Elizabeth Harrington v. Cap Gemini Ernst & Young Hong Kong Ltd

HCCL 10/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.10 AND NO.61 OF 2002

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BETWEEN

AND

HCCL 61/2002

BETWEEN

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Before : Hon Stone J in Chambers

Date of Hearing : 20 September 2004

Date of Judgment : 22 September 2004

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D E C I S I O N

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The applications

1.There are three summonses before the court, all of which represent further procedural ‘fall out’ from the judgment of this court, dated 17 May 2004, consequent upon the trial of this action.

2.By this judgment, which speaks for itself, the plaintiff was successful in obtaining damages against the defendant in the sum of US$46,666.00.

3.An initial post-judgment application, dated 7 July 2004, led to a further judgment upon interest and costs.  In the papers prepared for that hearing it was disclosed that on 9 April 2003 the defendant had paid into court the sum of HK$771,072.08, which at the then rate of exchange represented some US$98,000.  The situation, therefore, was that the plaintiff, Miss Harrington, had recovered less than 50% of the sum paid into court, a fact which was reflected in the costs order then made.

4.This costs order was that the plaintiff was to have the costs of the action up to and including the date of the payment in, that is, 9 April 2003, but that the costs incurred after the date of this payment into court until the date of judgment, 17 May 2003, were to be to the defendant.

5.At the time of this post-judgment costs hearing, allusion had been made to the status of the monies presently standing in court, and there was preliminary argument about whether the judgment sum, together with interest thereon, in the particular circumstances could be satisfied by payment out of the monies presently in court.  Such circumstances included not only the cross-orders as to costs, but also the fact that, pursuant to two pre-trial interlocutory orders the plaintiff, a resident of the United States, had lodged in court the cumulative sum of HK$475,000 as security for the defendant’s costs, and the defendant’s contention was that the monies designated as security for costs would be totally insufficient to satisfy the costs balance enuring in favour of the defendant consequent upon the striking of a ‘costs account’ between these parties.

6.No view on this issue then was expressed by the court since the question was not before it for decision.  Now, however, the point has been specifically raised by two of the summonses, the third being an application by the plaintiff for an extension of time in which to appeal the substantive judgment of 17 May 2004.

Plaintiff’s summons, dated 15 September 2004, pursuant to Order 59, rule 15

7.By this summons the plaintiff sought a 14 day extension in which to serve her Notice of Appeal “if she so decides”.

8.In moving this application Mr Kemp noted that his client was still within time to appeal, and that as matters presently stood the deadline imposed by the rules was 28 September 2004.

9.Although he accepted that his client already had had in excess of four months to consider her position regarding an appeal, he submitted that she had been travelling and only recently had returned to Hong Kong to consult with her advisers as to the position, and that an additional 14 days would greatly assist.

10.Initially I had been of the view that there was a jurisdictional difficulty, and that extensions of time in which to appeal were matters within the exclusive purview of the appellate court.  However, it has been pointed out that in fact this is not so, and that the express terms of Order 59 rule 15 permit a first instance court to extend the period in which to appeal “on application made before the expiration of that period.”

11.On that basis, therefore, the question properly was one for this court, which, after hearing Mr Kemp and Mr Carolan for the defendant, immediately dismissed this application.

12.No affidavit evidence was placed before the court to justify the exercise of the discretion thus sought, and in my view it was signally insufficient for Mr Kemp to observe, as he did, that this was a difficult case requiring reflection, and that more time was required.

13.For my own part I do not consider that the particular point in issue — which arises from the specific finding of fact that there was no independent agreement sufficient to circumvent the strictures of section 5(2) of the Employment Ordinance — poses problems of identification, and with respect I am unable to grasp why four months has been insufficient in order to make a considered decision as to an appeal.  In any event no evidence has been filed telling me why it has not been possible to deal with this question up to the present, and absent such evidence I declined to exercise my discretion in favour of the plaintiff.  In short, there was no material before me upon which my discretion properly could be exercised.

14.Accordingly, the application failed.  The costs of this application must be to the defendant, as indeed the summons concedes.  I so order.

Defendant’s summons dated 7 September 2004

Plaintiff’s summons dated 15 September 2004

15.These applications are two sides of the same coin, and concern the status of the monies presently standing in court.

16.By its summons, dated 15 September, which is taken out pursuant to Order 22, rule 5, the plaintiff seeks payment out of court of the judgment sum presently standing in its favour, together with interest thereon.  The calculations on the face of the summons, with interest up to and including 20 September 2004, have resulted in the total amount now sought to be paid out being HK$454,081.82, which it is said should be paid out of the sum of HK$771,072.08, which was the sum paid into court in by the defendant on 9 April 2003.

17.The defendant’s own application looks to have been something of a pre-emptive strike, and was taken out some eight days earlier.  On its face it is said to be made pursuant to Order 45, rule 11, Order 47, rule 1 and Order 22, rule 5.

18.Although the summons is drafted in some detail, the gravamen of the defendant’s application is that the plaintiff should not be permitted to take out of court the sum of money representing the fruits of her judgment, and that such monies should remain in court as security for the defendant’s costs which have accrued post 9 April 2003, the date of payment into court — which costs, it is asserted, will very significantly exceed those costs such as have accrued to the plaintiff from the commencement of the action to the date of such payment in.  The defendant further seeks immediate payment out of the balance of its funds paid in after deduction of the judgment sum.

19.In addition, paragraph 1 of this summons prays that execution on the judgment of 17 May 2004 be stayed in favour of the plaintiff pending taxation of the parties’ respective bills of costs.  On this element of the application Mr Carolan, for the defendant, made it clear that he did not seek relief pursuant to Order 45, rule 11 — which applied to a stay of execution sought on the ground of matters which have occurred since the date of judgment — and that he confined his application herein to Order 47, rule 1, which delimits the power to stay execution by writ of fi fa “wherein there are special circumstances which render it inexpedient to enforce the judgment or order …”

20.Mr Carolan put his position thus.  His bill of costs, which now was available in properly taxable form, demonstrated a costs bill subsequent to the date of payment into court in the sum of HK$1.2 million, of which there presently was in court, as designated security for costs, the sum of HK$475,000 only.  On the other side of the fence, he said, the rough estimate of the plaintiff’s costs for the year prior to the payment into court stood at an egregious HK$1.6 million, notwithstanding that the defendant’s costs, for the like period prior to the date of payment in, amounted to something in the order of HK$250,000.  In the absence of better data, therefore, Mr Carolan invited the court to proceed on the basis that the plaintiff’s current costs estimate, which was in rough form and not in the form required for taxation, was vastly inflated, and was not to be trusted.

21.If this was correct, ran his submission, the overwhelming probability was that the costs balance in his client’s favour, upon a netting down of the respective taxed costs in favour of plaintiff and defendant, would all but extinguish the total of plaintiff’s judgment sum together with such taxed costs as the plaintiff would be able to secure.

22.Thus, he said, to permit the plaintiff now to take out of court the sum that it wished, in satisfaction of its judgment debt, would inevitably mean that at the end of the day the defendant would be left with a very considerable unsatisfied costs’ shortfall, and would be placed in the position of having to pursue Miss Harrington, a non-resident plaintiff, for such shortfall.  On the other hand, if the status quo was to be preserved in terms of the monies presently in court, and a stay also was to be correspondingly granted in terms of execution by writ of fi fa, then the position could be reviewed after taxation, or at the least preparation by the plaintiff of a costs bill in properly taxable form, at which time the court would have relevant and accurate figures at its disposal, and could come to a considered view as to the merits of any payment out of monies now standing in court.

23.For the plaintiff Mr Kemp strongly resisted this argument.  He made two primary points.  There was no doubt, he said, that his client had a valid and unimpugned judgment in her favour; a quantifiable sum in terms both of principal and interest had been awarded, and there was no reason in principle why such recovery now should be impeded.  Second, Mr Kemp pointed out that notwithstanding the limited stay, in terms of execution by writ of fi fa, that the defendant now sought, on the defendant’s own case the plaintiff was entirely free to pursue other modes of enforcement, such as a 21 day notice as a prelude to winding up, or a garnishee/charging order.  No “special circumstances” existed in this case, he said, and his client should be permitted to obtain payment out of that amount representing her judgment sum, together with interest, which had been the subject of the plaintiff’s earlier payment into court.

24.And in any event, said Mr Kemp, he also could play the “numbers game” : on the basis that his broadly-estimated bill was to be reduced by, say, two thirds, so that he ended up recovering, say, even HK$500,000 for his costs prior to the date of payment in, the defendant would be virtually completely ‘protected’ in costs terms — if its own costs bill was taxed down to HK$1 million from the current figure of HK$1.2, and it already had in court the amount of HK$475,000 in security for costs, this would leave it but marginally short in terms of the alleged costs shortfall about which it was complaining.  In effect, he submitted, the defendant’s submissions on this subject amounted to a thinly-disguised attempt to gain security for costs greater than that which earlier had been ordered, and a greater security over and above that to which it was entitled.  Accordingly he submitted that the court should not hesitate to grant the application for payment out.

Decision

25.The resolution of these applications remains the only matter upon which a decision is required.

26.I have reflected upon the arguments which have been persuasively presented on each side.  Let me take the issues in turn.

27.The application for a stay of execution, which has been run in parallel by the defendant together with resistance to any payment of monies out of court, is refused.

28.I am unable to see why the plaintiff should not be free to utilize all means of execution of a valid judgment which are open to her under the law.  The judgment is good on its face, and has not been sought to be impugned by the defendant.  On his own case Mr Carolan did not seek to obtain a stay other than pursuant to Order 47, rule 1, and I decline to grant even that limited form of relief.

29.I turn now to the issue of payment out of that portion of the monies currently in court which represents the judgment debt, together with interest.  I see these monies in court as quite a separate issue.

30.Order 22, rule 5 reads, in part :

“If any money paid into court in an action is not accepted in accordance with rule 3, the money remaining in court shall not be paid out except in pursuance of an order of the Court which may be made at any time before, at or after the trial or hearing of the action; …”

31.Under this scheme the court retains the power to supervise these monies, and not to permit payment out save and except when it is clear that this course is just in all the circumstances.  Such is not clear to me as matters currently stand.

32.I see no reason why I cannot take into account the fact that the present situation as to costs remains opaque, to say the least.  Mr Carolan has levelled strong criticism about the costs figures put up by the plaintiff, and of the form in which these figures were couched.  I presently make no comment upon his dark suspicion that there is, at its lowest, a certain tactical element at play in this connection.  However, looking at the matter broadly, and whilst I stress that I retain an open mind, it does seem a trifle odd that there is so apparent a disparity between the plaintiff’s estimate of HK$1.6 million for the period from the commencement of the action to the date of payment in, when set against the defendant’s costs for the like period of some $250,000.

33.In this regard there may well be a very good explanation; after all, as Mr Kemp observed, entirely reasonably, the plaintiff had had to make the running in cases such as this, and the present estimate of expenditure merely reflected that obvious fact.  He may well be right, and, if I may say so, it goes without saying that so far as this court is concerned his integrity is unquestioned.

34.The more pertinent question, however, is why should the court be placed in what is, in effect, a speculative position?  Why should the court have to guess as to the true situation in making an important decision in terms of authorizing the payment out of monies in court?  However, this undoubtedly is the position in which the court currently finds itself, and it is a position which has proved fertile ground for argument, much of it necessarily based on supposition.

35.I appreciate Mr Kemp’s argument that, in effect, the defendant was attempting wrongly to obtain additional unauthorized security for costs, and also his reliance upon certain observations in Powell v. Vickers [1906] 1 KB 71, at 77, per Collins MR, whom in that case pointed out that the onus was on the defendant to give some good reason why the money should remain in court, and that that onus had not been met.

36.However, in my view in the present case the defendant currently has provided such good reason.  I bear in mind also that in Powell, op cit., one of the factors influencing Collins MR was that to allow the money to remain in court “would be to give the defendants a security for costs to which they are not entitled”, and that, as Mr Carolan has observed, this provides an obvious distinction with the facts of this case; it is clear, Mr Carolan submitted, both from the fact of the past orders of this court for such security, and indeed from Mr Kemp’s disinclination to afford himself the proffered opportunity to place on affidavit his submission, upon instructions, that Miss Harrington currently was a Hong Kong resident (and thus would be available to be executed against in terms of any costs deficit), that the defendant indeed was entitled to such security —although as matters had transpired clearly it had not succeeded in obtaining enough.

37.At the end of the day, therefore, this court is required to weigh the competing interests, and in the exercise of my discretion I have decided not to accede to the present application of the plaintiff for payment out of court of a sum equivalent to the judgment sum plus interest.  Whilst naturally I appreciate that it would be signally more convenient for the plaintiff thus to obtain satisfaction of her judgment debt, I am unsatisfied that to make an order in the terms currently sought would be ‘just and convenient’ in the accepted legal sense.  In short, in my judgment the status quo is to be preserved until the overrall position as to costs becomes considerably clearer.

38.Given this aim, not only do I decline to make any order for payment to the plaintiff out of any part of the monies presently in court, but I further decline to make any order for payment out to the defendant either —the defendant, as earlier noted, itself having asked for payment out of the balance of its funds as paid in after retention of the judgment sum and interest thereon.

39.Accordingly, I order that all monies presently in court are to remain so until further order.

40.It follows, therefore, that the parties’ respective applications for payment out are refused, for the time being at least.  In so far as may be necessary, and absent agreement thereon, I will hear the parties upon the appropriate form of order upon the summonses before the court.

41.As to costs, it seems to me that the fair disposition of the costs of these summonses is best achieved by the reservation of such costs to such further hearing before this court as subsequently is to be scheduled for disposition of these funds in court.  I make an order nisi to this effect.

Mr Malcolm Kemp of Messrs Stephenson Harwood & Lo, for the plaintiff

Mr Paul Carolan, instructed by Messrs Minter Ellison, for the defendant