LAU YUE KUI, THE ADMINISTRATOR OF THE ESTATE OF LAU WAI CHAU, DECEASED AND OTHERS v. PHILIP CHAN & CO (a firm)

HCMP 593/2007

[2023] HKCFI 2673

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT MISCELLANEOUS PROCEEDING NO 593 OF 2007

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D E C I S I O N

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Background

1.  In my Decision handed down on 19 December 2022, I ordered, inter alia, that (1) decision on paragraph 4 of the Amended Summons be reserved pending further submissions of the parties; and (2) decision on paragraphs 1(b) and 4 of R’s Summons be reserved pending further submissions of the parties. I also ordered the parties to submit and serve their respective further written submissions by certain deadlines.

2.  The parties subsequently agreed to extend the deadlines, and even after all the written submissions had been submitted, the parties continued to make further submissions by way of letters to the court to raise other issues.

3.  The last letter was written by R and dated 14 July 2023. In that letter, R stated that it is their intention to apply for leave to include some orders dated 31 January 1996, 12 December 1996 and 24 January 1998 in HCMP 3924/95 and HCMP 3209/96 to clarify the commencement date of interest on costs.

4.  However, no such application for leave was actually made by R, and for reasons stated below, I do not find such orders would help R in any way. Hence, there is no reason for me to wait for such an application for leave any longer.

5.  Paragraph 4 of the Amended Summons is concerning the costs of the review application and of the initial taxation hearings. Paragraphs 1(b) of R’s Summons is concerning the costs of and incidental to the Originating Summons dated 27 March 2007, ie the costs of the initial taxation. Paragraph 4 of R’s Summons is concerning the costs of R's Summons.

6.  P1 was excused from attending further taxation proceedings until further order by the Order of Master K Lo dated 23 April 2013, and hence P1 has not taken part in the taxation proceedings nor in the review application by P2-6s. P1 is therefore nominally joined for the sole purpose of being bound by any taxation decision or order which may be made by the court.

7.  There are several issues raised by P2-6s and R in relation to costs and interest. The main issue is whether R’s two letters both dated 3 March 2017 (one in respect of Bill No 1 and the other Bill No 2) constituted sanctioned offers under RHC O.62A or Calderbank offers. I shall deal with this issue first.

Sanctioned offers

8.  There is no dispute that the two letters dated 3 March 2017 were issued. They both had the heading “SANCTIONED OFFER MADE PURSUANT TO ORDER 62A, RULE 4 and 5 OF RHC”.

9.  In paragraph 3 of both letters, it was stated that R is prepared to accept a lump sum of certain amounts ($9,404,412.01 and $9,430,145.00 respectively) “plus interest and taxing fee”. In paragraph 6 of both letters, it was stated that the offer is “exclusive of interest and interest is not offered”.

10.  P2-6s argue that paragraphs 3 and 6 are inconsistent with each other, as paragraph 3 seems to suggest that interest is included whereas paragraph 6 does not. However, I do not see any inconsistency here. It is clear to me that in both paragraphs, the lump sum does not include interest. The words “plus interest and taxing fee” in paragraph 3 cannot be construed to mean interest and taxing fee is included in the lump sum. Paragraph 6 just made it clear that interest is excluded and not offered.

11.  Thus, I do not accept P2-6s’ contention that it was not possible for a reasonable reader to know from the two letters whether R’s offer was in fact inclusive of interest. Interest was clearly not included and has to be determined.

12.  P2-6s also contend that under O.62A, r.22, the offer letters must make clear how much the paying party is requested to pay by way of interest, and if interest is not offered, it means that the offer does not require the paying party to pay a separate sum representing interest.

13.  This is clearly a wrong reading of O.62A, r.22. O.62, r.22(1) clearly states that a sanctioned offer is inclusive of interest unless the contrary is indicated. As aforesaid, R has clearly stated in the two letters that interest is not included.

14.  O.62A, r.22(2) is not applicable because interest was not offered by R. Interest is required to be ascertainable under O.62A, r.22(2) only when interest is offered. It is clear that R did not offer interest.

15.  When interest is not included and not offered, P2-6s can still accept the lump sums offered by R to settle the amounts on costs leaving interest to be determined by the court. It is not right for P2-6s to contend that there were no valid sanctioned offers just because interest was not ascertainable.

16.  Thus, it is my finding that the two letters do constitute valid sanctioned offers on the amount of costs acceptable to R even though interest was not included or offered. P2-6s have clearly failed to beat the offers and it is wrong for P2-6s to consider interest as part of the sanctioned offers when it is clear that interest should be dealt with or determined by the court separately.

17.  P2-6s’ reliance on common law principles of offer and acceptance is not relevant at all, as the provisions concerning sanctioned offer under O.62A are already very clear.

18.  It is not necessary for me to discuss about Calderbank offers as it is very clear to me that the two letters were sanctioned offers.

Consequences of not accepting the sanctioned offers

19.  As submitted by R, under O.62A, r.20, the court has the power to order that (1) on the costs allowed in the taxation, interest of up to 10% above judgment rate on such costs after service of the sanctioned offer (O.62A, r20(2)); and (2) on the costs incurred in taxation proceedings, such costs on an indemnity basis and interest on such costs at up to 10% above judgment rate after service of the sanctioned offer (O.62A, r.20(3)).

20.  Under O.62A, r.20(4), the taxing master “shall” make the above orders unless he considers it “unjust” to do so. As held in Qvist Henrik v Clatronic Far East Ltd & Anor [2020] 1 HKLRD 703 (which concerns similar provisions under O.22, r.24), “there must therefore be some positive reasons making it unjust for the orders … to be made.”

21.  In my view, R’s offers were very reasonable, particularly in view of the long history of the proceedings in this case and the unmeritorious issues raised by P2-6s. I simply see nothing “unjust” in making the orders aforesaid.

22.  As to the rate of interest that should be ordered above judgment rate, I have considered the cases cited by R, namely, Cheung Shuk Han v Chik Wai Yin [2013] 4 HKC 311, Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd [2017] 2 HKLRD 477 and Better Marine International Ltd v Zhong Shan Company Ltd [2020] HKCFI 623. I agree with R that a full 10% uplift is warranted in the present case, as R has been deprived with the costs for a long period of time and all these unmeritorious issues raised by P2-6s had prolonged the proceedings. P2-6s only succeeded in one issue concerning the commencement of interest from the date of certification, which could have been brought to the court’s attention at the initial taxation proceedings. R’s offers were very reasonable indeed and yet P2-6s did not even respond to the offers. Comparing with the aforesaid cases, a 10% uplift is really justified.

23.  P2-6s agree that R should be entitled to costs of the initial taxation, but contend that there should be no order as to costs for the review application. I do not agree that there should be no order as to costs for the review application. P2-6s failed in all the substantive issues, and the only issue they won was in relation to the commencement date of interest, which could have been brought to the court’s attention in the taxation proceedings, and it was only a small part of the review application. Since R won the review application substantially, R should have their costs as a whole.

24.  In the circumstances, I am of the view that (1) on the costs allowed in the taxation, there be interest of 10% above judgment rate on such costs after service of the sanctioned offer; and (2) on the costs incurred in taxation proceedings, such costs should be to R and shall be taxed on an indemnity basis, if not agreed, together with interest on such costs at 10% above judgment rate after service of the sanctioned offer.

Pre-certification interest

25.  However, R also wants the court to order pre-certification interest or if the court cannot so order, order the effective date of the certification to be from 4 March 2017.

26.  In this regard, I agree with P2-6s that I have already made a ruling that interest should run from the date of the certification of taxation. To ask me to order pre-certification interest is equivalent to asking me to change my previous ruling. This cannot be done.

27.  As to whether I should order the effective date of certification to be another date, this is simply wrong in law as there is no statutory provision to empower me to do so. R’s reliance on China Medical Technologies Inc (in liquidation) v Samson Tsang Tak Yung, CACV 197/2014, is misplaced as that case involved claims for costs as between opposing parties in legal proceedings which involves a different set of statutory provisions.

28.  As stated clearly in Lam and Lai Solicitors v Ho Chun Yan Albert (No.2) [2018] 5 HKLRD 323, “There being no judgment or order for payment of a solicitor’s bill prior to taxation under s.67, interest cannot run from a date prior to the certificate of taxation, unlike the situation of party-and-party taxation.”

29.  Likewise, it is wrong for R to rely on Robertson, Double and Boase (a firm) v Stephen Lee (a male), HCA 8560/1984, as that case did not involve taxation at all.

30.  The purported reliance on the orders made in HCMP 3924/95 and HCMP 3209/96, as mentioned above, would not help R at all, as the parties have already agreed to have the costs taxed, the amounts were to be determined by taxation. Before the amounts are taxed, there is simply no liability to pay. The previous orders ordering payment of Bill No 1 and Bill No 2 must have lapsed.

Costs of R’s Summons

31.  As to the costs of R’s Summons, it is clear to me that R should bear the costs when they failed to obtain the order sought in paragraph 1(a) of R’s Summons. There is no reason to depart from the “costs-follow-the-event” general principle.

32.  Paragraph 1(b) of R’s Summons is wholly redundant as R could have applied for costs of the initial taxation and review without taking out a formal application.

33.  Thus, R should pay costs of R’s Summons to P2-6s to be taxed if not agreed with certificate for one counsel.

Whether costs should be paid out of the Estate

34.  As to the costs payable by P2-6s, they contend that the costs should be paid out of the Estate, whereas R contend that P2-6s should be liable personally.

35.  First of all, I do not see how R could argue on behalf of the Estate as to whether P2-6s should be reimbursed by the Estate. R should have no interest or locus on this matter. P1 as administrator of the Estate should take care of this, but he took a neutral stance and is willing to be bound by any court orders.

36.  Although I agree with R that P2-6s cannot say that they are acting as administrator of the Estate for the purpose of these taxation proceedings, they are beneficiaries of the Estate and in that capacity they have interest and are entitled to challenge the costs to be borne by the Estate.

37.  On the other hand, I agree with P2-6s that they should not bear the costs personally as what they are pursuing in these taxation proceedings are for the benefit of the Estate as a whole. If they could succeed in having the costs taxed down, this would benefit the whole Estate. The fact that P1 as administrator did not take part in the proceedings does not mean that these proceedings are not for the benefit of the Estate. It is clear that P1 cannot take part in these proceedings because of conflict of interest, but P1 is a party to give the consent to have these taxation proceedings.

38.  In my view, the main question is whether these proceedings are for the benefit of the Estate, and if so, P2-6s should not be held liable personally. All the other matters raised by R are irrelevant.

Consequential directions

39.  P2-6s agree that the certificate of taxation can be issued after the decision on costs is handed down. So this can be so ordered now.

40.  R objects to have dispensation of the usual directions after taxation under PD 14.3, paragraph 38, but P2-6s will not insist on that. I agree that the usual directions should apply just in case there may be other issues that the parties would need to iron out, even though the amounts of costs have been determined.

41.  For the avoidance of doubt, I agree with P2-6s that the reasons set out in the Decision dated 19 December 2022, as well as the Decision herein, shall stand as reasons for the certificate for the purpose of O.62, r.34(4).

Conclusion

42.  By reasons aforesaid, I order as follows:-

(1)  P2-6s do pay costs of the initial taxation and the review application to R, to be taxed on a common fund basis before service of the sanctioned offers and on an indemnity basis after service of the sanctioned offers, if not agreed with certificate for one counsel;

(2)  P2-6s do pay R interest on the whole amount of costs allowed to R in the taxation of Bill No 1 and of Bill No 2 at 10% above judgment rate after service of the sanctioned offers;

(3)  P2-6s do pay R interest on R’s costs of taxation pursuant to paragraph (1) hereinabove mentioned at 10% above judgment rate after service of the sanctioned offers;

(4)  P2-6s’ own costs and the costs and interests awarded to R as aforesaid be paid out of the Estate;

(5)  Usual directions under PD 14.3, paragraph 38 applies;

(6)  Certificates of taxation of Bill No 1 and Bill No 2 be issued;

(7)  The reasons set out in the Decision dated 19 December 2022 and the Decision herein shall stand as the reasons for the said certificates for the purpose of O.62, r.34(4); and

(8)  R do pay P2-6s’ costs of R’s Summons to be taxed on party and party basis if not agreed, which can be offset from the costs payable by P2-6s to R in the review application.