ARTHUR ANTONIO DA SILVA AND ANOTHER v. GABRIEL RICHARDO DIAS-AZEDO AND ANOTHER

HCA 2158/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2158 OF 2009

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R U L I N G  ON  C O S T S

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Introduction

1.  I have to rule on the costs of two issues which arise from rulings dated 16 August and 12 October this year upon which I have now received written submissions on behalf of the Plaintiffs (the judgment creditors), HSBC (the garnishee) and Mrs Gardner (the interested party).

2.  The two rulings that I have referred to are in the court papers and so I do not propose to make detailed reference to them. As to the ruling of 16 August, I had to decide whether I needed to set aside the garnishee order absolute, as the garnishee was submitting, or merely to amend it, as the judgment creditors were submitting, so as to insert into the order the correct amount owed by the garnishee to the judgment debtor.  I ruled that it was only necessary to amend the order.

3.  Having made that order I directed that the ruling should be served on Mrs Gardner’s solicitors.  I had been informed by the garnishee’s solicitors that Mrs Gardner had started bankruptcy proceedings against the judgment debtor in respect of a judgment that she had obtained against him for US$9,796,879.63.  It seemed to me that I ought to wait and see whether she objected to my ordering the garnishee to pay out the amount owing to the judgment creditors pending the outcome of her bankruptcy petition.  In the event, she made that objection.

4.  The ruling of 12 October dealt with the question of whether the garnishee should pay out or whether the sum owing should go to the trustee in bankruptcy in the event of a bankruptcy order.  I ruled that there should be no payment out to the judgment creditors.

5.  The costs of 16 August are between the judgment creditors and the garnishee and those of 12 October are between Mrs Gardner and the judgment creditors, and between the garnishee and the judgment creditors. 

Costs of the 16^th August

6.  In respect of this, the argument was won by the judgment creditors.  I ruled that all that was required was an amendment of the order and I dismissed the garnishee’s summons to have the order set aside.  In such circumstances, it might be said with some justification that costs should follow the event.  Not so, says the garnishee.  In garnishee proceedings RHC, O.62 r. 32(4) provides for fixed costs for the garnishee “unless the court orders otherwise”.  The position of a garnishee, particularly a bank, is that it stands as an innocent third party under a duty to make disclosure for the benefit of the judgment creditor so that the expense incurred by it in doing so ought generally to be paid by the judgment creditor.  The fixed costs regime can be displaced by a taxation on a party and party basis, common fund or on an indemnity as may be appropriate.  See Ever Good Trading Corporation v Cheng Ching Kwok trading as Bonanza Industry Co. and Hang Seng Bank & Ors [1988] 1 HKLR 307, where Cruden DHCJ, having considered a line of English cases held, on the facts of that case, the bank garnishee’s costs should be paid by the judgment creditor on a party and party basis.  A similar order is sought by the garnishee on this occasion.

7.  In order to decide what is the correct course to adopt, I need to re-visit what had undoubtedly gone wrong on this occasion. Both sides were in error.  The garnishee order absolute was irregular because the judgment creditors’ solicitors had drawn up the order requiring the garnishee to pay the judgment creditors HK$25,798,065.78 which was the sum that the judgment debtor owed the judgment creditors under their default judgment against him.  The garnishee was also mistaken because it failed to identify and set-off amounts in the credit accounts of the judgment debtor with it.  The garnishee says that these errors were drawn to the attention of the judgment creditors’ solicitors as early as March 2010.  It was not until July 2010 that the judgment creditors’ solicitors proposed rectifying the order.  In between those dates, there was correspondence between the garnishee and the judgment creditors’ solicitors in the course of which it is said for the garnishee that those solicitors took no steps to rectify the order or indeed to do anything about the matter.  In these circumstances, the garnishee took out its summons first on 27 July 2010 (and not the other way round as I had suggested in my ruling of 16 August) to set aside the order due to the existence of the two errors which I have drawn attention to, and the judgment creditors responded with their amendment summons on 10 August 2010.

8.  Given the delay on the part of the judgment creditors’ solicitors it is submitted that the garnishee acted correctly in issuing its summons which, if successful, would have resulted in the judgment creditors starting again.

9.  There is no doubt that the garnishee has been drawn into a far greater involvement than it would have had to participate in had this straightforward matter not been de-railed by these two errors, one on either side.

10.  The order for costs needs to reflect what has gone wrong.  It seems to me that the judgment creditors were tardy in their response to this matter which would have been rectified very much sooner than it was.  For its part, the garnishee was in error in its calculations.  It also adopted the wrong course in seeking to set aside the order.  I have decided that on this occasion both parties should bear their own costs up to and including the date of my ruling on 16 August.  It would not be right to oblige one party to pay any portion of the other party’s costs in circumstances such as these.

Costs of the 12^th October

11.  So far as the garnishee and the judgment creditors are concerned, this is very much part of the fall-out from what had happened previously.  I will therefore also say that as between these two parties there should be no order for costs.  As far as Mrs Gardner is concerned she has succeeded in getting a stay but is not asking for costs against anyone.  As between her and the judgment creditors, I will say no order for costs.  There is no issue between her and the garnishee and so an order for costs, even one of no order, is inappropriate.

Costs of This Written Argument

12.  There will also be no order for costs in respect of these written submissions on costs.