Cheung Ching Yee, The Administratrix of the Estate of Kwok Kam Sing, Deceased, and in Her Own Capacity v. Daily Joy Investment Ltd

DCEC 91/2017

[2021] HKDC 412

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 91 OF 2017

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DECISION

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A. Introduction

1.On 22 January 2015, Kwok Kam Sing (Deceased), a driver employed by the Respondent, met an accident in the course of the employment when he suddenly lost consciousness whilst driving the Respondent’s minivan.  He lost control of the vehicle, which collided with another vehicle (Accident).  The Deceased sustained personal injuries from the Accident, and later died on 3 December 2015.

2.On 12 January 2017, the employees’ compensation application (Application) was issued pursuant to the Employees’ Compensation Ordinance[1]. In the Application drafted by the Legal Aid assigned solicitors, the 1^st and the 2^nd applicants were respectively stated as the Deceased and “Cheung Ching Yee, on behalf of herself and the other Dependents of Kwok Kam Sing, Deceased”, and the claim for compensation was pleaded in the alternative basis - “fatal injury / personal injury” by the Accident.

3.On 27 March 2018, the description of the applicants was reconstituted by the Amended Application.  After the amendment, “Cheung Ching Yee, the administratrix of the estate of Kwok Kam Sing, Deceased, and in her own capacity” was the only applicant (Applicant) in these proceedings.

4.On 7 October 2020, the Amended Application was further amended by the Applicant abandoning the alternative claim for compensation for death.  The Re-amended Application was recast for a claim for compensation for incapacity only.

5.Since January 2018, the Respondent has acted in person, and had completely ignored these proceedings.  On 22 February 2019, an interlocutory judgment (Default Judgment) on liability was entered against the Respondent as a result of the Respondent’s default in complying with the unless order to file and serve an answer.

6.On 16 October 2020, the Employees Compensation Assistance Fund Board (Board) issued a summons (Summons) pursuant to O 15, r 6, O 13, r 9 and O 38, r 36 of the Rules of the District Court (RDC) and s 25A of the Employees Compensation Assistance Ordinance (ECAO) to apply for the following orders:-

(a) to join as the 2^nd Respondent to contest both liability and quantum;

(b) to set aside the Default Judgment on liability; and

(c) “to adduce expert evidence and appoint Dr Yu Yuk Ling [(Dr Yu)], its neurologist, to conduct joint medical examination with Dr Ng Wing Kit, the Applicant’s neurologist, and to prepare a joint medical report to address on the following issues: -

(i) the cause of loss of consciousness of the Deceased shortly before the alleged accident;

(ii) the loss of earning capacity of the Deceased; and

(iii) the reasonable sick leave period.”

7.The Applicant consented to the Board’s joining as the 2^nd Respondent to contest quantum only, but not to contest liability and to apply to set aside the Default Judgment.  The Board’s solicitor, Cheng Ching Lim Evan of Messrs Cheng, Yeung & Co (CY), had made the supporting and reply affirmations (respectively “Cheng 1^st” and “Cheng 2^nd”).  The Applicant’s affirmation in opposition was made by the Affirmation of So Kin Tai of Messrs Au-Yeung, Cheng, Ho & Tin, the solicitors for the Applicant (AuYeung).

8.At the hearing of the Summons, the Respondent was absent.  Counsel for the Applicant was Mr Patrick Lim, the Legal Aid assigned counsel, and for the Respondent, Mr Alfred Cheng.

9.This court declined Mr Cheng’s application to adjourn the hearing to enable the Board to file the medical report of Dr Yu.  My reasons for the refusal of the adjournment are set out in Section F below.

B. Undisputed legal principles for setting aside

10.It is undisputed that the Default Judgment is a regular judgment, and that the principles this court stated in Kaur Paramjit v Li On Na[2] are to be applied.

“[8] … the court has discretion under Order 13 rule 9 of the Rules of the District Court to set aside a regular judgment, which well-established legal principles can be found in the Hong Kong Civil Procedure 2016, Vol.1 paras 13/9/12-14. They are summarized as follows.

(1) The court’s discretionary power to set aside a regular judgment is unconditional.

(2) A defendant is required to satisfy the court that he has “a real prospect of success” to enable a court to form a provisional view of the probable outcome of the action that his case and the evidence the defendant adduces in support of his application to set aside are potentially credible and carry some degree of conviction. If a court is unable to form a provisional view of the probable outcome of the action, the court would need to be satisfied that the defence “could well be established” at trial.

(3) A defendant who is able to demonstrate a defence which has a real prospect of success does not have an automatic entitlement to have the default judgment set aside. A court will need to weigh all relevant factors against the dominant factor of the merits in order to see where the justice of the case lies when exercising its discretion. The relevant factors will include:

(i) …;

(ii) the defendant’s conduct after he had notice of the proceedings;

(iii) an explanation for the time taken where there has been delay in making the application.  However, the consideration of merits would usually transcend any reasons given by the defendant for the delay in making the application; and

(iv) any prejudice that would be caused to the plaintiff or to third parties if the default judgment were to be set aside.”

11.Accordingly, the first hurdle the Board needs to cross is to satisfy the court that it has “a real prospect of success” on liability, namely that the Accident / the Deceased’s loss of consciousness was solely due to the Deceased’s undisputed pre-existing medical conditions stated in Section C below.

C. The Deceased’s Injuries and pre-existing underlying conditions

12.After the Accident, the Deceased was admitted to the Accident & Emergency Department (A&E) of Queen Elizabeth Hospital (QEH). According to the medical report[3] dated 20 November 2016 by Dr Leung Kar Ho of the A&E of QEH, the Deceased’s clinical diagnosis was head injury with traumatic subarachnoid haemorrhage.

13.In the medical report[4] dated 14 October 2016 by Dr Poon Tak Lap of the Department of Neurosurgery of QEH, it was reported that the Deceased “developed generalized tonic-clonic seizure for 50 seconds then tonic seizure for 5 minutes … Neurologist was consulted and suggested transient ischaemic attack as the cause of his condition”.  It was stated in the report that the Deceased had the following underlying conditions:-

(i) Diabetes mellitus with nephropathy and retinopathy;

(ii) Hypertension;

(iii) Hyperlipidemia;

(iv) Alpha thalassemia trait;

(v) End-stage renal failure;

(vi) Adjustment disorder with suicidal ideation; and

(vii) Generalised tonic-clonic seizure 14/1/2015.

D. Whether the Board has demonstrated a “real prospect of success”

14.In stating that the Board has shown merits, Mr Cheng stated that the Applicant has no evidence to explain the reason why the Deceased became unconscious.  As the above underlying conditions were not in dispute, Mr Cheng stated that the Deceased’s unconsciousness, and the resultant injuries “might have happened spontaneously because of the Deceased’s pre-existing conditions”.  In such a case, Mr Cheng submitted compensation might not be awarded.

15.To put the discussion in context, I should state at the outset that the present claim after the Re-amendment is compensation for a non-fatal accident.  Evidence on the cause of the Deceased’s death will not be needed.  The Respondent’s liability in these proceedings is for compensation for incapacity the Deceased suffered resulting from the Accident.

16.The deeming provision set out in s 5(4)(a) deems “an accident arising in the course of an employee’s employment” as an accident “also to have arisen out of that employment” unless there is evidence to the contrary.  Since it cannot be disputed that the Accident arose in the course of the Deceased’s employment, it was therefore deemed to have also arisen out of the Deceased’s employment.  The Applicant therefore would not need to adduce evidence to explain why the Deceased became unconscious as Mr Cheng seemed to have suggested.

17.The Board’s reliance on the Deceased’s underlying conditions only to establish merits is hardly sufficient. The authorities show that when an accident came “from the disease and employment taken together”, and that the strain from the employment that contributed to the accident, would satisfy as “an unlooked for mishap or an untoward event, which is not expected or designed” – it was an accident within the meaning of s 5 (see Clover Clayton v Hughes[5]). The deceased employee in Clover who died when the strain of tightening a nut with a spanner caused the rupture of the aneurism he suffered was held to have been entitled to compensation.

18.In the circumstances, by the operation of the deeming provision, the Board, for the purpose of showing merits, would be required to adduce contrary evidence to rebut the statutory presumption.  By the established principle in Wilson v Chatterton[6], followed by O-Anan Umphai v The National Lacquer and Paint Products Co Ltd[7], that “unless the weakness or illness of the workman is the sole cause of the accidental injury to, or death of, the workman, the employer is liable”[8] to pay compensation (emphasis added) applies, the Board would need to adduce evidence showing that the Deceased’s pre-existing condition was the sole cause of the loss of consciousness leading to the crash and the resultant personal injury.

19.To demonstrate the severity of the Deceased’s underlying conditions before the Accident, Mr Cheng referred to the reported incident of “Generalised tonic-clonic seizure 14/1/2015”(see §13(vii)). Mr Cheng stated that undisputedly the Deceased had already been subject to a stroke a mere 8 days before the Accident.  Disclosed in the same neurosurgery medical report was a reported accident of “slip and fall with head injury “1 day before the Accident.

20.By contrast, Mr Cheng stated that the Deceased’s injuries caused by the Accident (according to the A&E medical report), were relatively minor - a “head injury with traumatic subarachnold hemorrhage” with no traumatic injury to the scalp.  Mr Cheng therefore submitted that it is reasonable to believe that the Deceased’s pre-existing condition was already seriously affecting the Deceased physically on the date of the Accident.

21.Mr Lim however contended that all Mr Cheng was referring to was nothing more than just the Deceased’s medical conditions.  In order for the Board to show real prospect of success, according to the above authorities Mr Lim relied on, it needs to show raw data showing that the Deceased’s pre-existing medical condition was the sole cause leading to the Deceased’s loss of consciousness on the date of the Accident.

22.I respectfully agree with Mr Lim’s submissions.  The Board’s assertions that the Accident (loss of consciousness) was likely to have been caused by the Deceased’s pre-existing condition are, in my view, mere speculation.  The Board, in the absence of expert evidence, has no evidence to show whether the conditions were such that they might have caused the Deceased’s unconsciousness.  A light exertion or strain caused to the Deceased by the condition of his work could be deemed as having contributed to the Deceased’s loss of consciousness; a strain caused by the tightening of a nut was held in Clover to have sufficed.

23.I find it illogical for the Board to have failed to support its arguments on liability by adducing expert evidence bearing in mind that the Board has already in Cheng 1^st alluded to the necessity of an expert report to determine whether the Accident arose out of the course of the employment (see §54 below)[9].  As Mr Lim has correctly stated, I find the approach the Board took in this application to have been inconsistent with its previous cautious attitude adopted in another application to join to contest liability in Chiu Kwai Yuk v Lee Tak Wah & Ors[10], a fatal accident in which the deceased employee collapsed and died suddenly from a heart attack (acute myocardial infarction and coronary thrombosis).

24.In Chiu Kwai Yuk, the Board succeeded in persuading this court to exercise the discretion to allow it to join to contest liability because its application was well supported by an expert report of a cardiologist on the cause of death.  The Board in that case had a less onerous threshold than the Board in the present application as no default judgment had been entered.

25.In my provisional assessment on the merits, I am not satisfied that the Board has adduced sufficient evidence to show that the Accident (loss of consciousness) was solely caused by the Deceased’s pre-existing condition.  The Board has failed to pass the most important hurdle of demonstrating that it has a good prospect of success.

26.In light of the conclusion I reach on merits, I will discuss the secondary considerations of delay and prejudice together.

E. Delay and Prejudice

27.Late issue of the Summons is also one of the Applicant’s objections to the Board’s seeking to contest liability. The Applicant averred that since the Board has been throughout duly informed of the progress of the proceedings and provided with the Deceased’s medical reports and records, the Board should have at the very least immediately made the application after the Default Judgment was entered[11].

28.Mr Cheng submitted that the Applicant’s complaint of delay was more apparent than real as no milestone date had been set in this case.  Since the Board would not call any factual witness upon the setting aside of the Default Judgment, the case will unlikely be much delayed.

29.Mr Cheng submitted that the Board had acted promptly when the condition was “crystalized” making it appropriate for the Board to issue the Summons.  It was suggested that any delay that the Applicant complained of was more due to the Applicant’s opposition to contest this application and having failed to plead the case properly.

30.The Board faulted the Applicant in claiming compensation for both fatal and non-fatal accidents when commencing these proceedings.  It was suggested that the alternative plea was only regularized by the Re-amended Application made at a late stage when the Default Judgment was already entered.  Rightly, the Board was under an impression that evidence on causation would be adduced especially when it was aware that the court (by the orders dated 2 November 2018 and 3 January 2020) had in fact granted leave to the Applicant to prepare a neurological expert report.  However, for some unclear reasons, the Board was only informed in August 2020 that the preparation of the expert report was being withheld as a result of the court’s further directions.

31.It was only on 23 September 2020, when the Board’s solicitor attended a directions hearing on a watching brief, did the Board learn first-hand that the court at the hearing granted the order of Re-amendment and directed the limiting of the scope of the expert evidence to the issue of loss of earning capacity and reasonable sick leave period.  In less than 1 month after that hearing, the Summons was issued.

32.When viewing the matter in this context, Mr Cheng submitted that the Board was right to have been concerned with “the causal link between the Accident, and the injuries (and his ultimate demise) sustained by the Deceased”.  Bearing in mind its statutory function of ensuring the proper spending of public funds, the Board was justified, Mr Cheng submitted, to have waited until the expert report the Applicant had been allowed to adduce was available (or more precisely in this case until the scope of the expert report was specifically defined) before making a decision whether to intervene or not.

33.As for prejudice, Mr Cheng stated that the Applicant had not alleged any prejudice when opposing the Summons.

34.Mr Lim did not agree with the Board’s assertion that its potential liability “crystalized” only after the Re-amendment.  It was contended that the Board should have made the application much sooner as the Board already learnt at a very early stage that the Respondent acted in person (in January 2018), and that there was no relevant insurance policy.

35.The Board was not entitled to rely on the alternative pleading to excuse itself, Mr Lim suggested.  By the deeming presumption of s  5(4)(a), Mr Lim stated that the Board would still have been exposed to the potential liability for payment irrespective as to whether the claim proceeded on the basis of a fatal or non-fatal accident.  It was not reasonable, Mr Lim argued, for the Board to have taken a wait and see attitude, and waited for more than one year after the Default Judgment was entered before issuing the Summons.

36.Mr Lim disagreed that no prejudice would be caused to the Applicant.  The proceedings have progressed to the stage whereby expert evidence on the percentage of loss of earning capacity and reasonable sick leave period was about to be prepared.  If the Default Judgment were ordered to be set aside, Mr Lim stated that a longer time would likely be needed for the adducing of expert evidence on the question of whether the pre-existing conditions was the sole cause of the transient ischaemic attack or whether the Deceased’s work was a contributing factor.  Additional witnesses may need to be called on the liability issue.  However, given the long lapse of more than 6 years since the Accident, the Applicant would suffer additional prejudice in relation to the difficulty of locating witnesses; and the adverse effect on the recollection of any potential witnesses.

37.Mr Lim also submitted an additional ground of disproportionality.  Mr Lim stated that the amount of compensation payable, according to his broad estimation, would be modest in the region of not exceeding $500,000.  It was therefore suggested that were the Board granted leave to contest liability, a disproportionate amount of additional costs would likely be incurred.

E.1 Discussion

38.The condition allowing the Board to apply to join in the proceedings in the present case is pursuant to s 25A(a)(v) of the ECAO.  Relevantly, it provides:-

“25A. Board may apply to be joined as party to proceedings

If proceedings have been initiated to claim compensation …, the Board may apply to the court to be joined as a party to the proceedings as follows—

(a) where no policy of insurance is known to be in force at the time of the accident to which the proceedings relate, the Board may apply to the court to join in the proceedings as a party in accordance with Order 15, rule 6 of the Rules of the High Court (Cap. 4 sub. leg. A) or Order 15, rule 6 of the Rules of the District Court (Cap. 336 sub. leg. H), as the case may require, to take over the defence as if it were the employer in the proceedings if—

(i) …;

(ii) …;

(iii) …;

(iv) …; or

(v) at any time when the employer fails to attend the hearing, leaving the claim uncontested;” (Emphasis is added)

39.Order 15, r 6, RDC, empowers a court to exercise a discretion to allow a joinder application made by the Board.  In my view, when exercising its discretion, a court will have regard also to the underlying objectives laid down in O 1A, r 1, RDC[12], particularly the objectives of expeditiousness and proportionality in r 1(b) and (c).

40.Hence, the existence of the statutory condition, which grounds the Board’s right to make an application, is only the starting point.  It is incumbent on the Board, being guided by its duty of filtering claims to avoid abuse, adopting an impartial attitude (see Wo Chun Wah v Chau Kwei Yin & Ors[13]), to make an assessment as to whether to intervene.  If and when a decision is made to join, the application should be made with reasonable promptitude so as not to undermine the underlying objectives of O 1A, r 1, RDC.  Ultimately, it is a matter of a judgment call.

41.Once a notice of proceedings is given by a claimant in employees’ compensation proceedings, the Board will need to, in the discharge of its duty, constantly monitor the developments and progress of a claim so as to enable it to make a proper decision on intervention.  An uncontested claim with the resulting risk of the entry of a default judgment will undoubtedly be a weighty consideration albeit not necessarily a determinative factor.

42.In this case the Board was notified of these proceedings on 26 January 2017, and thereafter through CY, was informed of the developments of the proceedings, particularly the following significant events:-

(1) On 5 January 2018, the Respondent became unrepresented and had since failed to participate in the proceedings by complying with any of the court orders to file, among others, an Answer to contest the claim.  The Respondent’s non-participation had left the claim uncontested.

(2) On 26 September 2018, CY learnt that the insurer disclosed by the Respondent, Pacific Insurance, had only provided for the Respondent a commercial vehicle insurance and that there was no relevant employees’ compensation insurance policy. 

(3) On 19 February 2019, CY was provided with a copy of the unless order dated 2 November 2018 (Unless Order) by which the court imposed a sanction by way of the entry of an interlocutory judgment in the event of Respondent’s failure to comply with the Unless Order to file and serve an Answer.

(4) On 10 June 2019, the Board was notified of the entry of the Default Judgment dated 22 February 2019.

43.Based on the above significant events, the Board was clearly, by 26 September 2018, aware that there was no relevant insurance and that the Respondent had failed to participate in the proceedings.  The statutory condition under s 25A(a)(v) allowing the Board to intervene arose.

44.Pertinently, at a very early stage before 26 September 2018, the Board, due to the information it received regarding the Deceased’s pre-existing medical condition, had assessed the claim to be a likely case for intervention.  In the letter dated 25 July 2018[14], CY informed AuYeung that in light of the Deceased’s pre-existing medical conditions (those referred to in §13 above ) disclosed in the Deceased’s medical documents, the Board was “seriously considering joining as a party to the proceedings”.

45.By that early stage, the issue of causation, or more aptly liability, was still at large when the Default Judgment had not yet been entered, I’d be inclined to the view that the Board was correct in not making the application to join notwithstanding its early indication of intention.

46.However, the entire matrix of the case changed when CY was served with the Unless Order on 19 February 2019.  By the Unless Order, CY would have realized that the deadline date for the Respondent to be ordered to serve the Answer would have expired and the resulting consequence of the entry of a default judgment was imminent, and was likely to be effective at the upcoming hearing on 22 February 2019.  Since the Board by that time was already mindful of the need to scrutinize the issue of causation due to the Deceased’s pre-existing medical conditions, the Board, in my view, should have taken reasonable steps to actively prevent the sanction from taking effect by either making the application to join to contest liability there and then or, at the very least, requesting the Applicant’s solicitors not to obtain judgment to allow it more time to make a decision.

47.The Board did none of these things but only passively observed the hearing on 22 February 2019.  I do not think that AuYeung should be blamed in not informing the Board that they would obtain an interlocutory judgment at the forthcoming hearing on 22 February 2019.  The Default Judgment was pursuant to the sanction this court imposed.  AuYeung had no part to play on the entry of the Default Judgment.  Hence, the Board’s faulting of AuYeung is wholly unjustified.

48.Neither do I think that the Board’s raising with AuYeung the irregularity of the Default Judgment after the Re-amendment of the Application is a good explanation for delay.  The claim for compensation is made pursuant to s 5.  According to the heading of the section printed in bold print, this section is for “employer’s liability for compensation for death or incapacity resulting from accident” (my emphasis). Accordingly, whether the claim, due to the poor drafting by AuYeung, was originally pleaded in the alternative or later amended to a non-fatal injury claim by the Re-amended Application, would not affect the Respondent’s liability to pay compensation.  The only effect of the Re-amendment by confining the claim to a non-fatal injury claim is on the amount of compensation payable by the Respondent.

49.In conclusion, I am not satisfied that the Board has acted promptly in issuing the application to join in the proceedings to contest liability after more than one year of the entry of the Default Judgment.

50.It has been more than 6 years since the Accident.  The Applicant still has not obtained compensation.  Allowing the Board to contest liability would undoubtedly cause further delay. In my view, the likely prejudice that may be caused by any further delay is real. Given the long lapse of time, and the relatively modest amount of compensation, I am of the view that allowing the Board to set aside the Default Judgment would not be in line with the two underlying objectives I mentioned in §39 above - expeditious disposal of proceedings and proportionality between the amount of compensation and costs.

51.For these reasons, I’d also be disinclined to exercise my discretion in favour of the Board on liability.

F. Reasons for refusal of the Board’s application to apply for adjournment

52.The application to adjourn the hearing to allow the Board to obtain the expert report of Dr Yu was made very late.  It was only made at the start of Mr Cheng’s submissions.  I refused the application because it was made at such a late stage that I was of the view that the prejudice that would be caused by the adjournment would unlikely be sufficiently compensated by costs.

53.In the discussion in Section E above, I have stated that I do not accept Mr Cheng’s submissions that the claim was only crystalized after the Re-amendment.  I also do not accept the Board’s explanation for the delay on the ground of the alternative plea for compensation.

54.The Board, as discussed above, was all along alive to the issue of pre-existing medical conditions.  Even in its own supporting affirmation, the Board was already at that time asserting the necessity for expert evidence.  In Cheng 1^st, the deponent, when supporting the Summons, asserted:-

“[i]n order to determine whether the alleged accident arose out of the course of the [Deceased’s] employment and whether the Applicant’s claim falls within the Employees’ Compensation Ordinance, expert opinion on the cause of loss of consciousness of the Deceased shortly before the alleged accident is essential to assist the Court in determining the liability of the Respondent and question in the present case”.

55.The Board’s explanation for the late application to adjourn was therefore entirely undermined by the above assertion in Cheng 1^st.  Despite his usual eloquence and valiant effort, Mr Cheng was not able to put forth any explanation as to why the Board had not prepared an expert report when it was at material times fully alive to this issue.

G. Disposition

G.1 The Summons

56.I grant the following orders:-

(1) Order in terms of §1 as amended by deleting the word “liability” and §2.

(2) No order on §§3 and 4.

57.As for the costs of the Summons, I grant a costs order nisi, pursuant to O 42, r 5B(3), RDC, that:-

(1) The costs relating to joining to contest quantum be reserved;

(2) The costs relating to the application to join to contest liability be paid by the Board to the Applicant, with certificate for counsel, to be taxed if not agreed; and

(3) The Applicant’s own costs be taxed in accordance with the Legal Aid Regulations.

G.2 Case Management Directions

58.The Applicant and the Board shall within 14 days of the handing down of this Decision submit a joint written application for expert directions in relation to the Deceased’s (i) loss of earning capacity and (ii) the reasonable sick leave period.

59.It remains for me to express my gratitude to the assistance rendered by both counsel in this application.

Mr Patrick Lim, instructed by Au-Yeung, Cheng, Ho & Tin, assigned by the Director of Legal Aid, for the applicant

The respondent was not represented and did not appear

Mr Alfred Cheng, instructed by Cheng, Yeung & Co, for the intended 2^nd respondent