LAW YIN POK BOSCO, a minor by LAM PO YEE, his mother and next friend v. DR. CHAN YEE SHING also known as DR. CHAN YEE SHING ALVIN

HCMP 2256/2012

[2022] HKCFI 345

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2256 OF 2012

(ON APPEAL FROM HCPI 369/2010 AND HCPI 62/2011)

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HCPI 369/2010

BETWEEN

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HCPI 62/2011

AND BETWEEN

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(Consolidated by Order of Master Roy Yu dated 13^th July 2011)

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DECISION

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Introduction

1.  On 15 October 2021, I handed down a decision in these proceedings: [2021] HKCFI 3058. I made a costs order nisi at para 62. Before me this morning are two applications to vary the costs order nisi.

2.  I shall adopt below the defined terms used in the decision. I shall refer to the defendant’s summons filed on 4 September 2020, which is the subject-matter of the decision, as “the Summons”.

3.  By summons filed on 5 November 2021, the parents apply to vary my costs order nisi such that the following three sets of costs are to be taxed or assessed on an indemnity basis:

(1) the costs of the taxation proceedings of the Bill;

(2) the costs of the Summons, including the substantive hearing before Master Martin Wong; and

(3) the costs of the appeal against the master’s decision.

4.  By summons filed also on 5 November 2021, the defendant applies to vary the costs order nisi such that (1) the parents be deprived of the costs of the hearing on 10 May 2021 and the costs of their written submissions lodged for that hearing, and (2) the defendant should not bear the costs of the Director incurred on the preparation of his written submissions.

5.  As I noted in the decision, this case has a long and unhappy history. The parties have been embroiled in litigation with each other for more than a decade.

6.  In my view, it is imperative and in the interest of everyone that these costs applications, which should be the tail end of the whole litigation, should be disposed of speedily. Hence, notwithstanding that parties have lodged fairly lengthy submissions, I shall not deal with all the points raised one by one. Instead I shall focus on what I consider to be the material matters which together are determinative of the applications.

The parents’ summons

7.  This summons concerns only the parents and the defendant. The Director has no interest.

8.  The principles governing indemnity costs orders are not in dispute. I shall apply the general principles which I sought to summarise in Wong Yung Tai v Top Eagle Security Management Ltd [2019] HKDC 408 at paras 39 to 43. They are:

(1) Generally speaking, the court has a broad discretion to determine how costs shall be paid and whether indemnity costs should be ordered: see, in general, Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114 at para 12.

(2) In order to obtain an order for costs on an indemnity basis, it is for the party seeking it to show that the case has some “special or unusual feature”: Town Planning Board at para 15.

(3) It is now well recognised that indemnity costs are no longer confined to cases where the paying party’s conduct lacks moral probity or deserves moral condemnation for which the court wishes to express disapproval. Conduct which falls short of that can be so unreasonable as to justify an order for indemnity costs. But such conduct would need to be unreasonable to a high degree. Unreasonable in this context does not mean merely wrong or misguided in hindsight: Kiam v MGN (No 2) [2002] 1 WLR 2810 at para 12; cited recently in Hong Kong in Heung Wing Yan v Hangway Housing Management Ltd HCPI 347/2012, 14 February 2017 at para 19.

(4) The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs. On the other hand, to maintain a claim that one knows, or ought to know, is doomed to fail on the facts and on the law, is conduct that is so unreasonable as to justify an order for indemnity costs: Wates Construction Ltd v HGP Greentree Allchurch Evans Ltd 105 CLR 47 at 55; Heung Wing Yan at para 19.

(5) There is an infinite variety of situations in which the court may consider appropriate to make an indemnity costs order. But ultimately what the receiving party must demonstrate is something in the conduct of the action or other circumstances of the case that “takes it out of the norm” which warrants such an order: Heung Wing Yan at para 20.

9.  I have reviewed the extensive correspondence exchanged between Ip Kwan, Howse Williams and the Director since shortly after the Bill was served in April 2020. There were both open and without prejudice letters in relation to how the Bill should be dealt with. Having also considered the submissions of the parents and the defendant, I am of the view that in principle the defendant should bear the parents’ costs of the Summons and the appeal on an indemnity basis as from 7 October 2020. That is the date immediately after the expiry of the offer made by the parents in Ip Kwan’s letter dated 29 September 2020. Ms Corrina Kwan, of Ip Kwan, representing the parents, has referred to this offer in her submissions as “the Waiver Proposal”.

10.  In their summons, the parents also asked for the taxation costs of the Bill to be granted on an indemnity basis as well. I was not prepared to do so. In any event, at today’s hearing, Ms Kwan confirms that she would not insist on this limb of the summons.

11.  That must be correct.

12.  I am not seised of the taxation proceedings. The matter came before me in the form of an appeal against the master’s decision on the Summons. Under the Summons, the defendant sought retrospective leave to commence taxation of the Bill out of time. While the Summons concerned the taxation of the Bill, it was not the actual taxation of the Bill. The costs of the taxation as between the parents and the defendant should be dealt with in the forum of taxation.

13.  For completeness, I am informed by the defendant and the Director today that as between them, the taxation process of the Bill had been drawn to a conclusion in that both agreed that an all-in sum of $100,000 should be payable by the Director to the defendant under the Costs Order. That agreement had just been approved by the court earlier this week.

14.  In gist, I am of the view that there are a number of matters which stand out from these proceedings and which, together, form special features warranting an indemnity costs order. I would add that, objectively speaking, how the defendant had gone about pursuing the Bill vis-à-vis the parents can be said to be oppressive. In light of that, an indemnity costs order is appropriate.

15.  The starting point of the analysis is the unusual circumstances in which the defendant sought to tax the Bill. The Costs Order was made in October 2012. But it was not until April 2020 that the defendant served the Bill. The Bill was 5½ years out of time. It is an extraordinary delay. The amount claimed under the Bill was however of a modest amount. Furthermore, there had been an exercise undertaken in 2019 in which the parties sought to reach a “global compromise” on the outstanding costs orders made in this long-running litigation. Yet the Costs Order was not raised in that exercise. And the reason for the delay in claiming the costs under the Costs Order was oversight on the part of the defendant’s solicitors.

16.  Against this factual backdrop, one would expect a reasonable litigant to seriously consider whether he would want to pursue the Costs Order and whether that would be a sensible and proportionate thing to do. Where there is undue delay in commencing taxation proceedings, a taxing master has the power to, among other things, disallow part of the costs sought to be taxed under Order 62, rule 22(5). Given the extraordinary delay, one can expect that such power may be exercised. In that event, the costs eventually awarded would be even less.

17.  In light of this possibility, the litigant should naturally pause and ask himself whether it is worthwhile and proportionate to pursue the costs when opposition would likely be met and to further drag on these proceedings.

18.  The defendant has not revealed his thinking process behind pursuing the Bill in these unusual circumstances.

19.  In any event, he had elected to claim the costs under the Costs Order. I would consider then that it was incumbent on him to pursue the taxation properly, efficiently and with a sense of proportion. He and his solicitors should think through the steps carefully and should find out about his precise legal position in the process.

20.  The first thing to note is that notwithstanding that the taxation was seriously out of time, the defendant nonetheless proceeded to commence it without first seeking the consent of the parents (or the Director) or applying for leave of the court. It would appear that it was only after the parents raised the issue of delay that the defendant then took steps to seek retrospective leave.

21.  But that perhaps is a minor point when compared with the subsequent development.

22.  Shortly after the Summons was taken out on 4 September 2020, the Director, acting for the child, confirmed that he had no objection to the defendant’s application to commence taxation out of time, provided that the costs of the application in the sum of $1,040 be paid to the Director. That was set out in a without prejudice letter from the Director to Howse Williams dated 9 September 2020. And that offer was expressed to be without prejudice to the Director seeking sanction under Order 62, rule 22(5).

23.  The significance of the Director’s offer is this. As a matter of law, the liability of the parents and the child to pay the defendant’s costs under the Costs Order is joint and several. Each is liable to pay the full amount of the defendant’s costs if called upon by the defendant to do so. That is subject to the caveat that the total amount recoverable by the defendant does not exceed the costs as agreed or taxed. See paras 47 to 48 of the decision.

24.  In the present case, given the Director’s stance, there was no apparent need for the defendant to pursue costs against the parents if that legal position is recognised. He could simply claim the full amount of the costs under the Costs Order solely from the Director in the taxation proceedings. (I should perhaps add, for completeness, that the defendant retained the right to claim costs from all the plaintiffs and in different proportions.)

25.  In my view, if the defendant and his solicitors had applied their mind to this and tried to find out precisely where the defendant stood legally in light of the Director’s offer, they could have readily reached this conclusion upon doing some proper legal research. The only logical thing then for the defendant to do would be to accept the Director’s offer, proceed with the taxation of the Bill vis-à-vis the Director only, and withdraw the taxation proceedings as against the parents. If he had done so, the taxation proceedings would have long been concluded.

26.  That said, I would say that the defendant’s failure to appreciate the correct legal position at that juncture is not by itself a matter that warrants the imposition of an indemnity costs order. That is not sufficient in itself to depart from the general position of party-and-party costs.

27.  The watershed moment in this case is, in my view, the Waiver Proposal made by the parents on 29 September 2020.

28.  In light of the Director’s stance, Ip Kwan made the offer in an open letter to Howse Williams as follows:

“1. as DLA has agreed to pay your bills, your client should consider getting paid from DLA for your costs and waive its claims for all costs under the 2 bills against our clients; and

…

The 2 bills of costs are of minimal value. The coverage of the costs orders as contended by us are of very limited scope. Even there exists no O62 r22(7) arguments, the 2 bills are of minimal worth. The most importantly, our clients’ objections made pursuant to O62 r22(7) are meritorious and their situation are completely different from all the authorities which have held on the issue. Your client is at real risk of the bills being dismissed with costs to be paid to our client.

Adopting a pragmatic approach, your client should consider getting as much as from DLA who has asked for your offer repeatedly and DLA will agree to pay with reference to the amount claimed by you, not based on the terms or the coverage of the costs orders. If so, your client should withdraw the 2 bills against our clients. If your client will agree to this proposal within the time stated below, our clients will be advised to waive all their costs which they have so far incurred in resisting the 2 bills.

Please revert to us on the above proposal within 7 days of this letter i.e. by 6^th October 2020, failing which, our client will incur more costs to prepare for the objections. It will be difficult for our clients to reopen this proposal again.” (italics added)

29.  The reference to “the 2 bills” in the extract is to the Bill and another bill which I do not consider to be directly relevant here.

30.  In gist, Ip Kwan invited Howse Williams to pursue the costs against the Director only, since he was not opposing, and drop his claim against the parents. The parents would then waive the costs so far expended in the taxation proceedings.

31.  The offer lapsed on 7 October 2020.

32.  Ip Kwan renewed the offer by letter dated 27 October 2020.

“… given the amount involved (i.e. the amount to be foregone by your client) is relatively insignificant but the delay is very substantial, the opposition of the Parents is meritorious. …

… we would like to re-open the discussion with you that your client will agree to withdraw his 2 bills of costs claimed against the Parents (50% of both bills) and the Minor (pre-legal aid in HCMP 2256 of 2012). If your client will confirm his agreement to this proposal within 7 days of this letter (i.e. by 3^rd November 2020), our clients will withdraw their Lists of Objection and agree to waive all costs incurred so far in opposing your client’s said 2 bills of costs including the summons.

Your client will have to pay costs even if he will get leave to file the bills of costs out of time as he is seeking indulgence.

If you will agree to withdraw the claims against our clients, your client can still seek to recover half of his costs from DLA who has not raised the issues as ours.”

33.  It can be seen from the above that Ip Kwan were at that time also under the belief that the defendant could only claim half of his costs from the Director.

34.  Ip Kwan repeated the rationale of the Waiver Proposal in their letter to Howse Williams dated 3 November 2020 as follows:

“DLA has only taken issue on quantum in respect of your clients’ 2 bills of costs which means that DLA will pay on your bills. It is only a matter of quantum. Having our clients involved in the upcoming hearings means that the Court will rule on issue of entitlements. …

Even if your client will be granted leave to issue the bill out of time, he will still be ordered to pay costs as he is seeking indulgence of the Court. The amount of costs to be claimed against your client will outweigh any benefit which he will be able to get from having his 2 bills of costs to be taxed against our clients (who are only liable for 50% of the taxed sum).

Against all these risks for your client to keep our clients in these proceedings, we find it surprising that your client will not be responding positively to our client’s offers.”

35.  It is quite clear from the correspondence exchanged at the time that both Ip Kwan and Howse Williams did not address their mind to the strict legal position in relation to the Costs Order which operates in favour of the defendant. That is, the defendant could have just gone after the Director for the entire sum, without having to engage in further dispute with the parents. Whether the Director would subsequently seek contribution from the parents is not a matter that concerns the defendant or that affects his interest.

36.  That would appear to be the subjective mindset of the parties. I would go on to evaluate their conduct against that mindset.

37.  In my view, on that factual premise, in light of the Director’s stance which had been expressly made clear to the defendant, where the defendant’s aim was to recoup as much costs as possible under the Costs Order, the Waiver Proposal represented a sensible, workable and pragmatic course to take.

38.  In essence, the defendant ought to have compared the two options before him.

39.  First, he could have foregone the half share payable by the parents. But in doing so he would have the comfort of securing the half share from the Director without at the same time having to overcome the hurdle of seeking leave to tax out of time and to bear the associated costs, ie the costs of his Summons. Given the circumstances, the half share costs would likely amount to a few tens of thousands of dollars, after either taxation or agreement with the Director. That would have been the end of the matter. The process could have been completed fairly quickly, given that there would have been no opposition from the parents.

40.  The second option was for the defendant to insist on pursuing the costs against both the Director and the parents. That way, if leave to tax out of time was granted, the defendant would have been able to claim the whole costs, as opposed to half, as agreed or taxed. However, since the prospect of strong opposition from Ip Kwan to the leave application was almost certain, in order to achieve that result, it could well be expected that the defendant would have to spend much time and incur much costs to obtain leave.

41.  Furthermore, as rightly pointed out by Ip Kwan, since in seeking leave the defendant was seeking the indulgence of the court in the rather extraordinary circumstances, he would likely have to bear a portion, if not all, of the costs of his Summons even in the event that he prevailed. Assuming that those costs were in the region of a few tens of thousands of dollars (if not more), the defendant would have ended up in the same (if not worse) position as under the first option in terms of quantum.

42.  The Waiver Proposal was not only made once but was renewed a few times in the period leading to just before the substantive hearing before the master.

43.  Up to now, it is not clear to me why the defendant did not find it acceptable.

44.  If the defendant and his solicitors had thought through the whole matter carefully and applied their mind to the extraordinary circumstances in which they took out the Summons to seek leave (most notably the limited amount and the lengthy delay), they should have had no difficulty in seeing that from the defendant’s own perspective, the Waiver Proposal represented a good outcome for his costs position.

45.  The defendant nonetheless chose to press on with the Summons in a full-blown manner against both the Director and the parents. Much time and costs had by now been spent. All these did not turn out to improve the defendant’s costs position as compared to if he had accepted the Waiver Proposal back in September or October 2020. To me, this is conduct which shows a lack of any sense of proportion on the part of the defendant when pursuing his costs.

46.  Lastly, given the small amount at stake and given further that the defendant had a better option to claim costs than to pursue the Summons vis-à-vis the parents, objectively speaking, the defendant’s insistence to pursue the parents for the costs is, in my view, oppressive.

47.  In sum, after the Director made clear his stance in early September 2020, the defendant ought to have appreciated his true legal position and could have simply dropped his claim against the parents and thus saved all the costs there without substantially affecting his financial interests. In any event, subsequently, even believing that he could only claim half the costs from the Director, if he had acted sensibly, pragmatically and with a sense of proportion, he should have accepted the Waiver Proposal by 6 October 2020, which was the initial deadline set by Ip Kwan. The defendant did not do either. His conduct has taken the case out of the norm and an indemnity costs order should justifiably be imposed on the costs incurred after 6 October 2020.

48.  I now turn to the defendant’s summons.

The defendant’s summons

49.  There are two parts in the defendant’s summons. First, the parents’ costs of the adjourned hearing on 10 May 2021 and the written submissions lodged for that hearing. Second, the Director’s costs for preparing the written submissions also for that hearing.

50.  As regards the first part, the defendant’s ground is essentially that the parents should be deprived of those costs because their submissions were unhelpful to the court. On the five issues which I had asked for submissions at the first hearing (see para 46 of the decision), the parents had either given the wrong answers or given the right answers with the wrong reasons. The defendant contends that since the adjourned hearing was almost entirely spent on the five issues, I should decline to award to the parents the relevant part of their costs.

51.  I decline to accede to the defendant’s request. I think one should take a step back and keep a proper perspective of the appeal as a whole.

52.  The subject-matter of the appeal was the Summons. In the Summons, the defendant sought leave to tax out of time. The parents opposed leave on a number of grounds. In the end, I found that those grounds have merit and ruled that as between the parents and the defendant, leave should not be granted, subject to the issue raised by the special feature of the case.

53.  I was concerned about the practical implication flowing from allowing the appeal as against the parents only and therefore adjourned the matter for further submissions. At the first hearing, I think it is fair for me to say that both the defendant and the parents had not addressed their mind to it and were not in a position to make full submissions on this point. That was the background leading to the adjournment.

54.  While quite a number of the answers given by the parents at the adjourned hearing were found by me to be incorrect, this does not of itself justify the court depriving them of the relevant costs. When awarding costs, the court does not undertake a scoring exercise. Parties make submissions to the court. Sometimes they are correct. Sometimes they are not. An incorrect submission does not of itself take the case out of the norm which would attract adverse costs consequences.

55.  The present case in not the Elgindata type of situation where the parents had pursued a point or an allegation which has failed and which has caused a significant increase in the costs or length of the proceedings.

56.  The questions thrown up by the special feature arose from the fact that the Director had earlier on consented to the leave application. This was not a point taken up at the initiative of the parents. But it was a point that the court had to resolve in order to properly adjudicate on the appeal. Hence even though quite a fair amount of time was spent there, there is no proper basis to deprive the parents’ costs in this regard.

57.  As regards the second part of the defendant’s summons, the defendant contends that he should not bear the Director’s costs incurred on the preparation of the written submissions. In essence, the defendant’s grounds are that the Director is not a party to the appeal and in any event the Director has expressly said he would not claim costs in his written submissions. Furthermore, the Director’s submissions were not helpful to the court in determining the five issues.

58.  When I made the costs order nisi, I explained (at para 62) that since the Director’s costs were incurred by reason of the appeal which the defendant has lost, I granted him his costs.

59.  At today’s hearing, it is common ground between the defendant and the Director that the latter was not a party to the appeal but as a matter of jurisdiction the court has the power to join him as a party to the appeal for costs purposes only under Order 62, rule 6A. The key question is therefore whether the court should do so in the present case and award costs to the Director.

60.  I disagree with the defendant’s contention that the Director’s submissions were unhelpful. I had derived assistance from his submissions when coming to my ruling. I awarded costs to the Director on a nisi basis as I was mindful that the Director was (effectively) being involuntarily dragged into this appeal and it would be a just result for the losing party in the appeal to bear the Director’s costs.

61.  At today’s hearing, Ms Chung Hiu Yee, of Howse Williams, emphasised that the Director had explicitly confirmed in writing that he would not claim costs and there is no reason why he should be able to retract that waiver.

62.  I have to say that the Director has not really given any good reason why he should be allowed to do so. Hence, on further reflection, I would accede to the defendant’s request and vary the costs order nisi such that the Director should not be given costs of his written submissions.

Conclusion

63.  For the above reasons, I vary and replace the costs order nisi by the following:

(1) The defendant do pay the parents’ costs of the appeal on an indemnity basis.

(2) The defendant do pay the parents’ costs of the Summons incurred up to and including 6 October 2020 on a party and party basis.

(3) The defendant do pay the parents’ costs of the Summons incurred after 6 October 2020 on an indemnity basis.

(4) There be no order made as to the costs of the Director.

(5) There be summary assessment of the costs awarded in para (1) above.

(6) The parents do lodge their statement of costs within 21 days from today. The defendant do lodge a list of objections, if any, within 21 days after that. In each case, the document should not exceed 3 pages.

(7) The assessment be conducted on the papers after the deadline.

[Submissions on costs]

64.  The parents do have costs of their summons and also the defendant’s summons, as against the defendant, on a party and party basis.

65.  There be no order as to costs as between the Director and the defendant under the defendant’s summons.

66.  The parents do lodge and serve their statement of costs (not exceeding 3 pages) within 21 days from today.

67.  The defendant do lodge and serve a list of objections (not exceeding 3 pages) within 21 days after that.

68.  The costs be summarily assessed on the papers after the deadline.