LEE TSO FONG v. KWOK WAI SUN AND ANOTHER

   HCA 272/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 272 OF 2005

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D E C I S I O N

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Introduction

1.  On 9 May 2008, I handed down judgment dismissing the Plaintiff’s action against the Defendants (“Judgment”) but made a costs order nisi that there be no order as to costs, thereby depriving the successful defendant of her costs in defending the action.  The 2^nd Defendant applies to review the said costs order nisi.  She seeks the usual costs order that she be awarded costs of the action against the Plaintiff. 

The legal principles applicable to costs

2.  The principles applicable to an award of costs are set out in Order 62 of the Rules of the High Court.  The starting point is Order 62, rule 2(4) which provides that award of costs is in the discretion of the Court.  Order 62, rule 3(2) provides that the Court in the exercise of its discretion should order costs to follow the event, except when it appears to the Court that in the circumstances of the case some other orders should be made as to the whole or any part of the costs.  While costs are to be in the discretion of the judge, that discretion has to be exercised judicially, i.e. in accordance with legal principles.

3.  In Ritter v Godfrey [1920] 2 KB 47 at 60, Atkin LJ held that in the case of a wholly successful defendant, the judge must award him costs unless there is evidence that the defendant:

(1) brought about the litigation; or

(2) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense; or

(3) has done some wrongful act in the course of the transaction of which the plaintiff complains.

4.  In the present case, principles (1) and (3) are clearly inapplicable.  In respect of principle (2), Atkin LJ said at page 61:

 “(2), I think, would include improper conduct in or connected with the litigation calculated to defeat or delay justice.  Such conduct would also be included in (3), which, I think, further extends to cases where the facts complained of, though they do not give the plaintiff a cause of action, disclose a wrong to the public …  If there is evidence of facts falling within the three classes above mentioned, then an appellate Court will not interfere with the discretion of the trial judge, even though they might not have come to the same finding of fact or exercised their discretion in the same way.”

5.  The above principles in Ritter v Godfrey have been adopted and approved time and again by the Hong Kong Court of Appeal: see for example, Edmund Kung Chiu Nam and The Insider Dealing Tribunal, unreported CACV 176/2006.  These principles are heavily relied on by Mrs Chan, counsel for the 2^nd Defendant and not disputed by Mr Wong, counsel for the Plaintiff.  The same principles also formed the basis of my costs order nisi.  The argument of counsel is focused on whether the facts of the present case fall within principle (2) in Ritter v Godfrey.

Reasons for the costs order nisi

6.  The facts of the present case have been set out in the Judgment.  In particular, paragraphs 105 to 113 of that Judgment are summary of the relevant facts.  It is unnecessary to repeat them in this Decision.

7.  The reasons for the costs order nisi, which I gave in paragraphs 130 to 134 of the Judgment, are as follows:

 “130.  This case was set down for trial with five days reserved.  Counsel took eleven days to finish.  The case involves some argument on the law, but is otherwise factually simple.  The relevant facts are summarised in paragraphs 105 to 113.  Except for the source of funds for making the down payment for the purchase of the Chun Fai Property and the Plaintiff’s intention in purchasing the Lok Moon Property, none of the facts stated therein were in dispute.  However, Mrs Chan spent a disproportionately long time in pursuing other irrelevant factual disputes which are all resolved against the 2^nd Defendant.   

131.  Through her counsel, the 2^nd Defendant raised many trivial and irrelevant disputes of facts.  She claimed that the Tuen Mun Property was a gift to the 1^st Defendant when she had absolutely no basis for making that assertion.  That part of her case is clearly concocted.  She argued that the Plaintiff instructed her to look for a property costing not more than $3,000,000 and not $2,000,000.  She disputed about the circumstances under which she signed the Family Agreement.  She alleged that the siblings coerced and fraudulently misled her into signing the Family Agreement, when she was not seeking to have the Family Agreement set aside.  Rather, she relied on the Family Agreement and she succeeded principally because of the Family Agreement.  All these factual disputes are irrelevant and are resolved against her.

132.  She raised her theory of one property for each son.  With that proposition, she mounted very extensive and expensive interrogatories and discoveries.  She managed to show that the Plaintiff paid the purchase price of the Lok Moon Property for Leuk and paid the down payment of the Chun Fai Property for Edwin.  The discoveries yielded some evidence of marginal value.  However, her proposition failed.

133.  The Plaintiff had a good case, but she tried to make it better by concocting a false case and giving false evidence.  Even on the Plaintiff’s case, the presumption of resulting trust is a very weak one.  The 2^nd Defendant could have easily rebutted that presumption by her close relationship with the Plaintiff and the Family Agreement.  She could have easily succeeded even on the undisputed facts.  However, she chose to indulge in meaningless and irrelevant and trivial factual disputes which were all resolved against her.  Had the defence been conducted in good faith, the case could have completed within less than four days and without the need for the extensive interrogatories and discoveries.  Tremendous amount of costs are wasted. 

134.  The Plaintiff is to blame for commencing these proceedings, which in the end prove to be unmeritorious.  Under normal circumstances, she should bear the costs of the Defendants.  However, because of the way the defence was conducted, this is an appropriate case to depart from the general rule of costs to follow the event.  It is obvious that the Plaintiff was made to incur unnecessary costs, far more than what she should be liable for, including her own as well as the Defendants’ costs, had the defence been properly conducted.  In the circumstances, I think it fair that despite the 2^nd Defendant is successful, she should be deprived of her costs.  Accordingly, I make a costs order nisi that there be no order as to costs.”

The review of the costs order nisi

8.  Mrs Chan says that the 2^nd Defendant is suffering from a psychiatric condition as a result of the violence she suffered at the hands of the 1^st Defendant.  That assertion is not supported by any medical evidence.  I am prepared to accept that assertion from the bar table as I do not wish the parties to incur more costs.  One may feel sympathetic for the 2^nd Defendant but the question the Court has to consider is whether looking at the objective facts the 2^nd Defendant has done something connected with the conduct of the proceeding calculated to occasion unnecessary litigation and expense.

9.  Mrs Chan begins her submission calling the litigation the result of a bitter family dispute.  That may well be how the 2^nd Defendant and, regrettably, her counsel viewed it.  But that is an utterly prejudiced view which is contrary to the objective facts.  On the incontraventible evidence, the disputes were only a matrimonial dispute between the 1^st and 2^nd Defendants and an ownership dispute over the Suit Property between the Plaintiff and the 2^nd Defendant.  These apart, the 2^nd Defendant and her daughters had the love and care from a very concerned mother-in-law and her children.  They were provided all their wants which the 1^st Defendant failed to provide them.  The Plaintiff and the siblings provided accommodation for the Defendants and their family in the Chun Fai Property.  The Plaintiff bought the Defendants the Suit Property to live in to salvage their breaking marriage and provided shelter for the 2^nd Defendant and her daughters whenever the 1^st Defendant abused them.  Angela arranged for the two daughters to study in St Francis Canossian College.  The siblings worked out the family arrangement to provide maintenance for the Defendants and their daughters and to preserve the Suit Property.  They even gave the Defendants the option to re-purchase the Suit Property interest free.  Certainly, save for the dispute over the ownership of the Suit Property which arose only recently, there was absolutely no dispute between the Plaintiff and the 2^nd Defendant.  But the 2^nd Defendant allowed her matrimonial dispute to spill over to Plaintiff and the siblings and severed their access to her daughters.  She was ungrateful and revengeful.  But that is not the reason I deprive her of her costs. 

10.  Mrs Chan submits that the 2^nd Defendant was a defendant who was dragged into litigation in this action by the Plaintiff and she should not be deprived of her costs.  She reinforces her submission by arguing that the Plaintiff put up a bogus claim.  I have found the Plaintiff’s claim unmeritorious and that the inferred intention of the Plaintiff was to make the Suit Property a gift to the Defendants.  That finding was not based on express intention.  In paragraph 92 of the Judgment, I find:

“Accordingly, I find the Plaintiff’s evidence credible.  The living condition in the Chun Fai Property was indeed crowded for six people and the Plaintiff had to sleep in the sitting room.  On the other hand, the 2^nd Defendant used to live in the more spacious accommodation in the Tuen Mun Property of over 600 square feet.  It is credible that she raised the problem of crowdedness.  This part of the Plaintiff’s evidence is corroborated by Angela, whose credibility I have no doubt.  Upon the 2^nd Defendant’s complaint of crowdedness, the Plaintiff offered to buy a property of not more than $2,000,000 as a residence for the Defendants and their two daughters.  The Plaintiff might have mentioned about the liquidation of the Father’s estate in her casual conversations with the 2^nd Defendant, but I am satisfied that she had not represented to the 2^nd Defendant that it was the Father’s wish to buy one property for each son or that the property was intended as a gift to the Defendants.  However, because of the then prevailing property market condition, no suitable property at that price was available.  The 2^nd Defendant made a prudent choice of purchasing the Suit Property with a sitting tenant at a price of $2,375,000, which marginally exceeded the ceiling set by the Plaintiff.”

Thus, though the Plaintiff’s claim was unmeritorious, it was, nevertheless, not malicious or bogus.  As I have found that the Plaintiff never represented that the Suit Property was a gift, it was not unreasonable for her as a matter of law to launch a case based on resulting trust.  She fought her case on that basis and on good faith.  She gave no false evidence.  She never pretended or falsely alleged that she had expressly told the 2^nd Defendant that the 2^nd Defendant was to hold the Suit Property on trust for her.  Apart from the fact that I found her claim unmeritorious, the Plaintiff had not been guilty of any misconduct in the litigation.  In the normal course of event, the Plaintiff should pay the 2^nd Defendant’s costs for having failed.  Mrs Chan submits that this case was severely contested.  Indeed it was but unnecessarily so.  Much costs were wasted.  The questions are whether conduct of the proceedings was calculated to occasion unnecessary litigation and expense and who was responsible for such conduct.

11.  Mrs Chan puts the blame largely on Mr Wong for asking irrelevant questions when cross-examining the 2^nd Defendant on issues relating to the matrimonial proceedings, such as whether the 1^st Defendant had exerted violence on the 2^nd Defendant and who was responsible for the breakdown of the marriage.  Mr Wong, certainly, went astray.  Those lines of cross-examination were promptly stopped and disallowed.  The time wasted on those issues was negligible compared with that spent on the irrelevant issues and concocted issues pursued by the 2^nd Defendant.

12.  In respect of the costly discovery and the 2^nd Defendant’s case of one property for each son, Mrs Chan submits that those matters were pursued because they were raised by the Plaintiff.  I am surprised by that submission.  The Plaintiff’s case is that the Suit Property was held by the Defendants under a resulting trust.  The 2^nd Defendant’s defence was that it was a gift.  And in support of that defence, she raised her theory of one property for each son.  Clearly the issue was raised by the 2^nd Defendant.

13.  Then Mrs Chan argues that but for the Plaintiff’s breach of my order for discovery, she could have proved the theory of one property for each son and that the Plaintiff should not benefit from her breach of court order.  I have analysed the evidence in the Judgment and it is unnecessary to repeat my analysis and finding.  The Plaintiff was asked to disclose bank statements which dated back to more than eighteen years ago.  The Plaintiff certainly had difficulties locating and finding them.  Indeed I am surprised that some are still available.  Edwin did not timely produce his Bank of East Asia passbooks pursuant to my order, but he brought them to Court and offered them for inspection by Mrs Chan while he was being cross-examined.  Mrs Chan explained that she did not take up the offer because she did not wish to spend more time on the issue.  That is a lame excuse.  The time to be spent in examining the bank passbooks would unlikely be to be long compared with that spent on the other issues under this theory of one property for each son.  In any event, the 2^nd Defendant would have been entitled to costs for an adjournment occasioned by the late production of the bank passbooks.  Her counsel made her choice.  The 2^nd Defendant cannot now complain.  On the other hand, I did not excuse the Plaintiff and Edwin for the breach of my discovery order.  But it is not the law that the 2^nd Defendant is deemed to have proved the issue by reason of such breach.  I gave the Plaintiff the most punitive treatment which such breach deserved.  I drew the most adverse inference which is appropriate in the light of the totality of the evidence.  But even then, the 2^nd Defendant failed in respect of the Chun Fai Property.  She also failed in respect of the Tuen Mun Property.  She only succeeded in respect of the Lok Moon Property.  The theory has to be proved as one.  Either she failed or she succeeded.  I find that she failed miserably. 

14.  The truth is that when viewed objectively, the theory was a concoction.  The 2^nd Defendant has no evidence in support of her theory whatever.  The Chun Fai Property and the Tuen Mun Property were purchased long before she married into the family.  She has no personal knowledge about Edwin’s purchase of the Chun Fai Property eighteen years ago.  Yet she alleged it was wholly purchased by the funds of the Plaintiff.  For that wild assertion, her solicitors launched a very expensive discovery process, which the Plaintiff unwittingly resisted.  She has no personal knowledge about the purchase of the Tuen Mun Property.  Yet she alleged it was purchased under the same theory.  Mrs Chan argues that the 2^nd Defendant was led into the belief that the Tuen Mun Property was purchased by the Father or the Plaintiff as a gift to the 1^st Defendant because the 2^nd Defendant was so told by the go-between who introduced the 1^st Defendant to her and by the 1^st Defendant.  That assertion is inconsistent with Edwin residing in the Tuen Mun Property before the 2^nd Defendant’s marriage.  For reasons as explained in my Judgment, I disbelieve her evidence.  But, it is not even her evidence that she had been told by some credible source, such as the Plaintiff or from the casual conversations in the family, that the Tuen Mun Property and the Chun Fai Property were purchased by the Father for the 1^st Defendant and Edwin respectively.  Mrs Chan submits that the timing of the transfer of the Tuen Mun Property from the 1^st Defendant to Alice and Angela tied in very well with the purchase of the Suit Property and this gave the 2^nd Defendant the belief that the Tuen Mun Property was a gift to the 1^st Defendant.  But it is not even her evidence that the Plaintiff had ever told her that because the Plaintiff had bought the Tuen Mun Property for the 1^st Defendant, the 1^st Defendant had to re-transfer the Tuen Mun Property to Alice and Angela upon purchase of the Suit Property.  The 2^nd Defendant failed miserably on her theory which I found was purely based on her concoction.  The theory was not supported by any objective evidence or by any honest and genuine belief on the part of the 2^nd Defendant.  Now, with hindsight, the discovery was a fishing exercise raised without any evidential basis or any honest and genuine belief.

15.  Mrs Chan submits that the Plaintiff acted maliciously in launching the litigation the day before the hearing of the ancillary relief proceedings with the purpose of delaying the 2^nd Defendant from getting relief against the 1^st Defendant.  She submits that if the Plaintiff had a genuine claim she should have started the action soon after the 2^nd Defendant left the Suit Property.  The timing indeed cast a very bad light on the motive of the Plaintiff.  However, the Plaintiff’s inaction is not unreasonable.  It is always a wisdom to let a sleeping dog lie.  Though the 2^nd Defendant had threatened to sell the Suit Property, it would be prudent for the Plaintiff to wait and see and hope that things would change.  Even if the Plaintiff were to have a good claim against the 2^nd Defendant, there is no point waking up a sleeping dog just for the purpose of killing it.

16.  As for the timing when the Plaintiff commenced this action, it is embarrassing.  However, I accept the Plaintiff’s explanation that she was not aware of the hearing of the ancillary relief proceedings until a very late stage.  This is not surprising given the attitude of the 1^st Defendant.  The 1^st Defendant did not defend the matrimonial proceedings and took no interest in the ancillary relief proceedings.  The Plaintiff had lost contact with the 1^st Defendant.  It is credible that he had not informed the Plaintiff about the progress in the ancillary relief proceedings until a very late stage.  The Plaintiff and Angela have always been very loving and caring to the 2^nd Defendant and her two daughters.  They provided them with pocket money after the 2^nd Defendant left the Suit Property.  It could not have been their intention to cause any hardship to the 2^nd Defendant and her daughters.  I do not think the action was commenced by the Plaintiff out of malice.

17.  This is an unfortunate piece of litigation.  But it did not arise out of any long and bitter family dispute as submitted by Mrs Chan.  There was a dispute over the ownership of the Suit Property which arose recently following the breakdown of the 2^nd Defendant’s marriage, which had nothing to do with the Plaintiff.  What the Plaintiff and the siblings did was to salvage the marriage.  The dispute was bitter because the 2^nd Defendant made it bitter.  She had a good case of gift.  She tried to improve on it by putting up a concocted case.  She concocted the theory of one property for each son.  Not only did her theory occasion costly and unnecessary discovery proceedings, she pursued her theory vigorously to the end at trial.  She queried every cent used in the purchase of the Chun Fai Property eighteen years ago when she had neither the evidential basis nor any genuine belief that its purchase was funded by the Plaintiff.  She alleged that the Tuen Mun Property was a gift to the 1^st Defendant by alleging that that was what she was told by the 1^st Defendant and the go-between who introduced her to the 1^st Defendant when Edwin’s earlier occupation in the Tuen Mun Property would have cast serious doubt on such belief.  That evidence was in any event rejected by me.  The conduct of her litigation was calculated to occasion unnecessary expense.

18.  Furthermore, she raised numerous irrelevant issues, such as whether the Plaintiff placed a ceiling of $2 million or $3 million on the value of the property to be purchased and whether the 1^st Defendant or Annie’s husband was the applicant for the purchase of the Tuen Mun Property.  Again, she caused extensive discovery and pursued them unnecessarily and vigorously at trial.  She raised the issue that she was coerced and misled into signing the Family Agreement, when she relied on that agreement to succeed.  That line of evidence was stopped by me when it became manifestly obvious that resolution of those issues would lead her to nowhere.

19.  Unlike the irrelevant issues unwittingly raised by Mr Wong which were promptly stopped and discontinued, the irrelevant and unnecessary issues raised by the 2^nd Defendant were pursued vigorously to the very end.  I was unable to stop her from pursuing those issues as those issues were the very basis of her defence.  In the end, those issues were all resolved against her.  Tremendous amount of time was wasted.  As I have already indicated in my Judgment, the 2^nd Defendant could have easily succeeded on the undisputed evidence.  She could have easily succeeded  by telling the Court that she married a lousy husband and her marriage was breaking down, but she had a loving and caring mother-in-law who made her a gift of the Suit Property in the hope of salvaging the breaking marriage and to facilitate her daughters to study in St Francis Canossian College and that the Family Agreement which the siblings made was evidence of the gift of the Suit Property.  She only had to be honest and grateful to succeed in the case.  But instead, she smeared everybody who had been kind to her.  I feel a strong sense of indignation at her conduct.  But that is not the reason for depriving her of her costs.  But, in smearing the siblings and in presenting a concocted case, she raised numerous irrelevant and unnecessary issues which were calculated to occasion unnecessary litigation and expense.  All those issues were resolved against her.  The 2^nd Defendant was largely responsible for severity in which the case was contested and the unnecessary expense occasioned.

20.  It is one thing that a party loses in failing to prove an issue he raised, but it is another if he failed because the issue is a concocted one.  It is even worse if, based on a concocted theory, he caused the other party to incur excessive costs in discovery and in contesting the issue at trial.  Our litigation system is based on fairness and justice.  Penalising a party by way of costs is one effective sanction to preserve the integrity of this system.  If a party has a good case or a good defence, he should come forth to court and present his true case.  Whatever the reason, it is wrong to attempt to mislead the court by presenting a concocted case.  The court should not countenance such misconduct in the litigation before it.  If such misconduct is condoned, litigants would be encouraged to take their chances.  Our litigation system would fall apart and our courts would be degraded into even less than moot courts. 

21.  Efficiently litigated on undisputed evidence, this trial should take three days.  Reasonably litigated without the irrelevant issues, this trial should take no more than four days.  However, the trial was severely contested on concocted evidence and irrelevant issues which took eleven days.  While the Plaintiff should be responsible at least for the 2^nd Defendant’s costs for four days, she was made to incur unnecessary costs for seven more days.  The Plaintiff was made to incur more costs than what she would have been liable for including the 2^nd Defendant’s costs, had the defence been properly conducted.  In the circumstances, a reverse costs order that the 2^nd Defendant pay part of the Plaintiff’s costs would not have been wrong.  But, as the 2^nd Defendant was dragged into this litigation by the Plaintiff, an order of no costs would be more appropriate.

22.  Mrs Chan pleads that the 2^nd Defendant is on legal aid and the Director of Legal Aid will recover his costs from the proceeds of sale of the Suit Property to be transferred to the 2^nd Defendant.  She submits that depriving the 2^nd Defendant of her costs will result in the value of the Suit Property being wholly absorbed by the legal costs in this action and in the matrimonial proceedings. 

23.  I am sympathetic with the situation in which the 2^nd Defendant now finds herself.  But my discretion in respect of costs has to exercise in accordance with legal principles.  The 2^nd Defendant is the maker of her own misfortune by creating a concocted case.  Though the Plaintiff wrongly commenced the litigation, the 2^nd Defendant turned it into a vendetta.  She indulged herself in extensive and costly discovery process and pursued irrelevant and unnecessary issues vigorously to the very end at trial, thereby occasioning unnecessary litigation and expense.  The possible consequences to the 2^nd Defendant is not a valid reason for not depriving her of her costs if she was guilty of misconduct in the litigation in the way I found.  If a defendant uses public funds to present a concocted case, he only has himself to blame when he is required to reimburse the public funds from his own property.  It is absolutely unjust that the other party should be ordered to pay for his costs of presenting a concocted case so as to protect him from the consequences of his misconduct in the litigation, which is in effect what Mrs Chan is now seeking to persuade me to order.  As a fall back, Mrs Chan asks for an order that the 2^nd Defendant be awarded part of her costs.  On the calculation I have demonstrated, that is equally unjust.  

24.  I was conscious of the consequence of costs.  In each pre-trial review, I urged the parties to come to settlement because the value of the property did not justify the costs of the litigation in the way I foresaw it would be run, i.e. including the theory of one property for each son.  But my words of wisdom fell upon deaf ears.  Both parties have to suffer the consequence of costs.  The Plaintiff lost her case which she was bound to and her own costs which she could have saved.  As for the 2^nd Defendant, she was primarily to blame for advancing the concocted theory and insisting on pursuing the irrelevant issues.  Had those advising her seriously evaluated the 2^nd Defendant’s assertions and properly presented her defence without that theory and the irrelevant issues, the 2^nd Defendant would have succeeded with a costs order in her favour.  However, the blame primarily lies on the 2^nd Defendant who had clouded the better judgment of those advising her and her counsel.

Conclusion

25.  Having heard what counsel has submitted and reconsidered my costs order afresh, I am only convinced that the costs order nisi was appropriate.  Accordingly, I affirm my costs order in my Judgment.  I also treat this review as part of the trial proceedings and make no order as to costs, save that the 2^nd Defendant’s own costs be taxed in accordance with Legal Aid Regulations.