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In civil proceedings, a sanctioned payment can be made by a defendant to settle all or part of a plaintiff’s claim. Under Order 22, rule 15(3) Rules of the High Court, a plaintiff has 28 days to accept this payment. If accepted, the plaintiff will additionally be awarded his costs of the proceedings up to the date of acceptance. On the other hand, a plaintiff who rejects the payment and fails to obtain a judgment better than the sanctioned payment suffers two consequences. Under Order 22, rule 23, unless the court considers it unjust, the plaintiff could lose all or part of the interest he would otherwise have been entitled to on the judgment sum and will have to pay the defendant’s costs from the latest time he could have accepted the sanctioned payment. The court must consider all the circumstances of the case subject to considerations set out in Order 22, rule 23(6).

In Or Siu Lung v Fu Hong Home for the Elderly [2018] 1 HKC 580, the plaintiff’s mother sustained injuries during her residence in an elderly home operated by the defendant in 2013. She commenced legal proceedings against the defendant seeking damages, during which the defendant made a sanctioned payment. However, the payment was not accepted. The plaintiff’s mother passed away in 2016 for reasons unrelated to the prior injury, and the plaintiff took over the action seeking leave to accept the expired sanctioned payment and the legal costs of the action. The Hong Kong Court of First Instance allowed the plaintiff to accept the expired sanctioned payment but ordered him to pay the defendant’s costs beginning from the latest time he could have accepted the payment.

The plaintiff appealed to the Court of Appeal, who had to rule on which party should bear the legal costs when the court grants leave to accept an expired sanctioned payment. The Court adopted the criteria under Order 22, rule 23(6) and held that, in this instance, it was unjust to require the plaintiff to pay the defendant’s costs for two reasons. Firstly, the defendant had admitted liability. Secondly, the mother’s serious injury rendered the earlier rejection reasonable since the offer itself was unreasonable in the circumstances of the case. Ultimately, the Court ordered the defendant to pay the costs of the action up to the date of acceptance of the sanctioned payment, but considerations of this kind remain highly fact-sensitive.

For more information on the topic of sanctioned payments, please see:

Halsbury’s Laws of Hong Kong on Civil Procedure

Hong Kong Civil Court Practice