One of the changes to the Rules of the High Court (the “RHC”) brought in by the Civil Justice Reforms (“CJR”), implemented in April 2009, was the insertion of a new Order 13A, designed to facilitate early settlement of claims by providing simple and flexible provisions for a binding admission to be made by a defendant to all or part of a claim.
The Order 13A regime applies to monetary claims (liquidated or unliquidated) only and allows a defendant who admits liability to propose terms in relation to the time for payment and, if payment is to be made in instalments, the amount of each instalment. The defendant’s admission of the whole or part of a monetary claim amounts to an offer to the plaintiff to settle the action for an amount less than the claim, and it is open to the plaintiff to accept or reject the offer or contest the defendant’s proposal for payment.
There were no written judgments issued considering Order 13A during the first two years it was in effect. However, last year the court considered the Order, in the decision made by Master Levy in the Court of First Instance in Panjabi v Cader HCA 290/2011 17 June 2011.
The Defendant made an application under Order 13A of the RHC to request time to satisfy an admitted judgment debt of approximately HK$4,464,000. The Defendant proposed to repay the judgment debt in instalments of HK$50,000 per month, which meant that it would take more than seven years to repay the principal judgment sum. The Defendant stated that he was employed as a company manager earning HK$76,000 per month (although he was owed 4 months’ wages by his employer). Set against this, the Defendant said that he incurred monthly expenses of HK$100,000, apparently supporting a large number of dependants. The Defendant also had substantial credit card debts and two legal charges, totalling over HK$ 5.5 million had been executed against a property he owned, for which he had paid a deposit of HK$7.18 million, with the balance of HK$21.55 million being due in late 2011 or early 2012.
Master Levy noted that much of the information the Defendant had given concerning his assets and liabilities was unsupported by documentary evidence, that some of the figures looked “quite doubtful”, and she felt it “quite odd” for him to let wages remain outstanding given his financial position. She also noted that no realistic proposal in relation to a lump sum payment had been made.
In making her decision, the Master noted that there was little Hong Kong authority in relation to the Order 13A procedure, but cited with approval, passages from the judgment of Field J in the English case of Gulf International Bank B.S.C. v Al Ittefag Steel Products Co  EWHC 2601 (QB), a decision relating to a similar provision in the English Civil Procedure Rules, to the following effect:
1. When considering whether a defendant’s proposed time for paying a judgment sum should be accepted, the court has absolute discretion.
2. In considering how the discretion should be exercised, the court will have regard to the interests of the relevant parties. This will inevitably include the interests of the judgment creditor whose claim will be vindicated by a judgment and the interests of the judgment debtor. The court would also bear in mind that, where enforcement of the judgment can take place within the jurisdiction, the judgment creditor would be free to choose from the available methods of enforcement, including a petition to secure the bankruptcy or the winding-up of the debtor, as the case may be.
3. The observation that inability to pay will usually not justify a pre-execution extension of time, with an insolvent debtor having to take the usual consequences of his or its insolvency, applies, a fortiori, where the parties are business entities.
4. In ordinary circumstances, the court will only exceptionally extend time for payment, and then only where the judgment debtor is solvent and for relatively short periods of time, and after which, the whole judgment debt will become payable. Further, in reaching its decision, the court will give careful consideration as to whether some provision in respect of interest ought to be made in light of the fact that the judgment debtor will be kept out of his money for the period of the extension.
Master Levy held that in exercising her discretion she had to decide how to balance the creditor’s interests and the debtor’s financial situation. As the Defendant appeared to be insolvent, it would be quite difficult to say that the Defendant’s case fell into an exceptional circumstance where the court would grant time to pay, as the Defendant’s solicitor had confirmed that the Defendant was unable to put forward a more realistic proposal by making full repayment within a short period of time. This was not a situation where an individual debtor was clearly solvent and only needed perhaps a short period of time to restructure his financial situation so that the entire judgment sum (together with interest) could be paid.
As the Master had been told that the Defendant had already put his property on the market, she saw no reason why the Plaintiff should be prejudiced by being prevented from executing the judgment, so that he could be put in a more secured position by way of an immediate execution of the judgment against the Defendant before he could actually dispose of his property. Therefore, the Master declined to exercise her discretion in favour of the Defendant by accepting his proposal or allowing any time for him to satisfy the admitted sum. The Master entered judgment for the sum claimed in the Statement of Claim, together with interest from the date of the writ until payment at judgment rate, and refused the Defendant’s application under O.13A for time to pay the admitted sum.
So far as costs were concerned, the Master noted that upon receiving the plaintiff’s notice not to accept the defendant’s proposal for payment by instalments, the court’s standard practice under Order 13A rule 10(3) of the RHC is to enter judgment for the amount admitted, without a hearing. However, the court here used its discretion and directed the parties to attend a hearing before the judgment was entered. This created an issue regarding costs, because Order 13A does not provide for costs in situations where a hearing takes place. Master Levy noted that where a plaintiff obtains judgment under Order 13A without a hearing, Order 62, Sch.2, Part I, para.1A of the RHC applies and the plaintiff is entitled to fixed costs. She held that as the purpose of Order 13A was to facilitate admission so that the defendant would know his costs liability with certainty when making the admission, the fact that a hearing was needed to determine the Defendant’s request for payment would not affect the fixed costs provisions under Order 62,Sch.2, Part I, and the costs incurred by the Plaintiff before the hearing were still to be a fixed sum based on this provision. However, the court had the usual discretion when considering the costs of the hearing itself.
Whilst guidance as to the application of new rules created by the CJR is always welcome, the adoption of the principles from the Gulf International Bank case and the suggestion that further time for payment will only be granted to a solvent defendant with temporary cashflow problems tends to indicate that the Order 13A regime may rarely be used in practice.