WONG WING ON WILLIAM RONALD v. YAU PAK MAN AND OTHERS

CACV 33/2009 & CACV 35/2010

CACV 33/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 33 OF 2009

(ON APPEAL FROM LDBM NO 83 OF 2007)

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CACV 35/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 35 OF 2010

(ON APPEAL FROM LDBM NO 83 OF 2007)

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BETWEEN

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JUDGMENT

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Hon Tang VP:

1.  I have had the advantage of reading Kwan JA's judgment in draft. I am in respectful agreement and have nothing to add.

Hon Cheung JA:

2.  I agree with the judgment of Kwan JA.

Hon Kwan JA:

3.  On 29 January 2010, we ordered the appeal of Wong Wing On William Ronald (the applicant in LDBM 83/2007) in CACV 33/2009 from the substantive part of the judgment of HH Judge Yung in the Lands Tribunal on 2 February 2009 to be struck out. We gave leave to the applicant to appeal on the order of the judge on costs alone, and also granted leave to the 1^st and 2^nd respondents to appeal the said order of the judge on costs alone out of time (CACV 35 of 2010). This is the hearing of both appeals on costs.

4.  In his judgment, the judge dismissed the applicant’s claim against the 11 respondents for an injunction, declarations and damages. The 1^st to 10^th respondents were members of the management committee of the incorporated owners of Uptown Plaza in Tai Po, New Territories at the material time, and the 1^st and 2^nd respondents were the chairman and secretary of the committee. The 11^th respondent was the incorporated owners.

5.  In the proceedings below, the 1^st respondent, the 2^nd respondent, the 3^rd to 10^th respondents and the 11^th respondent were separately represented by four legal teams. The judge ordered the applicant, the 1^st and 2^nd respondents, jointly and severally, to pay the costs of the 3^rd to 11^th respondents of the proceedings on an indemnity basis and on the High Court scale with certificate for counsel.

6.  For the background of this litigation, I gratefully adopt the Reasons for Judgment of the Vice-President on 4 February 2010, paras 8 to 17.

7.  We struck out the applicant’s appeal on 29 January 2010 on the ground it is frivolous, vexatious and an abuse of the process of the court. Our reasons for so doing appeared in paras 18 to 22 of the Reasons. In short, none of the arguments advanced on behalf of the applicant in the proceedings below had any merit.

The judge’s reasons for the costs order

8.  The trial before the judge was set down for two days but took 17 days. The findings and observations in the judgment below relevant to the costs order may be stated as follows:

(1)     The 1^st and 2^nd respondents took the same stance as the applicant on the matters in dispute from the very beginning. They were opposed to the measures proposed by the other members of the management committee, namely, the 3^rd to 10^th respondents.

(2)     Because of the opposite stance taken by the 1^st and 2^nd respondents, they engaged their own solicitors to represent them in the dispute and in the subsequent litigation brought by the applicant against all 11 respondents.

(3)     In the application for an interlocutory injunction brought by the applicant to restrain the 11^th respondent from holding a meeting of the owners to consider and pass a resolution to provide a permanent disability access ramp until trial of the action or further order, the 1^st and 2^nd respondents had provided affidavits which supported this application.

(4)     The trial was prolonged as it was largely taken up with the dispute whether the 3^rd to 11^th respondents were “wilfully negligent” in handling various matters as alleged by the applicant and supported by the 1^st and 2^nd respondents in their contribution notices against the 3^rd to 11^th respondents.

(5)     The declarations and injunctive relief sought by the applicant were unfounded and inappropriate. The allegations of wilful negligence against the 3^rd to 11^th respondents were not substantiated.

(6)     The applicant and the 1^st and 2^nd respondents spared no effort to protect the interest of Messrs Kong & Chang (whose legal advice they agreed with and supported) and to thwart the 11^th respondent from exploring the feasibility of a settlement in the claim brought by a Mr Siu against the 11^th respondent regarding discrimination in the access of premises under the Disability Discrimination Ordinance, Cap 487.

(7)     Notwithstanding that they all took the same stance, the applicant did not give up his claim against the 1^st and 2^nd respondents. This was in order that the 1^st and 2^nd respondents could issue contribution notices against the 3^rd to 11^th respondents.

(8)     The judge did not believe that the applicant and the 1^st and 2^nd respondents did not know their allegations of wilful negligence could not be substantiated. The judge was of the view that the applicant brought these proceedings to malign the 3^rd to 11^th respondents so as to achieve the purpose of hindering the 11^th respondent from a settlement of the claim brought by Mr Siu. If the applicant and the 1^st and 2^nd respondents had no prior understanding of this purpose, they had acted in concert as the events unfolded to achieve the same goal. The judge found such behaviour of the applicant and the 1^st and 2^nd respondents unpardonable.

The arguments in the costs appeal

9.  The applicant and the 1^st and 2^nd respondents raised these arguments in the costs appeal:

(1) indemnity costs should not be awarded against them;

(2) costs should not be assessed on the High Court scale; and

(3) the costs awarded to the 3^rd to 10^th respondents should be reduced for the inordinately long cross-examination by their counsel on irrelevant or peripheral matters in the trial.

10.  The 1^st and 2^nd respondents contended in addition that they were successful parties in that the applicant’s claim against all 11 respondents was dismissed by the judge. Instead of ordering them to pay the costs of the 3^rd to 10^th respondents, the judge should have considered one or more of these orders which would be more appropriate: depriving them of part of the costs they could recover from the applicant as the winning party; making no order as to costs between the 1^st and 2^nd respondents vis-à-vis the applicant; making no order as to costs between the 1^st and 2^nd respondents vis-à-vis the 3^rd to 11^th respondents.

11.  I reject the above additional contention of the 1^st and 2^nd respondents. These respondents had actively supported the applicant in this litigation by providing affidavits in the interlocutory injunction application, by making submissions in support of that application and by adducing evidence at the trial to support the applicant’s allegations of wilful negligence against the other respondents. As submitted by Mr Paul Wu for the 11^th respondent, they were effectively and practically additional applicants in the proceedings although they were sued by the applicant as respondents. There is no basis to interfere with the exercise of the judge’s discretion that the 1^st and 2^nd respondents should be treated in the same way as the applicant regarding the costs incurred by the other respondents in resisting this claim.

12.  That leaves the three main arguments as identified above.

General principles

13.  The Court of Appeal does not lightly interfere in the exercise of a judge’s discretion in making a costs order, unless it can be shown that the judge did not exercise his discretion judicially, or had based his discretion on a wrong principle or was under a misapprehension of material facts, or had wrongly taken some matter into account, or had failed to take into account some matter which he should have done, or if his decision was so plainly wrong. Where the appeal court is asked to interfere with the exercise of the judge’s discretion in making an order on the basis of the taxation of costs, particularly one in which the trial had lasted many days, extra caution should be exercised because the court does not have the “feel” of the case as the trial judge had (Wang Din Shin v Nina Kung [2005] HKEC 568 at paras 5 and 6).

Indemnity costs

14.  The grounds for making an order for indemnity costs are not confined to particular situations. The courts have emphasised that it is undesirable to circumscribe or fetter the court’s discretion beyond the requirement that indemnity costs must be “appropriate”. The grounds for awarding indemnity costs must be connected with the case. This may extend to any matter relating to the litigation and the parties’ conduct in it, and the circumstances leading to the litigation, but no further (Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114 at paras 16 to 18).

15.  In the present case, the judge’s reasons for awarding indemnity costs to mark his disapproval of the conduct of the applicant, the 1^st and 2^nd respondents were as stated in para 8(8) above. He had failed to take into account pertinent matters in disbelieving that the applicant, the 1^st and 2^nd respondents did not know their allegations of wilful negligence against the other respondents could not be substantiated.

16.  The divided opinion between the applicant, the 1^st and 2^nd respondents on the one hand and the 3^rd to 10^th respondents on the other hand must be viewed against the background as summarised in Mr Wu’s submission. The 11^th respondent had obtained legal opinion from four solicitors firms from September 2002 to March 2007 on the provision of a permanent access ramp for each of the six buildings in the estate as demanded by Mr Siu and on the litigation brought by Mr Siu in September 2006. The legal advice given by the four solicitors firms was divided. The legal advice provided by solicitors in 2002 and 2006 was to the effect that there was no contravention of the Disability Discrimination Ordinance in not providing permanent access ramps in the estate. The advice given by two other firms in 2007 was to the opposite effect.

17.  The applicant, the 1^st and 2^nd respondents accepted the earlier legal advice. They had accused the other respondents in the committee of failing to act on such legal advice and were thus wilfully negligent in the discharge of their duties. Their stance that the construction of the permanent ramps was in breach of the Deed of Mutual Covenant and the New Grant was obviously influenced by the earlier legal advice obtained by the 11^th respondent, see, for example, the letter of the applicant’s solicitors to all members of the management committee dated 15 December 2006 and the open letter of the 1^st and 2^nd respondents to all the owners dated 24 February 2007.

18.  The judge found that the applicant, the 1^st and 2^nd respondents had firmly believed in the correctness of the earlier legal advice, so much so that they declined to consider the subsequent legal advice including an opinion given by a barrister, see para 27 of the judgment. There was no mention in the judgment that they had any private material gain in opposing the construction of the permanent ramps and the settlement of Mr Siu’s claim.

19.  The position taken by the applicant, the 1^st and 2^nd respondents regarding the construction of the permanent ramps is wrong in law. But in light of the fact that they were influenced by the earlier legal advice, the judge had acted on a misapprehension of material facts when he disbelieved the applicant, the 1^st and 2^nd respondents did not know their allegations of wilful negligence against the other respondents could not be substantiated. This also cast doubt on the soundness of the inference drawn by the judge that these proceedings were brought by the applicant to malign the 3^rd to 10^th respondents for the purpose of hindering the 11^th respondent from settling the claim with Mr Siu.

20.  The judge’s exercise of his discretion in awarding indemnity costs is flawed. This is not an appropriate case for indemnity costs. Viewed against the relevant background and the firm belief of the applicant, the 1^st and 2^nd respondents in the correctness of the earlier legal advice, they should be penalised in costs in pursuing an unmeritorious claim against the 3^rd to 11^th respondents, but not on an indemnity basis.

Costs on High Court scale

21.  The judge did not give any reason for awarding costs on the High Court scale. The only point about the provisions in the Deed of Mutual Covenant and the New Grant was that the construction of the permanent ramp would require the approval of the Director of Lands. This does not raise any difficult question of law. As for the factual dispute whether the allegations of wilful negligence were made out, that too is hardly a case of complexity. Notwithstanding the many documents adduced in evidence by the parties, there are just three matters involved in these allegations, according to the submission of Ms Koo Yeuk Lan, counsel for the 3^rd to 10^th respondents.  Mr Wu submitted that the High Court scale is appropriate having regard to the history and background of the dispute and the fact that the applicant sought injunctive relief against the respondents. I am unable to see the relevance of any of these matters. In my judgment, taxation should be on the District Court scale.

If the 3^rd to 10^th respondents should be deprived of part of their costs

22.  Mr Kenneth Chan (for the applicant) and Mr Roland Lau (for the 1^st and 2^nd respondents) urged this court to reduce the costs awarded to the 3^rd to 10^th respondents by half to two-thirds on the ground that the trial of the action was much prolonged by the cross-examination of Ms Koo of the witnesses on matters that were irrelevant to the dispute or of peripheral importance. They made no complaint about the cross-examination conducted by Mr Wu and do not seek reduction of the costs awarded to the 11^th respondent. But insofar as additional costs were incurred by the 11^th respondent in the prolonged trial (for which the applicant and the 1^st and 2^nd respondents were ordered to pay) due to the lengthy cross-examination of Ms Koo, they submitted this should be reflected in the reduction of costs of the 3^rd to 10^th respondents.

23.  This trial was initially set down by HH Judge M Wong for two days. It lasted 17 days. We have been given a breakdown of the time taken in the questioning of the five witnesses. The cross-examination by Ms Koo of the applicant, the 1^st and 2^nd respondents took nine days.

24.  Only two broad issues were raised in these proceedings. The first is a simple question of law and that is whether the proposed construction of the permanent ramps would be in breach of the Deed of Mutual Covenant and the New Grant. The second, which took up the bulk of the time, was the factual dispute whether there was wilful negligence of the 3^rd to 10^th respondents. According to Ms Koo’s submission, the allegations of wilful negligence covered these three matters: (1) the failure of the management committee to distribute to the owners the legal opinion of Messrs Kong & Chang before the owners’ meeting held on 5 November 2006; (2) retaining Messrs Chung & Kwan to act for the 11^th respondent in defending Mr Siu’s claim notwithstanding there was conflict of interest of these solicitors; and (3) convening a meeting of owners on 15 September 2007 to consider and pass a resolution to settle Mr Siu’s claim and to build permanent ramps.

25.  Having regard to the nature and scope of these allegations, and that oral evidence was given without the need of translation, the trial should not have lasted for more than two to three days. We were taken by the parties to excerpts of the transcript of proceedings, to give us a flavour of the tangential issues canvassed in the cross-examination of Ms Koo. It is unnecessary to set out these matters here. Suffice it to say I fail to see the relevance of the line of questioning taken by Ms Koo aimed at showing that the applicant, the 1^st and 2^nd respondents had all behaved unreasonably, or that there was ulterior motive on the part of the applicant in bringing these proceedings against all 11 respondents.  Had the judge exercised proper control over the proceedings, and confined the cross-examination to questions that were germane to the issues in dispute, such prolix cross-examination (which on a number of occasions became a debate between counsel and the witness, with the judge joining in) would not have been allowed and the trial would not have been unnecessarily prolonged to the disadvantage of all.

26.  The words of Ribeiro PJ in Wang Din Shin v Nina Kung (No 2) (2006) 9 HKCFAR 800 at para 57 are of particular resonance to the present situation:

“In my view, there was undoubtedly a great deal of time wasted at the trial by an inordinately long, and often oppressive, cross-examination … on matters which were peripheral or irrelevant. There was a single central question … But the cross-examination did not discriminate between evidence which was fundamental to that issue and evidence which could, at best, be only of the remotest circumstantial significance. The trial was taken up with examining the minutiae without any sense of proportionality.”

27.  In the circumstances, it is right that the costs awarded to the 3^rd to 10^th respondents should be substantially reduced. On a broad brush approach, I think it appropriate to reduce their costs by half.

Conclusion

28.  In summary, I would allow the costs appeal of the applicant and the 1^st and 2^nd respondents and set aside the order of the judge that costs awarded to the 3^rd to 11^th respondents be taxed on an indemnity basis and on the High Court scale. In lieu thereof, I would order as follows:

(1) the applicant and the 1^st and 2^nd respondents, do, jointly and severally, pay half of the costs of the 3^rd to 10^th respondents in the proceedings and all of the costs of the 11^th respondent in the proceedings, to be taxed if not agreed, on a party and party basis and on the District Court scale, with certificate for counsel; and

(2) there be no order as to costs as between the applicant and the 1^st and 2^nd respondents in the proceedings.

29.  As for the costs of the costs appeals, I would make an order nisi that there be no order as to costs.