Introduction

In our December 2018 issue, we explained the potential costs consequences where the plaintiff acted unreasonably in his personal injury claims despite the fact that compensation awarded by the Court has beaten the sanctioned payment offered by the defendant. In this issue, we focus on a recent judgment in Tsui Sui Fong v Megabox Development Co Ltd  [2018] HKCFI 2863 (“Megabox Development”), where the Court clearly explained the costs implication in the event that the damages awarded in a personal injury action is less than the amount obtained by the plaintiff as employee’s compensation.

Case background

Megabox Development concerned a personal injury action where the defendants were held liable for the damages in the amount of HK$323,665.2. However, and as suggested by the plaintiff in her statement of claim, she had already received an amount of HK$504,095.63 as employee’s compensation and was therefore not entitled to any damages under the personal injury action. On such basis, the defendants contented that the plaintiff should be ordered to pay all the defendants’ costs on an indemnity basis while it is the plaintiff’s position that the defendants should be liable to pay all the legal costs as the plaintiff succeeded in the personal injury action.

Court’s ruling

The defendants in Megabox Development relied on, among other things, the judgements in Ho Wan Yung v AS Watson & Co Ltd. [2010] HKEC 855 ( “Ho Wan Yung”) and Lam Yan Foo v Pun Wai Hong Another [1999] HKEC 1456 ( “Lam Yan Foo”) in support of their position that the Court should order the plaintiff to pay all the defendants’ costs on an indemnity basis..

Ho Wan Yung concerned a personal injury action where the plaintiff was a former employee of the defendant and the defendant was held liable to pay the plaintiff damages in the amount of HKD268,486.5. Similar to Megabox Development, the plaintiff had separately obtained employee compensation in the amount of HKD366,510.39, which exceeded the amount of damages awarded in the personal injury action. On such basis, the Court held that the personal injury action must be dismissed and that the plaintiff shall pay the defendant’s costs of the action despite the Court’s findings in favour of the plaintiff on the issue of liability. Similarly in Lam Yan Foo, the Court imposed costs order against the plaintiff even though the defendant was held liable in the personal injury action on the basis that the employee compensation separately received by the plaintiff exceeded the amount of damages awarded thereunder.

In rejecting the defendants’ submission that the plaintiff should be ordered to pay all the defendants’ cost on an indemnity basis, the Court distinguished Megabox Development from Ho Wan Yung on the basis that in Megabox Development, the defendants were not the employer of the plaintiff.

Under section 25(1)(a) of the Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong) (“ECO”), it is provided that where the injury in respect of which compensation is payable was caused in circumstances creating a legal liability in some person other than the employer to pay damages to the employee, the employee may both claim compensation under ECO and take proceedings against the third party in the Court of First Instance. Accordingly, the Court held that the plaintiff in Megabox Development was entitled to proceed with a separate personal injury action even if she had already initiated her claim under ECO.

Further, the Court in Megabox Development refused to follow the ruling in Lam Yan Foo and held that the mere fact that the employee compensation received by the plaintiff exceeds the amount of damages awarded in a personal injury action does not inevitably suggest that the personal injury action is unnecessary. Instead, a separate personal injury action would enable the defendants to clarify their liability respectively owed to the plaintiff.

Based on the above findings, the Court rejected the defendants’ submission that the plaintiff should be ordered to pay all the defendants’ cost on an indemnity basis on the basis that she had received employee compensation which exceeded the amount of damages granted in the personal injury action.

Conclusion

Megabox Development serves as a good reminder to the claimants under ECO for their entitlement to initiate a separate personal injury action against the third party (who is not the employer of the claimant). At the same time, the third party defendants in the personal injury actions should not readily assume that the plaintiffs will be sanctioned by costs order as long as they had already received employee compensation which exceeds the amount of damages awarded under the personal injury actions.

With that being said, the plaintiffs in the personal injury actions should always bear in mind the importance to make timely acceptance of reasonable sanctioned payment made by the defendants. While the plaintiff in Megabox Development was not ordered to pay all the defendants’ costs on an indemnity basis, she was ordered to pay the defendants’ costs on indemnity basis after the latest date on which she could have received the defendants’ sanctioned payment without leave on the basis that she had unreasonably refused to accept such sanctioned payment made by the defendants.

For enquiries, please contact our Insurance & Personal Injury Department:

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.