Sit Sau Ming v. Leung May Chun, Alison Aliance Formerly Known As Sham May Chung

DCCJ 4453/2008

[2020] HKDC 1084

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4453 OF 2008

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Before: His Honour Judge Ko (Paper disposal)

Date of Decision: 30 November 2020

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DECISION

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A. INTRODUCTION

1.In the judgment handed down on 6 March 2020 following a trial (“the Judgment”), I entered judgment for the plaintiff and dismissed the defendant’s counterclaim.  I made a costs order nisi that the defendant do pay the plaintiff the costs of the action (including the costs of defending the counterclaim) to be taxed if not agreed.

2.There were then the following applications to vary the order nisi:-

(a)  The plaintiff’s summons for, inter alia, an order that: “the Defendant do pay the Plaintiff’s costs of the action (including the costs of defending the counterclaim and all costs reserved, if any) with a certificate for 2 counsel, to be taxed if not agreed, and such costs, incurred up to 8 August 2019, to be taxed on a party-to-party basis, and as from 9 August 2019, to be taxed on an indemnity basis with enhanced interests at a rate not exceeding 10% above judgment rate on the indemnity costs until payment, or such order that the Court thinks just and reasonable.” [1]

(b)  The defendant’s summons for the following order: “(1)    Costs of and occasioned by the application for leave to appeal before Deputy Judge Chow and the costs of and occasioned by CACV 535/2018 be to the Defendant with certificate for 2 Counsel; and (2) Costs of the first trial before Deputy Judge Chow be to the Defendant, alternatively, there be no order as to costs of the first trial.” [2]

3.By my direction, these applications are dealt with on the papers.  I am grateful for the submissions of the parties.

B. BACKGROUND

4.The trial before me was in fact a retrial pursuant to the order of the Court of Appeal.

5.Previously, the action had been tried before the Deputy Judge (“the first trial”) that culminated in a judgment dated 12 December 2017 in favour of the plaintiff (“the 2017 Judgment”).

6.Feeling aggrieved, the defendant applied to the Deputy Judge for leave to appeal.  By a decision dated 22 October 2018, the Deputy Judge granted leave based on one of the grounds set out in the draft notice of appeal and ordered (at para 19): “Costs of the defendant’s summons filed on 9 January 2018 shall be in the cause of the appeal, with certificate for counsel, to be taxed if not agreed.”

7.Pursuant to the leave granted by the Deputy Judge, the defendant commenced CACV 535/2018 in the Court of Appeal.

8.Separately, the defendant applied to the Court of Appeal under CAMP 158/2018 for leave to appeal against the 2017 Judgment based on the grounds rejected by the Deputy Judge.

9.After some discussion, the parties jointly applied to the Court of Appeal, by means of a consent summons filed in CACV 535/2018, for the following orders: (i) the appeal be allowed; (ii) the 2017 Judgment be set aside; (iii) the case be remitted to the District Court for a speedy retrial before another judge; (iv) leave be granted to the parties to adduce expert evidence on the market rent of the subject 6 carparks limited to one expert each; and (v) the parties do file written submissions on all questions of costs including CAMP 158/2018 within 14 days from the date of the order to be made.

10.In response, the Court of Appeal directed a rolled up oral hearing for CAMP 158/2018 and directed CACV 535/2018 to be listed for hearing at the same time.

11.On 6 December 2018, the Court of Appeal, after hearing the parties, made the following orders:-

“BY CONSENT IT IS ORDERED that:

(1)  the appeal be allowed;

(2)  [the 2017 Judgment] be set aside; and

(3)  the case be remitted to the District Court for a speedy trial before another judge.

AND IT IS ORDERED that:

(1)  the costs of the first trial be in the cause of such new trial; and

(2)  the costs of this appeal be in the cause of the retrial with a certificate for 2 counsel for the Defendant.”

12.The present argument is concerned with the costs of the following proceedings:-

(i)  the first trial before the Deputy Judge;

(ii)  the application for leave to appeal before the Deputy Judge;

(iii)  CACV 535/2018 before the Court of Appeal;[3] and

(iv)  the retrial before me.

13.As we shall see, whereas Mr Chain for the plaintiff focuses on the costs of proceeding (iv), the submissions of Mr Hung for the defendant touch upon all four proceedings.

C. THE PLAINTIFF’S STANCE

14.Mr Chain submits that the sole issue before this court is the costs of the re-trial (ie proceeding (iv)).  Depending on what order is made, the previous costs (ie proceedings (i), (ii) & (iii)) will follow, applying JT Stratford & Son Ltd v Lindley (No 2) [1969] 1 WLR 1547.

15.In relation to the costs of proceeding (iv), the plaintiff made a sanctioned offer under Order 22 of the Rules of the District Court (“RDC”) on 11 July 2019 before the retrial to forgo 2 of the 6 car parking spaces claimed in full and final settlement of her whole claim (“the Sanctioned Offer”).  Under Order 22, rule 16, the defendant had 28 days after the offer was made to accept the offer without requiring the leave of the court (ie up to 8 August 2019).  By a letter dated 17 July 2019, the defendant informed the plaintiff that the Sanctioned Offer was “not acceptable”.  After the retrial, judgment was entered for the plaintiff in terms of the Judgment.

16.Mr Chain submits that as the plaintiff has succeeded in the re-trial, there is no reason why she should not have her costs of the retrial.  Consequently, he asks for:-

(a)  a certificate for 2 counsel for the retrial, nothing that both the plaintiff and the defendant were represented by two counsel at the retrial;

(b)  indemnity costs from 9 August 2019, in pursuance of Order 22, rule 24; and

(c)  enhanced interest on such indemnity costs at the rate of 4.5% from 9 August 2019 to the date of payment, in pursuance of Order 22, rule 24 and following Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273.

D. THE DEFENDANT’S STANCE

17.Apart from repeating the request in the defendant’s solicitors’ affirmation (see para 2(b) above), Mr Hung alternatively suggests a broad brush approach to deprive the plaintiff of part of her costs.

18.With respect, his submissions are convoluted and unnecessarily repetitive.  His argument revolves around the following main complaints:-

(a)  The plaintiff had been dilatory in prosecuting her claim.  According to Mr Hung, the statement of claim was filed 4 years after the writ.  Not until September 2016 – some 8 years after commencement of the action – did the plaintiff disclose for the first time in her supplemental witness statement that she had paid the balance of the purchase price to MWC (the solicitors representing both parties in the transaction) on 31 December 2007 and give discovery of the relevant bank pay-in slips.  The plaintiff amended her pleadings in October 2016 to adopt the defence of MWC (being the Third Party in the third party proceedings) that the defendant had failed or refused to complete following an oral agreement to postpone the completion date.  Prior to that, the parties had been fighting over the plaintiff’s allegation that there had been defects in the defendant’s title and that the defendant had failed to show and prove good title.  The plaintiff’s counsel conceded when applying for leave to amend the plaintiff’s pleadings that the plaintiff’s former solicitors had mishandled the proceedings.  But for the plaintiff’s misconduct, so argues Mr Hung, “8 years had not been wasted, memories of the witness would be better, missing documents would be traceable, the anxiety and inconvenience of the parties would be avoided or minimized, determination of the case would have had come 10 years ago if not earlier.”

(b)  The plaintiff unreasonably opposed the defendant’s application for leave to appeal against the 2017 Judgment initially, only to concede to a retrial later.  This has caused the defendant to spend over $1.2 million on her legal costs for the appeal as she was represented by two counsel.

(c)  The plaintiff succeeded, in terms of the Judgment, on her new case which she had only started to run some 8 years after the commencement of the action.

(d)  The defendant had acted reasonably throughout these proceedings in not opposing the plaintiff’s late amendment of pleadings shortly before the first trial, in consistently denying the alleged oral agreement to postpone the completion date, and in counteroffering “no order as to costs” in response to the Sanctioned Offer.  In contrast, the plaintiff was unreasonable in opposing the defendant’s application to the Deputy Judge for leave to appeal initially, in failing to respond to the defendant’s counteroffer, and in asking for an inquiry as to damages (in pursuance of para 104 of the Judgment) contrary to the plaintiff’s election at the pre-trial review before the first trial not to claim further damages if specific performance is granted.

19.By reason of the above, so argues Mr Hung, much time and costs have been wasted in proceeding (i).

20.He submits that the defendant should be entitled to the costs of proceedings (ii) and (iii) because: “The event of the appeal was in favour of the Defendant …  There is no reason why P should not pay the costs of the appeal to the successful party D.”  He prays in aid Cheng Kwing Yueng v Hong Kong Ham Holdings Limited, CACV 24/2014, decision on costs dated 22 April 2015, and says that: “P was the party making D had to go to the CA to get the judgment set aside, which D was entitled to, P should face the music of losing at the end.” 

21.He suggests a broad brush approach in the event I am not minded to “make separate costs order” for proceedings (i), (ii) and (iii) and submits that “50% reduction [of the plaintiff’s costs] would be fair”. 

22.He opposes the plaintiff’s application (in relation to proceeding (iv)) mainly on two grounds:-

(a)  Had the defendant accepted the Sanctioned Offer, the consequences specified in Order 22, rule 21 would automatically follow and the plaintiff would be entitled to her costs of the proceedings up to the date upon which the defendant served her notice of acceptance, including the costs of proceedings (i), (ii) and (iii). 

If the court is wholly or partially with the defendant in her present application, then the plaintiff may be deprived of part of her costs or may even have to pay costs to the defendant.  Thus, it is not clear before the final adjudication on costs whether the plaintiff is in fact doing better in terms of the Judgment than her Sanctioned Offer.

(b)  Under Order 22, rule 24(5), the court shall take into account all the circumstances of the case in considering whether it would be unjust to order indemnity costs and enhanced interest against the defendant.  The Sanctioned Offer was made at a very late stage of the proceedings, some 11 years after commencement of the action.  By then, both parties had incurred substantial legal costs and it was reasonable for the defendant not to accept the Sanctioned Offer having regard to her liability on costs.  Notwithstanding her costs burden, the defendant counteroffered “no order as to costs” but the plaintiff never responded.  In those circumstances, it would be unjust to blame the defendant for not accepting the Sanctioned Offer.

E. DISCUSSION

E1 The costs of proceedings (i), (ii) and (iii)

23.The Deputy Judge ordered the costs of proceeding (ii) be “in the cause of the appeal”.  The Court of Appeal ordered the costs of proceeding (i) be “in the cause of such new trial”, and the costs of proceeding (iii) be “in the cause of the retrial”. (underline added)

24.Both counsel refer me to Hong Kong Civil Procedure 2020 and JT Stratford & Son Ltd v Lindley (No.2) [1969] 1 WLR 1547 on the meaning of “costs in the cause”.

25.In para 62/1/3 of the former, it is noted that the phrase means the costs of those proceedings are to be awarded according to the final award of costs in the action.

26.In my view, the judgment in the Stratford case is more instructive.  There, the plaintiff obtained an interlocutory injunction against the defendants but the Court of Appeal later allowed the defendant’s appeal.  On the appeal of the plaintiff, the House of Lords granted them an interlocutory injunction and ordered that the costs in the House of Lords and in the Court of Appeal were to be “costs in the cause”.  Thereafter, the action went to sleep and never came to trial.  The defendants took out a summons to dismiss the action for want of prosecution with costs including all the “costs in the cause”.  On a cross-summons, the plaintiff asked for leave to discontinue the action upon the term that the defendants should pay the plaintiff’s costs.

27.Lord Denning, giving the judgment of the English Court of Appeal, observed (at 1552H-1553A):-

“There is no definition in any law book of the words ‘costs in the cause.’ But every pupil on his first day in chambers is told what it means. ‘Costs in the cause’ means that the costs of those interlocutory proceedings are to be awarded according to the final award of costs in the action. If the plaintiff wins and gets an order for his costs, he gets those interlocutory costs as part of his costs of the action against the defendant. Vice versa, if the defendant wins and gets an order for his costs, he gets those interlocutory costs as part of his costs of the action against the plaintiff.”

28.Referring to the particular circumstance before the court, His Lordship (at 1553H-1554A) said:-

“The plain fact is that, when the House of Lords made the order for ‘costs in the cause’ they anticipated that the case would go to trial for adjudication on the merits. It was a case that was finely balanced. A slight turn in the evidence might make all the difference. So the House thought it right to make the costs of the interlocutory proceedings depend on who won or lost in the main action. But a situation has arisen which they never envisaged.”

29.The Court of Appeal was invited but declined to go into the merits of the case because (at 1554B-C):-

“We cannot try the action at this stage. I put aside the respective merits of the dispute. I ask simply: what is to be done in a situation which the House of Lords did not envisage? I think that we should not dismiss the action under Ord 25, r 1(4) for want of prosecution. I think the court should give the plaintiffs leave under Ord 21, r 3 to discontinue. That rule gives the court a wide discretion as to costs. It covers the costs which have been ordered to be ‘costs in the cause’. In the new situation, we should deal with the costs as if they had been ‘costs reserved.’ Finding that neither side wishes to go on with this action, I think the master and the judge exercised their discretion wisely in giving leave to discontinue on the footing that each side is to bear its own costs including costs in the cause.”

30.Thus, the Court of Appeal only revisited the costs order of the House of Lords because a new situation had arisen that had not been anticipated by the House of Lords.

31.Applying these authorities, I take the view that:-

(a)  Given the order of the Deputy Judge, the costs of the application before her (proceeding (ii)) should form part of the costs of the appeal and subject to the final award of costs in the appeal.

(b)  Given the final award of costs in the appeal in terms of the Court of Appeal’s order, Mr Chain is right that all the previous costs (proceedings (i), (ii) and (iii)) should follow the final award of costs in the retrial (proceeding (iv)), which will be discussed in the next section of this decision.

32.Whilst Mr Hung purported to apply the above authorities, he is in effect trying to reopen the costs orders made by seeking:-

(a)  no order as to costs for proceeding (i);

(b)  not just costs of proceedings (ii) and (iii) but also costs occasioned by such proceedings;[4] and

(c)  to deprive the plaintiff of part of her costs of proceedings (i), (ii) and (iii).

33.In Cheng Kwing Yueng, the plaintiff’s claim was dismissed by the first instance judge.  In allowing his appeal and ordering a retrial, the Court of Appeal made an order nisi that the costs of the appeal be awarded to the successful appellant/plaintiff.  The respondent/defendant applied to vary the order nisi.  That was the context in which the Court of Appeal commented (at para 6):-

“… we see little reason to depart from the costs follow the event principle. Just as the defendant is entitled to justice from the court process, so is the plaintiff. In order to obtain the fair hearing of his claim to which he is entitled the plaintiff had to come to the Court of Appeal. Should he not succeed at trial then the defendant will obtain the costs of those proceedings. That, it seems to us, is the outcome which achieves fairness and justice to both parties.”

34.It must be emphasized that the above was said in the context of an application to the Court of Appeal to vary its own order nisi. In the present case, the defendant is asking me (a different court) to revisit the final order of the Court of Appeal.  Unlike the Stratford case, the present situation is within the contemplation of the Court of Appeal.  There is no room for the defendant to reopen the order made. 

E2 The costs of proceeding (iv)

35.Mr Chain invokes Order 22, rule 24 and contends that the Judgment is more advantages to the plaintiff than the Sanctioned Offer so much so that the defendant should be visited with the costs consequences specified in sub-rule (3).  This is disputed by Mr Hung who argues that it would be unjust to make such an order. 

36.Order 22, rule 24 provides:

“Costs and other consequences where plaintiff does better than he proposed in his sanctioned offer (O. 22, r. 24)

(1)  This rule applies where—

(a)  a defendant is held liable for more than the proposals contained in a plaintiff’s sanctioned offer; or

(b)  the judgment against a defendant is more advantageous to the plaintiff than the proposals contained in a plaintiff’s sanctioned offer.

(2)  … [not relevant for present purposes] …

(3)  The Court may also order that the plaintiff is entitled to—

(a)  his costs on the indemnity basis after the latest date on which the defendant could have accepted the offer without requiring the leave of the Court; and

(b)  interest on those costs at a rate not exceeding 10% above judgment rate.

(4)  Where this rule applies, the Court shall make the orders referred to in paragraphs (2) and (3) unless it considers it unjust to do so.

(5)  In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3), the Court shall take into account all the circumstances of the case including—

(a)  the terms of any sanctioned offer;

(b)  the stage in the proceedings at which any sanctioned offer was made;

(c)  the information available to the parties at the time when the sanctioned offer was made; and

(d)  the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated.

(6)  The power of the Court under this rule is in addition to any other power it may have to award interest.”

37.The plaintiff is presently seeking indemnity costs after the latest date upon which the defendant could have accepted the Sanctioned Offer without requiring the leave of the Court as well as enhanced interest on such costs (collectively called “an enhanced costs order”). 

38.The issues for determination are:-

(a)  Whether the plaintiff does better in terms of the Judgment than her Sanctioned Offer?

(b)  If so, whether it would be unjust to make an enhanced costs order?

(c)  If not, what should the enhanced interest be?

E2.1 Whether the plaintiff does better in terms of the Judgment than her Sanctioned Offer?

39.Mr Hung argues that given the unusual and chequered history of the action, the defendant’s costs liability had become a very significant factor in deciding whether to accept the Sanctioned Offer.  He refers to the costs statements presented to the Court of Appeal stating that:-

(a)  the plaintiff has incurred some $815,000 for the first trial and about $375,000 for the appeal proceedings; and

(b)  the defendant has incurred some $1,296,000 for the appeal,

and submits that as the consideration for the 6 car parking spaces was only $660,000, “the Plaintiff is in fact worse off than what the Plaintiff asked for in the [Sanctioned Offer].”  I do not agree with his analysis.

40.Order 22, rule 24(1) requires a comparison to be made between the plaintiff’s proposals in her sanctioned offer and what she gets out of the judgment.  Neither the letter that communicated the Sanctioned Offer nor the Judgment mention the costs of proceedings (i), (ii) and (iii).  In other words, the comparison mandated by Order 22, rule 24 should be between the plaintiff’s offer in her Sanctioned Offer and what she is awarded by the Judgment.

41.In this action, the plaintiff claimed specific performance of the sale and purchase agreement for 6 car parking spaces.  By the Sanctioned Offer, she offered to forego 2 of the car parking spaces claimed in full and final settlement of her claim.  In the Judgment, I ordered specific performance of the agreement covering all 6 car parking spaces.  It is thus clear that the plaintiff has done better in terms of the Judgment than her Sanctioned Offer. 

42.In any event, I agree with Mr Chain that Mr Hung’s (monetary) analysis is defective.  Mr Hung has apparently omitted to take into account the rise in property prices of the car parking spaces since 2007 in his calculation.

43.According to the valuation evidence adduced by consent of the parties,[5] the market value (as at 5 July 2019) of the 2 car parking spaces the plaintiff proposed to forgo was estimated to be:-

Property	Market Value without Title Defect (HK$)
Car parking space No 15	1,360,000
Car parking space No 40	1,140,000
Net total	2,500,000

44.Thus, the updated value of the two car parking spaces that the plaintiff proposed to forgo (ie $2,500,000) was comparable to the defendant’s costs liability in Mr Hung’s calculation (ie $375,000 + $815,000 + $1,296,000 = $2,486,000).  It has not been demonstrated that the plaintiff has failed to do better.

45.In my view, the plaintiff has clearly done better in terms of the Judgment than her Sanctioned Offer. The next question is whether the costs consequences specified in Order 22, rule 24(3) should apply.

E2.2 Whether it would be unjust to make an enhanced costs order?

46.Apart from submitting (in terms of Order 22, rule 24) that it would be unjust to make an enhanced costs order against the defendant, Mr Hung has also addressed me in terms of Order 62, rule 5 (special maters to be taken into account in exercising discretion).  Before I delve into his submissions, I should say a few words about my approach.

47.In my view, the provisions of Orders 62 and 22 should be read together as a coherent mass.  On a general level, I am directed to seek to give effect to the underlying objectives set out in Order 1A in the exercise of my powers and in interpreting the rules, including the promotion of a sense of reasonable proportion and procedural economy in the conduct of proceedings and the facilitation of settlement of disputes.

48.More specifically, Order 62, rule 5 directs me to take into account the special matters enumerated therein when exercising my discretion as to costs, one of which is “any admissible offer to settle made by a party, which is drawn to the court’s attention”.  There is an elaborate scheme of sanctioned payment and offer under Order 22, and rule 2(3) thereof expressly provides that an offer made under that order has the consequences specified in the applicable rules.

49.The learned editors of Hong Kong Civil Procedure 2020 have observed (at para 22/24/1) that the consequences set out in Order 22 are vital to effective application of the new sanctioned payment and offer regime introduced by the civil justice reform.  They are designed to provide important incentives to encourage plaintiffs to make, and defendants to accept, settlement offers at appropriate levels thus promoting a sense of reasonable proportion and procedural economy in the conduct of proceedings.  Such an incentive would be deprived of effect unless the non-acceptance of an offer, which subsequently proves to have been a sufficient offer, ordinarily will advantage the plaintiff in the manner foreseen in the rules.

50.In the Golden Eagle case, Johnson Lam J (as Lam VP then was) explained the rationale behind Order 22, rule 24 in these terms (omitting the references to enhanced interest on judgment under Order 22, rule 24(2) which is not relevant for present purpose):-

“10. In England, it has been explained in several cases that these powers under O.22 r.24 are not meant to be penal in nature. Rather, they aim at achieving a fairer result for the winning party…

…

13. Next I turn to the basis of taxation of costs, Chadwick LJ explained the purpose of the power to order costs on an indemnity basis in McPhilemy v Times Newspapers (No 2), para.22:

‘… The purpose for which the power to order the payment of costs on an indemnity basis is conferred, as it seems to me, is to enable the court, in a case to which r.36.21 applies, to address the element of perceived unfairness which arises from the fact that an award of costs on the standard basis will, almost invariably, lead to the successful claimant recovering less than the costs which he has to pay to his solicitor.’

…

16. I come to the power to award interest on costs under O.22 r.24(3)(b). The purpose of such power was explained by Chadwick LJ at para.23 of McPhilemy v Times Newspapers (No 2):

‘… It is to redress, in a case to which r.36.21 applies, the element of perceived unfairness which arises from the general rule that interest is not allowed on costs paid before judgment … So, in the ordinary case, the successful claimant who has made payments to his own solicitor on account of costs in advance of the trial will be out of pocket even if he obtains, at the trial, an order for costs in an indemnity basis … he will get nothing to compensate him for the costs of money (or the loss of the use of money) which he has had to bear before trial in relation to payments which he has made on account of costs. An order under para.3(b) of r.36.21 enables the court to achieve a fairer result in that respect.’

17.  In the subsequent case of KR v Bryn Alyn Community (Holdings) Ltd [2003] PIQR P562, Waller LJ referred to this part of the judgment of Chadwick LJ and went on to say at para 22:

‘If an order is made to pay costs on an indemnity basis, it is unlikely to be unjust to make the party pay interest on those costs for the period when litigation is being funded when acceptance of a Pt 36 offer should have led to it not being funded. There may be cases where evidence will demonstrate actual dates when clients had put up funds and from which interest will run. Without such evidence the court can do no more than Chadwick LJ did and make the interest run from the date when the work was done or liability for disbursements was incurred.’

18.  I propose to adopt a similar but modified approach here.  There is no evidence of actual payment of costs by the Defendant.  In principle the Plaintiff should pay the Defendant interest on the costs incurred after 1 February 2010 running from the date when the works were done respectively.  However, it would be a complicated process if each item of work were to carry interest from a different date.  To simplify the process, I shall borrow a well-established approach in working out interest for special damages in personal injuries litigation.  I will order interest at half of the rate I would otherwise order on all the costs incurred after 1 February 2010 with interest starting to run from 1 February 2010 for all the items.  I consider this approach to be appropriate bearing in mind that we are not talking about a substantial period.  The relevant period is between 1 February 2010 and the date of this judgment on costs and interest when the judgment is finalized.

19.  As regards the interest rate, the English authorities adopted 4% above the base rate as a generous assessment of the costs of money.  Mr Ng argued that since our rule 24(3)(b) referred to the judgment rate, the proper award should be 4% above judgment rate.  I cannot accept that submission.  The rule only sets the maxima.  Given the rationale for the exercise of the power and that it is not penal, I should ask what should be the appropriate rate in Hong Kong which can generously reflect the costs of money to the Defendant.  Based on the information from Mr Chan, 4% above prime in Hong Kong is 1% above judgment rate.  I shall adopt this (9%) as our generous assessment of costs of money.  Applying that to my simplified approach, I will order interest on costs incurred after 1 February to the date of this judgment be paid by the Plaintiff to the Defendant at 4.5% and such interest shall run from 1 February 2010.”

51.In the present case, there is no dispute that the Sanctioned Offer was made under Order 22, and I have determined that Order 22, rule 24 is applicable.  Having regard to the overall scheme of the RDC as elaborated above, I take the view that the plaintiff should be prima facie entitled to indemnity costs with enhanced interest unless I am satisfied that it would be unjust to make the order.  The burden is upon the defendant to show why it would be unjust.[6]

52.In considering whether it would be unjust to make the order, whilst I am directed to take into account all the circumstances of the case, I should focus on the “perceived unfairness” to the successful plaintiff if no order is made as elaborated in Golden Eagle.

53.In my view, the correctness of my approach is confirmed by the special matters set out in Order 22, rule 24(5).  For example, it would be unjust to make an order if:-

(a)  The terms of the sanctioned offer are ambiguous making it difficult for the defendant to appreciate the offer.

(b)  The sanctioned offer was made very late in the day when the parties had already geared up for the fight and there would not be much incentive in accepting the offer.

(c)  The plaintiff had refused to provide the necessary information under Order 22, rule 14 to enable the defendant to properly evaluate the offer.

54.Of course, there may be other relevant circumstances.  For example, Recorder Stewart Wong SC has observed in Arnold Robert Ltd v Glorious Motors Ltd [2019] HKCFI 91 at para 12(2) that the following circumstances would be relevant: “while the continuation of the proceedings is primarily due to the non-acceptance of the sanctioned offer, costs are incurred or increased thereafter due to any unreasonable conduct of the plaintiff.”  Hence, the court is directed to consider all the circumstances of the case. 

55.In the present case, I do not think the submissions made by Mr Hung, whether considered separately or together, are sufficient to show that it would be unjust to make an enhanced costs order against the defendant.

56.There is no suggestion from the defendant that she had any difficulty in appreciating the terms of the Sanctioned Offer and she had not requested for information under Order 22, rule 14.  It is clear from Mr Hung’s submissions that the defendant had all the information she needed (such as the costs statements submitted to the Court of Appeal) to evaluate the offer.

57.Whilst Mr Hung has complained about the lateness of the Sanctioned Offer, the fact that it was made shortly before the retrial has no bearing on the “perceived injustice” suffered by the plaintiff as elaborated in Golden Eagle.

58.Based on the defendant’s argument, the plaintiff has put her house in order in September/October 2016, about three years before the retrial.  I do not see how the alleged delay can be relevant.  In my view, the defendant has made a commercial decision to reject the offer taking into account her costs exposure.  As with the decision to accept the offer, her rejection also carries its own consequences such as the costs consequences stipulated in Order 22, rule 24(3).  There is nothing unjust for the defendant to be visited with such consequences.

59.Indeed, if the defendant was concerned about the effect of her acceptance of the Sanctioned Offer on her costs liability under the Court of Appeal order, she should have applied to the court under the proviso in Order 22, rule 21(1) to displace the specified costs consequences.  That she did not do. 

60.Regrettably, Mr Hung’s submissions contain a lot of factual inaccuracies.  For example:-

(a)  The plaintiff in fact filed her Statement of Claim in April 2010 – 1.5 years after the writ.  The defendant has likewise taken time to prepare her Defence, which was only filed in November 2011 following an unless order.

(b)  The agreement to postpone the contractual completion date was in fact pleaded in para 11 of the Statement of Claim (before the amendment).  Given the denial in para 12 of the Defence, it was all along an issue in the action.

(c)  The defendant has been compensated for the costs of and incidental to the Plaintiff’s amendment of the Statement of Claim and filing of her supplemental witness statement, in terms of para 6 of the Order dated 7 October 2016 which was made by consent of the parties.

(d)  It remained the plaintiff’s stance at the retrial that it had been the bona fide opinion of MWC that completion could not take place on 2 January 2008 by reason of the title defects perceived by them, see para 34 of the Judgment.

(e)  Given the Defence filed and its subsequent amendments, it is doubtful if the action could have been determined earlier even if the plaintiff had articulated her claim “correctly” the first time round.  In fact, the defendant was still raising new issue at the retrial, see para 35 of the Judgment.

(f)  There is no evidence to support the defendant’s complaint that the alleged delay on the part of the plaintiff had adversely affected the memory of any witness or the tracing of any missing documents.

(g)  It was the plaintiff who suggested a joint application to the Court of Appeal for a retrial, see the plaintiff’s solicitors’ letter dated 25 October 2018.[7] Mr Chain has recounted the relevant background in paras 12-27 of his reply submissions.  It is debatable if the plaintiff’s initial objection to the defendant’s application for leave to appeal was unreasonable.  In any event, any argument on the reasonableness of the plaintiff’s initial objection should have be taken before the Court of Appeal before the making of the costs order.

(h)  It is a misstatement for the defendant to say that she had responded to the Sanctioned Offer by counteroffering “no order as to costs”.  The defendant’s counteroffer contained two separate proposals which were different from the plaintiff’s Sanctioned Offer and “no order as to costs” was only one of the terms proposed.[8] In any event, it is not the defendant’s case that the plaintiff has failed to do better than the defendant’s counteroffer and I fail to see how the counteroffer can be relevant for present purposes.

61.Turning to the alternative broad brush approach advocated by Mr Hung, it is trite that a successful plaintiff who recovers more than nominal damages against the defendant should in normal circumstances have an order for costs against the defendant.  A successful party to an action should not be ordered to pay any part of the costs of the hearing unless he has acted improperly or unreasonably in raising issues.  In order to justify a reduction in costs to the successful party on the basis of an issue unsuccessfully litigated, that issue must be something so distinct and separate in itself that the decision of it constitutes an “event”.  See Hong Kong Civil Procedure 2020, para 62/3/3. 

62.There is no suggestion from the defendant that the plaintiff has acted improperly or unreasonably in raising issues at the retrial so much so that she should be deprived of part of her costs. 

63.All in all, I am not satisfied that it would be unjust to make an enhanced costs order against the defendant.  The defendant should pay the plaintiff’s costs as from 9 August 2019 on an indemnity basis with enhanced interest in accordance with Order 22, rule 24(3).  There is no cause to deprive the plaintiff of any part of her costs.

E2.3 What should the enhanced interest be?

64.Having regard to paras 16-19 in the judgment of Golden Eagle (quoted above), I accept Mr Chain’s submission that the usual rate for enhanced interest under Order 22, rule 24(3)(b) should be 4.5% per annum.

F. DISPOSITION 

65.For the above reasons, the plaintiff’s application is allowed.  In substitution of the costs order nisi in the Judgement, I make an order that the defendant do pay the plaintiff’s costs of the action (including the costs of defending the counterclaim and all costs reserved, if any) with certificate for 2 counsel, to be taxed if not agreed, and such costs, incurred up to 8 August 2019, to be taxed on a party and party basis, and as from 9 August 2019, to be taxed on an indemnity basis with enhanced interests at the rate of 4.5% per annum on such indemnity costs until payment.

66.The costs of para 1 of the plaintiff’s summons dated 19 March 2020 be to the plaintiff to be taxed if not agreed.

67.The defendant’s summons dated 20 March 2020 be dismissed with costs to be taxed if not agreed.  Notwithstanding Mr Chain’s efforts in his reply submissions, I decline to order the costs of the defendant’s summons be taxed on an indemnity basis.  Whilst the defendant’s application is by and large misconceived, she would have made more or less the same points in opposition to the plaintiff’s application.

Mr Benjamin Chain, instructed by Pansy Leung Tang & Chua, for the plaintiff

Mr Andy Hung, instructed by Kim & Company, Solicitors, for the defendant