CHAN CHUN NI v. CHAN NGAI KEUNG

HCA 2206/2018

[2023] HKCFI 97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2206 OF 2018

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D E C I S I O N

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Introduction

1.  This is a summons by the Defendant for variation of the costs order nisi such that the Plaintiff do pay costs on indemnity basis with enhanced interest at 10% above the judgment rate, on the ground that the Plaintiff had failed to beat a sanctioned payment. The Plaintiff opposes the application on the ground that she had not done worse than the sanctioned payment.

2.  The facts were that the Defendant made a sanctioned payment by paying $10,000 into Court on 19 November 2021, offering to settle the Plaintiff’s claim, inclusive of costs of this action. The time for the Plaintiff to accept the payment without leave of the Court expired on 17 December 2021, without the Plaintiff accepting the payment.

3.  By a judgment dated 30 September 2022 (“the Judgment”), this Court dismissed, after trial, the Plaintiff’s claim in common intention constructive trust and awarded costs to the Defendant on a nisi basis to be summarily assessed.

4.  According to Order 22, rule 23(5) of the Rules of the High Court, where this rule applies, the Court shall make the orders for indemnity costs and enhanced interest at a rate not exceeding 10% above judgment rate unless it considers it unjust to do so. The Court can take into account the factors in rule 23(6).

Whether the Plaintiff did better than the Defendant’s sanctioned payment

5.  In this case, the Plaintiff has failed on all 3 issues after trial. She has not appealed against the Judgment.

6.  The Plaintiff considered that she did better than the sanctioned payment because this Court found that the Winnings were in the nature of a loan which had been repaid save for HK$20,000 and lack of full repayment of the Winnings may warrant an order for repayment of the balance though not a declaration of proprietary interest in the Premises (Judgment, §87). Ms Ma and Mr Tung submit on behalf of the Plaintiff that the word “judgment” in Order 22, rule 23(1) should not be narrowly construed as merely the orders or reliefs granted. For the purpose of the rule, the plaintiff’s “actual entitlement” arising from the Judgment shall be considered to decide whether the Plaintiff had obtained a judgment better than the sanctioned payment.

7.  With respect, this bold submission conflates a finding of fact and a judgment and is not supported by authorities. The finding of fact did not give rise to any “entitlement” to the Plaintiff. Her statement of claim never prayed for a money judgment. After trial, the Plaintiff’s solicitors submitted a draft judgment for, amongst others, a money judgment in the sum of HK$20,000, which was disallowed by the Court. The Plaintiff will be barred by res judicata from seeking HK$20,000 from the Defendant post-Judgment. It is entirely inappropriate for her counsel to “venture” (in their own words) to invite the Court, through a set of submission, to consider if it is suitable to order the Defendant to repay the HK$20,000 to the Plaintiff “to avoid further unnecessary dispute”.

8.  In the premises, the Plaintiff never obtained any judgment, let alone a better judgment, than the sanctioned payment.

9.  In any case even if the Plaintiff had obtained a “judgment” of $20,000, she still did not do better because the Judgment required her to bear costs, which could have been avoided if she had accepted the sanctioned payment.

Indemnity costs

10.  The trial was fixed during the period of the pandemic. Video conferencing had to be arranged for one witness to give evidence and for closing submission. Extra steps had to be taken to secure the attendance of one defence witness (who resided in Mainland China) to come to Hong Kong. All of these could have been spared had the Plaintiff accepted the sanctioned payment. There is nothing to make it unjust to order indemnity costs against the Plaintiff.

11.  There is no application to vary the basis of assessment of costs on the District Court scale after the increase in jurisdiction in December 2018. As the defence was filed on 20 December 2018, it appears that not much costs of the Defendant were incurred on the High Court scale.

12.  For costs on indemnity basis, as in taxation, a receiving party is entitled to all of his costs save where they are unreasonable. Any doubt as to the reasonableness should be resolved in favour of the receiving party. See Hong Kong Civil Procedure 2023, Vol 1, §62/28/2.

13.  I have considered the grounds of objection of the Plaintiff. The hourly rates of solicitors, counsel’s fees are reduced to the District Court level. Costs in relation to the supplemental witness statement filed on behalf of the Defendant are disallowed as they have been covered by a summary assessment order of Master Ho. Where the Court has reserved the question of costs and that question has not been decided in favour of the Defendant, the Defendant will not be granted costs. As costs are to be assessed on indemnity basis, costs of counsel for CMCs (as if it were conducted in the District Court) are allowed. Refreshers are reduced as the trial ended earlier than estimated. Unused refreshers are not recoverable despite costs on indemnity basis. Mediation fees are reduced for the reasons given by the Plaintiff.

14.  Taking into account the reductions in the preceding paragraph, I maintain my previous assessment of $1,150,000 as costs summarily assessed on indemnity basis.

Enhanced interest

15.  As for enhanced interest, I do not find the case of Grupo Pacificia Incorporada v Worldwide Marine Product Ltd [2018] HKCFI 2584, Au-Yeung J to be a useful comparison. The circumstances were very different as the defendant there took a hostile and dismissive attitude towards the plaintiff’s sanctioned offer and never responded to it (at §12); and the Court took the view that the proceedings should never have been defended.

16.  In this case, I do not find the Plaintiff to have run an utterly unmeritorious case. Despite the Mother’s favour of the Defendant, the Plaintiff had contributed to the family finance and the Mother had deployed the Plaintiff’s funds to assist the Defendant in purchasing the Premises. There was reason for the Plaintiff to feel aggrieved and hence pursued this litigation to air her grievance. She has produced weighty evidence to support her case (Judgment, §45). She herself had made 2 sanctioned offers on 16 November 2021. Her litigation conduct did not warrant criticism. It was just that her case did not come up to proof to the requisite standard. She has complied with the Judgment by delivering the title deeds to the Defendant already.

17.  On the other hand, there was material inconsistencies in the Defendant’s evidence and the Court has found the Defendant to be unreliable on certain aspects (Judgment, §37). The sanctioned payment did not even take into account the Defendant’s prior letter dated 19 November 2021 stating that he has been “ready, willing and able to make repayment” in respect of the $20,000 pursuant to the Mother’s Purported Will. The amount of $10,000 was not sufficient to cover the $11,000 balance of unpaid loan on the Plaintiff’s worst case.

18.  The Judgment does not award damages to the Defendant but only costs. Indemnity costs form a “penalty” to the Plaintiff already. Taking all circumstances into account, I am of the view that judgment rate plus 2% is sufficient to penalize the Plaintiff for not accepting the sanctioned payment. Such interest should run from 18 December 2018 to the date of the Judgment and thereafter at judgment rate until payment.

19.  The Defendant only succeeds on the question of interests. I order half of the costs of this summons to the Defendant, also on indemnity basis. Even so, I would not allow some of the costs of the Defendant. The affirmation in reply is in effect a set of submission and costs thereon should be disallowed. I also find it alarming that parties would incur over $100,000 on the District Court scale on a simple issue of costs. It is completely disproportionate to the costs issue and subject matter of the claim. The fact that the Plaintiff is incurring a similar amount is no justification for the costs. I summarily assess the Defendant’s costs of the summons on indemnity basis at $30,000.

Conclusion

20.  I vary the costs order nisi such that:

(1)  The Plaintiff do pay the Defendant’s costs of this action on indemnity basis, summarily assessed on the District Court scale at $1,150,000; and

(2)  Interest on costs shall be at the enhanced rate of judgment rate plus 2% from 18 December 2018 to the date of judgment and thereafter at judgment rate until payment.

21.  The costs of this summons are also to be borne by the Plaintiff on indemnity basis, summarily assessed on the District Court scale at $30,000.

22.  It is the duty of legal representatives to advise clients of the correct venue to litigate in order to achieve costs effectiveness, proportionality and to ensure that the resources of the Court of First Instance are distributed to cases with complexity worth trying here. The solicitors for the Plaintiff and Defendant shall write to me by 19 January 2023 as to whether they are willing to undertake to charge their respective client only on the District Court scale for this action as regards the period after December 2018, or repay what was over‑charged.

23.  I thank counsel for their assistance.