SO YUK KAM v. LIU, CHAN & LAM(A FIRM)AND ANOTHER

DCCJ 1599/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1599 OF 2012

--------------------

--------------------

JUDGMENT

--------------------

Introduction

1.  The plaintiff was the applicant in DCEC 30/2008 (the “EC Action”).  In the EC Action, the plaintiff claimed against Lau Kam Yuen trading as Ngai Shing Construction (“Lau”) and Lung Hing Transportation Limited (“Lung Hing”) for employees’ compensation arising out of an accident occurred during work on 20 June 2006 (the “Accident”).  The 1^st defendant (“D1”), a firm of solicitors, acted for the plaintiff in the EC Action. 

2.  Both Lau and Lung Hing disputed that they were the plaintiff’s employer at the material times.  The court had in the judgment handed down on 19 December 2008 in the EC Action found that Lung Hing was the plaintiff’s employer for the work causing the injuries to the plaintiff and awarded $277,143.00 to the plaintiff against Lung Hing.

3.  On 6 June 2009 the plaintiff commenced proceedings for his common law claims against Lau and Lung Hing in DCPI 1310/2009 (the “PI Proceedings”).  D1 also acted for the plaintiff in commencing the PI Proceedings.

4.  Lung Hing turned out to be insolvent.  A winding-up order was granted against Lung Hing on 24 February 2010 in HCCW 727/2009.  D1 in acting for the plaintiff in the EC Action and the PI Proceedings had not identified any insurer underwriting Lung Hing’s employees’ compensation insurance.  Thus the plaintiff was unable to recover the amount of compensation awarded to him in the EC Action from Lung Hing (his employer) or from Lung Hing’s insurer.  The plaintiff then applied to the 2^nd defendant (“D2”) for payment under s16 of the Employees Compensation Assistance Ordinance (Cap 365) (the “ECAO”) of the amount of compensation awarded in the EC Action to him.

5.  D2 rejected the plaintiff’s application by a letter dated 2 March 2011 from D2’s solicitors to D1 on the ground that the plaintiff had failed to take reasonable proceedings to recover payment from Lung Hing’s insurer as required by s16(3) of the ECAO (pp276-278 of bundle A).

6.  The plaintiff was dissatisfied with D2’s aforesaid determination and commenced these proceedings on 16 May 2012 against D2 pursuant to s24 of the ECAO.  The plaintiff also claimed against D1 for professional negligence and/or breach of contract and/or breach of duty in handling the plaintiff’s claim in the EC Action causing the plaintiff unable to recover the compensation awarded to him either from Lung Hing’s insurer or D2.  The plaintiff’s claims against D1 and D2 were in the alternative.

7.  D2 claimed that if D2 was liable to pay the plaintiff, D2 had the statutory right of subrogation under s37 of the ECAO to seek an indemnity or contribution from D1.  D2 issued a contribution notice against D1 on 3 July 2012.  On 27 November 2012, the court directed that D2’s claim against D1 under the contribution notice be tried at the trial of the main proceedings.

8.  The plaintiff’s case was that if Lung Hing had insurance cover, D1 was negligence in not obtaining particulars of Lung Hing’s insurance to enable the plaintiff to claim payment from Lung Hing’s insurer pursuant to s44 of the Employees’ Compensation Ordinance (Cap 282) (the “ECO”).  D1 should be liable to the plaintiff’s claim.  If Lung Hing had no insurance cover, D2 was wrong in rejecting the plaintiff’s claim and should be liable to pay the plaintiff’s claim under the ECAO.  If D2 was right in rejecting the plaintiff’s claim, it was D1’s negligence and/or breach of contract which had caused the plaintiff’s non-compliance of the relevant provisions of the ECAO.  D1 should be liable to the plaintiff’s claim.  The plaintiff’s case was that either D1 or D2 should pay his claim.

9.  D1 denied that it was negligent in handling the plaintiff’s claim in the EC Action.  D1 further denied that the loss to the plaintiff was caused by its negligence, even if such negligence did occur.  D1’s case was that Lung Hing did not have an insurance policy covering the plaintiff and D2 had wrongly rejected the plaintiff’s application for payment under the ECAO.

10.  D2’s case was that there was evidence showing that Lung Hing had taken out employees’ compensation insurance for its employees.  The court had found that the plaintiff was an employee of Lung Hing at the material times.  In such case, the plaintiff’s claim in the EC Action should have been covered by Lung Hing’s insurance.  The plaintiff had failed to serve notice of proceedings of the EC Action to Lung Hing’s insurer as required by s25B(1) of the ECAO and failed to take reasonable proceedings to recover payment from Lung Hing’s insurer as required by s16(3) of the ECAO.  Hence, the plaintiff was not entitled to claim payment from D2.  If D2 was liable to pay the plaintiff’s claim, D2’s case was that it was entitled to claim indemnity or contribution from D1 pursuant to the statutory right of subrogation stipulated in s37(1) of the ECAO.

11.  The following issues were in dispute:-

(1) Whether Lung Hing had taken out employees’ compensation insurance which covered the plaintiff’s claim in the EC Action?

(2) Whether D1 was negligence in not taking out applications to compel Lung Hing to disclose particulars of its employees’ compensation insurance policy?

(3) Whether D2 was entitled to reject the plaintiff’s claim under the ECAO? If not, whether D1 was liable to indemnify D2 or to contribute to D2 in respect of the payment to the plaintiff?

12.  The plaintiff had signed a witness statement dated 9 November 2012. Both defendants agreed that it was not necessary for the plaintiff to testify at the trial.  D1 had called Miss Selina Hui (“Hui”) and Mr Allen Lam (“Lam”), handling solicitors of the plaintiff’s cases at D1 at the material times, to testify at the trial.  Both Hui and Lam had signed their respective witness statement dated 12 November 2012.  D2 had called Miss Patricia Yim (“Yim”), Secretary to D2, to testify at the trial.  Yim had signed a witness statement dated 8 November 2012.

The EC Action and the PI Proceedings

13.  The procedural history of the EC Action and the PI Proceedings was not in dispute.  Mr Wong SC, counsel for D2, had in his opening submissions helpfully listed out the relevant events.

14.  On 8 January 2008, D1 acted for the plaintiff to file his application in the EC Action.

15.  On 19 January 2008, D1 wrote a pre-action letter to Lung Hing pursuant to the pre-action protocol of the PI Proceedings seeking, inter alia, the identity of Lung Hing’s insurer.  No reply was received from Lung Hing.

16.  On 21 January 2008, D1 served a notice of proceedings on D2 in respect of the EC Action.

17.  On 23 January 2008, D2 wrote to the Hong Kong Federation of Insurers (the “HKFI”) requesting circulation of the details of the EC Action amongst the HKFI’s members with a view to ascertain whether Lung Hing had taken out employees’ compensation insurance.  D2 also wrote to D1 on the same day to enquire whether D1 knew of any action taken by the Labour Department against the plaintiff’s employer for failure to take out employees’ compensation insurance and whether any effort had been made in investigating the insurance status for the plaintiff’s claim.

18.  On 12 February 2008, Lung Hing filed its Answer in the EC Action denying that the plaintiff was its employee at the material times.

19.  On 26 August 2008, Lung Hing filed the witness statement dated 18 August 2008 of Chan Siu Po (“Chan”), a director and shareholder of Lung Hing.  Chan in his witness statement referred to Lung Hing’s employees’ compensation insurance but stated that the insurance did not cover the plaintiff as the plaintiff was not Lung Hing’s employee.

20.  On 8 October 2008, Lam & Partners (“L&P”), solicitors acting for Lung Hing in the EC Action, informed D1 that Lung Hing had taken out employees’ compensation insurance but stated that the insurance did not cover the plaintiff as Lung Hing denied that the plaintiff was Lung Hing’s employee.

21.  The EC Action was tried before HH Judge Yung on 16 and 17 December 2008.  The learned judge handed down his judgment on 19 December 2008 holding that Lung Hing was the plaintiff’s employer at the material times and was liable to the plaintiff’s claim in the EC Action.

22.  On 25 March 2009, D2 wrote to D1 enquiring on enforcement actions taken to enforce the judgment in the EC Action

23.  On 6 June 2009, D1 issued the PI Proceedings for the plaintiff also naming Lau and Lung Hing as defendants.

24.  On 24 June 2009, D1 served a notice of proceedings in respect of the PI Proceedings on D2.

25.  On 7 July 2009, D2 wrote to D1 to follow-up on the enforcement actions taken against Lung Hing to enforce the judgment in the EC Action.

26.  On 24 February 2010, D1 acting for the plaintiff obtained a winding-up order against Lung Hing.

27.  On 3 March 2010, D1 informed D2 of the winding-up order against Lung Hing and sought confirmation from D2 on payment of the plaintiff’s claim under the ECAO.

28.  Between 13 and 15 March 2010, D1 wrote to Lung Hing, Lung Hing’s Liquidators (the “Liquidators”) and certain of Lung Hing’s shareholders and former officers (including Chan) seeking details of the employees’ compensation insurance taken out by Lung Hing.  No reply was received from Lung Hing’s shareholders and former officers.

29.  On 18 March 2010, Mr Mat Ng of the Liquidators informed D1 that the Liquidators were unable to locate the directors or any books and records of Lung Hing. 

30.  On 8 April 2010, D2’s solicitors wrote to D1 stating that as Lung Hing was insured, it was premature for the plaintiff to apply for payment under the ECAO.

31.  On 14 April 2010, D2 wrote to the HKFI requesting circulation of the details of the PI Proceedings amongst the HKFI’s members.

32.  On 4 May 2010, D2’s solicitors informed D1 that the plaintiff was not eligible for an application under s16 of the ECAO in light of D1’s failure to ascertain the identity of Lung Hing’s insurer.

33.  On 6 May 2010, D1 wrote to the Labour Department enquiring whether Lung Hing had taken out employees’ compensation insurance in respect of the plaintiff.

34.  On 12 May 2010, the Labour Department informed D1 that Lung Hing had not presented the Labour Department with any insurance policy.  The Labour Department also sent to D1 a copy of the Form 2 received by the Labour Department in this case.

35.  On 10 August 2010, D1 acting for the plaintiff obtained default judgment against Lung Hing in the PI Proceedings.

36.  On 7 September 2010, D1 issued a summons in the PI Proceedings seeking specific discovery of Lung Hing’s employees’ compensation insurance policy from L&P.  On 20 September 2010, Mr Lam San Yin (“LSY”) of L&P filed an affirmation deposing that L&P had never been in possession of any insurance policy of Lung Hing.

37.  On 13 December 2010, D1 applied on behalf of the plaintiff to D2 for payment from the Employees Compensation Assistance Fund (the “Fund”) of the sums awarded to him under the EC Action.

38.  On 20 December 2010, D1 wrote to Lung Hing’s former shareholders and directors again in a further attempt to enquire on employees’ compensation insurance taken out by Lung Hing.  No reply was received.

39.  On 2 March 2011, D2’s solicitors informed D1 that D2 had rejected the plaintiff’s application, stating that D1 had failed to take reasonable steps to identify Lung Hing’s insurer to obtain its employees’ compensation insurance policy, either by way of specific discovery in the EC Action or application under s44A of the ECO to demand production or inspection of the aforesaid policy from Lung Hing, thus failing to comply with s16(3) of the ECAO.

40.  On 16 May 2012, the plaintiff issued the writ herein.

Whether Lung Hing had taken out employees’ compensation insurance covering the plaintiff’s claim in the EC Action?

41.  The parties had disputes on whether Lung Hing had taken out employees’ compensation insurance covering the plaintiff’s claim in the EC Action.  The parties also had disputes on who had the burden of proving the existence or non-existence of such insurance policy.

42.  In this case, to determine whether Lung Hing had taken out employees’ compensation insurance covering the plaintiff’s claim is a two stage process. Firstly, the court has to determine whether Lung Hing had taken out any employees’ compensation insurance at the material times.  Secondly, if so, whether the employees’ compensation insurance taken out by Lung Hing covered the plaintiff’s claim.

Burden of proof

43.  Mr Lim, counsel for D1, referred to Wakelin v London and South Western Railway Co [1866] 12 App Cas 41 to submit that to invoke s16(3) of the ECAO, D2 bore the burden of proof that there was a policy covering the plaintiff.  In the Wakelin case, a man was killed on a railway line. The House of Lord held that even assuming (without deciding) that there was negligence on the part of the railway company, there was simply no evidence to connect the negligence to the accident.  The Wakelin case affirmed the principle of “ei qui affirmat non ei qui negat incumbit probatio” but it was not a case on construing burden of proof in respect of provisions in a statute.  The Wakelin case did not assist Mr Lim’s aforesaid submission.

44.  The general rule of evidence is that the party who asserts must prove. As pointed out by the learned author of Phipson on Evidence, 18^th edition (2013), in para 6-06 at pp162-163, that:-

“In deciding which party asserts the affirmative, regard must be had to the substance of the issue and not merely to its grammatical form; the latter the pleader can frequently vary at will. Moreover, a negative allegation must not be confused with the mere traverse of an affirmative one. The true meaning of the rule is that where a given allegation, whether affirmative or negative, forms an essential part of a party’s case, the proof of such allegation rests on him.”

45.  In this case, the plaintiff and D2 asserted that Lung Hing had taken out employees’ compensation insurance for its employees at the material times.  The burden was on the plaintiff and D2 to prove on balance of probabilities that Lung Hing had taken out such insurance.

46.  D1’s stance on whether D1 agreed that Lung Hing had taken out employees’ compensation insurance at the material times was ambiguous.

47.  On the one hand, D1 agreed that in Chan’s witness statement and various correspondences from L&P, it was said that Lung Hing had taken out employees’ compensation insurance for its employees.  Mr Lim also referred to this fact in both his opening and final submissions.  In para 49 of his final submissions, Mr Lim said that: “What was stated by Chan in para 7 [of Chan’s witness statement] is only prima facie evidence of existence of a policy covering Lung Hing’s own employees”.  Hui stated in her evidence-in-chief that her understanding of L&P’s letter dated 8 October 2008 was that there was a policy but it did not cover the plaintiff.  Lam also said in cross-examination that he did not take the view that Lung Hing had no insurance policy at all and that he merely considered that it would not have covered the plaintiff.

48.  On the other hand, D1 seemed to be disputing Lung Hing had taken out any employees’ compensation insurance for its employees at all when Lam in para 14 of his witness statement expressly did not admit that Lung Hing had had a policy of insurance covering its employees in the occupations stipulated in Chan’s witness statement (ie 司機(driver), 汽車維修技工(vehicle repair technician) and文員(clerk)).  Mr Lim also submitted in para 41 of his final submissions that “a reasonable inference is that prior to 2007 Lung Hing did not even purchase EC insurance for its own employees” and “there being no EC insurance at the time of the accident”.

49.  In para 4.1 of D1’s defence to D2’s contribution claim, D1 pleaded that:-

“4.1 If Lung Hing did have an employees’ compensation policy at the time of the Accident (which is denied) such policy:

(a) must have been limited to Lung Hing’s other employees (10 truck drivers, 1 vehicle repair technician and 1 clerk); and/or

(b) did not extend to the Plaintiff or any other person working as a welder; and/or

(c) did not cover the site where the Plaintiff’s accident occurred.”

50.  In this judgment, I proceed on the basis that D1 did not admit that Lung Hing had taken out any employees’ compensation insurance at the material times.  The plaintiff and D2 had to prove the existence of such insurance as asserted by them.  D1 asserted that such insurance, if existed, only covered other employees of Lung Hing, did not extend to the plaintiff, and did not cover the site of the Accident.  The burden was on D1 to prove, also on balance of probabilities, its aforesaid assertions.

Whether Lung Hing had insurance?  Whether the insurance covered the plaintiff?

51.  From the evidence adduced before me, I am satisfied on balance of probabilities that Lung Hing had taken out employees’ compensation insurance for its employees at the material times.  I set out below my analysis.

52.  Chan in his witness statement filed on 26 August 2008 in the EC Action stated that:-

“7. 於2006年6月20日，〝藝成〞 [Lau’s company] 正在貨櫃車場進行拆卸工程，當時本人不在現場，於當天下午時份，本人返回貨櫃車場見到一個劉金源 [Lau] 的工人坐在地上，他對我說剛才從平台上跌下受傷，本人於是致電劉金源，劉金源對我說他稍後會返回貨櫃車場處理。本人當日是第一次見到該名劉金源的工人，本人當時並不知道他的名字。稍後劉金源返回貨櫃車場，並對我說他沒有購買勞工保險，他問我〝龍興〞 [Lung Hing] 有沒有為僱員購買勞工保險，我說〝龍興〞有為〝龍興〞的僱員購買勞工保險，於是他問我可否用〝龍興〞的名義去追討工傷賠償，我當時說要諮詢保險經紀，稍後劉金源便帶他的工人去看醫生。

8. 第二天我向〝龍興〞的保險公司經紀查詢，他對我說不能這樣做，否則就等同詐騙保險公司，會觸犯刑事條例，本人於是致電劉金源拒絕他的要求。

9. 大約兩星期後，劉金源帶同當天他受傷的工人到我公司，當時我才知道他的名字叫蘇玉金 [the plaintiff] ，他說他的伙記肩膊骨爆裂，並再次要求我將他的伙記當做〝龍興〞的僱員，從而向〝龍興〞的保險公司追討工傷賠償，本人當時再次拒絕他的要求。” (Emphasis added)

53.  Chan had clearly stated that Lung Hing had taken out employees’ compensation insurance for its employees.  This was also confirmed in a letter dated 8 October 2008 sent by L&P to D1 (p244 of bundle A).  In the letter, L&P stated that:-

“1. As mention in paragraph 7 of our client’s witness statement dated 18 August 2008 [Chan’s aforesaid witness statement], our client [Lung Hing] has all along taken out insurance policy to cover its liability under Employees’ Compensation Ordinance and its common law liability for its employees but not for the Applicant [the plaintiff] in the captioned proceedings [the EC Action] who has never been the employee of our client.” (Emphasis added)

54.  In a letter dated 11 August 2011 replying to the inquiry of the plaintiff’s current solicitors (pp770-771 of bundle D), L&P confirmed that:-

“(c) To the best of our knowledge, Mr Chan Siu Bor [Chan] should have mentioned to us the existence of workmen compensation insurance in respect of Lung Hing’s employees, otherwise we would not have issued the said letter dated 8^th October 2008 to Messrs Liu, Chan & Lam [D1] and it would not have been so stated in paragraph 7 of the Witness Statement of Chan Siu Bor filed on 26 August 2008. We have no recollection nor documents in respect of the circumstances as to how he mentioned to us the said matter.” (Emphasis added)

55.  D1 adduced no evidence to challenge the aforesaid evidence from Lung Hing and L&P (Lung Hing’s then solicitors).  I am satisfied that the plaintiff and D2 had proved on balance of probabilities that Lung Hing had taken out employees’ compensation insurance for its employees at the material times.

56.  D1 asserted that the employees’ compensation insurance of Lung Hing, if any, did not cover the plaintiff.  Hui in the course of her evidence repeatedly said that she did not consider that there was employees’ compensation insurance covering the plaintiff on the day of his accident (ie 20 June 2006).  D1 relied on the following matters to substantiate its aforesaid contention:-

(1) in a letter dated 31 October 2007 from Chan to the Labour Department (“Chan’s Letter”).  Chan stated that there was not any employees’ compensation insurance in relation to the renovation matter on 20 June 2006;

(2) in the copy of Form 2 provided by the Labour Department to D1, there was no mention of any employees’ compensation insurance;

(3) D1’s enquiries with L&P, the Liquidators, Lung Hing’s shareholders and former directors did not produce information on any employees’ compensation insurance taken out by Lung Hing;

(4) the solicitors acting for Lung Hing in the EC Action, L&P, did not act for Lung Hing upon instructions of Lung Hing’s insurer;

(5) D2’s enquiries with the HKFI also did not produce information on any employees’ compensation insurance taken out by Lung Hing; and

(6) Lung Hing was in the business of transportation and the employees’ compensation insurance taken out by Lung Hing (if any) would not cover the plaintiff.

Chan’s Letter

57.  D1 relied heavily on Chan’s Letter to substantiate its case.  Mr Lim submitted that Chan’s admission in Chan’s Letter that Lung Hing had no employees’ compensation insurance in relation to the renovation on 20 June 2006 was in answer to questions raised by the Labour Department.  It was an admission against interest and it was unlikely that Chan would make such admission unless that was true.

58.  Chan’s Letter only stated that Lung Hing had not taken out employees’ compensation insurance specifically for the renovation works.  This was not to say that Lung Hing’s employees were not covered by the employees’ compensation insurance already taken out by Lung Hing if they were injured when the renovation works concerned were going on.  I do not see the logic of Mr Lim’s submission that Chan’s answer in Chan’s Letter to the Labour Department was clear and unequivocal that there was no insurance covering the works in question, hence there was no insurance coverage for the plaintiff. (See para 43 of Mr Lim’s final submissions)  There was simply no basis or evidence to support such conclusion.

59.  If the plaintiff was Lung Hing’s employee, he would be covered by Lung Hing’s employees’ compensation insurance which would have covered all employees of Lung Hing.  The plaintiff, as Lung Hing’s employee, did not need a specific insurance for the renovation works to cover him.  Assuming that the aforesaid statement made by Chan in Chan’s Letter was true, it did not assist D1 in its contention that Lung Hing did not have employees’ compensation insurance covering the plaintiff’s claim in the EC Action.

The Form 2

60.  D1 also relied on the copy of Form 2 provided by the Labour Department under cover of its letter dated 12 May 2010 which named Lung Hing as the plaintiff’s employer without mentioning any employees’ compensation insurance (pp716-721 of bundle D).

61.  The copy of Form 2 obtained from the Labour Department was unsigned.  No evidence had been adduced as to who had submitted this Form 2 to the Labour Department.  Even the Labour Department which provided copy of the Form 2 to D1 said that it had no knowledge of who completed the Form 2 received by it on 19 September 2006 (p723 of bundle D).

62.  The Form 2 named Lung Hing as the plaintiff’s employer.  Considering the stance of Lung Hing in the EC Action denying itself as employer of the plaintiff, it was unlikely that this Form 2 was submitted by Lung Hing.  If the Form 2 was not submitted by Lung Hing, it would of course not have contained information on employees’ compensation insurance taken out by Lung Hing.  The Form 2 did not assist this court in determining whether Lung Hing had taken out employees’ compensation insurance or whether the employees’ compensation insurance taken out by Lung Hing covered the plaintiff.

D1’s enquiries

63.  D1 also referred to the futile enquiries made to the shareholders and former officers (ie directors and secretary) of Lung Hing.  There was simply no response to D1’s enquiries.  These enquiries were made in March 2010 after Lung Hing had already been wound up (pp254-259 of bundle A).  By that time, even the Liquidators with their statutory authorities were unable to contact Lung Hing’s former directors or obtain books and records of Lung Hing.  In such circumstances, it would not be surprising that D1 received no response from Lung Hing’s shareholders and former directors for its enquiries.  I do not agree that inference can be drawn on this fact of “no response” to show that Lung Hing had not taken out employees’ compensation insurance at the material times or that the employees’ compensation insurance of Lung Hing did not cover the plaintiff.

64.  Mr Mat Ng, one of the Liquidators, had in his letter dated 18 March 2010 sent to D1 (p260 of bundle A) provided the following explanation as to why the Liquidators were unable to provide to D1 copy of Lung Hing’s employees’ compensation insurance policy:-

“Since my appointment as Joint and Several Provisional Liquidator of the Company [Lung Hing], I have not been able to locate the directors or any books and records of the Company. Accordingly, I am unable to provide you [D1] with copy of the said insurance policy as requested.”

65.  The Liquidators were unable to provide copy of Lung Hing’s employees’ compensation insurance policy not because Lung Hing did not have such insurance but because they were unable to locate any books and records of Lung Hing.  I also do not agree that inference can be drawn from the aforesaid reply of the Liquidators that Lung Hing did not have any employees’ compensation insurance at the material times or that the employees’ compensation insurance taken out by Lung Hing did not cover the plaintiff.

66.  The fact that Lung Hing’s former solicitors, L&P, were unable to provide a copy of Lung Hing’s employees’ compensation insurance policy also did not work to support the contention that Lung Hing did not have any employees’ compensation insurance or that the employees’ compensation insurance taken out by Lung Hing did not cover the plaintiff.  In a letter dated 15 September 2010 (pp214-216 of bundle A), L&P informed D1 that:-

“… Your only reason for believing that we are in possession of the subject insurance policy is by virtue of our letter dated 8^th October 2008. However, we have never mentioned in our said letter that we are/were in possession of any insurance policy of our former client [Lung Hing], nor have we mentioned therein that we had knowledge of the name of the insurer of our former client.

We hereby inform you that we have never been in possession of any insurance policy of our former client, nor do we have any knowledge of the name of the insurer of our former client.”

67.  LSY, the principal of L&P, in his affirmation opposing to D1’s discovery application made against L&P in the PI Proceedings for copies of Lung Hing’s employees’ compensation insurance policy and correspondence between L&P and Lung Hing’s insurer (pp206-212 of bundle A) confirmed that:-

“12. After receiving the Summons [for specific discovery], I went through my office file and could not find any insurance policy or copies thereof as mention in the said letter [L&P’s letter dated 8 October 2008]. I cannot now recollect whether I had been provided with any insurance policy or copies thereof by Lung Hing for perusal in relation to DCEC 30 of 2008 [the EC Action]. I also have no knowledge or recollection of the name of the insurer of Lung Hing. I therefore verily believe that I have never been in possession of any insurance policy or copies thereof of Lung Hing. There is no correspondence between my firm and the insurer of Lung Hing. …”

68.  The only reason provided by L&P for unable to provide a copy of Lung Hing’s employees’ compensation insurance policy was that it had never had possession a copy of the policy.  This was neutral as to the existence of such policy and the coverage of the policy.

L&P not instructed by insurer

69.  Mr Lim submitted that the fact that L&P took instructions on the EC Action from Lung Hing directly was strong circumstantial evidence that Lung Hing did not have insurance coverage for the renovation works.  As discussed above, the fact that Lung Hing might not have taken out specific insurance to cover the renovation works did not mean that Lung Hing had no insurance cover for the plaintiff who had been found by the court to be an employee of Lung Hing.  In the circumstances of this case, the fact that L&P did not act for Lung Hing upon instructions of Lung Hing’s insurer was neither here nor there. There were at least three possible reasons for this to occur:-

(1) Lung Hing did not have any employees’ compensation insurance to cover the plaintiff’s claim;

(2) Lung Hing had employees’ compensation insurance but had not reported the plaintiff’s claim to its insurer; or

(3) Lung Hing had employees’ compensation insurance and had reported the plaintiff’s claim to the insurer but the insurer disclaimed liabilities or denied liabilities.

70.  No evidence had been adduced to show the reason for no insurer being involved in the EC Action.  I agreed with Mr Lim that if there was a policy on which the insurer had declined liability, one would expect L&P to be aware of it and had engaged in correspondence with the insurer on behalf of Lung Hing.

71.  Mr Lim submitted that if there was a valid and relevant policy.  There was no reason for Lung Hing not to report to the insurer and get the benefit of the insurance.  I can see the force of the aforesaid contention of Mr Lim. However, as Lung Hing had been taking the stance that the plaintiff was not its employee, I am unable to rule out the possibility that Lung Hing might have chosen not to report the plaintiff’s employees’ compensation claim to the insurer underwriting Lung Hing’s employees’ compensation insurance.  Hui admitted in cross-examination that she had no knowledge on whether Lung Hing had notified its insurer of the accident causing the injuries to the plaintiff. There was no basis for me to draw the conclusion that L&P was not acting upon instructions of an insurer because Lung Hing did not have insurance policy covering the plaintiff.

D2’s enquiries with the HKFI

72.  D2 had made enquiries with the HKFI but no response was received from the HKFI’s members.  D1 contended that this suggested that Lung Hing did not have employees’ compensation insurance or its employees’ compensation insurance did not cover the plaintiff.  As pointed out by Mr Wong SC that such contention was premised on the following assumptions:-

(1) that the HKFI had circulated D2’s enquiries amongst its members;

(2) that all members of the HKFI did conduct diligent enquiries upon receiving the HKFI’s circular; and

(3) that all members of the HKFI would, if their enquiries should reveal information on Lung Hing’s insurance, have faithfully reported the results of their enquiries either to the HKFI or to D2.

73.  Mr Wong SC submitted that it would require numerous leaps of logic to infer the absence of any employees’ compensation insurance or absence of an employees’ compensation insurance covering the plaintiff from the lack of replies to enquiries with the HKFI.

74.  As I have found that the evidence adduced before me showed that Lung Hing had taken out employees’ compensation insurance for its employees at the material times, yet no insurance companies had responded to the HKFI’s circulars to contact the HKFI or D2 to ascertain whether the plaintiff’s claims were covered by the employees’ compensation insurance taken out by Lung Hing. Yim’s evidence was also that D2 received few replies to D2’s inquiries from insurers.  In my judgment, this lack of response to the HKFI’s circular lends more support to the aforesaid contention of Mr Wong SC than to Mr Lim’s contention.

Lung Hing’s business

75.  Mr Lim submitted that Lung Hing’s business was in transportation and Lung Hing had engaged Lau to do the renovation works which was not Lung Hing’s trade.  He submitted that there was no reason why Lung Hing’s employees’ compensation insurance policy for its transportation business would also cover renovation workers.

76.  The fact that Lung Hing was in the business of transportation was neither here nor there.  This did not mean that Lung Hing would not employ a welder.  Lung Hing might require a welder to do repair and maintenance works for its trucks, its containers and its other plant and machinery.  In fact, the learned judge in the EC Action did find that Lung Hing did employ the plaintiff, a welder.  To say that because Lung Hing was in the business of transportation, the employees’ compensation insurance taken out by Lung Hing would not cover the plaintiff was mere speculation without basis or evidence. 

Other matters

77.  Mr Lim drew my attention to the available financial statements of Lung Hing for the years 2004/2005 and 2006/2007 which showed that Lung Hing had incurred expenses for insurance for the years from 2004 to 2007 (pp881-901 of bundle E).  Mr Lim submitted in his final submissions that:-

“41. As can be seen between 2006 and 2007 licence fees doubled (vehicles doubled) but the amount for insurance went from $20,944.00 to $158,944.00, an increase of eight times! What can be inferred from the disparity between the increase in licence fees and insurance expenditures. The financial statements did not specify which type of insurance the insurance expenditures were for. Given the background of this case a reasonable inference is that prior to 2007 Lung Hing did not even purchase EC insurance for its own employees and it was only after the Plaintiff’s accident on 20 June 2006 that Lung Hing began to purchase EC insurance for its own employees. Hence the huge jump in the amount spent on insurance. This is consistent with there being no EC insurance at the time of the accident.”

78.  There were numerous reasons for the increase of insurance expenses of a company, such as increase of premium because of claim history or increase of insured sums, just to name a few.  With respect, I am of the view that in making the above submission, Mr Lim was not drawing inference from evidence adduced in the proceedings but making speculation in disregard of the evidence contained in Chan’s witness statement and P&L’s letter dated 8 October 2008 when both expressly stated that Lung Hing did have employees’ compensation insurance for its employees as at 20 June 2006.

79.  The plaintiff’s current solicitors had enquired with Mr Chung Wing Cheong, the auditors of Lung Hing.  Mr Chung in a letter dated 29 February 2012 (p902 of bundle E) advised the plaintiff’s solicitors that:-

“I did not have any particulars or documents of the insurance policies taken out by the captioned company [Lung Hing]. Moreover, I did not have internal ledgers or documents pertaining to the insurance expenses as shown in your attached accounts.”

80.  The reply of Lung Hing’s auditors also did not support the contention that Lung Hing did not have employees’ compensation insurance or that the employees’ compensation insurance taken out by Lung Hing did not cover the plaintiff.  The information provided was neutral to the issue of existence or non-existence of employees’ compensation insurance policy for Lung Hing. 

81.  Mr Lim submitted that rightly or wrongly Lung Hing did not regard the plaintiff as its employee but regarded Lau as its contractor for the renovation works, so there was no reason for Lung Hing to take out employees’ compensation insurance to cover the plaintiff.

82.  If Lung Hing had taken out employees’ compensation insurance for its employees and the plaintiff was found to be one of its employees by the court, I fail to see the logic of contending that the plaintiff would still not be covered by Lung Hing’s employees’ compensation insurance unless there was evidence to suggest that Lung Hing’s employees’ compensation insurance had somehow excluded the plaintiff.  If Lung Hing’s employees’ compensation insurance only covered named employees, Lung Hing might not have named the plaintiff in the policy as Lung Hing subjectively did not consider the plaintiff as its employee.  However, no evidence had been adduced before me to show that Lung Hing’s employees’ compensation insurance only covered named employees.

83.  Both Hui and Lam admitted in their respective cross-examination that they had not seen the insurance policy of Lung Hing.  Hui also admitted that she had not been told by anyone that some of Lung Hing’s employees had been excluded from its insurance policy, or that the insurance policy contained any limits on liability, or that the insurance policy was confined to certain named employees or to specific categories of employees.  Lam also admitted that he did not have any information or evidence on the terms of Lung Hing’s insurance policy.  He did not know whether the insurance policy had any limits or exclusions.  Lam admitted that he had not seen any evidence or been aware of any information that Lung Hing’s insurance policy only applied to specific employees.

84.  In fact, the evidence in Chan’s witness statement suggested the otherwise.  If Lung Hing’s employees’ compensation insurance only covered named employees or specific categories of employees, Chan would not need to check with his insurance agent before he turned down Lau’s request to submit the plaintiff’s claim in Lung Hing’s name as the plaintiff was simply not named in the policy or did not fall within the specific categories of employees named in the policy.  Furthermore, if Lung Hing’s employees’ compensation insurance only covered named employees or specific categories of employees, Chan would not have turned down Lau’s said request on the ground that it would be fraud on the insurance company to make such claim as there would be no chance to defraud the insurance company in such case because it would not be possible for Lau to claim on Lung Hing’s insurance with such restrictions.

85.  Mr Lim referred me to Law Lai Ha and anor v Zurich Insurance Company [2011] 2 HKLRD 450 when Sakhrani J held that s40(1) of the ECO did not impose an obligation on an insurer to provide a policy of insurance to an employer other than the one requested by the employer.  In the Law Lai Ha case, the employees’ compensation insurance policy limited its cover to the insured’s employees to only one office attendant and one clerk each earning an estimated annual salary of $91,000.  The court held that such insurance did not cover claim of a production/factory manager earning an annual salary of $169,000.

86.  The Law Lai Ha case was on construction of contract and I agreed that the insurer’s obligation to indemnify was determined by the contract of insurance.  However, in this case the relevant insurance policy was not produced.

87.  Mr Lim submitted that if Lung Hing’s employees’ compensation insurance policy existed, it would only cover drivers, mechanic and office staff.  If D1 asserted that Lung Hing’s employees’ compensation insurance only covered specific categories of employees not including the category of the plaintiff’s work, the burden was on D1 to prove such assertion.  No evidence had been adduced to prove such assertion of D1.  The evidence relied on by D1 at most could only show that Lung Hing had not taken out specific insurance for the renovation works.  It was not evidence showing that Lung Hing’s employees’ compensation insurance only covered specific categories of employees or named employees.  There was no question of construction of contract before me.  D1 simply failed to discharge its burden of proof and the Law Lai Ha case was of no assistance to D1.

88.  Mr Lim submitted that all Chan said in his witness statement was that Lung Hing had insurance coverage for its own employees, meaning its employees for the transportation business.  With respect, I see no evidential basis for Mr Lim to contend that Lung Hing’s employees’ compensation insurance only covered Lung Hing’s employee for the transportation business and I do not accept Mr Lim’s such contention.

89.  I am satisfied that the evidence adduced before me has proved on balance of probabilities that Lung Hing had taken out employees’ compensation insurance for its employees.  As the plaintiff was an employee of Lung Hing at the material times, the plaintiff would have been covered by Lung Hing’s employees’ compensation insurance unless prove to the contrary.

90.  I find that D1 has failed to prove on balance of probabilities that the employees’ compensation insurance taken out by Lung Hing did not cover the plaintiff.

Whether D1 was negligent in not taking out applications to compel Lung Hing to disclose particulars of its employees’ compensation insurance policy?

91.  The plaintiff claimed against D1 in both contract and tort.  The plaintiff pleaded in para 6 of the Statement of Claim that it was an implied term of D1’s contract of appointment as the plaintiff’s solicitors that it would exercise reasonable care and skill in instituting and prosecuting the employees’ compensation proceedings, and to enforce or recover the judgment debt on behalf of the plaintiff, including making application for payment from the Fund, as would be expected of a reasonably competent and skilled solicitor.  Alternatively, D1 owed the plaintiff such duty of care in tort.

92.  It can be seen that whether in contract or in tort, the plaintiff’s case was that in handling his employees’ compensation claim, D1 failed to exercise reasonable skill and care to be expected from a reasonably competent and skilled solicitor.  Particulars of the negligence and/or breach of duty and/or breach of implied terms of contract were pleaded in para 22 of the Statement of Claim to include:-

(1) failing to conduct the plaintiff’s case with due skill and care;

(2) failing to take any or any sufficient steps to ensure all provisions of the ECAO were complied with in the event that a claim for payment had to be made to the Fund;

(3) even after D2 by its letter dated 23 January 2008 had drawn D1’s attention to the need to investigate the insurance status of both Lau and Lung Hing, failing to take any or any sufficient steps to confirm or investigate whether Lung Hing did indeed have a policy of insurance for the purpose of Part IV of the ECO (Part IV of the ECO concerns compulsory employees’ compensation insurance for employers) and to request and/or seek discovery of a copy of the same;

(4) if Lung Hing did have a valid policy of insurance for the purpose of Part IV of the ECO, failing to give notice to such insurer pursuant to s43 of the ECO;

(5) failing to demand production or inspection of such insurance policy from Lung Hing pursuant to s44A of the ECO;

(6) failing to take reasonable steps to identify Lung Hing’s insurer or to confirm the insurance status of Lung Hing in good time so as to not to be in breach of the provisions of the ECAO;

(7) failing to take reasonable steps to identify Lung Hing’s insurer or to confirm the insurance status of Lung Hing when a Notice to Act in Person was filed by Lung Hing;

(8) failing to take any or any sufficient steps to enforce the judgment in the EC Action against Lung Hing;

(9) failing in the circumstances to take all reasonable steps that were necessary to take recovery proceedings against Lung Hing’s insurer, if any;

(10) causing, allowing or permitting the plaintiff’s application to the Fund pursuant to s16 of the ECAO be rejected by D2;

(11) failing in the circumstances to take all reasonable steps that were necessary to recover the judgment of the EC Action from the Fund; and

(12) failing to exercise care and skill commensurate with personal injuries solicitors of reasonable competence.

93.  In a nutshell, the plaintiff claimed that D1 was negligence in failing to ascertain the insurance status of Lung Hing and to identify Lung Hing’s insurer to enable the plaintiff to recover compensation payment awarded to him from Lung Hing’s insurer or to comply with the ECAO to obtain payment from the Fund.

94.  The plaintiff and D1 had no dispute on the principles governing professional negligence of solicitors which were set out by Stock J (as he then was) in Foshan Hua Da Industrial Co v Johnson, Stokes & Master (a firm) [1999] 1 HKLRD 418 at 425A-426F:-

“(1) A retained solicitor owes a duty to his client, both in contract and tort. There arises, when a solicitor is engaged for reward, a contractual duty to exercise skill and care on behalf of his client. A solicitor is not expected or bound to know all the law, nor is he to be judged according to the standard which might be demonstrated by “a particularly meticulous and conscientious practitioner”. (See Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp (a firm) [1979] Ch 384 at p403.)

(2) The duty of a solicitor is “to exercise that reasonable degree of skill and care to be expected of a competent and reasonably experienced solicitor” (Clerk and Linsell on Torts (17^th ed.) para 8-81).  “The test is what a reasonably competent practitioner would do having regard to the standard normally adopted in his profession.” (See Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp (a firm) [1979] Ch 384 at p403.)

(3) “If in the course of taking instructions a professional man like a solicitor learns of facts which reveal to him as a professional man the existence of obvious risks then he should do more than merely advise within the strict limits of his retainer.  He should call attention to and advise upon the risks.” (per Lawton LJ in Boyce v Rendells [1983] EG 268 at p272.)

(4) Where a solicitor is asked to advise upon one matter then, as a general rule, he is not obliged to advise on different points though related, unless the connection is so close and reliance placed in the solicitor to advise generally so obvious, that advice on related points may be required. (Clerk and Lindsell on Torts (17^th ed.) para 8-89.)

(5) The duty of a solicitor might be affected by the experience or inexperience of the client, in the sense that a client inexperienced in the field in which he seeks advice is “entitled to expect the solicitor to take a much broader view of the scope of his retainer and his duties than will be the case with an experienced client.”  (See Carradine Properties Ltd v DJ Freeman & Co (1985) 1 PN 41.)

(6) “The standard of care to be expected of a professional man must be based on events as they occur in prospect and not in retrospect.” per Simon Brown LJ in Boston & Co v Roberts (unrep., The Times, 17 March 1995), who then cited Duchess of Argyll v Beuselinck [1972] 2 Lloyd’s Rep 172 at p185:

In this world there are few things that could not have been better done if done with hindsight.  The advantages of hindsight include the benefit of having a sufficient indication of which of the many factors present are important and which are unimportant. But hindsight is no touchstone of negligence.

(7) A solicitor is not, in the absence of unequivocal instructions and acceptance by him to do so, expected to advise upon the commercial good sense of a business proposition, whether he should or should not, as a matter of commercial advantage, proceed with a transaction, whether a transaction is or is not good business or prudent, although where it is evident that a client relies on the solicitor for more than legal advice, the solicitor may be under a duty to refer the client to an appropriate source or sources of information.  (See Yager v Fishman & Co and Teff & Teff [1994] 1 All ER 552; Reeves v Thrings & Long [1996] PNLR 265; Clark Boyce v Mouat [1994] 1 AC 428).  Indeed, “it is in general the client’s privilege if he so wishes to mismanage his affairs.  He is entitled … to lend on insufficient security, or to enter an unwise bargain if he so chooses.  The solicitor has a duty to advise on the legal hazards of the transaction, but no more:

It was the duty of the solicitor to inform and advise, ensuring that the information and advice was understood by the client.  It was not part of his duty of care to force his advice on the client.

If that advice is disregarded he must carry out the client’s instructions or else determine the retainer”.  (Jackson & Powell on Professional Negligence (4th ed.) para 4-92, citing Dutfield v Gilbert H Stephens & Sons [1988] Fam Law 474).

(8) “The onus of proving professional negligence over and above errors of judgment is a heavy one.”  (See Rondel v Worsley [1969] 1 AC 191.)”

95.  The plaintiff’s complaint against D1 was that D1 should have taken out application for specific discovery against Lung Hing in the EC Action or application under s44A of the ECO to compel Lung Hing to disclose its employees’ compensation insurance policy.

96.  There was no dispute that D1 had not taken out any application for specific discovery against Lung Hing in the EC Action or application under s44A of the ECO.  The issue is whether a reasonably competent experienced solicitor would take out the aforesaid applications in the circumstances of this case. If so, whether it was professional negligence or errors of judgment in not taking out these applications.

97.  D1 referred to the following reasons for not taking out the aforesaid discovery applications:-

(1) D1 took the view that there was no employees’ compensation insurance covering the plaintiff;

(2) the employees’ compensation insurance policy, if exist, was not a document relating to the matters in issue in the EC Action; and

(3) section 44A of the ECO applied only to an employer but at the material times Lung Hing denied it was the plaintiff’s employer.

98.  The question of D1’s liability to the plaintiff’s claim for negligence turned almost entirely on Hui’s conducting of the EC Action.  Lam was, apart from Hui’s informal consultation in March 2010, not involved in the EC Action or the PI Proceedings until Hui left D1’s employment in about November 2010.  Hui repeatedly said in her evidence under cross-examination that she considered that it was not necessary to take out applications to compel Lung Hing to disclose its employees’ compensation insurance policy. 

99.  Hui relied on her belief that there was no employees’ compensation insurance covering the plaintiff to explain why she did not seek discovery of the employees’ compensation insurance referred to in L&P’s letter dated 8 October 2008.  I have found that Lung Hing had taken out employees’ compensation insurance for its employees and that D1 had failed to prove that such insurance policy did not cover the plaintiff.  The remaining issue is whether D1 was negligent in not taking out the aforesaid applications for discovery of Lung Hing’s employees’ compensation insurance in the circumstances of this case.

Hui’s belief of non-existence of employees’ compensation insurance covering the plaintiff

100.  Hui was the handling solicitor of the EC Action and the PI Proceedings for the plaintiff in D1 until end of October 2010 when she was about to leave D1’s employment.  She said that she had 9-10 years experience in handling employees’ compensation and personal injuries claims when she acted for the plaintiff in the EC Action.

101.  Both Lau and Lung Hing disputed that they were the plaintiff’s employer.  Hui stated in her witness statement dated 12 November 2012 that when she commenced the EC Action for the plaintiff, it was unclear to her which party was the plaintiff’s employer.  Hui had on 3 April 2007 made an initial enquiry to the Labour Department for the Form 2 (p710 of bundle D) which should have contained information of the plaintiff’s employer and the employer’s insurer.  No Form 2 was provided by the Labour Department when it replied to D1’s inquiry on 17 April 2007 (p713 of bundle D).  Yet Hui took no action to follow-up with the Labour Department on the missing Form 2 until May 2010 ie more than one year after judgment of the EC Action.

102.  Hui was an experienced solicitor in this area of law.  She should be familiar with the provisions of the ECO and the ECAO being the two main pieces of legislation concerning employees’ compensation claims.  Hui confirmed in her evidence that she was aware of her obligations under the ECAO.

103.  Section 40(1) of the ECO provides that:-

“(1) Subject to subsections (1B) and (1C) [which do not concern this case], no employer shall employ any employee in any employment unless there is in force in relation to such employee a policy of insurance issued by an insurer for an amount not less than the applicable amount specified in the Fourth Schedule [which amount is sufficient to cover the plaintiff’s claims in the EC Action] in respect of the liability of the employer.”

104.  Hui confirmed in cross-examination that she knew that an employer was statutory obliged to take out employees’ compensation insurance for its employees. The case ran by D1 for the plaintiff in the EC Action was that the plaintiff was the employee of either Lung Hing or Lau.  Hui should have expected that the plaintiff’s employer had taken out employees’ compensation insurance covering the plaintiff as required by s40(1) of the ECO.

105.  Hui had on 18 September 2008 written to solicitors acting for Lau and Lung Hing to enquire on the insurance status of Lau and Lung Hing (pp241-242 of bundle A).  Answer from Lau’s solicitors was a straight negative (p243 of bundle A).  However, answer from L&P (Lung Hing’s solicitor) was in the positive when L&P stated in its letter dated 8 October 2008 that: “our client [Lung Hing] has all along taken out insurance policy to cover its liability under Employees’ Compensation Ordinance and its common law liability for its employees” (p244 of bundle A).

106.  In the EC Action, the plaintiff claimed to be an employee of Lung Hing. In such case, Hui should have expected that the plaintiff’s claims would be covered by Lung Hing’s employees’ compensation insurance if the plaintiff successfully established in the EC Action that he was an employee of Lung Hing.

107.  Knowing that an employer was obliged to take out employees’ compensation insurance for all his employees, a competent and reasonably experienced solicitor would not in the circumstances of this case as set out above hold the view (if Hui did so hold such view) that there was no employees’ compensation insurance covering the plaintiff.  I am of the view that a reasonably competent solicitor would in the circumstances of this case seek discovery of the employees’ compensation insurance referred to in the witness statement of Chan to verify whether it would have covered the plaintiff in the event that the plaintiff succeeded in establishing that he was employed by Lung Hing.

108.  Hui agreed in cross-examination that she knew the risk of the employer of the plaintiff being found insolvent and the plaintiff might have to claim against the insurer of his employer.  It did not require the extent of Hui’s experience for a solicitor to realize that to protect the interest of the plaintiff, it was necessary to obtain particulars of Lung Hing’s employees’ compensation insurance before the trial of the EC Action.

109.  Section 43(1) of the ECO provides that where in relation to an employee there is in force a policy of insurance issued for the purpose of the ECO and the employer of the employee becomes liable to pay any sum under the ECO in respect of an injury to the employee arising out of and in the course of his employment, such sum shall forthwith become due and payable by the insurer, including any sum payable in respect of interest and costs, notwithstanding anything to the contrary in the policy of insurance.  However. Section 43(2) of the ECO provides, inter alia, that in the case of compensation determined or adjudged by a court to be payable to the employee, no sum shall be payable by an insurer under s43 of the ECO unless the insurer had sufficient notice of the institution in the court of proceedings for compensation to enable such insurer to be added as a party to the proceedings.

110.  In order to enable the plaintiff to obtain the benefits conferred by the ECO to claim against the insurer of the plaintiff (be it Lau or Lung Hing), the plaintiff had to give sufficient notice to the insurer concerned to enable that insurer to make application to the court to be joined as a party.  In other words, notice of the EC Action should be given to the plaintiff’s employer’s insurer latest before judgment of the EC Action was handed down on 19 December 2008.  In fact such notice should have been given well before the commencement of the trial on 16 December 2008 to enable the insurer to apply to be joined as a party to the EC Action.  A reasonably competent experienced solicitor will know that failure to give notice of proceedings to the insurer will seriously prejudice his client’s interest and render his client losing the right to recover from the insurer.

111.  To enable the plaintiff to give notice of proceedings of the EC Action to his employer’s insurer, D1, being solicitors acting for the plaintiff in the EC Action, had to ascertain the particulars of such insurer.

112.  Hui was negligent in holding the belief that there was no employees’ compensation insurance covering the plaintiff.  She was further negligent in not taking discovery application to verify her aforesaid belief when she should know the seriousness of the consequence of failure to give notice of proceedings to the employer’s insurer.

113.  In the EC Action, D1 acting for the plaintiff claimed against Lung Hing as the plaintiff’s employer.  Lung Hing denied that it was the plaintiff’s employer.  Of course, D1 did not accept the stance of Lung Hing.  Otherwise, D1 would not have advised the plaintiff to pursue his claim against Lung Hing to trial.  As D1 did not accept that the plaintiff was not Lung Hing’s employee, Hui should have handled the EC Action for the plaintiff on the basis that the plaintiff was Lung Hing’s employee. 

114.  I agree with Mr Sakhrani, counsel for the plaintiff, that it should have been clear to any competent solicitor professing to be experienced in employees’ compensation and personal injury litigation that a trial would be required to establish who was the plaintiff’s employer and that in the meantime the necessary enquiries should be made to ascertain and verify the insurance status of Lung Hing and whether its policy covered the plaintiff.  This was also necessary to satisfy the provisions of s16(3) of the ECAO in the event that the plaintiff had to apply to D2 for payment from the Fund.  The fact that Lung Hing had disputed that it was the plaintiff’s employer was no reason for not compelling Lung Hing to disclose particulars of its employees’ compensation insurance.

115.  Hui relied heavily on Chan’s Letter to justify not making application to compel Lung Hing to disclose its employees’ compensation insurance.  In para 28 of her witness statement, Hui stated that:-

“I also respectfully point out that the most direct and, in my view at the time (and now) most compelling evidence concerning the existence or non-existence of the Policy, was Chan’s unequivocal statement in a letter dated 31 October 2007 to the Labour Department [Chan’s Letter] that: “There was no employees’ compensation insurance policies in relation to the renovation on 20 June 2006”; that is, according to Chan, the owner of Lung Hing, Lung Hing held no Policy in relation to the Plaintiff and the Accident.”

116.  Chan’s Letter was exhibited to Chan’s witness statement which clearly stated that Lung Hing had taken out employees’ compensation insurance for its employees.  This had not escaped the attention of Hui.  In para 12(viii) of her own witness statement Hui pointed out that Chan said in his witness statement that “Lung Hing had taken out employees’ compensation insurance for Lung Hing’s employees, although significantly, Chan did not give any details of the policy or the insurer in his statement.”  Noting that significant information being left out, Hui still said in cross-examination that she concluded from Chan’s Letter that it was not necessary to ask for the policy for the employees’ compensation insurance referred to in Chan’s witness statement as she believed that there was no insurance covering the plaintiff.  Such belief was inconsistent with the case pleaded by D1 for the plaintiff in the EC Action.

117.  As discussed above, Chan’s Letter only stated that Lung Hing had not specifically taken out employees’ compensation insurance in respect of the renovation works.  This was not evidence to say that Lung Hing did not have general employees’ compensation insurance.  Hui’s evidence at the trial was also that she did not consider Chan’s Letter was in contradiction with Chan’s witness statement.  Accordingly, Hui’s view was that Lung Hing had not taken out employees’ compensation insurance for the renovation works was not inconsistent with Lung Hing had taken out employees’ compensation insurance for its employees.  Mr Lim had submitted in para 21 of his opening submissions that:

“There is nothing inconsistent between the statement that Lung Hing had all along taken out insurance to cover its liability under the ECO and at common law for its own employees but not for the Plaintiff in DCEC 30 of 2008 [the EC Action] as the Plaintiff had never been Lung Hing’s employee and the statement that Lung Hing did not have employees’ compensation insurance in relation to the renovation on 20 June 2006.”

118.  In such case, the statement in Chan’s Letter would not have led Hui to conclude that Lung Hing had no employees’ compensation insurance.

119.  If Lung Hing had taken out employees’ compensation insurance, the scope and ambit of such insurance was to be determined objectively and not by Chan’s subjective thought.  D1 was duty bound to verify Chan’s claims about the policy coverage by compelling Lung Hing to disclose the policy.  Failing to do that was not merely an error of judgment but amounted to professional negligence in the circumstances of this case.  Taking Chan’s statement in Chan’s Letter at its face value not only demonstrated a naïve and fundamental lack of understanding of the nature of adversarial litigation as suggested by Mr Sakhrani but also amounted to failure of duty owed to the client. 

Appropriateness of a specific discovery application

120.  In para 6.2(d) of D1’s Defence to D2’s claim in the contribution proceedings, D1 pleaded that Lung Hing’s employees’ compensation insurance policy was not a document relating to the matters in issue in the EC Action.  What D1 said was that there was no ground for D1 to take out a specific discovery application in the EC Action.

121.  The legal principles applicable to inter-parties discovery had been set out in para 11 of the judgment in Tullett Prebon (Hong Kong) Limited v Chan Yeung Fong Nick & others (unrep, HCA 2197/2009, 9 June 2011, To J) as follows:-

“It is trite that a party seeking an order for discovery must make out a prima facie case that: (1) a specified document or class of documents exists; (2) the party against whom the order is sought has or had the documents in his possession, custody or power; (3) the documents relate to a matter in question in the action; and (4) discovery is necessary either for disposing fairly of the cause or matter or for saving costs.”

122.  It was unlikely that Lung Hing could resist a specific discovery application on the existence and possession of the employees’ compensation insurance which had been referred to in Chan’s witness statement and the letter of L&P dated 8 October 2008.

123.  The governing principle for relevancy as set out in Compagnie Financiere du Pacifique v Peruvain Guano Co (1882) 11 Q B D 55, per Brett LJ at 63 covers document containing information which may enable the party (applying for discovery) either to advance his own case or to damage that of his adversary, if it is a document which may fairly lead him to a train of inquiry which may have either of these two consequences.

124.  One of the main issues in dispute in the EC Action was whether Lung Hing was the plaintiff’s employer.  Whether Lung Hing had taken out employees’ compensation insurance covering the plaintiff was one of the relevant factors which the court would consider in determining whether Lung Hing was the plaintiff’s employer.  Chan’s evidence was that Lung Hing’s employees’ compensation insurance policy did not cover the plaintiff.  According to the then available information and evidence, I agree that D1 would have difficulties to make out a case that Lung Hing’s employees’ compensation insurance policy contained information which might enable the plaintiff to advance his case or to damage that of Lung Hing.  It seems that the then available information suggested that the policy might advance Lung Hing’s case instead of the plaintiff’s case.

125.  D1 might also not be able to show that discovery of such document would be necessary for disposing fairly of the matter or saving costs.  The fact that the plaintiff would require information contained in the policy to pursue his possible claim against Lung Hing’s insurer was no ground for a specific discovery application against Lung Hing in the EC Action.  

126.  I accept that D1 was not negligent in not taking out application for specific discovery in the EC Action for Lung Hing’s employees’ compensation insurance policy.

Section 44A application

127.  The plaintiff said that D1 should have pursuant to s44A of the ECO requested Lung Hing to produce for inspection Lung Hing’s employees’ compensation insurance policy to ascertain the particulars of the insurer concerned so as to give notice of proceedings of the EC Action to the insurer. No such request or application was made.  Hui’s explanation was that Lung Hing had denied that it was the plaintiff’s employer and that Lung Hing’s employees’ compensation insurance did not cover the plaintiff.

128.  Section 44A of the ECO provides that:-

“An employer insured under a policy of insurance issued for the purposes of this Part shall, within 10 days after receiving the written request of an employee or other person having a claim against the employer, produce for inspection to the employee or other person or his agent the policy of insurance and all other documents relating to the policy.”

129.  Both Mr Sakhrani and Mr Wong SC referred me to Chung Yuen Yee v Sam Woo Bore Pile Foundation Limited and Anor (unrep, CACV 86/2006, 3 August 2006) when Rogers VP stated in para 4 that:-

“(4) It appeared to this court that it was not correct to dismiss the application [an application under s44A of the ECO] on the ground that it had not been established at that stage that the first respondent was the employer. The scheme of the Ordinance [the ECO] is that there should be a speedy resolution of cases, applications have to be made in a timeous manner and, furthermore, it is open to an applicant to bring proceedings against the insurer so as to be able to secure payment directly in respect of any claim. In those circumstances, the intent of section 44A was that an applicant should be able to serve proceedings on the insurer notwithstanding liability might be disputed.”

130.  Mr Sakhrani submitted that any suggestion that application under s44A of the ECO was not made because both Lau and Lung Hing denied being the plaintiff’s employer in the EC Action represented a total misunderstanding of the professional duty of a solicitor to protect its client’s interests in the event that its client’s case was correct.  Such suggestion was also contrary to the notice of proceedings prepared by D1 for the EC Action (pp231-233 of bundle A) and sent to D2 which referred to Lung Hing’s relation with the plaintiff as “Employer / Principal Contractor”.

131.  Bearing in mind that the plaintiff was required by s43(2)(b) of the ECO to give sufficient notice to his employer’s insurer of the institution of the EC Action to enable such insurer to be added as a party to the EC Action, it could not be right to hold that if Lung Hing disputed that it was the plaintiff’s employer, no s44A request should be made until after determination of Lung Hing’s liability as employer as it would be too late by then for the plaintiff to give the aforesaid notice to Lung Hing’s insurer.  Accordingly, the fact that Lung Hing denied that it was the plaintiff’s employer was no explanation for not serving request under s44A of the ECO and applying to the court for an order to compel compliance of such request.

132.  Hui stated in para 23 of her witness statement that:-

“From the time I commenced acting for the Plaintiff, I was aware of his potential right to apply for relief payments under section 16 of the Employees Compensation Assistance Ordinance (Cap 365)(“ECAO”). I realised that at the end of the day there was always the chance that the employer (who was to be determined by the Court) would not be able to pay compensation or damages awarded to the Plaintiff. I advised the Plaintiff on material aspects of the ECAO. Notice was duly given to the Employees Compensation Assistance Board (“Board”) [D2] of both DCEC 30/2008 [the EC Action] and DCPI 1310/2009 [the PI Proceedings].”

133.  If the plaintiff had to apply for payment under the ECAO, particulars of Lung Hing’s insurance would also be required.  As there was always the chance that the plaintiff’s employer would not be able to pay the compensation awarded to the plaintiff, it was incumbent on D1, as the plaintiff’s legal representative to identify if the plaintiff’s employer (as claimed by the plaintiff) was insured and to ascertain the identity of the insurer as well as the coverage of the policy to ensure that the plaintiff could exercise his right against the employer’s insurer under the ECO and fully comply with the provisions of the ECAO.

134.  Hui explained in her witness statement for not making application under s44A of the ECO as follows:-

“25.     At no point in the correspondence between the 1^st Defendant and the Board [D2] and GYTH [D2’s solicitors] did the Board or GYTH provide information indentifying the Policy [defined in Hui’s witness statement as “employer’s liability insurance policy re the Accident”], nor did they urge an application under section 44A of the Employees’ Compensation Ordinance (Cap 282) for production of the Policy.  In the course of DCEC 30/2008 [the EC Action] I did not apply for orders against Mr Lau or Lung Hing for production of the Policy (if it existed) as that application may be made only against an employer and both Mr Lau and Lung Hing denied that they were the employer of the Plaintiff, which would have been their answer to an application.  More to the point, from all the evidence I had (and I refer to further below) there probably never was a Policy, so a section 44A application would have been pointless and is now a purely academic issue.”

135.  Hui then referred to the Form 2 subsequently obtained from the Labour Department, Chan’s Letter and her subsequent inquiries made to various parties including the Labour Department, Chan, Lung Hing’s secretary, L&P and the Liquidators to support her belief of non-existence of an employees’ compensation insurance policy covering the plaintiff.

136.  Hui’s understanding of circumstances under which application under s44A of ECO could be taken out was not supported by the Chung Yuen Yee case. Section 44A of the ECO is a powerful statutory weapon provided to the employee to ensure that the employee will be able to comply with the requirements of s43 of the ECO to obtain the benefits conferred by s44.  Although a solicitor is not expected or bound to know all the law and he is not to be judged according to the standard which might be demonstrated by a particular meticulous and conscientious practitioner, a solicitor practising in the areas of personal injuries and employees’ compensation claims should know the current law governing the applicability of s44A of the ECO.  The decision of the Court of Appeal in the Chung Yuen Yee case was handed down on 3 August 2006 ie just over a year before D1 commenced the EC Action for the plaintiff.  It should still be fresh in the mind of the practitioners practising this area of law and yet Hui admitted in cross-examination that she had not heard of the Chung Yuen Yee case.

137.  Hui tried to blame D2 and D2’s solicitors for not identifying to D1 the insurance policy covering the plaintiff and not urging her to make application under s44A of the ECO.  It seems that Hui had forgotten that she was the solicitor acting for the plaintiff.  It was her duty as solicitor for the plaintiff to identify the insurance policy taken out by the plaintiff’s employer.  It was also her duty as solicitor for the plaintiff to take out appropriate applications to protect the interest of her client.  The issue of insurance status of the plaintiff’s employer had been raised by D2 in the letter dated 23 January 2008 from D2 to D1.  I fail to see how Hui might blame D2 for not telling her how to discharge her duties towards her client.

138.  Hui said in cross-examination that the Form 2 was one of the reasons for her to think that Lung Hing did not have insurance covering the plaintiff.  The Form 2 was received by D1 in May 2010 after Lung Hing had been held in the EC Action as the plaintiff’s employer.  As discussed above, the Form 2 in this case was of little, if not nil, assistance in determining the identity of the plaintiff’s employer or whether the plaintiff’s employer had taken out employees’ compensation insurance.  The fact that the Form 2 was not received until May 2010 (ie more than one year after the judgment in the EC Action had been handed down) simply did not assist Hui in explaining why she made no application for production for Lung Hing’s employees’ compensation insurance policy under s44A of the ECO prior to conclusion of the EC Action.

139.  Hui also relied on the nature of business of Lung Hing to support her belief that Lung Hing did not have employees’ compensation insurance covering the plaintiff.  According to the business registration of Lung Hing, Lung Hing was engaged in transportation business.  As discussed above, the fact that Lung Hing was in the trade of transportation did not mean that Lung Hing’s employees’ compensation insurance only covered named employees or named categories of employees.  Without sight of Lung Hing’s employees’ compensation insurance policy, it was only mere speculation to say that such policy did not cover the plaintiff.  Hui and Lam admitted in cross-examination that they could not have known of any limitation or exemption contained in Lung Hing’s employees’ compensation insurance without sight of the policy.  Mr Sakhrani had rightly pointed out that in L&P’s letter dated 8 October 2008, Lung Hing’s solicitors only cited the assertion that the plaintiff was not an employee of Lung Hing to deny the plaintiff being covered by Lung Hing’s employees’ compensation insurance, making no mention of any limitation of coverage of the policy. 

140.  I am of the view that relying on speculation in handling a client’s case fell far short of the standard required from a reasonably competent solicitor of nine to ten years experience. 

141.  Hui as an experienced solicitor in handling employees’ compensation claims should know that if the plaintiff was unable to recover employees’ compensation from his employer, the plaintiff would have to apply to D2 for payment of the amount of compensation awarded to him.  This was confirmed in para 23 of Hui witness statement set out above.  Hui should also be familiar with the provisions of the ECAO.

142.  Section 16(3) of the ECAO casted a burden on the plaintiff to demonstrate that he had taken such proceedings to recover payment of compensation as were reasonable in the circumstances.  D1 as the plaintiff’s legal representative in the EC Action owed a duty to the plaintiff to ensure that he had discharged such burden to get the protection offered by the ECAO. Accordingly, Hui should know that in order to get payment from D2, the plaintiff had to take proceedings not only against the plaintiff’s employer but also against the employer’s insurer.  D1 held the view that the plaintiff was one of Lung Hing’s employees.  When Hui learned that Lung Hing had taken out employees’ compensation insurance for its employees, Hui should know that the plaintiff was required by the ECAO to pursue against Lung Hing’s insurer before the plaintiff might apply to D2 for payment.  This was confirmed in the letter dated 23 January 2008 from D2 to D1 when D2 asked D1 to advise D2 whether any effort was made in investigating the insurance status (pp234-235 of bundle A). Of course, before the plaintiff might take proceedings against Lung Hing’s insurer, the plaintiff had to know the particulars of Lung Hing’s employees’ compensation insurance.

143.  Knowing that the plaintiff was required to take proceedings against his employer’s insurer before the plaintiff might apply to D2 for payment, D1 failed to take out application under s44A of the ECO to obtain particulars of the insurer underwriting Lung Hing’s employees’ compensation insurance rendering the plaintiff unable to take proceedings against such insurer entitled under the ECO as well as required by the ECAO.

Findings on the plaintiff’s claim against D1

144.  D1 only started on about 13 March 2010 to make earnest enquiries about the existence of Lung Hing’s employees’ compensation insurance policy when Lung Hing had already been wound up and Chan was not to be found.  The belated actions could not retrospectively cure the earlier failures of D1 in taking timely actions to protect the plaintiff’s interests under the ECO and the ECAO. When Lam, the partner of D1 who took over the plaintiff’s cases after Hui left D1, was cross-examined at the trial, he conceded that if enquiries had been made earlier, there would have been a better chance to locate Lung Hing’s employees’ compensation insurance policy.  The inaction of Hui had reduced the chance of the insurance policy being made available to the plaintiff and reduced the chance of the plaintiff to recover compensation payment from Lung Hing’s insurer and to satisfy D2 that all reasonable proceedings had been taken.

145.  To consider whether the way Hui conducted the EC Action for the plaintiff fell below the standard reasonably required from a solicitor of her experience, the following matters were relevant:-

(1) Hui knew that the plaintiff’s employer was required by the ECO to take out employees’ compensation insurance covering the plaintiff;

(2) Hui knew that despite Lung Hing’s denial, there was a possibility that the court would hold Lung Hing to be the plaintiff’s employer;

(3) Hui acknowledged that the party eventually found to be the plaintiff’s employer (be it Lau or Lung Hing) might turn out to be insolvent and therefore it was important to find out whether Lau and Lung Hing had employees’ compensation insurance cover;

(4) Hui knew that under the ECO in order to claim against the plaintiff’s employer’s insurer, the plaintiff had to give notice of proceedings of the EC Action to the insurer before judgment of the EC Action;

(5) Hui knew that the plaintiff might have to apply to D2 for payment from the Fund if he could not recover from the plaintiff’s employer or its insurer;

(6) Hui knew that for the plaintiff to be entitled to payment from the Fund under the ECAO, the plaintiff had to give notice of proceedings of the EC Action to the plaintiff’s employer’s insurer and to take reasonable recovery proceedings against the plaintiff’s employer and its insurer; and

(7) to give notice of proceedings to the plaintiff’s employer’s insurer under the ECO and the ECAO and to take reasonable recovery proceedings against the plaintiff’s employer’s insurer, the plaintiff had to identify such insurer.

146.  In the context of the aforesaid matters, I find that it was not an error of judgment but professional negligence for Hui not seeking discovery of Lung Hing’s employees’ compensation insurance policy by request or application under s44A of the ECO.  In making such finding, I bear in mind that the burden to prove professional negligence over and above errors of judgment is by no mean a light one.  In the circumstances of this case, I accept that the plaintiff has discharged such heavy burden.  I find that Hui was negligence in handling the plaintiff’s claim and D1 as employer of Hui shall be liable for the negligence of Hui and answerable to the plaintiff’s claim herein.

Whether D2 was entitled to reject the plaintiff’s application under the ECAO?

147.  D2 reject the plaintiff’s application for payment under s16 of the ECAO on the following three grounds:-

(1) the plaintiff was not a person unable to recover from his employer pursuant to s16 of the ECAO;

(2) the plaintiff had failed to serve on his employer’s insurer a notice of proceedings in respect of the EC Action as required by s25B(1) of the ECAO; and

(3) the plaintiff had failed to assist D2 in carrying out its inquiries as required by s21 of the ECAO.

Section 16 of the ECAO

148.  In the letter dated 2 March 2011 from D2’s solicitors to D1 (pp276-278 of bundle A), it was stated that the plaintiff’s claim was rejected on the following grounds:-

(1) on the evidence available to D2, it appeared that Lung Hing had a policy of insurance for the purposes of Part IV of the ECO in force in relation to the plaintiff;

(2) D1 had failed to take reasonable steps to identify Lung Hing’s insurer and to obtain a copy of the aforesaid policy in the EC Action through specific discovery or otherwise;

(3) D1 had failed to obtain a copy of the aforesaid policy pursuant to s44A of the ECO;

(4) the failure of the plaintiff (through D1) to take such steps resulted in the difficulties in identifying Lung Hing’s insurer and in recovering against it; and

(5) the plaintiff (through D1) had failed to take all reasonable steps that were necessary to enable him to take recovery proceedings against Lung Hing’s insurer, as required by s16(3) of the ECAO.

149.  Pursuant to s16 of the ECAO, the plaintiff had to fulfil the following conditions before he might apply to D2 for payment:-

(1) the plaintiff was unable to recover from his employer an amount of compensation for which his employer was liable; and

(2) the amount was payable pursuant to a judgment or order of a court or tribunal of competent jurisdiction in Hong Kong .

150.  Section 16(1) of the ECAO provides that:-

“(1) A person who is unable to recover from an employer payment of an amount of compensation for which the employer is liable may apply for payment of that amount from the Fund.”

151.  Section 16(3) of the ECAO further provides that:-

“(3) For the purpose of this section a person is not to be regarded as being unable to recover from an employer payment of an amount of compensation for which the employer is liable unless the person has taken such proceedings to recover payment of the amount―

(a) From, wherever applicable―

(i) the employer;

(ii) the principal contractor …; and

(iii) an insurer who has issued a policy of insurance―

(A) which is in force in relation to the injured employee at the time of the accident concerned; and

(B) indemnifying the employer, or the principal contractor mentioned in subparagraph (ii), in respect of such liability; and

(b) as are reasonable in the circumstances, having regard to the likely cost of such proceedings, the resources available to the person and the amount likely to be recovered from, whichever applicable, the employer, the principal contractor and the insurer.”

152.  In this case, the plaintiff would not be treated as being “unable to recover from an employer” for the purposes of s16(1) of the ECAO unless he had taken proceedings to recover payment as were reasonable in the circumstances, as against:-

(1) Lung Hing; and

(2) an insurer who had issued a policy of insurance issued for the purposes of Part IV of the ECO:

(a) which was in force in relation to the plaintiff at the time of the accident; and

(b) which indemnified Lung Hing in respect of such liability.

153.  The reasonableness of the proceedings was to be considered in light of their likely cost, the resources available to the plaintiff and the amount likely to be recovered from Lung Hing and its insurer.

154.  The ECAO is a piece of social legislation for the protection of employees who are unable to recover employees’ compensation payment awarded to them from their employers, the principal contractors for the works concerned and the insurers of the employer or principal contractor.  This can be seen from the long title of the ECAO which describes the ECAO as:-

“An Ordinance to provide for the protection of the entitlement of employees and others to compensation for employment-related injury; for the making of relief payment to eligible persons in relation to damages for employment-related injury; for the establishment of a board and a fund for those purposes; and for incidental or connected matters.”

155.  Mr Wong SC submitted that it was the legislative intention that the Fund was only to serve as a last resort.  He referred to Fok Por v Sum Shuk Ching [1992] 1 HKC 581 when HH Judge Downey stated at pp586-587 that:-

“In my judgment, the general scheme of the Ordinance [the ECAO] is that the Board [D2] should serve as a last resort for obtaining payment of compensation or damages legally awarded to employees, only after it has been shown that attempts to obtain satisfaction have failed because of the insolvency of the employer or his insurer. Even then, the amount to be paid from the Fund, and whether any payment should be made, are matters left to the discretion of the Board. With the exception of cases which fall within s25, there is no question of any entitlement on the part of employees to a payment from the Fund.”

156.  Mr Wong SC submitted that it could be seen from the overall scheme of the ECAO that reasonable efforts had to be made to recover compensation and damages from the employer, the principal contractor and their respective insurers before recourse could be had to the Fund.  It was incumbent on the plaintiff to establish that he had attempted and exhausted other avenues of recovery. 

157.  Mr Wong SC further submitted that:-

(1) there was prima facie evidence that Lung Hing had taken out an employees’ compensation policy for its employees;

(2) the plaintiff (and hence D1) should have been put on notice or enquiry;

(3) it was open to the plaintiff (and hence D1) to obtain a copy of Lung Hing’s employees’ compensation insurance policy in the EC Action, either through specific discovery or through a written notice served pursuant to s44A of the ECO; and

(4) such measures were and would have been reasonable for the plaintiff (and D1 on its behalf) to take, and if taken, would have enable the plaintiff to take reasonable proceedings to recover payment from the insurer of Lung Hing. Failure to take these reasonable steps had resulted in failure to identify the insurer of Lung Hing, and had the effect of stifling the proceedings that the plaintiff would otherwise have been obliged to take against the insurer before he could apply to D2 for payment under s16(1) of the ECAO.

158.  I have found that Lung Hing had taken out employees’ compensation insurance for its employees.  The court had in the EC Action found that the plaintiff was an employee of Lung Hing.  I have also found that D1 had failed to prove that the employees’ compensation insurance of Lung Hing did not cover the plaintiff.  There was no dispute that the plaintiff had not taken any proceedings against Lung Hing’s insurer as the plaintiff did not have particulars of Lung Hing’s employees’ compensation insurance.

159.  D2’s case was that pursuant to section 16(3) of the ECAO, the plaintiff had not taken reasonable proceedings to recover payment of the compensation awarded from Lung Hing’s insurer and accordingly was not regarded as a person unable to recover payment of compensation from his employer.

160.  Mr Lim commented that D2’s position insofar as it related to inability to recover from an insurer, was that the person had to make extensive investigation to identify and locate the policy before he qualified for relief payment.  This was not my understanding of D2’s stance.  Mr Wong SC submitted that D2 only required the plaintiff to take steps which were reasonable in the circumstances to ascertain the identity of the insurer for Lung Hing’s employees’ compensation insurance.  As both Chan and L&P had confirmed that Lung Hing had taken out employees’ compensation insurance for its employees but Lung Hing had failed to disclose the relevant insurance policy, it was only reasonable for the plaintiff to compel Lung Hing to disclose copy of its employees’ compensation insurance policy through request or application under s44A of the ECO.  I do not accept that this amounted to “extensive investigation” in the circumstances of this case.

161.  Having considered the costs for making a request or an application for production under s44A of the ECO, the fact that the plaintiff was legally aided in the EC Action and the amount likely to be recovered from the insurer, I am of the view that it was reasonable in the circumstances of this case for the plaintiff (through D1) to make request or take out application for production under s44A of the ECO to obtain a copy of Lung Hing’s employees’ compensation insurance policy to identify Lung Hing’s insurer for the purposes of complying with the requirements of s43(2) of the ECO or s16(3) of the ECAO.

162.  Mr Lim submitted that if D2 rejected the plaintiff’s application on the ground that the plaintiff had failed to take proceedings against Lung Hing’s insurer, the burden of proof was on D2 to prove that there was an insurer who had issue a policy of insurance which was in force in relation to the plaintiff at the time of the Accident to indemnify Lung Hing in respect of Lung Hing’s liability to pay compensation to the plaintiff.

163.  Mr Lim further submitted that the plaintiff’s obligation under s16(3) of the ECAO was to take reasonable steps in the circumstances to recover the amount of compensation from his employer’s insurer.  Section 16(3) did not oblige the plaintiff to take investigative steps to identify / locate the insurance policy.  Mr Lim submitted that the plaintiff (through D1) had discharged his duty under s16(3) of the ECAO to take such proceedings to recover as were reasonable in the circumstances.  There was no policy of insurance in existence and the plaintiff (through D1) had taken reasonable steps to recover against Lung Hing.  Mr Lim contended that the proceedings to recover payment referred to in s16(3) of the ECAO could only mean enforcement proceedings to recover the compensation awarded.  It could not be implied from the wordings “such proceedings to recover payment of the amount” to include the making of extensive investigation to identify the plaintiff’s employer’s insurer and locate the insurance policy.  He submitted that such interpretation was not consistent with the purpose and objective of the ECAO.

164.  Mr Wong SC submitted that it was incumbent upon the plaintiff (and D1 as his solicitors) to comply with the duty to engage in reasonable proceedings against his employer and its insurer pursuant to s16(3) of the ECAO before he might make a claim to D2.  D2 was entitled and indeed required by s22(1)(a) of the ECAO) to be satisfied that all the conditions imposed by the statute were satisfied by the plaintiff before approving the plaintiff’s application for payment from the Fund.

165.  Mr Wong SC submitted that generally the burden rested with an applicant for payment to satisfy D2 that he was entitled to claim against the Fund and that all statutory requirements had been satisfied.  He further submitted that it was plain from s21(3) of the ECAO that the burden was on an applicant to satisfy D2, not for D2 to gather evidence on the applicant’s behalf and make out a case for him in order that the applicant might make a claim against the Fund.  Accordingly, the burden rested with the plaintiff to satisfy D2 that he has complied with s16(3) of the ECAO.

166.  I agree that when an applicant makes an application for payment under the ECAO, it is for the applicant to satisfy D2 that he is entitled to make the application and that all statutory requirements have been satisfied.  D2 is to make inquiries for determining an applicant’s application but not for gather evidence on behalf of the applicant or for making out a case for the applicant.  I agree with Mr Wong SC that the burden was on an applicant to satisfy D2 that he was entitled to payment from the Fund.  It was not for D2 to prove that the applicant had failed to comply with the relevant statutory criteria but for the applicant to satisfy D2 that he had complied with those criteria in making an application to D2 for payment.

167.  Section 16(3) of the ECAO provides that a person is not to be regarded as being unable to recover from an employer unless he has taken such proceedings to recover payment of the compensation awarded from, inter alia, the employer’s insurer as are reasonable in the circumstances.  I agree with Mr Wong SC that for the plaintiff to claim under s16(1) of the ECAO, the burden was on the plaintiff to prove that he was unable to recover from his employer, ie Lung Hing, and Lung Hing’s insurer.  If the plaintiff’s case was that he did not have to take proceedings against such insurer, the burden was on the plaintiff to prove his case.  If the plaintiff’s case was that there was simply no insurer, the plaintiff had to satisfy D2 that in fact there was no insurer. When considering whether the plaintiff had discharged his burden of proof, the plaintiff might not rely on absence of evidence on the identity of Lung Hing’s insurer or the absence of evidence of the terms of Lung Hing’s employees’ compensation insurance to contend that there was no evidence or insufficient evidence that Lung Hing had taken out employees’ compensation insurance which covered the plaintiff’s claim in the EC Action when the absence of such evidence was caused by the plaintiff (and D1 acting on the plaintiff’s behalf) failing to take reasonable steps to obtain documents relating to such insurance.

168.  Mr Lim submitted that the way D2 handled the plaintiff’s application was to say that as long as there was some evidence suggesting that there might be a policy, s16(3) of the ECAO applied to exclude the plaintiff from relief.  In making such submission, it seems that Mr Lim had misconceived D2’s case.  It was not that the prima facie evidence of existence of insurance which led to the plaintiff’s application being rejected.  It was the plaintiff’s failure to take reasonable steps upon such prima facie evidence enabling recovery proceedings against the insurer to be taken which led to the plaintiff’s application being rejected under s16(3) of the ECAO.

169.  I have found that Lung Hing had taken out employees’ compensation insurance for its employees and that D1 had failed to prove that such insurance did not cover the plaintiff.  Whether the plaintiff had discharged his duty under s16(3) of the ECAO had to be considered in the context of the factual matrix found as aforesaid.  I do not agree with Mr Lim that the obligation under s16(3) of the ECAO did not include taking reasonable steps to ascertain the identity of the applicant’s employer’s insurer.  To say that an applicant is obliged to take proceedings against the insurer but not obliged to take reasonable steps to identify the insurer defies common sense.  I find that the plaintiff had failed to prove that he was unable to recover from Lung Hing’s insurer as required by s16(1) of the ECAO.  I accept Yim’s evidence that it was the plaintiff’s breach of the obligations under s16(3) of the ECAO which caused D2 to refuse the plaintiff’s application.

Section 25B of the ECAO

170.  D2 further relied on the ground that the plaintiff failed to serve any notice of proceedings on Lung Hing’s insurer as required by s25(B)(1) of the ECAO and thus was barred by s25(B)(6) of the ECAO from receiving payments out of the Fund. (See para 11 of D2’s Defence)

171.  Section 25B of the ECAO provides that:-

“(1) Where, after the commencement of this section [1 July 2002], a person commences by writ proceedings in respect of a claim for compensation or damages, the person shall serve on the Board and, where applicable, the insurer concerned a notice of the proceedings-

(a) in writing in a form specified by the Board [D2], signed by the person and accompanied by a copy of the writ;

(b) by registered post; and

(c) subject to subsection (2), not later than 30 days after the date on which the writ is filed with the court.”

“(6) A person who fails to comply with subsection (1) or (3) [subsection (3) does not concern this case] in respect of a claim mentioned in that subsection shall not be entitled to any payment under this Ordinance in respect of the claim, and notwithstanding the other provisions of this Ordinance.”

172.  There was no dispute that notice of proceedings of the EC Action was not served to Lung Hing’s insurer.  Of course, without information on identity of Lung Hing’s insurer, the plaintiff would not be able to serve any notice of proceedings in respect of the EC Action on Lung Hing’s insurer as required by s25(B)(1) of the ECAO.

173.  I have found that Lung Hing had taken out employees’ compensation insurance for its employees.  The plaintiff should be able to identify Lung Hing’s insurer by making a request pursuant to s44A of the ECO.  In such case, s25B(1) of the ECAO requiring service of the notice of proceedings on the insurer shall be applicable.  It was D1’s negligence which caused the plaintiff’s inability to satisfy the provision s25B(1) of the ECAO.  This would not affect the operation of s25B(6) of the ECAO and D2 was justified in rejecting the plaintiff’s application for payment.

Section 21(3) of the ECAO

174.  Mr Wong SC submitted that in the course of D2’s inquiries, the applicant was obliged by s21(3) of the ECAO to assist D2 in carrying out its inquiries. Mr Wong SC said that in D2’s solicitors’ letter dated 23 January 2008, D2 had identified the insurance issue to the plaintiff and D1 acting for the plaintiff had failed to do what D2 had requested the plaintiff to do, ie to seek discovery of insurance policy from Lung Hing and to request Lung Hing to identify its insurer.  Mr Wong SC submitted that the plaintiff failed to comply with s21(3) of the ECAO.

175.  Section 21(3) of the ECAO provides that:-

“(3) It is the duty of every applicant to assist the Board [D2] in carrying out inquiries under this section, and where an applicant fails without reasonable excuse so to assist the Board, the Board may, notwithstanding any other provision, determine that the applicant shall not be entitled to payment from the Fund.”

176.  Under s21(3) of the ECAO the plaintiff has to assist D2 in the inquiries which D2 considered as necessary to determinate whether D2 is satisfied as to the applicant’s entitlement.  Failure to assist D2 may result in the plaintiff’s application being refused.

177.  The assistance requested by D2 as identified by Mr Wong SC were items 1 and 2 listed in D2’s letter dated 23 January 2008, namely:-

(1) to advise D2 whether D1 knew any action had been taken by the Labour Department against the plaintiff’s employer for failing to take out an employees’ compensation insurance policy; and

(2) to advise D2 whether any effort was made in investigating the plaintiff’s employer’s insurance status.

178.  D1 replied to D2 on the aforesaid matters by a letter dated 18 September 2008 (pp236-240 of bundle A).  The material parts of D1’s letter read as follows:-

“1. We understand that no action has been taken by the Labour Department against the two Respondents [Lau and Lung Hing] in the above Case [the EC Action] for failing to take out Employees Compensation Insurance policy;

2. The 1^st and 2^nd Respondents have not provided the identities of their respective insurers.”

179.  By a letter dated 9 October 2008, D1 provided the following further information to D2 (p245 of bundle A):-

“We refer to our letter dated 18^th September 2008.

We write to inform you that in respect of the insurance policy, we are informed by the Solicitors for the 2^nd Respondent [Lung Hing] the following:-

1. their client has all along taken out insurance policy to cover its liability under Employees’ Compensation Ordinance and its common law liability for its employees but not for the Applicant [the plaintiff] in the captioned case [the EC Action] as the Applicant has never been the employee of their client; and

2. the Labour Department has investigated the matter and made enquiries with their client.  After investigation, the Labour Department was satisfied that their client was not the employer of the Applicant in the captioned case so no action has ever been taken by the Labour Department against their client.”

180.  After receiving D1’s aforesaid letters, D2 did not request other specific assistance or information from the plaintiff until 25 March 2009 when D2 asked D1 to advise what enforcement actions had been taken against Lung Hing for recovery of the judgment debt.  Subsequently, the plaintiff petitioned through D1 to wind up Lung Hing.

181.  Mr Wong SC relied on the plaintiff’s failure to seek discovery of Lung Hing’s insurance policy and to request Lung Hing to identify its insurer as pleaded in para 10(h) of D2’s Defence to show that the plaintiff had failed to comply with s21(3) of the ECAO.

182.  With respect, I do not agree that the plaintiff had failed to comply with s21(3) of the ECAO.  D1 had answered matters referred to in D2’s letters.  The plaintiff did not fail to assist D2. I agree with Mr Lim that failure to comply with s16(3) of the ECAO was different from failure to comply with s21(3).  D2 had not requested the plaintiff to do particular things which the plaintiff failed to do.  After D2 received D1’s aforesaid letters answering to matters raised by D2, D2 did not raise any complaint against the plaintiff for failure to assist.  I find that D2 failed to establish non-compliance of s21(3) of the ECAO on the part of the plaintiff.

Conclusion on the plaintiff’s claim against D2

183.  In the premise, I find that D2 was entitled to reject the plaintiff’s application under s25B(6) and s16(3) of the ECAO.  The plaintiff has no claim against D2 in this action.

184.  As the plaintiff’s claim against D2 is alternative to his claim against D1 and I have found D1 liable to the plaintiff’s claim, I make no order to the plaintiff’s claim against D2.  I do not dismiss the plaintiff’s claim against D2.  In the event that I were wrong in holding D1 being negligence, the plaintiff’s claim against D2 would have to be reconsidered at the same time.

D2’s indemnity or contribution claim against D1

185.  D2 had issued a contribution notice against D1 on 3 July 2012 pursuant to s37 of the ECAO.  Section 37(1) of the ECAO provides that:-

“(1) Where a payment is made from the Fund under Part IV to any person (“the recipient”), being payment of an amount of compensation or damages which an employer, insurer or third party is liable to pay the recipient, all the rights and remedies of the recipient with respect to ―

(a) the compensation or damages existing immediately before the payment are, to the extent of the amount of the payment; and

(b) any sum payable in respect of interest or costs in respect of the compensation or damages are,

transferred to and vested in the Board [D2] for the benefit of the Fund.”

186.  As submitted by Mr Wong SC, D2’s claim for indemnity or contribution only arose where D2 was held liable to the plaintiff to make payment.  I have found that D2 is not liable to the plaintiff’s claim.  It will not be necessary for me to deal with D2’s indemnity / contribution claim against D1.  As such, I make no order on D2’s indemnity / contribution claim against D1.

187.  However, if I were to find that D2 was not entitled to refuse payment to the plaintiff notwithstanding my finding of negligence on the part D1, I would have allowed D2’s indemnity / contribution claims against D1 pursuant to s37(1) of the ECAO.  This will happen if I were wrong in holding that the obligations of the plaintiff under the ECAO included taking reasonable steps to identify Lung Hing’s insurer.  In such case, D2 might not be entitled to refuse payment to the plaintiff and the negligent acts of D1 might not have caused the whole of the plaintiff’s loss (bearing in mind that interest on the compensation payable by the Fund was less than interest recoverable from Lung Hing’s insurer).  I would allow D2’s indemnity / contribution claims against D1 for reasons briefly set out below.

188.  I have found that D1 was negligent in handling the plaintiff’s claim in the EC Action in not making request or taking out application under s44A of the ECO to obtain particulars of Lung Hing’s employees’ compensation insurance and identity of the relevant insurer which had led to the plaintiff unable to recover the compensation awarded from Lung Hing’s insurer.  Section 37 of the ECAO provides for all rights and remedies of the plaintiff with respect to the compensation existing immediately before payment by D2 to be transferred to and vested in D2 for the benefit of the Fund.  In such case, before payment by D2, the plaintiff would have claims against D1 for negligence causing non-recovery of compensation awarded to the plaintiff.  If D2 had to pay the plaintiff’s claims, such rights of the plaintiff to claim against D1 for negligence, which were rights in respect of the compensation payable to the plaintiff, would be transferred to and vested in D2.  D1 would be liable to indemnify D2 for the amount of payment made by D2 to the plaintiff.

189.  D1 pleaded in para 10 of its defence to D2’s contribution claim that if D2 suffered any loss due to the inability to exercise its potential rights against an insurer pursuant to s37 of the ECAO, such loss was caused or substantially contributed to by D2’s negligence.  Particulars of D2’s negligence alleged by D1 were as follows:-

(1) after received from D1 the plaintiff’s notice of proceedings in respect of the EC Action in January 2008, D2 did not make any attempt to locate the insurer (if one existed);

(2) after receiving the plaintiff’s application under s16 of the ECAO, D2 did not attempt to use its wide investigative powers under s21(4) of the ECAO to identify the insurer (if there was one);

(3) D2 did not take any steps to secure its rights against Lung Hing or Lung Hing’s insurer (if any);

(4) D2 did not identify for D1 Lung Hing’s insurance policy covering its liability for employees’ compensation or common law damages arising from the Accident or an insurer notwithstanding D2’s insistence both existed; and

(5) D2 took no steps to ensure an insurer was or would become liable for the compensation awarded to the plaintiff in the EC Action so that D2 could recover from the insurer under s37 of the ECAO.

190.  In short, D1 said that D2 was negligent in not identifying Lung Hing’s insurer by itself.

191.  Mr Lim submitted that under s21(2) of the ECAO, upon receipt of an application D2 should carry out such inquiries as it considered necessary to make a determination on the application.  The carrying out of the inquiries was mandatory.  Mr Lim referred to two judgments of the Court of Appeal in Tsang Chin-Keung v Employees Compensation Assistance Fund Board (unrep, CACV 3312/2001, 11 July 2002 and 28 January 2003) when the Court of Appeal stated that D2 was required to make investigations.  Mr Lim criticized D2 for only writing to the HKFI in carrying out such mandatory inquiries when s21(4) of the ECAO had given wide powers of investigation to D2.  He submitted that this was double standard when all D2 would engage in was to write to the HKFI, despite having wide powers of investigation, but at the same time requiring the plaintiff to carry out extensive investigation regarding insurance status.

192.  Section 21(2) 0f the ECAO provides that:-

“(2) Upon receipt of an application under this Part, the Board [D2] shall carry out such inquiries as it considers necessary to make a determination under section 22,”

193.  Section 25B(7) of the ECAO provides that:-

“(7) Upon receipt of a notice [notice of proceedings of the EC Action] under this section, the Board [D2] shall carry out such inquiries as it considers necessary to facilitate the proper carrying out of the functions of the Board in relation to the claim to which the notice relates.”

194.  As pointed out in para 39 of the 2003 judgment in the Tsang Chin Keung case, s22 of the ECAO required D2 to examine the validity of any claim made against it under the ECAO.  Of course, D2 in discharge of its statutory duties under the ECAO has to make investigations as stated in s21(2) and s25B(7) of the ECAO.  However, I agree with Mr Wong SC that the ECAO did not create a private duty of care owed by D2 to the plaintiff.  It was not the law that the investigative duties of any public body were to be treated as private duties of care to any person who might have an interest in the investigation.  Mr Wong SC referred me to Kaisilk Development Ltd v Urban Renewal Authority [2004] 1 HKLRD 907 when Rogers VP stated at 918D that:-

“It is trite law that, in the ordinary case, a breach of statutory duty does not, by itself, give rise to any private law cause of action.”

195.  Whether a statutory duty gives rise to a private cause of action is a question of construction.  (See X (Minors) v Bedfordshire County Council [1995] 2 AC 633 andStovin v Wise [1996] AC 923)  Mr Wong SC submitted that the scheme under the ECAO administered by D2 was a statutory social welfare scheme and the courts had long been reluctant to impose a private duty of care on public bodies responsible for administering such schemes.  He referred to X v Bedfordshire (supra) to support his said contention.

196.  D2 is administering a scheme established by the ECAO which is in the nature of a social security scheme.  D2 is only required under s21(2) and s25B(7) of the ECAO to “carry out such inquiries as it considers necessary” to make a determination or to facilitate the proper carrying out of its functions.  What inquiries are considered necessary is matter to be determined by D2 in the circumstances of the relevant case.  I agree that unless it is the intention of the legislature to confer a private right of action for breach of duty, it is inappropriate to superimpose on the statutory regime a common law duty of care giving rise to a claim in damages.  As HH Judge Downey pointed out in the Fok Por case (supra), except cases fell within s25 of the ECAO, there was no question of any entitlement on the part of employees to a payment from the Fund.  For cases governed by s16 of the ECAO, the amount to be paid from the Fund and whether any payment should be made were all matters left to the discretion of D2.  I do not see from the provisions of the ECAO legislative intent to confer a private right of action for breach of duty.

197.  After receiving the plaintiff’s notice of proceedings in the EC Action in January 2008, D2 had on 23 January 2008 wrote to the HKFI requesting that details of the EC Action be circulated amongst its members.  D2 had on the same day wrote to D1 enquiring on efforts made to investigate the insurance status of the plaintiff’s employer.  On 25 March 2009, D2 requested information from D1 as to steps taken to enforce judgment against Lung Hing in the EC Action.

198.  The inquiries considered necessary by D2 in this case had to be put into the context of this case where the plaintiff was legally represented and funded by legal aid in the EC Action.  As I have found that it was for an applicant to satisfy D2 that he had complied with all the statutory requirements, I accept that by making inquiries to the HKFI and requiring D1 to investigate the insurance status of the plaintiff’s employer, D2 had discharged its duty of investigation under the ECAO in the circumstances of this case.  I do not accept D1’s contention that D2’s inability to exercise its potential rights against an insurer pursuant to s37 of the ECAO was caused or substantially contributed to by D2’s negligence in discharging its statutory duties.

Remedies and quantum

199.  I find D1 liable to the plaintiff’s claim for negligence.

200.  The plaintiff claimed the following sums against D1:-

(1) compensation awarded in the EC Action in the sum of $277,143.00;

(2) interest awarded in the EC Action on the said sum of $277,143.00 or damages for loss of use of the said sum of $277,143.00;

(3) the plaintiff’s taxed costs for the EC Action in the sum of $278,183.00 or damages;

(4) the plaintiff’s taxed costs for the winding-up proceedings against Lung Hing in the sum of $60,436.00 or damages;

(5) the plaintiff’s common fund costs for the EC Action in the sum of $6,878.00 or damages; and

(6) the plaintiff’s common fund costs for the winding-up proceedings against Lung Hing in the sum of $2,901.00 or damages.

201.  The plaintiff’s claim against D1 was in both contract and tort.  The general principle in measuring damages for breach of contract is that the claimant is, as far as money can do it and subject to the limitation imposed by law, to be placed in the same position as if the contract had been performed.

202.  The general principle in measuring damages for tort as put forwarded by Lord Blackburn in Livingstone v Rawyards Coal Co [1879-80] 5 App Cas 25 at 39 is that:-

“I do not think there is any difference of opinion as to its being a general rule that, where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.”

203.  But for the breach of contract and negligence of D1, the plaintiff would have obtained information on the insurer underwriting Lung Hing’s employees’ compensation insurance and would have enforced the compensation awarded to the plaintiff directly against the insurer without the need to wind up Lung Hing. Section 43(1) of the ECO provides that:-

“(1) Subject to this section, where in relation to an employee there is in force a policy of insurance issued for the purposes of this Part and the employer of the employee becomes liable to pay any sum under this Ordinance or independently of this ordinance in respect of an injury to the employee arising out of and in the course of his employment, such sum shall forthwith become due and payable by the insurer, including any sum payable in respect of interest and costs, notwithstanding anything to the contrary in the policy of insurance.”

204.  The amount of damages which the plaintiff is entitled to recover from D1 whether in contract or tort will be the same in this case.  The amount of damages liable to be paid by D1 to the plaintiff include the amount of compensation awarded to the plaintiff in the EC Action in the sum of $277,143.00 together with interest thereon at half judgment rate from 20 June 2006 to 19 December 2008 and thereafter at judgment rate until payment as well as costs recoverable from Lung Hing in the EC Action.  The costs recoverable from Lung Hing in the EC Action had been taxed at $278,183.00.

205.  Costs had also been incurred for winding-up Lung Hing which had been taxed at $60,436.00.  Costs to wind up Lung Hing would not have been incurred if not for D1’s negligence.  Such costs also formed part of the damages liable to be paid by D1 to the plaintiff.  Mr Sakhrani informed the court that by a letter dated 29 May 2013, Messrs Fred Kan & Co, solicitors for D1, had agreed the quantum of the amounts of the compensation awarded to the plaintiff and the taxed costs.

206.  The plaintiff also claimed common fund costs incurred in the EC Action and in the winding-up proceedings in the sums of $6,878.00 and $2,901.00 respectively.  The plaintiff would have to pay the common fund costs for the EC Action irrespective of any negligent acts on the part of D1.  Such costs were not caused by D1’s breach of contract or negligence and were not recoverable from D1.  However, if it was not D1’s breach of contract and negligence, the plaintiff would not have to take enforcement action against Lung Hing by way of winding-up proceedings and to incur the common fund costs for such proceedings in the sum of $2,901.00.  I find that such sum also formed part of the plaintiff’s damages caused by D1’s breach of contract and negligence.

207.  I find that D1 is liable to pay to the plaintiff the sum of $618,663.00 (being $277,143.00 + $278,183.00 + $60,436.00 + $2,901.00).  But for D1’s breach of contract and negligence, the plaintiff should have recovered from Lung Hing’s insurer interest on the compensation and costs awarded to him in the EC Action.  In such case, I find that D1 is also liable to pay interest on the sum of $277,143.00 at half judgment rate from 20 June 2006 to 19 December 2008 and on the sum of $555,326.00 (being $277,143.00 + $278,183.00) at judgment rate from 19 December 2008 until payment.     

Costs

208.  I make an order nisi that D1 shall pay the costs of the plaintiff and D2 in this action including the contribution proceedings (including costs previously reserved) to be taxed, if not agreed, with certificate for counsel. The plaintiff’s own costs shall be taxed in accordance with the Legal Aid Regulations.

209.  Unless application is received within 14 days from any party to vary any of the aforesaid costs order nisi, the same shall become absolute within 14 days from the date of this judgment.