Rai Rana Magar Pabitra Personal Representative ofThe Estate of Rana Magar Mohan Jung, Deceased and Another v. Pacific Construction (HK) Co Ltd and Others

HCPI 398/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 398 OF 2008

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Before : Hon Bharwaney J in Chambers

Date of Hearing : 9 February 2011

Date of Reasons for Decision : 24 May 2011

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REASONS FOR DECISION

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1.This is a fatal accident claim brought by the dependants of the deceased who died in an accident at work. The action was warned for trial for the week commencing on 31 January 2011. On 2 February 2011, on the eve of Chinese New Year, the defendants’ solicitors took out a summons returnable before me for leave to the defendants to accept the plaintiffs’ sanctioned offer on liability dated 18 November 2009. By that summons, the defendants’ solicitors sought an order that interlocutory judgment on liability be entered for the plaintiffs for 50% of the amount of damages, and interest thereon, to be assessed, and that costs on the issue of liability be to the plaintiffs from 16 December 2009 up to and including 1 February 2011, to be taxed, if not agreed, on an indemnity basis.

2.On 8 February 2011, the plaintiffs’ solicitors took out a cross summons for leave to the plaintiffs to withdraw their sanctioned offer on liability dated 19 November 2010. 

3.I heard both summonses on 9 February 2011 and ordered that the defendants’ application for leave to accept the plaintiffs’ sanctioned offer on liability dated 18 November 2009 be refused, that the costs of and occasioned by the defendants’ summons be paid to the plaintiffs by the defendants, and that there be no order in respect of the plaintiffs’ summons. 

4.I also directed that the plaintiffs’ own costs be taxed in accordance with the Legal Aid Regulations, Cap. 91. 

5.These are my reasons for that decision. 

6.The case concerned a fatal accident that occurred on 12 June 2005 at a construction site called the Hong Kong Shenzhen Western Corridor in the New Territories.  A road bridge was under construction at that site, and the deceased was employed by the 1^st defendant as a skilled labourer and assigned to work for the 2^nd defendant at the site.  The 2^nd defendant was the sub-contractor of the main contractor on the site, the 3^rd defendant.  As part of the construction work, it was necessary to transport pre-cast concrete sections of the bridge to be constructed.  These pre-cast sections were very large and were moved by a machine called a “carrier”.  This consisted of a flat platform that was 9 metres long and 3 metres wide.  The platform was 1 metre high and supported by 24 wheels.  The carrier would be moved by an operator who would stand nearby and operate the carrier by a control panel which was attached to the carrier.  The accident occurred at about 9 p.m. on 12 June 2005 when the carrier was being moved by the operator.  The site was lit and the carrier also had lights of its own at each corner.  The carrier had not moved very far when the operator saw a safety helmet roll into his view from the front of the carrier.  The operator stopped the machine and found the deceased lying on the ground at the front of the carrier.  He was seriously injured and died afterwards from the injuries he sustained that night. 

7.Issue was joined between the parties on liability and contributory negligence, and the extent thereof. 

8.Although issue was joined, the parties exchanged sanctioned offers on liability.  On 6 August 2009, the defendants offered a settlement of liability on the basis of 80% contributory negligence.  This was rejected by the plaintiffs’ solicitors on 15 September 2009 when they wrote to the defendants’ solicitors counter-offering settlement on the basis of 25% contributory negligence.  The defendants’ solicitors rejected this counter-offer on 22 October 2009. 

9.By a letter dated 18 November 2009, expressed to be “without prejudice save as to costs”, the plaintiffs’ solicitors wrote to the defendants’ solicitors enclosing a “Notice of Sanctioned Offer” in respect of liability.  That Notice stated as follows :

“Plaintiffs’ Sanctioned Offer

The Plaintiffs hereby make a sanctioned offer under O22 r5 RHC in respect of liability for the whole claim on the following basis:

The 1^st, 2^nd & 3^rd Defendants accept 50% liability; and

The Plaintiffs accept 50% liability by way of contributory negligence

Take notice that if the sanctioned offer is not accepted within 28 days, the Defendants may only accept it after this if either the parties agree on liability for costs or the Court grants leave to accept it.”

10.Receiving no response from the defendants’ solicitors, the plaintiffs’ solicitors wrote on 3 February 2010 asking them to confirm specifically, if that was the case, that their clients were not interested in settling liability on the basis of the plaintiffs’ sanctioned offer.  The defendants’ solicitors only wrote on 10 May 2010, expressly rejecting the plaintiffs’ sanctioned offer on liability of 18 November 2009 and offering to settle on the basis of 70% contributory negligence. 

11.The parties attempted to mediate their differences on 19 November 2010, but this was unsuccessful.  The action was warned for trial for the week commencing 31 January 2011 and, on 1 February 2011, the defendants’ solicitors wrote an open letter to the plaintiffs’ solicitors accepting the plaintiffs’ sanctioned offer on liability made on 18 November 2009, and offering to pay costs on the issue of liability, on an indemnity basis, from 16 December 2009 (i.e. 28 days after 18 November 2009) until 1 February 2011.  This prompted a response by the plaintiffs’ solicitors, by a without prejudice letter dated 2 February 2011, reminding the defendants’ solicitors that they had rejected the plaintiffs’ sanctioned offer of a 50/50% settlement by their letter of 10 May 2010 and stating further that :

“Matters have moved on and our further analysis of the evidence had led us to believe that our case is stronger on liability than represented by the proportion set out in the Sanctioned Offer. We have told our clients this and they have accepted our view in the matter.

We subsequently informed you, not least at the beginning of the mediation process, that we were not prepared to come to a settlement on liability at this amount (50/50%).”

The letter ended with the statement that the plaintiffs were unable to agree with the defendants’ proposal and that any application to court would be opposed.

12.The plaintiffs’ cross summons was supported by the affidavit of their solicitor, Mr Simon Cleves, sworn on 7 February 2011, in which he deposed to the fact that the defendants’ solicitors were told, on 3 separate occasions, on 12 July 2010 at the hearing of the checklist review, at the mediation session on 19 November 2010, and over a telephone conversation on 31 January 2011, that the plaintiffs were no longer willing to settle on a 50/50% basis.  He had specifically informed the defendants’ solicitors on 12 July 2010 that the plaintiffs were no longer willing to settle on that basis “since we had obtained Counsel’s Advice and her evaluation of the evidence led her to opine that the plaintiffs should succeed at a far higher level in their favour as regards percentage of liability/contributory negligence”. 

13.For completeness, I should add that the defendants’ solicitors gave notice of a sanctioned payment into court in the sum of $120,000 (after taking into account the amount of $935,000 paid as employees’ compensation).  That notice was dated 13 December 2010.  

14.One of the major changes effected by the Civil Justice Reform was the amendment to O. 22 of the Rules of the High Court (RHC) introducing, for the first time, the procedural mechanism of “Sanctioned Offers”.  This is an offer to dispose of the case on terms and can be made by a plaintiff as well as by a defendant.  The new provision, which permits plaintiffs to make sanctioned offers, produces a level playing field and enables plaintiffs to enjoy the benefits of O. 22 which, prior to its introduction, could only be enjoyed by defendants making payments into court. 

15.Our provisions are modelled on the provisions of the old Part 36 of the 1998 UK Civil Procedure Rules (“CPR”).  By an amendment to the CPR, enacted in 2006 and coming into effect on 6 April 2007, the provisions of the original Part 36 of the CPR were completely replaced. The following current provisions of Part 36, pertaining to Part 36 offers, are relevant: 

“36.2 Form and content of a Part 36 offer

(1) An offer to settle which is made in accordance with this rule is called a Part 36 offer.

(2) A Part 36 offer must –

(a) be in writing;

(b) state on its face that it is intended to have the consequences of Section I of Part 36;

(c) specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with rule 36.10 if the offer is accepted;

(d) state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and

(e) state whether it takes into account any counterclaim.

(Rule 36.7 makes provision for when a Part 36 offer is made)

Rule 36.2(2)(c) does not apply if the offer is made less than 21 days before the start of the trial.

(3) Rule 36.2(2)(c) does not apply if the offer is made less than 21 days before the start of the trial.

(4) In appropriate cases, a Part 36 offer must contain such further information as is required by rule 36.5 (Personal injury claims for future pecuniary loss), rule 36.6 (Offer to settle a claim for provisional damages), and rule 36.15 (Deduction of benefits).

(5) An offeror may make a Part 36 offer solely in relation to liability.

36.3 Part 36 offers – general provisions

(1) In this Part -

(a) the party who makes an offer is the ‘offeror’;

(b) the party to whom an offer is made is the ‘offeree’; and

(c) ‘the relevant period’ means -

(i) in the case of an offer made not less than 21 days before trial, the period stated under rule 36.2(2)(c) or such longer period as the parties agree;

(ii) otherwise, the period up to end of the trial or such other period as the court has determined.

(2) A Part 36 offer -

(a) may be made at any time, including before the commencement of proceedings; and

(b) may be made in appeal proceedings.

(3) A Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of all interest until -

(a) the date on which the period stated under rule 36.2(2)(c) expires; or

(b) if rule 36.2(3) applies, a date 21 days after the date the offer was made.

(4) A Part 36 offer shall have the consequences set out in this Section only in relation to the costs of the proceedings in respect of which it is made, and not in relation to the costs of any appeal from the final decision in those proceedings.

(5) Before expiry of the relevant period, a Part 36 offer may be withdrawn or its terms changed to be less advantageous to the offeree, only if the court gives permission.

(6) After expiry of the relevant period and provided that the offence has not previously served notice of acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree without the permission of the court.

(7) The offeror does so by serving written notice of the withdrawal or change of terms on the offeree.

(Rule 36.14(6) deals with the costs consequences following judgment of an offer that is withdrawn)

36.9 Acceptance of a Part 36 offer

(1) A Part 36 offer is accepted by serving written notice of the acceptance on the offeror.

(2) Subject to rule 36.9(3), a Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer) unless the offeror serves notice of withdrawal on the offeree.

(Rule 21.10 deals with compromise etc. by or on behalf of a child or protected party.)

(3) The court’s permission is required to accept a Part 36 offer where -

(a) rule 36.12(4) applies;

(b) rule 36.15(3)(b) applies, the relevant period has expired and further deductible amounts have been paid to the claimant since the date of the offer;

(c) an apportionment is required under rule 41.3A; or

(d) the trial has started.

(Rule 36.12 deals with offers by some but not all of multiple defendants)

(Rule 36.15 defines ‘deductible amounts’)

(Rule 41.3A requires an apportionment in proceedings under the Fatal Accidents Act 1976 and Law Reform (Miscellaneous Provisions) Act 1934)

(4) Where the court gives permission under paragraph (3), unless all the parties have agreed costs, the court will make an order dealing with costs, and may order that the costs consequences set out in rule 36.10 will apply.

(5) Unless the parties agree, a Part 36 offer may not be accepted after the end of the trial but before judgment is handed down.

36.10 Costs consequences of acceptance of a Part 36 offer

(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.

(4) Where -

(a) a Part 36 offer that was made less than 21 days before the start of trial is accepted; or

(b) a Part 36 offer is accepted after expiry of the relevant period, if the parties do not agree the liability for costs, the court will make an order as to costs.

(5) Where paragraph (4)(b) applies, unless the court orders otherwise -

(a) the claimant will be entitled to the costs of the proceedings up to the date on which the relevant period expired; and

(b) the offeree will be liable for the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.

36.14 Costs consequences following judgment

(6) Paragraphs (2) and (3) of this rule do not apply to a Part 36 offer –

(a) that has been withdrawn;

...”

16.The provisions of the new Part 36, set out above, may be compared with the following provisions of our O. 22, which were enacted by Legal Notice No 152 of 2008 dated 4 June 2008 :

“2. Offer to settle with specified consequences (O.22, r.2)

(1) A party to an action containing a money claim or a non-money claim or both 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.

(2) An offer made under paragraph (1) may take into account any counterclaim or set-off in the action.

(3) An offer made under paragraph (1) has the consequences specified in rules 20, 21, 22, 23 and 24 (as may be applicable).

(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.

II. MANNER OF MAKING SANCTIONED OFFER OR SANCTIONED PAYMENT

3. Defendant’s offer to settle (O.22, r.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.

4. Plaintiff’s offer to settle (O.22, r.4)

An offer by a plaintiff 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.

5. Form and content of sanctioned offer (O.22, r.5)

(1) A sanctioned offer must be in writing.

(2) A sanctioned offer may relate to the whole claim or to part of it or to any issue arising from it.

(3) A sanctioned offer must –

(a) state whether it relates to the whole claim or to part of it or to an issue arising from it and if so to which part or issue;

(b) state whether it takes into account any counterclaim or set-off; and

(c) if it is expressed not to be inclusive of interest, give the details relating to interest set out in rule 26(2).

(4) A defendant may make a sanctioned offer limited to accepting liability up to a specified proportion.

(5) A sanctioned offer may be made by reference to an interim payment.

(6) A sanctioned offer may be made at any time after the commencement of the proceedings but may not be made before such commencement.

(7) A sanctioned offer made not less than 28 days before the commencement of the trial must provide that after the expiry of 28 days from the date the sanctioned offer is made, the offeree may only accept it if -

(a) the parties agree on the liability for costs; or

(b) the Court grants leave to accept it.

(8) A sanctioned offer made less than 28 days before the commencement of the trial must provide that the offeree may only accept it if -

(a) the parties agree on the liability for costs; or

(b) the Court grants leave to accept it.

7. Withdrawal or diminution of sanctioned offer (O.22, r.7)

(1) A sanctioned offer made not less than 28 days before the commencement of the trial may not be withdrawn or diminished before the expiry of 28 days from the date the sanctioned offer is made unless the Court grants leave to withdraw or diminish it.

(2) A sanctioned offer made less than 28 days before the commencement of the trial may be withdrawn or diminished if the Court grants leave to withdraw or diminish it.

(3) If there is subsisting an application to withdraw or diminish a sanctioned offer, the sanctioned offer may not be accepted unless the Court grants leave to accept it.

(4) If the Court dismisses an application to withdraw or diminish a sanctioned offer or grants leave to diminish the sanctioned offer, it may by order specify the period within which the sanctioned offer or diminished sanctioned offer may be accepted.

(5) If a sanctioned offer is withdrawn, it does not have the consequences specified in this Order.

12. Time when sanctioned offer or sanctioned payment is made and accepted (O.22, r.12)

(1) A sanctioned offer is made when it is served on the offeree.

...

(3) An amendment to a sanctioned offer is effective when its details are served on the offeree.

...

(5) A sanctioned offer or sanctioned payment is accepted when notice of its acceptance is served on the offeror.

16. Time for acceptance of plaintiff’s sanctioned offer (O.22, r.16)

(1) Subject to rule 7(3), a defendant may accept a sanctioned offer 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 plaintiff a written notice of acceptance not later than 28 days after the offer was made.

(2) If -

(a) a plaintiff’s sanctioned offer is made less than 28 days before the commencement of the trial; or

(b) the defendant does not accept it within the period specified in paragraph (1),

then the defendant may –

(i) if the parties agree on the liability for costs, accept the offer without the leave of the Court; and

(ii) if the parties do not agree on the liability for costs, only accept the offer 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.”

17.In Scammell v Dicker [2001] 1 WLR 631, the Court of Appeal in England (Aldous and Mance LJJ) held that the provisions of the old Part 36 did not seek to exclude the general law of contract that an unaccepted offer could be withdrawn, but laid down the requirements needed to attain the consequences of making a Part 36 offer, as opposed to any other kind of offer, and that, therefore, an offer to settle an action made under Part 36 could be withdrawn at any time prior to acceptance.  In that case, the defendant made an offer to settle the action under Part 36 by letter dated 9 March 2000 but withdrew that offer by letter dated 13 March 2000.  The offer being expressed to be open for 21 days, the claimants took the view that the defendant was not entitled to withdraw the offer within that period, and purported to accept it on 14 March 2000.  The judge concluded that the Part 36 offer could not be withdrawn unilaterally before the expiry of the period of 21 days, and he held that the action had been compromised on the terms of the letter of 9 March 2000.  On appeal, the Court of Appeal allowed the appeal, holding that an offer to settle an action made on the Part 36 could be withdrawn at any time prior to acceptance, and that, having been withdrawn on 13 March 2000, it was no longer open for the claimants to accept it.  Aldous LJ gave six reasons to support his conclusion that Part 36 did not seek to exclude the general law of contract that an unaccepted offer could be withdrawn, at p. 637A-E :

“The Civil Procedure Rules do not prevent a Part 36 offer being withdrawn at any time prior to acceptance. That I believe to be clear for six reasons. First, there is nothing in Part 36 which states that a Part 36 offer cannot be withdrawn. If withdrawal was precluded, I would have expected the rule to have said so in clear terms. That is to be contrasted with rule 36.6(5), which prevents withdrawal of a payment without permission. Second, rule 36.5(6)(a) only requires the offer to ‘be expressed to remain open for acceptance for 21 days …’ If the intention had been that the offer had to remain open for 21 days then the word ‘expressed’ would not have been used. Third, there is no mention of a particular period for offers made close to trial: see rule 36.5(7). To read into the rules that such offers cannot be withdrawn for a reasonable period from the date of the offer would provide uncertainty which could not have been contemplated. Fourth, rule 36.5(8) expressly provides that a Part 36 offer can be withdrawn. There is no limitation on when the withdrawal can take place. The effect is set out, namely that the offeror cannot rely upon the consequences of having made a Part 36 offer. Fifth, a requirement that a Part 36 offer could not be withdrawn could impose hardship in certain circumstances. That being so, I would have expected a provision providing for withdrawal in certain circumstances, at least with permission of the court. Sixth, a Part 36 offer is an offer to enter into a contract with the offeree. To impose a term that the offer could not be withdrawn would result in an addition to the contractual terms offered by the offeror. That would be possible, but should not be done by implication. The purpose of making a Part 36 offer, as opposed to another type of offer, is to attain the advantages that the rules provide. It is only those offers which comply with the rules that are certain to attain those advantages.”

18.The decision of the Court of Appeal in Scammell v Dicker attracted considerable criticism[1]. It is difficult to accept that an offer expressed to be made pursuant to Part 36 is not subject to those provisions.  In Flynn v Scougall (Practice Note) [2004] 1 W.L.R. 3069, May LJ observed that a defendant who makes a Part 36 payment has to make an offer to which the relevant provisions of Part 36 are attached. 

19.To permit a claimant to withdraw, at any time, an offer expressed to be valid for 21 days creates a lopsided situation when contrasted with the case of a defendant making a payment into court.  An offeree should be provided with a reasonable time to consider the offer.  To permit a claimant to withdraw, at any time, an offer expressed to be valid for 21 days does not facilitate and is not conducive to settlement.  The new Part 36 now provides in r. 36.3(5) that, before the expiry of the relevant period, a Part 36 offer may be withdrawn or its terms changed to be less advantageous to the offeree, only if the court gives permission, and overturns the decision in Scammell v Dicker to this extent. 

20.I am of the view that the provisions under O. 22 are entirely procedural in nature and that they are not affected by the general law of contract.  In my judgment, the observations of Goddard LJ in Cumper v Pothecary [1941] 2 KB 58 in relation to payments into court apply equally to sanctioned offers.  He said, at p. 67 :

“… there is nothing contractual about payment into court. It is wholly a procedural matter and has no true analogy to a settlement arranged between the parties out of court, which, of course, does constitute a contract. When once the seven days have expired the plaintiff can only get the money if he can obtain an order, and before the court makes an order it must consider whether it is right so to do.”

I find support for this view from the fact that, unlike the situation in the UK, in Hong Kong, a sanctioned offer can only be made after the commencement of proceedings. Indeed, Moore-Bick LJ in his leading judgment in the conjoined cases of Gibbon v. Manchester City Council and LG Blower Specialist Bricklayer Ltd. v. Reeves [2010] 1 WLR 2081 observed in §6 that :

“Certainty is as much to be commended in procedural as in substantive law, especially, perhaps in a procedural code which must be understood and followed by ordinary citizens who wish to conduct their own litigation. In my view, Part 36 was drafted with these considerations in mind and is to be read and understood according to its terms without importing other rules derived from the general law, save where that was clearly intended”.

21.O. 22, r. 7(1) specifically states that a sanctioned offer made not less than 28 days before the commencement of the trial may not be withdrawn or diminished before the expiry of 28 days from the date the sanctioned offer is made, unless the Court grants leave to withdraw or diminish it. Although there is no express provision in Hong Kong, similar to r. 36.3(6) of Part 36, that a sanctioned offer, made not less than 28 days before the commencement of trial, may be withdrawn or diminished after the expiry of 28 days without the leave of court, the wording of r. 7(1) necessarily implies that that must be so.  Indeed, Mr Albert Yau, who appeared for the defendants, very fairly conceded that the offeror could withdraw the sanctioned offer after the expiry of 28 days without the leave of the court, and he referred me to a decision of Deputy Judge Alfred H. H. Chan in Wealthy Century Investment Ltd v DBS Bank (HK) Ltd (DCCJ 1519 of 2009, 8 September 2010) who said :

“8. Just as the previous provisions on payment into court were wholly procedural (per Goddard LJ, Cumper v Pothecary [1941] 2 KB 58 at 67), so are the new provisions on sanctioned payments and the parallel provisions on sanctioned offers. A sanctioned offer, once made, will have the effect and consequences provided for under Order 22. If made not less than 28 days before the trial commences, it may be accepted by the offeree any time within 28 days, during which time it cannot be withdrawn or diminished by the offeror without the leave of the court. Even after the 28 days, it remains open for acceptance by the offeree, subject to the court’s leave or the parties’ agreement on the liability for costs. A sanctioned offer does not normally ‘lapse’. These provisions represent obvious departures from the normal rules of offer and acceptance in the law of contract.

9. It is true that after the initial 28-day period, a sanctioned offer may be withdrawn or diminished without the leave of the court. Order 22 does not specify how a sanctioned offer may be withdrawn after the 28-day period, although in most cases it should not be difficult to determine if a party intends to withdraw a sanctioned offer, given the potential costs and interest implications.”

22.I agree with these observations, but not with the comment that “in most cases it should not be difficult to determine if a party intends to withdraw a sanctioned offer, given the potential costs and interest implications”.  These observations accord with Recommendation 41 of the Civil Justice Final Reform of March 2004 (at §316 on p. 156) that :

“A sanctioned offer or payment should be required to remain open for acceptance for 28 days after it is made (such 28-day period falling before commencement of the trial), unless leave is granted by the court for its earlier withdrawal. Thereafter, the offer could be withdrawn and if not, would continue to be capable of acceptance.”

I would add that, after the period of 28 days, the offer could be withdrawn by the offeror without the leave of the court and, if not withdrawn, would continue to be capable of acceptance pursuant to the provisions of r. 5(7) if :

(a) the parties agree on the liability for costs; or

(b) the court grants leave to accept it.

Indeed, the Notice of Sanctioned offer in this case states expressly repeats the words of r.5(7) that after the expiry of 28 days the offeree may only accept it if either the parties agree on liability for costs or the court grants leave to accept it.

23.It is specifically provided in r. 36.3(7) of the new Part 36 that the offeror must serve a written notice of the withdrawal or change of terms on the offeree.  Our O.22, r. 12(3) provides that an amendment to a sanction offer is effective when its details are served on the offeree. Clearly an amendment may be by way of increasing a previous sanctioned offer or by diminishing it. A withdrawal of a sanctioned offer can also be regarded as an “amendment” of that offer. O.22, r. 12(3), together with the requirements in r. 5(1) that a sanctioned offer must be in writing, and in r. 5(7) that it must provide that, after the expiry of 28 days from the date of the sanctioned offer is made, the offeree may only accept it if the parties agree on the liability for costs or the court grants leave to accept it, lead me to conclude that the court would only accept that a withdrawal or diminution of the sanctioned offer has occurred if a written notice of withdrawal or diminution of the sanctioned offer from the offeror addressed to and served on the offeree is produced to the court. Given the serious consequences of a sanctioned offer, there must be clarity and certainty on the issue of whether or not a sanctioned offer has been withdrawn. The written notice of withdrawal must expressly refer to the date of the sanctioned offer and to its terms and must expressly state that the sanctioned offer is withdrawn.  This will avoid uncertainty and argument. 

24.As the provisions are entirely procedural, the fact that counter-offers are made by the offeree will not prevent the offeree, after the expiry of 28 days from applying to court for leave to accept the sanctioned offer.  In my judgment, oral communications, such as we have seen in the present case, that the plaintiffs are no longer willing to settle on the basis of the terms of the sanctioned offer do not constitute an effective or valid withdrawal of the sanctioned offer as would prevent a court from exercising its discretion under r. 5(7).  As Moore-Bick LJ observed in Gibbon v. Manchester City Council and LG Blower Specialist Bricklayer Ltd. v. Reeves [2010] 1 WLR 2081 at §16 :

“To import into Part 36 the common law rule that an offer lapses on rejection by the offeree would … give rise to disputes about whether the offer had been rejected in any given case so as to render it incapable of acceptance”.

25.Given the serious consequences of failing to beat a sanctioned offer, there must be certainty on the issue of whether or not there is a valid and subsisting sanctioned offer at the time of trial so that the court may award costs on an indemnity basis and interest at a higher rate as provided for under rules 23 and 24. 

26.Once the sanctioned offer has been withdrawn in writing, r. 5(7) can no longer be invoked by the offeree who wishes to accept it after the expiry of 28 days from the date the sanctioned offer was made.  R. 5(7) can only be invoked in respect of sanctioned offers which are subsisting in the sense that they have not been withdrawn in writing.  The fact that a second or third increased sanctioned offer is made in the course of the proceedings does not constitute a withdrawal of the earlier unaccepted offers which remain subsisting. The subsisting sanctioned offer which is not beaten by the offeree after trial can be relied upon by the offeror to invoke the court’s jurisdiction to award costs on an indemnity basis and interest at enhanced rates. So, for example, if the plaintiff offers to settle for $1 million in January and for $800,000 in April and for $500,000 in July and the defendant fails to accept any of these offers and, at trial, the plaintiff obtains judgment in December in excess of $1 million, the plaintiff may be able to enjoy indemnity costs and enhanced interest from the date of the first sanctioned offer made in January.

27.R. 7(5) provides that if a sanctioned offer has been withdrawn, it does not have the consequences specified in the order.  Obviously, if the sanctioned offer has been withdrawn in writing, it is no longer subsisting and cannot be relied upon at the conclusion of trial to invoke the enhancement provisions as to costs and interests contained in rules 23 and 24 of O. 22. 

28.By the same token, where a sanctioned offer is subsisting in the sense that it has not been withdrawn, albeit that 28 days have lapsed from the date that the sanctioned offer was made, and the offeror successfully resists an application by the offeree for leave of court to accept the sanctioned offer pursuant to r. 5(7), then the sanctioned offer is no longer subsisting and can no longer be relied upon to invoke the enhancement provisions as to costs and interests contained in rules 23 and 24.  For this reason, it is not necessary to grant leave withdraw the sanctioned offer to the offeror who has successfully resisted an application for leave under r.5(7), and I did not make any order on the plaintiff’s cross summons for such leave.

29.I refrain from expressing any view on whether and to what extent a sanctioned offer, which is no longer subsisting in that it has been withdrawn in writing or in that the offeree has successfully resisted an application under r. 5(7) by the offeror for leave to accept it after the expiry of 28 days, can be relied upon by the court in the exercise of its general discretion as to costs, and the statutory discretion under s. 48 of the High Court Ordinance, Cap. 4 to award interest.  The court dealing with this issue would be mindful of the authorities on point, including Garner v. Cleggs [1983] 2 All E.R. 398, Capital Bank Plc v. Strictland [2005] 1 WLR 3914 and Trustees of Stoke Pension Fund v Western Power Distribution (South West) Plc [2005] 1 WLR 3595.  

30.As I have concluded that the sanctioned offer in the present case is subsisting and that the defendants’ application for leave of court to accept it after the expiry of 28 days from the date of the sanctioned offer under r. 5(7) is properly made, I turn to consider whether or not I ought to grant leave in this case. 

31.The court’s discretion to grant or to refuse leave to accept the sanctioned offer after the expiry of 28 days from the date that it was made is unfettered.  Goddard LJ’s observations in Cumper v Pothecary in connection with the defendants’ application for leave to take up monies paid into court apply with equal force to sanctioned offers.  He said, at p. 67-68 :

“When once the seven days have expired the plaintiff can only get the money if he can obtain an order, and before the court makes an order it must consider whether it is right so to do. [Counsel for the plaintiff] admitted that, if the defendant could show that he had grounds for alleging fraud or mistake which was unknown to him when he paid the money in, the court would refuse to allow the money to be paid out, but he contended that these were the only grounds on which an order could be refused.

We can see no ground for putting such a limit on the powers of the court. If the court can in any circumstances refuse an order, it is plain that in making or refusing an order the court must be acting judicially and not ministerially. If the plaintiff can accept as of right up to the eve of trial, why might he not do so during the trial? The note in the Annual Practice to which [counsel for the plaintiff] referred clearly has reference to the concluding words of r.3, which says that an order may be made at any time before, at, or after the trial. In other words, the plaintiff may ask for an order at any time, but it does not mean that he is necessarily entitled to it. In substance the same argument was advanced by the plaintiff in Frazer & Haws, Ld. v Burns (I), and was briefly answered by the Master of the Rolls, who inquired : ‘What is the good of the seven days?’ It is, in our opinion, clear that, if the plaintiff does not accept the money within the prescribed time, the court has thereafter complete discretion either to make or refuse an order. In the majority of cases, no doubt, it would only be a question of costs, whether the plaintiff should pay those incurred between the expiration of the seven days and the date of the application, but there may be many other considerations.”

32.I agree with the submissions of Mr Yau that the discretion of the court in this type of application is very wide and that it should be exercised as widely as possible so as to advance the overriding objective to do justice to the parties concerned.  It is inappropriate to attempt to give an exhaustive list of all relevant factors to be taken into account.  The relevant factors must vary from case to case.  In considering these factors, the court must not lose sight of the fact that the object of O.22 is to promote settlements, save costs, and avoid the uncertainties of litigation. In a Judiciary Press Release dated 3 March 2004, Ribeiro PJ, Deputy Chairman of the Working Party on CJR stated that “the major recommendations of the Working Party include... encouraging earlier, fair settlements...” and that “the rules should be interpreted and applied with a view to increasing cost-effectiveness of the procedures in question... facilitating settlement and achieving a fair distribution of the court’s limited resources among its users.”  

33.The main criterion must be whether there has been such a change of circumstances as would render it unjust to allow the offeree to benefit from the offer.  A change of the evaluation of the merits of the case may or may not be a good reason to advance to resist the leave application.  New evidence coming to light which materially affects the relative strengths and weaknesses of the parties’ respective cases can be a relevant circumstance[2]. However, an offeror who chooses to make a sanctioned offer before obtaining expert evidence may find himself in difficulty trying to resist leave on the ground that he is now in possession of favourable expert evidence. May LJ refused leave to reduce a payment into court in Flynn v Scougall (Practice Note) [2004] 1 WLR 3069 for the reason that the defendant in that case had chosen to make a Part 36 payment before her expert’s report arrived and thereby secured the advantage of an earlier payment into court.  The favourable expert report was not the product of new evidence or a change of law but was a review of available information by the expert which could have been obtained prior to making the payment into court[3].

34.On the other hand, the court may be less inclined to grant leave to accept the sanctioned offer where an application is made on the eve of trial or, as in the present case, when an action was warned for trial, particularly when the parties resisting the application advances a cogent reason why the court ought not to grant leave. 

35.In my judgment, the plaintiffs have established cogent reasons why I ought not to grant leave to the defendants to accept the sanctioned offer.  Although the sanctioned offer was not withdrawn in writing, the defendants’ solicitors were notified on 3 separate occasions, on 12 July 2010, 19 November 2010 and 31 January 2011 that the offer was no longer on the table.  This fact alone may not weigh as heavily in future cases where parties, having the benefit of this judgment, fail to withdraw their sanctioned offers in writing. 

36.Further, I am satisfied that the plaintiffs in this case were no longer willing to settle on the basis set out in the sanctioned offer because they had obtained counsel’s advice and her evaluation of the evidence which led counsel to opine that the court was likely to assess the contributory negligence of the deceased at less than 50%.  The plaintiffs, who are legally aided, did not have the benefit of counsel’s advice when their solicitors made the sanctioned offer.  They could only have the benefit of counsel’s advice when counsel was assigned to them.  This is a material change in circumstance since the sanctioned offer was first made that I took into account in the exercise of my discretion.  A privately funded plaintiff, who has the means to engage counsel prior to making the sanctioned offer but choses not to do so until much later, may not be able to rely on this ground to resist the application for leave in the absence of cogent reasons to explain the late engagement of counsel.  Nor would this ground avail a legally aided plaintiff if his assigned solicitors fail to avail themselves of the opportunity to obtain advice from counsel already assigned on the case and only do so after having made a sanctioned offer without the benefit of assigned counsel’s advice.

37.Although Mr Yau made an eloquent submission to me that the outcome of this litigation was uncertain, I do not think that it is right for the court hearing an interlocutory application of this nature to conduct a mini trial of the issues on paper and come to a view as to whether or not the sanctioned offer was reasonable in all the circumstances of the case so that leave ought to be granted under r. 5(7) in the interest of saving costs, promoting settlements and avoiding the uncertainties of litigation. 

38.Taking into account all the relevant factors set out above and guided by the overriding consideration that the court should strive to do justice between the parties, I came to the conclusion that I ought to accept to the submission of Ms Josephine Pinto, who appeared for the plaintiffs to oppose the application, and refuse to grant leave to the defendants to accept the sanctioned offer out of time. 

Ms Josephine Pinto, instructed by Messrs Krishnan & Tsang, for the 1^st and 2^nd Plaintiffs

Mr Albert Yau, instructed by Messrs Deacons, for the 1^st, 2^nd and 3^rd Defendants