Who is more powerful?
Wong Chun Wah v. Chau Kwei Yin, Chow Yat Kuen, Employees Compensation Assistance Fund Board, FACV No. 6 of 2019, Chief Justice Ma, Mr. Justice Ribeiro PJ, Mr. Justice Fok PJ, Mr. Justice Stock NPJ and Madam Justice McLachlin NPJ, 20th December 2019.
TWO QUESTIONS OF GREAT PRACTICAL IMPORTANCE TO THE OPERATION OF THE EMPLOYEES COMPENSATION ASSISTANCE FUND BOARD (“ECAS”)
1. Whether the Courts have jurisdiction to make costs order against ECAS in certain proceedings to which it is a party?
2. Whether ECAS is empowered to enter into binding settlements regarding claims or potential claims for payments out of the fund which it administers?
The plaintiff was an interior decoration worker who sustained injuries at work. The 2nd defendant had been engaged by the 1st defendant to do the construction work. The plaintiff alleged that the 2nd defendant was his employer but brought proceedings against the defendants for compensation under the Employees’ Compensation Ordinance, Cap. 282 (“ECO”) and for common law damages. The case was discontinued against the 1st defendant in 2015 when he settled the plaintiff’s claims by payment of $80,000.
That left the plaintiff’s claims, which included one for over HK$4.7 million damages, against the 2nd defendant who had no insurance cover and who acted in person throughout. Accordingly, ECAS obtained leave to be joined as 3rd defendant in the proceedings, stating that it wished to participate in the assessment of damages. It proceeded in 2016 to commission a medical report jointly with the plaintiff and to file an answer to the plaintiff’s statement of damages, putting forward a lower assessment.
The plaintiff obtained judgment against the 2nd defendant for HK$602,380.00 before Deputy District Judge Chow in the ECO proceedings in September 2016. The common law action then came on for trial in May 2017 and at its commencement, the plaintiff and ECAS agreed to settle his potential claim under the Employees Compensation Assistance Ordinance, Cap., 365 (“ECAO”) for HK$1.42 million.
The 2nd defendant was not a party to the settlement and the trial proceeded against him before Deputy High Court Judge To, resulting in an award of damages in the sum of HK$2,110,927.00. Deducting the sums of HK$80,000.00 received from the 1st defendant and the ECO award of HK$602,380.00, the net amount of damages due to the plaintiff from the 2nd defendant was HK$1,428,547.00, which was marginally more than the settlement amount agreed with ECAS. The Judge ordered the 2nd defendant to pay the plaintiff’s costs but refused the plaintiff’s application for costs against ECAS as from the date of its joinder in the action, directing that there should be no order as to costs as between the plaintiff and the ECAS.
The plaintiff sought and obtained leave from the Court of Appeal to appeal against the direction of no order as to costs. By a respondent’s notice, ECAS sought to uphold the Judge’s order on the additional ground that the Court lacked jurisdiction to make any costs orders against it. The Court of Appeal dismissed the plaintiff’s appeal against the refusal of costs against ECAS and did not accept ECAS’s argument that there was no jurisdiction to order costs against it in such proceedings. ECAS was granted leave to appeal the captioned two questions of law to the Court of Final Appeal.
Section 20B(3) of the ECAO does not deprive the Court of jurisdiction to order costs against ECAS in relation to proceedings in which it has been joined as a party. The power to make such costs orders is conferred by Section 52A of the High Court Ordinance, Cap. 4. Section 29 of ECAO also recognises the existence of such power.
In exercising its discretion regarding a possible costs order against ECAS, the principle that costs normally follow the event does not apply, given the ECAS’s statutory role and the starting-point is no order as to costs. Needless to say, the Court has a wide discretion and may depart from this if the circumstances warrant a different order.
Section 29 authorises ECAS to settle potential claims for relief payments in amounts it assesses to be reasonable, arriving at such assessments in good faith on available information considered sufficient after having made due inquiry. Settlement is an alternative means for disposing of a claim and obtaining relief. The settlement agreement constitutes a binding contract and is not affected by any Judgment which the employee may subsequently obtain against the employer. It should not generally be necessary to pursue that action after settling with ECAS.
The appeal was dismissed and although the outcome would normally entail making an order for costs against ECAS, the Court of Final Appeal took into account its special statutory role and accepting that there was a need for clarification of the legal position affecting ECAS’s operations hence the Court made no order as to costs.
This judgment is indeed good news to the employee. By the operation of Section 29 of ECAO which empowers ECAS to strike a settlement with any party hence the employee does not have to go through the painful exercise of taking the matter to trial in order to obtain a judgment.
If ECAS is not joined as a party to the proceedings, Section 28 of the ECAO gives a wider power to ECAS to protect its costs and settle with the plaintiff if ECAS thinks that the plaintiff is or might be entitled to obtain payment from the Fund.
While ECAS is entitled to give pressure on plaintiffs to settle, it is unsatisfactory that there is no mechanise for the plaintiffs to make any sanctioned offer or Calderbank offer against ECAS to protect their costs. It is because there is “no event” between the plaintiffs and ECAS. Hence, ECAS is rarely asked to pay the plaintiffs’ costs unless its conduct is unreasonable or misconceived or unjustifiably antagonistic, unnecessarily prolonging its intervention or otherwise untoward.
In view of the Civil Justice Reform, our view is that the law should be changed such that the plaintiffs may give counter-pressure on ECAS to settle the actions as soon as possible and to protect the Fund. This proposed change is particularly important to the common law actions because unlikely Employees’ Compensation actions, any cost order against the employers in such proceedings, even if awarded on indemnity basis after effective sanctioned offers, is not recoverable from ECAS.