LUCK SKY (HONG KONG) LTD v. BODUM A.G.

HCA 1513/2017

[2022] HKCFI 1692

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1513 OF 2017

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DECISION ON INTEREST AND COSTS

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1.  On 8 April 2022, I handed down my Judgment[1] in the trial of the captioned matter (“Judgment”).

2.  To recap, this case concerns a sale of goods dispute, where the Plaintiff and the Defendant each advanced claims against each other. There were 6 items of claim in total, defined as Annex A to Annex F Claims in the Judgment. My findings are that:-

On the main claim

(1)  I find in favour of the Plaintiff on the Annex A Claims in the sum of US$894,532.42.

(2)  I find against the Plaintiff on the Annex B Claims.

On the counterclaim

(3)  I find against the Defendant on the Annex C Claim. The credit of US$33,333,32 for defect claimed by the Defendant and admitted by the Plaintiff should be paid by the Plaintiff to the Defendant under this head.

(4)  I find in favour of the Defendant for US$111,270 on the Annex D Claim.

(5)  I find against the Defendant on the Annex E Claims.

(6)  I find in favour of the Defendant on the Annex F Claims, that (i) it is entitled to the return of the moulds as set out in the Judgment; and (ii) it is entitled to liquidated damages in the sum of US$1,536,718.59.

3.  This Decision addresses the following matters:-

(1)  pre-judgment interest;

(2)  costs; and

(3)  the order to be made to give effect to my finding in §2(6)(i) above on the return of the moulds.

PRE-JUDGMENT INTEREST

4.  Both parties sought pre-judgment interest on the amounts they claimed. Given my findings in the Judgment I find that:-

(1)  the Annex A Claims in the sum of US$894,532.42 shall carry interest at prime rate plus 1%[2] from 13 March 2017 (based on my finding in Judgment §53);

(2)  the US$33,333,32 shall carry interest at prime rate plus 1% from 14 May 2018 (the date of the Reply and Defence to Counterclaim, when the Plaintiff admitted this sum);

(3)  the Annex D Claim in the sum of US$111,270 shall carry interest at prime rate plus 1% from 28 September 2016 (based on my finding in Judgment §17 that Tuesday Morning cancelled the remaining orders and the loss on the Cancelled TM Products accrued); and

(4)  the Annex F Claims in the sum of US$1,536,718.59 shall carry interest at prime rate plus 1% from 4 November 2016 (based on my finding in Judgment §24 that the Defendant asked the Plaintiff to return all moulds on 28 October 2016 and clause 6.3 of the Standard Mould Terms that the Plaintiff shall within 7 days of demand deliver the same to the Defendant),

in each case until the date of the Judgment.

COSTS

5.  Costs are in the unfettered discretion of the court. However, the discretion must be exercised judicially, seeking to achieve practical justice in the particular circumstances of the case. While costs normally follow the event, the court may make some other order as to the whole or any part of the costs, depending on the circumstances of the case. Order 62 rule 5(1) identifies the matters which the Court will take into account in exercising its discretion. See Lui Ming Lok v Ng Im Fong Loretta [2020] HKCFI 2463, HCAP 28/2019 (unrep., 22 September 2020), §§10-11.

6.  In this case, it is common ground between the parties that the Defendant is the “overall winner” (as per the Plaintiff’s written submissions) and that the Plaintiff should pay the Defendant’s costs, but they disagree over the extent of the Plaintiff’s costs liability – the Plaintiff says it should only be responsible for one-third, while the Defendant says the Plaintiff should be responsible for all, and on an indemnity basis.

7.  The parties’ disagreement centres on rules 5(1)(d) and (f), namely the extent of success and the relevance of the “without prejudice save as to costs” offer made by the Defendant in the correspondence between 21 November 2018 and 1 February 2019.

8.  First, on the extent of success, while the Defendant failed to resist the Annex A Claims, did not succeed on the Annex C Claim and the Annex E Claims, and was only partially successful on the Annex D Claim, (i) the net result, in terms of monetary payment, is that the Plaintiff would have to pay the Defendant over US$700,000; and (ii) although the Defendant is unable to discharge its burden with respect to a small number of moulds, it succeeded in obtaining an order for the recovery of the vast majority of its moulds.

9.  Second, in terms of time spent at the trial, the time spent on addressing the Annex A Claims, Annex C Claim and Annex E Claims was not substantial.

10.  Third, as to the Defendant’s “without prejudice save as to costs” offer:-

(1)  By that offer, the Defendant offered that (i) the Plaintiff should return the moulds without imposing any condition on their release and in accordance with a reasonable timetable and logistical arrangements directed by the Defendant; (ii) whereupon the Defendant would pay US$500,000 to the Plaintiff within 7 days; (iii) the Plaintiff would release the goods under the Annex B Claims to the Defendant and pay the outstanding warehouse storage fees; and (iv) each party would bear its own legal costs.

(2)  The Plaintiff does not dispute that the “exclusionary rule” in Order 62, rule 5(1)(d) does not apply. Its only challenge is that the Defendant has not managed to better its own offer.

(3)  I have taken into account the Plaintiff’s submissions on this but I do not accept that the Defendant fails to do better than its offer.

(4)  Firstly, on the monetary claims, taking an uncomplicated approach and comparing the total amounts offered and recovered (Coward v Phaestos [2014] 6 Costs LO 843, §71), it is clear that the Defendant has done better, for as submitted by the Defendant, even if one were to take into account the value of the Annex B Claims (which in the offer the Defendant sought the release thereof), the Plaintiff would still not have recovered anything close to US$500,000 from the Defendant.

(5)  Secondly, on the return of the moulds, I do not accept the Plaintiff’s submission that it had always been willing ready and able to return them. The position remains that the Plaintiff had insisted on conditions for the return of the moulds by reason of which it never returned them to the Defendant, which conditions have now been found in the Judgment to be wholly without basis.

(6)  Accordingly, I find that the Defendant has done better than its offer.

11.  In light of the above, I direct that the Plaintiff should pay all of the Defendant’s costs, to be taxed if not agreed. I further direct that such costs should be on an indemnity basis, on the basis that failure to beat a favourable settlement offer can attract an award of indemnity costs (Bright Gold Ltd v Mega Well Development Ltd [2019] 3 HKLRD 868, §13), as well as the express contractual provision for indemnity costs in the Standard Mould Terms and the Standard Product Terms.

12.  Finally, on certificate for two counsel, given both sides were represented by two junior counsel, I cannot see any basis for the Plaintiff’s opposition to the certificate. Accordingly I will certify the costs for two junior counsel in this case.

ORDER ON THE RETURN OF THE MOULDS

13.  I have already held, in Judgment §77(6), that the Defendant is entitled to the return of the moulds as found in the Judgment. The parties are subject to express contractual obligations in the Standard Mould Terms governing the return of the moulds.

14.  Nevertheless, the Defendant invited me by correspondence to impose a timetable and certain logistical requirements to facilitate the return of the moulds.

15.  As explained above, the parties’ respective rights and obligations are governed by the contractual documents they have entered into, and in the absence of a dispute which is properly placed before the court, I am not prepared to prescribe how the parties should discharge their respective obligations. Nevertheless, given both parties have filed written submissions on this point, I will adopt a practical approach as follows.

16.  The Plaintiff’s position is that the moulds will be ready for collection by the Defendant within 7 days of instruction given by the Defendant. This is of course consistent with the contractual term in the Standard Mould Terms. The Defendant has offered a longer timetable, namely:-

(1)  The Plaintiff shall notify the Defendant of the location(s) where the moulds as set out in Annex F to the Judgment and as found in §73(1) of the Judgment (“Moulds”) are stored within 7 days from the date of the order to be made; and

(2)  The Plaintiff shall procure that the Defendant and/or its agents be allowed to inspect and/or collect the Moulds from the said location(s) within 35 days thereafter.

17.  Given what the Defendant offers is more generous than what the Plaintiff has indicated, I am prepared to direct as per §16(1) and (2) above and I will so direct.

18.  However, the Plaintiff has also indicated that for the above purpose, it intends to engage a third party company to prepare a condition report at the time of the collection of the Moulds. I decline to make such order. I have already made findings in the Judgment on the scope of the parties’ contractual obligations with respect to the return of the Moulds. It is a matter of agreement between the parties whether any arrangement over and above what the Standard Mould Terms provide should or should not be adopted.