LIN MAN YUAN v. KIN MING HOLDINGS INTERNATIONAL LTD AND ANOTHER

HCA 216/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 216 OF 2008

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DECISIONS ON COSTS AND TERMS OF THE INJUNCTION

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1. This is a dispute arising out of a contract to develop a piece of land in the city of Xiamen, the Fujian Province in the Mainland.

2. The background of this case has been set out in my Judgment handed down on 3 June 2015 (“the Judgment”), and I do not want to repeat the same here.  For the purpose of these Decisions on Costs and Terms of the Injunction, I would adopt the same abbreviations that I had used in the Judgment.

3. After 17 days of trial, I dismissed the claim by Madam Lin against Kin Ming in the Main Action.  I also granted judgment for Mr Kho against Madam Lin and Mr Huang Rui-fu (“the Couple”) in the Counterclaim for harassment and intimidation and awarded exemplary and aggravated damages in the sum of $450,000 and ordered a permanent injunction against them in terms to be determined by the court.

4. For the costs, I made an order nisi (“the Costs Order Nisi”) that:

(i) Madam Lin do pay to Kin Ming the costs of the Main Action;

(ii) the Couple do pay to Mr Kho 60% of the costs of the Counterclaim;

(iii) there be no order as to costs between Kin Ming and the Couple in respect of the Counterclaim; and

(iv) there be certificate for 2 counsel for both the Main Action and the Counterclaim.

5. After the handing down of the Judgment, both sides have filed summonses to vary the Costs Order Nisi.

6. Kin Ming and Mr Kho invite the court:

(i) to order costs in respect of the Main Action and the Counterclaim (as regards the award of 60% of Mr Kho’s costs therein) to be taxed on indemnity or common fund basis; and

(ii) to grant certificate for 3 counsel for both the Main Action and the Counterclaim.

7. On the other hand, the Couple invite the court to vary part of the Costs Order Nisi in respect of the Counterclaim only.  As between Kin Ming and the Couple, they ask that the costs of the Counterclaim be paid by Kin Ming up to 12 August 2013 (i.e. the last day when Kin Ming could have accepted their sanctioned payment without leave of the court) on a party-and-party basis, and thereafter on an indemnity basis together with interest on costs at a rate not exceeding 10% above the judgment rate.  As between Mr Kho and the Couple, they ask Mr Kho to pay the Couple: (i) their costs of the Counterclaim for his loss of business opportunities claim from its inception and on an indemnity basis; and (ii) their costs of the Counterclaim from 12 August 2013 onwards on an indemnity basis together with interest on costs at a rate not exceeding 10% above judgment rate.  As an alternative, Mr Kho should be deprived of 70% (as opposed to 40% as the Costs Order Nisi now provides) of his costs in the Counterclaim, or there should be no order as to costs in the Counterclaim between Mr Kho and the Couple.

Costs of the Main Action

8. I first deal with the costs of the Main Action. Costs should follow the event and Kin Ming should get its costs against Madam Lin.  The only issue is whether the court should order the costs to be taxed on a higher basis.

9. Kin Ming asks for the costs to be taxed on a higher basis by reason of the following 3 grounds:

(i) the whole of the claim in the Main Action was based on a lie relating to the existence of the Oral Revival Term, the evidence of which had been expressly rejected by the court;

(ii) the Couple condoned in, or at least turned a blind eye to, their agents’ acts of intimidation and harassment on Mr Kho to deter him from defending the on-going litigation and to pressurize him into settlement, thereby conducted the litigation in an improper and oppressive manner; and

(iii) the conduct of Madam Lin in bringing the Main Action amounted to forum shopping, when she deliberately avoided setting aside the Default Judgment and instead initiated a fresh claim against Kin Ming in the Mainland on the basis of the Written Contact, and having lost there she then sought to vex Kin Ming with a bogus Oral Revival Term in Hong Kong by way of the present proceedings.

10. In support of the application, Mr Neoh, SC, counsel for Kin Ming, refers me to the principles relating to the granting of indemnity costs as laid down in Town Planning Board v Society for Protection of Harbour Ltd (No 2) (2004) 7 HKCFAR 114 at §§16-18, Re Hyundai Engineering & Construction Co Ltd [2002] 2 HKLRD 71 at §§6-7 and O 62 r 5 of RHC.

11. Having carefully considered the principles set out in the said authorities, I do not accept that the dismissal of Madam Lin’s claim would justify an award of costs on a higher basis.  Although the court rejected the evidence of Madam Lin and her witnesses, it does not mean that Madam Lin had pursued the claim with an ulterior motive or for an improper purpose, or there was some deception or underhand conduct in the conduct of the proceedings.  On the contrary, I can understand her grievances for being left out in the Project.  Though this contractual dispute was not resolved in Madam Lin’s favour, I agree with Mr Fung, SC, counsel for Madam Lin, that this was a normal hostile litigation with no exceptional elements that justify a higher basis of costs.

12. For the harassment and intimidation, they were not directly related to the conduct of the proceedings.  Further, the Couple had been ordered by the court to pay damages to Mr Kho as a result of the wrongful acts, and so the court should penalise them again by ordering them to pay costs on a higher basis.

13. I also do not accept Kin Ming’s suggestion that Madam Lin had deliberately engaged the tactic of forum shopping.  The allegation that it was “Madam Lin’s deliberate litigation tactic not to answer to the default judgment obtained by Kin Ming against her” is simply far-fetched and not supported by any finding.  In fact, Kin Ming had already run that argument in its earlier application to strike out the Main Action, which was rejected by DHCJ L Chan (as he then was) in the decision dated 26 August 2009.  DHCJ L Chan’s decision was upheld by the Court of Appeal.

14. For the above reasons, Madam Lin will continue to pay Kin Ming the costs of the Main Action on a party-and-party basis.

Costs of the Counterclaim

15. Kin Ming, as a corporate entity, did not succeed in the Counterclaim.  Costs follow the event, and so Kin Ming should, in principle, pay to the Couple the costs of the Counterclaim.  I therefore so order.  For the reasons given in the later part of these Decisions, there is also no reason for the costs to be paid other than the party-and-party basis even after the making of the sanctioned payment (see: §17 below).

16. For the costs between Mr Kho and the Couple in respect of the Counterclaim, I am given to understand that the Couple had made a sanctioned payment of $800,000 into court on 15 July 2013.  After trial, I only awarded damages in the sum of $450,000 to Mr Kho.  As the sum awarded by the court is less than the amount of the sanctioned payment, the Couple argue that they should get the costs of the Counterclaim after 12 August 2013, which was the latest day by which Kin Ming and Mr Kho could have accepted the sanctioned payment without the leave of the court.  After such date, under O 22 r 23, Kin Ming and Mr Kho should pay the costs of the Counterclaim on an indemnity basis with enhanced interest on the costs.

17. On the other hand, Mr Kho argues that he had done better than the sanctioned payment.  Mr Kho had obtained a permanent injunction against the Couple which had all long been resisted by them in these proceedings.  In such circumstances, Mr Kho was justified in not accepting the sanctioned payment.  Moreover, the sanctioned payment was made in settlement of the whole of the Counterclaim of both Kin Ming and Mr Kho.  No separate sanctioned payment was made against Kin Ming and Mr Kho individually.  It would create the difficulty that none of them was provided with an opportunity to accept an offer and withdraw from the litigation leaving the other plaintiff in the Counterclaim free to pursue his claim (see the dicta of Judge Withers in Fennell & Ors v Aherne (No 2) [2005] SASC 364 at §11). In fact, it would not even have been open to Kin Ming to accept the sanctioned payment leaving Mr Kho to continue with the Counterclaim on his own, given: (i) the sanctioned payment was expressly stated to be made in settlement of the whole Counterclaim of both Kin Ming and Mr Kho, in other words, the sanctioned payment was not intended to pay off only one of Kin Ming and Mr Kho; and (ii) the Couple could not have conceivably intended to have made the sanctioned payment only to get rid of Kin Ming but they nevertheless had to continue to litigate with Mr Kho in the Counterclaim arising out of the exact same facts.

18. In reply to such argument, the Couple argue that it is not right for Mr Kho to say that, by obtaining the injunctive relief, he had done better than the sanctioned payment.  Under the old O 22 r 1, payment into court could only be made in satisfaction of actions for a debt and damages but not of other claims.  If it was made in respect of actions where debts and damages were sought together with other relief, payment into court could only be made in respect of the monetary claim (see: Associated Engineers Ltd v Lo Chee Pui [2003] 2 HKLRD 76, per Cheung JA at §§9-17).  The position should remain the same after the CJR (see: Hong Kong Civil Procedure 2013 §22.2.3).  In other words, it was open to Mr Kho to accept the sanctioned payment, thus disposing of the question of damages, and left the question of his entitlement to permanent injunctive relief to be litigated.  Yet he had not done so.

19. I do not agree.  Unlike the pre-CJR O 22 where an offer could only be made in respect of monetary claim, an offer, either in the form of sanctioned offer or sanctioned payment, can now be made under the new rule to settle in respect of both monetary and non-monetary claims (see: Hong Kong Civil Procedure 2016, vol. 1, §22/2/A at note 2).  But under the new rule, a defendant is required to state in the notice of sanctioned payment (or notice of sanctioned offer as the case may be) whether the payment relates to the whole claim or part of the claim or to an issue arising from it and if so to which part or issue it relates (see: O 22, r 8(2)(b)).  According to O 22 r 1(2)(a), whole claim is to be construed as a reference to all the claims in their entirety.  Hence under the new rule, it is open to the defendant to make a sanctioned payment with a view to settle all the claims of a plaintiff including both the monetary and non-monetary claims.  The offer would depend on the wording in the notice of sanctioned payment.

20. Since the Couple (i.e. the Defendants in the Counterclaim) stated in the notice that the sum of $800,000 was paid into court in settlement of “the whole of the Counterclaim” (instead of “part of the claim”), Kin Ming and Mr Kho would be barred from pursuing the injunctive relief if they had accepted the sanctioned payment.  That was the term of the offer made by the Couple as specified in the notice.

21. Apparently, the question of injunction became an obstacle in the negotiation for the settlement of the Counterclaim.  In the without prejudice save as to costs letter dated 16 January 2014, Kin Ming and Mr Kho made a sanctioned offer to settle the Counterclaim by accepting a sum of $2 million and a permanent injunction against the Couple.  In another without prejudice save as to costs letter dated 4 July 2014, Kin Ming and Mr Kho made another sanctioned offer to settle the Counterclaim on terms of the payment of $800,000 and the making of a permanent injunction.  In the reply letter dated 8 July 2014, the Couple queried the legal basis for the making of another sanctioned offer without the leave the court.  Moreover, they disputed that Kin Ming and Mr Kho were entitled to any permanent injunction against them.

22. Taking into account the history of this case, I can see the reason as to why Mr Kho had insisted to have a permanent injunction against the Couple.  There was a real risk that the Couple might resort to the same tactics in trying to resolve the dispute with Mr Kho.  As the Couple refused to accept an injunction against them, at least Mr Kho was entitled to pursue the Counterclaim at the trial.

23. On the other hand, substantial time and effort were spent by the parties on the loss of business opportunities claim, which caused a significant increase in the length and the costs of the proceedings. Multiple expert reports were filed.  Substantial documentation was produced. Both sides had devoted substantial time in the submissions relating to such claim. A number of factual witnesses gave evidence and were questioned on the related issues.

24. Mr Kho had hopelessly lost the claim for loss of business opportunities.  In §§253-258 of the Judgment,  I had made a remark that the evidence in support of such claim was far from satisfactory, and the claim was “fanciful and illusory, or at the very least, unsubstantiated with concrete evidence”.  I agree that the sum claimed for the Counterclaim, i.e. US$1,100 million, was grossly exaggerated.

25. On the other hand, the signing of the Powers of Attorney and the Zhuang Agreement were admitted by the Couple right from the start.  It was also admitted that Mr Kho was visited by the purported agents of the Couple.  The actual disputes were whether Mr Kho was really threatened to the extent as alleged by him and whether it caused him the alleged mental suffering so that he was unable to make business decisions as claimed by him. I agree with Mr Fung that, if Mr Kho had not unreasonably raised this extensive and elaborate loss of business opportunities claim, the Counterclaim would have been much more focused and required much less time to adjudicate.

26. Hence, although Mr Kho succeeded in part of the Counterclaim, he should be regarded as a loser in the other substantial part of the Counterclaim which related to the claim for loss of business opportunities.  Following the issue-based approach as set out in In Re Elgindata (No 2) [1992] 1 WLR 1207, I agree that Mr Kho had unreasonably made the claim for loss of business opportunities.  As he failed in such claim, he should pay the costs of the Couple in dealing with such claim.

27. As mentioned above, substantial time and costs had been spent in the Counterclaim in dealing with the loss of business opportunities claim.  The time and costs spent might even be more than those involved in the other parts of the Counterclaim.  Adopting a broad brush approach, I am of the view that the fair costs order in respect of the Counterclaim between Mr Kho and the Couple should be one of no order as to costs.  I therefore so order. 

Certificate for 3 counsel

28. It is trite that a certificate for 3 counsel is exceptional (see: Fu Kor Kuen Patrick v HKSAR, FACC 4/2011 (27 August 2012) at §5, per Bokhary PJ, recently applied by Court of Final Appeal again in HKSAR v Pang Hung Fai, FACC 8/2013 (16 January 2015) at §§11-15). A certificate for 3 counsel will only be justified in the most difficult cases.  It is not justified even if there is “a good deal of work” and “the issues were not simple” (see: Secretary for Justice v Ocean Technology Ltd & Ors, HCA 70/2008 (13 March 2008) at §32, per Hartmann J).

29. I do not accept that this case warrants the engagement of 3 counsel.  Although the trial lasted for 17 days and the amount of the claim was substantial, most of the issues at the trial related to factual disputes which did not involve difficult points of law.  Further, the factual disputes were not particularly complicated and so there was no need to engage 3 counsel to conduct the trial of this case.  I therefore only certify the engagement of 2 counsel.

30. For the above reasons, the Costs Order Nisi is now replaced by the following costs order:

(i) Madam Lin do pay to Kin Ming the costs of the Main Action on a party-and-party basis;

(ii) Kin Ming do pay to the Couple the costs of the Counterclaim on a party-and-party basis;

(iii) there be no order as to the costs of the Counterclaim as between Mr Kho and the Couple; and

(iv) there be certificate for 2 counsel for both the Main Action and the Counterclaim.

Terms of the permanent injunction

31. There is one more outstanding matter.  The arguments on the final wording of the permanent injunction had been done on papers and so I have to give my ruling on such issue.

32. The court has to ensure that the terms of the injunction should not be too wide.  However, the terms must also be effective to prevent the Couple from trying again to resolve the dispute by unlawful means.  Furthermore, since Kin Ming has lost on the Counterclaim, the permanent injunction should only cover the claim by Mr Kho.

33. Having considered the submissions of the parties, I grant a permanent injunction in the following terms:

“There be a permanent injunction restraining each of Madam Lin and Mr Huang Rui-fu, whether by themselves or their servants or agents or any of them, or otherwise howsoever, from carrying out the following acts or any of them, namely:

(a) causing or permitting harassment or intimidation whether directly or indirectly, and whether by personal contact or by telephone, facsimile, email, short message service, social networking tools or otherwise howsoever to Mr Kho or any of his family members;

(b) entering or remaining at the premises of Mr Kho at Room 1818, 18^th Floor, Hutchison House, 10 Harcourt Road, Hong Kong; and

(c) approaching or contacting (other than through their solicitors) Mr Kho or any of his family members, whether directly or indirectly, and whether by personal contact or by telephone, facsimile, email, short message service, social networking tools or otherwise howsoever.”

34. As agreed by the parties, I also provide for liberty to apply in case that there is any change of circumstances such as the relocation of the office of Mr Kho.  I refuse to grant a general injunction to prevent any persons from resorting or accessing Mr Kho’s office, as I consider it a relief more for the protection of the business interest of Kin Ming and not Mr Kho.  I also refuse to make an order for substituted service of the penal notice at this stage.  If the need arises, Mr Kho should make a proper application for substituted service with the filing of supporting affirmation.

35. The parties are able to agree on the terms relating to the award of interest.  As agreed by them, I order that:

(i) interest on aggravated damages ($300,000) at 2% p.a. from the date of the joinder of Mr Kho as the 2^nd Plaintiff by Counterclaim (15 June 2012) until the date of judgment, with the quantum agreed at $17,819.18;

(ii) there be no pre-judgment interest on exemplary damages ($150,000); and

(iii) for both aggravated damages and exemplary damages, there be interest at judgment rate from the date of judgment until payment.

36. I take the view that Kin Ming and Mr Kho have lost their summons to vary the Costs Order Nisi and so I order them to pay the costs of their variation application to the Couple.  For the Couple’s application to vary the Costs Order Nisi and the paper application relating to the terms of the injunction, neither sides can be regarded as the winner and so I order that there be no order as to costs of these applications.