CHAN SIK PAN v. WYLAM'S SERVICE LTD AND OTHERS

HCPI 648/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 648 OF1995

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RULING ON COSTS

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1. Written judgment in respect of the retrial in this matter was given by me on 16 December 2002.  At the end of that judgment, I indicated that I would need to hear from the parties on costs.

2. The hearing on costs took place on 25 April 2008.  The reason for that was partly due to the fact that the plaintiff and the 3^rd defendant appealed to the Court of Appeal in respect of the judgment given in the retrial.  The Court of Appeal dismissed the appeal by both the plaintiff and the 3^rd defendant and gave its reasons in writing on 27 October 2004.

3. This Ruling therefore deals with the costs of the retrial, having heard the parties on their submissions as to costs.

4. This matter in its entirety had taken a long and checkered history and background which will be useful to note.

Background

5. This case concerned an accident to the plaintiff in the course of his employment at a construction site.  The accident occurred on 21 August 1992 and the plaintiff was working as a fire installation worker.  The circumstances of the accident is not germane to the issues relating to costs and will not be repeated here.

6. The plaintiff claimed against all three defendants on the basis that one of them was his employer but that he cannot be sure which of them in law was the actual employer.

7. The matter went to trial between 13 and 29 December 1999 and was heard by the late Deputy Judge Z.E. Li who gave judgment on 3 February 2000.  In that judgment Deputy Judge Li found the 1^st defendant to be the employer of the plaintiff and was solely liable to the plaintiff for negligence and breach of statutory duty.

8. The 1^st defendant appealed from that judgment of Deputy Judge Li to the Court of Appeal.

9. In the Court of Appeal, the appeal by the 1^st defendant was heard before Hon Leong JA, Wong JA and Woo JA on 22 and 23 June 2000.  Judgment was given on 31 July 2000 in which they allowed the appeal of the 1^st defendant and on the facts found the 3^rd defendant to be the employer of the plaintiff.  Accordingly, they set aside the judgment against the 1^st defendant and gave judgment to the plaintiff against the 3^rd defendant on the plaintiff’s Respondent’s Notice.

10. On 3 January 2001, the same Court of Appeal gave leave to the plaintiff and the 3^rd defendant to further appeal to the Court of Final Appeal.

11. Up to this stage, the 2^nd and 3^rd defendants had all along been acting in person and only the plaintiff and the 1^st defendant were represented by counsel.

12. The matter was heard by the Court of Final Appeal on 10 and 11 September 2001.  In the Court of Final Appeal, the 3^rd defendant was represented by counsel.

13. It was submitted on the 3^rd defendant’s behalf that at the trial before Deputy Judge Li, the 3^rd defendant was advised by the deputy judge not to give evidence after evidence had been adduced by the 1^st defendant since the deputy judge did not believe the factual evidence called by the 1^st defendant and was minded to find against the 1^st defendant on facts.  As a result the 3^rd defendant did not give or adduce any factual evidence at the trial.  This however was not made known to the Court of Appeal who proceeded to find against the 3^rd defendant in the appeal.

14. In the circumstances, the Court of Final Appeal ordered a retrial on the only issue in the case, namely, who was in fact the employer of the plaintiff, as there could not have been any proper finding of fact in the matter because the 3^rd defendant had not even given his version of the factual evidence.  It was the judgment of the Court of Final Appeal that whoever was found to be the actual employer of the plaintiff, that party would be the person liable to the plaintiff for the accident.

15. The retrial was therefore limited to only that one issue as decided by the Court of Final Appeal.

16. In so ordering, the Court of Final Appeal also made a cost order that the cost of the appeal to the Court of Final Appeal, as well as the costs below in both the Court of Appeal and at the trial before the deputy judge, to be costs in the cause of the retrial.

17. The retrial was heard by me between 22 July and 30 August 2002 and a written judgment given on 16 December 2002.  All the parties were represented by counsel at the retrial.

18. I found as a fact that the 3^rd defendant was the employer of the plaintiff at the material time of the accident.

19. Thereafter, both the plaintiff and the 3^rd defendant appealed against that judgment to the Court of Appeal.

20. The appeal was heard by the Court of Appeal (differently constituted from the division which heard the first appeal from the deputy judge) on 13 October 2004, who dismissed the appeals by the plaintiff and the 3^rd defendant with costs after the hearing but gave their reasons in writing on 27 October 2004.

Plaintiff’s submission as to costs

21. The plaintiff ultimately succeeded only against the 3^rd defendant, being the sub-sub-contractor of the 1^st defendant.

22. In so far as costs is concerned, the plaintiff’s position is that it was reasonable for the plaintiff to have joined in the 1^st and 2^nd defendants in this matter, since the plaintiff, from the outset, had no knowledge as to who was his actual employer.  Moreover, the 1^st and 2^nd defendants had created a situation which led the plaintiff to reasonably believe that either of them could have been the employer of the plaintiff.

23. On that basis therefore, the plaintiff submits that since the plaintiff succeeded against the 3^rd defendant, there should be no question but that the 3^rd defendant will have to pay the plaintiff’s costs of the action against the 3^rd defendant.

24. As for the plaintiff’s costs of the claim against the 1^st and 2^nd defendants, the plaintiff submits that the plaintiff ought to recover those from the 1^st and 2^nd defendants or alternatively, the plaintiff should recover same from the 3^rd defendant.

25. In so far as the respective costs of the 1^st and 2^nd defendants are concerned in defending the claim against them, the plaintiff submits that those should be paid by the 1^st and 2^nd defendants themselves respectively, alternatively, if the 1^st and 2^nd defendants are to get their costs, the same should be paid by the 3^rd defendant.  In this respect a Sanderson order (rather than a Bullock order) should be made.

Stance of the 1^st and 2^nd defendants

26. The stance taken by the 1^st and 2^nd defendants in so far as their costs of defending the claim is concerned is simply that costs should follow the event and since the 1^st and 2^nd defendants both succeeded in defending the claim against them by the plaintiff, the plaintiff should pay the costs of their successfully defending the claim.

27. It was also suggested by the 1^st defendant that as between the plaintiff and the 3^rd defendant, where the 3^rd defendant was not legally aided, the 3^rd defendant should pay the plaintiff’s costs of the claim against the 3^rd defendant, but where the 3^rd defendant was legally aided, there should be no order as to costs as between them.

Decision

28. The general rule relating to an order for costs is that costs should follow the event.  In the present case, the plaintiff has succeeded against the 3^rd defendant on the issue of liability which is the very crux of the retrial.

29. In that respect, there can be no question but that the plaintiff should get his costs of his claim against the 3^rd defendant on the retrial.

30. As for the costs of the plaintiff’s claim against the 1^st and 2^nd defendants, the plaintiff did not succeed against the 1^st and 2^nd defendants on the issue of liability such that it would not be correct for the 1^st and 2^nd defendants to have to pay such costs to the plaintiff.  Whether or not the plaintiff ought to be able to recover the costs of the plaintiff’s claim against the 1^st and 2^nd defendants will depend on whether it was or was not reasonable for the plaintiff to have brought the claim against the 1^st and 2^nd defendants and, even if it was reasonable for the plaintiff to have sued the 1^st and 2^nd defendants, whether there is any valid basis for the 3^rd defendant to have to bear such costs.

31. These considerations will be dealt with, in particular whether it was reasonable for the plaintiff to have brought the claim against the 1^st and 2^nd defendants, in the latter part of this decision.

32. The more difficult question that has to be considered is the question of the 1^st and 2^nd defendants’ costs in defending the claim as they were successful in their defence on the issue of liability.

33. As already stated above, the general rule is that costs should follow the event.  However, that is but a general rule.  Where there are special or exceptional circumstances which make it unjust for that general rule to apply, then a court will have to consider those special or exceptional circumstances and exercise its discretion accordingly.

34. In the present case I will need to consider the following special circumstances pertaining to the case albeit that the 1^st and 2^nd defendants were found not to be the employer of the plaintiff and therefore not liable :

(a)  the 1^st defendant was engaged by the main contractor (Carrier) to carry out the fire installation works at the Site since the 1^st defendant was registered with the Fire Services Department to carry out such works and held a necessary license for same;

(b)   it was not permissible for the 1^st defendant to sub-contract such fire installation works to anyone else who did not have such necessary license;

(c)   both the 2^nd and 3^rd defendants did not have the necessary license to carry out fire installation works;

(d)   nevertheless the 1^st defendant did sub-contract the fire installation works to the 2^nd  defendant who in turn sub-sub-contracted a part of it to the 3^rd defendant;

(e)   in so doing, the 1^st defendant contrived to hide the chain of subcontracting downwards from Carrier and in the process, generated much evidence including documentary evidence which would have the effect of showing the 1^st defendant to be the employer of all the workers (including the plaintiff) carrying out the fire installation works on Site and in this respect had misled the plaintiff into believing that the 1^st  and/or the 2^nd defendant was his employer; and

(f)   moreover, the 1^st defendant had agreed with the 2^nd defendant that it would be responsible for taking out the necessary insurance to cover the workers of all its subcontractors when it subcontracted the fire installation works to the 2^nd defendant, however, when, after the accident, the 1^st defendant lodged a claim under the insurance policy in capacity of the employer of the plaintiff, the insurers rejected the claim on the ground that the policy only covered direct employees, but the plaintiff was not such.  The 1^st defendant had failed to take out the necessary insurance to cover the workers of the 2^nd and 3^rd defendants.

35. The evidence generated by the 1^st defendant and referred to in (e) above included the following:

(i)   a Form II filled out by the 1^st defendant notifying the Labour Department of the subject accident to the plaintiff in which the 1^st defendant admitted itself to be the employer of the plaintiff;

(ii)   the plaintiff being told by a Miss Ng of the 1^st defendant in the office of the 1^st defendant in December 1992 that the 1^st defendant was his employer;

(iii)   two agreements entered into between the plaintiff and the 1^st defendant in January and May of 1993 in which the 1^st defendant, as the employer of the plaintiff, agreed to and in fact paid the plaintiff two-thirds of the plaintiff’s salary during part of the sick leave period granted to the plaintiff;

(iv)   a worker’s Attendance Book signed by all workers on Site and in which reference is made to  them as workers of the 1^st defendant;

(v)   a letter from the 1^st defendant to Carrier, the principal contractor, dated 15 June 1993 in which the 1^st defendant admits to being the employer of the plaintiff;

(vi)   the objection by the 1^st defendant to the assessment of 15% loss of earnings capacity of the plaintiff in which the objection is made by the 1^st defendant as the employer of the plaintiff;

(vii)  insurance claim made by the 1^st defendant to its insurers on behalf of the plaintiff as its employee; and

(viii)  a name card printed for the 2^nd defendant describing him as a foreman of the 1^st defendant.

36. Given the special circumstances referred to above, there can be little doubt but that in generating such evidence which had the effect of showing the plaintiff to be its employee when in fact that was not the case, as was the finding made at the retrial, the 1^st defendant, had by its own conduct brought it upon itself to be sued by the plaintiff as being the employer of the plaintiff.

37. It should also be noted that the deputy judge in the first trial was sufficiently misled by such evidence generated by the 1^st defendant to come to the finding that the 1^st defendant was the employer of the plaintiff.  That ultimately led to the first appeal to the Court of Appeal and then to the Court of Final Appeal.

38. It also follows that from such evidence generated by the 1^st defendant that it was reasonable for the plaintiff to have thought or believed that it had a strong case against the 1^st and 2^nd defendants being his employer.

39. Indeed at the best of times, someone in the position of the plaintiff would have little or no idea as to who his actual employer in law is, particularly in the construction trade and in the case of casual workers.  That is especially so since who is the actual employer in law can be a very complex matter because it is a mixed question of law and fact.  Therefore given the special circumstances in this case, the only conclusion I can come to on the question as to whether it was reasonable for the plaintiff to have sued the 1^st and 2^nd defendants must be a resounding “yes”.

40. Although most if not all of the ‘evidence’ referred to above were generated by the 1^st defendant, it follows from the entirety of the special circumstances in this case that the 2^nd defendant must be in on it with the 1^st defendant since he had gone along with the 1^st defendant by holding himself out to be the “foreman” of the 1^st defendant in all the site meetings involving Carrier, and thereby compounding the charade that he was also an employee of the 1^st defendant.

41. One further matter which I also take into account is the fact that throughout the trial, the 1^st and 2^nd defendants had never come clean in the sense of frankly admitting that all the evidence generated to show that the 1^st defendant was the employer of the plaintiff was contrived to hide from Carrier the fact that there had been subcontracting to the 2^nd and 3^rd defendants by the 1^st defendant.  That matter was left to the court to determine and find from all the evidence adduced.

42. Given the special circumstances in this case and which was the doing of the 1^st and 2^nd defendants, there is no question in my mind that although they have been exonerated from liability to the plaintiff upon the finding by the court that neither the 1^st nor the 2^nd defendant were the employer in law of the plaintiff, when it comes to the question of costs, the general rule that costs should follow the event ought not to be applied in this case in so far as the 1^st and 2^nd defendants are concerned.

43. On the other hand I am not persuaded by the submission of leading counsel for the plaintiff to order the 1^st and 2^nd defendants to pay costs of the action to the plaintiff for after all, they were successful in their defence on liability.

44. Therefore, exercising my discretion in the matter, I am of the view that the fairest order for costs relating to the 1^st and 2^nd defendants is that they should bear their own costs in defending the plaintiff’s claim.

45. For the reasons given above, and having come to the conclusion that it was reasonable for the plaintiff to have brought this claim against the 1^st and 2^nd defendants, I will also need to deal with the costs of the plaintiff in bringing the claim against the 1^st and 2^nd defendants.

46. In respect of the plaintiff’s costs of bringing the claim against the 1^st and 2^nd defendants, I am of the view that those costs should also be borne by the 3^rd defendant, since throughout the trial, the 3^rd defendant had maintained that it was the 1^st and/or the 2^nd defendants who were the true employer of the plaintiff.

47. A large part of the submission before me on costs related to whether there should be a Sanderson or Bullock order, but that would only arise if the 1^st and 2^nd defendants would have succeeded in obtaining an order for costs of their defence of the claim against them.  In the circumstances it is not necessary for me to decide that issue.

Costs Order

48. Accordingly, the costs order which I will make relating to this action will be as follows :

(a)   The costs of the plaintiff’s claim against the 1^st, 2^nd and 3^rd defendants be borne by the 3^rd defendant, to be taxed if not agreed;

(b)   The 1^st defendant to bear its costs in defending the action;

(c)   The 2^nd defendant to bear his costs in defending the action;

(d)   Plaintiff’s own costs to be taxed in accordance with Legal Aid Regulations; and

(e)   There be certificate for two counsel.

49. The parties have also agreed that the hearing on costs ought to be treated as part of the retrial itself.  In those circumstances, it would not be necessary for me to make a separate costs order relating to the hearing on costs.