SUN CROWN TRADING LTD v. HOLYROOD LTD

HCA 1158/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1158 OF 2007

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BETWEEN

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R U L I N G

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1.  This is an application by the unsuccessful defendant at the trial to have varied an order nisi that it should pay the plaintiffs their costs to be taxed on an indemnity basis. The variation sought only relates to the basis of taxation.

2.  I need to approach this by being loyal to my judgment as to the defendant’s overall conduct in conducting its defence both before trial and in the trial itself.  My reasoning for awarding indemnity costs can be found in paragraph 109 of the judgment.  I said:

“The defence of this action has offended the court’s sense of justice. These plaintiffs have had to fight long and hard and at great expense for the relatively small amounts which are undoubtedly due to them. A party and party taxation would simply not do them justice. If ever there was a case for an indemnity taxation, it is this one, and I so order.”

3.  Previously, indemnity orders were reserved for cases brought or defended with an ulterior motive or for an improper purpose, for litigants who conducted their cases in bad faith or as a personal vendetta or in an improper or oppressive manner or who caused costs to be incurred irrationally or out of all proportion as to what was at stake.

4.  These days, the discretion is not to be fettered or restricted beyond the requirement that an indemnity taxation should be “appropriate”.  This said, the successful party will need to demonstrate some “special or unusual feature” which would justify taxation on this more generous scale.  See Town Planning Board v The Society for the Protection of the Harbour [2004] 7 HKCFAR 122.  The observations of Lord Justice Buckley in Scherer v Counting Instruments Limited [1986] 1 WLR 615 at 621F that:

“The grounds [upon which costs are awarded] must be connected with the case. This may extend to any matter relating to the litigation and the parties’ conduct in it and also to the circumstances leading to litigation but no further”

are especially relevant in this case. These remarks were said by the Chief Justice in Town Planning Board supra to apply not only to the award of costs generally but with equal force to the exercise of the discretion to award indemnity costs.

5.  This overall appraisal of the defendant’s conduct in how it carried out its contractual duties towards the plaintiffs in terms of the massively substandard building that it produced, which took three years to put right after the completion of the conveyances, with the attendant adverse consequences for the plaintiffs, and then in how it fought the actions for compensation, is the basis for an indemnity taxation.

6.  In saying this, I recognise the points made by Mr Wilson Chan in seeking to carefully analyse the issues in the trial which he says were reasonably taken and contested, albeit unsuccessfully.  He also draws attention to the late improvement in the plaintiff’s case in terms of its pleadings and witness statements which I had allowed subject to an indemnity costs order against the plaintiffs.

7.  Whilst all of these matters have been properly advanced by Mr Wilson Chan, the fact of the matter is that these aspects only form part of the much larger picture which I have drawn attention to in the judgment.  The defendant knew very well what a substandard building it had delivered to the plaintiffs and to the other purchasers, and yet it was prepared to fight the plaintiffs to judgment through a long and expensive process of litigation.

8.  I have heard of no offer by the defendant to try to settle.  In the event it has lost and, by my judgment, it has lost very badly. To now direct the more usual party and party taxation would not produce a fair result for the plaintiffs, whose claim was at all times a relatively modest one.  There must therefore be a taxation on an indemnity basis.

9.  The costs of the variation application will also be to the plaintiffs and taxed on an indemnity basis.

10.  This order will be an order nisi, and any application to vary it must be in writing.