Tang Man Kit and Another v. Hip Hing Timber Co. Ltd.

A8000/1990

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8000 OF 1990

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DECISION

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1. This is an application by the Defendant under Order 62 rule 8 and the inherent jurisdiction of the Court that two firms of solicitors be ordered to pay the Defendant's costs of the action "for purportedly acting for the unincorporated association known as Wah Yan Mo Fan Heung without authority".

2. The application arises in the following circumstances. On 28 January 1989, Chan Kam Cheung (now deceased) and Tang Man Kit were purportedly appointed managers of "Wah Yan Mo Fan Heung", in which name various parcels of land in the New Territories had been registered. The Defendant was in occupation of some of those parcels of land.

3. On 22 November 1990, a writ was issued against the Defendant. The writ was filed by a firm of solicitors, not the two firms the subject of the present application. The name of the plaintiff was "Wah Yan Mo Fan Heung with Chan Kam Cheung and Tang Man Kit as Managers". The statement of claim pleaded that the Wah Yan Mo Fan Heung was "an unincorporated body beneficially interested" in the land , but the Defendant did not at that stage mount any challenge to the action on this ground.

4. In 1997, Messrs Susan Liang & Co (which has been referred to in this hearing as "Firm A") came on the record as solicitors for the plaintiff.

5. Later than year, there was an amendment of the statement of claim, but no change was effected in the name of the plaintiff or the pleading of the nature of "Wah Yan Mo Fan Heung".

6. In March 1998, the Defendant issued a summons applying to strike out the amended writ and statement of claim and to dismiss the action on the ground that "the Plaintiff, as an unincorporated association, has no corporate or separate legal existence or capacity" to sue.

7. This was followed by a summons filed on 13 May 1998 for the hearing of an application "on the part of the Plaintiff" for leave to re-amend the writ. The re-amendment included the change of the name of the plaintiff from "Wah Yan Mo Fan Heung with Chan Kam Cheung and Tang Man Kit as managers" to "Tang Man Kit (suing as sole manager of Wah Yan Mo Fan Heung)", and the addition of a pleading that "at all material times, the Heung was and is a tong within the meaning of section 19 [currently s.15] of the New Territories Ordinance ...".

8. The Defendant argued against allowing the re-amendment, but in an application of that nature, it had the burden of showing that there was not even an arguable case that "Wah Yan Mo Fan Heung" was not a tong or that there was no approval of managers under s.15 NTO. On 15 December 1998, I held that that burden had not been discharged and I granted leave to re-amend.

9. On 26 March 1999, the Defendant issued a Notice of Motion to set aside the writ as having been issued without authority. This was later amended to include the grounds that "Wah Yan Mo Fan Heung" was not a clan, family or tong within the meaning of s.15 NTO, that it had no legal status to enforce rights over land or to authorize legal proceedings, and that no application for approval under s.15 had been made, nor was any approval granted.

10. In May 1999, Firm A ceased to act and Messrs KW Lai & Li & Co (which has been referred to as "Firm B") came on the record as solicitors for the plaintiff.

11. On 22 March 2000, the writ and statement of claim was further re-amended, such that the name of the plaintiff became "Tang Man Kit and Foo Tak Ching (suing as Managers of Wah Yan Mo Fan Heung)".

12. At the hearing of the Motion, the pleading that "Wah Yan Mo Fan Heung" was an unincorporated body was not abandoned, but the plaintiffs' case on the motion was that Mr Tang and Mr Foo were managers of a tong known as "Wah Yan Mo Fan Heung" which they claimed to be a tong within the meaning of s.15 NTO.

13. I found for the Defendant on the Motion. The reasons for my decision can be seen in a Decision handed down on 3 September 2001 and I will not repeat them here.

14. Following submissions on the form of the order and costs, on 2 January 2002, I ordered that (i) the Re-Re-Amended Writ of Summons be set aside and the action be dismissed (a form of order which was not disputed by leading counsel appearing for "the unincorporated association known as Wah Yan Mo Fan Heung" as well as Mr Tang and Mr Foo); (ii) Mr Tang pay the costs of the action and the Motion; and (iii) Mr Foo pay the costs of the action and the Motion incurred on or after the re-re-amendment on 22 March 2000; with liberty to the Defendant to apply for orders for payment of costs by Firms A and B, and the firm of solicitors which had filed the writ. This led to the present hearing.

15. At the hearing, the following statements of principle found in the English Court of Appeal's decision in Nelson v Nelson [1997] 1 WLR 233 were not disputed.

(1) A solicitor who commenced proceedings warranted that

(I) he had a client,

(ii) the client bore the name of the party to the proceedings, and

(iii) that client had authorised the proceedings (Nelson 235).

Where these are satisfied, the other party to the proceedings would have to look to the client to pay the costs of the action (Nelson 237).

(2) Where the person for whom the solicitor purports to act does not exist (eg a defunct corporation), then by analogy with breach of warranty of authority, the solicitor would ordinarily be held liable to pay the other party's costs (Nelson 239-240).

(3) Where the person does exist but is at law incapable of instructing a solicitor (eg a minor, or a person of unsound mind), then the solicitor would, on the same analogy, similarly be ordinarily held liable to pay the other party's costs, because he had no principal who had authorised him to commence the proceedings (Nelson 239-240).

(4) In the situations in (2) and (3) above, there is no effective retainer and the proceedings are a nullity (Nelson 236).

(5) In those cases, although the solicitor is not under a strict liability to pay the costs as the court always has a discretion when dealing with matters in its inherent jurisdiction, ordinarily one would expect the solicitor to be held liable to pay the costs, because otherwise the other party would be left without any person or entity against whom an order for costs could be obtained (Nelson 241).

(6) In any case, a solicitor does not warrant that his client has a good cause of action, or that his client is solvent (Nelson 237).

16. In respect of the discretion referred to in the statement at sub-paragraph (5) above, Rimer J has held in Gwembe Valley Development v Koshy [2000] 2 BCLC 705, that if there has been delay in bringing an application to strike out proceedings on the ground that they have been brought without authority, the applicant even if successful may only recover his costs incurred down to the time when he ought to have made the strike-out application (at 730).

17. In the present case, the Defendant has emphasized the fact that until May 1998, the plaintiff in the action was said to be an unincorporated body only, and indeed the pleading that "Wah Yan Mo Fan Heung" was an unincorporated body was never deleted nor has that case been formally abandoned. It was submitted that Mr Tang (and later Mr Foo) have always purported to act as managers only (first, of an unincorporated body and later, of a tong), and not in their personal capacities. Firms A and B were in effect, purporting to act for a non-existent client.

18. With respect to Mr Mok, I do not accept that submission. In my view, that would have been valid had the action remained one where the plaintiff throughout been "Wah Yan Mo Fan Heung" only as an unincorporated body. However, the nature of the amendment in May 1998 (as shown in the summons referred to in paragraph 7 above) was not to add Mr Tang as a new plaintiff, but to change the name of the plaintiff to that of Mr Tang, whose action it was throughout, even though he was purporting to act in a capacity which was rejected in my Decision.

19. That amendment was intended and understood to speak from the commencement of the proceedings. Put another way, Mr Tang was the plaintiff from the very start. The Defendant has rightly accepted that Mr Tang is personally liable for the costs of the action from the date of commencement of proceedings (and Mr Foo is personally liable from the date of the re-re-amendment), as they had failed to establish that they were managers of a s.15 tong as they had alleged.

20. Their lack of authority from a s.15 tong is not to be confused with their solicitors' authority to act for them - the latter authority is not impeached. A solicitor does not warrant that his principal (the client) is himself authorised (Nelson 240). Mr Tang and Mr Foo exist, the action bore their names and they had authorised Firms A and B to conduct the proceedings. As I have indicated, although the pleading of "Wah Yan Mo Fan Heung" as an unincorporated body was not formally abandoned, the plaintiffs did not advance that ground and did not object to the action being dismissed when the s.15 tong argument was rejected.

21. In light of the above, there is no question of the exercise of any discretion one way or the other. However, as a matter of completeness, I would indicate that if I were wrong and for some reason, the Firms had been acting for a non-existent client, or such a client existed but had not instructed them, I would not have exercised my discretion in favour of the Firms. The fact that an application is made late to strike out an action for want of authority is not fatal to the success of the application, and these Firms had been warned in correspondence soon after they came on the record for the plaintiff that they were personally at risk as to costs.

22. For the reasons in paragraphs 1-20 however, I would dismiss the summons and I would give an order nisi that the costs of the summons follow the event, i.e. that they be paid by the Defendant.