YU JIANG AND ANOTHER v. CHENG WAI LIN ROSALIND AND OTHERS

HCA 2562/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2562 OF 2005

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DECISION ON COSTS

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1.  On 11 June 2014, after a trial of 21 days, I handed down Judgment, dismissing the plaintiffs’ claims against the defendants, and made an order for inquiry and for an account to be made on the defendants’ counterclaim. I further made costs orders nisi that the plaintiffs should pay the cost of the main action and of the counterclaim.

2.  The defendants now apply for the costs orders nisi to be varied, such that the plaintiffs should be ordered to pay the costs of the main action and of the counterclaim on an indemnity basis, and alternatively, on a common fund basis.

3.  In resisting the application for variation, the plaintiffs argued that there must be some “special or unusual feature” in the case to justify costs being ordered on a common fund basis, and costs on an indemnity basis require “even more special or unusual features”.  The mere fact that the court rejects a party’s case or its evidence does not justify the departure from the usual costs order, that they be paid on a party and party basis.  The plaintiffs rely on Choy Yee Chun v Bond Star Development [1997] HKLRD 1327, 1334C-E; and KJ v KMLM, HCMC 4/2010, 21 May 2014.

4.  In Town Planning Board v Society for Protection of the Harbor Limited (No 2) (2004) 7 HKCFAR 114, the Court of Final Appeal made it clear that the discretion of the court to order indemnity costs is not fettered or circumscribed, beyond the requirement that indemnity costs must be “appropriate”.

5.  In referring to the one sentence in my Judgment (in paragraph 91), to argue that the court had given all the benefit of the doubt to the 1^st plaintiff, Yu, as to whether he was deliberately telling untruths, counsel for the plaintiffs suggest that this is not a case which justifies costs being awarded other than on party and party basis.  By so doing, counsel have chosen to ignore all the other observations I made in the Judgment on the overall evidence and conduct of Yu.  They could not have overlooked the remaining part of paragraph 91 of the Judgment, which immediately follows the sentence they quoted:

“However, when Yu’s evidence is considered in its entirety, I have to conclude that he has in fact made inflated and fictitious claims, and that he is a witness who has no regard for the truth. In the light of all the evidence, I agree with Senior Counsel for the defendants that there are serious doubts cast on Yu’s claim to be a partner of Rosalind, that such claim is more fiction than fact and, like his other exaggerated claims, simply a magnification of his role…”

6.  A thorough reading of the Judgment should make it clear that I found Yu to be a dishonest and unreliable witness (paragraph 52 of the Judgment), whose evidence is fraught with inconsistencies in important aspects (paragraph 62), who had made inflated and fictitious claims, with no regard for the truth (paragraphs 91 and 92), whose evidence is unbelievable and who had told many lies to the court (paragraphs 56 and 114).  I will not repeat the examples I set out in the Judgment to justify these conclusions I made.

7.  On each and every important document pleaded by the Plaintiffs to evidence and support Yu’s case, I rejected Yu’s evidence and his convoluted arguments that these documents support his claims: on the Letter of Authority, the November 2002 Contract, the 2002 Agreement and the 2003 Agreement.  His contrived claims relating to the November 2002 Contract (paragraphs 71 to 76 of the Judgment), the arguments he made in the course of giving evidence on these documents, and his evasiveness in answering questions put to him in court, have all contributed to unnecessarily prolonging the cross-examination and the trial itself.

8.  Counsel for the plaintiffs argued that the court has made no finding that the controversial Letter of Authority had been forged by Yu, since no such case had been pleaded or alleged against him.

9.  As the Court of Appeal highlighted in Wang Din Shin v Nina Kung alias Nina TH Wang CACV 460/2002, 19 April 2010, in the context of making an order of costs on an indemnity basis against a person seeking to propound a will, an actual finding of forgery by that person is not a prerequisite for such an order.  If the evidence shows that the person seeking to propound the will has, in order to advance his own interests, knowingly participated in a dishonest design to put forward as a genuine will a document which was not, that may be a special and unusual feature such as to warrant an order for costs on an indemnity basis.  In Wang Din Shin, the court found that as the wife had intentionally made a statement on affirmation to advance her own interests based on documents found to have been fabricated, an order for costs on an indemnity basis was appropriate.

10.  In Chinachem Charitable Foundation Limited v Chan Chun Chuen HCAP 8/2007, 16 April 2010, Lam J (as he then was) ordered indemnity costs, having found that the signatures on the propounded will were forged, and that the 1^st defendant was involved in the preparation of the will and had made up a story as regards his having been given the will found to have been forged.  The court explained that the “necessary implication” of the findings of the court is that the 1^st defendant had deliberately perpetuated a deception on the probate court with a view to obtaining financial advantage by seeking probate to be granted on the will.

11.  In this case, it is true that I did not make any express finding that the Letter of Authority had been forged by Yu.  I found that the defendants only had to adduce sufficiently cogent evidence to raise an issue as to forgery (paragraph 37 of the Judgment), and that having evaluated the doubts surrounding the execution of the Letter of Authority, the unsatisfactory nature of Yu’s evidence and all the other evidence as a whole, it was totally unreliable to accept Yu’s evidence that the Letter of Authority was genuine (paragraph 90). 

12.  In paragraph 44 of the Judgment, I made it clear that it was inherently improbable that Rosalind or Holm of the defendants would have drafted the Letter of Authority.  Yu’s evidence on how the Letter of Authority was allegedly produced to him by Rosalind was all rejected as utterly unreliable.  The necessary implication from my findings is that the Letter of Authority had emanated from Yu.  It is clear that the plaintiffs had pleaded the Letter of Authority, had tendered it in evidence and relied on it throughout the trial as the basis of Yu’s claims. 

13.  The plaintiffs fabricated a case on the basis of documents emanating from the plaintiffs which were rejected by the court.  Yu made up evidence in the witness box, and in my view unreasonably and without good cause resisted the counterclaim for an account of the money he had received.  His evasiveness, refusal and inability to directly answer questions put to him in cross-examination lengthened the trial. 

14.  If the dismissal of the plaintiffs’ claims in the main action had been due to the fact that their claims were not proved, because the court considered Yu’s recollection of the events and the making of the agreements to be hazy and unreliable, an order for costs on party and party basis might have been appropriate.  However, when the claims of the plaintiffs in this case are dismissed because the key witness of the plaintiffs was found to have lied, and to have made up exaggerated claims, obviously in an attempt to mislead the court, special and unusual features exist to justify a more onerous order of costs, to mark the court’s disapproval of the party’s lies, and its conduct of the litigation.

15.  I would add that at the pre-trial review in February 2013, I had in fact directed the parties to attend court with their lawyers, for the purpose of reminding them that they had to testify in Court as to the assertions they made, and drawing to their attention that on the face of the pleadings and the witness statements, it was clear that the case rests on the credibility of the witnesses, and that if the court should conclude after trial that a party had lied in evidence on the facts of the case, or had unreasonably conducted the case, there would be an order of indemnity costs to reflect this.   The parties did not in fact attend court as directed, but the legal advisers should and would have made the parties aware of the court’s reminder.

16.  I accordingly vary the orders for costs, and order that the plaintiffs pay the defendants’ costs of the main action and the counterclaim on an indemnity basis, to be taxed if not agreed, with certificate for 2 Counsel.

17.  The costs order extends to the defendants’ costs of the application for variation.