WOO KIN WAH v. SOMEC (HK) LTD AND OTHERS

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JUDGMENT

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Kempster, JA:

1. On 9 November 1989 Woo Kin Wah commenced proceedings against both Somec (HK) Ltd ("Somec") and Excellence Plants and Machineries Co ("Excellence") claiming damages for personal injuries sustained by reason of their alleged negligence and breach of statutory duty. There is no claim for compensation under the Employees' Compensation Ordinance (Cap 282). When the action came on for hearing before Deputy High Court Judge Leong on 18th January 1991 he allowed Tugu Insurance Co Ltd ("Tugu"), the insurers of Somec who, by the terms of the policy had the contractual right to take over their defence, to seek an order that Tugu be added as third parties although the application was made by summons and issued only on the previous day. The affidavit in support, seeking leave for Tugu to be joined as third defendants, had been sworn on 14th of that month. Tugu had been notified of the claim in November 1989.

2. Tugu's application was made pursuant to section 43(3) of the Ordinance but Mr. Pirie, who represented them as he does before us, was permitted also to rely upon the provisions of RSC Order 15 rule 6(2)(b). He no longer relies upon that rule. The application was opposed by all parties to the action and the trial judge dismissed it. Tugu appeal and the action stands adjourned pending the outcome.

3. By their Notice of Appeal Tugu appear to seek an order that they be added as parties, and not third parties, to the action. By "as parties" I understand them to mean "as co-defendants".

4. It is alleged in the Amended Statement of Claim that Somec were the contractors responsible for and the occupiers of the site where the plaintiff sustained injuries and that Excellence who, as we now know, had arranged cover for their liabilities with other insurers, were his employers. This allegation Excellence admit. The claim as against Somec is for breach of statutory duty under the Occupiers Liability Ordinance (Cap 314) and the Construction Sites (Safety) Regulations (Cap 59) and against Excellence for negligence and breach of statutory duty.

5. By reason of the terms of section 24(l), in Part II of the Ordinance, it is contended that Somec were also to be deemed the plaintiff's employers for the purposes of section 43 in Part IV. The material words in section 24(1) are

Accepting that each alternative is, if possible, to be given meaning I am satisfied that "compensation is claimed" when sections 16A, 16D and 17 are invoked and "proceedings are taken" when the employee makes an application to the District Court pursuant to section 18A(2); all relating to "compensation" and having no reference to such claims as are made in the action which are for "damages". "Compensation" and "damages" are defined in section 3. There is no substance in Tugu's application in this regard.

6. Since, by the Ordinance, the plaintiff is afforded direct rights as against the insurers of Excellence the next question which arises is whether Excellence have been shown to be sub-contractors of Somec so as to be covered by Tugu's policy. If they are it is "a policy of insurance for the purposes of this Part" (Part IV of the Ordinance) and any sum awarded in the plaintiff's favour against Excellence - independently of the Ordinance - will become due and payable to him by Tugu pursuant to the provisions of sections 43(1) and 44 providing, in the terms of section 43(2) (b) and as was here the case, that Tugu were afforded time to be added as parties to the proceedings. In his affidavit in support of the application, filed by analogy with the procedure under RSC Order 15 rule 6(2) (b) and (3), Mr. Giblin deposes only to the fact that although Tugu had disclaimed liability to indemnify Somec they were, nonetheless, subject to contingent liability to the plaintiff. He was obviously referring to the terms of section 42. No suggestion is made that Tugu may be liable to the plaintiff as insurers of Excellence. Further, there is no averment that Excellence were sub-contractors to Somec or engaged "about the business of the Hong Kong Housing Authority as principal on the construction of Yiu On Estate - Phase 3 at Ma On Shan Area 92 and the Contract No. 187/85" so as to bring them within the parameters of "the Insured"  in the Schedule to the policy exhibited. That lacuna Mr. Pirie has sought to fill by reference to and inference sought to be derived from the pleadings. This will not suffice. It was for Tugu, by affidavit, to show their interest in the matters in dispute or the question at issue between them and any other party and in particular that the policy they had issued covered Excellence.

7. Had Tugu demonstrated that they were liable to the plaintiff under "a policy of insurance for the purposes of this Part" they would have been entitled to apply to be added as a party having "the same right to defend the proceedings as if such insurer were the employer". This right to apply is surely a quid pro quo for contingent and direct liability to the employee.  In my opinion, however, the court cannot be bound to accede to the application despite the wording of section 43(3). Excellence, by itself or its own insurers, is already defending the proceedings and, having regard to the difficulties in ensuring a fair trial that would result, I cannot accept that the legislature is deemed to require the action to proceed with double legal representation in the same interest. .were the word "shall" to be construed as mandatory in its effect, in accordance with its ordinary meaning, it could "... lead to results ... manifestly absurd or unjust ..." to quote Lord Diplock in In re Racal Communications Ltd [1981] AC 374 at p 380. The court must therefore be assumed to have been given the same discretion to grant or refuse leave to an insurer "to defend the action, either alone or jointly with any defendant" as it has in relation to a third party under RSC Order 16 rule 4(4). In context "shall" can be no more than directory and permissive as found in the circumstances of R v Spring Hill Prison Governor [1988] 1 All ER 424 and Re Salcombe Hotel Development Co Ltd (1989) 5 BCC 807.

8. In the absence of any suggestion that Excellence were failing properly to defend their, and thereby. their insurers', interests and taking into account the frank admission that Tugu's sole concern was to invoke the provisions of section 43(4) without recourse to separate proceedings or to arbitration the judge could not have been faulted for declining to accede to the application even if otherwise well founded.

9. For all the forgoing reasons I would dismiss this appeal and make an order nisi for costs in favour of the respondents.

Fuad, V-P:

10. I agree that this appeal should be dismissed, and for the reasons given by Kempster, J.A. However, I wish to add a few observations of my own.

11. Mr. Pirie sought to persuade us that s.24 of the Ordinance, properly construed, imposes liability upon a principal contractor to pay an employee of his sub-contractor not only any compensation due to him under the Ordinance but also any damages awarded to the employee in an ordinary action against his immediate employer. Quite apart from the impact of the definition of the word "compensation" which occurs in s.3 of the Ordinance, as will be seen below, when the legislature intends to refer to any other monetary recompense that might be due to an employee as a result of injury or death, it uses very clear and express language. This is how "compensation" is defined:

          "'compensation' means any of the following -

12. References to damages or sums payable to an employee which are not "compensation" under the Ordinance are to be found, for example, in:

13. In s.3, we find the following definition of "damages":

14. In my judgment, s.24 does not give an employee a right to claim anything other than compensation as defined in s.3 against a principal contractor. An employee cannot rely on s.24 to make the principal contractor liable to him in an ordinary action for damages as if he had directly employed the employee. The section read in the context of the Ordinance as a whole makes this abundantly clear. In so far as Mr. Pirie's submissions rely on s.24 to support the appeal, they fail.

15. I would mention that in Mr. Pirie's helpful skeleton argument he says:" ... by inference the judge in the present case thought that there was no duty on the principal contractor to insure his sub-contractors' employees. Given the industry practice, and the wording of this policy the judge must be wrong." With very great respect I find this an astonishing proposition and I reject it. If the plaintiff had not been insured by his employer, or by the principal contractor, would the latter have been liable to be convicted under s.40(2) if the plaintiff had worked on the site? One has only to ask the question to appreciate how it must be answered.

16. As I construe s.43(1), the sum which forthwith becomes due and payable to the employee by virtue of its provisions, is any sum his employer becomes liable to pay under the Ordinance or independently of it - the words "and the employer of the employee becomes liable to pay" cannot be read as if they were "and any person becomes liable to pay". And in the light of the meaning of the words "employer" and "employee" as defined respectively in s.3 and s.2(1), they cannot possibly be read as including a principal contractor and an employee of his sub-contractor. If this is so, then subsections (2), (3) and (4) of s.43, which are designed to safeguard the position of the insurer, must be read with this distinction in mind.

17. About Mr. Pirie's fears formulated in the following way in his skeleton arguments: "if we do not join in the proceedings, there may be a question of 'res judicata', 'issue estoppel' or 'abuse of the process of the court', to be considered in the later court proceedings, or arbitration between Somec and Tugu", I feel bound to say that they seem to me to be quite unreal and ill-founded.

18. I have reached the firm conclusion that the application to be added as a party under s.43(3) was, as the judge rightly put it, misconceived. The applicant cannot acquire a locus standi by that route.

Penlington, JA :

19. I agree with the judgment of Kempster, JA that this appeal should be dismissed for the reasons he has stated. I am satisfied that the interpretation he gives to the relevant provisions of the Employees' Compensation Ordinance, and in particular sections 24 and 43(3) are correct. In particular I have no doubt that it was not the intention of section 43(3), and it does not allow, the joinder of an insurer as a defendant alongside, but not in the shoes of, the employer. In my opinion the words "shall have the same right to defend the proceedings as if such insurer were the employer" make that clear.