RE: CHOY BING WING

HCB 12343/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO. 12343 OF 2009

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D E C I S I O N

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1.  This is the adjourned hearing for the application of the Director of Housing Department (“the Petitioner”) for leave to withdraw the bankruptcy petition against Mr Choy and an order of costs against Mr Choy on an indemnity basis.

2.  The application was first raised at the first hearing of the petition on 11 November 2009.  Mr Choy then sought an adjournment on the grounds that he had only just received the affidavit filed by the Petitioner in support of the application and that he required time to consider, research and prepare.  I acceded to his request and adjourned the application.

3.  Mr Choy is absent at the adjourned hearing on 21 January 2010.  I am satisfied by the affidavit of service filed by the Petitioner that Mr Choy has been duly notified of the hearing.  In fact, Mr Choy has written to the Petitioner[1] and to this Court[2] making references to the adjourned hearing.  I have therefore decided to proceed with the application.

4.  In light of Mr Choy’s absence, I shall set out the reasoning of my decision in writing.

BACKGROUND

5.  In order to properly appreciate the application, it is necessary for me to go into the background of this case.

6.  Mr Choy was the plaintiff in HCA 2458/2007.  By that action, he claimed against, inter alia, the Petitioner for ruining his professional career.  Mr Choy elected not to proceed with that action and applied for leave to discontinue it.  By an order dated 7 January 2008, the Registrar granted him leave to do so and ordered him to pay costs to all the defendants.  The costs due to the Petitioner under the Registrar’s order has since been taxed and allowed at $45,896.50.    

7.  Mr Choy refused to pay the taxed costs to the Petitioner.  On 15 May 2009, the Petitioner served a statutory demand on Mr Choy demanding him to pay up but to no avail.  The Petitioner then presented the petition herein for the bankruptcy of Mr Choy on the ground that Mr Choy was unable to pay the taxed costs plus interest.

8.  By a letter to the Petitioner dated 16 September 2009, Mr Choy enclosed the complaint letters he had sent to the Chief Executive and the Chief Justice respectively and enclosed a cheque for the sum of $52,439.98.  The last sentence of the letter read:

“You can cash the cheque only when the two tilting towers 天頌閣 be sold to the public.”

There is a similar endorsement at the back of the cheque.

9.  I am told that $52,439.98 is equivalent to the Petitioner’s taxed costs in HCA 2458/2007 plus interest calculated up to 15 September 2009.

10.  The Petitioner considered the condition imposed by Mr Choy on the presentment of the cheque irrelevant and unacceptable.  By a letter dated 8 October 2009, the Petitioner’s solicitors (“JSM”) returned the cheque to Mr Choy urging him to issue a cheque without any condition attached.

11.  In his reply to JSM dated 8 October 2009, Mr Choy accused the Petitioner of abusing the court’s process in continuing with the bankruptcy proceedings.  This letter ended with the following remark:

“I now return the cheque for you to cash it with your guaranty of sale in a later date per this letter in order for you to kill off my charges of you of frauds.  Please issue guaranty of sale of the tilting towers before you cash this cheque.”

The cheque previous returned by the Petitioner was enclosed in this letter.  The original endorsement at the back of the cheque was crossed out and marked cancelled, and the following new endorsement was made:

“The date is revised per the reply dated 8/10/2009 by Choy with guaranty.”

12.  The Petitioner did not accept the new condition.  By a letter dated 15 October 2009, JSM returned the cheque to Mr Choy and asked him to make payment on an unconditional basis failing which the bankruptcy proceedings would be proceeded with.

13.  By a letter to JSM dated 16 October 2009, Mr Choy enclosed a complaint letter he had sent to the Chief Executive and stated that he would reserve his rights and that:

“The two tilting towers (bombs left in the city area of Tin Shui Wai) have been excluded from the 1392 flats to be on sale to the public and your inability to make guaranty due to crime cover-ups committed by HKSAR, I now withdraw the previous conditions (i) and (ii) and pay the blackmail committed by you against me.”

Mr Choy once again returned the cheque with his letter.  This time, the first two endorsements at the back of the cheque were crossed out and the following new endorsement indorsed:

“Cancelled due to evidence of no sale of these two blocks published by 東方.”

14.  The Petitioner considered that Mr Choy had withdrawn all his conditions and accepted the cheque for payment.  By a letter dated 27 October 2009, JSM informed Mr Choy that:

“You state in your letter that you withdraw the conditions previously imposed on the cheque.  In these circumstances, our client will proceed to present the cheque to the bank for payment and will treat such payment as your settlement of the costs order dated 7 November 2008 made by the Registrar of the High Court.  Upon clearance of the cheque, our client will withdraw the bankruptcy petition.

For the avoidance of doubt, our client makes no representation, agreement or guarantee on any matters raised in your previous correspondence.”

15.  Two days later, JSM received Mr Choy’s letter dated 29 October 2009 in which Mr Choy insisted that “the condition of the cheque is still there” and made scandalous remarks against various parties including the Petitioner, JSM and the Registrar.

16.  By then, the Petitioner had already presented the cheque.  By a letter dated 10 November 2009, JSM informed Mr Choy that:

“Your letter dated 16 October 2009 clearly states that you withdraw the conditions previously imposed on the cheque.  We do not accept your subsequent allegations contained in your letter dated 29 October 2009 that the cheque remains as a conditional one.

Our client has obtained payment form the bank and will seek leave to withdraw the bankruptcy petition.  We will be attending the hearing set down at 10:30 am tomorrow to seek an order that you pay our client’s costs of the petition.”

17.  The first hearing of the petition was scheduled for 11 November 2009.  Mr Boyle (a partner of JSM) sworn an affidavit on 10 November 2009 to indicate the Petitioner’s intention to apply for leave to withdraw the petition.  He stated that the Petitioner had presented Mr Choy’s cheque for payment and would forego the remaining interest. 

18.  Furthermore, Mr Boyle stated in paragraph 21 of his affidavit that:

“The Petitioner has incurred a substantial amount of costs in the bankruptcy petition.  Most of the costs were incurred due to the unreasonable and vexatious attitude of Mr Choy in his refusal to make an unconditional payment – which has required my firm to go to considerable lengths to understand Mr Choy’s allegations, to advise the Petitioner regarding the status of the cheque tendered on a so-called conditional basis and to respond to Mr Choy.”

In those circumstances, stated Mr Boyle, the Petitioner would seek costs against Mr Choy on an indemnity basis and asked for gross sum assessment of such costs in view of the vexatious attitude of Mr Choy.

19.  Mr Choy also filed an affirmation on 3 November 2009 before the first hearing in which he made scandalous remarks against the Registrar.

20.  At the first hearing on 11 November 2009, I struck out the scandalous remarks in Mr Choy’s affirmation and referred the matter to the Department of Justice to consider whether contempt of court proceedings should be instituted against Mr Choy.  I further adjourned the Petitioner’s application for further consideartion.

21.  Mr Choy lodged an appeal against my above order.  By a written decision handed down on 24 December 2009, Chung J dismissed the appeal.

22.  Prior to this adjourned hearing, Mr Choy filed his 4^th affirmation in reply to Mr Boyle’s affidavit.  In his affirmation, Mr Choy referred to the assertion that he had withdrawn all conditions as a lie and made some serious allegations against JSM.

DISCUSSION

23.  Mr Choy is apparently appealing against Chung J’s order.  In his letter to this Court dated 19 January 2010, Mr Choy enclosed a copy of his Notice of Appeal filed in CACV 4/2010 and threatened that I should not deal with the present application until after his appeal has been disposed of by the Court of Appeal.  I disagree.

24.  Order 59, rule 13 of the Rules of the High Court, Cap.4A (“RHC”) provides that except so far as the court below or the Court of Appeal or a single judge may otherwise direct, an appeal shall not operate as a stay of execution or of proceedings under the decision of the court below.

25.  I am not aware of any order directing a stay of proceedings.  There is, therefore, nothing to stop the Petitioner from proceeding with the application.

26.  In my view, the Petitioner’s application can be looked at in 3 stages:

(1)  Whether leave should be granted for the withdrawal of the petition?

(2)  Whether Mr Choy should be ordered to pay costs to the Petitioner?

(3)  Whether Mr Choy should be ordered to pay costs on the indemnity basis?

(1)  Whether leave should be granted for the withdrawal of the petition?

27.  The petition was presented on the ground that Mr Choy was unable to pay the taxed costs plus interest.  Irrespective of whether there had been any condition imposed on the cheque, the fact remains that the Petitioner has obtained payment on part of the petitioning debt and elected to forego the remainder.

28.  The Official Receiver has been informed of the application, and raises no objection. 

29.  As the underlying basis of the petition is gone, I grant leave under section 5(2) of the Bankruptcy Ordinance, Cap.6 (“the Ordinance”) to the Petitioner to withdraw the petition.

(2)  Whether Mr Choy should be ordered to pay costs to the Petitioner?

30.  Section 100(1) of the Ordinance provides that:

“Subject to the provisions of this Ordinance and to general rules, the costs of and incidental to any proceeding in court under this Ordinance shall be in the discretion of the court.”

31.  Rule 79 of the Bankruptcy Rules, Cap.6A (“BR”) further provides that:

“ (1) Subject to paragraphs (2), (3) and (4), the costs of all proceedings under this Ordinance down to and including the making of the bankruptcy order shall be borne by the party prosecuting the same.

(2)  The court may at any time order that the debtor shall pay the whole or any part of the costs.”

Sub-rules (3) and (4) are not relevant for present purposes.

32.  In my view, the Petitioner was clearly justified in commencing these proceedings against Mr Choy. 

33.  According to Mr Boyle’s affidavit, the Petitioner had repeatedly requested Mr Choy between February and September 2008 to pay the Petitioner’s costs in HCA 2458/2007.  The Petitioner had also put forward a without prejudice settlement offer with a view to save time and costs of taxation.  However, Mr Choy did not accept the offer.  The Petitioner therefore filed a bill of costs in HCA 2458/2007 for provisional assessment.  Notice of provisional assessment was subsequently served on Mr Choy and he did not apply for formal taxation.  The Petitioner thereafter obtained an allocatur for the taxed costs and served it on Mr Choy.

34.  Mr Choy continued to refuse to make payment and chose to ignore the statutory demand served on him on 15 May 2009.  Eventually, the Petitioner presented the petition on 15 September 2009.

35.  Mr Choy only settled the petitioning debt after the Petitioner had commenced these proceedings.  In those circumstances, I see no reason why he should not be responsible for costs. 

36.  In the exercise of my discretion under r.79(2) of BR, I order Mr Choy to pay costs to the Petitioner.

(3)  Whether Mr Choy should be ordered to pay costs on the indemnity basis?

37.  This is a more difficult question in terms of both law and facts.

38.  Mr Boyle says the application is based on Order 62, rule 28 of RHC, the relevant part of which provides:

“…

(3)   The Court in awarding costs to which this rule applies may in any case in which it thinks fit to do so order or direct that the costs shall be taxed … on the indemnity basis.

(4A)    On a taxation on the indemnity basis all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred and any doubts which the taxing master may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the receiving party; and in these rules the term "the indemnity basis" (彌償基準) in relation to the taxation of costs shall be construed accordingly.

…”

39.  Mr Boyle submits that the combined effect of Order 1, rule 2 of RHC and section 99(1) of the Ordinance is that RHC continue to apply in bankruptcy proceedings “so far as the same may be applicable and not inconsistent with the provisions of [the Ordinance]”.

40.  At the adjourned hearing, I drew Mr Boyle’s attention to rule 32A(1) of BR which provides that:

 “When awarding costs the court may-

(a)    direct that the costs of any matter or application-

(i)     shall be taxed and paid as between party and party or as between solicitor and client, on the basis of a common fund in which the client and others are interested; or

(ii)    may be allowed as between solicitor and own client; or

(b)   fix a sum to be paid in lieu of taxed costs.”

That rule does not expressly provide for the court’s power to order taxation on an indemnity costs.

41.  In response, Mr Boyle has submitted that although r.32A may be silent on indemnity costs, it is not inconsistent with O.62, r.28.  As such, O.62, r.28 insofar as it empowers the court to order taxation on an indemnity basis should still be applicable.

42.  Mr Boyle informs me that Chung J has in fact awarded costs against Mr Choy in the appeal on an indemnity basis although the written judgment does not expressly say so.  I also note that there are other decided cases in which the Court has ordered indemnity costs in exercising its bankruptcy jurisdiction. [3] 

43.  On the final analysis, I do not think I need to labour on this point on jurisdiction.  First, O.62, r.28 relates to the court’s power to order taxation on the indemnity basis.  However, the Petitioner is presently asking me to make an order under r.32A(1)(b) of BR in lieu of taxation.  Secondly, I have decided not to order indemnity costs against Mr Choy in the circumstances of this case.  Thirdly, I consider the costs asked for by JSM to be excessive even on an indemnity basis. 

44.  In deference to the submissions made by Mr Boyle, I shall elaborate on why I will not order indemnity costs against Mr Choy.  I shall assume (without deciding) in the ensuing discussion that Order 62, rule 28 does apply.

45.  The discretion conferred by Order 62, rule 28 is a broad one.  There must be some special or unusual feature in the case to justify an order for indemnity costs.  In Town Planning Board v. Society for Protection of the Harbour Ltd (No.2)[4], Li CJ said this:

“Grounds for making an order for indemnity costs

16.   The courts have rejected the proposition that an award of indemnity costs will only be made where a case has been brought with an ulterior motive or for an improper purpose or where there is some deception or underhand conduct on the part of the losing party. (Macmillan v. Bishopsgate Investment Trust Ltd, unreported, judgment delivered 10 December 1993 (Millett J); Disney v. Plummer, unreported, judgment delivered 16 November 1987 (English Court of Appeal)). These decisions and the reasoning on which they were based have been endorsed by the Hong Kong Court of Appeal (Sung Foo Kee Ltd v. Pak Lik Co. (A Firm) at 575E-576F, per Godfrey JA; see also Choy Yee Chun v. Bond Star Development[1997] HKLRD 1327 at 1334G-1335I, per Stock J.)

17.   In these and other cases, courts have emphasised the undesirability of attempting to define the circumstances in which orders for indemnity costs are to be made. It has been said that:

"the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be 'appropriate'."

(Macmillan v. Bishopsgate Investment Trust Ltd, per Millett J; Sung Foo Kee Ltd v. Pak Lik Co. (A Firm) at 575E-576F, per Godfrey JA; see also Choy Yee Chun v. Bond Star Development Ltdat 1334G-1335I, per Stock J).

18.   Neither statements of principle nor authority provide any support for the Board's proposition that the attributes of the parties and the character of the proceedings are irrelevant to the exercise of the discretion to award indemnity costs. In relation to the award of costs generally, it has been accepted, as Chu J pointed out, that while

‘the grounds [upon which costs are awarded] must be connected with the case. This may extend to any matter relating to the litigation and the parties' conduct in it, and also to the circumstances leading to the litigation, but no further.’ (emphasis supplied)

(Scherer v. Counting Instruments Ltd [1986] 1 WLR 615 at 621F, per Buckley LJ). There is no reason why this statement does not apply with equal force to the exercise of the discretion to award indemnity costs.”

46.  Mr Boyle argues that I should order Mr Choy to pay indemnity costs because:

“(1)  The bankruptcy petition was commenced due to Mr Choy’s unreasonable and persistent refusal to comply with the costs order made by the Registrar of the High Court dated 7 January 2008.  The Petitioner has made every effort to obtain payment of the costs order by correspondence.  Mr Choy’s intransigence left the Petitioner with no alternative but to issue bankruptcy proceedings to enforce the costs order.

(2)   After the commencement of the bankruptcy petition, Mr Choy presented three cheques in succession with different conditions attached.  The conditions imposed on the presentation of the cheque were irrelevant, unreasonable and irrational, and were a continuation of Mr Choy’s advancement of his grievance against the Petitioner.  The presentation of these cheques required the Petitioner to incur substantial costs in obtaining advice from this firm whether it should cash the same.

(3)   Throughout the bankruptcy petition, Mr Choy wrote abusive letters to this Honourable Court, the Registrar, the Honourable Chief Justice and other Judges, the Chief Executives of the HKSAR, the Petitioner and JSM making groundless and defamatory allegations of fraud and dishonesty.  It is evident from the letters that Mr Choy was trying to pursue the same allegations as pleaded in the Statement of Claim of the main action against the Petitioner in pursuit of his long-standing grievance against the Government and the Judiciary.

(4)   Mr Choy has conducted himself throughout these bankruptcy proceedings with an ulterior motive and in a scandalous and vexatious manner, causing the Petitioner to incur substantial costs in these bankruptcy proceedings, which would not otherwise have been incurred in the normal course of events.

(5)   Mr Choy has so far appealed against every order and decision made by this Honourable Court.  Mr Choy has also indicated his intention not to comply with the Honourable Mr Justice Chung’s order to pay the indemnity costs to the Petitioner.  In fact, Mr Choy has past history of making all possible applications and appeals, and conduct proceedings in a vexatious, abusive and oppressive manner.  The Court in those proceedings, rightly, ordered indemnity costs against Mr Choy.”

47.  Let me examine each of these submissions more closely.

48.  First, I do not think I can regard Mr Choy’s refusal to settle prior to the commencement of these proceedings as a justification for ordering indemnity costs against him.  His refusal, whilst justifying the presentation of the petition, is not unique to this case.  After all, all creditor’s petitions are based on the inability of the debtor to pay the petitioning debt. 

49.  Secondly, Mr Choy’s attempts to settle the petitioning debt by means of cheque payment is an improvement on his pre-petition attitude.  Although he was still stubborn initially in trying to impose unreasonable conditions on the presentment of the cheque, he responded positively to the Petitioner’s rejections.  He eventually (in my view) dropped all his conditions and settled the matter before the first hearing of the petition.  So, Mr Choy did not prolong these proceedings unnecessarily by opposing the petition.

50.  It was no doubt necessary for the Petitioner to consider each of Mr Choy’s proposals with care and circumspection before responding.  Such costs are recoverable even without an order for indemnity costs. 

51.  In my view, Mr Choy’s conduct in thrice sending a cheque to the Petitioner to settle the petitioning debt provides no basis for ordering indemnity costs against him. 

52.  The third and fourth submissions are really two sides of the same coin. 

53.  In the context of these proceedings, Mr Choy made some serious accusations in correspondence against the Petitioner and JSM in an attempt to justify the conditions he imposed on his cheque.  He did not, however, insist on those conditions and eventually tendered unconditional payment. 

54.  Mr Choy was generally repeating his allegations in HCA 2458/2007 in those correspondences.  As these accusations had been raised before (in the context of HCA 2458/2007) and were clearly unrelated to the basis of the petition, I cannot imagine that the Petitioner and JSM would have spent much time and costs in dealing with them. 

55.  Mr Choy has also filed 4 affirmations in these proceedings.  Chung J has already dealt with the costs in relation to Mr Choy’s 2^nd and 3^rd affirmations (filed for the appeal) in the appeal.  I have noted the contents of Mr Choy’s 1^st and 4^th affirmations.   

56.  In my view, Mr Choy’s abusive correspondences and affirmations should be looked at against his conduct in settling the matter.  Given the frequency and duration of these abusive correspondences and affirmations, I do not feel disposed to order indemnity costs against Mr Choy.

57.  Finally, Mr Boyle has referred me to Choy Bing Wing v Official Receiver & Trustee of Ng Yat Chi, Discharged Bankrupt[5] and Ng Yat Chi v China Resources (Holdings) Company Limited[6]to illustrate how unreasonable Mr Choy had been in other proceedings.  In fact, Mr Choy has been imprisoned for contempt before.[7]

58.  But all that is past.  The underlying basis of the present proceeding is the non-payment of the taxed costs.  It has nothing to do with the 2 cases cited by Mr Boyle.  Mr Choy’s vexatious conduct in other proceedings has been appropriately dealt with by the Court.  Insofar as Mr Boyle is suggesting that Mr Choy will likely take this decision further (as he has done so in relation to my previous order), it is Mr Choy’s right to do so.  It would be wrong for me to penalize Mr Choy for something he has not done.  Furthermore, every case is different and the fact that other Courts had seen fit to order indemnity costs in the past does not mean that it is appropriate to do so in the present instance.

59.  For the above reasons, I will not order indemnity costs against Mr Choy in the exercise of my discretion even if I have the power to do so.

CONCLUSION

60.  I grant leave to the Petitioner to withdraw the petition and order Mr Choy to pay the Petitioner’s costs of and incidental to these proceedings.

61.  Although the Petitioner has not succeeded in his application for indemnity costs, I consider such application justified and will not deprive the Petitioner of his costs in relation to that.

QUANTUM OF COSTS

62.  Mr Boyle has invited me to fix a sum on the costs payable by Mr Choy under r.32A(1)(b) of the BR.  For that purpose, he has submitted a statement of costs seeking costs in the total sum of $213,691.40.  I explored with him at the hearing the costs claimed in the statement. 

63.  As I have mentioned at the hearing, I consider JSM’s charges excessive.  For example:

(a)   Bearing in mind that the solicitors are charging separately for their work done in relation to the statutory demand, their charges on the bankruptcy petition (totaling $43,983) is on the high side.

(b)  JSM proposes to charge $61,565.40 for their work undertaken in relation to Mr Choy’s cheque.  This involves 12.1 hours of attendance on the Petitioner, 9.3 hours of attendance on Mr Choy and 11.6 hours on research. 

As I have pointed out above, Mr Choy’s allegations had been raised and considered before and the conditions he imposed on the cheque were clearly irrelevant.  So, what was required of the Petitioner in the context of these proceedings was simply to note these allegations and to reject the conditions.  I cannot see how JSM could have spent so much time and costs on it.

(c)   JSM proposes to charge $42,315 for their preparation and attendance of the hearing on 11 November 2009.  This includes 3.3 hours of attendance on the Petitioner, 6.5 hours of preparation of documents, and 5.2 hours of perusal of documents. 

The more significant work done in relation to this hearing should be the preparation of the affidavit sworn on 10 November 2009.  However, that is not a substantial affidavit.  There is also no justification for engaging 2 solicitors to prepare and attend the hearing.

(d)  I also consider the proposed charges of $48,828 for the hearing on 21 January 2010 as excessive.  The time charged for preparation of documents (totaling 10.7 hours) and perusal of documents (totaling 3.5 hours) is clearly excessive.  Again, there is no justification to engage 2 solicitors for the preparation and attendance.

64.  Taking a global view of the matter.  I will fix the Petitioner’s costs at $70,000.

65.  The Petitioner is agreeable to have the costs of the Official Receiver in the sum of $5,300 to be deducted from the deposit.  This should also be borne by Mr Choy.

66.  The total costs payable by Mr Choy therefore comes to $75,300.

[1]    by the letter dated 13 January 2010

[2]    by the letter dated 19 January 2010

[3]    For example, see Lam Lai Wah Susanna v Pacific Century Insurance Company Limited (formerly known as Top Glory Insurance Company (Bermuda) Limited), unreported, CACV 385/2002, Rogers V-P, Le Pichon and Yuen JJA,18 February 2003; and Re: Lam Chik Sing, unreported, HCB 9148/2006, Kwan J, 21 January 2009.

[4]    (2004) 7 HKCFAR 114

[5]    unreported, HCA 667/2003, Deputy High Court Muttrie, 11 June 2003

[6]    the first instance decision reported in [2005] 3 HKC 506; and Court of Appeal’s unreported decision in CACV 263/2005, Yeung JA, 9 November 2005

[7]    See the unreported decisions of Hartmann and Suffiad JJ in Secretary of Justice v Choy Bing Wing, HCMP 4694/2003 dated 25 October 2005, 7 and 12 December 2005 respectively.