Tang Lai Ngor v. Tseng Anne Formerly Known As Tseng Heng Tzu

DCCJ 2061/ 2018

[2019] HKDC 753

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION No. 2061 OF 2018

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Coram:

His Honour Judge Kent Yee in Chambers

Dates of Written Submissions: 16 April 2019 (Plaintiff) 30 April 2019 (Defendant)

Date of Decision: 4 June 2019

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DECISION

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Introduction

1.This court handed down a decision dated 3 April 2019 (“the Decision”) for the disposal of Ms Tang’s application for default judgment and Ms Tseng’s cross application for retrospective leave to file her defence out of time.

2.In the Decision, this court also made a costs order nisi that Ms Tseng should forthwith pay Ms Tang her costs of the two applications up to 18 December 2018 (two weeks after the filing of the reply affirmation on behalf of Ms Tseng) with certificate for counsel and thereafter each party do bear her own costs.

3.By summons dated 16 April 2019 (“the Summons”), Ms Tang applies for variation of the costs order nisi to the extent that Ms Tseng should pay her costs incurred after 24 December 2018 including the hearing on 31 January 2019 with certificate for counsel, to be taxed if not agreed on an indemnity basis.

4.Ms Tseng opposes this application. This court has given directions to the parties to lodge their respective written submissions for paper disposal of the Summons. Ms Tang opted not to lodge any reply submission after the deadline and this court now proceeds to decide on her application.

5.In this document, this court shall adopt the abbreviations used in the Decision. This court shall also refer to the Decision for the background facts, which will not be repeated here.

Grounds of the Application

6.Ms Tang principally relies on two without prejudice correspondence exchanged between the parties on 24^th and 28^th December 2018. There were also open letters exchanged. In the supporting affirmation filed on her behalf, criticisms were also made on the conduct of the legal advisers of Ms Tseng. It is further suggested that this court should consider whether the solicitors for Ms Tseng should bear personal costs for a particular affirmation. This suggestion falls outside the ambit of the Summons and will not be entertained.

7.The secondary ground is premised on the alleged unreasonable conduct of Ms Tseng, which will be elaborated below.

8.For the first ground, I have read all the letters exhibited to the supporting affirmation and I shall not recite their contents here. I need only refer to the following four letters to which Ms Tsau, counsel for Ms Tang, helpfully invited my attention.

9.The first one in time is the open letter dated 9 October 2018 issued by Messrs CLY Lawyers (“CLY”), solicitors for Ms Tang, to Messrs Ho & Associates (“Ho”), solicitors for Ms Tseng (“the 9/10 Letter”). It first referred to the Default Judgment Summons taken out on the previous day and CLY stated the position of Ms Tang on the same. Ms Tang had no objection to Ms Tseng’s application for retrospective leave to file and serve the defence out of time if made and to the setting aside of her application provided that Ms Tseng agreed to pay costs of and incidental to her application and the application for time extension to file and serve the defence out of time.

10.Before Ho replied to the 9/10 Letter, they filed the Retrospective Leave Summons on 10 October 2018. Their reply letter dated 12 October 2018 (“the 12/10 Letter”) was a lengthy one. They alleged that the Default Judgment Summons was an abuse of process and fundamentally misconceived. Their position was, and still is, that Ms Tang could not possibly obtain declaratory relief by way of default judgment in any event. It was stated that out of abundance of caution, they took out the Retrospective Leave Summons. Lastly, it was counter-proposed that Ms Tang should withdraw the Default Judgment Summons with no order as to costs whereas Ms Tseng was prepared to pay Ms Tang the fixed costs of the Retrospective Leave Summons, which was a time summons in nature.

11.Obviously the parties were unable to reach any agreement and they appeared before the master on 24 October 2018 for the two Summonses. For the purpose of that hearing, Ms Liao, counsel for Ms Tseng, lodged a document known as speaking notes running over 70 pages. It is alarming indeed. The master made the Order for the parties to file their evidence for argument at the adjourned hearing before this court on 31 January 2019.   

12.After the close of evidence, on 24 December 2018, CLY sent Ho a letter on a without prejudice basis (“the 24/12 Letter”). In the said letter, CLY urged Ho to reconsider their position on costs and asked Ms Tseng to pay Ms Tang her costs of and incidental to the two Summonses with a view to vacating the adjourned hearing on 31 January 2019 by consent.

13.Ho replied by way of a without prejudice letter dated 28 December 2018 (“the 28/12 Letter”). The said letter referred to CLY’s letter dated 27 December 2018 and I assume it was meant to be the 24/12 Letter. Ho maintained the same position in the 12/10 Letter and they pointed out that Ms Tang should withdraw the Default Judgment Summons with costs to be decided by this court on 31 January 2019 and the Retrospective Leave Summons should be allowed with the fixed costs of HK$800 to be paid by Ms Tseng to Ms Tang. Ho asked for the agreement of CLY to their proposal so that the hearing bundle index could be amended accordingly for the purpose of the adjourned hearing.

14.By the costs order nisi, this court, among other matters, ordered that Ms Tseng should forthwith pay Ms Tang her costs of both Summonses up to 18 December 2018 with certificate for counsel, to be taxed if not agreed. Ms Tang does not seek to vary this part of the costs order nisi. Nor has Ms Tseng applied for variation of the same. I still maintain the view that Ms Tang was perfectly entitled to take out the Default Judgment Summons despite the fact that the delay was only slight and the defence had been purportedly filed without leave: see Schindler Lifts (Hong Kong) Ltd v Ocean Joy Investments Ltd [2002] 1 HKLRD 279.

15.I do not accept Ms Liao’s submission that Ms Tang is not entitled to the declaratory relief on a default basis in any event. On the basis that the pleaded matters including the existence of the Trust Agreement are taken to be proven, Ms Tang’s beneficial interest in the Relevant Shares can be confirmed. Needless to say, Ms Tang has a genuine need for the declaratory relief claimed. She does not need to show the need by way of evidence, which is not admissible in applications for default judgment. In my judgment, she is of course entitled to the declaratory relief claimed in the particular circumstances of the present case.

16.In the premises, I cannot accept the position taken by Ms Tseng in the 12/10 Letter. She should have accepted the proposal of Ms Tang in the 9/10 Letter.  

17.My view was, and still is, that after the close of evidence, Ms Tang should reconsider her position and come to the conclusion that Ms Tseng may have an arguable defence despite the bare denials in the Defence purportedly filed. I allowed her two weeks to reach this reasonable conclusion in the costs order nisi. 

18.The 24/12 Letter only came 6 days late. The proposal contained therein was reasonable. In my view, Ms Tseng should have accepted her liability to pay costs of the two Summonses up to the date of the said letter so that the substantive hearing on 31 January 2019 could have been avoided.

19.Now Ms Tseng has failed to do better than the proposal. The 6-day lateness does not make any practical difference, particularly given the intransigent stance of Ms Tseng maintained throughout. In the end, Ms Tseng has failed to avoid her liability to pay Ms Tang her costs of the two Summonses up to 18 December 2018 and failed to limit her liability to the fixed costs of the Retrospective Leave Summons. She is substantially worse off as a result of the costs order nisi. On this basis, she should be ordered to pay indemnity costs after her rejection of the proposal in the 24/12 Letter: Lung Po Kwan and Anor. v Tang Kam Sheung and Anor., unreported, CACV 164/2010, 5.5.2011 per Hon. Tang Acting CJHC (as he then was) at §§11-12.

20.On the first ground alone, the present application should be granted. Before turning to the second ground, I should make it clear that I do not accept the submission of Ms Tsau that the usual costs order in default judgment applications crossed over with retrospective leave summons should be in favour of the plaintiff. The question of costs is very much a fact-sensitive issue and has to be decided on its own facts.

21.Indeed in a recent decision of the Court of Appeal in Harbour Hero Enterprises Limited v Chau Nung Tai [2019] HKCA 565, the defendant succeeded in setting aside a regular judgment. The costs for resisting the setting aside application was, however, ordered to be borne by the plaintiff by reason of the fact that the merits of the defence had been sufficiently disclosed by the defendant in the supporting affirmation. This was also the same approach adopted by Chung J in Welson International Ltd v Jebson Investments Ltd, unreported, HCA 2620/2008, 29.6.2010.

22.The second ground can be disposed of briefly. Ms Tsau fairly identified the high threshold that an applicant for indemnity costs should meet. He has to demonstrate that there is something in the conduct of the action or other circumstances of the case that takes it out of the norm which warrants an order for indemnity costs. He has to show that the paying party’s conduct, though not necessarily in lack of moral probity or deserving moral condemnation, must be unreasonable to a high degree: Wong Yung Tai v Top Eagle Security Management Ltd [2019] HKDC 408 per HHJ Winnie Tsui at §§41-43.

23.Ms Tsau raises two points for this ground. First she submits that Ms Tseng failed to negotiate with Ms Tang about settlement after the receipt of the 24/12 Letter other than repeating her unrealistic counter-offer.

24.Ms Tseng’s position stated in Ho’s letters was misplaced. She was simply misguided in my view and she did not really refuse to negotiate with Ms Tang. I cannot accept that she was unreasonable to a high degree.   

25.Ms Tsau further points out that Ms Liao was late in the lodging of her skeleton submissions for the hearing on 31 January 2019. She only lodged the said document at 2:48 pm on 29 January 2019 when she should have done so at 9:30 am.

26.Practitioners are expected to comply with the applicable practice directions in lodging their skeleton submissions. This court frowns upon such non-compliances and, where real prejudice can be shown, shall not hesitate to sanction the defaulters. The defaulters should also be ready to give an explanation for the delay and duly apologize for the same to all other parties.

27.Ms Liao did not deal with this complaint at all in her reply submissions, let alone proffering an explanation and still less an apology. Plainly, the 5-hour delay, in the absence of prejudice, would not render the conduct of Ms Tseng unreasonable to a high degree to justify indemnity costs. It would be disproportionate to penalize Ms Tseng in costs on account of the immaterial delay.

Conclusions and dispositions

28.For the reasons given, I accept that the costs order nisi should be varied to the extent that Ms Tseng should forthwith pay Ms Tang her costs of both Summonses up to 24 December 2018 including the reserved costs before the master with certificate for counsel, to be taxed if not agreed and thereafter costs of both Summonses and the Summons with certificate for counsel on an indemnity basis.

29.I thank both counsel for their assistance in this matter.

Ms Margaret Tsau, instructed by Messrs CLY Lawyers, for the plaintiff

Ms Tara Liao, instructed by Messrs Ho & Associates, for the defendant