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HCPI 739/2009
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
PERSONAL INJURIES ACTION NO. 739 OF 2009
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BETWEEN
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LIN YANJIN |
Plaintiff |
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And |
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SMART BILLION ENGINEERING LIMITED |
Defendant |
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_________________________ |
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Coram : Before Master Marlene Ng in Chambers (open to the public) |
| Dates of Hearing : |
26 July 2011 and 4 August 2011 |
| Date of Handing Down Decision : |
10 August 2011 |
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D E C I S I O N
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I. BACKGROUND
1. The Defendant was the contractor responsible for carrying out improvement works to the Sha Tin Country Trail (“Site”), and employed the Plaintiff as a construction site labourer.
2. On 26 February 2007, whilst the Plaintiff was operating a rubber track carrier to transport cement up an inclined path at the Site, the carrier’s engine failed. The carrier slipped backwards and overturned, thus causing the Plaintiff to suffer personal injuries (“Accident”).
3. On 24 November 2007, the legally aided Plaintiff through his assigned solicitors Messrs TS Tong & Co (“TST”) commenced the present action against the Defendant to claim damages for personal injuries as a result of the Accident.
4. The present action has been settled by the Defendant’s payment of the sum of HK$220,000.00 on top of the employees’ compensation settlement sum of HK$359,501.33 already received by the Plaintiff (“EC Sum”). Such settlement sum of HK$220,000.00 has been paid into court by way of three sanctioned payments in the respective sums of HK$161,000.00, HK$39,000.00 and HK$20,000.00 on 26 August, 19 October and 19 November 2010 (“1st, 2nd and 3rd SP”).
5. The outstanding dispute before me concerns certain costs that have been reserved in the course of the litigation, ie costs on the issue of liability in the present action (“1st Reserved Costs”), costs of the Checklist Review (“CLR”) hearing on 13 January 2011 (“2nd Reserved Costs”), and costs of the Defendant’s summons filed on 3 May 2011 (“Settlement Summons”) including costs of the hearing of such summons on 18 May 2011 (“3rd Costs”).
6. At the hearing before me on 26 July 2011 (“1st Hearing”), the parties made some concessions in respect of the 2nd Reserved Costs and the 3rd Costs which helped to narrow the scope of the dispute. But since the present action and its settlement have a chequered history, it is necessary to recount the chronology of the salient events for proper understanding of the dispute.
II. CHRONOLOGY OF EVENTS
7. In the Statement of Claim, the Plaintiff averred inter alia that the Accident was due to the Defendant’s default, and as a result his “left lower limb was hit and pressed by the [carrier]” and he sustained injuries to his left lower limb, back and neck (“Alleged Injuries”). In the Statement of Damages, the Plaintiff claimed damages in the total sum of HK$1,310,783.67 with interest.
8. In the Defence, the Defendant admitted negligence on their part in respect of the Accident. In paragraph 5 of the Defence, the Defendant admitted the occurrence of the Accident save as except that (a) the causation of the Alleged Injuries was not admitted (“Causation Dispute”), and (b) the Plaintiff was put to strict proof that his left lower limb was hit and pressed by the carrier and that he sustained personal injuries to his left lower limb, back and neck. The Defendant further averred that upon taking into account the EC Sum already paid to the Plaintiff and the expert medical opinion already available at the commencement of the present action the Plaintiff would not be entitled to any recoverable common law damages in respect of the Accident.
9. On 24 March 2010, the Director of Legal Aid (“DLA”) re-assigned Messrs Joseph Leung & Associates (“JLA”) to act for the Plaintiff.
10. At the CLR hearing on 28 April 2010 (“28/4/10 CLR”), notwithstanding the Defendant’s admission of negligence, case management directions were granted inter alia in relation to the issue of liability, such as directions for (a) serving “witness statement as to fact” (as opposed to witness statements as to quantum), (b) limiting expert evidence on liability to the occupational safety officer’s accident report, and (c) adducing the statements made to (and the plan and/or photographs taken by) the Labour Department in relation to the Accident (“28/4/10 Order”).
11. The letter from JLA to WKT referred to in paragraph 13 below suggested that at the 28/4/10 CLR the PI Master had explored with JLA and WKT the option of entering judgment on liability, but WKT “adopted ‘no liability / no pay / defend’ stance …… despite the learned Master’s repeated advice and warning”.
12. On 4 May 2010, WKT sent a letter to JLA on a “without prejudice save as to costs” basis to remind them that the Defendant had admitted negligence in respect of the Accident and that the Defendant merely required proof of the Alleged Injuries. They asked JLA to treat paragraph 5 of the Defence as amended to the effect that the Defendant admitted the circumstances of the Accident as averred by the Plaintiff “save and except the extent of the [Alleged Injuries] is denied and the Plaintiff is put to strict proof thereof. The Defendants shall rely on Dr Lam Kwong Chin’s evidence to rebut the Plaintiff’s claim as well as his medical expert’s evidence”. On such basis, WKT suggested that the only outstanding issue would be the assessment of damages, and there was no need for the parties to revisit the issue of liability in terms of the cause of the Accident and/or to prepare their respective case on the issue of liability. They told JLA not to include any evidence on the issue of liability in the Plaintiff’s witness statement since the Defendant would not bear any wasted costs in this regard.
13. On 5 May 2010, JLA by open letter to WKT reminded them to make proper application to amend the Defence, and stated that they would not regard WKT’s letter as any amendment of the pleadings. They also informed WKT that following the 28/4/10 CLR (which specified 19 May 2010 as the deadline for serving the Plaintiff’s witness statement) they had already taken the Plaintiff’s instructions on the issue of liability and had prepared his draft witness statement, so they rejected WKT’s refusal to bear such costs. JLA noted the court still had no record that liability would not be in issue, and asked WKT whether interlocutory judgment could be entered against the Defendant.
14. On 6 May 2010, WKT by open letter to JLA stated that although the Defendant had admitted negligence the Plaintiff in fact suffered no loss or damages over and above the EC Sum and the advance payments he had already received, and therefore he was not entitled to any judgment on liability. WKT went on to say that “[if] you so wish, you may go ahead with your so-called summons for “judgment”. We will oppose the same vigorously and claim costs against you on a full indemnity basis, if necessary. Your client and you proceed at your perils”. On the question of costs on the issue of liability, WKT said “[we] will never concede that you are entitled to costs of the action on liability and on the accident since our Defence. Quite to the contrary, it is very clear that you have only tried to inflate the costs contrary to the Civil Justice Reform”.
15. On the same day, WKT also sent on a “without prejudice save as to costs” letter to JLA and stated that in order to save time and costs they would be prepared to advise the Defendant to enter into a Consent Order on inter alia the following terms and asked JLA to take instructions:
(a) judgment on liability be entered against the Defendant in favour of the Plaintiff with damages, if any, to be assessed;
(b) costs of this action on the issue of liability up to and inclusive of this application, if not agreed, be reserved for further argument before the court after the assessment of damages or at the conclusion of the present action.
16. On 14 May 2010, JLA wrote to the PI Master to seek clarification as to whether the parties were required to prepare witness evidence as to liability. The PI Master replied he would not give comments without hearing from the Defendant.
17. On 20 May 2010, pursuant to the 28/4/10 Order, the Plaintiff served his witness statement dated 18 May 2010, which canvassed inter alia some aspects of the issue of liability, including the circumstances of the Accident.
18. On the same day, WKT wrote to the PI Master referring to the above correspondence between the solicitors for the parties and maintaining their complaint against the inclusion of matters that touched on the issue of liability in the Plaintiff’s witness statement. They also asserted that notwithstanding the Defendant’s admission of negligence in respect of the Accident, interlocutory judgment on liability should not be entered because the Plaintiff did not suffer any recoverable loss or damages.
19. Apparently, on the same day, JLA sent a reply to WKT on a “without prejudice” basis, but such letter was not placed before me. Nevertheless, WKT’s letter dated 2 July 2010 (see paragraph 23 below) alluded to JLA’s reply which stated inter alia that the Plaintiff was entitled to costs on the issue of liability.
20. On 1 June 2010, the PI Master (who was not the master who granted the 28/4/10 Order) by written directions to the solicitors for the parties urged the Defendant to clarify their position to enable early resolution of the issue of liability, and provisionally opined that the following matters implicitly suggested that liability had not been admitted: (a) the terms of the 28/4/10 Order and (b) the need for the Plaintiff to prove his case on the issue of liability at trial in the absence of any interlocutory judgment on liability.
21. On 23 June 2010, WKT again wrote to the PI Master to maintain their complaint against the Plaintiff’s witness statement which touched upon matters concerning the issue of liability. They stated that “the Defendant has admitted negligence and hence responsibility for the accident is not equal to the statement that the Defendant has admitted liability for the cause of action now claimed by the Plaintiff. The Plaintiff still has to prove as a complete cause of action that they have suffered losses and damages as a result of or caused by such negligence claimable in the present proceedings”. They claimed that the Defendant had no liability in the present action upon deduction of the EC Sum from any common law damages that might be claimed in the present action, so
“[for] obvious reason, “interlocutory judgment on liability” should not be entered against the Defendant in this case, as entering of interlocutory judgment with damages to be assessed presupposes that there will be net damages claimable in the present proceedings (or else there is no damages to be assessed as such), which is not the pleaded case of the Defendant ……
……
We do not think that the Court has any jurisdiction to enter judgment on liability against the Defence [sic], on the basis as aforesaid and it will be unhelpful and misleading if the Court’s impression of the matter is not clarified nor removed.”
22. On 25 June 2010, the PI Master directed the parties to agree on a “list of issues to be tried”. Pursuant thereto, JLA forwarded a draft list to WKT. On 23 July 2010, WKT gave their comments on the draft list. On 26 July 2010, JLA made further observations on the draft list.
23. On 2 July 2010, WKT sent a “without prejudice save as to costs” letter to JLA inviting the Plaintiff to reconsider the proposal in their “without prejudice as to costs” letter dated 6 May 2010.
24. On the same day, the Plaintiff filed his Revised Statement of Damages to claim damages in the sum of HK$1,334,998.67 with interest. On 30 July 2010, the Defendant filed their Answer thereto.
25. On 26 August 2010, the Defendant filed a Notice of Sanctioned Payment (“1st SP Notice”) giving notice that he had made sanctioned payment in the sum of HK$161,000.00 into court on top of the EC Sum in settlement of the whole of the Plaintiff’s claim (“1st SP”). The 1st SP Notice stated that “[it] is part of the terms of a sanctioned offer set out in the sanctioned offer dated 26th August 2010. If you give notice of acceptance of this sanctioned payment, you will be treated as also accepting the sanctioned offer”.
26. On 19 October 2010, the Defendant filed a further Notice of Sanctioned Payment (“2nd SP Notice”) giving notice that he had made sanctioned payment of HK$39,000.00 into court on top of the EC Sum and additional to the 1st SP in settlement of the whole of the Plaintiff’s claim (“2nd SP”). The 2nd SP Notice stated that “[it] is part of the terms of a sanctioned offer set out in the sanctioned offer dated 19th October 2010. If you give notice of acceptance of this sanctioned payment, you will be treated as also accepting the sanctioned offer”.
27. On 19 October 2010, WKT sent a “without prejudice save as to costs” letter to JLA stating they were instructed to make a sanctioned offer pursuant to Order 22 rule 5 of the Rules of the High Court (“RHC”) as part and parcel of the 2nd SP (which took into account the EC Sum) in respect of the whole claim (“2nd Offer”). By the 2nd Offer, “[the Defendant] offers to pay costs on a party and party basis on District Court scale to be taxed if not agreed if [the 2nd SP] is accepted by the Plaintiff as a full and final settlement of the whole of this claim and it is a condition of the settlement, if the [2nd Offer] is accepted, to execute a consent summons/order incorporating the terms of settlement”. The 2nd Offer further stated it was open for acceptance within 28 days thereof, and after the expiry of such period the Plaintiff could only accept the 2nd Offer if (a) the parties agreed on the liability for costs or (b) the Court granted leave to accept it.
28. At the CLR hearing before me on 20 October 2010 (“20/10/10 CLR”), I took note of (a) the Defendant’s admission that the Accident was caused by their default and (b) their claim that the remaining disputes were the extent and quantum of damages and the Causation Dispute, which disputes in my view (i) should not be a bar against entering interlocutory judgment on liability for damages to be assessed, (ii) should be resolved at the assessment of damages and not at any full trial on the issues of both liability and quantum, and (iii) should not inhibit any argument the Defendant might raise at the assessment of damages that upon proper assessment there were no recoverable loss or damages beyond the EC Sum.
29. So at the 20/10/10 CLR, I granted leave for the Defendant to amend the Defence to admit liability but deny the extent of the damage, which would enable the Defendant to eventually raise the Causation Dispute in their Answer to the Statement of Damages. The previous case management direction by the PI Master requiring the parties to prepare an agreed list of issues to be tried therefore became redundant, and I also gave the parties a further 7 days to try and resolve the issue of liability, failing which the Defendant was directed to apply within 14 days for interlocutory judgment to be entered with costs on the issue of liability reserved. The reason why costs on the issue of liability should be reserved was because the Defendant on their Amended Defence insisted that the Plaintiff was not entitled to any common law damages over and above the EC Sum, which argument suggested that the Plaintiff should not have commenced the present action at all (and hence costs on the issue of liability could have been avoided) notwithstanding any interlocutory judgment that might be entered for damages to be assessed.
30. On 21 October 2010, WKT by a “without prejudice save as to costs” letter to JLA proposed for both parties enter into a consent order for judgment on liability with damages to be assessed and for reservation of costs on the issue of liability up to and inclusive of such application (if not agreed) for determination by the court at the assessment of damages or upon argument before the court at the conclusion of the present action.
31. On 22 October 2010, the Defendant filed the Amended Defence. On 2 November 2010, the Plaintiff’s legal aid certificate was discharged and he became unrepresented. Pursuant to the Defendant’s summons filed on 3 November 2010 and returnable on 16 November 2010, I granted interlocutory judgment on liability in favour of the Plaintiff for damages (if any) to be assessed, and directed that costs of the present action on the issue of liability (if not agreed) be reserved for determination at the hearing of the assessment of damages or upon argument before the court at the conclusion of the present action (ie the 1st Reserved Costs) (“16/11/10 Order”).
32. On 19 November 2010, the Defendant filed a further Notice of Sanctioned Payment (“3rd SP Notice”) giving notice that they had made a sanctioned payment of HK$20,000.00 into court on top of the EC Sum and additional to the 1st and 2nd SP (thus bringing the overall sanctioned payments to a total sum of HK$220,000.00) in settlement of the whole of the Plaintiff’s claim (“3rd SP”). The 3rd SP Notice stated that “[it] is part of the terms of a sanctioned offer set out in the sanctioned offer dated 19th November 2010. If you give notice of acceptance of this sanctioned payment, you will be treated as also accepting the sanctioned offer”. By a Certificate of Service, WKT certified that the 3rd SP Notice had been duly served on the Plaintiff on 19 November 2010.
33. On 19 November 2010, WKT sent a “without prejudice save as to costs” letter to JLA stating they were instructed to make a sanctioned offer pursuant to Order 22 rule 5 of the RHC as part and parcel of the 3rd SP (which took into account the EC Sum) in respect of the whole claim (“3rd Offer”). By the 3rd Offer,
“ 2. [The Plaintiff] offers to pay costs on a party and party basis on District Court scale to be taxed if not agreed if [the 3rd SP] is accepted by the Plaintiff as a full and final settlement of the issue of quantum.
3. In respect of the [1st Reserved Costs], it is a condition of the settlement that [the Plaintiff] agree to bear [the Defendant’s] costs on the liability issue on High Court scale from 06.05.2010 (our WP letter dated 06.05.10) up to 16.11.2010 (date of judgment on liability).
[The 3rd Offer] is open for acceptance within 28 days from the date hereof. [The Plaintiff] may only accept [the 3rd Offer] after the expiry of 28 days from the date hereof if (a) the parties agree on the liability for costs or (b) the Court grants leave to accept it.”
34. The Plaintiff applied again for legal aid as shown by the Memorandum of Notification of an Application for Legal Aid dated 26 November 2010 (“LA Memo”). On 20 December 2010, the DLA assigned TST to act for the Plaintiff, and the legal aid certificate specified that “Legal Aid has been granted for the purpose of continuing [the present action], limited to application to the court to accept [the 2nd SP]”. On 5 January 2011, the DLA re-assigned JLA to act for the Plaintiff.
35. On 7 January 2011, JLA sent a “without prejudice” letter to WKT stating they were instructed that the Plaintiff agreed to accept the 2nd SP out of time with costs of the action on or before 16 November 2010 to the Plaintiff and no order as to costs thereafter.
36. On 8 January 2011, WKT wrote to JLA on a “without prejudice save as to costs” basis inter alia as follows:
“In order for [the Defendant] to consider [JLA’s] proposal of allowing the Plaintiff to accept [the 2nd SP] out of time without leave of the Court, please inform [WKT] within the next 3 days whether [the Plaintiff] will consider making the following offer:-
1. Costs of the captioned proceedings up to and including 19.10.2010 be to the Plaintiff; and
2. There be no order as to costs thereafter (including the [1st Reserved Costs]).
Subject to [JLA’s] reply to the above, [WKT] will take [the Defendant’s] instructions on whether or not to accept [the Plaintiff’s] revised offer. Nothing herein shall be construed as [the Defendant’s] agreement to accept points 1 and 2 above, if so offered by the Plaintiff. [WKT] trust [JLA] would agree that in fact [the Defendant] is entitled to claim costs from 20.10.10 onwards from [the Plaintiff] even if [the Plaintiff] is minded to obtain leave from the Court for accepting the same.”
37. On 10 January 2011, JLA replied on a “without prejudice” basis with an offer that (a) costs of the present action up to and including 16 October 2010 be to the Plaintiff and (b) there be no order as to costs thereafter (including the 1st Reserved Costs).
38. On 11 January 2011, WKT replied by open letter to accept the Plaintiff’s offer in full and final settlement of the present action on the basis inter alia that (a) leave be granted to the Plaintiff to accept the 2nd SP out of time, (b) costs of the present action up to and including 19 October 2010 be to the Plaintiff, and (c) there be no order as to costs thereafter including the 1st Reserved Costs.
39. Subsequently on the same day (ie 11 January 2011),
(a) JLA sent to WKT a draft Consent Summons proposing that (i) the Defendant do pay the Plaintiff the sum of HK$200,000.00 in full and final settlement of the present action, (ii) the 1st and 2nd SP be paid out to the DLA on behalf of the Plaintiff, (iii) costs of the present action up to and including 19 October 2010 be to the Plaintiff to be taxed if not agreed, and (iv) there be no order as to costs thereafter (including the 1st Reserved Costs);
(b) WKT returned to JLA the draft Consent Summons marked up with their comments, which included a proposal for the 3rd SP to be released and paid out of court to WKT on behalf of the Defendant;
(c) following a telephone conversation between the parties’ respective solicitors, WKT by open letter faxed the 3rd SP Notice to JLA and asserted that the Plaintiff was aware of the 3rd SP because WKT had “duly served [the 3rd SP Notice]”;
(d) on a “without prejudice” basis JLA returned to WKT the re-revised draft Consent Summons that asked for inter alia the Defendant’s payment of the sum of HK$220,000.00 (and not HK$200,000.00) on top of the EC Sum in full and final settlement of the present action;
(e) WKT by an open letter to JLA claimed that the present action had already been settled by the Defendant’s acceptance of the Plaintiff’s offer by their open letter dated 11 January 2011.
40. On 11 January 2011, WKT in their “without prejudice save as to costs” letter to JLA complained of JLA’s continued amendments to the draft Consent Summons when (a) the Plaintiff knew of the 3rd SP (given that (i) he had sought assistance from a district councillor and (ii) a staff member at such district councillor’s office had confirmed she had the 3rd SP Notice to hand when she telephoned WKT) and (b) a binding settlement had been concluded on 11 January 2011 upon the Plaintiff’s acceptance of the 2nd SP in the sum of HK$200,000.00 out of time and upon the terms in JLA’s “without prejudice” letter dated 10 January 2011.
41. On 12 January 2011, JLA replied on a “without prejudice” basis to WKT. They said that (a) to WKT’s knowledge the Plaintiff was unaware of the 3rd SP and (b) previous negotiations were made on the erroneous premise of there being no more sanctioned payments made after 19 October 2010. They further claimed that the Plaintiff’s offer to accept the 2nd SP could not stand, and as a result of the legal aid stay pursuant to the LA Memo the 3rd SP Notice was still open for acceptance without leave of the court. JLA stated they would “file Notice of Acceptance of Sanctioned Payment today (copy enclosed). On these basis, [JLA] do not agree to [WKT’s] revised draft Consent Summons and will send [WKT] the Notice of Request for Payment shortly”.
42. On the same day, the Plaintiff’s legal aid certificate was amended “to cover attending the CLR of the proceedings and the work incidental thereto and to cover work in relation to the acceptance of the sanctioned payment of $220,000 filed by the opposite party”.
43. On the same day, JLA filed Notice of Acceptance of Sanctioned Payment giving notice that “the Plaintiff accepts the payment(s) into court totalling $220,000.00 in settlement of the whole of the Plaintiff’s claim as set out in [the 1st, 2nd and 3rd SP Notices] respectively” (“Acceptance Notice”). Again on the same day, WKT by open letter to JLA maintained that (a) the Plaintiff was well aware of the 3rd SP Notice (and the 3rd Offer being part and parcel of the 3rd SP) and (b) a settlement was concluded on 11 January 2011 as per WKT’s two open letters of such date, so the Plaintiff was not entitled to file the Acceptance Notice. WKT added that such purported acceptance of the 3rd SP would not have benefited the Plaintiff since (i) the 3rd SP Notice referred to the 3rd Offer which was part and parcel of the 3rd SP and (ii) by accepting the 3rd SP the Plaintiff agreed to bear the Defendant’s costs on the issue of liability on High Court scale from 6 May to 16 November 2010.
44. At the adjourned CLR hearing on 13 January 2011, JLA and WKT informed me that the parties had compromised the present action but there was still disagreement over the precise scope/terms of the settlement. I (a) urged the parties to resolve their difference, failing which the parties were directed to take out inter partes application on or before 11 February 2011 for final disposal of the present action, and (b) further reserved the costs of such CLR hearing (ie the 2nd Reserved Costs).
45. On 3 May 2011, the Defendant filed the Settlement Summons to seek alternative reliefs as follows:
(a) leave be granted to the Plaintiff to accept the 2nd SP out of time in the sum of HK$200,000.00 on top of the EC Sum pursuant to the settlement reached between the parties on 11 January 2011 with (i) costs of the present action up to and including 19 October 2010 to the Plaintiff on District Court scale to be taxed if not agreed, (ii) no order as to costs thereafter (including inter alia the 1st Reserved Costs), and (iii) the 3rd Costs be to the Defendant (“2nd SP Alternative”); or
(b) the present action having been settled on 12 January 2011 by the Acceptance Notice accepting the 3rd SP (ie the sum of HK$220,000.00 on top of the EC Sum) as well as the 3rd Offer being part and parcel of the 3rd SP with (i) costs of the present action (subject to (ii) and (iii) below) to the Plaintiff on District Court scale to be taxed if not agreed, (ii) the Plaintiff to bear the 1st Reserved Costs save and except that the Plaintiff shall pay the Defendant’s costs on the issue of liability from 6 May to 16 November 2010 on High Court scale to be taxed if not agreed, and (iii) the 2nd Reserved Costs and the 3rd Costs to the Defendant (“3rd SP Alternative”).
46. The Defendant’s 2 affirmations filed on 3 May 2011 in support of the Settlement Summons stated inter alia that:
(a) WKT served the 2nd SP Notice on the Plaintiff (by delivering the same to JLA) and on the DLA;
(b) on 19 November 2010, WKT served the 3rd SP Notice and the 3rd Offer by ordinary post to the Plaintiff’s last known address in Tsuen Wan (“Address”);
(c) on 22 November 2010, WKT’s solicitor received a telephone call from a Ms Ho who claimed to be from a district councillor’s office, and it appeared that (i) the Plaintiff had approached the district councillor with some papers from WKT and (ii) Ms Ho had the 3rd SP Notice and the 3rd Offer to hand.
47. On 16 May 2011, the Plaintiff filed 2 affirmations in opposition stating inter alia that:
(a) he was 70 years old and lived alone at the Address;
(b) he did not understand English, could not read Chinese, understood a little Cantonese, and spoke only the Fukien dialect and some putonghua;
(c) since the Address was located at an old-style tenement without security guard or caretaker and his small letterbox affixed to the ground floor metal gate could only hold a limited volume of letters, letters that were posted to him but placed outside his letterbox would easily fall down and be swept away;
(d) even if WKT had sent the 3rd SP Notice to him by ordinary post, he had not received it and was unaware of the 3rd Offer when he was granted legal aid again on 20 December 2010, consequently the DLA limited his legal aid certificate to the matters specified in paragraph 34 above;
(e) when he agreed to accept the 2nd SP after meeting with JLA and the DLA, he was still unaware of the 3rd SP;
(f) subsequently JLA told him about the 3rd SP, and the DLA amended the legal aid certificate in the manner specified in paragraph 42 above;
(g) he did approach and meet with a district councillor in 2011 after he was granted legal aid again, but he did not know any other staff member at such district councillor’s office or whether any such staff member telephoned WKT.
48. On 16 May 2011, WKT wrote to JLA to enquire whether it was the Plaintiff’s stance that he was (a) withdrawing his acceptance of the 2nd SP, (b) affirming his acceptance of the 3rd SP, and (c) claiming for costs of the whole action. In respect of (c), WKT asked JLA to state the legal basis for making such claim for costs.
49. Initially, WKT and JLA proposed that the Settlement Summons be adjourned for substantive argument, but at the hearing before me on 18 May 2011 I drew their attention to the difference of only HK$20,000.00 in respect of the settlement sum under the 2nd and 3rd SP Alternatives, and queried whether it would be proportionate to incur the effort, time and costs to resolve such dispute. In the end, the parties sensibly agreed to settle the present action for the sum of HK$220,000.00 without formal determination of the substantive merits of the 2nd and 3rd SP Alternatives, and further agreed to seek court determination of the 1st and 2nd Reserved Costs.
50. I therefore granted the following orders at the hearing on 18 May 2011 (“18/5/11 Order”):
(a) leave be granted to the Plaintiff to accept the 1st, 2nd and 3rd SP in the total sum of HK$220,000.00 on top of the EC Sum in full and final settlement of the present action;
(b) save and except for the 1st and 2nd Reserved Costs, costs of the present action be paid by the Defendant to the Plaintiff on District Court scale to be taxed if not agreed;
(c) the issue of the 1st and 2nd Reserved Costs be adjourned for argument and in the meantime the 1st, 2nd and 3rd SP shall remain in court;
(d) costs of the hearing on 18 May 2011 be reserved.
In the circumstances, apart from the 1st and 2nd Reserved Costs, costs of the Settlement Summons including costs of the hearing on 18 May 2011 (ie the 3rd Costs) are also pending court determination.
III. UNDISPUTED MATTERS
51. At the 1st Hearing, there was no dispute between the parties in respect the following matters:
(a) the 1st, 2nd and 3rd SP are sanctioned payments within the meaning of Order 22 of the RHC;
(b) without prejudice to the parties’ dispute over whether the 3rd SP Notice has been served on the Plaintiff by ordinary post on 19 November 2010 and/or whether the Plaintiff has received such document, the form and content of the 3rd SP Notice meet the requirements in Order 22 rule 8 and Form No.23 of Appendix A (“Form 23”) of the RHC;
(c) settlement of the present action in the sum of HK$220,000.00 on top of the EC Sum and the advance payments already received by the Plaintiff was premised on the Acceptance Notice;
(d) at the time when the Plaintiff filed and served the Acceptance Notice on 12 January 2011 (see paragraph 43 above), JLA on behalf of the Plaintiff already had in their possession the 3rd SP Notice (see paragraph 39(c) above);
(e) without prejudice to the parties’ dispute over whether the 3rd Offer has been served on the Plaintiff by ordinary post on 19 November 2010 and/or whether the Plaintiff has received such document, the Defendant and WKT did not send or re-send the 3rd Offer to JLA and/or the Plaintiff after 19 November 2010;
(f) the Acceptance Notice meets the requirements in Order 22 rule 15(4) of the RHC and is in the prescribed Form No.24 of Appendix A (“Form 24”) of the RHC;
(g) upon taking into account the legal aid stay, the Acceptance Notice was given within 28 days of the 3rd SP Notice.
52. The undisputed matter in paragraph 51(c) above reflects the stance of the Plaintiff (see paragraphs 41-43 and 47 above) and the stance of the Defendant under the 3rd SP Alternative (see paragraph 45(b) above). The 2nd SP Alternative (see paragraph 45(a) above) is no longer applicable in light of the 18/5/11 Order.
53. At the 1st Hearing, Mr Chan, solicitor for the Plaintiff, and Ms Hui, solicitor for the Defendant, also agreed on the following matters:
(a) for the 1st Reserved Costs, the Defendant shall pay the Plaintiff’s costs on the issue of liability for the period up to 5 May 2010;
(b) each party shall bear their own costs in respect of the 2nd Reserved Costs;
(c) for the 3rd Costs, each party shall bear their own costs in respect of (i) the Settlement Summons (including the affirmations referred to in paragraphs 46-47 above) in respect of the matters specified in paragraphs 50(a), (b) and (d) above under the 18/5/11 Order and (ii) the hearing of the Settlement Summons on 18 May 2011;
(d) there be legal aid taxation in respect of the Plaintiff’s own costs in respect of the costs in (a) to (c) above.
For the avoidance of doubt, I hereby grant formal order in respect of (a)-(d) above.
54. Thus, the remaining disputed costs that require my determination are as follows:
(a) for the 1st Reserved Costs, costs of the action on the issue of liability for the period from 6 May to 16 November 2010 (“1st Disputed Costs”);
(b) for the 3rd Costs, costs of the Settlement Summons (including the affirmations referred to in paragraph 46 or paragraph 47 above, whichever is appropriate) in respect of the matters specified in paragraph 50(c) above under the 18/5/11 Order and (ii) the 1st Hearing on 26 July 2011 and the part-heard hearing on 4 August 2011 (“2nd Hearing”) in respect of the Settlement Summons (collectively, “3rd Disputed Costs”).
55. Initially at the 1st Hearing, Ms Hui and Mr Chan also had no dispute over the following matters:
(a) the 3rd Offer is a sanctioned offer within the meaning of Order 22 of the RHC;
(b) without prejudice to the parties’ dispute over whether the 3rd Offer has been served on the Plaintiff by ordinary post on 19 November 2010 and/or whether the Plaintiff has received such document, the form and content of the 3rd Offer meet the requirements in Order 22 rule 5 of the RHC.
After the 1st Hearing, I have referred Ms Hui and Mr Chan to the authorities referred to in paragraphs 65, 66 and 68 below and called for the 2nd Hearing for further addresses to be made. At the 2nd Hearing, Mr Chan withdrew his concessions in respect of (a) and (b) above. In any event, where a concession on law was wrongly made by a party, in the absence of prejudice (and there is none in this case as the concessions were made in respect of legal and not factual matters), it is open to the court to hold that the concessions were wrongly made and to allow the party to argue his case on proper legal basis (see Deng Minghui v Chau Shuk Ling [2007] 1 HKLRD 905, 910-912).
IV. HEARING BUNDLE
56. In respect of the hearing bundle placed before me, the Plaintiff initially disputed the inclusion of various documents, but at the 1st Hearing Mr Chan withdrew such objection and conceded that I could refer to all the documents therein. At the 1st Hearing, I also declined Ms Hui’s request to submit the letter referred to in paragraph 15 above made in the course of her submissions in reply out of fairness to the Plaintiff (since Mr Chan by that time had already completed his submissions in opposition), especially when the 3rd Offer referred to such letter as a “without prejudice” letter.
57. However, on 3 August 2011, WKT alerted JLA of their intention to submit further correspondence (including the letter referred to in paragraph 15 above, which transpired was made on a “without prejudice save as to costs” basis) to the court. At the 2nd Hearing, after brief resistance, Mr Chan conceded that I could refer to the further “without prejudice save as to costs” correspondence submitted by Ms Hui, but not JLA’s “without prejudice” letter dated 20 May 2010.
V. ORDER 22 OF THE RHC
58. Order 22 of the RHC provides inter alia as follows:
“2(1) A party to an action containing a money claim …… arising from any cause or causes of action may make an offer to settle the whole claim, a part of it or any issue arising from it in accordance with this Order.
……
(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 have the consequences specified in this Order, unless the Court so orders.
3(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.
5(2) A sanctioned offer may relate to the whole claim or to part of it or to any issue arising from it.
……
(6) A sanctioned offer may be made at any time after the commencement of the proceedings but may not be made before such commencement.
6 An offeror shall serve the sanctioned offer – (a) on the offeree; and (b) where the offeree is an aided person, on the [DLA].
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 [DLA]; and (b) file with the Court a certificate of service of the notice.
12(1) A sanctioned offer is made when it is served on the offeree.
(2) A sanctioned payment is made when a sanctioned payment notice is served on the offeree.
……
(5) A sanctioned offer or a sanctioned payment is accepted when notice of its acceptance is served on the offeror.
15(1) …… a plaintiff may accept a sanctioned offer or a sanctioned payment made not less than 28 days before the commencement of the trial without requiring the leave of the Court if he files with the Court and serves on the defendant a written notice of acceptance not later than 28 days after the offer or payment was made.
(2) If – …… (b) the plaintiff does not accept it within the period specified in paragraph (1), then the plaintiff may – …… (ii) if the parties do not agree on the liability for costs, only accept the offer or payment with the leave of the Court.
(3) Where the leave of the Court is required under paragraph (2), the Court shall, if it grants leave, make an order as to costs.
……
20(1) When 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.
……
22(1) If a sanctioned offer or a sanctioned payment relates to the whole claim and is accepted, the claim is stayed.
……
(5) Any stay arising under this rule does not affect the power of the Court – …… (b) to deal with the question of costs (including interest on costs) relating to the proceedings; or (c) to order payment out of court of any sum paid into court.” (my emphasis)
VI. DISCUSSION
(a) Sanctioned payment and sanctioned offer
59. I agree with Ms Hui that a defendant is entitled to offer to compromise legal proceedings by making a sanctioned payment together with a sanctioned offer such that the sanctioned payment is part of the terms of the sanctioned offer. This is reflected in the wide ambit of Order 22 rule 3(1) of the RHC (see paragraph 58 above) as well as the last check-box in the prescribed Form 23 as follows:
“□ It is part of the terms of a sanctioned offer set out (identify the document). If you give notice of acceptance of this sanctioned payment, you will be treated as also accepting the sanctioned offer.”
(b) Sanctioned offer or not?
60. Whilst there is no dispute that the 3rd SP is a sanctioned payment, the first question is whether the 3rd Offer is a sanctioned offer within the meaning of Order 22 of the RHC. Although not addressed at the 1st Hearing, this issue is of significance in relation to the question of costs. I therefore invited Ms Hui and Mr Chan for further addresses at the 2nd Hearing.
61. Under Order 22 rules 2(4) and 3(1) of the RHC (see paragraph 58 above) (which provisions are analogous to Parts 36.1(2), 36.2(1) and 36.3(1) of the English Civil Procedure Rules (“CPR”) prior to the amendments that came into effect on 6 April 2007 (“Old CPR”) – see paragraph 62 below), unless the 3rd Offer is a sanctioned offer made in accordance with the order, the 3rd Offer will not have the consequences specified in the order unless the court so orders.
62. Parts 36.1(2), 36.2(1), 36.3(1), 36.13(1) and 36.14 of the Old CPR provide as follows:
“36.1(2) Nothing in this Part prevents a party making an offer to settle in whatever way he choose, but if that offer is not made in accordance with this Part, it will only have consequences specified in this Part if the court so orders.
(Rule 44.3 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs)
36.2(1) An offer made in accordance with the requirements of this Part is called – (a) if made by way of a payment into court, “a Part 36 payment”; (b) otherwise “a Part 36 offer”.
36.3(1) Subject to rules 36.2A(2), 36.25(5) and 36.23, an offer by a defendant to settle a money claim will not have the consequences set out in this Part unless it is made by way of a Part 36 payment.
36.13(1) Where a [defendant’s] Part 36 offer or a Part 36 payment is accepted without needing the permission of the court the claimant will be entitled to his costs of the proceedings up to the date of serving the notice of acceptance.
36.14 Where a claimant’s Part 36 offer is accepted without needing the permission of the court the claimant will be entitled to his costs of the proceedings up to the date upon which the defendant serves notice of acceptance.
63. Parts 36.1(2) and 36.10(1) of the current version of the CPR (“New CPR”) provide as follows:
“36.1(2) Nothing in this section prevents a party from making an offer to settle in whatever way he chooses, but if the offer is not made in accordance with rule 36.2, it will not have the consequences specified in rules 36.10, 36.11 and 36.14.
36.10(1) Subject to paragraph (2) and paragraph (4)(a), where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror.”
64. There is no doubt that the 3rd Offer contains terms as to costs (see items 2-3 of the 3rd Offer in paragraph 33 above). It is also plain that the validity of such offer must be decided, in principle, at the date such offer was made (see Eiles v London Borough of Southwark [2006] EWHC 2014 (TCC) (28 July 2006) para.26).
65. In Mitchell & ors v James & ors [2003] 2 All ER 1064, a case concerning an alleged Part 36 offer under the Old CPR, Peter Gibson LJ (with whom Potter LJ and Sir Murray Stuart-Smith agreed) held that the draftsman of Part 36 did not intend terms as to costs to be included in a Part 36 offer. He gave four reasons for that conclusion at pp.1071-1072:
“[30] First, r 36.14 is worded as applicable whenever a claimant's Pt 36 offer is accepted without needing the permission of the court. It does not say ‘unless a claimant’s Part 36 offer indicates to the contrary’ (r 36.22(1)) or other wording to indicate that the parties can agree otherwise. Similarly, para 7.2 of the practice direction indicates that on acceptance of the Pt 36 offer ‘[t]he costs consequences set out in [rule] ... 36.14 will then come into effect.’ So too in a case where the court’s permission is needed for the defendants to accept a Pt 36 offer, if permission is given, para 7.5 envisages that the court may order that the costs consequences set out in r 36.14 will apply. These provisions are inconsistent with a term as to costs being part of the Pt 36 offer.
[31]Second, r36.21 [being the equivalent of Order 22 rule 24 of the RHC] is applicable where at trial either a defendant is ‘held liable’ for more, or ‘the judgment’ against a defendant is more advantageous to the claimant, than the offer. The words ‘held liable’ and ‘the judgment’ both appear to me to connote what the trial judge holds or decides on the substantive issues in the case as distinct from the ancillary issue of costs to be determined after the substantive issues are decided. Mr. Brunner accepted that that was so in relation to ‘held liable’, though not in relation to ‘judgment’. For my part, I cannot see why there should be such a difference.
[32]Third, the rule is intended to apply universally at the end of the trial when the judge is required to make an order for costs. Save in a case where the judge can make a summary assessment or the rare case where the costs at that point are agreed, there will have been no assessment of the costs, the figure for which would therefore be uncertain. Yet the rule contemplates that merely by reference to that for which the defendant is held liable or by reference to the judgment the judge will be able to decide whether r36.21 [being the equivalent of Order 22 rule 24 of the RHC] applies because the defendant has been held liable for more, or the judgment against a defendant is more advantageous, than the offer. I find it hard to believe that the draftsman contemplated that a Pt 36 offer is one which includes a term as to costs, so that the judge might have to evaluate the quantum of his costs order. That is normally the function of a costs judge, not the trial judge.
[33]Fourth, there would be a real risk of abuse if a term as to costs could be included in a Pt 36 order. Every well-advised claimant would make a Pt 36 offer containing the terms sought in his claim plus an offer as to costs in the hope that if he succeeded in his substantive claim he would obtain indemnity costs in place of the ordinary award of costs on the standard basis. Merely to win on his substantive claim and to obtain an order for costs under the general rule (see CPR 44.3(2)) will cause r36.21 [being the equivalent of Order 22 rule 24 of the RHC] to be applicable, so that the court ‘will’ make the orders referred to in r36.21(2) and (3) [being the equivalent of Order 22 rule 24(2) and (3) of the RHC] unless it considers it unjust to do so [being the equivalent of Order 22 rule 24(4) of the RHC]. Injustice in the eyes of the court is therefore the only basis on which the court could refuse to make an order for indemnity costs and interest. That does not confer a general discretion on the court.” (my emphasis)
66. The English courts have consistently regarded the conclusion in Mitchell (ie that an offer which includes terms as to costs is not a valid Part 36 offer) to be of general application whether under the Old or New CPR, (see Eiles at para.28 and Shah v Elliot [2011] EW Misc 8 (27 June 2011) at paras.26-27).
67. For the present purpose and for considering the reasons given by Peter Gibson LJ, Order 22 rule 24 of the RHC is modelled on and is almost on all fours with Part 36.21 of the Old CPR as referred to in Mitchell. Further, in my view, the provisions under the Old and New CPR set out in paragraphs 62-63 above are not materially different from Order 22 rules 2(4) and 20(1) of the RHC (see paragraph 58 above) except for the proviso “unless the Court otherwise orders” (“Otherwise Proviso”) in Order 22 rule 20(1) of the RHC which is absent in Parts 36.13(1) and 36.14 of the Old CPR and/or Part 36.10(1) of the New CPR.
68. Turning to the local scene, the applicant in Sunbeam Investments Limited v The Incorporated Owners of Villa Veneto LDBM 370/2007 and LDBM 175/2009, HH Judge Wong (unreported, 7 September 2010) sought to distinguish the rationale in Mitchell by referring to the Otherwise Proviso in Order 22 rule 20(1) of the RHC which is absent in the Old and New CPR. However, the learned Presiding Officer rejected such argument as follows:
“ 31. I do not accept the Applicant’s submissions in this regard. Apart from the addition of the discretion proviso, the sanction offer referred to Order 22 and its counterpart in Part 36 of the English rules are basically the same. There may be some modifications of the wordings, but the essential features of the sanctioned offer in Hong Kong are not different from its English counterpart. I find that the intention not to include any terms as to costs is equally applicable to Hong Kong, especially when one looks at Order 22, rule 15(2)(b) and rule 16(2)(b), where the liability for costs can be considered separately from the acceptance of the sanctioned offer. From these provisions, it is clear that the parties can always accept the sanctioned offer without agreeing on the liability for costs. I do not accept that the word “judgment” is construed restrictively, as costs is always to be dealt with after the substantive issues are determined first. It is always possible to have judgment on the substantive issues with or without any costs order. If costs were to be considered as part of the sanctioned offer, there could be real situations where a party offers an actual amount of costs to the other side, and the court would have to assess whether the amount offered is the right amount, and hence there would be a taxation or assessment exercise on costs. The court can prevent any abuse is one thing, but whether a sanctioned offer would create situations for abuse is another matter. I do not think that the intention of the sanctioned offer provisions was to include terms as to costs so as to create such a risk of abuse. ……
32. I therefore find that all the reasons given in Mitchells’ case are equally applicable to sanctioned offers in Hong Kong, and a term as to costs should not be considered as part of a sanctioned offer. ……”
69. At the 2nd Hearing, Ms Hui resurrected the argument raised by the applicant in Sunbeam Investments Limited, and urged me to depart from the conclusion reached by HH Judge Wong and to go on and hold that a sanctioned offer within the meaning of Order 22 of the RHC can include terms as to costs that are inconsistent with the express provision as to costs in Order 22 rule 20(1) of the RHC. In support of such contention, Ms Hui was only able to say that Order 22 rule 20(1) of the RHC contains the Otherwise Proviso absent in Parts 36.13(1) and 36.14 of the Old CPR. She also sought to distinguish Mitchell and Sunbeam Investments Limited on the basis that those cases dealt with applications made after judgment under Part 36.21 of the Old CPR or Order 22 rule 24 of the RHC for indemnity costs and/or for variation of the costs order nisi.
70. I am not persuaded by such arguments. First, under Order 22 rule 20(1) of the RHC, if a sanctioned offer is accepted without requiring leave of the court, the plaintiff is statutorily entitled to his costs of the proceedings up to the date of serving the notice of acceptance “unless the Court otherwise orders”.
71. In such context, if a sanctioned offer may contain terms as to costs that deprive the plaintiff of all or part of his costs of the proceedings, once the plaintiff accepts the sanctioned offer without requiring leave of the court, the terms of such offer (including the terms as to costs therein) will become binding on both parties through the operation of the Order 22 statutory regime that prescribes how sanctioned offers are to be made/accepted, thereby ousting the costs provision in favour of the plaintiff in Order 22 rule 20(1) of the RHC. Such departure from the statutory costs provision is not achieved by any order otherwise made by the court as required under Order 22 rule 20(1) of the RHC.
72. I bear in mind that Order 22 of the RHC is a self-contained statutory code with a carefully structured and prescriptive set of rules that are wholly procedural and not contractual in nature (see Hong Kong Civil Procedure 2011 Vol.1 para.22/1/B at p.470). There is no provision for any third methodology (as distinct from (a) the statutory costs provision in Order 22 rule 20(1) of the RHC and (b) costs that may otherwise be ordered by the court under the same sub-rule) for identifying the costs consequences upon acceptance of a sanctioned order without requiring leave of the court. To use the words of Peter Gibson LJ in para.30 of his judgment which sets out his first reason for excluding terms as to costs in a Part 36 offer, Order 22 rule 20(1) of the RHC does not say “unless a defendant’s sanctioned offer indicates to the contrary” or other wording to indicate the parties can agree otherwise (see paragraph 65 above). In my view, an offeror cannot seek Order 22 protection without at the same time accepting the burden of the costs consequences unless he can invoke the court’s discretion under the Otherwise Proviso. To put it in another way, an offer which deals with costs consequences upon acceptance (unless such term is precisely the same as the statutory provision for costs in Order 22 rule 20(1) of the RHC – see paragraph 58 above) means that such offer can only be validly accepted by disapplying the costs provision in Order 22 rule 20(1) of the RHC, and yet such statutory costs provision is expressed to apply without limitation to sanctioned offers only if the court otherwise orders (and not when the offeree otherwise accepts or the parties otherwise agree). Hence, an offer that contains terms as to costs is inconsistent with the notion of sanctioned offer under Order 22 of the RHC.
73. Secondly, three of the four reasons put forward by Peter Gibson LJ in Mitchell for his conclusion that terms as to costs should not be included in a Part 36 offer turn on the provisions in Part 36.21 of the Old CPR. Since Order 22 rule 24 of the RHC is materially the same as Part 36.21 of the Old CPR, the potential problems arising from the inclusion of an offer in relation to costs in a sanctioned offer as highlighted by Peter Gibson LJ are equally applicable to the scheme under Order 22 rule 24 of the RHC.
74. Although Ms Hui sought to distinguish Mitchell and Sunbeam Investments Limited on the basis that the present case is concerned with Order 22 rule 20(1) and not rule 24 of the RHC, the fact remains that at the time when the sanctioned offer is made one never knows whether its impact on costs will be considered upon acceptance of such sanctioned offer within time without requiring leave of the court or after trial/judgment. After all, as pointed out in paragraph 64 above, the validity of a sanctioned offer is not determined by hindsight but at the date when such offer was made. Plainly, a sanctioned offer under the Order 22 statutory regime must be valid for the purpose of both Order 22 rule 20(1) and rule 24 of the RHC. Consequently, the matters discussed in the above paragraph remain pertinent even though the present case concerns the costs consequences in Order 22 rule 20(1) of the RHC.
75. Thirdly, although the remaining reason put forward by Peter Gibson LJ relies on the mandatory nature of the costs provision in Part 36.14 of the Old CPR, which Ms Hui claims to be materially different for the present purpose from Order 22 rule 20(1) of the RHC with the Otherwise Proviso, there are both English and Australian authorities that suggest the Otherwise Proviso does not confer a general discretion but instead requires the discretion to be exercised only under exceptional and compelling circumstances (see paragraphs 97-105 below). Underlying this approach is the importance of having some certainty as to the costs consequences to facilitate proper consideration and/or acceptance of reasonable offers for promoting settlement of litigation. This also lends weight to the application of the Mitchell prohibition of inclusion of terms as to costs in any sanctioned offer.
76. Taking the above matters into consideration and bearing in mind the reasons for HH Judge Wong’s decision set out in paragraph 68 above, I conclude that the 3rd Offer is not a valid sanctioned offer because it includes an offer in respect of costs. As such, it does not have the consequences specified in Order 22 of the RHC unless the court otherwise orders.
(c) Acceptance Notice
77. There is no dispute that the Acceptance Notice is in the prescribed Form 24 (see Order 22 rule 15(4) of the RHC), and that it has been served on WKT on 12 January 2011 (see paragraph 43 above). Hence, the Plaintiff’s acceptance of the 3rd SP was “within the prescribed time, ie no later than 28 days after the offer or payment was made” (see Order 22 rule 15(1) of the RHC – see paragraph 58 above). Consequently, leave of the court was not required for such acceptance.
78. The 3rd Offer expressly stated that the 3rd SP was part and parcel of the 3rd Offer in respect of the whole of the claim. The 3rd SP Notice also provided as follows :
“þ It is part of the terms of a sanctioned offer set out in the sanctioned offer dated 19th November 2010 [ie the 3rd Offer]. If you give notice of acceptance of this sanctioned payment, you will be treated as also accepting the sanctioned offer.” (“3rd Offer Box”)
Notwithstanding the assertion in the 3rd SP Notice that any acceptance of the 3rd SP would also be treated as acceptance of the 3rd Offer as a sanctioned offer, the Acceptance Notice cannot be treated as any such acceptance because the 3rd Offer is in fact an invalid sanctioned offer.
79. Pursuant to Order 22 rule 20(1) of the RHC (see paragraph 58 above), since the 3rd SP was accepted in settlement of the whole of the Plaintiff’s claim without requiring the leave of the court, the Plaintiff is entitled to his costs of the proceedings up to 12 January 2011 (ie the date of serving the Acceptance Notice) “unless the court otherwise orders”.
80. At the 1st Hearing, Mr Chan drew analogy with a Part 36 offer that “relates to the whole of the claim” (see Part 36.5(3)(a) of the Old CPR), and referred to extracts from Foskett, The Law and Practice of Compromise 5th edition (2002) paras.16-04 – 1605 at p.222 to say that “[the] natural meaning of this expression connotes all issues that arise directly in the proceedings”, and “[in] most cases, the “whole of the claim” will embrace primary liability, contributory negligence (where applicable), causation of loss and all issues relating to the remoteness and quantification of damages” (see also paras.15.05 – 15-06 at p.230 of the current edition being the 7th ed (2010)). Mr Chan argued that since the 3rd SP was for settlement of the whole of the Plaintiff’s claim, the Plaintiff was therefore entitled to his costs of the whole of the present action up to 12 January 2011 including the 1st Reserved Costs and/or the 1st Disputed Costs.
81. Putting aside the Otherwise Proviso for the moment, the first question is whether the statutory costs provision in Order 22 rule 20(1) of the RHC (ie “[the plaintiff’s] costs of the proceedings up to the date of serving notice of acceptance” – see paragraph 58 above) triggered by the Acceptance Notice covers the 1st Reserved Costs (inclusive of the 1st Disputed Costs) such that the Defendant becomes liable to pay such costs to the Plaintiff. To answer this question, it is necessary to first turn to the meaning of “costs reserved” since the 1st Reserved Costs (inclusive of the 1st Disputed Costs) have been reserved under the 16/11/10 Order (see paragraph 31 above).
(d) Costs reserved
82. In Hong Kong Civil Procedure 2011 Vol.1 para.62/1/3 at p.1089, it is said as follows:
“ “Cost reserved” means that the costs will be lost and will not be allowed on taxation unless the court makes a specific order dealing with them at the conclusion of the proceedings (British Natural Premium Provident Association v. Bywater [1897] 1 Ch. 531, Beckley v. Colley (1904) 48 Sol. Jo. 261; How v. Earl Winterton (No.4) (1904) 91 L.T. 763). Such costs are not included in the costs of the action (Gardner v. Marshall (1845) 14 Sim. 575). (cf.: the definition of the same phrase in O.62, r.3 of the English Rules of the Supreme Court, The Supreme Court Practice 1999, para.62/3, p.1120).”
In How v Earl Winteron (No.4) (1904) 91 LT 763, in considering what were the defendant’s costs of the action, Kekewich J held that when costs were reserved the court had pronounced “no opinion whatever, not only on the question of whether the plaintiff should pay the defendant or the defendant should pay the plaintiff, but as to how the costs should be borne at all, it might at the end say that neither party should have any costs, or it might deal with them in one of the other ways [he has] suggested; but it is impossible, I think, for the taxing master, dealing with the costs of the defendant to an action, to look at any costs which have been reserved” (at p.765).
83. Kekewich J suggested that there would always be liberty to apply even if the costs were reserved and “[nothing] can be easier than for the plaintiff to issue a summons asking that those several reserved costs may be allowed as costs in the action. That can be conveniently done before the taxing master disposes of the whole case” (at p.765). But in British Natural Premium Provident Association v Bywater [1897] 2 Ch 531, 532-533, Bryne J whilst accepting that where costs had been reserved in respect of interlocutory applications that had been disposed of “such costs are not to be mentioned in the judgment or order, or allowed on taxation, without the special direction of the judge”, reminded that in future if judgment had been passed and entered costs reserved not mentioned at trial shall not be allowed “except under very special circumstances”.
84. From the above, the local meaning of “costs reserved” is tolerably clear, but the last phrase in the passage extracted from Hong Kong Civil Procedure 2011 Vol.1 para.62/1/3 at p.1089 in paragraph 82 above hinted that the English position may be different. It is said in The Supreme Court Practice 1999 Vol.1 para.62/3 at p.1120 as follows:
““Costs reserved” |
(Except in proceedings in the Family Division) the party in whose favour an order for costs is made at the conclusion of the cause or matter in which the proceedings arise shall be entitled to his costs of the proceedings in respect of which this order is made unless the Court otherwise orders;” |
Further, in Cook on Costs 2011 paras.[16.8] and [16.16] at pp.292 and 297, it is said that “costs reserved” means “[the] decision about costs is deferred to a later occasion, but if no later order is made the costs will be costs in the case” and “[any] interim costs which have been reserved will automatically be awarded to the winner of the action unless the trial judge orders otherwise”. No authorities have been cited for the English approach to “costs reserved” in the learned legal texts.
85. In my view, the different approach to “costs reserved” adopted by the local and English courts is probably due to the evolution of court practice in separate common law jurisdictions. For the present purpose, there is no reason not to follow the conventional approach consistently adopted in Hong Kong, and I shall do so. Such approach not only enjoys the support of legal authorities, it is also in line with Order 62 rule 2(1) of the RHC which provides that “[subject] to the provisions of this Order, no party shall be entitled to recover any costs of or incidental to any proceedings from any other party to the proceedings except under an order of the Court”. This provision is of particular relevance to the 1st Reserved Costs and/or the 1st Disputed Costs because the 16/11/10 Order specifically reserved such costs for determination either at the hearing of assessment of damages or for argument before the court at the conclusion of the present action (see paragraph 31 above) and there is as yet “no order of the Court” as required under Order 62 rule 2(1) of the RHC that allows either the Plaintiff or the Defendant to recover such costs.
86. In the circumstances, even though the Plaintiff is prima facie entitled to his costs of the proceedings up to 12 January 2011 (ie up to the date of service of the Acceptance Notice), Order 22 rule 20(1) of the RHC of itself does not confer on him any entitlement to recover against the Defendant the 1st Reserved Costs and/or the 1st Disputed Costs “unless the Court otherwise orders”. Likewise, unless there is a court order in favour of the Defendant in respect of the 1st Disputed Costs pursuant to the Otherwise Proviso, the Plaintiff is not obliged to pay them the 1st Disputed Costs. It seems that both parties have to pray in aid the Otherwise Proviso to seek their respective costs on the issue of liability from 6 May to 16 November 2010.
(e) Otherwise Proviso
87. How is the discretion to be exercised under the Otherwise Proviso in Order 22 rule 20(1) of the RHC (see paragraph 58 above)? In her recent decision in Chan Cheuk Kwan v Ho Kam Wo & anor DCPI 2103/2010 (unreported, 20 July 2011) where the defendant sought costs from the date of a pre-action offer until the date of acceptance of the sanctioned payment (in the same amount as offered in the pre-action offer) without requiring leave of the court, Master J Chow was called upon to consider “in what circumstances should the Court order costs otherwise” (at para.18).
88. In her decision, Master J Chow referred to Part 36.10(1) which was said to be extracted from the Old CPR as follows:
“Subject to paragraph (2) and paragraph 4(a), where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror.”
and then to Part 36.10(1) which was said to be extracted from the New CPR as “updated in 2011” as follows:
“If a person makes an offer to settle before proceedings are begun which complies with the provisions of this rule, the court will take that offer into account when making any order as to costs.” [emphasis added]
The learned Master then said “[the] court shall embark on the same test [see the emphasis add in the above extract] to decide on costs consequence in the present case” and “[the] new Rule 36.10 shed light to situations where the Court should consider” (at paras.16 and 19).
89. However, a review of Civil Procedure 2006 and Civil Procedure 2011 shows that in fact the first extract of Part 36.10(1) in the above paragraph said to be from the Old CPR was in fact drawn from the New CPR (see paragraph 63 above) and the second extract of Part 36.10(1) in the above paragraph was in fact drawn from the Old CPR (and the wording has been the same since the CPR was originally made in 1998). Further, the 55th Update to the CPR that came into force on 6 April 2011 did not bring any changes to Part 36.
90. Still further, the Old CPR case of Walker Residential Limited v Davis & anor [2005] EWHC 3483 (Ch) (9 December 2005) cited in Chan Cheuk Kwan referred to the second extract of Part 36.10(1) of the Old CPR in paragraph 88 above, and held that under Part 36.13(1) and not Part 36.10(1) of the Old CPR (which does not contain the Otherwise Proviso – see paragraph 62 above), the English courts had no jurisdiction to deprive the claimant of the mandatory costs in his favour upon acceptance of a Part 36 offer. The same conclusion was reached by the English Court of Appeal in Lahey v Pirelli Trust Ltd [2007] 1 WLR 998, which was also decided under the Old CPR. Under Part 36.10(1) of the New CPR (which again does not contain the Otherwise Proviso – see paragraph 63 above), the English courts continued to hold they had no power to disallow any part of the mandatory costs (see London Tara Hotel Ltd v Kensington Close Hotel Ltd [2011] EWHC 29(Ch) (14 January 2011) and Civil Procedure 2011 Vol.1 para.36.10.1 at p.1100). In the circumstances, I am not persuaded that either Part 36.13(1) of the Old CPR or Part 36.10(1) of the New CPR is helpful in interpreting the power of the Hong Kong courts to “otherwise order” costs under Order 22 rule 20(1) of the RHC.
91. As regards Part 36.10(1) of the Old CPR (see the second extract of Part 36.10(1) in paragraph 88 above), an offer to settle before the commencement of proceedings which is not a Part 36 offer but is compliant with the provisions in Part 36 of the Old CPR should be treated in a like fashion to a Part 36 offer made after proceedings are begun and should where appropriate attract the provisions of Part 36 of the Old CPR. But Order 22 of the RHC does not apply to any pre-action offer (see Order 22 rule 5(6) of the RHC – see paragraph 58 above). I am not persuaded that Part 36.10(1) of the Old CPR is of any material relevance to the exercise of the court’s discretion under Order 22 rule 20(1) of the RHC.
92. So for the present purpose, whilst I do not wish to go behind the decision in Chan Cheuk Kwan, I wish it to be understood that I am not thereby to be taken to be agreeing with it.
93. The Otherwise Proviso appears in Part 36.10(2) of the New CPR which provides as follows:
“Where –
(a) a defendant’s Part 36 offer relates to part only of the claim; and
(b) at the time of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim,
the claimant will be entitled to the costs of the proceedings up to the date of serving notice of acceptance unless the court orders otherwise.” (my emphasis)
and also in Part 36.13(2) of the Old CPR which provides as follows:
“Where –
(a) a Part 36 offer or a Part 36 payment relates to part only of the claim; and
(b) at the same time of serving notice of acceptance the claimant abandons the balance of the claim,
the claimant will be entitled to his costs of the proceedings up to the date of serving notice of acceptance, unless the court orders otherwise.” (my emphasis)
94. It has been suggested in Phillips v Associated Newspapers Ltd [2004] 2 All ER 455, 457 that in the absence of the Otherwise Proviso in Part 36.13(1) of the Old CPR, “[it] seems tolerably clear, however, that the wording of sub-para (2) [of Part 36.13 of the Old CPR] is intended to draw attention to the court’s power to deprive a claimant of some part of his costs in respect of a partial offer where the balance of the claim is abandoned” (at para.6).
95. In E Ivor Hughes Educational Foundation v Leach [2005] EWHC 1317 (Ch) (14 June 2005), a case also under the Old CPR, the claimant accepted the payment in and abandoned the rest of its claim. The defendant accepted he was liable to pay the claimant’s costs relating to such aspect of the claim that was compromised, but denied liability to pay the claimant’s costs relating to the rest of the claim on the ground that it had been seriously exaggerated by the claimant. Peter Smith J said that “the courts should not limit the clear and wide discretionary words “unless the court orders otherwise” [in Part 36.13(2) of the Old CPR]. It seems to me that that gives the court a complete discretion, like it has under CPR 44.3, to deal with costs at large”.
96. In my view, the exercise of the discretion under the Otherwise Proviso in Part 36.13(2) of the Old CPR (and presumably similarly under Part 36.10(2) of the New CPR) is not of particular relevance to the present context which calls for interpretation of the statutory cost provision in Order 22 rule 20(1) of the RHC upon resolution of the whole of the Plaintiff’s claim. After all, the issue of costs where only part of the claim has been compromised with abandonment of the balance of the claim (in contra-distinction to settlement of the whole of the claim) necessarily calls a wider discretion.
97. I have referred Ms Hui and Mr Chan to the pre-CPR decision of the English Court of Appeal in Glenlion Construction Limited v Beaverfoam (Moreton) Limited (1983) 134 Fam Law 861; Lexis-Nexis transcript (3 November 1983). In that case, the question was whether, when a plaintiff accepted a payment into court in full satisfaction of all claims so that the proceedings were thereby stayed, the court had discretion to deprive the plaintiff of all or any of the costs of the action. Under Order 62 rule 10(2) of the English Rules of the Supreme Court (ie the equivalent of Order 62 rule 10(2) of the Hong Kong Rules of the Supreme Court that was in effect before the amendments brought about by LN403/1992 dated 30 November 1992), “[the plaintiff] may, after four days from payment out and unless the court otherwise orders, tax his costs incurred to the time of receipt of the notice of payment into court and 48 hours after taxation may sign judgment for his taxed costs” (my emphasis). At p.6 of the transcript, Stephenson LJ said that whilst the words of the English sub-rule did not limit or restrict the court’s power over costs,
“[but] this, as I shall endeavour to indicate later, was an exceptional case by the judge; it was an order, and the order which he made, and which should only be made, in an exceptional case. Secondly, this was a case in which the plaintiffs from a very early stage had been put on notice by a warning from the defendants that they were going to ask the court to make the order which the judge in fact made [ie to deprive the plaintiff of some of the costs of the action]. …… I would regard it as a wrong exercise of the judge’s discretion to make such an order as was made in this case unless there had been a clear warning to the plaintiffs by the defendants that that was their intention – that it was their intention to claim such an order. ……” (my emphasis)
98. At p.9 of the transcript, Griffiths LJ opined that the words “unless the court otherwise orders” in the sub-rule, far from cutting down the very wide discretion on costs conferred by the terms of section 51 of the Supreme Court Act 1981, were inserted to make clear that the court retained its discretion in the circumstances dealt with by that sub-rule. At p.10 of the transcript, he agreed with Stephenson LJ as follows:
“…… A plaintiff faced with a payment into court has a very difficult decision to take. As a general rule he should be entitled, when applying his mind to that decision, to assume that if he takes the money he will at least be able to recover his taxed costs up to the date of payment in. But if he has been put specifically on notice by the defendants either at or before the date of payment in, then they propose to apply to the court for an order that he should not recover his full costs, then that is a further factor which he must take into consideration. It would however, in my view, save in the most exceptional cases, the circumstances of which at the moment I am unable to envisage, be quite wrong for a defendant to allow a plaintiff to take money out of court on the faith that he would recover his costs up to the date of payment in and then thereafter, without warning, apply to the court for an order either limiting or excluding his right to recover those costs.” (my emphasis)
99. Griffiths LJ went on to say at p.10 of the transcript as follows:
“But, however that may be, I agree with my Lord that it would only be in an exceptional case that it would be right to exercise the discretion in favour of a defendant who had not put the defendant [sic] on notice at or before the time of the payment in that he intended to make an application as to costs.”
100. Turning to the Australian jurisdiction, Maitland Hospital v Fisher (No.2) (1992) 27 NSWLR 721 dealt with an equivalent rule of the New South Wales Supreme Court Rules 1970 concerning plaintiff’s offer and indemnity costs. Rule 17(4) provides as follows:
“17(4) Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim to which the offer relates no less favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall, subject to rule 24, be entitled to an order against the defendant for his costs in respect of the claim from the day on which the offer was made, taxed on an indemnity basis in addition to his costs incurred before and on that day, taxed on a party and party basis.” (my emphasis)
In that case, the Court of Appeal said at p.725 as follows:
“Litigation is inescapably chancy. The purpose of the rule is to put a premium on realistic assessment of cases. It is not to demand perfect foresight which is denied even to judges. That is why a discretion is retained, under the rule, for the court to order otherwise than as the rule provides. But the ordinary provision is expected to apply in the ordinary case. It has added a new duty to the functions of legal practitioners advising litigants. It is a duty which is both protective of the interests of litigants and of the public interest in the prompt and economical disposal of litigation. It is the duty of courts, allowing for exceptions in particular cases, to give effect to the purpose of the rule.” (my emphasis)
101. I have also referred Ms Hui and Mr Chan to the case of Donald John Wills and Heather Reney Wills v Bigmac Pty Ltd & anor VG59/1992 (unreported, 9 December 1994). In that case, the respondents made payment into court. The applicants successfully applied to amend the statement of claim shortly before trial, and during the trial the respondents made a second payment into court, which was eventually accepted. Under Order 23 rule 11(1)(a) of the Federal Court Rules, the applicants would be entitled to tax their costs on a party and party basis up to and including the day the offer was accepted, unless the court otherwise orders, but the respondents asked for their costs from the date of the first payment into court to the date of the hearing of the applicants’ amendment application. Heerey J held that the respondents were seeking an indulgence to vary the usual costs consequences provided for by the rules, and said as follows at p.6 of the Lexis-Nexis transcript:
“Moreover, an important element in facilitating proper consideration of a payment in is certainty as to the costs consequences. It would in my opinion require compelling and exceptional circumstances before the court “otherwise orders”. Were this not so, applicants might be inhibited in accepting otherwise reasonable offers because of uncertainty as to the costs consequences. The effectiveness of O.23 in promoting settlement of litigation would be diminished.” (my emphasis)
102. Kirby P in Hillier v Sheather (1995) 36 NSWLR 414 declined to accept that the circumstances must be “compelling” before the court might “otherwise order” in relation to an equivalent rule of the District Court Rules of New South Wales. He went on to say at p.422 that “[it] is enough to say that the case needs in some way to be exceptional. It must be exceptional because the general rule is that provided for in the rule itself. To gain relief, an exceptional exempting order must be made”.
103. But Heerey J’s observations were cited with approval by Mansfield J in Smith v 600 Machinery Australia Ltd [1996] FCA 1029 (unreported, 19 November 1996). In Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No.2) [2004] FCA 1437 (unreported, 5 November 2004), Hely J at para.17 explained as follows:
“Heerey J’s statement is no more than a description of the predicament created for defendants by the operation of the Rules. …… Correctly understood, Heerey J was explaining the operation of the Rule, rather than impermissibly attempting to place a fetter on the exercise of the Court’s discretion. There has been some criticism of the use by Heerey J of the expression ‘compelling ... circumstances’ (see Hillier v Sheather (1995) 36 NSWLR 414 at 422), but in my respectful opinion his Honour was not seeking to do more than to convey that the prima facie position should only be departed from for proper reasons which, in general, only arise in an exceptional case (see Houatchanthara v Bednarczyk (unreported, NSWCA, Clarke and Handley JJA, Santow AJA, 14 October 1996, BC 9604998)).”
104. In Uniline Australia Ltd ACN 010 752 057v SBriggs Pty Ltd CAN 007 415 518 (No.2) [2009] FCA 820 (unreported, 20 August 2009), Greenwood J emphasised that:
“46. An offeree ought only to be relieved of the consequences of the rule in support of an order “otherwise” if the offeree can demonstrate compelling and exceptional circumstances to support a different form of order: Wills & Anor v Bigmac Pty Ltd …… That position was adopted in Smith v 600 Machinery Australia Pty Ltd …… In Houatchanthara v Bednarczyk (New South Wales Court of Appeal, BC9604998), Clarke JA, Handley JA and Santow AJA agreeing, observed:
The rule lays down the general principle that should be applied, and the order provided for in that rule should only be departed from for proper reasons which, in general, only arise in an exceptional case. It is clear that if the rule operates, the plaintiff will be significantly disadvantaged, but that disadvantage flows naturally from the risks of litigation. The idea behind the rule is to encourage settlement or compromise of proceedings, and more specifically, to encourage litigants to give serious consideration to the settlement of proceedings. Where an offer is made by a defendant to a plaintiff, the latter is put on notice that unless he or she accepts that offer, there is a significant risk that the order provided for by the rule may follow. In declining to accept the offer, the plaintiff undertakes the risk and the consequences that flow naturally from that risk.”
105. Nevertheless, the Australian courts have recognised that it is impossible to exhaustively state the circumstances in which a discretion to contrary effect (that is to otherwise order) may be exercised, and that it will be imprudent to attempt any such exhaustive statement (see New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100, 102 per Gleeson CJ).
106. The Australian courts have consistently required the party making an “offer of compromise” to demonstrate compelling and exceptional circumstances so as to “otherwise” relieve the offeree of the benefit of the statutory costs provision triggered by the acceptance of such “offer of compromise”. In my view, the Australian authorities on the exercise of discretion to oust the statutory costs provision upon acceptance of an “offer of compromise” are more akin to the present context where the acceptance of a sanctioned payment compromises the whole of the claim.
107. The pre-CPR English case of Glenlion Construction Limited being concerned with a compromise of the whole claim by acceptance of payment into court is also akin to the present context. Like the Australian authorities, Stephenson LJ (with whom Griffiths and Purchase LJJ agreed) considered both an exceptional case and “secondly” a prior warning are fundamental to the exercise of the discretion under the Otherwise Proviso (see paragraph 97 above).
108. Yet, in the recent decision of Cheung Mai Po v Chan Yu Ching, Alexs HCPI 71/2010 (unreported, 24 June 2011), Master KK Pang after considering Glenlion Construction Limited and Donald John Wills and Heather Reney Wills was “prepared to hold that the Court’s discretion should only be exercised in compelling and exceptional circumstances” (at para.18), but did not consider that any prior warning to be a prerequisite for the exercise of the discretion to order costs “otherwise” (at para.68). He came to the following view based on Griffiths LJ’s observations set out in paragraph 99 above:
“…… One can see from Griffiths LJ’s statement …… that where there is exceptional and compelling circumstance, it could be right to exercise the discretion in favour of a defendant who had not put the plaintiff on notice at or before the time of the payment in that he intended to make an application as to costs”.
109. However, Griffiths LJ’s observations must be viewed in context. As explained in paragraph 107 above, Griffiths LJ in fact agreed with the observations of Stephenson LJ that the exercise of the discretion under the Otherwise Proviso to deprive the plaintiff of his statutory entitlement to costs required both an exceptional case and “secondly” a prior warning. Indeed, Griffiths LJ himself stated that “save in the most exceptional cases”, the circumstances of which were so rare that at the moment he was unable to envisage, it would be “quite wrong” to oust the claimant’s entitlement to costs under the sub-rule without any prior warning (see paragraph 98 above), and it was in such context that he went on to say it would only be in an exceptional case that it would be right to exercise the discretion in favour of a defendant who had not given prior warning at or before the time of the payment in that he intended to make an application as to costs. In my view, Griffiths LJ in so saying was merely underlining or emphasising the fundamental importance of giving prior warning for the exercise of the “otherwise order” discretion. In the circumstances, whilst I do not think the court in Glenlion Construction Limited put the matter of prior warning as high as a prerequisite to the exercise of discretion, and even if the matter of prior warning is not a “second” requirement that has to be satisfied but is part of the overall considerations, they obviously considered it to be a most material factor in deciding whether the discretion is engaged.
110. Cheung Mai Po is presently under appeal. Since we shall shortly have the benefit of the appellate court’s guidance on the approach to be adopted in the exercise of the “otherwise order” discretion as to costs under Order 22 rule 20(1) of the RHC, I do not propose to say anything further except to refer to the edifying English trend in respect of the exercise of the court’s discretion on costs discussed in paragraph 125 below.
111. However, in the present case, it is unnecessary for me to come to a definitive view on the approach to be adopted upon review of the above authorities because, unlike those authorities, the present action is a not one in which one party seeks to deprive the other party’s entitlement to costs under any statutory costs provision, but one in which both parties want the court to make a costs order in respect of the 1st Disputed Costs in his/their respective favour. In such circumstances, it must be common ground that the discretion under the Otherwise Proviso is engaged irrespective of whether there are any exceptional and compelling circumstances and/or any prior warning. If prior warning is required, by the terms of the 16/11/10 Order (see paragraph 31 above) both parties have already been alerted to the need for eventual court determination of the 1st Reserved Costs at the assessment of damages or upon argument before the court at the conclusion of the present action.
(f) Order 22 rule 2(4) and Order 62 rule 5 of the RHC
112. Order 22 rule 2(4) of the RHC (see paragraph 58 above) on its face seems to give the court a wide discretion to order that an invalid sanctioned offer to have Order 22 consequences. The equivalent English provision can be seen in Part 36.1(2) of the Old CPR (see paragraph 62 above) and Part 36.1(2) of the New CPR (see paragraph 63 above).
113. Before considering the scope for exercise of the discretion under the “unless the Court so orders” proviso in Order 22 rule 2(4) of the RHC, it is necessary to refer to Order 62 rules 3 and 5 of the RHC which provide as follows:
“3(2) If the Court in the exercise of its discretion sees fit to make any order as to costs of and incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.
……
5(1) 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;
……
(b) any payment of money into court and the amount of such payment;
……
(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;
(e) the conduct of all the parties;
(f) whether a party has succeeded on part of his case, even if he has not been wholly successful;
(g) any admissible offer to settle made by a party, which is drawn to the Court’s attention.”
114. The material parts of the equivalent provision in Part 44.3(4) of the New CPR are as follows:
“44.3(4) In deciding what order (if any) to make about costs, the court must have regard to all the circumstances including –
(a) the conduct of all the parties;
(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and
(c) any payment into court or admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.”
115. Shah (at paras.31-32) said the fact that a defendant tried to make a Part 36 offer and failed simply deprived him of the guaranteed protection of Part 36.10, but did not prevent him from seeking to take advantage of Part 44.3(4)(c).
116. Accordingly, the English courts have a discretion derived variously or cumulatively from Part 36.1(2) and/or Part 44.3, and in exercising such discretion, the court will have regard to the conduct of the parties and any admissible offer to settle, whether made in accordance with Part 36 or not. The court will look at the reality, so far as it can, of what was going on and not dwell on the precise particulars of how the offer may have been drawn up or expressed.
117. In Trustees of Stokes Pension Fund v Western Power Distribution (South West) plc [2005] 1 WLR 3595, the English Court of Appeal considered whether a pre-action “without prejudice save as to costs” offer by a defendant should have the same consequence as a Part 36 payment. In reviewing the discretion under Part 36.1(2) of the Old CPR, Dyson LJ observed that it was unfortunate that the rules gave no guidance as to how the discretion should be exercised, but he (with whom Auld LJ agreed) identified four features an offer had to exhibit in order to be regarded as a Part 36 payment (at p.3604):
(c) the offer was expressed in terms which left no doubt as to what was being offered, including which parts of the claim it was intended to satisfy, whether any counterclaim had been taken into account, and what provision for interest was proposed;
(d) it was open for acceptance for at least 21 days;
(e) it was not a sham or non-serious offer; and
(f) it was made by a defendant who was clearly good for the money at the time the offer was made.
118. Dyson LJ went on to say at p.3604 as follows:
“ 25. To the extent that any of these conditions is not satisfied, the offer should be given less weight than a payment into court for the purposes of a decision as to the incidence of costs. Where none of the conditions is satisfied, it is likely that the court will hold that offer affords the defendant no costs protection at all.
26. But if all the conditions to which I have referred are met, then I can see no reason in principle why the effect of an offer should differ from that of a payment into court. Simon Brown LJ mentioned the need to promote clarity and certainty. I agree. That is why an offer which is unclear and uncertain will usually not carry the same weight as a payment into court. But an offer which satisfies the four conditions should by definition be no less clear or certain than a payment into court. It is important to emphasis that the purpose of a payment into court is not to provide the claimant with security for his judgment if he succeeds at trial. It is to encourage settlement. As Lord Woolf said (Access to Justice final report, ch 11, para 3), a payment into court is “a useful way of assuring claimants of the substance of an offer”, and thereby encouraging them to settle by accepting the money that has been paid into court. If a claimant has no less assurance as to the substance of an offer than where a payment into court has been made, there is no reason to treat the offer as providing any less encouragement to settle or to treat it differently from a payment into court.”
119. Ramsey J in Eiles (at para.42) in deciding whether to exercise his discretion whether to order the claimant’s invalid Part 36 offer as having the relevant consequences in Part 36, summarised the factors he would have regard to, ie the observations of Dyson LJ in Trustees of Stokes Pension Fund, the overriding objectives under Part 1.1, and the requirement to deal with cases justly and in particular to save expense and deal with the case in ways which are proportionate to the amount of money involved.
120. But before considering how to exercise the discretion under Order 22 rule 3(4) and Order 62 rule 5 of the RHC, it is necessary to ask whether the court can order an offer which includes terms as to costs to have the consequences specified in Order 22 of the RHC.
121. Peter Gibson LJ in Mitchell at p.36 stated as follows :
“34. I therefore conclude that a term as to costs is not within the scope of a Part 36 offer. That does not of course mean that a claimant cannot make an offer which includes a term as to costs; the court will have regard to that in exercising its usual discretion in relation to inter partes costs at the end of the case. As r 36.1(2) states, nothing in Part 36 prevents a party making an offer to settle in whatever way he chooses. However, nothing in r 36(1)(2) permits a party to include a term as to costs as part of a Part 36 offer for the purpose of obtaining an order for costs on an indemnity basis.”
122. In Feakins v Burstow & anor [2005] EWHC 2441 (QB) (11 November 2005), Jack J cited Mitchell with approval and reiterated that an offer could be considered under Part 44.3(4)(c) even though it was not a Part 36 offer because it included a term as to costs. Such approach in Mitchell was also followed in Hong Kong by HH Judge Wong in Sunbeam Investments Limited at para.32.
123. Ramsay J in Eiles at paras.36-39 said the above passage extracted from Mitchell did not circumscribe the discretion which would otherwise apply under Part 36.1(2) of the Old CPR. Rather, the English Court of Appeal in Mitchell was pointing out that an order under Part 36.1(2) that the consequences of Part 36.21 of the Old CPR (ie the English equivalent of Order 22 rule 24 of the RHC) should apply to an offer did not thereby change the threshold test for Part 36.21, so that if, as in Mitchell, “the decision on the substantive issues was insufficient in itself to exceed the offer, the ancillary issue of costs could not be used to determine whether the defendant was held liable for more or the judgment against a defendant was more advantageous to the claimant than the offer”. Where a claimant had, independently of the offer as to costs, satisfied the conditions in Part 36.21 and did not need to rely on the success on costs to succeed in relation to the threshold test for Part 36.21, there would be no impediment to the exercise of discretion under Part 36.1(2) to order that the offer should have the consequences specified in Part 36.
124. Underhill J in Huntley v Simmonds [2009] EWHC 406 (QB) para.7 said he was not troubled by giving Part 36 effect to an offer that failed to comply with the rules:
“…… A defendant who makes a non-compliant offer is in a worse position because he is at the mercy of the Court instead of being able to rely on the strong presumption that the costs consequences specified by CPR 36.14 will apply. It would not be in every case that the Court would be prepared to overlook any defects, even if they could be characterised as technical. But in a proper case – and I think, for the reasons advanced by Mr Walker, that this is such a case – I see no reason why a party should be penalised for what are in truth purely technical failures. I was referred to Mitchell v James [2004] 1 WLR 158 and Hertsmere Primary Care Trust v Estate of Rabindra–Anandh [2005] EWHC 320 (Ch), in which the Court gave effect to a non-compliant Part 36 offer in broadly analogous circumstances. Those cases are not directly applicable because they relied on the terms of CPR 36.1(2), which has since been amended; but they reinforce my view that there is nothing wrong in principle in the approach which I propose to take.”
125. But currently there seems to be a tightening trend in the exercise of such discretion by the English courts as the ills of a wide-ranging discretion gradually become more apparent. In Fox v Foundation Piling Ltd [2011] EWCA Civ 790 (7 July 2011), Jackson LJ referred to the body of case law that had accumulated around the provisions of Part 36 and their interrelationship with Part 44.3 as “not a welcome development”. He alluded to a new Part 36.14(1A) that will be introduced with effect from 1 October 2011 which will reverse the effect of Carver v BAA Plc [2008] 3 All ER 911 in which the English Court of Appeal held that the New CPR permitted a more wide-ranging review of all the facts and circumstances of deciding whether the judgment being the fruit of the litigation was worth the fight. Jackson LJ also added as follows:
“ 62. There has been a growing and unwelcome tendency by first instance courts and, dare I say it, this court as well to depart from the starting point set out in rule 44.3 (2) (a) too far and too often. Such an approach may strive for perfect justice in the individual case, but at huge additional cost to the parties and at huge costs to other litigants because of the uncertainty which such an approach generates. ……
63. I hope that the forthcoming amendment to rule 36.14 will point the way to a more clear cut approach to the costs rules in future. In the context of personal injury litigation where the claimant has a strong case on liability but quantum is inflated, the defendant’s remedy is to make a modest Part 36 offer. ……”
126. These authorities are largely concerned with the issue of whether after judgment a party has obtained a more advantageous result on the substantive issues than that proposed in the Part 36 offer or Calderbank offer. But this comparison of the offer in question and the result after trial is not relevant to the present situation where the Plaintiff did not proceed with the assessment of damages and instead accepted the 3rd SP without admission of liability and without any findings made by the court. Moreover, for the purpose of determining liability for the 1st Disputed Costs as distinct from the 3rd Disputed Costs, it is doubtful whether the 3rd Offer adds anything further to the Defendant’s position. After all, the 3rd Offer only repeats the Defendant’s claim all along and under the 3rd SP Alternative in the Settlement Summons that the Plaintiff should bear their costs in the present action on the issue of liability from 6 May to 16 November 2011 (see paragraph 45(b) above) and does not make any offer or concession. In my view, subject to my ruling on whom the liability for the 1st Disputed Costs should fall and on whether it is permissible under Order 62 rule 5(1) of the RHC to take the 3rd Offer into account on the question of costs, the 3rd Offer may possibly be relevant to the exercise of discretion in respect of the 3rd Disputed Costs.
127. In any event, as explained in paragraph 111 above, this is not a case of one party asking the court to exercise its discretion under Order 22 rule 3(4) and Order 62 rules 3 and 5 of the RHC to deprive the other party’s entitlement to any statutory costs provision. Rather, the present situation is one in which each party is seeking a cost order in his/their favour beyond the scope of the statutory costs provided for under Order 22 rule 20(1) of the RHC. Given that under the 16/11/10 Order the 1st Reserved Costs have been expressly reserved for future determination (see paragraph 31 above), I am of the view that in the special context of the present case the exercise of the court’s discretion in respect of the 1st Disputed Costs is unfettered by any principles that may be distilled from the above authorities vis-à-vis the 3rd Offer. I leave for future consideration in an appropriate case the applicability of those principles to the question of costs where the judgment on the substantive issues fails to exceed an admissible offer outside Order 22 of the RHC.
(g) Without prejudice save as to costs
128. But apart from the 3rd Offer, Ms Hui at the 2nd Hearing also asked me to look at the series of “without prejudice as to costs” correspondence emanating from WKT between 4 May and 21 October 2010 (see paragraphs 12, 15, 23 and 30 above). Quite correctly, Ms Hui did not suggest that these letters constitute any sanctioned offer, and she did not ask for the exercise of the court’s discretion under Order 22 rule 2(4) of the RHC in respect of such letters. Rather, she urged me to take into account the offers made in these letters in the exercise of my discretion in respect of the 1st Disputed Costs as required under Order 62 rule 5(1)(d) and (g) of the RHC (see paragraph 113 above).
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 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.
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. But since neither Ms Hui nor Mr Chan argued these points before me at the 2nd Hearing, I shall assume without decision that WKT’s Calderbank letters as aforesaid (see paragraphs 12, 15 and 23 above) are admissible for the present purpose.
131. As to the exercise of discretion in light of the aforesaid “without prejudice save as to costs” letters from WKT, they should influence but not govern the exercise of such discretion. The following guidance by Mummery LJ in Butcher at p.340 was cited with approval in Luk Kwan Hung Nelson v Victory Mark Investment Limited HCA 8530/1999, Sakhrani J (unreported, 9 February 1994) and is, in my view, also applicable to the post-CJR scene:
“A Calderbank offer is made for the same reason as a payment into court is made; to encourage a settlement and, failing a settlement, to protect the position on costs of the person making the payment in or the Calderbank offer. But a Calderbank offer is not to be treated as, or to be regarded as a substitute for, or to be equated for all purposes with, a payment into court. As a Calderbank offer is appropriate in a case other than a claim for debt or damages, it requires a greater degree of flexibility. The proper approach to a Calderbank offer, when it is taken into account on a later argument on costs, is to ask whether the party to whom the offer was made ‘ought reasonably to have accepted the proposal in the letter?’ Or, to put it another way, account must be taken of the reasonableness or otherwise of the refusal to accept the offer - see Cutts v Head and Another [1984] Ch 290, 302 per Oliver J, and Chrulew and Others v Borm-Reid & Co [1992] 1 WLR 176, 182A. This approach is to be compared with the payment into court where, in the absence of a special reason for depriving the offering party of his post-offer costs, the simple question is whether the payment in is equal to or is beaten by the defendants at trial.”
132. Emboldened by the above analysis of the authorities, I now turn to the 1st Disputed Costs.
(h) 1st Disputed Costs
133. In determining where liability for the 1st Disputed Costs should lie, I need to ask the question whether the Plaintiff ought reasonably to have accepted the Defendant’s proposal in WKT’s letter of 6 May 2010 (see paragraph 15 above) or, to put it in another way, whether the Plaintiff’s refusal of the offer is unreasonable. It is necessary to look at the reality of what was going on and not dwell unduly on the precise particulars in which such Calderbank letter has been expressed.
134. In reality, on the issue of liability, the Plaintiff has secured interlocutory judgment for damages (if any) to be assessed, and on the issues of causation and quantum of damages he secured HK$220,000.00 upon his acceptance of the 3rd SP within the prescribed time. Having crossed the hurdles on all issues of liability, causation and quantum of damages so that as a matter of substance and reality he has arguably “won”, why should the Plaintiff be deprived of and further has to pay the Defendant the 1st Disputed Costs?
135. In the present case, there is no doubt the Defendant has admitted the occurrence of the Accident and their negligence in relation thereto as early as in the Defence. However, they disagreed that in the course of the Accident the Plaintiff’s left lower limb was hit and pressed by the carrier (which allegation puts the circumstances of the Accident in issue) and they also raised the Causation Dispute (see paragraph 8 above), and on such premise they resisted any attempt to enter interlocutory judgment for damages to be assessed. This resulted in the 28/4/10 Order which granted case management directions on inter alia the issue of liability (see paragraphs 10-11 above). In my view, the Plaintiff was fully justified in preparing his case on the issue of liability as required under the 28/4/10 Order.
136. I am not persuaded that WKT’s “without prejudice save as to costs” letter dated 4 May 2010 (see paragraph 12 above) is of assistance to the Defendant. First of all, as JLA rightly pointed out in their letter of 5 May 2010 (see paragraph 13 above), it is inappropriate for a party to effect amendment of pleadings by way of a Calderbank letter that can only come to light on the issue of costs after resolution of the substantive issues, and it is even more inappropriate in the present case when the Defendant required the Plaintiff to desist from preparing his case on liability as required under the 28/4/10 Order on the strength of so-called amendments to pleadings made by way of a Calderbank letter. I have no hesitation in coming to the view that JLA’s rejection of such demand was reasonable. In declining to allow judgment on liability to be entered and in not proceeding to seek leave to properly amend their pleadings (despite JLA’s reminder) to remove any impediment to full resolution of the issue of liability, the Defendant could not dictate the content of the witness statement which the Plaintiff was required to prepare to meet the court-imposed case management direction and timetable specified in the 28/4/10 Order. Indeed, JLA advised that by the time of their receipt of WKT’s Calderbank letter of 4 May 2010, some costs had already been incurred on the issue of liability since they had already taken instructions from the Plaintiff.
137. WKT’s open letter and Calderbank letter both dated 6 May 2010 (see paragraphs 14-15 above) must be looked at together in order to properly understand the offer made in the latter correspondence. Putting aside the flamboyant language in the open letter, WKT indicated that the Defendant would resist any interlocutory judgment for damages to be assessed because the Plaintiff suffered no recoverable loss or damages beyond the EC Sum and the advance payments he had already received. In short, WKT was asserting that the Plaintiff had no viable claim for any recoverable loss or damages, and therefore he should not have commenced the present action at all notwithstanding the Defendant’s admission of negligence, and so it must be the Defendant and not the Plaintiff who should be entitled to costs on the issue of liability.
138. Plainly, it must be on the above rationale that the Defendant made the Calderbank offer to allow judgment on liability to be entered for damages (if any) to be assessed with costs on the issue of liability to be reserved for argument after the assessment of damages or at the conclusion of the present action. But for such rationale, I can hardly think of any justifiable reason for the Defendant not to have offered to pay the Plaintiff’s costs on the issue of liability when in their Calderbank letter they were prepared to allow judgment on liability to be entered. Indeed, even as at 23 June 2010, WKT continued to maintain there were no recoverable loss or damages to justify entering interlocutory judgment for damages to be assessed notwithstanding the Defendant’s admission of negligence (see paragraph 21 above).
139. It seems to me that the Defendant wanted to have the best of both worlds, on one hand refusing to let interlocutory judgment on liability to be entered and on the other hand ousting cost responsibility for the evidential efforts by the Plaintiff on the issue of liability. The Plaintiff was understandably concerned for he carried the onus of proving his case and seeking judgment on liability before he could proceed with assessment of his loss and damages. After all, to the knowledge of the Defendant and WKT, the case management directions granted by the 28/4/10 Order were premised on the basis that the issue of liability was still at large (see paragraph 10 above) otherwise directions for, say, expert evidence on liability would have been wholly meaningless, and the Plaintiff’s concern was reflected in the PI Master’s provisional view that liability had not been admitted by the Defendant and in his direction for preparation of a list of issues to be tried (see paragraphs 20 and 22 above).
140. In my view, the Defendant was misconceived in resisting interlocutory judgment on liability and in requiring the Plaintiff to proceed with the assessment of damages without any interlocutory judgment being entered. In determining whether liability should be admitted or interlocutory judgment should be entered for a cause of action based on negligence, it is necessary to consider whether the components of the tort of negligence have been established. According to Charlesworth & Percy on Negligence 12th ed (2010) para.1-34 at pp.17-18:
“…… Whatever form of words is adopted the essential components are recognised as three: “duty”, “breach” and “resulting damage”, i.e.:
1. the existence of a duty to take care, which is owed by the defendant to the complainant;
2. the failure to attain that standard of care, prescribed by law, thereby committing a breach of duty; and
3. damage, which is both causally connected with such breach and recognised by the law, has been suffered by the complainant.
……
If the claimant satisfies the court on the evidence that these three ingredients are made out, the defendant should be held liable in negligence. It will then be necessary to identify the extent of damage referable to the breach of duty, before assessing its value in money terms. ……” (my emphasis)
Likewise, in Clerk & Lindsell on Torts 20th ed (2010) para.8-04 at p.415, it is said that when the requirements for the tort of negligence (including the elements of “a causal connection between the defendant’s careless conduct and the damage” and “that the particular kind of damage to the particular claimant is not so unforeseeable as to be too remote”) are satisfied, “the defendant is liable in negligence. Only then is it relevant to consider the assessment of damages, i.e. the compensation for the damage for which the defendant is responsible”.
141. Thus, the component of “resulting damage” only goes to the question of whether the claimant has suffered the type of damage that is not nominal and not too remote, and is not concerned with the quantum or extent of damages that may be subject to proper assessment in due course. In the present case, the first two components have been admitted, and there is no dispute that the Plaintiff did suffer some personal injury, which plainly must be the type of damage not too remote in respect of the Accident. In such circumstances, the cause of action on negligence is complete and the Defendant is plainly liable in negligence. There is no room for the Defendant to resist interlocutory judgment being entered. The remaining question, as the above passage from Charlesworth & Percy on Negligence shows, is the identification of the extent of damage referable to the breach of duty, and this is where the denial of the Alleged Injuries and the Causation Dispute become relevant in the assessment of damages. WKT’s suggestion that interlocutory judgment on liability should not be entered because there is no “recoverable” loss or damages after taking into account the EC Sum and the advance payments already received by the Plaintiff and the expert medical evidence as to the extent of the Plaintiff’s impairments and disabilities (see paragraphs 8, 12 and 21 above) merely focuses on the extent and quantum of damages upon assessment and does not address the component of “resulting damage” that comprises the cause of action on negligence.
142. It is for the above reasons that at the 20/10/10 CLR I granted leave for the Defendant to amend the Defence to properly reflect these matters and to enable interlocutory judgment on liability to be entered for damages to be assessed (see paragraphs 28-29 above). Since the Defendant at that stage still maintained that the extent and quantum of “recoverable” loss and damages would be nil, costs on the issue of liability had to be reserved pending the outcome of the assessment of damages or the conclusion of the proceedings (see paragraph 29 above). If it turns out that the Defendant were correct in their contention, there may be room for argument that the Plaintiff ought not to have commenced the present action at all and hence be liable for the Defendant’s costs of the action including costs on the issue of liability. But if the extent and quantum of the Plaintiff’s loss and damages exceed the EC Sum and the advance payments he has already received, then he would have been justified to bring the present action and there may be room for argument that the Defendant should be liable for his costs of the action including costs on the issue of liability. On such basis, interlocutory judgment was eventually entered on 16 November 2010 on application by the Defendant made on 3 November 2010, and the 1st Reserved Costs were reserved for determination at the assessment of damages or for argument at the conclusion of the proceedings (see paragraph 31 above).
143. Clearly, notwithstanding the Plaintiff’s consistent stance all along that he was entitled to interlocutory judgment on liability, the fact that such interlocutory judgment was only entered on 16 November 2010 was due to the Defendant’s resisting attitude (which I have found to be unjustified) notwithstanding concerns expressed by the Plaintiff and the PI Master. Even though it may be argued that the Plaintiff need not adduce evidence to prove the admitted matters for the purpose of establishing his case on the issue of liability and/or causation of damages, given the dispute in the pleadings (which the Defendant had not sought to amend until the 16/11/10 CLR despite JLA’s earlier reminder to them to make proper application for such purpose – see paragraphs 12-13 and 28-29 above) over whether the carrier hit and/or pressed on the Plaintiff’s lower limb at the time of the Accident, the Defendant clearly put the Plaintiff to proof as to the circumstances of the Accident insofar as relates to his leg injury and to the causation of the Alleged Injuries, so the Plaintiff cannot be criticised for making efforts to prepare his case in respect of the circumstances of the Accident and all matters concerning the Causation Dispute.
144. This case eventually did not proceed to assessment of damages but was finally resolved by the Plaintiff’s acceptance of the 3rd SP on 12 January 2011. Thus, by accepting the sanctioned payments the Plaintiff in reality has obtained “something more” from the present action beyond the EC Sum and the advance payments he had received. In this sense, the Plaintiff can be regarded as the “successful” party on the issue of liability since there can be no doubt that he has an incontrovertible case on all relevant components of the cause of action on negligence, and his pursuit of the present action has been vindicated by the recovery of HK$220,000.00 through acceptance of the 3rd SP.
145. But the Defendant claims that the Plaintiff has obtained nothing from the present action that (a) he could not have obtained by accepting the offer made in WKT’s Calderbank letter dated 6 May 2010 (see paragraph 15 above) which has been repeated in their further Calderbank letter dated 2 July 2010 (see paragraph 23 above) and (b) justified his pursuit of the action on liability until 16 November 2010. Is that correct?
146. It is true that in their offer letter of 6 May 2010 the Defendant proposed to let judgment on liability be entered in favour of the Plaintiff with damages, if any, to be assessed (see paragraph 15 above). But it is an integral part of that offer that costs on the issue of liability would be reserved for further argument before the court at the assessment of damages or at the conclusion of the present action. Plainly, the Defendant was not making any concession at all on who should be liable for costs on the issue of liability (whether incurred before or after 6 May 2010); they wanted to adopt a wait and see attitude to see if the Plaintiff would eventually recover any damages at all and then decide.
147. But it is clear that as at 6 May 2010 there was at the very least no justification for the Defendant to resist liability for costs on the issue of liability from the commencement of the present action until 5 May 2010. By virtue of the fact that (a) the Defendant was not prepared to admit liability (as distinct from admitting negligence in respect of the Accident) even on Calderbank basis at least until 6 May 2010, (b) judgment on liability was eventually entered against the Defendant, and (c) the Defendant eventually recovered HK$220,000.00 from his acceptance of the 3rd SP in the present action, there can be no doubt that at the very least the Plaintiff’s demand for an immediate order for costs on the issue of liability up to 5 May 2010 in his favour without any deferral of such costs issue for eventual argument as proposed by the Defendant has been vindicated. The Defendant failed to concede liability for such costs either on open basis (see 3rd SP Alternative in the Settlement Summons which requires the Plaintiff to bear such costs – see paragraph 45(b) above) or on Calderbank basis (see WKT’s Calderbank letters dated 6 May, 2 July and 21 October 2010 – see paragraphs 15, 23 and 30 above). The Defendant only conceded liability to pay such costs at the 1st Hearing. Simply on this point, it cannot be said that the Plaintiff’s rejection of the Defendant’s Calderbank offer is unreasonable. On the contrary, I find such refusal reasonable.
148. In respect of the 1st Disputed Costs, I also cannot see how the Defendant can resist such costs. On an open basis, the Defendant tried to limit the case to an assessment of damages but at the same time sought to avoid responsibility for costs on the issue of liability by resisting interlocutory judgment. On a Calderbank basis, whilst the Defendant was prepared to accede to judgment on liability, they declined to bear responsibility for costs on the issue of liability. This is a classic case of a litigant wanting to have his cake and eat it. The court has little sympathy for a party who seeks to oust responsibility for costs on liability but at the same time refuses to bring closure to the issue of liability. Likewise, the court also has little sympathy for a party who concedes liability but declines to bear responsibility for costs that that concession entails. The Plaintiff’s insistence on having his costs on the issue of liability without deferral for argument as to who should be liable for such costs has been vindicated by his being “successful” on both liability and quantum, ie having judgment on liability entered and recovering HK$220,000.00 from the sanctioned payments paid by the Defendant. There is simply no basis for the Defendant to resist costs on the issue of liability, especially when it was their resisting attitude that delayed entering interlocutory judgment on liability until 16 November 2010. The Plaintiff in demanding the Defendant to pay costs on the issue of liability and refusing to defer such costs for argument (ie which contention by the Plaintiff is tantamount to leaving the matter of liability for such costs wholly at large) is not unreasonable. In all the circumstances, I consider the Plaintiff’s conduct reasonable, and I order the Defendant do pay the Plaintiff the 1st Disputed Costs (ie costs on the issue of liability from 6 May to 16 November 2010), and the Plaintiff’s own costs be taxed in accordance with Legal Aid Regulations.
(i) 3rd Disputed Costs
149. Given my conclusion on the 1st Disputed Costs, even assuming without decision that the 3rd Offer is an “admissible offer to settle” under Order 62 rule 5(1)(g) of the RHC on the issue of the 3rd Disputed Costs, it still does not assist the Defendant. There is no good reason why costs should not follow event, and bearing in mind that the Defendant only conceded liability for costs on the issue of liability for the period from the commencement of the present action to 5 May 2010 at the 1st Hearing, I therefore grant a costs order nisi that the Defendant is to pay the Plaintiff the 3rd Disputed Costs to be taxed if not agreed, and the Plaintiff’s own costs taxed in accordance with Legal Aid Regulations.
VII. OTHER OBSERVATIONS
150. The above is sufficient to dispose of the application before me. However, a number of issues premised on the assumption that the 3rd Offer is a valid sanctioned offer (“Assumption”) have been argued before me. Although I have found the 3rd Offer to be an invalid sanctioned offer, it may be useful for me to make some observations, albeit obiter, on certain matters raised by Mr Chan at the 1st Hearing concerning the 3rd SP Notice that may be of wider interest.
151. Mr Chan in his written submissions argued as follows:
“The Defendant may make sanctioned payment relating to the whole claim, a part of it or any issue arising from it by ticking an appropriate box. In the Form 23, there were 3 boxes for the Defendant to express their intention. In the respective boxes for ‘part of your claim’ and ‘a certain issue or certain issues arising from your claim’, there were italic words written in the bracket, i.e. ‘(give details below)’. However, there was no such italic words after the ‘the whole of your claim’. It should mean that any details given below are not relating to the settlement of the ‘whole of claim’.”
152. To properly understand such argument, it is necessary to first turn to the prescribed Form 23:
“Notice of sanctioned payment
(O. 22 r.8(2))
(Heading as in action)
To the plaintiff(“s solicitor) and to the Director of Legal Aid (if applicable)
_____________________________________________________
Take notice that the defendant(s) __________________________ has/have paid $_________________________ (a further amount of $________________) into court in settlement of –
(tick as appropriate)
□ the whole of your claim
□ part of your claim (give details below)
□ a certain issue or certain issues arising from your claim (give details below)
The (part)(issue or issues) to which it relates is (are): (give details)
□ It is in addition to the amount of $ __________________ already paid into court on ___________________ and the total amount in court now offered in settlement is $____________________ (give total of all payments in court to date)
□ It is not inclusive of interest and an additional amount of $ ___________________ is offered for interest (give details of the rate(s) and period(s) for which the amount of interest is offered)
□ It takes into account all (part) of the following counterclaim or set off: (give details of the party and the part of the counterclaim to which the payment relates)
□ It takes into account the interim payment(s) made in the following amount(s) on the following date(s): (give details)
□ It takes into account the following sum(s) of money that has (have) been paid into court: (give details)
□ It is part of the terms of a sanctioned offer set out in (identify the document). If you give notice of acceptance of this sanctioned payment, you will be treated as also accepting the sanctioned offer.
Note:-This notice will need to be modified where an offer of provisional damages is made (Order 22, rule 11).
……
Note: To the plaintiff
If you wish to accept the payment made into court and the Court's leave for acceptance is not required, you should complete Form No. 24, send it to the defendant and file a copy in the Registry of the High Court.”
153. Upon clarification with Mr Chan at the 1st Hearing, it appears that his submissions as set out in paragraph 151 above in a nutshell is this : the 4th to 9th check-boxes in the prescribed Form 23 are only applicable where the sanctioned payment is for settlement of part of the claim or certain issue(s) arising from the claim, and since the 3rd SP is for settlement of the whole of the Plaintiff’s claim (as apparent from the tick affixed to the 1st check-box of the 3rd SP Notice), the 4th to 9th check-boxes in the 3rd SP Notice are irrelevant and the information given in the 3rd Offer Box concerning the 3rd Offer can be safely ignored. Hence, the Acceptance Notice filed/served in response to the 3rd SP Notice cannot be regarded as any acceptance of the 3rd Offer.
154. In other words, Mr Chan suggested that the appropriate methodology for completing any prescribed Form 23 was for the party making the sanctioned payment to choose 1 out of the first 3 check-boxes therein to identify the scope/nature of the settlement (ie whether the sanctioned payment was for settlement of the whole of the claim, part of the claim or certain issue(s) arising from the claim), and if he selected the 1st check-box (ie the sanctioned payment is for settlement of the whole of the claim), he should not and has no need to complete the 4th to 9th check-boxes, which are to be completed only if he chooses the 2nd or 3rd check-box (ie the sanctioned payment is for settlement of part of the claim or certain issue(s) arising from the claim).
155. In my view, such argument is misconceived. First, Mr Chan is mistaken in his reading of the prescribed Form 23. In accordance with usual principles of statutory interpretation, a natural and purposive meaning should be given. I am unable to accept Mr Chan’s construction either on plain reading of the prescribed Form 23 or upon construction of such standard form based on the aforesaid principles.
156. First, the 4th to 9th check-boxes in the prescribed Form 23 are as equally relevant to a sanctioned payment for settlement of the whole of the claim as for a sanctioned payment for settlement for part of the claim or certain issue(s) arising from the claim. For example, irrespective whether the sanctioned payment is for settlement of the whole of the claim, part of the claim or certain issue(s) arising from the claim, there may well be earlier sanctioned payments, interim payments or sums of money paid into court to be taken into account. Thus, the 3rd SP Notice gave details of the 1st and 2nd SP which together with the 3rd SP made up the total sanctioned payment sum of HK$220,000.00. Such check-box and the information given therein remained relevant and applicable even though the 3rd SP was for settlement of the whole of the Plaintiff’s claim. Likewise, the issue of whether the sanctioned payment is inclusive or exclusive of interest can be relevant to a sanctioned payment for settlement of the whole or part of the claim or for certain issue(s) arising from the claim. Still further, the position vis-à-vis a counterclaim or set-off may need to be addressed whether the sanctioned payment is for settlement of the whole or part of the claim or for certain issue(s) arising from the claim.
157. Mr Chan countered by saying that where a plaintiff had selected the 1st check-box (ie for settlement of the whole of the claim), there would have been no need to, say, fill in the 4th check-box to remind the recipient of the Notice of Sanctioned Payment of the sums previously paid into court because such recipient should have been aware of such information and the court file would have record of any previous payment in. But in my view, if such rationale holds water, it is equally applicable to any sanctioned payment for settlement of part of the clam or certain issue(s) arising from the claim. There is no merit to such argument.
158. For the last check-box of the prescribed Form 23, I am unable to appreciate why a sanctioned payment made as part of the terms of a valid sanctioned offer is necessarily limited to settlement of part of the claim or certain issue(s) arising from the claim and not for the whole of the claim, and Mr Chan was unable to offer any plausible explanation. Such suggestion also flies against the broad terms of Order 22 rule 3(1) of the RHC, which allows the parties to make both a sanctioned offer and sanctioned payment for settlement of any claim (see paragraph 58 above).
159. Mr Chan next suggested that the phrase “(give details below)” at the end of each of the 2nd and 3rd check-boxes in the prescribed Form 23 relating to settlement of part of the claim or certain issue(s) arising from the claim in fact refers to the 4th to 9th check-boxes in the form. Such contention does not bear scrutiny. In my view, details to be given under such italicised phrase necessarily refer to the description of the precise “part” of the claim or the precise “issue(s)” arising from the claim that correlate to the sanctioned payment in question (see Order 22 rule 5(3)(a) of the RHC) and not to the distinctly different type of information to be given in the 4th to 9th check-boxes. In my view, the party making the sanctioned payment should “give details” of the relevant “part” of the claim or the relevant “issue(s)” arising from the claim under “(give details)” at the end of the phrase “The (part)(issue or issues) to which it relates is (are): (give details)” in the prescribed Form 23. Since the description of the relevant “part” of the claim or the relevant “issue(s)” arising from the claim must necessarily be fact or case sensitive, the standard form can do no more than prescribe “(give details)”. Consequently, the phrase “The (part)(issue or issues) to which it relates is (are): (give details)” necessarily correlates to the 2nd and/or 3rd check-boxes rather than to the 4th to 9th check-boxes.
160. I am therefore driven to the construction that the 4th to 9th check-boxes of the prescribed Form 23 are applicable irrespective of whether the sanctioned payment is for settlement of the whole of the claim, part of the claim or certain issue(s) arising from the claim. Mr Chan’s argument fails to give proper meaning to the plain terms of Form 23.
VIII. CONCLUSION
161. To conclude this matter, I grant leave for the 1st, 2nd and 3rd SP to be paid out to the DLA on behalf of the Plaintiff subject to the DLA’s first charge.
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(Marlene Ng)
Master of the High Court
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Representation:
Mr I Chan of Messrs Joseph Leung & Associates for the Plaintiff.
Ms W Hui of Messrs W K To & Co for the Defendant.
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