PHILIP GERALD BUNDY v. VICTOR BASE LTD

HCSA10/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO. 10 OF 2016

(ON APPEAL FROM SMALL CLAIMS TRIBUNAL CLAIM
NO. 19004 OF 2015)

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J U D G M E N T

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1. This is an application for leave to appeal against an award of the Small Claims Tribunal in SCTC 19004/2015 made by Deputy Adjudicator, Ms Ann Lui on 9 December 2015 and confirmed by her upon review on 29 January 2016. The application is by the defendant and is restricted to the amount of costs ordered against it.

2. The claimant, Mr Bundy was the tenant of the defendant. He in the course of the tenancy raised problems with the defendant about the refrigerator, oven and range hood.  He also raised a water seepage problem on a wall of the bedroom and above the bath of a bathroom.  The defendant however failed to address to these problems. 

3. After the termination of the tenancy and the removal from the flat, Mr Bundy lodged a claim against the defendant for damages for breaches of tenancy.  He claimed a total sum of HK$50,000 for damages.

4. The Deputy Adjudicator found for Mr Bundy and awarded damages at HK$4,500 in relation to the faulty refrigerator, HK$1,500 for the oven and HK$10,000 for the seepage problem, totalling HK$16,000.

5. Regarding costs, the Deputy Adjudicator held in §§102-116 of her reasons for decision as follows :-

“G. COSTS

102. Given that Mr Bundy was the winning party, I also made an order for costs in favour of Mr Bundy in the sum of $18,519. I arrived at this figure in the following way:

(a) Filing fees of $120 for these proceedings at the Tribunal – allowed.

(b) Mr Bundy’s loss of income: he had to attend court for altogether 4.5 days, and his daily salary is $3,236. I arrived at this figure for his daily salary by dividing his monthly salary of $97,083 (exclusive of rental reimbursement, and as stated in his salary advice issued by Swiss Reinsurance Company Ltd for the month of October 2015) by 30 days. Given that he had to take leave of absence from work in order to attend these court hearings, I awarded him costs for his loss of income the sum of $3,236 x 4.5 = $14,562.

(c) Ms Liang’s loss of income: she had to take one day’s leave of absence from work in order to give evidence as a witness on the first day of trial, accordingly in this regard I awarded costs equivalent to one day of her salary, i.e. $3,837. I arrived at this figure by dividing her annual salary of $1,381,380 (as stated in the letter from the Human Resources Department of her employer, Manulife, dated 16 September 2015) by 12 months by 30 days.

103. Upon review, Mr Bundy urged me to increase my award of costs in their favour. He argued that he and Ms Liang actually worked for fewer than 30 days per month if weekends, public holidays, and annual leave were to be taken into account. Hence, I should not have divided their monthly salary by 30 days. After consideration, I was not persuaded to amend or vary my original order. Taking a broad-brush approach, and taking into account Mr Bundy and Ms Liang were not actually paid by the day by their respective companies anyway, I am of the view that the figures that I arrived at represented a reasonable assessment of their loss of income by reason of their having to take time off from work to attend court hearings.

104. Mr Bundy also invited me to also take into consideration his housing reimbursement. He said that his housing reimbursement would also be deducted whenever he took leave from work. He invited me to consider an email from a Ms Rebecca Li, apparently a human resources officer from his company, to him, in which it was stated, “The rental reimbursement will be deducted for unpaid leave …” However, this email was dated 11 December 2015, i.e. it came into existence after I made my award/order on 9 December 2015. Ms Rebecca Li was not made available to give oral evidence in court to further explain why, as a matter of company policy, housing reimbursement would also be deducted if an employee were to take unpaid leave from work. I was not convinced that Mr Bundy’s argument, supported only by this bare allegations and this email, was sufficient by way of evidence to result in an increase in costs order awarded to him.

105. Upon review, VBL also invited me to reduce the costs awarded to Mr Bundy.

106. I do not think there is anything in principle against the award of a costs order that is even greater than the award of substantive damages. Parties have from very early on been warned of the litigation risks involved as to costs (including the question of the proportionality of the costs when compared to the claimed amount). I also explained the general principles as to costs at the pre-trial review on 20 October 2015 and urged both parties to take this into consideration before pressing on with trial.

107. I have also closely considered the provisions in section 24 of the Small Claims Tribunal (Cap 338). Insofar as it is material, section 24 provides ad follows:

‘(1) Subject to subsection (2), the tribunal may award to a party costs and expenses, which may include-

(a) Any reasonable expenses necessarily incurred and any loss of salary or wages suffered by that party; and

(b) Any reasonable sum paid to a witness for expenses necessarily incurred and any loss of salary or wages suffered by him.’

In attending the hearing.’

108. From my reading and interpretation of section 24, sub-section (1) does not set out the exhaustive situations under which I may exercise my discretion in the award of costs to a party.

109. In any event, I am of the view that section 24(1)(b) expressly provides that I have a discretion to make an order for costs in relation to “any loss of salary or wages suffered by [a witness]”. Having considered the relevant evidence put forward by Mr Bundy on behalf of his wife on matters of costs, I was satisfied that Ms Liang, being an actuary herself, suffered a loss of salary by reason of having to take a day’s leave from work, in order to give evidence as Mr Bundy’s witness. It was reasonable for Mr Bundy to call her as a witness for his case – as mentioned above, her evidence added to Mr Bundy’s case, by reason that she was the one who attended to the repairmen sent by VBL when they visited the Flat, and she was the one who called/WhatsApp-ed directly Ms Hung in the early months of the tenancy.

110. I am of the view that I should not take an overly narrow approach to the interpretation section 24(1)(b) (and section 24 in general), to the effect that the party must show that a certain sum of money was actually paid out of the party’s pocket to the witness as a witness fee, before the Tribunal can invoke its jurisdiction and discretion to make an award for costs in favour of that party. I do not think it would have been reasonable or practical for me to require Mr Bundy to adduce evidence to show that he actually paid over a certain sum of money to Ms Liang as a fee for her serving a witness for his case, given that they are husband wife. Even if he had been able to produce such evidence, it would probably have been (to say the least) somewhat artificial.

111. Further, even if I consider the wording under section 24(1)(a), and/or the spirit of justice and reasonableness behind the applicable legal principles in relation to matters of costs, the evidence showed that both Mr Bundy and Ms Liang contributed to the income of the family, as a unit. If Ms Liang had suffered a loss to her income, this may well be regarded as a loss to the family’s income – and in turn party’s reasonable expenses incurred (albeit strictly speaking not synonymous to the loss of salary suffered by Mr Bundy himself).

112. VBL also invited me to consider the following authorities:

(a) 怡居地產有限公司訴蔡路加, HCSA 36/2004 (25 July 2005)

(b) Real Honour Limited v Gamuse Company Limited, HCSA 29/1999 (26 August 2000)

113. I am unable to see the particular relevance of the authorities citied by VBL to the circumstances of our present case. I did not make my order on costs on the basis of what Mr Bundy and Ms Liang, as professional actuaries, would have charged their clients on an hourly or daily basis. I made my assessment based on their actual monthly income. The present case is clearly distinguishable from other cases (as discussed in the two authorities cited by VBL) in which the award of costs was made on the basis of what a solicitor, as a professional, would have directly charged their client by hourly rate.

114. I am fully aware that the order on costs is not meant to be punitive, but merely compensatory in nature.

115. Also, having made the relevant inquiries with Ms Hung, the highest offer for settlement out of court put forward by VBL was $10,000. Given that my award for damages in the sum of $16,000 is higher than the best offer put forward by VBL, I see no special circumstances for me to depart from the general rule that costs should follow the event.

116. All in all, I even after having considered the parties’ respective arguments upon review, I am of the view that I have not exercised my discretion as to costs unlawfully or unreasonably.” (emphasis supplied)

6. The defendant advanced three grounds of appeal:-

“1. … In awarding costs to the Claimant, the Adjudicator should not simply rely on the hourly income of the Claimant and award the sum of HK$14,562 for the costs of the Claimant himself. In any event, there was no evidence that the Claimant has taken leave and actually suffered the loss of salary or wages. The Adjudicator should not have awarded the sum of HK$14,562 as the costs in respect of the Claimant himself.

2. … The only witness for the Claimant is Madam Liang, who is the wife of the Claimant. The Claimant has not adduced any evidence to show that the Claimant had paid any sum to Madam Liang as a witness for any loss of salary or wages suffered by Madam Liang. Further, in view of the relationship of husband and wife between the Claimant and Madam Liang, no inference can be drawn that such witness expenses were incurred. In awarding costs to the Claimant for his witness expenses, the Adjudicator should not simply rely on the hourly income of the witness and award the sum of HK$3,837 as the costs and expenses in respect of the witness. The Adjudicator should not have awarded the sum of HK$3,837 as the costs and expenses of the witness.

3.  … The amount of costs awarded by the Tribunal should be reasonable expenses which are necessarily incurred.  The purpose of the Ordinance was compensatory in nature with an emphasis on reasonableness. The costs order is not meant to be punitive.  Further, the total costs of HK$18,519 is entirely disproportionate to the awarded sum of HK$16,000.  The award of costs is erroneous in principle and excessive in amount.”

These grounds are elaborated in Mr Tai’s written submissions for the defendant/applicant.

7. Section 28 of the Small Claims Tribunal Ordinance, Cap 338 provides:

“(1) Any party who is aggrieved by a decision of the tribunal –

(a) on any ground involving a question of law alone; or

(b) on the ground that the claim was outside the jurisdiction of the tribunal,

may apply to the Court of First Instance for leave to appeal and the Court of First Instance may grant such leave if it thinks fit.”

8. I will consider below whether the Deputy Adjudicator had committed any error of law or acted without jurisdiction.

9. Regarding the first ground on the HK$14,562 awarded to compensate Mr Bundy’s loss of income, Mr Tai referred to the decision of Deputy High Court Judge Tong (as he then was) in Real Honour Ltd v Gamuse Co Ltd (HCSA 29 of 1999).  The parties there were the landlord of an office in Central and its tenant.  Behind them were in fact two solicitors firms.  The dispute was on HK$14,500 paid by the tenant for some electrical work that it considered should be borne by the landlord.  This led to proceedings in the tribunal.  In the course of the proceedings, the Adjudicator dismissed an application by the claimant for an order to inspect a metre room.  The Adjudicator also ordered the claimant to pay HK$3,830 costs.  The defendant’s case was conducted by a solicitor.  This sum was assessed on the hourly rate charged by this solicitor when providing professional service to his clients.  The learned Judge regarded it wrong for costs to be based on the hourly rate of the solicitor as it was not “reasonable expenses necessarily incurred” nor “loss of salary or wages suffered” as stated in section 24(1)(a) of the Tribunal Ordinance.

10. The learned Judge said in §18 of the judgment:

“18. I failed to see how this amount of cost could be described as ‘reasonable expenses necessarily incurred’ or ‘loss of salary or wages suffered’. The purpose of the section was compensatory in nature with an emphasis on reasonableness. The costs order is not meant to be punitive. I considered it generally inappropriate to take the hourly charge of a solicitor to be the basis of assessing loss of salary or wages or expenses when he appears as a litigant in the Tribunal. However, apart from the amount, the costs order was, in principal, correct. I would therefore allow the applicant’s appeal on the costs order and substitute it with $500, which should be paid by the applicant in any event.”

11. I fully agree with the learned Judge.  When a solicitor appears as a litigant, the “reasonable expenses necessarily incurred” is not what he would otherwise have earned in providing service to his clients.  His loss of salary or wages is also not measured in terms of what he may charge his clients for provision of professional services. 

12. However, the HK$14,562 awarded to Mr Bundy was not measured in terms of what he might have otherwise earned for providing actuarial service to clients in the course of running such a business.  It was awarded to him to compensate his loss of salary as he was employed by a reinsurance company as an actuary on monthly terms.

13. Mr Tai further argued that the Deputy Adjudicator should not have applied a simple mathematical calculation in awarding costs to Mr Bundy.  But I cannot see why this approach is wrong.  I do not think there is conflict between such an approach and the judgement in Real Honour.

14. Finally on this part of the award, Mr Tai submitted that Mr Bundy has not produced any evidence that he had taken leave of absence to attend the hearings and the Deputy Adjudicator should not have found that he had taken leave of absence from work to attend the hearings.

15. However, this is a matter of fact.  If the Deputy Adjudicator has accepted the words of Mr Bundy that he had taken leave of absence from work and his employer had deducted his salary for such absence, there is no basis for me to grant leave to appeal against such finding of fact.

16. I also refer to section 29(2) of the ordinance which bars the Court of First Instance from reversing or varying any determination on question of fact or receive further evidence.  Even if leave should be granted, the Court of First Instance in hearing the appeal still cannot vary the Deputy Adjudicator’s finding that Mr Bundy had taken leave of absence to attend the hearings and his employer did not pay him for that.

17. On the whole, I do not think this ground has shown any error of law or want of jurisdiction in the costs order of the Deputy Adjudicator.

18. The second ground is on the sum of HK$3,837 awarded under section 24(1)(b) of the ordinance to cover the reasonable sum paid to a witness for expenses necessarily incurred and any loss of salary or wages suffered by him/her in attending the hearing.

19. Mr Tai referred me to 怡居地產有限公司及蔡路加, HCSA 36 of 2004.  The Adjudicator in that case awarded HK$9,000 to the defendant as costs for the appearance of the defendant’s witness who was a solicitor.  The amount was based on the hourly charge of the solicitor at HK$3,000 and his appearance for three hours.  A Cheung J (as he then was) affirmed the reasoning of Real Honour Ltd and applied it to the costs for the attendance of witnesses in the tribunal under section 24(1)(b).

20. For reasons that I have mentioned under the first ground, I agree that it is wrong to calculate costs under section 24(1)(b) on the basis of the hourly rate charged by a solicitor witness for rendering professional service to a client.  However, that was not the basis of the Deputy Adjudicator in awarding the HK$3,837 to Mr Bundy for the attendance of his wife Ms Liang.  The basis of the award was for loss of salary suffered by Ms Liang.

21. Mr Tai also submitted that the Deputy Adjudicator had adopted a mathematical approach.  But I have already pointed out above that there is nothing objectionable about this approach. 

22. Mr Tai then submitted that Mr Bundy had not adduced any evidence showing that Ms Liang had taken leave of absence to attend the hearing and was not paid by her employer for the absence.  This is again a determination of fact by the Deputy Adjudicator that cannot be disturbed on appeal.

23. Mr Tai’s next argument is on the liberal approach of the Deputy Adjudicator in interpreting section 24(1) in a situation where the litigant and his witness are in a husband and wife relationship.  The Deputy Adjudicator regarded that any evidence of payment made by the litigant to the witness in such a situation would have been somewhat artificial.  The Deputy Adjudicator also regarded that Ms Liang’s loss of income can be translated to the family’s loss of income and hence Mr Bundy’s reasonable expenses (though not strictly a loss of salary suffered by him).  Mr Tai submitted that the Deputy Adjudicator’s approach was wrong and that the Deputy Adjudicator should have held that Ms Liang, being the wife of Mr Bundy, was obliged to assist Mr Bundy in his claim and the defendant should not have been ordered to compensate her loss of salary.  I find this argument unreasonable. I cannot see why the defendant should be in a better position and be immune from section 24(1)(b) simply because the witness is the wife of the claimant.  I also consider that Ms Liang’s loss of salary can be translated to mean an expense incurred by the family that Mr Bundy had to bear and hence can be compensated under section 24(1)(b).

24. On the whole, I also do not see that this ground has pointed out any error of law or want of jurisdiction in the Deputy Adjudicator’s costs order. 

25. Mr Tai’s last ground is on conduct and proportionality.

26. He referred to the quantum claimed by Mr Bundy at HK$50,000, the defendant’s pre-trial offer of HK$10,000 and the tribunal’s award of HK$16,000 and submitted that Mr Bundy had failed in more than 2/3 of his claim. The defendant should therefore not be ordered to bear 100% of the costs of the proceedings. But he did not refer to any legal principle for support or suggest a percentage that the defendant would regard as fair.  He also has not suggested that Mr Bundy had taken any particular issue that would have warranted a departure from the costs to follow the event principle (see In re Elgendata Ltd (No.2) [1992] 1 WLR 1207 where Nourse J said at 1214:

“(i) Costs are in the discretion of the court.

(ii) 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.

(iii) 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.

 (iv)   Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs.”

27. Furthermore, though the award was less than 1/3 of the amount claimed, it exceeded the offer by 60%.  The excess of HK$6,000 cannot be regarded as insubstantial in the circumstances.  The defendant failed to invoke an exercise of judicial discretion in its favour simply because it was not generous enough.  It only has itself to blame.

28. I also note that the Deputy Adjudicator had very adequately warned the parties of the problem of proportionality of costs comparing with the claimed amount.  But the parties still preferred to press ahead with the trial.

29. In the premises, I cannot see any error of law or want of jurisdiction in the Deputy Adjudicator’s costs order.  I also find that the defendant has failed to demonstrate that any of the grounds of appeal is arguable on appeal.  I therefore dismiss the application for leave to appeal.