CHAN YU CHAU v. FONG ON CONSTRUCTION & ENGINEERING CO. LTD. AND ANOTHER

HCPI 753/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 753 OF 2000

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(By Order of Master C B Chan to carry on proceedings dated 19 October 2000)

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RULING AS TO COSTS

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1. This matter comes before the Court on the 1st Defendant's summons dated 14 June 2002. It follows an order nisi as to costs made by the Court when giving judgment in this action on 4 June 2002, that unless any party applied to be heard on the question of costs within 14 days, the Plaintiff's costs should be taxed and paid by the 1st and 2nd Defendants. There is no challenge to that part of the order nisi which provided that the Plaintiff's own costs be taxed under the Legal Aid Regulations and consequently that part of the order stands.

2. The action was one for personal injuries brought by the Plaintiff against the estate of his employer as the 2nd Defendant and against the 1st Defendant as the principal contractor responsible for the construction site. The 1st Defendant had taken out a policy of insurance in relation to workers on the site including those of the 2nd Defendant but the insurer has gone into liquidation. On 15 April 2002, a week before the trial commenced on 22 April 2002, the Intervenor (The Employees Compensation Assistance Fund Board) was successful in its application to be joined as a party in view of it potential liability in the event of a judgment against the 2nd Defendant. On the first day of the trial, on the hearing of an application by Plaintiff that the statutory stay as a result of the 2nd Defendant's application for Legal Aid be lifted, Mr Yeung Kim Ho on behalf of the 2nd Defendant made clear that the 2nd Defendant was unlikely to be able to satisfy any judgment against it.

3. On 4 June 2002, the Court gave judgment against both Defendants in the sum of HK$981,145 which took into account a sum of HK$1,330,572 which had already been received by the Plaintiff as Employees' Compensation. The Court found 15% contributory negligence on the part of the Plaintiff and apportioned liability between the Defendants as to 25% on the part of the 1st Defendant and 75% on the part of the 2nd Defendant.

4. Apart from paragraph 2 of the 1st Defendant's summons which Mr Chu on behalf of the 1st Defendant informed the Court he was not pursuing, the 1st Defendant's application is primarily based upon a "Calderbank" offer made "without prejudice save as to costs" in a letter dated 19 April 2002 (i.e. the Friday before the trial which was due to start on the following Monday) from the 1st Defendant's solicitors to the solicitors for the Plaintiff. The letter offered "the amount of HK$750,000 inclusive of interest in full and final settlement of the 1st Defendant's liability to your client arising out of the accident". It stated that the 1st Defendant would require time for payment and proposed that the sum be paid in four instalments. The offer was said to be conditional on the Plaintiff "discontinuing" the action against the 1st Defendant from 22 April 2002.

5. The offer was not accepted by the Plaintiff. There was never any payment into court by the 1st Defendant. Nonetheless, it is argued by Mr Chu on behalf of the 1st Defendant that, since the court's judgment was only in the sum of HK$981,145 and the court found that as between the Defendants, the 1st Defendant was only 25% responsible for the accident, this offer was "better" than the judgment obtained by the Plaintiff against the 1st Defendant at trial and should be taken into account in the court's decision as to costs. The 1st Defendant's summons seeks an order that its costs after 19 April 2002 (the date of the "Calderbank" offer) be borne by the Plaintiff, that its costs from the date of the writ to 19 April 2002 be borne by the 1st and 2nd Defendants severally in the proportions 25%/75% and that the Plaintiff's costs incurred after 19 April 2002 be borne by the 2nd Defendant and the Intervenor.

6. The first matter to be decided is whether the court is entitled to take the "Calderbank" offer into account at all bearing in mind the terms of O. 62 r. 5(d) and O. 22 r. 14 which provide that the court "shall not take such (an) offer into account if at the time it is made the party making it could have protected his position as to costs by means of a payment into court under O. 22".

7. These provisions of the Hong Kong Rules give effect to the words of the English Court of Appeal in Cutts v Head [1984] 1 Ch 312 in which Oliver LJ had said:

"In the case of the simple money claim a defendant who wishes to avail himself of the protection afforded by an offer must in the ordinary way, back his offer with cash by making a payment in and speaking for myself, I should not, as at present advised, be disposed in such a case to treat a Calderbank offer as carrying the same consequences as payment in."

8. In Singh v Parkfield Group PLC [1996] PIQR Q110 (which was followed by the Hong Kong Court of Appeal in The Hong Kong and Shanghai Hotels Ltd v Choi Bing Wong [1991] 1 HKLRD 473) the English Court of Appeal considered a similar provision in the rules to the current O. 62 r. 5(d). As in the present case there had been a "Calderbank" offer by the Defendant in a claim for damages of personal injuries. Stewart Smith LJ said:

" In the ordinary way when a defendant is facing a money claim which he wishes to settle he should do so by payment into court and he should do so in sufficient time for the plaintiff to have a reasonable opportunity to consider it, even if that is less than 21 days before trial. I am aware that there may be some delay between the decision to pay in and the actual payment from insurers, but that merely means that the whole question should be considered in time and not left to the last minute. There may be cases where the plaintiff has failed to provide proper information, sought a last minute amendment or introduced new material which makes it in practice impossible for a defendant to make a payment into court. If that is so it can be said that it was not possible to make a payment into court. If such a case arises it must be considered on its own facts, that is not his case.

I agree with Mr Matthews that the policy of the law should be to encourage settlement of actions wherever possible and Calderbank offers are a useful tool in achieving such settlements because the recipient of the letter knows that he will be at risk it he does not do better than the offer in the litigation. The machinery of payment into court where a money claim alone is made is simple and well understood. In all save exceptional cases, an example of which I have just given, the defendant can protect his position on costs, and the plaintiff knows the consequences if he recovers less than the money in court. There may be some advantages in giving the court a wider discretion than that at present given by Ord. 62, r. 1(d); but equally there are advantages certainly in these, but in any event it is not a matter for the court, but one for those who make the rules whether there should be any change or not. I would dismiss the appeal."

9. Mr Chu has sought to argue that this is an exceptional case where the Defendant could not have made payment in. He relied principally on the fact that the Plaintiff's claim was unliquidated and that there was more than one Defendant. I am satisfied that neither matter would preclude the Defendant from making a payment into court.

10. If one of two or more Defendants sued as joint tortfeasors wishes to protect his position as to costs then he can make a payment in sufficient to satisfy the Plaintiff's claim and then proceed to seek contribution against his fellow Defendants. S. 3(4) Civil Liability (Contribution) Ordinance (Cap. 377) makes specific provision for such a situation.

11. I was referred to the case of Lee Yau Tsang v United India Insurance Co. Ltd [1995] No. PI690 in which Cheung J had said that it would not be right to expect 2nd and 3rd Defendants, who had already been found only to be 20% liable to make payment in of the whole sum but it is clear from the judgment that the situation in that case was quite different and that what the court was considering there was the question of costs between the Defendants rather than between the Defendants and the Plaintiff.

12. In such circumstances, I find that the rules do not permit the court to take into account the "Calderbank" offer of 19 April 2002.

13. Even if I had been permitted to do so it would not have led me to the view that the Plaintiff should not be entitled to his costs of the trial against the 1st Defendant.

14. The apportionment of liability at 25%/75% made by the court was made between the Defendants as joint tortfeasors. It is well established that one of two or more joint tortfeasors is liable for the whole of the damage sustained by the Plaintiff even though he may have been responsible merely for just a small part of it (subject to a right to claim contribution from a joint tortfeasor). The liability of the 1st Defendant to the Plaintiff was for the whole judgment sum (HK$981,145 and interest thereon). Even if the "Calderbank offer" of 19 April 2002 had been equivalent to judgment in the sum of HK$750,000 the Plaintiff by the judgment obtained more than the amount offered. As a matter of fact, the offer in letter of 19 April 2002 if accepted would have been far from equivalent to judgment in the sum of HK$750,000 as it was only payable by instalments, was inclusive of interest and was conditional upon the Plaintiff discontinuing the action (which would have entitled that the Defendant to his costs against the Plaintiff).

15. I am satisfied that as between the Plaintiff and the 1st and 2nd Defendants is no basis for altering the costs order nisi made on 4 June 2002.

16. Even if the Plaintiff had sought such an order, I would not have regarded it is appropriate for there to be any costs order in favour of the Plaintiff against the Intervenor in the circumstances of this case. The Intervenor is a statutory body with a duty to protect its fund against the possibility of collusion. As I state later, the Intervenor was not in a position to represent the 2nd Defendant due to the relevant statutory provisions nor to settle the matter. It played a very limited role in the proceedings. It did not advance a positive case for the 2nd Defendant and did little more than cross-examine and make submissions on the contributory negligence of the Plaintiff (which assisted the case of the 1st Defendant) and, to a lesser extent the apportionment of liability between the 1st and 2nd Defendants. The latter role assisted the court in apportioning liability between the 1st and 2nd Defendants. This intervention did not unnecessarily prolong the trial.

Apportionment between the Defendants and the Intervenor

17. In so far as the apportionment of liability for costs between the 1st and 2nd Defendants and the Intervenor are concerned the court has been referred to correspondence marked "without prejudice save as to costs", passing between the solicitor for the 1st Defendant and the 2nd Defendant and the solicitor for the 1st Defendant and the solicitor for the Intervenor.

18. In so far as the Intervenor's position is concerned it made clear from the outset that it did not have any authority to bind the 2nd Defendant either as to apportionment of liability or agreement as to quantum. In the circumstances of this case, any legal liability on the part of the Intervenor would only arise following an application to the Board after judgment against the 1st Defendant. While by virtue of s. 28 The Employees Compensation Assistance Ordinance (Cap. 365), the Board did have the ability to make an offer to pay a sum from the fund in anticipation of entitlement, I am satisfied that it would not have been appropriate to make such an offer as the 2nd Defendant was contesting liability to the Plaintiff, and the Intervenor would not have been in a position to make any realistic assessment of any potential liability on its part. I am satisfied that the Intervenor's position on costs should not be prejudiced by its failure to accept any proposal put forward by the 1st Defendant.

19. The position between 1st and 2nd Defendants was different. In a letter also dated 19 April 2002 but to the 2nd Defendant, the 1st Defendant's solicitors offered to contribute 25% of the damages which the Plaintiff might recover in the action. This was of course the percentage responsibility for which the Court eventually found the 1st Defendant was liable between itself and the 2nd Defendant. Had that offer been accepted it might have saved the very limited part of the trial which was utilised in deciding the respective liabilities of the two Defendants.

20. I do not regard a second letter from the 1st Defendant's solicitor to the 2nd Defendant in the course of the trial but dated 24 April 2002 as having any additional significance. It offered to contribute of 40% of the damages which the Plaintiff might recover and offered to settle the claim with the Plaintiff in the sum of HK$1 million. It appears that this offer was accepted by the 2nd Defendant but the offer of HK$1 million was never communicated to the Plaintiff.

21. Both Defendants contested liability and quantum in these proceedings. The liability alleged against the Plaintiff was joint and several. Therefore on the matters that concerned by far the greatest part of the trial, the Defendants' interest were common. The amount of the time devoted to the issue of apportionment of liability between them was not significant. In such circumstances, I find that between themselves the Defendants should bear the Plaintiff's costs in the proportion that the court found that they were liable, namely 75% by the 2nd Defendant and 25% by the 1st Defendant.

22. For the reasons have referred to earlier, I do not consider it appropriate that the Intervenor should bear any costs.

23. Accordingly I dismiss the 1st Defendant's summons. I make the order nisi as to costs of 4 June 2000 absolute. I order that the costs of the Plaintiff and of the Intervenor of and occasioned by the 1st Defendant's summons be paid by the 1st Defendant. The Plaintiff's costs to be taxed under the Legal Aid Regulations.