YIP LAI HEUNG v. 伍炳榮 AND OTHERS

DCEC 1252/2016

[2023] HKDC 606

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 1252 OF 2016

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2^nd DECISION ON COSTS

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1.  With the relevant parties’ agreement, this matter on costs is disposed of on papers, while a hearing was held to deal with the applicant’s summons to vary the costs order nisi. This court therefore hands down together on the same occasion 2 written decisions. The other is my 1^st DECISION ON COSTS and reference is made to the introductory words I made in §§ 1 to 12 therein.

2.  While the applicant’s application to vary was pending and on 2 December 2022, this court indicated, with brief reasons given, to revise its costs order nisi by further ordering on nisi basis that both R1 and R2 be deprived of 30% of their respective costs (“the additional order nisi”). R1 and R2 indicated that they opposed and/or sought to vary the additional order nisi. The applicant, though a potential paying party, indicated that it remained neutral. R3, the other potential paying party and by then was acting in person, did not respond. Directions were then given to file affirmation evidence (if advised) and written submissions and the matter would be disposed of on papers. To avoid doubt, it was also made clear that the court would be treating this as an application to vary a costs order nisi.

3.  I have considered the affirmation evidence and the written submissions and this is my decision.

R1’s costs

4.  Mr Cheng, on behalf of R1, referred this court to the cases of Re Elgindata Ltd (No 2) [1992] 1 WLR 1207, Commissioner of Inland Revenue v HIT Finance Ltd [2014] 4 HKLRD 412 and Mo Ying v Brillex Development Ltd HCA 111/2011, 9 June 2014, DHCJ Eugene Fung SC.

5.  Relying heavily on Re Elgindata Ltd (No 2) and Mo Ying, Mr Cheng contended that R1’s case that the Trio together as partners have contracted the Demolition Work as self-employed persons (“the Defence”) did not amount to a “distinct or separate” issue or a separate “event” or as an issue raised unreasonably or improperly such as to displace the general rule that costs should follow the event.

6.  However, it is not disputed, as observed by the Court of Final Appeal in Commissioner of Inland Revenue v HIT Finance Ltd, a decision on costs and cited by Mr Cheng, that

“There is a discretion in the court to deprive a successful party of the whole or part of his costs because he had caused a significant increase in length or costs of the proceedings by raising issues on which he did not succeed. That can be done even if it was not unreasonable to have raised those issue. Whether or not it should be done depends on all the circumstances. This discretion exists for the purpose of avoiding the rigour of too inflexible an application of the rule that costs generally follow the event. It is to be approached with due circumspection so as not to undermine the utility of the general rule.” (p 415)

7.  Indeed, in §62/5/7 of Hong Kong Civil Procedure 2023, it was also commented, in my humble view correctly and particularly apposite in the circumstances of the present case, that:

“In Zhuhai International Container Terminals (Jiuzhou) Ltd v Lo Tong Hoi (CACV 181/2011, [2012] HKEC 1087), it was held that it is not necessary to establish that a successful party has acted unreasonably or improperly in raising an issue for it to be deprived of the whole or part of its costs. Where a failed allegation of the successful party has caused significant increase in the length or costs of proceedings, the court may order that such a party be deprived of their costs in part or in whole. Hence, litigants may take this as an incentive to be selective as to the issues raised. Reference were made to Lord Woolf MR’s word in AEI Rediffusion Music Ltd v Phonographic Performance Led [1999] 1 WLR 1507 that “too robust an application of ‘following the event’ principle encourages litigants to increase the cost of litigation… If you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so” as a warning of the consequences of leaving no stone unturn and increasing the costs in litigation - Ma Kam Sing v Lau Sui Keung (DCEC 1022/2010, [2012] HKEC 1546), where recovery of costs were reduced to two-third due to costs wasted in raising a defence that was found to be untrue.”

8.  In his submissions, Mr Cheng in gist argued that R1 did no more than the usual respondent in defending himself when faced with this complex issue of whether the applicant was an independent contractor or an employee.

9.  In the circumstances of this case, I do not accept that such accurately describes or characterizes R1’s conduct. Rather, I am of the view that

(a)  The Defence ran by R1 was more than merely contending that upon certain facts or state of affairs, the relationship should be regarded as contract for service rather than contract of service. As I mentioned below, R1 indeed manufactured some evidence and clearly embellished his evidence to run the Defence as a positive case, and running it rather vigorously.

(b)  Of the respondents, only R1 (and not even R2, as I allude to later) seriously ran the case that the Trio was in partnership and that the Trio was self-employed.

(c)  As I find in the Judgment, the evidence showing that the applicant was self-employed in a partnership with R1 and R2 was flimsy, at best. It therefore seemed to me rather clear that the applicant was an employee and the main and real contentious issue was who was the employer.

(d)  The Defence has taken up substantial time and costs.

(e)  In paragraph 52 of the Judgment, I rejected R1’s allegation that the applicant said in the Premises: “大家都是自僱不用你擔心，有事我自己負責，…，沒有關係，不要穿安全鞋了”. It is a clear embellishment and a lie by R1. This triggered much response from the applicant who strenuously denied it. Moreover, the events and conversations in the Premises, as I find them, were rather different that those presented by R1 in paragraph 11 of his 1^st witness statement.

(f)  I find that R1 clearly lied about the whole matter relating to the disposal of the Debris.

(g)  I find R1 has in the course of his oral evidence changed his evidence regarding the arrangement he reached with R3 concerning the disposal of the Debris. I further find that R1, together with R3, were not honest or forthright in their evidence concerning the arrangement.

10.  In the result, I am of the view that R1 in his conduct has acted unreasonably and improperly in the above-mentioned regards, over which substantial time and costs have been spent. At trial, Mr Cheng on his part, in my view rightly and sensibly, tempered the situation by not pushing the Defence but focused primarily on the issue of who was indeed the employer.

11.  In the round, I think it just and appropriate that R1 should be deprived 25% of his costs. I so order.

R2’s costs

12.  Mr Wong, on behalf of R2, submitted and emphasized:

(a)  In the initial handwritten version of R2’s Answer filed by him in person only months after the Application was issued, R2 merely pleaded that no employment relationship existed between him and the applicant and that the Trio had agreed to perform the Demolition Work for a total sum of HK$2,100 to be shared by them equally – which are indeed the facts I found in the Judgment.

(b)  R2 pleaded in the 1^st amendment of his Answer that R3 or R4 was the employer if the applicant was an employee. The Defence was only expressly and clearly pleaded in the re-amendment of his Answer when he was legally represented.

(c)  Though the Defence was so formally pleaded as part of his case, the Defence was not really pursued by R2 in his witness statements or at trial in any serious degree. In a nutshell, his case has always been merely telling things as they were - that the Trio performed the Demolition Work together and shared the remuneration equally.

(d)  R2 all along in his witness statements and in oral evidence was forthright and honest. The court indeed has so found. This court has generally accepted his evidence.

(e)  Thus, he has not pursued any issue or allegation unreasonably or improperly, or that has caused any increase in time or costs.

13.  I am persuaded by Mr Wong and accept the matters he submitted above, with the result that R2 should not be deprived any part of his costs. I so order. That being the case, I do not find it necessary to deal with the other matters raised by Mr Wong.

Disposal

14.  In the premises, I vary the costs nisi and order that R1 be deprived 25% of his costs.

15.  I would consider that the costs incurred by the parties in relation to this present matter are costs spent to sort out the proper costs order according to the findings in the Judgment, and thus could be properly viewed as part of the costs of the trial. On a nisi basis, I order that such costs, with certificate for counsel, to be dealt with as part of the parties’ respective costs of the trial; and R1’s and R2’s own costs be taxed according to the Legal Aid Regulations.

16.  I thank Mr Cheng and Mr Wong for their helpful assistance.