Sparkle Capital Ltd v. Chan Wai Man also known as Chan Wai Man Ivan

DCCJ 836 & 1380/2018 & 289/2021 (Consolidated)

[2025] HKDC 366

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NOS 836 & 1380 OF 2018 & 289 OF 2021

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(Actions consolidated by Order of

Mr Registrar Ho dated 2nd May 2018 and

Order of Master B. Mak dated 7th July 2021)

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DECISION

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A.  Introduction

1.This is the defendant’s application (the “Application”) to vary the costs order nisi made by the court in the judgment dated 28 November 2024 (the “Judgment”).

2.The trial of this action took place in October 2024. In the Judgment, the court:

(a)  allowed the plaintiff’s claim for breach of the Employment Contract[1] by the defendant, but held that the plaintiff had failed to establish that it had suffered any loss or damage, and in consequence awarded the plaintiff nominal damages of HK$1;

(b)  dismissed all the other claims of the plaintiff;

(c)  dismissed the defendant’s counterclaim for unlawful termination of his Employment Contract and wages in lieu of notice;

(d)  allowed the defendant’s counterclaim for outstanding wages and annual leave pay, and

(e)  made a costs order nisi that the defendant do pay 50% of the plaintiff’s costs of this action (including all costs reserved), with certificate for one counsel, to be taxed if not agreed (the “Costs Order nisi”).

3.In making the Costs Order nisi, the court considered in paragraph 145 of the Judgment that:

(a)  The main disputes in these proceedings concern the existence of the alleged Oral Agreement and defendant’s breaches of the Employment Contract, both of which the court found in favour of the plaintiff.

(b)  The above led to the dismissal of the defendant’s counterclaim for unlawful termination of his employment and payment in lieu of notice.

(c)  No or minimal time was spent on the defendant’s counterclaim for arrears of wages and annual pay leave.

(d)  Some of the alleged breaches of the Employment Contract and the plaintiff’s claim in misrepresentation and breach of confidence failed.

4.By a summons dated 11 December 2024 (the “Summons”), the defendant made the Application to vary the Costs Order nisi to an order that:

(a)  The plaintiff do pay 50% of the defendant’s costs of this action (including all costs reserved), with certificate for one counsel, to be taxed if not agreed;

(b)  Alternatively, there be no order as to costs.

5.The Application is opposed by the plaintiff, who invites the court to dismiss the Application; alternatively, to vary the Costs Order nisi to one which gives the plaintiff a lower percentage of its costs of the action.

6.On 8 January 2025, the Court ordered (by consent) (the “Order”), inter alia, that the Application be dealt with by way of paper disposal.

B.  The Application

7.In the Application, the defendant relies inter alia on the ground that it had made previous Calderbank offers to the plaintiff to settle the matter, all of which were not accepted by the plaintiff.

8.On 27 June 2024, the defendant’s solicitors, Messrs Ma Tang & Co (“MT”), wrote to the plaintiff’s solicitors, Messrs Li, Kwok & Law (“LKL”), setting out the purported weaknesses of the plaintiff’s claims and offering to:

(a)  pay a sum of HK$307,500 (the “Settlement Sum”) to the plaintiff;

(b)  relinquish all of the defendant’s counterclaims against the plaintiff;

(c)  undertake inter alia to return certain intellectual properties and all confidential information in the defendant’s possession; and

(d)  bear his own costs of the consolidated action

(the “1^st Offer”).

9.The plaintiff did not accept the 1^st Offer.

10.On 16 October 2024, MT wrote to LKL, inviting the plaintiff to seek no order on its claim and offering to:

(a)  pay the Settlement Sum to the plaintiff;

(b)  seek a dismissal of his counterclaim against the plaintiff; and

(c)  seek no order as to costs of the consolidated action

(the “2^nd Offer”).

11.The plaintiff did not accept the 2^nd Offer.

12.According to the affirmation filed by the plaintiff, there were verbal negotiations between the parties, which did not result in any settlement. The plaintiff also pointed out that the 1^st and 2^nd Offers came rather late.

13.In the Application, the defendant also relies on inter alia the following matters:

(a)  the plaintiff was only awarded nominal damages in relation to its claim for breach of the Employment Contract;

(b)  all other claims made by the plaintiff were dismissed and all other reliefs sought were rejected;

(c)  the defendant has succeeded in his counterclaim for outstanding wages and annual leave pay;

(d)  the unproven or abandoned allegations made by the plaintiff were extensive and disparate from the successful claims; and

(e)  the need to engage expert evidence (and the considerable time and costs incurred as a result thereof) arose because of the plaintiff’s allegations of failure to deliver work products and intellectual properties, which were rejected by the court.

C.  Relevant Legal Principles

14.It is trite that the court has a wide discretion on matters concerning costs, but such discretion must be exercised judicially.

15.Order 62 rule 5(1) of the Rules of District Court (Cap 336H) sets out a list of factors that the court shall, as may be appropriate in the circumstances, take into account in exercising its discretion as to costs. These factors include the underlying objectives set out in Order 1A rule 1, conduct of the parties, whether a party has succeeded on part of his case, even if he has not been wholly successful, and any admissible offer to settle made by a party. Order 62 rule 5(2) then sets out the conduct of the parties for the purpose of rule 5(1)(e).

16.Both parties acknowledged that the starting point is costs should follow the event. However, the defendant contends that where only nominal damages have been awarded, the starting point is that the plaintiffs:

“… are not to be regarded as successful plaintiffs, and the court will normally treat the defendants as having succeeded and award the defendants the costs of the action, whether or not the defendants have at any stage made a payment into court of nominal damages...”

See: Hong Kong Civil Procedure 2025, §62/2/6, applied in eg Perfect Best Asset Management Inc v ADL Express Ltd & anor [2021] HKCFI 3021, §§3-4.

17.I agree with the defendant that the two cases cited by the plaintiff are distinguishable. First, in Tang Kam Wah v Fung Kam Shu [2002] HKDC 487, which was an adverse possession case, although the defendant was only awarded nominal damages for his counterclaim, the court granted the injunction sought by the defendant. This justified the costs order of 95% of costs of the proceedings be paid by the plaintiff to the defendant.

18.Secondly, as to Cosme De Net Co Ltd v Lam Kin Ming [2021] HKDC 445, the plaintiff succeeded in obtaining the injunctions sought. The court therefore awarded costs in favour of the plaintiff even though the claims for damages failed.

19.However, as mentioned above, other than nominal damages, the plaintiff failed to obtain any of the reliefs sought in this action.

D.  Analysis

20.First, on one hand, I agree with the defendant’s counsel that given the plaintiff was only awarded nominal damages for the only successful claim for breach of the Employment Contract, following Perfect Best Asset Management (supra), it cannot be regarded as the successful party in respect of its claims.

21.Secondly, although the plaintiff’s success in defending against the existence of the alleged Oral Agreement led to the dismissal of the defendant’s counterclaim for unlawful termination of his employment and payment in lieu of notice, all other claims made by the plaintiff were dismissed.

22.Finally, although the 1^st and 2^nd Offers were not sanctioned offers, they can still be taken into account in considering the issue of costs pursuant to Order 62, rule 5(1)(d) of the Rules of the District Court: see Choi Tak Man v Chan Yuk Lan, Didi & anor [2017] 5 HKLRD 619, at §23.

23.That said, the 2^nd Offer was made very late – only a week before trial. By then, most costs have been incurred. Little weight, if any, should be given to it in deciding the Application.

24.However, in MT’s letter dated 27 June 2024 mentioned above, when making the 1^st Offer, MT on behalf of the defendant specifically highlighted the plaintiff’s difficulty in proving its alleged damages. The plaintiff nevertheless chose to proceed and was awarded only nominal damages.

25.By reason of all the above reasons, I agree with the defendant that the plaintiff should not be awarded costs of the action.

26.That said, as explained in the Judgment, first, the court’s finding against the major issue of the existence of the alleged Oral Agreement has led, not only to the defendant’s failure in defending against the plaintiff’s claim for breach of the Employment Contract, but also to the dismissal of the defendant’s counterclaim for unlawful termination of his employment and payment in lieu of notice.

27.Secondly, no or minimal time was spent at trial on the defendant’s successful counterclaim for arrears of wages and annual pay leave.

28.Thirdly, although the plaintiff’s allegations of failure to deliver work products and intellectual properties were rejected by the court, they were part and parcel of the plaintiff’s claim for breach of the Employment Contract and could not be said to be disparate or improperly or unnecessarily made. In the premises, the plaintiff’s lack of success in such issues should not attract a costs sanction.

29.In the premises, despite making the Calderbank offers, I do not agree that the defendant should be awarded any costs.

E.  Conclusion

30.By reason of the above, I agree with the defendant that the Costs Order nisi should be varied to an order that there be no order as to the costs of the action.

31.Accordingly, I make an order in terms of paragraph 2 of the Summons.

32.As to the costs of the Application, I make a costs order nisi that the costs of and occasioned by the Application be paid by the plaintiff to the defendant, with certificate for one counsel, to be taxed if not agreed. Any application to vary such costs order nisi should be made within 14 days from the date of this decision.

Mr Richard Leung, leading Mr Tommy Cheung, instructed by Li, Kwok & Law, for the Plaintiff

Mr Danny K K Chan, leading Mr Benjamin Chong and Mr Johnson Cheung, instructed by Ma Tang & Co, for the Defendant