FONG CHOK FUNG AND ANOTHER v. WAYTEX PLASTIC MANUFACTURING LTD AND ANOTHER

HCA 1950/2017

[2023] HKCFI 204

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1950 OF 2017

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DECISION ON INTEREST
AND COSTS

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1.  By Judgment herein dated 14 December 2022 (the “Judgment”), I gave judgment for Ps in the amounts set out at §§86 and 87 (the “Judgment Sums”). The background and issues are set out in the Judgment, and I adopt the terminology therein.

2.  Pursuant to §§89 and 90 of the Judgment, Ps applied to vary the costs orders nisi and addressed their claim for interest. The parties have exchanged written submissions on these issues, which I now determine.

3.  In relation to both interest and costs, Ps relied on two sanctioned offers dated 25 April 2022 and 10 June 2022 respectively, made by Ps to Ds, which offered amounts lower than the Judgment Sums, but which Ds did not accept.

4.  Ps sought orders for:

(1)  interest on the Judgment Sums from the date upon which each cause of action accrued until the latest date Ds could have accepted the first Sanctioned Offer without leave of the Court ie 23 May 2022 (the “1^st Sanctioned Offer Date”) at 1% over HSBC’s best lending rates;

(2)  interest on the Judgment Sums after the 1^st Sanctioned Offer Date at 10 % above the judgment rate;

(3)  costs on an indemnity basis after the 1^st Sanctioned Offer Date; and

(4)  interest on such costs at 10% above the judgment rate.

5.  In seeking items (2) to (4) above, Ps relied on Order 22 rule 24 RHC (Cap 4A).

INTEREST ON THE JUDGMENT SUMS UP TO THE 1^ST SANCTIONED OFFER DATE

6.  Ds did not object to Ps’ proposed interest rates for this period, and made no submission as to the dates from which interest should start running (which were set out in some detail in Ps’ written submissions).

7.  Accordingly, I will award to Ps interest on the Judgment Sums from the dates when the causes of action accrued until 23 May 2022 at 1% over HSBC’s best lending rates which were applicable from time to time[1].

INTEREST ON THE JUDGMENT SUMS AFTER THE 1^ST SANCTIONED OFFER DATE

8.  A main item of controversy was whether Ps should be awarded elevated interest on the Judgment Sums after the 1^st Sanctioned Offer Date.

9.  The applicable principles are set out in: Qvist v Clatronic Far East Ltd [2020] 1 HKLRD 703 per Mr Recorder Stewart Wong SC at §§15-29; Zief Inc v Tekchandani and ors [2021] HKCFI 730 per Mr Recorder Eugene Fung SC; Wah Lun International Development Ltd v Lau Chiu Shing [2021] HKCFI 1976 per DHCJ William Wong SC at §§4-10. I will not repeat the principles, but rely on and apply the summaries in those decisions.

10.  Ds did not dispute that the powers to order elevated interest and costs were engaged, since Ps obtained a more favorable result than was offered in either of the sanctioned offers. Accordingly, the Court should make orders as set out in Order 22 rule 24(2) and (3), unless it considers it unjust to do so.

11.  Ds argued that it would be unjust to award (inter alia) elevated interest, for the following reasons.

12.  First, Ds said that the sanctioned offers were made at an advanced stage of the proceedings with trial initially scheduled to start on 15 September 2022.

13.  However, I do not see that as a reason why it would be unjust to order elevated interest. Given the advanced stage of the proceedings, Ds should have been well-placed to assess the merits of the sanctioned offers when they were made.

14.  Second, Ds complained that Ps did not suggest the basis of calculation for the figures offered. In particular, no amount was identified by Ps for their profit-share claim, and Ps’ pleadings only asked for such claims to be assessed.

15.  However, whilst a defendant should not be required to make a decision whether to accept a sanctioned offer without a careful review of the case with proper information, a defendant ought to make reasonable efforts to settle including, where appropriate, seeking further information: see Qvist §§21 & 22. Insofar as Ds wished to have further information as to the breakdown of the sums offered, they could have sought such information. In any event, the correct calculation of Ps’ profit-share entitlement was of its nature a matter within Ds’ knowledge: see Judgment §30.

16.  Third, Ds said they had an arguable case throughout the trial, and the Judgment acknowledged that portions of Ps’ evidence was thin or less than ideal: Judgment §§33, 62, 73 and 84.

17.  It is true that portions of Ps’ documentary evidence could have been firmer. However, I do not consider that this renders it unjust to order elevated interest, particularly given the manner in which Ds conducted the litigation: Judgment §§6, 22-30, 35, 41, 58, 71, 72 & 82.

18.  Further, the two offers appear to be genuine and were each substantially below the Judgment Sums.

19.  In the circumstances, I am not satisfied that it would be unjust to order elevated interest, and I will so order.

20.  The rate of such interest should be proportionate to the circumstances, including whether a defendant took entirely bad points or behaved unreasonably in the settlement process or litigation. The maximum uplift should be reserved for the worst kind of case.

21.  Taking all the circumstance in the round (including the matters at §16 above), I do not consider this the worst kind of case. I will award an elevated interest rate of 2% above the judgment rate after the 1^st Sanctioned Offer Date.

INTEREST ON THE JUDGMENT SUMS FROM THE DATE OF JUDGMENT

22.  I accept Ds’ submission that in all the circumstances, post-judgment interest should run at the judgment rate: compare Zief at §§38-44.

INDEMNITY COSTS

23.  The arguments on indemnity costs under Order 22 rule 24(3)(a), were the same or very similar to those canvassed above.

24.  For essentially the same reasons, I do not think that it has been shown to be unjust to order indemnity costs after the 1^st Sanctioned Offer Date, and I will so order.

INTEREST ON COSTS

25.  Ps sought interest on their costs from 24 May 2022 onwards, at 10% above the judgment rate. Ds argued that any interest on costs from that date should be at half of the rate of elevated interest on the Judgment Sums, up until judgment: Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273 per Lam J (as he then was) at §§16-19.

26.  There is no evidence as to when Ps’ costs were paid after the 1^st Sanctioned Offer Date. Accordingly, I accept Ds’ submissions here. I will award interest on Ps’ costs incurred from 24 May 2022 up to the Judgment, at a rate of 5%.

DISPOSITION

27.  I will award simple interest to Ps on the Judgment Sums referred to at §§86 & 87 of the Judgment:

(1)  from the dates when the causes of action accrued until 23 May 2022, at 1% over HSBC’s best lending rates which were appliable from time to time[2];

(2)  from 24 May 2022 until the date of Judgment, at 2% over the judgment rate;

28.  After the date of Judgment, interest on the Judgment Sums will run at the judgment rate.

29.  The costs order nisi pronounced at §89 of the Judgment shall be varied to provide that Ps’ costs in this action, including any costs reserved, be paid by Ds, to be taxed if not agreed:

(1)  on a party-and-party basis up to 23 May 2022;

(2)  on an indemnity basis from 24 May 2022;

(3)  with interest on Ps’ costs incurred from 24 May 2022 up to the date of Judgment, at 5%.

30.  As to the costs of Ps’ applications on interest and costs, I will award these to Ps but on a party-and-party basis, to be taxed if not agreed.