Tung Po Decoration Engineering Ltd v. Great Bright Engineering Ltd

DCCJ 4853/2020

[2024] HKDC 2081

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION 4853 OF 2020

------------------------------

BETWEEN

------------------------------

-----------------------------------

DECISION ON COSTS

-----------------------------------

INTRODUCTION

1.On 2 July 2024, this Court delivered its judgment to this action (“Judgment”) in which the Court:-

(1) Awarded the sum of HK$216,378.10 (“Judgment Sum”) to the Plaintiff after setting off part of the Defendant’s counterclaim together with interest;

(2) Made an order nisi that costs of the action and the counterclaim be to the Plaintiff to be taxed if not agreed, with certificate for one counsel (“Costs Order Nisi”). The Costs Order Nisi shall become absolute upon the expiry of 21 days from the date of the Judgment.

2.Subsequent to the Judgment, the Defendant took out a summons for amendment of certain parts of the Judgment under O 20 r 11 of the Rules of the District Court (Cap 336H) (“RDC”). On 28 August 2024, I allowed the Defendant’s application[1] and a Corrigendum was issued on 12 September 2024 (“Amendment”). Pursuant to the Amendment, the amount of Judgment Sum was reduced to HK$47,098.10.

3.Further, by another summons dated 23 July 2024, the Defendant applied for the Costs Order Nisi to be stayed and not made absolute pending its appeal against the Judgment. On 28 August 2024, I refused to stay the Costs Order Nisi pending the appeal, but granted an interim stay of the Costs Order Nisi up to the date of hearing and directed the parties to lodge further submissions as to whether the Costs Order Nisi should be varied in view of the Amendment.

4.Pursuant to my directions, the parties have respectively lodged their submissions on 11, 25 September 2024 and 9 October 2024. In gist:-

(1) The Plaintiff’s stance is that the Costs Order Nisi should not be varied and be made absolute;

(2) The Defendant’s stance is that the Costs Order Nisi should be replaced by no order as to costs or, as a fallback position, an order that the Plaintiff should only have 20% of its costs to be assessed on the Small Claims Tribunal scale (“SCT Scale”).

REASONS FOR VARIATION

5.The reasons relied upon by the Defendant in support of its primary case that there should be no order as to costs (which also apply mutatis mutandis to its alternative case) can be summarized into the followings:-

(1) Both parties have been partially successful in their respective claim / counter-claim, and the disparity between the parties’ respective success is minimal;

(2) The Plaintiff’s primary pleaded case – that it had completed “over 99%”[2] or “over 99% of the contracted works … on or before 4 January 2020” as confirmed by the Defendant in the meeting on 17 January 2020[3] – has completely failed;

(3) In finding that the Plaintiff had been in repudiation, the Court found that the Plaintiff’s version of events to be “inherently incredible”.[4] On the contrary, the Defendant’s version was found to be credible and supported by unimpeached evidence[5];

(4) The length of the trial was markedly increased from 5 days to 9 days partly due to the Plaintiff’s belated introduction of new witnesses less than a month before the commencement of the trial. The new evidence raised new issues, but the Plaintiff’s case on both new issues was rejected by the Court.

6.In relation to its alternative case, the Defendant further submitted, inter alia, that the outcome of the trial was within the jurisdiction of the Small Claims Tribunal and it was unreasonable for the Plaintiff to persist with its claim in the District Court upon having sight of the Defendant’s counterclaim.

APPLICABLE PRINCIPLES

7.There is no dispute that the Court has wide discretion with costs. In exercising its discretion, the Court is entitled to, insofar as is relevant to the present case, take into account: (a) the underlying objectives set out in O 1A r 1 of RDC; (b) the conduct of all the parties and (c) whether a party has succeeded on part of his case, even if he has not been wholly successful: O 62 r 5(1) of RDC.

8.In considering the parties’ conduct, the Court shall bear in mind various factors including, insofar as is relevant to the present case: (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) the parties’ conduct before, as well as during, the proceedings: O 62 r 5(2) of RDC.

SUMMARY OF DECISION

9.Having considered the parties’ written submissions, I come to the decision that the Costs Order Nisi should be varied and there should be no order as to costs. Below are my reasons.

ANALYSIS

(A) Partial Success & Disparity

10.The Plaintiff’s claim is for outstanding payment for renovation works performed. In general, the performance of works was not hotly disputed by the Defendant (subject to the same being proven by the Plaintiff).[6] The primary defence relied upon by the Defendant is a set-off by way of counterclaim for overpayment to, and damages for repudiation of contract by, the Plaintiff. If one takes a holistic view of the parties’ cases, the trial was in substance a contest between parties on the quantum of their respective claim and counterclaim.

11.In respect of the outcome of their claim and counterclaim (in terms of the quantum awarded), both parties can be said to have won only a small fraction of their cases:-

(1) I found in favour of the Plaintiff’s claim in the sum of HK$205,604.10, which accounts for about 25% of its pleaded claim;

(2) I found in favour of the Defendant’s counterclaim in the sum of HK$158,506, which accounts for about 17% of its pleaded counterclaim.

12.I do not find the disparity between the parties’ respective rates of success (and the difference in quantum) to be of high significance. It suffices to say that both parties were only able to succeed on a relatively small fraction of their cases. Indeed:-

(1) If one takes into account the amount of set-off, the net sum awarded to the Plaintiff (ie HK$47,098.10) only accounts for about 5.75% of its pleaded claim. The value of the net award is small in the sense that the making of the award is within the jurisdiction of the Small Claims Tribunal;[7]

(2) Apart from the amount awarded under the counterclaim, the Defendant also succeeded in claiming for certain additional expenses to be deducted from the outstanding sum payable to the Plaintiff, whether through concession by the Plaintiff or otherwise. Those additional expenses were however not pleaded as part of the counterclaim (although in theory they could be). Hence, whilst I am not of the view that the disparity between the parties’ rates of success to be a matter of significance, the Defendant’s successful rate is in substance higher than 17%.

13.Against this position, the Plaintiff submitted that it was the substantive winner of the claim and counterclaim because:-

(1) The actual worth of the Plaintiff’s works as found by the Court amounted to almost 80% of the total amount payable for the works upon completion. On the other hand, it was unreasonable for the Defendant to refuse making any payment to the Plaintiff;

(2) The Court should take into account 13 additional or variation works (“VO Works”) of which the completion was admitted by the Defendant but no sum to those VO Works was awarded by the Court due to want of objective valuation evidence. These VO Works were recorded to be worth HK$100,250 under the payment application forms submitted on behalf of the parties on about 3 January 2020 (“3^rd PAF”);

(3) The Defendant has unreasonably sought to disparage the Plaintiff’s works by refusing to take into account the additional works and underestimating the degree of completion by the Plaintiff (of which the position was rejected by the Court[8]);

(4) The Defendant has failed in most of the heads of the counterclaim and exaggerated its counterclaim with a view to pressurize the Plaintiff.

14.I am not persuaded by the aforesaid arguments.

15.First, the mere fact that the actual worth of the Plaintiff’s works amounted to almost 80% of the total amount payable is neither here nor there insofar as whether the Plaintiff was the substantive winner of the action is concerned. The fact remains that, after taking into account the set-off, the Plaintiff was only able to achieve or obtain about 5.75% of its pleaded claim, which is a far-cry from the Plaintiff’s contention that it was the substantive winner. On the other hand, the relatively small amount awarded to the Plaintiff also suggests that the Defendant might not be unreasonable in refusing to make any payment for the outstanding sum after properly taking into account the merits of the parties’ cases.

16.Second, despite the value of the 13 VO Works was reportedly the same under both parties’ 3^rd PAFs, there is no justification for me to take the stated value into account in deciding whether the Plaintiff is the substantive winner, since it was my finding that the stated value had neither been agreed nor verified.[9] Indeed, given my findings as to the nature of the 3^rd PAF,[10] there were ample reasons why the stated value of the 13 VO Works under both parties’ 3^rd PAFs was the same. In the premises, it is futile to suggest (insofar as it was the Plaintiff’s stance) that the Plaintiff has failed to establish its claim under the 13 VO Works only for technical reason. In my view, the lack of objective valuation evidence is a material cause for the failure of the Plaintiff’s claim for the 13 VO Works. This is especially glaring when there was evidence that invitation has been made by the Defendant on 7 January 2020 for the Plaintiff to inspect the work progress at the site with professional surveyor.

17.Third, as I have found in the Judgment, the absence of any reference to the additional or variation works in the evidence of Cheung Siu Ming (“Ming”) was because of the Defendant’s position that these works were performed without approval rather than due to their non-existence.[11] As to the degree of completion, the reason why the Court refused to accept Ming’s evidence was that Ming was inherently not an impartial witness (being a staff of the Defendant) and hence incapable of making an objective assessment.[12] Ming’s evidence was not rejected on his credibility.

18.Fourth, whilst the Defendant has admittedly only been successful in a small fraction of its pleaded counterclaim, I am unable to come to the view that it would per se mean that the Defendant had exaggerated its claim with a view to pressurize the Plaintiff:-

(1) Among the heads of claim by the Defendant, certain heads (or amount under those heads) were conceded by the Plaintiff. This demonstrates some degree of genuineness in the Defendant’s counterclaim;

(2) For certain heads of claim rejected by the Court, the reason for rejection was not that the Defendant had provided no evidence (which would be indicative of an exaggeration of its claim) but the evidence provided was insufficient to satisfy the connection between the repudiation and the damages suffered.[13]

19.All in all, the fact that the parties were both partially successful in their respective claim and counterclaim by a relatively small fraction and the little disparity on their degree of success tilt strongly in favour of a reflection of this result by making no order as to costs.

(B) Failure of Plaintiff’s Primary Case

20.It is undisputed that the Plaintiff has failed to prove its primary case of substantial performance – that the works were performed by “over 99%” or “over 90%”.[14] Insofar as legal costs is concerned, there seems to me to be no good justification as to why the Plaintiff should now be entitled to this part of the costs.

21.The Plaintiff succeeded in its alternative case of quantum meruit. However, despite the Plaintiff’s success, it is pertinent to note that the evidence relied upon by the Plaintiff on quantum meruit has been rejected by the Court.[15] The favourable outcome of the Plaintiff claim under its alternative case was entirely derived from evidence produced, and concessions made, by the Defendant, namely:-

(1) A Schedule of Completion produced by Ming (工程完成度紀錄表) (“Ming’s Schedule”), under which Ming set out his own observation on the degree of completion of works by the Plaintiff;

(2) Concessions made by the Defendant in a schedule jointly prepared by the parties pursuant to the Order of the Court dated 4 September 2023 (“Work Schedule”).[16]

22.In my view, the Plaintiff would be unable to succeed in quantum meruit if not for the Ming’s Schedule and the Defendant’s concessions in the Work Schedule (which only came in shortly before the commencement of the trial). On this footing, it would appear that, despite the Plaintiff had been the ultimate winner on quantum meruit, a fair costs order is that the Plaintiff should not be entitled to its costs despite its success in its alternative case.

23.From the above perspective, I am also of the view that no order as to costs would be the appropriate costs order.

(C) Credibility of Plaintiff’s Witnesses

24.Under O 62 r 5(1) of RDC, credibility of a witness is not a relevant factor which the Court has to take into account when considering the appropriate costs order. In a trial involving factual disputes, the Court invariably has to rule on the credibility of a witness. In my view, unless there are specific observations on the credibility of a witness which goes to the conduct of the relevant party, findings on the credibility of a particular witness should not be a relevant factor to be considered when it comes to costs.

25.In the present case, although I found against the Plaintiff on the credibility of its witnesses regarding the repudiatory event on 4 January 2020 and the meeting on 17 January 2020, I am not of the view that their credibility have shed any light on the conduct of the Plaintiff so as to affect the latter’s position on costs.

26.For this reason, I find this factor to be irrelevant in deciding whether the Costs Order Nisi should be varied.

(D) Trial Length

27.Less than a month before the commencement of the trial, the parties took out a consent summons on 10 October 2023 for the introduction of new witnesses and evidence, for which order in terms was granted on 16 October 2023. Pursuant to the said order, a total of 4 witness statements (with annexures) were filed after the pre-trial review hearing. In particular:-

(1) The Plaintiff filed 4 additional / supplemental witness statements (including those from two new factual witnesses) on 20 October 2023; and

(2) The Defendant filed 3 supplemental witness statements from its 3 witnesses on 1 November 2023.

28.As it later transpired at trial, much of the cross-examination arose from these newly adduced statements (and the documents annexed). Nevertheless, neither party has made any proactive attempt to update the Court on the time estimate after these statements were filed. The trial, which was originally fixed for 5 days, eventually took up to 9 days.

29.The Plaintiff submitted that it was the Defendant who contributed to the marked increase of trial days. The Plaintiff argued that: (a) it had not deviated substantially from its own time estimation; (b) the introduction of new witnesses did not raise any new issues; and (c) it was the Defendant who had introduced long witness statements right before the trial with voluminous exhibits which were not disclosed beforehand.

30.Having considered the parties’ submissions, I reject the Plaintiff’s argument.

31.When the parties sought to introduce new evidence at the eleventh hour before trial, the real issue is not whether it would disturb the original time estimates previously given by the parties. Common sense tells that it would, as the increment on number of witnesses and expansion of evidence would normally entail more cross-examination. In my view, in a situation like this, the real issues would rather be:-

(1) Why were the new witnesses and evidence not introduced at an earlier stage, and was there any reasonable excuse for the parties to introduce them at such a late stage?

(2) Having introduced the new witnesses and evidence at a late stage, whether any action has been taken by the parties to facilitate the conduct of the trial, including those underlying objectives under O 1A r 1 of RDC?

32.The aforesaid issues are relevant to the decision on costs as they would reflect the parties’ conduct before and during the proceedings. See: O 62 r 5(2) of RDC.

33.In the present case, there is no reason why the new witnesses and evidence could not be introduced at a much earlier stage. Further, upon the introduction of the new witnesses and evidence, there could have been actions taken to facilitate the conduct of the trial and/or to remedy the uncertainty brought by the introduction of the new and voluminous evidence, including (but not limited to) making proactive and realistic update and evaluation on the trial length and timely proposal as to any new trial arrangement. Nevertheless, none of these have been done. During their opening submissions, the parties were still hoping, and in my view quite unrealistically, that the evidence could be finished within the original time estimation. The consequence was that, quite expectedly and contrary to the Plaintiff’s submissions, both parties had deviated substantially from their own time estimations.

34.In my view, the parties’ passiveness in dealing with the consequence of their introduction of new witnesses / evidence is a matter which the Court is entitled to take into account in determining the appropriate costs order to be made. Having considered the circumstances, I find that both parties have contributed to the overrunning of the trial, and most importantly none of them have taken any step to facilitate the conduct of the trial and the underlying objectives under O 1A r 1 of RDC after the introduction of the new witnesses and evidence. This, in my view, should be reflected by an order depriving the costs of the parties despite both of them appeared to have been partially successful in their respective claim and counterclaim.

(E) Conclusion

35.Taking into account the above factors and adopting a global view on the entire matter, I come to the view that there should be no order as to costs of the action.

36.In view of my decision above, it is unnecessary for me to consider the Defendant’s alternative position, namely, that the Plaintiff shall have 20% of its costs to be taxed on SCT Scale.

ORDER

37.I order that the Costs Order Nisi should be varied and be replaced by no order as to costs.

38.As to the costs of the paper application for variation of the Costs Order Nisi, although the Defendant is the successful party, the application was effectively necessitated by the Amendment, of which no fault should be attributed to the Plaintiff. In my judgment, the most appropriate costs order should be no order as to costs. I therefore so order.

Mr Billy Mok, instructed by Ho, Tse, Wai & Partners, for the Plaintiff

Ms Valerie Tang, instructed by Yung, Yu, Yuen & Co, for the Defendant