楊松 v. 陳華智

HCA 2491/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2491 OF 2008

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BETWEEN

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DECISION ON COSTS

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1.  This is a dispute arising out of a transfer of shares agreement relating to a joint-venture business in the Mainland. The background of this case has been fully set out in my Judgment handed down on 11 May 2012, and I do not want to repeat the same here.

2.  At the trial on liability, I made a declaration that it was the defendant who was in repudiation of the said agreement.  Instead of proceeding with the assessment of damages, the parties agreed to settle the case on the basis that the defendant would pay nominal damages to the plaintiff in the sum of $1.  The parties cannot agree on the issue of costs and so I have to determine this remaining issue between the parties.

3.  I would adopt the same abbreviations that I have used in the Judgment.

4.  The plaintiff asks for the costs of the whole action.  According to Mr Hung, counsel for the plaintiff, the plaintiff succeeds in this action because of the judgment on liability given by the court in his favour.  Further, as the court accepts the evidence of the plaintiff about the part payment of RMB¥320,000 as the consideration for the transfer of the shares of the JV Company, the plaintiff, in the case of assessment of damages, should be able to claim back at least the said sum from the defendant.   Despite that, the plaintiff considers the defendant as “a man of straw”, and so he adopts a pragmatic and sensible approach in not proceeding with the assessment of damages against the defendant.  Taking into account these circumstances, costs should follow the event and the plaintiff should get the costs of the whole action.

5.  However, in the case that a plaintiff is only able to obtain nominal damages in a claim, it does not automatically follow that he should be regarded as the “winner” of the litigation and therefore get the costs of the legal proceedings.

6.  In Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 All ER 685, where the plaintiffs had failed to prove that they had suffered any damages as a result of the defendant’s breach of contract and being awarded only nominal damages, the court found that it was unable “to regard them as remaining successful plaintiffs”.  The plaintiffs were therefore ordered to pay the defendant’s costs.

7.  In Hong Kong, the question of “who really won?” was considered by the Court of Appeal in Elpe International (Far East) Limited v Hewlett Packard Hong Kong Limited, unreported, CACV 58/1993, and the approach in Alltrans Express Ltd was expressly affirmed and adopted.

8.  The court should therefore, in the case of an award of only nominal damages, look at the conduct of the parties and all the circumstances of the case in deciding the issue of costs.

9.  In the Judgment, I have already expressed my view about the unusual development of this case, and I am always puzzled as to why the plaintiff had to bring the present proceedings against the defendant especially in the Hong Kong court.

10.  According to the plaintiff’s case, the defendant agreed to transfer his interest in the JV Company to the plaintiff under the Agreement.  In the pleadings, the plaintiff has all along claimed for the relief of specific performance of the Agreement against the defendant.  However, the problem is that there was a specific provision in the Articles of Association of the JV Company, which expressly stated that any transfer of the shares of the JV Company had to be approved by the Guiyang Partner.  If the Guiyang Partner is not joined as a party to the proceedings, there is simply no way that the plaintiff can enforce an order for specific performance of the Agreement.  Yet the plaintiff decided to bring the proceedings in the Hong Kong court without joining the Guiyang Partner.  At the commencement of the trial, the plaintiff finally dropped the claim for specific performance of the Agreement against the defendant.

11.  I am therefore puzzled by the following questions.  Firstly, if it was the intention of the plaintiff that he should get the shares of the JV Company, which should be of considerable value, how could he achieve that by just bringing an action in the Hong Kong court without joining the Guiyang Partner?  Was that the case that the plaintiff was only aiming for damages in lieu of damages from outset?  If that was the case and the defendant was a man of straw, why did the plaintiff have to bring the proceedings as he did not expect to get any damages from the defendant?  As conceded by Mr Hung, there are simply no satisfactory answers to these questions and the court’s queries about the object of the litigation remain unanswered.

12.  Despite such queries, the plaintiff succeeds in obtaining a declaration that it was the defendant who was in breach of the Agreement.  Further, based on my ruling in §47 of the Judgment, the plaintiff, in the case of assessment of damages, should at least be able to prove the loss of RMB¥320,000 against the defendant.  Although this relatively small sum of money might not be the plaintiff’s target at the commencement of the action, he should not be asked to pay for the costs of the defendant simply because he waives such claim against the defendant.  On the other hand, I have serious queries about the plaintiff’s motive and object behind the present litigation. Coupled with the fact that the plaintiff is only able to obtain nominal damages against the defendant, the appropriate costs order for the whole action should be one of no order as to costs.

13.  However, I agree with Mr Hung that the court should make a separate order for the costs of the trial on liability and the costs after the trial.  No matter what was the true motive behind the plaintiff’s claim, it was clear that the object of the trial on liability was just to resolve the issue as to whether the plaintiff or the defendant was in breach of the Agreement.  Since the defendant contested and lost on this particular issue, and considerable costs had been incurred in the conduct of this particular trial, he should pay for the costs of the trial on liability.

14.  Further, the plaintiff should get all the costs after the trial.  The plaintiff’s solicitors had written to the defendant’s solicitors a number of times after the trial on liability, proposing that the case be settled on the basis that the plaintiff’s damages be agreed at a nominal sum of $1.  In the letter dated 23 July 2012, the plaintiff’s solicitors even proposed that, save as any previous costs orders in favour of the defendant, there be no order as to costs of the whole action, and yet the defendant refused to accept the same.

15.  In view of my ruling above, the defendant should have accepted the offers made by the plaintiff after the trial for the settlement of the case.  As the defendant had unreasonably rejected these offers, he should pay for all the plaintiff’s costs after the trial.

16.  I also agree with Mr Hung that that the defendant should pay for the summonses dated 29 October and 14 December 2012, including the hearings on 8 November 2012 and 6 February 2013, on an indemnity basis. The plaintiff only asked for nominal damages, and it is difficult to understand why the defendant refused to accept such offer, in particular the plaintiff only asked for no order as to costs of the whole action despite the fact that he succeeded at the trial on liability.  I consider the defendant’s conduct as so unreasonable that he should pay for the costs of the 2 summonses on an indemnity basis.

17.  I also order that the sum of $500,000 paid by the plaintiff into court as security for the defendant’s costs be released back to the plaintiff.  In view of my ruling on costs above, there is simply no point for the court to keep such sum of money for the protection of the defendant.

18.  I therefore make the following order:

(i)  the costs of the plaintiff’s summonses dated 29 October and 14 December 2012, including the hearings on 8 November 2012 and 6 February 2013, be to the plaintiff to be taxed on an indemnity basis if not agreed;

(ii)  subject to the aforesaid costs order, the costs of the trial on liability and the costs of the action after such trial be to the plaintiff to be taxed on a party-and-party basis if not agreed;

(iii)  subject to the aforesaid costs order, there be no order as to costs of the whole action including all costs reserved; and

(iv)  the sum of $500,000 paid into court as security for costs by the plaintiff and interest thereon be paid out to the plaintiff forthwith.