|
HCA 2219/2014
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
HIGH COURT ACTION NO 2219 OF 2014
_________________________
BETWEEN
| |
KOKO LAI-SHAN HUIE |
Plaintiff |
| |
and |
|
| |
YANG FU-YEN |
1st Defendant |
| |
EUROPTRONIC (HK) COMPANY LIMITED |
2nd Defendant |
| |
STANDARD CHARTERED BANK
(HONG KONG) LIMITED |
3rd Defendant |
| |
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED |
4th Defendant |
_________________________
| Before : Master M Wong in Chambers |
| Date of Hearing : 16 April 2015 |
| Date of Submission of Last Written Submission : 7 May 2015 |
| Date of Handing Down of Decision : 19 June 2015 |
_____________
D E C I S I O N
_____________
Background
1. By way of Inter-Partes Summons dated 15 December 2014 (“the Security Summons”), the 2nd defendant applied for security for costs against the plaintiff. The hearing of the Security Summons was fixed on 8 January 2015, but was subsequently adjourned to 29 April 2015 for argument by consent.
2. Before the adjourned hearing of the Security Summons, the 2nd defendant took out an Inter-Partes Summons dated 2 April 2015 (“the Withdrawal Summons”) to withdraw the Security Summons. At the hearing of the Withdrawal Summons on 16 April 2015, leave was granted to the 2nd defendant to withdraw the Security Summons by consent.
3. However, the parties cannot agree on who should bear the costs of the Security Summons and the Withdrawal Summons and require my determination on paper, but the amount of the costs for the Withdrawal Summons is agreed by the parties to be fixed at $800.00. The parties submitted their respective written submissions on 7 May 2015.
4. This is my decision on the costs of the Security Summons and the Withdrawal Summons.
The law
5. It is trite that subject to certain well established legal principles, the court has wide discretion on costs, and the general principle is that costs normally follow the event.
6. Nevertheless, after the Civil Justice Reform, costs of interlocutory proceedings are now dealt with under the new Order 62, rule 3(2A) of the Rules of the High Court, which stipulates that:-
“If the Court in the exercise of its discretion sees fit to make any order as to costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit”.
7. Under Recommendation 122 of the Working Party on Civil Justice Reform (see paragraph 62/3/3B of the Hong Kong Civil Procedure 2015): -
“The principle that the costs should normally ‘follow the event’ should continue to apply to the costs of the action as a whole. However, in relation to interlocutory applications, that principle should be an option (which would often in practice be adopted) but should not be the prescribed ‘usual order’. Costs orders aimed at deterring unreasonable interlocutory conduct after commencement of the proceedings should be given at least equal prominence in practice, with the court being directed to have regard to the underlying objectives mentioned in relation to Recommendation 2. These powers should not apply to pre-action conduct”.
8. Thus, for interlocutory proceedings, the principle that costs normally follow the event is no longer the prescribed usual order but is instead just an option.
9. Moreover, the court in exercising its discretion as to costs shall take into account the special matters referred to in Order 62, rule 5 of the Rules of the High Court , which includes the conduct of all the parties (Order 62, rule 5(1)((e)). Order 62, rule 5(2) specifies that the conduct of the parties includes: -
“ (a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;
(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and
(d) conduct before, as well as during, the proceedings.”
10. In other words, the court is entitled to consider whether a party has acted unreasonably or misconducted itself (see Kam Hing Trading (Hong Kong) Ltd v The People’s Insurance Company of China (Hong Kong) Limited, HCA 1062/2008).
The plaintiff’s case
11. The plaintiff submits that the general principle “costs follow the event” applies and that the party withdrawing the summons/application filed and taken out by it should be liable to pay the costs of the other party against whom the summons/application was sought, as well as the costs of the withdrawal.
12. Thus, the plaintiff contends that in the absence of reasons sufficiently justifying alternative costs entitlement or orders, the plaintiff should be entitled to the costs of the Security Summons as well as the Withdrawal Summons, and both of which should be payable forthwith by the 2nd defendant.
13. The plaintiff further submits that the 2nd defendant should pay the plaintiff’s costs of the Security Summons because the Security Summons was wrongfully taken out by the 2nd defendant in the absence of prior proper or reasonable enquiry on the particulars of the plaintiff’s background, assets and other connections to Hong Kong.
The 2nd defendant’s case
14. The plaintiff’s claim in relation to the 2nd defendant is that it was defrauded by one “Ruihua Chen”, and as a result of certain misrepresentations made by him, the plaintiff voluntarily transferred a total sum of US$348,000.00 (“the Sum”) into the 2nd defendant’s bank account maintained with the 4th defendant between 31 July 2014 and 4 September 2014.
15. The 2nd defendant’s case is that it does not know “Ruihua Chen” and has no knowledge whatsoever of the fraudulent activities alleged by the plaintiff. The Sum was received by the 2nd defendant pursuant to a genuine arm’s length sales contract dated 2 July 2014 between the plaintiff’s related company, Shanghai Dinghan Biotechnology Co Ltd and one Mr Wang (黃旭瑤) for the sale of orchid plantlets for the same price of US$348,000.00, the sale of such products being within the ordinary course of Dinghan’s business. The orchid plantlets were delivered on 2 August 2014.
16. All along, in all contemporaneous documents disclosed by the plaintiff in this action and all court documents prior to the issue of the Security Summons on 15 December 2014, without exception, the plaintiff had represented herself to be residing in the United States of America. This included the address she stated in her Writ of Summons, her first affidavit in support of her application for Mareva injunction, contemporaneous emails and bank records.
17. The 2nd defendant had no knowledge of any assets of the plaintiff in Hong Kong or her connection with Hong Kong.
18. Thus, the 2nd defendant submits that it did not act unreasonably or misconduct itself in taking out the Security Summons, and should not be blamed for taking the course it had, as the plaintiff had represented herself to the 2nd defendant as a foreign plaintiff, with no connection or assets in Hong Kong, and also in the 2nd defendant’s view, the plaintiff’s claim lacks any merit. It was not unreasonable for the 2nd defendant to issue the Security Summons after its request for voluntary payment of security was ignored.
19. However, the plaintiff switched to using a Hong Kong address in her 2nd affidavit filed on 4 February 2015 in opposition to the Security Summons and stated for the first time that she owns a Hong Kong property and a Hong Kong bank account and produced a land search in support thereof. It was also the first time when the plaintiff claimed that she resides in Hong Kong from time to time.
20. When the 2nd defendant learned of the plaintiff’s property in Hong Kong from the plaintiff’s 2nd affidavit, the 2nd defendant took prompt and reasonable action in proposing to withdraw the Security Summons with costs in the plaintiff’s cause against the 2nd defendant, as it is trite law that a foreign plaintiff with substantial property in the jurisdiction will not be required to pay security (see paragraph 23/3/6 of Hong Kong Civil Procedure 2015).
21. However, the plaintiff insists that the 2nd defendant should pay its costs and hence the parties had to attend the hearing on 16 April 2015.
22. The 2nd defendant submits that the plaintiff’s unreasonable conduct prior and up to the Security Summons should be taken into account, and asks for the costs of the Security Summons (to be summarily assessed) and the costs of the Withdrawal Summons (agreed at $800.00) to be paid by the plaintiff forthwith.
23. Alternatively, the 2nd defendant submits that its position in the case is an innocent recipient of the Sum being payment for goods of equivalent value which has already been delivered to the purchaser. However, for reasons unknown to it, it is now caught up in litigation with the plaintiff. The 2nd defendant therefore asks for: -
(a) Costs of the Security Summons up to 12 February 2015 (the date when the 2nd defendant proposed to withdraw the Security Summons with costs in the plaintiff’s cause against the 2nd defendant) to be costs in the plaintiff’s cause against the 2nd defendant;
(b) Costs of the Security Summons after 12 February 2015, including the costs of preparing submissions on costs, to be summarily assessed and paid by the plaintiff to the 2nd defendant forthwith; and
(c) Costs of the Withdrawal Summons, agreed at $800.00, to be paid by the plaintiff to the 2nd defendant forthwith.
Discussion
24. As aforesaid, for interlocutory proceedings, the principle that costs normally follow the event is no longer the prescribed usual order but is instead just an option. Thus, even though it is the 2nd defendant who wants to withdraw the Security Summons after taking it out, it is not a must that the 2nd defendant should bear the costs. The court is still entitled to look at the conduct of the parties to see who should bear the costs.
25. No doubt, the onus is on the 2nd defendant to prove that the plaintiff is “ordinarily resident” out of jurisdiction (see paragraph 23/3/4 of Hong Kong Civil Procedure 2015).
26. However, it is not disputed that all the contemporaneous documents disclosed by the plaintiff in this action such as contemporaneous emails and bank records and all the court documents prior to the issue of the Security Summons on 15 December 2014 including the Writ of Summons and the plaintiff’s first affidavit in support of her application for Mareva injunction show that the plaintiff resides in the United States of America. There is clearly sufficient prima facie evidence to prove that the plaintiff is “ordinarily resident” out of jurisdiction and to support the 2nd defendant’s application for security for costs.
27. Thus, the plaintiff’s contention that the 2nd defendant is still required to make other prior enquiry on the particulars of the plaintiff’s background, assets and other connections to Hong Kong before it can take out the application for security for costs is simply untenable.
28. The plaintiff submits that in accordance with the letter dated 18 November 2014 issued by Messrs Deacons for the 2nd defendant to Messrs Tanner De Witt, the plaintiff’s then solicitors, the 2nd defendant invited the plaintiff to consider making security for costs payment without making any enquiries but merely putting forwards allegations on the plaintiff’s residency and asset status in Hong Kong. The relevant extracts of the said letter are as follows:-
Paragraph 3:
“Furthermore, as your client is a foreign plaintiff who does not reside in Hong Kong and has no assets in Hong Kong known to our client, our client has no effective means of protecting its costs position or in securing any payment to be made by your client pursuant to her undertakings as to damages.”
Paragraph 4:
“By reason of the above, we write to invite your client to consider making payment into Court the sum of HK$200,000 as security for costs from now until completion of discovery of the captioned proceedings within the next 14 days.”
29. The plaintiff further submits that in the absence of making a proper and reasonable enquiry on the particulars of the plaintiff’s background, assets and other connections to Hong Kong, Messrs Tanner De Witt was not under a duty to disclose the same to the 2nd defendant’s solicitors. It is the 2nd defendant’s duty to make all sort of reasonable enquiries before taking out any summons, and it is well settled legal principles that it would be penalized on costs, if it did not discharge their duty properly, which might be only another letter for clarification with the plaintiff’s former solicitors.
30. I do not accept the plaintiff’s submissions in this regard. As aforesaid, the 2nd defendant had sufficient prima facie evidence to establish that the plaintiff does not reside in Hong Kong, and hence there was nothing wrong for the 2nd defendant’s solicitors to put forward this matter to the plaintiff’s then solicitors and asked for security for costs. When the evidence is so clear, I see no reason why the 2nd defendant would need to make any further enquiry on the particulars of the plaintiff’s background, assets and other connections to Hong Kong before taking out the application for security for costs.
31. It is also wrong for the plaintiff to contend that she was not under a duty to disclose the particulars of the plaintiff’s background, assets and other connections to Hong Kong to the 2nd defendant’s solicitors. Clearly, if the plaintiff wished to claim that she is an ordinary resident in Hong Kong, she should have raised this issue in reply to the letter dated 18 November 2014, so that the 2nd defendant would know that this is in dispute. If the plaintiff had provided these particulars to the 2nd defendant in reply to the letter dated 18 November 2014, she could have stopped the 2nd defendant from taking out the Security Summons.
32. However, the plaintiff simply failed to deny that she is a foreign plaintiff who does not reside in Hong Kong and has no assets in Hong Kong, or to raise this issue to the 2nd defendant. On 20 November 2014, when the plaintiff’s former solicitors replied to the letter dated 18 November 2014, they only stated that in their view, the plaintiff had a good arguable case on the merits. No mention was made of the fact that the plaintiff had a residential address in Hong Kong and a Hong Kong property registered under her name. The plaintiff took no step to correct the 2nd defendant’s stated belief that the plaintiff was a foreign plaintiff with no assets in Hong Kong.
33. Thus, it was reasonable for the 2nd defendant to take out the Security Summons on 15 December 2014.
34. Moreover, after the Security Summons was taken out and since 29 December 2014, Messrs Huen & Partners have acted for the plaintiff in place of Messrs Tanner De Witt. On 2 January 2015, Messrs Huen & Partners issued a letter to the 2nd defendant’s solicitors intending to seek the 2nd defendant’s consent on adjourning the call-over hearing of the Security Summons for 1 month for the sake of allowing more time to take instructions from the plaintiff on the Security Summons. Again, no mention was made of the fact that the plaintiff had a residential address in Hong Kong and a Hong Kong property registered under her name.
35. However, the plaintiff submits that the 2nd defendant’s solicitors in their reply letter dated 5 January 2015 should not have refused to adjourn the call-over hearing and insisted on further proceedings of the Security Summons without making any enquiries on the plaintiff’s residency and asset status in Hong Kong. I cannot agree with this submission at all. As aforesaid, this is a matter that the plaintiff should have raised to the 2nd defendant, not the other way round.
36. In fact, on 6 January 2015, when the plaintiff’s solicitors replied to the 2nd defendant’s solicitors’ letter of 5 January 2015, the plaintiff’s solicitors only proposed directions for the Security Summons, but again, no mention was made of the fact that the plaintiff had a residential address in Hong Kong and a Hong Kong property registered under her name.
37. The plaintiff only disclosed that she has an address and a property in Hong Kong and resides in Hong Kong from time to time in her 2nd affidavit which was filed on 4 February 2015. The 2nd defendant’s solicitors immediately took action and wrote to the plaintiff’s solicitors on 12 February 2015 expressing the 2nd defendant’s disappointment in the plaintiff’s omission of the above information in their letters prior to the Security Summons, which has resulted in a waste of costs. The 2nd defendant also proposed to withdraw the Security Summons with costs in the plaintiff’s cause against the 2nd defendant (rather than with costs to the 2nd defendant) and enclosed a draft consent summons for the plaintiff’s consideration.
38. However, on 24 February 2015, the plaintiff’s solicitors explained that the plaintiff had not informed them of her ordinary residency in Hong Kong when she retained them and made proposed amendments to the draft consent summons asking for costs to the plaintiff.
39. On the same day, the 2nd defendant’s solicitors replied asking the plaintiff to reconsider the proposal to dispose of the Security Summons with costs in the plaintiff’s cause against the 2nd defendant.
40. Nevertheless, on 26 March 2015, the plaintiff’s solicitors replied and repeated again the plaintiff’s request for costs of the Security Summons. The plaintiff claimed that the waste of costs was the result of the 2nd defendant’s failure in making reasonable and necessary enquiries (notwithstanding the previous rounds of correspondence and their earlier admission that the plaintiff had not informed them about her residency in Hong Kong).
41. On 27 March 2015, the 2nd defendant’s solicitors wrote to the plaintiff’s solicitors proposing that in the light of the parties’ residual dispute on costs, the parties agree to vacate the substantive hearing of the Security Summons on 29 April 2015 and dispose of the residual dispute on costs on paper. In view of the imminence of the hearing, the 2nd defendant asked for a reply by 30 March 2015.
42. The plaintiff’s solicitors were unable to confirm whether or not the plaintiff would agree to paper disposal of the costs dispute. Therefore, on 2 April 2015, the 2nd defendant had to file the Withdrawal Summons to withdraw the Security Summons and seek for directions to dispose of the costs dispute on paper.
43. On 10 April 2015, the plaintiff’s solicitors replied objecting to paper disposal of the costs dispute and insisted on getting costs of the Security Summons, thereby making it necessary for the parties to attend the hearing on 16 April 2015.
44. At the hearing on 16 April 2015, the plaintiff changed her stance and agreed to paper disposal of the costs dispute. It is clear to me that the hearing on 16 April 2015 could have been avoided if the plaintiff had agreed to paper disposal before the hearing.
45. It is also clear to me that the issuance of the Security Summons was caused by the plaintiff’s conduct in representing her residency being in the United States of America and her failure in disclosing her property and residency in Hong Kong earlier when the parties were exchanging correspondence. The plaintiff had even failed to inform her new solicitors about her residency in Hong Kong.
46. The 2nd defendant was not to blame at all for the issuance of the Security Summons, as the evidence available then shows clearly that the plaintiff was not ordinarily residing in Hong Kong. It was only after the issuance of the Security Summons that the plaintiff revealed for the first time her connection with Hong Kong and the property held under her name in Hong Kong. If the plaintiff had been forthcoming with this information, the costs of the Security Summons would not have been wasted.
47. As aforesaid, the plaintiff’s contention that the 2nd defendant ought to make necessary or reasonable prior enquiries is untenable, especially when the plaintiff was legally represented and when she changed solicitors, she failed to inform the new solicitors of her residency in Hong Kong. Even if the 2nd defendant had tried to make a land search, it would not be able to find out the property under the plaintiff’s name, as her Hong Kong property was registered under a different name, namely “Huie Lai Shan”, rather than “Koko Lai-Shan Huie”.
48. In any event, it is still arguable that the plaintiff does not ordinarily reside in Hong Kong, as her evidence is that she would only return to Hong Kong once a year or occasionally for “family gatherings” and “personal matters”. Thus, the plaintiff may still be a foreigner. The 2nd defendant only conceded to withdrawing the Security Summons because the plaintiff has a property in Hong Kong, which would not be found out by the 2nd defendant if the plaintiff had not disclosed the same.
Conclusion
49. For the above reasons, I find that the issuance of the Security Summons was caused by the plaintiff’s unreasonable conduct and hence the plaintiff should bear the 2nd defendant’s costs of the Security Summons including the costs of preparing its written submission. Such costs should be assessed summarily. As the 2nd defendant has already submitted its Statement of Costs on 7 May 2015, the plaintiff has to submit her Statement of Objection on Costs as directed below.
50. As to the costs of the Withdrawal Summons (agreed at HK$800), it was also incurred solely as a result of the plaintiff’s conduct by insisting on getting costs from the 2nd defendant and failing to agree to paper disposal. The plaintiff should be blamed for taking the course she did and hence should bear the costs of the Withdrawal Summons as well.
Orders
51. I therefore order that: -
(a) The plaintiff do pay the 2nd defendant costs of the Security Summons, including the costs of preparing its written submission, to be assessed summarily on paper and payable forthwith;
(b) The plaintiff do submit and serve her Statement of Objection on Costs on or before 3 July 2015; and
(c) The plaintiff do pay the 2nd defendant costs of the Withdrawal Summons agreed at $800.00 forthwith.
|
(Michael Wong)
|
|
Master of the High Court |
Mr S K Tse of Messrs Huen & Partners for the plaintiff
Ms V Leung of MessrsDeacons for the 2nd defendant
|