RUKHSAR BEGUM v. NATIVE ENGLISH CENTER LTD t/a THE GREEN LOUNGE

DCEC 867/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 867 OF 2015

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DCPI 2243/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

PERSONAL INJURIES ACTION NO 2243 OF 2015

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D E C I S I O N

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A.　INTRODUCTION

1.  On 3 April 2017, I handed down a judgment (“Judgment”) of these parallel proceedings that were abbreviated as the EC and the PI Actions. By the Judgment, I awarded in favour of Ms Begum compensation and damages that I respectively assessed under the EC and the PI Actions. I further, at paras 127 and 130 of the Judgment, made the following costs orders nisi respectively for the EC Action and the PI Action, and directed at para 131 taxation of these costs and for Ms Begum’s own costs be taxed in accordance with the Legal Aid Regulations.

“[127] That there be a costs order nisi that the respondent do pay the applicant the costs of these proceedings, with the following exceptions: -

(1) The respondent do pay the applicant 50 percent of the costs of the following:

(i) The costs (except the costs of filing and serving) in relation to the preparation and perusal of the expert medical reports.

(ii) The costs (except the cost of filing and serving) of the drafting of 1st and the 2nd witness statements.

(iii) The costs of the trial, including the costs of the preparation of the trial bundles.

(2) That 20 percent of the costs of the drafting of the 1^st witness statement be disallowed.

(3)   There shall be no costs payable by the respondent for the costs of and incidental to the drafting, filing and serving of the 3^rd witness statement.”

“[130] That there be a costs order nisi that the defendant do pay the plaintiff the costs of these proceedings, with the following exceptions: -

(1) The defendant do pay the plaintiff only 50 percent of the costs of the following:

(i) The costs (except the costs of filing and serving) in relation to the preparation and perusal of the expert medical reports.

(ii) The costs (except the cost of filing and serving) of the drafting of 1^st and the 2^nd witness statements.

(iii) The costs of the trial, including the costs of the preparation of the trial bundles.

(2) That 20 percent of the costs of the drafting of the 1st witness statement be disallowed.

(3) That 20 percent of the costs of the drafting of the SOD be disallowed.

(4) There shall be no costs payable by the defendant for the costs of and incidental to the drafting, filing and serving of the 3rd witness statement.”

2.  By summons filed on 24 May 2017, Ms Begum applied for variation of these costs orders nisi in relation to paras 127(1) and 130(1) of the Judgment, and for an order for the payment of costs under the EC Action for:

“(1) The Respondent do pay [Ms Begum] 50 percent of the costs of the following:

(i) The costs (except the costs of filing and serving) in relation to the preparation and perusal of the expert medical reports.

(ii) The costs (except the cost of filing and serving) of the drafting of 1st and the 2nd witness statements.

(iii) The costs of the trial, including the costs of the preparation of the trial bundles.”

3.  It was not immediately clear from the aforesaid contents of the summons as to the aspect and the extent of Ms Begum’s variation application. Mr Burke, the same legally-aided assigned solicitor who has represented Ms Begum throughout the proceedings, informed me at the hearing that the variation sought was only for the setting aside of the orders directing the 50 percent split of the costs between the EC and PI Actions in paras 127(1) and 130(1) of the Judgment but was not concerned with the remaining parts of the orders under para 127 (sub-paras (2) and (3)) and para 130 (sub-paras (2), (3) and (4)).

4.  The costs orders that are subject to the 50 percent split in para 127(1) and para 130(1) are concerned with three duplicated items of costs for both Actions, and they essentially form the substantial parts of the costs of the entire proceedings. These three items of costs are: -

(i)   The costs (except the costs of filing and serving) in relation to the preparation and perusal of the expert medical reports;

(ii)   The costs (except the cost of filing and serving) of the drafting of 1^st and the 2^nd witness statements; and

(iii)   The costs of the trial, including the costs of the preparation of the trial bundles.

5.  For convenience, I will refer to the relevant parts of the costs orders in para 127(1) and para 130(1) that are the subject matter of this application for variation as “split costs orders”.

6.  In this decision, I shall, unless otherwise stated, adopt the same nomenclature used in the Judgment.

B.　APPLICABLE LEGAL PRINCIPLES

7.  The legal principles governing a court’s exercise of discretion on costs are trite. It may be convenient to set them out below by quoting from a judgment[1] by a Deputy District Judge also involving parallel personal injuries and employees’ compensation proceedings on an application for variation of a costs order nisi which Mr Burke referred to in his affidavit in support of the summons as follows:

“[8] The court has a wide and unfettered discretion on the decision of costs. Section 53(1) of the District Court Ordinance provides that: -

“The costs of and incidental to all proceedings in the Court … are in the discretion of the Court, and the Court has the full power to determine by whom and to what extent the costs are to be paid.”

[9] The powers and discretion of the court as to costs under section 53 shall be exercised subject to and in accordance with Order 62 of the Rules of District Court (See Order 62 rule 2). The discretion shall be exercised judicially.

[10] The relevant factors in Order 62 rule 5 that this court shall take into account are: -

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

…

(e) the conduct of all the parties;

(f) …”

[11] The conduct of the parties include: -

“(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 has succeeded in his claim, in whole or in party, exaggerated his claim; and

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

(Order 62 rule 5(2))”

C.　GROUNDS OF THE APPLICATION

8.  In support of the summons for variation, Mr Burke, on behalf of Ms Begum, advanced three grounds in his supporting affidavit.

C.1　The split costs orders will be financially detrimental to Ms Begum

9.  The first and the main ground is that the split costs orders will likely have a detrimental effect on the amount of compensation and damages Ms Begum may receive. Ms Begum, Mr Burke stated, as an aided person pursuant to two Legal Aid Certificates issued to her for pursuing the PI and EC Actions with “Nil” contribution, would potentially be subject to the first charge of the Director of Legal Aid (“Director”) under s.18A(1) of the Legal Aid Ordinance (Cap. 91) (“LAO”) for any common fund costs which the latter may deduct from the amount of compensation/damages Ms Begum may recover.

10.  It is understood that the alleged detriment is dependent upon the happening of two sequential eventualities: -

(A)   The first eventuality is that Ms Begum is unable to obtain satisfaction from the Employer in respect of the awards for compensation and damages. (This eventuality is referred to as “Eventuality (A)”.)

(B)   Next, and as a consequence of Eventuality (A), Ms Begum would seek, as a last resort, and obtain payment of the compensation and damages this court awarded from the Employees’ Compensation Assistance Fund Board (“Fund Board”) under the Employees Compensation Assistance Ordinance (“ECAO”). (This eventuality is referred to as “Eventuality (B)”.)

11.  In the event of Eventuality (B), Ms Begum however would not, Mr Burke added, be paid her costs of the PI Action by the Fund Board due to a statutory provision (s.20B(3)[2]) in ECAO that expressly excludes payment for costs arising from, among other things, personal injuries proceedings.

12.  In those circumstances, Ms Begum’s unpaid costs of the PI Action would be debited as her common fund costs, and be deducted by the Director from the amount of compensation/damages she obtained.

13.  Mr Burke further deposed in his supporting affidavit that given that fact that the Employer did not seem to have any assets and that there was no valid insurance, there is high chance of Eventuality (A) happening. Eventuality (B) will next need to be engaged. In such case, it is likely that the costs of the PI Action that comprise substantially the 50 percent duplicated costs of the entire related proceedings will become unsatisfied.  Thus, the amount of Ms Begum’s compensation/damages will be diminished by the amount the Director may deduct for payment of the first charge.

C.2　Setting aside the split costs orders will not result in the “Duplication of claims”

14.  By contrast, Mr Burke stated in the second ground for the setting aside of the split costs orders that the Employer’s total costs liability will not be affected by setting aside the split costs orders so long as the Employer would not be liable for any duplicate costs of the proceedings.  This, Mr Burke submitted, can be achieved by an express court order to be made in the costs for the PI Action disallowing any costs that were to be allowed in the EC Action.

C.3　Conduct of parties

15.  Lastly, Mr Burke urged this court, to also take into account the conduct of the Employer in three aspects: that it had (i) no employees’ insurance; (ii) ignored the proceedings; and (iii) did not attend the mediation arranged by the Fund Board.

16.  The Fund Board’s conduct, submitted Mr Burke, is also a relevant consideration.  The Fund Board, Mr Burke alleged, insisted on Ms Begum in obtaining a judgment in each of the Actions as a condition of settlement with Ms Begum.

17.  As for Ms Begum, it was submitted, she was an innocent party who had throughout acted reasonably in following the directions of the court in pursuing her claims against the Employer.

D.　DISCUSSION

18.  In the normal course of event, the split costs orders are fair to both parties.   It is, on the one hand, fair to the Employer as they will safeguard the Employer from paying any duplication of costs of these related parallel proceedings.  

19.  On the other hand, despite the splitting of the costs for the duplicated costs, the split costs orders will still enable Ms Begum to recover the entire costs of these proceedings that were properly and necessarily incurred on a party-and-party taxation. Thus, no injustice will be caused to Ms Begum.

20.  Unfortunately, due to a statutory anomaly created by ECAO between employees’ compensation and common law proceedings in relation to the payment of costs by the Fund Board, that only provides for payment for the costs of the former proceedings (under s.23[3] ) but not the latter (by virtue of s.20B(3), see footnote 2), Ms Begum’s costs for the PI Action, in the event of Eventuality (B) (that she obtained payment from the Fund Board for the compensation pursuant to s.16[4] and damages under s.20A[5] of ECAO), will be left unpaid.

21.  Any unpaid costs of the PI Action will ultimately have to be paid by the Director having been incurred for Ms Begum (an aided person), which costs are to be taxed, pursuant to s.20A[6] of the LAO, on the common fund basis. These costs, according to my understanding of Mr Burke’s submission, would be treated as common fund costs (see para 9 above). In the result, all the costs under the PI Action that Ms Begum cannot obtain payment for from the Fund Board will result in a deficit on Ms Begum’s account with the Director.

22.  The Director is empowered by s.18A[7] of the LAO to have a charge on any property recovered in these proceedings, which would include the award of damages made in the PI Action (but not against the award under the EC Action due to s.18A(5)(e) (see footnote 7)). Thus, I agree with Mr Burke that in the event of Eventuality (B), the actual amount of the damages Ms Begum will ultimately obtain (from the Fund Board) will be diminished by the common fund costs deducted by the Director.

23.  On the evidence that Mr Burke put forward, I accept that the likelihood of Eventuality (B) happening is high. Hence, the prospect of the costs of the PI Action being satisfied does not look good. Since the 50 percent of the duplicated costs under the PI Action are essentially substantial parts of the entire PI Action (see para 4 above), the amount of damages that are likely to be diminished by the deduction by the Director for the payment of the common fund costs will be substantial.

24.  Thus analyzed, so long as there is put in place a safeguard against duplication of costs as Mr Burke proposed, I consider that justice can be achieved by doing away with the splitting of the costs between the EC and PI Actions. Whilst this would allow the 50 percent of the duplicated costs of the PI Action to be recovered under the EC Action, the paying party, being the Employer, as Mr Burke rightly stated in para 14 above, will not be prejudiced.

25.  In the event of Eventuality (B), the Fund Board may become the ultimate paying party for the duplicated costs of the proceedings that will now become part of the costs of the EC Action, which were hitherto costs of the PI Action (under para 130(1) of the Judgment) that it was otherwise not obliged to pay under s.20B (3) of ECAO. I nonetheless do not regard that as being unfair bearing in mind that the Fund Board, apart from it being a non-party in these proceedings, would have been liable for any duplicated costs of the PI Action as part of the EC costs had these proceedings not been heard together but as separate proceedings.   

26.  For the reasons above, I accede to Ms Begum’s application for the variation of the split costs orders.

E.　COSTS ORDER ABSOLUTE

E.1　The EC Action

27.  The costs order nisi under para 127 of the Judgment be varied. There be a costs order absolute that the respondent do pay the applicant the costs of these proceedings, with the following exceptions: -

(1)   That 20 percent of the costs of the drafting of the 1^st witness statement be disallowed; and

(2)   There shall be no costs payable by the respondent for the costs of and incidental to the drafting, filing and serving of the 3^rd witness statement.

E.2　The PI Action

28.  The costs order nisi under para 130 of the Judgment be varied. There be a costs order absolute that the defendant do pay the plaintiff the costs of these proceedings, with the following exceptions:

(1)   That 20 percent of the costs of the drafting of the 1^st witness statement be disallowed.

(2)   That 20 percent of the costs of the drafting of the SOD be disallowed.

(3)   There shall be no costs payable by the defendant for the costs of and incidental to the drafting, filing and serving of the 3^rd witness statement.

(4)   For the avoidance of doubt, any duplicate costs or disbursements allowed in the EC Action be disallowed.

F.　COSTS OF THE VARIATION APPLICATION

29.  Since Ms Begum succeeds in the application for the variation of the costs orders nisi, I further grant a costs order nisi that Ms Begum shall have the costs of the summons, and that her costs be taxed in accordance with the Legal Aid Regulations.

POSTSCRIPT

In light of the statutory anomaly in the ECAO that I have highlighted and its ensuing unsatisfactory outcome as set out in this decision, legislative changes may be needed to address this anomaly in relation to the payment by the Fund Board of costs arising from employees’ compensation proceedings and common law proceedings.  Hence, I direct that a copy of this decision be also served on the Fund Board.