Associated Engineers Ltd. v Lo Chee Pui

CACV 398/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 398 OF 2002

(ON APPEAL FROM HCA NO. 328 OF 2000)

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J U D G M E N T

______________________

Hon Cheung JA (giving the judgment of the Court):

The facts

1. The plaintiff was the former employer of the defendant. It alleged that the defendant was in breach of his contract of employment with the plaintiff or alternatively his implied duty of fidelity to the plaintiff. It alleged that the defendant had accepted another employment whilst he was still in the employ of the plaintiff and had intended to develop a project in the new employment to compete directly with the plaintiff's own project. The plaintiff claimed against the defendant first, a declaration that he was in breach of his employment contract, or alternatively his duty of fidelity to the plaintiff and second, damages.

2. The defendant denied the claim. The trial of the case was due to start on 7 January 2002. On 8 December 2001, the defendant made a payment of HK$5,000.00 into court. The notice of payment stated that :

“ The said sum of HK$5,000.00 is in satisfaction of all the causes of action in respect of which the plaintiff claims."

3. The plaintiff accepted the payment on 21 December 2001. The notice of acceptance stated that the plaintiff accepted the money "in satisfaction of the causes of action in respect of which it was paid in and in respect of which the plaintiff claims against the defendant".

4. After the plaintiff accepted the payment, it applied on 7 January 2002 to vacate the hearing date. The trial was duly vacated. The plaintiff then prepared the bill of costs for the action and obtained an appointment for taxation. The defendant applied by summons before the Master seeking an order that the plaintiff was not entitled to require its costs to be taxed pursuant to Order 62 rule 10(2) of the Rules of the High Court (the "Rules") and that the plaintiff's application for taxation of its costs of the action be dismissed. The Master granted the order. Deputy High Court Judge Poon affirmed the order on the plaintiff's appeal. The plaintiff now appeals to this Court.

The issue

5. The issue in this appeal is whether the plaintiff (as it contends) is entitled to tax its costs of the action against the defendant without a court order or whether (as the defendant contends) a court order is required. Before one deals with this issue, it is necessary to put the case in perspective. The plaintiff's claim for costs is nearly HK$2,000,000.00. HK$650,000.00 was for disbursements and HK$1,350,000.00 was for profit costs. This astronomical figure can be contrasted with the paltry figure of HK$5,000.00 which the plaintiff had accepted in satisfaction of its claims against the defendant. Naturally, the defendant was anxious not to allow the plaintiff to proceed with the taxation because it contends that the plaintiff is only entitled to costs on the Small Claims Tribunal scale and not on the High Court scale.

Order 62 Rule 10(2)

6. The starting point is that under Order 62 rule 3(1), no party is entitled to recover any costs inter partes except under an order of the Court. It follows that no taxation may take place in the absence of an order of the Court. An exception is provided by Order 62 rule 10(2) which provides that :

“ Where a plaintiff by notice in writing in accordance with Order 22, rule 3(1), accepts money paid into court in satisfaction of the cause of action or of all the causes of action in respect of which he claims, or accepts money paid in satisfaction of one or more specified causes of action and gives notice that he abandons the others, he shall be entitled to his costs of the action incurred up to the time of giving notice of acceptance."

Order 22 Rules 1 and 3

7. In order to determine whether the plaintiff can avail itself of Order 62 rule 10(2), it is necessary to ascertain whether the plaintiff had accepted the payment in in accordance with Order 22 rule 3(1). This in turn depends on whether in this case the payment in was made pursuant to order Order 22 rule 1.

8. I will first set out the relevant rules on payment in and out of money.

Payment in

Order 22 Rule 1(1). "In any action for a debt or damages any defendant may at any time pay into court a sum or sums of money in satisfaction of the cause of action in respect of which the plaintiff claims or, where two or more causes of action are joined in the action, a sum or sums of money in satisfaction of any or all of those causes of action."

Payment out

Order 22 rule 3(1). "Where money is paid into court under rule 1, then, subject to paragraph (2), within 14 days after receipt of the notice of payment or, where more than one payment has been made or the notice has been amended, within 14 days after receipt of the notice of the last payment or the amended notice but, in any case, before the trial or hearing of the action begins, the plaintiff may-

(a) where the money was paid in respect of the cause of action or all the causes of action in respect of which he claims, accept the money in satisfaction of that cause of action or those causes of action, as the case may be, or

(b) where the money was paid in respect of some only of the causes of action in respect of which he claims, accept in satisfaction of any such cause or causes of action the sum specified in respect of that cause or those causes of action in the notice of payment, by giving notice in Form No. 24 in Appendix A to every defendant to the action."

Order 22 rule 3(4). "On the plaintiff accepting any money paid into court all further proceedings in the action or in respect of the specified cause or causes of action, as the case may be, to which the acceptance relates, both against the defendant making the payment and against any other defendant sued jointly with or in the alternative to him, shall be stayed."

Debt and damages

9. It is clear from the terms of Order 22 rule 1 that it only applies to actions for a debt and damages and not to other claims, see, for example, Nichols v. Evens(1883) 22 Ch D 611. This Order, however, also applies to actions where debts and damages are sought together with other relief, for example, injunction, see Moon v. Dickinson (1890) 63 L.T. 371. In such a case, payment in must be only in respect of the claim for damages, otherwise it is not within this rule.

10. In Moon, the plaintiff claimed for an injunction and damages for nuisance by the defendant. The defendant made payment into court in respect of the plaintiff's claim for damages. The plaintiff accepted the money in satisfaction of his claim for damages and wrote to the defendant that he should discontinue the action and take out of court the amount paid in and have his costs taxed. It was held by North J. that the money had not been paid into court to satisfy the entire cause of action, but only in respect of the claim for damages. The plaintiff therefore could not treat the whole action as satisfied by the payment in. As the entire claim or cause of action was not satisfied, the English Order 22 rule 7 did not authorize the taxation of costs thereunder.

11. In Young v. Black Sluice Commissioners (1909) 73 J.P. 265, the plaintiff claimed three reliefs, namely a declaration, an injunction and damages. Parker J. held that the payment in could only be in respect of the claim for damages. See Note 22/1/1 of the 2002 Hong Kong Civil Procedure and Note 22/1/3 of the 1999 Supreme Court Practice.

12. This Court in The Prudential Enterprise Limited and another v. P.H. Shek Limited and another [1990] 2 HKLR 79 also stated that payment in can only be made in respect of monetary claims. The latest judgment on this topic referred to by counsel is Braben v. Emap Images Ltd. [1997] 2 All ER 545 which is another example that payment in can only be made of a claim for a debt or damages.

Payment in does not satisfy declaration

13. In this case, as the plaintiff is seeking a declaration in addition to its claim for damages, it is clear that the payment in by the defendant of HK$5,000.00 could only be made in respect of the plaintiff's claim for damages and not for the declaration.

14. It is necessary to emphasize the words in Order 22 rule 1 namely, "in an action for a debt or damages" because it is only in an action which involves a claim for a debt or damages that the payment in mechanism can be invoked. While different causes of action may be joined in the same action, the essential requirement for payment in for the purpose of compromising the action is that it must be in respect of debts and damages. Where the claims include other relief then the payment in mechanism cannot be invoked to satisfy those claims. The proper reading of the rule is that the payment in is in satisfaction of the cause or causes of action in respect of which the plaintiff claims a debt or damages.

15. The causes of action in this case are breach of contract of employment and breach of duty of fidelity towards the plaintiff. While the payment in was said to be in satisfaction of both causes of action, the fact remains that the payment in can only satisfy the claim for damages based on these two causes of action and not on the claim for declaration based on the same causes of action. It is all too easy to lose sight of this essential requirement when the question of causes of action is considered.

16. In order to bring the situation...