MAN PING NAM v. MAN MEI KWAI

HCA 9852/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9852 OF 1998

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(by counterclaim)

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J U D G M E N T

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1. On 1 February 2002, I handed down judgment in this action including the counterclaim between the parties. In my judgment, I made an order nisi as to costs relating to the costs of the action as well as the costs of the counterclaim. I gave the parties liberty to apply to vary my costs order nisi. An application was duly made on behalf of the Plaintiff as the 1st Defendant in the counterclaim ("the Plaintiff") as well as the 2nd Defendants in the counterclaim ("the 2nd Defendants") to vary my costs order nisi. I have now heard counsel's arguments relating to the application to vary my costs order. I shall deal with the matters raised one by one.

2. First, in relation to the position of the 2nd Defendants, the 2nd Defendants are successful in defending the counterclaim made by the Plaintiff (by counterclaim) ("the Defendant"). They should get the costs of the counterclaim. That has been provided for in sub-paragraph (c) in paragraph 110 of my judgment. There is no application to vary this.

3. Mr Chong, on behalf of the 2nd Defendants, is not happy with sub-paragraph (f) of that paragraph, in which I apportion the costs of the trial as follows: i.e. 1/4 in respect of the Plaintiff's claim by original action; 1/2 in respect of the counterclaim against the Plaintiff; and 1/2 in respect of the counterclaim against the 2nd Defendants. Mr Chong says that the 2nd Defendants ran two points at trial: one was a factual point, i.e. whether there was a tenancy agreement between the Wui and the 2nd Defendants. The other one was a point of law, i.e. the proper construction of Section 15 of the New Territories Ordinance (Cap.97).

4. In my judgment, I ruled in favour of the 2nd Defendants on the factual point, but ruled against the construction put forward by Mr Chong in relation to Section 15.

5. According to sub-paragraph (f), so Mr Chong argues, the 2nd Defendants would only get 1/4 of the costs of the trial, effectively representing the costs expended on the factual issue relating to whether there was a tenancy. In other words, the 2nd Defendants will not get the costs of the argument over Section 15. Mr Chong says this is not right. This is because even though the 2nd Defendants are unsuccessful with the Section 15 construction argument, they were not acting improperly or unreasonably in joining in with the Plaintiff in running the Section 15 construction argument.

6. Having listened carefully to Mr Chong's argument, I agree with Mr Chong. Mr Chong's argument in this regard has the indirect support of Hong Kong Civil Procedure 2002, Volume 1, paragraph 62/3/3 on p.862 where it says that:

" A successful party to an action should not be ordered to pay any part of the costs of the hearing simply because he has failed to prove all of the allegations made. The successful party should not pay any of the costs unless he has acted improperly or unreasonably in raising issues."

Of course, the passage does not directly say that in that situation, the successful party should be paid his costs of running the issue that was subsequently ruled by the Court against him. But in my judgment, unless the running of the argument or the raising of the issue was done improperly or unreasonably, similar considerations apply and the successful party should be given his costs.

7. So for that reason, I am with Mr Chong and am agreeable to vary my costs order nisi. Sub-paragraph (f) would now read:

"The costs of the trial be apportioned thus: 1/4 in respect of the Plaintiff's claim by original action; 1/2 in respect of the proper construction of Section 15 of the New Territories Ordinance; and 1/4 in respect of the alleged tenancy of the 2nd Defendants. Further, the 2nd Defendants shall get 1/2 of the costs of the trial, being the aggregate of 1/2 of that portion of the costs of the trial in respect of the proper construction of Section 15 and the said 1/4 of the costs of the trial in respect of the alleged tenancy of the 2nd Defendants."

8. I turn now to deal with the position of the Plaintiff. In my judgment, I ruled against the Plaintiff in relation to the proper construction of Section 15. In my costs order nisi, I order that the Plaintiff, out of the funds and if necessary other properties and assets of the Wui, pay to the Defendant his costs of the counterclaim against the Plaintiff, to be taxed on a common fund basis if not agreed between the two; and that the Plaintiff be paid out of the funds and if necessary other properties and assets of the Wui his costs of defending the counterclaim, to be taxed on a common fund basis if not agreed with all the members of the Wui.

9. Mr Chong is not happy with this costs order nisi for two reasons. First, Mr Chong says that I should take into account a Notice to Admit Fact served by the Plaintiff on the Defendant on 9 July 2001. Mr Chong argues that had the Defendant admitted those facts, factual as well as expert witnesses need not be called at trial and therefore, there ought to have been some saving of the costs of trial. In relation to this argument, I am in general agreement with Mr Chan appearing for the Defendant. I need not repeat in detail his submission that has been set out in great detail in his skeleton argument.

10. Suffice it to say that the Notice to Admit Fact was served well after the preparation of the relevant witness statements of the factual witnesses, and when the factual witnesses gave evidence in Court, those parts of their evidence that were covered by the Notice to Admit Fact (which they gave by way of adoption of their witness statements) were not challenged at all by the Defendant during cross-examination. The rest of their evidence related to matters that neither party suggested was irrelevant to the issues between the parties.

11. As for the expert witness and his expert report, it is true that at the time when the Notice to Admit Fact was served, the expert had not yet been instructed by the Plaintiff to prepare his expert report, let alone to appear at trial. But one must bear in mind that when the expert did eventually prepare his expert report pursuant to his instructions, the contents of his report were much more extensive and ambitious than the matters covered by the Notice to Admit Fact. When the expert came to give evidence at trial, those parts of his evidence that were covered by the Notice to Admit Fact (which he gave by way of adoption of his expert report) were, likewise, not challenged by the Defendant during cross-examination. The rest of his evidence was found by both parties to be useful and both parties sought to make use of his expert evidence for their respective purposes at trial.

12. In those circumstances, although O.62 r.3(5) says that prima facie, the costs of proving matters set out in a Notice to Admit Fact that has been served and that has not attracted any favourable response from the opposite party should be recovered from the opposite party regardless of the result of the litigation (if those facts were eventually proven at trial), the costs incurred by the Plaintiff in establishing the relevant facts contained in the Notice to Admit Fact by the respective factual witnesses and the expert witness were, in my judgment, minimal in the context of the present trial. I see no justification in making any separate provision for the costs of proving the facts at trial.

13. Moreover, sub-paragraph (f) in paragraph 110 of my judgment relating to the apportionment of costs simply represents a rough estimate of the costs incurred at trial in relation to the various issues in question. The estimate itself contains sufficient leeway and flexibility to absorb the costs incurred by the Plaintiff in establishing the matters set out in the Notice to Admit Fact.

14. One other matter that I note is this: the Notice to Admit Fact contains many matters covered by the original action by the Plaintiff against the Defendant, in respect of which I have already made my order as to costs, in relation to which there is no application to vary.

15. So for all these reasons and looking at the matter in the round, in the exercise of my undoubted discretion in the matter, I refuse to accede to Mr Chong's request to vary my order as to costs on this ground.

16. Finally, Mr Chong complains that the costs awarded in favour of the Defendant should only be taxed on a party and party basis instead of a common fund basis. He argues that the Defendant did not commence or prosecute the counterclaim in any representative capacity. That was factually correct, but I agree with Mr Chan that one must look at the substance of the counterclaim. The counterclaim relates solely to the proper construction of Section 15, a matter which is of great importance to the management of the Wui. Of course, I am not unaware of the different motives behind the parties in fighting this litigation, but they do not have the effect of overshadowing the importance of a proper resolution of the disagreement over the true construction of Section 15. This is, as I say, a matter of great importance to the Wui and the proper administration and management of the land owned by the Wui.

17. Indeed the resolution of this dispute between the parties benefits not only the Defendant as a member of the Wui, but also the Plaintiff, as the manager of the Wui, as well as all other members of the Wui. Mr Chan says that in fact the resolution of this issue benefits all the tsos, tongs and wuis in Hong Kong. I see no reason to disagree with this statement. So in substance, the litigation benefits the Wui and out of the funds of the Wui should be paid the costs of the litigation. In this regard, no distinction should be made between the Plaintiff as manager and the Defendant as a member of the Wui in relation to this litigation, and that was the reason why I made my order nisi as to costs giving costs to the Defendant on a common fund basis in the first place.

18. Having heard Mr Chong's argument carefully, I can really discern no good reason to depart from my order nisi; so I also reject this part of Mr Chong's argument.

19. In short, save as to the variation of sub-paragraph (f), my original costs order nisi shall stand, and I order that the same (as varied) be made absolute.

20. As regards the costs of today's hearing, I award half of the costs to the 2nd Defendants against the Defendant, to be taxed on a party and party basis if not agreed.

21. As regards the remaining half of the costs of this application, I order that the costs be regarded as part of the costs of the counterclaim by the Defendant against the Plaintiff and the same be dealt with in accordance with sub-paragraphs (d) and (e) of paragraph 110 of my judgment.