TSE SIU HOI v. LEE DICK GOLD AND JEWELLERY LTD

LDPE 1132/2014

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

APPLICATION NO. LDPE 1132 OF 2014

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DECISION ON COSTS
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Introduction

1.  This is an application by the applicant to vary the costs order nisi (“the Costs Order Nisi”) which I made on 27 August 2015 when I ordered in the applicant’s favour in that the respondent is not entitled to remain in possession of the Premises after 30 June 2014 as a lawful tenant.

2.  This case arose when the applicant claimed possession of the premises at Shop B, No 66 San Hong Street, Sheung Shui, New Territories (“the Premises”) when, according to the applicant, the tenancy agreement between the applicant’s predecessor in title and the respondent (“the 2012 agreement”) expired on 30 June 2014.

3.  On the other hand, the respondent submitted that the 2012 agreement contained an option to renew for another 2 years or alternatively the applicant was bound by such a renewal as a matter of law.

4.  Subsequent to a trial for two days, I handed down my judgment dated 27 August 2015 (“the Judgment”) ruling in favour of the applicant on all issues in dispute, ordering the respondent to deliver vacant possession of the Premises to the applicant, pay the applicant arrears of mesne profits at the rate of $67,500 per month from 1 October 2014 until delivery up of vacant possession and pay costs to the applicant on District Court scale.

5.  It is the case of the applicant that he had issued two letters dated 8 June 2015 which together comprise a sanctioned offer (“the Sanctioned Offer") which, inter alia, required:

(1) the respondent to deliver vacant possession of the Premises on or before 31 July 2015;

(2) the respondent to pay mesne profits to the applicant for occupation of the Premises from 1 October 2014 to 31 July 2015 at the sum of $67,480 per month; and

(3) there be no order as to costs between the applicant and the respondent, including all costs reserved and the costs of mediation and valuation.

6.  More particularly, by a summons issued on 8 September 2015, the applicant now requests this Tribunal to vary its order on costs on indemnity basis such that:

“The respondent do pay the applicant’s costs of the application to be taxed at District Court scale if not agreed with certificate for counsel. Furthermore, the respondent do pay the applicant’s costs on indemnity basis (with certificate for counsel) from 9 July 2015 onwards, to be taxed, if not agreed.”

Order 22, rule 24(3)& 24(4) RHC

7.  The applicant is relying on Order 22 rule 24 of the Rules of the High Court which provides that:

“(3) The Court may also order that the plaintiff is entitled to-

(a) his costs on the indemnity basis after the latest date on which the defendant could have accepted the offer without requiring the leave of the Court; and

(b) interest ……

(4) Where this rule applies, the Court shall make the orders referred to in paragraphs (2) and (3) unless it considers it unjust to do so.

(5) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3), the Court shall take into account all the circumstances of the case including-

(a) the terms of any sanctioned offer;

(b) the stage in the proceedings at which any sanctioned offer was made;

(c) the information available to the parties at the time when the sanctioned offer was made; and

(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated. ”

Chronology of Events

8.  For the purposes of illustration, I summarise hereunder the sequence of events that might lead to this argument on costs, some of which are repeated from the Judgment itself[1]:

Date		Particulars
5 Feb 14		The respondent received a notice to quit issued by Raymond Chan on behalf of Silver Joyce stating that the 2012 agreement would be determined on 30 June 2014.
17 Feb 14		The respondent instructed Messrs David YY Fung & Co (“David YY Fung”) to rebut by letter that clauses 2 and 12 together provided it an option to renew the tenancy for another 2 years. The letter also stated: “Pursuant to the Agreement, we hereby on behalf of our client give you on behalf of your client, notice that our client hereby exercises the said option and/or its rights to renew the tenancy for another 2 years, namely from 1st July 2014 to 30th June 2016. Please let us have your draft Tenancy Agreement for our approval in compliance with Clause 2 of the Agreement.”
3 Apr 14		The applicant entered into a provisional sale and purchase agreement with Silver Joyce to buy G/F, 1/F, 2/F & Rooftop, 66 San Hong Street (ie including the Premises) which is registered vide memorial 14050202140012 in Land Registry.
8 Apr 14		David YY Fung sent a letter to Raymond Chan alleging that “Mr L(i) and Mr Y(ang), the respective representatives of our respective clients, did on 7th April 2014 over the telephone confirm that the existing tenancy as to the Premises between our respective clients be renewed for 2 years, namely from 1st July 2014 to 30th June 2016, at a monthly rent of HK$57,000.00 while the other terms and conditions of the existing tenancy agreement remain unchanged.”
17 Apr 14		Letter apparently signed by Mr Yang of Silver Joyce reminding the respondent that the fixed term under the 2012 agreement would expire on 30 June 2014 and Silver Joyce would resume the Premises on 1 July 2014.
10 May 14		David YY Fung sent a letter to Raymond Chan re-stating that the respondent had exercised the option to renew the 2012 agreement for another 2 years and requested to have a draft Tenancy Agreement for approval.
20 May 14		Raymond Chan sent a letter to David YY Fung, inter alia, denying the existence of an option to renew under the 2012 agreement.
21 May 14		David YY Fung sent a letter to Raymond Chan, inter alia, reaffirming the contents of its letter of 10 May 2014.
23 Jun 14		Raymond Chan sent a letter to David YY Fung, inter alia, demanding vacant possession of the Premises on 30 June 2014 and “the alleged option shall in all respect be void”.
27 Jun 14		David YY Fung sent a letter to Raymond Chan, inter alia, re-stating the respondent had duly exercised the option to renew the 2012 agreement.
4 Jul 14		Raymond Chan sent a letter to David YY Fung stating that “our client exercised its rights to terminate the said tenancy such that your client must deliver vacant possession” of the Premises to Silver Joyce.
10 Jul 14		Raymond Chan sent a letter to David YY Fung purporting to respond to a letter from the latter dated 8 July 2014 (the contents of which is not provided) and stating, inter alia, its position as of the letter dated 4 July 14.
11 Sep 14		The applicant became the owner of the Premises by an Assignment vide memorial 14100802410129 registered in Land Registry on 8 October 2014.
16 Sep 14		Messrs Tam & Partners, Solicitors (“Tam”) issued a “Final Notice” to the respondent requiring the latter to quit and deliver up vacant possession of the Premises to its landlord on or before 22 September 2014.
19 Sep 14		David YY Fung sent a letter to Tam, inter alia, repeating the respondent’s stance that it had duly exercised the option to renew the 2012 agreement.
23 Sep 14		Tam sent a letter to David YY Fung stating that “there is no ‘option to renew’” under the 2012 agreement and the tenancy had already expired.
27 Sep 14		David YY Fung sent a letter to Tam, inter alia, repeating the respondent’s stance that it had duly exercised the option to renew the 2012 agreement.
29 Sep 14		Tam sent a letter to David YY Fung stating that this was a notice to quit and requesting the respondent to give vacant possession of the Premises to the applicant on or before 1 November 2014. In paragraph 5 of the letter, “Our client is determined to obtain vacant possession of the Premises and would not accept any payment from your client except mesne profits through our firm.”
		On the same day, Tam sent a letter to David YY Fung stating, inter alia, that it only received the latter’s letter of 27 September 2014 on that day.
30 Sep 14		David YY Fung sent a bank draft to Tam purporting as rent for the Premises for the period of 1 October 2014 to 31 October 2014. Tam refused to accept and the bank draft was returned to David YY Fung on that day. This bank draft was sent to Tam again on the same day.
3 Oct 14		Tam returned the bank draft to David YY Fung.
31 Oct 14		Tam sent a letter to David YY Fung demanding the respondent to deliver vacant possession of the Premises to the applicant on or before 1 November 2014.
18 Nov 14		The applicant commenced the application for recovering possession.
25 Nov 14		The respondent filed the Notice of Opposition dated 24 November 2014.
15 Dec 14		Hearing before HH Judge K W Wong who gave directions on (1) filing and service of Notice of Reply; (2) Mediation; (3) filing of witness statements; and (4) interim payment of $60,000 per month by the respondent to the Tribunal.
2 Jan 15		Notice of Reply filed by the applicant.
30 Jan 15		Mediation.
13 Feb 15		Mediation.
2 Apr 15		Filing and exchange of witness statements of the applicant and the respondent.
13 Apr 15		Hearing before HH Judge K W Wong who gave directions on instructing a single joint expert on the market rent of the Premises for the period under dispute.
27 May 15		Filing of report by single joint expert stating the market rent of the Premises on 1 October 2014 was $67,500 per month.
4 Jun 15		Without prejudice letter from respondent via its solicitors proposing that: (1) Vacant possession be delivered on 30 June 2016; (2) Mesne Profits at $60,000 per month.
8 Jun 15		The Sanctioned Offer was made and it is undisputed that the respondent received it on 9 June 2015.
11 Jun 15		Hearing before H H Judge K W Wong who ordered, inter alia, trial scheduled to commence on 3 August 2015 and a pre-trial review on 10 July 2015. There was also conversation/discussion between applicant’s solicitors and respondent’s solicitors.
7 Jul 2015		The last day for the respondent to accept the Sanctioned Offer without leave of the Tribunal.
3 & 13 Aug 15		Hearing on the trial took began.
27 Aug 15		The Judgment was delivered.

Position of the Respondent

9.  The respondent objects to the applicant’s application, submitting that costs consequence of Order 22, rule 24 would not be triggered in the present case on the grounds that:

(1) the Sanctioned Offer was not advantageous or better than the Judgment (ie the Judgment on the mesne profits);

(2) terms of costs should not be considered as part of the Sanctioned Offer (ie the costs order).

10.  Alternatively, the respondent objects to the applicant’s application on the ground that it is unjust in this case to order indemnity costs against the respondent, because:

(1) the timing of the Sanctioned Offer, ie it was only after the respondent’s without prejudice offer and at a very late stage;

(2) the $20 per month difference in mesne profits is too small to be considered as a genuine offer; and

(3) the respondent has responded to the Sanctioned Offer.

Whether the Sanctioned Offer was advantageous or better than the Judgment (ie the Judgment on the mesne profits)

11.  Mr Lee Ming Wai (“Mr Lee”) of David Y Y Fung, the solicitors for the respondent, submits that the spirit of sanctioned offers in Hong Kong was modelled on and is “almost on all fours” with its counterparts in the United Kingdom and therefore the application of English cases on such issues relating to Part 36 Offers in the United Kingdom should be highly persuasive, if not directly applicable, to similar issues relating to sanctioned offers in Hong Kong.

12.  In this regard, Mr Lee refers to Huck v Robson [2002] EWCA Civ 398, [2002] 3 All ER 263 (“Huck”), where all three judges of the English Court of Appeal agreed that if the Part 36 Offer was only used as a tactical step, indemnity costs should not be ordered. Mr Lee is referring to the concession of mere $20 per month in mesne profits in the Sanctioned Offer being too small to be considered as a genuine and realistic attempt by the applicant to resolve the dispute by agreement. Mr Lee accuses the applicant of making a mere concession on costs in the Sanctioned Offer.

13.  As acknowledged by Mr Lee, Huck was a personal injury case where the quantum on liability was in issue. Jonathan Parker LJ stated in §63 that:

“it is in my judgment implicit in r 36.21 that, consistently with the philosophy underlying Pt 36 (to which I have already referred), in order to qualify for the incentives provided by paras (2) and (3) of the rule, a claimant’s Pt 36 offer must represent at the very least a genuine and realistic attempt by the claimant to resolve the dispute by agreement. Such an offer is to be contrasted with one which creates no real opportunity for settlement but is merely a tactical step designed to secure the benefit of the incentives. That is not to say that the offer must be one which it would be unreasonable for the defendant to refuse; that would be too strict a test, and would introduce considerations of punishment and moral condemnation which (on the authority of Petrotrade Inc v Texaco Ltd [2001] 4 All ER 853, [2002] 1 WLR 947 and McPhilemy v Times Newspapers Ltd (No 2) [2001] 4 All ER 861, [2002] 1 WLR 934) are irrelevant in the context of para (3) of r 36.21. Indeed, the terms of the offer may reflect a degree of optimism and confidence on the part of the claimant/offeror. Provided only that the offer represents a genuine and realistic offer to resolve the dispute by agreement, it is for the claimant to decide at what level to pitch his offer. In some cases, an offer which allows only a small discount from 100% success on the claim may be a genuine and realistic offer; in other cases, it may not. It is for the judge in every case to consider whether, in the circumstances of that particular case, and taking into account the factors listed in paragraph (5) of rule 36.21, it would be unjust to make the order sought.”[2]

14.  Even Mr Lee agreed that there was no definite mechanism to measure the smallness of the margin between the offer and the outcome. Therefore, whether or not the offer was a tactical step should be decided on a case by case basis. In contrast with Huck, in the present case, the main plank of the applicant was that the 2012 agreement between the applicant’s predecessor in title and the respondent expired on 30 June 2014. The quantum on mesne profits was only a consequential issue and especially by the time the Sanctioned Offer was made on 8 June 2015, it was determined by single joint expert at $67,500 per month[3].

15.  In the meantime, Mr Lee is aware of Antwerp Diamond Bank N V v Brink’s, Incorporated and others, CACV 282/2012 (unreported, 14 August 2015) (“Antwerp Diamond Bank N V”) in which the plaintiff’s offer by way of a sanctioned offer at a discount of 0.27% off its claim was still upheld to justify the triggering of Order 22 rule 24. The Court of Appeal said that:

“19. In Kai Min Fashion (HK) Limited v Fond Express Logistics Limited and anor [2013] 1 HKC 563, a misdelivery case (like the present) where a discount of 2% was offered, Recorder Jat SC said (at paragraph 14 of his judgment):

“ … Huck v Robson was a traffic accident case and in that type of cases [sic] issues of contributory negligence often arise, making it uncertain as to the extent of the parties’ respective responsibility for the accident. Thus making a sanctioned offer of the kind described by Tuckey LJ may be seen as a tactical move. This case, on the other hand, is what may be called a “mis-delivery” case and claimants in such cases are often, and justifiably, confident of success if the carrier has delivered the goods without production of the original bills of lading. I do not see why the Plaintiffs should not offer a small discount in this type of case to reflect their reasonably justified confidence in the strength of their claims.”

20. In the present case, the extent of the discount offered is even less than that in Kai Min Fashion. But it does not follow that it would therefore be unjust to make orders of the sort envisaged by Order 22 rules 24(2) and (3). Just as in Kai Min Fashion, the Plaintiff here could well have genuinely regarded its claim as an extremely strong one (and there is no reason to suppose that it did not). We therefore do not think that the smallness of the discount offered of itself renders it unjust to make the orders which the Plaintiff seeks on the basis that the offer was to be castigated as merely “tactical”. Moreover, in this regard, we would, with respect, agree with the observations of Norris J in Wharton v Bancroft [2012] EWHC 91 at paragraph 22 that:

“The concept is not an easy one to apply. All Part 36 offers are tactical in the sense that they are designed to take advantage of the incentives provided by Part 36. A low offer in a case in which the offeror considers that the offeree’s position has no merit cannot be written off as self evidently ‘merely a tactical step’.”

21. In this connection, there is no reason why a recipient of a sanctioned offer of a relatively small discount to the claim should not give it serious consideration. Such consideration may lead the recipient to respond with (from his point of view) a more realistic sanctioned offer or sanctioned payment.  If this is done, the party who put forward the original sanctioned offer would have to give serious thought to this counter sanctioned offer or counter sanctioned payment.  The process may go on and it may take several rounds of offer and counter offer before one gets to a point where an offer acceptable to both sides emerges.  Even if that point is not reached, the process would have driven the parties (together with their lawyers) to give serious and realistic consideration to the possible options of settlement as opposed to the ordinary adversarial mindsets which unfortunately have a tendency to dominate the thinking of those involved in litigation.  To that end, the whole process initiated by the original sanctioned offer can achieve what the sanctioned offer and sanctioned payment regimes are designed to achieve.”

16.  Mr Lee submits that Antwerp Diamond Bank N V or Kai Min Fashion (HK) Limited on which Mr Lam Siu Wah Joseph (“Mr Lam”), counsel for the applicant, seeks to rely in his submission must be distinguished from the present case because of the following reasons:

(a) The ratio of Antwerp Diamond Bank N V seems to be, inter alia, that in a case where the claimed amount is very clear and the evidence is very straightforward, ie on a “mis-delivery” case, the slightest discount would justify the triggering of the costs consequences under Order 22 rule 24, which is not the case in the present proceedings;

(b) The situation of this case is that the Sanctioned Offer does not induce the respondent to settle or to conduct further negotiations, but rather led to a breakdown of negotiation only less than 2 months before trial;

(c) If I follow the decision of Antwerp Diamond Bank N V and order indemnity costs on the basis that “the smallness of the discount offered of itself” would not “render it (ie a sanctioned offer) unjust to make the orders which the applicant seeks on the basis that the offer was to be castigated as merely “tactical”, and accepts that the $20 difference could justify the triggering of Order 22 rule 24, then the decision would go against the very core notion of Order 22 Sanctioned Offer;

(d) There are practical difficulties for practitioners or even judges to determine whether the cases before them are “extremely strong”. The facts under Antwerp Diamond Bank N V were peculiar. In the present case the applicant’s case is not “extremely strong”  and the respondent’s case had a decent chance of success at trial (even though the respondent’s submissions at trial were not accepted and the respondent chose not to appeal);

(e) The potential abuse envisaged in Huck that a sanctioned offer used as a tactical step would, unjustly, trigger costs consequences would become a reality and that this case could become precedent that plaintiffs/claimants may submit sanctioned offers incredibly close to their actual claim at the time of the filing of the Writ and/or the Statement of Claim, in the hope that if they would be successful at trial, costs following the event claimed on an indemnity basis could be justified.

17.  Despite the forceful submission by Mr Lee at first glance, I am not persuaded. As mentioned in §14 above, the quantum on mesne profits was only a consequential issue and especially by the time the Sanctioned Offer was made on 8 June 2015, it was determined by single joint expert at $67,500 per month. There could be little concession that the applicant would reasonably make. I echo with what Recorder Jat SC said in Kai Min Fashion (HK) Limited (and CEP Limited v Wuxi Jiacheng Solar Energy Technology Company Limited [2014] 4 HKLRD 44 to which Mr Lam also refers) and ask why the applicant should not offer just a small discount to reflect their reasonably justified confidence in the strength of its claim for vacant possession of the Premises.

18.  In the present case, by the time the applicant made the Sanctioned Offer, there had also been Notice of Reply filed by the applicant, exchange of witness statements, etc. I agree with the Court of Appeal inAntwerp Diamond Bank N V that “there is no reason why a recipient of a sanctioned offer of a relatively small discount to the claim should not give it serious consideration .…”

19.  In addition, I consider the applicant had good reason for his “confidence in the strength of (its) claim” and his case was “extremely strong”. In §52 of the Judgment, I stated:

“it is neither reasonable nor obvious to a reasonable bystander there exists an option in favour of the respondent in the 2012 agreement. There is simply no mechanism for the exercise as spelt out in the 2012 agreement. The renewal at $57,000 per month as alleged for the open tenancy by the respondent, save for the telephone conversation as alleged on 7 April 2014 which I have dealt with in §41 above, has not ever appeared in the 2012 agreement. I agree with Mr Lam’s submission that if the respondent’s allegation as regards the negotiation of the 2012 agreement were correct, it would have been a very simple job for Ms Chan to write down the agreed rent for the period from 1 July 2014 to 30 June 2016 like what happened in the 2008 agreement.”

Then I ruled that the open tenancy agued by the respondent was unenforceable for being uncertain and the 2012 agreement took effect as creating a tenancy for only two years and nothing more.

20.  I do not consider my ruling here would become any precedent in any event because “(i)t is for the judge in every case to consider whether, in the circumstances of that particular case, and taking into account the factors listed in paragraph (5) of rule 36.21, it would be unjust to make the order sought.”

Whether Terms of Costs can be considered as part of the Sanctioned Offer (ie the Costs Order)

21.  The applicant admits that the concession contained in the Sanctioned Offer is mainly on costs. Mr Lee cites Gill Ajmer Singh v Wah Hing Scaffolding Engineering Limited and another, DCEC 348/2010 (unreported, 13 November 2013) (“Wah Hing Scaffolding”) where Deputy District Judge R Lai ruled that an offer requiring the other side to discontinue one’s claim and pay costs was only a tactical step and indemnity costs was not granted to the successful party.

22.  While Mr Lee suggests that the Sanctioned Offer is of similar nature, with respect, I do not agree because in the present case, the Sanctioned Offer requires “no order as to costs”. Indeed, the Sanctioned Offer corresponds with Chan Kwing Chiu and another v 陳志球 also know as Johnnie C K Chan, CACV 209/2012 (unreported, 3 October 2013) discussed in Wah Hing Scaffolding where Deputy District Judge R Lai termed the sanctioned offer by the defendant there was a “drop hands” basis with no order as to costs and tended to agree that costs on indemnity basis should be awarded for the post-offer costs to the successful defendant.

23.  Also, Mr Lee relies on Mitchell and others v James and others [2002] 2 All ER 1064 (“Mitchell”) which suggests that a “no order as to costs” terms contained in a Part 36 Offer must not be construed as part of the Part 36 Order and therefore must not be taken into account in determining whether the costs term is more advantageous to the costs order following judgment.

24.  Mr Lee then also refers to Chen Tek Yee & others v Chan Moon Shing and another, HCA 954/2010 (unreported, dated 11 June 2015) and argues that although Deputy High Court Judge Marlene Ng held that a sanctioned offer containing a term of costs should be regarded as valid, she upheld the logic and reasoning behind Mitchell and Sunbeam Investments Limited v The Incorporated Owners of Villa Veneto, LDBM 370/2007 and LDBM 175/2009 (unreported, dated 7 September 2010) in which Mitchell was applied:

“23.  In Hong Kong, H H Judge Wong in dealing with the applicant’s offer in Sunbeam Investments Limited rejected the applicant’s attempt to distinguish Mitchell & ors on the basis that Order 22 rule 21(1) of the RHC contained the proviso “unless the Court otherwise orders” (“Otherwise Proviso”) absent in Parts 36.13(1) and 36.14 of the Old CPR and/or Part 36.10(1) of the New CPR.  H H Judge Wong alluded to the practical difficulty “where a party offers an actual amount of costs to the other side, and the court would have to assess whether the amount offered is the right amount, and hence there would be a taxation or assessment exercise in costs……” The learned judge did not think that the provisions on sanctioned offers in Order 22 of the RHC were to include terms as to costs so as to create such practical difficulty.

……

26. Mr Chan submitted that Central Management Ltd was unhelpful because details of the sanctioned offer were unclear and hence it was not known how the judgment was more advantageous to the plaintiff.  He also argued “[it] is not clear whether to what extent did the Court reach the decision to order indemnity costs on the basis that the [trial judge’s] cost order beat the offer for no order as to costs contained in the sanctioned offer”.  I am not persuaded by these arguments.  In my view, irrespective of these concerns, it was obvious from the judgment of Cheung JA (with whom Rogers VP and Le Pichon JA agreed) in Central Management Ltd that the plaintiff’s offer contained terms as to costs, but such offer was still regarded as a valid sanctioned offer that attracted the costs consequences under Order 22 rule 24(4) of the RHC.  Mitchell & ors was not referred to, but the ratio of the decision in Central Management Ltd to award indemnity costs on the strength of a judgment that was “more advantageous” than the plaintiff’s sanctioned offer that contained terms as to costs plainly contradicted the decision in Mitchell & ors.

27. I also drew counsel’s attention to the subsequent first instance decision (in 2012) in The Procter & Gamble Co v Svenska Cellulosa AB SCA & anor. Mitchell & ors was again not referred to, but this case clearly reflected modern judicial concern about excluding terms as to costs (at least) in claimant’s Part 36 offers.”

25.  I cannot but concur with Deputy High Court Judge Ng that a sanctioned offer containing a term of costs should be regarded as valid when I take into account Central Management Limited v Light Field Investment Limited and others [2011] 2 HKLRD 34 which is a judgment of the Court of Appeal and therefore binding on this Tribunal. Deputy High Court Judge Ng also referred to Eiles v London Borough of Southwark [2006] EWHC 2014 (TCC), where Ramsey J, although following Mitchell, alluded to the important objectives of encouraging settlements and giving incentives for claimant’s Part 36 offers.

26.  I have earlier remarked in §17 that there could be little concession that the applicant would reasonably make as regards the mesne profits. In addition, as submitted by Mr Lam, by 8 June 2015, the case had dragged on for more than 6 months since the present application and the applicant had incurred legal expenses in attending the hearings on 15 December 2014 and 13 April 2015, the two mediations as well as expenses in appointing the single joint expert in determining the amount of mesne profits. I consider the Sanctioned Offer containing a term of costs was a genuine and realistic attempt by the applicant to achieve settlement.

Whether it is unjust in this case to order costs against the Respondent

27.  Again Mr Lee refers to Huck where LJ Schiemann said:

“77. The crucial question to be addressed by the judge in the present case was that posed in Part 36.21(4): will it be unjust to award the claimant his costs on an indemnity basis? It is important to bear in mind that this is the way the question is phrased. The question is not: will it be unjust not award the claimant his costs on an indemnity basis?”

28.  Mr Lee submits the answer should be “yes” in the present case because

(a) the timing the Sanctioned Offer, ie it was only after the respondent’s without prejudice offer and at a very late stage;

(b) the $20 difference in mesne profits is too small to be considered as a genuine offer.

29.  I do not consider the timing of the Sanctioned Offer has any problem. I note the respondent also chose to make its without prejudice offer on 4 June 2015 which indeed made no concession at all as regards the main issue on the expiry date of the 2012 agreement when it proposed only to deliver vacant possession be delivered on 30 June 2016. Neither do I consider the Sanctioned Offer was late as it was right before the hearing on 11 June 2015 and the trial day had not been fixed yet.

30.  As regards the second concern (b), I have dealt with it in §§ 17-20 above and I am not going to repeat myself here except to say a sanctioned offer for a nominal (or very small) concession would not, in itself, unreasonable. I agree that I should take into account all the circumstances of this case by reference to Order 22, rule 24(5).

31.  As per Note 1 to this rule 24, the provisions of Order 22, rules 23 & 24 “are designed to provide important incentives to encourage plaintiffs to make, and defendants to accept, settlement offers at appropriate levels. Such an incentive would be deprived of effect unless the non-acceptance of an offer, which subsequently proves to have been a sufficient offer, ordinarily will advantage the plaintiff in the manner foreseen in the rules. ” I agree that the Sanctioned Offer is a “sufficient offer” in this sense as explained above, taking into accounts matters stipulated in Order 22, rule 24(5).

32.  Note 2 further states that the enhancement provisions as to costs … in Order 22 rule 24(3) are new provisions and are designed to redress any perceived unfairness if there was to be no difference between acceptance and non-acceptance. This is particularly pertinent to the Sanctioned Offer here and the respondent failed to respond to it. See for instance §8 of 2^nd Affirmation of Yuen Sau Chun Betty of Tam, the solicitors for the applicant[4].

33.  As stated by Deputy Judge Grace Chin in CLP Power Hong Kong Limited v Kong Chung Sang, DCCJ 2775/2010, [2012] HKEC 1232:

“18. Further, a defendant is perfectly entitled to reject the sanctioned offer. But in so doing, a defendant has to accept that he has to bear the inherent risk of the plaintiff being able to prove its case successfully or his defence being rejected by the court at trial, leading to the consequential risk of having to pay the enhanced interest, indemnity costs and interest on costs specified in the said Order 22 rule 24. This is what we call the risk of litigation.”

34.  In the 2^nd letter of 8 June 2015, the respondent was specifically warned that if it did not accept the Sanctioned Offer but be held liable for more than the proposals contained in it, or if the judgment against it be more advantageous to the applicant than the proposals contained in it, it would be the applicant’s intention to rely on Order 22 rule 24.  Whereas I have in the Judgment ordered the respondent do pay the applicant’s costs of the application to be taxed at District Court scale, I find what the applicant is able to achieve at the hearing must be more advantageous than the Sanctioned Offer in June 2015. I do not consider it unjust to order that the applicant is entitled to his costs on indemnity basis after the latest date on which the respondent could have accepted the Sanctioned Offer without requiring the leave of the Tribunal. Otherwise there was to be no difference between acceptance and non-acceptance of the Sanctioned Offer.

Orders

35.  Having heard the submissions by the parties, I vary the Costs Order Nisi and grant a costs order absolute as sought by the applicant that is:

The respondent do pay the applicant’s costs of the application to be taxed at District Court scale if not agreed with certificate for counsel. Furthermore, the respondent do pay the applicant’s costs on indemnity basis (with certificate for counsel) from 9 July 2015 onwards, to be taxed, if not agreed.

Costs

36.  As for costs of the Costs Summons, I make a costs order nisi that the respondent do pay the applicant’s costs to be taxed at District Court scale if not agreed, with certificate for counsel.

37.  This is a costs order nisi.  The aforesaid costs order nisi is on party and party basis.

[1] See §12 of the Judgment.

[2] Although Jonathan Parker LJ was the dissenting judge in the above case, his aforesaid view was shared by other Law Lords in that case.

[3] I am surprised that in the without prejudice offer of 4 June 2015, the respondent suggested the $67,500 was on the high side, ie disagreeing with the opinion of the single joint expert.

[4] Page 344 of Bundle.