LEUNG HOI YEE v. TAI HING WORLDWIDE DEVELOPMENT LTD t/a TAI HING

DCEC 2008/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 2008 OF 2013

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DECISION

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Introduction

1. This is an application for costs made by the respondent, pursuant to Order 22, rule 20 of the Rules of District Court.

2. The applicant accepted sanctioned payment made by the respondent.  The solicitors for the applicant wrote to the respondent to ask for costs of the proceedings up to the date of serving notice of acceptance pursuant to Order 22, rule 22(1). 

3. In response, the respondent took out this summons to seek costs of the proceedings on the ground that the respondent had made a pre-action Calderbank offer to the applicant. As the amount of the sanctioned payment accepted by the applicant is lower than the Calderbank offer, the respondent is of the view that not only the applicant is not entitled to his costs, he should be paying the respondent’s costs.

The facts

4. For the purpose of this application, the facts of the case can be stated briefly.  The applicant was a chef and was at the material times employed by the respondent.  On 22 April 2012, while working in the kitchen of one of the restaurants operated by the defendant, the applicant fell from a table and got injured on his right leg.  He was granted sick leave for 278 days.

5. On 9 July 2013, the respondent’s insurer, Falcon Insurance Company (Hong Kong) Limited, sent the applicant one pre-action EC Calderbank letter and one pre-action PI Calderbank letter.  In the EC Calderbank letter, the respondent offered to settle the EC claim in the amount of HK$150,000. 

6. On 11 November 2013, legal aid was granted to the applicant and on 13 November 2013, solicitors for the applicant lodged this EC application.  

7. On 27 November 2013, solicitors for the applicant received the notice of sanctioned payment issued by the solicitors for the respondent in which the respondent offered to settle the EC claim in the sum of HK$149,741 (including advance payment).  On 6 December 2013, solicitors for the applicant issued the notice of acceptance of sanctioned payment and accepted the offer to settle the EC claim.

The Law

8. The starting point is Order 22, rule 20(1) where it provides:-

“(1) 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.”

9. In Estratech Asia-Pacific Ltd v Leader Printed Circuit Boards Ltd [2013] 2 HKLRD 1184, Mr Justice Poon has analyzed the interpretation of this rule in detail.  He said at paragraph 18:-

“… O.22 r.20(1) plainly envisages that upon acceptance of the sanctioned payment or sanctioned offer, the plaintiff is, as a 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…”

10. That brings us to the operation of the “Otherwise Proviso”.  Mr Justice Poon went on to explain the reasoning behind the Otherwise Priviso.  I respectfully agree and adopt his reasoning.  At paragraph 23, he concludes:-

“… fairness dictates that the plaintiff, who is considering whether to accept the sanctioned payment or sanctioned offer, should be given a prior warning that the defendant will apply to invoke the Otherwise Proviso and how it is to be invoked.”

11. The reason is clear.  A plaintiff, when considering whether to accept a sanctioned payment or sanctioned offer, needs to know for sure whether hisentitlement as to costs may be displaced so that an informed decision can be made.  Such certainty is very important for a plaintiff to consider settlement offer.  If a defendant can invoke the Otherwise Proviso without giving prior notice, no plaintiff is going to accept sanctioned payment or sanctioned offer because of the uncertainty as to costs. 

12. If a defendant has given notice that he will apply to invoke the Otherwise Proviso and a plaintiff chooses to accept the sanctioned payment or sanctioned offer, the defendant still needs to show exceptional circumstances to justify a departure of the prima facie rule.

Discussion

13. In the present case, there is no dispute that no notice had been given by the respondent that the Otherwise Proviso would be invoked.  The applicant cannot be faulted when considering whether to accept the sanctioned payment, he assumed the prima facie rule is applicable and the Respondent would not seek to invoke the Otherwise Proviso.  That means with the prima facie rule in mind, the applicant accepted the sanctioned payment on the basis that the respondent would pay his costs.  If the respondent is allowed to invoke the Otherwise Proviso now, it would be unfair to the applicant as he made his decision to accept the sanctioned payment on a totally different basis. 

14. Considering the amount of the sanctioned payment, there is every chance that the applicant would not have accepted it had he known that he might have to pay the costs of the proceedings not only for himself but also for the respondent. 

15. Adopting the principle set down in the Estratech case, as the respondent failed to give the applicant any notice or warning that the Otherwise Proviso would be invoked, on this ground alone the respondent’s application for costs must fail.

16. As the respondent failed to give any notice to invoke the Otherwise Proviso, there is no need for this court to further consider whether there are any exceptional circumstances that justify a departure of the prima facie rule.

Conclusion

17. Base on the above analysis, the respondent’s summons is dismissed. 

Costs

18. The applicant seeks costs on indemnity basis.  After consideration, I am not persuaded that this is an appropriate case to order indemnity costs.  Therefore, I make a costs order nisi that the respondent do pay the applicant’s costs of this summons, to be taxed on a party and party basis if not agreed, with certificate of counsel.