THE NEW CHINA HONG KONG GROUP LTD (IN LIQUIDATION) AND ANOTHER v. VICTOR LAP LIK CHU AND ANOTHER

HCA 1095/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1095 OF 2005

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J U D G M E N T

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1.  This is an appeal from the order of Master de Souza made on 28 January 2011. As Mr Chan has submitted, this is an appeal as to the costs order made by the master. That being so, Mr Chan must persuade me that the master’s order was unreasonable.

2.  The issue between the parties is as to paragraph 2(b) of the order where the master ordered the 2^nd plaintiff to pay to the defendants costs from and including the costs of 12 April 2010, the date when the 1^st plaintiff filed its notice of change of solicitors, up to the date of the order, to be taxed if not agreed.

3.  As regards paragraph 3, it is submitted by Mr Chan that the words “by the 2^nd plaintiff” be added after the words “the Defendants’ costs so ordered to be payable”.  In effect, what Mr Chan is submitting is that the security for costs should only be available to the defendants for the payment of the costs ordered to be paid by the 2^nd plaintiff and not by the 1^st plaintiff. 

4.  And paragraph 4 of the order made by the master is that the costs of the application before the master including costs that had been reserved be to the 1^st plaintiff and the defendants, to be taxed if not agreed.  This, in effect, was an order that the 2^nd plaintiff do pay those costs.

5.  As to paragraph 5 of the order, the master made an order that leave be granted to the 1^st plaintiff to amend the writ as per the draft attached to the counsel’s submission.  No dispute arises as to this.  The only dispute is in respect of the costs of the amendment which the master ordered to be borne by the 2^nd plaintiff.  Mr Chan submits that these should be borne by the 1^st plaintiff.

6.  I have been taken through the correspondence at length by Mr Chan.  I was told that the master described this dispute as a storm in a teacup.  I entirely agree.  A lot of correspondence has been emanated dealing with this dispute which should have been dealt with at a much earlier stage with a consent summons.  Unfortunately that has not been possible.

7.  I agree with Mr Chan that the correspondence exhibits a change of stance on the part of the 1^st plaintiff.  The earlier stance adopted by the 1^st plaintiff was that directions were required for evidence to be filed to oppose this application so that the 1^st plaintiff could be heard on this matter properly.

8.  It is not necessary for me to recite all the correspondence that I have been referred to.  After some toing and froing, by a letter dated 7 September 2010 the solicitors for the 1^st plaintiff wrote to the solicitors for the 2^nd plaintiff in effect agreeing to their proposal to either withdraw or cease to be a party in the action subject to certain matters.  One of those matters was that :

‘ (2) Consequential upon your client’s withdrawal from the action, leave to our client (the 1^st Plaintiff) to amend the Writ, the Indorsement of Claim and the Statement of Claim herein and to file and serve the amended documents within 28 days from the date of the order to be made herein.”

9.  It also asked for costs of and occasioned by any amendments to the pleadings to be borne by the 2^nd plaintiff. 

10.  On that basis they were prepared to agree that this summons taken out by the 2^nd plaintiff be dismissed with no order as to costs. 

11.  I do not think that it can be seriously argued that at that stage the 1^st plaintiff was seeking to make much more substantial amendments from the ones that were eventually made by the order of the master.  The fact that they asked for 28 days to make those amendments not only to the writ, the indorsement of claim but also to the statement of claim is self-evident.

12.  Quite rightly, the solicitors for the defendants and the solicitors for the 2^nd plaintiff took the view that any amendments that they wished to make after the 2^nd plaintiff dropped out had nothing to do with the 2^nd plaintiff. 

13.  I was also referred to the letter dated 28 September 2010 from the solicitors for the 1^st plaintiff to the solicitors for the 2^nd plaintiff whereby having proposed the Rider A to a consent summons, they indicated that they were prepared to exclude Rider A subject to the 2^nd plaintiff agreeing to the following :

“ Adverse costs orders in favour of the Defendants against the 1^st Plaintiff in relation to the 1^st Plaintiff’s application for leave to amend the Writ, the Indorsement of Claim and the Statement of Claim herein be paid by the 2^nd Plaintiff to the Defendants, to be taxed if not agreed.”

And it was said that the proposal was necessitated by the 2^nd plaintiff’s objection to Rider A.

14.  Rider A to the proposed consent summons asked for leave to amend the writ, the indorsement of claim and the statement of claim and to file and serve the amended documents within 28 days from the date of the order with consequential liberty to the defendants to amend their defence.

15.  It is clear to me that three days before the hearing before the master the solicitors for the 1^st plaintiff changed their stance but as Mr. Chan submitted, and I accept, at that stage it was much too late to save the costs of the summons before the master as the matter had progressed to the stage where counsel had already been instructed.

16.  In view of the fact that the 1^st plaintiff, in my view, had adopted an unreasonable stance in trying to obtain an adverse costs order against the 2^nd plaintiff in the event that they needed to make substantial amendments to the pleadings against the defendants, that was, in my view, unreasonable.  That being so, in my view, it was unreasonable for the master to fix the 2^nd plaintiff for all the costs of the summons. 

17.  Dealing with the order that he made it seems to me that paragraph 2(b) was unreasonable and I would substitute for that the order in paragraph 2(b) as set out in the notice of appeal. 

18.  As to paragraph 3 of the order, I see no reason to disturb the master’s order.  The security for costs was provided by both plaintiffs as security for the defendants’ costs.  That security should be available to satisfy the defendants’ costs.  In my view, that order should not be disturbed. 

19.  As far as paragraph 4 of the master’s order is concerned, I would set aside that order and substitute that order with the order that the 1^st plaintiff do pay the 2^nd plaintiff and the defendants the costs of and occasioned by the application, to be taxed if not agreed.

20.  As regards paragraph 5 of the order which dealt with the costs of the leave granted to the 1^st plaintiff to amend the writ with the minor amendment made, it seems to me that the costs of that amendment should be borne by the 2^nd plaintiff and I do not think that it is appropriate to amend or vary the master’s order.

21.  The appeal succeeds to the extent that I have mentioned.  I will hear the parties as to costs.