PFEIFFER GmbH v. CHEUNG HAY KIT t/a SUN WAI CONSTRUCTION

HCA 1369/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1369 OF 2011

____________

______________

D E C I S I O N

______________

1.  This is an application by the plaintiff under section 14(3) (e) of the High Court Ordinance, Cap 4 (“the Ordinance”), and Order 59, rule 2B of the Rules of the High Court for leave to appeal against my ruling on costs handed down on 21 November 2013.

2.  On 24 October 2013, I handed down judgment in this case, awarding the plaintiff the sum of $1,024,525 which represented about one third of the total claim made by the plaintiff against the defendant under eight invoices.

3.  In my ruling on costs, I awarded the plaintiff half of its costs of the action.  I found that the plaintiff’s claim under the last four invoices was doomed to fail due to the lack of evidence.  I also found that the plaintiff’s delay in commencing the proceedings was inordinate and unreasonable.

4.  Under section 14(3) (e) of the Ordinance, no appeal lies against a costs order without the leave of the court that made the order or the Court of Appeal.  The relevant test for granting leave to appeal is set out in section 14AA(4) of the Ordinance which provides that leave will not be granted unless the court is satisfied that the appeal has a reasonable prospect of success or that there is some other reason in the interests of justice why the appeal should be heard.  It has been held by the Court of Appeal that the use of the word “reasonable” means that the prospect of success must be more than “fanciful”, without having to be “probable”.[1]

5.  By way of general propositions, an appellate court will not interfere with a judge’s exercise of discretion in the award of costs unless it can be shown that the judge (a) failed to exercise the discretion; (b) exercised it upon a false principle; (c) did not exercise it judicially; or (d) the exercise of the discretion was demonstrably flawed.[2]

6.  The plaintiff argues that I ought to have held that although its claim under the last four invoices was bound to fail because of insufficient evidential support, this did not justify a departure from the general rule of “costs follow the event” since the plaintiff had not caused any or any significant increase in the length or costs of the proceedings by making the claim under those four invoices.

7.  The plaintiff relies on the principles stated in Commissioner of Inland Revenue v HIT Finance Ltd [3] and In re Elgindata Ltd (No 2).[4]  The plaintiff argues that I should have applied the general rule as there was no justification to depart from it simply because the successful party raises or makes allegations on which it failed without any adverse consequences to the proceedings.  The relevant principles that the plaintiff relies on provide as follows.  The court may deprive a successful party of the whole or part of his costs because he had caused a significant increase in the length or costs of the proceedings by raising issues or making allegations on which he failed.  A court may not only deprive him of his costs, but may also order him to pay the whole or part of the unsuccessful party’s costs because he has raised issues or made allegations improperly or unreasonably.  I should add, that bearing in mind the underlying objectives enshrined in Order 1A of the Rules of the High Court, an unsubstantiated claim whether it represents the whole or part of the action can impact on proceedings inappropriately or adversely in a number of ways.[5]

8.  The defendant opposes the application on the basis that I did not depart from the general rule in that I did award costs to the plaintiff, even though it was only half of the costs, and that I was exercising my discretion by doing so.  The defendant relies on the reasons of my ruling and submits that I exercised my discretion in awarding half of the amount of the plaintiff’s costs by taking into account and examining all the factors and circumstances.

9.  I have carefully considered the arguments for and against the application for leave to appeal the award of costs but my decision did involve a departure from the general rule and in circumstances where a reasonable argument may be mounted providing a reasonable prospect of success on appeal.  I accordingly grant the plaintiff leave to appeal the costs order.

[1] SMSE v KL [2009] 4 HKLRD 125 at paragraph 17 per Le Pichon JA.

[2] Hong Kong Civil Procedure, 2014, Vol 1, paragraph 62/2/11, page 1114. See also Famous Marvel Co Ltd and Anors v Conversant Group Ltd and Anors, HCA No 2153 of 2009, 4 January 2013, at paras 2 and 3 per Au-Yeung J.

[3] Nos 8 and 16 of 2007, 26 June 2008, at paragraphs 6 and 7 per Bokhary PJ.

[4] [1992] WLR 1207 at 1214 A-C per Nourse LJ.

[5] See paragraph 3 of my ruling on costs.