DESIR, ANTHONY C v. KNIGHT FRANK (SERVICES) LTD AND OTHERS

HCSA 36/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO 36 OF 2013

(ON APPEAL FROM SCTC No 31038 OF 2012)

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DECISION ON COSTS

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I. INTRODUCTION

1. On 9 January 2015 I handed down judgment in respect of the appeal by the claimant (“Desir”) against the decision by the adjudicator in the Small Claims Tribunal (“Adjudicator”) that dismissed Desir’s claim in SCTC31038/2012 against the 3^rd defendant (“IO”) with no order as to costs, and against the Adjudicator’s decision that dismissed Desir’s application for review with no order as to costs (“Judgment”).  For convenience, I shall adopt the abbreviations in the Judgment.

2. By the Judgment, I allowed the Appeal and granted judgment in favour of Desir in the sum of $25,699 and interest thereon at judgment rate from the date of disposal of the Bicycles (ie 19 March 2012) until payment.  I also granted a costs order nisi that the IO shall pay costs of the Appeal (including all costs reserved, if any) to Desir to be taxed if not agreed (“Costs Order Nisi”).

3. On 15 January 2015, the IO applied for variation of the Costs Order Nisi to the effect that the IO should only bear 1/6 of Desir’s costs of the Appeal on the basis that (a) save and except for the 2^nd Ground Desir’s other grounds of appeal were failed allegations that caused increase in the length and costs incurred for the Appeal proceedings, and (b) Desir should not have costs for the significant unsuccessful allegations for the grounds of appeal (“Variation of Costs Application”).  The IO made clear they would not ask Desir to bear any part of their costs of the Appeal.  In short, the IO wished to deprive Desir of 5/6 of his costs of the Appeal.

4. By written directions dated 16 January 2015, I noted that at the hearing of the Appeal on 10 October 2014 both Desir and IO had not yet addressed on the issue of costs of the proceedings in SCTC31038/2012 (“Costs Below Issue”) pending the outcome of the Appeal (in respect of which the Judgment was handed down).

5. On 16 January 2015, I gave written directions for Desir and the IO to lodge written submissions for the Variation of Costs Application and Costs Issue Below to be dealt with on paper.

II.  COSTS ISSUE BELOW

6. Section 24 of the Ordinance provides as follows:

“(1) Subject to subsection (2), the tribunal may award to a party costs and expenses, which may include –

(a) any reasonable expenses necessarily incurred and any loss of salary or wages suffered by that party; and

(b) any reasonable sum paid to a witness for expenses necessarily incurred and any loss of salary or wages suffered by him,

in attending the hearing.

(2) In making an award of costs under this section, the tribunal shall include a direction as to the amount to be paid by each party who is liable to pay costs.

……”

7. Desir submitted that since he succeeded in the Appeal which overturned the Decision and Review Decision, his costs and expenses for the proceedings in the SCTC31038/2012 (“Costs Below”) should follow event and be summarily assessed or taxed pursuant to Order 62 of the Rules of the High Court (“RHC”). 

8. On the other hand, the IO submitted it was notable that even when the Adjudicator found in favour of the IO by the Decision and Review Decision he made no order as to costs in respect of the Costs Below.  They argued there was no reason to disturb such costs orders when the parties were unrepresented in SCTC31038/2012, the claim value was only $25,699 and Desir did not make any application for costs and/or expenses then. 

9. But in my view, Desir could not be faulted for not making such application when the Decision and Review Decision were against him. But now that he succeeded in the Appeal which showed he had a meritorious claim, I see no reason why this court should not exercise its discretion to award the Costs Below in his favour. 

10. There was serious contention between the parties as to the quantum of the Costs Below.  Desir claimed (with the aid of a breakdown table) that he had spent 40.5 hours for preparation work and 27.5 hours for attendance at the Tribunal for hearings and filing of documents.  As for his time costs, he claimed that as a senior private equity banker he was able to command significant remuneration (comparable to a survey from a Hong Kong recruitment agency) and his charge-out rate (from information in the public domain) as a professional presenter ranged from US$10,000 to US$20,000 per 8-hour day, which he recognised might be higher than some legal professionals.  Desir declined to provide his personal information as to his work and income except for a broad description of the nature of his work found in the public domain.  Desir claimed disbursements for (a) fees and court costs ($181), (b) travelling expenses ($2,300) and (c) print/copy/fax/mail charges ($2,096). 

11. On the other hand, the IO submitted that taking into account various hearings at the Tribunal for SCTC31038/2012, including three days of trial and one day of review hearing, the appropriate award for the Costs Below should be $2,250 (inclusive of transportation expenses and other related losses).  The IO found support for this from M Beraha & Co Ltd v Ng Wai Lun[1] where the first instance judge in the District Court held that if the case before him had proceeded in the Tribunal it would have taken four hearings to complete the trial in ordinary litigation, and “[the] Tribunal would generally award costs to the winning party at about $250 per hearing for transportation expenses and other related losses”, and awarded the plaintiff costs in the amount of $1,000. However, I note that subsequent to this decision DHCJ Poon (as he then was) questioned the propriety of a daily rate of $250 unless there was evidence to support such assessment.[2]

12. In assessing the Costs Below under section 24 of the Ordinance, I bear in mind the following considerations:

(a)  one of the main purposes of establishing the Tribunal and letting litigants have resort to it is to let the parties resolve their disputes on matters within the monetary jurisdiction of the Tribunal without incurring the expenses of retaining legal services;[3]

(b)  the purpose of section 24 of the Ordinance is compensatory and not punitive in nature with an emphasis on reasonableness;[4]

(c)  any award for costs and expenses in respect of proceedings at the Tribunal is governed by section 24 of the Ordinance by way of a direction to the paying party to pay a sum to the receiving party for “costs and expenses” (including expenses necessarily incurred and loss of wages/salary actually suffered “in attending the hearing”) and not by way of summary assessment or taxation under Order 62 of the RHC;

(d)  however, in assessing the amount of “costs and expenses” under section 24 of the Ordinance other than those under subsection (a) and (b), reference can be made to the Order 62 rule 28(2) of the RHC which provides for taxation on party and party basis, ie “there shall be allowed all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed”, and apart from loss of salary and wages actually suffered by a party the amount of costs and expenses should be reasonable in the context of a claim within the jurisdiction of the Tribunal;[5]

(e)  if the receiving party being a litigant in person claims to suffer pecuniary loss (especially when he has no job), the burden is on him to establish and prove his actual pecuniary loss;[6]

(f)  if the receiving party being a litigant in person has not suffered actual pecuniary loss (eg actual loss of salary or wages), he is entitled to costs for time reasonably spent by him on work for the litigation subject to the considerations in (a) above and (h) below;

(g)  even if the receiving party being a litigant in person has a job, if his work on the litigation can be done in his off-duty hours, then there is no actual pecuniary loss and the considerations in (f) apply;[7]

(h)  although the Civil Justice Reform does not apply to proceedings in the Tribunal, given the purpose of the Tribunal as explained in (a) above, the concept of reasonable proportionality is clearly relevant, and the assessed costs and expenses should not be disproportionate and/or unreasonable having regard to the nature, value and/or circumstances of the application or matter before the Tribunal.

13. In light of the above principles, I am not persuaded Desir would be entitled to his claim for time costs and disbursements as he alleged. 

14. As regards Desir’s claim for his time costs for preparation work and for attending the Tribunal for hearings and filing of documents,

even taking his submissions to the highest, there was insufficient information to show he suffered actual pecuniary loss (such as actual loss of remuneration/income), especially when he chose not to place his personal information before the court but only relied on a remuneration survey for various professionals.  There was also insufficient material to show whether or not Desir was self-employed, his normal working hours, whether he was unable to earn income as a result of attending the Tribunal for hearings or filing of documents, whether such time as spent would otherwise have been used to earn income, how such time as spent cut into his work schedule, whether he could have done his preparation work in his leisure hours etc.

15. Further, I find the time spent by Desir on preparation work for the hearings to be grossly excessive. Desir himself was the participant in various correspondence and events, and had personal knowledge of the matters in question. The time said to be incurred for preparation is disproportionate and excessive. Further, the claim for costs below is against the IO (who was only joined as a party to SCTC31038/2012 on 11 October 2012) and not against the 1^st and 2^nd defendants. The costs incurred by Desir in respect of his claims against the 1^st and 2^nd defendants and his application for withdrawal of such claims cannot be recovered against the IO.

16. Bearing in mind the objective of the Ordinance is to provide an inexpensive forum for dispute resolution between unrepresented parties, the requirement of reasonableness in respect of costs and expenses that might be awarded under the Ordinance, and the need to pay heed to proportionality between the nature/value of the dispute and costs/ expenses incurred, and taking into account the above principles, Desir’s claimed rate based on his alleged regular attendance fee of US$10,000-US$20,000 per 8-hour day, which is unsupported by any personal record, is wholly excessive and inappropriate. 

17. As regards travelling expenses for attending the Tribunal for hearings and filing of documents, I find Desir’s claim of $230 per round trip (presumably by taxi) excessive.  After all, travelling expenses that are allowed have to be necessarily and reasonably incurred rather than based on how Desir chose to travel. I also find photocopying charges, which are not receipted, excessive.

18. Taking into account all of the above circumstances, including the nature and history of the proceedings in SCTC31038/2012 and the number of hearings that concerned the IO, I order and direct the IO to pay to Desir a sum of $4,000 for the Costs Below.

III.  VARIATION OF COSTS APPLICATION

19. The starting point is Order 62 rule 3(2) of the RHC which provides as follows:

“If the Court in the exercise of its discretion sees fit to make any order as to 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.”

20. Order 62 rule 5(1)(aa), (d), (e) and 5(2) of the RHC provide that the court in exercising its discretion as to costs shall take into account the following matters:

(a)  the underlying objectives set out in Order 1A, rule 1 of the RHC;

(b)  any written offer which is expressed to be “without prejudice save as to costs” and which relates to any issue in the proceedings, but the court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22 of the RHC;

(c)  the conduct of all the parties, which would include:

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

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

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

(iv)  conduct before, as well as during, the proceedings;

21. The underlying objectives in Order 1A rule 1 of the RHC are as follows:

“(a) to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court;

(b) to ensure that a case is dealt with as expeditiously as is reasonably practicable;

(c) to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings;

(d) to ensure fairness between the parties;

(e) to facilitate the settlement of disputes; and

(f)  to ensure that the resources of the Court are distributed fairly.”

22. The IO suggested that too robust an application of the “costs follow event” principle would encourage litigants to increase the costs of litigation by leaving no stone unturned.[8] In Zhuhai International Container Terminals (Jiuzhou) Limited v Lo Tong Hoi & anor CACV 181/2011 (unreported, 31 July 2012), the Court of Appeal noted that the court below ruled against the 1^st defendant who successfully resisted the plaintiff’s claim on his alternative ground of defence, which was a discrete issue that added significantly to the time and costs of the proceedings, and deprived the 1^st defendant of 25% of the costs below for raising the failed issue.  Kwan JA with whom Cheung and Yuen JJA concurred said as follows:

“33. …… On established principles, it is held that it is not necessary to establish that a successful party has acted unreasonably or improperly in raising an issue for it to be deprived of the whole or part of its costs. The court may so order where the failed allegation of the successful party has caused significant increase in the length or costs of proceedings (Re Elgindata Ltd (No 2) [1992] 1 WLR 1207 at 1214B to C). By the amendments introduced to Order 62 rule 5, litigants should bear in mind the possible costs implications. There is incentive to conduct litigation in a responsible way and be selective as to the issues raised.”

23. The IO claimed that in the Appeal Desir succeeded on the 2^nd Ground but failed on the 1^st and 3^rd to 6^th Grounds, which were raised in a wholly unselective manner with entirely excessive documentation amounting to three bundles of over 500 pages, and which required the IO to respond to all of such failed grounds, in particular the 1^st, 4^th and 5^th Grounds, and to review the bundle of irrelevant emails, minutes, correspondence and newspaper articles.  The IO further claimed that whilst they had tried to minimise costs by trying to appear in person, members of the IO were unavailable and their application for the property manager to appear on their behalf at the Appeal hearing was refused, so counsel had to be instructed to appear on their behalf.  The IO also claimed there was unnecessary hostile litigation conduct prior to the Appeal hearing in that attempts to agree the hearing bundle was met with extreme hostility and outright refusal to communicate, resulting in two sets of bundles being prepared.

24. I am not persuaded I should vary the Costs Order Nisi.  First, two days after the Review Decision on 28 August 2013, ie on 30 August 2013, Desir sent a written without prejudice save as to costs offer to the IO proposing to forego any further appeal (in order to save costs and to positively resolve the matter) if the IO would confirm their intention to pay him the costs of the Bicycles in the sum of $25,699.  Had the IO taken up such offer, the Appeal (and indeed the application for leave to appeal) would have been unnecessary and both costs and interest would have been reduced.  But plainly the IO did not take up Desir’s offer which led Desir to lodge and eventually to succeed on the Appeal. 

25. Secondly, prior to lodging the Appeal, Desir applied for leave to appeal against the Decision and Review Decision.  On 4 December 2013, I granted leave to appeal on the basis that the 1^st to 6^th Grounds put forward by Desir reached the threshold test of being arguable in the sense that the Adjudicator might have erred in law in reaching his conclusion.  It is only after full hearing of the Appeal that I rejected some of the grounds, but I cannot say that the failed grounds of appeal were so wholly unreasonable that they should not have been raised at all.

26. Thirdly, although the IO complained they were constrained by the unnecessary width of the Appeal to consider extraneous correspondence, emails, minutes and newspaper articles, I have found that under the 4^th Ground the Adjudicator erred in law in refusing to consider the emails produced at trial and at the review hearing insofar as they discuss the potential location(s) of the Designated Areas,[9] and it could not be said that such emails were irrelevant, especially when it appeared that the Adjudicator appeared to have misunderstood Desir’s case.[10] I also consider that even though the 4^th Ground did not succeed, Desir’s pursuit of such ground of appeal could not be said to have no apparent basis at all, especially when I have found that the IO’s submissions on the 4^th Ground were not persuasive.[11]

27. Fourthly, although Desir ultimately failed on the 1^st Ground, I was also unconvinced by the IO’s interpretation of clause 21(j) of the DMC.  Desir saw the force of the IO’s arguments in relation to clauses 13 and 12(l) of the DMC, and made concessions in his supplemental written submissions which minimised the disputed issues.

28. Fifthly, although Desir also failed on the 5^th and 6^th Grounds, I cannot say they were unarguable in the first place, and indeed leave was granted for such points to be pursued at the Appeal.

29. Sixthly, whether the IO could have acted in person is irrelevant for considering whether the IO ought to pay Desir’s costs of the Appeal, and Desir could not be blamed for the fact that members of the IO were not available to appear at the Appeal hearing or that the IO failed in their application for leave to be self-represented.  Likewise, since the IO was not asking Desir to pay any part of their costs of the Appeal, I cannot see how Desir’s many complaints in his written submissions for the Variation of Costs Application against the IO’s litigation/other conduct (including the IO motives and how they dealt with other property management issues/matters) are relevant.  The taxing master should take note of these matters.

30. Seventhly, as regards the IO’s complaints about the hearing bundle, this court has directed that the hearing bundle as prepared by Desir shall be used for the Appeal.  Whether Desir is entitled to payment of all of his alleged time costs in preparing, lodging and serving the hearing bundle will be subject to taxation on party and party basis, and it is open for the IO to raise objection during taxation (if they see fit) then.  But I do not see why Desir should not be entitled in principle to such costs (subject to determination during the taxation process as to the appropriate amount that was necessary or proper).  In light of such conclusion, it is inappropriate at this stage to deal with Desir’s many counter-allegations in his written submissions in relation to the preparation of the hearing bundle.

31. Eighthly, since Desir did not apply to vary the Costs Order Nisi, there is no need for me to deal with the suggestions in his written submissions that I should consider ordering costs against members of the IO and/or the IO’s solicitors.

32. For all the above reasons, I dismiss the IO’s Variation of Costs Application, and the Costs Order Nisi is now made absolute.  There is no reason why costs should not follow event, and I therefore order the IO to pay Desir costs of the Costs Below Issue and the Variation of Costs Application (including all costs reserved if any) to be taxed if not agreed.