LO YIU LAM v. FAI SHING CONTAINER TRANSPORT CO LTD formerly t/a FREIGHT CONTAINER TRANSPORTATION CO AND ANOTHER

DCEC 1592/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 1592 OF 2010

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BETWEEN

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REASONS FOR DECISION

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Introduction

1.  The 2^nd respondent by his summons dated 6 March 2012 (“the Summons”) applied for a variation of the costs order nisi in my judgment dated 29 February 2012 (“the Judgment”) whereby the 2^nd respondent was ordered to pay, in addition to the costs of the applicant, the 1^st respondent its costs of the action with certificate for counsel to be taxed if not agreed. The 2^nd respondent contended that the 1^st respondent’s costs should be solely borne by the applicant.

2.  By his summons dated 10 April 2012, the 2^nd respondent applied to amend the Summons to seek another costs order in the alternative, viz, the applicant do pay the costs of the 1^st respondent of this action and the 2^nd respondent do pay the applicant all costs of this action including those costs the applicant has to pay the 1^st respondent, to be taxed if not agreed with certificate for counsel. This is in substance a Bullock order.

3.  Both the applicant and the 1^st respondent had no objection to this amendment application. I therefore made an order in terms of paragraph 1 of the latter summons with the proposed amendments of the Summons save that all the references to the Plaintiff therein should be replaced by those to the applicant.

4.  Whilst the applicant opposed the 2^nd respondent’s application, the 1^st respondent adopted a neutral position. At the conclusion of the hearing, I dismissed the 2^nd respondent’s application and ordered him to pay forthwith costs of the application to both the applicant (with certificate for counsel) and the 1^st respondent, summarily assessed at HK$32,000.00 and HK$4,000 respectively. I also ordered that the applicant’s own costs of this application be taxed in accordance with the Legal Aid Regulations. My reasons appear below.

The background

5.  The background facts were narrated in the Judgment and I shall not repeat them here. The key issues were, at the time of the accident, whether the applicant was a business partner of the 2^nd respondent and if not, whether the applicant was an employee of the 1^st respondent or the 2^nd respondent.

6.  In the Judgment, I found that there was no partnership agreement between the applicant and the 2^nd respondent as alleged and the 2^nd respondent was the sole employer of the applicant despite the document entitled Driver Wage Receipt (“the Receipt”) bearing the letterhead of the 1^st respondent. The applicant received the Receipt from the younger sister of the 2^nd respondent when he was paid his wages for the only time on 18 June 2010.

Grounds of this application

7.  Mr Wong, counsel for the 2^nd respondent, put forward three main grounds for the present application. Firstly, Mr Wong submitted that as soon as the 2^nd respondent filed his witness statement on behalf of the 1^st respondent, the applicant should know that the dispute should be confined to the applicant and the 2^nd respondent and hence it was unreasonable for the applicant to continue to pursue against the 1^st respondent.

8.  Secondly, Mr Wong urged this court to take into account the important factor identified by HH Judge A Cheung (as he then was) in Lui Yin v Chan Lin-mui and Anor., unreported, DCPI44/2000, 21.8.2001 (at §8) that there was no in-fighting between the 1^st respondent and the 2^nd respondent. In the Lui Yin case, the learned judge pointed out that in many typical cases where a Bullock or Sanderson order was made, there was in-fighting between the co-defendants as to which the plaintiff had no way to decide who was telling the truth. The learned judge further found that there was no in-fighting between the 1^st defendant (successful) and the 2^nd defendant (unsuccessful) and the 2^nd defendant never accused that the 1^st defendant was at fault. The learned judge concluded that the trial was solely a contest between the plaintiff and the 1^st defendant and thus refused to make a Bullock order against the 2^nd defendant. The plaintiff had to bear the costs of the 1^st defendant in the result.

9.  Thirdly, as a fall-back position, Mr Wong argued that the applicant relied on the same cause of action against the 1^st respondent and the 2^nd respondent and so a Bullock order would be more appropriate than a Sanderson order. Mr Wong relied on Wisecal Limited v Conwell International Limited & Anor., unreported, HCA841/2008, 29.9.2010. Mr Wong also referred to Chiu Kwok Hung Ban v Ng Fu Wing trading as Wing Kee Aquarium Eng Co and Ors. unreported, CACV83/2010, 3.11.2010.

Applicable legal principles

10.  The costs order nisi is in substance a Sanderson order. Bharwaney J in Fung Chun Man v Hospital Authority and Anor., unreported, HCPI 1113/2006,  20.2.2012 (at §7) examined the court’s discretion to make a Sanderson and Bullock order and I can do no better than recite the relevant passage as follows:

“In the context of actions in tort, it does not matter that the claim against the successful defendant was not made in the alternative but was a separate and independent cause of action. Although a Sanderson or Bullock order is unlikely to be made in a case of successive and unrelated torts by different tortfeasors causing different damage, whether tortfeasors jointly caused the same damage or whether they separately caused different damage or only one of them caused the damage may only be known after a final determination by court. In exercising its discretion whether or not to make a Sanderson or Bullock order, the court would have regard to all the circumstances of the case and the state of the evidence to determine whether or not 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 (per Bohhary J., as he then was, in Lee Lai Ha & Anor. v. Hong Sau Ling & Anor. [1993] 1 HKLR 86).” (my emphasis)

11.  Though this application is made under the Employees’ Compensation Ordinance, Cap. 282 and is really not an action in tort, I find the foregoing dicta of Bharwaney J equally apposite[1].

12.  The parties also agreed that this court should be guided by the principles elucidated by Bhawaney J in the Fung Chun Man case. Indeed none of the authorities relied on by Mr Wong said anything materially different. Without any disrespect, I do not intend to deal with all of those authorities here since costs decisions are invariably facts sensitive and different facts and circumstances justify different costs orders.  

Circumstances of the case and state of evidence before trial

13.  Before dealing with the three main grounds advanced by Mr Wong, on the authority of the Fung Chun Man case, it is imperative to review the circumstances of the case and the state of evidence before the trial to ascertain whether there was any uncertainties facing the applicant which justified the involvement of the 1^st respondent at the trial.

14.  The applicant said he was employed to be a driver for the purpose of the 2^nd respondent’s business. He obtained the employment after a meeting with the younger sister of the 2^nd respondent called Tsang Kit Ling (“Ling”) on 17 May 2010. He received instructions from Ling. The applicant was not sure which business vehicle the 2^nd respondent used for the purpose of his business. After the accident on 27 May 2010, the applicant received the Receipt from Ling. The Receipt bore the letterhead of the 1^st respondent. He knew nothing about the 1^st respondent beforehand.

15.  With the Receipt, it was perfectly understandable that that the applicant was misled into believing that his employer was the 1^st respondent and hence he was all entitled to commence these proceedings against the 1^st respondent on 30 December 2010.

16.  Mr Wong submitted that it was neither the applicant’s pleaded case nor the applicant’s evidence that Ling issued the Receipt with the authorisation and/or consent of the 1^st respondent. He argued that whether or not the Receipt was issued with the authorisation and/or consent of the 1^st respondent was not a live issue and had no bearing on the question as to who the applicant’s employer was. I cannot accept this submission.

17.  The applicant filed a notice of accident with the Labour Department involving the 1^st respondent on the same day when he received the Receipt. He subsequently commenced these proceedings against the 1^st respondent only. These actions taken by the applicant were clearly predicated upon his belief that the Receipt was duly issued by Ling on behalf of the 1^st respondent. He was plainly led to believe that the 1^st respondent was his employer by the Receipt. I do not think it was necessary for the applicant to spell out his belief.      

18.  The Answer filed by the 1^st respondent dated 28 March 2010 shed little light on the core issue as to who the employer of the applicant was. It contained only non-admissions and bare denials. Madam Patty Leung, sister-in-law of the 2^nd respondent, filed a witness statement dated 25 May 2011 on behalf of the 1^st respondent. She held 99% shareholding in the 1^st respondent. She and her husband who was the brother of the 2^nd respondent were the directors of the 1^st respondent. Madam Leung disclosed that the 1^st respondent ceased business in 2006 though it was not yet dissolved due to sentimental reasons.

19.  On the other hand, the 2^nd respondent filed a witness statement dated 25 May 2011 in support of the defence of the 1^st respondent. There the 2^nd respondent alleged that he and the applicant entered into a partnership agreement and the applicant was only his business partner. He further claimed that he did not know how the applicant came up with the Receipt.

20.  The 1^st respondent further disclosed records of the 1^st respondent filed with the Inland Revenue Department. They showed that the 1^st respondent was reported to cease business on 10 July 2006.

21.  In my view, such evidence was not conclusive proof of the cessation of the business of the 1^st respondent, however. The Receipt, if issued with the authorisation and/or consent of the 1^st respondent, could be cogent rebutting evidence despite the notification it had given to the authority. I do not think the applicant should have readily accepted that factually the 1^st respondent had not carried on any business since 2006 and hence discontinued his application against the 1^st respondent upon learning the respondents’ allegations in their witness statements. The applicant was entitled to take a sceptical view of their evidence, particularly given the false allegations of the 2^nd respondent that he had entered into an altogether different agreement relating to a partnership business and that he had fabricated a story about receiving the Receipt from Ling.

22.  Then I come to deal with the first ground. Mr Wong submitted that in the 2^nd respondent’s first witness statement (§21), the 2^nd respondent already admitted that he was the business partner of the applicant and the applicant was not an employee of any company or organisation.  Accordingly, so the argument ran, there was no uncertainty that the contest was only about the nature of the agreement reached between the applicant and the 2^nd respondent and not about the identity of the contracting parties to the agreement. The 1^st respondent should not be involved in the contest and the applicant should have discontinued the application against the 1^st respondent. Mr Wong submitted that the applicant should bear the costs of the 1^st respondent at least after the date of the filing of the witness statement of the 2^nd respondent. I cannot agree to this submission.

23.  To start with, the applicant should not be expected to accept the evidence of the respondents at face value when the 2^nd respondent was obviously painting a false picture, as found by this court eventually. To the applicant, the 2^nd respondent could not possibly be his business partner and understandably he could not accept the 2^nd respondent’s assertion that he was not an employee of any company or organisation.

24.  Further, on a fair reading of the evidence of the 2^nd respondent, the 2^nd respondent only claimed to be the applicant’s business partner. In the event that a partnership agreement was found to exist, he would undoubtedly be a party to such an agreement. His evidence could not be taken to be an unequivocal admission that if the alleged partnership agreement was found by this court to be an employment contract, he alone, and none others, would be the employer of the applicant.

25.  After the 2^nd respondent filed his first witness statement for the 1^st respondent, the applicant joined the 2^nd respondent in these proceedings on 30 August 2011. The 2^nd respondent subsequently filed his second witness statement and Ling also filed a witness statement in support of the defence of the 2^nd respondent. These witness statements did nothing to remove the uncertainties facing the applicant as to who his employer was. Ling’s assertion that she never issued to the applicant the Receipt and had no idea as to how the applicant came up with the Receipt only added fuel to the fire.

26.  Lastly, Mr Wong submitted that at that time when the applicant joined the 2^nd respondent, he was certain that the 2^nd respondent was his employer in light of his own evidence and the evidence of the respondents. Mr Wong referred to me to a fraction of the sentence in paragraph 6 of the witness statement of the applicant, which reads “… just knew the employer were the 2^nd respondent and Ling.” This submission cannot be right. The applicant filed this witness statement to support his claim against the 1^st respondent as his employer.  

27.  Moreover, on a fair reading of the said paragraph, it plainly means that the applicant did not know the name of the company employing him and he just knew that the 2^nd respondent and Ling recruited him. I also referred Mr Wong to various parts in the witness statements of the applicant to show that, contrary to his submission, the applicant indeed thought he worked for a company albeit he did not know its identity until he obtained the Receipt.[2]

28.  The respondents gave dubious evidence about the Receipt and the applicant was entitled to take both respondents to trial to find out the actual circumstances under which it was issued by Ling to him. If Ling did so with the authorisation and/or consent of the 1^st respondent, the 1^st respondent would have a lot to explain to avoid being found to be the actual employer of the applicant. Having regard to all the circumstances of the case as outlined above and the state of the evidence before the trial, I am convinced that I have ample reasons to order the 2^nd respondent to pay the costs of the 1^st respondent.

29.  Now I come to the second ground of this application. Though I agree that many typical cases in which a Sanderson or Bullock order are made involve in-fighting between the co-defendants, I do not think in-fighting between the co-defendants is an essential requirement for the court to exercise its discretion to make a Sanderson or Bullock order.  

30.  In the present case, the respondents were on the same side and there was no in-fighting between them. Both of them denied liabilities. As pointed by Mr Lam for the 1^st respondent, there were family connections between them. It was only natural that the applicant disbelieved the evidence adduced by the 1^st respondent and insisted on a trial to test their truthfulness given the false allegations in the 2^nd respondent’s witness statements.

31.  Mr Wong argued that in any event a Bullock order was more appropriate even though the 2^nd respondent had to foot the bill of the 1^st respondent. He referred this court to the Wisecal Limited case in which Sakhrani J made a Bullock order upon concluding the claims against two defendants were founded on the same complaint. His Lordship also quoted (at §12) his own judgment in Hoie Sook Fong & Anor v Ismail Halima & Anor [2009] 1 HKC 326 to the effect that a Bullock order is inappropriate where a plaintiff is alleging perfectly independent causes of action against two defendants where the breaches of duty alleged are in no way connected the one with the other.

32.  I agree to the legal principles expounded by Sakhrani J. Nevertheless, it does not follow that a Sanderson order is inappropriate in cases where the plaintiff relies on the same cause of action against two defendants. The Wisecal Limited case did not assist the 2^nd respondent at all.

33.  To illustrate the practical difference between a Sanderson order and a Bullock order, Ms Leung, counsel for the applicant, referred this court to paragraph 26 of judgment of Poon J in Standard Chartered Bank v Li Wai Ping and Anor., unreported, HCA 10587/2000, 7.6.2011, which reads,

“In cases where the unsuccessful defendant is solvent, the practical difference between a Sanderson or Bullock order is minimal. He can pay the successful defendant’s costs either way. But the costs of taxation will be greater because the successful defendant’s costs will be taxed twice, once between the plaintiff and the successful defendant and once between the plaintiff and the unsuccessful defendant as part of the plaintiff’s costs. The additional costs of taxation are a relevant factor and may persuade the court to make a Sanderson Order.”

34.  Mr Wong submitted that no double taxation issue should arise in the present case and there would be minimal, if not nil, additional costs of the second taxation, if any. He submitted that it would be unlikely that the 2^nd respondent would challenge the taxed costs of the 1^st respondent though he would not be a party to the first taxation exercise. He however failed to convince this court, by way of evidence or otherwise, why the 2^nd respondent would agree to whatever amount of the 1^st respondent’s taxed legal costs that he was liable to repay the applicant. Absent an undertaking given by the 2^nd respondent, I cannot be persuaded that the 2^nd respondent would certainly not require the second taxation of the 1^st respondent’s legal costs.

35.  Mr Wong explained that in practical terms, a Bullock order would allow the 2^nd respondent more time to pay the legal costs of the 1^st respondent. Be that as it may, it should not be a factor to be taken into account. It is wrong in principle and manifestly unfair to order the applicant to pay the costs of the 1^st respondent first for the purpose of allowing the 2^nd respondent more time to raise the money to reimburse the applicant.

36.  Rather, the proper concern should be that the applicant should not be ordered to pay the costs of the 1^st respondent first and only expect to be reimbursed by the 2^nd respondent by way of a successful execution of the costs order against the 2^nd respondent. The 2^nd respondent should and could have told the truth in his first witness statement. Had he done so, it might have been unreasonable for the applicant to continue to maintain the application against the 1^st respondent and the 2^nd respondent might not be required to pay the legal costs of the 1^st respondent at all.

37.  It was not a case in which the 2^nd respondent misunderstood the legal nature of the agreement between he and the applicant. He alleged a very different agreement and even denied the issue of the Receipt to the applicant. In effect he told positive lies in his first witness statement in the hope that both respondents could avert liability. The 2^nd respondent could have no excuses and should take full responsibility for what he has done. The applicant should not be further victimised.

38.  In the circumstances, I am convinced that a Sanderson order against the 2^nd respondent is perfectly justified in this case. I accordingly dismissed the 2^nd respondent’s application with costs to the applicant and the 1^st respondent.