RAI GEHENDRA RAJ v. YICK HING CONSTRUCTION CO LTD

HCPI 48/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO 48 OF 2012

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1.  By a judgment handed down herein on 31 August 2017, I dismissed the plaintiff’s claim against the defendant and made a costs order nisi for the plaintiff to pay the defendant’s costs of this action, to be taxed on a party and party basis if not agreed and for the plaintiff’s own costs prior to the discharge of his legal aid certificate[1] to be taxed in accordance with the Legal Aid Regulations.

2.  By a summons dated 13 September 2017, the defendant applies for variation of the costs order nisi to seek:

(1) costs from 25 February 2014 or alternatively 22 April 2014 on an indemnity basis; and

(2) pre-judgment interest at 4% above the judgment rate on its costs from 25 February 2014 or alternatively 22 April 2014 up to 31 August 2017 (date of judgment).

3.  The defendant has since elected to proceed with the application for indemnity costs, and enhanced pre-judgment interest at 1% above the judgment rate (i.e. 9% per annum) on such costs, from 22 April 2014.

4.  The defendant so applies pursuant to Order 22 rule 23 of the Rules of the High Court (Cap 4A) because it had on 24 March 2014 made a sanctioned payment of $282,000 (“First Sanctioned Payment”) in settlement of the whole of the plaintiff’s claim under Order 22 rule 8(2).  The period for acceptance of the First Sanctioned Payment by the plaintiff without leave of the court expired on 21 April 2014.  This payment was eventually raised to $1 million by 5 more sanctioned payments made between 26 February 2015 and 15 July 2016.  The plaintiff did not accept any of them.

5.  The Director of Legal Aid has, by a letter dated 3 November 2017 to the defendant’s solicitors, indicated his agreement to bear the defendant’s costs from 22 April 2014 to 6 May 2015 on an indemnity basis and to pay enhanced pre-judgment interest thereon at the rate claimed by the defendant from 22 April 2014 until the date of judgment.  

6.  A plaintiff who has failed to obtain a judgment that is more advantageous than a sanctioned payment or sanctioned offer by the defendant may be ordered to pay:

(1) the defendant’s costs incurred after the latest date on which the plaintiff could have accepted the sanctioned payment or sanctioned offer without requiring leave of the court (Order 22 rule 23(3)) on indemnity basis (Order 22 rule 23(4)(a)); and

(2) enhanced interest on such costs at a rate not exceeding 10% above the judgment rate (Order 22 rule 23(4)(b)).

7.  The court shall so order unless it considers it unjust to do so: Order 22, rules 23(5) and 24(4).  In considering whether it would be unjust to make these orders, the court shall take into account all the circumstances of the case including:

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

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

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

(4) 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.

See Order 22 rules 23(6) and 24(5).

8.  I am satisfied that it will not be unjust to order the plaintiff to pay either the defendant’s costs from 22 April 2014 on an indemnity basis or enhanced pre-judgment interest on such costs from 22 April 2014. 

9.  The First Sanctioned Payment was clear and unambiguous in its terms.  It was made after mutual discovery, exchange of witness statements and completion of the joint report by the medical experts for the parties so that the plaintiff and those acting for him should have available to them all the information necessary to evaluate the First Sanctioned Payment. There is no suggestion that the defendant had withheld from the plaintiff any or any material information. 

10.  The only matters raised in court by the plaintiff to oppose the present application are (1) that he did not accept the First Sanctioned Payment or any of the subsequent sanctioned payments by the defendant because he had been advised that he was likely to recover more; and (2) that he presently has no means to satisfy the costs ordered against him. 

11.  A plaintiff’s subjective belief that he or she has a good claim does not constitute a relevant consideration to override the mandatory direction in Order 22 rule 23: Shih P    ik Nog v G-2000 (Apparel) Ltd [2011] 4 HKLRD 121, per Bharwaney J at [6].  It makes no difference that such belief was based on legal advice. 

12.  The plaintiff’s impecuniosity is likewise irrelevant to the application of the mandatory costs consequences for failing to beat a sanctioned payment.

13.  On interest, the defendant has adduced evidence of the payments made by its insurers on costs totalling $1,252,239 (before taxation) since 22 April 2014.  The defendant has further compiled a detailed calculation of the enhanced pre-judgment interest on each such payment of costs before taxation from the actual date of payment to 31 August 2017 at 9% per annum.  According to such calculations, the total enhanced interest on costs would amount to $151,769.39. 

14.  In contrast, my attention has been drawn to the modified approach adopted by Johnson Lam J (as he then was) in Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273 at [16]-[19] and followed in, for example, Shih P    ik Nog, supra, at [15]-[16], under which enhanced interest on costs is awarded at 4.5% per annum (being half the full enhanced commercial rate of 9% per annum) from the last date of acceptance without requiring leave up to the judgment date regardless of the actual dates on which the defendant or his insurers had put up funds on account of costs. The adoption of such modified approach in the instant case would however yield the higher figure of $189,431.19 according to my computation.

15.  As the purpose of awarding interest on costs at an enhanced rate is not to penalise a plaintiff for not accepting a sanctioned payment but to compensate the defendant for the costs of money (or the loss of the use of money) which he has had to bear before trial in relation to payments which he has made on account of costs (see cases cited by Bharwaney J in Shih Pik Nog, supra, at [11]-[12]), I propose not to follow the modified approach under which the plaintiff would end up paying more enhanced interest on costs.

16.  For these reasons, I allow the defendant’s application and vary the costs order nisi dated 31 August 2017 as follows:

(1) the plaintiff shall pay the defendant’s costs of this action up to and including 21 April 2014, to be taxed if not agreed on a party and party basis;

(2) the plaintiff shall pay the defendant’s costs of this action from and including 22 April 2014, to be taxed if not agreed on a party and party basis;

(3) the plaintiff shall pay the defendant interest on the costs provided for under sub-paragraph (2) hereof from the actual dates on which the payments of such costs were made by the defendant or its insurer up to and including 31 August 2017 at the rate of 9% per annum and thereafter at judgment rate until payment;

(4) the sanctioned payments made by the defendant in the total sum of $1,000,000, together with the interest accrued thereon, shall be paid out to the defendant though its solicitors, Messrs Deacons, forthwith;

(5) the plaintiff shall pay the defendant’s costs of this application to be taxed if not agreed on an indemnity basis with certificate for counsel for the hearing on 15 November 2017; and

(6) the plaintiff’s own costs prior to the discharge of his legal aid certificate shall be taxed in accordance with the Legal Aid Regulations.