CHU CHEUNG CHEUNG AND ANOTHER v. THE INCORPORATED OWNERS OF PROVIDENT CENTRE No 21-53 WHARF ROAD, NORTH POINT, HONG KONG AND OTHERS

DCCJ 244/2021

[2025] HKDC 523

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 244 OF 2021

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BETWEEN

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DECISION

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Introduction

1.  On 18 November 2024, I handed down the judgment in respect of the present action (see [2025] HKDC 1899).

2.  I ordered the 1^st and 2^nd Defendants to pay (i) damages of HK$2,456,565.04 to the Plaintiffs; and (ii) interest at half judgment rate on the sums of HK$2,005,641.71, HK$50,000 and HK$30,000 from 1 June 2019 to the date of this judgment, and thereafter interest at judgment rate until payment in full. I also made a costs order nisi that the 1^st and 2^nd Defendants do pay the Plaintiffs’ costs in this action, including all costs previously reserved, to be taxed if not agreed (with certificate for counsel).

3.  Pursuant to Order 22, rule 24, this is the Plaintiffs’ application by summons dated 28 November 2024 seeking to vary my order nisi. The Plaintiffs seek an order along the following lines:-

(1) The 1^st and 2^nd Defendants do pay interest on HK$2,005,641.71, HK$50,000 and HK$30,000:-

(a) at half judgment rate from 1 June 2019 to 11 September 2023;

(b) at a rate of 5% above judgment rate from 12 September 2023 until the date of judgment (or at such rate as the court deems fit); and

(c) at judgment rate from the date of judgment until payment in full.

(2) The 1^st and 2^nd Defendants do pay the Plaintiff’s costs in this action, including all costs previously reserved with certificate for counsel, to be taxed if not agreed. Such costs incurred up to 11 September 2023 are to be taxed on a party and party basis, whereas such costs incurred from 12 September 2023 onwards are to be taxed on an indemnity basis.

(3) The 1^st and 2^nd Defendants do pay the Plaintiffs interest on costs incurred in this action from 12 September 2023 onwards at half of 5% above judgment rate (or at such rate as the court deems fit), and such interest shall from 12 September 2023 until the date of the judgment.

Legal Principles

4.  Order 22, rule 24(4) provides that where a plaintiff does better than its proposed sanctioned offer, the court shall grant costs on an indemnity basis and enhanced interest rate on the judgment sum after the latest date on which the sanctioned offer could have been accepted without leave of the court, unless the court considers that it would be unjust to do so: see Ghazi Faidi v Qantex Capital Markets Ltd [2023] HKCFI 3196 at para 4 (per DHCJ Sara Tong SC).

5.  The unsuccessful party who fails to beat the sanctioned offer bears the burden of proof in showing why it would be unjust to make the orders prescribed in Order 22, rules 24(2) and (3): see Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd [2017] 2 HKLRD 477 at para 25(c) (per Peter Ng J).

6.  In considering whether it would be unjust to impose sanctions pursuant to Order 22, the Court would consider all the circumstances of the case, including those set out in Order 22 rule 24(5) and the factors in Order 62 rule 5(1): see Grupo Pacifica Incorporada v Worldwide Marine Product Ltd [2018] HKCFI 2584 at paras 8-9 (per Queeny Au-Yeung J).

The Plaintiffs did better than their Sanctioned Offer

7.  On 14 August 2023, the Plaintiffs put forward their first sanctioned offer (the “Sanctioned Offer”) proposing to accept a sum of HK$1,700,000 in full and final settlement of their claims against the 1^st and 2^nd Defendants.

8.  The deadline for accepting the said Sanctioned Offer without leave of the court was 11 September 2023.

9.  The 1^st and 2^nd Defendant did not accept the Plaintiffs’ Sanctioned Offer. Instead, the 1^st and 2^nd Defendants made a series of sanctioned payments on the following dates:-

Dates of Sanctioned Payments	Amounts of Sanctioned Payments
24 July 2024	HK$200,000
30 August 2024	HK$900,000
17 September 2024	HK$1,000,000

10.  Since I ordered the 1^st and 2^nd Defendants to pay damages of HK$2,456,565.04 to the Plaintiffs, there is no question that the Plaintiffs did better than their Sanctioned Offer of HK$1,700,000.

Would it be Unjust to Order Indemnity Costs and Enhanced Interest?

The 1^st and 2^nd Defendants’ Contentions

11.  Relying on the following grounds, Mr Wong Cho Lik (for the 1^st and 2^nd Defendants) submitted that it would be unjust to order indemnity costs and enhanced interest:-

(1) The Sanctioned Offer did not contain a breakdown of the amounts claimed. As such, the 1^st and 2^nd Defendants could not decide whether to accept the same.

(2) Certain materials (such as supplemental expert reports and supplemental witness statements) were not available to the 1^st and 2^nd Defendants when the Sanctioned Offer was made.

(3) The Sanctioned Offer was inconsistent with the Plaintiff’s stance that the 4^th Defendant was also liable to them.

12.  I am not persuaded by Mr Wong’s submissions.

No Breakdown

13.  As pointed out by Mr Vincent Li (for the Plaintiffs), none of the provisions in Order 22 provide that a party who put forward a sanctioned offer is required to provide a breakdown in respect of the offer.

14.  The purpose of Order 22 is to encourage parties to settle their dispute. In my view, parties who negotiate settlement with each should adopt a pragmatic approach. In the course of negotiating settlement, they are not expected to argue the disputed issues and justify their claims substantively as if they were conducting the trial. This approach is neither costs effective nor conductive to dispute resolution.

15.  In any event, whilst the Plaintiffs set out the bases of their claims in the pleadings and put forward an expert report at an early stage, the 1^st and 2^nd Defendants were all along legally represented and an expert (who was an associate professor) was engaged.

16.  I have no doubt that the 1^st and 2^nd Defendants (and/or their insurer) were in a position to assess the Plaintiffs’ claims and come to an informed view in regard to the questions relating to quantum. When they refused to accept the Plaintiffs’ Sanctioned Offer, they took the risk of being exposed to the adverse consequences under Order 22, rule 24.

Certain Information not Available

17.  Mr Vincent Li pointed out at the time when the Sanctioned Offer was made, the pleadings had closed and the parties had already exchanged (i) lists of documents; (ii) witness statements; and (iii) one round of expert reports. In my view, the parties had sufficient information to assess the merits of their case as well as the issues relating to quantum. Thus, it was clearly appropriate for the Plaintiffs to invoke the mechanism under Order 22.

18.  It is desirable for parties to settle their dispute at an early stage. As the proceedings develop, further evidence or information are bound to emerge. The whole point of reaching a settlement was to save legal costs and avoid litigation risks. There was no reason why the parties should wait until the conclusion of trial. By that time, all the information would be available; however, the costs that could have been saved would be minimal.

19.  If Mr Wong’s argument were correct, a party who puts forward a sanctioned offer or makes a sanctioned payment at an early stage can never seek indemnity costs and enhanced interest pursuant to Order 22, rule 24. This is absurd and cannot be right.

20.  In any event, in light of the negotiation history, I do not believe that the 1^st and 2^nd Defendants refused to accept the Plaintiffs’ Sanctioned Offer due to inadequate information. In my view, this is an afterthought, and the truth was that the 1^st and 2^nd Defendants (or their insurer) took the view that the Plaintiff could not have obtained damages exceeding HK$1 million (which was the amount of their last sanctioned payment). It transpired that they were wrong. As such, they must face the adverse consequences under Order 22, rule 24.

Involvement of the 4^th Defendant

21.  There is no reason why the Plaintiffs’ Sanctioned Offer must be extended to the 4^th Defendant.

22.  The Plaintiffs’ claim against the 4^th Defendant is a matter that is separate from the Plaintiffs’ claims against the 1^st and 2^nd Defendants.

23.  The 1^st and 2^nd Defendants’ claim for contribution and/or indemnity against the 4^th Defendant is also a matter that is separate from the Plaintiffs’ claims against the 1^st and 2^nd Defendants.

24.  It is open to the Plaintiffs to settle their dispute with the 1^st and 2^nd Defendants without settling their dispute with the 4^th Defendant.

25.  Had the 1^st and 2^nd Defendant accepted the Plaintiffs’ Sanctioned Offer, they could still have pursued the claims for contribution and/or indemnity against the 4^th Defendant under the amended notice of contribution.

26.  I cannot see how the involvement of the 4^th Defendant might constitute a valid excuse for not accepting the Sanctioned Offer.

Order and Disposition

27.  For all the above reasons, none of the excuses relied on by the 1^st and 2^nd Defendants are valid, and I am not of the view that it would be unjust or unfair to order them to pay indemnity costs and enhanced interest.

28.  Having considered the authorities cited by counsel, I am of the view that 5% above judgment rate is proportionate and reasonable in the circumstances of the present case.

29.  In the premises, I am prepared to vary my order nisi, and I make an order absolute as follows:-

(1) The 1^st and 2^nd Defendants do pay interest on HK$2,005,641.71, HK$50,000 and HK$30,000:-

(a) at half judgment rate from 1 June 2019 to 11 September 2023;

(b) at the rate of 5% above judgment rate after 11 September 2023 until the date of judgment; and

(c) at judgment rate from the date of judgment until payment in full.

(2) The 1^st and 2^nd Defendants do pay the Plaintiff’s costs in this action (including all costs previously reserved) up to 11 September 2023 on a party-to-party basis, to be taxed if not agreed (with certificate for counsel).

(3) The 1^st and 2^nd Defendants do pay the Plaintiff’s costs in this action (including all costs previously reserved) after 11 September 2023 on an indemnity basis, to be taxed if not agreed (with certificate for counsel).

(4) The 1^st and 2^nd Defendants do pay interest on the costs incurred by the Plaintiff in this action after 11 September 2023 at 5% above judgment rate, and such interest shall accrue from 12 September 2023 until the date of the judgment.

30.  I make a costs order nisi that the 1^st and 2^nd Defendants do pay the Plaintiffs’ costs in respect of the summons dated 28 November 2024 on an indemnity basis, to be taxed if not agreed (with certificate for counsel).

31.  I thank Mr Li and Mr Wong for their helpful assistance.