China Everbright Finance Ltd and Another v. Chan Yung and Another

HCA 18300/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 18300 OF 1999

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BETWEEN

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Before: Deputy High Court Judge Muttrie in Chambers

Date of Hearing: 7 December 2006

Date of Ruling: 12 December 2006

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R U L I N G

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1.In this case I gave judgment in favour of the plaintiffs against the 1^st defendant, with costs (nisi) to be taxed if not agreed.  I dismissed the plaintiffs’ claim against the 2^nd defendant, with costs (nisi) to the 2^nd defendant against the plaintiffs to be taxed if not agreed.

2.The plaintiffs now apply to vary the costs order by making a Sanderson order, that as between them and the 2^nd defendant there be no order as to costs, but that the 1^st defendant should pay the 2^nd defendant’s costs.  In the alternative they seek a Bullock order to enable them to recoup from the 1^st defendant the costs payable to the 2^nd defendant.

3.The authorities for these orders are respectively Sanderson v Blyth Theatre Co. [1903] 2 KB 533, CA and Bullock v London General Omnibus Co. [1907] 1 KB 264, CA.

4.It is not in dispute that the first question is whether it was reasonable for the plaintiffs to sue the two defendants in the alternative.  If it was not, the costs orders should stand.  If it was, this might justify an order that the burden of the 2^nd defendant’s costs be borne by the 1^st defendant.  Costs are in any event discretionary, and if this kind of order is to be made, the choice between the two types of order is also a matter of discretion; see Bankamerica Finance Ltd v Mock [1988] 1 AC  1002.

5.The 2^nd defendant opened an account with the 1^st plaintiff on behalf of the 1^st defendant.  The main factual issue at trial was whether the 2^nd defendant had the 1^st defendant’s authority to open a margin trading account or whether his authority was restricted to the opening of a cash trading account with a specific limit.

6.The 1^st defendant’s solicitors indicated in pre-action correspondence that the 1^st defendant had “not given the relevant instructions and/or directions to your office to deal with certain shares resulting in certain alleged used margin under the above account nor authorised formally any other person(s) to do so on his behalf”.  It could have been expressed more directly, but the meaning is pretty clear; the 1^st defendant was claiming that the 2^nd defendant did not have his authority to open or trade in the account.

7.Ultimately, I disbelieved the 1^st defendant’s case on the facts, without even hearing evidence from the 2^nd defendant.  It is not right to apply hindsight and say that the plaintiffs should have expected this.  However, on the face of the documents, everything was in order.  The plaintiffs knew all along that the 2^nd defendant was the 1^st defendant’s agent; just a middleman, rather than the rich man who was putting up money to open a margin account.  They knew all along that the 1^st defendant would have to establish the absence of authority on which he relied.  He would necessarily have an uphill struggle.  If he succeeded in shifting liability to the 2^nd defendant, the latter, as middleman, might not be worth much anyway.  So while the 2^nd defendant could be sued, it might well not be worthwhile to do so.

8.I cannot say, in the light of the pre-action correspondence, that it was unreasonable for the plaintiffs to sue the two defendants in the alternative.  It follows that a Sanderson or a Bullock order is appropriate.  However it seems to me that I can and should take the factors mentioned above into account in deciding which order to make.

9.A dominant consideration in deciding which order to make is the balance of hardship.  See the judgment of Lord Brandon in Bankamerica at 1007C-D and 1011F-1012A.  Now, it appears, the 1^st defendant has no money.  He appears in person, and he has appealed in person against my judgment.  Also he gave evidence that he had lost money because of the Asian financial crisis.  I am told that the judgment sum, with interest, comes to over $15 million.  It may be that he is good for neither the judgment sum nor the costs.  On the other hand his pleas of poverty may be of no more value than those parts of his evidence which I disbelieved.

10.It is argued that if I make a Sanderson order, the 2^nd defendant will probably never see his costs.  If I make a Bullock order, the 2^nd defendant will recover from the plaintiffs but they will probably never get those costs back from the 1^st defendant.  Mr Shieh SC argues that a Sanderson order would mean that the plaintiffs will get nothing but at least they will not have to pay the 2^nd defendant’s costs, and to that extent the hardship will be spread.  He also argues that the costs of taxation will be greater if a Bullock order is made.

11.What concerns me is that the 2^nd defendant is an individual, and, on my findings, an innocent one.  He was brought in by the 1^st defendant, who must ultimately pay his costs.  But given the factors mentioned above, it seems to me right and proper that the plaintiffs should guarantee, by way of a Bullock order, that the 2^nd defendant actually see some reimbursement of his costs.

12.I will therefore make an order in terms of paragraph 2 of the plaintiffs’ summons.

Mr Paul Shieh, SC, instructed by Messrs Cheng, Yeung & Co.,  for the 1^st and 2^nd Plaintiffs

Mr Albert Yau, instructed by Messrs David Lo & Partners,  for the 2^nd Defendant

The 1^st Defendant, in person, present