FACV 6/2019

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL APPEAL NO. 6 OF 2019
(ON APPEAL FROM CACV NO. 271 OF 2019)

BETWEEN

WO CHUN WAH Plaintiff

(Respondent)
and

CHAU KWEI YIN 1st Defendant

(Discontinued)

CHOW YAT KUEN 2nd Defendant

EMPLOYEES COMPENSATION 3rd Defendant

ASSISTANCE FUND BOARD (Appellant)

_________________________________

THE APPELLANT’S CASE

_________________________________

A. OVERVIEW Record

1. This appeal against the judgment of the Court of Appeal (“CA”) [A/4/65-82]
dated 26 October 2018 (“Judgment”) concerns the proper
interpretation of the provisions of the Employees Compensation
Assistance Ordinance, Cap. 365 (“ECAO”), and in particular,
whether the courts have jurisdiction under the ECAO to order costs
against the Board, and if so, how the discretion should be properly
exercised.

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2. By an Order dated 25 July 2019, the Board obtained leave to appeal [A/11/118-
to the Court of Final Appeal (the “Court”) on two related 123]
questions, namely:

2.1. Whether, upon proper construction of the provisions of the

ECAO, and in particular, s.20B(3) thereof, the court has
jurisdiction to order costs against the Board in common law
damages claims to which the Board joins in pursuant to
s.25A of the ECAO (“Joinder Cases”), and if so, whether
there is a “usual order” or “starting point” on costs to be
made or ordered in Joinder Cases where the Board (i)
disputes liability and quantum, and (ii) disputes quantum [A/4/68-69,
only (See §§14, 20, 32 and 34 of the Judgment). 71, 75-76]

2.2. Whether, in view of the fact that a plaintiff is entitled under

s.20B(1) of the ECAO to an amount of relief payment which
“shall be the amount of damages for which the employer is
liable to pay to the eligible person”, the Board, as a statutory
body constituted under the ECAO, has power to settle with
a plaintiff on the quantum of relief payment payable by the
Board before such amount of damages for which the
employer is liable is known, i.e. before trial or assessment
of damages, and if so:

(a) Whether the trial judge was correct that should the
quantum of damages assessed against the employer be
higher than the agreed amount, the plaintiff cannot
apply to the Board for relief payment in respect of the

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 difference, and should the quantum of damages
assessed against the employer be lower than the amount
agreed between the plaintiff and the Board, the Board
may have no authority to pay the plaintiff the higher
amount that has been agreed (See §§40-41 of the [A/4/77-78]
Judgment and §25 of the judgment of the trial judge [A/1/35-36]
dated 23 June 2017 (the “1st instance judgment”)).

(b) Whether the Board has power under the ECAO to pay
the agreed relief payment to the plaintiff in the absence
of an application under s.20A of the ECAO (Cf.
ss.28(1) and 30 of the ECAO in relation to
compensation claims).

(c) If not, what is the legal effect of such settlement

between the plaintiff and the Board?

3. The Board submits that upon proper construction of the ECAO, the
court does not have jurisdiction to order costs against the Board in
Joinder Cases. Any construction otherwise would be inconsistent
with the purpose of the amendments to the ECAO in 2002, and
give rise to absurdities in the construction and operation of the
statutory scheme (the “jurisdiction issue”).

4. Alternatively, even if the court has jurisdiction to order costs

against the Board in Joinder Cases, the Board submits that there is
no “usual order” or “starting point” for costs order in Joinder Cases
where the Board (a) disputes liability and quantum or (b) disputes

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 quantum only. It is the employer or insurer, but not the Board, who
should bear the costs. The Board’s special position which
differentiates it from ordinary litigants militates against the
application of the “costs follow the event” principle.

5. The Board’s submissions are reinforced by the lack of express

provision in the ECAO which enables the Board to settle with a
plaintiff on the quantum of relief payment before trial and at a
figure other than the amount of damages for which the employer is
adjudged liable to pay the plaintiff under s.20B(1) and 20A(2) of
the ECAO. The Board is therefore, unlike any other ordinary
litigant, not in the position to take steps (including to make
settlement offers “without prejudice save as to costs”) to mitigate
its exposure for costs in the event that the Board is unsuccessful.
Whether the Board has made reasonable settlement offers is
therefore not a factor which the courts should take into account
when exercising its discretion on costs against the Board.

B. BACKGROUND

6. The Plaintiff (i.e. the Respondent) was an interior design worker

who sustained injuries at work. He claimed damages against the
2nd Defendant in excess of $4.7 million. The Plaintiff discontinued
his claim against the 1st Defendant after receiving $80,000 with no
admission of liability. [A/1/25]

7. As the 2nd Defendant was not covered by insurance, the Board

joined in the proceedings pursuant to s.25A of the ECAO to

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 participate in the assessment of damages. Meanwhile, the Plaintiff
succeeded in a claim for employees’ compensation against the 2 nd
Defendant for $602,380. [A/1/25]

8. At the commencement of the trial, the Plaintiff and the Board

reached a “settlement” for the Plaintiff’s damages claim at
$1,420,000. It is common ground that this “settlement” was not [A/1/25]
binding on the 2nd Defendant and the trial had to proceed against
him. This is unlike normal situations where a party will drop out
of the proceedings after a compromise.

9. After trial, DHCJ To assessed damages against the 2nd Defendant

in the total sum of $2,110,927. Deducting the award of employees’
compensation of $602,380 from the 2nd Defendant and the amount
of $80,000 from the 1st Defendant, the net amount of damages to
the Plaintiff under the 1st instance judgment was $1,428,547. [A/1/41]

10. DHCJ To ordered the 2nd Defendant to pay the Plaintiff’s costs. He
held there is jurisdiction but declined to make an order for costs
against the Board. [A/1/42-51]

11. On 14 November 2017, the CA granted leave to the Plaintiff to

appeal against DHCJ To’s refusal to order costs against the Board.
On 19 December 2017, the Board filed a Respondent’s Notice to
affirm the costs order on the jurisdiction issue.

12. The CA dismissed the Plaintiff’s appeal and upheld the costs order
of DHCJ To. Despite having heard full arguments on the

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 jurisdiction issue, the CA held that it was “unnecessary” to deal
with the Respondent’s Notice. In fact, the CA had expressly
rejected the Board’s submissions on the jurisdiction issue, and held
that its earlier decision in Jiang Zhong v Yeung Chun Leung
[2018] 1 HKLRD 886 was not plainly wrong (§§47-54 of the
Judgment). [A/4/79-81]

13. As for the costs of the appeal, the CA exercised its discretion to
depart from the principle that costs should follow the event and
made an order that there be no order as to costs between the
Plaintiff and the Board notwithstanding that the Plaintiff’s appeal
was dismissed (§§55-56 of the Judgment). [A/4/82]

C. NO JURISDICTION TO ORDER COSTS AGAINST THE

BOARD

14. The Board submits that the CA was wrong in rejecting its
submissions on the jurisdiction issue, and that upon proper
construction of the ECAO, the CA’s decision in Jiang Zhong is in
fact plainly wrong. The CA therefore had no basis to deprive the
Board of its costs of the appeal.

15. In construing legislation, the Court adopts a purposive approach

by construing the words of a statute in the light of their purpose:
Yung Chi Keung v Protection of Wages on Insolvency Board
(2016) 19 HKCFAR 469, [2016] HKCFA 32 at §22. A proper
construction of the ECAO must therefore have regard to the nature

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 of the Board, the statutory scheme under the ECAO, the history of
its amendments, and the purpose of those amendments.

C1. The nature of the Board as a statutory body

16. The Board is a statutory body constituted under the ECAO as the
administrator of the Employees Compensation Assistance Fund
(the “Fund”). Under s.4(a) of the ECAO, the Board holds the
Fund upon trust to administer it in accordance with the objects of
the ECAO. Such funds are, by nature, public as well as limited.

17. The powers of the Board are set out in s.5 of the ECAO, which
provides, inter alia, that the Board may do all such things as are
expedient for or conducive to the attainment of the functions
referred to in s.4 or which, in the opinion of the Board, are
necessary to facilitate the proper carrying out of the functions of
the Board.

18. The sustainability of the Fund depends on the sources of funding

set out in s.7 of the ECAO, which include insurance levies,
interests and other income derived from investments, and moneys
received by the Board under Part V of the ECAO, enabling it to
make payments out of the Fund under s.8 of the ECAO.

19. Section 8 exhaustively sets out the payments which the Board may
pay from the Fund, namely:

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 “(a) payments to or on behalf of persons eligible
under Part IV;
(b) expenses incurred by the Board for the
purposes of this Ordinance;
(c) capital, interest and charges in respect of any
loan; and
(d) any other sums required or permitted to be
paid by the Board under this Ordinance.”

20. The Board, unlike ordinary litigants, does not have personal
knowledge of the facts pertaining to the employee’s claim or the
employer’s defence. Accordingly, in certain cases where the
evidence is not entirely clear, the Board, in the discharge of its
statutory duty, may need to put the employees to strict proof, or
even test their evidence by way of cross-examination. But this
does not mean that the Board is wasting costs or acting
unreasonably, for, irrespective of whether the Board has
intervened, plaintiffs have to prove their case to the court before
they can obtain judgment against their employers.

21. It is wrong to equate the Board with an adversary or an ordinary

litigant acting in its own interests. The Board has a public role in
that if employees exaggerate their claims when there is no
employer or insurer defending the claim, the Fund may be exposed
to unwarranted depletion, and this will operate to the detriment of
other employees in need of the protection of the Fund.

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22. The special position of the Board as a party in Joinder Cases is
recognised in the authorities. Any judgment obtained by the
employee can only be entered against the employer or insurer only:
Chen Xiu Mei v Li Siu Wo [2008] 3 HKC 52 at §§6-8; Tu
Zhiqiang v Hap Sang Co (a firm) [2012] 1 HKLRD 1075 at §§45-
51. The Board only becomes liable when relief payment is applied
for under s.20A of the ECAO and the applicant satisfies the
eligibility requirements.

C2. The statutory scheme and the history and purpose of its
amendments

23. The ECAO is a piece of social legislation which provides a last

resort for compensation or relief payment to employees who are
unable to recover against the employers or insurers. The statutory
scheme under the ECAO has been conveniently summarized by
the CA in paragraphs 3.1 to 3.4 of Jiang Zhong.

24. Prior to the enactment of the Employees Compensation Assistance

(Amendment) Ordinance 2002 (the “Amendment Ordinance”),
s.23 of the Employees Compensation Assistance Ordinance 1991
(the “1991 Ordinance”) required the Board to pay from the Fund
“an amount equal to any costs payable to the applicant pursuant
to an order of a court for costs against the employer or the
employer’s insurer in proceedings claiming the compensation or
damages.” An injured employee who was unable to recover
compensation or damages from his employer was therefore

9
 entitled to full recovery of not only those amounts but also his costs
of those proceedings from the Fund.

25. The “costs” referred to in the then s.23 were only those ordered
“against the employer or the employer’s insurer”, but not against
the Board. There were no express provisions in the 1991
Ordinance authorizing the Board to pay from the Fund any costs
ordered against itself.

26. It may be that no such provision was necessary, since the 1991
Ordinance contained no provision empowering the Board to
intervene in proceedings. Equally there was no restriction under
the 1991 Ordinance prohibiting the Board from intervening in
proceedings. The court refrained from expressing a concluded
view on this issue: Lai Chi Pon v Toto Steel & Iron Works Ltd
[1997] 2 HKC 195 at p.203D-H.

27. There was nothing in the 1991 Ordinance, prior to the amendment,
which expressly or impliedly prevented a costs order being made
against the Board, if it had intervened.

28. But the position in relation to proceedings for common law

damages was radically changed after the Amendment Ordinance.

29. The history and reasons for the Amendment Ordinance have been
fully summarized in Kwan Kam Pui v Fung Man & Ors [2014] 6
HKC 361 at §20. The Legislature removed all references to
“damages” in s.23 (which continues to apply in relation to the costs

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 of proceedings for compensation) and introduced s.20B(3) in its
place to govern the costs of proceedings for damages.

30. Section 20B(3) provides that:

“Notwithstanding the definitions of ‘compensation’

and ‘damages’, for the purposes of determining the
amount of a relief payment–
(a) any interest payable on any amount; and
(b) any costs,
arising from proceedings in respect of any damages
or compensation claim shall not be included.”
(emphasis added)

31. The Board relies on this provision to exclude the court’s

jurisdiction to order costs against it. The words “any costs arising
from proceedings in respect of any damages or compensation
claim” are of the widest import and can give rise to no ambiguity.
They cover an employee’s costs in common law proceedings for
damages, irrespective of whether it was a Joinder or a Non-Joinder
Case.

32. To the extent that the Court may find the meaning of these words
ambiguous or obscure or lead to absurdity, it may refer to
Legislative materials as an aid to statutory construction: Pepper v
Hart [1993] AC 593, 634C-E. Such materials reinforce the
construction that the legislative intention behind these

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amendments was to remove the Board’s liability for costs arising
from proceedings for damages. In particular:

(1) This was expressly stated in the Legislative Council Brief on

the Employees Compensation Assistance (Amendment) Bill
2002:

“5. The financial predicament of the Scheme

was due to a number of reasons which
included …. payments for …. common law
damages, interests, legal costs ….”

“11. The Scheme currently covers liabilities

relating to common law damages in respect of
employment-related injuries. The amount of
common law damages awarded by the Court
could be quite substantial, bringing about
uncertainty to the financial exposure of the
Scheme. There is, therefore, a need to reduce
the financial volatility brought about the
common law awards but at the same time
maintaining reasonable protection to injured
employees. To achieve this aim, it is proposed
that a relief payment should be payable under
the Scheme in lieu of common law damages.

12. The proposed relief payment shall not

exceed the aggregate sum of damages award

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 by the Court and shall not cover any costs
arising from proceedings in respect of
damages…” (emphasis added)

(2) In the Minutes of the Meeting of the Legislative Council

Panel on Manpower on 17 May 2001, the Assistant
Commissioner for Labour (Rights and Benefits) similarly
stated, in response to a question concerning legal costs that
an employee had to incur (in order to obtain a judgment)
before he could apply to the Board for compensation, that:

“47. … the Board should be empowered to

take a more active role in legal proceedings
with a view to encouraging early settlement of
claims and reducing the legal costs.
Following the proposal to provide ex-gratia
payment in lieu of common law damages, the
Board would only pay the legal costs of
employees’ compensation under ECO. It
would no longer be responsible for the legal
costs in respect of common law claims.”
(emphasis added)

(3) In the Official Record of Proceedings (Hansard) dated

Wednesday, 26 June 2002 (see pp.7952-7953, 7963), some
legislators were of the view that the amendments were “a
retrogression in labour protection” as the principle has
changed from full compensation covering both damages and

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 cost to the making of a relief payment which excluded costs.

33. During the entire legislative process, there was never any mention
that the exclusion of costs from relief payments only applied where
the Board did not intervene in the proceedings. There was no
mention of “two regimes” as contemplated by the CA.

C3. No “two regimes” under the ECAO

34. As the statutory scheme for payment under Part IV of the ECAO
is largely self-contained (see Kwan Kam Pui at §21), and
specifically includes provisions as to costs, the ECAO should be
construed as exhaustively setting out the circumstances in which
the Board shall pay the costs of an employee arising from
proceedings in respect of any damages or compensation claim.

35. The words “arising from proceedings in respect of any damages

or compensation claim…” in s.20B(3) of the ECAO draw no
distinction between Joinder Cases and Non-Joinder Cases. On
plain reading, the phrase “proceedings in respect of any damages
or compensation” includes proceedings where the Board has
intervened. There is no basis to construe these words as excluding
Joinder Cases.

36. Such construction produces the anomaly that employees in Joinder

Cases can recover their costs from the Board but those in Non-
Joinder Cases cannot, which result has no rational basis. After all,
an employee incurs only one set of costs in his damages claim,

14
 whether or not there is intervention by the Board. If the employer
has insurance, the employer’s insurer takes over the employer’s
defence. The Board only intervenes when the employer has no
insurance. Hence there is no injustice or unfairness to the
employee who still incurs one set of costs.

37. However, according to the CA in Jiang Zhong at §§6.7 and 17,

there are “two regimes” under the ECAO – the first being that of
the relief payment application where costs are excluded from the
recovery, and the second is the joinder of the Board as a party.

38. It could not have been intended by the Legislature that the Board
was only relieved of costs liability in Non-Joinder Cases but would
continue to be exposed to costs in Joinder Cases at a time when the
Fund was at a perilous financial state. This is a fortiori as the
Legislature simultaneously introduced s.20B(3) to exclude costs
from relief payments and ss.25A and 25B of the ECAO to facilitate
the Board’s intervention in court proceedings in order to protect
the interests of the Fund. The CA in Jiang Zhong at §6.6
recognised the force of this argument but went on to endorse a
“most unusual” construction which leaves the back door open for
costs orders to be made against the Board in Joinder Cases.

39. The CA’s attempt to construe the plain words of s.20B(3) of the
ECAO in such a way (see Jiang Zhong at §6.8) is yet again another
example of, in the words of this Court, the distressing development
by the courts below in distorting or ignoring the plain meaning of
the words and construing the statute in whatever manner that

15
 achieves a result which they consider desirable: China Field Ltd v
Appeal Tribunal (Buildings) (No 2) (2009) 12 HKCFAR 342,
[2009] HKCFA 95 at §36 per Lord Millett NPJ.

40. The “two regimes” approach means that s.20B(3) has no

application at all where s.25A is invoked. This was precisely what
Yuen JA expressly held at §17 of Jiang Zhong. Such a conclusion
effectively circumvents the express exclusion of costs when
making relief payments in Joinder Cases. The CA created two
regimes in order to confine the exclusion of costs to Non-Joinder
Cases only, an outcome which it considered fairer to employees
who would otherwise have to bear the additional costs occasioned
by the intervention of the Board from the relief payment. But an
examination of the legislative process of the Amendment
Ordinance shows that nothing in the wording of s.20B(3) supports
such a bifurcated approach.

41. Irrespective of whether the proceeding is a Joinder Case or a Non-

Joinder Case, an employee who cannot obtain satisfaction of the
award for damages against his employer has to make an application
for relief payment under s.20A of the ECAO. The amount of relief
payment is governed by s.20B, the application of which is plainly
not restricted to Non-Joinder Cases. Thus, even if Yuen JA was
correct in §17 of Jiang Zhong in referring to s.20B(3) as a
provision governing quantum rather than liability, it is not a
provision governing quantum in Non-Joinder Cases alone, but
must equally govern quantum in Joinder Cases as well.

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 42. Furthermore, the bifurcated approach adopted by the CA is not
supported by its reasoning that there is no “express exclusion” of,
or “total ban” on, the making of costs orders against the Board in
Joinder Cases (Jiang Zhong at §6.7). Quite apart from express
provisions, the jurisdiction to make costs orders can be excluded
impliedly based on policy reasons.

43. In Re Robert Michael Englehart QC [1996] HKCFI 266 and Re

Robert Potts QC [2001] HKCFI 461, it was held that by virtue of
rule 9(2) of the Admission and Registration Rules (Cap 159B)1 the
Court had no jurisdiction to order costs against the Bar Council
where it unsuccessfully opposed the application for admission by
a barrister. Rule 9(2) provided that:

“The Court, upon hearing the Secretary for Justice or

such Counsel and upon hearing any representation
which may be made by or on behalf of the Bar
Council or of the Secretary for Justice and upon
being satisfied that the applicant is eligible for
admission as a barrister, may order that the
applicant be admitted as a barrister or, if the Court
is not so satisfied, may dismiss the application upon
such terms as regards costs or otherwise as the Court
may deem appropriate.”

44. The provision does not expressly provide that no order for costs
can be made against the Bar Council. Instead, the Court arrived at

1
Now repealed and replaced by s.3(2) of the Barristers (Admission) Rules (Cap. 159AA),
which is for all practical purposes identical with rule 9(2).

17
 its conclusion on an implied basis; it held that there was no
jurisdiction to award costs against the Bar Council since “express
provision is made for award of costs in the case of an application
being dismissed by the court, whereas no such provision is made
where the application is successful.” 2 It further held that the
absence of power to award costs on successful application in rule
9(2) could not be said to be against the fundamental general rule
that costs follow the event.3

45. Thus, an applicant seeking admission as a barrister may have to

pay the Bar Council’s costs if he fails, but cannot recover his costs
from the Bar Council if he succeeds. Such “inequality” or
“unfairness” (which appears to have never been challenged) can
thus be expressly or impliedly provided for by statute. Although
the court in both cases was of the view that the Bar Council acted
in the public interest and reasonably in the circumstances, these
were at best subsidiary reasons fortifying the principal basis for the
conclusion which rested upon the construction of rule 9(2).

46. By analogy, there are equally good policy reasons for the Board to
be exempted from a costs order in Joinder Cases. The Board is a
statutory body subject to public scrutiny and should be trusted to
intervene only in appropriate circumstances.

47. The Board submits that s.20B(3) impliedly, if not expressly,

excludes the Court’s jurisdiction to order costs against the Board

2
Re Robin Potts QC at §7.
3
Re Robin Potts QC at §18.

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 in Joinder Cases, and such express or implied exclusion cannot be
circumvented by construing “two regimes” out of the ECAO.

C4. It is not for the courts to go behind the policy reasons to cure
any perceived unfairness

48. Whilst the result may seem, at first glance, to be harsh or unfair to
an employee who has to incur additional costs in Joinder Cases
instead of obtaining default judgment against an uninsured
employer, it is important to recognise that all employees must
inevitably incur some costs in obtaining judgment against their
employers, and the main reason why such costs eat into the relief
payment in the first place is because the employer is unable to pay
the costs, not because of any unfairness in the statutory scheme.

49. It is a policy decision made by the Legislature in deciding how

wide to cast the safety net for employees who cannot recover from
their employers. The reality is that the Fund is limited in resources
and if it is depleted, it works to the detriment of all other employees
in need. The issue of fairness must be seen in that light.

50. It is not for the courts to rewrite the legislation or go behind the
policy reasons to cure any perceived unfairness. The courts have
in the past recognised that difficult policy choices have to be made
in relation to statutory schemes involving public funds, e.g.:

50.1. Under the legal aid system, the Court has no jurisdiction to
order the Director of Legal Aid to pay the costs ordered

19
 against an aided person who is an unsuccessful defendant:
s.16C(1) of the Legal Aid Ordinance (Cap. 91).

50.2. Of similar effect is s.13 of the Legal Aid Act 1974, although
it goes on further to provide that even if the aided person
was an unsuccessful plaintiff, no order should be made for
costs to be paid out of the legal aid fund unless the court is
satisfied that the unassisted defendant will suffer severe
financial hardship without such order for costs.

50.3. Although these statutory provisions give rise to unfairness,

the courts accept that it is a result of difficult policy choices
made by the legislature. In Hamilton v Al Fayed (No 2)
[2003] QB 1175 at §79, Hale LJ (as she then was) observed
that:

“This was a statutory scheme involving public

funds in which Parliament had to make some
difficult policy choices. It was decided that the
fund should be able to recover costs of
successful litigation but should not have to pay
the costs of unsuccessful litigation save in cases
of hardship or on appeal.”

50.4. Although the Director of Legal Aid, unlike the Board, is not
a party to the proceedings, the decision to grant legal aid has
a similar effect as the Board’s decision to intervene in
proceedings under s.25A of the ECAO, in that the granting

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 of legal aid enables the defendant to be legally represented
in contesting the plaintiff’s claim. The Board’s intervention
in cases where the employer is either not present or is
unrepresented also ensures that the plaintiff’s claim is
properly contested. In both situations, costs are likely to
increase.

50.5. But more importantly, there is inequality engendered by the

legal aid rules in respect of the liability for costs between an
unaided plaintiff and an aided defendant.

51. These rules are contrary to the principle that a successful party in
litigation is entitled to an award of costs in his favour. As the Court
explained in Leung Kwok Hung v President of the Legislative
Council of the Hong Kong Special Administrative Region (2014)
17 HKCFAR 841, [2014] HKCFA 104 at §14:

“When a party is put to the expense of responding to

a claim in a court of law and prevails, it is only fair
that he should be compensated for his expenditure.
Equally, compensatory costs orders have long been
part of our legal system and they serve to give
claimants pause for thought before embarking on ill-
conceived or unmeritorious litigation.”

52. However, the general rule has exceptions. For example, the courts
have recognized the public interest litigation exception whereby it
may be appropriate to grant pre-emptive costs orders in favour of

21
 an applicant who brings proceedings to seek guidance on a point
of general public importance for the benefit of the community as a
whole and who stands to obtain no personal private gain from the
outcome: Chu Hoi Dick v Secretary for Home Affairs (No 2)
[2007] 4 HKC 428; R (Corner House Research) v Secretary of
State for Trade and Industry [2005] 4 All ER 1.

53. It is therefore wrong to concentrate solely on the fairness to an

individual employee and neglect the bigger picture of fairness to
employees in general. The Board’s insulation from an adverse
costs order does not benefit the Board for some private purpose but
protects the sustainability of the Fund for the benefit of employees
at large.

54. Accordingly, the courts should recognize the Legislature’s policy

choice. Rather than focus on the perceived unfairness to the
specific employee, the courts should acknowledge that the
legislative intention was to provide relief payments to employees
(albeit less costs), which is still better than undermining the
sustainability of the Fund.

55. The courts are ill-equipped to go behind these policy

considerations, and should not attempt to cure the perceived
unfairness by making adverse costs orders against the Board as this
gives rise to a number of consequences which are inimical to the
statutory scheme.

C5. Consequences of an adverse costs order against the Board

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56. If the court has jurisdiction to order costs against the Board in
Joinder Cases, there can be no doubt that employees will ask the
court to do so in every case where damages have been awarded. It
is inconceivable that the Legislature intended to leave the question
of whether the Board ought to be liable for an employee’s costs to
be decided by the court on a case-by-case basis. This would result
in uncertainty and financial burdens which were exactly the
reasons for costs to be excluded from relief payments in the
Amendment Ordinance. It makes little sense on the one hand to
empower the Board to intervene to reduce possible inflated claims
but on the other hand to discourage such intervention with risks of
costs upon an award of damages to the employee.

57. An adverse costs order against the Board may also give rise to a
number of consequences which may not have been intended:

57.1. First, an employee’s position on costs will be greatly

improved not only in the sense that he can obtain his costs
from the Fund, but he will not be subject to the statutory
scheme governing the assessment of costs and the time at
which they become payable.

(a) Section 23(5) of the 1991 Ordinance, which applied to

the employee’s costs of proceedings for damages (and
which continues to apply in respect of the costs of
proceedings for compensation), expressly limited the
Board’s liability for costs to a party and party basis.

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 Following the 2002 amendments, which dis-applied
s.23 of the ECAO to the costs of proceedings for
damages, there is no longer any provision in the
ECAO preventing the amount of costs payable by the
Board from being taxed on a higher basis, thus
increasing rather than reducing the Board’s potential
liability for costs. Such disapplication of s.23(5) must
be on the basis that the Board would not be liable for
costs, whether in Joinder or Non-Joinder Cases.

(b) Section 23(11) of the 1991 Ordinance provided that

the costs only became payable as and when the
amount determined under the principal application
became payable. In other words, it did not become
payable at all unless the employee was eligible for
payment of damages. However, if the court has
jurisdiction to make a direct costs order against the
Board in Joinder Cases, the payment of the costs will
be governed by O.62, and not section 23(11) which
now only applies to compensation cases. The
employee can immediately enforce the costs order
against the Board without first having to make a s.20A
application for relief payment. The Board will have
to immediately pay the costs of the common law
proceedings to the employee before any steps are even
taken to enforce the costs order against the employer.
Delayed payment of costs by the Board further gives
rise to interest payable as a judgment debt. Similarly,

24
 the disapplication of s.23(11) to common law
damages claim can only be explained on the basis that
the Board would not be liable for costs, whether in
Joinder or Non-Joinder Cases.

(c) In order to alleviate the financial pressure on the Fund,

ss.20C – 20E of the ECAO were introduced to provide
an elaborate mechanism of making relief payments.
These include payment by way of an initial lump sum
plus monthly payments, which effectively defers an
employee’s entitlement so that the Fund does not have
to pay a huge sum upfront, and also provides for
cessation of the Fund’s liability for relief payments
upon defined situations such as the employee’s death.
Such protection will be much reduced if costs can be
directly enforced against the Board without any
provision for deferment.

(d) Payments from the Fund are also subject to a defined

order of priority under s.26, which does not deal with
costs orders against the Board. As a result, a costs
order against the Board is effectively elevated to the
top of the priority to be paid out even before amounts
of compensation under s.16. There appears to be no
good reason why this should be so. The absence of
any provision dealing with the deferment or priority
of payment of costs indicates that no order for costs
against the Board is contemplated under the ECAO.

25
 (e) These disruptions to the statutory scheme may have
serious consequences on the viability or sustainability
of the Fund and may undermine the value of s.25A
which was added at the time when the Fund was in
financial difficulties.

57.2. Second, the Board will have no statutory right of

subrogation to recover any costs paid to the employee from
the employer since s.37 of the ECAO does not apply to a
payment made from the Fund pursuant to a costs order
against the Board.

(a) Moneys received by the Board under Part V of the

ECAO (which deals with, inter alia, the Board’s right
of subrogation) are one of the few important sources
of its funding: see s.7(1)(b) of the ECAO.

(b) Prior to the 2002 amendments, s.23(6) of the 1991

Ordinance provided that s.37 “applies in respect of a
payment made from the Fund pursuant to subsection
(1)(b) as if such payment were payment of an amount
of… damages”.

(c) Following the Legislature’s deletion of the references

to “damages” in s.23(1)(b) and (6), s.37 no longer
applied to payments of an employee’s costs in
proceedings claiming damages since such costs were

26
 no longer payable from the Fund by virtue of the
enactment of s.20B(3).

(d) Section 23(6) of the ECAO dealing with subrogation

in respect of costs of compensation proceedings which
are paid out of the Fund reflects the policy that the
ultimate responsibility for the injured employee’s
costs lies with the employer, and that the Fund is only
a last resort.

(e) It is inconceivable that the Legislature intended to

leave the Court with the discretion to order the Board
to pay the employee’s costs without also preserving its
right of subrogation.

(f) The clear legislative intention in removing the

statutory right of subrogation is that the Fund is not
meant to pay the employee’s costs of the common law
proceedings whether in Joinder or Non-Joinder cases.

57.3. Third, a costs order against the Board may unwarrantedly

benefit the employer or employer’s insurer, which cannot be
intended under the statutory scheme.

(a) If a costs order is made against the Board, the

employee will be entitled to immediately enforce it
against the Board under O.62 without going through
the statutory scheme under the ECAO. This can
happen before it is known whether the employer has

27
 the means to pay the employee’s costs. Indeed, the
employer may well have such means. But if the Board
pays the costs ordered against it first, and there is no
subrogation or recourse against the employer under
s.37, the employer will be freed of his liability for
costs as the employee cannot double recover for the
same costs.

(b) There is no mechanism under the ECAO to monitor

whether, in such a situation, the employee may in fact
double recover from both the employer and the Board.
This is because the employee will likely enforce the
costs order against the Board under O.62 before any
steps are taken against the employer. Subsequently, if
the employee claims the entire award (i.e. damages,
interest and costs) from the employer who pays up,
there will be no s.20A application and the Board may
never know that the employee recovered the costs
twice.

(c) Alternatively, the Board may have to handle two

applications from the same employee, one for the
costs order against the Board under O.62, and a
subsequent one for relief payment under s.20A (after
reasonable steps have been taken unsuccessfully to
enforce the judgment against the employer). This
generates additional administrative costs for the
Board. If the Board has to investigate or monitor

28
 whether there is double recovery, that again adds
another layer of administrative costs on the Fund.

(d) This has led the courts to order the employer and the
Board to be jointly and severally liable for the
employee’s costs. In that case, if the Board has paid
the employee’s costs, it could rely on the right of
contribution under the general law to recover 50% of
the costs from the employer: Hussain Kamran v
Khan, Amar [2017] HKCA 167 at §6. But similarly,
if the employer paid the employee’s costs, he could
mount a contribution claim against the Board. This is
wholly contrary to the policy that the Fund is a last
resort, and it is the employer who should ultimately be
responsible for all the costs of the proceedings as the
Board would not have intervened if the action was
properly defended or the employer took out a valid
policy of insurance.

58. These anomalies were raised during the course of the hearing
before the CA in Jiang Zhong and the appeal below, but have not
been addressed by the CA.

C6. Other matters on jurisdiction

59. The CA in Jiang Zhong at §§6.14, 6.18 – 6.19 regarded ss.23(4)

and 29 of the ECAO as provisions against the Board’s position on
the jurisdiction issue.

29
60. Section 29 will be addressed under Section D below.

61. As for s.23(4), it only concerns costs in employees’ compensation

proceedings, and is therefore irrelevant to the jurisdiction issue in
common law claims. To the extent that the CA derived support
from s.23(4) to find that the court had jurisdiction to order costs
against the Board in Joinder Cases, that reasoning must be
erroneous.

62. In any event, s.23(4) of the ECAO plainly contemplates a situation

whereby costs are being apportioned between the Board and the
employee. In other words, it only applies in a situation where costs
have been awarded to, rather than ordered against, the Board. Its
sole effect is to reduce the amount of costs payable by the Board
under s.23(1) of the ECAO. Properly construed, s.23(4) cannot
possibly support the presence of a jurisdiction to order costs
against the Board in Joinder Cases.

C7. Conclusion on jurisdiction

63. It is respectfully submitted that the courts below have erred in

failing to construe s.20B(3) of the ECAO in light of its purpose and
against the entire statutory scheme under the ECAO. The potential
ramifications of a costs order against the Board have been
repeatedly overlooked.

30
64. In the premises, the Board respectfully requests the Court to make
a definitive ruling that the courts do not have jurisdiction to order
costs against the Board in Joinder Cases.

D. DISCRETION

65. If this Court finds against the Board on the jurisdiction issue, then
the Board invites the Court to give clear guidance on how the
discretion as to costs should be exercised.

D1. No “usual order” or “starting point” on costs

66. The need for definitive guidance arises as a result of the conflicting
decisions on whether there is a “usual order” or “starting point” on
costs to be made in Joinder Cases. In particular:

66.1. In Kwan Kam Pui, Bharwaney J opined at §§66-67 that in

Joinder Cases in which the Board contested liability and
quantum, the “usual order” to be made against the Board
where judgment was given in the plaintiff’s favour was that
the Board should pay the entire costs of the action, not just
from the date of the Board’s joinder. And where the Board
had only intervened to dispute quantum, the “usual order”
was that the Board should pay the costs of the proceedings
from the date of its joinder.

66.2. In the 1st instance judgment, DHCJ To held at §45 that these [A/1/44]
two principles on costs are merely a “starting point” in

31
considering the appropriate costs orders, which is to say, the
court should make these usual costs orders unless the Board
can persuade the court that there are special reasons not to.
DHCJ To further stated at §§48-52 that there is an important [A/1/45-49]
difference between disputing liability and disputing
quantum, in that:

(a) Where the Board disputes liability, the Board’s

position is no different from that of the actual
employer. In some circumstances it may also be
necessary for the Board to adopt an adversarial
attitude in the proceedings in order to perform its
functions. In such circumstances, the most
appropriate and fairest approach is to apply the
principle that costs are to follow the event, and the
Board shall pay all costs of the successful employee,
not just from the date of joinder. This is precisely the
“usual order” as referred to by Bharwaney J in Kwan
Kam Pui at §66.

(b) But where the Board disputes quantum only, the

employee is successful even if the Board manages to
prove that the damages claimed by the employee are
excessive. Hence the principle that costs are to follow
the event is not necessarily fair and applicable in any
circumstances. Where the Board adopts an
antagonistic role, the court should apply the “costs
follow the event” principle as the starting point, such

32
 that if the Board loses the case, it should be ordered to
pay the employee’s costs from the date of joinder.
Where the Board only plays a filtering role, the proper
starting point remains that the Board shall pay the
employee’s costs, but the court may, in light of the
attitudes of both parties to the proceedings and the
difference between the amount of damages awarded
by the court and the amount claimed by the employee,
make such costs order as it thinks fit.

66.3. The CA endorsed DHCJ To’s view that the “usual orders” [A/4/71-76]
were merely the “starting point” and were not unalterable
rules. It then repeated the opinion expressed by Cheung JA
in Jiang Zhong at §6.10 that Bharwaney J’s view is not
necessarily appropriate in all circumstances but depends on
the context of the case. It also endorsed DHCJ To’s
approach of considering the litigation conduct of the Board
and giving recognition to the “special position of the Board
as may differentiate it from ordinary litigants.”

67. It seems the CA has in substance agreed with the Board that there
is in fact no “usual order” or “starting point”, the discretion is
unfettered.

68. Nonetheless, the above gives rise to confusion as to what extent

the usual “costs follow the event” principle applies, and if so, the
special circumstances the Board need to show for departure
therefrom. The Board submits there is no usual rule or starting

33
 point and the special role of the Board should be recognized. Even
if the court does have jurisdiction, no costs should be ordered
against the Board unless it has acted unreasonably.

D2. The special position of the Board which differentiates it from

ordinary litigants

69. As a matter of principle, it is difficult to see why the Board ought

to be ordered to pay the plaintiff’s costs simply because the
plaintiff is successful in his claims. At law, judgment can only be
entered against the employer, who is responsible and liable for the
personal injury suffered by the employee. No such responsibility
rests with the Board. Both damages and costs should therefore
only be ordered against the employer.

70. The Board is a statutory body which administers the Fund. The
courts rightly recognise that, in the proper discharge of its statutory
duty to administer the Fund, the Board may have to intervene in
appropriate cases to test or defend the plaintiff’s case: Hussain
Kamran at §6. It is therefore proper for the court to give
recognition to the special position of the Board as may differentiate
it from ordinary litigants.

71. The Board has no personal knowledge of the facts pertaining to the
employee’s claim or the employer’s defence. Sometimes there is
clear evidence of an employer-employee relationship, but
sometimes there is not. If there is a “usual order” or “starting
point” for costs which are against the Board, the Board would be

34
 caught in a real dilemma in deciding whether or not to intervene in
proceedings if it runs a real risk of costs for the entire action or a
part thereof. This undermines the policy of encouraging or
facilitating the Board to take a more active role in filtering
unmeritorious or exaggerated applications as suggested by Cheung
J (as he then was) in Lai Chi Pon at 204E.

72. It is also wrong to consider whether the Board unreasonably failed

to settle with plaintiff or make settlement offers, because the Board
has no power to do so.

D3. Absence of power to settle with plaintiffs in Joinder Cases

73. The Board, as a statutory body constituted under the ECAO, is

authorized to pay under s.20B(1) an amount of relief payment
which “shall be the amount of damages for which the employer is
liable to pay to the eligible person”. There are no provisions in the
ECAO expressly granting the Board power to settle with a plaintiff
on some other amount of damages before the amount of damages
for which the employer is liable is known.

74. In the present case, the Board “settled” with the Plaintiff on the
sum of HK$1,420,000 before trial, and the Plaintiff was ultimately
awarded damages of HK$1,428,547 against the 2nd Defendant. As
the CA recognized, the settlement was not binding on the 2nd
Defendant and the trial had to proceed against him. Having then
obtained an award of damages against the 2nd Defendant which is
higher than the “settlement sum” with the Board, the question is

35
 whether the Board can pay the smaller “settlement sum” instead of
the amount as per the ECAO.

75. Section 8 of the ECAO restricts the payments that can be made by
the Board from the Fund to the four situations set out therein,
which include, under “payments to or on behalf of persons eligible
under Part IV”, an amount of relief payment. Upon making an
application to the Fund for a relief payment under s.20A, an
eligible person is entitled under s.20B(1) to “an amount of relief
payment which shall be the amount of damages for which the
employer is liable to pay to the eligible person”. Such amount of
damages is expressly made subject to s.20A(2) and (3). Section
20A(2) provides that “an employer is not to be regarded as liable
for the payment of an amount of damages unless the amount is
payable pursuant to a judgment or order of a court of competent
jurisdiction in Hong Kong.” Such wording precludes the
possibility of a settlement between the Board and a plaintiff or a
payment from the Fund without a judgment against the employer.

76. There is no mechanism under the ECAO for the Board to pay any
amount of relief payment other than the amount of damages for
which the employer is liable to pay (cf. ss.28, 29 and 30, as
discussed below).

77. The CA held that there is no provision in the ECAO to prohibit an

eligible person such as the Plaintiff from agreeing with the Board
to accept the settlement amount even if it should transpire to be
less than the amount adjudged by the court that the employer is

36
 liable to pay: §41 of the Judgment. However, the CA did not [A/4/78]
consider whether the Board would have authority to pay a
settlement sum which is more than an award: §41 and fn 24 of the [A/4/78]
Judgment.

78. Although the question does not arise strictly on the facts of the
present case, it is a question of undeniable significance as it goes
to the operation of the statutory scheme. If the Board has no
authority to pay a settlement sum in excess of a lower award, a
plaintiff would have no incentive to settle with the Board. Any
settlement would only cap his entitlement to relief payment from
the Board at the agreed sum even if he does better at trial, but does
not bind the Board if he does worse. This makes no sense for the
plaintiff who would be ill-advised to enter into such a settlement
with the Board.

79. There is also the related question whether the “settlement” can bind
other eligible persons. Normally, parties who have settled a claim
will not need to take any further part in the proceedings. However,
the plaintiff must carry on with the action because he needs a
judgment before he is entitled to apply for relief payment. And if
the Board drops out of the proceedings after “settlement”, it may
find itself liable for relief payments to other eligible persons (such
as a spouse or children) if the employee plaintiff obtains a higher
award from the court after the Board has dropped out.

D4. Absence of power to pay relief payment in the absence of a

s.20A application

37
80. The Board has to act within its statutory powers when making
payment of “settlement sums”. It is particularly pertinent in this
regard that an application for relief payment can only be made by
an eligible person under s.20A of the ECAO, and the amount of
relief payment payable by the Board is statutorily prescribed by
s.20B(1).

81. The CA failed to address the Board’s arguments regarding ss.28

and 30 of the ECAO, both of which only apply to employees
compensation claims and not relief payments. In particular:

81.1. Section 28 expressly authorizes the Board to offer to pay to

a person who is or might be entitled to apply for payment
under s.16 “an amount in satisfaction of such entitlement”.
Once the offer has been accepted and the payment received,
that person shall have no right to make an application under
s.16 of the ECAO. But there is no similar provision for
settlement of relief payment or common law claim.

81.2. Section 30 authorizes the Board to make an ex gratia

payment in such amount as it sees fits where it appears to
the Board that a person is unable to establish entitlement
under s.16 (which only applies to compensation claims) by
reason of limitation. Again, there is no similar provision in
respect of relief payment or common law claim.

82. The old s.28 (which used to apply to both compensation and
common law damages cases) was amended in 2002 to confine it to

38
 compensation cases. The 2002 amendments therefore disapplied
s.28 to common law damages claims. Similarly s.30 on ex gratia
payments is also limited to compensation cases.

83. Given the clear wording in s.20A and 20B as the only provisions
governing the payment and amount of relief payment, and in the
absence of express provisions (such as ss.28 and 30 which only
apply to compensation cases) which enable the Board to make
payments “in anticipation of entitlement”, there is no statutory
power for the Board to pay an “agreed relief payment” in either
Joinder Cases or Non-Joinder Cases.

D5. Inapplicability of s.29 of the ECAO to Joinder Cases

84. In Jiang Zhong at §§6.14 - 6.17, 14.3 - 15, the CA held that s.29
supported the existence of the Court’s jurisdiction to order costs
against the Board where it has joined as a party. That section,
which has been enacted since 1991 and has not been amended
since then, provided that Calderbank offers made by the Board “in
any proceedings to which the Board is a party under this Part” (i.e.
Part IV of the ECAO) would be taken into account by the Court
“notwithstanding any other law”.

85. Such other law must be that which prevents the Court from taking
into account of Calderbank offers, such as the then O.62, r.5(d),
which provided that the Court should not take into account a

39
 Calderbank offer if the party making it could have protected his
position as to costs by means of a payment into court under O.22.4

86. Upon proper construction and analysis, prior to the Amendment

Ordinance, the words “in proceedings to which the Board is a party
under this Part” could only be a reference to proceedings under
ss.24 and 25 of Part IV of the ECAO. Section 24 of the ECAO
gave an employee a statutory cause of action against the Board
where he was dissatisfied with a determination of the Board under
s.22 of the ECAO. Section 25, on the other hand, permitted an
injured employee to issue proceedings for compensation or
damages against the Board as if it were the employer where (1) the
employer could not be identified, or was dead or insolvent, or for
any reason could not be served with proceedings and (2) there was
no insurance policy maintained in respect of the employee.5

87. The words “in proceedings to which the Board is a party under
this Part” meant proceedings where the Board was sued as an
original party, i.e. a proper defendant. It could not have referred
to proceedings for compensation or damages commenced by the
injured employee under the Employees’ Compensation Ordinance
(Cap. 282) or under the common law and where the Board later
intervened but not as a party against whom a judgment could be
obtained. Prior to the Amendment Ordinance, the Board could
only have intervened in those proceedings by virtue of O.15, r.6,

4
After the CJR, the means of protecting one’s position as to costs is by a sanctioned offer or
sanctioned payment under O.22.
5
After the 2002 amendments, an injured employee could no longer issue proceedings against
the Board for damages as if it were his employer as all references to “damages” in s.25 of the
1991 Ordinance have been deleted.

40
 since prior to the enactment of s.25A of the ECAO, such
proceedings could not have been proceedings under Part IV of the
ECAO. Bharwaney J was therefore wrong when he held in Kwan
Kam Pui at §39 that “Before 2002, when the [Board] was obliged
to provide full payment for damages, interests, and costs, nobody
could sensibly contend that this provision curtailed the court’s
jurisdiction to award costs against the ECA Fund Board which had
joined in the proceedings pursuant to O 15 r 6.” Section 29 simply
had no application to such situation back then.

88. After the amendment of the ECAO, s.29 continued to apply to

proceedings under ss.24 and 25, albeit s.25 no longer applied in
respect of claims for common law damages. With the enactment
of s.25A, the Board is now expressly enabled to join in as a party
to proceedings for compensation or damages. The question is
whether s.29 now applies to those situations, i.e. whether the
phrase “proceedings to which the Board is a party under this Part”
now includes the situation where the Board intervenes in
proceedings pursuant to s.25A.

89. In Jiang Zhong at §6.17, Cheung JA simply stated that “there is

no indication that it has no application to a post 2002 joinder
situation”. However that does not automatically mean that the
courts have jurisdiction to order costs against the Board under the
new s.25A situation. Section 29 merely puts the employee at risk
of being liable for all the Board’s costs from the date of the offer
if he fails to obtain a better award after trial, but says nothing about
the Board’s liability for the employee’s costs.

41
90. If section 29 is meant to enable settlement offers in Joinder Cases,
there is no conceivable reason why the Amendment Ordinance
which introduced s.28(4) for compensation cases should not apply
to common law claims. In any case, as s.29 has a clear application
in cases under ss.24 and 25 of the ECAO, on the true and proper
construction of that section, it does not support or reinforce the
presence of the courts’ jurisdiction to order costs against the Board
in Joinder Cases.

91. In exercising its discretion on costs, the CA held that the only
matter which gave it some concern was that no written offer was
made by the Board: §39 of the Judgment. As s.29 does not apply [A/4/77]
in Joinder Cases, the Board has no power to make without
prejudice settlement offers. The Board therefore respectfully
invites the Court to rule that the absence of s.29 offers is not a
factor to be taken into account by the courts in the exercise of
discretion on costs against the Board.

E. CONCLUSION

92. The Board respectfully submits the following answers to the

questions in §2 above:

92.1. The Court has no jurisdiction to order costs against the

Board in Joinder Cases; if it does, it should only do so if the
Board has acted unreasonably in departing from its statutory
duties.

42
 92.2. The Board has no power to settle any claim for common law
damages or relief payment.

93. By reason of the aforesaid, the Board respectfully requests the

Court to allow the appeal on the jurisdiction issue with costs to the
Board and with certificate for two counsel.

Dated this 14th day of October 2019.

Audrey Eu SC

Roger Phang

Counsel for the Appellant

43
44
 FACV 6/2019

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL APPEAL NO. 6 OF 2019
(ON APPEAL FROM CACV NO. 271 OF 2019)

BETWEEN

WO CHUN WAH Plaintiff

(Respondent)
and

CHAU KWEI YIN 1st Defendant

(Discontinued)

CHOW YAT KUEN 2nd Defendant

EMPLOYEES COMPENSATION 3rd Defendant

ASSISTANCE FUND BOARD (Appellant)

_________________________________

THE APPELLANT’S CASE

_________________________________

Dated the 14th day of October 2019.

Filed the 14th day of October 2019.

P.C. Woo & Co.

Solicitors for the 3rd Defendant (Appellant)
Room 1225, Prince’s Building
10 Chater Road
Central, Hong Kong
Tel: 2533 7709 Fax: 2525 5737
Ref No. 120295:RMC:SYU:scs

45