Yim Wai Ling and Another v. Yuen Chik Wah and Another

DCCJ 663/ 2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 663 OF 2013

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D E C I S I O N

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1.In the decision handed down on 14 February 2017 (“the Costs Decision”), it is the findings of this court that the Sanctioned Offer made by the defendants is not valid to attract the costs consequences in Order 22 rule 23.  However, based on the findings that the plaintiffs should have commenced these proceedings in the SCT, the application for variation of the Costs Order Nisi by the defendants was allowed to the extent that costs should be taxed as if the claim had been brought in the SCT.  The Costs Order Nisi was varied to costs of this action be to the plaintiffs including all costs reserved, to be summarily assessed by this court if not agreed, as if the claim had been brought in the Small Claims Tribunal (“Costs Order”).

2.By a summons dated 28 February 2017 (“the Summons”), the defendants asked for leave to appeal against the Costs Order on the ground that:  

a.   This court erred in that there was a misapplication of the legal principles; and

b.   This court failed to take into account relevant factors and considered irrelevant factors when exercising the discretion.

Legal Principles

3.Under Section 63A(2) of the District Court Ordinance Cap 336, leave to appeal shall not be granted unless the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.  This has now been clearly established by the authorities to mean more than just an arguable case, but an appeal that has merits, the prospects of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable” (Ho Yuen Ki Winnie & Anor v Ho Hung Sun Stanley & Others, unreported, HCMP 1009/2009, 24 August 2009).

4.Question of costs is in the discretion of the court and it is well established that the Court of Appeal “will not interfere with the exercise of a judge’s discretion in the award of costs unless it be shown that the court failed to exercise the discretion, or exercised it upon a false principle, or did not exercise it judicially” (Choy Yee Chun v Bond Star Development Ltd [1997] HKLRD 1327 at 1337A).

Ground 1 – Incorrectapplication of principle

5.It is the contention of the defendants that this court had applied the cases of Wong Yim Man Anthea v Wong Ho Ming Felix [2016] 3 HKLRD 249 and Leung Lai Kwan v Lo Kai Wing and Anor (unreported, HCMP 1554/2015, 20 August 2015) out of context and ignored the specific facts in those 2 cases which should have made them distinguishable and not applicable.

6.I found this ground must fail.  Irrespective of the specific facts in the 2 cases, the relevant issue and the reasoning I adopted from these 2 cases is whether any Sanctioned Offer made on the basis of no order as to costs can be accommodated by the Order 22 regime in view of Order 22 rule 20(1).  The prayers involved in these cases are neither here nor there.  And in §27 of the Costs Decision, it is stated that “(T)he terms of the offers in Leung Lai Kwan are not simply payment of money by the defendants to the plaintiff but include, inter alia, a term that there shall be no order as to costs” (emphasis added).  This court is well aware of the other terms of offer in the case but given the fact that they are not relevant to the issue to be determined, I see no point in putting all other terms of offer in the Costs Decision.  By not doing so does not mean that this court had failed to take heed of the same.

Ground 2 – Failtoconsider the Sanctioned Offer as a Calderbank offer

7.It is the contention of the defendants that even if this court found that the Sanctioned Offer and Sanctioned Payment were not valid to attract the costs consequences in Order 22 rule 23, should take into consideration the defendants’ offer as a Calderbank offer and gave credits to the Defendants.  Since the award to the plaintiffs cannot beat the terms of the Sanctioned Offer, an award of party-to-party costs or common fund costs against the plaintiffs should be appropriate.

8.Upon finding the Sanctioned Offer was not properly constituted as a sanctioned offer, this court had, in §§31-37 of the Costs Decision, dealt with the same as an offer to settle.  Even though the word Calderbank offer had not been mentioned throughout the Costs Decision, this court reached the conclusion at §38 that “Even treating them as an offer to settle, this court is not convinced that discretion should be exercised in favour of the defendants to vary the Costs Order Nisi”.  This court had never ignored the effect of the Sanctioned Offer, though invalid, as an offer to settle like a Calderbank offer.  In any event, an award of party-to-party costs or common fund costs against the plaintiffs was never an issue before this court at the variation of Costs Order Nisi hearing.

Ground 3 – Matters should not have taken into account

9.The defendants contended that this court had considered matters that should not have taken into account in reaching the conclusion in the Costs Decision, ie the finding that the defendants had been unreasonable in insisting on fighting the issue on liability (§§33-35).  It is submitted that the defendants had all along been acting reasonably in the course of negotiation and conduct of the proceedings and it was the unreasonable behaviour of the plaintiffs which compelled the defendants to fight the case.  The unreasonable behaviour of the plaintiffs includes:

a.   insisted on his plea for an injunction even up to the close of trial;

b.   increased their claim quite substantially at the stage of opening; and

c.   ignored the Sanctioned Offer for more than a year by which time costs had already escalated to a point of no return.

10.The plaintiffs may have insisted on the plea for an injunction, but when compared to the issue on liability, this had never taken up much of the time spent at trial.  As for the substantial increase of the claim, this involves the claim item (10) and (11) which was as a result of the expert’s findings at a joint inspection closed to trial (see §80 of the Judgment dated 12 August 2016). Given the recent findings by the expert at the Joint Inspection, it would not be unreasonable for the expert to update his opinion on the quantum of damages.  This is through no fault of the plaintiffs.  As for the delay on the part of the plaintiffs in responding to the Sanctioned Offer, it is true that the plaintiffs had only responded to the defendants’ request for a breakdown of the legal costs claimed after more than 9 months’ time (request made on 10 September 2013 and reply only forthcoming on 30 June 2014).  But as can be seen from the chronology attached to the submissions prepared by counsels for the defendants for the hearing on variation of the Costs Order Nisi, nothing had been done during this period and no costs should have been incurred, least to say escalated.

11.In any event, the defendants had missed the point as stated at §35 of the Costs Decision.  It is the findings of this court that the defendants should take the blame for the unreasonable behaviour of not accepting the last counter offer from the plaintiffs and to have a full fight in the question of liability which had escalated the costs in these proceedings.  I fail to see how the defendants can be forced to fight on liability when the negotiations between the parties fell through.  The defendants can either admit liability and fight on quantum or, given their stance in making the Sanctioned Offer, admit liability and agree on quantum but leave the issue of costs to this court.  Yet, the defendants had not adopted any of such a course and decided to have a full fight at trial. Such an attitude adopted at trial cannot be ignored in the question of costs.

Conclusion

12.In the circumstances, the defendants’ application for leave to appeal must be dismissed.

13.Costs should follow the event.  I grant an order nisi that costs of the Summons be to the plaintiffs to be taxed if not agreed on party and party basis, with certificate for counsel.  This is a costs order nisi.  Unless any of the parties apply by summons to vary it, the costs order nisi shall be made absolute upon expiry of 14 days.

Mr Tony Ko, instructed by Jackson Ho & Co, for the plaintiffs

Mr Victor Gidwani and Mr Ricky Li, instructed by W H Chik & Co, for the defendants