HCPI 914/2015
[2023] HKCFI 1442
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
PERSONAL INJURIES ACTION NO. 914 OF 2015
________________________
BETWEEN
CHAN WAI CHUNG
Plaintiff
and
CHINA TRAVEL SERVICE
1st Defendant
CHINA TRAVEL TOURS
2nd Defendant
TRANS-ISLAND CHINALINK BUS COMPANY LIMITED
3rd Defendant
CHINA TRAVEL TOURS
4th Defendant
________________________
Before:
Hon Marlene Ng J in Chambers
Date of the plaintiff’s submissions:
3 April 2023
Date of the 2nd and 4th defendants’ submissions:
24 April 2023
Date of Handing Down Decision (Paper Disposal):
31 May 2023
________________________
DECISION ON COSTS
________________________
I. INTRODUCTION
1. The trial of the present action was heard by this court. On 14 December 2022, I handed down written judgment (“Written Judgment ”) granting judgment in favour of the plaintiff (“P ”) against the 2nd and 4th defendants (“D2 ” and “D4 ”) jointly and severally in the sum of $5,409,023.31 with interest payable on (a) the award for pain, suffering and loss of amenities at 2%pa from the date of the writ of summons to the date of judgment therein, and (b) special damages from the date of the subject accident (“Accident ”) to the date of judgment therein at half judgment rate, and thereafter at judgment rate until payment (“Judgment ”). I also granted a costs order nisi that D2 and D4 shall jointly and severally pay P’s costs of and occasioned by the present action (including all costs reserved if any) to be taxed if not agreed, and P’s own costs be taxed in accordance with Legal Aid Regulations (“Costs Order Nisi ”).
2. On 28 December 2022, P filed a summons to seek the following reliefs (“Summons ”):
(a)
the Costs Order Nisi be varied to the extent that:
(i)
costs from the date of the writ of summons up to 28 days after the date of the sanctioned offer made on 3 April 2019 by P to D2/D4 be paid by D2/D4 to P on party and party basis with certificate for counsel to be taxed if not agreed;
(ii)
costs of the present proceedings, including all costs reserved if any, incurred by P after 2 May 2019 be paid by D2 and D4 to P on indemnity basis to be taxed if not agreed;
(iii)
interest on costs referred to in (ii) above be paid by D2/D4 to P at a rate of 5%pa above judgment rate;
(b)
costs of and occasioned by the application by the Summons be paid by D2/D4 to P on indemnity basis to be taxed if not agreed;
(c)
P’s own costs be taxed in accordance with Legal Aid Regulations;
(d)
liberty to apply.
3. On 17 January 2023, DHCJ Leung inter alia (a) granted case management directions for filing/serving affidavits and written submissions to support and to oppose the Summons, and (b) directed that the Summons shall be determined by paper disposal unless the court otherwise directed (“17/1/23 Order ”).
4. On 18 January 2023, DHCJ Leung inter alia directed P and D2/D4 to agree on the mathematical calculations of the judgment sum pursuant to the Judgment comprising (a) the awards in paragraph 399 of the Written Judgment, and (b) the accrued interest up to the date of the Judgment in paragraph 400 of the Written Judgment (“Agreed Calculations ”) no later than 21 days from the date of the order (“18/1/23 Order ”).
5. Pursuant to the 17/1/23 Order, P filed the affidavits of P’s solicitors Or Kwong Fai (“Or ”) and Wong Hoi Yi Venus (“HYV Wong ”) on 20 December 2022 and 28 March 2023 (“Or Aff ” and “HYV Wong Aff ”) respectively in support of the Summons, and D2/D4 filed the affirmation of D2’s/D4’s general manager Wong Ming Chi (“Mr Wong ”) on 7 February 2013 (“Wong 2nd Aff ”) to oppose the Summons.
6. In relation to the HYV Wong Aff, paragraph 2 of the 17/1/23 Order required P to file/serve his affidavit in reply within 21 days after the Wong 2nd Aff. P failed to file/serve such affidavit in reply within the prescribed time. On 10 March 2023 (ie after expiry of the prescribed time), P filed/served a time summons to seek inter alia time extension to file/serve his affidavit in reply (if any) on/before 31 March 2023 (“Time Summons ”). The Time Summons was heard by Master Rita So on 21 March 2023 (“Master Hearing ”). After hearing from the solicitors for P and for D2/D4, the learned master granted the following order:
(a)
unless P shall file/serve his affidavit in reply by 4pm on 31 March 2023, P be debarred from doing so;
(b)
costs of the application be paid by P to D2/D4 forthwith summarily assessed at $1,040;[1]
(c)
P’s own costs be taxed in accordance with Legal Aid Regulations.
7. Pursuant to the 18/1/23 Order, P and D2/D4 jointly lodged with court the Agreed Calculations. According to the Agreed Calculations, (a) the total sum of the awards granted in paragraph 399 of the Written Judgment was $5,409,023.31, (b) the amount of interest on general damages from the date of the writ of summons (27 August 2015) up to the date of the Judgment (14 December 2022) was $172,411.64,[2] and (c) the amount of interest on special damages from the date of the Accident (22 October 2013) up to the date of the Judgment (14 December 2022) and taking the denomination of 365 days/year was $460,139.95,[3] so the awards and accrued interests up to the date of the Judgment (14 December 2022) was $5,409,023.31 + $172,411.64 + $460,139.95 = $6,041,574.90.
8. Ms Lee, counsel for P, lodged her written submissions on 3 April 2023, and Mr Lam, counsel for D2/D4, lodged his written submissions on 24 April 2013.
9. For convenience, I shall adopt the abbreviations in the Written Judgment.
II. OR AFF
10. The Or Aff stated that pursuant to Order 22 rule 24 of the RHC P’s solicitors by a without prejudice letter of his solicitors on 3 April 2019 made a sanctioned offer in the sum of $5,500,000 (inclusive of interests) plus costs of the present action to be taxed if not agreed (“3/4/19 Letter ” or “Sanctioned Offer ”). The 3/4/19 Letter exhibited to the Or Aff was marked “without prejudice save as to costs” and “sanctioned offer”, and stated as follows:
“We refer to the above matter.
Without prejudice to [P’s] rights, we are instructed to put forward this sanctioned offer (“Sanctioned Offer”) pursuant to Order 22 r. 5 of the Rules of the High Court (“RHC”).
Sanctioned Offer
In full and final settlement of the whole of [P’s] claim in this action, [P] offers to accept from [D2/D4], namely [D2/D4] the sum of HK$5,500,000 (inclusive of interest) plus costs of this action to be taxed if not agreed .
Acceptance of the Sanctioned Offer
Pursuant to Order 22 rule 16 of RHC, this Sanctioned Offer is open for acceptance without leave of the Court not later than 28 days from the making of this offer. Otherwise, [D2/D4] may only accept it if:-
1. the parties agree on the liability for costs, accept the offer or payment without leave of the court; and
2. the parties do not agree on the liability for costs, the Court grants leave for [D2/D4] to do so.
Pursuant to Order 22 rule 44 of the RHC, [D2/D4] may, within 7 days from the making of [P’s] Sanctioned Offer, seek clarification thereof.
Please take instructions accordingly and revert to us within the next 28 days i.e. on or before 1 May 2019 .”
11. It was said that as a result of the Judgment with accrued interest up to the time of the Judgment (now known to be $6,041,574.90 according to the Agreed Calculations), P did better than his Sanctioned Offer of $5,500,000 (inclusive of interest) in the 3/4/19 Letter, so P sought an order pursuant to Order 22 rule 24 of the RHC (a) to have his costs on indemnity basis after the latest date on which D2/D4 could have accepted the offer without requiring leave of the court (ie 1 May 2019), and (b) to have interest on costs as prayed for in the Summons.
III. WONG 2ND AFF
12. Mr Wong accepted P did better than his proposal in the 3/4/19 Letter, so D2/D4 (as advised by their solicitors) had to show it was unjust to order indemnity costs and interest on costs against them.
13. The Wong 2nd Aff claimed the chronology below showed D2/D4 had acted reasonably in the settlement process, and it was reasonable for them not to accept the Sanctioned Offer made on 3 April 2019 on/before 1 May 2019 and to participate in the 2nd mediation which should be attended by all parties:
(a)
By a letter dated 6 March 2019 by P’s solicitors, P proposed Mr Brian Wong as mediator.
(b)
On 23 April 2019, D2/D4 by their former solicitors accepted P’s proposal. But on the same date, D1 by its solicitors proposed 2 other candidates as mediators.
(c)
On 27 May 2019, D3 through its solicitors accepted both P’s and D1’s proposed mediators.
(d)
On 31 May 2019, P through his solicitors informed D2/D4 (i) P had discontinued his action against D1, and (ii) the available dates in June/July 2019 of Mr Brian Wong as mediator.
(e)
On 5 July 2019, D2/D4 attended mediation, but the parties failed to settle.
(f)
On 2 August 2019, P by his solicitors wrote to the court to apply to set this present action down for trial.
14. D2’s/D4’s solicitors advised D2/D4 and Mr Wong believed that as a result of P’s conduct, (a) P discontinued his claim against D1 on 31 May 2019 and against D3 on the 2nd day of the trial, and (b) (as recorded in paragraph 23 of the Written Judgment) Ms Lee in her written closing submissions at the end of the trial indicated P would rely on P’s 3rd Case and the 2nd Alternative Contract, so costs were increased or incurred.
15. By reason of the above matters, D2/D4 urged the court to dismiss the Summons with costs to them.
IV. HYV WONG AFF
16. HYV Wong noted that Mr Wong by the Wong 2nd Aff accepted P had done better than the Sanctioned Offer.
17. HYV Wong rejected D2’s/D4’s reliance on the anticipation that the 2nd mediation would be held on 5 July 2019 as reasonable justification for them not to accept the Sanctioned Offer made on 3 April 2019. HYV Wong noted D2/D4 filed/served their Answer on 20 January 2019, so by April 2019 pleadings had been closed and all evidence for D2/D4 to consider the reasonableness of P’s Sanctioned Offer was already in place. Had D2/D4 accepted the Sanctioned Offer within the stipulated 28 days, the parties could have saved the costs of the mediation that was scheduled to be held 3 months after the Sanctioned Offer was made, and P would not have been kept out of his damages for another 3½ years.
18. As regards D2’s/D4’s claim that P only discontinued his claim against D3 on the 2nd day of the trial, HYV Wong said (a) the fact P pleaded an alternative case (ie P’s 3rd Case) and relied on the 2nd Alternative Contract did not affect D2’s/D4’s potential liability, and (b) the fact there were contribution proceedings between D3 and D2/D4 was not a sound/valid reason for D2/D4 not to accept the Sanctioned Offer. There was no impediment for D2/D4 to pursue their contribution claim against D3 after accepting the Sanctioned Offer.
19. HYV Wong highlighted the following conduct by D2/D4: (a) D2 did not call any witness including the drivers involved in the Accident who were employed by subsidiary companies of D2/D4, (b) D2 did not advance a positive case as to why the Archived Webpages were not theirs, and (c) instead D2/D4 called a witness from D4 (ie Mr Wong) who appeared to know little about the operation side of the business of D2/D4, which conduct drew adverse comments in the Written Judgment.[4] HYV Wong claimed D2/D4 had persisted in an unmeritorious defence, did not call relevant witnesses and did not produce relevant documentary evidence, which conduct was not looked upon kindly by the trial judge, so there was nothing unjust in visiting upon D2/D4 the costs consequences under Order 22 rule 24 of the RHC.
20. The Wong 2nd Aff did not address on the question whether interest on costs as requested in the Summons should be ordered against D2/D4. HYV Wong invited the court to grant such interest so as to reflect the full consequences of D2/D4 failing to better the Sanctioned Offer.
21. As regards the Time Summons, D2/D4 remarked to the court at the Master Hearing on 21 March 2023 that P should not claim interest or enhanced interest from 28 February up to 31 March 2023 because P sought indulgence from the court for further time to file the affidavit in reply (ie the HYV Wong Aff). HYV Wong said that compared with the substantial time/costs P incurred after D2/D4 rejected the Sanctioned Offer, the impact/prejudice to D2/D4 of a delay of approximately 1 month due to time extension required for filing/serving P’s affidavit in reply was minimal, which should not be a ground to deny any interest or enhanced interest to P.
22. Pursuant to Order 22 rule 24 of the RHC, HYV Wong urged the court to order that P be entitled to (a) his costs on indemnity basis after the last date on which D2/D4 could have accepted the Sanctioned Offer without requiring leave of the court (ie 1 May 2019), and (b) interest on costs as prayed for in the Summons.
V. UNDISPUTED MATTERS
23. There were 4 undisputed matters material to the Summons.
24. First, the 3/4/19 Letter was a valid sanctioned offer within the meaning of Order 22 rule 5 of the RHC. Although a sanctioned offer that includes an offer as to costs is generally inconsistent with the statutory regime under Order 22 of the RHC for attracting the costs/ interest consequences prescribed thereunder,[5] such restriction does not render the sanctioned offer invalid if the term as to costs in the offer is consistent with the costs consequences prescribed by, say, Order 22 rule 21 of the RHC.[6]
25. Secondly, there was no reply by D2/D4 to the Sanctioned Offer, which was not accepted within the statutory prescribed time or at all.
26. Thirdly, by the Judgment, P did better than the Sanctioned Offer. Indeed, Mr Wong admitted as much in the Wong 2nd Aff (see paragraph 12 above).
27. Fourthly, by the Summons, P sought variation of the Costs Order Nisi by claiming that he was entitled to costs on indemnity basis for the period on/after 2 May 2019 pursuant to Order 22 rule 24(3)(a) of the RHC (see paragraph 2(a)(ii) above and paragraph below) and interest on such costs pursuant to Order 22 rule 24(3)(b) of the RHC (see paragraph 2(a)(iii) above and paragraph below). There was no application by P in the Summons or otherwise for enhanced interest “on the whole or part of any sum of money (excluding interest) awarded” under the Judgment pursuant to Order 22 rule 24(2) of the RHC (see paragraph below).
VI. LEGAL PRINCIPLES
28. Order 22 of the RHC provides as follows:
“2 (1) A party to an action containing a money claim …… arising from any cause or causes of action may make an offer to settle the whole claim …… in accordance with this Order.
……
(3) An offer made under paragraph (1) has the consequences specified in [rule] …… 24 (as may be applicable).
4 An offer by a plaintiff to settle the whole …… of a claim …… does not have the consequences specified in this Order unless it is made by way of a sanctioned offer.
12 (1) A sanctioned offer is made when it is served on the offeree.
……
(5) A sanctioned offer …… is accepted when notice of its acceptance is served on the offeror.
16 (1) Subject to rule 7(3), a defendant may accept a sanctioned offer made not less than 28 days before the commencement of the trial without requiring the leave of the Court if he files with the Court and serves on the plaintiff a written notice of acceptance not later than 28 days after the offer was made.
24 (1) This rule applies where –
(a) a defendant is held liable for more than the proposals contained in a plaintiff’s sanctioned offer; or
(b) the judgment against a defendant is more advantageous to the plaintiff than the proposals contained in a plaintiff’s sanctioned offer.
(2) The Court may order interest on the whole or part of any sum of money (excluding interest) awarded to the plaintiff at a rate not exceeding 10% above 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.
(3) The Court may also order that the plaintiff is entitled to –
(a) his costs on the indemnity basis after the latest date on which the defendant could have accepted the offer without requiring the leave of the Court; and
(b) interest on those costs at a rate not exceeding 10% above judgment rate.
(4) Where this rule applies, the Court shall make the orders referred to in paragraphs (2) and (3) unless it considers it unjust to do so.
(5) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3), the Court shall take into account all the circumstances of the case including –
(a) the terms of any sanctioned offer;
(b) the stage in the proceedings at which any sanctioned offer was made;
(c) the information available to the parties at the time when the sanctioned offer was made;
(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated.
(6) The power of the Court under this rule is in addition to any other power it may have to award interest.”
29. The starting point is that the sanctioned offer regime under Order 22 of the RHC is a statutory creature that is wholly procedural in nature, and its purpose is to promote settlement and to save costs.[7] In Qvist Henrik v Clatronic Far East Ltd ,[8] Recorder Stewart Wong SC endorsed the observations by Mimmie Chan J in Maysun Engineering Co Ltd v International Education and Academic Exchanges Foundation Co Ltd that:[9]
“14. …… The orders are aimed to provide a means of achieving a fairer result for a plaintiff, to compensate the plaintiff for having to come to court to bring proceedings and for the incidental inconvenience, anxiety, distress and disruption to its business (Petrograde Inc v Texaco Ltd [2002] 1 WLR 947), which are not compensated by orders for costs in the proceedings, even when they are made on an indemnity basis. These principles were recognised and accepted by Johnson Lam J in Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273 ……”
30. Costs on an indemnity basis after the last date on which the defendant can have accepted the plaintiff’s sanctioned offer without requiring the leave of the court is justified where a defendant fails to respond to a sanctioned offer (unless it is unjust to do so) (see Central Management Ltd v Light Field Investment Ltd [10] ). Thus, a defendant who rejects a plaintiff’s sanctioned offer is at risk as to costs and further financial penalty under Order 22 rule 24(2)-(3) of the RHC. Indeed, where the defendant fails to do better than the sanctioned offer under the judgment, the court shall make the orders for indemnity costs and enhanced interest under Order 22 rule 24(2)-(3) of the RHC unless the court considers it unjust to do so (see Order 22 rule 24(4) of the RHC and paragraph 28 above).[11]
31. The onus is on the defendant to show that in view of all the circumstances of the case, including the factors in Order 22 rule 24(5) of the RHC, it is unjust to make the orders in Order 22 rule 24(2)-(3) of the RHC.[12] Further, it is a question of fact in each case whether a defendant is able to persuade the court it is unjust to allow the statutory consequences.[13] Recorder Stewart Wong SC at pages 711-712 in Qvist Henrik explained the court’s approach as follows:[14]
“18. Given the express terms of O.22 r.24(4), and the rationale behind the sanctioned offer regime as summarised, there must therefore be some positive reasons making it unjust for the orders under Order 22, rule 24(2) and (3), to be made. In my judgment, such reasons ought to be those which show that the defendant who has refused to accept a sanctioned offer which the plaintiff has managed to better at the trial has been acting reasonably in the settlement process and the litigation process despite the plaintiff’s attempt to settle . As was said by Sir Geoffrey Vos C[15] said in OMV Petrom SA v Glencore International AG :[16]
[38] In my judgment, the use of the word ‘penal’ to describe the award of enhanced interest under CPR r 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.
19. The emphasis is on the reasonableness of the defendant’s conduct in the settlement process or in the conduct of the litigation . As I said in Arnold Robert Ltd v Glorious Motors Ltd ,[17] for a circumstance to be taken into account as relevant in considering whether it is unjust to make the orders stated in O.22, r.24(2) and (3):
(1) It ought to relate to the reasonableness or otherwise of the defendant’s non-acceptance of the sanctioned offer ; or
(2) It suggests that, while the continuation of the proceedings is primarily due to the non-acceptance of the sanctioned offer, costs are incurred or increased thereafter due to any unreasonable conduct of the plaintiff .” (my emphasis)
32. In short, when undertaking the evaluative exercise for determining whether it is unjust to award indemnity costs and/or interest on costs, the court is entitled to and should assess the conduct of the defendant over the course of the litigation and the reasonableness or otherwise of the defendant’s non-acceptance of the plaintiff’s sanctioned offer.[18]
33. The court will take into account all the circumstances of the case, including the factors in Order 22 rule 24(5) of the RHC, such as whether the parties had all the information to make an informed decision whether to accept a sanctioned offer or not. But 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 defendant therefore ought to make reasonable efforts to settle the matter as early as possible; if he does not react to an early sanctioned offer at all but simply sits on his hands without attempting to seek any further information, he will need to convince the Court that he has not been acting unreasonably.”[19]
VII. ISSUE
34. D2/D4 opposed the Summons and contended that they should not be visited with the statutorily mandated consequences under Order 22 rule 24(3)(a)-(b) of the RHC. D2/D4 argued it was unjust to award indemnity costs and interest on costs against them because (a) they had acted reasonably in the settlement process and in not accepting the Sanctioned Offer on/before 1 May 2019, and (b) P had acted unreasonably such that costs were unnecessarily increased or incurred.
VIII. D2/D4 ACTED REASONABLY?
35. Mr Lam submitted that D2/D4 acted reasonably in the settlement process and in not accepting the Sanctioned Offer on/before 1 May 2019. D2’s/D4’s contentions in this regard essentially raised 2 matters.
36. First, it was said that at the time of the Sanctioned Offer, there were discussions for arranging a 2nd mediation with a view to compromise P’s claim. P kickstarted the negotiations in relation to the arrangements for the proposed 2nd mediation on 6 March 2019 (when D1 and D3 were still parties to the action) by proposing Mr Brian Wong as mediator (see paragraph 13(a) above). About 1½ months later (ie on 23 April 2019), D2/D4 accepted P’s suggestion to have Mr Brian Wong as mediator for the proposed 2nd mediation (see paragraph 13(b) above). By 31 May 2019, P wholly discontinued his claim against D1 by way of a consent order filed on the same day,[20] and P, D2/D4 and D3 resolved the choice of mediator (see paragraph 13(b)-(d) above). The 2nd mediation was held on 5 July 2019 and was attended by P, D3 and D2/D4 (see paragraph 13(e) above).
37. Mr Lam submitted that since P, D1 (who dropped out of the picture since 1 June 2019), D3 and D2/D4 were organising the proposed 2nd mediation and attempting to agree on the choice of mediator for the period from March to May 2019, it was reasonable for D2/D4 not to accept the Sanctioned Offer dated 3 April 2019 within 28 days (ie on/before 1 May 2019) and to participate in the settlement process by way of the 2nd mediation, especially when D1 and D3 were parties to the action in the period from March to May 2019. It was said that (a) D2/D4 reasonably waited for the results of the mediation (in which all parties were expected to attend) instead of accepting the Sanctioned Offer that was addressed to D2/D4 alone, and (b) the significance of the 2nd mediation and the reasonableness for the parties to await its outcome was borne out by the fact that P only applied to set the case down for trial on 2 August 2019 (see paragraph 13(f) above).
38. I am not persuaded that such argument sufficiently showed it would be unjust in all the circumstances for the consequences under Order 22 rule 24(3)(a)-(b) of the RHC to follow. I agree with Ms Lee that a pending mediation is not sufficient reason to reject a sanctioned offer. Here, not only did D2/D4 not accept or even respond (whether by way of sanctioned payment or open/Calderbank offer) to the Sanctioned Offer pending mediation, there was no response from them even after the mediation took place and failed. There was also no application to seek leave to accept the Sanctioned Offer out of time accompanied by a request to the court to make an order as to costs (see Order 22 rule 16(2)-(3) of the RHC).
39. A party’s unreasonable failure to mediate attracts its own costs consequences. Johnson Lam J (as he then was) in Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd said as follows:[21]
“42. …… In a speech made in India, Lord Phillips of Worth Matravers agreed with Lightman J that a party who refuses to attempt mediation should have to justify his refusal.
43. In Hong Kong, para.4 of our Practice Direction 31 provides that unreasonable failure of a party to engage in mediation is conduct to be taken into account when the court exercises its discretion as to costs. Further, para.5(2) sets out how a party can avoid such costs sanction. Other than participating in mediation to the minimum level of participation, the refusing party has to provide a reasonable explanation for not engaging in mediation.
44. In my view, Practice Direction 31 supports the more robust approach of Lightman J (endorsed by Lord Phillips) instead of that adopted by Dyson LJ in Halsey v Milton Keynes General NHS Trust . The burden is on the part of the refusing party to provide a reasonable explanation. The willing party does not carry any burden to show that mediation has a reasonable prospect of success ……”
40. But the present issue was not about any failure to mediate, but about whether D2’s/D4’s willingness to mediate and/or actual participation in mediation would cause the court to disapply the consequences in Order 22 rule 24(3)(a)-(b) of the RHC. In Shih Pik Nog v G2000 (Apparel) Limited ,[22] Bharwaney J said that in principle it would not be unjust for those consequences to apply:
“7. Further, in my judgment, the fact that the plaintiff had attempted to mediate her dispute and had attended a mediation meeting, which, however, failed to resolve the dispute, does not make it unjust for the court to give effect to mandatory provisions of O.22 rr.23 and 24. A party’s failure to mediate attracts its own consequences. However, the fact that a party has mediated his or her dispute does not take away the sting provided in O.22 for failing to better a sanctioned payment or sanctioned offer.”
41. Secondly, Ms Lee submitted that the fact there were contribution proceedings by D3 against D2/D4 (which contribution proceedings were not withdrawn until the 2nd day of trial when P discontinued his claim against D3) should not have affected D2/D4’s consideration/acceptance of and/or response to the Sanctioned Offer, so the consequences under Order 22 rule 24(3)(a)-(b) of the RHC would not be precluded.
42. In any event, paragraphs 14-15 of Mr Lam’s written submissions clarified that D2’s/D4’s “present complaint is not about the existence of third party proceedings, but [P’s] unreasonable conducts”. I will deal with P’s alleged unreasonable conduct in Part IX below, but it appeared from Mr Lam’s written submissions that he did not dispute Ms Lee’s general proposition in the above paragraph.
43. Ms Lee cited Ho Kin Pong & anor v Tam Kok Hung & anor [23] and Yau Po Shan v The Express Lift Company Limited & anor [24] in support of her proposition in paragraph 41 above:
(a)
In Ho Kin Pong & anor , the plaintiffs secured final judgment at trial that was better than their sanctioned offer to the defendants, so the plaintiffs applied under Order 22 rule 24 of the Rules of the District Court (“RDC ”) for enhanced interest on the judgment sum and costs of the action on indemnity basis from 20 August 2010 until payment (paragraphs 1-4).Ho Kin Pong & anor .Siemens Building Technology v Supershield Ltd [2009] 2 All ER (Comm) 900 at 918, “within the range of settlements which reasonable people in the position of the settling party might have made”, the Tenant cannot, on good grounds, dispute the amount claimed by the Defendants.”Ho Kin Pong & anor ) by accepting the Sanctioned Offer. That being the case, there was even more reason for D2/D4 to properly consider their own potential liability to P and/or respond to the Sanctioned Offer, which offer was addressed to D2/D4 and not to D1 or D3 (see paragraph 44 below).
(b)
In Yau Po Shan , the trial judge entered judgment in favour of the plaintiff against the 1st defendant, dismissed the plaintiff’s claim against the 2nd defendant, and found it unnecessary to decide on the the 2nd defendant’s contribution proceedings against the 1st defendant (paragraph 2).st defendant and the solicitors for the 2nd defendant separately. DDJ S H Lee found it was a valid sanctioned offer as it was open to acceptance by either the 1st defendant or the 2nd defendant without the consent of the other, and did not require them to jointly accept the offer. Thus, either defendant “could have accepted the [offer] on its own within time or out of time”. So had the 1st defendant accepted the offer within time, the relevant costs consequences under the Order 22 regime shall apply automatically between the plaintiff and 1st defendant (paragraphs 27-33).nd defendant’s contribution claim against the 1st defendant (because the plaintiff’s claim against the 2nd defendant was dismissed), and having considered all the circumstances, he held it was not unjust to make the orders sought by the plaintiff pursuant to Order 22 rule 24(2)-(3) in the RDC (paragraphs 39-48).Yau Po Shan (which Ms Lee relied) concerned the learned judge’s analysis as to whether or not the offer was a valid sanctioned offer, and was not support for Ms Lee’s submissions that in the present case, “[even] if the claim against D3 was dismissed after the trial the Court has held that it is not unjust to order indemnity costs against the unsuccessful defendant in face of a valid Sanctioned Offer from the plaintiff”. I disagree. Yau Po Shan shows that dismissal the plaintiff’s claim against a defendant who issued contribution proceedings against a co-defendant (who in turn received a sanctioned offer from the plaintiff but failed to respond to such offer) would not have precluded application of the consequences under Order 22 rule 24(2)-(3) of the RDC to such co-defendant if upon consideration of all circumstances it would not be unjust.
44. I agree with Ms Lee’s proposition in paragraph 41 above, and in coming to this view I bear in mind:
(a)
D3’s contribution proceedings against D4 would not be determinative of the issue of liability between P and D2/D4;
(b)
To date D2/D4 had not issued contribution proceedings against D1 and/or D3, so all along up till now they could not have expected to receive any contribution from D1 and/or D3 in respect of any liability (and hence damages) that they themselves owed to P in the present action;
(c)
D2’s/D4’s essential focus must be their own lis with P, so even if P failed in his claim against D3, the issue of liability between D2/D4 and P would still be a live matter that required resolution;
(d)
P’s Sanctioned Offer was addressed to D2/D4 alone (ie it was not a global offer to D1, D3 and D2/D4 or a global offer with breakdown amongst D1, D3 and D2/D4 that might have required inter -party negotiations), so D2/D4 ought to have considered and responded to P’s offer in light of their own potential liability to P, especially in the absence of any contribution claim by D2/D4 against D1 and/or D3 in the present action;
(e)
the Order 22 regime does not apply as between co-defendants nor in relation to third party proceedings,[25] so it would not have precluded D2/D4 from accepting the Sanctioned Offer so as to put an end to their own lis with P but still remain free to continue D4’s defence of D3’s contribution proceedings and/or to make a corresponding Calderbank offer to D3 to safeguard their own position;
(f)
it was not for this court to speculate whether D2/D4 would have issued separate contribution claims against D1 and/or D3 in due course.
IX. P ACTED UNREASONABLY?
45. Mr Lam submitted that P’s conduct was unreasonable, so it would be unjust to allow the consequences under Order 22 rule 24(3)(a)-(b) of the RHC. D2/D4 essentially relied on 2 grounds.
46. First, D2/D4 accepted they should fully bear the damages awarded after trial, but complained (a) P discontinued his claim against D1 on 31 May 2019, which was after 1 May 2019 being the last date D2/D4 could have accepted the Sanctioned Offer without leave of the court, and (b) P discontinued his claim against D3 on the 2nd day of the trial.[26] D2/D4 pointed out that P did not explain his reason for discontinuing his claim against D3 at such a late stage, and suggested that “costs were increased or incurred due to [P] choosing the wrong party to sue. [D2/D4] submits that it is unjust for [D2/D4] to solely bear indemnity costs of the whole action after 1 May 2019, particularly from 1 May 2019 to the 2nd day of trial on 29 September 2021”.
47. The Accident happened on 22 October 2013,[27] and P commenced the present action on 27 August 2015.[28] By the date of the Sanctioned Offer (ie 3 April 2019), pleadings were closed and all evidence was available to the parties. I agree with Ms Lee that by such time D2/D4 had all the information needed to assess their potential liability to P and the reasonableness of P’s Sanctioned Offer. Neither the Wong 2nd Aff nor Mr Lam suggested otherwise. However, D2/D4 did not respond to the Sanctioned Offer whether on/before or after 1 May 2019, which required P to incur time, effort and costs for (a) the 2nd mediation, and (b) when that failed, the eventual trial.
48. In any event, D2’s/D4’s suggestions, ie (a) costs were increased or incurred due to P choosing the wrong party to sue, and (b) it would be unjust for D2/D4 to solely bear indemnity costs for the whole action after 1 May 2019, especially for the period from 1 May 2019 (ie the last date on which D2/D4 could have accepted the Sanctioned Offer without leave of the court) to 29 September 2019 (ie the 2nd day of the trial when P discontinued her claim against D3), were not understood, and might have resulted from misunderstanding of the effect of the Costs Order Nisi.
49. By a consent order filed on 31 May 2019, P’s claim against D1 was compromised, and it was ordered by consent that:
“1. [P’s] claim against [D1] in this action be wholly discontinued.
2. There be no order as to costs of this action including the costs of the application between [P] and [D1].
3. [P] do waive all the costs orders against [D1] including but not limited to the order made by Master Roy Yu dated 21 February 2017 .
4. [D1] do waive all the costs orders against [P] including but not limited to the orders made by Master Roy Yu dated 22 March 2017 and 15 August 2018 respectively .
5. [D1] be discharged from all future and further liabilities to [P] arising out of [these] proceedings and the subject accident on or about 22 October 2013.
……” (my emphasis)
Then on 29 September 2021 (ie the 2nd day of the trial), P’s claim against D3 and D3’s contribution claim against D4 were also compromised, and I granted orders by consent that:
“1. Leave be granted to [P] to discontinue his claim against [D3] with no order as to costs of this action (including this application) up to today’s date ;
2. [P] do waive the costs order against [D3] dated 21 March 2018 where D3 was ordered to pay half of [P’s] costs for the application by way of summons dated 13 July 2017 ;
…...” (my emphasis)
and that:
“1. There be leave for [D3] to withdraw the Notice Claiming Contribution and Indemnity by [D3] Against [D4] dated 10 May 2018 and to discontinue the Contribution/Indemnity Proceedings with immediate effect;
2. There be no order for the Contribution/Indemnity Proceedings and for the [joint letter application by D2/D4 and D3 dated 29 September 2021] .” (my emphasis)
50. The above clearly showed P’s claims against D1 and D3 had been fully compromised, which resolutions covered both the substantive proceedings and the matter of costs between P and D1 as well as between P and D3. There were no outstanding/unresolved costs issues in relation to the proceedings between P and D1, P and D3, and D3 and D4. As a result, there were 2 consequences on the then remaining proceedings in the present action between P and D2/D4:
(a)
since there was no order as to costs in the proceedings between P and D1, P and D3, and D3 and D4 (ie P had no liability to pay costs to D1/D3), P did not need to and did not seek any Sanderson order[29] for D1’s/D3’s costs to be paid by D2/D4 instead of P, or any Bullock order[30] for D1’s/D3’s costs to be paid by P but to have such costs included in P’s own bill against D2/D4;
(b)
P did not at trial or by the Summons seek any order for his own costs in relation to his claims against D1 and D3 to be paid by D2/D4, and in any event, P’s such costs in the proceedings as between P and D1 as well as between P and D3 had been finally compromised by the provisions for “no order as to costs” in the orders in the above paragraph, which were made without any reservation for P to “claw back” his own unrecovered costs in respect of his claims against D1 and D3 from D2/D4.
51. That being the case, the only costs requiring adjudication by this court at the trial were costs of the proceedings between P and D2/D4, which costs were the subject matter of the Costs Order Nisi. So, the reference to “P’s costs of and occasioned by the present action” in the Costs Order Nisi in paragraph 401 of the Written Judgment must be read accordingly. On this proper understanding, I cannot see why it would be unjust for D2/D4 to bear P’s costs of the present action (ie the costs of the litigation between P and D2/D4 that were resolved by the Costs Order Nisi) on indemnity basis after 1 May 2019 (including the period from 2 May 2019 to 29 September 2021) when the Costs Order Nisi only captured P’s costs of his claims against D2/D4, and would not cover P’s costs that were “incurred” or allegedly “increased” as a result of having sued D1 and/or D3.
52. In any event, I note there had not been any admission or finding that P in choosing to also sue D1 and D3 in fact sued the wrong parties. There had been no adjudication by the court on this, and the orders in paragraph 49 above did not acknowledge this. The fact P discontinued his claims against D1 and D3 did not ipso facto mean D1 and D3 were wrongly sued. Discontinuance of proceedings would not have precluded a negotiated compromise/settlement with genuine give and take between the relevant parties. It is not unknown that parties may adopt the legal methodology of simple discontinuance to bring formal closure to legal proceedings whilst they keep the terms of the negotiated compromise/settlement out of the prying eyes of the court and (with leave of the court to search the court file) others.
53. Secondly, D2/D4 complained it was only in Ms Lee’s written closing submissions that she indicated P would rely on P’s 3rd Case and the 2nd Alternative Contract,[31] so costs were unnecessarily increased or incurred by P pleading various different alternatives that he eventually did not rely on.
54. I am not persuaded by D2/D4’s contention in the above paragraph. The starting point was that P as a passenger on the Coach had little idea of the business arrangements in relation to the cross border operations of the Service, but (in view of my findings in relation to the Corporate Issue in the Written Judgment) D2/D4 well knew about such business operations because they were party to or commercially involved in the same. P first sued D1/D2 when he commenced the present action,[32] and joined D3/D4 as additional defendants in the course of the litigation when they came to learn about the Co-operation Agreement.[33]
55. And yet D2/D4 adopted a coy approach towards the issue of liability (ie the Corporate Issue) by putting P to strict proof not only as to any contract between P and D2/D4 and also as to the authenticity and admissibility of the Archived Webpages[34] even though it must have been within D2’s/D4’s (or at the very least D4’s) own knowledge (i) whether the Website was D2’s/D4’s and/or pertained to D2/D4, and (ii) if so, whether the digital content of the Archived Webpages of the Website was genuine.[35] I have concluded in the Written Judgment that “[after] all, one would have expected D2/D4 (or at the very least D4) to have material, circumstance, documents and/or witnesses that would have clarified/explained whether they themselves or any group/holding/ related/service/agent company on their behalf (a) were the holders/owners of the domain being the Website Address with any domain host, (b) built the Website by filling it with digital content (and thereby would have known the file paths of the webpages so built), and/or (c) built the previous Archived Webpages that pertained to D2/D4”.[36]
56. But apart from D2 admitting that the registered owners of the Coach and the Other Coach were D2’s subsidiary companies,[37] and D4 admitting D3 and D4 (which were engaged in the business of providing the Service between, say, ZS and HK) had signed the Co-operation Agreement to jointly operate the Service between ZS and HK with D1 as selling agent of the Bus Tickets,[38] D2’s D2RAD and D4’s D4D merely denied liability, denied any contract with P, and put P to proof on the sale of the Bus Ticket(s) (including the sale of P’s Ticket Package and P’s Bus Ticket to P) and the matters concerning the Corporate Issue (including the business relationships of various group companies, the Service, the Co-operation Agreement, the Ticket Packages and the Archived Webpages of the Website).[39]
57. Further, it was only on the 1st day of the trial that leave was granted for D4 to serve the Mr Wong WStmt and to call Mr Wong as its factual witness on the Corporate Issue,[40] which meant the D4 Chart annexed to the Mr Wong WStmt that was said to be a chart showing D4’s relationship with other parties (including D1, D2, D3 and the ticketing agents) was only adduced on the 1st day of the trial.[41] But even though Mr Wong was the only witness for D4 (as D2 had withdrawn To who was previously put forward as its sole factual witness – see paragraph below), he had practically little knowledge/experience concerning the websites/ webpages (including the Archived Webpages of the Website) pertaining to D2/D4, and could not say much about (a) why it was said the Archived Webpages of the Website were allegedly not from D2’s/D4’s website(s) or any website of any group/holding/related/service/agent company that pertained to D2/D4, and/or (b) the business operations of the Service (of which the sale/marketing of the Bus Tickets and the Ticket Packages was an essential part).[42]
58. Then, in the course of the trial and after P closed his case, D2 decided not to call To (whose witness statement dealt with the Corporate Issue) to give oral evidence.[43] In the Written Judgment, I have found that “To was expected to have been called to give oral evidence in view of D2’s denial of P’s case and D2’s defence pleas on the Corporate Issue, and had To given oral evidence it was likely that as a director of D2 he would have been questioned on D2’s operations, its corporate/business relationship with D1, D3 and/or D4, its involvement in the Service …… D2’s website and webpages, and the Archived Webpages of the Website, especially when such matters necessarily would have been more in the knowledge of D2 and/or its directors (of which To was one) than P (as mere passenger of the Coach)”.[44] More importantly, I concluded that “[in] the absence of cogent explanation for the last-minute decision not to produce To for questioning, D2 obviously waged a battle of tactics to prevent P from eliciting evidence on the Corporate Issue by examining To. In my view, D2’s failure to call To as witness to be examined at trial should lead to an inference being drawn against D2 that it feared his evidence would not have assisted its case on the Corporate Issue. I can think of no other credible explanation”.[45]
59. Still further, even though D2/D4 were expected to have some material, circumstance, documents and/or witness(es) about the issue in paragraph 55(i) above, they failed to bring forward such material, circumstance, documents and/or witness(es) that would elucidate the facts, which could not simply be answered by putting P to strict proof.
60. In all the circumstances, given D2’s withdrawal of To from being examined at the trial on the Corporate Issue, D4’s non-production of Liang as witness,[46] D4’s failure to call Zhu to give oral evidence at the trial,[47] and D4’s introduction of Mr Wong (who had little relevant knowledge and/or experience on the Corporate Issue – see paragraph 57 above) as its witness, which reflected “a last minute and complete overhaul of D2’s/D4’s factual witness(es) for the trial”,[48] this court concluded in the Written Judgment as follows:
“54. Summary I find the evidence adduced by D2/D4 left much to be desired, and there were lacunae in their evidence that had not been cogently or credibly explained. It gave a strong impression of anxiety to shroud in obscurity behind a veil of non-admission and denial evidence they were expected to have and expected to be able to throw light on the facts, not least by lamentable last minute tactical move of withdrawing To (who was expected to have some knowledge of the facts and matters in relation to the Corporate Issue) as witness, and introducing Mr Wong (who was not shown to have much knowledge beyond 車輛維修 (repair and maintenance of D4’s fleet of vehicles)) as witness.”
61. Against such background when P had to proceed initially in the dark as to the business operations concerning the Service rendered by the Coach, it was not unreasonable for P to proceed against D1 and D2 and later to join D3 and D4 (when he learned about the Co-operation Agreement) by pleading and relying on P’s 1st , 2nd and/or 3rd Cases and the Contract, the 1st Alternative Contract and the 2nd Alternative Contract.[49] It was also not unreasonable for P to narrow his reliance to P’s 3rd Case and the 2nd Alternative Contract at closing submissions after (a) P compromised his claims against D1 and D3 (the latter of which happened on the 2nd day of the trial), (b) the aforesaid developments as explained in paragraph 53-59 above that largely happened at the trial, and (c) Mr Wong’s evidence on the Corporate Issue was elicited during cross-examination at the trial.
62. In my view, if costs were “incurred” and/or “increased” in resolving the Corporate Issue, the major players who contributed to such incurred and/or increased costs would have been D2/D4 (who had the requisite information but was coy with their pleadings/evidence) rather than P (who had no knowledge/evidence to give and who had to rely on his legal representatives who by dint of investigative diligence and legal skill discovered the Archived Webpages (which this court eventually found on the balance of probabilities to be genuine/authentic past webpages of the Website with the Website Address[50] that belonged and/or pertained to D2/D4[51] ) and legally framed P’s alternative cases against D1, D2, D3 and D4). I also agree with Ms Lee that P’s reliance on P’s 3rd Case and the 2nd Alternative Contract should not have caught D2/D4 by surprise as they were clearly in issue in P’s pleadings, and P was entitled to pursue his pleaded case in face of the way D2/D4 conducted their defence as explained above.
63. Finally, Ms Lee went on to submit it was not P’s conduct but rather it was D2’s/D4’s litigation/settlement conduct that increased costs and lengthened the trial:
(a)
Ms Lee argued that D2’s/D4’s silence upon receipt of P’s Sanctioned Offer of itself formed a justifiable basis for the court to order indemnity costs against them. She referred to the following observations by Cheung JA (with whom Rogers VP and Le Pichon JA agreed) in Central Management Ltd as follows:
“32. However, in my view, the plaintiff is nevertheless entitled to indemnity costs because of the failure of the defendants to respond to the plaintiff’s sanctioned offer proposing to enter judgment by consent against the defendants with no order as to costs in full and final settlement of the parties’ claim and counterclaim. The Deputy Judge, apart from entering judgment against the defendants, further penalized them with costs. Accordingly the judgment against the defendants is more advantageous to the plaintiff than under its sanctioned offer. In such a situation, under the terms of O.22 r.24(4) of the Rules of the High Court (Cap.4A, Sub.Leg.), the Court shall order costs on an indemnity basis. It has not been shown that it is unjust to make such an order in the present case.”
Mr Lam submitted that the above observations did not go further to say that silence per se was unreasonable conduct, so it was said that Central Management Ltd did not support P’s contention. I disagree. There was no need for P to prove the conduct of D2/D4 was unreasonable. Rather, it was for D2/D4 to show the prescribed consequences under Order 22 rule 24(3) of the RHC were unjust in the circumstances, and the court was to look at all the circumstances. Cheung JA’s observations clearly state “[it] has not been shown that it is unjust” for the prescribed consequences to apply where the defendant failed to respond to the plaintiff’s sanctioned offer and failed to better such offer by the judgment after trial, which observations supported Ms Lee’s proposition.
(b)
Ms Lee submitted (and I agree) that D2’s/D4’s further conduct in not seeking leave to accept the Sanctioned Offer after the failed 2nd mediation was unreasonable, and supported the mandatory consequences under Order 22 rule 24(3)(a)-(b) of the RHC.
(c)
Ms Lee contended it was D2’s/D4’s pursuit of an unmeritorious defence that caused the trial to take place and caused the court to expend time/effort unnecessarily when it could have been avoided. She noted that D2/D4 had been particularly unhelpful, and consequently drew criticism from the court.[52]
In this respect, I refer to the discussions in paragraphs 53-59 above, and agree that D2/D4 were coy in their defence to P’s claim and in the evidence they adduced at the trial, which left much to be desired (see paragraph 60 above).
64. In all the circumstances, I do not find it unjust to order indemnity costs and interest on costs against D2/D4.
X. TIME SUMMONS
65. At the Master Hearing, the solicitor for D2/D4 submitted to Master Rita So that enhanced interest or interest should not be paid to P for the period from 28 February 2023 (original deadline) to 31 March 2023 (extended deadline) as P had to seek time indulgence from the court to file/serve the affidavit in reply for the Summons. P’s solicitor explained to the learned master that (a) the due date for P to file/serve affidavit in reply pursuant to the 17/1/23 Order fell on 28 February 2023, (b) P had applied for legal aid to proceed with the Summons, (c) a legal aid certificate that extended the scope of legal aid to cover the Summons was issued only on 7 March 2023, which P’s solicitors received on 8 March 2023, (d) P by his solicitors promptly on 10 March 2023 issued the Time Summons which was returnable on 21 March 2023, and (e) the HYV Wong Aff was filed on 28 March 2023, so P could not have issued the Time Summons or prepared the HYV Wong Aff any sooner.
66. Ms Lee submitted there was no conduct on P’s part deserving of censure, and P ought not to be deprived of interest or enhanced interest for the unavoidable delay in relation to the Time Summons. She also contended that since the HYV Wong Aff was filed on 28 March 2023, any diminution in interest awarded should take that as the determinative date.
67. As regards interest on damages for the period before the date of the Judgment payable by D2/D4 to P, it was set out in the Judgment itself (see paragraph 1(a)-(b) above), which was a final order. As regards interest on damages after the date of the Judgment, section 49(1) of the High Court Ordinance Cap 4 provides that:
“Judgment debts shall carry simple interest –
(a) at such rate as the Court of First Instance may order; or
(b) in the absence of such order, at such rate as may be determined from time to time by the Chief Justice by order,
on the aggregate amount thereof, or on such part thereof as for the time being remains unsatisfied from the date of the judgment until satisfaction.”
By the Judgment, I expressly ordered that interest on damages awarded thereunder for the period after the date of the Judgment until payment be payable by D2/D4 to P at judgment rate. This was, again, a final order. This court was no longer in a position to “deprive” P of the interest on damages awarded under the Judgment. In any event, D2/D4 did not file any summons/application to seek any order to such effect.
68. Further, as there was no application in the Summons or otherwise for enhanced interest on the whole or part of the damages awarded under the Judgment pursuant to Order 22 rule 24(2) of the RHC, there was, quite simply, no enhanced interest on damages to speak of.
69. As regards interest on P’s costs, (a) there was no basis for disallowing P’s entitlement to interest on costs in the post -Judgment period from 28 February to 31 (or 28) March 2023 when D2/D4 did not file any application for such purpose (and P’s Summons merely concerned variation of the Costs Order Nisi for seeking inter alia pre -Judgment interest on costs under Order 22 rule 24(3)(b) of the RHC), (b) there was no suggestion that P’s costs had been taxed (or agreed) and/or paid during the period from 28 February to 31 (or 28 March 2023) which logically would have stopped interest from accruing, (c) D2/D4 could have protected themselves on costs (and hence interest to be accrued thereon) by making sanctioned payment on costs pursuant to Order 62A of the RHC, and (d) P gave reasonable explanation in paragraph 65 above for the brief delay for filing/serving the HYV Wong Aff out of time, so there was no justifiable basis to “deprive” P of interest on costs for the period from 28 February to 31 (or 28 March) 2023. Indeed, the complaint by D2’s/D4’s solicitors aired at the Master Hearing did not even feature in Mr Lam’s written submissions.
70. As regards enhanced interest on costs, the short answer was that P’s Summons did not seek enhanced interest on costs under Order 22 rule 24(3)(b) of the RHC for the post -Judgment period from 28 February to 31 (or 28) March 2023. In any event, P’s solicitors could not have taken steps in relation to the HYV Wong Aff and/or other preparations for the Summons pending extension of the relevant legal aid certificate, so P would not have incurred any or any significant costs during such period that would have attracted interest. As regards previously incurred (but as yet unpaid) costs payable by D2/D4 to P, the interest accrued thereon during the period from 28 February to 31 (or 28) March 2023 was not caused by the slight delay in filing/serving the HYV Wong Aff but by the fact that those costs were as yet unpaid.
XI. INDEMNITY COSTS
71. For all of the above reasons, I do not think it had been shown to be unjust to order indemnity costs after the last day on which D2/D4 could have accepted the Sanctioned Offer without leave of the court, and I so order.
XII. INTEREST ON COSTS
(a) Parties’ stance
72. Ms Lee submitted that although Order 22 rule 24(3)(b) of the RHC provides that the ceiling for interest on costs is not to exceed 10%pa above judgment rate, P would ask for interest on costs at 5%pa above judgment rate,[53] which sought middle ground and was reasonable.
73. But Mr Lam invited the court to consider the approach adopted in the following cases:
(a)
Golden Eagle International (Group) Ltd where Johnson Lam J (as he then was) at pages 279-280 adopted a simplified or “modified” approach by granting interest at 4.5%pa, being half of the full enhanced rate of interest at 9%pa (which full enhanced rate was (i) 4% above the then prime rate of 5%pa[54] or (ii) 1%pa over the then judgment rate of 8%pa), ie [(4%pa + 5%pa) or (1%pa + 8%pa)] ÷ 2 = 4.5%pa, on costs incurred after 1 February 2010 being the last day on which the defendant in that case could have accepted the plaintiff’s sanctioned offer without leave of the court (page 277);
(b)
Wah Luen International Development Limited where DHCJ William Wong SC by following Golden Eagle International (Group) Ltd (i) found the full enhanced rate of interest on costs should be 4%pa above the usual rate in commercial cases (which in that case was 1%pa over the then prevailing RMB prime rate of 5.125%pa, ie 4%pa + 5.125%pa + 1%pa = 10.125%pa), and (ii) ordered the defendant to pay interest at 5.0625%pa (being half of the aforesaid full enhanced rate of interest ) on the plaintiff’s costs incurred after 19 December 2017 (being the last day on which the defendant in that case could have accepted the plaintiff’s sanctioned offer without leave of the court) up to the date of judgment (paragraphs 5, 16-17, 20-21 and 22(3)).
(b) Legal principles – rationale for interest on cost
74. Following the incipitur rule, interest on costs runs from the date of judgment at judgment rate.[55] Such post -judgment interest is not awarded on costs incurred and paid by the successful party before judgment, and does not depend on whether the receiving party (usually the successful party) has been out of pocket. Such non-discretionary statutory interest is automatically paid pursuant to a costs order which carries interest under section 49 of the High Court Ordinance Cap 4 as if it were a judgment debt.[56]
75. Indeed, but for the statutory provisions as to interest on costs in Order 22 rule 23(4)(b) and/or rule 24(3)(b) of the RHC, there can be no interest on costs incurred prior to the judgment or order. As I have explained in IMY (a minor) v Dr Lo Ni Boon Peter ,[57]
“75. In McPhilemy v Times Newspapers (No 2)[58] cited in Shih Pik Nog v G2000 (Apparel) Ltd ,[59] Chadwick LJ explained that a successful claimant “will get interest on his costs from the date of the order (whether he has actually paid them or not ); but he will get nothing to compensate him for the cost of money (or the loss of use of money) which he has had to bear before trial in relation to payments which he has made on account of costs” (my emphasis). McPhilemy in turn refers to the leading case of Hunt v R M Douglas (Roofing) Ltd[60] in which Lord Ackner, with whom the other Law Lords agreed, concluded that while a satisfactory result cannot be achieved in every case, the balance of justice favoured the incipitur rule, and one of the reasons given was that “it is the unsuccessful party …… who …… has caused the costs unnecessarily to be incurred, [and, since] interest is not awarded on costs incurred and paid by the successful party before judgment , why should he suffer the added loss of interest on costs incurred and paid after judgment?” (my emphasis) It is therefore plain that Interest on Costs has no correlation with the payment or non-payment by the receiving party in respect of profit costs and/or disbursements to his/her solicitor prior to taxation.”
76. Order 22 rule 24(3)(b) of the RHC gives power to the court to award interest on costs incurred prior to judgment. Johnson Lam J (as he then was) at page 279 in Golden Eagle International (Group) Ltd cited with approval the explanations by Chadwick LJ in McPhilemy v Times Newspapers (No 2) [61] and by Walker LJ in KR v Byrn Alyn Community (Holdings) Ltd [62] on the rationale for such power as follows:
“16. I come to the power to award interest on costs under O.22 r.24(3)(b). The purpose of such power was explained by Chadwick LJ at para.23 of McPhilemy v Times Newspapers (No 2) :
… It is to redress, in a case to which r.36.21 applies, the element of perceived unfairness which arises from the general rule that interest is not allowed on costs paid before judgment …. So, in the ordinary case, the successful claimant who has made payments to his own solicitor on account of costs in advance of the trial will be out of pocket even if he obtains, at the trial, an order for costs in an indemnity basis … he will get nothing to compensate him for the costs of money (or the loss of the use of money) which he has had to bear before trial in relation to payments which he has made on account of costs. An order under para.3(b) of r.36.21 enables the court to achieve a fairer result in that respect.
17. In the subsequent case of KR v Bryn Alyn Community (Holdings) Ltd [2003] PIQR P562, Waller LJ referred to this part of the judgment of Chadwick LJ and went on to say at para.22:
If an order is made to pay costs on an indemnity basis, it is unlikely to be unjust to make the party pay interest on those costs for the period when litigation is being funded when acceptance of a Pt 36 offer should have led to it not being funded. There may be cases where evidence will demonstrate actual dates when clients had put up funds and from which interest will run. Without such evidence the court can do no more than Chadwick LJ did and make the interest run from the date when the work was done or liability for disbursements was incurred.”
(c) Legal principles – approaches
77. “Modified” approach Johnson Lam J (as he then was) at pages 279-280 in Golden Eagle International (Group) Ltd adopted a simplified or “modified” approach where there was no evidence of actual payment of costs by the receiving party[63] because “[in] principle the defendant should pay the plaintiff interest on the costs incurred after 1 February 2010 [ie the last day on which the defendant could have accepted the plaintiff’s sanctioned offer without leave of the court] running from the date when the works were done respectively”, but “it would be a complicated process if each item of work were to carry interest from a different date”.
78. Bharwaney J at page 129 in Shih Pik Nog commended such approach, which he summarised at 128 as follows:
“13. Johnson Lam J referred to these decisions but adopted a modified approach in Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273 by taking the personal injury practice of awarding pre -trial loss and damage at half the usual rate:
(a) He awarded interest at half rate on costs incurred after the last date of acceptance without requiring leave of court, with such interest to run from that date to the date of his judgment on interest and costs;
(b) The normal commercial rate of interest awarded by the courts is prime plus 1%. Lam J enhanced that rate of interest by 3% and awarded interest at a rate of 4% above prime. The prime rate was 5% and adding another 4% on top of that produced an enhanced rate of 9%, ie 1% above the then (and current) 8% judgment rate;
(c) He awarded interest at half of that rate, ie at 4.5%, on costs incurred after the last date of acceptance without requiring leave of court, such interest to run from that date to the date of his judgment on interest and costs.”
79. The “modified” approach in Golden Eagle International (Group) Ltd was approved and applied by the Court of Appeal in Wong Tang Keung v Lee Wai Engineering Co Ltd (No 2) [64] and Antwerp Diamond Bank NV v Brink’s Incorporated (No 2) :[65]
(a)
In Wong Tang Keung (which is a personal injury case), the 2nd defendant successfully varied the costs order nisi to secure interest on costs for the appeal, but since the 2nd defendant did not provide reasons in support of its claim for interest at 10%pa above judgment rate and/or any information as to the costs incurred before judgment, interest on costs was awarded at 4.5%pa (ie half of the full enhanced rate of interest as adopted in Golden Eagle International (Group) Ltd ) from 26 September 2006 (ie expiry of the 28 days during which the plaintiff could have accepted the sanctioned payment without leave of the court) to the date of judgment) (page 414).
(b)
In Antwerp Diamond Bank NV , judgment was entered against the 3rd defendant who failed to do better than the plaintiff’s sanctioned offer, so the consequences prescribed in Order 22 rule 24(2)-(3) of the RHC were triggered. The Court of Appeal saw no reason to depart from the “modified” approach in Golden Eagle International (Group) Ltd where Johnson Lam J (as he then was) “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” (page 639).
80. The “modified” approach expounded in Golden Eagle International (Group) Ltd was followed in a number of cases:
(a)
In Kai Min Fashion (HK) Ltd v Fond Express Logistics Ltd & anor ,[66] Recorder Jat SC held that the full enhanced rate of interest on costs “should be payable at a rate which is the lower of (i) 6% above US dollar prime from time to time or (ii) 2% above judgment rate” (page 569), but following the simplified or “modified” approach in Golden Eagle International (Group) Ltd (page 569), the learned judge ordered the 2nd defendant to pay the plaintiffs’ costs on indemnity basis with interest thereon at half the lower of (i) 6%pa above US dollar prime rate from time to time or (ii) 2%pa above judgment rate from 5 June 2012 (ie expiry of the last date on which the 2nd defendant could have accepted the plaintiff’s sanctioned offer without leave of the court) until judgment (pages 569-571).
(b)
In CEP Ltd v Wuxi Jiacheng Solar Energy Technology Co Ltd ,[67] the defendant applied for inter alia interest on costs under Order 22 rule 23(4)(b) of the RHC when the plaintiff failed to do better than the defendant’s sanctioned payment. In the absence of opposition to the defendant’s proposed rate of interest, Recorder Jat Sew Tong SC referred to Kai Min Fashion (HK) Ltd and ordered that “interest on the enhanced costs be payable on all items of costs at half that rate [that rate being 5%pa above judgment rate], with interest starting to run from 16 November 2012 [ie after the last date on which the plaintiff could have accepted the defendant’s sanctioned payment without leave of the court] on all the items, until judgment ……” (pages 49-50).
(c)
A number of very recent cases still relied on Golden Eagle International (Group) Ltd and followed its “modified” approach as to interest on costs, eg Americhip Inc v Zhu Hongling & ors ,[68] Fong Chok Fung & anor v Waytex Plastic Manufacturing Limited & anor ,[69] and Hydrotech Waterproofing Solutions Limited v Shun Yuen Construction Company Limited .[70]
81. The “modified” approach in Golden Eagle International (Group) Ltd was also followed and adopted in a number of personal injury cases in which the plaintiff sought interest on costs under Order 22 rule 24(3)(b) of the RHC (or RDC) when the defendant failed to do better than the plaintiff’s sanctioned offer, but did not submit information as to incurred/paid costs and disbursements. An example is Rich Metro Ltd v Ka Ming Court Castle Peak Road (IO) .[71] In that case, the plaintiff sought inter alia indemnity costs as from early December 2014 and interest on such costs pursuant to Order 22 rule 24(3)(b) of the RDC. The plaintiff asked for interest on costs at 4%pa above judgment rate (ie 4%pa + 8%pa = 12%pa). DDJ Lee Siu Ho was satisfied that in the absence of any suggestion that the plaintiff was funded by its insurer, “the plaintiff would have funded the trial by paying costs on account to the plaintiff’s solicitors in advance. Absent detailed account of the amount of such costs paid by the plaintiff and the dates thereof, [the learned deputy judge] decide, as the case law suggested, to award interest at half of 12% pa sought by [the plaintiff’s counsel] ie 6% pa on the indemnity costs [the learned deputy judge] award to the plaintiff as from 5 December 2014. Such interest should be paid up to judgment ” (pages 668-669).
82. Likewise, the “modified” approach in Golden Eagle International (Group) Ltd was adopted in personal injury cases where the defendant sought interest on costs under Order 22 rule 23(4)(b) of the RHC (or the RDC) when the plaintiff failed to do better than the defendant’s sanctioned payment, but did not submit information as to incurred/paid costs and disbursements:
(a)
In Rai Pabitdara v Vegetable Marketing Organization , DDJ A Kot (as she then was) agreed with Golden Eagle International (Group) Ltd , and adopted (i) 9%pa as the full enhanced rate of interest as it was “the appropriate rate in the circumstances of the Hong Kong economic condition to reflect the costs of money to the Defendant”, and (ii) the “modified” approach by ordering interest on costs before judgment at half of the full enhanced rate of interest as found (ie 4.5%pa) “since there is no evidence as to when the Defendant was out of pocket as far as its legal costs is concerned”.[72]
(b)
In Irving Matthew William (suing his father and next friend Irving William Samuel) & anor v Man Chun Yeung & anor , DDJ Lawrence Hui also adopted 4.5%pa, ie half of the full enhanced rate of interest at 9%pa (ie 1%pa over the then judgment rate of 8%pa) in Golden Eagle International (Group) Ltd , as the appropriate rate of interest on costs.[73]
(c)
In Leung Hoi Wai v Po Leung Kuk , DHCJ Kent Kee said the full enhanced rate of interest at 9%pa in Golden Eagle International (Group) Ltd was “on the generous side for the purpose of assessing costs” (see paragraph 79(b) above), so in the circumstances of the case before him, the learned deputy judge adopted the judgment rate (8%pa) “as a starting point”, but with “…… no evidence as to when [the defendant] actually paid the legal costs, [the learned deputy judge] would adopt the approach in the Global Eagle case and order interest at half of 8%, ie 4% for the Period”.[74]
83. To award interest on costs under the “modified” approach, the court would first determine the full enhanced rate of interest, and would then apply half of such full rate to all items of costs and disbursements incurred by the successful litigant for the period after the last date on which the paying party (usually the unsuccessful litigant) could have accepted the sanctioned offer/payment without leave of the court until the date of judgment, irrespective when each such item of costs/disbursements was paid or advanced.
84. “Full rate” approach In Shih Pik Nog , Bharwaney J agreed that the “modified” approach usefully did away with the need to ascertain the actual dates when the receiving party had to put up funds on account of costs and from which interest would run at the full enhanced rate of interest (eg 9%pa in Golden Eagle International (Group) Ltd ) to the date of judgment, but the learned judge took the view that in personal injury cases where the receiving party was the defendant and the defendant’s insurer had the carriage of the case on behalf of the defendant, the court should not award any interest on costs in favour of the defendant if the defendant’s insurer had not made any advance on account of fees incurred since an order for interest on costs incurred after the last date for acceptance of the sanctioned payment without leave of the court under Order 22 rule 23(4)(b) of the RHC because otherwise it would produce an unjust windfall for the insurer (page 130). Bharwaney J said at page 130 as follows:
“18. In my judgment, save for legally-aided parties , it is incumbent on the party seeking interest on costs, be that party a plaintiff or a defendant, to state, in his supporting affidavit, the amount of disbursements, costs, and costs on account paid to his solicitors during the period commencing from the last date of acceptance up to the date of the supporting affidavit, and the date(s) of payment. Upon sight of this information, the court can either refuse to or make an order for enhanced interest on the actual amounts of disbursements, costs, and costs on account paid during the relevant period, and the court can award interest either at the full rate from the actual dates of payment or adopt the modified approach of Lam J. The former approach would be suitable for cases where there have only been a few payments and the latter approach for cases where there have been multiple payments spanning a long period of time.” (my emphasis)
85. In Shih Pik Nog , the defendant was directed to and did provide “a statement of the funds …… advanced by the defendant’s insurer on account of costs during the relevant period”. Of the costs and disbursements incurred from 5 November 2011 (ie the day after the last date for acceptance of the sanctioned payment without leave of the court) up to 25 May 2011 (ie the date of judgment) that amounted to $461,980.50, the defendant’s insurer had paid $62,228 and $148,000 on 15 March and 4 April 2011 respectively, so Bharwaney J eventually ordered the plaintiff to pay interest at the full enhanced rate of 9%pa only on the sums of (a) $62,288 from 15 March 2011 to the date of judgment and (b) $148,000 from 4 April 2011 to the date of judgment (page 131).
86. Subsequently, Bharwaney J in Fung Chun Man v Hospital Authority [75] adjusted his “full rate” approach. In that case, he awarded interest on costs to 1 of the defendants who was publicly funded and represented by the Department of Justice on the basis that “[if] any such costs were incurred during the period from the last date of acceptance of the sanctioned payment or offer until the date of judgment, an order for enhanced interest may be made in respect of such costs, from the dates on which the work was done up to judgment, notwithstanding that no payment in respect of or on account of those costs had been paid by the aided person or government department involved in the litigation ” (my emphasis) (page 492). But in respect of enhanced interest on disbursements, the learned judge said at page 493 as follows:
“5. Just as private solicitors pay disbursements, including fees for experts’ reports, and counsels’ fees, so does the Legal Aid Department and the Secretary for Justice. If any payment of such fees and other disbursements were made during the period from the last date of acceptance of the sanctioned payment or offer up to the date of judgment, an order for enhanced interest may be made in respect of such fees and disbursements, from the dates of payment up to the date of judgment. An order for enhanced interest should be made from the date of payment of such fees and disbursements and not from the date liability for the payment of such fees and disbursements costs accrued . An award of enhanced interest from the date liability for the payment of such fees and disbursements costs accrued would produce an unjust windfall for the receiving party. For this reason, I decline to follow Waller LJ who was prepared to award enhanced interest from the date liability for the payment of such fees and disbursements costs was incurred by the publicly funded body (see para.23 of his judgment in KR v Bryn Alyn Community (Holdings) Ltd (in liq) [2003] PIQR P30 (p.562), 570).” (my emphasis)
87. At page 150 in IMY (a minor) , I summarised Bharwaney J’s approached in Shih Pik Nog as adjusted by Fung Chun Man as follows:
“97. It appears from the above case law that in dealing with the question of enhanced interest under O.22 of the RHC Bharwaney J draws a distinction between legally aided and privately-funded claimants, and in respect of legally aided cases he draws a further distinction between enhanced interest on costs (recoverable on the basis that they have been incurred but may or may have been fully paid) and enhanced interest on disbursements (recoverable only on the basis that they have been incurred and paid) ……”
88. Bharwaney J applied the “full rate” approach in Shih Pik Nog (as adjusted by Fung Chun Man ) in 2 further cases in which the plaintiff failed to do better than the defendant’s sanctioned payment/offer such that the consequences in Order 22 rule 23 of the RHC were applicable:
(a)
In Hung Sau Fung v Lai Ping Wai and Wu Kwai Ming, Danny (formerly trading in partnership under the style or firm name of Elegant Motors Services Company) , the learned judge ordered that interest on costs was payable at the full enhanced rate of 9%pa (as adopted in Golden Eagle International (Group) Ltd ) on 2 payments of disbursements made by the defendant’s insurers in the sums of $54,000 and $290,000 from their respective dates of payments on 18 and 29 July 2011 to the date of judgment on 7 October 2011.[76]
(b)
In Yeung Ho Man v Shum Kin Leung & anor , the learned judge explained that Shih Pik Nog “was in respect of the run-of-the-mill case where the only failure of the plaintiff was a failure to accept the successful sanctioned payment”, but since the court’s disapproval of the “egregarious character of the plaintiff’s conduct” should be reflected in the full enhanced rate of interest in the case before him, he exercised his discretion to order interest on costs at 10%pa above judgment rate (ie the statutory maximum rate) “on each payment of costs incurred after 8 April 2019 from the date of payment by the defendants up to the date of judgment”. Thus, notwithstanding the imposition of the maximum enhanced rate of interest, the learned judge still adopted the methodology in Shih Pik Nog (ie the “full rate” approach on incurred and paid costs items) because “the payments are few and well documented in the exhibits to the [defendant’s supporting affirmation], and can be easily calculated” (paragraph 23).[77]
89. Subsequently, other courts followed the “full rate” approach in Shih Pik Nog (as adjusted by Fung Chun Man for publicly funded cases) by applying the full enhanced rate of interest to items of costs/ disbursements incurred and paid/advanced during the relevant period:
(a)
DHCJ Nicholas Cooney SC in Cai Guoping v Yim Hok Wing & ors ordered the plaintiff to pay the defendants interest on disbursements in the sum of $9,000 being half share of the mediation fees (such disbursements to be taxed if not agreed) at the rate of 9%pa (ie the full enhanced rate of interest at 4%pa over the then prevailing prime rate of 5% as adopted in Golden Eagle International (Group) Ltd ) from 13 January 2015 (date of payment) to date of judgment.[78]
(b)
B Chu J in 賴容 對 醫院管理局 followed Shih Pik Nog , Fung Chun Man and Cai Guoping ,and awarded interest on costs at the full enhanced rate of interest at 9%pa on payments of counsel’s fees ($305,600) and psychiatric expert’s fees ($50,200) from the date of payment (20 July 2015) to the date of judgment.[79]
(c)
In Tsang Chiu Yip v Ho Kwok Leung , the parties followed the “full rate” approach in Shih Pik Nog , and had no dispute (and consequently I ordered) that the full enhanced rate of interest be payable by the plaintiff to the defendant at 3%pa above judgment rate on the defendant’s disbursements of medical expert’s fees, surveillance fees, mediation fees/disbursements and counsel’s fees advanced by the defendant’s insurer after 28 May 2014 (ie after expiry of the last day on which the plaintiff could have accepted the defendant’s 5th sanctioned payment) (subject to taxation).[80]
(d)
In Wong Yau Sui v Moral Accord Limited & anor , the defendants incurred expert fee (paid on 3 March 2016) and fee for counsel’s advice (paid on 10 August 2016) after 21 October 2015 (ie after the last date on which the plaintiff could have accepted the defendants’ sanctioned payment without leave of the court) (paragraphs 2(7) and 17), and DDJ Gary C C Lam (i) found that the full enhanced rate of interest was 9%pa (ie 4%pa above the prime rate) as adopted in Golden Eagle International (Group) Ltd on the premise that (1) there had not been much change (if any) in terms of the prime rate since then and (2) there was absence of information about other facts that would have affected the cost of money (paragraph 21), and (ii) ordered the plaintiff to pay the defendant interest at 9%pa on expert fee paid on 3 March 2016 and fee for counsel’s advice paid on 10 August 2016 until the date of judgment (paragraph 23(3)).[81]
(e)
In Rai Gehendra Raj v Yick Hing Construction Company Limited , Lisa Wong J referred to the the “modified” approach in Golden Eagle International (Group) Ltd and the “full rate” approach in Shih Pik Nog , and on the basis that the defendant in the case before her had adduced evidence of payments on costs made by its insurers since 22 April 2014 (ie after expiry of the period for acceptance of the 1st sanctioned payment without leave of the court), declined to follow the “modified” approach, and instead ordered the plaintiff to pay the defendant interest on its costs of the action incurred since 22 April 2014 to be taxed if not agreed “from the actual dates on which the payments of such costs were made by the defendant or its insurer up to and including [the date of judgment] at the rate of 9% per annum ……”[82]
(f)
In Angbuhhang Netra Jang v Liang O’Rourke Construction Hong Kong Ltd , Lisa Wong J cited the rationale for interest on costs as explained in OMV Petrom SA (see paragraph 31 above), referred to case authorities in which the highest enhanced rate of interest was ordered for the egregarious character of the plaintiff’s conduct[83] and where “the defences were devoid of merits or only faintly argued”,[84] and exercised her discretion to order interest on costs at the maximum rate of 10%pa above judgment rate (which rate of interest included a non-compensatory element to reflect her disapproval of the plaintiff’s litigation conduct) “on each payment of costs incurred by the defendants after 26 February 2015[85] from the date of payment by the defendants’ insurers up to the date of judgment”.[86]
(g)
In Bokhim Dil Kumar v Dragages Hong Kong Limited & anor , DHCJ Paul Lam SC referred to Shih Pik Nog , and held that “since the Defendants have not adduced any evidence to support their application for the award of enhanced interest on costs …… I agree with the Plaintiff that, in the absence of such evidence, it would not be appropriate to allow the Defendants’ application in this respect”.[87]
(h)
In Cheung Sau Lin v Tsui Wah Efford Management Limited , in respect of “被告人由2017年7月11日之後至作出9/8/19判決之日為止, 支付的代墊付費用合共港幣386,000.00元 …… (如雙方未能就金額達成協議，則由法庭按彌償基準評定), 被告人要求從2017年7月12日起直至2019年8月9日之加強利息, 即是按每年 5% 之利率計算, 其後需按判定利率計算, 直至該代墊付費用完全清繳為止” (paragraph 26). The Director of Legal Aid consented to an order that the plaintiff was to pay the defendant interest on the aforesaid disbursements (to be taxed on party and party basis if not agreed) “which have been actually incurred and paid by the Defendant (with proof) from the dates of actual payment made before 28 May 2019 and up to the discharge of the legal aid certificate on 28 May 2019 at 2%pa (paragraph 35), and Master Chow ordered “原告人需向被告人支付就原告人於 [18/5/20修訂傳票] 附件所列之代墊付費用 (如雙方未能就金額達成協議, 就該傳票附件內第(i)(a)及(ii)(a)項目則由法庭按各方對評基準評定, 而就該傳票附件內其他項目, 則由法庭按彌償基準評定) 的加強利息, 加強利息由該代墊付費用付款當日起計算直至2019年8月9日, 按每年10% [ie 2%pa above judgment rate at 8%pa] 之利率計算, 之後則以判定利率計算利息” (paragraph 44).[88]
(i)
In Hui Po Chi v Trade Travel (Hong Kong) Limited , DHCJ Herbert Au-yeung concluded that “原告人須以高於判定利率的利率向被告人支付上述訟費的利息” (paragraph 12(2)), and upon referring to Shih Pik Nog , the learned deputy judge considered that “由於由2022年5月3日起, 被告人所支付的訟費只有寥寥數項, 故此本席認為有關利率應以全利率 (full rate approach) 而非半利率 (modified approach) 計算。以高於判定利率的利率來計算訟費利息的時段, 應以該判案書之日期為止 ……” (paragraphs 16-17), and ordered that “原告人須以彌償基準支付被告人於2022年5月3日或之後招致的所有訟費及開支(包括本申請的訟費、兩位大律師出席審訊的費用及在此期間保留待決的訟費), 以及在2022年5月3日後已支付訟費的利息。由被告人支付上述訟費之日直至2022年6月30日之間的時段, 有關利息以年利率9%計算。由2022年7月1日直至法律援助署署長向被告人清償訟費之日, 有關利息以判定利率計算” (paragraph 18(3)).[89]
90. To award interest on costs under the “full rate” approach, the court would first determine the full enhanced rate of interest, and would then apply such full rate to each item of costs and disbursements incurred by the receiving party (ueually the successful party) (as disclosed in affirmation evidence) since the last date on which the paying party (usually the unsuccessful party) could have accepted the sanctioned offer/ payment without leave of the court that has been paid or advanced for the period from the actual date of payment by such party or his insurer up to the date of judgment.
(d) Legal principles – legal aid cases
91. In Shih Pik Nog , although the matter was not argued before him, Bharwaney J indicated his “agreement with Waller LJ who stated in paragraph 23 of his judgment in KR v Bryn Alyn Community (Holdings) Ltd [90] that the court has power to award enhanced interest on costs to parties who are publicly funded and who may obtain an award of enhanced interest costs and disbursements which have been incurred but not yet paid or fully paid” (page 130). The learned judge explained at page 130 as follows:
“19. …… Parties on legal aid seeking interest on costs should state in their supporting affidavit the dates on which the work was done and disbursements paid or the dates on which liability for disbursements was incurred. Again, the modified approach of Lam J would be suitable for cases where there are multiple items spanning a long period of time. Although I incline to the view that the interest or enhanced interest ordered to be paid pursuant to O.22, rr.23 or 24 in a legally aided case ought to be paid to the Director of Legal Aid instead of the aided person, I refrain from deciding this point as I have not had the benefit of argument on the point. However, the fact that publicly funded plaintiffs may be able to obtain an award for enhanced interest on costs incurred but not yet paid or not yet fully paid by the Director of Legal Aid does not, in my judgment, justify an order for enhanced interest on costs incurred but not yet paid by privately funded parties.”
92. This issue came squarely before Suffiad J shortly thereafter in Lau Koon Loi v Wong Wai Sing & anor .[91] In that case, the legally- aided plaintiff applied to vary the costs order nisi given in the written judgment after trial and to seek orders inter alia that (a) the defendants do pay the plaintiff’s costs on an indemnity basis from 4 February 2010 at the latest and (b) such costs to bear interest thereon at 10%pa above judgment rate (which then stood at 8%pa), ie the maximum rate provided by Order 22 rule 24(3)(b) of the RHC (paragraphs 14-16), on the premise that he had done better than his sanctioned offer made to the defendants which they did not accept (paragraphs 1-2 and 9). The relief in (a) above was not disputed.
93. Suffiad J, citing the rationale expressed by Chadwick LJ in McPhilemy set out in paragraph 76 above, explained that the power to award interest on costs under Order 22 rule 24(3)(b) of the RHC is not penal in nature (paragraph 17). The learned judge accepted such statutory consequence applies to successful legally-aided litigants. He went on firstly to determine the full enhanced rate of interest, and came to the view that since “interest on costs is to redress the perceived unfairness arising from loss of use of money”, a rate of interest at 2%pa above the then judgment rate (which was equivalent to 2%pa + 8%pa = 10%pa) “will fairly and sufficiently compensate the plaintiff in that respect rather than 10% above judgment rate as sought by the plaintiff” (paragraph 18). Then, the learned judge adopted the “modified” approach in Golden Eagle International (Group) Ltd which he considered to be appropriate for legally-aided cases:
“20. The present case is a legally aided case for the plaintiff and there is no evidence of actual dates on which work was done or disbursements issued in respect of the costs incurred by the plaintiff between 4 February 2010 and the date of judgment.
21. This difficulty was overcome by Lam J in the Golden Eagle case (ibid ) in the approach adopted by him in these words in paragraph 18 of his judgment in the Golden Eagle case: [see summary in paragraphs 77-78 above] The same difficulty is present in the present case and that approach adopted by Lam J commends itself to be similarly adopted in this present case.
22. Accordingly, I shall order that interest on the indemnity costs to be at the rate of 5% (being half of 2% above judgment rate) [ie (2%pa + 8%pa) ÷ 2 = 5%pa] for all costs incurred after 4 February 2010 and that such interests to start to run from 4 February 2010 for all items until date of judgment. Thereafter, interests to run at judgment rate.”
94. Very shortly thereafter, Bharwaney J in Fung Chun Mun also confirmed the court had power to award interest on costs under Order 22 rules 23-24 of the RHC to parties who are publicly funded. But the learned judge adopted the “full rate” approach in Shih Pik Nog with slight adjustment as explained in paragraphs 86-87 above.
95. Thus, both the “modified” approach and the “full rate” approach have been applied for awarding interest on costs in favour of publicly funded litigants.
96. Confusion However, there are a number of cases that raise confusion as to whether the “modified” approach or the “full rate” approach was adopted.
97. In Maysun Engineering Co Ltd (which was handed down several months before Bharwaney J handed down his decision in Shih Pik Nog ), the defendant was held liable for more than the proposal in the plaintiff’s 2nd sanctioned offer, so Order 22 rule 24 of the RDC was triggered (pages 848-849). After considering all the circumstances, DDJ Mimmie Chan (as she then was) saw nothing which would make it unjust to grant orders for indemnity costs and interest on costs (page 850). The learned judge said “[there] is no evidence in this case as to when the plaintiff was out of pocket in having to make payment on account of costs, or in having to actually put up funds for payment of its legal costs. Nor is there evidence of when liability for disbursements such as counsel’s fees was incurred” (page 852). Unfortunately, the learned judge’s attention was not drawn to the “modified” approach in Golden Eagle International (Group) Ltd (which she cited on other matters at page 850) that squarely addressed her concerns about the absence of payment information. The learned judge’s answer to her concerns at page 852 was as follows:
“24. …… if I do not make an order for enhanced interest on costs under r.24(3), interest on costs will run from the date of the judgment …… at judgment rate. To reflect the spirit of O.22 and the principle of compensation for the cost of money paid before trial, I will order interest on indemnity costs from 18 September 2009, at a lower rate of 2% above judgment.”
However, Golden Eagle International (Group) Ltd had already addressed the learned judge’s concerns by adopting the “modified” approach that applied half of the full enhanced rate of interest on all items of costs incurred after expiry of the last date upon which the defendant could have accepted the plaintiff’s sanctioned offer to the date of judgment (rather than by a “lower” full enhanced rate of interest), but the “modified” approach was unfortunately not referred to. The learned judge also did not have the benefit of the subsequent guidance by Bharwaney J in Shih Pik Nog that applied the full enhanced rate only to incurred items of costs and disbursements paid or advanced by the receiving party. Maysun Engineering Co Ltd was an early decision handed down not long after the introduction of the new Order 22 regime, but the more recent decisions by the learned judge in Americhip Inc and Hydrotech Waterproofing Solutions Limited & anor in paragraph 80(c) above showed she was well aware of and did apply half of the enhanced rate of interest under the “modified” approach as explained above.
98. In Au Man Ming v Goldwell Property Management Limited ,[92] HHJ Leung gave a short ex tempore judgment in which he ordered the plaintiff (whose claim was dismissed and hence failed to do better than the defendant’s sanctioned payment) to pay interest on costs under Order 22 rule 23 of the RDC at “the enhanced rate” of “9%pa, that is 1% above the judgment rate, as proposed by [the defendant]” (paragraph 15). Neither Golden Eagle International (Group) Ltd or Shih Pik Nog was cited. Given its brief ex tempore nature, the judgment was unclear as to (although the parties at the hearing probably understood) whether such interest was to be imposed on all items of costs incurred after expiry of the last date on which the plaintiff could have accepted the defendant’s sanctioned offer without leave or on specific items of such incurred costs/disbursements that had been paid or advanced by the defendant or its insurers when the learned judge directed that “[what] costs of [the defendant] under this order shall be taxed on indemnity basis and carrying enhanced interest will be a matter for taxation, if not agreed” (paragraph 15).
99. In Chan Lap Kwan v Skypy Limited & anor ,[93] the plaintiff failed to recover an amount under the judgment which was higher than the 1st sanctioned payment. Mimmie Chan J ordered the plaintiff to pay the defendant’s costs of the action incurred from 17 July 2014 onwards (ie after expiry of the last date on which the plaintiff could have accepted the 1st sanctioned payment without leave of the court) on High Court scale and on indemnity basis, and “[the] Plaintiff is also to pay interest on these costs incurred from 17 July 2014, at 2% above judgment rate” (paragraph 11). In that case, the plaintiff was self-represented, and the decision did not contain any discussion as to how the interest rate of 2%pa above judgment rate was arrived at, and made no reference to either the “modified” approach in Golden Eagle International (Group) Ltd and/or the “full rate” approach in Shih Pik Nog . But as explained in paragraph 97 above, the more recent decisions by the learned judge in paragraphs 80(c) above showed she was well aware of and did adopt the “modified” approach by applying only half of the full enhanced rate of interest to costs incurred during the relevant period.
100. In Xu Xinhong v Cheung Chu Lau ,[94] the plaintiff applied for inter alia costs to be awarded on indemnity basis with interest on costs after the defendant failed to do better than her sanctioned offer (paragraphs 1 and 5). The plaintiff proposed that the defendant shall pay (a) her costs (with certificate for counsel) on party-and-party basis up to 24 August 2016 and thereafter on indemnity basis to be taxed if not agreed, and (b) interest on her costs at 2%pa above judgment rate for the period from 24 August 2016 to the date of judgment (paragraph 10). The defendant had no objection to such reliefs (paragraph 11), and Master J Wong granted orders as proposed by the plaintiff accordingly (see paragraph 25(2)-(3)).
101. In my view, none of the cases in paragraphs 97-100 above shed useful light on the reasoned approach(es) of the courts towards the exercise of discretion on interest on costs under Order 22 rule 23 and/or rule 24 of the RHC or on the relevant rate of interest to be applied under the “modified” approach or the “full rate” approach.
102. In Union Glory Finance Inc & ors v Merrill Lynch International Bank Limited & anor ,[95] the plaintiffs’ claim was dismissed, so they failed to do better than the defendants’ sanctioned payment. DHCJ Cooney SC considered it would not be unjust to award indemnity costs and interest on costs under Order 22 rule 23 of the RHC in favour of the defendants (paragraphs 19 and 23). The learned judge referred to Kai Min Fashion (HK) Ltd , CEP Ltd and Maysun Engineering Co Ltd (see paragraphs 80(a)-(b) and 97 above), and said as follows:
“35. In the present case there is no evidence as to when the plaintiffs incurred liability for costs or evidence of payment of costs or having paid money on account of their legal costs. In these circumstances, I shall adopt the simplified approach and order a rate of interest of half of what I would otherwise have ordered. As to that rate, in the absence of evidence as to the actual cost of money, I take a broad approach and I consider the rates applied by Recorder Jat Sew Tong and HH Judge Mimmie Chan to be appropriate, in which case I order interest on the indemnity costs from 27 June 2015 at a rate of 2½%.”
Consequently, DHCJ Cooney SC ordered the plaintiffs to pay inter alia the defendants’ costs on an indemnity basis from 27 June 2015 (ie after expiry of the last day on which the plaintiffs could have accepted the defendants’ sanctioned payment without leave of the court) with certificate for two counsel and “[interest] on indemnity costs at a rate of 2½% above judgment rate from 27 June 2015 until payment” (my emphasis) (paragraph 41(2)-(3)).
103. I have explained why with the benefit of hindsight of judicial guidance that has fallen from various courts since the early days, it is unsafe to rely on Maysun Engineering Co Ltd (which was decided before Shih Pik Nog and without consideration of the fullness of the “modified” approach in Golden Eagle International (Group) Ltd ). Further, the methodology adopted in Union Glory Finance Inc & ors might have rested on misunderstanding of Recorder Jat SC’s decisions in Kai Min Fashion (HK) Ltd and CEP Ltd because although the learned recorder in those 2 cases held that the full enhanced rate of interest was respectively (a) the lower of (i) 6%pa above US dollar prime rate from time to time or (ii) 2%pa above judgment rate from 5 June 2012 (ie after expiry of the last date on which the 2nd defendant could have accepted the plaintiff’s sanctioned offer without leave of the court) until judgment (see paragraph 80(a) above) and (b) 5%pa above judgment rate (see paragraph 80(b) above), he applied only half of such full rates and not the full rates to all items of costs incurred after the last date on which the plaintiff could have accepted the 2nd defendant or the defendant’s sanctioned payment without leave of the court until the date of judgment. By accepting inter alia that the rates adopted Recorder Jat SC appropriately justify a full enhanced rate of interest of “2½% above judgment rate”, but failing to apply half of such full enhanced rate of interest to all indemnity costs incurred since 27 June 2015 until payment, Union Glory Finance Inc appeared to have misapplied Kai Min Fashion (HK) Ltd and CEP Ltd , and more fundamentally, might have misapplied the “modified” approach in Golden Eagle International (Group) Ltd .
104. In Man Hin Fung v SKH Chan Young Secondary School , the plaintiff failed to do better than the defendant’s sanctioned payment, so the defendant applied to vary the costs order nisi by requiring the plaintiff to pay its costs on indemnity basis and to pay enhanced interest on costs at the rate ot 10%pa above judgment rate (but by the time of the hearing the defendant’s counsel was prepared to accept enhanced interest on costs a rate at 5%pa above judgment rate) (paragraphs 4-5 and 15).
105. HHJ Andrew Li agreed with and adopted the “modified” approach in Golden Eagle International (Group) Ltd , which he said was adopted by DDJ Simon Ho in Fan Kai Ming v Lam Susan Shui Hing [96] (paragraphs 16-19), and held as follows:
“19. I would respectfully agree and adopt the approach of Lam J (as the V-P then was) in Golden Eagle, supra. As there is no evidence on any actual payment of costs, the defendant being represented by the insurance company, I should follow the approach in the above two cases and apply a 4.5% on costs above the judgment rate as enhanced interest in this case
20. In conclusion, I shall make the following order on the defendant’s Variation of Costs Summons:-
(1) The costs order made by me on 23 March 2018 in the judgment be varied to the extent that:-
……
(c) enhanced interest on the costs under (b) above at a rate of 4.5% above the judgment rate from 16 September 2016 until payment of the same.” (my empahsis)
106. In fact, Fan Kai Ming that HHJ Andrew Li referred to in his decision correctly applied the “modified” approach. In that case, the plaintiff failed to do better than the sanctioned payment by the defendant, so interest on costs could start to accrue after the last day on which the plaintiff could have accepted the sanctioned payment without leave of the court (page 237). The defendant’s counsel made no submissions and cited no authority as to what appropriate rate of enhanced interest should be adopted (page 237). DDJ Simon Ho noted there was no evidence of actual payment of costs by the defendant, but accepted that “in principle, it should run from the date when the works were done or liabilities for disbursements were incurred” (page 238). The learned deputy judge adopted the “modified” approach in Golden Eagle International (Group) Ltd , and “[after] considering the circumstances of this case in the round, [the learned deputy judge] also see it appropriate to order the enhanced interest be accrued on the defendant’s costs of this action from 26 June 2015 onwards until the date of judgment at half of the relevant rate, viz 4% above the prevailing HSBC’s prime rate, as held by Lam J to be appropriate in Golden Eagle International . Prima facie , such rate is also applicable here, and [the learned deputy judge has] heard no submission from either party to the otherwise” (page 238). Hence, DDJ Simon Ho ordered that the costs order nisi be varied to inter alia the following terms (page 241):
“(a) the plaintiff do pay the defendant’s costs of this action incurred from 26 June 2015 onwards to be taxed if not agreed with certificate for counsel on an indemnity basis;
……
(b) the plaintiff shall also pay the defendant enhanced interest accrued on the defendant’s costs as mentioned in sub-paragraph (a) above from 26 June 2015 onwards up to the date of judgment at half of 4% above the prevailing HSBC’s prime rate.”
107. Returning to Man Hin Fung , even though HHJ Andrew Li confirmed that he agreed with and that he would follow and adopt the “modified” approach in Golden Eagle International (Group) Ltd because there was no evidence of actual payment of costs in the case before him, he actually did not do so. Instead of applying half of the full enhanced rate of interest in Golden Eagle International (Group) Ltd (which full rate was 9%pa being either 4% above the then prime rate or 1%pa above the then judgment rate – see paragraph 78 above), ie 4.5%pa , the learned judge thought the “modified” rate of interest in Golden Eagle International (Group) Ltd was “4.5% above the judgment rate” and he ordered interest on costs at such latter rate accordingly. In the circumstances, I find myself unable to draw assistance from Man Hin Fung .
108. In Hu Wan v Sanwo International Company Ltd ,[97] the legally-aided plaintiff applied to vary the costs order nisi pursuant to Order 22 rule 24 of the RDC to ask for costs on indemnity basis and interest on costs at 10%pa above judgment rate on the basis that the defendant failed to do better than the plaintiff’s sanctioned offer (paragraphs 1 and 47). HHJ Andrew Li found there was no injustice caused to the defendant in allowing the consequences under Order 22 rule 24 of the RDC (paragraph 37). As regards interest on costs, at the hearing before the learned judge, the plaintiff sought interest on costs at 2%pa above judgment rate by relying a number of case authorities (paragraph 47). HHJ Andrew Li noted the plaintiff’s latest concession, and awarded “enhanced interest on costs [incurred after 2 June 2020] at 2% above judgment rate from 3 June 2020 [ie after expiry of the period when the defendant could have accepted the plaintiff’s sanctioned offer without leave of the court] until date of Judgment ……” (paragraphs 48 and 57(3)).
109. The learned judge did not expressly refer to the “modified” approach in Golden Eagle International (Group) Ltd or the “full rate” approach in Shih Pik Nog as adjusted by Fung Chun Man . But since there was no mention in the decision that the legally-aided plaintiff in that case provided any information on disbursements that were incurred after expiry of the deadline for accepting the plaintiff’s sanctioned offer and actually paid/advanced (which information was necessary for applying the “full rate” approach under Shih Pik Nog as adjusted by Fung Chun Man ), it was likely that the learned judge looked to the “modified” approach under Golden Eagle International (Group) Ltd that obviated the need to ascertain which item of costs/disbursements was to carry interest from which date it was incurred/paid.
110. In my view, although not expressly stated by HHJ Andrew Li in his decision, the ordered rate of interest on costs at 2%pa over judgment rate was obviously the full enhanced rate of interest because (a) if it were the half “modified” rate as adopted in Gold Eagle International (Group) Ltd , the full rate would have been (2%pa + 8%pa being the then judgment rate) x 2 = 20%pa, and (b) a full enhanced rate of interest at 20%pa (ie 12%pa above the then judgment rate of 8%pa) would have exceeded and therefore outwith the statutory maximum of 10%pa above judgment rate under Order 22 rule 24(3)(b) of the RHC. But if the ordered rate of interest at 2%pa above judgment rate was the “full” rate, the learned judge did not apply such “full” rate (which rate is relevant to the “full rate” approach under Shih Pik Nog as adjusted by Fung Chun Man for legally-aided cases) to costs incurred as well as disbursements incurred and advanced/paid for the relevant period. Instead, the learned judge applied the “full” rate (and not the half “modified” rate) to all costs incurred, ie irrespective whether any disbursements had been paid or not (which wide scope was relevant to the “modified” approach under Golden Eagle International (Group) Ltd and not the “full rate” approach under Shih Pik Nog as adjusted by Fung Chun Man ), for the relevant period.
111. As regards the case authorities relied on by the plaintiff in Hu Wan , as I have explained above, (a) Maysun Engineering Co Ltd , Au Man Ming , Chan Lap Kwan and Xu Xinhong do not give useful insight as to the proper application of the “modified” approach in Golden Eagle International (Group) Ltd as explained by Johnson Lam J (as he then was) (see paragraph 97-101 above), (b) Union Glory Finance Inc & Co probably misunderstood the “modified” approach in Golden Eagle International (Group) Ltd as applied by Recorder Jat SC in Kai Min Fashion (HK) Ltd and CEP Ltd when the full enhanced rate of interest at 2%pa above judgment rate was adopted as the applicable rate for interest on costs for the “modified” approach (see paragraphs 102-103 above), and (c) my decision in Tsang Chiu Yip in fact adopted the “full rate” approach under Shih Pik Nog (and not the “modified” approach under Golden Eagle International (Group) Ltd) by applying the full enhanced rate of interest at 3%pa above judgment rate to several specific items of disbursements advanced by the defendant’s insurers and not to all items of costs incurred after expiry of the last date on which the plaintiff could have accepted the defendant’s sanctioned payment without leave of the court (see paragraph 89(c) above).
112. In the circumstances, I am not persuaded that I can safely draw assistance from Hu Wan on the matter of enhanced interest on costs.[98]
113. Which approach? Both the “modified” approach under Golden Eagle International (Group) Ltd and the “full rate” approach under Shih Pik Nog as adjusted by Fung Chun Man for publicly funded cases have been adopted and followed in subsequent cases, and both are viable approaches.
114. In Antwerp Diamond Bank NV , the Court of Appeal at pages 638-639 discussed Shih Pik Nog as follows:
“26. …… 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.” (my emphasis)
115. Thus, where insurers were involved for defendants in personal injury cases, it is likely that the courts would expect such defendants to adduce relevant evidence for the “full rate” approach, failing which there is risk that the court may not allow enhanced interest on costs (see Bokkim Dil Kumar in paragraph 89(g) above). But in other cases, in the absence of information as to when legal costs/disbursements were paid, it is likely that the court may find the “modified” approach under Golden Eagle International (Group) Ltd appropriate. Indeed, in publicly funded cases, the courts have applied both the “full rate” approach (see Fung Chun Man in paragraphs 86-87 and 94 above) and the “modified” approach (see Lau Koon Loi in paragraphs 92-93 above).
116. In my view, where a successful legally-aided party seeks enhanced interest on costs under Order 22 rules 23-24 of the RHC and does not place information as to whether and if so when the costs/ disbursements incurred by such legally-aided party after expiry of the deadline for the unsuccessful party to accept his sanctioned payment/offer have been advanced/paid, the “modified” approach under Golden Eagle International (Group) Ltd should be followed, especially when there have been work done over a long period of time.
117. Under section 20 of the Legal Aid Ordinance Cap 91, the Director of Legal Aid (“DLA ”) assumes an obligation to pay the assigned solicitor such fees and costs as prescribed by the ordinance and the regulations made thereunder. The amount payable by the DLA to an assigned solicitor is prescribed by regulations 5-6 of the Legal Aid (Scale of Fees) Regulations Cap 91C (“LA(SOF)R ”):
“5. The amount payable by the Director to a solicitor acting for an aided person shall be:
(a) the full amount allowed on taxation on account of disbursements;
(b) the full amount allowed on taxation on account of profit costs; and
(c) in cases where fixed costs are applicable and the solicitor has made an election to take fixed costs, the full amount of such fixed costs,
or, in default of taxation or where an election to take fixed costs has not been made, an amount as may be fixed by the Director, not exceeding such amount as in the opinion of the Director would have been allowed if there had been taxation or would have applied if there had been an election to take fixed costs.
6. (1) The Director may before taxation make an advance payment to counsel or solicitor of an amount not exceeding 75% of the sum which the Director estimates will be payable under regulation 4 or 5 and such advance shall be on account of moneys so payable.
(2) If the amount paid under subregulation (1) exceeds the amount payable under regulation 4 or 5, counsel or solicitor, shall repay the excess to the Director.”
118. Thus, regulation 5 of the LA(SOF)R requires an assigned solicitor’s costs/disbursements to be either taxed or determined by the DLA at his discretion, and regulation 6 thereof permits partial payment of the assigned solicitor’s profit costs and disbursements (presumably under interim bills) with “claw back” provision under regulation 6(2) thereof. This suggests the DLA is likely to have advanced some costs and disbursements for work done, but it will be a complicated matter to identify which item of cost/disbursement has been paid or not, and if paid, whether it will be clawed back upon taxation. In my view, it is therefore plainly suitable to adopt the “modified” approach under Golden Eagle International (Group) Ltd (as in Lau Koon Loi in paragraphs 92-93 above).
119. Discussion The level of enhanced interest awarded must be proportionate to the circumstances of the case, which circumstances include those set out by Sir Goffrey Vos C in OMV Petrom SA (see paragraph 31 above), bearing in mind that the maximum of 10%pa above judgment rate must be reserved for the worst kind of cases.[99]
120. Bearing in mind the aforesaid principles, the length of time that elapsed between the deadline for accepting the Sanctioned Offer (1 May 2019) and the Judgment (13 December 2022), the parties’ litigation/settlement conduct as discussed above, and the fact P had to go through the mediation and the trial upon D2’s/D4’s non-acceptance of the Sanctioned Offer to secure his award of damages, I adopt the current judgment rate of 8.583%pa (which is slightly higher than that at the time of Golden Eagle International (Group) Ltd ) and which also reflects an increase in the cost of money) as a starting point, and consider that the appropriate full enhanced rate of interest should be 3%pa above judgment rate, ie 3%pa + 8.583%pa = 11.583%pa. Applying the “modified” approach and the half “modified” rate of 11.583%pa ÷ 2 = 5.7915%pa, which I round up to 5.8%pa, it is appropriate to award interest on costs incurred by P after 1 May 2019 (ie the last date on which D2/D4 could have accepted the Sanctioned Offer without leave of the court) at the rate of 5.8%pa from 2 May 2019 to 14 December 2022 (ie the date of the Judgment).
XIII. CONCLUSION
121. In the circumstances, the Costs Order Nisi is varied to the effect that D2 and D4 shall jointly and severally pay P’s costs of and occasioned by the present action (which, as explained in paragraphs 48-51 above, referred to costs of the proceedings between P and D2/D4) (including all costs reserved if any) on party-and-party basis up to 1 May 2019 and on indemnity basis from 2 May 2019 with interest on P’s costs incurred from 2 May 2019 up to the date of Judgment at 5.8%pa, and P’s own costs be taxed in accordance with Legal Aid Regulations.
122. P asked for costs of and occasioned by the Summons on indemnity basis with certificate for counsel. D2/D4 readily accepted costs should follow event in relation to the Summons, but they argued that it should be on party-and-party basis. Although I see the force of P’s contention given that (a) costs incurred from 2 May 2019 onwards were awarded on indemnity basis, and (b) D2/D4 were generally unsuccessful in resisting the Summons, I note the rate of enhanced interest on costs was reduced from 5%pa above judgment rate as proposed by Ms Lee to a level much closer to the position adopted by Mr Lam. In all the circumstances, I consider that costs of and occasioned by the Summons should instead be taxed on usual party-and-party basis. I therefore grant a costs order nisi that D2 and D4 shall jointly and severally pay P’s costs of and occasioned by the Summons (including all costs reserved, if any) to be taxed on party-and-party basis if not agreed, and P’s own costs be taxed in accordance with Legal Aid Regulations.
( Marlene Ng )
Judge of the Court of First Instance
Ms Christina Lee, instructed by Or & Partners, solicitors for the plaintiff
Mr Solomon Lam, instructed by P Y Cheung & Co, solicitors for the 2nd and 4th defendants
[1] pursuant to a letter application dated 22 March 2023 by P’s solicitors and a letter response dated 29 March 2023 by D2’s/D4’s solicitors, the order dated 21 March 2023 by Master Rita So in relation to costs of the Time Summons was varied to “costs of this application be paid by [P] to [D2/D4] in any event summarily assessed at $1,040”
[2] $1,180,000 x 2% x 2,667/365
[3] (a) $1,254,398.88 x 4% x 675 days / 365 (22 October 2013 to 27 August 2015) = $92,791.15, (b) $1,254,398.88 x 4% x 1,222 days / 365 (28 August 2015 to 31 December 2018) = $167,986.35, (c) $1,254,398.88 x 4.044% x 90 days / 365 (1 January 2019 to 31 March 2019) = $12,508.25, (d) $1,254,398.88 x 4.063% x 275 days / 365 (1 April 2019 to 31 December 2019) = $38,394.49, (e) $1,254,398.88 x 4.042% x 91 days / 365 (1 January 2020 to 31 March 2020) = $12,640.97, and (f) $1,254,398.88 x 4% x 988 days / 365 (1 April 2020 to 14 December 2022) = $135,818.75
[4] see eg para 54 of the Written Judgment
[5] see Order 22 rules 4-5 of the RHC, Hong Kong Civil Procedure 2023 Vol 1 para 22/4/A at p 622 and郭生琼作為2015年8月5日法庭命令委任為死者馬黑皮的遺產代表人及另一人對黃文俊及另二人 HCPI995/2013 (unreported, 30 November 2021) paras 65-83
[6] see The Owners and/or Demise Charterers of the Ship or Vessel “MCC Jakarta” v The Owners and/or Demise Charterers of the Ship or Vessel “Xin Nan Tai 77” HCAJ48/2011, Ng J (unreported, 30 November 2017) paras 25-31
[7] see Hong Kong Civil Procedure 2023 Vol 1 paras 22/1/B, 22/1/1, 22/1/4 and 22/24/1 at pp 613-614 and 637-638 which states that “…… [these] rules are designed to provide important incentives to encourage plaintiffs to make, and defendants to accept, settlement offers at appropriate levels as early as possible. Such an incentive would be deprived of effect unless the non-acceptance of an offer, which subsequently proves to have been a sufficient offer, ordinarily will advantage the plaintiff in the manner foreseen in the rules ……”
[8] [2020] 1 HKLRD 703, 711
[9] [2011] 2 HKLRD 844, 850 (see also Zief Incorporated v Tekchandani Ajai Mohan (trading as D’Ziner Collections (Hong Kong)) & ors HCA2459/2017, Recorder Eugene Fung SC (unreported, 23 March 2021) para 32)
[10] [2011] 2 HKLRD 34, 44
[11] see Qvist Henrik at p 711
[12] see Wah Lun International Development Limited v Lau Chiu Shing HCA1429/2015, DHCJ William Wong SC (unreported, 8 July 2021) para 7
[13] see Hong Kong Civil Procedure 2023 Vol 1 para 22/24/1 at p 638
[14] see also Hong Kong Civil Procedure 2023 Vol 1 para 22/24/1 at p 639 and Wah Lun International Development Limited at para 10(5)
[15] with whom Kitchin LJ (as he then was) and Floyd LJ agreed
[16] [2017] 1 WLR 3465
[17] [2019] HKCFI 91 , [2019] HKEC 1023 (10 January 2019) at [12(1)]
[18] see Wah Lun International Development Ltd at para 10(7)
[19] see Hong Kong Civil Procedure 2023 Vol 1 para 22/24/1 at pp 638 and 641-642 (see also Key Light Holdings Ltd & anor v Shih Hua Min & anor DCCJ1167/2020, HHJ Kent Yee (unreported, 2 September 2013) paras 42-43)
[20] see para 16 of the Written Judgment
[21] [2010] 3 HKLRD 273, 284-285 (see also Kan Wan Chung v Leung Man Kon & anor DCCJ2388/2016, DDJ Connie Lee (unreported, 2 September 2019) paras 12-19)
[22] [2011] 4 HKLRD 121, 125 (followed by DDJ Lee Siu Ho in Rich Metro Ltd v Ka Ming Court Castle Peak Road (IO) [2018] 5 HKLRD 653, 663)
[23] DCCJ624/2010, HHJ Mimmie Chan (as she then was) (unreported, 27 June 2011)
[24] DCPI2370/2014, DDJ S H Lee (unreported, 27 March 2020)
[25] see Hong Kong Civil Procedure 2023 Vol 1 para 22/1/23 at p 619
[26] see para 21 of the Written Judgment
[27] see para 1 of the Written Judgment
[28] see para 15 of the Written Judgment
[29] see Hong Kong Civil Procedure 2023 Vol 1 para 62/1/5 at p 1305
[30] see Hong Kong Civil Procedure 2023 Vol 1 para 62/1/6 at p 1305
[31] see para 23 of the Written Judgment
[32] see para 15 of the Written Judgment
[33] see para 15 of the Written Judgment
[34] see para 19 of the Written Judgment
[35] see para 49 of the Written Judgment
[36] see para 49 of the Written Judgment
[37] see para 8 of the Written Judgment
[38] see para 9 of the Written Judgment
[39] see paras 9-10 of the Written Judgment
[40] see para 30 of the Written Judgment
[41] see para 156(b) and the 2nd Schedule of the Written Judgment
[42] see paras 50-51 and 53 of the Written Judgment
[43] see para 22 of the Written Judgment
[44] see para 45 of the Written Judgment
[45] see para 45 of the Written Judgment
[46] see paras 38-44 of the Written Judgment
[47] see paras 32-37 of the Written Judgment
[48] see para 30 of the Written Judgment
[49] see paras 3-5 of the Written Judgment
[50] see para 219 of the Written Judgment
[51] see para 221 of the Written Judgment
[52] see para 54 of the Written Judgment (see para 60 above)
[53] the judgment rate was 8.583%pa as from 1 April 2023
[54] or to put it in a different way, 3%pa above the usual rate of interest in commercial cases being 1%pa over the then prime rate of 5%pa (see para 78 below)
[55] see section 49 of the High Court Ordinance Cap 4, Wong Wai Chun & anor v Lewin [2000] 2 HKC 271, 276, Shih Pik Nog at p 128 and IMY (a minor) v Dr Lo Ni Boon Peter [2014] 5 HKLRD 109, 115
[56] see IMY (a minor) at p 142 and para 67 above
[57] [2014] 5 HKLRD 109, 142
[58] [2002] 1 WLR 934, 944
[59]
[60] [1990] 1 AC 398, 415
[61] [2002] 1 WLR 934
[62] [2003] PIQR P30
[63] ie the plaintiff in that case, whose sanctioned offer was not accepted but who was able to secure judgment after trial that was more advantageous than such offer
[64] [2014] 1 HKLRD 409
[65] [2015] 4 HKLRD 628
[66] [2013] 1 HKC 563
[67] [2014] 4 HKLRD 44
[68] HCA1644/2016, Mimmie Chan J (unreported, 23 November 2021) para 14
[69] HCA1950/2017, DHCJ Alexander Stock SC (unreported, 20 January 2023) paras 25-26 and 29(3)
[70] HCCT44/2020, Mimmie Chan J (unreported, 27 February 2023) para 37
[71] [2018] 5 HKLRD 653, 656 and 668-669
[72] DCPI2473/2009, DDJ A Kot (as she then was) (unreported, 6 May 2011) paras 13 and 14(b)
[73] DCPI2242/2013, DDJ Lawrence Hui (unreported, 11 July 2016) paras 31-34 and 55(e)-(f)
[74] HCPI999/2015, DHCJ Kent Yee (unreported, 11 July 2018) paras 5-11 and 14
[75] [2012] 2 HKLRD 490
[76] HCPI204/2009, Bharwaney J (unreported, 9 January 2012) paras 3-5 where the learned judge said “[save] where the receiving party is legally aided, enhanced interest should only be awarded on paid costs and disbursements for the period from the date of payment up to the date of judgment and should not be awarded beyond that date (see Shih Pik Nog …… at §13)” (para 5)
[77] HCPI547/2017, Bharwaney J (unreported, 30 October 2020) paras 16-23
[78] HCPI494/2013, DHCJ Nicolas Cooney SC (unreported, 23 June 2015) paras 4(4), 23-25 and 26(3), but allowed on appeal in CACV96/2015 (unreported, 13 October 2015) paras 9, 12, 14 and 16 on the basis that the half share of mediation fees were incurred by the defendants before 16 December 2014 but paid after that date, so it did not fall within the statutory provisions in Order 22 rule 23(4)(b) of the RHC which provides that the defendant is entitled to “interest on costs referred to in paragraph (3) …… at a rate not exceeding 10% above judgment rate” and Order 22 rule 24(3) of the RHC which provides that the court may order the plaintiff to pay “any costs incurred by the defendant after the latest date on which the payment …… could have been accepted without requiring the leave of the Court” (para 16)
[79] HCPI219/2013, B Chu J (unreported, 11 January 2016) paras 24-26 and 30
[80] HCPI305/2013 (unreported, 8 August 2016) paras 3, 4(e), 7, 12, 15 and 80, and the only debate in that case was whether the full enhanced rate of interest was payable on 100% (according to the defendant) or 40% (according to the plaintiff) of the defendnat’s incurred disbursements of $445,990 (subject to taxation) (para 15), and this court held that interest on costs was payable on 100% of the defendant’s incurred disbursements (paras 79-80)
[81] DCPI1622/2015, DDJ Gary C C Lam (unreported, 1 June 2017)
[82] HCPI48/2012, Lisa Wong J (unreported, 20 November 2017) paras 4,13-15 and 16(2)-(3)
[83] see Yeung Ho Man and para 88(b) above
[84] see Grupo Pacifica Incorporada v Worldwide Marine Product Ltd & ors HCA2640/2014, Au-Yeung J (unreported, 22 November 2018) paras 4 and 16-23
[85] according to the defendants’ supporting affirmation, “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” (para 4)
[86] HCPI69/2015, Lisa Wong J (unreported, 27 January 2021) paras 3-4, 7, 14 and 16
[87] HCPI995/2018, DHCJ Paul Lam SC (unreported, 22 February 2021) paras 8-9
[88] HCPI505/2017 (unreported, 30 September 2021) paras 17 and 26
[89] HCPI228/2018, DHCJ Herbert Au-yeung (unreported, 25 November 2022)
[90] [2003] PIQR P30
[91] HCPI445/2007, Suffiad J (unreported, 15 August 2011)
[92] DCPI636/2010, HHJ Leung (unreported, 28 September 2011)
[93] HCPI258/2012, Mimmie Chan J (unreported, 7 September 2016)
[94] HCPI554/2015, Master J Wong (unreported, 11 July 2019)
[95] HCA2494/2013, DHCJ Cooney SC (unreported, 13 December 2016)
[96] [2017] 5 HKC 230
[97] DCPI3621/2019, HHJ Andrew Li (unreported, 11 August 2021)
[98] Master Matthew Leung in Chan Chun Long Sunny v EGL Tours Company Limited DCPI3307/2019 (unreported, 19 September 2022) followed Hu Wan in adopting 2%pa above judgment rate as the enhanced rate for interest on costs (para 26) despite having cited and adopted the “modified” approach in Golden Eagle International (Group) Ltd that applied the half “modified” rate rather than the “full” rate for enhanced interest on costs incurred after expiry of the deadline for accepting the sanctioned offer/payment without leave of the court (paras 22-24)
[99] see Qvist Henrik at p 715 (see also Yeung Ho Man in para 88(b) above and Angbuhhang Netra Jang in para 89(f) above)