LAU KOON LOI v. WONG WAI SING AND ANOTHER

HCPI 445/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES NO. 445 OF 2007

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BETWEEN

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RULING ON COSTS

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1.  This is an application by the plaintiff, by Amended Summons dated 12 July 2011, to vary the costs order nisi given in the written Judgment after trial in this matter which was handed down on 28 June 2011.

2.  The basis of this application by the plaintiff to vary the costs order nisi was that the plaintiff, in the judgment given after trial, had done better than its sanctioned offer made to the defendants on 5 January 2010 but which was not accepted by the defendants.

Background

3.  This is a personal injuries claim brought by the plaintiff against the defendants.

4.  The trial of this matter, being an assessment of damages, took place on 26 to 30 July 2010, 3 to 5 and 27 January 2011.

5.  In the written judgment handed down on 28 June 2011, I gave judgment in favour of the plaintiff for the amount of $3,252,648 as assessed in that judgment.

6.  Needless to say but unknown to me at the time of the assessment, the plaintiff had made a sanctioned offer under Order 22 of the RSC to the defendants by letter dated 5 January 2010 to the effect that the plaintiff would accept $1.8 million inclusive of interest and inclusive of the ECC payment of $519,076 already received by the plaintiff plus costs to be taxed if not agreed. Paragraph 10 of the letter making such sanctioned offer further stated that in calculating the balance, regard would be had to the $500,000 interim payment paid to the plaintiff.

7.  Pursuant to the provisions of the RSC, the last day for the defendants to have accepted this sanctioned offer of the plaintiff without leave of the court would have been 3 February 2010.  However, this sanctioned offer was not accepted by the defendants and had not been withdrawn by the plaintiff.

The application to vary the costs order nisi

8.  After having assessed damages to the plaintiff in the net amount of $3,252,648 in the written judgment, I made a costs order nisi that the defendants do pay the plaintiff’s costs of the assessment and the assessment hearing to be taxed if not agreed and that the plaintiff’s own costs to be taxed in accordance with Legal Aid Regulations.

9.  By its Amended Summons dated 12 July 2011, the plaintiff seeks to vary that costs order nisi in the following manner:

(a)  an order that the defendants do pay the plaintiff’s costs on an indemnity basis from 4 February 2010 at the latest;

(b)  the said costs to bear interest thereon at 10% above judgment rate;

(c)  the damages assessed in favour of the plaintiff, allowing for the interim payment of $500,000 made on 31 October 2008, do bear interest thereon at 10% above judgment rate;

(d)  the costs of and incidental to the Summons (to vary costs) be paid by the defendants and to be taxed on an indemnity basis if not agreed;

(e)  there be Legal Aid taxation of the plaintiff’s own costs.

10.  Apart from the matters stated above, it was also brought to my attention by the defendants that there had been an interim payment of $500,000 made to the plaintiff on 31 October 2008 pursuant to the order of Master Kwan and that the interests awarded at the assessment should be varied to take this interim payment into account.

11.  It was also contended by the defendants that consideration should also have been given to the ECC compensation amount when calculating interests.

Costs on an indemnity basis from 4 February 2010

12.  This was made pursuant to Order 22 rule 24(3)(a) of the RSC and has not been disputed by the defendants.

13.  It follows therefore that an order for indemnity costs should be made in respect of all costs incurred by the plaintiff from 4 February 2010 onwards.

Interest on costs

14.  This was made pursuant to Order 22 rule 24(3)(b) of the RSC.

15.  The plaintiff asks for the rate of interest to be awarded at 10% above judgment rate (which currently stands at 8%).

16.  10% above judgment rate is the maximum provided by the rules.

17.  However, the power given to award interests on costs is not meant to be penal in nature, but to redress:

“… 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 had 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 on an indemnity basis. He 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 costs of money (or the loss of the use of the money) which he has had to bear before the trial in relation to payments which he has made on account of costs.”

(McPhilemy v Times Newspaper (No. 2) [2001] 4 All ER 861 at 873 paragraph 23.)

18.  On the basis therefore that such interest on costs is to redress the perceived unfairness arising from the loss of use of the money, I am of the view that a rate of interests of 2% above judgment rate (which is equivalent to 10%) will fairly and sufficiently compensate the plaintiff in that respect rather than the 10% above judgment rate as sought by the plaintiff.

19.  In this respect, I note that in a similar context, Chung J made an award at the rate of 3% above judgment rate in the case of Tsoi Hak Kong Herbert, the Administrator pendent lite in respect of the estate of ChuYee Junk aka Yee Junk Chu, deceased v Kok Wai Chun and ors (HCA 4 of 2006) and that Deputy District Judge Alfred HH Chan made an award at the rate of 2% above judgment rate in the case of Amoi Electronics Company Ltd v Kin Cheung Transportation (Hong Kong) Company Ltd (DCCJ 3993 of 2008) whilst Lam J in the case of Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] HKLRD 273 adopted a rate of 1% above judgment rate.

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:

“I propose to adopt a similar but modified approach here. There is no evidence of actual payment of costs by the plaintiff. In principle the defendant should pay the plaintiff interest on the costs incurred after 1 February 2010 running from the date when the works were done respectively. However, it would be a complicated process if each item of work were to carry interest from a different date. To simplify the process, I shall borrow a well-established approach in working out interest for special damages in personal injuries litigation. I will order interest at half of the rate I would otherwise order on all the costs incurred after 1 February 2010 with interest starting to run from 1 February 2010 for all the items. I consider this approach to be appropriate bearing in mind that we are not talking about a substantial period.”

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) 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.

Enhanced interest for damages assessed

23.  This is provided for by Order 22 rule 24(2) of the RSC.

24.  Under that rule, the court may provide for enhanced interests at a rate not exceeding 10% above judgment rate on the whole or part of the damages awarded for some or all of the period, in this case, after 3 February 2010.

25.   Once again, the purpose of the power to award enhanced interests on awards is not meant to be penal but to:

“… redress the element of perceived unfairness, otherwise inherent in the legal process, which arises from the fact that damages, costs (even costs on an indemnity basis) and statutory interests will not compensate the successful claimant for the inconvenience, anxiety and distress of having to resort to and pursue proceedings which he has sought to avoid by an offer to settle on terms which (as events turned out) were less advantageous to him than the judgment which he achieved”

(see McPhilemy (ibid) at page 872 paragraph 21of the judgment.)

26.  Given therefore that the award of enhanced interests on damages was also meant to be compensatory, the rate of interests should be no different from the rate adopted above for costs.

27.  Accordingly, I take the same view as above, that the rate of 2% above judgment rate should adequately and sufficiently compensate the plaintiff in this respect.

28.  There will therefore be enhanced interests at 2% above judgment rate in respect of the awards for PSLA, pre-trial loss of earnings and other special damages as assessed for the period from 4 February 2010 until judgment and thereafter at judgment rate.

Variation of interest to take account of interim payment

29.  Interim payment of $500,000 was, pursuant to the order of the Master, paid to the plaintiff by the defendants on 31 October 2008.

30.  For good reasons, payment of that interim payment was not revealed to the court during the assessment hearing.

31.  As a result, the interest calculated by the court for the purpose of the assessment did not take into account the interim payment paid to the plaintiff.

32.  At this hearing, Miss Lau, appearing for the defendants, for the purpose of calculating interests, worked out the pro-rata apportionment of the interim payment to the 5 heads of damages assessed.  On that basis, those heads of damages which would have attracted interests, namely, PSLA, pre-trial loss of earnings and other special damages, net of the interim payment (on pro-rata basis) as from 31 October 2008 is worked out as:

  PSLA                                                  $339,300

  Pre-trial loss of earnings                  $1,279,778

  Other special damages                          $46,747

33.  In so far as interests on PSLA is concerned, it is only affected by the interim payment.

34.  The interests on PSLA ought properly to have been calculated as 2% on the full PSLA assessed (i.e. $400,000) from the date of Writ until 31 October 2008 and thereafter at the reduced amount of PSLA (net of interim payment pro-rata) up until 4 February 2010 after which date the rate of interests to be at the enhanced rate as ordered above.

35.  On that basis stated above, I make out the interests on PSLA (including the enhanced interests) up to the judgment date to be $67,317.80.

36.  As for the interests on pre-trial loss of earnings and special damages, it is not only affected by the interim payment, but also by the ECC compensation which is dealt with below. 

Further variation to interests taking account of the ECC compensation

37.  It is common ground that the ECC compensation received by the plaintiff was made up of:

(a)  regular sick leave payment totalling $416,077 which were paid to the plaintiff over the sick leave period between 15 July 2004 and 31 October 2006; and

(b)  the amount of $103,000 payment into court by the defendants in the ECC claim brought by the plaintiff which was accepted by the plaintiff  on 2 October 2007 in full settlement of the ECC claim.

38.  On the basis of the above, it was submitted by the defendants that the calculation of interests should also have taken into account the above payments which comprised the ECC compensation to the plaintiff in this case.

39.  For the purpose of calculating interests, the acceptance by the plaintiff of the amount of $103,000 paid into court by the defendants in the related ECC claim pose no great problem.

40.  However, in respect of the $416,077 which were the regular sick leave payment spanning over the sick leave period between 15 July 2004 and 31 October 2006, I propose to approach that in the following manner.

41.  The mid point of that sick leave period to the plaintiff is 7 September 2005.

42.  For the purpose of calculating interests, I propose to take that mid point as being the time when the entire amount of $416.077 was paid to the plaintiff.

Re-calculation of interests for pre-trial loss of earnings and special damages

43.  Based on the matters stated above, and taking into account both the interim payment as well as the ECC payments made to the plaintiff, and also the enhanced rate of interests for damages, the proper interests to be awarded for pre-trial loss of earnings and special damages are calculated as follows:

(a)  at the rate of 4% on the full amount of pre-trial loss of earnings and special damages assessed (totally $1,563,925) from 15 July 2004 to 7 September 2005 giving $71,680;

(b)  at the rate of 4% on $1,147,848 (i.e. $1,563,925 reduced by $416,077) from 8 September 2005 to 2 October 2007 giving $94,697;

(c)  at the rate of 4% on $1,044,848 (i.e. $1,147,848 reduced by $103,000) from 3 October 2007 to 31 October 2008 giving $41,445;

(d)  at the rate of 4% on $807,448 (being the total of pre-trial loss of earnings and special damages net of interim payment pro-rata reduced by the amount of ECC payment) from 31 October 2008 to 3 February 2010 giving $40,372; and

(e)  at the enhanced rate of interests (i.e. 10%) on $807,448 from 4 February 2010 until judgment giving $113,043.

The total of the above five sub-heads of interests on pre-trial loss of earnings and special damages comes to $361,237.00

Conclusion

44.  Based on the above, there will be an order that costs order nisi will be varied as follows:

(a)  the defendants do pay the plaintiff’s costs of the assessment and the assessment hearing to be taxed on party and party basis in respect of the costs incurred prior to 4 February 2010 and on an indemnity basis for all costs incurred on or after 4 February 2010 if not agreed;

(b)  there be interests on the indemnity costs at 5% p.a. for all costs incurred after 4 February 2010 and that such interests shall start to run from 4 February for all items until judgment and thereafter at judgment rate.

45.  There will be a further order that the amount of the interests on PSLA and on pre-trial loss of earnings and special damages stated in paragraph 134 of the written Assessment handed down on 28 June 2011 be substituted and replaced by the amounts of $67,317.80 and $361,273.00 respectively for PSLA and for pre-trial loss of earnings and special damages.

Costs of this hearing for variation

46.  There can be no question but that this hearing for variation was necessary since both the interim payment and the sanctioned offer of the plaintiff could not have been made known to the court before the assessment was complete.

47.  Accordingly, there will be a costs order nisi that the costs of and incidental to this application and hearing for variation of the costs order nisi in the Assessment be also awarded to the plaintiff on an indemnity basis to be taxed if not agreed.

48.  The plaintiff’s own costs to be taxed in accordance with Legal Aid Regulations.