AIE CO LTD. v. KAY KAM YU

IN THE COURT OF APPEAL

1995, No. 45
(Civil)

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J U D G M E N T

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Bokhary, J.A.:

1. The first judgment will be given by Godfrey JA.

Godfrey, J.A.:

Introduction

2. On 14 November 1995, this court gave judgment in an appeal from an order made by Findlay J on 26 May 1995 in a purchaser's action for specific performance. The judge had upheld the claim of the purchaser to be entitled to specific performance, and we dismissed the vendor's appeal from his order. In giving judgment, I expressed the provisional view that the vendor's former solicitor, practising as J. Fang & Co., ("the solicitor") was exclusively responsible for what had happened. Ching JA agreed with my judgment. Bokhary JA, who presided, said this :

" Costs will be dealt with on a date to be fixed. My mind is open on the question of costs. But since we may, after hearing all concerned, make an order as to costs against Messrs J. Fang & Co. under Order 62, rule 8, they will of course be given a reasonable opportunity to appear before us and show cause why no such order should be made. Accordingly, they will be notified that we may make an order as to costs against them. They will be so notified before the fixing of the date for dealing with costs; and they may make representations as to the date to be so fixed."

3. The solicitor has questioned our jurisdiction to make any such order for costs against him and now asks us to rule on that matter, which we now do.

The court's general jurisdiction as to costs

4. This court has full power to determine by whom and to what extent the costs of and incidental to all proceedings in this court and in the High Court are to be paid : see section 52A(1) of the Supreme Court Ordinance, Cap.4 ("the Ordinance"). However, it has no power under section 52A(1) to make an award of costs against a person who is not a party to the relevant proceedings, except in a case where primary legislation specifically authorises such an award of costs : see section 52A(2).

Can this general jurisdiction be invoked here?

5. The solicitor was not a party to the relevant proceedings. Mr Geoffrey Ma QC, who appeared before us on the solicitor's behalf, argued that this general jurisdiction cannot, accordingly, be invoked here to justify an award of costs against the solicitor. I agree. It is, in my judgment, quite clear that section 52A(2) precludes us from making any such award against the solicitor in the exercise of our general jurisdiction as to costs, unless there is to be found some specific enactment which takes the case out of the operation of section 52A(2). Neither the vendor nor the purchaser chose to be represented before us to advance any argument contrary to that advanced by the solicitor. But it would have been the duty of Mr Geoffrey Ma QC to draw our attention to any relevant specific enactment, and, since he did not do so, we infer that none such exists. Accordingly, I consider we are bound to hold that, since the solicitor was not a party to the relevant proceedings, our general jurisdiction as to costs cannot be invoked so as to justify the making of an award of costs against him here.

The court's specific jurisdiction over solicitors

6. A solicitor is an officer of the court. This court has an inherent jurisdiction over its officers, including a jurisdiction in a case of misconduct to order a solicitor or other officer of the court to pay costs : see Myers v. Elman [1940] AC 282, where the jurisdiction is described by Lord Wright (at. p.318) as "a summary jurisdiction exercised by the court which had tried the case in the course of which the misconduct was committed" (emphasis added).

7. In England and Wales, this jurisdiction is regulated by Order 62 rule 11 (formerly Order 62 rule 8) of the relevant Rules of the Supreme Court (see Bahai v. Rashidian [1985] 1 WLR 1337, per Balcombe LJ at p.1345 G-H).

8. The position is the same here : see Ho Lee Man v. Wong Wai Kai (No.2) [1993] 1 HKC 193, especially per Litton JA at p.195G. But in our case the conduct of the solicitor which was criticised in this court was not misconduct in the course of the proceedings fought out between the vendor and the purchaser in the High Court and this court. The solicitor had acted for the vendor in the conveyancing transaction which gave rise to the dispute between the parties; but he did not act as the vendor's solicitors in the litigation to which it gave rise. The misconduct (if any) of the solicitor here was misconduct in the course of the conveyancing transaction, leading perhaps to civil proceedings for compensation against him at the suit of the vendor (or even the purchaser); but it was not misconduct "in the course of a cause" (cp. Stephens v. Hill (1842) 10 M & W 28) and accordingly not misconduct in his capacity as an officer of the court (see Brendon v. Spiro [1938] 1 KB 176). It is not enough that a solicitor's general conduct for a client has been improper; in every case where a solicitor has been made to pay costs, he has been proved guilty of misconduct "in the matter itself" (emphasis added) : see In re Gregg (1869) LR 9 Eq. 137 per Lord Romilly MR at p.141. And there is, so far as I am aware, no modern case to the contrary effect : all the cases in which solicitors have been ordered to pay costs personally have been cases in which they were acting as solicitors in the litigation in which the costs were incurred.

Conclusion

9. I conclude that this court has no jurisdiction to order the solicitor to pay the costs of what I described in my judgment on the appeal as "all this ruinous litigation." It will now be for the successful purchaser (if the matter cannot be dealt with by agreement between the parties as to the incidence of costs) to apply to this court for an order for the payment of its costs, here and below, by the unsuccessful vendor, and for the unsuccessful vendor to take such steps as he may be advised to take to recover from the solicitor such costs as he may have to pay to the purchaser and such costs as he has incurred himself.

Ching, J.A.:

10. The present legislative provisions as to costs being ordered against solicitors is unsatisfactory. This may be the result of piecemeal legislation or a failure to appreciate the ramifications of any new section or regulation. However that may be, we are bound to apply the legislation as we find it subject only to the proper interpretation which may be given to it.

11. There is no doubt that the Courts have a general jurisdiction over solicitors. They are officers of the Court. Section 52A(1) and (2) of the Supreme Court Ordinance, Cap.4, provide that,

"(1) Subject to the provisions of rules of Court, the costs of and incidental to all proceedings in the Court of Appeal in its civil jurisdiction and in the High Court ..... shall be in the discretion of the Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid.

(2) Subject to specific provision made in this or any other Ordinance (other than subsidiary legislation) nothing in subsection (1) shall authorise an award of costs against a person who is not a party to the relevant proceedings."

I note two things about these subsections. The first is that solicitors acting for one or another party in any litigation can never be properly called a party to the litigation. That being so, subsection (2) would appear on the face of it to deprive the Court of its general jurisdiction over solicitors insofar as costs are concerned. Secondly, if that be right, then the subsection also prohibits a revival of that jurisdiction under the Rules of the Supreme Court. Order 62 rule 8 of those Rules, however, provides by subparagraph (1) that in appropriate circumstances costs between solicitor and client may be disallowed, or that the solicitor may be ordered to repay to his client costs which that client has been ordered to pay to other parties to the proceedings, or to direct the solicitor to indemnify such other parties against costs payable by them. If the first comment I have made above is correct, it would follow inevitably that Order 62 rule 8 is ultra vires and void because that Order and rule is subsidiary legislation which cannot stand against section 52A(2). The deprivation of the Court of so important a part of its inherent jurisdiction over solicitors and the result that Order 62 rule 8 is ultra vires and void is not a conclusion to which I feel that I can come. Giving section 52A(2) such effect as I can, I conclude that it was not, by its intendment or wording, apt to deprive the Court of that part of its jurisdiction and that it applies only to non-parties other than solicitors. I am fortified in this conclusion by the consideration that there could then be no question of Order 62 rule 8 being ultra vires and void.

12. I am fortified further in that conclusion by this consideration. Section 52A is restricted in its application to orders for costs in "proceedings". I see no reason to doubt that this refers only to costs incurred after the issue of the writ. This is in itself an artificial starting point. Sometimes a large sum of costs, perhaps even the majority of the costs, is built up before the issue of the writ. In some cases the writ may have been issued very quickly to preserve, for instance, rights under the Limitation Ordinance, Cap.347. In the first case the application of section 52A(2) would deprive the Court of the jurisdiction in question whereas in the second case it would not. I can think of no sensible reason why this should be so. Costs ordered against a party after a hearing, particularly an order for costs of and incidental to the proceedings, normally include costs properly incurred before the issue of the writ, see Megarry VC, in In re Gibson's Settlement Trusts (1981) Ch. 17 at 184E and 186C et seq. Where such costs have been incurred by one party and are recoverable against the other it is surely logical that the solicitor of that other should bear the costs in the appropriate circumstances. Whether or not such an order should be made against the solicitor is a question of fact leading to an exercise of discretion but it is not or should not be a question of jurisdiction.

13. Reference has been made by Godfrey JA, to the decision of another decision of this Court in Ho Lee Man v. Wong Wai Kai (No.2) (1993) 1 HKC 193. That was a case where the solicitor involved was actually the solicitor acting in the proceedings. No question arose as to the position of a solicitor who ceased to act either before proceedings were issued or while those proceedings were on foot. In those circumstances the Court held that the Court did have a general jurisdiction over solicitors but so far as costs were concerned that jurisdiction were regulated by Order 62 rule 8(1). That was said in the context of that case and it does not follow that that regulation applies in this.

14. I was initially persuaded, although reluctantly, by the draft judgment of Godfrey JA. Having regard to the draft judgment of Bokhary JA, which I have also read, I have reconsidered the matter and I have come to the conclusions which I have attempted to expound above. In my view section 52A(2) does not affect the general jurisdiction of the Court in ordering costs against Messrs J Fang & Co. and there was jurisdiction to make the order nisi which we made. I have no doubt whatsoever, however, that the legislation is in need of urgent amendment for the sake of clarity.

Bokhary, J.A.:

15. In my judgment, there is no jurisdiction in these proceedings to make any order as to the costs thereof against Messrs J Fang & Co.

16. Two separate arguments have been advanced on their behalf as to why that is so. I reject the first but accept the second.

17. The first argument comes to saying that that aspect of the courts' inherent jurisdiction over its officers which is regulated by Order 62 rule 8 has been abolished by section 52A of the Supreme Court Ordinance, Cap. 4. It has not. Section 52A has nothing to do with that aspect of the courts' inherent jurisdiction. It cannot be read as having abolished the same by a side-wind. So the first argument fails.

18. That leaves the second argument. It involves the scope of Order 62 rule 8. As to that, I say this. The particular jurisdiction regulated by Order 62 rule 8 is, in short, a "wasted costs" jurisdiction exercisable summarily (albeit of course on due notice and with a proper opportunity to be heard) over solicitors in proceedings in which they function as solicitors but unfortunately misconduct themselves or put themselves in default of their duty as officers of the court. Messrs J Fang & Co were not engaged as solicitors in these proceedings. The summary jurisdiction which I have just described does not, therefore, extend to them. So the second argument succeeds.

19. Accordingly, Messrs J Fang & Co. have succeeded in showing cause why no order should be made against them in these proceedings in respect of the costs thereof.

20. What (if anything) may or may not be recoverable against them in any fresh proceedings, being proceedings brought against them for the purpose of such recovery, I do not say. But I do venture to say this. It is very much to be hoped that even if further litigation is contemplated in this already all too litigation-ridden matter, none will be pursued unless all reasonable efforts to avoid it fail.