Million (Far East) Ltd v. Manley Best (International) Food Ltd and Another

HCA 2429/2017

[2018] HKCFI 2635

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2429 OF 2017

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Before: Deputy High Court Judge Fee in Chambers

Date of Plaintiff’s Written Submissions: 22 October 2018

Date of 1^st and 2^nd Defendants’ Written Submissions: 23 October 2018

Date of Decision on Costs: 30 November 2018

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DECISION ON COSTS

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1.I adopt the same abbreviations as used in my judgment handed down on 2 October 2018 (“Judgment”).

2.By the Judgment:

(1) for the Plaintiff’s Summons for summary judgment—

(a) as against the 1^stDefendant, final judgment was entered in favour of the Plaintiff for damages in the sum of HK$11,138,251.37; and

(b) as against the 2^nd Defendant, it was dismissed.

(2) for the 2^nd Defendant’s Summons for summary judgment on her counterclaim against the Plaintiff, it was dismissed.

3.The parties have subsequently lodged their respective written submissions on costs of the above two summonses as directed in the Judgment.

4.The Plaintiff contends that:

(1) for the Plaintiff’s Summons—

(a) as against the 1^st Defendant, the Plaintiff as the successful party should be awarded the costs of the Plaintiff’s Summons and of this action, with certificate for counsel; and

(b) as against the 2^ndDefendant, there should be costs in thecause as the Court was, in reality and in effect, grantingthe 2^nd Defendant unconditional leave to defend though the Court’s “formal order” was for the dismissal of the Plaintiff’s Summons as against the 2^ndDefendant.

(2) for the 2^nd Defendant’s Summons, as it was dismissed, the Plaintiff should be awarded the costs of the 2^ndDefendant’s Summons, with certificate for counsel.

5.On the other hand, the Defendants contend that the fairest order for costs is that there be no order as to costs as between the Plaintiff on the one hand and the 1^st and 2^nd Defendants on the other in respect of both the Plaintiff’s Summons and the 2^nd Defendant’s Summons.

6.The grounds in support of the Defendants’ contention may not be easy to understand.  They are set out (in the original language) below:

“ a) since the Court granted summary judgment in P’s favour againstD1 which would entitle P to its costs of P’s application from D1(which should be half of P’s costs of P’s application since P was ‘successful’ only against D1[)]; and

b) since the Court ought to have dismissed (but did not dismiss[1]) P’s summary judgment application against D2, which would have entitled D2 to its costs of P’s application from P (again, it should only be half of the costs of P’s application because P ought to have been ‘unsuccessful’ against D2); and

c) since instead of actually dismissing P’s application against D2, and D2’s application against P, the Court ought instead to have granted unconditional leave to defend to both P and D2 against the other, which ought to have resulted in orders of ‘costs in the cause’ as between P and D2 in respect of each of P’s application and D2’s application;”

7.Essentially on the ground that the Court ought to have grantedunconditional leave to defend to the 2^nd Defendant in respect of the Plaintiff’sSummons and to the Plaintiff in respect of the 2^nd Defendant’s Summons, the Defendants’ alternative case is that:

(1) the 1^st Defendant be ordered to pay the Plaintiff 50% of the costs of the Plaintiff’s Summons, with certificate for counsel, and 50% of the Plaintiff’s costs of the action, to be taxed if not agreed and paid forthwith;

(2) the remaining 50% of the costs of the Plaintiff’s Summons, with certificate for counsel, should be taxed if not agreed, and should be costs in the cause as between the Plaintiff and the 2^nd Defendant; and

(3) the costs of the 2^ndDefendant’s Summons, with certificate for counsel, should be taxed if not agreed, and should be costs in the cause as between the Plaintiff and the 2^ndDefendant.

8.Where unconditional leave to defend is given, the usual order is for the costs to be in the cause: Hong Kong Civil Procedure 2019, Volume 1, paragraph 14/7/3.

9.On the other hand, where a court dismisses a summons for summary judgment, it may order the applicant to pay the costs either in any event or forthwith: Hong Kong Civil Procedure 2019, Volume 1, paragraph 14/7/4.

10.Both the Plaintiff and the 2^ndDefendant contend that the Court was in reality granting unconditional leave to defend though its order was for a dismissal of its/her summons, presumably to avoid the liability to pay costs following a dismissal of the summons.

11.The Judgment, however, does not admit such contention.  The order made therein was for a dismissal of the relevant summons.  There is no room to argue otherwise.

12.In determining the costs of a summons for summary judgment, the relationship between unconditional leave to defend and a dismissal is further set out in Order 14, rule 7 of the Rules of the High Court.  If it appears to a court that a plaintiff knew, before the issue of the summons, that a defendant relied on a contention which would entitle himto unconditional leave to defend, then the court may dismiss the summons with costs and may require the costs to be paid by him forthwith.

13.As submitted by the Plaintiff, the Court dismissed the 2^nd Defendant’s Summons (rather than merely giving the Plaintiff unconditional leave to defend) essentially because:

(1) it should have been apparent to the 2^ndDefendant at the outsetthat there were serious factual disputes as to the circumstances of the Deposit of the Title Deeds, and the 2^ndDefendant herself said in evidence that “there was a confusion as to the arrangement of depositing the title deeds with the Plaintiff”;[2]

(2) it should have also been apparent to the 2^nd Defendant at the outset that there were serious legal disputes as to whether or not an equitable mortgage or charge was created as the correspondence between the solicitors prior to the 2^ndDefendant’s Summons already touched on the issue;[3]

(3) there are serious factual and legal issues to be determined under the 2^nd Defendant’s Summons and it was not suitable for resolution under Order 14;[4] and

(4) Order 14A was abandoned by the 2^ndDefendant[5] and Order 14A is in any event inappropriate given the “conflictingallegations of fact”[6] in relation to the 2^nd Defendant’s Summons.

14.Similarly, the Court dismissed the Plaintiff’s Summons as against the 2^nd Defendant (rather than merely giving the 2^ndDefendant unconditional leave to defend) essentially because the Plaintiff knew, before the issue of such summons, that the 2^ndDefendant relied on contentions which would entitle her to unconditional leave to defend, namely the Conditional Agreement Defence and the Equitable Mortgage Contention.

15.It should have been apparent to the Plaintiff at the outset that the Conditional Agreement Defence is arguable to say the least.[7]

16.Similarly, the Plaintiff should have been aware that the Equitable Mortgage Contention is also fact-sensitive[8] and that “ultimately the real test is to ascertain the intention of the parties to see whether a charge is created”.[9]  By reason of the letters passing between the solicitors before the issue of the Plaintiff’s Summons,[10] the Plaintiff should have been aware that the Equitable Mortgage Contention is at least arguable.

17.The Conditional Agreement Defence was in fact expressly pleaded in the Defence.[11] Though the Defence was technically filed after the issue of the Plaintiff’s Summons, it was filed before substantive steps were taken by the Plaintiff to pursue the Plaintiff’s Summons.  Such substantive steps include the filing of two substantive affirmations and the oral hearing.

18.As a separate note, the 2^ndDefendant alluded to the submissions that the Repayment Agreement is not supported by consideration passing from the Plaintiff to the 2^ndDefendant, and that the Plaintiff’s Summons against the 2^ndDefendant should be dismissed on that ground.

19.It is difficult to understand how such submissions may assist the 2^nd Defendant.  The Plaintiff’s Summons was in fact dismissed as against the 2^ndDefendant, albeit on a different ground.

20.The Plaintiff’s Summons was not dismissed on the lack of consideration ground because such ground is flawed.

21.The forbearance to sue and the extension of time for repayment in favour of the 1^stDefendant amount to good consideration for the Repayment Agreement: Chitty on Contracts, 32^ndedition, paragraph 4‑048.  The 2^ndDefendant herself said in evidence that “Ah Fung even told me, if I did not resolve the matter, the Plaintiff would sue the 1^st Defendant”.[12]

22.It is trite that whilst consideration must move from the promisee, it need not move to the promisor: Treitel, The Law of Contract, 13^th edition, paragraph 3‑024.  It matters not that the Plaintiff forbore to sue the 1^st Defendant but not the 2^nd Defendant as such forbearance was clearly made at the request of the 2^nd Defendant.[13]

23.In fact, the lack of consideration ground is neither pleaded nor referred to anywhere in the Defendants’ affirmations.

24.I will therefore award costs on the basis that the Plaintiff’s Summons was dismissed as against the 2^ndDefendant and the 2^nd Defendant’s Summons was dismissed as against the Plaintiff.  As pointed out above,[14]in such situation, I may order an unsuccessful applicant to pay costs either in any event or forthwith.  In the present case, there is no reason to push the parties to incur the costs of taxation at this stage.  Moreover, the net amount recoverable by a party (if any) after deducting the amount payable, may not be substantial in any event.  Having considered the underlying objectives set out in Order 1A, rule 1, it is in the circumstances better to order payment of costs in any event but not forthwith.

25.As there are two defendants in this action, it appears fair that the 1^st Defendant should only be held liable for half of the relevant costs.

26.For the foregoing reasons, I make the following orders on costs:

(1) For the Plaintiff’s Summons—

(a) the 1^stDefendant do pay the Plaintiff 50% of the costs ofthis action up to the Judgment, including 50% of the costs of the Plaintiff’s Summons, to be taxed if not agreed, and paid forthwith, with certificate for counsel; and

(b) the Plaintiff do pay the 2^nd Defendant 50% of the costs of the Plaintiff’s Summons in any event, to be taxed if not agreed, with certificate for counsel.

(2) For the 2^nd Defendant’s Summons, the 2^ndDefendant do pay the Plaintiff the costs of the 2^nd Defendant’s Summons in any event, to be taxed if not agreed, with certificate for counsel.

27.In respect of the costs arising from the written submissions on costs, the Plaintiff and the Defendants have each succeeded in some respect and failed in others.  Having taken into account the above and the underlying objectives set out in Order 1A, rule 1, I make no order as to costs arising from the written submissions, instead of leaving them to form part of the costs of the action or the relevant summons.

28.For reference in taxation, about 50% of the hearing on 11 July 2018 was spent on the Plaintiff’s Summons, and the remaining 50% on the 2^ndDefendant’s Summons.

Written submissions by Mr Robin D’Souza, instructed by C L Chow & Macksion Chan, for the plaintiff

Written submissions from Chan, Lau & Wai, for the 1^st and 2^nd defendants