GURUNG DEVCHANDRA v. PACIFIC CONSTRUCTION (HK) CO LTD AND OTHERS

HCPI 138/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO 138 OF 2011

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D E C I S I O N

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1. This is the 1^st and 2^nd defendants’ summons to accept the plaintiff’s sanctioned offer on costs out of time.

Background

2. This case concerned an assessment of damages and by the judgment dated 14 July 2014, an order nisi was made for the defendants to pay the plaintiff’s costs.

3. The defendants have made several sanctioned payments into court previously and on 25 July 2014, the defendants applied for a variation of costs order.  The substantive hearing was fixed for 15 October 2014.

4. Before the substantive hearing, on 6 August 2014, the plaintiff made a sanctioned offer on costs of HK$360,000 (all inclusive) in the following terms :-

“Take notice that once the Sanctioned Offer is not accepted by the Defendants within 14 days from the date hereof, it shall no longer be treated or otherwise regarded as a subsisting offer. In such circumstances, if the Defendants intend to apply for leave of the Court to accept the same thereafter, we have standing instructions to peruse all and any costs incurred due to the Defendants’ failure to accept the Sanctioned Offer within the prescribed time.”

5. The defendants did not accept this. The hearing went ahead and the defendants’ application was dismissed (with costs to the plaintiff).  The court found that the sanctioned payments were beaten, albeit by a small margin.

6. The defendants took out the current application on 18 December 2014 to seek leave to accept the sanctioned offer on costs out of time.

7. The plaintiff’s solicitor, Ms Chong Man Yee, made an affirmation in opposition on 20 January 2015 submitting that: -

“…since the Sanctioned Offer was not accepted within time, it can no longer be treated as valid and/or subsisting…. I humbly pray to this Honourable Court to dismiss the Present Summons with costs….

Alternatively, the Plaintiff proposes to seek for the following orders and/or other reliefs as this Honourable Court deems fit: -

(1) Leave to the Defendants to accept the Plaintiff’s sanctioned offer on costs made on 8 August 2014 out of time;

(2) The Defendants do pay the sum of HK$360,000 (exclusive of interest) to the Plaintiff forthwith in partial settlement of the Plaintiff’s claim for costs and disbursements in this action;

(3) Interest of the Plaintiff’s costs incurred from date of Judgment (i.e. 14 July 2014) up to 20 August 2014 be calculated at judgment rate of 8%;

(4) Interest of the Plaintiff’s costs of HK$360,000 incurred from 21 August 2014 up to the date of payment be calculated at the rate of 10% above the judgment rate; and

(5) The Plaintiff’s costs incurred after 20 August 2014, including the present Summons, be payable by the Defendants on indemnity ass, to be taxed f not agreed.”

8. The Court was informed that the defendants have approached the plaintiff to offer negotiation but there was no settlement.

Has the sanctioned offer been properly withdrawn?

9. The plaintiff’s sanctioned offer was made under Order 62A, rule 5.

10. It is trite law that sanctioned offers are entirely procedural in nature and not affected by the general law of contract (Rai Rana Magar Pabitra Personal Representative of Estate of Rana Magar Mohan Jung, Deceased & Anors v Pacific Construction (HK) Co. Ltd. & Anors, HCPI 398/2008).

11. In that case, Bharwaney J was referring to sanctioned offers under Order 22 but in my view, the same principle must apply to sanctioned offers on costs under Order 62A.

12. Thus, it is a feature of sanctioned offers that the offer does not automatically “lapse” like a contractual offer after the expiry date. Instead, the offeree may still accept it but only if (as in case of Order 62A rule5): (1) the parties agree on the liability for and quantum of costs of taxation incurred after the periods; or (2) the Court grants leave to accept it.

13. Another “non-contractual” feature of a sanctioned offer is that it may not be withdrawn or diminished before the expiry date unless there is leave of court. However, after the expiry date, the offeror may withdraw or vary the terms without leave of court.

14. As to what constitutes a withdrawal of sanctioned offer (after the expiry date), Bharwaney J stated in the Rai case (again addressing Order 22 but which should similarly apply to Order 62A) that:

“Given the serious consequences of a sanctioned offer, there must be clarity and certainty on the issue of whether or not a sanctioned offer has been withdrawn. The written notice must expressively refer to the date of the sanctioned offer and to its terms and must expressly state that the sanctioned offer is withdrawn.”

15. Of course, once the sanctioned offer has been withdrawn, it is not open to the Court to grant leave to accept it under Order 62A, rule 5(5)(b), that is, the defendants’ current application.

16. Ms Chong, solicitor for the plaintiff, submitted that the plaintiff has indeed withdrawn the sanctioned offer.  She relied upon the wordings of the sanctioned offer: “…once the Sanctioned Offer is not accepted by the Defendants within 14 days from the date hereof, it shall no longer be treated or otherwise regarded as a subsisting offer”.

17. However, the very next sentence reads:  “In such circumstances, if the Defendants intend to apply for leave of the Court to accept the same thereafter, we have standing instructions to peruse all and any costs incurred….”

18. As stated above, if the plaintiff has withdrawn the offer after 14 days and the offer was no longer “subsisting”, the court could no longer grant leave to accept the offer.  As such, these two sentences, when read together, do not make sense.

19. In fact, the second sentence simply reflected the required wordings under Order 63A Rule 5 (5) for a sanctioned offer.

20. I think it is clear from the decision of Bharwaney J that, in order to withdraw the sanctioned offer after the expiry date, the offeror must serve a separate “written notice” with the required “clarity and certainty” which “expressively refer to the date of the sanctioned offer and to its terms and must expressly state that the sanctioned offer is withdrawn”.

21. The plaintiff has clearly failed to do so therefore I am of the view that the court still has the discretion to grant leave for late acceptance.

Has the sanctioned offer been varied?

22. Order 62A Rule 7 also allowed for “diminution” of the sanctioned offer after the expiry date.

23. Although no such argument was raised by the plaintiff, I would consider, in passing, whether the “alternative plea” in Ms Chong’s affirmation (see paragraph 7 above) constituted a “diminution” of the original sanctioned offer.

24. The answer is clearly “no” because any variation of the sanctioned offer must necessary also follow the required form and content stated in O62A, r5.  The affirmation clearly did not.

Exercising the court’s discretion

25. Since I found that the sanctioned offer dated 6 August 2014 has not been withdrawn or varied, I turn to consider whether to grant leave for its late acceptance.

26. Of course, the Court has unfettered discretion but “the main criterion must be whether there has been such a change of circumstances as would render it unjust to allow the offeree to benefit from the offer” (per Bhawaney J in Rai case).

27. In this case, the plaintiff’s sanctioned offer on costs was made in view of the litigation risk on the defendants successfully applying to vary the cost order.  (As I understand it, the basis of the defendants’ argument was that their sanctioned payments were only HK$356.07 below the award so  “it was unjust and unreasonable for the plaintiff not to accept” and thus the defendants should be allowed the costs consequence as if the sanctioned payments have beaten the award.)

28. The defendants have made the application to vary the costs order and elected to take the risk to proceed to the substantive hearing in face of the sanctioned offer.  Having now lost that application, it would be unjust that they could still benefit from a late acceptance of the sanctioned offer.

29. The purpose for a sanctioned offer is to promote earlier settlement in face of uncertainties of litigation.  It would make a mockery of this if the offeree, having taken the “gamble” to continue with the litigation, could still reap the benefit when the situation turned against him.

30. I would therefore dismiss the defendants’ application with costs to the plaintiff to be taxed if not agreed.