SECRETARY FOR JUSTICE v. HON KAM WING AND OTHERS

HCA 3377/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3377 OF 2000

____________

____________

________________

J U D G M E N T

________________

1. I have before me an application to vary the costs order nisi which I made when giving judgment on a preliminary issue in these proceedings. The preliminary issue was concerned with the question of whether the Plaintiff's claim in this action was statute-barred by reason of the provisions of the Limitation Ordinance. I concluded that the claim was not so barred and at the end of my judgment, I made a costs order nisi that the Defendants should pay the Plaintiff's costs of the trial of the preliminary issue. As I did not state that the costs should be payable by the Defendants to the Plaintiff in any event, the Plaintiff would in the normal course be entitled to seek an immediate taxation and payment of these costs.

2. Today, Mr Lam, who appears for the Defendants, has invited me to revise that order. As I understand it, his primary position is that the costs of the trial of the preliminary issue should be in the cause. As an alternative, he submitted that even if those costs should be payable by the Defendants to the Plaintiff, I should made the order one which requires them to be paid in any event, so that taxation and payment will not take place until the end of the trial.

3. Ms Wong, appearing for the Plaintiff, opposed any variation to the costs order that I made and submitted that it was one which I was both entitled to make and right in principle.

4. It was, I think, common ground that there was no definitive guidance in the authorities in relation to the situation before me, and also that I had a wide discretion which I can exercise in relation to the question of the incidence of costs.

5. I was referred by Mr Lam to Re Elgindata Ltd (No.2) [1992] 1 WLR 1207, in which Nourse LJ gave guidance as to the manner in which costs, after trial, of an action should be dealt with where the action involved a number of discrete issues, on some of which the ultimately successful party had succeeded and on others of which he had failed. Mr Lam suggested that in the light of that decision and the guidance given by Nourse LJ, an appropriate order might be costs in the cause, I think principally because it could not be said that the Defendants had acted unreasonably in raising the limitation point, or in seeking to have it dealt with as a preliminary issue, a course which I understand was not objected to by the Plaintiff. The relevant passage in the judgment of Nourse LJ in the Elgindata case is at page 1214A, where Nourse LJ said this:

" The principles are these.

(i) Costs are in the discretion of the Court.

(ii) They should follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made.

(iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or a part of his costs.

(iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the Court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party's costs."

6. Mr Lam also referred me to the decision in Pacheco v. Brent & Harrow Area Health Authority (Unreported, 17 April 1994, QBD), a personal injuries case in which there was a limitation issue tried at a preliminary issue, in which it appears that the order made was costs in the cause.

7. Ms Wong submitted, however, that the case falls within the second part of the third principle in Elgindata. She also referred me to the decision of the Court of Appeal in England in Surrey Heath Bourough Coucil v. Lovell Construction Ltd (1990) 24 Con LR 1. In that case, Dillion LJ described the options in relation to costs that were available to a judge, having tried and determined a preliminary issue as follows (at p.11):

"a judge who has decided preliminary issues has (unless he is going to make no order as to costs) three possible courses before him is going to make in relation to the costs of the trial of the preliminary issues viz:

(i) he may make those costs costs in the cause, or

(ii) he may reserve the costs to the trial, or

(iii) subject to the points in issue on this appeal, he may award the costs, or a proportion of the costs, to one or other party."

Dillion LJ went on to make certain observations as to the first two of those options. As to costs in the cause, he said:

"To make the costs costs in the cause is not, however, satisfactory to a defendant if as a result of the defendant's success on certain of the preliminary issues, very important parts of the claim will go out of the Court and will not be pursued to trials."

As to reserving the costs, Dillion LJ said:

"To reserve the costs to the trial may be necessary in some cases, e.g. if there has already been a payment into Court. But it can have its advantages, particularly if, as is not the case here, the judge who tried the preliminary issues may not himself be the trial judge. It is not mandatory that the costs of preliminary issues be reserved to the trial judge."

8. Ms Wong also relied on the fact that the costs of the trial of the preliminary issue were, as she put it, substantial. It seems to me that the costs of trying the preliminary issue in this matter will undoubtedly have been substantial. It is not possible to say how much they will be or indeed how expensive and how long the trial will be. However, I think it would be fair to say that substantial time and costs must have been expended in preparing and arguing the preliminary issues, particularly having regard to the thoroughness with which both parties' counsel prepared their submissions.

9. It seems to me also fair to say that having had a trial of the preliminary issues, the costs of dealing with the limitation issue in this way are likely to have been somewhat higher than if the matter had been left to be dealt with at the trial since it will have been necessary to incur at least the additional costs of the separate hearing.

10. In these circumstances, I think that it would be inappropriate to make the costs in the cause. I say this because the effect of such an order would be that if at the end of the day, the Defendants were successful, it would mean that the Plaintiff would still have to pay the costs of the preliminary issue to the Defendants notwithstanding that that was an issue on which the Plaintiff has succeeded. This, I think, would not be a fair result and I would not be inclined to exercise my discretion by making an order that costs be in the cause.

11. I did suggest in the course of argument that a possible order might be that the Plaintiff should have its costs in the cause. This would have the result that the Plaintiff would be entitled to recover the costs at the preliminary issue if he succeeded but not if the Defendants succeeded. However, I did not understand Mr Lam to press for this particular option and on reflection, it seems to me that having regard to the fact that the costs of dealing with the preliminary issue separately are likely to have been greater than the costs that would have been incurred had it been dealt with at trial, it seems to me that this solution might not be particularly fair to the Plaintiff either.

12. I therefore do not make an order that costs be in the cause or that the costs be the Plaintiff's costs in the cause.

13. However, that leaves Mr Lam's second argument, which was that I should make an order for the Defendants to pay the Plaintiff's costs in any event. Mr Lam referred me to Sutherland v. Barnes (unreported, 30 June 1994, English Court of Appeal). It appears that in that case there was a trial of a preliminary issue on which the defendant was successful which was followed by a trial of the action in which the plaintiff was successful. It seems, but it is not entirely clear at what stage, that various costs orders were made. It seems that Millett LJ, who heard the preliminary issue, and who was also the trial judge, ordered that the Defendant pay the Plaintiff his costs of the trial but that the Plaintiffs pay the Defendant the costs of the preliminary issue. An order was also made setting off the two sets of costs, and this was described by Millett LJ (in the Court of Appeal) as a normal order (I should perhaps add that the reason why Millett LJ was sitting in the Court of Appeal was that the appeal in question was an appeal on a separate question on costs which had been determined by another judge).

14. Mr Lam relied on this authority to suggest that it was normal or at least common, for costs of a preliminary issue to be set off at the end of the day against the costs of the trial as a whole. Mr Lam also relied on various factors which he suggested made it fairer in this case for the order to be costs in any event. These included the point that the 1st Defendant in this action was a representative Defendant, who was appointed to represent the estate of the late Hon Sum. Second, the assets of the estate had been frozen by a restraint order obtained by the Plaintiff. Third, that requiring the Defendants to pay the Plaintiff's costs now would prejudice the Defendants by reducing the amount of funds available to contest the substantive trial. Fourth, that by contrast, the Government has relatively deep pockets and is unlikely to be prejudiced in having its costs paid to it at a somewhat later stage. Mr Lam also suggested that the trial should not be too far in the future, as there was unlikely to be much documentary evidence to be discovered. He suggested that the trial could take place perhaps by the end of this year or early next.

15. Ms Wong opposed this. She relied, first, on a submission based on the increasing popularity in these courts of making gross sum assessments at the end of a particular hearing. She also took issue with a number of the other factors relied upon by Mr Lam, in particular pointing out that the assets which had been frozen by a restraint order are only the assets of the late Hon Sum which are in Hong Kong and which are known to the Government. In other words, the assets which are the subject of the claims of constructive trust in these proceedings. She points out that there may be other assets available which have not been subjected to any restraining order, and also points out that over the 20 odd years that the assets have been in the possession on the various Defendants, they have had the enjoyment of them and have been able to collect rents from them. She therefore does not accept, particularly in the absence of any evidence filed by the Defendants that that would be any undue hardship to the Defendants if an order requiring immediate payment of costs were made.

16. The Surrey Heath case does not expressly deal with the question of timing although there was perhaps some encouragement for judges dealing with preliminary issues separately to dispose of the costs of the trial of those issues at that point. It seems to me that this objective would be met by an order indicating how the costs should be disposed of. The question of timing seems to me to be a separate issue. It is fair to say that in that particular case, the terms of the order suggested that there was no statement that the costs should be payable in any event, so that, in that case, it may be that the order was such that the costs would have been taxable and payable forthwith.

17. Mr Lam said in response to this that it is worth noting that in the Surrey Heath case, the determination of the preliminary issues, although on assumed facts, went to the merits of part of the Plaintiff's claim in that case. By contrast, he said that in this situation, where the only issue is one of limitation, there is no investigation of the underlying merits of the claim and it is entirely possible that at the end of the day even if the Plaintiff did succeed on the question of limitation, the Defendants would succeed on the substantive merits at the end of the trial. In that situation, said Mr Lam, it would be fairer to afford the Defendants the usual, or common, set off that would be available if costs were ordered to be payable in any event.

18. It seems to me that there is some force in Mr Lam's contention. It is fair to say that the determination of the preliminary issue as determined it in this case has no necessary consequence in relation to the overall disposition of the action. It is perfectly possible that, at the end of the day, the Defendants will succeed. Indeed I pointed out as much towards the end of my judgment when I noted certain points that would still be open, such as the point on laches, and also perhaps points that may arise as a result of the evidence that is put before the court eventually hearing the trial of this matter.

19. I think it therefore fair to say that there is, at the very least, a possibility which cannot be discounted, that the Defendants will succeed in resisting the Plaintiff's claims at the end of the day. That seems to me to be a factor which points in favour of making the costs payable in any event.

20. So far as Ms Wong's point on the increasing popularity of gross sum assessment is concerned, I observe that no such assessment had been applied for in this case and that there will have to be a taxation in any event if the Government, the Plaintiff, were to seek to obtain an order for payment of its costs for the preliminary issue before the trial.

21. It also seems to me that there may be some difference between a situation where the event in question is the trial of a preliminary issue which does not go into the merits of the case, and where it is in both parties' interest to have it dealt with in advance, with a view to saving the costs of the trial, if the preliminary issue is determined in one way, and a case in which a procedural application is made which may well be perceived to be in the interest of the party making the application, where that application fails.

22. So far as the other points raised by Mr Lam are concerned, it seems to me that in the absence of evidence as to the financial position of the Defendants, it would not be appropriate for me to take into account any allegations of hardship that might be faced. But it does seem to me realistic to bear in mind that the Plaintiff is the Government of the Hong Kong Special Administrative Region and that any delay, even if of a year or so, in payment of costs to it is unlikely to cause it any significant hardship.

23. In the circumstances, it seems to me that on balance, a fairer order would be to order that while the Defendants do pay the Plaintiff's costs of the trial of the preliminary issue, the order should be for those costs to be paid in any event, so that they will be paid at the end of these proceedings and will afford the Defendants an opportunity to set those costs off against any costs they may be awarded in the event that they succeed.

24. In those circumstances, I would accede to Mr Lam's application to the extent of varying my earlier order so as to make the costs of the trial of the preliminary issue payable by the Defendants to the Plaintiff in any event.

25. As, having heard counsel, it appears to be agreed between both parties that there should be no order to costs in respect of this hearing, I shall not make any order as to the costs of today.