Lo Man Yau v. Chiu Sung Fai and Another

DCCJ 2516/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2516 OF 2013

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DECISION ON COSTS

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1.In a Judgment handed down on 14 February 2017 (“the Judgment”), I dismissed the plaintiff’s claim for possession of the property situated at Flat B7 and B8 on 3^rd Floor, Tung Lee Building, Nos 1C, 1D, 1E, 1F, 1G, 1H, 1J and 1K Water Street, Nos 1-15 On Ling Lane, Hong Kong (“the Property”) and mesne profits and granted a declaration that the 1^st defendant is the beneficial owner of the Property to the extent of 30.77% under a resulting trust. I made a costs order nisi that the 1^st defendant’s costs of this action be paid by the plaintiff to be taxed if not agreed with certificate of counsel and that the 1^st defendant’s own costs be taxed in accordance with the Legal Aid Regulations: see §80 of the Judgment.

2.By a Summons filed on 23 February 2017, the plaintiff asked for an order that the costs order be varied such that the 1^st defendant do pay the plaintiff one third of the costs of this action and the counterclaim to be taxed if not agreed; or alternatively, there be no order as to costs; or any other costs order as this court shall think just.

3.Unless otherwise stated, in this Decision on Costs, I shall adopt the abbreviations used in the Judgment.  

4.In determining this application, I have borne in mind the following statutory provisions and principles:-

(1)  S.53(1) of the District Court Ordinance (cap.336) provides:-

“The costs of and incidental to all proceedings in the Court … are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid.”

(2)  O.62, r.3(2) of the Rules of District Court provides:-

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

(3)  O.62, r.5 of the Rules of District Court provides:

“(1)  The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account -

(aa)  the underlying objectives set out in Order 1A, rule 1;

...

(e)  the conduct of all the parties;

(f)  whether a party has succeeded on part of his case, even if he has not been wholly successful;

(2)  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.”

(4)  In Seepersad v Persad (2004) 64 WIR, Lord Carswell, in delivering the advice of the Privy Council, said (at §24):-

“An issue for these purposes must be something so distinct and separate in itself that the decision of it constitutes an ‘event’.”

This principle has been repeatedly followed in Hong Kong: see Hong Kong Kam Lan Koon Ltd v Readray Investment Ltd (No 4) [2005] 4 HKC 162, at §13 per Lam J (as he then was); Kwan Siu Wa Becky v Cathay Pacific Airways Ltd, unreported, CACV 92/2010, 19 April 2011, at  §9 per Tang Ag CJHC (as he then was).  

(5)  There is a discretion in the court to deprive a successful party of the whole or part of his costs because he had caused a significant increase in the length or costs of the proceedings by raising issues on which he did not succeed.  That can be done even if it was not unreasonable to have raised those issues.  Whether or not it should be done depends on all the circumstances.  This discretion exists for the purpose of avoiding the rigour of too inflexible an application of the rule that costs generally follow the event.  It is to be approached with due circumspection so as not to undermine the utility of that general rule: Commissioner of Inland Revenue v HIT Finance Ltd (No 2) [2014] 4 HKLRD 412, at §7 per Bokhary PJ (as he then was); Pony HK World v Vand Petro-Chemicals (BVI) Company Ltd & Anor, unreported, FACV 4/2013, 18 March 2014, at §4.

(6)  A party seeking to displace the general rule that costs should follow the event naturally bears the burden of showing that the circumstances justify the exceptional course of such displacement: Mariner International Hotels Ltd v Atlas Ltd (No 2) (2007) 10 HKCFAR 246, at §18 per Bokhary PJ.

5.Mr Shum, leading trial counsel for the plaintiff, fairly and helpfully indicated that no issue is taken on the conduct of the 1^st defendant. Thus the Court does not need to be concerned with O.62, r.5(1)(e) of the Rules of District Court.  However, he submitted that there were three distinct and separate issues raised by the 1^st defendant at trial, namely (1) the resulting trust issue; (2) the constructive trust issue; and (3) the life interest issue, and that the 1^st defendant failed on issues (2) and (3).  He submitted that after the Civil Justice Reform in April 2009, the Courts are more inclined to and readily depart from the general principle of costs following the event: the Courts would take into account a wide range of considerations and make different orders as to costs which would more fairly reflect the outcome of different issues in the case.  He relied on Wong Kam Tong v Tin Shing Court, Yuen Long (IO) (No 2) [2012] 2 HKLRD 1128, at §§10-13 and AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507, at 1522H-1523B and 1523H in support of his submissions. 

6.In AEI Rediffusion Music, in commenting on the effect of the English Civil Procedure Rules (which came into effect on 26 April 1999) on the award of costs, Lord Woolf said:-

“I draw attention to the new Rules because, while they make clear that the general rule remains, that the successful party will normally be entitled to costs, they at the same time indicate the wide range of considerations which will result in the court making different orders as to costs. From 26 April 1999 the ‘follow the event principle’ will still play a significant role, but it will be a starting point from which a court can readily depart. This is also the position prior to the new Rules coming into force.The most significant change of emphasis of the new Rules is to require courts to be more ready to make separate orders which reflect the outcome of different issues. In doing this the new Rules are reflecting a change of practice which has already started. It is now clear that too robust an application of the ‘follow the event principle’ encourages litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take. If you recover all your costsas long as you win, you are encouraged to leave no stone unturned in your effort to do so.”

7.In Wong Kam Tong, the Court of Appeal said (at §13 per Cheung JA):-

“One can see immediately that Hong Kong has adopted a similar approach under Order 62, rule 3(2) in terms of the ‘follow the event principle’ and its departure and also under rule 5 in terms of the consideration whether a party has succeeded on part of the case, even if he has not been wholly successful, and conduct. In our view, one can say with equal confidence that after 2 April 2009, while the ‘follow the event principle’ will still play a significant role in Hong Kong, it will nonetheless only be a starting point from which the Court can depart, the rationale being that a mechanistic adoption of the ‘follow the event principle’ may result in parties incurring unnecessary costs in civil litigation. We do not consider the provisions of Order 62, rule 7(1) (which enable the Court to disallow a party’s costs or order it to pay the other party’s costs if there is anything done or omitted which is improper or unnecessary) will by itself curtail the power of the Court under the new regime. The amendment to rule 7(2) had specifically added the new (aa), namely, regard to the underlying objectives set out in Order 1A, rule 1. In our view Order 62, rule 7 enables the Court to address the costs issue when there are improper or unnecessary acts or omissions but it does not confine the Court’s power only to such situations.”

8.It is correct that a mechanistic adoption of the “follow the event” principle may result in parties incurring unnecessary costs in civil litigation.  Be that as it may, in considering whether to depart from the principle of costs following the event, the Court is obliged to consider what the “event” was.

9.In my judgment, the central issue at the trial or the “event” was the beneficial ownership of the Property and whether the 1^st defendant was entitled to remain in possession of the Property.  By the Judgment, this central issue or event was resolved against the plaintiff and in favour of the 1^st defendant.  That was why I made an order nisi in the Judgment that the 1^st defendant’s costs of the action be paid by the plaintiff to be taxed if not agreed with certificate of counsel.         

10.In my view, issues (2) and (3) are all part of the 1^st defendant’s defence to the plaintiff’s claim for possession of the Property and mesne profits.  They were facets of the central issue or event which called for determination by the Court and were not something so distinct and separate in themselves that the decision of them constituted an “event”.  As I made clear in §§4 and 68 of the Judgment, as I have found that the 1^st defendant had a 30.77% beneficial interest in the Property by virtue of a resulting trust, it was strictly speaking not necessary for me to deal with issues (2) and (3).

11.At the hearing, Mr Shum fairly accepted that the central issue or “event” at trial was the beneficial ownership of the Property and whether the 1^st defendant was entitled to remain in possession of the Property.

12.The fact that issues (2) and (3) were all interlinked with the central issue or “event” can be demonstrated by the following.  The 2^nd defendant’s counterclaim for a declaration of constructive trust and life interest is based on the 1^st Compromise Agreement and the 2^nd Compromise Agreement respectively made on 25 September 2009 and 29 November 2011.  However, as I found in para.20 of the Judgment (which was not challenged by the plaintiff), it was on 25 September 2009 that     Daniel Ng brought with him the one-page 12.05.2004 PSPA on which he wrote down Sung Fai’s payments towards the purchase of the Property in the following sums:- (i) further deposit of $100,000; (ii) second deposit of $300,000; and (iii) miscellaneous expenses of respectively $6,703 and $11,560, totally $418,263.  This contemporaneous document is important to the resolution of the main issue or the event, i.e., whether the 1^st defendant had a beneficial interest in the Property.  As I found in para. 47 of the Judgment, the 1^st defendant’s case that he had a beneficial interest in the Property by virtue of a resulting trust is supported by this document.

13.Furthermore, as Gloster J observed in HLB Kidsons (a Firm) v Lloyrds Underwriters [2008] 3 Costs LR 427 (at §11):-

“There is no automatic rule requiring reduction of a successful party’s costs if he loses on one or more issues. In an litigation, especially complex litigation such as the present case, any winning party is likely to fail on one or more issues in the case …. ”

14.For the above reasons, I see no basis to depart from the general rule that costs should follow the event.  The plaintiff’s summons to vary the costs order nisi is dismissed with a costs order that the 1^st defendant’s costs be paid by the plaintiff to be taxed if not agreed with certificate of counsel and that the 1^st defendant’s own costs are to be taxed in accordance with the Legal Aid Regulations.

15.Last but not least, I thank counsel for their assistance.

Mr Erik Shum, instructed by Simon C W Yung & Co, for the plaintiff

Ms Jennifer Tsui, instructed by Cheung & Choy, assigned by the Director of Legal Aid, for the 1^st defendant

The 2^nd defendant was not represented and did not appear