WONG TANG KEUNG v. LEE WAI ENGINEERING CO LTD AND ANOTHER

[English Translation – 英譯本]

CACV 165/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 165 OF 2012

(ON APPEAL FROM DCPI 2053 OF 2007)

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JUDGMENT ON APPLICATION FOR VARIATION OF

COSTS ORDER NISI

Hon Chu JA (giving the judgment of the Court):

1.  On 13 May 2013, we handed down a judgment granting the Plaintiff’s appeal by allowing the damages payable to him by the 1^st and the 2^nd defendants to be increased from $118,543.50 to $231,815.25 with a deduction of $103,788.91 being the employee’s compensation already received by the Plaintiff from the 1^st Defendant. We also made an order nisi as to costs requiring the 1^st and the 2^nd Defendants jointly to pay the Plaintiff $5,000 as the costs of the appeal [“Order Nisi”].

2.  On 27 May 2013, the 2^nd Defendant through his solicitor wrote to this Court applying to amend the order nisi [“the present application”] as follows:

(1) The Plaintiff do pay the 1^st and the 2^nd Defendants costs of the appeal on an indemnity basis, with a certificate for counsel; and

(2) The 1^st and the 2^nd Defendants shall be awarded interest on costs at judgment rate plus 10%.

3.  By a letter dated 21 June 2013, we directed that the Plaintiff do file with the court and serve on the 1^st and the 2^nd Defendants written submission for the present application on or before 4 July 2013, and that the 2^nd defendant do have leave to make a reply submission in writing within 7 days thereafter.  The Plaintiff so far has not submitted to the Court any written submission in relation to the present application.

4.  To save costs and litigation time, we think that it is appropriate to dispense with a court hearing and deal with the present application on papers.

5.  The 2^nd Defendant relied upon Order 22, rule 23 of the Rules of the High Court (Cap. 4A), in making its application.  The applicable parts of the rule are as follows: 

“23. Costs consequences where plaintiff fails to do better than sanctioned offer or sanctioned payment(O.22,r.23)

(1) This rule applies where a plaintiff–

(a) fails to obtain a judgment better than the sanctioned payment; or

(b) fails to obtain a judgment that is more advantageous than a defendant’s sanctioned offer.

(2) …

(3) The Court may order the plaintiff to pay any costs incurred by the defendant after the latest date on which the payment or offer could have been accepted without requiring the leave of the Court.

(4) The Court may also order that the defendant is entitled to–

(a) his costs on the indemnity basis after the latest date on which the plaintiff could have accepted the payment or offer without requiring the leave of the Court; and

(b) interest on the costs referred to in paragraph (3) or sub-paragraph (a) at a rate not exceeding 10% above judgment rate.

(5) Where this rule applies, the Court shall make the orders referred to in paragraphs (2), (3) and (4) unless it considers it unjust to do so.

(6) In considering whether it would be unjust to make the orders referred to in paragraphs (2), (3) and (4), the Court shall take into account all the circumstances of the case including–

(a) the terms of any sanctioned payment or sanctioned offer;

(b) the stage in the proceedings at which any sanctioned payment or sanctioned offer was made;

(c) the information available to the parties at the time when the sanctioned payment or 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 payment or offer to be made or evaluated.

(7) The power of the Court under this rule is in addition to any other power it may have to award or disallow interest.

6.  The Plaintiff was granted leave to appeal out of time regarding HCMP 489/2012 on 18 July 2012. He took out a notice to appeal in relation to the present case on 26 July 2012. Following that, on 28 August 2012, the 1^st and 2^nd Defendants jointly paid into court a sum of $150,000 being the sanctioned payment as an offer in settlement of the whole of the Plaintiff’s claim (minus the employee’s compensation $103,788.91 already received by the Plaintiff). On the same day, the 1^st Defendant also filed and served on the Plaintiff a copy of “Sanctioned Payment Notice”. Meanwhile, the legal representative of the 1^st Defendant also sent a letter to the Plaintiff setting out the possible legal consequences should the Plaintiff fail to do better than the sanctioned payment.

7.  The Plaintiff did not accept the above settlement sum before the expiry of the prescribed 28-day period during which a party may accept a settlement offer without requiring the leave of the court. Subsequently, the 1^st and the 2^nd Defendants jointly wrote to the Plaintiff on 5 April 2012. The said settlement offer was mentioned again and the Plaintiff was given another 14 days to consider accepting the settlement offer. The Plaintiff made no reply.

8.  According to the judgment of this Court dated 13 May 2013, the amount of damages awarded to the Plaintiff minus employee’s compensation $103,788.91 was $128,026.34, namely $231,815.25 - $103,788.91 = $128,026.34. This sum was less than the sanctioned payment ($150,000) offered by the 1^st and the 2^nd Defendants. In other words, the Plaintiff failed to obtain a judgment better than the sanctioned payment.

9.  Order 22, rule 23(5) of the Rules of the High Court (Cap. 4A), provides that the Court shall make the orders referred to in paragraphs(2) to (4). The Court shall only exercise its discretion not to make those orders when it considers it unjust to do so. In the present application, the 2^nd Defendant is seeking orders pursuant to paragraphs(3) and (4).

10.  Rule 23(6) of Order 22 stipulates that in considering whether it would be unjust to make the orders concerned, the Court shall take into account all the circumstances of the case including the 4 factors specified in the rule.

11.  The mechanism under Order 22 aims to encourage the parties concerned to take positive actions to settle the case as soon as possible so as to avoid incurring unnecessary and expensive legal costs.

12.  In the present case, the two Defendants offered their sanctioned payment one month after the commencement of the appeal. This settlement offer was put forward at the very beginning of the appeal. The offered sum for settlement was $21,973.66 more than the judgment sum $128,026.34 (minus the employee’s compensation) allowed by this Court. The difference could not be regarded as insignificant.

13.  The Plaintiff was not legally represented in the appeal. However, the 1^st Defendant’s solicitor’s letter dated 28 August 2012 clearly set out the possible legal consequences should the Plaintiff fail to obtain a judgment better than the sanctioned payment. Not long before the appeal hearing, the two Defendants’ legal representatives wrote to the Plaintiff again revisiting the settlement offer and giving the Plaintiff another 14 days to consider.

14.  Furthermore, in the present application, the Plaintiff did not point toany particular reasons to illustrate that it was unjust to make orders in accordance with rule 23(3) and (4) of Order 22.

15.  Having considered all the circumstances of this case, we are of the view that there are no grounds not to make such orders as mentioned in rule 23(3) and (4). Therefore, the Plaintiff shall pay the 2^nd Defendant’s costs of this appeal taxed on theindemnity basis running from 26 September 2012 (i.e. after the expiry of 28 days where a plaintiff may accept a sanctioned payment without leave from the court).

16.  Besides, the 2^nd Defendant is also entitled to claim interest on costs at a higher rate. The 2^nd Defendant is seeking a rate at judgment rate plus 10%. Yet, his claim was not supported by any particular grounds.

17.  Rule 23(4)(b) mentions a rate which is 10% above judgment rate. Nonetheless, it is merely the ceiling that the court can adopt when making an order for a higher rate. It is not the figure that the court must adopt.

18.  The making of rule 23 (2) to (4) is not intended to penalize those litigants who reject settlement offers. Rather, it aims to achieve a fairer result for the party who wishes to avoid the inconvenience, anxiety and distress of having to go through court proceedings by proposing a settlement offer which is more advantageous than the judgment. In relation to the interest rate on costs as set out in rule (23)(4)(b), it is meant to compensate the party who offers settlement for the costs incurred before judgment. It follows, in the strict sense of the word, that the interest should start to run from the date when the respective expense is incurred. However, this way of computation must be extremely trivial. And the 2^nd Defendant did not submit information in this regard in the present application, either. Under such circumstances, we are of the view that the principles stated in paragraphs 19 and 20 of Golden Eagle International (Group) Limited v G R Investment Holdings Limited [2010] 3 HKLRD 273 can be adopted and award the 2^nd Defendant interest on costs at 4.5% per annum to run from 26 September 2012.

19.  We therefore grant the 2^nd Defendant’s application to varythe order nisi. The order that the 2^nd Defendant do pay costs $5,000 to the Plaintiff shall be amended to:

(1) The Plaintiff do pay the 2^nd Defendant costs in this appeal from 26 September 2012 which are to be assessed on theindemnity basis; and

(2) The Plaintiff do pay the 2^nd Defendant interest on costs as mentioned in paragraph (1) above at 4.5% per annum running from 26 September 2012.

20.  Since the 1^st Defendant does not seek to varythe order nisi, the order that the 1^st Defendant do pay costs $5,000 to the Plaintiff shall stand and become absolute accordingly.