CHU WAI LEONG v. LEUNG SUM KEE ET AL FRAMEWORK, PIPEWORK AND DEMOLISH ENGINEERING LTD AND ANOTHER

CACV 292 /2019

[2020] HKCA 658

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 292 OF 2019

(ON APPEAL FROM DCEC NO 2270 OF 2016)

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DECISION ON COSTS

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Hon Kwan VP (giving the Court’s Decision on Costs):

1.  On 4 June 2020, we handed down our judgment (“the Judgment”) allowing the appeal of the Employees Compensation Assistance Fund Board (“the Board”) from the decision of Deputy District Judge Barbara Wong (“the Decision”) in relation to the costs awarded to the applicant against the Board on 7 May 2019. We set aside the judge’s order and replaced it with an order of no order as to costs as between the applicant and the Board for the disputed items. We made costs orders nisi there be no order as to costs for the costs of the application before the judge and for this appeal.

2.  The Board issued a summons on 18 June 2020 to vary part of the orders nisi, such that the applicant is to pay 50% of the costs of the Board of this appeal, alternatively such lower percentage as the court thinks fit, with certificate for two counsel, to be taxed if not agreed.  The Board seeks an order that the costs of this summons be in the cause of the appeal.

3.  The summons is opposed by the applicant.

4.  In making the costs order nisi there be no order as to the costs of the appeal, we had departed from the general rule that costs should follow the event.

5.  To displace the general rule that costs should follow the event in this appeal, as the unsuccessful party the applicant bears the burden of showing that the circumstances justify the exceptional course of such displacement (Mariner International Hotels Ltd v Atlas Ltd (No 2) (2007) 10 HKCFAR 246 at §18).

6.  The reasons why we departed from the general rule were explained in §65 of the Judgment.  The Decision was given before there was guidance from the Court of Final Appeal in Wo Chun Wah v Chau Kwei Yin & Ors (2019) 22 HKCFAR 495 that in light of the special status of the Board as a statutory body with specific duties, the appropriate starting point should generally be no order as to costs.  The judge had failed to have regard to the Board’s special status and looked at the matter from the wrong perspective, and this might well have influenced the way she assessed the pertinent circumstances in exercising her discretion on costs.

The Board’s submissions

7.  Mr Clark Wang submitted for the Board that the circumstances here do not justify the exceptional course of displacing the general rule to the extent that there should be no order as to the costs of the appeal. In seeking a percentage only of the Board’s costs on appeal (whether 50% or lower), he submitted that this is to reflect properly the conduct of the parties and to strike a fair balance in light of their conduct.  The conduct of the parties is a relevant factor the court should take into account in exercising its discretion on costs (Order 62 rule 5(1)(e) of the Rules of the High Court).

8.  By the Judgment, we allowed the appeal of the Board on all the three broad grounds as advanced: the judge had failed to have regard to the Board’s special status and erred in principle in not adopting no order as to costs as the starting point (ground 1); she failed to appreciate the applicant’s case was, until 20 February 2019, based on the Paper Mills Formula (ground 2); and she failed to appreciate the value and appropriateness of the Board’s intervention, including the value of the surveillance evidence and the additional medical opinion of the Board’s medical expert (ground 3).

9.  Mr Wang pointed out that the judge’s errors complained of in grounds 2 and 3 stemmed from the wrong factual premise that the applicant was not running a case based on the Paper Mills Formula, and such errors were hardly influenced by the absence of guidance of the Court of Final Appeal in Wo Chun Wah.  The wrong factual premise adopted by the judge was not caused by any consideration of the special status of the Board, but was due to a misconception of the general law of employees’ compensation proceedings, in particular section 9(1A) of the Employees’ Compensation Ordinance, Cap 282.  And the wrong factual premise led to the erroneous determination as to the value and appropriateness of the Board’s conduct after it was joined in the proceedings.

10.  In respect of ground 1, it is pertinent to note the sequence of events in the conduct of this appeal.

11.  The Board filed its Notice of Appeal against the Decision on 28 June 2019. The appeal was initially fixed to be heard on 20 November 2019. On 23 October 2019, the Board lodged its skeleton argument and the applicant lodged his on 5 November 2019.  On 14 November 2019, this court wrote to the parties directing that the appeal be adjourned to a new date to be fixed, not earlier than three months from the court’s direction.  This was because of the imminent hearing in the Court of Final Appeal of Wo Chun Wah on 26 November 2019 and that was directly relevant to the issues raised in ground 1.  This court gave leave to the parties to lodge revised and superseded submissions in light of the judgment to be handed down by the Court of Final Appeal.

12.  On 22 November 2019, a notice of hearing was issued informing the parties that the new hearing date of this appeal was fixed to 21 April 2010.  The Court of Final Appeal handed down its judgment on 20 December 2019.  From 29 January 2020 to 3 May 2020, all the court proceedings were generally adjourned due to public health considerations.  With the agreement of both parties, this court directed on 8 April that the appeal was to be dealt with on paper.  The Board lodged its revised skeleton argument on 31 March 2020.  The applicant lodged his revised skeleton argument on 7 April and the Board its reply submission on 14 April.

13.  Mr Wang submitted that after the judgment in Wo Chun Wah, the applicant ought to have re-assessed his opposition to the appeal and should at least concede ground 1.  There was a period of about four months from late December last year giving ample opportunity to the applicant to re-assess his opposition in light of the guidance given by the Court of Final Appeal.  Instead, the applicant maintained his opposition and substantially revised his arguments to contend that Wo Chun Wah was distinguishable and advanced a new argument that the appropriate starting point for costs in employees’ compensation proceedings (unlike the common law proceedings in Wo Chun Wah) should be section 23 of the Employees Compensation Assistance Ordinance, Cap 365.  These and other arguments raised in opposition to ground 1 were rejected by us.

14.  Senior and junior counsel were retained by the Board as there were issues of significant general importance and complexity involved in ground 1, particularly when the special role of the Board in employees’ compensation proceedings was denied by the applicant and he challenged the applicability of the guidance in Wo Chun Wah to employees’ compensation proceedings.

15.  Mr Wang submitted the proposed order that the applicant should pay half of the Board’s costs in this appeal, with a certificate for two counsel, would properly reflect the conduct of the applicant in maintaining his opposition to the appeal after Wo Chun Wah and the reasonable stance adopted by the Board all along.

The applicant’s submissions

16.  On behalf of the applicant, Mr Victor Gidwani drew attention to the fact that substantial costs had already been incurred for the appeal before it was directed to be adjourned in November last year, in that both sides had lodged their skeleton arguments and briefs had been delivered to senior and junior counsel for the applicant.  We were told that senior counsel subsequently withdrew from the case after the Court of Final Appeal handed down its judgment, and waived all his costs already incurred.

17.  Mr Gidwani contended that the Board is “pushing too hard” in seeking a variation of the costs order nisi.  Even if the court is minded to allow a variation in favour of the Board, the Board should have asked for 50% of the costs post-Wo Chun Wah, rather than 50% of the costs of the appeal from start to end, and there should not be a certificate for two counsel.

18.  He argued that departure from the general rule that costs should follow the event does not necessarily require the unsuccessful party to show that the failed grounds were raised unreasonably or improperly. Besides, the arguments he raised on appeal, although rejected by this court, were not criticised as unreasonable or improper.  Furthermore, the applicant was just “defending” the grounds of appeal raised by the Board. The applicant did not file a respondent’s notice and was basically seeking to justify what the judge had held in the Decision.

19.  Regarding the wrong factual premises in the Decision, he submitted that it was not the applicant’s fault that the judge had adopted wrong factual premises which stemmed from a misconception of the general law of employees’ compensation proceedings.  Nor was there any indication in the Decision that the judge was misled by his arguments.

20.  As for the conduct of the appeal after the judgment of the Court of Final Appeal in Wo Chun Wah, he queried whether the applicant really had “ample opportunity” to re-assess the merits of the appeal as there was a Christmas break, a Chinese New Year break and an adjournment generally of all the court proceedings from 29 January 2020, with an intervening Easter break.  He further submitted that the Board’s contention the applicant should have re-assessed his opposition to the appeal after the judgment in Wo Chun Wah was made with the benefit of hindsight.

21.  Mr Gidwani contended that a certificate for two counsel is not justified as the arguments had become “simple” given the judgment of the Court of Final Appeal and the Board should no longer require the assistance of a senior counsel, especially when the case was directed to be disposed of on paper.  He said the Board had incurred additional costs with an “extremely strong and expensive legal team” to pursue this appeal which involved a relatively insignificant amount and was not expected to be “ground-breaking”.  He queried why the Board did not engage its trial counsel to draft the notice of appeal and retained instead a senior counsel and another junior counsel who would have to peruse all the papers from scratch. This had inflated the costs of the appeal and 50% or more of the additional costs are uncalled for.  This is acting contrary to the underlying objectives in Order 1A rule 1(c), which seeks to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings.  He submitted that awarding the Board 50% of its costs in this appeal “can be very harsh or even sound punitive” to the Legal Aid Fund and can cause “a lot of hardship” to an uninsured and injured employee.

22.  Lastly, he complained that the Board never made an offer to the applicant to abandon its opposition on the basis that half of the costs of the appeal would be borne by the Board.  The Board had always sought the full costs of this appeal.

The decision in this application

23.  As mentioned, the applicant has the burden of showing that the circumstances here justify the exceptional course of departing from the general rule that costs should follow the event, where the Board is entirely successful on all the grounds raised.

24.  In making the order nisi of no order as to costs, we gave weight to the fact that the judge did not have guidance as to the proper starting point on costs.  But even making that allowance for the Decision, it would not appear that the errors complained of in the second and third grounds of appeal were influenced by the lack of guidance in that respect. Further, there is much to be said for the Board’s submission that the applicant should have re-assessed its opposition to the appeal and at least concede ground 1 in light of the judgment of the Court of Final Appeal.  Instead, the applicant stood its ground in opposing the appeal with new arguments.  We do not accept that the applicant did not have ample opportunity to re-assess whether it would be prudent to maintain its opposition to all the grounds of appeal in the four-month period.  Nor are we persuaded that any of the matters raised in Mr Gidwani’s submissions would justify the displacement of the general rule.  It is irrelevant that his failed arguments were not criticised as unreasonable or improper.

25.  The revised and additional arguments raised by the applicant in opposition to ground 1 took up a large part of Mr Gidwani’s skeleton argument.  They are of sufficient difficulty to justify the engagement of a senior counsel, in view of the significance of the issues to the operations of the Board.  Nor do we think the Board had acted unreasonably in retaining senior and junior counsel from the start to draft the grounds of appeal, so that its appeal would be launched on a proper footing.

26.  In our judgment, awarding the Board 50% of its costs in this appeal would strike a fair balance of the conduct of the parties, and in so doing would also take into account that a significant part of the costs had been incurred on both sides before guidance was given by the Court of Final Appeal, which had an impact on the further conduct of this appeal.

27.  We allow the application of the Board to vary the costs order nisi there be no order as to the costs of this appeal and replace it with an order that the applicant is to pay the Board 50% of its costs of this appeal.

28.  As for the costs of this application, we make an order nisi that such costs are to be in the cause of the appeal, as the application to vary the costs order nisi should be regarded as part of the original hearing itself, in this case being the appeal (Elijah Saatori v Raffles Medical Group, CACV 184/2009, 4 May 2010, §10).