CHONG NGAN SENG v. CHINA HARBOUR ENGINEERING COMPANY LTD AND OTHERS

CACV 54/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 54 OF 2012

(ON APPEAL FROM DCPI NO. 2078 OF 2009)

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BETWEEN

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Hon Fok JA (giving the Judgment of the Court):

Introduction

1.  By our judgment handed down on 1 February 2013, we allowed the 1^st defendant’s appeal against the judgment for the plaintiff entered against it below.  We made an order nisi that the costs of the appeal be paid by the plaintiff to the 1^st defendant to be taxed if not agreed.

2.  The plaintiff seeks to vary the costs order nisi for an order that the costs of the 1^st defendant of both the appeal and in the court below be borne by the 2^nd and/or 3^rd and/or 4^th defendants.  It also seeks an order for the costs of this application.

3.  For its part, the 1^st defendant seeks to maintain the costs order nisi in respect of the costs of the appeal and, in addition, seeks an order that the plaintiff pay its costs in the court below.  Similarly, in turn, it seeks an order for the costs of this application.

4.  Although notified of this hearing and put on notice that the respective applications might affect their interests, neither the 3^rd or 4^th defendants appeared or made written representations to the court.  By fax dated 17 September 2013, the 2^nd defendant made written representations to the court and appeared in person at the hearing before us.

The principles on which the court acts

5.  Where a plaintiff sues a number of defendants, the court may order an unsuccessful defendant to pay the costs of a successful defendant.  It may do so in one of two ways: either by a Sanderson order[1] whereby the unsuccessful defendant is ordered to pay the costs of the successful defendant directly; or by a Bullock order[2] whereby the plaintiff pays the costs of the successful defendant but is indemnified in respect of that liability by the unsuccessful defendant, thereby indirectly requiring the unsuccessful defendant to pay those costs.

6.  In deciding whether to make a Sanderson or Bullock order and, if so, which of the two orders to make, the court is exercising its discretion.

7.  It was common ground that, in deciding whether to exercise that discretion, the court looks to see whether it was reasonable in all the circumstances of the case for the plaintiff to join the successful defendant in the action: see Leung Lai-ha and Another v Hon Sau-ling and Another [1993] 1 HKLRD 86, a decision of this court, and see also, as a recent example of the statement of this principle, the judgment of Bharwaney J in Fung Chun Man v Hospital Authority [2012] 1 HKC 531 at §5.

8.  We note that in Raulfs v Fishy Bite Pty Ltd, unrep., [2012] NSWCA 135, a decision of the New South Wales Court of Appeal, Campbell JA appeared to suggest (at §110) that the question of the reasonableness of the joinder of a successful defendant should be looked at in terms of whether it was reasonable not just as between the plaintiff and unsuccessful defendant but also as between the plaintiff and successful defendant.  This distinction is not made in Leung Lai-ha.  However, since it was not suggested that this distinction was of materiality in the present case, we leave the question of whether it should be incorporated in the test to some future occasion if the point is raised.

Was it reasonable for the plaintiff to join the 1^st defendant?

9.  In the present case, it will be recalled, the plaintiff was suing for personal injuries sustained by her when she was travelling in a bus.  She had fallen and been injured when the bus was forced to brake suddenly to avoid a light goods vehicle driven by the 2^nd defendant which had cut into the bus’s lane.

10.  The 1^st defendant was the registered owner of the LGV.  It had sold the LGV to the 3^rd defendant but retained legal ownership pending full payment.  The 1^st defendant was responsible for insuring the LGV in the meantime.

11.  In its defence, the 1^st defendant denied liability by reason of the sale of the LGV to the 3^rd defendant and asserted that at the time of the accident the 2^nd defendant was driving the vehicle as servant or agent of the 4^th defendant.

12.  On the other hand, in the “Insurer’s claim form” completed by the 1^st defendant, it was stated that the driver of the LGV was the 1^st defendant’s employee.

13.  For their part, the 2^nd, 3^rd and 4^th defendants each pointed the finger of blame at, amongst others, the 1^st defendant.

14.  The 2^nd defendant’s defence asserted that the 1^st and/or 3^rd and/or 4^th defendants were vicariously liable and the 2^nd defendant issued a contribution notice against the 1^st defendant.  Although the 2^nd defendant admitted liability six days before the trial commenced, he maintained his case at trial that the 1^st and 3^rd defendants should be held vicariously liable for his acts.

15.  The 3^rd defendant, who was the 1^st defendant’s subcontractor, acted in person.  It pleaded that the LGV was under the control of the 1^st and 4^th defendants and was used by the 2^nd defendant with the full knowledge and consent of the 1^st and 4^th defendants.

16.  The 4^th defendant, who was the 3^rd defendant’s subcontractor, pleaded that the 1^st defendant, through the 3^rd defendant, exercised or retained control over the activities of the 4^th defendant through the provision of the LGV and insurance coverage for it.  It also pleaded that the 2^nd defendant used the LGV on the day of the accident with the full knowledge and consent of the 1^st or 3^rd defendants.  The 4^th defendant only admitted liability four weeks before the trial.

17.  In addition to the respective cases of the 2^nd, 3^rd and 4^th defendants, there was evidence, and the Judge below found, that the LGV was carrying road signs and fences of the 1^st defendant at the time of the accident and, as already mentioned, the 1^st defendant’s insurance form suggesting the 2^nd defendant was its employee.  Although the plaintiff only became aware of the latter form after the action was commenced, it seems to us that it would have confirmed the stance taken by the plaintiff in naming the 1^st defendant in the writ.

18.  We are satisfied that, in these circumstances, it was reasonable for the plaintiff to have joined the 1^st defendant in the action.  She was a stranger to the defendants and a mere passenger in an unrelated vehicle.  The arrangements between the defendants, who were themselves all connected by the sub- and sub-sub-contracting relationships, were matters outwith her knowledge.  Although it was submitted on behalf of the 1^st defendant that there was no evidence to show that the 2^nd defendant was the 1^st defendant’s employee or that he drove the LGV as its agent, and that vicarious liability could not be founded on the mere incidence of ownership of the LGV, we consider that the plaintiff was entitled to take the pleaded cases of the various defendants at face value and, on that footing, there could be no assurance that the 1^st defendant would be exonerated at trial (or on further appeal, as was eventually the case here).  As Bokhary J (as he then was) said in Leung Lai-ha at 92, in deciding the question of reasonableness, one must not lose sight of the uncertainties that surround a case at its earlier stages prior to trial or capitulation.

19.  Mr Patrick Lim, counsel for the 1^st defendant, contended, as a refinement to his main submission, that even if it were reasonable for the plaintiff to have joined the 1^st defendant at the outset, it was not reasonable for the plaintiff to have continued the action against it after the 4^th defendant admitted liability as employer of the 2^nd defendant and, further, after the 2^nd defendant himself admitted liability.  However, in our view, the late admission of liability by the 4^th defendant still left the question of vicarious liability of the other defendants in issue and, as noted above, notwithstanding the eventual (and even later) capitulation of the 2^nd defendant, he maintained his case that the 1^st and 3^rd defendants were vicariously liable for his acts.  Moreover, even though liability was admitted by the 2^nd defendant, he maintained a contribution notice against the 1^st defendant.

20.  Furthermore, the uncertainty of the case is reflected in the uncertainty surrounding the insurance position in the light of the sale of the vehicle by the 1^st defendant to the 3^rd defendant and the absence of insurance taken out by the latter which led to the plaintiff’s solicitors putting the Motor Insurers’ Bureau on notice that she might have to look to it for payment in the event she was unable to recover from the defendants or the insurer.

21.  Mr Lim submitted that the present case was not a classic case of suing alternative defendants for the same damage on the same cause of action since the basis of vicarious liability alleged against the 1^st defendant (agency) was different to that against the 4^th defendant (employment).  However, that point does not meet the position of the 3^rd defendant, who was alleged to be vicarious liability on the basis of agency (like the 1^st defendant).  Moreover, and in any event, it is not necessary for the making of a Sanderson or Bullock order, as a matter of law, for the causes of action against the various defendants to be the same: see Fung Chun Man at §7.  Here, the causes of action against the various defendants, although different, did all arise out of the same incident and factual matrix and these are part of the circumstances by which the question of the reasonableness of the joinder of the 1^st defendant falls to be examined.

22.  Mr Lim also referred us to Michael Irvine v Commissioner of Police for the Metropolis and Others, unrep., [2005] EWCA Civ 129 in which the English Court of Appeal upheld the decision of the trial judge who declined to make a Sanderson or Bullock order and the need to consider the liability for costs as a matter of principle.  However, the issue being one of reasonableness of the joinder of a defendant, that decision is necessarily one which turns on its own particular facts.  In any event, we note that Peter Gibson LJ, when analysing the jurisdiction to make a Sanderson or Bullock order, indicated that whether one defendant puts the blame on another defendant is a “significant factor”.  That was a factor that was present in this case and, in our judgment, was a weighty factor.

23.  Mr Lim further submitted that, where a claim against a successful defendant was unsustainable, it would be unjust and harsh to saddle an unsuccessful defendant with liability for the successful defendant’s costs.  However, we do not think this is a material point where, as here, the unsuccessful defendant has in fact blamed the successful defendant.

24.  Finally, Mr Lim submitted that the plaintiff must have been aware that the claim against the 1^st defendant for vicarious liability was weak and that the real reason that claim was pursued was because of the perception that the plaintiff might not in practice be able to recover damages from the 2^nd, 3^rd and 4^th defendants.  He relied on the case of Raulfs v Fishy Bite Pty Ltd, unrep., [2012] NSWCA 135 where the New South Wales Court of Appeal overturned a Sanderson order made in favour of the plaintiff after trial on the basis that it was not a case in which there was any doubt about the roles of the respective protagonists.  We do not think that was the case here and note that, at §110 of the judgment, Campbell JA contrasted the position “there sometimes is when there is doubt about which of several possible defendants was the occupier of a particular site or the employer of a negligent person”.

25.  As we held in the present case, the agency of a driver for the owner of a vehicle may arise in various ways: either because the owner has authorised the act, or requested it, or because the driver is carrying out a task or duty delegated, or because the owner is in control of the driver’s conduct.  Vicarious liability is not limited to employment of the driver and so, in the particular circumstances of this case, we think the plaintiff’s joinder of the 1^st defendant was reasonable.

The 2^nd defendant’s representations

26.  The points made in the 2^nd defendant’s written representations were not addressed to the incidence of liability for the costs of the appeal and the action below but rather were directed to the underlying issue of liability for the plaintiff’s injuries.  The 2^nd defendant maintained that the plaintiff’s loss was caused by the failure of the 1^st defendant, as owner of the LGV, to make a timely report to its insurers.  He also maintained that he was employed by the 1^st defendant.

27.  The former point was not an issue argued at trial or on the appeal and is not a proper basis for attaching vicarious liability to a vehicle owner for the negligence of a driver of the vehicle.

28.  As to the latter point, the question of who was the 2^nd defendant’s employer was thoroughly canvassed at trial and on the appeal (in respect of the plaintiff’s respondent’s notice).  The 2^nd defendant could have appeared on the appeal to support the plaintiff’s respondent’s notice but did not do so and it is not appropriate for him to seek to re-argue this point before us on this application.

Which of a Sanderson or Bullock order is appropriate?

29.  The difference between the two types of orders has been addressed above.

30.  It is submitted on behalf of the 1^st defendant that in this case, where the 2^nd to 4^th defendants are likely to be impecunious, the practical consequence of a Bullock order is that the plaintiff will have to bear the 1^st defendant’s costs and of a Sanderson order that the 1^st defendant will have to bear its own costs.

31.  The English Court of Appeal in Michael Irvine v Commissioner of Police for the Metropolis and Others approved (at §15) the trial judge’s comments that (i) the question of liability for costs should be considered as a matter of principle and (ii) “… whether or not there is any practical consequence of making one order or another in terms of amounts to be paid is a subsidiary point and is not one that should weigh heavily with the court in considering whether as a matter of principle one party should be liable for another party’s costs or not.”

32.  We accept and acknowledge the need to adhere to a principled approach.  However, whilst the practical consequence may not weigh heavily, it seems to us that it is a matter which can be taken into account.  Note 62/1/6 of the White Book (on p.1102) includes the statement that:

“A trial judge was entitled, without infringing the requirement that costs should generally follow the event to make a Sanderson order rather than a Bullock order where the judgment was given against a co-defendant who was insolvent; because a Sanderson order would spread the hardship caused by the co-defendant’s insolvency and consequent inability to meet the costs more fairly between the plaintiff and the other defendant, both of whom were innocent parties, than would a Bullock order. The choice between a Bullock order and a Sanderson order in such circumstances was a matter for the judge’s discretion.”

33.  In the present case, there is no certainty that the 2^nd to 4^th defendants will all be impecunious so that the 1^st defendant would not be able to recover its costs from one or other of them.  On the other hand, the amount of damages awarded to the plaintiff in the present case was the sum of HK$305,115.55 with interest and these damages would be very likely significantly eroded if the plaintiff were to be liable for the 1^st defendant’s costs but unable to recover them from the other defendants.

34.  In the exercise of our discretion, we consider that a Sanderson order would be the fair order to make in the circumstances of this case.

Conclusion

35.  For the above reasons, we make an order that:

(1) The costs of the 1^st defendant of the appeal and in the court below be paid by the 2^nd and/or 3^rd and/or 4^th defendants;

(2) The plaintiff’s costs of this application be paid by the 1^st defendant;

(3) The plaintiff’s own costs be taxed in accordance with the Legal Aid Regulations.