CEP LTD v. 無鍚市佳誠太陽能科技有限公司

CACV 97/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 97 OF 2014

(ON APPEAL FROM HCCL NO. 12 OF 2012)

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1.  On 6 October 2014, I handed down my decision in an application of the defendant for security for costs on appeal (“the Decision”). By consent of the parties, the application was disposed of on written submissions. The liability to provide security was not disputed. The only matter I had to resolve was quantum. I ordered the plaintiff appellant to provide security of $442,030 on the terms as set out in §15 of the Decision and that the plaintiff was to pay the defendant its costs of the application in any event. The costs order was not an order nisi.

2.  On 10 October, and before the order in the Decision is perfected, the plaintiff’s solicitors wrote to the court enclosing correspondence marked “without prejudice save as to costs”.  The plaintiff sought to vary the costs order in the Decision on the basis of without prejudice offers to pay security.  The defendant questioned the court’s jurisdiction to vary the costs order.  I am satisfied I have inherent jurisdiction to entertain the application to vary the costs order where the plaintiff had omitted to ask the court to reserve its decision on costs or to make an order nisi, as the order has not been drawn up, entered or otherwise perfected and I am not functus officio (Andayani v Chan Oi Ling [2000] 4 HKC 233 at 237C to D, per Keith JA).

3.  The plaintiff relied on the following matters.

4.  Before the summons was issued on 22 August 2014, the plaintiff sent the 1^st without prejudice letter to the defendant indicating willingness to pay $400,000 into court as security.  After the summons was issued, and on 28 August, the plaintiff made its 2^nd without prejudice offer and increased the amount of security to $500,000.  The defendant rejected this offer by a letter dated 3 September and made a counter-offer of $1.2 million.  As this was not accepted by the plaintiff, the application was determined by the court.

5.  In the Decision, the reasonable amount of security assessed at $442,030 was made up of estimated costs and disbursements in respect of the appeal at $382,030 and estimated costs of the application for security for costs at $60,000.

6.  The plaintiff submitted that if $60,000 is deducted from the security ordered, even its first offer of $400,000 has in effect exceeded the proper estimated costs of the appeal as assessed by the court.  In any event, its 2^nd offer of $500,000 puts it beyond doubt it has managed to beat the amount of security ordered.  It submitted that the costs order should be varied and the costs of the application should be borne by the defendant instead, and, in which event, the sum of $60,000 should be taken out from the sum of $442,030 ordered to be paid into court as security.

7.  The defendant opposed the application and submitted that one should take a closer look at more of the correspondence.

8.  When the defendant sought security from the plaintiff by letter dated 4 August 2014, it enclosed a draft bill of costs which assumed that the application for security would be contested as to both liability and quantum.  The plaintiff responded on 20 August contesting liability to provide security but nonetheless made a without prejudice offer to pay $400,000.  The offer of $400,000 was made in respect of the totality of the defendant’s draft bill, which was prepared on the assumption that both liability and quantum would be contested.

9.  As that offer was not acceptable to the defendant, it issued the summons on 22 August, seeking security in the sum of about $1.3 million, on the basis that the application would be contested both as to liability and quantum and there would be an oral hearing.

10.  On 27 August, the plaintiff wrote to the court indicating that three hours would be required for the contested hearing.

11.  On 28 August, the plaintiff increased its without prejudice offer to $500,000, still making no concession on liability.

12.  The court gave directions on 2 September for the hearing scheduled to last for three hours.

13.  On 3 September, the defendant made a counter-offer of $1.2 million as security.  At that stage, the plaintiff continued to contest both liability and quantum.

14.  It was only on 4 September that the plaintiff wrote to the court stating that the application would be contested as to quantum only and proposing to dispose of the application on paper.  The defendant agreed to this on 5 September.

15.  The defendant made the point that it was after a full month when it first wrote to the plaintiff seeking security for costs, and almost two weeks after the summons was issued, that the plaintiff conceded liability to provide security.  It was submitted that whether the security ordered beat the plaintiff’s offers should be viewed in the context of the plaintiff’s late concession not to contest liability.  The initial offer of $400,000 was made on the premise that liability was in issue, as was the increased offer of $500,000.

16.  The defendant submitted it would be quite wrong to assess the matter by comparing on the one hand the plaintiff’s offer in respect of the quantum of security to be provided for both the appeal and the costs of a fully contested hearing on the application for security, and on the other hand the court’s assessment of the security to be provided, made up of the estimated costs of the appeal and the costs of the application for security on the basis of a paper disposal in respect of quantum only.  The pertinent question is whether, if the plaintiff had contested both liability and quantum in an oral hearing, the amount of security to be ordered – which would include provision for the costs of the security application – would have exceeded $500,000.

17.  I see the force in the defendant’s submission and agree with it.  If the application was fully contested in an oral hearing, with both sides represented by counsel, I think it is unlikely that the additional costs incurred would be less than $57,970 (the difference between $500,000 and $442,030).

18.  For the above reasons, I decline to vary the costs order in the Decision.  As for the costs of this application to vary, I would also order that the plaintiff should pay the defendant its costs in any event.

19.  I decline to assess summarily the costs of the application for security and the costs of the application to vary, as they are to be paid in any event and could be assessed by the taxing master conveniently when the costs of the appeal are taxed.