FUNG YIU CHUNG v. YU KWAN TIN

DCCJ 4980/2014

[2019] HKDC 453

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4980 OF 2014

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DECISION ON COSTS

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Introduction

1.  This is an application by the defendant for variation of a costs order nisi.

2.  By a judgment handed down on 5 December 2018, I dismissed both the plaintiff’s claim and the defendant’s counterclaim.  I also made an order nisi that the plaintiff shall pay half of the defendant’s costs of this action, to be taxed if not agreed, with certificate for counsel (“costs order nisi”).

3.  By a summons dated 17 December 2018, the defendant applied to vary the costs order nisi to the extent that the plaintiff shall pay half of the defendant’s costs up to 10 February 2016 and that the plaintiff shall pay the defendant’s costs in full after 10 February 2016 (“Application”).  The basis of the Application, in simple terms, is that there were Calderbank offers by the defendant to the plaintiff, the first being one on 13 January 2016 which was open for acceptance up to 10 February 2016, that the plaintiff should have accepted.

4.  The Application was opposed by the plaintiff on the basis that it was not unreasonable for the plaintiff to reject all the defendant’s Calderbank offers and that, in any event, it is not just and fair to throw the defendant’s entire costs on the plaintiff.

Offers between the parties

5.  On 12 January 2016, the defendant made a sanctioned offer to the plaintiff that the defendant would accept $25,800 inclusive of interest in full and final settlement of the defendant’s counterclaim.

6.  On 13 January 2016, the defendant made a separate Calderbank offer to the plaintiff that, if the plaintiff would accept the said sanctioned offer, the defendant would pay $55,800 inclusive of interest in full and final settlement of the plaintiff’s claim, the defendant would waive his entitlement to costs in the counterclaim and that the whole action would be discontinued with no order as to costs.  That means, the plaintiff, if willing to accept that Calderbank offer, would receive $30,000 net.  That Calderbank offer was open for acceptance until 10 February 2016.  It was rejected by the plaintiff on 15 February 2016.

7.  On 14 March 2016, the defendant made another Calderbank offer to the plaintiff that, the defendant would pay the plaintiff $50,000 net (inclusive of interest and no order be sought on costs) in full and final settlement of the whole action (including plaintiff’s claim and defendant’s counterclaim).  It was again rejected by the plaintiff on 29 March 2016.

8.  On 1 April and 3 June 2016, the defendant made two more Calderbank offers to the plaintiff with increased net settlement sums of $100,000 and $120,000 (proposing no order as to costs) respectively, both offers were rejected by the plaintiff.

9.  Then, the plaintiff made two Calderbank offers to the defendant on 17 June 2016 and 8 May 2017 respectively.  In the first offer, the plaintiff expressed willingness to accept a net sum of $230,000 ($140,000 damages plus $90,000 costs) to settle.  In the second offer, the plaintiff indicated that he would agree to a full and final settlement of the whole action, if the defendant would pay the plaintiff $100,000 with costs to be taxed if not agreed and withdraw the counterclaim with no order as to costs.  Both offers were rejected by the defendant.

10.  Finally, on 15 May 2017, the defendant proposed both parties withdrawing their respective claims altogether with no order as to costs. That proposal was not accepted.  The parties never came to any settlement and the trial commenced as scheduled.

My Decision

11.  It is provided under Order 62 rule 5(1)(d) of the Rules of the District Court that:

“ Special matters to be taken into account in exercising discretion (O.62, r.5)

(1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account-

…

(d) any written offer which is expressed to be ‘without prejudice save as to costs’ and which relates to any issues in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22; … ”

12.  As said, the plaintiff’s grounds of objection to this Application are that it was not unreasonable for the plaintiff to reject all the defendant’s Calderbank offers and that, in any event, it is not just and fair to throw the defendant’s entire costs on the plaintiff[1]. In other words, the plaintiff never contended that the Court should not take those Calderbank offers into account by arguing that they fall within the exception under Order 62 rule 5(1)(d).  In fact, the plaintiff submitted and invited the Court to consider the authority Luk Kwan Hung Nelson v Victory Mark Investment Limited[2], at paragraph 14 of the judgment, reciting what was said by Mummery L.J. in Butcher v Wolfe and Wolfe [1999] 1 FLR 334 at p. 340:

“The proper approach to a Calderbank offer, when it is taken into account on a later argument on costs, is to ask whether the party to whom the offer was made ‘ought reasonably to have accepted the proposal in the letter?’ Or, to put it another way, account must be taken of the reasonableness or otherwise of the refusal to accept the offer …”[3]

13.  It is also noted that the plaintiff did not contend that his position under the judgment of this Court was better than the Calderbank offers.  The plaintiff accepted that he could not beat the defendant’s Calderbank offer made on 13 January 2016[4] but still contended that, in all the circumstances, it is reasonable for the plaintiff to reject the defendant’s Calderbank offers, in particular the one made on 13 January 2016 when the parties had not yet exchanged their respective witness statements by then.

14.  As such, the key question for this Application is, whether the plaintiff “ought reasonably to have accepted” the Calderbank offer made by the defendant on 13 January 2016 (which was open for acceptance up to 10 February 2016), namely, to receive $30,000 net from the defendant (parties to bear their own costs) or any of the subsequent Calderbank offers by the defendant, in full and final settlement of this whole action.

15.  Even accepting the plaintiff’s argument that he could not reasonably have accepted the Calderbank offer made on 13 January 2016 because he could not by then have fully assessed all the evidence to come from the defendant, there is no reasonable explanation or justification for the plaintiff not to accept the Calderbank offer made on 3 June 2016, which was open for acceptance until 10 June 2016.   There are two obvious reasons.  First, the defendant filed his last witness statement on 4 May 2016 and the whole of the defence case was then made known to the plaintiff.  Second and more importantly, the Calderbank offer made by the defendant on 3 June 2016, namely a net payment of $120,000 to the plaintiff with no costs order to be sought, was the best offer made by the defendant. This can be regarded as a generous offer from the defendant, in view of the plaintiff’s claim being $300,000 and the defendant’s counterclaim being $201,600[5]. On the other hand, the last Calderbank offer made by the plaintiff, presumably the best one, was the one made on 8 May 2017 asking from the defendant $100,000 with costs to be taxed if not agreed.  Subject to the matters in my observation as expressed in the following paragraph, I consider that the plaintiff “ought reasonably to have accepted” the defendant’s Calderbank offer made on 3 June 2016 which was open for acceptance until 10 June 2016.

16.  Nevertheless, I do not lose sight of the fact that the defendant abandoned two out of three claims under the counterclaim[6] only on the first day of the trial.  In addition, the defendant’s only claim (for return of rental deposit), which was pursued all the way, was also dismissed after trial.  I am of the view that, when exercising my discretion on costs, those matters should be reflected in the final costs order as a matter of fairness.

17.  Now, having been able to consider all the circumstances before, during and after the trial, I am prepared to amend the costs order nisi and make an order absolute as follows:-

(a)   the plaintiff shall pay the defendant half of the defendant’s costs from the date of service of the writ of summons up to 10 June 2016 and 80% of the defendant’s costs thereafter, with certificate for counsel, to be taxed if not agreed; and

(b)   the plaintiff shall pay the defendant costs of this Application under the summons dated 17 December 2018, to be taxed if not agreed.