GRAND POWER INTERNATIONAL LTD v. CHAN SING HOI ENTERPRISES LTD AND OTHERS

LDBM 329/2014

[2019] HKLdT 16

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 329 OF 2014

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DECISION
(variation of costs order nisi)

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Background

1.  By the judgment handed down by me on 1 November 2018 (“the Judgment”), I made a costs order nisi (“the Costs Order Nisi”) that:-

“The Applicant do pay the 1^st Respondent costs of these proceedings including all costs reserved, if any, to be taxed on the High Court scale if not agreed, with certificate for counsel…”

2.  Unless otherwise stated, I will adopt the abbreviations used in the Judgment.

3.  By the Summons (“A’s Summons”) dated 14 November 2018, A seeks an order to vary the Costs Order Nisi as follows:-

“The Applicant do pay the 1^st Respondent 50% of the costs of these proceedings, including all costs reserved, if any, to be taxed on the High Court scale if not agreed, with certificate for counsel.” (emphasis added)

4.  By the Summons (“R1’s Summons”) dated 15 November 2018, R1 seeks an order to vary the Costs Order Nisi as follows:

“The Applicant do pay the 1st Respondent of the costs of these proceedings, including all costs reserved, if any, to be taxed on the High Court scale if not agreed, with certificate for counsel on indemnity basis pursuant to Clause 10 of the DMC, further or alternatively, section 12 of the Lands Tribunal Ordinance (Cap. 17).” (emphasis added)

A’s Summons

5.  I shall deal with A’s Summons first. 

6.  I agree with the submission of Mr Lee for A that the starting point is section 12 of the Lands Tribunal Ordinance (Cap 17) (“LTO”) which provides as follows:

“(1) The costs of and incidental to all proceedings in the Tribunal are in the discretion of the Tribunal, and the Tribunal has full power to determine by whom and to what extent the costs are to be paid.

…

(7) … Order 62 of the Rules of the High Court (Cap. 4 sub. leg. A) applies, with the necessary modifications, to the award, taxation and recovery of costs in the Tribunal.” (emphasis added)

7.   Mr Lee submitted that after the CJR, the courts are more ready to depart from the general rule that costs should follow the event: Pfeiffer GmbH v Cheung Hay Kit trading as Sun Wai Construction, CACV 245/2013 (29 October 2014) at §§7-10 (perKwan JA giving the reasons for judgment of the Court of Appeal).   Lord Woolf’s observations cited in Pfeiffer’s caseat §8 are particularly germane in the present context:

“… It is now clear that too robust an application of the ‘follow the event principle’ encourages litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take.  If you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your efforts to do so … it is no longer necessary for a party to have acted unreasonably or improperly to be deprived of his costs of a particular issue on which he has failed.” (emphasis added)

8.  In Chan Shun Kei trading as Chan Shun Kei Construction Works v Hong Kong Construction (HK) Ltd, CACV 192/2014 (7 March 2016) at §24, Lam VP (giving the judgment of the Court of Appeal) noted that the plaintiff failed in respect of 6 issues out of 8 issues addressed at the trial and said:

“25.   We have no hesitation in rejecting Mr Lee’s submission that the issue based approach should not be applicable in the instant case because the so-called issues identified in the judgment constitute only one event.  Citing Seepersad v Persad (2004) 64 WIR 378, Mr Lee submitted that in the application of the issue based approach espoused by In re Elgindata (No 2) [1992] 1 WLR 1207, the court should only embark on that approach if an issue is something so distinct and separate in itself that the decision of it constitutes an event.  With respect, that is a too narrow interpretation of the issue based approach after the introduction of Civil Justice Reform.  Order 62 Rule 5(2)(a) and (b) particularly directs the court to consider the conduct of the parties including whether it was reasonable for him to raise, pursue or contest a particular allegation or issue and the manner in which a particular allegation or issue was pursued.  We do not think the “issue or allegation” in such context should be so narrowly confined.  Such narrow construction is not in line with Order 1A Rule 1. 

26.   We are of the view that the judge was correct in taking the failure of the Plaintiff on those 6 issues into account in his overall assessment of costs.”

9.   On the other hand, Mr Fan cited SNE Engineering Co Ltd v Hsin Chong Construction Co Ltd (HCA 1466/2012), in which Lok J ordered the plaintiff (the losing party) to pay the costs of the 2 defendants after trial.  The plaintiff applied to vary the costs order on the ground that there should be issue-based approach in dealing with costs.  The learned judge having considered Pfeiffer’s case as well as Chinachem Charitable Foundation Ltd v Chan Chun Chuen & Anor[1] handed down the Decisions on 23 June 2015 refusing to vary the original costs order.

10.   The plaintiff appealed to the Court of Appeal[2] (CACV 88/2014, 6 August 2015) which dismissed the appeal and said in the judgment:

“I2. Issue-based approach

193.  The Judge considered Mr Clark’s submissions on issue-based approach in awarding costs at §§44 to 63 of the Costs Judgment. Having particular reference to the facts and circumstances, the Judge held that the issue-based approach should not be adopted.  This is again a decision on the exercise of costs discretion which this court would not intervene lightly, see Ho Shu Kwong v Chiang Chun Yuan [2002] 3 HKLRD 419.

….

196.  Though there are authorities suggesting the court may be more willing to adopt an issue-based approach in patent cases in respect of “suitably circumscribed” issues, it is not a strict rule of law and much depends on the facts of the case.  Based on his knowledge of the case (which is much greater than ours as he had been dealing with it shortly after the directions for speedy trial were given), the Judge gave sound reasons for not adopting this approach in the present case and it is a decision which this court has no proper basis to intervene.”  (emphasis added)

11.   In short, I am of the view that the Tribunal must have very wide discretion for the question of costs and that not only in patent cases, issue-based approach is also not a strict rule of law for determination of such question in building management cases which much depend on their own facts.   The ultimate aim is always to make a cost order which reflects the overall justice of the case[3]. As required by section 12 LTO, it is also necessary for the Tribunal to consider the matters mentioned in Order 62 Rule 5 of the Rules of the High Court (Cap. 4A), which provides that:-

“(1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account:-

…

(e) the conduct of all the parties;

…

(2) For the purpose of paragraph (1)(e), the conduct of the parties includes—

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.” (emphasis added)

12.   Mr Lee for A submitted that this Tribunal dismissed both A’s claims as well as R1’s counterclaim which is substantially a cross-action, not merely a defence to the plaintiff’s claim.  In my view, all the declaratory reliefs counterclaimed by R1 are in effect almost mirroring and corresponding to the declaratory reliefs sought by A.  The actual time spent by A in opposing R1’s counterclaim is very minimal since if A succeeds in obtaining the injunctions sought, R1’s counterclaim will be bounded to be dismissed.  I consider that it has not caused any significant increase in the length of the proceedings.

13.   Mr Lee for A indeed heavily relies upon the issue-based approach and submitted that R1 only prevailed in respect of 6 out of 13 issues in dispute and failed in respect of the remaining issues addressed at the trial.  However, I think that there are much more side or sub issues in dispute which are inter-related to each other.  Some of them are complicated legal issues but involves very little factual dispute whilst some are pure factual disputes not really involving much legal principles.  Of course, there are some mixed question of law and facts to different extent.  It is always difficult to say how much time is actually spent on each of these issues.  I further consider that issue-based approach which should not be regarded as strict rule of law cannot be an arithmetic exercise to determine the percentage of the costs to be borne by the parties.  After all, it is just one of the factors affecting the wide discretion given to the Tribunal under section 12 LTO.

14.   Mr Lee for A submitted that R1 adopted a “kitchen-sink” approach in conducting these proceedings, contesting against A’s claims every step on the way, apparently without consideration of the underlying merits and contrary to the underlying objectives of proportionality and procedural economy.

15.   In my view, the injunctions sought by A must have great importance to R1 which has used to lease the 4 units ie G/F No 72, G/F No 74, 1/F No 74 and 1/F No 76 for profit for the past many years as well as in the future.  Bearing in mind their location in the heart of Causeway Bay, the redevelopment value of the Building is extremely high.  Besides, in view of the existence of the Acquisition Campaign found by me in the Judgment, not just the rental, even the market value of these units are very likely adversely affected if the injunctions were granted.

16.   It is understandable as to why R1 has to vigorously contest A’s claims.  In the circumstances, I do not agree that R1 unreasonably raised those defences or issues even though they were eventually rejected by me.

17.   Although most of the evidence given by R1’s witness, Yuen, were not accepted, in particular his evidence concerning the Common Assumptions, in the Judgment, I consider that he still in any event had to give oral evidence at the trial regarding other matters and defences of R1, such as acquiescence and waiver, which were accepted by me.  On the other hand, I rejected the evidence of A’s witness, Yip that the issue of safety was the reason for instituting these proceedings and I also found against him that he turned his blind eyes as to the existence of the incorporated owners of the Building without making reasonable enquiries.

18.   In fact, one of the most difficult legal issues in the present case is whether A is bound by the defence of waiver and acquiescence established against its predecessor in view of the conflicting authorities.  After analysing a lot of legal authorities, I found this issue against A in the Judgment.  However, this issue does not much depend on the evidence of the parties’ witnesses.

19.   Concerning the conduct of the parties, I spent about half day in the 1^st day trial to deal with A’s summons to expunge certain paragraphs of the witness statements of R1 and R2 and delivered the oral reasons for decision in the 2^nd day morning.  Then A took almost the entire remaining time in the 2^nd day trial to reach the settlement with R2 whereas the solicitors and Counsel of R1 seemed to have nothing to do but wait.  In my view, I can see no reason why A and R2 together with their legal representatives could not do the negotiation earlier or during the lunch break or even after the hearing.  Some costs of R1 must be wasted and I have to take this into account in exercising the discretion as to costs.

20.   As a whole, I do not find that R1 raised the issues which have the effect of unnecessarily prolonging the trial or caused a significant increase in the length of the trial.  After all, many issues overlap and are interrelated with each other.  As said above, the injunctions sought by A have great impact on the value of R1’s 4 units, R1 should be entitled to raise all reasonable defences in order to defeat A’s claims.  I therefore refuse to apportion the liability for costs in respect of those issues pursued by R1 but rejected by the Tribunal.

21.   In the Judgment, I also exercised the discretion not to grant the injunctions even if R1 failed to establish the defences of waiver and acquiescence.  R1 should be regarded as the winning party in any event.  Having carefully considered all the circumstances of this particular case and with a view to reflecting the overall justice, I maintain that A shall pay R1 costs of the proceedings.  A’s Summons be dismissed accordingly.

R1’s Summons

22.   R1 has advanced two reasons to justify its request for indemnity costs. 

23.   First, R1 relies on Clause 10 of the DMC which states:

“Each of the parties hereto shall be responsible to all other parties for the act, negligence or default of all persons occupying or using the same with his consent, express or implied, the Unit of which he is entitled to the exclusive use occupation and enjoyment and to pay all costs charges and expenses incurred in repairing or making good any loss or damage caused by the act negligence or default of all such persons and to indemnify all other parties against all actions, proceedings, claims and demands whatsoever arising out of or in respect of any loss or damage to any person or property caused by the act negligence or default of all such persons.” (Emphasis added)

24.   This clause consists of several parts, and R1 is relying on the last part namely, to indemnify all other owners against all actions, proceedings, claims and demands whatsoever arising out of or in respect of any loss or damage to any person or property caused by the act negligence or default of all such persons, which is referring to the persons occupying or using the unit with this unit owner’s consent. 

25.   Mr Fan for R1 submitted that under this clause as properly construed, the “act” shall include an “act to sue”.  With respect, I disagree. I fail to understand as to how the “act” could include an “act to sue” of the persons occupying or using the unit with that owner’s consent.  In my view, what this clause means is that if owner X takes legal actions against another owner Y in respect of any loss or damage caused by the act negligence or default of the persons who occupy or use Y’s unit with Y’s consent, Y shall indemnify X against such actions, including the legal costs incurred by X.

26.   The defence of R1 to A’s claims as well as R1’s counterclaim against A for various declarations are certainly not within the scope of this clause since it has nothing to do with the act of the persons who occupy or use the A’s unit with its consent.  This reason relied on by R1 must be rejected.

27.   Secondly, Mr Fan for R1 submitted as a further or alternative ground for an award of indemnity costs, that there exists in the present case some special or unusual features.

28.    The principles governing the award of costs on an indemnity basis were summarized by Ribeiro PJ in Libertarian Investments Ltd v Thomas Alexej Hall, FACV 14/2012 (11 March 2014) at §6 as follows:

“… An order for costs on an indemnity basis is only considered where the case has some ‘special or unusual feature’.  The Court’s discretion may be exercised in relation to (but is not limited to) cases ‘brought with an ulterior motive or for an improper purpose or where there is some deception or underhand conduct on the part of the losing party’.  However, such improper conduct generally relates to the conduct of the litigation rather than conduct which constituted the cause or matter giving rise to the litigation. …” 

29.   In my view, there is no “special or unusual feature” justifying the Tribunal to exercise discretion to order for costs on an indemnity basis against A.  As said in para 131 of the Judgment, I was not able to guess what A’s motives of commencing the present proceedings were.  In other words, I cannot find any ulterior motive or improper conduct relating to the conduct of the litigation on the part of A, though it is the losing party. 

30.   Hence, R1’s Summons be dismissed.

Costs of these 2 applications

31.   Parties’ Counsel accepted that costs shall follow event.   Usually, A shall pay R1 costs of A’s Summons whereas R1 shall pay A costs of R1’s Summons.  However, in view of the fact that 2 applications were heard together and both Counsel made submissions at the same time, I consider that costs of these 2 applications would be more or less the same. After setting off, the difference should be very small.  Thus, in order to save time for taxation, I exercise the discretion to make no order as to costs for these 2 applications.