INVEST GAIN LTD v. NOVEL GOOD LTD

HCA 939/2013

[2023] HKCFI 1965

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 939 OF 2013

______________________

BETWEEN

______________________

____________________

DECISION
(ON COSTS)

____________________

Introduction

1.  The present applications are in relation to costs which arose out a 12 day trial which took place between end of May and November 2018 (“Trial”). This Court handed down its judgment on 28 June 2019 (“Judgment”). I shall continue to adopt the abbreviations and nomenclature therein unless otherwise stated.

2.  At the conclusion of the Judgment, I directed the parties to fix a hearing for argument on costs. The proceedings were later stayed on 21 November 2019 pending the parties’ respective appeal.

3.  P and D each brought an appeal against those parts of the Judgment with adverse findings against that party, namely CACV 341/2019 (“D’s Appeal”) and CACV 344/2019 (“P’s Appeal”).

4.  The appeal was heard on 17 December 2020. The Court of Appeal handed down its judgment on 20 January 2021 (“CA Judgment”). Suffice to say at this stage, part of D’s Appeal was allowed and P’s Appeal against the part of the Judgment against P was not successful. The Court of Appeal made a costs order nisi that for D’s Appeal, P was to pay 40% of D’s costs, and for P’s Appeal, P was to pay D’s costs.

5.  P then sought leave to appeal to Court of Final Appeal against the CA Judgment. Leave was refused on 31 December 2021, and P was ordered to pay D’s costs summarily assessed in the amount of HKD 110,000.

6.  The hearing on costs of the Trial was then directed to be fixed and eventually took place before this Court on 10 May 2023.

7.  Mr William Wong SC leading Mr Michael Lok appeared for P, and Ms Eva Sit SC leading Mr Danny Tang appeared for D.

The parties’ respective positions

8.  As set out in the Judgment, there were a total of 12 agreed disputed issues (“12 Issues”). Ms Sit submitted on behalf of D that on a “issues-based approach”, and on a broad–brush basis, D was overall successful on 9.5 out of the 12 Issues, and that P was only successful on 1 out of the 12 Issues, and that netting them off, P should pay D 70.83% (8.5 out of 12) of D’s costs of the Trial.

9.  On the other hand, Mr Wong submitted on behalf of P that there should be no order as to costs. It was submitted that D was successful on 5 of the 12 Issues, namely Issues 1-4, and 7 and partially successful on Issue 6, and that P was successful on Issues 5, 8 and 9. Issues 10 and 11 should be left out of the equation as both were partially successful and Issue 12 was the “flipside” of the Counterclaim.

Discussion

10.  As set out in paragraph 4 of her Skeleton Submissions, Ms Sit had summarised this Court’s and Court of Appeal’s respective determinations of the 12 Issues in a table (“Table”), which is reproduced below:

Issue[1]	Nature	Determination	Appeal
10	Whether compliant contractual notice of claim(s) given	(a) In favour of D on cl.8.05 being “bald notice” clause (Judgment §§63-100 [HBA2/9/150-162]) (b) In favour of P that cl.8.05 requires that claim(s) have already come to the knowledge of or revealed to or discovered by D at the time of giving notice (Judgment §§101-106 [162-164]) (c) In light of (b), no compliant notice given for Issues 5, 6, 8 (Judgment §§107-118 [164-168])	(a) Upheld (CA Judgment §§39-55 [HBA2/10/300-307]) (b) Upheld (CA Judgment §§56-68 [307-311]) (c) Overturned for Issue 6; compliant notice given (CA Judgment §§102-106 [321-322])
1	Yingtong (盈通) Recovery (cl.6.04)	In favour of D (Judgment §§121-159 [168-180])	Upheld: §§69-78 [311-314]
2	Xian Project (warranties)	(a) Against D on construction of warranty (Judgment §§161-176 [180-185]) (b) In favour of D on causation (Judgment §§218-226 [198-200])	(a) Overturned; in favour of D on liability (CA Judgment §§79-91 [314-318]) (b) P’s appeal abandoned (CA Judgment §10 [288])
3	Jinma (金馬) Tax Rebate (warranties)	In favour of D on liability and causation (Judgment §§228-267 [201-212])	P’s appeal abandoned (CA Judgment §10 [288])
4	Zheng (鄭向麗) Litigation (warranties)	In favour of D on liability and causation (Judgment §§268-316 [212-226])	P’s appeal abandoned (CA Judgment §10 [288])
5	Hua Fu Yi (華富益) Undertaking (warranties)	In favour of D on liability and causation (Judgment §§317-344 [226-234])	P’s appeal abandoned (CA Judgment §10 [288])
6	BJ Xinsong (北京新松) accounts (warranties)	(a) In favour of D on liability (Judgment §§345-367, 372-373 [234-240, 242-243]) (b) In favour of D in part on causation (Judgment §§368-371, 374 [241-242, 243])	P’s appeal abandoned (CA Judgment §10 [288]) (a) Finding on causation upheld (CA Judgment §§92-101 [318-321])
7	Rich Glory transaction (warranties)	In favour of D on liability and causation (Judgment §§375-407 [243-254])	Upheld (CA Judgment §§107-127 [322-328])
8	Moral Luck Undertaking (warranties)	(a) In favour of D on liability (b) Against D on causation	No appeal
9	Wo Ke account misstatements (warranties)	Against D on liability and causation	No appeal
11	Cl.8A construction	(a) In favour of D on construction (Judgment §§466-478 [271-275]) (b) In favour of D that on the facts subject matter of breaches within knowledge and/or control of P/ Li (驪松校) (save for Issue 2) (Judgment §481 [276])	P’s appeal abandoned (CA Judgment §10 [288])
12	Release of Share Charge	Share Charge should not be released in light of breaches found for Issues 1, 3, 4, 7 (Judgment §§482-486 [276-277])	Upheld (CA Judgment §129 [329]) In light of CA’s decision on Issues 1(c) and 2 (above), P was in breach for Issues 1, 2, 3, 4, 6, 7

11.  Issues 1 to 9 were factual issues which concerned the 9 heads of claim arising out of the Counterclaim.

12.  So far as Issues 5 and 8 were concerned, Ms Sit argued that D was successful on the underlying merits and it was only held by this Court that no proper or effective notice was given in light of this Court’s construction of Clause 8.05. As seen in paragraphs 115 to 120 of the Judgment, this Court had held that for Issues 5, 6 and 8, there was no proper or effective notice, but did go on to consider merits, and found in favour of D on merits save the 2013 claim in Issue 6. Eventually, on appeal D succeeded in Issue 6 and that the Court of Appeal found that compliant notice had been given. Thus, D was ultimately successful on claiming loss regarding the 2011 Claim including legal costs but not the legal costs of the 2013 Claim. On a broad basis, I would regard both to be partially successful on Issues 5, 6 and 8.

13.  Thus for the 9 heads of claim, D was overall successful on Issues 1, 2, 3 ,4 ,7 and partially for Issues 5, 6 and 8, or roughly, 6.5 out of 9 heads of claim.

14.  It was argued by Mr Wong that as both parties were partially successful on Issues 10 and 11, there should be no order as to costs on these issue.

15.  As for Issue 10, even though P was only successful on its secondary case on the construction of Clause 8.05, D did appeal and was not successful, save for Issue 6. I accept that the parties were both partially successful on Issue 10 but do not agree that it be taken out of the equation. I would approach it similarly as for Issues 5, 6 and 8.

16.  As for Issue 11, this issue was whether P’s liability was confined and limited under Clause 8A of the SPA. As stated in paragraphs 466-478, I stated that I did not accept Mr Wong’s submissions on the construction and effect of Clause 8A.01. As seen in paragraphs 479-481, even though I also did not agree with Ms Sit that for 4 of the 9 issues, namely Issues, 3 ,4, 5 and 9, P could not rely on Clause 8A.01, D did not find it necessary to rely on breach of paragraph 4 of the Warranties for Issues 3 and 4. In any event, save for Issue 2, for the other Issues, I was satisfied that the subject matters of the breaches were within the knowledge and/or control of Mr Li/P.

17.  P’s Appeal had included Issue 11, but this was abandoned at the appeal. On the other hand, D’s Appeal concerning the Court’s construct of the Warranty was overturned by the Court of Appeal, as seen in the Table. Having considered this, I am of the view that D was overall successful on Issue 11.

18.  Issue 12 was submitted by Mr Wong to be the “flip side” of the Counterclaim. The main issue in the claim and the Counterclaim was whether the Share Charge should be released, and I accept that this issue would very much depend on the determination of the 9 heads of claim. However, it was an agreed disputed issue and that as seen in Section C of P’s Opening Submissions for the Trial and Section O of P’s Closing Submissions, there were submissions made on behalf of P that D had a contractual discretion under the Share Charge and that the exercise of the contractual discretion must not be unreasonable. This Court had considered those submissions in paragraphs 482-486 of the Judgment. Even if not much time was spent on Issue 12, it was an issue which P did not succeed on.

19.  Having considered the parties’ respective submissions, on an “issues based approach” and on a rough broad brush basis, I am of the view that D was overall successful on 9 (including 0.5 for partial success) out of 12 Issues namely Issues 1, 2, 3, 4, 7, 11, 12 and partially successful on Issues 5, 6, 8 and 10 or roughly about 9 out of the 12 Issues, and P was successful on Issue 9 and partially successful on Issues 5, 6, 8, 10 roughly about 3 out of the 12 Issues.

Conclusion

20.  Having considered the above, and adopting Ms Sit’s “netting off” approach (ie 9-3, ie 6, over 12 Issues), I exercise my discretion and order P to pay 50% of D’s costs of the Trial on liability and causation (including any reserved costs order) with certificate for 2 counsel, to be taxed if not agreed on party and party basis.

21.  As for the hearing on costs, although P had succeeded on part of its arguments, this Court did not make no order as to costs as proposed by P. Having considered all the circumstances, I will make a similar costs order, namely P to pay 50% of D’s costs of the costs hearing, with certificate for 2 counsel, to be taxed if not agreed on party and party basis.