Wong Chun Choi also known as Wong Cheun Choi and Others v. Mak Tak Sum, also known as Man Sum 文德森，文森

DCCJ 3902/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO.3902 OF 2013

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DECISION

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1.By his summons filed 23 Dec 2016 (“leave summons”), defendant applied for leave to appeal against a costs order of no order as to costs made by me on 1 Dec 2016 (“the costs order”) after a hearing before me on 1 Dec 2016 (“the hearing”).

2.For background to the costs order and my reasons for it, they are set out in my Reasons for Decision dated 14 Dec 2016 (“my reasons”), whose abbreviations will be adopted below. By its intended appeal, defendant seeks to replace the costs order with one that the plaintiffs do pay him costs of and incidental to the amended summons to be taxed, if not agreed.

3.As was the case on the hearing, Mr Yeung Man Sing of plaintiffs’ solicitors (“Mr Yeung”) appeared for the plaintiffs and Mr David Wong of defendant’s solicitors (“Mr Wong”) appeared for the defendant. Mr Yeung opposed to the leave summons.

Grounds of appeal

4.Six grounds of appeal are set out in the leave summons. As I understand them, they run as follows.

5.First, it is submitted that I mistook the amended summons and the orders I made therein as interlocutory proceedings and interlocutory orders. They being final orders, I ought to have ordered costs to follow the event as defendant has wholly succeeded on the amended summons and there is nothing to displace that usual order.

6.Secondly, my criticism of defendant’s conduct in endeavoring to negotiate with plaintiffs and accommodate to some extent their demands for additional terms in the lease to be executed is, it is submitted, misconceived.

7.Thirdly, the weight attached by me to the lateness of the amendment summons cannot either be supported.

8.Fourthly, the orders I made at the hearing demonstrate that the plaintiffs were worse off than having accepted defendant’s last offer before the negotiations broke down.

9.Hence, even if the amended summons and the orders I made therein were interlocutory, costs of and incidental to the amended summons ought, it is submitted, to be awarded to the defendant upon a proper exercise of my discretion.

Applicable law and rules

Leave to appeal

10.S.63(1) of the District Court Ordinance, Cap.336 (“DCO”), reads: “…an appeal can, with leave of a judge …be made to the Court of Appeal from every … order or decision of a judge in any civil cause or matter… (2) An appeal is subject to rules of court…”

11.S.63A of DCO reads: “… (2) Leave to appeal shall not be granted unless the judge… hearing the application for leave is satisfied that- (a) the appeal has a reasonable prospect of success… (italics added)”.

12.O.58 r.2 of the Rules of District Court, Cap.336H (“RDC”), reads: “(4) An application for leave to appeal must be made to a judge… in the case of an appeal under paragraph (2), within-… (b)in the case of an appeal from a…order or decision (other than an interlocutory … order or decision) of a judge, 28 days from the date of the … order or decision; (c) in the case of an appeal from an interlocutory … order or decision of a judge, 14 days from the date of the interlocutory … order or decision. (10) The Court … may, at any time, and notwithstanding that the time for … an application for leave to appeal may have already expired, extend the time … for applying for leave to appeal.”  (italics added)”

13.O.58 r.4, RDC, reads: “(1) For the purposes of rule 2(4)(b) and (c), the following judgments and orders are not interlocutory- (a) a judgment or order determining in a summary way the substantive rights of a party to an action (italics added)”.

Costs entitlement

14.S.53(1) of DCO reads: “The costs of and incidental to all proceedings in the Court… are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid.”

15.O.62 r.3, RDC, reads: “(2) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs. (2A) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit. (italics added)”

16.O.62 r.5, RDC, reads: “(1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account- (aa) the underlying objectives set out in Order 1A, rule 1; …(e) the conduct of all the parties; (f) whether a party has succeeded on part of his case, even if he has not been wholly successful; and (g) any admissible offer to settle made by a party, which is drawn to the Court's attention.”

Defendant’s submissions

17.Mr Wong reminded me that plaintiffs insisted on a forfeiture clause for breaches other than non-payment of rent (“forfeiture clause for other breaches”) to be included in the lease such that it caused defendant to take out the summons in the first place.

18.Mr Wong emphasized that, at the hearing, Mr Yeung took time to take instructions and came back with only 2 proposals by way of additional terms to be included to the revised draft lease and one proposal on clause 2.2 was not accepted by me. As such, the plaintiffs, he submitted, conceded much at the end of the day.

19.On the issue of final or interlocutory order, Mr Wong cited Hip Hing Timber Co Ltd v Tang Man Kit & Another (2004) 7 HKCFAR 212, 225G, where Lord Millet NPJ said at para 38 of the judgment:

“This is a notoriously difficult question … For present purposes, however, it is sufficient to say that an order is a final order if, whatever the outcome of the application on which it is made, it is finally determinative of the entire cause or matter. An order is also regarded as a final order if, although not finally determinative of the entire cause or matter, it is finally determinative of a crucial or substantial issue in the cause or matter: see Shell Hong Kong Ltd v. Yeung Wai Man Kiu Yip Co. Ltd (2003) 6 HKCFAR 222 and the cases there cited.”

20.He submitted that the orders sought and made on the amended summons were of a final nature for they are summary determination on the construction of the terms to the schedule of the Tomlin order (as part of the settlement agreement).

21.But not for only 2 proposals advanced by Mr Yeung, he submitted that I would have been required to determine the parties’ substantive rights and obligations over the question of law whether the plaintiffs were entitled to forfeiture clause for other breaches in the lease. Although not finally determinative of the entire cause or matter, it is, Mr Wong submitted, finally determinative of a crucial or substantial issue in the cause or matter.

22.He submitted that the orders I made on the amended summons were “final orders” under O.58 r.4(1)(a), RDC i.e. orders “determining in a summary way the substantive rights of a party to an action”. The substantive rights of the defendant to a lease were, he stressed, at stake at the hearing for my summary determination.

23.Mr Wong emphasized that defendant had achieved 100% success on the amended summons and thus costs should follow the event for such final orders in the absence of anything before this court displacing it.

24.Were the orders I made interlocutory, Mr Wong alternatively submitted that the exercise of my discretion in depriving defendant’s costs of the amended summons was flawed.

25.It is submitted that I wrongly took into account that defendant did not obtain declaration as per para 1 of the amended summons when it was no “concession” from defendant (it was simply no longer unnecessary for his side), and it had no costs implication, at the hearing.

26.My doubt as to whether the dispute between the parties had any practical effect, it was submitted, was unwarranted as the parties had a disputed question of law for my determination.

27.It was wrong, Mr Wong submitted, for me to consider the taking out of the amendment summons by defendant at 11^th hour of the hearing when the summons had already allowed for the lease to be “in such other terms as may be settled by the Court”. Such amendment should not take the case out of the usual rule of costs following the event and he cited Nottage v Jackson (1883) 11 QBD 627, 638, quoted at para 20/8/2 at p.493 of Vol.1 of Hong Kong Civil Procedure 2017 (“HKCP”).

28.Delay, it was submitted, had no bearing on costs of the amended summons as it came as no surprise to the plaintiffs, the point of law raised therein immediately apparent and that no adjournment was sought by Mr Yeung at the hearing.

29.It was, he submitted, wrong at law and in fact for this court to be skeptical as to whether defendant genuinely accommodated the plaintiffs in negotiation over the terms of the lease. Defendant genuinely did so to avoid litigation but was penalized by this court.  Negotiation broke down, it was repeated, due to plaintiffs’ insistence on forfeiture clause for other breaches and its refusal of last counter-offer from defendant’s solicitors. Had plaintiffs accepted defendant’s last counter-offer or agreed to the summons, they would not have ended up in a less advantageous position now.

30.Mr Wong ended up submitting that the intended appeal carries reasonable prospect of success. In the event that the orders were interlocutory orders such that the leave summons was out of time, he humbly asked for time extension for the same.

Plaintiffs’ submissions

31.Mr Yeung submitted that the leave summons should have been taken out within 14 days after the making of the costs order by me on 1 Dec 2016 as it was interlocutory in nature. It was taken out late despite I correctly so ruled at para 50 of my reasons. He therefore opposed to any time extension sought by the defendant.

32.On the high threshold for granting leave to appeal, he referred me to para 59/2A/4 at pp.1108-9 of HKCP where it was said that “reasonable prospect of success” means more than just an arguable case, prospect that are more than fanciful but need not to be probable. Where the intended appeal is one against the exercise of discretion, the applicant would have to show that the relevant decision exceeds the generous ambit within which reasonable disagreement is possible, and is in fact plainly wrong. And even if there is reasonable prospect of success, the court retains discretion whether to grant leave or not.

33.Citing Shell Hong Kong Ltd, supra, 231A-C, Mr Yeung reminded me that the “application approach” was preferred by our courts than the “order approach” in deciding whether an order is interlocutory or final for the purpose of obtaining leave to appeal: para 26, per Chan PJ. This approach was understood to involve “an examination of the nature of the application to see whether the order or judgment made upon such an application would, whether it fails or succeeds, determine the whole action”.

34.The parties’ substantive rights and obligations in this action, he submitted, had already been disposed of and decided by the settlement agreement. The summons and the amended summons, whichever way they go, do not affect the final outcome of this action, which had been disposed of by the Tomlin order. They were taken out merely to seek court directions as to the terms of the lease to be executed in order to carry out into effect the settlement agreement. As such, I did not err in holding the proceedings as interlocutory and decided on costs the way I did.

35.In any event, Mr Yeung submitted that I have exercised my discretion judicially and in a manner open to me on the materials before me at the hearing. Defendant’s various objections are either misconceived or cannot be substantiated.

36.During the negotiation over the terms of the lease, he submitted that plaintiffs’ focus was in fact on clause 5.2 of the draft lease i.e. a tenant’s covenant not to breach government lease, to which defendant responded by suggesting the amendment proposal.

37.Mr Yeung agreed with my reasons that defence had indeed changed its course by 180 degrees by submitting that the defendant had “withdrawn” the draft lease annexed to the summons containing numerous terms more than those in the settlement agreement and including the amendment proposal by taking out the amendment summons annexing the revised draft lease to the amended summons with only terms similar to those in the settlement agreement but no longer containing the amendment proposal any more.

38.The inclusion of sweeping words of “in such other terms as may be settled by the Court” at para 1 of the summons does not, he stressed, detract from the fact that defendant also sought an order by way of the said para 1 for plaintiffs to execute a lease in terms of the draft lease annexed thereto (as opposed to seeking any interpretation of the terms of the settlement agreement as Mr Wong claimed).

39.Looking at the whole history of the dispute, Mr Yeung disagreed with Mr Wong’s claim that defendant had achieved 100% success on the amended summons or on the parties’ dispute. He further disagreed with the suggestion that plaintiffs were worse off at the end of the day.

40.The amendment summons taken out by defendant at 11^th hour of the hearing, Mr Yeung repeated, did take plaintiffs by surprise. He did complain of it prior to and at the hearing. Plaintiffs did not ask for adjournment, he said, solely to avoid dragging on the matter further. Nottage v Jackson, supra, was, he submitted, distinguishable as the amendment therein was made by the court and not by the parties.

41.Had time or more time be given earlier for plaintiffs to consider carefully the revised draft lease proposal raised for the first time in the amended summons, these proceedings or the hearing could indeed, Mr Yeung accepted, be avoided and parties’ costs substantially saved as this court so ruled in my reasons.

42.And it is, he agreed, perfectly open for this court to take into account that 1) no negotiation over the terms of the lease was required had defendant taken the view that the settlement agreement contained all the terms of the lease; 2) plaintiffs had grounds to be concerned about change of the structures on the ground after the Tomlin order; 3) the amendment proposal is a recipe for future argument than a solution to parties’ dispute.

43.All in all, he submitted that the intended appeal is groundless and leave to appeal should not be granted.

Analysis

44.I have fully and carefully considered all materials, submissions and authorities put before me by both parties.

45.I bear fully in mind the applicable law and rules above and such principles decided by the Court of Final Appeal in Hip Hing Timber Co Ltd, supra, and Shell Hong Kong Ltd, supra, and cited above.

46.In addition, Chan PJ had, I note, further said at para 31 of Shell Hong Kong Ltd, supra, at 232G-H:

“In my view, what one can extract from these cases is that where an order or judgment given in an application does not finally dispose of the whole action but only an issue in the action, it is necessary to consider the purpose and substance of the application, the issue dealt with and determined by the court and the effect of a determination of this issue on the rights of the parties, the further conduct of the proceeding and the final disposal of the whole action. A broad commonsense approach should be adopted. If the issue dealt with and determined by the court is “a substantive part of the final trial” (Holmes v. Bangladesh Biman, p.124); or “a crucial issue” in the case or a point “that goes to the root of the case” (First Pacific Bank Ltd v. Robert HP Fung, p. 532), or “a dominant feature of the case” (Korso Finance Establishment Anstalt v. Wedge & others, p.7), then the order or judgment, even if it does not finally dispose of the whole action, should nevertheless be regarded as a final judgment.”

47.I have further taken into consideration para 59/2A/4 of HKCP submitted by Mr Yeung as well as para 59/0/54 at p.1101-2 of HKCP where the learned authors said that “there are many authorities for the proposition that an appeal will not be entertained from an order which it was within the discretion of the judge to make, unless it be shown that he exercised his discretion under a mistake of law or in disregard of principle or under a misapprehension as to facts; or that he took into account irrelevant matters or failed to exercise his discretion or the conclusion which the judge reached was outside the generous ambit within which a reasonable disagreement is possible”.

Interlocutory proceedings and orders

48.First, I agree with Mr Yeung that the 5 plaintiffs’ claims to vacant possession of their lands and to outstanding rent from defendant, and defendant’s claim to possessory title of the occupied portion, had already been disposed of and decided by the settlement agreement entered into by plaintiffs and defendant, and the Tomlin order subsequently made by court with their consent under O.42 r.5A(2)(b)(iii), RDC.

49.In short, all further proceedings in the action were stayed except for carrying out the scheduled terms of the Tomlin order into effect, which terms have altogether 7 clauses, ranging from demise of the occupied portion to defendant for 10 years, with right of renewal for 5 successive terms, appointment of PR to the estate within 9 months, execution of the lease in accordance with agreed terms within 1 month of grant of probate, joint preparation of division plan, discontinuation of claims and counterclaim after execution of the lease, to payment of parties’ costs of proceedings and of mediation.

50.Clause 3 of the schedule provides that the lease shall contain 7 provisions i.e. landlord’s right of forfeiture for non-payment of rent, tenant’s covenant not to breach government lease of the occupied portion (other than maintaining and repairing the existing structures thereon) (clause 3.2) and not to use the same for unlawful purpose (clause 3.3), payment of stamp duty, rates and rental deposit, and tenant’s service of notice on landlord in the event of assignment and renewal of lease.

51.Instead of taking out fresh action to enforce parties’ rights under the terms of the settlement agreement, as defendant did by way of the summons and he fully understood[1], the parties could apply summarily under “liberty to apply” clause of the Tomlin order to carry out its scheduled terms into effect (which mirrored the terms of the settlement agreement). That serves, I must point out, to enforce the scheduled terms.

52.By para 1 of the summons, defendant applied for an order that plaintiffs do execute the lease in terms of the draft lease or in such other terms as may be settled by the Court to carry the scheduled terms into effect. No question of law was, I should point out, framed by defendant for this court to determine on the face of the summons.

53.Should there be any difficulty carrying out, or dispute about, the many other scheduled terms of the Tomlin order, either party could, I must further point out, equally apply under “liberty to apply” clause to seek assistance of the Court to enforce such other terms.

54.By para 1 of the amended summons, the defendant seeks a declaration that plaintiffs are not entitled to include in the lease any provision not expressly included in the schedule of the Tomlin order. By para 2 to 4, he seeks respectively execution of a deed poll, execution of a lease in terms of the revised draft lease or in such other terms as may be settled by the Court to carry into effect the scheduled terms, and delivery of the lease duly executed, by certain deadlines.

55.Again, the said para 2 to 4 above are, I think, plainly for enforcement of the scheduled terms of the Tomlin order while the said para 1 above posed a question of law for this court to decide (and defendant’s first skeleton for the hearing had quoted authorities about usual covenants of lease etc.). But such question of law was, I think, plainly posed to support execution of a lease in terms of the revised draft lease as per the said para 3 above (as the revised draft lease contained no provision other than those expressly included in the schedule of the Tomlin order).

56.However, I was not obliged to decide and/or grant a declaration as sought. Indeed, during the hearing, I did not need to decide at all as Mr Wong no longer required it in view of Mr Yeung’s instructions. I did not decide the parties’ rival contentions of full or basic terms either (for I think this dispute had no practical meaning). I simply made orders in terms of para 2 to 4 of the amended summons by setting some deadlines and by deciding that the lease be in terms of the revised draft lease as it was in line with the terms of the settlement agreement.

57.After the hearing, should there still be any difficulty carrying out the above orders I made at the hearing or there be any dispute about other outstanding scheduled terms of the Tomlin order to be performed, either party could, I should also point out, apply again under the “liberty to apply” clause of the Tomlin order to seek my assistance.

58.And looking at the evidence filed by the parties prior to the hearing and summarized at para 21 to 28 of my reasons, including parties’ correspondences produced before me at the hearing[2], the parties’ dispute had, I am afraid, nothing to do with forfeiture clause for other breaches[3] as Mr Wong submitted.

59.As Mr Yeung rightly submitted and as I have already said at para 18 & 19 of my reasons, the parties disagreed over clause 5.2 of the draft lease and, to use Mr Wong’s words, defendant sought to “water it down” by suggesting the amendment proposal. The plaintiffs were, one should note, agreeable to clause 5.2 of the draft lease to be in line with clause 3.2 in the schedule of the Tomlin order, including having the words of “(other than maintaining and repairing the existing structure thereon)” added as suggested by the defendant[4].

60.However, defendant, one observes, never let go the amendment proposal[5], despite the plaintiffs were ready to sign a formal lease to avoid further time and costs except for the amendment proposal[6], and defendant fired the first shot of taking out the summons asking for the execution of the draft lease with the amendment proposal.

61.At 11^th hour of the hearing, the revised draft lease without the amendment proposal was put forward by defendant in the amended summons and adopted by me at the hearing. Defendant ultimately let go its amendment proposal, as there was no more clause 5.2 of the draft lease in the revised draft lease. A clause 2.2 of the revised draft lease in line with clause 3.2 of the scheduled terms of the Tomlin order and also clause 3.2 of the settlement agreement remains.

62.So, notwithstanding that the terms of the draft lease and those of the revised draft lease are many, the disputes of the parties have in fact narrowed down after negotiations, and boiled down at the hearing before me, to clause 5.2 of the draft lease and the amendment proposal to it.

63.Adopting a common sense approach to the matter, I think the proceedings before me at the hearing did not finally dispose of the whole action.  Neither did they finally determine any crucial or substantial issue in this matter.  It was but a small chapter in the long enforcement history of the scheduled terms of the Tomlin order, involving one out of its many scheduled terms about the terms of the lease to be executed and the dispute of the parties focusing on one term in substance.

64.The proceedings before me are, as I held in my reasons, interlocutory in nature and the orders I made on the amended summons are not final orders. They did not determine in a summary way the substantive rights of the parties to this action[7]. The usual rule of costs following the event did not apply.

65.This primary ground of appeal is without merit at all. And the leaves summons was plainly out of time.

Exercise of my discretion as to costs

66.For the remaining grounds of appeal which I have also carefully considered, I do not see the need to deal with each of them point by point here. It suffices for me to repeat para 48 to 60 of my reasons and say that I believe I have taken into account relevant factors, attached such weight to each of them as I see fit and entitled to do so.  I was under no misapprehension of facts as submitted. And I came to a decision open to me though others may disagree with me.

67.Importantly, as I observed again at para 59 to 62 above, it is right, I think, for Mr Yeung to disagree that defendant achieved 100% success, or that plaintiffs were worse off, at the end of the day. By changing its course at 11^th hour as defendant did by taking out the amendment summons and by making only 2 proposals by way of additional terms to be included to the revised draft as plaintiffs did before me, defendant and plaintiffs did both trade off one set of terms in the draft lease for another different set of terms in the revised draft lease.

68.For example, among many others, landlord’s obligation to give quiet enjoyment and tenant’s obligation to comply with ordinances went both missing in the revised draft lease while both were included in the draft lease at the same time.

69.Most importantly, plaintiffs were ordered to execute a lease in terms of the revised draft lease in line with the terms of the settlement agreement as they always required in the negotiation and had the amendment proposal rejected after this trade-off process. And clause 5.2 of the draft lease (i.e. tenant’s covenant not to breach government lease) without being “watered down” by the amendment proposal defendant heavily complained of during the negotiation also disappeared after the process.

70.Considering plaintiffs’ stance in the parties’ correspondences and Mr Yeung’s instructions at the hearing before me, amicable settlement of the lease terms, and the proceedings before me, was, if I may say again, most likely to happen and to happen earlier had the parties stuck to, or reverted earlier to, such simple terms of the settlement agreement they both agreed in the first place.

71.All in all, I do not believe my exercise of discretion was in any way flawed as submitted by Mr Wong. I have come to the conclusion that the intended appeal carries no reasonable prospect of success and that time extension should not be granted for this late application.

Disposition

72.Accordingly, I dismiss the leave summons and decline to grant leave to appeal to defendant as prayed.

Costs

73.By way of order nisi, I order defendant to pay plaintiffs costs of and incidental to the leave summons, to be summarily assessed by this court on papers. In the absence of any written application by way of summons to vary within 14 days of this decision, it shall become absolute. In that event, I order plaintiffs’ solicitors to lodge and serve their statement of costs within 7 days thereafter, and defendant’s solicitors to lodge and serve their grounds of objection within 7 days thereafter.

74.Finally, I thank both teams, including assistants for Mr Wong and Mr Yeung, for their assistance.

Mr YEUNG Man Sing of Messrs. Li & Partners for the 1^st to 4^th plaintiffs

Mr David P.H. WONG of Messrs. Wong, Hui & Co. for the defendant