SMELOAN HONG KONG LTD v. JIMMY TOYS FACTORY LTD

CACV 34/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 34 OF 2003

(ON APPEAL FROM DCCJ 4813 OF 2002)

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DECISION ON COSTS

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Hon Cheung JA (giving the judgment of the Court):

The appeal

1. The plaintiff obtained judgment in the District Court against the defendant in default of acknowledgment of service by the defendant.

2. The defendant then applied to set aside the judgment but was unsuccessful. An appeal was lodged against the decision.

3. The appeal was fixed to be heard on 31 October 2003.

4. The plaintiff conceded the appeal. We had on 31st October 2003 ordered the appeal to be allowed, the judgment to be set aside and the defendant be given 14 days to file the defence. We refused to grant an order that the plaintiff's action be stayed until a third party is joined.

Costs

5. The only matter that concerns us is the costs relating to the appeal which we shall now give our decision. The parties agreed that the costs in the District Court should not be disturbed and that the defendant should also have the costs of the application for leave to appeal against the judgment.

The offer

6. The plaintiff offered to resolve the appeal by a letter dated 9 October 2003 addressed to the defendant's solicitors. It proposed that the appeal be allowed with no order as to costs. The offer was in the form of a Calderbank letter.

7. The defendant's solicitors did not respond to this letter immediately. The reason being that the handling solicitor was not able to contact the defendant between 11 and 20 October 2003. He only informed the plaintiff's solicitors that he was not able to contact the defendant on 16 October 2003 after the plaintiff's solicitors asked for a response to the offer on 15 October 2003. We would expect a prudent solicitor to have responded earlier and explained the difficulty to the counterpart.

8. In the meantime the defendant's solicitors filed the appeal bundle on 15 October 2003 and counsel's written submission was lodged in court on 20 October 2003. It was served on the plaintiff's solicitors on 22 October 2003.

9. The defendant's solicitors managed to contact the defendant on 21 October 2003 and a conference was held on the next day. On 23 October 2003 the defendant's solicitors rejected the offer and gave a counter offer to the plaintiff. They asked that the costs below and the costs up to the date of the appeal on 31 October 2003 be to the defendant in any event.

10. The plaintiff's solicitors responded on the next day, offering to pay costs up to 9 October 2003.

11. Thereafter there was further correspondence on costs which is not necessary for us to go into.

Starting point

12. The starting point in considering the costs is that it is unreasonable for the plaintiff to offer no order as to costs at first and then to offer to pay costs of the appeal only up to 9 October 2003.

13. The date of the appeal was fixed as early as 5 June 2003. The plaintiff's solicitors came to the scene at the latest on 19 July 2003 when the Notice of Change of Solicitors was filed. The offer to concede the appeal only came on 9 October 2003. The offer should have come earlier. Further it is derisory to make an offer of no order as to costs. By this time the defendant must have incurred costs in relation to his appeal. In any event the defendant must be allowed sufficient time to consider the offer including obtaining legal advice. Hence the costs should not have stopped on the date of the offer.

Defendant's solicitors

14. On the other hand the defendant's solicitors were clearly not justified in the counter offer to ask for costs up to and including the hearing of the appeal on 31 October 2003. The fact that the date of the appeal had already been fixed does not mean that the defendant's solicitors are bound to receive the costs of the hearing from the other party if the appeal is to be resolved earlier. The interest of a lay client in having a dispute resolved without incurring further unnecessary costs must be the first consideration.

15. Moreover, although the defendant's counsel was instructed in about mid June 2003 to attend the appeal and counsel fee which included attending the appeal and preparation of skeleton argument was also agreed upon, brief to counsel was only delivered on 29 October 2003. Until the brief is delivered there is no obligation by the defendant's solicitors to pay for the counsel's fee for the appeal. Hence in considering the response to the offer, counsel's fee in attending the appeal should not have featured in the defendant's counter offer.

16. The costs and fee of the defendant's solicitors and counsel for the hearing of the appeal, however, were featured prominently in the response of the defendant's solicitors. We have no doubt this contributed to the failure of the negotiation. Further concession from the defendant's solicitors on these matters only came on 28 October 2003.

17. The defendant's solicitors had after the receipt of the offer, sought counsel's advice and instructed counsel to prepare for the appeal on 13 October 2003. Pursuant to instruction, counsel prepared the skeleton submission. In our view, while it is justified to seek counsel's advice, the defendant's solicitors were clearly not justified in asking counsel to prepare the skeleton argument on the appeal when the plaintiff had already indicated that it would concede the appeal. Likewise they should not have rushed to prepare the appeal bundle.

18. We fail to see why the defendant's solicitors should incur costs relating to the substance of the appeal when the clear concession is that the appeal would not be contested. The requirement in the Practice Directions on the time for the filing of the appeal bundle and skeleton submission obviously has to be considered in the light of the concession. We repeat that lawyers involved in litigation must ensure that their clients would not be required to incur unnecessary costs. With the concession, the only matter that will really concern the court is the question of costs. The appeal bundle and the skeleton submission are clearly not relevant to this issue.

Our ruling

19. In our view the defendant is entitled to the costs relating to the appeal up to and including 31 October 2003. These costs, however, will not include the costs relating to the preparation of the appeal bundle and the skeleton argument.

20. As the plaintiff had not achieved what it had offered, it must be responsible for the costs of today. Counsel for the defendant was briefed to attend this hearing. However, it is clearly not right to award counsel's costs by reference to the substantive appeal. The hearing on 31 October 2003 lasted for one hour and ten minutes. Forty minutes were taken up for negotiation by the parties at the invitation of this Court with regard to the relevant perspective on the costs issue we sought to identify to the parties at the outset.

21. Originally we had intended to make a gross sum assessment on costs for the entire appeal. Mr. Yeung, counsel for the defendant, provided us with a lump sum figure for his fees and the solicitors' costs. However, as no breakdown figure was given, we would not give an overall assessment. The costs relating to the appeal have to be taxed together with the costs relating to the leave application and the other costs orders that had already been made in this case.

22. We will further disallow the costs of the preparation of the appeal bundle and the skeleton submission as between solicitor and client.