THE INCORPORATED OWNERS OF FU (OR FULL) KING BUILDING, TAI PO v. LOU TONG CHIU KEE CONSTRUCTION CO LTD

HCMP 200/2019

[2020] HKCFI 1195

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 200 OF 2019

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REASONS FOR DECISION

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REMINDERS TO LITIGANTS

1.  The Civil Justice Reform has been in force for more than a decade and it is unfortunate that parties still have from time to time to incur substantial costs in order to argue on costs which could have been minimised had the parties adopted a more sensible approach in parties’ negotiation and communication by explaining properly and adequately any anomaly (for example, any proposal departing from the general rule and any substantial delay), rather than insisting upon points which are obviously unmeritorious in the negotiation and communication, apparently contrary to their duty owed to the Court under Order 1A rule 3.  Had the parties done so here, the matter may well have taken a better course. 

2.  Litigants are also reminded that in general, whenever a party is seeking indulgence such as time extension, the Court expects adequate explanation on evidence, especially when the parties, though agreed to the substantive relief by consent, are still in dispute in a substantive hearing.  Failure to do so may itself be a ground for refusing to grant the indulgence, and/or at least a ground for ordering taxation on a more generous basis. 

INTRODUCTION

3.  By an originating summons dated 14 February 2019, the plaintiff claims for HK$5,086,150.72.  On 23 April 2019, the defendant made sanctioned payment of HK$1,580,000.  The 28-day period for accepting the payment expired on 21 May 2019.  The plaintiff did not accept the payment. 

4.  On 22 July 2019, as detailed below, the plaintiff’s solicitors informed the defendant’s solicitors in writing that the plaintiff would accept the payment, subject to agreement to costs.  The parties could not come to any agreement.  By the plaintiff’s summons dated 10 Sept 2019, the plaintiff applies for leave to accept the defendant’s sanctioned payment of HK$1,580,000 made by the defendant on 23 April 2019 out of time in full settlement of the Plaintiff’s claim. 

ISSUE

5.  The parties agree that leave should be given for accepting the sanctioned payment out of time.  They however argue on costs.  There is no dispute that the costs of the proceeding up to 21 May 2019 (the deadline for accepting the sanctioned payment) shall be paid by the defendant to the plaintiff on a party and party basis to be taxed if not agreed, in line with the costs consequence of an acceptance of sanctioned payment within time under Order 22 rule 20.  The dispute before me was concerning costs incurred thereafter.

PARTIES’ CORRESPONDENCE

6.  To solve the dispute, it is important to appreciate the parties’ correspondence set out below: -

(1)  By letter dated 22 July 2019, the plaintiff’s solicitors informed the defendant’s solicitors that the plaintiff was agreeable to accepting the sanctioned payment, and proposed that there shall be no order as to costs from 23 May 2019. 

(2)  By 30 July 2019, the defendant’s solicitors did not agree costs after 22 May 2019, saying that the defendant had incurred quite a substantial amount of costs from 22 May 2019, and asking for the amount of costs incurred by the plaintiff up to 21 May 2019 to see if the parties could set off the costs. 

(3)  On the same day, that is, 30 July 2019, the plaintiff’s solicitors replied with a figure of HK$123,800 being the costs incurred up to 21 May 2019, and in return, asked for the amount of the defendant’s costs from 22 May 2019 for the parties to consider set-off. 

(4)  Nothing came from the defendant. 

(5)  On 29 August 2019, the plaintiff’s solicitors repeated in writing to the defendant’s solicitors the proposal that costs before 21 May 2019 shall be to the plaintiff and that there shall be no order as to costs from 23 May 2019.  It is noted that the plaintiff’s solicitors did not chase the defendant’s solicitors for the amount of costs incurred by the defendant anymore; nor did they propose any settlement on costs anymore.  The tone of that letter was a final notice for the offer, as it was written “If we do not hear from you before close of business on 30th August 2019, we will take out appropriate summons without further notice”. 

(6)  By letter dated 30 August 2019, the defendant’s solicitors refused to accept this offer and raised that the costs of HK$123,800 were excessively high. 

7.  I make the observation here that in the whole correspondence (and in fact even in the evidence before me), the plaintiff did not make any attempt to explain the delay in accepting the sanctioned payment.  Nor was there any explanation, in proposing no order as to costs incurred after 21 May 2019, why the parties should depart from the general rule that costs should be borne by the party who is seeking indulgence.  At one point, the plaintiff seemed willing to enter into a negotiation by asking for the amount of costs incurred by the defendant in the letter of 29 July 2019.  But within a month, the plaintiff reverted to its position that there should be no order as to costs incurred after 21 May 2019.

PLAINTIFF’S SUMMONS AND AFTERWARDS

8.  After the above series of correspondence, on 10 September 2019, the plaintiff issued the present summons returnable on 27 September 2019, seeking the following costs order: -

“2. The costs of the above matter up till 21^st May 2019 be to the Plaintiff in any event;

3. The costs of the above matter from 22^nd May 2019 to 22^nd July 2019 be to the Defendant to be taxed if not agreed;

4. No order as to costs of the above matter for costs incurred after 23^rd July 2019 including this application.”

9.  The summons was filed and served only on 23 September 2019. 

10.  It is noted that paragraph 2 of the summons does not contain the phrase “to be taxed if not agreed”, while paragraph 3, by contrast, does. 

11.  It is also noted that in the supporting affirmation, the plaintiff still offers no explanation at all for the delay. 

12.  Given the previous correspondence on the exact amount of the costs incurred up to 21 May 2019 as set out above, on 23 September 2019, the defendant’s solicitors sought to clarify if “to be taxed if not agreed” should be included in paragraph 2 of the summons.  Nothing came from the plaintiff’s solicitors. 

13.  The return date hearing being imminent, on 24 September 2019, the defendant’s solicitors wrote “on the basis that we do not have any clarification of the Summons from you” to seek a consent to directions per the draft consent summons attached thereto.  Again, nothing came from the plaintiff’s solicitors. 

14.  The return date hearing thus took place as scheduled on 27 September 2019.  According to the defendant’s affirmation filed in relation to the present summons, before the hearing, Mr Cheng of the defendant’s solicitors made enquiry with Mr Ho of the plaintiff’s solicitors as to whether the plaintiff would agree to add “to be taxed if not agreed” to paragraph 2 of the Summons, but Mr Ho rejected right away and insisted that the plaintiff would pursue its claim as per the wording stated in the Summons.  This evidence is not traversed by the plaintiff.  In fact, the plaintiff has filed no affirmation in reply (despite being given opportunity) to traverse anything sworn in the defendant’s affirmation.  At the hearing, the plaintiff’s counsel accepted that the defendant’s evidence accords with the truth.

15.  I pause here to observe that by Order 62 rule 9(1), it was actually not necessary for the defendant to seek clarification.  Odd as the wording in paragraph 2 of the Summons may seem especially when contrasted with that in paragraph 3 thereof, Order 62 rule 9(1) makes it clear that if the Court is to make an order in terms of paragraph 2 of the summons, the costs are still to be taxed, even though the phrase “to be taxed if not agreed” is not inserted.  That said, given the past correspondence and the plaintiff’s insistence upon the difference of wording between paragraph 2 and paragraph 3 of the Summons, the defendant cannot be blamed for seeking clarification and being worried that the plaintiff was indeed seeking some order other than “to be taxed if not agreed”. 

16.  The next letter is almost 3 months later.  On 24 December 2019, the plaintiff’s solicitors referred to its letter of 30 July 2019 and enquired again about the amount of costs incurred by the defendant from 22 May 2019 to 30 July 2019.   I must say that this letter was disingenuous in that while correctly, the plaintiff’s solicitors did make enquiry for the amount of costs incurred by the defendant from 22 May 2019 to 30 July 2019, it is reasonably clear to any objective readers of the letter of 29 August 2019 issued by the plaintiff’s solicitors (and the defendant’s solicitors’ reply on 30 August 2019) that the enquiry mattered no more, given that the plaintiff’s solicitors repeated the previous costs proposal that the plaintiff shall have the costs up to 21 May 2019 and there be no order as to costs from 23 May 2019 to 22 July 2019, and threatened issuing summons without further notice. 

17.  On 2 January 2020, the defendant’s solicitors sought more time for taking instructions, given the intervening holiday after 24 December 2019.  On 10 January 2020, the plaintiff’s solicitors sent a chaser to the defendant’s solicitors.  On 15 January 2020, the defendant’s solicitors replied with an estimated figure of HK$70,000, but stated that because by the plaintiff’s solicitors’ letter of 29 August 2019 wherein the plaintiff’ solicitors repeated the previous proposal, there was no point in giving the figure because from the proposal, there would not be any set-off. 

DEFENDANT’S POSITION

18.  At the hearing before me, the defendant sought the following costs order: -

(1)  The costs of the action up to 21 May 2019 be to the plaintiff on a party and party basis to be taxed if not agreed.

(2)  The costs incurred after 21 May 2019 to 23 September 2019 be to D on a common fund basis to be taxed if not agreed.

(3)  The costs of the plaintiff’s summons be to D on an indemnity basis to be taxed if not agreed.

COSTS UP TO 21 MAY 2019

19.  In my view, for the costs incurred up to 21 May 2019, it is clear that the costs order should be in line with Order 22 rule 20(1), because if the plaintiff had accepted the sanctioned payment within time, this would have been the costs consequence in any event.  The parties so agree, as mentioned above.  Therefore, I ordered that costs incurred up to 21 May 2019 shall be to the Plaintiff on a party and party basis to be taxed if not agreed. 

COSTS FROM 22 MAY TO 22 JULY 2019

20.  For costs from 22 May to 22 July 2019, I ordered that costs shall be to the Defendant on a common fund basis to be taxed if not agreed.  The reasons for this order are as follows: -

(1)  The Plaintiff is seeking indulgence and thus the normal position is that it should bear the costs arising from this.  I see no reason here for departing from this normal position.

(2)  The Plaintiff has offered no explanation for the failure to accept the sanctioned payment within time.  This, in my view, does not show the necessary respect to the rules, the defendant and the Court.  It acted as if the defendant and the Court would simply rubber-stamp, while the defendant, having properly regarded its sanctioned payment as rejected, proceeded further in the action.  “In these circumstances, it can only be right and proper that the [defendant] should not be out of pocket in respect of reasonable amounts which had been reasonably incurred”, and common fund taxation is thus ordered: see The Law Society of Hong Kong v A solicitor, CACV 62/2005, 5 March 2007 per Rogers VP (with whom Le Pichon JA and Lunn J agreed) at paragraph 8.

COSTS FROM 23 JULY TO 10 SEPTEMBER 2019

21.  For costs from 23 July to 10 September 2019, the plaintiff insisted on its costs proposal that there shall be no order as to costs incurred from 23 May onwards.  This proposal, for the same reasons I set out in the preceding paragraph, should be discouraged. In the premises, I ordered that costs shall be to the Defendant on a common fund basis to be taxed if not agreed. 

22.  It remains for me to say that as observed above, the plaintiff did for a stint from 29 July to 30 August 2019 seem willing to enter into a negotiation by asking the defendant for the amount of costs incurred.  However, as pointed out above, somehow, the plaintiff reverted to its previous position in its letter of 30 August 2019 sent as a final warning before the summons was issued.  In the overall scheme of things, this stint does not warrant a different treatment in the period from 23 July to 10 September 2019. 

COSTS OF THE PLAINTIFF’S SUMMONS

23.  For costs of this summons, I ordered that costs be to the defendant on an indemnity basis to be summarily assessed.  The reasons are: -

(1)  I note that the plaintiff changed it costs proposal in the summons.  In the summons, the plaintiff albeit belatedly accepts that it should also pay the defendant the costs from 22 May to 22 July 2019 to be taxed if not agreed.

(2)  However, it proposes that there shall be no order as to costs incurred thereafter.   I have in the above rejected this costs proposal – the plaintiff is seeking indulgence and there is no explanation for departing from the normal rule that the one seeking indulgence should bear the costs. 

(3)  The plaintiff has failed to file any evidence to explain the delay, which would be expected in any affirmation in support of a summons like the present summons.  Any explanation by way of plaintiff’s counsel’s submissions is not acceptable especially where, like in the present case, the parties are in heated dispute and there could be many other reasons than those offered from the bar table. (Indeed, here, I note that the reason offered for the delay in the plaintiff’s counsel’s skeleton submissions is different from that offered to me orally at the hearing.)

(4)  At the hearing, when I enquired if there was any reason for the failure to file evidence to explain the delay, the plaintiff’s counsel sought to stand down the matter for about 5 minutes.  When I resumed the hearing, the plaintiff’s counsel’s answer was that there was no explanation for the failure.

(5)  While as mentioned above, the defendant’s solicitors seeking for clarification of “to be taxed if not agreed” in paragraph 2 of the Summons was strictly speaking unnecessary, the plaintiff’s solicitors’ approach to handling this clarification – the plaintiff’s insistence upon the difference between paragraph 2 (without “to be taxed if not agreed) and paragraph 3 (with “to be taxed if not agreed) of the Summons for no good reason – should be discouraged.

(6)  By reason of the matters above, I come to the view that the plaintiff’s conduct in the present summons is unreasonable – the plaintiff looks as if “here is my offer, I do not have any reason for the delay and any reason for the offer which seems to depart from the normal rule. Take it or leave it to the court to decide.”  In the circumstances, an indemnity basis is justified. 

24.  However, I do not think the present matters justifies engagement of counsel, and thus, though both parties were represented by counsel, I refused to give counsel certificate.  

ANY OTHER COSTS FROM 23 SEPTEMBER 2019

25.  Lastly, it seems from the defendant’s submissions that there are some costs incurred from 23 September 2019 other than those of the present summons.  For the avoidance of doubt, I made no order as to such costs (if any) because it should be clear to the defendant that from 23 September 2019 onwards, the parties should only be focused on the summons. 

ORDER IN SUMMARY

26.  In the circumstances, at the end of the hearing, I ordered that: -

(1)  There shall be leave for the Plaintiff to accept the sanctioned payment made by the Defendant on 23 April 2019 out of time.

(2)  Costs incurred up to 21 May 2019 shall be to the Plaintiff on a party and party basis to be taxed if not agreed.

(3)  Costs from 22 May to 22 July 2019 shall be to the Defendant on a common fund basis to be taxed if not agreed.

(4)  Costs from 23 July to 23 September 2019 shall be to the Defendant on a common fund basis to be taxed if not agreed.

(5)  Costs of this summons shall be to the Defendant on an indemnity basis summarily assessed at HK$80,000.

(6)  For the avoidance of doubt, there shall be no order as to any other costs than the costs of this summons incurred after 23 September 2019.