CHENG KEE CHUN v. YU LEUNG KIN

HCA 3464/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3464 OF 2003

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RULING ON COSTS

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1.  This is the hearing on the costs order nisi that the plaintiff do pay the costs of the action to the defendant upon the handing down of the judgment.

2.  The plaintiff’s claim that the defendant is the trustee of the suit property on her behalf was dismissed, and so was her claim that the defendant was liable to repay the money lent by her to the defendant and the rent collected by the defendant. 

3.  The defendant won on the counter-claim that he is the beneficial owner of the suit property.  The counter-claim of payment of rent collected by the plaintiff was dismissed upon an effective abandonment by the defendant. 

4.  Before I go into the issues, there is a point raised on the form of the summons.  Mr Li for the defendant argued at the outset that the plaintiff’s summons was bad in that it only asked for further submissions on the question of costs order nisi but it had not specified in what way or to what extent the plaintiff sought to vary the costs nisi. 

5.  Mr Li referred to PCCW-HKT Ltd v Telecommunications Authority, CACV274/2003 (date of decision on costs: 7 September 2004).  In that case, the respondent submitted by letter that the costs order nisi ought to be changed to no order as to costs.  Ma CJHC, giving judgment for the Court of Appeal, commented that was a most unsatisfactory (and incorrect) way of making an application to the court, but the court was content to treat the letter as containing an application as the letter itself was treated by the appellant as an application made under Order 42, rule 5(e)(vi) of the Rules of High Court to vary the costs order nisi.

6.  Here, before the summons was filed on 6 January 2006, the plaintiff’s solicitors wrote to the court asking for further submissions on the costs nisi and the basis of the variation was set out:

“So far as the Defendant’s costs are concerned, we are advised by counsel that in view of the Defendant’s counterclaim for account of rent had been abandoned/dismissed at the trial, the Defendant is not entitled to have his full costs of the Defence and a discount of 10% should be given.  Similarly, the Plaintiff has incurred her costs in defending that part of the counterclaim which was abandoned/dismissed.  We would like to make further submission on the question of costs that the Plaintiff is entitled to have that part of costs and a further discount of 10% on the Defendant’s costs should be granted.  Thus, counsel would like to make further submission on Order Nisi for costs to the extent that a total of 20% discount on the Defendant’s costs should be allowed.”

7.  Mr Li argued that the basis of the variation should be in the summons itself, and upon seeing the objection to the form of the summons, the plaintiff should have amended the summons. 

8.  I approach the matter on whether there was any real prejudice to the defendant, and whether an instant amendment (if made) should not be allowed for the hearing to continue.  I can see no real prejudice because the substance of the matter was clearly set out in the letter.  Hence I shall proceed to hear the application. 

9.  There are these issues in the case:

(1) whether the defendant is the beneficial of the suit property or trustee for the plaintiff;

(2) whether money paid by the plaintiff to the defendant was in the nature of a loan or payment of the rent due to the defendant collected by the plaintiff;

(3) whether the plaintiff was liable to account to the defendant for rent collected by the plaintiff after deduction of an allowance therefrom for the living expenses of the plaintiff. 

10.  I was referred to the principle in In Re Elgindata Ltd (No. 2) [1992] 1 WLR 1207, at page 1214A to C: 

“The principles are these.  (i) Costs are in the discretion of the court.  (ii) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made.  (iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or a part of his costs.  (iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs.”

11.  Mr Shum for the plaintiff submitted that the counter-claim for an inquiry of the rent collected and payment after finding the sum due was a distinct claim and not a mirror of the plaintiff’s claim.  The only true mirror of the plaintiff’s claim in the counter-claim was the claim of declaration of beneficial ownership and return of the title deeds.  What was more reprehensible was that the counter-claim was destroyed by the defendant’s own words.  One would ask why he had lodged the claim in the first place.  Mr Shum relied on principle (iv) of In Re Elgindata Ltd and asked the court to order the defendant to pay the costs of the abandoned counter-claim in order to show disapproval of making the counter-claim in the first place.

12.  Mr Li asked me to look at the issue as and when they were decided, and to look at the matter in the round as and when how the case was fought, and not to make a minute forensic dissection of the issues.  Mr Li said that the counter-claim for the rent collected by the plaintiff was a natural defence that the defendant was entitled to the rent in answer to the claim for the loan and the rent collected by the defendant.  It was intricately wrapped up or flowing from the issues on the main claim.  As to reprehensibility, Mr Li pointed out that it had been the defendant’s case from the beginning that the plaintiff was entitled to living expenses and the extent of the inquiry was to find the sum due after deduction of the living expenses allowed by the defendant.  There was no withholding of any facts, and after the plaintiff said that all the money had been spent, and the defendant’s stance was that the plaintiff was allowed to deal with whatever amount, then sensibly, the counter-claim was not pursued.  The rent had always been an issue in the case because it was a natural corollary of the incident of title.  Mr Li submitted that no cost was significantly increased by the counter-claim for the account inquiry. 

13.  I agree that rent would have to be examined in any case.  I would concentrate as to whether the conduct of the defendant in making the counter-claim was so reprehensible that I should make the defendant pay a percentage of the costs.

14.  Mr Shum submitted that as at 31 December 2002, it was made clear to the defendant that the only money left in the joint account of the plaintiff and the defendant was $1,705.00.  With the truth that the defendant had allowed the plaintiff to use whatever amount, the defendant should not have continued with the counter-claim for the account and inquiry. 

15.  Having regard to that the living expenses had been pleaded and disclosed and how the counter-claim was abandoned, I do not find the conduct of the defendant so reprehensible that the counter-claim should be extracted out from the issue of the rent so as to make a separate order of costs on the counter-claim.

16.  Hence, I will make the order nisi absolute that the plaintiff is to pay the costs of the action (including this hearing) to the defendant.