LI LAI FUN AND ANOTHER v. LEUNG YIU CHEUNG AND OTHERS

CACV253/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 253 OF 2005

(ON APPEAL FROM HCPI NO. 697 OF 2002)

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DECISION ON COSTS

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Hon Ma CJHC :

1. On 16 November 2005, this Court allowed an appeal brought by the Plaintiffs in a fatal accidents case, resulting in a revised award for loss of accumulation of wealth of $132,000.  The background to the appeal is contained in the Reasons for Judgment handed down on 23 November 2005.

2. In the Reasons for Judgment, an order nisi was made in favour of the Plaintiffs.  We said this : -

“On the question of costs the plaintiffs have had to come to court to obtain an increase.  Albeit that the increase was less than contended for, we nonetheless make a costs order nisi in their favour.”

3. The 1st Defendant (who was the Respondent in the appeal) now applies to have that order nisi varied pursuant to RHC O.42, r.5B(6).

4. The main ground relied on by Mr John Hemmings (for the 1st Defendant) relates to a payment into court that had been made prior to the assessment of damages by Master Levy in the court below.  The 1st Defendant made a payment into court of $2,650,000.  The Master awarded damages (inclusive of interest) of $2,607,672, some $42,328 short of the payment in.  As a result, the Plaintiffs did not get the full costs of the action.  The Master ordered that the costs of the action be to the Plaintiffs only up to and including 4 June 2004 (the date they were notified of the 1st Defendant’s last payment into court) and thereafter, the costs were to be to the 1st Defendant.  Our decision on the appeal effectively increased the damages by $32,300.  The resultant figure for damages overall, however, was still less than the amount paid into court by some $10,028.  It therefore followed, so Mr Hemmings submitted, that since the damages had still not bettered the payment in, an award for the costs of this appeal should be made in favour of the 1st Defendant (at least he should not have to pay them).

5. Mr Mohan Bharwaney (for the Plaintiffs) understandably submits the opposite.  He says (as the passage just quoted from the Reasons for Judgment states) that the Plaintiffs had to appeal to the Court of Appeal in order to obtain an increase in damages.  He reminded us that the 1st Defendant had at no stage after the assessment of damages or prior to the appeal, offered (by payment into court or otherwise) to increase the amount awarded by the Master.  The original payment into court could not, as Mr Bharwaney puts it, have been withdrawn by the Plaintiffs after the assessment was made.  In these circumstances, unless the Plaintiffs appealed successfully, there would simply have been no increase in the damages awarded.  Obviously if, as a result of the appeal, the damages had exceeded the amount paid in, then the Plaintiffs would have been entitled to a much more generous order of costs for the proceedings below.  However, this was not so.  Mr Bharwaney accepted that the order for the costs below and of the action should remain intact.  He only sought that the costs for the appeal should be to the Plaintiffs.

6. In my view, the proper order for costs in the present appeal is to make no order : -

(1) While it is entirely correct for Mr Bharwaney to say that his clients had to appeal in order to obtain an increase in the damages awarded in the court below, it is equally accurate to note that overall, the Plaintiffs have still obtained less than the payment in made by the 1st Defendant.  The Plaintiffs also did not succeed entirely in the arguments raised in the appeal.  They had sought more than they eventually obtained (no doubt to secure an overall award beyond the payment in).

(2) Of course, I fully acknowledge the important fact that the payment in was not extended to cover the appeal nor was there any offer made to the Plaintiffs by the 1st Defendant in relation to the appeal.  However, had this been the case, the 1st Defendant would have been entitled to the costs of the appeal if the outcome did not result in any offer being bettered.

(3) Overall, the order that each side should bear their own costs meets the justice of the case.  An order for costs wholly in favour of the Plaintiffs would be the cause of a genuine grievance on the 1st Defendant’s part : after all he had at a very early stage made a payment in, which, if accepted, would have meant the end of the litigation (appeals included).  Equally, an order for costs in favour of the 1st Defendant would also be wrong :  the Plaintiffs had to appeal in order to obtain any increase in damages.  It is worthwhile remembering in this context that the court’s discretion regarding costs is a wide and flexible one to enable the court to do justice between the parties : see Hong Kong Civil Procedure 2006 Vol.1 at paragraphs 62/2/5 and 62/2/6.

7. For the above reasons, the order nisi should be varied to confirm the order for costs below but no order is made on the costs of the appeal.  As for the costs of the present application, I would likewise make no order as to costs.  Neither side has fully succeeded in their submissions.

Hon Yeung JA :

8. I agree with the decision of the Chief Judge and have nothing further to add.

Hon Burrell J :

9. I would go one step further and award the costs of the appeal and the costs of the application to the defendant.

10. In my judgment, the following matters, on costs only, are highly persuasive when deciding what order meets the overall justice of the case.

11. Firstly, the defendant has, throughout, been the successful party.  At first instance, the successful party was the one who estimated the claim was worth $2.65 million or less, i.e. the defendant.  The litigation process does not come to an end until the appeal process is exhausted.  On appeal, therefore, the defendant’s position that the claim was worth $2.65 million or less remained the same.  They remained the successful party.  Other than conceding the appeal the defendant had no choice but to resist it.  They successfully resisted it to the extent that their assessment of the value of the claim remained good.

12. Secondly, it is important, in this case, to consider the appeal in context.  After the judgment at first instance, the plaintiff was about $42,000 short of the payment in.  The costs of the trial were awarded against them.  On appeal, the plaintiff argued one ground only.  That ground had a maximum value of $100,000.  There were no circumstances in which the award, on appeal, could have been increased by more than $100,000.  Thus an entirely successful appeal would have increased the award by 4% and would have beaten the payment in.

13. Mr Bharwaney, very properly, conceded that an important reason for the appeal was as much to beat the payment in and therefore gets the costs order below reversed as it was to get more money for the plaintiff.  Common sense suggests that the former reason was the more important reason of the two.  In the event, the plaintiff failed to get the costs order below reversed because it failed to beat the payment in.  On its own admission therefore, it failed to achieve an important purpose of the appeal (probably the more important purpose).  Thus, in yet another sense, it was not the successful party.

14. Thirdly, the actual increase in the award on appeal was a mere $32,000 or less than 1.5% of the judgment at first instance which is a small sum in both dollar and percentage terms.  Even if there had been no payment in, it is questionable whether the plaintiff would have been awarded all its costs on appeal.  By failing to accept the (very reasonable) payment in in the first place, the plaintiff took a risk and lost.  By appealing to try and get an extra 2%, it took a risk and lost.  Only the plaintiff could have avoided the costs that have been incurred.  The defendant, on the other hand, made a realistic payment in which was refused and were compelled to resist the appeal which, to all intents and purposes, they did successfully.

15. The plaintiff’s only argument in favour of being awarded the costs of the appeal is that it had to come to court to get an increase and was successful in so doing.  A further $32,000 was awarded due to an erroneous method of calculation by the Master.  (In passing, it should be noted that the basis upon which the appeal court increased the award was not the basis contended for by the plaintiff.  In this sense also the plaintiff’s submissions before the Court of Appeal did not succeed.)

16. As a result of any, or virtually any, increase, the plaintiff submits that costs should follow the event.  In my judgment, in this case, that principle is outweighed by the defendant’s submissions and I would therefore exercise the discretion on costs in their favour.

17. It is a matter of concern that any costs order against a legally aided plaintiff may have the effect of reducing the damages ultimately received by him or her.  In this case that will not happen as my decision is a minority one.

Hon Ma CJHC :

18. By a majority, it is ordered that the order nisi on costs be varied to confirm the order for costs below and there be no order as to costs for the appeal and the present application to vary.