BETTER MARINE INTERNATIONAL LTD v. ZHONG SHAN COMPANY LTD
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HCA 958/2014
[2020] HKCFI 623
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 958 OF 2014
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| BETWEEN | ||
| BETTER MARINE INTERNATIONAL LIMITED (百泰國際船務有限公司) | Plaintiff | |
and | ||
| ZHONG SHAN COMPANY LIMITED （鍾山有限公司） | Defendant | |
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Before: Deputy High Court Judge MK Liu in Chambers
Date of Plaintiff’s Submissions: 3 April 2020
Date of Defendant’s Submissions: 30 March 2020 and 9 April 2020
Date of Decision: 17 April 2020
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DECISION
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1. This is an application (“the application”) made by the Defendant (“D”) for varying the costs order nisi (“the Costs Order Nisi”) made by Deputy High Court Judge Seagroatt (“the Judge”) in these proceedings on 6 December 2016. I would first set out the background.
Background
2. In these proceedings, the plaintiff (“P”) claims against D for commission in a ship brokerage contract. In essence, D disputes being a party to the relevant shipbuilding and commission agreements.
3. The trial took place before the Judge on 16-18 and 22-23 November 2016. On 30 November 2016, the Judge handed down a judgment (“the Judgment”), in which the Judge ruled in favour of P and awarded to P €683,850 (or its Hong Kong dollar equivalent at the option of P based on the rate of exchange at 10 March 2010) with interest thereon at the rate of 1% above prime rate from 10 March 2010 until judgment and thereafter at the judgment rate.
4. On 2 December 2016, P wrote to the Judge alerting his lordship of the P’s sanctioned offer dated 24 March 2015 (“the Sanctioned Offer”) made under Order 22 of the Rules of High Court. The gist of the Sanctioned Offer is that the proceedings could be settled by a payment of €827,810 (inclusive of interest) from D to P. D did not accept the Sanctioned Offer.
5. There is no dispute that the Sanctioned Offer was more favourable to D than the provision made in the Judgment. Under the Judgment, D is required to pay about €889,005 (inclusive of interest) to P. Had D accepted the Sanctioned Offer, D would have had been about €61,195, or about 6.88% better off.
6. Having read the Sanctioned Offer, on 6 December 2016, the Judge made the Costs Order Nisi, the terms of which are as follows:
(1) D shall pay interest upon the judgment sum of €683,850 (or its Hong Kong dollar equivalent at the rate of exchange on 10 March 2010) at the rate of 17.9% per annum for the period from 22 April 2015 (ie the deadline to accept the Sanctioned Offer) until 30 November 2016 (ie date of the Judgment);
(2) D shall will pay P’s costs to be taxed on an indemnity basis with effect from 22 April 2015; and
(3) D shall pay interest on those costs at the rate of 17.9% per annum.
7. The Judge directed that D should raise arguments or submissions concerning the Costs Order Nisi within 7 days, otherwise the Costs Order Nisi would become absolute. On 12 December 2016, D made the application and provided submissions to the court. On 16 December 2016, P provided their reply submissions to the court. The application has not yet been determined.
8. D lodged an appeal against the Judgment, which was heard by the Court of Appeal on 7 September 2017. On 11 March 2020, the appeal was dismissed by the Court of Appeal.
9. On 16 March 2020, D wrote to this court and said that as a result of the dismissal of D’s appeal, it would be necessary to have a determination on the application.
10. On 23 March 2020, I directed that the application would be determined by me on paper without an oral hearing. Both Mr Hau for P and Ms Lam for D have provided me detailed written submissions, and I am grateful for that.
The Issues
11. D does not dispute the validity of the Sanctioned Offer and the fact that D did not accept the same. D also does not dispute the indemnity costs provided in the Costs Order Nisi. According to Mr Hau, the matters at issue now are as follows:
(1) whether there should be interest at 17.9% per annum on the judgment sum;
(2) whether there should be interest at 17.9% per annum on costs; and
(3) whether enhanced interest on costs should carry beyond the date of Judgment.
The Proper Approach
12. Before turning to the issues, I would first examine the proper approach in considering the application. Ms Lam submits that the Costs Order Nisi is an order made by the Judge as a result of the exercise of his discretion, and that discretionary decision should not be lightly interfered with. Mr Hau submits that the Costs Order Nisi is only a provisional decision made by the Judge, and the court is prepared to hear further submissions and to vary that provisional order if and when necessary.
13. Ms Lam argues that the Costs Orders Nisi was made by the trial judge over 3 years ago. The Judge has carefully considered the Sanctioned Offer and the parties’ submissions made in the letters provided to the Court in December 2016. In the usual scenario, an application to vary a costs order nisi would be referred back to and determined by the trial judge, who is obviously in the best position to consider all the circumstances of the case, including the conduct of the unsuccessful party, having had first-hand knowledge of the trial, as well as the advantage of observing the witnesses in their oral testimonies and going through the documentary evidence. Regrettably, due to the unsuccessful appeal brought by D to the Court of Appeal, this action dragged on unnecessarily for another 3 years. Consequently, the present application is now unable to be heard before the trial judge. Ms Lam submits that in the circumstances, the Judge’s exercise of his discretion in making the Costs Order Nisi should not be lightly interfered with.
14. Mr Hau submits that the Costs Order Nisi is only a provisional decision made by the court. D is making the application pursuant to the direction given by the Judge. D is not seeking to interfere with the Judge’s discretion. D’s case is that the court could and indeed should come to a different conclusion had the court have the benefit of detailed submissions from the parties.
15. In my view, in considering the application, I am not hearing an appeal against a decision made by the Judge as a result of the exercise of his discretion. I agree with Mr Hau that the Costs Order Nisi is only a provisional decision made by the court, and the court is prepared to hear further submissions and to vary that provisional order if and when necessary. In these circumstances, the rule that a discretionary decision cannot be interfered with unless it can be shown that the discretion was exercised under an error of law or under a misapprehension of facts, or the conclusion reached was outside the generous ambit within which a reasonable disagreement is possible, is irrelevant.
16. However, in considering the application, everything must be based upon the findings and the comments made by the Judge in the Judgment and in the course of the trial. The application is not an opportunity for D to reargue the matters which have already been determined by the Judge. I am not allowed to and would not revisit those matters[1].
Issue 1 – Enhanced interest on the judgment sum
17. Under Order 22 rule 24(2), if the judgment against a defendant is more advantageous to the plaintiff than the proposal contained in a plaintiff’s sanctioned offer, “the Court may order interest on the whole or part of any sum of money (excluding interest) awarded to the plaintiff at a rate not exceeding 10% above judgment rate for some or all of the period after the latest date on which the defendant could have accepted the offer without requiring the leave of the Court.”
18. The principles governing the court’s exercise of discretion in awarding enhanced interest have been succinctly summarized by Au-Yeung J in Grupo Pacifica Incorporadav WorldwideMarine Product Ltd And Others[2], in which the learned judge said:
“7. Order 22, rule 24 of the Rules of the High Court provides that where a plaintiff does better than its proposed sanctioned offer, the court may grant it costs on indemnity basis and enhanced interest rate on the judgment sum after the latest date on which the sanctioned offer could have been accepted without leave of the court. The court will make such orders unless it is unjust to do so.
8. In considering whether it is unjust to do so, the court is required to take into account all the circumstances of the case, including the terms of the sanctioned offer, the stage in the proceedings in which the sanctioned offer was made, the information available to the parties at the time the sanctioned offer was made and the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated: Order 24, r 24(5).
9. The court should also consider the factors set out in Order 62, rule 5(1) when exercising its discretion as to costs, including the underlying objectives and the conduct of the parties.”
19. Order 22 rule 24(5) provides that:
“In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3), the Court shall take into account all the circumstances of the case including—
(a) the terms of any sanctioned offer;
(b) the stage in the proceedings at which any sanctioned offer was made;
(c) the information available to the parties at the time when the sanctioned offer was made; and
(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated.”
20. Order 62 rule 5 provides that:
“(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—
(aa) the underlying objectives set out in Order 1A, rule 1;
(a) any such offer of contribution as is mentioned in Order 16, rule 10, which is brought to its attention in pursuance of a reserved right to do so;
(b) any payment of money into court and the amount of such payment;
(c) any written offer made under Order 33, rule 4A(2);
(d) any written offer which is expressed to be “without prejudice save as to costs” and which relates to any issue 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;
(e) the conduct of all the parties;
(f) whether a party has succeeded on part of his case, even if he has not been wholly successful; and
(g) any admissible offer to settle made by a party, which is drawn to the Court’s attention.
(2) For the purpose of paragraph (1)(e), the conduct of the parties includes—
(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;
(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and
(d) conduct before, as well as during, the proceedings.”
21. In providing interest at the rate of 17.9% per annum interest on the judgment sum in the Costs Order Nisi, the Judge has enhanced the interest at 9.9% above the judgment rate, which is close to the maximum rate allowed under Order 22 rule 24(2). Mr Hau submits that the enhancement is excessive. Mr Hau argues that the proper enhanced interest rate should be 2% above the judgment rate.
22. Mr Hau submits:
(1) The maximum 10% uplift must be reserved for the worst kind of cases[3].
(2) The relevant factors in considering the enhanced interest rate include the following:
(a) whether the plaintiff would have been overcompensated for awarding excessive enhanced interest bearing in mind the plaintiff’s own costs of finance[4];
(b) the generosity of the sanctioned offer in comparison with the provisions of the judgment[5] (naturally, the more generous the sanctioned offer, the more the reasons the defendant should have been encouraged to accept the offer instead of protracting with the legal proceedings);
(c) the straightforwardness of the dispute[6] (the more straightforward the dispute is, the more the defendant should have realized that the defendant should accept the offer).
23. Mr Hau argues that in normal circumstances, the court would not award enhanced interest at the rate of 10% or close to 10% above the judgment rate. Mr Hau refers me to various cases in support of his submissions[7].
24. Mr Hau submits that the enhanced interest rate should be 2% instead of 9.9% above the judgment rate for the following reasons:
(1) The Sanctioned Offer is not excessively generous as it is only more than the provision in the Judgment by less than 7%. D acknowledges that D should have accepted it as a matter of hindsight, but the Sanctioned Offer cannot be categorized as one which is plainly generous enough that any reasonable person in D’s position ought to have accepted it even with the benefit of legal advice.
(2) The dispute in these proceedings cannot be said to be a straightforward one. The dispute involves a chain of shipbuilding contracts, commission agreements, variations and addendums involving different parties and change of parties at different stages and factual disputes on whether D was a party to these contracts. Throughout the proceedings, D had never acted in such a way (eg in unreasonably pursuing the matter to trial where his case was obviously unsustainable either on the facts or in law) which warrants a higher enhanced interest rate. In any event, the time needed for the Court of Appeal in delivering the decision (2.5 years) indicates that the underlying factual circumstances and degree involves a degree of complexity and is definitely not a straightforward claim.
(3) Given the low interest regime in Hong Kong in the past decade, an award of enhanced interest rate at 17.9% per annum would have the effect of giving P a windfall and overcompensation.
25. With respect, I am unable to accept these submissions.
26. As said in the above, in considering the application, everything must be based upon the findings and the comments made by the Judge in the Judgment and in the course of the trial. It would be useful to begin by looking at the findings and the comments made by the Judge in the Judgment. The Judge in fact took a very dim view on D’s case and made severe criticisms against D and D’s witnesses in the Judgment.
(1) At [8] of the Judgment:
“The defendant attempted to suggest that it was not a subsidiary of the Jiangsu Overseas Group or controlled by it but was a wholly separate entity. This was really a form of subterfuge in order to try and be consistent with the defence, which itself soon proved to be a sham.” (Emphasis added)
(2) At [9]:
“The agreed diagram showing the corporate structure of these Jiangsu businesses, effectively under the overall direction and responsibility of the Jiangsu provincial government, made it clear that the defence and the contended for nature of Zhong Shan Company Limited, a company incorporated in HongKong, was a fiction.” (Emphasis added)
(3) At [10]:
“…… Although the manoeuvrings of these companies in relation to the ship building contract with Concordia, and the commission agreement with the plaintiff, resembled a form of corporate musical chairs, it was apparent that Zhong Shan’s role was principally, though not exclusively, that of a financial facilitator.” (Emphasis added)
(4) At [32]:
“…… The defendant failed to pay this and consistently ignored all the demands and failed to provide any sort of explanation until proceedings were commenced in 2014. It is difficult, even at this stage, to see what possible explanation there could be for this default.” (Emphasis added)
(5) At [33]:
“This pleading [the defence], “padded out” to 14 pages of largely irrelevant and repetitious material and riddled with contradictions, denies, amongst other things, any knowledge of preliminary negotiations and/or agreements as to the commission payable to the plaintiff.” (Emphasis added)
(6) At [54]:
“He [Mr Cai of D] had to concede that he had misled (and may have defrauded) the HSBCBank in applying for financial funding for the company in respect of the ship building contract with Concordia. He confirmed that had he declared that Zhong Shan was merely a financial facility agent for the sellers/ship builders, and not in reality a party to the contract with full liability under it, the bank would not have provided the funding necessary.” (Emphasis added)
(7) At [55]:
“He [Mr Cai of D] sought to maintain the fiction that the defendant merely acted as an agent ……” (Emphasis added)
(8) At [61]:
“Madam Lin Min [D’s witness] was a difficult and dogmatic witness in that she was frequently evasive, thus necessitating the repeating of material questions several times before an answer, not always the relevant one, could be elicited. She seemed to be more concerned with trying to defend her actions than concentrating on material matters. I was quite satisfied long before the end of her evidence that she had decided, for her own reasons, whatever they may have been, that she was determined that the plaintiff should not receive its second instalment of commission.” (Emphasis added)
(9) At [75]:
“…… Madam Lin’s arbitrary assessment of what she thought was an appropriate rate of commission within the industry was a post-facto attempt at self-justification and did not make sense.” (Emphasis added)
(10) At [76] and [77]:
“…… No question of agency can possibly arise. Any attempt by the defendant or Jiangsu International in relation to that contract to argue otherwise would constitute an attempted fraud upon Concordia and it was clear from Concordia’s requirements that it was alert to any possible muddying of the waters in relation to liability under the contract.
An identical situation arose in relation to the commission agreement ……” (Emphasis added)
(11) At [79]:
“…… Little did he [Mr Ren of P] know of the plot to deprive him of any more commission.” (Emphasis added)
(12) At [83]:
“It is quite clear, in my judgment, that there was a deliberate decision by the defendant, orchestrated by Jiangsu International and/or Jiangsu Overseas, not to pay MrRen or his company the balance of the commission due to him or it. Madam Lin Min, a powerful personality within the mainland company or group, was behind this decision. She was personally involved throughout, manipulating the defendant company.” (Emphasis added)
(13) At [84]:
“Whether it was a conspiracy involving two or more persons, employees of Jiangsu International and/or the defendant, or Madam Lin Min’s own dishonest attempt to avoid the liability to pay the commission, does not matter. It was decided, probably by Madam Lin Min, to devise some spurious defence to try and justify the decision not to pay the 2ndinstalment of the commission.” (Emphasis added)
(14) At [85]:
“This picture was readily apparent from the outset of this case based on the facts, the documentary evidence and straightforward commercial and commonsense, as I pointed out to defence counsel on two occasions in the vain hope that the defence case would acknowledge some reality.” (Emphasis added)
(15) At [86]:
“The trial as a consequence, took up five working days …… This duration used up valuable court time which could have been applied to cases of substance ……” (Emphasis added)
27. As recorded in [85] of the Judgment, in the course of the trial, the Judge pointed out to defence counsel twice that D should reconsider whether D should pursue the defence to the very end. These reminders have been ignored by D.
28. The Judge also made adverse comments on D’s opposition to an application made by P for leave to amend pleadings. The Judge said the following in the Judgment:
“68. Although I felt that the state of her pleadings was comprehensive enough, and that the defendant’s problems were virtually insuperable on the documents alone, ignoring for the moment the commercially sound sense of the plaintiff’s case, I decided to allow them. They could not cause any prejudice to the defendant and certainly there was no element of surprise.
69. Nonetheless, as was to be expected in this case, [counsel] for the defendant opposed the application because he said he had his “instructions to do so”. The opposition was unwarranted and unrealistic.
…………
71. The proposed amendments could not sensibly be opposed. Strictly speaking they were not necessary but I had some sympathy with [counsel for P] in her concern to ensure that her pleaded case was watertight. There was in any event no need for [counsel for D] to indulge in any amendments to the defence. It is difficult to see how he could graft onto the existing defence anymore “denials”—it would have needed complete re-casting to turn it into an acceptable pleading. Furthermore a “no costs” order could be regarded as generous to the defence. ……” (Emphasis added)
29. In view of all these findings and comments made by the Judge, the point made by Mr Hau as summarized in [24(2)] above simply cannot stand. In the Judge’s view, the picture “was readily apparent from the outset of this case based on the facts, the documentary evidence and straightforward commercial and commonsense”[8]. The Court of Appeal does not disagree with this view. As rightly submitted by Ms Lam, the suggestion that the time taken by the Court of Appeal in delivering its judgment is an indication of the complexity of the dispute is a pure conjecture. It is clear from the Court of Appeal’s judgment itself that the issues raised on appeal was a relatively simple one on the issues of authority and quantum. While the Court of Appeal’s judgment consists of 27 pages, approximately 20 pages are devoted to background.
30. As to the point made by Mr Hau as summarized in [24(1)] above, there is no merit in this point.
(1) I agree with Ms Lam that while Peter Ng J in LoYukSui accepted at [29] that the failure to accept a “very generous” offer in comparison with the judgment may be a relevant factor pointing to an enhanced interest rate, it is not authority for the proposition that the converse position (ie the failure to make an “excessively generous” offer or an offer that “cannot be refused”) should constitute a “mitigating factor” pointing to a lower enhanced interest rate.
(2) The fact that an offer is close to the amount claimed is simply a reflection of the plaintiff’s confidence in the strength of its case and should not be a relevant factor for a defendant’s consideration in rejecting an offer. This is a well-established position and is supported by the authority.
(a) In ChowHow Yeen Margaret And Othersv Wex Pharmaceuticals Inc and another[9] (HCA 537/2013, 5 September 2017), Au-Yeung J said:
“40. Even if the sanctioned offer was close to the amount claimed with interest, that was not a reason to reject it. It might be a reflection of the offeror’s confidence in the strength of her case.CEPLtdv Wuxi Jiacheng Solar Energy Technology Co Ltd [2016] 2 HKC 264, §41.
41. In AntwerpDiamond Bank N.V.v Brink’s Incorporated (No 2) [2015] 4 HKLRD 628, Barma JA said at §21:
“There is no reason why a recipient of a sanctioned offer of a relatively small discount to the claim should not give it serious consideration. Such consideration may lead the recipient to respond with (from his point of view) a more realistic sanctioned offer or sanctioned payment…the process would have driven the parties (together with their lawyers) to give serious and realistic consideration to the possible options of settlement as opposed to the ordinary adversarial mindsets which unfortunately have a tendency to dominate the thinking of those involved in litigation. To that end, the whole process initiated by the original sanctioned offer can achieve what the sanctioned offer and sanctioned payment regimes are designed to achieve.”” (Emphasis added)
(b)Similarly, in KaiMin Fashion (HK) Ltdv Fond Express Logistics Ltd & Anor[10], Recorder Jat SC said:
“12. …… Whether the discount offered was ‘miserly’ or not is irrelevant; what matters under the rules is that the Plaintiff has done better than what it has offered: see on this point Huckv Robson [2002] 3 All ER 263, [2002] EWCA Civ 398, 21 March 2002 (Tuckey LJ at §69-70; Schiemann LJ at §§76, 80). Once that criterion is satisfied, the Court should make an order under O 22 r 24 unless it is unjust in the circumstances of the case to do so.
……
14. …… This case, on the other hand, is what may be called a ‘mis-delivery’ case and claimants in such cases are often, and justifiably, confident of success if the carrier has delivered the goods without production of the original bills of lading. I do not see why the Plaintiffs should not offer a small discount in this type of case to reflect their reasonably justified confidence in the strength of their claims.” (Emphasis added)
31. As to the point made by Mr Hau as summarized in [24(3)] above, I am also of the view that there is no substance in that point.
(1) Mr Hau relies upon the dictum of Peter Ng J in [37] of LoYuk Sui in support of his submissions. However, what has been exactly said by the learned judge in that paragraph is as follows:
“37. To give enhanced interest at the rate of 14% from 1 January 2015 to 8 January 2016 would indeed overcompensate the plaintiff for being kept out of the money which ought to have been paid to him earlier. On the evidence, it is quite inconceivable that the plaintiff had to borrow at the rate of 14% p.a. But that is only part of the picture. As this Court said earlier, it is important that the power under RHCO.22r.24 should be so exercised that the court’s time and resources will not be unnecessarily spent and incurred by the rejection of a serious sanctioned offer which the losing party eventually fails to beat. Awarding interest at the conventional rate of prime plus 1% means interest is not enhanced at all and will be defeating the purpose and underlying objectives of the CJR in general, and RHCO.22 in particular.” (Emphasis added)
(2) The Sanctioned Offer in this case was made on 24 March 2015, after the close of pleadings and around the stage of discovery. Bearing in mind the comment made by the Judge at [85] of the Judgment, the picture was readily apparent from the outset based on the facts, the documentary evidence and straightforward commercial and commonsense. Accordingly, D would already have sufficient information to consider to accept the Sanctioned Offer at the time of the Sanctioned Offer. The Sanctioned Offer was also made 1 year and 8 months before the trial. Had D acted reasonably and accepted the offer, P could have received its long overdue commission over 5 years ago and saved substantial time and out of pocket legal costs, as well as avoided the tremendous inconvenience and disruptions caused to P.
(3) In the view of the Judge, D’s defence is utterly without merit. The Judge is of the view that there was a dishonest, deliberate plot and conspiracy on the part of D to deprive P of its legitimate commission. The Judge is also of the view that this is a case which should not be defended at all.
(4) Mr Hau refers me to cases in which the court awarded enhanced interest at the rate much lower than 10% per annum above the judgment rate. However, each case must depend upon its own facts. In view of all the matters set out in the aforesaid subparagraphs and in [26] – [28] above, it would not be an exaggeration to say that this case is one of the worst cases in which an enhanced interest rate close to 10% per annum above the judgment rate should be adopted.
(5) I am also of the view even on the enhanced interest rate, P could not be regarded as being overcompensated, bearing in mind that P would not be compensated for the inconvenience, anxiety and distress of having to resort to and pursue proceedings which it had suffered for 5 years and had sought to avoid by the Sanctioned Offer[11].
32. In my judgment, the enhanced interest on the judgment sum provided in the Costs Order Nisi is not unjust and should not be varied.
Issues 2 and 3 – Enhanced interest on costs and the time period for the enhanced interest on costs
33. Under Order 22 rule 24(3)(b), the court has jurisdiction to enhance interest on costs in a situation in which the unsuccessful party has previously refused to accept a sanctioned offer which is better than the provision of judgment. As to how the discretion should be exercised, in GoldenEagle Internationalv GR Investment Holdings[12], Johnson Lam J (as he then was) said:
“16. I come to the power to award interest on costs under O.22 r.24(3)(b). The purpose of such power was explained by Chadwick LJ at para.23 of McPhilemyv Times Newspapers (No2):
… It is to redress, in a case to which r.36.21 applies, the element of perceived unfairness which arises from the general rule that interest is not allowed on costs paid before judgment … So, in the ordinary case, the successful claimant who has made payments to his own solicitor on account of costs in advance of the trial will be out of pocket even if he obtains, at the trial, an order for costs in an indemnity basis … he will get nothing to compensate him for the costs of money (or the loss of the use of money) which he has had to bear before trial in relation to payments which he has made on account of costs. An order under para.3(b) of r.36.21 enables the court to achieve a fairer result in that respect.
17. In the subsequent case of KRv Bryn Alyn Community (Holdings) Ltd [2003] PIQR P30, Waller LJ referred to this part of the judgment of Chadwick LJ and went on to say at para.22:
If an order is made to pay costs on an indemnity basis, it is unlikely to be unjust to make the party pay interest on those costs for the period when litigation is being funded when acceptance of a Pt 36 offer should have led to it not being funded. There may be cases where evidence will demonstrate actual dates when clients had put up funds and from which interest will run. Without such evidence the court can do no more than Chadwick LJ did and make the interest run from the date when the work was done or liability for disbursements was incurred.
18. I propose to adopt a similar but modified approach here. There is no evidence of actual payment of costs by the plaintiff. In principle the defendant should pay the plaintiff interest on the costs incurred after 1 February 2010[13] running from the date when the works were done respectively. However, it would be a complicated process if each item of work were to carry interest from a different date. To simplify the process, I shall borrow a well-established approach in working out interest for special damages in personal injuries litigation. I will order interest at half of the rate I would otherwise order on all the costs incurred after 1February 2010 with interest starting to run from 1February 2010 for all the items. I consider this approach to be appropriate bearing in mind that we are not talking about a substantial period. The relevant period is between 1 February 2010 and the date of this judgment on costs and interest when the judgment is finalised.” (Emphasis added)
34. Although Lam J borrowed the approach in working out interest for special damages in personal injuries cases, the approach proposed by Lam J in Golden Eagle has a general application. Obviously, Golden Eagle is not a personal injury case but is a contract dispute.
35. In the light of the principle laid down in GoldenEagle, I am of the view that the pre-judgment enhanced interest on costs should be reduced to a certain extent. There is also force in Mr Hau’s submission that as shown in P’s solicitors’ letter to the court dated 16 December 2016, by that time, P had only paid HK$2,703,711 as costs and disbursements out of the total bill from P’s solicitors in the amount of HK$5,793,348.23 (ie less than half of the billed amount). Hence, by the time of the Judgment, P had only been deprived of less than half of the costs from his pocket. For this reason, the enhanced interest on costs should be reduced. I agree with Mr Hau on this point.
36. There is no dispute that the court may provide post-judgment interest at an enhanced rate on costs[14]. However, Mr Hau submits that there should be no post-judgment enhanced interest on costs. Mr Hau argues that in the Costs Order Nisi, the Judge only provided enhanced interest on the judgment sum up to the date of Judgment. There is no reason why the Judge was not also minded in awarding enhanced interest on costs only up to the date of Judgment. Mr Hau urges that the enhanced interest (at a reduced rate) on costs should be limited to the period from 22 April 2015 to 30 November 2016.
37. I am unable to agree with Mr Hau on this issue. As submitted by Ms Lam, if the Judge was minded to award interest on costs after judgment at the judgment rate only with no enhanced interest, he would have so ordered in the Costs Order Nisi as he did for the enhanced interest on the judgment sum. Given the conduct of D as found by the Judge in the Judgment, I am of the view that post-judgment enhanced interest on costs should be provided to P.
38. Apply the principle in GoldenEagle, I would order that the interest on the costs incurred by P in these proceedings should be at the rate of 9% per annum (ie about ½ of 17.9%) from 22 April 2015 to 30 November 2016. There is no reason to alter the post-judgment interest on costs provided in the Costs Order Nisi. The interest on costs after the date of the Judgment until full payment of the same shall remain at 17.9% per annum.
Costs of the application
39. Save and except the reduction of the pre-judgment interest rate on costs, D has failed in the application. Taking a broad brush approach, I am of the view that 80% of the costs of the application should be awarded to P. Those costs would be summarily assessed on paper without an oral hearing. The application could have been spared if the Sanctioned Offer had been accepted by D in the first place. I am of the view that the 80% costs to be paid by D to P should be assessed on an indemnity basis and with enhanced interest thereon[15].
40. The application was made by D in D’s solicitors’ letter to the court dated 12 December 2016. For the reasons provided in [33] to [38] above, I am of the view that there should be enhanced interest at the rate of 9% per annum on the 80% costs of the application from 12 December 2016 to the date of this decision, and thereafter there would be enhanced interest at the rate of 17.9% per annum on those costs until full payment of the same.
Disposition
41. I order that the Costs Order Nisi be varied to the extent as indicated in [38] above. Subject to this variation, I make absolute the Costs Order Nisi.
42. I also make the costs order as set out in [39] and [40] above. There be leave to P to provide a bill of costs for summary assessment to the court and serve the same on D on or before 24 April 2020, and leave to D to provide a written reply to the said bill to the court and serve the same on P on or before 5 May 2020. Letters and documents provided to the court during the General Adjourned Period should be sent to the designated no-reply email address.
43. Lastly, it remains for me to thank Mr Hau and Ms Lam for the assistance provided to the court.
| ( MK Liu ) Deputy High Court Judge |
Ms Catrina Lam, instructed by DLA Piper Hong Kong, for the plaintiff
Mr Hau Pak Sun, instructed by Charles Chu & Kenneth Sit, for the defendant
[1] Hong Kong Civil Procedure 2020, Volume 1, para.42/5B/1
[3] QvistHenrikv ClatronicFar East Limited[2020] HKCFI 128, [29]
[4] Lo Yuk Suiv Fubon Bank (HongKong) Ltd [2017] 2 HKLRD 477, [37]
[5] Lo Yuk Sui (supra), [29]
[6] Ditto
[7] Qvist (supra), LoYuk Sui (supra), and Lau Koo Laiv Wong Wai Sing [2011] HKCFI 550
[8] Judgment, [85]
[9] HCA 537/2013, 5 September 2017
[10] [2013] 1 HKC 563
[11] Grupo (supra), [19]; Mcphilemy v Times Newspaper Ltd (No2) [2002] 1 WLR 934, [21]
[12] [2010] 3 HKLRD 273
[13] Deadline to accept the sanctioned offer in that case
[14] MaysunEnginneering Co Ltdv International Education and Academic Exchanges Foundation Company Limited [2011] 2 HKLRD 844; UnionGlory Finance Incv Merrill Lynch International Bank Limited [2016] HKCFI 2096
[15] Grupo, [26]; Chow How Yee Margaret, [57]