CHENG KA SHING v. BONUS PLUS CO LTD

HCA 674/2013

[2020] HKCFI 828

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 674 OF 2013

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DECISION ON COSTS

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Introduction

1.  The Defendant is and since January 1994 has been the registered owner of 4 plots of land viz Lot Nos 759, 860, 861 and 862 in Demarcation District No 105, Yuen Long, New Territories (“Defendant’s Lots”).

2.  This Action is concerned with the Plaintiff’s claim to adverse possession of a substantial part of the Defendant’s Lots (“Plaintiff’s Claim”) and the Defendant’s counterclaim to recover vacant possession of that part of the Defendant’s Lots claimed by the Plaintiff (“Defendant’s Counterclaim”).

3.  On 28 February 2020, this court handed down judgment (“Judgment”) dismissing the Plaintiff’s Claim and allowing the Defendant’s Counterclaim.  This court also made an Order nisi that costs of the Action including the Counterclaim be to the Defendant, to be taxed if not agreed, and paid by the Plaintiff forthwith, certificate for 2 counsel (“Order nisi”).

4.  By paragraph 1 of the summons dated 12 March 2020 (“Summons”), the Plaintiff seeks to vary the Order nisi and replace it with an Order that the Plaintiff shall pay the Defendant 20% or such other percentage as the Court may deem just of the Defendant’s costs of the Action including the Counterclaim, to be taxed if not agreed with certificate for 2 counsel.

5.  In his Skeleton Submissions, Mr Shum for the Plaintiff adds an alternative that the Plaintiff shall pay the Defendant 40% (or such other percentage as the Court may deem just) of the Defendant’s costs of the Action including the Counterclaim to be taxed if not agreed with certificate for 2 counsel.

Legal Principles

6.  On the question of costs, the starting point is that costs are in the discretion of the Court and they should follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs: RHC Order 62 rule 3(2).

7.  Under RHC Order 62 rule 5(1), amended as a result of the Civil Justice Reform, the matters which the Court may take into account in exercising its discretion include inter alia:

(1) the underlying objectives set out in Order 1A, rule 1: para 5(1) (aa);

(2) the conduct of all the parties: para 5(1)(e);

(3) whether a party has succeeded on part of his case, even if he has not been wholly successful: para 5(1)(f).

8.  RHC Order 62 rule 5(2) provides:

“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.”

9.  In Re Elgindata Ltd (No 2) [1992] 1 WLR 1207 at 1214A-C, Nourse LJ set out the well-established principles relating to costs in the following terms:

(1)  Costs are in the discretion of the Court. 

(2)  They should follow the event, except when it appears that in the circumstances of the case some other order should be made.

(3)  The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or a part of his costs.

(4)  Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs.  (emphasis added)

10.  With regard to principles (3) and (4), in Zhuhai International Container Terminals (Jiuzhou) Ltd v Lo Tong Hoi & Anr unrep, CACV 181 of 2011, 31 July 2012 at [33], Kwan JA (as she then was) further clarified their relationship after the amendments to Order 62 rule 5 and the rationale for it: 

“ … On the established principles, it is not necessary to establish that a successful party has acted unreasonably or improperly in raising an issue for it to be deprived of the whole or part of its costs. The court may so order where the failed allegation of the successful party has caused a significant increase in the length or costs of the proceedings (Re Elgindata Ltd (No. 2) [1992] 1 WLR 1207 at 1214B to C). By the amendments introduced to Order 62 rule 5, litigants should bear in mind the possible costs implications. There is incentive to conduct litigation in a responsible way and be selective as to the issues raised.” (emphasis added)

11.  As to the meaning of “a significant increase in the length or costs of the proceedings”, that was explained by Mr Recorder Fok SC (as he then was) in Chan Lan v Shing Kei & Anor unrep, HCA 1206 of 2006, 16 June 2008 at [16] as follows:

“ … in my judgment, where principle (3) refers to a significant increase in the length or costs of the proceedings, this does not mean that a precise quantum of costs over a particular threshold must be ascertained. It seems to me that the phrase ‘a significant increase in the length or costs of the proceedings’ simply requires the court to be satisfied that the increase is one that can be estimated as a more than trifling proportion of the total costs. As for the question of isolation of those costs from the costs of a successful cause of action, I do not consider that it is necessary for the court to be able to quantify this to any precise extent. It suffices if the court can give an estimate of the proportion of these costs.” (emphasis added)

12.  Lastly, as Lok J explained in SNE Engineering Co Ltd v Hsin Chong Construction Co Ltd unrep, HCA 1466 of 2012, 23 June 2015:

“48. … The issue-based approach is not a hard and fast rule, and the aim of the court is always to make an order which reflects the overall justice of the case …

49. In Hong Kong, the relevant applicable principles were summarised by Lam J (as he then was) in Chinachem Charitable Foundation Ltd v Chan Chun Chuen & Anr [unrep, HCAP 8/2007, 16 April 2010 at [46] as follows:

‘Thus, in deciding whether it is appropriate to depart from the costs follow event starting point, the court should address the two pertinent matters indentified under Rule 5(2)(a) and (b). Elgindata principle (iii) remains relevant because unless the issue in question has caused a significant increase in the length or costs of the proceedings, it is generally disproportionate to embark on an enquiry as to whether an issue-based approach should be adopted, as such likely to be inconsistent with the underlying objectives in Order 1A rule 1(a) to (c). And the court is required to bear in mind these underlying objectives under Order 62 Rule 5(1)(aa)’” (emphasis added)

Discussion

13.  As set out in paragraph 18 of the Judgment, the main issues for adjudication can be summarised as follows:

(1)  Whether the Plaintiff has proved the requisite continuous period of factual possession of the Disputed Area together with the necessary animus possidendi, and that the possession was adverse.  (“Issue 1”)

(2)  Whether the possession of the Plaintiff (or Cheng Senior) of the Disputed Area or any part thereof, if any, was under a licence granted by the Government by virtue of the Licence—the Licence being the one issued by the Director of Agriculture, Fisheries and Conservation on 11 December 2000, 31 December 2003 and 8 March 2007.  (“Issue 2”) 

(3)  Whether the possession of the Plaintiff (or Cheng Senior) of the Disputed Area or any part thereof, if any, was tainted by illegality involving the making of a fraudulent representation in the so-called 2000 Pro Forma—a Chinese document dated 18 October 2000 to the Director of Agriculture, Fisheries and Conservation signed by the Plaintiff and used in his application for the Licence; and if so, whether the Plaintiff’s adverse possession claim should be allowed to stand.  (“Issue 3”) 

(4)  If the Plaintiff (or Cheng Senior) had rented land adjoining the Disputed Area, whether the possession of the Plaintiff (or Cheng Senior) of the Disputed Area or any part thereof, if any, is presumed to have encroached for the benefit of the Plaintiff’s landlord; and if so, whether the Plaintiff can claim a possessory title against the Defendant over the land so encroached.  (“Issue 4”) 

(5)  Whether the Plaintiff deliberately concealed from the Defendant or its predecessor in title his use, occupation or possession of the Disputed Area or any part thereof, if any; whether section 26 of the Ordinance applies so that the applicable limitation period did not begin to run until the commencement of this Action.  (“Issue 5”) 

(6)  Whether the Defendant is entitled to possession of the Disputed Area or any part thereof and damages for trespass.  (“Issue 6”)

14.  This court ruled in favour of the Defendant on Issue 1 and hence Issue 6.  The other 4 Issues were ruled against the Defendant.

15.  There is no doubt that Issue 1 is the most important issue and has taken up the bulk of the parties’, the witnesses’[1] and the court’s time both before and at the trial.  But as Mr Shum submits, the other 4 Issues are separate and discrete issues raised by the Defendant as its positive defences to the Plaintiff’s Claim.  These 4 Issues are not simple, insignificant or merely incidental to Issue 1.  The raising of these 4 Issues necessitated both the Plaintiff and the Defendant to incur considerable legal costs, as well as time and resources of this court to consider and resolve them.

16.  Take, for instance, the parties’ written Submissions.  In the Defendant’s Opening, 14 pages out of a total of 20 pages were devoted to the 4 Issues.  In the Plaintiff’s Opening, about 27 pages out of 36 were devoted to those Issues.  In the Plaintiff’s Closing, about half of the 41 pages were devoted to Issue 1 while the other half were devoted to the 4 Issues.  The Defendant’s Closing was more economic with the 4 Issues—only about 5 out of 26 pages were devoted to the 4 Issues. 

17.  As far as pleadings are concerned, apart from a number of denials and non-admissions, the bulk of the Re-Amended Defence was devoted to the 4 Issues, while the bulk of the Re-Re-Amended Reply contained matters pleaded in response to the positive defences put forward by the Defendant concerning the 4 Issues. 

18.  This court accepts that the 4 Issues are principally legal points so that the vast majority of the documentary evidence and the witnesses’ oral testimony were concerned with Issue 1.  However, the actual time spent by the witnesses and the time spent going through the documentary evidence in court constituted only a part of the time and legal costs spent by the parties and the time spent by the court in preparing for and presiding over the trial.  That part of Counsel’s oral Opening and Closing submissions at the trial in dealing with the authorities on the 4 Issues also consumed a not insubstantial amount of the Court’s time.

19.  Overall, this court has no doubt that the raising of the 4 Issues has caused a significant increase in the length or costs of the proceedings as a whole and this should be reflected in this court’s costs order.

20.  In Cathay Pacific Airways Ltd v Kwan Siu Wa Becky & Ors, unrep, FACV 5/2012, 26 July 2013 at [4], Ma CJ exhorted that the Court should take an overall view of the matter to arrive at a suitable order as to costs:

“ ... it ought to be recognized that where discrete issues are raised in an appeal, generally the Court will, as a starting point in determining the question of costs, examine how the parties have succeeded (or failed) on these issues. The Court will then take an overall view of the matter to arrive at a suitable order. We use the word ‘overall’ to emphasize that the Court will not generally go into a minute examination of whether each issue and each sub-issue and argument within each issue has been argued successfully or not by the parties. Usually, an overall view of the justice of the case will serve as the best guide to determine the question of costs.” (emphasis added)

21.  Without trying to quantify the increase in the length or costs of the proceedings to any precise extent, it seems to this court the overall justice of the case is that the Defendant should be deprived of part of its costs even though it is eventually the successful party.  Looking at the matter broadly, this court is of the view that a reduction of 25% is the appropriate figure.

Disposition and costs order nisi

22.  This court shall therefore vary the Costs Order nisi as follows:

“75% of the costs of the Action including the Counterclaim be to the Defendant, to be taxed if not agreed, and paid forthwith by the Plaintiff, with certificate for 2 counsel.”

23.  Since the Defendant has not been wholly successful in resisting the Summons while the Plaintiff has not been wholly successful in seeking the Order sought in the Summons, the fairest costs order for the Summons, on a nisi basis, is that each party shall bear its own costs.