XCHRX LEUNG KAM TAI v. WONG CHUEN, owner of lighter "SUN CHUEN LEE No. 1"

1995 No. P. I. 374

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 374 OF 1995

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R U L I N G

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1. This is a claim for damages for personal injuries. The matter was last before me on the 11th March when following referral of the papers I vacated the date of the Pre-Trial Review in the light of the Plaintiff's solicitors notifying the court that the case had been settled. The Plaintiff was "Sui generis" and not under any disability, so there was no question of court approval of the terms of settlement.

2. On or about the 17th April 1998 the parties filed a Consent Order relating to the terms of the settlement. The reason for such an order was to deal with the sum of money which had been paid into court by the Defendants on 3rd February 1998. The provision in the Consent Order sought, was an order that that sum of money be paid out to the Defendants' solicitors. Since the terms of settlement included payment of the sum of $1.3m. in satisfaction of the Plaintiff's claim and the sum in court was less than that figure, the provision to be expected was an order that that sum be paid out to the Plaintiff's solicitors in part satisfaction with the balance of the settlement sum being paid within a number of days. That would have been the normal order. However I regarded the provision to pay the sum of money in court to the Defendants to be both highly abnormal and questionable.

3. The immediate concern was that the order if approved, could result in the Plaintiff losing the security of the largest part of the settlement sum being in court. I have never known such a situation before and inquired of the Plaintiff's solicitors in writing if the Plaintiff was prepared to take the risk of losing the money if for example the Defendants were on the verge of bankruptcy. His solicitors could well expose themselves to an action for negligence if the Defendants defaulted.

4. The Plaintiff's solicitors' reply was to the effect that they too considered the provision inappropriate but because the settlement figure had been reached, and the Defendants' solicitors were insisting upon this provision as part of the mechanics of the settlement, they were prepared to accept it to avoid further delay. They felt the Plaintiff was in any event protected by Part IV of the Employees Compensation Ordinance, Cap. 282. I will return to that point later.

5. My concern for the position nonetheless remained and I instructed that the case be listed for directions. I later realised that the order had in fact been sealed and acted upon under order 42 rule 5A. Certainly this provides for a consent order where any order is, inter alia, for the payment out of money in court. However the court has a complete discretion to be exercised judicially, whether to allow a payment into court to be paid back out to the Defendant and if so, on what terms - see Order 22/1/18. Furthermore as is apparent from Order 42/5A/3 if the Consent Judgment or Order, when presented to the court officer to enter or seal, does not appear to make sense or is contradictory in its terms or is unclear or otherwise defective, the court officer will refer the matter to the Practice Master. In my view this Consent Order does not appear to make sense for the reasons I have set out and purports to exclude the court's discretion under order 20/1/18.

6. I required the respective solicitors handling the matter for the parties to attend to explain why this provision had been agreed. The fact that a settlement had been reached was entirely independent of the mechanics for putting it into effect and it was inappropriate for the Defendants' solicitors to insist on the provision for payment out as part of the settlement. I am bound to say I viewed the tactic with considerable suspicion.

7. I called for the correspondence between the parties in order to see how the provision had come to feature in the order. After doing so it was clear that the Plaintiffs' solicitors had drafted the normal and sensible provision for payment out to them of the sum in court and this was accepted by the Defendants' solicitors in the first instance. However they later changed their minds for no clear reason and submitted a draft Consent Order with the altered provision. The Plaintiff's solicitors accepted this for the reasons already given.

8. I asked Miss Rosita Lau why the Defendants' solicitors had adopted and insisted on this course. I was informed that it was because the payment in had ceased to have any tactical significance. Since a settlement had been reached between the parties this was irrelevant. No explanation was put forward to explain this strange approach. I explained my concern and that, on a cynical view, the only explanation I could conceive of was that the solicitors for the Defendant wanted the sum in court as a security for their costs, the Defendants perhaps being in some financial difficulties. Miss Lau assured me that this was not the case and that there was nothing untoward, suspicious or dubious in the approach adopted. I accepted what she said but there remained an absence of any explanation nonetheless.

9. As a consequence I took the view that this provision should not have been included in the order and should not appear in any future Consent Order submitted under order 42 rule 5A, for the following reasons.

10. It is irregular and does not make sense for a payment into court to be paid out back to the Defendant where there has been a settlement in favour of a Plaintiff which involves payment of a sum of money to the Plaintiff. For obvious reasons, if the Defendant, having agreed to pay a sum of money, for which the money in court could reasonably regarded as a security for payment (if only in part), subsequently defaults because, for example, it becomes insolvent, the Plaintiff's solicitors could expose themselves to an action for negligence at the suit of their client.

11. This Plaintiff was legally aided. Mr. Wong told me that the Director of Legal Aid had not been informed of the provision which effectively put at risk the Director's first charge on sums recovered. Had he been so informed I doubt very much whether he would have agreed to losing the security of a substantial part of the settlement sum by it being repaid to the Defendants or their solicitors. I am satisfied that there is a duty owed to the Director to acquaint him with such a proposed provision and seek his instructions.

12. Although Part IV of the Employees Compensation Ordinance enables a Plaintiff to pursue his judgment against the insurers, in the event of default in payment, there is always a possibility, if not probability, that the insurers would contend, with some force, that a sum of money which would largely have satisfied the judgment or settlement, was released back to the Defendant's control to the insurers' prejudice, with that obvious risk.

13. Fortunately payments under the Consent Order were made satisfactorily and no-one has in fact lost. However the imprudence remained. Furthermore it is entirely unjustified for a Defendant or his solicitors, having reached a settlement of a claim, to seek to impose as a condition of that settlement, such a provision in respect of the payment out of the money in court. Solicitors for a Plaintiff should never agree to such a provision and should apply to the court. Court officers must be vigilant to ensure that Consent Orders under order 42 rule 5A do not allow for such a provision concerning payment out of money to a Defendant.

(Conrad Seagroatt)

Judge of the High Court