LAI KI v. B+B CONSTRUCTION CO LTD AND OTHERS

HCPI 63/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 63 OF 2001

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D E C I S I O N

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1. The above action was listed for trial before Madam Recorder Jacqueline Leong S.C. on 16 December 2002. The action had in fact been settled between the parties at the end of the previous week subject to some fine-tuning of the terms involving certain defendants.

2. Eventually the Recorder was asked to make an order by consent which was in effect a settlement of the Plaintiff's claim for the sum of $510,000. This was in addition to the sum already paid in Employee's Compensation proceedings in the District Court which amounted to a further $229,158. The provision for the Plaintiff's costs in the Consent Order was:

" plus costs to be taxed if not agreed ..."

and more particularly:

"The Plaintiff's all costs of this action including the costs between the Plaintiff and the 4th Defendant be paid by the 1st and 3rd Defendants ... to be taxed if not agreed."

As is clear from the provisions repeated above, the Consent Order did not identify whether those costs should be on the High Court scale or the District Court scale.

3. Neither party, it appears, sought to have the matter resolved by the Recorder who then was in the best position to resolve any argument since she would have read the papers in preparation for the trial and thus been 'all fait' with the issues.

4. The Plaintiff's solicitors however took the view that since the action had been brought in the High Court and that the Defendants had agreed to pay costs of the action, that meant costs of the High Court action. The matter there rested with the Plaintiff's solicitors expecting either agreement of costs or taxation of costs, on such a scale, save that by letter of 17 December 2002 (one day after the making of the Consent Order) the Defendants' solicitors raised the matter of the scale of costs. In that letter it said:

"Since the settlement sum falls short of the High Court jurisdiction [it means "falls within the District Court jurisdiction"], your estimate on costs and disbursements should be provided at the District Court scale."

5. Although there has been much correspondence and various contact since then, this is the issue which has now been ventilated before me. The ceiling of the District Court jurisdiction is $600,000. The settlement figure was $90,000 below that. Should the Plaintiff have only District Court scale costs on that basis or was it justified in bringing and continuing proceedings in the High Court?

6. The starting point is the current legislation. Section 32 of the District Court Ordinance sets the limit of that court's jurisdiction. Subsection (2) defines the amount of the Plaintiff's claim as the amount claimed "after taking into account -

(a) ... [not relevant in this case]

(b) any compensation as defined by section 3 of the Employee's Compensation Ordinance (Cap. 282) paid to the Plaintiff under that Ordinance; and

(c) any contributory negligence

that the plaintiff admits in his Statement of Claim."

The operative sections for consideration have two specific potential results. The first, employee's compensation which has been paid, is quite clear. It means that in evaluating the Plaintiff's claim for the purpose of deciding in which forum to commence proceedings, the amount of that compensation actually paid must be deducted. That is obviously good sense quite apart from the legislative provision. Since credit has to be given for such compensation received in claims for damages for personal injuries (or fatal accident claims) it is proper to look at the amount of damages recoverable, net of such compensation already received, for the purpose of commencing proceedings in the appropriate forum.

7. The matter of contributory negligence is somewhat different. A discount or reduction on the amount of the claim is only to be taken into account if the Plaintiff admits contributory negligence in the Statement of Claim. In practice rarely will a plaintiff make such an admission because although the matter of contributory negligence must realistically be assessed for the purposes of negotiations on liability and quantum, rarely will a plaintiff want to preempt a finding on liability which may favour him and confound his more pessimistic assessments. I can however envisage a situation where the parties have openly agreed a percentage of liability/contributory negligence before proceedings but the court is required to assess damages. There, of course, a plaintiff will have to concentrate on the likely value of the claim after the agreed degree of contributory negligence has been taken into account.

8. That section is not straightforwardly drafted however. The expression "that the Plaintiff admits in his Statement of Claim" governs all three matters to be taken into account. However in relation to (b), the Employee's Compensation payment what really operates is that the compensation has been paid, not whether the Plaintiff admits the payment in the Statement of Claim. My construction of this provision is that account must be taken of the fact of payment of this compensation. It would be wholly artificial and destructive of the true intent of the section if the Plaintiff were to be able to argue that although he had received the sum, he had not admitted it in his Statement of Claim and therefore it should not be taken into account for the purposes of determining the amount of the claim and therefore the appropriate forum.

9. The provision in relation to contributory negligence makes it patently clear that the consideration of the value of the Plaintiff's claim for the purpose of deciding which forum is appropriate for its determination is to be made without regard to any possible deduction for contributory negligence unless subsection 2(c) applies. This is, as will be seen, a proper recognition of the position established by authorities and long term practice and exercise of judicial discretion.

10. Although Miss Kwan sought to pray in aid section 44A(6) of the District Court Ordinance that does not assist her argument. It reads:

"Where proceedings in which the [District] Court has jurisdiction are brought in the Court of First Instance, the [District] Court shall order costs on the scale and in the amount as if the proceedings had been brought in the [District] Court, unless the proceedings were brought by leave of the Court of First Instance or unless the Court of First Instance otherwise orders."

This subsection is of course subject to subsection (1) which says:

"This section applies to an action or proceeding transferred -

(a) from the Court of First Instance to the [District] Court;

(b) from the [District] Court to the Court of First Instance; or

(c) from a tribunal to the [District] Court."

It is clear that it applies only to transferred cases. This is in contrast to the former section 43(2) which was free standing and not limited to transferred cases. The cases to which Miss Kwan has referred were decided when that former provision was in force.

11. Although Miss Kwan argues that the decision of Glyn-Jones, J. in Hopkins v. Rees & Kirby Ltd (1959) 2 All ER 352, has no application to Hong Kong because it specifically considered the 1934 County Courts Act, I disagree. Certainly the English legislation has no application as such but the principle considered by the judge was whether the Plaintiff, though gaining an award of damages well below the limit of the English County Court jurisdiction, had a reasonable prospect of recovering more than the jurisdictional limit of the County Court.

12. The judge expressed himself in the following way

"Putting myself as far as I can, in the position of the Plaintiff at the time when he issued that Writ, am I satisfied that it was then obvious that this was a county court action, or was it an action which, when tried by one judge rather than another, might have resulted in an award exceeding [the jurisdictional limit] excluding any reduction for contributory negligence?"

Quite apart from the provisions of the statutes, that has been the discretionary approach of judges in the United Kingdom since then. The statutory provisions have, of course, changed over the intervening years. The acid test therefore has been, 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?

13. It is contended that this approach was disregarded by the Hong Kong Court of Appeal in Lee Wah Man Weaving Factory v. Hau Lap Co. Ltd CACV No. 48 of 1984, an unreported decision.

14. Firstly it is to be noted that it concerned a sale of goods. Secondly, the appeal was essentially concerned with the exercise by the trial judge of his discretion. Fuad, J.A. expressly stated

"I would add here that the cases which apply section 47 of the United Kingdom County Courts Act are, no doubt, generally helpful to the exercise of the judge's discretion."

The broad ambit of the discretion was underlined by his reference to part of the judgment of A. L. Smith, M.R. in Solomon v. Mulliner (1901) 1 Q.B. 76, where he considered the words "which could have been commenced in a County Court"

"I read them as meaning 'which could properly have been commenced in the County Court", both as regards the character of the action and the amount really involved. At what time is it to be ascertained whether the action is, as regards amount, properly within the jurisdiction of the County Court? Not, in my opinion, at the time when the Plaintiff is stating what amount he thinks fit to claim on the Writ or Statement of Claim, but at the time when the amount recoverable is adjudicated on by the proper tribunal or otherwise ascertained by the result. It cannot depend on the amount which the Plaintiff chooses to claim."

I do not consider that the principle in Hopkins v. Rees & Kirby has been disregarded in Hong Kong. On the contrary the nature of the discretion exercised, and how it has been exercised, has continued to influence Hong Kong decisions in this field.

15. The decision of Power, J. in Lui Po Keung v. Tam Kwok Hung (1985) 1 HKC 224 is very limited in its scope. Again section 43(2) of the old Ordinance was relied upon and the Court of Appeal decision in Lee Wah Man Weaving Factory v. Hau Lap Co. and Solomon v. Mulliner were considered. A running down action in the High Court was settled by the Plaintiff accepting $50,000. The District Court's jurisdiction was then $60,000. The Master taxed the Plaintiff's costs on the District Court scale. I find it difficult to derive any assistance from that decision on the issue argued by Miss Kwan on behalf of the Defendants.

16. There is no indication that the judge was asked to consider the question of contributory negligence though it appears that the Plaintiff's counsel did argue that "the amount recovered was less than the amount which might have been recovered had there not been a settlement." What was the substance of that argument is not stated. What is perhaps more contentious is the judge's statement that the argument that "this court somehow had jurisdiction to go beyond the words of the settlement" was not tenable. He said he could not look beyond the words of the settlement. I have, with respect, to disagree with the learned judge if he was saying that the court had no discretion to consider whether there was any reasonable prospect of the Plaintiff recovering damages in excess of the District Court jurisdiction so as to justify proceedings in the High Court. However the decision was essentially concerned with whether the Master, who was the taxing officer, was correct in taxing the costs on the District Court scale in the absence of any order from the High Court which provided for costs on the High Court scale. That decision does not lend any support to Miss Kwan's argument and serves to underline what was then already clear from section 43(2), that a High Court order was required in such circumstances (i.e. recovery of a sum of money which fell within the jurisdiction of the District Court) for the costs to be taxed on the High Court scale. Of more relevance is the decision of Mortimer, J. in Chui Ding Tse and Another v. Ho Kwong Hung (1987) No. A1347, a claim for damages under the Fatal Accidents Ordinance. The plaintiff accepted a sum paid into court which was within the District Court's jurisdiction. The Master ordered the costs to be paid on the District Court scale. On the appeal the judge reviewed section 43(2) and the Court of Appeal's decision in Lee Wah Man Weaving Factory and Power, J.'s decision to which I have referred earlier. Mortimer, J. made it clear that on the pleadings, on full liability, the amount of the claim exceeded the District Court jurisdiction. Contributory negligence was pleaded in the Defence. He adopted the reasoning of Glyn-Jones, J. in Hopkins v. Rees & Kirby.

17. I respectfully agree with Mortimer, J.'s approach. It faithfully reflects the time honoured principle applied in the exercise of the discretion. In view of the provision of section 32(2)(c), it is unarguable that for the purposes of assessing whether the amount recovered should attract High Court or District Court scale costs the value (not pre-action estimate) of the claim has to be assessed before any discount for contributory negligence is made.

18. In this case before me, as in the case before Mortimer, J. the value of the claim on full liability is above the District Court limit. Even when the Employee's Compensation payment is deducted, it remains above that limit.

19. I need to dispose of only two more arguments. Miss Kwan seemed to suggest that because the Plaintiff's counsel considered that there should be a discount on the value of the Plaintiff's claim between 10% and 30% that this should be translated into a revision downwards of the amount of the Plaintiff's claim for the purposes of deciding the forum in which to commence proceedings, or at a later stage, whether the action should be transferred to the District Court. Counsel's or solicitors' evaluation on the basis of contributory negligence is not to be equated with the provision in section 32(2)(c). The only consideration must be to the valuation of the claim after any Employee's Compensation has been paid. The question of contributory negligence does not come into the picture.

20. Finally, although Mr. Lau argued that the wording of the Consent Order was to be construed as a provision for costs on the High Court scale and the Defendants were estopped from arguing to the contrary, he is, as I have made clear, not correct and the decisions make this clear.

21. The position in relation to a claim in the High Court settled or adjudicated upon in a sum which is within the District Court jurisdiction is as follows:-

(1) The usual order will mean that costs will be on the District Court scale unless the High Court is, in the exercise of its discretion, persuaded that there was a reasonable prospect of obtaining an award in excess of the District Court jurisdiction. To that end the valuation of the claim must be on the basis of full liability.

(2) The order by consent, or upon adjudication, for the Plaintiff's costs to be taxed does not carry with it any inference or construction that it means costs on a High Court scale.

(3) For the purposes of deciding the proper forum in which to commence proceedings the amount of the Employee's Compensation paid and received must be deducted.

22. The proper course for the Plaintiff's solicitors to take in a High Court action is as follows:

(1) Where a sum of money which is within the District Court jurisdiction is paid into court, and accepted by the Plaintiff (without agreement by the parties as to the scale of costs to be taxed), the Plaintiff must apply promptly by way of Summons to a Master for a determination as to the scale of costs.

(2) Where the parties agree a settlement in a sum within the District Court jurisdiction and there is agreement as to the scale of costs, this must appear in the Consent Order or in a joint letter to the court. If there is no such agreement as to costs then the Plaintiff must promptly apply by way of Summons for the costs issue to be determined by a Master. If the settlement is achieved before trial commences or in the course of a trial then the Plaintiff's solicitors must ask the trial judge to decide the issue of the scale of costs.

Costs of this application

23. The Plaintiff's solicitors should have asked the Recorder to deal with this matter at the time of the making of the Consent Order.

24. As a result of that omission there had to be a hearing before me six months later. However this hearing will, I have been informed, act as a guidance and resolve many outstanding disputes as to the scale of costs. I think in all the circumstances the proper order to make is one of no order as to costs. For the Plaintiff, this means that his solicitor will bear the costs. They are not to be passed on to him.