SUNBEAM INVESTMENTS LTD v. MANNITOP INVESTMENT CO LTD

HCA1897/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1897 OF 2007

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D E C I S I O N

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1. By this summons the plaintiff submits that it must be granted an award of costs on the High Court scale because, in the particular circumstances which have arisen, the court has no discretion to do otherwise.  Should this primary submission fail, they submit that the court should exercise its discretion in favour of costs on the High Court scale.

2. The particular circumstance can be briefly stated as follows.  In 2006 the plaintiff commenced an action against its neighbour in the District Court for damages and injunctive relief.  For over a year it remained in the District Court.

3. However, in August 2007, by an order of the District Court it was transferred to the High Court.  The transfer was necessary because the District Court had no jurisdiction to grant the injunctive relief sought.  It is an agreed fact that the plaintiff’s solicitors had made a mistake when they commenced the proceedings in the District Court.  That mistake went unheeded until the transfer order in August 2007.

4. Soon thereafter the defendant paid $200,000 into court.  Soon after that the payment was accepted by the plaintiff.  The injunctive relief was not pursued upon certain undertakings being given by the defendant.

5. What now remains is an argument on the appropriate scale of costs in these circumstances.  There is no issue concerning the plaintiff’s entitlement to costs, neither is there any issue that the appropriate level of costs after the transfer of the case to the High Court should be on the High Court scale.

6. As to the costs incurred prior to the transfer (i.e. the bulk of the costs) the plaintiff submits that they too must be on the High Court scale.  The defendant on the other hand submits that the pre-transfer costs are in the court’s discretion and they should be on the District Court scale.

The plaintiff’s submission

7. In seeking to persuade the court that it has no discretion in this matter the plaintiff’s counsel Mr Paul Lam and his solicitors have carried out considerable legal research and formulated a detailed legal argument.

8. In essence the submission relies on two things.  Firstly, that Order 62 rule 10(2) applies to this situation and that section 44A(4) of the District Court Ordinance (Cap. 336) does not.  Secondly, that the decision in Wellegant Development Ltd v. Fine Telecom Ltd [2007] 2 HKC 427 was correctly decided.  In Wellegant Deputy Judge L. Chan decided that when a case was resolved by the acceptance of a payment-in Order 62 rule 10(2) meant that the plaintiff was entitled to all its costs on the scale of the court in which the action was listed.  There was no discretion to award any other scale.  Mr Lam acknowledged also that if his submission was correct the lack of discretion extended to the type of costs to be ordered.  In other words the court was compelled to award party and party costs.  It has no power to award, for example, indemnity costs.

9. Order 62 rule 10(2) provides as follows :

“Where a plaintiff by notice in writing in accordance with Order 22, rule 3(1), accepts money paid into court in satisfaction of the cause of action or of all the causes of action in respect of which he claims, or accepts money paid in satisfaction of one or more specified causes of action and gives notice that he abandons the others, he shall be entitled to his costs of the action incurred up to the time of giving notice of acceptance.”  [emphasis added]

10. I accept that Order 62 rule 10(2) gives such a plaintiff an automatic entitlement to costs. The issue (as decided in Wellegant in the affirmative) is whether the automatic entitlement to costs means an automatic entitlement to costs on a particular scale (and of a particular type).

11. In a contrasting case, Wong Lan v. Hong Chang Construction Transportation Engineering Co. Ltd, HCPI 973/2005, Fung J came to a different conclusion. The authorities conflict and neither are binding on this court.

12. Whilst I prefer the conclusion reached in the latter case it is not necessary for me to resolve the differences of judicial opinion for two reasons. Firstly, I do not accept the premise, upon which the plaintiff’s submission depends, that Order 62 rule 10(2) applies to our situation to the exclusion of section 44A, Cap. 336.  Secondly, neither authority cited concerns a situation, as does the present case, where a case has been transferred to the High Court from the District Court.  Such a situation is specifically dealt with in section 44A.  Not surprisingly, Mr Richard Khaw, counsel for the defendant, places heavy reliance on it.

Defendant’s submission

13. Cap. 336 section 44A(1)–(4) provide as follows :

14. Thus there is specific provision that where a case is transferred from the District Court to the High Court (section (1)(b)) costs are in the High Court’s discretion (section (3)) and the court may order different scales of costs for different parts of the proceedings (section (4)).

15. Mr Lam submits that this has no application to the present case because it is a “payment-in” situation therefore Order 62 rule 10 applies to the exclusion of section 44A and Wellegant takes away any discretion.

16. In my judgment, even assuming that Wellegant was correctly decided (an assumption I do not make) on an ordinary and sensible reading of section 44A I can see no basis for the submission that it does not apply.  It seems that the high water mark of Mr Lam’s argument is that because Order 62 rule 10(2) provides for “automatic” costs the court’s “power” in relation to costs is not engaged at all.

17. I do not agree.  Section 44A(4) confers a “power” in precisely the circumstances which prevail in this case.  That “power” does not disappear when a case is resolved by the acceptance of a payment-in.  The transfer happens first.  Section 44A must be engaged at that moment.  In my judgment there is neither any authority nor any cogent argument for the proposition that the statutory provision ceases to have any effect by virtue of a case being resolved by acceptance of a payment-in. 

18. In any event, I accept Mr Khaw’s submission that even if Wellegant was correctly decided and the entitlement to costs on the High Court scale is automatic by virtue of Order 62 rule 10(2) the RHC have to be read in conjunction with current legislation.  Order 62 rule 2(3) expressly caters for this situation and provides that :

“This Order shall have effect subject to the provisions of the District Court Ordinance (Cap. 336) and to any rules thereafter and to any other enactment.”

19. Mr Lam sensibly conceded that should his submission that section 44A has no application in this case fail then the court did have a discretion in the matter and the only remaining issue was how that discretion should be exercised.

Discretion

20. In my discretion the costs in this case should be on the District Court scale up to the time of transfer to the High Court.  After the transfer they should be on the High Court scale. 

21. The factors which have led me to exercise my discretion in this way are as follows :

22. In answer to the plaintiff’s summons dated 5 November 2007 I make an order in accordance with paragraph 20 of this decision.  The costs of the summons shall be to the defendant to be taxed if not agreed.