Lam Hon Wing v. Centaline Property Agency Ltd and Others

DCCJ 5441/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5441 OF 2008

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DECISION ON COSTS ISSUE

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1.This is an action by the Plaintiff for various reliefs against the Defendant, including declaration that the agency agreement between the Plaintiff and the 1^st Defendant, and a preliminary sale and purchase agreement are invalid, and damages in the sum of $98,000.  The Defendant counterclaims for damages in the sum of $53,000.  The claim for damages was abandoned by the Plaintiff in August 2012 and the action came before me for trial on the declaration and the counterclaim.  The background of the action has been set out in my judgment given in 22 May 2013, and I do not repeat.

2.By my said judgment, the claim for declaration by the Plaintiff was dismissed.  I granted judgment to the Defendant on its counterclaim in the sum of $53,000.  I was minded to award costs of the action to the Defendant.  However, Mr. Choy, solicitor for the Defendant, at the closing submission indicated that the Defendant would seek costs on indemnity basis if they were successful, and the Plaintiff also indicated that he would ask for leave to adduce evidence to resist the claim if he failed. Hence, when I granted judgment in favour of the Defendant, I gave directions for filing and exchange of affirmations and the matter was adjourned to today for argument.

3.While the Plaintiff was unrepresented at the trial, counsel Mr. Cheung instructed by Messrs. Boase Cohen & Collins appears for him on this hearing.  It is confirmed by Mr. Cheung that the Plaintiff is not resisting the order of costs in favour of the Defendant. The Plaintiff only resists the claim for costs on indemnity basis.

4.The Plaintiff has filed a further summons last Saturday for leave to file and serve his 3^rd Affirmation.  Having considered the implication of possible adjournment and costs, the Plaintiff abandoned the application with costs to the Defendant.

5.The Defendant is represented by counsel Ms. Leung.  She adopted the written submission which was submitted earlier on by her instructing solicitor Mr. Choy in support of the application of the Defendant for indemnity costs, and further provided her reply submission to the written submission of Mr. Cheung.  I would start with the legal principle which I believe is not in dispute.

6.On when to order indemnity costs, Mr. Cheung refers me to the judgment given by the Court of Final Appeal in Town Planning Board v. Society for Protection of the Habour Ltd (No. 2) (2004) 7 HKCFAR 114 –

“13. In the exercise of the court’s discretion, the usual order for costs made in favour of a successful party in litigation is that the party be awarded costs on a party and party basis. …..

14. Having regard to the different statutory test, an award of indemnity costs, which is a more generous basis, will usually enable the successful party to recover more of his costs than under a party and party award. In that sense, an award of indemnity costs may be perceived as achieving a fairer result for the successful party …..

15. …..Indeed, the courts in this jurisdiction have repeatedly emphasised, correctly in our view, that the successful party should show, in order to obtain an order for costs on an indemnity basis, that the case has some “special or unusual feature” …..

16. The courts have rejected the proposition that an award of indemnity costs will only be made where a case has been brought with an ulterior motive or for an improper purpose or where there is some deception or underhand conduct on the part of the losing party.

17 . …..courts have emphasized the undesirability of attempting to define the circumstances in which orders for indemnity costs are to be made. It has been said that:-

…the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be “appropriate”. [my emphasis]”

7.The legal principle on when to award indemnity costs is well settled.  Ms. Leung also refers to para 90.1366 of Halsbury’s Law of Hong Kong –

“In deciding whether or not to award indemnity costs, each case must, of course, be considered on its own facts. The attributes of the parties and the character of the proceedings may both be relevant in the exercise of the court’s discretion to award indemnity costs. The grounds for making such an order must, however, be connected with the case and might extend to any matter relating to the litigation and the parties’ conduct in its and also to the circumstances leading to the litigation, but no further.

Costs on indemnity basis have been awarded in cases where there has been an abuse of the court’s process, contempt of court, … for commencing futile and misconceived litigation … for presenting and pursuing a vexatious petition, for commencing litigation on the basis of flawed evidence, for pursuing an appeal that was utterly devoid of merit, and for conducting litigation in an oppressive manner …”

8.The burden rests with the Defendant to prove that they are entitled to indemnity costs.  Ms. Leung relies on 4 limbs –

a. Legal costs incurred irrationally by the Plaintiff in commencing futile and misconceived litigation, causing costs to incur irrationally or out of all proportion to what are at stake;

b. Plaintiff’s $98,000 claim is not a genuine complaint but weapon to bargain for big discount in the claim of the Defendant, and is an abuse of court process;

c. No genuine intention to negotiation settlement or mediate; and

d. Plaintiff misled the Court in resisting Defendants’ claim on cost on indemnity basis.

9.It is the 1^st Defendant’ case that its claim is for $53,000 and it has sensibly waived the surplus of $3,000 and started the claim in the Small Claim Tribunal to save all solicitors’ charges.  But the Plaintiff counterclaimed for $98,000.  Initially, the Plaintiff was willing to waive the difference of $48,000 to litigate the whole action in the Small Claim Tribunal.  On the first call over at Small Claim Tribunal, and after discussing the case with parties, the learned Adjudicator directed the Plaintiff to file a counterclaim at the Small Claim Tribunal.  But after the hearing, on or about 21 November 2008, the Plaintiff applied to the Small Claim Tribunal to dismiss the claim on the ground that his counterclaim of $98,000 exceeded the jurisdiction of the Small Claim Tribunal.  He withdrew his earlier waiver.

10.As a result, the Plaintiff started this action in the District Court, acting in person.  The Defendant was represented by Messrs. Cheung & Choy, and legal costs were incurred.  And after exchange of pleadings, the Plaintiff amended his Statement of Claim and withdrew the claim for damages.  It is the case of the Defendants that legal costs were incurred irrationally by the Plaintiff.

11.Pausing here, I note that by the said amendment, the Plaintiff has added the claim for the above mentioned declaration.

12.For the second limb, the Defendant complains that the claim for $98,000 is not a genuine claim.  If he believes he has a reasonable claim, the Plaintiff would not offer to pay the Defendant $20,000 to settle the action at the first call over at the Small Claim Tribunal, and later agree to settle at $87,000 (but failed as hereinafter mentioned).

13.The Defendant is alleging that the Plaintiff use this as a tactic to force the Defendant to give greater discount for settlement.  It appears from the evidence that there are occasions when settlement was attempted.  The first is at the Small Claims Tribunal hearing.  And then when this case was commenced, there were negotiation for settlement as set out in the affirmation of Lo Choi Ying filed on 27 June 2013.  And they were close to a settlement by December 2011 which I shall come to later.

14.Ms. Leung also refers to the dialog between the Plaintiff and the learned Adjudicator on the first call over.  She submits that according to the transcript, it shows further that the Plaintiff agreed that he had approached banks within the 2 weeks after signing the preliminary agreement.  But at the proceedings in the District Court, he claims that he had not approached banks.  Ms. Leung suggests that the Plaintiff continued the proceedings in the District Court for him to put forward a different version of story.

15.I believe Ms. Leung wants to convince me that the Plaintiff has ulterior motive to bring the action in the District Court.  I would first deal with the second limb.

16.It must be remembered that at the call over hearing, the learned adjudicator is not conducting a trial.  It is clear from the transcript that he is inviting the parties to consider settlement.  And he made enquiries with the parties, and possibly referring to witness statement submitted before the hearing, on the issues in dispute.  I note the learned adjudicator tried not to give any conclusive comment or indication, presumably to prevent any suggestion that he pre-judged the case.  And any question and answer are part of a conversation.  I should consider the answer of the Plaintiff with great caution.  I do not believe I could rely on the transcript to conclude that the Plaintiff has made a misstatement in Court and he intends to cover up by transferring the case to District Court.

17.There is no direct evidence that the Plaintiff threatens to bring this action in the District Court unless the Defendant gives him greater discount.  I am not convinced that the Plaintiff brings the action in the District Court as a weapon for bargain or is acting in abuse of court process.

18.I shall now move back to the first limb.  The fact that the Plaintiff has offered to pay $20,000 at the Small Claim Tribunal for settlement, and “agreed” to resolve at $87,000 at a later stage is not an indication that he believes his claim is unmeritorious.  People have all kind of reason to offer a settlement and I should not speculate.  I am not convinced that this justify consideration of granting indemnity costs to the Defendants.

19.Even if the Defendant is correct, then it is the claim for $98,000 which is unmeritorious.  Mr. Cheung draws my attention to the fact that after withdrawing the claim of $98,000, the Plaintiff substituted a claim for declaration that the agency agreement with the Defendant is invalid.  I agree that declaratory relief cannot be obtained in the Small Claim Tribunal.  And this is the legal basis of his defence, though he failed.  I cannot say that the claim is hopeless when it is instituted. 

20.Further, when the Plaintiff drops his claim for $98,000 in the District Court, they should apply for costs of and occasioned by the withdrawal of the claim.  I note from the Court file record that on the application for amendment, the learn Master has granted order for costs of and occasioned by the amendment in favour of the Defendant.  So the costs of and occasioned by the amendment has been adjudicated upon and not before me.  If the Defendant considers bringing the claim for $98,000 is an abuse of Court process, they should have applied for costs on indemnity basis before the Master.

21.In conclusion, I am not convinced that the Plaintiff has incurred legal costs irrationally or has abuse court proceedings to force the Defendant to settle at a great discount.

22.The 3^rd complaint is that the Plaintiff has no genuine intention to negotiate for settlement.  It is trite law that when party unreasonable refuse to mediate or engage in alternate dispute resolution, the Court may take that into account on the issue of costs.  There is no complaint that the Plaintiff refused to mediate.  In fact, the Plaintiff has invited the Defendant to mediate and did attend mediation.

23.For without prejudice negotiation, it is not a form of alternate dispute resolution.  But why the Defendant has not issue a sanctioned offer if they wish to protect themselves on issue of costs?  Order 62 rule 5 provides that the Court in exercising its discretion as to costs shall, take into account any written offer which is expressed to be “without prejudice save as to costs” but “the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22.”  I see no reason why the Defendant could not make a sanctioned offer.

24.Further, there are a few correspondences for negotiation of settlement which indicated that the Plaintiff agreed directly with the Defendant to resolve the dispute by a payment of $87,500 and his withdrawal of his complaint to the Estate Agents Association by December 2011.  On or about 30 December 2011, Messrs. Cheung & Choy drafted a consent summons to record the terms and a letter for withdrawal of the complaint.

25.In his reply letter dated 4 January 2012, the Plaintiff opined that the drafting is not to his protection and ask for a separate settlement agreement be drawn, a summons to settle the case without mentioning the complaint, and re-worded the letter for withdrawal.  He did not reject the agreement all together.  I do not consider it too unreasonable to ask for a different form of record for the agreement.

26.It is the evidence of the Defendant that the Plaintiff indeed revoked his agreement and asked the Defendant to give further concession.  This part of the conversation is not recorded in any correspondence produced.  But I note that the Plaintiff by 10 January 2012 re-offers in writing to settle at $87,500.  This has been rejected by the Defendant and Ms. Leung explains that this is rejected by the Defendant as further costs have been incurred for preparing witness statement.  If she is talking about the costs between 4 January and 11 January 2012, I cannot image it to be of any significance.

27.Hence, even accepting that the Plaintiff has revoked the agreement, the Defendant has not accepted the re-offer of the Plaintiff made within a few days.  If settled then, I am sure that the cost incurred from January 2012 to trial could be saved, which amount of costs well exceed the counterclaim.  Had the parties taking into account proportionality being one of the underlining objectives set out in Order 1A, they would approach settlement with a different attitude.  I would not give weight to this set of interaction between the parties for considering the scale of costs to be imposed.

28.On the fourth ground of complaint, the Defendants refer to the affirmation filed by the Plaintiff in resisting the claim for costs on indemnity basis.  It is alleged that the Plaintiff wanted to paint a picture that he had been forced to bring the proceedings in the District Court.  The Defendant quoted from the Plaintiff’s affirmation saying “… I encountered an interesting situation and was surprisingly be challenged by the Adjudicator to put the dispute to higher judicial level to District Court.  I was forced to put the dispute to district court DCCJ 5441/2008.”

29.It is sufficient to say that I do not share the impression of the Defendants after reading the transcript adduced. 

30.It is also alleged that the Plaintiff has attempted to mislead the Court by saying the he proposed mediation to the 1^st Defendant and received no response.  The 1^st Defendant has all along been attempting negotiation for settlement with the Plaintiff.  I believe I have covered the issue on mediation and negotiation for settlement earlier on and I do not repeat.  And looking at the all the evidence, I am not convinced that the Plaintiff attempted to mislead this Court.

31.Balancing all the complaints of the Defendant, there is no special or unusual feature that invites this Court to impose costs on indemnity basis.  And the conduct of the Plaintiff does not justify indemnity costs.  In summing up, I only order the Plaintiff to pay the Defendant the costs of the action on party and party basis, to be taxed if not agreed.

32.But the Plaintiff should be entitled to the costs of today’s application, such costs to be taxed if not agreed.  I am not minded to give certificate for counsel for today.  After all, this is expected to be a simple argument on scale of costs which solicitors could handle.

Mr. Cheung, instructed by Messrs. Boase Cohen & Collins, for the plaintiff

Ms. Leung, instructed by Messrs. Cheung & Choy, for the defendant