LI KAI YIN v. ATTA-TRANS LTD AND ANOTHER

HCPI 196/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 196 OF 2009

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D E C I S I O N

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1.  In this action for damages for personal injuries sustained in an accident at work, the plaintiff applied and was granted orders by Master Katherine Lo on 14 January 2011:

(1) for leave to the plaintiff to accept the sanctioned payment made by the 1^st defendant in the sum of HK$150,000 on 16 January 2010 in full and final settlement of the whole of the plaintiff’s claim in this action against the 1^st and 2^nd defendants;

(2) that the sanctioned payment be paid out forthwith to the plaintiff through the Director of Legal Aid; and

(3) that the plaintiff’s claim against the 2^nd defendant be discontinued.

2.  I pause to mention that the claim arose out of an accident at work which occurred on 25 October 2006 at the cargo loading area of the 2^nd defendant in Super Terminal 1 located at Chek Lap Kok Airport.  The plaintiff was performing delivery work as an employee of the 1^st defendant. He slipped and fell and suffered personal injury as a result.  Notwithstanding that he claimed damages in excess of HK$2 million in his Revised Statement of Damages, he was content to bring the proceedings to an end by accepting the sanctioned payment made by his employer, the 1^st defendant in the sum of HK$150,000. 

3.  The controversy that brings this matter before me, by way of an appeal from the order of Master Lo, relates to the costs orders made by her on 14 January 2011.        

4.  The plaintiff had contended that he slipped and fell because the floor of the premises occupied by the 2^nd defendant was wet and slippery.  Being satisfied with the sanctioned payment made by the 1^st defendant, the plaintiff was prepared to discontinue the proceedings against the 2^nd defendant.  What I find surprising is that the plaintiff did not then proceed to ask for an order that the costs of the 2^nd defendant be borne by the 1^st defendant on the ground that it had been reasonable for him to commence these proceedings against both defendants.  Instead, he asked for the following orders :

(4) the 1^st defendant do pay the plaintiff’s costs of this action as incurred between the plaintiff and the 1^st defendant, such costs to be taxed if not agreed; and

(5) the 2^nd defendant do pay the plaintiff’s costs of this action as incurred between the plaintiff and the 2^nd defendant, such costs to be taxed if not agreed.

5.  Master Lo granted the 1^st of the orders sought and ordered the 1^st defendant to pay the plaintiff’s costs of the action as incurred between the plaintiff and the 1^st defendant up to 11:06 a.m. of 7 July 2010, such costs to be taxed if not agreed; and further ordered that the 1^st defendant’s costs between 11:06 a.m. and 11:26 a.m. of 7 July 2010 be borne by the 2^nd defendant, such costs also to be taxed if not agreed.  There is no appeal before me against these orders.  The plaintiff’s appeal relates to the further two orders made by Master Lo in these terms :

(6) the 1^st defendant’s costs after 11:26 a.m. of 7 July 2010 up to and including the costs of the hearing on 14 January 2011 be borne by the 2^nd defendant and the plaintiff jointly, such costs to be taxed if not agreed, with certificate for counsel; and

(7) the 2^nd defendant’s costs of this action (including all costs reserved) be borne by the plaintiff at the High Court Scale, such costs to be taxed if not agreed.

6.  The learned Master also made an order for the plaintiff’s own costs to be taxed pursuant to the Legal Aid Regulations. 

7.  When the matter first came before me on 5 May 2011, I adjourned the hearing to 11 May 2011 in the hope that the parties could reach a sensible compromise on the issue of costs, given the fact that the order of costs made by Master Lo against the plaintiff in favour of the 2^nd defendant would result not only in the sanctioned payment being fully utilised to pay those costs but also in the Director of Legal Aid having to cover the difference from public funds; and, secondly, in the event that a compromise was not possible, for the plaintiff to reconsider his case against the 2^nd defendant, including the option of applying to withdrawing the discontinuance of the proceedings against the 2^nd defendant so that he might proceed to trial against the 2^nd defendant with a view to obtaining an award of damages and costs against the 2^nd defendant, after giving credit for the amount of the sanctioned payment. 

8.  The parties returned before me on 11 May 2011 and informed me that the parties were unable to compromise their differences, that the plaintiff maintained his discontinuance of the proceedings against the 2^nd defendant, and, further, that the plaintiff did not seek a Sanderson or Bullock order of costs that the 1^st defendant should pay the costs of the 2^nd defendant.

9.  Therefore, I proceeded to hear submissions dealing, firstly, with my jurisdiction to hear a costs only appeal and, then, with the order made by Master Lo that the plaintiff bear the costs of the 2^nd defendant.

The plaintiff’s appeal against the costs orders made by the Master

10.  It is well established that a judge in chambers will not allow an appeal from a Master’s costs order unless it was unreasonable or the Mastererred in law.  That principle was well expressed by Morland J in Hoddle v CCF Construction Ltd [1992] 2 All ER 550 at 550h–551a in these terms :

“In my judgment it would be highly undesirable as a matter of general principle that a judge in the position that I am in today should intervene and make different orders as to costs from that made by a master, unless it can be shown by the appellant that the Master demonstrably erred in the exercise of his discretion in the order that he made. If it can be shown that the Master took into account matters that he should not have taken into account or failed to take into account matters that he should have taken into account, in those circumstances the judge in chambers would be entitled to vary the order made by the master, but in my judgment it would not be in the interests of justice if judges in chambers entered into detailed examination of all the matters that were before the Master in order to decide whether they would have come to the same decision as the master. Generally speaking, in my judgment, judges in chambers should not allow appeals against costs orders by masters, unless it can be shown that the order made was unreasonable or erred in law or, …., either failed to take into account proper matters or took into account matters that should not have been taken into account.”

The plaintiff’s appeal against the order made in relation to the 2^nd defendant’s costs

11.  Mr Y.L. Cheung, who appeared for the plaintiff, pointed me to Order 22, rule 18 of the Rules of the High Court (“RHC”) as the provision applying to the present case.  This rule states :

“18. Acceptance of sanctioned offer or sanctioned payment made by one or more, but not all, defendants

(1) This rule applies where the plaintiff wishes to accept a sanctioned offer or a sanctioned payment made by one or more, but not all, of a number of defendants.

(2) If the defendants are sued jointly or in the alternative, the plaintiff may accept the offer or payment without requiring the leave of the court in accordance with rule 15(1) if –

(a) he discontinues his claim against those defendants who have not made the offer or payment; and

(b) those defendants give written consent to the acceptance of the offer or payment.

(3) If the plaintiff alleges that the defendants have a several liability to him, the plaintiff may -

(a) he discontinues his claim against those defendants who have not made the offer or payment; and

(b) those defendants give written consent to the acceptance of the offer or payment.

(4) In all other cases the plaintiff shall apply to the court for –

(a) an order permitting a payment out to him of any sum in court; and

(b) such order as to costs as the court considers appropriate.”

12.  Mr Cheung submitted that Parts III and IV of Order 22 was part of a new statutory regime aimed at encouraging and regulating settlement of an action by way of acceptance of sanctioned offer or payment where multiple defendants were involved.  He submitted that one important legislative purpose of the new rules was to discourage continuance or prolongation of proceedings when the claimant had already received a reasonable sanctioned offer or payment from one defendant, but not the others, and that the court retained an unfettered discretion to make such order as to costs as was appropriate.  He further submitted that the unfettered discretion as to costs contained in the new Order 22 was not to be curtailed by the orthodox principles governing the withdrawal and discontinuance of proceedings under Order 21.  In support, he relied upon the commentary in 2011 Hong Kong Civil Procedure at marginal note 22/20/1 that Order 22, rule 20 gives the court a complete discretion as to how to deal with costs.  Indeed, Order 22, rule 18(4)(b) also provides that the plaintiff should apply to the court for such order as to costs as the court considers appropriate. 

13.  The question I have to answer is whether the discretion as to costs under Order 22, including the court’s power under Order 22, rule 22(5)(b) to deal with any question of costs (including interest on costs) relating to the proceedings, is wide enough to enable the court to make an order of costs against a defendant who has not been adjudged liable to the plaintiff and against whom proceedings have been discontinued by the plaintiff.

14.  Mr Samuel Chan, who appeared for the 2^nd defendant, was adamant that the answer to that question was no.  He referred me to the general rule set out in 2011 Hong Kong Civil Procedure at marginal note 21/5/11 that a party withdrawing the claim should pay for the costs of the opposite party, and to the judgment of Mortimer VP in Ta Tung China & Arts Ltd v Fontana Restaurant Ltd [1999] 1 HKLRD 404 at 406J that it would be “most unusual” for the plaintiff to ask for an order for the payment of costs by the party against whom he is discontinuing.  I agree.  The proper course for the plaintiff to take, when he wishes to accept a sanctioned offer or payment by one of the defendants and when he does not wish to pursue his remaining claims, if any, against the other defendants, is to ask for an order that the proceedings be discontinued against the other defendants and for the paying-in defendant to bear the costs of the plaintiff incurred against the discontinued defendants as well as the costs of the discontinued defendants.  The plaintiff can obtain such an order if he can demonstrate that it was reasonable for him to sue the discontinued defendants.  I do not understand why the plaintiff has chosen not to seek such an order against the 1^st defendant. That decision not to seek such an order against the 1^st defendant cannot lend support to the plaintiff’s application that the 2^nd defendant, who has not been adjudged liable, should not only bear its own costs of the discontinued proceedings and also to pay the costs of the plaintiff incurred against it. 

15.  The “orthodox principles” referred to by Mr Cheung may be stated simply as follows. The general rule is that a defendant is entitled to costs when an action is discontinued: see Inchroy Credit Corporation Ltd v Cheung Man-cheung [1992] 1 HKLR 120, Trend Publishing (HK) Ltd v Vivien Chan & Co (a firm) [1996] 2 HKLR 227 and Terkildsen v. Barber Asia Ltd. HCA 1963/2003, 6 June 2007. That general rule will be applied where the discontinuance constitutes a recognition by the plaintiff of likely defeat. But there may well be cases where justice requires the defendant to recover its costs from the plaintiff, even when the plaintiff has discontinued the proceedings for reasons other than the certainty or likelihood of defeat. But that is not an absolute rule. The rules recognise that there may be circumstances in which a plaintiff should be permitted to discontinue an action without having to pay the defendant's costs. An example of such a case is one where the case has been discontinued because the issue has become academic rather than by reason of an acknowledgment by the plaintiff of defeat or likely defeat. However, to award costs to a plaintiff would be a very substantial departure from the general rule. In Ta Tung China & Arts Ltd v. Fontana Restaurant Ltd & Ors. [1999] 1 HKLRD 404 Mortimer VP was of the view that such an order would be most unusual. In the same case, Godfrey JA expressed the view that the only way for the plaintiff to get his costs was to bring the action to trial for the purpose of doing so. According to Deputy Judge Muttrie in Leung Yuet Ching v. Leung Yuet Keung HCA 9924/2000, 24 September 2000, this could only happen where the plaintiff's case was certain of success in that any defence filed was liable to be struck out under Order 18 rule 19 and the discontinuance came about because the defendant accepted that.  

16.  Order 22, rule 18 is modelled on §36.17 of Part 36 of the 1998 UK Civil Procedure Rules.  The two provisions are nearly identical save for the reference to sanctioned offers and payments in our rule 18 and to Part 36 offers and payments in §36.17 and save that the phrase “if he is entitled to do so” which appears in §36.17 is missing from our rule 18(3).  §36.17 was amended and reproduced in identical terms in §36.12 of the 2006 UK Civil Procedure Rules.  One notable change made in 2006 is that §36.12(4) now reads as follows :

“(4) In all other cases the claimant must apply to the court for an order permitting him to accept the Part 36 offer.”

17.  This amendment does not concern the present case which falls within rule 18(3), namely, a case in which the plaintiff alleges that the defendants have a several liability to him.  The present case is not a case of joint tortfeasors causing the same damage.  Cases of joint tortfeasors causing the same damage include cases where an agent’s tortious conduct on behalf of his principal makes them both joint tortfeasors, or where an employer is vicariously liable for the tort of his employee.  This is not a case of defendants being sued in the alternative, in which only one of them may be adjudged liable.  This is not a case where several tortfeasors have caused different damage.  The plaintiff here suffered one injury.  Accordingly, pursuant to rule 18(3), the plaintiff may accept the sanctioned payment made by the 1^st defendant and still continue with his claims against the 2^nd defendant. The phrase “if he is entitled to do so” which appears in both the old Part 36 §36.17 and the new Part 36 §36.12 is missing from our rule 18(3). The omission is not material.  The basic rule is that damages are compensatory and a claimant cannot recover more than the amount of his loss.  Where a claimant accepts, for tactical or other reasons, a sanctioned payment or a sanctioned offer in a sum which is less than the full value of his claim, he is not precluded from pursuing the balance of his claim from the remaining defendants.

18.  In my judgment, there is no material difference between the provisions of Order 22, rule 18(2), the similar provisions in the new and old Part 36, and the former Order 22, rule 4(1)(a) and (2) of the RHC in relation to defendants sued jointly or in the alternative.  Order 22, rule 18(3), and its counterpart in the old and new Part 36, is a new provision which does no more than state the position that prevailed under the old Order 22 of the RHC. It does not enlarge the court’s discretion to order costs against a defendant who has not been adjudged liable and against whom proceedings have been discontinued. 

19.  Whilst it is right that the court has an unfettered discretion in relation to the award of costs, that discretion has to be exercised judiciously.  In the absence of compelling reasons, it would not be a judicious exercise of discretion to award costs against a defendant who has not been adjudged liable and against whom proceedings have been discontinued.  The normal order of costs is that costs follow the event.  In discontinuing the proceedings against the 2^nd defendant, the 2^nd defendant became the successful party and was entitled to an order of costs in its favour from the unsuccessful party, the plaintiff, unless good reason, such as those identified in §15 above, was shown to depart from the normal rule.  No such good reason was shown to me.

20.  I was also referred to the without prejudice correspondence exchanged between the plaintiff and the 2^nd defendant.  The fact that the 2^nd defendant failed to reach a compromise with the plaintiff does not justify an order of costs being made against the 2^nd defendant in the present case.  Whilst an unreasonable refusal to mediate may have costs consequences, an unreasonable refusal to enter into negotiations for settlement or the imposition of unreasonable terms does not have such consequences.

21.  For these reasons, it has not been shown the learned Master’s order in connection with the 2^nd defendant was unreasonable or wrong in law and I dismiss the plaintiff’s appeal against the order that the 2^nd defendant’s costs of the action (including all costs reserved) be borne by the plaintiff to be taxed on the High Court Scale, if not agreed.

The plaintiff’s appeal against the order made in relation to the 1^st defendant’s costs

22.  This part of the appeal relates to the learned Master’s order in relation to the costs of the 1^st defendant who appeared at the hearing of the plaintiff’s summons.  The learned Master ordered that the 1^st defendant’s costs incurred after 11:26 a.m. on 7 July 2010 up to the date of her order on 14 January 2011 be borne by the 2^nd defendant and the plaintiff jointly.  I understand that order to mean that the plaintiff and the 2^nd defendant each have to bear 50% of those costs.    

23.  As I have indicated above, there is no appeal against the order made by the learned Master that the 1^st defendant pay the plaintiff’s costs of the action incurred as between the plaintiff and the 1^st defendant up to 11:06 a.m. on 7 July 2010 and that the 1^st defendant’s costs between 11:06 a.m. and 11:26 a.m. of 7 July 2010 be borne by the 2^nd defendant.  The appeal relates to the further order made by the learned Master that the defendants’ costs thereafter be borne by the 2^nd defendant and the plaintiff jointly.  The 2^nd defendant has not cross-appealed that order and I am only concerned with the plaintiff’s appeal against that order.  He contends that those costs should be borne solely by the 2^nd defendant as the plaintiff’s stance all along was that he were not seeking a Sanderson or Bullock costs order against the 1^st defendant to pay the costs of the 2^nd defendant.  Mr Chan, for the 2^nd defendant, countered by submitting that the plaintiff should also pay half of the 2^nd defendant’s costs because he could have responded to the learned Master in a less equivocal way.

24.  I have reviewed the correspondence exchanged between the parties.  I must remark that the stance taken by the insurers and solicitors for the 2^nd defendant was high-handed, positional, and not at all conducive to a reasonable settlement of the proceedings.  An early offer to agree to no order as to costs would have quickly brought these proceedings, in respect of a relatively small claim, to an end.  Instead, costs have been incurred which are wholly disproportionate to the amount at stake.  This attitude is totally contrary to the modern culture which is underpinned by the reforms initiated by the Civil Justice Reforms.  To their credit, however, they did, ultimately, make an offer of no order as to costs of the proceedings between the plaintiff and the 2^nd defendant but, for reasons which escape me, the offer was rejected by the plaintiff who insisted on an order in terms of his summons of 12 February 2010 seeking an order that the 2^nd defendant pays the plaintiff costs of the action as incurred between the plaintiff and the 2^nd defendant.

25.  Coming back to the issue at hand, I conclude that there was no express statement in the correspondence, after the issue of the summons of 12 February 2010, that the plaintiff was seeking a Sanderson or Bullock costs order against the 1^st defendant. There is no plea for such an order in the plaintiff’s skeleton submissions dated 5 July 2010.  It was the 2^nd defendant who, in its skeleton submissions of 5 July 2010, sought such an order in the alternative to the primary order it sought that the plaintiff pays the 2^nd defendant’s costs.  This is acknowledged by the skeleton submissions of the 1^st defendant dated 12 January 2011, which were prepared for the hearing before Master Lo on 14 January 2011 when she made the orders being appealed against. Indeed, Master Yu, in his order of 4 March 2011, dispensed with the attendance of the 1^st defendant at the adjourned hearing of the plaintiff’s summons unless the 2^nd defendant sought costs against the 1^st defendant.  In the light of this background, I cannot see any basis for the order made by the learned Master  that, in effect, the plaintiff should bear half of the costs of the 1^st defendant incurred after 11:26 a.m. on 7 July 2010 up to the date of her order. 

26.  The reason given for the order in §25 of the 2^nd defendant’s skeleton submissions before me was that the learned Master had ruled that the 1^st defendant’s attendance on 7 July 2010 and 14 January 2011 was necessitated partly by the 2^nd defendant’s submissions that the court had a discretion to order a paying-in defendant to bear the costs of the non-paying-in defendant and partly “by the ambiguous stance of the plaintiff in not being forthcoming at the hearing on 7 July 2010 with the undertaking elicited by the court not to enforce against the 1^st defendant any Bullock order which might be made by the court”.  I do not accept this as a good or sufficient reason to impose a liability on the plaintiff to pay the 1^st defendant’s costs from 7 July 2010. 

27.  It would be wrong in principle for the court to elicit such an undertaking from the plaintiff before acceding to the 2^nd defendant’s alternative submission to make an order that the 1^st defendant should bear the 2^nd defendant’s costs.  In any event, it is clear from the order of Master Yu of 4 March 2010 that the attendance of the 1^st defendant on 7 July 2010 was necessitated by the 2^nd defendant’s skeleton submissions of 5 July 2010 that, in the alternative to its primary prayer, the 1^st defendant pay the plaintiff’s costs of this action including the plaintiff’s costs of proceedings against the 2^nd defendant and the 2^nd defendant’s costs of defending the plaintiff’s claim.

28.  I have also listened to the audio recording of the hearings on 7 July 2010 and 14 January 2011.  The plaintiff was consistent throughout those two hearings in maintaining his stance that he was not seeking a Sanderson or Bullock costs order against the 1^st defendant.

29.  Where a Master has given oral reasons for his or her decision, those oral reasons ought to be transcribed and included in an appeal bundle for the consideration of the judge in chambers hearing the appeal.  This was not done and I had to spend a considerable amount of time to listen to the audio recording of those reasons.  An appellant who fails to provide a written transcript of the Master’s reasons is at risk of being penalised with the costs of and occasioned by any adjournment of the appeal in order to obtain a transcript of those written reasons.  Although the appeal to a Judge in chambers from a Master’s order is a hearing de novo of the subject matter of the appeal, the Judge hearing the appeal will always consider and take into account the Master’s reasons for making the order or orders being appealed against.

30.  For reasons I cannot discern or understand, the plaintiff deliberately and consistently refrained from seeking a Sanderson or Bullock order against the 1^st defendant. Having made and acted upon that decision, it is wrong in principle to make the plaintiff bear part of the costs of the 1^st defendant when the plaintiff neither claimed any benefit from nor sought the attendance of the 1^st defendant at the hearing of his summons.

31.  In that it was suggested that the alternative prayer was made to alert the plaintiff to the possibility of seeking such an order against the 1^st defendant, the 2^nd defendant’s motives may have been laudable.  However, that alert could have been conveyed in correspondence with the plaintiff.  The stance taken by the 2nd defendant resulted in the court attendance of the 1^st defendant and the 2^nd defendant should pay the costs of such attendance.

32.  In the circumstances, I am satisfied that the learned Master has demonstrably erred in making the costs order that she did.  I set aside that costs order and make an order that the 1^st defendant’s costs, after 11:26 a.m. of 7 July 2010 up to and including the costs of the hearing of 14 January 2011, be borne by the 2^nd defendant to be taxed if not agreed, with certificate for counsel.

Costs of this appeal

33.  I propose to make the following costs orders nisi in relation to the appeal before me.

34.  I make no order as to costs in respect of the hearing on 5 May 2011.  The adjournment on that date was granted for the benefit of all the parties concerned.  Unfortunately, the parties did not utilise the opportunity given to them to resolve this matter and the matter came back before me and was argued on 11 May 2011. 

35.  The plaintiff failed in his appeal against the learned Master’s order that the 2^nd defendant’s costs of the action be borne by the plaintiff, but succeeded in overturning the learned Master’s order that the 2^nd defendant and the plaintiff jointly pay the costs of the 1^st defendant incurred on and after 7 July 2010.  In the circumstances, I make no order as to costs of the appeal save that I order that the plaintiff’s own costs be taxed in accordance with the Legal Aid Regulations.

36.  That leaves the costs of the 1^st defendant who appeared by counsel before me on 5 May and 11 May 2011.  I have closely perused the correspondence exchanged between the parties on the issue of the need for the 1^st defendant to attend the appeal, and I am satisfied that that attendance was necessitated by the suggestion of the solicitors of the 2^nd defendant that the mere fact that the plaintiff would not, in any event, seek reimbursement from the 1^st defendant of any costs which the plaintiff might be found liable to the 2^nd defendant does not, ipso facto, preclude the possibility that the court might still, in the exercise of its own discretion, consider that a Bullock order to be appropriate in the circumstances of the case, regardless of the positions of the plaintiff and the 2^nd defendant.  In the light of that statement, the 1^st defendant had no alternative but to appear at the appeal before me.  I order that the 2^nd defendant pays the costs of the 1^st defendant on the appeal, to be taxed if not agreed.  The 1^st defendant appeared at the appeal because of a perceived risk that it might be subject to a Bullock or Sanderson order in respect of the costs of the 2^nd defendant.  That perception was created by the 2^nd defendant, not by the plaintiff.  The 1^st defendant did not appear to resist the appeal of the plaintiff against the costs order made in its favour.  Quite apart from the fact that it was insured, the 2^nd defendant is a substantial company well able to pay those costs.  As I understand the written submissions for the 1^st defendant dated 3 May 2011, the 1^st defendant was content with an order that the costs incurred by the 1^st defendant either be borne by the 2^nd defendant and the plaintiff, or be borne by any one of them.