LO PUI FAN AND ANOTHER v. HONGKONG UNITED DOCKYARDS LTD

HCPI 171/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 171 OF 2011

____________

____________

_____________

D E C I S I O N

_____________

1.  This is an application by the third party for leave to appeal against my decision given on 29 July 2013. My decision was against the third party’s application to stay the third party proceedings for arbitration in London pursuant to an arbitration clause in the contract between the defendant and the third party.

2.  This application for leave is made under section 14AA(1) and (4) of the High Court Ordinance, Cap 4 and O 59 r 2B of the Rules of the High Court:

“(4) Leave to appeal for the purpose of subsection (1) shall not be granted unless the court hearing the application for leave is satisfied that –

(a) The appeal has a reasonable prospect of success; or

(b)   There is some other reason in the interests of justice why the appeal should be heard.”

The application is brought under subsection 4(a).  Mr Mazoni, SC made it plain at the hearing that he was not going under subsection 4(b).

3.  It has been explained in the case of SMSE v KL [2009] 4 HKLRD 125 at para 17 per Le Pichon, JA that “reasonable” means more than fanciful but without having to be probable.

The plaintiff’s claim

4.  This action is brought by the administratrices of the estate of Hung Tak Ming, Raymond, deceased.  Mr Hung was an employee of the defendant.  He was fatally injured on 13 March 2008 when he fell from an elevated dock arm which suddenly detached from the floating dock on which it was installed.

5.  The plaintiffs’ claim against the defendant is for damages brought under the Law AmendmentAnd Reform (Consolidation) Ordinance, Cap. 23 and the Fatal Accidents Ordinance, Cap. 22.  The grounds are negligence, breach of statutory duties in relation to the provision of a safe working place and working system, breach of occupier’s common duty of care and breach of implied terms of the employment contract or any one or more of them. 

6.  The defendant denies liability.  It also issued a third party notice on 9 January 2012 which was amended on 11 January 2012. 

The third party notice and the relevant ordinances

7.  The third party designed and built the floating dock for the defendant pursuant to a contract dated 15 July 1993.  The defendant alleged in the third party notice that the design of the floating dock was defective and the dock was built with inferior materials. 

8.  The defendant therefore claimed in the third party notice a full indemnity against the plaintiff’s claim.  Alternatively, it seeks contribution to the plaintiff’s claim by the third party under the Civil Liability (Contribution) Ordinance, Cap 377 (“the Contribution Ordinance”) and/or the common law and also recovery of the employees’ compensation that the defendant had paid under the Employees’ Compensation Ordinance, Cap  282 (“the EC Ordinance”).

9.  Section 3(1) of the Contribution Ordinance provides:

“(1) Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).

10.  Section 25(1) of the EC Ordinance provides:

“(1) Where the injury in respect of which compensation is payable was caused in circumstances creating a legal liability in some person other than the employer (in this section referred to as the third party) to pay damages to the employee in respect thereof-

(a) the employee may both claim compensation under this Ordinance and take proceedings against the third party in the Court of First Instance or, subject to the provisions of the District Court Ordinance (Cap 336) relating to the limits of jurisdiction, in the District Court to recover damages: (Amended 25 of 1998 s. 2)

Provided that where any such proceedings are instituted the court in which the action is tried shall, in awarding damages, have regard to the amount which, by virtue of paragraph (b), has become or is likely to become payable to the employer by the third party; and

(b) the employer by whom compensation is payable, and any person who may be called upon to pay an indemnity under section 24 in the case of an employee employed by a sub-contractor, shall have a right of action against the third party for the recovery of any sum which he is obliged to pay as a result of the accident, whether by way of compensation or indemnity or by virtue of any agreement made with the employee prior to the accident, and may exercise such right either by joining in an action begun by the employee against the third party or by instituting separate proceedings:

Provided that the amount recoverable under this paragraph shall not exceed the amount of damages, if any, which in the opinion of the court would have been awarded to the employee but for the provisions of this Ordinance.

Nature of the defendant’s claims against the third party

11.  Mr Kwok, counsel for the defendant made it plain that the defendant is not seeking any contractual remedy from the third party but is relying on the two ordinances above-mentioned.  He also submitted that the defendant’s claim for indemnity is not a contractual claim but is overlapping with the claims under the two ordinances.  These claims are based on the third party’s alleged negligence and breach of duty of care owed to the defendant and are brought pursuant to the defendant’s rights under the two ordinances. 

12.  I would add that the defendant’s claims against the third party are based on the third party’s alleged liabilities to the estate of the deceased arising out of the same accident.  Otherwise, the defendant cannot bring these statutory claims against the third party.

The arbitration clause

13.  Clause 14 of the contract between the defendant and the third party is an arbitration clause which provides:

CLAUSE 14 - ARBITRATION”

14.1    Any dispute arising under or by virtue of this Contract or any differences of opinion between the parties hereto concerning their rights and obligations under this Contract shall be resolved by arbitration.  Such arbitration proceedings shall take place in London unless the parties hereto agree otherwise.  All arbitration proceedings shall be conducted and governed in accordance with English Law.  Either party may demand arbitration of any such dispute or difference of opinion by giving written notice to the other party.

14.2    … The Arbitration shall be before a single arbitrator who shall, in default of agreement, be appointed by the Institute of Maritime Arbitrators.  The provisions of the Laws of England shall apply to any such arbitration, …

…

14.4    The award of the Arbitrator as to any question so submitted shall be final, binding and conclusive upon the parties hereto and their respective successors and assigns, and each agrees to abide by such decision.

…

14.6    Judgment on award by the Arbitration Board may be entered in any court of competent jurisdiction.

14.7    Each party submits to the non exclusive jurisdiction of the English courts and agrees that all notices whether required in an arbitration or otherwise shall be deemed duly served if sent to the address of the relevant party in Clause 18 hereof.”

Discussion of the grounds and decisions thereon

14.  I decided against the application for stay for the reason that the arbitration clause only encompasses “any dispute arising under or by virtue of this contract or any differences of opinion between the parties hereto concerning their rights and obligations under this contract”.  It does not cover the statutory claims brought by the defendant pursuant to its rights under section 3 of the Contribution Ordinance and section 25(1)(b) of the EC Ordinance.

15.  At the hearing, Mr Manzoni drew my attention to clause 5.10 of the contract.  He said that that clause excluded personal injury claims to be made against the third party and submitted that if this clause is taken into consideration, the interpretation of the arbitration clause would include the defendant’s claims against the third party. 

16.  I doubt if clause 5.10 is a clause excluding liability for personal injury claims in general.  I think this clause only has effect at the time when the floating dock was built in Singapore back in 1993.

17.  Clause 5.10 is within a section headed “Buyer’s Supervision”.  Clauses 5.1 and 5.10 provide as follows:

“5.1  The Buyer shall appoint a representative or representatives (hereinafter called “the Supervisor”) to attend the construction of the Dock.

5.10  The Supervisor engaged by the Buyer under this Contract shall be at all times deemed to be an employee of the Buyer.  The Builder shall be under no liability whatsoever to the Buyer, or to its Supervisor or employee(s) or agent(s), for personal injuries, including death to such Supervisor, employee(s), or agent(s), or any of them, during the time they, or any of them, are on the Dock or within the premises of either the Builder or its sub-contractors, or are otherwise engaged in and about the construction of the Dock, unless such personal injuries, including death, shall have been caused by the gross negligence of the Builder or of its employees, or agents or the sub-contractor of the Builder while acting within the scope of their employment or work or the wilful act or omission of the Builder, its employees, agents or sub-contractors. …”

18.  If clause 5.10 only had effect when the dock was built in Singapore, then the two ordinances referred to above might well have been inapplicable.  However, I would doubt its applicability to the defendant’s supervisor or servant as they did not appear to be parties to this contract.  In any event, this clause was not mentioned at the hearing of the application for stay or in the written submissions of the third party in this application, I do not think I should take it into consideration in this application.

19.  The next point by Mr Manzoni is that the contract between the defendant and the third party is an international one and that Hong Kong is an arbitration centre and in favour of arbitration.  I however do not consider these factors significant in the task of understanding the meaning of the words in the arbitration clause.

20.  Mr Manzoni also referred to para 23 of my decision and submitted that I had appeared to have concluded that the parties had selected English law as the proper law of the contract by virtue of the inclusion of the English law in the arbitration clause.  Para 23 of my decision reads:

“23. He also referred to the provision in the arbitration clause requiring the arbitration to be conducted in London unless the parties hereto agree otherwise and it should be conducted in accordance with English law. He submitted that this is an indication that the clause is not intended to include statutory claims brought under Hong Kong laws.”

21.  I have simply accepted the submission that the adoption of English law by the arbitration clause as the law governing the arbitration indicates that the arbitration clause is not intended to include the Hong Kong statutory claims.  I think Mr Manzoni has read too much into para 23 of my decision.

22.  Mr Manzoni also made the point that the statutory claims made by the defendant against the third party have not been excluded or carved out from the arbitration agreement.  With due respect, I think it is a wrong approach to consider what sort of claim has been excluded or carved out from the arbitration clause.  The correct approach is to consider whether the claims in question are within the scope and ambit of the clause.

23.  Mr Manzoni also submitted that I had erred in accepting the defendant’s submissions that the claims pleaded against the third party are statutory claims.  He submitted that the defendant’s claims against the third party include contractual, tortuous and statutory as well as common law claims.

24.  I accept that the Amended Third Party Notice has pleaded negligence in the performance of contract and breaches of duty on the party of the third party.  However, the defendant is not relying on its rights in the contract to raise the claims, but the liabilities of the third party to the estate of the deceased and the rights of the defendant as conferred by the Contribution Ordinance and the EC Ordinance.

25.  Mr Manzoni also submitted that claims under a Hong Kong statute can be dealt with in London and the Contribution Ordinance largely mirrors the English Civil Liability (Contribution) Act 1978.  He is certainly correct on these points.  But I did not dismiss the application for stay on the ground that the claims under Hong Kong Statutes could not be dealt with in an arbitration in London or that the Contribution Ordinance was unknown to England so that claims made under it should not be arbitrated in London.

26.  Mr. Manzoni also referred to clause 14(2) of the arbitration clause and submitted that an expert arbitrator could be more suitable to resolve the dispute in the third party notice as it is a technical matter.  That may be right.  But my decision is based on the scope and ambit of the arbitration clause.  

27.  Finally, Mr Manzoni criticised the use of the officious bystander test in my decision.  I think that test was used to illustrate the obvious.  The sole test on whether the claims in the third party proceedings should go to arbitration is the interpretation of the arbitration clause and it is by interpretation that the scope and ambit of the clause ascertained.  The arbitration clause in this case encompasses any dispute which arise under or by virtue of the contract or any differences of opinion between the defendant and the third party concerning their rights and obligations under the contract.  I do not think it is wide enough to include the statutory claims in the third party proceedings.  I do not think the third party has a reasonable prospect of success in the proposed appeal. 

28.  I dismiss this application.  I also make a costs order nisi that the third party do pay the costs of this application to the defendant.