LAU PO LING v. JOSEF GARTNER & CO. (HK) LTD AND ANOTHER

DCEC 976/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 976 OF 2014

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D E C I S I O N
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Introduction

1. On 15 May 2014, the applicant issued an application under the Employees’ Compensation Ordinance, Cap 282 (“ECO”) for employees’ compensation in the present proceedings for an injury that occurred on 21 February 2013 to his right middle finger when working as a construction site worker in the course of his employment. The 1^st and 2^nd respondents were respectively the main contractor and employer at the time of the accident.

2. On 9 October 2014, interlocutory judgment on liability was entered by consent, and on 13 October 2014, the respondents through their solicitors, Munros (“Munros”), made a payment (“Payment”) in the sum of $94,000 into court.

3. This is a summons (“Application”) by the applicant pursuant to O.22 r.5(7)(b) and O.62.r.5 of the Rules of District Court ( “RDC”)  to apply (1) for leave for payment out, and (2) for the costs of the proceedings including the costs of the Application to be paid by the respondents.

4. At the hearing on 5 March 2015, upon clarification sought from the court, Mr Chan, solicitor for the applicant, clarified that the reference to O.22.r.5(7)(b) of the RDC in the margin note of the summons was incorrect and that O.22 r.15(2) should have instead been cited. For the sake of procedural economy, I dispensed with the requirement for amendment to the margin note, and simply noted the correction.  I further made by consent an order (a) granting leave to the applicant to accept the Payment out of time and to obtain a payment out, and (b) allowing costs to the applicant up till and including 10 November 2014 with a direction for legal aid taxation.

5. This leaves the only remaining dispute in respect of the question of liability for costs after 10 November 2014 (“Deadline”), which date was the last day the Payment was available to be accepted by the applicant in accordance with O.22 r.15 of the RDC that stipulates for the acceptance of a sanctioned payment to be made within 28 days from the date of the service of the notice of a sanctioned payment into court. As the applicant had failed to accept the Payment by the Deadline date, it is the respondents’ contention that the applicant, as from 11 November 2014, should be ordered to pay their costs.

6. It is common ground that the provisions governing the Payment should be those governing the sanctioned payment regime under O.22 of the RDC even though a payment into court is provided for in Rule 20[1] of the Employees’ Compensation Rules (“ECR”) for employees’ compensation proceedings: see Li Kwok Shing v Law Ka Fu & Anor., CACV 212 of 2002 (unreported), 21 June 2003[2].  Thus, it is observed the respondents have indeed all along treated the Payment as a sanctioned payment made under O.22 of the RDC as their notice of the Payment was stated to be a “Notice of Sanctioned Payment” pursuant to O22 r.8 (2) of the RDC. 

7. Undisputedly, therefore, the relevant principles to be applied should be those governing sanctioned payments under O.22 of the RDC. 

Applicable legal principles

8. Under O.22 r.15(1) and (2) (b)  of the RDC, leave of the court is required before a plaintiff may be allowed to accept a sanctioned payment after 28 days from the payment into court and when the parties, as in this Application, do not agree on the liability for costs.

9. When the applicant has failed to accept the Payment until after the expiry of the Deadline, he will now be considered the unsuccessful party after the Deadline and he should normally, unless there are special circumstances, pay the post- Deadline costs: Wong Ching Wan v A S Watson & Co Ltd [2007] 4 HKLRD 362[3], the case the respondents rely on.

10. Wong Ching Wan was considered and applied by Deputy District Judge D. Ho in Yuen Chi Lok v i-Cable Telecom Limited, DCPI 1346/2012 (unreported), 24 December 2013 (a decision Mr Chan[4]referred to).

11. Irrespective of the fact that Wong Ching Wan and Yuen Chi Lok are decisions of the co-ordinate jurisdiction, I consider these decisions  to be persuasive as the ratios stated in these decisions have been based on the English Court of Appeal decisions of Factortame Ltd & Anorv Secretary of State for the Environment, Transport and the Regions [2002] 2 All ER 838 and Plymouth and Torbay Health Authority v Glanfield [2002] EWHC 827 (QB), both of which relate to Part 36 of the English’s Civil Procedure Rules (“CPR”), on which the rules under O.22 for  sanctioned payments  have been based.

12. The principles elucidated in the above authorities can be found in the passages in Yuen Chi Lok set out below: -

“11. Under O 22, r 15(3), RDC, upon granting leave to accept a sanction(sic) payment outside the specified 28-day period (“prescribed period”), the court is empowered to make an order as to costs. Costs are in the discretion of the court (s.53, District Court Ordinance) and should normally follow the event but the court can make some other costs order where appropriate (O 62, r3 (2), RDC).  In exercising its discretion, the court should take into account the matters set out in O 62, r 5 including, inter alia, the underlying objectives set out in O 1A, r 1, RDC and the conduct of all the parties which in turn includes the manner in which a party has pursued or defended his case; whether a successful clamant exaggerated his claim; and conduct before as well as during the proceedings.

  16. In Factortame Ltd v Secretary of State for the Environment, Transport and the Regions [2002] 1 WLR 2438, the English Court of Appeal held that the starting point is that a party who fails to accept a Part 36 payment until after the expiry of time for accepting such a payment is deemed to be the unsuccessful party.

  17. In Matthews v Metal Improvements Co Inc [2007] EWCA Civ 215 involving a late acceptance of sanctioned payment under the earlier CPR, the English Court of Appeal held that the usual costs order was for the claimant to pay the defendant’s costs after expiration of the prescribed period for accepting payment into court and the question was whether it was unjust to make the usual order.  The court held that the court below had wrongly identified the question whether it was unjust to make the usual order with the question whether the claimant’s advisors had acted reasonably in assessing the defendant’s offer…

  18. The principle laid down in Factortame was accepted by HH Judge M Ng in Wong Ching Wan v AS Watson & Co Ltd [2007] 4 HKLRD 362 at §42 where the learned judge quoted the following text from the judgment of Waller LJ:

‘…… The first relevant and important principle is that the unsuccessful party should pay the costs of the successful party. If there has been a payment into court it will follow that the offer contains a further offer that the payer in will meet the costs up to the date when the payment in should have been accepted.

If the payment in has not been accepted there is a further starting point accepted by the judge and by both parties in this case, that if the claimant fails to beat the payment in, prima facie the claimant will be considered the unsuccessful party as from the date when the payment in should have been accepted. He must pay the costs from that date as a normal rule’……”

13. Accordingly, the parties are in agreement that broadly a court has complete and wide discretion as to costs (s.53 of the District Court Ordinance, Cap.336). In the exercise of its discretion, the court should (as Mr Chan submitted) take into account the provisions of O.62 r.5, in particular sub-rrs (1) (aa) (relating to the underlying objectives in O.1A of the RDC) and (1) (e) (concerning conduct of the parties); and further be (according to Miss Fong) guided by O.62 r.2. of the RDC.

14. In this Application, there is no issue on whether the applicant has failed to beat the Payment. Thus, the relevant principles, according to the authorities discussed above, are as follows:

(1) The starting point is that a party who fails to accept a sanctioned payment until after the expiry of time for accepting such a payment is deemed to be the unsuccessful party and that the usual costs order is for the claimant to pay the defendant’s costs after the expiration of the prescribed period for accepting the sanctioned payment unless there are special circumstances that make it unjust to make the usual order:  Wong Ching Wan (supra); Yuen Chi Lok (supra).

(2) The discretion should be exercised in furtherance of the overriding objective of justice and fairness: O.62 r.2 (4).

(3) The conduct of the parties : O.62 r.5(1)(e), which includes:

(a) Whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) The matter in which a party has pursued or defended his case or a particular allegation or issue;

(c) Conduct before, as well as during, the proceedings.

15. In accordance with the above principles, the applicant will need to show that there exist special circumstances in this proceeding that justify the departure from the usual costs order  as discussed above.

16. Each case will invariably turn on its own facts. In this case, the special circumstances in this case, according to Mr Chan’s submissions, are based on the alleged unreasonable conducts of the respondents’ insurer, Kono Insurance Limited (“Kono”) and Munros.

17. These imputed conducts I next turn to.

Conduct complained of against Kono

18. The allegations against Kono can best be understood by referring to the correspondence exchanged between Kono and the applicant’s solicitors, Messrs KF Chan (“KFC”), which correspondence is tabulated in Table A below.

Table A

	Date (2014)	From Kono to KFC	From KFC to Kono	Remarks
(a)	4. 9			Legal Aid was granted to the applicant
(b)	12. 9	KFC was asked to confirm within 7 days whether they would agree to jointly appoint Kono’s chosen orthopedic specialist,  Dr Lam, to conduct a medical examination  of the applicant
(c)	17. 9		KFC stated that the applicant would instruct his own orthopedic specialist, Dr. Tsoi for a joint medical examination (“JME”) after the granting of approval from DLA.
(d)	22. 9	Kono confirmed that the date of the JME had been fixed on 5 December 2014. KFC was asked to prepare joint instructions to the specialists		KFC denied having received this faxed letter
(e)	25. 9		Informed Kono that DLA had approved the engagement of Dr Tsoi
(f)	3.10	Kono referred to KFC to the fax of 22.9		The letter was faxed twice
(g)	6.10		KFC stated that they did not receive the fax of 22.9 and were still waiting for Kono’s response to the 25.9 (item (e) above) letter regarding a JME

19. The correspondence between them ceased as from 6 October 2014 when Munros came on the record as the respondents’ solicitors, who had since corresponded with KFC.   

20. It can be seen from the correspondence tabulated above that the alleged misconduct against Kono appears to have originated from Kono’s letter of 22 September 2014 (Table A item (d)), which together with the subsequent correspondence exchange allegedly shows (according to Mr Chan) that Kono had acted improperly in two aspects. First, Kono had, as revealed in the 22 September letter, unilaterally arranged an appointment for the JME and failed to properly notify KFC of the arrangement. Secondly, Kono had failed to choose an earlier date for the JME. The date (5 December 2014) Kono had chosen for the JME was at least two months from the date (as revealed from Kono’s letter of 22 September) when Kono fixed that date for the JME. Mr Chan submitted that the late date has prevented the applicant to have the result of the JME earlier.

Conduct complained of against Munros

21. As soon as Munros became the respondents’ solicitors, a number of significant events took place.

(1) On 13 October 2014, the respondents made the Payment. 

(2) On 16 October 2014, KFC unilaterally (undoubtedly due to the pressure of the Deadline for the acceptance of the Payment) instructed Dr Tsoi to examine the applicant on 20 October 2014, and to make the report available by 30 October 2014. 

(3) On 17 October 2014, KFC (after they had sent the instructions to Dr Tsoi) informed Munros of Dr Tsoi’s appointment. The arrangement was immediately met with opposition from Munros by their letter of the same day. In the letter, Munros, attaching Kono’s letter of 22 September (Table A item (d)), referred to the date having already been fixed for the JME on 5 December 2014 and warned KFC the applicant’s risks of paying wasted costs.

(4) On 18 October 2014, KFC denied having received the faxed letter of 22 September (Table A item (d)) but agreed to cancel the appointment with Dr Tsoi (whose appointment was later canceled). 

(5) On 12 November 2014, Munros approved the draft instructions sent by KFC on 28 October 2014.

(6) On 5 December 2014, the JME took place.

(7) On 15 December 2014, the report (“Report”) of the JME was available.

22. By the time the Report was available, the Deadline had of course lapsed. The allegation against Munros, in a similar vein to that against Kono is also that the date for the JME was fixed too late. In a nutshell, Mr Chan’s allegations are: First, Munros’ objection to the applicant’s appointment of Dr Tsoi was unreasonable. After KFC informed Munros on 18 October 2014 that they had agreed to cancel Dr Tsoi’s medical appointment, Munros, Mr Chan suggested, should have brought the date for the JME forward when, in particular, they knew that the deadline for the acceptance of the Payment was to be due on 10 November 2014. By having failed to do so, Mr Chan further alleged, Munros had acted improperly.  Second, Munros had failed to approve the draft instructions for the JME promptly as they only approved them about two weeks after KFC sent them the draft for approval.

Parties’ contentions

23. The applicant’s case is thus built on conduct: apart from using the alleged misconduct of Kono and Munros to underline the foundation for the existence of the “special circumstances”, Mr Chan, with a view to further buttress the case for the special circumstances, seems to be also arguing that the applicant, contrary to the respondents’ misconduct, had acted reasonably throughout.

24. Mr Chan submitted that since the applicant was entitled to await the outcome of a medical examination before making a decision to accept the Payment, the cancelation of the appointment with Dr Tsoi was clearly conduct highlighting the applicant’s observance of the spirit of CJR. Thus, the applicant should not be penalized with costs for the delay in accepting the Payment occasioned by the applicant’s waiting for the Report.

25. The reason for the applicant’s belief of his asserted entitlement can be found in his affirmation in support of the Application, and seems to be mainly due to a remark made by an occupational therapist of Kwong Wah Hospital (“KWH”) in her report of 28 July 2014 (exhibited as “LPL-2” to the affirmation), in which she stated that the applicant’s “physical capacity and not match with mentioned job demands, significantly and he was suggested to change job in the future”.

26. By relying on the said remark by the occupational therapist, the applicant averred that he was entitled to a medical examination by Dr Tsoi and, after Dr Tsoi’s appointment had been cancelled, to further wait for the Report to confirm whether he was able to return to his pre-accident employment as a construction worker.

27. The applicant has also, Mr Chan further submitted, acted with promptitude because as soon as the Report had been explained to him on 30 December 2014, Munros were informed of his intention to accept Payment. The Application was thus solely occasioned by Munros’ refusal to pay the applicant’s costs from the Deadline date.

28. On behalf of the respondents, Miss Fong denied any improprieties on the part of Kono or Munros.  Referring to a Certificate of Review of Assessment by the assessment Board, i.e. Form 7 (which was only submitted by consent during the hearing)- that assessed the applicant to have suffered 3% loss of earning capacity and endorsed a sick leave entitlement from 21 February 2013 to 5 March 2014, Miss Fong suggested that KFC, by the time the Payment was paid, must have known full well that if the applicant accepted the Payment, the applicant would have received (together with  the advance payment in the sum of $159,640) a total of $253,640, which sum, KFC must have known, represented the total compensation and interest the applicant would be awarded under ss.9,10 and 10A of the ECO in accordance with the Form 7 assessment.

29. It was therefore contented that it was incumbent upon the applicant, who was all along legally represented, to make a decision as to whether to accept the Payment based on his assessment under legal advice of the available materials and of the costs implications when failing to beat the Payment. By choosing to adopt a wait and see approach and to take his chance of getting more compensation, Miss Fong suggested, the applicant, according to Wong Ching Wan, would have to bear the costs consequences of such decision.

30. Miss Fong also referred to the applicant’s personal antecedent disclosed in the Report, which in fact shows that the applicant had in the past suffered a number of injuries in industrial accidents.  Miss Fong therefore suggested that it was likely that the applicant had made claims for these injuries and thus would have had previous experience of claiming compensation or damages for these injuries. Miss Fong disputes that the applicant’s waiting for the sight of the Report before giving favourable consideration to the Payment amounts to a special circumstance.

Discussion

31. The special circumstances the applicant relies on seem to be premised on the applicant’s belief in his entitlement to the result of a medical examination by specialists before considering whether the Payment was to be accepted. Not surprisingly therefore, Mr Chan’s arguments appear to have run like this:  the applicant would have been entitled in any event either to have waited for the report of Dr Tsoi (had the appointment with Dr Tsoi not been cancelled in the circumstances described above) or for the Report. Had Kono and Munros acted properly by fixing an earlier date for the JME or had Munros not objected to the appointment with Dr Tsoi, the applicant would have likely been able to accept the Payment within the prescribed time.

32. By waiting for the medical assessment with the hope that a favourable medical assessment may be produced before deciding whether the Payment was to be accepted, the applicant, in my view, took a risk and cannot normally complain if he has to pay the costs incurred after the acceptance of the Payment: see Wong Ching Wan at §59 .

33. The authorities discussed above make it abundantly clear that the waiting by a claimant for more favourable evidence or a more favourable medical assessment to surface before deciding whether a payment -in should be accepted will not constitute a special circumstance. Thus, I do not accept that the applicant was entitled to wait for the Report (or for the result of the medical assessment by Dr Tsoi for that matter). Having so found, I think the complaint against Munros in §22 above concerning the allegedly unreasonable objection to the appointment of Dr Tsoi has fallen by the wayside.

34. In my judgment, one of the crucial questions that needs to be decided is whether Kono and Munros are found to have committed any unbecoming conduct. If so, the court should next consider whether the applicant, in the circumstances of this case, was justified to have waited for the result of the medical examination. 

35. As already outlined above, the key complaint against both Kono and Munro was the allegedly belated date for the JME. According to  Kono’s letter of 22 September 2014 (Table A, item (d)), Mr Chan is correct to point out that the date of 5 December 2014 chosen for the JME was  more than two months from the time of the fixing of the date.

36. Notwithstanding that, however, I am unable to find that Kono, as Mr Chan alleged, had acted improperly in any way in respect either of the arrangement for the JME or the fixing of the date.  Mr Chan’s complaint about Kono in having failed to inform him of the date of the JME was in my view not due to Kono’s fault but due more likely to KFC having mislaid Kono’s faxed letter of 22 September 2014. This is because the fax transmission report indeed shows that the said letter was successfully transmitted to the office of KFC on 22 September 2014.  In my view, Mr Chan should only have his own firm to blame for having likely mislaid the said fax. 

37. Neither do I find that Kono and Munros were responsible for the alleged lateness of the date for the JME. First, there is no evidence (Mr Chan has not suggested otherwise) that a date earlier than 5 December 2014 could have been available for the conducting of the JME. Secondly and more importantly is that there is no evidence that either Kono or Munros had deliberately allowed the appointment for the JME to be held only after the Deadline date for the acceptance of Payment had expired. 

38. Pertinently, there is no evidence that any effort had been made by the applicant to attempt to have the date for the JME brought forward. It is not fair to only lay the responsibility for the fixing of the date on Kono and Munros when the applicant should have as much responsibility as the former.

39. This leaves the remaining allegation against Munros of the delay in approving the joint instructions for the specialist.  In my judgment, this allegation is entirely irrelevant as the original date of 5 December 2014 for the JME was fixed before the joint instructions had been sent. The alleged lateness of Munros in sending the joint instructions to the specialists did not affect the original date for the JME at all. 

40. Mr Chan’s arguments appear to presuppose an entitlement by the applicant to wait for the outcome of the medical examination, and further are based on the presumption that had Kono and Munros been able to fix the date for the JME much earlier than 5 December 2015, the applicant would have had enough time to consider the Report, allowing the applicant to make a decision as to whether or not to accept the Payment.  Such arguments are circuitous and they simply cannot in my view be supported by the facts analyzed above.

41. In the circumstances, not only is the applicant unable to show that Kono and Munros had acted improperly, I further find on the additional materials (which are the Form 7 referred to by Miss Fong in §28 above, Form 5 and the Report to be discussed below) that were placed before me in the course of the hearing, that the waiting for the Report, hoping for a more favourable assessment by the specialists, was wholly unjustified.

42. Before the present proceedings were filed, the applicant had in fact been issued with two relevant forms provided under the ECO - Form 7 dated 19 March 2014 Miss Fong has referred to in her written affirmation and Form 5, “Certificate of Compensation Assessment” dated 24 April 2014 by the Commissioner for Labour.

43. In the Form 5, based on the assessment stated in Form 7, the Commissioner assessed the applicant’s total amount of compensation as $215,084.48.

44. Apparently dissatisfied with the assessment, the applicant therefore instituted the present proceedings to appeal against the assessment in Form 7 in his claim for compensation.

45. I do not think that the applicant can be criticized for bringing the employees’ compensation claim, hoping that some more favourable medical evidence might help him successfully set aside the Form 7 assessment with a more favourable outcome. However, when the respondents made the Payment on 13 October 2014, the proceedings then reached a flash point- the applicant would be at risk of becoming an unsuccessful party and liable to the respondents’ costs when he rejected the Payment.

46. By the stage when the Payment was paid, the applicant, apart from Form 5 and Form 7, had also, according to the information disclosed in the Report, a number of medical reports and records from KWH such as the report from the A & E department, the report from the department of Orthopedics & Traumotology, the report of the physiotherapist and the report of the occupational therapist (referred to in the applicant’s affirmation) and the x-rays reports, which set out his medical condition.

47. According to these reports, the applicant suffered no fracture to his right middle finger, which was found to have suffered mild soft tissue swelling, tenderness and pain.  By the time when the Payment was paid in October 2014, it had been 19 months since he met his accident.  Thus, the applicant’s heavy reliance on the remark of the occupational therapist referred to in §25 above seems to be have been misplaced for the said remark was based on an assessment that was conducted on 15 November 2013, which was one year before the date of Payment, and thus was not an updated assessment of the applicant’s condition.

48. By the time the respondents made the Payment, the applicant’s condition would have likely improved since the assessment by the occupational therapist in November 2013. In my view, the applicant should have been able to assess himself whether he was capable of returning to his pre-accident employment as a construction worker. Yet, I do not think the applicant had in fact undertaken such a self-assessment for I can only find some vague reference to the condition of his injured finger  in §6 of his affirmation:

“My right hand after the Accident is unlike before and the injury I sustained in the Accident, affects significantly the strength of my right hand and therefore my work as a construction worker.”

49. All the applicant seemed to be addressing was - instead of addressing the crucial question of the prospect of  whether he could return to his pre-accident job as a construction worker,  an assessment he had wanted to wait for from the specialists –  the strength of his injured finger (which was allegedly weakened), which relates only to (allegedly reduced) efficiency.

50. I am not impressed by the applicant’s explanation for the waiting, and find the excuse wholly unpersuasive. Thus, as Miss Fong had contended in her written submission, I also agree that after the Payment had been made, the applicant was obliged to make a decision as to whether to accept the Payment by actively reviewing all the available materials as well as assessing the applicant’s condition at the time in order to avoid the risks on costs.  I however found that the applicant did not seem to have undertaken such an assessment exercise, and thus should now face the costs consequence for the failure.

51. Allowing the applicant to continue with the proceedings without reasonable justification, and to incur costs after the Deadline date for the acceptance of the Payment without suffering any costs consequences,  would lead to the unfair result described as the “double jeopardy”: see Wong Ching Wan at §61, which is that that the respondents will  face the double penalty of having to pay the applicant’s costs in addition to having to bear their own costs after the Deadline date for the acceptance of the Payment.

52. In my judgment, there are no special circumstances in this case that enable me to  depart from the usual costs order in this case by causing the respondents to suffer any “double jeopardy” when I have found that they had acted throughout to further the underlying objectives of the CJR and in accordance with the spirit of the scheme for sanctioned payment, which aim is “to further encourage the parties to take positive settlement seriously and avoid unproductive and expensive prolongation of the litigation :  HKCP p500 at §22/02.

53. For the reasons stated above, I am not satisfied that there are special circumstances that justify the departure from the usual costs order discussed above. It is just, in my judgment, to order the applicant to bear the costs incurred after the Deadline date, which is 11 November 2014.

Order

54. I make the following orders:

(1) As from 11 November 2014, the applicant do pay the respondents’ costs of these proceedings (including all costs reserved, if any) such costs are to be taxed if not agreed. The applicant’s own costs are to be taxed in accordance with the Legal Aid Regulations.

(2) A costs order nisi that applicant do pay the respondents’ costs (including all costs reserved) of the Application, which costs are to be taxed if not agreed. The applicant’s own costs are likewise to be taxed in accordance with the Legal Aid Regulations.

55. I wish to thank Mr Chan and Miss Fong for their assistance in this Application.