GROUP STAR LTD v. LAM SUI KEI JOSEPH AND OTHERS

DCCJ 5378/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5378 OF 2009

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BETWEEN

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DECISION

1.  Before me is a Summons dated 2 June 2011 issued by the Plaintiff seeking certain orders against the 2^nd and 3^rd Defendants following upon the acceptance by the Plaintiff of a sanctioned payment by the 2^nd and 3^rd Defendants.

2.  The 1^st and 3^rd orders sought by the Summons deal respectively with the payment out of the sanctioned payment and the vacation of trial dates.  These orders are not opposed.

3.  Paragraph 2 of the Plaintiff’s summons seeks an order that the 2^nd and 3^rd Defendants pay the Plaintiff’s costs of this action against all Defendants – i.e. not just of the action against the 2^nd and 3^rd Defendants themselves but of the action against the 1^st Defendant too.

4.  The 2^nd and 3^rd Defendants accept that an order should be made that they pay the Plaintiff’s costs of the action against them – but they oppose (to what I am told by Mr Joe Lau, appearing for the Plaintiff, was the surprise of his client) an order requiring them to pay the costs of the action against the 1^st Defendant.

5.  I should note a preliminary matter. At the beginning of the hearing, I notified Mr Lau that I have accepted instructions as a barrister in private practice, reasonably regularly, from the solicitors for the 2^nd Defendant – though I have no current such instructions, no connection with this case, and no acquaintance with any of the staff of the 2^nd Defendant’s solicitors who are dealing with it.  Mr Lau invited me to recuse myself – and to adjourn the matter, so that another judge could be assigned and also so that his client could engage counsel to appear on its behalf.  I declined to take either course.

6.  This action arose out of what has been termed in the pleadings as the “Sub Sale Agreement” dated 12 August 2008 for the sale and purchase of property.  The Plaintiff was the purchaser and the 1^st Defendant was the vendor.  The 2^nd Defendant was the solicitor for the Plaintiff/purchaser and the 3^rd Defendant was the solicitor for the 1^st Defendant/vendor.

7.  The long and short of it is that the transaction failed when the 1^st Defendant did not complete.  The 1^st Defendant absconded together with deposit money paid to him on behalf of the Plaintiff.  These proceedings were eventually issued, claiming (among other things) breach of the Sub-Sale Agreement, damages and the return of deposit moneys (against the 1^st Defendant); breach of retainer, negligence and damages (against the 2^nd Defendant); and negligence and damages (against the 3^rd Defendant).

8.  Final and interlocutory judgment was entered by the Plaintiff against the 1^st Defendant, and sealed, on 28 September 2010 for HK$760,000 and damages and (importantly for present purposes) costs.  This judgment was entered in default of the 1^st Defendant having filed a Notice of Intention to Defend.

9.  The 1^st Defendant having absconded, no part of the judgment against him (including costs) has been satisfied.  Hence the Plaintiff’s application for costs against the 2^nd and 3^rd Defendants not just for the costs of the action against them, but for the costs of the action against the 1^st Defendant too.

10.  While I am sympathetic to the predicament of the Plaintiff, I have arrived at the view that I cannot accede to its application.  I do so for the following main reasons.

11.  First, having entered and sealed the default judgment (including judgment on costs) against the 1^st Defendant, the Court has been rendered functus officio with respect that judgment, including – it seems to me – the part of it dealing with costs:  per Stone J at para. 33 of Kwok Siu Ming Simon v Rothschild Bank AG & ors (HCCL 140/1997, 2 September 2005).  The Court now has no jurisdiction to vary the judgment, it having been entered and sealed.

12.  Mr Lau sought to persuade me that any order made now, making the 2^nd and 3^rd Defendants pay the Plaintiff’s costs against the 1^st Defendant, would not be a variation of the default judgment against the 1^st Defendant.  I am unable to accept this submission.  The only possible interpretation of the costs part of the default judgment is that the costs of that action should be paid by the 1^st Defendant.  Any order made now, making the 2^nd and 3^rd Defendants liable for those costs, would necessarily vary the judgment.  While it is easy to be wise in hindsight, the Plaintiff might have been better off, for example, leaving open the issue of costs in the default judgment or by suing for those costs as an item of special damage in the claims against the 2^nd and 3^rd Defendants.

13.  Second, I see no jurisdictional basis, in the circumstances of this case, on which I can consider allowing the Plaintiff to seek all its costs against the 2^nd and 3^rd Defendants.  It is said on behalf of the Plaintiff that, in considering costs following the acceptance of a sanctioned payment, the Court may order the paying-in party also to bear the costs of the non-paying in party – with the question being (on the exercise of the Court’s discretion on that point) whether it was reasonable for the plaintiff to sue all the defendants.  Reliance is placed on para. 10 of Registrar Au-Yeung’s decision in Yuen Chun-wah v Kanson Crane Service Co. Ltd & ors (HCPI 893/2006, 4 June 2008).

14.  This case, however, does not assist the Plaintiff.  The jurisdiction discussed therein exists only where the defendants are sued jointly or severally, not alternatively.  It is plain on the Plaintiff’s own pleading that the claims against the 2^nd and 3^rd Defendants were alternative claims, not joint or several claims – see paras 41 and 48 of the Amended Statement of Claim.  While the claims for liquidated sums are the same as against all parties, the causes of action against the 2^nd and 3^rd Defendants are separate and independent from the cause of action against the 1^st Defendant.

15.  I was also invited, on behalf of the Plaintiff, to conclude that the entry of default judgment against the 1^st Defendant did not truly amount to an election (as opposed to a procedural step) and that it had been reasonable for the Plaintiff to sue the 2^nd and 3^rd Defendants in this case.  It is not necessary for me to do more than note these points for the record given the conclusions I have already reached.

16.  For these main reasons, I dismiss the application for an order that the 2^nd and 3^rd Defendants pay the Plaintiff’s costs of its action against the 1^st Defendant.  I make an order that the 2^nd and 3^rd Defendants pay the Plaintiff’s costs of its actions against them, to be taxed if not agreed.

17.  I would further make a costs order nisi that the costs of and incidental to this application and of the hearing be to the 2^nd and 3^rd Defendants.