CHOI PAK SUM v. LAM LUNG KI AND ANOTHER

HCPI 529/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 529 OF 2008

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D E C I S I O N

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Introduction

1.  This is the Plaintiff’s application to vary my costs order nisi made on 3 December 2010.  The facts of the case, my finding of fact and reasons for the costs order nisi were given in my judgment (“Judgment”).  Putting it very briefly, the Plaintiff, who was unemployed, suffered injury in an accident inside the Defendants’ restaurant. She filed a grossly exaggerated claim for damages for personal injuries exceeding $3 million by making a fictitious claim for loss of future earning.  The Defendants denied liability dishonestly alleging that the accident occurred outside the restaurant.  I dismissed the claim for loss of future earning and awarded the Plaintiff damages in the sum of $213,760 with interest.  I made the following costs order nisi that:

(a)   the Defendants shall pay half of the Plaintiff’s costs at the District Court scale;

(b)   the Plaintiff shall pay the Defendants’ costs at the High Court scale less half of those costs at the District Court scale;

(c)   all costs shall be assessed on indemnity basis, to be taxed if not agreed; and

(d)   the Plaintiff’s own costs shall be taxed in accordance with the Legal Aid Regulations.

2.  The Plaintiff sought to vary item (b) of the costs order nisi.  Mr Law, counsel for the Plaintiff, called item (b) as “wasted costs”.  The Plaintiff’s grounds for variation of the costs order nisi are: (1) that the Defendants in denying liability were as dishonest as the Plaintiff in making an exaggerated claim and hence should not be awarded all the wasted costs; (2) that item (b) was unfair to the Plaintiff as it had the effect of compensating the Defendants for defending the liability and general damages issue on a defence which never existed; and (3) that the proper costs order would have been for the Plaintiff to pay the Defendants half of the difference between the Defendants’ costs at the High Court scale and District Court scale. 

3.  Mr Law also intimated that the costs order nisi had aroused much discussion among personal injuries practitioners because it was unjust and had the effect of encouraging defendants to put up fictitious defences in the hope of winning the liability issue and with the comfort that in case they lose they would be compensated part of their costs if, by inadvertence, the plaintiffs had chosen the wrong forum.

The costs order nisi explained

4.  In paragraphs 72 and 73 of my Judgment, I set out a summary of the case and my finding of fact.  In paragraph 74, I set out the reasons for making the costs order nisi.  These paragraphs are reproduced hereunder:

“72. At the end of the day, what is this action all about? The Plaintiff is a divorced and unemployed housewife living with her two sons on public assistance of $8,000 to $9,000. I mention this not with the least disrespect or sense of discrimination but as part of the necessary background which explains in part the reasons for my award in damages. The Plaintiff had an accident inside the Defendants’ restaurant in Mong Kok on 9 July 2007 at 11 pm. She was taken to Kwong Wah Hospital by ambulance for treatment. She discharged herself against medical advice in order to look after her sons. On her way home to Yuen Long, she made a detour to Mong Kok Police Station to make a report expressly for the purpose of this civil action. At some stage, she must have come up with the idea of turning the misfortune into a small fortune by fabricating a claim for loss of earnings.

73. On my finding of fact, the Plaintiff went to the length of fabricating her impending employment as a masseuse and tutor at a guaranteed salary of $20,000 with Telbo Sauna, procuring Lee to sign the two documents and procuring Lau to give false testimony in support of her claim in excess of $3 million. She was only entitled to an award of $213,760. The Plaintiff obtained legal aid to launch this action in the High Court which she should have commenced in the District Court, had she acted honestly. The Defendants were made to incur excessive costs in defending the action. Of course, the Defendants also fabricated a defence that the accident occurred outside the restaurant. Basically, the case turned out to be dishonesty against dishonesty. The true facts have now been sorted out. What costs order should I make?

74.    I think it appropriate to apportion the costs on the liability and ordinary damages issue and the loss of earnings issue equally and treat the Plaintiff as successful on the former and the Defendant on the latter issue.  In a normal case, the costs of one successful party in one issue would cancelled out the costs of the other successful party in the other issue, resulting in no order as to costs.  In the present case, had the Plaintiff honestly commenced proceedings in the District Court without the claim for loss of earnings, she would have been entitled to half of the costs she incurred from the Defendants but at the District Court scale and the Defendants would not have wasted their costs in defending both issues in the High Court.  The Defendants would of course have to incur costs in defending the liability and ordinary damages issue in the District Court.  They should bear those costs as they are solely to blame for defending on a defence which never existed.  Those costs would be half of what they now incur for defending the two issues but at the District Court scale.  Thus, the Defendants’ wasted costs is the difference between the costs they now incur at the High Court scale less half of those costs at the District Court scale.  Despite the Defendants are unsuccessful on the liability and ordinary damage issue, justice would require that they be compensated by the Plaintiff for the wasted costs.  In view of the conduct of the parties, all costs should be assessed on indemnity basis.  The Plaintiff may set off the costs to be paid to the Defendants against the costs she is awarded.  I believe, the end product of the computation will be a balance in favour of the Defendants which the Defendants would be entitled to set off against the award of damages.”

5.  Though no complaint was raised by the Plaintiff as regards items (a) and (c), I shall explain the rationale behind the making of the entire order nisi as the order has to be understood as a whole. 

6.  To start with, I apportioned the costs in prosecuting and defending the liability and general damages issue and loss of earning issue equally.  The parties had no complaint about such apportionment.

7.  Under item (a) of the costs order nisi, I awarded the Plaintiff her costs in the liability and general damages issue as half of her costs in this action, but at the District Court scale, which were what she was entitled.  The reduction in scale was not a penalty to the Plaintiff or compensation to the Defendants.  This item was the costs which the Defendants had to pay the Plaintiff.  To penalise the Defendants for their dishonesty, those costs were to be taxed on indemnity basis under item (c). The Plaintiff had no complaint about item (a).

8.  As the Plaintiff dishonestly commenced action in the High Court, the Defendants were entitled to be compensated their wasted costs for having been wrongfully caused to defend the action in the more expensive forum instead of in the District Court.  Item (a) contained no element of compensation or discount for the Defendants’ wasted costs for having to defend, though unsuccessfully and dishonestly, in the wrong forum.  On the above apportionment, the Defendants’ wasted costs would be half of the costs at the High Court scale which they actually incurred less those costs at the District Court scale which they ought to have incurred had the Plaintiff commenced action in the appropriate forum.        I call these costs “the Defendants’ wasted costs in the liability and general damages issue”. 

9.  In respect of the loss of earning issue, the Plaintiff was the loser.  Not only that she was not entitled to her costs, she might be liable to pay the Defendants’ costs.  In the exercise of my discretion in costs,            I ordered her to pay the Defendants’ costs.  On the above apportionment, the Defendants’ costs should be half of their costs at the High Court scale.    The Plaintiff could not complain about the scale of costs, since it was she who brought the proceedings in the High Court.  Because of her dishonesty, the costs were also ordered to be assessed on indemnity basis.  I call these costs as “the Defendants’ costs in the loss of earning issue”. 

10.  When the Defendants’ wasted costs in the liability and general damages issue were added to the Defendants’ costs in the loss of earning issue, the simple result was that the Defendants were entitled to the entirety of their costs at the High Court scale less half of those costs at the District Court scale.  That was how item (b) of the costs order nisi was computed.

Discussion

11.  Immediately, Mr Law’s misapprehension about item (b) became apparent.  He mistook item (b) as the Defendants’ wasted costs only when they were not.  As analysed in paragraphs 8 to 10 above, item (b) was made up of two elements: the Defendants’ wasted costs for having been wrongfully made to defend the liability and general damages issue in the wrong forum plus the Defendants’ costs in having successfully defended the loss of earning issue.  I think Mr Law’s misapprehension arose out of his misunderstanding of how item (b) was computed and his ignoring the Defendants’ entitlement to costs for having succeeded in defending the loss of earning issue. 

12.  As for the costs formula suggested by Mr Law, it was incidentally exactly the same as the Defendants’ wasted costs in the liability and general damages issue I assessed in paragraph 8 above.  It would be inadequate to replace item (b) by that formula, because the Defendants would then be left without costs despite having succeeded in defending the loss of earning issue dishonestly raised by the Plaintiff.  As I said, this was a case of dishonesty against dishonesty.  In the circumstances, there was no reason why the Plaintiff should be relieved of the costs consequence of her dishonesty.  As between dishonest parties, the rule that costs follow the event would best serve the ends of justice.  Applying Mr Law’s logic, to relieve the Plaintiff of the costs consequence would encourage others to make exaggerated claims.  Mr Law was absolutely right in his assessment of the wasted costs, but was wrong in treating those costs as the totality of the Plaintiff’s costs liability.  He wholly ignored the Plaintiff’s liability for costs in respect of the loss of earning issue.

13.  Mr Law then argued that item (b) would have been justified had the Defendants admitted liability and/or made adequate payment into court.  Again this argument was based on his misunderstanding of what constituted item (b).  Had the Defendants done so, item (a) would have to be reduced substantially in quantum and the Defendants’ wasted costs in the liability and general damages issue would not arise.  With the liability and general damages issue out of the way, the Defendants’ costs in the loss of earning issue would simply be half of the present costs (which included costs for two issues) at the High Court scale.  Quantum-wise, those costs would be similar to what was awarded under item (b) as it now stands.      If the Defendants denied liability but mistake putting up a false case,     they would still be liable in costs but not on indemnity basis and would  also be entitled to wasted costs.  Anyway, this is irrelevant to the present discussion.  

14.  Mr Law submitted strongly that there was a sense of injustice felt among personal injuries practitioners in that item (b) had the effect of compensating dishonest defendants in the liability issue for their costs and of encouraging them to put up fictitious defences in the hope of winning the liability issue and with the comfort that in case they lose they would still be compensated part of their costs if, and I emphasise “if”, the plaintiffs had chosen the wrong forum.  To the extent that the Defendants’ wasted costs in the liability and general damages issue had the effect of allowing them to claw back some of their costs in defending that issue, Mr Law is right.  That is the natural consequence of a wasted costs order.  It must not be forgotten that the Defendants should not have been made to incur those costs at the higher scale, but for the Plaintiff’s dishonesty.  The Defendants were entitled to be compensated and the Plaintiff penalized. 

15.  As for the effect of encouraging fictitious defences, the scenario painted by Mr Law would only arise if a plaintiff grossly and dishonestly exaggerates his claim, which I hope is not of frequent occurrence.  The present case was one of gross dishonesty.  It was a deliberate choice of wrong forum.  A defendant who raises a false defence will invariably be penalised in costs as the Defendants were in the present case under item (a).  I do not think the peculiar facts of the present case will have the effect of encouraging defendants to put up fictitious defences.  In fact, their solicitors would have advised or even warned them not to.  Judicial experience has no difficulties in distinguishing between a deliberate and dishonest choice of forum from an inadvertent one.  The court has very wide discretion in costs.  The discretion will be exercised fairly and taking into account all the circumstances of the case including the conduct of the parties.  In a case of genuine mistake in choice of forum, the court’s discretion will be exercised to meet the justice of the case.  The wasted costs to be awarded may be reduced. In an appropriate case, the wasted costs order may not even be made.  Thus, I do not think the worries alerted to by Mr Law, are real.  On the contrary, I think the risk of plaintiffs dishonestly putting up exaggerated claims is a far greater evil which the court should prevent by making wasted costs order.

16.  As for the sense of injustice suggested by Mr Law, in my view, it only arose out of the misunderstanding on the part of Mr Law and those who share his mistaken views as to how item (b) was constituted and their wrongly ignoring the Defendants’ entitlement to costs for having succeeded in defending the loss of earning issue dishonestly raised by the Plaintiff.

17.  Lastly, Mr Law criticised the costs order nisi as creating an undesirable precedent.  With respect, for reasons as explained above, the order was well justified in every respect.  The costs order nisi I made was on the basis of well established legal principles and did not involve any novel principles.  It was made on the peculiar facts of this case and is unlikely to be of use as a precedent.  Furthermore, the court has very wide discretion in costs.  Other judges may evidence their discretion differently under different factual circumstances. 

18.  I appreciate the sympathy felt by Mr Law as the Plaintiff’s award would most likely be absorbed by the costs order.  The costs order nisi was not made without that sympathy in mind.  I had seriously considered whether, in the exercise of my discretion, the two elements making up item (b) could be reduced.  On the liability and general damages issue, the Defendants acted dishonestly in not just testing the Plaintiff’s case but by putting up a positive case and calling witnesses.  I would describe the Defendants’ witnesses as “mildly dishonest”; one of them might even have been honestly mistaken.  They did not try to impress the Court with strong evidence on their part.  The Defendants were penalised with indemnity costs.  Their dishonesty in denying liability was a separate and distinct issue from the Plaintiff’s dishonest choice of forum.  There was no reason why the Defendants should not be compensated for their wasted costs or for those costs to be reduced.  As for the loss of earning issue, the Plaintiff put up a false case. She produced false documents.  She and her witness gave false evidence and tried hard to impress the Court of that falsehood.  The Defendants did no more than by discrediting them through cross-examination.  They were not guilty of any improper conduct in their part of their defence.  I could find no reason to deprive them of their costs or to reduce their costs in the loss of earning issue.  The Plaintiff had to live with her consequence. 

19.  In my view, item (b) of my costs order nisi is a proper costs order to be made in the circumstances.  It was made up of an element for the Defendants’ wasted costs in defending the liability and general damages issue in the wrong forum caused by the Plaintiff’s dishonest and deliberate choice of forum and an element for successfully defending the loss of earning issue in a more expensive forum dictated by the Plaintiff.  This item contained no more and no less than these two elements.  There was no reason for me to vary item (b).

Conclusion

20.  For the above reasons, I dismiss the Plaintiff’s application to review my costs order nisi which is hereby made absolute.  The Plaintiff shall pay the Defendants the costs of this application on the High Court scale, to be taxed on common fund basis if not agreed.  The Plaintiff’s own costs shall be taxed in accordance with the Legal Aid Regulations.