Accurate Contractors & Renovators Co Ltd v. Evangel College School Management Committee Ltd
Read the full judgment text of HCCT 78/2021 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 3 February 2023 before Master D To.
Costs taxation — Arbitration — Calderbank offers — Variation of costs order nisi. The Applicant claimed approximately HK$12.9 million in costs following an arbitral award but only about HK$5 million were ultimately allowed after taxation and review. Both parties exchanged a series of without prejudice settlement offers, with the Respondent making a final Calderbank offer of HK$5.4 million. The Applicant narrowly beat the offer by HK$9,490.27 (0.17%), which was considered de minimus and insufficient to justify full costs recovery. The court considered the parties' conduct; the Applicant delayed setting down taxation for over six months and made multiple unrealistic offers, while the Respondent acted promptly and reasonably to settle. Given the substantial inflation of claimed costs and the minimal margin by which the offer was beaten, the court exercised its discretion under Order 62 r 32A RHC to vary the costs order nisi. The Respondent was ordered to pay Applicant’s taxation costs only up to 18 April 2022, and the Applicant to pay the Respondent’s costs thereafter. Additionally, the Applicant must pay the Respondent’s costs of the variation application, to be summarily assessed.
Legal issues: Costs of taxation allocation after Calderbank offer
Outcome: Respondent’s Summons allowed; costs order nisi varied so Respondent pays Applicant’s taxation costs up to 18 April 2022 and Applicant pays Respondent’s costs after that date.
Cites 2 cases
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HCCT 78/2021 [2023] HKCFI 291 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTRUCTION AND ARBITRATION PROCEEDINGS NO 78 OF 2021 ____________
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________________________ VARIATION OF COSTS ORDER ________________________ 1.This is the hearing of the Respondent’s Summons dated 13 October 2022 for variation of the costs order nisi made at the taxation hearing on 29th September 2022 (“Respondent’s Summons”). 2.The issue is who should bear the costs of the taxation considering the taxation outcome and the various without prejudice offers made by both parties. Factual Background The taxation hearings 3.Pursuant to an Arbitral Award on Costs dated 29 October 2020, the Applicant as the receiving party commenced taxation proceedings on 22 October 2021. 4.The costs claimed by the Applicant in the bill of costs (excluding interest) can be summarized as follows :-
5.After the taxation hearing conducted on 29 September 2022, the Applicant being dissatisfied with the outcome has applied for a review. The review was heard on 11 November 2022. 6.Upon review, the Applicant’s costs (excluding interest) were eventually taxed and allowed as follows :-
The Without Prejudice Offers 7.Before the commencement of taxation proceedings, the Applicant on 26 March 2021 provided the Respondent with an estimate of costs and disbursements in the sum of HK$13,657,052. The Applicant proposed a global settlement in the sum of HK$13,000,000. This was rejected by the Respondent. 8.On 8 December 2021, the Respondent offered the sum of HK$5,000,000 in full and final settlement of the Applicant’s costs and disbursements, inclusive of interest. 9.On 15 February 2022, the Applicant counter-offered the sum of HK$9,500,000. 10.On 31 March 2022, the Respondent increased its settlement offer to HK$5,100,000. 11.On 7 April 2022, the Applicant counter-offered the sum of HK$7,800,000. 12.On 11 April 2022, the Respondent made its final offer in the sum of HK$5,400,000 (“the Calderbank Offer”). 13.The Applicant had until 18 April 2022 to accept the Calderbank Offer. However, the Applicant did not reply until 25 April 2022 it made a final counter-offer of HK$6,800,000 for global settlement including interest. The same was rejected by the Respondent on 6 May 2022. Result of taxation and the Respondent’s Summons 14.As said in paragraph 6 above, the Applicant’s costs eventually allowed was HK$4,967,629.67 excluding interest. Parties agreed that calculated up to 18 April 2020, costs inclusive of interest was HK$5,409,490.27. Thus, strictly speaking the Applicant has successfully beaten the Calderbank Offer, albeit by a very small amount. 15.By the Respondent’s Summons, it seeks to vary the costs order nisi to the effect that the Respondent shall only pay the Applicant’s costs of the taxation up to 18 April 2022, and the Applicant shall pay the Respondent’s costs after 18 April 2022. Applicable Law 16.O 62 r 32A of RHC, Cap 4 provides that:-
17.In Singh Gorinder Bal v Chan Nga Kai, HCPI No 840 of 2008, unreported (13 May 2011), it was held that whether a plaintiff has or has not beaten a Calderbank offer is not determinative of the issue of costs of the taxation proceedings, because the offer is only a matter which the court may take into account when considering the question of costs. Other matters such as the parties’ respective conduct, and whether the offer has been beaten in all or only some of the constituents of the offer and by how much, are also relevant in the overall exercise of the court’s discretion on costs. Discussion 18.In the present case, the amount of the solicitors’ profit costs and disbursements taxed and allowed represent only approximately 37.86% and 38.5% respectively of those claimed in the bill of costs. Further, there was an unreasonable demand for the Applicant’s own disbursements under item B.4 of the bill of costs in the amount of $3,489,556.00. Such item was entirely taxed off. 19.The above suggested that both solicitors’ profit costs and disbursements were very substantially inflated. Such inflation was so unreasonable and disproportionate to the work involved. Since it discouraged settlement and was an invitation to the Respondent to contest the matter, the Respondent should not be ordered to fund such unnecessary taxation. See: Manova International Limited v Giga Technology Limited and another, HCA 733/2009, unreported (26 February 2010). 20.Although the award of HK$5,409,490.27 exceeded the Calderbank Offer, the beat was only by a small margin of $9,490.27 ie 0.17% of the offer of HK$5,400,000.00. Under the de minimus principle, it allows matters of insufficient importance or small scale to be exempted from a rule or requirement. 21.The de minimus rule was applied in Wong Wai Chun v Lewin [2000] 2 HKC 271 and in Lo Ah Wah v Wo Hing Transportation Company, HCPI 1203/1999, unreported (1 December 2001). I am of the view that the de minimus rule is also applicable to the present case. 22.On the parties’ conduct in relation to the taxation proceedings, it is noted that there was a delay of more than 6 months on the part of the Applicant in setting down the bill of costs for taxation. Further, the Applicant’s earlier without prejudice offers of HK$13,000,000, HK$9,5000,000, HK$7,800,000 and HK$6,800,000 were all unrealistic. On the contrary, the Respondent has acted promptly and reasonably by making various sensible offers with a genuine view to settle and to save costs and time. The Applicant’s argument 23.The Applicant submits that in considering whether its claim for costs was unreasonably inflated, the court should give sufficient regard to its final counter-offer of HK$6,800,000. It is boldly asserted that the claim was not significantly inflated because the award of HK$5,409,490.27 represents 79.6% of the Applicant’s “final claim”. 24.The Applicant’s claim under the bill of costs is for the sum of $12,938,856.67 (excluding interest). The attempt to call a final counter-offer of HK$6,800,000 by the fine-sounding name of a “final claim” did not assist the Applicant nor confuse the court. 25.The Applicant also suggests that in considering whether the de minimus rule applies, its final counter-offer of HK$6,800,000 is a relevant figure to be considered. This must be flawed. The relevant figure is HK$9,490.27, ie the difference between the award of HK$5,409,490.27 and the Calderbank Offer of HK$5,400,000. 26.On the issue of delay, the Applicant submits that the several time extensions to set down the bill for taxation were made with a view to attempt settlement and save costs. I disagree. As said in paragraph 22 above, the Applicant’s offers were so unrealistic that would only discourage as opposed to promote settlement. The Respondent was prejudiced by having to incur more costs to test how genuine the bill and the offers were. 27.By reason of the above, I find that it would be unfair if the Applicant does not have to pay the Respondent’s costs after 18 April 2022. The Respondent’s Summons is therefore allowed. Conclusion 28.The costs order nisi be varied as follows:
29.I make an order nisi that the Applicant do pay the Respondent’s costs of this application, to be summarily assessed. The order nisi shall become absolute unless an application to vary is made within 14 days from today. 30.Directions in respect of summary assessment of costs:
Mr Stephen Lau, LCD instructed by Messrs So, Lung & Associates for the Respondent Mr Michael Leung instructed by Messes Yam, Pun & Yipp Solicitors for the Applicant |