CHAN FO TAI v. AGGRESSIVE CONSTURCTION COMPANY LTD AND OTHERS

DCEC 1515/2022

[2024] HKDC 674

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 1515 OF 2022

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DECISION

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Introduction

1.  This is an application, by Summons dated 19 December 2023, by the 1^st, 2^nd and 3^rd Respondents for relief from sanction from paragraph 2 of the Order of Deputy District Judge David Chan dated 24 August 2023 made by consent, which provided that unless the 1^st to 3^rd Respondents filed and served their Answer within 14 days from the date of service of the Order, the Applicant would have liberty to enter Judgment on liability against the Respondents with costs (“the Unless Order”).

2.  There is no dispute that the Order had been served on each of the Respondents under a letter dated 25 September 2023 from the Applicant’s solicitors, which the Respondents say was received only on 28 September 2023.

Factual background and procedural history

3.  The Applicant commenced these proceedings seeking employee’s compensation in respect of an incident on 23 September 2021 in which she claimed to have been assaulted by an employee of another sub-contractor of the 1^st Respondent, and suffered injuries as a result. It is the Applicant’s case that her injuries arose out of and in the course of her employment.

4.  The 1^st Respondent was at the material time the principal contractor of a construction site Tung Chung in Lantau Island. It is the Applicant’s case that 2^nd Respondent was the sub-contractor of the 1^st Respondent, whilst the 3^rd Respondent was the sub-contractor of the 2^nd Respondent. There is a dispute as to this, as the Respondents say that the 3^rd Respondent was the sub-contractor of the 1^st Respondent instead, whilst the 2^nd Respondent was the sub-contractor of the 3^rd Respondent.

5.  There is also a dispute as to who was the Applicant’s employer at the material time. The Applicant’s case is that she was an employee of the 3^rd Respondent, whilst the Respondents say she was employed by the 2^nd Respondent, replying on an employment contract dated 13 June 2019.

6.  According to the Respondents[1], the 1^st and 3^rd Respondents were made aware of the intended claim herein by a letter dated 7 April 2022 from the Applicant’s solicitors, which was received on 11 April 2022. This came as a surprise to the Respondents as according to them, the Applicant had in fact resumed her work duties the day after the incident and had not taken any sick leave or submitted any sick leave certificate concerning the incident.

7.  The 1^st Respondent then reported the incident to its insurer, AIG Insurance Hong Kong Limited (“AIG”) on or about 25 April 2022 through the insurance brokerage company, Willis Hong Kong Limited (“Willis”). Further correspondence ensued between the 1^st Respondent and Willis on behalf of AIG, and a loss adjustor was also appointed by AIG to conduct investigation into the intended claim.

8.  On 19 August 2022, each of the Respondents was served with the Application herein, and the documents were passed on to the loss adjustor. Thereafter, there had been further exchanges made between the 1^st Respondent and Willis. Eventually, by a letter dated 13 January 2023 from Messrs Winnie Leung & Co (“WLC”), solicitors acting on behalf of AIG, to the Respondents, it was stated that AIG was declining policy liability on the basis that they had not been notified of the incident on 23 September 2021 until 26 April 2022.

9.  Despite the position taken by AIG, WLC informed Willis by email on 16 January 2023 that it would file a Notice to Act on behalf of the Respondents purely to deal with the First Hearing of the Application scheduled on 20 January 2023, without prejudice to the stance taken by AIG. The Notice to Act was then filed by WLC on 17 January 2023.

10.  On 19 January 2023, WLC, as the Respondents’ solicitors, entered into a Consent Summons with the Applicant’s solicitors that led to an Order made by Her Honour Judge Levy with directions for, inter alia, the filing of Mediation Certificates, and the Respondents’ Answer within 28 days. The Respondents say that prior to the making of that Order, although each of the Respondents had received a letter dated 11 January 2023 from the Applicant’s solicitors informing them of the proposed directions, WLC had not approached the Respondents to discuss the those directions with them. According to the Respondents, they reasonably assumed that WLC would liaise directly with the Applicant’s solicitors in respect thereof.

11.  Meanwhile, the 1^st Respondent had continued to engage in exchanges responding to the allegations made by AIG concerning the lateness in reporting the matter to them. The 1^st Respondent’s position is that the incident forming the subject of the Application did not arise from the employment, and therefore no report was made to AIG immediately. Further, they say that no sick leave had been sought by the Applicant immediately after the incident, and they had informed AIG of the intended claim soon after they had been informed of the same in April 2022. As such, the 1^st Respondent believed that AIG has no basis to decline policy liability for the Applicant’s claim.

12.  In fact, the 1^st Respondent had sought advice from another firm of solicitors in the meantime, who actually also prepared various documents for filing and service by late April 2023, including their Notice to Act, Answer and Mediation Certificate. However, upon realising that WLC was in fact solicitors already acting for the Respondents on the record, the filing and service of those documents could not be done.

13.  On 20 July 2023, notwithstanding the stance taken by them as earlier indicated to the 1^st Respondent, WLC entered into a Consent Summons with the Applicant’s solicitors agreeing to various further directions including, inter alia, the Unless Order. The Respondents say that WLC had not approached or communicated with any of them as to the proposed directions contained in the Consent Summons, and they were only informed of the same by Willis instead, by way of an email dated 28 July 2023, by which time the Consent Summons had already been signed.

14.  Before the Order of Deputy District Judge David Chan was made on 24 August 2023 in terms of the said Consent Summons, WLC took out a summons seeking leave to cease to act as the solicitors for the Respondents in these proceedings. According to the Respondents, this came as a surprise to them as they had not been previously informed of WLC’s intention to cease to act for them whilst negotiations with AIG were still ongoing at the time.

15.  The Order of Deputy District Judge David Chan made on 24 August 2023 was not served by the Applicant’s solicitors until 25 September 2023 under a letter sent to the Respondents by post, which made the filing and service of the Respondents’ Answer due on 9 October 2023, or at the most on 12 October 2023 when the Respondents received the letter.

16.  Eventually, although the Respondents had sought to resist the application by WLC to cease to act for them at a number of hearings, the application was allowed by the court on 15 November 2023. It is the Respondent’s case that during the time with they had spent time on resisting the application by WLC to cease to act, and whist WLC was still acting for them on the record, WLC had not reminded the Respondents of the deadline for filing the Answer, nor had they done anything to deal with this matter for them.

17.  After WLC successfully obtained leave to cease to act for the Respondents on 15 November 2023, the Respondents immediately sought legal representation by another firm of solicitors. In the event, Messrs Cheung, Yeung & Lee, the present solicitors acting for the Respondents, came on the record on 23 November 2023.

18.  The present application for relief from sanction was then taken out on 19 December 2023.

19.  I should also mention that at the hearing before me, I have allowed the application by summons dated 11 April 2024 taken out by the Applicant to file and serve her Supplemental Affirmation of the same date. That affirmation referred to two letters issued by the 2^nd and 3^rd Respondents respectively that support the Applicant’s case that the 3^rd Respondent was her employer at the material time. Having considered the said Supplemental Affirmation, I was of the view that in fairness to the parties, and to allow the court to have all relevant documents before it for consideration, leave should be granted to the Application to rely on the said Supplemental Affirmation.

Applicable principles

20.  The principles regarding relief from sanction are well established and are not in dispute. Mr Cheng for the Respondents has referred to Dp Properties Ltd v. E Cube Club (Tsuen Wan) Ltd (Formerly Known As Play House (Tsuen Wan) Ltd) and Another [2020] HKCFI 1252, referring to Daimler AG v Leiduck [2012] 3 HKLRD 119 at paragraphs 57 & 66. The principles can be summarised as follows:

(i)  Under Order 2 rule 5 of the Rules of the High Court, Cap 4A (similarly thus under Order 2 rule 5 of the Rules of the District Court, Cap 336H), the court must consider all the circumstances, including the factors set out in rule 5(1)(a) to (j):

(a)  the interests of the administration of justice;

(b)  whether the application for relief has been made promptly;

(c)  whether the failure to comply was intentional;

(d)  whether there is a good explanation for the failure to comply;

(e)  the extent to which the party in default has complied with other rules and court orders;

(f)  whether the failure to comply was caused by the party in default or his legal representative;

(g)  in the case where the party in default is not legally represented, whether he was unaware of the rule or court order, or if he was aware of it, whether he was able to comply with it without legal assistance;

(h)  whether the trial date or the likely trial date can still be met if relief is granted;

(i)  the effect which the failure to comply had on each party; and

(j)  the effect which the granting of relief would have on each party.

(ii)  An important factor in the weighing exercise is the question of proportionality of the sanction in the circumstances of the case. The court should be slow to prevent a party from bringing its case before the court other than as a matter of last resort. A failure to comply with conditions that have the effect of allowing a judgment to be entered would have that effect unless relief is granted.

21.  Ms Kung for the Applicant has also referred to Top One International (China) Property Group Co Ltd v Top One Property Group Ltd [2011] 1 HKLRD 606 where Fok J ruled that the exercise of the discretion to refuse an extension of time or to relieve a party from sanction is not limited to cases of intentional and contumelious default. The court should consider all the circumstances of the case, including the factors set out in Order 2 rule 5(1)(a) to (j) mentioned above. Failure to comply with an order or direction through negligence, incompetence or sheer indolence may be such as to lead the court to conclude that there is a degree of fault which warrants a refusal of an extension of time or relief from sanction.

22.  Ms Kung further submitted that Order 2 rule 4 requires a party in default to apply to the court for relief from sanction for failing to comply with a court order within 14 days of the failure. In the present case, the application was not made until 19 December 2023, which was over two months after service of the Unless Order on the Respondents.

23.  I will bear in mind the above rules and principles when considering the application.

Discussion

24.  The Respondents submitted that firstly, the circumstances of this case are unusual. There is a dispute as to whether AIG was entitled to decline policy liability, whilst at the same time WLC were acting for the Respondents on the record. Meanwhile, WLC had entered into the Consent Summons with the Applicant’s solicitors without first seeking instructions from the Respondents on the timetable. Mr Cheng for the Respondents highlighted to the court that the Unless Order was not imposed on them by the court on its own initiative, but was a result of the Consent Summons entered into by WLC on their behalf.

25.  Eventually, WLC had even applied to cease to act for them after the Consent Summons had been filed but before the Unless Order was made. It is thus submitted that the Respondents had been facing various fronts whilst they had not been really assisted by WLC on the procedural side in these proceedings.

26.  Secondly, the Respondents submitted that the effect of imposing the sanction is disproportionate in the circumstances of this case, which is to bar them from arguing their case on liability entirely.

27.  Thirdly, the Respondents say that this is not a case of intentional failure to comply with the Unless Order. The Respondents had in fact sought advice from another firm of solicitors who have prepared an Answer, but by reason of the fact that WLC was still solicitors acting for the Respondents on the record, the same could not be filed.

28.  As has been noted during the hearing, each of the Respondents had in fact written to the court on 12 October 2023 and 13 October 2023 respectively seeking indulgence to the effect that the time for them to file their Answer be adjourned to a date after the determination of the application by WLC to cease to act. This shows that they have the intention to proactively engage in the proceedings.

29.  On the other hand, Ms Kung for the Applicant submitted that even though the Respondents claim that WLC had not obtained instructions from them as to the terms of the Unless Order, they had not raised any objection with WLC after they had been made aware of the proposed directions contained in Consent Summons on 28 July 2023.

30.  In fact, the Applicant pointed out that an Answer had already been prepared by another firm of solicitors for the Respondents as early as January 2023, but no effort had been made to file the same by the Respondents to comply with the deadline stated in the Unless Order. The terms of the Unless Order are clearly expressed, and there is no room for the Respondents to say that they did not full appreciate the effect or significance of the Unless Order.

31.  The Applicant further submitted that the fact that the Respondents may have been negotiating with AIG on their denial of policy liability, and also opposing the application by WLC to cease to act for them, would not take away their responsibility to file and serve their Answer under the Unless Order. Ms Kung stressed that the Application was issued on 4 August 2022, and no Answer has yet been filed up to now, some 20 months later. Not only had the Respondents failed to file their Answer, they have also failed to file their Mediation Certificate, a List of Earnings of the Applicant, and their List of Documents pursuant to the Unless Order.

32.  On the other hand, whilst the Respondents accept that the application for relief from sanction was not made within 14 days of the failure to comply with the Unless Order, they also accept that they are seeking indulgence from the court and invite the court to grant the relief from sanction sought in all the circumstances mentioned above.

Ruling

33.  Having considered all the circumstances, and the submissions made on both sides, in exercising my discretion, I am of the view that relief from sanction should be granted to the Respondents in the unusual circumstances of this case.

34.  As I have observed, the Respondents have been proactive in dealing with the various fronts during the course of these proceedings. They have even written to the court on their own initiative upon the expiry of the time for them to file their Answer under the Unless Order to seek indulgence and an extension of time to do so after the determination of the application by WLC to cease to act for them. This was so although the formal application for relief from sanction was not made until December 2024, after their present solicitors came onto the record.

35.  Further, whilst I accept, and the Respondents have not denied it, that they had been informed of the proposed directions contained in the Consent Summons prior to the signing of the same by WLC, the assertion that they had been relying on WLC to deal with the situation as their solicitors on the record is understandable. I also do not think that they should be forced to file any Notice to Act in Person before the determination of the application by WLC to cease to act for them, which were being opposed.

36.  It can also be discerned from the submissions made by both sides that, apart from the identity of the employer, there also is a dispute over the issue whether the alleged injuries were suffered by the Applicant in the course of and arising out of her employment. If the Respondents were denied the opportunity to raise their objection on this issue, the result might not have been fair and just in the circumstances of this case.

37.  Although there has been some time since the issue and service of the Application, the present proceedings are at still at the early stage, where no trial date is set yet.

38.  Having considered the principles and weighed the various factors mentioned above, I would allow the Respondents’ application.

39.  I make the following order:

(i)  The 1^st, 2^nd and 3^rd Respondents be relieved from the sanction imposed by paragraph 2 of the Order made by Deputy District Judge David Chan dated 24 August 2023;

(ii)  Notwithstanding paragraph 2 of the Order made by Deputy District Judge David Chan dated 24 August 2023, the time for the 1^st, 2^nd and 3^rd Respondents to file and serve their Answer be extended to 28 May 2024;

(iii)  Notwithstanding paragraph 1 of the Order made by Deputy District Judge David Chan dated 24 August 2023, the 1^st, 2^nd and 3^rd Respondents shall file and serve their (a) Mediation Certificate; (b) List of the Applicant’s Earnings for the 12 months immediately preceding the date of the accident or such lessor period of the employment with the 1^st, 2^nd and/or 3^rd Respondents and (c) List of Documents within 21 days from the date hereof;

(iv)  The parties shall jointly write to the court by way of a Joint Written Application within 56 days from the day hereof for further directions.

40.  As for the costs of the Respondents’ application, I make an order nisi that such costs, as well as the costs of the Applicant’s summons dated 11 April 2024 mentioned above, be to the Applicant, to be taxed if not agreed, with Certificate for Counsel. If either party wishes to apply to vary the costs order nisi, an application should be made within 14 days from the date hereof, which will be dealt with by way of paper disposal.

41.  Lastly, I wish to thank counsel on both sides for their helpful assistance.