CHAN WOON FUI v. CHAN WING SUEN AND ANOTHER

HCA 858/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 858 OF 2004

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D E C I S I O N

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1.  There are 3 Summonses before me:

(i)  Plaintiff’s Summons (“the Striking Out Summons”) to strike out a paragraph of the Amended Defence and the whole of the Counterclaim on the ground of no reasonable cause of action and abuse of process;

(ii)  Defendant’s 1^st Summons (“the 1^st Summons”) to re-amend the Defence and Counterclaim as per draft;

(iii)  Defendant’s 2^nd Summons (“the Re-Amendment Summons”) for leave to withdraw the 1^st Summons and to re-amend the Defence and Counterclaim as per a fresh draft (“the draft re-amendments”). 

2.  As on many occasions, the parties could agree on the substantive issues but not on the form of the order or costs. 

Background

3.  After a series of Calderbank letters, the parties could agree, 4 days before the hearing, as follows:

(i)  That the Plaintiff do withdraw his Striking Out Summons; costs of and incidental thereto be to him;

(ii)  That the 1^st Summons be withdrawn with costs thrown away to the Plaintiff;

(iii)  That the Defendants be at liberty to re-amended their Defence and Counterclaim; costs of and occasioned by the re-amendments be to the Plaintiff. 

What could not be agreed were:

(iv)  Whether or not the Plaintiff should be given counsel’s fees for (i) and (ii);

(v)  Whether, as suggested by the Plaintiff, costs should be payable forthwith for (i) to (iii) instead of in any event;

(vi)  Whether the Plaintiff should be given 21 days (as suggested by the Defendants) or 28 days (as suggested by the Plaintiff) to serve his Reply and Defence to Counterclaim.

4.  Since overall agreement could not be reached, counsel were briefed – for the Plaintiff 3 days before the hearing and for the Defendants 2 days.  As expected, the skeleton arguments for each side re-opened all the issues and various authorities on striking out of pleadings were cited. 

5.  On the day of the hearing, the Plaintiff wanted an order for striking out.  The draft re-amendments were agreed to but the Plaintiff would reserve his position on whether or not to take out a further application to strike them out.  The Plaintiff wanted costs on all 3 Summonses.  Mr Remedios for the Defendants objected to the reservation.  He suggested that the Plaintiff should withdraw his Striking Out Summons or it should otherwise be dismissed.  If the Plaintiff intended to strike out the re-amendments, the proper way would be for him to object to those draft re-amendments instead of taking out a striking out summons later.  The Defendants sought costs on the Striking Out Summons and costs of the hearing.

6.  I will deal with the 3 Summonses in the reverse order.  The issues were:

(i)  the proper order for the Re-Amendment Summons;

(ii)  the time for the Plaintiff to file his Reply and Defence to Counterclaim;

(iii)  the proper order for the Striking Out Summons;

(iv)  the proper order for costs;

(v)  whether counsel’s fees should be included;

(vi)  whether costs should be payable forthwith or in any event;

(vii)  who should bear the costs of the hearing.

The Proper Order for the Re-Amendment Summons

7.  The draft re-amendments were given to the Plaintiff on 1 November before the Re-Amendment Summons was taken out on 5 November.  By the date of the hearing, the Plaintiff has had over 2 weeks to consider them.  After about an hour’s exchange between counsel and the bench, I put the Plaintiff to election:

(i)  Either he accepted the draft re-amendments without reservation; or

(ii)  If he considered a striking out in future, he should oppose the draft re-amendments, seeking an adjournment if necessary.  After all, it was the first time the Re-Amendment Summons came before the court.

8.  Having stood down for instructions, Miss Lam for the Plaintiff consented to the draft re-amendments without reservation.  Those draft re-amendments, in my view, contained an arguable defence which did not warrant a striking out.  Accordingly, leave should be granted to the Defendant to re-amend the Defence and Counterclaim and to withdraw the 1^st Summons.

Time for the Plaintiff to File His Reply and Defence to Counterclaim

9.  This was not argued at the hearing before me.  Given the length of the Re-amended Defence and Counterclaim, it was not unreasonable to grant 28 days for the Plaintiff to file his Reply and Defence to Counterclaim, counting from the day of the order.  I would, however, sound a note of caution.  The Plaintiff had more than sufficient time to consider the draft re-amendments before the hearing.  He is now given 28 more days.  If he does not comply with this time limit, any request for extension of time in future might well end up with an immediate unless order.

The Proper Order for the Striking Out Summons

10.  The court could not, of course, order the Plaintiff to withdraw his summons against his wish.  At the hearing, Miss Lam suggested that the court should make no order in respect of the striking out application.  I suggested that in that case the relevant part of the summons should not be restored without leave of the court.  I could hardly see how any court, in the light of the Plaintiff’s consent to the draft re-amendments, would give leave to restore the striking out application.  The Plaintiff’s and my suggestions were agreed to by Mr Remedios.  An order should be made accordingly. 

What is the Proper Order for Costs?

11.  As regards the striking out application, the Plaintiff asked for costs.  The Defendants, however, resiled from their offers on costs set out in correspondence.  Mr Remedios submitted that the striking out application was misconceived.  There was no letter setting out the broad grounds for striking out before the Striking Out Summons was issued.  Moreover, the Defendants had previously obtained leave of Master Hui to amend their Defence and Counterclaim without opposition from the Plaintiff.  If the Plaintiff was not satisfied with the Amended Defence and Counterclaim, he should have appealed against Master Hui’s order or opposed the amendments there and then instead of asking me to sit in an appellate jurisdiction to overturn the order of a fellow Master. 

12.  Even if there was no letter before summons, one can hardly say that the Plaintiff’s application was doomed to failure in the first place.  The 2 attempts made by the Defendants to re-amend their Defence and Counterclaim showed that there was some substance in the Plaintiff’s application.  Further, Mr Remedios’ arguments were not raised in correspondence or in his skeleton arguments.  They were clearly a red herring and did not reflect the true manner in which legal advisers on both sides conducted the 3 Summonses.  Had those arguments been put forth earlier, the parties might have taken a different course and much costs might have been saved.  In the premises I placed little weight on Mr Remedios’ arguments when considering costs. 

13.  Considering all circumstances, costs on the Striking Out Summons should, in principle, be to the Plaintiff as set out in paragraph 3(i) above. 

14.  For re-amendments, paragraph 20/8/51 of the Hong Kong Civil Procedure 2004 states that the costs should be as follows:

“The usual penalty imposed as a term for giving leave to amend is that the party seeking the amendment should pay in any event all the costs incurred and thrown away by the amendment and the costs of any consequent amendment.  In accordance with Yam J in Lessy Sarl v. Pacific Star Development Ltd & another [1996] 2 HKLR 1, the usual order for case (sic) where an application for leave to amend has been resisted but is allowed is that, there be two sets of costs namely, costs of and occasioned by the amendment shall be to the other side in any event but costs of the hearing before the court shall be to the party who is successful in the argument as to whether leave to amend ought to be granted.  However, the court has discretion to order otherwise.  If any wider or different order as to costs is desired, the court should be asked to make a special order as to costs.”

15.  The costs offered by the Defendants in correspondence as set out in paragraphs 3(ii) to (iii) were reasonable and in accordance with the principles set out in paragraph 14 above.  The Defendants had even offered to pay for the costs of the consent summons if agreement could be reached.

Counsel’s Fees to Be Included?

16.  For re-amendment to pleadings, even if the order for costs is silent as to counsel’s fees, where it is shown that it is necessary or proper to involve counsel in considering and advising on the opponent’s draft amendments and to draft/settle the necessary subsequent pleading, the taxing master can always exercise his discretion to grant counsel’s fees.  There was no need for the Plaintiff to insist on including the words “including Counsel’s fees” in the order for costs.  The taxing master will be guided anyway by the principles set out in Part II to the First Schedule to Order 62. 

Costs Forthwith or In any Event?

17.  In Kickers International S A v. Paul Kettle Agencies Ltd & Another [1990] FSR 436, Hoffmann J (as he then was) said,

“The next question is whether [costs] should be taxed and paid at once or only after the conclusion of the trial.  There are several reasons why the court might not think it right to order immediate taxation.  The amount involved might be too small to justify a separate taxation.  Or it might be unfair to order immediate payment by a party who might, as a result of the trial, become entitled to set off an award for costs in his favour.  Such unfairness may arise either from the effect upon his cash flow (an order for immediate payment might, for example, hamper his further conduct of the action or destroy his business) or because he might find that the opposing party does not have the means to repay the money if there should be a subsequent order against him.  These reasons are not intended to be exhaustive.  On the other hand, even if such reasons exist, they must be balanced against the prejudice which may be caused to the successful party if he is kept out of his money until the trial.  And once again, the possibility that there may be no trial has to be borne in mind.  Some of the reasons for making a final rather than a contingent or postponed costs order are equally good reasons for an immediate taxation.  I therefore do not think that it would be right to reserve an order for immediate taxation only for cases in which the court wishes to show disapproval of the way in which the proceedings have been conducted.”

18.  The only reason relied on by the Plaintiff to justify a “costs forthwith” order was the delay of the Defendants in diligently proceeding with and processing their Defence and Counterclaim.  I have considered the chronology of events.  The Writ was issued just about 7 months ago.  In between were 2 requests from the Plaintiff for further and better particulars of the Defence and Counterclaim and 3 requests for inspection and provision of documents referred to in the Defence and Counterclaim.  The Defendants have responded to some of those.  There was no apparent delay on their part. 

19.  The Plaintiff has not shown me other reasons e.g. prejudice to him for insisting on payment of costs forthwith.  The amount of costs incurred by the Plaintiff would not be substantial, probably in the region of some ten thousand dollars.  Effectively it was for consideration of 3 versions of the Defence and Counterclaim.  There was as yet no Reply and Defence to Counterclaim filed and hence wasted.  In any case, there was no evidence of bad faith or doubtful financial status on the part of the Defendants. 

20.  More importantly, whilst orders for costs to be paid forthwith or on gross sum assessment basis appears to be the trend in interlocutory matters, practitioners must think about the practicalities of such orders.  It is often difficult to decide what costs have been thrown away or incurred as a result of or incidental to the amendments until the subsequent pleading has been filed, or until it is clear that a subsequent pleading will not be filed, or at an even later stage, i.e. at trial.  Any doubts will be resolved in favour of the paying party.  Unless the receiving party is very certain about his position on costs or is ready to take a concessionary approach to his costs, there is no point insisting on an order for costs forthwith to be taxed in the context of amendment to pleadings. 

21.  In the present case, whilst the Defendants have filed a fresh re-amended Defence and Counterclaim, many of the background facts were similar to the original version.  Without seeing the Reply and Defence to Counterclaim, one can hardly say what costs have been wasted.  I do not consider it appropriate to order costs payable forthwith. 

Costs of the Hearing Before Me

22.  The Defendants’ suggestions in correspondence on how to dispose of the 3 Summonses were reasonable.  The Plaintiff was unsuccessful in persuading me to rule paragraphs 3(iv) and (v) in their favour.  Paragraph 3(vi) has no bearing on costs at all and was not the focus of arguments.  Had the Defendants’ suggestions been accepted by the Plaintiff, the hearing before me could have been vacated and it would not be necessary to brief Counsel. 

The Overall Position on Costs

23.  In principle, the Plaintiff should get all costs on the 3 Summonses as set out in paragraphs 3(i) to (iii) above in any event but the Defendant should get costs of the hearing before me.  I was told that on the Plaintiff’s side, the estimates of costs just for the hearing before me was in the region of $40,000 to $50,000.  On the Defendants’ side, it was $66,000 to $70,000.  To spend this level of costs just because parties failed to agree on terms set out in paragraphs 3(iv) to (vi) above was simply out of proportion to the importance of those issues.  It did not advance the parties’ case one step further.  Had the Plaintiff (or his legal advisers) taken the more sensible and practical approach in accepting the terms set out in paragraphs 3(i) to (iii), the Plaintiff’s cost position would have been better safeguarded.  To take a pragmatic approach, and to save further costs and time for 2 sets of taxation (the outcome of which is likely to set off against each other), I am of the view that there should be no order as to costs on all 3 summonses.

Conclusion

24.  I order as follows:

(i)  In relation to the Striking Out Summons, there will be no order in relation to paragraphs 1 and 2 (which sought an order for striking out paragraph 25 of the Amended Defence and the entire Counterclaim and dismissal of the Amended Counterclaim), provided that those two paragraphs should not be restored for hearing without leave of the Court.

(ii)  In relation to the Re-Amendment Summons, I give

(a)  leave to the Defendants to withdraw the 1^st Summons;

(b)  leave to the Defendants to re-amend the Defence and Counterclaim as per the draft re-amendments; service dispensed with;

(c)  leave to the Plaintiff to file and serve a Reply and Defence to Counterclaim within 28 days from the date of this Order;

(iii)  In relation to all 3 Summonses, there shall be no order as to costs.

25.  I have the consent of the parties to circulate this Decision.