ABLE CONTRACTORS LTD v. WUI LOONG SCAFFOLDING WORKS CO LTD

HCA 2587/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2587 OF 2008

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BETWEEN

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R U L I N G

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1.  On 13 June this year, I handed down judgment by which, in summary, both the plaintiff and defendant succeeded partially on their respective claim and counterclaim. I also made a costs order nisi to the effect that the plaintiff will have its costs on the claim and the defendant will have its costs on the counterclaim.

2.  The plaintiff issued a summons on 27 June 2012, seeking to vary the costs order nisi to the extent that the costs of the action, which would include the costs of the claim and counterclaim, be paid by the defendant to the plaintiff. 

3.  As a starting point, there is no dispute that costs is in the discretion of the court and it is also trite that the discretion should be exercised judicially and fairly.  In Commissioner of Inland Revenue v Hong Kong International Terminals LimitedFACV 8 and 16/2007, at paragraphs 6 and 7, the Court of Final Appeal stated that the general rule is that costs should follow the event, except if and when it appears to the court that, in all the circumstances, some other order as to costs should be made.  There is a discretion in the court to deprive a successful party of the whole or part of its costs because it had caused a significant increase in the length or costs of a proceedings by raising issues on which he did not succeed, even if it was not unreasonable to have raised those issues. 

4.  The plaintiff’s present application is based on a number of grounds.  First, it is submitted that the plaintiff is the real successful party.  There are two broad bases on which the plaintiff put forward this contention.  The first is that the plaintiff had succeeded to the extent of approximately 65% of its claim, that is, it was successful in obtaining a judgment of approximately $1.6 million over a claim of $2.45 million.  Secondly, it was said that the defendant only succeeded as to 15% of its counterclaim and this was worked out on the basis of an award of $210,000 ($0.8 million less the retention money which was not disputed by the plaintiff throughout) over a counterclaim of $1.35 million ($1.9 million less $0.59 million retention money).

5.  Secondly, the plaintiff argued that the costs order nisi does not reflect the fact that the plaintiff was, overall, the successful party and that the costs order nisi is unduly complex when it comes to taxation because the claim and counterclaim were closely intertwined.  Thirdly, the plaintiff referred to a sanctioned offer made very close to the trial.  The offer was for $1.15 million, which was not more advantageous than the judgment awarded to the plaintiff.  Mr Wong submitted that the plaintiff should have the costs of the action, including both the claim and counterclaim, but accepted that the court may reduce the plaintiff’s entitlement to reflect the overall justice of the case, but he the reduction, he said, should not be more than 15%.

6.  On behalf of the defendant, Mr Cheng argues that the defendant is really the ultimate successful party because the plaintiff only succeeded on the point of law as to whether the defendant was entitled to terminate the subcontract on the ground of repudiation, whereas the defendant had succeeded on the majority of the factual issues which include whether there was an agreement on an 1% discount rebate; whether there had been late and underpayment by the plaintiff; and whether the amount of the plaintiff’s claim with regard to the additional costs occasioned by engaging Chit Tat was correct. 

7.  In AL Barnes Ltd v Time Talk (UK) Ltd [2003] EWCA Civ 402, at paragraph 28, the English Court of Appeal considers that in commercial litigation, in deciding the successful party, the most important thing is to identify the party who is to pay money to the other.  Mr Wong relied on this case as demonstrating that the plaintiff is the ultimate successful party. 

8.  I wish to make two observations on this case.  The first is that the English Court of Appeal said that who pays is the most important thing, but it did not consider the fact to be the only thing to be taken into account.  Secondly, and which follows from the first point, is that the court is entitled to also look to other relevant factors in the case.

9.  In the present case, each party succeeds in part of the claim.  The net result is that the defendant has to pay the plaintiff approximately $0.8 million.  However, the length of the trial and the costs would have been significantly reduced but for the disputes of facts on which the defendant was predominantly successful.  In my view, a fair costs order ought to reflect this aspect of the case.

10.  With regard to the conduct of the parties, I do not regard the sanctioned offer made by the plaintiff as a relevant consideration because, firstly, the offer was not met and the difference between the offer and the ultimate award was not insignificant. Secondly, the defendant cannot be said to have acted unreasonably in not accepting the sanctioned offer; nor can the defendant be criticised for not coming back with a counter offer. In this regard, it is relevant to note that the plaintiff’s claim was, to some extent, overstated.  For instance, the costs of the remedial work pleaded in the statement of claim were significantly reduced when the witness statements were filed. There was also no production of the contract entered into with Chit Tat, so that would put the defendant in some difficulty in gauging what would have been a fair or proper amount of the quantum of the plaintiff’s claim. 

11.  What I do recognise is that the costs order nisi will give rise to complexities in taxation as submitted by Mr Wong.  Essentially, the claim and counterclaim in the present case are very closely intertwined, so much so that a rational and sensible apportionment is very difficult when it comes to taxation. 

12.  In the circumstances, I accept an appropriate approach is not to segregate the costs of the claim and counterclaim.  I would therefore take the approach of awarding the plaintiff the costs of the action which would cover both the claim and the counterclaim, and to make a reduction to properly reflect the various matters that I have referred to, including the fact that the defendant was successful on part of the counterclaim and also had succeeded on most of the factual issues and the fact that the length of the trial would be significantly reduced but for these factual disputes.  In these circumstances, I consider that the plaintiff should be awarded 50% of its costs of the action. 

13.  In summary, the application of the plaintiff is allowed to the extent that the costs order nisi is to be varied to the effect that the defendant shall pay the plaintiff 50% of its costs of the action, to be taxed if not agreed.  The defendant shall also pay the plaintiff 50% of the costs of this application.