LINFIELD LTD v. TAOHO DESIGN ARCHITECTS LTD AND OTHERS

HCCT 68/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 68 OF 2001

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J U D G M E N T

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I.  Introduction

1.  Linfield succeeded at trial against MML but not against GWA.  In my Judgment, I made a provisional order that MML pay Linfield’s costs.  I also made an order nisi that Linfield pay GWA’s own costs and indemnify GWA against payment of what I defined in my Judgment as PCL’s and BHP’s costs.

2.  Linfield applies to vary my provisional order.  It submits that all GWA’s costs should fall on MML.  Alternatively, Linfield says that GWA should bear PCL’s and BHP’s costs.

3.  MML did not participate in the trial.  This was because, as stated in a letter dated 14 September 2004 from MML’s solicitors to those of Linfield, MML has no assets.  It is unlikely that any party can recover anything from MML. 

4.  The real question before me then is who should bear the consequences of MML’s insolvency.

II.  Discussion

5.  In general terms, I am not persuaded to vary my costs order as Linfield proposes.

6.  I do not see any reason from departing from the usual order that costs follow the event. 

7.  Given my conclusion that GWA had not breached any duty of care to Linfield, GWA was wrongly sued by Linfield.  Linfield must bear the consequences of that outcome.

8.  Ms Cheng SC (appearing for Linfield) argues that it was reasonable for Linfield to sue both MML and GWA.  Assume that was the case. 

9.  In my view, as Mr Manzoni (appearing for GWA) points out, GWA were neither brought into the action by MML nor as a result of anything said or done by MML to implicate GWA.  The decision to sue GWA was Linfield’s own.  It would be wrong in the circumstances to make a Sanderson order with the effect that GWA bears MML’s insolvency.

10.  I also have in mind the fact that on 21 November 2003, before substantial costs in the preparation for trial had been incurred, GWA offered to pay Linfield $1,000,000 in full and final settlement of all Linfield’s claims against GWA.  The offer remained open until it was withdrawn in February 2004.  Had Linfield accepted the claim, it would have been $1,000,000 better off and GWA would not have incurred the substantial costs of trial preparation.  In that light, I do not think it would be fair now to leave GWA to recover its costs from MML.

11.  As for PCL’s  and BHP’s costs, in my view it was reasonable and inevitable that GWA would seek contribution from PCL and BHP upon being sued by Linfield.  The same would be true of BHP’s seeking contribution from others.  Such reactions on should have been foreseeable by Linfield at the time when it brought its claim.  It is therefore right for Linfield to bear PCL’s and BHP’s costs.

12.  Much of the evidence before me today canvassed the parties’ failure to agree one forum, arbitration or the Court, for the trial of all issues in this action. 

13.  I do not see how the failure to agree a single venue for trial of all issues can be blamed on GWA.  GWA was amenable in principle to a single forum, provided all parties could agree to one within a reasonable time.  In the end unanimity proved elusive, primarily (it seems) because of MML’s intransigence.  GWA cannot be responsible for the breakdown or MML’s refusal to play ball.

14.  It may be the case that, because some issues have come before the Court, while others (not involving GWA) have yet to go to arbitration, the parties have had to incur greater overall costs than they might otherwise have done.  But I do not think that is any valid reason for altering my proposed order.  That is unfortunately simply “the nature of the beast”.  It is a consequence of Linfield’s contracts with some parties being subject to arbitration clauses, and its contractual and tortious claims against GWA not being governed at all by any such clause.

15.  Nor do I think that there is any “travesty of justice” in my proposed costs order, contrary to what has been hyperbolically suggested by Linfield’s affirmation evidence.  Linfield had every opportunity to cross-examine GWA’s witnesses as well as those of BHP and PCL in the contribution and third party proceedings.  As far as I can see, Linfield took that opportunity. 

16.  The whole point of hearing Linfield’s action together with the contribution and third party proceedings was so that all parties may be bound by the Court’s findings of fact.  This was done precisely to save time and cost.  Linfield accepted this arrangement from the outset of trial.  Indeed, I doubt that the trial of the main action was significantly lengthened by such mode of proceeding. 

17.  Taking account of all circumstances, I do not think that there is unfairness in Linfield now bearing PCL’s and BHP’s costs.  Nor do I believe that it is appropriate to reserve the question to later as Ms Cheng has invited me to do.

18.  For the above reasons, save in 2 respects, my costs order remains as stated in my Judgment of 3 September 2004.  The 2 respects are set out below.

19.  First, in my provisional order, I did not make it clear whether Linfield should be entitled to recover from it its own costs as well as those costs of PCL, BHP and GWA payable by it.  I am prepared to vary my order to remedy that omission.  For what it is worth, it seems appropriate to complete the circle to enable Linfield to recover from MML its own costs as well as those costs of PCL, BHP and GWA which Linfield has to pay.

20.  Second, as against GWA, Ms Tan (appearing for PCL) asks for PCL’s costs of GWA’s contribution proceedings.  Mr Manzoni did not resist GWA’s liability on that score.  I therefore order that GWA pay PCL’s costs of GWA’s contribution proceedings, such costs to be taxed if not agreed.  Linfield is in turn to indemnify GWA against that set of costs.

21.  Finally, Linfield asks for clarification of §313(7) of the Judgment.  There I left it open to Linfield to argue later in this Court, depending on the outcome of its arbitration proceedings against PCL and BHP, that Linfield should be able to recoup PCL’s and BHP’s costs from PCL or BHP. 

22.  I did not mean by that to preclude any argument before the arbitrator as to Linfield recovering PCL’s and BHP’s costs from one or either or both of PCL and BHP.  The arbitrator may or may not wish to consider the question.  It is not for the Court to dictate to the arbitrator how to conduct the arbitration.

23.  All I was doing was making it clear that, as far as the Court was concerned, the question of recovering BHP’s and PCL’s costs could be raised in Court at the end of the arbitration proceedings, when the existing stay is lifted.  In other words, the Court is not “functus” on those specific issues.  Obviously, if the question of recoupment is conclusively dealt with by the arbitrator, there will be no need to restore that matter for the Court’s consideration.

24.  I note that Mr Houghton (appearing for BHP) further asked me to leave open the possibility of BHP passing any costs payable to Linfield further down onto GWA.  I declined that request.

25.  POST-JUDGMENT NOTE:  For the avoidance of doubt, it occurs to me I should also state by way of clarifying §313(7) that, depending on the outcome of the arbitration, it remains open to Linfield to argue before this Court that Linfield should be able to recover GWA’s costs and Linfield’s costs from PCL or BHP or both.