LIN SAN JIH AND OTHERS v. CHAI ZHEN ZHONG AND OTHERS

HCMP 1197/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1197 OF 2005

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REASONS FOR JUDGMENT ON COSTS

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Background

1.  On 14 September 2011, I handed down my judgment for the plaintiffs and ordered nisi on costs as follows :

(1)  Ps shall have their costs of the action against D1‑4;

(2)  No order as to costs between Ps and D5; and

(3)  D6 shall have its costs against Ps who shall be indemnified by D1‑4.

2.  D1 /3 and D2 /4 applied to vary the Order nisi as follows :

(1)  Ps shall only have 30% of their costs against D1‑4;

(2)  D6 shall have its costs against Ps.

3.  After the hearing on 18 January 2012, I have dismissed D1‑4’s application and the following is my reasons therefor.

4.    (1)     In this application, D1‑4 submitted that Ps only succeeded in one cause of action for misrepresentation but not on duress, undue influence, and conspiracy.  Thus they argued that they should not be deprived of part of the costs.

(2)     However I accept the submissions of counsel for Ps.  The correct analysis is not so much on causes of action, but on the issues, and depends on whether an issue is “so distinct and separate in itself that the decision of it constitute as an ‘event’ ” and hence has added to time and costs.  I accept that in these proceedings, Ps case in misrepresentation was the crux of the dispute and Ps succeeded therefor.  This primary case had been made clear as long ago in their Listing Questionnaire for CMC on 10 September 2009, and their opening submission at trial.  Even the previous counsel for D1‑4 understood that the causes of action in misrepresentation, duress, undue influence or conspiracy amounted to the same issue in practice.  In their opening submissions, they framed these causes of action as 1 issue among 4 and attacked them together.

(3)  More importantly, little time was in fact taken up by evidence on the other three causes of action.

Forgery

5.  D1 to D4 submitted that Ps and in particular P1 failed in his allegation in forgery of his signatures on certain board resolutions and corporate returns.  P1 explained in his evidence in chief that the basis of his belief that those signatures were not his, was that he could not have signed documents when the contents contradicted what he knew to be true, or when he could not remember the document. 

6.  However, the amount of time spent herein was not substantial. 

D1‑4’s unreasonable conduct

7.  My decision on costs was mainly based on D1‑4’s conduct at the trial which caused much delay and lengthening of the trial as shall be stated under 4 headings herein below :

(I)  Attempts to get the trial aborted

(1)  The previous counsel for D1‑4 estimated time of trial was 12 days whereas P estimated 15 days.

(2)  However on Day 1, D1‑4’s counsel applied for an adjournment of 2 days for mediation / negotiation. The Court was assured that the estimated time would be sufficient for trial if negotiation failed.

(3)  Negotiation failed, as disclosed by P now, as D1‑4 actually proposed a “drop hand” proposal of them keeping 80% interest in D5 with each party to pay its own costs.  This of course was rejected by Ps.

(4)  After the aforesaid 2 days adjournment, D1‑4 dropped their old legal team resulting in a further adjournment 5 days, and costs were awarded to P.  Had the Court not been available for those dates afterwards, D1‑4 would have succeeded in getting the trial aborted.  In any event, successive adjournments were granted to the new legal teams for D1/ D3, and D2/ D4, all because of D1‑4 changed their legal teams.

(II)     Prolixity at trial

8.  D1‑4’s prolixity caused an extreme lengthening of the trial by the following actions :

(1)  D1‑4 cross‑examined Ps’ first witness Xu for 8 days, and often on wholly irrelevant matters.  This was despite repeated reminders from the Court that many of the questions asked by counsel for D1/ D3 turned out to be quite irrelevant. 

(2)  Inspite of the aforesaid warning, P1 was still cross‑examined for 9 days and again those questions from counsel for D1 / D3 were often irrelevant, or on matters not in dispute.

(3)  Counsel for D1‑4 took a “no stone unturned” approach and sought discovery of documents mentioned by Xu and P1 regardless of relevance and sometimes ignored the fact that D1‑4 had the documents sought.

9.  This Court had repeatedly reminded counsel of this improper approach and the costs consequence thereof.

10.  Further D1‑4 changed their case after cross‑examination of P’s witness Xu and even half way through P1’s evidence. 

11.  Furthermore when D1 finally gave evidence on the 23^rd day of the trial, D1 and D3 made substantial amplification of the evidence in chief, which they should have done by way of a supplemental witness statement. 

12.  In D2’s witness statement, he purported to adopt D1, D3 and D4’s witness statements.  However since D1 and D3 changed their evidence from time to time, it became unclear what part of their statements D2 meant and the Court would have to adjourn for D2 to read those statements and state exactly which part he would adopt disown. 

13.  Lastly, D1‑4 made several delayed but futile interlocutory applications which added to the time and costs.  All three applications made during trial were dismissed.

14.  All the aforesaid factors caused an extremely lengthening of the trial.  I agree with counsel for Ps that this already suffices to justify awarding P’s their full costs.

15.  Counsel for D1‑4 submitted that certain delay was caused by Xu’s late disclosure of his notebook.  However the adjournment granted in this respect was quite limited in that this Court rose early on 18 February 2011 at 3:26 pm and on 19 February 2011 at 10:43 am.

D1‑4s’ Intentional Non‑Disclosure

16.  D1‑4 did not disclose pages 9 and 10 of the ETA and the same was only disclosed, apparently quite accidentally, when the new legal team took over.  These 2 pages were P’s main piece of evidence and their existence became a major basis of the Court’s decision (see paragraph 97‑106 of the judgment).  Eventually this Court found that D1‑4 “intended to hide the existence of the SETA by hiding pages 9 and 10 from this Court” (paragraph 104) and “there was a deliberate attempt to mislead the Court regarding the content and existence of page 9 of the ETA by D1 to D4 when they were jointly represented”.  (see paragraph 106).

D6’s costs

17.  D1‑4 blamed Ps for suing D6 and should be soley responsible for the costs of D6.

18.  However it is Ps’ case that D1‑4 misrepresented that they were representing D6 in taking over the management of the Golf Club and in taking up the controlling interests in D5.  This Court found in favour of Ps that D1‑4 did make such representation.

19.  Ps did not know whether representation by D1‑4 was true or false until D6’s evidence was revealed.  D6 was obviously a necessary party and it is only sensible for Ps to sue D6 as well.

20.  The Court found that D1‑4’s misrepresentation was just a lie and they have no authority from D6.  Thus, I agree with counsel for Ps that D1‑4 should bear Ps’ liability for D6’s costs. 

Conclusion

21. (1) The aforesaid D1‑4’s unreasonable conduct suffices to justify awarding Ps full costs;

(2) Ps succeeded in the main cause of action of misrepresentation and the other matters which Ps had failed were not “distinct and separate” issues.  In any event, they did not significantly add to time and costs.

(3) Ps were justified in suing D6 so D1‑4 have to bear the costs of D6 as well.

22.  For the aforesaid reasons, I dismissed D1‑4’s application to vary my Order nisi on costs with costs to Ps with certificate for 2 counsel.