WING MING GARMENT FACTORY LTD v. THE INCORPORATED OWNERS OF WING MING INDUSTRIAL CENTRE

HCCT 60/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 60 OF 2006

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DECISION ON COSTS

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1. On 23 June 2014 I handed down judgment in the action. What remains to be decided is the costs of the action and the counterclaim.

2. The principles are not in dispute.  I have been referred to two Court of Appeal decisions which set out the correct legal approach, namely Wong Kam Tong v Tin Shing Court, Yeung Long (IO) (No 2) [2012] 2 HKLRD 1128 and Pfeiffer GmbH v Cheung Hay Kit trading as Sun Wai Construction (CACV 245/2013, 29 October 2014).

3. The court has a very broad discretion on the issue of costs.  I am entitled to look at, among other things, the degree of success of the parties on their claims, the outcome of specific issues raised as well as the parties’ relevant conduct before and during the proceedings.  I can also have regard to the amount of time or costs attributable to specific issues or matters.  I have considered the parties’ written and oral submissions and I mean no disrespect by not mentioning all their points later on.

4. A counterclaim takes the nature of a separate action.  In this case, the counterclaim does not operate as a defence to the action and has relatively little overlap with the action otherwise than in terms of the background.  I shall therefore deal with the costs of the action and costs of the counterclaim separately.

Costs of the action

5. It is fair to say Wing Ming is successful to a substantial extent on the claims raised in the action.  All its claims regarding defects in the common parts were upheld except a claim relating to the smoke vent in the basement. On that basis, Mr Pennicott SC, for the plaintiff, says Wing Ming should be entitled to 88 per cent of the costs of the action.

6. Mr Cooney SC, on behalf of the IO, opposes this on a number of grounds. First, the writ was issued in August 2006.  However, Wing Ming made very substantial amendments to its Statement of Claim in June 2009.  Although the IO’s skeleton argument opposing the amendment shows that they had asked for costs thrown away and all the costs of the pleadings and evidence filed hitherto, Burrell J, who gave leave to amend, only made an order that the costs of and occasioned by the amendments be paid by Wing Ming.  Looking at the form of the decision however, which was made by a letter containing directions to the parties in which the judge said an hour had been taken for argument and even that only enabled the parties to make a somewhat superficial airing of the issues, I do not think that the judge intended to preclude the trial judge from taking into account the effect of the amendments in deciding how the costs overall should be dealt with.

7. It is clear that by the amendments, Wing Ming deleted certain claims in June 2009, for example, the claims on lift system and all damages claims against the IO for failure to maintain the common parts.  I agree with Mr Cooney that the amendments which amounted to abandonment of claims ought to be taken into account now.

8. Wing Ming also substantially amended the other claims in June 2009 which it maintained.  There was a substantial re-focussing of its case in June 2009. It introduced a lot of details into its claims.  However I am not satisfied that Wing Ming ran an entirely new case thereafter.  Even before the amendment: (1) on toilet modification works, it is clear that Wing Ming had complained about they being unlawfully constructed contrary to the approved building plans; (2) when it came to the upper roof, Wing Ming had complained about the waterproofing system in the upper roof.  See the first witness statement of Yuen Man Pui dated May 2007 at paragraph 34.

9. As for the basement, Wing Ming had complained about drainage facilities not being maintained by the IO, although before the amendment, it is fair to say the claim was very general and lacking in detail. 

10. The fact that a party’s case is not particularised does not mean it has to pay all the costs of the action before giving particulars.  After all, the IO did not concede most of Wing Ming’s claims after the amendments were made. However, without proper particulars, the claim was unfocussed and the IO would have found it difficult to ascertain the case it had to meet.  There was bound to be some wastage of costs as a result of the lateness of the plaintiff in properly formulating its claim.

11. In my view, I am entitled to take into account the fact that Wing Ming took a long time to particularise its claims and thereby to identify the real issues requiring resolution. 

12. Separately, the IO argues that no costs should be given to Wing Ming prior to 14 November 2011, because it only served on that date its expert report on the relevant tests in respect of the water leakage complaints.  I do not think that I should deprive Wing Ming of all costs prior to that date on that ground.  Wing Ming’s case had remained the same after the amendment in June 2009.  There is no suggestion the amended Statement of Claim was unparticularised.  The IO therefore knew clearly from it the case it had to meet.  The service of Wing Ming’s expert report substantiated its claims. There was nothing to prevent the IO from carrying out similar tests if necessary.

13. The IO also contends Wing Ming is guilty of expert shopping.  I shall deal with the costs of the expert evidence summons separately but I think, in terms of the conduct of the proceedings in the action, the effect of the relevant conduct of Wing Ming, as pointed out by Mr Cooney, whose criticism I find to be justified, is that Wing Ming had failed to produce all the materials necessary for the trial in good time so that the precise issues between the experts could be identified and crystallised as early as possible.  It was a serious distraction from the real dispute and I think I am entitled to take this into account in deciding the costs of the action.

14. I do not think, however, I should put much weight on Wing Ming’s delay in bringing its claims, given that the IO also delayed substantially in bringing its complaints. 

15. The IO says Wing Ming should pay the costs of an original claim for indemnity in respect of the claim by the tenant of the 10th floor.  The tenant’s claim transpired to be very small, approximately $20,000.  Wing Ming stated in Mr Ho’s supplemental statement that the claim would not be pursued. However, in the scheme of things, this was merely part of Wing Ming’s complaint about the relevant defect and I place little weight in the fact that this was not pursued in the end.

16. There is also a claim in relation to damage to the 11^th floor workshop which was rectified by the IO.  It seems to me that, subject to the other points raised, there is no reason to exclude this from Wing Ming’s costs.

17. The IO says Wing Ming did not come with clean hands since it had failed to pay management fees.  There was indeed a finding of Wing Ming’s failure by Reyes J and the Court of Appeal in the first action.  However, this mainly applies to the period before early 2008, since pursuant to the court order, about HK$6.5 million was paid by Wing Ming to the IO in early 2008 by way of unpaid management fees and expenses and interest.

18. I do not think I ought to take into account the complaint about breach of injunction imposed in the first action in deciding the costs of this action.

19. Overall, I think the IO should pay Wing Ming 60 per cent of its costs of the action.

Costs of and relating to the summons dated 13 May 2011

20. Mr Pennicott conceded the costs outstanding on Wing Ming’s summons dated 13 May 2011 relating to expert evidence.  The only question is the scale of costs.  For the reasons submitted by Mr Cooney, it seems to me Wing Ming’s conduct smacks of expert shopping.  I was distinctly unimpressed by Mr Yuen’s evidence given at trial on this aspect.  I prefer the evidence of the expert, Mr Cheung on the relevant disputes.  I think, in these circumstances, it is appropriate to order that costs be on an indemnity basis.

Costs of the counterclaim

21. On the counterclaim the IO succeeded on certain claims for substantial monetary relief and an injunction to remove the Part Loft and certain alterations to the external wall.  There is some basis, however, for saying that the various counterclaims relate to different parts of the building and many counterclaims raise quite different issues, so that it is necessary to look more closely at the individual counterclaims.

22. The counterclaims are not all of equal complexity and did not all necessitate the same factual investigation, nor are they of the same importance to the parties.  For instance, the counterclaims relating to the 11th floor storeroom and the ground floor advertisement and display, on which Wing Ming succeeded, turned mainly on simple questions of the construction of the DMC.  The IO’s claim relating to Room A was only raised in July 2013 and added little costs overall.  It is therefore not a simple matter of counting the heads of counterclaim on which each party has prevailed. 

23. I made no order on the first counterclaim because the cluttering had long been removed.  The obstruction was caused by materials placed there by a company called Cheung On.  For the reasons submitted by Mr Cooney, I think that the IO is justified on the evidence in saying that it is likely that Cheung On had been permitted by Wing Ming to place materials and debris there.  I think the IO should be regarded as the successful party in respect of this counterclaim during the material times.

24. Mr Cooney says the IO should be regarded, on the whole, as the successful party in relation to the alterations of the external walls.  I think this is correct.  The IO fails on part of its claim in relation to the old 1994 alterations, but it did succeed on the other two alterations and the 1994 alterations would have come into the picture as necessary context in any event.

25. As for the claim relating to car parking spaces 2, 5, 8 and 9, the IO submits Wing Ming should not have its costs because it was in breach of covenant and the claim only failed because it was time-barred.  I do not agree. I think it would be wrong in principle to deprive a party of costs on the mere ground that he had succeeded on a limitation defence.  However, I think that since the IO won on car parking spaces 3 and 4 and recovered substantial damages, the claim relating to car parking spaces overall should not be regarded simply as having resulted in a tie.

26. On the ground floor extension wall, the IO contends that Wing Ming succeeded on the basis of correspondence which was disclosed late by Wing Ming, only in September 2013.  However, the IO’s new case on the external wall, complaining about breach of the Conditions of Sale, was only introduced by amendment in July 2013.  Accordingly, I do not accept the IO’s argument.

27. The IO submits and I accept that even in relation to counterclaims on which the IO was ultimately unsuccessful, Wing Ming had raised several issues which failed.  These include lack of standing on the part of the IO, exclusive jurisdiction of the Lands Tribunal, abuse of process or the wider principle of res judicata, and laches and acquiescence (except in relation to the 1994 alternations of the external wall).  These arguments took up considerable time at trial and necessitated a factual inquiry into the history of the litigation between the parties.

28. I also take into account the aspect of expert shopping referred to earlier. 

29. In the result overall, I order Wing Ming to pay the IO 33 per cent of its costs of the counterclaim. 

30. I give a certificate for two counsel for both parties.

(Discussion between Court and Counsel)

31. I will make no order as to costs in relation to the costs argument.