Indemnity Costs - Impact of Poor Litigation Conduct

In a recent judgment (Wang Ho Yin Patrick v Fu Chun Lung & Ors. [2018] HKDC 301) handed down by H.H. Judge Andrew Li, the Court highlighted the importance of good litigation conduct once again to practitioners.

Background

After the Plaintiff withdrew an otherwise misconceived application to vary the terms of a Tomlin Order in which the Court observed, “no citation was provided by P in the margin of the Summons as to what rules the Summons was supposed to be based on … it is quite clear to me that P’s application has been totally misconceived and without any proper legal or factual foundation”.

Held the Plaintiff in this case, being himself a litigation solicitor at the Plaintiff’s firm (see para 10), was slapped with an Indemnity Cost Order after the Court found against him on not just one (1) ground, but all four (4) grounds available (any one of which alone is already enough to justify the awarding of Costs on Indemnity basis).

Ground 1: A Totally Unmeritorious Application

The Court reaffirmed that the fact that the Plaintiff took out a totally unmeritorious application going way beyond mere procedure defects is, by this ground alone, already sufficient to award costs against the Plaintiff on indemnity basis.

Ground 2: A Summons Taken Out in An Oppressive Manner (Manners & Conduct)

In respect of the 2nd Ground, it is noteworthy that the Court will explore the particular conduct in which negotiations were conducted.

Here, the Court found that the Plaintiff’s threat of “Contempt Proceedings” only after the 1st round of negotiations oppressive. In the Court’s own words “I do not see how P’s client (who was P himself) “sincerity for settlement” could have been exhausted when the negotiations had hardly begun.”

Furthermore, the Court again took a stern view against the Plaintiff’s refusal to even agree on simple directions in which, in the Learned Judge’s Decision, reaffirmed a rebuke made by the Registrar that P “did not have to come to court to obtain those directions” and to that extend the Registrar considered that P was “in the wrong”.

This ruling is a stern reminder to practitioners that where a directions hearing can be avoided, it is good practice to deal with it by consent, failing which, may result in sanctions from the Court.

As a result of the anti-CJR conduct as exhibited by the Plaintiff, the Court too allowed indemnity on this ground.

Ground 3: Outcome No Better than Any of D1’s Prior Offers

An often-overlooked ground in application for Indemnity Costs, it is noteworthy that where offers had been made but ignored, a withdrawal will automatically put the applicant at a position no better than if earlier offers were accepted.

It was found in this case that “as a result of the withdrawal of the Summons on that date of the hearing, P was no better off than any of D1’s offers made at various stages of the negotiations which consisted of a number of concessions made by D1 with a view to amicably settle the matter.” The resulting wasted costs from Plaintiff’s belligerent conduct therefore resulted in yet another ground being found against the Plaintiff for indemnity.

Ground 4: P’s Unreasonable Behaviour

Lastly, this ground cannot be better elucidated than in the words of H.H. Judge Andrew Li where it was held that “this application had to come as far as the hearing (only to find that P’s counsel would abandon it half way through) was as a result of P’s (both in his capacity as the handling solicitor and lay client in the case) refusal to curtail the dispute by consent and constant attempts to refer to matters which occurred prior to the entering of the Tomlin Order… In my view, this could have been totally avoided had P acted reasonable and with a sense of proportionality and judgement.”

Take Away Points

This case only goes to highlight the importance of professional courtesy where, if left unobserved, can very well lead to very severe consequences. In summary:

  1. Cite the proper legal authority in the margins of a Summons (merely citing Inherent Jurisdiction is unacceptable).
  2. Be sincere during negotiations. This case illustrates how the Court will look into conduct of parties to ascertain whether offers were sincere.
  3. Always endeavor to seek common ground - no matter how minor. The refusal to even work out directions resulted in the Court’s rebuke against the Plaintiff for being “in the wrong”. Directions hearings are to be avoided.
  4. Consent Summons are always your friend. Beauty of Consent Summons is that it can be entered into at any stage (so long as parties are willing).
  5. Always be courteous. The Plaintiff’s mannerisms were deemed as “an affront to professional courtesy”.

Practitioners are therefore reminded of the imperative to avoid falling into the same pitfalls as the Plaintiff (whom himself is a litigator), it can be easily seen how good manners and courtesy pays off in the long run.

Jurisdictions: 

Solicitor, GPS McQuhae (Hong Kong)

Joshua Chu is Litigation Consultant at GPS McQuhae LLP in Hong Kong. He specialises in corporate, healthcare and technology law and has experience in cross-border and conflict of laws dilemmas. Joshua has also represented the successful Defendant in one of Hong Kong’s first cryptocurrency litigation.

Since embarking on his legal career, Joshua has developed a predominantly civil practice with a focus on general civil, commercial, company and technology. He has represented Clients in all levels of Court in a wide range of commercial and criminal litigation. 

Solicitor, GPS McQuhae (Hong Kong)

Anna Lau is Litigation Consultant at GPS McQuhae LLP in Hong Kong. A biomedical engineer by training, prior to her embarkation onto her legal career, Ms Lau had worked closely with the United States Patent and Trademark Office (USPTO) and US Food and Drug Administration (FDA) on intellectual property and FDA regulatory work.

Her unique skill set enables her to expertly deal with Technology/Intellectual Property law, being able to use an engineer’s perspective to understand each individual client’s need and advise them in their own (tech) language. Anna was part of the team that represented the successful Defendant in one of Hong Kong’s first cryptocurrency litigation.