B+B Construction Co. Ltd./ Wai Nai Yip Formerly t/a Ka Yip Machine & Engineering Co. v. Lai Ki
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HCA 3402/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 3402 OF 2003 ____________ BETWEEN
____________ Before: Deputy High Court Judge Carlson in Chambers Date of Hearing: 6 February 2007 Date of Judgment: 7 February 2007 _______________ J U D G M E N T _______________ Introduction 1.In this appeal from Master Hui, I am required to construe the meaning and effect of an order for costs dated 24 May 2005 made by Master Ho which is in these terms [page 52]:
2.To understand how all of this comes about it is necessary to provide some of the background and history to this matter. In 2001 the Defendant in this action, Mr Lai, sued the two Plaintiffs arising out of an accident and injuries caused to him at work [case HCPI 63/2001]. The two Defendants in that action had their cases conducted on their behalf by their insurers. The action was settled when Mr Lai accepted $510,000 in damages. This left over the question of whether the costs awarded to him should be taxed on the District Court scale (the award accepted being within the District Court’s jurisdiction) or on the High Court scale. Seagroatt J who heard the argument on this issue decided that costs should be on the High Court scale. The Defendants, who at all times were represented by the firm of Ip, Kwan & Co. (“IK”) who also represent them in this action, they being a very experienced firm of solicitors in this type of litigation, advised the Defendants to appeal against Seagroatt J’s ruling. 3.Mr Lai, having had advice from his solicitors, who also represent him in this matter, decided that it would be more sensible to put an end to that dispute as soon as possible and decided to accept to have his costs taxed on the District Court scale. The parties therefore agreed to compromise the appeal and a consent summons was drawn up and signed by the parties’ solicitors on their behalf. When that summons was placed before Seagroatt J, he refused to make the order taking the view that the parties could not alter his order by their own doing. This being the position, Mr Lai’s solicitors then refused to carry out the agreement contained in the consent summons. 4.IK then advised the Defendants that they should start a fresh action, being this action, to sue and enforce the agreement that the parties had entered into whereby Mr Lai would only get his costs on the District Court scale. Things Start to Go Wrong 5.Just before this action was started the 1st Plaintiff went into liquidation. While this was happening the insurers, who had instructed IK to bring this action appeared to be content to proceed in this matter and stand behind the action. This having been said it is trite law that when a company goes into liquidation, it can only sue with the leave of the court or with the consent of the Committee of Inspection (“the Committee”) overseeing its liquidation. No leave or permission had been obtained from either the Court or the Committee. Once Mr Lai’s solicitors got wind of this they, quite rightly, took out a summons to strike out the action on this basis. Plainly, the 1st Plaintiff had no answer to the summons hence the order by Master Ho on 24 May 2005 which I have previously set out. There is no appeal from that order. 6.What I have to decide relates to paragraph 2 being his order for costs. He took the view that IK had brought this action by the 1st Plaintiff without authority and he made the order for costs against IK personally on this basis, wording it in the way that he did. They were to be liable to the Defendant (Mr Lai) for his “… costs of an occasioned by the claim …” against him. What Costs is Mr Lai Entitled to? 7.This being the order, the 2nd Plaintiff’s action against Mr Lai continued. Mr Lai’s solicitors then prepared their bill of costs so that they might be paid by IK personally as provided by the Master’s order. The solicitors prepared a bill that sought to apportion the costs between the 1st and 2nd Plaintiffs equally. IK objected to this and on 18 October 2005 they filed a list of objections [pages 132-140]. Part of those objections related to the scope of Mr Lai’s solicitors’ bill. IK said that it was not right to apportion the costs between the two Plaintiffs on a 50/50 basis and that the extent of their liability to Mr Lai was limited to the costs of and occasioned by their having brought the action against him by the 1st Plaintiff without authority, that is to say without the Court’s or the Committee’s sanction. If that was right then the costs’ liability would be far more limited than having to face a bill representing half the costs of the whole action. Pausing here, there was also an argument as to whether the wording of the Master’s order which referred to “the claim” rather than “the action” had an additional circumscribing effect. 8.A summons was taking out before Master Ho, heard on 19 May 2006, for him to say whether “the claim” meant the same thing as “the action” [transcript at page 190 et seq]. He said that it did and so the order was amended to read “the action”. I therefore need to construe the effect of the order on the basis of this amendment. 9.Before me Mr Sakhrani, who also appeared before the Master on IK’s behalf, had submitted to the Master that on any basis this order only made IK liable for a limited range of costs, those over and above the other costs of the action caused by the wrongful joinder of the 1st Plaintiff without authority. Master Ho did not express a view on that and the matter then went off to Master de Souza, sitting as the Taxing Master. He felt unable to proceed with taxation until there had been a determination of this issue which was further adjourned off to Master Hui who on 9 November 2006 decided that IK’s liability under Master Ho’s order was not limited to just those costs but that they were liable to Mr Lai on the 50/50 apportionment as between the 1st and 2nd Plaintiffs. 10.To complete the factual situation, the 2nd Plaintiff, by now the only Plaintiff in the case as a result of Master Ho’s order of 24 May 2005, decided to discontinue the action against Mr Lai and a consent order to that effect was entered into on 5 November 2005 with the inevitable costs order against it, on this occasion worded differently and in these terms:
11.That order therefore had the effect of disposing of the remainder of the action, leaving over this short point as to the effect of Master Ho’s order. I should also observe that Mr Lai’s solicitors then drew up a second bill of costs reflecting their view that these two Plaintiffs should bear the costs on a 50% apportionment basis. The quantum of that second bill of costs was settled between the parties by correspondence in January 2006 [pages 26-27]. The Argument 12.Although this does not assist me in resolving the appeal, I should observe that IK’s position is that none of this need have happened if Mr Lai’s solicitors had presented their bill on the basis that all the costs of the action would be borne by the 2nd Plaintiff which the Plaintiff’s insurers were content to settle on their behalf, this being a case of a common claim against Mr Lai by both Plaintiffs. Nevertheless, it seems to me from a reading of the correspondence that these two firms of solicitors have had something of a falling out, with the result that Mr Lai’s solicitors have been insistent that IK should personally bear half the costs of the action, on their interpretation of Master Ho’s order. As a result, one or other of these firms will now be seriously out of pocket depending on the outcome of the appeal. 13.Mr Sakhrani submits that what Master Ho had sought to do was to penalise IK personally for having brought an unsanctioned and therefore invalid action by the 1st Plaintiff. The action by the 2nd Plaintiff was perfectly properly constituted. The Master therefore, submits Mr Sakhrani, was making an order, having struck out the 1st Plaintiff’s action, to the effect that IK should pay Mr Lai’s costs incurred as a result of that invalid action having been brought against Mr Lai. Hence, the Master advised use of the expression “the costs of and occasioned by the 1st Plaintiff’s action …”. That order was therefore one of limited scope given the fact that there was already afoot a perfectly good claim against Mr Lai brought by the 2nd Plaintiff. In the event, all the other costs of the action fell to be determined in accordance with the eventual outcome of the action between Mr Lai and the 2nd Plaintiff. The 2nd Plaintiff having subsequently discontinued the action was ordered to pay Mr Lai’s costs of the action. Mr Sakhrani accepts, and indeed submits, that once that order for costs was made against the 2nd plaintiff upon its having discontinued the action, it through its insurers would have been disposed and indeed obliged to pay all of the costs of the action. That did not happen because of Mr Lai’s solicitors’ attitude that each of these two Plaintiffs’ were liable on an apportionment of 50/50 hence the second bill of costs which sought to claim only 50% of the costs of the action from the 2nd Plaintiff, the reminder being sought against IK pursuant to Mr Lai’s solicitor’s interpretation of Master Ho’s order. 14.Mr Ng, Mr Lai’s solicitor, who is also very experienced in such matters, has essentially based his case on Paragraph 6(1) of Butterworth’s Costs Service which is in these terms:
Authority for these propositions comes from the decision in Beaumount v Senior [1903] 1 KB 282. 15.It is for this reason that Mr Ng has steadfastly proceeded on the basis of apportioned bills of costs against and in respect of each of these two unsuccessful Plaintiffs. Analysis 16.Although the argument before me has ranged widely, in the ultimate analysis, this is a short point. The correct way to start is to look and see what it is that Master Ho sought to do in the circumstances that presented themselves to him. Here was a Plaintiff (the 1st Plaintiff) without locus, if I can express it in this way. Without the sanction of the Court or of the Committee it had no authority to sue. Mr Lai was being vexed by a Plaintiff who had no standing, by virtue of it being in liquidation, to sue him. That was the fault of IK who should have properly informed themselves of the position before purporting to bring the action by the 1st Plaintiff. Master Ho therefore sought to penalise IK for causing Mr Lai additional costs in defending the action against the 1st Plaintiff over and above the costs of the properly constituted action by the 2nd Plaintiff. That is why he said that these were costs of and occasioned by the 1st Plaintiff’s action against Mr Lai. This in my judgment was an order for costs of limited effect — it was not an order for Mr Lai’s costs of the action by the 1st Plaintiff against him as a whole. Those costs remained in play to be determined as between the 2nd Plaintiff and Mr Lai which they ultimately were by the costs order of 5 November 2005 which provided that the 2nd Plaintiff should pay Mr Lai’s costs of the action. The matter, it seems to me, must be understood in this way. 17.Regrettably, Mr Ng, for whom I have much sympathy, has misunderstood what Master Ho ordered. I have to say that I have not been able to follow why it was that Master Ho, in clarifying his order on 19 May 2006, did not avail himself of the opportunity to indicate the extent and meaning of his order because clearly the parties were at odds as to its interpretation when they appeared before him beyond the issue that he clarified which was that “claim” meant “action”. Had he done so it is probable that this issue would have been cut short at that stage. 18.Had Mr Ng understood the very limited effect of IK’s personal liability as to Mr Lai’s costs he would not have adopted the 50/50 approach that he has embarked upon. The situation canvassed in Beaumount v Senior supra is not applicable to these circumstances where IK are only personally liable for the additional costs over and above the costs of the action which they had caused by wrongly and invalidly making the 1st Plaintiff a party to the action. 19.This being my view, Master Hui’s ruling to the contrary cannot stand and the appeal must therefore succeed. In these circumstances, the taxation must proceed on the basis of an appraisal of the costs of and occasioned by IK’s invalid introduction into the action of the 1st Plaintiff which would be costs over and above the other regularly incurred costs of defending the action against the 2nd Plaintiff. This should not be a difficult exercise.
AsLok Sakhrani, instructed by Messrs Ip, Kwan & Co., for the Plaintiff Ng Ming Kin, of Messrs Kwok, Ng & Chan, for the Defendant |
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