TANG HUNG ON v. CROWN RICH TRANSPORTATION LTD AND OTHERS

HCPI 304/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 304 OF 2006

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RULING   ON   COSTS

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1.  Judgment was handed down in this matter on 21 January 2010.  Mr Tang substantially succeeded, and received an award of damages, which after adjustment for contributory negligence and having given credit for Employers Compensation payments made, amounts to some $1.15 million.

2.  This ruling deals with questions of costs and interest.

Plaintiff’s costs

3.  On 25 May 2009, the solicitors for the Plaintiff made a sanctioned offer to the 1^st Defendant to settle the action in the sum of $850,000 (net of the EC Award).  That sanctioned offer was not accepted and the matter proceeded to trial. 

4.  At trial to Plaintiff has recovered a substantially better sum than that offer.  By O 22 r 24(3), where a sanctioned offer is not accepted, the Court is given a discretion to award a plaintiff costs on an indemnity basis for the period after the latest date upon which the defendant could have accepted the offer without requiring the leave of the Court.  Mr Leung seeks indemnity costs from Crown Rich from 22 June 2009.  Mr Gidwani, sensibly, for Crown Rich does not oppose that order.

5.  There will accordingly be an order that the 1^st Defendant must pay the Plaintiff’s costs of the action from 23 June 2009 onward, including the costs of the trial, to be taxed on an indemnity basis if not agreed.

6.  By an order made by Fung J, on 31 August 2009, the Plaintiff was given leave to accept a payment into court in the sum of $297,500 made by the 2^nd, 4^th and 5^th Defendants.  There is no reason why the Plaintiff should not be entitled to his costs of the action up to and including 22 June 2009 (last day upon which that offer could have been accepted).  There will accordingly be in order that the 1^st, 2^nd, 4^th and 5^th Defendants jointly bear the Plaintiff’s costs of the action up to and including 22 June 2009, to be taxed on a party and party basis if not agreed.

7.  Although I believe it is unlikely that the Plaintiff will not recover his costs from the 1^st Defendant to the period 23 June 2009 to 31 August 2009, the sake of completeness, there will be an order that the 2^nd, 4^th and 5^th Defendants must pay the Plaintiff’s costs of the action for that period, to be taxed on a party and party basis if not agreed, in so far as that sum is not recovered by the Plaintiff from the 1^st Defendant.

Costs between the Defendants

8.  The 2^nd, 4^th and 5^th Defendants claimed contribution and indemnity against the 1^st Defendant.  On 2 April 2009 they made a sanctioned offer to the 1^st Defendant to bear the liability, in the proportions 66% to the 1^st Defendant and 33% to the remaining Defendants.  On 20 May 2009, but offer was increased, with the remaining defendants being willing carry 35% of the liability.  That sanctioned offer was not accepted.

9.  In the judgment, the 5^th Defendant was found to be entitled to a contribution from the 1^st Defendant in the sum of $200,000.  The 5^th Defendant had compromised the action with the Plaintiff in the sum of $297,500, that is approximately 26% of the net sum awarded to the Plaintiff.  After making allowance for the contribution, the net sum borne by the 5^th Defendant was $97,500, approximately 9% of the net sum awarded to the Plaintiff.  The sanctioned offer made by the remaining Defendants was correctly described by Mr Lim as generous.

10.  The 1^st Defendant not only failed to do better than the sanctioned offer, but failed by a substantial margin.  Mr Gidwani argued that the 1^st Defendant had not acted unreasonably and accordingly costs should be on a party and party basis. 

11.  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.  Mr Gidwani has not established any special circumstances which might justify a departure from the starting point contained in the Rules of indemnity costs.  There is no reason why I should not exercise my discretion in favour of the party who has made the offer which has not been accepted.

12.  There will accordingly be an order that the 1^st Defendant must pay the costs of the 5^th Defendant on the contribution notice, those costs to be on a party and party basis from the date of the filing of the contribution notice to 2 April 2009, and thereafter on an indemnity basis.

Interest

13.  Where a plaintiff succeeds against a defendant, pre-trial interest is in the discretion of the Court: see s 48 High Court Ordinance, Cap 4.  The usual practice in personal injury cases is that the discretion is exercised in favour of the plaintiff by awarding interest on the special damages at an average of one half the judgment rate during the pre-trial period, and 2%  on PSLA from the date of the writ to judgment.

14.  Now, in circumstances where the defendant is liable for more than the proposals contained in a plaintiff’s sanctioned offer, the Court has an additional discretion to order interest on the whole or any part of the sum awarded to the plaintiff, at a rate not exceeding 10% above the 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, see O 22 r 24(1).

15.  Although entitled to argue for enhanced interest of 10%, Mr Leung was content to accept 5% above the judgement rate on the full amount of the damages since 22 June 2009, that is the last date upon which the Plaintiff’s offer could have been accepted.  An enhancement of 5% would take the interest rate to 13%.

16.  In the present case I am satisfied that it is appropriate, when considering the question of interest, to take into account the conduct of the proceedings on the part of the 1^st Defendant. 

17.  Prior to the proceedings being issued, and consequent upon enquiry on the part of the solicitors for the Plaintiff, the 1^st Defendant, by its solicitors denied any knowledge of the identity of the owner or the operator of the plant at which the accident had occurred.  The evidence established that that assertion was quite unbelievable.

18.  First, the 1^st Defendant’s former manager admitted that all along, he knew of the existence of the 5^th Defendant.  That is not surprising, bearing in mind that both shared the same office floor in Kwun Tong.  The 1^st Defendant had a close relationship with the 2^nd Defendant through indirect common ownership.  They too shared offices on the same office floor.  Either or both would have sent periodical invoices or demands to the 5^th Defendant for collection and delivery charges.

19.  Second, by the time of closing submissions, the 1^st Defendant’s position was that it admitted that it had no safe system of work, instead arguing that by virtue of lack of expert evidence, the Plaintiff had failed to prove his case on causation.  That was an entirely disingenuous submission.  The Plaintiff had sought leave to rely upon an expert report, but had been refused that leave by the Master.  If the point was to be taken, the Plaintiff should have been told in order that it might renew the application for leave to reduce expert evidence on the point of causation.

20.  The matters I have set out in paragraph 27 below are also relevant in this respect.  It is plain it was a close relationship between all of the defendants, and they were simply not willing to reveal the extent of that relationship.

21.  The 1^st Defendant’s conduct of the action has been such as to place barriers in the way of the Plaintiff in ascertaining the truth.  Had those barriers not been so placed it is highly likely that this action would have settled for a much more substantial sum than that at which the Plaintiff made his sanctioned offer, and much earlier than the date of judgment.

Interest on future earning capacity

22.  Mr Leung sought interest on the future pecuniary loss award.  The position is dealt with by the decision in Ming An Insurance Co (HK) Ltd v Ritz-Carlton Ltd (No 2) [2009] 3 HKC 230 at 253, CFA.  There should in principle be no interest on loss of future earnings because the plaintiff has not been kept out of any money.  On the contrary, he will have received it in advance.

23.  In the whole of the circumstances Mr Leung’s position on enhanced interest is entirely reasonable.  There will accordingly be an order that the 1^st Defendant shall pay the Plaintiff interest at the rate of 5% above judgement rate, (i.e. 13%), on the total principal sum of damages, less that for loss of future earning capacity, from 23 June 2009 to 21 January 2010.

Interest on costs

24.  Where indemnity costs are awarded under O 22 r 24, the Court may also order interest on those costs at a rate not exceeding 10% above judgment rate: see O 22 r 24(3)(b).  For the same reasons that justify enhanced interest on damages, there will be an order that the 1^st Defendant pay the Plaintiff interest at 13% on the cost ordered pursuant to paragraph 5 above, to be calculated from the date upon which the work was done or liabilities of disbursements incurred.

The extent of the costs to be allowed

25.  As I have noted in paragraph 19 above the Plaintiff sought leave from the Master to reduce expert evidence in relation to the circumstances of the accident.  The Master refused that leave.  That was unfortunate.  It became quite apparent in the course of the trial that this was a case in which expert evidence would greatly assisted the court in determining the precise circumstances that caused the accident.

26.  Notwithstanding that refusal by the Master, the Plaintiff seeks a direction to the Taxing Master those costs should include the cost of investigating the claim. 

27.  The 1^st Defendant’s responses denying knowledge of the other defendants greatly extended the Plaintiff’s costs in preparing his claim.  Mr Leung was entirely justified in making submissions in relation to the defendants’ conduct of the action, which may be summarised as follows:

28.  Despite the close relationship between D1 to D5, none of them was forthcoming in providing information to P during the investigation.

(a) D1 pretended not to know anything about the owner and operator of the plant.

(b)    D2 only provided basic registered information of the tank whereas in fact it knew (or ought to have known) a lot more since:

(i)   D2 was closely related to D5, sharing the same office and common directors (see P’s opening submission); and

(ii) Unbeknown to P at the material time, D2 was the guarantor of D5 in the performance of an agreement between D3 and D5 made in August 2001 for the sale of the licence to use the plant for five years.

(c) At all material times up to March 2008, D3 was the registered owner of the plant with the Environmental Protection Department (EPD) under the Air Pollution Ordinance (Cap 311).  On 17 March 2003 (i.e. one month before the accident on 18 April 2003), the licence was renewed to D3 for five years.

(d) Contrary to s 13 Cap 311, D3 sub-licensed the plant to D5 to produce ready mixed concrete apparently without the knowledge or approval of the EPD.

(e) On 16 February 2006, D3 claimed it was “not the owner and/or operator” of the plant at the time of the accident, whereas in fact it was still receiving periodic licence fees from D5 until August 2007 and was still the registered licensee under Cap 311.

(f)  On 23 May 2006, when D3’s status as the subsisting licence holder was pointed out, D3 claimed that it had not knowledge of itself still being the licensee, when the licence had just been renewed for 5 years, one month prior to the Plaintiff’s accident.

(g) On 23 May 2006, D3 claimed to have assigned the production line at the plant to D5 under an assignment dated August 2002, but it was ultimately revealed that the assignment did not include the silo in question.

(h) When this was pointed out to D3, it was alleged that the silo in question was later assigned “orally”, but the date could not be recalled.  In contrast, D5 said it was not the owner of the silo at the time of the accident.

(i)   On 6 January 2004, D4 claimed not to have anything to do with the plant.  It transpired that D4 was the nominated company of D5 under the scheme of arrangement between the various defendants.  D4 maintains a business registration at the address of the plant.

(j)   All along, D5 admitted to be the operator of the plant but was not forthcoming in explaining its relationship with D2, D3 and D4.

In the face of those facts the Plaintiff was entirely justified in undertaking investigations to the extent that were made prior to and after the issue of the writ against all Defendants, including the experts report.

29.  Having regard to the circumstances of the accident and the very live issue of causation, the Plaintiff’s solicitors were entirely justified in instructing an expert evidence and could have reasonably expected that the report so obtained would be allowed in evidence.  In no circumstances they ought to have the costs of that report.

30.  There will accordingly be a direction to the Taxing Master that the costs awarded to the Plaintiff shall include the Plaintiff’s own costs incurred in investigating the claim against all five Defendants, notwithstanding the action against the 3^rd Defendant had been discontinued, and also the cost of an incidental to the commissioning of an expert report from Dr Alan Lau, Engineer.

31.  The Plaintiff’s costs will be taxed in accordance with Legal Aid Regulations