WONG LAN AND ANOTHER v. HONG CHANG CONSTRUCTION TRANSPORTATION ENGINEERING CO AND ANOTHER

HCPI 973/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 973 OF 2005

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D E C I S I O N

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1.  The plaintiffs seek to vary the costs order nisi that each party shall bear their own costs on the argument on the scale of costs on taxation.

2.  The case was settled by the plaintiffs accepting payment in under O.62, r.10(2), Rules of the High Court (“RHC”).  The amount was within the jurisdiction of the District Court.  The plaintiffs argued that they were entitled to costs taxed on the High Court scale on the ground that:

(1)      the party accepting payment in in satisfaction of the action under O.22, r.3(1), RHC is automatically entitled to taxed costs on the High Court scale under O.62, r.10(2), RHC as held in Wellegant Development Limited t/a Tak Shing Manufactory v. Fine Telecom Limited t/a Remington Company HCA 2132/2001 per DHCJ L Chan (date of decision: 22 February 2007);

(2)      alternatively, costs should be awarded on the High Court scale as there was reasonable prospect of recovering damages above the District Court jurisdiction when the writ was issued as pursuant to Lai Ki v. B&B Construction Co Ltd [2003] 3 HKC 322 per Seagroatt J.

3.  I did not follow Wellegant and ruled against the plaintiffs on ground (1).   However, I ruled in favour of the plaintiffs on ground (2).

The relevant principles

4.  The relevant principles on the award of costs are set out in Re Elgindata Ltd. (No. 2) [1993] 1 A11 ER 232 per Nourse LJ at p.237f-h:

“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. … the fourth (principle) implies that a successful party who neither improperly nor unreasonably raises issues or makes allegations on which he fails ought not to be ordered to pay any part of the unsuccessful party’s costs.”

5.  Re Elgindata Ltd (No. 2) have been followed by the Court of Appeal in Hong Kong in La Chemise Lacoste SA v Crocodile Garments Ltd [2000] 4 HKC 317, 327 per Rogers VP:

“The first point is that the costs should generally follow the event.  That rule does not cease to apply simply because a successful party has raised issues or made allegations which failed.  However, if he has caused a significant increase in the length of the trial and, thereby, increased the costs of the proceedings he may be deprived of some or all of his costs and indeed if he has acted improperly he may be compelled to compensate the other side in costs”

6. In PCCW-HKT Telephone Ltd v. Telecommunications Authority, CACV 274/2003, Ma CJHC followed Re Elgindata Ltd (No. 2) and held that:

“I accept that in certain circumstances, a court may make costs orders to reflect the success or failure of a party in relation to discrete issues arising in the course of a hearing. … This sort of situation is, however, quite different to that in the present case where there exists not discrete issues but merely different arguments going to the same issue.  In this latter situation, the Court should simply order costs to follow the event (that is, the decision made on the particular issue) unless circumstances exist to dictate a different result, for example, a significant increase in the length or costs of proceedings by running an unsuccessful argument or the raising of an argument that is improper or unreasonable.”

Plaintiffs’ argument

6. Mr Wong, for the plaintiffs, submitted as follows:

(1)      The plaintiffs succeeded in having costs taxed on the High Court scale and the costs of the application should follow the event.

(2)      When a party makes an application based on several arguments and the application is successful, it should not be liable for costs because it succeeded in only some but not all of the arguments.

(3)      An “no order as to costs” in the present case means a set-off between costs to the plaintiffs on the Lai Ki principle and costs against he plaintiffs on the Wellegant argument.

(4)      Wellegant was valid authority at the time and the plaintiffs could not be criticized for relying on it.

(5)      Alternatively, the costs on the argument on the scale of costs are part and parcel of the approval for infant settlement.

(6)      Costs on infant settlement is usually on the common fund basis so that the court can be reasonably sure of the adequacy of the compensation to the infant (see Tai Chau Yung & anor v. Ng Jim & Anor [1999] 2 HKLRD 549, 551-2 per Suffiad J).

(7)      The effect of no order as to costs means that the plaintiffs’ own costs for the scale of argument will be paid out of the settlement.

(8)      Prior to the hearing, the plaintiffs had in open correspondence asked for settlement on the High Court scale, and it was not acceded to and there was a contest even on the Lai Ki principle.

(9)      Even if the plaintiffs were to be deprived of the costs on the Wellegant argument, there should be a apportionment as follows:

(a) 1/5 on the infant settlement;

(b) 3/5 on the argument on the Wellegant argument; and

(c) 1/5 on the argument on the Lai Ki principle

(10)The plaintiffs should at least be awarded 2/5 of the costs of the hearing by reason of succeeding on the Lai Ki principle.

Defendant’s argument

7.  Mr Sakhrani, for the defendant, submitted as follows:

(1)      The common practice is that approval of infant settlement will be dealt with by solicitors exhibiting counsel’s opinion.

(2)      Any argument on the Lai Ki principle could equally have been competently dealt with by solicitors.

 (3)     Had there not been any argument based on Wellegant, no counsel would have to be instructed.

(4)      The argument based on Wellegant was not part and parcel of the approval of settlement and it formed a novel and discrete issue as the plaintiffs could have applied for costs on the High Court scale relying only on the Lai Ki principle.

(5)      Wellegant should not have been relied on as it was contrary to the practice before it was decided, and for reasons given by this court in not following it.

(6)      The plaintiffs took a gamble on Wellegant (and an unreasonable gamble bearing in mind the infant interest) and lost, and the plaintiffs should be liable for costs on this issue and not seek to penalise the defendants by making defendants bear its own costs on the Wellegant argument.

(7)      Reliance on Re Elgindata (No.2) is misplaced as the plaintiffs here were not ordered to pay any part of the costs of the defendant, where had the court so ordered it would have resulted in the plaintiffs paying 3/5 of the costs of the Wellegant argument to defendant.

(8)      Since the coming into force of the Civil Procedure Rules in England in April 1999, the courts have been adopting a more robust approach and are more ready to make separate orders which reflect the outcome of different issues (see AEI Ltd v. Phonographic Performance Ltd [1999] 1 WLR 1507, 1523 per Lord Woolf MR.

8.  Mr Sakhrani also referred to Chan Ching Kit, Katherine v Lam SukKei & Anor HCMP No. 2239/2000, where Kwan J referred to AEI  v. Phonographic Performance and said that the robust approach was to encourage litigants to be more selective on points they took, and to discourage them from leaving no stone unturned and thereby increasing the costs of litigation.

9.  Mr Sakhrani submitted that in the normal course where a party relied on authorities which were rejected by the court resulting in a substantial loss on the issue, the party having mounted the issue would be liable in costs as a consequence.

Discussion

10.  I shall adopt the issue based approach.  In the order nisi I stated that it was understandable as to why the plaintiffs had relied on Wellegant.  After hearing arguments of counsel and on the time apportionment, I consider it is fairer that there should be no order as to costs on the Wellegant argument as it was not unreasonable for the plaintiffs to have relied on it at the relevant time, as it was valid authority and a well considered judgment.

11.  I bear in mind that the event in this case is that the plaintiffs succeeded overall.  I also bear in mind that the Wellegant argument took up substantial part of the hearing which amounted to 3/5 of the time.  I consider that a just order would be that the plaintiffs be neither entitled to nor liable for those costs, hence, there be no order as costs on the Wellegant argument.  The plaintiffs do recover 2/5 of the costs for having succeeded in the overall result.

The Order

12.  I order that the defendant do pay 2/5 of the costs to the plaintiffs for the application on 7 May 2007, and the plaintiffs’ own costs are to be taxed in accordance with the Legal Aid Regulations.