RISE TALL DEVELOPMENTS LTD v. YEUK MAN CO LTD

HCA 1953/2019 and
HCA 2399/2019
(Consolidated)

[2023] HKCFI 2333

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS. 1953 AND 2399 OF 2019

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D E C I S I O N

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A.  INTRODUCTION

1.  The Plaintiff has applied to vary the costs order nisi (“the Costs Order Nisi”)  made in my decision of 18^th May 2023 (“the Decision”),[1] in which I had ordered that (1)  the Defendant should have 70% of the costs of and occasioned by the appeal (that is, the costs relating to the Expert Evidence Summons and the Split Trial Summons), and the application before the Master, but that (2)  the Plaintiff should have the costs of and occasioned by the New Evidence Summons, with certificate for counsel for both hearings, to be taxed if not agreed.

2.  The Plaintiff says that in relation to (1), costs up to and inclusive of 20th October 2022 should be to the Defendant, but costs from 21^st October 2022 onwards should be to the Plaintiff.  The reason for this is that there were two written offers previously made by the Plaintiff to the Defendant expressed to be “without prejudice save as to costs”.

3.  There is no dispute as to the applicable principles.

3.1  The court has a wide discretion to deal with costs of interlocutory proceedings under RHC O.62 r.3(2A).  The matters to be taken into account in exercising that discretion are set out in O.62 r.5 and include the underlying objectives in O.1A r.1, any written offer expressed to be “without prejudice save as to costs” (a Calderbank offer), the conduct of all the parties, and whether a party has succeeded on part of his case, even if he has not been wholly successful.

3.2  A Calderbank offer influences but does not govern the exercise of the discretion.  The proper approach is to ask whether the party to whom the offer was made ought reasonably to have accepted the proposal in the letter.  Account must be taken of the reasonableness or otherwise of the refusal to accept the offer.  See Wong Wai Chun v Lewin [2000] 2 HKC 271 at 277A-D (Master Poon, as he then was).

3.3  A Calderbank offer must be made in clear terms so that the party against whom it may be used on the issue of costs knows what he is offered: Luk Kwan Hung Nelson v Victory Mark Investment Ltd [2004] 2 HKC 305 at [14] (Sakhrani J).

4.  The Plaintiff says that it made two such offers.

4.1  By its solicitors’ letter of 19^th October 2022, the Plaintiff offered to accept the Defendant’s proposal for the appointment of a single joint expert, and for the costs of the Split Trial Summons and the Expert Evidence Summons to be in the cause.

4.2  By its solicitors’ letter of 20th October 2022, the Plaintiff further offered to bear the costs of and occasioned by the Split Trial Summons, and the call-over hearing on 6^th July 2022 insofar as it concerned the Expert Evidence Summons, with the remainder of the costs of the Evidence Summons to be in the cause.

5.  The Defendant did not accept these offers.  The Plaintiff says that this was unreasonable, since:

5.1  it would have resulted in the making of expert directions sought by the Defendant under paragraphs 1(a)  to 1(e)  of the Expert Evidence Summons, which would have been more favourable for the Defendant than the position it eventually achieved since paragraph 1(a)  of the Expert Evidence Summons was dismissed in the Decision;

5.2  it would have obviated the need for the parties to incur the time and costs after 20th October 2022, including two hearings before the Master and the hearing before me.  Had it accepted the Plaintiff’s offer, the Defendant would have been better off in terms of costs even on the basis that costs were to be in the cause (as proposed by Plaintiff in its offers);

5.3  accordingly, the Defendant acted wholly unreasonably and caused a significant increase in the time and costs incurred in the disposal of the Split Trial Summons and the Expert Evidence Summons.

6.  The Defendant says that:

6.1  the letter of 19^th October 2022 was not clear and certain enough to be capable of acceptance, as it simply indicated agreement to the Defendant’s proposal for the appointment of a single joint expert and invited the Defendant to provide a draft consent summons, without specifying details such as the timetable for the expert evidence, payment of the expert’s fees, and so on.  It was the Defendant’s solicitors’ reply of 20th October 2022 which provided the relevant terms;

6.2  the letter of 20th October 2022 was not an offer, but merely an argument regarding the proposed direction as to costs.  The draft consent order in the Defendant’s solicitors’ reply of 20th October 2022 had proposed that the costs of the Split Trial Summons and the Expert Evidence Summons be paid by the Plaintiff.  The Plaintiff had not agreed with this and had only counter-offered that costs should be in the cause;

6.3  the parties in fact reached agreement on 20th October 2022 as regards the disposal of both summonses save as to the issue of costs.  However, the Plaintiff reneged on the agreement, insisted on a full-blown substantive argument, and sought directions for this purpose at the call-over hearing of 26^th October 2022, rather than simply proceeding to have the Master deal with the issue of costs between the parties.

7.  In my view, the Defendant understood the Plaintiff’s solicitors’ letter of 19^th October 2022 sufficiently so that its solicitors were able to propose the terms of a draft consent summons for the Plaintiff’s consideration.  In any event, by the time of the Plaintiff’s letter of 20th October 2022, it was clear that the only disagreement between the parties was that of costs, with all other terms being agreed.  The Plaintiff’s counter-proposal as to costs was spelt out in clear terms.  It was open to the Defendant to accept this counter-proposal, and had it done so, no further time and costs would have needed to be spent on resolution of the two summonses.

8.  The Plaintiff says, and I agree, that there was no concluded agreement on 20th October 2022, as the issue of costs, being a material term, had not been agreed.  See Fosket on Compromise, 9^th ed., at paragraph 3-50.  It could therefore not be said that the Plaintiff had reneged on any agreement when it proceeded to prepare for the call-over hearing on 26^th October 2022 on the basis that the Defendant had not accepted its offer.

9.  The question which I have to consider is whether it was unreasonable for the Defendant not to have accepted the Plaintiff’s offers in its solicitors’ letter of 19^th October 2022 as amended by its solicitors’ letter of 20th October 2022.

9.1  The Plaintiff had agreed to withdraw its application for a split trial and to pay the costs of the application; it had agreed to the Defendant’s proposal for expert evidence and directions for the same, and had further agreed to pay the costs of the same in relation to the forthcoming hearing of 26^th October 2022.

9.2  In response, the letter of the Defendant’s solicitors of 20th October 2022 complains that the costs of the Expert Evidence Summons had been “substantially increased” and were “incurred by virtue of [the Plaintiff’s] unreasonable opposition, inter alia, in taking out [the] Split Trial Summons”.

9.3  It seems to me that these increased costs would already have been provided for by the Plaintiff’s agreement to pay the (a)  costs of the upcoming hearing insofar as it related to the Expert Evidence Summons and (b)  the costs of the Split Trial Summons.  As the Defendant’s solicitors observed at the time, insofar as there were other costs relating to the proposal for expert evidence, these would have formed part of the costs of the action generally and could have been appropriately dealt with as costs in the cause of the action.

9.4  In the circumstances, it was unreasonable for the Defendant not to have accepted the Plaintiff’s offers.

10.  Had the Defendant agreed to the Plaintiff’s offers, substantial time and costs, including but not limited to that of three court hearings, could have been saved.

11.  I therefore vary the Costs Order Nisi in the manner sought in the Plaintiff’s summons of 1^st June 2023.

12.  I further make an order nisi that the costs of the application to vary the Costs Order Nisi should be paid by the Defendant to the Plaintiff, to be summarily assessed on the papers.  The Plaintiff is to lodge and serve a statement of costs within 7 days, limited to 2 pages.  The Defendant is to lodge and serve a list of objections within 7 days thereafter, limited to 2 pages in bullet point form. The Plaintiff is to lodge and serve its reply (if any) within 3 days after, limited to 2 pages in bullet point form.