WONG LEUNG TAK v. WONG LEE (BROTHERS) TRANSPORTATION CO. LTD. AND ANOTHER

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JUDGMENT

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Clough, J.A.:

1. This appeal raises a number of important questions under the Employees' Compensation Ordinance (Cap. 282).

2. Hip Hing Construction Company Limited ("the principal contractor"), (the second respondent below), appeals against the certificate of award of His Honour Judge Yam giving effect to his determination on the 17th August 1989 of compensation under the Ordinance in favour of the applicant Mr. Wong Leung Tak ("the employee") in the net amount of $251,765 with costs against Wong Lee (Brothers) Transportation Company Limited ("the employer"), (the first respondent below), and against the principal contractor. Pursuant to section 13(2) of the Ordinance the judge ordered the employer and the principal contractor to pay the net amount of the compensation into court and directed that upon payment in there should be an order for payment out of the sum of $251,756 to the Director of Legal Aid who represented the employee.

3. The principal contractor also appeals against the order of the learned judge made at the end of the hearing on the 17th August 1989 whereby, after refusing the application of the principal contractor's counsel for an order of indemnity against the employer under section 24 of the Ordinance in the absence of a third party or contribution notice, the judge gave directions for the filing of pleadings relating to the principal contractor's claim for indemnity and the employer's proposed counterclaim for cross-indemnity under section 25(1) (b) of the Ordinance.

4. The judge's award was made at the hearing of the employee's opposed application made on the 8th July 1988 against both the employer and the principal contractor for compensation under sections 9 (permanent partial incapacity), 10 (temporary incapacity) and 10A (medical expenses) of the Ordinance. No witnesses were called and the following agreed facts were recorded by the judge:

5. A number of documents were also agreed for the purposes of the hearing. These included the building agreement under which the principal contractor had contracted to carry out and complete the construction of four residential blocks and a car park block and associated works at the site in accordance with contract drawings and bills for the price of $270 million. The preliminaries bill, which included a description of the works to be executed, provided that the principal contractor was to be deemed to have allowed in his tender for all costs in respect of all items described in the bill. The following items appeared in the preambles under the heading "CONCRETOR":

6. There were invoices and receipts relating to delivery of steel bars on the 7th January 1988 by the employer from the suppliers Shui Wing to the site. There was also a copy of the statutory employer's notice of an accident to an employee (Form 2 prescribed by regulation 4 of the Employees' Compensation Regulations) dated the 10th January 1988 which is required under section 15 of the Ordinance. This notice had in fact been sent to the Commissioner of Labour by the principal contractor, presumably because it had contracted under the building agreement to send such notices when the occasion arose. In that notice the principal contractor had entered its name in the box headed "Name and address of principal contractor if employer is a sub-contractor".

7. Another agreed document was a section 17 agreement dated the 13th December 1988 made between the employer and the employee agreeing the amount of compensation payable to the employee by the employer at $221,240 less $19,000 in respect of payments already made to the employee by the employer, leaving a balance of $202,240. The agreement was of no binding effect by reason of section 17(11) because it never received the Commissioner's approval under section 17(5) of the Ordinance. The agreement's only relevance is that it shows that at some time or times between the date of the accident and the date of the agreement the employee had recovered compensation amounting to $19,000 from the employer. By the time of the hearing of the application it was agreed that a total sum of $21,924 was deductible in respect of previous payments.

8. The applicant had made his application in Form 1 prescribed by rule 16 of the Employee's Compensation (Rules of Court) Rules which envisages that compensation may be claimed in the same application by an employee against an employer (under section 5) and against a principal contractor (under section 24). In its answer lodged by the employer it had confined itself to a succession of non-admissions leading up to a final denial. The effect of the agreed facts was to leave the employer with no defence to the claim against it under section 5. The principal contractor had lodged an answer but the only issue raised which was not eliminated by the agreed facts was the denial in paragraph 2 that it was a principal contractor or that the employer was a sub-contractor to it within the meaning of the Ordinance.

9. Accordingly counsel for the employee addressed the judge on the basis that there was only one issue to be tried, namely whether the principal contractor was a principal contractor within the meaning of section 24 as submitted by him. Counsel for the employer supported the employee on this issue and made no submission about the employer's liability. Counsel for the principal contractor submitted as his first point that only one party could be liable for compensation payable to the employees, either the principal contractor under section 24 or the employer under section 5. He conceded that if the court had to choose between the two respondents to the application, then the principal contractor would be liable. His second point was that (as also contended on appeal) the principal contractor was not liable at all under section 24 because the supply of steel was no part of the work undertaken by it.

10. Counsel for the employee's reply to the first point raised by the counsel for the principal contractor was to rely on the language of the prescribed form of application as indicating the joint and several liability of the employer and the principal contractor to pay compensation to the employee. The judge determined both issues raised on behalf of the principal contractor in favour of the employee. In his written judgment he held as follows:

11. When the decision went against him counsel for the principal contractor applied under section 24(2) for an order for indemnity against the employer. No previous written application had been made to the court for such indemnity, but this court was informed by counsel at the hearing of the appeal that on the 13th July 1989 the principal contractor's solicitors had written to the employer's solicitors indicating their client's intention to claim an indemnity under section 24(2). The reply by letter dated the 27th July 1989 was to the effect that if such an indemnity were to be claimed the employer would claim a cross-indemnity under section 25 of the Ordinance.

12. The judge accepted the objections raised on behalf of the employer and refused the principal contractor's application for an indemnity under section 24(2). In his written judgment he gave the following reasons for his decision:

13. The issues which have been raised on the appeal are as follows:

(1)    Application of section 24

14. The issue arising under this head has to be determined by the interpretation of section 24(1) and the application of that provision to the facts of this case. However, it will be convenient to set out, at this stage, all the provisions of section 24 which are material to this appeal:

15. Section 3 defines "principal contractor and "sub-contractor" as follows:

16. The argument advanced below and on appeal by Mr Graham for the principal contractor was based on the distinction between "work' as meaning labour bestowed on the one hand and "work" as meaning that upon which the labour is bestowed on the other hand. He relied on Atkinson v. Lumb [1903] 1 K.B. 861 (C.A.) where Collins M.R. identified the meaning of "work" in these two senses in the definition of "Engineering work" contained in section 7(2) of the Workman's Compensation Act 1897. Mr Graham also referred to Stern v. Redpath & Sons, Ltd. [1949] N.Z.L.R. 60 from which it appears at p.65 that the draftsman of the Wages Protection and Contractors' Liens Act 1939 of New Zealand saw fit to define "work" in section 20 of that Act as including inter alia the supply of material used or brought on the promises to be used in connection with the work.

17. Relying on these distinct meanings of "work", Mr Graham pointed out that under the building agreement the principal contractor was obliged to carry out and complete "the Works" shown upon the contract drawings and described by or referred to in the contract bills and conditions. He relied on the "Description of Works" in the preliminaries which was in terms that -

There followed a description of the residential blocks and associated works involved.

18. The emphasis, Mr Graham submitted, was on (the execution of) the actual construction of the works and the work involved in that construction. He accepted that there was an element of work involved in supplying materials needed for the work to be done but stressed that such work was only incidental to the execution of the work undertaken by the principal contractor. On this basis, whilst conceding that the contract made by the principal contractor with the employer for the transportation of and delivery on site of the steel was made "in the course of or for the purposes of" the principal contractor's "trade or business", Mr Graham contended that the contract was not one "for the execution.... of .... any part of any work undertaken by the principal contractor" for the purposes of section 24 (1).

19. For my part I am unable to accept this argument and consider the judge was right to reject it. There can be no doubt that the principal contractor had undertaken under the building agreement to supply and get on site at his own expense the steel required to execute the necessary concreting work involved in the construction of the relevant buildings. The fact that the work involved was incidental to the actual construction work seems to me to be hihil ad rem. The important thing is that it was undertaken under the building agreement by the principal contractor: see Halsbury's Laws of England, 2nd edition, Vol. 34 at paragraph 1245. The principal contractor had sub-contracted the necessary transportation and to some degree the ultimate delivery work to the employer. In the ordinary use of language the principal contractor had therefore undertaken the execution of the work involved but had sub-contracted that work to the employer.

20. I can see no reason for not giving the word "work" its ordinary meaning in section 24. There can be no doubt that if the principal contractor had not sub-contracted the transportation of the steel to the employer (which was a transportation company and not a supplier) but had employed its own vehicles and personnel, then it would have been liable to pay compensation to any of its personnel who might have been injured in the course of transporting and moving the steel on site. Indeed section 24(l) is framed inter alia to impose liability on a principal contractor to pay to a sub-contractor's employee employed in the execution of the relevant work ".... any compensation under this Ordinance which the principal contractor would have been liable to pay if that employee had been immediately employed by him;".

21. The case of Atkinson v. Lumb is not of any assistance in the present context because it was concerned with the actual definition of "Engineering work" contained in section 7(2) of the Workmen's Compensation Act 1897 which was superseded by wholly different provisions in the Workmen's Compensation Acts of 1906 and 1925 which, like the Ordinance, do not define engineering work or any other work.

22. As to the "floodgates" argument advanced by Mr Graham and the uncertainties created for insurers by a liberal construction of section 24(1), I accept that such a construction does create a measure of uncertainty because every case has to be decided on its own facts. However the Ordinance is a piece of social legislation designed for the protection of employees and since its introduction in 1953 the legislature's consistent policy has been to enlarge its provisions in favour of employees. Thus section 24, which was originally section 23 of the Ordinance, formerly contained, in sub-section (5) a provision (reproducing section 6(4) of the Workmen s Compensation Act 1925) restricting the application of the section to accidents occurring on the principal contractor's work site or premises under his control. That provision was repealed by section 19 of the Employees' Compensation (Amendment) Ordinance 1982 (No. 76 of 1982).

23. In a situation like the present where the sub-contractor was performing contractual obligations undertaken, albeit impliedly, by the principal contractor in the course of his trade or business I would have no hesitation in applying section 24. Ultimately it must be a question of degree and remoteness to determine whether in any given set of circumstances a principal contractor has undertaken the execution of the work in question. However, in my judgment this case falls within the ambit of the section.

(2)    Nature of employee's right to claim compensation against the principal contractor under section 24

24. The question whether section 24 confers upon an employee a right to compensation against the principal contractor which is additional or alternative to his right to the same compensation against the employer under section 5 of the Ordinance is one which has been determined at various times in the Scottish and Irish jurisdictions under the corresponding provisions of the Workmen's Compensation Acts of 1897, 1906 and 1925. In those jurisdictions relief under the equivalent of section 24 has been held to be alternative to relief under the equivalent of section 5 of the Ordinance: see Herd v. Summers (1905) 7 F.870 and (1905) 13 S.L.T. 239; followed in Meier v. Dublin Corporation [1912] 2 I.R. 129 and Geddes v. Dunfermline District Committee (1927) S.L.T. 571 and (1927) S.C. 797.

25. These cases are cited in Willis's Workmen's Compensation, 37th ed., at p.221 where it is pointed out that although the then existing rules framed under the 1925 Act in England (see rule 2(2) of the Workmen's Compensation Rules 1926 at p.806 in Willis and c.f. Form 1 at p.864) contemplated that the workman might make both principal and contractor respondents in proceedings for compensation, it had not been decided in any reported case in England whether that was the proper course.

26. Reference is made in Willis at p.221 to Mulrooney v. Todd [1909] 1 K.B. 165 (C.A.) where the equivalent of employer and principal contractor were joined in the same proceedings by the widow of a deceased workman who claimed against both of them. The county court judge made an award against both of them but declared that the principal contractor (i.e. the Bradford Corporation as the principal for the purposes of section 4(1) of the 1906 Act) was entitled to be indemnified by the deceased's employer. On appeal by the Bradford Corporation only Cozens-Hardy M.R. observed at p.168-9:

27. Willis also refers at p.221 to Farleigh v. Parker & Lang (1930) 23 B.W.C.C. 490 (C.A.) where the workman had proceeded against both a building contractor and his employer (a farmer) in the alternative because he was in doubt, in the unusual circumstances of the case, as to which of them was his employer. No point on joinder was taken by the respondents or raised by the Court of Appeal.

28. Mr Graham for the principal contractor, also relied on the obiter dictum of Slesser L.J. in Heywood & Bryett Ltd. v. A. Heywood & Son [1940] 2 K.B. 145 (C.A.) at p.151 where he referred to the right of the workman under sections 1 and 6 of the Workmen's Compensation Act 1925 to have recourse to the employer and the principal "at his option".

29. This court is not bound by the Irish or Scottish decisions although it gives great weight to them and would follow them in the absence of any convincing reason to the contrary, notwithstanding that the decisions, particularly in Meir's case (where the workman was precluded from proceeding against the principal corporation after having obtained but failed to satisfy an award against his employer) caused hardship to the employees and seem to defeat the purpose of the Acts.

30. The fact that the procedural rules and forms 1 and 2 in England under the 1925 Act and the Hong Kong forms (prescribed in rules made by the Chief Justice under section 50 of the Ordinance) contemplate that the employer and principal contractor may both be joined and claimed against by the employee does not decide or control the meaning of section 24: Jackson v. Hall [1980] AC 854 (H.L.) per Viscount Dilhorne at p.884G-H and per Lord Fraser at p.889F; c.f. Hanlon v. The Law Society [1981] AC 124 (H.L.) per Lord Lowry at p.193G.

31. However, after anxious consideration I would not follow the Scottish and Irish cases because I consider there to be weighty dicta, albeit obiter, by Lord Davey in Cooper & Crane v. Wright [1902] AC 302 (H.L.) which I would apply in preference to the reasoning in those cases. In Cooper & Crane the House of Lords held by a majority that a sub-contractor was liable to indemnify his principal contractors under the proviso to section 4 of the Workmen's Compensation Act 1897 where the principal contractors had been held liable to the widow of the sub-contractor's workman as undertakers (with the meaning of section 7 of the Act) under section 4 of the Act.

32. Section 4 of the 1897 Act was in the following terms:

33. The issue which divided the House of Lords was stated by Lord Brampton in his dissenting judgment at p.310 by reference to the argument, as follows:

34. In the course of his judgment supporting the majority view Lord Davey considered the provisions of section 4 and observed at pp.317-18 (emphasis supplied by underlining):

35. The only report of Herd v. Summers available to this court is contained in (1905) 13 S.L.T. 239. It reports the argument in that case and indicates at p.239 that the above dicta of Lord Davey was relied upon by counsel for the appellants, but to no avail. The court upheld the Sheriff-Substitute's ruling that a party seeking compensation under the 1897 Act must elect his undertaker. The Lord President, with whom the other members of the court concurred, observed at p.240:

36. The Workmen's Compensation Act 1906 adopted a different terminology in some respects from the 1897 Act. In particular the definition of "Undertakers" was omitted. Section 4 of the 1897 Act was re-cast as section 4 of the 1906 Act in the following terms:

37. In the light of the decision in Herd v. Summers I would regard the introduction of sub-section (3) as indicating that claims could be made against both principal and contractor to the point of actual award but that the word "instead" made it clear that there could only be actual recovery of an award against one respondent to the extent that it had not already been recovered against the other. However in Meier's Case, decided in 1912 under the 1906 Act (where Lord Davey's dictum in Cooper & Crane does not seem to have been cited), Herd v. Summers was followed and section 4(3) was construed as making it plain, in the opinion of the Lord Chancellor at p.138, that the workman was put to his election as to whether to claim against the employer or the principal and that an award against one or other of them terminated the liability of the other. In the opinion of Holmes L.J. at p.141 and of Cherry L.J. at p.142 section 4(3) implied that the claim could be made against the contractor or the principal, but not both.

38. The provisions of section 4 of the 1906 Act were reproduced as section 6 of the Workmen's Compensation Act 1925 with a slight modification in sub-section (2) which is not here material. In the Geddes case, which was decided under section 6 of the 1925 Act, the Court of Session applied Herd v. Summers and Meier's Case and held that, having accepted payments of compensation from his employer (his father), the workman had elected to take his employer as his debtor in the matter of compensation under the Act and was not entitled to claim compensation against the principals.

39. Section 24 of the Ordinance was first introduced as section 23 when the Ordinance was enacted in 1953. Section 23 in its original form was in substantially the same terms as section 4 of the 1906 Act and section 6 of the 1925 Act, save that the proviso in sub-section (1) relating to agricultural work was omitted and that section 23 introduced the following new provision as sub-section (3) (re-numbered sub-section (7) with modifications in the present section 24):

40. In its present form, as section 24 (set out earlier in this judgment) the section includes (in such-sections (3) to (6)) provisions regarding notices which are perhaps more appropriate for subsidiary legislation and the vocabulary of principal contractor and sub-contractor was introduced under section 19 of the Employees' Compensation (Amendment) Ordinance 1982 (No. 76 of 1982). Also subsection (5) of the original section 23 (corresponding to section 4(4) of the 1960 Act and section 6(4) of the 1925 Act) has been repealed.

41. The present provision has not been substantially amended since it was first introduced and is clearly based on section 6 of the 1925 Act. I accept that the introduction of what is now sub-section (7) tends to lend support to the argument that the legislature contemplated that a claim against a principal contractor under section 24 would not be joined with a claim against an employer under section 5, but I consider that, in importing what is now section 24 of the Ordinance from section 6 of the 1925 Act it must have been the intention of the legislature that the Hong Kong provision should have substantially the same effect as the English provision.

42. Considered in the light of section 19 of the Interpretation and General Clauses Ordinance (Cap. l) and giving section 24 a fair and liberal construction as a provision in legislation clearly intended to insure an employee against an accident taking place in the course of his employment (c.f. the observations of the Earl of Halsbury on the intendment of the 1897 Act in Cooper & Crane at p.323) I would not, unless constrained to do so, by high authority, put a narrow construction upon section 24 which results in the type of hardship to an employee caused by the Scottish and Irish decisions. Such a result seems to me to be one which defeats the obvious purpose of the legislation.

43. The dicta of Lord Davey in Cooper & Crane, although obiter, express an opinion which carries great weight and is in accord with the purpose of the legislation. I would therefore respectfully adopt Lord Davey's opinion and, not being bound by the Scottish and Irish decisions, hold that an employee is given an additional remedy under section 24 of the Ordinance which does not restrict his remedy under section 5 and that the combined effect of sections 5 and 24 is that both the employer and the principal contractor are severally liable to pay compensation to the employee for the same injury.

44. In my judgment the employee is therefore entitled to join both the employer and the principal contractor in the same proceedings and to claim compensation against both of them to the point of adjudication and award after which he is entitled to recover the full amount of compensation from one or other of them. It seems to me that the order made by the county court judge in Mulrooney v. Todd (see p.167 of the report) was right. I can see no reason why, in a situation such as that which arose in Meiers' case an employee should not claim and recover against the principal contractor after he has failed to get satisfaction from an award against the employer.

45. I add that I am fortified in the opinion I have formed on this difficult question of construction by the language employed by the draftsman in the original section 25(1) of the Ordinance (now substantially amended as section 26 of the present Ordinance) which provided as follows:

46. This section derived form section 29(1) of the 1925 Act, which in turn derived from section 1(2)(b) of the 1897 and 1906 Acts. Here the draftsman has used express words to indicate alternative remedies either of which the employee may elect to exercise, but he may not exercise both. It seems to me that if the legislature had intended the right conferred on the employee to claim compensation under section 24 (originally section 23) against the principal contractor to be alternative to his right to claim the same compensation under section 5, it would have used clear and explicit language to that effect as it did in section 25(1).

47. In this connection, Mr Graham for the principal contractor contended that the employee's claims under sections 5 and 24 against the employer and principal contractor respectively were alternative and not several but he nevertheless argued, for reasons which I found difficult to follow, that no question of election arose in the circumstances of this case. This latter contention cannot be right if the claims are alternative claims as in the case of the claims to which the former section 25 of the Ordinance and section 29 of the 1925 Act apply : see Young v. Bristol Aeroplane Company Ltd. [1946] AC 163 (H.L.). In the light of the opinion I have formed to the effect that the proceedings in this case were competent I refrain from expressing any further view regarding election in the present case which was not, in fact, explored below.

48. In reliance on a passage in the judgment of Cherry L.J. in Meier's case at p.143, Mr Graham contended that once a claim was made under section 24 against the principal a claim against the employer was precluded because section 24(1) provided that "... where compensation is claimed from or proceedings are taken against the principal contractor, then, in the application of this Ordinance, references to the principal contractor shall be substituted for references to the employer....". However it seems to me that the only reasonable construction of these words of substitution is to treat them as applicable only for the purposes of the claim against the principal contractor. To give them wider effect as applicable generally would destroy an employer's claim against a negligent principal contractor under section 25(1)(b). That cannot have been intended.

49. Mr Graham for the principal contractor was not at first minded to claim that the indemnity under section 24(2) should include the costs incurred by the principal contractor in the employee's compensation proceedings. He did so only when invited to consider the matter by the court. The editor of the 9th (1926) edition of Elliott on Workmen's Compensation indicates in the notes on section 6 of the 1925 Act that the principal contractor is entitled to include, in his claim for indemnity from his sub-contractor, the costs he has reasonably incurred in the proceedings brought against him.

50. The decision of Darling J. in Great Northern Railway Co. v. Whitehead (1902) 18 TLR 816 is cited for this proposition. However that was a decision relating to a claim by an employer for indemnity against a negligent third party under section 6 of the 1897 Act (corresponding broadly to section 30 of the 1925 Act and section 25 of the Ordinance). The last edition of Willis does not cite the authority as applicable to section 6 of the 1925 Act, but only cites it in the notes to section 30 of that Act.

51. In the absence of any express provision in section 24 or of any English authority indicating that the principal contractor could claim costs incurred in the compensation proceedings as part of his indemnity under section 6 of the 1925 Act and its predecessors under the 1897 and 1906 Acts, I would not be prepared to construe section 24(2) of the Ordinance as extending the relevant indemnity to the costs incurred by the principal contractor in the employee's compensation proceedings.

(3)    The nature of and procedure for enforcement of the principal contractor's entitlement to indemnity under section 24

52. I have no hesitation in following Heywood & Bryett Ltd. v. A. Heywood & Son cited above in holding that the principal contractor's entitlement to indemnity from the employee under section 24(2) of the Ordinance is unqualified and not defensible by any defence of negligence or breach of statutory duty on the part of the principal contractor. The scheme of the Ordinance is to give the employer a separate right to relief under section 25(1)(b) if the principal contractor's negligence has caused the injury to the employee: c.f. section 30 of the 1925 Act and see the observations of Lord Davey regarding section 6 of the 1897 Act in Cooper & Crane at p.319.

53. As to the procedure for the enforcement of the principal contractor's entitlement to indemnity, in the present case no written application wan made and no third party notice was lodged. Under the English rules this would not have been permissible. Section 6 of the 1925 Act had no provisions for notice corresponding to sub-sections (3) to (6) of section 24 of the Ordinance. Under rule 20 of the Workmen's Compensation Rules 1926 a respondent claiming to be entitled to indemnity under section 6 of the 1925 Act against a person who was not a party to the proceedings was required to file a notice of his claim in accordance with Form 23. In default of appearance under rule 21 by the recipient of the notice, the judge was empowered under rule 22 (if the arbitration resulted in an award in favour of the applicant workman), on the application of the respondent, to make such award as the nature of the case might require in favour of the respondent against the third party.

54. Rule 27 dealt with the situation where there was a claim to indemnity as between respondents. The rule provided that the respondent claiming indemnity should issue a like notice and that the same procedure should be adopted as might be issued and adopted respectively against the other respondent if the latter were a third party. This had the effect, by virtue of rule 27, of making rules 20 to 25 applicable. The practical result was that a notice under rule 20 claiming entitlement to indemnity was also necessary where there was a claim to indemnity as between respondents to the same proceedings: see Appleby v. Horseley Co. (1899) 2 QB 521 (C.A.) and Willis at p.222 indicating that effect was given to this decision by rule 27.

55. However the scheme of the Ordinance and the Employees' Compensation (Rules of Court) Rules has always been different in Hong Kong. Under section 24(6) an employee is required, before making any claim or application under section 24 against a principal contractor, to serve him with a notice giving the information stipulated in that provision, which includes the name and address of the employer sub-contractor and the amount of the compensation claimed. Under section 24(7) of the Ordinance a principal contractor against whom a claim or application is made by an employee under section 24 is required to give notice thereof to the sub-contractor specified in the section 24(6) notice who is "thereupon entitled to intervene in any application made against the principal contractor".

56. The notice provision contained in section 24(7) is picked up by rule 22(1) of the Employee's Compensation (Rules of Court) Rules which requires that a notice, presumably under section 24(7), to a sub-contractor of a claim or application for compensation made against the principal contractor shall be in Form 10, which is a simple form giving notice of the claim and making no reference to a claim for indemnity by the principal contractor against the employer. Rule 22(1) goes on to provide that if the employer sub-contractor to whom such notice is given desires to intervene he is required forthwith to lodge with the registrar of the court and serve on the applicant and the principal contractor a notice, in Form 11, that he so intervenes.

57. Having so intervened, the sub-contractor is required to lodge an answer to the application in accordance with rule 22(2) and under rule 22 (3) the court may on the hearing of the application, if satisfied that he is entitled to intervene, order that the sub-contractor be made a respondent. Rule 23 provides as follows:

58. These rules are not very satisfactory. Thus whereas Forms 1 and 2 prescribed by rule 16 seem to contemplate that an employer sub-contractor and a principal contractor may both be joined as respondents in the same application initiating the proceedings where the employee claims compensation against the employer under section 5 and against the principal contractor under section 24, rule 22 seems to be framed on the basis that a sub-contractor who receives a section 24(7) notice will not have been made a respondent and will not be a respondent until made so under rule 22(3).

59. Furthermore if a sub-contractor who has been served with a section 24(7) notice fails to appear before the court he is deemed under rule 23 to admit the validity of both any order made under section 24 against the principal contractor and his own liability to indemnify the principal contractor to the extent claimed in the section 24(7) notice. This notwithstanding that neither section 24(7) nor the notice prescribed in Form 10 is expressed to require any claim of indemnity to be made in the notice.

60. The Rules certainly require re-consideration in relation to these matters. Be that as it may, I can see no reason why the principal contractor should have been denied the order for indemnity which he sought on the oral application of his counsel at the hearing. This court was informed that a section 24(7) notice had been duly served on the employer. The employee had joined the employer as a respondent with the principal contractor. No point had been taken by the employer on joinder. The employer had not sought to deny its own obligation under section 5 to pay compensation to the employee and it had, by its counsel, supported the employee's claim against the principal contractor under section 24. I cannot see what conceivable practical reason or principle of fairness necessitated the giving of any notice of claim for indemnity under Form 3 (the form prescribed under rule 16 for a general application), as contended by Mr Bharwaney.

61. The decision in Appleby v. Horeseley Co., relied on by Mr Bharwaney, is not in point because it turned solely on the relevant rules which were there applicable and have no counterpart in Hong Kong. Moreover that decision preceded the decision of the Court of Appeal in England in Heywood & Bryett Ltd. v. A. Heywood & Son to the effect that the principal contractor's claim against the employer was absolute and unqualified. In my judgment the refusal of the oral application for indemnity by counsel for the principal contractor is not sustainable in so far as that refusal was based on the absence of any written application for the indemnity.

(4)    Employer's claim against principal contractor (as "third party") under section 25(1)(b) and procedure for enforcement of that claim.

62. I have already rejected the construction of the substitutional language in section 24(1) that would destroy the employer's claim against the principal contractor as the "third party" under section 25(1)(b). I also accept Mr Bharwaney's argument that it cannot have been the intention of the legislature that the employer's claim against the principal contractor under section 25(1)(b) should be maintainable where the employee has chosen to confine his claim to one against the employer under section 5, but not maintainable where the employee has chosen to invoke section 24 against the sub-contractor who has obtained an order for indemnity against the employer.

63. As to the procedure for the enforcement of the employer's claim against a negligent (or otherwise liable) third party under section 25, the original provision in the Ordinance dealing with such a claim was section 24 of the 1953 Ordinance which expressly provided that all questions relating to the right to and amount of such a claim should, in default of agreement, be settled by "civil action": see Ng Mei Ho v. Leung Sil [1962] D.C.L.R. 52 where Judge Huggins (as he then was) held, by reason of the express provisions of section 24 that he had no jurisdiction, in proceedings by an alleged employee against his alleged employer for compensation under the Ordinance, to make an order of indemnity against a third party in those proceedings.

64. The original section 24 was replaced by a new provision under section 19 of the Workmen's Compensation (Amendment) Ordinance (No. 55 of 1969), which was in turn reproduced with amendments as the present section 25 by section 19 of the Employees' Compensation (Amendment) Ordinance 1982. Section 25(1) is in the following terms (with emphasis supplied):

65. Mr Bharwaney, for the employer, sought to rely on King Tak-on v. Lau Chun Yip [1987] 1 HKLR 126 (C.A.) (which was concerned with the employee's right of recovery against his employer's insurer under section 44 of the Ordinance) in support of his proposition that the employer's claim under section 25(1)(b) for the recovery of the amount of the indemnity payable by it to the principal contractor under section 24 was "a claim for compensation" within the meaning of section 18A. He also contender that the words ".... may exercise such right either by .... or by instituting proceedings" in section 25(1)(b) were permissive and to be construed as merely enlarging the jurisdictional provisions contained in section 18A(1). Mr Bharwaney contended that this permissive language in section 25(1)(b) did not prevent the employer from recovering against the principal contractor under that section in the compensation proceedings.

66. For my part the language of section 25(1) seems to be unambiguous and clearly indicating that the employer's claim in the present circumstances can only be brought in the High Court. Section 25(1)(a) obliges the employee, if he seeks damages against a third party (in addition to or in lieu of claiming compensation under the Ordinance), to take proceedings against the third party to recover those damages in the High Court or the District according to which of those courts has jurisdiction. There can therefore be no question of the employee's claim for damages being entertained in the compensation proceedings. The two sets of proceedings are separate and distinct, even if the amount of the claim for damages is within the civil jurisdiction of the District Court.

67. Although section 25(1) (b) relates to a situation where it is the amount of compensation or the payment of indemnity in respect of that compensation which is being sought to be recovered against a third party, that provision is expressed to give the claimant "a right of action against the third party for the recovery" of the relevant sum. The permissive word "may" which follows in the provision is clearly expressed to be merely to give the claimant the option of pursuing his claim by joining in the employee's action (if any) against the third party under section 25(1)(a) or by "Instituting separate proceedings".

68. In their context the latter quoted words can only mean a separate action in the High Court or the District Court. As the claimant under section 25(1)(b) is given "a right of action" which may be separately instituted or joined with any action which the employee might bring against the third party it seems to me that there can be no possible textual or other basis for interpreting section 25(1)(b) as permitting the claimant to pursue his claim in the compensation proceedings. I therefore conclude that the judge's order giving directions to facilitate the prosecution by the employer in these proceedings of his claim against the principal contractor under section 25(1) (b) cannot stand.

69. As to the question of the stay of the indemnity award under section 24 in favour of the principal contractor, which the employer first sought at the hearing of the appeal, pending the determination of its section 25(1)(b) claim against the principal contractor, it seems to me to be just, under the circumstances of this case, that a stay, in suitable terms, should be granted. This court was informed by counsel that the principal contractor had paid into court the amount of the outstanding compensation specified in the judge's order. The employee, whose interest the Ordinance is primarily concerned to protect, is therefore assured of his compensation for his injury.

70. The scheme of the Ordinance is to make the employer ultimately liable for the employee's compensation where the principal contractor (or some other third party) has not incurred legal liability for the injury sustained by the employee. However, where the principal contractor has incurred such liability, the effect of section 25(1) (b) is to put the ultimate liability for the compensation on the principal contractor. Mr Bharwaney has rightly conceded that the employer's claim under section 25(1) (b) cannot be relied upon by way of defence to the principal contractor's claim for indemnity under section 24(2). The position is, in my opinion, analogous to that where a defendant in Order 14 proceedings raises a counterclaim for not less than the amount of the claim but cannot rely on it by way of set off against the claim. In such circumstances the court may give judgment on the claim with costs, with a stay of execution pending trial of the counterclaim: see the 1988 Supreme Court Practice, Vol. 1, p.145.

71. The fact that the employer's claim under section 25(1) (b) cannot be brought in the compensation proceedings should, in my opinion, be given less weight than the manifest intent of the Ordinance to place the ultimate liability for the payment of an employer's compensation on a third party who has incurred legal liability, by reason of negligence or breach of statutory duty, for the employee's injury.

72. There was no suggestion that the employer's claim under section 25(1) (b) was not bona fide or that it was lacking in merit. Any deferment of the payment of the principal contractor's indemnity payment under section 24(2) could (if section 21(3) is not applicable) be compensated for by a condition, inserted in the order directing a stay, requiring the payment of interest by the employer in respect of the indemnity sum. I would therefore favour a suitably framed order granting a stay of execution of the proposed order requiring the employer to indemnify the principal contractor under section 24(2).

73. Accordingly I would allow the principal contractor's appeal in part to the extent indicated in this judgment and I would also allow the employer's cross-appeal.

Sir Derek Cons, V.P.:

74. I am in full agreement with the conclusions expressed by My Lord and with the orders he proposes. I would add only two short continents.

75. Firstly, it seems to me that the difficult question of whether the delivery of the steel bars to the site was "work undertaken" by the principal contractor is not helped by a close study of the terms of the contract between the contractor and the Hongkong and Shanghai Hotels Ltd. Those terms would be relevant to an examination of the situation if it fell within the second sense of "work" suggested in Atkinson v. Lumb, i.e. "that upon which labour is bestowed .... a physical thing embraced in a physical area". But in my judgment it is not necessary to go that far. Work can be undertaken without the need for contractual liability, as e.g. in Mulrooney v. Todd. In the present instance the contract with the Hongkong and Shanghai Hotels Ltd. merely provided the setting in which the contractor took a particular piece of work upon himself - one of the meanings of "undertake" given in the shorter Oxford English Dictionary - namely, the fetching of property which it had earlier purchased. Provided that particular piece of work was "in the course of and for the purposes of (the contractor's) trade or business", which it clearly was and was so conceded, liability would attach.

76. Secondly, even without the benefit of the dicta from Cooper v. Crane, to which we were not referred in the course of argument, I would take the remedy given to the employee under Section 24 to be additional rather than alternative to that under Section 5. With the greatest respect to those who have held otherwise, I do not find that the language of the Ordinance points inexorably to the latter construction, while its spirit seems necessarily to favour the former. I am unable to envisage the "difficulties and complication" at which Holmes, L.J., hinted in Meier v. The Corporation of Dublin.

Kempster, J.A.:

77. I also agree with the orders proposed by Clough J.A. and with his reasons.

Sir Derek Cons, V.P.:

78. The principal contractor's (second respondent's) appeal will therefore be allowed to the extent only that :

79. The employer's cross-appeal is also allowed and, upon the undertaking of the employer to commence forthwith an action in the High Court against the principal contractor under section 25(1)(b) of the Ordinance for the recovery of the sum of $251,756 which it is liable to pay by way of indemnity to the principal contractor, there shall be an order staying execution, until the determination of that action or further order, of the order requiring the employer to indemnify the principal contractor in the sum of $251,756.

80. The order will include liberty to apply generally. It is to be hoped that the employer and the principal contractor will be able to come to terms regarding interest in respect of the deferment of payment of the principal contractor's indemnity under section 24.

81. We will make the following order nisi as to costs. The principal contractor will pay the employee's (applicant's) costs of the appeal and we direct a legal aid taxation of those costs. The employer will pay half the costs of the principal contractor on the appeal. The order for costs below will remain undisturbed.