CHUNG YUEN YEE v. SAM WOO BORE PILE FOUNDATION LTD AND OTHERS

FACV No. 7 of 2012

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 7 OF 2012 (CIVIL)

(ON APPEAL FROM CACV NO. 145 OF 2010)

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JUDGMENT ON COSTS

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Mr Justice Chan NPJ:

1. On 10 May 2013, we handed down judgment allowing the appeal by the first, third and fourth defendants (D1, D3 and D4) and dismissing the plaintiff’s (P) claim against them. We directed that costs be dealt with by way of written submissions.

2. D1, D3 and D4, in their three written submissions, seek costs against both P and the second defendant (D2) in relation to the whole proceedings, on an indemnity basis as against P and on a party to party basis as against D2, with a certificate for two counsel in relation to the appeals to the Court of Appeal and to this Court. They also oppose the making of an order that their costs as against P be paid by D2 on behalf of P.

3. In her written submissions, P asks for an order that D2 should pay P her costs in the whole proceedings and pay D1, D3 and D4 their costs in relation to the appeals to the Court of Appeal and to this Court. Counsel however puts forth a number of alternatives: the first alternative is that D2 should pay P her costs of the whole proceedings and that D1, D3 and D4 should pay P her costs of the appeal before this Court; the second alternative is that if P is required to pay any costs to D1, D3 and D4, the Court should make a Sanderson Order directing D2 to pay such costs to D1, D3 and D4; and the third alternative is that D1, D3 and D4 should be deprived of their costs on some of the issues taken in this case. Finally, P also asks for costs over the issue of apportionment of liability to be borne by the defendants.   

4. D2 did not file any written submissions. However, after the other parties had done so, its solicitors wrote a letter to the Registrar informing the Court that after protracted negotiations, the parties have reached agreement as follows:

(1) P on the one part and D2 on the other part have agreed that D2 shall pay P her costs of this appeal and in the courts below, such costs to be taxed if not agreed on a party to party basis; and

(2) D2 on the one part and D1, D3 and D4 on the other part have agreed that D2 shall pay D1, D3 and D4 their costs of this appeal and their costs in the courts below on the issue of apportionment of liability amongst the defendants, such costs to be taxed if not agreed on a party to party basis. 

5. D2 does not dispute a certificate for two counsel in relation to the costs on appeal. It has also indicated in the letter that D2 is prepared to pay D1, D3 and D4 their costs in defending P’s claim in the courts below and their costs on appeal to this Court on a party to party basis. This proposal was rejected by D1, D3 and D4. In an attempt to assist the Court, D2 has submitted in the same letter that there is no basis for making an order for costs on an indemnity basis. It also asks for costs as against D1, D3 and D4 in relation to these applications for costs in the event the Court accepts its submission.

6. As a result of these submissions and agreements, it would seem that there are two remaining disputes on the question of costs:

(1) whether P or D2 should be responsible for the costs of D1, D3 and D4 in defending P’s claim at first instance and on appeal; and

(2) whether such costs should be payable on an indemnity basis.

7. With regard to the costs of D1, D3 and D4, it is important to note that as pleaded in the pleadings and as canvassed at trial and on appeal to the Court of Appeal, the parties had raised three main issues for determination: (i) liability of the defendants; (ii) contributory negligence on the part of Mr Lai; and (iii) apportionment of liability of each defendant. While the apportionment of liability amongst the defendants is usually necessary in a multi-defendant action, contributory negligence, depending on the circumstances of the case, does not always arise for determination. In the present case, D1, D3 and D4 chose to actively litigate this issue. Although they were successful before the trial judge (and this resulted in P’s cross appeal), the Court of Appeal overturned the judge’s finding on contributory negligence. On appeal to this Court, this issue was no longer pursued and only the liability of D1, D3 and D4 was argued. Thus, it would appear that for whatever reason, it was considered that contributory negligence was an issue which should not have been taken as part of the defence in the lower courts.

8. In these circumstances, we take the view that although D1, D3 and D4 which are ultimately successful are entitled to their costs in defending the P’s action, it would not be unfair to order that they should only be allowed two thirds of their costs of the proceedings at first instance and on appeal to the Court of Appeal and to make no order as to costs on P’s cross appeal.

9. As to the costs of appeal before this Court, both P and D2 are respondents and both strenuously resisted the appeal lodged by D1, D3 and D4 and defended the finding of liability made by the lower courts. We are of the opinion that in these circumstances, it would only be fair that P and D2 should each bear 50% of the costs of D1, D3 and D4 in this appeal.

10. As to whether D2 should be ordered to pay on behalf of P the costs incurred by D1, D3 and D4 in defending P’s claim in the courts below and on appeal to this Court (i.e. the costs referred to the preceding two paragraphs), we take note of the following matters.

11. First, the defendants were associated companies within the same group, having common directors and shareholders, sharing the same office, workshop, equipment, machinery and vehicles, and having a common interest in the same contractual work. Secondly, although there was an employment contract between D2 and Mr Lai, for some reason better known to the directors of D1 and D2, it was D1 which paid for Mr Lai’s salary and claimed in its records and tax returns that Mr Lai was its employee. Thirdly, D2, in its defence, apart from disputing its own liability, made the same allegations as P did that the accident was caused and contributed to by the negligence of D1, D3 and D4 and adopted P’s particulars of negligence. Fourthly, in the appeal before this Court, D2 also took the same line as P and resisted the appeal by D1, D3 and D4.

12. In other words, D2 not only denied liability, but also put the blame on D1, D3 and D4 and caused P to institute and/or continue the proceedings against D1, D3 and D4. In the circumstances of the present case, P might be legitimately concerned that if she did not join D1, D3 and D4, she might end up having sued the wrong employer and the wrong tortfeasors. We consider that this is an appropriate case to make a Sanderson order against D2 with regard to the costs which P would have to pay to D1, D3 and D4 in defending P’s claim and appealing to this Court against the lower courts’ decisions. See paragraphs 62/1/5 and 62/1/6 on page 1110 of Hong Kong Civil Practice 2014.

13. With regard to the request by D1, D3 and D4 for their costs to be paid on an indemnity basis, while we have concluded that there was no basis to hold D1, D3 and D4 responsible for what happened to Mr Lai and dismissed P’s claim against them, for the same reasons which we have stated in the preceding paragraph and given the facts of this case (which were seriously challenged at trial) and the views taken by the lower courts, one would understand why P would choose to join D1, D3 and D4 as defendants in addition to D2. She was entitled to test before the trial judge the statements made by some of the witnesses for the defendants and the evidence given at the death inquiry (which obviously served a different purpose). In the circumstances of this case, we do not think it is appropriate to order costs to be paid on an indemnity basis and we decline to do so.  

14. For the reasons given above, we would therefore make the following orders:

(1) D2 shall pay P her costs of this appeal and in the courts below;

(2) D2 shall pay D1, D3 and D4 two thirds of their costs in defending P’s claim in the courts below;

(3) D2 shall pay D1, D3 and D4 their costs of the appeal before this Court; 

(4) D2 shall pay D1, D3 and D4 their costs in the courts below on the issue of apportionment of liability amongst the defendants;

(5) All costs to be taxed if not agreed on a party to party basis; and

(6) There be a certificate for two counsel in relation to the appeals in the Court of Appeal and in this Court.

15. As sought by D2, we also order that D1, D3 and D4 do pay P and D2 their costs in relation to the present applications for costs.