NG YAU SING AND OTHERS v. FALCON INSURANCE COMPANY (HONG KONG) LTD AND ANOTHER

HCA 135/2022

[2025] HKCFI 2343

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 135 OF 2022

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BETWEEN

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D E C I S I O N

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A. INTRODUCTION

1.  The plaintiffs (“Ps”) were the 4 joint owners of a racehorse named “Super Star”.

2.  Super Star was euthanized in February 2021 after having failed to respond positively to treatments for a serious respiratory condition.

3.  These proceedings involved a claim by Ps against Super Star’s insurers, Falcon Insurance Co (Hong Kong) Ltd (“D1”) and Assicurazioni Generali Societa Per Azioni (“D2”) (collectively as “Ds”), for an indemnity under a Bloodstock Insurance Policy issued on 18 March 2020 (“the Policy”) which covered, inter alia, the “Humane Destruction” of Super Star.

4.  The underlying claims were settled by Consent Orders dated 12 and 24 April 2024, under which leave was granted for Ps to accept Ds’ sanctioned payment on 13 April 2022 at HK$100,000 (“Sanctioned Payment”) out of time.

5.  What remains in dispute are costs as between Ps and D1.[1]

6.  There are two outstanding costs issues.

7.  First, there is a dispute as to liability for costs after 11 May 2022, ie the date of expiry of the Sanctioned Payment:

(a) D1 accepts that it should pay Ps’ costs up to 11 May 2022 but contends Ps should pay its costs thereafter.[2]

(b) Ps contend D1 should pay their costs up to 31 December 2022, ie the month when the exchange of witness statements was completed. Ps accept that they should pay D1’s costs thereafter.[3]

(c) In commercial terms, what is at stake is – broadly speaking – the incidence of costs arising from discovery and preparation of witness statements.

8.  Second, there is a dispute as to the applicable scale for taxation purposes:

(a) D1 contends that Ps’ costs should be taxed on the District Court scale, while its own costs should be taxed on the High Court scale.[4]

(b) Ps’ position is that all costs should be taxed on the High Court scale.

B. BACKGROUND

9.  The following background facts, which have been succinctly summarized by Mr Joshua Chan for Ps in his submissions (Ps’ Submissions”), are not seriously disputed by D1.

B.1 The Policy

10.  On 18 March 2020, D1 and D2 issued the Policy.

11.  The Insuring Agreement at p.J-1 of the Policy provides that:

“[D1] agree[s] that, subject to the following terms and conditions, in the event of the death, theft or HUMANE DESTRUCTION of the HORSE:

a) during the period of this Insurance…

[D1] will indemnify the INSURED in respect of the FAIR MARKET VALUE of the HORSE at the time of the accident, injury, illness or disease causing its death or HUMANE DESTRUCTION, up to but not exceeding the limit of [D1’s] liability specified in the Schedule.”

12.  The Glossary at p.J-1 of the Policy defines “Humane Destruction” to mean inter alia:

“a) that the HORSE incurs an injury or is affiliated with an excessively painful disease, and a VETERINARY SURGEON appointed by [D1] shall first have given a certificate that the suffering of the HORSE is incurable and so excessive that immediate destruction is imperative for humane reasons; or”

b) that the HORSE incurs an injury and a VETERINARY SURGEON appointed by the INSURED shall first have given a certificate that the suffering of the HORSE is incurable and so excessive that immediate destruction is imperative for humane reasons without waiting for the appointment of a VETERINARY SURGEON by [D1].” …..

13.  Pursuant to the Equine Agreed Value Clause at p.J-4 of the Policy and the Schedule to the Policy, it was agreed that the Fair Market Value of Super Star for the purposes of the Policy was HK$4.7 million.

14.  The Policy also contained a Retirement Clause at p.J-9 which provides that:

“Subject to all of the terms, conditions and exclusions of the Insurance to which this clause is attached, it is understood and agreed that in the event of any insured HORSE being retired, from the use specified in this insurance, either voluntarily by the INSURED or compulsorily by The Hong Kong Jockey Club all cover under this Insurance shall cease with immediate effect and a return premium shall become payable by [D1] in accordance with Short Rate Scale under Condition 11 of this Insurance.”

15.  The use specified in the Schedule to the Policy was “Flat Racing in Hong Kong only”.

16.  The Policy was issued upon the acceptance of a letter dated 2 March 2020 from Dr Paul Robinson (“Dr Robinson”) of the Hong Kong Jockey Club (“HKJC”) certifying that Super Star was in good health and condition.

17.  The insurance broker in respect of the Policy was Golden Horse Insurance Brokers Ltd (“Golden Horse”).

B.2 Super Star’s illness and euthanasia

18.  On 5 February 2021, Dr Robinson issued an Ultrasound Report (“the Ultrasound Report”), in which he reported, inter alia, that:

(a) Super Star had a recent history of fever with a blood abnormality. Despite antibiotic and anti-inflammatory therapy, his blood results still showed signs of infection and an ultrasound scan was recommended to assess the health of the lungs.

(b) The ultrasound showed that the horse had an infection within his lungs that resulted in fluid accumulation within his chest cavity.

(c) Super Star had already had a tie-back procedure for being a roarer (ie a condition of the larynx which affects the horse’s airway) and this can result in persistent, low-grade lung infection in some horses which can occasionally lead to pleuropneumonia.

(d) Super Star would be treated with an aggressive antibiotic and anti-inflammatory approach and re-scanned in the following week to determine the response to therapy.

19.  On 18 February 2021, Dr Robinson issued a Veterinary Report (General) (“the Veterinary Report”), in which he reported, inter alia, that:

(a) Given the amount of fluid in the chest cavity in the previous week, a chest drain was placed on either side of his thorax to drain the fluid that had accumulated. The fluid was submitted for a laboratory evaluation which confirmed a high level of infection. The previously identified area of collapsed/infected lung was still evident in both sides of the chest.

(b) A follow-up examination of the chest cavity that week revealed re-accumulation of the fluid which was very concerning. While the condition could be treated with indwelling chest drains and prolonged antibiotic therapy over the course of weeks to months, Dr Robinson’s concern was that the original cause was likely related to Super Star’s throat problem for which he had underwent surgery. Even with aggressive medical therapy there was a good chance that aspiration pneumonia will continue and that condition may well be a recurrent problem in the future.

(c) Given the poor response to therapy so far and Super Star’s history of being a roarer leading to a serious lung infection, Dr Robinson recommended that strong consideration be given to euthanasia.

20.  In view of the views expressed in the Veterinary Report, on 20 February 2021, Ms Joey Poon Sui Yi (“Poon”) of Golden Horse sent an email to HKJC on behalf of Ps informing the latter that Ps wished to lodge a mortality claim and sought advice as to whether the suffering of Super Star was incurable and so excessive that immediate destruction was imperative for humane reasons.

21.  On 22 February 2021, HKJC replied to Poon attaching an email from Dr Robinson in which he advised that “[T]he horse can potentially be treated aggressively but I think this will be a recurring problem and HVCS[5] and I have spoken and recommend euthanasia on humane grounds”.

22.  In light of Dr Robinson’s advice:

(a) On 22 February 2021, Ps signed a form to retire Super Star from racing.

(b) On 23 February 2021, Mr Ng Yau Sing (ie P1) signed a form on behalf of Ps giving the Jockey Club authority for euthanasia of Super Star.

23.  On the same day, Poon emailed staff members of D1 notifying the latter of Ps’ mortality claim for the fair market value of Super Star.

24.  On 25 February 2021, Super Star was euthanized.

25.  On 2 March 2021, Mr Kenneth Chow (“Chow”) of D1 replied to Poon stating, inter alia, that “we regret to our belated acknowledgement. In fact, we had already appointed Dr Peter Schiff to review the medical issue and a report will be available soonest.”

B.3 Denial of claim and exchange of correspondence

26.  On 25 March 2021, Ds’ loss adjusters, Robert Scally & Associates (“RSA”), indicated that Ds would deny liability on the ground that:

(a) Super Star’s suffering was not incurable and so excessive that immediate destruction was required for humane reasons; and

(b) coverage under the Policy ceased on 21 February 2021 pursuant to the Retirement Clause because Ps had made a voluntary decision to retire Super Star from racing with effect from that date.

27.  P noted that RSA relied primarily on the views of Dr Robinson in support of its position. It merely relied upon the opinion of Dr Peter Schiff (“Dr Schiff”) as being consistent with and supporting the views of Dr Robinson.

28.  Between May and July 2021, Ps’ solicitors Keith Lam Lau & Chan (“KLLC”) and RSA exchanged 6 letters with a view to resolve the disputes between the parties. During this process, KLLC specifically requested RSA by letter dated 7 May 2021 to “provide the names of these [other veterinary surgeons RSA consulted] and details of their views in the form of their reports or contemporaneous records of the consultation for our client’s reference.”

29.  This request was however ignored by RSA.

30.  RSA instead relied exclusively on the opinions and reports of Dr Robinson in its letters dated 17 May and 19 July 2021.

31.  This is illustrated by the following passages in RSA’s letter dated 17 May 2021[6]:

“It will be clear that Dr Robinson states that “Super Star”’s condition could be treated with indwelling chest drains and prolonged antibiotic therapy over the course of weeks to months but his comment is that even with such aggressive medical therapy there is a good chance that aspiration pneumonia will continue and the problem would be a recurrent problem in the future. Dr Robinson therefore advises quite specifically that treatment options were available in this 18 February 2021 Report, albeit he expected there would be recurrence hence he does not recommend the aggressive medical therapy outlined…

We put a specific question to Dr Robinson and we would suggest that you follow up in this regard directly with Dr Robinson if you feel such is necessary. We asked whether the horse's condition was such that the suffering was incurable and so excessive that immediate destruction was imperative for humane reasons. Dr Robinson's response was quite candid namely the horse's condition did not meet this Policy definition...”

32.  In light of RSA’s non-response, KLLC further attempted to clarify the position by requesting RSA by letter dated 20 September 2021 to provide Ps with the report or certification prepared by Dr Schiff or any other veterinary surgeons appointed by Ds pursuant to the Policy such that Ps[7]. In the same letter KLLC reminded “We have then specifically asked you in our letter dated 7 May 2021 to you to provide the other veterinary surgeons you have consulted and details of their views in the form of their reports. But apparently you have ignored our request.” [emphasis added]

33.  As an alternative, KLLC indicated to RSA that:

“If however there is no such report or certification because [Ds] did not appoint their veterinary surgeon to do so, please confirm if [Ds] insist upon such report or certification or if [Ds] are satisfied to rely on Dr Robinson’s veterinary reports and his views because you have leaned heavily on him in your previous letters…”[8]

34.  By a letter dated 27 September 2021, RSA asserted that Dr Schiff’s report was subject to litigation privilege and refused to release the same to Ps[9]. RSA further reiterated Ds’ position that in light of the concurring views of Dr Schiff and Dr Robinson, Super Star’s suffering was not so incurable and excessive as to require humane destruction.

35.  A further request from KLLC for disclosure of Dr Schiff’s report by letter dated 4 October 2021 was declined by RSA on the same grounds in its letter dated 5 October 2021.

C. PROCEDURAL HISTORY

36.  The following procedural history has been summarized by Mr Chan for P of which D1 does not seriously dispute.

C.1 The Pleadings

37.  On 27 January 2022, Ps commenced these proceedings by issuing a writ and serving the statement of claim (“SoC”) where they claim that they were entitled to an indemnity under the Policy by virtue of Super Star’s humane destruction, pursuant to the opinion and recommendation of Dr Robinson.

38.  In their defence dated 11 April 2022, Ds continued to deny liability based on, inter alia, the contention that Super Star’s suffering was not so incurable and so excessive that immediate destruction was imperative for humane reasons. However, Ds did not refer to any opinion of Dr Schiff or any other veterinary surgeon as the basis for such a contention. P claims that Ds pleaded cases was ambiguous as to whether they had appointed any veterinary surgeon for the purposes of assessing whether Super Star’s case fell within the definition of Humane Destruction in the Policy.

39.  In their reply dated 6 July 2022, Ps averred, inter alia, that Ds had waived their right to deny Ps’ indemnity on the ground that Dr Robinson was not the veterinary surgeon appointed by them in light of (1) Ds’ failure to inform Ps that they had appointed their own veterinary surgeon, or request Ps to hold off on the euthanization of Super Star pending such appointment; and (2) Ds’ repeated reliance on the opinions of Dr Robinson in the pre-action correspondence.[10]

40.  Ds did not file any rejoinder suggesting that they had appointed their own veterinary surgeon.

C.2 Discovery

41.  The parties filed their respective lists of documents on 28 September 2022.

42.  In their list of documents, Ds did not refer to any report or certificate produced by, or any correspondence with, a veterinary surgeon other than Dr Robinson.

C.3 Exchange of witness statements and further discovery

43.  Ds filed 4 witness statements on 25 November 2022 and 1 December 2022 respectively, including the witness statement of Chow and the witness statement of Dr Schiff, both dated 1 December 2022.

44.  Ds filed a supplemental list of documents on 2 December 2022.

45.  In these new materials:

(a) Ds asserted for the first time that Dr Schiff had been appointed as Ds’ veterinary surgeon for the purpose of determining whether the requirements for Humane Destruction under the Policy were satisfied.[11]

(b) Ds disclosed for the first time, inter alia, the Schiff Report[12], as well as related documents such as the Schiff Materials[13] and Schiff Correspondence.[14]

46.  P claims that Dr Schiff’s opinion was materially different from Dr Robinson’s opinion (as expressed in the Ultrasound Report and the Veterinary Report), in that Dr Schiff opined, inter alia, that:

(a) As of February 2021, notwithstanding that (1) Super Star was suffering from pleuropneumonia which was a life threatening condition; and (2) Super Star was not responding to initial treatment and the prognosis for recovery was poor, immediate destruction was not necessary at that stage because the horse was not in excessive pain.

(b) There was no evidence showing that Super Star’s pleuropneumonia was caused by the earlier surgery to treat Super Star’s throat condition.

47.  Thereafter, KLLC sent a number of letters to Ds’ solicitors at the time, namely, Messrs Mayer Brown, to protest against the late disclosure of materials which were evidently in Ds’ possession even before proceedings were commenced.[15]

C.4 Settlement negotiations between the parties

48.  In the same month, the parties recommenced[16] negotiations with a view to settling the claims in these proceedings. This resulted in a mediation session on 9 December 2022, as well as on-and-off without prejudice correspondence in 2023 and 2024.[17]

49.  The settlement negotiations culminated in the Consent Orders of Master Hui dated 12 and 24 April 2024 whereby:

(a) as between Ps and D2, Ps discontinued their claim with no order as to costs; and

(b) as between Ps and D1, Ps were granted leave to accept the Sanctioned Payment out of time.

D. DISCUSSION

D.1 P’s case

50.  P’s case is that D1 should pay costs up to 31 December 2022 because of Ds’ alleged deliberate withholding of information and materials highly relevant to their assessment of the Sanctioned Payment.

51.  The withheld information and materials that Ps labelled as “relevant materials” are set out in Section B5 of the second affidavit of Ps’ solicitor Poon Sui Wah (“Poon’s 2^nd Aff”). I would prefer to call them the new materials (“New Materials”). The key information and materials which had allegedly been withheld by Ds included:

(a) the assertion that Dr Schiff had been appointed as Ds’ veterinary surgeon for the purpose of determining whether the relevant requirements under the Policy were satisfied;[18]

(b) a report produced by Dr Schiff on Super Star’s medical condition on or around 11 March 2021 (“Schiff Report”);

(c) various reports and records relied upon by Dr Schiff (“Schiff Materials”); and

(d) correspondence between D1 and Dr Schiff in relation to the Schiff Report (“Schiff Correspondence”).

D.2 D1’s Case

52.  The following is a summary of D1’s case as stated in Mr Ho’s skeleton argument (“D1’s Submissions”).

D.3 In relation to the background facts

53.  In relation to the background facts summarized by Mr Chan in P’s Submissions, Mr Ho for D1 has highlighted the following facts in D1’s Submissions.

54.  First, Dr Robinson considered that Super Star had pleuropneumonia, ie infection of chest cavity and lungs. He however did not state in the Ultrasound Report or the Veterinary Report that the infection in the lungs was an excessively painful disease. In particular, the word “pain” is not found in the Ultrasound Report and the Veterinary Report.

55.  Second, while Golden Horse has referred to Dr Robinson’s email dated 22 February 2021 to support P’s case as definition for “humane destruction”, Dr Robinson email did not reply with a simple “yes”. He qualified his reply by stating that Super Star “can potentially be treated aggressively”, but cautioned that “this will be a recurring problem”, hence he and the Head of Veterinary Clinical Services (“HVCS”) recommended “euthanasia on humane grounds”.

56.  Third, while the decision to undergo euthanasia of Super Star was made on 23 February 2021 when the consent form was signed, Dr Schiff only came into the picture after the death of Super Star (he was appointed by Ds on 27 February 2021 only). In other words, D1 claims that before the death of Super Star, the only veterinary surgeon who had expressed any condition of Super Star was Dr Robinson. Further, as was admitted by Ps, Ds have already indicated to Ps, via Golden Horse, on 2 March 2021 that they had appointed Dr Schiff. Thus, the appointment of Dr Schiff was all along known to Ps.

57.  Fourth, Dr Schiff’s report was prepared on 11 March 2021. Having set out the chronology leading to euthanasia of Super Star, Dr Schiff stated that:

“Comments

In my opinion this case does not fulfill the conditions for a mortality insurance claim:

1. There were further treatment options suggested by the clinician

2. There is no suggestion in the clinical history that the animal was suffering unrelenting pain and required humane destruction

3. There is no evidence that the surgery played any part in the pleuropneumonia which developed (see histopathology report)”

58.  Fifth, although Dr Schiff’s report was not provided to Ps at the pre-action stage (and D1 claims that Ds had no obligation to do so), the gist of Dr Schiff’s comments was provided to D1 in a letter from RSA dated 25 March 2021[19]:

“Whilst your Bloodstock Insurance Policy provides cover for Mortality arising from Humane Destruction this coverage is only operative in circumstances where there are no medical or surgical options available and the suffering is so excessive that immediate destruction on humane grounds is warranted. We have spoken with the HKJC attending Veterinary Surgeon Dr Robinson as well as taking the views of an independent Veterinary Surgeon namely Dr Schiff and we have also reviewed the veterinary treatment records. We are advised by Dr Robinson and this is supported by Dr Schiff and indeed evident from a review of the veterinary treatment records that there were treatment options available further in the view of the Veterinary Surgeons we have consulted it is clear that “Super Star”’s condition was such that the suffering was not considered to be so excessive that immediate destruction was required for humane reasons.” [emphasis supplied]

59.  RSA stated in another letter dated 27 September 2021 to Ps’ solicitors that:

“We note your request for a copy of Dr Peter Schiff’s veterinary report with regard to “Super Star”, HKJC Brand #B380. We would respond by advising that this report was commissioned with Dr Peter Schiff by Insurers in contemplation of legal proceedings and is therefore a legally privileged document. We will therefore not be releasing this report to your Client. Indeed we believe that we have addressed all of your Client’s questions with regard to Policy coverage and the circumstances giving rise to “Super Star” being euthanized on 25 February 2021. We have also explained that Dr Peter Schiff's views concur with those of Dr Paul Robinson (“Dr Robinson”) of the Hong Kong Jockey Club (“HKJC”) namely your Client was advised that further treatment options were available by HKJC but clearly declined to proceed with such options. Further at the time that “Super Star” was euthanized there was no suggestion that the horse was “suffering unrelenting pain and required humane destruction”.” [emphasis supplied]

60.  Therefore, D1 says that all the key comments in Dr Schiff’s report have been conveyed to Ps at the pre-action stage.

D.4 D1’s pleaded case

61.  In Ds’ defence, they have specifically raised, inter alia, the following matters:

(a) In the Veterinary Report, Dr Robinson neither gave an opinion that Super Star was afflicted with an “excessively painful disease”, nor gave an opinion that the suffering of Super Star was incurable or so excessive that “immediate destruction” was imperative for humane reasons. In fact, Super Star was not inflicted with an excessively painful disease: (§16(a));

(b) Dr Robinson was not a veterinary surgeon appointed by Ds, and there was no certificate given by a veterinary surgeon appointed by Ds (§16(b)); and

(c) The suffering of Super Star was not incurable and so excessive that immediate destruction was imperative for humane reasons. The euthanasia of Super Star was a scheduled destruction rather than an immediate destruction as specified under the Policy: (§22(c)).

62.  Mr Ho in particular emphasized the fact that Ds have never pleaded that Dr Schiff was a veterinary surgeon appointed by Ds in accordance with the definition of “humane destruction” of the Policy, or that Dr Schiff produced any certificate in relation to Super Star prior to its euthanasia. Dr Schiff’s name cannot be found in the defence. All along, Ds have not amended the defence.

63.  Mr Ho submits that, after the filing of lists of documents, Ps plainly knew that Chow / D1 had communications with Dr Schiff; Dr Schiff had prepared a report; and there must be materials (eg treatment records, trackwork records) provided to Dr Schiff which enabled him to make a report. Yet, Ps did not seek specific discovery.

D.5 Legal principles on acceptance of sanctioned payment

64.  In relation to the costs on the acceptance of sanctioned payment, the following principles apply.

65.  Order 22 r.15 of the Rules of the High Court (“RHC”) provides for the grant of leave to accept a sanctioned payment out of time.

66.  Order 22 r.15(3) provides that in cases where the Court grants leave, it shall make an order as to costs.

67.  In Or Siu Lung v Fu Hong Home for the Elderly Co Ltd [2018] 1 HKLRD 872, Lam VP (as he then was) set out the following principles in relation to O.22 r.15(3)[20] :-

(a) Though Order 22 r.23 provides for situations where a judgment is entered and P failed to obtain a judgment more advantageous than a sanctioned payment by D, the approach in that rule should also guide the Courts in the exercise of the discretion under r.15(3): see §12.

(b) By virtue of r.23(5), the Court shall make an order under r.23(3), ie P shall pay any costs incurred by D after the latest date on which the sanctioned payment could have been accepted without leave, unless the Court considers it unjust to do so: see §15(a).

(c) It is no longer the case that the Court should only depart from the order under r.23(3) where there are exceptional circumstances: see §§14-15, 17(b).

(d) Instead, the test is to see what the fairness of the situation demands: see §17(b).

(e) The Court should have regard to all the circumstances of the case and the non-exhaustive factors set out in r.23(6) when determining what the fairness of the situation demands: see §15(b).

(f) The factors under r.23(6) are:

(i) the terms of any sanctioned payment or sanctioned offer;

(ii) the stage in the proceedings at which any sanctioned payment or sanctioned offer was made;

(iii) the information available to the parties at the time when the sanctioned payment or sanctioned offer was made; and

(iv) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the payment or offer to be made or evaluated.

(g) A classic situation where the normal rule should not apply is the withholding of information relevant to the assessment of the sanctioned payment. If the Court is satisfied that there was a reassessment of the risk in light of new material which was attributable to D’s failure to produce that material at an earlier date, it may take the view that P should not be required to bear all or some part of any intervening costs: see §§22-23.

E. ISSUES TO BE DECIDED

68.  Having read counsel’s written submissions and having heard their oral submissions in court, it seems to me that the following are the issues which the Court has to decide in order to determine the arguments in this case:-

(a) Whether the New Materials were relevant to the merits of Ps’ claim;

(b) Whether Ps relied on the New Materials before accepting the Sanctioned Payment; and

(c) Whether Ds had deliberately withheld the New Materials.

E.1 Whether the New Materials were relevant to Ps’ claim

69.  In my judgment, the fundamental problem with Ps’ claim in the present proceedings is that it doomed to fail from the word “Go” as Ps had plainly failed to fulfil the terms of the Policy to make Ds liable to pay.

70.  In the SoC, Ps pleaded that the conditions for the term “Humane Destruction” as defined in §3(a) of the Glossary of the Policy (“Definition (a)”) were satisfied.

71.  I do not agree with that very bold proposition.

72.  Definition (a) says:

“…. that the HORSE incurs an injury or is afflicted with an excessively painful disease, and a VETERINARY SURGEON appointed by the COMPANY shall first have given a certificate that the suffering of the HORSE is incurable and excessive that immediate destruction is imperative for humane reasons;”

73.  From the plain reading of the above definition, in my view, it is beyond dispute that in order for Ps to succeed in making a claim against Ds under the Policy, they have to fulfill the following 3 conditions:

(a) Super Star incurred an injury or was afflicted with an excessively painful disease;

(b) A veterinary surgeon appointed by Ds shall first have given a certificate; and

(c) The certificate states that the suffering of Super Star is incurable and so excessive that immediate destruction is imperative for humane reasons.

74.  With respect to P’s legal team, I do not think any of the above 3 conditions had been fulfilled prior to Ps consented to having Super Star put down on 25 February 2021.

75.  First, in my judgment, no injury or excessively painful disease had been experienced by Super Star prior to it being euthanized.

76.  Despite Ps tried to rely on the Veterinary Report to say that Super Star was suffering from an excessively painful disease (See §7 of Reply), and alternatively pleuropneumonia constituted injuries for Definition (a) (See §8.2 of Reply), in my view, this is not supported by the medical evidence made available at the time when the decision was made to euthanize the horse.

77.  Dr Robinson said nothing about pain, let alone excessive pain in the Veterinary Report. There is also no description of any objective sign of excessive pain of Super Star. Ps have not called Dr Robinson to make any witness statement and did not adduce any expert evidence. In my judgment, there is simply no factual basis for Ps to say that Super Star had suffered from excessive pain as a result of pleuropneumonia. Ps assertion that pleuropneumonia would lead to excessive pain also cannot stand as it is merely speculation and not supported by any medical opinion.

78.  Further, I agree with Mr Ho that Ps’ alternative argument that pleuropneumonia was an injury is against common sense. In that regard, I agree with the following statement of Latham CJ in Hume Steel Ltd v Peart (1947) 75 CLR 242 at 252 cited by Mr Ho:

“There is a distinction, according to the common use of language, between getting hurt and becoming sick. The former would be described as an injury and the latter would generally not be so described.”

79.  The medical evidence reveals that Super Star had pleuropneumonia over a period of time. It was not caused by a specific incident or event. Dr Robinson explained that pleuropneumonia could be treated by indwelling chest drains and prolonged antibiotic therapy. I agree with Mr Ho that the treatment of antibiotic therapy suggests that the pleuropneumonia might be caused by bacterial infection.

80.  In my judgment, the pleuropneumonia suffered by Super Star over a period of time cannot be regarded as an “injury” suffered by it.

81.  Second, in order for Ps to make a successful claim under the Policy, they have to show that a veterinary surgeon appointed by Ds shall first to have provide a certificate.

82.  Clearly, Dr Robinson was not a veterinary surgeon appointed by Ds to provide such a certificate in this case.

83.  Moreover, the Ultrasound Report and the Veterinary Report were not prepared pursuant to the request by Ds. They were addressed to Ps. Specifically, the Veterinary Report contains a note to request it to be forwarded to “all owners and insurance companies (if applicable) involved with this horse”. This indicates that Ds were not even aware of the existence of the Veterinary Report when it was being prepared.

84.  Further, there is no evidence to show that Dr Robinson was appointed by Ds to treat Super Star or to express an opinion of whether he should be put down. If anything, the documents show that Dr Robinson (who works for HKJC) was the treating veterinary surgeon appointed by the horse owners (ie Ps in this case) for the horse. He certainly could not speak on behalf of Ds, let alone issuing a certificate for the purpose of authorizing the euthanasia on their behalf, without their specific instructions.

85.  Moreover, it is not disputed by Ps that the first time Ds had informed them about Dr Schiff was on 2 March 2021 via Golden Horse. It was for the purpose of informing them that Dr Schiff was being appointed to review the medical issue. This was 5 days after Super Star was put down. Thus, Dr Schiff could not have been appointed by Ds to provide the required certificate. D1 certainly had not mentioned anything about Dr Schiff being appointed by them to certify anything at all.

86.  In my view, Ps pleaded case that Dr Robinson was appointed by D1 because he had issued a letter on 2 March 2020 (ie almost one year before Super Star was euthanized) certifying that the horse was then in good health and condition and was a fit subject for Mortality and Restrictive Loss of Use Insurance, is a pretty desperate one. With respect, Dr Robinson’s letter was accepted by the Ds as a Veterinary Certificate at the commencement of cover under condition 2 of the Policy. It was not for the purpose of recommendation of humane destruction of the horse. Ps should have waited for Ds to appoint such a veterinary surgeon by Ds before they make a decision of following Dr Robinson’s recommendation of giving “strong consideration” for the euthanasia of Super Star.

87.  Thus, in my judgment, Ps would have failed to fulfil the second condition also.

88.  The third condition requires a certification from a veterinary surgeon that the suffering of Super Star was “incurable and excessive that immediate destruction was imperative” for humane reasons.

89.  On the issue, I agree with Mr Ho that the Veterinary Report relies on by Ps fell far short to satisfy the third condition for the following reasons:-

(a) In the Ultrasound Report, Super Star was said to be “eating and is quite bright and alert”. The Veterinary Report, which was prepared 13 days later, did not suggest that the behaviour of Super Star changed significantly. The Veterinary Report did not suggest that Super Star had any particular suffering, for example, excessive pain, breathing difficulties, serious physical discomfort, inability to eat or drink, drastic change of behaviour. Without elaboration of the suffering of Super Star, there was no elaboration on whether the suffering was “incurable and so excessive”;

(b) Dr Robinson said re-accumulation of fluid might be treated with indwelling chest drains and prolonged antibiotic therapy over the course of weeks to months, and that the condition may well be a recurrent problem in the future. Dr Robinson’s opinion is that prolonged treatment was viable — at the very least, immediate destruction was not imperative. This is consistent with Dr Robinson’s later email on 22 February 2021 stating that Super Star “can potentially be treated aggressively”;

(c) Dr Robinson said strong consideration should be given to euthanasia. Yet, he did not say euthanasia (let alone immediate euthanasia) was imperative. Ds subsequently informed Ps that Dr Robinson agreed with Dr Schiff opinion that there was no suggestion that Super Star was suffering unrelenting pain and required humane destruction.

90.  In my judgment, if Ps would not be able to fulfill those 3 conditions when they made their claim with Ds in the first place, then whatever New Materials which came into the picture later, whether it is in the form of Schiff Report or Schiff Materials, they would not be able to save the day. Thus, seen in such light, in my judgment, the New Materials could not be said to be material or relevant to Ps’ claim against D1 at all.

E.2 Whether Ps relied on the New Materials before accepting the Sanctioned Payment

91.  Mr Chan submits it is self-evident that Ps would take into account the New Materials when deciding whether to accept the Sanctioned Payment. He submits that the New Materials are not mere “background” documents. They consist of Ds’ witness statements and the exhibits thereto. He says that materials of such a nature would obviously be taken into account when considering any settlement offer.

92.  He says that Ps did in fact take such materials into account was specifically confirmed by Mr Ng Yau Sing on behalf of Ps in his evidence.[21]

93.  Mr Chan claims that Ps’ reliance on the New Materials is also consistent with and affirmed by the timing of the settlement negotiations leading to the acceptance of the Sanctioned Payment, which shows that (1) the parties recommenced negotiations shortly after the New Materials were filed, and (2) these negotiations led to the eventual settlement of the underlying claims.

94.  With respect, I do not see how Ps can argue that they had relied on the New Materials to decide whether to accept the Sanctioned Payment if Ps did not have a case against Ds in the first place.

95.  If Dr Schiff was not (and could not be) the veterinary surgeon appointed by Ds for the purpose of certifying whether Super Star had suffered from an incurable and excessive condition, then whatever things he said and whatever materials he gathered (particularly after Super Star was put down) would not have changed anything at all. It simply would not have made any difference to Ps’ claim against Ds, which, as I explained above, was doomed to fail.

96.  Thus, whether Ps relied on the New Materials before accepting the Sanctioned Payment is not here nor there as it would have made no difference to the ultimate outcome of the case.

97.  It should be noted here that, before Ds filed the defence, Ds’ solicitors issued a detailed without prejudice letter dated 22 February 2022 to Ps explaining why Ps did not satisfy Definition (a):

“(i) No veterinary surgeon appointed by our clients have given a certificate prior to the euthanasia - It is plainly clear that our clients never appointed any veterinary surgeon prior to the euthanasia or the Horse. Further, your client’s interpretation of the Policy is entirely misconceived, as there is no basis under the Policy to support your clients’ pleaded case under paragraph 11 of the Statement of Claim that our clients’ acceptance of the Mortality and Restrictive LOU issued by Dr. Robinson dated 2 March 2020 as a declaration of the Horse’s health condition is equivalent to our clients’ agreement to appoint Dr. Robinson as the veterinary surgeon under the Policy, including for the purpose of satisfying the definition of Humane Destruction.

(ii) The suffering of the Horse was not incurable and so excessive that immediate destruction was imperative for humane reasons - The available evidence has not shown the necessity of immediate destruction at the material time. Dr. Robinson’s opinions have on multiple occasions expressed the possibility of alternative treatment options. In the Veterinary Report (General) dated 18 February 2021, Dr. Robinson opined that “this condition can he treated with indwelling chest drains and prolonged antibiotic therapy”. In Dr. Robinson’s email of 22 February 2021, Dr. Robinson’s recommendation of euthanasia on humane grounds was with the qualification that “the horse can potentially be treated aggressively”

Incidentally, we also note that according to the article entitled “Pleuropneumonia in Horses” in the MSD Veterinary Manual, authored by Ms. Bonnie Rush, the Dean and Professor of Equine Internal Medicine at College of Veterinary Medicine at Kansas State University, the survival rate of horses with pleuropneumonia can be as high as 90% with a 60% chance to return to athletic performance.

(iii) Not an excessively painful disease - Related to paragraph 1.3(ii) is the criteria that the Horse is suffering an excessively painful disease. Thus far we have not seen any evidence in support of this criteria. To the contrary, we note that Dr. Robinson had a discussion with Robert Scally & Associates Ltd, the loss adjusters appointed by our clients, on 22 March 2021 and Dr. Robinson advised that the Horse “was not in a situation where he was suffering unrelenting pain or discomfort which required Humane Destruction”. Dr. Robinson agreed with the view of Dr. Schiff, formerly a veterinary surgeon of the Hong Kong Jockey Club, that “there is no suggestion in the clinical history that the animal was suffering unrelenting pain and require humane destruction”.” [emphasis added]

98.  Ds invited Ps to withdraw their claim on a “drop hands” basis within the next 14 days, which was rejected by a lengthy letter from Ps’ solicitors. A second without prejudice offer was made on 24 March 2022, which was rejected with a statement that “We shall leave our client’s counsel to fully argue our case in court. We look forward to receiving your Defence on or before the requested extension of time”. In response to the point that there was no evidence of excessive pain, Ps said “one can learn from the dreadful experience from someone who had been exposed to pneumonia or the recent COVID-19 which is a kind of respiratory infection”.

99.  Given Ps’ stance on the matter, Ds filed the defence and raised, inter alia, the same points I have mentioned above.

100.  Thus, in my judgment, it is clear that despite Ds had clearly explained why in their view Ps were not entitled to make a claim due to the failure in meeting the 3 conditions under Definition (a), Ps were adamant that they would go ahead with issuing the writ and filing the SoC.

101.  The evidence reveals that at no time did Ds make any representation to Ps that they would rely on Schiff Report or Schiff Materials as part of their defence, least that they would rely on them as a “certification” for the humane destruction of the horse.

102.  As such, in my judgment, it does not make any logical sense for Ps to claim that they had relied on the New Materials before accepting the Sanctioned Payment as in my view they were irrelevant. If Ps chose to do so, whether on the advice of their legal advisers or otherwise, it is their choice. However, they cannot now claim that they are entitled to claim the costs between the date of Ds making the sanctioned payment and when the New Materials were made available to them.

E.3 Whether D1 deliberately withheld the New Materials

103.  Mr Ho in his written submissions does not deny the fact that Ds had not provided the New Materials, including Schiff Report, Schiff Materials and Schiff Correspondence, to Ps prior to the issue of proceedings. Instead, what he says is that the gist of Schiff Report can be found in the correspondence between Ps and RSA or Ds’ former solicitors.

104.  In my judgment, based on the factual background and procedural history set out above, there is little doubt in my mind that Ds had withheld the New Materials from Ps. They included the Schiff Report, the Schiff Materials and the Schiff Correspondence. They were not disclosed to Ps until the exchange of witness statements in December 2022.

105.  Ps say that Ds chose to do so notwithstanding that:

(a) such information and materials were clearly in Ds’ possession even before proceedings were commenced; and

(b) Ps had repeatedly asked Ds, even before commencement of proceedings, to provide such information and materials (or at least confirm whether Ds would be relying on the same) so that they could assess the factual and legal bases for Ds’ denial of liability.

106.  In the pre-action correspondence, Ds claimed, through their loss adjustors RSA, that the New Materials were subject to litigation privilege.[22]

107.  In my judgment, that was clearly an erroneous assertion made by RSA as it can be seen from the Schiff Correspondence that:[23]

(a) Dr Schiff was asked to prepare the Schiff Report on 27 February 2021, merely two days after Super Star was euthanised. At the time, there was no threat of litigation whatsoever; and

(b) Dr Schiff was not asked to prepare the Schiff Report in relation to litigation or the threat of litigation. Litigation was never even mentioned in the Schiff Correspondence.

108.  I agree with Mr Chan that, thereafter, it is plain Ds adopted a “stonewall” or “cards face down” approach whereby they sought to disclose as little information as possible until the last possible moment, so as to avoid giving away anything which might prejudice their attempt to deny liability.

109.  While I agree with Mr Chan that such an approach plainly goes against the spirit and underlying objectives of Civil Justice Reform, in the particular circumstances of this case, for the reasons explained above, I do not consider it has any relevance to the claim made by Ps in the present proceedings nor the decision in accepting the Sanctioned Payment out of time.

E.4 Conclusion on the Costs Issue

110.  In the aforestated circumstances, I find:

(a) Ps are entitled to the costs up to 11 May 2022 (ie the last date when they were capable of accepting the Sanctioned Payment without leave); and

(b) D1 is entitled to the costs after that date.

F. SCALE OF COSTS FOR TAXATION

F.1 Legal principles on Scale of Costs

111.  In relation to the scale of costs upon sanctioned payments accepted without leave under Order 22 r.20 of the RHC, the following principles apply:

(a) The starting point is that costs should be taxed on the High Court scale.

(b) The Court should only order taxation on the District Court scale if there are exceptional circumstances warranting a departure from the starting point. It is for D to demonstrate the existence of exceptional circumstances.

(c) The ultimate question which should guide the Court is whether, in light of all the circumstances, P could or should have commenced the action in the District Court. There is no exhaustive list of the circumstances which may be relevant to this assessment.

(d) An acceptance of a sanctioned payment lower than HK$1,000,000, may be an indication that proceedings ought to have been commenced in the District Court. But there may be other good reasons to justify the proceedings being brought in the High Court.

See Wong Chim Hing v Discovery Bay Transit Services Ltd (unrep., HCPI 254/2011, 7 November 2014) at §§14-23, Etratech Asia-Pacific Ltd v Leader Printed Circuit Boards Ltd [2013] 2 HKLRD 1184 at §§14-26, 34-37.

F.2 Scale of Costs in this case

112.  There is no dispute that for the period which D1 is entitled to costs, such costs should be taxed at the High Court scale. The parties’ difference is on the scale of costs for the period which Ps are entitled to costs (which I find to be up to 11 May 2022 only).

113.  By a letter dated 13 April 2022, Ds have indicated to Ps that if the Sanctioned Payment was accepted, Ds would apply to the Court for an order that the costs of this action be taxed on the District Court scale. As held by Bharwaney J in Wong Chim Hing, supra, at §20, if a sanctioned payment of the amount within the jurisdiction of the District Court was accepted for a High Court claim that would constitute an “exceptional circumstance” for the exercise of the Court’s discretion to make an “otherwise order” under O.22 r.20 of the RDC.

114.  In my judgment, the fact that Ps were prepared to accept a meagre sum of HK$100,000 for a claim of HK$4.7 million strongly indicates to me that they knew their claim were lack of merits and very likely going to fail in light of the clear terms of the Policy.

115.  Further, if the Court can form a preliminary view on whether the claim should have been proceeded in the first place or that a plaintiff’s claim is bound to fail in light of the available evidence, it is a relevant factor for the Court to take into account when considering exercising its discretion on costs: See Chan Fung Yu Anji v Hong Kong Sheng Kung Hui Welfare Council Ltd [2023] 4 HKLRD 223 at §§13, 44.

116.  Moreover, it is crucial for Ps and their legal advisers, having considered the evidence available to them at the pre-action stage, to decide whether to issue the proceedings or not. Thus, if there was clear evidence provided to Ps suggesting that they should not have issued the writ, that must be one of the major factors to be taken into account by the Court when exercising its discretion as to what scale of costs should be awarded: Li Suk Yee v Parknshop (HK) Ltd [2024] 1 HKLRD 146 at §§42-45.

117.  Based on my analysis above, it is my view that Ps should never have commenced proceedings in the first place as their claim was bound to fail in light of the clear wordings under Definition (a) of the Policy. Further, the fact that they were willing to accept a small sum of less than 2% of the claimed amount after the defence was filed shows that Ps effectively admitted defeat in the case.

118.  Thus, I consider that a fair scale of costs for Ps’ costs up to 11 May 2022 should be taxed at the District Court scale.

DISPOSITION

119.  In conclusion, I would make the following costs order in this case:-

(a) D1 do pay Ps’ costs of the action up to 11 May 2022 at the District Court scale, such costs to be taxed if not agreed; and

(b) Ps do pay D1’s costs of these proceedings from 12 May 2022 onwards, including the costs of and occasioned by the argument on the issues of costs at the High Court scale, such costs to be taxed if not agreed.

120.  Lastly, I would like to thank counsel on both sides for their helpful assistance.