KWAN KAM PUI v. 馮文 AND OTHERS

HCPI 18/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO 18 OF 2012

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

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

D E C I S I O N

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

1.  In Lau Yuk Hung v Tsang Kwong Ming & Ors. [2013] 2 HKLRD 614, I expressed my misgivings at the current state of affairs, the result of the amendment of the provisions of the Employees Compensation Assistance Ordinance, Cap.365 (“ECAO”), under which injured persons, who are unable to recover payment from their employer are required, nevertheless, to prove their claim for common law damages in court, and incur the costs of proving their case in court, before they can claim payment from the Employees Compensation Assistance Fund Board (“ECA Fund Board”), but who, when they claim payment, after obtaining such judgment, are told that the ECA Fund Board is not liable to pay interest on the damages that had been awarded and, more surprisingly, that the ECA Fund Board is not liable to pay the costs incurred in proving their case in court and obtaining that judgment against the employer. It is a catch 22 situation: the injured employee cannot get payment from the ECA Fund Board unless he obtains a judgment from court but he would not be reimbursed for the costs incurred in obtaining that judgment. The net result is that any damages that are awarded are reduced by the amount of the costs incurred to obtain that judgment, which can run into a few hundred thousand dollars.

2.  In that case, the proceedings for common law damages had been commenced on 5 June 2010.  On 25 November 2010, interlocutory judgment was entered against the employer for damages to be assessed.  He took no part in the proceedings.  On 20 August 2012, pursuant to my order, the ECA Fund Board was joined in the proceedings.  The plaintiff’s solicitors and the solicitors for the ECA Fund Board then entered into discussions culminating in an agreement that the ECA Fund Board would not contest the assessment of damages, if the plaintiff’s claims were limited to the net amount of $420,000.  I was asked by the plaintiff on 24 September 2012 to assess damages in this amount. I was able to do so, on the evidence that was adduced before me, and I entered final judgment against the employer in that amount, together with interests and costs.

3.  So far as costs against the ECA Fund Board were concerned, I was prepared to order that there be no order as to costs of that action as between the plaintiff and the ECA Fund Board.  I was prepared to do so because that was the subject matter of agreement between the solicitors for the plaintiff and the solicitors for the ECA Fund Board.  The ECA Fund Board had only been joined about a month before the date of the assessment of damages and, during that period of time, the ECA Fund Board did not participate in the active defence of the action other than entering into the negotiations referred from above.

4.  The present case is an entirely different case.

5.  On 3 March 2009, the plaintiff suffered personal injuries in the course of his employment.  He commenced proceedings for employees’ compensation in the District Court and, on 4 January 2012, commenced proceedings in the High Court to recover common law damages.  Although the ECA Fund Board had joined in the employees’ compensation proceedings as a 2^nd respondent, it informed the plaintiff’s solicitors, by letter dated 13 March 2012, that it would not intervene in the common law proceedings.  Thereafter, the plaintiff proceeded to enter interlocutory judgment against the employer[1] and to obtain medical reports from neurologists and orthopedic specialists to prove his case.

6.  Almost a year after it had decided not to intervene, the ECA Fund Board changed its mind and, on 28 February 2013, applied by summons to intervene in the proceedings, pursuant to Order 15, rule 6 of the Rules of the High Court (“RHC”) and section 25A of the ECAO.  Master Leong granted leave to the ECA Fund Board to join in the proceedings as an additional defendant on 1 March 2013 and directed the ECA Fund Board to serve its answer to the plaintiff’s revised statements of damages.   The master also granted leave to the ECA Fund Board to adduce in evidence, the joint expert medical reports on quantum which it had obtained in the course of the employees’ compensation proceedings.  These had been compiled by the orthopedic experts, Dr. Lau Man Tsang, instructed by the plaintiff’s solicitors in those proceedings, and Dr. Lau Hoi Kuen, instructed by the solicitors acting for the ECA Fund Board; and the joint expert neurological reports prepared by Dr. Fung Ching Fai, instructed on behalf of the plaintiff in those proceedings, and by Dr. Yu Yuk Ling, instructed on behalf of the ECA Fund Board.  It is also pertinent to note that the costs order made by the master was that the costs of the intervener’s application be in the costs in the cause of the assessment of damages.  

7.  Thereafter, a number of further steps were taken in the action.  At a check list review on 12 April 2013, further orders were made for the plaintiff and the ECA Fund Board to proceed to   mediation.  Further directions were given for the plaintiff and the ECA Fund Board to serve witness statements and the ECA Fund Board was granted an extension of time to serve its answer to the revised statements of damages within 14 days of the service of those witness statements. Further directions were also given for the preparation of the assessment bundle, and the check list review was adjourned to 23 August 2013 for leave to set down for the assessment of damages. Again, the master ordered that the costs of the check list review be costs in the cause of the assessment of damages. 

8.  It is, therefore, surprising, in the context of this order, to note that one of the directions given was that time be extended to 15 May 2013 for the ECA Fund Board to file its defence.  Given that interlocutory judgment had been entered against the employer, in the absence of an application to set aside that judgment, the joinder of the ECA Fund Board and the direction for it to file an answer can only be construed to mean that the ECA Fund Board was joined to enable it to participate in the assessment of damages, not to raise defences going to the issue of liability[2].  The grant of leave to the ECA Fund Board to file a defence must, therefore, be construed to mean a defence limited to issue of quantum, not liability, even though, strictly speaking, such a pleading is unnecessary given that defences relating to quantum can be, and are usually, pleaded in the

answer to the statement of damages[3].              

9.  Clearly the ECA Fund Board thought otherwise because, on 10 May 2013, it served a defence in which it did not admit the liability of the employer and averred, in the alternative, that the matters complained of were caused or contributed to, in whole or in part, by the contributory negligence of the plaintiff.

10.  On 14 June 2013, the ECA Fund Board served an answer to the plaintiff’s revised statement of damages in which it set out its case in quantum.  On 16 June 2013, the index of the agreed trial bundle was filed in court.  On 5 August 2013, the plaintiff’s solicitors filed a certificate of time estimates in which it was stated that “both quantum and liability to be argued”.  On 23 August 2013, Master Leong directed that leave be granted to the plaintiff to revise and serve on the defendants a trial bundle index “for liability and quantum” within 28 days; that all statements to the Police and Labour Department in relation to the accident be placed in the trial bundle; and that the report of the occupational safety officer be adduced as evidence on liability.  The master then granted leave for the case to be set down for trial and, as before, ordered that the costs of cause of the check list review be costs in the cause.   

11.  On 10 October 2013, the case was set down in the running list and, on 6 November 2013, the case was put on the warned list.

12.  In the interim, the parties had corresponded with each other exchanging a number of offers which culminated in a settlement of the action.  On 28 November 2013, the parties issued a summons returnable before me on 19 December 2013 for orders to give effect to settlement reached between the parties and that the action be removed from the warned list.  The parties had to proceed by way of a summons, instead of a proceeding by way of a consent summons or consent order, in order that the defendant employer, on whom the summons had been served, might be bound by the orders made on that summons.

13.  The orders sought under that summons included orders that the ECA Fund Board pay the plaintiff a sum of $1,850,000, inclusive of interest, in full and final settlement of the plaintiff’s claim against the defendants, pursuant to section 29 of the ECAO; that the settlement sum to be satisfied by credit being given for the sum of $1,050,000, being employees’ compensation already received by the plaintiff from the ECA Fund Board, and by the balance sum of $800,000 to be paid by the ECA Fund Board within 28 days;  and, further, that there be no order as to costs between the plaintiff and the defendants, i.e. the employer and the ECA Fund Board.   

14.  When the matter came before me on 19 December 2013, I queried the basis upon which the parties had reached an agreement that there be no order as to costs between the plaintiff and the defendants.  In order to ascertain whether or not the settlement sum included an amount to cover the plaintiff’s costs, I directed the parties to provide me with a breakdown of the parties’ respective assessment of the quantum of the plaintiff’s claims.  This they did and the breakdown is shown in the following table:

	Plaintiff’s  assessment (HKD)	ECAFund Board assessment  (HKD)
PSLA	700,000	500,000
Pre-trial loss of  earnings and MPF	70,000	100,000
Post-trial loss of  earnings	575,069	588,823
Loss of earning capacity	530,788	442,323
Special Damages(pre-trial)	32,733	30,000
Special Damages (post-trial)	15,010	11,060
Sub-total	1,923,600	1,672,206
Less EC award	(1,050,000)	(1,050,000)
Total	873,600	622,206

It is clear from the above table that the settlement sum represented the compromise between the plaintiff and the 3^rd defendant of the value of the plaintiff’s claims and did not contain any sum to be paid to the plaintiff towards his costs of the action.

15.  I was informed by the plaintiff’s solicitors that their costs and disbursements in the High Court action was likely to be allowed in the sum of about $500,000 on a party and party taxation of the same.  This would have to come out of the net settlement sum of HK$800,000, leaving the plaintiff with only $300,000, which was less than the amount of costs incurred in bringing the proceeding to a conclusion.

16.  Faced with this rather unsavoury situation where the lawyers appear to have benefitted more from the litigation than the plaintiff did, I directed the parties to appear before me on 19 March 2014 and to address me on the following:

1) the question of the Court’s jurisdiction, if any, to make an order of costs against ECA Fund Board in cases where the Board has intervened as an additional party in proceedings for common law damages;

2) whether any such jurisdiction includes discretionary power to order the Board to pay costs incurred before its intervention and, if so, in what circumstances ought such power to be exercised;

3) the reasons, if any, why the plaintiff settled the present proceedings on the basis of no order as to costs;

4) the further conduct of this action.

17.  I received written submissions from the parties and, at the hearing on 19 March 2014, Mr Horace Wong S.C., appearing for the ECA Fund Board, pressed his main point that, by reason of the specific provision in section 20B(3) of ECAO and the clear legislative intention behind that provision, the court does not have jurisdiction to order costs against the ECA Fund Board in the present proceedings, whether for costs incurred before or after the Board’s intervention.

18.  He accepted that under section 52A of the High Court Ordinance, Cap. 4, the award of the costs of and incidental to the proceedings before it is in the discretion of the court; that the discretion may be exercised for or against any person, whether a party to the proceedings or not; and that, although the discretion must be exercised judicially and in accordance with principles, this was a general power of wide import.  However, Mr Wong submitted that the general power conferred by a statute may sometimes be curtailed or limited by specific legislation. By way of illustration, he referred to the decision of Re Robin Potts QC, HCMP 5027/2001, 19 December 2001, where it was held that the court did not have jurisdiction to award costs to a successful applicant for admission as a barrister under r. 9 of the old Admission and Registration Rules, Cap. 159B, by reason of the specific provisions under those rules.

19.  To make good his submission in relation to the effect of the ECAO on the exercise of the court’s wide jurisdiction on costs, he outlined the history of the ECAO, and the reasons for its substantial amendment that was effected by Ordinance No. 16 of 2002 on 1 July 2002 (the Amendment Ordinance).

20.  I accept and gratefully adopt Mr Wong’s outline of that history, and the reasons for the amendment, which appears in §§21 to 26 of his written submissions and which I set out as follows:

“21. The Board was established in 1991 pursuant to the enactment of the Employee’s Compensation Assistance Ordinance 1991 (“the 1991 Ordinance”) to administer the Employee’s Compensation Assistance Fund (“the Fund”). The Fund serves the purpose of providing, inter alia, a safety net for injured employees who were unable to recover employee’s compensation or common law damages for which they had been granted judgments.

22. At the time of its enactment, the 1991 Ordinance provided for full compensation where the employee concerned has satisfied all the conditions required for recovery. Pursuant to the original statutory scheme, the Board was required to make payment to eligible employees the full amount of employees’ compensation as defined under Employees’ Compensation Ordinance, Cap 282and common law damages. Both compensation and damages were therefore treated in the same fashion under the 1991 Ordinance. In particular ss. 16 and 23 included costs incurred by an applicant as part of the amount payable by the Board.

23. However, the scheme under the 1991 Ordinance was reviewed extensively between 2000 and 2002 predominantly by reason of the financial difficulties that plagued the Board:

(1) The Review of the Employment Compensation Assistance Scheme – Consultation Paper (“the Consultation Paper”)compiled by the Education and Manpower Bureau dated January 2000 at §4 identified the problem:

“Since 1996/97, the ECAFB has been operating on annual deficits.  It has been facing a rising number of large claims and escalating amounts of damages awarded by the court.  As at 10 December 1999, the accumulated reserves of the Board stood at $11.8 million only.  Based on the experience in the first eight months of 1999/2000, it is expected that all reserves would be depleted by the first quarter of 2000/2001.  However, if there are any large common law claims requiring payment from the Board, the reserves may be depleted at an even faster pace.”

(2) By the time the Bill for the Amendment Ordinancewas put before the legislative council, the financial position of the Board had become even grimmer. The Legislative Council Brief for the Amendment Ordinance dated February 2002 (“the Council Brief”) recorded that the Board had already depleted its funds and had to rely on a bridging loan of $60 million from the government for further operation and even with such bridging loan, there was only a balance of $32.5 million left by 31.12.2001, which was likely to be depleted again before mid-2002 (§§4-6, 9). According to the Council Brief, the Amendment Ordinance was “a rescue package for the Scheme, which includes (a) measures to improve the financial stability of the Fund …” (§10).

(3) It is clear that the purpose of passing the Amendment Ordinancewas to redress the perilous position of the Fund, and restore the financial stability of the scheme for its continuous long-term operation. This was clearly recognized by the legislative council when the bill for the Amendment Ordinance was discussed: see, Hansard 26.6.2002 pp 7953-7956, 7959, 7961, 7968.

24. As a result of the financial difficulties of the Fund under the original scheme, various specific remedial measures were introduced. The Consultation Paper proposed three major options: (A) to retain the existing scheme but to substantially increase the levy; (B) to cap the payment at $4 million and also to increase the levy; and (C) to remove the provision for payment of common law damages; together with various supplemental measures including removal or reduction of entitlement to interest, and removal of the entitlement to legal costs;

25. The Amendment Ordinanceadopted some of the proposals in the Consultation Paper, and as passed, effected substantial revision to the original uniform scheme under the 1991 Ordinance. The relevant major amendments are as follows:

(1) Employees’ compensation and common law damages are now treated differently. Whilst the scheme regarding payment of employees’ compensation is largely left intact (except for interest payment), the Fund is no longer made available for payment of common law damages;

(2) On the other hand, a new category of “Relief Payment” was introduced, the amount of which is closely connected to, but different from, common law damages. A special scheme was created for eligible persons to apply and receive Relief Payment from the Board (ss 20A-20G ECAO);

(3) Special provisions were also made for the Board to join in as a party to proceedings initiated by potential applicants against their employers (ss.25A & B, ECAO).

26. “Relief Payment” was a major amendment introduced by the Amendment Ordinance and is … different from the common law damages ordered by the Court, which the 1991 Ordinance was originally designed to cover. The differences are mainly three-fold:

(1) Amount: Full recovery is no longer the policy and various items, that were included in the amount that an applicant would usually recover from an employer or insurer when suing for common law damages, are now expressly not recoverable from the Fund.

(a) The Relief Payment is the amount of the common law damages minus interest and costs arising from proceedings in respect of any damages or compensation claim (s. 20B(3) ECAO – which expressly provides that for the purposes of determining the amount of a relief payment, any interest and costs arising from proceedings in respect of any damages or compensation claim shall not be included);

(b) The reference to damages under s.23 ECAOof the 1991 Ordinance (which made provision for payment of costs of proceedings from the Fund) was expressly deleted; and the section now [only] deals only with payment of costs in an application for employees’ compensation payment under s.16 of ECAO;

(c) Amongst others, the intention of the legislature to remove the Fund’s liability to pay costs to eligible applicants for Relief Payment is clear from the Council Brief, which stated at §12:

“The proposed relief payment … shall not cover any costs arising from proceedings in respect of damages”;

(d) The Relief Payment would not be paid in full if monthly payment is necessitated pursuant to s. 20C(2), and the relevant eligible persons died before such payment was paid in full (s.20D);

(e) The discussions in the legislative council also make it clear that full compensation is no longer the aim of the ECAO especially regarding Relief Payment (Hansard26.6.2002 at 7952-7953, 7963, 7968, 7975).

(2) Payment Method (ss. 20C, 20D, 20E, Sch 4 ECAO):

(a) Unlike common law damages, the Relief Payment is not a lump sum if the total amount exceeds the prescribed sum of $1.5m;

(b) The amount exceeding the prescribed sum would be payable to eligible persons by a prescribed monthly payment determined under ECAO;

(c) For an injured employee, the monthly payment will first be made to him. If he dies before receiving full payment through monthly payment, then his relatives defined as eligible person (not his estate) can continue to receive the monthly payment;

(d) For a deceased employee, the monthly payment will be made to the relatives who are eligible persons right away;

(e) Such monthly payment will cease (if not fully paid) if the eligible person attains the age of 21 (in some situations) or dies;

(f) The level of monthly payment was [a] heated topic among the legislators (see Hansard26.6.2002 7947-7948, 7959-7960, 7964, 7971, 7973-7974);

…

(3) Payees:

(a) Eligible payees of Relief Payment are comprehensively and elaborately defined (as “eligible person”) under s. 2 ECAOin relation to fatal and non-fatal cases;

(b) The categories of “eligible person” were also a heated topic amongst legislators before the Amendment Ordinance was passed (Hansard26.6.2002 7956-7957; 7961-7962; 7964-7965; 7976-7982);

(c) The statutory definition of “eligible person” overlaps [with] but is different from the [definition of dependants under the Fatal Accidents Ordinance, Cap .22] .

21.  The statutory scheme under Part IV of the ECAO is largely self-contained.  Under section 20A(1), an eligible person who is unable to recover from an employer payment of an amount of damages for which the employer is liable may apply for a relief payment of that amount from the Fund, established by section 7 of the ECAO.  The link between this statutory scheme and court proceedings is provided by section 20A(2), which provides that, for the purpose of that section, an employer is not to be regarded as liable for the payment of an amount of damages unless the amount is payable pursuant to a judgment or order of a court of competent jurisdiction in Hong Kong.

22.  Applications for payment under the Fund are required, by section 21, to be made to the ECA Fund Board, which will determine the applications pursuant to the provisions of section 22 of the ECAO.

23.  By section 24 of the ECAO, an applicant who is dissatisfied with the determination of the ECA Fund Board under section 22 may commence proceedings in court against the ECA Fund Board, which must be commenced by writ.

24.  Section 20B provides that the amount of the relief payment to an eligible person shall be the amount of damages for which the employer is liable to pay the eligible person after that amount is reduced by any employees’ compensation received, or any amount of damages already paid by the employer.  Section 20B(3) provides that, notwithstanding the definition of “damages”, for the purposes of determining the amount of a relief payment, any interest payable on any amount, and any costs arising from proceedings in respect of any damages, shall not be included.  This provision limits the amount of the relief payment to damages and excludes from the amount of the relief payment, any amount due by way of interest on damages, and any amount incurred by way of costs.  It is this provision that creates the inherent injustice in the statutory scheme which requires an eligible person to incur costs to obtain a judgment for damages from the District Court or from the High Court, which amount of costs cannot be recovered from the ECA Fund Board and which, in the absence of any other sources of income or capital, must come out of the relief payment made to the eligible person.  In effect, the relief payment has to be utilised to fund a judgment which is a prerequisite of eligibility to claim the relief payment.

25.  On my construction of the above provisions of the ECAO, I conclude that there is nothing in these provisions governing the statutory scheme for relief payments that impacts on the court’s discretion to award costs in actions brought by injured employees to recover damages for personal injuries.  The statutory definition of a relief payment, which excludes costs incurred to obtain a judgment, does not impact on or, otherwise, affect the court’s general, and very wide, powers to award costs in common law proceedings for damages for personal injuries. 

26.  Whilst I agree with the submission of Mr Wong that the intention of the legislature was clear that the ECA Fund Board is not required to pay the costs of common law proceedings to applicants for relief payments, there is nothing in the provisions relating to the statutory scheme which have been addressed thus far to fetter the court’s discretion as to costs in cases where the ECA Fund Board elects to participate in those common law proceedings.  Are there any other provisions under the ECAO which impact on the court’s wide discretion to award costs? 

27.  Before I turn to consider sections 25, 25A and 29 of the ECAO, let me set out the position prevailing under the ECAO before its amendment by the Amendment Ordinance in 2002. 

28.  There was no express provision under the ECAO enacted in 1991 for the ECA Fund Board to intervene in any proceedings between an employee and his employer.  However, the Motor Insurers’ Bureau (“MIB”), who serve a similar purpose to that served by the ECAO, albeit that its genesis is contractual, rather than statutory, has been joining in as interveners in personal injury actions for damages against uninsured motorists, pursuant to Order 15, rule 6 of the Rules of the Supreme Court, since the decision of the English Court of Appeal in Gurtner v Circuit [1968] 2 QB 587.  The basis of joinder was explained by Lord Denning in that case at   p. 595D-F & p.596E-G: 

“It seems to me that when two parties are in dispute in an action at law, and the determination of that dispute will directly affect a third person in his legal rights or in his pocket, in that he will be bound to foot the bill, then the court in its discretion may allow him to be added as a party on such terms as it thinks fit.  By so doing, the court achieves the object of the rule.  It enables all matters in dispute to “be effectually and completely determined and adjudicated upon” between all those directly concerned in the outcome.

…

[MIB] are directly affected, not only in their legal rights, but also in their pocket. They ought to be allowed to come in as defendants. It would be most unjust if they were bound to stand idly by watching the plaintiff get judgment against the defendant without saying a word when they are the people who have to foot the bill.

…

… On being added, they should be entitled to defend the action and to exercise all the rights of the defendant [driver] therein.”

29.  Notwithstanding clear legal authority enabling the ECA Fund Board to join in the common law proceedings in which damages were claimed against uninsured employers, it was the practice of the ECA Fund Board, for reasons best known to them, to take a passive attitude to such proceedings and rarely to seek to intervene in them.  Lai Chi Pon v Toto Steel & Iron Works Ltd and others [1997] 2 HKC 195 was a case where Cheung J., as he then was, requested the ECA Fund Board to Appear before him to explain its position in relation to the case before him and, specifically, to explain why the ECA Fund Board had not intervened in the undefended proceedings before him in order, for example, to set up a positive case on contributory negligence and/or to defend the claim on quantum.  It was submitted to Cheung J. on behalf of the ECA Fund Board that there were no restrictions in the ECAO which prevented the ECA Fund Board from intervening in such actions, but that:

“... Whether there should be an application by the Board to join in the proceedings will depend on whether the Board takes the view that in the proper administration of the Fund, it is necessary for the Board to do so. Such circumstances may arise if it has come to the Board’s notice that there is a real likelihood that a judgment may be procured by fraud, or there is a real likelihood of collusion between the plaintiff and the defendant, or where a default judgment is likely to follow if the Board does not intervene. However, the Board is of the view that the mere fact that a potential claim may be made against the Fund or a defendant is not legally represented, does not of itself amount to appropriate circumstances to justify the Board making an application for joinder.”[4]

In response to this submission, the learned Judge suggested that:

“… the Board should take a more active role in intervention by negotiation. A likely award of huge sums together with substantial costs must be one of the situations in which the Board should intervene in a case as soon as possible after it has received notice.

…

It is laudable not to deplete the Fund with legal expenses, but in my view the resources of the Fund can in fact be enhanced if the Board can take a more active role …

…

Further, the Board by not taking part in the proceedings, will not be able to advance arguments which may reduce the claim ….”[5]

I daresay that the passive role of the ECA Fund Board up to that point of time contributed to the substantial depletion of the Fund, from which payments were made to eligible persons who obtained judgments for substantial amounts, by reason of their claims being undefended.  It appears to me that the deleterious effects on the Fund of the passive approach of the ECA Fund Board was a factor that prompted the legislative changes in the Amendment Ordinance which resulted in the enactment of the new section 25A and section 25B, being provisions that facilitate the ECA Fund Board’s intervention in court proceedings. 

30.  Before I turn to those provisions, I should make brief mention of section 25 which was contained in the original ordinance and which provides a statutory vesting of the cause of action against the employer in the ECA Fund Board, in cases where the employer cannot be identified or, if identified, cannot be found, or is insolvent, or is dead, or, in the case of a company, has been dissolved, wound up or struck off the register, or, for any reason, cannot be served with proceedings, and no policy or insurance is known to be in force in relation to the employee.  The original section 25 effected a statutory vesting of the claim for employees’ compensation as well as the claim for damages.   The 2002 amendment narrowed the scope of section 25 by removing the reference to claims for damages.  After 2002, an injured employee would need to take steps to obtain an order for substituted service, or restore the employer company on the register, in order to obtain a judgment against the employer, before it can pursue the ECA Fund Board for payment.

31.  HH Judge Downey was right to state in Fok Por v Sum Shuk Ching, [1992]  1 HKC 581 at p.587A that, with the exception of cases which fall within section 25, there was no question of any entitlement on the part of employees to payment from the Fund, which is left to be determined by the ECA Fund Board.  As Cheung CJHC stated in Tu Zhiqiang and Hap Sang Co (a firm) [2012] 1 HKLRD 1075 at §26 on p.1082, section 25 provides an essential shortcut to an employee who would otherwise encounter great difficulties in serving proceedings on his employer and, for that reason, in obtaining judgment against him and that, where it applies, section 25 provides an alternative to section 16.  The vesting of the cause of action against the employer in the ECA Fund Board enables the injured employee to sue the ECA Fund Board and to obtain a judgment against the ECA Fund Board, as if it were the employer, not only for compensation, but also for interest and for the costs of the employees’ compensation proceedings brought against the ECA Fund Board.  There is nothing in section 25 that impacts on the court’s wide discretion as to costs in those compensation proceedings and, before the amendment in 2002, in proceedings for common law damages.  

32.  Section 25B was a new provision enacted by the Amendment Ordinance in 2002 which required the ECA Fund Board to be notified of proceedings and, thereby, facilitated the Board’s intervention in such proceedings.  Although there was no suggestion that the ECA Fund Board did not have power to intervene in proceedings prior to the Amendment Ordinance, section 25A expressly empowered the ECA Fund Board to do so.  I set out the provision in full as follows:      

“25A. Board may apply to be joined as party to proceedings

If proceedings have been initiated to claim compensation or damages (whether initiated before, on or after the commencement* of this section), the Board may apply to the court to be joined as a party to the proceedings as follows-

(a) where no policy of insurance is known to be in force at the time of the accident to which the proceedings relate, the Board may apply to the court to join in the proceedings as a party in accordance with Order 15, rule 6 of the Rules of the High Court (Cap. 4 sub. leg. A) or Order 15, rule 6 of the Rules of the District Court (Cap. 336 sub. leg. H), as the case may require, to take over the defence as if it were the employer in the proceedings if –

(i) the employer cannot be identified or, if identified, cannot be found;

(ii) the employer is insolvent;

(iii) the employer is dead or has been dissolved, wound up or struck off the register;

(iv) the employer, for any reason, cannot be served with the notice of proceedings; or

(v) at any time when the employer fails to attend the hearing, leaving the claim uncontested;

(b) where no policy of insurance is known to be in force at the time of the accident to which the proceedings relate and the employer is present at the proceedings, the Board may apply to the court to join in the proceedings as a party in accordance with Order 15, rule 6 of the Rules of the High Court (Cap. 4 sub. leg. A) or Order 15, rule 6 of the Rules of the District Court (Cap. 336 sub. leg. H), as the case may require;

(c) where the insurer concerned is insolvent, the Board may apply to the court to join in the proceedings as a party in accordance with Order 15, rule 6 of the Rules of the High Court (Cap. 4 sub. leg. A) or Order 15, rule 6 of the Rules of the District Court (Cap. 336 sub. leg. H), as the case may require.”

33.  Cheung CJHC explained these provisions in his judgment in Tu Zhiqiang and Hap Sang Co (a firm) [2012] 1 HKLRD 1075 at pp. 1082 – 1083:

“27. Section 25A caters for a different case [from the case covered by s.25], that is, where the employee has chosen to sue the employer. In a normal case, one can expect the employer or, in most cases, his insurer to take up the defence of the proceedings. If the employee manages to obtain judgment against the employer, and if the judgment is not satisfied by the employer or his insurer, the employee may go after the Board for payment pursuant to s.16. However, if for one reason or another, neither the employer nor the insurer defends the proceedings, and the employee is permitted to enter judgment against the employer in those circumstances and subsequently seeks payment of the judgment sum against the Board pursuant to s.16, that will work injustice to the Board.

28. Section 25A comes into play and allows the Board to join in and contest the proceedings. If the employee still succeeds in obtaining judgment against the employer, and if the judgment remains not satisfied, he can then seek payment of the judgment sum against the Board pursuant to s.16.

29. Section 25A provides for three types of situation where the Board may apply to join in, that is, the respective situations set out in sub-ss.(a) to (c). Subsections (a) and (b) deal with the position where there is no policy of insurance; whereas sub-s.(c) deals with one where there is an insurance policy.

30. Where there is no insurance policy, and where the employer is “present” at the proceedings, the Board may apply to join in the proceedings as an intervener pursuant to s.25A(b). The rationale is that in the situation described, the employer may or may not see fit to contest the proceedings, and he may or may not find it necessary or be in a position to retain a lawyer to defend the claim. Depending on the facts, therefore, the Board may find it prudent to join in as an intervener to contest the employee’s claim, so as to protect its own ultimate interest.

31. What if the employer is not “present” at the proceedings? This is covered by sub-s.(a). Subsection (a) refers to five different scenarios, (i) to (v). It may be noted that (i) to (iv) are identical to the four scenarios described in s.25(1)(a). Under those scenarios, assuming that employer has been served successfully or there has been obtained an order for substituted service, if the Board does not join in, the employee will, in the normal course of events, have no or little difficulty in obtaining judgment against the absent employer, to the ultimate detriment of the Board.

32. Likewise, in scenario (v), that is, “at any time when the employer fails to attend the hearing, leaving the claim uncontested”, the position of the Board is jeopardised.

33. Therefore it is natural to find that s.25A(a) provides that under those five scenarios, the Board may apply to join in the proceedings as a party “to take over the defence as if it were the employer in the proceedings”.

34. To complete the picture, s.25A(c) deals with the situation where there is a policy of insurance. Normally, in such a case, the Board will have no reason to intervene. The insurer will take care of the proceedings. However, where the insurer is insolvent, which is the situation dealt with by s.25A(c), the proceedings will be left uncontested, if the employer does not defend them. Therefore, depending on the facts, the Board may wish to join in to contest the claim. Section 25A(c) allows the Board to do so

….

51.    …under s.25A(a) where the Board has taken over the defence as if it were the employer in the proceedings, no judgment may be entered against the Board as such. Any judgment would be entered against the employer.”

34.  It is clear from the above analysis that, in cases where the ECA Board successfully applies to join in the proceedings, any judgment that is finally entered in those proceedings must be a judgment for damages against the employer only and not a judgment for damages against the ECA Board[6].  After such judgment has been obtained, the plaintiff must apply for payment from the Fund pursuant to section 20A[7].  A similar situation prevails in cases involving the MIB which intervenes in proceedings against the uninsured motorist: judgment for damages must first be obtained against the motorist and a claim then made for payment of the judgment debt pursuant to the terms of the MIB Agreement of 1 February 1981.

35.  However, the fact that a judgment cannot be entered against MIB for damages does not prevent the court from ordering MIB to pay the costs of the action which it has joined as an interested party.  Indeed such orders are commonly made against MIB in cases in which it has intervened.[8]  

36.  On my construction of section 25A, I conclude that there is nothing in its provisions which affect the court’s wide discretion on the award of costs. Indeed, all 3 sub-paragraphs of section 25A direct the ECA Fund to intervene, if it so chooses, pursuant to Order 15, r 6 of the Rules of the High Court, or of the District Court, as the case may be.  Unlike section 43(3) of the Employees’ Compensation Ordinance, Cap. 282[9], section 25A does not create a separate power which the court can utilise to join the ECA Fund Board. The reference to the application for joinder being governed by the Order 15, rule 6 reinforces my conclusion that section 25A does not seek to curtail either the powers of the court in its conduct of the proceedings before the court or the wide powers conferred by s52A of the High Court Ordinance to make orders as to costs against parties, intervening parties, and even non parties.  Cheung CJHC made clear that the ECA Fund Board, applying to join pursuant to the provisions of section 25A(b) or (c), would do so as an intervening party to protect its interests but that its application to join under s25A(a) would be to join in order to take over the defence “as if it were the employer in the proceedings”.  Cheung CJHC noted that:

“39. … The taking over of the defence must mean the taking over of the defence from the employer, similar (but not entirely identical) to the situation where an insurer takes over from the insured the defence of a claim made against the insured.  In that latter case, it would no longer be open to the insured to argue that it has not entered an appearance in the proceedings and no judgment can be obtained against him.  A normal intervener, on the other hand, does not “take over” anybody’s defence.  He just joins in to contest the claim in whatever way that suits his interest.  The taking over of a defence obviously means something more than that.”

If the court, in the exercise of its wide powers to award costs, may order an intervener to pay costs, a fortiori, it must have powers to order the ECA Fund Board to pay costs when it joins, not as an intervening interested party, but in order to take over the defence “as if it were the employer in the proceedings”, pursuant to section 25A(a).  The joinder of the ECA Fund Board in the present case was under section 25A(a).

37.  Clearly, if the ECA Fund Board is joined “as if it were the employer in the proceedings” pursuant to section 25A(a), it can advance all the defences available to the employer to contest liability and quantum.  However, a joinder of the ECA Fund Board as an interested intervener under section 25A(b) or (c) is unlikely to lead the court, joining the ECA Fund Board, to restrict its participation in the proceedings. As an interested party affected in its pocket, the ECA Fund Board ought to be entitled to exercise all the rights of the employer and the order for joinder ought to expressly state, in every case where it is appropriate to do so[10], that the ECA Fund Board is entitled to defend the proceedings on liability as well as on quantum[11].  

38.  I now turn to consider section 29 of the ECAO which provides:

“29. Written offers by the Board in proceedings

(1)Notwithstanding any other law where, in proceedings to which the Board is a party under this Part, the Board makes a written offer to any other party in the proceedings which is expressed to be “without prejudice save as to costs” and which relates to an issue in the proceedings, then in deciding the question of costs the court shall take into account any such offer which has been brought to its attention.

(2)An offer made under subsection (1) shall not be communicated to the court until the question of costs falls to be decided.”

39.  Without hearing full argument, I refrain from making any observations on the availability of the provisions of Order 22 to the ECA Fund Board after its joinder in the proceedings[12].  The first point to note about this provision is that it applies “notwithstanding any other law”.  Accordingly, its effect, and its only effect, is to override any contrary law that prevents the court from taking into account any offer make by the ECA Fund Board that is “without prejudice save as to costs”. Secondly, it is to be noted that the exact same provision has existed since 1991, i.e. this provision was not amended in 2002.  Before 2002, when the ECA Fund Board was obliged to provide full payment for damages, interests, and costs, nobody could sensibly contend that this provision curtailed the court’s jurisdiction to award costs against the ECA Fund Board which had joined in the proceedings pursuant to Order 15, rule 6.

40.  I conclude, upon my review and construction of the ECAO, that its provisions do not impact on nor curtail the court’s wide jurisdiction under section 52A of the High Court Ordinance, Cap. 4, to award costs against parties, intervening parties, and non-parties.  

41.  I now deal briefly with some of the other submissions made by Mr Wong.  On the basis that the court had power to make an award of costs against MIB who had joined in the proceedings as an interested party, Mr Wong submitted that there was an essential difference between MIB and the ECA Fund Board in that the obligation of the former arose from its contract with the Hong Kong SAR Government whereas the ECA Fund Board was a creature of statute and its obligations arose under the ECAO. 

42.  I am not persuaded that this difference would curtail the court’s jurisdiction to award costs against the ECA Fund Board which has joined as a party to the proceedings.  It is right, of course, that MIB continues to be liable to satisfy a judgment against an uninsured motorist, not only in respect of the award for damages, but also in respect of the award of interest and of the costs incurred by the plaintiff in obtaining such judgment; whereas the ECA Fund Board, since 2002, is not liable to make any relief payment in respect of either interest or costs.  However, I am not persuaded that the way that the statutory scheme had been structured under the ECAO, particularly since its amendment in 2002, is a factor which affects the court’s jurisdiction to award costs against the ECA Fund Board or is a factor to be taken into account in the exercise of such jurisdiction. 

43.  While the ECA Fund Board may be exercising a quasi- judicial function when it makes a determination of an application under section 22 of the ECAO, there is no doubt that the ECA Fund Board adopts an adversarial role when it intervenes and defends proceedings on liability and quantum, or, solely on quantum.  I do not agree that the role of the ECA Fund Board is akin to the role of the Bar Association when it appears to oppose an application for admission by overseas counsel.  The ECA Fund Board does not intervene in actions by injured employees for damages in order to act in the interest of the public and for the protection of the public.  For the reason that it adopts an adversarial role, it is right that it should be ordered to pay costs if it takes up unmeritorious points of defence which are rejected by the court. 

44.  It would be an incongruous state of affairs if the Board could take advantage of section 29 of the ECAO and obtain an order for costs in its favour, from the date of any offer of settlement made by letter pursuant to that provision, but not be liable to pay any costs of defending the proceedings should be plaintiff succeed in obtaining a larger sum by way of an award of damages than that offered by the ECA Fund Board under such letter.

45.  Ultimately, the risk of an adverse order on costs is a risk that the ECA Fund Board must accept if it elects to join in the proceedings and obtain the benefit of such joinder by preventing the plaintiff from obtaining a judgment for a higher amount of damages which would almost invariably be the case if the proceedings were undefended.[13]      

46.  It had been submitted that if the ECA Fund Board are ordered to pay the costs of the proceedings in which it has applied to be joined, that would be grossly unfair to injured employees who have obtained judgment in an undefended case and apply for relief payment but who would not be entitled to recover the costs of the proceedings, since any relief payment made under the ECAO would only cover the judgment for damages. 

47.  I do not agree.  Whilst it is true that judgment creditors in undefended actions for damages cannot recover costs by way of relief payment under the ECAO, for the reason that the proceedings are undefended, they are likely to obtain a higher award of damages, than if the proceedings had been defended by the ECA Fund Board.  It appears to me, broadly speaking, that it would be worthwhile for the ECA Fund Board to intervene to defend cases where a substantial amount is claimed by way of damages, as their defence of such a case is likely to reduce the quantum of damages by more than the amount of costs which might be ordered to be borne by the ECA Fund Board.  In all these cases, the ECA Fund Board can, of course, protect its position as to costs, by making sensible without prejudice, save as to costs, offers, pursuant to section 29 of the ECAO. 

48.  On the contrary, it would be unfair to injured employees, whose claims are reduced as a result of the participation of the ECA Fund Board, if they could not obtain an order to cover their costs of prosecuting their claim to judgment and the increased costs of doing so in the face of active participation in the proceedings by the ECA Fund Board.  Further, as already mentioned above, it would be an incongruous and unjust state of affairs if the plaintiff who prosecutes his claim to judgment and obtains a higher award of damages than that offered by the ECA Fund Board under its section 29 letter of settlement, could not obtain an order of costs against the ECA Fund Board, but is at risk of an order to pay the costs of the ECA Fund Board from the date of that letter, should he fail to beat the offer made by the ECA Fund Board under such letter.        

49.  None of the above considerations lead me to conclude that the court’s jurisdiction to order costs against the ECA Fund Board, as a party which has joined in the proceedings, is in any way fettered.  

50.  I now turn to consider the authorities that were cited to me.

51.  In Chen Xiu Mei v Li Siu Wo [2007] 1 HKLRD 331 (District Court) and [2008] 2 HKLRD 211 (Court of Appeal), the deceased was an illegal mainland worker who suffered fatal injuries while operating a forklift truck in the course of his employment by the 1^st respondent.  The ECA Fund Board had joined as a party to the employees’ compensation proceedings and successfully contended before the deputy district judge that the contract of employment was illegal and that the court ought not to exercise its discretion under section 2(2) of the ECO to award compensation as if the injured person had been a person working under a valid contract of employment.

52.  It was unfortunate that the earlier Court of Appeal’s decision, to the contrary, in Chan Cheuk Ting v Analogue Engineering Co Ltd and Anor. [1986] HKLR 935 had not been cited to the judge.  Before the appeal from the deputy district judge had been heard, another division of the Court of Appeal in Yu Nongxian v Ng Ka Wing [2007] 4 HKLRD 159, followed the Court of Appeal’s decision in Chan Cheuk Ting v Analogue Engineering Co Ltd and Anor. and exercised the discretion under section 2(2) of the ECO in favour of the illegally employed employee.  On the basis of the decision of the Court of Appeal in Yu Nongxian v Ng Ka Wing, the ECA Fund Board accepted that it could not properly advance any argument on the exercise of the discretion under section 2(2) of the ECO, and the Court of Appeal in Chen Xiu Mei v Li Siu Wo reversed the decision of the deputy district judge, and found that the discretion should be exercised in favour of the applicant. 

53.  The Court of Appeal also dismissed the cross-appeal of the ECA Fund Board, which had been advanced on other grounds. In disposing of the appeal in favour of the applicant, the Court of Appeal awarded costs against the ECA Fund Board, not only of the appeal, but also the costs incurred by the applicant in the employees’ compensation proceedings below.  The ECA Fund Board had not submitted to the Court of Appeal that it ought not to be liable to pay the costs of the employees’ compensation proceedings in the District Court, which it had joined as the 2^nd respondent.

54.  In allowing the appeal of the applicant against the decision of the deputy district judge, the Court of Appeal in Chen Xiu Mei v Li Siu Wo had ordered that judgment be entered in favour of the applicant against the 1^st and 2^nd respondents in the amount of the employees’ compensation that had been assessed.  This order resulted in a further application by the ECA Fund Board to amend the judgment to exclude it from an order for payment of employees’ compensation.  The Court of Appeal acceded to this application, accepting that the applicant would only be able to recover against the ECA Fund Board if she complied with section 16 of the ECAO.  Although the ECA Fund Board had succeeded on its application, it agreed that there ought to be no order as to costs of its motion to amend the judgment.

55.  In the following 3 cases, the Court refused to order costs in favour of the injured employee against the ECA Fund Board as intervener.  In Liang Yu Kuan v The personal representative of Chan Mau Wang, deceased, and Ors., HCPI 522/2000, 26 March 2003, Fung J made a costs order nisi that there be no order as to costs against the ECA Fund Board without giving any reasons for such an order.

56.  Similarly, HH Judge H C Wong in DCPI 2151/2009, 8 February 2012, did not make an order that the ECA Fund Board pay the costs of the plaintiff in the assessment of damages, in which it had participated; but she ordered that the employer should bear the plaintiff’s costs and the costs of the ECA Fund Board.

57.  In Leung Kwok Biu v Tam San Yu trading as New Shine Engineering Co & Ors, HCPI 810/2008, 21 November 2012, Deputy High Court Judge L Chan, as he then was, did not make any order as to costs against the ECA Fund Board which had intervened in the assessment of damages of the plaintiff’s claims, in the absence of the other defendants, for the reasons that the ECA Fund Board was a statutory body and had not joined to further its own interest or to suppress the plaintiff’s claim but to assist the court to come to a fair and just decision; and for the further reason that he found that the ECA Fund Board’s intervention had been useful and constructive, both in terms of evidence and submissions.

58.  I am not privy to how the ECA Fund Board conducted the proceedings before the learned judge, but with every respect to him, I must state that it has been my experience that the ECA Fund Board participates in these proceedings in an adversarial role and, by way of an example, it does not act as amicus curiae.

59.  In the following cases, a costs order was make against the ECA Fund Board as intervener.  In Lau Tuen Ping v Law Wai Kwong and Anor., HCPI 1221/2000, 15 April 2003, Master Lung, as he then was, after the assessment of damages in which the ECA Fund Board had intervened, in the exercise of his discretion under section 52A of the High Court Ordinance, Cap 4, made a costs order nisi that the ECA Fund Board should pay the plaintiff the costs of the assessment of damages, to be taxed if not agreed. He also ordered that the ECA Fund Board should not be liable for the costs up to the stage of the interlocutory judgment being entered against the employer. 

60.  The ECA Fund Board had participated in Chau Kin Fai v Hui Tak Wai and Ors., DCEC 886/2002, 12 December 2005, raising issues on liability and quantum.  At the conclusion of the employees’ compensation proceedings, HH Judge Marlene Ng, as she then was, after referring to the decision of Master Lung in Lau Tuen Ping v Law Wai Kwong & Anor., made an order that the costs of the proceedings be borne by the ECA Fund Board.

61.  In Chan Wai Yin v Wong Sau Ping & Anor., DCEC 97/2004, 14 June 2007, Deputy District Judge K Lo, as she then was, also referred to the decision of Master Lung in Lau Tuen Ping v Law Wai Kwong and ordered that the costs of the employees’ compensation proceedings, which had been contested by the ECA Fund Board, both on liability and quantum, be borne by the ECA Fund Board. 

62.  In Chan Chi Sing v.Chan Shu Kuen & Anor. [2009] 2 HKLRD 259, HH Judge Simon Leung, as he then was, ordered the ECA Fund Board to pay the costs of the assessment of damages in which the ECA Fund Board had participated.  He did so upon the concession made by Ms Phillis Loh, counsel for the ECA Fund Board in that case, which she had made based on the decision of Master Lung in Lau Tuen Ping v Law Wai Kwong.  Not only did Ms Loh act in the best traditions of the Bar by drawing the court’s attention to the authority of Lau Tuen Ping v Law Wai Kwong, in my view, the concession by counsel was rightly and properly made. 

63.  I should make reference to two more cases.  One was a decision of Master de Souza in Yi Shengmao & Ors. v Wong Kam Piu & Ors., HCPI 742/2005, 17 March 2010, in which Master de Souza awarded costs of the assessment of damages against the ECA Fund Board on the ground that the ECA Fund Board had allied itself with the representations of the employer and had made submissions of its own in an attempt to minimize the plaintiff’s claims, and that, in those circumstances, it was right and proper that the ECA Fund Board should also bear the costs consequences of doing so.

64.  Finally, in Wong Kim Hung v Wong Wing Kong & Ors., HCPI 421/2010, 21 August 2013, Au-Yeung J, held, after a trial on liability and quantum in which the ECA Fund Board had participated as the 3^rd defendant, that the ECA Fund Board should pay the plaintiff the costs of the action, but only from the date of its joinder.     

65.  My review of these decisions, including in particular, the reasons given by Deputy Judge L Chan, as he then was, does not lead me to depart from my conclusions that I have reached above, which I have reached based on my construction of the ECAO and after hearing the submissions of Mr Wong on behalf of the ECA Fund Board.

66.  In my judgment, the usual order should be made against the ECA Fund Board, as is made against an employer defending the proceedings against whom a judgment for damages has been obtained.  Such usual order is to pay the entire costs of the action, not just costs from the date of the intervention by the ECA Fund Board, in cases in which the ECA Fund Board has intervened and disputed liability and quantum or has obtained an order to set aside interlocutory judgment for damages to be assessed in order to dispute liability and quantum.  The taxation of such costs would ensure that any costs and expenses which were unreasonably incurred would not be allowed on the taxation.  The costs of necessary steps taken to prosecute a claim to judgment ought to be recoverable in a case in which the ECA Fund Board intervenes to dispute liability, even though those steps were taken before its intervention.  Interested parties such as insurance companies and MIB who join in the proceedings and obtain an order to set aside a default judgment that had been regularly obtained are usually made to the plaintiff’s costs in obtaining such judgment. A similar order should be made when the ECA Fund Board joins in the proceedings and obtains an order to set aside a regularly obtained default judgment.

67.  Where the ECA Fund Board intervenes in order to dispute the injured employee’s claim on quantum only, then the usual order ought to be the one made by Master Lung, as he then was, in Lau Tuen Ping v Law Wai Kwong and Anor., namely, that the ECA Fund Board ought to pay the costs of the proceedings from the date of its joinder.

68.  In the absence of any vitiating factors which would enable me to rescindthe settlement agreement by the solicitors acting on behalf of the plaintiff and the solicitors acting on behalf of the ECA Fund Board, which is reflected in the terms of the summons issued on 28 November 2013, I have no alternative but to make an order in terms of that summons, including the order that there be no order as to costs between the plaintiff and the defendants, including the ECA Fund Board.  It is my hope, however, that my decision herein might prompt the ECA Fund Board to reopen negotiations with the plaintiff and to offer to pay the plaintiff’s costs of the action, or part of those costs.

69.  I also order that there be no order as to costs between the plaintiff and the ECA Fund Board in respect of this hearing which had been initiated upon my request to them to address me on this issue which are not only of importance to them but to all parties to proceedings in which the ECA Fund Board has intervened.  I appreciate that the effect of my order may be to further reduce the amount of damages recoverable by the plaintiff, since the costs of the plaintiff’s solicitors at this hearing, which are to be taxed in accordance with the Legal Aid Regulations, are likely to come out of those damages.  However, it is my hope that the Director of Legal Aid would exercise his discretion to waive those costs, given the importance of the resolution of these issues and because my decision herein is likely to affect future cases brought by injured employees, the majority of whom would be funded by the legal aid scheme.

70.  The misgiving I had expressed in Lau Yuk Hung v Tsang Kwong Ming & Ors., [2013] 2 HKLRD 614, prompted the Honourable Member of the Legislative Council, Mr Dennis Kwok, on 17 April 2013 to raise the question whether the government had any plans to introduce amendments to the ECAO, to which he received a reply from the Secretary for Labour and Welfare that the Fund had been operating at a loss for the years between 1996 – 97, and 2005 – 06, and had only started to accumulate surplus from 2008 – 09, and that, as at the end of March 2013, there was still an outstanding principal loan of around $93 million that had been provided by the government to the ECA Fund Board in 2002 to enable it to tide over its financial difficulties.[14]Given the financial situation of the Fund at that time, the administration considered that it was inopportune to initiate amendments to expand the scope of the Scheme to cover payment of costs and interests on damages awarded by the court, adding that the loan to the government would only be fully paid off by 2015.  However, the Secretary for Labour and Welfare offered his assurance that they would continue to closely monitor the stakeholders’ concerns, the financial position of the Fund and the practical need to improve the protection of the ECAO.

71.  It is reassuring to note, from the Annual Report of the ECA Fund Board for the financial year of 2012-13, that the outstanding principal loan of $93 million owed to the government was repayable in three instalments on 1 April 2013, 1 April 2014 and 1 April 2015. Assuming that the ECA Fund Board had repaid part of the loan by instalment payments made on 1 April 2013 and 1 April 2014, there is only one outstanding instalment payment of $32.05 million due on 1 April 2015.  As against that, it is encouraging to note, from the same Annual Report, that the ECA Fund Board recorded surpluses of $81.9 million in the financial year ended 31 March 2012, and $104.5 million in the financial year ended 31 March 2013.  These surpluses were substantially higher than the total expenditure of the ECA Fund Board in the years in question.   Therefore, there is good reason to hope that the amendments to the ECAO to enable the ECA Fund Board to pay interest on damages and costs of the proceedings may be made as early as next year.

72.  In the meantime, to prevent the substantial erosion of any relief payment that may be recovered by the injured employee from the ECA Fund Board by the costs of proceedings to obtain a judgment for damages at common law, I direct that all such undefended cases in the District Court be transferred to the High Court to be case managed by me as the Personal Injuries Judge and that all such undefended cases in the High Court be also transferred to me to be case managed, until such time, as the ECA Fund Board decides to intervene in the proceedings.  It will be my paramount task in the case management of these undefended proceedings to ensure that the proceedings are brought to a conclusion, efficiently and economically, and I will expect solicitors acting for the injured employees, or their dependants, in these cases to furnish me with the budget of the likely costs and disbursements to bring these undefended cases to a conclusion.

73.  Whilst the risk of insurer insolvency is low, the failure of employers to purchase employees’ compensation liability insurance is a real concern.  The assistance of the Business Registration Office might be sought to ensure that no business registration certificate is issued unless the applicant provides details of a valid employees’ compensation liability insurance policy or declares that he does not intend to employ any persons during the year to be covered by the business registration certificate.