POON YIU CHEUNG v. WORLD MASTERY TECHNOLOGY LTD

DCCJ 632/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 632 OF 2005

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BETWEEN

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DECISION

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1.  There are 2 applications before me this afternoon, both arising out of my judgment given on 10 June 2011.

2.  By this action, the Plaintiff seeks to recover from the Defendant outstanding commission in the region of HK$600,000. At the trial, the Defendant admits part of the commission payable.  It also puts in a counterclaim on the ground that the Plaintiff has defaulted the company. The Defendant counterclaims against the Plaintiff for damages and seeks to set off the damages from any sum that this Court finds it liable to pay.

3.  By my judgment, the counterclaim is dismissed.  The Plaintiff is awarded a sum of over HK$330,000.00 with interest and costs.

4.  The Plaintiff has on 22 September 2010 made a sanctioned offer to the Defendant, offering to accept HK$300,000.00 with costs in full and final settlement of both claim and counterclaim, and all interest.  The offer has not been accepted by the Defendant within 28 days from service.

5.  It is not disputed that this is a sanctioned offer.  And it is not disputed that the Plaintiff does better than the offered terms.  The Plaintiff now applies under Order 22 rule 24(2) & (3) of the Rules of District Court for the following reliefs :-

a. Enhanced interest rate on the judgment sum at 4% over the judgment rate;

b. Costs of the action to be taxed on indemnity basis; and

c. Interest on costs at an enhanced interest rate from 21 October 2010 until payment.

6.  It is helpful to set out Order 22 rule 24 (1) to (4) :-

(1) This rule applies where-

(a) a defendant is held liable for more than the proposals contained in a plaintiff's sanctioned offer; or

(b) the judgment against a defendant is more advantageous to the plaintiff than the proposals contained in a plaintiff's sanctioned offer.

(2) The Court may order interest on the whole or part of any sum of money (excluding interest) awarded to the plaintiff at a rate not exceeding 10% above judgment rate for some or all of the period after the latest date on which the defendant could have accepted the offer without requiring the leave of the Court.

(3) The Court may also order that the plaintiff is entitled to-

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

(b) interest on those costs at a rate not exceeding 10% above judgment rate.

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

7.  Rule 24(4) provides that “the court shall make the orders referred to in paragraph (2) and (3) unless it considers it unjust to do so.”  As pointed out by Mr. Justice Saunders in Tang Hung On v. Crown Rich Transportation Ltd. & oths. HCPI 304/2006, “the whole emphasis of the rules in relation to the acceptance of sanctioned offers and sanctioned payments is to encourage those offers and payments to be accepted, a party who chooses not to accept a sanctioned offer must understand that he faces the risk of indemnity costs.”  And I would add that he also faces the risk of enhanced interest.

8.  But the above sanctions are not meant to be penal in nature.  I refer to the judgment of Lord Woolf MR in Petrotrade Inc v. Texaco Ltd [2002] 1 WLR 947 when Part 36.21 of the CPR of the UK has been considered. Part 36.21 is in similar wordings to our Order 22 rule 24 and the judgment has been adopted in a number of judgments given by the Court of First Instance.  Lord Woolf MR said at paragraph 63 :-

“63. The ability of the court to award costs on an indemnity basis and interest at an enhanced rate should not be regarded as penal because orders for costs, even when made on an indemnity basis, never actually compensate a claimant for having to come to court to bring proceedings. The very process of being involved in court proceedings inevitably has an impact on a claimant, whether he is a private individual or a multi-national corporation. A claimant would be better off had he not become involved in court proceedings. Part of the culture of the CPR is to encourage parties to avoid proceedings unless it is unreasonable for them to do otherwise. In the case of an individual, proceedings necessarily involve inconvenience and frequently involve anxiety and distress. These are not taken into account when assessing costs on the normal basis. In the case of a corporation, corporation senior officials and other staff inevitably will be diverted from their normal duties as a consequence of the proceedings. The disruption this causes to a corporation is not recoverable under an order for costs.

64. The power to order indemnity costs or higher rate interest is a means of achieving a fairer result for a claimant.”

9.  The same reasoning is to be adopted by this Court in considering the application by the Plaintiff.  And in considering whether it is unjust to make the order, rule 24(5) sets the guiding principle, which provides that :-

(5) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3), 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.

10.  Mr. Chan, counsel for the Defendant is not relying on any one of the 4 circumstances set out in the sub-rules.  I accept that these are matters to be taken into account, but they are not meant to be the sole consideration.  I shall take into account all the circumstances of the case including these 4 circumstances, if they are applicable.

11.  Mr. Chan submits that there is substantial and unexplained delay on the part of the Plaintiff to proceed with the action with reasonable expediency.  The Court should not allow the enhanced interest rate. 

12.  I accept that the action being commenced in 2005 is only set down before me for trial in January 2011.  But there could be many reasons for the delay and I am not going to speculate.  Mr. Chan has not elaborated on the delay, and why it is unjust to order enhanced interest.  The issue may be relevant to the general power of this Court to determine the pre-judgment interest to be awarded, which is not argued before me.  Delay would also be relevant if it could be demonstrated that it would affect the assessment of the Defendant in refusing the offer.  Again, this has not been shown.

13.  Mr. Chan in his written submission has alleged that the difference between the judgment sum and the sanctioned offer is only HK$30,078.49.  He said this is a small margin.  He has not pursued the point in his oral submission.  To be complete, I would add that HK$30,078.49 should not be regarded as a small margin.  And the difference in this case is more than HK$30,078.49, as I have awarded interest on the judgment sum from date of writ.  This would be an additional sum of over HK$100,000.  De minimus rule does not apply.

14.  In summing up, I see no reason why I should not exercise my discretion to award an enhanced interest rate from the last day when the sanctioned offer could be accepted without leave of Court, i.e. 21 October 2010.  Mr. Lam, counsel for the Plaintiff asks for an enhanced interest rate at 4% over judgment rate.  And Mr. Chan submits that 3% over judgment rate should be adopted.  He also refers me to the judgment of Deputy High Court Judge Carlson in Chung Mei Industries Ltd v. So Kwok Keung HCA 2604/ 2005 given on 10 June 2011.  The Honourable Deputy Judge noted the low interest rate in the commercial field and ruled that 3% over the judgment rate is the appropriate enhanced rate. 

15.  But another factor to be taken into account is the amount of the claim.  Lord Woolf MR in the said Petrotrade’s case said “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 the additional advantage for the claimant will not be achieved.”  I agree with the observation of Lord Woolf MR.

16.  In this case, the amount involved is neither large nor small.  Having considered all circumstances, I order the interest of the judgment sum be enhanced to 4% over judgment rate.

17.  While this has not been argued, I note that Mr. Justice Lam in the case of Golden Eagle International (Group) Ltd v. GR Investment Holdings Ltd[2010] 3 HKLRD 273 (which I shall refer to later herein) awarded enhanced interest for pre-judgment period only.  But there is no suggestion that the Court has no jurisdiction to grant post-judgment interest at enhanced rate.  I also add that the Honourable Deputy Judge Carlson has ruled in his said judgment that the Court have jurisdiction to order the enhanced interest rate after judgment. 

18.  I agree with the conclusion of the Honourable Deputy Judge Carlson.  I am aware of the judgment of Chadwick LJ given in McPhilemyv Times Newspapers Ltd (No 2) [2001] 4 All ER 861 that the English Court does not have jurisdiction to give enhanced interest after date of judgment.  The issue has been considered by HH Judge Mimmie Chan in Maysun Engineering Co Ltd v. International Education and Academic Exchanges Foundation Co Ltd t/a Hong Kong Institute of Technology [2011] 3 HKC 65:-

“…under s. 50 (1) of the DCO, judgment debts carry interest from the date of the judgment until payment “at the rate the Court orders” (s. 50 (1) (a)), or “in the absence of an order of the Court, at the rate the Chief Justice determines by order” (s. 50 (1) (b)). This section expressly confers on the Court the power to fix the rate at which interest is payable on judgment debts, and the rate determined by the Chief Justice applies only in the absence of an order of the Court which so fixes the rate. The Hong Kong position is thus distinct from that in England, where the power to fix the rate of the interest payable on judgment debts is conferred on the Lord Chancellor under s. 17 of the Judgments Act 1838 and s. 44 of the Administration of Justice Act 1970, which do not contain the equivalent of s.50 (1) (a) of DCO.”

19.  It is clear that this Court do have jurisdiction to award post-judgment interest at enhanced rate.  I order the Plaintiff to have enhanced interest at the rate of 4% above judgment rate from 21 October 2010 until payment.

20.  It must follow from my ruling that the Plaintiff should be entitled to have his cost after 20 October 2010 be taxed on indemnity basis.  But I would not adopt the wording of paragraph 2 of the summons by giving certificate for counsel generally.  For hearings when certificates have been issued, they have been dealt with.  For other matters, such as approval of witness statement by counsel, it would be a matter for taxing master.  As there is no specific item of work before me, I am not prepared to give a general certificate for all counsel works after 20 October 2010 but leave it at the good judgment of taxing master.

21.  The Plaintiff also asks for enhanced interest on the taxed costs from 21 October 2011 until payment.

22.  Mr. Chan refers to the judgment of Mr. Justice Bharwaney given in Shih Pik Nog v. G2000 (Apparel) Ltd HCPI 832/2009.  His Lordship said “it is incumbent on the party seeking interest on costs, be that party a plaintiff or a defendant, to state, in his supporting affidavit, the amount of disbursements, costs and costs on account paid to his solicitors during the period commencing from the last date of acceptance up to the date of the supporting affidavit, and the date(s) of payment.”  And His Lordship directed the receiving party to file a supporting affidavit before a final determination.  Mr. Chan submits that there is no supporting affidavit as to any payment of costs on account to the Plaintiff’s solicitors.

23.  It is not disputed that it is trite law, interest on costs runs from the date of judgment at the judgment rate. But the provision of Order 22 rule 24 creates the additional power on this Court to grant interest on costs incurred before date of judgment. 

24.  I refer to the judgment of Waller LJ given in KR v. Bryn Alyn Community (Holdings) Ltd [2003] PIQR P562:-

“If an order is made to pay costs on an indemnity basis, it is unlikely to be unjust to make the party pay interest on those costs for the period when litigation is being funded when acceptance of a Pt 36 offer should have led to it not being funded. There may be cases where evidence will demonstrate actual dates when clients had put up funds and from which interest will run. Without such evidence the court can do no more than Chadwick LJ did and make the interest run from the date when the work was done or liability for disbursements was incurred.”

25.  I agree with the judgment of Waller LJ.  And in fact, some judges have adopted the formula of asking the paying party to pay interest as and when the costs have been incurred.  I refer to the said judgment of Lord Woolf MR, and the said judgment of Mr. Justice Saunders. 

26.  And Mr. Justice Lam in Golden Eagle’ case modified the formula to award interest.  His Lordship allowed 1/2 enhanced rate.  This formula has been followed in other cases, and Mr. Justice Bharwani said in the Shik Pik Nag’s case that “the approach adopted by Lam J. is to be commended.”  I agree entirely.

27.  I believe the reason behind the judgment of Mr. Justice Bharwani is to ensure that the receiving party would not enrich unjustly.  And I believe the judgment of Waller LJ, and that of Mr. Justice Lam has the same consideration when they come to their conclusion.  I agree that whether the receiving party has paid his solicitors, and for how much would be a relevant factor to be taken into account.  When there is no evidence before me, and there is no special circumstances that suggests the receiving party does not have to pay the legal team in advance as in Legal Aid case or when the party is backed by insurance company, the approach of Mr. Justice Lam should be commended.

28.  Accordingly, I also award interest on the indemnity costs from 21 October 2010 to date of judgment at half enhanced rate.  On enhanced rate, I would adopt the said rate, that is 4% over the judgment rate, and half rate would be 6% per annum.

29.  Should I award post-judgment enhanced interest on costs?  To begin with, again, there is jurisdiction in this Court to award post-judgment enhanced interest.  The wording of Order 22 rule 24 is clear.  And I refer to the said judgment of Mr. Justice Bharwani when the question of post-judgment enhanced interest is discussed at length. While His Lordship does not award post-judgment enhanced interest on costs, it is clear that it is a matter of discretion. 

30.  I also agree with Mr. Justice Bharwani that there would be some delay in obtaining payment of costs in any event, depending on how quick is the taxation.  Hence, while the receiving party should obtain the right to tax his costs on the date when the sanctioned offer is accepted (if it has been accepted), in assessing the appropriate period when enhanced interest on costs should be granted, the inevitable delay due to taxation procedure should be taken into account.  In our case, the sanctioned offer is given in September 2010.  I consider that giving enhanced interest on costs until judgment would be appropriate.  I order the enhanced interest on costs shall run until date of judgment and thereafter shall be at judgment rate until payment.

31.  I shall now move on to the second application before me, the application by the Defendant for leave to appeal against my judgment.

32.  Both counsels agree the test for whether leave should be granted is whether the appeal has a reasonable prospect of success.  I only need to refer to section 63A(2) of the District Court Ordinance which provides that:-

“Leave to appeal shall not be granted unless the judge, the master or the Court of Appeal hearing the application for leave is satisfied that—

(a) the appeal has a reasonable prospect of success; or
(b) there is some other reason in the interests of justice why the appeal should be heard.”

33.  The burden is on the Defendant to demonstrate that its intended appeal is arguable with a reasonable prospect of success.  Mr. Chan lodged a draft Notice of Appeal, and has sent out in his skeleton submission the detail argument.

34.  The first 2 grounds relate to relationship between the Plaintiff and the Defendant – are they employer and employee, or that of independent contractor.  I have found at paragraph 62 of my judgment that the Defendant fails to prove that the Plaintiff is an employee.

35.  Mr. Chan in his submission further avers that I should have found that the Plaintiff is an agent of the Defendant and owes the duty of fidelity to the principal.  Should an agent act in breach of the duty of fidelity, whatever profits or commissions made should be disgorged and accounted for by the agent to the principal.  Further, in so acting against the fiduciary duty as an agent, he would not be entitled to recover the outstanding commissions from the principal.

36.  But it has been the case of the Defendant that there is outstanding commission payable to the Plaintiff.  Mr. Chan seeks to raise a new argument on appeal. 

37.  It is the pleaded case of the Defendant that they are entitled to withheld payment because the Plaintiff failed to assist the Defendant to follow outstanding invoices from customers served by the Plaintiff.  And at the closing, this line of defence has been abandoned.  In the end, the case turns on whether the Plaintiff is entitled to claim commission for a further period of 6 months from termination, as provided by the Agreement, or only up to 6 August 2004 when the contractual relationship between Plaintiff and the Defendant was terminated. 

38.  The amount of commission payable as at the date of termination is agreed, and the Defendant has conceded through counsel that it is payable.  I recall Mr. Poon, then counsel for the Defendant, saying that the Defendant only seeks to prove so much of the damages to set off against all the commission payable.  At no stage has it been the case of the Defendant that it is not liable to pay the Plaintiff at all. 

39.  In view of the above, I do not see any prospect of success in these 2 grounds of appeal.

40.  The second limb of argument as raised by Mr. Chan is that I have failed to pay sufficient weight to the failure of the Plaintiff to disclose all his bank statements, and to call Mr. Andrew Tsui as a witness.  The Defendant also argues that I erred in placing no or little weight to the emails restructured from a notebook computer returned by Mr. Andrew Tsui to the Defendant.

41.  Mr. Chan relies on the judgment of the Court of Appeal given in Ngai Chu v. Lau Pong Chun trading as Yau Pong Construction CACV 402 of 2004, when the Court of Appeal found that the failure of the respondent in that case to make discovery on document is a matter affecting the credibility of the respondent.  And Mr. Justice Ma CJHC (as he then was) said “this failure may well often result in a court making adverse findings as to that party’s credibility in the area where the failure has taken place.”

42.  I agree with the legal principle as stated by Mr. Justice Ma.  But, my judgment turns on the evidence from the Defendant to prove any of the allegations in the counterclaim, and burden rests on the Defendant to prove the counterclaim.  The Defendant relies heavily on the evidence from Mr. Dean Duckworth, who has not testified in Court.  The Defendant only relies on some e-mail and charts provided by Mr. Dean Duckworth.

43.  Mr. Chan also complains that I have paid no or insufficient weight to the contents of the print-outs of the emails exchanged between Mr. Andrew Tsui and the Plaintiff and third parties. I have covered the reason in my judgment and I am not convinced that I erred. The Defendant also complains that I placed no or insufficient weight on the documents supplied by one Mr. Dean Duckworth of BoardTECH.  Again, I have dealt with the issue in my judgment and I am not convinced that I erred.

44.  I have the benefit of a detail skeleton on all the proposed grounds of appeal.  Having heard the argument, I am not convinced that there is reasonable prospect of success on any of the grounds.  I therefore dismiss the application.

45.  The Plaintiff should have costs of both applications, to be taxed on indemnity basis for the application for enhanced interest and on party and party basis for the application for leave to appeal.  I grant an order nisi on costs to become absolute within 14 days, with certificate for counsel for this hearing.  I thank both counsels for their assistance.