THE POOL CO LTD v. SINO RISE REALTY LTD AND ANOTHER

HCA 1755/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1755 OF 2012

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D E C I S I O N
(Variation of Costs Order Nisi)

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Introduction

1.  On 26 September 2014, I handed down a judgment (“Judgment”) dismissing P’s Order 14 Summons which sought the following orders:

(a) final judgment for an injunction restraining the D1 and D2  from, among other things, causing, permitting or allowing any trespass or nuisance to P’s  property;

(b) interlocutory judgment on liability against Ds with damages to be assessed for trespass, nuisance, physical damage and loss of use and enjoyment of P’s property, in particular an open area working platform.

2.  In the Judgment, I made an order nisi that Costs of the Order 14 Summons be to Ds (“Order Nisi”).

3.  On 6 October 2014, D1’s solicitors wrote to the court seeking a direction from the court that the Order Nisi be varied to the extent that P to pay Ds’ costs of the Order 14 Summons with certificate for counsel forthwith to be assessed summarily.  D2 agreed to the direction sought by D1.

4.  On 16 October 2014, P took out a summons to seek a variation of the Order Nisi, and to seek an order that costs of the Order 14 Summons be costs in the cause.

Relevant Principles

5.  P’s Counsel, Mr Roy Lau, submitted that if the court were to find that a defendant had raised triable issues, the normal order for the court would be to grant unconditional leave to defend and that the usual order would be costs in the costs[1], although under Order 14 rule 7, the court could dismiss the application with costs in certain circumstances.

6.  Order 14 rule 7 of the RHC states as follows:

“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, without prejudice to Order 62 and in particular to rule 4(1) thereof, the Court may dismiss the application with costs and may require the costs to be paid by him forthwith.”

7.  As has been said by Mr Recorder Fok (as he then was) in Cyberworks Audio Video Technology Limited and Silver Kent Technology Limited HCA 2780/2006 (18 August 2009), the provisions of Order 14 rules 7 are not mandatory and under that rule, the court may (rather than must) dismiss the summons and award costs to a defendant where a plaintiff has issued his application having been made aware of the contention which would be relied upon in defence of the claim[2].

8.  The relevant principles on dismissing an application for summary judgment with costs to the defendant have also been set out by DHCJ Marlene Ng in Sin Yuk Hung v Sin Tung San, HCA 474/2013 (20 February 2014) who has referred to a number of authorities in her decision.

9.  DHCJ Ng had said in Sin Yuk Hung in relation to the court’s inherent power to dismiss an application for summary judgment as follows :

“I note that the court does not have to rely on the express power in Order 14 rule 7 of the RHC to dismiss an application for summary judgment for either of the two circumstances set out in the rule, which implicitly suggested that the court has broader powers of dismissal than just prevention of abuse of process[3].…”

10.  DHCJ Ng then went on to refer to what was stated in paragraph 14/7/1 of HKCP 2014 Vol 1, and cases referred thereunder, and in particular a more recent case Simba-Toys (Hong Kong) Limited v Fullmore Corporation Limited [4] where DHCJ A Chow, as he then was, had also said that the inherent power of the court to dismiss an Order 14 application was not limited to the two situations set out in Order 14 rule 7.

11.  There was no dispute in relation to what was stated by DHCJ A Chow or DHCJ Ng.  It was also not disputed between the parties that whether under Order 14 rule 7 or not, upon dismissal of the Order 14 application, the court is not bound to order costs against the unsuccessful plaintiff, and the court has a discretion to make other appropriate costs orders.

Submissions

12.  Mr Lau submitted that from the authorities the court’s discretion to dismiss a summary judgment with costs to the defendant would be exercised in the following 5 situations:

(i) The summons for summary judgment falls outside the rule of Order 14;

(ii) It is an abuse of process by the by the plaintiff to use the summary judgment application to compel or induce the defendant to disclose on oath the nature of his defence;

(iii) The plaintiff has made admission or acknowledgment of the defendant’s case that it is plain and obvious that the acknowledgment will lead to a clear defence;

(iv) The plaintiff’s own pleadings are defective or there are inherent problems with the plaintiff’s case;

(v) The plaintiff has no locus standi to sue or the case displays no cause of action.

13.  Mr Lau submitted that the present case did not fall within any of the above 5 situations, and that the court in the present case only found that there were triable issues and that in the circumstances, a more appropriate costs order in the circumstances should be costs in the cause.

14.  D1’s Counsel, Ms Elizabeth Cheung, submitted that what Mr Lau was seeking to argue was in fact that the Order 14 Summons should not have been dismissed.  It was Ms Cheung’s case that P plainly knew that D1 had relied on a contention which would entitle it to unconditional leave to defend, thus making the Order 14 procedure not the correct procedure.  She had referred to the case of Bang & Olufsen A/s v To Hok Chung t/a Mirage Electronics Industries Co HCA 2596/2005 (8 May 2006) where DHCJ Muttrie had said that the points the defendant relied on were all raised in the defence and thus the plaintiff knew the contention which would entitle the defendant to unconditional leave to defend[5].

15.  Ms Cheung also relied on what Stone J had said in Sterling Services Limited and Tan Kee Cheang and Patrick Ko Siu Shing HCCL 72 of 2002 (28 August 2003) where it was said that in embarking on the Order 14 application, the plaintiff knew the substance of the principal defence raised, given that the pleaded defence antedated the institution of the summary judgment application by almost 4 months[6].

16.  Counsel for D2, Ms Pauline Leung, made similar submissions, namely that the plaintiff knew the substance of the principal defence raised and  that:

(i) On the permanent injunction, there was no dispute that by the time the Order 14 Summons was taken out, all construction works had been completed and the last complaint of acts of trespass/nuisance was in July 2013, and that there was no sufficient evidence that the alleged wrongful acts would be repeated or continued to justify a final or permanent injunction;

(ii) On the interlocutory judgment with damages to be assessed, the court found that there were triable issues as to causation of water accumulation and flooding, factual disputes of wrongful acts after the interim injunction up to July 2013, and whether measures taken by D2 were reasonable.

Discussion   

17.  In the present case, P had issued the Order 14 Summons about two months after Ds filed their respective amended defences.   However, at the hearing of the Order 14 Summons, no Counsel had referred to Order 14 Rule 7 nor made any submissions thereunder, although Ms Leung, Counsel for D2, in her skeleton submissions had sought seek a dismissal order with costs, and Mr Lau, Counsel for P, had submitted at the hearing that in the event that the court was minded to grant leave to defend, then costs should be in the cause.  The court then indicated that either the costs would be reserved or a costs order nisi would be made.

18.  Thus, there were no submissions made at the hearing that the Order 14 Summons should be dismissed under Order 14 rule 7. 

19.  Both Ms Cheung and Ms Leung now sought to rely on Order 14 rule 7 and submitted that P knew that Ds would rely on a contention which would entitle them to unconditional leave to defence, their respective Defences antedated the Order 14 Summons.

D1’s Defence

20.  As I had said in the Judgment, D1’s position was quite different from D2’s, D1 being the owner KC Plaza and D2 was its independent contractor for the Construction Works on the Site.  However, in the ASOC, P’s case in the ASOC was pleaded against D1 and D2 without distinguishing their different positions.  In so far as D1 was concerned, the main issues were (a) whether D1 had “procured, caused, authorized, permitted or allowed” the alleged wrongful acts; (b) whether D1 “knew or ought to have known” the alleged wrongful acts of D1 and/or D2 or its employees, workers, contractors or subcontractors; and (c) whether D1 had failed to take reasonable steps to stop the alleged wrongful acts.

21.  There were three periods of time :

(i) Prior to the letters dated 5 September 2012 sent by P’s solicitors to Ds (“05.09.12 Letters”);

(ii) Between Ds’ receipt of the  05.09.12 Letters to the date of the interim junction on 28 September 2012;

(iii) From 28 September 2012 until the final construction phase in July 2013.

22.  D1’s defence was that it had acted reasonably in entrusting the Construction Works to D2, and it denied any knowledge of those alleged wrongful acts or problems/incidents alleged by P, or that it had “procured, caused, authorized permitted or allowed” any of the wrongful acts pleaded by P in the ASOC[7].

23.  The majority of D1’s amended defence consisted of denials and or non-admissions, except that there were particulars set out in D1’s defence in relation to (i) reasonable steps in entrusting the Construction Works to D2; (ii) reasonable measures taken to prevent any wasted construction materials falling to FP Platform after receipt of the 05.09.12 Letters from P, namely posting and issuing notices.  D1 said it had acted responsibly and reasonably after D2 was engaged and if there was any damage suffered by P, then it would be D2 that was liable and not D1.

24.  In D1’s director Mr Lee’s affirmation filed on 14 March 2014 in opposition to the Order 14 Summons, there was additional evidence produced by D1, disclosing other measures/steps after receiving P’s 05.09.12 Letter, such as reminders to D2’s representatives at weekly Friday meetings and letters sent by D1’s architect to D2.

25.  No affirmation had been filed on behalf of P to challenge what Mr Lee had said in his affirmation.  There was no real challenge from P that D1 had acted reasonably in entrusting the Construction Works to D2[8].

26.  Mr Lau had submitted at the hearing of the Order 14 Summons that it was futile for D1 to argue that D2 was carefully selected as an independent contractor, as it was clear that the alleged wrongdoings of D2 were totally foreseeable in an construction site and would result in nuisance to its neighbour and that D1 took no reasonable action to prevent or stop D2 from creating the nuisance to P.  I have set out in the Judgment circumstances in which a person will be liable for nuisance[9], and in the case of nuisance created by an independent contractor, it would depend on whether a person could reasonably have foreseen that the work he had instructed the independent contractor to do was likely to result in a nuisance.

27.  In the Judgment, I concluded that whether D1 could reasonably have foreseen that the Construction Works would likely to result in a nuisance and whether D1 had taken reasonable steps after the Interim Injunction were disputed factual matters which should be allowed to go to trial.

28.  In the present case, what P had pleaded in the ASOC was that D1 “ought to have known” the alleged wrongful acts.  This was simply denied by D1 in its Amended Defence, with no particulars.  D1 did not make any request for P to provide further and better particulars either.   Having said this, that the alleged wrongful acts of D2 ought to have been reasonably foreseen by D1 was not specifically pleaded by P in the ASOC, and hence not addressed in the Amended Defence.    

29.  Although I will not go to the extent of saying that P’s pleadings against D1 were defective, in my view there were ambiguities in P’s ASOC as to P’s case against D1, without distinguishing D1’s position from D2’s.  Having considered all the above circumstances, I maintain the view that P should pay D1’s costs of the Order 14 Summons, but I decline to order P to pay D1’s costs forthwith.  I am only prepared to vary the Order Nisi to that P shall pay D1 the costs of the Order 14 Summons in any event, and that such costs are to be taxed on party and party basis, if not agreed, with certificate for counsel.  As P has not succeeded in his variation application as against D1, I will also order that costs of the variation application be to D1 in any event.

D2’s Defence

30.  So far as D2 was concerned, I declined to grant the permanent injunction mainly because it was no longer necessary as the Constructions Works had been completed after July 2013, and that damages would provide an adequate remedy.  

31.  P had in its ASOC alleged various wrongful acts of D2 and as a result there were various incidents which caused loss and damage to P.  

32.  D2’s Amended Defence consisted entirely of bare denials and/or non-admissions, and there were no particulars.  D2 had served a request for further and better particulars on P and had reserved its right to plead further after P’s provision of the further and better particulars.  In its request, in particular, D2 had sought particulars as to which drainage pipes or system were alleged to be blocked by D2 which caused accumulation of rainwater on the roof.  P filed its answers in February 2014, and stated such drainage/water pipes “include but not limited to the drainage/water pipes on the FP Roof leading down to the FP Platform and those on the FP Platform”.  After the answers, there had not been any further requests by D2, nor any amendments to D2’s Amended Defence.

33.  In its Amended Defence, D2 had denied that any acts or omissions on its part caused the events alleged by P in the ASOC, and had further averred that such events were solely and/or partly caused by P’s own negligence. 

34.  In Mr Lui’s affirmation filed on behalf of D2 in opposition to the Order 14 Summons, he had stated the measures/steps taken by D2 after the interim injunction and that the main issues were whether (i) the water accumulation on the roof and water dripping from the ceiling of the 6/F of the FP Centre on about 31 August 2012 and (ii) the serious flooding on about 24 September 2012 were caused by blockage of drainage/water pipes, and if so, whether such blockage of pipes was caused by the waste materials allegedly dumped on the FP Platform by D2. 

35.  It was at the hearing of the Order 14 Summons that Ms Leung raised the issue as to expert evidence would be required on the causation of the water dripping from ceiling of 6/F and the serious flooding.

36.  As stated in the Judgment, I came to the conclusion that the issues of the causation of the water accumulation on the roof and the serious flooding, and also whether reasonable measures/steps had been taken by D2 after the Interim Injunction were triable issues and that the matter should go to trial.

37.  Having considered all the above, in so far as D2 is concerned, none of the 5 situations summarised by P would apply, I dismissed the Order 14 Summons against D2 only on the basis that there were triable issues.  In the circumstances, I am persuaded that in so far as D2 is concerned, the Order Nisi should be varied to that costs be in the cause, with certificate for Counsel.

Conclusion

38.  In light of the above, my orders are:

(i) In relation to D1,  the Order Nisi shall be varied to that P shall pay D1’s costs of the Order 14 Summons and also the variation application  in any event, such costs to be taxed on party and party basis, if not agreed, with certificate for counsel;

(ii) In relation to D2, the Order Nisi shall be varied to that the costs of the Order 14 Summons and also the variation application be costs in the cause, with certificate for counsel.

[1] HKCP para 14/7/3

[2] At para 43, pg 14

[3] Para 17, pg 8-9

[4] HCA1599/2008, DHCJ A Chow SC, unreported, 20 February 2009

[5] At para 28, pg 11-12

[6] At para 15, pg 6

[7] See para 23, Judgment

[8] See para 37, Judgment

[9] At paras 39-40