INDAH, VEBY MEGA v. OWT ASIA LTD

DCEC 1264/2020

[2021] HKDC 1137

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 1264 OF 2020

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IN THE MATTER OF AN APPLICATION BETWEEN

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DECISION

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A. Background Facts

1.  This is the legally-aided Applicant’s application by summons (“Leave Summons”) for leave to appeal to the Court of Appeal against the Decision (“Subject Decision”) this court handed down on 28 May 2021^[1]. The Applicant is still represented by the same assigned solicitor, Ms Kwan Long Yee Corrina (“Ms Kwan”) of Messrs Ip, Kwan & Co (“IKC”). The Respondent, represented by the same solicitors, Messrs Boase, Cohen & Collins (“BCC”), opposed the Leave Summons. Unless otherwise specified, I will adopt the same nomenclature used in the Subject Decision.

2.  For better understanding of the Leave Summons, I will briefly summarize the relevant facts of the Subject Decision as follows.

3.  In this employees’ compensation claim, liability and its costs were disposed of by an interlocutory judgment (“IJ”) granted pursuant to an admission made under O 13A of the Rules of the District Court^[2]. In the IJ, the court awarded fixed costs of $6,500 on the issue of liability (“Fixed Costs”).

4.  After the Respondent paid a Sanctioned Payment into court, it stopped paying periodical payments to the Applicant. An issue of interim payment arose, and the parties eventually agreed the payment of $200,000 as an interim payment but disagreed over the question of whether the payment should be applied from the Sanctioned Payment, and one of the conditions, Condition 3, the Respondent required the Applicant to comply with. The Applicant then issued a summons for an interim payment (“IP Summons”).

5.  These proceedings were eventually settled by way of Consent Summons with the Acceptance by the Respondent of the Applicant’s Sanctioned Offer. The Respondent agreed to pay the costs of the Consent Summons, and costs having been incurred up to 30 October 2020, the date on which BCC revised IKC’s draft consent summons regarding the disputes over the provisions for costs. The Applicant contended that since these proceedings were settled by the Sanctioned Offer, the Applicant should be entitled to have “the costs of the proceedings” as stated in the provisions of O 22, r 21(1). The Respondent contended that costs should be limited to quantum since the costs of liability were already disposed of by the Fixed Costs (“Dispute 1”).

6.  Since the case was settled by the Consent Summons, the IP Summons was also agreed to be withdrawn with the Respondent paying its costs. The parties however disputed the basis of the costs. The Applicant applied for costs to be awarded on an indemnity basis (“Dispute 2”).

7.  The Applicant succeeded in her arguments on Dispute 1. I ordered the Respondent to pay the Applicant’s costs of the proceedings up to 30 October 2020 (including the Consent Summons) on a party and party basis (Subject Decision, Section E (1)). This court however made no order as to costs after 30 October 2020 in relation to Dispute 1 (Subject Decision, Section E (4)).

8.  The Applicant did not succeed in persuading this court to order the Respondent to pay indemnity costs for the IP Summons. Upon the Applicant having failed in Dispute 2, I ordered the Applicant to pay the Respondent’s costs in relation to the arguments for Dispute 2 (Subject Decision, Section E (3)).

B. The Leave Summons

9.  The Leave Summons filed on 10 June 2021 was issued pursuant to s 63 of the District Court Ordinance^[3]. It was supported by the 3^rd Affirmation of Ms Kwan (“Kwan’s 3^rd Affirmation”).

10.  It is not clear from the Leave Summons as to which orders the Applicant wishes to appeal against. It is only from IKC’s letter exhibited as “KLYC-11” to Kwan’s 3^rd Affirmation can it be gleaned that the Applicant is appealing against the two costs orders stated in Section E (3) and (4) of the Subject Decision respectively in relation to Disputes 2 and 1, which will be respectively referred to as “Dispute 2 Costs Order” and “Dispute 1 Costs Order” in this Decision.

11.  For Dispute 1, I further made an order in Section E (5) of the Subject Decision disallowing legal aid taxation of the Applicant’s own costs after 30 October 2020. This order was referred to as the “No Legal Aid Taxation Order” (“NLATO”) in Kwan’s 3^rd Affirmation. The Applicant had concurrently filed in the Court of Appeal a Notice of Appeal against NLATO (“NLATO Appeal”) as of right without having to obtain leave. The Leave Summons does not concern the NLATO Appeal, but it will be referred to in the arguments (in Section F.2 below) in relation to Dispute 1 Costs Order.

12.  This court directed paper disposal of the Leave Summons. The written submissions and reply submissions of Mr Patrick Lim, the Applicant’s Legal Aid assigned counsel, and the opposing skeleton submissions of Mr Jeffrey Chau, the Respondent’s counsel, have been lodged.

C. A preliminary matter

13.  A preliminary issue has arisen from the 4^th Affirmation of Ms Kwan (“Kwan’s 4^th Affirmation”) the Applicant filed on 14 July 2021.

14.  The Respondent objected to the admissibility of Kwan’s 4^th Affirmation for the reasons that it was filed without leave of the court, and that it contained new evidence^[4]. Mr Chau suggested that it be considered on a de bene esse basis.

15.  In his contentions, Mr Lim stated that the new materials consisted of only two documents concerning the NLATO Appeal^[5], and that the rest of the evidence was from the documents extracted from the original hearing bundle.

16.  It is noted that the Respondent took issue not only with Kwan’s 4^th Affirmation, but also with Kwan’s 3^rd Affirmation in BCC’s letter dated 19 July 2021, contending that they were filed without leave. In the letter, the Respondent reserved its rights to challenge the admissibility and propriety of the Affirmations, and asked to be given a reasonable chance to respond.

17.  The only response the Respondent made is by Mr Chau’s opposition submissions. I note in agreement with Mr Lim that the bulk of the evidence in Kwan’s 4^th Affirmation was evidence previously before this court and the new evidence indeed comprises the documents relating to the NLATO Appeal, which are uncontentious as far as the disputes in the Leave Summons is concerned. Having regard to the fact that the Applicant would be relying on the NLATO Appeal to advance one of the grounds of the proposed reasons for leave to appeal against the Dispute 1 Costs Order, and that there is no evidence that the granting of leave to the Applicant to file Kwan’s 4^th Affirmation would cause any prejudice to the Respondent, I grant retrospective leave to the Applicant to file Kwan’s 4^th Affirmation, and its filing does stand.

18.  Despite the Respondent’s earlier objection to the filing of Kwan’s 3^rd Affirmation, that objection was no longer pursued.

D. Governing law and applicable principles

D.1 The statutory provisions

19.  The Leave Summons is pursuant to s 63A(2):-

“(2) Leave to appeal shall not be granted unless the judge … hearing the application for leave is satisfied that –

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appeal should be heard.”

20.  According to the commentary of the Hong Kong Civil Procedure 2021, Vol 1 (at §59/2A/4, pp1206-1207), the threshold test for the first limb of s 63A(2)(a) requires an applicant for leave to show that “he has an arguable case with reasonable chances of success on appeal.” It is insufficient to show that the appeal is “merely arguable” and “not fanciful”.

21.  As for the test concerning the second limb under s 63A(2)(b), it states that it is impossible to give an exhaustive list of the circumstances. Leave may be granted “if the question is one of general principle, decided for the first time; or a question of importance upon which further argument and a decision of the Court of Appeal would be to the public advantage”.

D.2 Principles governing an appeal against a costs order

22.  Since both the Disputes 1 and 2 Costs Orders are in the nature of costs orders, the consideration of the Leave Summons should further be guided by the principles set out in case of Chu Wai Leong v Leung Sum Kee^[6] (at §§30 and 31) which Mr Chau cited. Briefly stated, a costs order involves a discretion of a court, and it will only be overturned if palpable errors are made by the court. “[P]alpable errors are where the Judge has erred in principle, or did not exercise his discretion judicially having taken into account wholly extraneous and irrelevant matters, or the exercise of discretion was not based on facts or matters connected with or leading up to the litigation, or the decision was plainly wrong.” (per Kwan V-P at §31)

23.  The Dispute 2 Costs Order is more straightforward, I will therefore deal with it first.

E. Appeal against the Dispute 2 Costs Order

E.1 Arguments

24.  The reasons given for this costs order are set out in §41 of the Subject Decision, which order is a usual costs order of following the event.

25.  In his Written Submissions, Mr Lim only relied on §§10 to 12 of Kwan’s 4^th Affirmation, and referred to the Court of Appeal decision of King Royal Ltd v Lam Kwan Yuk^[7] as the authority that a District Court Judge, when granting leave to appeal, has no power to restrict the grounds which could be argued on the appeal.

26.  In Kwan’s 4^th Affirmation (at §§10 to 12), Ms Kwan stated that this court has failed to give effect to the legislative intent of s 10 of the Employees’ Compensation Ordinance (“ECO”) of curbing “irresponsible and oppressive conducts (sic)”. It was submitted that this court had wrongly overlooked the hardship and oppression caused to the Applicant brought about by the Respondent’s breach of s 10, ECO. It was also averred that the Respondent’s complaint and the court’s criticisms of the Applicant’s late disclosure of the Applicant’s two medical reports (exhibited as “KLYC-1” and “KLYC-2” to Kwan’s 1^st Affirmation) were not justified (see §§21, 31-32 of the Subject Decision) as these reports were not relevant to the Applicant’s entitlement to periodical payments under s 10 of the ECO.

27.  In his Skeleton Submissions, Mr Chau cited the authority of Town Planning Board v Society for Protection of the Harbour Ltd (No 2)^[8] at §§15-17 in suggesting that indemnity costs are awarded where there are some “special or unusual features” in a case. He stated that in determining whether to grant indemnity costs, this court’s primary task was to consider whether the Respondent’s conduct was unreasonable and oppressive. It was not necessary to determine whether the Applicant was technically entitled to periodical payments under s 10, ECO.

28.  Mr Chau argued that the Dispute 2 Costs Order is the usual costs order of following the event, and that the Applicant had failed to demonstrate that this court had failed to exercise its discretion judicially.

29.  Regarding King Royal Ltd which Mr Lim cited, Mr Chau contended that Mr Lim’s reliance on this authority was misplaced. The Court of Appeal in that case had only decided that there was no power for a District Judge to limit grounds of appeal when giving leave. The disposal of this Leave Summons does not concern limitation of grounds of appeal but concerns whether to grant leave to appeal against two separate costs orders – Disputes 1 and 2 Costs Orders.

30.  In the Reply Submissions, Mr Lim argued that this court’s refusal to make an indemnity costs order is tantamount to condoning an employer’s breach of the payment obligations under s 10, ECO if a sanctioned payment that is sufficient to settle all claims of compensation has been made by the employer: see Reply Submissions, §9.

31.  In Reply to Mr Chau’s submissions regarding King Royal Ltd and Town Planning Board, Mr Lim seems to additionally suggest that this court’s refusal in Section E (2) of the Subject Decision to grant indemnity costs in favour of the Applicant of the IP Summons has also fallen into error notwithstanding that the Leave Summons is not concerned with the said costs order.

32.  In reply to Mr Chau’s submissions (that indemnity costs would only be awarded where there are some “special or unusual features), Mr Lim submitted that after Huge Dragon Corp Ltd v Incorporated Owners of Lung Mun Oasis^[9], the test for an indemnity costs order has been revised to a more liberal test.

E.2 Any reasonable prospect of success?

33.  Extensive submissions have been put forward on behalf of the Applicant in relation to the Respondent’s breach of its s 10 obligations under the ECO. They went as far as suggesting that this court’s refusal to order the Respondent to pay indemnity costs was tantamount to condoning the latter’s alleged flagrant breach, and was a disregard of the legislative intention of the s 10, ECO.

34.  In respect of the Applicant’s submissions regarding s 10, ECO, I think Mr Chau made a compelling argument that the primary task of the court in the costs disputes of the IP Summons was to determine if the Respondent had acted oppressively and unreasonably in the circumstances leading to the issuance of the IP Summons. It was not the duty of the court to determine the issue of periodical payments.

35.  As summarized in Section A above, the circumstances leading to the issuance of the IP Summons was due to the parties’ disagreements over the Respondent’s request for applying the Sanctioned Payment for the payment of the interim payment, and one of the four conditions, Condition 3, the Respondent had required the Applicant to comply with: see the Subject Decision §§12-14. This issue before me, as Mr Chau has succinctly put, was plainly not about whether the Respondent has provided any “reasonable excuse” in respect of its payment obligations under s 10(10) of the ECO. I therefore do not think that the Applicant’s submissions regarding s 10, ECO, have merits.

36.  This Leave Summons does not concern court’s refusal to grant an indemnity costs order. It is therefore strictly unnecessary to deal with the arguments on the criteria of the grant of indemnity costs. Out of deference to the diligence of counsel, I will simply state that the Court in Town Planning Board did not restrict the circumstances for the making of indemnity costs to cases of “special or unusual features”. It in fact reiterated the broad discretion a court had “to determine how costs should be paid and whether indemnity costs should be ordered”.^[10]

37.  Pertinently, it is noted that the Applicant has not provided any reasonable arguments demonstrating how the Dispute 2 Costs Order granted on the principle of “costs follow the event” was an improper deviation from the usual position of ordering a losing party (the Applicant) to pay the costs of the succeeding party (the Respondent).

38.  I am in agreement with Mr Chau’s submissions. The issue of the limitation of grounds concerning King Royal Ltd Mr Lim referred to does not arise in relation to the Leave Summons, which concerns two separate and distinct costs orders.

39.  In the circumstances, I am not satisfied that the Applicant has demonstrated that she has a reasonable prospect of success in the Leave Summons regarding the Dispute 2 Costs Order.

F. Appeal against the Dispute 1 Costs Order

F.1 “Any prospect of success”

F.1.1 Arguments

40.  The Dispute 2 Costs Order was an order following the event. However, the Dispute 1 Costs Order was a departure from the usual costs order. The reasons for the departure is set out in §§62, 63, 64, 65, 66, 67 and 71 of the Subject Decision.

41.  In Kwan’s 4^th Affirmation, Ms Kwan repeated the correspondence exchanges previously adduced at the substantive costs arguments. Broadly, it was stated that the Applicant had all along taken a pragmatic approach in resolving the costs disputes. The disputes were necessitated by the ignorance on the part of BCC as to the legal position of O 22, r 21. It was further stated that since there was no evidence before the court in showing how the Applicant could have claimed more costs than the subsisting Fixed Costs, the court was therefore wrong in accepting that BCC’s concern and anxiety over the alleged claiming by the Applicant for more costs was justified.^[11]

42.  In his submissions, Mr Lim basically repeated the Applicant’s position set out in the preceding paragraph. It was submitted “IKC’s wrong averment in their letter dated 30 October 2020 was immediately corrected on the same day (Subject Decision §63). It is unfair to put the blame on the Applicant and her solicitor”.

43.  It was further pointed out that this court had misconstrued the Applicant’s position on the Fixed Costs entitlement (Mr Lim’s Written Submissions at §20). Mr Lim also stated that the Applicant’s said stance was clearly underlined by Ms Kwan’s letter to BCC stating that ‘ “the Taxing Master will always be able to tax the costs of proceedings having regard to the costs order already made” and [the Applicant] has all along made it clear that she did not seek taxed costs on liability” ’. Mr Lim therefore argued that there was no reasonable justification for the Respondent’s “concern” for paying more costs to the Applicant on liability. The Applicant was right to insist on using the wording of O 22, r 21(1) in view of the misguided view held by the Respondent.

44.  In opposing the Leave Summons, Mr Chau argued that the Applicant has failed to put forth any meritorious reasons for the appeal. It was contended that the overall circumstances of this case wholly justified the discretion exercised by this court in making an order as to no costs after it had concluded that both parties were equally responsible for the O 22, r 21 disputes: Wong Wai Wing v Mang Fan Lin^[12] and YBL v LWC (No 2)^[13].

45.  Mr Chau submitted that the court’s accepting of the Respondent’s concern that the Applicant was seeking more costs should be viewed in the context of the combative and aggressive attitude of the Applicant/her solicitor as found by this court.

46.  Mr Chau also stated that despite the Applicant’s acknowledgement of the mistake of the extent of the costs covered by the Fixed Costs, the Applicant nonetheless maintained that her rights to be paid the costs of the whole proceedings (liability and quantum) had not been affected^[14].

47.  In fortification of his submissions that the Respondent’s concern in relation to costs beyond Fixed Costs was totally justified, Mr Chau stated (Skeleton Submissions §46) that it was not uncommon for a court to make an order by expressly limiting costs to quantum only. He cited, by way of example, Riasat Ali v Kenwa Industrial (HK) Ltd^[15] and Kaur Paramjit v Li On Na^[16].

F.1.2 Discussion

48.  I will first state that the two cases Mr Chau referred to in the preceding paragraph are irrelevant and will be disregarded. The costs orders granted in the two cases that Mr Chau relied on were stated as “costs of assessment of compensation”. However, these costs orders were the usual orders made after a trial of assessment of compensation. In the instant case, the disputes arose from a fixed costs order granted pursuant to O 13A, and the attendant arguments over the statutory provisions of O 22, r 21(1).

49.  As the Dispute 1 Costs Order is a departure from the usual starting point, it will be instructive to set out the applicable legal principles stated in the Court of Appeal decision of YBL (supra) cited by Mr Chau:-

“[10] …

(a) whilst the courts often start with the proposition of costs following event, it is no longer a general rule but a starting point …

(b) there have to be some justifications for depriving a successful party of his costs;

(c) in measuring who is the successful party and the extent of his success, the court must examine the reality and justice of the case. …;

(d) in addition, under O.62 r.5, the court in exercising its discretion shall take into account the matters set out in r.5(1) as may be appropriate in the circumstances;

(e) Rule 5(2) highlights some conduct which the court may take into account including whether it is reasonable for a party to take an issue, the manner in which the matter was pursued or defended, the extent of success, and conduct before, as well as during the proceedings;

(f) if a successful party has brought the litigation upon himself or has done some wrongful act in the course of the transaction, he could be deprived of his costs.” (per Lam V-P)

50.  The main plank of the Applicant’s arguments is that it is not justifiable for this court to have faulted the Applicant when the O 22, r 21 disputes were caused by the ignorance of the Respondent/BCC as to the proper interpretation of the wording of “costs of the proceedings” provided in O 22, r 21(1). In gist, the Applicant argued that since the Applicant had no power to override the Fixed Costs, and had in fact readily accepted and corrected the mistake regarding her costs entitlement, this court was wrong to have overlooked the root cause of the disputes.

51.  It is true that the Applicant had acknowledged the mistake she had initially made on the extent of the costs under the Fixed Costs. However, the Applicant, as Mr Chau contended, had continued to conduct herself in a manner that created a genuine concern on the Respondent/BCC; that the Applicant could somehow find a way to claim more costs beyond quantum (see the Subject Decision §66).

52.  It cannot be gainsaid that the Applicant’s entitlement to costs on liability was bound by the Fixed Costs. The Applicant’s reliance on the irrefutable binding nature of the Fixed Costs to advance her arguments that the court was wrong to have accepted the Respondent’s “concern” as justified, in my view, was merely done with hindsight.

53.  Indeed, when the Applicant’s conduct is examined in context, quite a different picture emerges. Despite their recognition that the costs on liability were already fixed by the Fixed Costs, IKC had on no occasions clarified to BCC that their proposed wording of “costs of the proceedings” was merely to follow the statutory provisions of O 22, r 21(1) rather than as an enabling vehicle for the Applicant to claim costs beyond quantum.

54.  All in all, I find that the Applicant’s reasons for the intended appeal are mostly a rehashing of the background facts and the submissions made only with the advantages of hindsight. In conclusion, therefore, I am not persuaded that the Applicant has demonstrated reasonable merits in the Leave Summons.

F.2 Some other reason in the interests of justice

55.  The relevant criteria for the grant of leave on the second limb of s 63A(2) of “some other reason in the interests of justice” stated in the UK case of Smith v Cosworth Casting Processes Ltd [1997] 1 WLR 1538 were recapitulated by the Hong Kong Court of Appeal in Ma Bik Yung v Ko Chuen^[17] cited by Mr Chau as follows.

“[5] …

‘1. …

2. The court can grant the [leave] application even if it is not so satisfied. There can be many reasons for granting leave even if the court is not satisfied that the appeal has any prospect of success. For example, the issue may be one which the court considers should in the public interest be examined by this court or, to be more specific, this court may take the view that the case raises an issue where the law requires clarifying.”

56.  The Applicant relied on the NLATO Appeal to ground her arguments. However, the Applicant’s reasoning under this limb is a bit difficult to follow. It is submitted that irrespective of the outcome of the NLATO Appeal, the Applicant’s compensation would likely be diminished if the Applicant is denied leave and a chance to successfully overturn the Dispute 1 Costs Order on appeal. She therefore submitted that it is in the interests of justice that the Applicant should get leave to appeal so that she be given an opportunity to overturn the Dispute 1 Costs Order.

57.  In his contentions, Mr Chau argued that the Applicant’s reliance on the second limb was not easily understood as the Applicant did not demonstrate why the financial implication on the legally aided Applicant would constitute “reason in the interests of justice”.

58.  Therefore, in order to test the validity of the Applicant’s arguments, it will be useful to examine the possible implications of the result of the NLATO Appeal on the Applicant on the existing Dispute 1 Costs Order.

59.  In the event of a successful NLATO Appeal, the NLATO disallowing legal aid taxation will be overturned and replaced with a direction for the Applicant’s own costs be taxed. Since the Dispute 1 Costs Order is an order of no costs for the costs of Dispute 1 after 30 October 2020, the Applicant’s own costs having been personally incurred by the Director of Legal Aid, including the costs of IKC, for this portion will be taxed and be paid from the compensation she had received. Thus a successful outcome may likely have an adverse financial implication on the Applicant.

60.  Conversely, if the NLATO Appeal fails, the NLATO will then remain intact – no Legal Aid taxation for costs after 30 October 2020 for Dispute 1. This means that the statutory route that enables the Applicant’s assigned solicitors to tax their costs is not available. IKC will suffer financially as a consequence. In such instance, a failed outcome may have more adverse effect on IKC rather than the Applicant personally.

61.  Thus analyzed, it seems that the bringing of the NLATO Appeal may have been more for the benefit of the assigned solicitors than for the preservation of the Applicant’s compensation. I agree with Mr Chau that neither the financial implication of the NLATO Appeal, if any, on the Applicant nor the Respondent’s neutral stance in the NLATO Appeal constitutes good reasons for the grant of leave.

62.  In the circumstances, whilst I accept Mr Lim’s Reply Submissions that Ma Bik Yung did not intend to set out an exhaustive list for the consideration of the second limb for leave to appeal, I do not accept, from the above analysis, that the Applicant’s NLATO Appeal constitutes a good reason in the interests of justice to grant leave under the second limb.

G. Disposition

63.  For the reasons stated above, I decline to grant leave to the Applicant to appeal, and dismiss the summons.

64.  I grant a costs order nisi that the Applicant do pay the Respondent’s costs of the summons, with certificate for counsel, to be taxed if not agreed. The Applicant’s own costs are to be taxed in accordance with the Legal Aid Regulations. This nisi order shall become absolute unless an application is made to vary it within 14 days of the handing down of this Decision.

65.  Lastly, I wish to thank Mr Lim and Mr Chau for their assistance rendered to this court.