ANSAR MOHAMMAD v. GLOBAL LEGEND TRANSPORTATION LTD

HCPI 1057/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 1057 OF 2007

_______________

J U D G M E N T

_______________

A.  BACKGROUND

1.  On 9 July 2010, I handed down a judgment (“the Judgment”) awarding the Plaintiff a total sum of $1,015,819.30 with the usual interest for personal injuries. I further directed that the sum of $223,890.95 the Plaintiff has received for the employees’ compensation in the ECC application should be deducted from the award.

2.  I also made a costs order nisi in favour of the Plaintiff.

3.  The Defendant issued a summons to vary the said order nisi.

4.  The only issues that I am now concerned with is paragraph 3 sub-paragraphs (a) and (b) of the summons as amended on 15 October 2010 (“the Amended Summons”).

5.  Sub-paragraph (a) is for an order that the Defendant only pays costs to the Plaintiff of the action up to 13 May 2008 on District Court scale.

6.  Sub-paragraph (b) is for an order that the Plaintiff to pay the Defendant’s costs of the action from 14 May 2008 up to date on High Court scale.

B.  GROUNDS OF THE VARIATION

B.1  Payment-in

7.  The date of 13 May 2008 is relevant because it is the date of the last payment made by the Defendant into court, by which date the Defendant had paid into court a total sum of $865,000 (“Payment-in”).  The Plaintiff did not accept the Payment-in, and the claim then proceeded to assessment after interlocutory judgment was entered.

B.2  Total damages

8.  The parties do not dispute that that net amount of damages together with interest the Plaintiff actually receives will be in the sum of  $809,363.31– which amount is calculated by giving credit to the said sum of $223,890.95, with its interest being calculated in accordance with the principle laid down in Lau Chi Keung v Wong Wai Kei & Ano.[1]

9.  The net amount the Plaintiff now recovers is therefore less than the amount of Payment-in.

B.3  Consequence

10.  Since the Payment-in was made before the commencement of the Civil Justice Reform (CJR”) on 2 April 2009, the applicable rules should be the pre-CJR rules, under which, the court – when exercising its discretion as to cost –

(i) can take into account any payment of money into court and the amount of such payment[2].

(ii) when a defendant pays money into court which beats the settlement sum or the sum awarded to the plaintiff, he is usually regarded as the successful party who is entitled to costs from the date of payment-in[3].

11.  Relying on the aforesaid provisions, the Defendant asks for variation as per the said sub-paragraphs of the Amended Summons.

C.  WHETHER PLAINTIFF’S COSTS SHOULD BE TAXED AT DISTRICT COURT SCALE?

C.1.  Applicable Test

12.  When a plaintiff chooses to commence his personal injury claim in the High Court, and the amount of damages recovered (be it by consent or after adjudication) falls within the jurisdictional limit of the District Court, the Plaintiff’s costs are not necessarily be taxed in the High Court scale.

13.  The acid test as expounded in the English decision of Hopkins v Rees & Kirby Ltd [1959] 2 All ER 352, and applied by Seagroatt, J in Lai Ki v B+B Construction Company Limited & Ano[4] is by “ignoring all questions of contributory negligence, has the Plaintiff a reasonable prospect of recovering a sum of money in excess of the County Court jurisdiction?”[5]

14.  When the award is within the District Court jurisdiction, the usual scale of costs will be on the District Court scale[6].

15.  Thus, according to the principle laid down in Lai Ki (ibid.), the Plaintiff would need to satisfy me as to whether (paraphrasing the judge in the case of Hopkins (ibid.) by Seagroatt J. in Lai Ki (supra.) at §12) at the time when he issued the Writ on 12 December 2007 it was then obvious that it was a District Court action, or was it an action, when tried by one judge rather than another, might have resulted in an award exceeding the District Court jurisdictional limit (excluding any contributory negligence).

C.2.  Did the Plaintiff have a reasonable prospect of recovering a sum of money in excess of $1 million (being the District Court jurisdiction limit)?

16.  When the writ was issued in December 2007, the Plaintiff had already settled his ECC proceedings by acceptance of the Defendant’s payment into court therein.  Thus, the Plaintiff had already received a total amount of $223,890.95. In order words, when evaluating the reasonableness of his decision in instituting the claim in the Court of First Instance, it would have been obvious to him that he would reasonably be able to recover an amount not less than $1,223,890.95.

17.  Counsel for the Defendant, Mr. Sakhrani, submitted that the Plaintiff’s claim was premised upon a false platform in that (i)he had exaggerated and grossly inflated his residual symptoms; (ii) that there was no regard to the pre-existing condition and (iii)that the faulty expert evidence had not been carefully scrutinized.

18.  Mr. Burke, solicitor for the Plaintiff, on the other hand contended that the decision to litigate in the High Court  was  reasonable in the light of the evidence that was available to him at the time of the commencement of the action.

19.  In order to test the reasonableness of the Plaintiff’s judgment, one has to re-visit how the Plaintiff formulated his claim and the available evidence at the time of the commencement of the action.

20.  According to the Schedule of Medical Reports filed on 10 April 2008 together with the Statement of Damages, a number of medical reports and records from the government hospital as well as the first report by Professor Kumta were already available.

21.  The Plaintiff’s solicitors, when preparing the Statement of Damages, would have had regard to – apart from the Plaintiff’s instructions- the aforesaid medical evidence, including that of the expert’s.

22.  After having reviewed the evidence, I find that the following items of claim as pleaded in the Statement of Damages either did not have good prospect of success or were based on false premises. Examples are:

(a) The Plaintiff’s complaints of disabilities recorded in the Statement of Damages were not borne out by the surveillance tape taken in September 2007 (§20 of the Judgment).

(b) The median of $14,880 as pleaded for the calculation of pre-trial loss of wages was unsupported by evidence (§136 of the Judgment).

(c) The multiplier of 19.01 – based on a discount rate of 3.5 – is inconsistent with the usual practice of a discount of 4.5, and unlikely to be realistic for it having completely disregarded the likely reduction for the Plaintiff’s  pre-existing condition.

(d) The claim of $91,000 for loss of earning capacity on the basis on the Plaintiff’s  need to take sick leave and time off from work to seek further medical treatment as well as the limited nature of work duties was  legally unsound (§176-178 of the Judgment).

23.  In deciding whether his decision to bring the claim in the Court of First Instance, a plaintiff may not need to factor in the margin of differences between one tribunal to another in the assessment when one tribunal’s view of his claim may be less favourable than another so long as he considers that it is not obviously a District Court action.  Notwithstanding however it is of vital importance that solicitors acting for a plaintiff have to be prudent, and should critically evaluate their client’s case against all the imponderables of litigation.

24.  The new Practice Direction 18.1, which took effect on 2 April 2009, has now formally spelt out the said requirement.  At Part III Section E, §50, it provides:

“Before commencement of proceedings, the Plaintiff’s Solicitors should conduct a critical assessment on the strengths and weaknesses of the case. A realistic assessment of the quantum of damages should also be made so as to decide whether the action should be commenced in the Court of First Instance or the District Court. Counsel’s initial opinion should be sought where appropriate. The costs implication should be explained to the Plaintiff in the event that a claim within the jurisdiction of the District Court is brought in the Court of First Instance.”

25.  In my view, looking at the claim objectively, the amount of claim of $3,477,062.40 pleaded in the Statement of Damages is misguided.

26.  The unrealistic view of the claim in effect can be seen   throughout the proceedings as evidenced by the sanction offer of $1.8 million on 9 April 2009, and a further “without prejudice” offer – made dated 29 April 2009 shortly before the start of the hearing for assessment of damages -  of  a reduced amount of $1.2 million.

27.  Had the Plaintiff provided more truthful and accurate instructions to the solicitors, and his solicitors taken a more critical evaluation, particularly that of the expert’s evidence, it would be quite obvious that the Plaintiff’s injury was in fact quite minor and that there was not a reasonable prospect of the Plaintiff recovering an amount exceeding $1,223,890.

28.  For the above reasons, I would therefore follow the usual rule by ordering costs to be taxed at the District Court scale.

D.  SHOULD THE DEFENDANT BE DEPRIVED OF ITS COSTS FROM THE DATE OF PAYMENT IN?

D.1  Contentions of Parties

29.  When a plaintiff fails to beat the payment in made by a defendant, the usual rule is that the defendant would be entitled to the costs of the proceedings from the date of payment- in.

30.  In this case, Mr. Burke did not dispute that should the Defendant be allowed costs from the date of Payment-in, the scale of costs should be on the High Court scale.  However, he contends that I should exercise my discretion to disallow the Defendant’s costs owing to the Defendant’s refusal to resolve the dispute by mediation.

31.  This action was commenced before the commencement of the CJR.  Mr. Burke however relies on two letters proposing mediation his firm sent to the Defendant’s solicitors in March 2009.

32.  In the first letter dated 4 March 2009, Mr. Burke suggested mediation, and proposed the following terms:

“(1) Appoint a mediator –mutually agreed;

(2) If cannot agree – seek direction from Court:

(3) Costs of mediation to be shared equally initially – and to be costs in the cause.”

33.  The Defendant’s solicitors did not respond to this letter.

34.  In the second letter of 16 March 2009, Messrs. Burke & Co. in paragraph (3) referred to the English decision of Halsey v. Milton Keynes NHS Trust [2004] 1 WLR 3002, and commented that the Defendant had refused to participate in mediation without good reason.

35.  There was also no response to the second letter.

36.  Since the Defendant has been completely silent to the mediation suggestion, and further that it has not filed any evidence to explain for the refusal, Mr. Burke therefore submits that the Defendant is guilty of having conducted itself in a manner inconsistent with the underlying objectives of the CJR and the spirit of the now mandatory mediation regime.  I should therefore, as submitted by Mr. Burke, exercise my discretion by denying the Defendant’s costs.

37.  Mr. Sakhrani contended that since the Plaintiff made the proposal for mediation before the commencement of the CJR, it is not proper for the court to take into account the issue of mediation when considering costs for the fact that the jurisprudence and practice on mediation was only developing.

38.  As a fall-back position, Mr. Sakhrani further contended that the Defendant has acted reasonably in not acceding to the suggestion to mediate.

39.  The only document the Defendant has provided is a letter the Defendant’s solicitors sent to the Plaintiff on 30 July 2010 - shortly after the Defendant had issued the present summons to vary the costs order nisi in the Judgment. By this letter, Mr. Sakhrani submits that the Defendant has given its reason for not considering mediation when the proposal was put forward.  Paragraph 3,the relevant part of the letter, states:

“Practice Direction 31 had not been come into effective at the material times when you made the proposal. The authority Halsey v Milton Keynes NHS Trust [2004]1WLR 3002(sic) was therefore not applicable. Your client had not obtained the approval from the Director of Legal Aid. Your client had not solved out the sharing of initial costs on mediation with the Director of Legal Aid. No Mediation Certificate or Mediation Notice had been served by your client to us.”

40.  It is submitted that in paragraph 3 of the said letter, the Defendant not only gave - albeit late - an explanation for refusing mediation, its reasons is perfectly legitimate.

41.  Apart from the reason as stated in the said letter, Mr. Sakhrani - by referring to a letter shortly before the commencement of the trial by Messrs. Burke & Co. dated 29 April 2009, in which the Plaintiff offered $1.2 million to settle the case-  further submitted a further explanation on behalf of the Defendant, which is the lack of good prospect of a successful mediation.

42.  The Plaintiff’s last offer of $1.2 million - when added to the amount of $223,890 for ECC payment – means that the Plaintiff was only prepared to settle at a sum of not less than $1.4 million, which sum is $600,000 more than the Payment-in of $865,000.  These figures, Mr. Sakhrani contends, clearly show that that there was no prospect of a successful mediation.

D.2 Discussion

43.  The practice governing personal injuries, and the mediation regime is not governed by Practice Direction 31 as the Defendant’s solicitors have mistakenly referred to.  It is provided in the new Practice Direction 18.1, and Part D mandates a regime of Alternative Dispute Resolution (“ADR”) to achieve the underlying objectives set out in Order 1A of the Rules of the High Court, and mediation is a common mode of ADR.

44.  In March 2009 when Messrs. Burke and Co. suggested the idea of mediation, they have acted swiftly, and in my view, entirely properly in the light of the wind of change in the culture of civil practice.

45.  I am unable to accept Mr. Sahkrani’s submission that I should not take into account the Defendant’s unwillingness to participate to mediation because the jurisprudence was still evolving.

46.  The three decisions Mr. Burke have referred to-  though made at different periods, with two before the commencement of CJR, and one afterwards – reflect the importance our court attaches to mediation being an integral part of CJR. In all the three judgments, the learned justices alluded to the need for a party to consider mediation for resolving disputes, and further reminded practitioners of the consequence of refusal to participate.

47.  In iRiver Hong Kong Limited v Thakral Corporation (HK) Limited, CACV 252 of 2007, 8 August 2008, (C.A)., the Appeal court – in spite of the fact that the new CJR rules were yet to become effective in 6 months’ time – had chosen to include at the end of the judgment an additional part entitled “Alternative Dispute Resolution” to alert the practitioners of the imminence of CJR and its mediation regime.  In it, the learned justices cited a number of English authorities, including Halsey.  At the concluding paragraph at §106 of the judgment, they have reminded the legal profession of the duty to consider mediation:

“The Civil Justice Reform shall come into force in 2009. The new Order 1A sets out the underlying objectives of the rules and Order 1B sets out the power of the court in case management. Parties and their lawyers have a duty to assist the court to further the underlying objectives. They will be well advised to have the above comments on ADR in mind in making attempts to resolve their dispute effectively.”

48.  Thus, our Court of Appeal has echoed its sentiment expressed in the English courts concerning the importance of mediation, and set out to remind the profession of a need to give regard to this regime.

49.  In Supply Chain & Logistics Technology Limited v NEC Hong Kong Limited (unrep.), HCA 1939 of 2006, 29 January 2009 (Lam J.) – a judgment on costs – Lam J at §11 discussed the relationship between mediation and costs.

“Failure to participate in mediation can be taken into account on the question of costs. The rationale is that the purpose of civil litigation is to resolve dispute between the parties. Proper case management requires the court and the parties to consider what is the most cost effective and satisfactory way to resolve a dispute. In many instances, adversarial litigation is only one of the modes to resolve a dispute and it may not be the best mode. If there is an alternative by which the dispute may be resolved in a more cost effective, timely and satisfactory manner but a party insists on resorting to litigation despite suggestion from the court to explore that alternative, in effect he is adopting a potentially more expensive and time-consuming mode in dealing with the same subject matter that may cause greater attrition to all parties in terms of financial and personal well-being and human relationship, and as such less satisfactory. He may or may not have good reasons for taking such a stance. But before the court suggests the parties to consider mediation, it usually would have examined whether the case is appropriate for mediation. A party who chooses to ignore such suggestion should not be surprised if the court seeks an explanation from him for not making attempts in mediation when it deals with the question of costs.”

50.  Lam J further considered that the English authorities (Dunnett v Railtrack [2002] 1 WLR 2423 and Halsey (supra.)) were in line with the said approach he had outlined above.

51.  After CJR has come into effect, Lam J in a judgment on costs and interest in Golden Eagle International (Group) Limited v GR Investment Holdings Limited (unrep.), HCA 2032 of 2007, 25 June 2010 - though left open whether the various considerations debated in Halsey should be applicable to Hong Kong – has spelt out the consequence on costs should a party fail to provide reasonable explanation for refusing to mediate.

52.  After having considered the aforesaid authorities, I do not think that I need to go through the various matters as discussed in Halsey when considering whether the Defendant has acting reasonably in refusing mediation but would only confine myself to the facts of the present case.

53.  On the question as to who has the burden of showing reasonable prospect of success, Lam J in §43 of his judgment in Golden Eagle – after having referred to §4 of Practice Direction 31, which provides that unreasonable failure of a party to engage in mediation is a conduct to be taken into account when the court exercises its discretion as to costs on mediation – takes the view that the robust approach is to be preferred, and that the burden is on the part of the refusing party to provide a reasonable explanation.  The willing party does not carry any burden to show that mediation has a reasonable prospect of success.

54.  In this case, when mediation was proposed by the Plaintiff in March 2009, Part D on ADR of Practice Direction 18.1 had not yet come into effect (and it only commenced in January 2010).  Given the fact that our courts – as discussed above – have repeatedly sent out strong messages to the profession on the importance of mediation, I should on the issue of costs also consider whether the Defendant has given any explanation for its unwillingness to mediate.

55.  Following the analysis of Lam J in Golden Eagle, I consider the Defendant should be regarded as the refusing party, and thus bears the burden to show that it has acted reasonably in refusing mediation.  On the facts of this case, the Defendant had completely ignored the Plaintiff’s suggestion of mediation.

56.  A reason given after the trial of this action as to why the Defendant did not participate in mediation does not change the fact that the Defendant was completely silent to the suggestion of mediation.

57.  According to one of the reasons stated in the said letter of 30 July 2010, Defendant did not consider mediation because it did not think it was under any duty to do so given the fact that mediation had not at that stage become part of the obligatory regime of CJR.  Another reason was  the issue of the Legal Aid Certificate. Can these be described as good explanation?

58.  It is true that when the suggestion of mediation was put forward in March 2009, the CJR has not taken effect, and the obligatory ADR in Part D of Practice Direction 18.1 was to take effect much later in January 2010.It however in my view should not by itself provide the Defendant a good reason. As discussed above, way back in 2008, the Court of Appeal in iRiver has stressed the need for the parties to consider mediation.  Whilst it is true that parties were not obliged to engage the mechanism as provided in Part D of Practice Direction 18.1 by issuing Mediation Notice and Response before January 2010, there is no reason why the Defendant, in wake of the CJR, should be excused from its failure in adopting the most cost-effective way of disposing the disputes.

59.  On the facts, therefore, I find that the Defendant has not given any explanation at all for the refusal to mediate.

60.  Regarding the subsequent explanation for the Defendant’s unwillingness to consider mediation on the ground that there is no likelihood of a successful mediation for the difference of about $600,000, I think the suggestion is only speculative.  As discussed above, the court has repeatedly stressed that mediation does not need to result in a complete settlement of the case, parties sometimes can narrow down their differences during the course of mediation (iReiver at §103).

61.  During the assessment hearing that had lasted for 9 days, the Defendant was virtually disputing every item of the damages claimed.  I do not consider that there is no likelihood that the matter cannot be settled completely or partially.

62.  On the contrary, I find the Defendant and its legal advisers have not paid sufficient regard to the new system requiring a party to resolve dispute by ADR.  The Defendant’s silence to the Plaintiff’s suggestion for mediation is self-evident of such an unresponsive attitude.

63.  This attitude has regrettably led to a hearing lasting for much longer than the counsel for both sides has estimated, and no doubt incurring substantial legal costs.

64.  Further, I do not regard the question of whether Legal Aid would fund mediation should be a good reason for the Defendant not to make any response to the mediation suggestion.  Had the Defendant given a positive response, it would be the Plaintiff’s responsibility to ensure that the issue be resolved.

65.  I am therefore inclined to conclude that the Defendant’s silence and the lack of satisfactory explanation to the Plaintiff’s mediation suggestion is a factor that I should take into account on the question of costs.  Had the mediation regime been fully implemented, the Defendant may likely be at risk of having its entire costs be deprived.  Given the fact that the regime is relatively new, and has only recently become an obligatory part of the CJR, it would not be fair to deprive the Defendant’s entire costs. I think a modest reduction to mark the court’s disapproval of the Defendant’s conduct is needed. In the circumstances of this case, I think it is appropriate to deprive the Defendant 20% of its costs and I so order.

E.  ORDERS

66.  In the light of the foregoing, I grant the following orders:

(1) In terms of paragraph 3(a) of the Amended Summons that the Defendant do pay the costs of the action to the Plaintiff up to 13 May 2008 on District Court scale, to be taxed if not agreed.

(2) In terms of paragraph 3(b) of the Amended Summons as amended that the Plaintiff do pay 80% the costs of the action to the Defendant from 14 May 2008 on High Court scale, to be taxed if not agreed.

(3) Parties agree that the costs of the Amended Summons should follow event.  Since the Defendant has succeeded in respect of paragraph 3(a), and substantially succeeded in paragraph 3(b), I would grant a costs order nisi that the Defendant do have 75% of the costs (including costs reserved) of the Amended Summons with certificate for counsel, to be taxed if not agreed.  The Plaintiff’s own costs are to be taxed in accordance with the Legal Aid Regulations.

 

 

Mr. Patrick Burke of Messrs. Burke & Company. for the Plaintiff.

Mr. Ashok Sakhrani instructed by Messrs. Winnie Leung & Co. for the Defendant.