香港海洲同鄉會有限公司 v. 魏遜華

LDPD 1542/2016

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO LDPD 1542 OF 2016

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D E C I S I O N
(Leave to Appeal)

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Introduction

1.This is an application taken out by the applicant by a summons filed on 11 January 2017 for leave to appeal against the Tribunal’s decision on costs delivered on 28 December 2016 (“Decision on Costs”).

2.The Tribunal held that the applicant do pay the respondent’s costs summarily assessed at $32,700 for (i) the respondent’s interlocutory application filed on 9 September 2016 to set aside the default judgment on 23 August 2016 (“9 September Application”); and (ii) the respondent’s summons filed on 30 September 2016 for leave to file and serve Notice of Opposition out of time (“30 September Summons”).  In addition, the applicant alleged that the applicant’s claim for costs incurred for perusing the respondent’s submissions filed on 8 December 2016 without leave of the Tribunal (“Late Submissions”) on an indemnity basis was not permitted by the Tribunal.

3.There is no dispute on the principles governing application for leave to appeal and the Tribunal’s jurisdiction to award costs.  According to section 11(2) of the Lands Tribunal Ordinance (Cap 17) (“LTO”), any party to proceedings before the Tribunal may appeal to the Court of Appeal against a judgment, order or decision of the Tribunal on the ground that such judgment, order or decision is erroneous in point of law.  Section 11AA(6) of the LTO stipulates that leave to appeal shall not be granted unless the Tribunal, the Court of Appeal or the registrar hearing the application for leave is satisfied that (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal should be heard.  Pursuant to section 12 of the LTO, the costs of and incidental to all proceedings in the Tribunal are in the discretion of the Tribunal, and the Tribunal has full power to determine by whom and to what extent the costs are to be paid, but the Tribunal’s discretion on costs should be exercised judicially.

4.The parties argue over whether the Decision on Costs is erroneous in point of law and whether the appeal has a reasonable prospect of success.

5.Ms Yu, counsel for the applicant, submitted that the Tribunal erred in (1) adopting costs follow the event as the default position in the Decision on Costs for the 9 September Application; (2) failing to take into account material factors in the Decision on Costs for the 9 September Application; (3) refusing to award costs against the respondent for the 30 September Summons unnecessarily taken out and withdrawn; and (4) taking into account the Late Submissions and refusing to award costs to the applicant for dealing with the Late Submissions.

6.The respondent opposes the application for leave to appeal.  Ms Po, counsel for the respondent, submitted that the Tribunal has rightly exercised its discretion to costs and was neither wrong in law or in principle in awarding costs against the applicant.  Further, the applicant has failed to show there is a reasonable prospect of success on appeal.

Ruling (1) – The default position on costs on setting aside a regular default judgment

7.There is no dispute between the parties that the judgment on 23 August 2016 was a regular default judgment.  Ms Yu submitted that in Ko Sin Yun v Chan Chuen [2007] 1 HKLRD 324, the Court of Appeal held that where a regular judgment is set aside because of a meritorious defence, the “general rule” is that the defendant should bear the costs of the application to set aside the default judgment: -

“21. Generally speaking if an irregular judgment is set aside then the plaintiff should be ordered to bear the costs of the setting aside of the default judgment because the judgment was not properly obtained in the first place.  However, where a judgment was set aside not because of it being irregular but because of a meritorious defence the general rule is that the defendant should bear the costs of the application to set aside the default judgment.  As an alternative the costs of the application can be in the cause of the action.”  (emphasis added)

8.[13/9/16] of the Hong Kong Civil Procedure 2017 similarly states that costs of setting aside a regular judgment should normally be borne by the defendant: -

“Costs of setting aside a regular judgment – Where the defendant has been at fault, the usual practice is for the plaintiff to be awarded his costs in any event; such practice is not appropriate, however, on setting aside a regular judgment where neither party has been at fault (Cox (Peter) v Thirwell (1981) 125 S.J. 481).”  (emphasis added)

9.The respondent accepts, as a general rule, costs should be borne by the respondent for the 9 September Application.  Nevertheless, following the case Welson International Limited v Jebson Investment Limited [2010] HKEC 1041, Ms Po submitted that if the applicant decided to contest the setting aside application, once the basis of the defendant’s defence had been disclosed, costs ought to follow the event, any costs incurred by the parties from the date of disclosure ought to be borne by the applicant.  Welson was subsequently followed by Wong Tung Po v Lam Lei Yung [2014] HKEC 149, in particular [43] and [44].

10.At the hearing, Ms Yu submitted that Welson as a case of First Instance of the High Court in 2010, which had made no reference to the Court of Appeal judgment in Ko Sin Yun in 2006, was wrongly decided, and Ko Sin Yun is binding on this Tribunal.  This Tribunal as a lower court must follow the judgment of Ko Sin Yun only, either to order the respondent to bear the costs of the application for setting aside the regular default judgment or to order costs in the cause.  I disagree.

11.I consider that there is no conflict between these two cases Ko Sin Yun and Welson. What had been stated in Ko Sin Yun is a general rule only and there could have exceptions depending on facts and circumstances of each case that could justify a departure, otherwise the case would not be decided together with the words “Generally speaking”.  Welson is a case of exception.  Chung J had rightly pointed out that the successful party ought to be awarded with the costs of the contested proceedings, otherwise the costs order would encourage setting aside applications to be contested irrespective of whether there is substance in the opposition.

12.In the present proceedings, after the respondent had already provided evidence and submissions that could justify to set the case down for trial, the applicant decided to continue the contestation.  Therefore, I consider that the applicant should bear the costs of the contested proceedings.  The justifications and considerations for setting aside the regular default judgment are discussed in Ruling (2) below.

13.Although Ms Yu’s arguments raised a legal issue, I am not persuaded by them and I also consider that they are without reasonable prospect of success.  I am of the view that no leave to appeal should be granted against Ruling (1).

Ruling (2) – Other relevant factors on costs on setting aside a regular default judgment

14.If Ruling (1) is affirmed, Ms Yu submitted that the Tribunal has failed to identify truly exceptional circumstances in making an adverse costs order against the applicant. The applicant contended that the respondent could not meet the threshold of showing a real prospect of success in setting aside a regular default judgment and therefore there is no justification for the applicant to pay all the respondent’s costs for the 9 September Application. 

15.Ms Yu further submitted that in deciding whether or not a regular default judgment should be set aside, the Tribunal has to bear in mind all relevant considerations, including whether the respondent has shown a defence on the merits, why the default occurred, the respondent’s conduct after he had notice of the proceedings, an explanation for the time taken where there has been delay in making the application, and any prejudice that would be caused to the plaintiff or to third parties if the default judgment were to be set aside[1].  These factors should be relevant considerations when the Tribunal exercises its discretion on costs too.  Ms Yu argued that the respondent had deliberately flouted the rules of the Tribunal without any strong countervailing reason. Hence, to award costs to the respondent in these circumstances would encourage parties to ignore the rules of the Tribunal.  She contended that the Tribunal erred in failing to give weight or sufficient weight to the respondent’s lack of good explanation as to why the default occurred.

16.Above all, the applicant has taken out a summons for leave to appeal the costs order only, not the decision on setting aside the regular default judgment.

17.Ms Po submitted that the Tribunal has fully considered the circumstances of the case before making the costs order.  The 9 September Application could have been dispensed with by consent of the parties after the respondent, who was acting in person at the 1^st hearing on 19 September 2016, had disclosed part of his defence by adducing a tenancy agreement and copies of some rental payment records.

18.In the Notice of Application filed by the applicant on 27 July 2016, the applicant relied on both “non-payment of rent” and “lease expiry” as grounds for recovery of possession of the suit premises.  I consider that when the respondent submitted at the 1^st hearing on 19 September 2016 some rental payment records particularly the bank statement of a Bank of China account in the name of the applicant, for which the applicant then confirmed to the Tribunal that the applicant had already made application to the bank to successfully change the authorized signatories of this account, the respondent could have met the threshold of showing a real prospect of success to set aside the regular default judgment in respect of “non-payment of rent” as ground for recovery of possession.  This is not to say that the opposition in this regard will succeed at the end of the day, but merely that it is justified to set aside the default judgment and set the case down for trial.

19.Anyway, the solicitor acting for the applicant at the 2^nd hearing on 11 October 2016 had confirmed to the Tribunal that the applicant decided to withdraw “non-payment of rent” as ground for recovery of repossession, “咁我哋決定撤銷, 即係根據欠取租金而申請收樓呢個嘅理由嘅, 咁我哋就係純粹話租約完咗, 咁申 - -被 …”.  Further, having considered that the respondent was acting in person until the 2^nd hearing, I consider that the merits of the respondent’s defence was then the most important consideration in deciding the 9 September Application.  Nevertheless, Ms Yu acting for the applicant at the 3^rd hearing on 10 November 2016 argued that the applicant did not need to rely on “non-payment of rent” as ground for recovery of possession but the applicant would continue to rely on this ground to claim for arrears of rent and mesne profits.  Hence, considerable time was spent on discussing this issue.

20.However, it was discovered by the Tribunal at the 3^rd hearing on 10 November 2016 that the applicant had in fact already withdrawn “lease expiry” as ground for recovery of possession on 20 March 2016.  Hence, the default judgment on 23 August 2016 should have not considered “lease expiry”. The default judgment on 23 August 2016 comprised a relief and no relief should have been granted if the Tribunal had then considered and agreed that the lease had expired. Apparently, the applicant had not advised its legal team this withdrawal and therefore until the discovery by the Tribunal its legal team continued to argue that the applicant could rely on “lease expiry” as ground for recovery of possession and therefore opposed the 9 September Application.

21.On the conditions that the ground “lease expiry” had already been withdrawn before the default judgment on 23 August 2016, the ground “non-payment of rent” has also been withdrawn at the hearing by the applicant to oppose the 9 September Application and there is also a real prospect of success to set aside the regular default judgment in relation to this ground, I consider that the case should be set down for trial no matter whether there were arrears of rent payment because then the applicant has no reasonably arguable ground to oppose the 9 September Application. Unfortunately, the applicant has not given up and this is part of the reasons why there was a 3^rd hearing.

22.Although I consider that the applicant should bear the costs of the contested proceedings, I have not made any order in respect of the costs on and before the 1^st hearing on 19 September 2016.  In fact, the respondent accepts as a general rule that costs of setting aside should be borne by the respondent.  At the 3^rd hearing, the respondent had mainly asked for the costs after 19 September 2016 only and had also accepted the costs on or before 19 September 2016 be in the cause.  In my decision on 28 December 2016, I have also said that the applicant should not be accountable to the costs before the contested proceedings.

23.I have made a mistake in the Decision on Costs that I have not specified and separated the costs on or before 19 September 2016 from the costs after 19 September 2016. The Decision on Costs has just stated the costs after 19 September 2016 only. With the wisdom of hindsight, I accept the general rule that the respondent should bear the costs for setting aside on or before 19 September 2016, which could be summarily assessed at $3,000.  I would take into consideration that solicitor for the applicant Au, Thong & Tsang has acted for the applicant since 7 September 2016 only; before 19 September 2016, the applicant had not made any written submission; and the 1^st hearing on 19 September 2016 lasted for about 1 hour.

24.I noted the said mistake immediately before the hearing for leave to appeal.  Nevertheless, since the Tribunal shall not exercise its power of review in respect of a decision if this decision has already been the subject of appeal or otherwise unless such proceedings have been abandoned, I could then only ask Ms Yu at the commencement of the hearing for leave to appeal whether the applicant was aware of the procedures for review.  Ms Yu confirmed that the applicant was aware of the procedures for review but decided to make an application for leave to appeal.  In fact, what the applicant would like to achieve is much more and wider than rectification of the said mistake.  Hence, with a view not to interfere the right of the applicant to appeal, there was no discussion on the said mistake and further discussion on the procedures for review at the hearing.

25.I accept that I have not considered the costs on or before 19 September 2016, and therefore was erred in not taking into consideration of all relevant factors when the Decision on Costs was made. Although I am not persuaded by arguments of Ms Yu, I am of the view that leave to appeal should be granted against Ruling (2) because of the said mistake.

Ruling (3) – Costs on withdrawal of a summons

26.In the present case, while there was an outstanding 9 September Application to set aside a default judgment, solicitor for the respondent took out the 30 September Summons to file and serve a Notice of Opposition out of time.  The respondent then realized at the 2^nd hearing on 11 October 2016 that the 30 September Summons should not have been taken out in the first place and decided to withdraw it.  Ms Yu contended that by then the applicant had already incurred costs for having to deal with the 30 September Summons.

27.Ms Yu submitted that the principles in Best Joint Investments Ltd v Kagani Ltd HCA 2608/2006, unrep, 3 June 2008 that in an application for leave to withdraw a summons (for example as an acknowledgement by a plaintiff of likely defeat) the other party is entitled to costs should apply in the present case. Further, since the respondent’s legal team had not conducted proper legal research prior to the issue of the originating summons which was subsequently withdrawn, it was appropriate for costs to be ordered on an indemnity basis.

28.Ms Po submitted that despite the 30 September Summons was withdrawn during the proceedings, it did not affect the applicant and caused additional work to be done as a result. She said that content of the proposed Notice of Opposition had been fully utilized during the subsequent hearings.  Further, the Tribunal has rightly considered the misconduct of the applicant and exercised its discretion in awarding costs against the applicant.

29.No doubt, the respondent had filed the 30 September Summons mistakenly or prematurely.  On the conditions that the respondent agreed to withdraw this summons at commencement of the 2^nd hearing on 11 October 2016 and the contents of this summons had been utilized as the further and better particulars of the respondent for the 9 September Application, I consider that, after taking into consideration of both 9 September Application and 30 September Summons, only minimal additional costs had been incurred by the applicant in dealing with this issue.  Further, not only the respondent had committed a mistake, the applicant had also failed to serve on the respondent its further and better particulars for opposition of the 9 September Application on time, and therefore the hearing on 11 October 2016 was prolonged because of the mistakes of both the applicant and the respondent.

30.Having considered all the circumstances in the summary assessment, I exercised my discretion not to award the applicant’s costs in this regard separately while parts of the respondent’s costs to file and prepare the 30 September Summons were also disallowed.

31.I consider that I was not erred in refusing to award costs against the respondent for the 30 September Summons.  The costs of the 9 September Application and 30 September Summons were summarily assessed together and the costs on withdrawal of a summons have in fact been properly considered in the process.  I am of the view that no leave to appeal should be granted against Ruling (3) because there was no erroneous in law and the appeal has no reasonable prospect of success too.

Ruling (4) – Costs of and incidental to the Late Submissions

32.Ms Yu submitted that after setting aside the default judgement by the Tribunal on 10 November 2016, the Tribunal invited both parties to address the Tribunal on the question of costs, and only after hearing full submissions and the confirmation by both parties that there were no further submissions, the Tribunal reserved the decision on costs.  Ms Yu contended that the Tribunal has just directed the parties to file Statement of Costs and Statement of Objections (if any) only and has never directed the respondent to file any written submissions on costs, but the respondent subsequently filed the Late Submissions.  Hence, the Late Submissions was a clear breach of the practice stated in To Pui Kui, the Adminitratrix of the Estate of Ng Po, Deceased v Ng Kwok Piu & ors CACV 281/2012, urrep, 21 August 2014 and reiterated in Keen Lloyd Holdings Ltd v Commissioner of Customs and Excise [2016] 2 HKLRD 1372.  In To Pui Kui, the Court of Appeal firmly stated that no further submission shall be lodged after the close of hearing, unless leave of court has been given.  Otherwise, there would be proliferation of submissions and escalation of costs which would not be conducive to the effective and efficient management of the process.

33.Ms Yu further submitted that the respondent could not have in the circumstances misunderstood the directions of the Tribunal because the respondent had already fully addressed the Tribunal at the 3^rd hearing on 10 November 2016 and the respondent’s Statement of Objections was directed to be filed consequential to the filing of the applicant’s Statement of Costs.  In any event, since the Late Submissions were entitled by the respondent as “Respondent’s Reply Submissions to Applicant’s Statement of Costs filed on 10^th November 2016”, this should not be another round of written submissions on costs.

34.Ms Po submitted that the Tribunal allowed parties to file and serve a reply written submissions on costs and therefore the respondent was simply complying with the order and made no fault on his part at all.

35.At the 3^rd hearing on 10 November 2016, before I reserved the decision on costs and directed the respondent to file statement of costs and the parties to file written reply to the statement of costs, I have already allowed the parties to make submissions on costs and the parties have also confirmed that they had no further submissions on costs.  Hence, I agree with the applicant that it was inappropriate for the respondent to file the Late Submissions without leave of the Tribunal.  Nevertheless, I agree that the Chinese wording in my direction “訟費陳述書” might lead to confusion and some might misunderstand it as submissions on costs.  In any event, the respondent has repeated his positon in the Late Submissions.  Although I have not returned the Late Submissions to the respondent, I have stated at the hearing that the Late Submissions have not affected my decision at all. 

36.I was then of the view that if the applicant decided to ask for costs for the Late Submissions, the applicant should submit a formal application instead of requesting for such costs in a solicitor letter to the Tribunal on 15 December 2016 only.  Further, the hearing on 28 December 2016 was scheduled for 2 hours only from 10am in the morning and there was another case fixed for hearing at 12 noon on the same date; the new dispute on the Late Submissions was unexpected when the hearing was fixed on 10 November 2016; the applicant has not requested for extension of time to hear this new dispute; and the hearing of the scheduled issues has already run over time. Therefore, I refused to handle the applicant’s claim for costs for the Late Submissions at the hearing, but I have not made any other decision on this claim for costs, nor have dismissed this claim for costs.

37.It may be arguable whether or not I should also handle and decide this claim for costs at the hearing.  However, I have not refused to award costs to the applicant in this connection, and I have in fact refused to handle this claim for costs immediately at the hearing only.  Hence, I am of the view that no leave to appeal should be granted against Ruling (4) because the alleged decision had not been made by the Tribunal.

Conclusion

38.For the above reasons, I dismiss the application of the applicant for leave to appeal against Rulings (1), (3) and (4) as I am not satisfied that the proposed grounds of appeal have met the requirements set out in section 11AA(6) of the LTO.

39.I grant leave to appeal against Ruling (2) only because of my mistake in the Decision on Costs that I have not specified and separated the costs on or before 19 September 2016, which should be awarded to the applicant and could be summarily assessed at $3,000.

Costs

40.Since I dismiss the application of the applicant for leave to appeal against Rulings (1), (3) and (4), I say that the applicant should pay costs in relation to Rulings (1), (3) and (4).  These costs with certificate for counsel are to be taxed if not agreed on the District Court scale. 

41.For the leave to appeal against Ruling (2), there be costs in the cause of appeal.

Ms Christine Yu, instructed by Messrs Au, Thong & Tsang, for the applicant

Ms Rachel Po, instructed by Messrs Eva Wong & Co, for the respondent