TAM CHUI KAM AND ANOTHER v. SHUM MING HING AND ANOTHER

HCMP 3470/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3470 OF 1995

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BETWEEN

(By Original Action)

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(By Counterclaim)

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REASONS  FOR  DECISION

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1.  This is an application for costs of a summons issued on 7 July 2006.  The summons was settled except costs.  I heard the arguments on costs on 30 January 2007 and ordered the Defendants by original action and the Plaintiff by counterclaim (“the Defendants”) to pay the costs of the Plaintiffs by original action and the Defendants by counterclaim (“the Plaintiffs”) from 21 November 2006 to the conclusion of that hearing with reasons reserved.  These are my reasons.

2.  The Plaintiffs are the administrators of the estate of Shum Tak Hing who was the husband of the 1^st named Plaintiff.  Madam Chui Yan Tai was the mother of Shum Tak Hing. 

3.  The dispute between the Plaintiffs and Madam Chui was over their interest in a flat in North Point.  That dispute was tried in this court in Mach 1997.  At the end of the trial, the court declared on 3 April 1997 that the Plaintiffs were entitled to 1/3 of the flat.  Madam Chui owned the remaining 2/3 of the flat.

4.  The Court further ordered the Plaintiffs to pay Madam Chui $50,000 but stayed the execution of this part of the judgment until the flat was sold so that it could be paid out of the Plaintiffs’ shares of the proceeds. 

5.  Madam Chui was then living in the flat.  The Plaintiffs applied for an order for sale.  The Court did not allow the application, but gave liberty to the Plaintiffs to apply again upon change of the situation or upon the death of Madam Chui.

6.  The Court also ordered Madam Chui to pay the Plaintiffs 2/3 of the costs of the action which were taxed at $268,305 (“the taxed costs”). 

7.  The Plaintiffs later obtained a charging order in respect of the taxed costs and the order was registered at the Land Registry against Madam Chui’s interests in the flat.  However, the charging order did not cover the interest to accrue from time to time on the taxed costs.

8.  Madam Chui passed away on 31 May 2005.  Her estate is now represented by the Defendants who are the executors.  The 2^nd named Defendant continues to live in the suit premises after the passing away of Madam Chui.

9.  Since the death of Madam Chui, the Plaintiffs have been entitled to apply again for an order to sell the suit premises.  The application was not taken out until 14 July 2006 because the parties had been negotiating for a settlement.  The application was issued when the negotiation failed to bear fruit. 

10.  In the application, the Plaintiffs asked for vacant possession of the premises and an order for sale.  They also asked for interest at the judgment rate on the taxed costs from the date when they were payable to the date of payment, costs of the charging order and its discharge and mesne profits for the 2^nd named Defendant’s occupation of the flat.  There was however no provision for any interest on the $50,000 payable by the Plaintiffs to the Defendants. 

11.  The Defendants responded to the application on 20 July 2006 and made a proposal to settle it.  Instead of delivering up vacant possession, they proposed an undertaking to deliver up vacant possession on/or before completion of the sale.  This would delay the delivery of vacant possession by the Defendants but would not prejudice the Plaintiffs if both sides act in good faith.

12.  On the payments, the Plaintiffs proposed to pay 1/2 of the interest at judgment rate on the taxed costs from the date when they were payable to the date of payment.  They also offered $10,000 to cover the costs of the charging order and its discharge.  They, however, refused to pay any mesne profits.  They did not ask for interest in respect of the $50,000 payable by the Plaintiffs. 

13.  This proposal was a reasonable one as the parties have confirmed to me at the hearing that the Defendants cannot be made to pay any mesne profits in these proceedings and the Limitation Ordinance has wiped away part of the interest on the taxed costs which had accrued more than six years before the issuing of the application.  They have also agreed that interest should accrue on the $50,000 regardless of the Limitation Ordinance as execution on this sum was stayed by an order of this court.  This offer of 1/2 of the interest on the taxed costs regardless of the Limitation Ordinance and the abandoning of interest on the $50,000 would result in the payment of $127,798.74 interest to the Plaintiffs.

14.  If the Plaintiffs should be given the full rate of interest for the period not barred by the Limitation Ordinance but also to account to the Defendants interest on the $50,000 at the judgment rate, the Plaintiffs would only get a net sum of interest at $89,328.81.  In other words, the Plaintiffs would have obtained $29,469.93 more had they accepted this offer of 20 July 2006. 

15.  Nevertheless, the Plaintiffs did not accept this very reasonable proposal.  Their solicitors wrote back on 22 July and demanded full interest from the accrual of the taxed costs to payment.  They also asked for $25,000 as costs for the charging order and its discharge.  They further insisted on mesne profits and the costs on this application which they assessed at $30,000.  In the light of what I have said above, this counter-offer was less than reasonable.

16.  The Defendants filed the affirmation of the 1^st named Defendant on 29 September 2006.  In the affirmation, the 1^st named Defendant on behalf of the Defendants refused to pay any interest to the Plaintiffs on the ground of limitation.  She also demanded full interest on the $50,000 from the date of accrual to payment.  This would mean that the Plaintiffs would not get any interest whatsoever on the taxed costs but would have to pay the Defendants net interest at $49,633.71 for the $50,000.  Whilst the Plaintiffs were unreasonable in not accepting the 20 July offer, the Defendants by this affirmation had also become unreasonable on 29 September 2006. 

17.  On 17 October 2006, the Plaintiffs proposed to sell the flat first and leave the proceeds to be dealt with later.  This was also a reasonable proposal and would put an early end to the 2^nd named Defendant’s occupation of the flat.  There was no reply by the Defendants to this proposal and the Plaintiffs reiterated it on 1 November for the Defendants’ response.  There was still no response. 

18.  On 7 November, the Plaintiffs made a fresh proposal to settle the whole matter.  They proposed to charge only 1/2 of the interest at judgment rate on the taxed costs from accrual to payment and to pay 1/2 of interests at judgment rate on the $50,000.  They also proposed $10,000 as costs for the charging order and its discharge.  They also abandoned the claim for mesne profits and proposed no order as to costs for the application as a whole.  This proposal appeared quite reasonable for settling the application.  However, the Defendants did not find it acceptable. 

19.  In their reply dated 9 November 2006, the Defendants insisted that the Plaintiffs should not be paid any interest whatsoever on the taxed costs but at the same time should pay them full interest on the $50,000.  They also proposed to pay $5,000 as the costs for the charging order in its discharge.  This alternative did not appear to be unreasonable.  As an alternative, they also proposed to sell the flat first and leave the proceeds to be dealt with later.

20.  The Plaintiffs did not accept the proposal on interest or the alternative of selling the flat first.  They counter-offered on 21 November to charge interest at the judgment rate on the taxed costs only for the six years before issue of this application.  Such interest has not been barred by limitation.  They also agreed to pay the Defendants full interest at judgment rate on the $50,000.  They also asked for $10,000 as the costs for the charging order and its discharge and no order as to costs for this application.  The issue of mesne profits was not revived. 

21.  This counter-proposal was very reasonable and it more or less reflected the parties’ entitlements in law.  It also reflected a further concession when compared with the proposal of 7 November.  However, the Defendants did not respond to it despite reminders issued on 29 November, 2 December, 9 December, 18 December and 21 December. 

22.  In the reminder of 21 December, the Plaintiffs’ solicitors said that if there was no reply by 5 p.m. on 22 December 2006.  They would proceed to file an affirmation in reply and prepare for the hearing.  There was indeed no reply on 22 December.  The Plaintiffs then filed the 1^st named Plaintiff’s affirmation in reply on 12 January 2007. 

23.  In the meantime, the 2^nd named Defendant continued to live in the flat without the need to pay any rent or mesne profits.  It was only on 19 January 2007 that the Defendant’s solicitors wrote and indicated their preparedness to accept the Plaintiffs’ counter-proposal.  The application was shortly thereafter settled on the terms of the counter-proposal.

24.  Whilst the Defendants had been reasonable in their 20 July offer, they withdrew from that position on 29 September upon filing their affirmation.  Had they maintained their 20 July position, they might have been able to get the costs of the application.  When the Plaintiffs made a reasonable offer on 7 November, the Defendants maintained their unreasonable stance, but they also made an alternative of selling the premises first.  That alternative was not unreasonable.  For this reason, I do not think I should ask them to pay costs as a result of their failure to accept the 7 November offer.  However, after the 21 November counter-offer was made, they made no response for almost two months and in the meantime were enjoying the premises free of charge. 

25.  At the end, the matter was settled on the basis of the 21 November counter-offer.  Had the Defendants responded earlier, the Plaintiffs would not have found it necessary to file the affirmation in reply or to prepare for the hearing.  For this reason, I think the Defendants should pay the costs for these works. 

26.  In fact, when the Plaintiffs made the 7 November offer, the matter had already been discussed between the parties for many rounds.  The Defendants also replied on 9 November.  Hence, when the counter-proposal of 21 November was made, the Defendants should have been able to respond to it very quickly.  If the Defendants should have behaved reasonably, all the costs for preparing the reminders could have been saved.  I think it was wrong for the Defendants to have sat on the matter and continued to enjoy the rent-free accommodation. 

27.  I therefore ordered that the Defendants to pay the Plaintiffs the costs of the application from 21 November 2006 to and including the day of hearing and there be no order as to costs before that.