LO CHUI YUK v. GOLD WIN ENGINEERING LTD AND OTHERS

HCPI 279/2021

[2023] HKCFI 3235

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 279 OF 2021

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DECISION

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INTRODUCTION

1.  This Court handed down a Judgment on 18 September 2023 (“the Judgment”) after trial, and granted judgment in favour of the plaintiff against the defendants in the sum of $263,179 (“the Judgment Sum”) with interest.  I also made an order nisi that the defendants shall bear the costs of the plaintiff (including all costs reserved, if any), to be taxed if not agreed (“the Order Nisi”).

2.  Relying on their sanctioned payment of $800,000 (on top of advance payment, and with costs and disbursement) made on 22 May 2023 (“the Sanctioned Payment”), the defendants applied by letter dated 29 September 2023 (“the Application Letter”) for variation of the Order Nisi (“the Variation Application”).  In the said letter, the defendants asked for the following orders:

“1. In relation to [the Sanctioned Payment]:-

(a) A sum of HK$263,179.00 be paid out forthwith to the Director of Legal Aid on behalf of the Plaintiff being the Judgment Sum awarded to the Plaintiff pursuant to [the Judgment]; and

(b) The balance of the Sanctioned Payment in the sum of HK$536,821.00 be paid out forthwith to the [Defendants] through their solicitors Messrs. Lee & So.

2. Interest accrued on the Sanctioned Payment, if any, be paid out forthwith to the [Defendants] through their solicitors Messrs. Lee & So;

3. The [Defendants] do pay the Plaintiff’s costs on issue of liability in this action up to 16^th May 2023 on District Court Scale, to be taxed if not agreed;

4. The [Defendants] do pay the Plaintiff’s costs on issue of quantum in this action up to 23^rd May 2023 on District Court Scale, to be taxed if not agreed;

5. The Plaintiff do pay the [Defendants]’ costs of this action after 23^rd May 2023 on High Court Scale and on indemnity basis, with a certificate for counsel, to be taxed if not agreed (the ‘Indemnity Costs’);

6. Interest on any of the Judgment Sum payable to the Plaintiff after 23^rd May 2023 (if any) be disallowed;

7. The Plaintiff do pay the [Defendants] the enhanced interest on the Indemnity Costs at a rate of 10% above judgment rate per annum;

8. Costs of this application be to the Defendants; and

9.  The Plaintiff’s own costs be taxed in accordance with the Legal Aid Regulations.”

3.  By consent, the Variation Application has been directed to be dealt with by way of paper disposal.

4.  It can be seen from the defendants’ written submissions dated 20 October 2023 lodged in support of the Variation Application that, while the proposed orders have been re-phrased and re-organised, the substantive orders sought are basically the same, save that:

(1)  The defendants accepted that the plaintiff should only be liable to pay costs on indemnity basis from 19 June 2023 onwards (i.e. the last day on which the Sanctioned Payment could have been accepted without leave);

(2)  The defendants sought a further order that the plaintiff shall pay the defendants interest on the balance of the Sanctioned Payment (after deducting the Judgment Sum) (“the Net Sanctioned Payment after Deduction”) at the enhanced interest rate of 10% above the judgment rate from the date of the Sanctioned Payment up to the date of Judgment;

(3)  The defendants also asked for certificate for counsel in respect of the Variation Application.

5.  On the other hand, while the plaintiff accepted that the Order Nisi should be varied, it was contended in her written submissions that:

(1)  The enhanced interest rate should only be 5% above judgment rate;

(2)  Enhanced interest should not be awarded in relation to the Net Sanctioned Payment after Deduction; and

(3)  Certificate for counsel should not be granted in relation to the Variation Application.   

6.  Having considered the plaintiff’s written submissions, the defendants abandoned their claim for enhanced interest in respect of the Net Sanctioned Payment after Deduction.  They also accepted that the enhance interest rate to be adopted should be 5% over the judgment rate.

7.  Hence, what remains to be resolved is the costs of the Variation Application.

THE ISSUES ON COST

8.  Parties have argued on two issues by their respective submissions:

(1)  Whether the Court should grant certificate for counsel;

(2)  Whether the defendants should be entitled to all their cost or, as contended by the plaintiff, just 50% thereof?

DISCUSSION

Certificate for counsel

9.  With greatest respect, the application for certificate for counsel, and the opposition against the grant of certificate for counsel on the ground that counsel’s involvement is not necessary, is totally misconceived, as paragraph 2(3), Part II, First Schedule of Order 62 of the Rules of the High Court (Cap.4A, Laws of Hong Kong) (“RHC”) provides that:

“No costs shall be allowed in respect of counsel appearing before a master in chambers, or of more counsel than one appearing before a master in open court or a judge or the Court of Appeal, unless the master or judge or the Court of Appeal, as the case may be, has certified the attendance as being proper in the circumstances of the case.” (emphasis added)

10.  It can be seen that there is actually no need for the defendants to obtain certificate for counsel in the first place, because the defendants had not engaged “more counsel than one” for the purpose of the Variation Application.

11.  Pausing here, I should note that since the Variation Application is dealt with by way of paper disposal, no attendance of counsel/solicitor was required.  Hence, strictly speaking, it may be said that this is another reason why no certificate for counsel is required to be obtained because under the said paragraph 2(3), only “attendance” of counsel is certified.  However, I do not think the said paragraph 2(3) should be interpreted in such a literal way.  In my view, in a paper disposal case, the engagement of counsel for the preparation of written submissions should be treated as “attendance” for the purpose of the said paragraph 2(3).

12.  Coming back to the present case, even if it is necessary for the defendants to obtain certificate for counsel, I have no hesitation in certifying the engagement of counsel in the Variation Application accordingly.

13.  The plaintiff argued that counsel should not have been engaged because:

(1)  Upon the plaintiff’s knowledge of the defendants’ intention in making the Variation Application, the plaintiff has never indicated to the defendants that she intended to oppose the application for indemnity costs;

(2)  By letter dated 27 September 2023, the plaintiff’s solicitors informed the defendants that the plaintiff was applying for legal aid to appeal against the Judgment and reminded them about the “legal aid stay”.  It was expected that the defendants would reply to this letter, and it was intended by the plaintiff’s solicitors that, in the event the defendants disagreed to the “legal aid stay”, the parties could then discuss the terms of variation.  However, the defendants never reverted, but reported to the Court directly about the “legal aid stay” which led to the Court’s lifting of the “legal aid stay”;

(3)  The Variation Application “is appropriate for paper disposal and counsel’s involvement at this stage is not necessary”[1].

14.  To deal with the above arguments, it is necessary to set out the following chronology:

(1)  By letter dated 25 September 2023, the defendants’ solicitors informed the plaintiff’s solicitors of their intention to make the Variation Application.  A draft application letter to the Court was attached.  The plaintiff was asked to reply within 3 days, failing which the defendants would send the draft application letter to the Court.

(2)  On 27 September 2023, the plaintiff’s solicitors wrote to the defendants’ solicitors and stated:

“[…]

As you are aware, our client has lodged an application for legal aid for appeal against the judgment and a Notice of An Application for Legal Aid has been issued by the Director of Legal Aid has been issued (sic) on 25^th day of September 2023.

According to Section 15 of the Legal Aid Ordinance, Chapter 91, and Regulation 7A of the Legal Aid Regulations, Chapter 91A, all proceedings have been stayed for 42 days. […]

Accordingly, your clients should not make the application until the expiry of the stay. […]” (emphasis added)

(3) The defendants’ solicitors then proceeded to send the Application Letter to the Court on 29 September 2023. They also reminded the Court about the “legal aid stay”, but emphasised that it would be within the Court’s discretion as to whether such stay should be lifted.

(4) By letter dated 4 October 2023, the parties were informed of the Court’s directions dated 3 October 2023, by which:

(a) timetable on the lodging of written submissions was set, pursuant to which the defendants were to lodge and serve written submissions in support of the Variation Application by 20 October 2023;

(b) it was ordered that the “legal aid stay” would be lifted unless the plaintiff informed the Court that she would argue against such an order.

(5) On 27 October 2023, the plaintiff’s solicitors informed the defendants’ solicitors in writing that:

“We refer to our letter dated 27^th September 2023, to which we do not appear to have received your direct reply.

Referring to your formal application for variation of costs by your 2^nd letter to the court dated 29^th September 2023 (your ‘Costs Variation Application’) and for the purpose of saving time and costs, we are instructed to propose enhanced interest of no more than 5% above the judgment rate. Subject to this, the other terms as prayed for by your Costs Variation Application, i.e., terms 1 to 9 are agreeable. […]”

15.  Taking the above into account, I am of the view that the plaintiff’s arguments are totally without merit.

16.  First, it is a very unreasonable submission for the plaintiff’s solicitors to allege that since they had never indicated to the defendants that the plaintiff intended to oppose the application for indemnity costs, the defendants should have withheld preparation work for the Variation Application.  Neither do I accept that a majority part of the defendants’ submission on indemnity costs is unnecessary or wasted as alleged by the plaintiff.

17.  It can be seen from the above chronology that the plaintiff’s solicitors, upon being notified about the defendants’ intended application to vary the Order Nisi, only asked the defendants to withhold their application by reason of the “legal aid stay” which was caused by her application for legal aid to appeal against the Judgment. The plaintiff’s solicitors did not inform the defendants that the plaintiff was still waiting for the Director of Legal Aid (“the Director”)’s approval for her solicitors to deal with the Variation Application, still less in saying that there might be a chance for the matters to be resolved amicably once the Director has given his approval. 

18.  What the plaintiff’s solicitors should have done was to inform the defendants’ solicitors and the Court that they were still waiting for the Director’s approval, and apply to postpone the entire timetable for lodging submissions so that no further costs would be incurred on the Variation Application for the time being.  Regrettably, that was not done.

19.  In the absence of the plaintiff’s indication as mentioned, and in light of the timetable set by the Court, there was absolutely nothing wrong (in fact, it was necessary) for the defendants to proceed with the preparation of written submissions in support of the Variation Application. 

20.  It should be borne in mind that by the time when the plaintiff’s solicitors informed the defendants’ solicitors on 27 October 2023 that the Variation Application was not opposed in principle, the defendants had already lodged their written submissions for a week (20 October 2023 – which was the deadline set by this Court).

21.  Second, it is equally, if not more, unreasonable for the plaintiff’s solicitors to argue that the defendants should have replied to the plaintiff’s letter dated 27 September 2023.  I have set out the relevant part thereof in full above (at [14(2)].  It can be seen that there was nothing on which the defendants could reply, as the defendants were only reminded about the “legal aid stay”. 

22.  I must also say that I do not understand how the plaintiff’s solicitors could allege that in the event the defendants disagreed to the “legal aid stay”, the parties could then discuss the terms of variation.  This is because according to them, they were at the time “awaiting extension of the legal aid certificate to deal with the costs issue”, and that they “could not do anything until after obtaining the approval of Director of Legal Aid (as reminded by the Legal Aid Counsel)”[2]. The Notice of Amendment of Legal Aid Certificate regarding the Variation Application was eventually issued on 26 October 2023.  That means the plaintiff’s solicitors could not have started negotiation with the defendants’ solicitors back in September 2023 as alleged.

23.  I should also add that, in the circumstances where the plaintiff’s application for legal aid (which had been made known to the Court and the defendants at the material time) was only for the intended appeal against the Judgment, there was no reason why the proceedings on costs should be withheld. That was the reason why this Court considered it appropriate to lift the stay, in respect of which the plaintiff did not argue against.

24.  Third, insofar as it is suggested that since the Variation Application is suitable for paper disposal and therefore counsel’s involvement is unnecessary, this submission is made to be rejected, for the factors which determine the suitability of paper disposal of an application and the grant of certificate for counsel are different.

25.  Further, having taken into account the nature of the Variation Application, importance of the application to the defendants and the fact that counsel had been involved at the trial, it was necessary and proper for counsel to be engaged herein.

Percentage of costs recoverable by the defendants

26.  There is no dispute that the defendants should be entitled to the costs of the Variation Application.  The only question is whether they should get full cost thereof.

27.  The plaintiff’s solicitors submitted that the defendants should not be entitled to full cost because, while the defendants initially applied for enhanced interest at the rate of 10% over judgment rate, in the end they had conceded and agreed at the rate of 5% over judgment rate as suggested by the plaintiff.

28.  I do not accept this argument.  As mentioned above, the plaintiff only informed the defendants on 17 October 2023 about her agreement to pay enhanced interest at the rate of 5% over judgment rate.  By then, the defendants had already lodged their written submissions in support. Although the defendants were still going after 10% rather than 5% over the judgment rate at the time, I do not think it is fair to cut down the defendants’ entitlement merely because of that, since the same arguments on enhance interest would have to be made anyway.  In fact, the defendants did not make any submission specifically on the enhanced rate of 10% (as opposed to 5%) over the judgment rate.

29.  The plaintiff then relied on the fact that the defendants originally asked for an order that the enhanced interest rate should also be applicable to the Net Sanctioned Payment after Deduction, and that they subsequently conceded and abandoned this claim.

30.  I have no doubt that the defendants’ concession must be right, for the sanction which they originally sought is simply not provided for in Order 22 rule 23 of the RHC.

31.  In my view, it is not fair if the defendants are awarded full cost of the Variation Application in such circumstances.  The cost order which is to be made must reflect their failure to obtain part of the orders which they initially sought.

32.  Having said that, taking into account the number of paragraphs in the defendants’ written submissions in support which had been devoted to this issue, I do not think the defendants’ entitlement to cost should be cut down substantially.   A 15% discount should be adequate for this purpose.

33.  Despite my comment on the necessity on the part of the defendants to obtain certificate for counsel, it is noted that the defendants did not specifically argue on this in their first set of written submissions (dated 20 October 2023).  It was only when the plaintiff’s solicitors (unnecessarily I think) argued against it that the defendants made submissions on the matter in their written submissions in reply (dated 17 November 2023).  In these circumstances, I do not think the defendants’ entitlement to cost should be affected by this matter.

DISPOSITION

34.  I therefore make the following orders:

(1)  The Order Nisi be varied to the following extent:

(a)  The plaintiff do pay interest on special damages (less the amount of advance payment) at half judgment rate from the date of the accident up to 19 June 2023 (i.e. the last day on which the Sanctioned Payment could have been accepted without leave) and interest on PSLA at 2% per annum from the date of the writ up to 19 June 2023;

(b)  Subject to the first charge of the Director of Legal Aid, a sum of $263,179 together with the amount of interest calculated according to the preceding paragraph be paid out of the Sanctioned Payment to the plaintiff through the Director of Legal Aid.  The balance sum, with accrued interest (if any), be paid out to the defendants through their solicitors Messrs. Lee & So;

(c)  The defendants do pay the plaintiff her costs of this action on liability, including all costs reserved, up to the date of the Consent Order (16 May 2023), to be taxed on party and party basis on the District Court scale if not agreed;

(d)  The defendants do pay the plaintiff her costs of this action on quantum, including all costs reserved, up to 19 June 2023 (i.e. the last day on which the Sanctioned Payment could have been accepted without leave), to be taxed on party and party basis on the District Court scale if not agreed; and thereafter the defendants’ costs of this action on quantum, including all costs reserved and the hearing for assessment of damages, shall be paid by the plaintiff, to be taxed on indemnity basis on High Court scale if not agreed, with interest thereon at the enhanced interest rate of 5% above judgment rate as from 20 June 2023 to the date of payment;

(2)  85% of the defendants’ cost of the Variation Application be paid by the plaintiff, to be taxed on indemnity basis on High Court scale if not agreed; and

(3)  The plaintiff’s own costs to be taxed in accordance with Legal Aid Regulations.