Case Detail

HCA 597/2015

[2023] HKCFI 3009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 597 OF 2015

________________________

BETWEEN

	CHAN CHUN CHUEN (陳振聰)	Plaintiff
	and
	KAO, LEE & YIP (a firm)	Defendant

________________________

Before:

Deputy High Court Judge Anson Wong, SC in Chambers

Date of Hearing:	7 November 2023
Date of Decision:	7 December 2023

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D E C I S I O N

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A. Introduction

1. This is the hearing of the Summons dated 28 June 2023 taken out by the Defendant (the “Summons”).

2. By the Summons, the Defendant applies for wasted costs order in respect of its costs of this action against the former legal representatives of the Plaintiff (the “Respondents”).

3. The Respondents can be grouped into two camps: The first camp is Messrs Cheung & Liu and the relevant handling solicitors at the time were Mr Cheung Wai Keung William and Mr Chan Yiu Pun Jimmy (the “C&L Camp”); and the second camp is Messrs. Bough & Co and the relevant handling solicitors at the time were Mr Bough Anthony Michael and Ms Chan Yuen Wah Kitty (the “B&C Camp”).

4. At the hearing, the Defendant was represented by Mr Justin Lam and Mr Billy Liu, the C&L Camp was represented by Mr Ambrose Ho SC leading Mr Albert Chan, and the B&C Camp was represented by Ms Elizabeth Cheung and Mr Edward Tsui.

5. This action was commenced on 23 March 2015 by C&L Camp on behalf of the Plaintiff. C&L Camp acted as the Plaintiff’s solicitors in this action for two periods of time: the first period was between 23 March 2015 and 23 December 2015 and the second period was between 20 January 2016 and 22 December 2016. B&C Camp also acted in that capacity for two periods of time: the first period was between 24 December 2015 and 19 January 2016 and the second period was between 23 December 2016 and 19 August 2021.

6. On 12 August 2021, the Plaintiff was adjudged bankrupt in HCB 6563/2020. Upon the Defendant’s application made on 11 August 2022, this action was dismissed on 9 September 2022 by a Master “on the basis that the Joint and Several Trustees of the property of [the Plaintiff] will not adopt the present proceedings”.

B. The Claim in this Action and the Procedural History

7. In this action, the Plaintiff claims against the Defendant for damages / equitable compensation for breach of contract, breach of duty of care in tort, and/or breach of fiduciary duty. The Plaintiff’s case is that in breach of its duties, the Defendant failed to forward to him some property tax and profit tax assessments sent to the Defendant’s office (the “Tax Assessments”), as a result of which the Plaintiff was deprived of the opportunity to raise his objection against those Tax Assessments.

8. In relation to his claim for breach of contract, at the initial stage of this action, the Plaintiff alleged that an agreement was orally concluded in or around mid-1993, or was to be inferred from conduct between the parties since mid-1993, that the Defendant would bring to the Plaintiff’s notice those documents sent to the Plaintiff at the Defendant’s address.

9. For the reasons explained in my decision handed down on 12 October 2017 (the “1^st Decision”), I ordered that the plea there was an oral agreement concluded in or around mid-1993 be struck out as an abuse of process.

10. In simplest terms, I took the view that it is abuse of process for the Plaintiff to advance a case that there was the alleged oral agreement as such a case is “fundamentally inconsistent with and diametrically opposite to” the position adopted by the Plaintiff in HCAL 76/2010 (the “JR Proceedings”) in which he sought judicial review of the decision of the Commissioner of Inland Revenue in refusing granting extension of time for him to object to the Tax Assessments.

11. That said, I did emphasise (at §30(3) of my 1^st Decision) that what constitutes an abuse of process may vary with circumstances of each case. Thus, in deciding to strike out the plea of the alleged oral agreement, I (at §§67-76 of my 1^st Decision) examined the Plaintiff’s explanation for the inconsistency and concluded that such explanation is implausible and unsatisfactory such that it is an abuse of process for the Plaintiff to advance and rely on the alleged oral agreement in this action.

12. Later on, the Defendant sought leave to appeal against my 1^st Decision. In the application for leave to appeal, the Defendant sought to expand its striking out application to cover the Plaintiff’s case of “inferred agreement”.

13. For the reasons explained in my decision handed down on 27 August 2018 (the “2^nd Decision”), I refused to grant leave to appeal to the Defendant. I held that it was not open to the Defendant to seek an order striking out the Plaintiff’s case of “inferred agreement” since it had not been the subject of challenge in the affirmation in support of the striking out application as well as at the hearing of the application. I further observed (at §10 of my 2^nd Decision) that it was right that the Defendant’s Senior Counsel did not seek to strike out the plea of “inferred agreement” in view of the fact that the Plaintiff did make reference in the JR Proceedings to an “informal arrangement” whereby the Defendant would contact the Plaintiff’s agent when they received documents sent to the Defendant’s office for the Plaintiff’s attention.

14. The Defendant renewed its application for leave to appeal to the Court of Appeal. By its decision dated 15 February 2019 (the “CA Decision”), the Court of Appeal refused the Defendant’s application.

15. In the CA Decision, the Court of Appeal agreed (at §12 of the CA Decision) that it was not open to the Defendant to seek to strike out the Plaintiff’s case of “inferred agreement” in light of the evidence and argument advanced by the Defendant in the court below. More importantly, the Court of Appeal (at §§14-15 of the CA Decision) further held that there is no merit in the Defendant’s attempt to strike out the case of “inferred agreement” in light of reference to the “informal arrangement” in the JR Application.

16. On 13 May 2020, the Defendant obtained leave to amend its Defence[1]. For the present purposes, it is only necessary to note that one of the amendments made by the Defendant was to answer the Plaintiff’s claim for damages pleaded at §25 of his original Statement of Claim, which remained unchanged in his Amended Statement of Claim dated 30 July 2019. Under that paragraph, the Plaintiff claimed against the Defendant for 3 heads of losses. One head pleaded at §25.1 is that as a result of the Defendant’s breach of duties, the Plaintiff lost the opportunity to object to the profits tax assessments. In answer to this particular head of loss, the amendment introduced by the Defendant (at §17 of the Amended Defence) was that the Plaintiff did carry on business by providing Fung Shui services as so found by Lam J (as he then was) and the Court of Appeal in an earlier probate action involving the Plaintiff, namely HCAP 8/2007 and CACV 101/2010 (the “Probate Proceedings”).

17. Before this action was dismissed on 9 September 2022, this action had not progressed beyond disclosure of documents. No witness statements had yet been exchanged between the parties. Apart from the Defendant’s limited success in striking out part of the Statement of Claim, there had not been any determination of merits on any other issues of this action by the Court.

C. Considerations for First Stage Hearing

18. This is the first stage hearing of the Defendant’s application for wasted costs order against the Respondents.

19. Pursuant to O.62 r.8B(1)(a) of the Rules of the High Court (“RHC”), at the first stage, the Court must be satisfied that:-

(1) It has before it evidence or other material which, if unanswered, would be likely to lead to a wasted costs order being made; and
(2) The wasted costs proceedings are justified notwithstanding the likely costs involved.

20. In relation to the approach of the Court at the first stage, Li CJ in Ma So So v Chin Yuk Lun (2004) 7 HKCFAR 300 had the following observations:-

“[15] But the court’s discretion also operates at an earlier stage. Initially, the court is invited by the applicant to call on the solicitor to show cause as required by O 62 r 8(2). The court should not proceed automatically. It has a discretion whether to proceed further and may decline to do so: Ridehalgh v Horsefield [1994] Ch 205 at p.239D.
[16] In exercising its discretion at this first stage, the court has to take into account the strength of the prima facie case shown by the applicant. Obviously, the stronger the prima facie case shown, the greater is the inclination to proceed. But a most important matter the court has to consider is the proportionality of the exercise. The rule enables an aggrieved party to obtain compensation from the solicitor concerned for costs incurred or wasted. The court should compare (i) the costs likely to be incurred in litigating the application under the rule and (ii) the amount of the costs sought. The likely costs to be incurred in litigating the application would depend on many matters including the nature of the allegations, the extent to which there are undisputed facts and the requirements of procedural fairness (see para 22 below). If such costs are likely to be relatively high compared to the amount of costs sought, the court should give this matter great weight and in an appropriate case, it would be a proper exercise of discretion to decide not to proceed further. This would be so whether or not the applicant has a separate cause of action against the solicitor in respect of the conduct in question.
[17] The case of Re Freudiana Holdings Ltd, (unrep, The Times, 4 December 1995) provides an extreme example of the court exercising its discretion at the first stage not to proceed further. There, an application for wasted costs required a full scale relitigation of the issues in the original trial before another judge as the trial judge had disqualified himself having regard to the findings he had made. The judge’s decision not to proceed further was affirmed by the Court of Appeal.” (emphasis added)

21. Thus, the main issues for this Court to consider for the purpose of exercising its discretion at this stage are: (1) whether a prima facie case for wasted costs order is made out and, if so, the strength of such a case; and (2) whether it is proportionate for the matter to proceed to the second stage.

22. In doing so, this Court needs to bear in mind that the jurisdiction under the rule is “compensatory” and that “any order made is directed towards compensating the party concerned … for the costs incurred or wasted as a result of the solicitor’s conduct”: see Ma So So (supra) at §7. Further, the jurisdiction is a “summary jurisdiction” and “should be strictly confined to questions which are apt for summary determination”: see Ma So So(supra) at §8.

23. In exercising its discretion, this Court should approach the task with caution bearing in mind that there is tension between two important public interests, namely (1) that, on one hand, legal representatives should not be deterred from pursuing their clients’ interests for fear of incurring personal liability for costs to their clients’ opponents; and (2) that, on the other hand, litigants should not be financially prejudiced by unjustifiable litigation conduct of the legal representatives of their opponents: see Chiu Sui Ching v Cheng Kwai Hung[2023] HKCFI 1417per Marlene Ng J at §39.

24. Referring to the tension between these two important public interests, Sir Thomas Bingham MR (as he then was) in Ridehalgh v Horsefield [1994] Ch 205 (CA) at 226B-C warned that wasted costs orders “should not became a back-door means of recovering costs not otherwise recoverable against a legally-aided or impoverished litigant”.

D. Has a Prima Facie Case been Made Out?

D1. TheDefendant’s Complaints and the ApplicablePrinciples

25. There is no dispute that the discretion to award a wasted costs order against a legal representative is not engaged unless there is a prima facie case that the legal representative was responsible for (1) acting improperly or without reasonable cause or (2) for undue delay or any other misconduct for default in any proceedings: see Ma So So (supra) at §6.

26. In gist, the Defendant’s complaints against the Respondents are two-fold:-

(1) First, the Defendant complains that because of the diametrical inconsistency between the plea of the alleged oral agreement and the position taken by the Plaintiff in the JR Proceedings, perjury must have been committed by the Plaintiff and that the Respondents had lent their assistance to the Plaintiff by failing to advise the Plaintiff “not to commence or continue with the Action” or “otherwise withdraw from acting in the case” or “inform the Court at an appropriate juncture”[2] (the “1^st Complaint”).
(2) Second, in relation to the alleged loss arising from the alleged deprivation of opportunity to object to the profits tax assessments, the Defendant complains that it is obvious that there were direct factual findings in the Probate Proceedings that the relevant payments related to the Fung Shui services provided by the Plaintiff and such findings run contrary to the purported ground of objection that the payments were not chargeable to profits tax. Thus, the Plaintiff’s case on the alleged loss in this action amounts to a collateral attack against the findings in the Probate Proceedings and the Respondents effectively lent assistance to the Plaintiff’s abuse of court process[3] (the “2^nd Complaint”).

27. Before addressing the 1^st and 2^nd Complaints, it is necessary to bear in mind the conduct of legal representatives that are capable of giving rise to a wasted costs order.

28. In this context, as held by Marlene Ng J in Chiu Sui Ching (supra) at §42, “improper” connotes conduct which is regarded as improper according to the consensus of professional opinion, and “unreasonable” conduct connotes conduct which is vexatious or designed to harass the other side rather than to advance the resolution of the case. Although it does not require proof of bad faith, the conduct must involve a failure on the part of the legal representative to fulfil his duty to the court and to realise his duty to aid in promoting in his own sphere the cause of justice. The conduct must be inexcusable such as to merit reproof. The test is whether the conduct amounted to a serious dereliction of duty.

29. Further, there is also no dispute that the fact legal representatives act for a party who advances a hopeless case is not itself a ground for making a wasted costs order: see Chiu Sui Ching (supra) at §100. The rationale for this was explained by Sir Thomas Bingham MR (as he then was) in Ridehalgh v Horsefield (supra)at 234C-D:-

“… Legal representatives will, of course, whether barristers or solicitors, advise client of the perceived weakness of their case and of the risk of failure. But clients are free to reject advice and insist that cases be litigated.It is rarely if ever safe for a court to assume that a hopeless case is being litigated on the advice of the lawyers involved. They are there to present the case; it is (as Samuel Johnson unforgettably pointed out) for the judge and not the lawyers to judge it.” (emphasis added)

30. Accordingly, it is not sufficient for a party seeking a wasted costs order against the legal representatives of his opponent to show that his opponent’s case is hopeless. In order to invoke the Court’s jurisdiction to make a wasted costs order, that party bears to burden to show (at the first stage, a prima facie case) that such legal representatives have committed some misconduct that justifies the Court imposing a wasted costs order against them.

D2. Analysisof the 1^st Complaint

31. The gist of the 1^st Complaint is that the Respondents lent assistance to the Plaintiff’s abuse of process by commencing or continuing the pursuit of this action against the Defendant based on the alleged oral agreement, with full knowledge that such a case is diametrically inconsistent with the Plaintiff’s case in the JR Proceedings.

32. There is dispute about the point of time when each of the Respondents became aware of the Plaintiff’s position on this matter in the JR Proceedings. I do not think it is necessary for me to deal with such dispute at this stage. This is because it would have been apparent to the Respondents when they read the original Defence filed on 11 September 2015 that the Defendant challenged the Plaintiff’s case on the basis that there was a lack of reference to the alleged agency agreement in the JR Proceedings[4]. Hence, for the present purposes, I am prepared to accept (but without deciding) that the Respondents knew at some point of time that the Plaintiff’s case on the alleged oral agreement in this action could be inconsistent with his case put forward in the JR Proceedings.

33. This in itself, however, is insufficient to show a prima facie case that the Respondents were guilty of some kind of misconduct that justifies the making of a wasted costs order against them.

34. Whilst I ruled in my 1^st Decision that it is an abuse of process for the Plaintiff to advance a case based on the alleged oral agreement in this action, I also emphasised (at §68 of my 1^st Decision) that whether there is an abuse of process depends upon whether there is any explanation for the inconsistent cases advanced in the different sets of proceedings. Having considered the Plaintiff’s explanation (at §70 of my 1^st Decision), I concluded (at §§71-73 of my 1^st Decision) that such explanation is implausible and unsatisfactory. In other words, inconsistency between different sets of proceedings per se is not an abuse of process. My conclusion that it is an abuse of process for the Plaintiff to plead and rely on the alleged oral agreement in this action is based on my rejecting his explanation for the inconsistency.

35. As noted in The Hong Kong Solicitors’ Guide to Professional Conduct^{^[5]}, “[in] general, there is no duty upon a solicitor to enquire in every case where he is instructed as to whether his client is telling the truth and it will be for the court, and not the solicitor, to assess the truth or otherwise of the client’s statement” and “if, either before or during the course of the proceedings, a client makes statements to his solicitor which are inconsistent, this is not of itself a ground for the solicitor to refuse to act further on behalf of the client” (emphasis added).

36. As astutely observed by Marlene Ng J in Chiu Sui Ching (supra) at §90, “no general obligation is imposed on the litigation solicitor to conduct pre-trial screen of his client’s case claim or defence. To require a litigation solicitor to conduct a pre-trial screen will put him in a position of conflict by making him a preliminary assessor or judge of the issue in dispute” (emphasis added).

37. Further, citing (with approval) the decision of Sir John Donaldson in Orchard v. South Eastern Electricity Board [1987] QB 565, Marlene Ng J held in Chiu Sui Ching (supra) at §91 that “although a solicitor should not assist a litigant where prosecution of a claim amounted to an abuse of process it was not his duty to attempt to assess the result of a conflict of evidence or to impose a pre-trial screen on a litigant’s claim or defence; that such a charge of misconduct against a solicitor ought not to depend on inference without direct evidence” (emphasis added).

38. In my view, the fallacy of the Defendant’s 1^st Complaint is that it ignores the fact that the striking out of the Plaintiff’s plea of the alleged oral agreement was based on this Court not accepting his explanation for the inconsistency. It is for the Court, but not for the Respondents (who acted as the Plaintiff’s solicitors), to assess whether or not the Plaintiff’s explanation ought to be accepted.

39. It does not assist the Defendant to argue that because of the inconsistency, the Plaintiff must have been guilty of perjury. Even assuming (but without deciding) that the Plaintiff must have perjured because of the inconsistency, the Respondents had no duty to judge whether the Plaintiff had perjured in the JR Proceedings, or in this action, or in both sets of proceedings. From the Respondents’ perspectives, it could well be the case that the Plaintiff is telling the truth in this action, and that there were some mistakes or miscommunications between the Plaintiff and his former legal representatives when the latter handled the JR Proceedings on his behalf.

40. In this regard, I did not lose sight of the fact that C&L Camp did represent the Plaintiff when the JR Proceedings went before the Court of Final Appeal (“CFA”) in FAMV 23/2012. However, by the time when C&L Camp was retained by the Plaintiff to handle the application for leave to appeal before the CFA, the focus of the case concerned some constitutional issues. There is no evidence of the C&L Camp being privy to the communications between the Plaintiff and his former legal representatives in the JR Proceedings on any matters concerning the existence or non-existence of the alleged oral agreement.

41. In my view, it would unjustifiably penalise the Respondents for presenting their clients’ case based on their clients’ instruction on the facts given to them in this action if they are to be held liable for costs under a wasted costs order in the circumstances.

42. In this regard, Mr Ho SC drew my attention to the decision of Jacobs J in King v Stiefel [2023] Costs LR 559. In that decision, Jacobs J observed that although Sir Thomas Bingham MR in Ridehalgh v Horsefield (supra) at 234D-F said that legal representatives should not lent assistance to proceedings which are an “abuse of process”, it does not necessarily follow that it would be improper or unreasonable for them to act in case which is liable to be held as an “abuse of process”. At §§140-141 of the decision, Jacobs J had this to say:-

“[140] … The type of “abuse of process” discussed in Cockerill J’s judgment is usually referred to as Henderson v. Henderson abuse of process; in other words, failing to argue in earlier litigation a point which could and should have been argued in the earlier litigation, and then subsequently trying to argue the same point again. I agree with the respondents’ submission that the nature of the abuse of process addressed by Cockerill J was a very different species, or kind, of abse of process from the example given by Sir Thomas Bingham MR in Ridehalgh.
[141] I also agree with their submission that it is not improper, unreasonable or negligent for a legal adviser to act for a client in a case in which a lawyer realises might be held to be an abuse of process, in the Henderson v Henderson sense. Otherwise, parties who are defending Henderson v Henderson points might find that solicitors will not act for them, for fear of those solicitors having to pay wasted costs for having lent their assistance to an abuse of process by the court. Further, cases where Henderson v. Henderson abuse is raised can give rise to very substantial and respectable arguments, on each side, as to whether the principles in that case apply on the facts of a particular case. The fact that (as here) the judge decides that they do apply does in itself provide the basis for a wasted costs argument. Indeed, in the present case, Cockerill J recognized that there were substantial arguments relating to abuse of process, in the Henderson sense…” (emphasis added).

43. Although Jacobs J’s observation was made in the context of a case involving Henderson v Henderson abuse[6], his reasoning in my view is also applicable to other forms of “abuse of process” the determination of which require the Court to weigh various factors and balance the interests of the litigants before it as well as the other interests involved in the administration of justice. In my view, the specie of “abuse of process” involved in my decision to strike out the Plaintiff’s plea of the alleged oral agreement is one of such forms of “abuse of process”.

44. Thus, in order to make out a prima facie case for wasted costs order against the Respondent, it is simply insufficient for the Defendant to point out to the fact that the Respondents were aware of the Plaintiff’s position in the JR Proceedings at some stage, and that the Plaintiff’s plea of the alleged oral agreement was struck out as an abuse of process as a result of such position previously taken by the Plaintiff. The fact that the Plaintiff’s case was only (partially) struck out by me after some serious arguments demonstrates that, short of direct evidence of misconduct, the Respondents should not be held liable for any wasted costs order.

45. It follows from the above analysis that I must reject Mr Lam’s one-step-further argument that the Plaintiff’s position taken in the JR Proceedings “also renders [his] alternative pleaded case of inferred agreement wholly untenable, as any inferred agreement by conduct cannot be established irrespective the objective circumstances if the proponent subjectively knew that there was no agreement”[7].

46. Further, I would also respectfully adopt what was said by the Court of Appeal in the CA Decision in rejecting the Defendant’s attempt to expand the scope of the striking out to cover the Plaintiff’s plea of “inferred agreement”. At §15 of the CA Decision, Kwan JA (as she then was) held that:-

“[15] Mr Lam submitted that the Informal Agreement cannot amount to an agreement as pleaded because the plaintiff is bound by his position in the JR Application that there was “no retainer”. We do not think it is plain and obvious, as a matter of law, an assertion that there was no retainer must mean that there was no agreement of any kind, notwithstanding the reference to the Informal Arrangement (which was supported by evidence) in the JR Application. Besides, as rightly pointed out by Ms Po Wing Kay, the existence or lack of an agreement between the plaintiff and the defendant was just not the focus of the JR Application. The plaintiff’s position was quite simply that the Informal Arrangement did not result in his receiving the notices of tax assessment. We think there is much to be said for Ms Po’s submission (and reject Mr Lam’s submission to the contrary) it was not argued by the plaintiff in the JR Application that the Informal Arrangement did not amount to any agreement.” (emphasis added)

47. For the above reasons, I am not satisfied that the Defendant has made out a prima face case against the Respondents based on the 1^st Complaint.

D3. Analysis of the 2^nd Complaint

48. As to the 2^nd Complaint, the Defendant’s case is that there were direct findings in the Probate Proceedings that the money received by the Plaintiff related to his Fung Shui services, and that such findings run contrary to the alleged ground of objection, which the Plaintiff said he could have raised but for the alleged breach of duties on the part of the Defendant. Thus, the Defendant argues that the head of loss pleaded by the Plaintiff at §25.1 of the original Statement of Claim, which is maintained in the Amended Defence, is not only hopeless, but also a collateral attack of the findings made in the Probate Proceedings.

49. My first observation is that in the original Defence, the Defendant in answer to this head of loss did not make any reference to those factual findings made in the Probate Proceedings. Indeed, such reference was only added by the Defendant when it amended its Defence almost 5 years later in May 2020. Thus, it would not be unfair to say that the point that the Plaintiff’s case on this head of loss being contrary to the findings made in the Probate Proceedings and amounting to an abusive collateral attack of the same is not an obvious point to take. This factor militates against the Defendant’s case that the summary jurisdiction to award wasted costs order should be invoked against the Respondent.

50. Second, as pointed by both Mr Ho SC and Ms Cheung in their submissions, the Defendant in any event had never sought to strike out this head of loss claimed by the Plaintiff on the basis that such a claim would amount to an abusive collateral attack.

51. Ms Cheung brought my attention to the decision of DHCJ Kenneth Wong in Yap Michael v. Lai Yip Dyeing Factory Ltd [2023] 3 HKLRD 1013 in which the learned deputy judge held (at §§11-12) that the party seeking a wasted costs order against his opponent’s legal advisers should not be allowed to pursue such an order on the basis that his opponent’s case is liable to be struck out if he himself has not previously sought to strike out his opponent’s case summarily by way of summary judgment and/or striking out applications.

52. Even though I have some hesitation to go so far to say that an application for wasted costs order against the opponent’s legal advisers on the basis that the opponent’s case is liable to be struck out must always preceded by a successful striking out application, I agree that what was said by DHCJ Kenneth Wong in Yap Michael (supra) must be generally correct. In the present case, I cannot see why I should invoke the summary jurisdiction to allow the Defendant’s application for wasted costs order to proceed with when the Defendant, having raised the point in its Amended Defence, chose not to make any striking out application.

53. In this regard, I note that the Defendant did not offer any explanation for not attempting to strike out the Plaintiff’s claim for this particular head of loss, other than simply stating that there is no such requirement[8]. In my view, the fact that the Defendant failed to offer any credible explanation for not attempting to strike out militates strongly against its suggestion that the Plaintiff’s claim is clearly liable to be struck out and that the fault of his legal advisers are so obvious and clear that warrants this Court exercising its summary jurisdiction against them.

54. Third, in his oral submissions, Mr Lam fairly accepted that before this Court can make any wasted costs order against the Respondent, it must be satisfied in the first place that this particular head of loss claimed by the Plaintiff amounts to a collateral attack.

55. In this regard, both Mr Ho SC and Ms Cheung argued that there is no collateral attack. They emphasised that the main issues in the Probate Proceedings related to the authenticity and validity of the alleged will sought to be propounded by the Plaintiff in respect of the estate of the late Nina Wang (“Wang”)[9]. The observations or findings made by the Court that Wang made the relevant payments to the Plaintiff in respect of the Fung Shui activities carried out by him are collateral, but not fundamental, issues determined in the Probate Proceedings.

56. Mr Ho SC drew my attention to the passages at §§8.01 and 8.23 of Spencer Bower and Handley: Res Judicata (5^th Ed) and at §59 of the recent decision of Au Yeung J in Chu Kong v. Lau Wing Yan & Ors[2023] HKCFI 2703 to support the proposition that the doctrine of issue estoppel applies only to fundamental (as opposed to collateral) issues determined in an earlier proceeding which formed the basis of the judgment, but not to evidentiary facts found in the course of determining the affirmation or negative effect of an issue. If there is a distinction between fundamental issue and collateral issue in the application of the doctrine of issue estoppel, the same distinction should be applicable to the doctrine of collateral attack.

57. Mr Ho SC, as well as Ms Cheung, also stressed that the factual findings made in the Probate Proceedings were made for the purposes of determination the issues concerning the authenticity and validity of the alleged will sought to be propounded by the Plaintiff, and that it could be different from the questions that one has to look into for the purpose of deciding whether the payments received by the Plaintiff are chargeable to profits tax.

58. As emphasised by the Court of Appeal in the recent decision of Lo Kai Shui v. HSBC International Trustee Limited & Ors[2023] HKCA 983 (at §117): “It is not in every instance in which a collateral attack is mounted on a final decision that the subsequent proceedings would be regarded as an abuse of process. And not all relitigation constitutes a collateral attack”. In China North Industries Investment Ltd v Chum [2010] 5 HKLRD 1, the Court of Appeal (at §§52-54) held that the burden of establishing an abusive collateral attack rests on the party who relies on the earlier decision, and the power of the court to strike out based on such abuse of process requires “a scrupulous examination of all the circumstances”.

59. For the present purposes, it is not necessary for me to decide whether or not the head of loss in question claimed by the Plaintiff amounts to an abusive collateral attack of the factual findings made in the Probate Proceedings. What I can say at this stage is that I can see some serious arguments that may be advanced on behalf of the Plaintiff to defend an application to strike out had such application been made by the Defendant. It is far from plain and obvious that it is an abuse of process for the Plaintiff to advance a claim for such loss.

60. Applying the observations of Jacobs J in King v Stiefel (supra)as set out in paragraph 42 above, I am of the view that even assuming that the Respondents appreciated that the Plaintiff’s claim for loss under this head might be liable to be struck out, there is no basis to suggest that the Respondents were guilty of improper or unreasonable or any other misconduct warranting an application for wasted costs order against them.

61. For the above reasons, I am also not satisfied that the Defendant has made out a prima face case against the Respondents based on the 2^nd Complaint.

E. Is a Wasted Costs Order Proportionate?

62. In light of my conclusion that the Defendant fails to make out a prima facie case against the Respondent based on the 1^st and/or 2^nd Complaints. It appears to me that I should exercise my discretion against allowing the Defendant to take this application to the next stage.

63. That said, out of abundance of caution, I would consider the question of proportionality on the assumption (which is contrary to my conclusion) that the Defendant has made out a prima facie case for wasted costs order.

64. The major consideration, as stated at §9 of Ma So So (supra), is to “compare (i) the costs likely to be incurred in litigating the application under the rule and (ii) the amount of the costs sought”.

65. As to the amount of costs sought:-

(1)  This Court ascertained from Mr Lam, who fairly confirmed to this Court that the Defendant had already received the taxed costs of its successful striking out application from the Plaintiff.  Given that the jurisdiction to make wasted costs order is “compensatory” (at §7 of Ma So So (supra)), there is no need for this Court to invoke such jurisdiction to compensate the Defendant of its costs incurred in relation to its successful application to strike out the Plaintiff’s plea of the alleged oral agreement.
(2)  With regard to the Plaintiff’s claim against the Defendant based on the alleged “inferred agreement”, the Court of Appeal made it clear at §§15-16 of the CA Decision that the “inferred agreement” claim cannot be struck out based on what was said by the Plaintiff in the JR Proceedings. Thus, I am satisfied that such a claim would have proceeded to trial but for the bankruptcy of the Plaintiff.
(3)  In this application, it is the Defendant’s position that all the costs incurred in this action are wasted and, on that basis, the Defendant claims that the “wasted costs” are HK$2,366,851.68 (being legal costs of PC Woo acting as the Defendant’s solicitors in this action) and HK$6,043,635 (being the Defendant’s own internal legal costs), totalling about HK$8.3 million[10].
(4)  The upshot of my conclusion that the Plaintiff’s “inferred agreement” claim would have proceeded to trial is that at least a substantial part of the costs said to have been incurred by the Defendant in this action cannot be said to be “wasted costs” arising from the alleged misconduct on the part of the Respondents.
(5)  In this regard, Mr Ho SC drew my attention to the fact that despite the observation made by the C&L Camp in its affirmation in opposition of the bills or statements of costs supporting the Defendant’s claim for the wasted costs are relevant for the first stage enquiry[11], the Defendant refused to produce the same[12]. Mr Ho SC then brought my attention to the decision of Kwan J (as she then was) in Kwok Chin Wing v Kao, Lee & Yip,HCCW 743/2002, 18 July 2007 (unrep) in which the learned judge held (at §§37-38) that “the onus ison the applicant to satisfy the court at the first stage hearing the costs likely to be incurred in litigating the application are not likely to be out of proportion with the amount of the costs that are at stake” and that it is incumbent upon the applicant to provide “a credible figure of the amount of wasted costs likely to be at stake”.
(6)  In light of my conclusion that a substantial part of the costs cannot be “wasted costs”, the Defendant’s refusal to produce statements of costs to show a breakdown of its incurred costs prevent this Court from making an informed view of the amount of wasted costs likely to be at stake.
(7)  Furthermore, there is a dispute between Mr Ho SC and Mr Lam as to whether, having instructed PC Woo and counsel (both leading and junior) to represent and advise it in this action, the Defendant is entitled to claim its internal legal costs. Mr Ho SC referred to the decision of HKSAR v. Chan Pak Lin Perry [2020] 1 HKLRD 628 (at §§25-26) to support his argument that the Defendant is not entitled to such costs; whereas Mr Lam referred to the decision of Ultraframe (UK) Ltd v Eurocell Building Plastics Ltd & Anor [2006] EWHC 90069 (Costs) (at §43) to support his argument that there is nothing in principle to prohibit recovery of costs by a litigant of its in-house staff even where solicitors are retained by such litigant.
(8)  For the present purposes, I do not think it is necessary for me to decide on this question of principle. Even assuming (but without deciding) that Mr Lam’s submission is correct, it is clear from the decision of Ultraframe (UK) Ltd (supra) at §§43(ii)-(iii) that the Defendant is not entitled to such costs which represent duplication of works done by its legal advisers.
(9)  It is unrealistic to assume that there was no duplication of works at all. In fact, there is no evidence to support such assumption.  In the absence of any evidence from the Defendant of any breakdown of the costs incurred by PC Woo (as its solicitors on record) and the costs incurred by it internally, this Court cannot form any view on the extent of duplication of works (if any) between PC Woo and the Defendant.
(10)  For the above reasons, I am of the view that the Defendant fails to discharge its onus to provide this Court with a credible figure of the amount of wasted costs likely to be at stake.

66. As to the costs likely to be incurred in litigating the application under the rule:-

(1)  It is presently unclear as to what would happen at the second stage hearing.
(2)  Whilst Mr Lam claimed that he would not need to cross-examine the deponents of the Respondents insofar as they only rely on the existing evidence, he however also made it clear that he would need to reconsider the position if the Respondents are to file further evidence for the second stage hearing.  On the other hand, both Mr Ho SC and Ms Cheung informed this Court that they might have further evidence if this Court is to allow the matter to go to the second stage.  Thus, I cannot at the moment exclude the possibility that the matter can be turned into a trial involving cross-examination of witness(es), particularly when there are disputes as to the knowledge and intent on the part of the Respondents.
(3)  Further, it appears to me that if the matter is allowed to proceed to the second stage, there would be serious arguments on the question as to whether the Plaintiff’s first head of claim for loss amounts to an abusive collateral attack of the factual findings made in the Probate Proceedings. Plainly, such arguments would require the judge presiding over the second stage hearing to delve into the background of the Probate Proceedings and to make assessment as to whether the Plaintiff’s claim for loss would in all the circumstances constitute an abuse of process.
(4)  Furthermore, I can also envisage that there would be substantial arguments on issues of quantum such as (i) whether and, if so, which part of the costs incurred by the Defendant were caused by the misconduct of the Respondents; (ii) whether the Defendant having retained lawyers to advise and act on its behalf in this action is as a matter of law entitled to seek its internal costs and, if so, whether and to what extent the internal costs claimed by the Defendant overlap with those costs incurred by its legal advisers.  In relation to these issues, Mr Ho SC submitted that it would be for this Court (as opposed to a taxing master) to decide at the second stage hearing the exact amount of costs that should be awarded to the Defendant in the event of this Court considering it appropriate to make a wasted costs order.  Whilst I do not think it would be necessary for me to decide at this stage the exact scope of issues that have to be determined at the second stage hearing, I must bear in mind the possibility that there are serious disputes on the issues of quantum that may to be resolved at that stage.
(5)  In his written submissions[13], Mr Ho SC estimated that the second stage hearing would be nothing short of a full trial of no less than 8 days.  I tend to think this estimate is on the high side.  However, given the fluidity of the current state of affairs, I consider that it would not be unrealistic for me to estimate that the second stage hearing, if there is one, would take at least 3 to 4 days.  In fact, even for this first stage hearing, the parties had already used a whole hearing day in their oral submissions.  Thus, it appears strongly to me that the costs likely to be incurred in litigating the application are very substantial, and that it is not unlikely that such costs may exceed the amount of wasted costs that this Court may ultimately award in favour of the Defendant.

67. In light of the above matters, even if (contrary to my conclusion) that the Defendant has made out a prima facie case in respect of its 1^st and 2^nd Complaints, I take the view that the Defendant has failed to discharge its onus to satisfy this Court that it is proportionate to allow this application to proceed to the second stage hearing.

F. Disposition and Costs

68. In light of my views set out above, I do not consider it necessary for me to resolve the dispute as to whether there was undue delay on the part of the Defendant to take out this application for wasted costs order. Even assuming (but without deciding) that the Defendant took out the Summons without any undue delay, I would in any event exercise my discretion against allowing the matter to proceed further to the second stage.

69. I would for the reasons explained above dismiss the Defendant’s Summons.

70. As far as costs are concerned, I would make a costs order nisi that the costs of the Summons (including any reserved costs) be paid by the Defendant to the C&L Camp and B&C Camp with certificate for two counsel, to be taxed if not agreed.

71. I wish to take this opportunity to thank all counsel for their most helpful submissions.

	(Anson Wong, SC)
	Deputy High Court Judge

Mr Justin Lam and Mr Billy Liu, instructed by Kao, Lee & Yip, for the Defendant

Mr Ambrose Ho SC leading Mr Albert Chan instructed by Cheung & Liu, for C&L Camp (ie Cheung & Liu, Mr Cheung Wai Keung William and Mr Chan Yiu Pun Jimmy)

Ms Elizabeth Cheung and Mr Edward Tsui, for B&C Camp (ie Bough & Co (ceased practice), Mr Bough Anthony Michael and Ms Chan Yuen Wah Kitty)

[1] The Plaintiff’s appeal against the order granting leave to the Defendant to amend its Defence was dismissed by Coleman J for those reasons set out in his Reasons for Decision handed down on 19 March 2021.

[2] Defendant’s Skeleton Argument, §35

[3] Defendant’s Skeleton Argument, §36

[4] Defence, §8.

[5] Principle 10.03, Commentaries 2 and 4.

[6] In Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72, Ma CJ (at §83(5)) explained the doctrine of Henderson v Henderson abuse and stressed that in examine such a kind of abuse, the court is required to assess a number of factors.

[7] Defendant’s Skeleton Argument §35(f)

[8] Yeung’s 10^th Affirmation, §10

[9] HCAP 8/2007, 2 February 2010, per Lam J (as he then was) at §11

[10] Yeung’s 9^th Affirmation §34

[11] Chan’s Affirmation §74

[12] Yeung’s 10^th Affirmation §§15, 28

[13] C&L Camp’s Skeleton Argument, §139

HCA 597/2015

[2023] HKCFI 2372

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 597 OF 2015

________________________

BETWEEN
	CHAN CHUN CHUEN (陳振聰)	Plaintiff
	and
	KAO, LEE & YIP (a firm)	Defendant

________________________

Before:

Hon Au-Yeung J in Chambers

Closing Date for Submission:	9 August 2023
Date of Decision:	19 September 2023

________________________

D E C I S I O N

________________________

A. Introduction

1. KLY filed a Summons on 28 June 2023 to seek wasted costs for the action against 6 former solicitors / solicitor firms (“Solicitors”) who previously acted for the Plaintiff. The Solicitors are divided into those of Cheung & Liu (“C&L Camp”) and those of Bough & Co (“Bough and Chan Camp”).

2. The issue is which judge should hear the application. KLY suggests that the matter be listed before any judge. The 2 Camps suggest that DHCJ Anson Wong SC who heard a strike-out application should deal with the Summons; alternatively Coleman J, who dealt with an appeal against a master’s decision on amendment to the defence should do so.

B. Procedural history

3. The Plaintiff sued the Defendant (“KLY”) for breach of Agency Agreement and/or duty of care and/or fiduciary duty. It is alleged that KLY failed to bring to the notice of the Plaintiff the existence of tax assessment documents issued by the IRD as a result of which the Plaintiff’s application to object to the tax assessment was refused and the Plaintiff suffered loss and damage in the sum of HK$300 million.

4. On KLY’s application, DHCJ Anson Wong SC struck out §4 of the statement of claim which alleged an oral agreement in or around mid‑1993. The basis was abuse of process, in that Mr Chan had adopted a position which was fundamentally inconsistent with and diametrically opposite to the position adopted by him previously in HCAL 76/2010 (“JR Proceedings”), ie that there was no retainer between him and KLY for the service of tax assessment documents and that KLY’s address for service of the tax documents by the IRD was ineffective. See decision of DHCJ Anson Wong SC dated 12 October 2017, at §§3 and 81 (“the 2017 Decision”).

5. DHCJ Anson Wong SC subsequently dealt with KLY’s application for leave to appeal (which was refused) and to vary the costs order nisi on 27 August 2018: [2018] HKCFI 1933.

6. KLY’s renewed application for leave to appeal to the Court of Appeal was dismissed without an oral hearing: [2019] HKCA 170.

7. By a summons dated 30 September 2019, KLY obtained leave from a master to amend its defence. The Plaintiff’s appeal against that decision was dismissed by Coleman J on 19 March 2021: [2021] HKCFI 716.

8. Mr Chan was adjudged bankrupt on 12 August 2021. On 9 September 2022, pursuant to KLY’s application, Master Ho ordered that this action be dismissed as the Trustees in Bankruptcy of the Plaintiff would not adopt the present action, with costs to be paid by the Plaintiff to KLY.

9. KLY then took out the present Summons on 28 June 2023 for costs of the entire action. The Summons set out the particulars of the application:

(1)  §3 of the summons refers to the 2017 Decision itself;
(2)  §§4-5 alleges that because of the inconsistency in the Plaintiff’s case, the Plaintiff must have committed perjury. That was to the knowledge of the Plaintiff’s former solicitors, who should, as KLY alleges, have withdrawn from acting for the Plaintiff and advised him not to commence or continue the present action;
(3)  §8 further alleges that the Plaintiff’s former solicitors had (i) knowingly advised, recommended, or lent their assistance to proceedings which were premised on a false and/or diametrically inconsistent and/or hopeless claim; and (ii) deliberately suppressed discovery of documents relating to HCAL 76/2010; and
(4)  §9 KLY asserts that all costs of the present action were wasted costs, subject to costs orders already made by the Court.

C. Legal principles

10. Order 62, rule 8A, RHC provides that an application for a wasted costs order shall be heard by the judge or master who conducted the proceedings to which the order relates.

11. PD 14.5, §6 also states that the application should usually be heard by the judge or master who dealt with the proceedings in which the wasted costs are alleged to have been incurred.

12. PD 14.5, §9 provides that the application should usually only be made at the conclusion of the proceedings before the judge or master who tried the matter.

13. These provisions make clear that wasted costs order are applied for only after the proceedings are substantively and conclusively determined by a judge and the application must go before him. The rationale is obvious. That judge would have reviewed all the evidence of the case, is familiar with the background and the litigation conduct of a party, so as to enable the wasted costs application to be conducted summarily.

14. Chiu Sui Ching v Cheng Kwai Hung trading as Hang Nagi Works[2023] HKCFI 1417, §10, Marlene Ng J stated as follows: -

“It has been said that ‘[in] almost every case, the judge who heard the substantive application will be the right judge to deal with consequential issues as to costs, even if he made findings adverse to a party in the course of reaching his conclusion’ unless necessary exceptions, eg apparent bias, require recusal. After all, the trial judge is particularly well-placed to evaluate the evidence served in support of an application for a wasted costs order as he can rely on his own impressions, but this does not in any way reduce the burden on the applicant to demonstrate the requisite factors for a wasted costs order.”

D. Application of the legal principles

15. The Respondent Solicitors’ grounds for submitting that DHCJ Anson Wong SC will be the appropriate judge can be summarized as follows: -

(1)  §3 of the Summons itself refers to the 2017 Decision. The main basis of the wasted costs application is inextricably linked to the findings in the 2017 Decision. Coleman J’s decision to allow KLY to amend the defence did not address the same fundamental issue decided by DHCJ Anson Wong SC and merely set out his Decision. Coleman J was not required to and did not analyze the evidence and documents relevant to the stance taken by the Plaintiff (“first reason”);
(2)  The fact that DHCJ Anson Wong SC is a deputy judge and may not be available does not constitute “exceptional circumstances making it inappropriate” for him to hear the Summons. Section 10(3)(a) of the High Court Ordinance, Cap 4 empowers the Chief Justice to appoint a deputy judge for the purpose of a specified case. Any inconvenience must be subordinate to DHCJ Anson Wong SC’s “duty” to determine all applications as to costs of the action (“second reason”);
(3)  Another judge would have to start afresh without any knowledge of the underlying proceedings: §7 of PD 14.5 (“third reason”); and
(4)  KLY is forum shopping in order to get round §43 of the 2017 Decision that the Plaintiff’s plea of an agreement to be inferred by conduct was actually consistent with HCAL 76/2010. KLY had attempted this when seeking leave to appeal against the 2017 Decision from DHCJ Anson Wong SC and the Court of Appeal, but failed (“fourth reason”).

16. Alternatively, Bough and Chan Camp submits that Coleman J should deal with the wasted costs application.

17. With regard to the first reason, it is true that KLY relies heavily on the 2017 Decision. However, the Summons is not just to deal with the wasted costs of the strike-out proceedings before DHCJ Anson Wong SC but costs of the whole action. The whole action covered the following causes of action:

(1)  The alleged oral agreement that formed the subject matter of the 2017 Decision;
(2)  The Plaintiff’s claim based on an inferred agreement or one reached by conduct; as stated by Coleman J in his decision, §42 (dated 3 years after the 2017 Decision):
“But the question of whether, to what extent, and how the plaintiff’s previous statements in the JR Application would affect his claim based upon an inferred agreement or one reached by conduct was something that must be left to trial. This is what the Court of Appeal recognized to be fact sensitive.”
(3)  The alleged loss and damage of more than HK$330 million that the Plaintiff allegedly suffered. This is a matter which KLY asserts is doomed to fail from the start due to the definitive findings in the probate proceedings of Nina Kung’s estate that Mr Chan had received HK$330 million as income for providing fung shui services.

18. DHCJ Anson Wong SC only dealt with the first cause of action but not the other 2. His last involvement was in 2018. It cannot be said that he is apprised of all developments subsequent to 2018 to make it appropriate for him to handle the wasted costs application.

19. Further, DHCJ Anson Wong SC merely assumed all the facts pleaded in the statement of claim to be true in dealing with the strike-out application. He did not even hint that there was improper or unreasonable behaviour on the part of the Respondent Solicitors, unlike the case of Bahai v Rahsidan [1985] 1 WLR 1337 relied on by C&L Camp in which the trial judge did the contrary.

20. This is not a case where it can be said that one particular judge (including Coleman J) clearly conducted the proceedings to which the wasted costs order related or who had tried the case.

21. The cases cited by the C&L Camp are distinguishable in that all of them concerned wasted costs orders made after trial:

(1) Bahai involved a trial of 26 days wherein the judge heard the evidence of the plaintiff’s solicitor and expressed criticism on him on credibility. It was no surprise for the wasted costs application to be heard by the trial judge.
(2) Aaron v Shelton [2004] 3 Costs LR 488 expressly stated that “the trial judge would, of course, have heard the cross-examination, or would have considered the issue, and would be able to decide the point quickly”.

22. In the present case, the action was dismissed without a trial. The usual benefits of having a trial judge deal with a wasted costs application do not arise.

23. The second reason carries no weight having regard to my conclusion on the first. Without disrespect, I am unable to accept the Respondent Solicitors’ submissions that the proviso of “exceptional circumstances” O. 62, r. 8A(5) shall be restricted to situations where apparent bias is established, or where the death or retirement of the judge concerned renders the hearing of an application for wasted costs impossible to be placed before the same judge. Whilst a deputy judge can be re‑appointed, there are various reasons why that may not happen, including his own busy engagements as a practitioner. Mandating him to handle the wasted costs application may lead to delay in order to accommodate his/her diary. Therefore, the legal provisions in §§10-12 above should be applied with common sense in accordance with the state of judicial appointments.

24. With regard to the third reason, without disrespect, it is unrealistic to expect a deputy judge (in fact any judge) to have recollection of an interlocutory matter that occurred about 6 years before today except by reference to documents. All the facts underlying the 2017 Decision (if that is the decisive factor for this Summons) are readily ascertainable from documents. Coleman J had no difficulty referring to the 2017 Decision. Other judges would have none either. The third reason is unmeritorious.

25. With regard to the fourth reason, there is no merit in the allegation that KLY is forum shopping. This Summons is decided on matters of principle.

E. Conclusion

26. Without disrespect, I am not satisfied that it is mandatory to have DHCJ Anson Wong SC or Coleman J, deal with the wasted costs application as each of them was involved in only one interlocutory matter. This Summons could be listed before any judge.

27. I thank counsel for their assistance.

(Queeny Au-Yeung)
Judge of the Court of First Instance
High Court

Written submission by Mr Justin Lam, instructed by Kao, Lee & Yip, for the Defendant

Written submission by Mr Albert Chan, instructed by Cheung & Liu, for C & L Camp (ie Cheung & Liu, Mr Cheung Wai Keung William and Mr Chan Yiu Pun Jimmy)

Written submission by Reynolds Porter Chamberlain, for Bough and Chan Camp (ie Bough & Co. (ceased practice), Mr Bough Anthony Michael and Ms Chan Yuen Wah Kitty)

HCA 597/2015

[2021] HKCFI 716

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 597 OF 2015

________________________

BETWEEN

	CHAN CHUN CHUEN (陳振聰)	Plaintiff
	and
	KAO, LEE & YIP (a firm)	Defendant

________________________

Before: Hon Coleman J in Chambers (Open to Public)

Date of Hearing: 18 March 2021

Date of Reasons for Decision: 19 March 2021

________________________

REASONS FOR DECISION

________________________

A. Introduction

1. The plaintiff is no stranger to litigation. In this action, he brings a claim against the defendant firm of solicitors, essentially on the basis that he has been put to greater exposure to tax liabilities and penalties than would otherwise have been the case had the firm acted properly by forwarding to him the tax returns and other relevant correspondence addressed to him at or care of the firm’s address.

2. On 18 March 2021, I heard the plaintiff’s appeal – brought by Notice of Appeal dated 27 May 2020 – from the decision of Master Cruden dated 13 May 2020, by which she permitted the defendant to amend its Defence.

3. At the hearing, the plaintiff was represented by Ms Po Wing Kay and Mr Acorn Lau, and the defendant was represented by Mr Jenkin Suen SC leading Mr Justin Lam. Both sides had filed relatively full written submissions in advance of the hearing, and the hearing itself was therefore conducted with some efficiency.

4. At the end of the argument, I dismissed the appeal, and indicated that I would give later the reasons for my decision. These are my ‘Reasons for Decision’.

B. Procedural History

5. It is necessary to put the present appeal in the proper context of the procedural history of these proceedings. But, when I have done so, I agree with Ms Po that the particular point at issue in this appeal can be dealt with quite shortly.

6. The proceedings were begun by Writ dated 23 March 2015, and a Statement of Claim was filed on 16 July 2015. Following the filing of the Defence on 11 September 2015 and the Reply on 9 October 2015, the pleadings were closed.

7. By summons dated 29 April 2016, the defendant sought specific discovery from the plaintiff of all documents filed in, and records of hearings, orders and judgments and written submissions in, various court actions (together, “Tax Proceedings”) brought by the plaintiff seeking to challenge the relevant tax assessments imposed on him. The discovery application was resisted, but was eventually dealt with partly by of an undertaking and partly by an order. The plaintiff undertook to provide the updated court file indices of the Tax Proceedings and to furnish the defendant with copies of documents referred to in those inices as may then be requested. A Master ordered the plaintiff to provide the defendant with copies of the transcripts of the substantive hearings in each of the Tax Proceedings.

8. With the benefit of the materials disclosed, the defendant then applied to strike out the Statement of Claim (“SOC”). The application was by summons dated 8 May 2017, which put forward two grounds for striking out, namely that (a) the claim disclosed no reasonable cause of action against the defendant, and (b) the claim was vexatious or an abuse of process of the court. As will become apparent, and as seems to me to be for reasons obvious in the circumstances where evidence was necessarily deployed, the ‘no reasonable cause of action’ ground was not actually pursued at the hearing.

9. The thrust of the strike out application was that, in the Tax Proceedings, the plaintiff had made statements and averments and submissions which were “diametrically opposed” to the pleaded case against the defendant in this action.

10. The strike out application was heard by DHCJ Anson Wong SC, who ruled in a Decision dated 12 October 2017 (“1^st Decision”). Whilst he struck out that part of the plaintiff’s claim based upon an alleged oral agreement, he declined to strike out the remainder of the claim. I will deal with the detail of the Decision below.

11. The defendant sought leave to appeal from the 1^st Decision, first from the Deputy Judge. He refused leave to appeal by his Decision dated 27 August 2018 (“2^nd Decision”). The defendant renewed the application for leave to appeal to the Court of Appeal, which refused leave by its Judgment dated 15 February 2019 (“CA Judgment”). Again, I can deal with the detail of the 2^nd Decision and the CA Judgment below.

12. By summons dated 30 September 2019, the defendant applied to amend the Defence in the form of the draft attached to the summons. Some relatively minor amendments were not controversial, but the more substantive amendments – found in §§8, 8A and 9(aa) – were opposed by the plaintiff. The broad basis of the opposition (but, for the detail, see below) was that the proposed amendments sought to ‘re-run’ arguments already dealt with on the strike out application, so that it was an abusive ‘second bite at the cherry’.

13. The Master allowed the proposed amendments. She also made a consequent costs order. As is typical on an amendment application, the costs order separated (a) the costs of and occasioned by the amendments from (b) the costs of the argument. As to the latter, the Master made the usual order that the costs follow the event, namely that the plaintiff should pay the defendant’s costs (which she later summarily assessed, and which have been paid). However, as to the former, the Master made a less usual order that the costs of and occasioned by the amendments should be the defendant’s costs in the cause (as opposed to the more usual order that those costs be to the non-amending party).

14. As already stated, the Master’s order was made on 13 May 2020, and the matter was brought before me on the Notice of Appeal dated 27 May 2020.

C. The Proposed Amendments

15. Following the striking out of the plaintiff’s claim in so far as it was based upon an alleged oral agreement, the essential basis of the plaintiff’s SOC at §4 is that:

By an agreement between the Plaintiff and the Defendant to be inferred from conduct between the Plaintiff and the defendant (in particular via Mr. Yip Wan Tak) since around mid-1993, the parties agreed on the following terms (“Agency Agreement”): - [terms set out]

16. The plaintiff’s SOC at §§5 and 6 pleads that the defendant voluntarily assumed to act for the plaintiff, that the plaintiff had foreseeably placed trust and confidence in and relied on the defendant, and that the defendant is now estopped to deny the existence of an agency relationship.

17. The proposed amendments found in §§8, 8A and 9(aa) are as follows (as the paragraphs now read, ignoring any striking out and underlining to show the original and amendment):

8.  Further, the Plaintiff is estopped and it is contrary to the due administration of justice for the Plaintiff to rely on any alleged Agency Agreement in the light of his counsel’s submissions in the tax-related proceedings (i.e. HCAL 76/2010, CACV 113/2011 and the DCTC Action (collectively “the Tax Proceedings”)).
(a)  The Plaintiff’s Amended Notice of Application for Leave to Apply for Judicial Review in HCAL 76/2010 dated 3 May 2011 at paragraphs 56(d)(iii)-(iv) stated that “KLY had never been appointed as the Applicant’s taxation representative or agent for the purposes of the Ordinance” and “[t]here was no evidence whatsoever of a retainer subsisting between KLY and the Applicant for the service of important legal documents such as notices of tax assessment (and in fact there was no such retainer)”.
(b)  The Plaintiff’s Skeleton Argument dated 17 May 2011 in HCAL 76/2010 at paragraph 30.3 stated that “CIR had no knowledge of, or any basis whatsoever for suspecting that, any retainer subsisted between the Applicant and KLY for the service of important legal document (and indeed there was no such retainer)”.
(c)  The Plaintiff’s Senior Counsel made oral submissions to the Court at the hearing of HCAL 76/2010 that “from 2007 the professional connection with Kao, Lee & Yip had ceased, they ceased to be solicitors” and “[t]here was an informal arrangement and it did not result in the assessments that are the subject of this application being forwarded”.
(d)  The Plaintiff’s Skeleton Argument of Applicant dated 23 February 2012 in CACV 113/2011 at paragraph 26.2 stated that “CIR had no knowledge of, or any basis whatsoever for suspecting that, any retainer subsisted between the Applicant and KLY for the service of important legal document (and indeed there was no such retainer)”.
(e)  The Plaintiff’s Skeleton Argument dated 17 May 2011 in HCAL 76/2010 at paragraph 30.2 stated that “the KLY Address had obviously gone stale”.
(f)  The Addendum to the Plaintiff’s Skeleton Argument dated 24 May 2011 in HCAL 76/2010 at paragraphs 7,8 and 11 stated that “[t]here was an obvious indication that the KLY Address was stale”, “assessments sent to this were not being received by the Applicant because the address was stale” and “[b]y 2 December 2009 CIR were faced with clear evidence the KLY Address was a dud (which in fact it was)”.
(g)  The Plaintiff’s Skeleton Argument of Applicant dated 23 February 2012 in CACV 113/2011 at paragraph 31.2 stated that “a given address has been conclusively shown to be ineffective for the service of legal documents”.
8A.  There could not have been any alleged Agency Agreement:
(a)  As evidenced by the matters pleaded above, the Plaintiff in fact never had any intention to create any contractual or legal relations with the Defendant in relation to any alleged Agency Agreement.
(b)  The Defendant had no intention to create any contractual or legal relations with the Plaintiff in relation to any alleged Agency Agreement.
(c)  No consideration was given by either the Plaintiff or Defendant in relation to any alleged Agency Agreement.
(d)  No alleged Agency Agreement should be implied (or inferred) as it was not necessary and/or reasonable in the circumstances to do so.
9.  (aa)  It is specifically denied that the Plaintiff had placed trust and confidence and relied on the Defendant by reason of inter alia the Plaintiff’s own stance in the Tax Proceedings as pleaded in paragraph 8 above.

D. The 1^st Decision, 2^nd Decision and CA Judgment

18. In §3 of the 1^st Decision, the Deputy Judge noted that the only basis of the application to strike out was on the ground of abuse of process, and that the particular complaint of abuse of process was that the plaintiff in this action had adopted a position which is “fundamentally inconsistent with and diametrically opposite to” the position adopted by him in previous judicial review proceedings (“JR Application”). The JR Application was, of course, one of the Tax Proceedings. Reference can also be made to §13.

19. In §§14-16, the Deputy Judge noted that in correspondence referenced in the JR Application, the defendant confirmed that there was an “informal arrangement” whereby the defendant’s staff would contact the plaintiff’s agents when any letter was sent to the defendant’s agent for the plaintiff’s attention (“Informal Arrangement”). Hence, the position taken by the plaintiff in the JR Application was that whilst there was no retainer between the plaintiff and the defendant for the service of documents, there was the Informal Arrangement in place which unfortunately did not result in the tax assessments in question being brought to the plaintiff’s attention.

20. In §§21-40, the Deputy Judge dealt with the applicable legal principles. In §30, he specifically noted that a party who seeks to strike out a claim based on an abuse of process bears a heavy burden, and that the court will only strike out in a plain and obvious case, and that the doctrine of abuse of process is essentially a ‘fairness doctrine’. In §39, the Deputy Judge held that the ultimate question is whether, having assessed various factors and balanced competing interests, it is plain and obvious to the court that the bringing or defending of a claim is an abuse of process. He also held, at §40, that it does not matter how the abuse is described, and approved the dictum that abuse of process ‘means what it says’, being difficult to describe although ‘you know when you see it’.

21. Turning to the question of whether there was any diametric inconsistency, at §43, the Deputy Judge specifically noted that then Counsel for the defendant did not suggest that the plea in §4 of the SOC that an agreement should be inferred from conduct runs contrary to the plaintiff’s case in the JR Application. Further, the Deputy Judge thought that plainly right, as reference was in fact made to the existence of the Informal Arrangement in the JR Application. (This point was revisited in the 2^nd Decision, see below).

22. The core of the reasoning for acceding to the striking out of the plea of an oral agreement is to be found in §51. There, the Deputy Judge thought it plain that the Informal Arrangement is very different from what was alleged to be the oral agreement, and that instead of supporting the alleged oral agreement the reference to the Informal Arrangement, coupled with the positive assertion of there having been no retainer, flatly contradicted the existence of the alleged oral agreement.

23. In §§58-59, the Deputy Judge observed that, unlike his position on the existence of a retainer, the plaintiff in the JR Application did not state or assert that he placed no trust and confidence in the defendant in bringing to his attention legal or tax documents sent to the defendant’s address. Further, descriptions of the Defendant’s address as “stale” or “a dud” for the service of documents on the plaintiff were not inconsistent – I think in context he meant not necessarily inconsistent – with a case that the defendant was negligent in its handling of the plaintiff’s legal/tax documents sent to its address under the Informal Arrangement.

24. In §§60-65, the Deputy Judge rejected the argument that the underlying assumption in the JR Application was that the Informal Arrangement did not give rise to any legal relationship or legal consequences. He pointed out that the focus of the JR application was on whether the provisions of the Inland Revenue Ordinance (“IRO”) require “actual notice” of assessments to be given, where the plaintiff’s case was that he had no “actual notice” until much later, because the Informal Arrangement was ineffective in bringing the tax assessment to his “actual notice”. He said that case is not inconsistent with the plaintiff’s case that the defendant owed a common law or fiduciary duty to him under the Informal Arrangement. The issue about the statutory requirements of the IRO was very different from whether, and if so, what common law or fiduciary duties were owed by the defendant in the circumstances. So that there was no clear inconsistency. Specifically, and importantly for present purposes, at §65, the Deputy Judge left open the question whether the Informal Arrangement gave rise to any legal relationship and legal consequences as between the plaintiff and defendant.

25. In the 2^nd Decision, at §12, the Deputy Judge pointed out that even assuming a “diametrically inconsistent” case is run by the plaintiff in this action, the court had to assess various factors and balance competing interests in order to determine whether it was an abuse of process in the circumstances. He also went on to hold, at §14, that it was not then open to the defendant to strike out on the basis that the plaintiff’s case concerning the agreement inferred from conduct is “diametrically inconsistent” with his case in the JR Application so as to constitute an abuse of process.

26. In the CA Judgment, at §12, entire agreement with that last point was expressed. Further, at §15, Kwan JA (giving the judgment of the court) stated that the court did not think it is plain and obvious, as a matter of law, an assertion that there was no retainer must mean that there was no agreement of any kind, notwithstanding the reference to the Informal Arrangement in the JR Application. On the evidence from the transcript of the JR Application, Kwan JA accepted that it was not argued by the plaintiff in the JR Application that the Informal Arrangement did not amount to any agreement.

27. At §16, Kwan JA stated that whether the effect of the Informal Arrangement did or did not constitute a legally binding agreement would depend on a number of factual matters, and that could only be resolved properly after trial.

E. Applicable Principles

28. The principles applicable on applications to amend pleadings are well-settled, and need no particular reference to authority. Generally speaking, all such amendments ought to be made for the purposes of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings. Leave is readily granted to amend before trial, unless it can be demonstrated that the new claim based on the proposed amendment is bound to fail. Resistance to an amendment application constitutes, in effect, the mirror image of a strike out application.

29. Thus, as Ms Po accepts, the amendment will be permitted unless it can be demonstrated that it is bound to fail, has no real prospect of success, or raises a claim which is unsustainable in law.

30. Ms Po also refers to the well-known principles relating to res judicata and abuse of process. Ordinarily, a court will not permit a party to take a second bite at the cherry by re-litigating an issue that has already been previously decided by the court. This applies to each point or matter which properly or clearly belonged to or was part of the subject of litigation. Further, a party is ordinarily not permitted to raise in subsequent proceedings matters which that party could and should have raised in earlier proceedings.

31. In that regard, and in particular in her oral submissions, Ms Po referred to the case of Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72 at §§84-85, which state:

84. The jurisdiction to prevent claims being litigated in proceedings is almost invariably exercisable by an application to strike out. It is true that an application to strike out can be made at any time: see RSC O.18 r.19(1). However, where an application is made to strike out proceedings or any part thereof on the basis that they should not be permitted to go to trial, it is obvious that such an application should be made at the earliest possible opportunity, before the parties and the court’s resources are potentially wasted. Obviously, where a claim or defence is unsustainable as a matter of law, the timing of the application to strike out is less critical, but where a discretion (or something akin to it) exists as to whether or not a set of proceedings or any part thereof should be permitted to continue, time is important. In this latter situation, where proceedings may constitute an abuse on the basis that it would be vexatious for a court to try the case, the sooner this is dealt with the better; otherwise, the very evils sought to be avoided (the wastage of time and resources causing vexation or harassment of the other party) would continue to accumulate. The present case provides a glaring example of this.
85. In the speeches of Lord Bingham of Cornhill and Lord Millett in Johnson v Gore Wood & Co, references were made to the importance of expedition in such a situation: pp.34C-D and 61C-E. A delay in raising this point of abuse gives rise to a reasonable inference either that the relevant defendant is not really vexed at all by the second set of proceedings or has acquiesced in it. It is certainly not acceptable from the point of view of the administration of justice.

32. Reference was also made by Ms Po to the passage from Johnson v Gore Wood & Co [2002] 2 AC 1 at 30, relating to the test to be applied in determining whether an action amounts to an abuse of process:

The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.

33. Those passages identify that the test being put forward is applicable in the context of an allegation that there is an abuse of process by bringing a claim or raising a defence in later proceedings which were (or could have been) raised in earlier proceedings. This is also clear from the Ko Hon Yue case at §83(3). In such a scenario, I agree with Ms Po that the reason why such applications should be made early is because otherwise the whole purpose of making the application (if successful) would be lost: see the references to “irony” in the Ko Hon Yue case at §87.

34. But what is said to amount to an abuse of process comes in many shapes and sizes. For example, it is settled that there is a distinct overlap between the terms “frivolous”, “vexatious” and “abuse of process”. A proceeding is frivolous when it is not capable of reasoned argument, without foundation or where it cannot possibly succeed. A proceeding is vexatious when it is oppressive and/or lacks bona fides. The expression “frivolous or vexatious” includes, or may amount to, proceedings which are an abuse of the process.

F. Challenge to Proposed Amendments

35. Ms Po acknowledges that the effect of the Deputy Judge’s strike out ruling in the 1^st Decision was only to strike out the claim on an express oral agreement, but to leave to trial the plaintiff’s remaining causes of action pleaded in the SOC, including the plea that there was an agreement inferred by conduct of the parties. But, she submits that the plea put forward by the defendant that the plaintiff is estopped from relying on any such agreement is in substance seeking to shut out the pleas which have been left at trial, invoking in reverse the court’s strike out powers to an amendment exercise and having a second bite of the cherry. That, she says constitutes the proposed amendments themselves an abuse of process.

36. Ms Po submits that any arguments on estoppel were dealt with by the Deputy Judge and the Court of Appeal, and those points are res judicata. She submits that the abuse point, arising from what had been said by the plaintiff in the JR Application/Tax Proceedings, was raised at an appropriate time (though not exactly early), and was dealt with head-on. This is not a case of a factual dispute turning on the burden of standard of proof, and the attempt to re-run the point also creates a ‘fishing expedition’.

37. She also submits that the proper way to view the applicable principles is to see that it is the plaintiff which is the party being ‘vexed’ twice. As she puts it, all the facts are there, and the court had everything it needed for the Deputy Judge to make a decision to determine the abuse point. It would, therefore, be wrong to permit it to be repeated at trial.

38. Mr Suen submits that both the Deputy Judge and the Court of Appeal held that the basis of the strike out application did not cover the plea of an agreement inferred from conduct. That was why it was regarded as unfair for the defendant to have sought to open that argument when seeking leave to appeal.

39. In any event, Mr Suen submits that it is simply wrong to suggest that, simply because the defendant was partly unsuccessful in striking out other pleas in the SOC on the stringent ‘plain and obvious’ threshold test, with facts assumed in favour of the plaintiff, the defendant is now barred from pleading such facts and arguments and running them at trial. Indeed, the Court of Appeal expressly held that the issues relating to an agreement said to be inferred from conduct involved factual questions which could only be properly resolved after trial.

40. Mr Suen also submits that just because it is not plain and obvious that something is an abuse does not mean that the abuse might not be proved at trial, on the then applicable test of the balance of probabilities. To say otherwise would confuse the relevant standards of proof, differently applicable to an application to strike out and the decision at trial. I agree.

41. Though she does not quite put it this way, I think Ms Po’s submission amounts to saying that either something is an abuse or it is not, and the Deputy Judge (upheld by the Court of Appeal in refusing leave to appeal) has held that it was not. But, as I have indicated above, that may depend upon what is said to be the abuse, and when the question is being asked. Bringing a second set of proceedings on matters already decided in the first set of proceedings may well be something which can be identified at once (or, at least, early on) as abusive or not. But there will be other alleged forms of abuse, which may not be seen to be so strong as to require the claim or action to be struck out, leaving the matter to be determined at trial.

42. In my view, this is such a case. Properly understood, what the Deputy Judge decided was that whilst the plaintiff’s previous statements in the JR Application should preclude running a claim based on an oral agreement, those statements do not preclude running a claim on the alternate basis of the Informal Arrangement. Though addressed under the broad heading of ‘abuse of process’, the Deputy Judge was actually deciding that the claim based on the oral agreement could not possibly succeed or was unsustainable. This was because, instead of supporting the alleged oral agreement, the reference to the Informal Arrangement in the JR Application, coupled with the positive assertion of there having been no retainer, flatly contradicted the existence of the alleged oral agreement. But the question of whether, to what extent, and how the plaintiff’s previous statements in the JR Application would affect his claim based upon an inferred agreement or one reached by conduct was something that must be left to trial. This is what the Court of Appeal recognised to be fact sensitive.

43. The plaintiff is not being precluded from running his claim based upon the Informal Arrangement, inferred agreement or agreement by conduct. He can run that to and at the trial. But it seems to me that the defendant can seek to meet that claim at trial, including by raising the factual matters which have now been pleaded in the proposed amendments. One of the points raised is to plead that the plaintiff ought not to be permitted to assert the existence of some form of implied Agency Agreement or one reached by conduct, in light of the statements which he has made elsewhere. That is a point which is almost simply an evidential point, but in any event is one which properly falls to be determined at the trial. It is not precluded by the strike out ruling.

44. I also agree with Mr Suen that the proposed amendments in §§8A and 9(aa) relating to the validity of the implied Agency Agreement, and the trust and reliance point, must in any event be permissible, as they were clearly not the subject matter of the strike out application, and are themselves factually sensitive requiring exploration at a trial.

G. Result

45. For those reasons, I dismissed the appeal. In my view, the Master’s order was correct.

46. As to costs, I ordered the costs of the appeal to follow the event, namely for the plaintiff to pay the costs of the defendant, to be summarily assessed with certificate for two Counsel.

47. I gave directions for the summary assessment of costs to be dealt with by me on the papers, following the defendant producing its Statement of Costs for Summary Assessment within seven days, and the plaintiff producing its Objections within seven days thereafter.

48. For the avoidance of doubt, I did not disturb the costs order made by the Master. That was notwithstanding that an appeal from a Master to a Judge leads to a hearing ‘afresh’, and where Ms Po clarified that even were the substantive appeal to be dismissed, she would like to challenge the Master’s costs order.

49. As I understand it, the Master made her slightly unusual order relating to the costs of the amendments themselves because she was persuaded that the amendments were effectively only able to have been put forward after the plaintiff was forced to disclose the materials relating to the Tax Proceedings. This took the situation out of the more normal one where an amendment is initiated as a result of materials the amending party has, or its own alteration of its case. By reference to the Note 58/1/6 in the Hong Kong Civil Procedure 2021, I accepted that in those circumstances I would not allow the plaintiff’s (separate) appeal from the Master possibly as costs order, as I did not think it to be unreasonable or in error of law.

	(Russell Coleman)
	Judge of the Court of First Instance High Court

Ms Wing Kay Po and Mr Acorn Lau, instructed by Bough & Co., for the plaintiff

Mr Jenkin Suen SC and Mr Justin Lam, instructed by P.C. Woo & Co., for the defendant

HCA 597/2015

[2018] HKCFI 1933

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 597 OF 2015

________________

BETWEEN
	CHAN CHUN CHUEN （陳振聰）	Plaintiff
	and
	KAO, LEE & YIP (a firm)	Defendant

________________

Before: Deputy High Court Judge Anson Wong, SC in Chambers

Date of Hearing: 15 November 2017

Date of Decision: 27 August 2018

_______________

D E C I S I O N

_______________

1. By my decision handed down on 12 October 2017 (the “Decision”), I partially allowed the defendant’s striking-out application and made a costs order nisi that costs of the striking-out application be to the defendant with certificate for two counsel, to be taxed if not agreed (the “Costs Order Nisi”).

2. On 24 October 2017, the defendant took out two summonses respectively asking this court to vary the Costs Order Nisi and to grant leave to the defendant to appeal against the substantive order made in the Decision. I will now deal with these applications in turn.

3. Unless otherwise stated or the context otherwise requires, the abbreviations used in this decision shall bear the same meanings as defined in the Decision.

Variation of Costs Order Nisi

4. The defendant seeks to vary the Costs Order Nisi in two respects: (1) the defendant asks for costs to be taxed on indemnity basis; and (2) further or alternatively, the defendant invites this court to order such costs to be summarily assessed and paid forthwith.

5. In relation to indemnity costs—

(a) The applicable principles do not appear to be in dispute. There is no dispute that where there is an abuse of process of the court, the court may award costs on indemnity basis: Overseas Trust Bank Ltd v Coopers & Lybrand [1991] 1 HKLR 177 at 182G–183C; Re Hyundai Engineering & Construction Co Ltd [2002] 2 HKLRD 71 at para 7. That said, the ultimate consideration is whether an award of costs on indemnity basis is “appropriate” in the particular circumstances of a case: Hong Kong Civil Procedure 2018, at para 62/App/12.
(b) Mr Lam, counsel for the defendant, submits that given my ruling (at para 80 of the Decision) that it is plainly an abuse of process for the plaintiff to advance and rely on the alleged oral agreement to support his breach of duties claim against the defendant, this court should order costs on indemnity basis.
(c) With respect, I cannot accept Mr Lam’s submission.
(d) Mr Lam’s submission ignores the fact that I rejected some of the defendant’s arguments and only partially allowed its striking-out application. Taking a global view of the matter, I in the exercise of my discretion consider that it is fair, just and appropriate to award costs on party-and-party basis: Re King’s Glory Educational Centre Limited (unrep, HCCW 456/2016, 21 September 2017) at paras 34–38.

6. In relation to summary assessment and payment of costs forthwith—

(a) Mr Lam refers me to the decision of Lam J (as he then was) in Midland Business Management Ltd v Lo Man Kui (No 2) [2011] 2 HKLRD 667, which was approved by Ribeiro PJ in Wing Fai Construction Co Ltd v Yip Kwong Robert (No 2) (2012) 15 HKCFAR 454.
(b) In the above decisions, it is said that considerations relevant to deciding whether or not to make an order for immediate taxation in interlocutory applications included (1) the extent to which the proceedings on taxation were severable and self‑contained from the rest of the action, (2) the justice of making such an order having regard to the effect on the respective parties’ cash flow, (3) whether the amount at stake on taxation was sufficient to justify the expense of a separate taxation for it rather than bringing it on the final taxation, and (4) the possibility that there might be no trial. It is also emphasized that the lack of immediacy of orders to pay costs “in the cause” or “in any event” weakens costs as a sanction against unwarranted applications or resistance, although this must not be taken as saying that an immediate costs order should be made against every unsuccessful party in an interlocutory application: Midland Business (supra) at paras 7–12; Wing Fai Construction (supra) at paras 4–8.
(c) Mr Li does not dispute the above principles. He, however, submits that the defendant’s striking-out application is not severable and self-contained, since it is making an application for leave to appeal against my order partially allowing the striking-out application.
(d) With respect, I am unable to see how the fact that the defendant is now making an application for leave to appeal can be relevant to the question as to whether the striking-out application is itself a severable and self-contained application. In my judgment, I accept Mr Lam’s submission that the striking-out application is severable and self-contained.
(e) Mr Li further submits that since the defendant is a renowned law firm in Hong Kong and the plaintiff is currently in custody, an immediate costs order would seriously prejudice the plaintiff.
(f) In my judgment, there is before me no evidence of the parties’ respective cash position. Without such evidence, I am not in any position to speculate on the effect of an immediate costs order on the parties’ respective cash flow. However, I observe that the defendant has engaged a senior counsel (together with a junior counsel) to represent it in the striking-out application. It appears that substantive costs have been incurred in the striking-out application. Thus, I am of the view that there is some degree of unfairness if the defendant is to be deprived of the recovery of such costs in the meantime.
(g) In all the circumstances, I consider that it is fair and just for me to order costs to be summarily assessed and paid forthwith by the plaintiff.

Application for Leave to Appeal

7. In this application, the defendant seeks leave to appeal against my order partially allowing its striking-out application. It appears to be not in dispute that the intended appeal is one against an interlocutory order such that pursuant to section 14AA of the High Court Ordinance (Cap 4), the defendant has to demonstrate that the intended appeal has a reasonable prospect of success, or there is some other reason in the interests of justice why the intended appeal should be heard.

8. Mr Lam submits that the intended appeal involves a discrete point of law. He submits that “the content of the Amended Form 86[1]is also inconsistent with the Plaintiff’s case that there was an agreement inferred from conduct, i.e. the rest of para 4 of the Statement of Claim”, and that “it is fundamentally inconsistent for the Plaintiff to expressly denounce the existence of any retainer with the Defendant, and subsequently claim that there was in fact an implied retainer with the Defendant”. He goes on to submit that “given that the Plaintiff expressly denounced the existence of any retainer with the Defendant in the JR Application, the Plaintiff must now be debarred from advancing a claim in this Action to bind the Defendant to the alleged retainer, whether oral or implied by conduct”.[2]

9. At the hearing, I drew Mr Lam’s attention to para 17 of the 5^th Affidavit of Yeung May May, Betty, filed by the defendant in support of the striking-out application (the “Defendant’s Supporting Affirmation”). There, it is expressly stated that—

“In this regard, I set out the relevant pleas in the Statement of Claim (signed with the Plaintiff’s statement of truth) which run contrary to the Plaintiff’s case in the judicial review proceedings:-
(a) Paragraph 4: “By an agreement between the Plaintiff and the Defendant (in particular via Mr. Yip Wan Tak) concluded orally in or around mid-1993 … the parties agreed on the following terms (“Agency Agreement”) …
(b) …”

Notably, as I pointed out to Mr Lam at the hearing, the defendant in its supporting affirmation only says that “an agreement… concluded orally” pleaded in para 4 of the Statement of Claim is inconsistent with the plaintiff’s case in the JR Application. It, however, does not suggest that “an agreement… to be inferred from conduct between the Plaintiff and the Defendant” pleaded in the same paragraph is also inconsistent with the plaintiff’s case in the JR Application. In fact, the latter plea is deliberately omitted from para 17 of the Defendant’s Supporting Affirmation.

10. In fact, as stated in para 43 of my Decision, Ms Eu SC (who appeared at the substantive hearing of the striking-out application for the defendant) does not suggest that the plea in para 4 of the Statement of Claim that an agreement “to be inferred from conduct between the Plaintiff and the Defendant” runs contrary to the plaintiff’s case in the JR Application, and that she is right not to do so in view of the reference to the Informal Arrangement in the JR Application.

11. It is of great significance that this striking-out application is not mounted on the basis that the agreement allegedly inferred from conduct is also inconsistent with the plaintiff’s case in the JR Application.

12. As it was held in my Decision, the basis of the striking-out application is abuse of process. Even assuming that a “diametrically inconsistent” case is run by the plaintiff in this action, this court has to assess various factors and balance competing interests in order to determine whether it is an abuse of process in the circumstances. This means that any inconsistencies relied upon by the party seeking to strike out have to be fairly and squarely brought up, such that the party resisting the striking out would know the case that he has to meet and would be given sufficient opportunity to offer his explanation as to why there is no abuse of process.

13. In this regard, it is pertinent to observe that in his skeleton argument, Mr Lam submits that “in the absence of any plausible explanation for the Plaintiff’s inconsistent stance, it is respectfully submitted that it is clearly an abuse of process for the Plaintiff to maintain the plea of agreement to be implied by conduct”.[3] This submission duly underlines the importance of putting the alleged inconsistencies fully and squarely to the party resisting the striking out such that he can be given sufficient opportunity to explain the alleged inconsistencies.

14. In the present case, it is not suggested in the Defendant’s Supporting Affirmation that the agreement allegedly inferred from conduct is also inconsistent with the plaintiff’s case in the JR Application. Without making such suggestion, it is in my judgment not open to the defendant to strike out on the basis that the plaintiff’s case concerning the agreement inferred from conduct is “diametrically inconsistent” with his case in the JR Application and the same constitutes an abuse of process.

15. For the above reasons, I must dismiss the defendant’s application for leave to appeal.

Disposal of the Summonses

16. In relation to the defendant’s summons dated 24 October 2017 seeking the variation of the Costs Order Nisi—

(a) I would vary the same to the extent that costs of the striking‑out application be to the defendant be summarily assessed on paper with certificate for two counsel, and be paid by the plaintiff forthwith.
(b) For the purpose of making the summary assessment on paper, I direct that (1) the defendant do within seven days from the date of this decision lodge and serve its statement of costs for the striking out application in such format as per Appendix A to Practice Directions 14.3, and (2) the plaintiff do within 14 days thereafter lodge and serve its statement of objection.

17. As to the defendant’s summons dated 24 October 2017 seeking leave to appeal from my order, I would dismiss the same.

18. As far as the costs are concerned, I regard the defendant to be the party substantially successful in its application for variation of the Costs Order Nisi. At the same time, I regard the plaintiff as the successful party in resisting the defendant’s application for leave to appeal. Bearing in mind that both applications were heard at the same hearing, I would adopt a broad-brush approach and make an order nisi that there be no order as to costs in relation to these applications.

	(Anson Wong, SC)
	Deputy High Court Judge

Mr Sean Li, instructed by Bough & Co, for the plaintiff

Mr Justin Lam, instructed by P C Woo & Co, for the defendant

[1] Filed by the Plaintiff in the JR Application.

[2] Defendant’s Skeleton Argument, paras 7–9.

[3] Defendant’s Skeleton Argument, para 10.

HCA 597/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 597 OF 2015

________________________

BETWEEN
	CHAN CHUN CHUEN(陳振聰)	Plaintiff
and
	KAO, LEE & YIP (a firm)	Defendant

________________________

Before: Deputy High Court Judge Anson Wong SC in Chambers

Date of Hearing: 26 September 2017

Date of Decision: 12 October 2017

________________________

DECISION

________________________

A. INTRODUCTION

1. This is the Defendant’s application to strike out the Plaintiff’s Statement of Claim filed on 16 June 2015. For this application, the Plaintiff is represented by Mr Sean Li (who is not the pleader of the Statement of Claim); whereas the Defendant is represented by Ms Audrey Eu SC, leading Mr Justin Lam.

2. In the Summons taken out on 8 May 2017, the Defendant seeks to strike out the Plaintiff’s claim on the basis that it discloses no reasonable cause of action, and/or that it is vexatious or an abuse of process.

3. In her written and oral submissions, Ms Eu SC argues the striking out application solely on the ground of abuse of process[1]. The gist of Ms Eu’s complaint of abuse of process is that the Plaintiff in this action adopts a position which is “fundamentally inconsistent with and diametrically opposite to” the position adopted by him in a previous set of judicial review proceedings, namely HCAL 76/2010 (the “JR Application”).

4. In order to determine the validity of Ms Eu’s objection, it is necessary to set out the background of HCAL 76/2010, followed by the Plaintiff’s claim and allegations in this action.

B. THE JR APPLICATION (IE HCAL 76/2010)

5. In the JR Application, the Plaintiff sought judicial review of the decision of the Commissioner of Inland Revenue (the “Commissioner”) in refusing extension of time for the Plaintiff to object to some property tax and profit tax assessments.

6. At the material time, the property tax and profit tax assessments in question were sent to the Defendant’s address. The Defendant is a firm of solicitors, and the Plaintiff had engaged the Defendant as his solicitors for conveyancing matters. Those tax assessments were sent to the Defendant’s address because in July 2004, the Plaintiff had given such address as his postal address in his Profits Tax Return for 2003/04.

7. The Plaintiff alleged that he did not receive the tax assessments in question, and he only became aware of them when he heard a news report about them over television. Later, the Plaintiff instructed his lawyers to contact the Inland Revenue and was provided with copies of the tax assessments. However, when the Plaintiff sought to object to them, the Commissioner rejected his objections on the basis that such objections had not been received within the one‑month time limit, and that she was not satisfied that there was reasonable cause preventing the Plaintiff from objecting in time.

8. In challenging the Commissioner’s refusal to extend time for the Plaintiff’s objections in the JR Application, the Plaintiff contended that under the relevant provisions in Inland Revenue Ordinance (Cap 112) (“IRO”), the duty of the Commissioner to give notice of assessment meant that the Commissioner must establish actual receipt of the assessment by the Plaintiff, and/or to act on the information known to him to give such notice in such manner most likely to bring the assessment to the actual notice of the Plaintiff [2]. Further, the Plaintiff also contended that lack of actual knowledge of the assessment by the Plaintiff was a factor which the Commissioner should take into account in deciding whether or not to extend time for objection[3].

9. For reasons that I do not need to go into details, the JR Application was allowed by Mr Justice Reyes but was subsequently dismissed by the Court of Appeal upon the appeal brought by the Commissioner.

10. For the present purposes, it is pertinent to observe that in the JR Application, the case run by the Plaintiff was that there was no retainer with the Defendant for the service of tax assessments and the Defendant’s address was ineffective for such purpose.

11. In this regard, Ms Eu SC helpfully draws my attention to para 56(d)(iii) – (iv) of the Amended Form 86 filed in the JR Application in which the Plaintiff alleged that:

“the [Commissioner] failed to have regard to and/or give any weight and/or give due weight to …
(iii) [the Defendant] had never been appointed as the Applicant’s taxation representative or agent for the purposes of the Ordinance; and
(iv) there was no evidence whatsoever of a retainer subsisting between [the Defendant] and [the Plaintiff] for the service of important legal documents such as notices of tax assessments (and in fact there was no such retainer).”

12. Further, Ms Eu SC also highlights various parts of the written and oral submissions made by Mr Philip Dykes SC, the counsel appearing for the Plaintiff in the JR Application, to Mr Justice Reyes and the Court of Appeal in which Mr Dykes SC described the Defendant’s address as “stale”, “ineffective” or “a dud” for the service of legal documents on the Plaintiff, and that “there was indeed no such retainer” between the Plaintiff and the Defendant.

13. As it will be further elaborated below, Ms Eu SC argues that the position taken by the Plaintiff in the JR Application regarding his relationship with the Defendant was “diametrically opposite” to the position taken by him in the present action.

14. Before I move on to set out the Plaintiff’s case and allegations in this action, it is necessary for me to point out a matter of significance.

15. In the body of the Amended Form 86 filed by the Plaintiff in the JR Application (at para 33 thereof), the Plaintiff did make reference to a letter dated 6 July 2010 issued by the Defendant, in which the Defendant confirmed that there was an “informal arrangement” whereby the Defendant’s staff would contact the Plaintiff’s agents when any letter was sent to the Defendant’s office for the Plaintiff’s attention (the “Informal Arrangement”). The Informal Arrangement was also referred to in the Affirmation of Kan Ming Wan Patty and the Affirmation of Chan Chun Hung Bobby filed in the JR Application, and alluded to in the counsel submissions made on behalf of the Plaintiff in the JR Application.

16. Hence, the position taken by the Plaintiff in the JR Application was that whilst there was no retainer between the Plaintiff and the Defendant for the service of documents, there was the Informal Arrangement in place which unfortunately did not result in the tax assessments in question being brought to the Plaintiff’s attention[4].

C. PLAINTIFF’S ALLEGATIONS IN THIS ACTION

17. In this action, the Plaintiff claims damages for breach of duty of care and/or fiduciary duty owed by the Defendant to him (the “Duties”). The Plaintiff alleges that the Defendant was in breach of those duties by failing to bring to his notice the existence of those tax assessments, which form the subject matters of the JR Application.

18. The matters on which the Plaintiff seeks to rely to fix the Defendant with the Duties are pleaded in paras 4 to 6 of the Statement of Claim, which are set out in full as follows:

“4. By an agreement between the Plaintiff and the Defendant (in particular via Mr Yip Wan Tak) concluded orally in or around mid‑1993 and/or to be inferred from conduct between the Plaintiff and the Defendant (in particular via Mr Yip Wan Tak) since around mid‑1993, the parties agreed on the following terms (‘Agency Agreement’):
4.1 The Defendant would provide its postal address from time to time including the Defendant’s Address, as a care of (ie ‘c/o’) address to receive documents sent to the Plaintiff including, but not limited to tax assessments and tax returns and companies documents for and on behalf of the Plaintiff;
4.2 The Plaintiff would continue to retain the Defendant in respect of the matters including those conveyancing [sic] matters set out in paragraph 3 hereinabove;
4.3 The Defendant would bring to the notice of the Plaintiff, via his agents including Mr Chan Chun Hung Bobby (since around 1993) and/or Ms Kam Ming Yan Patty (since around 2001), of any documents received for and on behalf of him immediately or within a reasonable time; and
4.4 The Plaintiff thereafter arrange couriers or persons to collect the said documents received for and on behalf of him.
5. Further and/or alternatively:
5.1 The Defendant had voluntarily assumed to act for the Plaintiff for the matters set out in paragraphs 4.1 and 4.3 hereinabove;
5.2 The Plaintiff had foreseeably placed trust and confidence and relied on the Defendant (whether as an agent or as a firm of solicitors) for the matters set out in paragraphs 4.1 and 4.3 hereinabove;
5.3 The Defendant was and is aware of the fact that the Plaintiff had so placed reliance on it for the matters set out in paragraphs 4.1 and 4.3 hereinabove;
5.4 The Defendant was and is also aware that if the Defendant did not inform the Plaintiff of any incoming documents in accordance with paragraph 4.3, the Plaintiff would not have known the receipt and/or existence of such documents and act accordingly.
6. Further and/or alternatively, in the circumstances and by the matters set out in paragraph 5 the Defendant is now estopped above to deny the existence of the agency relationship between the Defendant and the Plaintiff for the matter set out in paragraph 4 above.”

19. In relation to the Plaintiff’s allegation that the Agency Agreement was concluded orally in mid‑1993, the Defendant served two rounds of requests for further and better particulars requiring the Plaintiff to give full particulars as to how the Agency Agreement was orally concluded.

20. In response to such requests, the Plaintiff gave detailed narratives of the meeting at which the Agency Agreement was allegedly concluded, including the time of the day of the meeting, the gist of the words spoken by those who were present at the meeting, etc.

D. THE APPLICABLE LEGAL PRINCIPLES

21. The Defendant contends that the Court would not permit a litigant to abuse the process of the court by bringing the administration of justice into disrepute.

22. In the context of this particular case, Ms Eu SC argues that there is a wealth of authorities supporting the proposition that it is an abuse of process for a litigant to advance two cases in separate legal proceedings that are plainly inconsistent and incompatible with one another.

23. Ms Eu SC helpfully refers me to the decision of Kwan J (as she then was) in Re Shun Tak Holdings Ltd [2009] 5 HKLRD 743.

24. In Re Shun Tak, Kwan J was called upon to decide an application to strike out an unfair prejudice petition on various grounds. One of the striking‑out grounds was that the petitioners’ case pleaded in the petition was inconsistent with the position taken by them in a set of existing legal proceedings in Macau. In the Macau proceedings, the petitioners sought to challenge the validity of certain shareholding in the company; whereas in the petition, the petitioners asked the Hong Kong Court to assume that such shareholding was valid.

25. Kwan J (at para 87 of her judgment) referred to the following dicta of Mortimer J (as he then was) in Berthier Godown Ltd v E Wah Realty Ltd[1986] HKC 8 (at pp 14H – 15A):

“It is that if the party seeks to raise new matters in separate proceedings or seeks to reverse a previous assumption that has been the basis of earlier proceedings in new proceedings, that amounts, first of all, to an abuse of process and second, he is estopped from doing do. A fortiori, this must be so if the earlier proceedings are still in existence and the party can raise those matters in the proceedings which have already been started and in which orders have already been made. He certainly cannot seek to raise factual and legal issues in conflict with his earlier stance and the earlier order of the court. He must pursue all the remedies available to him and raise all the arguments that are available to him in the first proceedings.”

26. Kwan J (at paras 89 – 90 of her judgment) considered that the above dicta in Berthier Godown was also applicable to the case before her, and concluded that it was an abuse of process for the petitioners to adopt a stance inconsistent with that in the proceedings in Macau in respect of the issue concerning the validity of the shareholding in question.

27. The other case referred to by Ms Eu SC, which bears more resemblance to the present one, is the Canadian decision of Mystar Holdings Ltd v 247037 Alberta Ltd [2009] ABQB 480.

28. In Mystar, the plaintiff sued the defendants for 100% interest in a hotel purchased pursuant to a joint venture agreement. The defendants argued that the plaintiff had abused the legal process by adopting a position that was inconsistent with the position taken by it in a previous action where it asserted that it had lost 50% interest in the hotel.

29. In dealing with the defendants’ objection, Brooker J made the following observations:

“ [44] I agree that an applicant who alleges that certain pleadings constitute an abuse of process bears a heavy burden. I also agree with the Court’s comments in Brewers Distributors that it must be plain and obvious that the claim amounts to an abuse of process of the court before it can be struck [out].
…
[46] I agree with the Ontario Court of Appeal that ‘abuse of process is essentially a fairness doctrine’. The Court must also ask itself whether, in the circumstances, it would be fair to allow the action in question to proceed.
…
[49] In general, I am persuaded that a party is not free to deliberately argue diametrically inconsistent facts in various actions, thus knowingly advancing irreconcilable positions which are not articulated as alternative claims. Whether this pronouncement has any application to the facts of this case remains to be determined.
…
[53] I am in agreement with the Court’s finding in Chevron that in certain circumstances, taking contrary positions on the same issue in separate proceedings may constitute an abuse of process and that ‘what constitutes an abuse of process may vary with the circumstances of each case’.
…
[62] The doctrine of abuse of process assists in promoting the ‘integrity of the administration of justice’. On the facts before me, [the plaintiff], with full knowledge of the facts, should not be able to advance a claim that is diametrically opposed to its earlier position. In these circumstances, the integrity of the justice system would be no less compromised simply because the initial claim was not followed th[r]ough to judgment.
[63] This does not mean, as [the plaintiff] suggests, that a factual pleading will forever and irrevocably bind a party in all subsequent pleadings. Rather, it means that, if a party, with full knowledge of the facts (thus distinguishing itself from a Potter scenario) chooses to argue irreconcilable facts in its pleadings, and where such pleadings are clearly not made in the alternative, allowing such a party to continue pursuing an incompatible claim may constitute an abuse of process.”
(emphases added)

30. The legal propositions that this Court can derive from the decision of Brooker J in Mystar can be summarized as follows:

(1) A party who seeks to strike out a claim based on an abuse of process bears a heavy burden. The Court will only do so in a plain and obvious case.
(2) The doctrine of abuse of process is essentially a “fairness doctrine”.
(3) It may be an abuse of process for a party, with full knowledge of the facts, to advance a claim that is diametrically opposed to its position taken in an earlier set of proceedings. What constitutes an abuse of process may vary with the circumstances of each case.
(4) In this type of case, the abuse lies in its effect on the “integrity of the administration of justice”. Where a party with full knowledge of the facts advances a claim which is diametrically inconsistent with his allegations in previous proceedings, the integrity of the justice system would be no less compromised simply because his previous allegations were not followed through to judgment.

31. Mr Li submits that a party is not bound by his inconsistent statements made in previous proceedings, and he does so by placing reliance on the principle accepted by the Court of Appeal in New Technology Cable Ltd v Popbridge Industrial Ltd CACV 50/2000 (3 May 2000)that an admission in a pleading is not binding in a subsequent action.

32. In my judgment, a distinction has to be drawn between a party admitting an allegation made by his opponent in previous proceedings, and a party taking the initiative to advance a diametrically inconsistent allegation in previous proceedings.

33. In the former scenario, the allegation was not positively put forward by the party, and once admitted, would become a non‑issue. However, in the latter scenario, the allegation was positively advanced by the party, and once advanced, would require the opponent and the Court to look into the allegation. When the party advances an inconsistent allegation in a subsequent proceedings, the latter scenario (but not the former) would result in a negative effect on the administration of justice and may, in the circumstances of a particular case, lead to an abuse of process.

34. Hence, I do not think one can derive the general proposition that a party is at liberty to run inconsistent cases in different proceedings from the principle that an admission in one action is not binding in subsequent actions.

35. Mr Li further submits that Mystar is an authority of minimum persuasiveness since it is only a first instance decision made by the Alberta Court. Whilst I agree that Mystar is no more than a persuasive authority, I am unable to see any reason why the Court should refuse to follow it. In my judgment, those legal propositions summarized in para 30 above are correct as a matter of principle.

36. To a certain extent, those principles are also in line with the ruling of Kwan J in Re Shun Tak, and more significantly, the dicta of Ma CJ in Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72.

37. Ko Hon Yue is a decision touching on what is commonly known as the Henderson v Henderson abuse (ie a party ought generally not to be permitted to raise in subsequent proceedings matters which that party could and should have raised in earlier proceedings). In discussing the doctrine, Ma CJ observed (at para 83) that:

“ (1) The starting point is to recognize that the doctrine is founded on an abuse of process. As Lord Wilberforce said in Brisbane City Council v A‑G for Queensland, ‘it ought only to be applied when the facts are such as to amount to an abuse: otherwise, there is a danger of a party being shut out from bringing forward a genuine subject of litigation’….
…
(4) The abuse can also take the form of administration of justice being brought into disrepute: see Chiang Lily, 256D–G ([58]) referring to Hunter v Chief Constable of the West Midlands Police [1982] AC 529. With the procedural reforms introduced by the Civil Justice Reform in 2009, the courts in Hong Kong must now, when exercising their procedural powers, increasingly bear in mind not just the parties before them in any particular litigation but also the position of other litigants in the court process. RSC O.1A r.1(f) states as one of the underlying objectives of the court’s procedural powers under the Rules to be ‘to ensure that resources of the courts are distributed fairly’.
(5) In examining aspects such as abuse, the court is concerned with balancing interests: not just those of the litigants before it, but also taking into account the other interests involved in the administration of justice. It is important therefore here to emphasise that when the court is dealing with the Henderson v Henderson type of abuse, it is not looking at an absolute bar to litigation such as issue estoppel or cause of action estoppel. On the contrary, in considering this type of abuse, the court is required to assess a number of factors and balance competing interests. …”

38. Although Ma CJ’s dicta was expressed in relation to the Henderson v Henderson type of abuse, it is in my view equally applicable to other forms of abuse, including the abuse of running a case which is diametrically inconsistent with that in previous proceedings.

39. At the end of the day, the ultimate question is whether, having assessed various factors and balanced competing interests, it is plain and obvious to the Court that the bringing or defending of a claim is an abuse of process.

40. In my view, it does not matter whether the abuse is described as “bringing the administration of justice into disrepute” or “undermining the integrity of administration of justice”. As Stone J observed in the Court of Appeal decision of The New China Hong Kong Group Ltd (in liquidation) v AIG Asian Infrastructure Fund LP [2005] 1 HKLRD 383, para 67:

“‘Abuse of process’ means what it says. Practising lawyers tend to have a feel for what it connotes. Perhaps it is like an elephant: difficult to describe, but you know it when you see it.”

E. DISCUSSIONS

41. In light of the legal principles discussed above, the two main issues which I need to consider are:

(1) Whether the Plaintiff’s case in this action (or any part thereof) is “diametrically inconsistent” with his case in the JR Application; and
(2) If “yes”, whether having assessed various factors and balanced competing interests, it is an abuse of process in the circumstances.

I can only make a striking‑out order if I am satisfied that it is plain and obvious that the two issues identified in the foregoing paragraphs are answered in the affirmative.

E1. Diametrically inconsistent?

42. In her written submissions (at para 13), Ms Eu SC submits that the following pleas in the Statement of Claim run directly contrary to the Plaintiff’s case in the JR Application:

(1) Statement of Claim, para 4:
“ By an agreement between the Plaintiff and the Defendant (in particular via Mr Yip Wan Tak) concluded orally in or around mid‑1993 … the parties agreed on the following terms (‘Agency Agreement’) …”
(2) Statement of Claim, para 5.2:
“ The Plaintiff had foreseeably placed trust and confidence and relied on the Defendant … for the matters set out in paras 4.1 and 4.3 hereinabove.”

43. Notably, Ms Eu SC does not suggest that the plea in para 4 of the Statement of Claim that an agreement “to be inferred from conduct between the Plaintiff and the Defendant (in particular Mr Yip Wan Tak) since around mid‑1993” runs contrary to the Plaintiff’s case in the JR Application. Ms Eu SC is plainly right in not making such suggestion since, as pointed out above, reference was in fact made to the existence of the Informal Arrangement in the JR Application.

(a) Oral agreement between the parties

44. I will consider each of these pleas identified in para 42 above in turn.

45. As to the plea that there was an oral agreement concluded in mid‑1993 between the parties, I agree with Ms Eu SC that such plea is “diametrically inconsistent” with the Plaintiff’s case in the JR Application.

46. The contents of the Amended Form 86 filed by the Plaintiff in the JR Application made it clear that there was no retainer subsisting between the Plaintiff and the Defendant for the service of legal documents. This is inconsistent with the Plaintiff’s case in this action that there was an oral agreement concluded between the parties in mid‑1993.

47. The inconsistency is all the more alarming when the Plaintiff, upon the Defendant’s requests, has in this action provided detailed particulars as to the oral discussions leading to the conclusion of the alleged oral agreement. If there were those discussions, the Plaintiff could not have stated in positive terms in his JR Application that there was no retainer between the Plaintiff and the Defendant.

48. I note that the Plaintiff alluded to the Informal Arrangement in the JR Application. I do not, however, think that the Plaintiff’s reference to the Informal Arrangement in the JR Application could explain the inconsistency between the absence of a retainer and the existence of an alleged oral agreement.

49. In the JR Application, no particulars were given as to how the Informal Arrangement came about. In particular, it was never alleged by the Plaintiff in the evidence that the Informal Arrangement was, or at least akin to, the alleged oral agreement.

50. In this action, according to the particulars provided by the Plaintiff, the alleged oral agreement was reached between the Plaintiff and Mr Yip Wan Tak of the Defendant at the Defendant’s office in mid‑1993 whereby Mr Yip expressly agreed with the Plaintiff that the Defendant’s address would be used for receiving the Plaintiff’s legal/tax documents, and that he even specifically instructed one Mr Raymond Chu of the Defendant to handle such matters[5]. Although the alleged oral agreement was not reduced into writing, it is quite inconceivable for one to describe what (allegedly) had been expressly agreed with a lawyer as an “informal arrangement”.

51. In my view, it is plain that such Informal Arrangement is very different from what is alleged to be the oral agreement in this action. Instead of supporting the alleged oral agreement, the reference to the Informal Arrangement in the JR Application, coupled with the positive assertion of there having been no retainer, flatly contradict the existence of the alleged oral agreement.

52. Mr Li does not strongly argue that there is no inconsistency. He, however, contends that the principle should only be applied to diametrical inconsistency as to fact. Since, as so contended by Mr Li, that whether a party is an agent is a matter of law, the Plaintiff cannot be said to have knowingly run inconsistent cases as to fact on this issue.

53. In support of his argument, Mr Li refers to various authorities (including Garnac Grain Co Inc v H.M.F. Faure & Fairclough Ltd [1968] AC 1130 at 1137B–C and First Good International Ltd v Shum Kin & Ors HCA 614/2004 (9 May 2005), paras 22 – 28) to support the proposition that whether a relationship is a principal and agent relationship is a question of law, and that it matters not whether the parties recognize it.

54. Although the legal proposition advanced by Mr Li is clearly right, it is in my judgment beside the point.

55. No relationship can exist in vacuum. In fact, in the authorities cited in para 53 above, the judges also emphasized that “the relationship of principal and agent can only be established by the consent of the principal and the agent”. Hence, facts as to how such consent came about are those facts which a party has to plead and prove in order to establish a case of agency. The Defendant’s objection here is that the facts which are said by the Plaintiff to give rise to a principal and agent relationship in this action are diametrically inconsistent with those previously asserted by him in the JR Application. What Mr Li seeks to argue does not address such objection.

56. For the above reasons, I find that the plea in this action that there was an oral agreement concluded in mid‑1993 between the Plaintiff and the Defendant is diametrically inconsistent with the Plaintiff’s case and allegations advanced in the JR Application.

(b) Trust and confidence placed by the plaintiff / duties owed by the defendant

57. The other complaint of the Defendant is that the plea in the Statement of Claim that the Plaintiff placed trust and confidence in the Defendant is directly contrary to his case in the JR Application.

58. As a starting point, I observe that, unlike his position on the existence of a retainer, the Plaintiff in the JR Application did not state or assert that he placed no trust and confidence in the Defendant in bringing to his attention legal or tax documents sent to the Defendant’s address. In fact, the Plaintiff in the JR Application mentioned the existence of the Informal Arrangement, but asserted that such arrangement did not result in the tax assessments being brought to his attention.

59. In her written submissions, Ms Eu SC refers to the descriptions or comments made by the Plaintiff’s counsel in the JR Application that the Defendant’s address was “stale” or “a dud” for the service of documents on the Plaintiff. However, as rightly pointed out by Mr Li in his written submissions, these descriptions or comments are not inconsistent with a case that the Defendant was negligent in its handling of the Plaintiff’s legal/tax documents sent to its address under the Informal Arrangement.

60. The main thrust of Ms Eu SC’s argument (as forcefully developed by her during oral submission) is that although the Informal Arrangement was referred to in the JR Application, the underlying assumption of such proceedings must be that the Informal Arrangement did not give rise to any legal relationship or legal consequences; for otherwise, there would be effective service of the tax assessments on the Plaintiff.

61. With respect, I am unable to accept Ms Eu SC’s argument.

62. As it can be seen from the Amended Form 86 filed in the JR Application, the judgment of Reyes J handed down on 1 June 2011 as well as the judgment of the Court of Appeal handed down in CACV 113/2011 on 8 March 2012 (on appeal from Reyes J’s judgment), the focus of the JR Application was whether the provisions in the IRO requires that “actual notice” of the assessments be given to the Plaintiff. The Plaintiff’s case in the JR Application was that “actual notice” was required such that it was unlawful for the Commissioner to refuse extension of time for the Plaintiff to object to the tax assessments when he had no “actual notice” of the same until a much later date.

63. Obviously, the Plaintiff’s case vis‑à‑vis the Commissioner in the JR Application was that the Informal Arrangement was ineffective in bringing the tax assessment to his “actual notice” as so required by the IRO. Such a case is, in my view, not inconsistent with the Plaintiff’s case vis‑à‑vis the Defendant that the Defendant owed a common law or fiduciary duty to bring the tax assessments to the Plaintiff’s attention under the Informal Arrangement.

64. The issues concerning the statutory requirements of the IRO are very different from the issues as to whether, and if so, what common law or fiduciary duties were owed by the Defendant in the circumstances. In my view, there is no clear inconsistency for the Plaintiff on the one hand taking the position that there was no effective service of the tax assessments by the Commissioner on him for the purposes of the IRO despite the existence of the Informal Arrangement, and on the other hand taking the position that the Defendant acted in breach of its duties in failing to bring those tax assessments to his attention under the Informal Arrangement.

65. Hence, I am unable to accept Ms Eu’s submission that the underlying assumption in the JR Application must be that the Informal Arrangement did not give rise to any legal relationship and legal consequences as between the Plaintiff and the Defendant.

66. For the above reasons, I find the Plaintiff’s allegation that he placed trust and confidence on the Defendant not directly contrary to his case in the JR Application. Nor am I satisfied that the Plaintiff’s case that the Defendant owed common law or fiduciary duties to him is diametrically inconsistent with his case in the JR Application.

E2. Abuse of process?

67. In light of the above discussions, the only allegation in the Statement of Claim that is found by me to be diametrically inconsistent with that in the JR Application is that the assertion that there was an oral agreement concluded the parties in mid‑1993. The next question is whether it is in the circumstances an abuse of process for the Plaintiff to advance and rely on such assertion in this action.

68. Amongst other factors, one important factor in determining whether it is an abuse of process is to see whether there is any explanation as to why diametrically inconsistent cases have been advanced by the Plaintiff in different proceedings. As pointed out by Brooker J in Mystar, it undermines the integrity of the administration of justice if a litigant with full knowledge is allowed to run diametrically inconsistent cases in different sets of proceedings.

69. There is no question that the Plaintiff has full knowledge of his dealings and discussions with the Defendant. If there were the alleged oral agreement concluded in mid‑1993, the Plaintiff could have mentioned it in the JR Application; even assuming the Plaintiff and his legal team did not consider it to be necessary to allude to such oral agreement, they should have refrained from making the positive assertion in the Amended Form 86 that there was in fact no retainer between the Plaintiff and the Defendant for service of documents. At the end of the day, as the applicant in the JR Application, the Plaintiff was required to make and file a supporting affirmation to verify the matters stated in the Amended Form 86 [6]. There is no reason for the Plaintiff or his legal advisers to allow statements, which are known to be false, to find their way into the Amended Form 86.

70. In his affirmation filed in opposition to this striking out application, the only explanation given by the Plaintiff is as follow:

“9. In the previous judicial review proceedings, my then legal representatives evaluated the law and made the legal submission that there was ‘no evidence … of a retainer’ and ‘in fact no such retainer’. The submission is unfortunately wrong. I have been advised that there is in law, a wealth of evidence that points towards an implied retainer.
10. It is therefore wrong to say that simply because my then representatives said there was no retainer in a previous proceedings, then either there was no retainer as a matter of fact, or that I must have lied. Whether there was an agency relationship or retainer between the parties is a matter for the Court at the end of the day.”

71. As rightly pointed out by Ms Eu SC in her written submissions, the Plaintiff’s explanation assumes that he had properly informed his legal advisers in the JR Application of all the facts concerning the alleged oral agreement, and his then legal advisers had come to the “unfortunately wrong” view that there was “no evidence … of a retainer” and “in fact no such retainer”.

72. In this regard, I agree with Ms Eu SC that it is wholly implausible for the Plaintiff’s then legal advisers to mislead the Court by making a positive assertion in the Amended Form 86 that “there was in fact no retainer” if they were duly informed by the Plaintiff of the facts concerning the alleged oral agreement.

73. The hollowness and lack of veracity of the explanation given by the Plaintiff in his affirmation in opposition is further demonstrated by what his counsel told the Court at the hearing.

74. At the hearing, Mr Li (after speaking to those instructing him) told the Court that when the JR Application was prepared, the Plaintiff was in jail and he was not asked by his then legal advisers to give particulars concerning the alleged oral agreement.

75. This explanation is nowhere to be found in the Plaintiff’s affirmation filed in opposition to this striking out application. More significantly, it is inconsistent with the Plaintiff’s original explanation, which seeks to blame his former legal advisers for coming to the “unfortunately wrong” view based on his instructions.

76. Accordingly, I am not satisfied that the Plaintiff has given any plausible explanation for his advancing diametrically inconsistent cases in the JR Application and in this action. To a certain extent, his unsatisfactory explanation lends support to the Defendant’s case that it is an abuse of process for the Plaintiff to advance and rely on the alleged oral agreement in this action.

77. On the question of abuse, Mr Li submits that there is no abuse of process because:

(1) The issues involved in the JR Application is very different from the issues in this action, and that the question about the existence of agency relationship was not even ruled upon by the courts in the JR Application;
(2) Further, there is also evidence (including the letter dated 6 July 2010 from the Defendant itself) supporting the existence of an agency relationship.

78. As to the first point, I accept that I would need to take those matters into account in assessing whether there is an abuse of process. However, as pointed out in Mystar, the abuse involved in knowingly running inconsistent cases in different sets of proceedings lies in its effect on the integrity of administration of justice. Accordingly, such abuse can exist even if a previous inconsistent allegation was not followed through to judgment, particularly when such previous allegation was an allegation of some significance. In the present case, I am satisfied that matters concerning the relationship and/or arrangement between the Plaintiff and the Defendant on service of documents were matters of some significance in the JR Application. Hence, I do not give too much weight to the fact that the issues in the two sets of proceedings are different, and that the courts in the JR Application did not rule on the alleged agency relationship.

79. As to the second point, I tend to agree that there is some evidence to support the existence of the Informal Arrangement, which may be sufficient to establish a case of agency by way of the doctrine of “implied retainer”: HKSAR v Wong Chi Wai (2013) 16 HKCFAR 539, paras 39 – 44. This is, however, very different from a case that there was an express agency agreement concluded orally back in mid‑1993. Apart from the Plaintiff’s bare assertion (which is inconsistent with what was said in the JR Application), there is in fact no evidence in support of the alleged oral agreement.

80. In my judgment, this action concerns the duties (if any) owed by the Defendant to the Plaintiff on service of documents at the Defendant’s address; and hence, the precise circumstances giving rise to the agency relationship (if any) are of great significance. In the absence of any plausible explanation for the Plaintiff’s inconsistent stance and also in the absence of potentially reliable evidence supporting his case on the alleged oral agreement, I find that it is plainly an abuse of process for the Plaintiff to advance and rely on the alleged oral agreement to support his breach of duties claim against the Defendant.

F. DISPOSAL

81. For the above reasons, I order that the words “(in particular via Mr Yip Wan Tak) concluded orally in or around mid‑1993” in para 4 of the Statement of Claim be struck out.

82. Although the Defendant has not successfully struck out the Statement of Claim in its entirety, it has persuaded this Court that the Plaintiff is guilty of abuse of process in seeking to advance and rely on the alleged oral agreement in this action. Further, I also consider the Defendant to have substantially succeeded in this application by striking out an important allegation in the Statement of Claim. Hence, I make an order nisi that costs of this application be to the Defendant with certificate for 2 counsel, to be taxed if not agreed.

83. Finally, I wish to thank counsel for their most helpful submissions in this case.

	(Anson Wong SC)
	Deputy High Court Judge

Mr Sean Li, instructed by Bough & Co, for the Plaintiff

Ms Audrey Eu SC, leading Justin Lam, instructed by P C Woo & Co, for the Defendant

[1] Mr Li in his oral submissions pointed out that the Defendant only argues its application on the ground of abuse of process. Ms Eu SC in her reply oral submissions did not suggest otherwise.

[2]Chan Chun Chuen v the Commissioner of Inland Revenue (HCAL 76/2010, 1 June 2011), paras 25 – 46

[3]Ibid, paras 47 – 82

[4] See also the transcripts of hearing before Reyes J, pp 6J – 7L and 29M – O.

[5] See the Plaintiff’s Answer to the Defendant’s Request for Further and Better Particulars of the Statement of Claim and Reply dated 3 March 2016, para 1.2

[6] Although the verifying affirmation of the JR Application is not before the Court, there is no dispute that such affirmation exists.

CHAN CHUN CHUEN v. KAO, LEE & YIP (a firm)

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