LAM MAN FUNG MAMIE v. ACTIVE BENEFIT LTD.

HCA 11556/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 11556 OF 1997

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REASONS FOR DECISION

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Introduction

1. The Plaintiff brought this action against the Defendant for breach of the terms of the sale and purchase agreement. In a Judgment dated 26 January 2000, I found in the Plaintiff's favour. The basis of my finding was in essence that the Defendant breached an implied term of that agreement.

2. In the Statement of Claim, the Plaintiff relied on 2 express terms of the sale and purchase agreement, that is, Clauses 28(1) and 6. On the second day of the trial of this action, the Plaintiff applied for, and was granted, leave to amend her Statement of Claim. The amendment was in effect to set forth the Defendant's breach of (a) other express terms, that is, Clauses 28(2) and 2 and Schedule 3, and (b) an implied term of that agreement. The trial was adjourned at the Defendant's application and by reason of the amendment. The costs thrown away by the adjournment were awarded to the Defendant. At the Defendant's request, the costs relating to the amendment were reserved.

3. A costs order nisi was made in the 26 January Judgment pursuant to RHC Ord. 42 r. 5B(6): costs of the action are to be paid by the Defendant to the Plaintiff to be taxed if not agreed. The Defendant made an application to vary that costs order nisi. As I understood from Mr Li for the Defendant, the Defendant sought the following costs orders against the Plaintiff:-

(a) the costs of and occasioned by the Plaintiff's amendment;

(b) the costs of the issues relating to Clauses 28(1) and (2), 2 and 6 and Schedule 3 and the claim based on the price difference of the said property and the unit below it.

(c) the costs of the action incurred up to the date of the amendment.

At the end of the hearing of the Defendant's application, I refused to vary the costs order nisi save as to the costs of and occasioned by the amendment, indicating that reasons for doing so would be given later. The 3 sets of costs referred to above will be dealt with herein under separate headings below.

The Costs of and Occasioned by the Amendments

4. Such kind of costs has been dealt with in most textbooks on costs. In The Supreme Court Practice 1999, Vol. 1, para. 20/8/52 it was said to be "the usual penalty imposed as a term for giving leave to amend ....". The usual order is that the applicant should pay "all the costs incurred and thrown away by the amendment and the costs of any consequent amendment" and such order is commonly referred to as "the usual terms as to costs": see The Supreme Court Practice 1999, Vol. 1, para. 20/8/52.

5. I did not find any valid reason for not making such a usual costs order. In fact, Mr Lam for the Plaintiff did not argue against my making such an order. The costs incurred and thrown away by the amendment and the costs of any consequent amendment were therefore ordered to be paid by the Plaintiff to the Defendant in any event.

The Costs of the Issues

6. It is true that I have found against the Plaintiff on the following issues:-

(a) the Plaintiff's case based on Clause 28: see p. 9 of the transcript of the 26 January Judgment;

(b) the Plaintiff's case based on Clauses 2 and 6 and Schedule 3: see pp. 10 to 13 of the transcript of the 26 January Judgment;

(c) the Plaintiff's case based on the price difference of the said property and the unit below it: see p. 7 of the transcript of the 26 January Judgment.

7. In considering how to exercise my discretion in relation to this aspect, the observations of the Court in In Re Elgindata Ltd (No. 2) [1992] 1 WLR 1207 at 1214 are relevant:-

"The principles are these. (i) Costs are in the discretion of the court. (ii) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made. (iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or a part of his costs. (iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party's costs. Of these principles the first, second and fourth are expressly recognised or provided for by rules 2(4), 3(3) and 10 respectively. The third depends on well established practice. Moreover, the fourth implies that a successful party who neither improperly nor unreasonably raises issues or makes allegations on which he fails ought not to be ordered to pay any part of the unsuccessful party's costs."

8. I did not find that the Plaintiff had significantly increased the length or costs of the proceedings. The most significant additional costs were the costs thrown away by the amendment, and those thrown away by the adjournment of the trial. As stated earlier, these were all already awarded in the Defendant's favour. I also did not find the Plaintiff to be improper or unreasonable in raising the issues over which she was unsuccessful.

9. Hence, I did not consider it an appropriate case to make a separate costs order regarding the individual issues raised in this action.

The Costs Incurred up to the Date of Amendment

10. Mr Li relied on The Supreme Court Practice 1999, Vol. 1, para. 20/8/12 and argued that this is a case:-

"Where the amendment asked for is a substantial one, and the Plaintiff could not succeed without it, he will in a proper case be only allowed to amend at trial on payment of all costs incurred up to date...."

see para. 9(6) of Mr Li's skeleton submissions.

11. Mr Li's argument is premised on the Plaintiff not being able to succeed in her original claim, that is, the claim based on a breach of the express terms of the sale and purchase agreement. I did not agree that this action falls within that category.

12. As was stated in pp. 17 to 18 of the 26 January Judgment (under the heading "Other Matters"), I found it quite arguable that the Defendant had breached the express term of the argument in that the roof top conveyed to the Plaintiff did not comply with its description in the sale and purchase agreement which should include a "roof terrace".

13. Mr Lam naturally relied on those observations and argued that the Plaintiff would therefore also have succeeded on her case based on the express terms of the agreement. Mr Li argued that the Court should not take into account the observations made in the part of the 26 January Judgment headed "Other Matters" because:-

(a) the matter was not pleaded;

(b) the matter was not argued by the Plaintiff in that manner.

In other words, Mr Li contended that costs should be decided purely on the manner in which the point was actually argued at the time.

14. As regards Mr Li's point (a) above, I considered that there was no need for each matter relating to the construction of a written contract to be pleaded because it is in essence a point of law. As regards Mr Li's point (b) above, I understood Mr Lam's argument to be as follows: if a litigant had raised a point in litigation which turned out to be a valid point, he should not be deprived of his costs regarding that part of his claim (let alone pay those costs to the other party) only because that part of the claim has not been fully or properly argued.

15. With respect to Mr Li, I did not agree with his points (a) or (b) above. Mr Li relied on para. 20/8/12 of The Supreme Court Practice 1999 in support of this part of his arguments. The underlying reason why the Plaintiff should be ordered to pay the costs up to the time of the amendment is that otherwise he would have lost his claim. I considered this reasoning should not apply to a case where the Plaintiff has (at least) an arguable case regarding his original claim. There is a difference between a claim which should fail irrespective of how it was argued and one which has only not been fully or properly argued.

16. Further to the foregoing, as regards whether this set of costs ought to be dealt with separately from the costs of the action, I find that they should not be separately dealt with for the same reasons I reached in relation to the set of costs under the heading "The Costs of the Issues".

Conclusion

17. For the above reasons, apart from the costs relating to the amendment (which should be paid by the Plaintiff to the Defendant), I did not find that the costs order nisi should be varied.

Costs of the Application for Variation of Costs Order Nisi

18. I awarded those costs to the Plaintiff. Mr Lam has shown to me a line of correspondence (marked "without prejudice save as to costs") between the solicitors. I considered that the Plaintiff had already offered to pay the costs relating to the amendment of her pleading but the Defendant had refused to accept that offer and insisted on having all 3 sets of costs. The Plaintiff has (at least substantially) been successful in the outcome of this application and should therefore have those costs.