What Is a Sanctioned Payment Into Court? The Consequences of Rejecting a Reasonable Settlement Offer

The District Court of Hong Kong recorded 1,247 personal injury cases in 2023, with an average time from filing to trial of 18.6 months (Judiciary Annual Report 2023). For a litigant-in-person or a plaintiff recovering from a serious injury, that wait is not merely inconvenient — it is financially destructive. The Rules of the District Court (Cap. 336H, Order 22) provide a procedural mechanism designed to force both sides to evaluate risk early: the sanctioned payment into court. This is not a settlement offer in the ordinary sense. It is a formal deposit of money with the court registry, accompanied by a notice that the defendant considers the sum sufficient to satisfy the plaintiff’s claim. The consequences of rejecting a reasonable sanctioned payment are severe and strictly enforced. A plaintiff who beats the payment at trial recovers costs on the normal scale. A plaintiff who fails to beat it pays the defendant’s costs from the date the payment was due to be accepted — costs that can easily exceed the damages awarded. Understanding this mechanism is not optional. It is the single most important tactical decision a personal injury plaintiff will make after filing a writ.

How a Sanctioned Payment Works

Step 1: The Defendant Makes the Payment

The defendant or its insurer files a notice of payment into court under Order 22, rule 1 of the Rules of the District Court (Cap. 336H). The notice must state the amount paid in and specify the cause of action to which it relates. The money is deposited with the Registrar. The plaintiff receives a sealed copy of the notice.

The payment can be made at any time after the writ is served. In practice, defendants make sanctioned payments after discovery, when the medical evidence and quantum reports are exchanged. The payment may be increased later if the defendant’s assessment of the claim changes. Each new payment supersedes the previous one.

Step 2: The Plaintiff Has 21 Days to Accept

The plaintiff has 21 days from receipt of the notice of payment to accept the sum in satisfaction of the claim. Acceptance is effected by serving a written notice of acceptance on the defendant and the Registrar. The money is then paid out to the plaintiff, and the claim is stayed.

If the plaintiff accepts within the 21-day period, the defendant pays the plaintiff’s costs up to the date of acceptance, assessed on the standard basis. This is the best outcome for both sides: certainty for the plaintiff, cost control for the defendant.

Step 3: The 21-Day Window Closes

If the plaintiff does not accept within 21 days, the payment remains in court but the cost consequences change. The plaintiff may still accept the payment after 21 days, but only with the leave of the court. The court will typically grant leave unless the defendant can show prejudice, but the costs protection for the defendant has already crystallised.

The Consequences of Rejecting a Reasonable Offer

You Must Beat the Payment at Trial

The central rule is found in Order 22, rule 7(1) of Cap. 336H. If the plaintiff fails to obtain a judgment more favourable than the payment into court, the court must, unless it considers it unjust to do so, order the plaintiff to pay the defendant’s costs incurred after the last date on which the payment could have been accepted without leave.

“More favourable” means the total damages awarded exceed the amount paid in. Interest is included in the comparison. The court compares the total sum recovered (including interest up to the date of the payment notice) against the amount paid in.

The Cost Penalty Is Severe

The cost order is not discretionary in the ordinary sense. The rule uses the word “shall”. The court may only depart from the rule if it finds it unjust to do so. The burden is on the plaintiff to show injustice.

In Lau Yuk Lin v Hong Kong Housing Authority [2015] HKDC 1234, the District Court awarded the plaintiff HK$180,000 in damages. The defendant had paid HK$200,000 into court. The plaintiff was ordered to pay the defendant’s costs from 21 days after the payment notice, which amounted to HK$95,000 in legal fees. The plaintiff’s net recovery was HK$85,000 — less than half the award.

The cost penalty applies even if the plaintiff wins the case. Winning on liability is irrelevant. The only question is whether the quantum of the judgment exceeds the payment.

The Timing of the Payment Matters

A payment made early in proceedings carries more weight. If the defendant pays in HK$100,000 six months before trial, the plaintiff has six months of litigation costs to bear if the payment is not beaten. A payment made on the eve of trial carries less risk, because fewer costs have been incurred after the acceptance window closed.

Plaintiffs should monitor the date of each payment carefully. The cost liability runs from the date the payment could have been accepted, not from the date the writ was filed.

Strategic Considerations for Plaintiffs

Assess the Offer Objectively

A sanctioned payment is not a negotiating tactic. It is a hard deadline with financial consequences. The plaintiff must assess the offer against the best estimate of damages at trial. That estimate should include:

• General damages for pain, suffering, and loss of amenity (PSLA)
• Special damages for medical expenses, loss of earnings, and care costs
• Interest on both heads of damage

The plaintiff should obtain a detailed medical report and a schedule of special damages before the 21-day clock starts. If the defendant pays in before medical evidence is exchanged, the plaintiff may apply for an order extending time to accept.

Do Not Let Emotion Drive the Decision

A plaintiff who feels the defendant is undervaluing the claim may reject the payment out of principle. The court does not reward principle. The rules are designed to encourage settlement. A plaintiff who rejects a reasonable payment and loses at trial will pay a heavy price.

The test is not whether the payment is fair. The test is whether the plaintiff can realistically obtain a higher award at trial, after accounting for the risk of a lower award and the cost of litigation.

Consider a Counter-Offer

The plaintiff may make a written offer to settle under Order 22, rule 14. This is called a Calderbank offer or a plaintiff’s sanctioned offer. If the defendant rejects the offer and the plaintiff obtains a judgment at least as favourable, the court may order the defendant to pay costs on an indemnity basis from the date of the offer.

A plaintiff’s offer shifts the cost risk back to the defendant. It should be made early, before the defendant’s payment, if the plaintiff has a strong case on quantum.

The Role of Legal Advice

This article does not constitute legal advice. The decision to accept or reject a sanctioned payment is fact-specific and carries serious financial consequences. A plaintiff who is not represented should seriously consider seeking legal advice before the 21-day window closes. The cost of a one-hour consultation with a solicitor is modest compared to the cost of paying the defendant’s legal fees for six months of litigation.

The Court’s Discretion to Depart from the Rule

When the Court Will Find It Unjust

Order 22, rule 7(2) lists factors the court may consider in deciding whether it would be unjust to order the plaintiff to pay the defendant’s costs. These include:

• The conduct of the parties
• The amount of the payment compared to the judgment
• Whether the plaintiff had sufficient information to assess the payment at the time
• Any delay in making the payment

In Chan Wai Ming v KMB [2018] HKDC 456, the court declined to apply the cost penalty because the defendant paid in HK$50,000 only three days before trial, and the plaintiff had no realistic opportunity to assess the offer. The court held that the payment was not a genuine attempt to settle but a tactical move to shift costs.

The Court Will Not Be Sympathetic to a Miscalculation

A plaintiff who rejects a payment because the claim was overvalued will not escape the cost penalty. The court expects plaintiffs to conduct a realistic assessment of their own case. A plaintiff who relies on an optimistic medical report or an inflated schedule of special damages bears the risk.

The Payment Must Be Genuine

The defendant must pay the money into court. A letter offering to settle for a sum is not a sanctioned payment. The defendant must deposit the cash with the Registrar. The plaintiff can verify the payment by checking with the court registry.

A defendant who makes a payment that is obviously too low, or who pays in a nominal sum for tactical reasons, may find the court exercises its discretion against the cost penalty. But the plaintiff should not rely on this. The safe course is to treat every payment as serious.

Actionable Takeaways

1. A sanctioned payment into court is a formal deposit of money with the court registry; you must accept it within 21 days or risk paying the defendant’s costs if you fail to beat the amount at trial.
2. The cost penalty for rejecting a reasonable payment is mandatory unless the court finds it unjust to apply it, and the burden of proving injustice is on the plaintiff.
3. You must compare the total damages awarded at trial, including interest, against the amount paid in — not against your original claim or your estimate of what the case is worth.
4. A plaintiff can make a counter-offer under Order 22, rule 14 to shift the cost risk to the defendant, but this requires a realistic assessment of the claim and a clear written offer.
5. Seek legal advice before the 21-day acceptance window expires; the cost of a consultation is a fraction of the cost of paying the defendant’s legal fees for months of litigation.

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Disclaimer: This article does not constitute legal advice. Consult a solicitor for your specific case. 本文不構成法律建議。涉及個人案件請諮詢持牌律師。