CHAN WAN CHUEN SNAKY also known as CHAN WAN CHUEN v. EXPRESS TOURIST BUS CO LTD AND OTHERS

HCA 1875/2015

[2018] HKCFI 2560

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1875 OF 2015

_____________

_____________

__________________________

DECISION ON COSTS

(To vary costs order nisi)

__________________________

1.  By the Court’s Judgment dated 21 September 2018, the Court struck out the Statement of Claim on the basis that the 4^thDefendant and the Plaintiff have reached a valid and binding settlement agreement (“Co-operation Agreement”) which has the effect of compromising all the claims made by the Plaintiff against the 4^thDefendant in this action.

2.  The Court also made a costs order nisi that the Plaintiff shall pay the 4^th Defendant the costs of this action including the costs of the striking-out application (“Application”), to be taxed if not agreed (“Costs Order Nisi”).

3.  Clause 2 of the Co-operation Agreement provided that all legal actions in relation to the dispute are to be withdrawn and the parties are to bear their own costs.

4.  In their letter dated 27 September 2018 proposing a variation of the Costs Order Nisi, the Plaintiff’s solicitors said:

“ Clause 2 of the subject agreement provides that, amongst others, each party should bear his own legal costs.

By paragraph 54 of the written judgment, the subject agreement is held to be valid and binding in its entirety.  However, by paragraph 57, not only the costs for the [striking-out] application but also that for the action are under the order nisi to be borne by our client. …”

5.  The Plaintiff’s solicitors did not then specifically propose the terms of the varied order, though it seems that they were only prepared to pay the costs of the Application to the 4^th Defendant.

6.  In his first written submissions, the Plaintiff submits that the Costs Order Nisi should be varied as follows (“Plaintiff’s Proposed Order”):

“ As between the Plaintiff and the 4^thDefendant, there be no order as to costs of this action, save that the Plaintiff do pay to the 4^th Defendant the costs of and occasioned by the Application and Amendment Summons to be taxed if not agreed.”

7.  The Amendment Summons is the 4^th Defendant’s summons dated 15 March 2018 to re-amend his Defence and Counterclaim.  One of the proposed amendments is to add the plea of a full and final settlement brought by the Co-operation Agreement.

8.  In his written submissions, the 4^th Defendant concedes that there be no order as to costs of this action up to 27 November 2017.  The 4^thDefendant however submits that the Plaintiff should be responsible for the costs incurred by the 4^thDefendant after 27 November 2017, and that a fairer costs order (“4^th Defendant’s Proposed Order”) should be:

“ As between the Plaintiff and the 4^th Defendant

(1) there be no order as to costs of this action up to 27 November 2017; and

(2) for the costs of and occasioned to the 4^th Defendant subsequent to 27 November 2017 the Plaintiff do pay to the 4^thDefendant such costs to be taxed if not agreed.”

9.  On 27 November 2017, solicitors for the 4^thDefendant wrote to the Plaintiff’s solicitors enclosing a copy of the Co-operation Agreement and asked the Plaintiff’s solicitors to arrange for the dismissal of the Plaintiff’s claim with no order as to costs.  However, the Plaintiff refused to do so.

10.  For costs incurred by the 4^th Defendant after 27 November 2017, the Plaintiff is only prepared to be responsible for those that are referable exclusively to the 4^thDefendant.  The Plaintiff submitted that the Application and the Amendment Summons are the only applications referable exclusively to the 4^thDefendant after 27 November 2017.

11.  Whilst the 4^th Defendant has filed a witness statement and issued a summons for leave to amend the Statement of Damages of the 3^rdand 4^thDefendants both on 22 March 2018, the Plaintiff submits that the two foregoing steps would also be relied on by the 3^rdDefendant and should not be covered by the Costs Order Nisi.

12.  For the same reasons submitted above, in his reply submissions, the Plaintiff adds a third disputed step, namely Master K W Wong’s order in respect of the Plaintiff’s summons for expert directions pursuant to a consent order between the Plaintiff and the 3^rd and 4^th Defendants.

13.  The Plaintiff submits that the costs arising from these three disputed steps (“Three Disputed Items”) are incurred by the 3^rd and 4^th Defendants jointly and are not referable exclusively to the 4^th Defendant (“Joint Costs”).

14.  The Plaintiff submits that the Co-operation Agreement did not settle the Joint Costs and thus they ought to be determined along the jurisprudence on costs where a plaintiff only succeeds against one/some but not all of the co-defendants.  The Plaintiff further submits that in those situations, a court may order the unsuccessful defendant to pay the costs of the successful defendant by means of either a Sanderson order or a Bullock order when it was reasonable for the plaintiff to join the successful defendant in the action (which is the case here according to the Plaintiff).

15.  The Plaintiff submits that a costs order in respect of the Joint Costs in the terms of the 4^thDefendant’s Proposed Order forces the Plaintiff to seek indemnity from the 3^rdDefendant, in effect binding the Plaintiff to a Bullock order.

16.  In determining the appropriate scope of the costs order, I accept the 4^thDefendant’s submission that the test is not whether an application is “referable exclusively” to the 4^thDefendant.

17.  The reason is simple.  So long as the action is still ongoing, the 4^th Defendant has to act in compliance with the Rules of the High Court and any court orders made for the further conduct of the proceedings.  It is not the Plaintiff’s case, and there is no evidence to suggest, that the costs incurred by the 4^th Defendant after 27 November 2017 were unnecessary or were increased by reason of possible reliance by other parties on the steps taken.  The same or substantially the same amount of costs would be incurred by the 4^thDefendant regardless of such reliance if any.

18.  On 27 November 2017, when solicitors for the 4^thDefendant wrote to the Plaintiff’s solicitors enclosing a copy of the Co-operation Agreement and asked the Plaintiff’s solicitors to arrange for the dismissal of the Plaintiff’s claim with no order as to costs, the litigation between the Plaintiff and the 4^thDefendant should have ended there.

19.  But for the Plaintiff’s subsequent refusal to accept the Co‑operation Agreement as valid and binding, the 4^thDefendant would nothave incurred any further costs after 27 November 2017.  The fact that the 4^thDefendant’s witness statement or his summons for leave to amend his Statement of Damages may be relied on by the 3^rd Defendant is not relevant.   

20.  Moreover, the Plaintiff’s reliance on the jurisprudence over a Sanderson order or Bullock order is misplaced.

21.  It is trite that where a plaintiff sues a number of defendants, acourt may order an unsuccessful defendant to pay the costs of a successful defendant provided that it was reasonable for the plaintiff to join the successful defendant in the action.  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: Chong Ngan Seng v China Harbour Engineering Co Ltd & Ors (unreported, CACV 54/2012, 25 September 2013), paragraphs 5 to 7 per Fok JA (as he then was).

22.  In cases where the unsuccessful defendant is insolvent, the question is how to distribute the hardship arising from his impecuniosity: Standard Chartered Bank v Li Wai Ping & Ors [2011] 5 HKC 149, at 155, paragraph 27.

23.  In the present case, there is however no basis to assume at this stage that the 3^rd Defendant, or indeed any other Defendant, is or will be an unsuccessful defendant.  Moreover, regardless of whether it was reasonable for the Plaintiff to join the 4^th Defendant at the outset, it was not reasonable for the Plaintiff to continue the action against the 4^th Defendant after 27 November 2017.  The Plaintiff’s argument based on the jurisprudence over Sanderson order or Bullock order simply cannot get off the ground.

24.  In any event, there is also no evidence on the financial position of the Defendants.  Absent such evidence, I am not in a position to accept that any of them is impecunious.

25.  Turning back to the scope of the costs order, as mentioned above, it was simply not reasonable for the Plaintiff to continue the action against the 4^th Defendant after 27 November 2017.  The Plaintiff therefore has to be responsible for those costs incurred by the 4^th Defendant after 27 November 2017.  There is also no ground to suspend the Plaintiff’s payment of those costs that are not “referable exclusively” to the 4^thDefendant.

26.  For the foregoing reasons, I accept that the 4^th Defendant’s Proposed Order is a more appropriate order than the Plaintiff’s Proposed Order.  The Plaintiff’s submission that the 4^th Defendant’s Proposed Orderin effect binds the Plaintiff to a Bullock order is largely a red herring.  There is no merit in such submission.

27.  On an overall assessment of this application to vary the CostsOrder Nisi, the Plaintiff and the 4^thDefendant have each succeeded in some aspects of it and failed in other aspects.  Costs are in the discretion of the Court (see section 52A of the High Court Ordinance, Cap 4 and Order 62, rule 2(4) of the Rules of the High Court).  Order 62, rule 5(1) deals with matters to be taken into account by the Court in exercising its discretion as to costs.  They include the underlying objectives set out in Order 1A, rule 1; and whether a party has succeeded on part of his case.  In view of the above, I consider a fair exercise of the discretion is to make no order on the costs of the application.

28.  I make the following orders on the application:

(1) The Costs Order Nisi is varied to the following order:

“ As between the Plaintiff and the 4^th Defendant—

(a) there be no order as to costs of this action up to 27 November 2017; and

(b) for the costs of and occasioned to the 4^th Defendant after 27 November 2017, the Plaintiff do pay to the 4^thDefendant such costs to be taxed if not agreed.”

(2) There be no order as to the costs of the application to vary the Costs Order Nisi.