LI FUK KEUNG v. YIK FAT REMOVAL LTD AND ANOTHER

DCEC1290/2016

[2019] HKDC 831

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO.1290 OF 2016

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DECISION

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1.  By summons filed on 14 May 2019 (the Summons), the Employees Compensation Assistance Fund Board (the Board) applied to vary 2 orders nisi as to costs at para 127(1) & (2) of my judgment dated 30 Apr 2019 (the Judgment).

2.  By the Judgment, I find that the Applicant Mr Li Fuk Keung (Mr Li) was employed by the 1^st Respondent company (R1) as a casual removal worker on 9 Oct 2014 and that personal injury by accident arising out of and in the course of that employment had been caused to Mr Li on that day. I entered judgment in Mr Li’s favour against R1 in the sum of $611,292 together with interest.

3.  For the background of these proceedings, I refer to the Judgment whose abbreviations are, unless otherwise stated, adopted in this decision.

4.  By para 127(1) of the Judgment, I make my 1^st order nisi that R1 do pay Mr Li the costs of this application, including all reserved costs and the costs of this trial, at such amount to be taxed if not agreed (the 1^st Order Nisi).

5.  The Board applied to vary it to “R1 do pay (a) Mr Li and (b) the Board the costs of this application, including all reserved costs and the costs of this trial, at such amount to be taxed if not agreed (italics supplied)” (1^st Variation).

6.  Mr Roger Phang (Mr Phang) appeared for the Board at the hearing of the Summons (and at trial). He added at the hearing that the Board also seeks certificate for counsel as part of the costs of the trial in the 1^st Variation.

7.  R1 did not turn up at the hearing of the Summons (as it did for the rest of these proceedings). But I am satisfied on affidavits of service before me that it had been duly notified of this hearing. I therefore proceeded with it in R1’s absence.

8.  Ms Christina Lee (Ms Lee) appeared for Mr Li at the hearing of the Summons (and at trial). She took no stance on the 1^st Variation.

9.  By para 127(2) of the Judgment, I make my 2^nd order nisi that the Board do pay Mr Li the costs of this application as from 29 Aug 2017, including all reserved costs and the costs of this trial, at such amount to be taxed if not agreed (the 2^nd Order Nisi).

10.  The Board applied to vary it to “There be no order as to costs between Mr Li and the Board” (2^nd Variation).

11.  Ms Lee opposed the 2^nd Variation and asked that the 2^nd Order Nisi be made absolute.

Board’s submissions

12.  Mr Phang argued that R1 ought to be aware that the Board may apply to join to these proceedings as R1 has failed to purchase employees’ compensation insurance. As the Board did join and run at trial essentially R1’s case by calling Mr Tsoi, R1’s director and shareholder, R1 had thereby benefited at public expense.

13.  It is unjust, he argued, for R1 to be so benefitted when it had not purchased insurance in the first place for its employees. Were the 1^st Variation not made, other uninsured employers would also be encouraged not to defend and let the Board fight their cases in court at the expense of the public.

14.  The 1^st Variation ought therefore, he argued, to be allowed.

15.  On the 2^nd Variation, Mr Phang submitted at length that the Board has statutory duties to follow in the Employees’ Compensation Assistance Ordinance, Cap.365 (ECAO).

16.  As the Employees Compensation Assistance Fund (the Fund) administered by the Board under ECAO may be financially affected by the outcome of these proceedings, it was, he argued, reasonable for the Board to join to these proceedings to protect the Fund and to enable the contrary case, and evidence, of R1 to be placed and fully canvassed before this court for determination.

17.  The Board, he emphasized, has no personal knowledge of the Accident and Mr Li has produced no direct evidence of the Accident except his words. Although it turns out that Mr Tsoi was not believed by this court and the Board’s reliance on him was misplaced with the benefit of hindsight, Mr Phang submitted that Mr Tsoi’s evidence was capable of belief before trial. Mr Tsoi’s performance as a witness at trial could not be predicted beforehand.

18.  Mr Li, said Mr Phang, has to incur costs anyway to prove his case in these proceedings. And, had R1 elected to defend in person or through lawyers, it could not, he argued, be suggested that Mr Li need not incur costs to deflect such challenge.

19.  Mr Phang stressed that Mr Li could recover his costs in these proceedings as part of his application for payment of unpaid compensation from the Fund under s.16 of ECAO, if he is unable to recover the awarded compensation from R1 after taking reasonable proceedings in the circumstances.

20.  Unlike the case for relief payment in s.20A of ECAO, which excludes costs of personal injuries proceedings under s.20B(3)(b) of ECAO, the Board, Mr Phang explained, would also pay to Mr Li such costs R1 was ordered to pay him in the Judgment for these proceedings when the Board approves and makes payment of unpaid compensation to Mr Li from the Fund in future: see s.23(1)(b) of ECAO.

21.  Hence, Mr Li, he stressed, is protected to recover his costs of these proceedings even had the 2^nd Order Nisi not been made by this court against the Board.

22.  The 2^nd Order Nisi, if made absolute, Mr Phang submitted, has the adverse effect of circumventing the statutory scheme of application and payment of unpaid compensation from the Fund in ECAO. It creates a separate costs liability on the Board which is not payable under Part IV, or s.8, of ECAO and enables Mr Li to recover his costs from the Board outside such statutory scheme.

23.  Mr Phang submitted that such costs order against the Board disturbs the statutory scheme in 4 ways.

24.  First, it removes the limitation that these costs be taxed only on party and party basis: s.23(5) of ECAO.

25.  Secondly, it accelerates the time of payment by the Board as it could be enforced against the Board before Mr Li’s application for unpaid compensation from the Fund is approved.

26.  Thirdly, it elevates the priority of such costs order against the Board over and above payment of unpaid compensation, if any, due to Mr Li from the Board in future (and over and above payment from the Board to other worthy applicants): s.26 of ECAO.

27.  Fourthly, it deprives the Board of its right of subrogation against R1 under s.37 of ECAO, which right the Board could avail of had it paid such costs to Mr Li in his application for payment of unpaid compensation under Part IV of ECAO.

28.  Mr Li, Mr Phang argued, suffers no prejudice if he is to be deprived of the 2^nd Order Nisi against the Board and left to recover such costs in an application for payment of unpaid compensation from the Fund, if he is unable to recover them from R1 in future.

29.  The 2^nd Variation, Mr Phang submitted, gives effect to the statutory scheme of ECAO and the legislative intention behind it to protect the Fund and ought to be allowed.

Submissions for Mr Li

30.  Ms Lee first reminded this court that there is jurisdiction to order costs in Mr Li’s favour against the Board as a party to these proceedings.

31.  In the exercise of this court’s discretion to award costs, the primary rule is that costs follow the event unless there are circumstances persuading the court to rule otherwise.

32.  The Board is a losing party, and Mr Li the successful party, after trial.

33.  It is, Ms Lee argued, a proper exercise of discretion for this court to make the 2^nd Order Nisi following the event as from the date of joinder of the Board.

34.  After its joinder, the Board, said Ms Lee, had taken an active part in these proceedings, contesting both liability and quantum of Mr Li’s application, necessitating joint expert medical report and a 3-day-long trial attended by counsels for Mr Li and the Board.

35.  It is, she argued, just and reasonable for the Board to pay Mr Li’s costs when it saw fit to put forwards, and rely at trial, the “totally incredible” defence of Mr Tsoi and finally lost on both liability and quantum in the end.

36.  The Board’s intervention had prolonged these proceedings and increased the costs incurred by Mr Li. It is, she stressed, no answer for the Board to argue that R1 could have defended and would have anyway caused Mr Li to incur costs when, in fact, R1 had elected not to do so.

37.  To the contrary, it is, she emphasized, unjust for the Board to walk away after losing the trial without paying the costs of Mr Li. It cannot, she stressed, have the best of both worlds.

38.  The 2^nd Order Nisi would, she pointed out, also be taxed on a party and party basis like any payment of costs from the Fund in any application for payment of unpaid compensation under s.16 of ECAO.

39.  While the 2^nd Order Nisi, if made absolute, could accelerate the timing of payment of such costs by the Board, Ms Lee pointed out that Mr Li has so far not received a penny of compensation though he was injured as early as in Oct 2014.

40.  Because of the Board’s intervention, it has already taken longer time for these proceedings to come to trial than it is otherwise the case.

41.  Even after winning the trial, Mr Li has to take further time  and incur further costs to take reasonable proceedings in the circumstances against R1[1] to show that he is unable to recover compensation from R1 before he can apply for payment from the Fund under s.16 of ECAO and seek at the same time to recover his costs of these proceedings from the Board.

42.  No issue of priority among competing applicants for payment out from the Fund arises, said Ms Lee, before this court as there is no suggestion or evidence that the Board has insufficient money in the Fund today to meet all applications for payment under Part IV of ECAO it has received. This court should, she argued, pay no heed to remote possibility raised by Mr Phang.

43.  Though the Board enjoys no right of subrogation against R1 had it paid costs to Mr Li pursuant to the 2^nd Order Nisi and not under Part IV of ECAO, Ms Lee pointed out that the Board enjoys at common law the right to seek contribution from R1 (albeit for 50% of Mr Li’s costs it has paid), as both the Board and R1 are liable to pay Mr Li’s costs jointly and severally under the 1^st and 2^nd Orders Nisi.

44.  Mr Li, Ms Lee reminded this court, is legally-aided in these proceedings and, thus, Mr Li’s costs, subject to any contribution, if any, to be made by him and the first charge enjoyed by the Director of Legal Aid, would also be paid by the public. The expenses of legal aid are to be met from the general revenue and require approval by the Legislative Council every year. The Fund is to be met mainly from employees’ compensation insurance levies instead.

45.  All in all, Ms Lee submitted that there is no good reason for the general rule of costs following the event to be departed in this case and the 2^nd Order Nisi should be made absolute.

Discussion

Applicable rules and principles

46.  There is jurisdiction with this court to award costs against the Board after the Board has joined as a party to these proceedings under s.25A(a) of ECAO. The provisions of ECAO are no impediment of this court’s discretion to award costs against the Board: Jiang Zhong v Yeung Chun Leung[2018] 1 HKLRD 886, 902-3, para 6.13.

47.  The above ruling is part of the ratio decidendi of Jiang Zhong, supra, and the Court of Appeal has declined to depart from it: Wo Chun Wah v Employees Compensation Assistance Board[2019] 1 HKLRD 48, 60.

48.  Accordingly, it is binding on this court and any contrary argument cannot be run before me, in so far Mr Phang has attempted to do so.

49.  By s.53(1) of District Court Ordinance, Cap.336, the costs of and incidental to all proceedings in the Court are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid.

50.  In exercising this discretionary jurisdiction, this court shall be guided by well-established principles on how costs are to be awarded and make costs order in the context of each case: Jiang Zhong, supra, para 6.10 at pp.901-2; Wo Chun Wah, supra, para 30 & 34 at pp.56-7.

51.  In final proceedings, under O.62 r.3(2) of the Rules of District Court, Cap.336H (RDC), the Court shall, subject to O.62 of RDC, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.

52.  That costs should follow the event and be recovered by the successful party is the starting point or the most important criterion: Jiang Zhong, supra, para 6.11(1) at p.902.

53.  In Jiang Zhong, supra, the Board was considered on appeal the successful party. In line with well-established principle of costs following the event, its appeal against costs order made against it below was allowed: para 6.21 at p.904.

54.  In exercising this court’s discretion as to costs of these proceedings, it shall also take into account such matters specified in O.62 r.5 of RDC, including conducts of the parties: Wo Chun Wah, supra, para 31 at pp.56-7. Litigation conduct is a relevant and important consideration when the court exercises its discretion on costs in our context: Hussain Kamran v Khan Amar and another, unreported, CACV 255/2014, 11 Apr 2017, para 6(5) at p.4.

55.  As a matter of approach, it is proper for this court to give recognition to the special position of the Board as may differentiate it from ordinary litigants: Wo Chun Wah, supra, para 34 at p.57.

56.  This court should be conscious that the Board, in the proper discharge of its statutory duty to administer the Fund, will have to intervene in appropriate cases to test or defend the claimant’s case: Hussain Kamran, supra, para 6(5) at p.4.

1^st Variation

57.  As between R1 and the Board, there is, for obvious reasons, no event on which a costs order can be made to follow.

58.  There is no suggestion or evidence before me that R1 had requested the Board to join as a party to these proceedings to run R1’s defence at trial.

59.  However, under s.40 of the Ordinance, R1 is required to purchase employees’ compensation insurance for its employees including Mr Li. Hence, I agree with Mr Phang that the primary responsibility of compensating Mr Li for his injuries in the Accident lies with R1 and no others.

60.  R1 has plainly failed to discharge its primary responsibility. Mr Tsoi had so admitted in the box[2]. And R1 had not produced its employees’ compensation policy pursuant to a discovery order made by this court on 8 Feb 2019[3].

61.  R1 (or Mr Tsoi) had, I think, misled the Board by providing it with false information about its relationship with Mr Li and the circumstances of the Accident, causing the Board to run R1’s case at trial at public expense.

62.  For these reasons, I agree with Mr Phang’s submissions at para 12 & 13.

63.  The 1^st Variation is, I agree with him, appropriate and I so order.

2^nd Variation

64.  Moving to the 2^nd Variation, Ms Lee’s submissions at para 30 & 31 are well supported by the authorities and the rules and cannot, I think, be doubted.

65.  I have also no doubt that Mr Li is the successful party, and the Board a losing party, after trial. Mr Phang has not advanced any contrary submission on this point.

66.  The 2^nd Order Nisi is therefore, I agree with Ms Lee, the starting point for the exercise of my costs discretion on well-established principles and it is incumbent on Mr Phang to persuade me to depart from it in the circumstances of this case.

67.  I am conscious that the Board has its statutory duties to administer the Fund and it intervened in these proceedings in order to protect the Fund.

68.  Before the joinder of the Board, an unless order had been made against the unrepresented and absent R1 for judgment to be entered against it on liability if it failed to file its Answer. Due to the provisions in ECAO, the Board has a pecuniary interest in the outcome of these proceedings and did not want Mr Li’s claim to go uncontested for want of participation by R1[4].

69.  On 29 Aug 2017, the Board was joined as the 2^nd Respondent to these proceedings pursuant to s.25A(a) of ECAO to take over the defence of R1 to contest the issues of liability and quantum. Further directions were given at the same time, including giving leave to the Board to file an Answer.

70.  On 20 Oct 2017, the Board filed its Answer positively pleading R1’s case on liability (or essentially Mr Tsoi’s would-be evidence in his witness statement dated Mar 2018 i.e. he did not know Mr Li, he never met Mr Li on 9 Oct 2014, R1 never employed Mr Li, and Mr Li never met any alleged accident at work on 9 Oct 2014[5]).

71.  By reasons of that, no default judgment was entered against R1 on liability and a trial, as opposed to an assessment of compensation, was thus required notwithstanding that R1 has never appeared in these proceedings.

72.  And, due to the Board’s intervention, the Joint Orthopedic Report dated Apr 2018 was ordered by court as opposed to a single expert report of Dr Miu for Mr Li as would otherwise be required by the Appeal against the assessment in Form 9.

73.  In May 2018, a witness statement of Mr Tsoi solely dealing with liability and a witness statement of Mr Li dealing with both liability and quantum were filed. Enclosed to Mr Li’s statement is a material piece of evidence i.e. the Mobile Record that was considered at various places of the Judgment[6].

74.  In July 2018, these proceedings were set down in the fixture list for trial in Mar 2019.

75.  In Oct 2018, Ms Lee was assigned by the Director of Legal Aid to act as counsel for Mr Li.

76.  On 2 Jan 2019, a mere 5 days before pretrial review (PTR) scheduled on 7 Jan 2019, the Board applied by summons to adduce supplemental witness statement of Mr Tsoi again dealing solely with liability, including the Mobile Record, on the basis of receiving further information from Mr Tsoi[7].

77.  At PTR hearing, leave was given to the Board to adduce the supplemental witness statement of Mr Tsoi and for Mr Li to file a supplemental witness statement in reply with costs in the cause. On 11 Feb 2019, Mr Li filed his supplemental witness statement, dealing mostly with liability including the Mobile Record.

78.  In early Mar 2019, the Board obtained the issue of subpoena to call Mr Tsoi as its witness at trial.

79.  During the 3-day-long trial, in terms of evidence and submissions, more time was spent on liability than on quantum. Mr Tsoi was called by the Board. Mr Li was cross-examined extensively by Mr Phang on liability (and relatively less on quantum[8]) and his credibility attacked. Mr Phang asked for dismissal of Mr Li’s claim in his closing submissions.

80.  Considering these litigation conducts of the Board since, and due to, its joinder, I cannot but agree with Ms Lee’s submissions at para 34, 36 and 40.

81.  Mr Phang’s submission of R1 defending these proceedings in person or through lawyers at para 18 is wholly contrary to the facts and I reject it.

82.  Indeed, the Board not only took an active part in these proceedings but also, in my view, adopted an adversarial role. Not only did it test Mr Li’s case on quantum or put it to strict proof, it also advanced a contrary case on liability and called Mr Tsoi to prove it. By its counsel, it attacked Mr Li’s credibility and asked for his claim to be dismissed.

83.  Had Mr Li’s claim been dismissed by this court, I have no doubt the Board would apply to have its costs paid by Mr Li in order to protect the Fund. Again, I cannot but agree with Ms Lee’s submission at para 37.

84.  Though made in the context of an approval of settlement reached in personal injuries proceedings, one cannot but also agree with Mr Justice Bharwaney’s judgment in Kwan Kam Pui v Fung Man & others [2014] 6 HKC 361, 382C, 382E & 383B-C. If I may borrow the words of his lordship, by reason of the Board adopting an adversarial role in these proceedings, it is right that it should be ordered to pay costs if it takes up unmeritorious points of defence which are rejected by this court. The risk of an adverse order on costs is a risk that it must accept if it elects to join to these proceedings to prevent them from going uncontested. It would be unfair to Mr Li not to have his costs against the Board, whose active participation had increased his costs to prosecute these proceedings to judgment.

85.  I fully appreciate the difficulties and limitation faced by the Board in assessing an application filed by an applicant like Mr Li and in assessing information supplied to it by an alleged employer like R1 (or by Mr Tsoi). That had been stressed in para 17 by Mr Phang.

86.  But, for reasons I have explained in the Judgment, I have great reservation whether the Board had properly assessed the evidence of Mr Tsoi before relying on it and calling him as its witness at trial. After all, it should always be remembered that R1 (and Mr Tsoi) is an interested party with its own motive to serve^[9].

87.  After Mr Li in Feb 2019 filed his supplemental witness statement proving that the Mobile Record was registered in the name of his son, it should, one thinks, be clear to those advising the Board that Mr Tsoi had no plausible explanation to those numerous calls between Mr Li and him as recorded in the Mobile Record.

88.  It is, in my views, a serious matter for the Board to intervene not only on quantum but also on liability, the latter course most likely involving attack on the credibility of the injured, prolonging the time required to bring the proceedings to trial and escalating the costs of the proceedings.

89.  While the Board has its statutory duties to administer and protect the Fund, it should not, I think, overlook at the same time that the Fund was set up in the first place as a scheme of last resort for the injured employees to obtain payment of compensation: Jiang Zhong, supra, para 3.2 at p.891.

90.  An ill-advised intervention by the Board on liability could have much adverse effect on the injured employee on his/her long road to obtain compensation from the employer and, in the last resort, from the Fund. It is to be hoped that all such decisions would be taken seriously and responsibly after careful consideration by the Board, and regularly reviewed and reconsidered as the case progresses.

91.  For present purpose, I would, however, not hold against the Board on the 2^nd Variation for my reservation in para 86 & 87. It suffices to stress that all such unmeritorious points of defence advanced by the Board on the basis of Mr Tsoi’s evidence were ultimately rejected by this court after trial.

92.  Now that the risk accepted by the Board by its conscious decision to intervene to these proceedings on both liability and quantum has materialized by its losing the trial. Is there any good reason for the Board not to bear the risk it accepted?

93.  Mr Phang has sought to rely on the statutory scheme of application, payment, priority and subrogation in ECAO, which, he stressed, should be preserved and followed.

94.  However, I do not agree that they are sufficiently good reasons in the circumstances of this case for me to depart from the starting point of costs following the event.

95.  By applying to intervene as a party to these proceedings in the first place, the Board must also, in my views, accept the risk of possible adverse costs order made against it after trial to be enforced against it outside the statutory scheme of ECAO. That is the short and simple answer to Mr Phang’s submission at para 22 & 29.

96.  Secondly, for Ms Lee’s contrary submissions at para 38 & 42, which I wholly agree, the 1^st and 3^rd complaints of disturbance of the statutory scheme of ECAO raised by Mr Phang at para 24 & 26 simply cannot stand.

97.  Though Ms Lee (and I) agree with Mr Phang’s observations at para 19, 20, 21, 25, 27 & 28, one cannot overlook, I agree with her, the adverse effect in terms of time and increased costs already inflicted on Mr Li by reason of the Board’s intervention said in para 39 & 40, and the further time and costs to be spent by him to obtain payment of compensation from R1 in order to apply for costs of these proceedings to be paid from the Fund.

98.  Further, like any other successful litigants, there is nothing unjust for Mr Li to obtain against the Board a costs order which he can enforce any time after the judgment. That is his normal fruit of success after trial. It would likewise apply if the Board obtains a costs order against Mr Li after winning the trial.

99.  And Ms Lee is right at para 43 that the Board is not without remedy after it pays Mr Li’s costs pursuant to the 2^nd Order Nisi. It nonetheless enjoys at common law a right of contribution from R1 to the extent of 50% of such costs it has paid Mr Li: Hussain Kamran, supra, para 6(2) at p.3.

100.  Considering the litigation conducts of the Board as from its joinder, I do not consider it fair or right that my discretion should be so exercised to protect the Board not only fully as to its own costs as against R1 (the 1^st Variation I agree has already protected the Board on that), but also fully as against Mr Li’s costs.

101.  There is all the more so when one bears in mind that the real contest is between one government department and a statutory body both funded by the public one way or another. Is the legal aid fund not deserved to be protected too?

102.  All things considered, including the special position of the Board with regard to the Fund it administers and the statutory scheme of the ECAO, I remain of the view that the general rule of the loser paying the winner should still prevail and I decide to make the 2^nd Order Nisi absolute.

Disposition

103.  Accordingly, I allow para 1 of the Summons and order that the 1^st Order Nisi in para 127(1) of the Judgment be varied to “R1 do pay (a) Mr Li and (b) the Boardthe costs of this application, including all reserved costs and the costs of this trial with certificate for counsel, at such amount to be taxed if not agreed”.

104.  And I dismiss para 2 of the Summons and make absolute the 2^nd Order Nisi at para 127(2) of the Judgment.

Costs of the Summons

105.  Mr Phang does not resist Ms Lee’s application for costs of the Summons in the event she successfully opposes the 2^nd Variation. As between the Board and R1, the Board is the successful party on the 1^st Variation and I shall also follow the general rule of costs following the event.

106.  I therefore make the following costs orders on the Summons:

(1)   R1 do pay the Board the costs of and incidental to para 1 of the Summons, including the costs of this hearing with certificate for counsel, at such amount to be taxed if not agreed;

(2)   The Board do pay Mr Li the costs of and incidental to para 2 of the Summons, including the costs of this hearing with certificate for counsel, at such amount to be taxed if not agreed; and

(3)   Mr Li’s own costs shall be taxed in accordance with Legal Aid Regulations.

107.  Finally, I thank Ms Lee and Mr Phang for their submissions.