Li Chun Bon v Yuen Suk Yee

CACV 405/2024 · [2026] HKCA 1304 · Court of Appeal · 2026-07-24 · published 29 July 2026

Background

The plaintiffs sued China Mobile Hong Kong in DCCJ 617/2017. Before trial, the defendant made a sanctioned offer under O.22 r.23 of the Rules of the District Court (Cap. 336H) for $63,333.40, inclusive of interest, plus costs to the plaintiffs. The offer contained three non-monetary terms: (i) the plaintiffs undertaking not to commence any fresh action on the same facts (Clause 4, the "Restrictive Condition"); (ii) a mutual confidentiality clause covering negotiations and settlement terms (Clause 5, the "Confidentiality Condition"); and (iii) discontinuance at each party's own costs. The plaintiffs did not accept by the 23 August 2017 deadline. The trial judge dismissed the claim and ordered the plaintiffs to pay the defendant's costs on a party-and-party basis up to 23 August 2017, then on an indemnity basis thereafter, with enhanced interest at 4.9375% p.a. under Golden Eagle International (Group) Ltd v GR Investment Holdings Ltd [2010] 3 HKLRD 273 (§3).

On appeal, the Court of Appeal allowed the appeal and awarded damages of $41,867 plus interest, a total of $43,272.13 (§1). The plaintiffs accepted the monetary award was below the $63,333.40 sanctioned offer (§7) but argued the judgment was nevertheless more advantageous because the defendant had failed to "better" the non-monetary terms at trial. The court reserved the costs of the trial below and dealt with it on paper.

Key findings

1. The Court of Appeal applied Recorder Houghton SC's approach in Ryder Industries Ltd v Timely Electronics Co Ltd [2013] 5 HKLRD 343, §20, that additional conditions in a sanctioned offer are an extra element the offeror must better at trial to obtain the costs consequences (§10). 2. Clause 4 (the Restrictive Condition) gave the plaintiffs no practical advantage: they could not relitigate the same subject matter in any event under the general law, so the defendant did not need to obtain an order mirroring Clause 4 to "better" it (§11). 3. Clause 5 (the Confidentiality Condition) also conferred no practical benefit: once the offer was rejected there was no settlement or terms to keep confidential, and the ability to disclose without-prejudice negotiations gave the plaintiffs no tangible advantage (§11). 4. Following the trial judge's reasoning (§§16, 21), the court rejected the plaintiffs' submission that every rejected sanctioned offer automatically carries an extra element to better by virtue of O.22 r.25(1) (§21 below). 5. The court therefore varied the costs order to require the defendant to pay the plaintiffs' costs up to 23 August 2017 on a party-and-party basis, with the plaintiffs paying the defendant's costs thereafter on an indemnity basis plus enhanced interest at 4.9375% p.a. (§12). 6. On the plaintiffs' leave-to-appeal application, the court set aside the order below and made no order as to costs (§13).

Why it matters

This decision is a useful counterweight to Ryder Industries. Practitioners drafting or responding to a sanctioned offer should note that the Court of Appeal will scrutinise whether non-monetary conditions actually confer a real benefit on the offeree. Boilerplate restrictive undertakings or confidentiality clauses are unlikely to be treated as elements the offeror must better, where the offeree's position under the general law (res judicata, without-prejudice privilege under O.22 r.25(1)) is already the same or better. The case also confirms that a party who fails to beat a sanctioned offer monetically will usually face an indemnity costs order from the offer deadline, and reinforces the role of Golden Eagle in calibrating enhanced interest at half the gap between the judgment rate and the prime-plus margin.