Chan Chun Chuen v. Kao, Lee & Yip (A Firm)

HCA 597/2015

[2023] HKCFI 2372

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 597 OF 2015

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D E C I S I O N

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A.  Introduction

1.KLY filed a Summons on 28 June 2023 to seek wasted costs for the action against 6 former solicitors / solicitor firms (“Solicitors”) who previously acted for the Plaintiff. The Solicitors are divided into those of Cheung & Liu (“C&L Camp”) and those of Bough & Co (“Bough and Chan Camp”).

2.The issue is which judge should hear the application. KLY suggests that the matter be listed before any judge. The 2 Camps suggest that DHCJ Anson Wong SC who heard a strike-out application should deal with the Summons; alternatively Coleman J, who dealt with an appeal against a master’s decision on amendment to the defence should do so.

B.  Procedural history

3.The Plaintiff sued the Defendant (“KLY”) for breach of Agency Agreement and/or duty of care and/or fiduciary duty. It is alleged that KLY failed to bring to the notice of the Plaintiff the existence of tax assessment documents issued by the IRD as a result of which the Plaintiff’s application to object to the tax assessment was refused and the Plaintiff suffered loss and damage in the sum of HK$300 million.

4.On KLY’s application, DHCJ Anson Wong SC struck out §4 of the statement of claim which alleged an oral agreement in or around mid‑1993. The basis was abuse of process, in that Mr Chan had adopted a position which was fundamentally inconsistent with and diametrically opposite to the position adopted by him previously in HCAL 76/2010 (“JR Proceedings”), ie that there was no retainer between him and KLY for the service of tax assessment documents and that KLY’s address for service of the tax documents by the IRD was ineffective. See decision of DHCJ Anson Wong SC dated 12 October 2017, at §§3 and 81 (“the 2017 Decision”).

5.DHCJ Anson Wong SC subsequently dealt with KLY’s application for leave to appeal (which was refused) and to vary the costs order nisi on 27 August 2018: [2018] HKCFI 1933.

6.KLY’s renewed application for leave to appeal to the Court of Appeal was dismissed without an oral hearing: [2019] HKCA 170.

7.By a summons dated 30 September 2019, KLY obtained leave from a master to amend its defence. The Plaintiff’s appeal against that decision was dismissed by Coleman J on 19 March 2021: [2021] HKCFI 716.

8.Mr Chan was adjudged bankrupt on 12 August 2021. On 9 September 2022, pursuant to KLY’s application, Master Ho ordered that this action be dismissed as the Trustees in Bankruptcy of the Plaintiff would not adopt the present action, with costs to be paid by the Plaintiff to KLY.

9.KLY then took out the present Summons on 28 June 2023 for costs of the entire action. The Summons set out the particulars of the application:

(1)  §3 of the summons refers to the 2017 Decision itself;

(2)  §§4-5 alleges that because of the inconsistency in the Plaintiff’s case, the Plaintiff must have committed perjury. That was to the knowledge of the Plaintiff’s former solicitors, who should, as KLY alleges, have withdrawn from acting for the Plaintiff and advised him not to commence or continue the present action;

(3)  §8 further alleges that the Plaintiff’s former solicitors had (i) knowingly advised, recommended, or lent their assistance to proceedings which were premised on a false and/or diametrically inconsistent and/or hopeless claim; and (ii) deliberately suppressed discovery of documents relating to HCAL 76/2010; and

(4)  §9 KLY asserts that all costs of the present action were wasted costs, subject to costs orders already made by the Court.

C.  Legal principles

10.Order 62, rule 8A, RHC provides that an application for a wasted costs order shall be heard by the judge or master who conducted the proceedings to which the order relates.

11.PD 14.5, §6 also states that the application should usually be heard by the judge or master who dealt with the proceedings in which the wasted costs are alleged to have been incurred.

12.PD 14.5, §9 provides that the application should usually only be made at the conclusion of the proceedings before the judge or master who tried the matter.

13.These provisions make clear that wasted costs order are applied for only after the proceedings are substantively and conclusively determined by a judge and the application must go before him. The rationale is obvious. That judge would have reviewed all the evidence of the case, is familiar with the background and the litigation conduct of a party, so as to enable the wasted costs application to be conducted summarily.

14.Chiu Sui Ching v Cheng Kwai Hung trading as Hang Nagi Works [2023] HKCFI 1417, §10, Marlene Ng J stated as follows: -

“It has been said that ‘[in] almost every case, the judge who heard the substantive application will be the right judge to deal with consequential issues as to costs, even if he made findings adverse to a party in the course of reaching his conclusion’ unless necessary exceptions, eg apparent bias, require recusal. After all, the trial judge is particularly well-placed to evaluate the evidence served in support of an application for a wasted costs order as he can rely on his own impressions, but this does not in any way reduce the burden on the applicant to demonstrate the requisite factors for a wasted costs order.”

D.  Application of the legal principles

15.The Respondent Solicitors’ grounds for submitting that DHCJ Anson Wong SC will be the appropriate judge can be summarized as follows: -

(1)  §3 of the Summons itself refers to the 2017 Decision. The main basis of the wasted costs application is inextricably linked to the findings in the 2017 Decision. Coleman J’s decision to allow KLY to amend the defence did not address the same fundamental issue decided by DHCJ Anson Wong SC and merely set out his Decision. Coleman J was not required to and did not analyze the evidence and documents relevant to the stance taken by the Plaintiff (“first reason”);

(2)  The fact that DHCJ Anson Wong SC is a deputy judge and may not be available does not constitute “exceptional circumstances making it inappropriate” for him to hear the Summons. Section 10(3)(a) of the High Court Ordinance, Cap 4 empowers the Chief Justice to appoint a deputy judge for the purpose of a specified case. Any inconvenience must be subordinate to DHCJ Anson Wong SC’s “duty” to determine all applications as to costs of the action (“second reason”);

(3)  Another judge would have to start afresh without any knowledge of the underlying proceedings: §7 of PD 14.5 (“third reason”); and

(4)  KLY is forum shopping in order to get round §43 of the 2017 Decision that the Plaintiff’s plea of an agreement to be inferred by conduct was actually consistent with HCAL 76/2010. KLY had attempted this when seeking leave to appeal against the 2017 Decision from DHCJ Anson Wong SC and the Court of Appeal, but failed (“fourth reason”).

16.Alternatively, Bough and Chan Camp submits that Coleman J should deal with the wasted costs application.

17.With regard to the first reason, it is true that KLY relies heavily on the 2017 Decision. However, the Summons is not just to deal with the wasted costs of the strike-out proceedings before DHCJ Anson Wong SC but costs of the whole action. The whole action covered the following causes of action:

(1)  The alleged oral agreement that formed the subject matter of the 2017 Decision;

(2)  The Plaintiff’s claim based on an inferred agreement or one reached by conduct; as stated by Coleman J in his decision, §42 (dated 3 years after the 2017 Decision):

“But the question of whether, to what extent, and how the plaintiff’s previous statements in the JR Application would affect his claim based upon an inferred agreement or one reached by conduct was something that must be left to trial. This is what the Court of Appeal recognized to be fact sensitive.”

(3)  The alleged loss and damage of more than HK$330 million that the Plaintiff allegedly suffered. This is a matter which KLY asserts is doomed to fail from the start due to the definitive findings in the probate proceedings of Nina Kung’s estate that Mr Chan had received HK$330 million as income for providing fung shui services.

18.DHCJ Anson Wong SC only dealt with the first cause of action but not the other 2. His last involvement was in 2018. It cannot be said that he is apprised of all developments subsequent to 2018 to make it appropriate for him to handle the wasted costs application.

19.Further, DHCJ Anson Wong SC merely assumed all the facts pleaded in the statement of claim to be true in dealing with the strike-out application. He did not even hint that there was improper or unreasonable behaviour on the part of the Respondent Solicitors, unlike the case of Bahai v Rahsidan [1985] 1 WLR 1337 relied on by C&L Camp in which the trial judge did the contrary.

20.This is not a case where it can be said that one particular judge (including Coleman J) clearly conducted the proceedings to which the wasted costs order related or who had tried the case.

21.The cases cited by the C&L Camp are distinguishable in that all of them concerned wasted costs orders made after trial:

(1)  Bahai involved a trial of 26 days wherein the judge heard the evidence of the plaintiff’s solicitor and expressed criticism on him on credibility. It was no surprise for the wasted costs application to be heard by the trial judge.

(2)  Aaron v Shelton [2004] 3 Costs LR 488 expressly stated that “the trial judge would, of course, have heard the cross-examination, or would have considered the issue, and would be able to decide the point quickly”.

22.In the present case, the action was dismissed without a trial. The usual benefits of having a trial judge deal with a wasted costs application do not arise.

23.The second reason carries no weight having regard to my conclusion on the first. Without disrespect, I am unable to accept the Respondent Solicitors’ submissions that the proviso of “exceptional circumstances” O. 62, r. 8A(5) shall be restricted to situations where apparent bias is established, or where the death or retirement of the judge concerned renders the hearing of an application for wasted costs impossible to be placed before the same judge. Whilst a deputy judge can be re‑appointed, there are various reasons why that may not happen, including his own busy engagements as a practitioner. Mandating him to handle the wasted costs application may lead to delay in order to accommodate his/her diary. Therefore, the legal provisions in §§10-12 above should be applied with common sense in accordance with the state of judicial appointments.

24.With regard to the third reason, without disrespect, it is unrealistic to expect a deputy judge (in fact any judge) to have recollection of an interlocutory matter that occurred about 6 years before today except by reference to documents. All the facts underlying the 2017 Decision (if that is the decisive factor for this Summons) are readily ascertainable from documents. Coleman J had no difficulty referring to the 2017 Decision. Other judges would have none either. The third reason is unmeritorious.

25.With regard to the fourth reason, there is no merit in the allegation that KLY is forum shopping. This Summons is decided on matters of principle.

E.  Conclusion

26.Without disrespect, I am not satisfied that it is mandatory to have DHCJ Anson Wong SC or Coleman J, deal with the wasted costs application as each of them was involved in only one interlocutory matter. This Summons could be listed before any judge.

27.I thank counsel for their assistance.

Written submission by Mr Justin Lam, instructed by Kao, Lee & Yip, for the Defendant

Written submission by Mr Albert Chan, instructed by Cheung & Liu, for C & L Camp (ie Cheung & Liu, Mr Cheung Wai Keung William and Mr Chan Yiu Pun Jimmy)

Written submission by Reynolds Porter Chamberlain, for Bough and Chan Camp (ie Bough & Co. (ceased practice), Mr Bough Anthony Michael and Ms Chan Yuen Wah Kitty)