So Wai-hung v. Cheung Kee Fung Cheung Construction Co.Ltd. & others

DCEC154/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES COMPENSATION CASE NO. 154 OF 2000

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R U L I N G

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1. In this matter the parties have come to a comprehensive and, if I may say so, very sensible resolution to this matter which has been outstanding for a very long time so far as the applicant is concerned, who is completely innocent in this matter. He, as I indicated in the course of the trial, has lost his sight in one eye and he has been out of his money now certainly since 1997, when the accident occurred. Whilst he has had to wait, what has been going on has been an insurance dispute, together with a dispute between the 1st respondent, who was the principal contractor at the site, and the third party, who, if I can describe it in this way, was the putative direct employers of the applicant.

2. At all events, the matter has now settled and the only matter that I need to resolve between these parties arises from paragraph 5 of the consent order, which is as to the basis of taxation of costs in relation to the 2nd respondent's costs, which are to be paid by the 1st respondent and the third party, the 2nd respondent being the 1st respondent's insurer. Mr Paul Lam, who appears for the 2nd respondent, submits that the behaviour of the 1st respondent and, to a lesser degree, the third party has been so bad as to fall within the sort of behaviour contemplated by the authorities, particularly the case of Choi Yee-chun v Bondstar Development Limited, a decision of the Court of Appeal dated 23 September 1997, where Stock J, who gave the leading judgment of the court set out the test which was as follows: that a taxation of the successful party's costs on an indemnity basis could properly be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner, any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for taxation of the successful party's costs on an indemnity basis.

3. Mr Lam starts his submission by drawing attention to the relationship between the 1st respondent and his clients, that being the relationship of insurer and insured, and he quite rightly draws attention to the principle that of course the insured owes a duty of uberrimae fidei to the insurer. And he draws attention to the way in which the 1st respondents have conducted this litigation, in such a way that the 2nd respondent had no alternative but to apply to be joined in the proceedings in order to protect its position. It is now accepted, the matter having gone to a third day of trial, that the 2nd respondents have no liability in this matter as between the 1st respondent and the third party, and indeed the applicant himself. They have been put to the expense of defending their position and they should now, being totally innocent in this, be given their costs on an indemnity basis. To award on a lesser scale would be to do them an injustice in all the circumstances.

4. And what Mr Lam says is that one when looks at the behaviour of the 1st respondent in relation to this matter, and in particular he draws attention to the conduct of Mr Yip, and I am bound to say, having heard him give his evidence for at least a day, that I have very serious doubts as to his bona fides in these matters, such that I thought it was important to warn him that he had the right not to answer certain questions lest those answers were to incriminate him in relation to any criminal proceedings that might be instituted against him. That is a step that, in my experience, certainly rarely occurs in the course of a civil trial.

5. I have come to the conclusion for the reasons that Mr Lam has advanced and having regard to the various matters that he drew attention to in the course of his submission, that the behaviour of the 1st respondent has been of a most serious and questionable kind. But I have this difficulty; the parties have agreed as between themselves that the basis of taxation should be the same for the 1st respondent as it should be for the third party. And Mr Lam himself quite rightly concedes that the third party is nowhere as culpable as the 1st respondent, and it seems to me that is right. It certainly did not owe the same duty to the 2nd respondent as the 1st respondent did. It did not have any contractual relationship of insured and insurer with the 2nd respondent. And so it could not be said that there should be an award of costs against the third party on the basis of a full indemnity.

6. And, as I indicated in the course of the argument, I am left in this rather delicate position, I cannot award on a different basis for the 1st respondent and for the third party. I have got to come to a decision which is just as between all three of them. Doing my best in these rather constrained circumstances, it seems to me that the appropriate order is to award costs to be paid on a common fund basis, which of course is more generous than a party and party basis. There are these special features which I have already drawn attention to. And it seems to me that if I were to award costs on the conventional basis of party and party costs, that simply would not do justice to the 2nd respondent. So overall it seems to me that the correct order is costs on a common fund basis, and that is the way I will fill in the blank, as it were, in paragraph 5.