KIN SHING (LEUNG'S) GENERAL CONTRACTORS LTD v. THE CHINESE UNIVERSITY OF HONG KONG

CACV 56/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 56 OF 2011

(ON APPEAL FROM HCCT NO. 69 OF 2010)

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BETWEEN

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REASONS FOR JUDGMENT

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Hon Tang VP:

1.  In domestic arbitration between Kin Shing (Leung's) General Contractors Ltd ("Claimant") and The Chinese University of Hong Kong ("Respondent"), Mr Charles Manzoni, QC, sitting as sole arbitrator who, having rendered a partial award dated 9 October 2009 on liability and quantum, and a partial award dated 12 May 2010 on interest, made a partial award on costs on 4 October 2010 and directed:

"(1) the Respondent is to pay the Claimant's costs, up to 23 July 2008 on a standard basis.

(2) the Claimant is to pay the Respondent's costs after 23 July 2008 on a standard basis."

2.  The costs award was made notwithstanding that the Claimant had recovered a total of HK$3,252,193.65, of which $2,335,516.76 was an interim payment ordered by the learned arbitrator on 13 February 2007, and the balance, an amount which was agreed as due following his partial award dated 9 October 2009.

3.  In making the costs award, the learned arbitrator took into account that the Respondent had :

"3. … made several offers on a 'without prejudice save as to costs' basis, which amount to factors which I can take into account in the exercise of my discretion. The following offers were made:

3.1. On 24 October 2010 an offer to pay HK$2,800,000 was made, with no order for costs.

3.2. On 23 July 2008 a second offer was made to pay HK$2,800,000, together with a reasonable sum in respect of costs.

3.3. On 31 July 2008 a third offer was made to pay HK$4,800,000, together with a reasonable sum in respect of costs.

3.4. On 25 August 2008 a fourth offer was made to pay HK$7,000,000 together with a reasonable sum in respect of costs."

4.  And over the objection by the Claimant:

"6. … that the offers were defective, in that they were not 'proper' calderbank offers, because they did not address clearly the issue of costs, such that I am unable to compare what was on offer with what was ultimately awarded. As a result it contends that I must ignore them in the exercise of my discretion. …"

5.  The learned arbitrator was of the view that he was entitled to take the offers into account, saying:

"10. Thus, the Respondents are correct to the extent that they submit that the offers cannot be taken as automatically resulting in a costs award in favour of the Respondent (assuming the offer has been beaten). But the Respondent is not correct in suggesting that I should ignore the offers entirely in the exercise of my discretion. They are but one factor in the discretionary mix, and I will have to make an assessment of the importance of those offers, having regard to all the circumstances. Overall, the question that I need to ask concerning the offers is whether they ought reasonably to have been accepted. This is consistent with the proposition of Mummery LJ in Butcher v Woolfe [1999] 1 FLR 334 at p340 A/B-D. Mummery LJ was talking about a classic Calderbank Offer, and on one view the offers in this arbitration are not classic Calderbank offers. But I am satisfied that the question posed is the relevant question to ask irrespective of the true nature of the offer. Any difficulties, or failures of the offer will inevitably be taken into account when asking whether it ought reasonably to have been accepted."

6.  The Claimant was dissatisfied with the costs award, and applied for leave pursuing to section 23(3) of the Arbitration Ordinance (Cap. 341) for leave to appeal to the Court of First Instance, from the partial award.

7.  Leave should normally be granted in the case of a "one-off" dispute when there is a serious doubt as to the correctness of the relevant crime, and when

"43. … a question of law of general public importance or the construction of a standard clause is involved, I think that our courts should normally grant leave to appeal from an arbitral award when, but only when, there is at least a serious doubt as to its correctness. …" per Bokhary PJ, Swire Properties Ltd & Ors v Secretary for Justice (2003) 6 HKCFAR 236.

8.  In the application before the learned Deputy Judge, the Claimant relied on Luk Kwan Hung Nelson v Victory Mark Investment Ltd [2004] 2 HKC 305, where Sakrani J made the following observations when he refused to have regards to the offers described below when exercising his discretion on costs:

"7. The first question for me to consider is whether or not the terms are sufficiently certain as to be capable of a valid acceptance by the plaintiff without any further query or negotiation on the matter. In other words, if everything set out in the letter had been accepted by the plaintiff, would that have constituted a binding and enforceable contract between the parties?

…

10. There must, of course, be certainty in the essential terms. … That being so, the offer made in the letter was not, in my view, capable of a valid acceptance by the plaintiff without any further query or negotiation on the matter. The acceptance of the offer without any further query or negotiation would not have resulted in a binding and enforceable contract between the parties."

9.  Before the learned Deputy Judge, the submission on behalf of the Claimant was that the second offer was not capable of a valid acceptance nor in clear terms so that the Claimant knew what was offered.  Mr G Shaw, of Messrs Deacons, for the Claimant, submitted that although the learned arbitrator had a wide discretion on costs, the discretion did not extend to relying on matters which, as a matter of law, the learned arbitrator could not take into account.

10.   Mr Anthony Houghton, SC, for the Respondent, relied on Article 18 of the Domestic Arbitration Rules:

"Article 18 Payment into Court

Any party may at any time avail himself of the procedure for payment into court pursuant to the provisions of Order 73 of the Rules of the Supreme Court of Hong Kong, although the Arbitrator may take account of any written offer of settlement where a payment into court could have been made."

11.  The learned Deputy Judge refused leave.  He was of the view that "any written offer" in Article 18 should be interpreted broadly.  It should not be "read to refer only to valid calderbank offers."

12.  This is the Claimant's appeal from the order of the learned Deputy Judge.

13.  We have dismissed the appeal, and these are our reasons.

14.  With respect, we agree with the learned Deputy Judge that there is no reason to confine "any written offer" to proper Calderbank offers.  Sakrani J was not dealing with arbitral proceedings, and the correctness of that decision does not have to be decided here.

15.  Although the offers made by the Respondent would not "automatically" result in a costs award in favour of the Respondent (nor indeed would a Calderbank offer when a payment into court could have been made), I am in full agreement with the learned arbitrator and the learned Deputy Judge that such offers may be taken into account by an arbitrator in his exercise of discretion over costs.  Depending on the circumstances, such offers may have no effect on costs or they may result in a successful party being deprived of all or some of its costs. Indeed, a successful party may be ordered to pay some or all of the costs.

16.  In the present case, the costs award was within the ample discretion of the learned arbitrator. I could see no basis for intervention. 

17.  For these reasons, I have dismissed the appeal with costs.

Hon Yeung JA:

18.  I agree.

Hon Chu JA:

19.  I agree.