FOCUS INDUSTRIES AND ANOTHER v. BLUE ANCHOR LINE AND ANOTHER

HCAJ 50/2021

[2023] HKCFI 1278

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 50 OF 2021

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D E C I S I O N

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1.  This is a hearing to decide on costs of 2 summonses: D2’s Summons to set aside an interlocutory judgment; and the Plaintiffs’ Summons conceding that judgment do stand in part and asking for case management directions.

(1)  D2 suggests that, with regard to D2’s Summons, the Plaintiffs should only get costs, at most, up to the time D2 disclosed its defence on the merits. With regard to the Plaintiffs’ Summons, D2 should get costs because that Summons duplicated the applications under D2’s Summons and another extant summons for directions to quantify the Plaintiffs’ damages (“Quantification Summons”).

(2)  The Plaintiffs seek costs of both Summonses.

Background

2.  On 26 November 2021, the Plaintiffs issued the writ claiming that the Defendants had misdelivered 6 containers. The Plaintiffs served the writ on 8 December 2021. D2 did not file an acknowledgement of service.

3.  On 22 February 2022, the Plaintiffs entered Interlocutory Judgment on liability with damages to be assessed against D2. On the following day, the Plaintiffs issued the Quantification Summons.

4.  D2 conceded that the Interlocutory Judgment was a regular judgment. D2 claimed that only 2 containers (“the 2 Containers”) were misdelivered. The remaining 4 containers (“the 4 Containers”) had been in D2’s possession. The Plaintiffs asked for inspection of the 4 Containers.

5.  On 12 April 2022, D2 issued D2’s Summons.

6.  The Plaintiffs were finally allowed to and did inspect the 4 Containers on 22 April 2022. The seals to the 4 Containers were found to have remained intact. Further, D2 sent photos of the 4 Containers to the Plaintiffs’ solicitors on 28 April 2022.

7.  The Plaintiffs eventually decided to proceed with their claim on the 2 Containers and drop their claims to the other 4. They provided security for the release of the 4 Containers by payment into Court.

8.  On 14 December 2022, the Plaintiffs filed the Plaintiffs’ Summons seeking for orders:

(1)  That the Interlocutory Judgment do stand in respect of the 2 Containers as to which the Defendants have admitted liability;

(2)  That the Plaintiffs waived their claims in respect of the remaining 4 Containers but reserved their rights and defences to the Defendant’s potential demurrage counterclaim;

(3)  That D2’s Summons be dismissed with costs to the Plaintiffs to be taxed if not agreed on indemnity basis; and

(4)  For case management directions relating to the claim and the counterclaim.

9.  Upon the parties’ agreement, an order has been made on the following terms in respect of D2’s Summons and the Plaintiffs’ Summons:

(1)  Setting aside of the Interlocutory Judgment insofar as it relates to the Plaintiffs’ claims in respect of the 4 Containers.

(2)  Directions for the filing of defence to counterclaim, discovery and filing of witness statements.

Only costs remain to be decided at this hearing.

Costs of D2’s Summons

10.  The plaintiff should, as a matter of principle be entitled to costs for setting aside a regular judgment. However, if a defendant has disclosed its defence on the merits (and in the context of set-aside summons, it would mean with sufficient particulars and evidence to support the defence), the plaintiff ought reasonably to consider it. If the judgment is set aside by consent, costs of the set-aside application up to consideration of the disclosure should be to the plaintiff. If the plaintiff continues to resist the application, costs should follow the event. See Lu Shaoping v Wu Lianmo, [2020] HKCFI 944, §§7-8, DHCJ William Wong SC; applying Welson International Ltd v Jebson Investments Ltd, HCA 2620/2008, 29 June 2010, Chung J, §§16 and 23.

11.  In this case, the Plaintiffs were misled, before issue of the writ, by D2’s agent into believing that the 4 Containers had been misdelivered. The Defendants had not responded to a letter before action. The Plaintiffs were not obliged to take D2’s word that the 4 Containers were in D2’s possession at face value but was reasonable in insisting on an inspection. Latest by 28 April 2022, the Plaintiffs ought to have agreed to set aside the Interlocutory Judgment in relation to the 4 Containers.

12.  Mr Toms, solicitor for the Defendants, points out that the affidavit of Mr Mirchandani filed on behalf of the Plaintiffs in opposition on 24 June 2022 devoted almost half of its contents to evidence that suggested that D2 no longer had the 4 Containers. The Plaintiffs subsequently decided (rightly in my view) not to pursue the claim in respect of the 4 Containers.

13.  With respect, I do not consider it is a fair comment of Mr Mirchandani’s affirmation. Mr Mirchandani was setting out the full background. This is because, as of the date of that affirmation, D2’s stance (as set out in D2’s Summons) was still to set aside the whole Interlocutory Judgment. Even at the call-over of the Plaintiffs’ Summons in December 2022, despite the Plaintiffs’ clear stance to let the Interlocutory Judgment stand only as regards 2 Containers, D2 insisted on proceeding with D2’s Summons.

14.  It can be seen from the affirmations and active correspondence and the submissions before me that the parties’ dispute was about the proper terms of the setting aside. Should the whole Interlocutory Judgment be set aside (as claimed for in D2’ Summons), and a fresh interlocutory judgment in respect of the 2 Containers be entered? Or should the Interlocutory Judgment stand to the extent of the 2 Containers whilst the Plaintiffs’ claim over the 4 Containers be dismissed or waived (as the Plaintiffs put it)? These could affect interest or a limitation issue raised by D2 in the unsworn affirmation of Ling Yan Yang (§§20-21).

15.  Mr Toms at this hearing referred to correspondence on the limitation issue that was not produced before the due time. I disregard the same for the purpose of this decision. Likewise, the post-hearing submission of the Plaintiffs’ solicitors by letter dated 10 May 2023 is also disregarded.

16.  Mr Toms submits that if the Plaintiffs are granted costs, their costs should be on the District Court scale because the total value of all 6 claims was US$368,986 (ie HK$2,870,715). Whether the claim concerns 2 or 4 Containers, the claims ought to have been brought in the District Court. The Plaintiffs have no answer to this.

17.  Considering all the circumstances, I order D2 to bear the Plaintiffs’ costs on the District Court scale.

18.  Given that the size of the claim, for the Plaintiffs to incur HK$666,272 on D2’s Summons and the Plaintiffs’ Summons is plainly disproportionate even on the High Court scale. There was also no justification for engaging 2 fee earners for an application which was not complex. However, I notice from the Plaintiffs’ costs statement that the fee earners are not charging the HC scale. Applying the District Court scale, I summarily assess the costs of the Plaintiffs for D2’s Summons, including the costs of this hearing, at $180,000.

Costs of the Plaintiffs’ Summons

19.  The Plaintiffs’ explanation for issuing this summons is that the D2 has not filed any affidavit in reply to D2’s Summons and has not fixed a date for hearing D2’s Summons. §§1-3 of the Plaintiffs’ Summons concern the terms of setting aside the Interlocutory Judgment; §§4-8 concern case management directions for this action.

20.  Without disrespect, the Plaintiffs took a wrong approach. A master has given directions for the filing of evidence and setting down D2’s Summons for hearing. Either party could have applied to fix a hearing date. There was no need for §§1-3 of the Plaintiffs’ Summons.

21.  There was no need for §§4-8 of the Plaintiffs’ Summons either because they were covered by the extant Quantification Summons.

22.  In principle, the Plaintiffs should bear the costs of the Defendants for the Plaintiffs’ Summons. However,

(1)  There is nothing unique in §§1-3 of the Plaintiffs’ Summons which has to be dealt with by D2 separately from D2’s Summons. I therefore award nominal costs of $10,000 for D2’s consideration of this Summons, correspondence between the parties and submission on costs.

(2)  There needs to be directions anyhow for the further conduct of the action after the Plaintiffs decided to drop its claim in relation to the 4 Containers and there is a counterclaim. In my view, 50% of the costs the Plaintiffs’ Summons should be costs in the cause, provided that if the Plaintiffs eventually get costs, it shall be on the District Court scale.

23.  The Quantification Summons is still extant but is probably of no further utility after this hearing. When it comes to disposal (including withdrawal) of that Summons, the Court and the parties can take into account the costs now awarded under the Plaintiffs’ Summons.

Conclusion

24.  I make an order as follows:

(1)  Costs of D2’s Summons (including the costs of this hearing) be to the Plaintiffs, summarily assessed at $180,000;

(2)  In respect of the Plaintiffs’ Summons,

(a)  the Plaintiffs do pay costs of $10,400 to the Defendants; and

(b)  50% of the costs of this Summons shall be in the cause, provided that if the Plaintiffs eventually get costs, it shall be on the District Court scale.

(3)  After set off of the costs, D2 do pay $169,600 to the Plaintiffs.