LAM CHI TAT, ANTHONY AND ANOTHER v. KAM YEE WAI, ANDREW

DCCJ1545/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1545 OF 2009

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BETWEEN

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D E C I S I O N

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Variation of cost nisi order

1.  First of all, I would like to give my reasons and decision on the variation of cost nisi order.  The defendant applies for a variation of cost order nisi at today’s hearing.  The basis is the defendant had succeeded in his counterclaim in the sum of $41,500.  Consequently, the defendant argued the defendant should have his costs on the counterclaim. 

2.  Mr Lau, counsel for the defence, submitted that the plaintiffs had resisted the defendant’s counterclaim all along and the defendant eventually recovered the sum he asked for.  It follows that he should have his costs.  He refers the court to the case of Chell Engineering Limited v Unit Tool and Engineering Company Limited [1951] All ER 378 at 380G and the case of Seacraft Hotel (Teignmouth) Limited v Goble [1984] 3 All ER 116. 

3.  The defendant’s application is opposed by the plaintiffs.  Miss Wong, counsel for the plaintiffs, submitted that the plaintiffs did not dispute the liability to refund the defendant.  The only issue had always been the quantum only. Further, the defendant amended the defence and counterclaim on 18 May 2011, the third day of trial, to the figure of $41,500 which was the sum he eventually obtained judgment on, and the plaintiff, Mr Lam, accepted during cross-examination on the same day of 18 May 2011 the plaintiffs’ liability to refund the defendant.  Therefore, there was no waste of trial time on the issue, and this was confirmed in the plaintiffs’ final submission. Furthermore, the main issue at the trial was whether the defendant was liable to pay the plaintiffs back the defendant’s share of contribution to the Hong Kong Solicitors Indemnity Fund Limited (or PIF) for the year 2004/2005 and 2005/2006; and if he was, the quantum of the contribution payable.

4.  Miss Wong referred the court to the cases of Universal Cycles PLC v Grangebriar Limited [2000] WL 439, paragraphs 21 to 22 and 28, and the case of In Re Elgindata Limited (No. 2) [1992] 1 WLR 1207. 

5.  In the Elgindata case, Nourse LJ set out the principles applicable in awarding costs under Order 62 of the Rules of Civil Procedure at page 1214, A to C of his judgment, these principles are:

“The principles are these. (i) Costs are in the discretion of the court. (ii) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made. (iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or a part of his costs. (iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs.”

Similar principles appear in the Hong Kong Civil Procedure 2012 edition at page 1103, under Order 62, rule 5(2)(a) to (d) and these are:

“For the purpose of paragraph (1)(e), the conduct of the parties includes-

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.”

6.  In paragraph 28 to 30 of Lady Justice Hale’s judgment in Universal Cycles PLC v Grangebriar Limited, she held:

“Nevertheless, that approach can be taken too far as is clear from the leading case of Re Elgindata (No. 2) [1992] 1 WLR 1207 where the claimant succeeds on some issues and not on others. It is one thing to award the claimant only a portion of his own costs, but it is quite another thing to order him to pay the costs of the other side in establishing his rights. There are trenchant comments of Beldam LJ at page 1214 on the deterrent effect on claimants who are in the right overall of so doing.

29. We understand that the defendant’s costs in this case are so large that the effect of the claimant having to pay half of them more than wipe out what it recovers.

30. Furthermore, if one is seeking to encourage good litigating practice in clearing out of the way those issues which should be cleared out of the way and concentrating on the rest, two further points must be relevant.  The first is whether the defendant has admitted liability or whether the defendant has effectively forced the claimant to go to court, etc.” 

7.  In the present case, it is clear that it is reasonable for the defendant to raise the counterclaim, but the liability was not disputed by the plaintiffs.  From the beginning, only the quantum was disputed and the plaintiffs have on pleadings admitted their liability of the sum of $27,500.  On 18 May 2011, the third day of the trial, the defendant amended the defence and counterclaim, and for the first time the figure of $41,500 was pleaded.  The plaintiffs, on the other hand, accepted this sum and amended their reply and defence to counterclaim on 18 May 2011, reflecting their agreement to liability.  Therefore, it was apparent before lunch on the third day of trial the plaintiffs did not dispute the sum of the defendant’s counterclaim which the defendant was eventually awarded.

8.  It is also clear that the real crux of dispute is whether the defendant was liable to repay the plaintiffs’ professional indemnity payment for 2005/2006 and 2006/2007. The counterclaim was not a hotly disputed issue even on the first two days of the trial.  Accordingly, little time was wasted on the issue.  The trial lasted six days, including the day for the final submissions.

9.  Applying the Elgindata principle, I assess the defendant should recover part of his costs due to the success of his counterclaim.  I assess it amounted to 10 per cent of the costs of these proceedings.  In coming to this decision, I have taken into account the defendant should recover the pre-trial costs on the counterclaim and on the pleadings and statements and preparation for the trial itself. 

10.  The costs nisi order is therefore varied that the defendant shall bear 90% of the plaintiffs’ costs in these proceedings.

Leave to appeal

11.  On the defendant’s application for leave to appeal, the threshold for granting leave is the court should be satisfied the appeal has a reasonable prospect of success.  It is set out in the CJR and in Order 59/2A/4 of the Hong Kong Civil Procedure and also at section 63A(2)(a) of the District Court Ordinance.  Provided the applicant is able to show more than just an arguable case “but an appeal that has merits and ought to be heard, although he does not have to demonstrate that the appeal would probably succeed.”  I refer to the recommendation 115 and paragraph 656 of the Chief Justice Working Report on Civil Justice Reform.  

12.  I have given full reasons in my judgment which I have no intention to repeat here, although I do not agree with Mr Lau’s grounds of appeal, I do not wish to deny the defendant an opportunity to take the appeal to the Court of Appeal on the basis of the grounds set out in the draft notice of appeal.  The defendant’s appeal is arguable and deserve to be heard.

13.  I therefore grant leave to the defendant to appeal with costs in the cause of the appeal.  There is consequently a stay of execution pending appeal.

Costs on application on variation of costs order nisi

14.  30% costs of the defendant’s application, preparation and hearing of variation of cost order nisi today, time used at hearing not more than two hours, to be borne by the plaintiffs with certificate for counsel.