YEUNG KAM KUEN AND OTHERS v. LIOU JE IANG AND ANOTHER

HCMP 1609/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1609 OF 2011

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(By original originating summons and by order to carry on proceedings dated the 2^nd day of March 2016)

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DECISION ON COSTS AND INTEREST

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Introduction

1.  This is a decision arising out of a judgment pronounced on 12 September 2017 (“the Sep 2017 judgment”).  The plaintiffs were the purchasers of a residential unit in Wan Chai (“the suit property”) whereas the defendants were the vendors thereof.

2.  The plaintiffs refused to complete the sale and purchase on the ground that title of the suit property was defective.  On the other hand, the defendants deny their title was defective and treated the refusal to complete as a repudiation of the sale and purchase agreement.

3.  In short, the Sep 2017 judgment decided in the plaintiffs’ favour on liability.  However, in relation to loss and damages, no award was made except for:

(a) $400,000 being the deposit (and part-payment) earlier paid by the plaintiffs to the defendants;

(b) $5,000 being wasted conveyancing expenses.

4.  In their earlier written opening submissions (served also as closing submissions), the parties have not addressed in detail their respective stance regarding the costs of this action and the interest on the judgment sum.  Directions were given subsequent to the Sep 2017 judgment for them to do so.  I have considered the written submissions on costs and interest before deciding on these matters.

Costs

5.  The plaintiffs argue that, because they have succeeded on liability, and managed to succeed in obtaining part of the relief sought, they are the successful party and should be awarded the costs.

6.  On the other hand, the defendants contend that the plaintiffs have not obtained substantial benefit over and above what the defendants have already offered.  More specifically:

(1) the defendants already offered to cancel the transaction and refund the deposit paid ($400,000) even before this action was commenced;

(2) by an offer made in a “Calderbank” letter dated 7 May 2012, the defendants offered to pay $50,000 (in addition to $400,000).  Later, another offer was made on 19 May 2017 to pay (in total) “HK$700,000 with no order as to costs”.

7.  In relation to the “Calderbank” offers, the plaintiffs rely on the observations in the following cases:

(a) Ming An Insurance Co (HK) Ltd v Ritz-Carlton Ltd, FACV 21/2008 (9 March 2009), para 16;

(b) Leung Lai Kwan v Lo Kai Wing & Another, HCMP 1554/2015 (20 August 2015), para 7.

The observations are to the effect that the policy behind RHC Ord 22 r 14(1) and 14(2) and Ord 62 r 5 (1)(d) is that a litigant wishing to settle a claim by money payment should pay the sum into court (to avoid abuses by a mere offer or promise to pay, but which may not be honoured), and that a litigant who fails to do so may not be able to rely on such offer or promise in relation to costs liability.

8.  I agree with the plaintiffs that the defendants’ failure to make use of Ord 22 r 14 should exclude from the court’s consideration their “Calderbank” offers.  However, I also agree with the defendants to the extent that, although the plaintiffs have succeeded on liability, a substantial part of their claim for loss has been unsuccessful.

9.  In this connection, it is noted that:

(1) liability and quantum of loss in this action were separate issues, which are quite distinct and can be easily identified;

(2) the plaintiffs’ claim for the additional costs for acquiring the alternative property (in Kornhill) (about $1.25 million) was wholly rejected;

(3) some of the plaintiffs’ other claims, such as reimbursement of stamp duty and rental expenses for about 2 months, were either not pursued or rejected.

10.  More than one approach may be adopted when deciding how to fairly reflect the outcome summarized in para 8 and 9 above. For example, the costs order may:

(a) award a portion of the costs to one party;

(b) award different costs for different issues;

(c) award costs taking into account both sub-para (a) and (b) above.

11.  Roughly speaking, as much of the trial has been spent on the issue of liability, as on the issue of quantum of loss (except for the return of deposit (para 3(a) and 6(1) above)).  For this reason, I will adopt a more robust approach and, akin to the approach mentioned in para 10(b) above, make an order that each party is to bear its own costs of this action (including any reserved costs).

12.  The defendants argue that the costs should be taxable on District Court scale, because the judgment sum falls far short of that appropriate for commencing an action in the High Court.  Because of the conclusion reached in para 11 above, it is unnecessary to consider this aspect.  Had it been necessary to do so, I would have awarded costs on District Court scale.

13.  The defendants also put forth in relation to this aspect various periods of the plaintiffs’ delay in proceeding with this action.  I agree with the plaintiffs that this is more appropriately a matter to be taken into account when considering the period for paying interest.

Interest

14.  The defendants complain of the following periods of delay by the plaintiffs:

(1) an unsuccessful Ord 14 application caused a 5-month delay;

(2) a 31-month period of total inactivity (March 2012 to October 2014);

(3) the plaintiffs’ application for amended grant of probate and the grant of a “carry-on” order caused another period of delay (early 2015 to March 2016);

(4) delay caused by the obtaining of expert valuation reports for an unsuccessful claim for the costs for acquiring an alternative property.

15.  The defendants argue further that, because of the above periods of delay, the court ought to suitably reduce the interest payable when exercising its discretion conferred by s 48, High Court Ordinance (Cap 4).

16.  They submit that interest should not be awarded at all.  Alternatively, they say interest should only be awarded:

(a) from 23 August 2011 (date of writ) to 7 May 2012 (“Calderbank” offers);

(b) at “the applicable interest rate … which represents interest which a customer might earn from his deposit with a bank” (para 35(c), defendants’ written submissions).  Specifically, interest should run at Hong Kong dollar 7-day fixed deposit rate of HSBC;

(c) post-judgment interest should be at judgment rate.

17.  Despite the observation in Polyset Ltd v Panhandat Ltd, FACV 28/2000 (25 April 2002), para 13, the plaintiffs contend that interest should be fixed at 8% per annum from 23 June 2011 (when the plaintiffs accepted the defendants’ repudiation of the sale and purchase agreement) (alternatively from the date of writ, that is, 23 August 2011).  The observation in the Polyset decision was:

“… the general practice in Hong Kong has, at least since 1984, been to award interest reflecting the theoretical cost to the plaintiff of borrowing the sums withheld. This is a rate taken to be prime plus 1% unless the evidence in a particular case makes adoption of another rate appropriate”.

18.  The factors put forth by the plaintiffs for departing from the practice mentioned in the Polyset decision include: the sale and purchase agreement provided for the immediate return of the deposit, and the defendants have been in possession of the suit property.

19.  None of these matters warrant a departure from the above practice.  The deposit paid earlier by the plaintiffs was in the nature of a debt owed by the defendants.  It was incurred in the ordinary course of what could have been a normal conveyance of real property.  So far as the defendants’ possession of the suit property is concerned, they have been the owners thereof.  There is no reason why their possession of the suit property should justify a higher rate of interest.

20.  The rate of interest should therefore be fixed at prime rate plus one percentage.

21.  I do not agree with either party as regards the period of interest.  The plaintiffs’ delay in proceeding with this action certainly does not justify wholly depriving them of interest on the judgment sum.  On the other hand, I also do not agree with the plaintiffs’ contended periods (para 17 above).

22.  At the end, I consider that the discretion should be exercised to deprive the plaintiffs of interest covering the periods of delay.  I assessed that to be about two years in total.  This action took about 7 years from its commencement to the time of final judgment. Accordingly, the plaintiffs should be entitled to 70% of the interest payable from the date of writ (23 August 2011) to the date of judgment (12 September 2017).  Interest should run at judgment rate thereafter until payment.

Other matters

23.  The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the decision on costs and interest and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

24.  At one stage, the plaintiffs’ solicitors repeatedly requested the court to hand down a “corrigendum” regarding interest on the judgment sum.  The reason why that matter (and the costs of this action) was not considered has been mentioned in para 4 above.  As experience (and the contents of the parties’ subsequent written submissions) shows, this is a matter where the parties ought to be given a proper opportunity to state their case.  It is thus not properly a matter for a “corrigendum”.

Costs order

25.  Similar to what happened in the main claim in this action, neither party has been entirely successful.  The costs in relation to the issues of interest and costs should likewise be: the parties themselves should bear their own costs.