XCHRX WONG WAN CHEE, ERNEST AND ANOTHER v. MON-KOK INVESTMENT COMPANY LIMITED AND OTHERS

1996, MP No 3985

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. I have a summons before me issued by the third respondent in which he asked these proceedings against him be struck out on the grounds, amongst other things, that the petition discloses no reasonable cause of action against him. Clearly, on the face of the petition, there was no cause of action against the third respondent. The petitioners conceded this so I granted the relief sought. There was, however, an argument about costs. I reserved my judgment on that aspect.

2. Miss Cruden says that the costs should follow the event.

3. Mr Lam argues that the order as to costs should be that they be granted to the third respondent on the basis that, after the appropriate advice and the issue of the summons to strike out, the third respondent had stated by affidavit or otherwise the grounds for his application, and there had been only a fifteen minute call-over hearing. Alternatively, he submits that I direct that, from the 6 or 11 January 1997, any costs for the preparation for a contested hearing on the striking out be disallowed.

4. On 5 December 1996, the third respondent informed the petitioners' solicitors that he intended to seek a striking out. At that stage, if the petitioners had considered their petition properly, they would have realised that, indeed, they had made no allegations that could found a cause of action against the third respondent, and would have conceded the point. That did not happen. The petitioners asked the third respondent to file an affidavit. They would file an affidavit in reply, and then the third respondent should seek a fifteen minute hearing at which a realistic estimate of the time required could be made. In the meantime, they proposed to proceed with their petition. They told the third respondent that they would not defer prosecution pending the striking out, and that the third respondent's application was without merit.

5. On 6 January 1997, the petitioners' solicitors wrote to the third respondent's solicitors seeking the grounds of the application to strike out. They drew attention to the practice direction requiring, in the absence of an earlier letter signifying the broad grounds for the application, the applicant write such a letter within 5 clear working days of the hearing. The hearing was to be on 20 February 1997. The petitioners' solicitors said that, if the third respondent gave a satisfactory explanation, the petitioners would agree to the removal of the third respondent, the substitution of the trustees, with no order as to costs.

6. On 10 January 1997, the third respondent's solicitors wrote to the petitioners' solicitors giving some background information and the grounds on which the application was made. The third respondent also rejected the offer mentioned above.

7. On 11 January 1997, the petitioners' solicitors wrote again saying that, in the light of the third respondent's explanations, the petitioners were prepared to seek leave to amend to remove the third respondent, and seek the same relief against the trustees, on the basis of no order as to costs. The petitioners' solicitors said that, if the third respondent was not prepared to accede to the proposal on the basis of no order as to costs, it appeared that only matter in dispute for the purposes of disposing of the striking out summons was the issue of costs.

8. On 13 February 1997, the third respondent's solicitors replied saying that costs must follow the event. They said that the petitioners' solicitors letter was written without prejudice save as to costs, and that their client did not accept the offer. They said that the petitioners had not agreed unconditionally to discontinue proceedings, and their client was bound to prepare his case. They asked the petitioners to agree to the strike out, with costs to the third respondent.

9. On 14 February 1997, the petitioners' solicitors wrote saying, in effect, that the third respondent was not entitled to all his expenses, and offered $20,000 on the basis that the removal was by consent and the hearing vacated.

10. On 17 February 1997, the petitioners' solicitors wrote again asking, in view of the third respondent's requirement to have his costs, for details of those costs. These were supplied on 19 February 1997.

11. The letters from the petitioners' solicitors regarded by Mr Lam as significant are those of 6 and 11 January 1997.

12. The letter of 6 January 1997 asks for the grounds of the application and makes an offer that, in my judgment, the third respondent was justified in refusing. The grounds were supplied on 10 January 1997. I do not think that, on this basis, the third respondent would have been at fault in continuing to prepare for a full hearing of its application to strike out.

13. The letter of 11 January 1997 says that, if the third respondent was "not prepared to accede to the . . . proposal on the basis of no order as to costs, then it appears that only matter in dispute . . . for the purposes of the disposing of your client's summons is the issue of costs." (My italics.) What does this mean? It could mean that the petitioners would not, at the hearing, oppose the application to strike out, but would argue on the matter of costs. It could also mean that the only obstacle to the disposing of the striking out summons was the absence of agreement on the question of costs. This seems the more likely interpretation in the light of the italicised words, which seem to say we cannot agree on the disposal of the summons until the question of costs is settled. And I asked Mr Lam, during argument, if the petitioners had made any unconditional offer not to contest the striking out proceedings. He said they had not. Certainly, it seemed to the third respondent's solicitors that no such unconditional offer had been made; they said so in their letter of 13 February 1997. In their reply of 14 February 1997, the petitioners' solicitors did not dispute this. They said "Having regard to the correspondence and our summons for amendment, it is clear that the only issue currently in dispute . . . is the question of costs." The italics are mine. The summons for amendment was issued on 28 January 1997.

14. It seems to me that that it was only when the third respondent received the summons of 28 January 1997 was he entitled to feel safe in not preparing for a hearing of his application to strike out on the merits.

15. I do not believe that I should give the main direction asked for by Mr Lam. This assumes that, if the third respondent had proceeded to give his grounds immediately and go for a fifteen minute hearing, the petitioners would have caved in immediately, and that lesser costs would have been incurred. I do not accept these assumptions are justified. The third respondent gave more grounds that it was required to give within the requirement of the practice direction on 10 January 1997. In fact, all that the third respondent was required to say was that no allegation in the petition supports any cause of action against the third respondent. The petitioners did not unequivocally intimate their surrender to the third respondent until they delivered the petitioners summons of 28 January 1997. And I am not convinced that applying for a fifteen minutes hearing would have lessened costs.

16. I am also not prepared to give any direction that the third respondent is not entitled to recover certain costs incurred after a certain date. I do not know what costs were incurred when, and I do not think I should give directions that may have no effect. The Taxing Master knows well that he should not allow costs unnecessarily incurred. He does not need me to tell him that. It is for him to decide if costs were necessarily incurred or not, subject to any right of appeal.

17. In the result, I award costs of the third respondent's application to strike out to him, including, of course, the costs of the hearing on 20 February 1997, to be taxed if not agreed. I am not prepared to award costs on any higher scale as suggested by Miss Cruden. I do not think there is any justification for this.