TSANG YUEN MUI v. 蔡嬋貞

DCCJ1347/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1347 OF 2008

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D E C I S I O N

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1.  The defendant applies for an order that the interest on judgment on the defendant’s counterclaim be paid at an enhanced rate and costs to be paid by the plaintiff to the defendant at an indemnity basis after the expiry of the date of acceptance of the sanctioned offer without leave, ie after 25 August 2011, and for interest thereon plus costs of the present application on an indemnity basis with enhanced interest.

2.  Miss Yung, counsel for the plaintiff, did not dispute that under Order 22 rule 24(2) and (3) indemnity basis costs as from 26 August 2011 shall be just and, an enhanced interest rate is justified.

3.  The remaining issue in dispute is the rate of the enhanced interest.  Miss Yung referred me to the judgment of Lam J in the case of Golden Eagle Group Limited v G.R. Investment Holdings Limited  [2010] 3 HKLRD 273, the case was followed by Bharwaney J in Shih Pik Nog v G2000 (Apparel) Limited [2011] 4 HKLRD 121, where Bharwaney J in his judgment at paragraph 13 held:

“The normal commercial rate of interest awarded by the courts is prime plus 1%. Mr Justice Lam enhanced that rate of interest by 3% and awarded interest at the rate of 4% above prime. The prime rate was 5% and adding another 4% on top of that produced an enhanced rate of 9%, i.e., 1% above the then and current 8% judgment rate.”

4.  In fact, the judgment in Golden Eagle Group case of Lam J referred to by Bharwaney J appeared at paragraph 11 of Lam J’s judgment:

“In the agreed draft judgment, apparently without considering the power of the court to order enhance interest, parties agreed upon interest on the judgment sum from the date of writ to the date of judgment at judgment rate. Judgment rate is usually higher than commercial rate. For the pre-judgment period, the usual practice in commercial cases, and I agree the present case is a commercial case, is to award 1 per cent above prime (see Hong Kong Civil Procedure 2010 Vol.1, pp. 86-87 para. 6/L/11).

Parties did not put evidence of prime rates before me.   However, in the course of submissions, Mr Chan told the Court that the Hong Kong Bank prime rate is 5 per cent whilst the judgment rate is now 8 per cent.  Thus the position agreed between the parties already carried an enhanced element as far as pre-judgment interest on the judgment sum is concerned.”

5.  Miss Yung today urged the court to adopt the Golden Eagle approach where Lam J’s rationale was the judgment rate, being based on the normal commercial rate of interest, already included an element of enhancement on the prime rate of 5%.

6.  In the present case, the defendant made a sanctioned offer to the plaintiff on 28 July 2011, in which the defendant offered to settle the whole claim of the plaintiff against the defendant and the defendant’s counterclaim against the plaintiff in the sum of $45,000, ie for the plaintiff to pay the defendant $45,000 to settle the case, so the case would not need to go any further.  It was presumably inclusive of interest on the sum.  The offer was not accepted by the plaintiff within 28 days from the date of the sanctioned offer.

7.  The judgment sum against the plaintiff on the defendant’s counterclaim after the setting off of the plaintiff’s claim was $50,658.55.  Consequently, Order 22 rule 24 of the Rules of District Court is triggered, hence the present application.   

8.  Pursuant to Order 22 rule 24(5) , the court shall take into account in considering whether it would be unjust to make the orders referred to in paragraphs 2 and 3 of rule 24.  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.

9.  Miss Yung submitted today that there was nothing wrong with the plaintiff proceeding to trial when the sanctioned offer was made 30 days before the trial by which time the parties had prepared for trial in any event.  Further, there is only a small difference between the offer and the judgment sum.

10.  Mr Chan, counsel for the defence, disagreed.  He submitted that  the sanctioned offer terms were reasonable, and the offer was made more than 28 days before the trial.  It was also after the pre-trial review on 21 June 2011, when all of the defendant’s documentary evidence on the counterclaim had been disclosed to the plaintiff but the plaintiff did not request the defendant to provide any information for the plaintiff to study the basis of the defendant’s sanctioned offer.  There was simply no response from the plaintiff after the sanctioned offer.   

11.  Mr Chan further submitted that because the claim is small the enhanced interest rate seemed to be large.  He relied on Lord Woolf’s, Master of the Rolls, dictum in the case of Petrotrade Inc. v Texaco Limited, the Court of Appeal in the UK case [2002] 1 WLR 951. This case was followed by my learned brother Deputy Judge Yu in the case of Poon Yiu Cheung v World Mastery Technology Limited DCCJ632/2005.  The dictum of Lord Woolf in paragraph 77 of his judgment is:

“The amount of the claim is also a relevant factor. If a claim is small, enhanced interest has to be at a higher rate than if the claim is large, otherwise additional advantage for the claimant will not be achieved. In this case the sum involved was neither particularly large nor particularly modest. The conclusion that I would come to is that, if the matter was one for my discretion at first instance, I would award in the region of 4 per cent above base rate for the appropriate period.”

12.  The purpose for Order 20 rule 24 was to encourage parties to settle the case whether it was early in the proceedings or close to the date of trial.   There are obvious advantages in settling early for both parties in the saving of costs and early payment of the claimed sum and the relief of the stress of litigation. The same with an acceptance or making of a sanctioned offer or sanctioned payment. 

13.  There are still obvious advantages in settling or accepting a reasonable sanctioned offer even though it may be a few weeks or days before the trial for it would still save costs and relieve the stress for the parties to attend court and, of course, with the certainty of the outcome when the parties decided to accept an amount offered or accept the payment suggested by the other side.

14.  In the present case, the plaintiff had 28 days or close to a month to accept the sanctioned offer before the trial and the plaintiff had seen all of the defendant’s documentary evidence and the defendant’s witness statements.  Consequently, the defendant’s counterclaim can be assessed by the plaintiff quite easily with the available information before the trial.   The judgment sum after trial was a small one compared to most civil cases in the District Court, it being just above the Small Claims Tribunal limit.  In such circumstances, when the claims and the possibility of recovery of the judgment sum is small, parties should have assessed their chances more carefully instead of just moving ahead and proceed to trial. 

15.  In the present case with the background of the sanctioned offer and the inaction on the plaintiff’s part after having been notified of the sanctioned offer, I can see little effort made by the plaintiff to reassess her position after the offer was made.     

16.  For the aforesaid reasons, I will therefore allow an enhanced rate of interest of 5% per annum on top of the half judgment rate from 25 August 2011 until full payment.

17.  Secondly, the defendant’s costs prior to 25 August 2011 to be taxed on a party and party basis if not agreed and the defendant’s costs since 25 August 2011 to be taxed on an indemnity basis, if not agreed, with certificate for counsel.

18.  Costs of this application and today to the defendant, to be taxed on an indemnity basis if not agreed, with certificate for counsel.