WING HONG INVESTMENT CO LTD v. FUNG SOK HAN AND OTHERS

HCA 2075/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2075 OF 2009

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D E C I S I O N

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1.  This is an application by the plaintiff for variation of part of my costs order nisi given in a judgment dated 25 September 2015.  The order nisi required the 2nd, 3rd and 4th defendants to pay the plaintiff 75% of the costs of this action with certificate for two counsel but provided no order as to costs as between the plaintiff and the 1st defendant.  This application is on the part that concerns the 2nd to 4th defendants.  It does not concern the part relating to the 1st defendant.

2.  My reasons in the judgment for ordering the 2nd to 4th defendants to pay the plaintiff 75% of the costs of the action with certificate for two counsel are as follows:

“373. On the question of costs, I think the plaintiff has succeeded substantially and in particular on what are the areas that it is entitled to their exclusive occupation, use and enjoyment. It has proposed to concede to some of these areas as common areas. That concession is in line with the defendants’ stance, but I have not accepted it as it is not a correct position in law. The plaintiff has also succeeded in proving the four raids against its properties. The plaintiff, however, has failed to obtain favourable orders over a few other matters that I have explained above.

374. Though the plaintiff’s alteration and use of the ground floor as shops and godowns were not in line with the occupation permits, that were not against the law or the DMCs.

375. The defendants’ main success is on the plaintiff’s flagrant misuse of the transformer room. But that is just one of the numerous matters raised in this action.

376. All in all, I think it is fair to make a costs order nisi that the 2nd, 3rd and 4th defendants do pay the plaintiff 75% of the costs of this action.”

3.  The plaintiff’s grounds of application are:

(a) the plaintiff has done better than a sanctioned offer previously made by the plaintiff to the defendants; and

(b) the court, in exercising its discretion on costs, should order a higher percentage of costs to the plaintiff.

4.  The 2nd to 4th defendants oppose this application. 

The sanctioned offer

5.  The two sides have each made two sanctioned offers to the other.  The plaintiff relies on the one it made on 7 July 2012 (“the Offer”).  The time for acceptance expired on 4 August 2012.  The plaintiff says that the judgment dated 25 September 2015 is more advantages to it than the terms of the Offer.

6.  In the Offer, the plaintiff asked for the right to exclusive occupation of a pink area on the G/F of Imperial Court as shown on a plan annexed to it.  It obtained in the judgment the right to exclusive occupation of a pink area on the G/F in the judgment plan which is almost identical to the pink area in the Offer save that the transformer room was also included in the pink area in the judgment plan.  The Offer treated the transformer room as a common area.  But I do not think this difference has really given the plaintiff a real advantage.  The reason being that the occupation of this room has to be and been handed over to the China Light & Power Co Ltd (“CLP”).  The plaintiff is only left with the obligation to maintain this room.  Even if there is no need or obligation to maintain the room, the plaintiff still cannot derive any benefit from it.  There is therefore no real difference between the Offer and the judgment on this point.

7.  The second point is about a strip of land on the G/F enclosing the eastern, northern and western sides of Imperial Court and a corridor adjacent to the transformer room.  They are all coloured yellow.  The plaintiff asked in the Offer for the exclusive right to occupy the strip and corridor subject to a common right of way for the other owners.  This is the same as the right that the plaintiff obtained in the judgment.

8.  Regarding the common areas; namely the entrance-hall, staircases and landings the common passages … as defined in the three deeds of mutual covenants, they are coloured yellow and hatched black in the judgment plan.  But they are just coloured yellow in the Offer plan.  That means the plaintiff was not treating these areas as common areas in the Offer. The plaintiff was seeking an exclusive right to occupy them subject to a right of way for the other owners over them.  The judgment on these areas is thus less advantageous to the plaintiff than the Offer.  The reason being that an exclusive right to occupy an area subject to a right of way over the area exercisable by others is a bigger right and interest than a right of use and occupation of the same area in common with others.  However, there may not be much difference in reality between the two rights.  The plaintiff and the other owners will make use of these areas in the same way regardless of whether they are common areas or they are subject to the plaintiff’s exclusive right of occupation with a right of way for the others. 

9.  The Offer also proposed an irrevocable licence to the other owners over the meter room and pump room on the G/F for use by them as a meter room and pump house but not otherwise.  The pump room was not mentioned in the proceedings and did not feature in the judgment.  Hence, it would not be considered in this application.

10.  However, insofar as the installations inside the meter room and pump room are common facilities, the plaintiff in the action has accepted that all owners have a right of access to them for the purposes of repair and maintenance.  In reality there is again not much difference between the Offer and the judgment on this point as the irrevocable licence over the meter room for use as a meter room is not much different from the conceded right of access for maintenance and repair.

11.  The plaintiff has also succeeded in getting some other relief like damages in the judgment.  But these are not significant remedies.  The damages to be assessed for the plaintiff are also not expected to be substantial.  The focus of the action was on the plaintiff’s exclusive right of occupation of the G/F areas.  The success of the plaintiff in the judgment on this is more or less the same as what it proposed in the Offer. 

12.  On the whole, I do not think the judgment is more advantageous to the plaintiff than the Offer.  I therefore will not vary the costs order nisi on the ground that the plaintiff had made the Offer.

The discretion on costs

13.  I ordered the 2nd to 4th defendants to pay only 75% of the costs of the action to the plaintiff because the defendants have succeeded in establishing their claim against the plaintiff on its misuse of the transformer room and in defending a few counterclaims.

14.  Mr Kwong, counsel for the plaintiff, submitted that the plaintiff should be entitled to a higher percentage.  He said that the main dispute was on the rights to possess various parts of the G/F.  The plaintiff obtained a complete victory in that.  For the other claims, the plaintiff also succeeded very substantially.  It had proved all four raids by the defendants against its properties.  It had also obtained most of the prayers for relief.  Some of the prayers that it failed to secure were either alternative prayers not favoured by the court or relief no longer necessary.

15.  Regarding the defendants’ counterclaims, their only significant success was the claim for an injunction against the plaintiff’s misuse of the transformer room.  However, the plaintiff had reinstated the transformer room and handed its occupation by delivery of the key to CLP before the filing of reply.  Hence, the complaint had been satisfied even before the pleadings were closed.

16.  The plaintiff further pointed out that the defendants had raised an unreasonably excessive number of issues that resulted in the escalation of costs.  Many of these issues were directed at the plaintiff’s use of the G/F area.  But the defendants failed in all of them save the claim against the plaintiff’s misuse of the transformer room.

17.  Mr John Chan, counsel for the defendants submitted that the costs order nisi was right and the 2nd to 4th defendants should only be ordered to pay the plaintiff 75% of the costs.  He referred to the various claims that the plaintiff had failed to obtain relief and the defendants’ success in the claim against the plaintiff’s misuse of the transformer room.

18.  Furthermore, he also submitted that despite the plaintiff had engaged in mediation up to the minimum level of participation, it had required the defendants to accept its right to exclusive occupation of the G/F areas as a pre-condition for a second round of mediation.  Such pre-condition prevented the second round from being undertaken.

19.  I will deal with the mediation point first.  §5(1) of Practice Direction 31 provides that the court will not make any adverse costs order against a party on the ground of unreasonable failure to engage in mediation if the party has engaged in mediation to the minimum level of participation agreed to by the parties or as directed by the court.

20.  Mr Chan’s submission is based on the ruination of the second round of mediation.  But the parties had already spent 11 hours in a first round of mediation.  Mr Chan also acknowledged in his submissions that the plaintiff had already engaged in mediation up to the minimum level of participation.  Therefore I should go by §5(1) of Practice Direction 31 and make no adverse costs order against the plaintiff because its pre-conditions had prevented the second round of mediation from going ahead.

21.  Regarding the relief that the plaintiff had failed to obtain, I note that the significant ones were an order requiring the defendants to demolish the meter room and an order that they should pay damages for the plaintiff’s loss of use of that room area. 

22.  I have pointed out in the judgment that the plaintiff should have been aware of the construction of the meter room which was to satisfy CLP’s requirements for up grading the electricity supply to the Imperial Court.  I also note that of the eight or nine meters housed in the room, seven of them belonged to the plaintiff.  The plaintiff’s claims that the defendants should incur expenses to demolish this room and pay damages to the plaintiff for its loss of use and occupation of the room area are utterly devoid of merit and should not have been brought at all.

23.  I also declined to order the defendants to demolish two large metal gates or to enjoin the defendants from interfering with the plaintiff’s tenants because the tenancies had already been terminated before the trial.

24.  However, looking at the claims and counterclaims as a whole, the plaintiff’s claims in relation to the meter room only constituted a small and relatively insignificant part of the whole.

25.  Taking into account the claims in relation to the meter room, the counterclaim on the plaintiff’s misuse of the transformer room and the few other minor claims that the plaintiff did not succeed, I think the fair costs order to make is to require the 2nd to 4th defendants to pay the plaintiff 90% of the costs of the action which includes the plaintiff’s defence of the counterclaim.

Decision

26.  In the light of my analyses above, I vary the part of the costs order nisi relating to the 2nd to 4th defendants to an order that the 2nd to 4th defendants do pay the plaintiff 90% of the costs of the action with certificate for two counsel.

27.  Since the plaintiff has succeeded in varying the percentage of costs order but failed in varying the amount of costs by reference to the Offer, I make no order as to costs for this application.