ZHENG LIE LIE AND OTHERS v. PROSPERFIELD VENTURES LTD AND ANOTHER

HCA4572/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4572 OF 2002

---------------------

----------------------

------------------------

R U L I N G

------------------------

1. The plaintiffs, having succeeded in the action, are now asking me to award them their costs on an indemnity basis. I do not propose to relate again the background and nature of this matter which appears in two judgments of mine dated 4 February and 18 March 2003, the latter following the trial of the action.

2. Mr Chua, who appears for the plaintiffs, relies on a number of findings and observations made by me in the judgment following the trial as to the conduct of the defendants. This has been in essence a dispute about discovery and whether the document, which is at the centre of the matter, is one to which privilege attaches and if so, whether the defendants would be able to make use of a copy of it as secondary evidence at the trial of the main actions.

3. It would be helpful if I indicated at the outset how I propose to view this action in relation to the two main actions. Mr Burns for the defendants has urged a restrictive approach by submitting that in considering this issue of costs, I should view the defendants' conduct only in relation to this action and not have regard to it as part and parcel of their conduct in the litigation as a whole by bringing into account the effect of their conduct in relation to the document on the main actions as well, which is what Mr Chua submits I should do. He does so by reference to the fact that this action has only come about to restrain use of the copy document in the main actions and it comes about because of the disclosure of the copy in the defendants' list of documents in the main actions.

4. I do not think that I can properly compartmentalise this conduct by ignoring its effect on the whole of the litigation - this action is after all no more than a satellite proceeding, if I may so describe it, attached to the main actions. I had indicated the view that it would have been better if this matter had been litigated as part of the main actions, by summons in those proceedings, rather than by separate writ, which in itself is a matter relied on by Mr Burns in support of a reduction of the plaintiffs' costs, to which I will need to make further reference presently. For these reasons I propose to look at the matter and the defendants' conduct in the round.

5. The argument before me has ranged fairly widely but in the final analysis, it seems to me that the only matter which can and should properly be taken into account in deciding whether to order indemnity costs is the defendants' conduct orchestrated by Mr Wang, who then had a sufficient say in their affairs and in the way in which the main litigation was being run, to order an embargo on disclosure of the copy of the document until a tactically opportune moment arose, with the result that there had been no disclosure until six years had elapsed from the date of the order of discovery in the main actions and eight years after the document had come into the defendants' possession.

6. Mr Chua has drawn attention to some other matters particularly the clandestine way in which the document had been appropriated from the plaintiffs' possession; but I have made no finding that the defendants had been responsible for the removal of the document from Mr Zheng's possession. If that had been the case I would have thought the application for indemnity costs would have been irresistible. What Mr Chua says is that this aspect must also be taken into account, even though the defendants may not have been guilty of the clandestine removal of the document, because they must have realized that it had been irregularly come by, which he submits is a serious matter to which regard can be had. Nevertheless, on this issue of indemnity costs I am not prepared to take into account the fact that I have concluded the document had been removed clandestinely from Mr Zheng's possession, simply because there is no evidence as to the precise manner in which the defendants came into possession of the copy of the document.

7. The only question therefore is whether by cynically and deliberately sitting on it, as I have found and commented on in the judgment, is sufficient to justify what is after all, an unusual and draconian order to make following hostile litigation, where the usual order is party-and-party costs.

8. I need to refer to two cases which bear on when such an order should be made. In the earlier of the two decisions, Godfrey JA (as he then was) in Sung Foo Kee Ltd v. Pak Lik Co. [1996] 3 HKC 570 held that judges have a discretionary power to make such an order if they consider it appropriate in the circumstances of the particular case before them, and that this discretion should not be limited by indications in previous cases, the only limiting factor being that there would need to be some special or unusual feature (see generally page 575B-E). The subsequent decision is that of Choy Yee Chun v. Bond Star Development Ltd [1997] 1 HKLRD 1327 (CA) which whilst repeating the necessity for special or unusual features which might justify this basis of taxation, is expressly cited by Mr Chua because Stock J (as he then was) drew attention to the English Court of Appeal decision in Scherer v. Counting Instruments Ltd [1966] 1 WLR 615 which provides authority for the proposition that the judge may have regard to conduct before the instigation of the litigation, rather than merely confine himself to the way in which the litigation was contested by the losing party. At 1338C-H, he said the following :

"Then it is said that somehow the judge ought not to have taken into account events prior to the institution of the proceedings. I do not agree. In determining whether the conduct of proceedings or the motive behind that conduct is or is not of a particular colour, the court cannot put on blinkers and shut out earlier behaviour by litigant which might well explain conduct within the litigation itself. In any event, in the course of normal litigation, whilst 'the grounds upon which costs are awarded must be connected with the case, this may extend to any matter relating to the litigation and the parties' conduct in it, and also to the circumstances leading to the litigation, but no further.' (see Scherer (supra) per Buckley LJ at 619)."

9. The significance of this is that Mr Burns has made the point that the matter has been litigated perfectly properly where he had put in issue whether this document had in fact been prepared for the dominant purpose of contemplated or ongoing litigation - the Waugh v. BRB point. Once that had been decided against the defendants, this left over the issue of whether the defendants could still deploy the copy of the document as secondary evidence, which gives rise to the exercise of the court's discretion as to whether to allow its use in all the circumstances of the case. There is no doubt at all that such submissions as have been addressed on those issues were entirely proper points to be made and if these were the only matters in terms of substance and background I cannot imagine that the present application for indemnity costs could even have been contemplated.

10. Nevertheless, I do not consider that I can possibly shut my eyes to the manner in which disclosure has been made - and I need not repeat the sequence of events - they show the defendants in the most unflattering light. These are special, unusual and most undesirable features which should be taken into account and condemned by an indemnity taxation, and that is the order that I make.

11. This leaves over the matter of whether the plaintiffs should somehow suffer a discount on their recoverable costs notwithstanding the basis of taxation because they have chosen the most cost intensive route of a separate action rather than by taking out a summons in the main actions themselves. I have already indicated my view that the latter course should have been adopted but it seems to me that I should allow the plaintiffs some latitude in the way that they have chosen to bring, what was a very urgent, application for an injunction before the court. Their choice, given the options available, has not been so unreasonable as to provide a reason for a discount on costs, particularly given the defendants' conduct which caused the urgency in the first place, disclosure only having been made in November 2002.

12. As to the costs of this hearing I have already heard provisional argument. The plaintiffs have succeeded and they must get their costs of today but I would have thought only on a party-and-party basis because the argument against such an order has been addressed entirely reasonably.