Thomas Hong Chi Fat and Another v. Alexander Sung Wai Yip

DCCJ 3196/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO.3196 OF 2004

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BETWEEN

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Coram : Deputy District Judge K.W. Wong in Chambers (open to public)

Date of Hearing : 28^th August 2007

Date of Handing Down of Decision : 12^th September 2007

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DECISION

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1.This is the Defendant’s application to vary a costs order nisi made by me against him in my written Assessment of Damages dated 10^th March 2006 (“my Assessment”). 

2.My Assessment concerned with the damages suffered by the Plaintiffs arising from an abortive sale to the Plaintiffs of a landed property the sale of which the Defendant held out to have authority but in fact he did not. After the assessment, the Defendant was held liable for damage in the sum of only $3,810, being legal costs incurred by the Plaintiffs in the abortive sale. In fact this head of damage was admitted by  the Defendant without any contest. The other three heads of claims, namely the price difference of the property between the date of contract and breach, the loss of use of stamp duty and legal fee as well as loss represented by additional rental during the period of renovation of the substitute premises, amounting to a total of $157,926.25, all failed.

3.According to Mr. Kwan, counsel for the Defendant, the application to vary was firstly made on 20^th March 2006, which was within the 14-day time limit. Such application was supplemented by a formal notice, which is in substance a summons, dated 25^th September 2006. The Plaintiffs do not take issue, and I think sensibly, whether the notice was given in time.

4.As regards why this matter took almost one and a half year before it was actually heard by me, Mr. Kwan explained that the delay was occasioned by the repeated applications of the Plaintiffs for legal aid. As a result of such applications the proceedings had been stayed for a number of times. The 2^nd Plaintiff is now legally aided and the 1^st Plaintiff acting in person.

The Grounds of the Parties

5.Mr. Kwan for the Defendant filed two written submissions respectively on 23^rd and 28^th August 2007. Miss Queenie Ng, counsel for the 2^nd Plaintiff filed her skeleton on 24^th August 2007. Both relied on their written submission in support of their contentions. The 1^st Plaintiff indicated that he adopted entirely the submission of the 2^nd Plaintiff.

6.The Defendant’s grounds to vary can be summarized as follows:

i)	from the start the Defendant admitted liability but contested that the Plaintiffs only suffered nominal damage. On the first day of the assessment hearing, upon the invitation of the Court the Plaintiffs had for the first time identified and quantified their four heads of claims. Once the four heads of damages were identified, the Defendant immediately conceded on one of them. The assessment was entirely on the remaining three heads. At the end of the assessment the Plaintiffs failed on all of them. As such the Plaintiff is the successful parties and should be entitled to costs of the assessment according to the general principles on costs in Re Elgindata Limited (No.2) [1992] 1 WLR 1207, as per Nourse L.J. at 1214;
ii)	as regards the amount of damages recovered, it should be regarded as trivial if not nominal. The Defendant instead of the Plaintiffs should be regarded as the successful party: Anglo-Cyprian Agencies Ltd v Paphos Industries Ltd [1951] All ER 873; and
iii)	even if (which the Defendant denies) the Defendant were not the successful party, the conduct of the Plaintiffs was so improper and unreasonable that they fell within category (iv) of the Re Elgindata principles and should be deprived of their costs.

7.As a fall-back, Mr. Kwan submitted that the Plaintiffs should only be entitled to costs on a Small Claim Tribunal scale if the Court was not with the Defendant: M Beraha & Co. Ltd v Ng Wai Lun [2004] 3 HKC 535 and Lai Ki V B+B Construction Co. Ltd [2003] 3 HKLRD 192 at 197D to 198D.

8.Miss Queenie Ng opposed the Defendant’s application. She urged this Court to make absolute the said order nisi on the following grounds:

21.	the amount of damages recovered by the Plaintiffs was HK$3,810 which cannot be regarded as nominal. As such the Plaintiffs should be regarded as the successful parties;
22.	if the Defendant would like to protect his position on costs, he should have protected himself by a payment into court. In the present case the Plaintiff had made payment of HK$10,000 into court before the filing of defence. Such payment into court was subsequently withdrawn with Court’s leave. The usual rule of costs to follow the event should apply; and
23.	according to the principles laid down by Atkin LJ in Ritter v Godfrey [1920] 2 KB 47 at 60, the Plaintiffs’ conduct was far from being improper and unreasonable.

9.Again, Miss Ng has a fall-back: if the Court is minded to vary the costs order, the Plaintiffs should be entitled to costs up to and inclusive of the first day of the assessment and the Defendant to the rest of the assessment, all on District Court basis. 

The Analysis

10.In the present case, it is not in dispute that the Defendant admitted liability from the outset. The writ was issued on 18^th June 2004. It is interesting to note that in the Statement of Claim, the causes of action pleaded were based on two breaches, namely, (i) breach of warranty of authority and (ii) breach of undertaking. In paragraph 14 of the Statement of Claim, the Plaintiffs particularized their damages in respect of the two breaches as follows:

i)	loss of the value of the provisional agreement; being the difference between the contract price and market price of the property; and
ii)	the stamp duty paid in the sum of HK$39,420.

11.In paragraph 15, after identifying the above two heads the Plaintiffs repeated that the Defendant was liable to the Plaintiffs for loss arising from the Defendant’s said two breaches.

12.In the prayer the Plaintiff specifically prayed for loss of the said stamp duty and damages for the said two breaches. After a fair reading of the Statement of Claim and in particular the prayer it is reasonable to infer that the damages referred to in the said prayer are stamp duty and price difference only.

13.In the Defence filed by the Defendant, the Defendant admitted liability but denied that the Plaintiff had suffered any loss and/or damages. The grounds of such defence were that the market price of the property in the abortive sale dropped or otherwise was lower after the breach. In other words the Plaintiffs were fortunate to have avoided a bad bargain. Furthermore, the stamp duty of the provisional agreement was not payable by reason of section 29C (5A) (a) of the Stamp Duty Ordinance.

14.Interlocutory judgment on liability with damages to be assessed was soon entered against the Defendant. It can be gathered from the 2^nd Plaintiff’s witness statement and the expert evidence disclosed that the Plaintiffs were concentrating their effort in proving their loss on market value of the property, extra rental and renovation expenses incurred.

15.Understandably, the Defendant met the Plaintiffs’ case by adducing evidence countering the alleged increase in market value and loss of the stamp duty.

16.The loss of legal costs in the sum of HK$3,810 was neither pleaded in the Statement of Claim nor mentioned in the 2^nd Plaintiff’s witness statement, which was the only statement of fact of the Plaintiffs. At the commencement of the assessment I was very surprised to note that the Plaintiffs had never identified the heads of damages nor had they ever quantified their damages to the Defendant. Without such particulars I wondered how the Court was in a position to know exactly which issues were to be tried. I therefore invited the Plaintiffs to identify their heads of claim and quantified the same. That was done. The Plaintiff did not pursue loss of stamp duty but pursed the loss of its use. The loss in renovation expenses was dropped but loss in terms of extra rental paid during the renovation period was claimed. The liquidated damages clause in the provisional agreement was not pursued. Instead, on the top of loss attributable to a difference in price, the Plaintiffs claimed loss of legal costs of the abortive sale and its use.

17.It is not in dispute that in a Calderbank letter dated 18^th February 2005 the Plaintiffs had offered to accept damages including legal costs and disbursements incurred by the Plaintiffs in the abortive property transaction. Such offer was rejected. It is common ground that it was the first time the Plaintiffs claimed for such legal costs.

18.In my judgment, I do not consider the appearance of such claim, which is in the nature of specific damage, in the Calderbank letter assists the Plaintiffs at all. The parties are litigating by pleadings and not by correspondence. Furthermore, apart from this letter there is no evidence before this Court showing that the Plaintiffs were pursuing this specific damage. Neither had the Plaintiffs incurred costs for claiming such damage. Once this head was formally raised, the Defendant immediately made concession. The assessment hearing therefore had nothing to do with this head. As such, I simply do not see what costs have been incurred by the Plaintiffs in pursuing this head of claims.

19.Furthermore, taking into consideration of the Plaintiffs’ pleadings and their evidence, I totally fail to see any prospect of settlement even if the Defendant had conceded this head earlier in the “without prejudice save as to costs” negotiation. The present assessment would have gone ahead anyway.

20.In Anglo-Cyprian (supra), Devlin J has this to say at P.874:

“

No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct. In applying that rule, however, it is necessary to decide whether the plaintiff really has been successful, and I do not think that a plaintiff who recovers nominal damages ought necessarily to be regarded in the ordinary sense of the word as a “successful” plaintiff. In certain cases he may be, e.g., where part of the object of the action is to establish a legal right, wholly irrespective of whether any substantial remedy is obtained. To that extent a plaintiff who recovers nominal damages may properly be regarded as a successful plaintiff, but it is necessary to examine the facts of each particular case.”

21.In Anglo-Cyprian, the plaintiff was claiming full value of goods sold and delivered to it, alleging them to be totally worthless, in the sum of £2,028. In the course of trial the defendant asserted that the defects, even if there were any, could be removed at a cost of £52. Amendment was then made to the pleadings in the middle of the trial and was granted. Devlin J. found as a fact the damage was trivial and the said sum of £52 was awarded. He held that the plaintiff had not recovered anything which was of value to it and could not be regarded as the successful party.

22.The present case is very similar to Anglo-Cyprian. As set out in the preceding paragraphs, no claim for legal costs of the abortive sale has ever been raised in pleadings and witness statements. All preparatory work was concerned with mainly the difference in property value and other heads which were either not pursued or had failed. All issues of quantum defined by pleadings or raised only at the commencement of the assessment fail. The successful unpleaded specific damage of $3,810 is only 2.3% of the total claim of the Plaintiffs as at the date of assessment whereas that in Anglo-Cyprian is about 2.6%. In term of percentage it is even less when comparing with the amount asserted by pleadings and witness statement. It is only a trivial sum. It is an amount that the Plaintiffs did not originally intend.

23.With due respect to Miss Ng, it is unnecessary to show a nominal sum. The principles in Anglo-Cyprian apply to cases where only a small or trivial sum is recovered. In the circumstances, I agree with Mr. Kwan’s submission that the Plaintiffs should not be regarded as the successful parties. They are obviously the losing parties of the assessment. The Defendant succeeded almost on every substantial point raised by the Plaintiffs in the assessment. I think justice requires that discretion should be exercised in favour of the Defendant, which is the genuine successful party of the assessment.

24.In light of my above analysis and conclusion, it will not be necessary for me to deal with the other issues raised by the parties. The withdrawal of the payment into court by a defendant essentially nullifies his own payment in. The defendant will then be exposed to the same risk for costs as a defendant who has never made any payment in: paragraph 22/1/19 of Vol. 1 of Hong Kong Civil Procedure 2007. However, he should not be subject to any reversed prejudice in the sense that discretion should therefore be exercised against it. Such withdrawal should not preclude the court from applying the ordinary principles in the exercise of its discretion.  

The Order Made

25.By reasons of the above, I vary the costs order nisi in my Assessment by substituting my said costs order with an order that the Plaintiffs do pay the Defendant costs of the assessment together with a certificate for counsel, to be taxed if not agreed. I also grant an order nisi on costs that the Plaintiffs do pay the Defendant costs of this variation application, together with a certificate for counsel, to be taxed if not agreed and such order be made absolute within 14 days from today. The 2^nd Plaintiff’s own costs are taxed in accordance with the Legal Aid Regulations.

Mr. Thomas Hong Chi Fat, acting in person

Miss Queenie W.S. Ng, instructed by John Ho & Tsui for the 2^nd Plaintiff

Mr. Thomas Kwan, instructed by F. Zimmern & Co. for the Defendant.