WONG KAI FOOK v. WONG KING CHAN

HCA 2621/2018

[2023] HKCFI 1315

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2621 OF 2018

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DECISION ON COSTS

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1.  On 9 June 2022, after a contested trial, I delivered Judgment in favour of the plaintiff only to a limited extent and dismissed the defendant’s counterclaim (the “Judgment”). My findings of fact were set out in §§88 to 90 of the Judgment. I specifically noted that I did not accept fully the case and evidence put forward by either the plaintiff or the defendant. The true “mutual understanding and/or terms of agreement” between the parties actually lie somewhere in between their respective pleaded case. Of the 3 substantive relief sought, I only granted in favour of the plaintiff one declaration which is a part only of one of those relief sought. Although I also ordered the vacation of the lis pendens, that is only consequential in nature and in fact, it was prayed for under the counterclaim. At §93 of the Judgment, I noted that neither the plaintiff nor the defendant fully won and that they had not given their evidence with full candour. I made an order nisi that each party shall bear his/her own costs in the action.

2.  This is an application on the part of the defendant to seek variation of the costs order nisi in the following ways:-

(1)  the costs of this action be paid by the plaintiff to the defendant on party-and-party basis up to and including 22 January 2020 and on indemnity basis (or such basis as the Court deems fit)  thereafter from 23 January 2020, to be taxed if not agreed; or

(2)  the costs of this action from 23 January 2020 be paid by the plaintiff to the defendant on indemnity basis (or such other basis as the Court deems fit), to be taxed if not agreed.

3.  The basis of the plaintiff’s application can be summarized as follows:-. 

(1)  On 15 January 2020, the defendant made her first “without prejudice save as to costs offer” (“D’s 1^st WP Offer”)[1] . The defendant offered that:-

(i)  she would make an ex gratia payment of HK$300,000;

(ii)  the lis pendens be vacated;

(iii)  she would undertake not to sell the Property during the plaintiff’s lifetime and would allow him to use the Property free of rent during his lifetime subject to the plaintiff's undertaking to pay all outgoing; and

(iv)  there be no order as to costs of the action.

The plaintiff was given 7 days, i.e. up to 22 January 2020, to consider the said offer.

(2)  By a letter dated 16 January 2020 issued by the plaintiff’s solicitors, the plaintiff rejected D’s 1^st WP Offer. The plaintiff’s solicitors were at all material times assigned by the Director of Legal Aid (“DLA”).

(3)  On 17 May 2021, the defendant revised D’s 1^st WP Offer by changing the ex gratia payment to HK$400,000 (“D’s 2^nd WP Offer”). This was again rejected by the plaintiff through his solicitors on 20 May 2021.

(4)  The plaintiff failed to beat any of the genuine offers made by the defendant and failed to obtain any of the pleaded relief.

(5)  Relying on Leung Lai Kwan v. Lo Kai Wing & Ano., unreported, HCA 1158/2011, 31 July 2014;  the Court’s decision in the same case on variation of costs order nisi as reported in [2015] 3 HKLRD 152 and its subsequent application for leave to appeal, unreported, HCMP 1554/2015, 20 August 2015, the defendant’s offers should be taken into account in the exercise of the Court’s discretion as to costs. The defendant submitted that she could not have protected her position as to costs by means of a sanction payment or a sanction offer under Order 22 as:

(i)  her offers did not only involve payment of the ex gratia payment as they also included the plaintiff’s right to use the Property free of rent during his lifetime; and

(ii)  her offers did not provide costs for the plaintiff.

(6)  As to the basis for seeking indemnity costs or common fund basis, the defendant argues that:-

(i)  the Court made a finding that it appears that the plaintiff had been coached in the giving of his evidence[2];

(ii)  the Court noted that it was highly suspicious that the plaintiff had discussed his evidence during the lunch break[3];

(iii)  Madam Chen yelled from the public gallery when the plaintiff gave an answer adverse to his case which led to a warning given by the Court[4];

(iv)  although the defendant prayed for vacant possession of the Property in her counterclaim, she never took any step to evict the plaintiff; and

(v)  the plaintiff never requested for any interest in the Property until 2017 or 2018 when the plaintiff and Madam Chen became worried about the plaintiff’s future medical expenses. The action was thus scandalous and vexatious and prosecuted for an ulterior motive.

4.  The DLA’s submissions can be summarized as follows:-

(1)  although the DLA does not argue that the Court cannot take into consideration D’s 1^st WP Offer and D’s 2^nd WP Offer in its exercise of discretion on costs, these offers have no sanctioned effect. They can only be treated as Calderbank offers.

(2)  the defendant’s offers involve the element of “payment of money”. She could have protected her position by (a)  tendering a cheque or cashier order to the DLA; (b)  bring her settlement offers to the notice of the DLA.

(3)  accordingly, the defendant has no basis to rely on her two offers as if they were sanctioned offers made under Order 22.

(4)  furthermore, the circumstances of the present case are not appropriate for indemnity costs. There is no finding by the Court that the plaintiff was guilty of misconduct or had abused the legal process so as to warrant penalty by an indemnity costs order. The Court found the plaintiff’s evidence regarding monthly mortgage repayment more credible and consistent with contemporaneous documents. The plaintiff’s claim was not a hopeless one and was by no means scandalous or vexatious. Neither can it be treated as having been initiated maliciously/with ulterior motive or pursued oppressively.

Discussions

5.  It is not in dispute that D’s 1^st WP Offer and D’s 2^nd WP Offers were not sanctioned offers pursuant to Order 22 and I do not understand the defendant’s submissions as inviting the Court to treat them as such. The defendant is merely asking this Court to take them into consideration as Calderbank offers in the general exercise of the Court’s discretion on costs. As I understand the position of the DLA, it is not a point in dispute. It is also indisputable that the plaintiff failed a long way to beat even D’s 1^st WP Offer. In my judgment, this was a matter unknown to the Court at the time when the costs order nisi was made. This matter should be properly reflected in the ultimate costs order.

6.  With respect to the DLA, I fail to see how the defendant can be criticized for not bringing her offers directly to the notice or attention of the DLA. Both parties were represented by solicitors and in particular, solicitors for the plaintiff was assigned by the DLA. Offers were conveyed respectively through solicitors’ correspondence. The fact that the plaintiff’s solicitors did not promptly report such offers from the defendant to the DLA is solely a matter of deficient communication between the DLA and its assigned lawyer. The suggestion that the defendant should have tendered a cheque or cashier order together with the offer letters is also unmeritorious.

7.  However, this does not detract from the fact that I did not accept fully the case and evidence put forward by either the plaintiff or the defendant. The true facts as I found lie somewhere in between their respective pleaded case. In the circumstances, I am still of the view that each party should bear his/her own costs of the action up to 22 January 2020.

8.  As from 23 January 2020 onwards, costs of the action were unnecessarily incurred by reason of the plaintiff’s refusal to accept the D’s 1^st WP Offer which the plaintiff eventually failed to beat. The plaintiff should therefore bear those costs of the action incurred as from 23 January 2020 at least on a party-and-party basis.  The only remaining question is whether the basis of taxation should be higher than that, i.e. at common fund basis or indemnity basis.

9.  In the written submissions of the DLA, I was referred to Choy Yee Chun (the Representative of the estate of Chan Pui Yiu v. Bond Star Development Ltd [1997] HKLRD 1327, at 1334 to 1335 in which the Court of Appeal held that a taxation of the successful party’s costs on an indemnity basis could properly be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for the taxation of the successful party’s costs on the indemnity basis. The same principles apply equally to those who not only instituted proceedings but who defend them. These principles were not disputed by the defendant[5].

10.  In my view, although I accepted parts of the plaintiff’s evidence and case but rejected others, the same applies to those put forward by the defendant. In the circumstances, neither the plaintiff nor the defendant can be said to have put forward a scandalous or vexatious case or that any of them had presented their respective cases oppressively or with ulterior motives. I certainly did not consider the conduct of the plaintiff or the defendant as constituting an affront to this Court.  In her Written Submissions, the defendant had highlighted instances where I was critical about the plaintiff’s case and evidence. I had equally made critical observations concerning her case and evidence in the Judgment.  In the circumstances of this case, I am not satisfied that it is appropriate to order taxation on indemnity basis.

11.  In the Court of Appeal decision in Leung Lai Kwan v. Lo Kai Wing & Ano., at §12, the Court of Appeal (whilst refusing to impose costs on indemnity basis)  commented that costs on common fund basis would in any event have been justified in the light of the Calderbank offers. Although not on all fours, there are much similarities between the facts in that case and those in the present case. In my view, the D’s 1^st WP Offer was most reasonable. It effectively acknowledged a life interest in favour of the plaintiff with the addition of a substantial ex gratia payment. The increase in the amount of ex gratia payment in D’s 2^nd WP Offer showed the defendant’s genuine intention of putting an end to the litigation. Its rejection was in my view due to the plaintiff’s unreasonable insistence. Accordingly, I am prepared to exercise my discretion to order taxation on common fund basis.

12.  In conclusion, I will vary the order nisi on cost as follows:-

(1)  each party shall bear his/her own costs of the action up to and including 22 January 2020;

(2)  the plaintiff shall pay to the defendant costs of the action incurred since 23 January 2020 to be taxed on common fund basis if not agreed;

(3)  the plaintiff shall pay to the defendant costs of and incidental to this application for variation which shall be taxed on party-and-party basis if not agreed; and

(4)  for the avoidance of doubt, the plaintiff’s own costs shall be taxed in accordance with the Legal Aid Regulations.