Kao, Lee & Yip (A Firm) v. Midland Realty International Ltd

HCA 2153/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2153 OF 2007

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BETWEEN

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Before: Deputy High Court Judge Lisa Wong, SC in Chambers

Date of Defendant's written submission on costs:  14 April 2009

Date of Plaintiff's written submission on costs:  28 April 2009

Date of Decision on Costs:  31 March 2010

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DECISION ON COSTS

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1.In this Decision, unless otherwise stated, I shall continue to use the terms and abbreviations defined in my Judgment dated 31 March 2009 (“the Judgment”) whereby I ordered that the Statement of Claim should be struck out and the action dismissed.

2.At the end of the Judgment, I refrained from making any costs order nisi before hearing the parties as Mr Yu SC reserved the right to make submissions on costs in his 2^nd Supplemental Submissions for KLY.

3.Save for the following issues raised by the parties’ subsequent written submissions, there does not appear to be any dispute that KLY should pay to Midland the costs of this action and of the application to strike out the Statement of Claim and to dismiss the action:

(1)  whether there should be any reduction to reflect Midland’s failure to establish

(a)  that this action is vexatious and an abuse of process because it was commenced by KLY with the ulterior purposes of delaying or otherwise prejudicing the resolution of the Owners’ Action with a view to bargaining for a better deal for itself; and

(b)  that the continuation of this action would constitute a collateral attack on the CFI Judgment

and, if so, by how much;

(2)  the basis of taxation, party and party or indemnity; and

(3)  whether there should be a Certificate for 2 Counsel.

APPORTIONMENT

4.Mr Anson Wong, Counsel for Midland, submits that the Court should not deprive a wholly successful defendant (who unlike a successful plaintiff is brought into the proceedings against his will) of his costs unless the defendant (i) brought about the litigation, (ii) has done something connected with the suit calculated to occasion unnecessary litigation and expense, or (iii) has done some wrongful acts in the course of the transaction of which the plaintiff complains (Ritter v Godfrey [1920] 2 KB 47 (CA) and Ho Shu Kwong v Chiang Chun Yuan [2002] 3 HKLRD 419 (CA)).

5.Although Midland was overall successful in having the Statement of Claim struck out and the action dismissed, it cannot in my view be treated as a wholly successful defendant insofar as it had failed in establishing 2 of the 4 different bases it put forward for the striking out of the Statement of Claim and dismissal of the action.

6.The hearing before me took place before the coming into force of the Civil Justice Reform. The 4 principles governing the award of costs were set out by Nourse LJ in In re Elgindata Ltd (No 2) [1992] 1 WLR 1207 (CA) and were restated by Yuen JA in Wang Din Shin v Nina Kung, CACV 67/2003, unreported, 19 April 2005, at §39 with reference to the applicable Hong Kong rules as follows:

“(i)  Costs are in the discretion of the court [Order 62 rule 2(4) RHC];

(ii)  They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made [Order 62 rule 3(2) RHC];

(iii)  The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or part of his costs;

(iv)  Where the successful party raises issues or make allegations ‘improperly or unreasonably’ [in Hong Kong, ‘improperly or unnecessarily’], the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs [Order 62 rule 7(1) RHC].”

7.KLY relies on the 3^rd principle.

8.Speaking in broad terms, Midland’s application raised 4 issues:

(1)  whether KLY was entitled to have it declared against Midland that it had a claim for the amount of HK$4,615,000 out of the Sum as property consultancy fees based on Mr Wan’s assurances, representations and/or promises or for quantum meruit fees qua property consultant;

(2)  whether KLY commenced this action against Midland with the ulterior motive of delaying or otherwise prejudicing the resolution of the Owners’ Action with a view to bargaining for a better deal for itself;

(3)  whether the continuation of this action would constitute a collateral attack upon the CFI Judgment; and

(4)  whether the continuation of this action would CONSTITUTE A COLLATERAL ATTACK UPON THE CA Judgment.

9.Each of these issues is distinct and separate. The volume of evidence and submissions (both written and oral) that are attributable to the second and third issues cannot be said to be insignificant. I am particularly struck by the length to which Midland had tried in evidence to contradict and discredit KLY’s allegations that Mr Wan had orally assured, represented to and/or promised Mr Davidson that KLY could charge 65% of the Sum and that KLY had served the Owners as a property consultant in reliance upon such alleged assurances, representations and/or promises. In addition to taking up a considerable portion of each of 2 affirmations of Ms Joyce Ko, a Senior Sales Manager of Midland, Midland also adduced evidence from Mr Wan, Mrs Wei and Mrs Wong.

10.I agree with Mr Yu SC that the Elgindata 3^rd principle is applicable. Applying a rough and ready assessment of the volume of Midland’s evidence and submissions (both written and oral) that are attributable to the second and third issues, I would disallow 30% of Midland’s costs. I do not accede to the 50% reduction suggested by KLY because looking at the matter in the round, I do not see the failed issues as having contributed equally to the length and costs of the application before me. I have taken into account the facts that much of the background giving rise to this action would have had to be gone into even if Midland had pursued just the first issue and that the first issue was heavier than the others.

BASIS OF TAXATION

11.The Court’s discretion to award indemnity costs is not fettered or circumscribed beyond the requirement that indemnity costs must be “appropriate”. What makes it appropriate is the existence of some “special and unusual features” connected with the case but which can otherwise extend to any matter relating to the litigation, the parties’ conduct in it and the circumstances leading to the litigation. See, for example, Society for Protection of the Harbour Ltd v Town Planning Board (No 2) [2004] 1 HKLRD 127 and (2004) 7 HKCFAR 114.

12.Mr Wong puts forward the following as “special and unusual features” that make it “appropriate” for the Court to award indemnity costs against KLY:

(1)  the absence of any good reason for KLY to bring this action;

(2)  the falsity of the assertions advanced by KLY in this action; and

(3)  the absence of any good reason for KLY to continue this action after the CA Judgment.

Absence of good reason for bringing this action

13.I do not need to go into the detailed submissions made by the parties as to whether or not it was reasonable for KLY to commence this action against Midland.

14.It is implicit in every order for the striking out of a statement of claim and the dismissal of an action that it is plain and obvious that the action should not have been brought and/or maintained, at least in the form that it was constituted. This, without more, is not a special or unusual feature making indemnity costs appropriate.

Falsity of the assertions advanced by KLY in this action

15.Midland relies on the following findings in the CA Judgment:

(1)  by Rogers VP (with whom Barma J agreed) :

“17.  In my view, however, even taking the most favourable view of the facts, the defendant is simply not able to make out a viable case either that it had contracted for a fixed fee or that it had contracted to act other than as a solicitor or on the basis that any work it carried out that might be considered as estate agent’s work would be treated separately or independently from its work as a solicitor.  The evidence filed on behalf of the defendant firm does no more than make unparticularised assertions that Mr Wan had said from time to time that he thought the defendant firm would be entitled 0.65%.  Not only is there no written record to support the defendant’s argued case, which goes much further than such an assertion, but the note made by the assistant solicitor in or around 18 May 2007, exhibited EJD-27, shows that what was under discussion was a fee of 0.5%, not 0.65%.

18.  Whilst, therefore, coming to the conclusion that the judge arrived at the right decision I do so on the basis that it is not arguable on the facts that the defendant has a defence to the plaintiffs' claim that it should deliver a bill of costs.”

(2)  by Wright J:

“20.  I agree with the Vice President that this appeal should be dismissed upon the ground that it is simply not arguable that the defendant has a defence to the plaintiff’s claim.  As the inherent improbability of the defence raised disposes of the appeal, I regard it as unnecessary to go into the other issues considered by the judge.

…

22.  It seems to me that, given the lengths to which the defendant went, in all of the documents generated by it, to describe itself as solicitors or “Appointed Solicitors” and to ensure that it was abundantly clear that its “Costs and Disbursements” would be payable out of the additional 1% to be paid by the successful tendered, any suggestion that there was an agreement as to a “consultancy fee” is unworthy of belief.”

16.In short, the Court of Appeal had found in the Owners’ Action that the factual case upon which this action was also premised was incredible.

17.Mr Wong draws my attention to She Tsu Yi v Tsui Ki Ting, HCA 1684/2004 & HCMP 3290/2004, unreported, 13 December 2007 in which Poon J ordered the defendants to pay indemnity costs because they had fabricated a bogus defence and made up evidence both in witness statements and in Court and they had conducted such bogus defence in a way that had unnecessarily lengthened the proceedings and the trial and escalated the costs.

18.To my mind, it must at the end of the day be a question of extent and degree. I would have come to the same conclusion on the facts as the Court of Appeal had I been invited to decide Midland’s application on such a basis. However, the disposal of an application for the striking out of a pleading (or, to take another example, for summary judgment) sometimes involves the Court making a finding that that the claim or the ground of defence is plainly and obviously incredible on the facts. Yet, we do not see the Court order indemnity costs in every such case. Indeed, in every case where there is a material dispute of fact, the Court is bound to prefer one party’s account. Such a finding, without more, is not a special or unusual feature making indemnity costs appropriate.

Absence of good reason for continuing this action after the CA Judgment

19.While the position maintained by KLY after the CA Judgment (summarized in paragraphs 24, 25, 38 to 440 of the Judgment) was wrong and regrettable, it would not be appropriate to use this to impose a harsher basis for the taxation of costs, the bulk of which was incurred prior to the CA Judgment.

CERTIFICATE FOR TWO COUNSEL

20.I treat this as being in issue because the costs order proposed by KLY does not include any Certificate for Counsel although Mr Yu SC has not made any submissions on this aspect of the costs.

21.In view of the nature and complexity of the issues raised, I consider Midland’s application appropriate for 2 Counsel.

22.For the above reasons, KLY should pay Midland 70% of the costs of the action and of the striking out application, to be taxed on a party and party basis if not agreed with a Certificate for 2 Counsel.

23.As I have ruled substantially in favour of KLY on the issues as to costs, I make an order nisi that Midland should pay KLY costs of their submissions on costs, to be taxed if not agreed on a party and party basis.

Mr Benjamin Yu SC and Ms Elsie Yiu, instructed by Messrs Ho, Tse, Wai & Partners, for the Plaintiff

Mr Anson Wong, instructed by Messrs Iu, Lai & Li, for the Defendant