OAKSHORSE FARM CORPORATION v. YAU FOOK PING

HCA425/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.425 OF 2002

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D E C I S I O N

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1. In the judgment handed down, I dismissed the plaintiff’s main action.  The counterclaim was earlier abandoned by the defendant.  I made an order nisi that the plaintiff and the defendant should each bear their own costs.  They now both seek to vary the order nisi.

2. Mr Chua SC stated the plaintiff’s position as follows :

(1) in respect of the main action, the parties should each bear their own costs;

(2) in respect of the counterclaim, the defendant should pay the costs of the plaintiff; and

(3) the court should make an apportionment that the costs on the counterclaim is 50% of the total costs.

3. Mr Chain for the defendant’s position can be summarized as follows :

(1) in respect of the main action, costs should follow the event;

(2) even if the court were to make a special order in the main action, it should only disallow part of the costs of the defendant;

(3) in respect of the counterclaim, the court shall not award costs to the plaintiff; and

(4) the court should make an apportionment that the costs on the counterclaim is 10% of the total costs.

Relevant principles

4. The general rule is that costs should follow the event unless there are circumstances suggesting that some other order should be made.  The only fair basis in deciding the part of costs of which successful party should be deprived is to ask how much time and expense was taken up in dealing only with the allegations on which it failed (see In re Elgindata Ltd (No. 2) [1992] 1 WLR 1207).

5. In considering the question whether there is good cause for depriving the successful party of costs, the court is not confined to consider the conduct of the parties in the litigation itself, but must consider the whole circumstances of the case and everything which led to the action (see Donald Campbell v. Pollack [1927] AC 733).

6. The claim and the counterclaim are treated for the purpose of taxation as separate actions (see Amon v. Bobbett (1889) 22 QBD 543).

Consideration

7. In making the order nisi, I have given separate consideration to the main action and the counterclaim.  I took into account that the defendant did not win because his version of full and final settlement was accepted by the court, and also that the counterclaim was abandoned. 

8. The issue at trial was whether the defendant had to pay for the balance of Mr Basketball.  In the judgment, I noted that the truth in the matter did not lie only in the dichotomy of the plaintiff’s version that the parties agreed that all the terms of the original contract of Deerhill were to follow upon the exchange of Mr Basketball for Deerhill, or the defendant’s version that the parties agreed not to pursue against each other upon the exchange.  I noted that there was a third possibility that the parties simply had not applied their minds to the matter and had not reached agreement one way or the other, and this third scenario was not inconsistent with the lack of a written contract for Mr Basketball one way or the other, and at the relevant time. 

9. Mr Chain referred to Ritter v. Godfrey [1920] KB 47 per Lord Sterndale MR at 53 :

“The principle as to the exercise of discretion is the same in the case of plaintiffs and defendants, but it is clear that considerations sufficient to justify a refusal of costs to a plaintiff are not necessarily sufficient in the case of a defendant, for the former initiates the litigation while the latter is brought into it against his will.

Speaking generally, I think it may be said that, in order to justify an order refusing a defendant his costs, he must be shown to have been guilty of conduct which induced the plaintiff to bring the action, and without which it would probably not have been brought.”

10. Mr Chain submitted that while there might be materials before the court to justify a special costs order, nevertheless the defendant should not be deprived of the entire costs of the main action.

11. Mr Chua submitted that the result was a rough draw with no clear winner, and it could also be said that the defendant had induced the plaintiff to bring the action as the defendant did not dispute that the balance for Deerhill was to be paid out of the prize money. 

12. The key issue was whether the defendant had to pay for the balance of Mr Basketball, and the mode of payment of Deerhill, though a necessary step, was not the entire answer.  The fact is that the plaintiff did not prove the continuation of the payment term.  It could not be said that the defendant had induced the plaintiff to bring the action.  However, I considered that a special costs order on the main action should be made because of the defendant’s conduct of giving evidence which was rejected.  More time was taken up in the evidence by Mr Liang than the defendant, and mostly in the cross examination of Mr Liang.  Insofar as Mr Liang’s evidence was rejected, the defendant should be taken as succeeding on this issue.  I considered that part of the defendant’s costs on the main claim should be disallowed, but taking into account of the abandonment of the counterclaim, I considered that the costs order for and against the parties roughly cancelled each other out.  At the end of the day I ordered that each party was to bear its own costs.

13. The defendant’s counterclaim was that the plaintiff was liable for the misrepresentation by Mr Liang, inter alia, that $1,000,000 was the right price for Deerhill and there was no over charge whereby the of the plaintiff must have known it was grossly overcharging the defendant. 

14. Mr Chain submitted that the counterclaim was only an  alternative claim and was made necessary by the plaintiff’s original  pleading that the sale of Mr Basketball was subject to a separate contract.  Not until the first day of trial the Statement of Claim was re-re-amended to plead the exchange of Mr Basketball was subject to the continuation of the terms of the contract for Deerhill.

15. Be that as it may, I fail to see how the counterclaim for misrepresentation was made necessary, and that the defence of full and final settlement was not sufficient to deal with the plaintiff’s original claim.  Further, even on Mr Chain’s own concession, the counterclaim was a very weak one as it went to the state of mind of Mr Liang.

16. The counterclaim was abandoned and it should be regarded as acknowledgment of defeat on the part of the defendant.  The defendant should be ordered to pay costs to the plaintiff.  Further, time had been taken up on the valuation of Deerhill and it should be reckoned in the reduction of the costs in favour of the defendant in the main action.  As I have already mentioned above, the debit and credit roughly cancelled each other out.

Conclusion

In the premises, the order nisi that each party is to bear its own costs is made absolute.

17. As there is a rough draw in the argument on the costs nisi, I shall made no order as to costs for this hearing.