PAQUITO LIMA BUTON v. RAINBOW JOY SHIPPING LTD INC

DCEC 1032/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEE COMPENSATION CASE NO. 1032 OF 2005

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JUDGMENT

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1.  This is an application by the Defendant for a stay of this proceedings and the claims of the Applicant be referred to arbitration pursuant to the Arbitration Ordinance.

Background

2.  The Applicant was employed by the Respondent as a Second Engineer on board its vessel “Rainbow Joy”.  The Applicant had an accident on board the vessel on 3 September 2003 and has since lost total vision in his right eye.

3.  The Applicant commenced arbitration before National Labour Relations Commission in Philippines (“Applicant’s Arbitration Proceedings in Philippines”) on 5 November 2003 and an admiralty action against the Respondent in Singapore (“Admiralty Action in Singapore”) on 30 December 2003.

4.  The Arbitration Proceedings in Philippines was dismissed without prejudice on 15 January 2004 upon application by the Applicant to withdraw his claim.  The Admiralty Action in Singapore was stayed upon the application by the Respondent and the appeal was also dismissed on 27 April 2004.  On 29 August 2005, the Applicant took out the present proceedings in Hong Kong whilst the Respondent commenced arbitration in Philippines (“Respondent’s Arbitration Proceedings in Philippines”) on 23 September 2005.

5.  The Applicant’s contract of employment with the Respondent is set out in three documents :

i)      A contract dated 9 August 2002 between the Applicant and a Cleene Maritime Corporation as sub-agent of the Respondent (“the POEA Contract”);

ii)      A contract dated 17 August 2002 between the Applicant and the Respondent titled Agreement and Lists of the Crew (“the Hong Kong Contract”);

iii)     A contract dated 2 October 2002 titled “The Collective Bargaining Agreement between Hang Woo Ship Management Limited and Merchant Navy Officers Guild Hong Kong, Amalgamated Union of Seafarers and The Hong Kong Seamen’s Union” (“the Collective Bargaining Agreement”).

The Respondent’s Case

6.  Section 29 of the POEA Contract reads “In cases of claims and disputes arising from this employment, the parties covered by a collective bargaining agreement shall submit the claim or dispute to the original and exclusive jurisdiction of the voluntary arbitrator or panel of arbitrators.”   This is an arbitration clause agreed by the parties.  Claims arising from the employment include claims protected by various statutes.

7.  According to Section 34C(1) of the Arbitration Ordinance, Cap 341 (“AO”), an arbitration agreement is governed by Chapters I to VII of the UNCITRAL Model Law (“the Model Law”).  Applying Article 1 of the Model law, Section 29 of the POEA Contract is regarded as an international agreement.  Article 8(1) of the Model Law (“Article 8(1)”) reads: “A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed”.

8.  Applying Section 21(1) of the Employees’ Compensation Ordinance Cap. 282 (“ECO”), the provisions of AO, being a piece of legislation in Hong Kong, is law which applies mutates mutandis to the District Court in hearing employees’ compensation (“EC”) claims.  So this court has the jurisdiction and should refer the matter to arbitration once the requirements under Article 8 (1) are met.  There is no restriction like Section 6(2) AO over a stay of EC claims.

9.  As for the exclusive jurisdiction of the District Court for EC claims under Section 18A ECO, it is not clear as to whether this also applies to cases which clearly falls within arbitration.  It is decided in the case of Li Kwok Shing and Law Ka Fu trading as Wing Fai Electrical Engineering and Another CACV 212/2002, that the word “determined” in Section 18A ECO must not necessarily mean a decision or an order of the District Court.   In para. 9 of Li Kwok Shing,it is stated that the District Court has almost exclusive jurisdiction in dealing with claim under the ECO insofar as such claims are made through judicial proceedings.  Arbitration is not a judicial proceedings.  The case recognized an agreement under O. 22 RDC as a determination by the District Court.  This is a demonstration of different ways for the parties in a EC claim to resolve the matter.  By drawing the same analogy, arbitration should be another alternative for a determination of the case and the District Court has jurisdiction to determine this proceedings by granting a stay.

10.  The criteria which the court should consider whether to stay the proceedings in favour of arbitration is summarized in the case of Tommy CP Sze & Co v Li & Fung (Trading) Ltd & Ors [2003] 1 HKC 418.  It is submitted that all 4 questions posed in Tommy Sze must be answered in favour of a stay in the present case.

The Applicant’s Case

11.  This is a claim by the Applicant arising from the ECO and not a claim arising from the employment, i.e. not a claim under the contract.  A claim for damages under common law may arguably fall within the arbitration clause as the crux of the common law action would be the allegation that the Respondent had breached that duty of care owed to the Applicant under the terms of the contract.  Compensation under ECO is payable so long as the person injured was an employee and the accident happened in the course of his employment (Wong Mei Na v Genryoku Sushi Company Limited CACV 82/2003).  The Applicant’s claim in this case does not fall within the arbitration clause and the Applicant is exercising the statutory right conferred upon him by ECO by virtue of his status as an employee.  The Respondent is wrong to rely on the arbitration clause to stay these proceedings.

12.  According to Section 18A of ECO, the District Court has the exclusive jurisdiction to deal with claims for compensation under ECO.  Section 21(2) ECO further reinforced this provision of exclusive jurisdiction.  Section 6 of AO expressly provides for hearing of matters within the jurisdiction of a Labour Tribunal to be dealt with by way of arbitration if an arbitration agreement exists.  But the AO makes no similar reference to claims for compensation under ECO.  The exclusive jurisdiction of the District Court for EC claims are preserved.  The case of Li Kwok Shing must be read in context of the issue in that case and in its ruling, the Court of Appeal found that “the application of those (RDC) rules would not affect the jurisdiction of the District Court in EC claims as provided for in s 18A.” (at para 29).  This is a recognition of the law that the District Court is the only tribunal with the jurisdiction to hear claims for compensation under ECO.

13.  Section 5(1) of ECO imposed an absolute liability on the Respondent to pay the compensation and Section 31 of ECO makes it null and void any contract or agreement whereby an employee relinquishes his rights for compensation so that the employer’s liability to pay compensation under ECO is removed or reduced.  The Respondent’s application to stay will effectively deprive the Applicant of his rights conferred by Section 5 of ECO and remove or reduce the Respondent’s mandatory liability to pay compensation under ECO.

14.  Not all disputes are arbitrable.  This is recognized by Article 1(5) of the Model Law.  Given the special features in this case as stated above, a claim for compensation under ECO is not arbitrable and does not fall within the arbitration clause. 

Claims arising from the Employment

15.  I found the contention by the Applicant on the interpretation of Section 29 of the POEA Contract to be unfounded.  The ECO is not providing the Applicant with a basis for the claim but instead the heads of compensation payable should liability arise.  There must be a claim arising from the employment before the employee is entitled to pursue with a EC claim for compensation provided by the ECO.  To say that a EC claim is not a claim arising from the employment is a misreading of the terms of the POEA contract.

Exclusive Jurisdiction of the District Court over EC Claims

16.  It is not in dispute that this proceedings involve the Applicant’s claim under the statutory provisions of the ECO.  From the wordings of Section 18A ECO, it’s beyond argument that this provision confers on the District Court an exclusive jurisdiction to determine EC claims as far as legal proceedings are concerned.  Determination of a EC claim can only be done in the different modes provided in that section.  A determination by the District Court may not necessarily mean a decision or an order of the court, but as can be seen from the case of Li Kwok Shing, other method of disposal must still fall within the ambit of the District Court jurisdiction so as not to affect the exclusive jurisdiction of the District Court in EC claims.  To stay the proceedings and referred the claim for arbitration is effectively taking the whole claim out of the hands of the District Court.  This is clearly inconsistent with the provisions of S.18A and an usurpation of the exclusive jurisdiction of the District Court.

17.  This conclusion is further reinforced by the provisions of staying proceedings within the exclusive jurisdiction of the Labour Tribunal under Section 6 of AO.  Had it been the intention of the legislation for arbitration be available for EC claims, there should be similar provisions for EC claims as for Labour Tribunal claims.  The absence of similar provisions for EC claims can only be treated as the intention of the legislation against it.

18.   The effect of Section 18A ECO on Article 8(1) is that the District Court cannot exercise it’s jurisdiction under Article 8(1) over EC claims since it’s inconsistent with Section 18A ECO.

Stay in violation of Section 31 of ECO

19.  The argument by the Applicant that a stay will deprive the Applicant of his rights conferred by the ECO and in violation of Section 31 of ECO is also unfounded.  Article 10 of the Collective Bargaining Agreement reads : ”Compensation for death or injury by accident arising out of and in the course of employment … shall be payable by the employer in accordance with the ECO”.  Should the case go for arbitration, this term in the contract should be considered and in a way, the Applicant’s entitlement under the ECO is still safeguarded without any deprivation and the Respondent is still required to pay the compensation under ECO.  The POEA Contract containing the arbitration clause is not in violation of Section 31 of ECO.

Conclusion

20.  I found for the Applicant that the District Court has exclusive jurisdiction over EC claims irrespective of the existence of an arbitration agreement between the parties.  The special feature that a EC claim must be determined in the District Court renders the EC claim inarbitrable.  Having said so, the Applicant’s claim should not be stayed and referred for arbitration.

Costs

21.  There is no reason why costs should not follow the event.  I order that the Respondent do pay the Applicant costs of this application, with certificate for counsel, to be taxed if not agreed.