TO YUNG SING HERMAN v. SZETO CHAK MEI AND OTHERS

HCMP 2741/2016

[2024] HKCFI 1897

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2741 OF 2016

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DECISION

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A.  Introduction

1.  The matter came to me as an assessment of damages, following the judgment of liability by Lisa Wong J dated 4 July 2018 in favour of the Plaintiff (“P”).  In short, P succeeded in liability and obtained declarations that there had been repudiatory breaches by the 1^st to 4^th Defendants (“Ds”)  of a sale and purchase agreement for the Property, and that P was entitled to accept the repudiation, such that Ds were to pay P damages (see Dec 2023 Judgment §§5- 6).

2.  By Judgment handed down on 15 December 2023 (“Dec 2023 Judgment”), I ruled on various major issues in dispute between the parties in the assessment trial.  Based on these rulings, the parties worked out the outstanding figures for the assessment, and by a further judgment dated 30 April 2024 (“Apr 2024 Judgment”), I formally made various orders in the assessment exercise.  

3.  In more detail, the overall result of the assessment can be summarised as follows:

3.1  In the assessment trial, the parties have agreed to a list of issues (see Dec 2023 Judgment §33), which essentially raised the following issues:

(a)  Whether the market value of the Property is to be assessed at the Completion Date or the Judgment Date.

(b)  Whether the market value of the Property is to be assessed on the existing use basis or the redevelopment basis.

(c)  In light of the above issues, what is the market value of the property, and the quantum of P’s loss of bargain.

(d)  If the Judgement Date is adopted, whether P is entitled to claim loss of rental income and the quantum of such loss. 

(e)  Whether P is entitled to claim under the following other heads: (1)  increased agency commission and stamp duty required to purchase a substitute property; (2)  interest on the Deposit; (3)  costs incurred to obtain the Colliers Report and the CBRE Report.

3.2  The various figures as to the market value of the Property contended for by the parties are set out at §35 of the Dec 2023 Judgment.  The highest figure contended for by P was HK$98,803,000, and the lowest figure contended for by Ds was HK$50,200,000 (Dec 2023 Judgment §35). Deducting the contract price of HK$50,000,001, P’s highest claim for the loss of bargain was HK$48,802,999, and Ds’ lowest figure was HK$199,999.

3.3  In the end, I only awarded HK$7,620,999, plus pre-judgment interest (see Apr 2024 Judgment §§5-6).   

3.4  P also claimed loss of rental income to the tune of HK$4,821,217.[1] This claim failed as I adopted the Completion Date.

3.5  I have rejected P’s claim on increased agency commission and stamp duty, or costs in relation to the Colliers and CBRE Reports.  I have awarded interest on the Deposit.  

4.  At §9 of the Apr 2024 Judgment, I made an order nisi that P should get 50% of its costs in the assessment with certificate for two counsel, such costs are to be taxed if not agreed (“Order Nisi”).  

5.  By a Summons dated 9 May 2024, P applied to vary the Order Nisi to that Ds do pay P’s costs in the assessment, or alternatively “an appropriate portion higher than 50% thereof so as to do justice between the parties”, with certificate for two counsel, to be taxed if not agreed.  

6.  I have directed the matter to be dealt with by paper disposal, and for written submissions to be filed by the parties.  Having considered those submissions,[2] I now hand down my decision.

B.  Legal principles

7.  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).

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

8.1  the underlying objectives set out in Order 1A, rule 1;

8.2  the conduct of all the parties;

8.3  whether a party has succeeded on part of his case, even if he has not been wholly successful.

9.  Rule 5(2)  further provides that:

“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.”

10.  In Wong Kam Tong v Tin Shing Court, Yuen Long (IO)  (No 2) [2012] 2 HKLRD 1128, the Court of Appeal referred to the well-established approach on costs set out in Re Elgindata (No 2) [1992] 1 WLR 1207, where Nourse LJ at 1214 held that:

10.1  Costs are in the discretion of the Court.

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

10.3  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.

10.4  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. 

11.  At §§11-12, the Court of Appeal further explained[3] that after CJR:

11.1  The “costs follow the event” principle will still play a significant role, but it will be a starting point from which a court can readily depart. 

11.2  Too robust an application of the “costs follow the event” principle would encourage litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take.

11.3  In relation to the third principle in Re Elgindata (§10.3 above), 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.

C.  My reasons for making the Order Nisi

12.  In making the Order Nisi in the Apr 2024 Judgment, I have taken into account all the circumstances of the case, including the parties’ relative success on the various points raised in the assessment (and the time and resources spent on the respective issues).  At §9 of the Apr 2024 Judgment, I have highlighted a few key matters to make clear that I have taken them into account.  

13.  First, I noted that P had to go through the assessment to obtain the award it has obtained now, and the result achieved is better than Ds’ position as at the Completion Date, but at the same time there was a substantial reduction in the quantum put forward by P (see Dec 2023 Judgment §35).  

14.  Second, I stated that given that there was no direction for a split trial (in the sense of a preliminary determination of the correct valuation date), I would not regard it as unreasonable for P to present valuation evidence of the different assessment dates open on the evidence.  However, as it turned out, the redevelopment basis, which generated a large part of the valuation evidence, was of no consequence.  

15.  In other words, while it was not unreasonable for P to put forward the valuation evidence of the Date of Judgment which was not in the end adopted by the Court, P’s reliance on the redevelopment basis did not affect the outcome of the assessment, and had caused a significant increase in the length or costs of the proceedings.  Plainly, I was alluding to the third principle and not the fourth principle in Re Elgindata. 

16.  I should make clear that I have highlighted the issue of the redevelopment basis because that issue generated expert evidence in relation to the valuation of a hypothetical redevelopment (at both valuation dates), as opposed to the valuation of the existing development under the existing use basis.  This involved a whole new set of issues relating to the parameters of the hypothetical redevelopment, and the consideration of a completely different set of comparables.  As it turned out, the figures arrived at under the redevelopment basis was lower than the figures under the existing use basis under both valuation dates and were not adopted. 

17.  Third, I also referred to the fact that P has lost on the other (relatively minor)  heads of claim, being increased stamp duty, increased agency commission and costs for the CBRE and Colliers Reports. 

18.  On further reflection, it may be that the brief reference to these specific points gave the impression that they were the only matters I have taken into account.  I should make clear that the key matter which I took into account in applying a discount to P’s costs entitlement is that P lost on the key issues of the correct valuation date (Judgment Date vs Completion Date)  and valuation basis (redevelopment basis vs existing use basis).  

19.  Because P put forward the Judgment Date and the redevelopment basis, a substantial amount of time and costs (whether at trial or in the preparation of arguments and evidence before the trial)  were spent on various matters: (1)  the legal arguments on the correct valuation date; (2)  valuation evidence relating to the Judgment Date; (3)  valuation evidence relating to the hypothetical redevelopment (at both valuation dates); (4)  the valuation evidence relating to the rental value of the Property (at both valuation dates).  In addition, some of the factual evidence also goes to the issue of the correct valuation date (such as those relating to P’s mitigation efforts). 

20.  It is with these considerations in mind that I made the Order Nisi.  The 3 points above were intended to make clear that certain special features of this case had been taken into account.  

D.  Discussion

21.  Having considered the various points made in P’s submissions, I am not persuaded that I should vary the Order Nisi. 

22.  At the outset, P emphasises that he is the successful party in the assessment of damages, and should be entitled to the whole costs of the assessment under the costs follow the event principle (P’s Submission §§3- 4 and also §10). 

23.  It is apparent that I have regarded P as the successful party in the assessment exercise.  This is reflected by the fact that I have ordered Ds to pay P’s costs of the assessment, although reduced to 50%, and have not ordered P to pay any part of Ds’ costs of the assessment.  In fact, this is why I referred to the fact that P had to go through the assessment to obtain the award, and that the result achieved was better than the position contended for by Ds (see §13 above).  

24.  There appears to be a submission that because there is “only one event” which is the assessment of damages, which P had ultimately been successful, there is no basis to apportion costs.[4] I have difficulty following this submission, which appears to have conflated the question of who was the overall successful party with whether that successful party have lost on certain discrete issues for which an apportion of costs can be made.  The fact that P was the overall successful party does not preclude the possibility that he had lost certain issues for which it would be appropriate to apportion costs.  I am unable to see how the case of Seepersad v Persad (2004)  64 WIR 37 discussed in Wong Kam Tong v Tin Shing Court, Yuen Long (IO)  (No 2) [2012] 2 HKLRD 1128 would assist P.  I note that in Wong Kam Tong at §16, Cheung JA said this of Seepersad:

“Whether a matter is an issue in the context of an award for costs must depend on the circumstances of the case. One can understand why different heads of damages in a personal injury claim were not considered by the Privy Council as issues because in that case while there was a decrease in one head, there was an increase in another head…”

25.  In the circumstances of this case, I consider it plain that the issues of the correct valuation date and valuation basis are separate and distinct issues in this assessment.  

26.  P then submits that it is wrong for me to have taken into account any of the 3 matters identified above, whether as a matter of principle or in the exercise of my discretion, to discount or partially disallow P’s entitlement to his costs (P’s Submissions §5). 

27.  In relation to the point that P has recovered less than he claimed (§13 above):

27.1  First, P submits that it would be wrong in principle to disapply the general rule “by the mere fact that P has recovered less than he claimed unless it is an appropriate case of apportionment of costs on different issues”, citing Friston on Costs (4^th edn) §6.165 and the case of Vestergaard Frandsen A/S v Bestnet Europe Limited [2014] EWHC 4371 (Ch).[5]

27.2  In the Vestergaard case, Rose J stated at §2 that:

“It is true that the amount awarded at the end of the day was a tiny percentage of the overall amount claimed and it is a small percentage of the amount of costs. That does not, in my judgment, automatically mean that some different order from the usual order should be made. To put it another way, those two disparities do not automatically mean that it would be unfair for the Claimants to be awarded the whole of their costs of the inquiry. One must consider why there is that disparity between the sum claimed and the amount awarded. The key, therefore, to the issue as to costs lies in the answer to two questions: why was the sum claimed so high; and why was the amount awarded so much less than the sum claimed?”

27.3  It appears to me that P’s submission is based on the wrong assumption that I have relied on the “mere fact that P has recovered less than he claimed” as an independent reason for reducing P’s costs.  What I have stated was simply that I have taken into account the 3 matters identified at §§13-17 above.  Under the first matter, the point I was making was that P was the successful party (in that he had to come to court to obtain the award, and the award was better than Ds’ position), while noting that he did not achieve overwhelming success (the quantum was significantly less than the amount he put forward).  The key factor which in my view justified a departure from the “costs follow the event approach” was the fact that P had lost on key valuation issues (valuation date and basis)  which led to a significant increase in the costs of the assessment.  

27.4  This is entirely in line with the approach of Rose J in the Vestergaard case.  I would also note that the Vestergaard case does not say that the Court cannot even take into account the ultimate quantum achieved. 

27.5  In the Vestergaard case, which concerned an inquiry as to damages, the reason why the plaintiff’s claim was so high was because its position as a matter of law that it was entitled to claim damages for sales of derived products based on the approach known as the General Tire approach, which was rejected (§4).  It does not appear from the judgment that that approach had led to a significant increase in the length or costs of the proceedings.  It also appears that the plaintiff (Vestergaard)  had succeeded in most of the factual issues in the inquiry hearing (§§9-10).  Thus, that case is distinguishable from the present case.  

27.6  Second, P also submits that it is wrong in principle to apportion costs based on some sub-issues lost by P in the valuation exercise.[6] P refers to Friston on costs, §6.178; Vestergaard §14. 

27.7  In my view, this submission is wrong and P has cited the authorities out of context.  The point made in Friston §6.178 is that it would not be appropriate to “drill down below [the substantial issues in the case]”, and apportion costs for each individual sub-issue and sub-sub-issue.  Whether an issue is a substantial issue or a relatively less significant sub-issue must depend on the facts of each case.  Here, the date of assessment and valuation basis are in my view clearly substantial issues in the assessment.  

27.8  As to Vestergaard §14, the finding in that case was that there were no discrete points “in relation to which it [was] possible to say that this evidence or those documents or that amount of court days could have been saved if the point had not been run”.  The present case is different.  

27.9  P also appears to emphasise that the assessment of market value was a complex and uncertain exercise involving many different factors, that the valuation exercise was done properly by the experts, and that the parties cannot know the range of quantum which would be awarded until the judgment.[7] But the point here is that in this exercise, P raised the significant issues of date of valuation and redevelopment basis, which he lost, and they generated a substantial amount of time and expenses.  

27.10   I am unable to agree with the submission at P’s Submissions §17 that “the Court should not fillet out the issues for costs purposes if success or unsuccess in any such issues would not alter the event”.  If this is saying that the success or unsuccess of an individual issue cannot, in all cases, be taken into account by the Court to depart from the general rule of costs follow the event, then that cannot be right.  I do not regard §35 of Tsang Woon Ming v Tsang Hing Tat Heidi [2021] HKDC 1091 to be making such a point.  In that case, what was decided was that the court would not apportion costs in favour of a plaintiff who has failed to establish adverse possession even though he has succeeded on establishing factual possession (he has failed on intention to possess).   In fact, the case of Wu Leung Kui Jackv v Leung Ming Yun CACV 175/2011 (unrep., 13 February 2012)  which was cited there did not contain any general statement of principle to such effect. 

28.  In relation to the point that the redevelopment basis issue generated significant amount of evidence which turned out to be of no consequence (§§14-16 above): 

28.1  P submits that “it is not entirely accurate” to say that the redevelopment basis was of no consequence, because it is “part and parcel of the valuation exercise”, because the redevelopment basis is relevant to the final outcome, based on the highest and best use principle.[8] However, the point I was making was that the evidence of the redevelopment basis was of no consequence to the outcome.  The fact that a point was relevant for the Court to consider does not change the fact that the point was lost.  The fact that it was reasonable for a party to raise a point that was lost does not mean that the Court cannot apply a discount in light of the point being rejected. 

28.2  P appears to refer to the fact that Ds have spent considerably more time in cross-examining P’s witnesses (generally), and that Ds have been less “restrained” in the cross-examination relating to the redevelopment basis.[9] But the point is that the redevelopment basis issue, a point raised by P which eventually had no impact on the outcome, generated substantial valuation evidence and time spent by both P and Ds.  I am unable to follow the relevance of the time spent generally (not limited to redevelopment basis).

28.3  P then emphasises that it was not unreasonable for P to have presented valuation evidence of different assessment dates (as I have observed).[10] But as noted above, it is not necessary for a party to have acted improperly or unreasonably before he can be deprived of the costs of an issue on which he has failed. 

29.  I am unable to agree with P’s submission that the argument on the different valuation dates was in essence only a legal argument which took up nominal time at trial, and no apportionment should be made.[11] As noted at §19 above, this issue did generate substantial time and costs on legal arguments and factual and expert evidence.  In this respect, I do not regard §13 of Vestergaard to support P’s submission, since the Court was there dealing with a contention that the plaintiff there had exaggerated its claims.  

30.  In relation to the other heads of damage (see §17 above), P makes the point that they were only briefly dealt with in P’s written opening and had no significant impact on the trial time or resources (P’s Submissions §§25-27).  However, they are nevertheless distinct heads of claim for which P has lost which I was entitled to take into account.  I have borne in mind that they are relatively minor issues (referring to this expressly at §9 of the Apr 2024 Judgment)  and relatively less time was spent on them.  I would also note that some of these points also featured in the evidence (there had been cross-examination on the purpose of the Colliers and CBRE reports).  

31.  It follows from the above that I do not accept P’s submissions, which appear to focus only on the contention that he should be entitled to the entirety of the costs of the assessment because there is no reason to depart from the costs follow the event rule. 

32.  As to the alternative position in the Summons that P should be awarded “an appropriate portion of its costs higher than 50%”, P has advanced no position and has made no submission as to what the appropriate percentage is.  It follows that I am not persuaded to adopt any different percentage. 

33.  I should also note that, at §13 of D’s Submissions, it is submitted that for various reasons set out therein, the Court “should make no order as to costs or alternatively to allow the Plaintiff less than 50% of its costs”.  If I understand this correctly, this is not just defending the Order Nisi, but asking the Court to reduce the cost award in the Order Nisi. 

34.  No summons was taken out by Ds to vary the Order Nisi.  It is inappropriate for the Ds to ask for a variation without taking out any summons and I will not entertain such suggestion. 

E.  Disposition

35.  For the above reasons, P’s Summons is dismissed.  

36.  I make an order that the costs of and occasioned by the Summons be paid by P to Ds with certificate for counsel, to be assessed summarily.  I direct Ds to file their statement of costs by 26 July 2024 at 4:30 pm, and that P should provide his statement of objections by 31 July 2024 at 4:30 pm.