ERIC CUMINE ASSOCIATES (A FIRM) v. THE WHARF (HOLDINGS) LTD. AND OTHERS

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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RULING

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1. On 16th December 1987 I gave a judgment in an action 1983 No. 13431 in which the Plaintiffs are Wharf Properties Limited and The Wharf (Holdings) Limited. That judgment was concerned with one of the Plaintiffs' claims, which I dismissed, in the action, an action for damages for professional negligence against Eric Cumine associates; a firm of architects, engineers and surveyors, the Defendants.

2. I now have to deal with the Defendants' application for an order for the costs of that claim to be taxed and paid by the Plaintiffs to the Defendants. The Defendants' claim for costs is not a claim for the costs to be taxed as between party and party, which is the normal basis of taxation in hostile litigation, but for the costs to be taxed on the common fund basis. It is with this point only that I am now concerned, and I shall deal later with other matters relating to costs.

3. The common fund basis provides a more generous basis for taxation than party and party costs.

4. An application for costs on chat basis has been recently considered here in a judgment of the Chief Justice in Lakhan v. Wu Wing Tat, 1987 No. 104 Civil Appeals (unreported). In that case the appellant, who was asking for costs on a common fund basis, conceded that such costs should be awarded only if it was shown that there were special and unusual features in the case. The same concession was made before me by Mr. Neville Thomas, Q.C. appearing for the Defendants.

5. The basis on which costs fail to be taxed has long been a matter of controversy. The reason is that the basic principle which underlies an order for costs is that the successful party should have an indemnity from the unsuccessful party as to his (the successful party's) costs of the action. On the other hand it would clearly be wrong that the successful party should have an idemnity against costs which it was unreasonable for him to have incurred. In the end the law has settled for a policy of providing the bread but not the butter.

6. The practice was stated by Brightman LJ in Bartlett v. Barclays Bank Trust Co. Ltd. (No. 2 [1980] 2 All E.R. 92 at p. 98 as follows:

"The usual rule, subject to well recognized exceptions in the case of fiduciary, contractual or tortious wrongdoing, is that the defendant pays to the plaintiff only party and party costs. It is not, I think, the policy of the court in hostile litigation to give the successful party an idemnity against the expense to which he has been put and therefore to compensate him for the loss which he has inevitably suffered save in very special cases. Why that should be I do not know but the practice is well established and I do not think there is any sufficient reason to depart from that practice in the case before me."

7. The position in Hong Kong is, in my judgment, the same as the position in England. It is true that in England there has recently been a change in the provision made for the taxation of costs; costs are now taxed either on the standard basis or on the idemnity basis. The standard basis is more generous than the party and party basis and the idemnity basis is more generous than the common fund basis. It is high time a similar reform was made in Hong Kong; the new standard basis does provide for a fairer basis of compensation to the successful party than the old party and party basis. However, on matters of policy, I am not at liberty to depart from the usual practice. I have only to consider whether, in this case, there are such special and unusual features as would warrant an order for common fund costs rather than party and party costs. As Knox J pointed out in Bowen-Jones v. Bowen-Jones [1986] 3 All E.R. 163, at p. 165, there is nothing in the new rule in England that suggests that any new principle is to be adopted by the court as a matter of general policy. I sympathize with the suggestion that a more generous policy should be followed in favour of successful litigants, but I do not consider that I am at liberty to adopt it.

8. Accordingly I turn to the narrower issue whether, in this particular case, the Defendants have shown such special and unusual features as would justify an order for taxation of their costs on the common fund basis.

9. Mr. Thomas submitted that this action disclosed no substantive claim by the Plaintiffs against the Defendants; as he put it, there was no "main line". The tenor of this submission was, I think, that the case of the Plaintiffs - was all froth and no substance. The Plaintiffs had failed to call two witnesses, Mr. Forsgate and Mr. McLuskie, who were in the driving seats at the Plaintiffs at the time when the material events happened, and who might well have supported the Plaintiffs' case (had they been able to do so) without the need for the Plaintiffs to concentrate on the mass of documentation which was laid before me in order to support the Plaintiffs’claim. Mr. Thomas pointed out that in the ordinary course a plaintiff must take proper legal and professional advice as to his claim for the purpose of which he must go to those who will be called on to support the claim by oral evidence in court. He described this case (in my view, rightly) as unusual in the sense that very few conflicts of evidence fell to be decided on the pleadings (voluminous though they were) and that really this action ought never to have been launched, or if launched, ought never to have been prosecuted. It was, he said, "a lawyer's claim". He pointed out, too, that the original Statement of Claim did not make the claim which was for so long the subject of consideration by this court, over a period of 60 days between June and November 1987; the claim in relation to maximizing plot ratio was a new claim, in so far as it suggested an onus on the Defendants to have achieved a plot ratio in excess of 8 for the site the subject of the Plaintiffs' development. He suggested that the Plaintiffs had not approached the case in a conventional way, and that they had engaged the court in far too wideranging an enquiry as a result.

10. In these circumstances, said Mr. Thomas, there were special and unusual features which would justify the court in making an order for taxation on the common fund basis.

11. I have already made it clear that as a matter of principle I have sympathy with the suggesticn that the party and party basis is too stingy, but I see nothing whatever in the considerations urged upon me by Mr. Thomas which would warrant a special order being made in this case. Even where, as in the case to which I have referred before Knox J, one party has fabricated the documents and given perjured evidence, the court is likely to treat the case as nothing outside the ordinary course of hostile litigation. There are, of course, some special and unusual circumstances which justify an order on the common fund basis and which arise from time to time. One such was cited to me. It was Preston v. Preston [1982] Fam. 17. That was an matrimonial dispute. Giving the first judgment, Ormrod LJ said at p. 29:

"On the question of costs the judge's decision to award costs on the common fund basis was an unusual order to make in this type of case. RSC 0.62 r. 28(3) however appears to give the court an unfettered discretion to order costs on this basis, but it is not in accordance with usual practice to do so unless there is a particular reason to depart it from normal practice. It is sometimes vitally important for a wife to receive the provision made for her in full without having to find the difference between party and party costs and costs of the common fund basis. That does not of course apply in this case but the judge was very unfavourably impressed by the uncooperative and grossly dilatory way in which the husband's former solicitors had conducted the preparatory stages of the case which must have considerably increased the wife's costs. In the circumstances I would not interfere which the judge's order. I would also dismiss this part of the appeal."

12. Brandon LJ deal with the same point at page 38.

13. He said this:

"Finally, as to costs. The basis on which costs awarded to one party against another are to be taxed is governed by RSC 0.62 r.28. The effect of paragraph (2) of that rule is that, in the generality of cases, such costs are to be taxed on a party and party basis. Paragraph 2 is however expressly made subject to the subsequent provisions of the rule and is accordingly qualified by paragraph (3) which reads:

 

'The court in awarding costs to which this rule applies may in any case in which it thinks fit to do so order or direct that the costs should be taxed on a common fund basis.'

 

The practice of awarding costs in certain cases on the more generous common fund basis originated in the High Court of Chancery: see Andrews v. Barnes [1888] 39 Ch.D. 133. It appears that in earlier days the practice was limited to particular classes of cases and that its application was fettered to that extent. The words of RSC 0.62 r. 28(3) however gives the court what appears to be an entirely unfettered discretion to order taxation on a common fund basis "in any case in which it thinks fit to do." On the true construction of paragraphs (2) and (3) of r. 28 taken together, however, I do not consider that the power to order costs to be taxed on a common fund basis is intended to be exercised arbitrarily or whimsically. On the contrary, it appears to me that it is necessary, before the court departs from the general basis of taxation laid down in paragraph (2) and directs taxation on the more generous basis authorized by paragraph (3), there should be some special or unusual features in the case to justify the court in exercising its discretion in that way."

14. The Lord Justice then went on to deal with two particular cases in which costs on the common fund basis had been awarded and mentioned, as to the case before the Court of Appeal, the extreme dilatoriness and lack of proper cooperation in conducting the proceedings of the husband's solicitors which had enormously increased the costs incurred by the wife, with the result that if the wife only got her costs on the party and party basis she would have to bear an unusually heavy loss in unrecovered costs.

15. I entirely accept that the costs of the claim in this action are heavy and burdensome. And if I had had materials satisfying me that the action had been launched or prosecuted oppressively, I would have taken a different view, but there is no such material before me and I am not prepared to allow my sympathy for the Defendants over the burden which they will have to bear, of the difference between party and party and common fund costs, to influence my judgment.

16. One last point; by an order of 29th July 1986 the claim considered by the court and which was the subject of my judgment on 16th December 1987 was severed from the rest of the claim against the Defendants. Mr. Thomas urged me to treat this as a special consideration justifying the application he makes for costs to be taxed on the common fund basis. I see no reason for doing so on that ground either. However the parties are agreed that the costs of the proceedings should be taxed as from the foot or the order dated 29th July 1986 to avoid the difficulties on taxation which would otherwise arise. i shall therefore direct the taxation to date from the foot of that order.

17. For those who are interested in a consideration of the rules relating to taxation of costs, an interesting and informative analysis is provided by the judgment of Sir Robert Megarry V-C in E.M.I. Records LtD. v. Ian Cameron Wallace Ltd. [1983] Ch.59. I do not think there is anything in that judgment to which need to refer for the purposes of this present application.