SIU KIT CHIU v. REX ENGINEERING LTD AND ANOTHER

DCEC795/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 795 OF 2007

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D E C I S I O N

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1.  The 2nd respondent took out an application to strike out the applicant’s application against it as the principal contractor at the Venetian Macau construction site on Cotai Strip at the Macau Special Administrative Region for compensation under sections 9, 10 and 10A of the Employees’ Compensation Ordinance for damages suffered at the construction site accident on 5 July 2005.

2.  The 2nd respondent’s application is taken under Order 18, Rule 19(1) of the Rules of District Court.  The summons specified all four grounds under Order 18, Rule 19, namely, the applicant’s application:

(a)  discloses no reasonable cause of action against the 2nd respondent;

(b) is frivolous and vexatious;

(c)  may prejudice, embarrass or delay the fair trial of the action and/or;

(d) is an abuse of the process of the court.

3.  In an application to strike out under Order 18, Rule 19(1)(a), Order 18, Rule 19(2) specifies that no evidence shall be admissible on an application under paragraph 1(a).  The court is obliged to look at the endorsement on the writ or the pleading without extrinsic evidence and decide whether on the assumption that the facts are true, the pleading or the endorsement on the writ discloses no cause of action.

4.  The aforesaid is found in the practice notes of the Hong Kong Civil Procedure 2009, page 349, 18/19/34.  On page 348 of the Hong Kong Civil Procedure 2009, the practice notes on 18/19/3, it is also stated that: 

“Although the rule expressly states that an application to strike out endorsement on a writ or a pleading may be made at any stage of the proceedings, the application should always be as promptly as a rule before pleadings are closed.”

5.  In the present case, the applicant made the application to join the 2nd respondent in January of 2008, after commencing the proceedings against the 1st respondent in June 2007.  In May 2008, the 2nd respondent filed an answer to the application, denying it was the principal contractor at the site at the material time of the accident.  The date of this summons to strike out is 8 September 2008, almost four months after the 2nd respondent filed the answer.  The summons to strike out cannot be described as timely.

6.  Paragraph 4 of the practice notes of Order 18, Rule 19/13 on page 349 of the Hong Kong Civil Procedure 2009 further specified that:

“Affidavit evidence is equally inadmissible where the only ground on which the statement of claim can be said to disclose no reasonable cause of action is that the action is unlikely to succeed, but in applications on any of the other grounds mentioned in the rule where the inherent jurisdiction of the court is involved or invoked, affidavit evidence may be and ordinarily is used by virtue of the general jurisdiction of the court, referring to Chitty J in the case of Republic of Peru v Peruvian Guano Company [1887] 36 Chancery Division 489 at 498.”

7.  It is presumed therefore that the 2nd respondent is relying on grounds (b), (c) and (d) since affidavit evidence had been filed, and these grounds are: the application is frivolous or vexatious; or it may prejudice, embarrass or delay the fair trial of the action; or is an abuse of process of the court because the 2nd respondent has filed rather lengthy and voluminous exhibits with the affidavit. 

8.  In any event, from the application of the pleadings itself, I cannot see any plain and obvious reason that indicated the applicant has no cause of action against the 2nd respondent or that his claim has no chance of success.  Neither have I detected any dishonesty, offensive, oppressive, immoral, embarrassing or outrageous conduct on the part of the applicant as disclosed in the pleadings or, otherwise, that may warrant his claim to be struck out.  Neither could the application be described as frivolous or vexatious or that it would prejudice or delay the fair trial of the action.

9.  Consequently, what remains is (d), abuse of process of the court.  I assume the 2nd respondent is asking this court to exercise its discretion under the court’s inherent jurisdiction where there appears to be abuse of the court’s process.

10.  Paragraph 18/19/10 on page 354 of the Hong Kong Civil Procedure 2009 provides that the court will prevent the improper use of its machinery and will in a proper case, for example, where an action is absolutely groundless, where the claim is time-barred, where the pleading is a sham or entirely without substance, etc., these are instances where the court will exercise its jurisdiction to strike out or stay such actions.  Actions which are intended to oppress the other side are frivolous and vexatious, time-barred or for being res judicata or when it is spurious, a spurious claim where the claimant clearly cannot prove and which is without any solid basis.

11.  In the present case, the 2nd respondent claimed it is not the principal contractor as defined under section 24 of the Employees’ Compensation Ordinance.  It relied on the contract it signed with the owner, Venetian Cotai Limited.  The 2nd respondent claimed it was the construction manager and not the principal contractor of the owner.

12.  I have been referred to the judgment of Hoffman, NPJ of the Court of Final Appeal in the case of Poon Hau Kei v Hsin Chong Construction Company Limited Taylor Woodrow International Limited Joint Venture [2000] 1HKC 342 where Hsin Chong Construction Company Limited contracted with the KCRC, the owner, to secure the carrying-out and completion of the project.  The CFA was asked to consider whether the contract between the respondent and the subcontractor, General Electric, was in respect of work which had been ‘undertaken’ by the respondent such that it would be liable to the appellant for payment of compensation under section 24(1) of the Ordinance.  The CFA found the effect of the management contract between the employer, KCRC, and the respondent, Hsin Chong, made the respondent a principal contractor within the meaning of section 24 of the Ordinance and was liable as principal contractor to the KCRC against whom it was entitled to claim an indemnity.

13.  Miss Yang, counsel for the 2nd respondent, argued that in the present case the contractual conditions with the owner of the 2nd respondent and with the 2nd respondent are different from those in the Poon Hau Kei case.  In the management contract in the present case, the 2nd respondent did not sign the contract with the work contractors.  The 2nd respondent claimed and exhibited a contract between the owner, Venetian Cotai Limited, and a contractor, Kingsmen Company Limited as an example of the works contract.

14.  I have been taken to examine the 2nd respondent’s brief from the owner which has been attached as a schedule to the 2nd respondent’s agreement with the owner at page 67 of the bundle.  It specified that the owner required the procurement of the development of the site.  This was the brief given by the owner to the 2nd respondent.

15.  Further examination of the services to be performed by the 2nd respondent under schedule 2 to the agreement at page 70 and the following pages of the bundle, the 2nd respondent’s services included leading the management of the development team and the works of all the trade contractors and administer all trade contractors; conduct and provide costs planning advice; provide planning strategies, programmes and schedules, etc.; provide detailed programmes, procure contracts on behalf of the owner for all the works and services necessary for the development, etc. as well as managing the construction work and collect applications for payment from trade contractors, etc.  These are works and services usually taken up by the principal contractor.

16.  Was the 2nd respondent’s role only one of the managers’ work, as a paid agent or servant of the owner?  Was the owner acting as its own principal contractor?  Or was the 2nd respondent a principal contractor in disguise?  As Miss Yang observed, these are not questions for this application.  The question for this court is whether the application disclosed a reasonable cause of action or whether the application against the 2nd respondent is an abuse of the process of the court.

17.  As to the question whether the application disclosed a reasonable cause of action, my answer is yes.  It is a clear case that the applicant has a case against its employer and the principal contractor.  However, as to the question whether it is an abuse of process of the court, it is not for this court on this application to strike out to go into the detailed contracts between the owner and the manager, the principal contractor or the trade contractors.  It is not suitable for me to go into the detailed evidence particularly when they are incomplete to decide the question of law if the 2nd respondent was the principal contractor.  In the Poon Hau Kei case, the Court of Final Appeal answered a specific question after all the facts had been agreed.

18.  Whether the owner was acting as its own principal contractor or was Kingsmen Company Limited the principal contractor or was the 2nd respondent in fact the principal contractor though not labelled as such but called a managing or management contractor or construction manager?  These are questions more suitable for the trial judge as a preliminary issue to be ventilated either before or at the trial.  It should not be an issue to be decided at the striking-out application under the guise of the application disclosed no reasonable cause of action or is an abuse of process of the court. 

19.  The Order 18 Rule 19 practice notes (18/19/3) at page 350 of the Hong Kong Civil Procedure 2009 provides:

“It is advisable to apply in the alternative to have the relevant point of law determined under Order 14A or tried as a preliminary issued under Order 33, Rules 3 and 4(2).  If only the application under Order 18, Rule 19 is made and it is decided that the case is not one which the pleading should be struck out, the court has no power to proceed to decide the question of law as if it had been raised as a preliminary issue.”

20.  For that very reason, it is not suitable for this court to decide the question.  For the aforesaid reasons, I rule the applicant has shown a reasonable cause of action.  Though the 2nd respondent may have a reasonable defence, it remains to be seen at the trial on a different application whether it is liable.  I therefore dismiss the 2nd respondent’s application with costs to be taxed if not agreed.

(Discussion re costs and certificate for counsel)

21.  I will grant certificate of counsel and the applicant’s own costs to be taxed in accordance with legal aid certificate.