CHECKSON METAL AND DIE-CASTING FACTORY LTD v. PERFECT WORLD CO LTD AND OTHERS

1995 No. PI 642

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

PERSONAL INJURIES

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J U D G M E N T

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1. Leung Sin Fai is now an unemployed, and virtually unemployable 59 year old former press worker. In November or thereabouts of 1986, he commenced employment with Checkson (the employers). The circumstances and conditions of that employment are more easily recognised as belonging to the 19th century rather than the end of the 20th. They need to be described.

2. The employers occupied an area on the 4th floor of the Kwai Shun Industrial Building in Kwai Chung. Their factory was in Unit C and housed at least 4, possibly 5, die-casting machines. There was also a grinding machine. There was no room for storage and certainly no room for the factory workers to sit out and rest or take their break in a satisfactory environment.

3. The working atmosphere was extremely hot with minimal heat-extraction and no effective cooling equipment. It was obviously enervating and fatiguing. His work involved transporting metal bars for heating and smelting, casting dies, and repairing and maintaining machines. The hours of work were from 8.30 a.m. to 8.30 p.m. with an hour break between 1.00 and 2.00 p.m. for a meal and rest. The last two hours of the working day were compulsory overtime. For this long, arduous, exhausting day he was paid the princely sum of $130. He worked 7 days a week. Additionally, everyday travelling to and from work took up 5 hours. This was almost slave labour in a sweat shop.

4. So much for the terms and conditions. What of the facilities to make this humanly tolerable? There were other industrial concerns occupying units on the same floor. Across the corridor opposite the employers was a furniture production unit where items were painted and varnished. The corridor was often cluttered with card board packaging and cans and drums, whose contents had been used or substantially so. Sometimes workers used to lie on the card board to rest. At one end was a canteen where Mr. Leung usually spent a part of his lunch hour. The canteen was open for general use and was not a facility provided by the employers. After using the canteen he would try and get some rest. Opposite the canteen was an area formerly used as a lady's toilet. It was in a state of disrepair with its facilities disrupted. There was no lighting or electricity supply. Its attraction was that it was quieter, darker and certainly cooler than any other area used for a similar purpose. Mr. Leung's evidence was that Mr. Yu, one of the directors of the employers and therefore one of his bosses, sometimes had his lunch in the canteen and Mr. Leung pointed it out to him as a place he used to rest. It was convenient for the employers to know where he was during this period, and that he was near to the factory premises, because he was expected to be on call to deal with any mechanical break down.

5. Other workers on that floor used the disused toilet, the outside steps of the building itself, or, as I stated earlier, the passage way or corridor between the units, although it is difficult to envisage anyone being able to sleep for a few minutes, before returning to work, in such a passage way.

6. There was clearly no designated rest area to provide a proper relaxation and recovery between the two halves of the 12 hours shift. The lack of concern on the part of the employers manifested itself in the indifference to the risks run by the employees in this high risk industry. No protective equipment of any kind such as boots, spats or goggles was provided. Mr. Leung provided his own gloves. Mr. Wong, one of the directors of the employers, said that hard-hats and goggles were provided but this was not put to Mr. Leung, whose evidence I accept as extremely reliable, because clearly Mr. Ng was unaware of it. The point did not feature in Mr. Wong's statement. I reject his evidence.

7. On 6th of February 1988, Mr. Leung followed his usual daily procedures. The lunch break came and after a time in the canteen he went for the rest in the toilet. The corridor that runs between the main passage way, separating the two sections of units, and the toilet entrance, was substantially narrowed by cans, drums and other items on either side. As usual there was no lighting within the toilet. Inside the toilet he became aware of a pungent smell and decided to leave. To check the time by his watch in the gloom, he flicked on his lighter. There was a great ball of flame and he was badly burned. The explosion closed the door to the room but a workman kicked the door in and released him.

8. The expert investigations subsequently carried out and the opinions obtained showed that the explosion was probably caused by thinners or some such inflammable substance being emptied into the toilet bowl. Two other explanations were discounted, one being the ignition of combustible vapour from the various cans or drums left in the outside corridor.

9. A number of proceedings resulted from the injuries sustained by Mr. Leung. He took proceedings under the Employees Compensation Ordinance Cap.282 against his employers. All he needed to establish was that he suffered personal injuries by accident arising out of and in the course of the employment. He did so and an award of compensation was made. The findings of the Learned District Court Judge now Mrs. Justice Verina Bokhary, are "res judicata" as between the parties. Although the management company of the building and other interested concerns who became involved in other litigation arising out of this incident were not parties to the ECO proceedings, in my view, the decision that Mr. Leung was injured in the course of his employment cannot be challenged by them. In any event, such a point is irrelevant to the considerations in the other proceedings which are ones of tortious and/or contractual liability; the management company adopts such a finding as part of its case against the employers.

10. The claim of Mr. Leung for damages for negligence and/or breach of duty of care has been settled by the management company which was the 1st Defendant in HCA No.642 brought by Mr. Leung. In that action the management company has brought third party proceedings against the employers. The 2nd, 3rd, 4th and 5th Defendants have dropped out of that action leaving only the issue between the management company and the employers as to indemnity or contribution.

11. Two other actions were brought by the employers seeking indemnity and/or contribution from the other Defendants in the Action 980/91 and against the 5th Defendant in Action 10290/94. Those two actions were sensibly consolidated and the 5th Defendant has disappeared from the litigation.

12. The multiplicity of actions was unnecessary and complicating. However, the last minute sensible agreements between the parties left only the one issue for me to try, namely the extent to which if at all the employers should bear liability in tort for Mr. Leung's claim for damages i.e. the issue raised by the third party proceedings by the management company in No.642 of 1995 and No.980 of 1991. The only difference between the two indemnity proceedings is that in the main Action 642 of 1995, the management company seeks indemnity or contribution in respect of the payment of damages to be made to Mr. Leung in due course, whereas in the employer's action, indemnity or contribution is sought only in respect of the sum paid to Mr. Leung in the ECO proceedings and the costs involved.

13. At the commencement of this trial counsel representing the two parties concerned in that issue were agreed that that was the only issue to be tried subject to the question of whether the employer was entitled to any contribution from the management committee in the event of the employer being found liable to some extent for the injuries to Mr. Leung.

14. At the end of the trial Mr. Alan Ng on behalf of the employers raised a procedural issue in effect contending that the third party proceedings by the management company were a nullity since the notice dated 2nd September 1997 had not been sealed by the court. This was discovered either by him or his instructing solicitors after the evidence had concluded. On 10th of September 1997, 5 days before trial I had allowed the management company's appeal against the master's decision dismissing the summons for third party directions. The background of this was that the management company had issued contribution notices against the other Defendants but had overlooked issuing a third party notice against the employers. It was clear to me that although the management company had belatedly taken third party proceedings it did not prejudice the employers in any way - the issues were clear cut and not likely to be affected by allowing these proceedings to stand. The employers could properly be compensated by an appropriate order for costs and so I made an order accordingly giving directions to bring the proceedings into line with the existing proceedings with an order for costs in favour of the employers.

15. Mr. Ng argues that the defect in not sealing the notice cannot be cured under Ord.2 r.1 and relies upon the decision of Sears J. in Keen Lloyd Ltd. v. Sam Lee Lightering and Transport Co. Ltd. [1995] 2 HKC p.350. I agree that the notice should have been sealed by the court. It is a third party notice. In Action 642 of 1995 the third party notice initiated the proceedings against the employers. Ord.2 r.1 provides that

"where in beginning or purporting to begin any proceedings .... There has by reason of anything done or left undone been a failure to comply with the requirements of these rules whether in respect of ... manner (or) form ... the failure shall be treated as an irregularity and shall not nullify the proceedings, any step taken in the proceedings or any document .... or order therein"

16. By sub-rule (2) the court may;

"exercise its powers under these rules to allow such amendments (if any) to be made and to make such order (if any) dealing with the proceedings generally as it thinks fit"

17. The distinction between non compliance with procedural rules which renders proceedings a nullity and non compliance which merely renders proceedings irregular was abolished by the present rule.

18. Although the notice was undoubtedly filed - for the court record shows such on 2nd September 1997 - the absence of sealing was the fault essentially of the Registry though the solicitor filing the document should have ensured that it was properly sealed.

19. This was not a failure of a fundamental kind. The court has the power to cure irregularities of the nature disclosed, in this case, right at the end of the trial. If I were to set aside the third party proceedings, renewed proceedings would result in a waste of money. In any event, the management company as a Defendant to the Action 980/91 could apply to amend their defence to add a counterclaim and/or set off so as to plead contribution or indemnity in respect of any payment it may be called upon to make to Mr. Leung, and simple justice would demand that it be allowed to do so. This is perhaps what it should have done in the first instance.

20. Finally I have to bear in mind that all the parties got together to simplify this group of unwieldy actions and provide for a court a straightforward agreed basis for a decision. I do not know, nor should I know, all the considerations and implications of the various agreements. It is sufficient to say that had the management company known of the defect and/or potential point to be taken by the employers, it would have dealt with this in the overall context of what was agreed. I take the view that the justice of case demands my exercising that discretion under Ord.2 r.1. The notice has in fact now being sealed.

21. Having resolved this issue I can now proceed to deal with the principal issue. Were the employers' negligent and/or in breach of their duty of care to any extent so as to be required to contribute to the damages the management company is to pay to Mr. Leung - and is the employer correspondingly entitled to a contribution or indemnity from the management company in respect of the payment of compensation made to Mr. Leung?

22. That the employers were neglectful of their employee's safety and comfort within the factory premises itself is in my view beyond question. I have already reviewed this aspect. Where the Plaintiff sustained his injuries was not part of the employers' actual premises or under their control. They knew however he went there. Their servants or agents pointed out the disused toilet as somewhere where he could rest. They acquiesced in his use of it. It was convenient for them to have him there nearby and on call. They knew of the nature and condition of the premises. They ought to have known that there was an obvious risk of some mishap befalling him in that room - no lighting, used for storage, generally run down. They had a duty of care towards him in his use of that room even though it was part of the premises over which the management company had control. In the absence of lighting it was foreseeable that someone using those premises might use a match for illumination or simply to light a cigarette.

23. In short, the employers should not have allowed him to use such premises. They should have taken steps to isolate the room and warn him not to use it. It was palpably unsafe. If lighting had been provided it is arguable that no match would have been struck - there would then have been no explosion.

24. However, what caused the hidden danger in this case, was the depositing of the inflammable liquid, unknown to the victim, the employers and the management company. Was that fact too remote from the reasonable contemplation of the employers and therefore outside their liability?

25. Mr. Yu Man Chau, one of the directors of the employers, was unable to give evidence in this trial since he was on the mainland but the management company through their counsel Mr. Chan wanted to rely on parts of his written statement and I admitted those in evidence. The effect of that, particularly paras.8-11, is that he was aware that the disused female toilet used to be padlocked, had been or was used as a store facility, and that Mr. Leung had used it on one occasion.

26. The statement of another director of the employers, Mr. Tsang Hon-chuen, was adduced in evidence by agreement. He did not become a director of the employers until shortly before the accident but played no part in the direction or control of the business until late 1989 at the earliest - he was involved in other business on the mainland. He had previously been employed by the Evergo Group at the same premises until approximately March 1987. During that period of employment he became aware of a fire having broken out in one of the toilets, probably on the 1st floor, thinners having been poured into the toilet bowl and ignited by a cigarette. He was also responsible for setting up a dangerous goods warehouse on the 3rd floor by converting a lady's toilet, subsequent to this fire. Other kinds of goods were stored on the 4th floor. I do not consider that his knowledge of those circumstances can be imputed to his later employers -

27. What was the cause of the Plaintiff's accident? The ignition of the thinners vapour was the obvious cause. Did the employers cause the presence of inflammable material or did they know or ought they to have known of its presence or the risk of it being present? If they did then they are liable because that would clearly put them in breach of their duty of care. It is clearly foreseeable that if such substances were present there was a risk of ignition. My review of the evidence earlier indicates that, lacking in their exercise of their duty of care toward their employee as I find the employers were, they certainly did not cause or permit the substance to be introduced into the bowl of the lavatory nor did they know nor ought they to have known that there was a risk of it being present. I have considered the classic decisions in Re-Polemis, The Wagon Mound (1) and The Wagon Mound (2).

28. The accident with the damage to the Plaintiff consequent upon it was caused by another person independent of the employers. This was the cause of the explosion and consequent damage. It was in my view a "novus actus", a fresh independent cause. Of course if the employer "ought reasonably to have anticipated such interventions and to have foreseen that, if they occurred the result would be that his negligence would lead to mishap" (per Hamilton L.J. in Latham v. Johnson & Nephew [1913] 1 KB at p.413). Put in another way the test is what the reasonable man would actually foresee, if he thought about it, as the consequences of his negligence or omission. I am quite satisfied that the reasonable man would not have had in his contemplation that another party would deposit such substances. The position is however wholly different as far as the management company is concerned and that has been accepted on their behalf. Consequently, there is no need for me to set out the position as far as the company is concerned.

29. It follows therefore that the management company's third party claim fails and that the employers, Checkson, are entitled to judgment against the 1st Defendants, Perfect World Company Ltd. with costs to be taxed if not agreed.

30. Checkson also had their own action against Perfect World claiming indemnity in respect of the payment they made to the Plaintiff in the ECO proceedings. Section 25(1)(b) of the Employees Compensation Ordinance provides for the employer, who has paid compensation, to recover from a tortfeasor, the sum which he has been obliged to pay to the employee. Accordingly the employers Checkson are entitled to judgment in their action for the sums paid to the plaintiff as compensation and his costs, and their own costs in defending their action, those figures being itemised in paras.21-24 of their Statement of Claim. The figure paid by way of compensation to the Plaintiff, Mr. Leung, is however to be reduced by 20% to reflect the concession which the 1st Defendant the management company was fortunate enough to obtain from the Plaintiff (Section 27). (See the decision of the Hong Kong Court of Appeal in the case of Wong Man Yip v. Wah Kong Construction Material [1994] 2HKC p.214) Cory v. France [1911] 1 KB p.114 has no applicability to these issues.

31. Therefore there will be judgment in the proceedings brought by the employers against the management company for 80% of the compensation paid to Mr. Leung, for the costs paid by the employers to Mr. Leung's solicitors and for the costs incurred by the employers in defending Mr. Leung's action, as set out in paras.21-24 of Statement of Claim together with interest on those sums at the prevailing rate, as set out in para.26 of the Statement of Claim, together with their costs of this action to be taxed if not agreed.