POH PO LIAN AND ANOTHER v. TONG CHI KONG, JODY AND ANOTHER

HCA 1280/2012

[2019] HKCFI 863

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1280 OF 2012

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J U D G M E N T

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1.  The Plaintiffs herein claim against the Defendants for loss and damage caused by the latter’s tortious acts of maintenance and champerty. 

2.  In gist, the Plaintiffs’ case is that the Defendants funded proceedings took out by a Madam Leung, namely HCA 681 of 2011 against both Plaintiffs (the “HCA”) and HCSN 3 of 2011 against the 2^nd Plaintiff (the “HCSN”), without any legitimate interest in or cause for funding those proceedings and sought to share the spoil of the litigation. 

3.  The HCSN stopped the 2^nd Plaintiff from disposing off certain shares and in the HCA Madam Leung claimed ownership of those shares as administratrix of an estate. 

4.  The HCA was eventually dismissed in March 2015, resulting in adverse costs order against Madam Leung in favour of both the Plaintiffs (the “HCA Costs”).  There has been no appeal against the same. 

5.  By the dismissal of the HCA, there was no basis for Madam Leung to maintain the stop notice obtained in the HCSN but she did not accede to a discharge of the same.  The Plaintiffs then commenced HCMP 1021 of 2015 to discharge the stop notice (the “HCMP”) and it was finally discharged by consent in May 2015.  Madam Leung was ordered to pay costs of and occasioned by these proceedings to the 2^nd Plaintiff (the “HCSN&MP Costs”). 

6.  The costs orders referred to above have gone through taxation in June 2016 and May 2016 respectively. 

7.  By amendments made in September 2015, the Plaintiffs added a claim herein for loss and damage to the extent of the actual legal costs incurred by them in the HCA, the HCSN and the HCMP as well as loss of use of the funds, or alternatively additional financing cost, caused by the stop notice, i.e. preventing sale of the shares. 

8.  By a judgment dated and entered on 17 December 2015, Mr Justice Ng gave judgment on liability in favour of the Plaintiffs on their claim herein with quantum of damages referred to a Master for assessment.  The Defendants did not appear at the trial. 

9.  An Unless Order was made against the Defendants that if they did not file and exchange witness statement for the purpose of assessment of damages by 26 October 2016 they would be debarred from adducing any witness statement for the purpose of assessment of damages.  The Defendants did not file any witness statement. 

10.  The Plaintiffs duly filed their witness statement for the purpose of assessment of damages and it shall stand as evidence in chief, unless otherwise ordered. 

11.  At the hearing fixed on 4 January 2019, the Plaintiffs, as a result of enquiries raised by me, applied to file further witness statement(s) for the purpose of assessment of damages and consequential adjournment of the assessment hearing.  I allowed the adjournment and directed that application for filing further witness statement(s) be taken out. 

12.  The hearing was adjourned to 12 February 2019 and the Plaintiffs’ application for filing a 3^rd supplemental witness statement of the 1^st Plaintiff was also placed before me. 

13.  At both hearings the Defendants did not appear.  After being satisfied by way of affirmation of service that proper notice had been given to them, the hearing proceeded in their absence on both occasions. 

14.  The said application was allowed at the hearing as the new witness statement is of probative value to the question of assessment, namely the causal link between the stop notice and the maintenance (or inability to discharge) of the various financing arrangements undertaken by the Plaintiffs.  I further find no prejudice to the Defendants beyond compensation by costs as the new evidence relates to matters within the sole domain of the Plaintiffs anyway; the Defendants, if they so choose, would be able to exercise their rights to cross-examine on the same, but they chose not to appear.  Costs of this application was reserved and will be dealt with below. 

15.  The 1^st Plaintiff adopted both his 2^nd and 3^rd Witness Statements (with minor typographical errors corrected) made in these proceedings and for the purpose of assessment of damages as his evidence in chief. 

16.  I shall deal with each head of damages in the order as they appear in the Statement of Damages filed herein. 

The HCA Costs

17.  The Plaintiffs must first show a causal link between the Defendants’ tortious acts, in this instance the champertous funding of the HCA, and the loss and damage they suffered, in this instance their own legal costs in the HCA. 

18.  It having been “established and explained in the trial on liability” that the Defendants’ funding caused the HCA and the HCSN to be continued or Madam Leung would have discontinued the same had the Defendants not funded them, the causal link is present. 

19.  Then there is the limitation of remoteness: is the type of damage (not the degree) reasonably foreseeable? 

20.  The answer is clearly in the affirmative as the Defendants funded the HCA against the Plaintiffs, the natural and in fact inevitable consequence is that the Plaintiffs would have to spend legal costs dealing with it so as a type of damage legal costs must be reasonably foreseeable and thus not outside the limit of remoteness. 

21.  On the traditional and overriding principle in tort that a claimant should be put in a position he would have been had he not suffered the tortious wrong, the above seems sufficient to lead to an award of all actual legal costs incurred in the HCA in favour of the Plaintiffs, because they would have not been out-of-pocket to that exact extent had the Defendants not funded the HCA. 

22.  However, when it comes to a claim for costs as damages there are further principles involved in determining the amount recoverable, even though the causation and remoteness requirements are satisfied.  These are explained in McGregor on Damages (20^th ed., 2018) from paragraph 21-077 to 21-089. 

23.  The situation in the present case concerns a successful defence by the Plaintiffs in the earlier actions took out by Madam Leung.  The principles examined at McGregor (ibid) paragraph 21-086 are engaged and they are essentially this: the amount recoverable against the defendant in the claim for costs as damages will be the difference between such costs assessed on a solicitor client basis and what the now claimant will recovery from the other side in the earlier proceedings, i.e. practically the party and party basis taxed costs, and if the taxed costs is practically irrecoverable from the other side in the earlier proceedings, the now claimant is entitled to recover that part from the now defendant as well. 

24.  There is however one twist in this general statement of principle: the entitlement to recover the difference has, at least under English authorities, become a thing of the past by the decision in the case of British Racing Drivers’ Club v Hextall Erskine & Co [1996] 3 All ER 667, which was extensively analysed in also McGregor (supra) from para 21-004 to 21-011.  The Plaintiffs’ counsel has also addressed this point extensively. 

25.  The author of McGregor was critical of this decision and despite its adoption in many later cases, considered it “mistaken”.  Counsel for the Plaintiffs helpfully summarized them in paragraph 36 of the Opening Submissions. 

26.  In that case, Carnwarth J had the following to say in concluding his reasoning on the issue of recovery as damages of litigation costs paid (p.691F-J): -

“However, litigation costs have traditionally been subject to special rules for policy reasons. Prior to the change in the taxation rules there was an established distinction between such costs incurred in proceedings between the same parties, and those incurred in proceedings against third parties. This was anomalous, given that similar policy considerations applied in each case. The most recent cases who that the position must be reconsidered in the light the changes to the taxation rules. This enables the anomaly to be resolved. Under the new dispensation, taxation on the standard basis is to be regarded as equivalent to the solicitor and client basis referred to by McGregor. Accordingly, where costs on the standard basis have been recovered from the defendant in other proceedings, there is no basis for an additional claim by way of damages.”

27.  It is apparent that the key to Carnwarth J’s decision was the “changes to the taxation rules”, the “standard basis” of which was “to be regarded as equivalent to the solicitor and client basis referred to by McGregor”. 

28.  This “solicitor and client basis referred to by McGregor” was in contrast to “party and party”, and both are equivalent to and embody the same concepts as the same terms used in Hong Kong, if one reads through the whole analysis from p.685d onwards. 

29.  This key has not found its equivalent in Hong Kong: party and party basis taxation, using McGregor’s words, is not substantially equivalent to solicitor and client taxation in Hong Kong, not in their standard and definitely not in their result. 

30.  I therefore do not find the British Racing Driver’s Club case applicable and in any event will not follow it.  I will follow what is described as the “old approach” in McGregor (supra) paragraph 21-086. 

31.  The ensuing question is then this: what is the solicitor client taxation basis costs in the HCA?  The Plaintiffs say that it is the total amount contained in the bills submitted for taxation. 

32.  The standard is to be found in O.62, r.29.  The long and short of it is that all costs incurred should be allowed except if unreasonably incurred or unreasonable in amount, and all costs incurred with the express or implied approval of the client shall, except unusual in nature in the circumstances, be conclusively presumed to have been reasonably incurred and where the amount has been expressly or impliedly approved by the client, to have been reasonable in amount. 

33.  Reading the 1^st Plaintiff’s witness statement filed for the purpose of assessment of damages, the Plaintiffs had full knowledge of the legal costs charged under all the bills and there is not a hint of anything falling outside of the Plaintiffs’ approval, either in nature or in amount. 

34.  There is therefore nothing on evidence to challenge any item in the various bills as being not reasonably incurred or not reasonable in amount. 

35.  The unchallenged evidence of the Plaintiffs also show that party and party taxed costs, or whatever balance that remains outstanding, are practically irrecoverable from Madam Leung, which on the strength of the principles mentioned above will result in the Defendants herein being liable for that part of the HCA Costs as well. 

36.  What is left is purely mechanical and mathematical, i.e. the actual computation of what is outstanding, the interest accrued thereon and so forth. 

37.  After clarification of a few calculations by way of the Amended Statement of Damages, I find the following: -

a.  Outstanding balance on the taxed HCA costs together with interest up to 12 February 2019 comes to HK$549,186.50; 

b.  Difference between party and party basis taxed costs and solicitor client basis costs comes to HK$5,013,775.44. 

38.  There being no interest claimed for item b, the total damages under this head therefore comes to HK$5,562,961.94. 

The HCSN&MP Costs

39.  For the same reasons stated above, the only question is computation.  Of course for this head of claim it is only available to the 2^nd Plaintiff. 

40.  After clarification of a few calculations by way of the Amended Statement of Damages, I find the following: -

a.  Outstanding balance on the taxed HCSN&MP Costs together with interest up to 12 February 2019 comes to HK$57,942.86; 

b.  Difference between party and party basis taxed costs and solicitor client basis costs comes to HK$112,315. 

41.  There being no interest claimed for item b, the total damages under this head therefore comes to HK$170,257.86. 

Additional Financial Costs

42.  This claim is made on behalf of the 1^st and/or the 2^nd Plaintiff. 

43.  The Plaintiffs only supplied quantification based on additional financial costs and therefore I am only able to carry out assessment on this alternative basis as there is no evidence as to the value of the loss of use of the potential proceeds had a sale not been prevented by the stop notice. 

44.  In the 1^st Plaintiff’s 3^rd supplemental witness statement it is explained that it had been the 1^st Plaintiff’s intention even before the HCA and the stop notice to liquidate the shares, and had actually taken active steps towards that end. 

45.  This is supported by the fact that the shares were sold in June 2015, albeit recovery of the sale proceeds eventually required taking legal actions against the buyer.  It is said that the Plaintiffs have still not received full payment of the sale. 

46.  Due to the problem in getting full payment, the Plaintiffs did not immediately utilize the part of it they received to discharge the Maybank Facilities, but rather discharging another loan owed by the 1^st Plaintiff’s partial subsidiary to Maybank.  I accept that this was due to the circumstances prevailing at that point in time rather than a reflection of absence of intention on the part of the Plaintiffs to repay the Maybank Facilities owed by the 2^nd Plaintiff. 

47.  I am therefore satisfied that the HCA and the stop notice did prevent the intended liquidation of the shares, which in turn led to the need to maintain the sequential financing arrangements with HL Bank and Maybank. 

48.  Further, it is explained that the Plaintiffs did not have other resources to discharge the said facilities. 

49.  All in all I find that the HCA and the stop notice did cause the loss contained in this head of claim.

50.  I assess therefore total financial costs, according to the Amended Statement of Damages, US$629,446.86 and SGD1,524,575.86. 

Costs

51.  Costs of this assessment should follow the event and I was invited to make a costs order nisi to that effect. 

52.  However, within that general costs entitlement there are parts that the Plaintiffs should not be allowed any costs, namely the costs of and occasioned by the adjournment, the application to file further witness statement and also the time extension application in that connection.  The reason is simply that it was due to the Plaintiff’s own omission in the first place. 

53.  Given the above, I make the following costs order nisi (to be made absolute unless any application to vary it is made by way of letter within 14 days from the date hereof): -

a.  There be no order as to costs of and occasioned by the adjournment of the assessment hearing on 4 January 2019, the Plaintiffs’ Summonses filed on 24 January 2019 and 4 February 2019 respectively; 

b.  Save as aforesaid, the Defendants do pay the Plaintiff’s costs in these assessment of damages proceedings, to be taxed if not agreed.