Image Technology (Hong Kong) Ltd and Others v. Ho Ying Cheong and Others
Read the full judgment text of on BabelCite. was delivered on 22 February 1995.
1. This judgment should be read in conjunction with my previous three judgments delivered in these actions, namely:-
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HCA006861A/1993 1993, No.A6861 IN THE SUPREME COURT OF HONG KONG HIGH COURT ___________
AND 1993, No.A9302
___________ Coram: Hon. Yam, J. in Court Dates of hearing:7, 8, 9, 13, 14, 15, 16, 19, 20, 22, 23, 28, 29 December 1994; 6, 11, 17 (in Chambers), 24, 25, 26 January and 6, 7, 8, 14, 15 and 17 February 1995 Date of delivery of judgment: 22 February 1995 -------------- Judgment --------------- Yam, J.: JUDGMENT ON THE DEFENDANTS' APPLICATION FOR INDEMNITY COSTS AGAINST ALL PLAINTIFFS IN BOTH ACTIONS 1. This judgment should be read in conjunction with my previous three judgments delivered in these actions, namely:-
2. The background of these two actions (i.e. the Qingyuan Action in HCA No.A6861/1993 and the Beijing Action in HCA No.A9302/1993) have already been stated in my previous three judgments and I shall not repeat them here. The Defendants now apply for costs on indemnity basis against all Plaintiffs in both Actions. There is, however, one preliminary point which I shall deal with right away before the main application. Admissibility of certain evidence 3. On 14th February 1995, I have ruled that the entirety of Miss Susan Johnson's affirmations (a solicitor for the Plaintiffs) should be excluded. However, the Plaintiffs are at liberty to refer to the offer made by the Plaintiffs on 9th January 1995 and the subsequent correspondences but not for the purpose of seeking to establish the Plaintiffs' reasons or motives for making the said or subsequent offers. The affirmations of Miss Johnson (4th in the Qingyuan Action, and 3rd in the Beijing Action made on 23rd January 1995) seek to establish the Plaintiffs' reasons for making their offer of settlement on 9th January 1995 and their earlier offers and for issuing the summons of withdrawal of these actions. 4. The principle on admitting evidence generally on the question of costs has been considered by Megarry V.-C. in the case of Computer Machinery Limited v. Drescher [1983]1 WLR 1379. It has been decided in this case that evidence of open offers and offers made without prejudice save as to costs may be relevant directly on the question of costs (see pages 1382G-1383H). However, generally the relevance of the offers is limited to such offers as accord with the eventual outcome of the case. If a defendant offers a plaintiff $100,000 on the plaintiff's claim and the court awards the plaintiff $500,000, it is a waste of time to examine the offer as the court is never going to consider that the offer earlier made should have been accepted. The offer is, therefore, irrelevant as the court looks at the effect of the outcome of the case and what the successful party has obtained but not what the unsuccessful party got out of it - for example, the Plaintiffs' contention that they are "throwing in the tower" here in order to save costs. 5. In this respect, Megarry V.-C. said in the Drescher's case at pp.1387-1388:-
6. The situation in the case before me is a fortiori since in the Drescher's case the action came to end before trial when the plaintiffs accepted payments in and certain offers as to undertakings, whereas here the matters have proceeded to trial, the actions were not compromised. The Plaintiffs have effectively lost the case and conceded that judgment must be entered against them in favour of the Defendants. The Plaintiffs have not been allowed and, in any event, do not seek to discontinue the action. 7. Further, insofar as Miss Johnson's affirmations are put in as evidence of the Plaintiffs' reasons for making the offers and for issuing the summons of 9th January 1995, this is all hearsay. The proceedings before me are no longer interlocutory but even if they are, the sources and grounds for the statements of information and belief are not stated in accordance with O.41, r.5. 8. In my view, if I allow the Plaintiffs to embark on an enquiry into Plaintiffs' reasons for making such offers or issuing the two summonses, it would entail a substantial enquiry of itself. The Defendants are challenging the Plaintiffs the true reasons behind these offers. This will certainly open a floodgate to a mini-trial of these issues. The court will then have to assess the evidence to be adduced, whether the motives of the Plaintiffs are as they claimed them to be or whether they have some other reasons for not wanting to proceed with the case. The whole exercise will be a tremendous waste of time and the court should not, for this reason, embark upon it. Otherwise the court would have to allow the Defendants to put in the 16th and 20th affirmations of their solicitor, Mr Edmund Lam, in the two respective actions and try those issues in dispute, which are irrelevant. This is said in the wake of the Plaintiffs' complaint that the Defendants have started a war of attrition even when the Plaintiffs had decided not to proceed with the action. 9. For the aforesaid reasons, I consider that Miss Johnson's affirmations should be excluded. The application for indemnity costs - the principle 10. The principle is apparently accepted by both sides as to when the court should exercise its discretion to award indemnity costs. Normally costs are to be awarded on a party and party basis unless there are special or unusual features which would warrant an order for costs on common fund or indemnity basis. It is also accepted that the circumstances in which costs may be awarded on an indemnity basis include where the proceedings have been instituted or prosecuted in such a manner as constitutes the proceedings an abuse of the process, or where the proceedings were scandalous, vexatious, initiated or prosecuted maliciously or for an ulterior motive or in an oppressive manner or in circumstances as to constitute an affront to the court. In this respect the court has an overriding discretion under O.62, r.28(3) to order or direct costs on indemnity basis "in any case in which it thinks fit to do so". 11. In OTV v. Coopers and Lybrand [1991]1 HKLR 177 per Godfrey J. (as he then was), it has been decided that to justify an order for costs on indemnity basis, the successful party has to show either that the case is "one of a type already recognized in the practice of the court as warranting a taxation on that basis" (at p.183, such as, for example, the contempt cases) or that there is some features in the case even more special or unusual than one which would justify a taxation on the common fund basis. Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for the taxation of the successful party's costs on the indemnity basis. However, Godfrey J. considered the plaintiff's conduct and found that the plaintiff's conduct was not of such a character. He said at p.183:-
12. In Recreation House Limited v. Festival Industrial (HK) Limited & Others (Unreported) No.A9681/1993, Rogers J. decided that material non-disclosure on an ex-parte Mareva application is certainly sufficient to warrant an award of indemnity basis whether or not the plaintiffs were deliberately dishonest and an order of costs to that effect was made. Any special or unusual features in these two actions? 13. In light of the aforesaid principles, I shall now consider whether there are any special or unusual features in the case before me. (i) Undue procedural advantage 14. As I have decided in my judgment of 20th January 1994, the Plaintiffs' inter parte summons to continue with the Mareva injunction obtained ex parte against the Defendants and the Defendants' summons to discharge the injunction were all adjourned to the trial. In other words, the Plaintiffs had only obtained an ex-parte Mareva injunction and there has been no decision inter parte that they were entitled to the continuation of such a drastic order. Subsequently, there was a lapse of the Mareva injunction as a result of the Plaintiffs' defaults in furnishing security for costs for some of the Plaintiffs but the injunction order was reinstated when the court was presented with a picture that the lapse was only due to an innocent mistake of the Plaintiffs' solicitors. 15. In my view, the Plaintiffs, having obtained the ex parte Mareva injunction and having maintained their entitlement to the injunctions in the circumstances of this case but then failed or refused to support them at the trial is an abuse of the process of the court. Such conduct would also amount to an affront to the court. In other words, the Plaintiffs are saying that having had the benefit of the injunctions and having said that the applications should be stood over to trial, they now fail or refuse to justify them. This is the effect of the Plaintiffs' inviting the court to dismiss their claims. 16. It is true to say that an action commenced with an ex parte Mareva injunction is not in itself a ground for indemnity costs. However, it is certainly a special or unusual feature as it cannot possibly be said that normally the general run of cases commences with the obtaining of a Mareva injunction - see Tamco Electrical and Electronics Limited v. Stephen Ng [1994]1 HKLR 178 at p.181 and p.191. On the contrary, the order was devised for use in rare and extreme cases and not for use as a daily and common place incidence of ordinary commercial litigation. The Mareva injunction has been judicially described as one of the laws' nuclear weapons - see Bank Mellat v. Nikpour [1985] FSR 87 per Donaldson L.J. at p.92. (ii) Gross miscalculation of amount restrained by Mareva 17. The Plaintiffs, at the outset, obtained a Mareva injunction in value which later on, on their own admission at the full interlocutory hearing, they could not conceivably justify as it was in excess by some HK$921,640. Certain value of the goods shipped by the 2nd or 3rd Defendant to Qingyuan was completely ignored. Eventually, Plaintiffs' counsel conceded that the amount of Mareva has been miscalculated. There was no explanation or even apology offered to the Defendants. (iii) Delay 18. It is also significant that, as I have said in my judgment on early or speedy trial, the Plaintiffs, at every round of evidence, introduced at the last possible moment new material not brought forward at the ex parte stage in order to maintain the injunction granted ex parte. This included the 5th affirmation of Mr Nicholas Lam which concerned with the alleged similar modus operandi of the Defendants on the Beijng Plaintiffs. Consequently, at the substantive hearing on the Qingyuan action, all of the Beijing action material then available was put before the court in order to maintain the Mareva injunction. When the hearing came before me on 5th November 1993, I adjourned the matter to a date to be fixed and I have deliberately not ordered the fixing of date in consultation with counsel's diaries. This was intended to have the earliest possible date for hearing the inter parte applications. However, the then solicitors for the Plaintiffs contended that they had mistakenly thought the order included consultation with counsel's diaries. In other words, the Plaintiffs, after the order of 5th November 1993 to refix the inter partes hearing in the Qingyuan case, have tried to refix the returned date to March 1994 on their so called "misunderstanding" that the order was made in consultation with counsel's diaries. Eventually, Mr K.M. Chong for the Plaintiffs conceded that the order did not include such consultation and the hearing date was brought forward to December 1993. 19. From the early history of both actions as indicated by the chronology as submitted by the Defendants, the Plaintiffs, having obtained the ex parte injunctions, then did their best to extend the period within which this could be enjoyed without being subjected to the scrutiny of an inter partes hearing. Further, once the order for speedy trial had been made, there was a history of default on the part of the Plaintiffs in complying with various orders made. For over four months nothing was done to seek directions after the Court of Appeal hearing despite reminders from the Defendants' solicitors. 20. The Plaintiffs tried to point out that the original date fixed by this court for the trial in March 1994 was "delayed" by the Defendants' own appeal to the Court of Appeal which ordered the trial to commence on 10th October 1994, and the Plaintiffs there and then had been saying that they were ready to have the trial according to my original schedule of directions. However, I cannot accept such a submission. It must be remembered that the Defendants were successful in the Court of Appeal. Should the Defendants have failed in the appeal and the matter was delayed by the appeal itself then one could say that certain time was lost by the Defendants' appeal. However, on the contrary, the Defendants succeeded in the Court of Appeal and, with respect, the Court of Appeal's decision must be taken as correct and binding. One cannot possibly say the Defendants have delayed the matter when they were just pursuing their rights according to the proper legal process. 21. On the other hand, the Plaintiffs who had said they were ready to commence the trial, were guilty of many defaults. They amended or re-amended their statement of claim to include other causes of action which, in the words of counsel for the Defendants, even if successful, would only produce the same result by way of relief. However, it complicated the case considerably by bringing in matters like Chinese law, breach of fiduciary duties, torts and breach of contract committed outside jurisdiction. 22. Further the Plaintiffs tried to put in a composite list of documents for all Plaintiffs whereas in this very case, as forewarned at the interlocutory stage, which party has what document or what copy of the same document is important in the context of allegations of deceit or fraud by the Plaintiffs. The Plaintiffs said at one stage they were ready to exchange witness statements. In fact, even the witness statement of Mr Nicholas Lam was, at one stage, incomplete with many blanks, and Mr Yonehana's statement was delayed time and time again. (iv) Concealment of funds provided by 1st Plaintiff 23. The Plaintiffs also concealed, until shortly before trial, the fact that those Plaintiffs who gave undertaking as to damages had not, in fact, themselves provided the funds for security as to costs. After the injunctions had lapsed because of the failure of the 2nd, 3rd and 4th Plaintiffs in the Qingyuan Action and all the Plaintiffs in the Beijing Action to provide the first tranche of security in accordance with the order of 20th January 1994, they secured their reinstatement by concealing the fact that the security had in fact been provided by the 1st Plaintiff or Mr Nicholas Lam or his friends and not by those Plaintiffs required to give security. There and then the evidence presented to me was that the Plaintiffs in the Qingyuan Action had remitted US$130,000 equivalent to HK$1m. on 26th January 1994 which was "received" by their solicitors on "even date". This was the affirmation of Chow Wai Lam. It was said that the solicitor had made out a cheque payable to the Hong Kong Government instead of to the Registrar of Supreme Court. When the mistake was discovered later on they were a few minutes late in paying the amount required into court. This was accepted as an innocent mistake on the part of the Plaintiffs' then solicitors. 24. However, shortly before the trial it then transpired that the matter was more complicated then what was presented to me. In fact, the fund which was said to be remitted and received by the solicitors, at that time was known to them that there was a mistake in the address of the receiving bank. Fund was not received there and then. It was in fact provided by the 1st plaintiff as aforesaid. Thus the Plaintiffs secured their restoration of the procedural advantage which they had obtained by presenting the appearance of having complied with the order of the court when it was not, in fact, they who had provided the security at all. Had the court known the true position the court might well have left the injunctions discharged or at least insisted that the Plaintiffs should fortify their undertaking as to damages. 25. Later on, when the funds remitted by the 4th Plaintiff arrived, they were not used to pay the second tranche of security but were instead used towards the legal costs of the Plaintiffs. In the case of Beijing Plaintiffs no attempt appears even to have be made to comply with the order in respect of security for costs since the money came from the 1st Plaintiff. This was not revealed to the court until Mr Nicholas Lam's 8th affirmation. In the application for extension of time for payment of security for costs, leading counsel for the Plaintiffs had taken instructions and informed the court that the Beijing Plaintiffs had also put their solicitors into funds in respect of the first tranche of security for costs. As aforesaid, it now turned out that the one who paid for the security for costs was the 1st Plaintiff. (v) Wilful neglect of Court Order and deliberate suppression of documents 26. I have already decided on 6th February 1995 that the 1st Plaintiff is guilty beyond all reasonable doubt that they had wilfully or contumaciously failed or neglected to comply with the order of specific discovery on 8th September 1994. 27. Further, I have decided on 13th February 1995 the 1st Plaintiff has probably failed to disclose certain documents and deliberately suppressed documents or that proper and full discovery has not been made by the 1st Plaintiff. I shall not repeat my reasoning delivered as contained in my two previous judgments. There are, however, certainly evidence which was shown to be untrue or misleading which I shall deal with herein below. It must, however, be emphasised here that the 1st Plaintiff's deliberate and wilful acts would affect not only the 1st Plaintiff by way of costs but all other Plaintiffs as the 1st Plaintiff's evidence was heavily relied on by all other Plaintiffs at the interlocutory stage. (vi) Evidence now shown to be untrue or misleading/material non-disclosure (a) The position of the other Plaintiffs is indistinguishable from the 3rd Plaintiff in the Qingyuan Action. All other Plaintiffs, in both actions, relied on the evidence of the 3rd Plaintiff in obtaining the ex parte injunctions. However, it is plain from the evidence of Mr Nicholas Lam that there was deliberate suppression of material facts at the ex parte stage. 28. The 3rd Plaintiff/Yonehana was presented at the interlocutory stage as the innocent victim who had no knowledge of the Qingyuan project and whose signed note paper was misused for the purposes of the alleged fraud practised on the 2nd and 4th Plaintiffs in the Qingyuan Action. However, there is good prima facie evidence that the 3rd Plaintiff at least deliberately suppressed material facts principally in the area of his involvement and knowledge in the Qingyuan and Beijing projects. 29. From the evidence available to me at a later stage, apparently Mr Yonehana has concealed the facts of his involvement with the Qingyuan project, his knowledge of the Qingyuan project and that it was he himself who introduced the 1st Defendant to the 1st Plaintiff. In fact, the 1st affirmation on Mr Nicholas Lam was intended to convey the impression that the 1st Defendant introduced himself to 1st Plaintiff whereas it is Mr Nicholas Lam's own evidence under cross-examination that Mr Yonehana and Georming Lee introduced the 1st Defendant to Mr Lam. In answer to the question of Miss Li's cross-examination:-
Mr Nicholas Lam answered:-
(See transcript pages 342-345). Mr Yonehana's affirmation evidence was obviously designed to create the impression that he did not even know about what Mr Ho was doing until the later half of 1991. (b) The knowledge of Mr Tsui Ka Po, the 3rd Plaintiff, Mr Yonehana and the 1st Plaintiff in respect of the Korean processors adapted to be used in 3-D processing have already been considered in my judgment on the 1st Defendant's summons to dismiss the 1st Plaintiff's claim for breach of discovery orders and I shall not repeat them here. Similarly, there was every indication of the 1st Plaintiff's involvement and knowledge of the application of ACE labels to goods shipped to Qingyuan. (c) At the interlocutory stage, the Plaintiffs through their counsel put forward a case that Yonehana was not involved in certain documentations. However, later Mr Yonehana, by his own signed statement which would or should have been sworn by him, contended that documents at Bundle 8/382-386, in particular 382 were recalled as having seen by him. Further, it also appears from document at p.383 that Mr Tsui had been setting the automatic fax number to the telephone number of the 3rd Plaintiff instead of the fax number which Mr Yonehana repeated in the fax. This is the very fax number which appears at the top of the document at Bundle 8/388 disclosed by the Defendants which Mr Yonehana denied as being sent by him. All these are material evidence in the sense that they are material to the weighing operation in the ex parte application and the inter partes application to discharge the injunctions by the Defendants. (d) I have already pointed out the 1st Plaintiff's alleged ownership or patents in U.S.A which turned out to be untrue. Essentially, what Mr Nicholas Lam had said on this matter, in his 1st and 4th affirmations, is untrue. The 1st Plaintiff's ownership of patents and fruits of research was used to counter the Defendants' submission that based on the 1st Plaintiff's exhibited accounts, the 1st Plaintiff was not good for its undertaking in damages. As emerged from the documents disclosed lately on 28th December 1994, the 1st Plaintiff has no such rights at all. I have decided that it is a deliberate suppression on the part of the 1st Plaintiff. Even up to his evidence in the witness box, Mr Nicholas Lam was still trying to maintain the impression that it was ITUS that was the assignee of the US patents and therefore the legal owner. In fact, there was no evidence that the assignment to ITUS was registered in the US. (e) In respect of the number of occasions upon which the 1st Plaintiff had sold 3-D products under trade name other than "Image Tech", the 1st Plaintiff had in fact sold goods under "ACE", "Trilogy" and "Photon 888" labels. Mr Nicholas Lam's explanation that sales of Trilogy were by ITUS and that was why it was not mentioned in his 1st affirmation is not credible in the light of his failing to make the same distinction in his answers on patents ownership between the 1st Plaintiff and ITUS (see transcript pages 292-293). So far as Photon 888 cameras are concerned, the manufacturing and marketing agreement between the 1st Plaintiff and Image Technology Inc. disclosed on 28th December 1994 made it clear that such sales are considered to be sales by the 1st Plaintiff. (f) Initially, it was alleged that the 1st or 2nd Defendants had "very recently sold shop premises located in Mongkok area" and this was relied on as part of the Plaintiffs' evidence of real risk of dissipation of assets. When this was denied by Mr Ho at the interlocutory stage, Mr Tsui Ka Po suggested that the transaction was too recent to have been revealed on a search of the Land Registry records. The position remains today that no such record of any sale is found. 30. By reasons of the aforesaid matters, the court is entitled to come to a view that a false picture was presented to the court both at the ex parte stage and at the stage of the substantive interlocutory hearing based on what the court has now heard by way of further discovery and admissions from Mr N. Lam's evidence. It is true to say, as submitted by the Plaintiffs' counsel, that Mr Lam's evidence was not re-examined to the full extent. In my view, this court should not make any findings of facts from the evidence adduced so far by Mr Lam. However, I am, of course, entitled to take what Mr Lam has admitted under cross-examination as admissions made by him. All these non-disclosure of material and/or misleading material would amount to an abuse of the process of the Court and an affront to the Court, leaving it with a proper sense of indignation. Conclusion 31. The cumulative effect of the aforesaid special and unusual features in this case can only have one compelling result and that is costs in both actions must be awarded on indemnity basis. It goes without saying that the costs on the 1st Defendant's summons to dismiss the 1st Plaintiff's action on the ground of non-disclosure of documents and the Plaintiffs' summonses in both actions to have the two actions dismissed upon their withdrawal of the actions should also be awarded on indemnity basis.
Representation: Mr Robert Tang, Q.C. and Miss Margaret Ng, inst'd. by Fok & Johnson, for Plaintiffs Miss Gladys Li, Q.C. and Miss Priscilla Wong, inst'd. by Chan, Wong & Lam, for Defendants |