BEST STAR HOLDINGS LTD v. LAM CHUN HING AND OTHERS

HCA 409/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 409 OF 2008

____________

BETWEEN

____________

______________

RULING ON COSTS

______________

APPLICATION

1.  The present Ruling on Costs should be read together with my Judgment given on 22 February 2012 (the “Judgment”) in this action.  Unless otherwise indicated, the expressions and abbreviations as used and defined in the Judgment will be adopted in this Ruling on Costs.

2.  In the Judgment, I made an costs order nisi as follows:

(1)            the 1^st and 2^nd defendants pay the plaintiff’s costs of the action, to be taxed if not agreed;

(2)            the plaintiff pays 60% of the costs of the 3^rd defendant of the action, to be taxed if not agreed.

3.  By a summons dated 1^st March 2012 (the “Summons”) , the plaintiff applied to vary the said costs order nisi and sought an order that the 1^st and 2^nd defendants, instead of the plaintiff, shall pay 60% of the costs of the 3^rd defendant of the action, to be taxed if not agreed.

4.  The 1^st and 2^nd defendants were duly served with the Summons, and an affirmation of service was put before me confirming such service.    The 1^st and 2^nd defendants, however, failed to attend the hearing of the Summons.  They had, as indicated in the Judgment, also absented themselves at the trial of the action.    Pursuant to r.5(1) of Order 32 of the Rules of High Court, I directed that the hearing of the Summons be proceeded with in the absence of the 1^st and 2^nd defendants.

SANDERSON AND BULLOCK ORDER

5.  The order sought by the plaintiff in the Summons is what is commonly called a Sanderson Order, which takes its name from the case of Sanderson v Blyth Theatre Co. [1903] 2 KB 533.  In his written submissions filed in support of the Summons, Mr Chong for the plaintiff indicated that while his preference was for a Sanderson Order, he would ask, in the alternative, for a Bullock Order, namely that the plaintiff be entitled to add to the costs which the 1^st and 2^nd defendants have been ordered to pay to it the costs that it has paid to the 3^rd defendant (see, Bullock v London General Omnibus Co. [1907] 1 KB 264, per Cozens-Hardy LJ at 272). 

6.  Generally, the award of costs is in the discretion of the Court (see, O.62, r2(4)) but O.62 r.3(2) provides that, "[i]f the Court in the exercise  of its discretion sees fit to make any order as to the costs of and incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs".

7.  The original costs order made by me was to order costs to follow the event.  If I am to vary my original costs order to make some other costs order, I need to be satisfied that in the circumstances of the present case it is just to make some other costs order.  The burden is upon the plaintiff to satisfy me of this.

8.  Mr Chong submitted that the making of a Sanderson Order or a Bullock Order would not prejudice the 3^rd defendant.  I cannot agree. Clearly, in the case of a Sanderson Order, the making of it would shift the burden of payment (of the 3^rd defendant's costs) directly from the plaintiff to the 1^st and 2^nd defendants.   The 3^rd defendant is justifiably concerned that if the burden of payment of his costs is shifted to the 1^st and 2^nd defendants, it would only be able to look to the 1^st and 2^nd defendants for its costs, and they may not be good for it.  There is no evidence before me to show the financial position of the 1^st and 2^nd defendants, and I am unable to form any view on this.  However, the fact that the 1^st and 2^nd defendants had failed to appear at trial and did not instruct solicitors or counsel to represent them has not inspired any confidence in this regard.  The 1^st and 2^nd defendants are justifiably apprehensive of the possible impact that a Sanderson Order may have upon the chance of recovery of its costs.

9.  There may not be any particular prejudice to the 3^rd defendant if a Bullock Order is made.  Yet such an order may not be just to the 1^st and 2^nd defendants, and although they have not appeared to make any submissions on the application, I need to be satisfied that there is a proper case for making such an order and that it is just in all the circumstances to make it.

10.  A Sanderson or Bullock Order seeks to distribute or adjust the burden of costs between a successful and an unsuccessful defendant, in a proper case where it was reasonable for the plaintiffs to sue two defendants in the alternative, succeeding against one but failing against the other.  Whether or not it is just to make such distribution or adjustment depends on the circumstances of each case.  If it is just to make it in any case, "the choice between a Bullock Order and a Sanderson Order .... was a matter for the judge's discretion" (see, Hong Kong Civil Procedure 2012, Vol.1, 62/1/6 and Bankamerica Finance Ltd v Mock [1988] 1 AC 1002).

ISSUES AT TRIAL

11.  In my view, the present case is not a proper case for the making of either a Sanderson or Bullock Order.

12.  As far as the issues at trial are concerned, there are 4 issues which require the substantive resolution by the Court.  They are:

(a)    the plaintiff's claim for specific performance based on the Jishan principles, which was made against both the 3^rd defendant as well as the 1^st and 2^nd defendants;

(b)   the plaintiff's claim based on proprietary estoppel, made against the 1^st and 2^nd defendants only;

(c)   the plaintiff's claim for money had and received, made against the 3^rd defendant only; and

(d)   the issue of illegality raised by the 3^rd defendant in defence of the plaintiff's claim against it.

13.  The issue of illegality was raised by the 3^rd defendant and not by the plaintiff.  It failed.   I have already, in the light (inter alia) of the failure of this defence, deducted some part of the 3^rd defendant's costs from the costs recoverable from the plaintiff.   The failure of the 3^rd defendant in maintaining this part of its defence cannot be a good reason for making either a Sanderson or a Bullock Order.

14.  The claim for specific performance concerned both the 1^st and 2^nd , as well as the 3^rd defendants.  The claim entirely failed.  It failed against all the defendants.  Hence as far as the cause of action for this claim is concerned, it is not a case of the plaintiff having succeeded against one defendant and failed against another. 

15.  The claim based on proprietary estoppel was made against the 1^st and 2^nd defendants only.   The claim was not, and could not have been, made against the 3^rd defendant.  Maintaining such a claim against the 1^st and 2^nd defendants do not require the joining of the 3^rd defendant.  Again, this is not a case whereby a plaintiff, having reasonably maintained a cause of action against several defendants, has succeeded against some and failed against others.   

16.  Similarly the claim for money had and received was made solely against the 3^rd defendant.  It was not a claim that could possibly have been made against the 1^st and 2^nd defendants.   Making this claim against the 3^rd defendant does not require the joining of the 1^st and 2^nd defendants at all.  The claim has nothing to do with them.

17.  This being the case, I do not see the present case as one that justifies the making of either a Sanderson Order or a Bullock Order.  This is not a case where, either because of the uncertainty of the evidence or for other reasons, causes of actions were reasonably maintained by the plaintiff against several defendants, eventually succeeding against some and failing against the others.   Rather the present case is one whereby the plaintiff has wholly failed against all defendants in respect of one cause of action; and as regards the other causes of actions, they were causes of actions that could only have been (as indeed they were) made against some only of the defendants.

THE AGENCY POINT

18.  At the hearing of the Summons, Mr Chong accepted the analysis above and confined his submissions to what I call "the agency point".   Mr Chong argued that at the commencement of the present action, and all the way up to the first day of the trial, the plaintiff had reasonably maintained the agency point, namely the claim that at all material times the 3^rd defendant was the agent of the 1^st and 2^nd defendants.   By the time of the first day of the trial, Mr Chong argued, brief to Counsel had already been delivered and a large part of the costs had already been incurred.

19.  I am prepared to accept, for the purpose of the present argument, that at the commencement of this action it was reasonable for the plaintiff to maintain the action against both the 1^st and 2^nd defendants and the 3^rd defendant, on the ground that whether the 3^rd defendant was acting as the agent of the 1^st and 2^nd defendants was an issue that required the joining of both the alleged agent (i.e. the 3^rd defendant) and the alleged principal (i.e. the 1^st and 2^nd defendants) in order to be properly resolved.

20.  But the fact remains that on the first day of the trial, the plaintiff abandoned the agency point entirely and the same no longer constituted part of the causes of action relied upon by the plaintiff.   When asked by the Court why his client chose to abandon the agency point only on the first day of the trial, Mr Chong sought to explain the same by arguing firstly, that the 3^rd defendant had previously admitted that it was the agent of the 1^st and 2^nd defendants and that this had led the plaintiff  down the garden path to take the view that the agency point had a reasonable chance of success; and secondly, that the plaintiff was entitled to wait until the first day of trial to see if the 1^st and 2^nd defendants would turn up to give evidence, before making a final decision on whether to drop the agency point.

21.  I do not find either explanation convincing.  It is true that in the original Defence the 3^rd defendant did admit that it was the agent of the 1^st and 2^nd defendants, but that admission was deleted by an amendment made as early as on 5^th October 2009. Hence by 5^th October 2009 the 3^rd defendant's pleaded case was to state quite clearly that it was not the agent of the 1^st and 2^nd defendants.   Thereafter, the Statement of Claim has been amended for 2 times and the Defence 3 times.     If the plaintiff considered that nonetheless the agency point could still be maintained, there was no reason why it should abandon it on the first day of trial.   On the other hand, if the Plaintiff considered that as a result of the withdrawal of the admission by the 3^rd defendant (that it was the agent of the 1^st and 2^nd defendants), it would not be able to establish the agency point, it should have abandoned the same well before the trial commenced in September 2010.

22.  I cannot see the basis for the argument that the plaintiff was reasonably justified in waiting until the first day of the trial to see if the 1^st and 2^nd defendants would appear, before deciding whether to drop the agency point or not.  The 1^st and 2^nd defendants have filed no defence (their previous Defence having already been struck out), and even if they turned up at trial, they would not be able to give any evidence in support of any case that they might desire to run in this action.  Neither of them has filed any witness statement.  Whether the 1^st and 2^nd defendants would turn up at trial or not cannot possibly affect how the plaintiff might want to run its case.  It is amazing, to say the least, that a plaintiff's cause of action should depend on whether a defendant (who has filed no defence) might decide to attend the trial or not.  

23.  If the plaintiff considered that it would not be able to establish the agency point at trial, the same should have been dropped before trial.  That it was only dropped on the first day of the trial could not help the plaintiff as far as costs are concerned.

24.  The agency point having been abandoned, it was not considered at trial and no time was spent on it.  It is, in my view, not a point that should have any material bearing on the question of costs.

CONCLUSION

25.  For reasons above, I am not satisfied that the plaintiff has established a proper case for the making of a Sanderson or Bullock Order.  The Summons is accordingly dismissed with costs to the 3^rd defendant, to be taxed if not agreed.