TSANG WOON MING v. TSAN HING TAT HEIDI AND OTHERS

CACV 18/2022, [2024] HKCA 320

ON APPEAL FROM [2021] HKDC 482

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 18 OF 2022

(ON APPEAL FROM DCCJ NO. 3791 of 2016)

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Decision on Variation of Costs

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Hon Cheung JA (giving the Decision of the Court) :

1.  The defendants apply to vary the costs order of our judgment of 4 December 2023. The defendants ask for a higher basis of taxation, namely either indemnity or common fund taxation and they also ask the Court to certify that the appeal is fit for two counsel.

2.  In essence the defendants submit that before the trial in the Court below, they had made a Calderbank offer in which they would pay the plaintiff $380,000 for the plaintiff to move out of the property and for both parties to withdraw their respective claims.  As it happened the plaintiff failed in his claim and the defendants succeeded in their counterclaim.  The Court below upon being apprised of the Calderbank offer, ordered the plaintiff to pay 90% of the defendants’ costs of the action on a party and party basis up to 12 June 2020 (being the date of the plaintiff’s rejection of the Calderbank offer) and on a common fund basis from 13 June 2020 onwards.  The defendants argue that as the plaintiff had failed in his appeal, he has continued to fail to beat the Calderbank offer and therefore he should be ordered to pay the defendants’ costs of the appeal on a higher basis.

3.  Order 22 of the Rules of the High Court contains provisions for sanctioned offers and sanctioned payments. This Court (Cheung, Yuen and Kwan JJA) in Dah Sing Insurance Services Limited v Gill Gurbux Singh (unreported, CACV 255/2012, 27 April 2015), after referring to Ryder Industries Limited v Chan Shui Woo and Ryder Industries Limited v Timely Electronics Co Ltd, CACV 164/2013 and CACV 165/2013, 13 March 2015, summarised the position as follows :

‘ 45(1) The provisions as worded in Order 22 on their face suggest that the scheme for sanctioned offers would apply to trials only. This suggestion is bolstered by the absence from Order 22 of an express provision applying the statutory scheme to appeals before the Court of Appeal. ...

(2)  There is a line of cases of the Court of Appeal in which the court ordered the costs of the appeal to be on an indemnity basis on the basis that the losing party failed to accept a sanctioned offer in the proceedings below, and if that offer had been accepted, there would have been no trial and no appeals (MGA Entertainment Inc v Toys & Trends (Hong Kong) Ltd & Ors [2012] 5 HKC 372 at §73; Montrio Ltd & Anr v Tse Ping Shun David, CACV 291/2011, 31 January 2013, at §4; Sino Trifone Ltd v Fond Express Logistics Ltd & Anr and Kai Min Fashion (HK) Ltd v Fond Express Logistics Ltd & Anr, HCMP 2366/2012 and HCMP 2367/2012, 22 May 2013, at §16) (at §§31 to 33).

(3)  From the rules and the case law, the following general principles are derived :

(i)    A sanctioned offer made below does not entitle the party making it to invoke the provisions in Order 22 for the purpose of the appeal.

(ii)   In dealing with the costs below, by reason of the combined effect of Order 59 rule 10(1) and Order 22 rule 23, the Court of Appeal should take into account the sanctioned offer made below where appropriate, having regard to all the circumstances, including how the appeal is disposed of.

(iii)  In dealing with the costs of the appeal, the Court may take into account the sanctioned offer made below where appropriate, having regard to all the circumstances, including the result of the appeal (at §34).’ 

4.  This Court, however, went on to discuss the problem of relying on a spent offer made below :

‘ 46. Even though the court has clarified the law to some extent, there are still areas of uncertainty. The party who makes a sanctioned offer in the court below does not know if he could make an improved sanctioned offer for the purpose of the appeal. The party to whom a sanctioned offer is made below does not know if that offer is still on the table if judgment is given and the offeror appeals and makes no fresh offer. Further, unlike the situation where the jurisdiction under Order 22 rule 24 is engaged and the court “shall” make orders on enhanced interest, indemnity costs, and interest on costs “unless it considers it unjust to do so”, a sanctioned offer made below does not entitle a party to invoke those powers of the court in dealing with the costs of the appeal and it is left to the discretion of the court to take into account the sanctioned offer below where it is appropriate to do so. Uncertain factors like these are not conducive to a regime to encourage the settlement of proceedings on appeal.’ (emphasis added)

5.  It should be pointed out that the majority decision of the Court of Appeal in MGM Entertainment Inc was reversed by the Court of Final Appeal (2014) 17 HKCFAR 27 although there was no discussion on the indemnity costs order made by the Court of Appeal by reference to the sanctioned offer made before trial.  Hence the factual basis in MGM Entertainment Inc to make such an order no longer existed and the majority decision did not explain why a spent offer could be taken into account. None of the cases that followed MGM Entertainment Inc actually discussed why a sanctioned offer made below could be taken into account.  The Court in Dah Sing Insurance Services Limited was probably influenced by this line of cases beginning with MGM Entertainment Inc when it said the spent offer should be taken into account.

6.  In line with the concern expressed in Dah Sing Insurance Services Limited, we are unable to subscribe to the notion that a spent Calderbank offer made below is by itself a relevant factor for the Court’s consideration in its discretionary exercise on costs in terms of either the extent of the costs to be awarded or the basis of taxation. There are well established principles on how to safeguard a party’s position on costs in an appeal.  An example is CEP Ltd v. Wuxi Jiacheng Solar Energy Technology Ltd Co [2016] 1 HKLRD 960 where a Calderbank offer was made in respect of the appeal which was taken into account together with other factors when this Court ordered common fund taxation.  In this case no fresh Calderbank offer was made in respect of the appeal itself and we do not see how the defendants could continue to rely on the Calderbank offer made in the Court below which did not say that it was also effective in respect of the appeal as well.  In our view for the purpose of certainty, it is best to ignore the spent Calderbank offer that was made below.  In any event even if, for the purpose of argument, such a factor may be taken into account, we do not see anything in the plaintiff’s conduct of the appeal which would cause us to exercise our discretion to order a higher basis of taxation.

7.  We also do not see any reason to change our view that the case does not merit the granting of a certificate for two counsel.

8.  Accordingly the application is dismissed with costs to the plaintiff.  The plaintiff’s own costs are to be taxed according to the Legal Aid Regulations.