TAI YIP DYEING FACTORY LTD (In Liquidation) v. KONG HOI SANG

HCA 2917/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2917 OF 2004

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RULING  ON  COSTS

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Background

1.  This was an action for slander of title.  The allegation made by Tai Yip was that by attempting to register a writ by way of lis pendens against certain real estate owned by Tai Yip, in circumstances where he was not entitled to register the writ, Mr Kong slandered Tai Yip’s title to that property.

2.  After a full trial, over three days, in which all matters were in issue, I found in favour of Tai Yip.  I made a declaration that Mr Kong’s attempted registration in the Land Registry of the writ against Tai Yip’s property was wrongful, and awarded nominal damages in the sum of $100 together with costs.

The application:

3.  Mr Kong now applies to vary the order for costs.

4.  It has been agreed between the parties, correctly in my view, that Tai Yip is entitled to the costs of the action up to and including 23 December 2004, to be taxed on a party and party basis, on the District Court scale.  It has also been agreed, again correctly in my view, that, to the extent that Mr Kong may be entitled to any costs, he is entitled to an order that such costs be paid in priority to other claims in the liquidation of Tai Yip, including the costs of the winding up.

5.  The issue between the parties is, effectively, as to the incidence of costs of the trial.

The law:

6.  The historic starting point for the consideration of costs in nominal damages cases is the well-known sentence from Maule J in Beaumont v Greathead (1846) 2 CB 494 at 499:

“Nominal damages are a mere peg on which to hang costs.”

7.  The leading modern authority on the incidence of costs when nominal damages are awarded is Anglo-Cyprian Agencies Ltd v Paphos Industries Ltd [1951] All ER 873 at 874, per Devlin J, as he then was:

“No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.  In applying that rule, however, it is necessary to decide whether the plaintiff really has been successful, and I do not think that a plaintiff who recovers nominal damages ought necessarily to be regarded in the ordinary sense of the word as a ‘successful’ plaintiff.  In certain cases he may be, e.g., where part of the object of the action is to establish a legal right, wholly irrespective of whether any substantial remedy is obtained.  To that extent a plaintiff who recovers nominal damages may properly be regarded as a successful plaintiff, but it is necessary to examine the facts of each particular case.”

8.  In that case, on a claim for £2,028 damages of £52 were awarded.  Notwithstanding the award of damages the court found that in reality it was the defendant who had been successful and the defendant was awarded costs.

9.  In Alltrans Ltd Express v CVA Holdings Ltd [1984] 1 WLR 394 CA, Anglo-Cyprian was expressly approved, and Stephenson LJ placed emphasis on the practical improbability of the acceptance of a “ritual” payment into court.  He said, at 402H,:

“… what Devlin J. said is of great weight and does apply very forcibly to the facts of this case.  To have paid £2, or possibly £5 or £10, into court in this case would have been very near to a ‘ritual’ act.  It would not have been taken out; the plaintiffs would have gone on with their mouth opened wider for a much larger sums; they did go on, having established a breach of contract, in the hope of getting a large sum of damages for breach; in pursuit of that object they took up the time of the court and, more important from the point of view of this appeal, put themselves in the defendants to considerable expense..”

10.  In Alltrans, liability had been determined under Order 14 and the case was concerned only with the assessment of damages.  Nominal damages were awarded, and on the appeal concerning an award of costs to the plaintiff, the award was reversed and cost ordered to the defendant.

11.  The effect of O 62 r 2(4) is that when the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs, but made ordered him to pay the whole or a part of the unsuccessful party’s costs.  This implies that a successful party who neither improperly nor unreasonably raises issues or makes allegations on which he fails ought not to be ordered to pay any part of the unsuccessful party’s costs: see Re Elgindata Ltd No 2 [1992] 1207 at 1214 B-D.  It must also follow that where a party elects to fight specific issues, and loses on those issues, that factor may be taken into account in the balance in assessing the incidence of costs.

12.  These specific principles must be read in the light of the fundamental jurisdiction of the High Court in costs.  By s 52A(1) High Court Ordinance Cap 4, and O 62, which provide that costs of and incidental to proceedings in the Court of First Instance shall be the discretion of the Court, and the court shall have full power to determine by whom and to what extent the costs are to be paid.  This discretion must be exercised judicially, the practice being described in Hong Kong Civil Procedure, 2007 §62/2/6, in the following terms:

“Wide though the discretion is, it is a judicial discretion, and must be exercised on fixed principles, that is according to rules of reason and Justice, not according to private opinion (Sharpe v Wakefield [1891] AC 173), or even benevolence, (Kierson v Joseph L. Thompson & Sons Ltd [1913] 1 KB 229, 231), and the exercise of discretion even by a judge sitting alone must be justified (Ritter v Godfrey [1920] 2 KB 47).”

13.  These are the principles that I apply in considering this matter.

The position of the parties as to costs:

14.  The submission made by Mr Pao is that Tai Yip should be ordered to pay Mr Kong’s costs in the action from 24 December 2004, onwards, since it failed to obtain more than nominal damages from the court, and the declaration granted is in substance only a reflection of the nominal damages awarded.

15.  Ms Wu’s submission is that the making of the declaration and the award of nominal damages is sufficient to entitle Tai Yip to an order for costs against Mr Kong.  In the alternative is submitted that Mr Kong ought to pay at least a proportion of Tai Yip’s costs, or that having regard to all of the circumstances there ought to be no order for costs.

Discussion:

16.  I accept Mr Pao’s submission that in the context of this case the declaration obtained by Tai Yip does nothing more than reflect the nominal damages award.  A declaration will be of real value when it recognises a right that may be required to be enforced in the future.  The most obvious example is in a case of trespass.  In such cases there will be no doubt at all that even if the plaintiff wins only the declaration and nominal damages, the plaintiff will be the “substantial” winner of the litigation, for he will have established a right that will be enforceable in the future.

17.  In the present case the establishment of the right is in relation to something that has occurred in the past and will not occur again.  The establishment of the right was an essential step in the progress towards the resolution of the issue of damages.  In cases such as this, it is open to argument that the plaintiff who succeeds with a declaration and an award of nominal damages is not, to use the expression in Anglo-Cyprian, a successful plaintiff.  But that does not conclude the matter, because, as Devlin J. said in Alltrans, it is necessary to examine the facts of each particular case.

18.  An essential step in these proceedings for Tai Yip was to first establish the basis for the claim for damages.  It was required to establish that a slander of title had occurred.  Mr Kong, at no stage, conceded that there had been a slander of title in the attempt to register the writ.  The attack mounted by Mr Kong was on three fronts. 

19.  First it was asserted, not in interlocutory proceedings as would have been appropriate, but only at trial, that there was a fundamental defect in the statement of claim, in that the actual words used were not set out in the statement of claim.  Second, it was contended that there was insufficient proof that there had been a malicious falsehood.  Third it was contended that in any event no falsity was established. 

20.  Mr Kong also attacked the claim for damages, arguing first that even if the words constituted a malicious falsehood, the evidence was insufficient to establish that the slander of title was the predominant or effective cause of a potential purchaser not entering into a sale and purchase agreement, and second that there was no proof of causation of loss.  In these arguments he was successful.

21.  However, the first three arguments failed.  It was only on the ground that Tai Yip could not establish that the malicious falsehood was a predominant or effective cause of there being no sale and purchase agreement, that Mr Kong succeeded.

22.  It was open to Mr Kong throughout this matter to have admitted that his actions and words constituted a malicious falsehood.  To have done so would have saved a great deal of time.  Mr Pao puts it that had Tai Yip not insisted on its claim for damages there would have been a reduction in the papers, and the trial would have not taken three days, but would have comfortably finished in one day.  The reverse may equally be said.  Had Mr Kong admitted his malicious falsehood and confined the conduct of his defence to the claim for damages the trial would have comfortably finished in one day.

23.  It was said for Mr Kong that it is manifestly unfair for the entire costs of the action to be awarded against him, because it was due to no fault of his own that the action and the trial were in fact more complex and expensive than it should have been.  Mr Kong brought this matter upon himself by his own conduct, conduct which I have found to be based upon a false assertion, made in the pursuit of self-interest, to obtain a commercial advantage.

24.  While it is correct that the award of nominal damages does nothing more than reflect the declaration obtained, in the exercise of the discretion in relation to costs it is appropriate to take into account Mr Kong’s own conduct as has been described above.

25.  In my view it would be quite wrong to permit a party, guilty of committing a malicious falsehood, who escapes substantial monetary liability for that malicious falsehood by the coincidence of subsequent events, from the liability of costs, if he should choose to resist the allegation that his conduct was as alleged.

26.  For these reasons I have come to the conclusion that an examination of the particular facts of this case demonstrates that, to an extent both parties have been, and may be regarded as, successful in the action.  Tai Yip has been successful in establishing its assertion that Mr Kong’s actions constituted a slander of title.  That is an assertion that was resisted right through trial.  By the coincidence of subsequent events Mr Kong has been successful in resisting the claim for damages.

Conclusion:

27.  Weighing all of the foregoing matters, in the exercise of my discretion, I am satisfied that the proper order for costs on the trial should be that there be no order for costs.  The effect of this order is that each party shall bear their own costs on the trial.

28.  Mr Kong has failed in his application for an order that Tai Yip should pay his costs on the trial.  Tai Yip has its costs by agreement to 23 December 2004, but has not succeeded in obtaining an order for costs thereafter.  It seems to me that it follows that there should be no order for costs on the costs argument.