UNITED CHRISTIAN MEDICAL SERVICE v. LOW & PARTNERS (a firm) AND ANOTHER

IN THE COURT OF APPEAL

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J U D G M E N T

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Fuad, V.-P.:

1. We have before us an interlocutory appeal by the defendants, Mr. Ernest Low and his firm, Low & Partners, against orders made by Barnett J. on 25th and 26th May 1992 during the trial of an action brought against them by the plaintiff, the United Christian Medical Service (a hospital) for damages for negligence and breach of professional duty. There is a cross-appeal by the hospital.

2. The progress of the action has met with many vicissitudes as will be seen and the history of the matter goes back a long way. In April 1978 the hospital was advised that a slope on its land was unsafe and needed attention. In June of that year, Ng Chu Man & Associates were appointed the architect for the project. Mr. Low was appointed geotechnical consultant in early March 1979. The slope reinstatement works began on 18th March 1982. On the following day, Ng Chu Man & Associates resigned their appointment and on 30th March 1982 Mr. Low accepted the additional appointments of Authorised Person and Registered Structural Engineer for the works.

3. On 9th June 1982 it was noticed that cracks had developed on a major road adjoining the works and a few days later, tension cracks appeared on the face of the slope. After inspection of the site by Government engineers, on 19th June 1982 the Building Development Department served an order upon the contractor under section 24A of the Buildings Ordinance, Cap. 123, to carry out certain safety measures and to cease work.

4. On 13th October 1982 the contractor, by a notice in writing, required the defendants to give them permission within 28 days to resume work. It is common ground that in the notice the contractor had mistakenly relied upon a term of the relevant Conditions of Contract which had no application in the circumstances. As a result, it seems, of this notice, a meeting was held on 4th November 1982 attended by the Regional Hospital Administrator, Mr. Low, and various Government officers, including the Chief Quantity Surveyor and the Chief Structural Engineer and Building Surveyor. One of the decisions reached at that meeting was that Mr. Low would respond to the contractor's notice and, at a meeting, work out an agreement as to payment and compensation due to the contractor for submission by the hospital, a subvented institution, to the Government, the ultimate paymaster, for approval. That meeting took place on 11th November 1982.

5. The works re-commenced on 10th January 1983 and were completed some 10 months later.

6. As the correspondence we have seen shows so plainly, the hospital did not wish to sue Mr. Low and his firm but were persuaded to do so by the Government after it had been assured of full indemnity. This aspect of the matter is fully reviewed in Barnett J.'s judgment of 11th May 1992 which does not give rise to an appeal but to which I will later, briefly, return.

7. To return to the chronology o?events. The hospital issued the writ on 1st March 1988. The Statement of Claim was not filed until 18th April 1989. The defence and counterclaim is dated 21st July 1989 and on that day there was a request for further and better particulars of the Statement of Claim. The reply was furnished on 27th February 1990 and at the same time the hospital served an Amended Statement of Claim. The Amended Defence and Counterclaim was filed on 14th May 1990 and the Defence to the Counterclaim on 25th May. On 13th April 1992 there was a mutual exchange of the reports of one expert on each side.

8. The trial of the action began before Barnett J. on 4th may 1992. On that day, the parties agreed that the defendants' summons (dated 28th April) to strike out the Amended Statement of Claim should first be heard. The defendants' grounds were that that pleading disclosed no cause of action and/or the proceedings were an abuse of the process of the court. It was argued on behalf of the defendants that the hospital had no reasonable cause of action because it had suffered no damage, the Government having funded the whole project and so it would not be out of pocket and further that, at best, the hospital would be entitled only to nominal damages for which there was no claim. On the averment of abuse of process, the defendants' argument was that the real plaintiff was the Government, for the hospital would not benefit from any money recovered, the work having been done at no cost to itself; and the hospital was immune from any adverse consequences arising from the action by reason of the indemnity given by the Government. It was further submitted that the hospital was on good terms with Mr. Low, did not feel that the action was justified and had only instituted the proceedings following pressure by the Government.

9. It is not necessary to go further into the grounds upon which the defendants' strike out application was based because after a 4-day hearing, in a reserved judgment delivered on llth May 1992 Barnett J. refused the application and there is no appeal against that decision.

10. Mr. Westbrook began to open the hospital's case in the afternoon of 11th May and continued on 12th. Early on during his opening he had indicated that he would have to apply to re-amend the Amended Statement of Claim and on 13th May Barnett J. asked Mr. Westbrook to formalise the application. An adjournment was granted until the next morning for the proposed re-amendments to be presented. When this happened (on 14th May, which was a Thursday) and the application to re-amend was formally made, Mr. Allman-Brown, for the defendants applied for, and was granted, an adjournment until the following Monday (18th May) so that he could consider the proposed amendments.

11. When the court resumed on 18th May, Mr. Allman-Brown was granted a further day's adjournment for the same purpose, and the same thing happened on 19th May, so that Mr. Allman-Brown's submissions opposing the re-amendment did not begin until 20th May. These submissions continued on 21st may and concluded on 22nd May, during the morning. Mr. Westbrook then began his reply and during the afternoon indicated to the court (and for the first time to those representing the defendants) that he was proposing to apply to "change" his expert. This was on the Friday and Barnett J. adjourned the matter until Monday 25th May when he gave his decision on the application to re-amend the Amended Statement of Claim as well as upon an application which had been made by Mr. Westbrook to amend one of the hospital's answers to Mr. Low's request for further and better particulars of the Amended Statement of Claim. Mr. Westbrook then made his formal application "to change experts".    

12. There was then an adjournment until the next day, 26th May when the Re-Amended Statement of Claim (as allowed by the judge) was handed in and Mr. Westbrook continued his submissions regarding his expert. When the hearing of that application had been concluded, after the short adjournment, the judge gave his decision on the substitution of experts and made orders as to the costs of the various applications which had been before him.

13. The Notice of Appeal was filed on behalf of Mr. Low on 30th June 1992 and the Cross-Appeal on 13th July. We heard the appeal and cross appeal over 4 1/2 days. Thus it happens that although about 10 years have elapsed since the cause of action arose; over four years have passed since the writ was issued and three weeks or so were taken up in the disposal of applications by the judge who expected to hear the action the trial of the action proper has yet to begin. Quite apart from any other consideration, the costs must have assumed horrendous proportions in relation to the amounts of the claim and counterclaim.

14. I now turn to the Re-Amended Statement of Claim in the form allowed by the judge. After stating the background of events, the plaintiffs averred the nature of the express or implied terms of the contract between the parties, and the fact that the defendants, as agents, owed the plaintiff fiduciary duties, and duties in tort equivalent to the express or implied terms pleaded. Further that the plaintiff had relied on the advice and professional skill of the defendants. The pleading then refers to the meeting of 11th November 1982 and its purpose. These matters are covered in paragraphs 1-15. Paragraphs 16-19 are in these terms:

"16.   By reason of the negligence of the Defendants, their servants or agents and/or by their breach of Contract in respect of the-duties pleaded in Paragraphs 8, 9 and 10 hereof the terms agreed by the Plaintiff for the compensation of the Contractors and the terms agreed with the Contractors for the recommencement and completion of the Works at the meeting referred to in Paragraph 15 hereof were not in the Plaintiff's best interests and were excessive.

PARTICULARS

(a) Advising the Plaintiff to accept terms in respect of compensation for delay and disruption which were excessive and more than the Contractors could have expected to receive in any claim made against the Plaintiff. Particulars of the excessive amounts and rates agreed and certified are set out in Schedule 1.

(b) Advising the Plaintiff to accept terms in respect of the re-commencement and completion of the Works which were excessive and more than the Plaintiff could have expected to pay had they employed another Contractor to execute the remaining Works. Particulars of the excessive amounts and rates agreed and certified are set out in Schedule 2.

(c) Failing to advise the Plaintiff of the alternatives available and of the financial consequences thereof.

(d) Failing to exercise reasonable skill, care and diligence in administering the Works in carrying out the matters pleaded in this paragraph.

17. In the premises the Plaintiff was denied the opportunity of negotiating acceptable rates with the Contractors for completion of the Works, and/or was advised to and did accept rates which resulted in the Contractor being paid more than. the costs of a replacement Contractor plus damages properly payable to the existing Contractor. By reason of the Defendants' breaches pleaded in Paragraph 16 hereof the Plaintiff has suffered the loss and damage set out in Schedule 3 hereof [$1,903,006]

18. By reason of the negligence of the Defendants, their servants or agents and/or by their breach of Contract in respect of the duties pleaded in Paragraphs 8, 9 and 10 hereof the Defendants failed, at the meeting referred to in Paragraph 15 above; to agree on behalf of the Plaintiff or to advise the Plaintiff that they should agree to a fresh Completion Date for the Works alternatively if which is denied a completion date could not have been calculated at the date of the meeting referred to in Paragraph 15 of the Statement of Claim the Defendant should have advised the Plaintiff to include a term in the agreement with the Contractor reached at the said meeting to the effect that a new Completion Date would be fixed by the Defendants when the full extent of the remaining works was known. As a result of the aforesaid the Plaintiff suffered loss and damage as is more particularised in Schedule 4. [$356,400)

19. By reason of the negligence of the Defendants, their servants or agents and/or by their breach of Contract in respect of the duties pleaded in Paragraphs 8, 9 and 10 hereof the Defendants, in their role as Engineer, certified payments to the Contractor in an excessive amount in respect of temporary works comprising (1) the soldier piles that caused the failure of the Works as is more particularised in Schedule 5 and as a result the Plaintiff suffered loss and damage. [$315,146)"

15. By his orders, the judge had allowed some of the amendments to the Amended Statement of Claim  sought by Mr. Westbrook and refused others. He also allowed an amendment to the plaintiff's response to a request by the defendants for certain further and better particulars. He also ordered that the trial be adjourned and that the plaintiff have leave to substitute the expert evidence of a Mr. Brian Rawling for that of a "Mr. X" (for reasons which will appear, I do not think it desirable to mention his name in this judgment) and made certain consequential orders in relation to the substitution of expert evidence. In respect of costs, he made the following order:

"3, The Plaintiff do pay the Defendants all costs of incidental to incurred and thrown away by the Plaintiff's applications to re-amend the Statement of Claim, to amend the Answer to Request for Further and Better Particulars of the Plaintiff's Statement of Claim ... and to substitute an expert report ... to include but not. limited to the costs of the hearing since . Counsel for the Plaintiff began to open the trial of this action ... any re-amendment of the Re-Amended Defence and Counterclaim ... considering and replying to the substitute expert report of Mr. Brian Rawling, the cots of [Mr. Low's] airfare and reasonable accommodation since the beginning of the trial to today, plus two extra days, on a common fund basis to be taxed if not agreed and paid before this action is relisted for trial;"

16. The judge also ordered that the action should not be restored to the list for hearing without his leave.

17. It must be said at once that the defendants' Notice of Appeal (which would take far too long to read now) was prolix, confused and confusing. The first order sought; after seeking an order that the plaintiff be refused leave to re-amend paragraphs 14 and 17 of the Amended Statement of Claim requested, in the alternative, that the plaintiff's claim be struck out on the grounds given. The first order sought by the proposed amended Notice of Appeal was as follows:

"(1) The Plaintiff be refused leave to re-amend paragraphs 14 and 17 of the Amended Statement of Claim and^-that paragraphs 14 to 17 [of] the Amended or Re-Amended Statement of Claim be struck out on the grounds that they disclose no cause of action; may prejudice, embarrass or delay the fair trial of the action; are an abuse of the process; or that they be struck out under the Court's inherent jurisdiction."

18. During the hearing we enquired from Mr. Ailman-Brown whether he could properly invite this court to strike out part of the plaintiff's pleading in the light_ of the course of the proceedings before the judge. There was no summons and no formal application relating to striking out the action or any part of the Amended Statement of Claim. There is no' order drawn up to reflect a decision by the judge to refuse any such application. Mr. Westbrook was not aware that any application of the kind had formally been made so that he could make an appropriate response. However, the judge in his "Ruling" of 25th May 1992, noted that one of Mr. Allman-Brown's arguments had been "that the Plaintiff's case is unsustainable and therefore should be stopped now". On this, the judge said:

"As to the latter point, while it is legitimate to draw attention to difficulties and obstacles in the Plaintiff's path, as material I can properly take into account in exercising my discretion, I do not consider it appropriate for me to embark on a detailed examination of the suggested defects in the Plaintiff's pleading or figures at this stage."

19. We were shown notes of the proceedings taken by some of those in the teams representing the parties (the judge's notes were not made available). There are certainly references to the court's inherent jurisdiction to strike out but the notes give no indication of the nature and scope of Mr. Allman-Brown's "strike out application" to use a broad term. What is' clear is that he did not specify precisely what order was being sought and the grounds upon which it was sought and, I feel bound to say, his explanation to us was uncertain and insecurely based.

20. Mr. Allman-Brown's vague application, in the judge's words, that the "case ... should be stopped now" wholly lacked the formality and clarity of the summons to, strike out of the 28th April 1992, heard between 4th and 7th May and upon which the judge gave his reasoned 31-page decision on 11th May. The other "strike out application", such as it was, came only during counsel's submissions opposing the amendments to the Amended Statement of Claim sought by Mr. Westbrook.

21. To the extent that it was incumbent upon the judge to entertain the informal and imprecise "strike out application" (as to which I have grave reservations) the alleged offending paragraphs of the Amended Statement of Claim or the action itself, if vulnerable, should have been attacked much earlier and it is not therefore surprising that the judge took the view he did about the matter in the passage from his 25th May 1992 decision L have just read.

22. In all the circumstances I entertained no doubt that Mr. Allman-Brown's attempt to obtain a "strike out" order in any form from this court was misconceived and I agreed with my Lords that we should not allow an amendment to the Notice of Appeal to seek such an order.

23. Following the indication of our decision, Mr. Allman-Brown abandoned his complaints about the amendments allowed by the judge to paragraphs 14-17 of the Amended Statement of Claim. However, he maintained his submission that the judge should not have allowed the plaintiff to amend its answers to one of the requests for' particulars made by the defendants. This matter arises out of paragraph 18 of the Amended Statement of Claim read with Schedule 4. I have already read-that paragraph. Paragraph 2 of Schedule 4 was in these terms:

"2. The Defendants failed to advise the Plaintiff to agree a revised date for completion and the Plaintiff states that the agreed daily sums were so high that the Contractor had no incentive to complete in the shortest possible time."

In relation to paragraph 2 of Schedule 4, the request by the defendants' and the plaintiff's answer were as follows:

"Request:-

Of the allegation that 'the agreed daily sums were so high that the Contractor had no incentive to complete in the shortest possible time', state:-

(i) whether it is alleged that the Contractors did not complete in the shortest possible time;

(ii) if it is so alleged, give full particulars of all facts and matters relied upon in support of such allegation.

Answer:-

(i) It is not so alleged.

(ii) Not applicable."

24. The judge dealt with Mr. Westbrook's application in this way in his judgment of 25th May 1992:

" The other matter with which I have to deal is the answer to question 20 in the further and better particulars. Mr. Westbrook says that 'not' has crept into answer (i) and applies to delete that word. He argued that it is an obvious mistake.

      Certainly, the answer is surprising but not obviously wrong. If answer (i) should have been in the affirmative then answer (ii) should have given particulars rather than stated 'not applicable'. In the context of this case, however, plainly it was an error and should be rectified or it would make nonsense of the Plaintiff's case. The correction will not, in my view, place an unjustifiable burden on the Defendants. I, therefore, allow the applications to amend the answer."

25. In my judgment, this was not a proper exercise of discretion. The request was made on 21st July 1989, the allegedly mistaken reply was given on 27th February 1990 and had stood in that form for over two years right up to the date of the trial of the action. No evidence was offered as to how the mistake arose, and while leave was given to amend answer (i) the court did no more than direct that particulars be given under answer (ii) (without time limit, I observe). Even until the conclusion of the hearing of this appeal, no particulars have been given. In my view the judge's order on this issue cannot stand.

26. On the issue of the proposed amendments to the Amended Statement of Claim, as mentioned earlier, the judge granted leave to the plaintiff to make some amendments but refused to allow a number of them. The plaintiff was content to accept the judge's decision save in one particular - and this relates to a proposed amendment to paragraph 19 of the Amended Statement of Claim (set out above) with the addition of a new Schedule 6. The amendments would have allowed the plaintiff to pursue a claim (alternative to the claims advanced under paragraph 17) that the defendants' negligence had resulted in the plaintiff having to pay the contractor excessive amounts in relation to hand-dug caisson work. Schedule 6 would have set out figures showing that the alleged "overcertification" for that work led to a loss of $2,012,112.

27. In his cross-appeal on this point, Mr. Westbrook emphasises the alternative nature of the new claim and that he had informed the judge that the plaintiff was willing (and is still willing) to submit to an order that the amount recoverable under the alternative claim should not exceed that under the original claim.

28. As the learned judge indicated in his judgment of 25th May 1992, he was fully aware that the value of the caisson work would have fully to be gone into at the trial as the case stood without the amendments sought. However_, this may be, it seems to me that an entirely new basis for a claim of over $2 million (albeit in the alternative) was being sought to be advanced very, very late in the day. It would not have been right to allow this amendment.

29. I now turn to consider the judge's decision to allow the plaintiff to substitute the expert evidence of Mr. Brian Rawling for that of Mr. X. I mention that it appears that the amendments sought to be made to the Amended Statement of Claim had been prompted by the former's advice.

30. Mr. X is a consultant of a leading group of consultant engineers, an international organisation practising in many regions of the world. He has been employed by the group for 43 years. He has degrees in civil engineering from Dublin and Harvard. He has a master's degree in geotechnical engineering, also from Harvard. For the past 34 years he has worked in Hong Kong on general civil engineering work with a geotechnical basis and has written many learned articles. It would seem, therefore, that Mr. X was ideally qualified to be the plaintiff's expert in the light of the case it sought to establish. I do not think it is necessary to read all that the judge said on this aspect of the matter but it is clear that he based his decision on the fact that he had been told from the Bar that the plaintiff had lost confidence in Mr. X who could not answer some of the points made by the defendants' expert. He also took into account the fact that the substitution of the expert in the place of Mr. X would mean that the court would have before it the reports and evidence of two quantity surveyors and not that of Mr. X, an engineer opposing a quantity surveyor.

31. Mr. Westbrook explained to us how it came about that he ultimately concluded that it was essential, in the interests o?his client, to make the application to substitute a new expert. His explanation revealed that he was placed in a delicate and difficult position because, as he frankly admitted to us, the real problem, which he did not feel it right to reveal in open court, was that after he had come late into the case and spoken with Mr. X he had concluded that he was senile. The plaintiff's advisers had considered the matter most carefully after Mr. Westbrook had formed that opinion of Mr. X and it was not until some 18 days after the hearing began before the judge that he had definite instructions to mention the matter to the judge. I do not see why the difficulties envisaged by Mr. Westbrook were not immediately intimated to those representing the defendants. And, in my view the real reason for the plaintiff's loss of confidence in Mr. X should have been revealed to the judge as it could have been, without embarrassment, in an affidavit to support the very far-reaching application being made, which would necessarily have led to the possibly lengthy adjournment of an action which should have reached trial long ago. Of course I accept what Mr. Westbrook has told us from the Bar but I wonder how Mr. X's senility was not apparent to those procuring his report when it was signed on 11th April 1992. Was his mental state not appreciated by the solicitors acting for the plaintiff when the expert reports were exchanged on 13th April 1992? Did Mr. X became senile just before Mr. Westbrook first discussed the case with him?

32. So substantial an indulgence was being sought by the plaintiff at such a late stage of the prosecution of a very stale claim that a full and frank explanation, fully supported by evidence, should have been given to the court in a manner which would have allowed the defendants a proper opportunity to oppose the application. With very great respect to the judge, despite the consequential orders he made which were designed to safeguard the position of the defendants, he simply did not have adequate material before him to justify permitting the substitution of experts. A proper exercise of discretion would not have resulted in the order he made.

33. I have already read the judge's order as to costs. The defendants challenge the order and say that the judge should have awarded them costs on an indemnity basis and not on a common fund basis. The plaintiff cross-appeals and asks for an order that the costs be on the ordinary party and party basis and that that part of the order which requires the costs to be taxed if not agreed, and paid before the action is relisted for trial, be varied.

34. As to the basis upon which costs were ordered, it seems to me that the authorities are usefully reviewed in the judgment of Hunter J.A. in Citibank N.A. v. Kung Kwok Wai, Civil Appeal No. 81 of 1989 (unreported), delivered on 19th October 1989. In that case Hunter J.A. referred to an unreported decision of this court (Dominga Lakham v. Wu Wing Tat, Civil Appeal No. 104 of 1987, 11th September 1987) which adopted as being appropriate to Hong Kong, Brandon L.J.'s analysis in Preston v. Preston [1982] Fam 17 at page 38. The broad test is that there should be some special or unusual feature in the case to justify the court granting an order for costs on a common fund basis as' opposed to the usual party and party basis. Hunter J.A. also referred to the accepted practice, of course, that an appellate court will only interfere with a judge's discretion on costs upon well-known principles.

35. For my part, I have no hesitation in declining to interfere with the judge's decision as to the basis of the award of costs. It seems to me that in all the circumstances, the nature and timing of the unsuccessful applications made on behalf of the plaintiff, which led inevitably to an adjournment, fully' merited the common fund order, but not an order for taxation on an even more generous basis.

36. However, a problem has arisen over that part of the order which directs that the action be not listed for trial until the costs awarded have been taxed (if not agreed) and paid. On the face of it the order seems unusual. Since the plaintiff was being funded by the Government there was no risk that the costs order would not be met, but it became clear that the reason why the judge made that order was because he was persuaded by Mr. Allman-Brown that unless he did so the defendants would be gravely prejudiced in the future conduct of the action because Mr. Low had run out of money.

37. We have been shown the considerable correspondence which has been exchanged on the subject between the parties since the order was made. I do not think it necessary to summarise what happened, but the fact is that the parties could not agree about the approximate level of the costs that the plaintiff will have to pay. Taxation has yet to be arranged. The result is, of course, that the action cannot be set down for trial. We enquired from counsel whether it might be possible for them to agree a minimum amount that the plaintiff would inevitably have to pay to the defendants so that something could be paid on account and thus enable the action to be listed for trial without the defendants being prejudiced, but no agreement could be reached.

38. In exercising his discretion, the judge obviously considered this matter most carefully, but in the light of events I am persuaded that it would be wrong to maintain the order in its present form. I accept Mr. Westbrook's point that it may be many months before a hearing date can be found for this case.

39. It seems to me important that the case be listed for hearing because, in between the date the case is listed and the date the trial comes on for hearing, there should be ample time, now that the basis of the award has been confirmed, for the costs to be taxed if they ultimately cannot.be agreed. Otherwise, many months will pass before the action is listed and then it will be many more months before it can be heard. I would therefore propose that the words "before this action is relisted for trial" be deleted from the order. The liberty to apply given by paragraph 5 of the order remains and so, no doubt, appropriate applications can be made to the trial judge if either party considers that his opponent is acting unreasonably.

40. I would therefore:

(a) allow the defendants' appeal on the issues of -

(i) the amendment to the plaintiff's answer to request No.20 for further and better particulars of paragraph 2 of Schedule 4 to the Amended Statement of Claim (setting aside paragraph 2 of the Amended Order dated 25th May 1992); and

(ii) the substitution of expert evidence on behalf of the plaintiff (setting aside paragraph 1 of the Amended Order dated 26th May 1992); and

(b) dismiss the defendants' appeal relating to the basis of the costs awarded to them by the Amended order of 26th May 1992; and

(c) dismiss the plaintiff's cross-appeal relating to the amendment of paragraph-19 of the Amended Statement of Claim and the addition of a new Schedule 6, and to the basis of the costs awarded against it by the Amended Order of 26th May 1992 but allow the cross-appeal to the extent of deleting the words "before this action be^-relisted for trial" in paragraph 3 of that Order.

 

Kempster, J.A.:

41. I agree with the conclusions reached and with the orders proposed by my Lord the Vice President and also with the reasons he has given. There is nothing I can usefully add.

Penlington, J.A.:

42. I also agree With the reasons given by the Vice President and with the orders he proposed. I would only add that in Overseas Trust Bank Ltd. v. Coopers & Lybrand and Others, HCA 5764 of 1986 (unreported), Godfrey J., referring to the level of costs, stated that there were now only two levels of costs in England and Wales: the standard basis and the indemnity basis and he sets out there the difference between the two. He had expressed the hope that a similar enactment or change will be made and the same procedure and same level of costs would be available in Hong Kong. That was in August of 1990. I also hope that a change will be made to reflect what seems to me to be a very sensible and reasonable provision.