HONG KONG RACING PIGEON ASSOCIATION LTD. AND OTHERS v. LAM KOON NAM AND OTHERS

HCA NO. 18376/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 18376 OF 1999

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D E C I S I O N

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1. On 21 June this year after trial of the above action, I (i) granted a declaration in favour of the Plaintiffs against the Defendants that the meeting held on 13 November 1999 purportedly as an extraordinary general meeting of the Association (1st Plaintiff) was not binding on the Plaintiffs; (ii) dismissed the Plaintiffs' claim against the 1st and 2nd Defendants for breach of fiduciary duty as directors of the Association; and (iii) made a cost order nisi that there be no order as to costs in this action. The Plaintiffs now seek to argue that they should be awarded the costs of the action.

2. Section 52A of the High Court Ordinance gives the Court full power to determine by whom and to what extent the costs are to be paid. The usual order is to order the costs to follow the events, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs: see Order 62 rule 3(2). In Donald Campbell & Co. v. Pollak, [1927] AC 732 Viscount Cave L.C. said at 811:

"A successful defendant in a non-jury case has no doubt, in the absence of special circumstances, a reasonable expectation of obtaining an order for the payment of his costs by the plaintiff; but he has no right to costs unless and until the Court awards them to him, and the Court has an absolute and unfettered discretion to award or not to award them. This discretion, like any other discretion, must of course be exercised judicially, and the judge ought not to exercise it against the successful party except for some reason connected with the case. Thus, if - to put a hypothesis which in our Courts would never in fact be realized - a judge were to refuse to give a party his costs on the ground of some misconduct wholly unconnected with the cause of action or of some prejudice due to his race or religion or (to quote a familiar illustration) to the colour of his hair, then a Court of Appeal might well feel itself compelled to intervene. But when a judge, deliberately intending to exercise his discretionary powers, has acted on facts connected with or leading up to the litigation which have been proved before him or which he has himself observed during the progress of the case, then it seems to me that a Court of Appeal, although it may deem his reasons insufficient and may disagree with his conclusion, is prohibited by statute from entertaining an appeal from it."

3. The issues raised in this action as I have identified them in my judgment of 21 June 2002 are (1) whether those requisitioning the meeting held on 13 November 1999 and attending and voting in it were members of the Association; (2) whether the resolutions should be passed as special or ordinary resolutions and (3) in that connection, whether adequate notice of the intention to pass the resolutions had been given. While all issues were resolved in favour of the Plaintiffs, the single and most important of these issues was the question of membership of the requisitionists and the voters.

4. On the evidence, the Purported Members were recruited mainly by the 1st Defendant. None of them, including the requisitionists and the 3rd to 13th Defendants had been properly admitted as members in accordance with the Articles of Association of the Association. But during the quarter of a century before this action started, these Purported Members were regarded and treated as proper members of the Association. They paid membership fees and were allowed to participate in the activities of the Association. The 3rd to 13th Defendants were invited into the Board by the Plaintiffs. They devoted their time and effort to the Association and for the purposes of the Association. The dispute only arose when the 2nd Plaintiff felt his leading position in the Association was being jeopardised. But even during the course of this litigation, the 2nd Plaintiff averred that the Association had 388 members. Thus, even at that very late stage, after the extraordinary general meeting complained of had been held, the 2nd Plaintiff on behalf of all the Plaintiffs selectively recognised some of the Purported Members as proper members of the Association, but not others, particularly the 3rd to 13th Defendants.

5. The Purported Members were led to and encouraged in the belief that they were proper members of the Association by the conduct of the Plaintiffs. Even during the course of the litigation, the 2nd Plaintiff was still holding out that the above mentioned 388 persons who were recruited under similar circumstances were proper members of the Association. Under the circumstances, it was natural and reasonable for the requisitionists, including the 3rd to 13th Defendants, to entertain the belief that they had similarly and properly acquired membership of the Association. It was therefore reasonable for the requisitionists, including the 3rd to 13th Defendants, to believe they had a right to requisition for a meeting and to attend and vote in it and similarly for the 1st and 2nd Defendants to act on the requisition. This belief was created by the very casual manner the Association was run and members admitted by the Plaintiffs and the 1st and 2nd Defendants, in particular the 2nd Plaintiff as the Chairman and the 1st Defendant as a paid executive of the Association. In addition, for the 3rd to 13th Defendants, they were further enhanced in that belief by being invited into the Board of Directors of the Association. Had it not been for this belief created by the Plaintiffs, the requisitionists would not have requisitioned the meeting and none of the Defendants would have themselves involved in this litigation. But for the Plaintiffs' conduct, the Defendants would not have believed they had a good defence. It was a very long course of conduct which created the belief in the Defendants and which now the Plaintiffs took advantage of. This is a conduct leading to the litigation which, in my view, is sufficient to justify a departure from the general rule that costs should follow the event.

6. In view of the expectation created by the Plaintiffs' conduct, I reject Mr Chu's argument on behalf of the Plaintiffs that their conduct in admitting new members and in recruiting the 3rd to 13th Defendants as directors did not trigger this litigation. Nor do I think the fact that the Plaintiffs were forced into the litigation because of the Defendants' attempt to take control of the Association by the passing of the resolution on 13 November 1999 has any merit if the Purported Members were exercising what they were led to believe as their membership right. Mr Chu submitted that the case did not turn on credibility and that the Defendants had no valid defence. Against the background leading to the litigation, these cannot weigh heavily in the scales so far as the exercise of my discretion in depriving the Plaintiffs of their costs is concerned.

7. Mr Chu argued that the 3rd to 5th Plaintiffs' involvement in the management of the Association was minimal and contributed little if at all to the belief of the Defendants. He submitted that they should not be deprived of their costs against the Defendants. I do not agree. They chose to institute the action along with the 1st and 2nd Plaintiffs. In any event, how to apportion the costs they incurred is a matter best left to be resolved among the Plaintiffs themselves.

8. I reiterate the views I expressed in Paragraphs 53 to 56 of my judgment dated 21 June 2002 when making the costs order nisi. Nothing of what I have heard from counsel today is sufficient to persuade me to change those views. Accordingly, I confirm my costs order that there be no order as to costs. I also make no order as to costs of the hearing today, treating today's hearing as if it were part of the substantive hearing.