DBS BANK (HONG KONG) LTD v. SAN-HOT HK INDUSTRIAL CO LTD AND ANOTHER

HCA 2279/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 2279 OF 2008

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DECISION ON COSTS

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1. By a judgment handed down on 12 March 2013, I gave judgment for the plaintiff and dismissed the defendants’ Counterclaim. I made a costs order nisi in favour of the plaintiff on a party‑and‑party basis. The plaintiff’s present application is to seek a variation of the said order nisi. The plaintiff asks me to order costs on indemnity basis in favour of the plaintiff.

2. The plaintiff properly reminds me that there was in fact a brief exchange between counsel and the bench on this issue on Day 9 of the trial[1].  During that exchange, Mr Jat invited me to look at a contractual provision in the General Commercial Agreement, Clause 16[2] which provided the basis for the plaintiff’s entitlement to seek indemnity costs.  Mr Jat also referred me to the Court of Appeal’s decision in Bank of China (HK) Ltd v Twin Profit Ltd (CACV 94/2010) which held that in the exercise of the court’s unfettered discretion in making costs order, the court will in normal course give effect to a contractual clause which provides for the basis on which costs are to be quantified.  Mr Jat further said that the defendant in Bank of China (HK) Ltd v Twin Profit Ltd, ibid, then represented by Mr Coleman, applied for leave to appeal to the Court of Final Appeal and leave was refused.  Thereupon, Mr Coleman confirmed to me that what Mr Jat said was correct.  Mr Coleman made no other comment or observation in respect of Mr Jat’s application for indemnity costs.

3. I must confess that at the time when I made the costs order nisi, I had forgotten about the above exchange on Day 9 of the trial.  In the Written Submissions of Mr Man, apart from reminding me of the above exchange, he also referred to Clause 26(i) of the Master Agreement[3] which has the same effect as Clause 16 of the General Commercial Agreement.  The Court of Appeal’s Judgment in Bank of China (HK) Ltd v Twin Profit Ltd and the Judgment of the Court of Final Appeal (FAMV 4/2012) were also provided to me.

4. Mr Wong for the defendants opposed to the application for variation on the sole basis that the plaintiff’s contractual entitlement to indemnity costs had not been pleaded in the Amended Statement of Claim.  Mr Wong stated that the defendants have no quarrel with the proposition that the court should be slow to disturb a contractual entitlement to indemnity costs.  Mr Wong however put forward no reason as to why, on the facts of this case, the general approach as held in Bank of China (HK) Ltd v Twin Profit Ltd should be departed from.  Mr Wong’s argument should properly be described as a pure pleading point.

5. With respect, I do not accept Mr Wong’s submission.  The starting point is that no party in a litigation has any “entitlement” to costs as such.  Order 62 rule 3(1) stated that “Subject to the provisions of this Order, no party shall be entitled to recover any costs of or incidental to any proceedings from any other party to the proceedings except under an order of the Court”.  Then, in the making of any costs order, the court has an unfettered discretion.  To properly exercise that discretion, the court can and should take into account all relevant matters, one of which is whether the parties have, by their agreement, agreed upon a basis for their quantification.  The principles expounded in Bank of China (HK) Ltd v Twin Profit Ltd then comes into play.  The proper question to ask in this case is whether I should ignore the aforesaid mentioned contractual clauses in the exercise of my discretion simply because they had not been specifically mentioned in the Amended Statement of Claim.

6. Although the contractual clauses had not been specifically mentioned in the Amended Statement of Claim, counsel did refer to and seek reliance on at least Clause 16 of the General Commercial Agreement during the aforementioned “counsel and bench” exchange prior to the conclusion of the trial.  Counsel for the defendant were then duly informed, if not earlier, of the Plaintiff’s intention to rely on Clause 16 of the General Commercial Agreement on the issue of what costs order I should grant in due course.  As I mentioned, Mr Coleman simply acknowledged the Bank of China (HK) Ltd v Twin Profit Ltd principles and made no other comments.  He certainly did not suggest that the defendants were in any way taken by surprise.  Nor did he mention that the defendants would in any way be prejudiced by plaintiff’s intimation of intention to rely on Clause 16 at such a late stage of the proceedings.  He did not suggest that I should ignore Clause 16 in the exercise of my discretion.

7. In the circumstances, I see no valid reason for not taking into account the contractual clauses in the exercise of my discretion.  I also see no basis for departing from the guidance in Bank of China (HK) Ltd v Twin Profit Ltd.  Accordingly, I order that the costs order nisi be varied in that the taxation of costs be changed from “party‑and‑party” basis to that of “indemnity” basis.  I further order that costs of the summons for variation be paid by the defendants to the plaintiff to be taxed on indemnity basis if not agreed.