Chiu Sui Ching, The Administrator of the Estate of Leung Ho Tin, Deceased v. Cheng Kwai Hung t/a Hang Nagi Works and Others

HCPI 939/2017

[2024] HKCFI 635

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 939 OF 2017

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DECISION ON COSTS

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Backgound

1.Judgment on the assessment of damages in the present case was handed down with a nisi costs order (“the 2022 Nisi Costs Order”) by Hon Marlene Ng J in November and December 2022. The award fell below the interim payment already received by the plaintiff out of the sanctioned payments made by the 2^nd to the 5^th defendants (“D2-5”). Hence the summons of D2-5 filed on 25 November 2022 (“D2-5’s 2022 Summons”) for recouping the overpayment and variation of the 2022 Nisi Costs Order in view of such outcome.

2.On 30 December 2022, by consent, this court ordered that, amongst other things, the plaintiff should repay D2-5 the amount of the interim payment received in excess of the award together with interest (“the Repayment Order”).

3.On 4 January 2023, this court further ordered that the 2022 Nisi Costs Order be varied so that (i) D2-5 shall pay the plaintiff’s costs of the action relating to quantum up to 28 May 2018[1] on the District Court scale and on a party and party basis; (ii) the plaintiff shall pay the costs of D2-5 in the action in relation to quantum from 29 May 2018 on the High Court scale and on an indemnity basis with certificate for counsel; and (iii) the plaintiff shall pay D2-5 enhanced interest on the costs under (ii) above. This court also ordered the plaintiff to pay D2-5’s costs of the above disposed parts of their summons with certificate for counsel.

4.The outstanding parts of D2-5’s 2022 Summons therefore were:

(1)  under §3 of the summons, D2-5’s application for an order that in case of default in compliance with the Repayment Order by the plaintiff, her solicitors (“MPC”) should inform the court of the reason and affirm to the court whether they had duly advised the plaintiff that there was a chance that interim payment should be repaid to the paying party in case of overpayment (“the §3 Application”);

(2)  under §5 of the summons, D2-5’s application for a wasted costs order against MPC to pay D2-5’s costs of this action in relation to quantum personally (“the §5 Application”);

(3)  Costs of the above applications.

The §3 Application and the §5 Application were adjourned for argument and disposal on paper by Hon Marlene Ng J.

5.On 31 May 2023, Hon Marlene Ng J handed down her decision whereby both the §3 Application and the §5 Application were dismissed. Following such event, Her Ladyship made a nisi order that the costs of and occasioned by these applications, including all costs reserved, be paid by D2-5 to the plaintiff on the High Court scale to be taxed if not agreed (“the 2023 Nisi Costs Order”).

6.By summons filed on 14 June 2023, MPC applies to vary the 2023 Nisi Costs Order so that the costs so ordered against D2-5 should be paid to MPC personally on the High Court scale and to be taxed on an indemnity basis if not agreed (“MPC’s Summons”).

7.By summons filed on 25 July 2023, D2-5 applies for an order that their costs liability to the plaintiff (pursuant to the costs orders made in 2022 and 2023 mentioned above) be set off against the plaintiff’s liability to D2-5 under the costs orders made in 2022 and 2023 (“D2-5’s 2023 Summons”).

8.On 27 July 2023, this court ordered MPC’s Summons and D2-5’s 2023 Summons to be dealt with together and be disposed of on paper. For such purpose, this court also gave directions in respect of affidavit evidence and written submissions. MPC and D2-5 have since filed their respective affirmations and lodged their respective written submissions.

MPC’s Summons

9.MPC’s Summons made clear on its face that the application is taken out by MPC personally for their own purpose. The basis for the application essentially is as follows:

(1)  The outstanding parts of D2-5’s 2022 Summons (ie the §3 Application and the §5 Application) adjourned for argument before Hon Marlene Ng J were directed against MPC personally, who contested the same at their own costs instead of those of the plaintiff. Had D2-5’s those applications been successful, MPC would have been the party ordered to bear the consequence including the costs of resisting the applications. There is no reason why it is not the reverse, so that MPC should be entitled to receover their costs when they succeeded in resisting the applications.

(2)  The effect of the 2023 Nisi Costs Order would confer an unexpected windfall on the plaintiff to the extent of what are clearly intended to be awarded by the court to MPC as their costs following the failure of the §3 Application and the §5 Application.

10.D2-5 oppose. Their arguments aside, the relevance of their stance in seeking to maintain the incidence of the benefit of the 2023 Nisi Costs Order on the plaintiff instead of MPC is readily apparent. If they are right, such costs liability would fall within the set off which they also seek by their 2023 summons.

11.According to their grounds set out in the affirmation, D2-5 essentially argue as follows:

(1)  Generally costs are paid to a plaintiff through his solicitors. MPC are still on record the plaintiff’s solicitors, and were still incurring costs on behalf of the plaintiff. The plaintiff is obliged to settle the costs of her solicitors, and it is not proved that she is impecunious. Therefore, there is no question of MPC being deprived of their costs, which the plaintiff would gain as windfall, as a result of the 2023 Nisi Costs Order.

(2)  The §5 Application was limited to the 1^st stage of the court’s exercise of jurisdiction under section 52A(4) of the High Court Ordinance, Cap 4 where the court merely enquired whether a case was made out for it to proceed to the 2^nd stage by directing MPC to show cause why a personal wasted costs order should not be made against them.

(3)  The §3 Application and the §5 Application were not wholly unmeritorious. There is no other proven special or unusual feature which would have justified a more generous than usual scale of taxation of the costs in respect of these applications payable by them under the 2023 Nisi Costs Order.

(4)  MPC was a non-party.

Incidence of the benefit of the 2023 Nisi Costs Order

12.In my view, MPC is correct and D2-5 are not.

13.First, the §3 Application and the §5 Application under D2-5’s 2022 Summons were directed against MPC personally. Answering both applications was from the outset a matter for MPC personally instead of one subject to the instruction of the plaintiff as to whether and, if yes, how to proceed. That MPC in doing so might need to obtain the consent of the plaintiff, insofar as the necessary disclosure subject to legal professional privilege was concerned, did not alter this only permissible understanding of the position.

14.Second, the argument advanced by D2-5 questioning that MPC were not a party joined in the proceedings is not accepted. Section 52A(2) confers discretion on the court to make, in accordance with the rules of court, an order awarding costs against a person who is not a party to the relevant proceedings. O62, r6A(1) of the Rules of the High Court, Cap 4A provides that in such case, that person must be joined as a party to the proceedings for the purpose of costs only. However, what section 52A(4) serves is to confer discretion on the court, in accordance with the rules of court, to order the legal representative conducting litigation on behalf of a party to meet any wasted costs in the litigation. O62, r6A(2) provides that where the court is considering whether to make such a wasted costs order, r6A(1) mentioned above does not apply. It follows that where a party seeks a wasted costs order against the legal representative of the other side but fails, the incidence of the consequential costs of the application may be determined without any issue of joinder of the legal representative as a party for costs purpose.

15.Third, the costs occasioned by answering the §3 Application and the §5 Application were incurred by MPC personally, and thus not costs incurred on behalf of the plaintiff. As far as this is necessary, the plaintiff has filed her affirmation verifying such costs arrangement. In accordance with the principle of indemnity, there is no basis for awarding costs of successfully resisting the two applications other than to the party incurring such costs in answering those applications. See for instance, China Citic Bank International Limited v Durrant Simon Patrick Michael [2018] HKCFI 396; Tai Yuk Cheung v Hung Sing Construction Engineering [2018] HKCFI 739.

16.Fourth, it is argued that before Hon Marlene Ng J was merely the 1^st stage hearing under O62, r8B so that the court was no more than invited to consider whether D2-5 had discharged their burden of demonstrating a prima facie case for directing the 2^nd stage hearing, and therefore MPC were yet to be directed to show cause why a personal wasted costs order should not be made against them. Such argument clearly detracts from what actually happened, which Her Ladyship indeed explained in her decision. By their 2022 summons, D2-5 applied for a wasted costs order against MPC to personally pay them their costs of the action in relation to quantum, and their counsel’s written submission was formulated on the basis that the hearing was one for MPC to show cause why the order should not be made against them. Specifically, counsel moved the court to make an order then and there that all or at least not less than 80% of D2-5’s costs awarded under the 2022 Nisi Costs Order should be paid by MPC personally. It was Hon Marlene Ng J who found and highlighted the procedural flaw of D2-5’s such application, and then concluded against D2-5 even as a matter of the 1^st stage enquiry. It was not D2-5’s initiative as now suggested in their argument for the present purpose.

17.In my judgment, there is clear basis for acceding to the variation of the 2023 Nisi Costs Order so that the incidence of the benefit of the costs under that order should belong to MPC personally instead of the plaintiff.

Costs on a higher basis

18.It is common ground that costs on higher than the usual party and party basis may be ordered if so justified by special or unusual features in the proceedings before the court. Costs on indemnity basis may be awarded in case such as abuse of process.

19.MPC argues that they should be awarded the costs of successfully resisting D2-5’s applications on an indemnity basis whereas D2-5 argue that their applications, albeit unsuccessful, were not entirely without basis, and hence absence of special or unusual features to justify the higher scale of costs taxation.

20.For this purpose, the reasoning behind Hon Marlene Ng J’s dismissal of D2-5’s applications is key. The analysis in respect of D2-5’s applications were explained in detail in her decision dated 31 May 2023. Of that, the analysis in respect of the proper procedure and governing principles of an application like the §5 Application was endorsed and applied in a similar application by the defendant for a wasted costs order against the former solicitors of the plaintiff in the subsequent non-personal injury case of Chan Chun Chuen v Kao Lee & Yip [2023] HKCFI 3009 (7 December 2023).

21.In my judgment, D2-5’s emphasis on the merits of their application for the present purpose must be viewed in the light of the important parts of Her Ladyship’s analysis and findings.

22.In respect of the §3 Application, Hon Marlene Ng J found that D2-5 failed to explain how non-compliance with the Repayment Order by the plaintiff would justify or allow the court to override what would have been protected by legal professional privilege between her and MPC and to order the solicitors to disclose their client’s reason for non-compliance. In view of the advice to the plaintiff actually given in writing disclosed by MPC under limited waiver of privilege, Her Ladyship also found that D2-5’s criticism about the choice of wordings in the advice did not give rise to any justifiable basis for the application when MPC did not owe any duty to D2-5 in the giving of such advice.

23.As to the §5 Application, it was found to have failed to follow the 2-stage procedure under O62, r8B from the outset. D2-5’s 2022 Summons failed to identify MPC’s conduct said to have been improper or unreasonable and what costs said to have been so caused to D2-5 which were wasted. It followed that the affidavit in support of the application failed to serve the purpose of clearly verifying what ought to have been identified in the summons. D2-5’s attempt to do so by way of affidavit in reply would be late and thus unfair. The application was formulated and proceeded with without actual regard to the 2-stage enquiry under O62, r8B. Her Ladyship expressly found that these were not merely technical errors.

24.This court notes that apart from Chan Chun Chuen (above), the District Court handed down the decision in Chung Ho Ming v Chan Wai Yip & Ors [2024] HKDC 269 (19 February 2024) 10 days ago. It was a personal injury case where the plaintiff’s claim was dismissed after trial. Whilst the defendant applied for its costs incurred subsequent to their offers for settlement, which were not accepted, to be paid by the plaintiff on an indemnity basis, the court at his own initiative directed the solicitors for the plaintiff to show cause why the costs wasted as a result of their client’s refusal to accept the defendant’s offers should not be borne by them personally on an indemnity basis.

25.In line with what is expected at the 1^st stage consideration as explained by Hon Marlene Ng J, the requisite particularisation of the conduct on the part of the solicitors which are said to constitute a prima facie case of a wasted costs order against them in the case of an application, in my view, should equally be requisite where the court on its own motion directs the solicitors to show cause. The court is expected to particularise in the direction to the solicitors (to show cause) such impugned conduct and the resultant wasted costs which are said to have constituted a prima facie case. If the requisite particularisation vis-à-vis the solicitors has been identifiably set out in the judgment or decision in the matter vis-à-vis the parties, the relevant parts of the judgment or decision may be incorporated by reference in the direction. General reference however would not meet what is fairly expected under the procedure.

26.In Chung Ho Ming, the court referred to the materials the defendants placed before him in support of what was their application for indemnity costs against the plaintiff which, he found, afforded the basis for his directing on his own motion for the plaintiff’s solicitors to show cause why a personal wasted costs order should not be made against them. Presumably the court considered that not only were the requisite elements of the prima facie case particularised in those materials, but that they were also clearly set out or incorporated by specific references in his written direction. Hence his response to the enquiry by the solicitors there for any other specific observation from the court against them other than what they managed to discern from the direction.

27.Back to D2-5’s argument with reference to the merits of their applications before Hon Marlene Ng J. Insofar as D2-5’s attempt for the present purpose to attribute responsibility to the approach of MPC in terms of the latter’s disclosure and evidence in opposition is concerned, it is in my judgment wrong in principle. For the purpose of their applications, it was the burden of D2-5 instead of that of MPC to file evidence and hence disclosure of potentially privileged matters. Insofar as the §5 Application is concerned, the burden of MPC to show cause, as discussed, did not arise unless D2-5 has discharged their burden of demonstrating a prima facie case and the court was satisfied that it would be appropriate to exercise the discretion to direct the matter to proceed to the 2^nd stage hearing.

28.As to the merits of the §3 Application, the above reference to Hon Marlene Ng J’s findings refers.

29.As to D2-5’s argument in respect of the substance of the application at the 1^st stage enquiry, it must be also considered in the light of the discussion and other findings of Hon Marlene Ng J.

30.First, Hon Marlene Ng J rehearsed the relevant case law, including the important starting point, as explained by the Court of Final Appeal ever since Ma So So v Chin Yuk Lun & Anor [2004] 3 HKLRD 294, that the jurisdiction of making wasted costs order against legal representatives must be exercised by the court with caution bearing in mind the need to balance the tension between competing public interests in litigation, and therefore only in reasonably obvious case.

31.Second, the threshold in the local statutory wasted costs order regime, which is identifiably different from that in the English jurisdiction, cast further light on the relative stringentness of the criteria. As Hon Marlene Ng J noted, negligence is distinctly not the applicable threshold for invoking the local jurisdiction. The court in Chung Ho Ming did not seem to agree with that, and referred to cases of serious or gross negligence. However, one would have thought that impugned conduct of such nature and degree such as gross negligence or default or misconduct would probably be caught by the applicable threshold of improper or unreasonable conduct or even abuse. This court does not read the discussion of Hon Marlene Ng J to be suggesting otherwise. In any event, Her Ladyship found that D2-5 failed to meet the applicable threshold in terms of, amongst others, the consideration of the impecuniosity of litigant and hopeless claims in the circumstances of this case.

32.Third, Hon Marlene Ng J explained that the causal nexus between the improper or unreasonable conduct complained of and the relevant wasted costs must be demonstrated as particularised in the summons for the purpose of the 1^st stage enquiry. Causation became an academic issue in view of the failure of D2-5 in demonstrating a prima facie case of improper or unreasonable conduct on the part of MPC. However, Her Ladyship found that D2-5 would have failed on causation in any event.

33.Last, Hon Marlene Ng J found that the §5 Application as presented failed to satisfy the requirement of proportionality, and it would in any event be inappropriate to exercise discretion to direct the application to proceed to the 2^nd stage, ie requiring MPC to show cause.

34.In the circumstances, D2-5 failed to discharge their burden in all the crucial aspects at the 1^st stage consideration of the section 52A application which suffered from substantive procedural defect from the outset. So lodged, the application was unfair to MPC at the receiving end of it and was inappropriate to proceed.

35.The above circumstances readily lead one to ask whether or not the §3 Application and the §5 Application so formulated ought to have been taken out and/or persisted with as such. My answer to that is in the negative.

36.MPC also advance other arguments. For instance, they argue that the §5 Application was motivated by D2-5’s concern about the prospect of successfully recovering their costs from the plaintiff. That, counsel argues, was deployment of section 52A for ulterior motive. So did Hon Marlene Ng J comment, he submits. Presence of such feature could found a situation of abuse. However, the absence of conscious ulterior motive does not therefore connotes the lack of abuse. Motive or subjective intent aside, the objective fact was that the application on the basis of the kind of criticisms directed at the solicitors in the present matter was initiated and persisted in without compliant or justifiable formulation. Nor was that substantiated even on prima facie basis. That was contrary to the level of caution and stringentness expected in such application. That warrants its categorisation as abuse.

37.In the circumstances, I find proper basis for the costs awarded to MPC in respect of the §3 Application and the §5 Application to be taxed on an indemnity basis.

D2-5’s 2023 Summons

38.Following from the above, where the costs of and occasioned by the §3 Application and the §5 Application should be paid by D2-5 to MPC personally, D2-5’s application for set-off between such costs and their costs payable by the plaintiff would have no basis for the lack of mutuality between the two sets (and recipients) of costs: see Re Finbo Engineering [1998] 2 HKLRD 695; Jora Sisi Omar v Jora Harmidar Omar [2017] HKCU 2328.

39.Mutuality would have existed in respect of the costs payable by D2-5 to the plaintiff and those payable by the plaintiff to D2-5. D2-5 obviously contemplate that the costs awarded to them would exceed what they would have to pay to the plaintiff. However, as counsel for the plaintiff points out, it was by the orders of Hon Marlene Ng J that such costs shall be taxed unless agreed. There is no good basis for effectively varying that part of the nisi costs orders. Where it is intended that the taxed costs payable by the parties respectively should be set off against each other, that could happen as a consequential matter without the need for an order at this stage prior to taxation in any event.

Order

40.The MPC’s Summons is allowed whereas D2-5’s 2023 Summons is dismissed.

41.The circumstances warrant the award of costs of the present applications on an indemnity basis.

42.Following the above event, I make a nisi order that D2-5 shall pay the costs of and occasioned by MPC’s Summons and D2-5’s 2023 Summons to MPC to be taxed on an indemnity basis, if not agreed, with certificate for counsel. In the absence of application in 14 days to vary, this nisi costs order shall become absolute without further order of the court.

Written submissions by Mr Kwan Ping Kan, instructed by Michael Pang & Co, for the plaintiff

Written submissions by Mr Ashok K Sakhrani, instructed by Munros, for the 2^nd to 5^th defendants