WAI CHUN INCORPORATION LTD AND ANOTHER V. 羅民基

DCCJ1980/2012

CIVIL ACTION NO 1980 OF 2012

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DECISION

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1.  On 23 September 2015, I handed down a judgment (“Judgment”) that allowed the plaintiffs’ claim against the defendant for the loss of the 2^nd Car (as defined in the Judgment) and dismissed the rest of the plaintiffs’ claims. The defendant applies for costs of the action against the plaintiffs on an indemnity basis, alternatively a costs order against the plaintiffs on an indemnity basis subject to a payment of fixed cost of HK$7,100 by the defendant to the plaintiffs.

The legal principles

2.  Costs order is a matter of the court’s discretion.  The usual starting point is costs follow the event, meaning that the losing party pays the costs of the winning party.  (Order 62 rule 3(2) of Rules of District Court; Re Elgindata Ltd (No 2) [1992] 1 WLR 1207)

3.  A successful plaintiff who recovers more than nominal damages against the defendant should in normal circumstances has the order for costs against the defendant.  (Oriental Press Group Ltd v Apple Daily Ltd [1998] 1 HKLRD 231; Hong Kong Civil Procedure 2016 §62/3/3)

4.  A party who seeks to displace the general rule that costs follow the event bears the burden of showing that the circumstances justify the exceptional course of such displacement.  (Mariner International Hotels Ltd v Atlas Ltd (No 2) (2007) 10 HKCFAR 246)

5.  The successful party should not be deprived of costs simply because he raised issues or made allegations on which he failed.  (Hong Kong Civil Procedure 2016 §62/3/3; Commissioner of Inland Revenue v HIT Finance Ltd (No 2) [2014] 4 HKLRD 412; KJ v KMLM, unreported HCMC 4 of 2010, 21 May 2014)

6.  If certain issues in question are discrete and isolated and the arguments on those issues had caused a significant increase in the length or costs of the proceedings, the court has a discretion to deprive a successful party of his costs incurred on these failed issues even if it was not unreasonable to have argued them.  The discretion to depart from the normal rule shall be approached with due circumspection so as not to undermine the general rule that costs follow the event.  (Commissioner of Inland Revenue v HIT Finance Ltd (No 2), supra; Kinetics Medical and Health Group Company Limited v Dr Tse Ivan Cheong Yau, unreported, HCA 1115 of 2010, 7 April 2014)

7.  Unless discrete and safely isolated points can be shown to have led to a wastage of time and costs, the practice of the court is not to engage in any “filleting” of cases according to the success or failure of the disparate issues which, when taken cumulatively, constitute the dispute to be judged.  (Active Base Limited v Roderick John Sutton and Desmond Chung Seng Chiong, Joint and Several Liquidators of Moulin Global Eyecare Holdings Limited, unreported, HCCW 470 of 2005, 17 October 2008; Moulin Global Eyecare Holdings Limited (in Liquidation) v Olivia Lee Sin Mei, unreported, HCA 167 of 2008, 3 June 2009)

8.  For the purposes of assessing whether a party is reasonable to raise issues which were unsuccessful, the court would allow for a fairly generous margin of error.  It is not a policy to discourage a party from placing before the court perfectly reasonable and properly founded submissions, which eventually may not find favour with the court.  (Moulin Global Eyecare Holdings Limited (in Liquidation) v Olivia Lee Sin Mei, supra)

9.  Order 62 rule 5(1) of the Rules of District Court sets out a list of factors that the court shall, as it may be appropriate, take into account in exercising its discretion as to costs.  The factors that may be relevant to the present case are:-

“(aa) the underlying objectives set out in Order 1A, rule 1;

(e) the conduct of all the parties;

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

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

10.  Order 62 rule 5(2) of the Rules of District Court provides that for the purpose of paragraph (1)(e) of the rule, the conduct of the parties includes:-

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

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

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

(d) conduct before, as well as during, the proceedings.”

The defendant’s case

11.  The defendant made the following submissions on costs:-

(1) the defendant should be the successful party since the amount awarded to the plaintiffs are trivial, if not nominal;

(2) alternatively, if the plaintiffs are the successful party, they should be deprived of costs due to their failure to accept the defendant’s admission of liability;

(3) further, even if the plaintiffs are to be awarded part of the costs, the scale for the Small Claims Tribunal should apply;

(4) the plaintiffs should pay the defendant’s costs on an indemnity basis because they had conducted the proceedings in an oppressive manner.

Who is the successful party?

12.  The successful party should normally have the order for costs unless there are any exceptional circumstances that justify a departure from the general rule that costs follow the event.

13.  Counsel for the defendant, Miss Wong argued that the defendant should be considered as the successful party since the amount of damages awarded to the plaintiffs is nominal or trivial.  In advancing this argument, lots of emphasis was placed on the amount awarded in the Judgment being about 1% of the amount claimed[1]. The authorities she relied on are Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] All ER 873 and Thomas Hong Chi Fat v Alexander Sung Wai Yip, unreported, DCCJ 3196 of 2004, 12 September 2007.

14.  The amount awarded to the plaintiffs in this case is insignificant as compared with the amount they have claimed.  However, the damages awarded is not nominal or trivial at law. 

15.  The English court in Mediana [1900] AC 113 has held that :-

“Nominal damages is awarded when the plaintiff or the claimant cannot prove any actual damages at all.”

16.  Mediana was applied by the High Court in Yeung Ping Hung trading as Alfred Yeung & Co v Ha Chiu Ping, unreported, HCA 4370 of 2003, 21 July 2006:-

“The law presumes that damage is suffered in any breach of contract or in tortious conduct. If an injured party is unable to prove the quantum of loss suffered, a nominal award on an arbitrary basis is given to mark the infringement of the injured party’s right. The counsel’s fee of $15,000 was a reimbursement and a quantified sum. It was not a small sum or a token amount although it was insignificant when compared with the amount claimed by the Plaintiff. Even a small sum does not cease to be a sum of substance and becomes a nominal sum by reason only of its being small in absolute term or insignificant in relative term.”

17.  The plaintiffs have successfully recovered the full amount of damages on the claim for the loss of the 2^nd Car.  This is a quantified sum.  It is not nominal and is not a token damages.  The small amount of damages awarded to the plaintiffs in this case would not deprive the plaintiffs of being an overall successful party.

18.  Further, as counsel for the defendant has fairly accepted, the amount of damages recovered is not the only factor to consider in deciding the costs order.  The other relevant factors include whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue, and the conduct of the parties in the proceedings.

19.  Although the plaintiffs were not successful in their claim for the loss of the 1^st Car (as defined in the Judgment), it was not unreasonable for them to raise this claim at trial, and it did not cause any unnecessary costs and time.

20.  Many legal issues argued at trial equally related to the claims for the loss of 1^st Car and the 2^nd Car.  Take for instance, whether the defendant owed a duty of care to the 2^nd plaintiff, whether there was a bailment relationship between the plaintiffs and the defendant.

21.  The factual matrix on the incident for the loss of the 1^st Car and the subsequent actions taken by the plaintiffs are relevant in the consideration of the claim for the loss of the 2^nd Car.

22.  The legal arguments and factual evidence relevant to the claims for the loss of the 1^st and 2^nd Cars are not safely isolated or entirely distinct from each other.  It is not appropriate to segregate the two heads of claims in considering the costs order.

23.  The defendant has not sought to show any other exceptional circumstance that justifies a displacement of the general rule that costs follow the event.  The plaintiffs who are the successful party shall have the costs order.

Admission by the defendant

24.  The defendant referred to two documents from the defendant and submitted that the defendant has admitted the liability to the sum of $5,895.20, which was the sum claimed for the loss of the 2^nd Car.  It is therefore submitted by the defendant that Order 13A of the Rules of District Court applies and the costs payable to the plaintiffs should be a fixed costs.

25.  The defendant first referred to a handwritten sum of $5,895.20 in point 3 of the Acknowledgment of Service of the Writ of Summons (in Chinese) (“AS”) filed by the defendant in person.  Point 3 required the defendant to state whether he intends to make an admission if the only remedy that the plaintiffs seek is monetary payment.  The defendant ticked the box “yes” there showing his intention to make an admission.

26.  Below the box he ticked was a printed statement as follows: “If yes, the Defendant may make the admission by completing Form No. 16 or Form No. 16C (as the case may require) accompanying the Writ of Summons.”  Next to this statement, the defendant wrote the figure “$5895.2”.

27.  The defendant also referred to paragraph 15 of the defence, which was prepared by counsel (not Miss Wong) as follows:-

“15. Furthermore, the Defendant had admitted liability to the sum of HK$5,895.20 before he seeked (sic) legal advice as an attempt to expedite the matter; he will not now seek to withdraw such admission due to the unproportionate costs and will only pay those sums that are reasonably incurred for the installation of the car theft detection system.”

28.  Under Order 13A rule 5 of the Rules of District Court, a defendant may admit part of the claim by filing an admission in Form 16.  Point 3 of the AS also referred to the making of admission by filing Form 16.

29.  The defendant was legally represented at all times since the filing of the defence.  Notwithstanding the expressed requirement under Order 13A and the AS, no Form 16 was filed by the defendant. Order 13A was not triggered.

30.  Despite the indication of part admission in the AS and the defence, the defendant has taken almost every point at trial in defending the liability for the loss of the 2^nd Car. The conduct of the defendant in the course of the proceedings and at trial was inconsistent with an admission of liability.

31.  The defendant cited the case of Fong Po Shan Eunice v Chung Wing Cheung Vincent, unreported, DCCJ 4063 of 2009, 26 January 2015, and Lo Pok Chung v Chan Tat Ki Robert, unreported, DCPI 316 of 2015, 22 May 2015.  The respective defendant in these two cases filed the specified form under Order 13A rule 6(2) indicated their admission of liability. Interlocutory judgments were entered against the respective defendant for damages to be assessed.  These two cases are different from the present one where no proper admission was made under Order 13A, and contrary to an admission of liability, the defendant has fought the claim till the end of the trial.

32.  No sanctioned payment or Calderbank offer has ever been made by the defendant.  The defendant did not have the protection on costs as in situation where a sanctioned payment or Calderbank offer was made.  The defendant has not made any admissible offer to settle.  The factor under Order 62 rule 5(g) is not a matter of consideration in exercising the discretion as to costs in the present case.

Small Claims Tribunal scale

33.  This court has a wide discretion in making a costs order, and has the power to award costs on a basis different from that for taxed costs on the District Court scale.  (M Beraha & Co Ltd v Ng Wai Lun [2004] 3 HKC 535; Fong Po Shan, supra)

34.  It is the defendant’s case that since the amount awarded is within the jurisdiction of the Small Claims Tribunal (that is less than $50,000), the costs awarded shall be taxed on the scale for the Small Claims Tribunal.

35.  In determining the scale on which the costs order shall be taxed, the court shall not only look at the outcome of the trial.  The proper approach is to consider whether at the time of the commencement of action, it is reasonable for the plaintiffs to have commenced the claims in this court instead of in the Small Claims Tribunal.  The court will look at whether the plaintiffs have reasonable prospects of success in bringing the claims before this court when the plaintiffs commenced the action, relying on the evidence available to them at that time.  (Lee Tsz Kin Ken v Climax Paper Converters Limited, unreported, HCPI 504 of 2003, 23 July 2004; Wong Wai Tak Belinda v Smart Team International Investment Limited, unreported, DCCJ 1023 of 2009, 19 July 2011)

36.  Issuance of a claim will not be taken as unreasonable simply because it turned out to be unsuccessful or simply because it is ambitious.  (Ho Wai Leung v Wan Chi Kuen [2001] 2 HKLRD 284)  The factors that the court will consider include whether the claim is entirely devoid of merit to have brought before this court, and whether the nature of the action is one that is more appropriately brought before a tribunal which allows legal representation.  (Ho Wai Leung, supra; Wong Wai Tak Belinda, supra)

37.  The total amount of the plaintiffs’ claims in this action was about $338,000, which is within the jurisdiction of the District Court.  A substantial part of it relates to the unsuccessful claim for the loss of the 1^st Car valued at $325,695.06. Having taken into account all the circumstances, including the nature of the dispute and the evidence available to the plaintiffs before trial, I do not consider it unreasonable to have commenced this claim in the District Court. The plaintiffs were eventually unsuccessful on the claim for the loss of the 1^st Car because they could not prove on balance that the defendant has lost the car key.  This is a decision made after consideration of the evidence at trial. 

38.  At trial, there were extensive legal arguments on the preliminary issues and main action involving the law of evidence on admissibility of prior criminal conviction, recognition of foreign penal code, the law of bailment and the law on duty of care in the case of negligence.  It is not unreasonable to have brought this case before this court that allows legal representation.

39.  The costs of this case should be taxed on the scale of the District Court.

Indemnity basis

40.  I have decided that the plaintiffs should have the costs of this action to be taxed on the District Court scale. It is not necessary to consider the defendant’s argument that he should be entitled to costs on an indemnity basis.  I would mention that even if it is necessary for me to consider this issue, this is not a case that justifies costs on an indemnity basis.

41.  The basis for taxation in a hostile litigation should, as a starting point, remain to be on a party and party basis.  To justify for an award of costs on an indemnity basis, there shall be evidence showing that the losing party’s conduct was unreasonable to the extent of a more venal kind and in some sense wicked. As held by the Court of Final Appeal in Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114 :-

“To qualify for costs on an indemnity basis, the successful party should show some special or unusual feature in the case. The proceedings must be instituted or prosecuted in circumstances as to constitute an affront to the court. Usually there must be something disgraceful in the conduct of the losing party or his legal representatives such as to cause the court to feel a proper sense of indignation. Normal litigious hostility would not suffice.”

42.  The facts identified by the defendant to support the contention of oppression are (1) the plaintiffs’ withdrawal of a claim for legal costs and administration fees, the withdrawal of the plea of malice and the amendment to reduce the claimed amount for the loss of the 1^st Car, all made on the first day of the trial; (2) the unsuccessful application for inserting a new cause of action; (3) the unsuccessful claims for the penalty paid for the traffic offences in the PRC; and (4) the final amount of damages awarded was within the jurisdiction of the Small Claims Tribunal.

43.  I do not agree with the defendant that the withdrawal or amendment of part of the plaintiffs’ claims in the beginning of the trial were oppressive.  This was not a point taken by the defendant at trial when the applications were made.  Quite the contrary, the defendant made no objection to these amendments and withdrawal when they were made. The application for including a new cause of action was immediately rejected by this court without causing any unnecessary costs and expenses.  There was nothing oppressive by bringing the claims which turned out to be unsuccessful.

Order

44.  The defendant was not successful in varying the costs order.  The defendant shall pay the plaintiffs the costs of this action and the costs of this application, if not agreed, to be taxed on a party and party basis on the scale of the District Court with certificate for counsel.