LUEN YIN CHING v. CHAN YI MAN

DCCJ 982 of 2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 982 OF 2002

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JUDGMENT

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1. This is an unusual application by the defendant for an order that the plaintiff pays his costs of the action. The unusual feature of this case is that the defendant, whilst seeking costs against the plaintiff, concedes the plaintiff's entitlement to the costs of this action up to 26th March 2002, being the date of acceptance of payment into court by the plaintiff.

2. In order to understand the basis of the defendant's application it is necessary to set out the background of this case. The plaintiff's claim stemmed from a road traffic accident on 21st October 2000 during which his car was damaged. The defendant was prosecuted for, and convicted of, careless driving on 12th April 2001. Parties instructed solicitors to deal with the plaintiff's claim for damages arising out of the accident. According to the inter-parte correspondence exhibited to the Affirmation of Leung Kam Fai (for the defendant), the defendant has from the outset requested the plaintiff to provide, amongst other documents, receipts and invoices to substantiate the latter's claim. The defendant's requests were met with resistance as the plaintiff took the view that the issue of quantum should not be broached until liability has first been admitted. Nevertheless the plaintiff on 12th June 2001, under protest, provided some of the requested documents. There were further correspondences between the parties as to the adequacy of documents and, proof of claim with the plaintiff accusing the defendant of engaging delaying tactics. On 18th June 2001 the plaintiff wrote and informed the defendant that Writ "will be filed into Court very soon". On 6th September 2001 the plaintiff wrote and threatened legal proceedings. In a second letter on the same day the plaintiff offered to settle the matter for $50,000. On 14th September 2001 the defendant wrote a Calderbank letter and offered the sum of $34,660 in full and final settlement of the plaintiff's claim. The plaintiff rejected the offer on 25th September 2001. On 5th October 2001 the defendant wrote another Calderbank letter offering $39,885 in full and final settlement of the plaintiff's claim. Nothing was heard from the plaintiff until 18th February 2002 when the plaintiff informed the defendant that a Writ will be served the next day. On 19th February 2002 the defendant was served with a Writ for $52,900.

3. By a Notice of Payment Into Court filed on 13th March 2002, the defendant paid into court the sum of $39,885 in satisfaction of all causes of action in respect of the plaintiff's claim. On 26th March 2002 the plaintiff accepted the payment-in by filing a Notice of Acceptance of Money Paid Into Court in accordance to O22 r 3(1) RDC.

4. Counsel for the defendant informed me that the present application, unlike applications of such nature, is not about money. This application is simply about the unreasonable manner and attitude of the plaintiff. The defendant says this action was instituted solely to achieve a better settlement and to recover costs. Had the plaintiff been co-operative and gave proper discovery when requested to do so, the defendant would have been able to make an offer for settlement much earlier than he did and much costs would have been saved. The amount of payment-in now accepted by the plaintiff is the same as the Calderbank offer made by the defendant pre-Writ and this action was wholly unnecessary. Therefore, and as a matter of principle, the defendant says his costs of the action should be borne by the plaintiff.

5. By his summons dated 9th August 2002 the defendant sought an order that "1. the plaintiff be ordered to pay the costs of this action, to be taxed if not agreed to the Defendant". My reading and understanding of this is that the defendant was seeking an order requiring the plaintiff to pay his (the defendant) costs and that he (the defendant) would not have to bear any costs including the plaintiff's. This is the usual interpretation and natural consequence of a costs order of the type sought. Such an interpretation is also consistent with the Affirmation of Leung Kam Fai. In paragraph 2 of his affirmation, Mr. Leung sets out the relief sought by the defendant, the material reads "(a) that the plaintiff is not entitled to costs of the present action even though it has accepted the Payment Into Court made by the Defendant on 13th March 2002; (b) that the Plaintiff do pay the Defendant the costs of this action, to be taxed if not agreed;.....". By a letter dated 14th August 2002 the defendant informed the plaintiff that ".........apart from the two orders stated in the Summons, we would also seek from the Court an order that "the Plaintiff is not entitled to costs of the present action even though it has accepted the Payment Into Court made by the Defendant on 13th March 2002" ". However at the hearing, counsel for the defendant informed me that the defendant was not disputing the plaintiff's entitlement to costs under O62 r10(2) but was merely seeking his costs of the action. Effectively, the defendant is asking the court to make a cross order as to costs.

6. The court's jurisdiction and discretion on costs is provided by section 53 of the District Court Ordinance. The Rules of the District Court provides the manner in which the court is to exercise its discretion. O62 r2(4) provides that:

"The power and discretion of the Court as to costs under section 53 of the Ordinance (which provides that the costs of and incidental to any proceedings in the Court shall be in the discretion of the Court and that the Court shall have full power to determine by whom and to what extent the costs are to be paid)............. shall be exercised subject to and in accordance with this order."

7. There are no authorities I am aware of dealing with a situation such as this. In Ho Kin Chung v Tsang Hiu Sang & Anor [2001] 1 HKC 110 Judge ZE Li held that O 62 r10(5) RDC, by providing a deemed order as to costs removes the power conferred on the court by section 53, is ultra vires subsidiary legislation. Since the defendant does not dispute the effect of O62 r 10(2) it is not necessary for me to go into this.

8. A party to litigation can protect his position on costs by either making a Calderbank offer or a payment into court. By O22 r14 and O62 r 5(d), if the party could have protected his position as to costs by making a payment into court, any Calderbank offer from him will not be considered by the court when exercising its discretion on costs.

9. In the present case the defendant has made a Calderbank offer on 5th October 2001. However, notwithstanding his complaints regarding the plaintiff's conduct of this case, the defendant made a payment into court on 13th March 2002. Bearing in mind the effect of O62 r10(2), which is not disputed, the defendant must know on 13th March 2002 that if the payment-in was accepted by the plaintiff within the period stipulated in the rules then the latter will have his costs of the action up to the day of acceptance of the payment-in.

10. The defendant relies on Wealthy Plus Limited v Lai Man Ho and Ng Shiu Ling DCCJ 15427 of 2000 in the present application. I accept there are similarities between the Wealth case and the present case in that the commencement of action was not necessary in order for the plaintiffs in both cases to recover their respective claims. However an important distinction between the Wealthy case and the present case is that no payment-in was made in the former case. In awarding costs to the defendant in the Wealthy case, Judge Lam took into account the Calderbank offers as he held the defendant's position on costs could not be protected by making payment into court due to the unreasonable attitude of the plaintiff in that case. Had the defendant in the present case not paid money into court, his Calerbank offer would undoubtedly be relevant in the exercise of my discretion as to costs. However as money has been paid into court, I will have to consider the nature and purpose of a payment into court in the exercise of my discretion.

11. The present case falls into the category of cases envisaged by Keith JA in Cho Ho Kuen v Yu Kwok Wah [2001] 3 HKC 566. In that case the plaintiff claimed $52,508 against the defendant in the District Court being damage to his car arising from a road traffic accident. The claim was settled when the plaintiff accepted the $25,000 paid into court by the defendant. By RHC O62 r10(2) the plaintiff was entitled to have his costs of the action incurred up to the time of giving notice of acceptance, the Rules of District Court not having come into force at that time. The defendant argued that the plaintiff's costs of the action should be assessed as if the claim had been brought in the Small Claim Tribunal. The defendant's argument was rejected and he appealed to the Court of Appeal. In dismissing the appeal, the Court of Appeal ruled that the court had no discretion under RHC O62 r10(2) to direct that costs be assessed on some other basis and that the plaintiff was entitled to have his costs taxed on the District Court scales. In his judgment at p570E, Keith JA said:

"I do not think that a plaintiff's entitlement to taxed costs on the acceptance of a payment into court necessarily results in injustice to a defendant. I appreciate that there may be cases, of which this is one, in which the defendant may not want to make a payment into court if the acceptance of the payment will automatically result in the plaintiff being entitled to his taxed costs. But the way to avoid that is by the defendant making his offer to settle the case in the form of a Calberbank letter, i.e. a letter marked "without prejudice save as to costs". I appreciate that a Calderbank letter will not usually be appropriate when the claim is simply for a sum of money: see O62 r5(d). But I do not see how the limitation on the circumstances in which a Calderbank letter may be used can apply to a case in which the defendant wishes to dispute what would automatically follow in terms of costs from the acceptance of money paid into court. If a defendant elects to make his offer to settle the case in the form of a payment into court, he has to accept that the plaintiff's entitlement to costs is to taxed costs."

12. If the defendant considers this action was instituted improperly and he should be entitled to his costs of the action then he should not have made a payment into court. A payment-in is a settlement on terms. A plaintiff's financial liability or position is crystallized on the date of his acceptance of a payment-in, in other words he knows that his case is over in return for the amount of money paid into court and that his costs up to that day will be borne by the defendant. A plaintiff having accepted the money paid into court within the period stipulated in the rules will not be concerned with potential liabilities for the costs of the paying-in party. By the same analogy a defendant who makes a payment into court, unless he withdraws the payment-in, knows that once the payment-in has been accepted his financial liability will be so limited and he will, in addition to his own costs, bear the costs of the plaintiff up to the date of acceptance of the payment-in. From the plaintiff's point of view, this consequence and "guarantee" which flows from his acceptance of the payment-in is undoubtedly a relevant factor when deciding whether to accept the payment into court and when assessing the risks of litigation. Mayo VP said at p572 B of the Cho case:

"It makes good sense when litigants are considering whether or not to accept a payment which has been made into court that there should be an element of certainty on the subject of costs so that everyone knows exactly where they stand. It would have been obvious to the defendants that the plaintiff's costs relative to the amount being claimed would be significant. Having regard to the clear wording of O62 r10(2) they should have realized that by accepting the $25,000 paid into court they would have to pay the plaintiff's costs in the District Court action as taxed".

The element of certainty referred by Mayo VP must necessarily include the certainty of knowing that there will no longer be outstanding issues on costs, in other words the possibility of having to pay for the defendant's costs should not be hanging over the plaintiff once he has accepted the payment into court.

13. O 62 r10(2) RDC is identical to its high court counterpart. If it was intended that the court should have a discretion as to costs under O62 r10(2) then the words "unless the Court otherwise orders" would have been included. The Court of Appeal in Hudson v Elmbridge Borough Council [1991] 1 WLR 880 concluded the exclusion of these words from the equivalent rule in the Rules of the Supreme Court meant that the court has no discretion to deprive a plaintiff of his entitlement to costs even if this might result in injustice. Although the defendant in this case has emphasized that he is not disputing the plaintiff's automatic entitlement to costs under O62 r10(2), by seeking an order of costs against the plaintiff the defendant is, in substance and in effect, asking this court to exercise its discretion such that the plaintiff's automatic rights under by O62 r10(2) is interfered with.

14. I am told that the plaintiff's bill of costs up to the time of this application is about $39,000 whilst the defendant's own estimated bill of costs is about $10,000. Assuming, for the sake of argument, that the plaintiff's taxed costs is $30,000, if I were to grant the defendant's application, this means the plaintiff would effectively recover two-third of his costs notwithstanding O62 r10(2) which says that the plaintiff should have his costs of the action incurred up to the time of giving notice of acceptance.

15. At first sight it might appear that the defendant is placed in an unjust position. However as Keith JA observed in the Cho case, a party in a situation such as the defendant in this case, instead of making a payment into court could simply make a Calberbank offer.

16. For these reasons I would dismiss the defendant's summons dated 9th August 2002 with costs to the plaintiff to be taxed if not agreed.