WONG KWEI PIU v. CHOW CHI CHEUNG t/a SUN LEE CO

DCEC 1082/2017

[2024] HKDC 1637

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 1082 OF 2017

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IN THE MATTER OF AN APPLICATION BETWEEN

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DECISION

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A. Background

1.  On 17 May 2017, Mr Wong Kwei Piu (“Piu”) privately engaged Mr Burke (“Mr Burke”) of Messrs Burke & Company to commence these proceedings (“EC Action”) to claim employees’ compensation arising out of an accident in the course of employment against his former employer (“Employer”).

2.  On 11 July 2017, the Employer made a sanctioned payment in the amount of $500,000 (“Sanctioned Payment”)[1] in the EC Action. Piu did not accept the Sanctioned Payment in accordance with O 22, r 15 of the Rules of the District Court[2] within 28 days, ie by 8 August 2017 (“Deadline Date”). On 24 August 2017, interlocutory judgment was entered by consent.

3.  On 22 September 2017, the Director of Legal Aid (“Director”) granted two legal aid certificates assigning Mr Burke as Piu’s solicitor in both the EC Action and the related common law action under DCPI 2318/2017 (“PI Action”) (which writ was issued on 19 October 2017). On 28 November 2017, interlocutory judgment was also entered by consent in the PI Action.

4.  Since the entry of interlocutory judgment, apart from a failed mediation held on 26 February 2019,[3] the EC Action was almost held in abeyance throughout before Mr Burke was replaced by the re-assignment on 7 March 2019 of Mr Tam Kam Tong (“Mr Tam”). On 9 and 10 April 2019, Mr Wong Tim Wai (“Mr Wong”) was assigned as Piu’s counsel respectively for the EC Action and the PI Action. (Mr Tam and Mr Wong are collectively referred to as the “Assigned Lawyers”.)

5.  While the PI Action was in progress for the obtaining of the single joint cardiothoracic surgery expert report dated 16 December 2019 and the joint psychiatric expert report dated 16 August 2021 respectively, the EC Action continued to be inactive. It was on this court’s own motion that this court ordered on 14 September 2021 the assessment of compensation in the EC Action to be tried together with the assessment of damages in the PI Action. By the judgment of this court handed down on 31 May 2022 (“Judgment”), Piu was awarded compensation less than the amount of the Sanctioned Payment.

6.  On 25 September 2023, this court made a costs decision (“Costs Decision”) in relation to the Employer’s application to vary the costs order nisi by ordering (“Adverse Costs Order”) Piu to pay the Employer’s costs on an indemnity basis from the Deadline Date with full enhanced interest on the 8 payments of costs made by the Employer.

B. Adverse effect on Piu and the Director

7.  Piu was an aided person. By virtue of s 18A of the Legal Aid Ordinance (“LAO”), any monies Piu were awarded in the EC and the PI Actions should be used to indemnify the costs payable to the Employer under the Adverse Costs Order, as well as his own costs incurred in both the EC and PI Actions. Any deficiency of costs will need to be paid by the Director out of public funds. It is stated that by virtue of the Adverse Costs Order, it is most likely that not only Piu would have no money left after the “settlement of the costs lost to [the Employer] and his own costs”;[4] there will likely be a deficiency of costs, which the Director needs to bear.

8.  After having read the criticisms this court made against the Assigned Lawyers in the Judgment and the Costs Decision, the Director faulted them for the adverse consequence Piu and the Director now face.

C. Court’s criticisms of Piu’s legal representatives in respect of the EC Action

C.1 Improper handling of the Sanctioned Payment

9.  The court faulted Piu’s solicitors in advising Piu to reject the Sanctioned Payment without reasonable justification. It was believed that the solicitors had allowed the EC Action to continue without additional financial benefit to Piu.[5]

C.2 Mr Tam’s unsatisfactory handling of the proceedings

C.2.1 Misconception that the EC and PI Actions were combined actions

10.  Piu’s rejection of the Sanctioned Payment created a so-called “costs predicament”. When Mr Tam became Piu’s assigned solicitor, this court criticized him for having a misconception about the EC and the PI Actions as “combined” actions. The court also faulted Mr Tam for not having regard to the statutory set off provisions in s 26 of the Employees’ Compensation Ordinance (“ECO”) in allowing the EC Action to continue.[6]

C.3 Mr Wong’s unsatisfactory handling of the trial

11.  This court criticized Mr Wong for the messy and disorganized preparation of evidence regarding medical expenses[7].

D. The Summons

12.  Based on the court’s adverse comments highlighted above, the Director, on 13 November 2023, issued a summons (“Summons”) pursuant to O 62, r 8 together with a supporting affirmation of Tsang Hoi Ling (“Supporting Affirmation”) to apply for a wasted costs order (“WCO”) against the Assigned Lawyers.

13.  In the Summons, the Director asks the court to disallow legal aid taxation for the Assigned Lawyers and order them to indemnify Piu (and the Director) the costs payable to the Employer:

(1) For Mr Tam, for the period starting from 3 months after his assignment on 7 March 2019; and

(2) For Mr Wong, the period starting from 3 months from 2 September 2019 after Mr Tam allegedly delivered instructions to Mr Wong. The subject period (“Subject Period”) for both ends on 31 May 2022, the date of the Judgment.[8]

14.  Thus, the Subject Period for Mr Tam is limited to the period from 6 June 2019 to 31 May 2022 (“Tam’s Subject Period”), and that for Mr Wong from 1 December 2019 to 31 May 2022 (“Wong’s Subject Period”).

E. The particulars of the alleged improper conduct

15.  In the Schedule attached to the Summons, the Director sets out four items of alleged improper conduct against the Assigned Lawyers as follows.

(1) “Failing by [the Assigned Lawyers] to conduct [the EC Action] in the most costs effective and procedurally economic manner, ie continuing with these proceedings to full trial and/or failing to apply to stay these proceedings to minimize the risk of costs whilst conducting [the PI Action] actively, despite their full knowledge that interlocutory judgment was obtained in [the PI Action] … and with the evidence in hand at the material time” (“Ground 1”).

(2) “Failing by [the Assigned Lawyers] to advise the Director the risk involved when continuing with these proceedings to full trial and/or failing to apply to stay these proceedings pending the resolution of [the PI Action], despite having full knowledge that interlocutory judgment was obtained in [the PI Action] … and with the evidence in hand at the material time” (“Ground 2”).

(3) “Wrong and/or substandard legal knowledge of [the Assigned Lawyers] that [the EC and PI Actions] were ‘combined actions’ leading to a misconception that the [S]anctioned [P]ayment … should become abandoned when the final damages awarded in [the PI Action] exceeds (sic) the [S]anctioned [P]ayment …” (“Ground 3”).

(4) “The combined effect of [the Assigned Lawyers’] improper and/or unreasonable act aforesaid result in these proceedings being brought together with [the PI Action] all the way to trial with unnecessary and unreasonable costs incurred in these proceedings (including costs lost to [the Employer] under [the Adverse Costs Order]) which could have been avoided but for their improper and/or unreasonable acts” (“Causation Ground”).

16.  Grounds 1 to 3 relate to conduct while Ground 4 relates to causation, hence so described.

17.  Apart from the Supporting Affirmation, the Director also filed the affidavit of the handling legal aid counsel of Mr Yau Kam Po (“Yau’s Affidavit”) (after Piu had given his written consent on 17 June 2024 for waiver of privilege),[9] and the Affirmation of Chan Tan Ying (“Chan’s 1^st”).

18.  The Summons was vigorously opposed. Mr Tam and Mr Wong each filed two affirmations.[10] The Director was granted leave at the substantive hearing to file the 2^nd Affirmation of Chan Tan Ying (“Chan’s 2^nd”) to adduce a copy of the Employer’s draft costs bill dated 6 August 2024 (“Draft Bill”).

19.  At the hearing, the Director was represented by the same Ms Chan, the deponent of Chan’s 1^st and 2^nd; Mr Tam was represented by counsel, Ms Elizabeth Cheung who appeared together with Mr Edward Tsui. Mr Wong acted in person.

F. The law and the applicable legal principles for wasted costs proceedings

20.  The applicable law and legal principles are not in dispute.

F.1 The law

F.1.1 The District Court Ordinance

21.  Section 53 of the District Court Ordinance (Cap 336) (“DCO”) provides:

“(3) In any civil proceedings before it, the Court may, in accordance with the rules of court, by order disallow, or order the legal representative concerned to meet, the whole or any part of any wasted costs.

…

(5) In subsection (3), wasted costs … means any costs incurred by a party as a result of—

(a) an improper or unreasonable act or omission; or

(b) any undue delay or other misconduct or default,

on the part of any legal representative, whether personally or through an employee or agent of the legal representative.

(6) In this section, legal representative …, in relation to a party to any proceedings, means a counsel or solicitor conducting litigation on behalf of the party.”

F.1.2 Order 62, r 8B (1)

22.  Order 62, r 8B (1) provides that the court shall consider whether to make a wasted costs order in 2 stages. In the first stage, this court must be satisfied that:-

“(a) …

(i) it has before it evidence or other material which, if unanswered, would be likely to lead to a wasted costs order being made; and

(ii) the wasted costs proceedings are justified notwithstanding the likely costs involved …”

F.2 Applicable legal principles

F.2.1 What constitutes an “improper or unreasonable act” under s 53(5)(a), DCO?

23.  Mr Wong referred to the following passages in the Hong Kong Civil Procedure 2024 Vol 1 (“HKCP”):

“Improper— It was not enough that a solicitor’s general conduct for a client had been improper; in every case where a solicitor had been made to pay costs, he had been proved guilty of misconduct a client had been improper … The jurisdiction is only exercisable where the solicitor was responsible for conduct of the kind prescribed by the rule in any proceedings …” (§62/8/3, p 1358)

24.  An “unreasonable act” refers to:

“… any impropriety should be very serious and there had to be something more than negligence. There had to be something akin to abuse of process. It is a necessary requirement of any wasted costs order that there should be a breach of the lawyer’s duty to the court, there must be something more than mere negligence for the wasted costs jurisdiction to arise … In cases where the allegation is that the legal representative has pursued a hopeless case, the question is whether no reasonably competent legal representative would have continued with the action. This question could not be answered affirmatively unless the representative also acted unreasonably which is akin to establishing abuse of process.

… unless an applicant for a wasted costs order can establish that the legal representative acted in a way that was not only ‘improper, unreasonable or negligent’ but was also in some way in breach of any duty to the court, the court cannot make a wasted costs order …

The jurisdiction could only be invoked in the case of serious misconduct and the initiation or continuation of an action when it had no or substantially no chance of success might constitute such misconduct …

…

Acting on instructions is no answer to a charge of abuse of process and breach of duty to the court …” (§62/8/4, p 1359)

F.2.2 Ma So So v Chin Yuk Lun & Anor[11]

25.  All parties in this WCO application refer to the guidance laid down in the seminal judgment of the Court of Final Appeal in Ma So So. It will be instructive to summarize it below.

(1) The alleged improper conduct and unreasonable acts (see §§23 & 24 above) of the lawyer being complained of caused costs to be incurred or wasted before the court should exercise the discretion to make an order. The court may make an order. It is not bound to do so and the aggrieved party has no right to an order: §§6 & 13.

(2) The jurisdiction under the rule is a summary jurisdiction and should be used where the need for such an order is “reasonably obvious”; when there is “a clear picture” of the fault of the lawyer. One must be careful not to allow the jurisdiction to give rise to costly satellite litigation: §§4 & 9.

(3) In exercising its discretion at the first stage, the court has to take into account the strength of the prima facie case shown by the applicant. The stronger the prima facie case shown, the greater is the inclination to proceed. At the first stage, the solicitor may be called upon to show cause as required by O 62, r 8(2). The court should not proceed automatically. It has a discretion whether to proceed further and may decline to do so: §§15 & 16.

(4) The burden of proof rested on the applicant: §23.

(5) The court has to consider the proportionality of the exercise. The court should consider whether the applicant is able to satisfy them that the costs likely to be incurred in litigating the application and the amount of the costs sought are not likely to be out of proportion to the amount of costs. If such costs are likely to be relatively high compared to the amount of costs sought, the court should give this matter great weight and in an appropriate case, it would be a proper exercise of discretion to decide not to proceed further. This would be so whether or not the applicant has a separate cause of action against the solicitor in respect of the conduct in question. Procedural fairness is relevant to the exercise of the discretion as to whether the application should be allowed to proceed further. But where procedural fairness requires an elaborate procedure that is likely to lead to costly litigation, the court would have to give the risk of disproportionate costs great weight in deciding whether to proceed further: §§16 & 22.

F.2.3 Other considerations

26.  Further, a mere mistake or error of judgment is not generally sufficient, but a gross neglect or inaccuracy in a matter that it is a solicitor’s duty to ascertain with accuracy will suffice. Conduct, which involves a failure on the part of the solicitor to fulfil his duty to the court, and to realise his duty to aid in promoting the cause of justice, will suffice. The conduct must be inexcusable and such as to merit reproof. The test was whether the conduct amounted to a serious dereliction of duty: HKCP, §62/8/1, p 1357.

27.  Negligence is also not sufficient. Any impropriety should be very serious and be something akin to an abuse of process. It is a necessary requirement of any wasted costs order that there should be a breach of a lawyer’s duty to the court.[12]

28.  Additionally, the applicant needs to state precisely what wasted costs are alleged to have been caused by the alleged acts or omission of the legal representative and how much of such costs are being claimed by the applicant who shall be required to provide a credible figure of the amount of wasted costs likely to be at stake.[13]

G. Legal principles on the duties of assigned solicitors and counsel

29.  There is no dispute that the primary role of the Director is to administer the legal aid schemes to ensure public funds are used effectively. Once a case is assigned out, the role of the Director will simply be to monitor the assigned-out cases but he has no duty to supervise the conduct of legally aided proceedings or any duty to invigilate the performance of the assigned lawyers, whether they are solicitors or counsel.[14] Hence, the Director will need to rely on the reporting duties imposed on assigned solicitors and counsel as mandated in the following statutory Legal Aid Regulations in providing the Director information on the progress and disposal of the proceedings.

“12. Conduct of proceedings by solicitors

…

(9) An aided person’s solicitor shall give the Director such information regarding the progress and disposal of proceedings to which the certificate relates as the Director may from time to time require for the purpose of performing his functions under [the LAO] …

…

21. Duty to report abuse of legal aid

(1) Where an aided person’s solicitor or counsel has reason to believe that the aided person –

(a) has required his case to be conducted unreasonably so as to incur unjustifiable expense or has required unreasonably that the case be continued; or

(b) has wilfully failed to comply with any regulation requiring him to provide information or in furnishing such information has knowingly made a false statement or a false representation,

the solicitor or counsel shall forthwith report the fact to the Director.

(2) Where the solicitor or counsel is uncertain whether it would be reasonable for him to continue acting for an aided person, he shall report the circumstances to the Director.”

30.  Similar statutory duties of assigned solicitors and counsel were confirmed in the UK. In the English Court of Appeal case of Davy-Chiesman v Davy-Chesman and Anor,[15] the Court of Appeal held that there was a personal duty to report for both solicitor and counsel. Should an aided client reject the legal advice not to proceed in a very bad case, the reporting duty arose. It further stated that an aided client’s solicitor is not immune from the duty to report should he form a view different to that of the counsel.[16]

31.  In Hong Kong, the court had similarly confirmed a duty on both assigned solicitors and counsel to report to the Director under Reg 21: Lai Sin Yan Elsie v Tata Communications (Hong Kong) Ltd.[17]

H. The Director’s allegations

H.1 Grounds 1 and 2

32.  These two allegations are intertwined, and can suitably be dealt with together.

33.  At the heart of the Director’s complaint is the alleged unreasonable decision of the Assigned Lawyers to allow the EC Action to proceed to a full trial despite the huge litigation risk of losing costs, which risks the Assigned Lawyers had failed to report to the Director. The Director averred that had he been fully advised by the Assigned Lawyers on the merits on quantum of the EC Action, and the huge litigation risk of losing costs, the Director would have likely discharged Piu’s legal aid certificate for the EC Action.[18]

H.1.1 Mr Tam failed to inform the Director of the settlement strategy

34.  In Yau’s Affidavit, Mr Yau deposed to the scant communications Mr Tam had with him during the time when he was in charge of the EC and PI Actions from 17 July 2017 to 31 July 2022. Apart from receiving two letters dated 23 June 2020[19] and 3 August 2021,[20] and two phone calls from him on 19 June 2019 and 15 September 2021, Mr Tam did not make any other reports on the progress of the proceedings.

35.  Mr Yau alleged that Mr Tam did not inform him of any settlement strategies, including the risk of litigation and costs implication.[21]

36.  Notwithstanding Yau’s allegation above, in Chan’s 1^st, Ms Chan alleged that the letters that Mr Tam had disclosed showed that as early as mid-June 2019, Mr Tam informed Mr Yau that he had advised Piu of the costs implications of the Sanctioned Payment. He had further advised Mr Yau that he had to “overcome the hurdle” of the Sanctioned Payment.[22]

37.  Ms Chan submitted that at that stage Mr Tam should have advised the Director (and Piu) of the option to “accept the Sanctioned Payment out of time or further pursue the EC Action upon balancing the pros and cons of the options”.[23] Since costs at stake would have been relatively modest[24] around that time, the costs risks would have been minimal.

38.  Further, it was alleged that as soon as Mr Tam realized that the option of global settlement was not available, the Assigned Lawyers should not have caused further costs to be allowed by allowing the EC Action to continue to trial. However, Mr Tam never reported or advised the Director of the high risk of losing substantial costs when allowing the EC Action to continue to trial.

39.  Ms Chan further alleged that it was apparent from Mr Wong’s written advice on 23 September 2021 that the Sanctioned Payment was reasonable, and that the chance of beating the Sanctioned Payment was low. In such circumstances, Ms Chan argued that Mr Wong should have then reported the costs risk to the Director in accordance with the duty imposed on him under Reg 21.[25]

H.1.2 Failure to report court’s comments

40.  After the EC Action was set down for trial, Ms Chan averred that the Assigned Lawyers had not only kept the Director in the dark about the costs risks, they had even failed to report to the Director the comments made by this court.

41.  This court had indeed raised concerns about the delay of the EC Action at the hearings on 21 August, 12 October 2020 and 14 September 2021 attended by the Assigned Lawyers. Mr Wong was urged to explore settlement, including staying the EC Action. Ms Chan alleged that apart from the letter mentioned in the following paragraph, the Assigned Lawyers did not alert to the Director of these comments to enable the Director to consider if Piu had proceeded with the EC Action unreasonably.[26]

42.  In the letter of 18 December 2020, Mr Tam sought approval from the Director for the obtaining of a supplemental report from Piu’s treating psychiatrist.[27] In that letter, Mr Tam only mentioned obliquely that the court had inquired about Piu’s psychiatric treatment. There was no mention of comments by the court about delay.

43.  It was averred that because of the Assigned Lawyer’s failure to report and inform the Director as to the risk of continuing with the EC Action, the Director was kept in the dark about the Court’s comments. Had the Director been informed of these comments, it was averred, the Director would have been able to make an informed decision as to whether to issue to Piu a “Notice to Show Cause” to explain why his legal aid certificate should not be discharged for lack of merits[28] and whether to extend Piu’s legal aid certificate to cover the trial on the assessment of quantum for the EC Action.[29]

H.2 Ground 3

44.  It was averred that throughout the proceedings, Mr Tam had harboured a misconception that by consolidating the EC Action with the PI Action, it would provide a weapon for Piu to defeat the Sanctioned Payment. Ms Chan averred that Mr Tam’s said misconception demonstrated Mr Tam’s “professional incompetency (sic)” and unjustified over-confidence, which ultimately led to the full-blown trial with the attendant adverse costs consequences Piu and the Director now face.[30]

45.  Further, it was alleged that before the extension of legal aid to Piu to cover the trial of the assessment, the Director had relied on the information Mr Tam provided in an application form known as “X47/G” (“Form X47/G”) and the advice rendered by Mr Wong. However, the information was misleading and the advice was wrong.

46.  In the Form X47/G, Mr Tam estimated the profit costs and disbursements including counsel’s fees incurred to date to be $56,000 and $56,100 respectively. The said estimates were clearly inaccurate, stated Ms Chan. Not only was it alleged that Mr Tam had failed to take into account the costs that had already been incurred by Mr Burke, Mr Tam’s interim bill dated 8 September 2020 showed that his costs from the date of his assignment to 8 September 2020 were already $465,130.[31] Ms Chan alleged that Mr Tam’s estimates were misleadingly inaccurate.

47.  The Director also alleged that Mr Tam’s estimate in Form X47/G that there was a “Good (60%-80%) chance of Piu being awarded compensation of $510,000 (exceeding the Sanctioned Payment) was also wrong. According to Ms Chan, Mr Tam’s stating that Piu had good prospects of beating the Sanctioned Payment was not supported by counsel’s advice. Evidently, in Mr Wong’s written advice dated 23 September 2021, Mr Wong advised that the amount of compensation should be in the range of $375,480 to $401,400.[32]

48.  Despite Mr Tam having been directed by Mr Yau to revise the Form X47/G, Ms Chan alleged that Mr Tam continued to wrongly estimate the quantum by giving wrong advice to Piu that the amount of the compensation would be well over $1 million ($1,078,431.84)[33] by adopting the so-called “Paper-Mill”[34] formula. Hence, the estimated amount of compensation for s 9, ECO (loss of earning capacity) was much inflated. Nonetheless, Ms Chan alleged that the available medical and documentary evidence did not support Mr Tam’s adoption of this formula in calculating s 9 compensation.[35]

49.  It was averred that the Assigned Lawyers consistently demonstrated their lack of legal knowledge throughout up to trial. In Mr Wong’s second advice rendered on 1 December 2021,[36] Mr Wong wrongly inflated the quantum of the compensation, advising that it would exceed the Sanctioned Payment. The quantification had been due to his ignorance of the statutory cap on the maximum daily medical expenses under the ECO.

50.  As for Mr Tam, it was averred that he had blindly adopted the wrong advice of Mr Wong without exercising his own legal judgment. As a result, in the revised Form X47/G, he continued to overestimate the chance of recovering compensation in excess of the Sanctioned Payment.

51.  In the circumstances, the Director had been misled on both the merits and the costs when extending the legal aid certificate to Piu for the trial by the Assigned Lawyers’ “deficiency in legal knowledge and gross negligence”.[37]

I. Mr Tam’s opposition

I.1 “Arrangement of a joint trial” is most costs effective and procedurally economical

52.  It was Mr Tam’s contention that when he was assigned to act for Piu, he had inherited the costs problem of the Sanctioned Payment. Not only had Mr Burke incurred legal costs believed to have been around $200,000,[38] there was the costs of the Employer as well. Mr Tam said in order to avoid the adverse costs consequences of the late acceptance of the Sanctioned Payment, he believed that it was necessary to negotiate for a global settlement of both the EC and PI Actions. However, the Employer had along taken an uncompromising attitude by refusing to make any settlement offers that include the payment of Piu’s costs of the EC Action. When no settlement was reached despite numerous without prejudice (“WP”) correspondence and a second mediation before trial, Mr Tam was of the view that Piu had a good chance of beating the Sanctioned Payment. This was because both the cardiothoracic surgery and psychiatric expert reports were favourable to Piu. Furthermore, he also believed that Piu would likely be awarded $2.8 million for both Actions as Mr Wong had advised. Mr Tam faulted Mr Wong for the undesirable outcome after the trial. He alleged that Mr Wong had abandoned the pleaded case for neck and shoulder pain and failed to advance a favourable case for the calculation of Piu’s pre-accident earnings.[39]

53.  In any event, since the EC Action had been left mostly dormant when the PI Action was on-going, Mr Tam believed that with the modest legal costs of around $100,000 for his costs from the time of his assignment to the time when the EC Action was set down for trial, having both the EC and the PI Actions tried together was the most costs effective and economical course to take.

54.  With the above belief in good faith and the costs difficulty he faced, Mr Tam therefore had duly advised Piu and had all along reported to Mr Yau (by letters and by phone calls) of the developments of the proceedings.

I.2 No wrong and substandard legal knowledge

55.  Mr Tam was emphatic that he knew that the amount of the compensation to be awarded by the court in the EC Action would need to be separately considered when determining if the Sanctioned Payment could be beaten. The term “combined” trial was in fact used by Mr Pirie to resist the Employer’s application to vary the costs order nisi (resulting in the Adverse Costs Order).

I.3 Not suitable for summary determination

56.  Mr Tam cited the voluminous documents (around 30 bundles for the EC and PI Actions) and the disproportionate costs (around $650,000 to $850,000) as being unsuitable for the Summons to proceed to the second stage.

J. Mr Wong’s opposition

57.  In common with Mr Tam’s opposition in relation to having inherited the costs problem of the Sanctioned Payment from Mr Burke, Mr Wong also contended that:

(1) Reg 12 (9) which the Director relied on only applied to assigned solicitors, but not to an assigned counsel;

(2) Reg 21 was not engaged as the Director had not made any allegations against Piu for having abused legal aid or acted unreasonably by not accepting the Sanctioned Payment;

(3) He denied that he had been instructed to provide any advice on 15 September 2021 as the Director alleged; and

(4) In relation to the allegations made by Mr Tam, Mr Wong alleged that the issue of neck and shoulder pain was only relevant to the PI Action, but not to the EC Action. As for the pre-accident earnings, it was contended that Piu had a positive case and that it was not necessary to rely on the Government Census and Statistics for drivers.

K. Discussion

K.1 Prima facie shown for Grounds 1 to 3?

58.  In relation to the allegation of misconduct contained in Grounds 1 to 3, it is necessary to reiterate the legal principles discussed in F.2 above that require the Director to prove that the alleged impropriety was serious in nature. Despite the allegation in Chan’s 2^nd of gross negligence, none of the Grounds the Director relied on had so alleged. Thus, the Director could only allege mere negligent conduct, which according to the principles discussed above, would not be a sufficient ground for a WCO.

59.  According to the evidence placed before me, it appears that the Director had framed the three Grounds of conduct allegations on the basis of the comments and criticisms this court set out in the Judgment and the Costs Decision. It cannot be gainsaid that the genesis of the Adverse Costs Order entirely arose from the consequence of Piu’s non-acceptance of the Sanctioned Payment. This court’s disapproval stems mainly from such unreasonable conduct. At the material time when the Sanctioned Payment was made, Mr Burke was the handling solicitor, and had been responsible for the conduct of both the EC and PI Actions for 2 years before Mr Tam’s and later Mr Wong’s assignment.

60.  Under these circumstances, the evidence in relation to Mr Burke’s conduct of the EC Action will be highly relevant. Particularly that the Assigned Lawyers had blamed Mr Burke for the “costs predicament” they had inherited. Thus, for the evidence to be complete, the Director ought to have adduced evidence on matters such as Mr Burke’s communications with the Director, his justification for advising Piu to reject the Sanctioned Payment, as well as the costs Mr Burke had incurred during his period of assignment. The Director adduced no such evidence.

61.  Notably, as stated in Chan’s 2^nd, before the proceedings were set down for trial, the court had in a number of hearings expressed concern for the undue delay and the inaction of the EC Action. I had also questioned the reasonableness of Mr Burke’s advice in rejecting the Sanctioned Payment after the interlocutory judgments for both the EC and PI Actions had been entered by the end of November 2017. Since the failure of the Assigned Lawyers to report to the Director the court’s comments forms one of the allegations the Director made, it would have been necessary for Mr Burke to provide an explanation for the inaction as discussed in §60 above.

62.  One of the allegations was Mr Tam’s failure in informing the Director of the settlement strategy and progress of the proceedings. In spite of the factual disputes between Mr Yau and Mr Tam regarding the frequency of communication by letters and phone calls, it seems that Mr Yau knew that Mr Tam’s strategy in solving the costs problem arising from the non-acceptance of the Sanctioned Payment was to run both the EC and PI Action in tandem, without having them “split up” (see §52 above). As reflected from the attendance record of the phone call on 19 June 2019, Mr Tam informed Mr Yau that the Sanctioned Payment was reasonable, and mentioned the difficulty about the costs that Piu faced. Mr Yau should have been aware of Mr Tam’s global settlement strategy.

63.  In the attendance record of the phone call on 15 September 2021, Mr Tam repeated again the difficulty about costs after reporting to Mr Yau that the Employer refused to pay costs beyond the Deadline Date.

64.  Whilst the question of the frequency of communications between Mr Tam and Mr Yau is in dispute, it appears that Mr Yau should have been aware of the on-going costs predicament created by Mr Burke. He also knew that the EC Action was neither settled nor stayed whilst the PI Action was on-going. After the interlocutory judgment for the PI Action had been entered, I believe that Mr Yau should not have allowed the assigned solicitors, Mr Burke and later Mr Tam, to continuously pursue the EC Action without stay or settlement. Unfortunately, Mr Yau seemed to have condoned Mr Tam’s strategy of conducting the EC and PI Actions in tandem. Notably, such practice has been repeatedly criticized by court.

65.  As to the alleged failure of reporting the comments of the court, it does not seem that such failure would have influenced the Director’s decision. As noted above (§41), the court’s concerns were mainly due to the delay in the EC Action. The discussion in the preceding paragraph shows that Mr Yau was aware of the delay. I do not think that those comments the court made in the hearings would have had much effect on Mr Yau’s decision on the continuation of Piu’s legal aid.

66.  As for the alleged underestimation of costs by Mr Tam, I note that both the Director and Mr Tam have provided conflicting evidence on costs. The allegation by Ms Chan that Mr Tam had failed to take into account the costs already incurred by Mr Burke is puzzling and unfair. Since Mr Burke was Mr Tam’s predecessor, the Director should have information on the costs Mr Burke had incurred.

67.  As for the allegations of the costs underestimation in the Form X47/G, I tend to think that the problem may have been due to the format of the pro-forma Form X47/G. It appears to only require the giving of rough costs estimates. The form does not contain any explanation as to whether the estimation of costs includes all the previous bills rendered. In any event, since the Director had already received Mr Tam’s interim bill for a much larger sum, it would have been apparent that the costs estimate of $56,000 was in addition to the $465,130 Mr Tam already claimed in the interim bill. The Director would not have likely been misled. What I find confusing is rather the increase of the estimated costs from $56,000 stated in the Form X47/G to $108,000 in the revised Form X47/G. Mr Tam did not provide an explanation for the increase.

68.  As for the Director’s allegation of wrong advice and sub-standard legal knowledge of the Assigned Lawyers, I would be inclined to agree with the Director’s allegation. In my Judgment and the Costs Decision, I have expressed similar comments. The performance of the Assigned Lawyers is not at all satisfactory. However, the legal principles have firmly established that bad performance is not sufficient for a court to make a WCO. Since the Director is not alleging gross negligence or abuse of process, the complaint does not meet the required threshold for a WCO.

69.  Despite the various aspects of the unsatisfactory conduct of the Assigned Lawyers, I do not think that the prima facie case on their conduct (Grounds 1 to 3) is strong.

K.2 Causation Ground

70.  In the Adverse Costs Order, I have commented “Piu and his legal advisers [ie Mr Burke] should already have had reasonably sufficient information to make a broad assessment as to the amount of the compensation Piu would likely obtain”.[40]

71.  The outcome of the Judgment clearly shows that Mr Burke had failed to carry out a proper assessment of the prospect of Piu being able to beat the Sanctioned Payment. Had Mr Burke done the calculation with reference to Form 9, which assessed Piu’s percentage loss of earning capacity (“LOE”) at 1.5% and the total number of days of absence from duty as 429 days, he would have realized that Piu would not beat the Sanctioned Payment. According to the court’s findings of Piu’s pre-accident earnings of $18,833, and the amount of $3,690 for medical expenses this court assessed,[41] Mr Burke should have been able to arrive at a rough estimated amount of $232,698.[42]

72.  It could be argued that Piu had achieved a better outcome after trial than an assessment based on Form 9. After trial, Piu’s LOE was assessed at 4% (instead of 1.5% in Form 9), and the period of absence from duty at 23 months (rather than 429 days in Form 9). However, it should not be overlooked that the so-called “improvement” was purely attributed to Piu’s psychiatric illness around 2 years after the Sanctioned Payment was made as a result of “the long and distressing effects of litigation”.[43] When the Sanctioned Payment was made, Mr Burke should have already had obtained Piu’s instructions on his pre-accident earnings (around $18,000), and his medical expenses ($3,690 assessed by the court after trial). Had a rough assessment been done based on Form 9, I believe that Mr Burke would have had little difficulty in advising Piu that the Sanctioned Payment was plainly and obviously reasonable.

73.  After the expiry of the Deadline Date, interlocutory judgment was entered respectively for the EC Action and the PI Action on 24 August and 28 November 2017. Incidentally, on the same day as the entry of the interlocutory judgment for the EC Action, the joint orthopaedic expert report of Professor Kumta and Dr Chun was also available. In the report, the joint orthopaedic experts opined that the reasonable duration of sick leave should be 161 days and the LOE should be 1%. Since the experts’ joint opinion clearly did not improve Piu’s case, but further undermined Mr Burke’s poor advice, his estimation of $1 million was entirely baseless.

74.  As noted above, from 22 September 2017 onwards until his replacement by Mr Tam on 7 March 2019, Mr Burke had been Piu’s assigned solicitor. During that time, the Director ought to have had information in relation to Mr Burke’s conduct of the EC Action including whether he had provided any justification for advising Piu not to accept the Sanctioned Payment, and for the period of the inaction mentioned in §4 above. The Director also has not adduced any evidence as to the circumstances finally leading to the “costs predicament” the Assigned Lawyers had inherited from Mr Burke.

75.  The discussion above (§62) shows that shortly after Mr Tam’s re-assignment, in around June 2019, Mr Tam had already informed Mr Yau that the Sanctioned Payment was reasonable, and that it should have been accepted. He also highlighted the costs difficulty Piu would face. His strategy to overcome the costs issue by pursuing a global settlement led to the much-criticized concept of “combined trial” and “joint trial”.

76.  The series of WP correspondence also underlined the Employer’s uncompromising refusal to pay Piu’s costs beyond the Deadline Date. As early as 26 August 2019, the Employer’s solicitors had insisted on the same stance of refusal in their WP letter. Their firm stance on costs remained up until the end in the EC Action.

77.  In view of the clear uncompromising attitude of the Employer, Tam ought to have realised that there was little prospects of reaching an agreement with the Employer to pay costs beyond the Deadline Date. I do not think that his strategy of using “combined trial” and “joint trial” would likely improve the chance of Piu overcoming the costs issue of the Sanctioned Payment. In this regard, I believe that Mr Tam had clearly committed an error of judgment.

78.  Owing to Mr Tam’s said strategy, the EC Action had been in fact largely left in abeyance whilst the parties proceeded to obtain medical expert reports in the PI Action (see §5 above). The EC Action seemed to have gone to “sleep”. In fact, it was due to this very inaction that later prompted this court to order both the EC Action and PI Action to be tried together. Thus, I do not think that Mr Tam’s foolhardy strategy had significantly compounded the costs for the EC Action.

79.  I agree with Ms Chan that Mr Wong had made an obvious mistake in his second advice in relation to medical expenses (see §49 above). Nonetheless, Mr Wong was not instrumental in pursuing the “global settlement” strategy or had engaged in WP negotiations.

80.  Overall, it cannot be denied that the Assigned Lawyers had made a number of mistakes. Mr Wong’s legal advice referred to in the preceding paragraph and Mr Tam’s reliance on it may have been the result of their desperate attempt to “salvage” the “costs predicament” caused by Mr Burke. I am therefore inclined to the view that the costs wasted has largely been due to the refusal to accept the Sanctioned Payment while Piu was represented by Mr Burke.

K.3 Conclusion

81.  The Assigned Lawyers might have been negligent and committed an error of judgment. However, I do not think that the Director has satisfied the necessary prima facie requirements in obtaining a WCO against the Assigned Lawyers. Additionally, he will further face two more hurdles that would likely stack against the court’s exercise of discretion in his favour.

L. Additional hurdles

L.1 Is it suitable for summary disposal

L.1.1 Factual disputes

82.  The disputes as to the communications between Mr Tam and Mr Yau are already set out in §§34-36 and 54 above.

83.  Mr Tam has not adduced any evidence such as attendance notes of the phone calls he had with Mr Yau. Hence, the extent of the dispute is unclear at this stage.

84.  However, insofar as the dispute on the correspondence is concerned, I believe it would be likely to be substantial. The correspondence that Mr Tam has already disclosed shows that the Director had been copied to in the following correspondence.

(1) 28 August 2019[44]

Mr Tam offered $400,000 inclusive of the Sanctioned Payment with costs to Piu to settle both the EC Action and the PI Action globally.

(2) 28 August 2019[45] (2^nd letter)

Mr Tam offered $350,000 inclusive of the Sanctioned Payment with costs to Piu to settle both the EC Action and the PI Action globally.

(3) 29 August 2019[46]

There are two letters dated 29 August – one repeated the offer of 28 August 2019, another one enclosing opening submissions and list of authorities.

(4) 26 March 2020[47]

Mr Tam requested specific discovery on pre-trial earnings and proposed “joint trial” of both the EC and PI Actions.

(5) 8 June 2020 (to court)[48]

Mr Tam was complaining of the conduct of the Employer’s solicitors in relation to the parties WP negotiations, and requested the EC Action not to be set down until a joint psychiatric expert report was available.

(6) 27 January 2021[49]

Tam asked the Employer’s solicitors to propose terms of settlement for the EC Action after the Employer made a further sanctioned payment in the PI Action.

(7) 1, 2, 3, 4, 5, 8, 9, 10 and 11 February 2021[50] (9 letters)

Repeated reminders of the request stated in the letter of 27 January 2021.

(8) 27 May 2021, 3 June 2021, 9 and 16 July 2021, 3, 17, 18 and 24 August 2021[51] (8 letters)

The gist of these letters is that Tam proposed to accept the Sanctioned Payment with costs to Piu.

(9) 24 November 2021[52]

Tam questioned the Employer’s solicitors about the alleged change of stance on the WP offer made at the conclusion of the mediation for a global settlement of both Actions.

85.  Thus, in addition to the 2 letters that Mr Yau had allegedly only received from Mr Tam (see §34 above), Mr Yau should have received the above totalling 24 letters if Mr Tam had indeed copied them to the Director as shown on the correspondence.

86.  Presently, this court is unable to resolve this factual dispute without receiving further evidence, which is only possible if there is a second stage hearing. The above disputed correspondence is central to the Director’s allegation that Mr Tam had failed to inform the former of the settlement negotiations.

87.  Given the importance of the nature of the disputed correspondence, I believe that the parties would likely require cross-examination of witnesses should the matter further proceed. The present disputes would render it unsuitable for summary disposal.

L.2 Costs proportionality

88.  To satisfy the costs-proportionality principle discussed above, the Director needs to demonstrate that the costs likely to be incurred in litigating this WCO application are not likely to be out of proportion to the amount of the costs that are at stake: see Ma So So (ibid) and Kwok Chin Wing v Kao, Lee & Yip (see f/n 11).

89.  According to Ms Chan’s skeleton submissions dated 13 August 2024, the total amount of costs at stake would be the costs of Mr Tam, Mr Wong and Mr Pirie respectively in the sums of $1,108,083, $176,000 and $774,000, totalling at $2,058,083. Since the WCO application only concerns the Assigned Lawyers’ costs during their Subject Periods, Mr Pirie’s costs are clearly not relevant.

90.  Mr Tam contended that the costs at stake should be a lot less. In his skeleton submissions dated 15 August 2024, it was submitted that the costs at stake for Mr Tam should only be about $595,019 instead of $1,108,083 as Ms Chan alleged. In Tam’s 4^th, Mr Tam explained the basis of his calculations. Firstly, he had informed the Director that he would waive common fund costs of $175,630.[53] Secondly, he stated that an amount of $156,330 should also be deducted as the bills were outside Tam’s Subject Period.[54] Lastly, there were overlapping charges in the sum of $181,104.[55] Thus, after deducting Mr Tam’s agreed waiver of $175,630, $156,330 and $181,104, the amount at stake should only be $595,019.

91.  Regarding Mr Wong’s fees of $176,000, they are made up of two fee notes respectively dated 24 December 2021 and 12 August 2022[56] for $140,000 and $36,000. For the latter fee note of $36,000, it was stated to be for “Advice on Merits” on 4 August 2022, which date is undisputedly outside Wong’s Subject Period. Hence, the second fee note of $36,000 should not be included in the costs at stake. Thus, the amount at stake for Mr Wong’s fees should only be $140,000.

92.  In the Draft Bill, the amount of the Employer’s costs after the Deadline Date was in the sum of $1,410,414. Ms Chan also included the costs variation application costs of $121,098. Since the costs of the Employer’s costs variation application is outside the Subject Periods, the said costs of $121,098 should not be counted. The Director was only granted leave to file the Draft Bill on the day of the hearing. The Assigned Lawyers therefore did not have much opportunity to make detailed comments on the reasonableness and the correctness of the amount claimed in the Draft Bill. Nonetheless, in Tam’s 3^rd, Mr Tam had put forward a few comments. He contended that the fees of the cardiothoracic surgery expert and the psychiatrist Dr Yu should be allotted to the PI Action and that counsel fees of $480,000 were unreasonably excessive.

93.  A cursory glance of the Draft Bill confirms that these disputed amounts have been included. Ultimately, the costs claimed in the Draft Bill will be scrutinized at the later taxation stage, and there may be deductions made from them.

94.  The suggested deductions discussed above seems to reflect the lack of credibility of the costs at stake provided by the Director. All in all, based on the deductions above, the Director’s costs at stake during Tam’s and Wong’s respective Subject Periods will seem to be the total of the above two sums of $595,019 and $140,000 together with the Employer’s costs of $1,410,414, totalling at $2,145,433.

95.  The gross amount of the costs at stake should be compared to the further costs likely to be incurred should the WCO application proceed to the second stage.

96.  On behalf of Mr Tam, Ms Cheung submitted that the costs which had been incurred at the first stage would serve as a useful guide as to the likely costs to be incurred in the second state. According to the “Statement of Costs for Summary Assessment” Ms Cheung submitted to the court, Mr Tam has so far already incurred legal costs of $1,419,573. Owing to the factual disputes between Mr Yau and Mr Tam in relation to the reporting of the settlement negotiations, she stated that cross-examinations of Mr Yau, all legal aid counsel involved during the Subject Periods, as well as Mr Tam would likely be inevitable in the second stage. In her estimation, Ms Cheung stated that the length of the hearing for the second stage would likely be in the region of 4 to 5 days. The three sets of legal costs of the Director and the Assigned Lawyers would likely be substantial. She urged this court to attach therefore “great weight” to the fact that the costs to be incurred in litigating the second stage hearing is likely to be higher when compared to the amount of costs sought by the Director. It was contended that this proportionality issue alone would be sufficient for this court to exercise its discretion not to allow the application to proceed to the second stage.

97.  Mr Wong had not provided his costs incurred for the first stage but echoed a similar sentiment to that of Ms Cheung.

98.  In Ma So So (ibid), the top court has clearly underlined the importance of the proportionality of costs when a court exercises its discretion (see §25(5) above) above. In examining the question of costs proportionality, I agree with Ms Cheung’s submissions that the costs for the second stage would be huge. The extent of the communications between Mr Yau and Mr Tam underpins a large part of the Director’s allegations against Mr Tam’s conduct. Hence, further evidence and cross-examination will likely be unavoidable. Based on the costs Mr Tam has so far incurred, I believe that the amount of further costs for Mr Tam alone will at least be similar to the Director’s costs at stake without taking into account the costs of the Director and Mr Wong. This is a weighty factor. After having carefully weighed up, in a broad brush, the various figures on costs, I do not believe that it is suitable to exercise my discretion in favour of taking the Summons to the second stage.

M. Order

99.  For the reasons stated above, the Summons is dismissed.

100.  As for the costs of the Summons, I would be inclined to depart from the usual costs order of following the event. Owing to the criticisms this court made, I believe that the Director had good reason to issue the Summons. I therefore make a costs order nisi that there be no order as to costs, including costs reserved.

101.  Lastly, I wish to thank all parties for the assistance they have rendered to this court.