Tsang Chiu Yip v. Ho Kwok Leung

HCPI 305/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO 305 OF 2013

BETWEEN

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DECISION ON COSTS AND INTEREST

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I. INTRODUCTION

1.On 29 February 2016, I handed down judgment in respect of the plaintiff’s (“P’s”) claim for damages for personal injuries (“Judgment”) in the sum of $501,398.63 (“Judgment Sum”). In the Judgment, this court assessed damages (exclusive of employees’ compensation P received in the sum of $508,562.20 (“EC Sum”)) in the sum of $716,283.75 (“Assessed Sum”), but it was reduced as a result of my finding of 30% contributory negligence on P’s part. In this Decision, I shall adopt the abbreviations in Judgment.

2.For convenience in understanding P’s arguments below,

(a) the Judgment Sum (on the basis of 30% contributory negligence on P’s part) together with accrued interest thereon up to 28 May 2014 (“Date”) in the sum of $39,374.00 payable by D to P (“Accrued Interest”) would be $540,772.63; and

(b) the Sum (exclusive of any contributory negligence) together with the Accrued Interest would be $755,657.75.

3.By the Judgment, I granted a costs order nisi that D do pay P costs of the action (including all costs reserved, if any) to be taxed on District Court scale if not agreed, and P’s own costs to be taxed in accordance with Legal Aid Regulations (“Costs Order Nisi”).

4.On 4 March 2016, D’s solicitors wrote to P’s solicitors for consent to variation of the Costs Order Nisi in the following terms:

(a) the Accrued Interest be assessed at $39,374.00;

(b) interest on the Judgment Sum after the Date be disallowed;

(c) D shall pay P’s costs in the present action up to the Date on party and party basis to be taxed on the District Court scale if not agreed;

(d) P shall pay D’s costs in the present action with interest thereon from 29 May 2014 on indemnity basis to be taxed if not agreed on High Court scale;

(e) interest on D’s costs in (d) above be paid at 3% above the judgment rate; and

(f) balance of the sanctioned payments made by D in the sum of $209,228.00 (after deduction of the Judgment Sum and Accrued Interest in the total sum of $540,772.00) and interest accrued on the sanctioned payments made by D be forthwith released to D through his solicitors.

5.On the same day, P’s solicitors replied to indicate P had no objection to the proposed figures but would dispute “the costs scale and the basis of costs in dispute”. On 7 March 2016, P’s solicitors replied further to indicate agreement to the proposed variation in paragraphs 4(a), (b) and (f) above but disagreed with the proposed variation in paragraphs 4(d)-(e) above. For the proposed variation in paragraph 4(c) above, P’s solicitors stated P would file separate application for variation on the scale of costs.

6.On 10 March 2016, D’s solicitors by letter requested P to reconsider his stance on the proposed variation in paragraphs 4(d)-(e) above. On 11 March 2016, P’s solicitors reiterated their earlier stance, and indicated P would oppose D’s intended application to vary the Costs Order Nisi.

7.On 14 March 2016, D applied by summons to vary the Costs Order Nisi (“Summons”) for an order in terms in paragraphs 4(a)-(f) above, and also for an order that costs of, incidental to and occasioned by such application be paid by P to D on indemnity basis to be taxed if not agreed on High Court scale and P’s own costs be taxed in accordance with Legal Aid Regulations.

8.On 14 March and 13 May 2016, D filed the 1^st and 2^nd affirmations of his solicitor Lee Kit Ying (“1^st and 2^nd Lee Affs”) in support of the Summons.

9.On 18 April 2016, P filed the affirmation of his solicitor Cheng Wing Fu (“Cheng Aff”) in opposition. The Cheng Aff confirmed P would not dispute the cost reliefs proposed in paragraphs 4(a)-(c) and (f) above, but suggested the following terms in place of the proposed reliefs in paragraphs 4(d)-(e) above:

(a) P shall pay 40% of D’s costs in the present action with interest thereon from 29 May 2014 on party and party basis to be taxed if not agreed on High Court scale, and D shall pay 60% of P’s costs in the present action with interest thereon from 29 May 2014 on party and party basis to be taxed if not agreed on High Court scale; and

(b) interest on D’s costs referred to in (a) above be paid at 3% above judgment rate.

10.However, P did not take out any application to vary the District Court scale of costs awarded under the Costs Order Nisi. It was not understood how P could seek any order that any costs payable by D to P (eg 60% of P’s costs in the present action as from 29 May 2014 as P suggested in paragraph 9(a) above) should be taxed if not agreed on High Court scale. This aspect of P’s proposal must be dismissed.

11.On 22 June 2016, D filed a summons for leave to file/serve Lee’s 3^rd affirmation of the same date (“3^rd Lee Aff”) in support of the Summons. At the hearing of the Summons on 24 June 2016 (“Costs Hearing”), Ms Lau, counsel for P, had no objection, and I granted leave for such affirmation to be filed/served with costs to P, and for P’s own costs to be taxed in accordance with Legal Aid Regulations.

II.  ISSUES

12.There was no dispute D made 6 sanctioned payments into court in the total sum of $750,000.00 (inclusive of interest but exclusive of the EC Sum):

Sanctioned Payment	Date	Amount (HK$)
1st	18 June 2013	300,000
2nd	4 October 2013	380,000
3rd	25 November 2013	450,000
4th	5 December 2013	500,000
5th	30 April 2014	600,000
6th	5 August 2014	750,000

13.D claimed that under Order 22 rules 23(3)-(4) of the Rules of the High Court (“RHC”) he was justified in seeking variation of the Costs Order Nisi as proposed in the Summons because P chose to commence the present action in the Court of First Instance but failed to beat the 5^th Sanctioned Payment let alone the 6^th Sanctioned Payment that he made. D further claimed (a) it was not unjust to require P to pay costs on indemnity basis as from 29 May 2014 with enhanced interest, which was the usual cost consequences for failing to beat sanctioned payments made, and (b) D was entitled to costs on High Court scale as from 29 May 2014 even though P was only awarded costs on District Court scale in the present action.

14.I pause to note Ms Lau, counsel for P, in her written submissions appeared to have assumed that D conceded he would get costs only after the filing of his Mediation Response on 21 August 2014 instead of after the Date (ie as from 29 May 2014). Mr Shum, counsel for D, confirmed there was no such concession.

15.Further, for the cost relief D sought in paragraph 4(e) above or P’s counter-proposal in paragraph 9(b) above, there was no dispute that the enhanced rate of interest should be 3% above judgment rate payable on either 100% (according to D – see paragraph 4(d) above) or 40% (according to P – see paragraph 9(a) above) of D’s costs in the sum of $445,990.00 (subject to taxation) being disbursements[1] already advanced by his insurer after 28 May 2014.[2]

16.In light of the above, the question then became whether (a) P should pay 100% or 40% of D’s costs in the present action as from 29 May 2014 on party and party basis to be taxed if not agreed on High Court scale together with interest on the sum of $445,990.00 in respect of such costs (subject to taxation) at 3% above judgment rate, and (b) D shall pay 60% of P’s costs in the present action as from 29 May 2014 on party and party basis to be taxed on District Court scale[3] together with interest thereon.

III.  PROCEEDINGS

17.Prior to the present action, the Experts jointly examined P on 5 October 2012 and rendered their 1^st and 2^nd Reports on 4 and 31 March 2013 respectively. Hence, the 1^st and 2^nd Reports as well as the Medial Documents were available even before commencement of the present action.

18.On 19 April 2013, P commenced the present action. According to the Statement of Damages filed on the same day, P claimed $2,122,269.25 (or alternatively $2,569,942.60) (inclusive of the EC Sum) with interest and costs.  According to the Medical Reports filed on the same day, P disclosed inter alia his treatment medical/physiotherapy reports. P also filed his Mediation Certificate on the same day.

19.On 30 May 2013, P filed/served his Mediation Notice proposing to commence mediation within 28 days, but he did not ask for interim stay of proceedings pending the outcome of the proposed mediation. On 18 June 2013 (ie shortly before D filed his Defence on 20 June 2013), D made the 1^st Sanctioned Payment. On 4 October 2013 (ie the date of the 1^st Check List Review (“CLR”)), D made the 2^nd Sanctioned Payment. On 25 November 2013 (ie shortly before D filed the Notice to Admit Facts on 30 November 2013), D made the 3^rd Sanctioned Payment. On 5 December 2013 (ie shortly before P filed his Admission of Facts Pursuant to Notice on 6 December 2013 and his summons for interim payment filed on 12 December 2013), D made the 4^th Sanctioned Payment.

20.On 28 December 2013, by consent Master Leong ordered D to pay $200,000.00 to P as interim payment on account of damages out of the 1^st Sanctioned Payment.

21.On 7 February 2014, D filed/served interrogatories on P’s pre-Accident earnings at Swire and his post-Accident work, work duties, sick leave etc. On 21 February 2014, P filed his answer thereto by deposing in his affirmation as to the enquiries he had made with Swire and his post-Accident employers, and the reply from Swire.

22.The Cheng Aff claimed that in/about February 2014 P obtained a bundle of payroll slips and commission receipts issued by Swire for a co-employee who did not want to disclose his name (“Co-employee Documents”). It was suggested the Co-employee Documents (disclosed in P’s 11^th Supplemental List of Documents filed on 27 February 2014) showed such co-employee’s average monthly earnings were about $18,000.00 (basic salary and commission).

23.On 30 April 2014 (ie shortly after the 2^nd CLR on 23 April 2014), D made the 5^th Sanctioned Payment in a total sum of $600,000.00 (inclusive of interest and exclusive of the EC Sum). P did not accept the 5^th Sanctioned Payment, and it lapsed on the Date. The Cheng Aff suggested that in view of the Co-employee Documents P considered D’s 5^th Sanctioned Payment was on the low side and he therefore did not accept the same. The 2^nd Lee Aff contended that how P wished to make use of the Co-employee Documents (which were disclosed by P and not by D) did not concern D, but if P chose to rely on them to form a subjective belief that he would do better than the 5^th/6^th Sanctioned Payments made in April/August 2014, he took the risk of failing to beat such sanctioned payments with consequent possibility of having to pay D’s costs with enhanced interest pursuant to Order 22 rule 23 of the RHC.

24.On 2 May 2014, D filed his Mediation Certificate that stated he “is willing to attempt mediation subject to the making of full and frank disclosure of documents between parties and the parties trying in the first place to attempt and exhaust without prejudice negotiation beforehand”.

25.On 13 May 2014, P filed his 2^nd affirmation in answer to D’s 2^nd interrogatories. According to the Revised Statement of Damages filed on 19 May 2014 (“RSOD”), P claimed $2,647,734.44 (or alternatively, $2,690,605.19) with interest and costs (inclusive of the EC Sum).

26.The Cheng Aff claimed that in/about May 2014 P obtained a copy of his employment contract dated 30 March 2014 in respect of his employment with Green River Restaurant that stated his monthly salary was $13,000.00 (“Green River Document”). Such contract was disclosed in P’s 13^th Supplemental List of Documents filed on 12 May 2014.

27.On 5 August 2014 (ie shortly after D filed his Answer to the RSOD on 3 July 2014), D made the 6^th Sanctioned Payment in a total sum of $750,000.00 (inclusive of interest and exclusive of the EC Sum). P did not accept the 6^th Sanctioned Payment. The 1^st Lee Aff claimed that up to the 6^th Sanctioned Payment, P did not propose any counter-offer or put forward further cogent evidence for quantification of his claim that was in excess of $2,600,000.00 (inclusive of the EC Sum). But the Cheng Aff suggested that a comparison between the Green River Document and the Co-employee Documents showed significant post-Accident loss of earnings, so P considered the 6^th Sanctioned Payment to be on the low side and therefore did not accept the same.

28.On 6 August 2014, P’s solicitors wrote to D’s solicitors to seek a 2^nd interim payment in the sum of $180,000.00. On 15 August 2014, D’s solicitors opposed such request on the basis that the present action would soon be set down for trial. D’s solicitors suggested that on (a) the medical evidence from the Experts, (b) the surveillance evidence and (c) the issue of contributory negligence, any award of damages might be reduced so it would not be right to say P would succeed in recovering the damages sought in the RSOD. D’s solicitors were concerned that since P had received the EC Sum and the 1^st interim payment, there was risk of overpayment if the 2^nd interim payment were allowed.

29.On 13 August 2014, P’s solicitors wrote to D’s solicitors to propose directions for the upcoming CLR on 28 August 2014, including that D shall file/serve his Mediation Response within 14 days from the date of the order. On 15 August 2014, D’s solicitors replied to say the present action was ready to be set down for trial apart from some outstanding comments by the Experts, so the upcoming CLR should not be adjourned, and there would be time enough for the Experts to finalise their joint comments even if leave were granted to set the present action down for trial at the upcoming CLR. On the same day, P’s solicitors enquired whether D intended to admit liability leaving damages to be assessed, and “[regarding] setting down, we have no objection to your proposal ……” On 16 August 2014, D’s solicitors confirmed liability remained in dispute.

30.On 18 August 2014, P’s solicitors wrote to say there were some outstanding matters (including mediation) before the present action could be set down for trial, and indicated they would advise P to agree to D’s proposed mediator. They requested D’s solicitors to provide a tentative date for mediation so P could seek legal aid approval. On 20 August 2014, D’s solicitors replied to say they found P’s stance surprising since P had already indicated on 15 August 2014 he had no objection to set the present action down for trial. In any event, given the limited scope of the Experts’ outstanding comments, D’s solicitors did not think it would affect counsel’s advice on merits and/or the Director of Legal Aid’s considerations for extending the relevant certificate for trial. By a further letter dated 20 August 2014 to P’s solicitors, D’s solicitors reminded that both liability and quantum were in dispute, and sanctioned payments had been made “from time to time based on the evidence available to [D] for the sake of achieving an early settlement with P”. D’s solicitors noted P never embarked on without prejudice negotiations, and wondered why there would be a chance of early settlement by mediation without having to go through trial. Again on the same day, P’s solicitors urged for reply to P’s mediation proposal, but asked for proposed case management directions if D insisted on setting the present action down for trial. P’s solicitors stated P was willing to mediate (and reach settlement) as evident from his Mediation Notice, and they urged D to file/serve his Mediation Response without further delay, nominate a mediator and arrange a mediation session as soon as practicable.

31.On 22 August 2014 (ie more than a year after P filed his Mediation Notice), D filed his Mediation Response that proposed to commence mediation within 21 days without need for any interim stay of proceedings for the mediation process.

32.On 23 August 2014, the Experts rendered the 3^rd Report. On 27 August 2014, Master Leong directed the parties to jointly write to the court for directions to set the present action down for trial after receipt of the 3^rd Report. On 10 September 2014, P applied by summons for 2^nd interim payment in the sum of $180,000.00. On 11 September 2014, D’s solicitors wrote to P’s solicitors that there were no outstanding directions to be complied with, so D wished to seek leave to set the present action down for trial. D’s solicitors considered that given P’s request for further interim payment, the present action should be tried as soon as practicable so as not to prejudice the parties’ respective position. On the same day, D’s solicitors sent a 2^nd letter to P’s solicitors that enclosed a draft letter of instructions to the mediator for their review/comments. On 12 September 2014, P’s solicitors replied they should adhere to Master Leong’s order dated 27 August 2014 on setting down for trial, and enclosed draft mediation minutes for P’s consideration. On the same day, D’s solicitors enquired whether there were any outstanding directions to be complied with by P, and reminded that mediation was not a pre-condition for setting the case down for trial. D’s solicitors indicated that unless P cooperated in jointly writing to the court for leave to set the case down for trial, they would do so unilaterally.

33.On 13 September 2014, D filed his Amended Answer to the RSOD. On 15 and 25 September 2014, P filed the Mediation Minutes and the Revised Mediation Minutes respectively that set out the parties’ agreement on arrangements for the proposed mediation to be held on or before 31 October 2014 without any interim stay of proceedings.

34.On 14 October 2014, Master Leong granted leave for P to set the present action down for trial on or before 31 October 2014 (ie 10 days after the mediation scheduled on 21 October 2014).

35.Mediation took place on 21 October 2014, but failed to reach settlement. On the same day, P made a sanctioned offer to accept a sum of $1,800,000.00 (inclusive of interest and exclusive of the EC Sum) with costs to P in full and final settlement of his claim. D did not reply or made any counter-offer.

36.On 22 October 2014, D’s solicitors informed P’s solicitors D maintained the same stance as set out in their letter dated 15 August 2014 in respect of P’s summons for 2^nd interim payment, but as the court had granted leave for the parties to set the present action down for trial, P was urged to consider withdrawing such application so as to save public funds. On the same day, P’s solicitors replied they had no instructions to withdraw the summons for 2^nd interim payment. On 23 October 2014, D’s solicitors advised that unless P withdrew his application for 2^nd interim payment “by close of business this Saturday”, D would deliver brief to counsel to prepare affirmation in opposition and attend the substantive hearing for argument.

37.On 29 October 2014, P applied to set the present action down for trial. On 19 November 2014, P made a revised sanctioned offer of $1,500,000.00 (inclusive of interest and exclusive of the EC Sum) with costs to P in full and final settlement of his claim. This was not accepted. On 3 December 2014, the parties received Notice of Trial scheduled to commence on 23 June 2015. On the same day, D’s solicitors wrote to P’s solicitors alluding to the alleged weaknesses of P’s application for 2^nd interim payment, and noted the scheduled trial (23 June 2015) was about 1 month after the scheduled substantive hearing for argument (20 May 2015). D’s solicitors urged P to re-consider withdrawing the summons with no order as to costs. On 11 December 2014, P’s solicitors replied to agree to withdraw the summons for 2^nd interim payment with no order as to costs. On 19 December 2014, by consent Master Leong granted leave for P to withdraw his summons for 2^nd interim payment with no order as to costs.

38.On 3 March 2015, I vacated the pre-trial review scheduled to be heard on 23 March 2015. On 20 April 2015, P filed his 19^th List of Documents that disclosed inter alia 2 payroll slips and commission records of Yip Ka Shing (P’s co-employee at Swire), his HSBC passbook records and 2 letters by the Union dated 31 March and 10 April 2015. On 4 May 2015, P made a revised sanctioned offer of $1,500,000.00 (inclusive of interest and inclusive of the EC Sum) with costs to P in full and final settlement of his claim, which meant P was prepared to settle his entire claim for $991,437.80 (inclusive of interest and exclusive the EC Sum). The Cheng Aff claimed there was no reply or counter-offer from D.

39.On 12 May 2015, P applied by summons for leave to adduce his 2^nd supplemental witness statement that gave explanations about his earnings based on materials from Yip Ka Shing and the Union. At the hearing on 19 May 2015, I granted leave to P to disclose/discover the 2 letters from the Union but otherwise dismissed P’s summons. On 29 May 2015, P filed Re-RSOD that raised his claim to $3,743,382.92 (or alternatively $2,848,825.92) with interest and costs but inclusive of the EC Sum. The 1^st Lee Aff claimed D considered such revised claim excessive and not supported by documentary proof. On 5 June 2015, D filed Re-Amended Answer to Amended Re-RSOD. On 8 June 2015, P filed his 21^st Supplemental List of Documents that disclosed the Wage and Commission Letters dated 31 May 2015 and issued by the Union.

40.Trial commenced on 23 June 2015. On the 1^st day of trial, I granted leave for P to disclose a letter from Swire dated 18 June 2015 with P’s appraisal reports from 2007 to 2011, and for D to further amend his Amended Defence and to serve his 2^nd supplemental witness statement.

IV.  LEGAL PRINCIPLES

41.Order 22 rule 23 of the RHC provides as follows:

“(1) This rule applies where a plaintiff-

(a) fails to obtain a judgment better than the sanctioned payment; or ……

……

(3) The Court may order the plaintiff to pay any costs incurred by the defendant after the latest date on which the payment …… could have been accepted without requiring the leave of the Court.

(4) The Court may also order that the defendant is entitled to-

(a) his costs on the indemnity basis after the latest date on which the plaintiff could have accepted the payment …… without requiring the leave of the Court; and

(b) interest on the costs referred to in paragraph (3) or sub-paragraph (a) at a rate not exceeding 10% above judgment rate.

(5) Where this rule applies, the Court shall make the orders referred to in paragraphs …… (3) and (4) unless it considers it unjust to do so.

(6) In considering whether it would be unjust to make the orders referred to in paragraphs …… (3) and (4), the Court shall take into account all the circumstances of the case including-

(a) the terms of any sanctioned payment ……;

(b) the stage in the proceedings at which any sanctioned payment …… was made;

(c) the information available to the parties at the time when the sanctioned payment …… was made; and

(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the payment or offer to be made or evaluated.

……”

42.Since there was no dispute the net amount P now recovered under the Judgment (ie $540,772.63 being the Judgment Sum and Accrued Interest) was less than the 5^th Sanctioned Payment let alone the 6^th Sanctioned Payment, the normal rule was D would be entitled to costs of the action after the Date (ie the latest date on which P could have accepted the 5^th Sanctioned Payment). This is because in respect of any sanctioned payment the relevant “event” is the recovery of more than the sanctioned payment or the failure to do so, so when a defendant has made a sanctioned payment that has beaten the sum awarded to the plaintiff, he is usually regarded as the successful party who is entitled to costs of the action after the latest date on which he could have accepted the sanctioned payment, and conversely the plaintiff will usually be considered to be the unsuccessful party as from the date when the sanctioned payment should have been accepted, and as a normal rule he is required to pay the costs from that date (which is no more than the embodiment of the cardinal principle of “costs follow event”). But such presumption may be dislodged in special circumstances, eg where the judge takes the view a defendant has withheld material and not allowed a claimant to make proper appraisal of the defendant’s case.[4]

43.Such rationale applies to the Order 22 statutory regime both before and after the Civil Justice Reform. Under such regime, the hardship on the plaintiff in meeting the consequences under Order 22 rule 23 of the RHC has to be weighed against the disadvantages that would ensue if plaintiffs have been offered reasonable compensation are nonetheless allowed to go to trial and run up costs with impunity. It has been said the public good is better secured by allowing plaintiffs to go to trial at their own risk generally as to costs.[5]

44.With such rationale in mind, I agree with Mr Shum (and Ms Lau did not dispute) that the real question here was whether P could demonstrate any special circumstances that would justify a departure from the normal rule as explained above. Ms Lau submitted it would be unjust to allow the consequences provided for in Order 22 rule 23 of the RHC to apply to P, and I turn to the reasons P put forward below.

V.  DISCUSSION

45.First, P sought to argue that the 5^th Sanctioned Payment was on the low side because the Co-employee Documents in February 2014 and the Green River Document in May 2014 supported his claim.

46.I cannot see how this would assist P at all because a sanctioned payment is not necessarily tied to the merits. It is merely a price for peace to prevent further litigation. As explained by Stanley Burton J in Matthews v Metal Improvements Co Inc,[6]

“33. …… The Defendant may make a conservative payment in the hope that it will tempt the claimant to accept a conservative estimate of the value of his claim. He may make a generous Part 36 payment because he is reluctant to incur the risks and costs of going to trial, and hopes thereby to avoid them. The Defendant may quite properly make a low payment in the hope that events or evidence will favour him …… Conversely, there is nothing unreasonable in a competent claimant rejecting a Part 36 payment in the hope that at trial the judge will take a generous view of his damages. The risks that the parties run are costs risks, in the case of the defendant that he will have to pay all of the claimant’s costs, notwithstanding his payment, and in the case of the claimant that he will have to pay the defendant’s costs from the last date when he could have accepted the payment. In other words, the function of a Part 36 payment is to place the Claimant on the costs risk if, as a result of the contingencies of litigation, he fails to beat the payment.”

47.Authorities both before and after the Civil Justice Reform made clear there is no scope for reading into the Order 22 statutory scheme reasonable time and opportunity for acceptance or for implying a right for the plaintiff to investigate into the merits of his own case. A defendant can make a sanctioned payment at any time (eg before disclosure of witness statements and/or expert reports and hence before the plaintiff knows the full extent of the defendant’s case), and there is no embarrassment even if it is not clear how the sanctioned payment is calculated. For the plaintiff, he makes an assessment of the risk of failing to beat the sanctioned payment in deciding whether or not to accept it (and he does so under advice and on materials then available). Even if the plaintiff decides not to accept the sanctioned payment within the prescribed time, it is always open to him to reassess the risk, and if on such reassessment he decides it will be in his interest to accept the sanctioned payment, he can apply to the court for leave to accept out of time. For the defendant, it is unnecessary for him to speculate why the plaintiff decides not to accept the sanctioned payment within the prescribed time. In short, Order 22 of the RHC does not restrict a defendant from making sanctioned payment or the usual rule as to costs from becoming applicable until the plaintiff knows the full extent of his own or the defendant’s case.[7]

48.So P was, of course, free to rely on the Co-employee and Green River Documents to think he could do better than the 5^th and/or 6^th Sanctioned Payments and to adopt a wait-and-see approach and take his chance of getting more damages, but in doing so he would have to bear the cost consequences of such decision. Interestingly, P at trial chose not to rely on the Co-employee Documents at all in calculating his notional earnings for pre-Accident work.[8] Further, P was well aware each worker’s basic pay and commission were different, and it was questionable how a co-employee’s earnings would aid calculation of P’s notional earnings without further explanation/clarification from such co-employee who declined to be named. As regards the Green River Document, although it clearly evidenced P’s return to kitchen work, his cessation of such employment after just 9 days was not explained.[9]

49.Further, one could not take a blinkered view of the Co-employee and Green River Documents for they must be considered in the context of the treatment/expert medical evidence and overall veracity or otherwise of P’s allegations, which materials/information were all available to P and his legal advisors. The upshot was P took a view on the evidence which ultimately did not find favour with the court. With the 5^th and 6^th Sanctioned Payments, it was plainly a cost risk that P took upon himself when he decided not to accept the 5^th and/or 6^th Sanctioned Payments. But if P really wanted to settle the case with D, he could have re-assessed the cost risks and invited D to allow him to accept the 5^th or 6^th Sanctioned Payments at any time prior to setting the present action down for trial or indeed at any time prior to commencement of the trial hearing.

50.More importantly, the Co-employee and Green River Documents were P’s and not D’s discovery. It could not be said D had withheld material and not allowed P to make a proper appraisal of P’s or D’s case, or there was anything in D’s conduct that justified in P proceeding to trial.[10] In my view, the Co-employee and Green River Documents did not amount to any special circumstance that justified departure from the normal costs rule under Order 22 rule 23 of the RHC.

51.Secondly, the Cheng Aff noted D applied for leave to file his 2^nd supplemental witness statement dated 13 June 2015 and further amended his Amended Defence on the 1^st day of trial, and argued this was a “factor [that] should also be reflected in the costs order”.

52.On the 1^st day of trial, I ordered that costs of and occasioned by the relevant summonses be to P in any event to be taxed if not agreed. Having so disposed of the issue of costs, I see no basis to re-open such issue. Even if I am wrong and the issue of costs on these matters were not closed, I am not persuaded it would aid P’s contentions. As Mr Shum rightly pointed out, even if such complaint might arguably be pertinent to a general exercise of discretion if costs of the action were at large, it failed to address how such applications might render it unjust for the court to depart from the usual order that required P to pay D’s costs after expiration of the prescribed period for accepting the 5^th Sanctioned Payment. Mr Shum questioned why events on the 1^st day of trial on 23 June 2015 would have justified P’s refusal to accept the 5^th Sanctioned Payment by the Date that was more than a year ago.

53.Further, the real-time Recording had been disclosed to P long before the trial. D had shown arguable basis for the proposed amendments to his pleadings and for his further statement evidence (which were restricted to matters that could be gleaned from the Recording), and on such confined basis I concluded on the 1^st day of trial that there was no prejudice to P since he could have given evidence to address the matter.[11] With the real-time Recording made available to P, I could not see how it could be said his appraisal of the case was affected. I am not persuaded this amounted to any special circumstance that justified departure from the usual Order 22 rule 23 cost consequences.

54.Thirdly, the Cheng Affirmation claimed that whilst P was keen to achieve amicable settlement expeditiously, D was determined to contest liability and put up a hard fight (even though he was convicted of careless driving). I am unable to see how D putting up a hard fight even up to trial amounted to any special circumstance. As explained above, once D made the sanctioned payments, the lis between the parties turned on a matter of costs. P could have accepted the sanctioned payments or adopted a wait-and-see approach, but he ran the risk of failing to beat the sanctioned payments with the usual cost consequences. D in maintaining a strong defence was also at risk on costs as a result of damages being awarded by the court at trial that might exceed the sanctioned payments. As explained by Recorder Jat Sew-tong SC in Kai Min Fashion (HK) Limited v Fond Express Logistics Limited & anor,[12] it did not make it unjust to make an order under Order 22 rule 24 of the RHC that the party who made the sanctioned offer had continued to contest claims in the normal way. Such factor alone would not make it unjust to order the additional costs consequences under Order 22 rule 24 of the RHC.

55.The Cheng Aff went on to urge this court to conclude that D actually failed on liability, so it was unjust for P to pay costs on the issue of liability, and the costs order should reflect that D failed to discharge on the issue of liability.  The Cheng Aff noted this court found P to be 30% contributorily negligent and P was therefore awarded damages in the Judgment Sum, but if one put aside the matter of contributory negligence, the Sum plus Accrued Interest would be $755,657.75 which would have exceeded the 6^th Sanctioned Payment in the total sum of $750,000. The Cheng Aff suggested that since (a) D lost on the question of liability, (b) P would have beaten the 6^th Sanctioned Payment if the issue of contributory negligence was put aside, and (c) P’s sanctioned offer in the sum of $991,437.80 (inclusive of interest but exclusive of the EC Sum) was “not too much far apart from the [Judgment Sum]”, “it cannot be fair to order [P] to pay all the costs of the proceedings, least to say on an indemnity basis from 29^th May 2014”.

56.Taking the last point first, P seemed to be saying that because D did not respond to P’s last sanctioned offer of $991,437.80 made on 5 May 2015 (which demonstrated P wished to settle his claim), and such sanctioned offer was, according to Ms Lau, “…… not too far off from the Judgment Sum before CN”, the normal Order 22 rule 23 cost consequences should not apply.

57.I am unable to see the relevance of this argument. The issue at hand was not whether P’s sanctioned offer was more advantageous than the damages awarded by the court, but whether P was able to beat the 5^th and/or 6^th Sanctioned Payments. In my view, there could be no doubt that P’s sanctioned offers had fallen off the mark. As explained below, there was no justification to ignore contributory negligence. But even if one were to put it aside, the Sum together with Accrued Interest would be $755,657.75, ie $235,780.05 less than P’s last sanctioned offer of $991,437,80, or a substantial 30% of the sum of $755,657.75. It was a wide margin. P chanced to recover more by his sanctioned offers and failed.

58.Turning to P’s other points, P seemed to be saying that since he achieved 90% of the 5^th Sanctioned Payment and would have beaten the 6^th Sanctioned Payment but for the court’s finding on contributory negligence (ie $755,657.75 versus $750,000) which, according to Ms Lau, was in all circumstances difficult to ascertain, the normal Order 22 rule 23 cost consequences should not apply.

59.Such submissions were not understood. Subject to discussion below on non-genuine attempts to settle proceedings, the Order 22 statutory regime does not turn on whether (a) the sanctioned payment or offer was beaten by a large margin or small margin, or (b) the sanctioned payment or offer would have been beaten if certain other matters were taken into account or certain other matters were ignored. Quite simply, Order 22 rule 23 of the RHC applies where the plaintiff “fails to obtain a judgment better than the sanctioned payment”. Since D’s sanctioned payments were made “in settlement of the whole of [P’s] claim” it necessarily encompassed both issues of liability and quantum. Ms Lau submitted D contended he was not negligent at all but in the Judgment I found D to be 70% liable, so P “succeeded” on the issue of liability. But this submission ignored the other side of the coin, ie despite P’s denial of any contributory negligence I found he was 30% liable. In any event, P’s suggestion of segregating liability and quantum in considering Order 22 rule 23 cost consequences had no merit and would not have amounted to any special circumstance. I find it rather academic and pointless to reject a sanctioned payment made in settlement of the whole of the claim on the notion that the plaintiff could/should insist on incurring costs to pursue a trial on liability (and succeeding thereon) only to be unable to recover damages that can better the sanctioned payment. Such submission failed to recognise that once the sanctioned payment is made, the lis between the parties becomes simply this: is the amount of sanctioned payment sufficient to cover the damage that has been suffered?[13]

60.Ms Lau referred to Cai Guoping v Yim Hok Wing,[14] but I am afraid this case did not support her suggestion that the issue of contributory negligence should be ignored in considering the cost consequences under Order 22 rule 23 of the RHC.

61.In that case, the trial judge held there was contributory negligence to the extent of 50%, so the damages (reduced by half) awarded failed to beat the defendant’s sanctioned payment. The learned judge varied the costs order nisi to provide for Order 22 rule 23 cost consequences. On appeal, the plaintiff succeeded in reducing contributory negligence from 50% to 25%, but he still failed to beat the sanctioned payment by a wide margin (damages of $21,621.75 versus sanctioned payment of $120,000). The plaintiff tried to argue that objectively there was a reasonable chance of beating the sanctioned payment, and if the Court of Appeal held that contributory negligence should be further reduced to, say, 15% instead of merely 25%, the net sum of damages awarded to the plaintiff would have beaten the sanctioned payment, so it was not unreasonable for the plaintiff to pursue his claim and it would be unjust to order him to pay the defendants’ costs after the last day for acceptance of the sanctioned payment on indemnity basis.

62.In that case, the plaintiff not so bold as to suggest that the entire issue of contributory negligence should be put aside. Even so, the Court of Appeal held the suggestion that there was objective basis for thinking the plaintiff might have reasonable chance of beating the sanctioned payment was sheer speculation, and there was nothing to show it would be unjust in any way if indemnity costs should be awarded. The Court of Appeal noted this was not a case in which the judgment sum (which necessarily referred to the award of damages after taking into account contributory negligence) was narrowly beaten by the sanctioned payment. Indeed, the plaintiff failed to do better than the sanctioned payment by a wide margin.

63.The Court of Appeal agreed with the defendant’s submissions that the provisions in Order 22 rule 23 of the RHC are mandatory directions unless the court considers it unjust to apply the same, and when the plaintiff decided not to accept the sanctioned payment he must have done so on a fully informed basis, accepting he had to bear the risk he might fail to obtain a judgment better than the sanctioned payment and the consequences that would follow.

64.In my view, it was quite clear from Cai Guoping that contributory negligence should be taken into account and not put aside when parties consider whether to accept sanctioned payment, and when the court considers the cost consequences under Order 22 rule 23 of the RHC. Here, the Judgment Sum failed to beat not only the 6^th Sanctioned Payment; it failed even to meet the 5^th Sanctioned Payment. This is sufficient to dispose of P’s arguments in this respect. But I further note here that in declining to accept the 5^th or 6^th Sanctioned Payment P was fully informed on the matter of contributory negligence. He was present at the scene and personally involved in the Accident. He and his legal advisors had the benefit of the real-time Recording, P’s and Ds’ Police Statement and the transcript of P’s evidence in the CD Case.

65.Ms Lau next argued that contributory negligence was something nebulous and hence ought to be put aside. I cannot accept such argument. Here, the finding on negligence was not a mere 1% or 2%. My finding was that P was 30% contributorily negligent, which was a real and substantial contribution on liability.

66.Ms Lau referred to Huck v Robson[15] which was succinctly summarised in Civil Procedure as follows:[16]

“Whilst 100 per cent offers do not work, in Huck v Robson …… the majority of the Court of Appeal allowed the claimant’s appeal and made orders under what is now r.36.17(4)[17] in a personal injury claim where the claimant had made a 95 per cent offer. While allowing the appeal, the Court of Appeal recognised the potential for abuse, holding that, if the offer was ‘merely a tactical step designed to secure the benefits of [Pt 36]’, the court would not give effect to it ……”

67.But even the English courts recognised the Huck test was difficult to apply, and Civil Procedure goes on to say as follows:

“…… As Norris J observed in Wharton v Bancroft [2012] EWHC 91 (Ch), 30 January 2012, unrep., all Part 36 offers are tactical. The Huck test was therefore not easy to apply. It was these considerations, and a concern that Huck was insufficient to check the potential for abuse, now exacerbated by the ‘additional amount’ awarded to claimants pursuant to r.26.17(4)(d), that led the Rule Committee to introduce the new para.(5)(e).[18] The focus of the additional enquiry is as to whether the offer was a genuine offer to settle, and not on whether it was or was not ‘tactical’. In approaching para.5(e), it is important to remember that the default rules in rr.36.17(3) to (4) are only to be departed from where such orders should be unjust and that (as explained above) the offeree faces a ‘formidable obstacle’ in obtaining a different order ……”

68.Ms Lau next referred to Kai Min Fashion (HK) Limited in which the plaintiffs sought cost consequences under Order 22 rule 24 of the RHC on the basis that the 2^nd defendant failed to do better than the plaintiffs’ sanctioned offer. The learned judge said as follows:

“12. …… Whether the discount offered was ‘miserly’ or not is irrelevant; what matters under the rules is that the Plaintiff has done better than what it has offered: see on this point Huck v Robson …… (Tuckey LJ at §69-70; Schiemann LJ at §§76, 80). Once that criterion is satisfied, the Court should make an order under Order 22 r 24 unless it is unjust in the circumstances of the case to do so.

13. I note that in Huck v Robson, Tuckey LJ said at §71 that:

‘ … if it was self-evident that the offer made was merely a tactical step designed to secure the benefit of the incentives provided by the Rule (eg an offer to settle for 99.9% of the full value of the claim) I would agree with Jonathan Parker LJ [who was in the minority in that case] that the judge would have a discretion to refuse indemnity costs.’

14. I am, however, unable to describe the Plaintiffs’ sanctioned offers in this case as a ‘mere tactical step’ in the sense referred to by Jonathan Parker LJ and Tuckey LJ. Huck v Robson was a traffic accident case and in that type of cases issues of contributory negligence often arise, making it uncertain as to the extent of the parties’ respective responsibility for the accident. Thus making a sanctioned offer of the kind described by Tuckey LJ may be seen as a tactical move. This case, on the other hand, is what may be called a ‘mis-delivery’ case and claimants in such cases are often, and justifiably, confident of success if the carrier has delivered the goods without production of the original bills of lading. I do not see why the Plaintiffs should not offer a small discount in this type of case to reflect their reasonably justified confidence in the strength of their claims.”

69.Mr Shum referred me to the more recent guidance by the Court of Appeal in Antwerp Diamond Bank NV v Brink’s Incorporated (No 2).[19] In that case the plaintiff made a sanctioned offer of US$850,000, and judgment was entered for the 3^rd defendant. The plaintiff successfully appealed and the 3^rd defendant was ordered to pay damages of US$852,399 with interest at commercial rate from the date of mis-delivery and costs of both trial and appeal. The plaintiff applied for additional costs orders under Order 22 rule 24 of the RHC.

70.The Court of Appeal at pp 636-637 referred to Huck and Kai Min Fashion (HK) Ltd, and came to the view it did not follow that a minor discount necessarily meant it would be unjust to make orders of the sort envisaged by Order 24 rule 24(2)-(3) of the RHC even though “we would not rule out the possibility that there may be cases in which it would be appropriate to regard a purported sanctioned offer as being “not genuine” so as to render it unjust to make orders of the sort envisaged by Order 22 rule 24(2) and (3)”. On such basis, it was held that it was not unjust to order the 3^rd defendant to pay the plaintiff’s costs of the trial on indemnity basis with interest enhanced to 4% over prime rate under Order 22 rule 24(3)-(4) of the RHC. It was said the plaintiff could well have genuinely regarded its claim as extremely strong, and the smallness of the discount (0.27%) on the amount claimed of itself did not render it unjust to make the orders sought on the basis that the offer was merely tactical and not genuine. The Court of Appeal found there was no reason why a recipient of a sanctioned offer bearing a relatively small discount on the claim should not give it serious consideration, respond with a more realistic counter-sanctioned offer and cause the parties to seriously and realistically consider the possible options of settlement instead of ordinary adversarial litigation.[20]

71.I cannot see how this line of cases would aid P’s contentions. As Ms Lau rightly conceded in her oral submissions, D’s sanctioned payments could not be classified as non-genuine offers even though they were admittedly tactical steps. But then all sanctioned payments are tactical steps.[21] The accumulated total sum of such sanctioned payments was $750,000, which could not be said to be paltry or non-genuine. Indeed, it was more than the Judgment Sum and Accrued Interest. The fact P thought the 5^th and/or 6^th Sanctioned Payments, albeit genuine, was on the low side could not assist. As explained in Antwerp Diamond Bank NV, there was no reason why P should not have given them serious consideration and responded with a more realistic counter-offer or sanctioned offer to cause both parties to realistically consider options for settlement. As it were, P’s sanctioned offers were off by a wide margin, and the fact P subjectively considered the 5^th and/or 6^th Sanctioned Payments “miserly” was neither here nor there. In my view, there was nothing unjust in letting the normal Order 22 rule 23 cost consequences apply.

72.Fourthly, the Cheng Aff complained that D insisted on setting the case down for trial so there was insufficient time and diminished chance for settlement by way of mediation. P filed his Mediation Notice on 30 May 2013, but it was only upon P’s efforts that D finally filed his Mediation Response more than a year on 2 May 2014. Ms Lau submitted D’s refusal to engage in early mediation increased P’s costs unnecessarily thereby making it harder to settle.

73.The 2^nd Lee Aff pointed out that given the quantum of damages pleaded in the Statement of Damages (and later in the RSOD and Re-RSOD), it would be premature to attempt early mediation without seeking discovery from P and making a thorough investigation of his claim. D therefore chose to proceed with mediation after he was able to obtain crucial materials from relevant parties for proper assessment of P’s claim. Anyway, P did not ask for interim stay of proceedings pending the outcome of the mediation, so there was no reason why parties should not proceed with expeditious progress of the present action by setting it down for trial merely because the parties had not yet attempted mediation. The 2^nd Lee Aff suggested that had P wanted to settle the case without a full trial, he should either have re-assessed his position by revisiting D’s sanctioned payments or strived to achieve amicable settlement via without prejudice negotiations and/or mediation. The 2^nd Lee Aff rejected the notion that D’s request to have the present action set down for trial (which was done in compliance with the order of Master Leong on 27 August 2014) reduced the chance of settlement by way of mediation.

74.The 2^nd Lee Aff further explained that the reason why D insisted on setting the present action down for trial was because of P’s 2^nd application for interim payment on 10 September 2014. D was concerned about the possibility of overpayment, and thought it would safeguard both parties’ interests to have a speedy trial so as to obviate the need for any further interim payment. Consequently, with the trial scheduled on 23 June 2015, P eventually abandoned his application for 2^nd interim payment that was returnable for substantive argument on 20 May 2015.

75.As Mr Shum submitted, D only claimed for costs after 28 May 2014. By such time he had already filed his Mediation Response. I am not persuaded D’s delay in responding to P’s Mediation Notice had any material bearing. I also note P did not make any attempt to embark on without prejudice settlement negotiations with D. P apparently adopted a strong stance as evident from the escalation of his claim for damages in the RSOD and Re-RSOD, the amounts offered in his 1^st and 2^nd sanctioned offers, and his failure to re-consider or more realistically respond to the 5^th/6^th Sanctioned Payments. Although I do not wish to speculate on the reasons for the failed mediation, P’s strong stance was not conducive to achieving consensual and amicable settlement. Whilst I could take into account D’s deferred filing of the Mediation Response and insistence on setting the case down for trial, in my view those matters add little in the circumstances of this case. I am not persuaded they amounted to any special circumstances that would sway the court from the normal Order 22 rule 23 cost consequences.

76.Fifthly, it must be remembered that D was successful party in respect of the “event”, ie recovery of more than the sanctioned payment or failure to do so, and P was the losing party, so the normal cost consequence was that P would have to pay D’s post-sanctioned payment costs of the action. But P’s proposal for cost relief in paragraph 9(a) above sought a reversal of the normal cost consequence in relation to the costs of the action after the Date. In this respect, it is necessary to distinguish 2 different parts to costs after the latest date in which a sanctioned payment could be accepted without leave, ie the taxed or agreed costs which a losing party should normally pay to the successful party, and the losing party’s own costs which he had to bear. If both parts are reversed so that the successful party not only fails to recover his own costs, and in addition has to pay the costs of the losing party, the successful party suffers a double jeopardy as a result of a departure from the usual costs order, which is normally considered unjust but for special circumstances. [22]

77.Here, D was undoubtedly the successful party in respect of the “event”. To ask D to pay any part of P’s post-sanctioned payment costs would be contrary to principle and rationale for sanctioned payments. In my view, the only question was whether there were special circumstances that indicated the court should exercise its discretion to order D not to recover his own costs after the Date.

78.In my view, the laudable purpose of the sanctioned payment scheme under Order 22 of the RHC to prevent further costs and to dispose of legal proceedings would be blunted if I were to find in favour of P. D made progressive payments into court as the litigation progressed to avoid incurring or to seek protection over substantial subsequent legal costs. If the court found in favour of P as per the cost relief proposed in paragraph 9(a) above, D would suffer risk of overpayment in respect of the sanctioned payments as well as the hardship of double penalty referred to above. This could not be just and public good would not be served by such result.

79.In all the circumstances, there was no reason to disturb the usual costs order under Order 22 rule 23 of the RHC. Nor is there anything under any of the 4 matters set out in Order 22 rule 23(6) of the RHC that pointed to it being unjust to make the orders sought by P.

VI.  CONCLUSION

80.I therefore grant an order in terms of paragraphs (a)-(d) and (f)-(g) the Summons. In respect of paragraph (e) of the Summons, I grant an order that “interest on the sum of $445,990.00 being part of the Defendant’s costs referred to in (d) above that had been advanced by his insurer after 28 May 2014 (subject to taxation) be paid at 3% above the judgment rate;”. Since P did not dispute the costs order in paragraph (g) of the Summons, the costs order in respect of the Summons is an absolute and not nisi order.

Ms Lorinda Lau, instructed by Au Yeung, Cheng, Ho & Tin, for the plaintiff

Mr Edward Shum, instructed by Lau, Chan & Ko, for the defendant