YIM TIN FOOK AND ANOTHER v. YU CHOR LAI AND OTHERS

HCA 2613/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2613 OF 2006

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(By Original Action)

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(By Counterclaim)

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D E C I S I O N

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1.  This is a summons by D8 concerning various costs orders. The history leading up to this summons can be briefly stated as follows.

2.  On 25 February 2015, a master struck out the counterclaim of D2/P against D8.  On 10 June 2015, I took into account what was described as the “purple version” of the counterclaim of D2/P and allowed D2/P’s appeal against the master’s decision.  I also gave leave to D2/P to file and serve that violet version.

3.  I made an order that the appeal be allowed and the order of the learned master be set aside.  I also made an order nisi on costs of the striking out summons before the master and the appeal against the striking out order be to D8, and for costs of the appeal before me to be summarily assessed at $100,000.

4.  D8 has filed a summons to vary the costs order nisi which I have dealt with on 10 July 2015.  Subsequent to the order on 10 July 2015 the parties still had concerns about other costs in relation to the learned master’s order.  I therefore directed that the order dated 10 July should not be sealed in the meantime.

5.  By their present summons, D8 applied for, amongst others, the following orders.

(1)     Paragraph 1A of the summons, the costs of defending the counterclaim of D2/P up to 25 February 2015 (ie, the hearing before the master) to be taxed and paid forthwith.

(2)     Paragraph 1B, the costs of and occasioned by D8’s strike out application before the master be taxed and paid forthwith.

Legal principles

6.  D2/P accepts that the court has inherent jurisdiction to reconsider and vary its orders before they are sealed: Wong Kam‑hong trading as Continental Knitting Factory v Triangle Motors Limited [1998] 2 HKLRD 330; HKSAR v Tins Label Factory Limited (2008) 11 HKCFAR 637. 

7.  This jurisdiction must be exercised judicially and not capriciously, and only where exceptional circumstances demanded recourse to it in the interests of justice.  The court will have to balance the need for certainty and finality in its decision with its duty to do justice between the parties and avert an unnecessary appeal: Sun Jianqiang v Trans‑Island Limousine Service Ltd [2004] 1 HKC 533 (CA) 542D-544D.

8.  I will add that this jurisdiction may also be exercised to clarify any ambiguities in the court’s order so as to facilitate the parties’ understanding and the taxing master’s understanding of the court’s intention when making the costs order.

9.  Before making this decision, I have made it absolutely clear to the parties that this should be the final application in relation to any costs orders arising out of the hearing of the appeal against the striking out order before me.

Paragraph 1A of the summons

10.  At the appeal before me, D2/P put forward the purple version of its counterclaim.  D8 had notice of it only a few days before that appeal.  I took into account the purple version to revive the counterclaim, but of necessity the implication of my order was that the old version of pleading for the counterclaim remained (as ordered by the master) struck out.  As a result, it is only fair that costs arising out of that purple version should be to D8.  The question is only in relation to the proper formula for this set of costs. 

11.  In paragraph 13 of my decision dated 10 June 2015 in relation to the appeal, I stated that:

“... when one looks at the substance [of the purple version], the new pleas are directed at the legal effect of facts already before the court and the concession of D8 that the lease operated as an assignment. (That concession escaped the attention of all the lawyers on both sides until D8’s case went into the able hands of Mr Wong). The only new “fact” relied on is that D2/P allegedly acquired knowledge of D8’s alleged breach of trust in 2006 - a factor disclosed in the witness statement of D2/P but not in the hearing bundle.”

12.  The implication is that there may be some facts in the original counterclaim that may be of use under the purple version of the counterclaim.  In the premises, it may not be correct in principle to grant D2/P the costs of defending the counterclaim up to a certain date.  A more proper formula, in my view, is that suggested by Mr Chan, counsel for D2/P today, ie, the costs thrown away as a result of the purple version of the counterclaim and costs of and occasioned by that amendment be to D8. 

13.  Just to illustrate how this formula will work in practice, D8 will have to file a new defence to the purple version.  Anything arising out of that purple version reflected in this new defence would, of course, be costs to D8 to be borne by D2/P.  If some facts in the old counterclaim can be reused, maybe D2/P can save some costs.

14.  Likewise, if witness statements already filed, expert evidence already adduced have to be adjusted as a result of the purple version.  If any part of the witness statements or expert evidence has to be abandoned as a result of the purple version, that would be an example of costs being thrown away. 

15.  The next question is whether or not such costs should be taxed and paid forthwith, or should only be paid in any event. 

16.  In a previous case handled by myself as a master, Chan Woo Fui v Chan Wing Suen, I have pointed out that it is often difficult to decide what costs have been thrown away or incurred as a result of or incidental to the amendments until the subsequent pleading has been filed, or until it is clear that a subsequent pleading will not be filed, or even at a later stage ie, at trial.

17.  Any doubts will be resolved in favour of the paying party, unless the receiving party is very certain about his position on costs, or is ready to take a concessionary approach to his costs.  There is no point in insisting on an order for costs forthwith to be taxed in the context of amendment to pleadings.

18.  I hold the same view in respect of the present case which had a convoluted history since 2006.  In the premises, I will only order the costs to be payable in any event. 

Paragraph 1B of the summons

19.  The learned master did not order taxation of the costs of the striking out summons before her to be done forthwith.  It was not necessary because at that time she had struck out the whole counterclaim.  It went without saying that D8 could have gone to taxation forthwith.

20.  The situation is different since the appeal had been heard by me.  The counterclaim has been revived subject to filing the purple version.  It is thus open to this court to reconsider the position of taxation of costs. 

21.  I have taken into account the history of this matter.  Regrettably, of course, the counterclaim has to take such a convoluted route to reach the purple version. The matter ought to go to trial as soon as possible.  I do not think that parties’ attention should be wasted on taxation of costs in the meantime.  In particular, there will be taxation of D8’s costs arising out of the purple version at a later date.  It will not be desirable for the parties to waste their attention yet on another round of taxation in the meantime.

22.  I therefore decline to make an order for costs before the master to be taxed forthwith. 

23.  In summary, I order as follows:

(1) In relation to paragraph 1A, the costs thrown away as a result of the purple version of the counterclaim and costs of and occasioned by that amendment shall be to D8 to be borne by D2/P in any event. 

(2) The application under paragraph 1B of the summons for taxation forthwith is dismissed. 

24.  For the avoidance of doubt, the costs of the summons for striking out before the master should remain costs in favour of D8. 

25.  So I now deal with costs of this application.

(Submissions on costs)

26.  D8 has substantively won on paragraph 1A of the summons.  Paragraph 1B did not take up much time of this court.  It was not an unreasonable move on the part of D8 to seek the order under 1B having regard to the fact that on appeal this court did not actually disturb the master’s striking out order in relation to D2/P’s pleading in the counterclaim.  Paragraphs 1C and 1D of the summons are not necessary at all, but this court took up no time in relation to these two subparagraphs of the summons.

27.  In my view, the hearing in relation to paragraph 1A of the summons cannot be saved because D2/P had made no offers prior to today which was in any way close to what I have ordered today. 

28.  In principle, therefore, D8 should get costs in relation to paragraphs1A and 1B of the summons.  However, D8 had previously applied to vary this court’s order in relation to the appeal.  It led to the decision on 10 July. 

29.  At the hearing for variation of the costs order nisi, Mr Wong purported to argue matters in relation to paragraph 1A of today’s summons, but because he had not given sufficient notice to D2/P, the solicitor then acting for D2/P was not in a position to respond and, hence, the need for today’s summons.

30.  Had D8’s solicitors properly managed its arguments in relation to variation of the costs order nisi, today’s summons and hearing might have been spared subject to probably slightly longer hearing time in relation to the variation summons.

31.  A lot of the costs incurred for today’s hearing, for example, preparation of bundles and attendance on client costs and preparation for this hearing would thus be saved or reduced.

32.  In the premises, looking at matters in the round, I will order costs in favour of D8 but only to the extent of allowing costs summarily assessed at $10,000.