YAU CHIU WAH v. GOLD CHIEF INVESTMENT LTD AND ANOTHER

HCA 807/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 807 OF 2001

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J U D G M E N T

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1. By a judgment handed down on 21 May 2003, I dismissed the Plaintiff's application for a wasted costs order against D.S. Cheung & Co. The main ground for doing so was that in circumstances where D.S. Cheung & Co. were prevented and thus handicapped by reason of legal professional privilege from disclosing the full extent of its instructions, retainer and communications while acting for its former client (the 1st Defendant), it was not fair to make such an order.

2. I also made a cost order nisi saying the following:-

"65. As to costs, I would make an order nisi that each side bears its own costs. It seems to me that where a large and critical part of the evidence is missing owing to privilege not having been waived and that this evidence, if revealed, may or may not have enured to the benefit of the solicitor involved, this is the right order. Of course, where it can be shown that the application was misguided in the first place or somehow unreasonably taken out or continued, this may be different. However, while fully accepting I have not heard the parties as to costs, it does not seem to me in the circumstances that the Plaintiff has taken out either a misguided or misconceived application nor that she has acted unreasonably in doing so or continuing it. This order for costs will also apply to all reserved costs."

3. D.S. Cheung & Co. now applies for this order nisi as to costs to be varied to an order that it should be paid the costs of and occasioned by the wasted costs application. Mr Gareth Thomas, for the firm, submits quite simply that costs should follow the event and there is nothing in the circumstances of the case to suggest a contrary order.

4. On reflection and in reviewing the legal propositions made by Mr Thomas, I agree that once the Plaintiff was apprised of the fact that D.S. Cheung & Co. was labouring under the handicap or disadvantage referred to earlier, she was at risk as to costs in the event her application was unsuccessful. The state of the law as I have described in my judgment in relation to this handicap (which the Plaintiff is presumed to know), reinforces this.

5. However, the focus then becomes just when it was that the Plaintiff first knew of D.S. Cheung & Co.'s handicap. At the time of the first hearing of the application on 20 November 2002, it was not clear whether or not at that stage the 1st Defendant was prepared to waive privilege. If that hearing had gone ahead, it is difficult to say whether or not D.S. Cheung & Co would have been successful in resisting the application. Mr Thomas submits that the Plaintiff ought to have known right from the start that the firm may have been handicapped in obtaining a waiver of privilege, but I do not share this view. D.S. Cheung & Co. at no stage hinted at this difficulty in the inter-solicitor correspondence that was exchanged. There was a hint of this in the first affirmation of Mr Cheung Doi Shu, but the matter was left inconclusive as to whether the 1st Defendant would in fact waive privilege.

6. However, by the time Mr Cheung served his second affirmation dated 22 January 2003, the Plaintiff would then have been apprised of the problems that the firm was experiencing in relation to privileged material. From then on, in my view, the Plaintiff was at risk as to costs.

7. I appreciate that there were many other aspects to the wasted costs application apart from the waiver of privilege issue and I have dealt with some of these in my judgment. I have also not forgotten that at the 20 November 2002 hearing, both sides were to an extent unprepared. However, the approach I take on the question of costs is to take an overall view of the application. While the principle that costs should follow the event applies in the present case, there were some unusual features that have to be taken into account. On the whole, these relate to the revelation that the 1st Defendant was not prepared to waive privilege.

8. In my earlier judgment, I referred to the fact that the privileged material which could not be disclosed, may or may not have enured to the benefit of D.S. Cheung & Co. and thought that this was therefore relevant as to the question of costs. I have reflected on this and am now persuaded that it is entirely neutral. Once the Plaintiff knew that D.S. Cheung & Co. was under the disadvantage I have described, she ought to have realised that to carry on with the wasted costs application put her on risk as to costs.

9. In these circumstances, I am of the view that the correct order for costs is:-

(1) That there be no order as to costs up to the time the second affirmation of Mr Cheung Doi Shu was served.

(2) Thereafter, the costs of and occasioned by the application be to D.S. Cheung & Co., all such costs to be taxed if not agreed.

(after submissions on costs)

(3) The costs of and occasioned by the present application be to D.S. Cheung & Co., such costs to be taxed if not agreed.