HUANG YU HUI v. ZHENG SHIZHI (also known as Zheng Shizhi)

HCA 646/2015
[2018] HKCFI 174

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 646 OF 2015

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RULING ON APPLICATION
TO VARY COSTS ORDER NISI

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INTRODUCTION

1.  This is the plaintiff’s application to vary the costs order nisi made in the judgment of this court (“the Judgment”) handed down on 13 January 2017 where it was ordered, by way of summary assessment, that the plaintiff shall pay the defendant a sum of $160,000 in total for the hearings before the master and this court.

PROCEDURAL HISTORY

2.  The case is about the sale and purchase of an apartment in Pokfulam in which the plaintiff is the named purchaser and the defendant is the named seller.  I will not repeat the facts here as they can be found in the Judgment.  For the present purpose, a brief procedural history of the case is as follows:

(i) the plaintiff obtained a summary judgement for specific performance of the transaction against the defendant before the master on 24 August 2016;

(ii) the defendant appealed against the master’s decision to this court.  The appeal, which was by way of rehearing, was heard on 5 January 2017.  This court handed down the judgment on 13 January 2017 granting the defendant conditional leave to defence and made the aforesaid costs order nisi against the plaintiff;

(iii) by a summons dated 25 January 2017 (“the Summons”), the plaintiff applied for variation of the costs order nisi. On 9 February 2017, by consent, the hearing of the summons was adjoined sine die with to liberty to restore;

(iv) on 21 April 2017, this court refused the plaintiff leave to appeal against the Judgment;

(v) on 8 August 2017, the Court of Appeal also dismissed the plaintiff’s application for leave to appeal.  The plaintiff then applied to restore the hearing of the Summons; and

(vi) on 2 January 2018, by consent the parties were directed to deal with the Summons on paper.

ORDER SOUGHT

3.  By the present application, the plaintiff asks that:

(1) the costs for the hearing before the master and the costs for the appeal before this court be in the cause;

(2) the costs of this application be paid by the defendant to the plaintiff forthwith, to be taxed if not agreed.

RELEVANT LEGAL PRINCIPLES

4.  The starting point is that costs in an application for summary judgement are in the discretion of the Court: Hong Kong Civil Procedure (“HKCP”), Vol 1, at §14/7/6.

5.  As regards the costs before the master, if leave to defend is granted unconditionally, the usual costs order is for the costs to be in the cause: see HKCP 2018, at §§14/7/12-13.   

6.  As pointed out by Mr Lai, counsel for the defendant, it is not uncommon that when a judge overturns a master’s decision to grant summary judgment, the judge will order both the appeal costs and the master’s costs to follow the event: see, e.g., Li Chuen Kwai v Po Lam Construction Development Ltd[1]; Lin Jan v Long Xiaobo[2]; and Rich Lucky Properties Development Ltd v Siu Pin Siu[3].  That said, the aforesaid 3 cases referred to by Mr Lai are just examples and that they do not purport to lay down any general principles.  I am fully alive to the discretionary nature of costs orders, so that the exercise of that discretion by the court must be case-specific. 

CONSIDERATION

Whether there was an agreement on costs

7.  At paragraph 40 of the Judgment, it was noted that, “Both parties agree that costs should follow the event.” It was on that basis that the costs order nisi was made.

8.  In the present application, Mr Tang for the plaintiff in his written submission first denied that there had ever been such an agreement between the parties.  To that end, Mr Tang attached to his written submission a transcript of the audio recording of the hearing on 5 January 2017 between 2.40 pm and 2:42 pm, which were the last two minutes of the hearing of the appeal, purporting to show that the agreement was only to the extent that there should be a summary assessment on quantum but not that costs should follow the event of the appeal. 

9.  Mr Lai, in his written submissions, is somewhat taken aback by the plaintiff’s denial.  Mr Lai recollects that there was a clear agreement during submissions just before the luncheon break on 5 January 2017 that costs should follow the event.  However, because of time restraint, Mr Lai was unable to seek further transcript of the hearing to support his recollection and therefore he invites the court to check its own records for verification.

10.  Mr Tang, in his written reply, retracts his denial a bit and submits that even if there was an agreement between the parties that costs should follow the event, the agreement is “not material” in determining the present application. This is because (i) the court retains a discretion on the issue of costs; and (ii) by making an order nisi, there was a clear intention of the court to hear further submissions from the parties.  

11.  In view of the aforesaid dispute, this court has listened to the relevant part of the audio recording of the proceedings.  Based on the recording, at 12:51:24 hours, which was towards the end of the submissions, this court raised with the parties whether costs should follow the event.  Mr Lai submitted then that it should be the case.  Mr Tang did not gainsay that but he asked, at 12:51:50 hours, that if the result of the appeal was in the plaintiff’s favour, that the costs of the appeal should be deducted from the balance of the purchase price which the plaintiff was to pay, there already being a similar order made by the master regarding the costs of the hearing before her.  At 12:52:30 hours, the proceedings were adjourned for luncheon break. The proceedings resumed at 14:40 hours.  After having dealt with a few legal points left over before lunch, this court reserved its judgment and said,

“And I propose to make an order nisi in relation to costs, so that if there is any application in that regard, parties can come back. But for the purpose of assessment, are both parties content with summary assessment?”

Both Mr Lai and Mr Tang confirmed there and then that they were content with summary assessment and that they both had filed their respective statements of costs.  Even up to that point, Mr Tang did not gainsay that costs should follow the event.  The hearing was then concluded at 14:42 pm.

12.  Based on the aforesaid exchanges between the court and the legal representatives, this court is of the view that there was clearly a consensus between the parties then that costs should follow the event of the appeal and that the quantum should be dealt with by way of summary assessment. As such, it is perhaps understandable why Mr Tang would now like to withdraw from that consensus and to seek to revisit the subject.  However, it would lie ill in Mr Tang’s mouth to deny the existence of that consensus.  It is also entirely unsatisfactory for him to refer to the court just what was said shortly after the luncheon break, without putting that in the context of what the parties had apparently agreed just before the luncheon break.  

13.  In my humble view, the aforesaid agreement between the parties on how the matter of costs should be approached is a factor that this court should take into account.  This is not to say that the court is dictated by what was agreed between the parties.  After all, it is a matter of discretion for the court.  Mr Tang has a point that this court, by making an order nisi, leaves open the possibility for the parties to make further submission on costs.  However, whilst the aforesaid agreement is not conclusive, I do not agree that it is “not material”.  The agreement remains a factor for consideration which is in the defendant’s favour and should not be ignored.

Other considerations

14.  I bear in mind that the defendant’s case is on its face not a strong one and was even described by this court as “shadowy” and that leave to defend was only granted on the condition that the defendant pay into court $2.12 million which represents the amount of the deposit said to have been paid by the plaintiff and not returned by the defendant.  

15.  Nonetheless, even without taking into account the aforesaid consensus on costs, by having looked at the matter of costs afresh and having considered the written submissions of the parties filed for the present application, I am satisfied that there are positive reasons as to why the plaintiff should bear the costs of the hearing before the master and those of the appeal heard before this court:

(i) as can be seen from the written submissions used by the parties in the hearing before the master, the plaintiff’s success before the master was mainly based on the procedural point that the defendant’s defence was not supported by a proper affirmation.  That procedural point, however, was firmly rejected both by this court and the Court of Appeal[4].  Moreover, much of court’s time in the appeal before this court was spent on dealing with the plaintiff’s aforesaid procedural point;

(ii) as the Court of Appeal points out in its judgment, in the present case the plaintiff’s application for summary judgment was made only after the defendant had filed its defence.  As such, the plaintiff should have known at the outset what the defence case is about and that there are circumstances indicating substantial disputes of fact, as identified at paragraph 18 of the Judgment, which would make the case not suitable for summary disposal; and

(iii) this court also set aside the master’s decision on the basis that there is sufficient foundation for the contention that the estate agent had constructive knowledge of the alleged impropriety in the transaction so that the plaintiff, who is seeking an equitable remedy, is not with clean hands.  By its judgement, the Court of Appeal agrees with this court that there is a triable issue as to whether an estate agent can impute his knowledge to his principal.

In view of the above, this court takes the view that the present case is not only not a plain and obvious one for summary disposal, but also that the application for summary judgment was ill-conceived.

Defendant got only conditional leave to defence

16.  Mr Tang places emphasis in his written submission on the fact that the defendant has only obtained a conditional leave to defence and that the defence is described as “shadowy”.  Nevertheless, it has to be borne in mind that this is a case for specific performance and (as noted in the Judgement[5]) normally no condition would be attached if leave to defend was granted.  In the present case, the conditional leave to defence was granted after consideration of a host of factors, including the defendant’s poor track record of meeting time requirements and that the plaintiff was said to have paid $2.12 million as deposits which had not been repaid by the defendant.  The condition was therefore imposed as a means to protect the plaintiff’s potential interest and to ensure that the defence would be proceeded with some diligently.  In the circumstances, this court takes the view that the fact the defendant is granted leave to defend on condition is not a sufficient reason for not awarding him the costs arising from the plaintiff’s application for summary judgment which is based mainly on a misunderstanding of the law and which, in the view of this court, also is ill-conceived.

CONCLUSION

17.  Based on all the above, the present application by the plaintiff for variation is refused and the costs order nisi is hereby made absolute.

18.  It is further ordered that the plaintiff is to pay the defendant’s costs for this application forthwith, to be taxed if not agreed.