CHAN PAK HUNG v. KEUNG LAI NOR WINNIE

HCA 1158/2017

[2022] HKCFI 2667

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1158 OF 2017

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BETWEEN

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D E C I S I O N    O N    C O S T S

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Introduction

1.  Final judgment was handed down on 29 April 2022. This Court made an order nisi that Madam Keung do bear Mr Chan’s costs to be summarily assessed. This is Mr Chan’s application for variation of the costs order nisi to the effect that Madam Keung shall bear his costs from 20 March 2021 onwards on an indemnity basis, on the ground that Madam Keung has failed to beat Mr Chan’s sanctioned offer.

2.  Mr Chan’s solicitors, Bobby Tse & Co (“BTC”) initially applied for variation by letter on 12 May 2022. When the Court pointed out that it was a wrong procedure, BTC took out a summons on 17 May 2022, being 4 days out of time. BTC took out a second summons on 26 May 2022 (“Variation Summons”) for leave to apply for variation out of time and to withdraw his prior summons.

3.  Madam Keung has no objection to Mr Chan’s application to extend time subject to costs. The delay was short. There was no suggestion of prejudice to Madam Keung. I therefore grant leave for Mr Chan to file the Variation Summons out of time.

4.  In this decision, I adopt all the abbreviations in the final judgment.

The sanctioned offer

5.  Mr Chan made an offer by BTC’s letter dated 19 February 2021, marked “without prejudice save as to costs” (“BTC’s letter”). He suggested having his 50% interest in the Peony Heights Flat and car parking space bought out by Madam Keung at a price of HK$4.9 million and to waive his claim for occupational rent. That offer was purportedly less than 50% share in the Peony Heights Properties. By February 2021, Madam Keung had resided, rent free, at the Peony Height Flat for over 30 years to the exclusion of Mr Chan.

6.  Madam Keung’s solicitors, John Ip & Co (“JIC”) responded on 23 February 2021 (“JIC’s letter”), stating that the valuation was not supported by any recognized or accredited valuation. Further JIC stated that as Mr Chan’s claims were not claims for money as such but for the sale of the Peony Height Properties, JIC took the view that BTC’s letter was neither a sanctioned offer nor a Calderbank offer for settlement of this action.

7.  The deadline for accepting the sanctioned offer without the need for leave of the Court fell on 18 March 2021. The trial commenced 4 days later. There was no further correspondence on settlement after JIC’s letter.

8.  After trial, the Court ordered a sale of the Peony Height Properties and that half of the net proceeds of sale be distributed to Mr Chan. The Court also awarded HK$1,000 nominal rent per month which Madam Keung had to pay Mr Chan for the period from 17 May 2017 to the date of delivery of vacant possession.

9.  JIC opposes the Variation Summons on various grounds, including those stated in JIC’s letter.

Whether BTC’s letter was a sanctioned offer or a Calderbank letter

10.  This ground in opposition raised by JIC displays an absence of understanding of the scheme under Order 22 on sanctioned offers.

11.  Whilst the prayer for relief in a statement of claim defines the scope of reliefs that the Court can order after trial, Order 22 does not limit the type of reliefs that a party can propose in his sanctioned offer.

12.  Take for example, in a case like the present where one residential property was in issue, the settlement offers that could be made could be in the form of a lump sum representing the offeror’s share in the property, a period of occupation (with or without rent) before delivery of vacant possession for the purpose of sale, a lease or licence, a percentage of the beneficial interest etc. The options are unlimited. Parties should endeavour to make sanctioned offers using figures rather than vague notions of damages or abstract notions of entitlement.

13.  In the present case where the Court may (and did) hold that each party owned 50% and neither party had the resources to buy out the other party or take out a mortgage, the inevitable consequence must be a sale and distribution of the net proceeds of sale in accordance with the Court order. The letter of Mr Chan was plainly a settlement offer made on the basis of that scenario less a notional amount.

14.  JIC complains that there was no supporting valuation report. With respect, a valuation report is needed only if there is an issue involving expert evidence for trial. For settlement purpose, a professional valuation report is not essential. Valuation is open and available on the internet. Further, a party can easily get a quote of the market price from an estate agent instead of wasting money on a valuation report when it comes to settlement. If Madam Keung had wanted professional valuation, she could have commissioned one herself.

15.  JIC also complains that the offer was made on the assumption of Madam Keung’s ability to raise a lump sum to meet payment of Mr Chan’s proposed sum without regard to her means. I find this complaint unmeritorious. If Madam Keung could not have raised a mortgage, it was equally open to her to make a counter-offer that Mr Chan bought out her share or ask for a percentage of net proceeds of sale beyond 50%. It took two to settle and yet Madam Keung/JIC’s approach was entirely unconstructive.

16.  I find BTC’s letter to be a sanctioned offer. Its being marked “without prejudice save as to costs” plainly also makes it a Calderbank letter. My analyses below would not be affected by the label attached to BTC’s letter.

Was the judgment more advantageous to Mr Chan than his sanctioned offer?

17.  To obtain the benefit of indemnity costs, the plaintiff has to show that the defendant was held liable for more than the proposals contained in the plaintiff’s sanctioned offer; or the judgment against the defendant is more advantageous to the plaintiff than the proposals contained in the plaintiff’s sanctioned offer: Order 22, rule 24(1).

18.  There were 2 major limbs to Mr Chan’s offer (i) in relation to the beneficial interest of the Peony Height Properties and (ii) the other, occupation rent.

19.  In respect of limb (i), there is lack of evidence to enable the Court to judge whether Mr Chan had done better than his offer. He had only produced (admissible) online valuation in respect of the Peony Height Flat before trial. There was nothing to support his suggested valuation of the car parking space at HK$2 million. There was also nothing to show the valuation of the Peony Height Flat and car parking space as of the date of the judgment, whether by way of actual sale price or online valuation evidence.

20.  In respect of limb (ii), the occupation rent from 17 May 2017 to the date of the judgment would have been about $60,000 compared to his waiver of the occupation rent in his offer. The sum awarded could not be regarded as de minimis. Mr Chan plainly did better than what he had offered.

21.  However, one should not lose sight of the fact that there was little trial time spent on the limb (ii). Mr Chan did not tender evidence of the market rent and that was why he was awarded only nominal damages. The trial would still have been inevitable, even if Madam Keung had conceded on the occupation rent. Counsel’s brief would have been incurred by the deadline for acceptance of the offer.

22.  Other grounds of objection have been raised by JIC but they, however decided, would not affect my decision on the outcome. The 2 authorities cited by JIC do not concern indemnity costs on sanctioned offers.

Conclusion

23.  Taking all circumstances into account, I do not consider it appropriate, in view of Mr Chan’s failure to prove his having done better than his offer for the bulk of his case, to order indemnity costs. I dismiss the Variation Summons and award costs to Madam Keung. On a nisi basis, I summarily assess and allow her costs in the sum of $25,000.

24.  I give leave to the Plaintiff to file the Variation Summons out of time and leave to withdraw the prior summons taken out on 17 May 2022. The costs order nisi is made absolute.

25.  On the question of quantum of costs, Mr Chan seeks costs of about $3 million for the action (partly based on his expectation of indemnity costs). This case had no complexity but Madam Keung had made 4 requests for further and better particulars of the statement of claim, and reply and defence and counterclaim. Her defence and counterclaim had undergone 5 versions. Many of the requests could have been dispensed with upon discovery and involved evidence, eg date when Mr Chan became registered owner of a property, when the parties were in an intimate relationship and when they separated, source of purchase money for a property, consideration for transfer of ownership. Similarly, Mr Chan’s request for particulars of the defence was one concerning evidence. He has had 4 versions of the reply and defence and counterclaim, partly arising out of further discovery and amendments to the defence and counterclaim. In my view, there had been unnecessary and disproportionate use of requests for further and better particulars.

26.  Taking all circumstances into account, I summarily assess Mr Chan’s costs at $2,200,000. The costs of $25,000 awarded to the Defendant shall be set off against this sum.

Observations

27.  The property in question was assessed by Mr Chan at $9,840,000. Just his costs claimed are about $3,000,000. It is not clear how much Madam Keung incurred. Costs on both sides would have eaten up over half of the value of the Peony Height Properties. Practitioners are reminded to make full use of sanctioned offers and as early as possible. An offer can be reviewed as the case progresses. Little costs could be saved and little costs on indemnity basis could be awarded, as in this case, by a sanctioned offer made only after pre-trial review.