ASSOCIATED ENGINEERS, LTD. v. LO CHEE PUI

HCA328/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.328 OF 2000

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J U D G M E N T

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1) The defendant had been working for the plaintiff since 1987. In 1999, he resigned and joined another company. The last position that he held with the plaintiff was the general manager of its Airport Engineering Services Division. On 11 January 2000, the plaintiff commenced the present proceedings against the defendant for breach of employment contract and fiduciary duty. The principal complaints were that he joined a rival company before leaving the plaintiff's employment and that he had transmitted confidential information to a director of that company. The statement of claim was amended on 14 April 2000. The plaintiff claimed for :

(1) a declaration that the defendant was in breach of the employment contract or alternatively his duty of fiduciary to the plaintiff;

(2) assessment of damages; and

(3) payment of the damages assessed.

The matter was listed for a nine-day trial due to commence on 7 January 2002.

2) On 8 December 2001, the defendant made a payment of HK$5,000 into court. The notice of payment expressly stated that the payment was in satisfaction of all the causes of action in respect of which the plaintiff claimed. The payment was accepted by the plaintiff on 21 December 2001. The notice of acceptance stated that the plaintiff accepted the payment in satisfaction of the causes of action in respect of which it was paid and in respect of which the plaintiff claimed against the defendant.

3) The trial date then was vacated by the court on 7 January 2002 upon the plaintiff's ex parte application. The defendant was informed of the same subsequently. Thereafter, the plaintiff prepared a bill of costs for the action and obtained an appointment for taxation to be heard on 7 May 2002.

4) Upon the defendant's application by a summons dated 2 May 2002, the master made an order on 11 June 2002, ordering that the plaintiff shall not be entitled to require its costs of the action to be taxed pursuant to Order 62, rule 10(2) of the Rules of the High Court and that the plaintiff's application for taxation of its costs of the action be dismissed, with costs to the defendant. This is an appeal by the plaintiff against the master's order.

Entitlement to costs and taxation

5) No party is entitled to recover any costs in the absence of a court order : Order 62, rule 3(1). And no taxation may take place without a costs order. However, if Order 62, rule 10 or 11 applies, the general rule is displaced. The party who avails of those rules is entitled automatically to costs and may proceed to taxation without any costs order. The question raised in this appeal is whether the plaintiff is entitled to invoke Order 62, rule 10(2), which provides :

"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."

Order 62, rule 10(2) bites only if the plaintiff accepted the payment into court by the defendant in accordance with Order 22, rule 3(1). That particular rule allows acceptance of payment into court under Order 22, rule 1. Thus, the ultimate question that I have to determine is whether the payment into court by the defendant was under Order 22, rule 1(1).

Whether payment made under Order 22, rule 1(1)

6) Order 22, rule 1(1) reads :

"In an action for a debt or damages any defendant may at any time pay into court a sum or sums of money in satisfaction of the cause of action in respect of which the plaintiff claims or, where two or more causes of action are joined in the action, a sum or sums of money in satisfaction of any or all of those causes of action."

7) It has along been accepted that the rule is not confined to actions for a debt or damages alone. It is equally applicable to actions where debt or damages are sought together with other relief : see Moon v. Dickinson (1890) 63 LT 371, at p.372 (on the old English rule) and Braden v. Emap Images Ltd, LTR 3, January 1997 (on the English rule upon the Hong Kong rule is modelled). Mr Liang took a similar stance in his written submissions but seemed to have suggested in the course of his oral submissions that on a proper construction, Order 22, rule 1(1) applies to an action for a debt or damages only. He referred to the old English Order 22, rule 1 and submitted that the change in wording in the present rule suggested that the latter applies to an action of a debt or damages only. The old English Order 22, rule 1 in essence provided that a defendant might make a payment into court by way of satisfaction, which should be taken to admit the claim or cause of action in respect of which the payment is made. The old rule differed from the present rule in two aspects. First, under the old rule, a payment into court shall be taken as an admission of the claim of cause of action in respect of which the payment was made. Under the present rule, no admission about the merits of the cause of action is implied : see A. Martin French v. Kingswood Hill Ltd [1961] 1 QB 96. Secondly, under the old rule, a payment could be made in satisfaction of either the claim or the cause of action. Under the present rule, the payment is made in satisfaction of the cause of action only. Despite the differences, there is nothing in the present rule (like the old rule) to confine it to an action to recover a debt or damages only, without seeking at the same time other relief. I would therefore rule that Order 22, rule 1(1) in its present form is applicable to actions where debt or damages are sought together with other relief.

8) But it does not follow that when debt or damages are claimed together with other relief, a payment into court is permissible under Order 22, rule 1(1) in satisfaction of any cause of action. On a plain reading of the rule, it is only permissible in satisfaction of the cause of action in respect of which the plaintiff claims a debt or damages. In a mixed claims scenario, Order 22, rule 1(1) applies thus :

(1) If the plaintiff is relying on separate causes of action in respect of the claims, the payment into court must be only in respect of the cause of action in respect of which the plaintiff claims a debt or damages. It cannot be made in satisfaction of other causes of action for other relief.

(2) If the plaintiff grounds the claims on the same cause of action, a payment into court in satisfaction of the cause of action cannot be made : Young v. Black Sluice Commissioners (1909) 73 JP 265, a decision on the old Order 22. There, the plaintiff alleged trespass against the defendant and claimed for a declaration, an injunction and damages. In other words, the plaintiff was relying on the same cause of action for different claims. The defendant made a payment into court to satisfy the plaintiff's claims in respect of the matters pleaded. It was held that as the payment could only be made in satisfaction of the claim for damages only, it did not come within the rule.

In scenario (2), to protect its position on costs, a defendant may avail itself of the practice of making a Calderbank offer.

9) The defendant's notice of payment is no doubt defective. Contrary to Mr Liang's submission, it purported to satisfy all the causes of action in respect of which the plaintiff claimed, including the declaratory relief. But the plaintiff is relying on the same causes of action, namely, breach of the employment contract or breach of duty of fidelity, to support its claims for a declaration and damages. Accordingly, the payment into did not fall within Order 22, rule 1.

10) Mr Coleman for the plaintiff submitted that the notice of payment clearly stated that it was made in satisfaction of all the causes of action in respect of which the plaintiff claimed. Once the payment was accepted on that basis, all the causes of action had been disposed of. The plaintiff was no longer able to maintain the claim for a declaration. In short, no cause of action survived to support the claim for a declaration, which was not a substantive and independent relief.

11) With respect, I am unable to accept Mr Coleman's submission for two reasons. First, if his submission were correct, the net result is that a payment into court in satisfaction of the cause of action in respect of which the plaintiff is seeking a declaration or indeed any relief other than a debt or damages is permissible under Order 22, rule 1(1). This is in flat contradiction of the clear wording of the rule and authorities. Second, while the plaintiff is certainly entitled to regard all the causes of action had in reality been disposed of after acceptance of the payment into court, it does not render the payment permissible under the rule in the first place.

Conclusion

12) For the above reasons, as the payment into court was not made in accordance with Order 22, rule 1(1), the plaintiff's acceptance could not possibly be made under Order 22, rule 3(1). Accordingly, the plaintiff is not entitled to invoke Order 62, rule 10(2). The learned master was therefore right in making the order. The question of costs is still at large. Before proceeding to taxation, the plaintiff must first obtain a costs order in its favour.

13) I will dismiss the appeal and make an order nisi that the costs of the appeal be to the defendant, to be taxed if not agreed. The order nisi is to be made absolute 14 days after handing down of this judgment.