ANMOL KUMAR SAWLANI v. YESHMA GOBINDRAM SAWLANI

HCA 2231/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2231 OF 2011

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R U L I N G   O N   C O S T S

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1. On 9 May 2013 I ruled on the plaintiff’s application to discontinue the action (and the costs of the action) as well as an application by the plaintiff to obtain costs out of the estate. The issue of costs of the application was left over for the parties to place further materials and submissions before me.

2. The plaintiff filed submissions dated 15May 2013 (subsequently amended on 16May 2013); the defendant filed submissions dated 23May 2013; the plaintiff filed reply submissions dated 27May 2013.

3. This is my ruling on costs.

4. The defendant’s argument is that he had made an offer to pay the plaintiff’s costs on a party and party basis (which “matched” the order that I eventually made) and therefore the costs incurred by the plaintiff’s attempt to seek costs on a higher standard of taxation (and to obtain his own costs out of the estate) were necessitated by the plaintiff’s refusal to accept the defendant’s offer. 

5. The lynchpin of the plaintiff’s argument is that even though at one time (12 September 2012) the defendant had indicated (by way of a draft consent order) a willingness to settle the matter by way of the plaintiff discontinuing the action and the defendant paying the plaintiff’s costs on a party and party basis (which “matched” my order made at the end of the day), this offer had been withdrawn so that there was no effective (or unconditional) offer which the defendant could rely upon to seek costs against the plaintiff.

6. The parties’ respective submissions went through a series of correspondence between the parties concerning their attempts to resolve the matter.  Each tried to put their own “spin” on the correspondence.   But at the end of the day the point is very simple.

7. The “withdrawal” relied on by the plaintiff stems from the fact that at one stage during the negotiations, the plaintiff wanted not only (i) an order that the defendant pays the plaintiff’s costs of the action but also (ii) an order that the plaintiff’s solicitors and client’s own costs be paid out of the estate (see plaintiff’s fax dated 24 October 2012).  The defendant was not amenable to that suggestion and indicated that position in a letter dated 30^th October 2012.  The plaintiff submitted that the result of this (and subsequent correspondence referred to at page 2 of the plaintiff’s costs submissions) was that the defendant had “withdrawn” the offer or had resiled from the earlier agreement to pay costs on a party and party basis, and therefore when he issued the summons there was no effective or “unconditional” offer from the defendant which could be taken into account in my exercise of discretion as to costs.

8. I reject the plaintiff’s interpretation of the correspondence.  I do not read the defendant as in any way resiling from or withdrawing his offer.  Rather, it was the plaintiff who sought to add conditions on the defendant’s proffered consent order (for a provision which I ultimately rejected).

9. Put simply the position was this:

(1) The defendant had made an offer (plaintiff discontinues; defendant pays plaintiff’s party and party costs) which matched my ultimate order.

(2) The plaintiff sought to add something to that offer (namely that plaintiff’s solicitors and own client costs to come out of the estate), which I had eventually held to be unjustified.

(3) The defendant did not accept that proposal.  In the defendant’s solicitors’ letter dated 30 October 2012 they stated:

“We are instructed to reiterate that although our client is agreeable to your client’s discontinuance of the Action and to pay the costs of the Action on a party and party basis (to be taxed if not agreed) he does not, however, agree to any costs of the Action being paid out of the estate.

Should your client insist that the Estate is liable to pay such costs, then there can be no basis for our client to be also held personally liable for the costs of the Action (whether on a party-and-party basis or otherwise). As co-administrator, our client can make a similar application to recover his own costs from the Estate, as indicated in our previous letter, if we apply your client’s own misconceived and flawed logic.”

(4) The plaintiff’s solicitors then wrote a few letters (dated 31 October 2012 and 28 November 2012) the effect of which was to put the plaintiff’s own interpretation on the defendant’s position as meaning a withdrawal or resiling from his previous position.  Relying on the defendant’s lack of reply, the plaintiff contends that the defendant has indeed withdrawn the offer.  In the plaintiff’s timetabling questionnaire dated 7 December 2012 it was also asserted that the defendant was not offering to pay the plaintiff’s costs.

(5) But that is not a fair or correct interpretation of the correspondence. 

(6) Specifically, the proposal put forward by the plaintiff on 24 October 2012 as described by me in paragraph 7 above is a rejection of the defendant’s simple offer of “defendant to pay plaintiff’s costs on a party and party basis”, and an attempt to add new terms which had an impact on the defendant.  This is because if any costs are to come out of the estate, it will have an impact against the defendant because the defendant is a beneficiary of the estate.

(7) What the plaintiff was trying to do was to (i) “pocket” the defendant’s offer to pay his costs on a party and party basis and then (ii) impose a new term (i.e. rest of the costs to come out of the estate) which could detrimentally affect the defendant.  But the defendant’s proposal is plainly a once-and-for-all proposal in the sense that it was intended to dispose of all issues in the action (including costs).  It is not something that the plaintiff can seek to “pocket” first and then seek to add some new terms. 

(8) The defendant was not obliged to accept that additional term.  The defendant’s 30 October 2012 letter, in rejecting that proposal, is in my view not a withdrawal of his initial offer.  He was doing no more than to reject the plaintiff’s counter-proposal.  The defendant never said that he was no longer prepared to pay the plaintiff’s party-and-party costs as a once-and-for-all settlement.  The plaintiff’s subsequent correspondence, in putting his interpretation on the defendant’s correspondence (namely in contending that the defendant had resiled from his offer), is really putting words in the defendant’s mouth. 

(9) Indeed the defendant’s letter dated 28 March 2013 made it clear that the defendant had always been agreeable to the plaintiff discontinuing on the basis that the defendant would pay the costs of the action on a party and party basis. 

10. The long and short of the matter is therefore that the defendant had made an offer which the plaintiff had failed to “beat” at the hearing.  In the exercise of my discretion I am entitled to, and I do, take this into account and place weight on it to order costs of this application be borne by the plaintiff on a party and party basis.  

11. But let it be assumed that I was wrong and that the defendant had, by the correspondence relied on by the plaintiff, indeed withdrawn his earlier offer:- my discretion as to costs would still be exercised in the same manner.  The fact remains that an offer has been made at one stage and has not been accepted.  On the facts of this case the defendant was not obliged to keep that offer open and thereby exposing himself to a continuing liability for the plaintiff’s costs (albeit still subject to taxation).  If the defendant had to keep the offer open down to the very last minute in order to protect his costs position, that would not provide any incentive for the plaintiff to provide any reasonable response.  If such a continuing offer is made, the plaintiff could be encouraged to make unreasonable counter-proposals, comforted by the knowledge that even if it was rejected, he could still resort to the defendant’s original offer which was always open for acceptance.  That cannot be right.

12. For the above reasons and in the exercise of my discretion I order that the costs of the application be borne by the plaintiff to be taxed on a party and party basis.