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Legal Update

Lessons from the CJR - Sanctioned Offer in Practice

14 May 2010
Mayer Brown JSM Legal Update

The recent decision in Fung Wing Yee (a minor) v. Chen Jung Chien demonstrates how the Court applies the new rules on sanctioned offer and awards enhanced costs and interests to the Plaintiff, who had done better at trial than her sanctioned offer to the Defendant.


The case arises from a traffic accident in which the minor Plaintiff sustained serious injuries. Liability was admitted and damages was assessed at HK$2,216,396.85 by the Court.

After Judgment was handed down, the Plaintiff applied for a variation of the costs order nisi in two-fold:

  1. costs to be taxed on common fund basis, on the basis that the Plaintiff was a minor; and
  2. enhanced costs and interests under Order 22 rule 24, on the basis that the Plaintiff had done better than her sanctioned offer of HK$1.9 million (excluding interests) plus costs, which was made more than a month before the assessment hearing and was met with no response from the Defendant.

The Ruling

The Court refused the first limb of the application, as it found no special or unusual feature of the case nor any doubt as to the adequacy of the damages awarded that would warrant costs to be taxed on a common fund basis. The fact that the Plaintiff was a minor suing by her next friend did not per se justify the exercise of the Court's discretion to order common fund costs.

On the application for enhanced costs and interest, the Defendant objected to the same on the grounds that it would be unjust, stating that there was delay in responding to the sanctioned offer as they had to take instructions from both the MIB and the provisional liquidators of Anglo-Starlight (the original insurer). It also argued that certain documents such as the supplemental witness statement and supplemental list of documents of the plaintiff were only disclosed after the sanctioned offer was made. Thirdly, to make the orders sought would deplete the MIB fund, which would not be in public interest.

The Court rejected all three arguments by the Defendant, as it considered that the Defendant was open to accept the sanctioned offer even after the stipulated period, and the subsequent, lower sanctioned offer made by the Defendant for HK$1.1 million showed that they were not minded to accept the sanctioned offer of the Plaintiff all along. Secondly, the documents served after the Plaintiff's sanctioned offer did not affect the decision making process of the Defendant. Thirdly, there was no rule to suggest that where MIB is involved as a party, different rules should apply.

The Court therefore varied the cost order nisi and awarded interest at 2% above the judgment rate for all special damages and PSLA from the last date of acceptance of the sanctioned offer without leave of Court to the date of judgment. The Plaintiff's costs incurred after the last date of acceptance are taxed on indemnity basis, with interest on those costs at 2% above judgment rate.

In addition, the Court held that had the Plaintiff applied for the second limb only, it would have ordered enhanced costs including indemnity basis to also apply to the costs of the application.


The case provides useful insight into what the Court would regard as relevant considerations in deciding whether the award of enhanced interest and costs on indemnity basis would be unjust to the losing party.

Parties to a proceeding and insurers are reminded to consider any sanctioned offers made by the other side carefully to avoid cost sanctions.

For inquiries related to this Legal Update, please contact:

Tow Lu Lim ( )

Carrie Tai ( )

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