CHEUNG HAU YING v. NEW PEOPLE'S PARTY

DCEC 1407/2016

[2021] HKDC 207

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 1407 OF 2016

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D E C I S I O N

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A. Introduction

1.  Ms Cheung (Ms Cheung), represented by Messrs Cap Chan & Co (Cap Chan), instituted this employees’ compensation claim (EC Claim) and a parallel common law action, DCPI 1636/2019 (PI Action), against her employer, New People’s Party (NP Party).  The NP Party’s solicitors are Messrs Sun Lawyers LLP (Sun Lawyers).

2.  At the Case Management Conference on 20 August 2020, this court granted the following order (CMC Order):-

“(1)  Interlocutory judgment on liability be entered against the Respondent in favour of the Applicant leaving compensation to be assessed;

(2)  The costs on liability of this action up to today be paid by the Respondent to the Applicant;

(3)  The parties do within 28 days file a consent summons to agree the amount of employees’ compensation payable by the Respondent … Alternatively, parties do submit a Joint Written Application before the EC Judge; and

(4)  The costs of today’s hearing be costs in the cause of assessment of compensation.”

3.  Pausing here, I note that, Cap Chan, in total disregard of §§(1) and (2) of the CMC Order, filed a consent order on 25 August 2020 which is in the same terms as §§(1) and (2) of the CMC Order.  This consent order is unnecessary and procedurally improper.

4.  By a Joint Written Application filed on 18 September 2020, the parties reached a settlement on quantum by the NP Party agreeing to pay Ms Cheung compensation in the total sum of $246,342.24 (Settlement Sum) (giving credit to the advanced payment in the sum of $171,370.97 (Advanced Payment), leaving a balance of $74,971.27 to be paid within 28 days).  The parties were unable to agree on costs in relation to quantum.

5.  As the parties did not lodge a joint bundle of correspondence as this court directed, Sun Lawyers later lodged with this court a bundle of without prejudice (WP) correspondence exchanged between the parties from 3 September to 17 September 2020 in relation to their negotiations on the amount of compensation payable by the NP Party.  On 5 October 2020, I acceded to the costs order Sun Lawyers proposed, that “[t]here be no order as to costs of this application”, and I granted a costs order nisi in terms of the said proposed costs order.  The effect of this order meant that Ms Cheung would only have the costs as ordered in §(2) of the CMC Order, but not any costs in relation to quantum.

6.  By summons filed on 12 October 2020 (Summons), Ms Cheung applied to vary the said costs order nisi, and sought an order that:-

“1. …

(a)  save for the costs on liability of this employees’ compensation action up to and inclusive of 20^th August 2020 be paid by the Respondent to the Applicant as per the Order made on 20^th August 2020, the Respondent do pay the Applicant’s costs of this action on quantum up to and inclusive of 20^th August 2020 on the District Court Scale, to be taxed if not agreed;

(b)  there be no order as to costs on quantum of this employees’ compensation action from 21^st August 2020 to 17^th September 2020 inclusive and occasioned by the joint written application filed on [18]^th September 2020…”

B.   Hearing of the Summons

7.  At the hearing of the Summons on 23 November 2020, Mr Chan of Cap Chan suggested conflicting costs positions.  On one hand, he agreed not to claim any costs after the CMC Order, but at the same time suggested that Ms Cheung was entitled to have her costs on quantum for the entire EC Claim.  In the light of this confusion coupled with references by Mr Tse of Sun Lawyers to WP negotiations on quantum before the CMC Order without providing such documents at the hearing, I adjourned the Summons to enable the parties to clarify these matters.

C.   The parties’ positions

8.  In the letters sent to the court after the hearing, Cap Chan said there was no such WP correspondence but Sun Lawyers stated the contrary.  In their letter to the court dated 30 November 2020, Sun Lawyers, referring to the following documents enclosed with their letter, stated that that there were WP “negotiations or offers relating to [the] quantum of” the EC Claim and the PI Action:-

(1)  The “Notice of Sanctioned Payment” dated 13 March 2020 (Payment Notice) for the payment of sanctioned payment in the amount of $480,000 (Sanctioned Payment) filed in the PI Action.  In the Payment Notice, Sun Lawyers checked the box that provides for the settlement of “the whole of your claim herein and in the related EC action no. DCEC 1407/2016”; and

(2)  A letter from Cap Chan dated 15 July 2020 marked “without prejudice save as to costs” and “Sanctioned Offer”.

9.  The parties had also lodged written submissions.

D.   Discussion

D.1  Governing Principles

10.  I do not propose to set out the general legal principles as to the award of costs Mr Felix Tang (counsel for the NP Party) stated in his submissions. It is trite that a court enjoys a wide discretion in the award of costs.  The primary principle which governs the exercise of the court’s discretion on the award of costs is that 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 as to the whole or any part of the costs”: O 62 r 3(2) of the Rules of the District Court[1].

11.  As the EC Claim was ultimately settled with an award of compensation in favour of Ms Cheung, costs should follow the event.  The NP Party should pay the costs to Ms Cheung in relation to quantum unless there are circumstances justifying a departure from this usual costs position: O 62 r 3(2).

12.  Under O 62 r 5(1), the court in exercising its discretion as to costs shall, in appropriate circumstances, take into account various matters.  The particular relevant matters for this Summons, in my view, are r 5(1)(b), (d) and (e):-

(i)  “any payment of money into court and the amount of such payment” ((1)(b));

(ii)  “any written offer which is expressed to be “without prejudice save as to costs” and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under O 22” ((1)(d)); and

(iii)  “the conduct of all the parties” ((1)(e)).

D.2  Any sanctioned payment and sanctioned offer?

13.  From the parties’ submissions, it is not in dispute that the parties, before the CMC Order, did not engage in any WP discussions on the quantum of the EC Claim.  It is also undisputed that there was no sanctioned payment or sanctioned offer made in the EC Claim.

14.  Mr Tang, however, contended (at §48 of the written submissions) that the Sanctioned Payment made in the PI Action, by virtue of s 26 of the Employees’ Compensation Ordinance (Cap 282)[2], should be regarded as “valid without prejudice discussion between the parties insofar as the quantum of the EC claim is concerned”.

15.  With respect to Mr Tang, I believe that he has misunderstood the implications of s 26, which obliges a plaintiff in a common law action to deduct from the award of damages, the amount of compensation which has been paid or is payable in the employees’ compensation proceedings.  Owing to this mandatory requirement of deduction, a defendant, when making a sanctioned payment in a parallel common law claim, is required by O 22 r 8(2)(c)[3] to state in a notice of sanctioned payment whether the sanctioned payment has taken into account the compensation paid in a related employees’ compensation application.

16.  In the circumstances, the specification stated in the box Sun Lawyers checked in the Payment Notice was a procedural requirement irrespective of what was expressly mentioned in the covering letter served together with the Payment Notice of their intention of using the Sanctioned Payment to achieve a global settlement of both proceedings.  Since the EC Claim and the PI Action, though related, are separate claims, separate sanctioned payments need to be made in each of these proceedings.  There are presently no rules allowing for the payment of a sanctioned payment in one action to cover both proceedings as a “global” sanctioned payment for both the EC Claim and the PI Action.  I therefore reject Mr Tang’s “global” sanctioned payment arguments.

17.  In the same vein, Cap Chan’s letter dated 15 July 2020, offering a total sum of $1.52 million to settle both the EC Claim and the PI Action without specifying an amount for the EC Claim, cannot be regarded as a valid sanctioned offer for the EC Claim. By virtue of the provisions of s 26 discussed above, the said global offer of settlement may be a relevant consideration when a court in the PI Action is called upon to determine costs liability.  In any event, since the parties are in agreement that there were no negotiations on the quantum of the EC Claim before the CMC Order, this letter, which was written before the CMC Order, is irrelevant.

18.  In the circumstances, I therefore conclude that the NP Party made no sanctioned payment in the EC Claim nor was there any sanctioned offer.  There are no exceptional circumstances to justify a departure from the usual costs order of costs following the event.  I therefore order the NP Party to pay the costs to Ms Cheung on quantum up till the CMC Order, including costs of the CMC hearing.

19.  After the CMC Order, the parties started a series of WP negotiations on quantum.  These WP negotiations are therefore relevant matters that I should take into account when exercising my discretion on costs after the CMC Order.

D.3  Conduct of the parties: WP negotiations

20.  It is common ground that it was only upon the court’s direction (see §(3) of the CMC Order) that the parties started engaging in active WP negotiations to settle the EC Claim.  

21.  The first WP letter was from Cap Chan dated 3 September 2020, in which Cap Chan offered to settle both sets of proceedings for a total sum of $651,846.11 (which sum has taken into account an amount of $173,846.11 calculated to be the compensation for the EC Claim and interest).

22.  The above offer was rejected on 11 September with Sun Lawyers offering $75,000 to settle the EC Claim.

23.  Subsequently, from 11 to 17 September, there were not less than four WP correspondence exchanges.  The differences between the parties were mainly the disputes related to whether the calculation of part of Ms Cheung’s sick leave be based on four-fifths of her monthly wages or whole monthly wages, the percentage wage increase for computing the periodical payments, and the amount of the advanced payment the NP Party paid to Ms Cheung.

24.  On 17 September, Cap Chan abruptly accepted the offer Sun Lawyers made on 11 September by enclosing with their letter a draft consent summons consenting to the Settlement Sum, which was substantially the same as the amount of Sun Lawyers’ said offer of $75,000. (Taking into account the Advanced Payment of $171,370.97, the total amount of Sun Lawyers’ offer would have been $246,370.97 ($75,000+ $171,370.97) which is in fact $28.73 more than the Settlement Sum of $246,342.24.)

25.  The offers put forward by Cap Chan before their abrupt acceptance of Sun Lawyers’ offer on 17 September, in my view, are wholly unrealistic. As the calculations set out in the preceding paragraph shown, the Settlement Sum is not only less than the offer Sun Lawyers made on 11 September, but worse still, is lower than a later offer of $80,000 made by Sun Lawyers on 16 September (which total sum would have been $251,370.97 after taking into account the Advanced Payment).

26.  The WP correspondence exchanged in September 2020 shows that Ms Cheung had unreasonably inflated the calculations of the amount of compensation[4] without any solid ground.  For example, the argument that Ms Cheung was entitled to full wages during some periods of the sick leave is without regard to s 10, which stipulates payment of four-fifths of an employee’s monthly earnings.  Her unreasonable conduct is amplified by an unexplained turnaround in her accepting an offer that was less favourable than Sun Lawyers’ later offer of $80,000 on 16 September.  Such conduct, pursuant to O 62 r 5(1)(e), is a matter I should have regard to when exercising my discretion on costs.  Having regard to Ms Cheung’s manner of negotiations through Cap Chan, I should exercise my discretion in not only depriving Ms Cheung of her costs after the CMC Order (which has been rightly conceded by Cap Chan on her behalf), but should further order her to pay the NP Party’s costs of and occasioned by the WP negotiations.  I so order.

E.   Disposition

27.  For the reasons stated above, I vary the costs order nisi dated 5 October 2020 by granting an order in terms of §1(a) of the Summons, and ordering the Applicant to pay the Respondent’s costs of and occasioned by the WP negotiations after the CMC Order, such costs to be taxed if not agreed.

28.  As for the costs of the Summons, I consider that neither party has emerged as a clear winner in the Summons.  Hence, I consider it fair that each party shall bear their own costs of the Summons, including the costs reserved for the hearing of the Summons.  Hence, I grant the usual costs order nisi of no order as to the costs of the Summons.

POSTSCRIPT

29.  I understand that there is a hearing in March 2020 for an application by Ms Cheung for leave to accept the Sanctioned Payment in the PI Action. Similar arguments on costs will likely be raised in that hearing.  In this regard, I wish to draw the parties’ attention to a decision of Bharwaney J in Maxwell v Keliston Marine (Far East) Ltd (In Liq) & Anor [2012] 2 HKC 249 concerning the proper approach to be adopted in relation to costs involving sanctioned payment in parallel employees’ compensation and the related common law proceedings.

30.  I hope this Decision will assist the parties to exercise their common sense and reach an agreement before the forthcoming hearing on costs for the PI Action.