Lee Hermie v. Landscope Realty Ltd

HCSD 1/2026 & HCSD 2/2026

[2026] HKCFI 3998

HCSD 1/2026

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY DEMAND

NO 1 OF 2026

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AND

HCSD 2/2026

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY DEMAND

NO 2 OF 2026

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D E C I S I O N

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Introduction and Background

1.These actions arise out of the sale and purchase of the property located at G/F of No. 138 Blue Pool Road, Green Land Court, Nos. 130-140 Blue Pool Road, Hong Kong (“the Property”) together with the designated car parking space.

2.The Applicant in both actions were the purchasers of the Property.

3.The Respondent in both actions was the estate agent acting for the vendor and the Applicants in respect of the sale and purchase of the Property.

4.The sale and purchase of the Property was completed on 13 October 2025.

5.On 16 December 2025, Ms Grace Oh (“Oh”), acting on behalf of the Respondent in the sale and purchase of the Property purported to serve on the Applicants by WhatsApp statutory demands dated 16 December 2025 (“SDs”) in respect of an alleged debt (“the Alleged Debt”) consisting of:

(1)  Outstanding commission in the sum of HK$153,000 (“the Commission”);

(2)  HK$462.14 being interests accrued on the Commission between 13 October 2025 and 30 October 2025;

(3)  HK$1,182.08 being interests accrued on the Commission between 31 October 2025 and the date of the SDs; and

(4)  HK$36,300 being the legal costs incurred by the Respondent.

6.On 2 January 2026, the Applicants commenced the present actions to set aside the SDs.

7.Following correspondence between the parties’ solicitors, ultimately parties were agreed that both the SDs and these actions be withdrawn save that the costs of these actions be determined by the court by way of paper disposal with directions given for the filing of written submissions.  Orders were made accordingly by me on 12 March 2026.

8.Written submissions have been filed by parties as permy directions.  It is clear that there is no dispute between the parties that the Respondent should pay the costs of these actions.  However, the Applicants’ position is that the Respondent ought to pay the costs of these actions on an indemnity basis whereas the Respondent’s position is that it should only pay the Applicants’ costs on a party-to-party basis.

Applicable Legal Principles

9.It is not disputed that the applicable legal principles were explained by Li CJ (giving the judgment of the Court of Final Appeal) in Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114 which can be summarised as follows:

(1)  The court has a broad discretion to determine how costs shall be paid and whether indemnity costs should be ordered (§12);

(2)  An award of indemnity costs (which is a more generous basis and will usually enable the successful party to recover more of his costs than under a party and party award) may be perceived as achieving a fairer result for the successful party (§14);

(3)  However, in order to obtain an order for costs on an indemnity basis, the successful party should show that the case has some “special or unusual feature” (§15);

(4)  The courts have rejected the proposition that an award of indemnity costs will only be made where a case has been brought with an ulterior motive or for an improper purpose or there is some deception or underhand conduct on the part of the losing party (§16);

(5)  The courts have emphasized the undesirability of attempting to define the circumstances in which orders for indemnity costs are to be made.  The discretion is not fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be “appropriate” (§17); and

(6)  The attributes of the parties, the character of the proceedings, matters relating to the litigation and the parties’ conduct in it and the circumstances leading to the litigation may all be relevant to the exercise of the discretion to award indemnity costs (§18).

10.Furthermore, it has been held that the statutory demand procedure is not meant to be used for the purpose of debt collection and the court must not allow the procedure to be used to exert pressure on a debtor to pay a debt, the liability of which is not established by judgment and which is disputed: see Ling Wai Hoi v Jetland Global Investments Ltd [2022] HKCA 1457 at §57 per Chu JA (giving the reasons for judgment for the Court of Appeal) and Re Leung Cherng Jiunn [2016] 1 HKLRD 850 per Kwan JA (as she then was) at §27(5).  The improper invoking of the bankruptcy jurisdiction of the court amounting to an abuse of process may warrant an indemnity costs against the creditor.

11.Specifically, in the context of service of statutory demand, it has been held that it would be an abuse of process for a creditor to serve a statutory demand on a debtor if he was aware that the debt the subject matter of the demand was subject to a bona fide dispute on substantial ground or that the debtor had a serious cross-claim against the creditor for an amount which exceeds the debt.  Where the court finds that the creditor has abused the process, it would order costs to set aside a statutory demand on an indemnity basis: see LB v F Ltd [2023] 2 HKLRD 157 at §34 per Linda Chan J and Cheung Man Kok v Fenn Kar Bak Lily (unrep) HCSD 25/2003, 11 December 2003 at §23 per DHCJ Poon (as he then was).

Discussion and Disposition

12.I accept as demonstrated from the correspondence placed before me that prior to the issuance and service of the SDs, the Respondent should have known that the Alleged Debt was disputed and the SDs should not have been issued on 16 December 2025:

(1)  By letter dated 17 November 2025 to the Applicants, the Respondent’s solicitors (“CPL”) demanding payment of the Commission, interests accrued thereon and legal costs incurred to the date of the letter;

(2)  In response, on 18 November 2025, the Applicant’s former solicitors (“LLL”) responded disputing the Applicants’ liability to repay and stated inter alia that the Respondent should not be entitled to receive any estate agent commission from the Applicants because in the period leading up to completion of the sale and purchase of the Property, Oh made various false representations/assurances regarding the encumbrances affecting the Property and also failed to inform the Applicants promptly about a building order for repair of drainage system to which the Property was subjected and therefore Oh failed to properly perform her duties as an estate agent towards the Applicants;

(3)  By letter dated 16 December 2025, CPL denied the Applicants’ allegations and enquired if LLL had instructions to accept service of the SDs on behalf of the Applicants;

(4)  Before LLL had responded, as mentioned already, Oh on behalf of the Respondent purported to serve by WhatsApp the SDs on the Applicants;

(5)  By letter dated 24 December 2025, the Applicant’s current solicitors (“ONC”) further elaborated on why there are clearly bona fide disputes on substantial grounds as to the Alleged Debt and that it amounted to an abuse of process.  ONC demanded the Respondent should confirm whether it would withdraw the SDs and would undertake not to present any bankruptcy petition in relation to the Alleged Debt by 29 December 2025;

(6)  By letter dated 29 December 2025, CPL responded that the deadline to reply was unreasonable and unnecessary and that they would revert within the next 2 weeks;

(7)  Only by letter dated 30 January 2026, CPL indicated that they were minded to withdraw the SDs purely as a matter of commercial consideration without prejudice to the Respondent’s right to claim against the Applicants through other means but the draft consent summonses enclosed therewith proposed that there be no order as to costs of the actions.

13.The Respondent sought to rely on various conduct on the part of ONC suggested to be unreasonable or not conducive to resolution of these actions which should be reflected in a costs order of party and party basis.  These include only giving 1 working day to respond to their letter dated 24 December 2025, not waiting until 6 January 2026 (the earliest day when the Respondent might present a bankruptcy petition) to commence the present actions and even after receipt of CPL’s letter dated 30 January 2026 forced them to fix a substantive hearing of their application to set aside the SDs by letter dated 6 February 2026, the late provision of statement of costs by ONC for CPL’s consideration whether the issue of costs could be settled and the late proposal for settlement etc.  However, given that the Respondent had already been informed as early as 18 November 2025 that the Alleged Debt was disputed substantively and by letter dated 24 December 2025 inter alia that the SDs are liable to be set aside and constitute an abuse of process for which the Applicants would hold the Respondent liable for costs on an indemnity basis, but the Respondent still did not withdraw the SDs or undertake not to present any bankruptcy petition and were maintaining there should be no order as to costs, I cannot see any basis to find unreasonable conduct leading up to or in these actions on the part of the Applicants.  This is even taking into account that the Respondent is a company and would require time for the authorised person to make a decision and convey instructions to CPL.  It was not unreasonable for the Applicants not to give further time to the Respondent and to progress the present actions.

14.In the circumstances of this case, having considered all the submissions of the parties, the Applicants’ costs of these actions to set aside the SDs (including the costs of this application) should be paid by the Respondent on an indemnity basis.  As I disagree that the Applicants’ acted unreasonably, I also see no basis to order that only the costs up to 6 February 2026 be paid on an indemnity basis but after 6 February 2026 should be on a party to party basis.

15.Furthermore, having considered the Respondent’s objections to the Applicants’ Statement of Costs, adopting a broadbrush approach, I have summarily assessed the Applicants’ costs at HK$280,000 (having disallowed some excessive costs on communications, and the time spent on legal research and preparation of the Statement of Costs is not allowed).

Mr Timothy Lam, instructed by Messrs ONC Lawyers, for the Applicants

Ms Evelyn L.C. Cheng, instructed by C. P. Lin & Co., for the Respondent