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HCA 352/2011
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 352 OF 2011
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| BETWEEN |
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WONG YIM MAN ANTHEA (黃艷文) |
Plaintiff |
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and |
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WONG HO MING FELIX
(黃漢明) |
Defendant |
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| Before: Deputy High Court Judge Kent Yee in Chambers |
| Date of Hearing: 18 November 2015 |
| Date of Written Submissions: 8 December 2015 (Plaintiff) 19 December 2015 (Defendant) |
| Date of Decision: 22 April 2016 |
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DECISION
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Introduction
1. This is an application of Mr Wong for indemnity costs and enhanced interest on costs pursuant to Order 22 r.23 of the Rules of the High Court (“RHC”) on the strength of a purported sanctioned offer contained in a letter of Mr Wong’s solicitors dated 1 September 2014 (“the Offer”) served on Madam Wong on the even date.
2. After trial, this court handed down a judgment on 24 September 2015 whereby Madam Wong’s claim was dismissed and an costs order nisi was made to the effect that Madam Wong do pay Mr Wong 40% of his costs, to be taxed if not agreed (“the Order Nisi”).
3. By his Amended Summons, Mr Wong asks for a variation of the Order Nisito that Madam Wong do pay 40% of the costs of this action to Mr Wong on a party and party basis up to 29 September 2014 and thereafter 100% of the costs of the action to Mr Wong on an indemnity basis to be taxed if not agreed with certificate for two counsel. Mr Wong further asks for enhanced interest on his costs from 29 September 2014 until the date of the judgment and thereafter at judgment rate until the date of actual payment.
4. The Offer was in the following terms:
(1) Madam Wong do withdraw her Statement of Claim;
(2) there be no order as to costs of this action.
5. At the hearing, Mr Sham (with Ms Chun) for Mr Wong submits that Mr Wong’s present application is made pursuant to O.22 and he should be entitled to the added protection under the mechanism of O.22 by reason of the Offer and there is nothing unjust to make an order thereunder. He also indicates that he no longer insists on certificate for two counsel.
6. Ms Lau (with Mr Fong) for Madam Wong submits that the Offer is no more than a meaningless tactical move and not a genuine offer to settle. As such, it is against the spirits of O.22 and should not be given its legal effect thereunder.
7. This court has some doubt as to whether the Offer was a sanctioned offer under O.22 given its express term as to the parties’ costs of the action. Pursuant to the directions given by this court, the parties filed further written submissions on the nature of the Offer after the hearing.
Discussion
8. In view of the following provisions of O.22, the Offer, in my view, does not appear to fall within the definition of a sanctioned offer under O.22.
9. O.22 r.1 defines a “sanctioned offer” in the following terms: “sanctioned offer” means an offer made (otherwise than by way of a payment into court) in accordance with this Order.
10. O.22 r.3 provides that an offer by a defendant to settle the whole or part of a claim or an issue arising from the claim does not have the consequences specified in O.22 unless it is made by way of a sanctioned offer or a sanctioned payment or both.
11. O.22 r.5 concerns the form and content of a sanctioned offer. I note that there is neither express prohibition against nor reference to inclusion of any costs element in a sanctioned offer.
12. O.22 r.5(7) provides that a sanctioned offer made not less than 28 days before the commencement of the trial must provide that after expiry of 28 days from the date the sanctioned offer is made, the offeree may only accept it if the parties agree on the liability for costs or the court grants leave to accept it. Thus, a late acceptance of a well-timed sanctioned offer is allowed only with either the parties’ agreement on the liability for costs or leave of the court.
13. Similarly, O.22 r.5(8) provides that a sanctioned offer made less than 28 days before the commencement of the trial must provide that the offeree may only accept it if the parties agree on the liability for costs or the court grants leave to accept it.
14. O.22 r.15(2) further provides that where a defendant’s sanctioned offer or sanctioned payment is made less than 28 days before the commencement of the trial or the plaintiff does not accept it within the 28 days after the offer or payment was made, the plaintiff may accept the offer or payment without leave only if the parties agree on the liability for costs. If such an agreement is not unavailable, the plaintiff may still accept the offer or payment if the court grants the leave and makes an order as to costs.
15. O.22 r.20 provides that where a defendant’s sanctioned offer or sanctioned payment to settle the whole claim is accepted without requiring the leave of the court, the plaintiff is entitled to his costs of the proceedings up to the date of serving notice of acceptance, unless the court otherwise orders. It is remarkable that this rule is not made subject to any costs provision in the sanctioned offer accepted by the plaintiff.
16. It is thus clear that if a sanctioned offer made in good time by a defendant (28 days before the commencement of the trial), a plaintiff can accept the sanctioned offer within 28 days from the date of its making without leave of the court and any further agreement on the liability for costs, the consequences specified in O.22, to be precise, r.20 will automatically flow from the acceptance of the sanctioned offer.
17. The specific requirement of the parties’ agreement on the liability for costs in the case of a late sanctioned offer (O.22 r.5(8)) or an intended late acceptance of a sanctioned offer (O.22 r.5(7)) fortifies my view that the specified costs consequences in O.22 r.20 and none others will without further ado flow from a plaintiff’s timely acceptance of a defendant’s sanctioned offer made no less than 28 days before the commencement of the trial.
18. In my view, the Offer does not fit in the O.22 mechanism due to its inclusion of a term as to costs. Its proposed costs order (no order as to costs) effectively prevents the specified cost consequences upon its acceptance by Madam Wong under O.22 r.20. It is not in dispute that the Offer was made more than 28 days before the commencement of the trial. If Madam Wong had accepted it within 28 days thereafter, she would have been completely deprived of her entitlement to her costs of the proceedings up to the date of serving her notice of acceptance under O.22 r.20.
19. Of course Madam Wong could have waived her right thereunder and proceeded to accept the Offer including the costs proposal of Mr Wong. However, such an acceptance could not ex post facto turn the Offer into a sanctioned offer.
20. I now turn to the relevant authorities on this issue cited to me by the parties. Mr Sham places heavy reliance on two Court of Appeal decisions in Central Management Limited v Light Field Investment Limited and Ors. [2011] 2 HKLRD 34 and Chan Kwing Chiu and Anor. v Chan Chi Kau (unreported, CACV 209/2012, 3.10.2013). He also relies on the decision of DHCJ Marlene Ng in Chen Tek Yee & Ors v Chan Moon Shing & Anor., unreported, HCA 954/2010, 5.6.2015 in which the deputy judge accepted that Central Management Limited was binding on her and hence despite her previous decision in Lin Yanjin v Smart Billion Engineering Limited (unreported, HCPI 739/2009, 10.8.2011), she held that a sanctioned offer in O.22 can include a term as to costs.
21. Mr Sham submits that as with the deputy judge, this court is also bound by the decision of Central Management Limited and hence the Offer must be a sanctioned offer despite its provision as to costs.
22. Chen Tek Yee & Ors is indeed a good starting point for discussion. O.22 is modelled on Part 36 of the Civil Procedure Rules (“CPR”) in England and Wales prior to its amendments in April 2007. The deputy judge first referred to Mitchell & Ors v James & Ors [2003] All ER 1064 (CA).
23. There, Peter Gibson LJ (with whom Potter LJ and Sir Murray Stuart-Smith agreed) concluded that the draftsman of Part 36 did not intend any inclusion of terms as to costs in a Part 36 offer (the counterpart of our sanctioned offer). He gave four detailed reasons for his conclusion and I do not find it necessary to set them out here. Suffice it to say, he observed that a term as to costs being part of a Part 36 offer is inconsistent with the specified costs consequences intended to flow from an acceptance of the Part 36 offer. I agree on his reasons entirely.
24. Mitchell & Ors was consistently followed in the English court both before and after the said amendment to the CPR. In Hong Kong, HH Judge Wong in Sunbeam Investments Limited v The Incorporated Owners of Villa Veneto (unreported, LDBM 370/2007 and LDBM 175/2009, 7.9.2010) held that Mitchell & Ors was not distinguishable there and concluded that a term as to costs should not be a part of a sanctioned offer. The judge in particular...
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