STEVE JAY SHIRE AND ANOTHER v. ZHAO YANLING

DCCJ 3359/2023

[2024] HKDC 1266

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3359 OF 2023

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DECISION

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Background and Summary of my Decision

1.  On 16 May 2024, I granted default judgment and made various orders in favour of the Plaintiffs (“Ps”). For the background to this action, as well as my Judgment and the orders granted see [2024] HKDC 776 (“the Judgment”). For convenience and ease of reference, I shall hereinafter adopt the same abbreviations and definitions used in the Judgment.

2.  By Inter Partes Summons dated 22 May 2024 (“the Summons”), Ps applied to vary the orders nisi on interest[1] and costs made by me on 16 May 2024 (“the orders nisi”) to:

(1)  D do pay Ps interest on the judgment sum of USD80,990 (or the Hong Kong dollar equivalent at the time of payment) at an enhanced interest rate of 10% above the judgment rate from 4 October 2023 until the date of the judgment and thereafter continued at the same enhanced rate until full payment, or at such higher interest rate and for such period as this Court deems fit;

(2)  D do pay Ps’ costs of this action including the costs of the application by way of summons filed herein on 15 February 2024 and the Plaintiffs’ application for the Norwich Pharmacal relief in 2023, with certificate for counsel, on an indemnity basis from 4 October 2023; and

(3)  D shall pay interest on such indemnity costs at an enhanced interest rate of 10% above judgment rate until full payment, or at such higher rate and for such period as this Court deems fit.

3.  In the Summons, P also sought costs of this application be to Ps to be taxed on an indemnity basis if not agreed.

4.  The Summons was supported by the 3^rd Affirmation of Su Lin (“Su 3^rd”). It appears therein that the basis for the application to vary is that on 6 September 2023, solicitors for Ps made a sanctioned offer to D pursuant to O 22, r 4 of RDC, to settle Ps’ claim against D if D pays to Ps the sum of USD79,000 (inclusive of interest). Accordingly, Ps have “beaten” the sanctioned offer. It is clear from Ps’ Skeleton Submissions lodged by Ps’ solicitors on 22 May 2024 that that is the only basis relied upon for the application for variation.

5.  By letter dated 22 May 2024 to this Court, solicitors for Ps requested for paper disposal of the Summons and invited directions be given for the service of the relevant documents in respect of the Summons as well as for D to file any evidence and submissions in opposition to the Summons. I acceded to the request and did make the directions as proposed on 11 June 2024.

6.  After the deadline for D to file and serve any evidence and submissions had passed, by letter dated 5 July 2024 enclosing inter alia a draft order, solicitors for Ps sought an order in terms of the draft order.

7.  On 8 July 2024, through my clerk, I raised with solicitors for Ps whether there was any authority or case in support of the orders sought for indemnity costs and enhanced interest under O 22, r 24 of RDC in a case like the present where judgment was only obtained by Ps without trial and proceedings had not been contested by D.

8.  By way of Supplemental Skeleton Submissions dated 16 July 2024, solicitors for Ps submitted the following cases:

(1)  Terence John Stott v Larks Trading Ltd and Another [2019] HKCFI 1317 at §21 (the Decision of Deputy High Court Judge Allan Leung dated 2 May 2019 and a copy of the sealed Judgment of 2 May 2019 were provided); and

(2)  Ascent Design and Builder LLC v HK Landehua Limited, DCCJ 2419 of 2023 (for which only the sealed Order made by Deputy District Judge S P Yip dated 15 September 2023 was provided).

9.  Having consider all the submissions and authorities submitted to me by Ps, my own research as well as having given this matter anxious consideration, I have decided not to vary the orders nisi for the following reasons.

Reasons for refusing to vary the orders nisi

10.  Firstly, I am not satisfied from Ps’ submissions or from my own research, that there is any case or authority which has held that the provisions of O 22 of RDC apply to judgment obtained in default of defence.

11.  In Terence John Stott, at §21, the learned Deputy High Court Judge Allan Leung held: “I have gone through the revised draft order with Mr Brown in which he changed certain provisions in relation to cost against 2^nd and 3^rd defendants because a sanction offer has been made. I agree with the new orders sought.” In the sealed Judgment, as against the 2^nd and 3^rd defendants, it was adjudged that: (a) from 1 February 2019 onwards interest on the judgment sum at an enhanced rate of 10% above judgment rate; (b) costs incurred by plaintiff on a full indemnity basis; and (c) interest on such indemnity costs at an enhanced interest rate at 10% above judgment rate until full payment, shall be paid by each of them.

12.  However, there is no analysis or reason given why the learned judge agreed to those orders. The learned judge seems to have accepted without question that: (1) there was a sanctioned offer; (2) O 22, r 24 is applicable to judgment in default of notice of intention to defend and defence; and (3) that it was not unjust to impose the costs and interest sanctions on the defendants.

13.  Similarly, there is no reason given (whether reported or unreported) for the order for enhanced interest and costs made by Deputy District Judge S P Yip in DCCJ 2419 of 2023. Nor have I been able from the court files to ascertain the reasons.

14.  I therefore do not find those cases to be of assistance.

15.  Secondly, whilst at first blush it seems that I have held D is liable for more that P’s sanctioned offer, or there is now judgment against D more advantageous to Ps than the proposal contained in Ps’ sanctioned offer, such that O 22, r 24(1) RDC is applicable, this may not be a correct reading of “held liable” or “judgment”.

16.  Lam VP (giving judgment for the Court of Appeal) in Or Siu Lung v Fu Hong Home for the Elderly Co Ltd [2018] 1 HKLRD 872 observed that O 22, r 23 (which provides for the costs consequences where a plaintiff fails to do better than a sanctioned payment or fails to obtain a judgment that is more advantageous than a defendant’s sanctioned offer) predicates upon a judgment being entered and there has been a judicial determination of the merits (see §13). Thus under r 23, a comparison is to be made between the terms of the sanctioned offer and the actual outcome in that judicial determination. Given r 24(1) is the mirroring provision to r 23(1), the dicta of Lam VP should be apposite to r 24(1).

17.  It is trite in the case of judgment in default of defence, the court must give judgment according to the basis of the pleaded facts rather than on the evidence. In entering judgment against D, I only scrutinized the Statement of Claim to see whether the matters pleaded therein entitle Ps to the judgment sought (see paragraphs 22 and 31 of the Judgment). It seems to me that in those circumstances there was no “judicial determination on the merits”.

18.  Thirdly, as a matter of principle, I am of the view that the provisions of O 22 RDC should not apply in the present case. In the Final Report of the Chief Justice’s Working Party on Civil Justice Reform (para 292) it was stated that:

“The proposed sanctioned offers and sanctioned payments under O. 22 aim to encourage parties to take positive settlement seriously and to avoid unproductive prolongation of the litigation. A plaintiff who rejects a sanctioned offer or payment and then fails to achieve a better result at the trial may, despite winning the case, be ordered to pay all of the defendant’s costs incurred after the time when the plaintiff could have accepted the offer. This substantially mirrors the rules [on payment into court in the former] Order 22 of the RHC. The major change brought by CPR 36 involves rules providing that a defendant who rejects a plaintiff’s sanctioned offer and then finds that the plaintiff does better at the trial, may be ordered to pay indemnity costs and additional interests up to base rate plus 10% on the sum awarded.”

19.  In the present case where D never appeared to contest the proceedings and default judgment was obtained around 9 months after the writ was first issued, without proceeding to any trial, I simply cannot see how D has prolonged these proceedings such that it would be fair and just to award enhanced costs and interest sanction against D.

20.  Lastly, even if I were wrong, I do not accept as submitted by Ps that upon receiving the sanctioned offer D could have easily entered an appearance, accepted the offer and brought this case to an end expeditiously but instead chose to go to ground.

21.  According to Su 3^rd, all the court documents including the sanctioned offer were served pursuant the order for substituted service by email. Whilst the email did not bounce back, there is no evidence that D had received the sanctioned offer and chose to ignore it.

22.  Besides, as already mentioned, I do not accept that this case has not been brought to an expeditious end as a result of D’s non-appearance. Therefore even if, but which I am not satisfied, O 22, r 24 is applicable, I would not exercise my discretion to impose costs and interest sanctions on D. I am of the view that it would be unjust to do so taking into all the circumstances of this case.

Disposition and orders

23.  Accordingly, I will dismiss the Summons with no order as to costs.

24.  I will further order that the orders nisi shall now be made absolute.