ORIENTAL DAILY PUBLISHER LTD AND ANOTHER v. MING PAO HOLDINGS LTD AND OTHERS

CACV 139/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 139 OF 2010

(ON APPEAL FROM HCA NO. 607 OF 2008)

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BETWEEN

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JUDGMENT

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Hon Tang Ag CJHC:

1.  At trial, Chung J awarded the 1^st Plaintiff general damages of $150,000, and aggravated damages of $75,000. The 2^nd Plaintiff was awarded general damages of $1,500,000 and aggravated damages of $75,000.

2.  The Defendants appealed on liability as well as quantum.

3.  On 15 April 2011, we: –

“(1) unanimously, dismissed the Defendants’ appeal against liability:-

……

(2) by a majority, allowed the Defendants’ appeal against quantum and ordered the Defendants to pay the 1^st Plaintiff damages in the sum of $50,000 and the 2^nd Plaintiff the sum of $150,000.”

4.  We also made an order nisi that the Defendants should have the costs of the appeal unless the Plaintiffs wished to contend for a different costs order within 7 days.

5.  The Plaintiffs now ask that the order nisi be varied to the extent either that the Defendants pay the Plaintiffs two-thirds of their costs of the appeal; or the Defendants pay the Plaintiffs their costs of the appeal against liability and the Plaintiffs pay the Defendants their costs of the appeal against quantum.

6.  Mr McCoy submits and I agree that the damages awarded in favour of both Plaintiffs by this Court are substantial.  They are certainly not derisory. 

7.  In the present case, one could say that there were two events, (1) one event was the question of liability; (2) the other was quantum.  That being the case, one could say that the Plaintiffs succeeded on one event and the Defendants on the other.

8.  The basic rule is Order 62 Rule 3 which provides:

“(2) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.”

9.  In 62/3/4 of the Hong Kong Civil Procedure, one finds a helpful collection of authorities, including a citation from the judgment of May LJ in Lipkin Gorman v Karpnale Ltd [1989] 1 WLR 1340 at 1390, which I have expanded as follows:

“… Taking the same line as did this court in Alltrans Express Ltd. V. CVA Holdings Ltd. [1984] 1 WLR 394, it may well be that in a straight-forward piece of litigation to ask oneself ‑ ‘who was the successful party?’ will provide a sufficient answer to ‘What was the event?’ for the purposes of following it, in respect of costs under Ord. 62, r. 3(3). But it is very difficult in a case with the complications of this one to give an answer as to who was the successful party without qualifying that answer, at least to some extent. Both parties were successful in one sense. The club was successful to a substantial extent. However Ord. 62, r. 3(3) itself refers to a situation ‘when it appears to the court that in the circumstances of the case some other order should be made as to the whole or any part of the costs’ – so that one need not be too rigid in seeking to discover precisely what the event was. In the circumstances of the instant case one must exercise one’s discretion in making a proper order for costs, doing justice to all the circumstances of the case, but bearing in mind that the underlying principle is that the winner, whoever may be described as the winner, is in general entitled to be paid his costs. So much for Ord. 62, r. 3(3), save where precisely at the end of the day it leads one.”

10.  I note that May LJ said:

“… one need not be too rigid in seeking to discover precisely what the event was. …”

11.  Indeed, sometimes the critical event may be the size of the award.

12.  In this case, it is quite clear to me that given the unsustainable level of general damages awarded in favour of the Plaintiffs and what I would regard as inappropriate awards of aggravated damages in favour of the Plaintiffs, an appeal was inevitable.  In other words, the Defendants had to come to this Court in order to get the damages reduced.

13.  Unfortunately, the Defendants were not content merely with challenging the awards, they made an unmeritorious appeal on liability.  The question is, in the circumstances of this case, what impact should the unsuccessful appeal on liability have on costs.  It is important that a litigant who may have a strong appeal on quantum should not be encouraged to launch an unmeritorious appeal on liability, and, if he should do so, it should be reflected in the costs order.

14.  Mr McCoy submits that the submission on liability had taken the most time in court.  The written submissions were also lengthy.  Mr McCoy is right but the length probably reflected the difficulty which was in the Defendants’ way.  Very often the length of the oral submission reflected the lack of merit, rather than the difficulty of the point.  The appeal on quantum, though equally strongly contested, was more straightforward.  And, of course, we were greatly assisted by the helpful written submissions provided by the parties on the numerous decisions on quantum.  In any event, the appeal was over in one day.

15.  I think in making an order for costs, we are entitled to take into account the fact that had there been no appeal on liability, and the appeal was confined to quantum, it would have been equally hard-fought and so far as counsel’s fees were concerned, although there would probably be some difference, they would not have been too substantial.

16.  Mr McCoy has referred to Moorjani Arjan Ramkrishandas v. Patel’s Wall Street Exchange Limited, CACV 80/2000, unreported, 26 May 2000, a decision of this Court (Godfrey VP, Rogers and Keith JJA).  The plaintiff had succeeded on a claim for damages for breach of an agreement and awarded $936,950.  The claim turned on a question of fact, namely, what were the terms of the agreement between the plaintiff and the defendant.  The judge preferred the plaintiff’s evidence to the evidence of the defendant’s witnesses.  The defendant appealed against both liability and quantum.  The appeal against liability was dismissed.  The defendant’s appeal against quantum succeeded to the extent that it was reduced by, according to Mr McCoy’s calculation, about 38.4%.  However, the defendant was ordered to pay the plaintiff two-thirds of his costs.

17.  Patel’s Wall Street provides a useful example of how the court’s discretion might be exercised.  It is also clear from a fair reading of the lead judgment by Keith JA, that the main critical event was the appeal on liability. 

18.  On quantum, three elements in the calculation of the plaintiff’s damages were challenged on appeal.  Keith JA said in his judgment at page 16:

“… Two are uncontroversial. First, it is accepted that the judge failed to deduct from his award of damages a sum to reflect the agreed deduction of interest on the $2.6m. up to the time when the flat would have been resold. It was agreed that that figure for interest is $104,000.00, and that the Plaintiff’s damages should be reduced by that amount. Effect was given to that agreement by amending the judgment to $832,950.00. Secondly, it is accepted that although the judge gave credit to the Plaintiff for the $70,000.00 decorating costs which he had paid, he failed to include that in the global figure for decorating costs which should have been deducted from the damages. It is accepted that the Plaintiff’s damages should be reduced by that amount as well.”

19.  The only element which was contested related to the figure which the judge took for the estimated market value of the flat, at the time when it should have been resold.  Keith JA went on to say at page 17:

“We are today in no better position than the judge to determine the market value of the flat in July 1995. It is, I think, not appropriate to order that this issue be re-tried (whether by a judge or a master), because even then the parties may not wish to go to the expense of instructing valuers. The best I can do in order to do justice between the parties is to take a figure which represents the lowest figure which such a valuation might have been against the background of (a) the fact that I can take judicial notice of the fact that the property market was steadily improving in the first six months of 1995 and (b) the evidence that Mr Ameen

(i) believed in December 1994 (based on the inquiries made by one of his managers) that the flat was then worth $3.5m. with vacant possession, and

(ii) advertised the flat in April 1995 with an asking price of $4m.

In my view, such a figure would be a figure no greater than $3.75m. Accordingly, a further $250,000.00 must be deducted from the damages.”

20.  In such circumstances, they made an order which was perfectly within the court’s discretion.

21.  In Ansar Mohammad v. Global Legend Transportation Ltd, CACV 162/2010 (unreported, 24 March 2011, Tang Ag. CJHC, Le Pichon and Cheung JJA), where the appellants succeeded on quantum but failed on liability this Court made an order nisi that the appellant should have the costs of the appeal.  Subsequently, the parties presented the court with a consent order that the appellants should have 50% of the costs of the appeal.  A consent order to that effect was made on 20 April 2011.

22.  In Kwan Siu Wa Becky and Ors v Cathay Pacific Airways Ltd, CACV 92/2010 (unreported, 17 March 2011), in the Labour Tribunal, the appellants succeeded in relation to “Line Duty Allowance” (“LDA”), “Ground Duty Allowance” (“GDA”) and “Duty Free Sales Commission” (“DFSC”) but failed on “Outport Allowance” (“OA”). The Deputy Presiding Officer also held in favour of one of the appellants that she had not received any holiday pay at all.  On appeal and cross-appeal, Stone J found in favour of Cathay Pacific Airways Limited (“CPA”) and against the appellants on every issue.  The appellants appealed against Stone J’s order and contended that they should have succeeded on all issues before the Labour Tribunal.  On appeal to us, the appellants succeeded on all issues apart from OA.  The arguments on OA had occupied most of hearing.

23.  This Court (Tang Ag CJHC, Le Pichon and Cheung JJA) made an order nisi that the appellants should have 60% of the costs of the appeal, and at First Instance before Stone J.  The order nisi was made absolute after hearing oral submissions from the parties.

24.  I will not refer to the other authorities on costs, which are well known, including the judgment of Lam J in Hong Kong Kam Lan Koon Ltd v Realray Investments Ltd (No 4) (2005) 4 HKC 162, which Mr McCoy has referred to us.

25.  Here, the amount of damages ultimately awarded to the Plaintiffs meant that their claims should have been brought in the District Court.  When I made the order nisi, I was influenced by two factors: first, the Defendants had to come to this Court and they had the damages significantly reduced; secondly, I was not going to interfere with the costs order at First Instance (which might already have been taxed and paid), leaving such costs to be taxed on the High Court scale.  If one were to be strict about it, one might have ordered that the Plaintiffs’ costs at First Instance to be taxed on the District Court scale, resulting, possibly, in a substantial reduction in the amount of costs payable by the Defendants to the Plaintiffs because of the importance to keep a sense of reasonable proportion.

26.  Now Mr Chow for the Defendants submits that costs of the trial should be taxed on the District Court scale under section 52D of the High Court Ordinance which has replaced section 44A(6) of the District Court Ordinance, which used to provide that:

“Where proceedings in which the Court has jurisdiction are brought in the Court of First Instance, the Court shall order costs on the scale and in the amount as if the proceedings had been brought in the Court, unless the proceedings were brought by leave of the Court of First Instance or unless the Court of First Instance otherwise orders.”

27.  Mr Chow submits, correctly in my view, that the main difference between the two provisions is that formerly under section 44A(6) the default position would be that the District Court scale applies where claims in which the District Court has jurisdiction were brought in the High Court, subject to any specific order of the Court of First Instance, whereas now under section 52D of the High Court Ordinance a specific order of the Court of First Instance/Court of Appeal is required to direct taxation on the District Court scale.

28.  Mr Chow further submits that the relevant test should remain the same, namely, whether the Plaintiff, when he issued the writ, had a reasonable prospect of recovering a sum in excess of the District Court’s jurisdiction of $1,000,000.

29.  Mr McCoy relies in particular on Seagroatt J’s decision in Lai Ki v B + B Construction Co Ltd & Ors [2003] 3 HKC 322, an action for personal injuries, where at 329, Seagroatt J said:

“21. The position in relation to a claim in the High Court settled or adjudicated upon in a sum which is within the District Court jurisdiction is as follows:

(1) The usual order will mean that costs will be on the District Court scale unless the High Court is, in the exercise of its discretion, persuaded that there was a reasonable prospect of obtaining an award in excess of the District Court jurisdiction. …”

30.  I am prepared to proceed in this instance on the basis that remains the appropriate test.

31.  Mr Chow submitted that when the Plaintiffs issued the writ they had no reasonable prospect of recovering a sum in excess of the District Court’s jurisdiction of $1,000,000.  I agree.  In this context, I note that although we have reduced (by a majority) the 2^nd Plaintiff’s award of general damages to $150,000, Cheung JA would have reduced it to $500,000.

32.  I would leave for future determination whether having regard to the important objectives of promoting a sense of reasonable proportion and to ensure fairness (see Order 1A rule 1) the Court should adopt a more stringent test against a plaintiff who has overestimated (though reasonably so) his claim.  It is arguable that the defendant should not suffer for the wrong (though reasonable) estimate.

33.  Mr McCoy also correctly submits that the Defendants had raised a defence of responsible journalism or reportage at trial and engaged eminent leading counsel.  However, I will not accept the implication that the District Court was not the suitable tribunal for the determination of such defence.  Also had the Plaintiffs commenced the proceedings in the District Court the defendants might not have engaged leading counsel.  In any event, if, as a result of the defence, the Plaintiffs considered it appropriate that the proceedings be transferred to the Court of First Instance, they could apply for an order to that effect.  Section 42 of District Court Ordinance, Cap. 336.  If an order for transfer had been made, no question of costs on the District Court scale could then arise.  In this case, the Plaintiffs ought to have commenced the proceedings in the District Court and it is a case where in the proper exercise of my discretion, I would order that their costs at trial be taxed on the District Court scale.

34.  In the circumstances of this case, I would modify the cost order nisi and award 60% of the costs of the appeal to the Defendants, because looking at the matter with common sense, the Defendants had to come to court to have the damages reduced. In that, they have succeeded to a significant degree.  But they should not have appealed on liability.  For that, they should be deprived of part of their costs.  As May LJ said in Lipkin Gorman v Karpnale Ltd [1989] 1 WLR 1340 at 1390:

“… Where one has to split up, or discount, orders for costs, [he] … prefer to achieve that result by way of a proportional order.”

That is also the practice of our courts. I believe in all the circumstances, a 40% discount is reasonable, and I would so order. But, in relation to the cost at First Instance, I agree with Mr Chow and would order that the Plaintiffs’ costs below should be taxed on the District Court scale.

35.  Since we have varied the costs order nisi, each party should pay its own costs in relation to the applications to vary the order nisi.

Hon Le Pichon JA:

36.  I agree with the judgment of Tang Ag CJHC.

Hon Cheung JA:

37.  I agree.