PAK LIK CO (A FIRM) v. SUNG FOO KEE LTD

IN THE SUPREME COURT OF HONG KONG HIGH COURT

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JUDGMENT

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1. On 15th March 1996, I entered judgment against the Defendant in the sum claimed by the Plaintiff on the basis of non-compliance with an unless Order and I said in my Judgment that the non-compliance was intentional and contumelious. The question of the interest rate and scale of costs were left over. On the 17th July 1996 the matter of interest rate was disposed of and the outstanding issue left to be decided by the Court is the question of what scale of costs should be ordered.

2. I now turn to the question of costs. It is not in dispute that the Plaintiff is to have the costs of the four Summons the subject of my Judgment dated 15th March 1996 ("Judgment"). Nor is it disputed that save as where previously there was already in existence any order specifically providing for costs, the costs of the Action and of the Counterclaim should be paid by the Defendant to the Plaintiff. The debate between the parties is on what scale the two sets of costs, namely the costs of the four Summons and the costs of the Action, should be awarded. For the Plaintiff, it was contended that I should order these two sets of costs on an indemnity scale or at least on a common fund basis. Mr. Clayton for the Defendant strongly argued against such costs ordered on such a penal scale.

3. The well known passage of Godfrey, J. (as he then was) in Overseas Trust Bank Ltd. v. Coopers & Lybrand [1991] 1 HKLR 177 at 182J-183C provides a good guideline, It reads:-

"To justify an order for costs on the common fund basis, the case has to have some special or unusual feature: see Preston v Preston [1982] Fam 17 and my own judgment in Wharf Properties Ltd. v. Eric Cumine Associates (HCA No. A13431/1983 and CL 48/1985, 24th February 1988, unreported. In my opinion, in order to justify a taxation on the indemnity basis, the successful party has to show, either that the case is one of a type already recognised in the practice of the court as warranting a taxation on that basis (such as, for example, the contempt cases to which I have already referred) or that there is some feature in the case even more special or unusual than one which would justify a taxation on the common fund basis. A case in which the successful party has demonstrated that the proceedings were initiated or prosecuted by the unsuccessful party in a manner which constitute that party's proceedings an abuse of the process of the court might well be a candidate for an award of taxation of costs on an indemnity basis. A taxation of the successful party's costs on an indemnity basis could properly be ordered, in my opinion, where the proceeding were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for the taxation of the successful party's costs on the indemnity basis."

In American Express v Johnson [1984] HKLR 372, Hunter, J. (as he then was) considered that in the circumstances of that case which was a heavy piece of litigation that the official receiver was entitled to the costs upon the most generous appropriate scale and then after examining indemnity costs and costs on common fund basis, ordered that the costs should be awarded on a common fund basis with a direction to the Taxing Master to exercise his discretion under Order 62 rule 32(2). A similar order was also made in Re Irish Shipping Ltd. [1985] HKLR 437 at 447.

4. A careful reading of my Judgment will clearly show my view that the repeated non-compliance of the Orders of the Court was deliberate and contumelious. At paragraph 42 of my Judgment for example I said that the Defendant's Financial Analysis Approach was used as "a means of causing the maximum delay in litigation and inflicting the maximum oppression on the other side." At paragraph 65 of the Judgment, I also said that the Defendant built up a monster from the oppressive discovery the Defendant managed to extract (albeit voluntarily) from the Plaintiff. Having regard to all the circumstances of the case, I have no doubt that the most generous scale of costs should be awarded to the Plaintiff. As far as I am concerned, the whole behaviour of the Defendant as revealed in the material before me showed conduct which was oppressive and an affront to the court. The question is on the basis of such conduct, should I order the indemnity costs or costs on a common fund basis or costs on the American Express formula referred to earlier.

5. Mr. Clayton argued against costs on any basis higher than the normal party and party basis and contended that the Plaintiff could have put a stop to the complained conduct of the Defendant earlier and could have resisted the extensive discovery made. This is simply adding insult to the injury. It is the conduct of the Defendant which called for a penal costs order. It is clear from my Judgment that there are special and unusual features in this Action which I considered wholly unacceptable even by the low standards of the Defendant (see paragraph 58 of Judgment). The conduct of the Action by the Defendant was in my judgment disgraceful so that this Court felt a proper sense of indignation (to use the expressions of Godfrey, J. at page 183 of the OTB judgment). Accepting as Mr. Clayton does that the Court has to take a broad brush approach in this matter of costs, I have come to the view, having considered all the points which Mr. Clayton made in favour of the Defendant, that the special and unusual features of this case although amounting to an affront to the Court are just barely not such as to call for the penal sanction of a full indemnity costs order. I have however no hesitation in reaching my conclusion that this is a case at least as deserving of a generous costs order as the many cases in the reports such as the American Express, the Irish Shipping, Ronald Li v Deacon Chiu [1986] HKLR 1011 and Dr. Linda Koo v Dr. Lam Tai Hing [1992] 1 HKC 193 and in the exercise my discretion having regard to all the circumstances, I order that the Defendant pay to the Plaintiff the costs of the four Summons and the costs of the Action (save as provided in previous costs orders) on the American Express formula, namely on a common fund basis with a direction to the Taxing Master to exercise his discretion under Order 62 rule 32(2). There shall be a certificate for two Counsel for the Plaintiff. The costs of the hearing before me today and on the 17th July 1996 should also be paid by the Defendant to the Plaintiff on the same basis.