LAI JIANXING v. SAKOMA (HK) LTD AND OTHERS

HCPI 757/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO 757 OF 2009

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BETWEEN

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R U L I N G

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1.  In the Judgment handed down on 9 September 2011, I decided that the plaintiff should be entitled to judgment against the 2^nd and 3^rd defendants in the sums of HK$250,570 and RMB474,668 plus interest. I also made an order nisi for the plaintiff’s costs of the action to be borne by the 2^nd and 3^rd defendants, to be taxed if not agreed.

2.  This is the 2^nd and 3^rd defendants’ application to vary the order nisi on costs on the ground that the plaintiff has failed to beat the sanctioned payment made on 15 September 2010.  The sanctioned payment in question was made in a lump sum in Hong Kong Dollars and was stated to be in settlement of the whole of the plaintiff’s claim. 

3.  Due to the fact that the judgment sum was partly awarded in RMB and the currency has risen in value in the past year, the main argument here centres on the date at which the rate of exchange for RMB should be adopted for the purpose of determining whether the plaintiff had managed to obtain a judgment better than the sanctioned payment. 

4.  It is the 2^nd and 3^rd defendants’ contention that the proper date for conversion should be the end of the 28‑day period allowed for acceptance of the sanctioned payment, being in this case, 13 October 2010.  The plaintiff, on the other hand, argued that the exchange rate at the date of judgment should be adopted.

5.  In my view, the defendants’ contention represents the correct position.  In the present case, part of the loss was incurred by the plaintiff in RMB (for example, his loss of income and miscellaneous items of expenses).  Thus, when the plaintiff was served with the notice informing him of the sanctioned payment in Hong Kong Dollars, to assess the adequacy or otherwise of the payment he would be expected to and must have applied the then prevailing conversion rate to evaluate the payment‑in.  His non‑acceptance of the payment within the 28 days would be deemed to be a rejection of the offer.  It is this rejection which is to be measured against the judgment eventually obtained.  It, therefore, makes proper sense to adopt the conversion rate applicable on the last day of the 28‑day period for the purpose of comparison. 

6.  On the other hand, I see no merit in the plaintiff’s argument for adopting the conversion rate at the date of judgment.  It is entirely fortuitous as to when the trial would take place and judgment be delivered.  In situations where the rates of exchange fluctuate, the approach of adopting the rate at judgment date would make it very difficult, if not impossible, for the parties to assess the adequacy or otherwise of their offers or payments.  Such an approach would relegate the regime of sanctioned offers and payments to little more than a game of chance, and as a result, undermine the objective of encouraging settlement of disputes among the parties. 

7.  In this connection, I do not believe the plaintiff can derive assistance by pointing to practice direction 16.2, paragraph 4, which provides that a payment into court may be made in foreign currency.  In practice, it would seem that RMB would not be accepted for payment‑in as it was apparently not possible for the registrar to open a High Court Suitors’ Fund Account in that currency.  But quite apart from that impracticality, it remains that when the payment‑in was made in Hong Kong Dollars purportedly in satisfaction of the whole of the plaintiff’s claim, it was inevitable that the plaintiff would have to evaluate that payment by applying the appropriate conversion rate.  The currency was never an issue between the parties whose negotiations had always been conducted on the basis of a lump sum offer in Hong Kong Dollars. 

8.  Applying the above principle and the RMB exchange rate as at 13 October 2010, the judgment obtained by the plaintiff in this Action is less favourable than the sanctioned payment.  Order 22, rule 23 is therefore engaged. 

9.  Order 22, rule 23(5) provides that unless the Court considers it unjust to do so, the Court shall make the orders referred to in paragraphs (2), (3) and (4) of the rule.  It is therefore necessary to consider whether there are circumstances making it unjust for the Court to give effect to the sanctions referred to in rule 23.

10.  I have taken note of the course of negotiations between the parties and the various sanctioned offers and payments before and after the sanctioned payment in question.    

11.  It transpires that on 18 January 2010, the plaintiff has made a sanctioned offer to settle his claim for a sum which is less than what he now obtained in judgment (“the January offer”).  As part and parcel of the offer, the defendants were asked to bear the plaintiff’s costs on High Court scale to be taxed.  In the same letter, the plaintiff’s solicitors indicated that they would be prepared to provide an estimate of their costs for the purpose of facilitating a global settlement.   

12.  The January offer was not accepted by the defendants. Instead, on 26 February 2010, the defendants counter‑offered a much smaller sum with costs to be taxed at the District Court scale.  The said sum was paid into court by way of a sanctioned payment on 3 March 2010.  The defendants had since increased the amount twice (on 1 April and 6 July 2010), but neither of these top‑ups had quite reached the level of the award eventually given in the Judgment. 

13.  On 12 July 2010, the plaintiff made another sanctioned offer which, as it now transpires, exceeded the judgment sum.  This offer was similarly made conditional on the defendants’ agreeing to bear the plaintiff’s costs on High Court scale. 

14.  In August 2010, the defendants counter-offered a sum of an amount equivalent to that paid into court on 15 September 2010, the subject of the sanctioned payment in question. 

15.  In considering whether the plaintiff should be visited with the sanctions imposed under rule 23(2), (3) and (4), the court is asked to take all circumstances into account: rule 23(6).  The factors set out in (a) to (d) of paragraph (6) are not exhaustive.

16.  In my view, the plaintiff’s January offer is clearly a material consideration.  Although I have not been provided with the relevant exchange rate, there does not appear to be any dispute that the plaintiff’s January offer (including interest calculated up to that time) would in fact have been lower than the award in the judgment. It means therefore that, apart from the issue relating to the scale of costs, the January offer should have been accepted by the defendants, and that if they had done so the action would have been brought to an end even before the defendants’ sanctioned payment in September 2010.  The only question therefore turns on whether the plaintiff was entitled to insist on costs on High Court scale in his January offer.

17.  In Lai Ki v B+B Construction Co Ltd [2003] 3 HKLRD 192 at 197, Seagroatt J cited the following passage in Glyn–Jones J’s judgment in Hopkins v Rees & Kirby Ltd [1959] 1 WLR 740 at 742:

“Putting myself as far as I can, in the position of the plaintiff at the time when he issued that writ, am I satisfied that it was then obvious that this was a county court action, or was it an action which, when tried by one judge rather than another, might have resulted in an award exceeding [the jurisdictional limit] excluding any reduction for contributory negligence?”

Seagroatt J then went on to say that:

“.... The acid test therefore has been, ignoring all questions of contributory negligence, has the plaintiff a reasonable prospect of recovering a sum of money in excess of the [District] Court jurisdiction?”

See also the observations of Suffiad J in Lam Wing Sum Monica v Tam Ka Kit Joe, HCPI 933 of 2005, at paragraphs 13 and 14.

18.  Similarly, in Wong Chi Ho Jack v Poon Yuk Shan, HCPI 910 of 2002, after referring to the above passages, Deputy High Court Judge Jat, SC said:

“28. ... The test, as I understand it, is an objective one, i.e. whether it would be obvious to a reasonable plaintiff or his legal adviser that the case was a District Court rather than High Court case. The subjective intent of the plaintiff and his legal advisers would not normally be relevant.”

19.  In the present case, quite apart from the general uncertainty relating to calculation of damages in a personal injuries action, one particular aspect of the plaintiff’s claim involves the assessment of the prospect of promotion, and also of demotion or dismissal. Quantification of such damages is notoriously difficult and different advisers could differ significantly.  It may also be noted that in the Judgment, although I had observed that there was a good prospect of the plaintiff’s promotion to the position as captain, I did not accept that the evidence was sufficient to establish that the promotion would have occurred before January 2011 (paragraphs 42 to 45, and 55 of the Judgment). This finding, of course, has had a not-insubstantial effect on the plaintiff’s claim for his pre‑ and post‑trial loss of earnings.  Thus, taking a broad view of the plaintiff’s claim as a whole, it cannot be said to be an obvious case that the award would necessarily fall within the District Court jurisdiction.  A legal adviser could justifiably have advised that there was reasonable prospect of the plaintiff recovering more than $1 million in this case.

20.  Accordingly, even though the amount of the plaintiff’s January offer was below $1 million, I do not think it was unreasonable for the plaintiff to make it a condition that costs should be paid on High Court scale.  I also think that the plaintiff’s solicitors’ offer to provide an estimate of the costs could have been received with a more constructive response from the defendants.  In other words, the defendants could and ought to have settled the action on the basis of such an offer. 

21.  The plaintiff, however, did not maintain his January offer.  As already noted, in July 2010 he increased his offer to a level which, as it now transpires, exceeded the award obtained.  He then refused to accept the sanctioned payment in question.   But even so, I do not think he is solely to blame for failing to settle the dispute.  The defendant was also partly responsible.  It is unfortunate that neither side had seized the opportunity to settle the matter before the costs escalated. The trial could and should have been avoided. 

22.  For the foregoing reasons, I think the fairest order to be made is to deprive the plaintiff of any interest payable under section 48 of the High Court Ordinance in respect of the period after 13 October 2011, and also of any costs incurred after that date.  In other words, the plaintiff will have the costs against the 2^nd and 3^rd defendants up to 13 October 2011 and the parties are to bear their own costs incurred thereafter.  I do not propose to make any orders referred to in paragraphs (3) and (4) of rule 23.

23.  For the avoidance of doubt, the order for costs of the 1^st defendant, having already been dealt with and sealed, is unaffected by this ruling. 

24.  As neither side has completely succeeded in this application, I would order that there be no order as to costs in respect thereof.  The plaintiff’s own costs are to be taxed in accordance with the Legal Aid Regulations.

25.  Lastly, I have been reminded that the Judgment is now subject to appeal, and matters concerning the sanctioned offers and payments should not be openly referred to: Order 59, rule 12A.  I would therefore direct that this ruling should not be published before the disposal of the substantive part of the appeal.  I trust that the parties’ advisers will ensure that Order 59, rule 12A will be observed.