GTE DIRECTORIES (HK) LTD. v. MO YUNG KWOK WAH t/a SUN HING CO

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JUDGMENT

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Sir Alan Huggins, V.-P.:

1. In this case the appellant Plaintiff claimed in respect of a contract for the inclusion in a telephone director of certain entries. The entries were made and the respondent Defendant, who has not appeared before us, failed to pay. The contract was in terms which covered the expense which the Plaintiff might incur in recovering any charges. It provides:

The debt was assigned to the present Plaintiff.

2. The Defendant having failed to pay, an action was brought in the District Court claiming the amount of the charges, which were claimed as liquidated damages, and the costs which would be incurred in recovering that amount. The costs were claimed as unliquidated damages. The matter came before the District Court on that claim and in the first instance interlocutory judgment was entered in respect of both parts of the claim. The Plaintiff then became anxious that judgment should not have been entered in this manner and applied itself to set aside the interlocutory judgment in respect of the costs. The judgment in respect of the liquidated damages appears to have remained on record and, indeed, execution was levied and recovery effected. We are concerned solely with the costs:

3. That matter came before another District judge and he came to the conclusion that it was not open to the Plaintiff to recover on the basis which was claimed, that is to say on a solicitor and own client basis. No point was then taken that the prayer was not in accordance with the body of the pleading but it is clear that, if we allow this appeal, we should direct that an amendment should be made to the prayer the Statement of Claim.

4. What the judge decided was that it was not open to him to give an award in respect of the costs of recovering the damages because that would be inconsistent with his right to decide the basis upon which the costs of the action should be awarded. He cited a number of cases, but with respect to him it seems to me that he overlooked the vital factor that all those cases were distinguishable because they were not concerned with an express contractual obligation. In the present case it was a term of the contract between the parties that the expenses should be paid on a solicitor and own client basis, and the judge's conclusion was in effect to destroy the right of the parties to contract on such terms as they saw fit. It is true that some mention has been made of a "penal" provision. This in my view was not a penal provision which could be ignored by the court as being contrary to public policy, because on any view it provided for compensation for costs incurred. I say nothing about a case where a contract is made and it is said that, in the case of breach, the costs shall be a fixed sum which is clearly a sum exceeding any amount which could possibly be incurred as costs. That would be a true penal provision: this was not. There are several passages in the cases which have been cited to us and which were cited to the judge indicating that a different situation arises where there is an express contract - or even where there is an implied contract, as in the case of a trustee or of a mortgagee. I take the view that there was nothing whatever to prevent the judge in this case from granting judgment in accordance with the terms of the contract made between the parties and I would allow this appeal, remit the case to the District Court with directions that judgment be entered for the Plaintiff for damages by way of costs to be assessed. Then an assessment would be made by way of taxation in the ordinary way.

Kempster, J.A.:

5. I agree. It is common in our courts for claims for damages to be compromised before or during a hearing and for the parties then to invite the court to make an order reflecting its terms being inclusive of provisions for costs. Indeed, when parties are sui juris and represented, they can compromise a cause or matter and have their compromise entered as a judgment, including provisions as to costs, without even appearing in court, as is demonstrated by R.S.C. 0.42 r.5A. In the premises it appears that the learned District Judge misconceived the position and did not appreciate the duty of the courts to enforce bargains, which do not offend against any of the rules of public policy. When parties of full capacity have concluded in agreement with regard to costs they no longer remain within the court's discretion. I also agree with the order proposed by my Lord the Vice-President.

Penlington, J.:

6. I also agree. The District Judge has said in his judgment that he takes a passage in Halsbury (Vo1.12 4th Ed. Para.1108) to mean that parties are not at liberty by contract to remove or fetter the court's discretion. I think that is wrong. The parties may agree on the basis of taxation, which is what they have done here.

10th January 1986