CHEUNG YUK YING ENGRACIA v. MACGREGOR ISABELLA

HCA 2870/2017

[2022] HKCFI 901

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2870 OF 2017

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D E C I S I O N  ON  C O S T S

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Introduction

1.  On the 14^th of February 2022, I handed down judgment following the trial of this Action (which was heard between 10^th to 13^th January 2022) and made an order dismissing the Plaintiff’s action.

2.  At paragraph 175 of my judgment where I dealt with costs, I held that

“In terms of costs, it was agreed that I would deal with this on a nisi basis. Having regard to my findings and observations above, I will make an order nisi that there be no order as to costs in this Action. The Order will become absolute after 28 days. If an application is made by either party, written submissions (no more than 3 pages) should be filed by that party with the responding party given 7 days to file submission in reply (no more than 3 pages). I will then determine the matter on the papers unless I consider it more appropriate to have a hearing. Having regard to all the circumstances and the history leading to these proceedings, the Court hopes this might be unnecessary.”

3.  Accordingly on the 14^th of March 2022, the Defendant sought to apply for a variation of my costs order nisi.

Defendant’s grounds to vary

4.  In her succinct and helpful skeleton, Miss Joyce Lee for the Defendant seeks the costs order to be varied, by seeking costs on a party and party basis from the second day of trial onwards with a certificate for two counsel to be assessed summarily pursuant to Order 62 rule 9(4) of the Rules of the High Court.

5.  That sum primarily consists of counsel fees in the form of three refreshers and solicitors attendance and total approximately $390,000. ie the days for Day 2 to Day 4 of the Trial.

6.  I have reviewed my notes and observe that the Plaintiff was giving evidence on 10:28 am on Day 1 until 11:51 am of Day 2, whereas the Defendant gave evidence from 14:50 pm on Day 2 until 10:48 am on Day 3. The closing was fixed in the afternoon of Day 4. I am of the view that this is relevant for reasons I will spell out below.

7.  The Defendant’s application is based upon a without prejudice offer (“the Offer”) made orally to the Plaintiff during the afternoon break on the 10^th of January 2022, in other words in the afternoon of the Day 1 of the trial.

8.  The terms of that offer were then set out in a letter dated 10^th of January 2022 which stated that “we put on record that our client has put forward during the afternoon break and hearing today at all about 1530 hours a ‘drop hand’ settlement offer, i.e. our respective clients shall withdraw all of their respective claims with no order as to costs . The said settlement offer was rejected immediately. We reserve all our client’s rights to produce this letter to the court “.

9.  The Defendant submits that the without prejudice offer matches exactly the outcome of the Judgement and that the Offer was immediately rejected by the Plaintiff and no reply has been received in response to it.

10.  This is not disputed by the Plaintiff whose position I will deal with below.

11.  Miss Lee submitted that since the Offer was not one which was made by way of sanctioned offer, as it could not be, Order 22 of the Rules of the High Court could not apply because it included an offer that there should be no order as to costs.

12.  The Defendant thus argues that this not a case where she could have protected her position by means of a sanctioned offer and the situation simply does not fall within the scope of Order 62 rule 5(1)(d).

13.  She refers to the judgement of the Court of Appeal in Leung Lai Kwan v Lo Kai Wing(unreported judgement dated 18^th of August 2015) where Lam VP (as Lam PJ then was) held that

“7. The offers to settle are not simply payment of money by the Defendants to the Plaintiff. They involved the Plaintiff agreeing that she had no interest in the property (under the offer of 12 Sept 2013) or she agreeing to sell the property within 6 months (under the offer of 19June2014) or she co-operating in the valuation process and agreement to accept her interest being limited to half of the assessed value or $1,550,000. All the offers were made on the basis of no order as to costs, which cannot be accommodated in the sanctioned payment or sanctioned offer regime in view of O 22 r 20(1), see Wealthy Plus Ltd v Lai Man Ho [2001] 4 HKC 691. The Judge was clearly right in holding that this is not a case where the Defendants could have protected their position by means of a sanctioned payment, and as such not within the scope of Order 62 rule 5(1)(d).

8. The Judge was also plainly right in holding that despite his view that none of these offers were valid sanctioned offers, they could still be taken into account as a matter of discretionary consideration in light of Order 22 rule 2(4). Mr Lam’s submission that the court cannot take account of offers other than sanctioned offers is plainly unarguable in light of this provision. Further, as we held above, this is not a case within the exclusionary rule of Order 62 rule 5(1)(d). It does not therefore matter whether the offers of 19 June 2014 and 7 July 2014 can in law be regarded as sanctioned offers. The Judge proceeded on the basis that these offers were not sanctioned offers. Notwithstanding that, Order 22 rule 2(4) gives him a discretion, see Eiles v London Borough of Southwark [2006] EWHC 2014 (TCC) (28 July 2006), as recently discussed by Deputy High Court Judge M Ng in Chen Tek Yee v Chan Moon Shing HCA 954 of 2010, 11 June 2015. This approach was consistent with the decision of the Court of Final Appeal in Ming An Insurance Co v Ritz-Carlton Ltd (No 3) (2009) 12 HKCFAR 745 though, unlike that case, we are not dealing with open offers. This was also the approach adopted by Poon J in Montrio Ltd v Tse Piong Shun David [2012] 2 HKC 392 which was upheld on appeal in CACV 291 of 2011, 28 Dec 2012. The Judge was entitled to make his order on costs in the exercise of that discretion.”

14.  This is not disputed by the Plaintiff.

15.  The Defendant argues that the “drop hands” offer they made is virtually indistinguishable from the situation in Fulham Leisure Holdings Ltd v Nicholson Graham & Jones [2006] EWHC 2428 (Ch) where Mr Justice Mann held that “the appropriate way of considering the fact of this offer is to consider what the appropriate cost order would have been absent (the drop hands offer) and then to compare that position with the offer made and see what effect it should have”.

16.  In that case Mr Justice Mann further held “since that letter offers a drop hands settlement and no order as to costs, it is in substance the same as the end result of the litigation…since it was an offer which ought to have been accepted, the costs since the date when it should have been accepted ought not have been incurred…Accordingly the defendants should have their costs from the date when that offer ought to have been accepted” (my emphasis).

17.  I consider that this approach is generally speaking apposite and consistent with common sense.

18.  Notwithstanding that the Plaintiff’s claim was dismissed, it is not the Defendant’s position that I was not entitled in the exercise of my discretion to make no order as to costs (before considering the Offer) given the fact that the Defendant’s evidence on dividends was not accepted by me. It is however said that this factor was already subsumed under the existing costs order.

19.  The Plaintiff therefore submits that applying the principles set out in Fulham Leisure, it is clear that had the Plaintiff accepted the Defendant’s Offer in the afternoon of Day 1 which was the same as the end result of the litigation, the cost and resources from Day 2 to Day 4 could have been save and therefore the Defendant should be awarded her costs from Day 2 onwards.

20.  In so far as quantum is concerned, the Defendant seeks a certificate for two counsel which is not opposed. For my part subject to the question of liability of those costs, I consider that it would be appropriate to grant certificate for two counsel, having regard to all the circumstances of the present case.

Submissions of the Plaintiff on costs

21.  Mr Pang SC (leading Miss Agnes Kwong) oppose the variation of the costs order.

22.  They accept that the existence of a Calderbank offer is a matter which the court is entitled to take into account when exercising its discretion as to costs, highlighting that Order 62 rule 5 makes clear that the extent always depends on the circumstances and the court is entitled to give such weight to such a matter, as it thinks appropriate.

23.  In particular reliance is placed on the judgement of the Deputy High Court Judge Anson Wong SC in Choi Tak Man v Chan Yuk Lan, Didi And Another [2017] 5 HKLRD 619 where his Lordship a paragraph 25 held that “whilst I agree that a party fails to do better than an offer which he has rejected may justify the court awarding cost against him on a higher scale, I am unable to accept that the court must always do. At the end of the day, the existence of a settlement offer is just one of many factors that the court can take into account in the exercise of its discretion and costs and the Order 62 rule 5”.

24.  The Plaintiff seeks to highlight the importance of the timing of the Offer.

25.  What is a reasonable time depends on the circumstances of each case: Wong Yik Po & Ors v Director of Lands [1996] 1 HKC at 593H to 594B citing Brandon J’s observation in The Salaverry [1968] 1 Lloyd’s Rep 53 at 68 (on the facts a case where the offer in question was made 11 days before trial and it was held there that it was not reasonable to expect foreign shipowners to take a decision in such a short time frame).

26.  The Plaintiff submits that the proceedings were commenced in 2017, trial dates were fixed in December 2020 and a pre-trial review was conducted on 18^th of October 2021.

Disposition and costs

27.  The trial was unusual in a number of respects as stated in my Judgment. In the introduction section I noted that “while this is on its face a dispute about property and money, this litigation is in reality the continuation of a personal fallout by other means”.

28.  A paragraphs 127 and 128, I also stated that I did not consider that the pursuit and defence of these proceedings by the Plaintiff and indeed the Defendant was really motivated by money per se.

29.  I consider that in the exercise of my discretion it is also important to bear in mind the type of proceedings that I am now dealing with. These are not commercial proceedings between parties who essentially pursue or defend the litigation for economic reasons.

30.  The fons et origo of these proceedings was a personal fallout between two individuals who were once and for many years extremely close to one another.

31.  I do not consider that the existence of the Offer made in the afternoon of Day 1 changes my overall analysis on the costs position. This is especially so where the Plaintiff had been giving evidence and was still giving evidence until the 2^nd day.

32.  Realistically the earliest it would be reasonable to expect that offer might be considered would be after Court hours on Day 2, by which the time the Plaintiff had given evidence and been cross examined. By that stage and given the factual matrix of this case I think it would be unlikely that a litigant in the Plaintiff’s shoes would agree to the Offer given that the bulk of the costs would have been expended and she had already been cross examined.

33.  I recognise that in many cases, and indeed perhaps in the vast majority of cases where a party cannot beat the offer made by the other that may well be a very good reason to order the costs against the person for having refused to accept the offer from that point onwards, because as the Defendant points out parties should be encouraged to take such decisions so as to reduce costs and court time. As Ms Lee highlighted in her further submissions (for which I grant leave) O 1A r 1 of the Rules of the High Court emphasises the need to encourage settlement and the fair deployment of Court resources. I accept that even ‘late’ offers should be encouraged.

34.  To paraphrase Mr Justice Mann, I do not think that in the present context and bearing in mind the overall background it could be said that Day 1 (or indeed Day 2) was the date when the Offer ‘should have been accepted’.

35.  This is thus one of those relatively rare cases where notwithstanding the Plaintiff did not ‘beat’ the Offer made on Day 1 nevertheless I am not prepared to award costs after it being made and therefore I will not accede to the application to vary the costs order nisi.

36.  However, bearing in mind the same very unusual background and the facts of the case I consider that it was reasonable for the Defendant to have made this application and to draw to my attention the existence of the Offer which I could not have been cognisant of, when I made the costs order on a nisi basis.

37.  This argument was dealt with by me on the papers, and having borne this in mind, as well as proportionality and the factors set out above (including that the no order as to costs I made to reflect the justice of this case), I will also make no order as to costs for this application although I have of course firmly borne in mind that the Plaintiff in a limited sense could be said to have succeeded in resisting the application.