TECHNICON ENGINEERING LTD v. CHAN LEE KWOK TRADING AS LEWA & CO

DCCJ607/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 607 OF 2007

D E C I S I O N

1.  The Defendant seeks costs of the action and of two summonses to strike out and to amend on an indemnity basis.  It is clear from the case of Choi Yee Chun v Bond Star Development Ltd. [1997] HKLRD 1327 that the circumstances in which an indemnity award of costs might properly be made are not restricted to the circumstances such as those described in the case of Overseas Trust Bank Limited v Coopers & Lybrand [1991] 1 HKLRD 177.  The discretion of the court is unfettered and not to be affected beyond the requirement that taxation on an indemnity basis must be appropriate.

2.  The question in this case is whether reasonable steps could have been taken to identify the proper party to be sued and to be named as the Defendant in the action commenced.  The Writ was commenced on 1 February 2007, naming as the Defendant “Chan Lee-kwok trading as Lewa & Company” and not just Lewa & Company.  The Statement of Claim was filed on 29 March 2007.  The Plaintiff claims that it only knew for the first time from the affirmation of the Defendant filed on 16 May 2007 that there are two companies both trading in the name of Lewa & Company.  However, in the Defence filed on 12 April 2007, the Defendant pleads that this business was only commenced on 6 February 2007.

3.  On being served with the Defence at the latest, if not before the commencement of the proceedings, the Plaintiff could have made a search at the Business Registration Office to verify the date of commencement of business and the date of registration of the business of the Defendant.  The Plaintiff alleges that it requires time, after receiving the Defendant’s affirmation, to carry out an extensive investigation into the relevant projects to verify the correct contracting parties.  The projects ranged from 1998 to 2004.  It would have been readily apparent that the named Defendant, whose business was only registered on 6 February 2006, could not have entered into the projects in question. 

4.  It is not an unusual situation at all in Hong Kong for companies to be registered with the same name.  Before issuing the Writ, the Plaintiff’s solicitors should have conducted the necessary business registration search as any reasonable firm of solicitors would have done to verify the details of the registration of the business known as Lewa & Company and to compare such details, in particular the registered address, with the details from the written agreement and the quotations in support of the Plaintiff’s alleged claim.  At the very latest when the Defence was served, these particulars should have been checked with the Plaintiff.  It was not until one month after the filing of the Defence on 12 April that the Defendant applied for striking-out on 16 May 2007.

5.  I do not accept the explanation given as to the time required to verify the correct contracting party as the information should have been available to the Plaintiff’s solicitors by the time of the filing of the Statement of Claim on 29 March 2007 at the very latest. 

6.  In these circumstances, I do not see any good reason why the Plaintiff should not pay the Defendant’s costs incurred in this action on an indemnity basis.  I have not seen any good reason why the Defendant, a separate legal entity to the limited company which is the proper party to the contracts in question and who has been unnecessarily dragged into this litigation, should be out of pocket in relation to these costs incurred.  The fact that Chan Lee-kwok, who is a director of Lewa Decoration Company Limited, had signed some cheques issued by the limited company does not alter the fact that he is a separate legal entity, and does not make him personally liable to justify an action being commenced against him.

7.  In my judgment, the circumstances fall within the same category of cases such as Paul Ki Ping Ki & others v Oriental Daily Publisher Limited & others ( CACV 201/1999, 28th March 2000) and Ho Man Yu v Ngai Shing Sau (t/a Shing Kee Engineering Company) & others ( HCPI 332/2004, 15th February 2006).  It is appropriate to make an order of costs on an indemnity basis in this case and I so award.