.  The appeal was then fixed to be heard on 14 November 2013, which is already more than 3 years after the Trial Judgment was delivered.

27.  Later, on their application, WKWL ceased to act for the plaintiff in June 2013.

28.  On 13 September 2013, W T Law Offices (“WTLO”) filed a Notice to Act to act for the plaintiff.

29.  On the other hand, notwithstanding the fixing of the date and the defendant’s solicitors’ chasers[8], the plaintiff still had not prepared and filed the hearing bundles or skeleton submissions for the appeal in accordance with the relevant rules and practice directions.

30.  Eventually, the defendant’s solicitors had to prepare and file the hearing bundles themselves.  The defendant’s counsel also filed his skeleton submissions on 8 November.

31.  At the same time:

(1) On 7 November 2013 (ie, a week before the hearing of the appeal), WTLO applied to cease to act.

(2) On 8 November 2013, the defendant took out a summons to apply to strike out the Notice of Appeal for want of prosecution.

32.  On the date of the hearing of the appeal, this court granted WTLO’s application to cease to act.  They however remained on record as the plaintiff’s solicitors at the hearing since they had not been able to comply with all the requirements under O 67 r6 (1) of the Rules of High Court.  But obviously, they did not and could not advance any submissions on behalf of the plaintiff at the hearing of the appeal.

D. THE APPEAL

33.  At the hearing, Mr Ho for the defendant asked this court to strike out the Notice of Appeal for want of prosecution and alternatively also to dismiss the appeal on merits.

34.  I will consider the dismissal first.

D1. Merits of the appeal

35.  In dismissing the set aside summons, the Judge was exercising a discretion.  It is trite that an appellate court would not interfere with that exercise of discretion unless it can be shown that the Judge had applied the wrong legal principles or that the said exercise was obviously wrong.

36.  It is for the plaintiff (as the appellant) to show and convince this court that the Order should be set aside on the above bases.  It must be noted that the Notice of Appeal (albeit drafted by counsel) does not elaborate on how the proposed grounds are to be advanced and supported by way of arguments.  However, as mentioned above, the plaintiff has not advanced any submissions to support that.  On this basis alone, I am of the view that the appeal should fail.

37.  In any event, purely looking at the grounds of appeal as set out in the Notice of Appeal, I am also of the view that there are no merits in this appeal.

38.  Those grounds of appeal are:

“(1) When making the Order on 13^th February 2012, the Learned Deputy Judge erred in law in misdirecting himself to a conclusion that the Plaintiff’s absence was a deliberate choice and not being made under mistake by failing to take into account adequately or at all the following facts:

(a) In their letter dated 9^th June 2010 to the Plaintiff, the Defendant’s solicitors, Messrs. W.K. To & Co. (‘WKT’), expressed that ‘……failing which the Court will make an appropriate Judgment in your absence’;

(b) The Plaintiff was not under legal advice as to the meaning of ‘an appropriate Judgment’ as stated in the said letter from WKT;

(c) Because of the lack of any legal advice, the Plaintiff mistook the words to mean that the Court would in any event make ‘an appropriate Judgment’ taking into account the merit of the Plaintiff’s claim.

(2) When considering the public interest for bringing an end to litigation, the Learned Deputy Judge erred in principle to place undue weight on the proportion between costs and the amount of claim. Further, the Learned Deputy Judge erred in principle in refusing to set aside the Judgment while he appreciated that the initial trial only took one day and a re-trial was estimated to take only 3 days.

(3) When making the Judgment on 8^th July 2010, the Learned Deputy Judge erred in law in failing to have adequate investigation into the following matters, namely:-

(a) The Plaintiff’s case that the Defendant had been owing the Plaintiff a rent of at least HK$101,800 (‘Minimum Amount of Claim’);

(b) The Maximum Amount of Counterclaim (HK$83,000) is less than the Minimum Amount of Claim; and

(c) The Plaintiff did not agree or intend to offer any rent reduction to the Defendant.

(4) For the reasons stated in paragraph (3), the Learned Deputy Judge adopted the wrong approach and erred in law when he held that the Defendant’s evidence was supported by contemporaneous documents and that ‘the existence of the two oral agreements tallied with the subsequent conduct of the parties’.

(5) Further, by reasons said above, the Learned Deputy Judge failed to consider whether in accordance with Section 63A(2)(b) of the District Court Ordinance Cap. 336 that leave to appeal should be granted in the interest of justice.”

39.  These grounds do not propose to challenge that the Judge had applied the wrong legal principles in adopting the 8 Factors approach in determining the set aside summons.  That must be correct in light of the authorities mentioned at paragraph 19 above.

40.  Although dressed up as “misdirection” or “errors in principle” in those five grounds, properly looked at, the plaintiff is in fact challenging the Judge’s assessments of the evidence in arriving at the conclusion in each of the 8 Factors.  To that extent, the plaintiff could only succeed if it can be shown that the Judge’s said assessments are obviously wrong.

41.  The Judge considered the plaintiff’s contentions and explained his assessments under the 8 Factors in the Decision as follows:

“9. In gist, Counsel for the Plaintiff advanced 4 contentions. Firstly, Mr. Yee’s couple did not know their attendance is necessary. They were under the mistaken belief that despite their absence, the Plaintiff’s case and merits would be taken into account. Secondly, the Defendant failed to state any prejudice that may be caused to them had the Judgment been set aside. Thirdly, the Plaintiff has a real prospect of success on at least the sum of $101,800 as the rent shortfall, on the assumption that the Defendant’s evidence on the two oral agreements was rejected. Fourthly, although the Plaintiff did not apply to set aside the Judgment within 7 days after the trial as required under O.35, r.2(2), 15 months’ delay was excusable because the Plaintiff thought that they won the case when the charging order was described in the Plaintiff’s favour, albeit it was the Plaintiff’s premises that was charged.

…

17. To begin with, the ultimate question seems to be whether the absence was deliberate. By virtue of the Note of absence dated 12^th June 2010, it is apparent that the Plaintiff’s absence was a deliberate choice. I extract the 1^st page of the Note hereunder:-

‘….’

18. The [Note] reflects that Mr. Yee’s couple was in the United States and they were preoccupied in personal affairs. They alleged that they had financial problem. They would not attend the trial. In brief, the absence was deliberate, there was no accident. They knew the trial date and they did not make any mistake on the trial date. The mistaken belief that attendance is not necessary is not reasonable, out of common sense or self-induced, if not created after thought. It lies ill in the mouth of the Plaintiff and Mr. Yee’s couple to allege that they did not appreciate the need for its witness to give viva voce evidence at trial.

19. Applying Shocked’s 1^st and 2^nd guidelines, it seems to me that the Plaintiff with notice of proceedings has disregarded the opportunity of appearing at and participating in the trial, the Plaintiff should be bound by the decision. Further, the absence was deliberate, the court should be unlikely to allow a rehearing.

20. Regarding the 3^rd guideline, at trial, I have heard the evidence of the Defendant and accepted her evidence, including the two oral agreements. If the Judgment is to be set aside, it would entail a complete retrial on matters of fact which have already been investigated by this court, the application to set aside should not be granted unless there are very strong reasons for doing so. I am not satisfied that the contentions advanced by the Plaintiff amount to strong reasons.

21. Regarding the 4^th guideline, I do not agree that the Plaintiff has a real prospect of success on $101,800, which was mostly the Plaintiff’s alleged rent shortfall accumulated in 2002. It is common ground that the Defendant has settled all the rent except the alleged rent shortfall accumulated in 2002 while the Defendant contended by relying on the oral agreements on reduction of rent. Not only there was no single notice of rent shortfall issued by the Plaintiff before 2006, the Plaintiff was willing to enter into another written tenancy agreement with the Defendant in early 2004. The parties’ subsequent conduct tallied more with the Defendant’s case. Worse still, the main character of the oral agreements, Mr. Yee did not prepare witness statement as at the trial on 8^th July 2010 to refute the oral agreements. Further, in this application, he did not prepare an affirmation to refute the allegations of reduction of rent in 2002. The Plaintiff’s claim cannot be said to have a real prospect of success. In brief, this is a regular Judgment, there is no real prospect of success and the court should not set aside the Judgment.

22. In respect of 5^th guideline, after the Judgment, the Defendant has acted on it. The Judgment was given on 8^th July 2010. The Plaintiff’s summons to set aside the Judgment was taken out on 4^th November 2011. There was about 15 months’ delay. During the period of delay, the Defendant had proceeded to enforce the Judgment by obtaining the charging order absolute.

23. In respect of 6^th guideline, the trial was fixed early in advance and by legal definition, it is a “milestone date” and it shall not be varied unless there are exceptional circumstances: see Order 25, r3 of the Rules of the District Court. There is no exceptional circumstances in this case. In short, by its own conduct, the Plaintiff has brought the consequence to its head. In these circumstances, the court should be less ready to exercise its discretion in its favour.

24. Regarding the 7^th guideline, I agree with the Defendant’s submission. This Court has heard and accepted evidence of the Defendant, including the 2 oral agreements made as early as in 2002. Further, if the Judgment is to be set aside, evidence has to be adduced again in 2012 or 2013 the oral agreements made in 2002. The Defendant would be incommoded by a retrial is a relevant factor.

25. Regarding the 8^th guideline, there is certainly a public interest in there to bring an end to litigation and in not having the time of the court occupied by two trials. Although the initial trial took only one day and the re-trial is estimated to take 3 days, the costs of the 1^st trial was summarily assessed in favour of the Plaintiff in the sum of $177,750. The estimated extra costs of the re-trial would be about $100,000 for each side on the lower end, making a total extra cost of about $200,000. Bearing in mind the amount of the claim is about $101,800 and the counterclaim amounts to $83,000, the costs incurred is disproportional to the amount of the claim. Shocked case and Lee Ching case are decided before the Civil Justice Reform. I venture to add the underlying objectives into the 8^th guideline, in particular, “costs effectiveness”, “to promote a sense of reasonable proportion”, and “to ensure that the resources of the Court are distributed fairly”, I have no hesitation to conclude that after weighing all relevant factors in this particular case, the Judgment should not be set aside.

26. The present case shares certain common features in the Shocked case. In saying that the trial judge erred in setting aside the Judgment, Leggatt LJ concluded as follows:-

‘When she buried [the application] her head in the sand, Ms Shocked made an election by which she should be bound, in default of special circumstances. There are none. Her explanation for non-attendance show that it was deliberate; and even if she was in personal difficulties, she has not explained why no application was made for an adjournment. A retrial would require the court to spend a further ten days hearing these proceedings in addition to four days when judgment was first given, five days on the application to set aside, and one day in this court. So far from finding that Ms Shocked enjoyed real prospect of success in a retrial, the deputy judge found merely that ‘there must be a reasonable prospect of making some impact by way of defence’. It is true that the delay in applying to set aside was not excessive, but that does not count positively in favour of acceding to the application. Ms Shocked’s conduct both before and after judgment has been undeserving. On the other hand, the extent to which Mr Goldschmidt would be incommoded by a retrial is a relevant factor. Finally, the suggestion that in these circumstances the court should devote a further ten days to proceedings in which it has already been an adjudication is wholly contrary to the public interest.’

27. The Plaintiff was embarking on a deliberate course to go to ground and avoid the consequences of the pursuit of the action. By doing so, they abjured their responsibilities to assist the court in furthering the underlying objectives of the Rules of the District Court. In my view, in the light of the CJR, that is an attitude which should not be countenanced by the court: Top One International (China) Property Group Company Limited and others v Top One Group Limited and others HCA 1244/2009 dated 9^th December 2010 by Fok J.

28. I bear in mind that the court should 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: see O.1A, r.2(2). On the other hand, the interests of the administration of justice require that a case is dealt with expeditiously as is reasonably practicable. I recognize that refusal to set aside the Judgment deprives the Plaintiff of the extra opportunity of calling witness or having their day in court. But in light of my findings, the Plaintiff or Mr Yee’s couple can be said to be the author of its misfortune, if any. In essence, I am of the view that “deliberate absence”, “no real prospect of success” and “public interest” are the material factors tipping against setting aside the Judgment.

29. By reason of the matters aforesaid, the overall justice of the case caused me not to extend the time for the Plaintiff to apply for setting aside the Judgment after trial: see O.35, r.2(2) and Nantong Angang Garments Co Ltd v Hellmann International Forwarders Ltd [2005] 4 HKC 86.”

42.  In my view, the Judge’s above analyses and assessments of the evidence before him for the purpose of the 8 Factors are exemplary and unimpeachable.  He was rightly and fully aware of the arguments raised by the plaintiff and had also clearly and carefully taken those parts of the evidence as mentioned in the Notice of Appeal into account in making the assessments.  There is thus no question of any misdirection or error in principle as suggested in the Notice of Appeal.  Moreover, it certainly cannot be said that those assessments or any of them are obviously wrong.

43.  For these reasons, the appeal is without merits and should be dismissed.

44.  For the sake of completeness, I now turn to consider the defendant’s application to strike out the Notice of Appeal.

D2. Striking out of the Notice of Appeal

45.  The court has inherent jurisdiction to strike out a Notice of Appeal on the basis of abuse of process.  Want of prosecution is one of such abuses.  Cf: Wong Shui Kee Roger v Victor Chu & Co [2011] 4 HKLRD (CA) 594, at paragraph 23 per Bharwaney J; Interasia Bag Manufacturers Ltd v Commissioner of Inland Revenue [2009] 5 HKLRD 818, at paragraphs 33-43 per Stone J.

46.  Whether there is such an abuse to warrant striking out must of course be looked at in all the circumstances of the case.

47.  In the present case, taking the history of the matter as a whole as summarised above, and for the following reasons, I am satisfied that the appeal amounted to an abuse by the plaintiff.

48.  First, given the significant delay (some 15 months) in taking out the application to set aside the Trial Judgment granted in July 2010, it must be even more important for, and incumbent on, the plaintiff to prosecute this appeal expeditiously.  However, the plaintiff had failed to do so.  As mentioned above, after applying to set down the appeal, the plaintiff simply did nothing for some 6 months until the defendant applied to fix a date.  Thereafter, again the plaintiff took no steps to prepare for the appeal.  The plaintiff has so far provided no explanations at all for its inaction.

49.  In the circumstances, the plaintiff has therefore failed to prosecute the appeal diligently and expeditiously.  This is particularly so as, in failing to properly prepare for the appeal, the plaintiff was in breach of the relevant rules, which are there to ensure that a case should be dealt with as “expeditiously as is reasonably practicable”.  See: O1A r 1(b), and The White Book 2014, paragraph 59/1/5.

50.  Second, the above delay coupled with the following shows that the plaintiff does not have a genuine intention to pursue the appeal to an end:

(1) Notwithstanding that an appeal date has been fixed, the plaintiff has not filed any skeleton or submissions to support its appeal.  As I observed above, the Notice of Appeal does not elaborate on how the proposed grounds are to be advanced and supported by way of arguments.  The plaintiff, being the appellant, must carry the duty to substantiate the appeal.  It cannot be left to the court to work out the arguments for the plaintiff.

(2) In this respect, it is also pertinent to note that this is a repeated situation where the plaintiff did not turn up at the substantive hearing of its own application (the first time being the trial).  The absence this time is particularly telling, as the plaintiff by now should know that its application could well be dismissed by reason of its absence at the hearing.

51.  Third, it is noted that it was after the defendant had applied for an order of sale of the premises based on the charging order that the plaintiff took out the set aside summons.  The said application for an order for sale has thus since been withheld.  As submitted by the defendant, the plaintiff has by way of this appeal therefore obtained a tactical advantage of stalling the defendant’s enforcement of the Trial Judgment.  To put it the other way round, the defendant has suffered prejudice by the plaintiff’s failure to prosecute the appeal diligently.

52.  I therefore also accept Mr Ho’s submissions that the Notice of Appeal should be struck out for abuse.

E. CONCLUSION

53.  I would dismiss the appeal, or alternatively strike out the Notice of Appeal.

54.  The defendant should have the costs of the appeal.

55.  A skeleton bill (in the sum of $165,420.67) has been provided to this court for summary assessment.  I have looked at the bill.  Some of the items claimed therein are excessive or not reasonably necessary in light of the nature of the appeal, the fact that the solicitors should be familiar with the matter and that the appeal was effectively not pursued, and its hearing lasted for not more than half an hour.  I would tax it down summarily to $80,000.

56.  I would therefore order that costs of the appeal be to the defendant, summarily assessed at $80,000.