CHOW SUI TAK AND ANOTHER v. CHOW SUI HEI AND ANOTHER

HCA 1287/2018

[2025] HKCFI 857

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1287 OF 2018

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D E C I S I O N

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1.  On 25 November 2024, I gave judgment for the Plaintiffs against the 1^st Defendant (“Hei”) for HK$1,245,000 (“Judgment”). I made a costs order nisi that Hei pays 75% of the costs of the proceedings, including all costs reserved, to the Plaintiffs, to be taxed if not agreed. The Plaintiffs have applied by summons dated 9 December 2024 for a variation. After hearing submissions, I reserved my decision. This is my decision.

2.  The Plaintiffs seek the follow variation:

(1)  Hei pays 75% of the costs of these proceedings, including all costs reserved, incurred up to 6 February 2023 to the 1^st and 2^nd Plaintiffs, with certificate for two counsel, to be taxed on a party and party basis if not agreed.

(2)  Hei pays 90% of the costs of these proceedings, including all costs reserved, incurred from 7 February 2023 to 28 April 2023 to the 1^st and 2^nd Plaintiffs, with certificate for two counsel, to be taxed on a party and party basis if not agreed.

(3)  Hei pays 90% of the costs of these proceedings, including all costs reserved, incurred from 29 April 2023 onwards to the 1^st and 2^nd Plaintiffs, with certificate for two counsel, to be taxed on an indemnity basis if not agreed.

(4)  Interest on costs incurred from 29 April 2023 to the date of judgment shall be at the rate of 4% above the judgment rate and thereafter at judgment rate until payment.

3.  At the outset, I should explain the rationale behind the costs order nisi. I took the view that the Plaintiffs should only be entitled to 75% of their costs. As indicated in the Judgment, this was in light of the following major considerations.[1] First, it was appropriate to deprive the winning party 10% of its costs due to the failure to fix a proper trial length. Second, Hei was partially successful in his counterclaim. Third, the damages awarded were substantially less than what the Plaintiffs claimed in the proceedings. The latter consideration was particularly relevant since there was a significant amount of time at trial – both in terms of evidence and submissions – devoted to the quantum issue. I took these matters in the round in reaching the view that the Plaintiffs should be only entitled to 75% of their costs despite their success at trial.

4.  The Plaintiffs have fairly accepted that they do not challenge the 10% deprivation of costs due to the trial length issue. Moreover, they have not taken issue with the other considerations mentioned above. Instead, the primary basis on which the variation is sought are settlement offers made before judgment. On behalf of the Plaintiffs, Ms Mok submits that the offers were more advantageous to Hei than the outcome of the Judgment, and ought to have been accepted thereby saving time, costs and judicial resources. The Plaintiffs place particular reliance on (i) the Calderbank offer made by the Plaintiffs dated 20 January 2023 (“20 January 2023 Offer”) and (ii) a letter described as a ‘Sanctioned Offer’ made by the Plaintiffs on 31 March 2023 (“31 March 2023 Offer”).

5.  Under the 20 January 2023 Offer, the Plaintiffs proposed to settle for HK$500,000 with no order as to costs. The HK$500,000 was taken to be the value of the goods which were disposed of, and upon payment, the offer proposed a discontinuance of all claims by the parties.[2] This offer was not accepted and the matter then proceeded to trial.

6.  This action was fixed for trial before me together with HCA 2925/2017 (“the 2017 Action”) with the first day being 21 March 2023.[3] The first matter dealt with that day was to determine whether the two actions should be heard together at the same time, or whether the 2017 Action should be heard first followed by this action (“the 2018 Action”). After hearing submissions by trial counsel, I directed that the two actions be tried one immediately after the other starting with the 2017 Action.[4]

7.  The matter was adjourned part-heard on 28 March 2023 in the midst of the evidence in the 2017 Action. I have explained the state of affairs which led to this adjournment in the Judgment. The trial resumed on 1 August 2023, and the evidence in the 2017 Action resumed. The Plaintiffs opened their case in the 2018 Action on 7 August 2023, and the case proceeded afterwards in the normal way.

8.  In the meantime, the Plaintiffs made the 31 March 2023 Offer. This offer was made after the trial was adjourned part-heard, and in the middle of the evidence being received in the 2017 Action. It was described as a “Sanctioned Offer” purporting to comply with the requirements in RHC Order 22, rule 5. The offer was that the Defendants should accept liability up to HK$300,000, which would include a settlement of the whole of the claims of both parties, interest and costs. The basis of the offer was that the trial of the 2018 Action had yet to commence, as evidenced by the Plaintiffs’ reliance on RHC Order 22, rule 5(7) in the offer and the imposition of a 28-day window for it to be accepted without leave.

9.  After hearing submissions from the parties, I do not consider that the 31 March 2023 Offer qualifies as a valid sanctioned offer under RHC Order 22. This is for two principal reasons.

10.  First, it proceeds on the basis that the trial of the 2018 Action had yet to commence. Ms Mok argues that this is the case in light of my order that the 2018 Action be tried immediately after the 2017 Action. She relies on the fact that the Plaintiffs only opened their case in the 2018 Action on 7 August 2023. Therefore, it was contended that the 31 March 2023 Offer was made well before the commencement of trial of the 2018 Action.

11.  I am unable to accept these submissions. In my judgment, the trial of both actions commenced on 21 March 2023. All parties filed opening submissions in both actions, including submissions on law and evidence, which the court considered before 21 March 2023. This was part of the trial process which formally commenced on that day. Moreover, the evidence in the 2017 Action was admissible in the 2018 Action. In this regard, Ms Leung drew attention to the fact that my findings of Tak’s credibility in the 2017 Action were taken into account in my evaluation of his evidence in the 2018 Action.[5] Further, my order as to the sequence of trial was made as the trial judge of both actions, and is predicated on the fact that I was seized of both sets of proceedings at trial when that order was made on 21 March 2023. Overall, I do not think it can be fairly be said that the trial of the 2018 Action only commenced on 7 August 2023.

12.  The second reason is that the 31 March 2023 Offer was made inclusive of costs. The offer was for the Defendants to accept liability up to a sum of HK$300,000, and that this included “costs incurred as of the date of the offer”. After this was pointed out by Ms Leung in her written argument, Ms Mok responded in oral submissions that this was an offer by the Plaintiffs. I understood her argument to mean that the Plaintiffs could, if they so wished, voluntarily give up their automatic entitlement to costs if the offer was accepted. It was suggested that this distinguished the case from a purported sanctioned offer made by a defendant. However, this argument has been raised before and squarely rejected (Choi Tak Man v Chan Yuk Lan Didi [2017] HKLRD 619 at [21]), and no good reason was advanced to me to justify a departure from what was decided in that case.

13.  Accordingly, for the reasons I have explained above, I do not accept that the 31 March 2023 Offer constituted a Sanctioned Offer under RHC Order 22. It follows that there is no basis to ask for indemnity costs or interest on costs, as contended for by the Plaintiffs in this application.

14.  I turn to consider the 20 January 2023 Offer. In hindsight, and bearing in mind the outcome of the Judgment, it was a sensible offer seeking to dispose of the matter with no order as to costs, and a payment of a modest sum of HK$500,000 to dispose of all claims. What then, is the impact, that it should have, if any, as to the costs of these proceedings?

15.  At the hearing, I drew attention to RHC Order 62, rule 5(1)(d) which states that the Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account:

“any written offer which is expressed to be “without prejudice save as to costs” and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22” (emphasis added).

16.  At the hearing, I inquired whether the Court was entitled to take into account the 20 January 2023 Offer in light of the exclusionary rule prohibiting the court from doing so if the party making it could have protected his position as to costs by means of a sanctioned offer under Order 22. Ms Leung fairly accepted that the court was entitled to consider the terms of this offer under RHC Order 62, rule 5.

17.  For present purposes, I will assume without deciding that I am entitled to take into account the 20 January 2023 Offer in the exercise of my discretion as to costs. It is true that the offer, if accepted, would have been more favourable to Hei than what is provided for in the Judgment.

18.  However, the terms of the variation sought by the Plaintiffs need to be borne in mind. Under the costs order nisi, the Plaintiffs are already entitled to 75% of the costs of these proceedings, and there has been no challenge to the basis on which they should be deprived of 25% of their costs. See [3]-[4] above. In other words, the Plaintiffs are entitled to full recovery of their costs on a party and party basis except for the proportion of costs which I have found it appropriate to deprive them of. Viewed in this light, I am unable to see how the non-acceptance of the 20 January 2023 Offer by Hei justifies the Plaintiffs to receive 90% of their costs incurred in these proceedings. This would amount to an effective reversal of the deprivation of costs for the reasons outlined at [3] above. At the end of the day, it may have been unwise for Hei not to have accepted the offer. However, the Plaintiffs are already receiving full recovery of their costs incurred on a party and party basis, except for the 25% deprivation against which there is no challenge. For these reasons, I am unable to agree that the rejection of the 20 January 2023 Offer by Hei justifies a variation of the costs order nisi in the manner sought by the Plaintiffs in their summons of 9 December 2024.

19.  In the same vein, I do not consider that the 31 March 2023 Offer takes the case of the Plaintiffs any further even if the Court could have regard to it as an ordinary settlement offer.

20.  It was agreed that certificate for two counsel should be provided for in the costs order. I will vary the costs order nisi only to the extent of providing for certificate for two counsel and the Plaintiffs’ summons of 9 December 2024 is otherwise dismissed, with costs of the application to vary payable by the Plaintiffs to Hei to be taxed if not agreed.