ATLANTIC LINK LTD v. THE INCORPORATED OWNERS OF YEN YING BUILDING AND OTHERS

DCCJ 1306/2018

[2019] HKDC 1744

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1306 OF 2018

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DECISION

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Variation of Costs

1.  By a decision dated 15 November 2019 (the “Decision”), I allowed the appeal of 1^st – 3^rd, 6^th – 13^th and 15^th Defendants (together, the “Defendants”) against Master S H Lee’s order dismissing the Defendants’ application for an extension of time to inter alia file a joint expert report (the “Appeal”).  I made the following costs order nisi in the Decision:-

(1)     Costs of the application by summons dated 18 July 2019 be borne by the [Defendants] except that there will be no order as to costs in relation to the application against the 14^th defendant in relation to the hearing on 29 August 2019 and the hearing today, with certificate for counsel, to be taxed if not agreed.

(2)      Costs of the wasted expert report prepared by the plaintiff’s expert to be borne by the [Defendants] on an indemnity basis, to be paid forthwith.

(3)     No order as to costs in relation to the appeal.

2.  By a summons filed on 15 November 2019, the plaintiff applied to vary the costs order nisi, asking for costs of the Appeal on an indemnity basis, to be taxed if not agreed.

Grounds for Variation

3.  The Appeal was allowed and I had granted a short extension of time enabling the joint expert report to be filed.  To that extent, the Defendants had been successful in the Appeal.  By the mere fact of being successful in the Appeal, the Defendants have discharged their burden of showing they are entitled to costs.  The burden then shifts to the plaintiff to adduce sufficient evidence and argument that some other order is appropriate.

4.  Essentially, the plaintiff relies upon the unreasonable conduct of the Defendants leading up to the Appeal (as held by this Court in the Decision) to argue that the Defendants should bear the costs of the Appeal.  The plaintiff says the Defendants had brought the Appeal upon themselves as a result of the way they had conducted themselves.  The case of Daniels v Walker[1] is relied upon for the proposition that costs do not necessarily follow the event and the court may award costs against a winning party.

5.  I agree with the plaintiff’s submission that post-CJR, costs in interlocutory proceedings no longer start with the general rule that costs follow the event[2].  I also agree with the Hon To J in the case of Melvin Waxman v Li Fei Yu [3] at paragraph 14, that: “an order that a successful party shall have his costs only if he succeeds in the action, or bear his own costs or even pay the opponent’s costs are possible options under the new rule 3(2A), depending on the court’s perception of where justice lies.”

6.  Shortly after the application to vary the costs order nisi had been taken out, the plaintiff had proposed to the Defendants that the costs of the Appeal should be in the cause of these proceedings to dispense with further costs arguments. The Defendants did not agree to the Proposal. I am also not convinced that this is an appropriate case for costs to depend on the ultimate result after trial. At this stage, the Court is simply not in a position to have a view on the merits of the claim.  The question the Court should concentrate on is whether it was reasonable for the Defendants to have pursued the Appeal and whether it was reasonable for the plaintiff to have resisted it.  Given the fact that the Appeal was allowed, it was clearly reasonable for the Defendants to have pursued the Appeal.

7.  Whether it was reasonable for the plaintiff to have resisted the Appeal depends not only on the outcome of the Appeal but also on what were the arguments available to the plaintiff and whether there was any merit.

8.  As can be seen from the historical correspondence between solicitors for the Defendants and the plaintiff, it is an understatement to say that parties had been taking a confrontational stance every step of the way.  Animosity was apparent from both sides.  To that end, I can see why it might have appeared natural for the plaintiff to have resisted the Appeal.  However, animosity aside, the court expects parties to act reasonably and solicitors to advise lay client of the true legal position before they take any stance in the course of the proceedings.

9.  Principles concerning the case management functions of the court had been clearly set out in the case of Chan Cheung Ming Jacky v Siu Sin Man (Formerly Siu Kit Ling)[4]. Neither party referred the learned Master to that case.  In the Decision, I had already applied the principles and discussed how in water leakage cases the trial judge would have been greatly assisted by a joint expert report.  Before arriving at a decision to resist the Appeal, the plaintiff ought to have considered the possibility that the court would have been deprived of the assistance of a joint expert report and how that would impact upon the ability of the trial court to carry out its task.  I disagree with the plaintiff’s submission that it was reasonable for them not to have brought the Learned Master’s attention to the case of Chan Cheung Ming Jacky.

10.  In terms of the Defendants’ unreasonable conduct, I consider that the court has already shown its displeasure, and that the Defendants have been penalised:-

(1) In the costs order nisi, the Defendants’ right to recover their costs against the plaintiff has been deprived, despite the fact that the Appeal was allowed. 

(2) The plaintiff had already been awarded costs of the hearing before Master.  That costs order already dealt with the Defendants’ conduct, however unreasonable they might have been, at the court below.

11.  When considering the costs for the Appeal, the court is to take into account, amongst other things, the outcome of the Appeal and whether it was reasonable for the plaintiff to have resisted the Appeal.  Based on my observations in the Decision and hereinabove, I do not think it was reasonable for the plaintiff to have resisted the Appeal. 

12.  The plaintiff also says that since the Defendants were seeking an indulgence from the court for the extension of time from their own breaches of previous Court orders, they should in any event bear costs.  This, the plaintiff says, differentiates the present case from the case of Chan Cheung Ming Jacky and the costs order granted in that case should not be followed.  I did not make the costs order nisi in the Decision based only on the case of Chan Cheung Ming Jacky.  As discussed, I considered all the circumstances and conduct of the parties, both below and on Appeal.  The fact that the Defendants are seeking an indulgence from the Court had already been reflected in them having to bear costs of and occasioned by the application to extend time.  They have also been penalized by not being able to recover costs against the plaintiff, despite their Appeal was allowed.

13.  The plaintiff also submits that as I had made an order for the costs of the wasted report to be borne by the Defendants on an indemnity basis, I ought to also award the plaintiff the costs of the Appeal on an indemnity basis so that the two costs orders align.  I do not agree.  The considerations for making a costs order for a wasted report are completely different to that for the costs of the Appeal. It would be wrong to align them just for the sake of doing so.  As analysed above I do not think it was appropriate for the Defendants to bear the plaintiff’s costs of the Appeal.  I also see no reason which warrants an order for indemnity costs for the Appeal against the Defendants and I decline to so order.

14.  Consequently, I dismiss the plaintiff’s application to vary the costs order nisi in the Decision.

15.  In view of the result, I make an order nisi that the plaintiff is to pay the Defendants’ costs of and occasioned by the Summons dated 15 November 2019.