XCHRX YUEN KIT YEE v. GREAT RICH DEVELOPMENT LTD.

HCA17748/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.17748 OF 1998

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D E C I S I O N

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Application to vary costs order nisi

1. The defendant applied to vary the costs order nisi I had made in favour of the plaintiff. It asked that it should have the costs of the action or that there should be no order as to costs. I refused the application and made the costs order absolute. I further ordered the costs of the defendant's application to be borne by the defendant to be taxed on a common fund basis. These are my reasons.

2. The defendant had on 26 January 2000 paid into court the sum of $337,362. It, however, is relying on an offer it made on 9 September 1997 in which it provided a cheque of $337,362 to the plaintiff in settlement of the dispute on matters concerning the flat roof. It argued that the sums awarded to the plaintiff are less than the $337,362 that it had offered on 9 September 1997 and accordingly the plaintiff should not be entitled to the costs of the action.

Judgment

3. In the judgment, I had made the following awards to the plaintiff :

(a)	diminution of value of the flat	HK$	218,409.00
(b)	extra Government rates	HK$	280.00
(c)	extra rent	HK$	1,650.00
(d)	extra solicitors' fees and stamp duty  (to be agreed by parties)
(e)	future disturbance due to maintenance	HK$	80,000.00
(f)	interest at commercial rates of 9.5% per annum on diminution of value of the flat from 6/8/1996 until judgment
(g)	interest at 9.75% per annum on extra solicitors' fees and stamp duty from 25/7/1997 until judgment

4. The quantified sum of the judgment is $300,339. The parties are still unable to agree on the amount of the extra solicitor's fees and stamp duty. According to the plaintiff, this sum should be $23,449. According to the defendant, this sum should be $22,391. However, the difference between them is minor.

5. The main dispute is on the calculation of interest. O.22, r.8 provides that :

"For the purpose of this rule, the Plaintiff's cause of action in respect of a debt or damages shall be construed as a cause of action in respect, also, of such interest as might be included in the judgment, where under section 48 of the Ordinance or otherwise, if judgment were given at the date of the payment into court."

See also the discussion on payment into court and interest in the case of Vianini Lavori S.P.A. v. Attorney General [1993] 1 HKAL 187. According to the plaintiff, interest on $218,409 from 6 August 1996 to 26 January 2000 (i.e. date of payment in) amounted to $72,137.82. The interest on extra solicitor's fees and stamp duty from 25 July 1997 to 26 January 2000 amounted to $5,738. The total amount of damages, inclusive of interests up to date of payment in, is $401,664. This exceeds the sum paid into court.

6. According to the defendant, interest should start from 25 July 1997 which is the date of the execution of the assignment. Interests from 25 July 1997 to 9 September 1997 or the latest 30 September 1997 only amounted to $2,958.87 and $4,309.66 respectively. The total award based on the defendant's calculation is either $325,688.87 or $327,039.66 which is less than the offer it had made.

The issue

7. The issue to be considered is which of the two events i.e. the offer of 9 September 1997 and payment into court of 26 January 2000 should be taken into account in considering costs because although the two sums are identical, the two dates are different and this has an impact on the length of the interest to be calculated for the purpose of determining the final award.

The principles

8. The award of costs is, of course, an exercise of discretion by the court, although generally speaking, a plaintiff who is successful in his claim is entitled to the costs of the action.

9. Order 62, r.5 of the Rules of the High Court made specific provisions on the matters that the court shall take into account in the exercise of his discretion on costs. These include :

(1) offer of contribution referred to in O.16, r.10;

(2) payment of money into court and the amount of such payment;

(3) any written offer in respect of liability under O.33, r.4A(2); and

(4) any written offer made under O.22, r.14, namely a Calderbank offer, provided that the court shall not take such an offer into account if, at the time it is made, the party making it could have protected his position as to costs by payment into court under O.22.

10. Apart from these specific provisions, there are other provisions in the Rules which deal with costs, for example, tender of the plaintiff's claim under O.18, r.16.

11. Further, according to Oriental Press Group Limited and another v. Apple Daily Limited (No.2) [1997] 3 HKC 615, the Court of Appeal held that while an offer to settle before action was something that the judge was entitled to take into account in the exercise of his discretion as to costs, after the action had commenced, the defendant in order to protect himself on costs, ought to admit liability and renew its offer. Godfrey JA (as he then was) was of the view that the effect of the offer was spent when the plaintiff rejected it and issued proceedings and to use this limited offer to support an order that the plaintiff who recovered less than the offer bear the defendant's costs of the action is to put too much weight on it. That result may sometime be achieved by a payment into court, or by an offer made after action brought under O.22, r.14 of the Rules of the High Court or in very rare circumstances by other ways. This approach was based on the earlier decision of E.W. Savory Limited v. World of Golf Limited [1914] 2 Ch. 566.

The offer was rejected and not renewed

12. In this case, the plaintiff had not accepted the offer made to her in September 1997. The defendant's solicitor had, by a letter dated 18 June 1998, expressly informed the plaintiff's solicitors that this offer was "merely suggested as a gesture of goodwill and on an entirely without prejudice basis. As your client has repeatedly declined to accept such, our client is therefore no longer obliged to maintain its position any longer." This was the position before the plaintiff commenced the proceedings on 20 October 1998. The defendant had not after the commencement of proceedings stated that it would open the offer again. It only took the step of protecting its position on costs by making the payment into court of the same sum on 26 January 2000.

13. In my view, the defendant's act of payment into court is the only relevant matter I should consider in the exercise of my discretion. Mr Chan, counsel for the defendant, argued that the offer made in September 1997 was "rejuvenated" when the defendant made the payment into court on 26 January 2000. Certainly, payment into court had been made in January 2000, but by no means of imagination can one say that the offer of September 1997, which had been expressly stated by the defendant to be no longer valid, would thereby become alive again and should be taken into account in the exercise of my discretion. As there was no offer in existence at the time of the action, the defendant cannot now say that the plaintiff should have accepted that offer and not proceeded with the action.

Interest

14. Mr Chan submitted that I should not award interest from 6 August 1996 until judgment on the amount on diminution of value of the flat. 6 August 1996 was the date when the plaintiff made the first payment of the purchase price to the defendant. She made the full payment on 30 August 1996. Mr Chan referred to McGregor on Damages at para.658 in which the author stated that interest cannot run for any period of time which is anterior to the accrual of the plaintiff's cause of action. He submitted that the plaintiff's cause of action accrued on 25 July 1997 which is the date of the execution of the assignment.

15. The defendant had not lodged any appeal against my judgment. Even if the cause of action is treated to have been accrued from 25 July 1997 and interest should only be awarded from that date onwards, the amount of interest to be excluded for the period 6 August 1996 to 24 July 1997 is $20,080. If this sum is excluded and the lower figure of $22,391 for solicitor's fee and stamp duty is used together with interest at $4,880.62 based on $22,391 instead of $23,449, the total award to the plaintiff is $379,669, a figure which is still higher than the $337,362 paid into court by the defendant.

16. Mr Chan submitted that the defendant had chosen not to appeal against the judgment on interest and the court in the exercise of its discretion should take this into account. In my view, this is an irrelevant consideration.

Application is without merits

17. As the plaintiff received an award which exceeds the amount of payment into court, it is entitled to the costs of the action. The only basis in which the defendant can vary the costs order is by relying on the offer it made on 9 September 1997. In the light of the letter of 17 June 1998, the reliance of such an offer is totally devoid of merits. The costs of the application should accordingly be taxed on common fund basis.