YUNG CHI MAN v. TANG KAN FU t/a YUN SHING MOTOR SERVICE

DCEC 770/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 770 OF 2004

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RULING

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Introduction

This is a ruling on costs arising from the hearing on the quantum of compensation to be paid to the Applicant by the Respondent under the Employees' Compensation Ordinance, Cap 282 (“ECO”).  In that hearing the court made an order nisi that there be no order as to costs.  The Applicant now asks for this order to be varied so that costs be to the Applicant.  The Respondent initially accepted the order of the court but changed its stance during the course of the hearing and asked for the costs to be awarded to it.  

Background of the Case

2. On 24 May 2001 when the Applicant was repairing a tractor while in the employment of the Respondent the oil tank of the tractor caught fire and exploded, causing burnt injuries to over 55% of the Applicant’s body.

3. The Respondent admitted liability but the parties could not agree on the quantum of compensation.  A trial was conducted.  The issues involved and the judgement of the court are as follows:

(a) compensation for loss of earning capacity under section 9 of the ECO – under this head the Applicant appealed against the assessment of 10% loss of earning capacity made by the Employees’ Compensation (Ordinary Assessment) Board and asked for 25% while the Respondent agreed all along to accept the assessment of 10%.  The court after trial assessed a loss of earning capacity of 10%;

(b)   compensation for temporary incapacity under section 10 of the ECO and for leave to extend the length of period for periodical payments under section 10(5) to 31 months 22 days – the Respondent agreed to pay the periodical payments for 24 months but objected to the extension.  Judgement was entered in favour of the Applicant;

(c)   payment of the medical expenses of the Applicant under section 10A of the ECO – parties agreed that the outstanding amount was $200 which the Respondent agreed to pay before trial commenced and judgement was entered in favour of the Applicant;

(d)   parties admitted that the Applicant had received a certain sum of money ($175,054.35) from the Respondent but the Applicant argued that it was periodical payments under section 10 of the ECO while the Respondent contended that this money was not only periodical payments but also included advancement of compensation – judgement was entered in favour of the Respondent.

4.  The Respondent also argued that this sum of money was sufficient to satisfy the whole claim of the Applicant under the ECO.  The court ruled against the Respondent and came to the conclusion that after the deduction of this sum of money the Respondent was still required to pay $33,607.75 with interest to the Applicant.

5.  As each party obtained judgement in some of the issues at the trial the court made an order nisi that there be no order as to costs in the trial and it is this order which the Applicant and Respondent now ask to vary.

Chronology of Events

6.  It is useful to set out at this point the chronology of the events in this case:

	Date	Event
(a)	24.5.2001	Accident in question occurred and Applicant suffered injuries
		Respondent started paying periodical payments and advancement of compensation to Applicant
(b)	16.6.2004	Applicant attended Employees' Compensation (Ordinary Assessment) Board (“the Board”) of Labour Department
(c)	30.6.2004	Form 7 certifying Applicant suffering from 8% loss of earning capacity issued by the Board and was objected to by Applicant
(d)	12.7.2004	Applicant applied to this court for compensation under sections 9, 10 and 10A of the ECO and to appeal against assessment of the Board
(e)	17.9.2004	Judgement on liability entered against Respondent by consent during call-over hearing before HHJ Lok who ordered costs of the hearing be costs in the cause
(f)	6.10.2004	Applicant attended the Board for review of assessment
(h)	20.10.2004	Form 9 issued by the Board certifying 10% loss of earning capacity of Applicant on review
(i)	14.3.2005	Applicant appealed to this court against the Form 9 assessment
(j)	21.4.2005	Without prejudice letter from Respondent to Applicant accepting the review assessment of 10% loss of earning capacity of Applicant
(k)	6.5.2005	Directions regarding serving and filing of medical reports and calling of medical evidence given by HHJ Ng who ordered the costs of the hearing be costs in the cause
(l)	4.7.2005	Joint medical assessment of Applicant by Dr Chow Sik Kuen and Dr Walter W K King who both came to conclusion of 10% loss of earning capacity
(m)	2.9.2005	Respondent absent from hearing and directions regarding serving and filing of medical evidence by the Applicant and the calling of the evidence at trial given by HHJ Ng who ordered $800 costs be paid by Respondent to Applicant
(n)	24.9.2005	Without prejudice letter from Applicant to Respondent setting out the calculations and amounts of various heads of compensation under the ECO based on a 10% loss of earning capacity and, after deducting the advancement received, offering to accept $46,126.09 plus costs in full and final settlement
(o)	27.10.2005	Without prejudice letter from Applicant to Respondent revising the calculations and offering to accept $41,000.00 plus costs in full and final settlement
(p)	28.10.2005	Without prejudice letter from Respondent to Applicant accepting the Respondent’s calculations of the amounts of compensation but disputing the amount of advancement stated by the Respondent
(q)	28.10.2005	Applicant amended its claim to include application for court’s leave under section 10(5) of ECO to extend the period of periodical payments beyond 24 months to cover the whole of Applicant’s sick leave of 31 months and 22 days
(r)	17.11.2005	Without prejudice letter from Applicant to Respondent revising the amount of advancement received and offering to accept $40,000.00 plus costs in full and final settlement
(s)	10.12.2005	Reminder of the Applicant’s without prejudice letter in (r) above giving Respondent 7 days to reply
(t)	4.1.2006	Letter from Respondent to Applicant offering to accept the Applicant’s proposal of $40,000.00 with interests as full and final settlement, but asking for the matters relating to costs to be argued in court
(u)	12.1.2006	Trial conducted
(v)	6.2.2006	Judgement handed down
(w)	13.2.2006	Letter from Applicant to Respondent asking Respondent to pay the costs of Applicant in the whole action or application would be made to vary court’s order nisi of no order as to costs
(x)	15.2.2006	Letter from Respondent to Applicant refusing to pay Respondent‘s costs in the action and stating that should Applicant be making the application to court it would ask for costs of the application and the whole action
(y)	16.2.2006	Applicant applying to court for variation of the court’s order nisi of no order as to costs and asking for costs of the whole action
(z)	8.3.2006	Hearing of the application

Arguments of Applicantt

7.  The main arguments of the Applicant are that the court had awarded $33,607.55 with interests to it and pursuant to the doctrine of costs to follow the event it should be awarded the costs for the whole action.  The Applicant cites in support Order 62 Rule 3(2) which provides that the court in exercising its discretion in awarding costs should order the costs to follow the event unless the circumstances of the case justify some other order to be made.  The cases of F v F HCMC 4/2001 and Yu Cheung Yim v Lucky Friend Industrial Ltd DCEC 160/1995 are also relied on by the Applicant.

8 .  The Applicant also points out that the Respondent had never made any payment into the court and had refused to accept various reasonable offers from the Respondent in the nature of Calderbank letters to settle the case. 

Arguments of Respondent

9.  The Respondent submits that the doctrine of costs to follow the event does not simply mean that the party which gets the judgement will automatically get the costs.  In the present case there were several issues to be determined at the trial and each party had judgement entered in its favour in some of the issues.  The bulk of the documentary evidence in the trial was, however, medical reports which related to the issue of the assessment of the Applicant’s loss of earning capacity.  A large portion of the time of the trial was also devoted to this issue in which judgement was entered for the Respondent. 

10.  The Respondent points out that the Applicant amended its claim on 28 October 2005 to include the application for the court’s leave to extend the period of periodical payments under section 10(5) of the ECO to cover the whole of the Applicant’s sick leave of 31 months and 22 days.  The Respondent argues that before such an application the advancement of compensation paid to the Applicant by the Respondent was more than sufficient to satisfy the whole claim of the Applicant.  As such the Respondent should in no way be held responsible for the costs of the Applicant before the amendment.

11. The Respondent also stresses that it offered by letter of 4 January 2006 to accept the Applicant’s proposed quantum of compensation leaving only the matters relating to costs to be argued in court and there was no response from the Applicant.

The Calderb a nk Offers

12. The Applicant made a Calderbank offer to accept $40,000 plus costs as full and final settlement while the Respondent made a counter offer of agreeing to pay the proposed $40,000 but asked for the matters of costs to be argued in court.

13. The Applicant sets out in paragraph 26 of its written submission that the cheque of $40,000 was never paid to it by the Respondent.  This creates an impression that the Applicant had accepted the offer and was expecting the cheque.  The Respondent explains in court that no cheque was issued because the Applicant had never indicated an acceptance of his offer.  When the court enquires with the Applicant as to what had happened the Applicant, to the surprise of the court, says that it had in fact telephoned the Respondent to refuse itscounter-offer.

14. The Respondent did not make any payment into court on its counter-offer being refused.  After the trial the court awarded $33,607.75 to the Applicant with interests.  According to the parties the amount payable with interests calculated up to 6 February 2006 is $41,595.97.  This figure obviously only exceeds $40,000 by a very small amount.  The difference is even smaller if the interests are only calculated up to the date of 17 November 2005 when the Applicant first made the offer of $40,000 plus costs for settlement. 

15. If the Applicant had accepted the counter-offer of the Respondent the trial would have been much shorter and simpler and the parties would not have had to call any witnesses at the trial.  This would no doubt have saved costs of both parties as well as public expenses.  It would also have saved the Applicant himself from going through the agony of recounting in the witness box his unfortunate and painful experience.  It is the view of the court that had the Applicant approached the matter more sensibly it would have no doubt accepted the counter-offer.  Having said that the court still has to bear in mind that the final award to the Applicant still exceeds the amount offered and the Applicant was therefore entitled to have acted in the way it did.

Costs of the Trial Hearing

16. Matters remained in issue at the trial related to the extension of the period of periodical payments, the assessment of loss of earning capacity and whether payment to Applicant was advancement of compensation or mere periodical payments.  The court gave judgement in respect of the first issue to the Applicant and the other two to the Respondent. 

17. In relation to the extension of the period for periodical payments the Respondent had indicated before the trial that it was not disputing the length of sick leave of the Applicant and conceded in the final submission that extension should be given to cover the whole length of the sick leave unless there were good reasons not to do so.  The Respondent did not argue that there were such good reasons in the present case.  Only a very small portion of the time of the trial was spent on this issue.

18. The majority of the time in the trial was taken up in canvassing the issue of the assessment of the loss of earning capacity which involved the submission of a number of medical reports to the court and the calling of the Applicant as a witness.

19. The last issue also involved the submission of documents to court and the calling of witness.  The time spent in this connection was, however, shorter than that spent on the issue of the assessment of loss of earning capacity.

20. In F v F Hartmann J said that it was a long-established principle that costs were to be determined not by dividing litigation into quantifiable subjects and figures like a profit and loss account but rather by way of overall impression.  His Lordship also added that although an issue advanced by a party had not found favour with the court it did not mean that the issue was not necessary, if only peripherally, to assist the court in considering the overall strength of that party’s case.  I accept that the contention of the Applicant that the money paid to him was only meant to be periodical payments falls into this category.

21. However, I am of the view that the issue advanced by the Applicant in asking for an assessment of 25% of loss of earning capacity was improper and unreasonable.  The Employees’ Compensation (Ordinary Assessment) Board had made an assessment of 10% on a review and the joint medical assessment arranged by the Applicant and the Respondent had also come to an identical finding.  There were also no authorities in support of the Applicant’s contention.  The action of the Applicant, in my view, comes within the exceptions to the rule of costs to follow the event set out in the principles of Nourse LJ in In re Elgindata Ltd (No. 2) [1992] 1 WLR 1207 (at 1214):

(i)    costs are in the discretion of the court;

(ii)    costs should follow the event except when it appears to the court that in the circumstances of the case some other order should be made;

(iii)   the general rule that costs follow the event does not cease to apply simply because the successful party raises issues or makes allegations on which he fails.  But where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or a part of his costs;

(iv)  where the successful party raises issues or makes allegation improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or part of the unsuccessful party’s costs.

These principles were adopted by Hartmann J in F v F and are in line with the terms of Order 62 Rule 3(2) of the Rules of the District Court stated above.

22.  In Yu Cheung Yim v Lucky Friend Industrial Ltd an employee who was injured at work made a claim against the employer and asserted that he suffered from 100% loss of earning capacity.  The doctors who had examined the employee were of the views that he was “grossly exaggerating his deficits” and the Employees’ Compensation (Ordinary Assessment) Board had assessed a 6% loss of earning capacity.  After the trial the court came to an identical assessment.  The court made an order nisi that the employee’s costs to be paid by the employer. 

23.  The Applicant in the present case seeks to rely on this case.  This case is a decision of the District Court and it is clear from the judgement that the court had not heard any arguments from the parties in coming to such a costs order.  More importantly, no reasons were given in the judgement as to how the court had come to such a decision.  It is my view that this case can hardly be taken as an authority on matters of costs.      

24.  Having considered the circumstances of the present case and the conduct of the parties at the trial the court is of the view that it is just and fair that the Applicant should pay 60% of the costs of the Respondent in the trial hearing and the court so orders. 

Costs in the Rest of the Action

25. One of the grounds of the Respondent’s arguments that it should be paid the costs of the whole action is that before the Applicant applied to amend its claim to include the application for the court’s leave to extend the period for periodical payments, the money it had paid to the Applicant by way of advancement of compensation was sufficient to satisfy the whole of the Applicant’s claim.  The Applicant replies that when it filed the claim with the court it was already stated that the claim was made under sections 9, 10 and 10A of the ECO and this would naturally have included section 10(5) which made provisions for the extension of the period for periodical payments.  The Applicant adds that it has only applied to make the amendment for the purpose of making better pleading.

26. I find the arguments of the Applicant to be too far fetching.  It is only fair that a party should specifically state so in its application if it is its intention to ask for the court’s leave to extend the period for periodical payments.  The court is, however, of the view that the failure of the Applicant to do so has no bearing in the matters of costs in the particular circumstances of the present case.  In the Calderbank letters of both the Applicant and the Respondent the calculation of the claim of periodical payments was already based on the extended period.  When settlement could not be reached due to the diverging views of the parties on the matters of costs the case went to trial.  The Respondent made known to the court at the commencement of the trial that it was objecting to the extension sought by the Applicant.  It can be seen that even if the Applicant had included the application for the extension in the very first claim filed with the court the end result would still have been the same and the Respondent would still have objected to the application at the time of trial.

27. As stated above the Applicant was awarded compensation by the court after the trial and the Respondent had not made any payment into court.  It follows that the Applicant should be awarded costs for the whole action with the exception of those in the trial hearing as I have set out in paragraph 24 above.  The court so orders.

28. The order nisi of no order as to costs is varied accordingly.

Costs of Present Hearing

29. The costs of the present hearing be to the Applicant.

Applicant's Own Costs

30. The Applicant's own costs are to be taxed in accordance with Legal Aid Regulations.