SHUM KIN YEE v. DBS BANK HONG KONG LTD

DCCJ 1726/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1726 OF 2011

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REASONS FOR DECISION

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1.  The plaintiff (“Shum”) claimed against the defendant (“the Bank”) for the loss of his investment in a financial product known as Series 74 Hong Kong Dollar Callable Credit-Linked Note, of which the Bank was the distributor. After trial, judgment was handed down on 31 July 2013 whereby the claim was dismissed. I made a nisi order that Shum shall pay the costs of the Bank to be taxed, if not agreed, with certificate for 2 counsel. This was his application to vary the nisi costs order.

2.  At the end of the hearing, I dismissed the application; made the nisi costs order absolute; and ordered costs of this application against Shum, to be taxed, if not agreed.  As indicated, I now give my reasons.

DISCRETION OF THE COURT

3.  Costs is a matter of discretion of the court.  The starting point is O.62, r.3(2) of the Rules of the District Court.  It provides that the court shall order the costs to follow the event, except when it appears to the court that in the circumstances of the case, some other order should be made as to the whole or any part of the costs.  Following the event of this case, I made the nisi costs order in line with this starting point.

4.  O.62, r.5 sets out the special matters, to such extent, if any, to be taken into account in exercising the discretion under r.3(2).  One of the matters is the conduct of the parties.  As to that, O.62, r.5(2) defines that to include:

(1) whether it is reasonable for a party to raise, pursue or contest a particular allegation or issue;

(2) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(3) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(4) conduct before, as  well as during, the proceedings.

5.  The reasons for judgment against Shum were set out in detail in the judgment, which I shall not repeat.  Suffice it to say that none of the special matters mentioned above operates in the present case in his favour.

SHUM’S APPLICATION

6.  In his application, Shum did not seek to reverse the incidence of the costs liability as ordered.  He essentially challenged the engagement of counsel by his opponent on the following grounds:

(1) He was unrepresented.

(2) The legal costs are out of proportion compared to the amount claimed.

(3) A solicitor should have been capable of handling the case.

(4) Leading counsel for the Bank was over-qualified for the case.

(5) Junior counsel for the Bank had no active participation.

DISCUSSION

7.  That a party to litigation is unrepresented, be that out of his own choice or not, does not per se render his opponent’s engagement of counsel unreasonable.  On the one hand, an unrepresented litigant may regard his opponent’s engagement of legal representatives as pressure in terms of the possible costs implication (if he fails).  On the other hand, a litigant who is entitled to his choice of legal representatives should not feel the pressure of being viewed unfavourably by the court simply because he affords to do so whereas his opponent does not.

8.  The question of whether it is proper and necessary to engage counsel, and senior counsel, all depends on the nature, complexity and significance of the dispute. Significance may come in various forms; and the amount of the claim is but one of them.

9.  Apparently following the economic crisis in late 2008, quite a number of investors of structured financial products have commenced actions against the Bank alleging mis-selling and claiming for the loss of their investments.  Of them (and involving the credit-linked notes), the present case was the first that came to trial.  Therefore, the Bank emphasized the commercial significance of the judgment in the present case both for vindication of its stance and for its reference value for similar pending and future cases.  Miss Ng for the Bank cited, as an example of the relevance of such considerations, the case of Woo Hing Keung Lawrence v CEF Brokerage Limited (formerly known as CEF GC Brokerage Limited), HCCL 39/2004 & CACV 148/2007 (3 March 2010) (at §27), Master Ng.

10.  Shum disagreed.  He produced a letter from the Consumer Legal Action Fund in November 2009.  Miss Ng raised no objection to that.  That was a notification by the Consumer Council of the result of Shum’s application for assistance by the Fund.  The Fund explained in the letter that assistance would be provided to those cases that were most representative of all, with a view that the court’s decisions in such test cases would help resolving other similar cases.  In refusing Shum’s application, the Council took the view that his case did not fall into the target category.  Relying on that, Shum argued that his case could not be as significant as the Bank suggested.

11.  Shum, in my view, has lost sight of the fact that this was indeed the first one of its kind involving alleged mis-selling of credit-linked structural financial product by the Bank that came to trial.  Whilst each case turns on its own facts, how the court adjudged in the present case on (i) the nature and extent of the duty of the distributing bank, (ii) the contention of mis-selling (legally), (iii) the validity and the effect of the contractual terms between the parties in governing their rights and liabilities (iv) as well as the issue of causation could have material implications on similar pending litigations concerning the Bank.  That the Bank had to ensure that all the contentions in these respects were properly advanced and argued, in my view, was a legitimate point of the view to be taken when deciding whether to instruct senior counsel for advice and trial.

12.  As mentioned, the amount of the claim, be it described as small or not, was but one of the considerations.  The amount at stake does not necessarily reflect the complexity of the issues, the difficulty in handling the case or the significance of the case.  Shum described that his claim was straight forward; and that it was dismissed simply on the ground that he failed to prove misrepresentation or mis-selling.  I think this was an oversimplification.  Again the judgment speaks for itself.

13.  Further, Shum conducted the case in a manner that did not make it easy for his opponent.  He has introduced documentary evidence from time to time and even up to the moment of the trial, contrary to his representation to the court during the pre-trial review.  He has also raised contentions and expanded his pleaded case substantially at the last minute with reference to voluminous new documentary evidence.  All those, as leading counsel for the Bank pointed out at the trial, would have to be addressed in any event at the last minute (despite protest).  It was not fair for him to now seek to under-state the difficulty in answering his case.

14.  Shum argued that senior counsel that the Bank instructed was over-qualified for this case. Very much assisted by leading counsel at the trial as a matter of fact, I do not find this argument of Shum’s to be fair.

15.  Shum then questioned the role and contribution of junior counsel in the conduct of the case.  But the Bank has not been indiscriminate in instructing senior counsel. Senior counsel only appeared at the trial.  I was informed that junior counsel has been involved in advice and preparation since December 2011.  He appeared in this court for the Bank at the pre-trial review.  He also dealt with the late discovery of documents by Shum.  I do not doubt there existed division of labour between counsel in the team in the preparation for and the conduct of the trial.  That only leading counsel was on his feet addressing the court during the trial, as it is normally the case, could not possibly indicate lack of contribution of the junior in the process.  Shum’s perception in this respect was wrong and unfair.

16.  In view of how the proceedings in the present case have been conducted, particularly by Shum, I would not be surprised if the legal costs incurred by the Bank might have matched, if not exceeded, the amount of claim even before the trial.  Importantly, Shum should not be surprised by that either.  The Bank pointed out that Shum has been urged to obtain legal representation by the end of 2011 or else the way he conducted the litigation would have unnecessary costs implication.  But the same was not heeded.  The Bank also offered to settle with Shum (at HK$150,000) before the exchange of witness statements.  By letter dated May 2012, the Bank’s solicitors repeated the offer and advised that senior counsel would be instructed to conduct the trial, if that could not be prevented.  Shum was requested to consider settlement out of court to avoid the potentially heavy adverse costs implication.  Prior to delivering brief to counsel, the Bank still repeated the previous advice and offered to arrange settlement meeting between its head of customer banking and Shum.  All those, as Shum confirmed during this hearing, were rejected.

17.  Pursuant to O.62, r.5(1)(d), an offer which could have taken the form of sanctioned payment could not be taken into account in the court’s exercise of discretion under r.3(2).  Miss Ng acknowledged that.   Nevertheless, the fact remained that Shum had the chance to settle out of court but decided to proceed to trial. Coupled with the repeated advice by the Bank mentioned above, Shum made the conscious decision to proceed knowing the extent of the adverse costs consequence if he failed.

18.  Shum also referred to the amount of counsel fee as per the defendant’s bill.  For challenge in respect of the amount of counsel fee, this should be a matter to be taken up during taxation.  In this respect, Shum also revealed an offer by the Bank to settle the costs without prejudice save as to the costs of taxation.  For the record, I did not include that in my deliberation.

19.  For the above reasons, I dismissed Shum’s application.