HONG KONG ASPHALT (GREEN) LIMITED (formerly known as ADRIAN ENVIRONMENTAL & WASTE TECHNOLOGIES LTD) v. SUN FOOK KONG (CIVIL) LTD

HCCT 17/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 17 OF 2010

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DECISION ON COSTS

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1. Following my judgment dated 4 July 2014, the defendant (who was successful at trial) applied to vary my costs order nisi to seek:

(1)  a certificate for two counsel; and

(2)  an order of indemnity costs.

2. The application for certificate for two counsel is not opposed and I so order.

3. The application for indemnity costs is made on two bases:

(1)  Primarily, on the basis that the claim was an improper claim founded on fabricated documents and ought not to have been brought at all.

(2)  In addition, the plaintiff had failed to accept a Calderbank offer made by the defendant on 12 June 2012 which proposed a settlement on what colloquially was called a “drop hands” basis.

4. I do not need to rehearse the details of my own judgment.  The parties had made elaborate submissions on my judgment as to what it meant and as to how culpable the plaintiff’s conduct had been (or had not been) in bringing this claim.  This is something not susceptible to elaborate analysis.  I have found (albeit not strictly necessary for dismissing the claim) that the Document was fabricated.  To bring a claim on the basis of a fabricated document is, needless to say, a serious matter.

5. The plaintiff contended that the authenticity of the Document has not been challenged.  However, the document has not even been disclosed in the plaintiff’s list of documents, and therefore there was no “deemed admission” pursuant to Rules of the High Court, Order 27 and the defendant could not have challenged the authenticity of the Document under Rules of the High Court, Order 27.  Also, if a party relies on a fabricated document as part of its case, it does not need to be told that the evidence was fabricated. It should have known about it.

6. The fabricated nature of the Document is a matter that I am entitled to, and I do, take into account in exercising my discretion as to the scale of taxation of costs.

7. The Calderbank letter dated 12 June 2012 is an additional factor that I am entitled to take into account in exercising my discretion as to costs.  The offer contained in that letter is one which was more generous (to the plaintiff) than the result at trial because it proposed “no order as to costs”.  Had the plaintiff accepted this offer, then all the costs afterwards could have been avoided.  The offer was not relied on by the defendant as a sanctioned offer under Rules of the High Court Order 22 but this only means that the specific costs consequences stipulated by Order 22 do not apply.  It still takes effect as a “without prejudice save as to costs” offer (the efficacy has not been abolished or removed by Order 22) and can still be taken into account by me in my discretion as to costs (specifically, as to scale of taxation).

8. Having taken into account the above circumstances, my decision is as follows.

9. I have a discretion to award costs on an indemnity basis.  Without burdening this ruling with elaborate citation of authorities (summarized by the defendant at §13–16 of its submissions on costs dated 6 August 2014), it suffices to say that an order for indemnity costs must be appropriate and it is not limited to cases of bad faith, disproportionate incurring of costs, or pursuit of claims in an improper or oppressive manner.  Indemnity costs may also be ordered in a case where the claim should never have been brought and the party bringing it nevertheless unreasonably and unjustifiably persisted. 

10. I stress that the above are just examples where indemnity costs may be ordered.  I do not treat them as cases where indemnity costs must be ordered.  Nor are they exhaustive examples.  Also, I bear in mind the fact that it is open to me to order costs on a common fund basis, which is on a higher scale than party and party but not as high as indemnity costs.

11. A case founded on a fabricated document is a serious case.  However, the case (at least the trial) has been conducted with moderation and with no undue aggressiveness or oppressiveness.  At least my attention has not been drawn to any oppressive or high handed way of conducting this litigation. 

12. As I said, a party relying on a fabricated document does not need to be told so, because he must be taken to know the authenticity of the document on which he relies.  It may be said that such a party ought also to have known that relying on false documents would have costs implications.  I am, however, prepared to give the plaintiff the benefit of the doubt and err towards the view that it was only by the Calderbank letter that the plaintiff was clearly put on notice that taxation on a higher scale would be sought. 

13. Taking all the disapprove factors into account I am of the view that it would be appropriate to disapprove the plaintiff’s reliance on a false document by an order for taxation on a higher scale. However, the plaintiff’s conduct, though worthy of disapproval, is not so bad that it attracts an order for indemnity costs.  I would therefore order taxation on a common fund basis for all costs subsequent to 26 June 2012 (being 14 days from the Calderbank letter, the time allowed for acceptance by the terms of the letter).  Costs prior to that date shall be taxed on a party and party basis.

14. I should add that in ordering common fund costs only from 26 June 2012, I am by no means laying down an immutable rule of law or practice that before an order for taxation on a higher scale can be allowed, the paying party must first be forewarned by a letter and that the period of higher scale taxation can only begin afterwards.  Nor should I be taken as saying that a claim based on false documentation can never, per se, attract an order for indemnity costs.  It depends on the facts of the case, including for example how egregious the losing party’s conduct was. 

15. Since the defendant had succeeded in varying the costs order nisi, I also order that the plaintiff should pay the defendant’s costs of and occasioned by this application, to be taxed if not agreed, but only on a party and party basis.