UNITY PROFIT LTD v. LEE CHING LAM

HCA 2503/2017

[2025] HKCFI 1563

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2503 OF 2017

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D E C I S I O N

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Introduction

1.  On 8 November 2024, I handed down the judgment in this action: see [2024] HKCFI 3178. I made a costs order nisi that there be no order as to costs of the action and the counterclaim: see para 161.

2.  By summons dated 22 November 2024, the defendant asks for the costs order to be varied such that the plaintiff should pay 70% of the defendant’s costs of the action and the counterclaim, including all costs reserved, to be taxed if not agreed, with a certificate for two counsel.

3.  By consent of the parties, the summons is dealt with by paper disposal.

4.  I shall adopt below the defined terms and paragraph numbers used in the judgment.

The defendant’s argument

5.  The ground in support of the variation application is as follows.

6.  It is contended that the issues in relation to Lots A and those in relation to Lot B are discrete issues. Under the judgment, the defendant wholly succeeded in respect of Lots A. He had not raised any issue that had significantly delayed or added to the costs of the proceedings. There is therefore no ground for depriving him of any costs incurred on Lots A. While the defendant was unsuccessful in respect of Lot B, he submits that the issues in relation to Lot B were dwarfed by those in relation to Lots A. This is because (1)  Lots A are much larger in size and economic value than Lot B, and (2)  in terms of the evidence, the bulk of the documents, witness testimony and cross-examination related to Lots A.

7.  Applying a broad brush approach, the defendant submits that the issues in relation to Lots A represented 70% of the time and costs of the action and the counterclaim. He says that he should be awarded such costs.

The plaintiff’s argument

8.  On the other hand, the plaintiff invites the court to make absolute the costs order nisi.

9.  The plaintiff disagrees that the relative sizes of Lots A and Lot B are a relevant factor when it comes to the issue of costs. Just because Lot B is smaller, it does not mean that the issues involved there were less complex and took up less time at the trial. The plaintiff contends that Lots A and Lot B gave rise to comparable number of issues and the parties spent roughly comparable amount of time on them, in terms of pleadings, witness statements, oral testimony and submissions at the trial.

10.  As the plaintiff succeeded in recovering vacant possession of Lot B and the defendant succeeded in his estoppel claim in respect of Lots A, there was no “overall winner”.  It is therefore fair and appropriate that there should be no order as to costs.

Legal principles

11.  The general starting point for deciding costs after trial is that costs should follow the event: Order 62, rule 3(2).

12.  Where a plaintiff is successful in his action and a defendant is successful in his counterclaim and where the action and the counterclaim raise distinct issues, applying the above starting point, it is prima facie appropriate to make separate costs orders for the action and the counterclaim such that the plaintiff should have costs of his action and the defendant costs of his counterclaim. Where a party is not wholly successful in his claim, a discount may be applied to reflect the extent of his success in the order which is made in his favour.

13.  Alternatively, instead of making separate costs orders which would involve separate assessments of costs attributable to the successful parts of the action and the counterclaim, the court may make a single overall costs order in respect of both the action and the counterclaim in favour of one party, subject to a percentage deduction: see Chung Pui Tong v Qian Zhen [2024] HKCA 814 at paras 11 and 20, citing Ho Lai King v Kwok Fung Ying [2020] HKCA 763 at para 14.

14.  Whether to make separate orders or a single overall order will depend on the circumstances of each case.  Ultimately, it will depend on the court’s assessment of which option is more likely to do justice to the case. There is no hard and fast rule. Nor is there any absolute formula. In Chung Pui Tong, the Court of Appeal declined to make a single overall order and made separate costs orders for the action and the counterclaim because it was not sufficiently clear who should be regarded as the overall successful party: para 20. On the other hand, in Ho Lai King, the Court of Appeal made a single overall costs order subject to a percentage deduction as it found that the defendant in that case succeeded on a dispute which could be identified as the major or principal part of the litigation in terms of the time and costs spent: paras 8, 15 and 21.

Discussion

15.  In the present case, each of the claim and the counterclaim concerned both Lots A and Lot B. In gist, the plaintiff claimed vacant possession, rent arrears and mesne profits in respect of both Lots A and Lot B. In his counterclaim, the defendant claimed, among other things, proprietary estoppel in respect of Lots A and adverse possession in respect of Lot B. For an outline of the parties’ cases, see paras 4 to 13. In the end, the plaintiff succeeded in recovering vacant possession of Lot B whereas the defendant succeeded in establishing proprietary estoppel in respect of Lots A: paras 159 and 160.

16.  This is therefore a case where each party was partially successful in their respective claim and counterclaim. It is appropriate to consider whether the court should exercise its discretion to make separate costs orders in respect of the successful parts of the claim and the counterclaim or a single overall order in favour of one party, subject to a percentage deduction.

17.  Here, I consider that the following matters are material considerations in the exercise of my discretion.

18.  First, there should be no dispute that Lots A and Lot B raised discrete and distinct issues, both on the facts and the applicable legal principles. It would therefore make sense to consider awarding costs in respect of Lots A to the defendant and costs in respect of Lot B to the plaintiff.

19.  Second, the case was primarily a factual dispute: para 15. There were two primary factual disputes in which the parties’ accounts of events were diametrically opposite. First, in respect of Lots A, did the May 2009 conversation in fact take place? Second, in respect of Lot B, did the oral tenancies from 2001 to 2007 and the tenancy agreements of 2008 and 2009 cover Lot B as well as Lots A? Within this dispute, the critical issue was whether Ho gave permission to the defendant to use the land in 2001. I resolved both disputes in favour of the defendant: paras 100, 133 and 134.

20.  Third, the defendant was wholly successful in respect of Lots A, not only on the facts but also on the final ruling. I held in favour of his claim for proprietary estoppel and granted him the relief accordingly: see paras 156 and 160.

21.  Fourth, in respect of Lot B, the defendant failed on his adverse possession claim as I found that the evidence which he put forward was not cogent or sufficient enough to make out exclusive possession: see paras 147 and 148. However, he was successful in resisting the plaintiff’s factual assertion that Ho had allowed him to use Lot B from 2001 onwards.

22.  Fifth, I am satisfied that the time and costs spent on issues in relation to Lots A were more than those spent on Lot B, in terms of pleadings, witness statements, cross-examination and submissions at the trial.

23.  While I do not agree with the defendant’s description that the latter was “dwarfed” by the former, it would be apparent from the judgment that the primary factual dispute concerning Lots A raised considerably more factual sub-issues than Lot B. A good part of the trial was about examining Ho’s knowledge of the $1 tenancy provision in the 1993 SPA and the question of whether the plaintiff continued to send demand notes to the defendant after that conversation. The resolution of these sub-issues had an important impact on the question of whether the May 2009 conversation took place or not. All these issues concerned Lots A only: see the factual findings made in para 135.

24.  By contrast, in respect of Lot B, apart from the factual dispute identified in para 19 above, there was not much evidence produced by the defendant in support of his adverse possession claim. No surveying evidence was adduced. In fact, it was for this reason that his claim failed. See paras 142, 145, 148 and 149 of the judgment. Hence, I find that the time and costs spent on the adverse possession claim in respect of Lot B was appreciably less than that spent on Lots A.

25.  I reject the plaintiff’s contention that the time and costs spent were “comparable” insofar as it means that the time and costs spent were more or less the same. I should however say that if the plaintiff’s contention is correct, an appropriate costs order would be no order as to costs of the action and the counterclaim. This is because the costs to be awarded to the plaintiff would by and large be offset by the costs to be awarded to the defendant. There is therefore no point in engaging in a taxation exercise to determine the actual quantum.

26.  Applying a broad brush approach, I would apportion the time and costs spent on Lots A and Lot B to be in the approximate ratio of two to one.

27.  Drawing from the above, I come to the conclusion that even though the defendant failed on his adverse possession claim in respect of Lot B, overall speaking, he can be said to have had more success than the plaintiff as (1)  he prevailed entirely on Lots A, which, on my estimate, took up about two-thirds of the time and costs, and (2)  he succeeded in the factual dispute relating to Lot B.

28.  In the circumstances, applying the approach in Chung Pui Tong and Ho Lai King, I consider that it is appropriate to make a single overall order in favour of the defendant in respect of both the costs of the action and the costs of counterclaim subject to a percentage deduction, instead of making separate costs orders.

29.  The 70% figure proposed by the defendant cannot, in my view, be justified even on his own case.  It is his submission that the issues in relation to Lots A represented 70% of the time and costs of the action and the counterclaim. Even adopting that apportionment for the time being (which is slightly higher than my estimate of two-thirds), it would be wrong, as a matter of principle, for the court to award the entire 70% to him. This is because this costs order only reflects the defendant’s success but completely fails to account for the plaintiff’s success. What we need is an order which adequately reflects the respective successes of both parties. As a matter of arithmetic, the 70% figure (attributable to the costs for Lots A)  ought to be offset by 30% (attributable to the costs for Lot B).

30.  Based on my conclusion set out in para 27 above, I consider that the appropriate figure should be 40%, which should broadly reflect the extent of the successes of both parties in this case.

31.  I now turn to the issue of counsel’s attendance.

32.  On the one hand, I agree with the plaintiff’s contention that the issues in this case were not unduly complex. On the other hand, the material events which the court needed to examine spanned over a long period of time and there was a fair amount of evidential matters to be canvassed. It should be pointed out that the plaintiff was also represented by two counsel at the trial.

33.  In the circumstances, I consider that it is appropriate to grant a certificate for two counsel.

Conclusion

34.  For the above reasons, I accede to the defendant’s application and vary the costs order nisi such that the plaintiff should pay 40% of the defendant’s costs of the action and the counterclaim, including all costs reserved, to be taxed if not agreed with a certificate for two counsel.

35.  While the defendant has asked for 70% of the costs and I am awarding him only 40%, I consider that he is effectively successful in this application by in principle overturning the “no order as to costs” order. I therefore make a costs order nisi that he should have costs of his summons, to be taxed if not agreed, with a certificate for two counsel.