WONG CHUN KUEN v. WONG TIN LAM AND OTHERS

HCPI 163/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO.163 OF 2002

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J U D G M E N T

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1. This judgment deals only with the Third Party proceedings between the 2^nd defendant in the main action, Dah Chong Hong (Engineering) Ltd (“Dah Chong Hong”) and the Third Party, Sun Yu Chau Engineering Co. Ltd (“Sun Yu Chau”), who was also the 4^th defendant in the main action.

2. The plaintiff’s claim in the main action against all the defendants has already been disposed of when the plaintiff accepted the payment of $600,000 into court made by the 2^nd, 3^rd and 4^th defendants at some time prior to the hearing of the Third Party proceeding.

Background

3. The plaintiff was injured on 6 March 1999 whilst working on a construction site known as Metro-City, Phase II at Tseung Kwan O, Lot 27 (“the Site”) where a commercial and residential development was being constructed.

4. In that development project at the Site, the principal contractor of the Site was Heng Tat Construction Co. Ltd (“Heng Tat”), originally the 3^rd defendant in the main action.  E-Man Construction Co. Ltd, (“E-Man”) was a sub-contractor of Heng Tat.  E-Man in turn sub-contracted the supply and installation of mechanical ventilation and air conditioning works (“the MVAC Works”) to Dah Chong Hong.  Part of the MVAC Works was then sub-sub-contracted by Dah Chong Hong to Sun Yu Chau.  Sun Yu Chau further sub-sub-sub-contracted same to Cheung Chi Keung trading as Aprils (“Aprils”).  Aprils was named as the 5^th defendant in the claim brought by the plaintiff.

5. The plaintiff was employed as a glazier by another sub-contractor of Heng Tat.

6. At the time of the accident, the plaintiff was walking past the second floor of the building under construction at the Site when a metal U-bar was thrown down from a light well by the side of the staircase near where the plaintiff was walking and hit the plaintiff on his left knee causing him to fall down thereby sustaining injuries.

7. That metal U-bar which hit the plaintiff was thrown down the light well from the third floor by one Wong Tin Lam, an employee of Aprils.  Wong Tin Lam was originally named as the 1^st defendant in the main claim brought by the plaintiff.

8. As already indicated above, the plaintiff’s claim against all the defendants was settled when the plaintiff accepted the total sum of $600,000 paid into court by the 2^nd, 3^rd and 4^th defendants.  Each of those three defendants had contributed $200,000 to make up the total amount paid into court and which was accepted by the plaintiff in full and final settlement of the plaintiff’s claim against all the defendants.

9. Apart from the amount paid into court by these three defendants, the same three defendants have also had to contribute a sum of $156,000 each to cover the plaintiff’s costs of the action brought by the plaintiff.

Third Party claim

10. Third Party proceeding were instituted by Dah Chong Hong against Sun Yu Chau to recover the $200,000 being Dah Chong Hong’s share of the payment into court in respect of the plaintiff’s claim as well as its share of the costs in the sum of $156,000 paid to the plaintiff.  There is also a further claim by Dah Chong Hong for the solicitor’s fees incurred in defending the plaintiff’s claim.

11. The basis of the Third Party claim by Dah Chong Hong against Sun Yu Chau is twofolds, firstly, Dah Chong Hong relies on a contractual indemnity given by Sun Yu Chau and which is expressly contained in Clause 3(b)(iii), Clause 6 and Clause 10(a) of the written Sub-contract between them.  Secondly, Dah Chong Hong relies on sections 3 and 4 of the Civil Liability (Contribution) Ordinance, Cap.377 claiming for an indemnity or contribution.

12. The relevant clauses of the Sub Contract between Dah Chong Hong and Sun Yu Chau relied on by Dah Chong Hong in its Third Party claim against Sun Yu Chau state as follows :

(a)      Clause 3(b)(iii) which provides as follows :

“[Sun Yu Chau] shall : –

(b)  indemnify and save harmless [Dah Chong Hong] against and from :–

…

(iii)  any claim, damages, loss or expense due to or resulting from any negligence or breach of duty on the part of  [Sun Yu Chau], his servants or agents (including any wrongful use by him or them of the Scaffolding or other property belonging to or provided by the Employer and/or [Dah Chong Hong]”

(b)     Clause 6 which provides as follows :

[Sun Yu Chau] shall be solely liable for and shall indemnify [Dah Chong Hong] against any expenses, charges, damages, costs liability, losses, claims actions, suits, and/or proceedings whatsoever arising under any statute at Common Law in respect of : –

(a)  personal injury to or the death of any person whomsoever; and

(b)  any injury or damage whatsoever to any property real or personal of any person(s) whomsoever arising out of or caused by the negligence omission or default of [Sun Yu Chau] or his employee(s), servant(s) or agent(s) in the course of the carrying out or execution of the said works.”

(c)     Clause 10 (a) which provides as follows :

“[Sun Yu Chau] shall indemnify [Dah Chong Hong] against every liability which [Dah Chong Hong] may incur to any other person whatsoever and against all claims, demands, proceedings, damages, costs and expenses in particular any such claims, demands, proceedings, damages, costs and expenses under and in connection with the main contract made against or incurred by [Dah Chong Hong] by reason of such breach by [Sun Yu Chau] of this Agreement.”

Defence and Counterclaim of Third Party

13. Firstly, Sun Yu Chau denies any negligence on its part causing the accident to the plaintiff.

14. Secondly, Sun Yu Chau alleges that there has been misrepresentation by Dah Chong Hong to it in that a Mr Cheng Kwan Hung of Dah Chong Hong told Leung Shung Lai of Sun Yu Chau that there was no need for Sun Yu Chau to obtain any insurance coverage apart from employees compensation insurance since the main contractor had obtained Third Party insurance coverage covering all the sub contractors engaged in the Site.  Relying on such representation, Sun Yu Chau only obtained employee’s compensation insurance but it now transpires that the All Risk Policy obtained by Heng Tat does not cover Sun Yu Chau.

15. In the circumstances and relying on the misrepresentation alleged, Sun Yu Chau says that Dah Chong Hong cannot rely on those clauses in the Sub-contract between them to claim any indemnity from Sun Yu Chau.

16. Moreover, Sun Yu Chau counterclaims against Dah Chong Hong also on the basis of the alleged misrepresentation for $200,000 being Sun Yu Chau’s share of the settlement amount in respect of the plaintiff’s claim as well as $156,000 being its share of the costs recovered by the plaintiff in the main action.  Sun Yu Chau also claims for the costs in defending the plaintiff’s action.

Abandonment of the defence of misrepresentation by Sun Yu Chau

17. However, after the completion of the evidence at the trial, counsel for Sun Yu Chau informed the court that Sun Yu Chau no longer pursued or relied on the misrepresentation originally pleaded by Sun Yu Chau.

18. The abandonment of the defence of misrepresentation came about because there was clear evidence that an Employees’ Compensation Insurance Policy had been taken out by Heng Tat as the Main Contractor with The Ming An Insurance Co. (H.K.) Ltd (“Ming An”) and that Insurance Policy was signed on 22 July 1996 with the Policy No.PEAH-96-00370-1 (“the EC Policy”).  A copy of that Insurance Policy was produced in evidence.

19. In the Schedule to the EC Policy “the Insured” was defined as :

“Heng Tat Construction Co. Ltd as Main Contractor &/or all its Sub-contractors (Excl. Nominated & Specialist Contractors’ Employees &/or their sub-contractors’ employees) Evercot Enterprise Co. Ltd &/or Shung King Development Co. Ltd &/or Millap Ltd &/or Egeria Investment Ltd &/or Join Fortune Development Ltd as Principal”

20. Endorsement W204 to the EC Policy states as follows :

“It is hereby understood and agreed that the indemnity herein granted is extended to indemnify the Insured against liability at law (including liability under the legislation set out in the Schedule) to employees in the employ of sub-contractors performing work for the Insured while engaged in the business in respect of which this Policy is granted.

It is further understood and agreed that exceptions (a) of this Policy is deleted.

Subject otherwise to the terms of this Policy.”

21. Exception (a) referred to in and deleted by the above Endorsement W204 to the EC Policy is as follows :

“The Company (i.e. Ming An) shall not be liable in respect of :

(a)  the Insured’s liability to employees of contractors to the Insured.”

22. By Endorsement W348A to the EC Policy the original witnessing clause of the EC Policy was deemed to be deleted and replaced so that the witnessing clause which applied read as follows:

“Now this Policy witnesseth that if any employee in the immediate service of any other parties jointly described as the Insured shall sustain bodily injury by accident or disease caused during the Period of Insurance and arising out of and in the course of his employment by the Insured in connection with the contract as described in the Schedule

THE COMPANY WILL subject to the Jurisdiction Clause and the other terms exceptions and conditions contained herein or endorsed hereon (all of which are hereinafter collectively referred to as the Terms of this Policy) indemnify the Insured against liability at law (including liability under the Legislation set out in the Schedule) to pay compensation and claimant’s costs and expenses in respect of such injury and will in addition pay all costs and expenses incurred with its written consent.”

23. It being common ground between the parties that neither E-Man, Dah Chong Hong nor Sun Yu Chau were “Nominated & Specialist Contractors” and therefore not excluded by the definition of “the Insured” from coming within it under the EC Policy, the EC Policy clearly covered Sun Yu Chau in the present case.

24. There is also unchallenged evidence that Heng Tat had also taken out a Contractors’ “All Risk” Policy with Tugu Insurance Co. Ltd bearing Policy No. NO39932/97/TUGU (“the CAR Policy”) in which the “Insured” was defined as :

“Contractors:    Heng Tat Construction Co. Ltd as Main Contractor and /or all its Sub-contractors and /or Nominated Sub-contractors.

Employer:  Evercot Enterprise Co. Ltd and /or Shung King Development Co. Ltd and/or Millap Ltd and/or Egeria Investment Ltd and /or Join Fortune Development Ltd.”

25. The CAR Policy did cover Sun Yu Chau by its definition of ‘Insured’, however, under “Exceptions to Section II” of the CAR Policy taken out by Heng Tat (and by reason of the deletion and substitution of Clause 4.6.1 under Memorandum B of the CAR Policy), the effective and operative Clause 4.6.1 of the CAR Policy states as follows :

“This Company (i.e. Tugu Insurance Company Ltd) shall not indemnify the Insured in respect of :–

4.6.1  liability in respect of death, bodily injury, illness or disease suffered by :–

(1)   any person employed by any insured party i.e. Principal Contractor, Sub-contractors, Sub-sub-contractors for the purpose of execution of the Insured contract or any parts thereof, and

(2)   any person to whom part or parts of the Insured contract have been sub-contracted including but not limited to self-employed Sub-contractors.”

26. Quite clearly therefore, although there was the CAR Risk Policy taken out by Heng Tat, the CAR Policy had no application to the present case where the plaintiff was an employee of another sub-sub-contractor of Heng Tat.

27. Based on the above, and the fact that Heng Tat had in fact taken out both the EC Policy and the CAR Policy both of which did cover Sun Yu Chau, the defence of misrepresentation was abandoned by counsel for Sun Yu Chau during the course of the hearing.

The remaining defence of Sun Yu Chau

28. Having abandoned the pleaded defence of misrepresentation, and having accepted that there was in place the EC Policy taken out by Heng Tat which covered Sun Yu Chau, the focus then shifted to the question that since there was the EC Policy relating to the plaintiff’s claim in this matter, why had cover been refused by the insurers, namely the Ming An Insurance (HK) Ltd (“Ming An”), in favour of Sun Yu Chau for this claim?

29. Counsel for Sun Yu Chau suggested that on the evidence before the court, the refusal of the insurers to cover the plaintiff’s claim herein was due to late notification to the insurers of the accident, and therefore a breach by Dah Chong Hong of the EC Policy which entitled Ming An to repudiate liability in respect of the EC Policy in so far as it related to the plaintiff’s claim herein.

30. Counsel for Sun Yu Chau further submitted that in relying upon this breach by Dah Chong Hong of the late notification of the accident, he relied on what he called “a rule of construction”, namely, that a party cannot take advantage of its own wrong as against the other party, which being a point of law would not need any amendments to the pleadings, in particular the Defence in order for Sun Yu Chau to rely on the point by way of defence.

The evidence

31. Quite obviously, the major part of the evidence adduced at the hearing by both parties relate to the misrepresentation originally pleaded by Sun Yu Chau but which, for present purpose, is now redundant since the misrepresentation defence has now been abandoned.

32. In the circumstances, I do not propose to repeat the evidence which relates only to the misrepresentation point.

33. The evidence which has bearing on the late notification to the insurers of the accident now sought to be relied on by Sun Yu Chau is, not surprisingly, patchy and incomplete, no doubt because the case was not even prepared on that footing.

34. The factual evidence relating to the “late notification” point are mainly documentary and are as follows :

(a)      By letter dated 9 November 2000 from Deacons, the solicitors for Heng Tat on instructions from Ming An, to Heng Tat, with the captioned subject in that letter referring to the ECC claim by the plaintiff in respect of this accident, Deacons informed Heng Tat that there will be further common law proceedings in relation to the accident to the plaintiff which should be covered by the CAR Policy and reminded Heng Tat to report this matter to their CAR insurers.

(b)     A pre-action letter dated 16 January 2002, from Yip & Partners, the solicitors for the plaintiff, to Dah Chong Hong informing Dah Chong Hong of the common law claim about to be taken out by the plaintiff and asking for a reply within 14 days as to whether Dah Chong Hong (inter alia) would accept liability for the accident or whether it would seek to put the blame on some third party.

(c)     A letter dated 18 January 2002 from Heng Tat to Alexander Forbes (the insurance brokers) informing of the receipt by Heng Tat of the pre-action letter from Yip & Partners addressed to Dah Chong Hong (in (b) above), enclosing a copy thereof and asking for same to be forwarded to the CAR and EC insurers for their consideration and action.

(d)     A letter dated 7 February 2002 from Deacons to Alexander Forbes which refers to a faxed message dated 21 January 2002 and a telephone conversation on 6 February between Miss Kwan (of Deacons) and Mr Cheng (of Alexander Forbes) and stating as follows :

“Please note that our client’s policy does not cover Dah Chong Hong (Engineering) Ltd (‘Dah Chong Hong’). Regarding the pre-writ letter dated 16 January 2002 from the Claimant’s solicitors, please note that the time for Dah Chong Hong to issue a constructive reply shall expire on 15 February 2002.”

(e)      A faxed message dated 8 February 2002 to Deacons and copied to Ms Carman Ying of Ming An and Ms Christina Ching of Heng Tat from Alexander Forbes which reads :

“Re: Intended Common Law Proceedings

Insured:    Heng Tat Construction Co. Ltd

Accident to Wong Chun Kuen on 3.3.99

Policy No. PEAH-96-00370-1

We refer to your letter February 7, 2002.

We do not agree with you that Dah Chong Hong (Engineering) Ltd is not covered under the captioned policy.  However, if Dah Chong Hong (Engineering) Ltd appoints its own solicitors for that proceedings, it will reserve its right to claim all the additional costs incurred against your client.”

(f)      A letter dated 8 February 2002 from Heng Tat to Alexander Forbes referring to the accident to the plaintiff and sending a copy of a letter from Yip & Partners to Dah Chong Hong dated 5 February 2002 for submission to the insurers.  In the letter Heng Tat further asks to be advised if the insurers will take over conduct of the proceedings on behalf of Dah Chong Hong, and if no favourable reply is received before 18 February 2002, Dah Chong Hong will instruct their solicitors to take over the case at the cost of the insurers.

(g)     A letter dated 21 February 2002 from T.S. Tong & Co., solicitors acting for Tugu Insurance Co. Ltd, (being the insurers of the CAR Policy) to Heng Tat with reference to the accident to the plaintiff, stating that under Exception 4.6.1 of the CAR Policy, Tugu was not on risk in respect of any claim arising from the accident to the plaintiff since the plaintiff was a worker employed by one of the sub-contractors.  The letter further states that the accident was not reported to Tugu until about 10 November 2000 therefore Heng Tat was in breach of General Conditions Nos.5.3, 5.8.1, 5.8.4, 5.8.6 and 5.8.7 of the CAR Policy which entitles Tugu to repudiate their liability to indemnify under the CAR Policy and this letter serves as notification to Heng Tat of its repudiation thereof without prejudice to Tugu’s reliance under Exception 4.6.1.

Decision

35. On the above evidence it was submitted by Sun Yu Chau that firstly, it was obvious (relying on the letter from Heng Tat to Alexander Forbes dated 8 February 2002) that Ming An was only notified of the claim on 8 February 2002 which is a breach of Clause 5 of the EC Policy.

36. It was also submitted by Sun Yu Chau that Ming An, because of such late notification, has repudiated its liability under the EC Policy to indemnify Sun Yu Chau in respect of the plaintiff’s claim arising from the accident.

37. I am unable to accept either submission of Sun Yu Chau on the facts.

38. Firstly, the letter from Heng Tat to Alexander Forbes dated 8 February merely asked Alexander Forbes to forward the letter from Yip & Partners to Dah Chong Hong dated 5 February 2002 to the insurers and to ask if the insurers will take over conduct of the proceedings on behalf of Dah Chong Hong.

39. That cannot be read to mean it being the first notification of the accident to the plaintiff given to the insurers, nor can I infer form the contents of the letter that to be the case.

40. There is in evidence a statutory Form II pursuant to the Employee’s Compensation Ordinance, Cap.282 (Notice by an employer of an accident to an employee) filled out by Heng Tat and dated 16 March 1999 relating to this accident to the plaintiff and in which Form II the insurer was filled out as “The Ming An Insurance Co. (HK) Ltd” and the Policy number filled out as “PEAH-96-00370-1”.

41. Although there is no direct evidence that the Form II was sent to Ming An, equally there is no evidence that it was not sent to Ming An at or around the date that the Form II was made out.  In normal circumstances I would be surprised if that was not done.

42. Moreover, the letter from Deacons to Heng Tat dated 8 November 2000 makes no mention of the fact that there has been late notification of the accident to Ming An when Deacons was acting in the ECC claim on the instructions of Ming An.

43. As for the second point submitted by Sun Yu Chau that Ming An had repudiated its liability to indemnify under the EC Policy, there is nothing in all the correspondence put in evidence to show that Ming An had “repudiated” the EC Policy.

44. All that was said in Deacons’ letter of 7 February 2002 was that their client’s policy did not cover Dah Chong Hong.  Nowhere did Ming An ever “repudiate” the EC Policy.

45. It is Sun Yu Chau who alleges that there was late notification of the accident by Dah Chong Hong or by Heng Tat to Ming An, resulting in breach of Clause 5 of the EC Policy and resulting in Ming An “repudiating” its obligation under the EC Policy.

46. It is therefore for Sun Yu Chau to adduce evidence to prove that on a balance of probabilities in this case.  This Sun Yu Chau has failed to do on the facts.

47. The defence of late notification advanced by Sun Yu Chau must therefore fail on the facts.

48. Neither can the late notification to Tugu of the accident as stated in the letter from T.S. Tong & Co. dated 21 February 2002 to Heng Tat avail Sun Yu Chau, since the late notification there was notification to Tugu and not Ming An.  Even then, it should be noted that the notification to Tugu was stated to be around 10 November 2000.  Very likely that notification came about as a result of Deacons’ letter dated 8 November 2000 to Heng Tat advising it to notify the insurers of the CAR Policy if they had not already done so.

49. In this respect, I accept Dennis Tung’s evidence that prior to receiving Deacons’ letter dated 8 November 2000, they had always been under the impression that the CAR Policy only covered situations where the person injured was not an employee of any of the sub-contractors on site which explains the late notification to Tugu.  That evidence, however, does not mean that there was also late notification of the accident to Ming An.

50. Furthermore, I accept the submission of Miss Cruden who appeared for Dah Chong Hong that on the basis of the applicable witnessing clause in the EC Policy (as deleted and replaced by Endorsement W384A which has already been stated above in this Judgment) and applying the decision of the Court of Final Appeal in the case of B+B Construction Co. Ltd v. Sun Alliance and London Insurance Plc [2001] 3 HKC 127 as to the proper interpretation to be applied to the operative words in the applicable witnessing clause in the EC Policy, it is clear that the scope of the indemnity in the EC Policy does not cover the liability of Sun Yu Chau in negligence to the plaintiff since, by its wording, the scope of liability covered would be liability for employee’s compensation.  In that respect the liability for employee’s compensation would only cover such compensation which the plaintiff could claim from his immediate employer, in this case it would be Hing Ngai Engineering Company, another sub-contractor of Heng Tat at the site, but who was not even a party to this action.

51. I accept that submission of Miss Cruden as being the reason why the EC Policy did not cover the liability of Sun Yu Chau to the plaintiff in this present action which was based on negligence on the part of (inter alia) Sun Yu Chau.

52. For the above reasons, Dah Chong Hong will be entitled to judgment on its Third Party claim against Sun Yu Chau upon the clauses of the Sub-contract between them and that the counterclaim by Sun Yu Chau must be dismissed as well.

53. Accordingly, there will be judgment for Dah Chong Hong on the Third Party proceedings against Sun Yu Chau for the sums of $200,000 being Dah Chong Hong’s contribution to the plaintiff’s settlement sum, $156,000 being Dah Chong Hong’s contribution to the plaintiff’s costs of the plaintiff’s action, and $313,491 being the amount of the legal fees which Dah Chong Hong had to pay in its own lawyers to deal with the plaintiff’s claim in this matter, altogether totalling $669,491.

54. Interests on this judgment amount will be awarded in the following manner :

(a)     on the sum of $200,000 there will be interests at 5% p.a. from 22 March 2004 (being the date of acceptance of the payment into court by the plaintiff) to judgment and thereafter at judgment rate;

(b)     on the sum of $156,000 there will be interests at 5% p.a. from the actual date of payment by Dah Chong Hong of the sum of $156,000 to judgment and thereafter at judgment rate;

(c)     on the sum of $313,491 there will be interests at 5% p.a. from the actual date of payment by Dah Chong Hong of that sum to judgment and thereafter at judgment rate.

55. Costs of the Third Party proceedings be paid by Sun Yu Chau to Dah Chong Hong to be taxed if not agreed on High Court scale.

56. The Counterclaim of Sun Yu Chau is dismissed with costs to be taxed if not agreed.