WU NAI SANG v. FELLOWSHIP ENGINEERING LTD AND OTHERS

DCEC 243/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 243 OF 2011

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DECISION

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Introduction

1.  At paragraphs 110 and 111 of my judgment in this case, I made the following costs order nisi:-

“(110) … that R1 and R4 shall pay A the costs of these proceedings, to be taxed if not agreed, with certificate for counsel.

(111)  … that A shall pay R2 and R3 costs of these proceedings, to be taxed if not agreed, with certificate for counsel.”

2.  By a summons taken out by A dated 6 October 2016, A applied to vary the said costs order nisi in paragraph 111 in the following manner:-

(a)  R1 do pay A’s costs of prosecution of these proceedings, including any costs reserved order, against R2 and R3, to be taxed if not agreed, with certificate for counsel;

(b)  R4 do pay A’s costs of prosecution of these proceedings, including any costs reserved order, against R2, to be taxed if not agreed, with certificate for counsel;

(c)   R1 and R4 do pay R2 and R3 costs of these proceedings, including any costs reserved order, to be taxed if not agreed, with certificate for counsel;

(d)  there be no order as to costs between A and R2 and R3.

3.  R2 and R4 through their solicitors, Messrs Kwok, Ng & Chan, informed this court that they have no objection to A’s application.  As a result, A, R2 and R4 agreed that there be no order as to costs of the summons between A and R4.

4.  At the hearing on 25 November 2016 when the argument of the summons was adjourned to 29 December 2016, R1 was legally represented.

5.  R1 filed a notice to act in person on 15 December 2016 but did not appear at the hearing on 29 December 2016.  Hence, the argument was proceeded in the absence of R1.

Legal principles

6.  In Fung Chun Man v Hospital Authority [2012] 1 HKC 531, Bharwaney J held that in making a Sanderson or a Bullock order, the court must determine whether or not it was reasonable to proceed against the successful defendant.  If it was, the unsuccessful defendant may be ordered to pay the successful defendant’s costs, either directly, via a Sanderson order, or indirectly, via a Bullock order.  The classic case where a Sanderson or Bullock order was made was where the unsuccessful defendant blamed the successful defendant and caused the plaintiff either to join the successful defendant or to continue the proceedings against the successful defendant.  In exercising its discretion whether or not to make a Sanderson or Bullock order, the court would have regard to all the circumstances and the state of evidence to determine whether it was reasonable for the plaintiff to pursue the successful defendant.  In making its decision the court must be careful not to lose sight of the uncertainties surrounding the case before its conclusion.

Discussion

7.  In the supporting affirmation of Woo Kwok Yin, it is deposed that R2 was joined to the proceedings due to the information amendment sheet dated 11 March 2011 provided by R1 stating that R2 was the principal contractor of the project and R3 was A’s employer.  Further, in R1’s amended answer filed on 20 October 2011, R1 alleged that it was only a formwork sub-contractor of R2 and R3 sub-contracted the steel binding work from R2.  A was an employee of R3 as a steel binder.  Hence, A was faced with the uncertainty of the real relationship between R1, R3 and A or alternatively whether R1 or R3 was A’s employer.  Therefore, R3 was joined in the proceedings.

8.  In view of the above background, I have no doubt that it was reasonable for A to pursue the claim against R3 even though he was found not to be A’s employer after trial.  Mr Albert Yau, counsel for R3, has fairly taken no issue on this.

9.  The question remains, however, is whether a Sanderson order (ie the unsuccessful R1 bearing the costs of the successful R3) should be made instead of a Bullock order.

10.  From the facts of this case, it can be said that both A and R3 are the victims of Kwok’s empty promise that he had already taken out insurance coverage.  Now, this court is faced with the distasteful task of deciding who is going to bear the costs of R3.

11.  In deciding whether to make a Sanderson or Bullock order is a matter of discretion of the court: see Chong Ngan Seng v China Harbour Engineering Co Ltd, CACV 54/12, 25 September 2013, unreported, at para 6.

12.  Mr Dennis Law, counsel for A, submitted that in view of the fact that R1 is a limited company, if a Bullock order is made, it is unlikely that A would be able to recover costs of R3 from R1.  If that happens, R3’s costs would have to be paid out of the compensation received.  Mr Law submitted that although practical consequence of the making of one order or the other is a subsidiary point and is not one that should weigh heavily, the Court of Appeal in Chong Ngan Seng (supra) was of the view that it is a matter which can be taken into account.  The Court of Appeal made a Sanderson order due to the fact the awarded damages was in the sum of $305,115.55 which would be very likely significantly eroded if the plaintiff were to be liable for the 1^st defendant’s costs but unable to recover them from the other defendants.

13.  Mr Yau, on the other hand, submitted that a Bullock order is appropriate in the circumstances of this case.  Mr Yau sought reliance on 2 letters expressed to be “without prejudice save as to costs” (“Calderbank letters”) dated 23 April 2014 (“1^st letter”) and 7 September 2015 (“2^nd letter”) respectively.  In the 1^st letter, R3 made an offer of $300,000 inclusive of costs for settlement.  In the 2^nd letter, R3 increased the offer to $500,000.  Mr Yau submitted by reason of Order 1 rule 2 of the Rules of the District Court (“RDC”), which provides that:-

“(1) Subject to this rule, these Rules shall have effect in relation to all proceedings in the Court.

…

(2A) Subject to paragraph (2B), these Rules shall not have effect in relation to –

…

(c) proceedings –

(i) for the recovery of employees’ compensation; and

(ii) in respect of which rules are made under section 50 of the Employees’ Compensation Ordinance (Cap. 282).

…

(4) In the case of the proceedings mentioned in paragraphs (2), (2A) and (3), nothing in those paragraphs shall be taken as affecting any provision of any rules (whether made under the Ordinance or any other Ordinance) by virtue of which the Rules of the District Court or any provision thereof is applied in relation to any of those proceedings.”,

the provision under Order 62 rule 5(1)(d) of RDC does not apply.  Therefore, I should take into account the Calderbank letters in exercising my discretion.

14.  In response, Mr Law submitted that the Calderbank letters are irrelevant or of little weight in considering the appropriate costs order to be made.

15.  With respect, I am unable to accept Mr Law’s submission.  In my view, the Calderbank letters are pertinent factors to be taken into account.  By reason of Order 1 rule 2 of RDC, the provision under Order 62 rule 5 of the same rules does not apply.

16.  R3 made 2 offers to A in 2014 and 2015 respectively with a view to settle the claim between them.  They were made long before the case was set down for trial.  Had it not been for the decision of A to continue his claim against R3, the complexion of the case would have been much different and both of them would not be in the position they are now in.  Indeed A has the right to make the decision as he did.  But whatever step he took in the proceedings would naturally come with its costs consequence.

17.  I have every sympathy with A’s situation because if R1 is found to be insolvent or impecunious, R3’s costs will have to be paid out of the compensation awarded to him.  However, in exercising my discretion, this is not the only factor I have to take into account.

18.  In Chong Ngan Seng (supra), the Court of Appeal exercised the discretion in favour of a Sanderson order in view of the fact that the damages awarded were only in the region of $300,000 and therefore it would very likely be eroded if a Bullock order was made.  Here, the compensation awarded is in the region of $1,500,000.  The predicament A is facing is not as grave as the plaintiff in Chong Ngan Seng (supra).

19.  Lastly, Mr Law made it a point that R3 had wrongly accepted Kwok’s words that he had already taken out insurance coverage without actually checking the insurance document.  This is of course unfortunate that Kwok had let R3 and consequently A down.  However, I do not think R3 should be made to bear the risk of not able to recover his costs simply because he was misled by an unscrupulous contractor.  In any event, the question under consideration is the costs of R3 in the proceedings in which it was A’s case that R3 was his employer, not the liability of R3 to A due to the lack of insurance coverage.

20.  Whatever decision I make is not an easy one.  Having considered the above factors, my conclusion is that the exercise of the court’s discretion should be in favour of a Bullock order.

21.  Finally, for the avoidance of doubt, I should make it clear that in relation to A’s costs of the proceedings, they include the costs against R2 and R3.

Order

22.  Accordingly, the costs order nisi is only varied by adding that:-

(1)  A’s costs of the proceedings include the costs against R2 and R3; and

(2)  R1 and R4 do indemnify A in respect of the costs to be paid to R2 and R3.

Costs of the summons

23.  In respect of the costs of the summons, costs should follow the event.  I order that:-

(1)  A shall pay R3 costs of the summons, to be taxed if not agreed.  Certificate for counsel is granted in respect of the hearing on 29 December 2016 only;

(2)  no order as to costs between A, R1, R2 and R4; and

(3)  A’s own costs shall be taxed in accordance with Legal Aid Regulations.