CHOI LISA MEI YIN v. YAU PAK KIN

HCA 3/2012

[2019] HKCFI 854

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3 OF 2012

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DECISION ON COSTS

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Introduction

1.  Ms Choi claimed that she had downloaded a promissory note from the net and Mr Yau signed the Promissory Note in her presence. 

2.  By a judgment handed down on 31 July 2018 (“the Judgment”), this court found, amongst others, on a balance of probabilities, that the Promissory Note was forged.  Ms Choi’s claim was thus dismissed and Mr Yau’s counterclaim was allowed in full.  This court ordered costs, on a nisi basis, in favour of Mr Yau.

3.  This is Mr Yau’s application to vary the costs order to one of costs on indemnity basis.  The basis is that the finding of forgery carried no other meaning but that Ms Choi had dishonestly and fraudulently pursued an entirely false case against him until trial.

4.  Ms Choi opposes the application.  She submits that the finding on forgery was not based on venal or wicked conduct on her part.  In any case, costs on indemnity basis should only apply to the forgery issue but not others.

Legal principles

5.  Costs are in the discretion of the court.  Such discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be appropriate: Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114, at §§16 & 17.

6.  In KJ v KMLM [2014] HKFLR 227 at §§21-23, To J expounded a practical way for deciding if indemnity costs should be ordered for hostile litigation:

(1) The starting point in hostile litigation is that costs should be taxed on party and party basis.  To qualify for costs on indemnity basis, the successful party should show some special or unusual feature in the case.  The proceedings must be instituted or prosecuted in circumstances as to constitute an affront to the court.  Usually there must be something disgraceful in the conduct of the losing party or his legal representatives such as to cause the court to feel a proper sense of indignation: at §21.

(2) If unreasonable conduct is relied on, the losing party’s conduct would need to be unreasonable to a high degree.  In this context, “unreasonableness” does not mean merely wrong or misguided in hindsight.  Advancing a case which is difficult, unlikely to succeed or which in fact fails, or without any foundation in law or fact, or devoid of merits, is not necessarily in itself a sufficient reason for an award of indemnity costs: at §22.

(3) The court’s finding that the claim or ground of defence is plainly and obviously incredible on the fact, or that the evidence has been deliberately untruthful will not necessarily in itself warrant an order for indemnity costs.  The conduct of the losing party must be of a more venal kind and the conduct of the litigation has in some sense been wicked: at §22.

(4) The court may also mark its disapproval of the conduct pertaining to part only of a party’s case by ordering costs of that part only to be assessed on an indemnity basis, with the rest assessed on party-and-arty basis: at §23.

7.  If the evidence shows that the person seeking to propound a document (eg a will) has, in order to advance his own interests, knowingly participated in a dishonest design to put forward as genuine a document that was not, that may be a special and unusual feature such as to warrant an order for costs on indemnity basis: Wang Din Shin v Nina Wang alias Nina TH Wong, CACV 460/2002 and CACV 67/2003, 19 April 2005, §17; Chinachem Charitable Foundation Limited v Chan Chun Chuen and anor, HCAP 8/2007, 16 April 2010, §36, Lam J (as he then was).

8.  Mr Kwong, counsel for Ms Choi, submits that even when there is a finding of fact that a plaintiff relied upon a forged document, it does not necessarily justify an order that costs should be assessed on an indemnity basis: Chan Mei Lin v Lee Hong [2018] HKCFI 2441 at §§72-73, 221 per DHCJ To; Chen Mei Lan v The Registrar of Companies & ors (unrep HCMP 894/2015, 30 December 2016) at §§60, 66, per Au-Yeung J.

9.  With respect, Chan Mei Lin and Chen Mei Lan did not establish any legal principles.  The costs order made were on nisi basis.

Application of the legal principles

10.  At the trial, 5 issues were raised, the forgery issue being the first one (§8 of the Judgment).  The other 4 were raised in the amended defence and counterclaim filed on 26 July 2013, 1½ years after the writ was issued.  The court found against Ms Choi on all issues and held that on any of them, the claim must be dismissed (§176 of the Judgment).

11.  Mr Yau had consistently denied having signed the Promissory Note since pre-action correspondence.  He pleaded a belief that the Promissory Note was a fabricated document but he could put it no higher than a case of suspicion of forged document in the first version of the defence and counterclaim.

12.  This was a case with an underlying debt although there was an issue as to whether Ms Choi had been paid in full. The finding of forgery was not based on highly unreasonable, venal or wicked conduct on the part of Ms Choi but solely on the expert evidence.  However, viewed against Ms Choi’s assertion that the Promissory Note was signed in her presence, the necessary implication of a finding of forgery was that that assertion was false and Ms Choi had advanced a false case.

13.  Even if the Promissory Note was not forged, Ms Choi would have failed on issues 2 and 3 (ie the no consideration issue and not-promissory-note issue) as a matter of law.  Those issues were raised soon after the handwriting expert reports were prepared in the first quarter of 2013.  Continuing the case from then was quite misconceived.  Issues 4 and 5 (ie the full payment issue and security agreement issue) would not have saved Ms Choi’s case even if they were decided in her favour.

14.  Considering all circumstances, I am of the view that Ms Choi should bear costs on indemnity basis from and since 27 July 2013.

15.  Mr Kwong submits that any costs order on indemnity basis should be restricted to the forgery issue.  I am unable to agree.  If the Promissory Note had not been relied on, the other 4 issues would not have arisen at all.

Costs of this summons for variation

16.  Costs should follow the event and be to Mr Yau on indemnity basis as well, as it would have been wholly unnecessary if Ms Choi had not pursued a false or unmeritorious claim.

17.  On a taxation on indemnity basis, all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred and any doubts which the taxing master may have as to whether the costs were reasonably incurred or were unreasonable in amount shall be resolved in favour of the receiving party: Order 62, rule 28(4A) of the Rules of the High Court.

18.  This principle is equally applicable to summary assessment.

19.  In the present case, a staggering amount of $144,100 is claimed by Mr Yau’s lawyers when there is no difficult issue of law involved.  It is true that, through correspondence, Mr Yau’s lawyers have requested for disposal of the costs issue on the papers without a hearing – but that was before they followed the proper course of issuing a summons for variation of the costs order nisi. After the summons was issued, the request was not renewed.  The court’s direction was not sought and a hearing of 3 hours was fixed. 

20.  I do not regard it as reasonable for there to be a hearing.  Nor do I find the costs claimed to be at all proportionate to a simple costs issue. Accordingly, for the present summons, I award costs on indemnity basis only in the amount of $40,000.

Conclusion

21.  I order that the costs order nisi given on 31 July 2018 be varied such that the plaintiff shall bear the defendant’s costs on party and party basis until and including 26 July 2013 and thereafter on indemnity basis. Costs of this summons is summarily assessed and allowed at $40,000.

22.  I thank counsel for their assistance.