HKSAR v. ZYREL LTD.

HCMA37/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.37 OF 2002

(ON APPEAL FROM KTS14348 OF 2001)

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J U D G M E N T

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1. This is an appeal against a refusal by a magistrate to award costs to the appellant, a company, following its acquittal on a summons alleging that it committed an offence of terminating the service of an employee before the issue of a certificate of consent under the terms of the Employees Compensation Ordinance, Cap.282, contrary to section 48(1)(a) of that Ordinance.

2. Section 48(1)(a) is in the following terms :

"(1) An employer shall not, without the consent of the Commissioner-

(a) terminate the contract of service or apprenticeship of an employee who has suffered incapacity in circumstances which entitle him to compensation under this Ordinance; or

....."

3. The facts of the case as found by the magistrate were that the appellant company, incorporated and having its office in Hong Kong, operated a factory in China. In November 2000, an employee of the appellant was en route to the Chinese factory from Hong Kong on a motorbike when he sustained injuries in a road accident. The appellant's staff in Hong Kong reported details of the employee's road accident to the Labour Department, as they were by law required to do. Subsequently on 5 January 2001, the appellant received a response from the Labour Department, following the Department having made enquiries of the employee, to the effect that in the Labour Department's view, the employee had not sustained his injuries in the course of his employment with the appellant and that the matter did not fall within the ambit of the Employee's Compensation Ordinance. That letter concluded in these terms :

" With effect from the date of this letter, no further action will be taken by this department in respect of the injured employee's claim for compensation."

That letter was signed for the Commissioner for Labour.

4. The appellant, by its staff, wrote back to the Labour Department querying that decision and asking that the case be further proceeded with, but no reply was ever forthcoming from the Labour Department to that letter. In other words, the appellant received no further information from the Labour Department and its position must have remained, so far as the appellant was concerned, as set out in the letter of 5 January 2001. The appellant subsequently, in February 2001, terminated the employment of the employee for reasons unconnected with the road accident.

5. Subsequently the appellant was summonsed and tried in respect of that termination of employment. It was acquitted. The fundamental basis of that acquittal was that it was entitled to terminate the employment of that particular employee without offending the terms of section 48(1)(a) of the Ordinance because it was entitled to rely upon the contents of the letter of 5 January 2001 sent to it by the Labour Department.

6. In her reasons for verdict given at the time of the acquittal of the defendant, the magistrate had said this :

" The court finds that the defendant was entitled to rely on the contents of P3, that is to say, the letter from the Labour Department [dated 5 January 2001], to be accurate and conclusive and binding on the Labour Department. The court finds that the defendant had relied on P3 to be a correct state of affairs when he dismissed PW1 [the employee]. Under such circumstances, the defendant would not have been required to obtain any consent from the Commissioner prior to his terminating PW1."

Those were the only reasons given by the magistrate for acquitting the appellant at that time.

7. Subsequently, some days following upon that acquittal, the appellant sought its costs of defending the summons. The magistrate refused to award costs to the appellant. She subsequently provided reasons for not doing so in her Statement of Findings as follows :

"The Court finds that the Defendant had relied on the contents of P3 when it dismissed PW1. From the contents of exhibit P3, it could be seen that the Labour Department had closed the case of PW1. Despite PW2 having written back to the Labour Department on a later date requesting for the case to be re-opened, no further correspondence was received by the Defendant from the Labour Department indicating one way or another. Therefore the Defendant had taken advantage of exhibit P3 to be the situation and dismissed PW1 without contravening the legislature."

8. In my judgment, the reasons given by the magistrate for refusing to award costs are, on their face, somewhat at loggerheads with her findings given as to the appellant's actions at the time of its acquittal.

9. At the time of acquitting the appellant the magistrate had, in effect, said the appellant had acted bona fide. In particular she had found that the appellant had relied upon the Labour Department letter of 5 January 2002 to be a "correct state of affairs" when it had terminated the employment of its employee.

10. In her subsequent Statement of Findings the magistrate had seemingly changed her mind about that being the position and had decided the appellant had taken advantage of the contents of that letter in terminating the employee's employment, apparently, in a way as to bring opprobrium upon the appellant so as to disentitle it to costs.

11. In apparently changing her mind in this way the magistrate had, one assumes, relied upon the prosecution's submission that at the time of terminating its employee's employment the appellant must have been aware the Labour Department had made a mistake.

12. In my judgment the magistrate's reasons for refusing to award costs flew in the face of her reasons for acquitting the appellant and effectively contradicted those earlier reasons.

13. In Tong Cun Lin v. HKSAR [2000] 1 HKLR 113, Litton PJ said :

"What then are the governing principles? When a defendant has been brought to trial upon particular charges and is then found not guilty it is clearly right that he should normally be compensated out of public revenue for the costs incurred in defending those charges. In considering whether, despite this general rule, he should be deprived of all or part of his costs, the judge exercising the discretion must obviously look to his conduct generally, so long as such conduct is relevant to the charges he faced. This cannot be confined to any particular period of time. Since, however, the discretion is being exercised in the context of an acquittal - the averments constituting the charges having been found by the jury as not amounting to the crimes alleged - it follows that, generally speaking, the conduct most relevant to the matters under consideration must be the defendant's conduct during the investigation and at the trial : How he first responded to the investigators, the answers he gave when confronted with the accusations, the consistency of those answers with his subsequent defence, etc. Wrapped up with this is the strength of the case against the defendant and the circumstances under which he came to be acquitted : These too are relevant to the exercise of the discretion to deprive him of his costs, so long as the judge is not, indirectly, thereby punishing him by taking a view of the facts palpably different from that taken by the jury and reflected in the not-guilty verdict. The person in the best position to weigh those matters is clearly the judge himself." (emphasis added)

14. It is true that the exercise of a discretion exercised by a judge or magistrate to award or not award costs in criminal matters is rarely interfered with. But that discretion must be exercised judicially. That means it must be exercised in accordance with legal principle.

15. In my view that must mean it is, in the normal course, to be exercised so as to reflect the reasons for verdict. If a defendant is acquitted because of a technicality and the acquittal is without merit in the face of otherwise strong evidence, then that will normally mean that there is reason to refuse costs. Even if a defendant is acquitted on the merits of the case it may be that his conduct during investigation or trial is such that he brought suspicion upon himself and thereby contributed effectively to the incurring of his own costs.

16. The terms of the magistrate's reasons for acquitting the appellant in this case at the time of verdict strongly suggest that neither of those two basis for refusing costs existed. Indeed quite to the contrary, they strongly suggest that the appellant was acquitted on the merits of the case and had acted properly and in good faith at the time of the termination of its employee's employment.

17. Accordingly in my judgment the magistrate was wrong in principle to refuse the appellant its costs.

18. The magistrate's refusal of costs is set aside. This was part of the legal argument as to costs.

19. I order that the appellant shall be awarded its costs of the hearing before the magistrate and that those costs be taxed, in the absence of any agreement as to those costs with the Department of Justice. So far as today's costs are concerned, I award the appellant its costs of today.

20. There is one more matter.

21. The prosecution before the magistrate was brought in the absence of any finding or determination by any other tribunal, as to the circumstances referred to in section 48(1)(a) as to the employee having suffering incapacity which entitled him to compensation under the Ordinance.

22. In other words, in this case as I suppose in others, the magistrate was expected, for the purpose of arriving at her verdict on the summons, to make a finding in the terms of section 48(1)(a), as to whether the incapacity of the employee was suffered "in circumstances which entitled him to compensation".

23. It is apparent that for a magistrate and indeed the investigating police to be expected to undertake an examination of the circumstances of the termination of an employees incapacity so as to determine whether it would entitle him to compensation under the Ordinance is most unsatisfactory. This is perhaps particularly so where that is done in advance of any other determination or hearing by a board or court under the provisions of the Ordinance.

24. Indeed even if a prosecution is launched pursuant to section 48(1) of the Ordinance after any such determination by any other board or court has been completed there appears to be no machinery in the Ordinance whereby that determination could be relied upon for the purposes of section 48(1)(a) and a magistrate may therefore still be required to arrive at an independent assessment as to whether the terminated employee was entitled to compensation.

25. In my view, some further consideration should be given either to the terms of section 48(1) or to the making of ancillary legislation to address that matter.