ZHENG BIAO v. KWOK WAI LUNG AND OTHERS

HCPI 115/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 115 OF 2001

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D E C I S I O N

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Background:

1.  This matter came before me for trial in June 2004, and on 25 June 2004 I delivered a reserved judgement in which I found:

(i)	New India were liable to indemnify Mr Kwok on the insurance policy they held as third-party indemnifier of a vehicle, registration number EY 3871, driven, but not owned by Mr Kwok;
(ii)	Mr Kwok, Ryoden Engineering, and Maeda-Kumagai were liable to Mr Zheng for damages fixed in the judgement;
(iii)	The apportionment of liability between the three defendants found liable was 85% against Mr Kwok, and 15% against Ryoden and Maeda-Kumagai:
(iv)	Mr Zheng was entitled to his costs, (an order nisi).

2.  New India appealed against the finding that they were liable to indemnify Mr Kwok, but that appeal was dismissed.

3.  Three discrete issues as to costs now arise.  They are:

(i)	Should Mr Zheng have his costs on the High Court scale, or should they be on the District Court scale;
(ii)	Should New India be liable to meet Mr Kwok’s share of the costs liability to Mr Zheng;
(iii)	Should New India be liable to Ryoden and Maeda-Kumagai for a proportion of the costs of the trial, based upon the time taken to deal with the indemnity point, (see 1(i) above).

High Court or District Court costs?

4.  Prior to the issue of the writ on 31 January 2001, Mr Zheng had received employees compensation a little in excess of $486,000.  At the time of the writ was issued the jurisdictional limit of the District Court was $600,000.  That limit was increased to $1 million on 1 December 2003.  The matter had then, not yet come to trial, and it was open, in the light of that increase, for Mr Zheng to apply to remove the proceedings to the District Court, having regard to the increased jurisdiction.  He did not do so.

5.  At the time the matter went to trial the damages claimed, (after deduction of the ECC award), amounted to some $1,630,000.  The significant portions of that claim, for the purposes of this judgement, were claims for pre-trial loss of earnings, $601,000; loss of future earnings, $585,000; and loss of earning capacity of $400,000.  At trial, pre-trial loss of earnings were fixed at $482,560.  But it was in the area of future loss of earnings, and loss of earning capacity that Mr Zheng significantly failed.  Future loss of earnings were fixed at $187,200, and no award was made for future loss of earning capacity.  The total amount of damages awarded, after deduction of the ECC award, amounts to some $480,000, significantly below the District Court jurisdiction, whether before or after the increase in that jurisdiction.

6.  There is no dispute as to the appropriate test to be applied when assessing costs following the failure of a plaintiff to achieve an award that exceeds the jurisdiction of the High Court.  It is set out by Seagroatt J in Lai Ki v B+B Construction Co Ltd [2003] 3 HKC 322 at 329E:

“The usual order will mean that costs will be on the District Court scale unless the High Court is, in the exercise of its discretion, persuaded that there was a reasonable prospect of obtaining an award in excess of the District Court jurisdiction.  To that end the valuation of the claim must be on the basis of all liability.”

7.  It is clear from that, that the onus in satisfying the court that it should exercise its discretion in favour of High Court costs lies on the plaintiff.  Solicitors for plaintiffs whose claim, when assessed at the pleadings stage, lies in proximity to the sum of $1 million, and accordingly on the cusp of the two different jurisdictions, face a difficult problem.  They are undoubtedly only too well aware of the consequences of the usual order as to costs, should a claim be brought in the High Court, but ultimately assessed as being within the jurisdiction of the District Court. The primary difficulty facing a plaintiff and his legal advisors is that if they commence the action in the District Court the plaintiff is forfeiting possible damages in excess of the jurisdictional limit of that court. Deputy Judge Jat SC accepted a submission that that was a relevant factor to take into account when exercising the discretion: see Wong Chi Ho v Poon Yuk Shan [2004] HKEC 1041. 

8.  A defendant, on the other hand, has, as an additional protection in relation to costs, namely the ability to make a payment into court.  By making a payment in a defendant puts a plaintiff at risk of losing his costs should he not accept the payment.  It is plain that, having regard to the exigencies of this case, New India may well have had other reasons for not making a payment in, but if it chooses to rely upon those other reasons, and not make a payment in then it must accept all the consequences of that choice.

9.  In my view, in the exercise of discretion in relation to costs, properly recognising the difficulties faced by plaintiffs, the court ought not to set the bar too high against the plaintiff who has failed to achieve an award in excess of the jurisdictional limit.

10.  The arguments that Mr Zheng was entitled to substantially more in the way of future loss of earnings and future loss of earning capacity were arguments that could not be said to have been unreasonably made.  It is right that they did not ultimately find favour with the court, but at the same time they were not arguments which could be dismissed out of hand as being vexatious.  The prospect of receiving an award in excess of $1 million was sufficiently reasonable in my view that Mr Zheng was justified in bringing the proceedings in the High Court.

11.  The position adopted by New India, whose insured bore substantial brunt of the liability, was to fight the question of liability at every level.  They did so notwithstanding a dearth of evidence upon which they could rely.  They relied as well on  the technical point taken in relation to the policy.  It is right that at the end of the day they were unable to contend seriously that the driver had not been negligent, but that was a position which was not adopted until the very end of the day.  That approach to the litigation necessarily extended the duration of the trial.

12.  Weighing all of the relevant matters I am satisfied that I ought to exercise my discretion in favour of Mr Zheng.  I am satisfied that although ultimately unsuccessful, there was a reasonable prospect of obtaining an award in excess of the District Court jurisdiction.  I accordingly order that costs shall be on the High Court scale.

Is New India liable for Mr Kwok’s share of the costs?

13.  Mr Zheng, as part of the proceedings, sought a declaration that New India were liable to indemnify Mr Kwok.  That issue, not normally part of a personal injuries claim, arose in the following way.  Mr Kwok was not the owner of the vehicle involved in the accident, and he himself was not the beneficiary of the policy carried by New India over the vehicle.  Mr Kwok was merely the driver of the vehicle, and, in the usual way, covered by the policy.

14.  Mr Kwok could not be found at the time the writ was issued.  New India were entitled in terms of the policy to conduct the defence in the name of Mr Kwok.  Notwithstanding that they had not found Mr Kwok a defence was filed which not only put the plaintiff to “strict proof”, (whatever that means), but went so far as to deny that there was any accident and that their insured was not vicariously liable for any actions on the part of Mr Kwok.  In addition, a positive case on contributory negligence was asserted, together with a positive case of negligence on the part of Ryoden and Maeda-Kumagai.  In the absence of Mr Kwok, New India sought and were granted leave to join the proceedings as a 4^th defendant.  They did so not withstanding their right to defend the matter on behalf of Mr Kwok.  By so joining the proceedings they became an active party.

15.  As well as taking an active role in his effectively putting a defence for Mr Kwok, New India also intended to take the technical point.  It is not in dispute that either prior to, or shortly after being joined as a 4^th defendant in the proceedings, New India made it plain to the other parties in the litigation that it was their intention to contend that under the terms of the third-party insurance policy they should not be held liable to indemnify the owner of vehicle, (and consequently any driver for whom the owner may be vicariously liable), because the event occurred not on a road, but in a construction site.

16.  Mr Zheng’s advisor’s were plainly told that it was intended to take that point.  On 28 July 2003, the Statement of Claim was amended to include the declaration sought.  In that respect Mr Zheng has succeeded.  The technical point failed, not only before me, but also on appeal.

17.  Mr Sadhwani argues that the technical point ought not to have been made part of the trial, but that that point, together with other matters New India wish to rely upon to avoid liability, should have waited until these proceedings are over and taken on enforcement proceedings.  It is right that such a point could be taken then.  But New India chose to involve themselves as a party to the action and thereby give to Mr Zheng the opportunity to deal with the point.  This he did and the consequence has been that New India have been held liable under the policy.  New India will have to deal ultimately with any res judicata point that may arise in consequence of their decision to take only that one point in these proceedings.  But that is by the by.  In my view it flows automatically from the finding that New India are obliged to indemnify Mr Kwok that they are obliged to meet Mr Kwok’s share of any costs awarded.

18.  I am accordingly hold that New India must meet 85% of the costs to which Mr Zheng is entitled.

Is the New India liable for a share of Ryoden and Maeda-Kumagai’s costs:

19.  In the trial Mr Lin aligned himself with Mr Wong and contended that New India ought to be held liable on the policy.  He did so, as he was entitled, for it was plainly to his  benefit, as Ryoden and Maeda-Kumagai would be liable under the joint tortfeasor rule to meet the whole of any judgement.  Should New India be liable to indemnify Mr Kwok, Ryoden and Maeda-Kumagai could recover Mr Kwok’s share of any damages in the event that they had to pay.

20.  The issue as to whether or not the policy covered the driving in question was an important part of the trial.  It was the most significant aspect of the submissions and involved a difficult area of law.  The judgement, ignoring the title page and the summary and formal declaration of judgement takes 17.5 pages.  The question of the liability for indemnity on the part of New India takes four pages, approximately 23% of the judgement.  In my view this rough and ready method accurately reflects the importance of the issue in the context of the trial.

21.  Again Mr Sadhwani contended that this was an issue which ought to have been left to the enforcement stage, and from this contend is that there ought to be no order for costs against New India.  I disagree.  New India elected to become a party to the proceedings.  They took an active role, in resisting the claim and in arguing the technical point.  It would have been open to them to apply to strike out that portion of claim relating to the technical point, but they chose not to, rather to submit to the judgement of the court.  They must take the consequences of any finding of res judicata that may follow from that judgement. 

22.  I am in no doubt whatsoever that had in New India succeeded on the technical policy point they would have sought costs.  It would have been impossible to resist such costs.  Mr Sadhwani was left unable to respond when I suggested that if they would have been entitled to costs when winning, so must they be liable to costs if losing.

23.  As far as Mr Zheng is concerned the matter is adequately dealt within the overall award of costs.  But Ryoden and Maeda-Kumagai on the other hand have been put to an argument in a trial that has been longer because the point was taken.  I think it only right in those circumstances that New India must meet some proportion of the costs of Ryoden and Maeda-Kumagai.  I direct that the New India must pay to Ryoden and Maeda-Kumagai costs equivalent to 20 % of the costs of the trial.

Costs:

24.  In the course of the hearing I indicated that I would reserve as the costs of this argument as to costs, as there are other costs reserved which may need to be resolved.  Upon further reflection I think it more appropriate to make an order nisi in respect of the costs of the hearing.  I do so in the hope that the parties will be able to resolve things by sensible agreement for as I commented on the course of the argument it appears that New India are determined to spend more on costs in this matter than the judgement that they are liable to meet.

25.  Mr Zheng has succeeded in keeping High Court costs.  New India supported the argument of Ryoden and Maeda-Kumagai.  Ryoden and Maeda-Kumagai have succeeded in getting costs from New India.  In my view that justice will be done if there is an order nisi, to be made absolute in 14 days, that the costs of today be borne 50% by Ryoden and Maeda-Kumagai and 50% by New India.