MAN FONG HANG v. MAN PING NAM AND OTHERS

HCA 7935/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7935 OF 1998

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DECISION ON COSTS

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1. For reasons given in my judgment of 11 December 2003, I ordered judgment be entered in favour of the Plaintiff in the sum of $2,756,354.39 by way of equitable compensation and interest thereon. I also ordered certain accounts be taken and the Defendants do pay to the Plaintiff the sums found to be due on the taking of such accounts. As regards costs of the action, there is no dispute that the Defendants should pay the Plaintiff's costs. However, the Plaintiff sought costs on indemnity basis. This was resisted by the 1st and 2nd named Defendants. As for the 3rd named Defendant, he did not give any instructions to his solicitors in respect of the question of costs and as a result, his solicitor did not have any comments at the hearing on 17 March 2004.

2. The legal principles as to the award of costs on indemnity basis are not in dispute. Mr Fung relied on a number of authorities. I do not find it necessary to go through all the cases cited. The leading case is Sung Foo Kee Ltd v Pak Lik Co. [1996] 3 HKC 570. The Court of Appeal endorsed some dicta in English cases on the subject and it would serve no useful purposes for me to recite the same again this Decision. Suffice to say that I have directed myself to the principles set out therein.

3. Another Court of Appeal decision referred to by Mr Fung was Choy Yee Chun v Bond Star Development Ltd [1997] 1 HKLRD 1327. That case underlined that an award of costs on indemnity basis can be made against an unsuccessful defendant or respondent. It was also relied upon by Mr Fung as authority for the proposition that the court is entitled to have regard to antecedent conducts of the parties in determining the appropriate basis of costs to be awarded.

4. In my view, the starting point is that to justify an award on indemnity basis, there must be some special features. But the discretion is unfettered and it must be exercised with reference to the facts of the case.

5. The special features relied upon by Mr Fung can broadly be categorized as follows,

(a) ulterior and improper motive with an oppressive game plan;

(b) conduct of the defence in a scandalous, vexatious and oppressive manner that constitute an affront to the court;

(c) defence conducted in bad faith and as personal vendetta with cross-examination of Plaintiff's witnesses on irrelevant matters.

6. On ground (a), Mr Fung referred to the obstructive and hostile stance taken by the Defendants in the release of the Plaintiff's entitlement to sale proceeds. Legal proceedings in the form of HCMP 2163 of 1998 was instituted by the Defendants under Order 85 Rule 2. That culminated in the decision of Yuen J (as she then was) on 21 October 1999. He urged this court to conclude that the Defendants were embarking on an oppressive game plan and these were conducts aiming at pressurizing the Plaintiff to sign some waiver letters. Mr Fung also took this court to the correspondence between the solicitors to demonstrate that different attitude was displayed by the Defendants after the Plaintiff indicated that he would not sign the waiver letters.

7. It seems to me that is a submission more relevant to the question of costs of HCMP 2163 of 1998 than the costs of this action. The alleged ulterior motive would be ulterior to that action although the same could be said in relation to the resistance of the summary judgment application in this action. The hostile attitude of the Defendants towards the Plaintiff had been referred to at the hearing before Yuen J. But Yuen J held in her judgment of 21 October 1999 that there was a confusion at that stage as to the identity of the party who was entitled to receive the payment and the Defendants were acting properly in coming to court to ask for an order before the making of payment. Yuen J therefore ordered that the Defendants could have their costs payable out of the trust fund insofar as such costs being limited to costs that would have been expended by a trustee doing no more than putting claimant beneficiaries to proof. The parties are bound by this decision as there is no appeal against the same.

8. Moreover, according to what was said in a letter dated 7 May 1998 from Messrs David Y Y Fung & Co., the representative from the Plaintiff's camp had claimed to be the registered manager of Man Mou Hei Tong at the appointment for collection of cheques on 6 May 1998. That was plainly wrong as Yuen J found at p. 12 of her judgment that the Tong had never been registered. In such circumstances, how could this court criticize the Defendants through their solicitors insisting on proper evidence as to title before the release of trust fund? In view of that, this court cannot regard the institution of HCMP 2163 of 1998 as part of an improper game plan.

9. I turn to consider the submission that pressure was exerted by the Defendants on the Plaintiff to sign the waiver letters. On the material before me, I am not prepared to go so far as inferring from the correspondence between solicitors that the Defendants were trying to stifle the Plaintiff's claim in demanding the said letters to be signed. Having regard to the resources and professional representation available to the parties and the relationship between the parties at the material time, it was highly unlikely that the Plaintiff's claim could be stifled.

10. In the letter dated 5 May 1998 from Messrs David Y Y Fung & Co. to Messrs Au, Kong & Tang, the Defendants through their solicitors intimated that they would pay the money into court if those in the Plaintiff's camp declined to sign the waiver letters. Whilst that might delay the release of the money for some time, in the circumstances of the present case, it would not affect the determination of the Plaintiff in pursuing the claims in this action.

11. Whilst it is correct to say that the Defendants were acting in a rather unfriendly manner towards the Plaintiff in adopting such a course, I think it is within the bounds of normal litigious hostility.

12. Moving on to ground (b), Mr Fung relied on several features in the conduct of the defence case in the course of the action,

(a) failure to give proper discovery;

(b) Man Leung stayed away from trial;

(c) Interference of Man Tin Sung by Man Ying Lam;

(d) Man Ping Nam and Man Pak Wan disbelieved by court;

(e) Man Ping Nam committed forgery and/or gave false testimony about the meeting of 16 March 1997.

13. On discovery, Mr Fung focused on two classes of documents in his oral submissions. The first is in respect of the Disputed Letter dated 30 July 1994 from the managers to the District Office enclosing the reply slips to the 1994 Circular. My findings are at Paragraphs 122 to 125 of my judgment. I also remind myself as to the role of MFT and Man Ping Wai in the genesis and handling of the Disputed Letter, the 1994 Circular and the reply slips. There is no evidence before the court to suggest that the Defendants had kept copies of these documents. This could not excuse them from failing to include these documents in their list of documents since the obligation of discovery extends to documents which have been in the possession, custody or power of the party. However, bearing in mind the role of MFT played in relation to these documents (and MFT is obviously very much involved in this action in the Plaintiff's camp), I do not think the omission to include the same in the Defendants' lists of documents was done with a view to conceal those documents. Since the original of these documents were in the files of the District Office and MFT had knowledge of the same, any attempt to conceal the same was doomed to fail.

14. Mr Fung directed the attention of this court to some correspondence between solicitors about the discovery as to these documents. The Defendants had through their solicitors disputed the existence of these documents. Forensically that must tie in with the defence case that those documents were prepared without the consent or knowledge of the Defendants. In my judgment of 11 December 2003, I specifically found against the Defendants on this point. But I would regard the non-admission by the Defendants as to the existence of these documents in the discovery stage as part and partial of this line of defence. I will therefore consider whether this feature justifies an award of cost on indemnity basis under the umbrella of the Defendants giving untruthful evidence at the trial.

15. The second class of documents referred to by Mr Fung were the documents relating to the sub-sale to System Link. He relied on some correspondence between the solicitors to contend that the Defendants must have access to these documents since their solicitors made reference to those terms in their letters. It has to be remembered that Messrs David Y Y Fung & Co. also acted for System Link some time after the sale in the attempts to evict the tenants or occupiers. It is therefore not surprising that the firm had acquired some knowledge as to the terms of the sub-sale. It does not follow that the Defendants were in possession, custody or power of copies of those documents. The Plaintiff had surmised that by virtue of those references to the terms of the sub-sale in the correspondence, the Defendants must have copies of those documents in their possession. In a letter dated 31 January 2002, Messrs David Y Y Fung & Co. had denied on behalf of the Defendants that they were in possession of such documents. The Plaintiff did not feel able to seek specific discovery in view of that. There is nothing that emerged in the course of the trial that would take this surmise on the part of the Plaintiff further. This point has no merit.

16. The absence of Man Leung had caused some hiccups at the beginning of the trial. Some time was spent on applications arising out of this episode. However, having regard to the circumstances leading to his absence and the results of those applications, I do not think that could constitute vexatious conducts or otherwise justifies costs on indemnity basis for the entire action.

17. As regards the allegation that Man Ying Lam interfered with Man Tin Sung before he gave evidence, I have not made any finding in my judgment. It is unnecessary for me to do so for the purpose of resolving the Plaintiff's claims. Should I do so for the purpose of determining the basis of award of costs? In my judgment, I should not do so. First, this is a serious allegation and I would hesitate to make a finding against Man Ying Lam without giving him another opportunity to give evidence if he so wishes. Mr Chong informed this court that this issue is of such marginal relevance that Man Ying Lam was advised not to give evidence in order to save costs and time. As it turns out, those advising Man Ying Lam was correct in their assessment in this regard. I perceive an element of unfairness if I were to make such a serious finding against him in this Decision (with possible ramifications other than on question of costs). Second, in m view, even if such allegation were established, it would not justify an award of costs for the entire action on indemnity basis. Bearing in mind the scope of the evidence of Man Tin Sung, it would be quite disproportionate to do so. The proper remedies against the tampering of witness lies in motion for contempt of court or alternatively criminal proceedings. Although it could be a relevant factor in determination on costs, in the present context, its relevance is limited.

18. I have highlighted various unsatisfactory aspects of the evidence of Man Ping Nam in my judgment. Paragraph 73 of my judgment summarized the position. Man Pak Wan's evidence was dealt with in Paragraphs 130 to 132. In Choy Yee Chun at p. 1336B to C, Stock J (as he then was) said,

"Of course there will in most litigation be evidence which a court rejects, and it is far from rare that a court will find that evidence has been deliberately untruthful. Such a finding will not necessarily in itself warrant an order for costs upon either of the bases alternatives to party and party taxation. But there will be cases --- and it is true that they will be the exception and not the rule --- where the conduct of a party in a case is of a more venal kind, where the conduct of the litigation has in some sense been wicked, and in such a situation the exceptional power can quite properly be applied."

19. Subject to what I shall say in respect of the conduct of the defence regarding the meeting of 16 March 1997, I do not find the conduct of the defence at the trial exceptionally hostile or vexatious. Mr Chong submitted that the central issues of the case are whether the Defendants sold the land at an undervalue and whether they had discharged their duties of due diligence. To those, I would add the defence intimation at an early stage that they would also rely on the relief under Section 60 (although it was not pleaded). On the question of discharge of duties and Section 60 relief, the background leading to the sale is relevant. Hence, I would not lessen the significance of Man Ping Nam's evidence. However, I cannot say the defence is so devoid of merit that the resistance of the Plaintiff's claim was conducted in bad faith or by way of personal vendetta. After all, the Plaintiff did not succeed to the full extent. The equitable compensation that I awarded to him is less than the amount he sought. Nor do I consider this to be a case where the defence has been conducted in an oppressive manner.

20. As regards the tampering with the minute of 16 March 1997, Mr Fung referred this court to the decision of Yam J in Wang Din Shin v Nina Kung, HCAP 8 of 1999, 30 January 2003. In that case, indemnity costs was awarded in favour of the plaintiff on indemnity basis on the ground that the defendant was probably the author of a forged will. Each case must depend on its own facts and it would, in my view, not be correct to regard that case as deciding as a matter of law that whenever a losing party had knowingly relied on forged document, he should be liable for costs on indemnity basis.

21. I do not agree with the submissions of Mr Chong that the meeting of 16 March 1997 was not an issue which the court needed to decide. The Defendant plainly relied upon what happened at that meeting. A late re-amendment to the Defence was made on 18 August 2003 to introduce a plea specifically related to that meeting (see Paragraph 20(6) of the Re-amended Defence). Further, in the course his oral testimony, Man Ping Nam referred to this meeting as his authority to sell the land. Both sides called a number of witnesses to testify about this meeting.

22. I would not repeat what I have said in my judgment concerning the defence evidence about this meeting and Man Ping Nam's addition to the minute. In my judgment, the conduct of defence in respect of this part of the case was so vexatious and scandalous that it constituted an affront to the court. But for those additions to the minute, it seems to me to be unlikely that such a case would be run. Mr Chong relied heavily on this minute in his application for leave to re-amend on 15 August 2003. Without such addition in the minute, this court would probably have refused leave to amend. All these underlined the impact of these additions to the minute on the conduct of the trial.

23. As regards the Plaintiff's contention that the cross-examination of Man For Tai by Mr Chong over irrelevant matters was actually by way of personal vendetta (viz. ground (c) in Paragraph 5 above), it is always a matter of degree and sometime the distinction between matters relevant to motive or credit and totally irrelevant matters can be a fine one. Mr Chong barely persuaded me that those matters were relevant on Man For Tai's role in the 1994 Circular and his credibility generally. I therefore do not regard this as a feature justifying an award of costs on indemnity basis.

24. All in all, apart from costs dealing with the meeting on 16 March 1997, I do not think there are exceptional features in this case to render it appropriate to order costs on indemnity basis. For reasons given, the position is different in respect of the dispute about the meeting on 16 March 1997. Although Mr Fung did not ask for indemnity costs in respect of part of the trial instead of the whole action, I do not think that should fetter the discretion of this court provided that I can be certain that there would not be any injustice to the Defendants. I have already heard full arguments from the parties concerning the forgery point and the conduct of the defence case generally. Apart from the question of apportionment or quantum, I do not see what further submissions the Defendants could make in respect of indemnity costs regarding costs incurred by the Plaintiff in dealing with the meeting of 16 March 1997.

25. In the circumstances, what I propose to do is to order as follows,

(a) the Defendants shall pay the Plaintiff's costs of the action;

(b) insofar as the Plaintiff's costs in dealing with the meeting of 16 March 1997 is concerned, such costs will be taxed on indemnity basis;

(c) save as to (b), the Plaintiff's costs shall be taxed on party to party basis;

(d) liberty to parties to file written submissions within 14 days on the question of apportionment as between (b) and (c) or quantum of (b) including submissions on whether this issue should be left to the Taxing Master.

26. I will also make a costs order nisi that the Plaintiff shall have the costs of the hearing on 17 March 2004 on party to party basis.