LI LAI FUN v. CHAN YAN

Courts, practice and procedure - costs - exercise of discretion as to costs where the damages awarded to the plaintiff exceed the amount paid into Court by the defendant under O.22, r.1 by reason only of a further claim added by an amendment allowed at the trial (Cheeseman v. Bowaters Ltd. [1971] 1 WLR 1773 applied).

IN THE COURT OF APPEAL

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J U D G M E N T

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Fuad, V.-P.:

1. This appeal arises out of a personal injuries action tried by Judge Ryan sitting as a Deputy Judge of the High Court. It concerns the quantum of the judge's award of special damages to the Plaintiff in respect of part of her loss of earnings, and his order for the costs of the action. His judgment is dated 3 May 1988.

2. Leading Counsel who represent the parties before us, Mr. Robert Tang for the Plaintiff and Mr. Kemal Bokhary for the Defendant, did not appear in the Court below.

3. The Plaintiff, Madam Li Lai Fun, is a Canadian citizen. She came to Hong Kong in mid-October 1984 to visit her parents and to make arrangements for her marriage. She had been intending to return to Canada on 14 December 1984 after her marriage.

4. Sadly, on 6 December she was knocked down by a motor-cycle ridden by the Defendant while she was walking along the side of a road in Fanling. She was taken to hospital and her left leg was found to be fractured in two places. She also had a bad bruise on her head. The fractures were secured by a plate and screws and her leg was put into a plaster cast.

5. Madam Li was able to leave hospital on 19 December. At first she needed two crutches to help her to walk. She was able to discard one crutch in July 1985 and the other in October of the same year. She had to have another operation on 23 June 1987 for the removal of the Plate.

6. The judge's award of damages was made partly in Canadian dollars and partly in Hong Kong dollars. For convenience, throughout this judgment, I have converted. amounts expressed by the judge in Canadian dollars into Hong Kong dollars at the uniform rate of exchange of HK$6.3 to one Canadian dollar, the reed governing rate

7. The judge awarded Madam Li $40,000 as general damages and $310,856.26 special damages (of which sum $93,657.15 had been agreed). The total award therefore was $350,856.26. I would mention here that no account seems to have been taken, when assessing her loss of earnings, of her income tax liability. There is no issue before us on this point.

8. One of the issues on this appeal makes it necessary to go into the way that the plaintiff's claim for damages was originally formulated and later re-formulated. The writ, indorsed with a Statement of Claim was issued on 13 January 1987. The plaintiff's claim was for $4,950 In respect of medical expenses etc. and for $88,707.15 being loss of earnings for the period 15 December 1984 to October 1985, making a total of $93,657.15 special damages.

9. On 28 January 1988 the Plaintiff's' solicitors wrote to the Defendant's solicitors enclosing a Statement of Claim with draft amendments, leave to make which would be sought on the first day of the trial. The proposed amendments added two new claims to the particulars of special damages. The first was for $261,198 under the heading: "Loss of future earnings and/or earning capacity" and was set out in the following way:

"Since November 1985, the Plaintiff worked as an instructor of hair dressing with a monthly salary of HK$3,580.00 (equivalent to CA $639.28). The plaintiff complains on weakness on her left leg and of the residual pain. The Plaintiff therefore cannot probably resume the work as waitress, which requires of her to stand all the time. The plaintiff aged 29 years. The plaintiff will return to Canada and work as a hairdresser, which occupation will give her above CA$650.00 a month. The Plaintiff suffers loss of earning each month at the region of CA$691.00 (i.e. CA$1,341.00 CA$650.00) CA$691.00 x 12 x 5."

10. There was considerable confusion of thought by the draftsman of this proposed amendment because any claim for special damages in respect of reduced earnings should have been limited to the period between the dates of the accident and of the trial. Loss of future earnings (as the loss of Madam Li's earning capacity) should, of course, have been claimed as part of the general damages. The draftsman overlooked the essential difference between these two types of loss. I will have to refer to this draft p_leading again later.

11. The second new claim intimated on 28 January 1988 was for $8,448.30 expressed to be for "Loss of future earnings in the month of March or April 1987 when the second operation was performed".

12. On 4 March 1988 the Defendant paid $195,000 into Court and gave due notice to Me Plaintiff. This was an effective payment in because the Plaintiff hit more than 14 days, the time prescribed by RSC O.22, r.3(1), within which to accept the money paid in if she wished to do so, the trial having been fixed to begin on 15 April 1988.

13. On 12 April 1988 the Plaintiff's solicitors wrote to their opponents sending a different draft of a proposed Statement of Claim asking them to ignore the draft sent in January and putting them on notice that leave to amend in accordance with the new draft would be sought at the start of the trial. On the same day they sent particulars of the Plaintiff's claim in obedience to the relevant Practice Direction.

14. The particulars given in the new draft Statement of Claim and those given under the Practice Direction were virtually identical and I will deal with them together. The particulars were set out in four Schedules:

Schedule I: related to special damages totalling $93,657.15 for loss of earnings and medical expenses etc. as originally claimed;

Schedule II: related to partial loss of earnings from 20 November 1985 to 27 November 1987 amounting to $101,858.40;

Schedule III: related to total loss of earnings during the period of the 2nd operation from 23 June to 31 August 1987, quantified at $19,008.68;

Schedule IV: related to future loss of earnings at the rate of $4,353,30 per month.

15. Later on the same day (12 April) the Defendant's solicitors gave notice under the Practice Direction that while the sums claimed by the Plaintiff in Schedule I were agreed, those featuring in Schedules II, III and IV were not.

16. On the first day of the trial, which it will be recalled pas 15 April 1988, the judge granted Plaintiff to amend her Statement of Claim in the form that had been intimated three days earlier. The application to amend had been objected to but no complaint about the exercise the judge's discretion regarding this amendment. The hearing of evidence then began.

17. Madam Li, who had been employed as a waitress in the coffee shop of an hotel in Canada before she left to come to Hong Kong, gave evidence on the first day of the trial about the tips she used to be given her by customers during the ordinary course of her duties. She was cross-examined on the subject. On the second day of the hearing her Counsel applied for leave to re-amend the Statement off Claim to cover the tip she had lost in addition to her lost wages, as part of her loss of earnings.

18. Counsel for the Defendant strongly opposed this application. He pointed at that no mention had been made of Madam Li's tips in any of the correspondence, pleadings or documents emanating from her solicitors before the trial nor bad a claim based on her tips been included in the on amended Statement of Claim, leave to amend which was given before the evidence began. Counsel submitted that if the leave now sought to further amend the Statement of Claim were granted, the Defendant would be in no position effectively to challenge the new claim; and this late amendment would be grossly unfair to his client.

19. The judge allowed the further amendment and as a result the special damages Madam Li was permitted to claim was inflated by $192,654. In the event the judge awarded Madam Li $96,327 in respect of the tips she would have received in her work as a waitress.

20. By his Notice of Appeal the Defendant had stated that the judge should not have entertained a head of damage based on Madam Li's tips because the necessary re-amendment of the Statement of Claim was "by a wholly erroneous exercise of discretion", but this ground of appeal has been abandoned.

21. The Defendant seeks to challenge the amount awarded to Madam Li it respect of her tips. This is what the judge said on the subject on his reserved judgment:

"It is not disputed that she was in receipt of monthly wages of CA$1,341.00 from the Holiday Inn. In addition the plaintiff pave evidence of receiving on average CA$40 per day in tips. There is no documentary evidence of the quantum of the tips although the plaintiff's tax return for 1984 does show a figure returned of CA$1,700.00 for a nine month period. This computes to CA$188.00 per month as compared with the plaintiff's claim to CA$880 per month. The plaintiff's explanation for this is that in accordance with the usual practice she only returned the amount of tips received through credit cards and did not return the amount of the cash tips. I accept that this was probably true but I do not accept that the plaintiff was in receipt of tips to a value of about two-thirds of her basic salary. In the absence of documentary evidence I can only make an educated guess as to the rue figure. I propose to allow a claim for tips based on a figure of CA$440 per month."

22. The way the matter was put in the Notice of Appeal is as follows:

"(iii) the amount claimed was contradicted by the Plaintiff's tax return;

(iv) the plaintiff's explanation for such contradiction was, in effect, that she was making false returns;

(v) the learned Judge did not accept her evidence as to the amount of tips she received;

(vi) he thereupon made what he described as 'an educated guess as to the true figure';

(vii) this educated guess happens to be, precisely half of what is asserted but not accepted;

(viii) on the strength of such guess the Defendant is ordered to pay precisely CA$15,290.00 or HK$96,327.00."

23. There was a cross-appeal by the Plaintiff to the effect that the judge should have given ber the full amount she had claimed in respect of tips, but this has been withdrawn by leave.

24. Before us, Mr. Bokhary cited a decision of this Court: Ho Lai Ping and Another v. Chiang Ying Cheng and Another [1979] HKLR 596. That concerned an assessment of damages under the Fatal Accidents Ordinance. As to the Registrar's assessment of the dependency of the deceased is parents brothers and sisters, Huggins, J.A. who gave the leading judgment, had this to say at p.598:

"What has caused all of us trouble was the award in respect of the parents and the brothers and sisters. The learned Registrar took a dependency of $1,500 a month and he arrived at the figure of $108,000. He disbelieved the evidence of the mother in respect of the figures here and came to the conclusion that although he believed that there was some dependency he was unable to say exactly how much. In my view that is not enough: it is essential for the Plaintiff to establish the degree of dependency or else to be satisfied with a merely nominal sum."

I will return to this case again presently.

25. Any claim for special damages must, of course, be established by evidence which satisfies the civil standard of proof. It seems to me that every case which involves an assessment of the tips a waiter or waitress has: lost by reason of the Defendant's negligence will present the judge with a difficult task. It is a matter of common knowledge that in most restaurants throughout the world waitresses do receive tips and that often wages in this trade are fixed on the assumption that they will be enhanced by tips.

26. While actual wages are capable of Precise proof it would not, I think, be right to expect the same particularity where tips are concerned. Necessarily, only estimates, however honest and reasonable, can be given. Customers vary in their generosity and no one can he certain how busy a restaurant will be throughout any "relevant period.

27. If a waitress declares all her tips for income tax purposes it will, no doubt, make it easier for her to prove her loss. If she does not, her task becomes more difficult and the judge will take into account, when assessing her credibility, that she has not been wholly hottest in her dealings with the revenue authorities.

28. It is clear from the passage of the judgment I have just read, that the judge believed Madam Li when she said she did regularly receive tips in her work and that she received more in tips than she declared in her income tax returns with respect to Mr. Bokhary, I think he has perhaps made a little too much of the judge's unfortunate use of the words: "I can only make an educated guess as to the true figure". To my mind thejudge has demonstrated that he was doing the best that he could in all the circumstances to quantify a sum that it would be reasonable to require the Defendant to pay in respect of losses of tips, as pant of her earnings that Madam Li undoubtedly suffered. By what he said the judge must betaken to have been satisfied that Madam Li had lost the equivalent of at least $2,772 per month from that source although he could not be certain how much more.

29. I think that what happened here can be distinguished from the facts which founded the Court of Appeal's decision in Ho Lai Ping's case if my analysis of the evidence before the judge arid his treatment of it is valid. Everything will depend on the nature of the evidence adduced and I do not think that this case helps the Defendant.

30. In my judgment, the judge's approach was realistic and fair to both the parties and I would not disturb his assessment.

31. I now turn to the remaning ground of appeal which relates to costs. The judge heard argument on the appropriate order to make after he delivered his reserved judgment. Counsel for the Defendant invited the judge to make an order that Madam Li have her costs of the action up to the time money was paid into Court (23 March 1988) and that the Defendant have his costs incurred after that date. The judge declined to make such an order and instead merely ordered that Madam Li have, the costs of the action. No reasons are recorded and we are, told that all he did was to indicate that nothing had been said before him that would persuade him to deprive the plaintiff of the whole costs of the action.

32. The Defendant now appeals against that order and it is submitted that the judge should have made a costs order in the form asked of him on behalf of the Defendant.

33. As indicated by the figures I have earlier given, if judgment had been entered on the basis of the formulation in the original Statement of claim (13 January 1987) $93,657.15 would have been awarded as special damages. When one adds the $40,000 general damages given by the judge to that sum, one reaches $133,657.15. Even when appropriate interest is taken into account the judgment sum would have fallen far short of the sum paid in.

34. I would mention here that Counsel for the Plaintiff agreed at the trial that the sum awarded to Madam Li in respect of tips ($96,327) made possible by the re-amended Statement of claim should not he taken into account in her favour when the question of costs was being considered in the light of the payment in.

35. If, then, the sums awarded in respect of Madam Li's tips are ignored, as a result of the amendment to the Statement of Claim allowed on the first day of the trial, the judgment sum would have been $254,529.26, well  above the amount paid not Court.

36. In support of his submission on behalf of the Defendant that he was entitled to his costs as from the date of payment in, Counsel had relied before the judge (as Mr. Bokhary now does before us) upon Cheeseman v. Bowaters Ltd. [1971] 1 WLR 1773. There an employee claimed damages from his employers for the injuries which he sustained as a result of their admitted negligence. Apart from general damages, the employee claimed special damages in respect of three periods during which he was not able to work. The employers paid £750 into Court. At the trial the employee was allowed to amend his Statement of Claim so that it included a claim for damages in relation to a fourth period when he was off work. He was also given leave to amend so he could claim extra damages in respect of his accelerated retirement which was forced on him by the injuries. It is not necessary to say more about that aspect of his claim.

37. The three periods which had been pleaded in the un-amended Statement of Claim involved a loss of wages to the plaintiff totalling £349 15s. 6d.. He was awarded $400 general damages. This came to a total of $749 15s. 6d., only 4s. 6d. less than the amount paid into Court. About the proper order for costs, Davies, L.J., who pave the leading judgment in the Court of Appeal (Karminski, L.J. and Stamp, L. J. Agreed with him.) had this to say:

" What is contended by the defendants is that on the pleaded case the plaintiff recovered less than the amount in court - less by a small amount of course but less and that in those circumstances the defendants ought to have the costs or at any rate, ought not to have to pay the costs after the date of payment in.

The extra £700 (approximately) which the judge awarded was in respect of these two other matters, the fourth period of being off work and the accelerated retirement, neither of which formed any part of the Plaintiff's pleaded case. Mr. Joseph sought valiantly to say that the defendants ought at any rate to have anticipated a claim in respect of the October - December being off work must have known that the plaintiff was off work. There is not much force in that contention. There is nothing at all in the case which should have made them anticipate the claim in respect of the accelerated retirement.

On the whole of the case I have come to the conclusion that the contention for the defendants is correct, namely, that the judge ought to have made the standard order which is normally made when the plaintiff fails to recover more than the amount in court. It is true that the plaintiff did recover more. But this was on a completely new case which necessitated one amendment and ought to have resulted in another amendment which was not made. Therefore in my view, the fudge should have made the usual order.

38. Mr^. Tamg submitted that the decision in Cheeseman v. Bowaters. Ltd. was An exception to the general rule that a successful party recovers all his costs, and that it was founded on the fact that in that case there had been no earlier intimation of any kind that a claim would be advanced at the trial for which an amendment of the Statement of Claim would be necessary in relation to the plaintiff's fourth spell off work. He drew our attention to what Davies, L.J. said at p.1176, D-E of the report: "There was in the Statement of Claim a claim for three periods of being off work, and three periods only. There was no reference to any other period, and no amendment by correspondence." Mr. Tang also pointed out that the Lord Justice had, mentioned claims that the defendant could not have anticipated in the passage of his judgment at n.1779 A-C that I have just read.

39. Here, Mr. Tang submits, the draft sent on 28 January 1988, though not well drawn was clear enough to put the Defendant on notice of a claim for loss of partial earnings in respect of the time during which Madam Li was working in the hairdressing salon in Hong Kong at a salary lower than she had been earning Canada. This, coupled with the documents included in the hearsay notice, gave the Defendant all the information he needed to assess what sum he should pay into Court. Indeed, Mr Tang suggests the size of the sum the Defendant chose to pay in on 23 March 1988 made it plain that he must have taken this claim into account. It was far more than the total of the special damages which had been claimed from the start when added to the sort of award the judge was likely to make in respect of general damages for pain and suffering in the light of Madam Li's injuries.

40. As to the proposed amen to the Statement of Claim of which notice was given on 28 January 1988, I am bound to say that I find it extremely confusing and it seems to me that although the draftsman mentioned that Madam Li had been working as a waitress in Hong Kong the claim if it could be understood at all, was in respect of the loss she returned on a date unknown to Canada, because the sum Canadian dollars and is quantified upon the basis of a what she was likely to earn there, rather than upon what she was in fact earning in Hong Kong. Part of the sum claimed over the five-year period must have been for Madam Li’s loss of future earnings, and the judge awarded no general damages to compensate her for such a loss.

41. The Defendant had, it is true, also received the hearsay documents but these would have been of very little help indeed in assessing what sum of money to pay in. Even if it is said that the Defendant shold have anticipated a larger award it is not surprising that here relied on the case as pleaded when he paid money into Court and upon that basis in my judgment $195,000 was an entirely reasonable sum.

42. When the new draft of the Statement of Claim was claims sent on 12 April 1988, formulating the enhanced claims properly for the first time it was too late for too Defendant effectively to increase the sum the Plaintiff would not have had by O.22, r.3(1) to accept the increased payment in.

43. No doubt, to save some costs, the Defendant could have paid more money into Court after the hearing had begun, under O.22, r.1, once the judge's decision to grant leave to amend had been announced, but I do not think it would be right to deprive the Defendant of the full benefit of the payment in on that account. It is to be noticed that no mention was made in Cheeseman v. Bowaters of this possible course of action, although the rules then in force permitted payment in during a trial.

The learned authors of the White Book have noted Cheeseman v. Bowaters Ltd. in paragraph 22/5/4 in this way:

"Where an amendment is allowed at the trial to enable the plaintiff to add fresh allegations of damage the discretion as to costs must be exercised by reference to the case as originally pleaded and not as so amended, and therefore if the damages awarded are less than the amount of the Payment in on the basis of the original case as pleaded even though they exceed such amount on the basis of the new case as amended, the defendant will be entitled to costs after the payment in."

44. With due respect, it may be that the use of the expression "must be exercised" is putting it high for there may be grounds for not following t he practice approved in that case (for example, by reason of the conduct of the defendant's case) in the exercise of the judge's overall discretion in matters of costs. It has also to be borne in mind that O.62, r.5(b) expressly provides that "to such extent, if any, as may be appropriate" a judge must take into account the fact and amount of any Payment in when deciding how to exercise his discretion as to costs.

45. Everything will depend on the particular facts of each case. I do not say that it would be improper for a judge to award a successful plaintiff all his costs where clear and properly formulated additional claims are Intimated in good time before an action is to be heard. It will be a factor he will take into account. However in all the circumstances of this case. I am pot persuaded that there were any grounds upon which a discretion could properly have been exercised to depart from the practice laid downy in Cheeseman v.Bowaters Ltd. which, in my opinion, is eminently fair.

46. For these reasons, I would allow the appeal to the extent only of varying the judge's order as to costs so that the Defendant becomes entitled to his costs as from the date of the payment in. The cross-appeal remains to be formally dismissed.

Cons, V.-P.:

47. I have had the advantage during the short adjournment of discussing with my Lord the substance of his conclusions upon the two matters which remain in this appeal. I can simply say that I am in full agreement with him and with the order that be Proposes.

Clough, J.A.:

48. I also agree.