Glory Sky Finance Ltd v. Chen Jianhua and Another

HCMP 2482/2014

[2018] HKCFI 578

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2482 OF 2014

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Before: Deputy High Court Judge Keith Yeung SC in Chambers

Date of Hearing: 30 January 2018

Date of Decision: 15 March 2018

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DECISION

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The appeal

1.There were before Registrar Lung on 29 August 2017 three summonses:

(1) the plaintiff’s summons dated 5 May 2017 (“P’s Irregularity Summons”) to set aside the order of Master K Lo of 27 April 2017 (“Master Lo’s Order”) on the ground of irregularity, and alternatively for leave to amend Master Lo’s Order;

(2) the defendants’ summons dated 22 August 2017 (“Ds’ Summons”) for an order that the plaintiff do pay the defendants such sum of money into court as the court shall see fit pursuant to Order 2, rule 3 of the Rules of the High Court (“the Payment-in Limb of Ds’ Summons”), and the statement of Yeung Say Han Fanny (“Fanny Yeung”) filed on 9 May 2017 in support of the plaintiff’s case(“Yeung’s Statement”) be removed from the court record (“the Removal Limb of Ds’ Summons”); and

(3) the plaintiff’s further summons of 24 August 2017 (“P’s Amendment Summons”) for the amendment of P’s Irregularity Summons to the effect that, in the eventuality of the court refusing to set aside Master Lo’s Order:

(a) the plaintiff be granted relief from sanction imposed for failure to comply with Master Lo’s Order, and

(b) Yeung’s Statement, which was filed out of the time as prescribed in Master Lo’s Order, be allowed to stand.

2.On 25 August 2017, the plaintiff took out a further summons (“P’s Remission Summons”).  This summons was returnable before Master K Lo on 18 September 2017.  The idea behind it was that the matter should be listed (or in the words of Mr Ching, solicitor acting for the plaintiff, be “remitted back”) before Master K Lo for re-consideration, so that either the Master Lo’s Order would be amended or varied by changing the dated from “4 May 2017” to “10 May 2017” “in order to reflect the manifest intention the court has in making the said Order”, or alternatively the same change be made by application of the slip rule pursuant to Order 20, rules 8 and 11. Before Registrar Lung on 29 August 2017, an application was hence made orally by Mr Ching on behalf of the plaintiff for an adjournment of all three summonses set out in paragraph 1 above so that P’s Remission Summons could be heard by Master K Lo on 18 September first.

3.Having heard the parties, Registrar Lung on 29 August 2017 (1) refused the oral application for adjournment, set aside P’s Remission Summons, vacated the hearing date of 18 September 2017 and proceeded to hear the three summonses, (2) granted the plaintiff leave to amend P’s Irregularity Summons, (3) refused the plaintiff’s application to set aside Master Lo’s Order, but granted relief to the plaintiff from the sanction of that Order and granted it leave to file and serve Yeung’s Statement out of time; and (4) dismissed Ds’ Summons.

4.The defendants now seek to appeal against that decision of Registrar Lung, for an order in its place that (1) P’s Irregularity and Amendment Summonses be dismissed, and (2) Ds’ Summons be allowed.

5.The plaintiff has also lodged a what Mr Ching called a “cross-appeal”.  The plaintiff sought thereby an order that Master Lo’s Order “ought to have been amended or varied as per [P’s Remission Summons]”, or alternatively the same “ought to have been set aside, amended or varied asper [P’s Irregularity Summons] as amended by [P’s Amendment Summons]”.  Mr Ching explained in his written submissions filed before me his reason for filing this “cross-appeal”.  He said it was technical.  He was not cross-appealing the relief from sanction granted by Registrar Lung.  The plaintiff’s position was that despite the fact that Registrar Lung had allowed P’s Amendment Summons and granted the plaintiff relief from sanction, Registrar Lung was wrong in having gone down the relief from sanction route, but should have gone down the amendment or variation route; and had he done so, the plaintiff would not have been in breach of Master Lo’s Order, and that “the defendants would not and could not have been able to ‘hang their hat thereon’ to make the application for payment-in under Order 2, rule 3”—see paragraph 29 of Mr Ching’s written submissions.  The purpose of filing the “cross-appeal”, Mr Ching explained, was out of his concern that had he not done so, he would be prohibited from advancing the above submissions on behalf of the plaintiff in opposition of the defendants’ appeal.  During the hearing on 30 January 2018, upon confirmation from Ms Yu, counsel appearing for the defendants, that no objection in that regard would be raised, Mr Ching made an application for the withdrawal of the “cross-appeal”.  I granted the application.

The plaintiff’s claim and the defendants’ defence

6.The plaintiff is a licensed money lender.  The defendants are husband and wife (“D1” and “D2” respectively) and tenants-in-common of a property at Grand Promenade, Tai Hong Street (“the Property”).  The defendants are based in the Mainland.  In gist, the plaintiff’s claim is that it has made to the defendants two loans secured by two charges on the Property in the total sum of HK$17,000,000, which loans the defendants have defaulted in repayment.  The defendants claim in defence that they are victims of a fraud, that the borrowers were in fact not them but fraudsters who impersonated them, so that they should not be held responsible for the loans or the charges. 

7.The plaintiff claims that D1 first approached it on about 12 February 2014.  Apart from himself, D1 also acted for D2 on the strength of a Power of Attorney dated 10 January 2014 (“the Power of Attorney”).  D1 indicated that he and D2 wanted to raise a loan, and that the loan would be secured by a charge over the Property.  The terms of the loan (“the 1^st Loan”) were subsequently agreed.  It was for HK$10,000,000.  The loan agreement was executed on 12 February 2014.  The related legal charge was signed on 14 February 2014.  Both documents were signed by D1 (on his own behalf and on behalf of D2 pursuant to the Power of Attorney).  Messrs Ching & Co (“Ching & Co”) acted for the plaintiff in the transactions whilst Messrs Wong, Fung & Co (“WF & Co”) acted for the defendants.

8.Things appeared to be fine and good after the 1^st Loan.  The plaintiff received two interest payments in the amount of HK$108,333 each on 13 March and 13 April 2014.

9.The plaintiff claims that D1 approached it again on 28 April 2014. Following a similar course of events, a second loan secured by a second charge over the Property in the sum of HK$7,000,000 was granted (“the 2^nd Loan”).  The second loan agreement was executed on 7 May 2014, and the second charge one day later on 8 May 2014.  The documents were similarly signed by D1 on his own behalf and on behalf of D2.  The parties were similarly represented.

10.The plaintiff continued to receive interest payments under the two loan agreements up to the month of June 2014.  The plaintiff claims that the defendants have since failed to make any further payment.  The present action was therefore started (originally by Originating Summons, subsequently ordered to be continued as if started by Writ) to enforce the two loans and mortgages.

11.The defendants filed their Defence and Counterclaim on 7 April 2016. They aver that the person who approached the plaintiff was not D1, that the Power of Attorney was a forgery, that the original title deeds of the Property had been stolen by some fraudsters, and that D1 had never signed on any of the two sets of loan agreements or mortgage deeds.  Importantly, and supported by a Statement of Travel Records the defendants subsequently obtained from the Hong Kong Immigration Department, the defendants plead that D1 was not even physically in Hong Kong during any of the days when he was supposed to approach the plaintiff or sign those documents.

12.However, as the defendants subsequently accepted, the averment in their Defence that the title deeds of the Property had been stolen was a mistake.  They had not been, and were at all times with them.  In her affirmation of 28 December 2017 filed in support of the defendants’ application to amend their Defence and Counterclaim, the 2^nd defendant explained that they had been searching for the title deeds at the wrong place,and that subsequent development in the case had caused them to look again more thoroughly. They successfully located them on 7 September 2017.  She said it was all a genuine mistake.

13.On 11 July 2016, the plaintiff filed its Reply and Defence to Counterclaim. Amongst other things, it was pleaded that:

(a) “ … the alleged theft of the title deeds and documents in respect of the property in question is suspicious unbelievable, and that despite the alleged reporting to the Hong Kong Police, there has been no updating of the progress of the investigation.  The possibility that the 1^st and 2^nd Defendants were involved in the alleged fraud and/or identity theft cannot be ruled out.”

(b) “ … The Plaintiff further avers that the allegation that the 1^stand/or 2^nd Defendant that they or any of them was/were physically absent from Hong Kong at the material times is irrelevant and not conclusive insofar as the issue of whether or not they or any of them was/were involved in the alleged fraud and/or identity theft.” 

The conduct of the plaintiff in the prosecution of its claim

14.On behalf of the defendants, Ms Yu drew to my attention what she submitted amounted to “P’s regular flouting of peremptory orders and most, if not all, of the requisite proper court procedures in the preparation of a case”.  She made the following elaborations:

(a) the plaintiff’s failure to comply with the Order of Master Lai dated 28 December 2015 for it to file and serve a Statement of Claim within 28 days, and only did so on 10 March 2016 after an unless order on 25 February 2016;

(b) the plaintiff’s failure to comply with the Order of Master Lai dated 28 December 2015 as extended by the Order of Master S Lo on 12 May 2016 to file its Reply and Defence to Counterclaim within 21 days, and only did so on 11 July 2016 after an unless order on 20 June 2016;

(c) P’s failure to file and serve its timetabling questionnaire and mediation certificate, and its failure to issue a case management summons, such that the defendants had to themselves issue one returnable before Master Hui on 10 January 2017, and the plaintiff’s timetabling questionnaire was only faxed to the defendants on the morning of 10 January 2017;

(d) P’s failure to comply with the Order of Master Hui dated 10 January 2017, including his directions for filing of the plaintiff’s mediation certificate within 7 days (which was only filed almost one year late on 6 December 2017), its List of Documents within 14 days (which the plaintiff only did on 24 February 2017 after an unless order dated 10 February 2017)and to exchange witness statements of facts (which failure was, as will be elaborated upon later, the immediate cause for the current series of summonses and applications);

(e) P’s failure and refusal to comply with the Order of Master Hui dated 10 January 2017 that there be inspection of documents within 7 days after the time prescribed for filing and serving of lists of documents.  Inspection only commenced after complaint had been made to Registrar Lung on 29 August 2017, and after the Registrar’s Order that the plaintiff should allow inspection within 14 days;

(f) P’s failure to disclose in its List of Documents of the following documents until ordered to do so by Master Ho on 17 November 2017: (1) copies of identity documents of the purported defendants taken by the plaintiff when approached for the two Loans, (2) the cheques the plaintiff issued to the purported 1^st defendant upon drawdown of the two Loans, and (3) the related evidence of bank transfers.  

The immediate cause for this series of applications before the Court

15.As has been mentioned above, the immediate cause for the series of summonses and applications now before me was the plaintiff’s failure to exchange witness statements of facts in compliance with the Order of Master Hui dated 10 January 2017.  The events summarized below are taken mostly from the Relevant Procedural Chronology that Ms Yu helpfully prepared.  During the hearing on 30 January 2018, Mr Ching informed me that the contents of that chronology were agreed. 

16.During the hearing of the case management summons on 10 January 2017, Master Hui directed, amongst other things, that “Parties do exchange signed witness statements within 35 days [after inspection]”.  The deadline for the exchange was, taking into accounts the dates when other steps were to take place, 9 March 2017.

17.On 8 March 2017, Messrs Holman Fenwick Willan (“HFW”), solicitors for the defendants, wrote to Ching & Co and stated that the defendants were ready to exchange witness statements and requested for the plaintiff’s proposed time and venue for the exchange.

18.On 3 April 2017, HFW wrote to Ching & Co further to arrange for exchange of witness statements on 7 April 2017.  There was no response from the plaintiff. 

19.On 13 April 2017, the defendants issued and served on Ching & Co a summons for an order that unless within 7 days from the order to be made the plaintiff do exchange its signed witness statement(s) of fact with the defendants, the plaintiff be debarred from adducing evidence at the trial.  The summons was set down to be heard before a Master on 27 April 2017 at 9:30 am.

20.On 26 April 2017 at 8:20 pm, which was the evening before the hearing for the unless order, Ching & Co faxed to HFW a letter saying that:

“… we consent to an order being made in terms of the Summons. With a view to saving costs, we shall be grateful if you will produce this letter to the learned Master hearing the Summons to signify our consent. In the circumstances, we would also askthe learned Master to please excuse our absence at the hearing.”

On the face of that letter, it was not copied to the court.

21.The case handler of HFW did not receive that letter and was not notified of the same until his office did so at 9:36 on the morning of 27 April 2017.  He was by then waiting outside court for the hearing.  He was sent a softcopy of the same via his Blackberry.  Subsequently during the hearing of the summons, he was asked by Master K Lo to read out that letter from Ching & Co.  Master K Lo then made her Order (ie Master Lo’s Order mentioned in paragraph 1 above).  The Order provided that:

“ By consent, unless on or before 4 pm, on 4 May 2017 the Plaintiff do exchange its signed witness statement(s) of facts with the 1^st and 2^nd Defendants, the Plaintiff be debarred from adducing evidence at the trial herein ….”

That Order was not exactly the same as the Order sought.  The difference lay in the addition of an express deadline.  That addition in itself was entirely proper, and was in conformity with Practice Direction 16.5.  The issue was however that the express deadline of “4 pm on 4 May 2017”, which was 7 days from 27 April 2017, was reckoned without discounting the intervening “specified dates” (as defined in Order 3, rule 2, ie 1 and 3 May 2017 being Labour day and the Birthday of the Buddha, and 29 April,30 April, 6 May and 7 May 2017 being weekends).  If that period of 7 days were reckoned in accordance with Order 3, rule 2, the deadline should have been 10 May 2017.

22.On 27 April 2017, HFW informed Ching & Co of Master Lo’s Order.  No reply or objection was received from Ching & Co.

23.On 2 May 2017, HFW wrote to Ching & Co and proposed that witness statements be exchanged at 2:30 pm on 4 May 2017.  No reply was received from Ching & Co.

24.At 4:08 pm on 4 May 2017, HFW wrote again to Ching & Co.  They stated that they had received no response to their letter of 2 May 2017, repeated the deadline for exchange, and said that in the absence of Ching & Co’s reply forthwith, they would file the defendants’ statements and would take it that the plaintiff would not adduce any witness statement at trial.  HFW further indicated that they would oppose to any subsequent filing of any statement by the plaintiff.

25.At 4:21 pm on the same day, Ching & Co faxed to HFW a letter stating that there was an error contained in HFW’s letter of 27 April 2017, that Ching & Co agreed to exchange within 7 days from the Order, which deadline according to Order 3, rule 2 should be 10 May 2017, and that they had never consented to the deadline of 4 pm on 4 May 2017.  Ching & Co then confirmed that they could exchange witness statements “at about” 4 pm on 9 May 2017 at the High Court Registry.  They said that “As there was a mistake, please refrain from sealing the Order made on 27 April 2017 to save costs.”

26.On 5 May 2017, HFW wrote back and said that they would not accept the late service of the plaintiff’s statements and would oppose the admission of such statements. 

27.Also on 5 May 2017, the plaintiff issued P’s Irregularity Summons pursuant to Order 2, rule 2 for an order that:

“ (1) [Master Lo’s Order] made, by consent, be set aside for irregularity on the ground that the plaintiff never consented to exchange witness statements by 4:00 pm on 4^th May 2017,and that the court mistakenly believed, or was misled into believing, that the Plaintiff consented to exchange witness statements by 4:00 pm on 4^th May 2017 and that the Order made was incompatible with the provisions under Order 3, rule 2 of the Rules of the High Court;

(2) alternatively, leave be granted to amend [Master Lo’s Order] to provide for exchange of witness statement [sic] by 4:00 pm on 10^th May 2017 instead of 4^th May 2017, and the rest of the Order do stand.”

28.On 9 May 2017, Ching & Co sought to serve on HFW a copy of the Yeung’s Statement.  Fanny Yeung is the General Manager employed by the plaintiff.  The main body of that statement comprised only six lines.  The proposed witness sought to adopt as her witness statement her first affirmation of 5 March 2015 filed in support of the Originating Summons, and her second affirmation of 15 October 2015 filed in answer to the affirmations of the 1^st and 2^nd defendants filed in opposition of the Originating Summons.

29.On 9 May 2017, Master Lo’s Order was sealed.

30.On 10 May 2017, Mr Ching filed his affirmation in support of P’s Irregularity Summons.  He deposed that Master Lo’s Order was not made with his consent, as he did not consent to not excluding weekends and general holidays when reckoning the 7-day period.  He deposed further that according to his calculation in accordance with Order 3, rule 2, the time allowed for performance should be up to and including 10 May 2017.  He also deposed that after the Master Lo’s Order had been made, and despite the various letters from HFW, he “did not realize that there was an error contain [sic] the terms of the order said to have been made by the court until 4^th May 2017.”

31.On 22 August 2017, the defendants filed Ds’ Summons.  On 24 August 2017, apparently after receipt of the defendants’ written submissions in support of Ds’ Summons (which made the point that the plaintiff had not sought any relief from sanction for breach of Master Lo’s Order), the plaintiff took out P’s Amendment Summons and sought (the proposed amendments are underlined)”:

“ … an order that:–

1. [Master Lo’s Order] made, by consent, be set aside for irregularity on the ground that the plaintiff never consented to exchange witness statements by 4:00 pm on 4^th May 2017,and that the court mistakenly believed, or was misled into believing, or there was no evidence before the court, that the Plaintiff consented to exchange witness statements by 4:00 pm on 4^th May 2017 and that the Order made was not the result of any consensus of the parties, and was incompatible with the provisions under, and was thus a failure to comply with the requirements under, Order 3, rule 2(5) of the Rules of the High Court, and was in effect a purported exercise of the power to make an order pursuant to Order 3, rule 5 of the Rules of the High Court abridging the period of time within which the Plaintiff was required or authorized by the Rules of the High Court, namely, Order 3 rule 2(5) of the Rules of the High Court, to do an act in these proceedings but without actually and expressly making the order and/or without giving the Plaintiff the right to be heard before making the order;

2. alternatively, leave be granted to amend [Master Lo’s Order],pursuant to Order 2 rule 1(2) of the Rules of the High Court,to provide for exchange of witness statement by 4:00 pm on 10 May 2017 instead of 4^th May 2017, and the rest of the Order do stand”;

3. in the event that upon the final determination of paragraphs 1 and 2 of this Summons by this Court but without making an order being made by this Court in favour of the Plaintiff,relief be granted to the Plaintiff under Order 2, rules 4 and 5 of the Rules of the High Court;

4. [Yeung’s Statement] filed on 9^th May 2017 herein do stand;”

32.On 25 August 2017, the plaintiff took out P’s Remission Summons.

Appeal by way of rehearing

33.I remind myself of the following principles, which are trite and not disputed by the parties.  An appeal from the master to the judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time. The judge will give the weight it deserves to the previous decision of the master, but he is in no way bound by it.  The judge in chambers is in no way fettered by the previous exercise of the master’s decision, and on appeal from the judge in chambers, the Court of Appeal will treat the substantial discretion as that of the judge, and not of the master—Hong Kong Civil Procedure 2018, paragraph 58/1/2.

P’s Irregularity Summons, P’s Amendment Summons and the Removal Limb of Ds’ Summons

34.P’s Irregularity Summons, P’s Amendment Summons and the Removal Limb of Ds’ Summons are closely related.  I will first consider the plaintiff’s application to amend P’s Irregularity Summons.  If I allow that application, I will then proceed to consider the merits of P’s Irregularity Summons as amended.  If I either allow the application to set aside or to amend Master Lo’s Order as requested, or alternatively dismiss that application but proceed to grant the plaintiff relief from sanction, the Removal Limb of Ds’ Summons will necessarily fail.  But if I am to refuse P’s Irregularity Summons as amended in its entirety, Yeung’s Statement will have to be removed from the court record, as it was filed in breach of Master Lo’s Order.

35.Ms Yu’s submissions on behalf of the defendants may be summarized as follows.  As the basis of P’s Irregularity Summons was that Master K Lo had made a mistake, the plaintiff should have appealed.  P’s Irregularity Summons was therefore misconceived.  In any event, Master Lo’s Order stood until amended or set side.  The plaintiff was aware of the terms of the order, and Yeung’s Statement was filed in blatant breach of the same.  In respect of P’s Amendment Summons, Ms Yu submitted that on the facts of the case, given the delay in the making of the application, the plaintiff’s history of regularly flouting court orders and proper court procedure, and the fact that it had been “dragging its feet” in the prosecution of the action, the Court should exercise its discretion against relief.  Yeung’s Statement ought to be removed from the court record.

36.Mr Ching’s position on behalf of the plaintiff was as follows.  As explained above, the plaintiff is not seeking to cross-appeal Registrar Lung’s decision to grant it relief against sanction.  A major part of Mr Ching’s submissions were directed towards the part of Ds’ Summons for payment-in, which I will come to.  In so far as P’s Amendment Summons was concerned, Mr Ching submitted that having regard to the specific facts of the case, there were good reasons for granting relief.  He pointed to the history that the action was originally commenced by Originating Summons supported by affirmatory evidence.  He submitted that as the contents of the affirmatory evidence were substantially the same as the pleadings subsequently required to be filed (after the case had been ordered to be continued as if started by writ):

“ … the impact, if any, of the incidents cited in the Defendants Submissions … for late filing of Statement of Claim, Reply and Defence to Counterclaim, and List of Documents, on the Defendants was much lesser and no real prejudice had been caused”,

and that:

“ Other incidents about mediation certificate or questionnaire are minor in nature by any standard”.

He also pointed to the defendants’ “change of story” relating to the title deeds, and the delay the defendants would cause as a result (the need to amend pleadings, consequential filing further witness statements, etc).  He submitted that in all the circumstances, the relief from sanction sought should be granted. 

Whether to allow the application to amend P’s Irregularity Summons as per P’s Amendment Summons

37.The Court has power under Order 20, rule 8 to order at any stage a pleading (which includes a summons) to be amended.  “It is a guiding principle of cardinal importance on the question of amendment that,generally speaking, all such amendments ought to be made ‘for the purpose of determining the real question in controversy between the parties to any proceeding or of correcting any defect or error in any proceedings’”—see paragraph 20/8/6 of Hong Kong Civil Procedure 2018.

38.When exercising my discretion under Order 20, rule 8, I also bear in mind the underlying objectives of the Rules of the High Court, that the primary aim in exercising the power is “to secure the just resolution of disputes in according with the substantive rights of the parties”—Order 1A, rule 2(2).

39.The main purpose of P’s Amendment Summons is to add to P’s Irregularity Summons the alternative application for relief from sanction.  I am satisfied that the question of relief is a real one in controversy to be determined, and its addition helps secure the just resolution of disputes in according with the substantive rights of the parties.  I allow the application to amend P’s Irregularity Summons as per P’s Amendment Summons.

40.I proceed to consider the merits of P’s Irregularity Summons as amended.  I will first of all consider whether Master Lo’s Order should be set aside or amended for irregularity.

The power to set aside or amend for irregularity

41.Non-compliance with the Rules of the High Court is treated by Order 2, rule 1(1) as an “irregularity”.  Specifically, it provides that:

“ Where, in beginning or purporting to begin any proceedings or at any stage in the course of or in connection with any proceedings, there has, by reason of any thing done or left undone, been a failure to comply with the requirements of these rules, whether in respect of time, place, manner, form or content or in any other respect, the failure shall be treated as an irregularity and shall not nullify the proceedings, any step taken in the proceedings, or any document, judgment or order therein.”

42.The Court is given certain powers under Order 2, rule 1(2) to deal with such non-compliances. Those powers include the power to set aside or amend the steps concerned.  But as is obvious from the express wording of Order 2, rule 1(2), those powers can only be invoked “on the ground that there has been such failure as is mentioned in paragraph (1)”, namely, the existence of an irregularity as defined.  “The power given to the court by O.2, r.1 is a power to cure irregularities consisting of failures to comply with the rules.  There is no power to remedy failures of a more fundamental kind”—see paragraph 2/1/2 of Hong Kong Civil Procedure 2018; and “The rule only applies to applications to set aside; ….  However,any alleged non-compliance with the rules by any tribunal or judge was an error in law and could only be corrected by an appeal to the appellant court(see Goh Kim Lay v. Versatile Advertising Co. Ltd & T.L. Ip. & Co. (applicant)(unrep., HCA A8090/1994, [1996] H.K.L.Y. 1079))”—see paragraph 2/2/1 of Hong Kong Civil Procedure 2018. 

43.The core of the plaintiff’s complaint is that Master K Lo erred in granting Master Lo’s Order which the plaintiff had not consented.  That complaint, if substantiated, was not an irregularity, but an error of law.  The appropriate route is an appeal, but not an application under Order 2.

44.In his Supplemental Submissions, Mr Ching referred me to Poon Ching Man v Lam Hoi Pun [2015] 3 HKLRD 57 and submitted that in four categories of cases, a court can revisit its previous order despite it having been sealed, namely (1) to reflect its original intention which is manifest as appearing from the body of the order or judgment; (2) in application of the slip rule to correct a clerical error or accidental slip, (3) under the express or implied “liberty to apply” provisions, and (4) where the court may do so pursuant to applicable rules of court.  I do not find the reference by Mr Ching to that case useful.  In my view, it is clear that none of those four categories applies in the present case.  There is no manifest intention that can be discerned from Master Lo’s Order; the slip rule clearly does not apply; any “liberty to apply” provision cannot confer jurisdiction upon a court which it otherwise does not have[1]; and any exercise of power pursuant to an applicable rule of court (for example to extend time) to revisit an order previously made involves a fresh exercise of power exercisable under and in accordance with that rule.

45.In the circumstances, I dismiss the plaintiff’s application to set aside or amend for irregularity.

46.I next consider whether the plaintiff should be granted relief from sanctions pursuant to Order 2, rule 5.

The power to grant relief from sanctions

47.The plaintiff only filed and served Yeung’s Statement on 9 May 2017, 5 days after the express deadline of 4 pm on 4 May 2017.  Now that I have refused to set aside or amend Master Lo’s Order, the plaintiff was clearly in breach of Master Lo’s Order.

48.Upon that breach, the sanction had effect, unless the plaintiff applied to the Court and obtained relief from the sanction within 14 days of the non-compliance—see Order 2, rule 4.  There was no need for the defendants to make further application to the Court.  It was for the plaintiff to seek relief—Marcan Shipping (London) Ltd v Kefalas [2007] 1 WLR 1864, paragraphs 28 – 36; and Daimler AG v Leiduck [2012] 3 HKLRD 119, at paragraphs 47 – 48.

49.The plaintiff did not take out P’s Amendment Summons until 24 August 2017.  Ms Yu referred me to China Metal Recycling (Holdings) Ltd & Anor v Chun Chi Wai & Ors (unreported, HCA 1412/2013, 25 June 2014, per Deputy Judge Saunders at paragraph 83) and submitted that it is open to the court to refuse relief simply because of the delay.  I note however “whether the application for relief has been made promptly” is only one of the 10 individual circumstances which the Court shall consider on an application for relief—see Order 2, rule 5.  I do not believe that it accords with that rule to focus only upon delay (or any other single circumstance for that matter), except perhaps when the delay has been extreme (but when delay has been so extreme, other circumstances would also have come into play). 

50.In determining whether or not relief should be granted, the Court shall undertake a weighing exercise and consider all the circumstances including the 10 individual circumstances set out in Order 2, rule 5.  When doing so, a weighty factor is the question of proportionality of the sanction in the circumstances in the case—see Daimler AG v Leiduck [2012] 3 HKLRD 119, at paragraphs 47 – 48.  Although intentional and contumelious disregard of a court’s peremptory order may be the most usual circumstance leading to the refusal of an extension of time to comply with a peremptory order, the exercise of the discretion to refuse an extension or to relieve a party from sanctions is not limited to those cases.  Failure to comply with one or a number of orders through negligence, incompetence or sheer indolence may be such as to lead the court to conclude there is an existence and degree of fault which warrants a refusal of an extension of time—see Top One International (China) Property Group Co Ltd v Top One Property Group Ltd [2011] 1 HKLRD 606, per Fok J (as he then was) at paragraph 41.

51.Where non-compliance of an unless order is involved, the Court may also take into account the philosophy underlying the approach adopted by the courts in dealing with applications for extension, which Ward LJ encapsulated in Hytec Ltd v Coventry City Council [1997] 1 WLR 1666 (CA) at 1674 – 1675:

“ (1) An unless order is an order of last resort. It is not made unless there is a history of failure to comply with other orders. It is the party’s last chance to put his case in order. (2) Because that was his last chance, a failure to comply will ordinarily result in the sanction being imposed. (3) This sanction is a necessary forensic weapon which the broader interests of the administration of justice require to be deployed unless the most compelling reason is advanced to exempt his failure. (4) It seems axiomatic that if a party intentionally or deliberately (if the synonym is preferred) flouts the order then he can expect no mercy. (5) A sufficient exoneration will almost inevitably require that he satisfies the court that something beyond his control has caused his failure to comply with the order. (6) The judge exercises his judicial discretion in deciding whether or not to excuse. A discretion judicially exercised on the facts and circumstances of each case on its own merits depends on the circumstances of that case; at the core is service to justice. (7) The interests of justice require that justice be shown to the injured party for the procedural inefficiencies caused by the twin scourges of delay and wasted costs. The public interest in the administration of justice to contain those two blights upon it also weighs very heavily. Any injustice to the defaulting party, though never to be ignored, comes a long way behind the other two.”

52.I see no contradiction between the observation made by the Court of Appeal in Daimler AG v Leiduck (that a weighty factor is the question of proportionality of the sanction in the circumstances in the case) and point (7) in the encapsulation by Ward LJ.  Whilst by the nature of things any injustice to the defaulting party may be subordinate to that suffered by the injured party, the Court ought not, when considering the injustice to the defaulting party, ignore the question of proportionality. Doing so may lead to the imposition of disproportionate sanctions.  That in turn will impact adversely on the wider interests of the administration of justice, which is the first individual circumstance which Order 2, rule 5 directs the Court to consider.  

Consideration of the plaintiff’s application for relief

53.I approach the plaintiff’s application for relief with the abovementioned considerations and principles in mind.

54.Master Lo’s Order is an unless order.  The philosophy encapsulated by Ward LJ in Hytec is engaged.  A failure to comply with an unless order will ordinarily result in the sanction being imposed.  But the circumstances leading to, and the reason for, the non-compliance will still have to be considered.  The application will have to be considered on its own merits.

Order 2, rule 5(1)(b)—
whether the application for relief has been made promptly:

55.The application for relief was not specifically sought until P’s Amendment Summons was taken out on 24 August 2017.  Strictly speaking it was more than three months after the non-compliance and was out of time.  But it was made by way of an amendment to P’s Irregularity Summons taken out on 5 May 2017, which was within time and only one day after the non-compliance.  As I have allowed the application for amendment, the application for relief can technically be regarded as having been made on 5 May 2017.  In any event, and without being too technical on the matter, the plaintiff had on 5 May 2017 by way of P’s Irregularity Summons taken steps to rectify the situation.  It might not have taken out the correct application.  But at the same time the plaintiff had not simply sat on the matter.  Yeung’s Statement was then filed and served on 9 May 2017.  The effects of any delay by itself are in my view not serious.

Order 2, rules 5(1)(c) and 5(1)(d)—
whether the failure to comply was intentional, and whether
good explanation:

Order 2, rule 5(1)(e)—
the extent to which the party in default has complied with other rules and court orders:

57.I have set out above the history of other non-compliances by the plaintiff. This is one factor against the grant of relief.

Order 2, rule 5(1)(f)—
whether the failure to comply was caused by the party in default or his legal representative:

58.In respect of the failure to comply with Master Lo’s Order, I am of the view that on the evidence, between Ching & Co and their lay client (ie the plaintiff), no fault can be attributed to the plaintiff. 

Order 2, rule 5(1)(h)—
whether the trial date or the likely trial date can still be met if relief is granted:

59.No trial date has been fixed, and in the light of the defendants’ application to amend their Defence and Counterclaim to correct the incorrectly pleaded facts relating to the title deeds, the trial will be sometime ahead.

Order 2, rules 5(1)(i) and 5(1)(j)—
the effect which the failure to comply had, and which the granting of relief would have, on each party:

Order 2, rule 5(1)(a)—the interests of the administration of justice:

Conclusion on the plaintiff’s application for relief

62.Having undertaken the weighing exercise required of me, and for the reasons set out above, I have decided that my discretion should be exercised in favor of allowing the plaintiff’s application for relief from the sanction for non-compliance of Master Lo’s Order.  I further order that Yeung’s Statement may remain in the court record.  I accordingly dismiss the Removal Limb of Ds’ Summons.

The Payment-in Limb of Ds’ Summons

The power to order payment-in

63.The Court is empowered by Order 2, rule 3 to order payment-in in the circumstances as specified.  The rule provides that:

“ (1) The Court may order a party to pay a sum of money into court if that party has, without good reason, failed to comply with a rule or court order.

(2) When exercising its power under paragraph (1), the Court shall have regard to –

(a) the amount in dispute; and

(b)   the costs which the parties have incurred or which they may incur.”

64.Order 2, rule 3 is materially the same as Rules 3.1(5) – (6A) of the Civil Procedure Rules (“CPR”).  Ms Yu has drawn my attention to a number of relevant English authorities, which included Mealey Horgan plc v Horgan & Anor, Times, 6 July 1999 (and Official Transcript); Olatawura v Abiloye [2002] 4 All ER 903; Ali v Hudson (t/a Hudson Freeman Berg) [2004] CP Rep 15; Huscroft v P & O Ferries Ltd [2011] 2 All ER 762 and Allen v Bloomsbury Publishing Ltd [2011] FSR 22, 597.  My attention has also been drawn to the decision of Deputy Judge M Ng in Chu Kwok Kee Kookie v Ming Chor Pao & Anor (unreported, HCMP 704/2015, 12 June 2015).  I have considered them.  I set out below the principles, in so far as relevant here, which I gathered from those authorities.

The power is a free standing discretion:

65.The power to order a payment into court under Order 2, rule 3 is a free-standing one, to be exercised according to the terms of the Order.  It is a wide discretion to ensure that justice is done in any particular case.  Its application is not confined to the power to order security for costs under Order 23—see Olatawura paragraphs [18] – [19] and Allen v Bloomsbury paragraph 32(iv).

The main purpose is to punish, but may also be beneficial to the future conduct of the proceedings:

Access to the court is a prime consideration:

“ … it would only be in an exceptional case (if ever) that a court would order security for costs if the order would stifle a claim or an appeal”.

Punishment is not the norm:

The strength of a party’s case is a relevant consideration:

Application of the principles

70.I proceed to consider the Payment-in Limb of Ds’ Summons in the light of the legal principles discussed above.

71.That the Court has the power to make the order is not in dispute.  The issue is how I should exercise my discretion, and if I am to order the plaintiff to make a payment-in, the amount.

72.On 10 May 2017, Cheuk Yuk Tak, a solicitor with HFW, filed his first affirmation on behalf of the defendants in opposition of P’s Irregularity Summons.  He raised therein, amongst other things, his belief that it was appropriate for the Court to, pursuant to Order 2, rule 3, order the plaintiff to pay into Court the defendants’ costs.  He then gave a breakdown of the defendants’ costs estimates down to the conclusion of the trial.  The estimated amount was HK$3 – 3.5 million.  The defendants subsequently filed Ds’ Summons on 22 August 2017.  Mr Cheuk filed his third affirmation on the same date in support thereof, and specifically adopted the parts of his first affirmation discussed above.  Despite the issue of payment-in having been raised and the evidence adduced, the plaintiff chose not to file any evidence in reply.  I also note that the plaintiff is a licensed money lender. I therefore draw the inference that the plaintiff will have no financial difficulty in meeting an order for payment-in. The issue of access to the Court, or the risk of an order for payment-in stifling the plaintiff’s case, does not arise.

73.The plaintiff has been regularly flouting proper court procedures and orders.  I have set out the relevant history above.  I am in particular not impressed by the plaintiff’s failure to disclose in its List of Documents copies of all identity documents of the purported 1^st and 2^nd defendants and the cheques which the plaintiff issued to them upon drawdown.  Those documents go to the heart of the main issue, namely whether the persons who approached the plaintiff for the Loans were the defendants.  The plaintiff ultimately disclosed those documents on 30 November 2017, but only after a contested application by the defendants for specific disclosure of inter alia those documents.  As recorded by Master Ho who heard the application at paragraph 36 of his Decision dated 17 November 2017:

“ Mr Ching however submits that the identity documents are not necessary as WF have already disclosed them in response to the earlier third party discovery summons taken out by the defendants. I cannot accept such argument because the plaintiff has its own primary obligation of disclosure to discharge.”

I entirely agree that those sort of arguments have to be rejected. 

74.No proper explanation has been tendered by the plaintiff for those incidents of non-compliances.  I do not accept the submissions made by Mr Ching’s which I have summarized in paragraph 36 above (that as the action was originally commenced by Originating Summons supported by affirmatory evidence, “… the impact, if any, of the incidents cited in the Defendants Submissions … for late filing of Statement of Claim, Reply and Defence to Counterclaim, and List of Documents, on the Defendants was much lesser and no real prejudice had been caused”, and that “Other incidents about mediation certificate or questionnaire are minor in nature by any standard.”)  I specifically reject his submissions that “Other incidents about mediation certificate or questionnaire are minor in nature by any standard”.  Those submissions completely ignore the underlying objectives of the Rules of the High Court, and in particular the one set out at Order 1A, rule 1(b), ie “to ensure that a case is dealt with as expeditiously as is reasonably practical”.

75.I have also considered the plaintiff’s attitude as reflected in its pleadings and affirmations.  I have dealt with the Reply and Defence to Counterclaim above.  In the absence of pleaded facts, averments like “The possibility that the 1^st and 2^nd Defendants were involved in the alleged fraud and/or identity theft cannot be ruled out” have no place in any pleading. In the second affirmation of Fanny Yeung of 15 October 2015, she deposed that:

“ 6. Regarding the issue of forgery, the 1^st and 2^nd Defendants also produced some documents purporting to prove that at some important point or period of times, the 1^st and/or 2^nd Defendants was/were not in Hong Kong. However, the document produced in relation to this point shall not be taken on its face value as it is notorious that Chinese people often had different names at different times or even at the same time, and they may have different travel documents issued by same or different countries in different names. Therefore, the Plaintiff is undertaking investigation in this regard, particularly, in the Mainland China … The process undoubtedly needs some time if not a lot of time to finish as the investigation would not be under the direct control of the Plaintiff, and a lot of things and records have to be checked by the authorities.”

Such speculative remarks as underlined above similarly have no place in any affirmatory evidence.  They in turn reflect badly on the plaintiff as to whether it has the will to litigate its claim as economically and expeditiously as reasonably possible in accordance with the overriding objective. 

76.A major part of Mr Ching submissions went towards the development of his suggestion that Registrar Lung should have adjourned the three summonses so that the matter could be “remitted” back to Master K Lo for consideration, in which case “there would not have been any failure to comply with the Order of Master K Lo, at all, and the Defendants would not and could not have been able to ‘hang their hat thereon’, to make the application for payment-in”.  I reject the submissions.  The submissions proceeded upon the assumption that had the matter been “remitted” back, Master K Lo would have amended or varied Master Lo’s Order.  That assumption is not justified.  I have explained why.  The appropriate route for the plaintiff to challenge that Order, should the plaintiff want to, was to appeal.  Registrar Lung was correct in refusing the application for adjournment.  He was further correct in setting aside P’s Remission Summons. 

77.I have also considered the merits of the plaintiff’s case.  The plaintiff had a genuine cause of action.  The plaintiff is either an unpaid creditor and mortgagee (if the persons who approached it for the Loans were in fact the defendants), or the victim of a fraud (if those persons were not).  But at the moment, the evidence suggests that it was not the defendants or either of them who approached the plaintiff.  The defendants have on affirmations denied having received the Loans or having made any repayments. The photographs on the identification documents concerned do not resemble the defendants.  The immigration records show that the 1^st defendant was not even in Hong Kong at the material times.  There is at this stage no evidence of any complicity on their part.  In any event, that is not the pleaded case of the plaintiff.  The change in the defendants’ pleaded case in respect of the title deeds cannot by itself be evidence of complicity, and does not alter the overall strength of the plaintiff’s case as it now stands.

78.As things now stand, I am of the view that the pleaded case of the plaintiff has no real prospect of succeeding.

79.For the reasons given above, I find that the plaintiff has regularly been flouting proper court procedures.  Given such conduct, and having considered the plaintiff’s pleadings and affirmations, I am of the view that the plaintiff has demonstrated a lack of will to litigate its claim as economically and expeditiously as reasonably possible in accordance with the overriding objective.  I emphasize that I have not found bad faith.  It was want of good faith as explained above.  But such conduct should not go unpunished.  The defendants should also be protected from such conduct.  I have also found, on the strength of the evidence disclosed, that the plaintiff’s pleaded case has no real prospect of succeeding.  I have weighed in the change in the defendants’ pleaded case in respect of the title deeds.  It does not provide any excuse to the plaintiff for any of its conduct in the past.  It may however be relevant to the issue of quantum, which I will come to.  In all the circumstances, and having undertaking the weighing exercise above, I am satisfied that this is one of those exceptional cases in which an order for payment-in ought to be made.

The amount to be paid in

80.I have dealt with Mr Cheuk’s first affirmation above.  He deposed that the defendants’ estimated cases down to trial will be about HK$3 to 3.5 million.  There is no evidence from the plaintiff that either it cannot afford it, or the estimates were otherwise objectionable.  On the other hand, I note the change in the defendants’ pleaded case in respect of the title deeds.  They will have to be responsible for any time and costs wasted.  On the issue of quantum, Ms Yu has brought to my attention Allen v Bloomsbury.  As observed by Kitchin J therein, the Court can only do the best one can.  Having considered the facts, and doing the best I can, I order that the plaintiff should within 14 days from the day hereof pay into court the sum of HK$1,500,000, which represent about 43% or 50% of the costs estimates, depending upon whether the sum of HK$3 million or HK$3.5 million is adopted.  In ordering that amount, I have also considered the amount in dispute, as I am required to do by Order 2, rule 3.  This sum of HK$1.5 million is not disproportionate to the amount in dispute.  I so order.

Costs

81.At the end of the hearing, I indicated that I will invite submissions before making any order for costs.  I direct that the defendants should file and serve their submissions on costs within 10 days from the date hereof, and the plaintiff within 10 days thereafter upon receipt.

Mr Ching Ming Yu, of Ching & Co, for the plaintiff

Ms Bianca Yu, instructed by Holman Fenwick Willan, for the 1^st and 2^nd defendants