WAAN CHUEN MING v. LO KIN NAM t/a KAR KIN ENGINEERING & SUPPLIER CO AND OTHERS

HCPI 588/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 588 OF 2003

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BETWEEN

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AND

HCPI 591/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 591 OF 2003

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(Consolidated by the Order of Master B Kwan dated 7 June 2004)

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J U D G M E N T

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Introduction

1.  I have before me two summonses.  The first in time, which is one made under O.15 r.6 of the RHC, is one dated 30 March 2006 [52-54 Blue Bundle] taken out by the 3^rd Defendant to cease to be a party to the action.  The later one, dated 18 January 2007, by the Plaintiff is in the form of a Notice of Appeal against so much of a decision of Master Au-Yeung which required the Plaintiff to pay the 3^rd Defendant’s costs on the Plaintiff’s summons to extend the validity of the writ in the action. 

History and Background

2.  This is a personal injury action in which the Plaintiff was injured in the course of his employment on 10 June 2000.  The Statement of Claim is dated 6 June 2003 and subsequently amended on 11 June 2004.  It is sufficient for me to observe that it was not clear who the Plaintiff’s direct employer was.  He has sued the 1^st and 2^nd Defendant on an alternative basis as his employer and additionally, the 2^nd Defendant as the occupier of the premises where he sustained his injuries.

3.  The Plaintiff also made a claim for Employees Compensation under the Employees Compensation Ordinance (“ECO”) naming both of these two Defendants as his employer.  The 3^rd Defendant is the 2^nd Defendant’s public liability insurer.  The 2^nd Defendant’s ECO insurer was another insurance company.  As the public liability insurer, the 3^rd Defendant applied under the ECO to be joined as a Respondent.  This came about because by reason of its investigations, it had cause to believe that there had been collusion between the 1^st and 2^nd Defendant to say, falsely, that the 2^nd Defendant, who was insured under two policies, was the employer and not the 1^st Defendant who was not insured and impecunious.  In such circumstances the 3^rd Defendant purported to repudiate the policy with the 2^nd Defendant notwithstanding which under the ECO it might still be liable on the policy to the Plaintiff (the Applicant in the EC application) hence its locus to be joined in those proceedings.

4.  Additionally, on 27 July 2004 the 3^rd Defendant took out a summons under O.15 r.6(2), RHC to be joined in the action.  That summons, which was unopposed, was heard by Master Kwang on 30 July 2004 who ordered that the 3^rd Defendant should be added as a party.  The basis of this application was to cover the contingency that if the court were to find that the 1^st Defendant was the Plaintiff’s direct employer then the 2^nd Defendant’s public liability policy with the 3^rd Defendant might become on risk should the court hold that the 2^nd Defendant was in breach of its duties of the Plaintiff as occupier of the premises.

5.  By oversight the Plaintiff’s solicitor had failed to serve the writ on the 2^nd Defendant within the limitation period.  This was done a day late.  As a result, an application had to be made to Master Au-Yeung to extend the validity of the writ.  This was opposed before the Master who heard the summons on 30 September 2004.  She decided that the validity of the writ should be extended.  Having made that order she also made an order on 14 October 2004 providing for the costs of the summons.  Having regard to the fact that the Plaintiff was seeking an indulgence she ordered that the Plaintiff should pay the 2^nd Defendant’s costs of the summons which she assessed at $89,000 and the 3^rd Defendant’s costs in the assessed amount of $65,000.  This order for costs is the one against which the Plaintiff is now seeking to appeal some 2½ years out of time.  The basis of this appeal I will need to come to presently. 

6.  Thereafter, there was an appeal by the 2^nd and 3^rd Defendants against Master Au-Yeung’s order extending the validity of the writ which was heard by me on 22 February 2005, which I dismissed by a judgment delivered the following day.  It should be observed that having been made a party to this action the 3^rd Defendant, represented by solicitors and counsel, had taken a leading part in opposing the Plaintiff’s application for an extension of the validity of the writ before the Master and also on appeal to me.  It had taken the perfectly proper and understandable view that as a party it should avail itself of every avenue open to it to defeat the Plaintiff’s claim against the 2^nd Defendant thereby not only putting an end to the Plaintiff’s action but also as a consequence its potential liability under the 2^nd Defendant’s public liability policy which it had purported to repudiate.  It is convenient to interject at this stage that as between itself and the 2^nd Defendant, the 3^rd Defendant was saying that it bore no liability because of the collusion that had taken place between the 1^st and 2^nd Defendant and also that the 2^nd Defendant’s claim under the policy had now been abandoned because the 2^nd Defendant had not sought to go to arbitration on the policy to determine whether the 3^rd defendant had been entitled to repudiate the policy.  That was something that it should have done within the 12-month period immediately following the repudiation, as provided under the policy.  Notwithstanding that situation there still remained the prospect that the 2^nd Defendant might obtain an order extending the time for arbitration and succeeding in showing that the 3^rd Defendant had not been entitled to repudiate its liability under the policy, hence its contingent liability which it was seeking to safeguard by being joined in this action.

7.  The next significant event was that, in the EC application, Judge Lok on 14 January 2005 heard, as a preliminary issue, the question of whether it was the 1^st or 2^nd Defendant who was the Applicant’s (the Plaintiff’s) direct employer.  I am told that at the end of that hearing he announced his decision that it was the 1^st Defendant with his written reasons to follow.  He handed down those on 12 May 2005.  The effect of all of this was that when I heard the 2^nd and 3^rd Defendant’s appeal on 22 February 2005 from Master Au-Yeung’s decision, the 3^rd Defendant was aware of the result of the preliminary issue but not the judge’s reasons for his decision.

8.  The next matter to relate is that following my dismissal of the 3^rd Defendant’s appeal on 23 February 2005, the 3^rd Defendant appealed from that decision to the Court of Appeal which it did on 21 March 2005, which was about seven weeks before Judge Lok handed down his written decision on the preliminary issue.  That appeal, which was dismissed, was heard by the Court of Appeal on 18 January 2006.

9.  Having explored that avenue, all the way to the Court of Appeal and lost, the 3^rd Defendant filed its defence in the action on 20 January 2006 and took one further step on 22 February 2006 by asking for inspection of the Plaintiff’s documents in the action.  Finally, on 30 March 2006, its solicitors took out this summons to be removed from the action on the basis that it ceased to have any interest in the case.  Its basis for saying so appears in its solicitors letter of 18 April 2006 sent to the Plaintiff’s solicitors who at that stage were not minded to consent to its summons.  The material parts of the letter are as follows:

“Before you embark upon your proposed courses of action regarding the costs orders, you should perhaps be aware of exactly what the position is.

You are no doubt aware that our client had issued a public liability policy in favour of the 2^nd Defendant.  As spelt out in the paragraph 2(C) of our latest affirmation, based on the information provided by the 2^nd Defendant, our client had already disclaimed liability by letter of 22^nd June 2000.  The 2^nd Defendant did not refer that to arbitration within 12 calendar months.  According to the policy, we argue, the claim is deemed to have abandoned and shall not be recoverable.

However, it must be recognised that there is still a risk since the 2^nd Defendant may argue otherwise, or seek extension of time.  This risk is sufficient to justify our client taking part in the several steps we did.

In fact, as the events turned out, the 2^nd Defendant is now arguing that they are still entitled to policy protection and we are dealing with that on a separate platform.  That fully justified our client’s early concern on the risk, and therefore their interest for joining in.

Please therefore reconsider the position before further costs are incurred.  We reserve our rights to bring these series of correspondence to the attention of the Court on consideration of costs.”

10.  Subsequently, in fact very recently, the Plaintiff’s solicitors have consented to the 3^rd Defendant’s summons but only subject to the 3^rd Defendant paying the Plaintiff’s costs of and occasioned by the 3^rd Defendant having joined in the action and it is this stance which has impelled them to issue their appeal out of time against Master Au-Yeung’s order on 14 October 2004 awarding the 3^rd Defendant’s costs in the assessed sum of $65,000.

The Argument

11.  Mr Y L Cheung, on behalf of the Plaintiff, submits that when one looks at the history and reasons for the 3^rd Defendant’s involvement in this matter, there was never any proper ground for allowing it to be joined.  Whilst he accepts that Master Kwang may have been right to have allowed it to be joined on the information then available to him and, that is why that application was unopposed, when one now examines the 3^rd Defendant’s conduct and motives in the action it will be seen that these were in fact improper with the result that his client has had to pay unnecessary double costs by virtue of the Order of 14 October 2004 and that is why by his appeal against that order he now seeks reimbursement of the costs that the Plaintiff has had to pay the 3^rd Defendant.

12.  The difficulty with this is that whilst Mr Cheung makes that submission he also seems to accept that it was reasonable for the 3^rd Defendant to have remained a party (having been properly joined) at least until 14 January 2005 when Judge Lok announced his decision on the preliminary issue and held that the 1^st Defendant was the direct employer.  Thereafter, submits Mr Cheung, the 3^rd Defendant’s position was precisely as it had stated it to be in its solicitors’ letter of 18 April 2006 which I have just set out.  Notwithstanding which the 3^rd Defendant has pursued an appeal before me from the Master’s extension of the writ and having failed it then pursued an appeal from my order to the Court of Appeal in January 2006 and indeed filed a defence to the action shortly after it had suffered a dismissal of its appeal.

Analysis

13.  What I need to do is to decide up to what point was it reasonable for the 3^rd Defendant to remain in the action.  Was it reasonable for it to remain until its summons to be removed on 30 March 2006 or should it have applied to go earlier and, if so, when.  This decision will then serve as a proper guide as to how the costs of this summons should fall and also largely determine the outcome of the Plaintiff’s notice of appeal against Master Au-Yeung’s costs order of 14 October 2004.

14.  I am entirely satisfied that having regard to the history of the matter and the motives that caused the 3^rd Defendant to be joined that there is no basis whatsoever for allowing an appeal, hopelessly out of time, against the costs order of 14 October 2004.  Mr Cheung accepts that the joinder was proper and that prima facie the order for costs was correct.  The Plaintiff was seeking an indulgence to have the validity of the writ extended and the usual practice that “he who is late pays” was correctly adopted by the Master.  One cannot by some ex post facto process and reasoning re-open this.  The appeal must therefore stand dismissed with costs.

15.  This then brings me to the real issue which is to decide when the 3^rd Defendant should have applied to leave this action.  As I have said Mr Cheung says it was reasonable for it to stay until 14 January 2005 when it knew of Judge Lok’s decision.  Once it found out it should have departed, abandoned its appeal before me on 22 February 2005, leaving the 2^nd Defendant to fight his and its corner on the question of the 2^nd Defendant’s liability for breach of his duty as an occupier, which is the only basis upon which the public liability policy might engage. 

16.  Miss Lee, on behalf of the 3^rd Defendant, submits that this is too early.  It was entirely reasonable for the 3^rd Defendant to have decided to wait until it had Judge Lok’s reasons which came on 15 May 2005 and which contained very damming conclusions about the 1^st and the 2^nd Defendants’ collusion over who would take on the mantle of employer, which the judge said he would report to the police.  I uphold Miss Lee’s submission in this regard.

17.  That then leaves over the question of whether the 3^rd Defendant should have batted on and pursued its appeal to the Court of Appeal, notice of which had been entered in March 2005 before the arrival of Judge Lok written reasons. 

18.  Miss Lee says that this was entirely justified — the 3^rd Defendant was after all a party and was entitled to take the course that it did.  Putting it in the demotic — in for a penny, in for a pound — if the appeal succeeded the 3^rd Defendant would have removed any possible risk of its liability under the public liability policy.

19.  What detracts from that approach is the letter of 18 April 2006 supra. which provides its reasons for applying to be removed from the case.  It is absolutely clear that those reasons obtained from the moment that the 3^rd Defendant received Judge Lok’s written reasons, I already having held that it was reasonable for it to wait until his reasons were available to it.  The question then is whether it was reasonable and proper for the 3^rd Defendant to have another go by appealing to the Court of Appeal.  The fact remains that even now there remains the same risk that in future, the 3^rd Defendant still faces a contingent liability under the public liability policy but, now having lost in the Court of Appeal it is prepared to deal with that risk by separate litigation or arbitration against the 2^nd Defendant.

20.  I find this a very finely balanced issue and on balance, it seems to me that whilst the 3^rd Defendant was a party who had been validly joined it was entitled to exhaust all the practical appellate process all the way to the Court of Appeal.  Nobody suggests that this sort of matter would be further entertained in the Court of Final Appeal.  Now that it has lost and has had to pay the Plaintiff his costs of the unsuccessful appeals before me and before the Court of Appeal it wishes to pull out of the action.

Costs

21.  This is what this matter is all about.  Although the Plaintiff has failed to demonstrate bad faith or at least obliqueness of purpose by the 3^rd Defendant, I do not think that it would be right to order him to pay the 3^rd Defendant’s costs for having tried and failed.  Whilst I have not condemned the 3^rd Defendant for pursuing the appellate process all the way of the Court of Appeal, it seems to me that at the end of the day where its appeal to the Court of Appeal has failed it has been left in the same position that obtained on 15 May 2005 when it received Judge Lok’s written reasons.  This is amply confirmed by its solicitors’ letter of 18 April 2006 supra.  The Plaintiff has had proper grounds for dealing with the matter as he has before me today, albeit having been far too ambitious with his notice of appeal for which he has suffered an order for costs against him on that matter.  Nevertheless, on this summons it seems to me that in all the circumstances the just order for costs should be no order for costs.  Although, the 3^rd Defendant was entitled to appeal my order of 23 February 2005 to the Court of Appeal, in circumstances where it has lost the appeal and is back to where it was on 15 May 2005 the Plaintiff has acted reasonably in taking the approach that he has with this summons and should not have to pay the 3^rd Defendant’s costs on the summons. 

Order

22.  I will make the order asked for by the 3^rd Defendant so that it is now able to be removed from the action.  The costs of its involvement in the case up to the issue of the summons will be costs in the cause of the action and there will be no order for costs of and occasioned by the summons between the Plaintiff and the 3^rd Defendant.  For the assistance of the parties and the taxing Master, I will say that 90% of today was taken up with the argument on the 3^rd Defendant’s summons and 10% by the Plaintiff’s notice of appeal.  Lastly, I order that there be legal aid taxation of the Plaintiff’s costs.