RE KIBUN HONG KONG CO LTD

HCA 2207/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2207 OF 2003

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J U D G M E N T

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Summonses

1. There are 2 Summonses before the Court.

2. By a Writ and Statement of Claim ("the SOC") dated 16 June 2003 the Plaintiff ("Mr Wong") claimed damages against the Defendants (respectively, "Mr Thomas" and "Herbert Smith"). Mr Thomas is a partner of Herbert Smith. By Summons ("the 1st Summons") dated 2 July 2003 the Defendants applied to strike out the SOC on various grounds, including that the SOC was frivolous, vexatious or otherwise and an abuse of process.

3. On 8th September 2003 Mr Wong filed an Amended Statement of Claim ("AMSOC") without leave pursuant to RHC Order 20, Rule 3. By Summons ("the 2nd Summons") dated 11 September 2003 the Defendants applied (pursuant to RHC Order 20, Rule 4) to disallow the amendments to the SOC.

Background

4. By HCA No. 5590 of 2000 ("the 2000 Action") Mr Wong sued Messrs Victor Chu & Co. ("Victor Chu") for libel in respect of certain words used by Victor Chu in inter-solicitor correspondence in the course of a previous litigation. Victor Chu and Mr Wong were respectively acting for the plaintiff and defendant in that previous litigation (which happened in 1994). In the 2000 Action Herbert Smith were appointed by the Solicitors' Indemnity Scheme to act for Victor Chu.

5. Following the trial of a preliminary issue, by a Judgment dated 19 September 2001 (upheld by the Court of Appeal on 29 November 2002) Hartmann J dismissed Mr Wong's claim against Victor Chu in the 2000 Action. Hartmann J held that the words complained of by Mr Wong had been published on an occasion of absolute privilege and were accordingly not actionable.

6. Following dismissal of the 2000 Action, Victor Chu proceeded to tax its costs. The bill of costs identified a number of fee earners on the part of Herbert Smith. These included Mr Sammy Fang ("Mr Fang") who was described in the bill as having "qualified in Australia in Time 1996". The bill charged for an aggregate of 93 hours ($289,333.30 at $3,100 per hour) of Mr Thomas' time. It claimed an aggregate amount of $10,400 (representing 4 hours 20 minutes of work at $2,400 per hour) for Mr Fang's time.

7. During a taxation hearing before Master Au-yeung on 15 August 2002, Mr Thomas stated that Mr Fang was a Registered Foreign Lawyer. In fact Mr Fang (although qualified in Australia) was not a Registered Foreign Lawyer at the time.

8. On 28 August 2002 Mr Wong applied to review Master Au-yeung's decision. A hearing was consequently fixed for 14th November 2002 to review her taxation.

9. In written Submissions dated 4th November 2002 for the then forthcoming taxation review, Herbert Smith volunteered the following correction of Mr Thomas' statement regarding Mr Fang:-

"3. Mr Fang is not a registered foreign lawyer. Mr Thomas was mistaken as to Mr Fang's position and apologizes to the Master for this mistake. Mr Fang is qualified in Australia, having been admitted as a Solicitor of the Supreme Court of New South Wales in December 1996 and as a Solicitor of the High Court of Australia in March 2001. He has been employed by Herbert Smith as a paralegal since 20th August 2001."

The submissions went on to suggest (relying on Waung J's decision in The "Magway" HCAJ 246 of 1999, 1 August 2002) that the erroneous description of Mr Fang should not affect the recoverability of his costs.

10. At the taxation hearing on 14 November 2002 Mr Wong submitted that Mr Thomas had deliberately misled the Master and accordingly all the time charged by Mr Thomas should be disallowed. Master Au-yeung adjourned the review and gave Mr Wong leave to apply out of time for the review of all costs claimed in respect of Mr Thomas. She further ordered that Mr Thomas file an affidavit explaining his mistake and attend the restored hearing of the review to give personal explanation if necessary.

11. Mr Thomas filed the requisite Affidavit ("the Affidavit") on 24 December 2002. In the Affidavit Mr Thomas also pointed out several other errors in Victor Chu's bill of costs which he had only discovered after the original taxation hearing. These errors related to the rates charged for Mr Thomas' work and to certain items of work done by other fee earners but mistakenly attributed by the law costs draftsman to Mr Thomas in the original bill of costs. As a result of such discovery, Victor Chu issued a Summons dated 15 January 2003 to withdraw the original (and substitute an amended) bill of costs. A further summons was issued on 30 January 2003 to amend this summons. An amended bill of costs annexed to this further summons claimed a revised aggregate of 42 hours 15 minutes work (comprising 26 hours 40 minutes ar $2,900 per hour and 15 hours 35 minutes at $3,300 per hour for a total of $128,758.30) for Mr Thomas. The amended bill charged 6 hours' work ($14,400 at $2,400 per hour) for Mr Fang.

12. On 6 February 2003 Master Au-yeung held that she had no jurisdiction to allow withdrawal of Victor Chu's original bill of costs. But she granted Victor Chu leave to issue an application for review out of time to deal with th errors mentioned in the Affidavit. Victor Chu thus obtained an appointment for a review to be heard on 6 March 2003. This appointment and Mr Wong's own review application were both subsequently adjourned to 10 June 2003.

13. At the 10 June 2003 review Mr Wong cross-examined Mr Thomas on the Affidavit, including Mr Thomas' explanation for the mistaken characterisation of Mr Fang's status. Mr Wong challenged Mr Thomas' explanation for the discrepancies between the original and amended bill of costs. Mr Wong submitted that Mr Thomas had deliberately misled the Master as to Mr Fang's status and that the reason for Mr Thomas seeking to review the original bill of costs was "so that the whole idea that whether or not Mr Fang was a registered foreign lawyer could be buried underground". Mr Wong described Mr Thomas as "the sort of person to have the propensity to twist [his] way around in order to suit [his] own purpose". Finally, Mr Wong argued that Mr Thomas' credibility was so much in doubt that the Master "should set aside all Mr Thomas's time in relation to his claim of time that he has sent in his bill of costs in relation to [the 2000 Action]."

14. At the end of the hearing on 10 June 2003 Master Au-yeung rejected Mr Wong's submissions. She held that:-

"There does not appear to be enough material to create a doubt in my mind as to the credibility of Mr Thomas when one views his explanation independently.

....

The explanation given by Mr Thomas was not incredible. The course of events was most unfortunate. Had Mr Thomas or his firm been more careful in giving instructions to the LCD [law costs draftsman], had they taken more care when approving the bill, the matter would not have ended up in the present state.

Unfortunate though it may be, there have been instances in the past where solicitors rely on LCDs whom they think are experienced in taxation matters to draft a bill and then are concerned only with the final figure and whether that final figure contravenes the indemnity principle.

Whilst this is not to be encouraged, I cannot say that, looking at all the circumstances together, the failure of Mr Thomas to notice that the bill overcharged his time was a deliberate, misleading act on the part of Mr Thomas.

....

Looking at all the circumstances, there is nothing which caused me to find that the misleading statement was made out of a deliberate intention to lie to the court as opposed to carelessness. Indeed it is not an irresistible inference that Mr Thomas had been lying to the court. There could be logical explanations consistent with innocence which I accept."

The Master thereupon granted leave to Victor Chu to amend its appointment for review and adjourned the hearing of the review to a date to be fixed. The review will be heard on 25th September 2003.

Discussion

15. The SOC pleads in substance as follows:-

"3. The first Defendant [Mr Thomas] acting in his capacity of partner of the second Defendant [Herbert Smith] had deliberately made a misleading lie to the court on the 15 August 2002 in that he claimed one of the employee Mr Sammy Fang was a registered foreign lawyer in employment of the second Defendant. In fact, Mr Fang was not a registered foreign lawyer in Hong Kong SAR at the material time.

4. The objective of making such misleading lie to the Court is to induce the Court to award a higher sum of costs against the Plaintiff in the taxation hearing in respect of High Court Action No. 5590/2000 [the 2000 Action]. As a direct result of this fraudulent misrepresentation, the Court was wrongfully induced in making a higher rate to second Defendant's client and to the detriment of the Plaintiff.

5. The said fraudulent misrepresentation was later discovered and admitted by the first Defendant and the first Defendant merely claimed it was a mistake.

6. On the 15 January 2003, the second Defendant took out an application to the Court and applied to replace the Bill of Costs (the first Bill) in respect of the High Court Action No.5590/2000 with an amended Bill of Costs (the second Bill). The two Bills relate to the same work purported to be the exact amount of time costs spent by the first Defendant and other employees and counsels of the same action and yet there are substantial and significant difference in the said Bills.

Particulars

a. The aggregate time claimed by Mr Thomas in the first Bill is 93 hours 20 minutes and in the second Bill the aggregate time claimed by Mr Thomas is 42 hours 15 minutes.

b. One of the fee earner claimed in the second Bill Ms Monica To was never mentioned in the first Bill.

c. The aggregate time claimed by Ms Ingrid Southorn in the first Bill is 7 hours 7 minutes and in the second Bill the aggregate time claimed by Ms Ingrid Southorn is 33 hours 22 minutes.

7. It is apparent that the Bills prepared by the second Defendant are in direct contradiction and conflict with each other and the Plaintiff is therefore subject to the persistent fraudulent practice and unfair treatment by both Defendants.

8. The Plaintiff will rely on the doctrine of Res Ipsa Loquitur at the trial of this action.

9. As a result of the fraud and conspiracy to defraud and the fraudulent misrepresentations by both Defendants, the Plaintiff suffered damages and losses.

10. The Plaintiff also averred that the second Defendant is vicariously liable for the conduct of the first Defendant to the Plaintiff.

11. On the 10 June 2003, the Court awarded costs against the Defendants as a result of the further amendments made in the taxation of the bill mentioned earlier and both defendants refused or neglected to pay to the Plaintiff the assessed amount without lawful exercise at the time of the issuance of this Writ and thy are therefore in contempt of the said Court Order."

16. Insofar as material the AMSOC pleads as follows:-

"3. The first Defendant acting in his capacity of partner of the second Defendant had made a positive false statement of the fact to the Plaintiff and a Master of the High Court on the 15 August 2002 in that he claimed one of the employee Mr Sammy Fang was a registered foreign lawyer in employment of the second Defendant. In fact, Mr Fang was not a registered foreign lawyer in Hong Kong SAR at the material time.

4. The first Defendant made the above false statement wilfully and deliberately with dishonest belief with the intent that it shall be acted on by both the Plaintiff and th Master of the High Court.

Particulars of the dishonest
belief of the first Defendant

a. Mr Sammy Fang has been working under the supervision of the first Defendant for a long period of time.

b. The qualification of Mr Sammy Fang as Australian lawyer was clearly stated in the Bill of Costs.

c. The High Court authority submitted by the first defendant to the Plaintiff and the Master of High Court on 15th August 2002 involved a registered foreign lawyer and the first Defendant asserted the said authority is directly relevant.

d. The absence of registration of Mr Sammy Fang as a foreign lawyer can readily be seen in the Lawlist of the Law Society and the letterhead of the Second Defendant.

5. The objective of making the said false statement to the Master of High Court and to the Plaintiff is to induce the Court to award and the Plaintiff to accept payment of a higher sum of costs against the Plaintiff in the taxation hearing in respect of High Court Action No. 5590/2000 [the 2000 Action]. As a direct result of this fraudulent misrepresentation, the Court was wrongfully induced in making a higher rate to second Defendant's client and Plaintiff suffered loss and damage.

Particulars of special damages

a. The Plaintiff was ordered to pay a higher hourly rate on a non-registered foreign lawyer.

b. The Plaintiff have to spend ten working hours of his time to apply for a review of this item in the taxation.

c. The Plaintiff have to attend extra court hearings to rectify this false statement.

d. The Plaintiff have to turn away one client during said period.

6. Further or in the further alternative, the first Defendant and second Defendant committed a tort of conspiracy in performing the following act causing damage to the Plaintiff.

Particulars

a. On the 15 January 2003, the second Defendant took out an application to the Court and applied to replace the Bill of Costs (the first Bill) in respect of the High Court Action No. 5590/2000 with an amended Bill of Costs (the second Bill). The two Bills relate to the same work purported to be the exact amount of time costs spent by the first Defendant and other employees and counsels of the same action and yet there are substantial and significant difference in the said Bills.

b. The aggregate time claimed by Mr Thomas in the first Bill is 93 hours 20 minutes and in the second Bill the aggregate time claimed by Mr Thomas is 42 hours 15 minutes.

c. One of the fee earner claimed in the second Bill Ms Monica To was never mentioned in the first Bill.

d. The aggregate time claimed by Ms Ingrid Southorn in the first Bill is 7 hours 7 minutes and in the second Bill the aggregate time claimed by Ms Ingrid Southorn is 33 hours 22 minutes.

7. It is apparent that the Bills prepared by the both Defendant are in direct contradiction and conflict with each other and the Plaintiff suffered loss and damage.

Particulars

a. The Plaintiff have to spend fifteen working hours to study the anomaly in the said bills.

b. The Plaintiff have to attend extra court hearing pursuant to said amendments by both Defendants.

c. By reasons of the sudden amendments to the first Bill of Costs, all the time and effort previously spent by the Plaintiff have been totally wasted.

d. The continue and relentless attempt by both Defendants to engage the Plaintiff in court hearings has caused the Plaintiff emotional distress and economic loss in business because the Plaintiff has to turn away clients in order to make preparation for the said wilful default of both Defendants."

Note AMSOC does not coincide precisely with the text of the SOC. For example, words have been added to the SOC which have not been underlined in the AMSOC. But I do not think that this detail affects the analysis below.

17. The Defendants attack the SOC and AMSOC on the following bases:-

(1) The action is a collateral attack on Master Au-yeung's decision of 10 June 2003 which was a final determination by a competent tribunal on the issue of Mr Thomas' alleged fraud.

(2) The plea of fraud is unparticularised and is incapable of cure by amendment or further particulars.

(3) In any event, as of the date of the Writ, Mr Wong has suffered no loss:-

(a) Whether or not someone is a "Registered Foreign Lawyer" has no bearing on the recoverability of costs attributable to his work on behalf of the firm for which he works.

(b) The taxation review of Victor Chu's original bill remains extant. The Master has come to no final decision on the review. Thus, the Master may hold that the mistake as to Mr Fang's status was material to the original taxation and tax down Mr Fang's costs. Alternatively, the Master may hold that the mistake was immaterial to the original taxation and (on such hypothesis) Mr Wong could have no complaint.

18. I consider each ground.

Collateral attack

19. It is an abuse of process for an intending plaintiff to initiate legal proceedings for the purpose of mounting a collateral attack upon a final decision against the intending plaintiff which has been made by another court of competent jurisdiction in previous proceedings in which the intending plaintiff had a full opportunity of contesting the decision in the court by which it was made (Hunter v Chief Constable of the West Midlands Police [1982] AC 529 (HL), at 541B-C (Lord Diplock)). It would be:-

"a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again"

(Lord Diplock in Hunter at 542C-D quoting Lord Halsbury LC in Reichel v Macgrath (1889) 14 App Cas 665, at 668). Such abuse may exist where, an issue having been resolved in an earlier action between the intending plaintiff against one party, the intending plaintiff seeks to raise the same issue in a later action against another party. See, for example, Cosby v Government of the USA [2000] 3 HKC 688 (Stock J), at 695I-696G. Where there is such abuse it is the Court's duty (as opposed to discretion) to prevent the same (Hunter at 536D; cited with approval by the Court of Appeal in Tsang Chin Keung v Employees Compensation Assistance Fund Board (No. 2) [2003] 1 HKC 499, at 510H-I (Rogers VP)).

20. Mr Wong raised the issue of fraud in the taxation hearing of the 2000 Action. The issue of fraud was raised for the purpose of enabling Mr Wong to persuade the Court to disallow Mr Thomas' costs. The Master squarely rejected Mr Wong's allegations of Mr Thomas' fraud in the 2000 Action.

21. It is apparent that the crux of the SOC and AMSOC are the allegations that:-

(1) Mr Thomas deliberately misled the Master about Mr Fang's status; and,

(2) the presentation by Mr Thomas and Herbert Smith of an amended bill of costs constituted a fraudulent act and a conspiracy to defraud.

Unless Mr Wong can establish these allegations, his claims in SOC and AMSOC stand no prospect of success.

22. But these allegations are precisely those which Mr Wong exhaustively canvassed (including in cross-examination of Mr Thomas) before the Master and on which the Master conclusively and finally held against Mr Wong. It follows that Mr Wong's attempt to ventilate the same issues of alleged fraud in this action against Mr Thomas and Herbert Smith is precisely the abuse of collateral attack which Lord Diplock described as "scandalous" in Hunter.

23. On this ground alone, I would strike out the SOC and disallow the AMSOC.

Want of particularity

24. Fraud cannot be lightly alleged. Allegations of fraud must be pleaded distinctly and with the utmost particularity (ADS v Wheelock Marden & Co. Ltd. [1994] 2 HKC 264, at 270B-C, Bokhary JA).

25. Mr Shieh SC for the Defendants complains that no particulars of knowledge are averred in relation to the accusation in SOC §3 that Mr Thomas "deliberately made a misleading lie to the Court". The same, Mr Shieh says, applies to the plea of "persistent fraudulent treatment" in SOC §7.

26. Mr Shieh acknowledges in his Skeleton §9 that:-

"It is sometimes an answer to an objection to a pleading that the omission can be cured by supplying Further and Better Particulars, or amending the Statement of Claim."

However, he submits that "no possible amendment or Further and Better Particulars could have been formulated to cure the pleading" here. This is because the claim is "a tissue of improbabilities, which ought not to be sent to proof" (see OTB v Coopers & Lybrand [1990] 1 HKLR 568).

27. I accept that logical gaps exist in the SOC.

28. For instance, SOC §7 purports to infer "a persistent fraudulent practice" by both Defendants from the mere fact that there are obviously differences between the original and amended bill of costs. The supposed conclusion can hardly follow from that bare premise.

29. AMSOC, which attempts to make good deficiencies in SOC, likewise displays flaws of logic. It does not remedy the flaws in the SOC.

30. Consider AMSOC §§3. The phrase "deliberately made a misleading lie" in SOC §3 is revised in AMSOC §3 to the expression "made a positive false statement of fact" (which seems to me to mean the same thing). But in new AMSOC §4 particulars of Mr Thomas' dishonest belief are proffered. These invite the Court to infer dishonest knowledge from the fact that Mr Fang worked under Mr Thomas; the fact that Mr Fang was described in the original bill of costs as an Australian lawyer; the fact that The "Magway" cited by Mr Thomas to Master Au-yeung concerned someone who was a registered foreign lawyer; and the fact that Mr Fang was not registered as a foreign lawyer in the Law Society's list and Herbert Smith's letterhead. Such facts are too slim a basis on which to draw such a momentous conclusion. Even if all the particulars averred in AMSOC §4 were made out, it would be a presumptuous Court that inferred dishonesty from such matters. The particulars alleged are insufficient to support the allegation sought to be made.

31. Consider AMSOC §6 where a tort of conspiracy is pleaded and purported particulars given. These particulars invite the Court to infer a conspiracy essentially from the mere fact that there are discrepancies between the original and amended bill of costs. Again even if the particulars were established a Court could not infer the desired conclusion, the existence of a conspiracy, from such matters alone.

32. Examine the tort of conspiracy more technically. There are broadly 2 types of conspiracy:-

(1) conspiracy to commit an act which is itself unlawful with an intention (but not necessarily the predominant purpose) to injure the plaintiff; and,

(2) conspiracy to do an act which is not otherwise unlawful, but with the predominant purpose to injure the plaintiff.

33. It is unclear from SOC and AMSOC whether Mr Wong is alleging one or other or both types of conspiracy. If Mr Wong is alleging the 1st type, the only unlawful act that could be relevant would be the alleged fraud by Mr Thomas. Master Au-yeung has ruled against that. In fact, during submission Mr Wong appeared to suggest that his case was of the 2nd type. If so, he has failed to plead any particulars to support the existence of a predominant purpose to injure.

34. Mr Wong argues that the alleged particulars are the best that he can do on the material available. That may or may not be the case. I agree with Mr Shieh that the Court must judge purported pleadings of fraud as they stand before the Court. If a claim of fraud is not made out to the requisite degree of rigorous particularity, it cannot be allowed to stand in the hope that later developments will allow the intending plaintiff to "flesh out" his deficient case.

35. I also accept Mr Shieh's contention that in any event no amount of further and better particulars or amendments could improve Mr Wong's case. No amount of particulars can cure the defects in the SOC and AMSOC because a court of competent jurisdiction has already found against Mr Wong on the essential premise underlying his allegations of fraud and conspiracy, namely, Mr Thomas' supposed deliberately misleading lies in respect of Mr Fang and the time spent by Mr Thomas on the 2000 Action.

36. Mr Wong argues that because the review has not come to any conclusion, Master Au-yeung's conclusion on the issue of fraud is not final. I disagree. The finality of Master Wong's finding is reflected in her sealed Order dated 10th June 2003 which recites: "AND IT HAVING BEEN FOUND that Mr Gareth Huw Thomas did not deliberately lie to or mislead the Court, in the manner alleged by the Plaintiff or at all". This is not an interlocutory conclusion but a final one on the merits. It is impermissible for Mr Wong to plead as if Master Au-yeung had made no finding adverse to the heart of his case in this action.

37. In summary, I conclude that Mr Shieh's ground of want of particularity is a consequence and refinement upon the collateral attack ground discussed above. SOC and AMSOC are deficient as pleading. They cannot be improved given Master Au-yeung's final conclusion on the issue of fraud.

No loss

38. Mr Shieh points out (and I understood Mr Wong to accept) that, to make out a cause of action, Mr Wong must establish that he has suffered loss. Since Master Au-yeung has not come to any conclusion on the review of her original taxation, it is possible (Mr Shieh says) that Mr Wong may persuade the Master that, Mr Fang not being a Registered Foreign Lawyer, his work should only be allowed at a significantly lower rate.

39. While I acknowledge that there is some force in Mr Shieh's argument, it seems to me that this ground is again simply a refinement of the collateral attack ground.

40. AMSOC alleges that to deal Mr Thomas' alleged lies Mr Wong has had to spend long hours of work analysing the bill of costs and has had to turn away work from clients as a result. Mr Wong's case in AMSOC is thus that he has already incurred loss. But, as Mr Shieh argues elsewhere in his Skeleton, the damages pleaded in AMSOC only have to be considered if the Court does not strike out the plea of fraud. If the plea of fraud is bad in consequence of Master Au-yeung's finding (as I have concluded), the damages claim (whether or not canvassed before Master Au-yeung) which is said to flow from the fraud must go as well.

Miscellaneous contentions

41. Mr Wong submitted that pleadings should be struck out and amendments disallowed only in plain and obvious cases. The principle is unobjectionable. But, in my view, for the reasons that I have given, this is a plain and obvious case where SOC and AMSOC are obviously bad and impossible of cure.

42. I note finally that Mr Wong invited me to infer from unrelated cases in which Herbert Smith has been involved that the Defendants have a "propensity" to act fraudulently so as to injure small solicitors' firms such as his own. In my opinion, Mr Wong's suggestion is unwarranted and unjustified. In particular, I record here that Mr Wong's suggestion of a supposed "propensity" for fraud is inconsistent with the fact that it was Mr Thomas and Herbert Smith which of their own motion pointed out that there had been errors in the original bill of costs and in Mr Thomas' description of Mr Fang.

Conclusion

43. For the above reasons, I disallow the amendments to the SOC, strike out the SOC and dismiss Mr Wong's action. I shall now hear the parties on costs and any consequential orders.