Lau Foon Wing v. Cheuk Lau Shek t/a Kamtorry Industrial Co and Another
Read the full judgment text of DCEC 757/2007 on BabelCite. This District Court judgment.
1. On 20 th June 2007, the Applicant (“ AP ”), a warehouse attendant cum office assistant (“ Assistant ”), commenced the present action for employees’ compensation (“ EC ”) against the 1 st Respondent (“ R1 ”) and the 2 nd Respondent (“ R2 ”) for personal injuries by accident arising out of and in the course of employment with R1 or R2.
Cited by 2 cases · Cites 3 cases
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DCEC757/2007 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION EMPLOYEES' COMPENSATION CASE NO. 757 OF 2007 ---------------------- BETWEEN
---------------------- Coram: H H Judge Marlene Ng in Chambers (open to the public) Date of Hearing: 3rd September 2008 Date of Handing Down Ruling on Costs: 29th September 2008 ------------------------------- RULING ON COSTS -------------------------------- I. Introduction 1. On 20th June 2007, the Applicant (“AP”), a warehouse attendant cum office assistant (“Assistant”), commenced the present action for employees’ compensation (“EC”) against the 1st Respondent (“R1”) and the 2nd Respondent (“R2”) for personal injuries by accident arising out of and in the course of employment with R1 or R2. 2. AP claimed that on 9th March 2006 whilst he was packing, arranging and stacking up carton boxes of goods under the instructions of R1 or R2 at the warehouse of R1 or R2 (“Warehouse”), he stepped on a patch of oil and then slipped and fell backwards, thus causinghis back and waist to hit against a wall behind him (“Accident”). 3. The Certificate of Review of Assessment dated 21st December 2006 (“Form 9”) assessed AP’s loss of earning capacity permanently caused by his injury at 1.5%. By his Application, AP appealed against the assessments in the Form 9. In fact, the appeal period under section 18 of the Employees’ Compensation Ordinance Cap.282 (“Ordinance”) expired on the very day the Application was issued. 4. On 13th March 2008, AP issued a summons seeking the following reliefs (“Summons”) :
5. AP filed the affidavit of his former solicitor Madam Leung Chick Yin Teresa (“Ms Leung”) on 13th March 2008 in support of the Summons. At the hearing before me, Ms Ip, solicitor for AP, submitted that if R2 were entitled to costs of defending AP’s claim, AP would seek a Sanderson order for R1 to pay such costs. 6. R1 filed his affirmation on 8th April 2008 to oppose the Summons. It is R1’s stance that :
At the hearing before me, Mr Lee, counsel for R1, confirmed R1 would pay AP’s costs of his claim against R1 up to and including 22nd September 2007. 7. R2 filed the affirmation of his solicitor Mr Leung Hon Keung (“Mr Leung”) on 9th July 2008 to oppose the Summons. It is R2’s stance that AP should bear R2’s costs of defending AP’s alternative claimagainst R2 upon discontinuance of such claim.Although Mr Leung’s affirmation doubted whether this court had any discretion to order R1 to pay AP’s costs of his claim against R2, Mr Chan, counsel for R2, conceded this court did have such jurisdiction. 8. At the hearing before me, Mr Lee and Mr Chan confirmed R1 and R2 had no objection to the reliefs referred to in paragraph 4(a)-(c) above, so I granted order in terms at the hearing. The relevant questions on the remaining issue on costs can be summarised as follows :
9. Some of the letters exhibited to the aforesaid affidavits/ affirmations were without prejudice letters. However, Ms Ip, Mr Lee and Mr Chan agreed to waive without prejudice privilege for the purpose of the present application. II. Undisputed background 10. The business registration records showed R1’s and R2’s business addresses were respectively at Unit 9 and Unit 8 of 20/F, International Trade Centre, 11-19 Sha Tsui Road, Tsuen Wan, Hong Kong (“Unit 9” and “Unit 8”). R2’s company search records showed its registered office was at Units 8 and 9 (collectively, “Premises”), and R1 was one of R2’s two directors. 11. According to the Employee Application Form of the HSBC MPF Supertrust Scheme (“Scheme”) supplied by HSBC Life (International) Limited (“HSBC Life”), signed by AP and dated 7th January 2006 (“MPF Application Form”), R1 was named as the participating employer. 12. According to the MPF Membership Certificate issued by HSBC Life and dated 27th January 2006 (“MPF Certificate”), AP was enrolled under the Scheme on 8th December 2005, and R1 was named as his employer. 13. After the Accident, R1 on behalf of R2 completed and submitted to the Labour Department (“Department”) a Form 2 dated 14th March 2006 (“Form 2”) stating inter alia that (a) R2 was AP’s employer at the time of the Accident, (b) the Accident happened in the course of work, and (c) R2’s EC insurer was Falcon Insurance Company (Hong Kong) Limited (“Falcon”). 14. On 6th April 2006 (“6/4/06 Letter”), R2 wrote to AP stating “我司已備妥3月份工資及3月份工傷各支票壹張” and asking him to collect such payments. The 6/4/06 Letter contained a remark that AP was originally R1’s employee but as from 1st March 2006 he was internally transferred to become R2’s employee (“Transfer”). R2 signed the 6/4/06 Letter, but R1’s company chop and signature also appeared on its face. Corresponding to the 6/4/06 Letter, AP’s payroll receipt for March 2006 (“3/06 Receipt”) showed his sick leave payment for that month (“3/06 SL Payment”) was paid through “HSBC”. There is no dispute that R2 maintained a bank account with The Hongkong and Shanghai Banking Corporation Ltd (“HSBC”). 15. AP’s monthly payroll receipts (together with copy cheques) showed his sick leave payments from April to August 2006 were settled by R1’s cheques drawn on Nanyang Commercial Bank, Ltd (“NCBL”). AP also signed 3 receipts dated 6th May, 5th June and 5th July 2006 under R1’s letterhead to acknowledge receipt of R1’s cheques drawn on NCBL for medical expenses during the relevant sick leave period. 16. On 27th May 2006, R1 submitted an Information Amendment Sheet (“Amendment Sheet”) to the Department to amend the name of AP’s employer in the Form 2 to R1. 17. On 15th September 2006, R2 wroteto urge the Department to amend its record of AP’s employer to R1 (“15/9/06 Letter”), and the Department acknowledged receipt of the Amendment Sheet and confirmed it had amended its record accordingly (“15/9/06 Fax”). 18. On 18th January 2007, AP’s former solicitors, Messrs Cheng, Yeung & Co (“CYC”),sent 2 separate letters to R1 and R2 (“18/1/07 Letters”) on the intended EC and common law claims concerning the Accident (“Intended Claims”) claiming that although AP was employed by R1 in December 2005 as an Assistant, it came to CYC’s notice that (a) R2 stated in the Form 2 it was AP’s employer at the time of the Accident, and (b) AP was notified of the Transfer by the 6/4/06 Letter. CYC requested R1 and R2 to confirm whether R1 or R2 was AP’s employer at the time of the Accident, and if either of them should so confirm, to further advise whether there was any EC insurance policy covering AP. 19. On 17th February 2007, Falcon replied (“17/2/07 Reply”) to say it was R2’s EC insurer, but it also provided claims assistance service to R1 as a gesture of goodwill. Falcon confirmed inter alia that “…… [AP] was an employee of [R1] instead of [R2] at the material time but unfortunately [R1] did not hold any valid EC policy at the moment”, and further stated that the contents of the 6/4/06 Letter were incorrect. “For the avoidance of doubt, nothing herein shall be constructed as any admission of liability ……” of the Intended Claims. Copies of inter alia the Amendment Sheet and 15/9/06 Letter were enclosed with the 17/2/07 Reply. 20. On 12th March 2007, CYC wrote to R1 on the Intended Claims. CYC advised that AP proposed to appoint Dr Arthur Chiang (“Dr Chiang”) to conduct medical examination of AP (“Examination”) on 7th July 2008, and enquired whether R1 would jointly instruct Dr Chiang or his own expert to conduct joint Examination with Dr Chiang. On the same day, CYC enquired whether Falcon would represent R1 in respect of the Intended Claims and to handle the Examination. 21. Since “liability investigation is still in progress”, Falcon on 2nd April 2007 confirmed it would represent R1 to explore the prospect of reaching amicable pre-action settlement and to arrange a joint Examination on a without prejudice and non-admission of liability basis. CYC was to liaise with Medico-Legal Asia Limited (“MLAL”) as appointed by R1 for such purpose. 22. On 19th April 2007, CYC replied that Dr Chiang and Falcon’s expert had scheduled a joint Examination on 2nd August 2007, and CYC made proposals for instructions to the experts. On 30th April 2007, CYC chased Falcon for the name of their expert. On 3rd May 2007, CYC informed Falcon that a Dr Yuen Wing Hung (“Dr Yuen”) had liaised with Dr Chiang for a joint Examination, but subsequently a Dr Orbach claiming to be from MLAL repeatedly called Dr Chiang to re-arrange such Examination. CYC requested Falcon to confirm the name of its expert. On 7th May 2007, MLAL confirmed Dr Yuen would attend the joint Examination with Dr Chiang on 2nd August 2007, and made counter-proposals on instructions to the experts. On 16th May 2007, CYC confirmed they would draft a joint letter of instructions to both experts for Falcon’s approval. 23. On 23rd May 2007, MLAL wrote to CYC to say inter alia that (a) it would not suit the experts to re-schedule the joint Examination to 14th June 2007, (b) Dr Chiang was unwilling to have the joint Examination at MLAL’s premises, (c) MLAL/Dr Yuen agreed to let Dr Chiang prepare the first draft of the expert report, but (d) requested confirmation of Dr Chiang’s available dates to expedite the joint Examination at MLAL’s premises. On 6th June 2007, MLAL requested CYC to confirm the date of the joint Examination and asked for the letter of instructions to the experts. 24. The present action commenced on 20th June 2007. 25. On 23rd June 2007, CYC explained that Dr Chiang squeezed in a time slot to accommodate MLAL’s request to expedite the Examination, so he could not afford to be away from his clinic. But Dr Yuen did not agree to have the joint Examination at Dr Chiang’s clinic. CYC therefore proposed to have separate instead of joint Examination. 26. On 11th July 2007, R1’s solicitors, Messrs K Y Lo & Co (“KYLC”), filed Notice to Act in the present action. 27. On 23rd July 2007, KYLC by letter (“23/7/07 Letter”) sought extension of time to file R1’s Answer, and asked for copies of AP’s government medical reports and for AP to attend the Examination by Dr Chiang (who by then was AP’s and R1’s single joint expert) on 2nd August 2007. KYLC added “[in] the event that evidence proves that [AP] has sustained injury at work, [R1] will not oppose the EC Application and will settle the claim amicably. Please let [KYLC] have quantification as soon as possible. …… [KYLC] are instructed that [R1] admits that [AP] was his employee at the material time of the accident. It appears to [KYLC] that [R2] should not have been joined as a Respondent in the present application.” 28. On 24th July 2007, R2’s solicitors, Messrs Clyde & Co (“CC”), wrote to CYC (“24/7/07 Fax”) to put on record there was no pre-action letter from CYC similar to that prescribed under Practice Direction PD18.1, and the previous correspondence only sought to clarify the identity of AP’s employer and to arrange the jointExamination. CC reserved the right to challenge costs irrespective of the litigation outcome. CC noted that notwithstanding Falcon’s clarification that R1 was AP’s employer (which stance R2 reiterated and R1 admitted), AP still unnecessarily joined R2 in the present action, so CC demanded AP to forthwith discontinue his claim against R2, failing which Falcon would instruct CC to act on behalf of R2 to apply inter alia to strike out AP’s claim against R2 with costs. CC enclosed (a) copy letter dated 18th July 2007 from R2 which confirmed AP was all along R1’s employee and the contents of the 6/4/06 Letter were wrong, (b) copy AP’s pay cheques drawn on NCBL and AP’s payroll receipts for December 2005 and January and February 2006 (to show that AP was paid by R1), (c) copy MPF Certificate (to show that R1 enrolled AP under the Scheme), and (d) copy 15/9/06 Letter and Amendment Sheet (to correct the name of AP’s employer to R1). 29. On 26th July 2007, CYC wrote to CC to say that “[R2] has on a number of occasions held out as [AP’s] employer at the material time of the accident, least to say to file the Form 2 dated 14th March 2006 in the capacity of the employer of [AP]”. CYC also advised it had invited KYLC “to admit liability given that the issue of liability is clear. Should [R1] agree to concede liability in this case, [CYC] shall advise [AP] to withdraw the action against [R2].” On the same day, “[to] facilitate [their] investigation of the employment relationship between R2 and AP”, CYC asked CC whether R2 had submitted any employer’s return to the Inland Revenue Department (“IRD”) since December 2005. 30. On 27th July 2007, KYLC wrote to CYC (“27/7/07 Letter”) stating R1 “admits that [AP] is an employee of [R1]” and requesting CYC to forward Dr Chiang’s invoice upon receipt for them to settle R1’s share of the fees. 31. On 31st July 2007, CC sent to CYC a copy of R2’s fax dated 27th July 2007 which confirmed R2 never submitted any employer’s return for AP. CC also referred to R1’s open admission in the 27/7/07 Letter thatAP was his employee, and urged AP to discontinue his claim against R2 forthwith. 32. On 3rd August 2007, CYC replied to say R2’s fax dated 27th July 2007 was insufficient, and requested confirmation from the IRD. “As regards the position of [R1], they have so far only admitted that [AP] was under their employment at the material time of the accident and no admission is made on liability. That being the case, unless and until [R1] admits liability in this case and all evidence indicates that [R2] was not the employer of [AP], [AP] shall has no alternative but to continue his claim against both [R1 and R2] in order to protect his own interests.” 33. On 6th August 2007, CC responded by saying that “…… whoever the employer was, the employer (whilst admitting [AP’s] employee status) can still deny liability on the basis that the accident did not happen or the resultant injuries were not suffered in the course or arising out of employment. As far as [CC] can see, this is the position as to [R1] who has openly admitted the fact that [AP] was their employee.” CC took the view there was no reason for AP to continue the present action against R2, and they would take appropriate steps and claim costs against AP accordingly. 34. On the same day, CC filed Notice to Act in the present action. Pursuant to a Consent Summons dated 9th August 2007, I granted directions for filing of Answer and List of Earnings and for discovery. 35. Dr Chiang completed his single joint orthopaedic expert report on 21st August 2007. He assessed AP’s loss of earning capacity at 2%. 36. On 28th August 2007, R1 filed his Answer. Save for non-admission as to the manner how AP suffered hisalleged injury, R1 admitted liability for quantum of compensation to be assessed. R1 further averred he had paid sick leave payments (HK$24,626.24) and incurred medical expenses (HK$1,020.00) to AP. “The only outstanding payment in this Claim is in respect of the Section 9 claim under the Ordinance. This is matter of computation and subject to mutual agreement will be settled.” 37. On the same day, R1 filed the List of Earnings and paid a sum of HK$8,800.00 into court in satisfaction of all causes of action in respect of which AP claimed. On 13th September 2007, the Applicant filed his List of Documents. 38. On 17th September 2007, CYC wrote to KYLC to say that the aforesaid payment into court was unacceptable. CYC gave a breakdown of AP’s claims under sections 9, 10 and 10A of the Ordinance in the total sum of HK$13,122.99 (inclusive of interest but exclusive of advance payments) calculated on the basis of Dr Chiang’s report. But CYC pointed out the available evidence was not conclusive on the identity of AP’s employer : (a) although subsequently amended, the Form 2 submitted to the Department shortly after the Accident referred to R2 as the relevant employer, (b) the 6/4/06 Letter referred to the Transfer before the Accident, and (c) the bundle of payroll receipts/ cheques for sick leave payments provided under cover of KLYC’s letter of 8th September 2007 showed the 3/06 SL Payment came from R2’s HSBC bank account whilst subsequent payments came from NCBL. “If any amicable settlement is to be made amongst the parties, [AP] cannot simply accept any payment-in made by any one of the Respondents. It is [CYC’s] view that should [AP’s] counter offer of HK$13,122.99 is acceptable to [R1], the parties shall sign a Consent Order in which [R1] shall be liable for [AP’s] costs in this action including costs of the claim against [R2].” 39. On 22nd September 2007, R1 made further payment into court in the sum of HK$4,322.99, thus bringing the total amount paid into court to HK$13,122.99 in satisfaction of all causes of action of which AP claimed. 40. On 4th October 2007, CYC wrote to KYLC and CC to advise that AP was prepared to accept the payment-in plus costs in full and final settlement of the present action, and enclosed a draft consent order along the lines of the Summons. 41. On 8th October 2007, KYLC wrote to CYC denying liability to pay R2’s costs and claiming AP was most unreasonable in bringing the alternative claim against R2. KYLC claimed the Form 2 as amended by the Amendment Sheet, which amendment was acknowledged by the Department, showed R1 was AP’s employer. R1 should not be liable for AP’s costs of his claim against R2, which costs should be resolved between AP and R2. Since KYLC agreed to settle AP’s claim for the sum of HK$13,122.99 plus AP’s costs up to 22nd September 2007 (ie the date of the further payment into court) to be taxed if not agreed, “[KYLC] propose that [AP] may separately deal with one settlement between [AP] and [R1] and another settlement between [AP] and [R2]” in order to save time and costs. 42. On 8th October 2007, CC sent to CYC a copy of IRD’s reply dated 28th September 2007, which confirmed that R2 had not submitted any employer’s return for AP for tax year 2005/2006. 43. On 15th November 2007, CC wrote to CYC with copy to KYLC claiming that AP should pay R2’s costs, and if AP did not agree, a hearing would be required, which would expose AP to further costs liability.On 26th November 2007, CC wrote to CYC with copy to KYLC to urge for a reply. 44. On 21st February 2008, CYC wrote to KYLC and CC reiterating that the available evidence was ambiguous as to the identity of AP’s employer, and AP had been most reasonable in the conduct of the present action. It was said that given R1’s and R2’s stance AP had no alternative but to apply to court for leave to accept R1’s payment-in and to leave the issue of costs to be adjudicated by the court. To save time and costs, CYC again proposed the following terms of settlement : (a) AP to discontinue his claim against R2 with no order as to costs, and (b) R1 to pay AP’s costs of the present action including costs of his claim against R2. There is no evidence of any response prior to issuance of the Summons. III. AP’s case 45. According to Ms Leung’s affidavit, on or about 7th December 2005, the Department referred AP to attend the Premises for a job interview, but AP had no knowledge of the name of his prospective employer. After the interview, he was employed to work as an Assistant, but Ms Chan of the Personnel Department of R1 and R2 who interviewed him did not say whether R1 or R2 or both of them were his employer. AP alsodid not sign any written employment contract. In short, AP had no knowledge which company was his employer when he commenced work. 46. As the only Assistant employed by R1 and/or R2, AP had to pack/take stock of goods and load/unload goods at the Warehouse at 20/F, International Trade Centre, 11-19 Sha Tsui Road, Tsuen Wan, Hong Kong that was used by both R1 and R2. In other words, AP had to handle the goods of both R1 and R2. 47. About a month after he commenced employment, AP discovered his pay cheque was issued by NCBL, but most of his colleagues were paid by HSBC cheques. AP’s colleagues told him he was R1’s employee whilst most of them were employed by R2. But the personnel department of either R1 or R2 did not confirm his employment status. Further, even though the Transfer was not made known to AP until R2’s 6/4/06 Letter, such letter suggested he could have been employed by R2 at the time of the Accident. Still further, the 18/1/07 Letters were letters before action that elicited the 17/2/07 Reply from Falcon. 48. Prior to commencement of the present action, neither R1 nor R2 provided further documents to support the allegation that AP was R1’s employee at the material time. The issue of whether R1 or R2 or both were AP’s employer was far from clear. Although there was real likelihood that R2 was AP’s employer at the material time, there was also evidence suggesting an employment relationship between AP and R1, so it was reasonable, prudent and proper for AP to bring alternative claims against R1 and R2 to protect his position. 49. It was after commencement of the present action that CC by the 24/7/07 Fax provided further evidence to support their proposition that R2 was not AP’s employer at the material time. As the action progressed, more evidence in relation to the employment relationship (eg records of payment to AP after the Accident) came to light. The 3/06 Receipt noted the 3/06 SL Payment was paid through “HSBC”, ie the bank through which R2 paid its staff. But IRD’s reply on 28th September 2007 showed R2 did not submit any employer’s return for AP for tax year 2005/2006. Ms Leung believed the issue of AP’s employmenthad to be determined at trial after hearing evidence from witnesses. 50. Subsequently, R1 admitted liability and AP found the total amount paid into court acceptable, so it was reasonable and proper for AP to discontinue the claim against R2 to conclude the present action. Since it was reasonable and proper on the available evidence for AP to bring alternative claims against R1 and R2 when the present action commenced, AP prayed for an order in terms of the Summons. IV. R1’s case 51. AP filled in, understood, signed, confirmed and declared the MPF Application Form. Like other MPF applicants, AP would have received the MPF Certificate on 27th January 2006 and some MPF correspondence from HSBC Life from time to time. R1 considered AP most unreasonable in bringing an alternative claim against R2 in the present action when it was clear from the Amendment Sheet (receipt of which was acknowledged by the Department by the 15/9/06 Fax) that R1 was his employer. The issue of costs between AP and R2 should be resolved between themselves, and R1 should not be liable for R2’s costs in the present action. V. R2’s case 52. R2 considered it was not reasonable, necessary or proper for AP to bring and/or continue with any alternative claim against R2 in the present action. The 18/1/07 Letters were not letters before action that gave notice of intention to commence court action since they merely sought to clarify the identity of AP’s employer. In fact, no pre-action letter similar to that prescribed under Practice Direction PD18.1 (which should apply equally to EC cases) was ever issued, which significant fact should be taken into account in deciding whether AP should pay R2’s costs. 53. The pre-action correspondence showed R1 genuinely intended to settle AP’s claim, which was reinforced by his swift payment-in immediately after commencement of the present action. One would therefore question why, pending such settlement, CYC still commenced the present action. 54. Subsequent to Falcon’s 17/2/07 Reply, CYC made no attempt to seek further clarification from R1 and/or R2, which they should have done if they were still confused as to who was AP’s employer. Such failure together with the relevant documentary evidence in CYC’s possession (which showed that R1 enrolled AP under the Scheme) suggested CYC must have been satisfied that R1 was AP’s employer prior to commencement of the present action. CYC could not substantiate their claim of alleged confusion. 55. At the post-action stage, CC did not produce further evidence to support the contention that R2 was not AP’s employer. It was said that notwithstanding the enclosures referred to in paragraph 28 above, the 24/7/07 Fax merely reiterated the position in Falcon’s 17/2/07 Reply without providing further evidence, but warned of adverse costs implications if AP refused to discontinue the action against R2. CC also noted that despite R1’s admission in the 23/7/07 Letter and reiterated in the 24/7/07 Fax that he was AP’s employer, CYC still refused to discontinue AP’s alternative claim against R2. 56. IRD’s reply dated 28th September 2007 would not have influenced AP’s decision to settle as it was provided to CYC after AP confirmed willingness to settle his claims on 17th September 2007. Likewise, R2’s 3/06 SL Payment disclosed after commencement of the present action could not retrospectively justify bringing the alternative claim against R2. Further, CYC never questioned the 3/06 SL Payment until after AP purported to settle on the basis of R1’s payment-in. 57. For the sake of completeness, the reason why R2 paid the 3/06 SL Payment, according to Falcon’s chief claims officer, was because R1 ran out of cheques when AP attended R1’s office to collect the 3/SL Payment and R1 had no alternative but to use R2’s cheque for convenience purpose only. But consistent with the available documentary evidence, all other post-Accident payments to AP were made by R1. VI. Legal principles (a) Court’s power on costs 58. Rule 20 of the Employees’ Compensation (Rules of Court) Rules provides inter alia that :
59. The Court of Appeal in Li Kwok Shing v Law Ka Fu & anor [2003] 3 HKLRD 173 and Sun Jianqiang v Trans-Island Limousine Service Ltd CACV20/2003 (unreported, 17th November 2003) held that the provisions of Order 22 of the Rules of the District Court (“RDC”) applied to EC proceedings. It is also common ground that the provisions on costs in Order 62 of the RDC apply mutatis mutandis to EC proceedings. 60. Ms Ip, Mr Lee and Mr Chan were in agreement that this court had jurisdiction to order a paying-in respondent to bear the costs of the other respondent(s) who are sued jointly or in the alternative, and the question was whether or not it was reasonable for the applicant to sue the other respondent(s) who did not make payment into court. In light of such concurrence on law, it is only necessary to refer to Hodgson v Guardall Ltd & ors [1991] 3 All ER 823 and Yuen Chun-wah v Kanson Crane Service Company Limited & ors HCPI893/2006, Registrar Au-Yeung (unreported, 4th June 2008) in support of the aforesaid legal principles. (b) Sanderson order 61. Where an applicant has properly sued two respondents in the alternative but succeeds against only one, the court may order the unsuccessful respondent to directly pay the successful respondent’s costs. This is normally called a Sanderson order (see Hong Kong Civil Procedure 2008 Vol.1 para.62/3/8 at p.963). The well-established principles governing whether the court should exercise its discretion to grant a Sanderson order have been succinctly summarised by H H Judge Au in paras.9-15 of his decision on costs in Lau Chu Wing v Law Wai Shing DCPI1389/2007 (unreported, 11th June 2008). It therefore suffices to say that the key consideration is whether it has been shown to be reasonable in all the circumstances for the applicant to join both respondents as respondents in the action for compensation. VII. Discussion 62. The key issue is whether AP has been reasonable in joining both R1 and R2 in the present action. The onus is on AP to establish such reasonableness. 63. Although AP has not been told explicitly by Ms Chan and/or the personnel department during his job interview or later whether R1 or R2 was his employer, and he was required to handle goods of both R1 and R2 at the Warehouse, AP was under the impression that he was initially employed by R1 in December 2005 (see the 18/1/07 Letters). Such impression is reinforced by the MPF Application Form and the MPF Certificate and by what AP’s colleagues told him when he queried why he was paid by HSBC and not NCBL cheque. 64. But such documents and impression pre-March 2006 pose no conflict with the ambiguity that arises from R1’s/R2’s conduct and the documentary material arising in and after March 2006. 65. On 14th March 2006, ie less than a week after the Accident, R2 submitted the Form 2 to the Labour Department in relation to the Accident. In the Form 2, R2 promptly confirmed it was AP’s employer at the time of the Accident and Falcon, R2’s insurer, was the relevant EC insurer. 66. Interestingly, the aforesaid statements in the Form 2 (signed by R1 on behalf of R2) are borne out by the following :
The contemporaneous 6/4/06 Letter particularly confirms that R2’s cheques were readied well before AP actually attended the Premises to collect the March 2006 Payments. It does not sit well at all with the explanation in Mr Leung’s affirmation that the 3/06 SL Payment was paid by R2’s cheque because R1 ran out of cheques when AP came to collect such payment. In my view, such explanation, which is disclosed for the first time in Mr Leung’s affirmation in July 2008 (ie more than two years after the Accident) and which presumably is a multiple hearsay assertion that rests on information provided by R1/R2, is at best doubtful. 67. I am therefore unable to rely on such explanation in Mr Leung’s affirmation, which in any event came too late to have any bearing on the commencement and continuance of the present action in the alternative against R1 and R2. Although Mr Leung suggested the 3/06 SL Payment was new evidence since the 3/06 Receipt was disclosed after commencement of the present action, Mr Lee suggested otherwise. He was at pains to point out that at the material time AP personally signed and acknowledged the 3/06 Receipt (which referred to “HSBC” on its face) by his own hand, namely, “暫時代收，有代勞工處處理”. In any event, long before commencement of the present action, the 6/4/06 Letter has specifically confirmed that R2 has readied two cheques for the March 2006 Payments, and there is no dispute AP did receive such cheques. Furthermore, CYC raised query with R1 and R2 over the 6/4/06 Letter again long before commencement of the present action (ie in their 18/1/07 Letters). 68. In the circumstances, I see no reason not to take into consideration the matters in paragraph 66(a)-(c) above even though KYLC and CC provided copies of the payroll receipts and cheques to CYC after commencement of the present action. I do not agree that the fact AP wrote “暫時代收，有代勞工處處理” on the 3/06 Receipt means he has accepted the explanation in Mr Leung’s affirmation as to why R2 instead of R1 paid the 3/06 SL Payment. At best, AP’s words showed his receipt of the 3/06 SLPayment was subject to his EC claim as handled by the Labour Department. 69. Mr Chan in his written submissions doubted the “validity/ effectiveness” of the 6/4/06 Letter that gave notice of the Transfer as from 1st March 2006 on the basis that such Transfer only came to AP’s knowledge after the Accident. But there is no dispute (a) as to the authenticity of the 6/4/06 Letter issued long before commencement of the present action, (b) R2 issued such letter which R1 signed and endorsed on its face, (c) the March 2006 Payments referred in such letter was actually implemented by R2 issuing HSBC cheques to AP, and (d) more importantly, AP accepted R2’s cheques and acknowledged the same by signing the 3/06 Receipt. Given the above factual matrix, at the very least there is a respectable argument that AP has acknowledged the Transfer as valid/effective, especially when one bears in mind that at the pre-action stage AP was concerned with reasonable joinder of respondents in the EC claim rather than final adjudication of their capacity and scope of liability on the merits. 70. The matters in paragraph 66(a)-(c) above (which R1 could not have been unaware) are, in my view, suggestive of R2 being AP’s employer at the time of the Accident even if he might not have been so at the initial stage of employment. Even up till now, there is no evidence before me that R1 has by actual payment or ledger entry or otherwise reimbursed R2 for the March 2006 Payments made by R2’s HSBC cheques to AP. 71. R1 started to pay AP’s sick leave payments and medical expenses only as from April 2006, and submitted the Amendment Sheet to the Department in May 2006. It is also only in May 2006 that R2 by the 15/9/06 Letter informed the Department R1 was AP’s employer at the time of the Accident. Although the Department acknowledged and amended its record accordingly, there is nothing to suggest that such amendment was based on any independent investigation by the Department apart from R1’s Amendment Sheet and R2’s 15/9/06 Letter. 72. Mr Lee and Mr Chan both laid strong emphasis on these two documents, but I am of the view that neither of them is conclusive. Whilst each case must turn on its own facts, it is not unknown for courts to conclude that information in the Form 2 (and presumably also in the information amendment sheet which is a document of the same nature) upon careful consideration of the relevant factual matrix (see Shek Kam Ching v Po Kee Construction Engineering Ltd & ors [2002] 3 HKLRD 796, 800, my unreported decisions in Chan Po Kai v Ng Moon Sum & anor DCEC820/2004 (24th February 2006), para.47 and Chan Yau Wing v Hyundai Engineering &Construction Company, Limited & ors DCEC672/2003 (unreported, 26th September 2005) paras.67-69, and Wong Kai Hung v Lam Geotechnics Limited DCEC110/2004 , H H Judge C B Chan (unreported, 13th April 2006)). 73. Here, the Form 2 was signed by R1, who is R2’s director as well as sole proprietor of his own business, and who therefore should be privy to the records of both R1 and R2. Yet to date, apart from an assertion of error in the Amendment Sheet, the 15/9/06 Letter and R2’s letter of 18th July 2007 (attached to the 24/7/07 Fax), neither R1 nor R2 gave any explanation as to why in the first place R2 came to submit the Form 2 naming itself as AP’s employer, to prepare the two HSBC cheques for the March 2006 Payments, to prepare the 3/06 Receipt that referred to “HSBC”, and to issue the 6/4/06 Letter that confirmed inter alia the Transfer. Prima facie, there is a reasonable argument that these steps taken by R2 as endorsed by R1 (see R1’s signature and company chop on the 6/4/06 Letter) are inconsistent with an inadvertent error in naming R2 instead of R1 as AP’s employer at the time of the Accident. 74. In my view, CYC quite properly called for an explanation of the contradiction posed by the 6/4/06 Letter in the 18/1/07 Letters. In claiming that R1 was AP’s employer at the time of the Accident, Falcon’s 17/2/07 Reply does not take the matter much further since it (a) drew support from the Amendment Sheet and the 15/9/06 Letter, and (b) merely claimed the contents of the 6/4/06 Letter were incorrect without offering explanation on the matters referred in the above paragraph. 75. Mr Chan argued AP must have been satisfied that R1 was his employer at the time of the Accident because (a) CYC did not seek further clarification on Falcon’s assertion that the contents of the 6/4/06 Letter were incorrect, and (b) AP carried the burden (which he failed to discharge) of making such enquiries in order to cure any confusion and satisfy himself that R1 was his employer. 76. I disagree. The fact that it is legally permissible for a claimant to sue defendants in the alternative reflects recognition that it is sometimes not possible to ascertain definitively which party is truly liable prior to commencement of legal action. In my view, there is no obligation on a claimant to ferret out all possible information and leave no stone unturned to form a definitive pre-action view as to which party is the proper respondent to be sued. His obligation is always to act reasonably in all the circumstances. 77. It is not as if AP has never raised the matter of the 6/4/06 Letter at all. In fact, CYC specifically drew R1’s/R2’s attention to the contradiction therein by the 18/1/07 Letters, but notwithstanding such opportunity to explain (which explanation must have been within the knowledge of R1 and/or R2), R1 and R2 through Falcon simply denied the correctness of the contents of the 6/4/06 Letter and offered no further explanation on why R2’s March 2006 Payments and the 6/4/06 Letter came about. AP is therefore left to consider the propriety of joining R2 on an alternative basis in the present action on the available information after having made enquiry with R1 and R2. In my view, all AP has to do is satisfy the court he has acted reasonably (not exhaustively) in all the circumstances in suing R2 in the alternative. In any event, would it have made any difference had AP pressed for clarification? Even now, when R1 and R2 oppose the Summons by putting in issue the reasonableness of AP’s decision to join R2 as a respondent in the present action, thereis still no explanation forthcoming on why the 6/4/06 Letter and the March 2006 Payments (which arguably rest on the Transfer) came about, and why R1 endorsed the 6/4/06 Letter by signing and affixing his company chop on its face if its contents were incorrect. 78. Mr Chan has not been able to cite any authority for his proposition that AP carries the burden to cure any confusion as Mr Chan suggested. Indeed, it has been held on the facts in Hodgson that although the plaintiff commenced proceedings against all possible defendants because it was not known, and more importantly because no attempt had been made to ascertain, who was responsible for the accident, it was not unreasonable for her to continue the action against all defendants since apart from the 2nd defendant they blamed everyone else in the defence at the post-action stage. This shows clearly there is no absolute burden on any claimant to seek clarification from potential defendants as to their capacity and scope of liability prior to commencement of legal proceedings. 79. Mr Chan pointed out that CYC spent 4 months after the 17/2/07 Reply liaising on the joint Examination without seeking further clarification of the 6/4/06 Letter, which meant AP was satisfied R1 was his employer at the time of the Accident. Bearing in mind that Dr Chiang’s report was for both Intended Claims and/or for exploring the prospect of amicable settlement, I am unable to criticise AP’s efforts in bespeaking such report. Further, I am not persuaded that such efforts have impact on costs in the manner suggested by Mr Chan. After all, if the parties were able to settle the EC claim for a mutually agreeable sum arrived at with the assistance of Dr Chiang’s expert opinion at the pre-actionstage, the dispute as to who AP’s employer was at the time of the Accident could have been avoided altogether. The parties’ efforts to obtain expert medical opinion do not necessarily mean the ambiguity over the identity of AP’s employer at the time of the Accident has been overcome. 80. Mr Chan next argued that the absence of any pre-action letter as prescribed under Practice Direction PD18.1 together with the parties’ efforts to reach some form of amicable settlement at the pre-action stage were significant factors to be taken into account in determining the costs order to be made between AP and R2. 81. Again, I disagree. First, whilst a formal pre-action letter similar to that prescribed in Practice Directions PD18.1 is desirable, it is not mandatory for there is no pre-action protocol for EC cases whether by statute or practice direction. Further, it is clear from the inter partes correspondence that AP had in mind (and R1 and R2 must have known of) the Intended Claims (including the intended EC claim in relation to the Accident). Secondly, I cannot see how a formal pre-action letter to R2 would have made any material difference. R2 has maintained and at the hearing before me still maintained its stance in the 17/2/07 Reply, but there is no further explanation to date as to why the 6/4/06 Letter and the March 2006 Payments came about if they or their contents were erroneous (see paragraph 73 above). Thirdly, the present action was issued at the last moment before expiry of the period for appeal against Form 9 when Dr Chiang’s expert report was still outstanding. Legal proceedings were inevitable since the parties probably had to consider Dr Chiang’s expert report before bringing the settlement negotiations to fruition. Indeed, there is no dispute the sums paid into court (which AP eventually accepted) is based on Dr Chiang’s assessments rather than those in the Form 9. 82. In my view, when AP commenced the present action, there was evidence suggestive of R1 being AP’s employer at the time of the Accident. But equally there was evidence which suggested AP had been transferred to become R2’s employee shortly before the Accident, and such Transfer is supported by R2’s 6/4/06 Letter endorsed by R1 and by R2’s March 2006 Payments to AP. Both R1 and R2 have failed to address these matters other than to say they or their contents are incorrect. 83. In light of (a) R2’s assertions in the Form 2 and the 6/4/06 Letter, which to R1’s knowledge referred to the Transfer and R2’s March 2006 Payments to AP shortly after the Accident, (b) the subsequent assertion that R1 was still AP’s employer at the time of the Accident in the Amendment Sheet, 15/9/06 Letter and 17/2/07 Reply, (c) the close business relationship between R1 and R2 in sharing the same Premises and the same director/proprietor, and (d) the fact that at the time of the Accident R2 had EC insurance coverage but R1 did not, I cannot dismiss the concern highlighted in Ms Ip’s submission as to whether R1 and R2 would have collaborated to contend that R1 (without EC insurance coverage) was AP’s employer notwithstanding transfer of AP’s employment to R2 (with EC insurance coverage) since 1st March 2006. 84. I also bear in mind that in determining who AP’s employer was at the time of the Accident the court does not just rely on assertions of the involved parties. Such determination is a fact-finding exercise pursuant to assessment of the available evidence in light of the relevant factual matrix. In this respect I need only refer to guidance by the Court of Final Appeal in Chan Sik Pan & anor v Wylam’s Services & ors (2001) 4 HKCFAR 308, which case has not been cited by the parties. 85. In that case, the plaintiff suffered a work-related injury. The 1st defendant submitted a Form 2 to the Labour Department and entered into two agreements with the plaintiff to make periodical payments to him, and two such periodical payments were actually paid to the plaintiff. In the EC proceedings, the 1st defendant denied he was the plaintiff’s employer, so the plaintiff joined the 2nd and 3rd defendants in the proceedings. The EC proceedings were settled by the plaintiff accepting payment into court by the 1st and 2nd defendants and the principal contractor. The plaintiff commenced common law proceedings against the 1st defendant and later joined the 2nd defendant. Still later he joined the 3rd defendant when the 2nd defendant pleaded the 3rd defendant was the employer. The plaintiff amended his pleadings to aver that the each of the three defendants was alternatively his employer. 86. The judge at first instance held the 1st defendant was the plaintiff’s employer on the basis that he was the only defendant who was insured, but the Court of Appeal held there was “overwhelming” evidence that the 3rd defendant was the employer. On appeal to the Court of Final Appeal, it was held that if someone did not take out insurance that an employer had to take out it did not mean he could not have been the employer. The Court of Final Appeal took note of the items of evidence that support the 1st defendant or alternatively the 3rd defendant as the plaintiff’s employer, and held it was necessary for a tribunal of fact receiving evidence at first-hand to make assessments of credibility and findings of fact on material matters before concluding which defendant was the plaintiff’s employer. Upon re-trial ordered by the Court of Final Appeal, it was found that the 3rd defendant was the employer (see Chan Sik Pan v Wylam’s Service Limited & ors HCPI648/1995, Suffiad J (unreported, 16th December 2002) and CACV17&66/203 (unreported, 27th October 2004)). 87. Both counsel attempted to distinguish the authorities cited by the parties at the hearing before me by saying that (a) R1 and R2 consistently maintained that R1 was AP’s employer at the time of the Accident and did not blame each other, and (b) the issue here was which respondent was the relevant employer rather than the relevant tortfeasor. I have no hesitation in saying that other than extracting general principles from the cases on the exercise of discretion on costs, how such discretion should be exercised on the particular factual circumstances in these cases are of no material assistance. 88. Mr Lee and Mr Chan submitted that after the commencement of the present action, R1 by the 23/7/07 Letter and 27/7/07 Letter and R2 by the 24/7/07 Fax unequivocally confirmed that R1 was AP’s employer at the time of the Accident. Since the Application did not suggest that AP was employed by both R1 and R2, it was unreasonable for AP to continue with the action against R2 in light of the aforesaid confirmation and R2’s repeated warnings on the consequential adverse cost consequences. 89. Ms Ip noted that despite R1’s assertion that he was AP’s employer at the time of the Accident, R1 did not admit liability until he filed the Answer on 28th August 2008, and very shortly thereafter the parties came to agreement on the amount of the settlement sum but could not agree on costs. In my view, without admission of liability, there is no certainty the court will on a fact-finding exercise have found R1 to be liable. I agree with Ms Ip it is not reasonable for AP to discontinue his claim against a potentially liable party (ie R2) when the liability issue is still outstanding, especially when R2’s liability (if any) is covered by EC insurance. 90. Although there is no final determination by the court as to who was AP’s employer at the time of the Accident, there is no doubt AP eventually acted on R1’s admission of liability, accepted his payment into court and sought leave to discontinue his claim against R2. R2 argued it should therefore be entitled to costs against AP on the basis that costs follow event, the event being AP’s election to accept R1’s payment-in which absolved R2 from liability. 91. But where there are special or exceptional circumstances that make it unjust for the aforesaid general principle on costs to apply, the court is bound to give consideration to those circumstances in exercising its discretion on costs. In my view, by reason of the aforesaid analysis of the relevant factual matrix, R1 and R2 created or permitted a situation which led AP to reasonably believe either of them could have been his employer at the time of the Accident. To R1’s knowledge, R2 made the March 2006 Payments and issued the 6/4/06 Letter which referred to such payments and the Transfer, and despite enquiry by CYC they failed to come clean on how these matters came about. As explained in Chan Sik Pan, the issue as to whether a person is an employer is a question of mixed fact and law, and depending on the relevant factual matrix an employed person (eg in the construction field in Chan Sik Pan) may have little idea who is the actual employer. In the circumstances, I am not persuaded that the costs follow event principle is applicable. I further find it is reasonable for AP to join R1 and R2 in the present action on an alternative basis. In the circumstances, it is appropriate that there be no order as to costs between AP and R2. 92. Although I take the view that R1 and R2 brought about the situation of AP suing them in the alternative, and AP’s belief that he has a fair case against R1 and R2 as employer is a reasonable one, R1, who was at the same time R2’s director and who has now admitted liability, is clearly more culpable in the sense that as AP’s employer at the material time he has caused or allowed this situation to happen. It is therefore appropriate that he should pay AP’s costs in bringing his claim in the present action against R2. 93. AP’s submissions in relation to the Sanderson order only arise if R2 succeeds in obtaining an order for its costs in defending AP’s claim. Since R2 has failed to obtain such order, it is not necessary to consider this argument. 94. In respect of the matter of costs between AP and R1 after 22nd September 2007 (ie after the date of the last payment-in by R1), it is argued that since AP did not accept the payment-in by filing and serving a notice in writing within the prescribed period, AP should pay R2’s costs after 22nd September 2007. However, AP did indicate within the prescribed period his willingness to accept the payment-in. The only sticking point is the provision for costs. Since AP requires the court to consider the special and exceptional circumstances in this case to exercise its discretion on costs, leave of the court is required for AP to accept the payment-in on terms as to costs. Since AP is essentially successful in respect of his stance on costs and R1 has unsuccessfully resisted the costs orders sought in the Summons, it is only fair for R1 to pay AP costs of the action both on/before and after 22nd September 2007. 95. I find that a fair order on costs (which I so grant) is as follows : (a) there be no order as to costs (including all costs reserved if any) between AP and R2, (b) R1 do pay AP’s costs of the action including AP’s costs of his claim against R2 in the present action and all costs reserved if any, and (c) there be legal aid taxation of AP’s own costs. VIII. Costs 96. AP is successful in respect of the Summons. There is no reason why costs should not follow event. However, as both R1 and R2 resisted the Summons, I do not consider it appropriate for R1 alone to bear costs of the Summons. In my view, it is only fair to order both R1 and R2 to pay costs of the Summons to AP (including all costs reserved if any) together with legal aid taxation for the Applicant’s own costs. I therefore grant such costs order nisi accordingly.
Representation: Mr Eunice Ip of Messrs ONC Lawyers for the Applicant. Mr Christopher Lee instructed by Messrs K Y Lo & Co for the 1st Respondent. Mr Vod Chan instructed by Messrs Clyde & Co for the 2nd Respondent. |
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