XCHRX CENTALINE PROPERTY AGENCY LTD. v. LAI YUK CHUN

HCA 18369/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 18369 OF 1999

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D E C I S I O N

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Introduction

1. The Plaintiff estate agency commenced the present action in the District Court against the Defendant to recover commission for selling the Defendant's flat (hereinafter called the "Property"). The Defendant counterclaimed for breach of fiduciary duty and contract. The whole case was transferred to the Court of First Instance upon the application of the Defendant on the ground that the counterclaim exceeded the jurisdiction of the District Court. On 7 December 2001, I dismissed the Plaintiff's action on the ground that the Defendant was discharged of her obligation to pay the commission by reason of the Plaintiff's breach of an agent's duty of good faith. On the counterclaim, I was not satisfied that the Defendant had lost any substantial chance of selling the Property for more than that at which it was sold, had there been no breach of duty on the part of the Plaintiff. In fact, I found that the chance she could sell, whether to the purchaser or to anybody else, for more than $11.48 million was unreal and non-existent. I therefore awarded the Defendant nominal damages of $1 only to mark the recognition of the infringement of the Defendant's rights and the Court's disapproval of the Plaintiff's conduct. I also ordered that the Defendant shall have costs of the action against the Plaintiff.

2. After my order has been sealed and perfected, the Plaintiff issued the present summons seeking an order that the costs of the action be taxed on the District Court scale. The Defendant opposes the application. The issues raised by the Plaintiff's application are (1) whether I have jurisdiction to review or clarify my order which has been sealed and perfected; and (2) if yes, what is the proper scale of costs to be allowed.

Jurisdiction to review or clarify a sealed and perfected order

3. Miss Chau, for the Defendant, refers to Lee Wai Man v Tso Yan, HCA 11301 of 1997 and submits that once an order has been sealed and perfected, the Court has no jurisdiction to vary the order. Miss Liu, on behalf of the Plaintiff, argues that what the Plaintiff is seeking is clarification as to the scale of costs which has not been indicated in the order and not variation. In Lee Wai Man v Tso Yan, Master Wilson ordered "costs to be taxed if not agreed" without indicating the scale of costs (hereinafter called "the first order"). Later, on an application by letter from the plaintiff's solicitors, Master Wilson ordered the costs to be taxed on the High Court scale (hereinafter called "the second order"). On appeal, Sakhrani J held that the second order was not a mere clarification of the first order but was in effect a variation and that Master Wilson did not have jurisdiction to vary the order which has been sealed and perfected. Miss Chau submits that the present case is on all fours with Lee Wai Man v Tso Yan and that I have no jurisdiction to determine the scale of costs now.

4. In my view, a careful reading of the case does not support Miss Chau's proposition. Sakhrani J's decision in Lee Wai Man v Tso Yan was founded on two basis: firstly, Master Wilson's first order that costs were to be taxed if not agreed and secondly, section 43(2) of the then District Court Ordinance which provided:

"Where any proceedings in which the Court has jurisdiction are brought in the Court of First Instance costs shall be recoverable on such scale and in such amount as would have been recoverable if the proceedings had been brought in the Court, unless the proceedings were so brought by leave of the Court of First Instance or unless the Court of First Instance otherwise orders."

After referring to the above section, Sakhrani J took the view that as Master Wilson had not invoked the "unless provision" in section 43(2) to order otherwise, then by leaving costs to the taxing master, the effect of the first order was that the taxing master shall award such costs as would have been recoverable if the proceedings had been brought in the District Court. He then held that the words in the first order are clear and the ordinary principles of taxation apply so that costs shall be taxed on the District Court scale. It was on that basis that Sakhrani J held the second order was not a mere clarification of the first order but was in effect a variation. That must be correct. But in my view, Lee Man Wai v Tso Yan did not establish any principle of law that an order, once sealed and perfected, is not subject to clarification. I think it is always open to the Court which made an order to give directions or clarifications so as to give effect to its order rather than to allow it to be frustrated by misinterpretation by or misunderstanding of the parties. Accordingly, I hold I have jurisdiction to give clarification, but not to make alterations. For reasons as given below, I consider the present case distinguishable from Lee Man Wai v Tso Yan.

Jurisdiction over the counterclaim

5. To determine the appropriate scale of costs to be allowed, the first question is whether the counterclaim is within the jurisdiction of the District Court. If it is not, the proceedings have been properly brought in the Court of First Instance and costs should be taxed on the Court of First Instance scale. If it is within the jurisdiction of the District Court, section 44A of the District Court Ordinance applies.

6. The Defendant counterclaimed $1,520,000 which she says was the difference between the actual selling price of the Property and the price which she would only have agreed to sell had she known that the purchaser was her neighbour of the flat below. The amount as claimed would definitely be outside the jurisdiction of the District Court. However, for reasons as given in my judgment dated 7 December 2001, I found that the chance of the Defendant being able to sell for any price higher than that which she had actually sold was unreal and non-existent. I therefore awarded her nominal damages of $1 only. That award is certainly within the jurisdiction of the District Court. It is well settled that in determining whether the proceedings were within the jurisdiction of the District Court for the purposes of the equivalent of section 44A of the District Court Ordinance, what mattered was the amount actually recovered and not the amount originally claimed: see Lee Wah Man Weaving Factory v Hau Lap Co CA 48/1984 and Solomon v Mulliner [1901] 1 QB 76. Thus, despite the amount of the counterclaim, the proceedings were within the jurisdiction of the District Court.

The appropriate scale

7. While the amount actually recovered is conclusive as to whether the proceedings were within the jurisdiction of the District Court for the purpose of section 44A of the District Court Ordinance, it does not necessarily follow that the scale of costs to be allowed must be on the District Court scale if the proceedings were within the jurisdiction of the District Court. The principles applicable to costs in respect of proceedings transferred from the District Court to the Court of First Instance and vice versa are summarised in section 44A of the District Court Ordinance. The section provides as follows:

"44A. Costs in transferred cases, etc.

(1) This section applies to an action or proceedings transferred -

(a) from the Court of First Instance to the Court;

(b) from the Court to the Court of First Instance; or

(c) from a tribunal to the Court.

(2) The court or tribunal that orders the transfer may make an order for costs prior to the transfer and of the transfer of proceedings.

(3) The costs of the whole proceedings both before and after the transfer are in the discretion of the court to which the proceedings are transferred subject to any order made by the court or tribunal which ordered the transfer.

(4) The court to which the proceedings are transferred has power to order costs and order the scales on which the costs of the several parts of the proceedings are to be taxed. The costs of the whole proceedings are to be taxed in the court to which the proceedings are transferred.

(5) In an action founded on contract, quasi-contract or tort, for the proceedings in the Court of First Instance before the transfer, the Court may, if satisfied that there was sufficient reason for bringing the action in the Court of First Instance and subject to any order of the Court of First Instance, allow costs on the Court of First Instance scale.

(6) Where proceedings in which the Court has jurisdiction are brought in the Court of First Instance, the Court shall order costs on the scale and in the amount as if the proceedings had been brought in the Court, unless the proceedings were brought by leave of the Court of First Instance or unless the Court of First Instance otherwise orders."

8. As provided for in section 44A, in general, the award of costs of such transferred proceedings and the scale on which such costs are to be taxed are within the discretion of the transferee court, i.e. the Court of First Instance in respect of the present proceedings. Subsection (3) gives the transferee court complete discretion to order costs of the whole proceedings, both before and after the transfer, subject to any order made by the transferor court prior to the transfer. Subsection (4) gives the transferee court power to order costs and determine the scale on which such costs are to be taxed. For actions founded in contract, quasi-contract or tort transferred from the Court of First Instance to the District Court, subsection (5) specifically gives the District Court discretion to allow costs on the Court of First Instance scale for proceedings prior to the transfer if satisfied that there was sufficient reason for bringing the action in the Court of First Instance. This is in fact a specific application of subsection (4), but obviously does not apply to the present proceedings. Subsection (6) makes it mandatory for costs to be allowed on the District Court scale where proceedings over which the District Court has jurisdiction were brought in the Court of First Instance, unless the proceedings were brought with leave of the Court of First Instance or unless the Court of First Instance orders otherwise. As the present proceedings have been transferred with leave from the District Court to the Court of First Instance, the mandatory provision in subsection (6) has no application to the present proceedings. I have complete discretion under subsection (4) to allow costs on the District Court scale or Court of First Instance scale as I see fit.

9. In my opinion, the single and most important factor affecting the exercise of my discretion is whether a plaintiff (or the Defendant in the present counterclaim) had reasonable ground for supposing the amount recoverable by him would be in excess of the District Court jurisdiction. I accept that the Defendant is a credible witness. I accept her evidence that by reason of her previous discord with Mr Wong Senior of the flat below, she would not wish to sell the Property to him or his son at a reduction from her asking price of $13 million. According to expert opinion, $9.8 million was the highest valuation obtainable for the Property at the time. After a series of negotiation, she obtained an offer of $11.48 million from Mr Wong, which was $1.68 million above the market price. Apart from Mr Wong, no other viewers had made any offer to purchase the Property. Thus, the Defendant could not reasonably believe that she could sell for more than $11.48 million to any purchaser other than Mr Wong.

10. In that setting, the question is: was her belief that Mr Wong would offer her more than $11.60 million for the Property so as to bring her claim just beyond the jurisdiction of the District Court reasonable, had she known that Mr Wong was her neighbour of the flat below? In my judgment of 7 December 2001, I have found that Mr Wong would not make any higher offer as he had other choices, including purchasing another property near his daughter's home which his wife has a higher preference. However, what I am now concerned is not whether Mr Wong would pay more, but whether the Defendant's belief that Mr Wong would offer a higher price reasonable, had she known of Mr Wong's identity. In view of the market condition then, an offer of $11.60 million would be 18% above the highest valuation of the Property available or 36% above the lowest valuation, or 27% above the average of the two valuations. The Defendant might subjectively and even honestly believe Mr Wong would pay more than $11.60 million. But that, in my view, is her own wishful thinking, which is totally out of line with reality. While the Defendant's Property was the only one in Pearl Court that was being offered in the market and Mr Wong was very earnest in acquiring it so as to be able to live near to his father, there must be a limit which one is prepared to go above the market price for the convenience of living near to one's parents. This is just common sense which must be obvious to any reasonable seller. The Defendant could not ignore that reality and believe that her Property could fetch whatever price she demanded. She must realise that there was a limit beyond which Mr Wong would not go but would chose to purchase other property instead. She must have that in mind when she sought to transfer her counterclaim to the Court of First Instance. The fact that I only awarded her nominal damages weighs heavily against the reasonableness of her belief. I am far from being satisfied that at the time of the application for transfer, the Defendant had any reasonable ground for supposing the amount recoverable by her would be in excess of the jurisdiction of the District Court. It was unreasonable for her to have brought the proceedings in the Court of First Instance. Even though she was successful, she was only awarded nominal damages. In my view, she is only entitled to have her costs on the District Court scale.

11. The present case is distinguishable from Lee Wai Man v Tso Yan. In that case, the proceedings were commenced in the Court of First Instance, without the need for leave. According to section 43(2) of the then District Court Ordinance, in the absence of an order to the contrary by Master Wilson, costs shall be awarded on the District Court scale. Hence, that section made the order clear and there was no need for clarification. Any subsequent attempt by Master Wilson to reverse the general rule provided by the section was an attempt to vary and not to clarify. In the present case, the proceedings were brought in the Court of First Instance with leave. That the leave was obtained by consent does not alter the fact that the proceedings were transferred with the leave of the Court of First Instance. The mandatory provision under section 44A(6) does not apply. In accordance with section 44A(3) and (4), the scale of costs to be allowed is at the total discretion of the transferee Court. Hence, without any clarification on my part, there is no way the applicable scale of costs could be ascertained. As the scale of costs to be allowed is a matter of discretion of the trial judge, it is all the more appropriate for that discretion to be exercised by the trial judge than by the taxing master putting himself in the shoes of the trial judge and guessing how the trial judge would have exercised that discretion. Thus to specify the scale of costs applicable in this case is a clarification of the order and not a variation. This is what distinguishes the present case from Lee Wai Man v Tso Yan.

Conclusion:

12. Accordingly, in clarification, I make an order that costs of the action be taxed on the District Court scale. In addition, I order that the costs of this application, including the costs of the hearing, be to the Plaintiff, and to be taxed on the District Court scale if not agreed.