SZE FUNG ENGINEERING LTD v. TREVI CONSTRUCTION COMPANY LTD

CACV 82/2023, [2025] HKCA 532

On Appeal From [2023] HKCFI 419

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 82 OF 2023

(ON APPEAL FROM HCCT NO 51 OF 2019)

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DECISION ON COSTS

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Hon Anthony Chan J (giving the Decision on Costs of the Court)  :

1.  This is Trevi’s application to vary the costs order nisi made pursuant to the Judgment[1] of this Court dated 28 March 2025 ([2025] HKCA 278)  by which SF’s appeal was allowed.

2.  Pursuant to para 76 of the Judgment, the costs of the appeal are to be paid by Trevi to SF with a certificate for 2 counsel, to be taxed if not agreed.  As for the costs below, they are reserved to be determined by the Judge to whom issues of quantum of SF’s claim against Trevi were remitted.  This application concerns the costs of the appeal only.

3.  Two grounds are advanced by Trevi in support of its application that SF should pay 75% (or such other percentage as the Court may determine as appropriate)  of Trevi’s costs of the appeal with a certificate for 2 counsel, to be taxed if not agreed. 

4.  The first ground is that Trevi is the overall winner in the appeal because it had successfully defended the idling and acceleration claims of SF, which are said to be the central issue all along in the dispute between the parties.  The importance of the idling and acceleration claims is based on the fact that they constituted the lion share of SF’s total claim against Trevi.  With the exclusion of those claims, SF’s claim is reduced to between 14% to 23.6% of its original size, depending on the ultimate finding of the court on the remaining claims.

5.  The second ground is based on a Calderbank offer made to SF by Trevi contained in a letter dated 20 June 2022.  It was made prior to the trial which started on 4 August 2022.  By that letter, Trevi offered to abandon its counterclaim in the amount of about HK$3.5 million and pay SF HK$3.95 million with a drop hands on costs.  Putting aside the costs, this offer is considerably better than what SF will recover as a result of the appeal.

6.  We are unable to agree with either of the two grounds.  In respect of the first, Trevi’s view on the winner of the appeal is unduly narrow.  The result of the appeal is that (a)  the judgment below that SF had to pay Trevi the sum of HK$865,985.28 as overpayment received from Trevi with interest and the costs of the action was set aside; and (b)  SF’s variation claims and loss of profits claim were remitted to the court below for determination. 

7.  It is evident from the Judgment that the key issue in the appeal was the proper construction of Item 18 (the first of 4 issues in the appeal), whether it was a pay when paid clause.  The answer to the construction issue would, and did, determine the 2^nd issue of implied term.  Both issues were resolved in favour of SF. 

8.  The 3^rd and 4^th issues concerned the quantum of SF’s claims.  They turned upon, firstly, whether Item 18 was a pay when paid clause.  Having held that it was not, the variation claims (both agreed variations and disputed variations)  and loss of profits claim were remitted by this Court to the Judge because no finding was made on them as a consequence of the ruling below that Item 18 was a pay when paid term.  Although whether the disputed variations (it appears that the parties have now reached consensus on the quantification of the agreed variations)  and loss of profits will ultimately be upheld is not presently known, SF had succeeded in having them determined by the court as a result of the appeal.

9.  As regards the idling claim and acceleration claim, the former turned upon the correct approach in assessing such claim. This Court was not satisfied that the court below had erred in rejecting it due to deficiencies in necessary particulars and evidence.  In respect of the latter, SF’s appeal was rejected due to the absence of appeal against the finding of the court below on Item 17. 

10.  Although SF’s appeal on the idling claim and acceleration claim had failed, the arguments were relatively straightforward. Trevi submitted that substantial costs were incurred in dealing with the quantification of the idling claim.  However, there was no finding made by the court below on the quantum of that claim, and this Court would not have been in a position to deal with it even if SF’s appeal was allowed. 

11.  It is trite that the general rule that costs should follow the event does not cease to apply simply because the successful party raised issues or made allegations on which he failed, but where that had caused a substantial increase in the length or cost of the proceedings he may be deprived of the whole or part of his costs: see In re Elgindata Ltd (No 2), CA, [1992] 1 WLR 1207 at 1214B.  We are not satisfied that the exception to the general rule should apply in this case.

12.  Turning to the second ground, whilst we accept Trevi’s argument that the exclusionary rule under O 62, r 5(1)(d)  does not apply to the Calderbank offer because of the costs provision therein contained (see Leung Lai Kwan v Lo Kai Wing & Anr, CA, unrep, HCMP 1554/2015, 20 August 2015, [7]-[8]), it was an offer made prior to trial, and there is no suggestion that it was referred to the court below. 

13.  Trevi had won the trial which resulted in a judgment of over HK$865,000 in its favour with interest and costs.  The appeal was contested by Trevi.  Its suggestion that SF should have attempted to “revived Trevi’s pre-trial offer” is unrealistic.  Had Trevi wanted to protect itself from adverse consequence of the appeal, it could have revived the offer on a without prejudice basis.  We see no good reason to revisit the costs order nisi based on the second ground.

14.  In the premises, this application is dismissed with costs to SF, to be taxed if not agreed.  We decline to grant a certificate for 2 counsel as the issues are straightforward and well within the competence of a junior counsel.

15.  Henceforth, the costs order nisi has become absolute.