COMPETITION COMMISSION v. ATAL BUILDING SERVICES ENGINEERING LTD AND OTHERS

CAMP 370/2023 and CACV 1093/2025
(Heard together)

[2026] HKCA 214

CAMP 370/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 370 OF 2023

(ON AN INTENDED APPEAL FROM CTEA NO 2 OF 2023)

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AND

CACV 1093/2025

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 1093 OF 2025

(ON APPEAL FROM CTEA NO 2 OF 2023)

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___________________

(Heard together)

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JUDGMENT ON COSTS

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Hon Zervos JA (giving the Judgment on Costs of the Court):

1.  By summons filed on 29 December 2025, the Competition Commission (the Commission) applies to vary the order nisi as to costs in the judgment of this Court dated 12 December 2025[1], by which costs were awarded to the 2^nd to 4^th Respondents (together, the Respondents). The Commission seeks an order that there be no order as to costs or, in the alternative, an appropriate reduction in the Respondents’ costs.

2.  The application is contested by the Respondents.

3.  This is our judgment on costs given on the basis of the written submissions received from the parties.

The legal principles on costs

4.  Costs are, in principle, within the broad discretion of the court, and that discretion is to be exercised so as to achieve substantial justice between the parties. The general guideline that “costs follow the event” is no more than a starting point, not a rigid rule. The court is not confined to the formal result of the appeal, but rather, it considers the substance of what has been achieved, asking which party has been successful overall, to what extent, and in what manner. In doing so, it takes into account the factors in Order 62, rule 5(1)–(2) of the Rules of the High Court (Cap 4A), including the reasonableness of raising particular issues or grounds, the conduct of the parties, the manner in which the litigation was pursued, and proportionality between issues and costs (YBL v LWC (No 2)[2]; Mariner International Hotels Ltd v Atlas Ltd (No 2)[3]).

5.  Where a party has not succeeded on a particular ground of appeal but has nevertheless advanced arguments that were accepted in substance, the court does not treat the formal failure as conclusive on costs. It considers the substantive impact of those arguments, including whether they have shaped the reasoning, clarified the law, narrowed the issues, or promoted the public interest, and whether the failed ground was a discrete and costly issue or instead formed part of an integrated case. The court takes an overall view and is concerned with the reality and justice of the outcome as a whole. Essentially, the inquiry is whether the formal outcome of the appeal accurately reflects where the real or practical success lies.

6.  The court may reduce a successful party’s costs where that party fails on distinct issues that occupy significant time or incur substantial cost, but will not normally “fillet” a case by reference to particular arguments: an “issue” or “event” must be sufficiently discrete, and mere lack of success on specific arguments does not, by itself, attract a costs sanction (Active Base Ltd v Roderick John Sutton and Others[4]; Hong Kong Kam Lan Koon Ltd v Realray Investment Ltd (No 4)[5]). Whilst the failed argument must be so distinct and separate that it constitutes an “issue” or “event”, an unduly narrow interpretation would not be consistent with the objectives and principles of the Civil Justice Reform (Chan Shun Kei trading as Chan Shun Kei Construction Works v Hong Kong Construction (Hong Kong) Ltd[6]).

7.  In practice, these principles are often implemented through percentage adjustments to the costs recoverable by the party who is successful overall. Where a party has failed on an important ground but has nevertheless achieved partial success through arguments accepted by the court, the judge may make a downward percentage adjustment to reflect the significance and impact on costs of the unsuccessful ground.

8.  Percentage reductions have been given where the successful party failed on its main arguments or ran unsuccessful contentions that featured significantly in the hearing (Secretary for Justice v Hui Yat Fai & Ors[7]; Beijing Tong Gang Da Sheng Trade Co Ltd v Allen & Overy (a firm) & Anor[8]), and in cases where, despite dismissal of the claim or appeal, no order as to costs was made in light of partial success on an important public interest point (GA v Director of Immigration[9]).

9.  The issue of costs where a ground of appeal formally fails but certain arguments succeed in substance can be summarised as follows.

If a party loses a ground of appeal but advances arguments that materially influence the court’s reasoning or clarify the law, the court will assess:

(i)  who is, in substance, the successful party overall;

(ii)  whether the unsuccessful ground or arguments constitute discrete issues that have unnecessarily wasted time and incurred additional costs; and

(iii)  whether there is a public interest element or mixed success outcome justifying departure from the general rule that “costs follow the event”.

Depending on this evaluation, the outcomes on costs commonly include:

(i)  ordinary “costs follow the event” with no adjustment;

(ii)  a percentage reduction of the winning party’s costs to reflect its failure on significant discrete issues; or

(iii)  no order as to costs (or each party bearing its own costs) where the formal loser has nevertheless achieved substantial success on important arguments, particularly in public interest or law clarification cases.

The submissions

10.  The Commission applied for leave to appeal the ruling of the President of the Competition Tribunal (the Tribunal) that the Kam Kwong[10]procedure for determining pecuniary penalties between the Commission and the 1^st Respondent should take place after the trial, or after all the respondents have agreed to a Kam Kwong settlement. The Commission sought an order setting aside that ruling and directing that the Kam Kwong procedure be listed for hearing before the Tribunal at an earlier stage. We granted the Commission leave to appeal the President’s ruling, but dismissed the appeal. We made an order nisi that costs be paid by the Commission to the Respondents.

11.  The Respondents’ main argument was that, by its order, the Tribunal was adhering to the established practice of criminal courts for all defendants to be sentenced together. However, the Commission emphasised that the prompt and efficient settlement of competition cases is a key feature of the competition regime and serves the public interest. While acknowledging the applicability of that practice, we held that Kam Kwong applications should not normally be adjourned to await the outcome of proceedings against other alleged offenders unless there is good reason to do so[11].

12.  Ms Leticia Tang, for the Commission, accepts that the Respondents were formally successful, but says their main arguments were all rejected, whereas the Commission’s arguments were accepted and formed the basis of this Court’s reasoning. She argues that the Respondents’ “one event” construction rests solely on the outcome of the appeal and fails to acknowledge the discrete issues raised in argument regarding this ground of appeal. She points out that the Court rejected the Respondents’ arguments that the practice would minimise the risk of disparity in penalties among defendants sentenced at different times[12]; that the delay caused no real prejudice in competition cases; and that an early Kam Kwong application might infringe their right to the presumption of innocence, which the Court characterised as misconceived [13]. She adds that the Court upheld the President’s ruling on the basis that two proceedings were involved in a single pecuniary penalty and that the President was not plainly wrong and had not exercised his discretion unreasonably. This point had not been raised by the Respondents.

13.  Ms Tang relies on authorities showing that a formally successful party can have its costs reduced, or that there can be no order as to costs, where: its main arguments failed and it succeeded only on a narrower issue or on a point raised by the court itself; its unsuccessful arguments occupied a significant part of the appeal; or important public interest principles were clarified (YBL v LWC (No 2); Secretary for Justice v Hui Yat Fai & Ors; Beijing Tong Gang Da Sheng Trade Co Ltd v Allen & Overy (a firm) & Anor; GA v Director of Immigration). She submits that the reality and overall justice of the appeal warrant displacing the normal rule, either by making no order as to costs or by making a significant percentage reduction in the Respondents’ costs.

14.  The Respondents maintain that, as costs follow the event, the Commission should pay their costs of the appeal. They rely on Mariner International Hotels Ltd v Atlas Ltd (No 2) as authority that the starting point is that costs follow the event, and that the Commission bears the burden of justifying any departure from that starting point. They argue that this burden has not been discharged. They submit that there was only one issue – namely, whether the Tribunal erred in adjourning the determination of the 1^st Respondent’s penalty – and that the arguments on disparity and delay were merely considerations within that single issue. There were no discrete “issues” on which the Commission could be said to have succeeded so as to justify a reduction, and the authorities caution against “filleting” costs on the basis of individual arguments (Active Base Ltd v Roderick John Sutton and Others[14]; Hong Kong Kam Lan Koon Ltd v Realray Investment Ltd (No 4)[15]).

15.  The Respondents dispute the Commission’s characterisation of the judgment. They say the Court upheld the President’s approach and accepted, in substance, the Respondents’ position that an adjournment to achieve consistency and efficiency was open to the Tribunal, and that any rejection of particular strands of their submissions (for example, on disparity, delay, and the presumption of innocence) did not significantly increase the time taken or the costs incurred. They contend that clarification of legal principles is common in appellate decisions and does not, by itself, justify depriving successful private litigants of their costs; indeed, where a public authority litigates to clarify the law, that is a reason for the public purse to bear the costs of successful respondents.

16.  It is true that, where a public authority litigates to clarify the law, the public purse should bear the costs of a successful respondent, but that does not entitle the respondent to receive costs for arguments that were unsuccessful and that thereby significantly increased the time taken to consider them and the costs incurred as a consequence. However, it is not simply a matter of generally characterising an argument as unsuccessful, for there may be justification or merit in advancing it before a court in addressing a particular ground of appeal. In such a case, a qualitative assessment needs to be made of the relevance and merit of the argument, and of whether any reduction or disallowance of a party’s legal costs should be made.

17.  In the present case, we considered that the underlying arguments concerning the disparity of penalties and the prejudice caused by delay were relevant and applicable to the ground of appeal and were properly advanced by the parties. There was partial success for both sides on these arguments. This could not be said in respect of the Respondents’ argument concerning the presumption of innocence. We did not find that argument to be relevant or persuasive.

Conclusion

18.  In light of the foregoing, we consider that an appropriate order is for the Commission to bear a substantial, but not the whole, proportion of the Respondents’ costs. Taking into account the formal outcome of the appeal, the Commission’s partial success on several points of substance, and the fact that the Respondents nevertheless succeeded overall, we conclude that it is appropriate to depart from the normal rule only to a limited extent. On that basis, we order that the Commission pay two-thirds of the Respondents’ costs of the leave applications and the appeal, to be taxed if not agreed, and that there be no order as to costs for the summons.