CHEUNG MEI PO v. CHAN YU CHING, ALEXS

HCPI 71/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 71 OF 2010

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BETWEEN

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R U L I N G S

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The Defendant’s application

1.  By the writ issued on 20 February 2010, the Plaintiff claimed the Defendant for personal injuries arising from a traffic accident on 21 February 2007.  By her Statement of Damages, the Plaintiff claimed a total of $2,321,370 plus interest.

2.  On 15 March 2010, the Defendant paid the sum of $280,000 into Court.  On 24 June 2010, the Defendant paid a further sum of $100,000 making a total payment of $380,000 into Court.  On 12 July 2010, the Plaintiff accepted the Sanctioned Payments totaling $380,000.

3.  On 14 February 2011, the Plaintiff filed a Notice of Commencement of Taxation of costs and a Bill of Costs in the sum of about $275,975, drawn up on the District Court scale of costs.

4.  On 3 March 2011, the Defendant issued Summons, amended on 11 April 2011 with the Court’s leave, for an Order that:

“Each party pays her or his own costs in this action, or in the alternative, P’s costs in relation to the following claims be disallowed:

(a) Pre-trial loss of earnings;

(b) loss of future earnings; and

(c) loss of MPF;”

5.  The application is supported by the 2^nd Affidavit of Chan Miu Lan Anita dated 23 March 2011 and is opposed by an affirmation of Wong Ka Hing dated 6 April 2011.

6.  The Defendant relies on Order 22 rule 20(1) and Order 62 rule 5(1)(e) and (2) of the Rules of the High Court, Cap. 4.

The Court’s jurisdiction and discretion on costs on acceptance of Sanctioned Payment

The present statutory regime

7.  Order 22, rule 20(1) provides that:

“Where a defendant’s sanctioned offered or sanctioned payment to settle the whole claim is accepted without requiring the leave of the Court, the plaintiff is entitled to his costs of the proceedings up to the date of serving notice of acceptance, unless the Court otherwise orders.”

8.  Order 62, rule 5(1)(e) provides that:

“The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account … the conduct of all the parties.”

9.  Order 62, rule 5(2) provides that the conduct of the parties includes:

“(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.”

10.  Order 62, rule 10(5) provides that:

“In the circumstances mentioned in this rule, Order 22, rule 20 and 21 and Order 25, rule 1C(6) an order for costs shall be deemed to have been made to the effect described and, for the purposes of section 49 of the Ordinance, the order shall be deemed to have been entered up on the date on which the event which gave rise to the entitlement to costs occurred.”

The pre-CJR regime

11.  The old Order 22, rule 3(1) provided that the Plaintiff may accept a payment into Court.  The costs consequence of doing so was set out in the old Order 62, rule 10(2) which provided that:

“Where a plaintiff by notice in writing in accordance with Order 22, rule 3(1), accepts money paid into account 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.”

12.  Under the old rule, the Court did not have any discretion to vary the costs event.

The present English rules

13.  While the present Hong Kong rules are modeled on the present English Civil Procedure Rules, there are material differences in this respect.  Part 36.13(1) provides that:

“Where a Part 36 offer or a Part 36 payment is accepted without needing the permission of the court the claimant will be entitled to his costs of the proceedings up to the date of serving notice of the acceptance.”

14.  The English Court does not have any discretion under this rule.

The issue

15.  It is accepted that pursuant to Order 22, rule 20(1), while a plaintiff will usually be entitled to costs, the Court has a general discretion on costs.  The Court’s jurisdiction is not disputed by the Plaintiff.  The issue is how the Court should exercise the discretion.

16.  The Plaintiff contested that the Court’s discretion should only be exercised in compelling and exceptional circumstance.  The Plaintiff relies on the Australian Federal Court’s decision in Donald John Wills and Heather Reney Wills v BigMac Pty Ltd and Ford Motor Company of Australia Ltd (19 December 1994, unreported, Heerey J) and the English Court of Appeal’s decision in Glenlion Construction Ltd v Beaverfoam (Moreton) Ltd (1983) 134 Fam Law 861.

17.  The Defendant did not agree that the Court’s discretion should only be exercised in compelling and exceptional circumstance, although he contended, in any event, there is compelling and exceptional circumstance.

18.  An important element in facilitating proper consideration of a payment in is certainty as to the costs consequence.  Were this not so, parties might be inhibited from accepting otherwise reasonable offers because of uncertainty as to the costs consequence.  The effectiveness of Order 22 in promoting settlement of litigation would be diminished.  What is more, if the costs consequence may be varied as a routine matter, the Court will be inundated with applications in which the Court has to go into all the facts and merits of cases.  For the above reasons, in this case, I am prepared to hold that the Court’s discretion should only be exercised in compelling and exceptional circumstance. Hence, in order to be successful in this application, the Defendant has to prove the existence of compelling and exceptional circumstance.

19.  By and large, the following background facts are undisputed, or undisputable.

The background facts

The accident and the Plaintiff’s injuries

20.  On 21 February 2007, the Plaintiff was a passenger of a taxi which was travelling along the Yuen Long bound of Kam Tin Road and had a collision with the Defendant’s taxi when the Defendant’s taxi cut into Plaintiff’s lane from the opposite lane.  The Defendant’s liability was undisputed.

21.  The Plaintiff suffered a head injury with a 1 cm laceration wound over upper lip and sprained right wrist.  There was no loss of consciousness after the accident.  She first attended the Accident and Emergency Department of North District Hospital.  Skull X-ray and X-ray of right knee were taken which showed no fracture.  She was given suturing treatment to lip laceration and referred to dental clinic for further management of the loosen incisor.  She was discharged from hospital and granted 8 days sick leave.  The Plaintiff attended the Kam Tin Clinic on 28 February 2007.  She made complaint of on-going back and neck pain after the traffic accident and right shin and right knee, lip, chin, thumbs injuries.  Physical examination revealed bruises over chin, shins.  There was tenderness over shins, thumbs.  The neurological examination was unremarkable.  Analgesics were given.  Then the Plaintiff visited the Tuen Mun Clinic for several times.  She complained of nightmare after the injury, insomnia, dizziness, neck and back pain and lower limb pain.  She said she was not able to resume work because of the symptoms and requested further sick leave.  Physical examination on 3 March 2007 showed that she walked with a stick and could not squat.  Spine flexion was limited, but cervical spine, knees and hands showed full range of movement.  The Plaintiff started to visit the Department of Family Medicine, Yuen Long Jockey Club Health Centre on 10 March 2007.  She said she still felt neck, back, lower limbs and hands pain.  Medical examination showed that she walked unaided, spinal flexion to 45 degree, neck and knees movement was full, hands and fists also full range of movement and able to make a fist.  Medical examination done during her visit on 17 May 2007 showed the gait was normal, there was no back tenderness, lower limb power of grade 5 (full power), and straight leg raising was 70 degree in both legs.  She was given topical and oral analgesic for pain control.

22.  The Plaintiff has been granted with sick leaves for a total of 325 days from 21 February 2007 to 11 January 2008.

Pre-action negotiations and communications between solicitors

23.  By a pre-action demand letter from her solicitors dated 13 May 2009, the Plaintiff alleged that: -

(a)   prior to the accident, she was employed as an assistant manageress in Fu Lum Group restaurants with average monthly income of $8,867;

(b)   she was granted sick leave of 325 days from the date of accident on 21 February 2007 up to 11 January 2008; and

(c)   she had not returned to work since the accident.

She produced the sick leave certificates up to 11 January 2008 and various medical reports in support.

24.  The Defendant requested the Plaintiff’s solicitors to provide quantification of damages for consideration.  At the same time, the Defendant engaged an investigation to conduct surveillance on the Plaintiff to find out if she was not working as alleged. 

25.  By a letter dated 6 July 2009, the Plaintiff quantified her damages at $1,846,950 and claimed, among other things, that: -

(a)   she suffered full loss of earnings during the sick leave period of 325 days at the rate of $8,867 a month in the sum of $94,484; and

(b)   she was only capable of working as a part time dish-washer in restaurants with an unstable wage of not more than $3,200 a month and so her loss of future earnings for 16 years would be $1,088,064 [($8,867 - $3,200) x 12 x 16].

She offered to accept $1.8 million plus costs of $35,000.

26.  The surveillance showed that: -

(a)   on 20 July 2009;

(b)   on 21 July 2009; and

(c)   on 22 July 2009

the Plaintiff was working as a waitress at a restaurant known as Camanna (Chiu Chow) Restaurant, Kowloon City.  Until the Defendant’s solicitors took out the present application, the Plaintiff did not know that they had conducted surveillance on the Plaintiff.

27.  On 13 August 2009, the Defendant tendered a cheque for $150,000 plus costs for settlement which was rejected.

28.  The offer was increased to $200,000 on 27 August 2009.  The Plaintiff rejected the offer and alleged that: -

(a)   she suffered severe injury;

(b)   she was granted continuous sick leave for one year; and

(c)   she was suffering from psychiatric problems of post-traumatic stress disorder as a result of the accident.

She counter-offered $1.6 million plus costs of $50,000.

29.  On 17 September 2009, the Defendant increased its offer to $280,000.  The next day after the offer was made, the Plaintiff counter-offered $850,000 all inclusive, stating that it was her final offer.

30.  The Defendant requested the Plaintiff to produce the medical notes by the treating hospitals/clinics/doctors and income proof documents.

31.  The Plaintiff failed to produce the documents as requested but only sent the Defendant a few receipts for medical expenses.

32.  When the Defendant pressed on for documentary proof, the Plaintiff produced a certificate purportedly issued by the Cheung Sha Wan branch of Fu Lam Fisherman Wharf dated 22 October 2007 stating that: -

(a)   the Plaintiff started to work for them from 1 September 2006;

(b)   as an assistant supervisor; and

(c)   her monthly income was $8,800.

33.  The certificate did not specify whether the Plaintiff had ceased working for them and if so, when and why.

34.  By a letter dated 6 October 2009, the Defendant requested the Plaintiff to produce salary records, tax returns, MPF statements and her bank accounts statements to prove her alleged pre-accident income.

35.  The Plaintiff did not provide the income proof documents as requested but just repeated her final offer of $850,000 by a letter dated 13 October 2009.

36.  By another letter dated 16 October 2009, the Plaintiff produced some MPF Annual Member Benefit Statements for the period from 1 July 2006 to 30 June 2007.  The documents disclosed 3 MPF schemes as follows: -

(a)   Hang Seng Mandatory Provident Fund – Supertrust scheme

-employer ID was 30702464;

-employer name was Fu Lam Fisherman Wharf; and

-the date for joining the scheme was 1 September 2006.

(b)   Hang Seng Mandatory Provident Fund – Supertrust scheme

-scheme ID was 39999972;

-scheme name was Hang Seng Supertrust Preserved Account Holder; and

-Account Commencement dated: 18 February 2004.

(c)   Hang Seng MPF scheme

-employer ID was 30262712;

-employer name was 聯盈國際發展有限公司; and

-date of commencement of employment was 1 April 2006.

37.  The Defendant pressed on the Plaintiff to disclose the missing documents by a letter dated 21 October 2009.  By a letter dated 22 October 2009, the Plaintiff replied that she had: -

(a)   no post-accident earnings; and

(b)   the income proof they provided were complete.

38.  The Defendant conducted further surveillance but the Plaintiff could no longer be traced.  The Plaintiff commenced this action on 21 February 2010, the last day before the action was time-barred.

Statement of Damages

39.  By the Statement of Damages dated 20 February 2010, the Plaintiff stated that: -

(a)   after the accident, the Plaintiff was granted a total of 325 days of sick leave (i.e. from 21 February 2007 to 11 January 2008);

(b)   she was an assistant manageress of the Fu Lum Group of restaurants and her average pre-accident employment income for 12 months preceding the accident was $8,867;

(c)   the loss of income during the sick leave period was $94,484;

(d)   after the accident, the Plaintiff was unable to return to her previous job.  She could hardly work at all and could only do part-time jobs as cleaner washing dishes in restaurants but she was dismissed frequently as her medical conditions made it very difficult for her to cope with the work, even on a part-time basis.  Her post-accident monthly income is below $3,000;

(e)   the loss of income after sick leave and before the notional date of trial i.e. between 12 January 2008 and 11 January 2011 is ($8,867 - $3,000) x 36 months = $211,212;

(f)   the total pre-trial loss of earning claimed is $305,696 ($94,484 + $211,212);

(g)   the loss of future earning is $844,848 [($8,867 - $3,000) x 12 x 12 years];

(h)   loss of MPF is $293,116 ($303,644 - $10,528).

40.  The Statement of Damages was accompanied by the Statement of Truth stating “I believe that the facts stated in the Statement of Damages are true” and signed by the Plaintiff.

Further and Better Particulars of the Statement of Damages and the 1^st payment-in

41.  On 9 March 2010, the Defendant asked the Plaintiff to provide Further and Better Particulars of the Statement of Damages and specific discovery of her income proof.  On 15 March 2010, the Defendant paid the sum of $280,000 into Court.

42.  After receipt of the Request for Further and Better Particulars, by a letter dated 16 March 2010, the Plaintiff made a Sanctioned Offer to accept $580,000 plus costs.

43.  By a letter dated 23 March 2010, the Plaintiff requested more time to answer the Request Further and Better Particulars.  When pressed on by the Defendant’s letter dated 24 March 2010, the Plaintiff’s solicitors stated in their letter dated 15 April 2010 that they were unable to take detailed instructions from the Plaintiff due to her prevailing medical conditions.  It was further stated that in order to assess the Plaintiff’s psychological conditions, they were preparing a medical report by Dr. Chan Chung Mau.

44.  The Defendant issued a Summons on 16 April 2010 for Further and Better Particulars of the Statement of Damages and specific discovery of the Plaintiff’s income proof, returnable on 22 April 2010.

45.  Before the hearing dated 22 April 2010, under the cover of a letter dated 20 April 2010, the Plaintiff produced a medical report by Dr. Chan Chung Mau stating that the Plaintiff was suffering from Post-traumatic Stress Disorder (“PTSD”) which was directly related to the accident.  On the same date of 20 April 2010, the Plaintiff increased the Sanctioned Offer from $580,000 to $1,180,000.

46.  At the hearing dated 22 April 2010, the Plaintiff agreed to provide the Further and Better Particulars and make specific discovery as requested but asked for 56 days on the ground that the Plaintiff was suffering from PTSD and her solicitors were unable to take instructions because of Plaintiff’s psychiatric conditions.  The Plaintiff was directed by Master Yu to produce medical report to show her medical conditions and the hearing was adjourned to 6 May 2010.

47.  At the hearing on 6 May 2010, the Plaintiff produced the following documents: -

(a)   reports by Dr. Chan Chung Mau dated 19 April 2010, 28 April 2010 and 5 May 2010;

(b)   referral letter dated 11 March 2010 from Yuen Long Jockey Club Health Centre;

(c)   appointment slip for the appointment dated 23 April 2010 from Castle Peak Hospital;

(d)   a certificate of income from Tsuen Ye Car Services Centre; and

(e)   a certificate of income from Group Yield International Development Ltd.

48.  After hearing the arguments, Master Yu ordered the Plaintiff to provide the Further and Better Particulars and the requested documents within 14 days and 28 days respectively.

49.  The Further and Better Particulars of the Statement of Damages were filed on 20 May 2010, in which the Plaintiff stated that during the period from 1 January 2008 up to 28 February 2010, she had worked as follows: -

(a)   Tsuen Ye Car Service Centre as cleaner on 29 and 30 November 2008 and her income was $250;

(b)   Kam Shing Restaurant as dish washer on 2 and 3 December 2008 and her income was $175;

(c)   Treasure Link Hong Kong Investment Limited between June to September 2009 earning $4,750 a month during the period; and

(d)   New Capital Worldwide Kitchen as supervisor between 22 December 2009 and 28 February 2010 and her salary was $9,500 a month plus commission ($3,680 for December 2009, $11,401 for January 2010 and $7,980 for February 2010).

50.  Under the cover of letters dated 2 June and 11 June 2010, Plaintiff produced the following documents in relation to her claim for loss of earnings: -

(a)   MPF records (Bank of East Asia (“BEA”));

(b)   MPF records (HSBC);

(c)   Bank statements (BEA A/C No. 521-78-01796-0);

(d)   Bank statements (BEA C/C No. 015-521-78-01796-0);

(e)   Bank statements (Hang Seng Bank A/C 360-232037-668);

(f)   Bank Book copy (Shanghai Commercial Bank A/C No. 372-14-17721-1); and

(g)   Reply letter from the Inland Revenue Department (IRD) dated 2 June 2010.

51.  The bank statements of Plaintiff’s accounts showed the following deposit entries relating to her incomes:

(a)   Hang Seng Bank (a/c no. 360-232037-668)

After 21/2/2007 (the accident)

Date	Payer	Amount
5/3/2007	Foo Lum	$3,197.35
5/3/2008	Sportful G Restaurant O B	$3,806.00
7/4/2008	Ibid	$10,682.00
5/5/2008	Ibid	$2,941.00
5/6/2008	Sportful Garden Rest	$7,224.00
4/7/2008	Ibid	$6,048.00
4/9/2008	Smart Mark Invest Ltd	$400.00

(b)   Bank of East Asia (a/c no. 015-521-78-01796-0)

After 21/2/2007 (the accident)

Date	Payer	Amount
19/2/2009	Tresasure Link HK Inv L	$5,000.00
6/3/2009	Ibid	$5,000.00
19/3/2009	Ibid	$3,000.00
5/6/2009	Ibid	$4,903.00
19/6/2009	Ibid	$4,750.00
6/7/2009	Ibid	$4,750.00
21/7/2009	Ibid	$3,740.00
6/8/2009	Ibid	$3,831.35
21/8/2009	Ibid	$4,750.00
5/9/2009	Ibid	$4,275.00
21/9/2009	Ibid	$4,750.00

(c)   Shanghai Commercial Bank Ltd (a/c no. 372-14-17721-1)

After 21/2/2007 (the accident)

Date	Remarks	Amount
8/2/2010	SAL PY	$11,033.00
10/2/2010	SAL PY	$368.00
8/3/2010	SAL PY	$7,980.00

52.  The letter from IRD dated 2 June 2010 set out Plaintiff’s incomes after the accident as follows:

Period	Name of Employer	Amount of Income
19/2/2008 – 31/3/2008	Sino Favour (Hong Kong) Ltd	$14,488 (i.e. the sums of $3,806 paid on 5 March 2008 and $10,682 paid on 7/4/2008 by Sportful G Restaurant)
1/4/2008 – 9/4/2008	Sino Favour (Hong Kong) Ltd	$2,941 (i.e. the sum paid on 5/5/2008 by Sportful G Restaurant)
10/5/2008 – 26/6/2008	Park Sun Property Agency Ltd	$13,272 (i.e. the sums of $7,224 paid on 5/6/2008 and $6,048 paid on 4/7/2008 by Sportful Garden Rest)
5/10/2008 – 26/6/2008	Strong Rich Investment Ltd	$1,451
27/10/2008 – 23/11/2008	Gold Bright Hong Kong Investment Ltd	$10,257
1/1/2009 – 11/3/2009	Treasure Link Hong Kong Investment Ltd	$23,500 (i.e. the bank statements show a total sum of $13,000 only)
1/6/2008 – 31/3/2009	Smart Mark Investment Ltd	$400 (i.e. the sum paid on 4/9/2008)
1/5/2009 – 30/9/2009	Treasure Link Hong Kong Investment Ltd	$36,886.00 (i.e. the bank statements show a total sum of $35,749.35)
24/9/2009 – 2/10/2009	China Spring Development Ltd	$2,380
22/12/2009 – 8/3/2010	Elegant City Development Ltd	$26,858 (i.e. the bank statements show a total sum of $19,381 only)
27/3/2010 – 28/3/2010	Happiness Group Co Ltd	$270
	Total	$132,703

The 2^nd payment-in and the Plaintiff’s acceptance

53.  On 24 June 2010, the Defendant paid a further sum of $100,000 making a total of $380,000 into Court.  The Plaintiff accepted the payment on 12 July 2010.

Analysis and Findings

54.  The Further and Better Particulars showed that, apart from some odd earnings, the Plaintiff had earned $4,750 a month during the period from June to September 2009 and had worked as supervisor for a kitchen with monthly salary of $9,500 plus commission for the period from 22 December 2009 to 28 February 2010 since the end of her sick leave.

55.  The bank statements disclosed by the Plaintiff showed that in addition to the income set out in the Further and Better Particulars, the Plaintiff had other incomes which were clearly the Plaintiff’s salaries in the said bank statements.

56.  Moreover, there were other deposits (apart from those that could be clearly identified as salaries) by way of either cash payment or transfer into the various bank accounts of the Plaintiff after the accident.  The Plaintiff did not account for the sources of the various deposits.

57.  Putting together the information disclosed by the Further and Better Particulars, the bank accounts and the letter from the IRD, one can see that the Plaintiff has worked during most of the time and earned much more that $3,000 throughout the period from early 2008 to early 2010.

58.  The Plaintiff had to know that she had worked throughout most of the time during the period from early 2008 to early 2010.  Yet, the Plaintiff falsely stated in the Statement of Damages dated 20 February 2010 that, after the accident, she could hardly work at all.  Her monthly income during the aforesaid period was much higher than $3,000 (the amount which she stated in the Statement of Damages).  Even so, with a calculation based on the false monthly income of $3,000, the Plaintiff claimed the loss of income after sick leave and before trial, loss of future earning and loss of MPF in the sums of $211,212, $844,848 and $293,116 respectively.  Despite that those claims were grossly exaggerated, the Statement of Damages was verified by a Statement of Truth signed by the Plaintiff.

59.  The Plaintiff put her ability to give instructions to her solicitors in issue.  The Medical Report by Dr. Chan did not support the Plaintiff’s allegation that she could not give instructions.  Indeed she had no difficulty in compliance with the Order of Master Yu dated 6 May 2010.  I do not believe that the Plaintiff was not able to give instructions.

60.  The Defendant contended the fact that

(a)   the Plaintiff made the above claims which are false, untrue, without belief in their truths and/or improperly or unreasonably;

(b)   the Plaintiff made false statements in relation to the above claims in her Statement of Damages dated 20 February 2010 and verified the same by a statement of truth which she signed without an honest belief in its truth; and

(c)   the Defendant wasted costs in investigating and defending such claims;

is exceptional and compelling circumstance in which the Court should exercise the discretion on costs against the Plaintiff.

61.  On the other side, the Plaintiff contested that the Court should not exercise its discretion in favour of the Defendant in this case.  The Plaintiff relies on the following 6 factors, namely: -

(a)   no prior warning;

(b)   no issue specific Sanctioned Payment;

(c)   misconceived ground;

(d)   misconceived allegation of “wasted costs”;

(e)   delay in making the application;

(f)   this application itself is disproportionate.

(a) No prior warning

62.  In Glenlion, the English Court of Appeal considered, under the old English rules which contained the phrase “unless the Court otherwise orders”, whether the Court had the discretion to deprive the plaintiff of all or any of the costs of the action, and if so, in what circumstances such discretion could and should be exercised.  The old English Order 62, rule 10(2) read as follows:

“If a plaintiff accepts the money paid into Court in satisfaction of the cause of action, or all the causes of action, in respect of which he claims, or if he accepts a sum or sums of paid in respect of one or more specified causes of action and gives notice that he abandons the others, then subject to paragraph (4), he may, after four 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 and 48 hours after taxation may sign judgment for his taxed costs.”

63.  The plaintiff in Glenlion, a construction company claimed for under contract the costs of the work done, and services provided, loss of profit as damages for breach of contract, or alternatively quantum merit.  The plaintiff quantified the quantum merit at £62,000 plus, on the basis of reasonable remuneration on professional scale of fees.  The defendant denied contract and saying that the only claim the plaintiff had was on a quantum merit basis, accepted that they were liable to pay the plaintiff a reasonable price but it should not be on the basis of professional fees at all.  The defendant eventually paid and the plaintiff accepted two payments totally £21,250.

64.  Stephenson LJ held that the Court had the jurisdiction to deprive the plaintiff of all or part of the costs of the action but held at the same time at page 6 that:

“But this, as I shall endeavour to indicate later, was an exceptional case and treated as an exceptional case by the judge; it was an order, and the order which he made, and which should only be made, in exceptional case. Secondly, it was a case in which the plaintiffs from a very early stage had been put on notice by a warning from the defendants that they were going to ask the court to make the order which the judge in fact made … I would regard it as a wrong exercise of the judge’s discretion to make such an order as was made in this case unless there had been a clear warning to the plaintiffs by the defendants that that was their intention – that it was their intention to claim such an order …”

65.  Griffiths LJ shared the same view at page 10:

“A plaintiff faced with a payment into court has a very difficult decision to take. As a general rule he should be entitled, when applying his mind to that decision, to assume that if he takes the money he will at least be able to recover his taxed costs up to the date of payment in. But if he has been put specifically on notice by the defendants either at or before the date of payment in, that they propose to apply to the court for an order that he should not recover his full costs, then that it a further factor which he must take into consideration. It would however, in my view, save in most exceptional cases, the circumstances of which at the moment I am unable to envisage, be quite wrong for a defendant to allow a plaintiff to take money out of court on the faith that he would recover his costs up to the date of payment in and then thereafter, without warning, apply to the court for an order either limiting or excluding his right to recover those costs …

… I agree with my Lord that it would only be in an exceptional case that it would be right to exercise the discretion in favour of a defendant who had not put the plaintiff on notice at or before the time of the payment in that he intended to make an application as to costs.”

66.  The Defendant contended that prior warnings about costs were given in this case, referring to the Defendant’s remarks of the Plaintiff’s apparent non-compliance with the disclosure requirements under paragraphs 9, 19, 50 & 66 of Practice Direction 18.1 made in the letters from solicitors for the Defendant to the Plaintiff dated 15 October 2009 and 21 October 2009, and the paragraph 4 of the Defence filed on 12 March 2010.  The Plaintiff retorted that it is unrealistic to regard such Defendant’s remarks as prior warnings of this application.  In particular, not only there was no hint whatsoever of this application, but also at the time when the said letters were sent out or the Defence was filed and served the 2^nd Sanctioned Payment dated 24 June 2010 was not yet existed.

67.  It should be fair to conclude that in this case, the Defendant had not warned the Plaintiff that he intended to make an application to vary the costs event at the time of making the 2^nd Sanctioned Payment or before the Plaintiff’s acceptance.  Relying on Glenlion, the Plaintiff contested that prior warning is a pre-requisite in this case, failing which, the Defendant’s application must go down.  She furthered that the Defendant could have given a prior warning, for example, by stating in a letter accompanying the Notice of Sanctioned Payment that, if the Plaintiff accepted the payment, the Defendant would apply to the Court as to costs in the manner as sought in this application.  By not giving any prior warning, the Defendant’s present application amounted to an “entrapment”.

68.  I do not consider that the English Court of Appeal in Glenlion held that prior warning is a pre requisite condition for exercise of the Court’s discretion, albeit in some cases, like e.g. Glenlion, it may become indispensable.  One can see from Griffiths LJ’s statement (cited in the preceding paragraph (65))that where there is exceptional and compelling circumstance, it could be right to exercise the discretion in favour of a defendant who had not put the plaintiff on notice at or before the time of the payment in that he intended to make an application as to costs. 

69.  The real question is whether there is exceptional and compelling circumstance in the present case.  The core of the Defendant’s case is that the Plaintiff made false claims and she verified the Statement of Damages by a Statement of Truth which she signed without an honest belief in its truth. Statements of Damages are served to give particulars of the amounts of claim.  Statement of Truth is serious and important.  The latter is an essential tool of the Civil Justice Reform, serving to help the Court and the parties achieve the underlying objectives of efficient, cost-effective and fair disposal of litigations.  The Plaintiff’s dishonest claim is precisely what Civil Justice Reform sought to get rid of.  There should be costs consequence for the Plaintiff’s dishonesty.  I hold that it is just and proper for the Court in this case to exercise the discretion on costs against the Plaintiff in favour of the Defendant.

70.  The Plaintiff’s complaint of entrapment does not hold water.  The Plaintiff has nothing/nobody else but her dishonesty/herself to put the blame on for this fallout.

(b) No issue-specific Sanctioned Payment

71.  The Plaintiff contested that when the Defendant made a Sanctioned Payment which was not a nominal sum, it is extraordinary to deprive all of the Plaintiff’s costs.  Furthermore, because the Defendant made a Sanctioned Payment to settle the whole of the Plaintiff’s claim, in the circumstance it should be exceptional for the Court to make an issue specific costs order to deprive the Plaintiff’s costs in relation to specific claims or issues.

72.  Having said that the Court should exercise the discretion against the Plaintiff, for the contestations advanced by the Plaintiff, I tend to agree that it is not an appropriate case for the Court to make an issue specific costs order.  I also agree that the Plaintiff should not be deprived of all costs. The next question is to what extent the Plaintiff’s entitlement to costs should be varied. 

73.  Negotiations between the parties were begun not long after the pre-action demand letter dated 13 May 2009. However, the process was dragged on without much success because the Plaintiff had failed to provide the necessary documentary proof of her claim for loss of income.  The Writ was issued on 21 February 2010 and afterwards specific discovery was obtained.  Once the Plaintiff provided the necessary income proofs in early June, the claim was settled by the Plaintiff’s acceptance of the 2^nd Sanctioned Payment on 12 July 2010.  As the events unfolded, and thinking of as a matter of fact this being a straight forward claim for a small amount, I consider, had an honest claim been put forwarded together with the necessary documentary proof, probably the parties would have settled it within 1-2 months of Writ, if not before action.  According to the Plaintiff’s bill of costs, the Plaintiff’s scale costs for the pre-action stage I (22 October 2007 to 19 February 2010), stage II: from Writ to date of settlement (20 February 2010 onwards) and stage III: general care were $69,784, $113,550 and $16,900 respectively.  As such, I consider that it is just and proper to reduce the Plaintiff’s costs of this action by 50%.

(c) Misconceived ground

74.  Before this application, the Defendant’s solicitors wrote to the Plaintiff that the Defendant would rely on Hong Kong Civil Procedure 2011, vol 1, §62/2/7 at p 1093 and Elgindata Ltd (No 2) [1992] 1 WLR 1207 in support of the argument that a successful party might be deprive of his costs if he presented a false case.  The Plaintiff contested that the Defendant’s purported reliance on the said authorities is misconceived as they are in relation to the court’s discretionary power on costs after trial.  Senior Counsel for the Defendant has not placed any reliance on the said authorities.  There is no need for me to further deal with the Plaintiff’s contestation in this respect.

(d) Misconceived allegation of “wasted costs”

75.  The Plaintiff contested that this cannot constitute a ground in support of the application because:

(a)   This application is not concerned about the Defendant’s own costs at all.

(b)   The Defendant’s own costs are not and do not appear to be “wasted”.  They appear to be usual costs incurred by defendants in similar cases and which the Defendant would have to incur in any event.

(c)   Master Yu has ordered that the Plaintiff shall pay the Defendant the costs of the Defendant’s Summons for Further and Better Particulars and specific discovery.  Thus, the Plaintiff has been penalized for her failure to provide Further and Better Particulars or proper documentary evidence in a timely manner which has led to unnecessary costs on the part of the Defendant.

76.  I consider that the Plaintiff’s contestations are misconceived because

(a)    The Court shall further the underlying objectives of Order 1A to achieve, among other objectives, the costs-effective disposal of litigations. Waste in costs and time should be disapproved.  It does not matter whether it is concerned with the plaintiffs’ or the defendants’ costs. 

(b)   Grossly exaggerated claims often provoke reaction (sometimes even overreaction) from defendants.  Like in this case, it is the Plaintiff’s untrue statement that she had not returned to work since the accident that led the Defendant to conduct surveillance on the Plaintiff.  Unnecessary costs and time has been actually incurred as a result.

(c)    The costs Order of Master Yu has not dealt with the wasted costs which are not part of the costs of the Defendant’s Summons for Further and Better Particulars and specific discovery.

(e) Delay in making the application

77.  The Defendant could take out this application as soon as the Plaintiff accepted the 2^nd Sanctioned Payment on 12 July 2010.  Still, the Defendant did not make this application until 3 March 2011.  True, a party should deal with his case expeditiously, but I consider that the Defendant should not be debarred from making this application for the alleged delay.  My reasons are as follows:

(a)   There is no time limit for the application. 

(b)   There is no suggestion that the Plaintiff has suffered any unjust prejudice by reason of the alleged delay. 

(c)    Having found that this is a meritorious application and bearing in mind the need to recognize that the primary aim in exercising this court’s power is to obtain a just resolution of disputes in accordance with the parties’ substantive rights, I consider that this application should be proceeded with.

(f) The application itself is disproportionate

78.  The Plaintiff contested that this is satellite litigation because the costs of this application are disproportional to the amount at stake, which must be less than $275,975 (the amount stated in the Plaintiff’s Bill of Costs). For my part, I consider that it is understandable that the Defendant felt aggrieved by the Plaintiff’s dishonest claim and as such, this application is justifiable.

Conclusion

79.  It is ordered that the Plaintiff’s costs of this action be reduced by 50%.

Costs of this application

80.  Though I am aware that if the Plaintiff is ordered to bear the Defendant’s costs of this application, such costs burden will eat up a large trunk, if not most, of the settlement sum of $380,000, this is not a valid reason for which I should depart from the usual principle that costs should follow the event.  To a large extent, the Defendant is successful in this application, but at the end only 50% of the Plaintiff’s costs are reduced and the Defendant fails in the alternative application as well.  The general rule that costs follow the event does not cease to apply simply because the successful party has raised issues or made allegations that has failed, but he can be deprived of his costs in whole or in part where he has caused a significant increase in the length of the proceedings. The alternative claim caused significant increase in the length of proceedings.  Therefore, I hold that the Plaintiff should pay the Defendant only 50% of the costs of this application.

81.  In summary,

(a)   The Plaintiff’s costs of this action be reduced by 50%. 

(b)   It is ordered nisi that the Plaintiff do pay the Defendant 50% of the costs of this application, to be assessed summarily, if not agreed.  The parties shall endeavour to agree such costs, failing which they shall fix a date for the hearing of the summary assessment before me with the Listing Clerk within the next 28 days.  This order nisi becomes absolute after 14 days unless a party has applied for varying the same.

(c)   When a hearing date for the summary assessment is fixed, the Defendant do file and serve a Statement of Costs at least 3 clear days before the hearing.

(d)   There be certificate for Counsel