Montrio Ltd and Another v. Tse Ping Shun David
Read the full judgment text of HCA 757/2009 on BabelCite. This High Court CFI judgment was delivered on 17 February 2012.
1. In the judgment handed down on 29 November 2011, I entered judgment against the defendant as follows :
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HCA 757/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE HIGH COURT ACTION NO 757 OF 2009 ------------------------
------------------------------- DECISION ON COSTS ------------------------------- Application 1.In the judgment handed down on 29 November 2011, I entered judgment against the defendant as follows :
I further made an order nisi that the defendant do pay the plaintiffs costs of the entire action, including all costs reserved, to be taxed if not agreed. 2.The 1st plaintiff now applies for an order that the judgment sum awarded to the 1st plaintiff shall carry interest at judgment rate from the date of writ to 9 November 2009 and thereafter at the enhanced interest rate of 2% above judgment rate until payment. 3.Both plaintiffs apply to vary the costs order nisi so that the defendant shall pay to the plaintiffs costs incurred after 9 November 2009 be taxed on an indemnity basis if not agreed; with enhanced interest at the rate of 5% per annum running from 9 November 2009 until payment. Discussion 4.In support of their applications, the plaintiffs rely on an offer (“the Offer”) by way of letter by their solicitors to the defendant’s dated 12 October 2009, to which the defendant made no response whatsoever. The Offer is couched in these terms :
5.The plaintiffs say the Offer is a sanctioned offer within the meaning of Order 22, Rules of the High Court but the defendant had failed to respond to it. The 1st plaintiff had done better than the Offer. So it should be entitled to enhanced interest on the judgment sum and indemnity costs with enhanced interest. The 2nd plaintiff is also entitled to indemnity costs with enhanced interest because the relevant provisions in Order 22, rule 24 equally apply to a case where the claimant has recovered at trial exactly the same relief as put forward in the sanctioned offer : Read v Edmed [2006] 2 Costs LR 201. 6.Order 22, rule 5(7) provides :
However, the Offer does not fully comply with rule 5(7) in that it has failed to stipulate (a) and (b), the circumstances enabling acceptance of the Offer after the expiry of 28 days. 7.The defendant contends that unless the Offer is in the prescribed form, it will not constitute a valid sanctioned offer. The consequence of which is that the plaintiffs cannot rely upon the provisions of Order 22, rule 24 as to costs and other consequences : see Kwok Chin Wing v 21 Holdings Limited & Anor [2011] 3 HKC 542, per Saunders J at paras 10 and 11. 8.The plaintiffs argue that failure is a technical slip. The irregularity does not nullify the effect of the Offer. The Offer was stated to be a sanctioned offer and was clearly intended to be so. This distinguishes the offer in Kwok Chin Wing which was marked as “without prejudice save as to costs”. The defendant was all along legally represented. The circumstances in rule 5(7) for accepting the Offer after expiry of 28 days must be known to the defendant. The defendant ought to have considered the Offer seriously and taken the reasonable step of accepting it to avoid unnecessary and unproductive prolongation of the litigation. Consequently, the failure to insert the requirements in rule 5(7)(a) and (b) could not have prevented the defendant from accepting the Offer. 9.Sanctioned offers are part of the new regime introduced by CJR to encourage litigants to take positive settlement seriously and avoid unproductive and expensive prolongation of the proceedings. Such offers enable a plaintiff to make an offer for settlement of his claims, wholly or partially. Serious consequences may follow from the sanctioned offer. If the defendant rejects it and the plaintiff does better at trial, he may have to pay indemnity costs and enhanced interest of the sum awarded. Since it is the plaintiff who seeks to invoke the new rules to protect his position, he must strictly comply with all the mandatory requirements when he purports to make a sanctioned offer. It does not lie in his mouth to say that his failure to do so is only a technical slip or the defendant is legally represented and hence must know what the requirements are. The plaintiff has a positive duty to fully comply with the rules in the first place in order to make his offer a valid sanctioned offer. I therefore rule that the Offer is not a sanctioned offer within the meaning of Order 22. 10.It follows that the plaintiffs are not entitled to rely on Order 22, rule 24 for their respective application for enhanced interest on the judgment sum, and indemnity costs with enhanced interest. Other than the specific provisions in rule 24, the court does not have any power to award enhanced interest on either the judgment sum or costs. Accordingly, those parts of the plaintiffs’ applications must fail. 11.What remains is the plaintiffs’ application for indemnity costs from 9 November 2009 onwards. 12.If the Offer constitutes a Calderbank offer, then subject to Order 62, rule 5(d), Rules of the High Court, the court may still take that into account when considering costs. That is what Saunders J did in Kwok Chin Wing when he ruled that the offer by the plaintiff was a Calderbank offer. Now, a valid Calderbank offer must be expressed to be “without prejudice save as to costs”. Unfortunately, as the Offer does not expressly say so, it is therefore not a valid Calderbank offer. That is, however, not the end of the matter. For it remains very much an open offer to settle. The question is whether the court can take it into account in exercising its jurisdiction as to costs. 13.Under Order 62, rule 5(d) :
14.Mr Pun, for the defendant, submitted that since the plaintiffs could have protected their position as to costs by means of a sanctioned offer, the exclusionary rule in rule 5(d) bites and prevents the court from taking into account the Offer in considering costs. Mr Li, for the plaintiffs, submitted that the exclusionary rule in rule 5(d) does not apply to an open offer : Ming An Insurance Co (HK) Ltd v Ritz‑Carlton Ltd (No 3) (2009) 12 HKCFAR 745, per Ribeiro PJ at para 18. 15.In my view, whether the exclusionary rule applies depends on the proper interpretation of rule 5(d). Plainly, rule 5(d) only applies to a written offer expressed to be “without prejudice save as to costs”. The policy becomes apparent when one goes back to the legislative history of rule 5(d), which was amended when the CJR was introduced. 16.The former Order 62, rule 5(d) provided :
It was an echo of the former Order 22, rule 14, which read :
The old Order 22 in effect codified and extended the procedure approved by the English Court of Appeal in Calderbank v Calderbank [1976] Fam 93. 17.The rationale behind the old Order 62, rule 5(d) is this. 18.Under the pre‑CJR regime, where the action was for a debt or damages, a defendant could make a payment into court for the purpose of settling a monetary claim against him. He might also make a Calderbank offer if his costs protection could not be achieved by payment into court. In the former scenario, he could only protect his costs position by making a payment into court. A Calderbank offer would not do under the old Order 62, rule 5(d). As explained by Ribeiro PJ in Ming An Insurance Co (HK) Ltd, supra, a pre‑CJR decision :
19.Order 22 was revamped when CJR was introduced. Now is not the occasion to give a detail analysis of the new Order 22. It is simply unnecessary to do so for present purposes. Briefly stated, the new Order 22 introduces the new concepts of sanctioned offers and sanctioned payments. Parts of the new measures allow, for the first time, a plaintiff to make a sanctioned offer of settlement. 20.The policy behind is, as I have observed above, to encourage the parties to take positive settlement seriously and to avoid unproductive and expensive prolongation of the litigation, resulting in more early settlements. A party who wishes to invoke the costs saving mechanism in Order 22 must either make a sanctioned offer or sanctioned payment as mandated by the relevant provisions. When a valid sanctioned offer or sanctioned payment has been made, the court will apply Order 22 in exercising its discretion as to costs. 21.The new Order 22 is a self‑contained statutory procedure for settlement. It is complete in its own right and by itself without the need to have recourse to other measures. Effectively, the need to resort to a Calderbank offer has been largely obviated. See Hong Kong Civil Procedure 2012, Vol 1, para 22/1/A at p 481. 22.However, the new Order 22 does not prevent a party from making a Calderbank offer. If he does, it is only just and reasonable for the court to take that offer into account in the exercise of its jurisdiction as to costs. Accordingly, it is necessary to retain the discretion in the old Order 62, rule 5(d) with the necessary modification to enable the court to take the Calderbank offer into account in exercising its jurisdiction as to costs. 23.That said, the new Order 22 is now the principal procedure for settlement, which the parties should follow. If a party, who should have made either a sanctioned payment or sanctioned offer under Order 22, is able to rely on a Calderbank offer that he made to protect his costs position, he may have less or even no incentive to follow Order 22. That would defeat the purpose of introducing the new regime of Order 22. It is therefore necessary to retain the exclusionary rule in the old rule 5(d), again with the necessary modification, to direct the court to disregard the Calderbank offer if the party making it could have protected his costs position by means of a sanctioned payment or a sanctioned offer under Order 22. 24.The above considerations explain why Order 62, rule 5(d) is couched in its current form. 25.Other than a sanctioned payment or sanctioned offer under Order 22 and a Calderbank offer, a party may offer to settle by means of an open offer. In the pre‑CJR era, the exclusionary rule in the old Order 62, rule 5(d) was held to be inapplicable and the court was entitled to take the open offer into account when exercising its jurisdiction as to costs : Ming An Insurance Co (HK) Ltd, supra, at para 18. 26.The same must be true in the post‑CJR age under the current Order 62, rule 5(d). As I have already demonstrated, on a proper reading, rule 5(d) only applies to an offer expressed to be “without prejudice save as to costs”. It must follow that it has no application to an open offer. Further, allowing the court to take into account the open offer when considering costs will place some legitimate pressure on the offeree, in the form of possible adverse costs consequences, to accept a reasonable offer of settlement and to bring the proceedings to an early end. That is entirely consistent with one of the principal aims of the CJR, that is, to facilitate and promote fair and reasonable settlement as early as possible. 27.For the above reasons, I hold that the exclusionary rule in Order 62, rule 5(d) does not apply to the Offer. I will take it into account in exercising my discretion as to costs. 28.In my view, the defendant ought reasonably to have accepted the Offer on or before 9 November 2009. His failure to do so had unnecessarily protracted the litigation and unreasonably forced the plaintiffs to go to trial. His conduct is wholly unjustified. He should be penalized by an indemnity costs to mark the court’s strong disapproval. 29.Mr Pun submitted that unnecessary costs had been incurred for the hearings before the master and Sakhrani J for requesting Mr Ivan Ho, the joint expert appointed by the parties, to testify in court and his actual attendance, an enhanced award of costs to the plaintiffs is not justified. The overall justice would be done by ordering costs on a party and party basis. 30.Mr Ho had prepared several reports for the trial. The plaintiffs wished to cross‑examine him on three questions relating to the gross floor area of the suit premises. They took out a summons dated 6 March 2010 for leave to do so. The master adjourned the summons, which was heard by Sakhrani J at the case management conference on 21 September 2010. Mr Pun indicated to the judge that he had no objection to the application. At the pre‑trial review before me on 26 July 2011, Mr Pun asked leave to examine Mr Ho on matters arising from the cross‑examination by the plaintiffs. I granted him leave to do so. At the trial, Mr Ho was called as the first witness. His evidence lasted for about an hour. 31.In my view, what Mr Pun did at the case management conference and at the pre‑trial review is inconsistent with his submission in paragraph 29 above, which I reject. Conclusion 32.For the above reasons, I vary the costs order nisi to the extent that the defendant do pay the plaintiffs costs of the entire action, including all costs reserved; that the costs incurred before and up to 9 November 2009 are to be taxed on a party and party basis, if not agreed; and that the costs incurred after 9 November 2009 are to be taxed on an indemnity basis, if not agreed.
Mr Li Chau Yuen instructed by Winston Chu & Co, for the plaintiffs Mr Chase Pun, instructed by Mike So, Joseph Lau & Co, for the defendant | ||||||||||||||||||||||||||
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