CHINA (HK) CHEMICAL & PLASTICS CO LTD v. CHINA INSURANCE CO LTD

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST

ACTION NO. CL19 OF 1997

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DECISION ON COSTS

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1. This case involves a dispute between the Plaintiff assured and the Defendant, its insurer under an Open Cover policy dated 9^th February 1995.

2. By Summons dated 8^th July 1997 the Plaintiff issued an application for summary judgment and after an adjourned two day hearing, the Judgment consequent upon that application was handed down on 18^th March 1998. Pursuant to that Judgment, the Plaintiff's summary judgment application was ordered to stand dismissed, and an Order nisi was made that the costs of and occasioned by the application be to the Defendant in any event, to be taxed if not agreed.

3. By Summons dated 26^th March 1998, the Plaintiff seeks now to vary this Order nisi as to costs. Mr Baker, on behalf of the Plaintiff, contended that in the particular circumstances of this case that the costs of and occasioned by the summary judgment application should be reserved to the trial judge. It would be unfortunate, he submitted, if the contentions advanced at the summary judgment application, in particular with reference to the fundamental issue of material non-disclosure, were in the event to be decided in his client's favour at trial. This submission was coupled with the assertion that, in the event, the Court ought to have finally decided on the legal issues raised after permitting full argument on the Order 14 application, which had proceeded on the basis of assumed facts over the course of two days, and that, if such was not in fact to occur, the application should have been disposed of early in the piece, with a consequent saving in costs. Mr Baker submitted that his client had been placed in the position of having to fight on two fronts, against both carrier and recalcitrant insurers who refused to meet their responsibilities, and now his client was left with no alternative but to proceed to a full trial, which eventuality it had been hoped to avoid. The way out of this "regrettable situation", he said, was to reserve the costs of the Order 14 application, so that there was scope at least for the present adverse costs order to be remedied if and when the Court ultimately held in favour of the validity of his client's various legal contentions.

4. In response, Mr Leung on behalf of the Defendant, was short and to the point. There had been a full hearing, he said, the summary judgment application had been dismissed, there had been no appeal against such dismissal, and accordingly costs should follow the event.

5. I can understand that Mr Baker clearly wished to avoid the expense of going to trial, but with respect I am at a loss to discern why the present state of play should be considered unfair or wrongly prejudicial. I do not accept the bald contention that, after hearing full argument, the decision in fact made "was not a decision that the Court was entitled to come to at that stage", which was how Mr Baker put it in his skeleton argument. This was not an application under Order 14A, namely, the summary disposal of a case on a point of law, nor was it the hearing of an issue under Order 33. It was a normal summary judgment application under the provisions of Order 14, rule 1 And summary judgment applications are susceptible to differing results, one of which is dismissal, the relief asked for by Mr Kat on behalf of the Defendant and which, rightly or wrongly, found favour with the Court, which rejected the alternative of unconditional leave to defend. The matters the subject of argument had been fully pleaded in the Defence, and absent assistance which hopefully will be afforded at trial by expert evidence, the Court declined to decide the non-disclosure issue or, indeed, the other issues raised, at the summary stage, ordering instead, in the exercise of an unfettered discretion, that the case proceed to trial.

6. Against this background the present application to reserve the costs clearly attempts to mitigate a decision which apparently is perceived as unjustified, but which has not been the subject of objection before a higher court; and certainly, taking Mr Baker's costs argument to its logical conclusion, it is not easy to see how it can be suggested that if, after hearing expert evidence at trial, the Court ultimately should rule in his client's favour upon the non-disclosure, or indeed upon the other 'live' issues, that it would nevertheless be open to the Court to award the Plaintiff costs of the unsuccessful Order 14 application notwithstanding the dismissal of that application. In this context it should not be overlooked that whilst argument on material non-disclosure - namely, the fact that the "Hang Shun" had sunk, and the loss occurred, prior to the declaration under the Open Cover being made - was perhaps the high profile point in the application, not least because of the ambitious nature of the proposition advanced, the Court decided also that the "remaining major areas of debate" (as particularised at page 6 of the judgment) were also matters which it was appropriate in the circumstances should go to trial.

7. As to the quantum of costs, I can appreciate the argument that it may have been preferable, from the pure costs standpoint, if the Court had precipitately rejected the Plaintiff's Order 14 application, rather than entertaining it in full, although in any event only the costs of the second day would have been so saved had that occurred. But it strikes me as something of a logical inversion to suggest that, since the Court reached the decision it did, full argument in fact should not have been entertained, notwithstanding that experienced Counsel for the Plaintiff consistently maintained the justification for bringing the summary judgment application.

8. At the end of the day, therefore, I regret that I am against Mr Baker's application to vary the costs Order nisi, and I reject an argument which, if successful, sought to have the effect, in part at least, of reversing the decision by the back door. Accordingly, the application to vary the Order nisi is dismissed, with the costs of the application to the Defendant, in any event, to be taxed if not agreed.

9. It remains only to apologise to the parties for the delay in rendering this written decision. The oversight was entirely mine.