V SHAPES MOULDERS LTD v. PACIFIC DUNLOP GARMENTS LTD

HCA 493/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 493 OF 2008

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D E C I S I O N

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1.  This is an application to vary my costs order nisi arising out of the judgment dated 8 June 2011 wherein I ordered 75% of the Defendant’s costs be paid by the Plaintiff. The Plaintiff now seeks an order that there be no order as to costs or that the Plaintiff do bear only 25% of the Defendant’s costs.

The Principles

2.  The starting point on costs is Order 62 r3(2) of the Rules of the High Court which provides that costs for proceedings other than interlocutory proceedings shall follow the event excepts where it appears to the Court that some other order should be made.  In Re Elgindata Ltd (No.2) [1993] 1 All ER 232:

“The principles are these. (1) Costs are in the discretion of the court. (2) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made. (3) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or a part of his costs. (4) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but order him to pay the whole or a part of the unsuccessful party’s costs.”

3.  The discretion to depart from the normal rule that costs should generally follow the event should be approached with due circumspection: Commissioner of Inland Revenue v. HIT Finance Ltd, FACV 8 and 16 of 2007; Yiu Hon Lam v. Chan Yu Chun CACV 383 of 2007.  Where plaintiffs in an action for breach of contract recover only nominal damages and do not establish anything which is of the least value to them, they are not to be regarded as successful plaintiffs, and the court will normally treat the defendants as having succeeded and award the defendants the costs of the action: Hong Kong Civil Procedure 2011, paragraph 62/2/6. 

4.  The correct approach in principle in money claims is that it is important to identify the party who has to pay money to another when deciding what order for costs to make when both the claim and counterclaim are successful.  Where the value of a defendant’s counterclaim amounted to one quarter of the claimant’s claim the English Court of Appeal quashed an order that the claimant should pay the defendant’s costs on the counterclaim and ordered the defendant to pay 75 percent of the claimant’s costs of the claim and counterclaim taken together.  See Hong Kong Civil Procedure 2011, paragraph 62/5/7. 

Application of the Principles

5.  I am grateful to Mr Poon for the Plaintiff for setting out the table of the amounts claimed and counterclaimed and the percentage thereof awarded to each party.  However, it is important not to decide costs according to a score sheet on how many issues had gone one way or the other.  It is also important that litigants should know that if they defended issues unnecessarily, they could be penalized in costs.  See Yiu Hon Lam v. Chan Yu Chun CACV 383 of 2007.  Therefore, instead of entering into minute analyses of each head of claim or counterclaim, I consider an overall view would be more useful.

6.  The claim for about $2,000,000 was virtually uncontested.  The counterclaim for about $4,400,000 was successful only to the extent of about $700,000. The damages which the Plaintiff or the Defendant has recovered were more than nominal.  Just by looking at the financial result, the Plaintiff was the overall winner. 

7.  Insofar as the various issues raised were concerned, all arguments on facts and law were centred on the Defendant’s defence and counterclaim.  On the most substantial issues like yellowing of mould shell fabrics, apex problem (which took up the most time), I have ruled in favour of the Defendant.  On the question of yellowing of the foam cups and whether there was a contract in respect of Style 2749, I have found in favour of the Plaintiff.  Overall, each party had acted reasonably in running its respective case.  There was no significant increase in the length or costs of the proceedings.  The fact that the Plaintiff lost on some of the issues did not detract from the fact that it was the overall successful party.  With respect to Mr Suen for the Defendant, though the Plaintiff’s claim was virtually uncontested, the counterclaim was not a truly separate cross-claim.  The claim and counterclaim were interwoven. When one asks rhetorically, could the Plaintiff have sought summary judgment and obtained a stay of execution pending trial of the counterclaim, the answer must have been no.  

8.  Having considered all the circumstances, and the fact that the Plaintiff does not seek costs in its favour, I adopt the best scenario that the Plaintiff proposes and order that there be no order as to costs.

9.  In terms of costs of this application, as the Plaintiff successfully varies the cost order nisi, I order that there be summary assessment of the Plaintiff’s costs in the amount of $40,000 as claimed.

10.  I thank counsel for their assistance.