KO HON YUE v. CHIU PIK YUK,the wife and intended administratrix of LIU CHING LEUNG, deceased AND OTHERS

HCA 3494/2003

[2018] HKCFI 1973

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3494 OF 2003

(Transferred from Labour Tribunal Claim No. LBTC 5616 of 2003)

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DECISION ON COSTS

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A.   The application

1.  On 29 September 2017, I handed down the judgment (“2^nd CFI Judgment”) on the determination of two issues directed by the Court of Final Appeal in [79] of its judgment dated 23 February 2012^[1] (“CFA Judgment”).  My findings on the two issues are: (1) The plaintiff’s contract of employment had not been lawfully terminated by the 1^st defendants (“the defendants”)[2] in July 2001; and (2) The damages to be awarded to the plaintiff for wrongful termination of his employment contract is $354,081.80.  At [106(2)] of the judgment, I made a costs order nisi that the defendants pay the plaintiff the costs of the determination.

2.  By summons filed on 11 October 2017, the plaintiff applies to vary the costs order nisi to the following:

“The defendants pay the plaintiff the costs of the determination and those in respect of the trial of this action. The costs order made in paragraph 267 of the judgment dated 4 August 2008 be varied and rescinded accordingly.”

In effect, the plaintiff seeks to have, in addition to the costs of the determination of the two issues, the costs of the trial of the action.

3.  The defendants oppose the application.  It is, however, clear from the written submission of Mr Lee for the defendants that the opposition only relates to the costs of the trial.  The defendants have not sought to vary the costs order nisi in relation to the determination of the two issues. 

4.  Both sides have lodged written submissions, and have no objection to the application being determined on paper without an oral hearing.

B.   Costs of the trial of the action

5.  In [267] of the judgment handed down on 4 August 2008 after the trial (“1^st CFI Judgment”), there is an order nisi that the plaintiff pays the defendants the costs of this action, including all costs reserved, to be taxed if not agreed.  There was no application to vary the order and it had accordingly become absolute.

6.  On the plaintiff’s appeal, the Court of Appeal allowed the appeal and ordered that the case be remitted to the trial judge for assessment of damages.  In [115] of the Court of Appeal’s judgment[3] (“CA Judgment”), the Court of Appeal made an order nisi that the plaintiff shall have the costs of the appeal and further ordered that “[t]he costs of the trial should wait the assessment of damages”.

7.  On the defendants’ appeal to the Court of Final Appeal, the Court of Final Appeal allowed the appeal in part and remitted the case to the trial judge for the determination of two issues and ordered the defendants to pay 75% of the plaintiff’s costs in the Court of Final Appeal.  The Court of Final Appeal made no order on the costs of the trial.  Neither did it deal with the Court of Appeal’s order relating to the costs of the trial.

8.  The defendants do not dispute that as a result of the order in [115] of the CA Judgment, which has not been reversed or varied by the Court of Final Appeal, the costs of the trial may be dealt with by the trial judge after the determination of the two issues.  I pause here to observe that the Court of Appeal’s order, and similarly the plaintiff’s present application, only touches on the costs of the trial.  The other costs in the action are not engaged in this application.

C.   The arguments

9.  The plaintiff’s principal argument is that the normal rule of costs follow event should apply and he should have the costs of the trial.  This is on the basis that he is the winning party in the action both in terms of liability and quantum, given that in respect of the eight issues identified in the 1^st CFI Judgment (see [32] below), he has succeeded on six of them, and that the failure on the remaining two issues should not justify a different costs order. 

10.  The defendants, on the other hand, argue that the Court should take an overall view of the case.  It is pointed out that the plaintiff has taken a too narrow and simplistic approach in contending that he has succeeded on six of the broad issues in the trial of the action.  The defendants say that the bulk of the trial preparation and the evidence as well as a substantial part of the trial had been devoted to issues and disputes that were decided against the plaintiff. It is further said that the plaintiff had acted unreasonably and improperly in grossly exaggerated his claim and advanced claim that was neither justified nor supported by evidence.   The defendants contend that the plaintiff should be deprived of 75% of his costs and the costs should be taxed on the District Court scale since the amount of damages awarded falls within the jurisdiction of the District Court.

D.   Relevant legal principles

D1.    Order 62 rules 3 and 5

11.  It is trite that costs are in the discretion of the court.  Order 62 rule 3(2) of the Rules of the High Court, Cap. 4A provides that in the exercise of the discretion, the Court shall, subject to Order 62, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs. 

12.  Order 62 rule 5 deals with matters to be taken into account by the court in exercising its discretion as to costs.  With the Civil Justice Reform (“CJR”), the rule was amended as from 2 April 2009 by the Civil Justice (Miscellaneous Amendments) Ordinance 2008, L.N. 152 of 2008 (“Amendment Rules 2008”).  Rule 5(1) now provides that the Court in exercising its discretion as to costs shall, to such extent as may be appropriate in the circumstances, take into account the underlying objectives set out in Order 1A rule 1 (rule 5(1)(aa)); the conduct of all parties (rule 5(1)(e)); and whether a party has succeeded on part of his case even if he has not been wholly successful (rule 5(1)(f)). 

13.  Rule 5(2) further provides that for the purpose of rule 5(1)(e), 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.

14.  The underlying objectives in Order 1A rule 1 include to increase the cost-effectiveness of practice and procedure in proceedings (rule 1(a)); and to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings (rule 1(c)).  

15.  The Court of Appeal had held that, post-CJR, the approach is not to regard the proposition that costs should follow the event as a general rule, but only to operate in shifting to the unsuccessful party the burden of showing why some different approach should be adopted on the particular fact of the case: Wong Kam Tong v. Tin Shing Court, Yuen Long (IO) (No. 2) [2012] 2 HKLRD 1128 at [11] to [13]; Hung Fung Enterprises Holdings Ltd v. Agricultural Bank of China [2012] 3 HKLRD 679 at [100]; Pfeiffer GmbH v. Cheung Hay Kit t/a Sun Wai Construction, unreported, CACV 245/2013, 29 October 2014 at [7] to [10] and [20]; and Chan Shun Kei t/a Chan Shun Kei Construction Works v. Hong Kong Construction (Hong Kong) Limited (formerly k/a Hong Kong Construction (Holdings) Limited, unreported, CACV 192/2014, 7 March 2016 at [24].

16.  At the same time, post-CJR the Courts are more ready to make costs orders that reflect the outcome of different issues, and it is no longer necessary for the winning party to have acted unreasonably or improperly to be deprived of his costs of a particular issue on which he has failed: Pfeiffer GmbH v. Cheung Hay Kit t/a Sun Wai Construction, supra, at [20]; and Chan Shun Kei t/a Chan Shun Kei Construction Works v. Hong Kong Construction (Hong Kong) Limited formerly k/a Hong Kong Construction (Holdings) Limited at [25].  The objective, as explained by Lord Woolf MR in AEI Rediffusion Music Ltd v. Phonographic Performance Ltd [1999] 1 WLR 1507 at 1522-1523, is to require litigants to be selective as to the points to take because “[i]f you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so.”  In this regard, the third principle[4] in Re Elgindata (No. 2) [1992] 1 WLR 1207, 1214 A-C should be less generally followed.

17.  Moreover, Order 62 rule 5(1)(e) and rule 5(2)(a) and (b) also direct the Courts to have regard to the conduct of the parties, including whether it was reasonable to raise, pursue or contest a particular allegation or issue, and the manner in which an allegation or issue was pursued.  Whether a matter is an issue will depend on the circumstances of the case.  However, in the light of the underlying objectives in Order 1A rule 1, in construing rule 5(2), “issue or allegation” should not be narrowly confined: see Wong Kam Tong v. Tin Shing Court, Yuen Long (IO) (No. 2) at [16]; and Chan Shun Kei t/a Chan Shun Kei Construction Works v. Hong Kong Construction (Hong Kong) Limited (formerly k/a Hong Kong Construction (Holdings) Limited at [25].  

D2.   Applicability of the CJR amendments

18.  Ms Wong submits in the reply submissions that I should not take into account the provisions in Order 62 rule 5 that were introduced with the CJR (namely, rule 5(1)(aa), (e), (f), (g) and rule 5(2)) and the principles that flow from them (see [15] to [17] above) because the trial took place before the CJR and parties proceeded on the basis that costs of the trial would be decided on the pre-CJR law, notably the principles in Re Elgindata (No. 2), supra, including the third principle. 

19.  In Wing Fai Construction Co Ltd v. Yip Kwong Robert (2011) 14 HKCFAR 935, the Court of Final Appeal had to consider the extent to which the Court has to, or can, take into account the CJR in considering an application to strike out an action for delay, which was issued before, but heard after, the coming into effect of the Reform.   After pointing out (at [23]) that the important question, when statutory amendments have intervened, is to inquire whether the amended law will apply to events which have taken place prior to the coming into effect of the amendments, the Chief Justice went on to consider the impact of the CJR on proceedings in existence at the time the Reform came into effect and laid down the principles at [25] to [28] as follows:

“25. Clearly, some aspects of the CJR cannot be applied retrospectively. For example, the new O.5 r.1 prescribes that, now, civil proceedings may only be commenced either by writ of summons or originating summons. This provision does not apply to proceedings which, prior to the CJR taking effect, had already been commenced by some other originating process. Such proceedings would continue as though the amendment had not been made: O.5 r.7.

26. Other provisions introduced under the CJR however – indeed the majority of them – will govern pre-existing proceedings. As a matter of commonsense alone, this must be so. This is also the position as a matter of statutory construction. Mr Barlow drew our attention to a number of authorities to this effect; among them the older cases of Gardner v Lucas (1878) 3 App. Cas. 582, at 603 and Attorney General v Vernazza [1960] AC 965 at 975 and 977, where it was held that statutory provisions dealing with procedural matters will generally be construed so as to apply to proceedings of which the Court was seized at the time the provision came into effect.

27. Some provisions in the new Rules under the CJR (I will in this Judgment refer to the Rules of the High Court) are expressly stated to apply to existing proceedings. One of the most important of these is the new O.25 dealing with the case management summons and conference, one of the most important changes introduced under the CJR. The new procedures under O.25 will apply to actions existing at the time the CJR took place: see O.25 r.11.

28.   Even without such express indication that provisions are to apply, it is clear that many other new provisions will apply to existing proceedings.  For example, the underlying objectives (contained in O.1A) will clearly apply to all proceedings which were in existence at the time the CJR took effect.  It would be odd to suggest that they did not.  Nothing in the language of the new O.1A suggests that they would not be so applicable.  Further, it would be not only illogical but contrary to the ethos of the CJR were an artificial distinction to be drawn between proceedings in existence at the time the Reform was implemented and post-CJR proceedings.”

20.  Applying the principles, it was held that applications to strike out for delay must take into account the CJR (at [29]):

“The approach to applications such as the present must therefore take into account the Reform that has taken place in Hong Kong. This was held by Fok JA to be the position: see Winpo Development Ltd v Wong Kar Fu [2011] 2 HKC 524, at 532D-F (para. 31). This was also the position in England when the Woolf Reform took effect – see Biguzzi v Rank Leisure PLC [1999] 1 WLR 1926; John Ian Purdy v Philip John Cambran [2000] CP Rep 67; Annodeus Entertainment v Gibson, unreported, Chancery Division, 2 February 2000. The Court is to apply the law that exists today. However, this is not to say that when an evaluation is made of the conduct of a party in proceedings (in the present case to examine the delay that has taken place), the Court then somehow disregards the circumstances and the statutory structure in place at the relevant time. There is a distinction to be made between, on the one hand, the application of the law that applied pre-CJR in determining an application and, on the other, taking into account circumstances prevailing at the relevant time, when making a factual evaluation (such as whether or not delay in proceedings was excusable). There is no inconsistency between a court adopting the latter approach without applying the former. This is the position in England: see Biguzzi.”

21.  In dealing with the defendants’ complaint of the two-year delay on the plaintiff’s part, the Chief Justice said (at [81(2)]:

“… Mr Barlow made several references to the administration of justice and that under the CJR, delays will no longer be tolerated. These are of course legitimate factors for the court to take into account, but in the present case, there is nothing more than the delay found by Kwan J. As stated earlier, it is important to view any delay in the context in which it arose. The two year delay took place before the CJR came into effect, at a time when the liquidators were perhaps not expected to do as much to move the proceedings along than obviously would be the case nowadays. I daresay a delay in the post-CJR era of two years would almost inevitably involve several breaches of court orders and Rules of court, and would be indicative perhaps of an intention not to bring proceedings to a proper conclusion.”

22.  Ms Wong prays in aid [29] and [81(2)] of the Court of Final Appeal’s judgment to support her argument that in considering the present application the court should not take into account the post-CJR rules on costs and the related case law.  It is argued that when the trial took place in 2007, the parties were proceeding on the basis that the costs of the trial would be decided on the pre-CJR law, and that the conduct of the trial, including all the pre-trial preparations, took place at a time when parties were arguably less of an obligation to be very cautious in terms of costs in raising, pursuing or contesting issues or allegations. 

23.  In my view, these arguments have taken too narrow a view of the Court of Final Appeal’s judgment.  Similar to the case considered by the Court of Final Appeal, the present case is a “straddle” case (see [79]).  Although the trial took place before the CJR with the initial costs order also made before the coming into effect of the amendment to the Rules, it is after the CJR that the question of the costs of the trial was ordered to be re-opened and re-considered. It is thus important to take note of the emphasis of the approach to be adopted for the “straddle” cases as laid down by the Court of Final Appeal.  They are: (1) the CJR should in general apply to proceedings in existence at the time the Reform came into effect, and the majority of the amended or new procedural rules will govern pre-existing proceedings; and (2) importantly, the underlying objectives in Order 1A rule 1 should apply to pre-existing proceedings, even when this is not expressly provided for in the Rules (at [25] to [28] of the judgment, see [15] and [16] above). 

24.  In the context of litigation costs, Order 62 rule 5(1) has made express reference to the underlying objectives in Order 1A rule 1.  In my view, it is plain that the approach to the exercise of discretion on costs should take into account the CJR principles and the related case law, even though the proceedings in question were commenced before the Reform.  The objectives of achieving cost-effectiveness, proportionality and procedural economy are of particular relevance when exercising the judicial discretion on costs.  A key aim of the CJR, as reflected by the underlying objectives, is to reduce litigation costs as much as practicably possible, with an emphasis on proportionality.  Courts should attach significance to these considerations, which involve commonsense notions of reasonableness and a sense of proportion, when making orders for costs. 

25.  Ms Wong also relies on Order 62 rule 37(4) and argues that the amendments made to Order 62 under the CJR are not intended to be applied to costs of events that took place before the CJR.  Order 62 rule 37(4) provides that:

“No costs for work undertaken before the commencement of the Amendment Rules 2008 are to be disallowed if those costs would have been allowed under this Order as in force immediately before the commencement.”

26.  Order 62 rule 37 was added under Part 23 of the Amendment Rules 2008.  It contains transitional provisions, which, as the heading of the rule suggests, relate only to Part 23.  The amendments to Order 62, however, come under two parts. Apart from Part 23, which relates to taxation of costs, there is also Part 22, which concerns general approach to inter-party costs and includes the amendments to Order 62 rule 5 (see [12] and [13] above).  Also included in Part 22 is an amendment to Order 62 rule 7(2), the effect of which is that the underlying objectives in Order 1A rule 1 shall be taken into consideration when the court decides on costs arising out of a party’s misconduct or neglect (see rule 7(2)(aa)).   

27.  As a matter of construction, given that the transitional provisions in rule 37 apply only to Part 23 and that the amendments to Order 62 rule 5 are separately contained in Part 22, rule 37 cannot be read as having any bearing on the application of the amendments to Order 62 rule 5.  I do not accept that rule 37(4) supports or throws light on the argument that the amendments made to Order 62 under the CJR are not intended to be applied to costs of proceedings or events that took place before the CJR.  On the contrary, the clear legislative intent is that the amendments under Part 22 shall apply irrespective of whether the costs in question arose before or after the CJR.  This is evidenced by the fact that: (1) the amendments to Order 62 rule 5 are separately contained in Part 22; (2) the amendment to Order 62 rule 7(2), which similar to Order 62 rule 5(2) makes express reference to the underlying objectives in Order 1A rule 1, is also separately contained in Part 22; and (3) unlike Part 23, Part 22 does not contain any transitional provisions.

28.  Additionally, it should be recognized that independent of the CJR, the Court has always enjoyed a wide discretion on costs, including depriving a winning party of part of his costs to reflect the justice of the case.  Likewise, the manner in which a party conducts his litigation is always a factor that the Court can, and should, take into account in exercising the judicial discretion on costs. 

29.  In short, I am of the view that when deciding how the discretion should be exercised in relation to the present application, I should have regard to the amendments to Order 62 rule 5 and the related case law in [15] to [17] above.   

E.   Application of the legal principles 

30.  The pertinent question in the present application is whether, having regard to the circumstances of the case, costs of the trial should follow event or some other order should be made as to the whole or any part of the costs of the trial. In this regard, the relevant considerations to be taken into account when taking an overall view of the case will include: (1) the extent of the plaintiff’s success; (2) the unsuccessful claim in breach of implied term; and (3) the litigation conduct of the plaintiff.

E1.   The extent of the plaintiff’s success

31.  The plaintiff’s claim for damages was pleaded on three bases: wrongful termination of employment contract, constructive dismissal and breach of implied term.  His pleaded claim was for over $14 million, which was revised to $6.9 million at the trial and further revised downwards to $2.6 million at the hearing of the determination of the two issues remitted by the Court of Final Appeal.  The plaintiff succeeds in the claim for wrongful termination of employment contract but fails in the claim for constructive dismissal and, significantly, the claim for breach of implied term.  He was awarded damages in the sum of $ 354,081.80.

32.  At the trial, on the basis of the pleadings, eight broad issues for determination were identified (see [52] of the 1^st CFI Judgment).  They are:

(1)   Whether the action amounted to an abuse of court process.

(2)   Whether the 1st defendants were correctly sued in this action.

(3)   Whether the Code of Aid (“COA”) formed part of the plaintiff’s employment contract.

(4)   Whether the employment contract was continuous until the plaintiff’s retirement.

(5)   Whether the termination of the plaintiff’s employment was wrongful and whether there was constructive dismissal.

(6)   Whether the implied term pleaded by the plaintiff exists in law and whether there was any breach of it.

(7)   What would be the quantum of damages that the plaintiff was entitled to.

(8)   What was the appropriate costs order consequent upon the order that the 2nd defendant ceased to be a party to the action.

33.  Issues (1) and (2) stemmed from the defendants’ defence.  Issues (3), (4) and (5) concerned the plaintiff’s claim for wrongful termination of employment contract and constructive dismissal.  Issue (4) also impacted on the quantum of damages.  Issue (6) was about the claim for breach of implied term.  There were two limbs to this implied term, the first is a duty to act in good faith towards the plaintiff, and the second is a duty not to damage the relation of confidence and trust between the plaintiff and the defendants (see [9A] of the Re-Re-Amended Statement of Claim).  Issue (7) was on the quantum of damages.  Issue (8) arose from the plaintiff’s acceptance that the 2^nd defendant (i.e. the School) is not a legal person and therefore not a proper party to the action, hence the discontinuance of the action against it.  

34.  In contending that costs of the trial should follow event, Ms. Wong’s principal argument is that the plaintiff has succeeded on six out of the eight issues, namely, Issues (1) to (5) and (7).  Mr. Lee, on the other hand, argues the eight issues identified in the CFI Judgment are broad issues involving a number of sub-issues.  It is said that, upon an analysis of how these issues were fought at the trial and the Court’s reasoning on these issues (see [15] to [46] of the defendants’ written submission), it can be seen that in relation to Issues (1), (2), (5) and (7), although they were determined in his favour, the plaintiff did not succeed in a lot of the sub-issues or arguments under these issues.

35.  In my view, there is force in Mr. Lee’s argument and his analysis of the extent of the plaintiff’s success under these issues.  Under Issues (1) and (2), the plaintiff had advanced a wide range of sub-issues and arguments at the trial, which were not accepted at trial (see [72] to [85] and [108] to [127] of the 1^st CFI Judgment).  In the Court of Final Appeal, Issue (1) was held in favour of the plaintiff[5] on a point not pursued by the plaintiff at the trial, namely, it was too late for the defendants to raise the issue of abuse of process since the action had proceeded to trial.  It should also be noted that, contrary to the thrust of the plaintiff’s position and arguments at trial, the Court of Appeal agreed that the plaintiff’s claim in this action could have been included in the first claim he brought in the Labour Tribunal (see [91] of the CA Judgment).  On Issue (2), the defendants failed because they had not pleaded, and put forward evidence on, the point that they were merely agents of the school sponsoring body[6].  

36.  In the case of Issue (5), the plaintiff had failed in his very extensive challenge to the events associated with the issue, which took up a significant part of the trial (see section E.2 below).  In the 2^nd CFI Judgment (at [14] to [52] and [81] to [88]), I held that, on the facts, the defendants were fully entitled to summarily dismiss the plaintiff, and there were also good and sufficient reasons for terminating his employment under clause 56(g) of the COA.  The termination of the plaintiff’s employment was held to be wrongful because the defendants’ termination letter did not rely on summary dismissal but purported to pay one month’s salary in lieu of notice, which did not conform to the termination procedure in the COA.  As for Issue (7), although the plaintiff was awarded damages, it was based neither on his pleaded case on quantum nor on the case on quantum that was put forward at the trial.  It is also relevant to note the large gap between the amount claimed and the award of damages eventually ordered.

37.  In short, while Issues (1), (2), (5) and (7) were determined in favour of the plaintiff, it is fair to say that he has not been successful with regard to many of the arguments or sub-issues underlying these issues, and also the case he sought to run on these issues. 

38.  Ms. Wong argues in her reply submission that issues that had been identified and framed by the court for adjudication at trial should not, when it comes to consideration of costs, be further divided into sub-issues based on the parties’ arguments made at the trial.  It is said that to deprive the plaintiff of his costs on winning Issues (1) to (5) and (7) is wrong in principle and not supported by authorities.    

39.  In my view, the argument misses the nub of the matter.  It is not about performing a forensic, microscopic exercise of dividing the eight broad issues identified and determined in the CFI Judgment into sub-issues, or splitting up the costs by reference to the sub-issues or the arguments made by the parties at trial.  The true importance of Mr Lee’s analysis, as I see it, lies in affording a broad and overall view of the manner in which the trial was conducted (i.e. whether the plaintiff had been selective in the points to take and how did the plaintiff framed and pitched his case) as well as giving a proper perspective of the outcome of the action (i.e. what is the extent of the plaintiff’s success).  This reflects the objective of what the authorities referred to as the “issue-based” approach, and as explained by Lord Woolf in AEI Rediffusion Music Ltd v. Phonographic Performance Ltd, supra, at 1522-1523 (see [16] above).  It also accords with the approach to costs under Order 62 rule 5(2) and the underlying objectives in Order 1A rule 1.  The manner in which an issue or allegation is pursued, and whether the proceedings were conducted with reasonable proportion and procedural economy are relevant considerations in the exercise of the discretion on costs.  The Court of Appeal had held that what constitutes an issue or an allegation will depend on the circumstances of the case, and it should not be narrowly confined (see [17] above).

40.  The analysis of the plaintiff’s arguments and the sub-issues involved in Issues (1), (2), (5) and (7) and their outcome has brought out the non-selective approach, to the extent of being unrealistic, that the plaintiff had adopted at the trial.  It is not an overstatement to say that his trial legal team had left no stone unturned.  The indiscriminate approach had led to a multiplicity of legal and factual issues and arguments and had unnecessarily added to the complexity and length of the case.  This is a relevant consideration when deciding on the present application not only because of the impact on the costs, but also because it reflects the litigation conduct, both of which be further addressed in the latter part of this decision.   

E2.    The claim in breach of implied term

41.  I turn next to consider the impact of the unsuccessful claim in breach of implied term on the conduct of the trial. 

42.  The trial lasted for 19 days.  The first four days were spent on: (1) the plaintiff’s opening, which dealt primarily with the facts of the plaintiff’s case; (2) the subpoenas issued to the officers of the Education Department to produce documents bearing on the acrimonious dispute between the plaintiff and the two schools involved in this litigation; and (3) the plaintiff’s unsuccessful application to further amend the Statement of Claim to add a new cause of action in breach of statutory duty.  This was followed by 11 days of oral evidence and four days of closing submissions from both sides.    

43.  Among the eight broad issues, Issues (1) to (4), (7) and (8) turned primarily on construction of documents and arguments on law with no or very little factual dispute.  Issues (5) and (6) were, however, different. Although they both involved some legal arguments and Issue (5) also involved the construction of the COA, they were heavily bounded with facts that were hotly contested.  The two issues shared some common factual issues.  The factual disputes concerned the events associated with what the 1^st and 2^nd CFI Judgments referred to as the 1^st to 4^th Warnings/Incidents, the 5^th Incident, and what happened in the 2000-2001 school year when the plaintiff taught at FK-LMST School.  These events formed the subject matter of the bulk of the oral evidence adduced at the trial.  A total of 15 witnesses gave evidence, of which ten were called by the plaintiff (nine factual witnesses and one expert witness) and five were the defendants’ witnesses (four factual witnesses and one expert witness).  The evidence of the plaintiff’s witnesses lasted for six and a half days while that of the defendants’ witnesses took four and a half days to conclude.  The plaintiff and the late principal of the School, who were the key witnesses, each testified for nearly three days.  In terms of documentary evidence, the vast majority of the documents in the 13 trial bundles, two of which were produced by the Education Department on subpoena, were also related to the factual disputes, with the issue on quantum of damages also taking up a fair load of the trial bundles.  

44.  Ultimately, the plaintiff failed badly on the factual disputes, as can be seen from the 1^st CFI Judgment (at [175] to [256]).  Importantly, too, the plaintiff also failed completely on Issue (6) and the claim for breach of implied term.  The implied duty of good faith towards the plaintiff was held not to be a part of the common law (see [171] and [172] of the 1^st CFI Judgment).  It was also held that there was no breach of the implied duty not to damage the relation of confidence and trust in that there was no factual foundation to support a breach (see [175] to [256] of the 1^st CFI Judgment).

45.  This issue/claim of breach of implied term was a distinct and independent issue that stood separately from the claim for wrongful termination of employment contract.  It also entailed a separate claim for damages in that the plaintiff had raised a claim for damage to reputation occasioned by being terminated in the middle of an academic year, which was plainly unsustainable when the evidence did not support a loss of reputation (see [262] of the 1^st CFI Judgment).  

46.  Ms Wong submits that this issue/claim of breach of implied term should not be regarded as distinct and separate in itself as it was closely related to the issue/claim of wrongful termination of employment in that the factual events of the two issues/claims were interwoven.  I do not agree.  It is true that there was some overlapping of the factual disputes of the two claims.  However, given that the plaintiff succeeded on the claim for wrongful termination not on the basis of the factual issues (see [36] above), and that, importantly, most of the factual disputes also relevant to the claim for wrongful termination were held against him, the overlapping is of no consequence.  Further, the evidence on the factual disputes surrounding the issue/claim of breach of implied term had gone considerably further than those of the issue/claim of wrongful termination as the plaintiff was hoping to elicit evidence of spite and ill-motive on the part of the defendants’ witnesses, notably the late principal of the School and the principal and panel chair of the English subject of FK-LMST School, in their dealings with the plaintiff so as to make good his case that the termination of his employment was made in bad faith and the confidence and trust had been damaged.     

47.  There can be no doubt that but for this claim for breach of implied term, the load of oral and documentary evidence and the submissions put forward at the trial would have been substantially reduced. The claim had therefore greatly lengthened the trial and increased the costs.  While post-CJR, the third principle in Re Elgindata (No. 2), supra, should be less generally followed, even if applying the principle, the significant increase in the length and costs of the trial brought about by the failed claim for breach of implied term justifies depriving the plaintiff of part of his costs of the trial.

E.3    The plaintiff’s litigation conduct

48.  Turning thirdly to the plaintiff’s litigation conduct, Mr Lee submits that the plaintiff had acted unreasonably and improperly with particular reference to the advancement and pursuit of the claim for breach of implied term and the grossly exaggerated amount of his claim.

49.  As can be seen from the determination of the issue/claim for breach of implied term in the 1^st CFI Judgment (at [165] to [257]), there was no proper factual or legal basis on which this claim can stand.  It would appear that the claim was advanced to ward off or water down the criticisms of the plaintiff’s teaching standard and performance in lesson and the way in which he related to students and fellow colleagues, which were the reasons underlying the decision to terminate his employment.  The claim was tenaciously fought by the plaintiff, as illustrated by the number of days taken up in examination of witnesses and the volume of documentary evidence.  As the discussion in the preceding section shows, this claim had greatly lengthened the trial, unduly compounded the complexity of the dispute and ultimately augmented the costs of the trial.  I agree that, on an overall view of this case, it was not reasonable for the plaintiff to maintain the claim for breach of implied term and to pursue it in the way he had done.

50.  The manner in which the plaintiff approached the quantum of his claim was even more unreasonable.  He had evidently exaggerated his claim.  It was excessive to have sought damages on the basis of a complete loss of salary, provident fund contribution and dividend of provident fund for 16 years, being the entire period of the remainder of his working life.  This stance was maintained throughout the trial when there was no realistic prospect of substantiating the $14 million claimed on pleading or the $6.9 million sought at trial.  The claim for damage to reputation in connection with the claim for breach of implied term was likewise unwarranted in light of the complete lack of evidential basis.  Furthermore, the plaintiff was ill prepared to prove his case on quantum (see [262] of the 1^st CFI Judgment).  The evidence on quantification of damages had come in dribs and drabs.  Further documents, notably with regard to the provident fund contribution and benefits, continued to be introduced as the trial progressed.  The table of calculation had to be revised in the course of the trial.  Notwithstanding all these, the plaintiff’s evidence on quantum remained patchy and incomplete.  

51.  All in all, the plaintiff had adopted an indiscriminate and wholly disproportionate approach in the conduct of the trial.  I have already alluded to the unreasonable pursuit of the claim for breach of implied term and the improper exaggeration of his claim.   It is also relevant to take note of the wide range of arguments raised under the other issues, such as those under Issues (1) and (2), and the resistance to bear the costs of the mis-joinder of the 2^nd defendant (Issue (8)).  As a result of the plaintiff’s litigation approach and conduct, the trial which was originally set down for 14 days overran to 19 days.  It should also be noted that the trial was preceded by two pre-trial reviews[7] resulting in the discontinuance of the claim against the 2^nd defendant.  Despite further amendments to the Statement of Claim were sought and granted at the second pre-trial review, some two weeks later on the third day of the trial, the plaintiff applied to further amend to add a new claim for breach of statutory duty based on non-compliance of Regulation 76 of the Education Regulations Cap. 279A, which was refused (see the Reason for Decision dated 13 November 2007). 

52.  That the plaintiff had conducted his case at the trial in an unreasonable manner and without any regard to reasonable proportion further justifies depriving him of part of his costs. 

E4.    Exercise of the discretion     

53.  For the reasons set out above, and having regard to the legal principles stated in section D above, this is a clear case for departing from the normal rule of costs follow event.  Even though the plaintiff was awarded damages in the action, he was not wholly successful.  The failed claim of breach of implied term had significantly increased the length and costs of the trial.  His conduct in unreasonably exaggerated his claim, and in adopting an indiscriminate and disproportionate approach to issues in dispute had further added to the costs of the trial.  All these considerations lend support to the defendants’ contention that the plaintiff should be deprived of a significant portion of his costs of the trial.

54.  In considering the extent to which the plaintiff’s costs are to be deprived, I bear in mind that the trial took place before the CJR when litigants and the legal practitioners were less mindful of the importance of achieving cost-effectiveness and reasonable proportion, and adopting a focused and selective approach to the conduct of proceedings.  In all the circumstances of the case, I consider that it is appropriate to deprive the plaintiff of 40% of the costs of the trial.  Had the trial taken place after the CJR, it would have been appropriate to order a greater reduction in the costs to be awarded to the plaintiff. 

F.   Taxation on District Court scale

55.  I turn finally to the defendants’ argument that the plaintiff’s costs should be taxed on the District Court scale.  In Oriental daily Publisher Ltd v. Ming Pao Holdings Ltd (No.2) [2011] 3 HKLRD 425, at [28] to [30], the Court of Appeal proceeded on the basis that where the judgment awarded on a claim brought in the High Court is in a sum within the District Court jurisdiction, the costs will be on the District Court scale unless the High Court is persuaded that, when the plaintiff issued the writ, he had a reasonable prospect of recovering a sum in excess of the District Court jurisdiction.   

56.  The amount awarded to the plaintiff in this case is $354,081.80, which is well within the District Court jurisdiction, which has since 1 December 2003 stood at $1 million[8]. Ms Wong submits that the plaintiff did have a reasonable prospect of obtaining an award in excess of $1 million, relying on two points:

(1)    The Court of Appeal had said that “the plaintiff might be entitled to substantial damages” ([98] and [108] of the CA Judgment).

(2)    There is uncertainty involved in assessing the damages that may be awarded in that much depends on the court’s view on the period of time allowed to the plaintiff to obtain alternate employment.

57.  On the first point, it is important to consider the context in which the Court of Appeal’s comment was made.  In [98] and [108] of the CA Judgment, the Court of Appeal was considering the issue of abuse of process, viz. whether the plaintiff’s claim was liable to be struck out for abuse of process on the basis that the claim could have been included in the earlier claim he brought in the Labour Tribunal and settled with the School.

58.  In this context, the Court of Appeal said at [98]:

“… it is not clear whether the learned judge’s decision to strike out the action was influenced by her view that the plaintiff was only entitled to 1 month’s pay from 13 July 2001 in lieu of notice. On the basis of my judgment, subject to assessment, the plaintiff might be entitled to substantial damages. Had the learned judge decided that the plaintiff might be entitled to substantial damages, I doubt whether she would have struck out the claim.”

59.  The Court of Appeal made the same point at [108]:

“… I believe the learned judge would not have dismissed the plaintiff’s claim for abuse of process had she concluded that he might be entitled to substantial damages.”

60.  The reference to possibility of obtaining “substantial damages” in both paragraphs in the CA Judgment was to contrast the one-month salary in lieu of notice[9], which the plaintiff was found to be entitled to in the 1^st CFI’s judgment.  It cannot be taken to mean that the Court of Appeal was of the view that the plaintiff stood to obtain damages in excess of $1 million.

61.  As to the second point that there was uncertainty in the amount to be awarded by the court in that much depended on what the court would regard as a reasonable period of time for the plaintiff to obtain alternative employment, it cannot serve to advance the plaintiff’s position on this issue for a number of reasons. Firstly, although there is an element of uncertainty regarding the exact amount of damages that the court would award, the quantification is not arbitrary but is based on well-established legal principles.  Ms. Wong has not elaborated on how, in accordance with the legal principles, the plaintiff could reasonably expect to receive an award of damages that came within the High Court jurisdiction.  

62.  The plaintiff’s claim was pleaded on several bases, but ultimately he only succeeded on the basis that the employment contract was not lawfully terminated in accordance with the procedures under Appendix 17 of the COA (see [90] of the 2^nd CFI Judgment).  The Court of Final Appeal had pointed out (at [79(2)] of CFA Judgment) that, in assessing damages on this basis, the objective was to calculate the appropriate period when the plaintiff could be expected to be paid his salary until his employment would have been terminated. On the facts of this case, and bearing in mind the analysis in [94] to [99] of the 2^nd CFI Judgment, there is no realistic basis for expecting the award to exceed $1 million.

63.  Secondly, the issue of what would be a reasonable period of time for the plaintiff to obtain alternative employment is an aspect of mitigation.   The plaintiff’s pleaded case did not appear to have considered this issue and the wider issue of mitigation.  The plaintiff’s pleaded case on damages for wrongful termination was that he should be compensated for the loss of salary and employment benefits for the entire period from the termination of his employment up to his retirement at the age of 60.  In respect of the unsuccessful claims in constructive dismissal and breach of implied term of good faith, the plaintiff sought damages in similar amount.  The plaintiff had maintained this stance throughout the trial, and was only prepared to give credit for the payments already received from the School and the income from being a part-time or substitute teacher.  The amount of damages sought in the pleading and the plaintiff’s quantification of the award he would receive from the court were not tied to any consideration of what would have been a reasonable period for him to obtain alternative employment.  

64.  Thirdly, even if the issue of what would be a reasonable period of time for the plaintiff to obtain alternative employment was engaged on the pleading, it is relevant to consider the observations on the quantum of damages previously made in the 1^st CFI Judgment (at [258] to [263]), which the Court of Final Appeal took note of when remarking that other factors would have to be taken into account if the court had to resort to other methods of assessment. On any realistic view of the case, the award for wrongful termination of the employment, after giving credit to the payments already received and other income received by the plaintiff after termination of employment, would not have exceeded $ 1 million.

65.  In short, I am not persuaded that, when the plaintiff issued the writ, he had a reasonable prospect of recovering a sum in excess of the District Court jurisdiction.  The plaintiff’s costs should therefore be taxed on the District Court Scale.

G.   Costs of this application

66.  On an overall view of this application, the plaintiff and the defendants have each succeeded on some aspects of it and failed on other aspects.  I consider a fair exercise of the discretion is to make no order on the costs of the application.

H.   Disposition

67.  I make the following order on the application:

(1)    The costs order nisi is varied to the following:

(a)   The 1^st defendants pay the plaintiff the costs of the determination, to be taxed if not agreed.

(b)   The costs order made in paragraph 267 of the judgment dated 4 August 2008 be varied and replaced by an order that the 1^st defendants pay the plaintiff 60% of the costs of the trial, to be taxed on District Court scale. 

(2)   There is no order as to the costs of the application.