LI HON MAN AND ANOTHER v. CRYSTAL KNITTERS LTD.

HCA 9169/1998
HCA 7028/1998
HCA 5524/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9196 OF 1998
ACTION NO. 7028 OF 1998
ACTION NO. 5524 OF 1998

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(Actions consolidated by Order of Master Poon dated 22 October 1998)

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DECISION ON COSTS

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1. These consolidated actions came on for trial before me in March and April and judgment was handed down on 25 May 2001. In the judgment I made an order nisi as to costs. Firstly, I ordered that there be no order as to costs as between the 1st Plaintiff and the Defendant and secondly, the 2nd Plaintiff had half of her costs of her claim and the costs of the counterclaim.

2. Today the parties appear before me and seek to convince me to vary the order nisi as to costs. There are also two summonses before me issued respectively by the Plaintiffs and the Defendant. These summonses were adjourned to me by Master C B Chan and as agreed between the parties, the determination of the question of the costs order would dispose of the other two summonses. The Plaintiffs essentially agree with the order nisi as to costs that was made. However, they submitted that they should be entitled to the costs of their claims and the counterclaim should the Defendant seek to vary the order nisi as to costs. I now turn to the application made by the Defendant in connection with the order nisi as to costs.

3. Essentially, the Defendant referred to three matters which were not before me when the order nisi as to costs was made. Firstly, there were payments made into court under O. 22 r. 14 by the Defendant in these proceedings. Secondly, there were Calderbank letters in these proceedings leading up to the trial of these actions. Thirdly, there were certain offers made by the Defendant on the first day of trial to the Plaintiffs. It is submitted by Mr Chan, counsel for the Defendant, that if these three factors are relevant they should be considered as factors in favour of the Defendant on the question of costs on balance. I shall now look at each of these factors separately.

4. Firstly, regarding payment in it is accepted that the payments made into court respectively on 13 November 1998 and 9 January 1999, in the sum of $88,881.20 to the 1st Plaintiff and a total sum of $6,000.00 to the 2nd Plaintiff fell short of the amounts I adjudged in favour of the Plaintiffs respectively in these proceedings. I think it is also accepted that in so far as the payments made into court fell short of the amounts actually adjudged, I have no discretion to order costs otherwise then in accordance with the normal circumstances.

5. Mr Chan next referred to a number of without prejudice save as to costs - so called Calderbank letters in these proceedings starting with the Defendant's solicitors' letter dated 1 April 1998. There was a long series of correspondence ending with what is described as an important letter dated 14 February 2001. In the first letter from the Defendant's solicitors, the 1st Plaintiff and 2nd Plaintiff were respectively offered sums which fell short of the amounts adjudged at the end of these proceedings. There were also condition precedents for the 1st Plaintiff in connection with this offer regarding certain allegations which formed the subject matter of the counterclaim. The offer was not accepted and there followed a series of letters exchanged between the parties. What next happened as more significant was a letter dated 23 January 1999 from the Defendant's solicitors to the Plaintiffs' solicitors. This was a letter in response to the Plaintiffs' solicitors letter dated 23 January 1999. As of 23 January 1999, there was a difference between the parties as to the amounts to be paid to the 1st Plaintiff. There appeared to be no dispute regarding the amounts that should be paid to the 2nd Plaintiff. There were disputes regarding the costs of the proceedings and the withdrawal or dismissal of the Defendant's counterclaim. By a letter dated 22 April 1999 from the Defendant's solicitors to the Plaintiffs' solicitors, the Defendant increased the offer substantially to the 1st Plaintiff. But there was no offer as to costs. Finally on 7 February 2001, the Defendant's solicitors wrote to the Plaintiffs' solicitors offering to pay the 1st Plaintiff $175,817.00 in full and final settlement of the 1st Plaintiff's claim in these proceedings. The Defendant also offered to pay the 2nd Plaintiff $6,000.00 in full and final settlement of her claim in these proceedings. The Defendant offered to withdraw its counterclaim against the Plaintiffs. Upon the foregoing conditions, the 1st Plaintiff was asked to make a written confirmation stating a number of matters which formed the subject matter of the Defendant's counterclaim. Finally, it was proposed that each party should bear its own costs in these proceedings. In response, the Plaintiffs' solicitors wrote on 14 February 2001 agreeing practically to all of the terms save that it was counter-proposed that the Defendant should pay the Plaintiffs costs of the actions, such costs to be taxed on a party and party basis if not agreed. So it would seem that as of 14 February 2001, the only difference between the parties was the costs of the actions.

6. Finally, regarding the third factor referred to by Mr Chan which was an alleged offer made by the Defendant to the Plaintiffs on 19 March 2001 immediately before the hearing of the trial, it is stated in an affidavit of Mr So Chun Kung Andy, solicitor for the Defendant that in the morning of that day, the Defendant made an offer to the Plaintiffs a lump sum of $100,000.00 in settling their entire claims plus a lump sum of $300,000.00 as their legal costs, on condition that (a) the 1st and 2nd Plaintiffs should withdraw their respective claims against the Defendant and (b) produce the bill of their legal representatives for the agreed costs in the amount of HK$300,000.00, and (c) issue a statement stating that Mr Kenneth Lo, Chairman of the Defendant, is an honest man and that he has never agreed to pay the 1st Plaintiff compensation on his termination and that the Defendant at all material time had no redundancy situation and that the Plaintiffs would return to the Defendant video tape and papers, if any, taken by them in the course of their employment. On this basis, the Defendant offered to withdraw its counterclaim. According to the Defendant, the Plaintiffs rejected the offer. At the hearing today, both Plaintiffs do not agree to the facts put forward by the Defendant in the affidavit of Mr So. The 2nd Plaintiff, Ms Chan, says that in fact the offer was withdrawn subsequently. Although neither Plaintiffs had put in any affidavit or affirmation in response, they informed the court that they were not legally represented and hence were not aware that they should put in an affidavit or affirmation in response to Mr So's affidavit.

7. I have considered the above factors and do not find it necessary to conduct an examination as to precisely what happened immediately before the trial of these actions. I think as of 14 February 2001, the difference between the parties was the question of costs of the actions. As of that date it would be difficult to say that either party was being unreasonable. Both parties seemed to be prepared and willing to resolve their differences save as to the costs of the actions. Regarding the situation on 19 March 2001, I do not find it necessary to resolve the differences as to whether the offer was actually withdrawn by the Defendant or whether the offer was exactly in the terms as stated in Mr So's affidavit. What matters is despite the offer, accepting that it was made and not withdrawn in the terms as stated, the counterclaim made by the Defendant was not abandoned - it was pursued with full vigour during the course of the trial.

8. As I indicated, the Plaintiffs succeeded partly in their claims. In so far as the 1st Plaintiff is concerned, he essentially failed in the main part of his claim. He succeeded on his claim for payment in lieu of annual leave and for annual bonus which was either not disputed at the trial or at the conclusion of the trial. But his claims regarding redundancy and the agreement between him and Mr Kenneth Lo at the time of the termination of his employment largely failed. On the other hand, the Defendant's counterclaim against the 1st Plaintiff, again substantially failed. There were a large number of allegations made against the conduct of the 1st Plaintiff by way of the counterclaim. These claims were either withdrawn or failed at the conclusion of trial. The issues between the claim and the counterclaim are the same issues or related or connected issues. As the 1st Plaintiff and the Defendant partly succeeded and partly failed in their respective claim and counterclaim, I thought it was right that there should be no order as to costs between the 1st Plaintiff and the Defendant. Having heard the parties this morning and having further considered the additional factors raised by the parties, I still come to the conclusion that that is the right order that should have been made. I therefore confirm the order nisi I made as to costs as between the 1st Plaintiff and the Defendant, i.e. there should be no order as to costs between the 1st Plaintiff and the Defendant.

9. In so far as the 2nd Plaintiff is concerned, I think she succeeded far more in her claim against the Defendant. I have held and found that she was unreasonably dismissed. On the other hand, she failed also in her redundancy claim. In the circumstances, by way of order nisi, I ordered that she should have half of her costs of her claim. In so far as the counterclaim is concerned, I think again in substance and essentially the Defendant failed on its counterclaim against the 2nd Plaintiff. As a result, I ordered that she should have the costs of the counterclaim and again, having considered further submissions and the additional material before me this morning, I am not convinced that I should change my mind and I therefore confirm that the costs must be for the 2nd Plaintiff as originally ordered by way of order nisi.

10. Having heard the parties further, I make the following additional orders:

(1) There be no order made on the two Summonses adjourned to me by Master C B Chan save that there be no order as to costs on each of these Summonses.

(2) Leave is granted to the Defendant to withdraw its payments made into Court.

(3) The Defendant do pay the 1st Plaintiff the sums adjudged within 7 days.

(4) There be no order as to costs for the hearing today.