YIP KIN HO v. CHAN KWOK LEUNG AND ANOTHER

DCCJ 3203/2021

[2025] HKDC 210

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3203 OF 2021

-------------------------------

BETWEEN

-------------------------------

--------------------------

DECISION

--------------------------

Introduction

1.  On 15 November 2024, after the trial for assessment of damages caused by water seepage that originated from the Defendants’ Property[1] affecting the Plaintiff’s Property[2], I gave Judgment for the Plaintiff for the sum of HK$94,822 (“the Judgment”). I also made an order nisi that save for the costs of the application by the Plaintiff made during the trial to adduce further evidence, the costs of the assessment of damages be to the Plaintiff, such costs to be taxed if not agreed, with certificate for counsel (“the Costs Order Nisi”).

2.  The 1^st & 2^nd Defendants subsequently applied by summons dated 27 November 2024 for an order that the Costs Order Nisi be varied as follows:

(a) The 1^st and 2^nd Defendants do pay the costs of the Plaintiff on a party to party basis on liability up to the date of admission of liability on 1 September 2021;

(b) The costs of these proceedings, including all costs previously reserved (if any), incurred by the 1^st and 2^nd Defendants after 30 September 2021, being the last day on which the Plaintiff could have accepted the sanctioned payment of the 1^st and 2^nd Defendants without leave, be paid by the Plaintiff to the 1^st and 2^nd Defendants on an indemnity basis, to be taxed if not agreed, with certificate for counsel;

(c) The Plaintiff do pay enhanced interest at 3% per annum above judgment rate on the 1^st and 2^nd Defendants’ costs and disbursements (to be taxed on an indemnity basis if not agreed) from 30 September 2021 to 15 November 2024, and thereafter at judgment rate until full payment;

(d) Leave to release the remaining balance of the sanctioned payment together with accrued interest to the 1^st and 2^nd Defendants through their solicitors; and

(e) That the costs of this application be paid by the Plaintiff to the 1^st and 2^nd Defendants on an indemnity basis, to be taxed if not agreed.

3.  As could be discerned from the summons and the affirmation filed in support, the 1^st and 2^nd Defendants are making this application on the basis of the sanctioned payment made by them. There is no dispute that on 1 September 2021, Interlocutory Judgment on liability against the Defendants was entered by consent. On the next day, that is 2 September 2021, the Defendants filed and served their Notice of Sanctioned Payment in the sum of HK$150,000.

4.  The Defendants subsequently filed and served a Notice of Increased Sanctioned Payment on 17 October 2023 for a further sum of HK$91,000, adding up to a total of HK$241,000 in terms of sanctioned payment.

5.  According to the inter-solicitors correspondence produced by the Defendants, the Defendants had subsequently on 22 April 2024 further increased their offer to settle the case up to the amount of HK$300,000, although the time of accepting the sanctioned payment had long expired. This offer was rejected by the Plaintiff.

6.  There is also no dispute that further negotiations had been conducted on the 1^st day of the trial, but to no avail.

7.  The Defendants say that since the Court has now awarded an amount of HK$94,822 as damages, which is an amount way below the sanctioned payments made by the Defendants and the further offer subsequently made, this application should be allowed.

8.  In respect of costs consequences where a plaintiff fails to do better than a sanctioned offer or payment, Order 22 rule 23(2) to (4) of the Rules of the District Court, Cap 336H provides that:

“(2) The Court may by order disallow all or part of any interest otherwise payable under section 49 of the Ordinance on the whole or part of any sum of money awarded to the plaintiff for some or all of the period after the latest date on which the payment or offer could have been accepted without requiring the leave of the Court.

(3) The Court may order the plaintiff to pay any costs incurred by the defendant after the latest date on which the payment or offer could have been accepted without requiring the leave of the Court.

(4) The Court may also order that the defendant is entitled to—

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

(b) interest on the costs referred to in paragraph (3) or subparagraph (a) at a rate not exceeding 10% above judgment rate.”

9.  Rule 23(5) provides that where this rule applies, the Court shall make the orders referred to above unless it considers it unjust to do so. Further, under rule 23(6), in considering the order to be made, the Court shall take into account all the circumstances of the case including:

“(a) the terms of any sanctioned payment or sanctioned offer;

(b) the stage in the proceedings at which any sanctioned payment or sanctioned offer was made;

(c) the information available to the parties at the time when the sanctioned payment or 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 payment or offer to be made or evaluated.”

10.  In this case, as expounded in the Judgment, the Plaintiff’s initial pleaded case was for damages in the total amount of HK$800,000, but this was increased to HK$1,345,000 during his testimony, whereas the amount he stated in his witness statement was HK$1,000,000. In any event, for the reasons set out in the Judgment (which I shall not repeat here), only an amount of HK$94,822 was eventually awarded after trial.

11.  The Defendants submit that, first of all, the Plaintiff has failed to do better than the sanctioned payments (which was first made as early as September 2021, and increased in October 2023), and the subsequent offer made by them. Further, they submit that the Plaintiff has always been in the best position to evaluate and assess his claim based on the available evidence, especially when he has all along been represented by his solicitors. At the trial, the Defendants had called no witnesses, and only relied upon their cross-examination of the Plaintiff to attack his case on quantum. Obviously, that succeeded in leading the Court to make its final assessment which is way below the claimed amount. The Defendants submit, which I accept (for the reasons set out in detail in the Judgment), that the claim was largely exaggerated.

12.  The Defendants also seek an order for enhanced interest of 3% above judgment rate, referring to the case of Imran v Intrafor Hong Kong Ltd [2024] 1 HKLRD 1066 at paragraph 12 where Deputy High Court Judge Simon Leung (as he then was) stated:

“12. Extreme cases involving complete lack of merits, untruthful account, egregious character and manifest exaggeration have attracted award by the court of enhanced interest rate near the top end of the range: see for instance Grupo Pacifica Incorporada v Worldwide Marine Product Ltd & Ors [2018] HKCFI 2584 at §§17, 19; Wong Giles v Donowho Simon Christopher & Anor [2020] HKCFI 1053 at §27; Yeung Ho Man v Shum Kin Leung & Anor [2020] HKCFI 2781 at §§17, 23; Angbuhhang Netra Jang v Laing O’Rourke Construction Hong Kong Limited & Anor [2021] HKCFI 232 at §§11-12; Thapa Hari Bahadur v Paramount Engineering & Manpower & Anor [2022] HKCFI 1305 at §11.”

13.  The Defendants submit that as the Plaintiff was only awarded an amount of HK$94,822, which is at the most about 11.85% of the initially claimed amount of HK$800,000. Certain heads of claim were completely disallowed or substantially cut down. It is obvious that the Plaintiff has exaggerated his claim by a large extent, and therefore an enhanced interest rate should be adopted.

14.  The Plaintiff on the other hand submits that firstly, the initial sanctioned payment was made at such an early stage that the Plaintiff had no information from the Defendants concerning assessment of damages. The Defendants have not filed any defence or witness statements, and only provided an expert report dated 6 March 2023 (which was later not relied upon). The Plaintiff was therefore robbed of the opportunity to assess the Defendants’ position.

15.  Further, the Plaintiff submits that notwithstanding I have dismissed his application to adduce further necessary evidence during the trial to prove that he had actually paid a total amount of HK$313,000 to Li Kwan Construction Co for the repair and renovation of his property[3], the Court did have the chance to consider that there were indeed bank documents showing that the Plaintiff had paid the sum to Li Kwan Construction Co, although he admits that he has overlooked to adduce those documents.

16.  It is also submitted by the Plaintiff that the provisions of Order 22 rules 23 and 24 are designed to provide incentive to parties to settle, in order to achieve a fair result, as opposed to being penal in nature, referring to Qvist Henrik v Clatronic Far East Limited and Another [2020] 1 HKLRD 703. In that case, the learned Recorder said at paragraphs 21 and 22:

“21. While I do accept that a defendant should not be required to make a decision whether to accept or to reject a sanctioned offer without a careful review of the case with proper information (and this is made clear by Order 22, rule 24(5)(b) to (d)), it is a question of fact in each case as to whether a defendant is able to do so when the sanctioned offer is made, depending on the nature and complexity of the case and the issues involved. Further, on receiving a sanctioned offer which a defendant considers he is unable to evaluate properly because of insufficient information or evidence, he should seek further information if possible. A balance must be struck between fairness to the defendant in that he should not be required to make a decision whether to accept a sanctioned offer without proper information to assess the merits of the case, and the spirit behind the sanctioned offer regime of encouraging settlement of actions as early as possible. The principle that a defendant ought to be allowed to make a decision with proper information must be applied with circumspection because it is always open to a defendant to say that the proper assessment cannot be made with only the pleadings, without full discovery and the exchange of witness statements. That is, on this argument, it can be said that no sanctioned offer ought to be made or accepted until quite an advanced stage of the proceedings are reached, which would be quite contrary to the whole intent behind the sanctioned offer regime.

22. A defendant ought to make reasonable efforts to settle the matter as early as possible, and a defendant who does not react to an early sanctioned offer at all but simply sits on his hands without attempting to seek any further information required will need to convince the Court that he has not been acting unreasonably.”

17.  Having considered the above principles, and the circumstances of this case, I do not accept the Plaintiff’s submissions.

18.  Firstly, the burden has always been on the Plaintiff to prove the damages suffered. It is neither here nor there as to what the Defendants may have to say about the details of the claimed amount, whether by way of their pleadings or witness statements, as the Plaintiff must have been in the position from the commencement of the action to ascertain his loss and damage. The fact that the Defendant has eventually indicated that they would not rely on the expert report filed on their behalf does not assist the Plaintiff, as no admission or acceptance has ever been made in respect of the Defendants’ expert report. In other words, this is not a case where the Plaintiff would require information from the Defendant before he would be put in a fair position to consider whether to accept the sanctioned payment, or the subsequent increased offer. Further, the Plaintiff’s reference to the negotiations on the first day of the trial does not assist him either, as the offer(s) made had not been accepted in any event.

19.  Secondly, the Plaintiff’s argument that he did seek to produce further documents at the trial concerning the payment of HK$313,000 to Li Kwan Construction Co for the repair and renovation of his property[4] but such application was disallowed is misplaced, as this is an application for variation of the Costs Order Nisi. There is no application for leave to appeal against the Judgment in this regard before me. In any event, as the application to adduce further evidence was dismissed, the documents had not been considered in reaching the Judgment, and should not be re-considered in this application. It has remained the duty of the Plaintiff to make discovery of all relevant documents well before the trial. Obviously, that was not done. It is not fair to the Defendants to allow the Plaintiff to rely on such documents now for the purposes of this application.

20.  For the above reasons, I do not find any reason to hold that it would be unjust to the Plaintiff to make the orders sought. I would allow this application.

21.  As for enhancement of interest, I take note that the court has awarded relatively lower enhanced interest rates despite findings of exaggeration or dishonesty ranging from 4% to 6%, and further lower enhanced rates for less serious cases – see paragraphs 13 to 14 of the Judgment in Imran v Intrafor Hong Kong Ltd. In the present case, I am of the view that 3% above judgment rate per annum should be appropriate.

22.  I therefore vary the Costs Order Nisi and make an Order in terms of what has been set out in paragraph 2 above.