CHEN LAI FUNG v. PANG MING WAI ELIXA JANE t/a HERBAGE TCM MEDICAL CENTRE

DCEC 1615/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 1615 OF 2012

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RULING

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INTRODUCTION

1.  This is an application by the respondent for costs of the action against the applicant upon an admission of liability by the respondent.

BACKGROUND

2.  The applicant, being employed by the respondent as a clinic services officer, sustained injury at work on 17 January 2012.  The applicant was granted legal aid on 9 August 2012. 

3.  Upon receipt of the Legal Aid Certificate, the respondent had sent a without prejudice letter to the applicant’s solicitor dated 29 August 2012 (page 208-209 of Bundle B) (“829 Letter”) asking for documents to be provided so that “upon receiving the above, parties shall further agree on the exact figure of the compensation thereby facilitating the earliest receipt of compensation by your client without protraction of this case to no party’s benefit”.

4.  By a letter dated 10 September 2012 (page 104-107 of Bundle B), the applicant’s solicitor had supplied the respondent with particulars of the accident and asking the respondent to confirm whether liability for compensation is admitted and for compensation to be assessed.  At the penultimate paragraph of the said letter, it is stated, “Finally we expect a constructive reply to this letter within the next 7 days by your client… failing which we shall commence legal proceedings against your client without further notice” (“Letter Before Action”).

5.  By a letter dated 14 September 2012 (page 210-211 of Bundle B) (“914 Letter”), the respondent proposed to settle the employee compensation claim in the sum of $45,137.38 without admission of liability.  It is the applicant’s case that her solicitor only received this letter on 18 September 2012. 

6.  The application in this case is signed on 14 September 2012 and filed on 15 September 2012.

7.  On 20 September 2012, the respondent’s solicitor sent a letter to the applicant’s solicitor stating the unreasonable conduct of the applicant to issue this proceedings and indicated its intention to admit liability and to consent to judgment to be entered with compensation to be assessed (page 112-114 of Bundle B) (“R’s 920 Letter”).  On the same day, solicitor for the applicant replied by letter (page 116-120 of Bundle B) (“A’s 920a Letter”) indicating the applicant is prepared to accept a sum of $76,233.68 plus costs in full and final settlement of the applicant’s claim in this proceedings, with detail calculation of the settlement sum.  By another letter of the same date (page 122-123 of Bundle B) (“A’s 920b Letter”), the applicant provided a reply to the request for information by the respondent in the 829 Letter.

8.  On 21 September 2012, the respondent, through its solicitor, paid the applicant’s solicitor a cheque in the sum of $76,233.68 to settle the claim (page 125-126 of Bundle B).  As for costs, the respondent proposed there be no order as to costs due to the unreasonable conduct of the applicant in the commencement of this proceedings and would take out a summons for argument on costs should the applicant disagree with the costs arrangement. 

9.  By a reply letter received by the respondent on 24 September 2012 (page 128-130 of Bundle B) (“924 Letter”), solicitor for the applicant had prepared a draft consent summons.  In the consent summons, it is suggested that costs be to the applicant and solicitor for the applicant reiterated in the letter that the issue of costs is a matter of taxation. 

10.  The respondent replied on 25 September 2012 (page 136-138 of Bundle B) (“925 Letter”) that contents of the consent summons is accepted save for the terms on costs. 

11.  On 20 October 2012, the respondent takes out the summons before this court for :

(a) judgment on liability be entered for the applicant;

(b) the respondent do pay the applicant the sum of $93,565.45 (inclusive of interest) in full and final settlement of the applicant’s claim herein (which had been paid on 3 October 2012);

(c) costs of this application and of the action be to the respondent; and

(d) the applicant’s own costs be taxed in accordance with Legal Aid Regulations.

The Respondent’s Argument

12.  The respondent contends that the applicant has conducted this proceedings unreasonably in the sense that :

(a) the applicant failed to respond to the 829 Letter but issued the Letter Before Action instead;

(b) the Letter Before Action was drafted in accordance with the proforma letter recommended by the Law Society save and except it only gave the respondent 7 days to respond as opposed to 1 month’s time recommended;

(c) notwithstanding 7 days had been stipulated, the applicant commenced this proceedings on 15 September 2012, before the expiry of the deadline.

The Applicant’s Argument

13.  Though a number of grounds are raised by the applicant in the correspondence and affirmation filed in this case, Mr. So for the applicant confirmed at this hearing that the objection raised by the applicant is only those stated in his written submission, namely :

(a) the respondent had no genuine intention to settle the claim;

(b) the settlement terms offered by the respondent in the 914 Letter is far below the entitlement of the applicant and is unreasonable;

(c) the wrongful behaviour of the respondent in failing to take out insurance coverage.

14.  It is submitted that the respondent never had the genuine intention to settle as indicated from the following facts :

(a) the respondent had been in contact with the Labour Department as well as the Legal Aid Department ever since the occurrence of the accident and there are ample opportunities for the respondent to settle with the applicant, should the respondent so minded.  Yet, there was never any offer to settle before the 914 Letter; 

(b) the respondent put up the excuse that the applicant had failed to attend a further medical examination on 24 February 2012 as requested but there is no evidence to show that such a request had been made; 

(c) Misleading the applicant and the Labour Department into the belief that the respondent has taken out valid insurance policy by copying letters sent to the applicant to the QBE HK & Shanghai Insurance Ltd (“QBE”);

(d) the respondent failed to pay the applicant any periodical payment since 24 February 2012 and failed to provide information to the Director of  Legal Aid;

(e) the respondent had never admitted liability until after this proceedings had commenced.

15.  The settlement sum proposed by the respondent in the 914 Letter is far below the sum eventually agreed by the respondent as indicated in the consent summons prepared by the applicant.  And it is also unreasonable for the respondent to include the salary before accident as part of the periodic payment in the settlement sum.  Since the respondent failed to come up with a reasonable sum of compensation, it is justifiable for the applicant to issue proceedings forthwith.

16.  The sample Letter of Claim recommended by the Law Society are subject to amendment to suit individual cases and is not binding, so the applicant cannot be faulted for a shorter time frame being stipulated.  And since the respondent had replied on 14 September 2012, the 7-day deadline was intervened and broken by the respondent.

17.  And it is also the applicant’s contention that had the respondent taken out an insurance coverage, the legal costs to be incurred would be fully covered and it is the respondent’s fault not to take out any insurance. 

The Legal Principle

18.  Costs are in the discretion of the court.  O.62 r.3(2) of the Rules of District Court (“RDC”) provides that if the court in the exercise of its discretion sees fit to make any order as to costs of or incidental to any proceedings, the court shall order the costs to follow the event, except when it appears that in the circumstances of the case, some other order should be made as to the whole or any part of the costs.  The party seeking to displace the general rule that costs should follow the event bears the burden of showing that the circumstances justify the exceptional course of such displacement (Active Base Limited v Roderick John Sutton & others, unreported, HCCW470/2005).

19.  Under O.62 r.5(1) of the RDC, the court in exercising its discretion on costs, shall take into account, amongst other things, the underlying objectives set out in Order 1A r.1 of RDC, the conduct of the parties, and any admissible offer to settle made by a party which is drawn to the attention of the court.  In particular, Order 62 r. 5(2) defines the conduct of the parties to include :

“(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether the claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.”

Discussion

20.  Having considered the evidence and submissions before me, I agree with the respondent that the conduct of the applicant in taking out this proceedings on 15 September 2012 is unreasonable and such conduct do justify a departure from the general principle of costs should follow the event.

21.  The main ground for the applicant to justify her commencement of this proceedings is the intention of the respondent to settle.  I found this to be irrelevant and unjustified.

22.  The applicant relied upon the allegations as particularised in paragraph 14(a)-(d) above in support of the contention that the respondent did not have the genuine intention to settle.  Yet, all these allegations occurred well before the 829 Letter and 914 Letter issued by the respondent.  No matter what is the attitude of the respondent towards settlement before, upon notified of the fact that the applicant had been granted legal aid to pursue with her claim, the respondent had sent out the 829 Letter indicating the intention to agree on the exact figure of compensation to facilitate early payment.  Even though the respondent had not admitted liability, it is apparent from the 829 Letter that it is not her intention to prolong the case.  There is apparently a change of attitude on the part of the respondent.

23.  Such intention is further enhanced from the issuance of the 914 Letter in which the respondent had in fact started the negotiation by offering a figure for settlement.  Such an offer was without the benefit of having detailed information from the applicant since the applicant had failed to reply to the request for information as stated in the 829 Letter.  The attack by the applicant that the respondent’s offer is unreasonable is unfounded since the figure offered by the respondent is not far below the eventual settlement figure. 

24.  In any event, it is the applicant’s case that her solicitor only received the 914 Letter on 18 September, 3 days after the filing of the application in this case. So, the offer in the 914 Letter, no matter how unreasonable it was, cannot be a factor considered by the applicant at the time she commenced this proceedings, hence cannot be relied upon to justify the commencement of this action on 15 September.

25.  Even if the respondent’s offer in the 914 Letter is received before the commencement of this proceedings and considered unreasonable, the applicant’s failure to respond upon receipt of the 914 Letter is not in line with the underlying objectives under Order 1A RDC.   After the Civil Justice Reform, the parties to any proceedings and their legal representatives have the duty to assist the court to further the underlying objectives of the Rules of the Court, which includes :

(a) to ensure that a case is dealt with as expeditiously as is reasonably practicable;

(b) to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings; and

(c) to facilitate the settlement of disputes.

26.  Having received the 914 Letter in which the respondent had started the negotiation process by way of an offer, in order to further the underlying objectives stated above, what the applicant should do is to reply by stating the applicant’s response to the offer and/or counter offer terms for settlement, as in the terms in A’s 920a Letter.  There is strong possibility that a settlement could have been achieved had there been continued negotiations.  This is particularly so bearing in mind the relatively small amount of the applicant’s claim and the underlying objectives with emphasis on cost effectiveness, procedural economy and proportionality.  Instead, the applicant decided to commence this proceedings, such conduct deprive the parties the opportunity to resolve the case at minimal cost.  The applicant should exhaust all possible negotiations to avoid incurring the costs of litigation before she should decide to bring this proceedings.

27.  The applicant’s conduct in taking out this proceedings on 15 September 2012 without replying to the 914 Letter no doubt unnecessary and unreasonably incurred costs not consistent with the underlying objectives.  

28.  There is also this argument between the parties about the failure by the applicant to give the respondent 1 month after the Letter Before Action to respond.  I agree with the applicant that the directions issued by the Law Society are only guidelines and the applicant cannot be faulted to set a shorter deadline.  But the fact that the applicant had commenced this proceedings before the expiry of her self-imposed deadline is unreasonable.  The argument by the applicant that the 914 Letter had intervened the deadline cannot be substantiated in view of the fact that it is the applicant’s case that the 914 Letter is only received on 18 September.  Even if the applicant did not receive the 914 Letter before she commenced the proceedings, the applicant should still wait till the expiry of the deadline before action, otherwise it would be meaningless to fix a deadline in the Letter Before Action.  It would be unfair to the respondent to deprive her of the full period stipulated.  And this court see no urgency in taking out this proceedings just a few days before the expiry of the deadline, even though the respondent’s attitude in settlement is doubted by the applicant.

29.  Lastly, on the argument of the applicant that there is no valid insurance coverage taken out by the respondent.  Again, it is not in dispute that the applicant was only made aware of this fact on 18 September 2012 (page 151 of Bundle B), this cannot be a factor in mind when this proceedings is being taken out on 15 September 2012.  Even if this is something considered by the applicant, I can’t see how this can be a valid factor to justify the applicant’s action in taking out the proceedings in the circumstances.  Whether the legal costs to be incurred by the respondent will be covered by any insurance coverage is not something that will affect the court’s consideration in the question of costs.

The Order

30.  It is ordered that :-

(a) Judgment on liability be entered for the applicant;

(b) the respondent do pay the applicant the sum of $93,565.45 (inclusive of interest) in full and final settlement of the applicant’s claim herein (which had been paid on 3 October 2012);

(c) costs of this application and of the action be to the respondent, to be taxed if not agreed; and

(d) the applicant’s own costs be taxed in accordance with Legal Aid Regulations.