SIU KAI MING v. LAU SAI HING

CACV 143/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 143 OF 2013

(ON APPEAL FROM HCA NO 2131 OF 2008)

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D E C I S I O N

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Hon Stock VP :

1. I agree with the judgment of Poon J as to costs.

Hon Barma JA :

2. I agree with the judgment of Poon J.

Hon Poon J :

INTRODUCTION

3. By our judgment handed down on 20 March 2014, we dismissed the defendant’s appeal against the order of Deputy High Court Judge Seagroatt dated 4 June 2013.  In so doing, we identified four main issues :

(1) First, what was the effect of the 2006 Agreement vis-à-vis the 1^st and 2^nd June Agreements?

(2) Second, on a proper construction, did Clause III.5 of the 2006 Agreement give the defendant a pre-emptive right or an option to purchase the Property?

(3) Third, if that was an option, was the oral communication by the mother of the defendant’s wish to purchase the Property a proper exercise of the option?

(4) Fourth, if that was a valid exercise of the option to purchase the Property, how was the parties’ position affected by the solicitors’ letters of 11 and 22 October 2008?

4. We held that :

(1) On Issue 1, the 2006 Agreement was a replacement agreement, replacing the 1^st and 2^nd June Agreements.

(2) On Issue 2, Clause III.5 of the 2006 Agreement gave the defendant an option to purchase the Property.

(3) On Issue 3, the oral communication by the defendant’ mother of his wish to purchase the Property on 16 December 2007 was a valid exercise of the option under Clause III.5 of the 2006 Agreement.

(4) On Issue 4, the defendant’s solicitors’ letter of 11 October 2008 amounted to a repudiation of the new agreement that the parties had entered into upon his exercise of the option on 16 December 2008.  The plaintiff’s obligations had been discharged when, by his solicitors’ letter of 22 October 2008, he accepted the defendant’s repudiation.

5. We further made an order nisi that the costs of the appeal be to the plaintiff to be taxed if not agreed (“First Order Nisi”) and another order nisi that there be no order as to costs of the respondent’s notice.  The defendant now seeks to vary the First Order Nisi.  He also seeks to clarify our judgment on one particular aspect concerning interest.

6. I will first deal with the application to vary the First Order Nisi.

VARIATION OF FIRST ORDER NISI

7. The defendant contends that an issue based approach should be adopted.  Here, the plaintiff failed on Issues 1 to 3 and succeeded on Issue 4 only.  The defendant should have the costs of the 4 Issues at trial.  For the appeal, the defendant should have the costs of Issues 1 to 3 and the plaintiff should have costs of Issue 4.

8. The defendant’s submission as to why he should have the costs below can be disposed of shortly.  In dismissing the defendant’s appeal, we upheld the Judge’s order, which includes the costs order that he made against the defendant.  That is the end of the matter insofar as the costs of the trial are concerned.  The defendant should not be allowed to re-visit the matter now.  Nor is it open to the defendant to apply to “vary” the costs order below as if they were part of the First Order Nisi for the simple reason that it does not cover the costs of the trial at all.

9. Turning to the costs of the appeal, the starting point is that the plaintiff, as the successful party, is prima facie entitled to his costs.  As Order 62, rule 3(2) of the Rules of the High Court provides :

“… the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.”

10. The general rule of costs following the event does not cease to apply simply because the successful party has failed on a discrete issue.  But where that issue has caused a significant increase in the length or cost of the proceedings, the court may deprive the successful party of the whole or a part of his costs.  Further, if the successful party raises the failed issue improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs.  See Re Elgindata Ltd (No 2) [1992] 1 WLR 1207, per Nourse LJ at p 1214.

11. These principles derived from Eglindata are not rules.  Nor should they be applied mechanically.  In considering if and how to apply them, the court always bears in mind that fairness is the touchstone.  That is to say, the court must exercise the discretion to achieve a just result having regard to the overall circumstances of the case.  See Hong Kong Kam Lan Koon Ltd v Realray Investment Ltd (No 4) [2005] 4 HKC 162, per Lam J (as he then was) at para 14; Kwan Siu Wa Becky v Cathay Pacific Airways Limited, CACV 92/2010 and HCAL 2, 4, 5, 8 and 9/2009, unreported, 19 April 2011, per Tang Acting CJHC (as he then was), paras 6 – 9.

12. Here, I do not think it is a proper exercise of the court’s discretion to award the defendant costs of Issues 1 to 3.

13. First, although I accept that Issues 1 to 3 are distinct from Issue 4, I do not think Issues 1 to 3 had caused a significant increase in length or cost of the appeal.  The Eglindata principles enabling a departure from the general rule that costs are to follow the event as set out above are not engaged.

14. Second and more importantly, the defendant should have carefully evaluated the prospect of his success before launching the appeal.  Had he done so, he should have known that even if he were to succeed on Issues 1 to 3, the answer to Issue 4 is so obvious that his appeal was doomed to fail.  The court should not sanction his conduct by awarding him costs of Issues 1 to 3 when he ought to have known that pursuing them before us would take his appeal, which is plainly unarguable, nowhere.

15. For the above reasons, I would refuse the application to vary the First Order Nisi.

CLARIFICATION OF OUR JUDGMENT

16. The Judge ordered, as part of the consequential relief, that the defendant is to pay interest to the plaintiff in the sum of HK$621,376.63 on the sum of HK$1,808,560.00 at commercial rate from 27 October 2007 to 4 June 2013 and thereafter at commercial rate until the date of completion of the assignment to the plaintiff; that the plaintiff is entitled to a lien in his favour over the House of the sum of HK$1,808,560.00 plus interest at commercial rate from 28 October 2008 until the date of completion of the assignment; and that the defendant do provide an account in respect of any mesne profits received by him as a result of any letting of the Property between 23 October 2007 and 4 June 2013 and thereafter until the date of completion of assignment of the title to the plaintiff, and to pay to the plaintiff any such sums received.  By a Note to Judgment dated 22 July 2013, the Judge further held that :

“3. …the Plaintiff was entitled only to the capital sum expended by him in building the whole house (the contract sum) plus interest from 27 October 2007 until vacant possession of the upper part of [the Property] is given to him. Once vacant possession has been given the capital sum would no longer be payable but he would still be entitled to interest accumulated up to that date. He is also entitled to any mesne profits obtained by Defendant during any of that interim period.”

In short, interest on any sums the defendant is ordered to pay to the plaintiff would start to run from various dates as identified by the Judge.

17. The defendant submits that in light of our holding on Issue 4, interest should only commence from 22 October 2008, that is, the date when the plaintiff’s obligations under the new agreement were discharged and not earlier.  This is inconsistent with our upholding the Judge’s order in toto.  He now seeks clarification.

18. Having reconsidered the matter, I think the defendant is correct.  I note that the order of this Court arising from our judgment is not sealed yet, which means that it can still be revised to reflect the correct position on interest.  I clarify the judgment by stating explicitly that interest arising from the Judge’s judgment is to commence on 22 October 2008.

COSTS OF THE PLAINTIFF’S APPLICATION

19. Bearing in mind how the two matters arising from the plaintiff’s application before us are disposed of, I think the plaintiff should have 50% of his costs and the defendant should have 50% of his costs. Both sets of costs are to be taxed if not agreed.

Hon Stock VP :

20. Accordingly, the application to vary the costs order nisi is refused and the costs of that application will be in the terms proposed by Poon J at paragraph 19 above.