CHAU SO MAN SUE v. CHOW WAI FONG ALICE

DCCJ 5648/2018

[2022] HKDC 541

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5648 OF 2018

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BETWEEN

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DECISION

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1.  By the judgment dated 1 March 2022 (“the Judgment”), this court allowed Madam Chau’s claim against Madam Chow and dismissed Madam Chow’s counterclaim.

2.  By summons dated 14 April 2022 (“the Summons”), Madam Chau applies for variations of the costs order nisi in the Judgment (“the Order Nisi”). In this Decision, I shall adopt the abbreviations used in the Judgment.

3.  The Order Nisi is in the following terms:

“Madam Chow shall pay interest on the Deposits in the sum of HK$200,000 at the best lending rate of HSBC plus 1% from 6 December 2018 and at judgment rate from date of judgment to payment”

“Madam Chow should pay Madam Chau her costs of the action including the counterclaim (including any costs previously reserved) to be taxed if not agreed with certificate for counsel”

4.  By the Summons, Madam Chau asks for the following orders:

(1) Madam Chow do pay interest on the Deposits in the sum of HK$200,000 at the best lending rate of HSBC plus 1% from 6 December 2018 to 22 March 2019;

(2) Madam Chow do pay interest on the Deposits in the sum of HK$200,000 at a rate of 10% above judgment rate from 23 March 2019 until full payment;

(3) Madam Chow do pay Madam Chau her costs of the action including the counterclaim (including any costs previously reserved) to be taxed if not agreed with certificate for counsel

(i) for the period prior to 23 March 2019, on party and party basis; and

(ii) for the period after 23 March 2019, on indemnity basis from 23 March 2019 until full payment;

(4) Madam Chow do pay interest on the costs payable to Madam Chau at a rate of 10% above the judgment rate from 1 March 2022 until full payment.

5.  This application is supported by the affirmation of Mr Wong, who is the handling solicitor for Madam Chau. Mr Wong exhibited the correspondence exchanged with the solicitors for Madam Chow to his affirmation. In this correspondence, it is disclosed that Madam Chau has made two sanctioned offers contained in two letters respectively dated 22 February 2019 and 26 March 2019.

6.  In the Summons, Madam Chau apparently relies on the former sanctioned offer as shown by the commencement date of enhanced interest and indemnity costs stated therein. The former sanctioned offer, however, demands the agreement of Madam Chow to the grant of an order that she should pay Madam Chau damages for breach of the Agreements. This court did not make such an order in the Judgment. For the purpose of this application, I have not received any submission to the effect that notwithstanding Madam Chau’s failure to obtain such an order for damages, the former sanctioned offer is still applicable. I do not think that the former sanctioned offer can form the basis of this application.

7.  I should focus on the latter sanctioned offer (“the Sanctioned Offer”), which is in the following terms:

“1. Your client shall confirm and acknowledge the following:-

(i) Our client is entitled to rescind from the Provisional Agreement and the Formal Agreement; and

(ii) Our client is entitled to a lien over the Property for the return of the Deposits to our client.

2. Your client shall pay our client a sum of HK$198,000 plus costs up to the date of acceptance of our Sanctioned Offer, to be taxed if not agreed, in full and final settlement of our client’s claim in these proceedings.

3. Your client shall consent to have her counterclaim in these proceedings dismissed by consent with costs to our client, to be taxed if not agreed.

This sanctioned offer is intended to have the consequences provided for under Order 22 of this RDC.”

8.  In the Sanctioned Offer, the proposed settlement amount is HK$198,000 (“the Offered Amount”) whereas by the Judgment, Madam Chau managed to recover the Deposits in the sum of HK$200,000. Mr Cheung, for Madam Chau, submits that Madam Chau did better than what she proposed in the Sanctioned Offer within the meaning of O.22 r.24, the Rules of the District Court (“RDC”) and hence is entitled to enhanced interest on the Deposits and indemnity costs pursuant thereto.

9.  Madam Chow opposes this application and Mr Fung, her counsel, advances several grounds of objection on her behalf. I shall deal with them in turn.

10.  First, Mr Fung submits that the Order Nisi became absolute on 15 March 2022 and the Summons should be dismissed in limine in the absence of any application for time extension.

11.  This submission is both unfair and unmeritorious. The General Adjournment of Proceedings (“GAP”) commenced on 7 March 2022 and Madam Chau on that day notified Madam Chow in writing that she would make this application as soon as practicable. The Summons was taken out on the very first business day after the completion of GAP. In case that time for variation of the Order Nisi did not cease running during GAP, the Summons could not be said to be late in any view and must be entertained even out of time.

12.  Next, Mr Fung submits that the Sanctioned Offer failed to strictly comply with O.22 r.4 in that there was an absence of the statement in terms of O.22 r.5(3)(b) of the RDC concerning counterclaim and that it contains a customized terms of costs inconsistent with the statutory consequence upon acceptance as per O.22 r.21.

13.  I do not understand this allegation. It is clear that the Sanctioned Offer covers the counterclaim of Madam Chow. I do not agree that O.22 r.5(3)(b) requires that a pro forma statement must be made in respect of a counterclaim. The proposed term relating to Madam Chow’s counterclaim in the Sanctioned Offer should suffice for the purpose of O.22 r.5(3)(b) in my view.

14.  Moreover, I cannot accept that the costs provision in regard to the claim of Madam Chau is a contravention of O.22. Mr Fung refers this court to Wong Yim Man Anthea v Wong Ho Ming Felix [2016] 3 HKLRD 249 and Bright Gold Ltd v Mega Well Development Ltd [2019] 3 HKLRD 868. I do not think that these two authorities can assist Madam Chow.

15.  In my view, a costs provision in a purported sanctioned offer is objectionable if it is in conflict with the prescribed costs consequences of acceptance set out in O.22 rr.20 to 22. Here, the costs provision in the Sanctioned Offer is, unlike those in Wong Yim Man Anthea and Bright Gold Ltd, consistent with the prescribed costs consequences under O.22 r.21. The omission to include the possibility that the court may subsequently make a costs order from such costs consequences cannot possibly have the effect of removing the court’s discretion. Costs is always a matter of the discretion of court and such discretion cannot be fettered by the parties’ agreement.

16.  Mr Fung submits that the costs provision in the Sanctioned Offer would entitle Madam Chau to costs up to the date of dismissal and not the date of acceptance as provided in O.22 r.21(1).

17.  I find no substance in this submission. The costs provision in the Sanctioned Offer is in effect no different from the costs consequences in O.22 r.21(1). The Sanctioned Offer is in compliance with O.22 to my mind.

18.  Mr Fung further argues that in any event Madam Chau did not do better than what she proposed in the Sanctioned Offer. He basically relies on the fact that this court did not allow Madam Chau a lien over the Property for the return of the Deposits. In the Sanctioned Offer, Madam Chow was required to confirm and acknowledge Madam Chau’s entitlement to such a lien.

19.  Mr Fung submits that in considering whether Madam Chau did better than what she proposed in the Sanctioned Offer, this court should not merely focus on the quantitative difference between the Deposits and the Offered Amount. The overall outcome of her claim should be considered in the comparison exercise. I agree.

20.  This court, however, cannot conclude that Madam Chau failed to get a better result merely because she did not get the declaratory relief relating to a lien. This court should adopt a blinker approach and has to consider why such a relief was not granted.

21.  As pointed out by Mr Cheung, at the outset of the trial, Mr Fung confirmed to this court that the Deposits were still in the possession of the solicitors for Madam Chow and they would readily return the same to Madam Chau if her case prevailed at the end. On this basis, Mr Cheung indicated that Madam Chau did not pursue her claim for a lien. This indication was repeated in his written closing submission.

22.  Thus, it is not the case that Madam Chau’s claim for a lien was rejected on merit. She made a reasonable decision to abandon such a claim upon the assurance made by Madam Chow’s legal representatives. This abandonment cannot possibly be considered a concession or failure on the part of Madam Chau.

23.  In the circumstances, I come to the conclusion that Madam Chau did better than what she proposed in the Sanctioned Offer. She is prima facie entitled to enhanced interest and indemnity costs pursuant to O.22 r.24.

24.  Mr Fung does not submit anything to show that it is unjust to allow Madam Chau such added protection. Nor does he say anything about enhanced interest and indemnity costs.

25.  On enhanced interest, Mr Cheung submits that the present case was straightforward and the merit of the claim of Madam Chau was overwhelming. Hence, Madam Chow’s refusal of the Sanctioned Offer is unreasonable. Mr Cheung submits that the rate of enhanced interest should be at least 4.5%.

26.  I accept his submission. As pointed out in the Judgment, Madam Chau’s claim is supported by a decision of the Court of Final Appeal, i.e. Chen Paul & Anor. v Lord Energy Ltd (1997-98) 1 HKCFAR 365 and there is little room for argument.

27.  Furthermore, I note that Madam Chau already abandoned her claim for damages for breach of the Provisional and Formal Agreements in the Sanctioned Offer. Madam Chow should not have insisted on her defence especially in light of the Sanctioned Offer.

28.  That said, Madam Chow only failed in her legal arguments in the proceedings. She did not raise any unnecessary factual disputes. There is no allegation of any questionable conduct or tactics. The enhanced interest rate of 5% is appropriate in the circumstances. Madam Chau should be entitled to enhanced interest on the Deposits in at the rate of 5% above judgment rate from 24 April 2019, which is the day after the latest date on which Madam Chau could have accepted the Sanction Offer without requiring leave, until full payment.

29.  On costs, I see no reason why Madam Chau should not be entitled to her costs of the entire action (including the Summons) on an indemnity basis from 24 April 2019 onwards.

Conclusion and order

30.  For the reasons given, I grant the application of Madam Chau. I make an order in terms of the Summons save that the enhanced interest rate should be reduced to 5% above judgment rate and the effective date for enhanced interest and indemnity costs should be changed to 24 April 2019.

31.  For the avoidance of doubt, I allow certificate for counsel for the purpose of this application too.