THE PRUDENTIAL ENTERPRISE LTD AND ANOTHER v. P.H. SHEK LTD AND ANOTHER

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JUDGMENT

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Cons; V.P.:

1. The material facts pertinent to this appeal are as follows: -

2. The 2nd Plaintiff (I shall simply refer to "the Plaintiff") as landlord brought an action against its tenants, the 1st and 2nd Defendants, to enforce a forfeiture of the lease by reason of unlawful subletting. The Plaintiff obtained judgment in August, 1988 from Rhind, J. The judge made an order for recovery of possession of the premises in question and for damages to be assessed. At the same time he dismissed the Defendants' Counterclaim for relief from forfeiture and dealt with the costs of the action up to that stage.

3. Damages were claimed in paragraph 10 of the Amended Statement of Claim, with Particulars in these words:-

4. The fees and charges, "pleaded in the Prayer", were put at specific rates in respect of separate items of air-conditioning, management fees, water charges and rates. This betrays a misunderstanding of the true nature of "mesne profits", a misunderstanding which seems to have been shared by all involved in the subsequent assessment. But that has no effect upon this appeal, for it is common ground that all such fees and charges were paid directly to and accepted by the plaintiffs in full up to the 12th October, 1988, the date on which the Defendants vacated the premises in accordance with the order of Rhind, J.

5. The assessment dealt only with what might be termed "the rental aspect" of the mesne profits and only that element of the interim payments, which had been ordered by Master Jennings and Master Perrior on the 11th September, 1987 and the 31st May, 1988 respectively, were taken into account in the final award of damages which was made by Liu, J. on the 23rd June, 1989.

6. The hearing before Liu, J. commenced on the 21st January and lasted seven days. It was conducted by leading counsel on both sides. The judge gave his decisionon the 28th February. Unfortunately there was misunderstanding when his decision was perfected by sealing the order in court, but that was put right under the slip rule - (the corrected version appears at p. 86 of the Appeal Bundle) - on the 23rd March when proceedings were further adjourned. On the 31st May and 1st June leading counsel addressed the judge on the question of costs. He reserved his decision which was delivered on the 23rd June (perfected on the 25th October) and required the Defendants to pay the Plaintiff, in round figures, $2.85 million together with the costs of the assessment and the costs of the further two days' argument. The figure of $2.8 million was obtained by deducting frow the gross amount which the judge found to be due the total amount of the two interim payments.

7. This appeal questions the correctness of that order as to costs and asks that the order be reversed. It is a matter of some importance, for we understand that an order for costs relating just to the assessment would be some where in the region of $1 million. The appeal is premised on a payment-in of the 2nd July, 1988, i.e. before the trial on liability. It was in the sum of $3.75 million, i.e. more than the amount ultimately awarded by Liu, J.

8. The Notice of Payment into Court (p. 39 of the bundle) is in these terms:

It does not comply with Order 29, rule 16, which provides that:

It is a little difficult to understand the need for this rule for rule 17 provides for

and the notes in the Supreme Court Practice at 29/9-18/16 illustrate how this is normally done in practice, as happened in the present instance. It follows that any plaintiff faced with a payment-in subsequent to an order for interim payment should appreciate that the payment-in had taken account of these payments. I note also that the wording of rule 16, as I read it, leaves a defendant with no choice in the matter, although the comment of 22/1/16 of the Supreme Court Practice indicates that the learned editors take a different view.

9. Section 14 of the Supreme Court Ordinance, Chapter 4, provides by Subsection 3 that:

            "No appeal shall lie -

No such leave has been obtained in this instance or even applied for. It is submitted that it is not necessary. Reliance is placed upon Scherer v. Counting Instruments [1986] 1 W.L.R. 615 which was approved by the House of Lords in Bankamerica Finance Ltd. v. Nock [1988] A.C. 1002.We were referred, in particular, to the judgment of Lord Brandon, @ p. 1009, who expressly endorsed the principles derived by the English Court of Appeal from the earlier authorities, of which No. 10 is:

That endorsement is in effect binding upon this Court: de Lasala v. de Lasala [1980] A.C. 546.

10. I note a slight distinction between the English leglislation and that in this jurisdiction, there being no provision in the former for a further application for leave to the Court of Appeal itself, but the absence of that factor does not appear to be material to the reasoning of the English Court of Appeal.

11. Mr. Swaine, for the Plaintiff, emphasizes the very heavy burden imposed upon the appellant Defendants and seeks to persuade us that the burden has not been discharged and indeed, that in the circumstances, the order of the judge is correct. With every respect, I find myself unable to agree.

12. I am influenced to my conclusion by three factors. The first is that it is well accepted that payments-in can only be made in respect of monetary claims, so that anyother reference in the notice of payment-in must be immaterial.

13. Secondly, that once the question of liability had been settled in the instant case, then, having regard to the common ground as regards the fees and charges, the only matter that remained in dispute"between the parties, and the only matter which could be thought by anyone, properly applying his mind to the situation, to continue to be the subject of the payment-in was the rental aspect of the claim for mesne profits.

14. Thirdly, having regard to Order 29, rule 16, on which I have already commented, the only conclusion to which anyone likewise applying his mind could come, would be that the interim payments had already been taken into account. In the particular instance that conclusion would be reinforced by reason of para. 10 of the Amended Statement of Claim, which clearly makes the Plaintiffs' claim, in satisfaction of which the payment-in was expressly made, subject to discount for the interim payments already made,even though on the face of it, the paragraph was in breach of rule 15.

15. I accept, at any rate for the purposes of this appeal, that failure to include in the formal notice a reference to the interim payments would preclude the Defendants from relying on any entitlement tnat would otherwise be given by Order 62, rule 5(b). The order for costs would be at large in the discretion of the judge, having regard to all the circumstances of the case, including those relating to the payment - in. As to that, if I understand the judgment correctly, the judge felt that the defects of the Notice were so great that it was not worthy of serious consideration by the Plaintiff and therefore not a factor to be considered in the exercise of his discretion. He does not appear to have considered the factors I have mentioned, and in particular that one to which I attach great importance, namely the wording of para. 10 of the Statement of Claim. Instead he appears to have considered the failure to comply with the formal requirements of rule 16 as in itself decisive. For that reason he has not, in my view, judicially exercised his discretion.

16. For myself, looking at the matter as a whole, I think the only way in which a judge having regard to all the circumstances could properly have exercised his discretion would have been in favour of the Defendants. I would, therefore, allow the appeal and reverse the order made below as to the costs of the assessment.

Kempster, J.A.:

17. For the reasons given by my Lord, the Vice President, I agree that we are entitled to entertain this appeal, that it should be allowed and that a consequential order should be made as he proposes.

Clough, J.A.:

18. I also agree.