As you may know, the Civil Justice Reform in Hong Kong comes into effect today.  A lot of the new measures are aimed at encouraging parties to a litigation case to settle their disputes without proceeding the case to a full trial. One such important measure is the Sanction Offer/Sanction Payment mechanism. It affects all currently ongoing cases, whether you are a plaintiff or a defendant. We shall briefly explain it below.  

What is a Sanctioned Offer?

Sanctioned offer means a settlement offer made in accordance with the new Order 22 of the Rules of High Court (Cap. 4A) (or the Rules of the District Court (Cap. 336H), as the case may be).  A plaintiff or a defendant may, at any time after the commencement of the court action, make a sanctioned offer.  

What is a Sanctioned Payment?

Sanctioned payment means an offer made by a defendant by way of a payment into court in accordance with Order 22.  Where an offer by a defendant involves a payment of money to the plaintiff, the offer must be made by way of sanctioned payment instead of sanctioned offer.  

Sanctioned Offer/ Sanctioned Payment is Confidential and Without Prejudice

Generally speaking, the fact that one party has made a sanctioned offer/ sanctioned payment is confidential and cannot be brought to the attention of the court until the end of the trial.  In addition, a defendant may make a sanctioned payment without admitting any liability.  As such, the concessions made by the offeror in the sanctioned offer/ payment would not be seen as a sign of weakness before the court.

Consequences of Non-Acceptance by Defendant

If a plaintiff has made a sanctioned offer which is not accepted by the defendant, and the plaintiff obtains a judgment better than the offer, the defendant is likely to be ordered to pay the plaintiff’s costs on an indemnity basis, enhanced interest (up to 10% above judgment rate) on those costs and enhanced interest (up to 10% above judgment rate) on any sum awarded to the plaintiff.  

Consequences of Non-Acceptance by Plaintiff

By the same token, if a defendant has made a sanctioned offer or sanctioned payment which is not accepted by the plaintiff, and the plaintiff fails to obtain a judgment better than the offer or payment, the plaintiff may, despite winning the case, be ordered to pay all of the defendant’s costs incurred after the time when the plaintiff could have accepted the offer and enhanced interest (up to 10% above judgment rate) on those costs.  Furthermore, the court may disallow interest on the principal sum or damages awarded to the plaintiff.

Given the possible consequences on costs and interests, litigants should seriously consider making a sanctioned offer or payment to the opponent.

For further details of the principles and mechanism of Sanctioned Offer/Payment, please refer to the Judiciary’s publication:

http://www.civiljustice.gov.hk/cjr/download.jsp?FN=eng/documents/Leaflet_08_Eng.pdf

If you have any query on the above, or any query related to your case which is currently handled by us, please do not hesitate to contact us to discuss.