WO CHUN WAH v. CHAU KWEI YIN AND OTHERS

CACV 271/2017

[2018] HKCA 789

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 271 OF 2017

(ON APPEAL FROM HCPI NO 903 OF 2014)

________________________

________________________

________________________

REASONS FOR JUDGMENT

________________________

Hon Kwan JA (giving the reasons for judgment of the court):

1.  We have before us an appeal brought by the plaintiff, Wo Chun Wah, against a costs order made by Deputy High Court Judge To on 23 June 2017, in which he made no order as to costs between the plaintiff and the 3^rd defendant, the Employees Compensation Assistance Board (“the Board”). The plaintiff sought to set aside this order and substitute this with an order that the Board should pay his costs as from the date the Board obtained leave to join in this action. There is also a respondent’s notice filed by the Board seeking to affirm the judge’s order there be no order as to costs on a different ground, namely, that the court has no jurisdiction to order costs against the Board by virtue of the provisions in the Employees Compensation Assistance Ordinance, Cap 365 (“ECAO”).

2.  We dismissed the appeal at the conclusion of the hearing with no order as to costs, save that the plaintiff’s own costs be taxed in accordance with the Legal Aid Regulations.  These are the reasons of the court.

Background

3.  To put matters in context, I will first relate the relevant background matters.

4.  On 1 June 2013, the plaintiff, who was an interior decoration worker, sustained injuries at work.  The 1^st defendant engaged the 2^nd defendant to carry out construction work.  According to the plaintiff, he was employed by the 2^nd defendant.

5.  On 11 September 2014, the plaintiff brought this action against the 1^st defendant to claim damages at common law for his personal injuries.  The writ was amended on 18 November 2014 to add the 2^nd defendant.

6.  The plaintiff also brought proceedings against the 2^nd defendant on 14 November 2014 to claim employees’ compensation.

7.  The 2^nd defendant acted in person throughout in both proceedings.

8.  The plaintiff discontinued the common law action against the 1^st defendant on 13 October 2015, after they reached settlement that the 1^st defendant was to pay him $80,000 on the basis of no admission to liability.

9.  On 20 October 2015, the Board obtained leave to join in this action as the 3^rd defendant, on the grounds that it was more likely than not there was no valid policy of insurance which covered the 2^nd defendant’s liability to pay damages to the plaintiff and the plaintiff was seeking substantial damages in excess of $4.7 million.  The Board made clear in its affirmation filed in support of its joinder application this was “to enable the Board to have the right to participate in the assessment of damages in this action”[1].  The writ was amended on 30 October 2015 to add the Board as the 3^rd defendant.

10.  On 26 February 2016, a joint medical report was prepared by the respective medical experts retained by the plaintiff and the Board.  The plaintiff filed a revised statement of damages on 30 May 2016 claiming damages in the total sum of $4,871,113.20.  The Board filed its answer to the revised statement of damages on 20 July 2016.

11.  The claim for employees’ compensation was heard by Deputy District Judge J Chow on 14 and 15 September 2016.  Judgment was given on 26 September 2016 in which it was held that the 2^nd defendant was the plaintiff’s employer and employees’ compensation was assessed at $602,380.

12.  The common law action against the 2^nd defendant and the Board was heard by Deputy High Court Judge To on 24 May 2017.  The plaintiff filed his opening submission on 16 May and the Board its submission on 22 May.  At the commencement of the trial, the plaintiff and the Board reached a settlement to settle the plaintiff’s claim at $1,420,000.  This settlement was not binding on the 2^nd defendant and the trial proceeded against him.  The judge handed down his judgment on 23 June 2017[2].  It was held that the 2^nd defendant was estopped from denying he was the employer and liability was established against the 2^nd defendant.  The judge assessed damages in the total sum of $2,110,927.  Deducting from this amount the sum of $80,000 the plaintiff received from the 1^st defendant and the award of employees’ compensation being $602,380, the net amount of damages he should receive from the judgment was $1,428,547.  The 2^nd defendant was ordered to pay the plaintiff’s costs.

13.  The judge refused the plaintiff’s request to order the Board to pay his costs in this action as from 20 October 2015, the date of the Board’s joinder as the 3^rd defendant.  Instead, he made an order there be no order as to costs between the plaintiff and the Board.

14.  On 14 November 2017, the Court of Appeal[3] granted leave to the plaintiff to appeal against the costs order of the judge.  In Kwan Kam Pui v Fung Man & Ors [2014] 6 HKC 361, Bharwaney J opined[4] that in those cases in which the Board had intervened and contested liability and quantum, the “usual order” made against the Board where judgment was given in the plaintiff’s favour was that the Board should pay the entire costs of the action, not just costs from the date of intervention.  And where the Board had only intervened to dispute quantum, the “usual order” was that the Board should pay the costs of the proceedings from the date of its joinder.  At the time leave to appeal was granted in the present case, there were a number of decisions in which the approach in Kwan Kam Pui was followed.

15.  The plaintiff filed his notice of appeal on 27 November 2017.  Legal aid was granted on 7 December 2017 for his appeal against the costs order.  On 19 December 2017, the Board filed a respondent’s notice to affirm the “no order as to costs” order on the basis that the court has no jurisdiction to order costs against the Board.  This was signed by counsel[5] who also appeared for the Board on appeal in the case of Jiang Zhong v Yeung Chun Leung, CACV 11 & 12/2017.

16.  The case of Jiang Zhong was heard by the Court of Appeal[6] on 13 December 2017, judgment was handed down on 26 January 2018 ([2018] 1 HKLRD 886).  This was an appeal by the Board against a costs order that the Board and the employer should jointly and severally pay the costs of Jiang in the employees’ compensation proceedings and the Board, the employer and another defendant should jointly and severally pay the costs of Jiang in the common law action.  The Board challenged the costs order root and branch.  It contended that the judge had no jurisdiction to order costs against the Board in both proceedings; alternatively, even if the judge had jurisdiction, the discretion was wrongly exercised.  In respect of the jurisdiction issue, counsel for the Board advanced the same arguments as in the respondent’s notice in the present appeal, which was filed six days after the hearing in Jiang Zhong.

17.  The Court of Appeal was unanimous in deciding that the court had jurisdiction to award costs against the Board when it joined as a party to the proceedings and that the judge erred in exercising her discretion by ordering the Board to pay costs in both proceedings, as the Board was successful in contesting the employer’s case denying that he was the employer.  Cheung JA gave the main judgment.  Yuen JA gave a separate judgment setting out the reasons of her conclusion on the jurisdiction issue.  Kwan JA concurred with both judgments.  The Court of Appeal allowed the appeal of the Board and restored the costs orders nisi of the judge, so for the employees’ compensation proceedings the employer was to pay Jiang’s costs and Jiang and the employer were to pay the Board’s costs; for the common law action, the employer and another defendant should pay the costs of Jiang and the Board.  The Board was ordered to pay Jiang 80% of the costs of the appeal as it was only partially successful in its appeal and failed on the jurisdiction issue which took up substantial time[7].

18.  As the Board had succeeded in obtaining the relief sought in that the costs orders nisi were restored, it is not able to appeal against the decision in Jiang Zhong even though it does not agree with the Court of Appeal on the jurisdiction issue.  The respondent’s notice in the present appeal is the renewed attempt of the Board seeking to overturn the ruling of the appeal court on the jurisdiction issue.  Ms Audrey Eu, SC was instructed to appear for the Board[8]. Her submissions are in substance no different from the submissions advanced for the Board on appeal in Jiang Zhong.

The appeal

19.  The Board had submitted before the judge it was in disagreement with Bharwaney J’s decision in Kwan Kam Pui that the court has jurisdiction to award costs against it.  But even if the court does have jurisdiction, the discretion should be exercised to make no order as to costs against the Board in the circumstances of this case.

20.  The judge rejected the submission that the court has no jurisdiction[9]. As for the views of Bharwaney J on the “usual orders”, the judge did not think Bharwaney J had meant to lay down any rules that cannot be altered.  What was said to be “usual orders” was merely the starting point.  The judge stated that in exercising his discretion on costs, the court should not only take into account the success or failure of a litigant, but should also consider the functions of the Board, the reason why it had intervened in the proceedings, and the litigation conduct of both parties[10].

21.  The judge declined to order the Board to pay costs to the plaintiff and made an order of no order as to costs for these principal reasons.

22.  It was understandable and reasonable for the Board to intervene in this action, as the 2^nd defendant had no legal representation, he had not obtained an opinion from a medical expert on the plaintiff’s injuries, and the plaintiff made a substantial claim in the region of $4.8 million[11].

23.  The Board only engaged a medical expert to participate in preparing a joint medical report.  In its answer to the revised statement of damages, the Board put forward a lower figure for pain and suffering and loss of amenities[12], it contended that the plaintiff could have earned a higher figure in a new job[13], that the plaintiff did not suffer a loss of earning capacity and even if he did, the compensation should be at a lower figure[14]. The judge did not think the Board had raised serious contentions in its answer, and there was nothing to criticise about its litigation conduct[15].

24.  The plaintiff had greatly exaggerated the amount of his claim.  It was reasonable and necessary for the Board to intervene.  The Board had only taken a “filtering” role in that its participation assisted the court in arriving at a proper assessment of damages, and this was in accordance with the public interest and met the requirements of justice[16].

25.  Mr Patrick Szeto submitted on behalf of the plaintiff that the judge erred in the exercise of his discretion and the only reasonable costs order he should have made and what litigants would have expected him to make is the “usual order” as stated by Bharwaney J in Kwan Kam Pui, namely, that the Board should pay the plaintiff’s costs as from the date of its intervention.

26.  Mr Szeto took issue with the judge’s statement that the plaintiff had greatly exaggerated the amount of his claim and that the Board had only taken on a “filtering” role not an adversarial role.  The plaintiff’s claims were not unreasonable and excessive.  The Board had filed an answer to challenge the plaintiff’s case on quantum and adduced expert medical evidence.  It had averred in its answer that the plaintiff should be able to resume his pre‑injury work as an interior decoration worker, albeit with decreased capacity and efficiency.  The judge had accepted the opinion of the plaintiff’s medical expert that it would be more practical for him to change to jobs with lighter physical demand[17].

27.  Mr Szeto pointed to §51 of the judgment in which the judge gave the range of not exceeding one‑third of the amount awarded by the court and not less than two‑thirds of the award as within the boundary of reasonable differences.  He submitted this is an arbitrary range not supported by authority and the judge did not have the benefit of full arguments in setting the boundary of reasonable differences.  Even assuming this range is to apply, the judge failed to take into account that the plaintiff’s claim for some individual items would fall within the range of reasonable differences (such as the claim for pain and suffering and loss of amenities[18], pre‑trial loss of earnings[19], future loss of earnings[20]), and the totality of items of damages “accepted” by the Board in its answer[21] was less than two‑thirds of the award and would have fallen outside the reasonable range.  He stressed that the Board had offered nothing better than the amounts “accepted” in its answer until the commencement of trial when they reached settlement.

28.  Mr Szeto sought to explain why the plaintiff abandoned some heads of claim[22] in the assessment of damages pursued against the 2^nd defendant.  He said it was “unnecessary” for the plaintiff to “fully advance his case at trial”, and this was done with the intention to “narrow down arguments upon a settlement with [the Board]”, and the plaintiff should not be penalised in costs for this form of “responsible conduct”.

29.  We do not accept the above submissions.

30.  First and foremost, as Cheung JA has stated in Jiang Zhong at §6.10, “Bharwaney J’s view that the Board may be liable for the costs of the whole action is not necessarily appropriate in all circumstances.  It depends on the context of the case.  What is important is that the discretionary jurisdiction is guided by well‑established “principles” on how costs are to be exercised.”

31.  Ms Eu suggested in §48 of the judgment, the judge had expressed the view that the Board would be regarded as taking on an adversarial role where it had intervened to contest liability and quantum, so when judgment is entered in favour of the plaintiff, applying the principle that costs should follow the event, the Board should pay the entire costs of the plaintiff, and this was the “usual order” as mentioned by Bharwaney J in Kwan Kam Pui.

32.  We do not think §48 should be read as an endorsement by the judge of the view that whenever the Board intervened to contest liability and quantum, it should be liable to pay the plaintiff’s costs when judgment is entered in favour of the plaintiff.  The judgment must be read fairly and as a whole.  In §45, the judge stated that Bharwaney J did not lay down any unalterable rules and the “usual orders” were merely the starting point in the exercise of discretion.  In §42, the judge noted that Mr Szeto had submitted costs should be awarded against the Board by applying the principle that costs should follow the event.  The judge clearly rejected this, as he went on to consider in the subsequent paragraphs the litigation conduct of the plaintiff and the Board in deciding how his discretion should be exercised.

33.  What the judge had taken into account in the exercise of his discretion on costs are among the matters which the court may take into account as provided in Order 62 rule 5(1) of the Rules of the High Court.  Rule 5(1)(e) relates to “the conduct of the parties” and this includes, as provided in rule 5(2):

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

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

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.”

34.  Ms Eu asked this court to give specific guidance how the discretion as to costs should be exercised where the Board has intervened in proceedings.  We do not think this necessary.  The rules and principles laid down in the rules of court and decided cases would give adequate guidance.  Ultimately, it depends on the context of the case how the discretionary jurisdiction should be exercised, as stated in Jiang Zhong. The judge here came to the view there was nothing to criticise about the litigation conduct of the Board.  In his deliberations, he had given recognition to the special position of the Board as may differentiate it from ordinary litigants.  We do not find fault with that approach.

35.  The judge was not in error in regarding the plaintiff as having greatly exaggerated the amount of his claim.  The total amount claimed in the revised statement of damages came up to $4.8 million.  The total amount awarded by the judge was $2.1 million, less than half of the amount claimed.  What the judge said about the range of reasonable differences (not exceeding one‑third and not less than two‑thirds of the award) was merely a range “at random” (as the judge had made clear), not an absolute or decisive range, but may be adjusted in light of the circumstances as required.

36.  Mr Szeto sought to play down the amount claimed by the plaintiff by pointing to the figures he put forward for individual items.  But those figures were taken from his opening submission for the trial, lodged just eight days before the hearing.  His contention that the total amount of damages “accepted” by the Board was less than two-thirds of the award is wrong.  One should have regard not only to those items of loss for which the Board put forward alternative figures and in that sense “accepted” those figures as appropriate but also to other parts of the answer in which the Board put forward alternative bases for the calculation of loss, such as the multiplier and multiplicand for future loss of earnings.

37.  Nor do we think the judge was in error in regarding the Board as having taken on a “filtering” role and not a positive adversarial stance.  The Board had not contended that damages should be assessed only on the basis that the plaintiff was able to resume his pre‑accident work albeit with decreased deficiency.  It had also stated in its answer that if the opinion of its medical expert was not accepted (that the plaintiff was able to return to pre‑accident work), the plaintiff should be able to take up jobs with lighter physical demands and on that basis proposed how the claim for future loss of earnings should be calculated.  This latter approach was accepted by the judge.

38.  The fact that the plaintiff chose not to pursue some of the heads of claim having settled with the Board is immaterial.  The fact remains he had advanced and maintained a substantial claim of $4.8 million up to the time of the trial.  The amount claimed was excessive and the Board was rightly concerned such that it sought leave to intervene to put forward facts and submissions for the court to consider in arriving at a proper assessment.

39.  The only matter that gave us some concern is that no written offer was made by the Board[23] and a settlement was reached by the Board with the plaintiff only at the commencement of the trial.

40.  We do not know the exact terms of the settlement, save that the settlement sum was $1,420,000, which turned out to be less than the amount of damages assessed by the judge ($2,110,927).  Mr Szeto informed us that pursuant to the settlement, the plaintiff can only recover $1,420,000 from the Board, not the higher amount awarded by the judge.

41.  Under sections 20B(1) and 20A(2) of the ECAO, the amount of “relief payment” that an eligible person may apply from the Employees Compensation Assistance Fund in relation to unpaid damages is “the amount of damages for which the employer is liable to pay” “pursuant to a judgment or order” of the court.  Notwithstanding these provisions, there is no provision in the ECAO to prohibit an eligible person (the plaintiff in this instance) from agreeing with the Board to accept the settlement amount even if it should transpire to be less than the amount adjudged by the court that the employer is liable to pay[24]. That would appear to be the situation here.

42.  As the Board is free to protect its position on the amount of “relief payment” it may have to pay after a judgment has been obtained against the employer by entering into a settlement with the plaintiff in advance, there is nothing to prevent the Board from making a written offer expressed to be “without prejudice save as to costs” in relation to any issue in the proceedings, as it is at liberty to do under section 29 of the EACO.

43.  Ms Eu submitted that section 29 has no application to the situation where the Board is sued, not as an “original party”, but merely as an “interested party” where it has obtained leave to intervene.  We firmly reject this submission.  Section 29 was fully considered in Kwan Kam Pui (at §§38, 39, 47, 48) and Jiang Zhong (at §§6.14 to 6.17, 14.1 to 14.5, 17).  The courts have noted this provision was not amended when extensive amendments were made to the ECAO in 2002 and held that it applies to the situation where the Board has joined as a party to proceedings claiming damages at common law.

44.  The judge was clearly aware of the fact that no offer was made by the Board and the Board only settled with the plaintiff at the commencement of the trial[25]. The plaintiff had to continue with the trial to obtain a judgment on liability against the 2^nd defendant so some costs would have to be incurred in any event.  It did not appear that the Board’s intervention in the proceedings had significantly increased the costs which the plaintiff would have to incur any way.  Being the trial judge, the judge was familiar with the litigation conduct of the plaintiff and the extent of involvement of the Board in the proceedings.  He would have a fair idea as to the likely costs attributable to the Board’s participation.  He regarded the Board’s participation as reasonable and necessary and was of the view that the Board had taken a balanced approach in what was a “filtering” role to assist the court in making a proper assessment.

45.  Ultimately, it is an exercise of discretion of the judge.  In accordance with well-established principles, the appeal court should not interfere with his discretion where it has not been shown he had erred in principle, had taken irrelevant matters into account, had failed to take relevant matters into account, or was plainly wrong.

46.  As there is no valid basis to interfere with the exercise of the judge’s discretion, the appeal must be dismissed.

The respondent’s notice

47.  Having dismissed the appeal, it is unnecessary to deal with the respondent’s notice which sought to support the “no order as to costs” order on the different ground that the judge had no jurisdiction to order costs against the Board.

48.  For this reason, we do not propose to discuss the detailed arguments of Ms Eu on the jurisdiction issue.

49.  We would just like to mention two points.

50.  First, Ms Eu contended that the determination of the Court of Appeal in Jiang Zhong that the court does have jurisdiction to order costs against the Board is obiter.  She submitted this ruling was not necessary to the decision of the court in allowing the appeal and should not form part of the ratio decidendi, citing Lai Siu Kin Rembert v Building Authority [2013] 4 HKLRD 74 at §§70 to 74.  She said the facts of Jiang Zhong “did not call for any consideration or exercise of discretion as to whether the Board ought to bear the plaintiff’s costs”, as the Board was the successful party, citing §6.21 of the judgment.

51.  The relevant part of §6.21 in Cheung JA’s judgment read as follows:

“As the Judge held, the Board at the trial had confined its challenge to whether Cheng was an employer of Jiang and the Judge’s decision was that Cheng was not Jiang’s employer. This being the case, the Board was the successful party in the two proceedings. A well-established “principle” on costs is that costs follow the event. While the Court in the exercise of its discretion may refuse to make a costs order in favour of a successful party, it is most unusual and rare for a successful party to bear the costs of the unsuccessful party. This clearly is not such a case. …”

52.  This paragraph came under the heading “Has the discretion been properly exercised”, after Cheung JA had discussed the arguments on the jurisdiction issue and held that the judgment of Bharwaney J in Kwan Kam Pui is correct in the interpretation of the ECAO and there is jurisdiction to award costs against the Board.  The ruling that the court does have jurisdiction is necessary for the second part of the discussion, namely, whether the judge had correctly exercised her discretion in ordering the Board to pay the costs of Jiang in both sets of proceedings.  To say that the court decided the case in favour of the Board by applying the principle that costs should follow the event is to over-simplify the steps of the reasoning.  The earlier ruling that the court does have jurisdiction to order costs against the Board is an essential part of the reasoning.  It clearly forms part of the ratio decidendi.

53.  Second, Ms Eu contended that this court should depart from the ruling on the jurisdiction issue in Jiang Zhong if satisfied it is “plainly wrong” (the test laid down in Solicitor (24/07) v Law Society of Hong Kong (2008) 11 HKCFAR 117 at §45), and “may be more prepared” to do so in a decision on statutory interpretation, “having regard to the courts’ responsibility to give effect to the legislative intent” (Solicitor (24/07) v Law Society of Hong Kong at §49).  She also submitted if the reasoning on the jurisdiction issue is only obiter, the court need not be satisfied it is plainly wrong before departing from it (A Solicitor v Law Society of Hong Kong [2015] 2 HKLRD 802 at §78).

54.  As stated above, we reject the contention that the ruling on the jurisdiction issue in Jiang Zhong is obiter.  If it were necessary to deal with this issue raised in the respondent’s notice, the test for departing from a previous decision of the Court of Appeal is that this court must be satisfied the previous decision is plainly wrong.  We have considered Ms Eu’s written and oral submissions with care.  We are not persuaded that the high hurdle of the plainly wrong test is satisfied.

Costs of the appeal

55.  We decided to exercise our discretion to depart from the principle that costs should follow the event and make an order there be no order as to costs save for legal aid taxation for the plaintiff’s costs, notwithstanding the plaintiff’s appeal is dismissed.

56.  This is because the Board has put in a respondent’s notice to raise the jurisdiction issue.  If this issue had not been raised, it would not have been necessary to engage leading counsel.  Further, substantial time and costs had been incurred in respect of this issue, which in the end we did not find necessary to deal with on dismissal of the appeal.