WAI MING KUI, by WAI FONG FONG, his next friend v. EXPRESS SECURITY LTD

DCEC 2254/2018

[2019] HKDC 1622

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 2254 OF 2018

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IN THE MATTER OF AN APPLICATION BETWEEN

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DECISION

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1.  This is an application made by the respondent following my written decision in the same case on 24 May 2019 (“the Decision”).

2.  By a summons dated 15 October 2019 (“the Summons”), the respondent sought an order from the court on how to deal with the $1.7 million sanctioned payment which had been paid into court by the respondent and accepted by the applicant. 

BACKGROUND

3.  The history of this case has been set out in the Decision and there is no need for me to repeat it here.

4.  After the title of the case has been changed and further arguments on the issue of costs have taken place (of which I have made a further decision), the parties still could not find a way to dispose of the case. As a result, a number of correspondence has been exchanged between the parties. But that did not resolve their difference either. The respondent issued the Summons as a result.

5.  I note that up to this stage the applicant’s summons issued on 15 March 2019 under Order 80, rules 10 & 12 of the Rules of the District Court (“RDC”) seeking leave to accept the sanctioned payment remains outstanding.  It was adjourned sine die with liberty to restore and costs in the cause by the order of a deputy judge on 2 April 2019.  By the time the respondent issued the Summons, the applicant has not restored her summons to dispose of the case. Obviously, Order 80, rules 10 & 12 no longer applies following the demise of the deceased.  

6.  In the Summons, the respondent asks for the following Order to be made:

“(1) The Respondent do pay the Applicant $1,700,000 in full and final settlement of the Applicant’s claim in this case (“the Settlement Sum”);

(2) The sum of $1,700,000 paid into court by the Respondent on 14 January 2019 be treated as payment of the Settlement Sum;

(3) The said sum of $1,700,000 be held and invested by the Registrar as he deems fit. Upon production of Letters of Administration to the estate of Wai Ming Kui, the said sum of $1,700,000 (with interest if any) be paid out to the personal representative of Wai Ming Kui, deceased;

(4) The interest (if any) accrued on the Sanctioned Payment of $1,700,000 be paid out to the Respondent through its solicitors Messrs. Hastings & Co.;

(5) The Applicant’s Summons dated 15 March 2019 be withdrawn;

(6) The Respondent do pay the Applicant’s costs of this action (except the costs of the application for Letter of Administration), to be taxed on party & party basis if not agreed;

(7) The costs of and incidental to this application be to the Respondent to be taxed if not agreed;

(8) Upon payment of the aforesaid costs, the Respondent be discharged from all or any liability in respect of the Applicant’s claim in this case.”

DISCUSSION

7.  The parties’ respective position on how to dispose of the matter can be summarized as follows.

8.  The applicant’s position is that:

(1) the interest accrued on the sanctioned payment should be paid out to the applicant; and

(2) the settlement sum should be paid to Wai Fong Fong, the daughter of the deceased (“Wai”).

9.  In contrast, the respondent’s position is that:

(1) the interest accrued on the sanctioned payment should be returned to the respondent; and

(2) the settlement sum of $1.7 million should be held and invested by the registrar until the production of a proper letters of administration to the estate of the deceased and the interest accrued during this period should be paid to the estate.

10.  The applicant reply to the respondent’s stance is that:

(1) the grant of the letters of administration is unnecessary; and

(2) in any event, this does not concern the respondent, nor the court; and even if it is necessary, the respondent should pay the costs for the letters of administration.

(i) Accrued interest

11.  On the accrued interest point, Mr Yeung for the applicant argues that “in his limited experience the interest on sanctioned payment or (formerly) the payment into court always go to the receiving party”.  He was however not able to produce any authority to support his proposition at the hearing.  He merely submitted that this matter “can be easily verified with the Judicial Accountant of the Court.”  As this is contrary to the court’s understanding of the normal practice in such situation, the applicant was invited to make further written submission, together with the appropriate authority, to support her argument. The applicant was given 14 days to do so with the respondent having the right to make written submission in reply within 7 days thereof.       

12.  In the applicant’s further written submission to the court dated 18 November 2019, Mr Yeung relies on Rule 16 of the District Court Suitor’s Funds Rules, Cap 336E where it stated, inter alia, that “… interest shall be credited to the ledger account for the relevant cause or matter, ….”

13.  Solely relying on the above passage, the applicant then drew the conclusion that the interest accrued should therefore be paid out to the receiving party, ie the applicant “as the interest shall be credited to the ledger account for the relevant cause or matter and the applicant is the winning party of this case.”

14.  As the court expected, the applicant was not able to find any authority to support of her contention that the accrued interest belonged to the receiving party.  Instead, the applicant tries to shift the burden to the respondent to produce such authority.

15.  The respondent has no qualm with the applicant that the interest should be credited to the ledger account of the case.  It is to whom it should be paid to that is in dispute.   I note the respondent has acknowledged that any future interest of the investment, pending payment out to the estate, should belong to the estate.

16.  In my judgment, the applicant has mistaken about where the accrued interest should go in such situation.

17.  In the sanctioned payment mechanism introduced under the Civil Justice Reform, which replaced the old payment into court mechanism, it has not changed the substance of how interest should be calculated.  Order 22, rule 26 (as its predecessor pre-CJR) was primarily introduced to counteract a decision in the English case of Jefford v Gee [1970] 2 QB 130 at 149-150, CA.  Under rule 26, the defendant has to pay into court a sum in satisfaction to cover not only the debt or damages claimed but also any interest which might be awarded in respect of the period until the last date it could be accepted without leave of the court: see Order 22, rule 26 of RDC.       

18.  Thus, up to the acceptance of the sanctioned payment, a plaintiff who chooses to accept the sum offered by the defendant would have received an amount which would have included interest for the damages up to the last date of which such sum is capable to be accepted.  Up to the moment a plaintiff accepts the sanctioned payment, the money belongs to the defendant.  If the sanctioned payment is rejected or the case cannot be settled, it will be returned to the defendant together with any interest accrued in the interim.  Hence, it logically follows that the interest accrued during the period should belong to the party who makes the sanctioned payment. Hence, they should be returned to the defendant, whether the sanctioned payment was accepted or not accepted by the plaintiff.  This is in accordance with my understanding how this rule operates and the practice of the court throughout the years. 

19.  Based on the above, I rule that the accrued interest for the sanctioned payment should be paid out to the respondent.

(ii) To whom the sanctioned payment should be paid out to?

20.  The applicant’s claim is for non-fatal injuries.  It is unfortunate that the applicant passed away after Wai had agreed (on the applicant’s behalf) to accept the sanctioned payment but before the summons for the approval of settlement was heard.

21.  Pursuant to the order I made in the Decision, Wai was appointed by the court to represent the estate of the deceased.  The question is whether this will only entitle her to carry on the proceedings only but not to receive the settlement sum on behalf of the estate.

22.  The respondent’s concern is that if the money is released to Wai, it may not constitute to a valid discharge as Wai was only appointed to carry on the proceedings but not to receive the settlement sum.  In this regard, the respondent relies on a passage by HH Judge KW Wong in Capital Matrix Ltd & Ors v The representatives of Khan Mohammed Sadig Khan (deceased) & Ors [2015] 5 HKC 47 (LDCS 19000/2014) which was referred to in para 15/6A/7 of the Hong Kong Civil Procedure 2020 at p 382. 

23.  I agree with the respondent that we are dealing with a similar situation as in the above case which was decided under the Order 15, rule 6A.  That rule provides a machinery for appointing someone for the limited purpose of carrying on the litigation on behalf of a deceased’s estate when no grant of probate of or administration has been made.  And the person so appointed should be someone having an interest in the outcome of the proceedings or the estate: See §19 of the judgment in Capital Matrix Ltd, supra.  

24.  Further, in this case, we are dealing with an order made under Order 15, rule 7 which allowed Wai to carry on the proceedings.  She was not appointed as the “personal representative” of the estate which would give her all the necessary powers associate with that office to receive and to deal with the compensation on behalf of the estate. 

25.  With due respect, I cannot agree with Mr Yeung for the applicant that as Wai was appointed by the court to represent the estate, any payment of compensation made to her is equivalent to payment made to the estate.  For one, we do not know if the deceased had died with a will making Wai one of the beneficiaries under the will.  If he died intestate, whether Wai would be a beneficiary under the applicable intestate law.  As the deceased had left his wife as widow, she will have the first priority to be granted letters of administration and not Wai, unless some compromise or arrangements can be made between them.  Further, reading from the affirmation of Wai filed in support of the Order 80 application, we know that Wai is the youngest of the 3 daughters of the deceased.  There is no mention about the status of their mother, ie the widow in that affirmation.   Thus, at least on the face of the matter, Wai is only one of the potential beneficiaries of the estate. 

26.  Mr Yeung for the applicant submits that there is no evidence to suggest that Wai, who was the appointed guardian and next friend of her father before he passed way, would abscond with the compensation.  In any event, he submits that she would receive the money in her capacity in a representative or trustee capacity and as such would be answerable for any loss or misappropriation under section 15(1) of the Trustee Ordinance, Cap 29.  Further, as a trustee or representative of the estate, she is in the position of giving a valid receipt.  Thus, the applicant submits that the respondent’s concern that making the payment to her may not constitute to a valid discharge is more imaginary than real.        

27.  Again, with due respect, I do not accept such arguments.

28.  Given the rather substantial amount of compensation, at least for someone of the deceased’s background and station in life, the court as a court of protection should ensure that there will be a valid discharge and distribution of the compensation to the right persons entitled under the estate.  While Mr Yeung may have confidence in Wai as he has had direct dealings with her in a solicitor and client relationship, the court is not privy to those dealings and have no basis to assess the character of Wai. Human nature as it is, there is always a risk that disputes may occur amongst the beneficiaries and one (or more than one) of them will one day claim that they have not received their fair proportion of the compensation.  I do not see why the court should put the other beneficiaries to such a risk before the letters of administration are properly obtained.

29.  On the point of Wai acting in a representative or trustee capacity and therefore section 15(1) of the Trustee Ordinance applies, I agree with Ms Siu who represents the respondent at the hearing that as Wai was only being appointed to carry on the proceedings and has not had received the compensation yet, she is not a trustee and therefore this section does not apply. Rhetorically speaking, even if she is a trustee if the compensation was released to her, why the court should do so when there is a better mechanism in the form of a probate to protect all the potential beneficiaries.     

30.  Practically speaking, given the amount of compensation, the family of the deceased will have to obtain the letters of administration from the probate registry in order to deal with the estate of the deceased in any event.  If no other assets or liabilities are involved, I expect that this process may only take a few months rather than years.  I do not see how Wai or other beneficiaries will be prejudiced if the compensation will be held and invested by the registrar of the court (on their behalf) in the meantime while waiting for the letters of administration to be issued. 

CONCLUSION

31.  In the aforesaid premises, I shall make an order in terms of paragraphs (1) to (6) and paragraph (8) of the Summons.  Paragraph (7) of the Summons will be finalized after the period referred to in the following paragraph.  

32.  For the costs of the Summons, as the applicant has lost on both the accrued interest and mode of payment out issues, I consider the applicant should bear the costs of the Summons.  Such costs should be taxed if not agreed on a party and party basis.  I shall make this costs order on a nisi basis and it will become absolute in the absence of any application to vary the same within 14 days.

33.  For the costs of the action itself, the respondent has already agreed to pay it under paragraph (6) of the Summons, I consider this is a fair proposal. As the family of the deceased will have to apply for the letters of administration in any event given the size of the compensation, the costs should be borne by them instead of the respondent.  Further, because this is no longer an Order 80 application, the common fund costs taxation basis will no longer apply.  Thus, the costs of the action will be taxed on a party and party basis.