HCA 290/2011




ACTION NO. 290 OF 2011





Coram : Before Master Levy in Chambers

Date of Hearing : 17 June 2011

Date of Judgment : 17 June 2011




1. This is an application by the Defendant made under the new Civil Justice Rules, O.13A, Rules of the High Court. Upon the admissionby the Defendant of the whole claim, he has, in the prescribed form, made proposal for time to satisfy the judgment of the admittedsum of $4,464,000.

2. In the prescribed form seeking for time to make payment, the Defendant sets out his personal particulars, his different dependentswhom are in large number. Apart from his immediate family members including his wife and the children, the dependents also includequite an unusually large number, in my view, members of the extended family, namely, his mother, brother, sister-in-law, two nephewsand a niece.

3. He is employed as a manager in the company. He has also disclosed his bank accounts and savings. According to the bank accountsthat he has disclosed, he has maintained three bank accounts which show credit balances in respect of each of these accounts.

4. He is currently residing in a temporary accommodation. His monthly earnings are stated to be in the sum of $76,000. However, hehas averred that, since February this year, his employer has not paid him salary and, therefore, he is owed arrears of wages forfour months.

5. He had listed two items of assets. One is a property under construction in Mid-Levels which he purchased in November 2009 for atotal purchase price of about $28 million. He had already paid a total deposit of $7.18 million, and is due to pay the remainingbalance of $21.55 million when the property is completed, which (according to the documents shown) is scheduled to be completed bythe end of 2011 or around early 2012. The second item of assets that he has listed is a number of securities, in the sum of about$41,000.

6. He has also listed his monthly expenses of more than $100,000, which apparently would have exceeded his monthly wage.

7. So far as liabilities are concerned, apart from his personal spending on electricity and gas, he has named a number of credit carddebts of quite a substantial amount. Particularly he has named a judgment having been entered by American Express in the sum of$2.3 million. Mr. Cheung, solicitor for the Defendant, has informed me this morning that, in fact, in respect of this judgment, AmericanExpress Bank has already executed an equitable legal charge against the said property in Mid-Levels for the sum of about $2.16 million. I have been shown a copy of that equitable charge.

8. I was further told that, apart from this legal charge, another financial institution has further executed a second legal chargein the amount of $3.45 million.

9. By and large, this is a broad view of the Defendant’s current financial situation. Apart from the sale and purchase agreementin respect of the property in Mid-Levels that the Defendant has purchased, and deposit he has paid as well as the equitable chargeentered by the American Express, the Defendant has not provided any documents in relation to his other assets and liabilities. Someof the figures look quite doubtful. For example, it is unusual for a person earning a fixed salary to support such a large numberof dependents. As disclosed, the expenses for keeping the extended dependent family are huge when compared to his monthly earnings. This is one observation.

10. The second observation which I would like to make is this. It is quite odd, if I may say so, for a man who (from the documents thathave been disclosed), being the main breadwinner earning $76,000 per month, could allow earnings to have fallen into arrears for4 months without taking steps to pursue these outstanding wages. This man, cash-wise, is tight and yet he is quite happy to letthese outstanding wages slip by without taking any steps.

11. He is now proposing to pay the judgment sum by way of instalments of $50,000 per month. On my rough calculation, even without takinginterest into account, that will take more than seven years for him, if his proposal were accepted, to satisfy just the principalsum of the claimed amount. Is this proposal reasonable? Even though I was told through his solicitor that he has put the propertyon the market, he has not, however, put forward any realistic proposal such as by way of a lump sum payment, to satisfy the claimedamount.

12. As I have stated above, O.13A is a recent creation under the CJR. There is very little authority in Hong Kong in respect of thisnew provision. Ms Pong, for the Plaintiff, has referred me to one English authority of the similar rule under order 13A on the applicableprinciple. In Gulf International Bank v Al lttefag Steel Products Co [2010] EWHC 2601 (QB), Field J stated that for a court to consider whether a defendant’s proposed time for paying a judgment sum should be accepted,the court has absolute discretion. At page 21:

“For a case of this nature, of course, in considering how the discretion should be exercised, the court will have regard to theinterest of the relevant parties. This will inevitably include the interest of the judgment creditor whose claim will be vindicatedby a judgment and the interests of the judgment debtor who invariably would be a business entity, usually in corporation. The courtwould also bear in mind that, where enforcement of the judgment can take place within the jurisdiction, the judgment creditor wouldbe free to choose from the available methods of enforcement including a petition to secure the bankruptcy or the winding‑up ofthe debtor as the case may be, as to which there are statutory rights providing that the preconditions of the making of such an orderare met.”

13. Further on, at page 22, he states:

“In my opinion, the observation that inability to pay will usually not justify a pre-execution extension of time, with an insolventdebtor having to take the usual consequences of his or its insolvency, applies, a fortiori, where the parties are business entities.”

14. Further on, at page 24, I quote:

“In the ordinary circumstances, this court will only exceptionally extend time under CPR 14.10 and 40.11, which is equivalent toa Hong Kong order 13A, and then only where the judgment debtor is solvent and for relatively short periods of time, and after whichthe whole judgment debt will become payable. Further, in reaching its decision, the court will give careful consideration as to whethersome provision in respect of interest ought to be made in light of the fact that the judgment debtor will be being kept out of hismoney for the period of the extension.”

15. I am in agreement with the passages stated above. When a court considers an application by a defendant to extend time to pay ajudgment sum that the defendant has admitted, the court has absolute discretion.

16. In balancing the interests of the relevant parties, I need to consider, first, in this case, the interests of the creditor againstthe Defendant’s financial situation. In this case, the admitted judgment sum is in the amount of HK$4.5 million approximately. The financial situation, as disclosed by the Defendant, shows that he is insolvent. So it will be quite difficult, in my view,for me to say that the Defendant’s case falls into an exceptional circumstance where the court would grant the discretion whenthe Defendant’s solicitor has confirmed that the Defendant is unable to put forward a more realistic proposal by making full repaymentwithin a short period of time. Even though Mr. Cheung is indeed doing the best he could, unfortunately he is still not able to comeup with any reasonable proposal on behalf of his client.

17. According to the materials placed before me, it is quite clear to me that the Defendant is insolvent. This is not a situation wherean individual debtor is clearly solvent and he only needs perhaps a short period of time to restructure his financial situation sothat the entire judgment sum (together with interest) can be paid.

18. That being the case, since I was told that the Defendant has already put the property on the market, I am unable to see any reasonwhy the Plaintiff should be prejudiced by being prevented from executing the judgment so that the Plaintiff can be put in a moresecured position by way of an immediate execution of the judgment against the Defendant before he can actually dispose of his property. So in the circumstances, I would not exercise my discretion in favour of the Defendant by accepting his proposal or allowing anytime for him to satisfy the admitted sum.

19. In the circumstances, upon the Defendant’s admission, I enter judgment for the sum claimed in the statement of claim, togetherwith interest from the date of the writ until payment at judgment rate. The Defendant’s application under O.13A for time to paythe admitted sum of $4,464,000 is refused.

Ruling on costs

20. This is my ruling on costs. Under O.13A, r.10, when a defendant has admitted the entire amount of a claim, the defendant is entitledunder O.13A to apply (in the prescribed form) for time to pay the amount of the judgment he has admitted. Upon a defendant havingfiled the prescribed form, it is open to a plaintiff to decide whether he will accept the defendant’s proposal for payment by instalment. Once a plaintiff shall decide not to do so, the plaintiff would be able to so indicate by filing a notice in the prescribed formwithin the prescribed time.

21. Under O.13A, r.10 (3), when the court receives a plaintiff’s notice, the court will enter judgment “for the amount admitted(less any payments made) to be paid by the date or at the times and rate of payment determined by the court” without a hearing. However, the court can also, on the information that is placed before it, direct the parties to attend a hearing by giving the necessarynotice.

22. Today’s hearing is as a result of the court’s direction asking the parties to attend consequent upon the Plaintiff having givennotice of its refusal to accept the Defendant’s proposal for time to pay the admitted amount of the claim. However, the new O.13Adoes not seem to contain any provision governing costs in a situation where a hearing is required.

23. On the other hand, however, O.62, the 2nd schedule, Parts 1 and 2 provide for fixed costs in respect of a situation where a plaintiffobtains judgment under O.13A without a hearing. Under Part 1, paragraph 1A of the 2nd schedule, had the Plaintiff in this case obtainedjudgment without a hearing, he would have been entitled to the fixed costs of $11,045- (1) $10,000 (as he is legally represented) and (2) $1,045 for filing fees.

24. However, in this case the Plaintiff obtained judgment only after a hearing in respect of the Defendant’s request for time to payby instalments. Ms Pong, for the Plaintiff therefore submitted that the fixed costs provisions under O.62, Part 1, and paragraph1A of the 2nd Schedule shall not apply because the Plaintiff only obtains judgment after a hearing.

25. Notwithstanding, however, she is prepared to accept fixed costs of $11,045 up till today, plus whatever amount of costs the courtassesses in respect of today’s hearing. Mr. Cheung, for the Defendant, agrees the Plaintiff’s costs up till today should befixed costs and the costs of the hearing should be discretionary costs.

26. When considering a plaintiff’s cost entitlement when a hearing is needed to determine a defendant’s request for time to makepayment of an admitted claimed amount, I think the starting point is to look at the intention of the fixed costs provisions underO.62, the 2nd Schedule. In my view, the fixed costs provision created under the new O.13A regime is designed to facilitate admissionso that a defendant is able to know his costs liability with certainty when making the admission.

27. The fact that a hearing is needed for the purpose of determining a defendant’s request for payment, or for time to pay, wouldnot affect the fixed costs provisions under O.62 Part I. Accordingly, I rule that the Plaintiff’s costs before the hearing shouldbe at the fixed sum of $11,045.

28. As for the costs of and occasioned by the hearing, I think it is right that the usual discretionary costs shall apply. Since theDefendant has failed to obtain an order from the court to allow him time to pay, so, effectively, the Plaintiff has succeeded. Costsshould follow the event. I allow the Plaintiff‘s costs of today.

29. Having considered the statement of costs and the submission of the parties, the Plaintiff’s costs occasioned by the hearing isassessed at $7,000. Hence the plaintiff costs should be as follow:

(1) Fixed costs $11,045;

(2) Costs of the hearing $7,000.

(Katina Levy)
Master of the High Court

Ms D Pong of Messrs Kennedys, for the Plaintiff.

Mr. J Cheung of Messrs Philip Tsui & Jackson Cheung, for the Defendant.