LAM SIK SHI v. LAM SIK YING, Administrator of the Estate of Lam Tim alias Stan Lam Tim, deceased AND ANOTHER

HCA1605/2004

[2020] HKCFI 2978

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1605 OF 2004

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JUDGMENT

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THE PLAINTIFF’S APPLICATION

1.  This is an application under RHC Order 62 rule 35, made by the Plaintiff (“P”) by summons issued on 20 August 2019 for a review of the taxation of a bill of costs filed on 1 December 2017 (“Bill of Costs #8”). Specifically, P seeks to review the decision of the Master to apportion the costs as between the two defendants (“D1” & “D2” respectively).

2.  In short, it is P’s case that the liability of D1 and D2 to pay the costs in question is joint and several and that the Master was wrong in apportioning those costs between them.

3.  P’s application is opposed by D1.

BACKGROUND

4.  This action concerned a claim by P as a beneficiary of the estate of Lam Tim deceased (“the Estate”) that D1, the administrator of the Estate, acted in breach of fiduciary duty by selling the main asset of the Estate, consisting of a landed property in Causeway Bay (“the Property”), to D2 at an alleged undervalue (“the Property Transaction”). The claim against D2 was that it dishonestly assisted in D1’s breach of fiduciary duty.

5.  The trial of the action commenced on 20 April before Hon. Chow J. it was heard together with HCA 894/2011 which was commenced against the same defendants by P’s sister, Lam Mo Chu, Susie (“Susie”), similarly challenging the Property Transaction. It was however Susie’s case that, in respect of the Property Transaction, D2 was D1’s nominee and thus, the sale of the Property was by D1 to himself. In this action D1 raised a counterclaim against Susie claiming loss of rental and other miscellaneous expenses and costs in respect of what he alleged to have been the wrongfully occupation of another property belonging to the Estate.

6.  Throughout these proceedings each party was represented by separate firms of solicitors and separate counsel.

7.  On 15 May 2015 (the 19th day of the trial) D2 submitted to judgment being entered against it in each of the 2 actions. By the Amended Judgment in HCA 1605/2004 (as re-refiled on 9 July 2015) it was ordered, inter alia, as follows:

7.1  that the sale and purchase of the Property and its assignment to D2 be set aside;

7.2  the registration and re-registration of the agreement for sale and purchase and the assignment be vacated;

7.3  that an account be taken of the rent and other income (if any) received by D2 from the Property less (a) government rent, rates and property tax and other expenses and outgoings discharged by D2 and (b) the purchase monies paid by D2 for the Property;

7.4  that D2 do pay the Estate any sum found due on the taking of the account;

7.5  that “[D2] do pay the costs of the action of [P] on common fund basis, to be taxed if not agreed with Certificate for Two Counsel.”

8.  The judgment entered against D2 in HCA 894/2011 was to the like effect. In view of D2’s submission to judgment in this action, it was submitted on Susie’s behalf that all that remained for the court to determine in relation thereto was:

8.1  the question of costs as between Susie and D1. In particular whether D1 should be held liable, jointly and severally with D2 for Susie’s costs or whether Susie should be held liable for D1’s costs, and

8.2  D1’s counterclaim.

9.  D1 continued to defend the proceedings throughout. After a full trial (which was adjourned part heard on 15 May 2015, resumed on 4 May 2016 and was concluded on 10 May 2016), Chow J handed down his judgment on 3 October 2016 (“the Judgment”).

10.  In paragraph 152 of the Judgment:

10.1  the learned judge found that D1 had acted in breach of fiduciary duty which he owed to the Estate in relation to the sale of the Property to D2.

10.2  in view of the consent judgments against D2, the learned Judge did not find it necessary to make a finding as to whether or not D2 knowingly assisted D1 in his breach of fiduciary duties but he observed that, had it been necessary to do so he would have had no difficulty in finding “knowledge” and “assistance” on the part of D2.

10.3     the learned Judge observed that if the Estate were able to recover from D2 the full amount due upon the taking of an account, there should not be any additional loss or damage payable by D1 to the Estate but that the position would be different if the Estate were unable to recover the full amount due from D2

11.  On the question of costs:

11.1  in HCA 1605/2004, the learned Judge made an order nisi that D1 should pay the P’s costs to be taxed if not agreed on a common fund basis with a certificate for 2 counsel

11.2  in HCA 894, the learned Judge made an order that D1 should pay Susie’s costs in respect of the main action, to be taxed if not agreed on a common fund basis. He made no order for costs on the counterclaim (in respect of which judgment was entered for a nominal sum only)

12.  The learned Judge left it to the parties to agree the form of the order to give effect to the findings in the Judgment with liberty to apply in the event of disagreement.

13.  By the sealed Amended Judgment in HCA 1605/20034 which was drawn up after the Judgment of Chow J was handed down, it was adjudged that D1 acted in breach of fiduciary duty which he owed to the Estate in relation to the sale of the Property, and it was further adjudged and ordered, inter alia, as follows::

13.1  that the sale and purchase of the Property and its assignment to D2 be set aside;

13.2  that an account be taken of the rent and other income (if any) received by D2 from the Property less (a) government rent, rates and property tax and other expenses and outgoings discharged by D2 and (b) the purchase monies paid by D2 for the Property;

13.3  that D2 do pay the Estate any sum found due on the taking of the account;

13.4  that there by liberty to P to apply for further relief against D1 in the event that the Estate should suffer any loss arising from D2’s failure to fully comply with the Amended Judgment dated 15 May 2015;

13.5  the there be a costs order nisi that D1 do pay the costs of the action of P, to be taxed if not agreed, on a common fund basis, with a certificate for two counsel.

14.  On 1 December 2017, P filed Bill of Costs #8 for the recovery of its costs of the action from commencement to 14 May 2016 against both D1 & D2 pursuant to the costs orders contained in the Amended judgment dated 9 July 2015 and 3 October 2016. Separately P filed its bill of costs No. 9 (“Bill of Costs #9) for the recovery of its costs of the action from 15 May 2016 to the conclusion of the trial against D1 only, as well as its costs of various interlocutory costs orders which were made against D1 only.

15.  P’s Bills of Costs ## 8 & 9 were taxed by the Taxing Master from 26 to 28 November 2018.

16.  During taxation, the Taxing Master acceded to D1’s argument as regards Bill of Costs #8 and ordered that D1 should only be liable to pay:

16.1  P’s costs as incurred exclusively against D1, and

16.2  half of P’s costs as commonly incurred against both D1 and D2.

17.  P applied to review the Taxing Master’s decision in respect of Bill of Costs #8, arguing that, in the absence of an order by the trial Judge to the contrary, D1 should be jointly and severally liable for P’s costs, including such costs which were incurred exclusively against D2.

18.  The Taxing Master dismissed P’s application for review with costs.

19.  P now applies to this court for review. As in the case of the review before the Taxing Master, the present application for review is in relation to Bill of Costs #8 only.

THE PROPER APPROACH TO THE COURT’S REVIEW OF TAXATION   

20.  It is common ground that, although the application to this court for a review of taxation is by way of re-hearing and is not a hearing de novo, the court can only disturb the Taxing Master’s decision in limited circumstances, viz, where the Taxing Master:

20.1  has made an error in principle;

20.2  has taken into account factors which he should not have considered; or

20.3  has failed to take into account any factors that he should have considered.

See: Lam and Lai, Solicitors v Ho Chun Yan, Albert [2018] 2 HKLRD 127, at §29.

THE TAXING MASTERS’ REVIEW

21.  In the written decision of the Taxing Master dated 6 August 2019:

21.1  the Taxing Master made the point that taxation is an item by item process (citing the judgment of Lisa Wong J in Li Sin Man Seline v Li Shu Chung [2018] 3 HKLRD 294, at §28); that the taxing master is under a duty to determine what sum in the way of costs is properly attributable to a party without causing injustice and that a taxing master has the jurisdiction to assess costs which are wholly attributable to steps taken in respect of one defendant against that defendant only;

21.2  it was for the trial judge and not for a taxing master to decide whether or not P was entitled to recover costs against D1 & D2 jointly and severally. In the absence of an order to this effect, P would not be able to recover costs on this basis. No such order was made by the trial judge.

21.3  as a matter of general principle D1 & D2 are responsible for paying P’s costs incurred in dealing with their respective defences and matters raised by each of them, whilst costs which are common to both D1 & D2 should be dealt with by way of apportionment,

21.4  the question of apportionment is a matter for the taxing master. In this case a 50:50 split is appropriate.

22.  In P’s summons dated 20 August 2019, by which application is made to this court for review it is contended that the Taxing Master failed to properly construe the order for costs made by the trial Judge; failed to take into account the factual matrix of the case and the inferences to be drawn from the Judgment and improperly took into account Susie’s position.

DISCUSSION

23.  In interpreting an order for costs, regard must be had to both the language of the order and the context in which that order is made: Praetorius v Head Architecture and Design Ltd [2016] 3 HKLRD 124 at 127-128 (§§13 -20).

24.  It is P’s case that the language of the order for costs (D1 to pay the costs of the action of P....) and the absence of any order or direction that costs be apportioned is consistent with the intention that D1 & D2 should be jointly and severally liable for P’s costs and that there was therefore no room for the Master to apportion costs between D1 & D2.

25.  In submitting that the trial Judge intended that D1 and D2 should be jointly liable for the costs of the action incurred up to the date on which D2 consented to Judgment, P relies on paragraph 152 of the Judgment of Chow J (see paragraph 10 above); the fact that P’s case against D1 & D2 involved common facts and that the defences of D1 & D2 were “intermingled”. P also contends that had it been otherwise there would not have been any reason for allowing P liberty to apply for further relief against D1 in the event that the Estate should suffer any loss arising from any failure on the part of D2 to comply with the Amended Judgment.

26.  P contends that his interpretation of the costs order of the trial Judge is in line with the principle established by Stumm v Dixon (1889) 2 QB 529 at 533-534, per Lord Esher, M.R. viz:

“In my opinion the true rule is this: When an action is tried against two or more defendants, and any defendant separates in his defence, and the judgment is against all, the law is that each of them is liable for the damages awarded by the judgment, and each of them is liable to the plaintiff for all costs taxed on his behalf as properly incurred by him in the maintenance of his action, except as to costs caused to him by so much of the separate defence of any defendant as is, and can only be, a defence for that defendant as distinguished for other defendants. With regard to such costs so caused to the plaintiff, he is entitled by law to recover them against that defendant alone who has so caused him to incur them…” (emphasis added)

The present case was tried against both D1 and D2. Judgement was against both D1 and D2, and the line of defence ran by D1 and D2 were intermingled which relied on the same/similar evidence.  It follows that D1 is liable to P for all costs taxed on his behalf in this action.[1] “

27.  I do not agree that either the wording or context of the order for costs or that anything in the judgment of Chow J itself indicates that the Judge’s intention was that D1 and D2 should be jointly and severally liable for P’s costs. In particular, I do not accept that it follows from the fact  that the claims against D1 & D2 concerned the same transaction and that substantially the same facts grounded the claims against both D1 & D2 that D1 & D2 should be jointly and severally liable for P’s costs of the action. This is a non sequitur which confuses the substance of P’s claims with the procedural steps taken by each defendant in the action

28.  There is in my view no basis and no justification in importing a direction that D1 & D2 should be jointly and severally liable for P’s costs of the action into the Judge’s order for costs. In this respect, the passage from the judgment of Lord Esher in Stumm v Dixon (supra), at pp. 532-533, immediately before the passage on which P relies, is of particular relevance, viz:

“.......the common form of “judgment for plaintiff with costs” does not in the case of a single defendant mean that the defendant is to pay all the costs incurred by the plaintiff, or all the costs reasonably incurred by him. It means that the defendant is to pay all the costs caused to the plaintiff by the act of the defendant.......the meaning of the common form is, that the plaintiff is to recover the costs caused by the defendant. In the present case the defendant Knight has not caused to the plaintiff the costs which are now in question, and if the plaintiff is to recover them against Knight, he will be recovering from him costs not caused by the act of Knight........it would be contrary to principle and natural justice that one man should be mulct for that which another man has done.......I agree with the Divisional Court (who affirmed the Master’s taxation) that the costs ought to be distinguished so that this frightful injustice need not be done and I think there is an easy mode of distinguishing them, as the  master has done.” (emphasis added)

29.  I am also unable to agree with P’s contention that, given the terms of the costs order, there was no room for the Taxing Master to exercise his discretion to apportion the costs. it is well established that even in a case such as this where the judgment is silent as to apportionment, the taxing master has a discretion to apportion costs as between defendants: see Hobson v Sir W. C. Leng & Co [1914] 3KB 1245 at 1252. There is in my view no basis for contending that the Taxing Master in the present case should not have exercised his discretion as he did.

30.  Lastly, there is in my view no merit in P’s complaint to the effect that in reaching his decision, the Taxing Master took into account “irrelevant matters” regarding Susie’s position.

30.1  this complaint concerns paragraph 30 of the Taxing Master’s decision on review:

“At one stage, it did come to my mind if parties had missed such question at the material times because nobody would image that APH, having been able to acquire the subject property at over 10 million, took no further step in the matter after conceding the judgment. However, Mr Tse referred me to paragraph 13 of the Judgement:

1. “ In paragraph 1 of Mr Miu’s closing submissions dated 9 May 2016, Mr Miu submits that, in view of the consent judgment entered against APH in HCA 894/2011, all that remains for the court to determine in relation to Susie’s claim in that action is the question of costs as between Susie and Victor, in particular:-

(1) whether Victor should be held liable, jointly and severally (emphasis added) with APH, for Susie’s costs; or

(2) whether Susie should be held liable for Victor’s costs of her claim.

2. …”“

3. With the above, the question of “joint and several” liability to pay costs of Susie (therefore including those of Victor) was a live issue at the trial but the Judge simply did not concede to it at the end when he made the costs order.

30.2  bearing in mind that it was P’s case on this application for review that the court should consider the costs order in context and for that purpose, P’s submission that regard should be had to the Judgment of the trial Judge, I see no reason why the Taxing Master should not have had regard to the passage from paragraph 13 of the Judgment.

30.3  Indeed I agree with the Taxing Master that that passage indicates that the trial Judge was alive generally to the option of making a specific order that liability for costs as between defendants be joint and several. In my view that is a matter to which it would be legitimate to attach some significance bearing in mind the fact that the learned Judge did not order that the liability of D1 & D2 for P’s costs in HCA 1605/2004 be joint and several. Having said that however, there is no indication from the Taxing Master’s observations in paragraph 30 of his decision that he did in fact take this factor into account in reaching the decision he did.

CONCLUSION

31.  For all of the above reasons I dismiss P’s application and make an order nisi that the costs of it be paid by P to D1, to be taxed if not agreed.