廈門新景地集團有限公司 Formerly Known As 廈門市鑫新景地房地產有限公司 v. Eton Properties Ltd and Others

CACV 158/2012

[2020] HKCA 876

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVI l appeal no 158 of 2012

(ON APPEAL FROM HCCL NO 13 OF 2011)

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JUDGMENT
(Notice of Motion filed 24 January 2020 and
Summons filed 29 May 2020)

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Hon Yuen JA (giving the Judgment of the Court):

Background

1.1.In a judgment given on 14 June 2012 (“the CFI Judgment”), DHCJ Stone (“the judge”) dismissed all the plaintiff’s claims against all 11 defendants in HCCL13/2011 (“CFI proceedings”). 

1.2.On 20 November 2012, the judge ordered the plaintiff to pay the costs of the CFI proceedings to the defendants. The judge granted certificate for 3 counsel to the 1^st and 2^nd defendants (“D1-D2”) for the trial, but only for 2 counsel for the rest of the action.

Appeal to Court of Appeal

2.The plaintiff appealed in CACV158/2012.  On 23 May 2014, it abandoned its appeal against D7, 8, 9 and 11.  As against the remaining defendants, the plaintiff’s claims were as follows:

(1)  damages in Common Law action on the arbitration award -    

against D1-D2 (“Claim 1”);

(2)  inducement of breach of contract -

against D3, D4, D5, D6 and D10;

(3)  unlawful means conspiracy -

against D1-D2, D3, D4, D5, D6 and D10;

(4)  constructive trust -

against D1-D2 and D3.    

3.On 15 April 2016, this court gave judgment (“the CA Main Judgment”) allowing only that part of the plaintiff’s appeal in relation to Claim 1 above¹.  However, the court required the plaintiff to elect between (a) a judgment it had obtained in HCCT54/2007 for “continued performance” of the matrix Agreement and (b) entering judgment on Claim 1.  On 9 October 2017, the plaintiff elected to enter judgment on Claim 1, and on 20 October 2017, this court entered judgment for Claim 1 and set aside the judgment in HCCT54/2007.

Costs Orders made by CA

4.Submissions were then made by the parties on costs.

5.1.On 10 December 2018, this court handed down a reasoned judgment on costs² (“the CA Costs Judgment”). 

5.2.As between the plaintiff and D1-D2, we ordered:                   

in respect of the appeal (“CA’s Appeal costs order”),

- that D1-D2 pay 75% of the plaintiff’s cost, with certificate for 4 counsel.

in respect of the CFI proceedings (“CA’s CFI costs order”),

- that the judge’s order on costs (i.e. the plaintiff pay all the costs of D1-D2, but granting certificates for different number of counsel for different stages of the proceedings) be set aside only to the following extent:

(i) D1-D2 to pay 30% of the plaintiff’s costs, with certificate for 3 counsel;

(ii) the plaintiff to pay 70% of D1-D2’s costs, with certificate for 3 counsel for the entire proceedings. 

5.3.As between the plaintiff and D1-D2, our reasons for the Appeal costs order appear at [8] - [10] of the CA Costs Judgment, and the reasons for the CFI costs order appear at [15] - [16].

Notice of Motion filed 24 January 2020

6.1.On 24 January 2020, the plaintiff filed a Notice of Motion (“N/M”) to appeal the CA’s CFI costs order only, submitting that there were the following questions of great general or public importance which ought to be submitted to the Court of Final Appeal (“CFA”) for decision:

“Where a plaintiff [is] a winning party in an action, in that it succeeds on the main issues enabling it to obtain a substantial part of the relief which it seeks (i.e. a substantial monetary order) against the defendant, but fails on other issues which would have been additional reasons for the plaintiff to obtain a substantial monetary order against the same defendant, in what circumstances would it be appropriate for the Court not just to deprive the plaintiff of a proportion of its costs, but to order that the plaintiff bear a proportion of the defendant’s costs such that it will in all likelihood become a net paying party?  In particular in the post-CJR era, is the fourth principle in Re Elgindata Ltd (No.2) [1992] 1 WLR 1207, 1213H-1214D (Nourse LJ) still good law, namely that a successful party can only be ordered to pay the unsuccessful party’s costs if he raised issues or made allegations improperly or unreasonably?” (“Question 1”)

“Where an appellant succeeds on the main issue in the appeal, and is awarded a majority of its costs in the appeal, in what circumstances (if any) would it be appropriate for the appellate court not only to deprive the appellant of a majority of its costs in the first instance proceedings below, but to order that the appellant bear a proportion of the respondent’s costs in the first instance proceedings such that it will in all likelihood become a net paying party” (“Question 2”)

6.2.The N/M was supported by an affirmation of the plaintiff’s solicitors Mr Anthony Siu Yat Fung.  The affirmation referred to a “summons filed together with this affirmation”.   On the same day, there was a letter to the court from the plaintiff’s solicitors which also referred to a summons “filed with the Court on even date”.  However, no summons was in fact filed³.  It is not understood why this was so.

7.1.On 4 May 2020, the parties sent a joint letter to the court which referred, amongst other things, to the summons “lodged by the Plaintiff with the Court on 24 January 2020” and proposing certain directions. 

7.2.On 29 May 2020, the court made an order in terms of the proposed directions, but reminded the plaintiff that no summons had ever been filed.  The plaintiff’s solicitors then filed the summons on the same day (29 May 2020).

Summons filed 29 May 2020

8.The summons sought an order:

(1) under the slip rule⁴ that the CA’s CFI costs order be corrected to the effect that although D1-D2 would have to pay 30% of the plaintiff’s costs in the CFI proceedings, the plaintiff would not have to pay any costs to D1-D2 in those proceedings;

alternatively,

(2) the plaintiff do have an extension of time to file the N/M within 28 days of the date of the sealing of the CA Costs order on 31 December 2019.

9.As mentioned earlier, the court gave directions for the matters to be disposed of together on paper, and written submissions have been provided by the parties.

Discussion

10.Logically, the summons should be dealt with first. 

(1) “Slip rule” application

11.1.This court considers that it has clearly expressed its manifest intention that, despite the plaintiff’s eventual success on Claim 1 on appeal, the plaintiff should still pay part of D1-D2’s costs in the CFI proceedings. 

11.2.First, the judge’s costs order was that the plaintiff should pay all the costs of D1-D2.  It was set aside “only to the extent”⁵ that D1-D2 were ordered to pay 30% of the plaintiff’s costs with certificate for 3 counsel, and the plaintiff was ordered to pay (a reduced) 70% of D1-D2’s costs, also with certificate for 3 counsel. 

11.3.Further, if it had not been this court’s intention that the plaintiff should still pay (part of) D1-D2’s costs in the CFI proceedings, we would not have added:

“The judge had awarded certificate for 3 counsel to D1/2 for the trial, but only 2 counsel for the rest of the action. We do not find it necessary to make such a differentiation between trial and the rest of the action”⁶.

If this court had intended to say that the plaintiff need not pay any of D1-D2’s costs, it would not have needed to concern itself with the number of counsel D1-D2 had instructed at different stages of the CFI proceedings.

12.1.The plaintiff sought to support its application for the slip rule by referring to [4] and [10] of the CA’s Costs Judgment to say that it was “the overall successful party in the substantive appeal”. 

12.2.With respect, these references do not assist the plaintiff in the slip rule application, because those passages concern the appeal costs, not the CFI costs, and it is clear that there was a significant difference between the presentation of the plaintiff’s case in the CFI and on appeal, such that to only ask the question “who really won?” is too simplistic⁷. In the present case, as succinctly put by D1-D2’s counsel, “the outcome of P’s claim (1) on appeal simply does not translate into any ‘overall’ success on P’s part at trial”⁸. For the discussion on CFI costs, see [15] - [20] below.    

(2) Extension of time to file N/M

13.1.Section 24(2) Hong Kong Court of Final Appeal Ordinance Cap.484 provides that a notice of motion shall be filed within 28 days from the date of judgment, not the date of sealing.

13.2.Hence, the N/M should have been filed within 28 days of 10 December 2018.  In Mr Siu’s affirmation, he said the N/M “might ... be technically out of time” but explained that the plaintiff had interpreted the CA’s CFI costs order in a way that the plaintiff need not pay D1 and D2’s costs.  He said “even if this interpretation was wrong, it was at the very least a reasonable interpretation and was consistent with the reasoning in the CA Costs Judgment ...”.  He said that the plaintiff promptly took action after the court order was sealed on 31 December 2019⁹.  The N/M was in fact filed 24 days later.

13.3.Be that as it may, this court recognises that the parties had drafted different orders, entered into a series of correspondence with each other and the court, and it was not until 31 December 2019 that the order was sealed.  We propose to go straight to the proposed Questions 1 and 2. 

Questions of great general and public importance?

14.1.The questions in the N/M ask the Court of Final Appeal to state “in what circumstances” would it have been appropriate for this court to have made the CFI costs order in the situation described by the plaintiff. 

14.2.With respect, these are not questions of great general and public importance. 

14.3.Order 62 rule 3(2) RHC allows the court to make orders other than to follow the event if the circumstances of the case show that some other order should be made as to the whole or part of any costs.  “Cross” costs orders are permitted.  In Summit Property Ltd v Pitmans (a firm)¹⁰, the trial judge ordered the losing plaintiff to pay 30% of the winning defendant’s costs, and the winning defendant to pay 65% of the losing plaintiff’s costs.  In other words, the winning party ended up being the “net paying party”.  The English Court of Appeal held:

“It is thus a matter of ordinary common sense that if it is appropriate to consider costs on an issue basis at all, it may be appropriate, in a suitably exceptional case, to make an order which not only deprives a successful party of his costs of a particular issue but also an order which requires him to pay the otherwise unsuccessful party’s costs of that issue, without it being necessary for the court to decide that allegations have been made improperly or unreasonably”¹¹. (Emphasis added).

14.4.No matter whether it is necessary to go so far, the 4^th principle of Elgindata Ltd¹² provides that “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”.  In our view, the plaintiff’s confusing characterization of its case in the CFI proceedings unreasonably raised issues in the disposition of Claim 1. 

15.1.The CFA has explicitly recognized that this court can make “fact-specific decisions” on costs as a matter of discretion¹³.

15.2.The present is such a case. Its unusual feature was that it was complicated by the plaintiff’s conduct in insisting throughout the CFI proceedings that the HCCT54/2007 Judgment (for “continued performance” of the matrix Agreement) could be maintained at the same time as (and indeed, as the “emanating” source) of Claim 1, i.e. damages in the Common Law action on the award.

15.3.Instead of recognizing that it needed to elect between (a) the judgment in HCCT54/2007 and (b) damages in the Common Law action on the award in Claim 1¹⁴, the plaintiff’s leading counsel at trial had expressed Claim 1 as “‘the enforcement of the enforcement order’ emanating from the 1^st action, HCCT54 of 2007”¹⁵ (emphasis added). 

16.D1-D2’s submissions to this court about the plaintiff’s unclear position in the CFI proceedings were as follows: 

“[The plaintiff’s] position regarding the precise basis of its claim for damages against D1 and D2 was fraught with confusion and kept shifting both before and over the course of the trial. It was only during closing submissions for the trial that Counsel for P confirmed that P’s claim was based on a ‘common law action on the Arbitral Award’. ... Given P’s failure to put its house in order, time was wasted on the parts of the Court and D1 and D2 to decipher and respond to P’s ever-changing arguments and positions. ... Further, as P had to acknowledge ... the bulk of the time of the trial was spent on hearing the evidence. The arguments on whether P was entitled to damages were legal arguments and, while the factual background was relevant, it was the same common factual background to P’s failed claims against D1, D2 and the remaining Ds, which the Court had to look into in any event”¹⁶. (Emphasis added).

17.1.These criticisms were supported by the judge’s Judgment which we had read again (see [16.1] of the CA Costs Judgment).

17.2.In the section headed “the ‘Shape’ of the case”, the judge said:

“[78] It has not always been straightforward accurately to characterize the ‘shape’ of the case and to identify with precision the various causes of action maintained by the plaintiff against each of the defendants: hence the profusion of paper to which this court was subjected both during (and after) Mr Barlow SC’s final submissions from defendants’ counsel, who wished to respond to allegations of which they maintained hitherto they had been unaware

[79] This is particularly striking when one comes to consider the action as now mounted against [D1-D2] whom, it will be recalled, were the sole parties to the agreement with the plaintiff and the sole parties to the arbitration proceedings before the CIETAC tribunal in Beijing”.

17.3.In another section headed “the Case(s) variously argued against the defendants”, the judge referred to the constant complaints by counsel for D1-D2 of the lack of clarity of the plaintiff’s case.  The judge expressed his concern as to the effect of what he called “the elephant in the courtroom”, being the extant and ongoing judgment in HCCT54/2007¹⁷. 

18.1.Indeed, it would appear that it was only at closing that the then leading counsel for the plaintiff stated that the action in HCCL13/2011 was a Common Law action on the award.  This obviously took the judge by surprise, for in the final address of the plaintiff’s then counsel, the plaintiff’s “beguiling” expression of its position was still as follows:

“All that this Court is asked to do is to make the judgment contained in the Enforcement Order [the Order of Cheung J in HCCT54 of 2007] (which required D1/D2 to continue to perform the agreement inter alia by transferring all the shares in D4 to P) efficacious”¹⁸.

The judge’s surprise was evident from the Transcript which the judge quoted in the CFI Judgment:

“Court: I thought what was happening was that this was effectively a continuation/amplification of the original court judgment [HCCT54/2007], specific performance being impossible to attain, or as you would put it, ‘inefficacious’”¹⁹.

18.2.Nevertheless, it is clear from the judge’s following observation that the plaintiff’s continued reliance on the judgment in HCCT54/2007 (for “continued performance” of the matrix Agreement), which was self-defeating of Claim 1, posed a substantial obstacle even to the plaintiff’s final position:

“ ... in any event it is difficult to appreciate how at this stage an independent cause of action on the 1^st Arbitral Award may be invoked (the position finally adopted by the plaintiff) since any cause of action, however characterized, must now be regarded as having merged within the earlier Order of Mr Justice Cheung in HCCT54 of 2007 ...”²⁰.

19.Even before the Civil Justice Reform, a plaintiff adopting an entirely wrong procedure may, though successful, have to pay his opponent’s costs²¹.  A fortiori, since the introduction of Order 1A rule 1 RHC.  It is all very well to say that the plaintiff needed to come to court to get the relief of payment of money, but when it did come to court, its insistence that it could do so on a self-defeating proposition (for at least most of the trial) has to be regarded as unreasonably raising issues justifying the application of the 4^th principle in Elgindata²². 

20.It was as a result of the above passages (and others) in the CFI Judgment that this court observed:

“[16.1] From our reading of DHCJ Stone’s Judgment, it is clear that the case put forward by the plaintiff at trial, which took 22 days, suffered from a lack of clarity, possibly due to a profusion of claims”.

21.1.Thus, on the issue in this court as to how the CFI costs should be dealt with, the parties’ respective contentions were as follows.  While the plaintiff contended that D1-D2 should pay 75% of its costs, D1-D2 contended that the plaintiff should pay 95% of their costs.  The “spread” was therefore 170%.

21.2.Having taken into account the state of the plaintiff’s case in the CFI proceedings, we made the CFI costs order “adopting a broadbrush approach, and doing the best we can in view of the circumstances set out above”²³. The “bespoke” order this court made for the CFI costs may be an “exceptional course” displacing the general rule that costs follow the event, but it reflected the fact that whilst the plaintiff did foreshadow Claim 1 at trial, the exceptionally confusing state of the plaintiff’s case in the CFI proceedings manifestly frustrated the judge (who described it as a “constant irritant”²⁴) and increased the costs of D1-D2 in trying to understand and meet it.  Such litigation behaviour should be discouraged.  On top of that was of course the dismissal of the plaintiff’s other claims against D1-D2 (for which viva voce evidence was adduced from a total of 9 witnesses over the course of 13 days, as well as expert witnesses)²⁵.

22.In light of the above, this case was not a simple one where a party succeeded on one issue and failed on others (as the Questions in the N/M suggest).

23.Finally, as to the “or otherwise” limb, it is the practice of this court to leave applications under this limb to the Appeal Committee of the CFA.  No exceptional circumstances are present to justify a departure from this practice.      

Order

24.For the reasons set out above, the Notice of Motion and the Summons are dismissed with costs.  Having considered the parties’ respective statements of costs, and the overlapping nature of some of the submissions, we would make an order that the plaintiff pay D1-D2 a global sum of $375,000 for the costs of both matters. 

Mr Bernard Man SC and Mr Justin Ho, instructed by Anthony Siu & Co, for the plaintiff

Mr Richard Khaw SC and Ms Bonnie YK Cheng, instructed by Mayer Brown, for the 1^st & 2^nd defendants