VASTCO TEXTILES LTD v. SUPER GLORY CORPORATION LTD

HCA1678/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1678 OF 2009

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BETWEEN

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JUDGMENT ON COSTS

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The substantive judgment

1.  On 2 March 2012 this court handed down its judgment in this case upon a monetary dispute between the plaintiff and defendant.

2.  This judgment speaks for itself.

3.  For the reasons therein outlined, the Order of the court was that judgment be entered for the plaintiff against the defendant in the sum of HK$101,101.64, together with interest thereon.

4.  As to costs, the court declined to make an order nisi, having been informed by counsel that materiel existed which would have a bearing upon any costs’ decision to be made.

5.  Thus the court ordered that short written submissions as to costs be filed within 14 days after delivery of the substantive judgment.

6.  Such submissions now have been received, and that which follows represents the judgment of the court upon the costs of this dispute.

Representations made

7.  On behalf of the defendant, Mr To argued that a disproportionate amount of costs had been expended on this trial by reason of the “highly unreasonable conduct” of the plaintiff, which on 11 February 2011 had rejected a ‘Without Prejudice Save As To Costs’ offer dated 1 February 2011, which had offered the full amount of the ‘Sample’ Invoices claim, namely, HK$101,101.64.

8.  This was precisely the amount recovered by the plaintiff after this trial, said Mr To, the plaintiff had not done better, and thus the defendant had had no choice but to incur considerable costs in what transpired to be the successful defence of the 3 further claims, all of which were dismissed by the court as being unsustainable or unproven.

9.  Thus, he argued, it should follow that the costs order should appropriately reflect this result, and the rejection of the defendant’s Calderbank offer, and that in practice this should mean that costs should follow the event, and that the plaintiff should bear the costs of the action; alternatively that the costs occasioned by the ‘Sample’ invoices claim prior to the offer date should be to the plaintiff on the District Court scale, and that all costs of all the 4 claims after the offer date should be to the defendant on the High Court scale.

10.  Counsel also submitted that the first day of the trial had been wasted by reason of the late discovery by the plaintiff of a significant amount of documents, and thus that the costs thrown away by the first day adjournment should be borne by the plaintiff on an indemnity basis.

11.  For the plaintiff, Mr D’souza asserted that, to the contrary, in light of the result of the case, whereby the plaintiff had recovered the ‘Sample’ invoices claim in full, the plaintiff should have 30% of its costs to be taxed and paid on a party and party basis, alternatively that in the  circumstances there should be no order as to costs of the action.

12.  As to the adjournment argument, Mr D’souza pointed out that during the course of the trial there had actually been two adjournments, one being necessitated by the defendant’s own discovery, and that these adjournments did not merit special costs’ treatment and that effectively they cancelled each other out on a ‘no order as to costs’ basis.

13.  Counsel for the plaintiff argued that in light of the plaintiff’s success upon one out of the four heads of claim, costs should be apportioned to reflect that success, and in terms of time spent he suggested that the ‘Sample’ invoices head should attract 30% of the time taken at trial—hence his submission that the plaintiff should recover this percentage of its costs.

14.  As to the Calderbank offer, he said that the defendant should not be able to rely on this offer, because pursuant to Order 62, rule 5(1)(d), the court may not take into account the offer, made post-CJR, if the defendant should have protected itself by way of sanctioned payment or sanctioned offer under Order 22.

15.  In this regard he cited Poon J in Montrio Limited & Anr v Tse Ping Shun, David, HCA757 of 2009, unreported, Judgment dated 17 February 2012, and the observations of Ribeiro PJ in Ming An Insurance Co Ltd v Ritz-Carlton Ltd (No 3)(2009) 12 HKCFAR 745, at para 18, cited by Poon J in Montrio, op cit.

16.  Mr D’souza noted that the offer in question in this case was not a ‘sanctioned offer’, and merely had been open for acceptance for 7 days; moreover, the offer as made had not sought to pay the plaintiff its costs of the proceedings in relation to the ‘Sample’ invoices claim up to the date of the offer; to the contrary, the offer in question merely had proposed no order as to costs.

17.  Thus, he concluded, the defendant had not properly defended its position as to costs and thus was liable to pay the plaintiff its costs under this head of claim on the basis that it had taken 30% of the trial time.

18.  As to the other heads of claim, Mr D’souza maintained that it was not unreasonable for the defendant to pursue its head of claim on the ‘Team Creative’ invoice, on the ‘Siu Cheung’ invoice, he argued that the defendant, although successful, should not be entitled to its costs because the fact of prior payment to Siu Cheung, the garment manufacturer, had not been indicated until the 4^th day of trial when the defendant produced documents to show such payment (which had never been apparent in any documents or witness statements prior to that point), and whilst the defendant had succeeded under the ‘Li Dong’ invoice, the plaintiff contended that the defendant should not be entitled to its costs under this head of claim because it had “brought upon itself” the close connection with Li Dong, and thus the plaintiff could not be faulted for having believed that there was an agency in existence between the parties; in any event, he concluded, if the plaintiff was entitled to costs under this head of claim, this entitlement should be set-off against the plaintiff’s entitlement as to costs under the successful ‘Sample’ invoices claim, thereby validating the suggested alternative contention of a ‘no order as to costs’ overall result.

19.  In addition, Mr D’souza argued that the scale of costs should be on the High Court scale, and that given that the cumulative sums of money claimed by the plaintiff exceeded the HK$1 million jurisdictional benchmark, it was reasonable for the plaintiff to have issued proceedings in the High Court.

Decision

20.  Whilst I do not find it attractive from the viewpoint of general principle, the significance of Calderbank offers now appears to have been “largely obviated” in light of the self-contained statutory procedure for settlement contained in Order 22 RHC: see the commentary in M/N 22/1/A, 2012 Hong Kong Civil Procedure.

21.  This being the current state of the law, it seems to me that I am constrained not to accord the defendant’s ‘Calderbank’ offer the significance which otherwise instinctively would have been the case in the exercise of my unfettered discretion as to costs; perhaps I am unreconstructed ‘old school’, and for my part I am unconvinced that this new approach is an advance upon the old.

22.  Be that as it may. 

23.  After considering the respective submissions by counsel, each of whom conducted the trial, and reflecting at some length on the circumstances and overall result of the case, I have come to the conclusion that this is one of those relatively rare occasions which should attract cross-orders as to costs.  I should add that, given the amounts of money involved, I have resisted the strong temptation to consign to taxation on a District Court scale all or part of the costs as now ordered, although it was a close-run thing.

24.  Accordingly, in my judgment the appropriate costs’ order in this case is as follows:

          The plaintiff is to have 20% of its costs of and occasioned by this action and the defendant is to have 80% of its costs of and occasioned by this action, such costs, if not agreed, to be taxed and paid on the High Court scale on a party and party basis.

25.  I so order.

Written Submissions