WESOFT NATIONMARK LTD v. NATIONMARK (H.K.) LTD AND OTHERS

HCA 724/2019 and

HCA 1317/2019

(Consolidated)

[2024] HKCFI 1695

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS 724 OF 2019 AND 1317 OF 2019

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(Consolidated by the Order of Master Lai dated 30 August 2019)

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J U D G M E N T

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INTRODUCTION

1.  This is the 1^st to 3^rd defendants’ (“D1–D3”) appeal pursuant to Order 58, rule 1 of the Rules of the High Court, Cap 4A against a costs order of Master Grace Chow dated 21 September 2023 (“Costs Order”).  The Costs Order was made at the end of the hearing of the plaintiff’s (“P”) application by way of summons for further and better particulars of the Re-Amended Defence of D1–D3 (“P’s Summons”) on 20 and 21 September 2023 (the “FBP Hearing”).

2.  In the Costs Order, the Master ordered D1–D3 to pay P 50% of its costs in respect of the requests against D1–D3 (summarily assessed at HK$62,500.00).

3.  D1–D3 contends that the the Costs Order was unreasonable, and invite the court to allow their appeal and impose a fresh order for costs accordingly.

OUTCOME OF THE FBP HEARING

4.  By way of P’s Summons (dated 15 June 2023), P, inter alia, made requests for further and better particulars (“FBP”) of D1–D3’s Re-Amended Defence.  18 requests were made, some of which also involved sub-questions on details. 

5.  By way of an Answer to the request for FBP filed by D1–D3 on 6 July 2023 (“Answers”):

(1)  D1–D3 gave full or partial answers to 9 of the 18 requests;

(2)  For the requests in respect of which D1–D3 declined to give FBP, D1–D3 explained that the requests sought were not necessary for the fair disposal of the dispute between P on the one hand and D1, D2, and/or D3 on the other, and/or that the requests tantamount to fishing for evidence.

6.  Despite the Answers, P decided to proceed with 17 of the 18 requests in P’s Summons.  This resulted in the hearing on 20 September 2023 (ie the FBP Hearing).

7.  At the end of the FBP Hearing, the Master granted 3 of the 18 FBP requests sought and dismissed the rest, with reasons for the decision given on 29 September 2023 (“FBP Decision”), and imposed the Costs Order.

APPLICABLE LEGAL PRINCIPLES

8.  The court’s approach to an appeal against a costs order made by a Master is well-settled.  In Paul Y-ITC Construction Ltd v Kin Shing Co Ltd[1999] 1 HKC 511 , the test is set out at page 515A as follows:

“As this is an appeal as to costs only from the discretion of the master, such application should not be allowed unless it can be shown that the order made by the master was unreasonable or erred in law, ie if he either failed to make into account proper matters or took into matters that should not have been taken into account …” (Emphasis added)

DISCUSSION

9.  The Master’s reasons for making the Costs Order, as can be discerned from the FBP Decision, may be summarised as follows:

(1)  The Master had regard to the amount of time spent and the fact that the FBP Hearing would have been occasioned in any event, given the Master’s orders for D1–D3 to provide answers to various FBP requests.^[1]

(2)  There was no basis for the Master to find that the application was unreasonably taken by P.[2]

(3)  Three of the requests were not ordered only because it was no longer necessary to so order after submissions were filed and/or confirmation by D1–D3’s counsel at the FBP Hearing.^[3]

10.  The Master accepted the starting point that costs are to follow the event.^[4]

11.  The details of the event, as determined by the Master, are as follows:

(1)  Requests 3, 4, 5, 6, 7, 8, 11, 13, 14, 15, 17.1–17.3, and 18.1 were rejected on the basis that the FBP sought were not necessary for the fair disposal of the matter between the parties;

(2)  No particulars were ordered in respect of Requests 1, 9, and 10 after the filing of written submissions and clarification by counsel at the FBP Hearing;

(3)  Request 2 was not further pursued by P at the FBP Hearing and no determination was made in respect of it; and

(4)  D1–D3 were ordered to give particulars in respect of Requests 12, 16, and 17.4.

12.  Therefore, taking a broad-brush approach, D1–D3 were clearly substantially successful at the FBP Hearing, in that D1–D3 have  generally succeeded in resisting P’s Summons, with only a small number of requests (3 out of 18) being granted.  

13.  In the circumstances, to award P 50% of the costs, and awarding none of the costs to D1–D3 is plainly unreasonable.

14.  First, I agree whether the FBP Hearing would have taken place in any event is an irrelevant factor by itself.  If the necessity of the FBP Hearing itself can be a reason in support of a costs order in favour of the party applying for FBP (in this case, P), this would in effect mean that if an applicant is successful on only one of the requests in an application for FBP, notwithstanding all the other requests being successfully resisted upon by the respondent, this would result overall in part of the costs being awarded to the applicant.  This sits uncomfortably with the position that costs are to follow the event.

15.  To test the point in another way.  If the defendants have successfully opposed all 18 requests for FBP, it cannot be seriously disputed that they must be entitled to all the costs.  If the plaintiff is successful instead on one of the requests (and fails on the other 17), surely it would be an unreasonable result for the defendants to get none of the costs and to have to pay some of the plaintiff’s costs just because a hearing is necessary.

16.  Or to put it yet in another way, the FBP Hearing would be necessary also for D1–D3 to argue against the requests for FBP which were disallowed.

17.  Second, nowhere in the FBP Decision did the Master appear to have given any weight to D1–D3’s successful opposition to the large number of FBP requests referred to in paragraph 11(1) above.

18.  It is unreasonable for D1–D3 not to be awarded any costs in respect of the requests which were disallowed by the Master.

19.  That said, D1–D3 fairly accept that the fact that Requests 1, 9, and 10 were rejected only upon submissions and clarification from D1–D3’s counsel is a relevant factor to be taken into account in determining the appropriate costs order for the FBP Hearing.  D1–D3 further accept that, on a broad-brush basis and considering all the circumstances of the FBP Hearing, this matter would be relevant to the quantum of costs D1–D3 can recover from P following the FBP Hearing, in order to apportion more justly the costs expended by P.  Even so, broadly speaking, the result is still 12:6 in favour of D1–D3.

20.  For all the reasons set out above, I conclude as follows:

(1)  The Costs Order is unreasonable.  I allow the appeal and set aside the same accordingly.

(2)  The plaintiff is to pay forthwith 1/3 of the costs incurred by the 1^st to 3^rd defendants in opposition to the plaintiff’s Request for Further and Better Particulars against the 1^st to 3^rd defendants by way of Summons dated 15June 2023.

(3)  Costs of the appeal be paid by the plaintiff to the 1^st to 3^rd defendants.

(4)  The costs awarded under sub-paragraphs (2) and (3) above are to be summarily assessed with the directions that: (i) the 1^st to 3^rd defendants shall lodge and serve a Statement of Costs within 14 days from the date hereof; and (ii) the plaintiff shall lodge and serve its Grounds of Objection (if any) within 14 days thereafter.  The summary assessment shall be conducted on paper unless otherwise directed by the court.