Legal Practitioners Who Blindly Pursue a Hopeless Personal Injury Case in Hong Kong May Have to Bear the Wasted Costs Themselves – So Kam v. Guildford Limited and Another (DCPI 1921/2016)

Summary

In a recent judgment handed down by Hong Kong district judge H.H. Judge Andrew Li, the learned Judge commented that Plaintiff’s solicitors who blindly pursue a hopeless personal injury claim without a reasonable cause of action may be subject to a wasted costs order (i.e. that the legal representatives shall bear legal costs of the winning defendant personally).

Background

On 27 September 2014, the Plaintiff motorcyclist was allegedly injured in a collision with the Defendants’ taxi in a traffic accident. The 1^st and 2^nd Defendants were the taxi owner and driver respectively. Prior to the accident, both vehicles were travelling along adjoining lanes respectively. The collision happened as the two vehicles were turning right and going downhill.

It was the Plaintiff’s claim that the taxi hit his motorcycle on the right, causing his motorcycle to fall and leading to injuries to his left leg. In contrast, the Defendants’ case was that the accident was caused by the Plaintiff’s cutting into the 2^nd Defendant’s lane as he was making the turn. The 2^nd Defendant tried to swerve to the right to avoid the collision but the left rear mirror still collided with the Plaintiff’s motorcycle. The 2^nd Defendant was not charged with any traffic offence.

Judgment

The Court dismissed the Plaintiff’s claim with costs to the Defendants. The Court found that the Plaintiff was an unreliable and untrustworthy witness, and the account of events stated by the 2^nd Defendant was preferred. There was no negligence and no breach of any duties on the part of the 2^nd Defendant. The claim against the 1^st Defendant was also dismissed as there was no vicarious liability on its part in the absence of employment relationship between the 1^st and 2^nd Defendants.

On the issue of costs, the Court considered this was not a normal case where costs shall follow the event (i.e. the losing party pays the costs of the action). The Court noted that the impecunious Plaintiff appeared to have no stake in this litigation at all as it was his solicitors who had provided financial assistance for medical expert and counsel’s fees and he did not have to pay any money upfront to fund the litigation except some photocopying expenses.

The Court applied the principles elicited from the Court of Final Appeal case Winnie Lo v. HKSAR (2012) 15 HKCFAR 16 and commented that while it is not objectionable for a solicitor to pay for the disbursements on behalf of the client, a solicitor who takes on such cases bears a continuing duty to make careful enquiry and satisfy himself that an honest case exists or that there is at least a reasonable cause of action or defence.

The Court also made the following important observations which would apply in a Personal Injury action:

1. Such duty to make enquiry and satisfy himself that his client has a reasonable cause of action or defence must be a continuing one. It is incumbent upon the solicitor in charge to review the case from time to time at different stages of the proceedings;
2. It is against both the letters and the spirit of the Civil Justice Reform to allow unmeritorious claims, no matter whether they are funded by a solicitor on behalf of his client or litigant who is acting in person, to proliferate;
3. It is also against public policy to permit a solicitor to pursue a hopeless case on behalf of his client;
4. To allow a solicitor or litigant to do so will often lead to the defendant or his insurer not able to recover any costs against the impecunious litigant at all;
5. The defendant or his insurers often will be unable to recover any costs against the impecunious plaintiff as in most cases he simply does not have the means to pay the successful party’s costs;
6. At the end of the day, the successful party’s costs will likely be borne by the general public in the form of increased premiums for employers (in industrial accident cases) and for motorists (in traffic accident cases); and
7. It will also lead to the wasting of the limited judicial resources when a court will have to hear a case that contains no or very little merits at all.

The learned Judge criticized that the Plaintiff did not have any reasonable cause of action against the Defendants right from the start of the proceedings. There was insufficient evidence pointing to any negligence and/or breach of other relevant duties on the part of the Defendants. The case should have never been brought by the Plaintiff’s solicitors on behalf of the Plaintiff in the first place. Latest by the time of completion of discovery and exchange of witness statements, it must have been apparent to the Plaintiff’s solicitors that the Plaintiff would not be able to prove his case at the trial.

He took the view that there must be a case to make solicitors who decide to pursue a hopeless case on behalf of the litigant pay for the costs of the successful defendant when it is apparent that the plaintiff is not in a position to pay those costs. Pursuant to Order 62, rule 8A of the Rules of the District Court and Practice Directions 14.5, on the Court’s own motion, the Court directed the Plaintiff’s solicitors to show cause as to why a wasted costs order should not be made against them on an indemnity basis.

Takeaway

The judgment reminds legal practitioners the risk of becoming personally liable for costs of the successful defendant if one blindly pursues a hopeless claim on behalf of an impecunious client through trial. It is a welcomed decision for defendants and insurers who might never be able to recover their costs against the plaintiff without means, as their costs will be covered by the plaintiff’s solicitors under the wasted costs order.

The Court in this case particularly noted that in recent years there had been a huge surge in personal injuries cases where a low income plaintiff with little prospect of success would be assisted by his solicitors to take on cases all the way to trial or very close to trial, only to find that his case cannot be proven at trial. In cases where the default costs order “costs shall follow the event” is made, insurers who have incurred substantial costs to defend the claim are often left without remedy as the plaintiff has no assets to be enforced against.

This decision sends a strong message to legal practitioners, in particular those in personal injury actions, that they have a continuing duty to make careful enquiry at different stages of the legal proceedings and satisfy themselves that an honest case exists or that there is at least a reasonable cause of action or defence. Otherwise, there is a real possibility that the legal practitioners might have to bear the costs consequences themselves.