TONG PUN CHUNG v. BLESSGAIN CONSTRUCTION ENGINEERING LTD

DCCJ 4618/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4618 OF 2008

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BETWEEN

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REASONS FOR DECISION

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1.  By a Summons ("the Plaintiff's Summons") dated 9 June 2010, the Plaintiff applied to vary the cost order nisi ("Order Nisi") which I made on 31 May 2010 on account of the sanctioned offer ("the Sanctioned Offer") which it made on 2 March 2010 in the sum of HK$55,000 inclusive of interest, which it managed to "beat".

2.  By a Summons ("the Defendant's Summons") dated 14 June 2010, the Defendant also applied to vary Order Nisi.

3.  I shall deal with the Plaintiff's Summons and the Defendant's Summons together.

Interest

4.  It is the Defendant's case that paragraph 28 of the Judgment should be re-opened and re-considered as the amount of interest payable should take into account the tender of the sum of HK$28,000 prior to 4 September 2008.  By paragraph 2 of the Defendant's Summons, the Defendant seeks a variation of paragraph 28 of the Judgment dated 31 May 2010 to read as follows :-

"As to the element of interest payable, interest on the sum of HK$35,225.25 (HK$63,225.25 - HK$28,000) shall be payable from 4 September 2008 at the rate of 1% above the prime lending rate of The Hongkong and Shanghai Banking Corporation Limited to the date of Judgment and thereafter at the Judgment Rate".

5.  To this, the Plaintiff's case is that this Court has no jurisdiction to entertain the said application as the Court's role is functus officio.

6.  As far as the Plaintiff's case is concerned, it made a Sanctioned Offer on 2 March 2010 in the sum of HK$55,000 which is inclusive of interest.  As the Plaintiff has been awarded a sum in excess of the said sum, the Plaintiff seeks a variation of the order on interest as per paragraph 2 of the Plaintiff's Summons.

7.  I have considered the issue of jurisdiction and I disagree with the Plaintiff's assertion that this Court has no jurisdiction to entertain the Defendant's Summons insofar as it relates to the issue of interest.  The Judgment of the Court has not been sealed.  The parties have not had the opportunity to address this Court on the issues of interest and costs.  Rather the Court has made the Order Nisi, pursuant to which both the Plaintiff and the Defendant have applied to have it varied.  If the Plaintiff's argument is right, this Court would not have jurisdiction to entertain the Plaintiff's application for interest at a higher rate.  This cannot be right.

8.  The relevant correspondence consists of an undated letter which was delivered on 18 June 2008 from the Defendant's solicitors to the Plaintiff's previous solicitors, Messrs Chan and Associates, where a cheque in the sum of HK$28,000 was tendered.  By a letter dated 30 September 2008, the Plaintiff's then present solicitors returned the cheque of HK$28,000 for the Plaintiff's further handling citing the reason that the Legal Aid Department had re-assigned the Plaintiff's case away from the Plaintiff's previous solicitors to the Plaintiff's present solicitors.  Thereafter the Defendant's solicitors by a letter dated 13 October 2008 further tendered payment of the sum of HK$28,000 by citing the basis of its previous tender of that sum :-

"In order to protect our client's position of interest, we send you herewith a cheque in the sum of HK$28,000.00 payable to "Director of Legal Aid" for your further action.  If the Honourable Court do [does] make any order in your client's favour less than the said sum, we reserve our client's right to claim for a refund of the excess paid (if any).

The aforesaid payment is made in advance in respect of your client's potential claim to protect our client's position on interest.  The payment is also made without prejudice to our client's contention that your client should not be allowed at any sum of more than HK$24,178.75 (or plus interest if the Honourable Court making such an order)."

The Plaintiff's solicitors however did not accept the same and returned the cheque on 15 October 2008.

9.  It is clear from the correspondence to which I have been referred that the reason for the return of the cheque in the sum of HK$28,000 on 30 September was made as a result of the re-assignment of solicitors by the Legal Aid Department.

10.  With regard to the 2nd tender of the cheque in the sum of HK$28,000, it was clearly expressed to protect the Defendant's position on interest and that the Plaintiff's entitlement should not be more than HK$24,178.75.  The Plaintiff's solicitors rejected such tender by its letter of 15 October without citing any reasons other than that "the conditions (which are confusing at best) ... are not acceptable."

11.  With respect, the tender by the Defendant's solicitors is not confusing at all.  It was protecting the Defendant's position by tendering payment, HK$24,178.75, of which it was not disputing.  The sum of HK$28,000 was not stated to be in full and final settlement of the Plaintiff's claims against the Defendant.  The Plaintiff on its own case could have accepted the same and this was a reasonable course to take when it would not be suffering any prejudice.  This is especially so when the Defendant admits owing HK$24,178.75.  As to the remaining HK$3,821.25, the Plaintiff could have accepted it on account of sums outstanding to it.

12.  On the above basis, I therefore rule that interest shall accrue from 4 September 2008 on the sum of HK$63,225.25 up to until 13 October 2008 at the rate of 1% above the prime lending rate of The Hongkong and Shanghai Banking Corporation Ltd.

13.  With regard to the interest after 13 October 2008, interest on the sum of HK$35,225.25 (H$63,225.25 - HK$28,000) shall accrue at the rate of 1%  above the prime landing rate of The Hongkong and Shanghai Banking Corporation Limited up until 30 March 2010, which is the last day the Defendant could have accepted the Sanctioned Offer.

14.  For the period after 30 March 2010 up until Judgment, the Sanctioned Offer is relevant and it is convenient that I deal with the issue of costs together with that of interest as the submissions of the Plaintiff and the Defendant was relevant to both.

15.  The Plaintiff's case on this is simple.  On 2 March 2010 it made a Sanctioned Offer in full and final settlement of the Plaintiff's claim against the Defendant. It is commonground that the Defendant did not accept this offer within the time period.  Nor did it make any counter-offer whatsoever.

16.  Since the Plaintiff has been awarded a sum in excess of the Sanctioned Offer, the Plaintiff seeks costs on a higher basis and interest at the higher rate.

17.  To this, the Defendant submitted that the basis of the Plaintiff's claim was rejected by the Court. On the contrary the Court accepted the Defendant's case of the assessment of workdone in that the Court accepted part of the Defendant's case as to how the contra-charges were arrived at.  Further the Court disallowed some of the Defendant's contra-charges not because it found in favour of the Plaintiff, but because the Court was of the view that the Defendant had failed to prove its case.

18.  As far as this is concerned, it was commonground that there was a contract between the parties and all that remained to be proved were the terms of that contract.  Whilst this Court found terms largely analogous to that contended by the Defendant, after the final accounting exercise which this Court conducted, this Court did find that the sum of HK$63,225.25 was outstanding from the Defendant to the Plaintiff.  I reject the contention that this Court disallowed some of the Defendant's contra-charges not because it found in favour of the Plaintiff, but because this Court was of the view that the Defendant failed to prove its case.  This completely ignores the fact that the onus of proof is on the Defendant to prove its case for contra-charges.  During the course of trial, I also remarked as to why in the Defendant's witness statements there was no reference to the reasons behind the contra-charges which the Defendant would have to prove and which it did not.

19.  Mr. Ngai for the Defendant cited, amongst other cases,  the case of Islam v Ali [2003] EWCA Civ 612 where in that case the Plaintiff was claiming a sum in the region of £80,000 and the Court awarded only £12,746.41.  The Court was invited to consider whether the Plaintiff could properly be identified as the successful party and "the winner".  The Court held that in reality the Defendant was the winner and that the amount the Court awarded was substantially less than the amount that was claimed and that the Plaintiff lost his case in principle on the main issue.  I have considered this as well as the other cases cited before me.  Whilst it is true that this Court found the terms of the agreement between the Plaintiff and the Defendant to be largely analogous to that contended by the Defendant, that is all.  This Court did not award a sum substantially less than the amount of claim by the Plaintiff.  Rather it was awarded a principal sum of HK$63,225.25 which is only approximately 18% less than the amount of claim.  I therefore do not find that I have to depart from the general rule that the unsuccessful party should pay the successful party's costs.

20.  As the Plaintiff has "beaten" its Sanctioned Offer in the absence of any counter-offer from the Defendant, in line with the Order 22 rule 24 of the Rules of District Court, it is just that the Plaintiff be entitled to interest at a higher rate and costs on a higher scale.

21.  In support of its application for interest at the higher rate, the Plaintiff's solicitors have sought to rely on Fung Wing Yee v. Chen Jung Chien (HCPI 657/2007).  However in that case Mr. Justice Suffiad only ordered interest at 2% above the Judgment Rate as opposed to the 10% which the Plaintiff now seeks.  In the absence of any oppressive or deceitful conduct on part of the Defendant, I see no basis for awarding interest at 10% above the Judgment rate.  Rather, in line with Fung Wing Yee, I am of the view that interest on the sum of HK$35,225.25 shall accrue at the rate of 3% instead of 1% above the prime lending rate of The Hongkong and Shanghai Banking Corporation Limited up until the date of Judgment and that interest on the sum of HK$63,225.25 shall accrue at 2% above the Judgment Rate until full payment.

Costs

22.  On the question of costs, the Defendant's argument is that had the Defendant accepted the sum of HK$28,000 that would bring its claim to below HK$50,000 which is below the lower Court limit of the District Court.  The Plaintiff should therefore have pursued its claim against the Defendant in the Small Claims Tribunal.  In those circumstances, as per paragraph 3 of the Defendant's Summons, there should either be no order as to costs, or costs should be awarded to the Plaintiff on the Small Claims Tribunal's scale and that the Plaintiff's costs be taxed in accordance with the Legal Aid Regulations.

23.  I do not accept this argument.  Of the sum of HK$28,000 tendered, only HK$24,178.75 is admitted.  The remaining amount of HK$3,821.25 is still contested. The Plaintiff in its action is bound to claim HK$53,630.25 (HK$77,809 - HK$24,178.75 = HK$53,630.25) and not the sum of HK$49,809 as contended by the Defendant.  The Plaintiff therefore issued proceedings correctly in the District Court.

24.  On the basis of the foregoing, I order as follows :-

(i)     Interest on the sum of HK$63,225.25 shall accrue from 4 September 2008 up until 13 October 2008 at the rate of 1% above the prime lending rate of The Hongkong and Shanghai Banking Corporation Limited;

(ii)    Interest on the sum of HK$35,225.25 shall accrue at the rate of 1% above the prime lending rate of The Hongkong and Shanghai Banking Corporation Limited from 13 October 2008 to 2 March 2010.

(iii)   Interest on the sum of HK$35,225.25 shall accrue at the rate of 3% above the prime lending rate of The Hongkong and Shanghai Banking Corporation Limited from 3 March 2010 up until Judgment.

(iv)   Interest on the sum of HK$63,225.25 shall accrue at the rate of 2% above the Judgment Rate from the date of Judgment until full payment.

25.  The Defendant does pay the Plaintiff's costs up to 30 March 2010 on party and party basis to be taxed if not agreed.  Thereafter the Defendant does pay the Plaintiff's costs on an indemnity basis to be taxed if not agreed.

26.  The Plaintiff's own costs to be taxed in accordance with the Legal Aid Regulations.

27.  With regard to the costs of the Plaintiff's Summons and the Defendant's Summons, the Defendant do pay the Plaintiff's costs on an indemnity basis to be taxed if not agreed.