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Legal Update

Ignore Pre-Action Letters at Your Peril!

25 January 2010
Mayer Brown JSM Legal Update

Summary

The ruling in Wong Shui Lam v. Hospital Authority (HCPI 151/2009) sends a message that failure by the defendant to respond to a claimant's pre-action letters may result in adverse costs orders on an indemnity basis.

Full Update

Background

The Plaintiff sustained personal injury whilst in the employ of the Defendant. The Labour Department issued a summons against the Defendant for failing to ensure the safety and health of its employee. The Defendant was convicted and the Plaintiff subsequently commenced common law proceedings.

The Defendant conceded liability before the Check List Review hearing and judgment was made in favour of the Plaintiff on liability with damages to be assessed, with costs to the Plaintiff. The Plaintiff, however, applied for a costs order on an indemnity basis.

The Ruling

The Court ruled the Plaintiff was entitled to costs on an indemnity basis for time incurred as result of the Defendant's failure to properly respond to pre-action letters and adopt measures to facilitate a quick resolution of the matter such as mediation.

The Court reiterated that an "acknowledgment" to a pre-action letter was not equivalent to a constructive reply. Further, a substantive reply required either a clear admission or denial of liability.

The Defendant's reason for failing to respond to pre-action letters within the prescribed timeframe on the basis the Plaintiff did not provide details of witnesses and a Statement of Claim was rejected by the Court. The Court considered those would incur time and costs that were unnecessary. As the Defendant was the Plaintiff's employer and was convicted under the Labour Department summons, the Court was of the view it was in possession of the relevant facts that would allow it to reach a decision on liability, irrespective of the Plaintiff's assistance.

Conclusion

The case reinforces the spirit and underlying objectives of the recent Civil Justice Reform. Parties must abide by the pre-action protocols set down by the Court to avoid cost sanctions. Clearly, the Court in this case took a dim view of the Defendant's failure to properly respond to pre-action letters and adopt measures to facilitate a quick resolution of the matter.

The ruling is a reminder that the parties should facilitate efficient conduct of a case even at the pre-action stage. If insurers are minded to save costs, alternative dispute mechanisms should be considered and explored. Failure to do so may be taken into account by the Courts when deciding on the issue of costs.

Legal advisers are also duty bound to advise clients to comply with the new practice directions to avoid costs sanctions. Clients must also be mindful of incurring unnecessary time and costs when requesting evidence and proof of a claim, especially if such information is already to their knowledge or can be more easily obtained through other means.

The arrival of the new practice directions requires defendants and their insurers to be diligent and pro-active with their investigation and assessment of claims. Failing to comply with the practice directions will not be tolerated by the Courts without good reason. Finally, where possible, defendants and their insurers should engage in meaningful settlement discussions or mediation.

For inquiries related to this Client Alert, please contact:

Lim Tow Lu ( )

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