ANGBUHHANG NETRA JANG v. LAING O’ROURKE CONSTRUCTION HONG KONG LTD AND ANOTHER

HCPI 69/2015

[2021] HKCFI 232

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO 69 OF 2015

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REASONS FOR DECISION ON COSTS

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1.  By a judgment handed down on 20 November 2020[1], I dismissed the plaintiff’s claim and made an order nisi that the plaintiff should pay the defendants’ costs of this action, to be taxed on a party and party basis if not agreed, and that the plaintiff’s own costs prior to the discharge of his legal aid certificate[2] should be taxed in accordance with the Legal Aid Regulations.

2.  Before the court is a summons dated 4 December 2020 issued by the defendants pursuant to Order 22 rule 23 of the Rules of the High Court (Cap 4A) to vary the said costs order nisi for:

(1)  taxation of the defendants’ costs incurred after 26 February 2015 on an indemnity basis; and

(2)  interest on the costs incurred after 26 February 2015 at the maximum enhanced rate of 10% above judgment rate.

3.  The defendants so applied on the basis that they had made a total of 4 sanctioned payments adding up to $800,000, the earliest of which was one of $200,000 made on 29 January 2015.  The last day on which the plaintiff could have accepted such first sanctioned payment without requiring the leave of the court was 26 February 2015.

4.  According to the affirmation of Yip Mei Ling dated 3 December 2020 for the defendants, the defendants’ insurers have incurred total legal fees and disbursements of $649,705.30 after 26 February 2015 paid from 1 April 2015 to 22 June 2020.

5.  Where a plaintiff fails to obtain a judgment better than the defendant’s sanctioned payment, the adverse costs consequences provided for in Order 22, rule 23 should be imposed unless the court considers it unjust to do so.  See rule 23(5).

Indemnity costs

6.  I can see no injustice in making the plaintiff, or the Director of Legal Aid before the discharge of the plaintiff’s legal aid certificate, pay costs on an indemnity basis after the last date on which the defendants’ first sanctioned payment could have been accepted without leave, i.e. 26 February 2015.  In particular, that the plaintiff had been legally aided for part of the period did not immunize him from such adverse costs order.  See Lai Sin Yan Elsie v Tata Communications (Hong Kong) Ltd [2020] 4 HKLRD 363, in which Bharwaney J ordered indemnity costs against a legally aided plaintiff because “failing to grant an adverse costs order will serve as an encouragement to legally aided parties to pursue unrealistic and exaggerated claims, which will in turn be an unnecessary and unjustified strain on the public fund”.  See, in particular, [18]-[27].  See also Shih Pik Nog v G2000 (Apparel) Ltd [2011] 4 HKLRD 121.

Enhanced interest

7.  In OMV Petrom SA v Glencore International AG (No 2) [2018] 1 All ER 703; [2017] EWCA Civ 195 at [38]-[39], Sir Geoffrey Vos C set out the relevant considerations in the award of enhanced interest on costs, in particular, that it can be awarded at a rate that is greater than purely compensatory to mark the court's disapproval of a party’s unreasonable or improper conduct.

“[38] In my judgment, the use of the word ‘penal’ to describe the award of enhanced interest under CPR 36.14(3)(a) is probably unhelpful. The court undoubtedly has a discretion to include a non-compensatory element to the award as I have already explained, but the level of interest awarded must be proportionate to the circumstances of the case. I accept that those circumstances may include, for example, (a) the length of time that elapsed between the deadline for accepting the offer and judgment, (b) whether the defendant took entirely bad points or whether it had behaved reasonably in continuing the litigation, despite the offer, to pursue its defence, and (c) what general level of disruption can be seen, without a detailed inquiry, to have been caused to the claimant as a result of the refusal to negotiate or to accept the Part 36 offer. But there will be many factors that may be relevant. All cases will be different. Just as the court is required to have regard to ‘all the circumstances of the case’ in deciding whether it would be unjust to make all or any of the four possible orders in the first place, it must have regard to all the circumstances of the case in deciding what rate of interest to award under rule 36.14(3)(a). As Lord Woolf MR said in the Petrotrade case, and Chadwick LJ repeated in the McPhilemy case, this power is one intended to achieve a fairer result for the claimant. That does not, however, imply that the rate of interest can only be compensatory. In some cases, a proportionate rate will have to be greater than purely compensatory to provide the appropriate incentive to defendants to engage in reasonable settlement discussions and mediation aimed at achieving a compromise, to settle litigation at a reasonable level and at a reasonable time, and to mark the court's disapproval of any unreasonable or improper conduct, as Briggs LJ put the matter, pour encourager les autres.

[39] The culture of litigation has changed even since the Woolf reforms.  Parties are no longer entitled to litigate forever simply because they can afford to do so.  The rights of other court users must be taken into account.  The parties are obliged to make reasonable efforts to settle, and to respond properly to Part 36 offers made by the other side.  The regime of sanctions and rewards has been introduced to incentivise parties to behave reasonably, and if they do not, the court’s powers can be expected to be used to their disadvantage.  The parties are obliged to conduct litigation collaboratively and to engage constructively in a settlement process.”

8.  OMV Petrom SA was considered in Wong Giles v Donowho Simon Christopher [2020] HKCFI 1053, in which K Yeung J ordered the plaintiff to pay interest on the defendants’ costs at the maximum enhanced rate of 10% above judgment rate, having regard to the plaintiff’s conduct, in particular, that he was untruthful, his conduct disgraceful, and the way he prosecuted his claim affronting to the court (see [19] and [27]).

9.  In the personal injuries context, OMV Petrom SA was considered in Yeung Ho Man v Shum Kin Leung [2020] HKCFI 2781 in which Bharwaney J awarded enhanced interest at 10% above judgment rate having regard to the egregious character of the plaintiff’s conduct (see [17] and [23]). 

10.  In Grupo Pacifica Incorporada v Worldwide Marine Product Ltd [2018] HKCFI 2584, Au-Yeung J similarly ordered the first defendant to pay interest on the plaintiff’s costs at the enhanced rate of 10% above judgement rate because the defences were devoid of merits or only faintly argued (see [17]).  Her Ladyship commented at [19]:

“These proceedings should never have been defended. Damages, costs and statutory interest would not compensate the successful plaintiff for the inconvenience, anxiety and distress of having to resort to and pursue proceedings which he had sought to avoid by the sanctioned offer: McPhilemy v Times Newspaper Ltd (No 2) [2002] 1 WLR 934 at §21. Indemnity costs and enhanced interest rate were not unjust.”

11.  In dismissing the plaintiff’s claim herein, not only did I disallow him to run a case on liability based on an account of the accident that did not emerge until the first day of the trial, I disbelieved such account because the manner in which the accident happened was expanded and added to so much in the new version that the complexion of the case on liability had altogether changed.  Further, although it had become unnecessary for me to deal with quantum as a result of my findings on the accident and conclusion on liability, I was convinced that the plaintiff had manifestly exaggerated his case on quantum in terms of the physical injuries that he sustained, the residual pains and impairments left by such injuries, his earnings at the time of the accident and whether, and if so, when he could have resumed his pre-accident occupation.

12.  Needless to say, I strongly disapprove of such litigation conduct.

13.  The 4 sanctioned payments were made at a very early stage of proceedings between January 2015 and March 2016.  There were ample opportunities for the plaintiff to settle the case early on terms that were exceedingly favourable to him.  Even if the court were to find liability, the plaintiff’s non-acceptance of the sanctioned payments is still unreasonable having regard to his relatively minor injuries.  As a result, much of the court’s resources and the parties’ time and costs had been wasted.

14.  I am persuaded that I should exercise my discretion to include a non-compensatory element to the award of interest.  I believe 10% above judgment rate is proportionate to the circumstances of this case.

Disposition

15.  I order the plaintiff to pay the defendants costs up to and including 26 February 2015 to be taxed on a party and party basis if not agreed and thereafter on an indemnity basis, to be taxed if not agreed.

16.  I also order the plaintiff to pay enhanced interest at 10% above judgment rate on each payment of costs incurred by the defendants after 26 February 2015 from the date of payment by the defendants’ insurers up to the date of judgment.

17.  The sanctioned payments totalling $800,000 made into court by the defendants on 29 January 2015, 9 December 2015, 22 January 2016 and 24 March 2016 together with any interest accrued thereon should be paid out to the defendants forthwith through their solicitors, Kennedys.

18.  The costs of this application to vary the costs order nisi dated 20 November 2020 should be paid by the plaintiff to the defendants, to be taxed on an indemnity basis if not agreed.