Asiahi Iwasa Wa & Associates Management Consultants Ltd v. Shibakawa (Hong Kong) Ltd

HCA 969/2014

[2021] HKCFI 2445

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 969 OF 2014

____________________

____________________

Before: Mr Recorder Pow, SC in Chambers

Date of Hearing: 9 October 2020

Date of Judgment: 27 August 2021

_________________________

JUDGMENT

_________________________

1.There are 4 matters before me:

(i)  The Defendant’s appeal against the Order of Master Kot dated 24 July 2019 by way of a Notice of Appeal dated 8 August 2019 (the “1^st Appeal” and the “1^st NOA”).  The Defendant has however filed a summons dated 6 October 2020 returnable before me seeking to withdraw the 1^st NOA (“D’s Withdrawal Summons”);

(ii)  The Defendant’s appeal against the Order of Master N. Nip dated 4 May 2020 by way of a Notice of Appeal dated 1 June 2020 (the “2^nd Appeal” and the “2^nd NOA”)

(iii)  The Plaintiff’s summons dated 28 August 2020 for an order that the hearing of the 2^nd Appeal (defined below) be heard immediately after the 1^st Appeal (defined below) (the “P’s Summons”); and

(iv)  The Defendant’s summons dated 30 September 2020 to amend the Defendant’s 2 Notices of Appeal (“D’s Amendment Summons”)

2.The matters arose out of the following procedural history.

Procedural chronology

3.On 18 April 2019, the Defendant filed its summons to strike out the Plaintiff’s Amended Statement of Claim (“ASOC”) under Order 18 rule 19 of the Rules of the High Court (Cap. 4A) (the “Strike Out Summons”).

4.On 17 July 2019, the Defendant filed a summons to amend the Strike Out Summons by adding two more grounds (the “17 Jul Amendment Summons”).

5.On 24 July 2019, at the conclusion of the hearing for the Strike Out Summons and the 17 Jul Amendment Summons, Master Kot allowed the 17 Jul Amendment Summons; adjourned the Strike Out Summons; directed for a further round of affirmations to be filed by both sides; and summarily assessed and awarded wasted costs of the hearing to the Plaintiff (“Master Kot’s Order”).

6.On 8 August 2019, the Defendant filed the 1^st NOA seeking to appeal against the costs order made by Master Kot.

7.On 4 December 2019, at the hearing for the Amended Strike Out Summons, Master N Nip adjourned the hearing and directed the Plaintiff to lodge and serve a draft Re-Amended Statement of Claim (“RASOC”).  At the hearing before me, Mr Thomson for the Defendant confirmed that at the hearing before Master Nip, the learned Master actually indicated that the matter was unlikely to be resolved by striking out.  Master Nip invited the Plaintiff to consider re-amending the Statement of Claim and to provide a draft amendment.  The Plaintiff accepted the invitation and Master Nip thus gave directions on the filing of a draft RASOC.

8.On 4 May 2020, at the adjourned hearing of the Amended Strike Out Summons, the Defendant did not oppose the filing of the draft RASOC but insisted that the original ASOC should be struck out.  Master Nip rejected the Defendant’s submission and dismissed the Amended Strike Out Summons.  He granted leave for the filing of the draft RASOC and gave consequential directions.  Master Nip also summarily assessed and awarded to the Plaintiff 50% of its costs of the Amended Strike Out Summons.

9.On 1 June 2020, the Defendant filed the 2^nd NOA seeking to appeal against the Order of Master N. Nip dated 4 May 2020.

10.As mentioned above, the Defendant issued the D’s Withdrawal Summons on 6 October 2020 seeking to withdraw the 1^st NOA.

The 1^st NOA

11.Mr Liu for the Plaintiff submitted that the 1^st NOA should be dismissed instead of being withdrawn.  He referred me to the Hong Kong Civil Procedures 2020 §O.59/0/19 and the case of Buckbod Investments Ltd v Nana-Otchere & Anor [1985] 1 All ER 283. I agree with Mr Liu that it is the usual practice to dismiss the notice of appeal unless there are exceptional circumstances. Mr Thomson for the Defendant had provided no such exceptional circumstances.  I therefore dismiss the 1^st NOA.  I will deal with the question of costs in due course.

P’s Summons

12.P’s Summons relates to the order of hearing the 1^st NOA and the 2^nd NOA. Since the 1^st NOA has now been dismissed, the P’s Summons has become academic save as to the question of costs.  For that purpose, I will set out the relevant solicitors’ correspondences.

13.On 22 June 2020, solicitors for the Defendant, Messrs Robert Lee Law Offices (“D’s Solicitors”) issued a letter to the solicitors for the Plaintiff, Messrs Ko & Co (“P’s Solicitors”), inviting P’s Solicitors to attend to the High Court to fix a date for the hearing of the 2 appeals so that they could be heard together.

14.On 24 June 2020, P’s Solicitors replied to the invitation of the D’s Solicitors, stating that they do not agree that the 2 appeals should be heard together given that the 2 appeals concern separate issues, but they have no objection that the 2 appeals be heard one after the other (the “24 June 2020 Letter”).

15.On 8 July 2020, P’s Solicitors wrote again to D’s Solicitors, reiterating their views expressed in the 24 June 2020 Letter.  Furthermore, P’s Solicitors stated that there had not been any order by the court that the 2 appeals should be heard together. Therefore, P’s Solicitors enclosed a draft consent summons to the effect that the 2^nd Appeal be heard immediately after the 1^st Appeal and asked D’ Solicitors to reply within 5 days.

16.Having received no response from D’s Solicitors, P’s Solicitors issued another letter to D’s Solicitors on 17 August 2020. In the said letter, P’s Solicitors, inter alia, reiterated their views in the 24 June 2020 and enclosed again the draft consent summons, asking D’s Solicitors to reply within 7 days.

17.D’s Solicitors finally replied by its letter dated 19 August 2020 (the “19 Aug 2020 Letter”), stating:-

“We disagree with your suggestion to hold the two appeals separately. Both of the appeals are dealing with the strike out application and to hear them separately could result in inconsistent judgments, since the appeal of Master Kot’s costs order dated 24 July 2019 could well affect the costs order for the hearing of 4 May 2020. There is no order for the two appeals to be heard together, neither is there an order to hear them separately. If it were inappropriate to hear them together, the Listing Office would not have allowed them to be scheduled together. Hearing the two appeals together is the most efficient way of conducting these proceedings.”

18.The Plaintiff therefore took out the P’s Summons on 28 August 2020 seeking an order from the Court that the 1^st Appeal be dealt with first, and the 2^nd Appeal be dealt with after the 1^st Appeal.

19.Pursuant to Order 4 rule 9(1)(c) of the Rules of the High Court (Cap. 4A), where two or more causes or matters are pending, then, if it appears desirable to the Court, the Court may order those causes or matters to be consolidated on such terms as it thinks just or may order them to be tried at the same time, or one immediately after another, or may order any of them to be stayed until after the determination of any other of them.

20.Mr Liu, counsel for the Plaintiff, submitted that the 2 appeals should be dealt with one after the other because they deal with completely different and separate subject matters and entail completely different and separate considerations.  In particular, Mr Liu submitted that the 1^st Appeal is an appeal against only a costs order, and hence involves pure discretionary considerations. Whereas the 2^nd Appeal is an appeal against the orders of Master N. Nip based on the merits of the Amended Strike Out Summons.

21.In my view, Mr Liu is strictly speaking correct.  Furthermore, I fail to see how “the appeal of Master Kot’s costs order dated 24 July 2019 could well affect the costs order for the hearing of 4 May 2020” and how could there be any risk of inconsistent judgmentsas stated by D’s Solicitors in the 19 Aug 2020 Letter.

22.It was thus unreasonable for the Defendant to refuse the Plaintiff’s proposal that the 1^st Appeal be dealt with first, and the 2^nd Appeal be dealt with immediately after the 1^st Appeal.  This matter could have been resolved by consent if solicitors firmly bear in mind their overriding obligation to streamline and expedite proceedings in the spirit of the CJR.

23.By reason of the above, although I no longer need to make any substantive order under the P’s Summons by reason of the dismissal of the 1^st NOA, I will make an order that the Defendant do pay to the Plaintiff the costs of and occasioned by the P’s Summons, to be taxed if not agreed, on a party-and-party basis.

D’s Amendment Summons

24.The Defendant originally expressly sought “no order as to costs” in the two NOAs.

25.By a summons dated 30 September 2020, the Defendant now seeks leave to amend the two NOAs so as to claim for costs of the appeals, if successful. Furthermore, the Defendant seeks no order as to costs for its application for amendments.

26.Mr Liu submitted that the Plaintiff has no objection in principle to the proposed amendments on the condition that the Defendant bears the costs of and occasioned by the amendments.  Strictly speaking, there is only a need to amend the 2^nd NOA, now that the 1^st NOA has been dismissed.

27.It is trite that in an application for amendment, terms are generally imposed, such as payment of all costs of and occasioned by the amendment [Hong Kong Civil Procedure 2020: O20, rule 8: §20/8/4]. Generally, the costs of the application for amendment should be borne by the applicant.

28.In seeking to justify the Defendant’s proposal for no order as to costs, Mr Thomson submitted that it was a “clerical mistake” that causes no prejudice to the Plaintiff and the Plaintiff could have been in no doubt that it was a mistake.

29.With respect, I cannot see how this argument can justify the Defendant’s proposal for no order as to costs.  First, if the appeal is dismissed, the court would likely award to the Plaintiff the costs of the appeal.  However, if the appeal is successful and the Defendant has sought for “no order as to costs” in the Notice of Appeal, the respondent of the appeal and indeed the Court can treat that as an indication that the Defendant has voluntarily given up any award of costs in its favour.  There is no basis to say that the Plaintiff must have known that it was a mistake and could incur no prejudice.  Second, even if it was a “clerical mistake”, it was a mistake nonetheless which the Defendant seeks to rectify.  As the party who wishes to correct its own mistake and would potentially gain from the amendment, I cannot see why the Court should depart from the usual practice of ordering the costs of and occasioned by the amendment be paid by the Defendant.

30.In the circumstances, I grant leave to the Defendant to amend the 2^nd NOA as per the draft attached to D’s Amendment Summons. I will make no order in respect of the 1^st NOA.  I order that the Defendant do pay to the Plaintiff the costs of and occasioned by D’s Amendment Summons to be taxed, if not agreed, on a party-and-party basis.

The 1^st Appeal and why it eventually became aborted

31.Initially, the Strike Out Summons taken out by the Defendant on 18 April 2019 was based solely on the ground of abuse of process.

32.Shortly prior to the hearing of the Strike Out Summons before Master Kot on 24 July 2019, the Defendant issued the 17 Jul Amendment Summons seeking to add two more grounds, namely that:

(i)  the Plaintiff’s ASOC discloses no reasonable cause of action; and

(ii)  the Plaintiff’s ASOC may prejudice, embarrass or delay the fair trial of the action.

33.At the hearing before Master Kot, the Plaintiff in summary took the following positions:

(i)  The Plaintiff opposed the 17 Jul Amendment Summons on the ground that it was a late application and there was no explanation or justification for the application. 

(ii)  The 17 Jul Amendment Summons sought to introduce new substantive grounds and the Plaintiff had had no opportunity to consider those new grounds.

(iii)  However, should the Court allow the amendments, the Plaintiff would ask for an adjournment to consider the additional grounds and seek for costs thrown away.

(iv)  The Plaintiff anticipated that it may need to file further evidence, particularly in respect of the additional ground of prejudice, embarrassment or delay to the fair trial of the action.

34.At the hearing before Master Kot, Counsel for the Defendant:

(i)  accepted that an adjournment would be necessitated by the 17 July Amendment Summons[see Transcript of proceedings before Master Kot on 24 July 2019 at p.6 K]; and

(ii)  asked for leave to file further affidavit evidence “to properly cover the new grounds”[See Transcript of proceedings before Master Kot on 24 July 2019 at p.6 N].

35.Consequently, Master Kot granted leave for the filing of further affirmations by both parties and ordered the Defendant to pay for the Plaintiff’s costs thrown away which was summarily assessed at $41,450 [See Transcript of proceedings before Master Kot on 24 July 2019 at p.8 N].  At this juncture, I would like to express my full support for Master Kot’s Order.

36.Nonetheless, the Defendant filed the 1^st NOA on 8 August 2019 seeking to appeal against Master Kot’s Order.

37.On 9 August 2019, P’s Solicitors wrote to D’s Solicitors stating that they do not see any merits in the 1^st Appeal and reserved their rights to claim costs against the Defendant on an indemnity basis if the 1^st Appeal shall fail. Furthermore, P’s Solicitors demanded for immediate settlement of HK$41,450 pursuant to Master Kot’s Order (the “9 Aug 2019 Letter”).

38.By a letter dated 30 August 2019, besides enclosing a cheque in the sum of HK$41,450 to settle the costs order by Master Kot, D’s Solicitors also attached a draft joint letter to the Court with a view to seeking the Plaintiff’s consent to the withdrawal of the 1^st NOA (the “30 Aug 2019 Letter”).

39.On 4 September 2019, D’s Solicitors issued another letter to P’s Solicitors to follow up and requested for P’s Solicitors reply by close of business of 5 September 2019.

40.By a letter dated 6 September 2019, P’s Solicitors informed D’s Solicitors that they would seek costs occasioned by the 1^st NOA.

41.On 10 February 2020, P’s Solicitors issued a letter to D’s Solicitors stating, inter alia:-

“Despite our above letter [the 9 Aug 2019 Letter] and the lapse of more than 6 months, you did not take any actions in respect of the Application (which is totally of no merit as stated in our letter dated 9^th August 2019) nor submit application to court to withdraw the Application.

In view of the circumstances, we are instructed that unless the Defendant submit application to court to withdraw the Application by 21^st February 2020, we will issue Summons against the Defendant to strike out the Application without further notice and costs will be claimed against your client on indemnity basis.”

42.By a letter dated 12 February 2020, D’s Solicitors informed the Court of their intention to withdraw the 1^st NOA and the Plaintiff’s refusal to sign the said draft joint letter unless the Defendant pay the Plaintiff costs occasioned by the 1^st Notice of Appeal (the “12 Feb 2020 Letter”). The 12 Feb 2020 Letter was copied to P’s Solicitors.

43.In response to the 12 Feb 2020 Letter, P’s Solicitors issued a letter to the Court dated 20 February 2020, explaining why their demand for costs was justified. In particular, P’s Solicitors relied on Practice Direction 4.1, stating that:-

“By reference to Practice Direction 4.1, it is submitted that appeals are usually dismissed by consent with costs to the respondent or consent between the parties as to how costs are to be dealt with. We submit it is improper for the Defendant through RLLO to seek to ‘withdraw’ the Defendant’s appeal without any provision or consent by us as to costs as provided in Practice Direction 4.1.”

44.On 13 March 2020, Au-Yeung J gave directions to the parties in the following terms:-

“Please take out a summons for withdrawal of the appeal. It is pointless to agree costs without figures.”

45.On 19 March 2020, D’s Solicitors issued a letter to P’s Solicitors, enclosing a draft consent summons with a view to obtaining consent from the Plaintiff to withdraw the 1^st NOA.  It was stated in said draft consent summons that the costs of the application be in the cause.  It is thus clear that the Defendant was refusing to face the ordinary costs consequence of its withdrawal.

46.P’s Solicitors replied to D’s Solicitors by a letter dated 23 March 2020, stating that the terms of the draft consent summons were not agreeable as it did not comply with the directions given by Au-Yeung J.

47.D’s Solicitors replied by a letter dated 23 March 2020, stating:-

“We refer to your letter of 23 March 2020 and in particular, the directions given by the Honourable Madam Justice Au-Yeung, namely “It is pointless to agree costs without figures”.  In this regard, kindly provide us with the amount of costs to be borne by the Defendant.

On a separate note and as you are well aware, Court services will be further adjourned to 5 April 2020.  That being the case, we suggest the use of a consent summons to wrap up the matter to avoid any actual hearing in Court.”

48.On 26 March 2020, P’s Solicitors issued a letter to D’s Solicitors, expressing their reservation as to whether the Plaintiff’s intended withdrawal of the 1^st NOA can be disposed of by way of a consent summons. However, P’s Solicitors suggested that if the Defendant insists on withdrawing the 1^st NOA by way of consent summons, D’s Solicitors can provide them with a draft consent summons to the effect that Defendant be awarded the costs of and occasioned by the 1^st NOA, including but not limited to the letters exchanged between P’s and D’s Solicitors in those months relating to the application, and the amount of the costs to be summarily assessed by the Court, and P’s Solicitors will then take instructions from the Plaintiff.

49.In a letter dated 27 March 2020, D’s Solicitors enclosed a revised consent summons, in which it was stated that the costs of and occasioned by the 1^st NOA be to the Plaintiff and be summarily assessed.

50.P’s Solicitors issued a letter dated 8 June 2020 to D’s Solicitors, stating that given the Defendant “still persistently fails/refuses to “take out a summons for withdrawal of the appeal” in accordance with the Honourable Madam Justice Au-Yeung’s directions made in the high Court’s letter dated 13 March 2020”, P’s Solicitors were instructed to submit and were preparing summons to court to strike out/dismiss the 1^st NOA with costs on indemnity basis against the Defendant.

51.On 10 June 2020, D’s Solicitors issued a letter to the Court, informing the Court of the Defendant’s intention to proceed with the 1^st Appeal notwithstanding the 12 Feb 2020 Letter.

52.By a letter dated 18 June 2020 (the “18 Jun 2020 Letter”), Au-Yeung J gave further directions in the following terms:-

“1. Having stated in very affirmative terms that you wanted to withdraw the appeal against Master Kat’s order, you have now incurred further costs on counsel’s advice and decided to appeal. You also want 2 appeals to he heard together.

2. Please go forth to have the appeals set down for argument.

3. Please be prepared to address the court on costs on indemnity basis and wasted costs to be borne by solicitors in respect of the period concerning from 12 February 2020.”

This was a clear indication that Au-Yeung J was not at all impressed by the Defendant conduct.  Up to now, no explanation has been put forward for such yo-yoing attitude.

53.More inexplicably, the Defendant eventually took out a summons on 6 October 2020 seeking to withdraw the 1^st NOA.

54.In the circumstances, I have ordered that the 1^st NOA be dismissed. In my view, the Plaintiff should be compensated in costs for the unreasonable conduct of the Defendant in relation to the 1^st Appeal.  I am in agreement with Au-Yeung J that I should seriously consider ordering costs against the Defendant on indemnity basis.

55.The principles on indemnity costs are conveniently summarized by Au-Yeung J in a recent decision of Re Ho Yuk Wah David, unrep, HCB 3819/2011, 17 July 2020 at paragraphs 12-15.  The principles are trite and I shall not repeat them here.

56.From the correspondences exchanged between P’s and D’s Solicitors as mentioned above, it transpired that:-

(i)  At the beginning, despite its intention of withdrawing from the 1^st Appeal, the Defendant refused to pay costs of and occasioned by the 1^st NOA to the Plaintiff;

(ii)  Au-Yeung J clearly directed on 13 March 2020 that the Defendant should take out an application for the withdrawal and deal with the question of costs.  The Defendant repeatedly ignored such direction and ignored the Plaintiff’s proposal that the application for the withdrawal of the 1^st NOA should be taken out by way of a summons as opposed to a consent summons;

(iii)  For no apparent reason other than procrastination, the Defendant changed its mind and decided to proceed with the 1^st Appeal.  This irrational and unexplained change of stance prompted the directions given by Au-Yeung J in the 18 Jun Letter. Effectively, Au-Yeung J was issuing a warning that the Defendant could face indemnity costs for its unreasonable conduct;

(iv)  Shortly before this hearing and without offering an explanation, the Defendant once again changed its mind and took out a summons to withdraw the 1^st Appeal.  This should have been done months earlier.

57.Given the utterly unreasonable and irresponsible conduct of the Defendant, coupled with my view that the 1^st Appeal was doomed to fail in the first place, I am in full agreement with the observation made by Au-Yeung J in the 18 June 2020 letter. I therefor order that the costs of and occasioned by the 1^st Appeal be paid by the Defendant to the Plaintiff: (i) on party-and-party basis from the date of the 1^st NOA to 11 February 2020; and (ii) on an indemnity basis from 12 February 2020 onwards.

The 2^nd Appeal

58.The only outstanding matter is the 2^nd Appeal. The Defendant appeals against Master Nip’s Order dated 4May 2020 which ordered that:-

(i)     the Amended Strike Out Summons be dismissed; and

(ii)     the Defendant do pay forthwith 50% of the costs of the amended Strike Out Summons to the Plaintiff including all costs reserved summarily assessed at HK$105,000.

59.The Plaintiff first challenged that the Defendant had filed the 2^nd Notice of Appeal out of time.

60.According to O.58, r.1(2) and (3), an appeal from a master’s decision shall be brought by a notice which must be issued within 14 days after the decision appealed against was given.

61.While the Order of Master Nip was made on 4 May 2020, the 2^nd Notice of Appeal is dated 1 June 2020, i.e. 28 days after the Order.

62.It is well established that, in considering whether to extend time to appeal, the Court is to consider the following factors (for example: Postwell v Cheng Kap Sang [2004] 2 HKLRD 355 per DHCJ Wong Yan Lung SC at para 33):

(i)  the length of the delay;

(ii)  the reasons for the delay, in terms of firstly, why the original time limit was not complied with and, secondly, why the application for extension of time could not have been made earlier;

(iii)  the chances of the appeal succeeding if leave is given; and

(iv)  the prejudice to the other party if application is granted. 

63.Further, DHCJ Wong Yan Lung SC, upon reviewing the authorities concluded that the Court should be slow to accede to the application in the absence of an acceptable reason for the delay: see Postwell at para 35.

64.  In submission for the Plaintiff, Mr Liu invited me to consider the following factors:-

(i)  the Defendant should be fully aware of the time requirements of an appeal from a master’s decision.  This is shown by the fact that the 1^st Appeal, after taking into account O.3, r.2(2), was issued just in time. 

(ii)  the Defendant has been legally represented at all material times. Counsel had been instructed to appear on behalf of the Defendant on every material occasion.  It can properly be assumed that the Defendant would have received timely advice from Counsel on matters pertaining to the intended appeal including the time limit for so doing.

(iii)  no reason has been given for the Defendant’s lateness until the filing of the affirmation of Ms Law Athene sworn just the day before the hearing. It exhibited a draft 3^rd affirmation of Robert Osborne Lee who was the handling solicitor for the Defendant and who was at the time overseas. Mr Lee tried to explain the delay blaming on the Covid 19 pandemic; his own ailment of Dengue Fever; and the fact that he had difficulties contacting his client in Japan. It is however difficult to understand why such an explanation was only offered months later. 

(iv)  the lateness of 13 days is not insubstantial.

(v)  the merits of the Defendant’s appeal are weak.

65.Since the Court is obliged in any event to take into account the merits of the appeal in exercising its discretion, I will proceed to examine the appeal substantively.

66.It is not in dispute that the appeal is by way of rehearing [Hong Kong Civil Procedure 2020: O58, rule 1: §58/1/2].

67.At the hearing, Mr Thomson accepted that Master Nip was correct in directing the Plaintiff to re-amend the ASOC by pleading its case on the Success Fee Agreement and clarifying the contractual basis of the quantum meruit. On the other hand, Mr Thomson relied on Sun Focus Investment Limited v Tang Shing Bor & Anor, unrep, 22 October 2009 andinsisted that the ASOC should still be struck out despite leave having been granted to serve the RASOC, which the Defendant did not oppose.

68.With respect, Mr Thomson’s position cannot be right. If the ASOC is struck out, there will be nothing left to re-amend on.  His stance might be due to an incorrect reading of the Sun Focus case.  In Sun Focus, Recorder Shieh SC struck out the statement of claim in its entirety.  Instead of dismissing the whole action, he gave the plaintiff one opportunity to cure the defect in the statement of claim by ordering that unless the plaintiff issues a summons for leave to file a “fresh statement of claim” within 14 days from the date thereof, the action shall stand dismissed with costs.  The present case is entirely different and distinguishable in that Master Nip decided not to strike out the ASOC but instead gave leave to the Plaintiff to re-amend its statement of claim.  This must be on the basis that the ASOC was not incurably bad.

69.Since Mr Thomson did not oppose, before Master Nip on 4 May 2020, the filing of the draft RASOC put forward by the Plaintiff, it is in my view sheer pedantry, and in fact logically erroneous, to insist that the original ASOC be struck out. Such a stance can serve no purpose.  The Plaintiff’s case will in any event proceed on the basis of the RASOC.  By consenting to the filing of the draft RASOC, the Defendant must have accepted that the amendments proposed therein were capable of curing the original defects.  The resultant matter in dispute should just be a matter of costs.

70.In my view, it is blowing hot and cold for the Defendant to agree with Master Nip on the one hand to grant leave to the Plaintiff for filing the RASOC while insisting on the other hand that the ASOC should be struck out.  It may well be that the Defendant can and should argue, on the question of costs, that the original striking out application was properly made.  That is not however to say that the dismissal of the striking out application was wrong.  The appeal against the Master Nip’s Order for the dismissal of the Amended Striking Out Summon is thus thoroughly without merits.  I shall dismiss the 2^nd Appeal on this ground alone.

71.For the sake of completeness, I shall also add my views as to why the Amended Strike Out Summons was bound to fail in the first place.

72.There are three grounds put forward in the Amended Strike Out Summons:

(i)  The ASOC discloses no reasonable cause of action

This ground must fail because at the very least, the Plaintiff’s quantum meruit claim remains untouched by the Re-amendments to the Statement of Claim. In fact, the Plaintiff has not included any draft re-amendments to its second cause of action based on quantum meruit.  As such, the Defendant’s application to strike out the ASOC in its entirety and then to dismiss the action is bound to fail.  The ASOC at least contained one reasonable cause of action throughout.

(ii)  The ASOC may prejudice or delay the fair trial of the action

On this ground, it is important to note the concessions made by Mr Thomson before me at the hearing:

(a)  the Defendant knew from the ASOC that the Plaintiff’s claim is based on 2 invoices;

(b)  the 2 invoices were admittedly sent to the Defendant;

(c)  the invoices stated the basis of the charge was “1/3 agreed success fee”;

(d)  in any event, the Defendant knew the Plaintiff’s case by reason of the affidavit evidence filed in the Order 14 application as early as 11 August 2014; 

(e)  the Defendant had in fact filed affidavit evidence in opposition, denying the alleged agreement; and

(f)  the Defendant only applied for striking out on 18 April 2019. 

Essentially, Mr Thomson’s submission is that all the particulars in support of the Plaintiff’s case now pleaded in the RASOC, though all along made known to the Defendant, should have been expressly spelt out in the pleadings.  With respect,it is clear and trite that the lack of particularity, even “serious want of particularity” should not justify a striking out [Hong Kong Civil Procedure 2020: O18, rule 19: §18/19/5].  Such deficiency must be capable of being cured by way of re-amendment which was what Master Nip ordered.

(iii)  The ASOC is otherwise an abuse of the process

On this ground, the Defendant submitted that the Plaintiff’s case was a sham or entirely without substance.  In this regard, in addition to the quantum meruit claim, the Plaintiff had pleaded its contractual claim in paragraphs 2 to 3 of the ASOC. In particular, the Plaintiff had pleaded that:-

(a)  the Defendant retained the Plaintiff’s services as accountants and management consultants;

(b)  the Plaintiff provided services to the Defendant;

(c)  the Plaintiff claims a sum of HK$5,567,000 for those services provided;

(d)  the Plaintiff issued 2 invoices in this respect which remain unpaid.

Therefore, the essence of the criticisms of the ASOC lies in the lack of pleaded particulars.  In the light of Mr Thomson’s concessions as stated above, it cannot be said that the ASOC was a sham or entirely without substance such as to merit a wholesale striking out.

73.In respect of the costs order made by Master Nip, it is trite that a judge in chambers will not allow an appeal from a master’s costs order unless it is unreasonable or the master had somehow erred in law.  [Hong Kong Civil Procedure 2020: O58, rule 1: §58/1/6 at]

74.The Defendant has made lengthy submissions arguing that the Master had exercised his discretion wrongly in awarding the Plaintiff 50% of the costs of the amended Strike Out Summons as he failed to consider, inter alia, the following:-

(i)  The Plaintiff had no reasonable excuse for not pleading the ASOC in June 2014 in the form of the RASOC;

(ii)  The Plaintiff had a period between 2014 and prior to the hearing on 22 October 2019 to serve the RASOC, and clearly erred in deciding that there was no necessity to re-amend the SOC, despite its own evidence in opposition to the Defendant’s application expressly relying upon the Success Fees Agreement;

(iii)  The Plaintiff’s reluctance between 2014-2019 to plead the Success Fees Agreement is wholly incomprehensible, particularly when this has always been the Plaintiff’s case from the start;

(iv)  The Plaintiff’s case may have deliberately pleaded in this misleading way to support the Plaintiff’s misconceived application for summary judgment on 24 June 2014;

(v)  Rather than serving a RASOC to plead the Success Fees Agreement, the Plaintiff pursued an Order 14 application, serving evidence which directly relied upon evidence of the alleged Success Fees Agreement;

(vi)  The Plaintiff unfairly criticizes the Defendant for applying for security for costs;

75.On the other hand, Mr Liu, on behalf of the Plaintiff, submitted that the costs order made by Master Nip was not wrong for the following reasons:-

(i)  The Defendant was bound to fail in the Amended Strike Out Summons;

(ii)  The Defendant had never asked for the ASOC to be re-amended despite knowing full well the nature and details of the Plaintiff’s case through the course of the Order 14 application.  The Strike Out Summons was issued without a pre-application letter;

(iii)  The Strike Out Summons is clear in its aims: that the ASOC be struck out and the action be dismissed with costs.  O.18, r. 19 does provide for an application to be made for an order that pleadings be amended.  However, the Defendant has not asked for nor made an application for the Plaintiff to re-amend its ASOC;

(iv)  If the Defendant had asked the Plaintiff to re-amend its ASOC or had requested for F&BP, the Plaintiff may have taken advice accordingly and applied to re-amend or provide F&BP;

(v)  it was by the Court’s own motion that the Plaintiff was ordered to submit and serve a draft RASOC after indicating that it was not appropriate to resolve the matter through striking out;

(vi)  the Defendant should not be allowed to profit or be rewarded by re-amendments ordered out of the Court’s own motion and a situation brought about by the Defendant’s own shortcomings;

(vii)  in the draft RASOC, the Plaintiff has not included any draft re-amendments to its second cause of action based on quantum meruit. As such, since the Defendant now does not seek to strike out the RASOC, it is implicit that the Defendant must have accept that all along it had no merits in seeking to strike out the Plaintiff’s quantum meruit claim;

(viii)  In the RASOC, the Plaintiff has not pleaded any material not previously disclosed in the Order 14 application;

(ix)  The Defendant’s Amended Strike Out Summons and supporting grounds as advanced in its supporting affirmations and skeleton submissions have conflated issues and grounds upon which the Defendant seeks to strike out the Plaintiff’s claim.

76.Having considered submissions from both parties, I am of the view that it has not been shown that Master Nip had erred in law or had been acting unreasonably when he awarded 50% of the costs of the Amended Strike Out Summons to the Plaintiff.

77.It should be noted that the Amended Strike Out Summons was drafted in very clear terms.  The Defendant was seeking an order that the ASOC be struck out and the action be dismissed with costs.  Therefore, the Defendant’s application clearly failed when Master Nip dismissed the Amended Strike Out Summons and allowed the action to proceed on the basis of the RASOC.  However, Master Nip must have considered the lack of particulars in the ASOC and the necessity for re-amendments.  In my view, it was perfectly reasonable for the learned Master not to award full costs to the Plaintiff upon the dismissal of the Amended Striking Out Summons.  I would have made the same costs order in the circumstances.

78.Accordingly, the 2^nd Appeal is dismissed with costs to be paid by the Defendant to the Plaintiff, to be taxed if not agreed, on party-and-party basis.

Mr Kelvin K H Liu, instructed by Ko & Co, for the Plaintiff

Mr James Thomson and Ms Jacqueline K K Chan instructed by Robert Lee Law Offices, for the Defendant