Townmens Investment Co Ltd v. Wider River Ltd (in Liquidation)
Read the full judgment text of HCA 538/2009 on BabelCite. This High Court CFI judgment was delivered on 21 September 2010.
1. The Plaintiff is the landlord and the Defendant, a limited company, operated a veterinary business, was its tenant under a tenancy agreement in respect of a premises (“Premises”) in Kowloon.
Cited by 3 cases · Cites 3 cases
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HCA 538/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 538 OF 2009
BETWEEN
Coram : Before Master Levy in Chambers Date of Hearing : 17 & 21 September 2010 Date of Judgment : 21 September 2010 _______________ J U D G M E N T _______________ 1.The Plaintiff is the landlord and the Defendant, a limited company, operated a veterinary business, was its tenant under a tenancy agreement in respect of a premises (“Premises”) in Kowloon. 2.The 1st Third Party (“1st TP”), a veterinary doctor, was the shareholder and director of the Defendant. 3.Upon the winding up of the Defendant on 31 December 2008, provisional liquidators were appointed, and the tenancy agreement was terminated. The Plaintiff would be entitled to take possession of the Premises by the operation of a relevant clause of the Tenancy Agreement. 4.Upon termination of the tenancy agreement, the 1st TP however continued to use the Premises to operate his veterinary clinic in the name of the 2nd Third Party (“2nd TP”). 5.On 24 February 2009, the Plaintiff issued the main proceedings against the Defendant for vacant possession, and for mense profit for the continuous occupation of the Premises. 6.The Defendant defended the action, and issued a Third Party Notice on 23 March 2009 against the 1st and 2nd TPs. 7.On 8 June 2009, the Plaintiff obtained vacant possession when the keys of the Premises were delivered by the 1st TP directly to the Plaintiff. 8.On 26 February 2010, a Notice of Discontinuance against the 2nd TP was filed. 9.On 3 March 2010, two summonses were issued:
10.On 13 April 2010, the Defendant issued a summons (“Defendant’s Summons”), also under Order 21 rule 3, for leave to discontinue the Third Party Proceedings against the 1st TP. 11.On 19 April 2010, a Master made an order in terms of a consent summons by disposing part of the Defendant’s Summons by granting leave to the Defendant to discontinue the Third Party Proceedings against the 1st TP, and by a separate order on 4 June 2010 allowed the questions of costs of the Third Party Proceedings be heard at the same time as the Plaintiff’s Summons. 12.As the issue of costs could not be agreed, the Master adjourned the Plaintiff’s summons for arguments. The 2nd TP’s Summons was also adjourned, but was never restored for hearing. Since parties have also advanced arguments in respect of the 2ndTP’s summons, I also dealt with it in the hearing. I have therefore before me three summonses on the issue of costs upon discontinuance of proceedings. A. The principle A.1 Costs upon granting leave to discontinue 13.The principles governing costs upon discontinuance with leave of the court can be derived from the cases cited by counsel for the Defendant[1] and counsel for the 1st and 2nd TP[2]:
A.2 Costs of the Third Party proceedings 14.Counsel for the Third Parties, Mr. Hew, submits two authorities, Thomas v Times Book Co. Ltd.[8] and Nam Kwong Medicines & Health Product Co. Ltd. v China Insurance Co. Ltd. & People’s Insurance Co. Ltd. (third party)[9],concerning the court’s approach to a third party’s costs upon a court dismissing a plaintiff’s claim against the defendant,
B. RELEVANT MATERIALS 15.With the above principles in mind, I now turn to consider the evidence before me. 16.From the brief background set out above, I think the facts are largely undisputed. 17.As a result of the winding up of the Defendant (by the 1st TP), the tenancy agreement was terminated, and the Plaintiff was entitled to obtain vacant possession of the premises. 18.The Provisional Liquidators had along, before the issuance of the writ, informed the solicitors for the Plaintiff that the 1st TP had made it impossible to deliver vacant possession because the latter was operating his veterinary clinic in the name of the 2nd TP. At the same time, the Provisional Liquidator had repeatedly written to the solicitors for the Third Parties that they had occupied the premises without their permission, and the latter were required to deliver vacant possession. 19.Upon the Defendant being wound up, the 1st TP, commenced his veterinary business under a new trade name in the premises- but continuing to pay rent to the Plaintiff- and attempted to negotiate a new rental agreement with the Plaintiff. 20.When the negotiations for a new rental agreement failed, the 1st TP attempted to deliver vacant possession by returning the keys to the solicitors for the Provisional Liquidators around 20 May 2009, but the solicitors refused to accept the keys. Hence, vacant possession was only delivered on 8 June 2009 by the attendance of all parties concerned. C. DISCUSSION 21.Both the counsel for the Plaintiff and the Defendant pointed an accusing finger at the 1st TP for the institution of the proceedings. Whilst the Plaintiff was content with no order to costs in the main action, the Defendant asks for costs against the Plaintiff in the main action, and against the 1st TP for the costs of the Third Party Proceedings. 22.The Third Parties also seek costs against the Defendant (by following the general principle) or alternatively against the Plaintiff on the ground that the Plaintiff was aware that the Third Parties were in occupation of the Premises before the commencement of the action, and hence it made the Third Party proceedings inevitable. 23.Whilst I would be disclined to approach the application by determining who was at fault, I however think that I should take into account broadly the circumstances the action was commenced, and also conduct of a party that necessitated the relevant proceedings. 24.I will now consider each summons in turn. C.1 2nd TP’s Summons 25.On 26 February 2010, the Defendant filed a summons for Third Party Directions as well as a Notice of Discontinuance against the 2nd TP. This may explain why on the hearing of the summons for the Third Party Directions, the Master granted leave to the Defendant to amend the summons by deleting there from all references to the 2nd TP. 26.It is not in dispute that the Third Party Notice was never served on the 2nd TP. On the face of the Notice of Discontinuance, it seems it was also not served on the 2nd TP. 27.In spite of the fact that the 2nd TP was not served with the Notice of Discontinuance, the 2nd TP however subsequent to the Notice of Discontinuance issued this summons under Order 62 rule 10, RHC for costs. 28.Under Order 62 rule 10, when an action is withdrawn without leave, a defendant is entitled under Order 62 rule 10 to tax his costs of the action or his costs occasioned by the matter withdrawn. 29.If the mechanism for withdrawal under Order 21 applies also to third party proceedings, there would be no need to obtain leave from the court when discontinuing the proceeding, and further by the operation of Order 62 rule 10, the 2nd TP would be entitled to have its costs up to the date of the discontinuance. 30.At the hearing for this summons as neither counsel for the Defendant and the 2nd TP have addressed me on the applicability of Order 62 rule 10, I therefore invited further submissions from them. 31.I am indebted to the further written submissions from counsel. After having considered counsel’s further submissions, I think (as Mr. Hew) has pointed out, there is confusion as to whether the mechanism for automatic taxation provided in Order 62 rule 10(1) applies to the discontinuance of third party proceedings. The commentary has this to say;
32.If the said comments of the learned editors were right, one then doubts whether the mechanism for discontinuance and withdrawal under Order 21 would also be applicable to third party proceedings. It follows therefore it is doubtful whether the Notice of Discontinuance the Defendant had filed was indeed valid. 33.Since parties have not in fact taken any issue on the validity of the Notice of Discontinuance, I would refrain from ruling on the applicability of Order 62 rule 10 to third party proceedings but I tend to think that it is open to a defendant in the third party proceedings to invoke the mechanism under Order 21 to withdraw the proceedings against a third party. 34.I say this because under Order 16 rule 3, once a court grants leave to issue a third party notice, the procedure governing matters such as service, and acknowledgment of service is substantially similar to that of a writ. The commentary at para. 16/3/3 seems to be a confirmation of such procedure. 35.Under the Civil Justice Reform, I think it would be quite contrary to the underlying objectives under Order 1A rule 1 to require discontinuance by summons. 36.Coming back to this case, I think the parties were so carried away by the issue of liability for costs that they seem to have overlooked the fact that in this case the Third Party Notice was never served on the 2nd TP. 37.Hence, without ruling on whether Order 62 rule 10 is applicable to third party proceedings, I think the 2nd TP was not even vexed with the proceedings and there is really no issue on costs. 38.Hence, I am inclined to think that it is not proper for the 2nd TP to issue the summons for costs. The summons is therefore dismissed. C.2 The Plaintiff’s Summons 39.In the light of the facts as discussed above, I am of the view that the Plaintiff is justified in instituting the action for vacant possession. In fact, it was only through the institution of the writ that the Defendant and the 1st TP were put under pressure to deliver vacant possession. It is therefore a situation that the Plaintiff has substantially obtained the relief it has claimed for. 40.In the circumstances, I think this is a sort of case where the usual rule can be departed from, and since the Plaintiff asks for no order to costs, I think it is a proper order to be made, and so order. 41.As there was no order for discontinuance having been granted, I make an order that leave to the Plaintiff to discontinue the action against the Defendant with no order to costs. C.3 The Defendant’s Summons 42.Mr. Hew has conceded that the joinder is inevitable. Hence, the facts of the case clearly demonstrate that the Defendant was a totally innocent party, and the Provisional Liquidators have been actively urging the 1st TP to deliver vacant possession to the Plaintiff. Hence the Defendant should not be liable for costs. 43.The fact that the 1st TP had along used the same Premises for his veterinary practice, and that he was negotiating a new lease with the Plaintiff was not a valid reason for exculpating him from his liability for the costs the parties have incurred in enabling the Plaintiff to obtain vacant possession. 44.I do not think that the facts of the present case are similar to those in the authorities Mr. Hew relied on (as per paragraph 14 above) and that the Plaintiff should be ordered to pay for the 1st TP costs because the joinder was inevitable. The discontinuance of the action is not the same as a plaintiff (as in the cases stated in paragraph 14 above) having lost an action against a defendant in a main action. Hence, I am unable to accept Mr Hew’s argument by ordering the Plaintiff to pay for the costs of the 1st TP upon discontinuance of the main action. 45.On the facts of this case, I think it is just for me to exercise my discretion by ordering the 1st TP to pay the Defendant’s costs of the third party proceedings, including all costs reserved. 46.As for the costs of the Defendant in the main action, I also think that the Defendant is entitled to be reimbursed for the costs incurred. Hence, the 1st TP is also to pay the costs of the Defendant in the main action including costs reserved. 47.I further order the costs that I have made in favour of the parties shall be summarily assessed. I would now hear submissions on the costs of the summonses, and on certification for counsel’s attendance.
Hearing on 17 September 2010: Mr. C. Chan instructed by Messrs Tong & Tsoi for Plaintiff. Mr. Jerry Chung instructed by Messrs Johnnie Yam, Jacky Lee & Co for Defendant Mr. Hew instructed by Messrs Stephenson Harwood for 1st and 2nd Third Parties. Hearing on 21 September 2010: Mr. C. Chan instructed by Messrs. Tong & Tsoi for Plaintiff. Mr. J. Lee of Messrs. Johnnie Yam, Jacky Lee & Co. for Defendant. Mr. Nigel Sayer of Messrs. Stephenson Harwood for 1st and 2nd Third Parties. [1] (i) Graham M Morley v Kwan Wo Shan & Ors., (unrep.( (HCA4366 of 2003), d.o.j. 30 December 2009 (ii) Re Chinese United Establisments Ltd., (unrep.) HCCW 391 of 1994, d.o.j 5 October 1995 (iii) Inchroy Credit Corp Ltd v Cheung Man Cheong [1992] 1 HKLR 120 [2] (i) Inchroy, supra. (ii) Hachette Filipacchi Presse v Kador Ltd. [1995] 1 HKC 352 (iii) Re Peaktop Technologies (USA) Hong Kong Ltd. [2007] 4 HKLRD 207 (iv) Thomas v Times Book Co, Ltd. [1966] 1 WLR 911 (v) Nam Kwong Medicines & Health Product Co. Ltd v China Insurance Co. Ltd & People’s Insurance Co. Ltd (third party) [2003] 2 HKLRD 345 [3] Peaktop(supra), per Barma J at para.7 [4] ibid [5] Graham M Morley (supra) per Recorder Jat at para.33) [6] Ibid, at para.29, citing the decision of Kwan J in Re Super Deluxe International Ltd. (unrep.) HCCW186 of 2001, d.o.j 3 June 2003. [7] Re Chinese United Establishment Ltd (supra.) , per Rogers J (as he then was) at paras. 6 to 10 [8] [1966] 1 WLR 911 [9] [2003]2 HKLRD 345 [10] [1966] 1 WLR 911 at 919G [11][2003] 2 HKLRD 235 at 350 A-B |
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