CHAU YUET CHING BRENDA v. CHAN BO MAN WILLIAM AND OTHERS

HCA 652/2017

[2021] HKCFI 1797

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 652 OF 2017

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(By Original Action)_

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 (By Counterclaim)

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DECISION

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INTRODUCTION

1.  On 7 April 2021, I handed down my decision (the “Decision”) allowing the application of the Plaintiff by Original Action and the 1^st and 2^nd Defendants by Counterclaim (the “Plaintiff”) to strike out parts of the Amended Defence and Counterclaim (“AD&C”) of the 1^st to 6^th Plaintiffs by Counterclaim (the counterclaim plaintiffs (“CCP”) ) with costs to the Plaintiff.  The Plaintiff now applies to vary that costs order to the extent that the costs be taxed on an indemnity basis, if not agreed, and be paid forthwith, with certificate for two counsel. 

Leave to file affirmation in opposition

2.  The CCP sought leave to file the 4^th Affirmation of Chan Bo Man William (the “Costs Affirmation”) in relation to factual matters touching upon the issue of costs and the Plaintiff’s application herein.  The affirmation relates to affairs between the CCP and their former solicitors, Messrs Au & Associates as well as the CCP’s cash flow problems.

3.  The Plaintiff opposes the application on the ground that these problems are not matters which the Court should take into account in exercising its discretion on the issue of costs.  If the CCP had issues with their former solicitors, they should make a complaint to The Law Society of Hong Kong against them.  The Plaintiff also argues that in any event the Court should not place much weight on the affirmation because the Plaintiff is not in a position to verify the matters which allegedly happened between the CCP and their former solicitors; and more importantly, there are conflicting evidence from the CCP as to their financial means.   Except in relation to the cash flow problems, I agree with the rest of the Plaintiff’s submission.  I admitted the affirmation, subject to consideration as to the weight to be attached.

Certificate for two counsel

4.  The Plaintiff’s ground for seeking certificate for two counsel is the nature and level of complexity of the striking-out application.  The parts of the AD&C sought to be struck out involves claims for more than $160 million out of the total claims of about $180 million and with $24 million locked up in court which is of particular importance to the Plaintiff.   The amount involved is substantial.  The case requires an understanding and analysis of the case as a whole.

5.  The CCP’s counter argument is that the application did not require such a heavyweight team of counsel and the variation sought seems to be a calculated attempt by the Plaintiff to stifle them by way of legal costs.  They refer to the letter dated 2 March 2020 from the Plaintiff’s legal team to the CCP asserting that the merits of the Plaintiff’s striking-out application was so strong that the CCP should have acceded to the application upon receiving the said letter.  They argue that the Plaintiff’s skeleton was only a rehash of the same arguments contained in the letter.  They also submit that this Court struck out parts of the AD&C on two fronts, namely uncertainty and on the CCP’s failure to remedy their pleading or provide particulars.  Hence, they submit the striking-out application was not so complex as to merit two counsel.

6.  As the Plaintiff submits, the substantive hearing itself may not involve prolonged argument, but the decision to engage counsel was made prior to the hearing and dependent on the evidence filed and issues arising therefrom.  The CCP filed the 3^rd Affirmation of Chan Bo Man William in opposition raising a series of issues in response to the letter.   Each of these issues may lead to complex arguments in the substantive hearing.  It is reasonable for the Plaintiff to be prepared for addressing the Court on these issues.  Whether the CCP did take the points and how they chose to argue the issues in the substantive hearing was for the CCP and does not affect the inherent complexity of the issues involved. 

7.  The striking-out application should also be viewed in the context of the entire case.  It was the CCP who chose to make the action complicated by making the Counterclaim, raising numerous issues and obtaining an injunction.  They were represented by two counsel in previous proceedings.  It is reasonable for the Plaintiff to anticipate that they will be represented by the same legal team and be prepared for it.  Having heard the application, I consider the complexities as raised by the CCP and as anticipated by the Plaintiff made it appropriate for the certificate to be granted.

Immediate taxation and payment forthwith

8.  Counsel have no disagreement that the relevant principles for ordering immediate taxation are set out in Midland Business Management Ltd v Lo Man Kui (No 2)[1]. The factors to be taken into consideration are:

(1)   whether the interlocutory application and the costs incurred are separate and distinct from the main proceedings;

(2)   the justice of making such an order having regard to the effect on the respective parties’ cash flow;

(3)   the amount at stake on taxation was sufficient to justify the expense of separate taxation instead of global final taxation; and

(4)   the possibility that there might be no trial.

9.  First, having regard to the background of the Plaintiff’s case and of the CCP’s case as set out respectively in paragraphs 13 to 19 and 20 to 31 of the Decision, I am satisfied that the costs of the striking-out application are severable and self-contained from the rest of the action.  The eventual outcome of the trial of this action will not have any impact on the costs order made at this stage of the proceedings. 

10.  Second, the CCP argue that the Plaintiff has no cash flow problems but they have; and immediate taxation would effectively stifle their defence.  In the Costs Affirmation, the CCP claimed that they are impecunious as part of the basis for its security for costs application.   With their counterclaim having been struck out, they are merely defendants and have no choice to participate in these proceedings.  Despite the proceedings were first commenced in July 2017, the Plaintiff chose not to expeditiously deal with the same resulting in several interlocutory skirmishes.  If immediate taxation is ordered, the CCP will be unable to defend the Plaintiff’s claims despite the same cries out for investigation and the Plaintiff will be able to obtain relief in the absence of any real genuine resistance.

11.  However, while asserting their own impecuniosity on the one hand, the CCP claimed that the 1^st to 4^th Defendants by Original Action were solvent and their business were of going concern[2]; the 2^nd Defendant has substantial cash coming in[3]; he has nearly $18 million in assets and the liabilities were mainly due to related companies and directors[4]; and he has over $1.7 million receivables as of May 2021[5].  In the circumstances, it is difficult to see how an order for immediate taxation will stifle the CCP’s defence.

12.  Besides, since CJR, costs arising from interlocutory skirmishes are usually payable forthwith.  This is particularly so for costs arising from striking out applications, whether of statement of claims or defence.   These claims and defences should not have been raised in the first place.  If a party raises such claims or defences, how could it rely on its own impecuniosity to argue that an order for immediate taxation requiring it to reimburse what its opponent had been made to unnecessarily incur would be unjust?  It should also be noted that it was the CCP who raised these interlocutory skirmishes by making these unmeritorious counterclaims which the Plaintiff rightly sought to have them struck out.  The CCP’s impecuniosity has little weighting in determining where the balance of justice lies.

13.  Third, the costs of the striking out application are fairly substantial, with involvement of a leading counsel and justify separate taxation.  There is no reason why the Plaintiff should be kept out of her money until trial, which would be a considerable time away.

14.  Lastly, in view of the above, I would not speculate on the possibility whether there would be no trial.

15.  In conclusion, the factors weigh in favour of immediate taxation.

Indemnity costs

16.  For reasons as explained in paragraphs 72 and 75 of the Decision, the CCP’s counterclaim are frivolous, vexatious and an abuse of process.  Indemnity costs are justified under the principle in Choy Yee Chun (Personal representative of the estate of Chan Pui Yiu) v Bond Star Development Ltd[6].

17.  Further, as submitted by the Plaintiff, the CCP’s resistance to the striking-out application is unwarranted and unreasonable.  They have been fully informed of the basis of the striking-out application via the Plaintiff’s solicitors’ letter of 2 March 2020.  They were asked to discontinue their counterclaim within 14 days.  They should know that their case has no merit and is frivolous, vexatious and an abuse of process of the court.  They did not respond.  They did not provide particulars which they hitherto failed to provide.   They reneged on what they had explicitly promised the court without ever giving any explanation.   They offered no meaningful resistance to the striking-out application at the hearing.  In the end, the Plaintiff’s application wholly succeeded.  Accordingly, indemnity costs are justified.

Conclusion

18.  For the above reasons, I allow the Plaintiff’s application for variation of the costs order to the extent that the costs be taxed on indemnity basis, if not agreed, and be paid forthwith, with certificate for two counsel.  As for the costs of the variation application, I make the usual order of costs on party and party basis with certificate for one counsel only but to be paid forthwith.

19.  The parties have no disagreement as to the directions for the further conduct of the proceedings.  Those directions are made accordingly.