INCHROY CREDIT CORPORATION LTD v. CHEUNG MAN CHEUNG

Headnote

Practice and Procedure - Discontinuance - Conditions to be imposed - whether order for costs appropriate.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is an appeal from an order of Master Bokhary dated 5th November 1991 whereby she permitted the plaintiffs to discontinue this action against the defendant on condition that they bring no further proceedings against the defendant in respect of their claim for instalments and interest under the Hire Purchase Agreement made between the plaintiff and the defendant. She further ordered that there be no order as to costs.

2. I reserved judgment in this matter because both Counsel informed me that they could find no Hong Kong authority on the appropriate principles to be applied in a situation like the present. I took time to consider the succinct arguments which both Counsel presented to me.

3. The facts are fairly simple. On 11th July 1990, the defendant entered into a contract for the purchase of a Peugeot motor car from Lion Motors. On 18th July 1990, the defendant entered into a Hire Purchase Agreement with the plaintiffs. On 15th October 1990, the defendant failed to pay the instalment due that day and failed to pay any instalment thereafter. On the 1st November 1990, the defendant commenced proceedings against Lion Motors in the District Court.

4. On the 7th March 1991, the plaintiffs issued a writ in the High Court against the defendant. It is fair to point out that by that date they had been informed that the defendant had commenced proceedings in the District Court against Lion Motors. On 26th March 1991, Master Cannon made an order for the preservation of the car.

5. On the 3rd July 1991, the defendant and Lion Motors entered into a Consent Order in the District Court, whereby Lion Motors agreed to indemnify the defendant in respect of his liability to the plaintiffs under the Hire Purchase Agreement. On 16th July 1991, Lion Motors paid the plaintiffs the whole outstanding hire purchase price under the Agreement together with interest and costs.

6. Not surprisingly, the plaintiffs wished to discontinue the High Court proceedings against the defendant, and issued a summons to that effect on the 20th September 1991.

The Condition

7. The defendant appeals against the refusal of the Master to award him the costs of the action. He also appeals against the condition to which I have already referred. The defendant contends that the appropriate order should be that the plaintiff have leave to discontinue on condition that:

"The plaintiff should not bring any subsequent action against the Defendant for the same or substantially the same cause of action."

8. The difference between the parties is this. The plaintiff supports the Master's Order because it ensures that no claim can be brought under the Hire Purchase Agreement, because the plaintiffs have been paid out in full. However, they wish to leave open the possibility that they may have to claim against the defendant for possession of the vehicle or may leave to join him as a necessary party to proceedings to that effect. The car is preserved under a Court Order. Prima facie the plaintiffs having been paid out in full, they would seem to have no further interest in the.car. Under the Hire Purchase Agreement, when the plaintiffs are paid in full including  the option to purchase fee, the title to the car would vest in the defendant. The defendant is not, so I am told, interested in the car and no doubt Lion would like it back in order to mitigate their loss.

9. The one matter with which I am not seized is the question of title to the car, nor do I consider it appropriate to attempt to deal with this matter. It suffices for the purposes of this judgment if I conclude, as I do, that there may well be future problems as to title to and possession of the car in question, and that the defendant may be involved as a party thereto even though I am told by his Counsel that he has no interest in the ill-fated vehicle. I would feel most uncomfortable in shutting the plaintiffs out from a possible future claim in relation to the car, which claim may involve the defendant.If the defendant wishes to avoid further costs and involvement in this matter, all he need do is to renounce in writing all and every claim to possession of or title to the car, and permit the plaintiffs to add his name as a party to any proceedings they may bring subject to the usual indemnity as to costs.

10. I accept that much of the above is speculative, but I do not propose to make an Order shutting the plaintiffs out forever in getting their tackle in order if there is a dispute about title. I should have added that although the plaintiff has discontinued against the defendant, the defendant still has a Counterclaim against the plaintiffs which at the moment I am told is still proceeding.

11. In chappie Ltd. v. warrington Canners Ltd. (1955) 72 R.P.C. 343 Wynn-Parry J. had before him an application to discontinue under 0.26 r.l. At p.344 he said this:

"It is quite clear from the authorities that I ought only to impose conditions if, upon a fair view of the whole of the relevant circumstances the imposition thereof is necessary, either for the protection of the Defendants or in the public interest."

12. I am quite satisfied that taking into account all of the relevant circumstances the condition imposed by the Master is necessary for the protection of the defendant, and that to go further as the defendant would have me do is to go beyond that which is reasonable or necessary in the circumstances.

13. I think the Master was correct in imposing the condition she did, and I would dismiss that part of the appeal that relates to that condition.

Costs

14. Under 0.21 r.2, the plaintiff can discontinue an action without leave at any time not later than 14 days after service of the defence.

15. Under 0.21 r.3, leave is required to discontinue for all cases not covered by r.2. R.3(1) ends with these words:

" . . .  on such terms as to costs, the bringing of a subsequent action or otherwise as it thinks just."

16. On p.387 of  the white Book, one finds the following passage which deals with the question of costs on a discontinuance:

17. The plaintiff contends that the High Court proceedings became academic when they were paid out in full by Lion Motors, and that their discontinuance was not an acknowledgement of defeat, but their recognition that they could not recover the same sum twice.

18. The defendant contends that the normal rules should be applied in this case: He was brought to Court to defend a claim which he strongly denied.Why, Mr. Jat asks rhetorically, should the defendant be prejudiced in costs just because the plaintiff has been paid off by a third party.

19. I was referred to the report in The Independent of the Barretts & Baird case, referred to in the passage in the White Book which I have just quoted. The facts there were very different to the present case. In that case, the defendants represented Fatstock Officers employed by the Meat & Livestock Commission (MLC). In October 1986, they held a one-day strike. This strike affected the abattoir owners. When a further strike was authorised by ballot, the abattoir owners applied for an interlocutory injunction which was granted ex-parte and discharged by Henry J. after a full hearing. Shortly thereafter, the dispute between MLC and the defendants was settled, and the injunctive relief sought in the action became academic. Leave to discontinue was given by the Master on terms that there should be no Order as to costs up to the conclusion of the interlocutory proceedings, but the plaintiff should pay the defendants' costs of the action thereafter. On appeal, Henry J. made the following observations as appears in the above report.

"His Lordship was satisfied that the  general rule should only apply when the discontinuance could safely be equated with defeat or an  acknowledgement of likely defeat."

20. Henry J., having considered all the factors relevant to the exercise of his discretion, concluded that the Master had been correct and that his Order reflected the justice of the case.

21. I would be most concerned if the general rule as to costs on a discontinuance should be limited in the . manner suggested by Henry J. I agree with him that there may be cases like the one before him, where events occur which render the continuation of the proceedings unnecessary and futile, and where justice would require the sort of Order made in that case. But to say that costs should only be awarded if the discontinuance can be equated to defeat in my judgment, goes too far. The facts of the  case before me illustrate the difficulty with Henry J.'s observations. I can see how the plaintiffs say that they have not been defeated. They have been paid in full as a result of the District Court proceedings. But they were not paid in full by any acknowledgement of the defendant that he was, in fact, liable to them. The tripartite nature of the relationship which leads to a Hire Purchase Agreement in these circumstances adds another dimension to the matter. The defendant wished to purchase a car from Lion Motors, and finance was arranged by reason of a sale by Lion to the plaintiff, who then let the vehicle on Hire Purchase terms to the defendant. The defendant can be forgiven for considering both the plaintiff and the dealer as the other side to the transaction.

22. The defendant put in a 21 page Defence and Counterclaim to the plaintiff's claim. He relies on a number of breaches of implied conditions, and further  contends that one Derick Yip of the dealer acted as agent of the plaintiffs in relation to the negotiations leading up to the Agreement. He also relies upon the fact that the Hire Purchase Agreement, into which he entered, was arranged by the dealer pursuant to a pre-existing arrangement between the plaintiff and the dealer. Had this action gone to trial these allegations would have had to be established. It is very difficult for a court hearing an application to discontinue to be able to judge what would have happened. These proceedings became unnecessary because of the defendant's success in the District Court action, which commenced before the High Court action, to the knowledge of the plaintiffs. The defendant was forced  to take proceedings in the District Court in order to recover his loss from Lion Motors, and then he had to defend himself and counterclaim against the plaintiffs at the same time.

23. Taking all these matters into account including all the points raised by Mr. Shieh for the plaintiffs, and bearing in mind the very wide discretion I have as to costs in a situation such as this, it does seem unjust to me to deprive the defendant of his costs in the light of the events which have happened in this unfortunate case. It seems to me that the defendant was a wholly innocent party, and I do not see why he should have to bear his own costs of the High Court proceedings. Each case depends on its own facts and the general rule may sometimes need to be departed from to achieve a just solution. But this case is not such a case.

24. I, therefore, propose to allow this appeal by ordering that the plaintiff do pay the defendant's costs of the action up to discontinuance, and that the discontinuance shall not be effective until the costs have been paid.

25. Counsel have already addressed me on the question of costs based on the various possibilities open to me. The defendant had to come to this Court to get his Order for costs, and although I ruled against him on the other condition I see no reason why the defendant should not have the costs of the appeal, and I so order.

26. Before parting with this case, I would like to point out that this case was listed for half a day. In fact, it took 45 minutes. No doubt this was in some part due to the very useful and succinct skeleton arguments and chronology placed before me. This is not the first time that I have found grossly exaggerated time estimates. It is essential for the purposes of proper listing, and for the administration of justice generally that time estimates are realistic. It is true that havoc can be caused by gross under estimates, and this often leads to over estimate. However, there is no way that this case could have lasted more than 1 hour. I hope these observations will be borne in mind when time estimates are made.