YUMUL JENNIFER CONCEPCION v. TAM PO SHAN

DCEC 1856/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 1856 OF 2011

--------------------

--------------------

DECISION

--------------------

Introduction

1. The applicant was a domestic helper of the respondent.  She claimed to have slipped on the wet floor whilst she was working on 3 January 2011.  She further claimed to have suffered back injury as a result.

2. On 6 December 2011, the applicant commenced employees’ compensation claim against the respondent.

3. On 13 February 2014, Deputy District Judge Lui ordered by consent as follows:-

(1) On a without admission of liability basis, the respondent do pay the applicant a sum of $59,880.65 (inclusive of interest) (“the Settlement Sum) in full and final settlement of all of the applicant’s claims hereof;

(2) Credit be given for the sum of $34,880.65 being the interim employee’s compensation payments paid by the respondent and received by the applicant;

(3) Subject to the Director of Legal Aid’s First Charge, the respondent do pay the balance of the Settlement Sum in the sum of $25,000 to the Director of Legal Aid on behalf of the applicant within 28 days from the date hereof;

(4) The respondent do pay the applicant’s costs of this action up to 27 September 2011 to be taxed on party and party basis if not agreed on the District Court scale;

(5) The liability of the remaining costs of this action shall be argued at a hearing with a  date to be fixed by both parties within 14 days from the date hereof;

(6) The applicant’s own costs be taxed in accordance with Legal Aid Regulations; and

(7) Upon full payment of the Settlement Sum and the costs by the respondent in accordance with sub-paragraphs 3 and 4 above, the respondent be fully and absolutely discharged from all further liability whatsoever arising out of the incident on 3 January 2011 being the subject matter of the applicant’s claims in this action.

4. The parties appear before me to argue on the liability of the remaining costs of this action after 27 September 2011 (“the Costs hearing”) per sub-paragraph 5 of Deputy District Judge Lui’s Order above.

Submissions on costs

5. Mr Gidwani, counsel for the respondent, initially submits that the respondent should be allowed costs on an indemnity basis[1]. Mr Sakhrani, counsel for the applicant, submits on the other hand that the applicant should have all her costs. 

6. In the course of the Costs hearing, Mr Gidwani submits further or alternatively that if I do not accept that the respondent should be entitled to costs from 27 September 2011, I should at least order costs to the respondent from 22 December 2011 (when Form 7 was issued) or make no order as to costs after 27 September 2011.

7. I state in passing Mr Sakhrani’s criticism that the respondent has shifted her case and has advanced a completely new position for the purpose of the Costs hearing.

Calderbank offer of 27 September 2011

8. Mr Gidwani solely relies on a Calderbank offer contained in a letter from the respondent’s solicitors, Munros, to the applicant’s solicitors, MCA Lai & Co (“MCA”), dated 27 September 2011.  He submits that I should take the same into account and exercise my discretion to award costs after 27 September 2011 in favour of the respondent.

9. For easy reference, I shall refer to what was stated in Munros’ letter dated 27 September 2011 as the Calderbank offer of 27 September 2011.  In doing so, I must state, to make things clear, that I have not lost sight of Mr Sakhrani’s argument that the Calderbank offer of 27 September 2011 was not an offer at all.

10. By way of letter dated 27 September 2011, Munros wrote to MCA:-

“For avoidance of doubt, unless and until notice to the otherwise, our offer of settlement increases every time when our client make any additional interim employees’ compensation and will always be $25,000 on top of interim EC payments plus costs in full and final settlement of your client’s claim for EC inclusive of interest”.

11. In the expression of Mr Gidwani, the settlement agreement eventually reached between the parties, as set out at paragraph 3 above, failed to “better” the Calderbank offer of 27 September 2011.  On this basis, the respondent asks for costs from 27 September 2011.

Calderbank offer of 27 September 2011 was not a valid new offer?

12. Mr Sakhrani argues that the Calderbank offer of 27 September 2011 did not contain a valid new offer.  I shall call this the validity argument.

13. Mr Sakhrani develops the validity argument by reference to the correspondences exchanged between Munros and MCA before 27 September 2011:-

(1) By letter dated 8 August 2011, Munros sent a Calderbank offer, which was stated to be a “one-off non-negotiable offer” (in bold and in emphasis) in the sum of $25,000 (on top of interim EC payments), to MCA for consideration.

(2) The Calderbank offer of 8 August 2011 was expressed to be conditional upon the applicant’s agreement that she had received interim EC payments of $19,888.65 within 28 days.

(3) The Calderbank offer of 8 August 2011 was not accepted.  The applicant did not agree to the condition imposed.

(4) By way of letter dated 15 September 2011, MCA made a counter-offer of “$70,000 (on top of periodical payment) plus costs”. 

(5) On 21 September 2011, Munros replied to MCA:-

“Bearing in mind the low level of earnings of your client, we are quite confident that our offer of $25,000 is more than sufficient to cover this EC Claim. If your client insists that she is entitled to more, she will have to commence EC proceedings and prove to the satisfaction of the Court that she has suffered a very serious injury, which is not likely to be accepted given the circumstances of the accident and the obvious trivial nature of injuries”.

The point made by Mr Sakhrani out of this reply is that Munros had not appreciated that the Calderbank offer of 8 August 2011 was conditional and had lapsed with effluxion of time.

(6) On 22 September 2011, MCA indicated to Munros that the applicant would commence EC application in due course.

(7) On 22 September 2011, Munros replied to MCA: -

“We observe that the time for unconditional acceptance of our offer of settlement has elapsed. If your client intends to accept our offer, conditions may be imposed”.

The same point to be made by Mr Sakhrani out of this reply is that Munros had not appreciated that the Calderbank offer of 8 August 2011 was conditional (such that it could not be unconditionally accepted) and had lapsed with effluxion of time (such that it could not be accepted at all). 

14. Against the background set by the solicitors’ correspondences above, Mr Sakhrani submits that “the [r]respondent’s confusion was confounded by Munros’ letter dated 27 September 2011 … The author [Munros] repeated his error by assuming that there was a subsisting offer on the table and that this would increase with each additional interim payment”.

15. Mr Sakhrani identifies the “omissions” from the Calderbank offer of 27 September 2011 to make it not a “genuine and unambiguous offer capable of being accepted without more”:-

(1) Did the respondent waive the condition that the applicant must agree beforehand the interim payments paid up to 27 September 2011?

(2) Since the interim payments were not agreed by the applicant, what was the settlement sum offered?  Mr Sakhrani highlights the fact that Munros was itself seeking to find this matter out.

(3) If there was disagreement as to the interim payments, how was this to be resolved finally?

(4) Was the offer subject to the total sum being identified?

(5) What was the time for acceptance?

(6) When would this sum of $25,000 be paid?

(7) What, if any, conditions were to be imposed in the event that the applicant wishes to accept the offer?

16. Paragraph 2-003 of Chitty on Contracts (31^st Edition) states:-

“An offer is an expression of willingness to contract on specified terms made with the intention (actual or apparent) that it is to become binding as soon as it is accepted by the person to whom it is addressed. Under the objective test of agreement, an apparent intention to be bound may suffice, i.e. the alleged offeror (A) may be bound if his words or conduct are such as to induce a reasonable person to believe that he intends to be bound, even though in fact he has no such intention”.

17. In Lin Yanjin v Smart Billion Engineering Limited, HCPI 739/2009 (unreported, judgment dated 10 August 2011), Master Ng (as she then was) held at paragraph 129:-

“There is no dispute that letters referred to above are expressed to be ‘without prejudice save as to costs’ or are what is commonly called Calderbank letters. Such letters are kept secret until the substantive issues have been resolved, but can be taken into [account] on the question of costs. To be effective a Calderbank offer must be made in clear terms so that the party against whom it may be used on the issue of costs knows what he is offered otherwise it may well be reasonable for such party to refuse an offer made in ambiguous terms (see C & H Engineering v F Klucznic & Sons Ltd [1992] FSR 667, 671 and Butcher v Wolfe and Wolfe [1999] 1 FLR 334, 340). For the present purpose, I shall assume that the aforesaid ‘without prejudice save as to costs’ letters from WKT are sufficiently certain, and are therefore ‘admissible offers to settle’ within the meaning of Order 62 rule 5(1)(g) of the RHC”.

18. The relevant principles on certainty of terms in agreements have been summarized by the Court of Final Appeal in New World Development Co Ltd & Others v Sun Hung Kai Securities & Another [2006] 3 HKLRD 345 perBokhary PJ (as he then was) at paragraphs 28-32 as follows:-

(1) To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties.  Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties (May & Butcher Ltd v R [1934] 2 KB 17 at 21).

(2) It is therefore important to note that an agreement is not incomplete in this fatal sense merely because it “leaves something which still has to be determined”.  It is often possible for the court to discern in the parties’ agreement the intended principles, criteria or machinery, express or implied, for determining specific contractual rights and liabilities without requiring the parties to arrive at further agreement.  Where this is possible, the agreement is not “incomplete”.

(3) The machinery provided by an agreement for resolving matters as yet undetermined may sometimes leave the question “to be resolved by the decision of one party”.

(4) An agreement may fail for uncertainty if the parties have expressed themselves in language that is too uncertain, vague or unintelligible to make their agreement legally enforceable. The court will hold that there is no contract where the language used was so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention.  The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form.  It will not be deterred by mere difficulties of interpretation.  Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted.  But the test of intention is to be found in the words used.  If these words, considered however broadly and untechnically and with due regard to all the just implications, fail to evince any definite meaning on which the court can safely act, the court has no choice but to say that there is no contract.  Such a position is not often found (G Scammell & Nephew Ltd v HC & JG Ouston [1941] AC 251 at 268).   

(5) The court will endeavour to find practical meaning in commercial agreements and are reluctant to strike down as too vague and uncertain agreement which businessmen have made and acted upon (Hillas & Co Ltd v Arcos Ltd (1932) 43 Ll L Rep 359 at 367).

19. Paragraph 2-130 of Chitty on Contracts (31^st Edition) states:-

“Thus an agreement is not incomplete merely because it calls for some further agreement between the parties. The parties’ later failure to agree on the matters left outstanding may then vitiate the contract only if it makes it ‘unworkable or void for uncertainty’. Often, the failure will not have this effect, for it may be possible to resolve the uncertainty in one of the ways already discussed, e.g. by applying the standard of reasonableness; or the matters to be negotiated may be of such subsidiary importance as not to negative the intention of the parties to be bound by the more significant terms to which they have agreed …”

20. Bearing the legal principles above in mind, I, with respect, reject Mr Sakhrani’s validity argument.  I do not agree that the terms of the Calderbank offer of 27 September 2011 were uncertain to render it not a valid new offer.  I shall set out my reasons as follows. 

21. “For avoidance of doubt”, Munros set out the Calderbank offer of 27 September 2011 in clear and unequivocal terms that it would “always be $25,000 on top of interim EC payments plus costs”.  Munros then illustrated with examples: “For instance, when interim payments amounted to a total sum of $10,000, our offer will be $35,000 plus costs.  When total interim payments increase to $20,000, our offer of settlement will be automatically increased up to $45,000 plus costs”. 

22. It is hard to imagine that any reasonable reader would be confused or have difficulty in understanding that the settlement sum offered by the respondent was $25,000 in addition to interim EC payments paid at any one point in time.

23. I shall now deal with the “omissions” identified by Mr Sakhrani, allegedly to give rise to “practical difficulties” when enforcing the Calderbank offer of 27 September 2011, one by one.

24. It is plain that the respondent did not make it a pre-condition in the Calderbank offer of 27 September 2011 the applicant must agree on the quantum of interim EC payments paid up to 27 September 2011.  Had the respondent so intended, Munros would have expressly included it in the Calderbank offer of 27 September 2011.  The respondent should have no difficulty in doing so.  As a matter of fact, this was what Munros did when it put forward the Calderbank offer of 8 August 2011 to MCA.

25. I would not accept any suggestion of oversight on Munros’ part either.  In support, I refer to Munros’ open letters dated 22 September 2011 and 27 September 2011 to MCA.  In the former, Munros requested the applicant to confirm whether she had “figured out” the quantum of interim EC payments when she was about to commence EC application. In the latter, Munros requested the applicant to confirm whether the quantum of interim EC payments effected to her was $25,996.  It is unlikely that Munros had overlooked the subject matter when making the Calderbank offer of 27 September 2011.  The “omission”, if any, must be a deliberate decision on the respondent’s part.

26. The Calderbank offer of 27 September 2011 was structured in such a way, namely, $25,000 on top of interim EC payments plus costs, to eliminate uncertainty, if any, of the settlement sum offered or the suggestion that the very sum of $25,000 was dependent on the identification of the quantum of interim EC payments.  Once the parties agreed on the sum of $25,000, they could work out or ascertain the quantum of interim EC payments.  I note that the respondent had been able to disclose copy receipts in respect of the interim EC payments when making the Calderbank offer of 8 August 2011.  The applicant certainly would know, and should likewise have kept record of, how much interim EC payments she had received from the respondent.  This is particularly so in view of her legal representation.

27. In this regard, I also do not perceive there being any real or serious dispute of the quantum of interim EC payments. Ultimately it is a question of proof.  If the applicant were to dispute the copy receipts adduced by the respondent, she must have a good basis with reference to her own documentary record to do so. 

28. Munros did not state, as in the case of the Calderbank offer of 8 August 2011, a deadline for the applicant to accept the Calderbank offer of 27 September 2011.  This must mean that the Calderbank offer of 27 September 2011 would remain open to the applicant until it was withdrawn by the respondent in due course.

29. The fact that Munros did not state when the settlement sum was to be paid to the applicant would not affect the certainty of the Calderbank offer of 27 September 2011.  Presumably once the Calderbank offer of 27 September 2011 was accepted by the applicant, the parties would be able to work out the logistics and the rest.

30. It is clear on the plain wording of the Calderbank offer of 27 September 2011 that no pre-condition was set.  If this is the case, why would the applicant want to second-guess?  This is totally unnecessary in the circumstances.

31. In further support, I would refer to the Calderbank offer of 8 August 2011, which was structured in the same way as the Calderbank offer of 27 September 2011.  The applicant had raised no complaint along any of the lines above.  It did not appear that she was confused or had any difficulty in understanding it.  Her only complaint, as expressed in MCA’s letter to Munros dated 15 September 2011, was that the sum of $25,000 was “on the low side”.  It is thus clear that the parties knew exactly what was on the table.  They however had not been able to agree on the sum of $25,000.

32. For the reasons above, I take the view that the Calderbank offer of 27 September 2011 was a valid new offer in the circumstances. 

Calderbank offer of 27 September 2011 no longer existed or had been withdrawn?

33. Mr Sakhrani next argues that the Calderbank offer of 27 September 2011 had been withdrawn and no longer existed when the respondent made another Calderbank offer in Munros’ letter to MCA on 16 January 2012.

34. In the letter dated 16 January 2012, Munros wrote to MCA as follows:-

“In accordance with instructions from our client [respondent], we hereby offer the following in full and final settlement of your client [applicant]’s EC claim:-

(1) $50,000 for employees’ compensation inclusive of interim EC payments;

(2) Costs to your client up to and inclusive of 27^th September 2011; and

(3) Your client shall pay our costs after 27^th September 2011”.

35. Mr Sakhrani submits that the Respondent, by purporting to make a new offer on different (less favourable) terms, must have withdrawn the Calderbank offer of 27 September 2011.

36. Mr Gidwani submits otherwise.  His point is that had the Calderbank offer of 27 September 2011 been withdrawn, MCA could not have indicated the applicant’s acceptance of it on 18 December 2013, which was recorded in MCA’s letter to Munros dated 14 January 2014 as follows:-

“We refer to the telephone conversation between your Mr Frederick Tai and our Alan Lau on 18 December 2013 in which we have indicated our client’s acceptance of your client’s settlement offer dated 27 September 2013 with costs up to 27 September 2011, leaving the remaining cost to be argued before the Court”.

37. I ask Mr Gidwani why the Calderbank offer of 27 September 2011 had not been replaced by the new Calderbank offer of 16 January 2014.  Mr Gidwani submits that the two Calderbank offers had existed in parallel and were both valid.  The applicant was free to choose which to accept.  According to Mr Gidwani, the applicant’s acceptance of the Calderbank offer of 27 September 2011 on 18 December 2013 provides the best evidence.

38. With respect, I do not agree with Mr Gidwani.

39. The respondent offered less money to the applicant under the Calderbank offer of 16 January 2012 than the Calderbank offer of 27 September 2011.  If Mr Gidwani’s argument is right, the applicant would certainly prefer the Calderbank offer of 27 September 2011 to the Calderbank offer of 16 January 2012.  The whole point of the respondent making a less favourable offer on 16 January 2012 was to replace the Calderbank offer of 27 September 2011 with it.

40. As submitted by Mr Sakhrani, the applicant did not accept the Calderbank offer of 27 September 2011 on 18 December 2013.  Rather the parties had eventually agreed to settle on the same terms as the Calderbank offer of 27 September 2011.

41. As the Calderbank offer of 27 September 2011 had been withdrawn by the respondent, it no longer existed after 16 January 2012.  By then the applicant had already commenced the EC application (on 6 December 2011).

42. It follows that it is not open to the respondent to seek costs basing on the Calderbank offer of 27 September 2011 after 16 January 2012.  

Calderbank offer of 27 September 2011 was not sanctioned payment or sanctioned offer

43. Mr Sakhrani then argues that I should not take the Calderbank offer of 27 September 2011 into account under O 62, r 5(1A)(d) of the Rules of District Court because the applicant could have protected her position as to costs by means of a sanctioned payment or a sanctioned offer under O 22.   

44. O 62, r 5 provides:-

“(1A) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account –

……

(aa) the underlying objectives set out in Order 1A, rule 1;

……

(d) any written offer which is expressed to be ‘without prejudice save as to costs’ and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22”.

45. Master Ng (as she then was) in Lin Yanjin v Smart Billion Engineering Limited said at paragraph 130:-

“However, Order 62 rule 5(1)(d) of the RHC prohibits the court from taking any Calderbank offer into account if, at the time it is made, the offeror could have protected his position as to costs by means of a sanctioned payment ‘or a sanctioned offer’ under Order 22 of the RHC. I note that Order 62 rule 5(1)(d) of the RHC permits a Calderbank offer ‘which relates to any issue in the proceedings’ to be taken into account, but query is necessarily raised as to whether the Defendant could have made a sanctioned offer within the meaning of Order 22 of the RHC and then invoke (if they can) the ‘otherwise order’ discretion in Order 22 rule 20(1) of the RHC for protection on costs. I am inclined to think that a forceful argument can be made that even if the terms of a Calderbank offer are clear and certain and such an offer may be regarded as an ‘admissible offer’ within the meaning of Order 62 rule 5(1)(g) of the RHC, the court should not take into account such offer on the question of costs if the relevant party could have made a sanctioned offer instead ... ”

46. Mr Sakhrani submits that the Calderbank offer of 27 September 2011 was not sanctioned offer or sanctioned payment under O 22 of the Rules of District Court.

47. O 22, r 2 makes it clear:-

“(4) Nothing in this Order prevents a party from making an offer to settle in whatever way he chooses, but if that offer is not made in accordance with this order, it does not has the consequences specified in this order, unless the Court so orders”.

48. O 22, r 3 provides:-

“(1) 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 this Order unless it is made by way of a sanctioned offer or a sanctioned payment or both.

(2) Where an offer by a defendant involves a payment of money to the plaintiff, the offer must be made by way of a sanctioned payment.

(3) A sanctioned payment may only be made after the proceedings have commenced”.

49. O 22, r 5 makes provision for the form and content of sanctioned offer.

50. The Calderbank offer of 27 September 2011 was made prior to the commencement of the EC application.  Neither had any sanctioned payment been made by the respondent.  It did not have the consequences specified in O 22. 

51. Mr Gidwani accepts that there was no valid sanctioned offer or acceptance of sanctioned offer in the present case.  He however submits as follows:-

(1) At the time the Calderbank offer of 27 September 2011 was made, the EC application had not commenced.  Therefore, clearly, the respondent could not have made a sanctioned payment at that time.

(2) Given the Calderbank offer of 27 September 2011, the respondent could not have protected her costs position by way of a sanctioned payment after the commencement of the EC application.  The concern was if the applicant accepted the sanctioned payment within the prescribed period, the automatic costs consequence under O 22, r 20 would follow.

(3) Unless the court invokes the “or otherwise proviso” under O 22, r 20, the applicant would be entitled to costs up to the date of acceptance.

(4) If a defendant who makes a pre-action offer could not get costs protection without making a sanctioned payment after the commencement of action and hence is required to pay the costs of the plaintiff from the time of the pre-action offer to the acceptance of sanctioned payment, there would be no incentive for a plaintiff to accept any pre-action offer, however reasonable it may be.

(5) Such a situation is clearly against the underlying objectives of the CJR to encourage early settlement.

(6) Hence a defendant who makes a pre-action offer should not be required to make a sanctioned offer in order to cover his own costs position.

(7) The court in several pre-CJR cases recognized that if a defendant did not want automatic costs consequence for payment in, a Calderbank offer could and should be made.  These authorities should be applied with equal force to sanctioned payment by a defendant after the CJR.

52. Mr Gidwani also relies on Trustees of Stokes Pension Fund v Western Power Distribution (South West) plc [2005] 1 WLR 3595 for the proposition that a Calderbank offer, subject to certain conditions being satisfied, should usually be treated as having the same effect as a Part 36 payment into court.  The relevant conditions are: firstly, the offer must be expressed in clear terms so that there is no doubt as to what is being offered; secondly, the offer should be open for acceptance for at least 21 days [the minimum period under Part 36]; thirdly, the offer should be genuine and not sham or non-serious in some way; and fourthly, the defendant should clearly have been good for the money at the time when the offer was made.

53. With respect, I am unable to agree with Mr Gidwani’s submissions for the reasons below.

54. First of all, it is not correct that the respondent could not have protected her costs position by means of a sanctioned payment or a sanctioned offer under O 22 after the commencement of the EC application.  As Mr Gidwani himself points out, there is the “or otherwise proviso” under O 22, r 20.  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 acceptance but it is open to the defendant to persuade the court to order otherwise. 

55. In Etratech Asia-Pacific Ltd v Leader Printed Circuit Boards Ltd [2013] 2 HKLRD 1184, Poon J explained the “or otherwise proviso”:-

“18. In my view, O 22 r 20(1) plainly envisages that upon acceptance of the sanctioned payment or sanctioned offer, the plaintiff is, as prima facie rule, entitled to his costs of the proceedings up to the date of serving notice of acceptance. The prima facie rule may, however, be displaced when the court orders otherwise by applying the Otherwise Proviso.

19. … What the prima facie rule does is to create certainty as to the costs consequences upon acceptance of the sanctioned payment or sanctioned offer. A party knows the exact extent of his exposure or entitlement to costs, as the case may be. Thus he will not be inhibited in proposing or accepting an otherwise reasonable offer to settle, as the case may be, because of uncertainty as to the costs consequences. This surely facilitates the principal objective of sanctioned payments and sanctioned offers, which is to encourage the parties to take positive settlement seriously and avoid unproductive and expensive prolongation of the litigation, resulting in more early settlements: Montrio Ltd v Tse Ping Shun David.

20. By virtue of the Otherwise Proviso, the court retains the discretion to depart from the prima facie rule where necessary. But the discretion should only be exercised in exceptional circumstances that clearly warrant a different costs order. Otherwise, the certainty as to costs consequences created by the prima facie rule, one of the very important features underpinning the effectiveness of sanctioned payments and sanctioned offers, will be greatly diminished.

21. While it is impossible and indeed imprudent to exhaustively state the exceptional circumstances that justify the departure from the prima facie rule, which by definition must be rare, the burden rests squarely on the party seeking to invoke the Otherwise Proviso to establish such circumstances.  The court will not lightly displace the prima facie rule until and unless the applicant has discharged the burden to its satisfaction”

[emphasis added].

56. It is clear that the court retains the discretion to depart from the prima facie rule by virtue of the Otherwise Proviso if necessary.  The fact that the court will not lightly displace the prima facie rule should not be taken by the respondent as reason or basis to suggest that she could not have protected her costs position by making a sanctioned payment or a sanctioned offer under O 22 after the commencement of the EC application.  There is good reason to impose such a high standard.  Otherwise, the certainty as to costs consequences created by the prima facie rule, one of the very important features underpinning the effectiveness of sanctioned payment and sanctioned offer, will be greatly diminished.

57. I refer to the Court of Final Appeal’s decision in Ming An Insurance Co (HK) Ltd v Ritz Carlton Ltd (No 3) (2009) 12 HKCFAR 745, cited by Mr Sakhrani, in answer to Mr Gidwani’s argument that if a defendant does not want the automatic costs consequence for payment in, a Calderbank offer could and should be made before the CJR (and such position should be applied to sanctioned offer and sanctioned payment after the CJR).  In that case, Ribeiro PJ said at pp 750-751:-

“14. Ming An argue, however, that in exercising its discretion as to costs, the Court is not permitted to take into account any of the Calderbank Offers made by the hotel company since, they argue, it could and should have protected its position by a payment into account. They rely on O 22 r 14 of the Rules of the High Court (Cap 4A, Sub Leg) which provides:-

(1) A party to proceedings may at any time make a written offer to any other party to those proceedings which is expressed to be ‘without prejudice save as to costs’ and which relates to any issue in the proceedings.

(2) … Provided that the Court shall not take such offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a payment into court under O 22.

15. This is echoed in O 62, r 5(d) stating:-

The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account –

(d) any written offer made under O 22 r 14, provided that the Court shall not take such an offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a payment into court under O 22.

16. The policy behind this rule is self-evident. If a defendant is willing to settle a claim by the payment of money, he is required to pay it into court so that there is no doubt about the seriousness of his offer of settlement. Otherwise, Calderbank Offers might be abused by defendants seeking to put off the day of judgment by promising to pay but then defaulting and requiring the plaintiff to chase them for payment”.

58. As regards the application of Trustees of Stokes Pension Fund v Western Power Distribution (South West) plc, as fairly pointed out by Mr Gidwani to my attention, it was not followed in any of the Hong Kong cases[2] cited by him.     

59. As a result of the respondent’s decision not to make a sanctioned payment or a sanctioned offer under O 22 after the commencement of the EC application, I would not take the Calderbank offer of 27 September 2011 into account under O 62, r 5(1A)(d) of the Rules of District Court after the commencement of the EC application on 6 December 2011.

Costs incurred during the period of 27 September 2011 to 6 December 2011

60. This brings me to consider the period of 27 September 2011 to 6 December 2011.

61. Mr Gidwani argues that it was not reasonable for the applicant, with the legal advice, to have rejected the Calderbank offer of 27 September 2011 even though it was made at a very early stage.  He makes reference to the various medical reports suggesting that the applicant’s injury was on the minor side.  He has also helpfully prepared calculations to compare the Calderbank offer of 27 September 2011 with the applicant’s “best-case scenario” for my reference.  He describes the applicant to be “a chance taking person” and submits that her “chance taking activity” should not be paid for by the respondent.  

62. In support, Mr Gidwani cites Cheung JA’s decision in Cheung Yu Tin v Ho Hon Ka [2006] 2 HKLRD 674:-

“47. The only relevant consideration is whether at the commencement of the action, in view of the nature of the injury of the plaintiff, it was reasonable to say that he would recover more than $50,000. I recognize fully that assessment of damages is not an easy task but at the same time any lawyer who practises in this area must be able to tell whether the plaintiff has a serious injury or not and whether his injury has any impact on this earning. In this case from the available evidence one can see that the plaintiff’s injury was extremely minor in nature and could not possibly have affected his earning. He could not possibly have recovered more than $50,000. The sum of $27,260 assessed by the Judge was the best indication of the value of the claim. The lawyer was duty bound to advise the plaintiff of the costs implications of suing in the District Court.

48. In the circumstances, it was unreasonable for the plaintiff to persist in pursuing the matter in the District Court, particularly, when the defendant had drawn his attention to the fact that the matter should be dealt with in the Small Claims Tribunal. The only proper way of exercising the discretion was to award costs to be assessed in a manner similar to the costs allowed in the Small Claims Tribunal”.

63. On the other hand, Mr Sakhrani argues that it was not unreasonable for the applicant not to accept the Calderbank offer of 27 September 2011 when the EC application had not begun at that stage and the MAB assessment had not even taken place.  The applicant’s sick leave was then continuing.  It could not be said that the applicant had acted unreasonably in failing to accept the Calderbank offer of 27 September 2011 when she did not have the benefit of proper expert medical advice which would have guided the legal advice.  The fact the applicant’s perception of her difficulties turned out eventually to be greater than the medical opinion should not take her outside the realm of reasonableness.

64. In support, Mr Sakhrani refers to Carlson J’s decision in Ho Wai Leung v Wan Chi Kuen [2001] 2 HKLRD 284 at 288:-

“ … The real question, as I see it, is whether it was reasonable for the plaintiff to issue his proceedings in this court. I am in no doubt that it was entirely reasonable for him to take that course. The claim itself, although ambitious in its assessment of quantum for personal injury, cannot be described as to wide off the mark that one can condemn it as entirely devoid of merit”.

65. Having heard the parties’ submissions above and with reference to the solicitors’ correspondences exchanged, whilst I agree with Mr Sakhrani that I should not look at the applicant’s decision not to accept the Calderbank offer of 27 September 2011 with the benefit of hindsight, I am on the other hand equally persuaded by Mr Gidwani that the respondent had been keen in settling the matter with the applicant to save time and costs throughout.  The most appropriate costs order to be made for the period of 27 September 2011 to 6 December 2011 should be no order as to costs. 

Conclusion

66. I accordingly make no order as to costs for the period of 27 September 2011 to 6 December 2011.  The costs thereafter shall be to the applicant. 

67. As regards the costs of the Costs hearing, Mr Sakhrani has requested me to reserve it for argument.  Mr Gidwani expresses no objection to this request.  I therefore adjourn the costs of the Costs hearing for argument to a date to be fixed by the parties.