LO KAI BUN v. PONG MAN YI AND OTHERS

HCA4700/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4700 OF 2002

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R U L I N G

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1.  This has been highly damaging and indeed destructive litigation in which the defendant has had to spend, I am told, $2.5 million in defending a claim that should never, in my judgment, have been brought, and I say that because the plaintiff knew that, at the time that he signed over 40 important documents transferring to a trust and to the defendant herself control of the family business.  Notwithstanding this, he launched these proceedings alleging all manner of fraud against this lady, who has been thoroughly vindicated in the course of the trial.

2.  This was a trial which lasted some 16 days.  Unfortunately, it was tried in three instalments.  Beginning in November 2004, it was then adjourned to July 2005, and finally, over the course of a number of days in November last year, the evidence was concluded.

3.  Having heard the evidence, I disbelieved the plaintiff on every material aspect of his case, and it is now said that I should vary the costs order nisi, in which I directed that the costs should be taxed on a party and party basis, to one of an indemnity basis.  It is submitted, and I think rightly, that if one leaves matters as they are this lady will be out of pocket by some $800,000 or so in defending an action which simply should never have been brought and which, in my judgment, was actuated by malice by this man against the background of the break-up of their marriage, which had gone wrong many years before this action had been started but which really came to a head in the course of the matters which I had to consider during the trial.

4.  The principles are these, and I think it is sufficient to take them from the note to Order 62.  This appears at page 961 of the current High Court Practice.

“Taxation of the successful party’s costs on an indemnity basis could properly be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously or for an ulterior motive or in an oppressive manner.  Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for the taxation of the successful party’s costs on an indemnity basis.”

5.  And that comes from what really is the leading authority in Hong Kong, Choi Yee Chun v Bond Star Development Limited [1997] HKLRD 1327, a decision of the Court of Appeal.  I am also assisted by the judgment of Millett J., as he then was, cited with approval in Choi Yee Chun in the case of Macmillan Inc v Bishopsgate Investment Trust Limited [unreported].  It is dated 10 December 1993.  Millett J. had this to say:

“The power to order taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose.  Litigants who conduct their cases in bad faith, or as a personal vendetta, or in an improper or an oppressive manner, or who cause costs to be incurred irrationally or out of all proportion as to what is at stake, may also expect to be ordered to pay costs on an indemnity basis if they lose, and have part of their costs disallowed if they win.  Nor are these necessarily the only situations where the jurisdiction may be exercised; the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be appropriate.”

6.    Much the same was observed in another English case, Munkenbeck & Marshall v McAlpine [1995] 44 Con LR 30, where Hollis J said:

“In my view it is a pity that various courts have attempted to define in exactly what circumstances indemnity costs may be ordered.  It is a matter in each case of the judge exercising his discretion to order costs on an indemnity basis when appropriate to the facts before him.”

7.  It is quite clear on the basis of all the authorities, to which I have been very helpfully referred, that before I exercise this discretion the case has to be wholly out of the ordinary.  In my judgment, if ever there was a case which is out of the ordinary, and where an indemnity taxation is appropriate, it is this one.  The plaintiff set out to prosecute this case knowing, on my finding, that in order to succeed he would have to tell a wholesale pack of lies to get around the fact that he had signed all these documents knowing that he signed them for the purpose for which they were intended, which was to transfer to the family trust and transfer to the control of the 1st defendant his wife, these companies, in the circumstances which have been canvassed in the course of the trial.

8.  It would be an affront to the court to allow this lady to have to face this oppressive litigation, having succeeded, and leave her with a shortfall of over $800,000, to find herself to pay her solicitors.  That simply would not be right and this situation can be put right by my awarding costs on an indemnity basis, which I now do.  In so far as the costs of today are concerned, this has been a bona fide argument.  I would have thought that the costs of today, subject to anything that counsel wish to say, should be to the defendants on a party and party basis.