Chan Oi Wah v. Cheung Chun Wai, The Executor of the Estate of Cheung Sai Sun, The Deceased
Read the full judgment text of DCCJ 448/2014 on BabelCite. This District Court judgment was delivered on 23 August 2016.
1. This is a water seepage case. The Plaintiff is the registered owner of 1/F of SS 13 of SB of Lot No 90 in DD115, House No B21 of Kwan Lok Sun Tsuen, Yuen Long, Hong Kong (“the Property”). The Defendant is the registered owner of the floor above, namely, 2/F of the Property.
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DCCJ448/2014 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 448 OF 2014 --------------------
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--------------------- DECISION --------------------- Factual Background 1.This is a water seepage case. The Plaintiff is the registered owner of 1/F of SS 13 of SB of Lot No 90 in DD115, House No B21 of Kwan Lok Sun Tsuen, Yuen Long, Hong Kong (“the Property”). The Defendant is the registered owner of the floor above, namely, 2/F of the Property. 2.The legally aided Plaintiff commenced proceedings against the Defendant and sought the following reliefs: (i) an injunction against the Defendant to prevent further water seepage; (ii) special damages which include the costs for rectifying the damaged structure and making good the decoration in the 1/F Property and (iii) general damages for diminution in the amenity value of the 1/F Property. 3.The Defendant did not admit liability and defended the Plaintiff’s claim. The parties engaged experts on liability and quantum. Joint inspection and examination of the 2/F Property was conducted on 5, 19 and 29 October 2015. 4.On 22 January 2016, the parties’ experts submitted their Joint Expert Report. The following matters were agreed by the experts: (i) the source of water seepage at the 1/F Property comes from the 2/F Property; and (ii) rectification works are required at 2/F Property to stop the water seepage. 5.The parties were able to reach a settlement and the matter did not proceed to trial. Pursuant to the Order of Master S P Yip dated 23 March 2016 (“the Order”), costs of the action up to and including 9 April 2015 be to the Plaintiff, to be taxed if not agreed. 6.The Order also provided that upon the Defendant’s undertaking to rectify the 2/F Property within 60 days so as to prevent further seepage of water from his property to the Plaintiff’s property, judgment would be entered against the Defendant and the Defendant should pay damages in the sum of HK$153,400 to the Plaintiff. 7.The Order also stipulates that the costs of this action (together with expert fees) thereafter as from 10 April 2015, save and except those consented by the parties or from orders made by the court are to be determined by the court under its general discretion as to costs under Order 62 rule 3 of the Rules of the District Court, Cap 336H (“RDC”). 8.The subject matter of this hearing is the dispute as to the costs of the action from 10 April 2015. Plaintiff’s Submission 9.The Plaintiff submits that she has effectively obtained what she had claimed in the action and therefore is the successful party in the action. As such, the Plaintiff claims that she is entitled to recover costs of the whole action. The Plaintiff asks for costs on an indemnity basis from 2 July 2015 or 8 February 28 being 28 days after the Plaintiff’s 2nd settlement offer dated 4 June 2015 and the Plaintiff’s 3rd settlement offer dated 11 January 2016 respectively. Defendant’s Submission 10.The Defendant submits that costs of the action from 10 April 2015 and thereafter should be paid by the Plaintiff to the Defendant by reason of (i) the offers to settle made by the Defendant; (ii) the unreasonableness of the Plaintiff for pursing certain issues; (iii) the manner in which the Plaintiff pursued her case; (iv) the conduct of the Plaintiff and her legal representatives during the proceedings after 9 April 2015 and (v) the failure of the Plaintiff to take into account the objectives of the Civil Justice Reform. 11.The significance of the date of 10 April 2015 as argued by the Defendant is that the Defendant made a sanctioned offer to the Plaintiff on 12 March 2015 and expiration of 28 days for acceptance falls on 9 April 2015. The Defendant argues that it was open for the Plaintiff to accept the Defendant’s offer dated 12 March 2015, in which case the action would have been settled and no costs would be incurred thereafter. The Court’s Discretion as to Costs 12.Pursuant to section 53(1) of the District Court Ordinance, Cap 336, costs are in the discretion of the court. Costs normally follow the event, but the court can make some other costs order in appropriate circumstances (see Order 62 rule 3(2) RDC). 13.Order 62 rule 5 RDC provides guidance on how the court should exercise its discretion on costs. It stipulates:-
14.The parties do not dispute the applicability of the above principles. The Parties’ Settlement Offers 15.Both parties made a number of settlement offers but unfortunately none were accepted. The Defendant made five settlement offers and the Plaintiff made three. It is regrettable that the parties were unable to reach an agreement on liability for costs. This has led to a situation which settlements are intended to prevent – further litigation between the parties with the incurrence of additional costs in deciding who should pay the costs already incurred. 16.On 12 March 2015, the Defendant made a sanctioned payment of HK$120,000 into Court in settlement of the whole of the Plaintiff’s claim. This sanctioned payment does not beat the damages ultimately awarded to the Plaintiff in the sum of HK$153,400 as reflected in the Order. There is a difference of HK$33,440 between the Defendant’s sanctioned payment and the ultimate award. 17.The Defendant submits that a sanctioned offer was also made on 12 March 2015 by way of letter marked as “without prejudice save as to costs” to the Plaintiff’s solicitors, containing two settlement options and further additional terms. Notwithstanding that the Defendant’s offer is expressed as a “sanctioned offer”, the court’s approach is to look at the contents of the offer and ascertain its validity with reference to the requirements of Order 22 rule 5. As held by Saunders J in Kwok Chun Wing v 21 Holdings Ltd [2011] 3 HKC 542:-
18.The Plaintiff contends that the Defendant’s settlement proposal dated 12 March 2015 does not constitute a sanctioned offer as it contains provisions as to costs and that at best it is a Calderbank offer. The terms of the Defendant’s offer is reproduced below (“D’s 1st Offer”):-
19.As D’s 1st Offer contains provisions as to costs, the question that arises is whether it is a valid sanctioned offer pursuant to Order 22. Both parties have cited and relied on the case of Wong Yim Man Anthea v Wong Ho Ming Felix (Unreported, HCA 352/2011, judgment dated 22 April 2016, Deputy High Court Judge Kent Yee). That case addressed the issue of whether the court can consider any offers described as a sanctioned offer and yet contains a provision as to costs. Paragraphs 45-47 of the judgment are pertinent:-
20.The conditions of D’s 1st Offer have altered the mechanism of Order 22, namely that the Defendant shall bear the Plaintiff’s costs up to the Plaintiff’s acceptance of the offer and that the Plaintiff’s expert costs relating to water testing on 7 March 2015 are to be borne by the Plaintiff. Applying Wong Yim Man Anthea to the present case, I am of the view that the Defendant’s 1st Offer does not constitute a sanctioned offer under Order 22. In any event, the value of the rectification works in D’s 1st Offer (both Option 1 and Option 2) is worse than the final sum awarded to the Plaintiff. In addition, there is no exclusion of the costs of the abortive water test in the Order. 21.However, D’s 1st Offer may be considered under Order 62, rule 5(1)(d) RDC under the court’s general discretion on costs. The offer to settle was not simply payment of money by the Defendant to the Plaintiff. It also involved the engagement of a licensed contractor to carry out repair and rectification works. The exercise of discretion should influence but not govern the exercise of discretion on costs. In Luk Kwan Hung Nelson v Victory Mark Investment Limited [2004] 2 HKC 305 Sakhrani J adopted the following guidance by Mummery LJ in Butcher v Wolfe & Anor [1999] 1 FLR 334 at 340:-
22.By letter dated 30 March 2015, the Plaintiff’s solicitors wrote back to the Defendant’s solicitors regarding D’s 1st Offer. The Plaintiff expressed her desire to consider Option 1 subject to clarifications form the Defendant. The Plaintiff’s position was that:-
23.Despite conveying her concerns and seeking clarifications from the Defendant in relation to D’s 1st Offer, the Defendant did not write back to the Plaintiff. I find that the concerns raised by the Plaintiff are all reasonable. I note that D’s 1st Offer was made at a time before detailed examination of the 2/F Property was carried out. The joint inspection and examination of the 2/F Property was conducted in October 2015. 24.The Plaintiff’s 1st Offer was made in the same letter marked as “without prejudice save as to costs” dated 30 March 2015 in which she expressed concerns over D’s 1st Offer (“P’s 1st Offer”). P’s 1st Offer was expressed to be a sanctioned offer. P’s 1st Offer included the following terms: (i) the repair and rectification work was to include “subsequent making good of the finishes with the original type and standard” in the Property as set out in paragraph 28 of the Plaintiff’s witness statement filed on 28 November 2014; (ii) that the repair and rectification was to be completed within 2 months of acceptance of P’s 1st Offer and for the contractor to provide a guarantee on the quality of works for 3 years commencing from the date of completion; and (iii) the Defendant should pay HK$30,000 to the Plaintiff as compensation within 14 days from the acceptance of P’s 1st Offer. 25.The Defendant argues that P’s 1st Offer could not have been a valid sanctioned offer as it was withdrawn on 9 April 2015, less than 28 days from 30 March 2015 without any leave from the court in breach of Order 22 rule 7(1). As the HK$30,000 compensation was not allowed in the Order, the Plaintiff concedes that P’s 1st Offer is of no effect apart from demonstrating the Plaintiff’s attempt in exploring settlement with the Defendant. 26.The Defendant criticized the Plaintiff’s refusal toacceptD’s 1st Offer and argued that the Plaintiff’s behavior in frivolous nit-picking and seeking clarifications was unreasonable. The Defendant sought to reply to the Plaintiff’s concerns in the 2nd Affirmation of Cheung Chun Wai dated 28 June 2016 alleging that: (i) there was no evidence to suggest that the standard of repair and rectification work would not be as good as the original type and standard; (ii) the implementation of a price range of HK$100,000 – HK$150,000 is reasonable as there is no reason why the Plaintiff should insist on the Defendant engaging a more expensive contractor; (iii) the comment that “repair/rectification works may be carried out in the 2/F Property as well” was not specifically mentioned in P’s 1st Offer and is the Plaintiff’s attempt to nit-pick D’s 1st Offer; (iv) the alleged costs of the re-scheduling of water testing on 7 March is not part of the costs of this action and is not a matter for taxation and (v) the claim for general damages for the diminution in the amenity value of the 1/F Property was ultimately not pursued by the Plaintiff. 27.It is not in dispute that P’s 1st Offer was withdrawn by letter dated 9 April 2015 and subsequently reinstated by a second letter on the same day. On 5 May 2015, the Plaintiff’s solicitors wrote to the Defendant’s solicitors stating that the Plaintiff was prepared to accept Option 1 of D’s 1st Offer but asked for no order as to costs after 9 April 2015 up to the date of the consent summons to be signed by the parties and that there be no order as to costs as to the consent summons to be made. This early offer to agree to no order as to costs would have quickly brought these proceedings to an end. However, the Defendant refused to agree to no order as to costs. 28.The onus to set out the settlement offer in clear terms rests on the Defendant. The Defendant could have responded to the Plaintiff’s concerns regarding D’s 1st Offer in an effort to settle the matter. Given the circumstances and the information available to the Plaintiff at the material time, the Plaintiff cannot be criticized for not accepting D’s 1st Offer immediately, but to enter into further “without prejudice” discussions and negotiations on the offer which she did. 29.I find that the Plaintiff’s request for the Defendant to specify the time period for the completion of rectification works is reasonable and understandable. I do not agree with the Defendant’s submission that this is frivolous nit-picking. The Plaintiff would undoubtedly want some assurance with regards to the time frame to rectify the water seepage problem. 30.In my view, most of the Plaintiff’s concerns have been addressed in the Order in her favour. I note that there is an undertaking made by the Defendant to rectify the 2/F Property to prevent further water seepage on top of the damages payable by the Defendant to the Plaintiff. In addition, the rectification works at the 2/F Property should be completed within 60 days and there is no exclusion of the costs of the abortive water test. 31.Although the Defendant contends that D’s 1st Offer was made to avoid significant legal costs, that was not achieved. One of the obstacles in reaching settlement was the Defendant’s stance in relation to costs arising from the abortive water test (see D’s 1st and 3rd Offers). At the hearing, the Defendant argued that the costs of the aborted water test on 7 March 2015 should not be borne by the Defendant and were unnecessarily incurred by the Plaintiff. The Defendant’s stance in relation to the aborted water test was set out in the 1st and 2nd Affirmation of Cheung Chun Wai. As a matter of fact, the costs of the aborted water test have not been excluded in the Order and I do not find it appropriate to disturb the Order (which was reached by consent). 32.Throughout these proceedings, the Defendant did not admit liability. It was not until 16 March 2016 that the Defendant admitted liability for the water seepage in its Timetabling Questionnaire. 33.The Defendant made further settlement offers in the form of letters to the Plaintiff marked as “without prejudice save as to costs” but none were accepted. They are summarized and set out in the table below:-
34.I find that the terms of D’s 2nd to D’s 5th Offers are worse that what was ultimately awarded to the Plaintiff as reflected in the Order. I also find that D’s 2nd to D’s 5th Offers do not constitute valid sanctioned offers as they all contain terms as to costs. In addition, D’s 2nd to D’s 5th Offers were not served on the Director of Legal Aid in breach of Order 22 rule 6(b) RDC. 35.The Plaintiff also made further settlement offers expressed as a sanctioned offer in letters marked as “without prejudice save as to costs” to the Defendant and they are summarized and set out in the table below:-
36.P’s 2nd Offer is essentially the same as P’s 1st Offer except that the Plaintiff no longer insisted that the Defendant pay HK$30,000 to her as compensation. P’s 2nd Offer was subsequently withdrawn by letter from the Plaintiff’s Solicitors to the Defendant’s solicitors dated 11 January 2016. 37.In the same letter, the Plaintiff set out P’s 3rd Offer. This offer was made after the joint inspection and examination carried out in October 2015. The Defendant submitted that the P’s 3rd Offer was not a valid sanctioned offer as it includes a term as to the costs of the action and it failed to stipulate the circumstances enabling acceptance of the offer after the expiry of 28 days. I find that P’s 3rd Offer is not a sanctioned offer under Order 22. As such, it is not just and appropriate to order indemnity costs against the Defendant. 38.As I have found that D’s 1st to 5th Offers are not sanctioned offers pursuant to Order 22, I proceed to consider D’s 1st to 5th Offers pursuant to Order 62 rule 5 in the Court’s exercise of discretion on costs. As set out in the table above, D’s 2nd to D’s 5th Offers were open for acceptance for 7, 2, 5 and 3 days respectively. I do not consider the short time frame to be reasonable. Such a short time frame does not facilitate and is not conducive to a settlement of the proceedings. 39.Notwithstanding the fact that the Joint Expert Report dated 22 January 2016 concluded that the source of water seepage at the 1/F Property comes from the 2/F Property, the Defendant did not admit liability until 16 March 2016 in its Timetabling Questionnaire. 40.I do not accept the Defendant’s submission that the Plaintiff was acting unreasonably and holding up the settlement by raising minor and insignificant issues such as the time by which repairs had to be completed and the standard of the rectification works. I do not find any merit in the Defendant’s criticisms against the Plaintiff’s conduct. Conclusion 41.There is no reason to justify a departure from the general rule that costs should follow the event in the present case. I therefore order that except otherwise provided by previous order(s), costs of this action from 10 April 2015 and thereafter to be to the Plaintiff, to be taxed if not agreed, with certificate for counsel. The Plaintiff’s own costs to be taxed in accordance with Legal Aid Regulations.
Mr Yan Kwok Wing, instructed by S H Chan & Co, assigned by the Director of Legal Aid, for the Plaintiff Ms Katy Chung, instructed by Lui & Law, for the Defendant |