SINGH GORINDER BAL v. CHAN NGA KAI

HCPI 840/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 840 OF 2008

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J U D G M E N T

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1.  This is the Defendant’s appeal against the Order of Master A Chow made on 20 January 2011 dismissing the Defendant’s application to vary the Costs Order Nisi made by the Master on 29 November 2010 in respect of the costs of the taxation proceedings herein.

Background

2.  The background facts leading to this appeal can be shortly stated as follows.

3.  The present personal injuries action was brought by the Plaintiff against the Defendant on 19 November 2008 arising out of a road traffic accident which occurred on 3 January 2007.

4.  On 7 January 2009, interlocutory judgment on liability with damages to be assessed was entered in the Plaintiff’s favour against the Defendant.

5.  By a Consent Order dated 25 February 2010, the proceedings herein were stayed upon the terms of settlement as set out in the Schedule to the Consent Order.  It was further provided that the Defendant was to pay to the Plaintiff the costs of the action on a party and party basis to be taxed if not agreed, and that the Plaintiff’s own costs were to be taxed in accordance with the Legal Aid Regulations.

6.  On 20 March 2010, the Plaintiff’s solicitors provided to the Defendant’s solicitor an estimate of the Plaintiff’s costs and disbursements.  The total amount of the estimated party and party costs came to HK$746,062.

7.  On 23 April 2010, the Defendant’s solicitors made a “Without Prejudice Save as to Costs of Taxation” offer of HK$265,000 (inclusive of interest) to the Plaintiff’s solicitors.  A cheque for the amount of HK$265,000 made payable to the Director of Legal Aid was enclosed with the offer letter as “interim payment” of the Plaintiff’s costs and disbursements.

8.  On 24 April 2010, the Plaintiff’s solicitors rejected the Defendant’s offer as being wholly “unrealistic”.

9.  On 28 April 2010, the Defendant increased the offer by HK$45,000, making a total of HK$310,000 (inclusive of interest).  A cheque for the amount of HK$45,000 made payable to the Director of Legal Aid, as further “interim payment” of the Plaintiff’s costs and disbursements, was sent to the Plaintiff’s solicitors on that date.

10.  On 29 April 2010, the Plaintiff’s solicitors again rejected the Defendant’s offer as being wholly “unrealistic” and made a counter-offer of HK$719,417.

11.  On 11 June 2010, the Plaintiff filed a Notice of Commencement of Taxation together with a bill of costs to formally commence the taxation proceedings.

12.  On 30 June 2010, the Defendant further increased the offer to the amount of HK$340,000 (inclusive of interest).  In the “Without Prejudice Save as to Costs of Taxation” letter dated 30 June 2010, the Defendant’s solicitors stated that the offer of HK$340,000 was in full and final settlement of the Plaintiff’s costs and disbursements claimed in his bill of costs and that the Defendant would let the Plaintiff’s solicitors have the balance of HK$30,000 within 21 days from the date of acceptance of the offer. A breakdown of the costs and disbursements comprised in the said sum of HK$340,000 was then set out.  The Plaintiff’s solicitors were also asked to reply by the close of business on 6 July 2010.

13.  On 6 July 2010, the Plaintiff’s solicitors rejected the Defendant’s latest offer as being “on the low side” but indicated that the Plaintiff was prepared to accept the sum of HK$634,182 plus interest in full and final settlement of the Plaintiff’s costs and disbursements.  A number of receipts for hospital charges were enclosed with the letter of 6 July 2010 for the Defendant’s consideration.

14.  Having considered those receipts, on 27 July 2010 the Defendant decided to reduce the offer to the sum of HK$334,000 on the ground that the Plaintiff’s solicitors had previously “overstated” the total amount of charges paid to Government hospitals.  The Plaintiff’s solicitors were asked to reply by the close of business on 30 July 2010.

15.  The Defendant’s reduced offer was rejected by the Plaintiff on 29 July 2010.  A further counter offer of HK$558,367 plus interest was made.  This counter offer was not accepted by the Defendant.

16.  By a letter dated 16 September 2010, the Plaintiff made a final offer, described as a “Sanctioned Offer”, of the total sum of HK$510,155.40 plus interest in full and final settlement of the Plaintiff’s party and party costs and disbursements.  Eventually, no settlement was reached and the matter proceeded to taxation.

The taxation proceedings

17.  In the Plaintiff’s bill of costs filed in the taxation proceedings, the total amount of the party and party costs (including disbursements and costs of taxation) claimed against the Defendant was HK$740,053, made up as follows:-

(1) solicitors’ profits costs of HK$586,828;

(2) disbursements of HK$121,917; and

(3) costs of taxation of HK$31,308.

18.  There was no item included in the bill for (i) interest on the costs and disbursement, or (ii) taxing fee.

19.  In addition, in view of the fact that the Plaintiff was legally aided, the bill also set out the Plaintiff’s own costs on common fund basis. The total amount of the common fund costs (including disbursements and costs of taxation) came to HK$60,345.

20.  The taxation took place on 29 November 2010 before Master A Chow.  It is agreed by the parties that the party and party costs and disbursement allowed by the taxing master came to HK$353,189, made up as follows:-

(1) solicitors’ profits costs of HK$222,514;

(2) disbursements of HK$90,567;

(3) costs of taxation of HK$25,450;

(4) taxing fee of HK$14,658.

21.  Master A Chow also made a Costs Order Nisi that the Defendant should pay the Plaintiff’s costs of taxation and the taxing fee (i.e. items (3) and (4) above).

22.  The above figure of HK$353,189 did not include interest on costs and disbursements, which I have been told would come to HK$6,621.71 calculated up to 29 November 2010.

23.  It is agreed by the parties that the taxed costs and disbursements allowed by Master A Chow, calculated up to 30 June 2010, would be as follows:

(1) solicitors’ profits costs of HK$222,514;

(2) disbursements of HK$90,567;

(3) costs of taxation of HK$16,820;

(4) the total amount of the taxed costs and disbursements (including interest, but excluding taxing fee of HK$14,658) would come to HK$334,440.73; and

(5) the total amount of the taxed costs and disbursements (including interest and taxing fee of HK$14,658) would come to HK$349,503.54.

24.  On the other hand, the agreed figures for the taxed costs and disbursements allowed by Master A Chow, calculated up to 27 July 2010, would be as follows:

(1) solicitors’ profits costs of HK$222,514;

(2) disbursements of HK$90,567;

(3) costs of taxation of HK$16,820;

(4) the total amount of the taxed costs and disbursements (including interest, but excluding taxing fee of HK$14,658) would come to HK$334,558.50; and

(5) the total amount of the taxed costs and disbursements (including interest and taxing fee of HK$14,658) would come to HK$349,708.05.

The decision under appeal

25.  On 8 December 2010, the Defendant applied to Master A Chow to vary the Costs Order Nisi relating to the costs of the taxation proceedings such that the Plaintiff should pay the Defendant’s costs and disbursements incurred in the taxation proceedings after 30 June 2010 (to be taxed if not agreed) and be responsible for the taxing fee (if payable).

26.  On 20 January 2011, Master A Chow dismissed the Defendant’s application, and ordered the Defendant to pay the costs of the application, summarily assessed at HK$9,000.

27.  The Defendant now appeals against the decision of Master A Chow made on 20 January 2011.

Relevance of the Calderbank offers

28.  In Leung Cheung Hong v Golden Pond Restaurant Limited, HCA 5399 of 1989 (21 March 1997), the late Jerome Chan J held that in a taxation where the receiving party was a legally aided person, a written offer made by the paying party in respect of the aided person’s party and party costs was not a relevant consideration in the determination of the costs of taxation.

29.  The decision of Jerome Chan J was considered by Barnett J in the subsequent decision of Tso Wing Yu Anita v Lau Siu Fan [1998] 2 HKC 286.  Barnett J held that it was in the interests of everyone to encourage compromise in litigation wherever possible.  If no effect was given to a Calderbank offer, compromise would be discouraged with the result that there would be a substantial increase in the volume of taxations.  The learned Judge further held that there was nothing in the regime of costs in legal aid cases which would preclude the taxing master from considering a Calderbank offer in the exercise of his discretion on the costs of taxation proceedings.

30.  From the authorities referred to by counsel at the hearing of the appeal, it appears that the court has regularly taken into consideration any relevant Calderbank offer when determining questions relating to the costs of taxation proceedings.

31.  In these circumstances, I shall follow the decision of Barnett J in Tso Wing Yu Anita, and take into account the offers made by the Defendant on 30 June 2010 and 27 July 2011, so far as relevant, when considering the costs of the taxation proceedings herein.

Relevance of the taxing fee

32.  In Lam Chi Sheung v Kin Wah Engineering Company and Others, HCPI 586/1997 (2 June 2000), P Cheung J (as he then was) held, in a case where the receiving party was legally aided, that the taxing fee should not be included in the taxed costs when one considered whether the Calderbank offer had been beaten or not.  At paragraphs 21 to 23 of his Judgment, the learned Judge stated as follows:-

“21. Taxing fee is prescribed in Rule 19 of the High Court Fees Rules. These are fees payable to the court on taxation. Rule 19 sets out the scales of the fee. Because the exact fee would depend on the taxed costs, it is not quantified in the bill of costs. The practice of the High Court Registry is to require the party applying for taxation to make a deposit on account of the fee. The excess is later returned after taxation. In the case of a legally aided person, he does not have to pay the deposit immediately. When the Legal Aid Department eventually received the taxing fee from the paying party, it would then pay the High Court Registry. As a matter of practice, when the legally aided person was unable to recover the taxing fee, the Legal Aid Department would request the High Court Registry to waive the taxing fee.

22. In his judgment on review, the master stated that the taxing fee should be ignored in considering the “Calderbank” letter. He gave two reasons. First, the offer itself necessarily assumes that there would be no taxation if it is accepted. Second, if a bill has already been filed, taxing masters will usually return the fee if the bill is withdrawn seven days before the hearing.

23. I agree that the taxing fee should be ignored for the purpose of calculating the final taxed costs.  If a bill has to be taxed, then the taxing fee has to be incurred.  But irrespective of whether the receiving party will be entitled to the taxing fee at the end of the day, the bill of costs does not quantify the taxing fee.  The taxing fee is not an item that requires taxation.  Since this fee was not quantified in the bill, then clearly the defendants had made no response to it.  In the circumstances, the taxing fee should not be included in the taxed costs when one considers whether the Calderbank offer had been beaten or not.”

33.  That the taxing fee should not be taken into account when considering whether a Calderbank offer has been beaten or not, where it is clear on the face of the offer letter that it is not included in the amount of the offer, is supported by decisions such as Wong Wai Chun v Lewin [2000] 2 HKC 271; and Leung Lin Ko v Yeung Chun Hung trading as Chun Hung Engineering Company and Others, HCPI 567/2005 (28 December 2007).

34.  In this case, it is clear that the Defendant’s offers made on 30 June 2010 and 27 July 2010 did not include taxing fee.

35.  At the hearing of the appeal, Mr Joseph Lee for the Plaintiff informed me that since the Plaintiff was legally aided, he was not required to pay the taxing fee upfront.  Further, as described in paragraph 21 of the Judgment of P Cheung J in Lam Chi Sheung, the practice is that where the legally aided person is unable to recover the taxing fee in a taxation, the Legal Aid Department would request the High Court Registry to waive the taxing fee.  I have been told by Mr Lee that normally a waiver of the taxing fee would be granted in such circumstances.

36.  In my view, 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 made on 30 June 2010 and 27 July 2010 in this case.

Whether the Calderbank offers have been beaten

37.  As earlier stated, if the taxing fee is excluded:-

(1) the total amount of the taxed costs and disbursements (including interest) calculated up to 30 June 2010 would come to HK$334,440.73;

(2) the total amount of the taxed costs and disbursements (including interest) calculated up to 27 July 2010 would come to HK$334,558.50.

38.  The offer made by the Defendant on 30 June 2010 was in the sum of HK$340,000, whereas the one made on 27 July 2010 was in the sum of HK$334,000.  Hence, the Plaintiff has successfully beaten the offer made on 27 July 2010 by a very small amount (HK$558.50), but not the earlier offer made on 30 June 2010.

39.  As a matter of principle, it seems to me that where a succession of Calderbank offers in reducing amounts have been made, generally speaking it is the last offer which is relevant for considering whether the receiving party has or has not beaten the Calderbank offer.  This is not to say that the earlier offers should necessarily be ignored or disregarded in all cases, because ultimately a decision on costs involves an exercise of discretion depending on all relevant circumstances of the case.

40.  In the present case, strictly speaking the Plaintiff has successfully beaten the last offer made by the Defendant on 27 July 2010, albeit by a very small amount.

Decision on costs of the taxation proceedings

41.  Whether a plaintiff has or has not beaten a Calderbank offer is not determinative of the issue of costs of the taxation proceedings, because the offer is only a matter which the court may take into account when considering the question of costs.  Other matters such as the parties’ respective conduct, and whether the offer has been beaten in all or only some of the constituents of the offer and by how much, are also relevant in the overall exercise of the court’s discretion on costs.

42.  In the present case, I take into account the following facts and matters:-

(1) The amount of the solicitors’ profits costs allowed by the taxing master is only approximately 37.9% of those claimed by the Plaintiff in the bill of costs.  This suggests that the solicitors’ profits costs were very substantially inflated in the bill of costs.

(2) The amount of the taxed costs and disbursements (including interest) calculated up to 27 July 2010 allowed by the taxing master exceeds the amount offered by the Defendant on that date by HK$558.50 only (i.e. 0.17% of the offer of HK$334,000).  The de minimus rule applied by Master Poon (as he then was) in Wong Wai Chun v Lewin [2000] 2 HKC 271 and by Master Au Yeung (as she then was) in Lo Ah Wah v Wo Hing Transportation Company, HCPI 1203/1999 (1 December 2001) is also applicable here.

(3) The Plaintiff could and should have accepted the earlier offer of HK$340,000 made by the Defendant on 30 June 2010.  Apparently, the revision of the offer was the result of certain overstatement of the Government hospital charges previously claimed by the Plaintiff.  It was not unreasonable for the Defendant to revise downward the offer in such circumstances.

(4) The two offers made by the Defendant on 30 June 2010 and 27 July 2010 are very close to the final amount of the taxed costs allowed by the taxing master calculated up to either date.

(5) The various offers made by the Plaintiff, ranging between HK$510,155.40 and HK$719,419, appear to be wholly unrealistic when viewed against the final amount of the taxed costs and disbursements allowed by the taxing master (HK$353,189, inclusive of costs of taxation and taxing fee).

(6) Overall, nothing of real value has been achieved by the Plaintiff by his continued pursuit of the taxation proceedings after 30 June 2010.

43.  In all the circumstances, I would order that:-

(1) the Defendants’ appeal against the Order of Master A Chow dated 20 January 2011 be allowed and the said Order be set aside;

(2) the Defendant shall pay the Plaintiff’s costs of the taxation proceedings up to 30 June 2010 only (for the avoidance of doubt, the taxing fee is excluded);

(3) the Plaintiff shall pay the Defendant’s costs of the taxation proceedings after 30 June 2010;

(4) the Plaintiff shall pay the costs of the Defendant’s application to Master A Chow and of this appeal, to be assessed summarily.  For this purpose, (a) the Defendant shall lodge his statement of costs of the application and of the appeal within 7 days of the handing down of this judgment, (b) the Plaintiff shall lodge his objections (if any) to the Defendant’s statement of costs within 7 days thereafter, and (c) the Defendant shall be entitled to a final reply (if so advised) within 7 days thereafter.