Yifung Developments Ltd v Liu Chi Keung Ricky (No. 2)
Court of First Instance
High Court Action No. 1341 of 2014
Queeny Au-Yeung J
20 December 2016

Costs – action commenced without authority but subsequently ratified – relation back of ratification as equivalent to antecedent authority – pre-ratification costs and post-ratification costs – solicitors did not have to bear any costs – nor did directors

An action in the name of the plaintiff-company (“C”) was commenced without authority. But its commencement was then ratified. D1’s summons on the issue of authority was dismissed. It was ordered nisi: that D1 should have certain pre-ratification costs of the authority summons; that C’s solicitors (the “Solicitors”) show cause why they should not bear those costs; and that half of C’s post-ratification costs of the authority summons be paid by D1. In addition, C was called on to make representations as to whether a mandatory injunction should be set aside for non-disclosure and consequently, whether the action had been necessary. Both sides sought variation of the order nisi. A variation summons taken out by C and a subsequent application to amend that summons were both dismissed with costs to D1. D1’s variation summons sought the costs of the hearing of the authority summons and, as an alternative to the Solicitors’ potential costs liability, asked that C’s directors (the “Directors”) pay his costs.

Held, dismissing D1’s summons, making the order nisi absolute, and ruling that there was no basis for costs to be ordered against the Solicitors or Directors nor had there been any material non-disclosure, that:

  • That the action had been commenced without a compliant board resolution to do so, that C succeeded in only one of its four lines of argument and that it had made unjustified complaints that D1 lacked locus and of abuse of process had all been reflected in the order nisi that C have only half of its post-ratification costs. There was no reason to order any variation in D1’s favour.
  • The ratification related back and was deemed to be equivalent to antecedent authority. The Solicitors should not be ordered to bear any of D1’s costs.
  • There was unity of purpose of all the stakeholders, and the Solicitors had all along taken instructions from two of the Directors as constituting the entire board of C. In all the circumstances, the Solicitors need not bear any of their client’s costs.
  • The action was for the purpose of recovering C’s assets. And the Directors could not have been the true beneficiaries of the action or the summons. There was no basis for making them personally liable.
  • No reason to question the obtaining of the injunction or the necessity of the action was made out. D1 having triggered the Court’s concern on those matters, he should bear C’s costs of making representations thereon.
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