MAN SAI MING v. MAINTOP ENGINEERING LTD AND ANOTHER

CACV 175/2015

CIVIL APPEAL NO 175 OF 2015

(ON APPEAL FROM DCEC NO. 228 OF 2014)

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REASONS FOR JUDGMENT
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Hon Chu JA (giving the Reasons for Judgment of the Court):

1.  This is the applicant’s appeal against the decision of His Honour Judge Leung (“the Judge”) of 24 June 2015 striking out the applicant’s claim against the 2^nd respondent with costs. After hearing counsel, we allowed the appeal with costs. Our reasons appear below.

The applicant’s claim

2.  The applicant was a stainless steel technician employed by the 1^st respondent.  It is the applicant’s case that he sustained injuries in the course of employment on two occasions on 20 and 23 March 2012, when he was working at 21^st Floor, Ho Lee Commercial Building, 38-44 D’Aguilar Street, Central (“the Premises”).  It is not in dispute that the 1^st respondent was a subcontractor of part of the renovation work of the Premises.

3.  On 6 February 2014, the applicant commenced employees’ compensation proceedings in the District Court against the 1^st respondent as the employer and against the 2^nd respondent as a principal contractor.  Paragraph 1(b) of the Application (which was amended on 10 October 2014) states:

“the 1^st Respondent was a sub-contractor within the meaning of the Employees’ Compensation Ordinance, Cap. 282 (“the Ordinance”) to a principal contractor within the meaning of the Ordinance, namely the 2^nd Respondent.”    

The 1^st respondent’s Answer

4.  In the Answer filed on 29 July 2014 opposing the Application, the 1^st respondent averred at paragraph 1 that:

“Save and except the Applicant was employed by the 1^st Respondent at the material time and the 1^st Respondent was a sub-contractor of the 2^nd Respondent, paragraph 1(a) and (b) of the Application are not admitted and the Applicant is put to strict proof …”.

The Statement of Truth was signed by its director, Mr Fong Chor Kit (“Mr Fong”).

The 2^nd respondent’s defence

5.  The 2^nd respondent also contests the application. After receiving the applicant’s solicitors’ letter before action, it emailed the applicant’s solicitors and said:

“the company name is incorrect. It should be C&I Ltd, please revised [sic]”.

6.  It is not in dispute that the 2^nd respondent and C&I Limited (“C&I”) are related companies.

7.  In the defence dated 18 July 2014, the 2^nd respondent said at paragraph 2:

“本公司從沒有就原告人的申索陳述書內所述的與原告人在此案中有任何合約上的關係。原告人必須就此提供有關方面的合約證明。”

(English translation:

“Our company never has any contractual relationship with the plaintiff in respect of what is stated in the statement of claim in this case. The plaintiff must provide proof of the contract involved.”)

The 1^st respondent’s Form 2

8.  Previously on 13 August 2012, the 1^st respondent had lodged with the Commissioner of Labour a Form 2 dated 6 August 2012 (“the 1^st Form 2”) to give notice of the applicant’s accidents.  In part C of this form, the space for filling in the name and particulars of the principal contractor was left blank. 

9.  Three months later on 15 November 2012, the 1^st respondent lodged an amended Form 2 (“the 2^nd Form 2”), in which the 2^nd respondent was named as the principal contractor and its business registration number and contact details were given in Part C.  The identity of the person responsible for making out and signing the 1^st and 2^nd Form 2 had been redacted from the copies in the appeal bundle. 

10.  After the applicant had commenced the employees’ compensation proceedings, the 1^st respondent lodged another revised Form 2 (“the 3^rd Form 2”) with the Commissioner of Labour.  It was signed by Mr Fong.  In the space in Part C for filling out the name of the principal contractor, the name of the 2^nd respondent and its particulars were crossed out.  Also crossed out was the Chinese name of C&I (i.e. 致藝有限公司).  The name of a third company 興勝室內及維修有限公司 (“in English “Hanison Interior & Renovation Limited”, “Hanison”) was inserted by the side.    

Mr Fong’s witness statement

11.  In the witness statement dated 29 December 2014 filed on behalf of the 1^st respondent, Mr Fong said (at paragraph 3) that the 1^st respondent had worked with the 2^nd respondent for many years and jobs were usually sub-contracted verbally.  After understanding the job and submitting the quotation, and if there was no problem, the 1^st respondent would proceed to commence work.  Mr Fong went on to say that very often the 1^st respondent was not clear which company was the principal contractor (大判). 

12.  Mr Fong also said (at paragraph 4) that with regard to the job in question, the 1^st respondent issued invoices to the 2^nd respondent after completing the work.  Subsequently, due to the fact that the applicant requested to give notice of his injuries, the 2^nd respondent informed the 1^st respondent that the work was subcontracted by C&I and a document was signed as confirmation.  However, C&I later informed the 1^st respondent that the principal contractor (大判) was Hanison.

The striking out application

13.  On 22 January 2015, the 2^nd respondent applied by summons to strike out the applicant’s claim against it on the ground that it discloses no reasonable cause of action.  The summons was amended on 27 March 2015 to include an additional ground that the claim is scandalous, frivolous, vexatious or otherwise an abuse of process.

14.  The 2^nd respondent’s case on the striking out is that the 2^nd respondent had no involvement in the job in question, that Hanison was the principal contractor of the job and C&I was Hanison’s sub-contractor and that C&I had sub-contracted part of the work to the 1^st respondent. 

15.  In his affirmation leading the application, Mr Kwan Kam Shing (“Mr Kwan”), who is the 2^nd respondent’s director, said that he believed it was a mistake on the part of the 1^st respondent that the two invoices were issued to the 2^nd respondent for payment of the work done.  He also said that C&I had settled the payment by way of a cheque payable to the 1^st respondent, and the 1^st respondent had given a receipt for it.  Copies of the invoices, the cheque and the receipt were exhibited to the affirmation. 

16.  Mr Kwan also exhibited to his affirmation: (i) an undated document in Chinese signed by the 1^st respondent and C&I; (ii) a summary of tender dated 12 January 2012 that bears the stamps of Hanison and C &I; and (iii) a letter dated 26 January 2015 from Hanison to C&I confirming that Hanison had awarded the tender of the renovation works to C&I on 12 January 2012. 

17.  In respect of the undated Chinese document, although Mr Kwan called it a written sub-subcontract, it is plain from the opening sentence (which refers to an oral contract) and paragraph 2 (which states the date of the oral contract was February 2012) that it is a post-record of an oral contract.  Similarly, the letter from Hanison to C&I is also not contemporaneous.  Both documents were made out after the applicant made the claim for compensation.      

18.  The applicant’s case, on the other hand, is that on the state of the available materials, it is not plainly and obviously unarguable that the 2^nd respondent is liable as a principal contractor under the Employee’s Compensation Ordinance, Cap. 282 (“ECO”).

The Judge’s decision

19.  The Judge did not accept that the applicant’s claim against the 2^nd respondent should be struck out on the basis that it disclosed no reasonable cause of action.  He, however, considered that the claim should be struck out as being scandalous, frivolous, vexatious or otherwise an abuse of process.  Underlying the Judge’s decision is his view that the applicant has failed to demonstrate that the evidence at the trial would possibly differ from what was already before the court, and that on the materials before him, there is no way the applicant could prove the 2^nd respondent had subcontracted the work to the 1^st respondent, and was a principal contractor for the purpose of the ECO.

20.  Paragraphs 18 to 22 of the Decision encapsulated the judge’s reasoning:

“18. It may be said that the witness statement of Maintop and the post-contractual written confirmation between Maintop and C&I came into existence for purpose of contesting Man’s claim. However, the summary of tender between Hanison and C&I for the work and C&I’s payment in settlement of Maintop’s invoice for the work in question back in 2012 are indeed contemporaneous documentary evidence. There are now also the written confirmations of not only C&I but also Hanison. The chance of falsity or mistake of that, which Man does not even suggest, is low. This is what Chi Shing puts forward in discharge of its burden in the present application.

19. On behalf of Man, it is argued that much may still arise out of cross examination during the trial, and it is premature to conclude on this factual dispute on affidavits. In my view, such argument would not take Man’s case any further. By resisting the present application, Man maintains that Chi Shing, and not C&I, subcontracted the work in question to Maintop. This will be Man’s burden of proof, if the issue goes to trial. What does Man have to say in support of that?

20. In Man’s witness statement, there is merely one line that to his knowledge or belief, Chi Shing was the principal contractor at the time. In opposing the present application, Man in his affirmation refers to nothing in addition to the background set out above as the ground of his belief that Chi Shing was the principal contractor. Whilst he claims to have not heard of C&I or Hanison before, he offers nothing that may serve to contradict the contemporaneous evidence adduced by Chi Shing. There is also no assertion that Chi Shing was somehow involved between C&I and Maintop so that it could become the party subcontracting the work in question to Maintop.

21. In discharge of his burden of proof at the trial, what Man asserts as his belief must give way to the fact, which is indeed evidenced as discussed above. If the evidence, oral and documentary, that Man would adduce in this respect ends here, I do not see how he manages to discharge his burden of proving liability against Chi Shing. For the present purpose, Man lays no plausible foundation, if at all, for me to take the view that what are now before the court in terms of the evidence, and thus the above observation about the tiers of subcontracting, would possibly differ, if this issue goes to trial.

22. In the circumstances, I am satisfied that Chi Shing has discharged its burden of showing that there is no way Man could prove that Chi Shing subcontracted the work in question to Maintop and was a principal contractor for the purpose of the Ordinance. This is a plain and obvious case for striking out.”

The grounds of appeal

21.  The applicant appeals to this Court against the order of the Judge.  The notice of appeal raises six grounds of appeal, namely,

(1) The 2^nd respondent and C&I could both be a principal contractor for the purpose of the ECO.

(2) The Judge should not have resolved the factual disputes on the affidavits.

(3) The applicant should be afforded a reasonable opportunity to properly present his case at trial.

(4) The Judge had misinterpreted paragraph 3 of Mr Fong’s witness statement in that he only said very often, the 1^st respondent had no clear idea which company was the principal contractor, but the Judge took it to mean the respondent had no clear idea which of the 2^nd respondent and C&I was the actual contractor (paragraph 10 of the Decision).

(5) The Judge failed to have regard to all the evidence and circumstances of the case.

(6) The Judge should not have allowed the 2^nd respondent to advance and adduce evidence to support an unpleaded case.

Reasons for judgment on the appeal

22.  It is not necessary to delve into each and every one of the grounds of appeal.  The core and most pertinent issue in the appeal is whether the applicant’s case that the 2^nd respondent is liable as a principal contractor under the ECO is plainly and obviously unarguable.

23.  Section 3 of the ECO defines “principal contractor” as a person referred to as a principal contractor in section 24. Under section 24(1), “principal contractor” refers to a person, who in the course of or for the purposes of his trade or business, contracts with a sub-contractor for the execution by or under the sub-contractor of the whole or any part of any work undertaken by him.  Mr Ho, who appeared for the applicant, contended that under section 24, there could be more than one principal contractor.  Mr Suen, who appeared for the 2^nd respondent had not advanced any contrary submission.  For the purpose of this appeal, it is not necessary for us to come to a definitive view on this legal point.

24.  Whether a person is a principal contractor is a question of fact.  In the present case, this is the central dispute between the applicant and the 2^nd respondent, and is heavily contested.  For the applicant, he states in his witness statement that to his knowledge, the 2^nd respondent was the principal contractor for the work on the Premises.  He also relies on the 2^nd Form 2, in which the 1^st respondent stated that the 2^nd respondent was the principal contractor, the two invoices that the 1^st respondent issued to the 2^nd respondent for payment of its work for the Premises, and also the 1^st respondent’s Answer in which the 1^st respondent avers it was a sub-contractor of the 2^nd respondent, the truth of which has been verified by Mr Fong. 

25.  The 2^nd respondent, on the other hand, relies on the following documents in resisting the applicant’s claim and contending that it was not involved in the work in question and that C&I was the principal contractor:

(1) The summary of tender dated 12 January 2012 between Hanison and C&I;

(2) The undated Chinese document signed by the 1^st respondent and C&I;

(3) Hanison’s letter to C&I dated 26 January 2015;

(4) C&I’s confirmation that Hanison had sub-contracted the renovation work to it and it had in turn sub-contracted the stainless steel and metal work to the 1^st respondent; and

(5)  The cheque issued by C&I to the 1^st respondent together with the receipt given by the 1^st respondent. 

26.  The Judge was sceptical of the applicant’s case, taking the view that the applicant, apart from asserting that the 2^nd respondent was the principal contractor, has not been able to point to anything to contradict the contemporaneous evidence adduced by the 2^nd respondent.  However, apart from the summary of tender and the cheque for payment and receipt, the other documents relied on by the 2^nd respondent are not contemporaneous, and were created after the applicant had made his claim. 

27.  Further, C&I’s cheque and receipt for it have to be viewed against the two invoices that the 1^st respondent issued to the 2^nd respondent.  While Mr Kwan suggested in his affirmation that it was a mistake of the 1^st respondent that the invoices were issued to the 2^nd respondent, Mr Fong has not really explained in his witness statement as to what caused the 1^st respondent to issue the invoices to the 2^nd respondent, and how did it eventually happen that C&I paid for the invoices. 

28.  It is also relevant to note the Answer filed by the 1^st respondent and the series of amendments it made to the Form 2.  In particular, the 3^rd Form 2, which was compiled after the applicant commenced the employees’ compensation proceedings, is obviously incompatible with the Answer.

29.  It is also pertinent to note the 2^nd respondent’s defence, in which the 2^nd respondent only denies having contractual relationship with the applicant, but has not advanced a positive case that the principal contractor was Hanison and/or C&I, or that the work in question was sub-contracted from Hanison to C&I, and in turn to the 1^st respondent.  There is no explanation for this in the affirmations filed on behalf of the 2^nd respondent.

30.  Thus viewed, the core dispute of whether the 2^nd respondent is a principal contractor for the purpose of the ECO is a substantial one that should be investigated and the parties’ case should be tested out at the trial.  While it may be thought that at this stage, the applicant does not seem to have a lot of evidence to support his case, the Judge was too robust to conclude that the applicant has no prospect of discharging his burden of proof.  This is not a plain and obvious case for striking out.   

Disposition

31.  For these reasons, we have allowed the appeal.  We set aside the order of the Judge and dismissed the 2^nd respondent’s striking out application.  Applying the normal rule of costs follow event, we have also ordered the 2^nd respondent to pay the applicant his costs of the appeal and of the striking out application below.  The applicant’s own costs shall be taxed in accordance with Legal Aid Regulations.