WEALTH HONEST LTD v. HUISHANG BANK CORPORATION LTD

HCMP 971/2018

[2020] HKCFI 577

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 971 OF 2018

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DECISION

1.  This is the Plaintiff’s application for variation of the costs order nisi I made against the Plaintiff on 5 December 2019 upon taxation of the Defendant’s costs in the Plaintiff’s failed injunction application. By consent, the application is dealt with on the papers.

2.  Before commencement of taxation proceedings, the parties had engaged in without prejudice communication on costs.  By its letters of 18 September 2018 and 18 October 2018, the Defendant’s solicitors (“LW”) offered to accept HK$2,220,395.26 and provided a draft breakdown comprising two sections only, one for profit costs and the other for disbursements (“Breakdown”). 

3.  By its letter of 28 November 2018 marked “WITHOUT PREJUDICE SAVE AS TO COSTS OF TAXATION”, the Plaintiff’s solicitors (“SWC”) commented by way of a 5-page table on 43 items of the Breakdown, criticized the excessiveness of the Defendant’s costs and then offered a lump sum of HK$450,000 in full and final settlement of the Defendant’s costs (“Costs Offer”).   SWC required LW to reply by 4 December 2018 failing which the Costs Offer would lapse automatically. 

4.  LW did not write back until 11 December 2018, when the Costs Offer had automatically lapsed, indicating that they were still taking instructions on the Costs Offer.  SWC did not respond to the holding letter.  Nor did LW follow up by a substantive reply before commencing taxation proceedings claiming slightly over HK$1.4 million covering profit costs, disbursements and costs of taxation.

5.  Upon taxation, I taxed down the Defendant’s costs and disbursements to HK$335,097, allowed its costs of taxation at HK$88,400 (with the taxing fee subsequently calculated at HK$17,205) and ordered the Plaintiff to pay the Defendant’s costs of taxation and the taxing fee.

6.  The Plaintiff now seeks a variation of the costs order nisi so that the Defendant shall pay the Plaintiff’s costs in the taxation proceedings after the making of the Costs Offer and the Plaintiff shall not be liable for the Defendant’s costs of taxation and the taxing fee. 

7.  In opposition, the Defendant first contends that the Costs Offer was not valid or effective as it was not itemized or particularized, relying on Tso Wing Yu Anita v Lau Siu Fan [1998] 2 HKC 286 and Lam Chi Sheung v Kin Wah Engineering Co & Ors (HCPI 596/1997) unrep., Cheung J (as he then was), 2 June 2000.  In particular, the Defendant relies on Barnett J’s holding in the former case that for a proper Calderbank offer “…to be effective, the offer must be divided at least into offers for profit costs, counsel’s fees, and other disbursements.  It may well be that the particular circumstances of a case will call for further divisions.”

8.  I agree with the Plaintiff’s submission that the Defendant has taken the above out of context when the said two cases concerned legally aided parties and the itemization requirement was imposed to facilitate consideration of a Calderbank offer in cases involving legal aid.  Indeed, Barnett J merely referred to difficulties inherent in a lump sum offer without saying that a lump sum offer would not qualify as a Calderbank offer.   

9.  While itemization would help to eliminate the difficulties inherent in a lump sum offer which may arise when it falls for consideration as to whether the offer is beaten, the absence thereof would not necessarily disqualify what would otherwise qualify as a Calderbank offer.  Rather, I subscribe to the view that an offer would qualify as a Calderbank offer if it is a genuine and serious offer couched in sufficiently clear terms, stated to be without prejudice save as to costs (or costs of taxation) and giving the offeree a reasonable time for acceptance.  What is a reasonable time depends on the circumstances of each case.  See Wong Yik Po & Ors v Director of Lands [1996] 1 HKC at 593H to 594B citing Brandon J’s observation in The Salaverry [1968] 1 Lloyd’s Rep 53 at 68.

10.  In any event, the lump sum offer here is preceded by detailed comments, with counter proposals where appropriate, on individual cost and disbursement items in the Breakdown akin to a list of objections in taxation proceedings, the majority of which questioning the reasonableness of quantum.  Even if itemization is a prerequisite as contended by the Defendant, the absence of itemization of the lump sum offer here would not in the circumstances disqualify the offer from being a Calderbank offer.  Nor do I see any basis for the Defendant’s criticism that the Costs Offer was not a serious one.

11.  There is, however, problem with the period of time the Defendant was allowed to consider the offer and respond.  From 28 November 2018 to 4 December 2018, the Plaintiff says the Defendant was given 7 days to consider the Costs Offer.  In fact, the 7-day period straddled a weekend so that the Defendant was in effect given no more than 4 (or at most 4.5) working days (counting from the date of the offer) to properly consider the comments and counter-proposals contained in the 5-page table, take instructions and respond, not to mention the possible need for procuring input from a professional law costs draftsman in the meantime.   

12.  As pointed out by the Defendant, it was the Plaintiff’s first settlement proposal in respect of a considerable sum of costs in dispute, a great portion of which would have to be forgone if the offer was accepted.  The Plaintiff had taken more than 5 weeks after 18 October 2018 to come up with a costs offer at a time when the Defendant had yet to commence taxation proceedings.  SWC gave no reason for imposing a tight deadline and I can see none. 

13.  That LW gave only a holding reply 7 days after the Costs Offer had lapsed may go some way to show a meaningful response would take more than 7 days or 4.5 working days in the present circumstances.  That LW did not follow up by any substantive reply is neither here nor there.  At issue is the reasonableness of the period for acceptance of an offer.

14.  In the circumstances, I find the Plaintiff to have failed to give a reasonable time for the Defendant to consider accepting the Costs Offer without taxation and would exclude the same from my consideration.  The costs order nisi would therefore stand and the Plaintiff’s application must be dismissed.

15.  The Defendant further points out the absence of any subsequent settlement offer from or sanctioned payment by the Plaintiff after commencement of and during taxation proceedings and argues that the Plaintiff should have made a sanctioned payment under Order 62A, Rules of the High Court to protect its position on costs.  Reliance is placed on Park Avenue Toys Ltd v Candy Novelty Works Ltd [2005] 1 HKLRD 372.

16.  Suffice it to say that I agree with the Plaintiff that Order 62A does not oblige a paying party to make a sanctioned payment and instead allows non-compliant costs offers to be made and to be taken into consideration by the court when deciding on issues of costs and that Park Avenue was decided on its own facts and is readily distinguishable. 

17.  The Plaintiff’s list of objections filed in the taxation proceedings would produce a figure way lower than the allowed costs but I would not describe the same as amounting to unreasonable conduct on the Plaintiff’s part as contended by the Defendant for the present purpose.

18.  The Defendant also argues that the taxed costs exceed the Costs Offer when accrued interests, costs of taxation and taxing fee are taken into account so that the Costs Offer was beaten by the taxed costs.  Given my ruling above, I need only address this argument by noting my agreement with the Plaintiff’s submission in reliance on Singh Gorinder Bal v Chan Nga Kai [2011] 3 HKC 411 (in which taxation proceedings had already commenced and the only issue was whether to exclude taxing fee from the calculation) that a costs proposal made prior to commencement of taxation would not include an offer for costs of taxation (including taxing fee).  As Recorder A Chow SC (as he then was) said in Singh at paragraph 36,

“it would be artificial to take into account the taxing fee when considering whether a Calderbank offer has or has not been beaten in a case where no taxing fee has been paid as at the time of the offer and the parties can reasonably contemplate that no taxing fee would be payable in the event of the offer being accepted, thereby avoiding the need for any taxation. Thus, I consider that the taxing fee should not be taken into account when considering whether the Plaintiff has beaten the Defendant’s offers…”

  (emphasis added)

19.  I agree with the Plaintiff that the same reasoning for exclusion of taxing fee should equally apply to costs of taxation.  Indeed, the Breakdown itself does not include any costs of taxation.  The Defendant’s argument would necessarily fail when its costs of taxation (and the taxing fee) are excluded from the calculation.  I do not propose to deal with the Defendant’s argument on calculation of interests for the present purpose save to say I do not consider the same to be sound, and even if otherwise, it would not salvage the position.

20.  In conclusion, the Plaintiff’s summons is dismissed with costs to the Defendant, to be summarily assessed if not agreed in 28 days.