Employees Compensation Assistance Fund Board v Wo Chun Wah

CourtCourt of Final Appeal (Hong Kong)
Judgement NumberFACV6/2019
Subject MatterFinal Appeal (Civil)

FACV No. 6 of 2019

[2019] HKCFA 48







WO CHUN WAH Plaintiff
CHAU KWEI YIN 1st Defendant
CHOW YAT KUEN 2nd Defendant


Before: Chief Justice Ma, Mr Justice Ribeiro PJ, Mr Justice Fok PJ, Mr Justice Stock NPJ and Madam Justice McLachlin NPJ
Date of Hearing: 26 November 2019
Date of Judgment: 20 December 2019




Chief Justice Ma:

1. I agree with the judgment of Mr Justice Ribeiro PJ.

Mr Justice Ribeiro PJ:

2. This appeal is brought by the Employees Compensation Assistance Fund Board (“the Board”) raising two questions which are of great practical importance to its operations. The first is whether the courts have jurisdiction to make costs orders against the Board in certain proceedings to which it is a party. The second is whether the Board is empowered to enter into binding settlements regarding claims or potential claims for payments out of the Fund which it administers.

A. The Board and the Fund

3. The Board was established in 1991 by the Employees Compensation Assistance Ordinance (“ECAO”)[1] to provide relief for employees and other eligible persons who are entitled to compensation under the Employees’ Compensation Ordinance[2] (“ECO”) or to common law damages in respect of employment-related injuries, but who are unable to make recovery against the employer or any insurer.

4. Payments to those eligible for relief are made out of a Fund established under the ECAO[3] which the Board holds upon trust to administer in accordance with the objects of the Ordinance.[4] The ECO[5] makes it compulsory for employers to take out insurance policies for indemnity against liability to their employees for injury or death by accident arising out of and in the course of their employment. Upon payment of each premium, a statutory levy is imposed[6] and more than half of the levies collected are distributed to the Board[7] for application pursuant to the ECAO.[8] The resources of the Fund derive largely from such insurance levies.

5. An employee who is injured at work may bring proceedings against the employer for compensation under the ECO or for damages at common law, or commonly, for both. The Board has a statutory contingent liability which is likely to become actual in cases where the employer has no substantial means and no insurance cover, whether or not the claim is contested. Upon becoming aware of such a case, the Board may wish to take steps to protect the interests of the Fund. This appeal examines what the Board can properly do to that end and what consequences may follow from the steps which it takes. In particular, where the Board decides to intervene in the proceedings between employee and employer, for instance, to ensure that the claim is not collusive or extravagant and is properly defended, the issue arises as to what the costs consequences of such intervention may be. Or if the Board thinks that seeking an early settlement of a potential claim against the Fund is in its best interests, the question arises as to whether the law permits it to contract a binding settlement. Answers to these questions are matters of statutory construction, as we shall see.

B. The present claim and the decisions below

6. 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 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.

7. That left the plaintiff’s claims, which included one for over $4.7 million damages, against the 2nd defendant who had no insurance cover and who acted in person throughout. In these circumstances, the Board 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.

8. The plaintiff obtained judgment against the 2nd defendant for $602,380 before Deputy District Judge Chow[9] 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 the Board agreed to settle his potential claim under the ECAO for $1.42 million.[10] The 2nd defendant was not party to this settlement and the trial proceeded against him before Deputy High Court Judge To, resulting in an award of damages in the sum of $2,110,927. Deducting the sums of $80,000 received from the 1st defendant and the ECO award of $602,380, the net amount of damages due to the plaintiff from the 2nd defendant was $1,428,547, which was marginally more than the settlement amount agreed with the Board. The Judge ordered the 2nd defendant to pay the plaintiff’s costs but refused the plaintiff’s application for costs against the Board 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 Board.[11]

9. The plaintiff sought and obtained leave from the Court of Appeal to appeal against the direction of no order as to costs. He sought to contend that the Judge should have adopted the approach in Kwan Kam Pui v Fung Man,[12] where Bharwaney J suggested certain “usual orders” that ought to be made against the Board in cases where it had intervened in proceedings which resulted in awards in favour of the plaintiff.[13] By a respondent’s notice, the Board sought to uphold the Judge’s order on the additional ground that the court lacked jurisdiction to make any costs orders against it. The plaintiff’s appeal was dismissed on the ground that there was a wide discretion as to costs and that there was no basis for interfering with the order made.

10. Regarding the challenge to jurisdiction, in Jiang Zhong v Yeung Chun Leung,[14] the Court of Appeal had held that the court does have jurisdiction to make costs orders against the Board where it is joined as a party. Although the Court of Appeal in the present case[15] said that it was unnecessary to determine the issue of jurisdiction, having dismissed the plaintiff’s appeal on the merits, it nevertheless endorsed the decision in Jiang Zhong, rejecting the Board’s submission that that decision was either obiter or plainly wrong.

11. Relying on section 29 of the ECAO,[16] the Court of Appeal also held that it was open to the Board to enter into a settlement agreement in relation to any issue in the proceedings, rejecting the Board’s submission to the contrary.[17]

12. The Board was unsuccessful before the Court of Appeal in its application for leave to appeal to this Court.[18] Leave was, however, granted by the Appeal Committee,[19] confined to the following questions of law:

Question 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 only (See [Court of Appeal] Judgment §§14, 20, 32 and 34).

Question 2

Whether, in view of the fact that a plaintiff is entitled under s.20B(l) 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 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 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 [Court of Appeal] Judgment and §25 of the judgment of trial judge dated 23 June 2017).

(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?

C. Question 1

C.1 Jurisdiction and ECAO section 20B(3)

13. ECAO section 20B(3) states:

“Notwithstanding the definitions of ‘compensation’ and ‘damages’, [20] 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.”

14. Ms Audrey Eu SC,[21] relies on this provision for the submission that, by excluding any costs from being part of...

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