STANDARD CHARTERED BANK HONG KONG TRUSTEE LTD AND ANOTHER v. MICHAEL PATRICK CHARLES BROGAN AND OTHERS

[A plaintiff who seeks leave to discontinue hostile Mitigation will normally be ordered to pay the costs of the defendants]

                                                                                 1989, No. MP2553

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. These proceedings last came before me on 30th October 1989, when I gave leave to the Corporate Affairs Commission of New South Wales ("CAC") to intervene in the proceedings. I set out the background to the matter in the judgment which I then delivered. Reference should accordingly be made to that judgment for the purpose of understanding this present judgment.

2. CAC has now been duly added as a defendant to the proceedings, but, on the substantive questions raised by the originating summons, I have not had the benefit of adversary argument because the questions raised have become academic.(In particular, the position of Mr Brogan as an employee of the plaintiffs has been safeguarded.)

3. Following the hearing before me on 30th October 1989, CAC on 15th December 1989 obtained orders in the Supreme Court of New South Wales compelling those persons to whom the plaintiffs consider themselves responsible to release the plaintiffs from their obligations of confidentiality to such persons. According to the evidence now before me, the reason CAC did not obtain such orders in advance of these proceedings (or in advance of the interlocutory hearing in New South Wales referred to in my previous judgment) was because, prior to the commencement of both sets of proceedings, "the Commission only knew the names of the trusts". But as a result of the proceedings in New South Wales and in. Hong Kong, CAC obtained a great deal more information relating to the trusts, Which formed the basis of their successful applications in New South Wales.

4. Following the orders obtained by CAC in New South Wales, the plaintiffs became free to disclose to CAC the documents and information CAC had requested.

5. Accordingly, there is no longer any issue between the parties to these proceedings for this Court to decide. It may however be helpful if I state that, as it seems to me, Mr Brogan, as an employee of the plaintiffs, was clearly under a duty to the plaintiffs to ask them for their authority to give the evidence and to produce the documents which he had been asked to give and produce; compare Eccles & Co. v. Louisville and Nashville Railroad Company [1912] 1 K.B. 135. The plaintiffs, his employers, as trustees, were equally clearly under a duty to their beneficiaries to do what they could to preserve the confidential character of the information and documents which they obtained as such trustees. They were, therefore, entitled to refuse to authorise Mr Brogan to give the evidence and produce the documents. But that did not mean that they were entitled to put his person or his fortune at the risk of enforcement proceedings in Australia. If Mr Brogan was placed under compulsion of law in Australia to give the evidence or to produce the documents, and, so far as he could, Mr Brogan did so; that would not involve him in any breach of his duty to his employers although he had been refused their authority to do so. Nor, in my judgment, would it have involved the plaintiffs in any breach of their duties as trustees towards their beneficiaries. As Lord Donaldson of Lymingtion pointed out in Barclays Bank Ltd. v. Taylor [1989] 2 W.L.R. 1066: "It is no part of the duty of confidentiality to seek to avoid disclosure under compulsion of law."

6. That would, I think, have been sufficient to have disposed of the case; but in the events I have mentioned, these matters no longer arise for consideration.

7. What has now happened is that the plaintiffs have restored to the list the originating summons by which these proceedings were commenced. They have done so because they want to obtain 'an order of the court dealing with the costs of the proceedings.

8. The proceedings have not been compromised. If proceedings are to be compromised, they must be compromised as a whole. You cannot arrive at an agreement with your opponent as to everything except the costs and then invite the judge to decide the question of costs alone. What you must ask for in those circumstances is leave to discontinue. If you wish to discontinue your proceedings, you may be allowed to do so. But you may be put on terms. The relevant provisions of the rules of the Supreme Court as to discontinuance are to be found in order 21. It appears from the notes to that order in the Supreme Court Practice 1990, and I accept, that the Court has a wide discretion as to the terms upon which it may grant leave to a plaintiff to discontinue his action.

9. An order for discontinuance should provide for the payments of the costs of the action. The general rule is that a defendant is entitled to his costs when the action against him is discontinued. That rule may be departed from, since the matter is one within the discretion of the Court. One instance, mentioned by the editors of the Supreme Court Practice, of such a departure might be a case where the matter has become academic, as distinct from one in which the plaintiff has acknowledged a likely defeat.

10. It became apparent, at an early stage of the hearing before me today, that what the plaintiffs were really asking for was an order for leave to discontinue these proceedings, without having to pay the Costs of CAC. They had not taken out any summons or motion for that purpose. But this is a technicality and nothing turns on it. I shall therefore treat this present application as if it had been instituted by a summons in these proceedings, issued by the plaintiffs against the defendants (including CAC), seeking leave to discontinue the action.

11. On that basis, there are two matters for me to consider. One is whether the plaintiffs should be given leave to discontinue the action only on terms that they pay the costs of CAC. The second is a subsidiary point. One of the defendants in the action is the Attorney-General, who has asked for an order that the plaintiffs do pay his costs, rather than the order suggested by the plaintiffs, which is an order that the Attorney-General should have his costs out of the trust estate. Upon this point, I am in agreement with the Attorney-General for reasons which will appear when I have explained the view I take on the more substantial point, which concerns the costs of CAC.

12. The proceedings, in the form in which they were launched, were said to have been brought under the provisions of O.85, r.2 of the Rules of the Supreme Court. I expressed in my earlier judgment some hesitation about the nature of the proceedings. I remain far from satisfied that the proceedings, to which no beneficiary was made a defendant, were properly constituted. There are two sorts of litigation; hostile litigation and domestic litigation. In domestic litigation, a trustee seeking directions from the court as to what he should do in or about the execution of the trust may institute proceedings in a summary way, in which somebody representing the beneficial interest in the trust estate is. constituted a party. The order made in such proceedings protects the trustee from any adverse criticism if he follows the course of action directed by the court. For example, a trustee may institute proceedings for the directions of the court whether he should institute other legal proceedings against a third party, or, perhaps,  one of the beneficiaries.  If the court-takes the view that the trustee ought to institute such proceedings the trustee may institute such proceedings and will be protected as to his own costs, even if the proceedings fail, for the court will allow him the costs out of the trust estate.

13. These proceedings, however, were really an attempt to get the substantive issue which arose between CAC and the plaintiffs dealt with in this domestic forum. That does not seem to me to be right. The right course, as I think, would have been for the plaintiffs to institute proceedings, to which a beneficiary had been made a party, asking for directions whether they should allow Mr Brogan to give CAC the documents and information it had requested, or institute other proceedings, against CAC, for a declaration that, as between themselves and CAC, the plaintiffs were not bound to disclose any information or provide any documents to CAC. That would have protected Mr Brogan in any event; if the result of the application for directions had been in the affirmative; if the proceedings against CAC had accordingly been issued; and if they had been successful.

14. But this would have been a cumbersome and time-consuming exercise and the matters which concerned the plaintiffs had to be dealt with extremely quickly. I can understand why the proceedings took the form that they did take. However, that is not enough to justify my finding that they were properly constituted when, as it seems to me, they were not. The real issue has always been, not between the plaintiffs and the beneficiaries as to whether or not the plaintiffs should institute any proceedings against CAC, but whether, as between CAC and the plaintiffs; the plaintiffs should resist the claim made by CAC to be provided with information and to have documents supplied to it.

15. That is the subject of ordinary hostile litigation. If these proceedings had been brought on, and had, accordingly, been decided, and been decided in favour of the plaintiffs, then, as they admitted, they would have had no hesitation asking for the costs of these proceedings as against CAC, which had been added as a defendant to the proceedings pursuant to my order. What is sauce for the goose is sauce for the gander. If CAC. had succeeded, they would have been entitled to the costs of the proceedings against them, brought by the plaintiffs, and the plaintiffs would have had to pay them. The plaintiffs might have had the protection of an order of the court giving them leave to institute such proceedings. But that is not the point. It would simply mean that the plaintiffs would get their costs (including those they were ordered to pay CAC) out of the trust estate.

16. The one point that has given me cause for concern is that (as I have already indicated) where proceedings have become academic, the court does have a discretion not to make the usual order that the plaintiff do pay the defendant's costs when he asks for leave to discontinue against the defendant. I think the question I have to decide really is: Ought I to exercise my discretion in the present case in favour of the plaintiffs by making, not the usual order that they do pay the costs of the defendants (including CAC), but a special order that they be at liberty to discontinue without doing so?

17. There are cases in which, when the case is not to come on for a hearing, the court has taken the view that the costs ought to lie where they fall. One such was J.T. Stratford & Son Limited v. Lindley & Others (No. 2) [1969] 1 W.L.R. 1547. This case was not cited to me in argument, so I do not use it in order to assist me to determine any point at issue. I use it simply to illustrate a case in which the exercise of the judicial discretion went in favour of not making any order as to costs other than that the parties should  bear their own costs.  In that case, the House of Lords had made an order, on an interlocutory appeal to the House of Lords, that certain costs should be costs in the cause. But then the parties no longer wanted to prosecute the cause. Lord Justice Winn said, at p.1554 :-

"It seems to me that had some not particularly impertinent enquirer asked their Lordships at the time when they were delivering their opinions ...'What is to happen if there never is a trial of this action?', the answer would have been terse and, compared with that which we must now give, relatively certain. Supposing that nothing whatsoever had thereafter happened with regard to this action, if it had simply lain like a dead pigeon in the street, then it would have been. impossible to suggest that either the plaintiff or the defendant could have enforced any order for costs against the opposite party."

18. But this action has not been allowed to lie like a dead pigeon in the street; the plaintiff is concerned to have it disposed of. And CAC is concerned that it should not be out of pocket in what it regards, in my opinion rightly, as in substance hostile litigation against it.

19. Upon the whole matter, I think I ought to exercise my discretion in favour of CAC. They were brought into these proceedings because the plaintiffs found themselves in a difficulty, vis-a-vis their customers and their employee, Mr Brogan, and needed help from the court as how to deal with those difficulties: Because there was no prospect of adversary argument from anybody else, and because CAC had what Mr Robert Ribeiro Q.C., for the plaintiffs, correctly described as an interest of their own in the matter, they were given leave to intervene in the proceedings, which then became, as between the plaintiffs and CAC, hostile rather than domestic litigation. I see no reason why, if the plaintiffs now wish to discontinue the action, the court should depart from the ordinary rule. For these reasons, I propose to order that the costs of CAC be taxed as between party and party and paid by the plaintiffs to CAC. The plaintiffs, I have no doubt, will have a right to an indemnity against the trust fund for the moneys which I have now ordered them to pay by way of costs to CAC:

20. I make the same order in relation to the costs of the Attorney General. I am not at all sure that he was properly joined as a party to the proceedings, as I indicated in my earlier judgment. But I see no good reason why he should not have his costs, taxed on a party and party basis, in the same way as CAC. Again, as between themselves and their beneficiaries, the plaintiffs will no doubt be entitled to recoup the payment that they have to make to the Attorney-General out of the trust fund.

21. In the circumstances, I think that the proceedings instituted by the plaintiffs, although improperly constituted, were sensible, and that the plaintiffs should have their costs as trustees out of the trust fund. Mr Brogan, who was joined as a defendant (although that was not right either) must have his costs, taxed as if he were a trustee, out of the trust estate.

22. I think I have now covered the costs of all the parties who are concerned with the matter; and upon the plaintiffs confirming that they seek leave to discontiue the action, and are prepared to submit to the terms which I have indicated as to what costs they should pay, I am prepared to give leave to discontinue and to make an order as I have indicated.