Risk Management Issues in Bringing a Claim in the High Court

This article looks at how recent cases on transferring claims and the cost consequences arising from bringing a claim in the wrong court will impact lawyers and the risk management issues that arise from this.

The decision whether to commence a case in the subordinate courts or in the High Court is generally a fairly straightforward issue. For most lawyers, this would involve a simple decision of examining the value of the claim made, and filing the writ in the court with the monetary jurisdiction of the appropriate level. However, where the plaintiff’s claim hovers at the monetary jurisdictional limit of one of the subordinate courts, in particular, the district court, a lawyer needs to consider various risk management issues that arise in such a situation.

Cost Consequences

The main factor to consider is the risk of suffering cost consequences if a plaintiff brings a claim in the High Court and fails to recover more than the amount of the district court monetary jurisdictional limit. The relevant section to consider is s 39(1) of the Subordinate Courts Act (‘SCA’) (Cap 321) which provides as follows:

Where an action founded on contract or tort or any written law to recover a sum of money is commenced in the High Court which could have been commenced in a subordinate court, then, subject to subsections (3) and (4), the plaintiff, if he recovers a sum not exceeding the District Court limit, shall not be entitled to any more costs of the action than those to which he would have been entitled if the action had been brought in a District Court

Subsection (4) in turn provides:

‘In any action, the High Court, if      satisfied:

(a)  that there was sufficient reason for bringing the action in the High Court; or

(b)  that the defendant or one of the defendants objected to the transfer of the action to a subordinate court,

may make an order allowing the costs

or any part of the costs thereof on the

High Court scale or on the subordinate

courts scale as it may direct.’

Section 39 was considered by the High

Court in two recent cases.

Wee Poh Hueh Florence v Performance Motors Ltd

In Wee Poh Hueh Florence v Performance Motors Ltd [2004] SGHC 47, the plaintiff made a claim against the defendant for rescission of her contract for purchase of a car. As the purchase price of the car was in excess of the monetary limit of the jurisdiction of the district court, she commenced the action in the High Court. Her claim for rescission was rejected, although she was awarded damages for breach of warranty of quality. The amount of damages awarded was substantially below the monetary limit of the jurisdiction of the district court. Accordingly, the Singapore High Court held that s 39 of the SCA applied.

The court looked at the exception in s 39(4) of the SCA and considered whether there had been sufficient reason to bring the claim in the High Court. It held that there had not been. Although it was argued that the claim that was brought exceeded the monetary jurisdiction of the district court and that this claim had not been deliberately inflated, the High Court rejected this as a factor for consideration. Instead, the court noted that the claim did not involve any complicated issues of fact or law, and further, that a realistic assessment of the claim would have indicated to the plaintiff that she had no right of rescission, but only to damages which would have been well within the monetary limit of the district court. Accordingly, she should have commenced her claim in the district court and costs would be awarded on that scale.

Cheong Ghim Fah & Anor v Murugian s/o Rangasamy (No 2)

In Cheong Ghim Fah v Murugian s/o Rangasamy (No 2) [2004] SGHC 125, the plaintiffs had brought an accident claim in the High Court. They had estimated the damages to be around S$300,000 to S$400,000, but were eventually — on an assessment of damages — awarded damages of slightly less than S$250,000, the monetary jurisdictional limit of the district court. The other reason for bringing the matter in the High Court was that the defendant was situated in Malaysia, and the plaintiffs anticipated that they might need to bring enforcement proceedings in Malaysia as the defendant had no assets in Singapore; the Malaysian courts would only recognise a Singapore judgment if the judgment was by a superior court.

The High Court held that the term ‘sufficient reason’ in s 39 of the SCA has no fixed or settled meaning. Only a case of unusual complexity or one that raises an issue of public interest or an important point of law can ever justify the initiation of proceedings in the High Court if it prima facie falls within the purview of the SCA. In this case, the issues raised in the present proceedings were well within the purview and competence of the district court. Nevertheless, it held that it was appropriate for the plaintiffs’ solicitors to initiate proceedings in the High Court for the following reasons:

•     They had reasonable grounds to believe that the damages their clients might potentially recover would exceed the district court’s jurisdiction. That the plaintiffs did not eventually recover such an amount should not be held against them.

•     If a subordinate court judgment cannot be enforced as a foreign judgment in another jurisdiction, as in the present case, this can be ‘sufficient reason’ for initiating the action in the High Court. However, it should be noted that enforcement in the foreign jurisdiction must be the sole means of enforcing the judgment. If the judgment could also be enforced in Singapore, then there may not be ‘sufficient reason’.

It should be highlighted, however, that the court also warned that if, in the course of proceedings, solicitors realise that the upper limit of recoverability falls within the subordinate courts’ jurisdiction prior to the commencement of a hearing, steps ought to be taken to immediately transfer the proceedings to the appropriate forum.

Given the court’s recommended course of effecting a transfer, it is therefore appropriate to take a look at the ease of transferring cases from the district court to the High Court, and the reverse.

Transfer from the District Court to the High Court

When dealing with a transfer of proceedings from the district court to the High Court, the principle provision governing such transfers is s 38 of the SCA. This provides as follows:

Where it is made to appear to the High Court, on the application of a party to any civil proceeding pending in a District Court, that the proceeding by reason of its involving some important question of law, or being a test case, or for any other sufficient reason, is one which should be tried in the High Court, it may order the record to be transferred to the High Court.

Ricky Charles v Chua Boon Yeow

The scope and effect of this section was considered in the High Court decision of Ricky Charles v Chua Boon Yeow [2002] SGHC 87. In that case, the plaintiff had commenced an action against the defendant in the district court for damages for personal injury arising from a traffic accident. The plaintiff subsequently obtained an interlocutory judgment, by consent, with damages to be assessed. The plaintiff later applied to have the proceedings transferred from the district court to the High Court on the grounds that in view of certain medical reports, the damages he sought might well exceed the S$250,000 jurisdictional limit of the district court.

The question before the High Court was essentially whether it had the power to effect such a transfer. At issue was whether its power was limited to the grounds set out in s 38 of the SCA, or whether it had a wider discretionary power conferred under para 10 of the First Schedule of the Supreme Court of Judicature Act (Cap 322). This provides that the Supreme Court has ‘[p]ower to transfer any proceedings to any other court or to or from the subordinate court, and in the case of transfer to or from a subordinate court to give any directions as to the further conduct thereof, except that this power shall be exercised in such manner as may be prescribed by the Rules of Court’. It will be noted that para 10 is worded in broader terms than s 38 of the SCA.

However, the High Court held that para 10 had to be read subject to s 38 of the SCA, and accordingly, the wide powers set out therein were subject to the limitations spelt out in s 38.

In this case, the ground for transfer was solely the increase in the amount of the claim, and did not involve either an important question of law or a test case. Accordingly, it was necessary for the plaintiff to show that there was ‘sufficient reason’ for the case to be tried in the High Court. Ultimately, the High Court decided against the plaintiff as there was already an interlocutory judgment from the district court. However, it noted the fact that damages exceeded the monetary jurisdictional limit of the district court:

(W)ould usually constitute sufficient reason to transfer the proceedings to the High Court.

The case went on appeal to the Court of Appeal (Ricky Charles v Chua Boon Yeow [2002] SGCA 52) which upheld the reasoning of the High Court. The decision here also turned on the fact that an interlocutory judgment had already been obtained. However, significantly, the Court of Appeal noted:

the power of the High Court to transfer proceedings from a lower court to itself or vice versa, is a necessary one, in the interests of justice. Nevertheless, such power should not be exercised liberally. The onus is on a plaintiff to commence his action in the correct court. The plaintiff, who has commenced his action in the inappropriate court, ought not to be allowed, without good cause, to simply rectify his own error by applying for a transfer of proceedings.

Notably, however, the Court of Appeal also noted that the plaintiff should have applied to transfer proceedings to the High Court as soon as it realised that damages were likely to exceed the monetary limit of the district court rather than going ahead with obtaining an interlocutory judgment. Implicit in this statement is the idea that such a transfer would likely have been granted. Unfortunately, however, the circumstances of the case itself did not allow for a clearer expression of the Court of Appeal’s view of this practice.

Rightrac Trading v Ong Soon Heng

The scope of s 38 came up for consideration in 2003, this time in the case of Rightrac Trading v Ong Soon Heng [2003] SGHC 236. This case actually dealt with a transfer from the magistrate’s court to the district court. The argument turned on the inconsistency between s 53 of the SCA and O 89 r 4(1) of the Rules of Court.

Section 53 provides as follows:

A Magistrate’s Court may, either of its own motion or on the application of a party to an action, transfer the action to a District Court on the ground that some important question of law or fact is likely to arise.

On the other hand, O 89 r 4(1) provides:

Where a Subordinate Court is satisfied that any proceedings in that Court ought to be tried in some other Subordinate Court, it may order the proceedings to be transferred to the other Court.

The High Court held that the scheme in the SCA and Rules of Court worked in this way:

(a)  Where a case or matter fell within the monetary jurisdiction of the magistrate’s court, then s 53 applied. In those circumstances, a party seeking transfer must show that there is some important question of law or fact.

(b)  Where a case or a matter fell outside the monetary jurisdiction of the magistrate’s court, then O 89 r 4(1) applied. In those circumstances, a party would get a transfer ‘as of right’ from the magistrate’s court to the district court.

The court noted that this was the only way to give any sense to O 89 r 4(1) which would otherwise be otiose.

While Rightrac Trading v Ong Soon Heng dealt with a transfer from the magistrate’s court to the district court, the court also opined on the effect of s 38 of the SCA. The court stated that, as with s 53, s 38 of the SCA applies where a case or matter in the district court fell within the monetary jurisdiction of the district court. This statement by the High Court is particularly interesting as it suggests that transfers from the district court to the High Court should be subject to the same scheme as transfers from the magistrate’s court to the district court. In other words, where this case or matter fell outside the monetary jurisdiction of the district court, then a party would get an automatic transfer from the district court to the High Court.

However, this should be viewed with some caution, as such a view was not made explicitly. Furthermore, unlike transfers from the magistrate’s court to the district court, it is not clear where the statutory support for such view would come from. With respect to transfers from the magistrate’s court to the district court, the court relied on O 89 r 4(1) which dealt only with transfers between subordinate courts. However, there is no equivalent of this rule with respect to transfers from the district court to the High Court.

Having said this, however, it can be argued that the same formulation can be reached, but by a slightly different route than that adopted by the High Court in this case. This is because s 38 does itself contain latitude to encompass a similar scheme via the wording ‘some other sufficient reason’ which, as indicated by the High Court in Ricky Charles v Chua Boon Yeow, could encompass the situation where the amount of the claim exceeds the monetary jurisdiction of the district court. It would be open to the High Court then to exercise its discretion with such cases on the basis that a transfer should be granted ‘as of right’. Further, there is nothing in either the High Court decision or Court of Appeal decision in Ricky Charles v Chua Boon Yeow that would preclude such a conclusion. Perhaps the only fly in the ointment would mean accepting that the legislative provisions in respect of transfers from the district court to the High Court and the legislative provisions in respect of transfers from the magistrate’s court to the district court are not symmetrical, but contain the same scheme using a different approach.

Regardless of the approach to be adopted, for the purposes of this article, it should be highlighted that the High Court in Rightrac Trading v Ong Soon Heng seemed prepared to look favourably on an application to transfer from the district court to the High Court on the sole ground that the claim in question exceeded the monetary limit of the lower court. However, again, the circumstances of the case did not allow for a clear expression of the attitude that will be adopted by the court in such circumstances.

Transfer from the High Court to the District Court

Transfers from the High Court to the district court are governed by s 37 of the SCA. This provides:

In any action commenced by way of writ of summons in the High Court in the exercise of its original civil jurisdiction, any party may for any sufficient reason at any time apply to the High Court for an order that the proceedings be transferred to a District Court.

The principles in relation to the application of s 37 are somewhat more straightforward and the principal case is Australian Master Builders Co Pty Ltd v Ng Tai Tuan [1987] SGHC 50. In this case, the Singapore High Court held that it had an unfettered discretion to effect such a transfer. In exercising its discretion, each case must be determined on its own merits. However, a speedier trial or cost savings would not by themselves be sufficient. That the proceedings have come within the jurisdiction of the subordinate courts would be a valid reason. On the other hand, if the matter involved complex issues or involved matters not normally tried in the subordinate courts that would be a reason against transfer.

And in Sunlink Engineering Pte Ltd v Koru Bena Sdn Bhd [2003] SGHC 120, the transfer of a claim below the jurisdictional monetary limit of the district court was positively encouraged. The High Court there asserted that in the circumstances of that case, ‘the resources of the High Court should not be utilised in this case to hear a claim for a relatively small sum’.

Conclusion

Given the relative ease of transferring cases from the High Court to the district court as compared to the uncertainties that still hover around a transfer from the district court to the High Court (notwithstanding the expressions of a relatively expansive attitude in the decisions of Ricky Charles v Chua Boon Yeow and Rightrac Trading v Ong Soon Heng), it is likely that lawyers will continue to bring claims in the High Court notwithstanding the risks posed by s 39 of the SCA.

In this respect, lawyers then face two main issues of risk management:

•     The effect of both Cheong Ghim Fah v Murugian s/o Rangasamy (No 2) (‘reasonable grounds’) and Wee Poh Hueh Florence v Performance Motors Ltd (‘realistic assessment’) is to place the burden on the solicitor to make a judgment call as to the merits of his client’s claim, and to bring the case in the appropriate level of court. Given that bringing a claim in the district court will effectively mean the client will be unable to make a claim beyond the jurisdictional monetary limit of the district court should events or evidence subsequently favour his claim, a solicitor will likely still prefer to err by bringing a claim in the High Court. In addition, the true strength of evidence supporting the amount of the claim may not become obvious until after interlocutory judgment is obtained in which case it will be impossible to get the case transferred upwards (Ricky Charles v Chua Boon Yeow).

•     As noted by the court in Cheong Ghim Fah v Murugian s/o Rangasamy (No 2), lawyers who initiate civil proceedings in the wrong forum run the risk of a delay in proceedings if the High Court, on its own motion or otherwise, decides to transfer what should have started off as subordinate court proceedings to their proper forum. In addition, parties who find their hearings delayed as a consequence could in turn legitimately take their solicitors to task for any such delay and/or unnecessary incurring of costs and the lawyers, as a result, could face issues of personal liability for wasted costs.

With these risk issues in mind, in addition to weighing carefully the decision of which court to bring a claim in, solicitors may need to adopt appropriate steps to manage the risks vis-à-vis clients who might disagree with the solicitor’s ultimate decision.

Lim Wee Teck

Rajah & Tann

E-mail: wee.teck.lim@rajahtann.com