CHUNG PUI TONG v. QIAN ZHEN

CACV 68/2020, [2024] HKCA 814

On appeal from [2020] HKCFI 187

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 68 OF 2020

(ON APPEAL FROM HCA NO 2555 OF 2014)

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DECISION ON COSTS

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Hon Kwan VP (giving the Decision on Costs of the Court):

1.  On 2 July 2024, we handed down our judgment[1] (“CA Judgment”) allowing the plaintiff’s appeal in part. The orders we made appeared at §144, which will not be repeated. The terms and expressions in the CA Judgment are adopted here.

2.  We set aside the costs order in the Judgment (that the defendant is entitled to the costs of the action and the counterclaim) and directed the parties to lodge submissions on this before we make an order in substitution of the costs of the action and the counterclaim. According to the outcome of this appeal, the plaintiff would have succeeded on part of his claim (that the defendant holds the Sum on trust for him) and the defendant on part of her counterclaim (that the plaintiff and the defendant are the legal and beneficial co-owners of 9F; and the defendant is the sole legal and beneficial owner of CSW).

3.  As for the costs of the appeal, we made a costs orders nisi that the defendant is to pay 60% of the plaintiff’s costs on appeal. We have taken into account the plaintiff is partially successful on appeal, and most of the time taken was on the effect of estoppel arising from the Consent Order and the receipt clause in the assignments and these are points that the plaintiff is largely successful.

Application to vary the costs order nisi

4.  On 15 July 2024, the defendant issued a summons to vary the costs order nisi to provide instead there should be no order as to costs of this appeal. The defendant’s solicitors filed an affirmation of 11 pages deposing to the litigation conduct of the plaintiff making these points:

(1) the plaintiff’s litigation conduct justifies depriving him of all costs, including inordinate delay in proceeding with the appeal, the inclusion of irrelevant documents in the appeal bundle despite the defendant’s objections;

(2) the notices of appeal are prolix and unfocussed; and

(3) whilst the time spent on the two legal issues (the effect of estoppel arising from the Consent Order and the receipt clause in the assignments) were significant, the plaintiff only succeeded in setting aside a “minor portion” of the reliefs sought in the notices of appeal.

5.  We do not propose to enter into minutiae of the solicitors’ correspondence as to whether those aspects of the plaintiff’s litigation conduct complained of can be justified.

6.  What cannot be disputed is that there was undue delay of the plaintiff in bringing forth this appeal, which was heard more than four years after the Judgment. The defendant’s real complaint seems to be that she was unable to dispose of her interest in the properties (her half share in 9F and her interest in CSW), but the delay is also to the plaintiff’s prejudice as he did not have the use of the Sum, a substantial amount of $2.7 million, during this period. The criticisms regarding the plaintiff’s preparation for this appeal – inclusion in the appeal bundle of documents that are apparently irrelevant and not been referred on in the hearing, filing three notices of appeal with prolix and unfocussed grounds – may well be justified. The plaintiff’s counsel sensibly pursued only those grounds in his skeleton arguments and oral submissions. It is also correct that the CA Judgment only granted part of the reliefs ought in the notices of appeal.

7.  Notwithstanding all the above, it is plainly far too ambitious to deprive the plaintiff – who has succeeded on those legal points that required serious argument – of all the costs of the appeal.

8.  Taking all the above matters urged by the defendant into account, we think justice would be served by deducting a further 10% of the plaintiff’s costs on appeal. Accordingly, we vary the costs order nisi by ordering the defendant to pay 50% of the plaintiff’s costs on appeal.

9.  The defendant seeks costs of the application to vary the costs order nisi. Her solicitors lodged a statement of costs for summary assessment of $43,200.

10.  The defendant has not succeeded in depriving the plaintiff of all costs on appeal. The affirmation evidence of the solicitor is not of material assistance. It is unreasonable to spend two hours attending the lay client on the matter of variation of costs. Notwithstanding the defendant can be considered the successful party in this application, we exercise our discretion to deprive her of a substantial part of her costs and award costs to her assessed summarily at $20,000.

Costs of the action and the counterclaim

11.  Where the plaintiff and the defendant were partially successful in their respective claims and counterclaims, it is in principle appropriate that costs should follow the event in respect of the respective parts where each party was successful. Instead of making cross-orders with separate assessments of costs attributable to each part, the court may make a single overall order of costs in favour of one party subject to a percentage deduction (Ho Lai King v Kwok Fung Ying [2020] HKCA 763 at §14).

12.  Mr Ng submitted for the defendant that a single overall costs order is more desirable in this instance and would save effort and resources in the taxation process. The plaintiff’s solicitor disagreed[2]. He submitted it is appropriate to order costs to follow the event in respect of those parts where each party was successful. He asked the court to make a costs order for the action and a costs order for the counterclaim to better reflect the procedural situations and to do justice to the parties.

13.  The plaintiff initially seeks an order that he should be allowed 50% of the costs of the action and the counterclaim in light of his partial success on the claim and the defendant’s partial success on her counterclaim. In the reply submission, it was contended that as the plaintiff won on two issues (the Sum and the effect of estoppel on the Consent Order), the plaintiff should have costs of these issues, estimated to be 50% of the costs of the action. As for the counterclaim, the defendant won on 9F, estimated to be 25% of total costs but 60% of this should be disallowed in view of the issues of the receipt clause, estoppel by deed and contractual estoppel which failed. This leaves her with 10% of the total costs of the counterclaim, representing her limited success on 9F. She also won on CSW, estimated to be 25% of total costs. Hence, the total costs of the counterclaim that should be awarded to the defendant would be 35%.

14.  In summary, the plaintiff’s proposal is that he should be awarded 50% of the costs of the action and the defendant should be awarded 35% of the costs of the counterclaim.

15.  The defendant’s stance is that the plaintiff should be ordered to pay her 25% of the costs of the action and the counterclaim.

16.  Mr Ng submitted that on an outcome-based analysis, the outcome of the appeal means that the plaintiff has succeeded in obtaining reliefs in respect of the Sum but failed on CSW and 9F, whereas the defendant has succeeded in respect of CSW and 9F but failed on the Sum. Hence, the defendant succeeded in obtaining more reliefs than the plaintiff. On an issue-based analysis, he submitted that the defendant remains the successful party of two of the three issues after the appeal and he contended that the two issues on which the defendant succeeded are more complex. To fairly reflect the respective success and failure of the parties, he submitted that an appropriate overall order is for the plaintiff to pay the defendant 25% of her costs below, as the defendant remains the successful party in the majority of the issues and reliefs even on appeal.

17.  Mr Ng emphasised that the defendant has made a substantial counterclaim and has mostly succeeded in her counterclaim. As the claim and the counterclaim revolved around the Sum, 9F and CSW, and the defendant’s success in respect of 9F and CSW necessarily meant that the plaintiff’s claim over these assets failed, the defendant should be regarded as the “overall successful party” in that she has obtained a majority of the assets in dispute.

18.  We do not agree with Mr Ng’s outcome-based analysis or his issue-based analysis. It does not appear to us that the defendant is apparently the overall successful party.

19.  Although there were three assets in dispute in the action and counterclaim, it does not follow that there were, broadly speaking, three issues in dispute, and that the defendant succeeded in two issues out of three. The effect of estoppel on the Consent Order, which affects the plaintiff’s right to claim any assets from the defendant, is an overarching issue in the action and the counterclaim and the plaintiff succeeded on this overarching issue which is a rather difficult point. Nor can we tell from the evidence who is likely to write a cheque at the end of the day.

20.  As it is not sufficiently clear who should be regarded the overall successful party, we do not think it appropriate to make a single overall order of costs with appropriate deduction. In view of these special circumstances, we think it is more likely to do justice to the parties by making separate costs orders for the action and the counterclaim, suitably discounted to reflect the extent of success on the issues raised in the claim and the counterclaim.

21.  The plaintiff succeeded in part in the action. His solicitor proposed a deduction of 50% to reflect his failure on some of the issues. In light of his success on the overarching issue and that the judge had made a number of factual findings against the defendant, we think this deduction is appropriate.

22.  The defendant succeeded in part in the counterclaim. The plaintiff’s solicitor apportioned 50% of the costs attributable to the issues she succeeded and subjected this to a further discount for the sub-issues in which she failed, so that she should be awarded 35% of the costs of the counterclaim. The apportionment and further deduction seem to us appropriate on the whole.

23.  Accordingly, we order the defendant to pay the plaintiff 50% of the costs of the action and the plaintiff to pay the defendant 35% of the costs of the counterclaim.

24.  The plaintiff’s solicitor further submitted that the plaintiff should be awarded the whole of the costs of the account and inquiries of the Sum ordered in the CA Judgment to be conducted before a master. This is neither necessary nor appropriate. At the conclusion of taking the account and inquiries, the master would make such costs order as he deems fit for this part of the proceedings.

25.  The costs incurred for submissions on the appropriate costs order in substitution of the costs order in the Judgment are to be subsumed in the costs of the appeal.