CHAN KOON NAM v. NG MAN SUM

HCA1494/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1494 OF 2007

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BETWEEN

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DECISION ON COSTS

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1.  I gave a written judgment in this matter after trial on 25 November 2011 and found for the plaintiff.

2.  At the end of that written judgment, I had requested written submissions from the parties on costs, in particular why indemnity costs should not be awarded to the plaintiff against the defendant.

3.  Having now received the written submissions of the parties on costs and having read those submissions, this is now my ruling on costs in this matter.

4.  This decision has therefore to be read in conjunction with my earlier written judgment dated 25 November 2011.

Applicable principles re indemnity costs

5.  Order 62, rule 28(3) of the Rules of the High Court provides that the Court may “in any case in which it thinks fit to do so”, order that costs payable by a party shall be taxed on the common fund or on the indemnity basis.

6.  This rule has been construed by these courts in a number of cases to the effect that the discretion of the court is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be “appropriate”.

7.  In that respect, the circumstances in which indemnity costs might be made were not restricted to circumstances of misconduct or those involving contumelious or unreasonable conduct.

8.  The conduct of a litigant is a relevant factor to be taken into account, particularly where such conduct leads to substantial and unnecessary increase in costs.  Conduct which is unreasonable, although falling short of misconduct, can justify an order for indemnity costs.

Application of the above principles to the present case

9.  The plaintiff was effectively forced to bring this litigation to recover the 50 shares of Karpex which the plaintiff had transferred to the defendant to hold on trust for him due to the refusal of the defendant to return those 50 shares of Karpex when asked for by the plaintiff back in 2007.

10.  In so doing, the defendant had totally undermined the trust which the plaintiff had placed in the defendant when the plaintiff sought to entrust the defendant with the 50 shares of Karpex as a trustee.

11.  The refusal of the defendant to return the 50 shares of Karpex to the plaintiff was premised on the flimsiest of defence which was pleaded in the Defence to be that the transfer of those 50 shares of Karpex to the defendant was by way of a “genuine commercial transaction” and not by way of the defendant being a trustee of those shares for the plaintiff.  At the same time, there was no pleaded case by the defendant in his Defence as to what was the consideration for that “genuine commercial transaction”.

12.  Notwithstanding that the absence of any pleaded case on consideration must be fatal to the pleaded defence, the defendant chose to continue to dispute the plaintiff’s claim all the way up to trial.

13.  That the defendant was allowed to proceed to trial was on the basis that at the Pre-trial Review, counsel for the defendant had assured the court that steps would be taken to amend the Defence to plead consideration.

14.  This however was not done even when the trial started.  The only explanation given by counsel for the defendant for failing to amend the Defence to plead consideration was that he was faced with an “insurmountable difficulty” but with no further explanation due to his inability to disclose privileged matters to the court.

15.  In the witness box, the defendant had concocted up a number of lies in a vain attempt to bolster up a non-existent defence.  Needless to say, the defendant’s evidence was totally disbelieved by the court.

16.  At the end of the day, counsel for the defendant was relegated, in his final submission, to argue that the evidence given by the plaintiff was not believable, and on that basis to ask the court to dismiss the plaintiff’s claim.  This was due to the fact that defence counsel fully realized that in the absence of any pleading of consideration, no positive defence had been put up or pleaded by the defendant.

17.  The long and short of this is that the defendant, by his conduct where he had no properly pleaded defence, had managed to hold out returning the 50 shares in Karpex to the plaintiff from 2007 (when the defendant was asked for their return by the plaintiff) until judgment was given in this matter.

18.  In so doing, the plaintiff was put to the unnecessary expenses of having to go through a full trial in the High Court which had been set for five days but ultimately took only three days where both counsel and solicitors had to be engaged and yet no proper defence had been put forward by the defendant.

19.  This kind of conduct on the part of the defendant is the kind of conduct in respect of which I have no hesitation in coming to the view that it would be “appropriate” to award costs on an indemnity basis.

20.  Accordingly, there will be a costs order that the defendant is to pay the plaintiff the plaintiff’s costs of the action, to be taxed on an indemnity basis if not agreed.