CHAN SIK PAN v. WYLAM'S SERVICES LTD. AND OTHERS

CACV 108/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 108 OF 2000

(ON APPEAL FROM HCPI 648/1995)

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J U D G M E N T

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Hon Leong JA (giving the judgment of the Court):

1. The Plaintiff Chan Sik-pan ("Chan") was a fire installation technician. In August 1992, Windsor House in Causeway Bay underwent renovation. The main contractor for the renovation work was one OSL International Company ("OSL"). OSL subcontracted the electrical and mechanical work in the renovation project to Carrier Ltd ("Carrier"). Out of this, Carrier further subcontracted the part relating to the fire installation work to Wylam's Services Ltd ("Wylam"). Wylam is the 1st defendant in this case. Wylam then subcontracted the work to Leung Kwok-chau ("Leung") the 2nd defendant. Leung again subcontracted the work to Yu Chi-kong ("Yu") the 3rd defendant. Chan was requested to work at the site by a person called Tong Kin-hung. As a result he started on 11.8.92 to carry out installation work. At about 2.30 pm on 21 August 1992, he and a fellow technician Ng Chi-hung were standing on a platform set up on a staircase landing. They were using chain pliers to fix a fire duct on the ceiling. The platform consisted of a standard frame with wooden planks on top. There were no rails around the platform to guard against a person from falling off the platform. In the course of his work, Chan's chain pliers broke when he applied force to tighten the grip of the chain. As a result, Chan lost his balance and fell off the platform injuring himself. Only Wylam was covered by insurance. Neither Leung nor Yu were covered. After the accident, Wylam reported the matter to the Labour Department. The report was made on the prescribed form (Form II) under the Employees' Compensation Ordinance, Cap. 282. Wylam in filling this form stated that it was the employer of Chan. In January and May 1993, Wylam entered into two compensation agreements with Chan and subsequently paid compensation to Chan pursuant to these two agreements.

2. Chan took out an action for common law damages for negligence against Wylam. The basis of his claim was that Wylam was his employer and Wylam was in breach of the common duty of care of an employer in failing to provide him with safe tools, a safe place and system of work. Leung and Yu were subsequently joined as co-defendants on the basis that they were subcontractors of Wylam.

3. The main issues at the trial were: who was Chan's employer at the material time and whether there was a breach of the common law duty of care by Chan's employer. At the trial, Deputy Judge Z E Li allowed Chan to amend his statement of claim to include a claim for breach of the duty to provide a safe working platform and also breach of the statutory duty of a contractor under Regulation 38N of the Construction Sites (Safety) Regulations, Cap. 59 to provide guard-rails to prevent a worker falling from a height of more than 2 meters.

4. Chan's case that Wylam was his employer is based on the following:

a. Wylam had signed Form II, stating that it was his employer;

b. Wylam had entered into two agreements with Chan to pay to him employees' compensation;

c. Wylam had paid Chan according to the terms of the two compensation agreements; and

d. Wylam was estoppled from denying that Chan was its employee because of these recognition and admissions which Wylam intended that Chan would act upon and Chan did act on it.

5. The trial Judge concluded that Wylam was Chan's employer for the following reasons:

1. Wylam had taken out employees' compensation insurance and is deemed to be the employer;

2. Wylam intended to hire workers, otherwise it would not have taken out employees' compensation insurance;

3. Neither Leung nor Yu had taken out employees' compensation insurance; therefore neither of them would have intended to hire workers and they could not be Chan's employer;

4. Chan knew neither Leung nor Yu was covered by insurance and therefore Chan would not have intended to be employed by either of them; and

5. S. 40(1) of the Employees' Compensation Ordinance prohibits an employer from employing any person unless he is covered by employees' compensation insurance. Leung and Yu not being covered by employees' compensation insurance, it is not open to the court to find either of them to be Chan's employer.

6. On the question of estoppel, the Judge found no estoppel arising from the filing of Form II and the subsequent payments.

7. The Judge also found that on a construction of Regulation 2(2) Construction Sites (Safety) Regulations, Cap. 59, Wylam as the principal contractor for the site, had failed to provide railing.

8. On the question of who was Chan's employer, there was clear evidence in the following aspects:

1. Yu daily gave Chan as well as other workers including Chan's colleague Ng Chi-hung, instructions as to what fire installation work was to be done and where and how the work should be carried out at the site;

2. Yu distributed tools daily to Chan and other workers for the day's work and he kept the keys to the tool room;

3. Yu supervised Chan and other workers on their work progress;

4. Yu gave Chan's instructions to sign an attendance book at the site for the purpose of calculating wages according to attendance;

5. Yu paid Chan and Ng Chi-hung their wages and if there was a short fall, Yu would make up the difference;

6. Yu never told Chan or Ng Chi-hung he was the foreman at the site; and

7. Yu and Leung knew each other many years and they had been working at construction sites together where Yu was Leung's subcontractor.

9. That Yu was a subcontractor of the fire installation work at the site and not a foreman of Leung, there was clear evidence in the following aspects:

1. Yu obtained the fire installation work in March 1992 by subcontracting from Leung who had obtained the work from Wylam. Under his subcontract, Yu was responsible for hiring workers, supply of tools and material;

2. Yu had full control of the fire installation work at the site except that Leung would occasionally inspect the site to check work progress and quality of work;

3. Yu had signed receipts for payments by Leung. These payments were for construction costs and Yu described himself as subcontractor in these receipts;

4. Yu was paid by Leung according to the progress of work and the number of workers at work. When Leung requested Yu to speed up the work, Yu demanded that the night workers should be paid double;

5. Yu signed an income and expenditure account on 17 October 1993 confirming his fees and three receipts in November, December 1993 and January 1994 acknowledging receipt of the balance of the fees due to him; and

6. In July or August 1994, Yu signed a memorandum prepared by Leung to clarify their relationship and Yu admitted in the memorandum that Chan was his employee at the time of the accident.

10. There was also clear evidence that Wylam had subcontracted the installation work to Leung and Wylam had no control over the work of Leung or any worker employed by Leung or Yu to work at the site. Neither could Leung employ any worker to work at the site on behalf of Wylam. As to why Wylam signed the Form II after the accident, Wylam's explanation is this. First, the accident occurred at the site and secondly, in the past, they had asked their insurance company to pay compensation to injured workers of their subcontractors and the insurance company did so. Because of these, they thought they were responsible for the accident and accordingly prepared the documents and paid Chan compensation.

11. Mr Ronny Wong SC for Wylam submits that the trial Judge should not have merely concentrated on the employees' compensation documents prepared by Wylam to determine the relationship between Wylam and Chan. The Judge, it is submitted, should have looked at all the evidence and considered the evidence as a whole. If the Judge had done so, it would have been plain to him that Chan was employed by Yu and not by either Wylam or Leung.

12. Mr Patrick Fung SC on the other hand says that the Judge had considered all the evidence and was entitled to reject the evidence that Chan was employed by Yu and conclude that Wylam was Chan's employer. Referring to the respondent's notice, Mr Fung submits that the Judge was wrong in finding that no estoppel had been raised as a result of the conduct of Wylam.

13. He submits that notice of an accident in the prescribed form (Form II) to the Labour Department is a statutory duty of an employer and Wylam declared on Form II that it was Chan's employer. In addition, Wylam had written to Chan urging Chan to contact it for the purpose of employees' compensation insurance matters. At that time, the question of liability under common law had not yet arisen and Wylam expected its insurance company to pay. There was no reason for Wylam to deny being Chan's employer. It then made payments into court in the capacity of an employer in connection with Chan's claim for compensation. In addition, Wylam wrote to Carrier on 15 June 1994 that Chan was its employee.

14. The circumstances were such that Wylam should be estopped from denying it was Chan's employer. Chan had relied on such conduct of Wylam not to sue Yu for employees' compensation. Now it is too late to proceed against Yu for employees' compensation and Chan is therefore forced to join Yu as a defendant in these proceedings. But there is no guarantee that he will win against Yu. Chan has therefore suffered detriment.

15. On the question of estoppel, Mr Wong argues that this has not been raised in the pleadings. It was only in the written submission of his counsel that Chan relied on his inability to sue Yu for employees' compensation and subsequent inconvenience and expenses to bring these proceedings against Yu as detriment suffered by him. As a matter of procedural law, it should not be considered. In any case, Chan had not discharged the burden for raising the issue of estoppel.

16. In our view, the evidence that Yu was the employer of Chan and neither Wylam nor Leung was his employer is overwhelming. The fact that Wylam prepared the compensation documents and paid compensation to Chan without more does not make Wylam the employer of Chan, where there is strong evidence to the contrary. Where the real factual situation was that Yu had sub-subcontracted the work from Wylam via Leung and Chan knew he was employed by Yu, the self-labelling by Wylam as employer in the documents, mistakenly or otherwise believing that it was liable under the Employees' Compensation Ordinance, does not change the situation. The fact that Wylam was covered where Yu and Leung were not covered, by employees' compensation insurance is only one of the factors to be considered in determining who was the employer. The Judge should not have simply relied on insurance cover to reach his conclusion.

17. On the question of estoppel, we do not think there was sufficient ground for Chan to raise this against Wylam. Chan had not been able to show how the Form II and the subsequent payment of compensation to him resulted in his detriment. The Commissioner for Labour has a discretion under the Employees' Compensation Ordinance to extend the time for making a claim for compensation. The Form II was a notice Wylam gave to the Labour Department and was not a representation made to Chan. Neither were the two agreements and the payments since these are in relation to periodical payment of wages for Chan's sick leave after the accident. The letter from Wylam to Carrier was not made to Chan. In any case, Chan has not merely relied on Wylam's representation that it was his employer since his present claim against Yu as the third defendant in these proceedings is also based on Yu being his employer. No detriment has therefore resulted.

18. Wylam's third ground of appeal is that the Judge was wrong to allow Chan's third amendment of his statement of claim so as to add a new cause of action the limitation in respect of which had long expired. Mr Wong submits that Chan in his third amendment sought to add two causes of action. First, that Wylam, Leung and Yu were negligent in failing to provide a safe place of work in that there were no guard-rails around the work platform and secondly, that Wylam, Leung and Yu were in breach of Regulation 38N of the Construction Sites (Safety) Regulations (applicable at the time but has since been repealed) in that they being the contractor at the site, had failed to provide guard-rails when Chan was liable to fall from a height of more than 2 meters. The accident occurred on 21 August 1992 and the limitation for Chan's claim in personal injury expired on 20 August 1995. The causes of action sought to be included were new causes of action and the limitation period in respect of them had expired. Such amendments were prejudicial to Wylam. Chan's statement of claim had been amended twice before and there was no reason why Chan should delay until the trial to add these new causes of action. It is submitted under Order 20 rule 5(5) of the High Court Rules, and as decided in Ng Kam Chuen v AG [1991] 2 HKC 560, where the amendment seeks is to add a new cause of action the limitation period in respect of which had expired, the amendment will normally be refused but the court has a discretion to allow it.

19. The original cause of action was Wylam, Leung and Yu were in breach of their duty as an employer and negligent in failing to provide safe tools and failing to maintain safe tools. To add an allegation that the three defendants had failed to provide a safe place of work is not adding a new cause of action. The new allegation of failure to provide a safe work place is no more than adding new particulars of breach of employer's duty and negligence to the cause of action already alleged in the statement of claim. The question of limitation does not arise. But the allegation of a breach of the statutory duty under Regulation 38N of the Construction Sites (Safety) Regulations is different. It is a new cause of action. The limitation period for Chan to claim damages based on breach of statutory duty by the thee defendants Wylam, Leung and Yu had long expired before the trial started. The Judge was wrong in allowing Chan to add by way of his third amendment the cause of action relating to breach of statutory duty. But he was right in so far as he allowed the amendment relating to the duty of care of an employer at common law.

20. The Judge's conclusion that Wylam was Chan's employer was not supported by the evidence and should not stand. The Judge should have found Yu was Chan's employer at the time.

21. It is not disputed that the chain pliers were defective. The expert evidence is that there was metal fatigue in the spring and clip. But before it finally broke, there were bound to be signs on its surface which could be observed if the pliers were carefully inspected. He said metal fatigue occurred through over use and improper use of the tool although it did not frequently occur. If properly maintained, the pliers would have a life span of 10 years. Thus the defect was not so latent that it would not have been detected on reasonable examination.

22. Mr Wong refers to Chan's evidence that he had never heard of metal fatigue in chain pliers and had never come across breaking a pair of such pliers. He also refers to Ng Chi-hung's evidence that he never heard of pliers needing maintenance. He submits that an employer is not liable for the latent defects of the tools supplied to his employees. The defect in question could only be discovered as a result of careful inspection by a person and to require an employer to test all metal tools to ensure there is no metal fatigue in any circumstances would be imposing too high a duty on an employer.

23. We do not agree with that submission. The law requires an employer to provide a safe system of work and that includes supplying safe tools. The pliers provided to Chan were not safe because it had a serious defect. It was not a latent defect since on careful inspection it could be detected. The fact that Chan and his co-worker Ng Chi-hung had no knowledge of metal fatigue is irrelevant. The duty remained with his employer to provide safe tools.

24. As to the provision of railings around the work platform erected by Chan, Chan's evidence is that he was never instructed that guard rails should be put up to prevent a person working on the platform from falling off the platform. Both Chan and Ng Chi-hung's evidence is that they had never put up such railings around work platforms nor contemplated that such guard-rails were required. They never thought that an accident as in the present case would happen.

25. It is submitted for Wylam that even if railings were provided, there was every likelihood that Chan would not have put them up. In other words, Chan would fall from the platform even if Wylam provided railings.

26. We do not agree. The duty of the employer is to provide a safe system of work and that includes providing guard-rails for work platforms and instructing employees to ensure there are measures to prevent a person working on platforms from falling off it. Failure to do so was a breach of this duty by Chan's employer, whoever he might be. It was no excuse that Chan and Ng Chi-hung would not use the guard-rails or did not know how to use them.

27. Chan suffered injury as a result of falling from the platform. The cause of his fall was the defective pliers. Unlike Ng Chi-hung who was standing near the wall which could give Ng support if he fell, there was nothing to prevent Chan from falling.

28. As we have said, the Judge was wrong to have allowed Chan's third amendment to his statement of claim to add the cause of action of breach of Regulation 38N of the Construction Sites (Safety) Regulations, whether there was a breach of regulation has now become academic. The Judge should have decided simply on negligence at common law.

29. As we have said, Chan's employer at the material time was Yu and not Wylam. Yu is liable in negligence to Chan as employer in failing to provide safe tools and safe place of work.

30. Wylam's appeal is allowed. The judgment against Wylam is set aside. Chan succeeds against Yu in paragraph 6 and 7 of Chan's respondent's notice.

31. We make a costs order nisi that the costs of this appeal and below be borne by Yu.

32. There will be liberty to apply on quantum.