WONG LAI PING v. YOUTH WORLD FOUNDATION LTD

DCEC 281/2021

[2023] HKDC 42

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 281 OF 2021

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DECISION ON COSTS

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INTRODUCTION

1.  This is a decision on costs after the Respondent (“R”), at the start of the hearing, withdrew its summons filed on 13 May 2022 for, essentially, a stay of all further proceedings herein upon the terms set out in the Schedule appended thereto (“the Summons”).

2.  Upon the withdrawal of the Summons, Ms Kong, R’s solicitor asked for no order as to costs, whereas Mr Lin, the Applicant’s counsel, asked for costs to be awarded on an indemnity basis, with certificate for counsel.

BACKGROUND

3.  The Applicant (“A”) was employed by R as an Event Officer. A claims that she was injured in the course of her employment by an accident which took place on 3 March 2019.

4.  On 8 February 2021, A commenced her application for employees’ compensation against R herein (“the EC Application”).

5.  On 22 February 2021, R filed an Answer to the EC Application.

6.  On 17 March 2021, the Employees’ Compensation (Ordinary Assessment) Board issued a Certificate of Review of Assessment, certifying the following matters: -

(a)  A suffered from a fourth lumbar vertebra fracture resulting in low back pain and weakness;

(b)  the period of absence from duty necessary as a result of the injury was two years (3 March 2019 - 3 March 2021); and

(c)  A’s loss of earning capacity permanently caused by the injury was 11%.

7.  On 16 April 2021, A’s solicitors issued a “without prejudice save as to costs” letter to United Adjusters (HK) Ltd, the loss adjusters. The letter stated, inter alia, the following:

“4. Advance Payments

Credit shall be given to the advanced payments received by our client [A] in the sum of HK$463,054.00 (subject to confirmation by both parties).

    5. Amount of claim

Section 9                                                   HK$285,883.10

Section 10                                                 HK$469,141.50

Section 10A                                              HK$  17,423.00

Sub-total:                                                  HK$772,447.60

Less: advanced payments                         (HK$463,054.00)

(subject to confirmation by

both parties)

Total:                                                        HK$309,393.60

    6. Interest (calculated up to 2/5/2021)

…

                                                                           HK$ 26,814.11

    7. Total amount of claim

HK$309,393.60 + HK$26,814.11 =       HK$336,207.71

In the circumstances, our client [A] would accept on an entirely without prejudice basis, a round-up sum of HK$336,000.00 on top of the advance payments of HK$463,054.00 (subject to confirmation by both parties) plus costs to be taxed if not agreed in full and final settlement of the Employees’ Compensation claim herein. …”

8.  On 17 February 2022, A’s solicitors issued an offer letter to R’s solicitors (“the First Offer Letter”). The First Offer Letter stated, inter alia, the following:

“In order to save the time and costs of the parties, we are instructed to hereby make a SANCTIONED OFFER to your client [R]:

Our client will accept a sum of HK$625,878.65 (inclusive of interest and the periodical payment received) plus costs and disbursement in full and final settlement of the whole claim under the captioned matter.

…

For your reference, a breakdown of the aforesaid sum is listed hereunder:-

Section 9 *HK$24,475.00 x 13% x 96	HK$305,448.00
Section 10   03/03/2019-02/03/2020 HK$24,475.00 x 12 x 4/5 = HK$234,960.00 03/03/2020-09/02/2022 HK$(24,475.00 x 1.02) x 23.2 x 4/5 = HK$463,3451.12	HK$698,301.12
Section 10A HK$17,057.00	HK$17,057.00
Sub-total:	HK$1,020,806.12
Less advance payment received^	(-HK$463,054.00)
	HK$557,752.12
Interest (calculated up to 15/03/2022)	HK$68,126.53
Total:	HK$625,878.65 ============

*HK$17,000.00 basic salary + HK$7,475.00 commission for February 2019

^Subject to documentary proof

For the amount of periodical payment paid to our client [A], please let us have the amount together with the documentary proof of the same for our client’s [A’s] confirmation. …”

9.  On 18 February 2022, R’s solicitors wrote to A’s solicitors, informing the latter that: (a) the name of their firm was Tsang & Associates, (b) their case reference number of the action was SK/8004.09/2022, and most importantly (c) the total advance payments received by A was HK$543,306.00 verified by a bundle of documents enclosed therewith. In the same letter, R’s solicitors requested A to clarify the First Offer Letter by virtue of Order 22 rule 14 of the Rules of District Court (Cap 336H) (“RDC”).

10.  Between 18 February 2022 and 7 March 2022, there was multiple correspondence between A’s solicitors and R’s solicitors in relation to, inter alia, the total amount of advanced payments received by A.

11.  On 9 March 2022, A’s solicitors issued another offer letter to R’s solicitors. The layout of the letter was similar to that of the First Offer Letter with the sum offered reduced to HK$574,975.25.

12.  Later on the same day, R’s solicitors wrote to A’s solicitors, pointing out that (a) the name of their firm was Tsang & Associates and (b) their case reference number of the action was SK/8004.09/2022. R’s solicitors further asked for re-sending of another offer letter for proper record purpose.

13.  Thus, on the same day, A’s solicitors, after correcting the two aforesaid mistakes, issued a revised offer letter to R’s solicitors (“the Second Offer Letter”). The Second Offer Letter stated, inter alia, the following: -

“Although the amount of medical reimbursements have not been confirmed yet, in order to save the time and costs of the parties, we are instructed to hereby make a SANCTIONED OFFER to your client:

Our client will accept a sum of HK$574,975.25 (inclusive of interest and the periodical payment received) plus costs and disbursement in full and final settlement of the whole claim under the captioned matter.

…

For your reference, a revised breakdown of the aforesaid sum is listed hereunder:-

Section 9 *HK$24,475.00 x 13% x 96	HK$305,448.00
Section 10   03/03/2019-02/03/2020 (i.e. 365 days – 12 days of statutory holidays = 353 days) HK$24,475.00 x 353/30 x 4/5 = HK$230,391.33 03/03/2020-09/02/2022 (i.e. 709 days – 24 days of statutory holidays = 685 days) HK$(24,475.00 x 1.02**) x 685/30 x 4/5 = HK$456,018.20	HK$686,409.53
Section 10A HK$24,834	HK$24,834.00
Sub-total:	HK$1,016,691.53
Less alleged advance payment	(-HK$504,302.00***)
Sub-total:	HK$512,389.53
Interest (calculated up to 15/03/2022)	HK$62,585.72
Total:	HK$574,975.25 ============

* HK$17,000.00 basic salary (before deduction of MPF contribution) + HK$7,475.00 commission for February 2019 as per the attached documentary proof provided by your client [R].

** According to the Reply Slip provided by your client [R] to the Labour Department dated 9 May 2020 as per attached.

*** According to the information provided by your client [R] under the cover of your letter dated 18 February 2022 less the annual leave payment made on 30 September 2021) …”

14.  On 6 April 2022, R’s solicitors requested for an extension of time of 14 days to respond to the sanctioned offer as propounded in the Second Offer Letter. On the following day, A’s solicitors agreed to grant R a 14-day extension.

15.  On 11 April 2022, R’s solicitors wrote to A’s solicitors and purported to accept the sanctioned offer in the following terms (“the 11/4/22 Letter”):

“We are instructed to accept the Applicant’s sanctioned offer of HK$574,975.25 (inclusive of interest and the periodical payment received) plus costs and disbursement to be taxed if not agreed in full and final settlement of the above action as stated in [the Second Offer Letter] …” (Emphasis added)

16.  Shortly, on 12 April 2022, A’s solicitors wrote to R’s solicitors, clarifying that “the proposed settlement sum was NET of advance payment received but NOT inclusive of periodical payment received” and that “[A] will accept a sum of HK$574,975.25 (inclusive of interest and ON TOP of the periodical payment received) plus costs and disbursement in full and final settlement of the whole claim …” In the same letter, A’s solicitors apologized for the confusion caused.

17.  However, R’s solicitors insisted that by the 11/4/22 Letter, R had accepted A’s sanctioned offer of HK$574,975.25 (inclusive of interest and the periodical payment received) plus costs and disbursement in full and final settlement of the whole claim herein, and a valid settlement agreement had reached between the parties.

18.  Hence, R’s issue of the Summons.

DISCUSSION

19.  As a general rule, an applicant has to pay the other side’s costs if he decides to withdraw an application. To persuade the court to depart from the general rule, the minimum an applicant has to do is to show that the discontinuance is for reasons other than an acknowledgment of defeat or likely defeat. The most direct way of proof is to show that the applicant would have succeeded if the application had been proceeded with. Even if the applicant had behaved “reasonably” in making the application, he would still have to pay the costs of such application to the respondent: see Uni-Creation Investments Ltd v Secretary for Justice (unreported, HCMP 2166/2015, 30 June 2017) at §§9-12.

20.  Ms Kong conceded at the hearing that the arguments R put forward might not be correct, leading to the withdrawal of the Summons. But Ms Kong submitted that there should be no order as to costs since the root cause of the stay application was the repeated mistakes committed by A’s solicitors. In both the First Offer Letter and the Second Offer Letter, R, as submitted by Ms Kong, was misled by the unequivocal terms that the settlement sums offered were “inclusive of interest and the periodical payment received”.

21.  Ms Kong’s submission loses sight of the focus being the legal basis, merits and reasonableness in making the application for a stay. In my view, this stay application is totally unmeritorious (see Ground 1 below) and R also has behaved unreasonably in taking out the Summons (see Ground 2 below). I discern no reason to depart from the general rule. R has to pay A’s costs.

22.  Order 62 rule 28(3) of RDC provides:

“The Court in awarding costs to which this rule applies may in any case in which it thinks fit to do so order or direct that the costs shall be taxed on the common fund basis or on the indemnity basis.” (Emphasis added)

23.  An order for costs on an indemnity basis is only considered where the case has some “special or unusual feature”: see Commissioner of Inland Revenue v Poon Cho-Ming John (2020) 23 HKCFAR 74 at §4. The following situations are pertinent to the Court’s consideration as to whether costs in this case should be awarded on an indemnity basis[1]: -

(a)  In cases where a plaintiff’s pursuing of a totally unmeritorious application: Tang Wai Cho v Tang Wai Leung [2011] 1 HKLRD 1 at §23; and

(b)  Whether there is any improper or unreasonable behaviour of the party (eg acts calculated to incur unnecessary costs or intentional omissions of acts that would have saved costs), in this connection, the court would bear in mind the underlying objectives of Order 1A of RDC: Adorn Workshop Ltd v Steicke David Paul (unrep, DCCJ 4350/2009) at §18.

Ground 1: R’s totally unmeritorious application

24.  R’s argument in support of this stay application was that the sanctioned offer of HK$574,975.25 “inclusive of interest and the periodical payment received” [2] was unambiguous. Ms Kong contended that A set out a favourable settlement sum to induce R to accept the offer and that it was only after R’s valid acceptance by the 11/4/22 Letter that A regretted and attempted to resile from it.

25.  Mr Lin, on the other hand, submitted that A’s solicitors had made a clear and obvious mistake. The sanctioned offer of HK$574,975.25 should be “inclusive of interest and on top of the periodical payment received”. R had actual knowledge of such a mistake, thus there was no valid acceptance by the 11/4/22 Letter.

26.  It is well-established that the Court may correct obvious and easily correctable mistakes in contractual documents as a matter of construction. Such circumstance arises when the relevant context and background lead the court to the conclusion that something has gone wrong with the language of a contract and it should be clear what a reasonable person would have understood the parties to have meant: see Sit Kwong Lam v Petrolimex Singapore Pte Ltd [2019] 5 HKLRD 646 at §§14 & 29.

27.  In O’Grady v B15 Group Ltd (formerly Brighthouse Group Ltd) [2022] EWHC 67 (QB), it was held that the doctrine of common law mistake could apply to a Part 36 offer in circumstances where a clear and obvious mistake had been made and the mistake was appreciated by the offeree at the point of acceptance. Master Thornett set out four reasons: -

(a)  Part 36 was a procedure intended for the resolution of claims of wide-ranging value. Whereas concepts of “rough justice” and a “rough and ready system” were applicable to systems where the value of claims was low (and within “a limited class”). Therefore, a more nuanced approach had to be applied to Part 36 given its far wider application. (at §11)

(b)  Part 36 did not incorporate “all the rules governing the formation of contracts” but was nonetheless compatible with them in the absence either of express exclusion, express inclusion or direct contradiction. (at §§15-17)

(c)  Authorities suggested that contractual principles still underpinned Part 36 and from which a particular methodology (eg interpretation) could be drawn providing that was still consistent and compatible with the drafting of Part 36. (at §§18-22)

(d)  Part 36 was not a hermetically sealed process. It was a procedural code that was intended to have clear and binding effect but not at the expense of obvious injustice. The Overriding Objective still had application to the construction of Part 36. (at §§23-25)

28.  The principles enunciated in O’Grady, which I shall adopt, are compelling and equally applicable in the context of Order 22 of RDC[3].

29.  I agree with Mr Lin’s submission that A’s solicitors had made a clear and obvious mistake on the face of the sanctioned offer for three reasons.

30.  Firstly, both the First Offer Letter and the Second Offer Letter had set out in their breakdown tables how the respective sanctioned offers of HK$625,878.65 and HK$574,975.25 were arrived at. In both letters, it was clearly stated that “[f]or your reference, a breakdown of the aforesaid sum is listed hereunder”, that the aforesaid sum in the First Offer Letter and the Second Offer Letter must mean HK$625,878.65 and HK$574,975.25 respectively and that the sums of HK$625,878.65 and HK$574,975.25 were clearly and obviously arrived at after deducting the advance payments. This is certainly not a case of A putting forward a sum which appeared more favourable to R than that set out in the breakdown calculation with the aim of inducing R to accept the offer.

31.  Secondly, if the sanctioned offers had been inclusive of the periodical payments, it would have meant that the net sums to be received by A under the First Offer Letter and the Second Offer Letter would be HK$162,824.65[4] and HK$70,673.25[5] respectively. These sums are unreasonable, given that the parties knew the seriousness of A’s injuries.

32.  Thirdly, if the sanctioned offers had been inclusive of the periodical payments, it would have meant that the periodical payments received would have been deducted twice from what A should have received as her employees’ compensation.

33.  Objectively construed, the sanctioned offer of HK$574,975.25 in the Second Offer Letter must mean HK$574,975.25 exclusive of the advance payments received by A, and should be read as “inclusive of interest and on top of the periodical payment received”. The 11/4/22 Letter which accepted A’s sanctioned offer of HK$574,975.25 (inclusive of interest and the periodical payment received) does not amount to an acceptance of A’s sanctioned offer at all, but a counter-offer from R indeed. In my view, R’s interpretation of the Second Offer Letter is artificial and plainly unarguable.

34.  If necessary, I will also find that R had actual knowledge of A’s solicitors’ mistake when purporting to accept the sanctioned offer by the 11/4/22 Letter on the following grounds: -

(a)  In R’s letters dated 18 February 2022 and 9 March 2022, R’s solicitors had been very meticulous in pointing out minor mistakes and verifying the total amount of advance payments made in the offer letters. R could not have lost sight of the inconsistency between the sanctioned offered sums and their breakdown.

(b)  R’s solicitors were very careful with the framing of the 11/4/22 Letter.

(c)  R has not so far denied its awareness of the inconsistency between the sanctioned offered sums and their breakdown.

35.  Accordingly, on Ground 1 alone, it is justifiable for the Court to award costs against R on an indemnity basis. For the sake of completeness, I would now proceed to consider Ground 2.

Ground 2: R’s unreasonable behaviour

36.  I agree with Mr Lin that this application has come as far as the hearing was due to R’s unreasonable conduct of attempting to take an unfair advantage of the mistake made by A’s solicitors. A had informed R of the mistake promptly after the 11/4/22 Letter. Further, A’s solicitors had set out their position very clearly and had warned R about the serious costs consequences on multiple occasions in writing prior to R taking out the Summons. R nevertheless was relentless in taking the chance and trying its luck. This application is totally unwarranted, leading to unnecessary incurrence of costs and wasting of valuable court’s time. This could have been avoided had P acted reasonably and with a sense of proportionality and judgment.

37.  In my view, this kind of “luck-trying” litigation conduct is deplorable and I do not see why costs should not be ordered on an indemnity basis.

CONCLUSION

38.  In conclusion, I order that R shall pay A the costs of and occasioned by the Summons on an indemnity basis with certificate for counsel, such costs to be summarily assessed and payable forthwith and that A’s own costs be taxed in accordance with the Legal Aid Regulations, Cap. 91A.

39.  It is further directed that A’s statement of costs be lodged and served within 7 days of this Decision and R’s statement of objection within 7 days thereafter. Summary assessment of costs will then be conducted on paper (no matter whether any statement of objection is lodged by R within time) thereafter. The costs assessed shall be payable by R within 21 days after assessment.