Ho Yuen Ki, Winnie v. Stanley Ho

HCA 2798/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2798 OF 2002

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BETWEEN

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Before: Deputy High Court Judge To in Chambers (Open to Public)

Date of Hearing: 1 September 2006

Date of Decision:  1 September 2006

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D E C I S I O N

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Background

1.This is an application by the Defendant to strike out the Plaintiff’s action under Order 18 rule 19 and/or the inherent jurisdiction of the Court.  The Plaintiff and Defendant are siblings and public figures in Hong Kong and Macau.  The present litigation is one of a series of litigations which they have engaged against one another in both jurisdictions.  In their affirmations filed for the purpose of this action, they have made allegations of bad faith against each other and averred to other collateral matters.  I do not think it necessary to resolve those factual disputes for the purpose of this proceeding and I shall not refer to them.

2.The Plaintiff and the Defendant were two of the six shareholders of Art King Estates Limited (“Art King”), a company incorporated in Hong Kong.  They were the sole directors of Art King before its deregistration.  Ho HIn this action, the Plaintiff sought damages for deregistration of Art King and inspection of its documents. 

3.In August 2002, the Plaintiff took out a summons for summary judgment and an interlocutory injunction against the Defendant under Order 14 and Order 29 of the Rules of the High Court respectively.  The Defendant took out a cross summons in September 2002 to strike out the Plaintiff’s action under Order 18.  The applications were heard before Suffiad J in January 2003.  On 20 February 2003, Suffiad J ordered:

(1)    in relation to the Plaintiff’s summons, (i) there be unconditional leave to the Defendant to defend for damages for wrongful deregistration of Art King and (ii) that the Defendant to allow inspection by the Plaintiff of documents of Art King;

(2)    in relation to the Defendant’s cross summons, that unless the Plaintiff amend her particulars of damages, paragraphs 2 to 6 inclusive of her Statement of Claim be struck out and her claim for damages be dismissed with costs to the Defendant; and

(3)    each party to bear his/her own costs of the application.

4.On 3 February 2004, the Plaintiff took out a summons in HCMP 317 of 2004 against the Registrar of Companies as the 1^st defendant and the Defendant as the 2^nd defendant, seeking re-registration of Art King.  By consent, Barma J ordered Art King to be re-registered, that the Plaintiff to pay the costs of the Registrar of Companies in the sum of $4,000 and that the Defendant to pay the Plaintiff’s costs.  Those costs were taxed on party and party basis and allowed in the amount of $56,330.67, with an amount of $22,844.63 taxed-off.  Not unexpectedly, following the re-registration of Art King, the shareholders of Art King requisitioned an extraordinary general meeting to be held on 9 March 2004 for the purpose of passing a resolution to remove the Plaintiff as director.  The Plaintiff was duly removed as director on 9 March 2004 and the Defendant resigned as a director on 10 March 2004.

5.Pursuant to the orders of Suffiad J, the Plaintiff filed her Amended statement of Claim on 18 November 2003, claiming the right to inspect the books and documents of Art King and alleging losses suffered by her in re-registering Art King.  The Plaintiff’s losses were subsequently particularised.  These were the $4,000 costs paid to the Registrar of Companies and the balance between the costs she paid to her lawyers on solicitor and client basis and the taxed costs.  Prior to the hearing, there was some misunderstanding by the Defendant’s solicitors that the Plaintiff was claiming the $4,000 costs paid to the Registrar of Companies and the taxed-off costs of $22,844.63.  The misunderstanding has been clarified through solicitors’ correspondence prior to the hearing and at the hearing through confirmation by the Plaintiff’s counsel, Mr Smith SC.  The Plaintiff is now claiming the un-recovered costs in HCMP 317 of 2004, i.e. the balance between the costs she paid to her solicitors on solicitor and client basis, which she alleged was $150,000 and the taxed costs.  She has waived her claim for the $4,000 costs to the Registrar of Companies.

6.On 15 March 2006, the Plaintiff issued a summons for directions returnable on 7 April 2006 for the further conduct of the action.  On 29 March 2006, the Defendant invited the Plaintiff to discontinue the action with no order as to costs.  That invitation was not accepted by the Plaintiff.  On 3 April 2006, the Defendant issued a summons to strike out the Plaintiff’s action under Order 18 on the ground that it disclosed no reasonable cause of action, is frivolous and vexatious and is an abuse of process or alternatively for the action to be transferred to the Small Claims Tribunal.  Whether the Plaintiff is claiming the taxed-off costs assessed on party and party basis or claiming un-recovered costs to be assessed on solicitor and client basis is only a question of quantum.  It may be relevant to the application for transfer to the Small Claims Tribunal but does not affect the issue at stake in the application to strike out the damages claim.  

7.Three weeks before the hearing, the Plaintiff counter-offered to discontinue her action on condition that the Defendant pays her all costs of the action that have not been taxed.  The offer was rejected by the Defendant.  In the course of the hearing, Mr Smith SC applies, in the alternative, to discontinue the action on a no costs basis.  Mr Shieh SC, counsel for the Defendant, does not object to the alternative application being heard without the Plaintiff making a formal application by summons, but contests that application.

The basis of the Plaintiff’s damages claim

8.The Plaintiff is seeking damages for the wrongful deregistration of Art King caused by the Defendant.  To restore herself to the position as if no wrong had been committed against her, she had to have Art King reinstated.  She could only do so pursuant to section 291AB of the Companies Ordinance.  A deregistered company may be reinstated by one of the two ways under the section.  Section 291AB(1) empowers the Registrar of Companies to reinstate the registration of a company deregistered as a result of a mistake on the part of the Registrar of Companies, otherwise a person aggrieved by the deregistration has to make an application for reinstatement to the court under section 291AB(2).  In the present case, the Registrar of Companies refused to reinstate Art King pursuant to section 291AB(1) as the deregistration was not the result of any mistake on the part of the Registrar of Companies.  Accordingly, the Plaintiff had, as a matter of necessity, to take out HCMP 317 of 2004 against the Registrar of Companies to seek an order for reinstatement.  Under the general principles in negligence, the Plaintiff would be entitled to recover against the Defendant by way of an action for damages the costs incurred in HCMP 317 of 2004 subject to the usual rules on remoteness: McGregor on Damages (17^th ed) at paragraphs 17-001, 17-012, 17-033 to 17-045.

9.There is no dispute that it was reasonably foreseeable that the Plaintiff, being aggrieved by the deregistration of Art King and assuming it was wrongful for the purpose of this application, would commence proceedings against the Registrar of Companies for reinstatement of Art King under section 291AB of the Companies Ordinance and would incur legal costs.  The Defendant consented to have Art King reinstated and agreed to pay costs.  That must be on the basis that it was reasonable for the Plaintiff to institute proceeding in HCMP 317 of 2004.  There was no other reason for the Plaintiff to take out that proceeding and there is no dispute that the proceeding in HCMP 317 of 2004 was caused by the deregistration.  Mr Shieh SC does not dispute that the legal costs incurred by the Plaintiff in HCMP 317 of 2004 were not remote and were recoverable in principle.

10.Mr Smith SC submits on the principle in The Solway Prince (1914) 31 TLR 56 and Agius v Great Western Colliery [1899] 1 QB 413 that the damages recoverable by the Plaintiff against the Defendant should be her costs in HCMP 317 of 2004 assessed on solicitor and client basis less the costs recovered by her in that proceeding assessed on whatever basis as was allowed by the court, which in the present case was on party and party basis.  He quoted McGregor on Damages (17^th ed) paragraph 17-060 in support of his proposition.  In that paragraph, the learned authors wrote:

“On the other hand, in the sparser cases of a now claimant who was successful in the prior proceedings, the amount of costs recoverable as damages will naturally be different.  Where the now claimant has successfully brought or successfully defended an action, the amount recoverable should be his costs assessed as between solicitor and client less the assessed costs which will generally be recovered by him from the other party to the prior litigation. This amount was given in The Solway Prince, where the claimant had successfully sued, and in Agius v Great Western Colliery where the claimant had successfully defended.  This measure was extended in two directions by Britannia Hygienic Laundry Co v Thornycroft.  In the first place, the claimant had incurred three sets of costs as there had been a double appeal: it was held that all were recoverable as “the probable and even direct consequence” of the now defendant’s breach of contract.  On the particular facts the now claimant had failed at first instance but had been upheld both in the Divisional Court and in the Court of Appeal.  It would not seem to matter, however, which party won in any of the lower courts; the only important question is that the now claimant should have won in the final court to which the original action was taken.  In the second place, the three sets of assessed costs awarded to the now claimant by the Court of Appeal in the prior action had not been paid by the other party because he was a man of straw, and it was held that the claimant could recover his full costs assessed bas between solicitor and client without any deduction in respect of the assessed costs awarded but practicably irrecoverable.  This seems plainly right: it will of course arise seldom, as not only does it require a man of straw but a successful now claimant.”

Mr Shieh SC does not dispute the above principles of law but submits that they have no application to the present case because of the principle in Berry v British Transport Commission [1962] 1 QB 306.

The principle in Berry v British Transport Commission

11.In Berry v British Transport Commission, the plaintiff was prosecuted for and convicted of an offence while travelling on the defendant’s train.   She successfully appealed against the conviction and was awarded costs.  She then brought an action against the defendant for malicious prosecution, claiming special damage which was the sums she had actually expended by way of costs on her defence and on her appeal after giving credit to the costs awarded to her.  On a preliminary issue, Diplock J, as he then was, dismissed the action on the contention that the statement of claim disclosed no damage of which the plaintiff was entitled to complain and in the premises disclosed no cause of action.  On the plaintiff’s appeal, the Court of Appeal held that the expenses which the plaintiff had incurred in the course of her defence and on her appeal in excess of the sum awarded were sufficient to support an action for malicious prosecution.  The Court of Appeal upheld the well established rule stated in Mayne on Damages, 11^th ed (1946), p. 119, which is in the following terms: “It was regarded as a general principle that the right to costs must always be considered as finally settled in the court where the question to which that right was accessory was determined; so that, if any costs were awarded, nothing beyond the sum taxed according to the rules of the court could be recovered; or if costs were expressly withheld in the particular case none would be recoverable by suit in any other court.”  The principles in Berry v British Transport Commission were adopted by the Court of Appeal in Fairview Park Property Management Ltd and Lee Yuen-yau [1988] 1 HKLR 290 which is binding on me.

12.Devlin LJ, as he then was, examined the rationale for the rule.  He first referred to the judgment of Brett MR in The Quartz Hill Consolidated Gold Mining Co v Eyre Vol 11 QBD 674.  He said at 319:

“The Court of Appeal held that the damage was not recoverable.  Brett MR said: “The theory is that the costs which the losing party is bound to pay, are all that were necessarily incurred by the successful party in the litigation, and that it is right to compel him to pay those costs because they have been caused by his unjust litigation; but that those which are called ‘extra costs,’ not being necessarily incurred by the successful party in order to maintain his case, are not incurred by reason of the unjust litigation.”  Bowen LJ said: “The bringing of an ordinary action does not as a natural or necessary consequence involve any injury to a man’s property, for this reason, that the only costs which the law recognises, and for which it will compensate him, are the costs properly incurred in the action itself.  For those the successful defendant will have been already compensated, so far as the law chooses to compensate him.  If the judge refuses to give him costs, it is because he does not deserve them: if he deserves them, he will get them in the ordinary action: if he does not deserve them, he ought not to get them in a subsequent action.”

The rule is not easy to apply with justice because it embodies a presumption, which the law finds it convenient and maybe necessary to make; but which it has to, and does in other contexts, admit not to be in accordance with fact.  Rule 28(2) of the Supreme Court Costs Rules, 1959 [Second Schedule to the Rules of the Supreme Court (No.3), 1959], provides that the ordinary basis on which costs shall be taxed is the party and party basis; and that on a taxation on that basis there shall be allowed all such costs “as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed.”  Other bases are provided for special cases.  Rule 29(1) provides that where costs are payable to a solicitor by his own client all costs shall be allowed “except in so far as they are of an unreasonable amount or have been unreasonably incurred.”  Another similar and perhaps wider basis is under rule 31 where costs are payable to a trustee out of the trust fund.  The difference between these standards and that laid down for a party and party taxation puts one in mind roughly of the difference between expenditure under Schedule E and expenditure under Schedule D in income tax law – the difference between what is necessary and what is reasonable.  Reasonableness is, of course, the ordinary test that is applied in a damage claim and which would be applied here if the items of expenditure claimed were not incurred in litigation.”

13.Then, Devlin LJ explained that the true reason for the rule is not whether the excess costs were reasonable but is the public policy principle against double recovery or double adjudication.  He said at 320:

“The reason for the rule is not that the costs incurred in excess of the party and party allowance are deemed to be unreasonable; it is that what is presumed to be the same question cannot be gone into twice.  The rule appears to have been first laid down by Mansfield CJ in Hathaway v Barrow where he put it on the ground that “it would be incongruous to allow a person one sum as costs in one court, and a different sum for the same costs in another court.”  If in the earlier case there has been no adjudication upon costs (as distinct from an adjudication that there shall be no order as to costs), a party may recover all his costs assessed on the reasonable, and not on the necessary, basis.  If a party has failed to apply for costs which he would have got if he had asked for them, a subsequent claim for damages may be defeated; but that would be because in such a case his loss would be held to be due to his own fault or omission.  In any case in which the legal process does not permit an adjudication, the rule does not apply.  This appears from a number of cases such as Prichet v Boevey, Doe v Filliter and Walshaw v Brighouse Corporation.  In the second of these cases Rolfe B said : “Where, indeed, there has been no taxation, then, ex necessitate, the jury must say what is to be an indemnity.”  In this connection it is worth citing In re Bater and Birkenhead Corporation, because two of the judges who decided it in the Court of Appeal were Lord Esher MR and Bowen LJ.  In this case the aggrieved party was left without costs, not because the court had refused to award them as in Quartz Hill Consolidated Gold Mining Co v Eyre, but because the court had no power to award them; and he claimed reimbursement of all the costs reasonably incurred by him in attending before the magistrate.  It was put against him that although the magistrate had not power to deal with costs, that did not give another tribunal power over the cots of the magisterial inquiry.  But the claim succeeded, Lord Esher MR saying : “An endeavour is made to avoid this conclusion by giving these expenses a legal name and calling them costs; but they are not the less expenses which the man has had to pay.”

14.Then, Devlin LJ considered the exception in respect of costs in proceedings brought against or by a third party.  He said at 321:

“It follows that if as the result of a breach of contract – see Agius v Great Western Colliery Co Ltd – or a tort – see The Solway Prince – a person brings unsuccessfully an action against a third party or loses an action brought by a third party, he may recover against the wrongdoer who has broken his contract or committed the tort the costs of the suit; and he will get all the costs he has reasonably expended.  The wrongdoer may not argue that the plaintiff is entitled to party and party costs, notwithstanding that that is all he could or would have got from the third party if he had been successful.”

15.Devlin LJ summarised the reason for the rule as follows at 322:

“Thus the reason for the rule is that the law cannot permit a double adjudication upon the same point.  It would be a rational rule and in accordance with the ordinary principle as to res judicata if in truth it were the same point.  But it is not.  It may be that when the rule was first laid down by Mansfield CJ in 1807 the two standards of assessment were not so far apart as they are now.  By 1844 the distinction had begun to appear in practice if not in theory.  In Doe v Filliter Pollock CB said: “The taxed costs are a fair indemnity; and if they ware not so, the rules which govern taxation ought to be altered.”  Alderson B said : “The taxed costs are intended to be a full indemnity to the plaintiff for his expenses in getting back the land.  That is the principle; whether it be fully carried out in practice is another matter.  …  If the taxed costs are not a full indemnity, they ought to be made so.”  But this advice has not been taken and the rules which govern taxation have not been altered.  In 1869 Blackburn J in Wren v Weild said that it was “artificial” to say that the party aggrieved had an adequate remedy in his judgment for costs.  InBarnett v Eccles Corporation Bigham J said: “The law does not recognise the difference between the sum which it gives as costs, that is, costs taxed as between party and party, and the larger sum which in practice a litigant has to pay.”

I find it difficult to see why the law should not now recognise one standard of costs as between litigants and another when those costs form a legitimate item of damage in a separate cause of action flowing from a different and additional wrong.  Limitation of liability is a principle that is now well recognised.  In the case of damage done by a ship it has been in force for the last two centuries in this country, and for longer in others, and the basis of it is simply that it is not in the public interest that shipowners should be deterred from seafaring by the prospect that they might be crippled by awards of heavy damages.  The stringent standards that prevail in a taxation of party and party costs can be justified on the same sort of ground; see, for example, Smith v Buller, per Malins V-C.  It helps to keep down extravagance in litigation and that is a benefit to all those who have to resort to the law.  But the last person who ought to be able to share in that benefit is the man who ex hypothesi is abusing the legal process for his own malicious ends.  In cases of malicious process Mansfield CJ’s rule has not always been applied.  Lord Ellenborough refused to apply it in 1816 and Lord Abinger in 1838 (Sandback v Thomsas and Gould v Barratt).  But the other view has prevailed, though Tindal CJ indicated in Grace v Morgan that his opinion might have been different if the matter was res integra.

If the matter were res integra, I should for myself prefer to see the abandonment of the fiction that taxed costs are the same as costs reasonably incurred and its replacement by a statement of principle that the law for reasons which it considers to be in the public interest requires a litigant to exercise a greater austerity than it exacts in the ordinary way, and which it will not relax unless the litigant can show some additional ground for reimbursement over and above the bare fact that he has been successful. Without a restatement of that sort, there is undoubtedly a practical need for the rule in civil cases.  Otherwise, every successful plaintiff might bring a second action against the same defendant in order to recover from him as damages resulting from his original wrongdoing the costs he had failed to obtain on taxation; this was unsuccessfully attempted by the plaintiff in Cockburn v Edwards.  Or as Lord Tenterden CJ said in Loton v Devereux: “actions would frequently be brought for costs after the court had refused to allow them.”  The rule is thus essential to the administration of justice in civil suits and will continue to be so until the time comes, if it ever does, when the law either allows to a successful litigant all the costs he has reasonably incurred or recognises openly that an assessment of damage and a taxation of costs as between party and party are two different things.”

16.Despite his preference that the successful party should be compensated by costs reasonably incurred instead of being limited to taxed costs only, Devlin LJ recognised the practical need for the fiction that taxed costs are the same as costs reasonably incurred.  This is because public interest requires that there should be finality in litigation and that multiplicity in legal actions should be avoided.  The administration of justice in civil suits requires that the right to costs must be considered as finally settled in the court where the question to which that right was accessory was determined.  Thus, the established principle is that a successful party in one action will only recover such amount of legal costs as are allowed on taxation in that action and may not recover the taxed off costs under the guise of damages in another action.  This principle is not applicable where the adjudicating tribunal has no jurisdiction to award costs.  The only other exception to the above principle is that where the costs in an earlier action not involving the same parties, i.e. costs in a third party proceeding, formed part of the damages claimed in a later action.  In that situation, the successful party may recover such excess costs as may have reasonably been incurred over and above those costs awarded or recovered in the third party proceeding.

Whether HCMP 317 of 2004 is a third party proceeding

17.In the light of the principle in Berry v British Transport Commission, the outstanding question is whether HCMP 317 of 2004 is a third party proceeding.

18.Mr Smith SC argues that HCMP 317 of 2004 was of necessity brought against the Registrar of Companies as the Plaintiff was seeking an order under section 291AB(2) against the Registrar of Companies as the 1^st defendant and that the Defendant as the 2^nd defendant in that proceeding was only a nominal defendant.   Hence he submits that HCMP 317 of 2004 was essentially an action against a third party so far as the present action is concerned, that the principle in Berry v British Transport Commission does not apply and that the Plaintiff is entitled to recover such excess costs taxed on solicitor and client basis over and above the taxed costs in that proceeding. 

19.On the face, HCMP 317 of 2004 is not a third party litigation because the Defendant in this action was also a defendant in HCMP 317 of 2004.  In Berry v British Transport Commission, Devlin LJ also had in mind the “third party litigation” rule.  At page 321, he gave the example of a victim of a tort or breach of contract unsuccessfully bringing proceedings against a third party or unsuccessfully defending proceedings brought by a third party.  In the examples given by his Lordship, the third parties in the previous actions were wholly different parties from the tortfeasors or contract-breakers.

20.In the present case, the Plaintiff joined the Defendant as the 2^nd defendant in HCMP 317 of 2004.  No other shareholders was made a party.  Thus the Defendant was not being joined as a nominal defendant because of his status as a shareholder or as the only other director of Art King but because he was perceived as having a substantive role to play.  Indeed the Plaintiff sought costs against the Defendant in that proceeding and the Defendant consented to pay her costs.  Thus the main or real purpose of joining the Defendant in HCMP 317 of 2004 was to make him pay the Plaintiff’s legal costs incurred in reinstating Art King or, in other words, to compensate her at least in part for the damage occasioned by its wrongful deregistration.  Now that no other damage is being sought against the Defendant, it must necessarily follow that the sole purpose of joining the Defendant in HCMP 317 of 2004 was to seek damages from him for the wrongful deregistration of Art King.  Hence, I am unable to agree with Mr Smith SC that HCMP 317 of 2004 was an action against a third party for the purpose of the principle in Berry v British Transport Commission and that the Defendant was a nominal defendant in that proceeding.

21.Not only that the Plaintiff obtained a costs order in her favour, the order was made by consent.  If she had any other claim for damages in the nature of legal costs incurred, she should have recovered those costs in that proceeding.  Having consented to the costs order, she may not now turn around and claim beyond what she had consented was her costs.  If there were other costs which she would have been awarded had she asked for them, she should have asked for them instead of consenting to the costs order being made.  Her position is the same as one who has failed to apply for costs.  In the words of Devlin LJ, her loss in un-recovered costs was due to her own fault or omission and not caused by the act or omission of the Defendant.  In my view, the Plaintiff having consented to the cost order in her favour in HCMP 317 of 2004, may not now re-litigate for the taxed off costs under the guise of damages in this action.  The Plaintiff could have no further claim for damages.

Whether the action should be struck out

22.Mr Shieh SC submits that there were two claims under the action, one for inspection which had been finally disposed of by Suffiad J, the other for damages which is bad and should be dismissed.  Hence, he submits that the entire action should be struck out with costs.

23.I respectfully differ from that view.  The Plaintiff claims for damages and inspection of documents.  For the reasons I have given, her claim for damages must be struck out.  However, she succeeded in obtaining an interlocutory order from Suffiad J for inspection of documents of Art King.  She had the inspection as result of which that claim is now academic.  But that is not a reason for striking out the inspection claim or the action in its entirety.  Furthermore, the question of the costs of the action remains to be decided.  Accordingly, I allow the Defendant’s application only to the extent of striking out paragraphs 2 to 6 inclusive of her Amended Statement of Claim with dismissal of the Plaintiff’s claim for damages.

Transfer to the Small Claims Tribunal

24.In the event that I refuse to strike out the Plaintiff’s claim, the Defendant applies for transfer of the action to the Small Claims Tribunal.  On the basis that the outstanding claim in this action is the taxed off costs of $22,844.63 or costs in that region, Mr Shieh applies for the action to be transferred to the Small Claims Tribunal.  As against that, the Plaintiff says she has incurred costs on a solicitor and client basis to the extent of $150,000, but no documentary evidence has been produced.   Mr Shieh argues that if the level of costs is such that the un-recovered portion had truly exceeded the jurisdictional limit of the Small Claims Tribunal there would be little difficult for her to give evidence to that effect and her failure to do so justifies an adverse inference being drawn that the amount of un-recovered portion is below $50,000.

25.In my view, as a matter of law, the Plaintiff is not entitled to claim the un-recovered costs, whatever the amount.  There is no need for me to consider the Defendant’s alternative application.  But, even if I were wrong in the law and even if the amount of un-recovered costs does not exceed the jurisdiction of the Small Claims Tribunal, this is not an appropriate case to transfer.  The claim for inspection of document, even though academic, is outside the jurisdiction of the Small Claims Tribunal.  In addition, there is the question of costs of the action, which remains to be determined.  That is also an issue which is outside the jurisdiction of the Small Claims Tribunal.

The Plaintiff’s application to discontinue the action with no order as to costs

26.In what I consider to be a desperate attempt to save the Plaintiff from costs consequence, Mr Smith SC applies to discontinue the action with no order as to costs.  The basis of his application is that the action is now academic, and indeed it is.  Though Mr Shieh SC raises no objection that the application is not made by summons or motion or by notice under Order 25, rule 7 of the Rules of the High Court, he objects to the application unless the action is discontinued with costs in favour of the Defendant.  The Plaintiff’s application is bound to fail and I shall deal with that application very briefly.

27.Order 21, rule 3 provides that a party may not discontinue an action without the leave of the Court and the Court may grant leave on such terms as to costs as it thinks just.  The Defendant, through his solicitors, has invited the Plaintiff to take such course by letter dated 29 March 2006.  This very reasonable offer was flatly refused by the Plaintiff’s solicitors via their letter dated 10 August 2006, just three weeks before the hearing.  In their letter, the Plaintiff’s solicitors were asking for the balance of the Plaintiff’s costs in HCMP 317 of 2004 and costs of this action.  Having heard counsel’s arguments, I have now come to the conclusion that the Plaintiff is not entitled to claim any balance of costs in HCMP 317 of 2004.  As for the costs on discontinuance, the usual rule is that the party who brought the action has to pay the other party’s costs.  The Plaintiff’s insistence three weeks before the hearing that the Defendant shall pay her costs was unreasonable and contrary to legal principles.  She had a very reasonable offer to discontinue the action with no order as to costs.  She rejected that offer which made it necessary for the Defendant to incur further costs in the present hearing.  Having fully argued the case, it is now far too late for the Court to allow her to discontinue the action with no order as to costs.  It would be wrong in principle for me to exercise my discretion to allow her to discontinue the action with no order as to costs under the present circumstances.  Accordingly, I refuse her application.

Costs

28.As for costs of this application, Mr Smith SC submits that as the Defendant is not successful in striking out the Plaintiff’s action in its entirety or in his application for transfer to the Small Claims Tribunal, the Defendant is not entitled to costs or should only be entitled to part of his costs.  The inspection claim having become academic, the essence of the application is the dismissal of the Plaintiff’s claim for damages.  In that respect, the Defendant is overall successful.  The time spent on the alternative application to transfer to the Small Claims Tribunal was minimal.  On the other hand, the Plaintiff’s alternative application to discontinue the action with no order as to costs is also unsuccessful.  In my view, the Defendant is substantially and overall successful.  This is not a case in which it is appropriate to apportion the costs according to the individual events.  Accordingly, I make an order that the Plaintiff shall pay the Defendant’s costs of the Defendant’s striking out application including the costs of the summons.   All costs are to be taxed, if not agreed.

29.The question of the costs of the action remains outstanding.  While the Plaintiff’s claim in respect of damages is dismissed with costs today because the Plaintiff was awarded costs in HCMP 317 of 2004 on 4 March 2004 by Barma J, there was nevertheless reasonable ground back in 2002 for her to commence the present action, in respect of both the damages claim and the inspection claim.  In respect of the damages claim, she was entitled to the claim and she was indeed compensated by costs in HCMP 317 of 2004.  In respect of the claim for inspection of documents of Art King, she was successful before Suffiad J, though in view of Suffiad J’s interlocutory injunction order, that part of the action is now academic.  The costs order made by Suffiad J was in respect of the costs of the summons and not costs of the entire action.  My costs order is only in respect of the Defendant’s striking out summons.  There are still the residual costs of the action which remains to be resolved.  In my view, it would have been reasonable taking into account the circumstances under which the litigation commenced and the course it has taken for the parties to agree to bear their own costs in respect of the residual costs.  Counsel agreed to try their best endeavour to resolve the question of residual costs without having to proceed to trial for the purpose of determining that question and to seek further directions only if necessary.

Conclusion

30.Accordingly, I allow the Defendant’s application only to the extent of striking out paragraphs 2 to 6 inclusive of the Amended Statement of Claim with dismissal of the Plaintiff’s claim for damages.  I also made a costs order that the Plaintiff shall pay the Defendant’s costs of this application.  Such costs are to be taxed, if not agreed.

Mr Clifford Smith SC, instructed by Messrs Tanner De Witt, for the Plaintiff

Mr Paul Shieh SC, instructed by Messrs Herbert Smith, for the Defendant