BALWINDER SINGH v. SINO PHIL ENGINEERING SERVICES LTD AND OTHERS

HCPI 423/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 423 OF 2004

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BETWEEN

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DECISION

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I. INTRODUCTION

1.  By summons dated 6 November 2007, the Plaintiff sought and obtained leave from Master B Kwan on 23 November 2007 to discontinue his claim against the 2^nd Defendant. Paragraphs 2 and 3 of the summons seeking respectively the costs of the 2^nd Defendant be borne by the 3^rd Defendant, and the costs of his claim against the 2^nd Defendant to the date of discontinuance be paid by the 3^rd Defendant were adjourned for argument. Those matters were returned before me for determination.

2.  At the commencement of the hearing, Mr. Brettell informed me that the 2^nd Defendant was no longer pursuing any claim for costs. Remaining extant therefore is whether the 3^rd Defendant has to pay the Plaintiff’s costs of pursuing his claim in this action against the 2^nd Defendant as well as the 2^nd Defendant’s costs to discontinuance. The 2^nd Defendant has been dissolved.

II. Costs on Discontinuance

3.  The application to discontinue proceedings against the 2^nd Defendant was brought under O.21 r. 3. As to costs, it is clear that leave to discontinue may be granted ‘on such terms as to costs as [the court] thinks just’: see 21/5/11. Accordingly, there is a wide discretion in the matter so that, in appropriate circumstances, such as here as the Plaintiff invites the court to find, the general rule that a defendant is entitled to costs when an action against him is discontinued may be departed from. The Plaintiff contends in gist that the 3^rd Defendant ought to be responsible for the costs incurred as the only reason the 2^nd Defendant was made a party was the 3^rd Defendant’s conduct. I shall revert to this argument in due course as a brief background of the Employees’ Compensation Proceedings and the subsequent common law action for personal injuries should first be given.

III. The Employees’ Compensation Action, DCEC 374 / 2003 and the ensuing High Court claim for damages

4.  The Plaintiff was a construction worker injured in the course of his employment at a construction site. Under DCEC 374/2003 (“the EC Action”) he sought to recover employees’ compensation from Sino Phil Engineering Services Limited (1^st Respondent) and Hyundai Engineering & Construction Company Limited (2^nd Respondent). The 1^st and 2^nd Respondents are respectively the 1^st and 3^rd Defendants in the High Court common law action.

5.  In the EC Action the 1^st Defendant did not dispute that it employed the Plaintiff. Its defence put in issue the existence of the accident and alternatively questioned the severity of the Plaintiff’s injuries. The 3^rd Defendant averred that the 1st Defendant had not employed the Plaintiff at the material time at all.

6.  Following a heavily contested hearing lasting a number of days in the District Court, Deputy District Judge S T Poon determined in January 2007 that the Plaintiff was indeed employed by the 1^st Defendant when injured. He therefore held the 1^st Defendant and the 3^rd Defendant, the Principal Contractor liable to pay the Plaintiff compensation under the relevant legislation. There was no appeal against the decision of the deputy judge and this ultimately led to the discontinuance application against the 2^nd Defendant in the High Court suit.

7.  In December 2004, well before the trial of the EC Action, the 3rd Defendant unsuccessfully sought leave from HH Judge H C Wong to join as 3^rd and 4^th respondents two companies, namely the 2^nd Defendant in the common law action and Jaytey Engineering Limited. In refusing the joinder, the learned judge commented:

“23. In the present case, I can see no justifiable reason to burden the existing action with two more of Mr De Souza’s companies when the 1^st respondent has already admitted liability.  What the 2^nd respondent alleged are mere suspicion that one of them, that is either the 3^rd respondent or the 4^th respondent, instead of the 1^st respondent, could have been the employer of the applicant.  I find the evidence in support, exhibited in these proceedings by the 2^nd respondent to be inconclusive and bare assertions.  This is particularly so in the face of the contract between the 1^st respondent and the 2^nd respondent and the fact that the applicant himself referred to the 1^st respondent as his employer.  For the aforesaid reasons, I refuse the application with costs.”

8.  It is in these circumstances, when the common law action was about to launch that Messrs. Munros (“Munros”), the Plaintiff’s solicitors brought in on legal aid wrote on 12 March 2004 to Messrs. Eric Yu & Co and Messrs. Krishnan & Tsang (“Krishnan & Tsang”) enquiring if they had instructions to accept service of process respectively for the 1^st and 2^nd Defendants. It is plain from Munros’ correspondence that the Plaintiff intended to pursue damages at large only against these two defendants and no one else. The letter of Munros to Krishnan & Tang dated 4 January 2006 puts this beyond peradventure. The material portion of the letter is in these terms:

“3. In the captioned High Court action, you have pleaded on behalf of your clients that Geotechnical was our client’s employer at the time of the accident.

4.  We have always taken the view that the 1st Respondent, (Sino Phil) was our client’s employer as at the date of the accident and for this reason, we did not include Geotechnical as a Respondent in the ECC.

However, in the face of your client’s plea in the ECC, we decided out of abundant caution to include Geotechnical as a Defendant in the common law action, making it quite clear in paragraph 1(d) of the Statement of Claim that our client alleged that Sino Phil was his employer at the material time and that he claimed against Geotechnical as the employer in the alternative.

But for your client’s plea as to the identity of the employer in the Employees’ Compensation Case we would not have included Geotechnical as a Defendant in the High Court Action.

5.  Mr. De Souza who represents Sino Phil has maintained his insistence that Sino Phil was our client’s employer and only relatively recently he has stated that Geotechnical has never ever employed our client.

……

Now that something approaching virtually full discovery of documents has been made by Sino Phil – although discovery in relation to our client’s employment history is unsatisfactory – it appears to us that there is not an iota of evidence to contradict Mr. de Souza’s insistence that Sino Phil was the actual employer at the material time and there is absolutely no evidence that our client was an employee loaned by Geotechnical to Sino Phil at the material time.

In the circumstances we respectfully invite you to re-consider this plea and accept that Sino Phil was the employer of our client as at the time of the accident.

6.  You will appreciate that in all the circumstances your client has been at risk insofar as Geotechnical’s costs of defending the High Court action are concerned and will continue to be so if you insist on maintaining this plea.”

9.  Krishnan & Tsang’s written response dated 4 February 2006 terse and to the point, stated, inter alia,:

“It is our client’s stance all along that they were never employers of Balwinder Singh – period.  We maintain that position and will be maintaining that position.

It is apparent to you that Geotechnical is the employer of Balwinder Singh and that’s why you have made it Defendant in the common law action.  It is not because of our clients “plea” that you are suing Geotechnical, it is because the evidence supports this.”

10.  In a lengthy letter to Messrs. Tsang, Chan & Wong, then solicitors for the 2^nd Defendant dated 16 May 2006 and copied to Krishnan & Tsang, Munros reiterated the Plaintiff’s position:

“2.  You will see from the letter dated 4th February 2006 that Krishnan & Tsang are persisting with their allegation that Geotechnical were our client’s employers as at the date of the accident and we would have thought it probable that, even if our clients were to discontinue as against your clients in the High Court action, then Hyundai would apply for leave to join your clients as a Third Party.  You will recall that Hyundai did apply – unsuccessfully – for an order adding Geotechnical as an additional Respondent in the ECC.

3.  In the event that SP [Sino Phil Engineering Services Ltd] is found by the ECC court to have been our client’s employer as at the date of the alleged accident, we shall advise our client to discontinue as against Geotechnical ….for whom you act in this action but to apply to the Court for an order that your clients costs be paid by Hyundai [the 3rd Defendant] rather than by our client.

…….

5.  In the Application commencing the ECC, our client, the Applicant, alleged that SP was his employer at the time of the alleged accident.  Our client claimed employees compensation from SP as his employer, and Hyundai [H] as the main contractor on-site.  Our client did not claim against Geotechnical because our client believed SP to be his employer.

6.  However, in paragraph 2(i) of H’s Answer it was denied that SP was the employer and it was alleged that our client was employed by Geotechnical.  That Answer was filed and served on 22.3.04.

7.  We believe that it is common between the parties that, in the event of our client satisfying the ECC court that he sustained injury by accident as alleged, then H would be liable to pay EC to our client even if H established that Geotechnical were the employers.

So, why have H raised an issue as to the identity of the employers?.  The answer to that question, as you are aware, is that if SP is found to be the employer, then the insurers instructing Krishnan & Tsang to represent H, namely the New India Assurance Co. Ltd, will be liable to pay the EC, while if Geotechnical is found to be the employer, then their insurers, The Ming An Insurance Co [HK] Ltd, who instruct your goodselves, will be liable to pay.

8.  On 14.5.04, 1 day before the time limit for the issue of Common Law proceeding was to expire, we issued the Writ commencing the Common Law proceedings.

9.  The Defendants named in the Writ were the 2 Respondents in the ECC plus Geotechnical.

10. Obviously, if H had accepted that SP were the employers, we would not have named Geotechnical as a Defendant in the High Court action because there would have been consensus as to the identity of the employer, namely SP.

11. It was obvious to us when drafting the Writ that H, in its Defence, would plead that Geotechnical were the employers. While we had formed the view that SP was probably the employer, in the face of the plea by H in the ECC, that Geotechnical were the employers, we decided it was prudent to include Geotechnical as a Defendant, making it quite clear in paragraph 1(d) of this Statement of Claim that our client alleged that SP was his employer at the material time and that he claimed against Geotechnical as the employer in the alternative.

12. In its Defence in the High Court action H duly pleaded that Geotechnical was our client’s employer at the time of the accident.

13. On 21.6.04 solicitors for SP, whose Answer had contained a denial of paragraph 1 of the Application commencing the ECC, wrote to Krishnan & Tsang to the effect that SP were prepared to admit liability in the ECC. SP are no longer legally represented. They are represented by the Managing Director, Mr De Souza who has maintained his insistence that SP was the employer and only relatively recently he has stated that Geotechnical has never ever employed our client.

14. This is not a case where we can be certain that our client will be able to establish that SP were his employers at the time of the alleged accident, albeit we are extremely confident of success on this point. Our confidence has been enough to persuade us not to add Geotechnical as a Respondent in the ECC, in which the main contractor would be liable to pay EC to our client no matter who the employer was – provided that our client persuaded the court that he had sustained injury by accident on the relevant site.

Mr De Souza was at all material times the controller of both SP and Geotechnical. He has stated that our client was employed by SP. Where the documentation has suggested otherwise Mr De Souza has explained this away. It seems to us that Hyundai’s only hope of establishing the allegation that Geotechnical was the employer lies in successful cross-examination of Mr De Souza. We have always felt that Hyundai were entitled to test the evidence at a trial and although we ourselves are extremely confident that the Court will find SP to have been the employer we take the view that it would be imprudent to discontinue against Geotechnical just in case the court takes a different view to our own.”

11.  Mr. Brettell for the Plaintiff submitted that the appropriate test was whether it was reasonable for the Plaintiff to have included and maintained the 2^nd Defendant as a party in the common law proceedings.  Reliance was placed on the decision of General Accident Insurance Asia Ltd v Hampton Winter & Glynn (a firm) & Ors [1998] 4 HKC 398.  In that case, the defence of the 1^st and 2^nd Defendants had placed the blame entirely on the 3rd Defendant.  On the question of costs arising in fairly similar circumstances as here, Yam J had this to say:

“By reason of the aforesaid matter, it was not unreasonable for the plaintiff to join the third defendant as well and to serve the writ of summons on them and to continue on with the action against the third defendant.  Accordingly, in exercising my discretion, I am of the view that the first and second defendants are liable to pay the aforesaid two sets of costs, namely:

1. The plaintiff’s costs of prosecuting the claim against the third defendant; and

2. The third defendant’s costs of defending the plaintiff’s claim.

In fact, even if I adopt the test of ‘most compelling reason’ to order costs against the first and second defendants as suggested in the cases of Fell and Carrs, I would also come to the same view that it is most compelling in this case that the aforesaid two sets of costs should be borne by the first and second defendants.

However I must add here that whilst I have adopted the test of ‘not unreasonable to sue’ in the case before me, I am not saying it is the only test the court should employ in arriving at a just solution.  The only test provided by the Rule and Statue is ‘as the Court thinks just’.  Due to myriad numbers of circumstances producing different matrixes of facts, it is dangerous to lay down a hard and fast rule to suit all situations.  Further the case before me could be decided on the merits in relation to costs without trial on the merits of the case itself.  I considerer it a just result.”

12.  Given the intransigent position of the 3^rd Defendant on the identity of the Plaintiff’s actual employer and the vagaries of litigation, I find that Munros had most prudently, reasonably and correctly advised the Plaintiff to join the 2^nd Defendant in the High Court suit and for the Plaintiff to have acted accordingly.  To have advised otherwise would indeed have been negligent in light of the 3^rd Defendant’s averment and the fast approaching time bar.  The Plaintiff was on the evidence plainly acting not unreasonably in prosecuting his claim against the 2^nd Defendant as well.

13.  That being so, I perceive no reason not to accede to the Plaintiff’s application.  I shall therefore make the following orders:

(i)  The costs of the 2^nd Defendant in defending the Plaintiff’s claim to dissolution are to be paid by the 3^rd Defendant, such costs to be taxed if not agreed.

(ii)  The Plaintiff’s costs of his claim against the 2^nd Defendant to the date of discontinuance be paid by the 3^rd Defendant, taxed if not agreed.

(iii)  The Plaintiff shall have his costs of this application including any costs that may have been reserved in respect thereof against the 3^rd Defendant, taxed if not agreed.

(iv)  There shall be Legal Aid Taxation of the Plaintiff’s own costs.