LAU CHUNG v. HUI KENG YEE AND ANOTHER

HCA 561/2019

[2025] HKCFI 2229

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 561 OF 2019

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DECISION

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A.  INTRODUCTION

1.  In this action, the plaintiff claims against the defendants for, among other things, declarations in relation to a total of 833 shares in the 2^nd defendant, and the 1^st defendant counterclaims against the plaintiff for a declaration that she is entitled to reside in the Kennedy Town Property[1] rent-free for the remainder of her life, or alternatively, for an order for payment that represents the value of the 1^st defendant’s free accommodation in the Kennedy Town Property for life.

2.  As the plaintiff failed to appear at the Pre-Trial Review which took place on 7 August 2024, his claim herein had been ordered to be provisionally struck out pursuant to Order 25 rule 1C of the RHC. 

3.  The trial of the 1^st defendant’s counterclaim then took place on 28 – 29 October 2024 and 3 January 2025.

4.  By a Judgment handed down on 21 January 2025 (“the Judgment”), this Court granted a declaration that the 1^st defendant is entitled to reside in the Kennedy Town Property rent-free for the remainder of her life.  This Court also made an order for possession against the plaintiff in favour of the 1^st defendant.  By virtue of the Judgment, the plaintiff’s application to restore his claim was also dismissed.

5.  The following costs order nisi had been made in the Judgment:

(1)  The plaintiff shall pay the defendants’ costs of the plaintiff’s claim (including the costs of the plaintiff’s application to restore his claim), to be taxed if not agreed (“the Main Claim Cost Order Nisi”);

(2)  The plaintiff shall pay the 1^st defendant’s costs of the counterclaim, including all costs reserved, to be taxed if not agreed (“the Counterclaim Cost Order Nisi”).

6.  On 4 February 2025, the 1^st defendant took out 2 summonses, and sought to vary the Main Claim Cost Order Nisi (“the 1^st Summons”)  and the Counterclaim Cost Order Nisi (“the 2^nd Summons”)  respectively (collectively, “the Summonses”).

7.  This Decision deals with the Summonses.

B.  THE APPLICATIONS – AN OVERVIEW

B1.  The 1^st Summons

8.  This summons relates to the costs of the plaintiff’s claim.

9.  By a letter dated 1 February 2024, the 1^st defendant made a sanctioned offer to the plaintiff, under which the 1^st defendant proposed to transfer her interest in 60 shares in the 2^nd defendant to the plaintiff and to pay him a sum of $430,484.35[2] (collectively, “the Main Claim Sanctioned Offer”).

10.  The plaintiff did not accept the Main Claim Sanctioned Offer at all.

11.  As the plaintiff’s claim has been struck out, it is asserted by the 1^st defendant that the plaintiff has failed to obtain a judgment that is more advantageous than the Main Claim Sanctioned Offer.  It is therefore argued that the plaintiff should bear the costs consequences pursuant to Order 22 rule 23 of the RHC (“Rule 23”)  which provides that:

“(1)  This rule applies where a plaintiff –

(a)  fails to obtain a judgment better than the sanctioned payment; or

(b)  fails to obtain a judgment that is more advantageous than a defendant’s sanctioned offer.

(2)  The Court may by order disallow all or part of any interest otherwise payable under section 48 of the Ordinance on the whole or part of any sum of money awarded to the plaintiff for some or all of the period after the latest date on which the payment or offer could have been accepted without requiring the leave of the Court.

(3)  The Court may order the plaintiff to pay any costs incurred by the defendant after the latest date on which the payment or offer could have been accepted without requiring the leave of the Court.

(4)  The Court may also order that the defendant is entitled to –

(a)  his costs on the indemnity basis after the latest date on which the plaintiff could have accepted the payment or offer without requiring the leave of the Court; and

(b)  interest on the costs referred to in paragraph (3)  or sub-paragraph (a)  at a rate not exceeding 10% above judgment rate.

(5)  Where this rule applies, the Court shall make the orders referred to in paragraphs (2), (3)  and (4)  unless it considers it unjust to do so.

(6)  In considering whether it would be unjust to make the orders referred to in paragraphs (2), (3)  and (4), the Court shall take into account all the circumstances of the case including –

(a)  the terms of any sanctioned payment or sanctioned offer;

(b)  the stage in the proceedings at which any sanctioned payment or sanctioned offer was made;

(c)  the information available to the parties at the time when the sanctioned payment or sanctioned offer was made; and

(d)  the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the payment or offer to be made or evaluated.

(7)  The power of the Court under this rule is in addition to any other power it may have to award or disallow interest.”

12.  The 1^st defendant asked that the Main Claim Cost Order Nisi be varied to the following extent:

(1)  The plaintiff shall pay the 1^st defendant’s costs of the plaintiff’s claim, including all costs reserved, incurred up to and inclusive of 29 February 2024, to be taxed on party-and-party basis, if not agreed.

(2)  The plaintiff shall pay the 1^st defendant’s costs of the plaintiff’s claim, including all costs reserved, incurred from and inclusive of 1 March 2024 onwards, to be taxed on indemnity basis (alternatively, on common fund basis), if not agreed.

(3)  The plaintiff shall pay interest on the 1^st defendant’s costs of the plaintiff’s claim provided for under sub-paragraph (2)  above:

(a)  from the actual dates on which payments of such costs were made by the 1^st defendant up to full payment, at the rate of 5% above the judgment rate;

(b)  alternatively, from the actual dates on which payments of such costs were made by the 1^st defendant up to and including the date of 21 January 2025 (i.e. the date of the Judgment), at the rate of 5% above the judgment rate, and thereafter at judgment rate up to full payment.

(4)  Alternative to sub-paragraph (3)  above, the plaintiff shall pay interest on the 1^st defendant’s costs of the plaintiff’s claim provided for under sub-paragraph (2)  above:

(a)  from 1 March 2024 up to full payment, at half of the interest rate of 5% above the judgment rate;

(b)  alternatively, from 1 March 2024 up to and including the date of 21 January 2025, at half of the interest rate of 5% above the judgment rate, and thereafter at judgment rate up to full payment.

B2.  The 2^nd Summons

13.  The 2^nd Summons relates to the costs of the 1^st defendant’s counterclaim.

14.  By a letter dated 27 February 2024, the 1^st defendant made a sanctioned offer to the plaintiff in that the 1^st defendant was prepared to accept a lump-sum payment of $1 million in full and final settlement of the counterclaim (“the Counterclaim Sanctioned Offer”).

15.  As aforesaid, at the end of the day, the 1^st defendant was successful in obtaining a declaration as claimed and an order for possession of the Kennedy Town Property.

16.  On the basis that the plaintiff has failed to obtain a judgment that is more advantageous than the 1^st defendant’s Counterclaim Sanctioned Offer, the 1^st defendant applied to vary the Counterclaim Cost Order Nisi as follows:

(1)  The plaintiff shall pay the 1^st defendant’s costs of the counterclaim, including all costs reserved, incurred up to and inclusive of 26 March 2024, to be taxed on party-and-party basis, if not agreed.

(2)  The plaintiff shall pay the 1^st defendant’s costs of the counterclaim, including all costs reserved, incurred from and inclusive of 27 March 2024 onwards, to be taxed on indemnity basis, if not agreed.

(3)  The plaintiff shall pay interest on the 1^st defendant’s costs of counterclaim provided for under sub-paragraph (2)  above:

(a)  from the actual dates on which payments of such costs were made by the 1^st defendant up to full payment, at the rate of 5% above the judgment rate;

(b)  alternatively, from the actual dates on which payments of such costs were made by the 1^st defendant up to and including the date of 21 January 2025 (i.e. the date of the Judgment), at the rate of 5% above the judgment rate, and thereafter at judgment rate up to full payment.

(4)  Alternative to sub-paragraph (3)  above, the plaintiff shall pay interest on the 1^st defendant’s costs of the counterclaim provided for under sub-paragraph (2)  above:

(a)  from 27 March 2024 up to full payment, at half of the interest rate of 5% above the judgment rate;

(b)  alternatively, from 27 March 2024 up to and including the date of 21 January 2025, at half of the interest rate of 5% above the judgment rate, and thereafter at judgment rate up to full payment.

C.  THE ISSUES

17.  I am of the view that, where an application for variation of costs order nisi is made by relying on the effect of Rule 23 or Order 22 rule 24 of the RHC (“Rule 24”)  (on the assumption that the relevant sanctioned offer or sanctioned payment have complied with all the formal requirements imposed by Order 22 of the RHC (“Order 22”)), the court has to consider the application in 3 stages:

(1)  In the first stage, the court has to consider whether the operation of Rule 23 (or Rule 24)  is triggered by the satisfaction of either of the conditions under Rule 23(1)  (or Rule 24(1), as the case may be);

(2)  If the first stage is satisfied, then in the second stage, the court has to consider whether it is unjust to make an order under Rule 23(2), (3)  and/or (4)  (or Rule 24(2)  and/or (3), as the case may be);

(3)  If it is not unjust for the court to make an order under Rule 23(2), (3)  and/or (4)  (or Rule 24(2)  and/or (3), as the case may be), then the court, in the third stage, would have to consider the precise orders to be made.

18.  In the present case, in the light of the respective stances taken by the parties[3], the relevant issues are as follows:

The 1^st Summons

(1)  Whether the plaintiff has failed to obtain a judgment which is more advantageous than the Main Claim Sanctioned Offer;

(2)  If so, whether it is unjust to order indemnity costs with enhanced interest against the plaintiff;

(3)  If so, what the rate of enhanced interest should be;

(4)  Whether the full rate approach or the modified approach should be adopted in relation to the enhanced interest;

(5)  What the rate of interest on costs during the post-judgment period should be.

The 2^nd Summons

(6)  Whether the judgment against the plaintiff is more advantageous to the 1^st defendant than the proposals contained in the Counterclaim Sanctioned Offer;

(7)  If so, whether it is unjust to order indemnity costs with enhanced interest against the plaintiff;

(8)  If so, what the rate of enhanced interest should be;

(9)  Whether the full rate approach or the modified approach should be adopted in relation to the enhanced interest;

(10)  What the rate of interest on costs during the post-judgment period should be.

D.  DISCUSSIONS

D1.  The 1^st Summons

D1.1  Judgment more advantageous?

19.  The plaintiff’s claim in the present case has been dismissed, not because of this Court’s finding on the merits thereof, but by reason of the operation of Order 25 rule 1C(1)  of the RHC and the fact that this Court refused the plaintiff’s application to restore his claim.  In short, the plaintiff’s claim was unsuccessful because of a procedural reason rather than on merits.

20.  The question is, whether Rule 23 is still applicable in such circumstances.

21.  I am of the view that it depends on the interpretation of Rule 23(1)  which reads:

“This rule applies where a plaintiff –

(a)  fails to obtain a judgment better than the sanctioned payment; or

(b)  fails to obtain a judgment that is more advantageous than a defendant’s sanctioned offer.”

22.  There is nothing in Rule 23 (or in other parts of Order 22 which provides that the “judgment” referred to in Rule 23(1)  must be a judgment given after trial or just even on merits (for example, summary judgment). 

23.  The position in this regard in England and Wales is different, for it is provided in Part 36.20(1)  of the Civil Procedure Rules 1998 (“CPR”)  that:

“This rule applies where at trial a claimant –

(a)  fails to better a Part 36 payment; or

(b)  fails to obtain a judgment which is more advantageous than a Part 36 offer.”

(emphasis added)

24.  It can be seen that the English equivalent refers to the outcome of the claim at trial.  That means the judgment obtained by the claimant which is used for comparison purpose must be one which is given not simply upon determination on the merits but after trial. 

25.  Such a position has been confirmed by the English Court of Appeal in Petrotrade Inc v Texaco Ltd  [2000] EWCA Civ 512 (23 May 2000).  In this case, the first instance judge refused to award the claimant enhanced interest and costs on indemnity basis, despite the fact that the claimant had made a Part 36 offer which was lower than the amount of the summary judgment which the claimant obtained.  On the claimant’s appeal, Lord Woolf MR had the following to say:

“58. It will be noted that the opening words of rule 36.21 are ‘This rule applies where at trial’ (my emphasis). Those words are not to be ignored. They mean that the rule does not apply where, as in this case, summary judgment is given under Part 24. Part 24.1 sets out a procedure by which the court may decide a claim or a particular issue ‘without a trial’. This may seem surprising, but it is to be borne in mind that a court always has the power to order costs on an indemnity basis. The court also has the general power to award interest at such a rate as it considers just. Furthermore, if proceedings are disposed of summarily this will normally be at an early stage in the proceedings so that questions of costs and interest will not be as significant as they would otherwise be.

[…]

61.  The reason for Part 36.21 not applying where there is no trial is probably a decision of the Rules Committee that paragraphs (2)  and (3)  should not apply to proceedings which are a form of debt collecting. By making a Part 36 offer, a claimant could put himself in a position where indemnity costs and enhanced interest orders could be made when it would not be appropriate.”

(original emphasis)

26.  Order 22 has been completely re-written as a result of the Civil Justice Reform in 2009, and one of the recommendations for such a reform (which was adopted)  was to introduce sanctioned offers and payments along the lines of Part 36 of the CPR[4]. It is for that reason that the revised Order 22 had been drafted in similar way as the said Part 36.  However, in the drafting process, the words “at trial” were not adopted in our rules.  In my view, such an omission must be deliberate, and the effect is apparent: the judgment which the “successful party” (the 1^st defendant in the present case)  relies on can be any judgment, and needs not be one which is obtained after trial or on merits.

27.  The position has been made even clearer in the document issued by the Judiciary Administration to the Subcommittee on Draft Subsidiary Legislation Relating to the Civil Justice Reform entitled “Summary of Responses to the Draft Rules of the High Court (Amendment)  Rules” dated February 2008 (CJRS 3/2008).  Serial No.30 of which reads:

	Summary of Comments Received on Draft RHC	Steering Committee’s Consideration
30.	The proposed RHC O 22 r 21 applies where the plaintiff betters the payment or offer ‘at trial’. If the O 22 scheme is to apply to proceedings that may be determined and concluded by judgment or order without a ‘trial’, clarification may be required.	Agree with the Bar. It may be possible for there to be costs consequences where a Plaintiff fails to better a sanctioned offer or sanctioned payment after obtaining judgment other than after trial.

(emphasis added)

28.  The plaintiff relied on Steve Jay Shire & Another v Zhao Yanling [2024] HKDC 1266 and argued otherwise.

29.  In this case, the plaintiffs, having obtained default judgment against the defendant, applied for variation of the costs orders nisi pursuant to Rule 24 on the basis that the plaintiffs have beaten a sanctioned offer made to the defendant.  The learned Judge refused the application.  One of the reasons relied on was that:

“16. Lam VP (giving judgment for the Court of Appeal)  in Or Siu Lung v Fu Hong Home for the Elderly Co Ltd [2018] 1 HKLRD 872 observed that O 22, r 23 (which provides for the costs consequences where a plaintiff fails to do better than a sanctioned payment or fails to obtain a judgment that is more advantageous than a defendant’s sanctioned offer)  predicates upon a judgment being entered and there has been a judicial determination of the merits (see §13). Thus under r 23, a comparison is to be made between the terms of the sanctioned offer and the actual outcome in that judicial determination. Given r 24(1)  is the mirroring provision to r 23(1), the dicta of Lam VP should be apposite to r 24(1).

17.  It is trite in the case of judgment in default of defence, the court must give judgment according to the basis of the pleaded facts rather than on the evidence. In entering judgment against D, I only scrutinized the Statement of Claim to see whether the matters pleaded therein entitle Ps to the judgment sought (see paragraphs 22 and 31 of the Judgment). It seems to me that in those circumstances there was no ‘judicial determination on the merits’.”

30.  With respect, I do not agree with the learned Judge.

31.  Firstly, I do not think it is right to place too much emphasis on the wordings used by Lam VP (as he then was)  in Or Siu Lung v Fu Hong Home for the Elderly Co Ltd [2018] 1 HKLRD 872.  In that personal injuries case, the defendant made a sanctioned payment on 17 July 2015 which was not accepted by the original plaintiff within the time prescribed by Order 22 (i.e. 14 August 2015).  The original plaintiff subsequently passed away in the course of the litigation.  The plaintiff’s son then took over the action and applied for leave to accept the sanctioned payment out of time.  The first instance Judge gave leave for the sanctioned payment to be accepted out of time, but ordered the plaintiff to pay the defendant’s costs as from 15 August 2015 pursuant to Order 22 rule 15(3)  of the RHC[5].  The plaintiff then appealed.  One of the issues which the Court of Appeal had to consider was the applicability of Rule 23 to such a situation.  In this context, Lam VP stated that:

“12. Though the Rule 23 provides for situations where a judgment is entered and the plaintiff failed to obtain a judgment more advantageous than a sanctioned offer by a defendant, it has been held in England under similar rules that the approach should also guide the courts in the exercise of the discretion under Rule 15(3)  when making order for costs upon granting leave to accept sanctioned payment out of time, see SG v Hewitt [2013] 1 All ER 1118 at [20] and [76].

13.  We respectfully endorse such approach and we see no reason not to adopt the same in the context of our Order 22 regime.  At the same time, we need to highlight a difference between the situation under Rule 15(3)  and the one under Rule 23.  Rule 23 predicates upon a judgment being entered, hence there is a judicial determination on the merit.  The comparison is to be made between the terms of the sanctioned offer and the actual outcome in that judicial determination.  On the other hand, in the case of an acceptance of sanctioned offer out of time, there would not be any judicial determination on the merit.  In that respect, in the examination as to whether it would be unjust to apply the normal costs rule, in particular the consideration of the terms of the offer under Rule 23(6)(a), the court may need to make some broad assessment as to the reasonableness of the sanctioned offer in order to have a meaningful comparison instead of simply accepting the terms of the sanctioned offer as the benchmark for comparison.”

(emphasis added)

32.  In my view, it is important to appreciate the context in which Lam VP made his comments.  His Lordship was comparing the situation under Order 22 rule 15(3)  of the RHC (where a sanctioned payment/offer was accepted out of time)  and the normal course of event under Rule 23.  Hence, although his Lordship did say that “Rule 23 predicates upon a judgment being entered, hence there is a judicial determination on the merit”, it should not be treated as if it had been held that Rule 23 would only be applicable if there is a judicial determination on the merit.  To interpret what his Lordship said in such a way is, with greatest respect, taking his Lordship’s meaning out of context.

33.  Secondly, it is apparent that it had not been brought to the learned Judge’s attention the omission in Rule 23 of the words “at trial” used in Part 36 of the CPR.

34.  It is therefore my conclusion that Rule 23 is applicable to the present case in which there was no judicial determination on the merit of the plaintiff’s claim.

35.  Having said that, it does not necessarily mean that the costs consequences provided in Rule 23 must be imposed on the party concerned.  As explained, in the whole process, the Court should still consider whether making the orders referred to in Rule 23(2), (3)  and (4)  is unjust.  In my view, the fact that there has not been any judicial determination on the merit of the plaintiff’s claim must be something which this Court may take into account when considering whether it is unjust to allow the 1^st defendant’s application.  Hence, I will deal with this matter further in the following section.

D1.2  Unjust to make order?

36.  While the onus is on the plaintiff in the present case to show that it is unjust for the Court to make the orders under Rule 23 in view of all the circumstances of the case, the plaintiff has not made any submission on this matter.

37.  Be that as it may, this Court proceeds to consider those matters specifically listed under Rule 23(6)  as the plaintiff is presently not legally represented:

(1)  Terms of the Main Claim Sanctioned Offer – the 1^st defendant’s offer represents her acceptance that the plaintiff should be entitled to 60 shares in the 2^nd defendant.  This offer is not so unreasonable that the Court would conclude that it is unjust to impose the consequences on the plaintiff in the present situation;

(2)  The stage of the proceedings when the Main Claim Sanctioned Offer was made – the offer was made on 1 February 2024.  It was around half a year before the PTR.  There is nothing to suggest that the timing of this offer would have any impact on the Court’s assessment of whether it would be unjust to impose the consequences under Rule 23;

(3)  The information available to the plaintiff at the time of the Main Claim Sanctioned Offer – By 1 February 2024, the case had been set down for trial.  The plaintiff did not suggest that he did not have adequate information to evaluate the 1^st defendant’s offer properly;

(4)  Conduct of the 1^st defendant with regard to the giving or refusing to give information – There is no evidence or suggestion that the 1^st defendant had ever refused to give the plaintiff any information for the purposes of enabling the offer to be evaluated.

38.  I should further point out that, even though the plaintiff is now unrepresented, he was in fact legally represented since the commencement of the action, all the way up to 22 July 2024 when he filed a Notice to Act in Person.  He should therefore have been properly advised on the legal effect of the Main Claim Sanctioned Offer and the legal consequences of refusing to accept it.

39.  In his affirmation filed in opposition to the Summonses, the plaintiff has referred to the fact that although he had not accepted the Main Claim Sanctioned Offer, he did subsequently make counter-offers to the 1^st defendant, and that he had also attended 2 sessions of mediation.  He also emphasised that he had pursued the Main Claim in good faith on a genuine belief of his entitlement.  For the avoidance of doubt, I should make it clear that I do not consider it unjust to make the orders under Rule 23 despite such efforts and belief on the part of the plaintiff.

40.  The remaining matter which the Court should consider is whether it would be unjust to impose the Rule 23 consequences on the plaintiff by reason of the fact that there was no judicial determination on the merits of his claim.

41.  In my view, it is not unjust at all even under such circumstances.  This is because the plaintiff only had himself to blame in relation to the striking out of his claim. 

42.  All in all, I consider that it is not unjust for the Court to impose the Rule 23 consequences on the plaintiff.

D1.3  Rate of enhanced interest

43.  Pursuant to Rule 23(4)(b), the Court may order the plaintiff to bear interest on the 1^st defendant’s costs at a rate not exceeding 10% above judgment rate.

44.  The level of enhanced interest to be adopted must be proportionate to the circumstances of the case: OMV Petrom SA v Glencore International AG [2017] 1 WLR 3465, per Sir Geoffrey Vos at [38].

45.  In Yeung Ho Man v Shum Kin Leung & Another [2020] HKCFI 2781, Bharwaney J explained that he had adopted 9% as the enhanced interest rate (i.e. 1% above judgment rate)  in Shih Pik Nog v G2000 (Apparel)  Ltd [2011] 4 HKLRD 121 because it was a run-of-the mill case where the only failure of the plaintiff therein was a failure to accept the successful sanctioned payment.  However, in a case like Yeung Ho Man, the court would have discretion to set the rate of interest that is greater than purely compensatory in order to mark the court’s disapproval of improper conduct.  In the end, his Lordship adopted 18% (i.e. 10% above judgment rate)  as the enhanced interest rate.

46.  In Zief Incorporated v Tekchandani Ajai Mohan (trading as D’Ziner Collections (Hong Kong))  & Others [2021] HKCFI 730, Mr Recorder Eugene Fung SC considered that 5% above judgment rate was an appropriate enhanced rate of interest where:

(1)  there was a reasonable discount in the sum offered in the sanctioned offer made therein;

(2)  such a sanctioned offer was made at an advanced stage of the proceedings (around 2 months before the PTR);

(3)  the receiving end failed to respond to the said sanctioned offer at all.

47.  Pausing here, it is noted that the situation in the present case is slightly different in that although the plaintiff did not accept the Main Claim Sanctioned Offer, he had made 2 rounds of counter-offers by Calderbank letters subsequently.

48.  The 1^st defendant’s counsel suggested that the enhanced rate should be fixed at 5% above judgment rate so as to show the Court’s disapproval of the following unreasonable or improper conduct on the part of the plaintiff:

(1)  The plaintiff had adequate information to assess the merits of his own claim when the Main Claim Sanctioned Offer was made;

(2)  The plaintiff’s claim was unclear and convoluted, and it was because of that that he failed to attend the PTR hearings without any satisfactory reason, and to promptly apply for restoration of such a claim;

(3)  The plaintiff failed to accept the very reasonable and genuine settlement offer made by the 1^st defendant in respect of his claim;

(4)  The plaintiff’s responses to the Main Claim Sanctioned Offer were not constructive attempts to reach a compromise solution at all;

(5)  The plaintiff had failed to attend the PTR hearings and to apply for restoration of his claim, which resulted in the dismissal thereof.

49.  I do not accept that the above are conduct which should be condemned by way of a higher enhanced interest:

(1)  While the inadequacy of information for evaluation of the sanctioned offer of the other side may make it unjust for the Court to impose costs consequences under Rule 23, I do not agree that the fact that the available information was adequate should be regarded as an aggravating factor as such;

(2)  In the circumstances of the present case, I do not think the Court may conclude that the plaintiff failed to attend the PTR hearings because of his recognition of the weakness of his own claim;

(3)  I do not think the Main Claim Sanctioned Offer was so generous that the Court should regard the plaintiff’s non-acceptance thereof as unreasonable to the extent that it should be visited with a higher enhanced interest.

(4)  I do not think the plaintiff’s counter-offers made subsequent to the Main Claim Sanctioned Offer may be labelled as “not constructive”.  It can be seen that he did make concessions thereby;

(5)  I do not accept that the plaintiff should be punished further for his absence at the PTR hearings. 

50.  I therefore take the view that 5% above judgment rate as suggested by the 1^st defendant’s counsel is too high. 

51.  On the other hand, I do not agree that the rate should be too low.  The powers conferred by Order 22 to order indemnity costs and a higher rate of interest are intended to provide a means of achieving a fairer result for the winning party (i.e. the 1^st defendant in the present case), and to redress the perceived unfairness from the fact that damages, costs (even costs on an indemnity basis)  and statutory interest will not compensate the successful party for the inconvenience, anxiety and distress of having to resort to and pursue proceedings which he had sought to avoid by an offer/payment to settle on terms which (as events turned out)  were less advantageous to him than the judgment which he achieved: McPhilemy v Times Newspapers Ltd (No 2) [2002] 1 WLR 934 at [19] & [21] and Golden Eagle International (Group)  Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273 at [10].

52.  Having considered all the circumstances, I fix the enhanced interest at 3% above judgment rate.

D1.4  Full rate approach or the modified approach?

53.  The 1^st defendant submitted that since there were only 2 payments of costs made since the date of the Main Claim Sanctioned Offer, the full rate approach instead of the modified approach should be adopted. 

54.  I agree that the full rate approach should be adopted herein.

D1.5  Post-judgment interest

55.  It is recognized that there are conflicting authorities on whether the Court should award enhanced interest until the date of payment or only until date of judgment.

56.  In Kai Min Fashion (HK)  Limited v Fond Express Logistics Limited & Another [2013] 1 HKC 563 (CFI), the learned Judge was not satisfied that the Court has jurisdiction to order enhanced interest on costs beyond the date of judgment:

“29. In McPhilemy v Times Newspapers, Chadwick LJ (with whom Longmore and Simon Brown LJJ agreed)  observed that the Court probably does not have jurisdiction under Rule 36.21 of the English CPR (the equivalent of our Order 22 r 24)  to award enhanced rate of interest under Order 22 r 24(2)  or interest on costs under Order 22 r 24(3)  after judgment. I am not aware of this point having been considered in any subsequent UK or Hong Kong case.

30.  I am not satisfied I have jurisdiction to order enhanced interest or interest on costs under Order 22 r 24 (2)  and (3)  after judgment.”

57.  In Zief Incorporated (supra), the Court also refused to apply the enhanced rate of interest on costs up to the date of payment.  The learned Judge took the view that:

“40. Post-judgment interest is a rate imposed where a judgment for a quantified sum has not been paid. It is conventionally charged at a rate determined periodically by the Chief Justice by order, at a rate significantly higher than commercial rates of interest, designed to encourage and provide an incentive for prompt satisfaction of judgment debts: Man Ping Nam v Man Fong Hang (No 2) (2007)  10 HKCFAR 140 at §23 (Ribeiro PJ); Ming An Insurance Co (HK)  Ltd v Ritz-Carlton Ltd (No 2) (2009)  12 HKCFAR 158 at §65 (Ribeiro PJ). The current interest rate on judgment debts is 8% per annum.

41. Although section 49(1)(a)  of the High Court Ordinance confers power on the Court of First Instance to decide what rate to be applied to judgment debts, it seems to me that there must be good reasons for the court to depart from the convention of ordering post-judgment interest to be charged at judgment rate (ie the rate as determined from time to time by the Chief Justice).

42.  P asked the Court to order a rate of 5% above judgment rate for post-judgment interest on HK$3,120,000 on the basis that D4 failed to accept the Sanctioned Offer.  However, I am not persuaded that the failure to accept a sanctioned offer provides sufficient reasons for the Court to order post-judgment interest at a rate higher than the judgment rate.”

58.  On my part, I have no doubt that this Court has jurisdiction to order enhanced interest on costs up to the date of full payment, and that the comments made by Chadwick LJ in McPhilemy v Times Newspapers Ltd (No.2)  [2002] 1 WLR 934 as referred to by the learned Judge in Kai Min Fashion (HK)  Limited (supra)  are not applicable in Hong Kong.  For the sake of clarity, I should first of all set out the relevant part of his Lordship’s comments at [24] as follows:

“[…] In my view paragraphs (2)  and (3)(b)  of rule 36.21 are not intended to confer on the court powers to vary the rate at which interest is payable on a judgment debt pursuant to section 17 of the Judgments Act 1838 (1 & 2 Vict c 110). An order for costs is a judgment debt for the purposes of the 1838 Act: see Thomas v Bunn [1991] 1 AC 362. The power to fix the rate at which interest is payable on judgment debts has been conferred on the Lord Chancellor by section 44 of the Administration of Justice Act 1970 and is exercisable by him with the concurrence of the Treasury. I can see no reason why Parliament should have intended to confer on the courts, indirectly through rules made by the Civil Procedure Rule Committee under section 1(1)  of the Civil Procedure Act 1997, power to vary in individual cases a rate fixed under the 1970 Act; nor any reason why a power to fix the rate at which interest is payable on judgment debts could be required for the purpose of ‘securing that the civil justice system is accessible, fair and efficient’: see section 1(3)  of the 1997 Act. Nor can I see why a party who fails to pay a judgment debt, which (ex hypothesi)  the court has ordered that he should pay, should pay more, or less, interest on that debt because, in the litigation which has led to that order, the other party has, or has not, made an offer to which rule 36.21 applies. The point was not addressed at any length in the argument on the cross-appeal, but, for my part, I am not persuaded that the court has power to make an order under paragraph (2)  of rule 36.21 for the payment of interest on the amount of the jury's award in respect of any period after judgment, or to make an order under paragraph (3)(b)  for the payment of interest on costs in respect of any period after judgment.”

(emphasis added)

59.  It should be noted that section 17 of the Judgments Act 1838 provided that:

“(1)  Every judgment debt shall carry interest at the rate of 8 pounds per centum per annum from such time as shall be prescribed by rules of court until the same shall be satisfied, and such interest may be levied under a writ of execution on such judgment.

(2)  Rules of court may provide for the court to disallow all or part of any interest otherwise payable under subsection (1).”

60.  Section 44 of the Administration of Justice Act 1970 provided that:

“(1)  The Lord Chancellor may by order made with the concurrence of the Treasury direct that section 17 of the Judgments Act 1838 (as that enactment has effect for the time being whether by virtue of this subsection or otherwise)  shall be amended so as to substitute for the rate specified in that section as the rate at which judgment debts shall carry interest such rate as may be specified in the order.

(2)  An order under this section shall be made by statutory instrument which shall be laid before Parliament after being made.”

61.  On the other hand, as far as the Court of First Instance is concerned, the position is governed by the High Court Ordinance (Cap.4, Laws of Hong Kong).  Section 49(1)  thereof 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.”

(emphasis added)

62.  It can therefore be seen that there is clearly jurisdiction for the Court of First Instance to impose enhanced interest on costs in respect of the period after the date of judgment.

63.  Similar conclusion has also been reached by Mr Recorder Eugene Fung in Zief Incorporated (supra)  at [41] (as quoted above)  and by Her Honour Judge Mimmie Chan (as her Ladyship then was)  in Maysun Engineering Co Ltd v International Education and Academic Exchanges Foundation Co Ltd [2011] 2 HKLRD 844, at [25] – [27].

64.  As for the question of whether the Court should exercise its discretion to order enhanced interest on costs beyond the date of judgment, I am of the view that if the Court considers it appropriate to impose enhanced interest on costs pursuant to Rule 23, that should constitute a good reason[6] to depart from the convention of adopting the judgment rate in respect of the post-judgment period. 

65.  In this regard, it should be borne in mind that the enhanced rate of interest in the present case is intended to provide a means of achieving a fairer result, and to better compensate the 1^st defendant in respect of the costs which she would not have to incur but for the refusal of the plaintiff to accept the Main Claim Sanctioned Offer.  I therefore fail to see why the date of judgment would have any significance in this regard. 

66.  I therefore hold that the enhanced rate of interest on costs should be applicable until the date of full payment.

D2.  The 2^nd Summons

D2.1  Judgment more advantageous?

67.  To recap, by virtue of the Counterclaim Sanctioned Offer made on 27 February 2024, the 1^st defendant offered that the plaintiff shall pay her a lump-sum of $1 million in full and final settlement of her counterclaim, which the plaintiff did not accept.  At the end of the day, pursuant to the Judgment, this Court has:

(1)  granted a declaration that the 1^st defendant is entitled to reside in the Kennedy Town Property rent-free for the remainder of her life, and

(2)  made an order for possession against the plaintiff in favour of the 1^st defendant.

68.  The question here is: whether Rule 24 is applicable in these circumstances.  In this regard, Rule 24(1)  reads:

“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.”[7]

69.  The burden to show that Rule 24 is applicable to the present scenario rests on the 1^st defendant.

70.  On this matter, the 1^st defendant has made 2 arguments.

71.  Firstly, relying on the case of Baker v Baker & Baker (1993)  25 HLR 408, the 1^st defendant submitted that the value of the 1^st defendant’s rent-free accommodation in the Kennedy Town Property (which she obtained by the Judgment)  may be quantified by the formula: “the annual value of the accommodation” times “the life expectancy of the promisee”.  It was said that, on the basis of the plaintiff’s evidence at trial that the current rent payable by his tenant in relation to the Kennedy Town Property is around $35,000 to $36,000 per month, the annual value of the accommodation in the Kennedy Town Property would be at least $420,000 ($35,000 x 12).  It was argued that according to Table 15 (Projected Hong Kong Life Table for Females, 2024)  of the Hong Kong Life Tables 2014-2069 published by the Census and Statistics Department, the life expectancy of a female aged 85[8] is 9.73 years, which is rounded down to 9 years. Using Table 28 of the Hong Kong Personal Injuries Table 2019, adopting the rate of return of 1% for a duration not exceeding 10 years, the appropriate life multiplier would be 8.61 years.  It was therefore said that the value of the 1^st defendant’s free accommodation in the Kennedy Town Property for the rest of her life would be at least $3,616,200 ($420,000 x 8.61 years), which is more advantageous to her than the proposal contained in the Counterclaim Sanctioned Offer.

72.  In Baker v Baker & Baker (supra), the trial Judge found as a fact that the plaintiff was promised by the defendants that he could have the use of a room in a house bought under the name of the defendants for the rest of his life.  In reliance of that, the plaintiff contributed to the purchase price.  He also gave up his council house.  He moved into the defendants’ house and lived with the defendants and their children together as a family.  However, that living arrangement ended abruptly because the plaintiff was accused of sexually molesting the defendants’ young daughter. That allegation was subsequently found to be without basis and there was no reasonable ground in support of that.  The unavoidable consequence was that the sharing arrangement could not continue, and the plaintiff had to move out of the house.  In the above circumstances, the trial Judge found that the plaintiff had successfully established his claim on estoppel.  However, in the light of what happened, it was agreed by the parties that the only way in which the equity could be satisfied was by a payment of money by the defendants to the plaintiff.  The issue was how much should be paid.  The trial Judge held that the amount should be the sum of money which the plaintiff had contributed to the purchase price.  On appeal, the English Court of Appeal held that the trial Judge had over-assessed the damages.  It was held by Beldam LJ that:

“A practical starting point for the valuation of the plaintiff’s interest is the annual value of the accommodation he enjoyed capitalized for the remainder of his life.”[9]

(emphasis added)

73.  It should be emphasized that “the annual value of the accommodation he enjoyed capitalized for the remainder of his life” was just a starting point, for Beldam LJ continued:

“In 1988 [the plaintiff] was 70 years of age and, had his health been normal, he could have looked forward to living in the promised accommodation for about 11 years. But, as the judge found, he was frail and had about ten years earlier suffered from a serious illness. He had survived from the effects of this illness and its treatment and, as events have shown, has survived for a further five years. Some reduction in the normal expectation should be made for his frail state of health and the sum awarded should be discounted as an award of a capital sum […]”

74.  It can therefore be seen that even in the only case authority relied on by the 1^st defendant, the Court did not treat the quantification of the life interest as a simple arithmetic exercise.  The Court would also take into account the successful party’s health condition.

75.  However, in the present case, no evidence has been adduced on the 1^st defendant’s health condition.  I take the view that the Court should not simply take the statistics on life expectancy on face value. 

76.  Bearing in mind that the burden to show that Rule 24 is applicable is on the 1^st defendant, I hold that her first argument fails.

77.  The 1^st defendant’s second argument is that the proposals contained in the Counterclaim Sanctioned Offer were based on the alternative relief (order for payment that represents the value of the 1^st defendant’s free accommodation in the Kennedy Town Property for life)  instead of the primary relief (declaration)  claimed.

78.  With greatest respect, this argument is even weaker than the first one. If the Counterclaim Sanctioned Offer was not made on the basis of the primary relief (which was eventually granted)  but on the alternative remedy (which was not granted), there is nothing with which such an offer could be compared.  The 1^st defendant’s reliance on Rule 24 would then be a non-starter.

79.  I therefore hold that the 1^st defendant has failed to show that she has obtained a Judgment against the plaintiff which is more advantageous to her than the proposals contained in the Counterclaim Sanctioned Offer.

80.  Rule 24 therefore does not apply.

81.  This conclusion is enough for the disposal of the 2^nd Summons. However, just in case I am wrong, I proceed to consider the other identified issues.

D2.2  Unjust to make order?

82.  While the plaintiff has not made any submissions that it is unjust for the Court to make the orders under Rule 24 herein, I go through the matters set out in Rule 24(5)  as follows:

(1)  Terms of the Counterclaim Sanctioned Offer – I do not accept the plaintiff’s argument that the offer is ambiguous.  Further, this offer is not so unreasonable that the Court would conclude that it is unjust to impose the consequences on the plaintiff in the present situation;

(2)  The stage of the proceedings when the Counterclaim Sanctioned Offer was made – the offer was made on 27 February 2024.  There is nothing to suggest that the timing of this offer would have any impact on the Court’s assessment of whether it would be unjust to impose the consequences under Rule 24;

(3)  The information available to the plaintiff at the time of the Counterclaim Sanctioned Offer – By the time of the offer, the case had been set down for trial.  The plaintiff did not suggest that he did not have adequate information to evaluate the 1^st defendant’s offer properly;

(4)  Conduct of the 1^st defendant with regard to the giving or refusing to give information – There is no evidence or suggestion that the 1^st defendant had ever refused to give the plaintiff any information for the purposes of enabling the offer to be evaluated.

83.  Furthermore, as aforesaid, the plaintiff was legally represented at the material time.  He should therefore have been properly advised on the legal consequences of refusing to accept the Counterclaim Sanctioned Offer.

84.  I take the view that it is not unjust for an order to be made under Rule 24 despite the fact that the plaintiff did make counter-proposals to the 1^st defendant for settling the counterclaim after his refusal of the Counterclaim Sanctioned Offer.

85.  To conclude, it is not unjust for an order to be made under Rule 24.

D2.3  Rate of enhanced interest

86.  The 1^st defendant counsel suggested that the enhanced rate should be fixed at 5% above judgment rate so as to show the Court’s disapproval of the following unreasonable or improper conduct on the part of the plaintiff:

(1)  The plaintiff had adequate information to assess the merits of the counterclaim;

(2)  The plaintiff ought to have known that his defence to the counterclaim had no merits.  His evidence was found to be self-contradictory.  He had also misrepresented the timing of the “financial assistance” by Father;

(3)  The plaintiff failed to accept the Counterclaim Sanctioned Offer which amounted to a substantial compromise of the 1^st defendant;

(4)  The plaintiff’s responses to the Counterclaim Sanctioned Offer were not constructive attempts to reach a compromise solution at all.

87.  I do not accept the arguments under sub-paragraphs (1), (3)  and (4)  above.  I repeat what I said in section D1.3 above.

88.  However, in my view, if this Court were to fix a rate of enhanced interest, it should be taken into account the fact that the plaintiff had been found to be a dishonest witness[10].

89.  Having considered all the circumstances, I would have fixed the enhanced rate of interest at 5% above judgment rate if required to do so.

D2.4  Full rate approach or the modified approach?

90.  For the reason explained in section D1.4 above, the full rate approach should be adopted.

D2.5  Post-judgment interest

91.  For the reason explained in section D1.5 above, if required, I would have held that the enhanced rate of interest on the 1^st defendant’s costs of the counterclaim should be applicable until the date of full payment.

E.  ORDER

92.  By reasons of the aforesaid, I make the following orders:

(1)  The Main Claim Cost Order Nisi be varied to the following extent:

(a)  The plaintiff shall pay the 1^st defendant’s costs of the plaintiff’s claim, including all costs reserved, incurred up to and inclusive of 29 February 2024, to be taxed on party-and-party basis if not agreed.

(b)  The plaintiff shall pay the 1^st defendant’s costs of the plaintiff’s claim, including all costs reserved, incurred from and inclusive of 1 March 2024 onwards, to be taxed on indemnity basis if not agreed.

(c)  The plaintiff shall pay interest on the 1^st defendant’s costs of the plaintiff’s claim provided for under sub-paragraph (b)  above from the actual dates on which payments of such costs were made by the 1^st defendant up to full payment, at the rate of 3% above the judgment rate.

(2)  The 2^nd Summons be dismissed.

(3)  The Counterclaim Cost Order Nisi be made absolute.

F.  COSTS

93.  I make an order nisi that:

(1)  The plaintiff do pay the 1^st defendant’s costs of the 1^st Summons to be taxed on indemnity basis if not agreed.  There be enhanced interest at the rate of 3% above judgment rate on such costs from the date of the 1^st Summons until date of full payment.

(2)  The 1^st defendant do pay the plaintiff’s costs of the 2^nd Summons.  Such costs shall be summarily assessed, and shall be set off against the 1^st defendant’s costs of the 1^st Summons upon taxation thereof.

(3)  Unless any application for variation of the aforesaid costs order nisi is made within time, the plaintiff shall lodge and serve his statement of costs within 7 days after the expiry of the 14-day period (see next paragraph).  The 1^st defendant shall lodge and serve her statement of objection within 7 days thereafter.  Summary assessment of the costs of the 2^nd Summons will be conducted on paper (no matter whether any statement of objection is lodged by the 1^st defendant within time)  thereafter. 

94.  The above order nisi shall become absolute in the absence of application to vary (which, if any, will be disposed of on paper)  within 14 days hereof.