Legal update: Adverse Costs Consequences in Discrimination Claims

The recent decision of Chan Wai Ho v Civil Service Bureau shows an increasing and important trend in the court’s approach to ordering costs against unsuccessful parties in discrimination cases.

Facts of the Case

The above case of Chan Wai Ho v Civil Service Bureau concerned a claim for substantial discrimination compensation on the grounds he had been less favorably treated by reason of a disability. Mr. Chan suffered from asthma.

This arose following Chan’s dismissal from the Civil Service. Chan was ordered to retire from his position as Assistant Clerical Officer based on his sickness record and his performance ratings of “bad” and “poor”.

The Court dismissed his claims and took the view that they had very little or no merit as:-

1. Part of his claim centred upon a policy relating to medical certificates and a refusal to accept certificates from private clinics. The Court ruled this policy was not discriminatory as it applied to all employees.
2. The Court’s role was not to handle interpersonal disputes about the employee’s appraisal or work performance but was to decide whether there had been discrimination.
3. Having regard to the above it was clear there was no discrimination based upon Mr. Chan’s asthma and that his termination was based upon his employer’s view of his performance under the applicable policies and appraisals.

The Rule on Costs

The ordinary rule in litigation cases is that the “costs follow the event” and the successful party receives an order for all or part of their reasonable costs, as assessed by the Court.

This does not apply to discrimination proceedings such as those under the Sex or Disability Discrimination Ordinances. As a matter of public policy the legislation provides a different starting point whereby both parties only pay their own costs (whether they win or lose) so that genuine claimants in discrimination claims are not discouraged. This includes claims based on harassment or less favourable treatment, both direct and indirect, which constitute discrimination and which are based on race, nationality, disability, illness, pregnancy, marital status or family status.

However under Sections 73B-E of the District Court Ordinance, the Court may still order the the unsuccessful party to pay the other side’s legal costs if the proceedings were brought maliciously or frivolously or there are special circumstances which warrant an award of costs.

Court’s Approach to Chan’s Claim

Given its finding in relation to the merits of Mr. Chan’s case, the Court decided that the claim was indeed frivolous and Mr. Chan was ordered to pay the legal costs of the Civil Service Bureau. Making adverse cost orders in cases such as these is clearly a mechanism by which the Court can deter and discourage abuse of the statutory costs regime referred to above, and in particular by employees seeking to use unmeritorious discrimination claims to apply unwarranted pressure to employers or former employers.

Recent Trend

The above decision was preceded by the First Instance decision on costs in Sit Kar Yin, Priscilla v The Equal Opportunites Commission and Others on 27 October 2010 and was followed by the Court of Appeal’s decision in that same case on 4 November 2011. In both of those decisions the Court also considered the claim to be frivolous and ordered costs against the claimant.

The Court gave useful guidance in stating that frivolous claims include ones where “objectively considered it is plainly without foundation and is bound to fail… or is on the face of it so manifestly misconceived that it can have no prospect of success”.

The approach in the three decisions mentioned above contrasts with the approach taken by Deputy High Court Judge Muttrie in the previous case of L v Equal Opportunities Commission 23 June 2003. In that case the Judge declined to make an order for costs against the claimant employee notwithstanding his findings and the apparent lack of merit in the claimant’s position.

To some extent this change of approach may be a result of the civil justice reforms and the change of emphasis by the Courts in aiming to produce more fair and balanced cost orders.

Conclusion

In our view these recent cases are a helpful and useful development in the law of Discrimination and provide protection to employers from claims which may be malicious, frivolous or lacking in any merit.

Whilst public policy tries not to discourage genuine claimants in pursuing their rights in these developing areas, these decisions act as a warning to claimants that they do not have a “free shot” in bringing discrimination claims and risk cost consequences if they bring claims which are frivolous and lacking in any real merit.

If you have any questions please contact our Employment partners Russell Bennett or Kim Boreham.

Kim Boreham
Partner | Email

Russell Bennett
Partner | Email

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.