OWT ASIA LTD v. CPCNET HONG KONG LTD

HCA 6436/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6436 OF 2000

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R U L I N G

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1.  These proceedings concerned a claim by the Plaintiff for damages for breaches by the Defendant of a contract for the supply of hardware and software to enable the Plaintiff to carry on a business of providing an international telephone calling service using calling cards sold by the Plaintiff.  Following trial, I gave judgment for the Plaintiff on 23 December 2005, awarding the Plaintiff damages of US$40,400 and HK$436,692.  I also made an order nisi as to costs – that the Defendant should pay the Plaintiff’s costs, to be taxed on the party and party basis if not agreed.  Interest on the damages awarded was the subject of a separate ruling dated 4 August 2006.

2.  In Hong Kong dollar terms, the total amount of damages awarded was about HK$751,812, an amount that falls within the limit of the District Court’s monetary jurisdiction in civil matters of HK$1,000,000.

3.  It appears that the parties were unable to reach agreement on the amount of costs payable to the Plaintiff, and the Plaintiff accordingly sought to tax its costs.  Prior to the commencement of the taxation, on 4 May 2006 the Plaintiff’s solicitors wrote to those representing the Defendant, enquiring whether the Defendant would seek to contend that costs should be taxed otherwise than on the High Court scale.  On 10 May 2006, the Defendant responded taking the position that the appropriate scale of costs to be applied was the District Court scale.

4.  There the matter rested until 19 October 2006, when the Plaintiff took out an Appointment to Tax.  This was returnable for a call over hearing on 5 December 2006.  On 1 December 2006, the Defendant served its list of objections to the Plaintiff’s Bill of Costs, included among which were an objection to the taxation of such costs on the High Court scale, contending that the appropriate scale to be applied, in the light of various authorities, was the District Court scale.

5.  When the matter came before Master S. Kwang on 5 December 2006, Master Kwang indicated that the issue as to the relevant scale on which the costs should be taxed was not something that should be argued with on taxation, indicating that if either party wanted to make submissions as to the applicable scale of costs, the matter should be referred back to me.  This is in accordance with the practice which I understand has been adopted by the Masters conducting taxations, on the basis that the judge dealing with the matter at trial is in the best position to determine whether or not recovery on the High Court scale should be permitted notwithstanding that the damages recovered are within the District Court’s jurisdiction.

6.  If no steps were taken to seek such clarification, it would, I think, be for the Master conducting the taxation to make a ruling as to the scale to be adopted, in the light of the authority to which I refer below.  In doing so, the Master would only be ruling as to the effect or proper interpretation of the order made where the order is silent as to the appropriate scale to be used, and would not concern himself with the question of which scale was the appropriate one to apply in the particular circumstances of the case.

7.  In the event, on 5 January 2007, the Defendant’s solicitors wrote to the court seeking clarification as to the scale on which the Plaintiff’s costs of these proceedings were to be taxed, making submissions, supported by authorities, in support of their contention that the appropriate scale of costs was the District Court scale.

8.  I directed the Plaintiff to file submissions in response, if it wished to do so.  On 24 January 2006, the Plaintiff’s solicitors provided short submissions which were to the effect that it was now too late for the Defendant to seek to re-open the matter, since the order nisi would have become absolute nearly a year earlier, and there was no appeal either against the judgment, or the direction given by Master Kwang on 5 December 2006.  The submissions did not seek to address the Defendant’s arguments in favour of a taxation on the District Court scale, or to suggest reasons why it would be appropriate, in the circumstances of this case, for me to order that the taxation should be carried out on the High Court scale.

9.  The Defendant submitted that the correct approach was as stated in paragraph 21 of the decision of Seagroatt J in Lai Ki v B+B Construction Co. Ltd (unreported, 24 May 2003, HCPI 63/2001), where it was stated that:-

“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.  To that end the valuation of the claim must be on the basis of full liability.

(2) The order by consent, or upon adjudication, for the Plaintiff’s costs to be taxed does not carry with it any inference or construction that it means costs on a High Court scale.

(3) For the purposes of deciding the proper forum in which to commence proceedings the amount of the Employee’s Compensation paid and received must be deducted.”

10.  Seagroatt J went on to make observations as to the appropriate course to follow where a payment in was accepted, or a settlement reached, in an amount within the jurisdiction of the District Court, without any express agreement as to the scale on which costs were to be taxed.

11.  Although Seagroatt J was concerned with the position following the settlement of personal injury proceedings, and the principal question before him was whether or not account should be taken of contributory negligence which was not admitted by the Plaintiff in deciding whether it was reasonable for the Plaintiff to have commenced proceedings in the High Court and so to direct that the Plaintiff’s costs should be taxed on the High Court scale notwithstanding his failure to recover damages in excess of the District Court’s jurisdiction, it seems to me that the principles which he stated represent the correct starting point.  They embody, as Seagroatt J pointed out, the approach which was adopted by the English courts as to the way in which the court should exercise its discretion as to whether or not to allow recovery on the High Court scale notwithstanding that the amount recovered fell within the jurisdiction of another court in which a lower scale of costs applied.  In my view, it is appropriate that in general, where a Plaintiff brings proceedings in the High Court, but succeeds only in obtaining an amount by way of damages or award that falls within the District Court jurisdiction, it will be for the Plaintiff to justify having commenced proceedings in the High Court, rather than in the District Court where the matter could have been tried at less expense.  Thus, in the absence of a specific statement that the High Court scale should apply, an order for costs made in favour of a plaintiff where the amount recovered (not including interest, which the District Court is equally able to award) falls within the jurisdiction of the District Court, should be understood as requiring taxation of such costs on the District Court scale.

12.  In the present case, therefore, the original order for costs made in my judgment of 23 December 2005, being silent as to the scale of costs to be applied, required that such costs should be taxed on the District Court scale.  That order was an order nisi which became absolute on 6 January 2006.  The effect of the Plaintiff’s submission as to the failure to challenge the order nisi therefore is that it is now too late for the Plaintiff itself to seek to argue that the costs order which I made should be varied, and should not be applied in the way that I have indicated it should be.

13.  It was, therefore, not strictly necessary for the Defendant to have sought clarification of my order as it did by its letter dated 5 January 2007.  However, having regard to the views expressed by the Master, it was not unreasonable for it to do so.  The Defendant having sought such clarification, I afforded the Plaintiff the opportunity to make such submissions as it wished to, and would have considered such submissions as were made as to why taxation on the High Court scale should be permitted in the circumstances of this case.

14.  However, the Plaintiff has failed to put forward any submissions in favour of my exercising my discretion to order a taxation on the High Court scale.  In any event, I do not think that it would have been appropriate to order that the taxation take place on the basis of the High Court scale, as the further damages claimed by the Plaintiff (which would, had they been awarded, been sufficient to take the award over the District Court limit) were not, for the reasons which I gave in my judgment, matters in respect of which damages should properly have been awarded in any event.  Accordingly, I shall confirm that the taxation of the Plaintiff’s costs should be carried out on the basis of the District Court scale.

15.  As the application for clarification was taken out by the Defendant in the light of the Master’s suggestion, which was made in accordance with the usual practice, I do not propose to make any order in relation to the costs of the parties in making their submissions to me.