WOONSING LTD. v. WONG YI MING

HCA 6744/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6744 OF 1998

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JUDGMENT ON COSTS

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1. On 30 November 2000, I gave judgment for the plaintiff on its claim and dismissed the defendant's counterclaim. The question of costs was reserved pending submissions from the parties. The reasons for deferring the judgment on costs appear at pages 36 and 37 of the written judgment. The plaintiff's counsel and the defendant's solicitors have since sent in their written submissions on the appropriate costs order to be made.

2. The costs to be determined cover the various interlocutory applications made shortly before and during the trial and also the costs of the action generally. The interlocutory applications include:

(1) the defendant's application to re-amend the Defence and Counterclaim to add an alternative plea of rectification and further items of damages, which was allowed;

(2) the plaintiff's application for further and better particulars of the Re-Amended Defence and Counterclaim, which was unsuccessful;

(3) the plaintiff's application to re-amend the Reply and Defence to Counterclaim, which was allowed;

(4) the plaintiff's application to amend the Statement of Claim to add the alternative claims of money had and received and of failure of consideration, which was allowed;

(5) the defendant's application to re-re-amend the Counterclaim to add a claim for damages in breach of contract, which was refused;

(6) the defendant's application for leave to adduce the statement and statutory declaration of the 2 estate agents by way of hearsay evidence, which was refused; and

(7) the plaintiff's application to call its solicitor as a witness, which was unsuccessful.

3. On these interlocutory applications, I consider that the normal rule as to costs should apply. The defendant had argued that for his application to re-amend the Defence and Counterclaim, he should be awarded the costs of the application in that the alternative plea of rectification was related to the plaintiff's original claim of mistake, which was eventually not relied upon. It is true that the plaintiff succeeds in this action on the basis of its alternative pleas, which were introduced by way of amendment in the course of the trial. It is also true that the original plea of mistake has no prospect of success. It may be that the defendant's decision to add an alternative plea of rectification was prompted by the plaintiff's initial claim of mistake; the plea of rectification, however, was introduced as a counterclaim. While disputing that there was any mistake as contended by the plaintiff, the defendant's case, pleaded in the alternative, is that there was a unilateral mistake on his part as to the car park to be sold under the 2nd Agreement and this mistake was known to the plaintiff. On this basis, rectification was sought. This plea of rectification, hence the re-amendment, were not occasioned by nor to deal with the plaintiff's claim of mistake. Therefore, notwithstanding that the plaintiff 's claim in mistake is a bad one and that the plaintiff only succeeds on the alternative claims, there is no reason for the defendant to be awarded the costs of the re-amendment, bearing also in mind that the re-amendment involves also adding further items of damages.

4. The plaintiff should therefore be entitled to the costs of and occasioned by the defendant's application to re-amend the Defence and Counterclaim, and also the costs of the applications for leave to adduce hearsay evidence and for leave to re-re-amend the Counterclaim. On the other hand, the defendant should be entitled to the costs of and occasioned by the plaintiff's applications to amend the Statement of Claim and to re-amend the Reply and Defence to Counterclaim, and also the costs of the unsuccessful applications for further and better particulars and for leave to call the plaintiff's solicitor as a witness. However, I do not intend to make separate orders for these costs, having regard to a number of matters. Firstly, these interlocutory applications were all heard either immediately before the commencement of or during the trial. Save the one relating to admission of hearsay evidence, they were short applications. It will be a rather cumbersome task to apportion the time and costs incurred for each of these applications when it comes to taxation. Secondly, for the reasons set out below, this is a case where I consider that the plaintiff should not be awarded the full costs of the action generally. Hence, it is both practical and convenient that a single costs order be made, and that the parties' costs entitlement in respect of these interlocutory applications be taken into account in arriving at the global order.

5. I turn now to deal with the costs of the action generally. I had in my Judgment pointed out that without the late amendment to the Statement of Claim, the plaintiff could not have succeeded on its claim and would have failed in the counterclaim, too. Counsel for the plaintiff takes issue on my view on the counterclaim. It is argued that the Counterclaim includes a claim to forfeit the deposit such that the Court is bound to adjudicate on the validity of this claim. That indeed is the position. Counsel for the plaintiff further argues that the amendment to the Statement of Claim did not affect the trial or the position taken by the parties. That I do not agree. It is of course for the defendant to establish repudiation by the plaintiff so as to justify forfeiting the deposit. On the facts of the case, the plaintiff had from the very beginning and throughout contended that it was entitled not to proceed with the 2nd Agreement by reason of a material mistake. The plaintiff said that there was no repudiation because the 2nd Agreement was void for mistake. Failure of consideration was never mentioned in the correspondence exchanged between the solicitors. Nor was it being pleaded as a defence to the Counterclaim. Accordingly, had the case proceeded without the amendment to the Statement of Claim, the only issue before the Court would have been whether the 2nd Agreement was rendered void by mistake such that the plaintiff had not repudiated the agreement by not proceeding with it. The Court needed not and would not have considered the issue of failure of consideration. Once the plaintiff failed on the point about mistake, then it would have lost on the claim as well as the counterclaim. The amendment therefore not only affects the claim, but also the counterclaim. It is a material and crucial amendment which has brought about the plaintiff's success.

6. Such a crucial amendment was admittedly sought at the very late stage of the proceedings. The application to amend was made after the plaintiff's only witness had finished his evidence-in-chief. The defendant therefore submits that he should be awarded the costs of the action up to the amendment. His argument is that all along the defendant was asked to meet a case of mistake and only at the last minute that he was landed with a different case. Further, but for the amendment, the defendant would have won the action and be paid his costs. Since the defendant now loses on a completely different basis, it will be unjust if the costs order does not reflect the way the plaintiff's case has evolved.

7. In Choy Bing Wing trading as Bing Choy & Associates v. The Hong Kong & Shanghai Hotels, Limited HCCL No. 8 of 1992 (unreported), the plaintiff amended his claim for fees for services rendered at the close of evidence to include 2 sums due under another agreement. As a result of this late amendment, the plaintiff was awarded a judgment sum in excess of the amount already paid into court by the defendant. Kaplan J. in awarding the defendant the bulk of the costs of the action, said at p.3:

"The plain fact of the matter is that this case was opened on the basis of an oral agreement. Perhaps after realising that this oral agreement was unlikely to succeed Mr. Harris came up with a last minute way of putting the case which found favour with me. Most of the time of the case was taken up with evidence and submissions dealing with the oral agreement point. That point failed. The success that the Plaintiff enjoyed came substantially from the new way of putting his case.

Pleadings serve a useful purpose in our adversarial system in framing the issues which the court is asked to decide. On the pleadings prior to the last amendment, the Plaintiff was unlikely to achieve much success in this action. The Defendant came to meet one case but lost on another lately introduced. To fail to give effect to the way the Plaintiff's case has evolved would be to do an injustice to the Defendant."

8. It is to be noted that the defendant in that case had made a payment into court and the plaintiff's claim would have been beaten down but for the late amendment. In the end, Kaplan J. ordered the plaintiff to pay the defendant the costs of the action incurred after the time for accepting the payment into court had expired. Despite this distinguishing feature, the above observations of Kaplan J. apply with full force to the present case.

9. Counsel for the plaintiff, on the other hand, refers to the case of Kaines v. Osterreichische [1993] 2 Lloyd's L.R. 1 as supporting his argument that the present case does not warrant a departure from the general rule that costs should follow event. That case involves a claim for breach of a sale contract. The defendant disputed both liability and quantum. In the course of the trial, the plaintiff amended to add an alternative claim on the measure of damages to be awarded and succeeded on the alternative claim. Steyn J. declined to make any special order for costs. In awarding costs of the action to the plaintiff, the learned judge was influenced by the consideration that the action would still have been vigorously resisted even if the amendment had been made at an earlier stage.

10. It is trite that the court has a discretion in matters of costs and the discretion has to be exercised judicially and fairly. Where a party's success is substantially brought about by a late amendment, it is open to the court to take this into account when deciding on the costs of the action. I agree with Kaplan J. that it will be doing injustice to the losing party if the costs order does not reflect the way in which the successful party has conducted his case, particularly when the new plea is all along available.

11. In the present case, the pleas of money had and received and failure of consideration are open to the plaintiff right from the beginning. The plaintiff had however chosen to go down the path of mistake, a plea which is clearly misconceived. Not only this, the plaintiff did not confine its claim to the return of the deposit, but had gone so far as to claim a declaration of interest in the Flat and CP13. The plaintiff subsequently consented to a dismissal of this part of the claim after the defendant had paid into court the amount of the deposit claimed and in order that the defendant may re-sell the property. The plaintiff's decision to base its claim on mistake has complicated these proceedings unnecessarily. Solicitors for the defendant is also right in submitting that but for the late amendment, the plaintiff would have lost the action and be liable to pay the costs of the action. The amendment has thus brought prejudice to the defendant for which he ought to be compensated.

12. The court is, at the same time, entitled to take into account whether and how the amendment has affected the conduct of the litigation. The case of Kaines v. Osterreichische is no more than an illustration of this approach. The defendant in that case disputed both liability and quantum. As the amendment only goes to the calculation of damages, it would not have affected the conduct of the defence even if the alternative claim were sought at an earlier stage. As Steyn J said, the defendant would still have vigorously resisted the action irrespective of the amendment.

13. In the present case, it cannot be said with certainty whether the defendant would have approached the action differently or at all had the plaintiff's claim be founded solely on failure of consideration and money had and received. Counsel for the plaintiff argues that the amendment does not in any way change the course of the trial or the evidence led. I agree that the added claims do not involve adducing new facts and evidence. The argument, however, overlooks the fact that although the amendment was pleaded in the alternative, the plaintiff has in effect abandoned the original claim. Despite that, the plaintiff never made this clear. Had the plaintiff's claim and case been confined to the plea of failure of consideration right from the beginning, or had the plaintiff made it plain at the commencement of the trial that the claim of mistake was not relied upon, the trial would have been shorter. To say the least, the defence final submissions on mistake would not have been necessary. The amendment, coupled with the manner in which the plaintiff conducted its case, does have an impact on the conduct of the proceedings. This is a matter to be taken into account in considering the appropriate costs order to be made.

14. In my view, this is a case where the normal rule as to costs should not apply. It will not be just to award the plaintiff the full costs of the action notwithstanding that it has succeeded on its claim and the defendant has failed in the counterclaim. I consider that the plaintiff's costs of the action, which covers both the claim and the counterclaim, should be reduced by one-half. This is to give recognition to the way in which the plaintiff's case has evolved and to compensate the defendant for the prejudice occasioned by it. It has also taken into consideration the parties' respective entitlement as to costs on the interlocutory applications mentioned above.

15. Accordingly, I order that the defendant pays the plaintiff half of the costs of the action, to be taxed if not agreed.

16. The plaintiff has also asked that the interest on the money paid into Court by the defendant be paid out to the plaintiff instead of to the defendant as previously ordered. Since the judgment in favour of the plaintiff includes interest on the deposit, it will be appropriate for the interest accrued on the amount kept by the Court be paid out to the plaintiff in satisfaction of the judgment on interest and for any surplus thereof to be paid out to the defendant. And I so order.