Read the full judgment text of CACV 000385/2002 on BabelCite. This Court of Appeal judgment was delivered on 4 March 2003 before Rogers VP, Le Pichon JA, Yuen JA.
Costs – indemnity principle – third party funding – whether winning party precluded from recovering costs because a third party (boyfriend) paid solicitors' costs and indicated he would not seek repayment – bankruptcy proceedings – statutory demand – substituted service – whether costs should be awarded on an indemnity basis – appeal from decision of Deputy Judge Poon dated 22 July 2002. The Respondent, an insurance company, claimed a loan made in 1994 to the Applicant, who had left its employ. The Respondent obtained default judgment in 2000 and, in January 2001, ex parte garnishee orders, in the course of which it affirmed that the Applicant was working for four other insurance companies. Despite this knowledge, when it later commenced bankruptcy proceedings, the Respondent attempted service of both the statutory demand and the petition only at a vacant Sai Kung address that the Applicant had given five years earlier, resorting to one-day newspaper advertisements. A bankruptcy order was made against the Applicant in her absence in May 2002. Deputy Judge Poon set aside the Statutory Demand, the Petition and the Bankruptcy Order, but made no order as to costs, holding that he was bound by the indemnity principle because a letter from the Applicant's solicitors stated that costs were paid by the Applicant's boyfriend who would not demand repayment. On appeal, the Court of Appeal allowed the appeal and ordered costs to the Applicant on an indemnity basis here and below (including the application for leave). The court held that the indemnity principle did not bar recovery. Applying the three-step test summarised from Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495, the court held that mere payment of costs by a third party, without an agreement that the winning party would under no circumstances be liable to the solicitors, was insufficient to rebut the presumption that the winning party was liable to remunerate the solicitors. The letter had to be read in its proper context, namely an assumption of a failed application, and could not be read as an agreement that under no circumstances would the Applicant be liable for costs. The time of payment was not crucial, and there was no evidence the Applicant would not reimburse her boyfriend if she recovered costs. As to the basis of costs, the court found fatal irregularities in service. The Respondent had known of the Applicant's workplaces (four insurance companies disclosed in the garnishee application) but made no attempt to serve her there for the statutory demand or the petition. The alleged debt was nearly nine years old, the default judgment had been set aside, and the claim had been reduced to HK$40,000. The manner in which the bankruptcy proceedings were initiated and carried on constituted an affront to the court, justifying costs on the indemnity basis. Authorities considered: Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495; Davies v Taylor (No.2) [1974] AC 225; Lewis v Averay (No. 2) [1973] 1 WLR 510; R v Miller and another [1983] 1 WLR 1056. Rules considered: Rule 46(2) and Rule 59 of the Bankruptcy Rules.
Legal issues: Application of the indemnity principle where a third party has paid the winning party's solicitors' costs · Whether costs should be awarded on an indemnity basis
Outcome: Appeal allowed; the deputy judge's order refusing the Applicant her costs was set aside.
Cited by 10 cases · Cites 1 case