WONG, CHI HUNG v. LO, WING PUN AND ANOTHER

DCCJ 1960/2019

[2023] HKDC 1664

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1960 OF 2019

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BETWEEN

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DECISION ON COSTS

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I. INTRODUCTION

1.  This is the plaintiff’s summons for varying the costs order nisi against the 2^nd defendant in favour of the plaintiff I made in my judgment handed down on 6 October 2023 (the “Judgment”). The ground for the summons is that the 2^nd defendant failed to do better than the plaintiff’s sanctioned offer under Order 22 rule 4 of the Rules of District Court made in his solicitors’ letter of 30 June 2023 (the “Plaintiff’s Sanctioned Offer”) issued to Messrs Li, Kwok & Law (“LKK”), who have been acting for both the 1^st and 2^nd defendants in the present action.

II. PLAINTIFF’S CLAIM

2.  In the Amended Statement of Claim dated 16 September 2020, the plaintiff sought the following relief:-

“AND THE PLAINTIFF CLAIMS AGAINST THE 1^ST DEFENDANT AND THE 2^ND DFENDANT AND EACH OF THEM FOR:-

(a) Damages in the sum of HK$1,170,265.00;

(ab) The sum of RMB1,000,000 as money had and received;

(c) [interest]”

3.  Relief (ab) was the only amendment in the relief added to the relief in the original Statement of Claim dated 14 May 2019. This amendment does not carry out any practical significance for the present purpose.

III. PLAINTIFF’S SANCTIONED OFFER

4.  The Plaintiff’s Sanctioned Offer, issued on 30 June 2023 to LKK as mentioned above, was made in the following terms:-

“Dear Sirs,

Re: DCCJ 1960/2019

We refer to the above matter.

We are instructed to reiterate herein that your purported defence to our client's claim cannot be sustained at all and that our client will in due course obtain judgment against your client… our client hereby makes the sanctioned offer under Order 22 Rule 4 of the Rules of District Court, (Cap.336H) Laws of Hong Kong ("the RDC"), relating to our client's whole claim in the captioned action on the following terms:-”

Your client shall pay our client a sum of HKD1,000,000 (one million) in full and final settlement of our client's claim plus costs in the above action to be taxed if not agreed.

This sanctioned offer is intended to have the consequences provided for under Order 22 of the RDC.

In accordance with Order 22 Rule 5 of the RDC, we set our further particulars of this sanctioned offer as follows:-

(1) this sanctioned offer relates to the whole of our client's claim;

(2) this sanctioned offer is inclusive of interest;

(3) this sanctioned offer is open for acceptance for 28 days from the date of this letter.

…

Under Order 22 Rule 21 of the RDC, if the above sanctioned offer is accepted, our client is entitled to costs up to the date upon which your client serves a notice of acceptance.

If you require any clarification of the terms of this sanctioned offer under Order 22 of the RDC, please make your request in writing specifying the precise points on which you ·seek clarification within 7 days from this letter.

We shall be grateful if you would advise your client to seriously consider this sanctioned offer and let us know whether the offer is acceptable to your client within the next 28 days.

…”

I shall refer to this offered sum of “HK$1,000,000” as the “Offered Sum”.

5.  As the Plaintiff’s Sanctioned Offer was made on 30 June 2023, it expired on 28 July 2023.

6.  Although LKK acted (and still act) for both the 1^st and 2^nd defendants, the Plaintiff’s Sanctioned Offer used “your client” in singular.

IV. JUDGMENT

7.  In the Judgment, I made, inter alia, the following order:-

“(1) The plaintiff’s claim against the 1^st defendant be dismissed;

(2) The 2^nd defendant do pay the plaintiff RMB1,000,000 (or its HKD equivalent at the time of payment); and

(3) There shall be pre-judgment interest thereon accruing from the date of the Writ (1 March 2019) until today, at the usual rate at which RMB could be borrowed in the PRC.”

V. PLAINTIFF’S PROPOSED VARIATION OF THE COSTS ORDER NISI

8.  In the summons for the variation of the costs order nisi, the plaintiff proposes the costs order nisi should be varied as follows:-

“(a) The 2^nd defendant do pay interest on RMB1,000,000 (excluding interest) awarded to the plaintiff at the ordered pre-judgment interest rate (i.e. the usual rate at which RMB could be borrowed in the PRC) from 1 March 2019 to 28 July 2023;

(b) The 2^nd defendant do pay interest on RMB1,000,000 (excluding interest) awarded to the plaintiff at a rate of 10% (or alternatively 5%) above judgment rate from 29 July 2023 until full payment;

(c) The 2^nd defendant do pay the plaintiff’s costs of and occasioned by the plaintiff’s claim for the period prior to 29 July 2023 on a party and party basis, and on an indemnity basis for the period as from 29 July 2023 onwards until full payment; and

(d) The 2^nd defendant do pay interest on the costs payable to the plaintiff at a rate of 10% (or alternatively 5%) above the judgment rate from 6 October 2023 until full payment”.

VI. 2^ND DEFENDANT’S GROUND OF OPPOSITION

9.  The 2^nd defendant opposes the plaintiff’s application. In essence, Mr Joseph Wong, counsel for the 2^nd defendant, submits that:-

(1) the Plaintiff’s Sanctioned Offer was an offer that the 1^st and 2^nd defendants should jointly pay the Offered Sum;

(2) therefore, it was not open for the 2^nd defendant alone to accept, and to make payment pursuant to, the Plaintiff’s Sanctioned Offer;

(3) because the Judgment ordered only the 2^nd defendant to pay a sum more than the Offered Sum, but wholly dismissed the claim against the 1^st defendant, the plaintiff did not do better than the Plaintiff’s Sanctioned Offer, and thus no sanctioned consequences would result.

10.  Mr Wong also submits that the Plaintiff’s Sanctioned Offer was not genuine (and thus the sanctioned consequences should not be attracted: see Antwerp Diamond Bank NV v Brink's Incorporated (No 2) [2015] 4 HKLRD 628 at §18 per Lam and Lunn VPs, and Barma JA) because:-

(1) It was made only 2 months before the trial.

(2) The Offered Sum was only slightly less than the sum of the plaintiff’s claim.

VII. ISSUE

11.  Thus, the issues are:-

(1) as a matter of construction, whether the Plaintiff’s Sanctioned Offer was an offer that the 1^st and 2^nd defendants should jointly make the payment, of whether it was an offer that the 1^st defendant alone, or the 2^nd defendant alone, or both the 1^st and 2^nd defendants jointly, should make the payment; and

(2) whether the Plaintiff’s Sanctioned Offer was genuine.

VIII. LEGEL PRINCIPLES IN RELATION TO CONSTRUCTION OF AN OFFER

12.  Order 22 is entirely procedural in nature, and does not affect the general law of contract: see Rai v Pacific Construction (HK) Co Ltd [2011] 3 HKLRD 469 at §20 per Bharwaney J. Therefore, the general legal principles governing contractual constructions apply in construing a sanctioned offer. Salient to the present application are the legal principles of contractual construction that: (1) terms are to be construed objectively in context; and (2) terms are to be construed with reference to the factual background known to both parties.

IX. MEANING OF THE PLAINTIFF’S SANCTIONED OFFER

13.  The factual background, not in dispute, contains the following facts:-

(1) The plaintiff’s present action was for a claim against the 1^st and 2^nd defendants jointly and severally.

(2) LKK acted (and still act) for both the 1^st and 2^nd defendants in the action.

(3) The Plaintiff’s Sanctioned Offer was made in one single letter issued to LKK.

14.  Against this factual background, it is clear that “your client” referred to LKK’s clients in the action, namely, the 1^st and 2^nd defendants. The question is whether they could accept the offer jointly or severally.

15.  Objectively viewed, in the light of and consistent with the plaintiff’s claim being against the 1^st and 2^nd defendants jointly and severally:-

(1) the plaintiff would not care which of the defendants (jointly or singly) would pay the Offered Sum because the plaintiff would only be concerned whether he would receive the Offered Sum, and accordingly, his intention, objectively understood, must mean that the 1^st defendant alone, the 2^nd defendant alone or the 1^st and 2^nd defendants jointly, may pay the Offered Sum; and

(2) similarly, the defendants would understand that the plaintiff would not care which of the defendants (jointly or singly) would pay the Offered Sum because the plaintiff would only be concerned whether he would receive the Offered Sum, and accordingly, they would understand that the plaintiff’s intention, objectively understood, must mean that the 1^st defendant alone, the 2^nd defendant alone or the 1^st and 2^nd defendants jointly, may pay the Offered Sum.

16.  In my view, it is disingenuous to say that because the Plaintiff’s Sanctioned Offer referred to both the 1^st and 2^nd defendants as “client” in singular means that the Plaintiff Sanctioned Offer was an offer intended for joint acceptance only. It must be clear to the defendants that the plaintiff was only concerned whether he would be able to receive the Offered Sum, and that there was no reason for the plaintiff to intend the offer for joint acceptance only.

17.  Thus, I find that the Plaintiff’s Sanctioned Offer was an offer that the 1^st defendant alone, the 2^nd defendant alone or the 1^st and 2^nd defendants jointly may pay the Offered Sum.

18.  I have not overlooked Mr Wong’s submissions that the Plaintiff’s Sanctioned Offer:-

“Your client shall pay our client a sum of HKD1,000,000 (one million) in full and final settlement of our client's claim plus costs in the above action to be taxed if not agreed”

should be construed to mean an offer that all of the plaintiff’s costs of the action should be paid, and this would mean either that the Plaintiff’s Sanctioned Offer was for a joint acceptance only, or that the plaintiff did not do better because in the Judgment, the plaintiff was award only 50% of the costs as against the 2^nd defendant and ordered to pay 50% of the costs to the 1^st defendant. However, I disagree. The “costs” here itself can be construed either way. There was no qualification of “costs” with “all” or “as against the defendant who would accept the offer”. The only qualification in context is the latter part of the offer that referred to Order 22 Rule 21 of the RDC for costs consequence. However, this reference adds nothing because if the offer were for joint acceptance, then the costs consequence under Order 22 Rule 21 of the RDC would be all the costs, and if the offer were for either defendant’s acceptance, then the costs consequence under the rule would be the costs as against that defendant only. Therefore, Mr Wong’s submissions do not advance the 2^nd defendant’s position any further; the Court would still have objectively to construe what “costs” was meant to be. Given my finding, “costs” here means costs as against the defendant who would accept the Plaintiff’s Sanctioned Offer.

19.  It remains for me to point out that if the wording of the Plaintiff’s Sanctioned Offer indeed confused the defendants as to whether or not the offer was joint only, in the light of the plaintiff’s claim against the 1^st and 2^nd defendants jointly and severally and the inherent improbability (put mildly) that the offer would be for joint acceptance only, the defendants should take heed of the reminder at the end of the Plaintiff’s Sanctioned Offer as well as under Order 22 rule 14 to seek clarification. However, no such clarification was ever sought.

X. GENUINENESS OF PLAINITFF’S SANCTIONED OFFER

20.  Mr Wong submits that the Plaintiff’s Sanctioned Offer was not genuine because it was made only about 2-3 months before the commencement of the trial. This submission is stated to be rejected. Under Order 22 rule 16, a sanctioned offer may be made not less than 28 days before the commencement of the trial without the leave of the court (and may still be made thereafter but could be accepted only with the leave of the court or with the parties’ agreement on costs). This means that the Plaintiff’s Sanctioned Offer was made well in advance by the standard of 28 days. The later the offer was made, the later the offer can be accepted, and the less serious the sanctioned consequence may usually be (notably, sanctioned interest accruing at a later date), but absent any proper evidence, a late offer does not mean at all that it is not genuine.

21.  As regards the amount, the Offered Sum is about HK$90,000-HK$100,000 less than the claim of HK$1,170,265.00 or RMB1,000,000, but with interest not yet included (which would have accrued from 2019 and the amount of which would thus be significant). This is approximately 10% discount, with interest not yet included. Further, this HK$90,000-HK$100,000 alone would be a significant portion of legal costs that could be saved if the matter would not proceed to trial. I therefore disagree with Mr Wong that the amount of Offered Sum was any indicia of any non-genuineness of the Plaintiff’s Sanctioned Offer.

22.  In any event, even assuming that this 10% discount could be said to be a small one, this itself, without more, cannot be evidence of non-genuineness but may simply be a reflection of the degree of the plaintiff’s reasonably justified confidence in his claim: see Antwerp Diamond Bank NV v Brink's Incorporated (No 2), supra at §§19-20. It must be borne in mind that the threshold for finding non-genuineness of a sanctioned offer simply based on the amount of the offer is a high one, bearing in mind what Norris J said in Wharton v Bancroft [2012] EWHC 91 at §22 (which the Court of Appeal approved at §20 of Antwerp Diamond Bank NV v Brink's Incorporated (No 2), supra):-

The concept is not an easy one to apply. All Part 36 offers are tactical in the sense that they are designed to take advantage of the incentives provided by Part 36. A low offer in a case in which the offeror considers that the offeree's position has no merit cannot be written off as self-evidently ‘merely a tactical step’.”

23.  In conclusion, the 2^nd defendant fails to satisfy me that the Plaintiff’s Sanctioned Offer was not a genuine offer.

XI. SANCTIONED INTEREST

24.  Having considered the authorities provided by the parties (including Maysun Engineering Co Ltd v International Education and Academic Exchanges Foundation Co Ltd [2011] 2 HKLRD 844 and Sit Sau Ming v Leung May Chu, Alison Alliance [2020] HKDC 1084), I would apply the enhance interest at 4.5%.

XII. CONCLUSION

25.  In the premises, I make the following costs order:-

(1) The costs order nisi made on 6 October 2023 that the plaintiff do pay the 1^st defendant costs of the action as between them (including all costs reserved) to be taxed if not agreed, with certificate for counsel be made absolute;

(2) For taxation purpose, my order nisi made on 6 October 2023 to apportion 50% of the costs of the whole action as the costs of the action between the plaintiff and the 1^st defendant, and 50% to be that between the plaintiff and the 2^nd defendant be made absolute;

(3) The 2^nd defendant do pay interest on RMB1,000,000 (excluding interest) awarded to the plaintiff at the ordered pre-judgment interest rate (i.e. the usual rate at which RMB could be borrowed in the PRC) from 1 March 2019 to 28 July 2023;

(4) The 2^nd defendant do pay interest on RMB1,000,000 (excluding interest) awarded to the plaintiff at a rate of 4.5% above judgment rate from 29 July 2023 until full payment;

(5) The 2^nd defendant do pay the plaintiff’s costs of and occasioned by the plaintiff’s claim for the period prior to 29 July 2023 on a party and party basis, and on an indemnity basis for the period as from 29 July 2023 onwards until full payment, to be taxed if not agreed, with certificate for counsel; and

(6) The 2^nd defendant do pay interest on the costs payable to the plaintiff at a rate of 4.5% above the judgment rate from 6 October 2023 until full payment.

26.  In respect of the plaintiff’s present application to vary the costs order nisi, costs should follow the event and therefore the 2^nd defendant do pay the plaintiff costs of the application, summarily assessed at HK$80,000, forthwith.