SUNLIGHT TECHNOLOGY DEVELOPMENT LTD v. AGP (FAR EAST) LTD

DCCJ 4867/2007

[2022] HKDC 263

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4867 OF 2007

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DECISION

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1.  By my decision handed down on 10 February 2022 (“the Decision”), I allowed the plaintiff’s appeal against the decision of the Master and ordered that the defendant’s counterclaim herein be struck out for want of prosecution. On the same occasion, I also ordered the plaintiff’s claim to be struck out for the same reason.

2.  There, I made a costs order nisi that the plaintiff will have the costs of this appeal and P’s Summons, including the costs of the hearing before the Master, with certificate for counsel, to be taxed if not agreed. 

3.  In the Decision and as requested by the parties, I also reserved the question of the costs of this action to be disposed of on papers and gave directions for that purpose. 

4.  On 24 February 2022, the plaintiff issued a summons seeking to vary the said costs order nisi to the extent that such costs be taxed on an indemnity basis.

5.  Since then, the defendant has accepted my directions given upon the plaintiff’s proposal and on a nisi basis on 25 February 2022 to dispose of the plaintiff’s application to vary also on papers, and together with the question of the costs of the action.

6.  I have duly considered the parties’ written submissions, and this is my decision.  For ease of reference, I will continue to adopt the same abbreviations and definitions used in the Decision.

7.  The background, the parties’ dispute and the procedural history are set out in the Decision.  I will only recap them briefly here.

8.  In August 2007, the plaintiff signed the Agreement to purchase the Generator Set from the defendant and paid the Deposit of HK$147,000.  Upon delivery in early September 2007, the plaintiff found that the Generator Set was not “全新西班牙製造及進口” as provided by Clause 1 and had some rust.  A Dispute ensued.  In November 2007, the plaintiff commenced this action to claim the return of the Deposit. The defendant then counterclaimed for the balance of the price at HK$343,000.  However, no steps whatsoever were taken in this action by either party in the next 11 and a half years after the close of pleadings on 7 March 2008.  On 4 November 2019, the defendant filed a Notice of Intention to Proceed to revive the action.  Certain case management and other steps were then taken.  On 23 March 2021, the plaintiff issued P’s Summons to strike out the counterclaim for want of prosecution, which was later dismissed by the Master.  As mentioned, I allowed the appeal and struck out the counterclaim, and at the same time essentially upon the plaintiff’s own application, also struck out the plaintiff’s claim for the same reason.

9.  As I have indicated towards the close of the hearing of the appeal, that on the materials then before me and if the plaintiff’s claim and the defendant’s counterclaim were both struck out for want of prosecution, the appropriate order for costs of the action seemed to me to be no order as to costs save that the plaintiff should have the costs of P’s Summons and this appeal.

10.  The defendant now advocates the same position.

11.  The plaintiff accepts that there should be no order as to the costs of this action up to 2 June 2020, but seeks the costs of the action incurred thereafter (including the costs of P’s Summons and this appeal)  and asks the same be taxed on an indemnity basis either (a)  as from 30 July 2020 because of the unreasonable conducts of the defendant, or (b)  as from 28 April 2021 because the defendant on that day rejected the plaintiff’s sanctioned offer made under Order 22 rule 5 by its solicitors’ letter dated 27 April 2021 in which the plaintiff offered to settle the entire action by the plaintiff paying the defendant RMB45,000 and both parties withdrawing their respective claims and bearing their own costs (“the April 2021 Offer”).

12.  The plaintiff submits that the defendant should pay the costs of this action as from 3 June 2020 because by its solicitors’ letter that day, the defendant rejected a “without prejudice save as to costs” offer made in the plaintiff’s solicitors’ letter dated 26 May 2020 in which the plaintiff offered to pay the defendant a sum of HK$50,000 in full and final settlement of the entire action, with no order as to costs (“the June 2020 Offer”).

The April 2021 Offer

13.  It is convenient for me to first consider the April 2021 Offer.

14.  The material part of the April 2021 Offer read:-

“ …

That being said, our client is prepared to settle this action with your client in order to save the parties’ costs and the Court’s time. Accordingly, pursuant to Order 22 Rule 5 of the Rules of District Court, we are instructed to hereby make a sanctioned offer to the Defendant for settlement of this Action. A draft Consent Summons setting out the details of our proposed terms is enclosed herewith for the Defendant’s consideration. We trust that you will take your client’s instructions thereon.

Please note that the sanctioned offer is for the purpose of resolving this Action expeditiously and is valid for acceptance within 28 days from the date of this letter.

Please also be reminded that the Court may require your client to pay our client’s legal costs on an indemnity basis plus interest if the sanctioned offer is not accepted by your client in time and our client eventually obtain an order in this Action with better terms than those proposed in the sanctioned offer.”

15.  Order 22, rule 5(7)  provides:-

“A sanctioned offer made not less than 28 days before the commencement of the trial must provide that after the expiry of 28 days from the date the sanctioned offer is made, the offeree may only accept it if –

(a)  the parties agree on the liability for costs; or

(b)  the Court grants leave to accept it.”

16.  It is now well settled that a sanctioned offer, to be one within the meaning of Order 22, must be in the prescribed form, and must strictly comply with all the mandatory requirements (Hong Kong Civil Procedure 2022 §22/5/A).

17.  Particularly, it has been consistently held that a failure to comply with Order 22 rule 5(7)  would make the purported sanctioned offer not one within the meaning of Order 22 and one that cannot be relied on as such (Kwok Chin Wing v 21 Holdings Ltd [2011] 3 HKC 542, Montrio Ltd v Tse Ping Shun David [2012] 2 HKC 392, affirmed on appeal [2013] 4 HKC 505, Limbu Dharamaraj v ISS Adams Secuforce Ltd DCPI 1568/2011 [2013] HKEC 510, Hong Kong Civil Procedure 2022 §22/5/A)

18.  However, the April 2021 Offer did not comply with rule 5(7)  in that, whether in the body of the letter or the enclosed draft Consent Summons, it has failed to stipulate the circumstances enabling acceptance of the April 2021 Offer after the expiry of 28 days, as mandatorily required under rule 5(7).

19.  The April 2021 Offer therefore did not constitute a valid sanctioned offer.

The June 2020 Offer and the defendant’s conducts

20.  As have mentioned, by the June 2020 Offer, the plaintiff offered to pay the defendant HK$50,000 in full and final settlement of the action with no order as to costs.  It is not disputed, nor could it be disputed, that this offer was more advantageous than the result the defendant obtained now.

21.  After the June 2020 Offer was rejected, “without prejudice save as to costs” offers and counteroffers continued to be exchanged between the parties up to October 2020.  The defendant initially on 30 July 2020 demanded HK$600,000 in full and final settlement, which was not accepted. Though the plaintiff later on increased its offer to HK$400,000.  It was rejected by the defendant who kept insisting on HK$500,000 in full and final settlement.  Again and stating the obvious, the terms of all these offers by the plaintiff were more advantageous than the results now achieved by the defendant.

22.  The plaintiff now says the amount demanded by the defendant was excessive and unreasonable in that the defendant should not expect to be awarded interest on the amount counterclaimed (HK$343,000)  for the entire period from late 2007 to the date of judgment; and therefore the defendant “was really putting a bite on P” and was oppressive.  The plaintiff submits therefore that it is appropriate to award indemnity costs against the defendant because of such conducts of the defendant.

23.  I note that roughly calculated : assuming Prime Rate to be 5%[1] and the rate of interest awarded being Prime plus 1%, therefore 6%, the interest for 15 years on the amount counterclaimed would have added up to HK$308,700.  The final amount of HK$500,000 demanded by the defendant therefore seems to me represented quite an optimistic assessment of the merits of the defendant’s claim and its entitlement to interest.  It seems to me unrealistic given the 11 odd years of inaction in these proceedings, but I would be hesitant to characterize it as being “oppressive”.

24.  That notwithstanding and in my view, the plaintiff has been making many genuine and sensible attempts by way of numerous rounds of without prejudice communications to try to settle this action amicably and reasonably.  The offers the plaintiff has been making since the June 2020 Offer have been reasonable and provided to the defendant much more advantageous results than the defendant now achieved.  The defendant ought to have reasonably accepted the June 2020 Offer or the later offers.  Instead, the defendant insisted on claiming to the hilt, which as I said is unrealistic.  Its persistent refusal to accept those offers had unnecessarily and unreasonably protracted this litigation. Moreover and plainly, the defendant should have known that its counterclaim was liable to be struck out for want of prosecution.  As I held in the Decision, the more-than-11 years of inaction without a doubt amounted to inordinate and inexcusable delay and yet Lai has proffered disingenuous excuses (which I rejected)  to try to explain away the defendant’s abuse, namely making the counterclaim without the intention to pursue it to conclusion.

25.  Considering the matter in the round, I am persuaded that the defendant’s such conducts are wholly unjustified, and it is appropriate to order it to pay costs on an indemnity basis.  Instead of ordering the defendant to pay the costs between 3 June 2020 and 30 July 2020 on a party and party basis, and thereafter on an indemnity basis, when there does not seem to be substantial costs incurred in those 2 months and in the exercise of my overall discretion, I would simply order that the defendant do pay the plaintiff the costs of this action as from 30 July 2020 on an indemnity basis, to be taxed if not agreed.

26.  The defendant asks that the costs of and occasioned by the very substantial amendment of the Statement of Claim pursuant to the Order of the Master made on 10 December 2021 should be excluded.  This is not disputed by the plaintiff in principle who says that at the time a costs order to that effect should have been given.  However, whether that was so is not entirely certain.  For the avoidance of doubt, I think it right to expressly exclude such costs in the costs order to be made now.

Disposal

27.  In the premises, I order that my costs order nisi be varied to, and the costs of this action be: There be no order as to the costs of this action up to 30 July 2020, and the defendant do pay to the plaintiff the costs of this action (including the counterclaim)  incurred thereafter, including the costs of P’s Summons and the appeal before me (with certificate for counsel), on an indemnity basis, save that the costs of and occasioned by the plaintiff’s amendment of the Statement of Claim pursuant to the Master’s Order dated 10 December 2021 be excepted, to be taxed if not agreed.

28.  On the costs of this application to vary and on the costs incurred to resolve the question of the costs of this action, they should follow the event.  Since the plaintiff has been successful, such costs should be paid by the defendant, and also on an indemnity basis.  I so order nisi to become absolute within 14 days unless any party applies to vary by letter.

29.  I thank Mr Cheung and the solicitors for the defendant for their assistance.