MAN WAI TONG, the intended administratrix of the estate of CHOW KAI YAN, deceased v. KINGSWAY CARS T SERVICE LTD

DCEC 376/2019

[2023] HKDC 939

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 376 OF 2019

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DECISION

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A.  Introduction

1.  On 29 March 2022, I handed down the judgment of this case (the “Judgment”) in which I dismissed the applicant’s claim with a cost order nisi that:

(1)  The costs of the Application be borne by the Applicant with certificate for counsel, to be taxed if not agreed; and

(2)  The Applicant’s own costs are to be taxed in accordance with Legal Aid Regulations.

2.  By summons dated 11 April 2022, the respondent applies for an order that:

(1)  The cost order nisi of the Judgment be varied and replaced by the following:

(a)  The Applicant do pay the Respondent’s costs of the action to be taxed on party and party basis if not agreed with certificate for counsel up to and inclusive of 4 February 2021;

(b)  The Applicant do pay the Respondent’s cost of the action to be taxed on indemnity basis if not agreed with certificate for counsel after 4 February 2021; and

(c)  The Applicant do pay the Respondent enhanced interest at 10% above judgment rate on each payment of costs incurred after 4 February 2021 from the date of payment by the Respondent up to the Date of Judgment; or alternatively at 10% above judgment rate on all costs incurred after 4 February 2021 up to the date of Judgment.

(2)  The Sanctioned Payments in the total sum of HK$500,000 made into Court by the Respondent on 7 January 2021 and 16 September 2021, together with interest accrued thereon, be paid out forthwith to the Respondent through its solicitors, Messrs. Mayer Brown.

3.  There is no issue in respect of paragraph (2) of the summons. The issue at the hearing is whether indemnity costs and enhanced interest on costs sought in paragraph (1)(b) and (c) of the summons should be ordered against the applicant, or whether the costs order nisi should be made absolute.

B.  Legal analysis

4.  It is not disputed that:

(1)  The respondent paid into court a total sum of HK$500,000 as sanctioned payments (ie HK$100,000 on 7 January 2021 and HK$400,000 on 16 September 2021).

(2)  The applicant, who was legally aided at the material time, has not accepted these sanctioned payments within 28 days therefrom.

(3)  Therefore, the applicant has failed to obtain a judgment better than the sanctioned payments.

5.  On the other hand, the respondent admits that owing to a procedural oversight, they did not serve the sanctioned payment notice on the Director of Legal Aid in accordance with Order 22, rule 9, which provides that:

“9. A defendant who makes a sanctioned payment shall —

(a) serve the sanctioned payment notice —

(i) on the plaintiff; and

(ii) where the plaintiff is an aided person, on the Director of Legal Aid; and

(b) file with the Court a certificate of service of the notice.”

6.  Mr Szeto, who appears on behalf of the respondent, makes three submissions.

7.  First, he argues that the service issue is irrelevant as there is a distinction between compliance under Order 22 with the provisions that are relevant to the form and content of the sanctioned payments, and the provisions that are relevant to the service of the sanctioned payment notice. While the non-compliance with the former will, prima facie, disentitle the party who purported to make a sanctioned payment to rely on Order 22 for the enhanced costs and interests consequences, the non-compliance with the latter will not.

8.  I do not accept such a proposition. In Montrio Ltd & Anor v Tse Ping Shun David [2012] 2 HKC 392, Poon J (as he then was) held, at 397BC, that:

“Since it is the plaintiff who seeks to invoke the new rules to protect his position, he must strictly comply with all the mandatory requirements when he purports to make a sanctioned offer. It does not lie in his mouth to say that his failure to do so is only a technical slip or the defendant is legally represented and hence must know what the requirements are. The plaintiff has a positive duty to fully comply with the rules in the first place in order to make his offer a valid sanctioned offer. I therefore rule that the Offer is not a sanctioned offer within the meaning of Order 22.” (emphasis added)

See also Kan Wan Chung v Leung Man Kon & Anor [2019] HKDC 1141, at [28], by Deputy District Judge Connie Lee.

9.  Although Montrio was concerned with sanctioned offers instead of sanctioned payments, there is no reason, in my view, that the legal principle should not be similarly applicable to sanctioned payments.

10.  It is noteworthy that Order 22, rule 9(a)(ii) uses the word “shall” in respect of the service of the sanctioned payment notice, which suggests that compliance with such service provision is mandatory. Montrio therefore applies. Moreover, I do not see the rationale behind the distinction suggested by Mr Szeto. The compliance with the service provisions of Order 22 is just as important as, if not more important than, the compliance with the form and content provisions. For example, in the present case, the proper service of the notice of sanctioned payments on the Director of Legal Aid was necessary to ensure that the Director would be timely informed about the circumstances of the case so that the Director could make proper decisions about the case. Mr Szeto has not provided any authority to support this proposition.

11.  Mr Szeto’s second submission is that if the non-compliance with service provisions will prima facie disentitle the respondent to rely on Order 22 for the enhanced cost and interest consequences, the court has still a discretion under Order 22 rule 2(4), which provides that:

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

12.  Mr Szeto submits that the phrase “unless the Court so orders” indicates the existence of such discretion of the court. Further, on the facts of the present case, Mr Szeto submits that the Director of Legal Aid must have known the existence of the sanctioned payments. He relies, inter alia, on the fact that no evidence has been filed by the Director to the contrary in the present application and the duty of the applicant’s solicitors to report to the Director all circumstances of the case. Therefore, he contends that the non-compliance with the service provision has caused no injustice, and the court can and should exercise its discretion to allow the respondent to rely on the enhanced cost and interest consequences as contained in Order 22.

13.  I am not convinced by Mr Szeto’s second submission. In the present case, it is the respondent who tries to invoke the court’s discretionary power (assuming it exists as Mr Szeto submits). While it is correct that the Director has not filed any evidence in the present application, the burden lies on the respondent to show their non-compliance with Order 22 has caused no injustice and the court should exercise such power in their favour notwithstanding the non-compliance.

14.  Ms Christy Wong (who appears for the applicant) informs the court that her instruction is that the Director was only aware of the 1^st but not the 2^nd sanctioned payment. As this information has not been adduced in any affidavit evidence, I do not think I should simply rely on the information from Ms Wong. As I have said, however, the burden lies on the respondent to satisfy the court that there was no injustice and the court should exercise the discretionary power in their favour. I am not so satisfied in the present case.

15.  Lastly, Mr Szeto submits that the court should award indemnity costs (not the enhanced interest) under the court’s general power in awarding costs, in any event, taking into account all the circumstances of the case, including but not limited to the applicant’s failure to do better than the sanctioned payments.

16.  As held by Deputy Judge Anson Wong SC in Choi Tak Man v Chan Yuk Lan Didi [2017] 5 HKLRD 619, at [25]:

“Whilst I agree that a party who fails to do better than an offer which he has rejected may justify the court awarding costs against him on a higher scale, I am unable to accept that the court must always do so. At the end of the day, the existence of settlement offer is just one of the many factors that the court can take into account in the exercise of its discretion on costs under Order 62, rule 5”.

17.  In the present case, I do not consider the applicant was acting in a completely unreasonable way in refusing the accept the sanctioned payments. At the time of the case, there were other cases which suggested that the applicant might be able to succeed. I spent a considerable length in Section D1 of the Judgment to trace the history and development of law in this area. I do not think that this factor alone is sufficient to justify indemnity costs. I also do not see any other factor which may justify the higher scale of costs.

18.  After the applicant filed their skeleton arguments, the respondent sought to rely upon their two sanctioned offers dated 7 January 2021 and 16 September 2021 (which were of the same date as the sanctioned payments) in addition to their sanctioned payments. Leaving aside the lateness of adducing such evidence, it appears to me that they suffer a similar problem of service and do not assist the respondent. Relevantly, Order 22, rule 6 provides that:

“6. An offeror shall serve the sanctioned offer —

(a) on the offeree; and

(b) where the offeree is an aided person, on the Director of Legal Aid.”

19.  For the reasons above, I reject Mr Szeto’s three submissions. I further agree with Ms Wong that the costs order nisi should be made absolute.

C.  Conclusion

20.  I make the order for this application as follows:

(1)  The Respondent’s application for indemnity costs and enhanced interests be dismissed;

(2)  The cost order nisi of the Judgment be made absolute;

(3)  The Sanctioned Payments in the total sum of HK$500,000 made into Court by the Respondent on 7 January 2021 and 16 September 2021, together with interest accrued thereon, be paid out forthwith to the Respondent through its solicitors, Messrs. Mayer Brown;

(4)  The costs of the Respondent’s summons be borne by the Respondent to be taxed on party and party basis, if not agreed, with certificate for counsel.

21.  It remains for me to thank Mr Szeto and Ms Wong for their assistance.