CHO HO KUEN v. YU KWOK WAH AND OTHERS

CACV 480/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 480 OF 2000

(ON APPEAL FROM DCCJ NO. 117 OF 2000)

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J U D G M E N T

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Keith JA (giving the first judgment at the invitation of Mayo V-P):

Introduction

1. The Plaintiff's car was damaged in a road traffic accident. He claimed damages against the Defendants in the District Court. The claim was for $52,508.00. In due course, the Defendants paid the sum of $25,000.00 into court in full and final settlement of the Plaintiff's claim. The Plaintiff accepted that sum. It was common ground that the Plaintiff was entitled to "his costs of the action incurred up to the time of giving notice of acceptance" pursuant to Ord. 62 r. 10(2) of the Rules of the High Court (the new District Court Rules not having come into force at the material time). The question was whether the Plaintiff was entitled to have those costs taxed on the appropriate District Court scales, or whether the court had a discretion to direct that the Plaintiff's costs be assessed on some other basis.

2. The Defendants' case was that if the court had a discretion to direct that the costs be assessed on some other basis, such a direction should take into account the facts that (a) the sum which the Plaintiff ultimately accepted was well within the jurisdiction of the Small Claims Tribunal, which could make awards up to $50,000.00, and which had exclusive jurisdiction over claims made within its jurisdiction, and (b) had the claim proceeded in the Small Claims Tribunal, any order for costs in favour of the Plaintiff would have been very modest. Accordingly, the Defendants issued a summons seeking, amongst other things, an order that the Plaintiff's costs of the action be assessed as if the claim had been brought in the Small Claims Tribunal. Judge Yung dismissed that application. He held that the Plaintiff was entitled to have his costs taxed on the appropriate District Court scales, but that if the court had had a discretion to direct that the costs be assessed on some other basis, he would still have ordered that the Plaintiff's costs be taxed on the appropriate District Court scales. The Defendants now appeal to the Court of Appeal.

The entitlement to taxed costs as of right

3. Ord. 62 r. 10(2) provides (so far as is material):

"Where a plaintiff by notice in writing .... accepts money paid into court in satisfaction of the cause of action .... in respect of which he claims, .... he shall be entitled to his costs of the action incurred up to the time of giving notice of acceptance."

Although, therefore, the Plaintiff was entitled to his costs of the action up to when his solicitors notified the Defendants' solicitors that he was accepting the sum paid into court in full and final settlement of his claim, Ord. 62 r. 10(2) is silent as to how those costs are to be assessed. However, Ord. 62 r. 9(1) provides:

"Subject to this order, where by or under these rules or any order or direction of the Court costs are to be paid to any person, that person shall be entitled to his taxed costs."

The words "[s]ubject to this order" mean that where a party is entitled to its costs, it is entitled to taxed costs unless there is anything in Ord. 62 which provides otherwise. Thus, Ord. 62 r. 9(2) is an example of Ord. 62 r. 9(1) being expressly disapplied in the particular circumstances to which Ord. 62 r. 9(2) relates.

4. The rule on which the argument of Mr Paul Lam for the Defendants is based is Ord. 62 r. 9(4) which provides (so far as is material):

"The Court in awarding costs to any person may direct that, instead of taxed costs, that person shall be entitled

(a) to a proportion specified in the direction of the taxed costs or to the taxed costs from or up to a stage of the proceedings so specified; or

(b) to a gross sum so specified in lieu of taxed costs ...."

The argument is that if the court has the power to award a gross sum instead of taxed costs, it has the power to order that costs be assessed otherwise than on a taxation. I cannot go along with that argument. I rather doubt whether Ord. 62 r. 9(4) applies to the costs of the action to which Ord. 62 r. 10(2) relates because discretionary awards of costs made by the court are different from automatic awards of costs under the Rules. But even if Ord. 62 r. 9(4) applies to the costs of the action to which Ord. 62 r. 10(2) relates, I do not see how Ord. 62 r. 9(4) can apply to the present case. As for Ord. 62 r. 9(4)(a), it is not suggested that the Plaintiff should only have a proportion of the costs incurred by him prior to his acceptance of the sum paid into court. It is not disputed that he should have all those costs incurred by him up to that date. The issue is whether those costs should be limited to the costs which the Small Claims Tribunal would have awarded to him. As for Ord. 62 r. 9(4)(b), its purpose is to enable the court to award a gross sum as an alternative to taxed costs where the court thinks that it can properly assess the Plaintiff's costs without requiring the parties to go to the expense of a taxation: see Leary v. Leary [1987] 1 WLR 72 at p. 76A. I do not believe, therefore, that the court's power to award a gross sum can be used to deny a party its costs for work which would have been compensated by an award for taxed costs.

5. For these reasons, I conclude that the words "his costs of the action" in Ord. 62 r. 10(2), when read with Ord. 62 r. 9(1), refer to the party's taxed costs of the action, and the court has no discretion to direct that the costs be assessed on some other basis. I am confirmed in that view by the legislative history of Ord. 62 r. 10(2). Prior to its amendment in 1992, it read (so far as is material):

"If a plaintiff accepts money paid into court in satisfaction of the cause of action ... in respect of which he claims, ... he may, after 4 days from payment out and unless the Court otherwise orders, tax his costs incurred to the time of receipt of the notice of payment into court ..." (Emphasis supplied)

It is true that when the rule came to be amended, the reference to the taxation of the costs was removed, but that may have simply have been because the reference to taxation was unnecessary in the light of Ord. 62 r. 9(1). What is significant about the differences in Ord. 62 r. 9(1) before and after its amendment is that the words "unless the Court otherwise orders" were removed. That can only have been done to remove the discretion which the court would otherwise have had to direct that the Plaintiff's costs should not be taxed.

6. A similar view was taken by the English Court of Appeal in Hudson v. Elmbridge Borough Council [1991] 1 WLR 880 in relation to a similar amendment to the equivalent rule in the Rules of the Supreme Court in England. The court in that case was not addressing the question whether the Plaintiff was entitled to taxed costs, but the question whether the Plaintiff was entitled to its costs in respect of causes of action which had been abandoned. The Court of Appeal was unable to discern why the amendment had been made, and it concluded that the amendment might well produce injustice, but the effect of the amendment in removing any discretion which the court may have had was not in doubt.

7. I do not think that a plaintiff's entitlement to taxed costs on the acceptance of a payment into court necessarily results in injustice to a defendant. I appreciate that there may be cases, of which this is one, in which the defendant may not want to make a payment into court if the acceptance of the payment will automatically result in the plaintiff being entitled to his taxed costs. But the way to avoid that is by the defendant making his offer to settle the case in the form of a Calderbank letter, i.e. a letter marked "without prejudice save as to costs". I appreciate that a Calderbank letter will not usually be appropriate when the claim is simply for a sum of money: see Ord. 62 r. 5(d). But I do not see how the limitation on the circumstances in which a Calderbank letter may be used can apply to a case in which the defendant wishes to dispute what would automatically follow in terms of costs from the acceptance of money paid into court. If a defendant elects to make his offer to settle the case in the form of a payment into court, he has to accept that the plaintiff's entitlement to costs is to taxed costs.

8. There are two other points which I want to make. First, it should be remembered that what the Defendants ultimately want is an order that the Plaintiff's costs of the action be assessed as if the claim had been brought in the Small Claims Tribunal. In that connection, it is, I think, pertinent to observe that there is no provision in either the District Court Ordinance (Cap. 336) or the Small Claims Tribunal Ordinance (Cap. 338) restricting the entitlement to costs of a plaintiff who brings his claim in the District Court when the claim might more appropriately have been brought in the Small Claims Tribunal. That is to be contrasted with section 43(2) of the District Court Ordinance (as it then was prior to its recent replacement), which empowered the Court of First Instance to award costs only on the District Court scales when a claim brought in the Court of First Instance might have been more appropriately brought in the District Court.

9. Secondly, the issue which this appeal has raised was considered by Judge Li sitting in the District Court in his interesting judgment in Ho Kin Chung v. Tsang Hiu Sang [2001] 1 HKC 110. Judge Li was addressing Ord. 62 r. 10(5), which provides (so far as is material):

"In each of the circumstances mentioned in this rule an order for costs shall be deemed to have been made to the effect respectively described ..."

Relying on the judgment of Webster J in QBE Insurance (UK) Ltd v. Mediterranean Insurance and Reinsurance Co Ltd [1992] 1 WLR 573, Judge Li held at p. 121G-H that Ord. 62 r. 10(5) "does not take away the discretion of the court in appropriate cases to determine to what extent the costs are to be paid and direct taxation on a particular basis". I have reached a different conclusion from Judge Li. In the QBE case, the Plaintiff had commenced proceedings against two defendants. The Plaintiff accepted money paid into court by one defendant. The question was whether the Plaintiff was entitled to recover all of its costs against that defendant, even though some of its costs had been incurred in connection with its cause of action against the other defendant. Webster J construed the words "his costs of the action" in the English equivalent of Ord. 62 r. 10(2) as meaning "his costs of the action as against that defendant". He did so because he thought that the automatic right to costs without any further order should be construed strictly and in such a way as to avoid any possible injustice. However, the distinction between that case and both this case and the case being considered by Judge Li is that Webster J's case was a case in which the court was concerned with construing the words "his costs of the action". In the present case, the question is whether there is any provision which, on its proper construction, disapplies the application of Ord. 62 r. 9(1) to Ord. 62 r. 10(2). I do not regard Webster J's judgment as touching upon that issue at all.

Conclusion

10. For these reasons, I have concluded that the Plaintiff was entitled to have his costs taxed on the appropriate District Court scales, and for my part I would dismiss this appeal for that reason. In the circumstances, I do not propose to comment on whether, assuming that the judge had had a discretion to direct that the costs be assessed on some other basis, the judge should have exercised his discretion to direct that the costs be assessed as if the Plaintiff's claim had been brought in the Small Claims Tribunal.

Mayo V-P:

11. I agree with Keith JA's judgment. I am satisfied that O.62 r.10(2) is in clear terms and that no discretion is reposed in a judge to depart from the provisions of the rule.

12. O.62 r.9 does not assist the defendants in contending that any discretion is vested in the judge. It provides that costs must be taxed. It goes on to provide for situations where a judge can make orders which dispense with the necessity for taxations. This appears to me to be an entirely separate matter.

13. It makes good sense when litigants are considering whether or not to accept a payment which has been made into court that there should be an element of certainty on the subject of costs so that everyone knows exactly where they stand. It would have been obvious to the defendants that the plaintiff's costs relative to the amount being claimed would be significant. Having regard to the clear wording of O.62 r.10(2) they should have realized that by accepting the $25,000 paid into court they would have to pay the plaintiff's costs in the District Court action as taxed.

14. The appeal is accordingly dismissed with costs to the plaintiff.