ANTWERP DIAMOND BANK N.V. v. BRINK’S, INCORPORATED AND OTHERS

CACV 282/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 282 OF 2012

(ON APPEAL FROM HCCL NO. 14 of 2010)

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JUDGMENT
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The Court:

1.  We handed down our judgment allowing the appeal on 17 July 2014.  This judgment deals with:

(a) The Notice of Motion of 14 August 2014 by the 3^rd Defendant seeking leave to appeal to the Court of Final Appeal; and

(b) The summons of 31 July 2014 by the Plaintiff seeking to vary our costs order nisi and the order we made regarding interest on the damages awarded to it.

Application for leave to appeal to the Court of Final Appeal

2.  The 3^rd Defendant seeks leave to appeal to the Court of Final Appeal on the basis that it is entitled to do so as of right.  Alternatively, it is contended on its behalf that the intended appeal raises these questions of great, general or public importance:

“ 2. Further to alternatively, the Defendant (Applicant) should be given leave to appeal pursuant to section 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance (Cap 484) in that the appeal involves questions of great general public importance, namely:

(1) Should the rule in Kum v Wah Tat Bank Ltd [1971] 1 Lloyd’s Rep 439 be applied in cases concerning goods which are claimed to be subject to a pledge and in the possession of a carrier, but which carrier has no knowledge of the alleged pledge? Thus that upon delivery of the goods by the alleged pledger/shipper to the carrier, such delivery is deemed to constitute a transfer of possession of the goods to the alleged pledgee, whose alleged agent is named as consignee on the air waybills in relation to the goods.

(2) Should the rule in Official Assignee of Madras v Mercantile Bank of India Ltd [1935] AC 53, which was approved by the Court of Appeal in Re Far East Structural Steelwork Engineering Ltd [2010] 1 HKLRD 156, be applied in cases concerning goods, which are claimed to be subject to a pledge and in the possession of a carrier, but which carrier has no knowledge of the alleged pledge? Thus that upon delivery of the goods by the alleged pledgor/shipper to the carrier, an attornment by the carrier is required in order for possession of the goods to be deemed to be transferred to the alleged pledgee, whose alleged agent is named as consignee on the air waybills in relation to the goods.

(3) For the purpose of a claim by an alleged pledgee against a carrier for conversion for misdelivery of goods which were alleged to be subject to a pledge, is it misdirection in law to find the carrier liable to be the alleged pledgee notwithstanding that:

(i) the carrier at all material times has no knowledge of the existence of or interest of the alleged pledgee in the contract of carriage;

(ii) the carrier at all material times had no knowledge of the alleged pledgee’s right in the goods, or right to possession of the goods;

(iii) there was no evidence to prove that monies were advanced by the alleged pledgee/ consignee to the alleged pledgor/shipper pursuant to a pledge or to any other agreement; and/or

(iv) in the pleadings, there was an absence of material fact to support the existence of the alleged pledge and/or no proper averment so as to plead a claim in relation to the alleged pledge?

(4)Should the mere possession of the air waybills suffice to give an alleged pledgee, whose alleged agent is named as consignee on the air waybills in relation to the goods, title to sue the carrier?

(5)Should an alleged pledgee have title to sue a carrier, even though the alleged pledgee’s purported agent is named as consignee on the air waybills, without joining the agent as a party to the proceedings?”

3.  The 3^rd Defendant also relies on the “or otherwise” limb in section 22 of the Hong Kong Court of Final Appeal Ordinance to seek leave.

4.  The claim of the Plaintiff was for conversion.  Though the Plaintiff had put forward a quantified figure in respect of its claim for damages, it is nonetheless a claim for unliquidated damages, see Carewins Development (China) Ltd v Bright Fortune Shipping Ltd CACV 328 & 329 of 2006, 6 November 2007.  Counsel for the 3^rd Defendant has confused the concept of quantifiable damages with liquidated damages.  Nor is it a claim to some particular property or to a proprietary right in the sense of those expressions as explained in Chinachem Charitable Foundation Ltd v Chan Chun Chuen (2011) 14 HKCFAR 798.  The intended appeal thereforedoes not fall within the scope of the “as of right” provision.

5.  As regards the questions raised in the Motion, we agree with Mr Sussex SC that they have not been argued before us.  Though Mr Sheppard had attempted to distinguish Kum v Wah Tat Bank Ltd [1971] 1 Ll Rep 439 at the appeal, he had not argued before us that the judgment of the Privy Council was wrong and should not be followed.  The authorities now cited by him to advance the submission that Kum should not be followed were not cited in the appeal.  Also, Mr Sheppard did not argue in the appeal that there was a lack of knowledge as to the interest of the Plaintiff on the part of the 3^rd Defendant as to the interest of the Plaintiff and by virtue of that it should not be liable.  That was also not how the case was argued before Deputy High Court Judge Lok (as he then was) and there was no finding by the judge as to the state of the 3^rd Defendant’s knowledge.

6.  In The Law Society of Hong Kong v A Solicitor CACV 78 of 2014, 10 July 2015, this court has explained why in general this court would not give leave to appeal on a ground not argued before us.  In the present circumstances, we do not see any valid reason for departing from such practice. 

7.  There is also no reason why we should take the exceptional course of granting leave on the “otherwise” limb.

8.  We therefore dismiss the Motion with costs, with certificate for 2 counsel.

Variation of costs order nisi and order for interest

9.  In our judgment of 17 July 2014, we made a costs order nisi requiring the 3^rd Defendant to pay the Plaintiff’s costs of the appeal and of the trial with certificate for two counsel.  We also ordered that interest on the value of each of the three shipments of diamonds should be paid to the Plaintiff at the commercial rate (1% over prime) from the date of misdelivery.

10.  The Plaintiff now applies to vary those orders, on the basis that the 3^rd Defendant failed to accept the Plaintiff’s sanctioned offer dated 8 July 2011, by which the Plaintiff offered to accept a sum of US$850,000 excluding interest in settlement of its claims against the 3^rd Defendant.  By our judgment, the Plaintiff was awarded damages in the amount of US$852,339 – US$2,339 more than the amount it had offered to accept.

11.  Mr Chong submits for the Plaintiff that as the 3^rd Defendant has done worse than the Plaintiff’s sanctioned offer, RHC Order 22 rule 24(1) applies.  Rule 24(2) provides that the Court may order interest on sums awarded at an enhanced rate of up to 10% above judgment rate, while rule 24(3) provides that the court may order that costs are to be paid to the successful plaintiff on the indemnity basis from the last date on which the offer could have been accepted, and also provides for interest on such costs to be awarded at a rate not exceeding 10% above judgment rate.  Rule 24(4) requires the court to make the orders provided for in rules 24(2) and (3) unless the court considers it unjust to do so, and for this purposes, rule 24(5) requires the court to take into account all the circumstances of the case, including the specific matters referred to in that sub-rule.

12.  The plaintiff now seeks the following orders:

(a) An order that its costs, both of the trial and of the appeal, incurred on or after 6 August 2011, be paid on an indemnity basis;

(b) An order that interest be awarded on the damages to be paid to the plaintiff at a rate of 6% over prime rate; and

(c) An order that interest be awarded on the costs incurred on or after 6 August 2011 at a rate of 5.5% (said to be half of 6% over prime rate).

13.  Each of these proposed orders is resisted by the 3^rd Defendant.  We will therefore consider each of them in turn.  In addition, it will be necessary to distinguish between the costs of the trial and those of the appeal – as this court (differently constituted) pointed out at paragraphs 28-34 of Ryder Industries Limited v Chan Shui Woo (unreported, CACV 164/2013, 13 March 2015):

(a) The wording of Order 22 suggests that the scheme contained in it applies to trials only, and not to appeals (but no concluded view was expressed on this point as it did not arise for decision).

(b) In any event, where (as here) a sanctioned offer was made in the course of proceedings below, but none was made in the course of the appeal, the sanctioned offer in the proceedings below could not carry over to the appeal.

(c) The sanctioned offer in the proceedings below should be taken into account by the Court of Appeal in dealing with the costs below.

(d) It could be taken into account by the Court of Appeal in the exercise of its general discretion as to the costs of the appeal, where it was appropriate to do so having regard to all the circumstances (see by way of examples the cases cited in paragraphs 31-33 of the judgment in the Ryder case).

14.  Here, the sanctioned offer was made in the course of the proceedings below.  No sanctioned offer was separately made for the purposes of the appeal.  In this respect, the situation is no different from that in the Ryder case.  We agree with Mr Chong that this court should consider it, and that the relevant provisions of RHC Order 22 are engaged, for the purpose of determining what orders to make in respect of the costs of the trial (and whether or not to order enhanced interest on the damages awarded to the Plaintiff).  So far as the costs of the appeal are concerned, as the sanctioned offer made for the purposes of the trial does not continue to have effect, and no fresh sanctioned offer was made (if one could have been) for the purposes of the appeal, no question of indemnity costs or enhanced interest on costs pursuant to Order 22 rule 24(3) arises.  However, it remains necessary for us to consider whether, in the exercise of our discretion as to costs, this is an appropriate case for the award of indemnity costs, and in this context, it is open to us to have regard to the sanctioned offer made below.

15.  We shall consider first the appropriate order in respect of the costs of the trial.  As to this, while we did not understand the 3^rd Defendant to dispute that Order 22 rule 24 was engaged, it did submit that it would be unjust to make the orders provided for in rules 24(2) and (3), because:

(a) A trial was (the 3^rd Defendant suggested) inevitable because the Plaintiff had wrongly pleaded that it was the owner of the diamonds; had failed to clearly plead that it was a pledge of the diamonds; had pleaded a reference to Indian law which it subsequently failed to particularise or pursue; had failed to respond to a request for particulars; did not give discovery until the day on which the sanctioned offer expired; did not deal clearly with these matters in its witness statements (which were in any event not provided until long after the sanctioned offer was no longer capable of acceptance; and failed to renew the sanctioned offer after discovery).

(b) The Plaintiff was late in delivering its opening submissions, and did not properly make the argument on which it eventually succeeded on appeal until it delivered further submissions some two months after the conclusion of the trial.

(c) The sanctioned offer offered only a miniscule discount (of only 0.27%) on the amount claimed, and should not therefore be regarded as a genuine offer which should attract the benefit of the Order 22 regime, particularly in light of the allegedly unsatisfactory way in which the claim was pleaded with the consequence that it could not be regarded as a strong claim so as to justify regarding the offer as a genuine one.

16.  We do not think there is any merit in the first two of these points.  The fact that the Plaintiff pleaded matters on which it did not ultimately succeed is neither here nor there, particularly as it is not suggested that these added significantly to the costs of the proceedings below.  As we observed in paragraph 18 of our judgment, the point about the Plaintiff being the pledgee of the diamonds was, in our view, adequately (if not perfectly) pleaded.  Moreover, as Mr Chong points out, it was clear from the outset that the Plaintiff’s status as a pledgee was a key issue in the proceedings.  It is not suggested that the 3^rd Defendant could not have formed a view as to the likelihood of the Plaintiff succeeding on this point without discovery or witness statements (which it says, in any event, were unhelpful in this respect).  In these circumstances, we do not think that any of these complaints are justified, or render it unjust to make the orders envisaged in Order 22 rules 24(2) and (3).

17.  Nor do we think that, in the circumstances of this case, the third point assists the 3^rd Defendant.

18.  The suggestion that in order to attract the consequences of Order 22, a sanctioned offer (or payment) must be a “genuine” rather than a “tactical” one was made by Tuckey LJ in Huck v Robson [2002] 3 All ER 263, at paragraph 71.  In that case, which involved a claim for personal injuries arising out of a traffic accident, Tuckey LJ expressed the view that an offer that gave only a 0.1% discount on the amount claimed might be regarded as merely “tactical”, and thus not one that would attract the consequences of the English equivalent of Order 22.  Further, in the same case Jonathan Parker LJ at paragraph 63 contrasted between offer which represented a genuine and realistic attempt to resolve dispute by agreement and offer which created no real opportunity for settlement but is merely a tactical step designed to secure the benefit of the incentives.  The approach was applied by Deputy Judge Lai in Gill Ajmer Singh v Wah Hing Scaffolding Engineering Ltd [2014] 1 HKC 495 in an employee compensation case in which a respondent had made a sanctioned offer on the basis that the applicant shall discontinue with the claim.

19.  In Kai Min Fashion (HK) Limited v Fond Express Logistics Limited and anor [2013] 1 HKC 563, a misdelivery case (like the present) where a discount of 2% was offered, Recorder Jat SC said (at paragraph 14 of his judgment):

“ … Huck v Robson was a traffic accident case and in that type of cases [sic] issues of contributory negligence often arise, making it uncertain as to the extent of the parties’ respective responsibility for the accident. Thus making a sanctioned offer of the kind described by Tuckey LJ may be seen as a tactical move. This case, on the other hand, is what may be called a “mis-delivery” case and claimants in such cases are often, and justifiably, confident of success if the carrier has delivered the goods without production of the original bills of lading. I do not see why the Plaintiffs should not offer a small discount in this type of case to reflect their reasonably justified confidence in the strength of their claims.”

20.  In the present case, the extent of the discount offered is even less than that in Kai Min Fashion.  But it does not follow that it would therefore be unjust to make orders of the sort envisaged by Order 22 rules 24(2) and (3).  Just as in Kai Min Fashion, the Plaintiff here could well have genuinely regarded its claim as an extremely strong one (and there is no reason to suppose that it did not).  We therefore do not think that the smallness of the discount offered of itself renders it unjust to make the orders which the Plaintiff seeks on the basis that the offer was to be castigated as merely “tactical”.  Moreover, in this regard, we would, with respect, agree with the observations of Norris J in Wharton v Bancroft [2012] EWHC 91 at paragraph 22 that:

“ The concept is not an easy one to apply. All Part 36 offers are tactical in the sense that they are designed to take advantage of the incentives provided by Part 36. A low offer in a case in which the offeror considers that the offeree’s position has no merit cannot be written off as self evidently ‘merely a tactical step’.”

21.  In this connection, there is no reason why a recipient of a sanctioned offer of a relatively small discount to the claim should not give it serious consideration. Such consideration may lead the recipient to respond with (from his point of view) a more realistic sanctioned offer or sanctioned payment.  If this is done, the party who put forward the original sanctioned offer would have to give serious thought to this counter sanctioned offer or counter sanctioned payment.  The process may go on and it may take several rounds of offer and counter offer before one gets to a point where an offer acceptable to both sides emerges.  Even if that point is not reached, the process would have driven the parties (together with their lawyers) to give serious and realistic consideration to the possible options of settlement as opposed to the ordinary adversarial mindsets which unfortunately have a tendency to dominate the thinking of those involved in litigation.  To that end, the whole process initiated by the original sanctioned offer can achieve what the sanctioned offer and sanctioned payment regimes are designed to achieve. 

22.  For our part, while we would not rule out the possibility that there may be cases in which it would be appropriate to regard a purported sanctioned offer as being “not genuine”, so as to render it unjust to make orders of the sort envisaged by Order 22 rules 24(2) and (3), we do not regard the present case as falling within that category.  We therefore do not think that it would be unjust to order, as provided for by Order 22 rules 24(3) and (4), that the Plaintiff’s costs of the trial incurred on or after 6 August 2011, should be paid by the 3^rd Defendant on the indemnity basis, and we shall vary the costs order nisi to so provide.

23.  Turning to the costs of the appeal, as we have explained, even if it were possible to make a sanctioned offer in respect of an appeal, no such offer has been made here.  The sanctioned offer in the proceedings below will therefore only be taken into account as a factor that may be relevant to the exercise of our discretion as to the costs of the appeal.

24.  As was noted in the Ryder case, there have been a number of cases in which the Court of Appeal has taken account of a sanctioned offer in proceedings at first instance and ordered payment of costs on an indemnity basis in respect of the appeal.  But it is relevant to note that all of those cases were ones in which the appellant had been unsuccessful in the court below, had failed to do better than the sanctioned offer, and had again been unsuccessful on appeal.  In these circumstances, it is not surprising that the court should order indemnity costs in respect of the appeal, particularly if it were of the view that the appeal had little merit. The present case is different, in that the successful party before us was the appellant Plaintiff.  The 3^rd Defendant was successful in the court below, but failed before us as we were satisfied that the judge had erred in coming to his decision.  It had no choice but to participate in this appeal. While it might be said that, had the 3^rd Defendant accepted the sanctioned offer, the need for the trial and the appeal would have been obviated, it does not seem to us that it can be said that the 3^rd Defendant was unreasonable in failing to accept the offer – the most that can be said is that it took a risk which succeeded in the court below, but ultimately failed before us.  In these circumstances, we think that the appropriate order to make as to costs would be to leave our order nisi undisturbed in relation to the costs of the appeal, so that such costs should simply be paid by the 3^rd Defendant to the Plaintiff with certificate for two counsel, and taxation on the party and party basis if necessary.

25.  Turning to the question of enhanced interest on costs, the Plaintiff suggests that a rate of 5.5% (half of 6% over prime rate) should be awarded as, being a bank, it could be expected to earn more with its money than the average litigant.  Mr Sheppard, for the 3^rd Defendant, points out (with some justification) that this is at least partly because, as a bank, the Plaintiff’s cost of funds would be lower than that of the average litigant.  The 3^rd Defendant also relies on Shih Pik Nog v G2000 (Apparel) Limited (unreported, HCPI 832/2009, 6 July 2011) in which Bharwaney J suggested that it was necessary for a party seeking interest on costs to provide evidence that it had in fact paid such costs, to submit that as no such evidence has been placed before us, no order for enhanced interest on costs should be made.

26.  Dealing with the latter point first, with respect, Shih Pik Nog appears to have been a case in which insurers were involved for defendants, and in those circumstances the learned judge might well have been concerned to see that costs had actually been expended before making an order for interest to be paid on them.  Most ordinary litigants (including companies and banks) can be expected to have to fund the litigation in which they are involved as it proceeds, and we do not think that such evidence should necessarily be required in every case.  However, given that enhanced interest on costs is meant to be compensatory rather than punitive, if a paying party has reason to think that the receiving party has not actually paid its own costs in the usual manner (viz by different instalments over a period of time during the course of the litigation), the paying party can raise his query with the court and, depending on the circumstances, the court may require a statement from the receiving party’s solicitors certifying the dates and amounts of costs that have in fact been paid. 

27.  As for whether the rate of interest should be enhanced, and if so to what level, it seems to us that the mere fact that the Plaintiff is a bank is not something that can render it unjust to make an order for the payment of interest on costs at an enhanced rate.  That being so, such an order should be made (see Order 22 rule 24(4)).  We also see no reason to depart from the approach of Lam J (as Lam VP then was) in Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273, where he suggested that 4% over prime rate would generally represent a generous assessment of the cost of money.  We would therefore order that interest on costs be paid at half of 4% over prime rate on the whole of the costs to avoid the necessity of calculating the precise amount of interest on each item of costs incurred.

28.  Finally, turning to the question of whether or not an enhanced rate of interest should be ordered in respect of the damages awarded to the Plaintiff, we again see nothing to suggest that it would be unjust to do so, and will therefore make such an order.  So far as the rate of interest is concerned, it seems to us that, just as a rate of 4% over prime rate would be a generous assessment of the cost of money (or the use to which it could be put) for the purposes of enhancing interest on costs, that rate would represent a generous assessment of the cost of money for the purposes of enhancing interest on damages, and we think it would be appropriate vary our order as to interest on the damages awarded to the Plaintiff by increasing the rate to 4% over prime rate.

29.  We will therefore order that:

(a) The costs order nisi be varied to provide that the costs of the trial be paid by the 3^rd Defendant to the Plaintiff, to be taxed on the indemnity basis if not agreed, and that the costs of the appeal be paid by the 3^rd Defendant to the Plaintiff, to be taxed on the party and party basis if not agreed.

(b) Interest be paid by the 3^rd Defendant to the Plaintiff on the costs of the trial at the rate of half of 4% over prime rate.

(c) Our order as to interest on the damages awarded to the Plaintiff be varied by increasing the rate of interest to 4% over prime rate.

30.  So far as the costs of the application to vary are concerned, as it seems to us that the Plaintiff has been substantially successful in relation to the application, we shall order that such costs are to be paid by the 3^rd Defendant to the Plaintiff, to be taxed on the party and party basis if not agreed.