The Incorporated Owners of Tung Fat Building Block a Kam Ping Street v. Ng King Fong Judy and Others

DCCJ 4309/2015

[2020] HKDC 763

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4309 OF 2015

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Before:  Deputy District Judge Rebecca Lee in Court (Paper disposal)

Date of Submissions by the Third Party: 12 June 2020

Date of Submissions by the Plaintiff:  2 July 2020

Date of Submissions by the 1^st-3^rd and 5^th-8^th Defendants: 3 July 2020

Date of Submissions by the 4^th Defendant:  3 July 2020

Date of Reply Submissions by the Third Party:  17 July 2020

Date of Reply Submissions by the 1^st-3^rd and 5^th-8^th Defendants:  17 July 2020

Date of Reply Submissions by the Plaintiff:  17 July 2020

Date of Decision on Costs:  28 September 2020

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DECISION ON COSTS

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Background

1.I adopt the same abbreviations as in the Judgement.

2.There are 3 Actions: the Main Action, the Contribution and Indemnity Action and the Third Party Action.

3.Under the Main Action, I entered Judgement in favour of the plaintiff against D1, D2 and D3 for the sum of HK$550,000.00 together with interests. The plaintiff’s claim against D4, D5, D6, D7 and D8 are dismissed.

4.Under the Contributory and Indemnity Action, I find that D4 was not liable to contribute and indemnify D1, D2 and D3.

5.The Third Party Action was dismissed.

6.This is my Decision on Costs after considering the Written Submissions from all parties.

General Principles on Costs

7.The general approach to inter party costs are well settled. The Rules of the District Court follow the Rules of the High Court in this respect.

8.O 62, r 3 stipulates that the Court shall order 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.

9.In making a proper order for costs the judge must exercise his discretion, doing justice in all the circumstances of the case, but bearing in mind the underlying principle that the winner, whoever may be described as the winner, is in general entitled to be paid his costs: Lipkin Gorman v Karpnale Ltd [1989] 1 WLR 1340.

10.A successful plaintiff who recovers more than nominal damages against the defendant should in normal circumstances have an order for costs against the defendant.  It is an error in principle for a judge to reflect disapproval of the way in which such a plaintiff has conducted the litigation by ordering him to pay the defendant’s costs: Gulpa v Klito, The Times,23 November 1989.

11.A successful party to an action should not be ordered to pay any part of the costs of the hearing simply because he has failed to prove all of the allegations made.  The successful party should not pay any of the costs unless he has acted improperly or unreasonably in raising issues: Re Elgindata (No.2) [1991] 1 WLR 1207.

12.Although the normal rule is that the unsuccessful party should be ordered to pay the successful party’s costs, the court has a discretion to make a different order where it would be unjust to follow the normal rule: 62/5/7, Hong Kong Civil Procedure 2020, Vol.1.

13.Under O 62, r 5, special matters that have to be taken in account by the Court in exercising its discretion includes (and not limited to):-

(a)  the underlying objectives set out in Order 1A, rule 1;

(b)  the conduct of all the parties;

(c)  whether a party has succeeded on part of his case, even if he has not been wholly successful.

14.The conduct of the parties includes:-

(a)  whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b)  the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c)  whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d)  conduct before, as well as during, the proceedings.

15.The principles on bases and scales of costs are to be found under O 62, r 28:-

(a)  Party and party basis: Unless the order specifies taxation on some other basis the costs must be taxed on the party and party basis necessary or proper to enable the adverse party to conduct the litigation, and no more: O 62, r 28(2).

(b)  Common fund basis: there shall be allowed a reasonable amount in respect of all costs reasonably incurred where there are some “special or unusual feature”: O 62, r 28(4).

(c)  Indemnity basis: All costs are to be allowed except those unreasonably incurred or of unreasonable amount, the receiving party being given the benefit of any doubt.  On an indemnity basis, in the absence of rigid rules to determine the proper hourly rate of solicitor, experience, expertise and the complexity of the issue were all relevant factors to be considered: O 62, r 28(4A).

16.A taxation of the successful party’s costs on an indemnity basis could properly be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner.  Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for the taxation of the successful party’s cost on the indemnity basis: Choy Yee Chun v Bond Star Development [1997] HKLRD 1327.

17.The discretion was not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be “appropriate”.  The principle for the award of an order of costs on an indemnity basis applied equally to those who not only instituted proceedings but who defended them.  The court may also have regard to the events prior to the institution of the proceedings, rather than merely confine itself to the way the litigation was contested by the losing party: 62/App/2, Hong Kong Civil Procedure 2020, Vol. 1.

18.The above principles are succinctly reiterated by the Honourable Lam J (as then was) in Cheung Wei Man Vivien & Chan Kim Thiam v Centaline Property Agency Ltd and Others HCA 286/2000:-

“The applicable legal principles on award of costs on indemnity basis are not in dispute. They are encapsulated in the judgment of the Chief Justice in Town Planning Board v Society for Protection of the Harbour Ltd (No.2)

(a) The discretion to award costs on indemnity basis is unfettered and is not limited to circumstances where a case has been brought with ulterior motive or for improper purpose or where there is deception or underhand conduct on the part of the losing party;

(b) In considering whether indemnity costs is to be awarded, the court may consider any matter relating to the litigation and the parties conduct in it and also circumstances leading to the litigation.

Further, conducts leading to unreasonable escalation of costs is a relevant factor to be taken into account, particularly when such conduct leads to substantial increase in costs. In Macmillan Inc v Bishopgate Investment Trust Ltd, Millett J (as he then was) referred to costs “incurred irrationally or out of all proportion as to what is at stake” (endorsed by the Court of Appeal in Sung Foo Kee Ltd v Pak Lik Co [1996] 3 HKC 570). Counsel also brought to this court’s attention other illustrations of award of indemnity costs by reason of unreasonable escalation of costs: Tonkin v UK Insurance (No.2) [2006] EWHC 1185 (TCC); NLA Group Ltd v Bowers [1999] 1 Ll Rep 109 at p.113.

It is also useful to remind ourselves what Simon Brown LJ said in Liam v MGN Ltd (No.2) [2002] 1 WLR 2810 at Paras 11 and 12 in considering whether the conduct of a losing party is so unreasonable so as to warrant an award of indemnity costs. In particular, at Para 12, His Lordship observed, “I for my part understand the court there to have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation, can be so unreasonable as to justify an order for indemnity costs. With that I respectfully agree. To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight.”…”

(emphasis added)

Main Action

Costs between the Plaintiff and D1-3 & D5-8

19.Following the general rule of costs follow the event, the plaintiff should be entitled to its costs against D1-3 while D5-8 should be entitled to their costs against the plaintiff.

20.However, both Miss Bu and Mr Chung (together with Mr Yip) invited the Court to do otherwise.

21.Mr Chung argued that since the plaintiff has only succeeded in its claim against D1-3, the plaintiff has substantially failed at the trial and his clients have substantially succeeded.  The fair approach is for the plaintiff to pay two-thirds of his clients’ costs and his clients to pay one-third of the plaintiff’s costs.

22.Miss Bu submitted that counting numbers of the defendants is not a persuasive standard of determining the success at trial and it would be grossly unfair for the successful party to have only one-third costs while paying two-thirds costs of the losing party.  The plaintiff has substantially succeeded at trial because the amount claimed was fully granted. 

23.Miss Bu relies on the general principle that the successful party should not pay any of the costs unless he has acted improperly or unreasonably in raising issues: Re Elgindata (No.2) [1992] 1 W.L.R. 1207 and asks for costs against D1-3 on indemnity basis.

24.As for D5-8, Miss Bu submitted that they could barely satisfy to be wholly successful defendants.  Their version of facts in the pleadings and their witness statements was substantially not accepted by the Court. 

25.Miss Bu relies on the following passage in Ritter v Godfrey [1920] 2 KB 47:-

“The defendant has so conducted himself as to lead the plaintiff reasonably to believe that he had a good cause of action against the defendant, and so induce him to bring the action; or the defendant has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense; or the defendant has done some wrongful act in the course of the transaction of which the plaintiff complain.”

26.Miss Bu said that D5-8’s different involvement compared to D1-3 were not pleaded nor supported by their witness statements before trial.  It came out as a result of their testimony in Court.

27.It is argued that the manner they defended their case is grossly misleading and confusing therefore no costs order should be awarded to them even the claims against them were dismissed.

Discussion

28.The pleaded case of plaintiff against D1-3 and D5-8 is that, as members of the Management Committee, they have, inter alia, failed to:-

(a)  deal with or conduct the Writ in appropriate manner;

(b)  keep an insurance in force in relation to the common area of the Building;

(c)  act in good faith in a reasonable manner in performing the duties imposed by BMO.

29.It is their negligence and/or breach of duties under the BMO that caused the plaintiff’s loss and damage.

30.The gist of the Defence of D1-3 and D5-8 is that they had never received the Writ and had no knowledge of the same.  They were thus acting in good faith and did not commit any breach of duties under BMO nor were they negligent.

31.Even though D1-3 and D5-8 did not specifically plead their different roles in their Defence, the burden rests on the plaintiff to prove its claim that they have failed, as Committee Member, to deal with or conduct the Writ (i.e. in forwarding the Writ to the insurer), and therefore were grossly negligent and/or in breach of their duties under BMO.

32.In the case of D5-8, I find that they had no knowledge of the Writ and thus not liable to the plaintiff’s loss and damage.  The plaintiff has failed to prove its case against D5-8.

33.Despite Miss Bu’s detailed submissions, I am unable to see that D5-8 are not wholly successful defendants for the purpose of O.62 r 5.  I also do not see that they had done any act as stipulated by Ritter v Godfrey so as to deprive them of their costs against the plaintiff.

34.In the case of D1-3, I find that they did receive the Writ and it was their omission/inaction that led to the failure in sending the Writ to the insurer thereby causing the plaintiff’s loss and damage.

35.Judgement was entered in favour of the plaintiff for the full amount claimed.  The plaintiff is no doubt a wholly successful plaintiff for the purpose of O.62 r 5.

36.After considering Miss Bu’s and Mr Chung’s Submissions, I see no reason to depart from the general rule that costs should follow the event.  I find that the plaintiff is entitled to its costs against D1-3 while D5-8 are entitled to their costs against the plaintiff.

37.Miss Bu asked for costs against D1-D3 on indemnity basis.

38.Hong Kong Civil Procedure 2020, Vol1, 62/App/12 provides that:-

“If a plaintiff had been forced to institute proceedings by a defendant whose conduct had been not only hostile in the normal litigious sense, but oppressive and with base ulterior motive and if the pursuit of a defence constituted conduct which was part of an oppressive game plan, then invocation of the power to award costs on an indemnity basis might well be justified.”

(emphasis added)

39.While I do not find D1-3 to be honest and truthful witnesses, I do not see any oppressive conduct with base ulterior motive or conduct forming part of an oppressive game plan.  They are no different from any losing party whose evidence was not accepted by the Court.

40.There is no “special or unusual feature” which suggests costs should be awarded other than the usual party and party basis.

41.I therefore award costs against D1-3 on the usual party and party basis in favour of the plaintiff.

42.As for the costs of D5-8, although Mr Chung did not express any views as to the basis of costs, I shall, for the sake of completeness, examine whether D5-8 are entitled to costs other than on the usual party and party basis.

43.Mr Chung pointed out the plaintiff did not join some ex Committee Members as defendants: Mr Chong Wing Ning and Mr Choi Lei Sheung who were present at the 8 July 2011 Meeting and Mr Ng Kin Chi who were present at the 2 May 2014 Meeting.

44.As noted in the Judgment, D7 was not present at the 8 July 2011 Meeting and D5 and D7 were both absent from the 2 May 2014 Meeting. D7, however, would be provided with the minutes of meetings afterwards.

45.The logic of pursuing D5-8 (in particularly D5 and D7) but not Mr Chong, Mr Choi and Mr Ng is unclear.

46.It is puzzling but it is not unreasonable to an extent that constitutes an affront to the Court such as to call for an order of costs on indemnity basis. It is not “unusual” nor “special” that costs should be ordered on common fund basis.  The plaintiff is free to choose who to sue (and subject to the necessary costs consequences).

47.I award costs against the plaintiff on the usual party and party basis in favour of D5-8.

Costs between the Plaintiff and D4

48.As for D4’s costs under the Main Action, Mr Cheung submits that the plaintiff should never have included D4 as the defendant since the plaintiff entered into a settlement under DCCJ 664/2014 with D4.

49.Mr Cheung further submitted that the plaintiff was fully aware of D4’s conflict of interest (as pleaded in the Plaintiff’s Reply) when D4 was both a plaintiff in DCCJ 664/2014 and one of the Management Committee members at the material time.

50.It is said that the plaintiff had not been acting impartially as the plaintiff did not include some of the then members (as pointed out by Mr Chung) as defendants.  It was unreasonable and unfair on the part of the plaintiff and is clearly an abuse of court’s process and costs should be ordered against the plaintiff on an indemnity basis.

51.Miss Bu argued that the plaintiff had no choice but to include D4 in the litigation as it is impossible for the plaintiff to determine which version is the truth.  It was either D4 or the rest of the defendants’ negligence that caused the plaintiff’s loss and damages.

52.According to Miss Bu, it was reasonable to have brought the proceedings against D4 and therefore no costs order should be granted against the plaintiff irrespective of its failed claim against D4.

53.Miss Bu further submitted that settlement between D4 and the plaintiff under DCCJ 664/2014 clearly and particularly stated that despite such settlement, the plaintiff reserves the right to sue the ex-members for loss and damages incurred due to their breach of duty and negligence.  D4 was not taken by surprise or attacked groundlessly.

54.Since D1-3 also failed in the Contribution and Indemnity Action against D4, Miss Bu said that D4 shall not be entitled to “double benefit” on costs from both the plaintiff and D1-3.  The plaintiff’s claim against D4 collapsed was also due to the fact that the Court did not accept the evidence of D1-3 and D5-8.  There is no justification for the plaintiff (instead of the other defendants) to be responsible for D4’s costs.

Discussion

55.The plaintiff’s claim against D4 as pleaded under the Statement of Claim is no different from its claim against the other defendants.

56.The gist of D4’s defence is conflict of interest as one of the plaintiffs under DCCJ 664/2014 and as a member of the Management Committee.

57.The plaintiff pleaded D4’s conflict of interest in its Reply.  It was suggested at trial that D4 should himself send a copy of the Writ to the IO and/or the insurer, despite the fact that he has instructed his solicitors to send the 4 Legal Letters over a span of 3 years and that the Writ was successfully served on the IO.

58.I have found that D4 did not cause the loss and damage suffered by the plaintiff.  The plaintiff has failed to prove its pleaded case against D4.

59.D4 is the successful party and I see no reason why costs should not follow the event.

60.On the question of “double benefit”, I do not agree with Miss Bu that the other defendants should be liable for D4’s costs in the Main Action.  Any costs between D4 on one hand and D1-3, D5-8 on the other are costs under the Contribution and Indemnity Action.

61.The costs under the Main Action and the Contribution and Indemnity Action inevitably overlapped but they are in principle two sets of costs.  Any “double benefit” or “double counting” can be dealt with at taxation and should not displace the general principle of costs follow the event.

62.As to whether the costs of D4 should be awarded on indemnity basis, there are strength in Mr Cheung’s argument that the plaintiff has been acting unfairly and unreasonably.

63.I do not agree with Miss Bu that it is either D4’s or the other defendants’ negligence that caused the plaintiff’s loss and damage.

64.The undisputed fact is that the Writ was found inside the cabinet of the Rooftop Office.  It means that someone must have received the Writ and put it there and the Writ should have been forwarded to the insurer.  It is where the negligence and/or breach of duty lied.  Whether D4 should have personally sent the Writ to the IO or the insurer is neither here nor there.

65.It is not a question whether D4 was “taken by surprise or attacked groundlessly” as suggested by Miss Bu.  The question is whether the proceedings were “scandalous or vexatious or had been initiated or prosecuted maliciously or for an ulterior motive, or in an oppressive manner” so as to constitute an affront to the Court: Choy Yee Chun v Bond Star Development.

66.The plaintiff settled DCCJ 664/2014 with D4 at HK$550,000.00 prior to institution of the Main Action.  The plaintiff then claimed against D4 under the Main Action for the settlement sum.

67.If the plaintiff did have good reasons to believe that the failure to forward the Writ to the insurer was caused by or contributed to by D4, steps could be taken before settling DCCJ 664/2014, eg applying to set aside the interlocutory judgment entered on 28 July 2014.

68.However, I am in no position, and it is certainly not my intention, to comment on what the plaintiff should have done before settling DCCJ 664/2014.

69.Considering all the matters before me, by claiming against the “original plaintiff” for the exact settlement sum arising from the same subject matter is certainly something “unreasonable to a high degree” which is “not merely wrong or misguided in hindsight”: Cheung Wei Man Vivien v Centaline Propety Agency Ltd, c.f. Liam v MGN Ltd (No.2).  It does constitute an affront to the Court that calls for costs on indemnity basis.

70.I award D4’s costs on indemnity basis as against the plaintiff.

Contributory and Indemnity Action

71.Mr Cheung asks for costs of the Contributory and Indemnity Action be paid by D1-3 and D5-8 on an indemnity basis.

72.Alternatively, if the Court finds D1-3 shall be responsible for the costs of D4, Mr Cheung asks for a Bullock Order where costs of D4 shall be paid by the plaintiff and it is up to the plaintiff to ask for indemnity from D1-3.

73.Mr Cheung’s reason is that if D4 has to go after D1-3 for cost, there is the possibility that the enforcement action may well be very difficult and time consuming as they might have to sell their property to satisfy the costs order.

74.The Contributory and Indemnity Action against D4 is totally unfounded according to Mr. Cheung, as D1-3 were well aware that the Writ was received and that D4 should refrain from dealing with the Writ under all circumstances in his capacity as a Management Committee member.

75.Mr Cheung said that the Action was commenced “with bad faith” as it was found by the Court that D4 did notify the other members of the Writ.

76.On behalf of D1-3 and D5-8, Mr Chung suggests no order as to costs between D4 and D5-8 as the latters’ claim against D4 did not arise.

77.Regarding D1-3, Mr Chung argued that costs for the trial stage, D4 is not entitled to double benefit on costs from both the plaintiff and D1-3.  The costs of the trial should be apportioned accordingly between the plaintiff and D1-3.

78.As no additional costs arose in the trial stage arising from the Contributory and Indemnity Action, Mr Chung submits that the appropriate costs order for the trial stage against D1-3 should be no order as to cost.

79.Alternatively, Mr Chung suggested that if the Court finds that D4 is entitled to costs in defending the Contributory and Indemnity Action during the trial process, it is reasonable to apportion 5% of the trial cost on D1-3 and the plaintiff be responsible for the remaining 95%.

80.Not surprisingly, Miss Bu replied that there is no justification for the plaintiff to be responsible for D4’s costs in the Contribution and Indemnity Action.

Discussion

81.In so far as Mr Cheung’s “bad faith” allegation is concerned, it does not apply to D5-8 as I have found that D5-8 had no knowledge of the Writ at all.

82.As D5-8’s claim against D4 does not arise, I do not agree with Mr Cheung that D5-8 should be liable to D4’s costs in the Contribution and Indemnity Action.  D4’s costs should be borne by D1-3 who were found liable to the plaintiff in the Main Action.

83.D4’s costs under the Contribution and Indemnity Action would be covered by costs order against D1-D3.  I agree with Mr Chung that there should be no order as to costs between D4 and D5-8.

84.It is true that D4’s costs at the trial stage under the Main Action and the Contribution and Indemnity overlapped.  However, as a matter of principle, these are two sets of costs and any overlapping could be dealt with during taxation.

85.D1-3 as the losing party should bear D4’s costs in the Contribution and Indemnity Action.  The plaintiff is not a party to the Contribution and Indemnity Action.

86.I see no reason why the plaintiff should bear any of D4’s costs in the Contribution and Indemnity Action and rejected Mr Chung’s submission in this regard.

87.As to Mr Cheung’s suggestion of a Bullock Order, I refer to Standard Chartered Bank (Hong Kong) Limited v Li Wai Ping & Others HCA 10587/2000 and HCA 3575/2003 where Mr Justice Poon held as follows:-

“22. The discretion to impose either a Sanderson or Bullock Order is engaged only if the court is satisfied that the plaintiff has properly sued the two defendants with his claims in the alternative : see Leung Lai-ha and Another v Hon Sau-ling and Another [1993] 1 HKLR 86, per Kempster JA at p. 91”

“25. …Where the circumstances justify the imposition of either a Sanderson or Bullock Order, the court does not act in breach of the general principle of costs following the event : see Bankamerica Finance Ltd, supra, per Lord Brandon at p. 1011D-E.”

26. In cases where the unsuccessful defendant is solvent, the practical different between a Sanderson or Bullock Order is minimal.  He can pay the successful defendant’s costs either way.  But the costs of taxation will be greater because the successful defendant’s costs will be taxed twice, once between the plaintiff and the successful defendant and once between the plaintiff and the unsuccessful defendant as part of the plaintiff’s costs.  The additional costs of taxation are a relevant factor and may persuade the court to make a Sanderson Order.

27. In cases where the unsuccessful defendant is insolvent, the question is how to distribute the hardship arising from his impecuniosity : Bankamerica Finance Ltd, supra, per Lord Brandon at pp. 1011F-1012A; applied in China Everbright Finance Ltd & Anor v Chan Yung & Anor, HCA18300/1999, unreported, 12 December 2006, per Deputy Judge Muttrie at para 9.  On the one hand, if a Bullock Order is made, the successful defendant would recover his own costs but the plaintiff would probably recover neither the judgment debt nor his own costs and further bear the successful defendant’s costs.  The hardship all falls on the plaintiff.  On the other hand, if a Sanderson Order is made, the successful defendant will not be able to recover his costs although he has won the case.

28. In balancing the hardship, the court must ensure fairness between the parties in the circumstances of the case, a factor which Order 62, rule 5(1)(aa) read together with Order 1A, rule 1, requires the court to take into account.  In achieving fairness, the parties’ conduct, another factor specified by the rules, is plainly relevant.”

(emphasis added)

88.As said, the Main Action and the Contribution and Indemnity Action are two sets of action.  The plaintiff did not sue D4 and D1-3 and D5-8 with its claim in the alternative.  This is not a suitable case to impose a Bullock Order against the plaintiff.

89.In any event, there is nothing to suggest that D1-3 are insolvent.  Even if it were the case, the “hardship” of going after D1-3 as suggested by Mr Cheung is the possible “difficult and time consuming” enforcement action.

90.However, any enforcement action against the plaintiff could equally be “difficult and time consuming”.  As the IO, the plaintiff would have to go through the necessary procedures and any financial contribution (if there was insufficient reserve) would have to come from all the co-owners of the Building, which would be a time consuming (and sometimes painful) exercise.

91.Considering all the matters before me and balancing the hardship and ensuring fairness amongst the parties, I do not regard this is an appropriate case for imposition of a Bullock Order as suggested.

92.Costs of D4 should be ordered against D1-3.

93.The last question is whether I should order costs against D1-3 on indemnity basis.

94.Mr Cheung said that the Action was commenced “with bad faith” as clearly D1-3 knew of the existence of the Writ.

95.In view of my findings, I do not see how D1-3 can argue otherwise.

96.In considering whether indemnity costs should be imposed, the Court has to satisfy that the conduct was “unreasonable to a high degree” and not “merely wrong or misguided in hindsight”.

97.As explained under Costs between the plaintiff and D4 above, going after the original plaintiff under DCCJ 664/2014 for the settlement sum warrants costs on indemnity basis.

98.I order D1-3 do pay D4’s costs on indemnity basis.

Third Party Action

99.The Third Party Action was dismissed as a result of the concession made by Mr Chung on behalf of D1-3 and D5-8 during Closing Submission at the end of trial.

100.Mr Wong has indicated earlier that D1-3, D5-8 ought to be ordered to pay TP’s costs in the Third Party Action on an indemnity basis.

101.Mr Chung relied on Fabio Perini SPA v LPC Group plc. [2010] EWCA Civ 525 and said that a party abandons a point because, upon reviewing the evidence, they realize it is a bad point, it does not necessarily follow that an award on the indemnity basis will be made.  Provided that it was at least arguable, the pursuit of a weak case, will not of itself be sufficient to justify an order for costs on the indemnity basis.

102.Mr Wong argued that D1-3 and D5-8’s original factual case against TP was wrong, if not totally fabricated.  They chose to lie or twist the facts which they well knew in order to cover their tracks and shift the blame to TP.  Their conducts are “vexatious, malicious and certainly with ulterior motive”.

103.Alternatively, Mr Wong argues that it constitutes sufficient “special and/or unusual features” to justify costs on a common fund basis.

104.As helpfully summed up by Mr Wong in his Reply Submission, Mr Chung resists an award of costs on indemnity basis on the following grounds:-

(a)  they cannot be faulted for bringing TP into the proceedings for the purpose of resolving factual matters.

(b)  TP’s conduct fell below the standard of a manager of the Building which brought suspicion upon itself and thus it is not inappropriate to initiate an action against TP.

(c)  the plaintiff should bear at least half of the costs for it failed to bring TP into the proceedings in the first place.

105.Mr Wong said that rather than joining TP, D1-3 and D5-8 should have compelled TP to give evidence by way of a Writ of Subpoena duces tecum.  It is trite that a plaintiff can cherry pick any potential defendant(s) he might want to sue against.  It is unfair for D1-3 and D5-8 in shifting the blame to the plaintiff.

106.Miss Bu said that Mr Chung’s suggestion that the plaintiff should bear at least half of the costs of TP is “ridiculous”.  It is not reasonable nor justified to involve the plaintiff at all regarding the costs of TP.

Discussion

107.I shall first deal with whether the plaintiff should be ordered to bear any of TP’s costs.

108.It is trite that the Court may order the unsuccessful plaintiff to pay the costs of the third and fourth parties whose joinder was rendered inevitable by the plaintiff’s claim: Hong Kong Civil Procedures 2020, Vol.1, 16/7/4, c.f. Thomas v Times Book Co. Ltd [1966] 1 W.L.R. 911; [1966] 2 All E.R. 241, applying Edginton v. Clark [1964] 1 Q.B. 367; [1963] 3 All E R 468, CA.

109.The plaintiff was granted judgment in the full amount claimed and therefore a successful plaintiff.  This is sufficient to dispose of the issue.

110.As to whether the joining of TP is “inevitable” in order to justify a costs order against the plaintiff and also to deal with Mr Chung’s point on resolving factual dispute, I agree with Mr Wong, that there is no need to issue the Third Party Action as a Writ of Subpoena duces tecum could serve the purpose.

111.In any event, the plaintiff is free to choose which party to sue.

112.Regarding Mr Chung’s point on TP’s conduct falling below standard of a building manager, it might well be the belief of D1-3 and D5-8 and the reason why they issued the Third Party Action in the first place.

113.However, no evidence of any conduct of TP that fell below the standard of a building manager emerged at trial and I made no factual finding in that respect.

114.Even if D1-3 and D5-8 did have reasons to support their belief, after exchange of witness statements and documentary evidence, D1-3 and D5-8 should have a better idea of the prospect of their case against TP.

115.D1-3 and D5-8 did not simply “abandon a point” but conceded their whole case against TP towards the very end of trial.

116.Had they re-assessed their case vis-à-vis TP before commencement of trial or even at the early stage of trial, a lot of time and costs could have been saved.

117.The question is whether such conduct is “unreasonable to a high degree”, which is “not merely wrong or misguided in hindsight”.

118.Considering all the matters before me, such conduct did unnecessarily lengthen the trial.

119.It is something “wrong or misguided in hindsight” and not something “unreasonable to a high degree”.

120.However, the unnecessary time (and costs) incurred does qualify as “an unusual or special feature” that warrants costs on a common fund basis.

121.I order TP’s costs against D1-3 and D5-8 on party and party basis up to trial, and costs on common fund basis thereafter.

Order

122.I make the following costs order nisi:-

(a)  Under the Main Action:

(i)    D1-3 do pay the plaintiff’s costs (with certificate for Counsel) on party and party basis, to be taxed if not agreed.

(ii)   The plaintiff do pay D4’s costs (with certificate of Counsel) on indemnity basis, to be taxed if not agreed.

(iii)  The plaintiff do pay D5-8’s costs, with certificate of Counsel, on party and party basis, to be taxed if not agreed.

(b)  Under the Contribution and Indemnity Action:

(i)   D1-3 do pay D4’s costs, with certificate of Counsel, on indemnity basis, to be taxed if not agreed.

(ii)  No order as to costs as between D5-8 and D4.

(c)  Under the Third Party Action:

D1-3 and D5-8 do pay TP’s costs on party and party basis up to trial, and costs on common fund basis thereafter, with certificate of Counsel, to be taxed if not agreed.

123.Mr Chung asked for certificate for two Counsel as the case involves 3 Actions and their team represents a total of 7 defendants which add to the complexity in handling the case.

124.I see no difficult questions of law or fact in the 3 Actions.  The volume of documents is not significant and the witness statements of D1-3 and D5-8 are essentially identical.

125.Both Mr Chung and Mr Yip are capable Counsel of considerable seniority.  I do not see any justification in granting certificate for two Counsel, particularly bearing in mind the plaintiff’s monetary claim is HK$550,000.00 which is well within the District Court jurisdiction.

126.The above costs order shall become absolute unless parties apply to vary within 14 days.

127.I am grateful for the assistance rendered by all Counsel.

Ms Annie Yanan Bu, instructed by Yu Hung & Co, for the plaintiff

Mr Jerry Chung and Mr Micky Yip, instructed by CMK Lawyers, for the 1^st to 3^rd & 5^th to 8^th defendants

Mr Harrison Cheung, instructed by Lo & Co, for the 4^th defendant

Mr Martin Wong, instructed by Kenneth C C Man & Co, for the third party