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FUNG LAI HAN (馮麗嫺) |
Plaintiff |
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and
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CHAN LAI ON (陳麗安) |
Defendant |
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| Before: |
Deputy District Judge Jeffrey Chau in Chambers (Paper disposal) |
| Date of Written Submissions by the Defendant: |
8 February 2024 |
| Date of Written Submissions by the Plaintiff: |
22 February 2024 |
| Date of Written Reply Submissions: |
28 February 2024 |
| Date of Judgment on Costs: |
6 May 2024 |
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JUDGMENT ON COSTS
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1. By my judgment dated 15 December 2023, I allowed the plaintiff’s claim to the extent of $312,877 to be paid by the defendant. However, as the defendant succeeded in all the issues, I made an order nisi that the defendant shall have its costs of the action to be taxed if not agreed, with certificate for counsel.
2. By summons dated 28 December 2023 (“Summons”), the defendant applied “to vary the cost order nisi to the following extent:-
“1. Costs of this action be to the Defendant, to be taxed if not agreed, with certificate for counsel;
2. The Plaintiff shall pay the Defendant's costs on a party-to-party basis for costs incurred on or before 24th March 2021 and on an indemnity basis for costs incurred thereafter;
3. The costs payable on indemnity basis referred to in the preceding paragraph shall carry an interest rate of 10% above judgment rate until the date of payment
Or to such other extent more favourable to the Defendant as the Court may think fit to make”
3. The variation is sought on the strength of a sanctioned payment of $360,300.00 made by the defendant on 24 February 2021, which the plaintiff did not accept. The defendant, therefore, seeks indemnity costs with enhanced interest pursuant to the Rules of the District Court (“RDC”) Order 22 rules 23(3)-(5).
4. It is directed that the Summons will be dealt with on paper.
Background
5. It is not disputed that on 24 February 2021, the defendant made a payment of $360,300.00 into Court (“Payment into Court”), filing and serving a notice of sanctioned payment on the same day stating that the $360,300.00 had been paid in settlement of the whole of the plaintiff’s claim, inclusive of interest (“Notice of Sanctioned Payment”). This was 2 weeks after the filing of the Defence.
6. The plaintiff does not allege that the Notice of Sanctioned Payment was defective in any way.
7. Thus, in accordance with RDC Order 22 rule 15(1), the last day the plaintiff could accept the sanctioned payment without leave was 24 March 2021. The plaintiff did not accept the sanctioned payment.
8. In a surprising turn of events, on 8 July 2021 the defendant’s previous solicitors, Messrs Cham & Co, sent a letter to the plaintiff’s solicitors, stating:-
“We refer to the payment into Court in the sum of $360,300 that our client made on 24th February 2021.
Subject to the duty on the part of your client to return any overpayment to our client, your client is welcomed to apply to the Court for release of the said payment to her. It would not affect her remaining claim(s) against our client and we are surprised that it has yet been done. In fact, such application should have been taken out by your client long ago”
9. What was set out in this letter is undoubtedly inconsistent with the nature of a sanctioned payment.
10. Two years then elapsed. On 12 September 2023, in response to the defendant’s inclusion of the Payment into Court and the 8 July 2021 letter in her witness statement, the plaintiff’s solicitors wrote to the defendant’s current solicitors, Messrs Eric Yu & Co objecting to the defendant doing so:-
“The Notice of Sanctioned Payment states that the Sum paid into Court was intended to be in settlement of "the whole of your claim (inclusive of interest)" (emphasis added). It is therefore clear that the Sum paid into Court is and was the Defendant’s sanctioned payment under O.22 r.8 of the Rules of the District Court, Cap. 336H (“RDC)
You are hereby reminded that under O.22 r.25(2) of RDC...”
11. On 13 September 2023, Messrs Eric Yu & Co wrote back stating that the Payment into Court was not intended to be a sanctioned payment:-
“We apologize for the confusion caused by the Notice of Sanctioned Payment issued on 24th February 2021. The payment into Court was never intended to be a sanctioned payment but somehow the staff of our predecessor, as we believe, has mistakenly issued the Notice. It was all along our client’s case, as stated in paragraph 6(d) of her Defence filed on 10th February 2021, that she admitted liability to the extent of $360,300 at most and for that she would make a corresponding payment into Court. Any confusion in this regard should have been cleared in any event when our predecessor wrote to you on 8th July 2021. There, your client was invited to ask for payment out of the sum, subject to her duty to return any overpayment, and it was expressly stated that “It would not affect her remaining claim(s) against our client...”. While the sum might have been mistakenly presented as sanctioned payment at the outset, it has been turned into an open offer to repay after the said letter. The question was again raised by our client in her witness statement filed on 22nd November 2021”
12. On 29 September 2023, the plaintiff took out a summons to apply for the expungement of the Notice of Sanctioned Payment and the 8 July 2021 letter from the Trial Bundles, and redaction of a reference to the Payment into Court from the defendant’s witness statement.
13. In the parties’ respective affirmations in the expungement application, the defendant took the position that the Payment into Court was never intended to be a sanctioned payment, while the plaintiff took the position that it was clearly a sanctioned payment.
14. On 31 October 2023, the expungement application was heard by DDJ Damian Wong, who held that the Payment into Court was a sanctioned payment independent of the defendant’s intentions, and allowed the plaintiff’s application.
Analysis
15. RDC Order 22 is a self-contained code that is wholly procedural in nature. Thus, as regards the validity of a sanctioned payment, the sole question is whether the prescribed formalities in RDC Order 22 rule 8(2) have been complied with, and the parties’ intentions are irrelevant: see Asahi Iwasawa & Associates Management Consultants Ltd v Shibakawa (Hong Kong) Ltd (unrep HCA 969/2014, 12 September 2023) at §§17-20, 29-30.
16. It is true that the Notice of Sanctioned Payment itself cannot contain any terms contrary to the nature of a sanctioned payment: see Wong Yim Man Anthea v Wong Ho Ming Felix [2016] 3 HKLRD 249 at §§18-53, in particular, §18, where an inclusion of a term as to cost in a sanctioned offer contrary to the specified cost consequences in Order 22 invalidated the sanctioned offer. However, the defendant’s subjective intention or ex post facto declarations of intention would not invalidate the sanctioned payment in the present case. This is also contrary to the approach in Asahi Iwasawa & Associates Management Consultants Ltd, §30.
17. Thus, in the present case, the defendant made a valid sanctioned payment on 24 February 2021, which was never subsequently withdrawn. This was affirmed by the decision of DDJ Damian Wong.
18. Instead, the plaintiff relies on the defendant’s subsequent change of position as to the nature of the payment from 8 July 2021 up to the expungement application in arguing that, taking into account the criteria set out in RDC Order 22 rule 23(6)(a) and (d), it would be unjust to apply the cost consequences in RDC Order 22 rule 23.
19. RDC Order 22 rule 23(6) lists four non-exhaustive criteria to be considered in determining whether it would be unjust to apply the said cost consequences. The Court of Appeal in Or Siu Lung v Fu Hong Home for the Elderly Company Limited t/a Fu Hong Home for the Elderly [2018] 1 HKLRD 872 gave guidance as to the applicable principles at §§17-26. Injustice should be the benchmark. Under such rubric, the court can assess “what the fairness of the situation demands”, which is a highly fact-sensitive assessment, and the court should not attempt to prescribe or restrict the circumstances in which the court may reach the conclusion that it is unjust to make the normal order. The ultimate question is whether it is unjust to impose the normal costs consequences.
20. I take into account the overall objective of Order 22 in avoiding the parties incurring unnecessary and expensive legal costs. To that end, the question is who has been responsible for the fact that costs have been incurred which should not have been: Factortame v Secretary of State [2002] 1 WLR 2438 at §27.
21. I keep in mind that ordinarily, a plaintiff who fails to beat a sanctioned payment would expect to have to pay costs on an indemnity basis with enhanced interest, and the burden of showing why it would be unjust lies on the plaintiff: CEP Ltd v Wuxi Jiacheng Solar Energy Technology Co Ltd [2014] 4 HKLRD 44 at §8.
22. The plaintiff’s submissions are twofold.
23. Firstly, the plaintiff argues that a sanctioned offer (and by extension, a sanctioned payment) needs to be couched in clear terms, citing Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273 at §7. In the present case, it was submitted that the position the defendant subsequently took meant that the Payment into Court was not couched on clear terms.
24. I am unable to accept this contention.
25. In Golden Eagle, Lam J (as Lam PJ then was) was commenting on the clarity of the terms of the sanctioned offer itself; it does not support the plaintiff’s contention that the defendant’s subsequent conduct has somehow affected the clarity of the sanctioned payment. As stated in Asahi Iwasawa, RDC Order 22 is purely procedural and the validity of a sanctioned offer or payment depends on adherence to the prescribed requirements in Order 22 rule 5 and Order 22 rule 8(2) respectively. The parties’ contractual intentions are irrelevant (§30).
26. In the present case, there is no doubt that the Notice of Sanctioned Payment on its own was couched in clear terms.
27. Secondly, the plaintiff argues that the defendant's overall conduct in insisting that the Payment into Court was not a sanctioned payment until a very late stage meant that she should not be afforded the protection of the sanctioned payment regime.
28. Notably, the plaintiff never sought to clarify the nature of the Payment into Court for 2 years after the defendant’s 8 July 2021 letter. In the 12 September 2023 letter, the plaintiff did not express any doubt about the nature of the sanctioned payment, but asserted in clear terms that it is “clear that [the Payment into Court] is and was the Defendant’s sanctioned payment under O.22 r.8…”.
29. As stated above, the 28-day period where the plaintiff could have accepted the defendant’s sanctioned payment without leave ran from 24 February 2021 to 24 March 2021. Thus, the first time the defendant introduced uncertainty was the 8 July 2021 letter, more than 3 months afterwards. In other words, during the 28 days, the plaintiff had full opportunity to evaluate the terms of the sanctioned payment without being misled in any way, and another 3 months to seek the leave of the Court to accept the payment thereafter. In any event, the plaintiff could have accepted the sanctioned payment (with leave) regardless of the stance taken by the defendant, since the sanctioned payment was not withdrawn.
30. Further, according to the defendant’s unchallenged version of events, during a Case Settlement Conference conducted by Master Amy Lam on 10 February 2022, the defendant made a further without prejudice offer of $400,000 on top of the Payment into Court, adding to a total of $760,300. The plaintiff also rejected this offer.
31. Taking into account all the circumstances, including the above, it is plain that the plaintiff was not deprived of any opportunity to properly evaluate the sanctioned payment and make an informed decision (cf RDC Order 22 rule 23(6)(d)). She did not accept the sanctioned payment for her own reasons, and should now be responsible for the additional costs incurred as a result.
32. In addition, the plaintiff has not alleged that the terms of the sanctioned payment were unreasonable. The sanctioned payment of $360,300 was $47,423 higher than the judgment sum of $312,877, which is not an insignificant difference, particularly when viewed against the overall claims made by the plaintiff: see Wong Tang Keung v Lee Wai Engineering [2014] 1 HKLRD 409 at §12.
33. For the above reasons, the plaintiff failed to discharge her burden of showing that the cost consequences in RDC Order 22 rule 23(3)-(4) are unjust. I therefore apply them in the present case. As a result, I also reject the plaintiff’s alternative proposal of not granting indemnity costs for the period after 8 July 2021.
The appropriate interest rate
34. The defendant seeks an enhanced interest of 10% above judgment rate. I accept the plaintiff’s submissions that 10% above judgment rate is the maximum, reserved for the worst kind of cases: Qvist Henrik v Clatronic Far East Ltd [2020] 1 HKLRD 703 at §29.
35. The defendant submits that in considering the rate of the enhanced interest, this Court should take into account the following facts:-
(1) The plaintiff knew full well that some of the claims she made were false;
(2) Apart from the sanctioned payment, the plaintiff has also ignored the much higher without prejudice offer ($760,300) made by the defendant at the Case Settlement Conference, as stated above.
36. Having considered all the circumstances of the case and the authorities (including those since Golden Eagle and Shih Pik Nog v G2000 (Apparel) Ltd [2011] 4 HKLRD 121, I am of the view that it is just to award 1% above the judgment rate.
37. In principle, the plaintiff should pay the defendant interest on the costs incurred after 24 March 2021, 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. I adopt Lam J’s (simplified) approach at §§18-19 of Golden Eagle to halve the appropriate interest rate, and apply it for all costs incurred after 24 March 2021.
The period of enhanced interest
38. The defendant’s Summons asks for enhanced interest to run until the date of payment.
39. In Shih Pik Nog, the issue of whether enhanced interest on costs should be awarded only up to the date of judgment or also thereafter was considered. The Court conducted a reasoned analysis and held at §14 that it should only be up to the date of judgment. The practice in most cases thereafter has been to award enhanced interest on costs up to judgment, and at judgment rate thereafter.
40. I will therefore set the rate of enhanced interest to be half of 1% above the applicable judgment rates from 25 March 2021 to 15 December 2023.
Disposal
41. I therefore order as follows:-
(1) Costs of this action be to the defendant, to be taxed if not agreed, with certificate for counsel;
(2) The plaintiff shall pay the defendant’s costs on a party and party basis for costs incurred on or before 24 March 2021, and on an indemnity basis for costs incurred thereafter;
(3) Interest on costs awarded on an indemnity basis shall accrue at half of 1% above the applicable judgment rates from 25 March 2021 until 15 December 2023 for all the cost items, and thereafter at the applicable judgment rate(s).
42. As to the cost of the present application, taking into account the conduct and the overall success of the parties, I order that the plaintiff should pay 50% of the defendant’s costs of this application, with certificate for counsel, to be summarily assessed.
43. I direct the defendant to lodge and serve its statement of costs for summary assessment within 14 days from the date of this decision, and the plaintiff to lodge and serve a list of objections (if any) within 14 days thereafter.
44. The summary assessment will be conducted on paper.
45. I thank counsel for their assistance.
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( Jeffrey Chau ) |
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Deputy District Judge |
Mr Samuelson TL Choi, instructed by Francis Kong & Co, for the plaintiff
Mr Bache Sit, instructed by Eric Yu & Co, for the defendant