Siu Pang Fai t/a Kam Pang Civil Engineering Company v. Charmwood Development Ltd and Another

DCCJ 1117/2022

[2023] HKDC 1601

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1117 OF 2022

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DECISION

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INTRODUCTION

1.On 25 August 2023, this Court handed down its decision on an appeal against Master’s decision[1] (the “Appeal Decision”). In it, the 1^st and 2^nd defendants’ appeal was allowed, and the plaintiff’s whole claim was stayed in favour of arbitration. Following such event, I ordered on nisi basis that the costs of the appeal, the Stay Summons, and the hearing before the Master on 10 February 2023 (“10.2.2023 Hearing’), shall be paid by the plaintiff to the 1^st and 2^nd defendants on indemnity basis, to be taxed if not agreed, with certificate for counsel. The plaintiff’s own costs shall be taxed in accordance with the Legal Aid Regulations.

2.Pausing here, for consistency and easy reference, I shall, in this Decision, adopts the same abbreviation and nomenclature used in the Appeal Decision.

3.On 11 September 2023, the plaintiff filed a Summons seeking variation of the said costs order nisi (the “Variation Application”). The scope of variation sought is limited to the costs of the 10.2.2023 Hearing. The plaintiff asks that the costs of and occasioned by the same shall be paid by the 1^st and 2^nd defendants to the plaintiff on party and party basis, with certificate for counsel, to be taxed if not agreed.

4.Direction was given for the filing of evidence and written submissions for the purpose of disposing the Variation Application on paper.

REASONS FOR THE VARIATION APPLICATION

5.In support of the Variation Application, Mr Chun Tsz Him Kenny (“Mr Chun”) of Messrs W.K. To & Co., solicitors for the plaintiff, filed an affirmation on 3 October 2023 (“Chun’s Affirmation”). In a nutshell, the grounds he presented are as follows:-

(1)  The Stay Summons sought to stay the whole action on the basis that Contract-003 and Contract-011 contained agreements that the disputes should be referred to arbitration. These contracts relate only to the FV Project.

(2)  Albeit the claim under the CYR Project was also made in the Statement of Claim, there was no reference to the Written CYR Project Agreement in Yuen’s 1^st and 2^nd Affirmations; neither was there denial to the assertion in Plaintiff’s 2^nd Affirmation[2] that there was no arbitration clause governing the CYR Project.

(3)  Thus, the 10.2.2023 Hearing was proceeded on the basis that there was no arbitration agreement for the CYR Project. Mr Chun said that the 1^st and 2^nd defendants lacked the legal basis to ask for a stay of the plaintiff’s claim for the CYR Project.

(4)  In fact, counsel for the 1^st and 2^nd defendants, Mr Warren Suen (“Mr Suen”), had expressly stated in his submissions that they would not deal with matters concerning the CYR Project, and reserved the right to do so in a fresh application if the Amendment Summons was allowed[3].

(5)  In the circumstances, Mr Chun said the best possible outcome that the 1^st and 2^nd defendants could achieve at the 10.2.2023 Hearing was that only the claims under the FV Project would be stayed for arbitration. The Stay Summons relating to the CYR Project would be dismissed with costs to the plaintiff.

(6)  Based on such best possible outcome, the plaintiff’s solicitors had by letters dated 5 January 2023 and 27 January 2023 invited the 1^st and 2^nd defendants to abandon their stay application in respect of the CYR Project; in return, the plaintiff would agree to stay the claims based on the FV Project for arbitration. The plaintiff also offered to seek no order as to costs on the Stay Summons (“WP Offer”). Unfortunately, the WP Offer fell on deaf ears. There was no reply from the 1^st and 2^nd defendants; equally, Mr Suen proceeded with the Stay Summons on the basis that the whole action should be stayed for arbitration.

(7)  Ultimately, the learned Master dismissed the Stay Summons, when the 1^st and 2^nd defendants were unable to produce the Written CYR Project Agreement which contained the arbitration agreement.

6.For the above reasons, Mr Chun said that the plaintiff had bested the WP Offer made to the 1^st and 2^nd defendants in terms of the outcome of the 10.2.2023 Hearing. Hence, the plaintiff should be entitled to the costs of the same. Mr Chun added that the learned Master had considered the WP Offer at the end of the 10.2.2023 Hearing and concluded that the 1^st and 2^nd defendants should pay costs of the Stay Summons, including the 10.2.2023 Hearing, on indemnity basis.

7.Notwithstanding my direction for the 1^st and 2^nd defendants to file their affirmation in opposition to the Variation Application on or before 17 October 2023, they have not done so.

LEGAL PRINCIPLES

8.For cases where a party seeks a costs order other than one to follow the event, I respectfully adopt the principles summarised by HH Judge H. Au-Yeung in the case of Antonia Louise Zoya Anton v Cathay Pacific Airways Limited[4]:-

“5. It is trite that the Court has a wide discretion on costs.

6. Order 62 rule 3(2A) of the Rules of the District Court (Cap. 336H) (“the RDC”) provides that:

“If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit.”

7. In Melvin Waxwan v Li Fei Yu (HCA 1972/2012, unreported, 11 September 2013), To J had the following to say:

“Summing up on the post-CJR position, I think the court has much wider discretion as to costs in interlocutory proceedings. Unlike other proceedings, the general rule of costs following the events do not apply. The court is entitled to take into account all the circumstances of the case, including those set out in rule 5, to make such order as it thinks fit. In the exercise of its discretion, the court may take the issue-based approach or may take into account merit of the parties’ case or the possible outcome of the action. The circumstances of interlocutory proceedings are so numerous that it is impossible to make any general rule. Costs to follow the event and costs be to the successful party’s costs in the cause are obvious options.”

8. Order 62 rule 5(1) of the RDC sets out a number of special matters which the Court may take into account in exercising its wide discretion. They include, among other things:

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

(2) any written offer which is expressed to be “without prejudice save as to costs” and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22 of the RDC;

(3) the conduct of all the parties;

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

(5) any admissible offer to settle made by a party, which is drawn to the Court’s attention.

9. In respect of “conduct of the parties”, Order 62 rule 5(2) of the RDC stipulates that it includes:

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

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

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

(4) conduct before, as well as during, the proceedings.” (emphasis added)

DISCUSSIONS

9.I shall start the discussions by repeating the observations I have made in §§8 to 13, and 20 to 27 of the Appeal Decision. In summary, I found that the 1^st and 2^nd defendants, and their legal representatives, should have known, at the time when the Stay Summons was taken out, that the plaintiff’s claims under the Statement of Claim included the CYR Project. The claim was crystalised by the Amended Statement of Claim, a draft of which was long provided to the 1^st and 2^nd defendants[5] before the 10.2.2023 Hearing. Moreover, the CYR Project was mentioned in the Plaintiff’s 1^st Affirmation, with the 2^nd Updated Settlement for the CYR Project exhibited to it. Mr Yuen had also referred to such document in §13 of Yuen’s 2^nd Affirmation.

10.Hence, I agree with Mr Chun that it was almost a foregone conclusion that the learned Master would refuse to stay the whole action for arbitration under section 20 of the AO. At best, the 1^st and 2^nd defendants would only be able to persuade the learned Master to stay the claims under the FV Project. In fact, I came to the same conclusion in §55 of the Appeal Decision after the New Evidence Summons was dismissed.

11.However, does that mean the 1^st and 2^nd defendants had abandoned their quest to stay the whole action? Hence, was it unreasonable to ignore the WP Offer? These are the main questions argued by Mr Wong in his submissions.

12.I agree with Mr Wong that, even if the hope of staying the whole action under section 20 of the AO was extinguished for the above reason, the application was kept alive by the request for this court to exercise the power and discretion under section 48(5) of the DCO and O.1B, r.1(2)(e) of the RDC to stay the whole or part of the action generally. This was the very reason why, also taking into consideration the underlying objectives and duties under O.1A, r.1 and r.4, I had allowed the appeal.

13.Mr Wong said that, in §§48-50 of Mr Suen’s written submissions, he also urged the learned Master to exercise such discretion. It was, for some unknown reasons, not considered by him. By making such submissions, Mr Wong argued that the 1^st and 2^nd defendants could not have abandoned their quest to stay the whole action, and they had every right not to respond to the WP Offer. I do not entirely agree with Mr Wong on this point.

14.Although Mr Suen did ask the learned Master to exercise his inherent jurisdiction under section 48(5) of DCO, he had relied on §U1/20/1 of the Hong Kong Civil Procedure 2023, Vol. 3, to support it[6]. However, he quoted only the part which says that the court may do so if it is satisfied that the continuance of the court proceedings would be oppressive or vexatious to a party or an abuse of the process of the court. Mr Suen had said nothing about O.1B, r .1(2)(e) in his submissions. Then, in §48, Mr Suen’s aim was to refer “P’s claims against both D1 and D2 to arbitration”. In §49, he expanded on this with the reason that “In the present case, P’s claims are premised on [Contract-003 and Contract-011], and his claims against D1 and/or D2 clearly arise out of these Agreements.”. And Mr Suen concluded by submitting in §50 that “If P’s claims against D1 and D2 were not heard together in arbitration, there is a risk of inconsistent judgments being rendered. In any event, it is appropriate and just to refer the present proceedings to arbitration to avoid any parallel proceedings on the same matter.”.

15.By these submissions, Mr Suen was obviously seeking to refer the claims under the FV Project against both 1^st and 2^nd defendants for arbitration. He was not seeking to do so for both the FV Project and CPR Project[7], i.e., the whole action. Such stance actually echoed what Mr Suen had submitted earlier, that he would not deal with matters concerning the CYR Project, and reserved the 1^st and 2^nd defendants’ right to do so in a fresh application if the Amendment Summons was allowed.

16.In the circumstances, it is right for Mr Chun to say that the best result the 1^st and 2^nd defendants could achieve by these submissions, at the 10.2.2023 Hearing, was to stay the FV Project only, i.e., part of the action.

17.It follows that the WP Offer was spot on in meeting the said best result, with a neutral costs order being proposed. I could therefore see no reason why the 1^st and 2^nd defendant, via their solicitors, had given the WP Offer the cold shoulder. If they had seriously considered the WP Offer against their case as presented in Mr Suen’s submissions, they should have accepted it, hence avoiding the costs incurred for the 10.2.2023 Hearing. They could, afterward, take out another application for the stay of the claims under the CYR Project, as envisaged by Mr Suen. Alternatively, Mr Sun’s written submissions, which was lodged to the court on 31 January 2023 (i.e., after the WP Offer), should have placed more emphasis on staying the whole action, or just part of it, pursuant to section 48(5) of the DCO and O.1B, r.1(2)(e), as Mr Wong had done in his submissions at the appeal.

CONCLUSION

18.In light of the above, I find that there is ample reason for this court to accede to the Variation Application. I shall therefore order that the costs of the appeal and the Stay Summons, shall be paid by the plaintiff to the 1^st and 2^nd defendants on indemnity basis, to be taxed if not agreed, with certificate for counsel. The plaintiff’s own costs shall be taxed in accordance with the Legal Aid Regulations.

19.As to the 10.2.2023 Hearing, costs of and occasioned from the same shall be paid by the 1^st and 2^nd defendants to the plaintiff on party and party basis, with certificate for counsel, to be taxed if not agreed. The plaintiff’s own costs shall be taxed in accordance with the Legal Aid Regulations.

20.Finally, costs of the Variation Application shall be paid by the 1^st and 2^nd defendants to the plaintiff on party and party basis, with certificate for counsel, to be taxed if not agreed. The plaintiff’s own costs shall be taxed in accordance with the Legal Aid Regulations.

21.I thank Mr Cheung and Mr Wong for their assistance.

Mr Tommy Cheung, instructed by W.K. To & Co., assigned by the Director of Legal Aid, for the plaintiff

Mr Simon Wong, instructed by Huen & Cheung, for the 1^st and 2^nd defendants