FLYING FINANCIAL SERVICES HOLDINGS LTD v. MESSRS. CHIU & PARTNERS

HCMP 130/2022

[2026] HKCFI 5193

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 130 OF 2022

____________

____________

____________

_____________

D E C I S I O N

______________

A. INTRODUCTION

1.  On 10 April 2026, this Court handed down judgment (“the Judgment”) ordering, amongst others, (a) taxation of Bills No. 1‑5 upon Flying Financial’s interim payment of HK$340,000 into Court; and (b) that Flying Financial do pay HK$682,528 to Chiu & Partners for unpaid retainer fees.  This Court made an order nisi that costs of the OS be to Flying Financial, summarily assessed at HK$250,000 (“the Costs Order Nisi”).

2.  This is a Summons taken out by Chiu & Partners for a variation of the Costs Order Nisi such that:

(1)  Costs of the OS until 1 November 2023 be to Flying Financial, summarily assessed at HK$60,000, after which each party is to bear their own costs; or

(2)  Costs of the OS be to Flying Financial, summarily assessed at HK$100,000.

3.  Chiu & Partners rely on 2 particular matters to ground this application:

(1)  Flying Financial’s delay in prosecution of the OS; and

(2)  Flying Financial’s refusal to accept Chiu & Partners’ Calderbank offer (“the Offer”) dated 1 November 2023 and other Calderbank communications.

4.  On the other hand, Flying Financial claims that Chiu & Partners were equally guilty of delay and that the refusal of the Offer was not unreasonable due to lack of particulars.

B.   LEGAL PRINCIPLES

5.  Costs are in the discretion of the Court.  In exercising its discretion, the Court may take into account a host of matters including the underlying objectives in O.1A, r.1 of the Rules of the High Court (Cap. 4A) (“RHC”), the conduct of the parties under O.62, r.5, and a Calderbank offer.

6.  A Calderbank offer is not a sanctioned offer and attracts no automatic costs consequence under O.22, r.24; it is a matter that the Court may take into account under O.62, r.5(1)(d): Tang Qiong v Zhang Ting Ting [2026] HKCFI 2499, DHCJ Jonathan Chang SC, §3.

7.  The Court may not take a Calderbank offer into account if, at the time it was made, the maker could have protected his position as to costs under the O.22 regime (“the Exclusionary Rule”): O.62, r.5(1)(d).

8.  The weight (if any) that a settlement offer carries turns on the reasonableness of its terms.  An offer insisting on terms the offeree could not reasonably be expected to accept carries little weight:  An offer requiring unpleaded relief was held not to be reasonable to insist upon: Tong Qiong, §6.

9.  Whether the offeree acted unreasonably in declining should be judged at the time of the offer, on the information then available to it.

10.  Failure to beat a favourable settlement offer can attract an order of indemnity costs: Bright Gold Ltd v Mega Well Development Ltd [2019] 3 HKLRD 868, A. Chan J (as he then was), §13.

C.   DELAY IN PROSECUTION OF THE OS

11.  Chiu & Partners submit that unjustified delays can be visited with a stringent costs order: Wing Fai Construction Co Ltd v Yip Kwong Robert (2011) 14 HKCFAR 935, §71, per Ma CJ.  With respect, that case was decided in the context of an interlocutory application to strike out for want of prosecution.  It does not apply to the present case where the Court has to decide on the question of costs after ruling on liability under an OS.

12.  On the other hand, there was significant delay of Flying Financial in bringing the OS to a substantive hearing (about 5 years since Bill No. 1 was rendered).  This was recognized in §36 of the Judgment.  After the first call-over hearing on 1 March 2022, Flying Financial had taken no substantive steps in the OS other than to amend the OS and pay HK$360,000 into Court pursuant to Master D. To’s order, until December 2024.  That was already over 2 years since the OS was filed.

13.  Chiu & Partners issued multiple chasers urging Flying Financial to file an affirmation in reply and/or to fix a date for hearing, but met with no substantive response from Flying Financial.

14.  Mr Sunny Chan, counsel for Flying Financial, submits that the issue of delay is not new but the Court has taken it into account at §36 of the Judgment.  He submits that Chiu & Partners was equally guilty of delay and could have proceeded to fix the date or applied for dismissal of the OS for want of prosecution.  The payment of HK$360,000 into Court could have mitigated the cash flow consequences or any prejudice arising from the delay. 

15.  I am unable to accept this submission.  The discussion in respect of delay in §36 of the Judgment was in the context of interim payment but not of costs of the OS.

16.  Further, the justification for the delay given by Flying Financial was that there was no one in its current management which had sufficient knowledge to make a reply affirmation.  That was an internal matter of Flying Financial and not an excuse for it not to proceed with the OS.

17.  Still less could the delay be laid at the door of Chiu & Partners, who had exhibited patience and indulgence in making various offers to settle in order to avoid a hearing for an order to tax.  The payment into Court could not have mitigated their cash flow consequences.  Chiu & Partners were the party who stood to lose from the delay.

18.  However, the delay of Flying Financial is more relevant to cutting down interests to be borne by Chiu & Partners over costs (not sought), but not the costs entitlement of any party.

D.   FAILURE OF FLYING FINANCIAL TO ACCEPT THE OFFER

19.  The chain of without prejudice correspondence is summarized as follows:

Table 1

Date	Event
22.08.2023	Chiu & Partners demanded for HK$1,816,098 in full and final settlement (including 80% of hourly rated work).
12.09.2023	Flying Financial requested for itemized bills of costs.
01.11.2023 (The Offer)	Chiu & Partners declined itemized bill. Proposed HK$675,000 forthwith and the remaining sum of HK$1,416,963 to be taxed; 7 days to accept.
08.11.2023	Flying Financial sought clarification, including the security paid into Court.
09.11.2023	Chiu & Partners clarified: HK$360,000 already paid into Court may not be applied. The Offer was “without prejudice to [Chiu & Partners’] position that the application for taxation of our bill no. 20-0497A [Bill No. 1] … shall be dismissed”. Bill No. 1 full and final payment at HK$495,810 (i.e. HK$360,000 paid out to Chiu & Partners + HK$135,810 in 14 days); taxation of Bill No. 1 be dismissed. Acceptance by noon on 13 November 2023.
19.09.2024	Further proposal: Bill No. 1 full and final payment at HK$495,810 (no taxation). HK$675,000 payable. HK$600,000 be paid into Court. Taxation of HK$860,776 only.

20.  I agree with Mr Yau, counsel for Chiu & Partners, that acceptance of the Offer could not have the proceedings stayed but still required the Court to grant an order for the Bills to be taxed.  Hence the Offer could not have been made by way of a sanctioned offer under O.22.  Rather, it should be considered as conduct under O.62, r.5(1).

21.  When considering whether a party has failed to beat or do better than a Calderbank offer, the Court should take into account the following factors peculiar to solicitor-client taxation cases:

1)  A solicitor-client taxation could end up with an order to tax with or without conditions, refusal of an order to tax and/or an order to pay a sum of money (by allocatur or otherwise). Whilst the offeror may try to rationalize the figures in his offer by reference to individual bills or items in a bill, the offeree must not overlook the overall terms offered in return for any of those orders. 

2)  A solicitor-client taxation usually involves a two-stage test of resolving issues of liability (most often before a judge) and taxation (before a taxing master) (§2 of the Judgment).  Whilst the parties may come to terms on seeking an order to tax, the Court should still ascertain if the issues in Stage 1 have been resolved before the order to tax for Stage 2 can be made. The Court may decline to make an order in terms agreed upon by the parties, and direct a hearing to complete Stage 1 first.

22.  Flying Financial submits that, properly understood, the comparison between the offers and the Judgment is as follows:

Table 2

		Offer as clarified by Chiu & Partners	Judgment (§43)
1.	Taxation of Bill No. 1	No taxation; full and final payment at HK$495,810	Order to tax this Bill in full
2.	HK$360,000 in Court	Paid out to Chiu & Partners forthwith	Retained in Court pending taxation
3.	Cash payable by Flying Financial forthwith	HK$810,810 (i.e. HK$675,000 +HK$135,810)	HK$682,528
4.	Further payment into Court	Nil	HK$340,000 as security, interest bearing
5.	Hourly fees under Bill No. 1 (HK$339,525)	Settled at a discount, without scrutiny	Taxed, the Court having found a “real prospect” of duplication and overcharging (§32)

23.  Mr Chan, submits that:

1)  HK$340,000 was not a payment to Chiu & Partners but security pending taxation.  The two are not the same thing;

2)  Taxation for a larger sum is not a larger benefit.  Of the HK$1,416,963 sent to taxation, HK$224,190 comprised agreed fees and disbursements in Bill No. 1, which Flying Financial never disputed owing.  Taxing undisputed fees serves no purpose.  What mattered was scrutiny of the hourly fees.  The Judgment ordered taxation on all 5 Bills; and

3)  The refusal itself was not unreasonable.  Flying Financial had asked for itemized bills, but Chiu & Partners refused.

24.  Mr Chan points out that Flying Financial was asked to settle some HK$2.1 million in disputed Bills, within 7 days, without particulars that it had sought.  The missing particulars were the very matter that the Court later held to constitute special circumstances justifying taxation (§§29-32, 41 of the Judgment).

25.  I do not entirely agree with Mr Chan.  This sort of comparison in Table 2 overlooks the overall picture in the Offer compared to the Judgment.  The “cause” of the OS was an order to tax all 5 Bills, which Flying Financial got only upon (a) stringent conditions of having to pay more cash than stated in the Offer; and (b) provision of further security which the Offer did not seek. 

26.  The lack of particulars was not due to the making of Chiu & Partners but the change of management in Flying Financial.  Flying Financial had not sought an order from the Court for an itemized Bills.  Even so, it was still unreasonable for Flying Financial not to accept the Offer or make a lesser counter offer for the retainer fees that were indisputably due (§38 of the Judgment).

27.  The Offer would have enabled Flying Financial to tax more costs than the Judgment ordered.

28.  I find that Flying Financial had not beaten the Offer.  In principle, costs after the date of the Offer should have been to Chiu & Partners.

29.  Be that as it may, a hearing for Stage 1 was inevitable even if the Offer had been accepted.  Of the 4 issues identified in §9 of the Judgment, Chiu & Partners succeeded on the 1^st (authorization issue) and 4^th (interim payment issue).  In my view, there should be no order as to costs for the hearing.

30.  The variation of the costs suggested by Chiu & Partners was just and fair as recognizing that Flying Financial had to come to Court in order to be able to get an order to tax in the light of Chiu & Partners’ fervent opposition but with stringent conditions imposed in the end.

E.   QUANTUM OF COSTS FOR THE OS LEADING UP TO THE ORDER TO TAX

31.  The statement of costs from Flying Financial did not segregate the costs into the pre- and post-1 November 2023 period.  However, taking a broad-brush approach, I agree with footnote 1 in the affirmation of Leung Wai Sin, assistant solicitor of Chiu & Partners.  If the Offer had been accepted, the substantive work that had to be done by Flying Financial before 1 November 2023 was the drafting of the OS and supporting affirmation, perusal of Chiu & Partners’ affirmation in opposition, first call-over and some correspondence.  No reply affirmation would have been necessary. 

32.  Mr Yau comments that the time claimed for preparation of documents by a solicitor of over 20 years’ standing was excessive.  I do not agree.  In terms of hourly rate, that solicitor only charged HK$5,800 per hour.  The number of hours is a matter of discretion of this Court, having regard to the nature of work done.

33.  Taking a broad-brush approach, I hold that the costs to be paid by Chiu & Partners to Flying Financial for the OS, up to and including 1 November 2023 should be reduced to HK$80,000.  The costs order nisi is thus varied accordingly.

F.   COSTS OF THIS SUMMONS

34.  Chiu & Partners have substantially succeeded in this Summons.  Costs should follow the event and be to them summarily assessed at HK$50,000.

35.  The costs in paragraphs 33 and 34 shall be set off against each other.

36.  Practitioners are reminded that written submissions should not exceed the number of pages directed by the Court without prior approval.  Lodging a set of submission of over 7 pages, when the Court only directed 5, is 50% in excess and cannot be justified, although I have to say that the quality of submissions of counsel has remained high.  If Flying Financial were to succeed in the present summons, I would have cut down their costs recoverable due to failure to abide by the directions.

37.  I thank counsel for their assistance.