Case Document

100%Judiciary

HCCL000061B/2002

HCCL 10/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.10 AND NO.61 OF 2002

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BETWEEN
	ELIZABETH HARRINGTON	Plaintiff

	AND

	CAP GEMINI ERNST & YOUNG HONG KONG LIMITED	Defendant

HCCL 61/2002

AND BETWEEN

	ELIZABETH HARRINGTON LYNCH	Plaintiff

	AND

	CAP GEMINI ERNST & YOUNG HONG KONG LIMITED	Defendant

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Coram: Hon Stone J in Chambers

Date of Hearing: 7 July 2004

Date of Judgment: 14 July 2004

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JUDGMENT ON INTEREST AND COSTS

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Introduction

1.On 17 May 2004 this court handed down its judgment in this case.

2.In that judgment, which speaks for itself, the plaintiff in both actions, Miss Elizabeth Harrington, was awarded the sum of US$46,666.00.

3.Paragraph 110 of that judgment indicated that, absent agreement thereon, counsel would be heard on the issues of interest and costs.

4.Pursuant to this order, the defendant herein has now restored this matter for argument. This judgment represents the conclusions of the court upon the matters thus canvassed.

Interest

5.Three matters arise for decision.

6.The first is the date from which interest upon the judgment sum is to run. The plaintiff submitted that the appropriate date was the end of May 2001, and the defendant maintained that the correct date was the beginning of October 2001.

7.In the event the issue was compromised, counsel agreeing that the date from which interest was to run should be 3 September 2001. I so order.

8.The next issue was the rate of interest. I see no reason to vary the usual order in commercial cases. Interest upon the judgment sum from the agreed date of commencement is to run at the rate of 1% over prime (that is, 6%) until the date of judgment, and thereafter at the judgment rate from time to time prevailing. I so order.

9.The third issue was the one which provoked the most controversy. It arose by reason of the existence of a payment into court, which is a fact which has resonance in terms both of interest and of costs.

10.On 9 April 2003 the defendant herein paid into court the sum of HK$771,072.08, which I am told at the then rate of exchange represented some US$98,000. Thus the amount of the payment into court was approximately twice the value of the sum ultimately awarded to the plaintiff at trial.

11.There is no issue as to the fact of this payment in, and that the plaintiff elected not to accept it in satisfaction of her cause of action, and proceeded to have the case tried.

12.In so far as the issue of interest is concerned, Mr Carolan maintains that interest is only to run from the agreed date, that is 3 September 2001 until the date of payment in, that is 9 April 2001. He says that the plaintiff ought to have accepted the payment in, and not having done so it would be wrong to continue to charge interest on the judgment sum.

13.For the plaintiff Mr Kemp maintains that such an approach is fallacious. He says that whilst the purpose of a payment in is to protect the position as to costs, it does not follow, such payment not having been accepted, that this has the effect of preventing interest from running upon the sum ultimately awarded. He points out that pursuant to Order 22 rule 1(8) RHC the defendant pays into court a sum in satisfaction not only of the debt or damages claimed but also an element of interest up to the date of the payment in. This enables the court to effect a comparison between the amount paid in and the amount of money subsequently awarded, inclusive of interest, which in turn facilitates determination of the issue of costs, but solely the issue of costs.

14.Notwithstanding the enthusiasm with which Mr Carolan invested the point, I remain unconvinced that the answer he propounded is the correct one. I fail to see why non-acceptance of a sum, inclusive of interest, which is paid into court should have the effect of precluding the award of interest upon such lesser sum as is eventually adjudged due for the period between the date of non-acceptance of the payment in and the date of judgment.

15.Were Mr Carolan to be correct, there would be a lacuna in the period for which interest would run, given that interest undoubtedly runs upon the judgment debt, and continues so to do until payment. I resist this notion. The position, it seems to me, is tolerably clear. The plaintiff who declines a payment in, inclusive of an interest element, is in peril as to costs should that sum which is recovered after trial, inclusive of interest, be less than the sum paid in. Thus is like compared with like. The plaintiff who gambles unsuccessfully may suffer in terms of costs subsequent to the date of payment in, but does not thereby forfeit interest for the full period on the sum in fact recovered.

16.So in this discrete debate I think that Mr Kemp is right. In my view the concept of the payment into court sounds to the adjudication of costs, and not to the award of interest.

17.Accordingly, the order of the court is that interest is to run upon the sum of US$48,666.00 at the rate of 6% per annum from 3 September 2001 to 17 May 2004, and thereafter at the judgment rate from time to time prevailing until payment.

Costs

18.There is no such doctrinal difference when it comes to the question of costs. Mr Kemp naturally accepts that the effect of an award at trial which fails to 'beat' a payment into court is to place his client at risk on costs.

19.However, he submits that costs are discretionary, and that which should be taken into account in the exercise of such discretion is the fact that the plaintiff in this case succeeded upon the primary issue of establishing a contract between herself and the defendant, but effectively 'lost' in terms of quantum because she was unable to surmount the problem posed by the provisions of section 5(2) of the Employment Ordinance, Cap.57, and was unable to get home in terms of her specific performance argument. This was to be compared, he said, with the position of the defendant throughout to the effect that no contract of employment ever had come into existence. In the circumstances he submitted that an appropriate order would be no order as to costs, alternatively that his client should bear a percentage only of the defendant's costs subsequent to the date of payment in.

20.In response Mr Carolan emphasized that the rules as to payment into court are clear, and that there was no unusual feature of this case which would justify a departure from the usual principles. In particular, he noted, in its judgment this court had eschewed any finding of bad faith on the part of his client, and had simply found to be incorrect the defendant's belief that a contract had not come into existence.

21.In this instance I think that Mr Carolan is right. After reviewing all the circumstances of this case I can see no reason why the defendant should be denied the protection it sought by means of a legitimate payment into court, or, to look at the issue through the other end of the rifle, why the plaintiff, having gambled in the face of a realistic payment in, should now in some wise be excused from the hard consequence of such a gamble. Adversarial litigation is not pleasant. It is a game often played for high stakes, and the rules are clear. The defendant offered to dispose of this highly contentious claim on terms, and not unfavourable terms at that, and the plaintiff refused. Having thus elected to move to trial, and having signally failed to recover any more than approximately half of that which was on offer, I am afraid that I am unpersuaded by the plaintiff's argument that the normal position as to costs should be modified.

22.Accordingly, subject to specific costs orders already in existence, I order that the plaintiff is to have the costs of this action up to and including the date of payment in, that is, 9 April 2003, but that the costs of this action incurred after the date of payment into court until the date of judgment, that is 17 May 2004, are to be to the defendant, to be taxed if not agreed.

Monies currently in court

23.The present position, as I understand it, is that there is not only the sum of US$98,000 (or its HK$ equivalent) which has been paid into court by the defendant, but that there is the further cumulative sum of HK$475,000 which has been paid into court by the plaintiff pursuant to two orders of this court for the provision of security for costs.

24.I refer to the existence of such monies at this stage because in the course of this hearing there was some argument about whether the judgment sum, together with interest thereon, could be satisfied out of the sum paid into court by the defendant.

25.In this connection Mr Carolan was at pains to emphasise that there should be no such payment out until the cross claims in terms of costs were quantified, and the court was able to see the whole picture which, he said, would almost certainly reveal a substantial costs balance in his client's favour for which the sum presently standing in court as security for costs would be insufficient. For his part Mr Kemp maintained that by this stratagem the defendant was in effect achieving an unwarranted stay of execution, although, after raising the point, he drew back from asking for an immediate determination of this issue.

26.In my view he was right to do so. This argument is premature. No application is before me for payment out of any monies which have been paid into court. There is not even yet in existence a sealed judgment, absent which the plaintiff cannot move to execute against the defendant, an Hong Kong company.

27.I leave open the interesting question as to whether the plaintiff can seek to enforce its judgment against the monies paid into court by the defendant notwithstanding the possibility (Mr Carolan would say 'probability') that the monies currently available to the defendant in the form of security for costs prove insufficient to satisfy any costs balance in its favour consequent upon the striking of a 'costs account' occasioned by the cross orders as now made.

Costs of today

28.Each side has won one argument in the course of a hearing which it seems unlikely in the circumstances could have been the subject of agreement.

29.It seems to me that the fairest order is that there be no order as to the costs of and occasioned by today's hearing. I make an order nisi to this effect.