FU SAU TAI, RAYMOND v. WOO KWONG PO AND ANOTHER

DCCJ 5546/2020

[2025] HKDC 1845

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5546 OF 2020

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BETWEEN

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DECISION ON COSTS

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Introduction

1.  On 29 July 2025, the 1^st and 2^nd Defendants applied by Summons dated 4 June 2025 (the “Summons”)[1] to vary the costs order nisi I made in para.111 of the Judgment dated 29 May 2025 that the 1^st Plaintiff do pay the costs of the 1^st and 2^nd Defendants, with Certificate for Counsel for the trial, to be taxed if not agreed. The costs order nisi was made upon dismissal of the 1^st Plaintiff’s claim herein after a trial that lasted 4 days.

2.  As the 1^st Plaintiff indicated that he would oppose the Summons, directions were made for the filing of further affirmations for consideration by the court. Pursuant to the directions, on 20 August 2025, Ms Wu Xue Ping, the 1^st Plaintiff’s wife, filed her affirmation on behalf of the 1^st Plaintiff in opposition to the Summons. On 4 September 2025, the 1^st Defendant filed his affirmation in reply, on behalf of the Defendants.

The basis of the Defendants’ application

3.  This application was made pursuant to Order 22, rule 23(1) & (4), Order 22A, rule 1 and Order 42, rule 5B(3) of the Rules of the District Court, Cap.336H (“RDC”).

4.  In particular, Order 22, rule 23(1)(a) and (4) provide that where a plaintiff fails to obtain a judgment better than the sanctioned payment, the court may 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 without requiring the leave of the court, and (b) interest on the costs referred to above at a rate not exceeding 10% above judgment rate.

5.  Further, according to Order 22, rule 23(5), “[w]here this rule applies, the Court shall make the orders referred to in paragraphs (2), (3) and (4) unless it considers it unjust to do so”[2].

6.  Rule 23(6) sets out the matters the court shall take into account when considering whether it would be unjust to make such orders, which include (i) the terms of the sanctioned payment, (ii) the stage of the proceedings at which the payment was made, (iii) the information available to the parties at the time of the sanctioned payment, and (iv) the conduct of the parties with regard to the giving or refusal to give information for the purposes of enabling the parties to evaluate the sanctioned payment. In this regard, the plaintiff bears the burden of showing that it would be unjust to make such an enhanced costs order (see Kan Lai Ling v Wong Man Kit [2024] HKDC 1686 at para.19).

7.  The basis of the present application is that pursuant to Order 22, rule 8 of the RDC, the 1^st and 2^nd Defendants made a sanctioned payment into court in the sum of HK$75,000 on 16 September 2021 in respect of the whole of the claim. The Notice of Sanctioned Payment was filed and served on the same day.

8.  As such, pursuant to Order 22, rule 15(1) of the RDC, since the sanctioned payment was made not less than 28 days before the commencement of the trial, the 1^st Plaintiff could have accepted it without requiring the leave of the court, not later than 28 days after the sanctioned payment was made, i.e. on or before 14 October 2021.

9.  Apparently, the 1^st Plaintiff did not accept the sanctioned payment, and according to the Defendants, nor had he responded by way of any sanctioned offer or without prejudice correspondence.

10.  The Defendants therefore say that had the 1^st Plaintiff accepted the sanctioned payment, he would have been entitled to his costs of the proceedings up to the date of his acceptance, and the parties would not have to go through the stress and suffer the costs of the proceedings any further some 4 years ago.

11.  The Defendants further submit that the sanctioned payment was made after the close of pleadings and at a time when the 1^st Plaintiff was legally represented, and as mentioned above, he had not attempted to engage in further negotiations, or to seek clarification of the sanctioned payment. This failure on the 1^st Plaintiff’s part is also reinforced by his rejection of payment of the uninsured loss under Incidents 1 and 2 referred to in para.74 of the Judgment, which led to that part of the claim being forced to be tried.

12.  It is also submitted by the Defendants that if the costs order nisi is not varied, they will in reality be penalised rather than rewarded for their attempt to end the proceedings on terms which would have been extremely favourable to the 1^st Plaintiff, given the Judgment after trial.

Applicable principles

13.  As already highlighted above, the provisions in Order 22, rule 23 of the RDC are mandatory directions, unless the Court considers it unjust to apply them. It would appear that one of the considerations is whether, when a plaintiff decides not to accept a sanctioned payment, he must have done so on a fully informed basis, accepting that he bears the risk of failing to obtain a judgment better than the sanctioned payment and the costs consequences that follow – see Tsang Chiu Yip y Ho Kwok Leung [2016] HKCFI 1297 at para.63, referring also to Cai Guoping v Yim Hok Wing, CACV 96/2015, 13 October 2015.

14.  Importantly, in Tsang Chiu Yip, the court also said at para.47:

“A defendant can make a sanctioned payment at any time (eg before disclosure of witness statements and/or expert reports and hence before the plaintiff knows the full extent of the defendant’s case), and there is no embarrassment even if it is not clear how the sanctioned payment is calculated. For the plaintiff, he makes an assessment of the risk of failing to beat the sanctioned payment in deciding whether or not to accept it (and he does so under advice and on materials then available). Even if the plaintiff decides not to accept the sanctioned payment within the prescribed time, it is always open to him to reassess the risk, and if on such reassessment he decides it will be in his interest to accept the sanctioned payment, he can apply to the court for leave to accept out of time.” [underline added]

The terms of the sanctioned payment

15.  The 1^st Plaintiff argues that the sanctioned payment did not provide for any injunctive relief, and thus even if accepted, it could not have effectively stopped the leakage at that time or prevented future leakage.

16.  However, as the Defendants have pointed out, the 1^st Plaintiff’s claim was dismissed by this court after trial. In other words, the 1^st Plaintiff has failed on both the claim for injunctive relief and damages. The submission by the 1^st Plaintiff that it would be unfair to disallow him to pursue injunctive relief cannot be correct – see for example Kan Lai Ling v Wong Man Kit [2024] HKDC 1686 at para 26.

17.  The 1^st Plaintiff also submits that as the leakage then was continuing, it could not have been reasonably ascertained whether the lump sum sanctioned payment would be sufficient to compensate for the 1^st Plaintiff’s continuing loss and damage. I do not agree with this submission. Firstly, the 1^st Plaintiff would have been in a position to ascertain his loss and damage at the time when the sanctioned payment was made. As this was a claim initiated by the 1^st Plaintiff, he would have been at full liberty to assess or re-assess the cause of the leakage at any stage of the proceedings. This is also said in the light of the fact, as pointed out by the Defendants, that in any event the 1^st Plaintiff must have been fully apprised of the findings of the Joint Office of the Buildings Department and Food and Environmental Hygiene Department, as well as the findings of the Management Office, which have been eventually considered and discussed in the Judgment.

The stage of the proceedings when the sanctioned payment was made and the information available at that time

18.  The 1^st Plaintiff does not challenge the Defendants’ entitlement to make a sanctioned payment at any stage of the proceedings, but he contends that it would not have been reasonable to accept the sanctioned payment as only limited information was available at the time when it was made in September 2021. In support of this argument, the 1^st Plaintiff has referred to a number of documents that came about afterwards, including the Joint Expert Report of the parties’ experts dated 23 August 2022, the test report by Modern Testing Consultants Limited dated 20 February 2023 recording the results of the water spray tests on the external wall (see paras. 57 and 107 of the Judgment), the inspection report by Prudential Surveyors International Limited dated 4 October 2021, in which the surveyor could not identify the Defendants’ premises as the source of leakage, the letter dated 14 October 2022 from the management office recording that the external wall was the source of leakage, and the Supplemental Joint Expert Report of the parties’ experts dated 21 July 2023 to that effect.

19.  However, as submitted by the Defendants, the sanctioned payment was made after the close of pleadings, and the 1^st Plaintiff was legally represented at the time. As the person making the claim, the 1^st Plaintiff with the advice of his legal representatives ought to have been in an informed position to assess the merits of his claim even at the commencement of the proceedings. Pausing here, the allegation that he was in fact planning to change his solicitors is an irrelevant consideration.

20.  The 1^st Plaintiff’s claim that he had made reasonable efforts to gather further information, including potential joint inspection which he had requested in August 2021, is neither here nor there, as that was apparently done before the sanctioned payment was made, at a time when the Defendants were yet to have legal representation.

21.  Further, and in any event, the fact remains that the documents referred to above which the 1^st Plaintiff says came about only after the sanctioned payment was made had nevertheless come to the knowledge of the 1^st Plaintiff in good time before the trial, but the 1^st Plaintiff has not indicated that he had sought to re-assess the merits of his claim in order to consider whether he should seek leave at a later stage before the trial to accept the sanctioned offer, which he has all along been fully entitled to.

22.  Also, as pointed out by the Defendants, the 1^st Plaintiff has sought to contend in para.23 of the affirmation of Ms Wu that “it was natural for the 1^st Plaintiff to rely on his expert, especially when he personally does not have any expertise in the area at all”. In this regard, I agree with what the court pointed out in Hui Wai Man v Chan Mei Wah [2015] HKDC 616 at paras.10 and 17:

“10. A plaintiff’s subjective belief that he has a good claim does not constitute a relevant consideration to override the mandatory direction in Order 22 rule 23...

……

17. While the plaintiff had the right to bring the case to trial, it is just for the plaintiff to bear the Specified Consequences imposed by Order 22 rule 23 RDC. His desire to test the defendant’s evidence and to resolve the issue at trial does not render it unjust for him to bear the costs of the defendant that should not have been incurred.”

23.  Here, the 1^st Plaintiff certainly has had the benefit of the contents of the expert evidence well before the trial, and in this regard, his desire to bring the case to trial justifies his having to bear the Defendants’ costs according to the rules.

The conduct of the parties regarding the giving or refusing to give information

24.  The 1^st Plaintiff sought to argue that he had through his former solicitors issued various letters to the Defendants for an inspection at the Defendants’ premises by the 1^st Plaintiff’s appointed expert as mentioned above, but the requests were not acceded to. However, in this regard, I agree with the Defendants’ contention that given that these were unilateral requests by the 1st Plaintiff for tests to be conducted solely by his expert, and that the Defendants were unrepresented at that time, they were understandably cautious about entering into such negotiations.

25.  In any event, as mentioned above, these invitations were made before the sanctioned payment was made, and there had indeed been tests and inspections carried out subsequently at both the 1^st Plaintiff’s and the Defendants’ premises, and 1^st Plaintiff had been able to lay his hands on the relevant reports and test results in any event.

Enhanced interest

26.  The Defendants ask the court to consider ordering that the 1^st Plaintiff shall pay enhanced interest on their costs by reason of the latter’s failure to accept the sanctioned payment in the circumstances set out above, at 5% per annum above judgment rate. The Defendants contend that the 1^st Plaintiff has taken a dismissive attitude towards the sanctioned payment and never responded to it, despite there is weighty evidence against his case. In short, the Defendants say the 1^st Plaintiff has run an utterly unmeritorious case, and therefore should be subject to such enhanced interest.

27.  The Defendants rely on Tse Lai Sing v Tung Wah Group of Hospitals [2021] HKDC 1095, but as the 1^st Plaintiff has pointed out, in that case, the court adopted 5% per annum above judgment rate as the enhanced rate of interest as the court found (see paras.16 to 17) that the appellant has deliberately exaggerated her evidence so as to bolster her claim. The 1^st Plaintiff submits that this has not been the case with him.

28.  The 1^st Plaintiff further refers to The Incorporated Owners of Shun Chi Court v Citi-Pro Property Services Company Limited [2023] HKCFI 2880 where DHCJ Leung (as he then was) considered a spectrum of cases and stated at paras.23-24:

“23. As to the enhanced interest rate, while this is a matter of discretion of the court, some guidance may be sought from the previous judgments of the court. For instance, extreme case of improper litigation conduct may attract the top rate: see Angbuhhang Netra Jang v Laing O’Rourke Construction Hong Kong Ltd, HCPI 69/2015 (27 January 2021) at §7.4% above the prime rate or 1% above the judgment rate has been considered to be generous: see Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273 at §19. 2% above judgment rate was directed in the absence of criticism about litigation conduct: see Chan Chun Ni v Chan Ngai Keung [2023] 1 HKLRD 888 at §§16-18.

24. Apart from proposing 5% above the judgment rate in counsel’s submission, the IO tendered no other material for the purpose of establishing an appropriate rate. On behalf of Citi-Pro, it is submitted that the present case does not bear circumstances warranting a rate over and above that should serve the purpose of penalising the rejection of the sanctioned offer. I tend to agree. I allow the enhanced rate of 2% above judgment rate.”

29.  There is no doubt that the facts of each case are different, and this issue is a matter of discretion by the court. I consider that in the circumstances of this case, the 1^st Plaintiff has acted unreasonably in failing to respond to the sanctioned payment in any way, or to take any initiative to engage in follow-up negotiations in light of the payment made, despite the further information made available to him afterwards as mentioned above. However, I agree that this is not the case here that the 1^st Plaintiff has deliberately exaggerated his evidence that would invite the court’s severe criticism in that regard as in Tse Lai Sing.

30.  Considering the circumstances overall, I am of the view that an enhanced rate of interest of 3% per annum above judgment rate is a fair one to order in this case.

Decision

31.  For the reasons set out above, I will vary the costs order nisi and make an Order that:

(1) The 1^st Plaintiff shall pay the 1^st and 2^nd Defendants’ costs of the action, including all costs reserved, up to and including 14 October 2021, on a party-and-party basis, to be taxed if not agreed;

(2) The 1^st Plaintiff shall pay the 1^st and 2^nd Defendants’ costs of the action, including all costs reserved, from 15 October 2021 on an indemnity basis with Certificate for Counsel for the trial, to be taxed if not agreed; and

(3) The 1^st Plaintiff shall pay enhanced interest on the costs and disbursements incurred by the 1^st and 2^nd Defendants on an indemnity basis from 15 October 2025 up to 29 May 2025 at 3% per annum above judgment rate, and thereafter at judgment rate until full payment;

(4) The 1^st Plaintiff shall pay the 1^st and 2^nd Defendants the costs of the Summons dated 4 June 2025, to be taxed if not agreed;

(5) The sanctioned payment in the sum of HK$75,000 paid on 16 September 2021 by the 1^st and 2^nd Defendants (together with interest accrued thereon, if any) be paid out to the 1^st and 2^nd Defendants forthwith through their solicitors, Messrs. Boase Cohen & Collins.