GO YU LIONG v. BONNTILE INDUSTRIES (H.K.) LTD.

HCPI 114/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 114 OF 1997

____________

______________

J U D G M E N T

______________

1. On 2 March 1994, Mr Go Yu Liong, a painter employed by Bonntile Industries (HK) Ltd, fell from a ledge of a building on the Phase 1 Construction Site of the Tsz Man Estate Redevelopment, and suffered fractures to his right lower limb. His claim has very sensibly been settled without prejudice to the issues pursued by the remaining parties to this litigation.

2. He fell from at least 15 feet. There was no scaffolding to enable him to work safely at that height. Although he was issued with and wore a safety belt, it was pointless because there were no anchorage points. He had been doing this painting work at this level for about 10 days. There had been no scaffolding in position for the whole of that period. Although painting work had been carried out at the higher level, he was unable to say whether there had been any scaffolding on site for that work because it had been finished before he arrived on site to do his designated work.

3. His employer was the sub-contractor for China State, the principal contractor on this site. The written contract provides for payment to Bonntile of a little over $542,000 for the work. The payment is calculated by reference to a measurement of an area of almost 13,000 square metres of paintwork.

4. The terms of the contract include that the subcontract work was to be carried out in accordance with the instructions and arrangement of the main contractor's foreman on site. The progress of the work had to be in accordance with the main contractor's instructions.

5. Clause 13 provides for the main contractor taking out insurance for the sub-contractor's employees, limited to work being carried out on the construction site. Any accident on site had to be notified by the sub-contractor to the main contractor within 24 hours for the purpose of notifying their insurers.

6. Clause 14 required the sub-contractor to provide safety equipment such as standard safety helmet and safety belt etc. Bonntile therefore was contractually bound to supply safety equipment to its employees, and liable if injury resulted to any employees through failure in that regard, or any penalty was imposed by any authority. Bonntile's representative was to liaise with China State's safety officer and carry out his oral and written instructions in that regard. If Bonntile failed to carry out its obligation then China State had the right to effect such safety requirements and deduct the cost of so doing from the contract sum to be paid in full. For these present purposes I do not need to consider the rest of this clause. The meaning of equipment is quite clear. Two examples are given. The Plaintiff in fact wore the safety belt issued to him. It was useless as safety equipment because there were no anchorage points. There is no evidence of any complaint by the principal contractor against the sub-contractor. No safety officer or foreman gave evidence on behalf of the main contractor (China State). In fact no evidence was called on behalf of the main contractor.

7. I now turn to clause 23 headed "Memorandum" - sub-clause (d) is relevant. "Party B [Bonntile] has the right to access to all temporary facilities installed by Party A [China State] without paying fee e.g. using scaffolding ...... etc. ....................[China State] may separately charge for addition of any extra temporary facilities in response to the need for the sake of the trade so as to facilitate its work." Implicit in this sub-clause, or as a matter of unarguable inference, is that China State is supplying the scaffolding for the use of Bonntile. The second part of the sub-clause is concerned, it is to be noted, with "extra temporary facilities in response to the need ... so as to facilitate its work." It is not concerned with the extension of facilities outside the period of the contract.

8. Miss Lisa-Jane Cruden, for China State, has argued that the facilities referred to in clause 14 of the sub-contractor under "Safety Regulation" includes the provision of scaffolding. I regret I am unable to accept such an argument. In my view, as earlier indicated, this clause relates to safety equipment. Scaffolding is not to be interpreted as within the ambit of safety equipment although clearly its provision has a safety element. But that is not its purpose. In any event I am satisfied that such a construction is inconsistent with clause 23 which specifically refers to scaffolding being installed by the main contractor [China State].

9. Miss Cruden extends her argument by contending that the "extra temporary facilities" in the same sub-clause means additional scaffolding for the sub-contractor's benefit, and that therefore the duty of assuring the safe means of access, safe place of work, etc. devolved upon it. I do not think that can be correct. Such a contract would provide specifically for an extension of scaffolding supply if that was what was envisaged. In any event as main contractor, China State had the duty of supply and maintenance of adequate and proper scaffolding under the Regulations. It was found to be in breach of that duty and convicted accordingly. The evidence of the Plaintiff which I accept, made it clear that there was no scaffolding for his use. It had all gone, if it had ever been there for the use of the sub-contractor. There is, as I have indicated earlier, no evidence that the sub-contractor had sought an extension of scaffolding facilities, or that it was carrying out its work without arranging for the supply of scaffolding facilities, or doing anything in that regard in breach of the terms of the sub-contract.

10. I have come inevitably to the conclusion that the main contractor was in breach not simply of its statutory duty under the Regulations, but in breach of its duty under the sub-contract. It failed to supply the necessary scaffolding which it was obliged to do. The Plaintiff suffered his injury as a direct result of that. There was of course no contributory negligence on his part and there is no argument to that effect.

11. At this stage therefore I can deal with the question of liability in negligence and breach of statutory duty for the Plaintiff's injuries as between the employer [Bonntile] and the main site contractor [China State].

12. The failure of the main contractor to provide scaffolding for the sub-contractor's employees was negligent as well as in breach of its statutory duty (under Regulation 38B) of the Construction Site (Safety) Regulations and of course in breach of its contractual duty. It was causative of the Plaintiff's fall and injury. To what extent if any is the sub-contractor in breach of his duty of care towards his employee as employer? He has a non-delegable duty of care to provide a safe place and safe system of work. The Plaintiff said that he had been working for about ten days on the site under the instruction of his foreman. In simple terms the employer was fixed with the knowledge that the scaffolding was not in place in accordance with the contract. There was therefore no safe place of work. Bonntile therefore continued to require the Plaintiff to carry out his painting work in those circumstances. This was in my view unarguably negligent. The greater liability rests however upon the main contractor in charge of the site with the contractual and statutory duty to provide safe and sufficient scaffolding. The proportions are one-third upon Bonntile and two-thirds upon China State.

The reporting of the accident

13. The site was controlled by China State. The contract with Bonntile provided for the work to be carried out "in accordance with the instructions and arrangement of China State's foreman in the construction site." Bonntile as sub-contractor was to "discuss with the site foreman in case any queries or difficulties arise."

14. China State had a statutory duty to employ a full-time safety officer on site by regulation 14(1) of the Factories and Industrial Undertakings (Safety Officers and Safety Supervisors) Regulations. Amongst his duties under regulation 15 were the inspection of the site to determine whether any of the work carried out was of such a nature as to be liable to cause risk of bodily injury to any person employed there, and the investigation and reporting of any accident resulting in bodily injury to any person employed there.

15. It is inconceivable in my view that either the foreman on site or the safety officer or both were unaware of the Plaintiff's accident on the day of its occurrence.

16. No safety officer of China State gave evidence in this case although it is clear from the papers that the Deputy Safety Manager had been traced and interviewed because there is a statement from him in the trial bundle. However I have not considered his statement because no evidence was adduced.

17. At the trial in the District Court of the claim brought by the Plaintiff under the Employee's Compensation Ordinance, China State did not admit that it was the main contractor or that Bonntile was a sub-contractor. It admitted that the Plaintiff suffered an injury but not that it arose out of or in the course of that employment.

18. The learned Judge had little difficulty it seems, from the tenor of his judgment, in finding against China State on all those points. The point on notice under section 14 was also taken by China State. Before the learned Judge the Plaintiff had given evidence to the effect that "a person in charge of the site was present" and called the ambulance. He did not know the identity of that person. He did in fact know the identity of his own foreman i.e. Bonntile's, so it was clearly some other person and must have been the main contractor's officer. This state of affairs clearly constituted knowledge on the part of China State through their servant or agent as the learned Judge held. His findings have not been appealed. They are "res judicata".

19. At a late stage in the proceedings before me a letter was produced on behalf of Bonntile which is dated 7 April 1997. It was written by Messrs T S Tong & Co. who have a strange role in this case having at some stage acted for China State as well as AGF, and then continuing to act for AGF when a conflict arose from the position under the insurance policy.

20. Writing to the former solicitors for Bonntile they said:

"China State's safety officer was only notified of the alleged accident by Bonntile a few months after its occurrence."

This does not fit in with the contention by China State that the only notice they had was in written form in October 1995. As indicated earlier there has been no evidence from China State and the inference drawn by the learned Judge in the District Court accords with that drawn by me in these proceedings. There was notice on the occasion of the accident. Accordingly I find that Bonntile was not in breach of the term of the contract. China State had such notice. In any event, the notice that the safety officer allegedly received "a few months after the occurrence", the full extent of which it has not been possible to examine, was notice to be imputed to him on the day by reason of his statutory obligations set out earlier.

21. Bonntile is in my judgment entitled to succeed in its claim against China State to the extent of a contribution of two thirds of the damages and costs paid to the Plaintiff, and its costs of these Third Party proceedings.

The claim against AGF

22. China State took out an Employee's Compensation Policy with AGF. It was in force at the time of the accident. The insured is described in the following terms.

"China State Construction Engineering Corporation as main contractor and/or any sub-contractors may be appointed from time to time but excluding employees of nominated sub-contractors and specialist contractors."

It has been argued that Bonntile falls outside that description of "any sub-contractors" but within the excluded group. Bonntile was not a nominated sub-contractor nor was it a specialist contractor. It is clear in my judgment that it was a "sub-contractor [as] may be appointed from time to time".

23. The policy covered liability at law and not simply liability under the Employee's Compensation Ordinance. That is specifically provided for. No issue arises on this.

24. It also specifically covers "employees in the employ of sub-contractors performing work for the insured".

25. Bonntile seeks a declaration that it is entitled to the benefit of this policy by reason of it being within the class of sub-contractors specified.

26. The type of policy is loosely described in the trade as a "Contractors Risk's Policy". Such insurance cover is often taken out pursuant to provisions in the main contract with the employer (in this case the Hong Kong Housing Authority). A sub-contractor, in this case Bonntile, is entitled to take proceedings against the insurer concerned to clarify its rights under the policy. As far as the enforcement of those rights is concerned, it will need to be a party with China State against AGF for the purpose of obtaining the indemnity under the Policy.

27. It has been argued that Bonntile would in any event be excluded from indemnity and therefore should not have any declaration, because, so AGF contend, it was in breach of the term of the sub-contract by not notifying China State within 24 hours of the accident. I have already made my finding on this point so there is no validity in this argument. Secondly, in relation to that, the policy itself, although there is no evidence that Bonntile received any copy of it with the sub-contract, the requirement by AGF (condition 5) is that "the insured shall as soon as possible give notice thereof to the company with full particulars". Whether China State in fact did this is a matter yet to be determined though not by me and not in these proceedings.

28. Mr Timothy Kwok for AGF also relies upon condition 4 as excluding liability to indemnify any of the parties to the insurance cover. The wording is:

"The Insured shall take all reasonable steps

a) to prevent accidents .....

b) to comply with statutory obligations."

I am not able to deal with the position in respect of China State as I have indicated. It is not within the ambit of these proceedings. However in principle, negligence of the insured is no bar to recovery under the policy since this is more often than not precisely what an insured wishes to insure himself against, and what insurance companies recognise as the risk on which the premium is based and insurance cover provided. Courts look at the terminology of such conditions with great care so that they are not construed in such a way as to make a nonsense of the insurance risk and policy.

29. In Woolfall v. Rimmer [1942] 1 Q.B. p.66 the English Court of Appeal (Greene, M.R., Goddard L.J. and Du Parcq L.J.) considered what was meant by "reasonable steps" in this standard condition. It drew the distinction between construing words in a contract between underwriters and assured, and construing words in a contract between employer and employed. Lord Goddard put the words on an analogous footing with the concept of conducting business in a reckless manner. This approach subsequently found favour with a number of appellate decisions including Fraser v. B.N. Furman (Productions) Ltd and Others [1967] 1 W.L.R. p.898. Diplock LJ at p.906 said:

"What, in my judgment, is reasonable as between the insured and the insurer, without being repugnant to the commercial purpose of the contract, is that the insured, where he does recognise a danger, should not deliberately court it by taking measures which he himself knows are inadequate to avert it. In other words, it is not enough that the employer's omission to take any particular precautions to avoid accidents should be negligent; it must be at least reckless, that is to say, made with actual recognition by the insured himself that a danger exists, and not caring whether or not it is averted. The purpose of the condition is to ensure that the insured will not, because he is covered against loss by the policy, refrain from taking precautions which he knows ought to be taken."

As far as Bonntile (as sub-contractor insured within the terms of the policy) is concerned, they took reasonable steps within the construction of the words as between underwriter and assured. It was a term of the sub-contract with China State that the latter would provide the scaffolding; Bonntile had to comply with all the safety requirements of the main contractor. There is no evidence that they did not do so. The work was also being carried out under the supervision of the main contractor. The main contractor was in breach of its statutory duty. Although the sub-contractor was negligent in respect of its duty of care towards its employee this is not to be equated with the requisite reckless disregard for the purposes of condition 4. I therefore find that insofar as condition 4 applied to the sub-contractor it was not in breach of it.

30. AGF also rely upon condition 6 of the policy which relates to any payment made by or on behalf of the insured without written consent on the part of AGF. I am surprised that AGF should seek to take what is a bad point. The interim payment made by Bonntile to its employee was in accordance with its obligations under the Employee's Compensation Ordinance (section 10). Even if Bonntile had notice of this condition, which it did not, it could not relate to the payments made.

31. As to the alleged breach under condition 10 and the provision for referral to arbitration, Bonntile had no knowledge of these terms and is not bound by them. The sub-contract does not include a copy of the policy nor does it identify any of the specific terms. There is no substance in AGF's argument.

32. The issues between China State and AGF relating to indemnity under the policy have by agreement been referred to or will be referred to arbitration. That seems to be an unfortunate and uneconomic course to follow in the light of these proceedings which have not been stayed to abide any arbitration decision. My judgment is, in some respects, given in a vacuum.

33. If China State were to succeed against AGF then Bonntile will have the benefit of an indemnity under the policy. If China State fails then there is no policy cover for Bonntile. Bonntile cannot obtain indemnity under the policy, even though I have held that it has breached no express or implied terms, because one of the principal parties to the insurance contract has failed to obtain indemnity. However Bonntile will be entitled in the event of China State's failure against AGF, to obtain an indemnity from China State because the latter will have been in breach of its contractual obligation to obtain effective insurance indemnity for the sub-contractor.

34. The foregoing means that there is a limitation on the form of declaration that can be granted to Bonntile and some words will have to be inserted into the content of it. It will be as follows:

"A Declaration that the Plaintiff (Bonntile Industries (H.K.) Ltd) was insured by the Defendant (Assurances Generales de France (HK) Ltd) and that, in the event of China State Construction Engineering Corporation, being adjudged or held or agreed to be entitled to be indemnified by the Defendant under the same policy, against all sums due, judgments given and costs incurred or paid in respect thereof, the Plaintiff (Bonntile Industries (H.K.) Ltd) shall be similarly entitled to be indemnified by the Defendant (Assurances Generales de France (HK) Ltd) in each and every identical respect including interest upon any sums paid."

The Plaintiff shall also have its costs of this action to be taxed if not agreed.