The Incorporated Owners of Kingland Apartments v. 余國偉trading As余國偉醫館 and Another

DCCJ 4542/2015

[2021] HKDC 437

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4542 OF 2015

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DECISION

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THE APPLICATION

1.After the trial which was conducted on 12 January 2021 and 8 February 2021, this court handed down its Judgment on 19 February 2021 (“the Judgment”) and made a costs order nisi that there be no order as to the costs of the whole action (including all costs reserved, if any).

2.This is the defendants’ application to vary the aforesaid costs order nisi.  The defendants’ proposed orders have been set out in paragraph 3 of Mr Chiu’s written submissions lodged in support of this application as follows:

“…costs of this action from 12 July 2016 are to be paid by P to Ds on an indemnity basis. On the assumption that the Court agrees with Ds’ application, Ds are prepared to accept that Ds should pay P’s costs from commencement of this action to 11 July 2016.”

3.Unless otherwise stated, in this Decision, I shall adopt the abbreviations used in the Judgment.

4.As Mr Chiu put it[1], in a gist, the defendants’ grounds in support of this variation of costs order application are:

(1)     The plaintiff should have discontinued this action by 7 July 2016 at the latest, when it confirmed that all the alleged illegal structures in the Statement of Claim had been removed; and

(2)     The plaintiff’s continuation of its unmeritorious claim after the removal of the alleged illegal structures was for an ulterior motive or an improper purpose, namely, to make a profit out of this litigation with the defendants.

DISCUSSION

Continuation of this action after 7 July 2016

5.In his written submissions, Mr Chiu had, relied on, among other things, the following 2 letters:

(1)     The first one was a “without prejudice save as to costs” letter dated 7 July 2016 (“the 7 July 2016 letter”) issued by the plaintiff’s then solicitors to the defendants’ solicitors, in which it was confirmed that by then the alleged illegal structures had been removed.  By this letter, the plaintiff informed the defendants that it was prepared to discontinue these proceedings upon the defendants paying a total sum of $160,000 (inclusive of expenses for the removal of the illegal structures, damages, interest and costs of these proceedings).

(2)     The second one was a “without prejudice” letter dated 8 July 2016 (“the 8 July 2016 letter”) sent by the defendants’ solicitors to the plaintiff’s then solicitors, by which the defendants denied that the Metal Rooftop was removed by the plaintiff and asserted that it was removed at the costs of the defendants rather.  This letter further disputed the alleged illegality of the structures which were the subject matters of these proceedings.  The defendants then counter-proposed (the offer was said to be valid until 5pm on 11 July 2016) that the plaintiff might discontinue this action “with no settlement sum and with each party bearing its own costs”. 

6.Mr Chiu submitted that it was unreasonable for the plaintiff not to discontinue the action by 7 July 2016 because, as confirmed by the 7 July 2016 letter, all alleged illegal structures had been removed by then, and that, as a result, the plaintiff should bear the defendants’ costs on indemnity basis from the day following the expiry of the counter-offer made by virtue of the 8 July 2016 letter.

7.First of all, I am of the view that the 8 July 2016 letter is inadmissible in these proceedings, because this letter was marked “WITHOUT PREJEDICE” (sic).

8.In The National Commercial Bank Limited, Hong Kong Branch v Kanishi (Far East) Limited & Another, Po Ding Company Limited (Claimant) [2005] 2 HKC 81, Ma J (as his Lordship then was) had the following to say:

“19. From a practical point of view, Cutts v. Head confirmed the conditions necessary to be fulfilled before a letter could be regarded as a Calderbankletter or, it must follow, where the contents of a without prejudice offer are sought to be referred to for the purposes of costs. Where a party seeks to alert the court to the fact that an offer to settle had been made at an earlier stage of the proceedings in without prejudice correspondence or negotiations, it is imperative it is made clear that the correspondence or negotiations (as the case may be) were without prejudice save as to the question of costs. This can be achieved either by a simple statement that the correspondence or negotiations are without prejudice save as to costs or an express reservation is made of the fact that the contents of any offer may be brought to the attention of the court on the question of costs. I refer here to the continued reference in Cutts v. Head to the ‘formula’ as I have referred to above: see pages 300G-H, 304C-D, 305H-306A, 312C, 315E-G, 316H.

20. The Court of Appeal in Cutts v. Head also analysed the underlying theoretical basis for this approach. Reference was made to Walker v. Wilsher, which had been argued in Cutts v. Head to be authority for an absolute bar to the use of without prejudice correspondence in relation to the question of costs. The Court of Appeal held, however, that there was no such absolute bar. Where a letter was marked without prejudice except as to the question of costs (in other words, a Calderbankletter), there was nothing to prevent such a letter being referred to when arguing costs. This was so whether one regarded the underlying theoretical basis as one of public policy (the desirability of encouraging settlements) or as one which resulted from the implied or tacit agreement between the parties that such correspondence could be used for the limited purpose of an argument on costs: see Cutts v. Head at 307B-308A, 309G-310E, 312B-C, 316A-G.

21. Mr Yin, in an elaborate argument, submitted that Walker v. Wilsher was wrongly decided. Reference was made to the circumstances and the statutory regime prevailing in 1889 (when that case was decided) and the statutory and procedural changes that had occurred in England since then. What Mr Yin was arguing ultimately was that Walker should not be regarded as an impediment to the making of ‘without prejudice’ offers of settlement with a reservation that if the offer was not accepted, this fact could be brought to the attention of the court on the question of costs. With this I agree and Cutts v. Head is authority for that.

22. I also agree with Mr Yin’s argument that it is a matter of construction as to whether in any given case, an offer has been made in Calderbank terms (if I may be permitted to use this term). What I disagree with, however, is the submission that as an aid to construction, it should somehow to be presumed that an offer to settle must necessarily be an offer on Calderbankterms even though not expressed as such and only expressed to be ‘without prejudice’.

23. On the question of construction, I gratefully adopt the words of Oliver LJ in Cutts v. Head at 307H, where he said:

‘If this is right, then is there any logical reason why, in appropriate circumstances, the conventional meaning of the phrase [i.e. without prejudice] should not be modified so long as this intended modification is clearly expressed and brought the attention of the recipient?’ (emphasis added)

24. True it is, as Mr Yin submits, that there is no magic in the words ‘without prejudice’ because their effect must be construed in the light of the relevant circumstances, but if a Calderbankletter is intended, it is important to get the message across. In other words, if a reservation is intended, it should be made clear. In Cutts v. Head, Fox LJ said at 316G-H:

‘In the end, I think the question of what meaning is given to the words ‘without prejudice’ is a matter of interpretation which is capable of variation according to usage in the profession. It seems to me that, no issue of public policy being involved, it would be wrong to say that the words were given a meaning in 1889 which is immutable ever after, bearing in mind that the precise question with which we are concerned in this case did not arise in Walker v. Wilsher, 23 QBD 335, and the court did not deal with it. I think that the wide body of practice which undoubtedly exists must be treated as indicative that the meaning to be given to the words [i.e. without prejudice] is altered if the offer contains the reservation relating to the use of the offer in relation to costs.’

25. Mr Yin said he was not making a submission adopting a more extreme position that in every case where letters were marked ‘without prejudice’, then such letters could always be referred to on the question of costs. He was right not to do so as this would be contrary to principle, authority and also statute. The matters contained in ‘without prejudice’ correspondence would, but for the without prejudice tag, almost always be useful to a court in determining questions of costs, just as they would assist in the disposal of questions of liability or other matters. This provides a great disincentive for parties to settle if the matters contained in such correspondence could freely be revealed to the court.

26. The need to have the requisite Calderbank formula has been recognised in many cases since Calderbank v. Calderbank: see Cutts v. Head and Rush & Tompkins Ltd v. Greater London Council.

27. With the above in mind, I finally approach the letter dated 6 September 2001. In my view, on a true construction thereof, it just cannot be said that what was meant was an offer on Calderbank terms. If this was what the claimant intended, it could simply and clearly have said that the claimant reserved the right to refer to the letter on the question of costs. It just did not express clearly enough to the recipient that it was a Calderbank letter. If anything, it would appear that this was not a Calderbank letter: note the words ‘Entirely without prejudice to our client’s rights herein...’ (emphasis added).

28.     In the circumstances, I am of the view that the letter is inadmissible and although I have by necessity looked at it to determine the question of admissibility, I cannot take it into account for the purposes of exercising my discretion as to costs.”

(emphases at paragraphs 19, 22, 24 and 25 are mine)

9.I appreciate that the 8 July 2016 letter did not contain the words “entirely without prejudice to our client’s rights herein” as in the letter dated 6 September 2001 in The National Commercial Bank case.  However, as a matter of construction, I do not think the 8 July 2016 letter had expressed clearly enough to the plaintiff that it was meant to be a Calderbank letter:  As aforesaid, it was only marked “without prejudice” but not “without prejudice save as to costs”; neither was it stated that the defendants might refer the content of that letter to the court on the question of costs.

10.Even if I were wrong on the admissibility of the 8 July 2016 letter, I am of the view that this letter would not assist the defendants, because I do not agree that it was unreasonable for the plaintiff to continue this action after 11 July 2016.

11.Although the plaintiff’s then solicitors stated in the 7 July 2016 letter that the illegal structures (as defined in the Statement of Claim) had been removed, it has subsequently transpired (and undisputed) that some alleged illegal structures remained upon the removal of the Metal Rooftop.  These included two metal beams, a cement structure wall and a raised cement platform (which were defined as “leftovers” in the Judgment). As a result, the plaintiff had to add these items in the Re-Amended Statement of Claim which was filed in April 2018.  In other words, it is not entirely correct for the plaintiff’s then solicitors to admit by virtue of the 7 July 2016 letter that the illegal structures had been removed.  With the benefit of hindsight, it was also probably not right for the plaintiff’s then solicitors to propose discontinuing the proceedings back then.

12.Indeed, it was admitted by the 2^nd defendant[2] that he had caused the leftovers to be removed shortly after the filing of the Re-Amended Statement of Claim. 

13.In these circumstances, I do not think it would be fair for the defendants to say that the plaintiff should have discontinued this action back in July 2016.

14.I should also add that it was not unreasonable for the plaintiff to reject the counter-offer contained in the 8 July 2016 letter, because given the plaintiff’s success herein in causing the Metal Rooftop to be removed, it was reasonable for the plaintiff to expect that the defendants would bear at least part of its costs back then.

15.For the above reasons, I would reject the first ground relied on by the defendants.

Ulterior motive / improper purpose

16.As a matter of background, it may be useful to begin by referring to the following paragraphs of the Judgment which have provided a bird’s eye view of the whole action:

“52. As aforesaid, this action (which was commenced in October 2015) initially involved 4 items of alleged illegal structures when it was commenced in October 2015. Out of these 4 items, 1 (the Metal Rooftop) was removed by the defendants in May 2016, and another 2 were removed by the defendants before 7 February 2018. The remaining one admittedly does not concern the defendants.

53. 5 additional items of alleged illegal structures were then added in the pleadings in April 2018, out of which 3 items were removed by the defendants in July 2018. The plaintiff indicated in the Pre-Trial Review hearing held on 2 January 2020 that the remaining 2 items would not be further pursued in this action.

54. It can be seen from the above summary that the plaintiff had been partly successful in this action in the sense that 6 items of the alleged illegal structures had been removed since the commencement of this action. No matter whether they were indeed illegal structures, the plaintiff had gained by these proceedings partly what it had come to the court to achieve.

55.     However, on the other hand, it is now clear that the survival of this action since July 2018 was only for the sake of a mere sum of $48,000, and in the end, the plaintiff had failed in this monetary claim.”

17.Mr Chiu submitted that the plaintiff had continued this action despite the removal of the alleged illegal structures because of an ulterior motive or improper purpose, namely, to make a profit out of its litigation with the defendants.  By reason thereof, he invited the court to order the plaintiff to bear the defendants’ costs on indemnity basis.

18.Before I go into the facts of the present case, I should set out the applicable legal principles.

19.Mr Chiu had referred this court to the case of Sung Foo Kee Ltd v Pak Lik Co (A Firm) [1996] 3 HKC 570, in which Godfrey JA (as his Lordship then was) set out at length the proper approach in the exercise of the court’s discretion in ordering indemnity costs:

“Here, as in England and Wales, the judge has a discretion, in a case which does fall outside the general rule, to direct the taxation of the receiving party’s costs on the basis which he considers to be appropriate to that case. This is not a discretion limited by indications in previous cases, such as, eg the observations of Godfrey J in Overseas Trust Bank Ltd v Coopers & Lybrand [1991] 1 HKLR 177 (in which he declined to order the successful party’s costs to be taxed on the indemnity basis), as to the sort of special or unusual feature (there does have to be some special or unusual feature) which could justify an award of indemnity costs. Although the examples given in the judgment of Godfrey J at 182J-183C may be of assistance in other cases in which indemnity costs are claimed, his judgment does not purport to be and is not to be taken as determinative of the sort of case in which indemnity costs may be ordered.

In Disney v Plummer, 16 November 1987, in the Court of Appeal (England and Wales), unreported, it was submitted that indemnity costs would only be appropriate where there had been deception or underhand conduct. Kerr LJ in his judgment said:

‘I entirely reject that submission. On the contrary, I wholeheartedly agree with the course which the judge took in relation to this ill-advised and, if I may say so, stupidly conducted piece of litigation. It is the sort of robust attitude which should be taken to pieces of litigation of this kind. The defendants still suffer, even when they win. But they should at any rate have been given such assistance as can be provided by the rules. I do not accept, as counsel submitted, that indemnity costs are only appropriate if there is some deception or underhand conduct on the part of the losing party, but not if the litigation is merely fought bitterly or even unreasonably. In the latter type of cases judges can still exercise their discretion under O 62 r 3(4).’

Eastham J in his judgment said:

‘The judge having listened to the various submissions which are summarised, clearly took the view that this was one of the cases in which he could, and should, make a robust order so as to discourage other plaintiffs from pursuing litigation in the way in which this litigation has been pursued on behalf of this particular plaintiff. In my judgment he had ample material on which he could find that it was appropriate to order costs on the indemnity basis and indeed, after the defendants had been exposed to the very serious consequences of this bitterly conducted litigation, they would have felt a sense of considerable injustice if their costs had been whittled away down to the costs on a standard basis.’

In Macmillan Inc v Bishopgate Investment Trust Ltd, 10 December 1993, unreported, Millett J, in the Chancery Division, said:

‘The power to order taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose. Litigants who conduct their cases in bad faith, or as a personal vendetta, or in an improper or oppressive manner, or who cause costs to be incurred irrationally or out of all proportion as to what is at stake, may also expect to be ordered to pay costs on an indemnity basis if they lose, and have part of their costs disallowed if they win. Nor are these necessarily the only situations where the jurisdiction may be exercised; the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’.’

In Munkenbeck & Marshall v McAlpine (1995) 44 Con LR 30, Hollis J (with whom Russell LJ agreed) said that he entirely agreed with that passage in the judgment of Millett J and said (at 33):

‘In my view it is a pity that various courts have attempted to define in exactly what circumstances indemnity costs may be ordered. It is a matter in each case of the judge exercising his discretion to order costs on an indemnity basis when appropriate to the facts before him.’

We endorse all these observations of Kerr LJ, Eastham J, Millett J and Hollis J.

We are of course aware that it has not, or not yet, been thought fit to effect in Hong Kong the ‘rationalisation’ to which Knox J referred in Bowen-Jones v Bowen-Jones above. But this makes no difference. Our rules do now expressly provide for the taxation of costs on an indemnity basis and when they consider it appropriate judges should not be slow to make orders for the receiving party’s costs to be taxed on that basis…”

(at 575C – 576G)

20.The approach adopted in Sung Foo Kee Ltd was followed by the Court of Appeal in Choy Yee Chun v Bond Star Development Ltd [1997] HKLRD 1327.

21.I now turn to the consider the factual basis of the defendants’ application.

22.The defendants’ argument is that the plaintiff has dragged on the action herein because of the ulterior motive or improper purpose on its part to make a profit out of this piece of litigation.  They relied on the minutes of an owners’ meeting held on 20 October 2016, which, among other things, recorded that:

“商討及議決 法團顧問服務確認獎金發放事宜;

商討有關唐逸麒先生代表法團跟進所有法律訴訟及清拆庭院僭建物的事件中，成績得到委員及業主們的讚賞.   由於現時尚有數宗法律訴訟未曾解決，早前，委員會會議上曾打算向各地鋪，提出和解，只收回律師費及清拆費.   但唐先生表示這處理方法，對先前提出和解，並給予法團和解費的商鋪業主不公平，未能一視同仁.   而據唐先生估計，這數宗法律訴訟案件，令法團可增加額外可觀回報收入.   主席：陳樂江先生最初因所有庭院僭建物業主全部採取不合作態度，後來法團邀請唐逸麒先生擔任法團顧問一職，專責處理所有法律訴訟及清拆庭院僭建物事宜，曾在委員會上，唐先生提議如他能為大廈爭取到額外收入.   要求分一半作獎金.   當時大部份委員同意.   由於獎金金額超出委員會管轄範圍，故管理公司及委員們諮詢過「民政事務處」及區議員的免費法律諮詢服務均建議召開業主大會商討及議決此事.   故此，是晚由業主商討後投票決定是否通過此事，商討期間正反雙方都各有理據，到了投票開始，反對一方業主，紛紛離場！剩下贊成的十多名業主在場，管理公司經理 – 梁先生即時請示「民政事務處」職員意見，建議按照344條建築物條例，出席會議剩下人數包括持有委任文書的業權份數，超過百分之十業權，可繼續進行投票.   最終，投票結果： 42份(業權)贊成，0份(業權)反對.   由當時在場出席業主一致通過.”

(Mr Chiu’s emphasis)

23.In the prayer of the Statement of Claim herein (which remained intact despite the plaintiff’s subsequent amendments thereof), the plaintiff claimed against the defendants for:

“(a) An Order that the 1^st and 2^nd Defendants shall remove the Illegal Structures and make good all damages at their own costs and expenses;

(b) Further or in the alternative, an Order that the Plaintiff is entitled to remove the Illegal Structures at the costs of the 1^st and 2^nd Defendants;

(c) Damages to be assessed;

(d) Further or alternatively, such liquidated sum as this Honourable Court deems just and fit;

(e) Interest on damages or such liquidated sum, where applicable;

(f) Costs; and

(g)  Further and other relief.”

24.Despite the claim of “damages” and “liquidated sum” in the prayer, the plaintiff had never pleaded in its Statement of Claim (or in any amended versions thereof) any special damages or “liquidated sum” suffered.  As aforesaid, at the end of the day, the plaintiff only claimed for the sum of $48,000 which it alleged was the expense incurred for the removal of the Metal Rooftop.  This item falls within paragraph (b) of the prayer but not paragraph (c) nor (d) thereof. 

25.In other words, according to the plaintiff’s case, it had not suffered from any further damages all along. 

26.Yet, from the said minutes, it can be seen that the plaintiff was not satisfied with settling the pending cases (which must include this court case) merely by recouping from the shop owners concerned (which must include the 2^nd defendant herein) its legal costs and costs of removal (“律師費及清拆費”), because the plaintiff was aiming at getting “extra considerable income” (“額外可觀回報收入”).

27.Ms Wong for the plaintiff submitted that the defendants’ submission is “wholly unfounded”.  She had given 4 reasons in support.

28.Firstly, Ms Wong relied on the excerpt “對先前提出和解，並給予法團和解費的商鋪業主不公平，未能一視同仁” of the minutes and submitted that the reason why the plaintiff did not agree to settle by accepting only legal costs and costs of removal was because it would be unfair to the other shop owners who had paid settlement fees (“和解費”) to the plaintiff. 

29.I do not understand how this excerpt could assist the plaintiff. I would not speculate as to why some other shop owners had paid settlement fees (“和解費”) to the plaintiff.  However, as far as the defendants are concerned, it is evident that, after the removal of all the illegal structures, the plaintiff could at most only ask the defendants for legal costs and costs of removal (“律師費及清拆費”) (not to mention that the latter claim was eventually dismissed) but nothing else, as the plaintiff had never mentioned that it had suffered from any other damages.  In my view, it was just an excuse of Mr Tong for refusing to settle without receipt of “settlement fees”. 

30.Secondly, Ms Wong stated that it was all along the plaintiff’s intention to recover its legal costs from the defendants (“委員會會議上曾打算向各地鋪，提出和解，只收回律師費及清拆費”), and that the reason why the parties could not settle at the end of the day was, as can be seen from the without prejudice correspondence, because the defendants had refused to pay the plaintiff’s legal costs, but not because the plaintiff was minded to make a profit.

31.With respect, Ms Wong had quoted the minutes out of context.  It is apparent that according to the minutes, it was already decided by the Management Committee of the plaintiff that the plaintiff was not to get merely legal costs and costs of removal but further monetary return, and the owners’ meeting not only adopted this decision, but also agreed that any net monetary return would be split between the plaintiff and Mr. Tong.

32.This approach is consistent with that shown by the 7 July 2016 letter, which was issued around 3 months before the owners’ meeting.  In this letter, the plaintiff’s solicitors stated that:

“…The Plaintiff is therefore entitled to claim against the Defendants:

1. expenses for the removal of the Illegal Structures;

2. damages and interests; and

3. legal costs of the Plaintiff in these proceedings.

In order to save time and costs of the parties, we are instructed that our client is prepared to discontinue these proceedings upon the Defendants paying a global sum of HK$160,000.00 for 1, 2 and 3 above, in full and final settlement of all the claims of the Plaintiff in the action…”

33.While the plaintiff’s solicitors did not provide any breakdown of the total amount of $160,000, they had clearly stated that this total figure comprised of three elements, which included “damages”.  As analysed above, there was as a matter of fact no “damages” as such.  Indeed, it is noted that the cost of removal, if any, would have been included under item 1 of the said letter.  This is a clear demonstration that the plaintiff was trying to get “extra income”.

34.Moreover, in my view, Ms Wong’s reference to the defendants’ refusal to bear the plaintiff’s costs is a red herring.  The focus here is the plaintiff’s intention.  Whether at the end of the day the defendants had succumbed to the plaintiff’s demand is neither here nor there.

35.I am aware that the plaintiff had subsequently sent another Calderbank letter dated 25 January 2018 and proposed that the defendants shall pay $700,000 (“inclusive of costs and interest”) to settle the whole action.  This brought a question as to why the proposed settlement sum had been increased for such an extent.  However, having considered counsel’s further submissions on this offer, I am of the view that the making of this offer cannot shed light on the issues before this court one way or another, partly because there is inadequate factual basis for the court to evaluate some of the arguments made.  I will therefore, without disrespect to counsel, say no more on the said offer and the submissions made, save as to make it clear that I do not agree with Ms Wong’s argument that the plaintiff had continued with this case for the purpose of determination of costs, for this argument has been made in total disregard of the clear evidence of intention on the part of the plaintiff in getting “extra income” which has been referred to in the earlier part of this Decision.

36.Thirdly, Ms Wong submitted that the statement that there would be income (“令法團可增加額外可觀回報收入”) is “neutral”, because in the circumstances where expenses had been incurred by the plaintiff in removing the illegal structures, it was up to the plaintiff to either absorb such expenses itself or recoup the same from the shop owners concerned.  Ms Wong said that if the latter approach is chosen and if it is successful, this would increase the plaintiff’s income, and as a result, there is nothing unconscionable about it.

37.This submission is unsupported by a fair reading of the minutes.  Apparently, in the owners’ meeting, the plaintiff was not talking about recovering just the costs of removal from the shop owners concerned, because the minutes clearly recorded Mr Tong’s view that it would be “unfair” to recover only the legal costs and the costs of removal.

38.Moreover, it is evident that the agreement between the plaintiff and Mr Tong was that they would only share the net proceeds after deducting all the relevant expenses.  I will explain on this further when I deal with Ms Wong’s fourth argument below.

39.Fourthly, Ms Wong submitted that the allegation that Mr Tong would be sharing profit is a matter of himself personally and the plaintiff should not be penalised for Mr Tong’s acts when his conduct did not prolong the action.

40.This argument is rejected. 

41.Even though it seems that it was Mr Tong who proposed to try to get “extra considerable income” from the litigation, it is undeniable that the owners in the owners’ meeting had approved this approach and they had agreed to share any such income with Mr Tong equally according to the resolution passed in the owners’ meeting.

42.It is also evident that they had not only agreed the proposal in principle but had given effect to it.  Reference may be made to the Plaintiff’s R/E Statement in which it was recorded that the plaintiff had paid Mr Tong a total of $280,000 as “法團顧問服務獎金” in the period ended 30 April 2017.  

43.This matter was brought up in a discovery application made by the 2^nd defendant against the Management Committee of the plaintiff in the Lands Tribunal.  During the hearing of the application, the Presiding Officer had enquired with Mr Tong (who attended the hearing on behalf of the Management Committee of the plaintiff) about the nature of the above payment of $280,000.  Mr Tong answered, among other things, that:

(1)     “哦，係因為一個官司嘅案件去和解咗之後呢，係我同法--同業委會都同意話呢如果係勝訴，扣番晒所有法團嘅費用之後呢，有剩一人一半嘅…”[3]

(2)     “係因為另一個案件，就係呢係12號舖金輪大廈，叫做文記，文記嗰度呢就我哋法團就同文記呢達成一個和解協議，就話唔告佢”[4]

(3)     “…佢哋雙方和解，佢賠番65萬畀法團，法團呢就扣番晒所有嘅支出，扣咗支出應該係四萬幾蚊喇個支出，因為佢冇上庭，冇盛乜都冇，所以個訟費呢好少，即係嗰個租金嘅賠償，侵佔嘅賠償嗰啲，所以呢到分我手嘅時候呢係28萬，唔知28萬定28萬5呀，我唔記得咗，法官吓，咁而家你就係一半嘅，扣除費用有一半係畀我嘅呢筆數”[5]

(emphasis added)

44.The highlighted parts of Mr Tong’s representation show that the plaintiff had recovered more than its costs.

45.I have not forgotten the fact that Mr Tong had already resigned on 22 October 2018.  However, that would not affect the fact that the plaintiff had decided to adopt the approach in getting “extra considerable income” out of the litigation.

46.In my view, the plaintiff had continued this action for an improper purpose which should not be condoned by the court.  The plaintiff had clearly abused the court’s process in an attempt to gain unjustified profit.  It is appropriate for the court to make an indemnity costs order in such circumstances to show the court’s disapproval of such conduct on the part of the plaintiff.

47.The next question is from which point of time such an order should be applicable to.

48.To recap, the defendants requested the court to order the plaintiff to pay the defendants costs of this action on indemnity basis from 12 July 2016, and the defendants to pay the plaintiff’s costs from the commencement of this action up to 11 July 2016.

49.As aforesaid, I do not agree that it was unreasonable for the plaintiff to continue this action beyond 11 July 2016, for the reason that there were leftovers after the removal of the Metal Rooftop and those leftovers were not removed by the defendants until July 2018.

50.Even though the plaintiff was probably not aware of the existence of the leftovers in July 2016, I am of the view that as a matter of fairness, the court should not ignore such existence when it exercises its discretion on costs. 

51.Mr Chiu referred to the facts that the plaintiff had never issued any pre-action letter before it sought to add those items of leftovers in the Re-Amended Statement of Claim and that the defendants had removed the leftovers promptly after the plaintiff’s re-amendment.  For the above reasons, he submitted that the plaintiff had sued the defendants unnecessarily in relation of these structures.  With respect, I disagree with this line of argument.  It can be seen from the joint inspection report dated 27 February 2018[6] (signed by both solicitors’ firms) that there had been a joint inspection attended by representatives from both the plaintiff and the defendants on 7 February 2018, and that the plaintiff had pointed out the leftovers to the representatives of the defendants.  If the defendants were really as cooperative as Mr Chiu asserted, they would have caused the leftovers to be removed right after the inspection.  However, it is undisputed that they did not do so until after the plaintiff had filed the Re-Amended Statement of Claim.  Moreover, as a matter of fact, the defendants’ representatives not only denied that the leftovers were illegal structures during the inspection, they also made the point thereat that the leftovers were not pleaded in the Amended Statement of Claim.  In such circumstances, I do not think it was unreasonable for the plaintiff to amend its claim without further ado.   

52.It is noted that the defendants had filed the Supplemental Witness Statement of the 2^nd defendant on 30 August 2018, and in paragraph 16 of which the 2^nd defendant had referred to certain photographs attached which show that the leftovers had already been removed by then.  In my view, upon perusal of such a statement, the plaintiff should have known that it should not have continued with the action herein. 

53.I therefore hold that the plaintiff should bear the defendants’ costs of this action incurred from 31 August 2018 onwards on indemnity basis.

54.On the other hand, in principle, the defendants should bear the plaintiff’s costs up to 30 August 2018.  However, to reflect the result that the plaintiff had only been partly successful in this action in the sense that only 6 items of the alleged illegal structures had been removed since the commencement of this action, it is my ruling that the defendants should only bear 2/3 of the plaintiff’s costs.

ORDER

55.I therefore order that the costs order nisi made in paragraph 56 of the Judgment be varied as follows:

(1)     The defendants shall pay 2/3 of the plaintiff’s costs of this action up to 30 August 2018, to be taxed on party and party basis if not agreed.

(2)     The plaintiff shall bear the defendants’ costs of this action from 31 August 2018 onwards, to be taxed on indemnity basis if not agreed.

COSTS

56.Costs should follow the event.  I therefore make a cost order nisi that the plaintiff shall bear the defendants’ costs of this application (including the costs reserved), with certificate for counsel, to be taxed on indemnity basis if not agreed. 

57.The above order nisi shall become absolute in the absence of application to vary within 14 days hereof. 

58.Any application for variation of the above order nisi shall be made by letter, and such an application will be disposed of on papers.

Ms Carol Wong, instructed by James K L Sin & Associates, for the plaintiff

Mr Peter Chiu, instructed by Liau, Ho & Chan, for the 1^st and 2^nd defendants