LAU YUK KWAN v. PO LIN MONASTERY

DCEC 315/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION NO. 315 OF 2010

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REASONS FOR DECISION

1. Pursuant to the Employees’ Compensation Ordinance, Cap.282 (“the Ordinance”), the Applicant (“Lau”) claimed compensation from the Respondent (“the Monastery”) for injury at work on 30 March 2008. Both liability and quantum were in dispute. On 18 July 2011, I handed down my written judgment (“the Judgment”). I found for Lau; and assessed the compensation in the sum of HK$273,031.90. Giving credit to the advanced payments, Lau obtained judgment in the sum of HK$34,369.10.

2. As to costs, I made a nisi order that Lau should have the costs of the Application, including any costs reserved. Costs shall be taxed, if not agreed, with certificate for counsel. Lau’s own costs should be taxed in accordance with legal aid regulations. The parties had 14 days to apply for variation of the nisi order. The Monastery did so by summons dated 29 July 2011.

3. At the end of the hearing this morning, I dismissed the Monastery’s application with costs to Lau. The nisi costs order made in the Judgment was made absolute. Here are the reasons in detail.

The Judgment and the Monastery’s summons

4. In the present case, the MAB assessed (as per Forms 7 and 9) Lau’s permanent loss of earning capacity to be 3%.  The Monastery accepted that; and at the agreed pre-accident monthly income, an award of section 9 compensation in the sum of HK$30,456.

5. Lau lodged an appeal against the MAB assessment, alleging 5% loss of earning capacity; and at the end of the trial the possibility of the higher rate of 46.89% by relying on the special formula in Hong Kong Paper Mill Ltd v Chan Hin Wu (1981).

6. On the evidence, I found 3% loss of earning capacity, which was in line with the assessment of the MAB and that of the medical expert engaged on behalf of the Monastery (the Judgment at paras.36-66).  Hence I dismissed the section 18 appeal.

7. Now by its summons, the Monastery basically asked that Lau be deprived of his costs of the section 18 appeal; and that Lau should instead pay the Monastery its costs of and occasioned by the appeal.

Discussion

8. O.62, r.3 of the Rules of the District Court reads:

“If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.”

9. Now O.62, r.5 sets out the special matters to be taken into account in exercising the court’s discretion as to costs:

“(1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account –

(aa) the underlying objectives set out in Order 1A, rule 1;

(a) ……

(b) ……

(c) ……

(d) ……

(e) the conduct of all the parties;

(f) whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(g) ……

(2) For the purpose of paragraph (1)(e), the conduct of the parties includes-

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

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

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

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

10. The general rule is that costs shall follow the event.  The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails.  It is where he has caused a significant increase in the length or costs of the proceedings that he may be deprived of the whole or part of the costs: see In re Elgindata Limited (No.2) [1992] 1 WLR 1207 at 1214A-D; Wang Din Shin v Nina Kung, CACV 460/2002; CACV 67/2003 (19 April 2005) (at para.39); and Active Base Limited v Roderick Hohn Sutton and Desmond Chung Seng Chiong, Joint and Several Liquidators of Moulin Global Eyecare Holdings Limited, In Liquidation, HCCW 470/2005 (17 October 2008) (at para.7).

11. In Active Base Limited (above), Kwan J (as she then was) summarised the following principles:

(1)  The party seeking to displace the general rule that costs should follow the event bears the burden of showing that the circumstances justify the exceptional course of such displacement.

(2)  The court has a discretion to exercise whether to deprive a party of all or part of his costs in respect of those issues on which he has failed.  The court has to exercise its discretion to achieve a just result having regard to the circumstances of the case.

(3)  Where the party who has been successful overall has failed on one or more issues, particularly where such issues have occupied a significant amount of hearing time or led to the incurring of significant expense, the court may in its discretion order a reduction in the award of the costs to him.  An issue for this purpose must be something so distinct or separate in itself that the decision of it constitutes an “event”.

(4)  It is not the case that lack of success in any specific argument of itself attracts a costs sanction.  It is only if it is possible to isolate an issue in the case that it can properly be said it is unnecessarily pursued as having no bearing on the real questions in the suit that it would be proper to deprive the successful party of all costs of that issue, otherwise a more general assessment should be made.

(5)  Unless discrete points can safely be isolated and can be shown to have led to a wastage of time and costs, the practice of the court is not to engage in any “filleting” of cases according to the success or failure of the disparate issues which, when taken cumulatively, constitute the dispute to be judged.

12. Kwan J observed that the courts here have not adopted the approach of readily departing from the principle that costs should follow the event and making separate costs orders to reflect the outcome of different issues.

13. The above principles remain applicable and have been applied in cases after the Civil Justice Reform: see for instance, Chan Shek v Milyway Image (Hong Kong) Limited, HCPI 295/2006 (19 April 2010); and in a similar context as the present case Tsang Chiu Tung v 陳創成經營成記水喉渠務工程, DCEC 713/2009 (25 November 2010; 24 January 2011).

14. What was the “event” of the present case? Section 18(3) of the Ordinance provides that on appeal under that section, the court may make such order including any order as to costs as it thinks fit.  Had the section 18 appeal existed in isolation, the outcome of the appeal would have been the event; and the costs of the appeal would have followed such event.

15. In the present case, as in most Employees’ Compensation Applications, the section 18 appeal was part of the proceedings where liability for and quantum of the compensation were in dispute.  The “event” of these proceedings must be the judgment on the liability and the awarding of compensation in favour of Lau.

16. Costs of these proceedings should therefore follow such event.  It is the Monastery’s burden to satisfy the court that some other order as to costs ought to be made.

17. Was the section 18 appeal a distinct issue?  For the purpose of assessment of the quantum of compensation, which the court had to make under sections 9, 10 and 10A of the Ordinance, the parties’ dispute in respect of Lau’s permanent and period of temporary capacity needed to be determined.  The section 18 appeal and the applicability of the Hong Kong Paper Mill special formula were not separate and distinct from, but part and parcel of, the issue of Lau’s permanent incapacity.  Likewise, whether the section 10(2) presumption is rebutted and whether to exercise the discretion under section 10(5) to extend Lau’s entitlement to periodical payments beyond 24 months were not separate and distinct from, but part and parcel of, the issue of Lau’s period of temporary incapacity.

18. The fact that I found against Lau on these questions does not mean that they were improperly or unnecessarily raised or pursued.  Lau indeed relied on the medical and medical expert evidence in support of the section 18 appeal.  This is also not the kind of case where the applicant lodged or proceeded with the section 18 appeal regardless of contrary evidence.

19. It was only after evaluating the evidence and upon my preferring the opinion of the medical expert engaged on behalf of the Monastery on the ability of Lau to resume his pre-accident work did I dismiss the section 18 appeal; and assess the compensation under sections 9 and 10.  The fact that I ruled against Lau on the basis of the evidence, including conflicting medical expert evidence, could not lead to the conclusion that the appeal in the first place ought not to have been lodged or proceeded with.

20. Mr Chan took issue that Lau attempted to rely on the Hong Kong Paper Mill special formula to suggest a rate of loss of earning capacity much higher than 5%.  That was the stance of Lau at the end of his case and submission along that line was included during his counsel’s closing.  As recorded in the Judgment, Miss Chao suggested that as a possibility but her client’s primary case was that it should be 5%.

21. More relevantly, it is not shown to my satisfaction that unnecessary evidence has been adduced or that the trial has been materially prolonged for the purpose of determining the applicability of the special formula on top of what was adduced for the purpose of determining whether the loss of earning capacity should be 3% or 5%.

22. Mr Chan raised the concern that litigants would be free to lodge unmeritorious section 18 appeal with no costs consequence.  By reference to the circumstances of the present case, that is in my view an overstatement.

23. Would these proceedings and particularly the trial have been conducted differently, had the section 18 appeal not been lodged or proceeded with at all?  The fact was that for the purpose of the section 10 compensation, Lau asked the court to exercise the discretion to extend his entitlement under section 10(5) on the basis of the sick leave issued whereas the Monastery disputed the period of temporary incapacity notwithstanding the sick leave issued.  Whilst Mr Chan repeated his client’s stance in this respect, no actual admission or concession was ever made known.

24. It was the Monastery’s burden to show that Lau could have resumed his pre-accident work and earned income during part of the period covered by sick leave.  For deciding whether such burden was discharged, the court had to consider the basically the same pool of evidence including medical and medical expert evidence.

25. It is not shown to my satisfaction certain witness or any part of the evidence would have been unnecessary but for the section 18 appeal.  Whilst Mr Chan suggested that he might have decided to cross-examine Lau differently, I am in no position to conclude with certainty that that would have been the case as a matter of fact but for the section 18 appeal.

26. I drew counsel’s attention to my earlier decision in Tsang Chiu Tung (above) for the principles discussed above.  As a matter of fact, I was there also faced with the dispute in respect of the loss of earning capacity (including the applicability of the Hong Kong Paper Mill formula) and the application under section 10(5) for the extension of the employee’s entitlement to periodical payments.  I found against the employee.  But that did not change the fact that the event of the assessment proceedings was an award of compensation to the employee.  Applying the same principles discussed above, I did not deprive him of his costs of the proceedings.

27. Applying the above principles and considering the circumstances of the present case, I arrived at a similar conclusion.  There is no basis for “filleting” the case for the purpose of costs.

Conclusion

28. For the above reasons, I dismissed the application with costs.  I also awarded costs of the application to Lau, to be taxed if not agreed with certificate for counsel.  His own costs should be taxed in accordance with legal aid regulations.