HUGE DRAGON CORPORATION LTD v. THE INCORPORATED OWNERS OF LUNG MUN OASIS

CACV 6/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 6 OF 2013

(ON APPEAL FROM HCA NO 524 OF 2010)

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DECISION ON COSTS

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Hon Stock VP :

1.  I agree with the judgment of Poon J as to costs.

Hon Lunn JA :

2.  I agree with the Decision for the reasons articulated by Poon J.

Hon Poon J :

INTRODUCTION

3.  On 25 September 2013, we dismissed the defendant’s appeal against the order of Deputy High Court Judge Mayo dated 17 December 2012 with costs.  We handed down the reasons for judgment on 25 October 2013.

4.  On 21 October 2013, the defendant filed a notice of intended application for leave to appeal to the Court of Final Appeal.  The notice of motion for leave to appeal was filed on 22 October 2013.  Upon the Registrar’s enquiry, the plaintiff agreed to a paper disposal without an oral hearing.  The defendant disagreed.  The leave application was then fixed to be heard by this Court on 25 March 2014.

5.  On 6 November 2013 and 19 February 2014, the plaintiff’s solicitors wrote to the defendant’s solicitors, asking them to withdraw the leave application.  They took the view that the leave application was wholly unmeritorious.  But the defendant’s solicitors did not make any reply.

6.  On 27 February 2014, the defendant purported to file a Form D (prescribed by Rule 11 of the Hong Kong Court of Final Appeal Rules, Cap 484A for leave to withdraw an application before the Court of Final Appeal) to withdraw the leave application.  The Form D stated unless within 7 days of service of this notice upon it, the plaintiff notified the Registrar that it opposed the application, an order might be made by the Court without hearing.

7.  The Form D was placed before Stock VP for directions.  By letter dated 7 March 2014, his Lordship directed :

“An order granting leave to withdraw could not be made until the expiration of 7 days of service of Form D. Since Form D is dated 27 February 2014, the seven days only expired [on 6 March]. If you confirm that the notice was served on 27 February, leave to withdraw, can be given today with a costs order in favour of [the plaintiff].”

8.  However, for some reasons which the defendant’s solicitors had not provided, they did not serve the Form D on the plaintiff at the time.  They only did so on 10 March 2014, that is, after Stock VP’s directions on 7 March 2014.  The plaintiff’s solicitors then wrote to the court on 11 March 2014, which prompted another letter from the defendant on the following day.

9.  In the event, Stock VP gave the defendant leave to withdraw its application on 12 March 2014.  The hearing date on 25 March 2014 was vacated.

10.  Pursuant to Stock VP’s directions, the parties lodged their written submissions on costs.  The plaintiff sought indemnity costs to be assessed summarily, with reference to the skeleton bill of costs attached to its submissions, at HK$172,021.00.  The defendant argued that it should not be visited with indemnity costs.  If the Court were to assess the plaintiff’s costs summarily, such costs should be allowed at HK$8,946.00 only. The defendant did not state the basis of its assessment of the plaintiff’s costs.  But it would appear from its objections that it has adopted the party and party basis.

INDEMNITY COSTS

11.  The Court of Appeal has a very broad discretion to determine by whom and to what extent costs incurred in all proceedings in its civil jurisdiction are to be paid : see section 52A(1) of the High Court Ordinance, Cap 4.  More specifically, under Order 62, rule 28(3), Rules of the High Court, Cap 4A, the Court may order costs to be taxed on the indemnity basis.

12.  As to when the courts may award indemnity costs, Li CJ had this to say in Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114 :

“16. The courts have rejected the proposition that an award of indemnity costs will only be made where a case has been brought with an ulterior motive or for an improper purpose or where there is some deception or underhand conduct on the part of the losing party. (Macmillan Inc v Bishopsgate Investment Trust Plc, (unreported, 10 December 1993) (Millett J); Disney v Plummer, (unreported, English Court of Appeal, 16 November 1987)). These decisions and the reasoning on which they were based have been endorsed by the Hong Kong Court of Appeal (Sung Foo Kee Ltd v Pak Lik Co (a firm) [1996] 3 HKC 570 at pp. 575E-576F, per Godfrey JA; see also Choy Yee Chun v. Bond Star Development Ltd [1997] HKLRD 1327 at pp. 1334G-1335I, per Stock J.)

17. In these and other cases, courts have emphasised the undesirability of attempting to define the circumstances in which orders for indemnity costs are to be made. It has been said that

…the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’.

(Macmillan Inc v Bishopsgate Investment Trust Plc (unreported, 10 December 1993), per Millett J; Sung Foo Kee Ltd v Pak Lik Co (a firm) [1996] 3 HKC 570 at pp. 575E-576F, per Godfrey JA; see also Choy Yee Chun v Bond Star Development Ltd [1997] HKLRD 1327 at pp. 1334G-1335I, per Stock J).”

13.  What constitute appropriate circumstances to award indemnity costs must be fact-sensitive.  As demonstrated by numerous authorities and now enshrined in Order 62, rule 5(1)(e), Rules of the High Court, the conduct of the party against whom indemnity costs are sought is cogently relevant.  Thus, where the proceedings in question should never have been brought or defended but the party nevertheless unreasonably and unjustifiably persisted, he may well be visited with indemnity costs : see, for example, Montrio Ltd & Another v Tse Ping Shun David, CACV 291/2011, unreported, 31 January 2013; Grant David Vincent Williams v Jefferies Hong Kong Limited, HCA 320/2011, unreported, 12 July 2013.

14.  Here, the defendant’s application for leave to appeal to the Court of Final Appeal was entirely devoid of merit.  In the notice of motion for leave to appeal, the defendant posed two questions, said to be of great general or public importance, or otherwise, which ought to be submitted to the Court of Final Appeal for determination.  The two questions as articulated are wordy and couched in convoluted terms.  Stripped of prolixity, they are a repetition of the defendant’s argument on the construction of the relevant provisions in the deeds of mutual covenants, which this Court has rejected and in the absence of any evidence that the construction issues are common to other housing estates, they can hardly raise any great or public importance or fall within the “otherwise” ground, entitling the defendant to take this very simple case about construction of these particular provisions to the Court of Final Appeal.

15.  In short, the defendant’s leave application should never have been launched.

16.  The defendant argued that as an incorporated owner, it cannot dispose of any legal proceedings or abandon any rights of appeal without acting prudently and without a proper resolution.  It had no alternative but to take out the application for leave to appeal to the Court of Final Appeal before expiry of time in order to preserve its rights.  It then sought advice from senior counsel which took time and was only available on 14 February 2014.  Acting on such advice, the defendant passed the resolution to withdraw the leave application on 24 February 2014.  It then took steps to apply for withdrawal.

17.  The defendant is in effect saying that it took out the application for leave to appeal to the Court of Final Appeal as a holding application, pending legal advice from senior counsel.  In my view, that is not a valid ground upon which the defendant can rely to ward off an indemnity costs order.  The reason is simple.  It hardly needed the benefit of senior counsel’s advice to illustrate that, no point of great or general importance could in this case possibly arise; and that no exceptional circumstances existed which would trigger the “otherwise” ground.

DISPOSITIONS

18.  In the circumstances, I would order indemnity costs against the defendant.

19.  I decline to assess the plaintiff’s costs summarily.  I think they should be taxed by a taxing master.

Hon Stock VP :

20.  Accordingly the plaintiff’s costs of and occasioned by the application for leave are to be paid by the defendant on an indemnity basis, to be taxed unless agreed.