KEEP POINT DEVELOPMENT LTD. v. CHAN CHI YIM AND OTHERS

HCMP 6550/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 6550 OF 1998

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REASONS FOR RULING

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1. On 14 March 2000 I gave judgment in these proceedings in favour of the plaintiff against the defendants (the main action), leaving the matter of costs for further argument, and on 20 June 2000 I further gave judgment for the defendants against the 2nd Third Party for damages to be assessed, and the costs of those third party proceedings. On 22 January 2001 the parties made further submissions on the costs of the main action, including an application on behalf of the plaintiff that costs should be on the common fund basis, and I ordered that the plaintiff's costs of the main action be paid in the proportion of 70% by the defendants and 30% by the 2nd Third Party, and that these were to be taxed on a party and party basis. I also made an order that the 2nd Third Party pay to the defendants the proportion of costs for which they are liable to the plaintiff, and their own costs in defending the main action. I now give my reasons for so doing.

Basis of taxation

2. Sir John Swaine, on behalf of the plaintiff, submits that this is a proper case for the Court to exercise its discretion and award costs on a higher basis than usual as the defendants made an allegation of fraud against the plaintiff which was never substantiated. This, he says, unnecessarily prolonged the trial and caused the plaintiff to incur additional costs. He says that the defendants alleged collusion between the plaintiff and Full Country, the 1st Third party, as a result of which the plaintiff was not a bona fide purchaser within the meaning of section 3(2) of the Land Registration Ordinance.

3. In support of this he relies on Brown v Scott (unreported) CA 10 June 1984, where the plaintiff had made a number of allegations against the defendants including fraud, misrepresentation and other allegations of serious misconduct, which the trial judge wholly rejected, and he was held by the Court of Appeal to have been justified to award costs on a higher basis. He also referred me to Dr Koo Chih Ling Linda & anor v Dr Lam Tai Hing [1992] 1 HKC 193, where Bokhary J considered, in awarding costs on the common fund basis, that the way the defence had been conducted was an affront to the court.

4. However, this case falls into neither of these categories. Firstly, as I made clear in my judgment, there was no allegation of fraud made by the defendants. There were circumstances, including an apparent admission in a tape recorded meeting, that the plaintiff was aware of the option the subject of this action, that the defendants felt entitled them to question the bona fides of the plaintiff, on the basis of possible collusion. I found there was none, but I do not consider the defendants taking the point to be so outrageous that they should be penalized in a costs order. As it transpired, the question of bona fides was not necessary to the plaintiff's case, but it is clear from the way that it was initially presented that the defendants were entitled to consider that it was.

5. It seems clear to me that, taking the authorities as a whole, including the Hong Kong decision of Hunter JA in Citibank N.A. v Kung Kwok-Wai, David CA 81 of 1989, that there has to be some special or unusual feature in a case to justify the Court exercising its discretion to order common fund costs, particularly in the way that the defence has been conducted. While the trial was somewhat longer than had been hoped, it was not so prolonged by the defendants' counsel's conduct of it that the Court needs to show its disapproval, nor was the defendants' case discredited by false or misleading evidence or wholly unsustainable.

6. In the circumstances of this action I find that there is no good reason for the award of costs to be anything other than on a party and party basis.

Proportions of costs

7. Sir John further sought an order that the proportion of the plaintiff's costs, that the other parties should be liable for, be as to 70% against the defendants, and 30% against the 2nd Third Party. He justifies this on the ground that the time taken on the trial by the 2nd Third Party's counsel in cross-examination and submissions was approximately one third of the whole.

8. The 2nd Third Party was given leave to, and did, take a full part in the trial of the main action, and in effect was also fighting the plaintiff on a similar basis to the defendants. There is accordingly no reason why a separate order should not be made. I cannot improve on the plaintiff's method of calculation as to the proportions and accordingly made the order sought.

Costs of legally aided defendants

9. The only other matter put forward on behalf of the plaintiff was that the legally aided defendants should be liable for the plaintiff's costs up to 17 May 1999, the date they agreed to be bound by the result of the other defendants' case, and dropped out of the proceedings. This is not really logical as the other defendants could just as well have waited until the Director of Legal Aid appointed counsel and have come to a similar agreement. In the circumstances I consider that the same order as to costs should apply to them.

Costs of hearing

10. In respect of this part of the applications before me I ordered that the plaintiff, having been unsuccessful in the main part of their contention as to the basis of taxation, should bear 90% of the defendants' costs, and 50% of the 2nd Third Party's costs, of this hearing.

Defendants' costs against the 2nd Third party

11. Although it is claimed on behalf of the 2nd Third Party that the defendants not only brought these proceedings on themselves by acting unreasonably on improper advice, and should not have defended the plaintiff's action, I can see no reason why the defendants should not have their proportion of the plaintiff's costs paid by the 2nd Third Party. These were ordinary people doing their best to protect their interests after suffering at the hands of the 1st Third Party, and I have no doubt that the 2nd Third Party would have similarly complained had they taken no action or submitted to judgment. It was never suggested by the 2nd Third Party that the defence should not be pursued, and, indeed, they actively cooperated in it. For the same reasons I ordered that the 2nd Third Party pay the defendants' own costs of defending the action.