NAM KWONG MEDICINES & HEALTH PRODUCT CO. LTD. v. CHINA INSURANCE CO. LTD.

HCCL27/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.27 OF 1999

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J U D G M E N T

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The Application

1. There is before the Court a summons dated 18 September 2002 taken out by the defendant.

2. Two forms of relief are requested: first, that the defendant have leave to further amend the existing Re-Re-Re-Amended Defence, and second, that the plaintiff do pay the defendant's costs of the Third Party Proceedings.

3. Both applications were strongly disputed. I deal with them in turn.

Leave to Amend

4. Judgment in this action was handed down on 28 June 2002. In that judgment the Court dismissed the assured plaintiff's claim against the defendant marine cargo underwriter which had declined to indemnify the plaintiff under the terms of a Marine Cargo Policy dated 1 June 1998. This judgment is under appeal.

5. Against this background comes this somewhat unusual application. The defendant now wishes to add a Counterclaim by way of further re-amendment, which for the first time canvasses a claim arising from the plaintiff's apparent refusal to refund a sum of US$47,000 which had been advanced by the defendant to the plaintiff in September 1998 at the time when the plaintiff's claim was under investigation by the defendant. It is said that such advance payment, which it seems was to cover interest charges imposed by the plaintiff's bank, was to be returned (less deduction of the insurance premium of US$6,572.38) if it subsequently was ascertained that there was no obligation to indemnify under the policy.

6. For the defendant, Mr Sussex SC says that this claim was not made before simply because it was assumed by his client that the plaintiff would repay the sum thus advanced should the defendant be successful in defeating the plaintiff's claim. This was a small matter which admittedly was not dealt with at the trial, he said, but which now could easily be cleared up on a cost-effective basis by permitting the amendment sought and thereafter further pleadings on the point and, if such proved necessary, by having a short further hearing to determine the issue, as to which there was no realistic defence. He suggested that his client may have been guilty of naivety in not initially claiming this sum as part of its case, but the matter now could be easily rectified.

7. In opposing the application for the plaintiff, Mr Graham submitted that it was far too late now to come in with further claims, and that in any event the court was functus and had no jurisdiction so to do since the Order reflecting the judgment of the court had been sealed. This was not a case wherein amendments of this sort ought now to be raised or allowed, he said.

8. The court has been referred to a number of cases dealing with when amendments can be made, even in extreme circumstances. There is, however, no need to refer to them in detail, because I am quite satisfied that in this instance, wherein the court is still occupied in dealing with matters, such as costs, arising from the case, that this is not an instance of the court being functus officio. Jurisdiction thus exists to entertain this application. The more pertinent question is whether the court should exercise its discretion to permit that which now is being sought?

9. In my view the answer is 'No'. This is an issue about which the defendant has been fully aware from the very outset of this case, some four years ago, and there is no reason whatever why a simple counterclaim of the type now mooted could not have been advanced and pleaded at the appropriate time, and thereafter adjudged as part of the trial. Whatever the merits of this residual claim - and it is said that there are none in favour of the plaintiff in my view it will not do to come back four months after judgment and request that the court re-open the substantive case on a new, albeit collateral, point. It was quite plain that the erstwhile good relations between these parties had disintegrated totally with the onset of this strongly-fought litigation, and if the defendant has chosen to proceed throughout the entirety of this case without raising this claim, it seems to me that it only has itself to blame.

10. There is a public interest in the finality of litigation, as Godfrey J (as he then was) observed in Wing Han Trading Co. Ltd. v. Tang Yan-Kit and Another [1991] 1HKLR 494, and nothing has been said to convince me, in the exercise of my discretion, that I should now permit this case to be re-opened on no other basis than that the defendant consciously chose not to mount this claim in the case as tried to judgment, only then to return to court, in effect on the premise that it had guessed incorrectly about what the plaintiff was likely to do in terms of repayment of these monies when faced with an adverse result. In my judgment a court would require an exceptional case before acceding to an application of this nature, and this case manifestly is not such.

11. It follows, therefore, that the application to re-amend after judgment, and to re-open this case on this 'repayment issue', is refused.

Third Party Costs

12. There has already been one disputed costs hearing to vary a costs order nisi (see the judgment in this regard handed down on 6 August 2002), and I confess that I had not appreciated that, subject to the "minor matters" remaining outstanding (see paragraph 20 of that judgment), there was anything of substance that required resolution by the court.

13. Nevertheless, that which apparently remains at issue is whether the plaintiff, who has lost the head action, should be responsible not only for payment of the defendant's costs of that action, but also for the costs incurred by the defendant in the third party proceedings commenced by the defendant against People's Insurance Company Ltd of Singapore, whom the defendant initially had joined as Third Party prior to reaching a settlement with the Singaporean insurer, thereby leaving the head action to proceed on its own. The terms of this settlement are described in Mr Horton's affidavit of 18 September 2002, and provided, inter alia, that the defendant would defend the action in Hong Kong in consultation with, and with the documentary assistance of PIC, and that should the defendant lose at trial the third party would contribute 43.5% of any sum adjudged due to the plaintiff, including the principal amount, costs and interest.

14. For all practical purposes PIC dropped out of this litigation, and compromise ensued, after it had failed to strike out the defendant's third party action, which application was based on a clause within a PIC policy which also had been issued to the plaintiff covering the lost shipment of palm olein.

15. In support of this application for the costs of these third party proceedings Mr Sussex made the point that, given the fact of such double insurance, it was inevitable, if PIC was not joined as 2nd defendant to the head action (as it should have been) that his client, as sole defendant, had little option but to move to join PIC as third party and thus obtain contribution for double insurance pursuant to the terms of the Marine Insurance Act 1906. Although the third party action had been dismissed by consent with no order as to costs between the defendant and third party, there was no reason in the circumstances, he submitted, why this plaintiff, which now had failed in its action against the defendant, should not be responsible for the costs incurred by the defendant in terms of those third party proceedings.

16. For his part Mr Graham opposed the making of such costs order. The Third Party action had been disposed of by a Consent Order of 22 September 2000, he said, and it was at this stage and at this stage only that the issue of third party costs had crystallized; or, put another way, third party costs had been "dealt with in toto" at the time of such discontinuation, and against the background of this third party settlement costs now should not be visited on the plaintiff. Nor, he added, should the defendant be penalized in costs for having decided to litigate in Hong Kong as opposed to Singapore.

17. I am unable to discern any merit in this argument. Once I am satisfied, as I am, that the third party proceedings were justified in the circumstances of this case, I fail to see why the PIC settlement, which was entered into on a 'no order as to costs' basis, should preclude the defendant now from making application that the unsuccessful plaintiff pay the defendant's own costs of the third party proceedings. It seems well-established that the court may order an unsuccessful plaintiff to pay the costs of third or fourth parties whose joinder was made inevitable by the plaintiff's claim see M/N 16/7/4 of the 2002 Hong Kong Practice - and, as Mr Sussex submitted, the defendant's costs are a fortiori.

18. At the end of the day, therefore, I am satisfied that it is appropriate, in the exercise of my discretion, further to order that the plaintiff do pay the defendant's costs of the third party proceedings in this action, save in so far as such third party costs already have been made subject of costs orders earlier made by this court. In this context I would add that, subsequent to the hearing of argument, I called for a breakdown of the plaintiff's costs in the third party proceedings (which document is exhibited to the further affidavit of Mr Horton dated 8 November 2002), which schedule makes it clear on its face that no claim is made for costs involved in the unsuccessful striking out application made by the third party. Naturally, such costs of the third party proceedings for which claim now is made are to be taxed, if not agreed, in accordance with usual principles.

19. It follows, therefore, that I make an Order in terms of paragraph 2 of the defendant's summons dated 18 September 2002.

Costs of these applications

20. The result of the foregoing is that each party has been successful in one of the applications before the court. It is not easy to attempt to estimate the proportion of the total time expended on each, although it is probably not far off a 50 : 50 split. In any event, I make an order nisi that there be no order as to costs of the defendant's summons dated 18 September 2002.

21. At the outset of his submissions Mr Sussex noted that the court was here concerned with "two final pieces of housekeeping" arising from this case. I trust that the finality to which he alluded accurately reflects the position, and that indeed nothing now remains outstanding for decision.