TSE MAU LAN v. WANCHAI GOLDEN ASTER RESTAURANT LTD

DCEC1117/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 1117 OF 2002

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R U L I N G

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1. The parties agree on the terms of the settlement.  As the Plaintiff is suffering from mental incapacity, leave of the court is required to approve the settlement.  After reading the supporting affirmation filed on behalf of the Applicant, such leave is granted.

2. The parties cannot agree on the basis under which the costs of the action should be taxed.  In order to ensure that the sum agreed under the settlement agreement is reasonable, there has been a long established practice to ask the defendants or respondents to pay for the costs of the action on a common fund basis.  The rationale for this practice is that the court, in approving the settlement agreement, can then be sure that the victim will get the agreed settlement sum in full without any potential liability for costs.

3. The present employees’ compensation application was commenced on 5 December 2002, and a next friend of the Applicant was appointed much later on 1 February 2005.  In such circumstances, the Respondent asks for a split-costs order, i.e. the costs prior to the appointment of the next friend be paid on a party-and-party basis and the costs after such appointment be taxed on a common fund basis.  According to Miss Sy, solicitor for the Respondent, if the case was settled prior to the appointment of the next friend, the costs would only have to be taxed on a party-and-party basis.  In such case, it would be unfair to ask the Respondent to pay for costs of the whole proceedings on a common fund basis.

4. However, I do not see how this argument can disturb the basis for ordering the Respondent to pay for the costs on a common fund basis.  In deciding whether the settlement sum is reasonable, the court has to ascertain whether the Applicant is subject to any potential liability for costs, and the court is only able to decide on the appropriateness of the settlement sum by ensuring that the Applicant would get the costs on a common fund basis.  Hence, I see no reason to depart from the general practice and order the costs of the whole action to be taxed on a common fund basis.

5. This case also raises an interesting issue.  According to Mr Yeung, solicitor for the Applicant, the Applicant will rely on the medical evidence and will seek to ask for a higher percentage of loss of earning capacity if the case proceeds to trial.  However, assuming that the Applicant does not seek to appeal the assessment in Form 9, and the settlement sum is the maximum amount that the Applicant can recover under the employees’ compensation proceedings, then I am not sure whether there is sufficient reason to order the Respondent to pay for the costs of the whole action anything higher than the party-and-party basis.  As the court does not need to decide on the appropriateness of the settlement sum, the Applicant’s potential liability for costs is an non-issue.  Perhaps I should leave this matter for future argument.