Employees Compensation – Court of Final Appeal Held ECAF Board Authorised to Settle Potential Relief Payment Claims Before Claimant Secures Judgment
Wo Chun Wah v Employees Compensation Assistance Fund Board
Reference:  HKCFA 48; (2019) 22 HKCFAR 495
Court: Court of Final Appeal
Before: Chief Justice Ma, Mr Justice Ribeiro PJ, Mr Justice Fok PJ, Mr Justice Stock NPJ and Madam Justice McLachlin NPJ
Date of judgment: 20 December 2019
Appearance: Patrick Szeto with Raymond Leung SC (Respondent / Wo Chun Wah)
In this case, the Court of Final Appeal has:
(I) affirmed the general understanding that Section 20B(3) of the Employees Compensation Assistance Ordinance 365 (the “Ordinance”) does not deprive the court of its jurisdiction to order costs against the Employees Compensation Assistance Fund Board (the “Board”) in relation to proceedings in which it has been joined as a party;
(II) indicated that the “starting point” for costs, when the Board had joined as party and had “properly carried out its filtering or monitoring functions”, should be no order as to costs between the Board and the claimant; and
(III) made significant breakthrough and decided that Section 29 of the Ordinance authorises the Board 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” without having to condition upon the claimant having secured a judgment from court.
Mr. Wo Chun Wah, the Respondent, was injured at work and claimed against his employer for, inter alia, common law damages. Since Mr. Wo’s employer had no insurance cover, the Board obtained leave to join as the 3rd Defendant in the proceedings. At the commencement of trial, Mr. Wo and the Board agreed to settle his potential claim under the Ordinance for HK$1.42 million.
After trial, Mr. Wo was awarded a net amount of common law damages of HK$1,428,547. The Court of First Instance ordered the employer to pay Mr. Wo’s costs but refused his application for costs against the Board as from the date of its joinder in the action and ordered that there should be no order as to costs as between Mr. Wo and the Board.
Two matters were argued before the Court of Final Appeal. The first issue was:
Whether, upon proper construction of the provisions of the Ordinance, 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 Ordinance, and if so, whether there is a “usual order” or “starting point” on costs to be made or ordered in such cases where the Board (i) disputes liability and quantum, and (ii) disputes quantum only.
Essentially, the Court of Final Appeal decided that the effect of Section 20B(3) of the Ordinance is only to “prescribe the amount of the relief payment claimable, stating that it shall be the amount of damages which the employer is liable to pay, reduced by any ECO compensation paid or payable and by any amount of the damages already paid”. Section 20B(3) is concerned with “circumscribing the quantum of the relief payment. It specifies that the relief payment is not to include any sum of interest or costs awarded to the employee against the employer. It does not address or seek to limit the court’s power to order costs against the Board.”
Plainly therefore, Section 20B(3) does not and cannot take away the court’s jurisdiction to order costs under, inter alia, Section 52A of the High Court Ordinance, Cap. 4.
The jurisdiction of the court to make order for costs is also reflected in Section 29 of the Ordinance which reads “29(1) Notwithstanding any other law where, in proceedings to which the Board is a party under this Part, the Board makes a written offer to any other party in the proceedings which is expressed to be ‘without prejudice save as to costs’ and which relates to an issue in the proceedings, then in deciding the question of costs the court shall take into account any such offer which has been brought to its attention.” [emphasis added] 
On how discretion of cost is to be exercised, the Court of Final Appeal had taken a departure from Kwan Kam Pui v Fung Man  6 HKC 361, the previous leading authority on point. The Court of Final Appeal, whilst recognizing the financial structure and the statutory role of the Board, now asserts that so long as upon joining as party, the Board had properly carried out its filtering or monitoring function and had not been “unreasonable or misconceived or unjustifiably antagonistic, unnecessarily prolonging its intervention, or otherwise untoward”, the starting point is to award no order as to costs between the Board and the claimant. The Court of Final Appeal, however, has also made clear that the discretion of the court on costs is unfettered and factors as those referred to in Order 62 Rule 5(2) and whether there was any Section 29 offer shall always be relevant.
Particularly on the statutory role of the Board, it is worth setting out the following observation by the trial judge which the Court of Final Appeal has cited with approval at §45:
“In participating in the proceedings, the Board’s function is neither to contest the employee’s claim in place of the employer nor to help save public funds, but is to ensure that employees in need can obtain such damages as they are entitled to. The Board has a duty to screen out unmeritorious or inappropriate claims to ensure (inter alia) that this assistance mechanism will not be abused, its recipients will not exaggerate their claims, and public funds will not be used for improper purposes. Therefore, unless it is necessary to contest false claims or suspected fraudulent claims, the Board should not adopt an antagonistic attitude in the proceedings. It should act as a filter and adopt an impartial attitude in the proceedings so as to assist the court in coming to a correct ruling.”
The second issue for the Court of Final Appeal’s adjudication was:
Whether, in view of the fact that a plaintiff is entitled under s.20B(l) of the Ordinance 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;
(b) Whether the Board has power under the Ordinance to pay the agreed relief payment to the plaintiff in the absence of an application under s.20A of the ECAO;
(c) If not, what is the legal effect of such settlement between the plaintiff and the Board?
Central to the analysis of the Court of Final Appeal are (a) the general principle that settlement is a new and separate contract, and, (b) the proper interpretation of Section 29 of the Ordinance.
As Section 29 of the Ordinance authorizes the Board to make offers for settlement, the Court of Final Appeal considered that there must be a corresponding right on the other side to accept such offers. On this basis, the Court of Final Appeal decided that Section 8 of the Ordinance (which for present purpose reads as “… the Board may pay from the Fund … any sums … permitted to be paid … under this Ordinance”) together with Section 29 and Section 4 (on general functions of the Board) give the Board express power to settle.
On the proper amount for settlement, the Court of Final Appeal highlighted the power of the Board to make all necessary enquiries under Sections 25B(7) and (8) of the Ordinance and the general principle that settlement is a separate contract and concluded that the settlement amount agreed to by the claimant and the Board is contractually binding and not affected by the level of any subsequent judgment obtained against the employer.
Significantly, the analysis of the Court of Final Appeal now makes it clear that settlement between the Board and the claimant is not conditional upon the claimant securing a judgment. To this, the Court of Final Appeal remarked that “ Indeed, one would hope that a wasteful pursuit of the presumptively impecunious employer after settlement with the Board would be avoided … 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 the Board.”
Accordingly, practitioners acting for the Board and those acting for claimant shall adopt a more focused, proactive and flexible approach to explore for possibilities of settlement in appropriate cases particularly when liability is not contested.
This case commentary was authored by Patrick Szeto and Ted Chan.
 §§70 and 73