VEMBER LORD LTD v. THE SWATCH GROUP (HONG KONG) LTD

CACV 83/2022

CACV 84/2022

(Heard Together)

[2023] HKCA 471

CACV 83/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 83 OF 2022

(ON APPEAL FROM HCA NO 1113 OF 2020)

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AND

CACV 84/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 84 OF 2022

(ON APPEAL FROM HCA NO 1114 OF 2020)

________________________

________________________

(Heard Together)

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J U D G M E N T

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Hon Yuen JA (giving the Judgment of the Court):

1.  On 15 March 2023, this court gave Judgment¹ dismissing the defendant’s appeals from the Decision of DHCJ Le Pichon², who had given summary judgment for the plaintiff. The parties had agreed at the conclusion of the hearing before us that costs would follow the event, and we ordered that the defendant should pay the plaintiff’s costs with certificate for two counsel.

2.  In the Tenancy Agreements the subject of these appeals, Section VIII Clause 5(a)(ii) stipulated:

“If the Tenant shall fail promptly to pay the rental and/or other charges and/or other moneys herein reserved (including the rent, Government Rent, rates and other charges referred to in Section II of this Agreement) or any part thereof on due date the Landlord shall be entitled to recover from the Tenant as a debt ... all solicitors’ costs and/or Counsel’s fees (on a solicitor and own client basis) and court fees incurred by the landlord for the purpose of recovering the rental and/or other charges in arrears and/or any other moneys unpaid or any part thereof from the tenant ...”. (Emphasis added).

3.  In §37.2 of our Judgment, we said:

“As for the basis of costs, the master had awarded costs to the plaintiff on a solicitor and own client basis. The defendant’s challenge to this basis was withdrawn before the judge³. As this court was not addressed on the basis of costs, the parties are at liberty to file written submissions only on the basis of costs (maximum of 3 pages) within 7 days of the date of the Judgment”.

4.1.  As noted in the preceding paragraph, the defendant had withdrawn its challenge to the solicitor and own client basis of costs for the proceedings before the master.

4.2.  The judge did not make an order on the basis of costs for the proceedings before herself in the Decision, although she did refer in footnote 32 in §90 of the Decision to GTE Directories (HK) Ltd v Mo Yung Kwok Wah⁴ (as to which see §8.2 below).

4.3.  Be that as it may, the plaintiff’s statement of costs for summary assessment was submitted on the solicitor and own client basis.  On 11 March 2022, the judge directed that the defendant should pay the plaintiff’s costs on that basis.

4.4.  The defendant did not appeal from this direction, but is now objecting to the same basis for the appeals before this court.

Discussion

5.  We have considered the parties’ respective written submissions. 

6.1.  Although the defendant has referred to a number of cases in its written submissions, we understand the law to be settled in Bank of China (Hong Kong) Ltd v Twin Profit Ltd⁵.

6.2.  That case concerned a mortgage in which the mortgagor agreed in the mortgage documents to pay the mortgagee’s costs on a full indemnity basis.

6.3.  In the Court of Appeal⁶, it was held by a majority⁷ that the costs should be taxed on an indemnity basis in accordance with the mortgage documents.  The parties had expressly agreed to do so.  Where parties had entered into a commercial transaction on a certain basis, the court should be slow to disturb the parties’ agreement, unless the circumstances were such as to cause the court in the exercise of its discretion to intervene.

7.  In so holding, the court was bound by the decision of the Court of Appeal⁸ in Chekiang First Bank v Fong Siu Kin⁹ which held that although the court has an unfettered jurisdiction as to costs,

“where parties have contractually provided for the basis upon which costs are to be quantified, the court would in the normal course of events give effect to that”.

8.1.  In Bank of China, the Appellate Committee of the CFA refused leave to appeal against the Court of Appeal’s costs decision.  Ribeiro PJ held:

“As with all questions of costs, the Court has a discretion which it exercises judicially. No one suggests that the discretion is fettered, Yuen JA having expressly noted the contrary. The parties’ agreement as to how costs should be dealt with provides the starting point for the discretionary exercise. No change is warranted. It would be counter-productive, were it possible, to try to lay down any less flexible ‘legal principles’ as invited by the formulated question” (emphasis added).

8.2.  Pausing here, as a matter of completeness, we would note that this holding overrides that of Kempster JA in GTE that “when parties of full capacity have concluded in agreement with respect to costs, they no longer remain within the court’s discretion”.

9.  Coming back to the present case, the basis of costs agreed by the parties is solicitor and own client and not full indemnity, the former being more generous to the receiving party, but the applicable principle should be the same, viz that the parties’ agreement as to how costs should be dealt with provides the starting point for the discretionary exercise.  The fact that the solicitor and own client basis of costs contains various presumptions¹⁰ does not per se entitle the court to ignore the parties’ agreement as to the basis of costs.

10.1.  In this respect, we would disagree with DHCJ W Tsui’s decision in Wharf Realty Ltd v Abebi Ltd ¹¹in which she held that the fact that the solicitor and own client basis was explicitly provided for in the tenancy agreement did not amount to “wholly exceptional circumstances”¹², the test for the order of solicitor and own client costs referred to in Bharwaney J’s judgment in Cathay Pacific Flight Attendants Union v Cheung & Choy¹³.

10.2.  However, in Cathay, there was no agreement between the parties for the solicitor and own client basis, and the issue arose simply in a dispute over costs claimed by the defendant¹⁴.

10.3.  It would also appear that DHCJ Tsui was not referred to the Bank of China principle, and the plaintiff before her had not provided any submissions opposing the defendant’s application to vary the costs order nisi from the solicitor and own client basis to a party and party basis.

11.  We are therefore left with the parties’ agreement for the solicitor and own client basis, which is the starting point, and in this case, also the end point for the exercise of discretion as to the basis of costs.  Although we recognize that the costs for the appeals before us are discrete, we do not have the benefit of the judge’s views on the basis of costs as the defendant had not previously challenged that basis.  Nor do we see any reason why this court should interfere on public policy grounds.

Order

12.  Accordingly, we would order that the costs of the appeals (including the submissions on the basis of costs) should be paid by the defendant to the plaintiff on the solicitor and own client basis.