China Shanshui Cement Group Ltd and Others v. Zhang Caikui and Others

HCA 2880/2015

[2020] HKCFI 610

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2880 OF 2015

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BETWEEN

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Before:  Hon Coleman J in Chambers (Open to Public)

Dates of Submissions:  25 March and 8 April 2020

Date of Costs Ruling:  16 April 2020

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C O S T S    R U L I N G

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1.In my Judgment dated 11 March 2020 (the definitions and abbreviations from which I adopt in this Ruling), I allowed part of the Strike Out Application in that I ordered the Qilu Claim to be struck out (albeit without prejudice to the possibility that the plaintiffs may make an amendment application so as to plead a recast claim arising out of the Qilu Property transaction). I refused to strike out the Shanshui Heavy Claim and the Professional Fees Claim. I also dismissed the Discharge Application and the Variation Application.

2.In those circumstances, I made a costs order nisi that there be no order as to costs of the various applications.  I indicated that any variation application would be dealt with on paper, in accordance with a timetable which I set.

3.The Defendants (that is, the Zhangs) have since applied by summons dated 25 March 2020 for a variation of the costs order nisi.  The variations sought are to the effect that:

(1)  the Plaintiffs to pay 60% (or a like portion as this Court thinks fit) of the Defendants’ costs of the Strike Out Application, to be taxed forthwith if not agreed (“1^st Proposed Variation”);

(2)  the 4^th Plaintiff to pay the Defendants the costs of and occasioned by the Qilu Claim as pleaded in paragraphs 44D(1) and (2) of the RASOC, to be taxed forthwith if not agreed (“2^nd Proposed Variation”).

4.The summons was accompanied by Mr Jean-Paul Wou’s written submissions of the same date.  Mr David Chen has provided reply submissions on 8 April 2020.

5.This is my Ruling.

Applicable Principles

6.The principles applicable on arguments as to costs are well settled.  The Court has a broad discretion as to costs, to be exercised judicially.

7.RHC Order 62 rule 3(2) provides that the Court shall order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.  But as regards interlocutory proceedings, Order 62 rule 3(2A) provides that the court may order the costs to follow the event or make such other order as it sees fit.

8.Order 62 rule 5(1) directs the Court to take account of various matters in the exercise of its discretion as to costs.  Those matters include (as is material for present purposes) the underlying objectives found in Order 1A rule 1; whether a party has succeeded on part of his case even if he has not been wholly successful; and the conduct of the parties.  Such conduct itself includes whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; and the manner in which a party has pursued or defended his case or a particular allegation or issue.

9.It is open to the Court in an appropriate case, and in the exercise of its discretion, to take an issue-based approach to questions of costs.

1^st Proposed Variation

10.As the Judgment struck out the Qilu Claim, and the corresponding paragraphs of the witness statements (Judgment §§43 and 46), Mr Wou submits that the Defendants are the winners of the application and so should be entitled to their costs.

11.Mr Wou acknowledges that the Defendants have not been wholly successful, but asserts that the Qilu Claim has all along been the main battleground between the parties, evident from the monetary value of the Qilu Claim (RMB146.88 million), Shanshui Heavy Claim (RMB79.33 million) and the Professional Fees Claim (HK$24 million).  This, he says, was also reflected in the pattern of the parties’ written submissions, and of the oral hearing on 13 December 2019, the lion’s share of which was spent on arguments over the merits of the Qilu Claim.

12.Hence, Mr Wou submits as the “overall winner” the Defendants should be awarded, say, 60% of their costs.

13.Mr Wou also relies on what he says was the unreasonable conduct of the plaintiffs.  First, he points to the unreasonable maintenance of a claim based on the non-recovery of the Equity Transfer Agreement (which triggered the Defendants’ spending extra time and costs in obtaining an expert opinion on Mainland Chinese law).  Secondly, he points to the fact that the basis of the allegations pleaded in the Qilu Claim was never supported by the witness statements, and my finding (see Judgment §§41 and 43) that it is possible to say now that the pleaded case is bound to fail.  Yet, the pleaded came was based on serious allegations of fraud and dishonesty, which should not have been made lightly.  So, says Mr Wu, the Defendants are entitled to recover at least 50% of their costs which had been thrown away by the plaintiff’s’ improper conduct.

14.In reply, Mr Chen points out that the Judgment struck out only the Qilu Claim, and that the Strike Out Summons was otherwise dismissed in its entirety (Judgment §75, as corrected).  Hence, within the three applications, the Defendant succeeded on only one third of one application – though that may not weight the three applications one against the others.

15.Mr Chen submits that it was open to the Court, taking an issue-based approach, to make no order as to costs, which broadly reflected the parties’ respective degrees of success set off against each other.

16.As to the two bases put forward by Mr Wou for the 1^st Proposed Variation, Mr Chen first submits that the Court is not constrained to count paragraphs or pages devoted to a certain argument when approaching costs in a broad-brush manner.  In any event, he says, the Qilu Claim was not the “main battleground” between the parties, if one has reference to the broad range of documents filed for the purposes of the application.  This might be particularly so where the significant volume of materials relating to an alleged improper purpose were found in the Judgment to be unhelpful in the determination of the Strike Out Application.

17.As regards the allegation of unreasonable conduct, Mr Chen submits that there was nothing unreasonable in the plaintiffs’ setting out their position on the Qilu Claim, even though the Judgment subsequently found against them.  He said the expert report on Mainland Chinese law was unhelpful, in that the plaintiffs did not respond to it and the Judgment makes no reference to it.

18.In my view, Mr Chen is correct in his ultimate point that the no costs order in substance awarded the costs of striking out the Qilu Claim to the Defendants, and all other costs to the Plaintiffs, setting each off against the other in a broad brush manner.  I also agree that costs allegedly “thrown away” would already be dealt with as seems to me to be appropriate within the no costs order.

19.I therefore reject the 1^st Proposed Variation.

2^nd Proposed Variation

20.Mr Wou reminds me that the Qilu Claim was introduced by the Plaintiffs by way of re-amendment in May 2017.  Since then, the Defendants filed their Defence in September 2017, and there followed discovery and the exchange of witness statements (as well as the obtaining of expert opinion evidence on Mainland Chinese law).

21.As the Judgment considered the totality of the parties’ evidence and reached the conclusion that the Qilu Claim is “bound to fail” so that it should be struck out, that means that the Qilu Claim has been dismissed.  It follows, says Mr Wu, that the Defendants should be entitled to recover their costs of defending the Qilu Claim in entirety.

22.As Mr Chen identifies, by the 2^nd Proposed Variation, the Defendants therefore seek the costs of the action in so far as it relates to the Qilu Claim.  He says such an award of costs would be premature.

23.First, there is the extant amendment application in respect of the Qilu Property transaction.  If that amendment is allowed, the Qilu Claim will feature at trial, albeit in a different form, and the underlying evidence would be largely identical (or at least include the matters already canvassed) and so the Defendants’ costs would not have been wasted.

24.Secondly, a taxation of the Defendants’ costs on the Qilu Claim would face significant practical difficulties, no doubt encompassing substantial disputes regarding apportionment of costs where the Qilu Claim does not exist in a vacuum.  Any taxation now might be a waste of time and costs, and would not be a productive use of Court time.

25.Thirdly, and flowing from the first two points, Mr Chen says that the Defendants’ costs of the Qilu Claim should properly be dealt with at the end of the trial when the Court has adjudicated all of the Plaintiffs’ claims.  In this context, he also relies on the proposition that if the Plaintiffs were to succeed on the other claims, the Court might order costs to follow that event, even if the Plaintiffs have not succeeded on every part of their claim.

26.I agree that it is premature to deal with the costs of the action insofar as they relate to the Qilu Claim.  I think those costs are properly to be regarded in the context of the action as a whole, following any trial (if earlier settlement is not reached between the parties).  In the meantime, the costs of the striking out application at the interlocutory stage have been appropriately provided for by the costs orders I have made on the relevant interlocutory applications.

27.I therefore reject the 2^nd Proposed Variation.

28.It may be helpful if I indicate that I would remain of the same view, whether or not the further proposed amendment relating to the Qilu Property transaction is allowed.  Whilst not permitting an amendment might indicate that the Qilu Claim is ‘out’ of the action once and for all, I still think the other points relating to the proper context within which to consider the costs of the action generally remain with full force. Any costs relating to the amendment application itself can be dealt with in the context of that application in the usual way.

Result

29.Both proposed variations put forward by the Defendants in their summons dated 25 March 2020 are refused.  The summons is therefore dismissed, and the costs order nisi becomes absolute.

30.In the summons, the Defendants sought their costs of the variation application, to be taxed forthwith if not agreed. However, as I have dismissed the summons, I see no reason why costs should not follow that event and be payable by the Defendants to the Plaintiffs.

31.However, as both sets of written submissions were suitably succinct, and to avoid any further wasted time or costs on arguing appropriate sums of costs, I simply proceed to a summary or gross assessment.  In the broad brush exercise of my discretion, I award the costs of the variation application to the Plaintiffs, to be paid by the Defendants forthwith, in the assessed sum of $8,000.

Mr David Chen, instructed by Haldanes, for all plaintiffs

Mr Jean-Paul Wou, instructed by Deacons, for the 1^st and 2^nd defendants