LAM YEE HUNG v. CHINACHEM CHARITABLE FOUNDATION LTD

HCA 764/2015

[2023] HKCFI 2047

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 764 OF 2015

________________________

BETWEEN

________________________

________________________

DECISION ON COSTS

________________________

1.  After trial, this court handed down judgment on 31 March 2023 (“the Judgment”) whereby I found for the plaintiff (“Lam”) and entered judgment on his claim against the defendant (“the Foundation”) with a nisi order that the Foundation shall pay Lam’s costs, including any costs reserved, in the action. Lam now applies to vary the costs order.

2.  The background and discussion of the case were set out in the Judgment, which will not be repeated here. The same definitions and abbreviations are adopted.

3.  By his summons filed on 14 April 2023, Lam seeks the following costs order:

(1) The Foundation do pay Lam’s costs in this action including all costs reserved:

(a) on an indemnity basis to be taxed if not agreed (Option A);

(b) alternatively, on a party and party basis up to 2 December 2021 and on an indemnity basis from 3 December 2021, to be taxed if not agreed (Option B);

(2) The Foundation do pay interest on the above indemnity costs at the enhanced rate of judgment rate plus 10% or a rate as the court deems fit from 3 December 2021 until full payment.

4.  By the affirmation filed in support of the application, those acting for Lam set out the following grounds:

(1) Lam has made a sanctioned offer on 4 November 2021 which the Foundation ignored. The Foundation lost, which is way worse than the terms of the offer.

(2) The Foundation engaged in unreasonable and abusive litigation conduct which wasted time, escalated costs and judicial resources, and contravened the underlying objectives of civil litigation.

5.  The Foundation resists.

Discussion

6.  Lam first argues his Option B on the basis of the sanctioned offer.

7.  There is no dispute that by letter dated 4 November 2021, Lam’s solicitors made a written offer to accept from the Foundation HK$75,000,000 inclusive of interest in full and final settlement of his entire claim. It was served on the Foundation’s solicitors on the same day. It qualified as an offer under O22, rr2-5 of the Rules of the High Court, Cap 4A (“RHC”). The offer was open for acceptance without leave in 28 days, ie until 2 December 2021.

8.  Lam obtained the Judgment against the Foundation in the sum of HK$42,850,000 with interest at the rate of 48% p.a. accruing from the drawdown dates. With accrued interests, the amount which Lam is entitled to recover as of 4 November 2021, ie the date of the sanctioned offer, would have materially exceeded the amount offered for the settlement.

9.  O22, r24 of the RHC provides, amongst others, that:

“(3) The Court may also order that the plaintiff is entitled to—

(a) his costs on the indemnity basis after the latest date on which the defendant could have accepted the offer without requiring the leave of the Court; and

(b) interest on those costs at a rate not exceeding 10% above judgment rate.

(4) Where this rule applies, the Court shall make the orders referred to in paragraphs (2) and (3) unless it considers it unjust to do so.

(5) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3), the Court shall take into account all the circumstances of the case including—

(a) the terms of any sanctioned offer;

(b) the stage in the proceedings at which any sanctioned offer was made;

(c) the information available to the parties at the time when the sanctioned offer was made; and

(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated.

(6) The power of the Court under this rule is in addition to any other power it may have to award interest.”

10.  The issue is whether it is unjust to make an order pursuant to r24(3) upon considering the circumstances of the case including those set out under r24(5).

11.  I do not think it is unjust to do so.

12.  First, nothing about the terms of the offer may be questioned. Second, the offer was made at a time close to the commencement of trial (18 January 2022). However, if one considers that in the scale of the time already taken since the commencement of this action, it was not unreasonably, if at all, late. Much costs and time could still have been saved, had a full blown trial been avoided. Third, the Foundation should have been in a fully informed position to assess its position and the offer when it was made. Last, by ignoring the offer, the Foundation made its conscious decision to accept the consequence of failure to beat the offer eventually.

13.  That the Foundation has lodged an appeal against the Judgment is irrelevant. The present application must proceed on the basis of the Judgment as it is, and hence the consequential costs order. That the Foundation projects the prospect of its appeal in respect of the adjudged interest rate on the principal of the loan recoverable by Lam is also irrelevant. As far as the Foundation was concerned, it was rejection of the offer in its entirety.

14.  As for Option A that Lam is seeking, he pleads for the exercise of this court’s general discretion as to costs pursuant to O62, r28. O62, r5 sets out the following special matters to be taken into account in exercising the discretion:

(1) The underlying objectives set out in O1A, r1;

(2) Settlement offers (including whether the party could have protected his position as to costs by means of sanctioned offer);

(3) Conduct of all the parties, including:

(a) Whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) The manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) Whether a claimant has exaggerated his claim;

(d) Conduct before, as well as during, the proceedings.

(4) Whether a party has succeeded on part of his case even if he has not been wholly successful.

15.  For his purpose, Lam quoted the instance where there is presence of ulterior motive or underhand conduct on the part of the paying party and where the proceedings were conducted in an oppressive manner or such that it constituted an affront to the court: see Overseas Trust Bank Ltd v Coopers & Lybrand (a firm) & Peat Marwick, Mitchell & Co (a firm) & Anor (third parties) [1991] 1 HKLR 177 at 183B-C. He also quoted the instance where the proceedings should never have been defended or unreasonably and unjustifiably persisted by the defendant: see Huge Dragon Corporation Ltd v The Incorporated Owners of Lung Man Oasis (IO) [2014] 3 HKLRD 286 at §13. These circumstances would warrant the exercise of the discretion by the court to award costs on a higher scale.

16.  It appears from the argument advanced by Lam that he acknowledged the need to draw a line between where the court preferred the case of one side to that of the other and where the case of the side rejected ought not to have been put forward at all. Lam argues that the Foundation had crossed the line of legitimate defence and fallen into the latter of the two situations.

17.  In my judgment, it requires much before one would categorise a case as the latter of the two situations mentioned above. The running of a case per se must either be an affront, and I stress, to the court or obviously oppressive or unreasonable from the outset. In other words, the running of the defence or its contentions per se is tantamount to an abuse of legal process. Such a conclusion should not be too readily drawn from the fact that the court prefers one side’s version and finds the losing side’s version to be incredible as a matter of assessment of the evidence in respect of the disputed existence of an oral agreement. While Lam may be aggrieved by the delay in obtaining judgment, the same was compensated by the award of interest, which in the present case was at a substantial contractual rate as found.

18.  Lam also refers to what is described as unfair and oppressive litigation tactics in disregard of the court’s orders. What he refers to was the late application of the Foundation which formed the subject of the order of this court dated 6 January 2022. For such specific litigation conduct in the proceedings, the Foundation was already ordered to face the adverse costs consequence: see reasons for decision and decision on costs in that matter dated 27 January 2022.

19.  As to the failure to mediate, there was attempt by the previous solicitors of both parties to arrange mediation back in 2018. That came to a halt partly because of the Coronavirus pandemic for nearly 2 years. When it was resumed by the succeeding solicitors of Lam, positive response from the Foundation was no longer forthcoming. The sanctioned offer was made at about similar time. As to the relevance of the sanctioned offer, the above discussion refers.

20.  Lam also criticises the attempt of the Foundation to run un-pleaded contention raised only during the trial. That was however disposed of swiftly, as explained in the Judgment. As to the apparent attempt of the Foundation to repeat the same contention in the appeal, that would be a matter for the appellate court to view.

21.  All the circumstances considered, I am not inclined to categorise the present case as one warranting an order that goes beyond the operation of O22, r24 of the RHC (ie Option B) so that the Foundation shall pay all the costs of Lam in the action on an indemnity basis (Option A).

Conclusion and order

22.  All matters considered, I grant an order in terms of §§1(1)(B) and 1(2) of Lam’s summons. Following such event, the Foundation should pay Lam his costs of the application on a party and party basis. Hence an order in terms of §2 of his summons.