HONG CHUN TAK v. YIP KAN KEE CONTRACTING CO LTD AND OTHERS

DCEC 849/2017

[2020] HKDC 333

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 849 OF 2017

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DECISION

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1.  The trial of these proceedings is scheduled to be heard on 2 and 3 June 2020.

2.  On 16 March 2020, the Employees Compensation Assistance Fund Board (“the Board”) took out a summons applying for :-

(a)     pursuant to section 25A(a) of the Employees Compensation Assistance Ordinance Cap 365 (“ECAO”) and Order 15 rule 6 of the Rules of the District Court, leave to be joined as the 3^rd respondent herein; and

(b)     leave to file witness statements of fact.

3.  The witness statements intended to be filed are that of one Mr Yip Chu Kan (葉柱根)(“Yip”) and that of one Ms Wat Yee Wai (屈綺慧)(“Wat”).

4.  Yip was the only director of the 1^st respondent (“R1”).  A copy of his signed proof of evidence was exhibited to the 2^nd affirmation of Cheng Ching Lim Evan filed on 20 March 2020, while his signed witness statement was provided to all concerned on 20 April 2020.  However, to date, the Board has not been successful in securing a signed witness statement from Wat, despite this court’s direction requiring the Board to do so.

5.  As the scheduled hearing of the summons on 31 March 2020 would have been adjourned as a result of the General Adjournment Period (“GAP”) already announced, this court by letter dated 25 March 2020 asked the parties to state their positions regarding the summons and whether they agreed to disposing of it on paper without an oral hearing.  The Applicant indicated that he did not oppose it.  R1 did not respond and per my direction was treated as not opposing.  The 2^nd respondent (“R2”) opposed and expressly indicated that no affirmation of opposition need to be filed.  All parties who have responded agreed to disposing of the summons on paper, which I now do.

6.  Mindful of dealing in one go with all interlocutory matters that might potentially arise concerning the calling of Yip as a witness, this court by letter dated 13 May 2020 enquired if the Applicant would himself apply for leave to file the witness statement of Yip.  That enquiry is now overtaken by this decision and the Applicant’s response thereto is no longer necessary.

Background

7.  The following are the salient backgrounds.

8.  On 23 September 2015, the Applicant suffered a work injury to his right thumb while renovating Wat’s village house in Fanling (“the House”).  He was then employed by R1.

9.  In the Form 2 dated 18 November 2015, the notice of the accident submitted by the R1 to the Labour Department, it was stated that R2 was the principal contractor. 

10.  By an application dated 19 April 2017, the Applicant claims employees’ compensation against R1.

11.  By a Notice given under section 25B(1)(a) of ECAO dated 20 April 2017, the Board was then informed of the Applicant’s claim.

12.  After a contested hearing in which R2 opposed and by a decision handed down on 28 March 2018, HHJ Levy allowed the Applicant to join R2 to claim against him compensation pursuant to section 24 of the Employees’ Compensation Ordinance (“ECO”) despite the expiry of the 24 months’ period after the accident to make a claim.  Section 24 essentially makes the principal contractor liable to pay employees’ compensation as if he were the sub-contractor employer.

13.  The only issue concerning the liability of R2 is whether he in fact was the principal contractor.

14.  R2’s case, as deposed to in his affirmation filed in 2017 for the said hearing before HHJ Levy, as stated in the Answer and as set out in his witness statement, is this.  Wat engaged R2 to perform water-pipe works in the House. While doing those water-pipe works Wat asked him if he would do other renovation works.  R2 declined as these works were outside his expertise.  He then introduced Wat to Yip.  Then after, Yip contacted Wat directly concerning those works, about which he knew nothing and were not involved in howsoever.

15.  R1 has never taken part in these proceedings.

16.  On 18 October 2019, interlocutory judgment on liability was entered against R1 (“the Default Judgment”) and an unless order was also made that if it failed to file and serve a witness statement as to fact within 28 days, it would “be debarred from adducing any factual evidence in the Trial” (“the Unless Order”).

17.  In late December 2019, the Board through its solicitors eventually was able to contact Wat who said she would provide a written statement, but as noted, has not yet so far.  In early March 2010, Yip provided the Board with the signed proof of evidence, and later, the signed statement.  Hence, this application by the Board.

Yip’s witness statement

18.  It consists of 13 paragraphs and 4 pages.  I have read it de bene esse only so as to gauge into the relevance of its contents for the purpose of this decision.  In gist, Yip spoke therein:-

(a)    about an enquiry made by R2 in early September 2015 as to whether the R1 was interested in being engaged to do some work in the House;

(b)    that he went with R2 to the House on 9 September 2015 to inspect and he then gave a quotation on the price;

(c)    that he or R1 has never met Wat and that he only liaised with R2 in relation to the work done in the House;

(d)    how he knew about the Applicant’s accident;

(e)    that R2 further engaged R1 to do some painting work in the House;

(f)    how R1 got paid by R2; and

(g)    that he had paid the Applicant certain salary for sick leave and medical expenses.

19.  R2 does not seek to dispute that these matters spoken to by Yip are highly relevant to the issue as to whether R2 was the principal contractor.

The Board’s reason for the application

20.  Section 25A(a) of ECAO provides:-

“If proceedings have been initiated to claim compensation or damages (whether initiated before, on or after the commencement* of this section), the Board may apply to the court to be joined as a party to the proceedings as follows—

(a) where no policy of insurance is known to be in force at the time of the accident to which the proceedings relate, the Board may apply to the court to join in the proceedings as a party in accordance with Order 15, rule 6 of the Rules of the High Court (Cap. 4 sub. leg. A) or Order 15, rule 6 of the Rules of the District Court (Cap. 336 sub. leg. H), as the case may require, to take over the defence as if it were the employer in the proceedings if—

(i)   the employer cannot be identified or, if identified, cannot be found;

(ii)   the employer is insolvent;

(iii)   the employer is dead or has been dissolved, wound up or struck off the register;

(iv)   the employer, for any reason, cannot be served with the notice of proceedings; or

(v)  at any time when the employer fails to attend the hearing, leaving the claim uncontested;”

21.  Paragraph 2(b), which is the relevant part, of Order 15 rule 6 of the Rules of the District Court provides:-

“(2) Subject to this rule, at any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application—

(a) … ;

(b) order any of the following persons to be added as a party, namely—

(i)  any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon; or

(ii)  any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.”

22.  It is common ground that no policy of insurance at the time relating to the accident has been taken out by R1 or R2 and that R1 has failed to attend various hearings, leaving the Applicant’s claim uncontested.

23.  Thus, the requirement under section 25A(a) to that extent is fulfilled.

24.  The Board says its interest would be prejudiced because:-

(a)    There was no insurance policy in force;

(b)    R1 is a limited company and in all likelihood would not be able to pay the compensation that would be awarded to the Applicant;

(c)    Having now made claim against R2, even though eventually unsuccessful, the Applicant would have fulfilled the requirements of section 16(3)(a)(ii) of ECAO, thereby making the Applicant eligible for payment from the Employees Compensation Assistance Fund (“the Fund”);

(d)    Without meaning any criticism against the Applicant, the plain practical reality is that if the Applicant fails to establish at trial liability as against R2,

(i)    the only downside for the Applicant is the liability to pay the costs of R2.  As the Applicant is legally aided, such costs would likely be borne by public fund;

(ii)    while R2, who appears to have sufficient assets to pay the compensation, would be let off his liability under section 24 of ECO;

(iii)    the Board would be left paying the compensation which should and could have been paid by R2.

25.  The Board therefore says it is under a duty, and ought to be given leave, to intervene to present properly the case on liability against R2, including proffering the evidence of Yip.

26.  The Board states clearly that it does not wish to disturb the Default Judgment against R1.  I understand also that it does not really seek to intervene in other issues save the one above-mentioned.

R2’s opposition

27.  R2 does not dispute, or seriously dispute, that the interest of the Board would be prejudiced in the circumstances as said in paragraph 24 above.

28.  Mr Fan, counsel for R2, advances 4 grounds of opposition, thus:-

(a)    Substantial delay without reasonable explanation;

(b)    The Board’s “conduct in the EC Claim going beyond the statutory limit”;

(c)    “Default judgment entered against the 1^st respondent”; and

(d)    “The Unless Order”

“The statutory limit” for the Board’s intervention

29.  This ground of opposition, as I understand it, runs thus.

30.  The wording in section 25A(a) of “to take over the defence as if it were the employer in the proceedings” limits the Board’s role in intervening to merely “defending” the employee’s claim whether in liability or quantum.

31.  The purpose of the Board’s present intervention is to try to make R2 liable, and therefore is outside “the statutory limit” of “defending”.

32.  Mr Fan further seeks to booster the point by arguing that the Board “is in effect advancing a counterclaim against R2 via backdoor” when it is well established that a counterclaim has no place in employees’ compensation proceedings.

33.  Mr Fan cites in support his advocated construction of section 25A(a) as imposing “the statutory limit” the descriptions of the Board’s role made by Ribeiro PJ in Wo Chun Wah v Employees Compensation Assistance Fund Board[1]:-

“the legislature must have envisaged the board being able actively to test, limit or resist the employee’s claim”[2]

“a “filtering role” to screen out unmeritorious or inappropriate claim”[3].

34.  I find that the advocated construction is not at all supported by the case, which dealt with the 2 questions placed before the CFA which have no bearing with the now advocated construction of section 25A(a).

35.  Moreover, it is very clear, in my view, that the above descriptions were never meant by Ribeiro PJ to be an exhaustive list of the Board’s role in joining the proceedings under section 25A(a) or the construction of what the words “to take over the defence as if it were the employer in the proceedings” mean, not to mention as imposing “a statutory limit” to the Board’s role when joining such proceedings.  The whole paragraph 24 in that judgment should be looked at:-

“Unlike section 25 (dealing with ECO claims), section 25A(a) is not explicit about the consequences of joinder.  It does not, for instance, expressly provide for the rights and liabilities of the employer to be vested in the Board in respect of the action for damages. Nevertheless, in authorising the Board to take over the defence “as if it were the employer”, the legislature must have envisaged the Board being able actively to test, limit or resist the employee’s claim regarding liability and/or quantum to ensure that the Fund’s resources are properly applied.” 

36.  As can be seen, the learned PJ began in that paragraph by stating that section 25A(a) is not explicit about the consequences of joinder and then observed what the legislature must have envisaged that the Board is thereby empowered to do to ensure that the Fund’s resources are properly applied.  The learned PJ clearly was never addressing his mind regarding the limits of, or limiting the Board’s role in, the joinder.  What was clearly expressed, rather, is the Board’s duty and function to ensure that the Fund’s resources are properly applied.

37.  It is trite that the ECAO should be construed by a purposive approach.

38.  The statutory scheme is clear.  Under section 24 of the ECO, the principal contractor of the sub-contractor who employed an employee to execute work in the course of which injury resulted is liable to pay compensation to the employee as if it were the sub-contractor employer.  Under section 16(3)(a)(ii) of the ECAO, only an employee who has taken such proceedings against a principal contractor to recover payment is regarded as “being unable to recover from an employer” and therefore eligible to apply for payment by the Fund.

39.  Therefore to ensure that the Fund is properly applied, the Board is duty bound on the one hand to properly test or limit (among other things) the employee’s claim, as much as on the other hand, to properly ensure that the principal contractor, who properly ought to pay, pays.

40.  I do not think I am constraint by its wording to read section 25A(a) as thwarting those objectives by limiting it to merely “defending” in the sense now advocated.

41.  In Tu Zhiqiang v Hap Sang Co (a firm)[4],CJHC Cheung (as he then was) observed:-

“In this regard, the taking over of the defence as if the Board were the employer in the proceedings must mean something over and above what a normal intervener would do (that is, contesting the claim). The taking over of the defence must mean the taking over of the defence from the employer, similar (but not entirely identical) to the situation where an insurer takes over from the insured the defence of a claim made against the insured…”[5] (my emphasis)

42.  The learned judge there in no unclear terms observed that by taking over the defence, it must mean something over and above merely contesting the claim.  He likened that to an insurer taking over the defence of the insured.  In that regard, it is not uncommon or impermissible for an insurer, in “defending” the claim against the insured, to try to establish the liability of a co-defendant to achieve an advantage whether in law or to help attain a better bargain or settlement.

43.  R2’s argument and analogy that the Board is in effect “counterclaiming” is clearly wrong, and I reject it.

44.  In my view, section 25A(a) allows the Board to be joined to take such steps in the proceedings as the employer would have been entitled in law to.  I reject “the statutory limit” R2 now advocates together with this ground of opposition.

The Default Judgment

45.  R2 argues essentially that in taking the present steps to try to “make R2 liable”, the Board is trying to circumvent the Default Judgment and therefore is an abuse of process.

46.  With respect, I must reject this argument.  R2 himself submits, rightly, that the liability of R1 and R2 to pay the compensation is joint and several. It therefore follows that even if R2 is liable to pay, R1’s liability in law remains. As a matter of law, R1’s liability would not thereby be replaced by that of R2.  There is therefore no “circumventing” of R1’s liability.  As mentioned, R2 does not challenge that the Board’s interest would be prejudiced in the circumstances alluded to in paragraph 24 above.  It is in my view abundantly clear that the Board is now merely trying to perform its statutory duty to ensure the integrity of the scheme as provided by section 16 of the ECAO, namely that recovery from those liable to pay ought to be properly exhausted before resort to the Fund.

The Unless Order

47.  R2 then argues that the Board is bound by the Unless Order, that it should have first applied for relief against the Unless Order and not try to by-pass it by seeking leave to file the witness statement of Yip.

48.  This argument again is predicated on R2’s construction of the words “to take over the defence as if it were the employer in the proceedings” in section 25A(a) such as to subject the Board to all the consequences of failure hitherto visited upon the employer who failed to attend or contest.

49.  I think the answer is simple.  Section 25A(a)(v) provides that the Board can apply to join “at any time”.  In the usual course of things, it would be most rare for the Board to know that the employer has not attended or has left the claim uncontested before the fact.  The Board would know only after the fact when sometimes various forms of adverse orders have already been made against the employer in his absence.  The Board would not be in a position to explain or justify those failures of the employer so as to seek relief.  The Board would be hand-tied and crippled and would not be fully able to actively test, limit or resist the employee’s claim regarding liability and/or quantum (among others) to ensure that the Fund’s resources are properly applied, which is the very purpose of section 25A(a).

50.  Moreover, as Ribeiro PJ said in the passage quoted in paragraph 35 above: “Unlike section 25 (dealing with ECO claims), section 25A(a) is not explicit about the consequences of joinder.  It does not, for instance, expressly provide for the rights and liabilities of the employer to be vested in the Board　…”.  The section in my view clearly does not seek to substitute the Board for the employer, thereby subjecting the Board to all the consequences of failure or inaction of the employer.

51.  I hold that the Board is not bound by the Unless Order, and this ground fails.

Undue delay

52.  R2 submits that there were unexplained and undue delay.

53.  In the said 2^nd affirmation of Cheng Ching Lim Evan filed on behalf of the Board, he deposed that:-

(a)    solicitors’ letters were sent to Wat and Yip respectively on 26 September 2018 and 6 November 2018.

(b)    Wat did not reply.  Telephone calls to her were also made but could not reached her.

(c)    Yip replied by letter of his solicitors Messrs Au Yeung Lo & Chung dated 27 November 2018 giving answers to the Board’s queries essentially consistent with the contents of Yip’s present witness statement.  I note that the letter ended with the remarks that should the Board had further enquiries they were free to contact them.

(d)     “… further investigations were taken (sic) by my firm.  Since my firm received no reply from Messrs Au Yeung, Lo & Chung, the investigations were stalled” until in mid-January 2020, the solicitors of the Board contacted Yip directly, having learned that he no longer acted by solicitors.

(e)    In December 2019, Wat was eventually contacted.  She said she would provide a statement which has not materialized.

54.  I note that from what was deposed, there appears to be little explanation as to why there were little follow up from early to late 2019. There is clearly delay which has not been quite satisfactorily explained.

55.  However, unexplained delay while is an important factor is not of itself determinative.  The court must look beyond at what prejudice, and its degree and extent, that the delay might have occasioned to the other party and also weight and give due regard to all relevant factors, particularly the primary aim of securing the just resolution of disputes in accordance with the substantive right of all the parties.

56.  It seems that presently, the only pieces of evidence proffered by the Applicant against R2 is the Form 2 and the Applicant’s account of a telephone conversation held between him and Wat (date and time unknown) in which Wat said the person responsible for the works had the surname 趙 [6]. While in the Applicant’s letter dated 30 March 2020 to the court in which the Applicant indicated he would not oppose this summons, it was mentioned that the Applicant intended to subpoena Wat.  To date, no application for a subpoena has been made.

57.  In short, as things presently stand there is a real likelihood that the scenario as put forth by the Board and set out in paragraph 24 above would occur, thereby to the prejudice of the Board.

58.  As said, the contents of Yip’s witness statement are indisputably highly relevant.  I am also of the view that the Board’s presence at trial would assist this court in arriving at a just resolution of the claim.

59.  R2 submits that if the Board is allowed to join and the witness statement is filed, the trial dates “will be postponed since R2 would need time to prepare the supplemental witness statement(s)”.  There was no explanation or details given as to why that is so.

60.  I have given the matter some keen thought.  I am however not persuaded that R2 would not have sufficient time to respond to the witness statement of Yip such that the trial dates would have to be derailed.

61.  As could be gathered by what I have already said, Yip’s version and R2’s version of events relating to the issue whether R2 was the principal contractor are diagonally different.

62.  I have mentioned above that R2 contested against the application by the Applicant to join him as R2.  In support of the point advanced by counsel acting for him that the Applicant’s claim against him was doomed to fail[7], R2 filed an affirmation on 19 December 2017 deposed to his version, which as I observed earlier, is the one maintained by him in the Answer and in his witness statement.  In other words, whether Yip’s statement is only filed now or not, R2 has had ample time and opportunities and indeed ought to have made due preparations in support of his own version, whether by way of producing witnesses or documents.

63.  R2 has had sight of Yip’s witness statement from 20 April to 4 May 2020, the latter being the date of his written submissions, yet he was unable to give any information or details to substantiate why a long time is required to prepare his supplemental witness statement in response, or who the potential witness(es) would be.  It seems to me that the need for a long time to respond is a bare claim without any substance.

64.  In the circumstances, I am of the view that 14 days would be adequate time for R2 to respond to Yip’s witness statement.

65.  In the round, I am persuaded that I should allow the Board’s joinder on terms limiting its participation, as follows, and to grant leave for it to file Yip’s witness statement.

Disposal

66.  In the premises, I make an order that :-

(1)     The Employees Compensation Assistance Fund Board be joined as the 3^rd respondent in these proceedings pursuant to section 25A(a) of the Employees Compensation Assistance Ordinance Cap 365 and O 15 r 6 of the Rules of the District Court, but its participation is limited to appearing at the trial herein in respect of the issue of whether the 2^nd respondent is a principal contractor within the meaning of section 24 of the Employees’ Compensation Ordinance Cap 282;

(2)     The Board do have leave to file and serve the witness statement of葉柱根 dated 18 April 2020;

(3)     The applicant and the 2^nd respondent do have leave, if so advised, to file and serve on or before 29 May 2020 supplemental witness statement(s) in response to the facts spoken to in the said witness statement of葉柱根.

67.  In view of the Board’s delay, I am presently of the view that it is not unreasonable for R2 to oppose.  I propose to make no order as to the costs of this application.  I so order on nisi basis to be made absolute unless any party within 14 days applies in writing to vary which then can be dealt with at the coming trial.

68.  The PTR was originally scheduled to be heard on 31 March 2020 which apart from GAP I also directed to be adjourned pending the outcome of this application.  In view of the tight timeframe, I will issue paper PTR directions on a nisi basis.

69.  Lastly, I thank Mr Yip, Mr Fan and the Applicant’s solicitors for their assistance.

Postscript

70.  Yesterday it was placed before me another round of written submissions by R2 which was sent to the Judiciary’s email address used during GAP and which was lodged without leave despite the direction that leave is required.  It seeks to argue that the Board cherry-picked, was self-contradictory and so on based on R2’s advocated construction of section 25A(a).  Leave was therein sought on the ground that “it is in the interest of justice and necessary”.  I refuse leave.