ROGER S.K. WONG t/a ROGER S.K. WONG & CO v. GARETH HUW THOMAS AND ANOTHER

HCA 27/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 27 OF 2004

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D E C I S I O N

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Background

1.  This is the Defendants’ application (1) to strike out the statement of claim of the Plaintiff pursuant to Order 18 rule 19 and the inherent jurisdiction of the Court, (2) for an injunction restraining the Plaintiff from taking further related proceedings against the Defendants and (3) for an indemnity costs order. 

2.  The Plaintiff is a practising solicitor and sole proprietor of Messrs Roger S K Wong & Co.  The 1^st Defendant (“Mr Thomas”) is a partner of the 2^nd Defendant (“Herbert Smith”) which is a firm of solicitors representing another firm of solicitors, Messrs Victor Chu & Co (“Victor Chu”), in High Court Action No HCA 5590 of 2000.  In that action, the Plaintiff sued Victor Chu in libel in respect of certain words used in an inter-solicitor correspondence in the course of a previous litigation five and half years ago.  Mr Thomas had the conduct of that litigation on behalf of Victor Chu.  On 19 September 2001, Hartmann J struck out the Plaintiff’s statement of claim and dismissed his action with costs.  The Plaintiff’s appeal to the Court of Appeal was also dismissed with costs on 29 November 2002.  

3.  Victor Chu then proceeded to taxation, firstly in respect of the costs of the first instance proceedings and subsequently those of the appellate proceedings.  Herbert Smith made a number of errors in the costs claim.  The one which the Plaintiff felt most strongly against was that Mr Thomas represented at a taxation hearing before Master Au Yeung on 15 August 2002 that one of Herbert Smith’s fee earners, Mr Fang, was a registered foreign lawyer when Mr Fang was not so registered, though legally qualified in Australia at the time.  The Plaintiff applied to review the taxation.  In a written submission prepared for the taxation review, Herbert Smith volunteered a correction and apologised for the error.  In a further affidavit, Mr Thomas disclosed other errors relating to the rates charged for Mr Thomas’ work and to certain items of work done by other fee earners mistakenly attributed by Herbert Smith’s law costs draftsman to Mr Thomas.  Victor Chu sought to withdraw the earlier bill of costs and to present a bill for a reduced amount.  Master Au Yeung held she had no jurisdiction to allow withdrawal of the original bill of costs and granted Victor Chu leave to apply for review out of time.  Both the Plaintiff’s and Victor Chu’s review were heard together on 10 June 2003.  The Plaintiff cross-examined Mr Thomas at length and submitted that these errors must have been fraudulent attempts to inflate costs and hence Victor Chu should be deprived of part of its costs.  At the conclusion of the hearing, Master Au Yeung dismissed the Plaintiff’s allegations of fraud. 

4.  Then, instead of seeking a review of Master Au Yeung’s  taxation by a judge of the High Court in accordance with Order 62 rule 35 of the Rules of the High Court, the Plaintiff issued proceedings in High Court Action No HCA 2207 of 2003 against the 1^st and 2^nd Defendants on 16 June 2003, making in substance the same allegations of fraud against them as had been dismissed by Master Au Yeung and claiming as damages the higher costs he was ordered to pay and the extra costs he incurred.  On 17 September 2003, Reyes J struck out this action as being, inter alia, a scandalous collateral attack on the master’s findings and ordered indemnity costs against the Plaintiff.

5.  The Plaintiff did not appeal against the decision of Reyes J and the first instance taxation review process resumed.  On 27 December 2003, an Allocatur was sealed, in which Master Au Yeung certified the costs subject to the first instance taxation in the sum of $516,211.60.  In her written Reasons For Decision On Review Of Taxation handed down on 30 January 2004, Master Au Yeung dealt with and rejected allegations of fraud raised against Mr Thomas.

6.  On 30 and 31 December 2003, Herbert Smith attempted to serve a statutory demand on the Plaintiff but was unsuccessful.  On 6 January 2004, the Plaintiff issued the present action repeating essentially the same allegations of fraud but claiming more substantial damages for insomnia, depression and loss of business.  On 7 January 2004, Victor Chu successfully served the statutory demand in respect of the Allocatur on the Plaintiff.  On 7 February 2004, the Defendants applied to strike out this action.

7.  In the meantime, on 10 February, Victor Chu served its evidence in response to the Plaintiff’s application to set aside the statutory demand.  On 11 February 2004, the Plaintiff applied to review Master Au Yeung’s taxation out of time.  The review has been fixed for hearing before Deputy High Court Judge Saunders on 13 May 2004.

Striking out

8.  The Defendants seek to strike out the Plaintiff’s action on three separate grounds.  The first two of these grounds are based on res judicata.  The third ground is that the fraud allegations are plainly not supportable on their face.

Scandalous attack on earlier judicial decisions

9.  Firstly, the Defendants say that the Plaintiff’s action is founded on fraud which had been adjudicated upon in previous proceedings, namely by Master Au Yeung at the taxation review hearing on 10 June 2003 and by Reyes J in HCA 2207 of 2003 on 17 September 2003.  Hence, the Plaintiff’s statement of claim is a scandalous collateral attack on one or more earlier judicial decisions in other proceedings and the Plaintiff’s action should therefore be dismissed.

10.  This ground put forward by the Defendants is based on res judicata proper or res judicata in its narrow sense.  This means that a party will not be permitted to re-litigate in subsequent proceedings issues which have already been adjudicated upon in previous proceedings by a court of competent jurisdiction: see Hunter And Chief Constable of the West Midlands Police And Others [1982] AC 529.  This principle is well settled.  I quote the following dicta of Reyes J in Wong Shui Kee Roger and Gareth Huw Thomas and Herbert Smith (a firm) unreported, HCA 2207 of 2003 as a statement of the above principle of law.  That was the case between the same parties referred to paragraph 4 above, which the Plaintiff accepted as correct in law.  At paragraph 19, Reyes J said:

“It is an abuse of process for an intending plaintiff to initiate legal proceedings for the purpose of mounting a collateral attack upon a final decision against the intending plaintiff which has been made by another court of competent jurisdiction in previous proceedings in which the intending plaintiff had a full opportunity of contesting the decision in the court by which it was made (Hunter v Chief Constable of the West Midlands Police [1982] AC529 (HL), at 541B-C (Lord Diplock)).  It would be:-

‘a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again.’

(Lord Diplock in Hunter at 542C-D quoting Lord Halsbury LC in Reichel v Macgrath (1889) 14 App Cas 665, at 668).  Such abuse may exist where, an issue having been resolved in an earlier action between the intending plaintiff against one party, the intending plaintiff seeks to raise the same issue in a later action against another party.  See, for example, Cosby v Government of the UDA [2000] 3 HKC 688 (Stock J), at 695I-696G.  Where there is such abuse it is the Court’s duty (as opposed to discretion) to prevent the same (Hunter at 536D; cited with approval by the Court of Appeal in Tsang Chin Keung v Employees Compensation Assistance Fund Board (No. 2) [2003] 1 HKC 499, at 510H-I (Rogers VP)).

The principle of law as stated by Reyes J is fully supported by decisions of the House of Lords in the United Kingdom and by decisions of the Court of Appeal in Hong Kong.  The principle is well settled and is beyond doubt.  The Plaintiff also accepted it as correct.

11.  At paragraph 10 of the Statement of Claim in this action, the Plaintiff pleaded:

“After the full taxation hearing, the Plaintiff seek an appointment to review the decision of Master Au-Yeung and the Review is fixed for hearing on the 14^th November 2002 and it was discovered that the First Defendant had lied about the status of one Sammy Fang one of the fee earner of the Second Defendant and leave was given to the Plaintiff to re-open all the items in relation to Second Defendant’s time and the Second Defendant was Ordered to file affidavit to give explanation of his conduct.”

At paragraph 16a, the Plaintiff pleaded the following particulars of fraud and deceit of the Defendants:

“The First Defendant had stated to the Court and to the Plaintiff that one Sammy Fang in the employ of Second Defendant is a registered foreign lawyer.  This is not true.”

12.  The Plaintiff’s attack is based on the Defendants lying about the status of Mr Fang as a registered foreign lawyer.  This issue had been determined by Master Au Yeung on 10 June 2003.  According to the transcript of the hearing before Master Au Yeung on 10 June 2003, the Plaintiff submitted at 11:18 am as follows:

“It’s the plaintiff’s contention that a clear case of misleading statement was being made to the court on 15 August 2002.  The misleading statement was self-admitted by Mr Thomas under oath that he has misled the court to the effect that Mr Fang, one Sammy Fang, who’s the person named in the bill of costs produced by the defendant’s solicitors, to the extent that he was a registered foreign lawyer.”

After hearing submission from both parties, the master held:

“The primary allegation against Mr Thomas is that he told a lie to the court at the taxation hearing.  When one talks about a lie, there is an element that the maker was aware that the statement was untrue and had the intention of telling an untrue statement to the court.

The burden of proof is on the plaintiff.  Notwithstanding the seriousness of this allegation and that it is against a solicitor, the burden is still one of balance of probabilities.

Mr Thomas has given an explanation.  As rightly pointed out by him, there is no independent evidence from the plaintiff to set up a positive version of a lie.  I have to look at the explanation independently and also the surrounding circumstances to see if I can draw the inference that Mr Thomas had a guilty intention.

….. (Master Au Yeung then analysed the evidence.)

Looking at all the circumstances, there is nothing which caused me to find that the misleading statement was made out of a deliberate intention to lie to the court as opposed to carelessness.  Indeed, it is not an irresistible inference that Mr Thomas had been lying to the court.  There could be logical explanations consistent with innocence which I accept.

The plaintiff has not discharged the burden of proof, and I find the allegation of lying not substantiated.”

Thus, the master has carefully considered the evidence and submission and found that the Defendants’ mistake about the status of Mr Fang was a careless mistake which does not amount to a deliberate lie to mislead the court.  In the order drawn up following the hearing on 10 June 2003, it was stated in the order that the Court “found that Mr Gareth Huw Thomas did not deliberately lie to or mislead the Court in the manner alleged by the Plaintiff or at all.”

13.  The same issues were before Reyes J on 17 September 2003 when he dismissed the Plaintiff’s statement of claim High Court Action No 2207 of 2003 as frivolous, vexatious or otherwise an abuse of process.   This was the decision which I quoted in paragraph 10.  After the passage I quoted, Reyes J went on from paragraph 20 onwards and said:

“20.   Mr Wong [the plaintiff] raised the issue of fraud in the taxation hearing of the 2000 Action.  The issue of fraud was raised for the purpose of enabling Mr Wong to persuade the Court to disallow Mr Thomas’ costs. The Master squarely rejected Mr Wong’s allegations of Mr Thomas’ fraud in the 2000 Action.

21.    It is apparent that the crux of the SOC and AMSOC are the allegations that:-

(1)   Mr Thomas deliberately misled the Master about Mr Fang’s status; and,

(2)   the presentation by Mr Thomas and Herbert Smith of an amended bill of costs constituted a fraudulent act and a conspiracy to defraud.

Unless Mr Wong can establish these allegations, his claims in SOC and AMSOC stand no prospect of success.

22.               But these allegations are precisely those which Mr Wong exhaustively canvassed (including in cross-examination of Mr Thomas) before the Master and on which the Master conclusively and finally held against Mr Wong.  It follows that Mr Wong’s attempt to ventilate the same issues of alleged fraud in this action against Mr Thomas and Herbert Smith is precisely the abuse of collateral attack which Lord Diplock described as “scandalous” in Hunter.

23.               On this ground alone, I would strike out the SOC and disallow the AMSOC.”

Reyes J then struck out the Plaintiff’s statement of claim as a collateral attack on the previous decision of Master Au Yeung and dismissed the action.

14.  The taxation hearing resumed and concluded on 15 December 2003.  On 30 January 2004, Master Au Yeung handed down her written reasons for decision.  Referring to the issue of Mr Thomas misleading the Court, she said at paragraph 23 and 24 as follows:

“23.   I had considered the evidence and submissions of both sides.  Mr. Thomas did not double check the status of [Mr Fang] before giving instructions to the [law costs draftsman].  It was not a prudent approach.  However, one does not always check on the qualifications of a colleague.  If the firm had a system of employing or deploying persons, and had qualification requirements when employing someone within the firm, a solicitor or partner within the firm might be entitled to rely on that system.  That was particularly so when the solicitors’ firm contained a number of persons, both qualified and unqualified.  I bore in mind that it was Messrs. Herbert Smith who, on their own initiative, drew to my attention the mistake as to [Sammy Fang’s] status.  But for their frankness, that mistake would have gone unnoticed and the Plaintiff would have to bear more costs than he ought to.

24.         Looking at all the circumstances, there was nothing which caused me to find that the erroneous representation was made out of a deliberate intention to lie to the court as opposed to carelessness.  Suggestions put in cross-examination had been considered but they were not irresistible inferences that Mr. Thomas had been lying to the court. At best they were suspicions of Mr. Wong.  There could be logical explanations consistent with innocence which I accepted.  There was no independent evidence to contradict Mr. Thomas’s version.”

15.  Thus, the issue of Mr Thomas misleading the Court had been exhaustively canvassed before Master Au Yeung at the hearing on 10 June 2003 and again in her written reasons for decision handed down on 30 January 2004.  The Plaintiff’s attempt to resurrect the issue before Reyes J in HCA 2207 of 2003 was dismissed by Reyes J as a collateral attack on the decision of Master Au Yeung.  In effect the Plaintiff is repeating the same allegations of fraud in paragraphs 10 and 16a of his statement of claim, though he is now claiming a different remedy.  The Plaintiff’s allegation in paragraphs 10 and 16 is a blatant collateral attack on the previous judicial decisions of Master Au Yeung and Reyes J.

16.  In paragraphs 11 and 12 of the statement of claim in the present action, the Plaintiff pleaded another fraud based on the fee cap of $30,000.  The particulars of fraud were pleaded in paragraph 16c.  These paragraphs are as follows:

“11.   The Review before Master Au-Yeung eventually come up for hearing on the 11^th December 2003 and in the course of the hearing, it was discovered that the Second Defendant sent a Bill of Costs to their client and the amount charged to his client is $30,000.00 calculated up to 13^th July 2000.  However, the at the instructions of the First Defendant, the Second Defendant charged a much larger sum to the Plaintiff and represented to the Court that actual amount is much more [than] $30,000.00.

12.    The attempt by both Defendants to charge and demand the Plaintiff to pay more [than] he should is not only in breach of the indemnity principle of taxation on party and party basis but also a further attempt to cheat and swindle money from the Plaintiff under the disguise of a Costs Order.

16c.   The Bill of costs presented by both Defendants to their client for work done up to 13^th July 2000 is $30,000.00.  The copy receipt is clearly in their file and yet they deliberately inflated the figure and demand the Plaintiff to pay more than $30,000.00 for the same period.”

17.  This issue has also been considered by Master Au Yeung in paragraphs 31 to 36 of her reasons for decision handed down on 30 January 2004.  She said:

“31.   At the original taxation, I had allowed a total of $36,700 for Period 1.  On review the [law costs draftsman] conceded that there was an overcharge of $6,700 and the amount was reduced to $30,000.

32.    Messrs. Herbert Smith had produced the letter from the insurers which had capped the fees for Period 1 at $30,000.  The relevant fee note at page 6 of the Adjourned Hearing Bundle of the Defendants confirmed that the client had been so billed for Period 1.  The issues were:

(i)                  Had the indemnity principle been breached?

(ii)                What were the reasonable fees for Period 1?

After referring to the legal principles, she answered question (i) in the affirmative but found the Defendants were not dishonest.  She reduced the quantum of costs of Period 1 to $30,000 and said at paragraph 36:   

“36.      The same logic would apply if the agreement between the receiving party and his solicitors governed only one item or step or stage of the litigation.  The First Fee Note was not an interim fee note.  It specifically stated the period of work covered and stated “(at an agreed fee)”.  In my view, it was a final fee note for the period of work stated and fell within the agreement for capped fees.  Although the bill for Period 1 might be drafted for an amount exceeding the capped fees, the receiving party had a duty to inform the Court after taxation if the amount allowed for that period exceed the cap.  I found that the indemnity principle had been breached for Period 1.  Despite Mr. Wong’s submission to the contrary, I was satisfied that there was no dishonesty on the party of either Mr. Thomas or Mr. Yu.  They might have taken an erroneous view of the law but that was far from dishonesty.  In fact, it was they who, on their own volition on review, informed the Court that there were capped fees.”

18.  Thus the allegation of fraud as to the capped fees contained in paragraphs 11-12 and 16c of the Plaintiff’s statement of claim has already been considered by the master.  The allegation is therefore another collateral attack on the judicial decision of Master Au Yeung.

19.  The Plaintiff also pleaded in paragraph 16f of the statement of claim in this action the Court of Appeal decision in William Au case as particulars of fraud.  No citation was given for that case, presumably that was the case in which the Court of Appeal formed the view that the costs claimed by the 2^nd Defendant against Mr William Au, another practising solicitor, as scandalous.  The Plaintiff is obviously seeking to adduce similar fact evidence for the purpose of showing that the 2^nd Defendant has a propensity to act fraudulently.  This evidence is clearly irrelevant and inadmissible.  Reyes J dealt with that allegation in paragraph 42 of his decision in HCA 2207 of 2003 as follows:

“42.   I note finally that Mr Wong invited me to infer from unrelated cases in which Herbert Smith has been involved that the Defendants have a ‘propensity’ to act fraudulently so as to injure small solicitors' firms such as his own.  In my opinion, Mr Wong's suggestion is unwarranted and unjustified.  In particular, I record here that Mr Wong's suggestion of a supposed ‘propensity’ for fraud is inconsistent with the fact that it was Mr Thomas and Herbert Smith which of their own motion pointed out that there had been errors in the original bill of costs and in Mr Thomas' description of Mr Fang.”

Thus, by pleading the fraud in paragraph 16f of the statement of claim, the Plaintiff is mounting another collateral attack on the decision of Reyes J in HCA 2207 of 2003.

20.  In paragraph 16g of the statement of claim, the Plaintiff pleaded the numerous amendments to the bill of costs and alleged illogical explanations offered by the Defendants as evidence of fraud.  These matters have been exhaustively explored and determined by Master Au Yeung at the hearing on 10 June 2003.  She stated the reasons for her decision in paragraphs 15 to 32 and 45 of her written reasons for decision handed down on 30 January 2004.  I do not think I need to quote what the master said in her decision here.  Reyes J has expressed a similar view in his decision: see paragraph 13 above.  Thus the Plaintiff’s allegations of fraud in paragraph 16g of his statement of claim is yet another collateral attack on the judicial decisions of Reyes J and Master Au Yeung.

21.  The Plaintiff raised the allegations of fraud against Mr Thomas and Herbert Smith as a ground for disallowing part of Victor Chu’s costs.  The allegations of fraud were dismissed by Master Au Yeung.  He then raised the same allegations in HCA 2207 of 2003 claiming the higher costs taxed by the master and his own additional costs as damages.  That action, too, was dismissed by Reyes J.  Now he repeats in effect, the same allegations of fraud dressed up in a claim for damages for insomnia, depression and loss of business.  If the Plaintiff is not satisfied with the decision of Master Au Yeung, he should have sought a review by a judge of the High Court in accordance with Order 62 rule 35 of the Rules of the High Court within 14 days of the decision of the master or such extended period as the Court may allow.  If he does not do so, the taxation order of the master must be conclusive.  If the Plaintiff is not satisfied with the decision of Reyes J, he should have launched an appeal, though in my view, he would have no chance of success and he acknowledged that.  By issuing the present proceedings, the Plaintiff is mounting a collateral attack on the judicial decisions of Reyes J and Master Au Yeung.  These paragraphs in his statement of claim must be struck out as frivolous and vexatious or otherwise an abuse of the process of the Court.  In the light of the chronology, I very much suspect the Plaintiff’s purpose of instituting the present action is to provide him a reason or evidence for setting aside the statutory demand on the ground that the debt which is the subject matter of the statutory demand is disputed on substantial grounds.

Res judicata

22.  The Defendants’ second ground for striking out the Plaintiff’s statement of claim is that the fraud allegations contained therein could and should have been raised in the taxation review hearing before Master Au Yeung and as the Plaintiff had not raise them, he is barred from raising them now.  This ground is based on res judicata in the wider sense.  This principle requires the parties to a litigation to bring forward their whole case and except in special circumstances will not permit the parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest but which was not brought forward because of negligence, inadvertence or accidental omission. The principle has been stated by Wigram V-C in Henderson v Henderson (1843) 3 Hare 100 at 115 as follows:

“In trying this question, I believe I state the rule of the Court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been  brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case.  The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties exercising reasonable diligence, might have brought forward at the time.”

23.  The principle was approved by the Privy Council in Yat Tung Investment Co Ltd and Dao Heng Bank Ltd and Another [1975] AC 581 at 590D-E where after citing the above dicta, Lord Kilbrandon continued:

“The shutting out of a ‘subject of litigation’ – a power which no court should exercise but after a scrupulous examination of all the circumstances – is limited to cases where reasonable diligence would have caused a matter to be earlier raised; moreover, although negligence, inadvertence or even accident will not suffice to excuse, nevertheless ‘special circumstances’ are reserved in case justice should be found to require the non-application of the rule.”

It is thus beyond dispute that the principle in Henderson v Henderson is applicable in Hong Kong, save where there are special circumstances.

24.  However, since the decision of Yat Tung Investment Co Ltd, there have been a number of decisions which queried the width of the principle stated in that case and in Henderson v Henderson: see the analysis of Ma J (as he then was) in Chen v Wan Ching Lam & Another [2002] HKEC 704.  The latest statement in relation to res judicata in its wider sense is contained in the decision of the House of Lords in Johnson v Gore Wood & Co (a firm) [2001] 2 WLR 72 where Lord Bingham of Cornhill said at 90A-E: 

“… But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them.  The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter.  This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole.  The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all.  I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party.  It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive.  That is to adopt too dogmatic an approach to what should in my opinion be a broad, merit-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.  As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.”

25.  As observed by Ma J in his analysis in Chen v Wan Ching Lam & Another, the House of Lords rejected Lord Kilbrandon’s speech in Henderson v Henderson that an abuse of process occurs if a party seeks “to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings” as too dogmatic.  The modern approach of the courts in the United Kingdom is heavily in favour of a broad, merit-based judgment which takes account of all the facts of the case focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before such that the failure to do so in the earlier proceedings and the attempt to revive the claim or the defence in the later proceedings constitutes an unjust harassment of the other party.  The burden of proof is on the party alleging the abuse. 

26.  As a matter of precedent, I consider I am bound by the Privy Council decision in of Yat Tung Investment Co Ltd.  But on the facts of this case, whether I adopt the Yat Tung principle or the more flexible approach in Johnson v Gore Wood & Co (a firm) [2001] 2 WLR 72, the result is the same.

27.  In paragraphs 9 and 16b of the statement of claim, the Plaintiff pleaded fraud on the basis of the Defendants’ refusal to disclose privileged documents despite his repeated requests for documents and bills.  In paragraphs 13, 14 and 16b, the Plaintiff pleaded another incident of fraud in that the Defendants sought to induce him to agree to pay costs of $360,000 by falsely representing that their costs were in the region of $480,000, when in fact the costs they presented to the master was only about $250,000.  The Plaintiff also relied on Mr Thomas’ shouting at the taxation hearing on 25 September 2003 that the allegations made by the Plaintiff was stupid as conduct indicative of fraudulent motive and intent.

28.  The Plaintiff was fully aware of his repeated requests for documents and bills and the Defendants’ repeated refusal of his requests.  He was aware of the without prejudice offer to agree costs at $360,000 and the final bill of costs of about $250,000 presented by the 2^nd Defendant to the master.  There is no reason why he did not raise those allegations before the master.  He was aware of Mr Thomas’ shouting at the taxation hearing.  If he wished the master to draw any inference of fraud from that, he should have made submission to the master to that effect.  These are allegations of fraud which the Plaintiff could have raised in the taxation hearing before the master but which he did not.  There is nothing to suggest that the Plaintiff was unaware of the facts which he now wishes to rely on as allegations of fraud.  As compared with the allegations of fraud contained in paragraphs 10-12, 16a, 16c, 16f and 16g, the allegations raised in paragraphs 9, 13, 14, 16b, 16d and 16e are insignificant.  In the light of the master’s finding in respect of the Plaintiff’s major allegations of fraud, it is difficult to see how these minor allegations could have affected her conclusion in any way.  To allow the Plaintiff to raise these new minor allegations of fraud would be to allow the Plaintiff a second bite of the cherry and to subject the Defendants to added costs and unnecessary anxiety in circumstances when they would have reasonably expected finality in the litigation, if not before Master Au Yeung at least before Reyes J.  In my opinion, the Plaintiff’s attempt to raise these new allegations of fraud when he could have done so in the earlier proceedings constitutes an unjust harassment of the Defendants and is a clear abuse of the process of the court.

Allegations of fraud are plainly not supportable on their face

29.   The third ground relied on by the Defendants is that the fraud allegations are plainly not supportable on their face and should as such be struck out on the authority of Overseas Trust Bank Ltd v Coopers & Lybrand (a firm) and Others and Anthony Wentworth Howitt and Others [1990] 1 HKLR 568.  This ground applies to all the pleadings covered by the above two grounds.  The allegations have been exhaustively canvassed by Master Au Yeung who held that the allegations of fraud were unfounded.  I agree with the views expressed in her well-reasoned decision and do not find it necessary to repeat them here.

Conclusion

30.  The Plaintiff’s cause of action is pleaded in paragraphs 9 to 16 of his statement of claim.  Except for paragraph 15, these have been shown to be collateral attacks on previous judicial decisions or res judicata in the wide sense. In paragraph 15 of the statement of claim, the Plaintiff pleaded:

“At the end of the Review of taxation hearing before Master Au-Yeung, the Learned Master made the finding that both Defendants have misled the Court and the Plaintiff twice and the Plaintiff has every reasons to lose confidence in their Bill of costs of High Court Action No. 5590/2000.”

31.  This is a very much distorted view of the master’s decision.  She did criticise the Defendants of their mistakes which misled the Court but nevertheless she was satisfied that there was no fraud on their part.   She attached no dishonesty to the word “misled” used in her written reasons for decision.  This is what she held in the concluding paragraph of her decision:

“Though the bill was chaotic and inconsistent, Mr Thomas and the [law costs draughtsman] had demonstrated to me their full preparation and sincerity in putting right what were once mistakes that had misled the Court.  The correlation between the computer print-outs, documents and bills rendered and the bill before me was tedious and time consuming but Mr. Thomas and the [law costs draughtsman] spared themselves no such trouble.  They were best endeavours to come clean with what had been wrongly done.  It was a genuine attempt to put the Court into the true picture of what had happened and I was satisfied as to the explanation for the mistakes made.  Further, Messrs. Herbert Smith had, in writing, informed their client of the mistakes and notified their clients of the consequences and the procedure to rectify them.  That was a clear reflection that Messrs. Herbert Smith was not deliberately trying to deceive anyone and had come clean as best they could.  Although I had made a ruling on dishonesty at an early stage of the Reviews, the issue was still in the forefront of my mind thereafter in case new materials might surface to justify re-opening the issue. At the end of the Reviews, I confirmed my ruling that there had been no dishonesty on the part of Mr. Thomas and I did not see the need to reflect my disapproval by deducting globally Mr. Thomas’s costs.”

Thus, there is no substance in paragraph 15 of the Plaintiff’s statement of claim.

32.  In conclusion, the particulars of fraud pleaded in the statement of claim amounted to scandalous collateral attacks on the previous judicial decisions of Reyes J and Master Au Yeung or are matters which the Plaintiff should have raised in the taxation hearing before the master and he is precluded from raising them now.  I do not find it necessary to rely on the Defendants’ third ground.  In the circumstances, the statement of claim must be struck out as frivolous, vexatious or otherwise an abuse of the process of the court and the Plaintiff’s action must be dismissed.

the injunction

33.  This is the second attempt by which the Plaintiff sought to revive his attack on the taxation order of Master Au Yeung.  By this summons, the Defendants sought to invoke the inherent jurisdiction of the Court to restrain the Plaintiff from making further applications or commencing any new proceedings against the Defendants in respect of the same matter as in this action or HCA 5590 of 2000 or HCA 2207 of 2003.  The Defendants rely on the authority of the English Court of Appeal in Ebert v Venvil [2000] Ch 484 which has hitherto been followed in Hong Kong.  However, on 3 March 2004, the Chief Justice’s Working Party on Civil Justice Reform expressed doubts as to the legal basis of Ebert v Venvil.  The Defendants, hence, do not wish to pursue the application for injunction today but reserve their right to seek such an injunction in future should the Plaintiff choose to bring further vexatious proceedings against them.  Accordingly, I make no order as to the injunction sought.

Indemnity costs

34.  Upon my dismissal of the Plaintiff’s action, the Defendants seek indemnity costs and an order for interim payment of costs under Order 62 rule 9A of the Rules of the High Court.  A taxation of the successful party’s costs on an indemnity basis could properly be ordered where the proceedings were scandalous or vexatious or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner: see Choy Yee Chun v Bond Star Development Ltd [1997] HKLRD 1327.  The Plaintiff’s statement of claim is struck out as frivolous, vexatious or otherwise abuse of the process of the court.  This action is in essence a repetition of HCA 2207 of 2003 in which Reyes J ordered costs against him on an indemnity basis.  The Plaintiff must have known of the impropriety of this action and the consequence of indemnity costs by reason of the decision of Reyes J in HCA 2207 of 2003 which he acknowledged as correct.  There was absolutely no reason for repeating the present action.  In the circumstances, it is appropriate that the Plaintiff should be ordered to pay costs on an indemnity basis.

35.  If a party conducts his litigation in a frivolous or vexatious manner, costs are unnecessarily incurred and wasted.  Not only that the innocent party should be entitled to recover all his costs, there is no reason why he should be kept out of his costs until the conclusion of the action.  Order 62 rule 9A gives the Court power, when ordering costs of an application to order interim payment of costs, if it considers the application or resistance to the application to be frivolous or vexatious or if in the circumstances it considers just.  This is to recompense the innocent party of his costs immediately and as deterrence against further frivolous and vexatious conduct of the other party.  Where the proceedings are still on-going, an order for interim payment of costs would be appropriate in order to immediately recompense the innocent party of his costs and to serve as a deterrence.  However, where the action has been extinguished as a result of the application having been disposed of, the need for deterrence no longer exists.  The costs order to be awarded is a final order.  The usual result of litigation must follow, i.e. immediate taxation and payment should be the norm.  To order interim payment under such circumstances would have the effect of a penalty which is not what the rule was intended to achieve.  As the Plaintiff’s action has been dismissed, I do not think it appropriate to make an order for interim payment of costs.  The parties should proceed to immediate taxation.  An order for payment to be made forthwith would be all that is required to prevent any delay in making payment by the Plaintiff seeking an appeal.

36.  Accordingly, I make an order that the Plaintiff shall pay the Defendants’ costs to be taxed on an indemnity basis and to be paid forthwith.