MEMORAN CO LTD v. THE INCORPORATED OWNERS OF MEI HING MANSION

HCCT 18/2020

[2022] HKCFI 1028

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 18 OF 2020

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DECISION

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Introduction

1.  At the end of the hearing on 23 December 2021, I delivered my decision on the plaintiff’s summons filed on 30 June 2021 (“the Summons”).  The decision has since been reduced to writing: [2022] HKCFI 50. 

2.  In para 1 of the Summons, the plaintiff sought final judgment for a mandatory injunction pursuant to Order 14.  In para 2, it sought, alternatively, an interlocutory injunction of the same scope pursuant to Order 29. 

3.  I dismissed para 1 of the Summons.  I granted the interlocutory injunction sought in para 2, subject to undertakings given by the plaintiff in the course of the hearing.  The undertakings are set out in para 53 of the decision (“the Undertakings”).

4.  After I delivered the decision, counsel made submissions on costs.  I then ordered that the plaintiff do have 70% of the costs of the Summons, to be taxed if not agreed: para 57. 

5.  By summons filed on 6 January 2022, the defendant applies for leave to appeal against my order on costs.  I shall adopt below the defined terms used in the decision. 

6.  Following the guidance laid down by the Court of Appeal in Tsang Wing Kwai v Tsang Wing Fai [2018] 5 HKLRD 350, [2018] HKCA 759 at para 24, I gave directions for the lodging of written submissions.  Having read the submissions, I am satisfied that an oral hearing is not necessary and the summons is suitable for disposal on paper only. 

7.  In the draft notice of appeal, the defendant asks for the costs order to be set aside and the costs of the appeal including the costs of the Summons in the court below to be to the defendant. 

8.  However, in the defendant’s written submissions, Mr Lo Sek Man, counsel, seeks leave to appeal for the following orders instead:

(1)  The costs of the Order 14 application be to the defendant, to be taxed if not agreed; and

(2)  The costs of the application for the interlocutory injunction be in the cause. 

9.  Mr Lo has not drawn the court’s attention to the difference in the written submissions.  Nor has he explained why there is such a difference.  In this decision, I shall proceed on the basis that the written submissions represent the stance of the defendant in this application. 

10.  Separately, the draft notice of appeal contains five grounds.  I have to say that the drafting is repetitive and there is considerable overlap between the grounds.  In some of the grounds, the defendant has not spelt out precisely the error which it says I fell into when arriving at the costs decision.  It is only by looking at the written submissions that the defendant’s contentions become clearer.  Notwithstanding the deficiency in the proposed grounds of appeal, I am prepared to proceed to deal with the application by reading those grounds in conjunction with the submissions. 

11.  The submissions are not structured so as to follow the proposed grounds of appeal as they appear in the draft notice. 

12.  The application for leave to appeal is made by way of the summons, which incorporates the draft notice of appeal.  For that reason, I consider that it is more appropriate for me to structure my discussion below by reference to the proposed grounds as they are enumerated in the draft notice of appeal. 

13.  The first, second, fourth and fifth proposed grounds relate to the costs of the application for the interlocutory injunction.  I propose to deal with them together. 

14.  The third proposed ground relates to the costs of the Order 14 application.  That will be dealt with next. 

Legal principles

15.  The principles governing the threshold for granting leave to appeal are well established.  The applicant needs to show that the appeal has a “reasonable prospect of success” or there is some other reason in the interests of justice why the appeal should be heard: section 14AA(4)  of the High Court Ordinance, Cap 4.  A “reasonable prospect of success” means an appeal with prospects that are more than “fanciful”, without having to be “probable”: SMSE v KL [2009] 4 HKLRD 125 at para 7. 

16.  The general approach in an appeal against an order on costs is well-known. 

17.  Costs is very much a matter of discretion for the first instance judge and the Court of Appeal would be very circumspect in interfering with a decision with such high discretionary content.  In the absence of any palpable error in the exercise of the discretion on costs, the mere fact that the appellate judges might have exercised the discretion in a different manner is not a sufficient ground to warrant interference with the discretion of the primary judge: Chow Steel Industries Public Company Limited v Ko Sung [2021] HKCA 1642, at para 18. 

18.  When awarding costs in an interlocutory injunction, it is now recognised that there is no “starting point” or “default rule” that the costs of such an application should be in the cause of the action unless there is justification for its departure.  The court is entitled to and should look at the merits of the injunction itself as at the time of the application to decide what should be the proper costs order for that application in all the circumstances.  It does not necessarily depend on the outcome of the trial.  The court’s hands are not tied.  If factors are present that warrant an immediate order as to costs, the court may exercise its discretion to make such an order: Chow Steel Industries at paras 19, 21 and 27. 

The first, second, fourth and fifth proposed grounds

19.  These four proposed grounds relate to the costs of the interlocutory injunction.  The theme running through them is as follows.

20.  The defendant refers to the correspondence exchanged between the parties’ solicitors on 8 and 9 March 2021.  In that exchange, the plaintiff’s solicitors informed the defendant’s solicitors that the plaintiff had obtained a fee quotation, as an interim measure, to repair the structural concrete slab and if the defendant did not revert, the plaintiff would engage the contractor to commence urgent remedial works without further notice.  The plaintiff’s solicitors referred to para 3 of the previous order and stated that the defendant was responsible for the repair and was liable to repay the plaintiff the interim repair costs. 

21.  On the following day, the defendant’s solicitors replied that (1)  the recorder had already ruled that the cause and extent of the damage to the concrete slab was indeterminate at this stage, (2)  the plaintiff’s alleged need to carry out urgent repair and the quantum of the quotation were unsupported by expert evidence, (3)  the proposed work would destroy the evidence concerning the alleged water leakage, and (4)  the plaintiff should refrain from carrying out the proposed work and tampering with the evidence. 

22.  There was no reply to that letter from the plaintiff’s solicitors.  The proposed repair work did not proceed. 

23.  The defendant now draws a comparison between the plaintiff’s proposal in the March correspondence and the Undertakings which it gave at the hearing, and contends that the latter contained more favourable terms to the defendant than the former in three respects:

(1)  In the March correspondence, the plaintiff insisted that the defendant must repay the repair costs whereas in the Undertakings, the plaintiff would bear the costs at first instance, subject to arguments later as to who shall ultimately be responsible.

(2)  In the March correspondence, the plaintiff did not undertake to give the defendant access to its premises for the defendant to prepare its expert evidence whereas in the Undertakings, it did. 

(3)  In the March correspondence, the plaintiff had already obtained its own quotation whereas in the Undertakings, it agreed to approve or comment on a quotation to be obtained by the defendant. 

24.  The Undertakings were offered at the hearing, but not before. 

25.  The defendant emphasises that at the hearing, it agreed to the interlocutory injunction upon the giving of the Undertakings by the plaintiff.

26.  In the circumstances, the plaintiff could not be regarded as the practical winner.  Accordingly, I erred in coming to that conclusion. 

27.  More specifically, the defendant contends that:

(1)  I failed to notice the different stances adopted by the plaintiff in the March correspondence and the Undertakings (the first proposed ground). 

(2)  I failed to consider sufficiently the fact that the plaintiff did not reply to the defendant’s solicitors in the March correspondence (the second proposed ground). 

(3)  I failed to consider sufficiently the fact that the parties’ agreement to repair was substantially based on the Undertakings (the fifth proposed ground).

(4)  I therefore erred in treating the plaintiff as being successful in its application for interlocutory injunction when it was not (the fourth proposed ground).

(5)  I ought to have ordered the costs to be in the cause of the action because the liability issue on who should be responsible for repairing the concrete slab is yet to be determined. 

28.  In my view, the above contentions have no reasonable prospect of success as they are based on an incorrect factual premise.  In short, the interlocutory injunction was not granted by consent of the parties, as now alleged by the defendant. 

29.  As recorded in the decision, the plaintiff initially sought the interlocutory injunction on the basis that the injunction, if granted, would immediately be stayed pending the determination of the appeal in CACV 48/2021: para 1.  (The plaintiff sought the Order 14 judgment also on that basis.)  The plaintiff had an explanation for this approach: para 33. 

30.  Having heard the parties’ submissions, I was of the view that the interlocutory injunction should be granted.  On that indication, the plaintiff offered to provide undertakings which were to address the defendant’s concern about the tampering of evidence.  I therefore stood down the case for parties to agree on the form of the undertakings.  The effect of the undertakings would be that if they could be agreed, it would be unnecessary to stay the interlocutory injunction as originally suggested by the plaintiff.  The repair works could then start straightaway, without having to wait for the outcome of the appeal: paras 51 and 52 of the decision. 

31.  After some negotiations, the Undertakings were finalised with the court making rulings on the parts on which the parties had been unable to agree. 

32.  As can be seen, pursuant to the Undertakings, the defendant would be able to have its expert conduct tests on the plaintiff’s premises before repair work was to be carried out.  The defendant’s concern of evidence being tampered with was therefore addressed: para 53 of the decision. 

33.  In other words, the Undertakings were given for the purpose of dispensing with the temporary stay.  They were not given in exchange for the defendant’s agreement to the grant of the interlocutory application. 

34.  It must be stressed that the Undertakings did not form part of my reasons for granting the interlocutory injunction. 

35.  That is clear from my reasoning: see paras 42 to 50.  More particularly, I said at para 46 that if the defendant was compelled to repair now, the only realistic downside of granting the injunction would be that it would bear the repair costs in the meantime when it was not responsible to do so.  On the whole, I was satisfied that granting the injunction carried the lower risk of injustice than refusing one.  That conclusion was reached without taking into account the Undertakings at all. 

36.  To conclude, I granted the interlocutory injunction on its merits.  I did so not because the Undertakings were given.  The Undertakings were only relevant to the dispensation of the temporary stay.  The plaintiff therefore could and should properly be regarded as the successful party in the application. 

37.  Furthermore, as pointed out by Mr Danny Leung, counsel for the plaintiff, I held that it was a clear-cut case where granting the interlocutory injunction carried the lower risk of injustice than refusing one: para 44. There was therefore justification for making an immediate order as to costs instead of making the costs in the cause of the action: Chow Steel Industries at para 27. 

38.  For the above reasons, these four proposed grounds of appeal have no reasonable prospect of success. 

The third proposed ground

39.  In this ground, the defendant says that most, if not all, of the contents of the affirmations, submissions and authorities were focused on the Order 14 application, which was dismissed.  In the circumstances, I erred in ordering a discount to the costs granted in favour of the plaintiff.  Instead I ought to have granted the costs of the Order 14 application to the defendant for the following reasons:

(1)  Even on the basis that the plaintiff was the “practical winner”, the Order 14 application was a discrete claim and the Elgindata principle applied. 

(2)  The Order 14 application was made by the plaintiff improperly and unnecessarily.  This is because I found that the recorder had substantively ruled on the Order 14 application in the previous order and the plaintiff was estopped from making yet another Order 14 application in the Summons.  I ought to have ordered the plaintiff to pay the defendant’s costs of the Order 14 application, which was made improperly or unnecessarily pursuant to Order 62, rule 7(1). 

40.  In my view, this proposed ground is not reasonably arguable.  (I should reiterate that the proposed ground appearing in the draft notice of appeal is incomplete and does not set out the error which the defendant says I made.  The ground only becomes intelligible when read in conjunction with the written submissions.  I shall proceed to deal with this proposed ground, as developed in the written submissions.) 

41.  As recorded in para 1 of the decision, the plaintiff sought the injunction on two alternative bases.  First, a final one under Order 14. Second, an interlocutory one.  That the concrete slab was damaged was not in dispute: para 45.  There was evidence before me that the plaintiff had been trying to resolve the water seepage problem over the past five years: para 55.

42.  It is plain that the plaintiff’s primary objective was to get a mandatory order to compel the defendant to repair the slab at the earliest opportunity, so that the persisting water seepage problem which had been affecting its premises could be fixed as soon as possible: para 33. 

43.  In the end, I granted the mandatory injunction.  On that view, the primary objective of the plaintiff of having the slab repaired immediately was achieved.  It is true that it failed to get the injunction on a final basis. It still needed to proceed further with the action to achieve that.  But, at the conclusion of the hearing, it had the assurance that the defendant is now subject to a court order which compels it to repair.  Practically speaking, that was what the plaintiff had come to the hearing for.  The thing which it did not manage to get was to have the action disposed of once and for all, the injunction being granted only on an interim basis.  Taking a broad and pragmatic view of the matter, however, the plaintiff can be said to have been successful. 

44.  In my view, it was open to me to look at the plaintiff’s application from this perspective and concluded that it was the practical winner, subject to its failure to obtain the injunction in a final form.  

45.  On that basis, I consider that it was within my discretion to award the costs of the entire Summons to the plaintiff with a deduction to reflect its failure to secure a final order. 

46.  As repeatedly emphasised by the Court of Appeal, different judges might exercise their discretion on costs differently.  How I had exercised my discretion in the present case is arguably not the only way.  However, I had sought to do so by taking into account in a broad manner the practical objective of the plaintiff and assessing the extent of its success in a pragmatic way. 

47.  In my view, the defendant has not managed to point to any substantive ground on which the Court of Appeal would interfere with my conclusion. 

48.  The defendant contends that the Order 14 application is a discrete claim.  I think that this may be one possible way to analyse the matter.  The Order 14 application is for final relief whereas the Order 29 application is for interim relief.  The former turns in part on matters that do not affect the latter. 

49.  A different judge might have attached more weight to this aspect of the Summons.  But, for me, I considered that it was proper to attach more weight to the practical aspect of the case, namely the ultimate objective of the plaintiff.  Hence, regardless of whether the Order 14 application can be properly described as a discrete claim, I consider that I was entitled to exercise my discretion in the way I did. 

50.  As a separate point, I do not agree with the defendant’s observation that most, if not all, of the affirmations and submissions were devoted to the Order 14 application.  On the contrary, a large part of the evidence and submissions go to both the Order 14 application and the interlocutory injunction application.  They relate to the merits of the plaintiff’s claim, the procedural history, the efforts or steps taken by the parties to deal with the damaged concrete slab.  It would be clear from my discussion of the injunction application that those were the matters which I had considered when making my decision: paras 44 to 50. 

51.  It is of course correct that there were evidence and submissions which related to issues arising solely from the Order 14 application, namely, the construction of the previous order and whether the plaintiff was estopped from making a further Order 14 application.  See Questions 1 and 2 identified in para 11 of the decision.  In resolving these issues, the court needed to review the sealed copy of the previous order, the transcript of the hearing before Recorder Houghton, SC and the judge’s written decision. 

52.  Hence I applied the discount to reflect that the plaintiff was not successful in this regard. 

53.  Lastly, I disagree with Mr Lo’s submission that the Order 14 application was taken out improperly and unnecessarily.  The application was not successful.  But one cannot simply equate an unsuccessful application with an improper one or an unnecessary one.  A party who alleges that an improper or unnecessary application has been made needs to demonstrate something more. What that “something more” is must depend on the circumstances of each case. Here, the defendant has not pointed to anything at all save to say that the plaintiff was unsuccessful.  That is not enough. 

54.  For these reasons, the third proposed ground is not reasonably arguable.

Conclusion

55.  None of the proposed grounds of appeal enjoy any reasonable prospect of success.  There is no other reason why the appeal should be heard.  I therefore dismiss the defendant’s summons seeking leave to appeal. 

56.  I order that the plaintiff do have costs of the summons, summarily assessed at $60,000.