Cornhill Enterprises Ltd v. Leung Chun Sang and Others

[English Translation ― 英譯本]
HCMP 2696/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 2696 OF 2014

(ON AN INTENDED APPEAL FROM HCMP 2037 & 2038 OF 2009)

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HCMP 2037/2009

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REASONS FOR JUDGMENT
and
ALLOCATUR

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Hon Chu JA (giving the reasons for judgment of the Court and the allocatur):

1.The 1^st defendant brought this action for applying for leave to appeal to the Court of Appeal out of time against the judgment dated 12 November 2013 given in respect of two actions, namely HCMP 2037/2009 and 2038/2009.  After hearing the application, we dismissed it and ordered that the 1^st defendant was to pay the plaintiff’s and the 2^nd defendant’s costs of the application and that the amount was to be assessed summarily.  We now give the reasons for our judgment and assess the costs of the plaintiff and the 2^nd defendant.

HCMP 2037/2009 and 2038/2009

2.The two plaintiffs are linked companies.  They were respectively the registered owners of seven plots of land situated in survey district no 4 at Tsuen Wan, New Territories[1].

3.In 2009 the two plaintiffs brought three actions, namely HCMP 2037/2009, HCMP 2308[sic]/2009 and HCMP 2039/2009, to ask the court to order the 1^st defendant, the 2^nd defendant and the occupiers to return the possession of five of the plots.  HCMP 2039/2009 concerned the 2^nd defendant only, so it is not included in this application made by the 1^st defendant.

4.The land involved in HCMP 2037/2009 and HCMP 2038/2009 was respectively the remaining portion of Lot no 1232, the remaining portion of Lot no 1234, the remaining portion of Lot no 1237 and the remaining portion of Lot no 1236.  In those two actions both the 1^st and the 2^nd defendants relied on adverse possession as their defence and the basis of their counterclaims.

HCB 440/2011

5.In 2010 judgment was entered against the 1^st defendant in a District Court employees’ compensation case, and he was required to pay to the plaintiff in that case $199,242 as compensation plus interest and costs[2].

6.By reason of the judgment debt resulting from that case, on 18 April 2011 in HCB 440/2011 the Court of First Instance ordered that the 1^st defendant be adjudged bankrupt.  Under the law the Official Receiver became the trustee of his property.

7.The 1^st defendant had been granted legal aid for him to conduct his defence and counterclaim in HCMP 2037/2009 and HCMP 2038/2009.  Since he was adjudged bankrupt and his property was taken over by the Official Receiver, the Director of Legal Aid discharged his legal aid certificates on 18 August 2011.

12 November 2013judgment

8.After the Official Receiver became the trustee of the 1^st defendant’s property, he wrote to the court on 5 January 2012 in connection with HCMP 2037/2009 and HCMP 2038/2009, saying that having considered the matter he had no intention to adopt the 1^st defendant’s defence and counterclaim in those two cases, nor did he consent to be a party in those two cases.  The Official Receiver also made it clear that no consent was given to the 1^st defendant to proceed with those two actions.

9.In these circumstance, the two plaintiffs made application to the Court of First Instance and was granted leave by the Registrar to continue the two actions against the 1^st defendant but they could not enforce any judgment against the 1^st defendant without the leave of the court.

10.On 25 September 2013 HCMP 2037/2009 and HCMP 2038/2009, having been consolidated, were heard together with HCMP 2039/2009 before Deputy High Court Judge Seagroatt (“the trial judge”).

11.The trial judge considered that[3] in view of the position taken by the Official Receiver, the 1^st defendant had no locus standi in HCMP 2037/2009 and HCMP 2038/2009, but in order to conduct a thorough inquiry into the case and have a clear picture of all relevant matters, he allowed him to give evidence and be cross-examined during the trial.  The trial judge also stated that he would evaluate the 1^st defendant’s claim about his interest in the land in question in the context of all the evidence.

12.The trial lasted seven days.  Besides the 1^st defendant, the 2^nd defendant’s widow and tenant also gave evidence.  In addition, there was expert evidence.

13.On 12 November 2013 the trial judge handed down judgment.  He found that the 1^st defendant failed in his defence and counterclaim, which were founded on adverse possession, but that the 2^nd defendant’s defence and counterclaim, likewise founded on adverse possession, were established, and he ordered the 1^st defendant to pay the costs of the plaintiff and the 2^nd defendant.  As stated in paragraph 9 above, the plaintiff and the 2^nd defendant must seek leave from the court before they can enforce the trial judge’s costs order against the 1^st defendant.

HCMP 536/2014

14.On the basis of the trial judge’s judgment, the 2^nd defendant’s widow and personal representative, Madam Chan Yuet Ming, commenced the action HCMP 536/2014 on 7 March 2014 against the occupiers of the remaining portion of Lot no 1232, claiming repossession of the plot.

15.The Official Receiver wrote to the court on 28 March 2014 to state the 1^st defendant’s position as a bankrupt and his position as the trustee in bankruptcy of the 1^st defendant’s estate in that action.  The Official Receiver stated that the claim made in HCMP 536/2014 was only directed against the 1^st defendant’s occupation of the land, that the action was one personal to the 1^st defendant and was commenced after the making of the bankruptcy order, that the 1^st defendant’s right of action to conduct his defence and bring a counterclaim did not vest in the Official Receiver, and that therefore the 1^st defendant had locus standi in that action.

16.In the end, judgment was given for Madam Chan in HCMP 536/2014 and on 5 June 2014 she was granted a writ of possession.  According to paragraph 4 of the submissions made by Mr Ho, counsel for the 2^nd defendant, the 2^nd defendant had recovered possession of the plot and the 1^st defendant had removed all his personal property.

This application

17.The 1^st defendant made this application on 28 October 2014 to ask for leave to appeal out of time against the 12 November 2013 judgment.  Attached to his summons was a draft copy of a notice of appeal, in which he set out his intended grounds of appeal.  He also filed an affidavit in support of his application.

18.Both the plaintiff and the 2^nd defendant filed affidavits to oppose the 1^st defendant’s application.

19.Both the plaintiff and the 2^nd defendant put forward the following grounds of opposition: the intended appeal of the 1^st defendant is seriously out of time; the 1^st defendant has not provided any good explanation for his delay in lodging his appeal; and the intended grounds of appeal have no prospect of success.  In addition, the plaintiff submitted that the 1^st defendant does not have any right of action to appeal against the 12 November 2013 judgment.

Our reasons for judgment

20.According to rule 4(1)(c) of Order 59 of the Rules of the High Court, Cap 4A Laws of Hong Kong, if the 1^st defendant intended to appeal against the 12 November 2013 judgment, the appeal had to be lodged within 28 days from the date of the handing down of the judgment (ie on or before 9 December 2013).  It was not until 28 October 2014 that the 1^st defendant made this application.  It was nearly 11 months out of time.  It is a case of inordinate delay.

21.Generally speaking, the factors which will be taken into account in deciding whether to exercise discretion to grant leave to appeal out of time include the length of the delay, the reasons for the delay, the strength of the grounds of the intended appeal and the degree of prejudice to other parties to the action if the application is granted: see paragraph 59/4/9 of Hong Kong Civil Procedure 2015.  Where the delay is not insubstantial, the party seeking leave to appeal out of time must show that the intended appeal has a real prospect of success: see Secretary for Justice v Hong Kong and Yaumati Ferry Co Ltd & Another [2001] 1 HKC 125, 127D-128D, 132F and Yifung Properties Limited and Others v Manchester Securities Corp and Others (unreported) HCMP 461/2015, date of judgment: 3 June 2015, paragraph 47.

22.In our judgment, the 1^st defendant has no locus standi to make this application or to appeal against the 12 November 2013 judgment given by the trial judge.

23.Section 58(1) of the Bankruptcy Ordinance, Cap 6 Laws of Hong Kong, provides that on the making of a bankruptcy order, the property of the bankrupt shall vest in the Official Receiver.  According to the definition in section 2 of that Ordinance, the property of a bankrupt includes choses in action.  The right to bring proceedings is a chose in action: see Chung Kau v Hong Kong Housing Authority & Others [2004] 2 HKLRD 650  paragraph 7.

24.Therefore, upon the making of a bankruptcy order, the bankrupt’s property, including his right to sue in respect of certain causes of action on the day of the order (except the right to bring actions that are personal to the bankrupt) vests in the Official Receiver: see Cheung Wing Kwan Tommy v Hong Kong Export Credit Insurance Corp [2012] 2 HKLRD 1249  paragraph 21, and Chung Kau v Housing Authority & Others  paragraph 8.

25.Furthermore, the property so vested in the trustee in bankruptcy is not returned to the bankrupt upon discharge of the bankruptcy order: see Cheung Wing Kwan Tommy v Hong Kong Export Credit Insurance Corp  paragraph 22. That being so, a right of action which has already vested in the Official Receiver will not revert to the bankrupt even when the bankruptcy order is discharged.

26.In the present case, as pointed out by the Official Receiver in his letter to the court dated 5 January 2012, the 1^st defendant’s right of action in respect of HCMP 2037/2009 and HCMP 2038/2009 already vested in the Official Receiver on the day of his being adjudged bankrupt.  The right of action vested in the Official Receiver included the right to appeal from the judgment of those two cases: see Grady v HM Prison Service [2003] EWCA Civ 527  paragraph 20.  Therefore, unless the Official Receiver has consented to the lodging of the appeal or has assigned to the 1^st defendant the right of appeal, the 1^st defendant has no right to appeal from the 12 November 2013 judgment.

27.The 1^st defendant submitted that in the letter dated 28 March 2014 the Official Receiver considered that he had right of action and did not object to his taking part in the action.  However, in that letter the Official Receiver only explained the circumstances in the action HCMP 536/2014.  He did not give any consent to the 1^st defendant to proceed with HCMP 2037/2009 and HCMP 2038/2009 or any appeal stemmed from those two actions, which are different in nature from HCMP 536/2014.  The fact that the Official Receiver did not object to the 1^st defendant taking part in HCMP 536/2014 does not mean that the 1^st defendant has right of action in HCMP 2037/2009 and HCMP 2038/2009, nor does it mean that he has the right to appeal against the judgment given in those two cases.

28.The 1^st defendant also complained that it was unfair to deprive him of his right of action.  However, it is not true that he had been deprived of his right of action.  What happened was that he was adjudged bankrupt and his right of action became vested in the Official Receiver, who had a legal duty to have regard to a number of factors covering different aspects, including the interests of the creditors and the circumstances of the actions in question.  Having considered these factors, the Official Receiver decided that he would not proceed with the two actions.

29.Not withstanding what has been said above, the trial judge, in order to fully scrutinize everything involved in the case, allowed the 1^st defendant to give evidence in court at the trial and, when he passed judgment he had considered the 1^st defendant’s claim regarding adverse possession on the basis of all the evidence of the case. In these circumstances, the 1^st defendant’s allegations that he was denied a fair trial and that to disallow him to appeal was unfair treatment against him are not substantiated.

30.Since the 1^st defendant has no right of action to appeal against the 12 November 2013 judgment, he has no right to make this application, and the explanation he puts forward of his lodging the appeal out of time, ie the Official Receiver did not object to his taking part in the action HCMP 536/2014, is not established.

31.Such being the case, we do not need to go into the 1^st defendant’s intended grounds of appeal; suffice it to say that his grounds of appeal largely concern the trial judge’s assessment as to the evidence and the witnesses’ credibility, and the findings in respect of the factual issues.  However, a well-established legal principle is that unless the 1^st defendant can show that the findings made by the trial judge were patently wrong, the Court of Appeal will not interfere with the trial judge’s findings.  We do not think that the 1^st defendant’s intended grounds of appeal have a real prospect of success.

32.On the basis of the above analysis and reasons, we dismissed the 1^st defendant’s application for leave to appeal out of time.

Decision as to costs

33.Under the usual rules governing litigation, the 1^st defendant, his application having been dismissed, should pay the plaintiff’s and the 2^nd defendant’s costs of this application.

34.The plaintiff and the 2^nd defendant filed their respective bills of costs for summary assessment.  The 1^st defendant filed his written objection on 23 July 2015.

35.The plaintiff’s costs are $61,134 in total, while the 2^nd defendant’s are $81,370 in total.

36.After considering the 1^st defendant’s objection, we find that, on the party and party basis, there is room for downward adjustment in respect of items D1 to D3 (preparation of documents, perusing documents and preparation for hearing) of the plaintiff’s costs, and that similarly, there is room for downward adjustment in respect of all these four items of the 2^nd defendant’s costs: C1 (contact with client), C3 (contact with counsel), D1 (preparation of and perusing documents) and D2 (preparation for hearing).  Moreover, since the counsel referred to in item E1 did not appear in the hearing of this application, according to the party and party basis, expenses relating to examining documents and holding of conferences cannot be recovered from the 1^st defendant.  However, we do not accept the 1^st defendant’s suggestion that the rate of the solicitor for the plaintiff and that of the solicitor for the 2^nd defendant (item A4) should be $2,000 per hour; nor do we agree that the fee charged for briefing the counsel for the plaintiff was too high.  Having considered as a whole the nature of this application and the documents and the issues involved, we find that the costs of the plaintiff and the 2^nd defendant should each be assessed at $40,000.

37.Accordingly, we order that the 1^st defendant shall pay the plaintiff $40,000 and the 2^nd defendant $40,000, being costs of this application.

Mr Michael Lok, instructed by Messrs Woo Kwan Lee & Lo, for the Plaintiff.

The 1^st Defendant, acting in person, present.

Mr Duncan Ho, instructed by Messrs Yip, Tse & Tang, for the 2^nd Defendant.

Translated by the Judgment Translation Unit of the Judiciary and vetted by Mr. Patrick W.S. Cheung, Barrister-at-law.