VIATECH ENGINEERING LTD v. THE MING AN INSURANCE CO (HK) LTD

HCA 2393 / 2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2393 OF 2007

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DECISION ON COSTS

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I.   Introduction

1.  By way of its Summons (“the O.14 Summons”) dated 10 April 2008, the Plaintiff seeks partial summary judgment or alternatively O.14A determination against the Defendant for an indemnity in respect of certain employee’s compensation. 

2.  This decision is only concerned with the costs of the O. 14 Summons, as by a consent order made on 21 August 2008, the Plaintiff withdrew its application under the O.14 Summons, with the question of costs to be argued by the parties by way of written submissions.

II.  Background

3.  The Plaintiff’s claim is mounted on an Employee Compensation Policy (“the EC Policy”) issued by the Defendant to Zen Pacific Construction Ltd.  

4.  The Plaintiff’s claim concerns a fatal accident that took place in March 2002 when 8 crew members employed by it on board a dredger were killed in a collision between the dredger and a container ship.  At the material time, the Plaintiff was a sub-contractor of Leader Marine Contractors Ltd in relation some dredging and disposal of sediment works.  Zen Pacific was the main contractor of the works, and Lead Marine was a sister company of Zen Pacific.

5.  The substantive hearing of the O. 14 Summons was held before me on 25 July 2008 reserved for one day.  At the start of the hearing, the Plaintiff raised an objection that it was taken by surprise, as the Defendant’s counsel had raised an argument in his skeleton (filed only on the day before the hearing) that the Plaintiff was not a party to the EC Policy and thus had no title to sue.  The Plaintiff said this defence (“the Privity of Contract Defence”) was a new one, as it was not pleaded in the Defence nor mentioned in the Defendant’s short affirmation in opposition (which was filed only on 22 July 2008).  The Plaintiff also said if the Defendant was allowed to argue the Privity of Contract Defence, the Plaintiff needed time to consider the authorities relied on by the Defendant in support of it.

6.  In order to save time, the hearing eventually proceeded to first deal with the submissions on the defence other than the Privity of Contract Defence.   I then adjourned the O.14 Summons to 22 August 2008 to enable the Plaintiff to prepare its submissions on the Privity of Contract Defence.  Mr Kwok, counsel for the Plaintiff, also made it clear that the Plaintiff would reconsider its position regarding the summary application under the O.14 Summons during the adjournment. 

7.   The Defendant’s other defence is premised on whether the “Other Insurance” clause provided in the EC Policy excludes the Defendant’s liability to indemnify the Plaintiff, in light of the fact that the Plaintiff had at the material time another insurance coverage under a Shipowner’s Policy issued by the Shipowners’ Mutual Protection and Indemnity Association (“the Double Insurance Defence”) .

8.  On 21 August 2008, as mentioned above, by consent and subject to the argument on costs, the Plaintiff obtained leave to withdraw the O.14 Summons.

III.    Costs of the O.14 Summons

The parties’ contentions

9.  In summary, Mr Kenny Lin, counsel for the Defendant, submits that the Defendant should be entitled to all the costs of the O.14 Summons for the following reasons:

(1)  O.14 r. 7 of the Rules of High Court (Cap 4A) provides that “If the plaintiff makes an application under rule 1 where the case is not within this Order or if it appears to the Court that the plaintiff knew that the defendant relied on a contention which would entitle him to unconditional leave to defend, then the Court may dismiss the application with costs and may require the costs to be paid by him forthwith” (emphasis added). 

(2)  The Privity of Contract Defence has been properly raised by the Defendant at paragraph 3(f) of the Defence.  It is also a point of law based on the reported decision of the Court of Appeal in B+B Construction Ltd v Sun Alliance and London Insurance PLC [2002] HKC 295, 300H-301B & 301E-H per Godfrey VP.   In the premises, before the issue of the O.14 Summons, the Plaintiff knew that the Defendant relied on a contention which was triable.  The Plaintiff should therefore pay the costs of the O.14 Summons.

(3)  Further and in any event, the Double Insurance Defence, which was fully argued on 25 July 2008, clearly also amounts to a triable defence which the Plaintiff should know before the issue of the O.14 Summons.  The Plaintiff should therefore also bear the costs of the application.

10.  Although accepting now that the Privity of Contract raises a triable defence, Mr Kwok for the Plaintiff however contends that the Defendant should instead bear the costs of the O. 14 Summons because:

(1)  The Privity of Contract Defence was not pleaded.

(2)  This defence was only raised at the last minute before the hearing of the O.14 Summons in counsel’s skeleton submissions.

(3)  The O.14 Summons was only withdrawn by reason of the Privity of Contract Defence.

(4)  As such, the Defendant should be liable to pay the costs of the O.14 Summons.

Discussion

11.  The usual costs order in a summary judgment application where unconditional leave to defend is given is costs in the cause: Hong Kong Civil Procedure 2008, para 14/7/13.

12.  Given that by consent, the parties are now to proceed to trial, I do not think it is appropriate for me at this stage to express my view one way or the other on the merits of the defences, substantively or otherwise, as to whether they amount to triable defences. 

13.  For the present purpose, suffice for me to say that having considered the present submissions of the parties, and having looked at the pleadings and the relevant evidence placed before me, I do not think there is anything to justify me to depart from making the usual costs order in the present application.  In other words, I am not satisfied that it has been shown to me that it was reasonably clear and obvious to the Plaintiff before the issue of the O.14 Summons that the Defendant relied on triable contentions.

14.  Mr Lin for the Defendant further submits that the alternative O.14A application made under the O.14 Summons is clearly inappropriate and also procedurally defective, as no questions of law or construction for determination are even posed in it. Mr Lin therefore says costs of the O.14A application must be to the Defendant.  

15.  I agree that the O.14A application is defectively made.  Mr Kwok for the Plaintiff does not contend otherwise.  At the hearing on 25 July 2008, Mr Kwok accepted that the matter should proceed solely as an O.14 application. 

16.  In the circumstances, I agree that the costs of the O.14A application, insofar as it is solely so incurred for that purpose, should be to the Defendant.

IV.    Conclusion

17.  In the premises, I make an order that:

(1)  Costs solely incurred for the O.14A application in the O.14 Summons be to the Defendant to be taxed if not agreed.

(2)  Save as to the above, costs of the O.14 Summons be in the cause.