GRUPO PACIFICA INCORPORADA v. WORLDWIDE MARINE PRODUCT LTD

HCA 2640/2014

[2020] HKCFI 1486

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2640 OF 2014

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J U D G M E N T

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1.  This application relates to a matter which I previously heard and determined at trial. The current application is made by a summons taken out by the plaintiff on 11 December 2019 seeking a “wasted costs” order against the solicitors (“D1’s Solicitors”) who acted for the first defendant (“D1”). At the conclusion of that application I dismissed the plaintiff’s application and awarded costs to be to D1 on an indemnity basis. This summarises briefly my reasons for doing so.

2.  The underlying basis of any application for wasted costs against a solicitor is that costs have been incurred which otherwise would not have been incurred due to the solicitor in question having acted improperly or unreasonably.  Jurisdiction to make such orders arises both under the inherent jurisdiction, and also, specifically, under RHC Orders 52A and 62.

3.  There are 5 specific complaints made on behalf of the plaintiff; these being that D1’s Solicitors:

Ground 1:    “lent assistance in advancing misleading case/pursuing hopeless defence”;

Ground 2:    “connived incomplete disclosure in D1’s response to P’s” request for particulars;

Ground 3:    “connived incomplete disclosure re P’s Notice to Admit Facts”;

Ground 4:    “made false statements to P re licence to operate money service”; and

Ground 5:    “assisted in D1’s continuous breach of the Disclosure Order”.

4.  It is common ground between the parties that there is a two‑stage process in considering any application for a wasted costs order.  At the first stage the Court must be satisfied that it has before it evidence which, if unanswered, would be likely to lead to a wasted costs order being made, and that the extent or amount of wasted costs is likely to be such as to justify the application for a wasted costs order.  At the second stage the court is to consider whether it would be appropriate to make such an order after having considered the reasons advanced against the making of such an order.

5.  It was also common ground at the hearing before me that it was only the first stage that was to be considered at present.

6.  Having read the written submissions of counsel on behalf of the parties, and having heard submissions from counsel for the plaintiff, I was not at all satisfied that a prima facie case had been demonstrated.

7.  The grounds of complaint made on behalf of the plaintiff have, of course, to be understood in context.  The facts of the case were such that there was no dispute that D1 had received funds belonging to the plaintiff to which it had, or over which it asserted, no right or entitlement.  It was the defence case that the funds had been received in the course of D1’s business, and that the funds in question had been dispersed on the direction of others following receipt.  The claim was made on the basis of money had not received and/or a constructive trust and was defended on the basis of their having been a change of position on the part of D1 and/or “ministerial receipt”.  Following trial those defences were rejected.

8.  The core of the complaint presently made by the plaintiff is that the business which was being operated by D1 was that of an unlicensed money exchange service.  Specifically, it is asserted that the running of such a business without a licence is a contravention of provisions of the Anti-Money Laundering Ordinance (“AMLO”); that illegality had been raised as an issue by the plaintiff in its Reply; and that D1’s Solicitors should therefore have known that the defences of change of position and/or ministerial receipt would be bound to fail.  This submission is made, it appears, on the premise that illegality of the sort ascribed to D1 would certainly negate any element of good faith in D1’s conduct or, put the other way, would comprise and constitute bad faith on the part of D1.

9.  I do not accept that premise.  Whether the illegality evidences bad faith (or negatives good faith) is a matter to be considered having regard to the whole of the circumstances.

10.  Perhaps of equal significance however is that I do not accept that illegality by the failure to obtain a necessary licence was a pleaded issue.  Illegality was adverted to by the plaintiff in its pleaded reply, but only in vague and imprecise terms, and without any reference to the absence of a licence giving rise to illegality.   Nor was there any pleading by the plaintiff to the effect that such illegality would evidence bad faith conduct on the part of D1. 

11.  The plaintiff now seeks to rely on one answer given in cross examination as a plank on which to build specific complaints regarding the apparent absence of this licence.  By the application for the wasted costs order it is suggested that there was misconduct, or at the least negligence on the part of D1’s Solicitors in not identifying this issue, in allowing the defence to proceed in the face of what is said to be clear illegality, and in representing D1 in those proceedings.  It is submitted on behalf of the plaintiff that the existence of illegality made any contention of good faith on the part of D1 such a ‘non-starter’ as to mean that the defence could not be properly advanced.  As appears above, I do not agree.

12.  Nor do I agree therefore that the material before me comes even close to showing prima facie misconduct on the part of D1’s solicitors, notwithstanding the fact that the defence was one which it would always have been difficult to establish.

13.  For those reasons, in summary, I dismissed the application.

14.  In considering costs, I was advised by counsel appearing for D1 that a Calderbank offer had been made in April this year seeking to resolve this application on a “drop hands” basis.  That offer was not taken up when, in my view, clearly it should have been since, as appears above, it was an application which had no merit, not even achieving the low bar of demonstrating a prima facie case. 

15.  Therefore, I made a costs order in favour of D1 on an indemnity basis, with directions that written submissions be made as to the assessment of costs.