YARDWAY MOTORS LTD v. TAM SIU LUN

cacv 135/2003

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 135 of 2003

(on appeal from HCA NO. 4158 of 2001)

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J U D G M E N T

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Hon Rogers VP:

1.  I have had the advantage of seeing in draft the judgments of Mrs Justice Le Pichon JA and Madam Justice Yuen JA.  Whilst I have no doubt that the construction of the two ordinances presents difficulty, I have come to the clear conclusion that this appeal should be dismissed.  I would, however, wish to add a few words of my own, in view of the divergence of opinion which has emerged.  Because the facts of this case are fully set out in the judgment of the judge below and that of Mrs Justice Le Pichon, it is unnecessary to repeat them.

2.  I have no difficulty in interpreting section 25(1)(b) of the Employees’ Compensation Ordinance as enabling the plaintiff, who is “the employer by whom compensation is payable” as having a right of action against the defendant, who is in this context the “third party”, for the recovery of any sum which the plaintiff is obliged to pay by way of compensation under section 6 of that Ordinance.  The question then arises as to whether that is the whole sum or whether it can be part of the sum.  Apart from the fact that the greater would include the lesser, I consider that the construction of the Ordinance itself envisages that the “sum” which may be recoverable under section 25 may not be the whole amount which the plaintiff has to pay in compensation.  Section 25(1)(b) limits the amount recoverable by the employer to the amount of damages that may be awarded in for example a negligence action.  Section 27, for example provides that a lesser sum than the amount paid by the plaintiff in compensation may be recoverable if the employee was contributorily negligent, even though the employer himself maybe blameless.  This is no doubt in keeping with the general purpose of the Ordinance: the employer is liable to make compensation in respect of any accident which happens at work irrespective of fault and a third party only becomes liable in respect of the compensation payable by the employer if there is fault on the part of the third party.  In respect of the third party, his liability to make contribution is fault based.  Under section 25 he only incurs liability if he is at fault.  Unlike the employer, if the employee was at fault, his liability is reduced.

3.  In saying that the “sum” which may be recoverable under section 25 may not be the whole amount which the plaintiff has to pay in compensation, I have not omitted consideration of the case of Wong Man Yip v Wah Kwong Construction [1994] 2 HKC 214.  That case, however, was concerned with the question of whether costs fell within the meaning of “sum” as used in the section.  When Mortimer JA used the expression “complete indemnity”, for example at page 220G, he was not considering the question of whether there could be any reduction due to contributory fault on the part of the employer.  He was simply considering the ingredients which went into the calculation of the “sum”.  The argument based on what was said in that case highlights the danger of treating a judgment like a statute.  Indeed, taken to its logical conclusion, if what Mortimer JA said were applied strictly and not with an attempt to understand it, his statement would override both the proviso to section 25(1)(b) and section 27.

4.  The question remains however, as to whether the claim which the employer can make is liable to be reduced because of his own fault.  In my view, the Employees’ Compensation Ordinance does not prevent that, but similarly does not provide for it.  It is in that respect that the Civil Liability (Contribution) Ordinance is in point.

5.  On this part of the case, I start on the premise that both the plaintiff and the defendant were negligent.  They were both responsible for the accident which caused the death of the deceased.  There is no dispute in this case that an action for negligence would have lain against both the plaintiff and the defendant.  Whether damages might have been recovered and what they would have been is another question. 

6.  Turning to the provisions of the Civil Liability (Contribution) Ordinance, the injury leading to the death of the deceased would constitute damage within the meaning of section 3.  Section 2(3) provides that a person, i.e. in this context a third party, is liable in respect of any damage if someone representing the dependants of the deceased person is entitled to recover compensation from him in respect of that damage, i.e. in this context the death, whatever the legal basis of that liability.  The judge below used the word “dependants” throughout whereas section 6 of the Employees’ Compensation Ordinance uses the term “member of the family”.  Section 2(1) of the Civil Liability (Contribution) Ordinance defines “dependants” as having the same meaning as in the Fatal Accidents Ordinance, Cap. 22.  As far as I have been able to determine the only “member of the family” as defined in section 3 of the Employees’ Compensation Ordinance, when construed with some understanding of what is meant, who would not fall within definition of dependant as defined in section 2(1) of the Fatal Accidents Ordinance would be a brother-in-law or a sister-in-law.  Hence in the remote possibility that employees’ compensation claim had been made by a brother-in-law or sister-in-law it might not have been recoverable by the employer from the third party.  But that is not in this case and hence does not fall for decision.  I have little doubt that this distinction was not intended when the legislation and the amendments were enacted.  Nevertheless, because the statutes provide the basis for a right to contribution and the liability to make it, I think it better that any discrepancy is clarified by legislative rather than judicial process.

7.  I would also add that the amendment to section 6 of the Employees’ Compensation Ordinance made in 2000 is a simplification in keeping with the tenor and original intent of that Ordinance.  Under that Ordinance compensation is and always has been payable to an injured employee, irrespective of any proven loss, on an easily applicable rule of thumb basis.  The introduction of the new section 6 takes away the requirement of proof of dependency in financial terms for the closest relatives and simplifies that proof in a basic way in respect of more distant relatives.  The restriction is to those who can claim under the section to be members of the family.  Broadly speaking, they would be the only persons who, except in 2 exceptional circumstances, come within the definition of dependants in the Fatal Accidents Ordinance.  There is a thus a right to compensation simplified by taking away not only the need to prove fault on the part of the employer but also, in addition, the need to prove financial loss on the part of his relatives who would previously have had to prove that, in those cases where the employee has died as a result of the injury.

8.  Both the plaintiff and the defendant would be liable in respect of the injury to the employee which caused the death.  The plaintiff would be liable both in negligence and under the Employees’ Compensation Ordinance.  The defendant would be liable in negligence.  As already said, what the liability in respect of negligence would be another question.  Section 3 simply provides that the plaintiff may recover contribution from the defendant because the defendant is liable in respect of the injury which led to the death of the deceased.  The fact that that contribution is in respect of compensation payable without proof of fault does not, it seems to me, prevent the contribution from being claimed.  Section 9(3) of the Civil Liability (Contribution) Ordinance provides that the right to recover contribution under that Ordinance supersedes any other right to recover contribution.  As already mentioned the right under section 25 of the Employees’ Compensation Ordinance is not confined to an indemnity, i.e. the full amount of the sum, but may be a partial amount.  If the employees’ compensation payment had been made in respect of a brother- or sister-in-law, the outcome might have been different, but since that has not been the case I see no reason why the claim should not succeed.

9.  I would simply add that although it has not affected my approach to the construction of the 2 Ordinances, the result achieved avoids the illogical result that would occur if a “third party” were 100% liable for the death of an employee the employer would be entitled to claim against him, but if he were 99% responsible for the accident and the employer were 1% responsible, the employer could not recover anything.

Hon Le Pichon JA:

10.  This is an appeal from the judgment of Deputy High Court Judge Line dated 8 April 2003 whereby the defendant was ordered to pay the plaintiff HK$1,076,682.25 (“the award”) with interest.

Background facts

11.  The plaintiff was the employer of the late Cheung Tsz Cheong who died in an accident suffered in the course of his employment.  The deceased had been employed as a mechanic.  As a result of the accident, the deceased’s family members made a claim for compensation under the Employees’ Compensation Ordinance, Cap. 282 (“ECO”) against the plaintiff but they brought no other proceedings, whether a claim for common law damages or under the Fatal Accidents Ordinance, Cap. 22 (“FAO”).  The plaintiff accepted the assessment as determined by the Commissioner of Labour and paid out a sum of HK$1,230,494 in respect of the ECO claim including costs.

12.  The plaintiff brought this action against the defendant seeking an indemnity or contribution in respect of the sum paid to the deceased’s family members.  It is unnecessary to go into the circumstances of the accident resulting in the deceased’s death except to state that the judge found that the accident was very nearly all the fault of the defendant.  The judge found that there had been no contributory negligence on the part of the deceased and that the accident had been caused by both the plaintiff and the defendant.  He apportioned liability between the plaintiff and the defendant in the proportions 1/8th and 7/8ths.

13.  The judge found that the plaintiff had a right to contribution from the defendant under section 25 of the ECO in respect of seven-eighths of the award including costs that the plaintiff had paid to the deceased’s family members.  He further held that the plaintiff also had a right of contribution against the defendant under the provisions of the Civil Liability (Contribution) Ordinance, Cap. 377 (“CLCO”) but in view of section 9(3) of the CLCO, its rights under the CLCO superseded its right of recovery under the ECO.

This appeal

14.  The issue which arises is this: whether the employer has a right of contribution from the third party under the ECO and/or the CLCO where an employee dies of injuries caused by the negligence of his employer (i.e. the plaintiff) as well as a third party (i.e. the defendant).

15.  I will first deal with the position under the CLCO.

Civil Liability (Contribution) Ordinance

16.  Section 3(1) of the CLCO provides:

“(1)  …, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).”

The judge came to the conclusion that section 3 of the CLCO was engaged because, in his view, the plaintiff and the defendant were both liable “in respect of the same damage”.  He considered that the damage suffered in each case was the loss of the support of the deceased.

17.  The defendant had argued against such a conclusion on the basis that the test set out in Howkins & Harrison v Tyler, [2001] 1 Lloyd’s Report PN 1 had not been met.  In that case, Sir Richard Scott V-C (as he then was), stated the test in these terms at page 4:

“  But it seems to me that a simple test should be applied to identify a claim capable of being one to which the 1978 Act can apply.  That test is this: Suppose that A and B are the two parties who are said each to be liable to C in respect of ‘the same damage’ that has been suffered by C.  So C must have a right of action of some sort against A and a right of action of some sort against B.  There are two questions that should then be asked.  If A pays C a sum of money in satisfaction, or on account, of A’s liability to C, will that sum operate to reduce or extinguish, depending upon the amount, B’s liability to C?  Secondly, if B pays C a sum of money in satisfaction or on account of B’s liability to C, would that operate to reduce or extinguish A’s liability to C?  It seems to me that unless both of those questions can be given an affirmative answer, the case is not one to which the 1978 Act can be applied.  If the payment by A or B to C does not pro tanto relieve the other of his obligations to C, there cannot, it seems to me, possibly be a case for contending that the non-paying party, whose liability to C remains un-reduced, will also have an obligation under s. 1(1) to contribute to the payment made by the paying party.”

The judge found the test to have been satisfied for the reasons set out in paragraph 55 of the judgment. 

18.  Mr Bleach SC, who appeared for the defendant, submitted that the judge was wrong in holding that section 3 of the CLCO applied.  His submissions may be summarised as follows.  Where section 6 of the ECO applies, i.e. in fatal cases, the compensation payable thereunder is paid to the family members of the deceased employee whether or not they are ‘dependants’ for the purposes of the FAO.  In such a case, the employer becomes liable to the deceased’s family members who are entitled to recover section 6 compensation from him.  The deceased’s family members therefore constitute ‘another person’ who has suffered damage for the purposes of section 3(1) of the CLCO, the ‘damage’ suffered by the deceased’s family members being the statutory compensation. 

19.  The nub of Mr Bleach’s complaint was that the judge erred in equating a claim by family members with a claim by dependants in that a family member who is not a dependant has no claim at common law or under the FAO.  However, if the family members happen to be ‘dependants’ for the purposes of the FAO, any ECO compensation would be deductible from damages awarded whether they be at common law or under the FAO.  It was said that in those circumstances, it might be arguable that the employer and the third party are liable in respect of the same damage but, in the present case, it was not the plaintiff’s case that the family members were dependants.  Mr Bleach went on to say that such a category of claimant no longer existed when the section 6 compensation claim was brought under the ECO.  Since the amendment made to section 6 by the Employees’ Compensation (Amendment) (No. 2) Ordinance 2000 (“the 2000 amendment”), the entitlement of family members to compensation is irrespective of any ‘dependency’ which previously had to be proved.  Indeed, the Amended Statement of Claim referred to the claim under the ECO by “the deceased’s family members.”  There was never any assertion that they were also “dependants” for the purposes of the FAO.  It was thus not an issue the trial judge had to consider or did consider or, indeed, as to which he had to make a finding.  In any event, a third party can never be liable to family members for section 6 compensation which is the relevant ‘damage’ for the purposes of section 3(1) of the CLCO.

20.  Mr Chan SC who appeared for the plaintiff pointed out that the section 3(1) of the CLCO refers to liability in respect of the same damage but does not specify that the liability had to be ‘to the same person’.  He argued that the ‘same damage’ for which the employer and the third party are liable meant the personal injuries and death suffered by the deceased.

21.  As a preliminary matter, it would be convenient to clarify the meaning of “dependants” and to consider the changes brought about by the 2000 amendment.  It is to be noted that even prior to the 2000 amendment, a difference existed between the meaning of ‘dependants’ for the purposes of the ECO on the one hand and the FAO and the CLCO which had adopted the FAO definition (see section 2(1) of the CLCO) on the other.  The definition of “dependants” in the FAO includes persons who would be “dependants” within the ECO provided such persons could prove dependency on the deceased’s earnings at the time of his death.  Upon analysis, it would seem that a “dependant” within the ECO before the 2000 amendment would necessarily also be a “dependant” for the purposes of the FAO.  It would follow that the employer would be “a person liable” within sections 2(3) and 3(1) and contribution would be available where both the employer and the third party were responsible for the injuries whether or not the injuries were fatal.

22.  The 2000 amendment substituted ‘family members’ for ‘dependants’ in section 6 and eliminated the need for the claimant to establish full or partial dependency before being entitled to compensation.  It came into force on 1 August 2000, just before the death of the deceased which gave rise to the section 6 claim.  See LN 245 of 2000.  But it would appear that the amendment made in 2000 to the ECO was not meant to achieve anything more than “to simplify the determination process by removing any potential dispute over the degree of dependency”.  See the Report of the Bills Committee on Employees’ Compensation (Amendment) (No. 2) Bill 2000, paragraph 10.  “Member of the family” in relation to an employee was defined as a person within one of four categories of relationship, namely, (a) spouse or cohabitee; (b) child; (c) parent or grandparent and (d) a class comprising more distant relatives who had been living with the employee as a member of the same household for 24 months immediately preceding the accident.

23.  It should be noted that the Seventh Schedule to the ECO sets out how the statutory compensation is to be apportioned among eligible members of the family.  Put shortly, the effect comes to this: (1) those in category (d) (i.e. the more distant relatives) do not take at all if eligible members include persons from each of categories (a), (b) and (c); (2) the compensation to be shared by category (d) members is capped at 5% if eligible members include anyone from any of categories (a), (b) or (c); (3) it is only if there are no eligible members from any of categories (a), (b) or (c) that the compensation is shared among category (d) members equally.  It goes without saying that if there are no category (d) members, the compensation will be apportioned among such of categories (a), (b) and (c) members as exist.

24.  Mr Bleach sought to suggest that notwithstanding some overlap, “family members” under the ECO and “dependants” as defined in the FAO are essentially different classes of persons.  But in fact, all family members bar two out of the class of seventeen relationships identified in category (d), namely a brother- or sister-in-law, are also “dependants” within the FAO.  When it is appreciated that a pre-requisite of becoming a category (d) member is to have lived with the employer as a member of the same household for 2 years immediately preceding the accident, that the entitlement to take is capped at 5% if there are eligible members under one of the other categories and extinguished altogether where the employee leaves eligible members under each of categories (a) through (c), it must be an exceedingly rare occurrence for a family member who is entitled to share in the compensation not also to be a “dependant” within the FAO.  The upshot of all this is that the distinction between a family member under the ECO and a dependant under the FAO is more apparent than real: the overwhelming likelihood is that a “family member” is also a “dependant”.

25.  In construing section 3(1), one has to have regard to section 2(3) of the CLCO which provides as follows:

“2.	Interpretation
	…
	(3)	A person is liable in respect of any damage for the purposes of this Ordinance if the person who suffered it (or anyone representing his estate or dependants) is entitled to recover compensation from him in respect of that damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise).”

The phrase ‘the person who suffered [the damage]’ must be referable to the employee who was injured and in fatal cases it must be referable to the deceased employee.  Under the ECO, an employer is rendered liable (under section 5) to pay compensation for death or incapacity to an employee resulting from an accident arising out of or in the course of employment.  In the context of sections 2(3) and 3(1) of the CLCO, in the case of an employee who has been injured, the employer is plainly “a person liable”, the claimant entitled to compensation being the injured employee.  It would therefore be quite extraordinary if the employer should cease to be a person who is ‘liable’ for the purposes of sections 2(3) and 3(1) should the injured employee subsequently die from his injuries.  But that would be the result if one were to follow Mr Bleach’s line of argument.  The reasoning would be along the lines that in the scenario postulated, the employer would not be a person “liable” for the damage (i.e. the injuries and subsequent death) for the purposes of sections 2(3) and 3(1) of the CLCO because the persons entitled to compensation under the ECO may not be “dependants” within the meaning of that term as used in the CLCO i.e. “dependants” as defined in the FAO.  If it is established positively that the “family members” are also “dependants”, Mr Bleach was apparently prepared to accept that in those circumstances, section 3(1) would “arguably” apply. 

26.  That the applicability of section 3(1) should turn on what appears to be a very fine distinction is itself somewhat surprising.  That the distinction is an extremely fine one is borne out by the fact that family members of the deceased entitled to share in the compensation are almost necessarily “dependants” within the FAO for the reasons explained earlier.

27.  I do not understand it to be suggested that pre the 2000 amendment, in fatal cases or where an injured employee subsequently dies from his injuries, the employer was not or ceased to be “a person liable” (as the case may be) for the purposes of sections 2(3) and 3(1).  So, if pre the 2000 amendment an employer was “a person liable” under sections 2(3) and 3(1), one would expect him to remain such a person post the 2000 amendment.  It would be quite remarkable and, in my view, inconceivable, that post the 2000 amendment, for the purposes of sections 2(3) and 3(1) of the CLCO, an employer is a person ‘liable’ for the damage and ‘eligible to claim contribution’ only in cases where the employee is injured but not where the injuries are fatal on the ground that family members could theoretically include a brother- or sister-in-law who cannot qualify as a “dependant” under the FAO.  I do not accept that the amendment introduced in 2000 effected such a change in relation to a contribution claim made under the CLCO or had the effect of requiring the employer to demonstrate that the “members of the family” are “dependants” within the FAO when claiming contribution under the CLCO.  There was plainly no such requirement prior to the 2000 amendment. 

28.  Mr Bleach SC submitted that absent evidence that the family members were also ‘dependants’ under the FAO, there was no basis for equating the deceased’s ‘family members’ under the ECO with his ‘dependants’ under the FAO or the CLCO.  As I understand it, the premise of Mr Bleach SC’s submissions was that for the purposes of sections 2(3) and 3(1), the “damage” suffered can only be referable to “section 6 compensation”, that being a convenient shorthand reference to compensation recoverable under section 6 of the ECO.  It is the correctness of that premise that falls for decision.  For my part, I have difficulty in accepting that sections 2(3) and 3(1) permit such a reading.  For one thing, “compensation” is not a synonym for “damage”: rather, it is the remedy the legislature provided to address the “damage”.  Therefore to substitute “section 6 compensation” for “damage” in sections 2(3) and 3(1) would render those provisions incomprehensible.

29.  No such difficulty arises if “damage” is read as meaning “the death of the employee” in section 2(3) in the context of a section 6 claim i.e. fatal cases.  The same meaning can be carried through to section 3(1).  On this analysis, it matters not that only family members may claim section 6 compensation or that ‘dependants’ is differently defined for the purposes of the old section 6 of ECO and the FAO.  If ‘damage’ (i.e. the death of the employee) occurs, the family members become entitled to section 6 compensation.  The same damage (i.e. the death) can also give rise to a claim by dependants under the FAO or for common law damages against the third party.  The provisions do not expressly state that liability for the same damage has to be “to the same person”.  In my view, there are no compelling reasons to read that requirement into the provisions. 

30.  If, contrary to my view, that requirement is to be read into the provisions, it is satisfied on the facts of this case although neither counsel drew the court’s attention to the relevant documents.  Upon a written request made by this court on 14 February 2005, copies of various documents appearing in the plaintiff’s list of documents were made available.  The documents provided included a Certificate of Compensation Assessment for Fatal Case issued by the Commissioner for Labour on 16 March 2001 pursuant to section 6B of the ECO.  The compensation payable was apportioned among the family members comprising the deceased’s spouse, father and mother all of whom are “dependants” for the purposes of the FAO.  Payment has been effected by the plaintiff and accepted by the family members in accordance with the assessment.  I would add this.  By the time it comes to a claim for contribution, it is inconceivable that the identity of the family members has not been determined.  This point could easily have been resolved at a much earlier stage and had that been done I doubt if the appeal would have been necessary.

31.  For all these reasons, I would dismiss the appeal. 

32.  In view of this conclusion, it is not strictly necessary to deal with the other issue i.e. section 25 of the ECO for it matters not whether contribution is available under section 25(1)(b).  Moreover, as the judge noted in paragraph 57 of his judgment, the right to recover contribution in accordance with section 3 of the CLCO supersedes any right to contribution otherwise than under the CLCO in corresponding circumstances.  So, even assuming that section 25 of the ECO allowed a claim for contribution by the plaintiff, its right to recover under section 3 of the CLCO would supersede any such right under section 25.  However, in deference to counsels’ submissions on this issue, I would make the following observations. 

Employees’ Compensation Ordinance

33.  The plaintiff relied on section 25 as giving it a right of contribution against the defendant.  The defendant argued that section 25 only applies in the case of an indemnity and not where the plaintiff had also been negligent. 

34.  Section 25 provides as follows:

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

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

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

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

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

35.  The judge construed section 25(1)(b) as entitling the plaintiff to contribution.  He noted that whilst the earlier Hong Kong legislation i.e. the Workmen’s Compensation Ordinance enacted in 1953 was modelled on the equivalent English legislation, i.e. section 6 of the Workmen’s Compensation Act 1906, the earlier Hong Kong legislation has been repealed and was replaced by the present section 25 in 1982.  The difference was summed up by the judge in the following passage in his judgment:

“37.  Importantly, the use of the word ‘indemnified’ was dropped and replaced in a differently worded section by a right in the employer against the third party ‘for the recovery of any sum which he is obliged to pay as a result of the accident’.”

The judge also noted that it was common ground that the overriding legislative intent behind that part of the legislation was one that prevented an employee, or his dependants in a fatal case, from recovering twice over. 

36.  The judge considered the English Court of Appeal’s decision in Cory & Son v France [1911] 1 KB 114 and the High Court of Australia’s decision in Public Transport Commissioner of New South Wales v J Murray-More [1975] 132 CLR 336 (which had decided that contribution was not available where the employer is partly to blame).  However, he concluded that those judgments

“34.  … were based variously upon a construction of the words “creating a legal liability in some person other than the employer” (which are common to our s. 25 and their legislation) as being exclusive of a situation where an employer was himself liable at common law to pay damages in respect of the event giving rise to the payment of the employee’s compensation; upon a construction that looked to legislative intent and found no intent to indemnify a wrongdoer in respect of his own wrong and upon a view that the legislation was to do only with a scheme of compensation of which no part was designed for the adjustment of rights between tortfeasors.”

The judge distinguished those cases in that they

“35.  … were decided in the context of different statutory provisions and against the background of different contribution legislation.  When Cory was decided there was no provision in English law for contribution between joint tortfeasors and the Act dealing with contribution in New South Wales at the time of the Public Transport case was in different terms to our Hong Kong Ordinance.  In both cases the legislation in question provided that a workman could sue both his employer under the Act and any third party who was otherwise liable in damages for his injury but that he could not recover both employees’ compensation and damages.  In both cases the word “indemnified” was used in the legislation when it came to considering the rights of the employer liable to pay employee’s compensation against a third party also liable for the relevant injury.”

37.  The nub of Mr Bleach SC’s submissions was that the opening words “creating a legal liability in some person other than the employer” is exclusive as had been construed in the Cory and Murray-More cases.  Not only has the Cory decision been followed in Hong Kong at first instance (see, for example, Wong Yat Chiu v Chan Kwok Wa [1999] 2 HKLRD 849, Tai Hing (a firm) v Chan Yuk Man, unreported, 24 July 1997, A. No. 3473 and Rai Bina v Pacific Crown Engineering, unreported, 26 February 2003, HCPI 338 of 2001), this court in Wong Man Yip v Wah Kwong Construction Material [1994] 2 HKC 214 decided that the indemnity provided by section 24(2) was the same as that provided for under section 25 and meant full indemnity.  The judge was criticized for not referring to Wong Man Yip in his judgment although it had been cited to him.

38.  For my part, I do not consider the Wong Man Yip is of assistance in the construction of section 25(1)(b) since it is not a case dealing with the apportionment of liability.  Rather, the question in that case was the extent of the indemnity only, namely, whether it extended to the costs incurred by the employee and the employer’s legal expenses in the District Court.

39.  Approaching the question purely as one of construction, I would agree with the observations of Gibbs J in Murray-More (at para 3 of his judgment) on the opening words of parallel New South Wales legislation

“Those words, considered alone, are in my opinion ambiguous; they may be intended to be an exhaustive statement and to refer to circumstances which create a legal liability in a stranger but not in the employer, or they may be intended to refer to circumstances which create a legal liability in a stranger whether or not the employer is also legally liable.”

40.  I now turn to consider other provisions in the ECO that may throw light on the meaning of section 25(1)(b).  Section 24 deals with ‘liability in case of employees employed by sub-contractors.”  Whilst there is provision for the principal contractor liable to pay compensation to be ‘indemnified’ by any person who would have been liable to the employee independently of the section, the section is not concerned with the apportionment of liability.  The section is therefore of little assistance. 

41.  There is also section 27 which bears the description “Limitation of right of indemnity against third party under section 25.”  The title suggests that the right under section 25 against the third party is a “right of indemnity”.  The body of the section reads:

“Where an employee or his legal personal representative or member of his family has recovered compensation under this Ordinance or any sum by virtue of an agreement referred to in section 25(1)(b) in respect of an injury caused under circumstances which would give a right to recover reduced damages in respect thereof by virtue of section 21 of the Law Amendment and Reform (Consolidation) Ordinance (Cap 23), from some person other than the employer (hereinafter referred to as the third party), any right conferred by section 25 of this Ordinance on the person by whom the compensation or sum was paid, or on any person called on to pay an indemnity under section 24 of this Ordinance, to be indemnified by the third party shall be limited to a right to be indemnified in respect of such part only of the compensation, sum or indemnity paid or payable as bears to the total compensation, sum or indemnity so paid or payable the same proportion as the said reduced damages bear to the total damages which would have been recoverable if the employee had not been at fault.”

The section only applies where there has been contributory negligence by the employee.  In such a case, the indemnity is capped such that it does not exceed the proportion recoverable by the employee.  Although it has no application to the present case, it does highlight the absence of any mechanism in section 25(1)(b) to limit recovery to the extent that it was caused by the third party where both the employer and the third party have, to some degree, been responsible for the accident.  For this reason, I am of the view that section 25 does not allow a claim for contribution by the employer who is himself partially responsible for the accident. 

Conclusion

42.  I would therefore dismiss the appeal.  I would also make an order nisi for costs in favour of the plaintiff. 

Hon Yuen JA:

43.  For the reasons appearing below, I too would dismiss the appeal.  Put briefly, I do not consider that the employer has a claim against the third party under the Employees Compensation Ordinance (“ECO”) where the employer is himself also at fault.  However, where the family members to whom employees’ compensation is paid are also the employee’s dependants (or beneficiaries of his estate) to whom the third party would be liable at common law (by which I include a claim under the Fatal Accidents Ordinance), I consider that the employer is entitled to claim contribution against the third party under the Civil Liability (Contribution) Ordinance (“CLCO”). 

Claim under s.25(1)(b) ECO

44.  I deal first with the employer’s claim against the third party under the ECO.  The employer has relied on s.25(1)(b) (this section has been reproduced in paragraph 34 of the judgment of Le Pichon JA).

45.  Section 25(1) applies

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

46.  Clearly, “the injury in respect of which compensation is payable” is the personal injury to the employee (including his death); “compensation ... payable” by the employer in respect of the injury includes payments for which the employer is liable under s.6 ECO to members of the employee’s family (see s.3 for the definition of “compensation”); and clearly, the injury to the employee was caused in circumstances where the third party was liable to pay damages to him in respect of the injury.

47.  However, one cannot stop there.  It has been held in Cory & Son v France, Fenwick & Co Ltd [1911] 1 KB 114 that the words “a legal liability in some person other than the employer” limit the section to the situation where the employer was not to blame at all for the accident (at 125).  This construction has been accepted not only in England for 40 years until the workmen’s compensation legislation was abrogated there, but also by judges of the High Court of Australia (Public Transport Commission of New South Wales v J. Murray-More (NSW) Pty Ltd [1975] 132 CLR 336, 339 - 340, 352).

48.  In my view, those words are by themselves ambiguous, but when one reads the rest of the section (and other parts of the ECO), one is driven to the conclusion that this section does not apply to a situation where both employer and third party were liable in common law to the employee.  In other words, the ECO provisions cater only for the simple situation where the employer was not to blame for the injury, and his only liability to the employee was the statutory duty (under the ECO) to pay compensation.  He can then stand in the shoes of the employee and recover what the employee can recover from the third party.

49.  First, s.25(1)(a) provides

“the employee may both claim compensation under this Ordinance and take proceedings against the third party”(emphasis added). 

There is no reference to proceedings being taken against the employer as well as the third party, which is what would occur if the employer was also to blame. 

50.  Secondly, s.25(1)(b) provides in addition

“the employer by whom compensation is payable ... shall have a right of action against the third party for the recovery of any sum which he is obliged to pay as a result of the accident, whetherby way of compensation ... or agreement made with the employee prior to the accident ...”(emphasis added).  

The italicized words show that the employer has a right to recover from the third party the whole of the compensation he (the employer) is obliged to pay the employee.  It is not intended that there would be recovery of a lesser sum, reduced on account of the employer’s own liability for the injury.  It has been held by this court (Penlington, Nazareth and Mortimer JJA) that the words “any sum which he is obliged to pay” provides a full indemnity, not only in respect of compensation, but also interest and costs, both payable by the employer to the employee as well as the employer’s own costs (Wong Man-yip v Wah Kwong Construction Material [1994] 2 HKC 214).  At 220, Mortimer JA noted that “if the intention is to limit the meaning of ‘any sum’, much clearer words could have been chosen”.

51.  The employer’s right to recover whatever sum he has paid is subject only to the proviso to s.25(1)(b), which limits the amount he can recover to the quantum of damages which would have been awarded to the employee but for the terms of the ECO.  This proviso, together with the proviso to s.25(1)(a), ensures that the employee does not recover - and the third party does not have to pay - anything more than the damages to which the employee would be entitled in common law.

52.  Thirdly, s.25(1)(b) goes on to provide that the employer

“... may exercise such right either by joining in an action begun by the employee against the third party or by instituting separate proceedings” (emphasis added).

The italicized words refer to only two options.  They do not contemplate a third option, i.e. an action by the employee for damages against both the third party and the employer, which would be the case if both were to blame for the injury.

53.  Fourthly, s.25(2) requires the employee to inform the employer of his intention to institute proceedings against the third party, and of any abandonment or settlement of the proceedings thereafter, and s.25(3) provides for what is to happen if the employee fails to do so.  Again it is contemplated that the employee would not be suing both the third party and the employer.

54.  In my view, the above points show that s.25 is intended to provide only for recovery of compensation paid by a blameless employer, whose only liability to the employee (or members of his family) is to pay compensation under the ECO, and who consequently would not otherwise be involved in the employee’s action for damages against the third party.

55.  Fifthly, s.27 ECO (which has been reproduced in paragraph 41 of Le Pichon JA’s judgment) supports the above view.  It provides

“where an employee ... has recovered compensation under this Ordinance ... in respect of an injury caused under circumstances which would give rise to a right to recover reduced damages [by reason of the employee’s contributory negligence] from ... the third party, any right conferred by s.25 on the person by whom the compensation was paid [the employer] ... to be indemnified by the third party shall be limited to a right to be indemnified in respect of such part only of the compensation ... as bears to the total compensation ... the same proportion as the said reduced damages bear to the total damages which would have been recoverable if the employee had not been at fault” (emphasis added). 

So, e.g. where an employee has sustained loss and damage of say $1m. in an accident, but was 70% contributorily negligent, then even though the employer has paid $500,000 by way of compensation, the employer can only recover from the third party 30% of the sum of $500,000 that he has paid the employee and he is not entitled to be “indemnified” in the sum of $500,000. 

56.  What is significant is the fact that whilst this section provides for the apportionment of liability as between the third party and the employee, there is no provision for an apportionment of liability as between the third party and the employer, which one would expect if the ECO were intended to provide for recovery by an employer who was partly to blame for the accident.

57.  It is unlikely that the legislature would have intended s.27 (which restricts the employer’s right to recover from the third party) to apply only in cases of a blameless employer who has a right to be “indemnified” if, as the Plaintiff submits, a partly-to-blame employer could recover under s.25.  There are no grounds for thinking that the legislature intended such an extraordinary result.

58.  Sixthly, my view that s.25 provides only for the blameless employer is supported by the use of the word “indemnified” (as between the employer and the third party) in s.27.  The continued use of this word in s.27 indicates, in my view, that no change in the substantive law was effected by the amendment of s.25 by the omission of this word and its substitution by the phrase “recovery of any sum which he is obliged to pay as a result of the accident, whether by way of compensation ... or agreement made with the employee prior to the accident ...”. 

59.  The amendment of s.25 was enacted on the same day as s.24, which refers to an indemnity between subcontractor and principal contractor.  The new phrase “recovery of any sum which he is obliged to pay as a result of the accident, whether by way of compensation ... or agreement made with the employee prior to the accident ...” in place of the word “indemnified” in the old s.25 thus serves to avoid confusion between the two types of indemnity which, in my view, is referred to in s.25:- the employer-third party indemnity and the subcontractor-principal contractor indemnity. 

60.  Accordingly, when s.25(1)(b) ECO is construed in the light of the rest of s.25 as well as s.27, it is clear that it does not provide for the partly-to-blame employer to recover, from the third party, compensation that he (the employer) has paid to the employee (or members of his family).  This was also the conclusion reached by McMahon Dep. J (now McMahon J) in Wong Yat-chiu v Chan Kwok Wa [1999] HKLRD 847, although on the facts found in that case, his views on the point were obiter.  I respectfully agree with the reasons given by the learned judge at 867-872.

Amendment of ECO creating statutory liability for non-dependants

61.  Before turning to the claim under the CLCO, it is necessary to consider first the effect of the amendment of the ECO in 2000 by Ordinance No. 52. 

62.  Prior to the amendment, an employer was liable to pay employees’ compensation to only those members of the employee’s family who were dependant on his earnings. 

63.  After the amendment in 2000 however, the employer was made liable under s.6 ECO to pay compensation to members of the employee’s family (as defined) irrespective of whether they were dependant upon his earnings.  There was created a new statutory entitlement for members of the family, who can lodge applications and appeals in their own right (s.6B(4) and s.6H), entirely independently of the employee’s estate and even though they were not dependant on him. 

64.  To give an example, after the amendment in 2000, an employer would be liable to pay compensation to an employee’s adult son who was not dependant on the employee and who had been left nothing in his will.  By contrast, the adult son would not be entitled to bring an action against a third party tortfeasor as he was neither a beneficiary of the employee’s estate, nor a dependant.  (In fact, as has been pointed out by Le Pichon JA at paragraph 21 of her judgment, even before the amendment in 2000, the classes of persons included in the definition of “dependants” for the purposes of the ECO differed in some respects from those included in the definition of the same word in the CLCO, which followed that in the Fatal Accidents Ordinance.  However, counsel has not referred us to any case in which this point has fallen to be considered). 

Claim under s.3 CLCO

65.  With the above circumstances in mind, I turn to the CLCO to see if the employer was entitled to claim contribution from the third party on the basis that the third party was liable in respect of the “same damage”. 

66.  The employer relied upon s.3 CLCO which has been reproduced in paragraph 16 of Le Pichon JA’s judgment.  Section 3(1) provides

“any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise)” (emphasis added).

Section 2(3) stipulates

“a person is liable in respect of any damage for the purposes of this Ordinance if the person who suffered it (or anyone representing his estate or dependants) is entitled to recover compensation from him in respect of that damage ...” (emphasis added).

The italicized words in s.2(3) make it clear that whatever “damage” means (which will be discussed below), for the purposes of contribution, what identifies the “damage” when considering whether there is “liability in respect of the same damage” is who can sue and who can be sued for it.   In my view, the statute permits contribution only when there is a commonality of liability to the same person, not merely when there is a commonality of the incident (or the victim of the incident) that brought about liability.  And the underlined words make it clear that where a person has died, it is not he who is entitled to recover compensation, but the persons representing his estate or dependants who are entitled (in their own right) to recover compensation.  However, it would be noted that “members of the family” of an employee who are neither beneficiaries of his estate nor dependants, but who have a statutory right to recover compensation in their own right, have not been included in s.2(3). 

67.  The identification of “damage” by reference to liability in claims made (or which could be made) against the parties in a contribution situation was affirmed by the Court of Appeal in Birse Construction Ltd v Haiste Ltd, Watson and others (Third Parties) [1996] 1 WLR 675.  As Sir John May noted (at 680), a more precise analysis is required for the word “damage” when construing s.1(1) Civil Liability (Contribution) Act 1978 (the English equivalent of s.3(1) CLCO).  The analysis must focus on liability, not the facts founding the liability of the parties (in that case, the defective condition of the reservoir and the need to replace it).  The Court of Appeal held that the above section should be construed as “any person liable in respect of any damage suffered by another person may recover contribution from any other personliable to that person in respect of the same damage (whether jointly with him or otherwise)” (at 680H, 682D-E). 

68.  Further, the House of Lords has held that contribution can only be recovered for “the same damage” which means exactly that, not “similar damage” or even “substantially or materially similar damage” (Royal Brompton Hospital NHS Trust v Hammond and others (Taylor Woodrow Construction (Holdings) Ltd Pt 20 defendant) [2002] 2 All ER 801, at §27).  It did not matter greatly whether one spoke of “damage” as “harm” or “loss” (at §6) so long as it is founded on one loss, a common liability to the same person.  Whether there is such commonality depends on the evaluation and comparison of the claims against the party seeking contribution and the party resisting contribution (at §27). 

69.  Thus, where an employee is injured (excluding, for the present analysis, being killed), one may begin by asking the question: who can sue and who can be sued for the injury suffered?  The obvious answer is that the employee (C) can sue, and both the employer (A) and the third party (B) can be sued, the employer under the ECO and the third party under the common law. 

70.  Tracking the words of s.2(3),

-	A is liable in respect of C’s damage, as the person who suffered it (C) is entitled to recover compensation from him (A) in respect of that damage;
-	B is also liable in respect of C’s damage, as the person who suffered it (C) is entitled to recover compensation from him (B) in respect of that damage.

By reason of the fact that both A and B can be sued by C, they are both liable in respect of the same damage.  There is a common liability.

71.  In the case where the employee has died and the statutory class of “members of the family” are neither beneficiaries of his estate nor his dependants, who can sue and who can be sued? 

72.  The members of the family (D) can sue the employer A under s.6 ECO in their own right.  The estate and dependants (E) can sue the third party B under the common law, and as s.3 makes clear, when they do so, it is not the employee who is “entitled to recover compensation” but the estate and dependants.  Thus, when A is liable to D, and B is liable to E, there is no commonality of liability on the basis of which A can recover contribution from B. 

73.  I do not understand the test formulated by Sir Richard Scott V-C (now Lord Scott) in Howkins & Harrison v Tyler and anor [2001] Lloyds Rep 1 to be a variation from the theme of common liability.  His test was postulated on the basis that both A and B were liable to the same person C (at 4).  In any event, the House of Lords regarded his test as being a practical test only, the usefulness of which may vary depending on the circumstances of individual cases.  The House of Lords held that ultimately the safest course is to apply the statutory test of common liability for the same damage (at §28). 

74.  Applying the test of common liability, I hold that in a case where the employer pays employees’ compensation to the members of the employee’s family, without proving that the third party would also have been liable to those persons if they had sued him (the third party), the third party would not be liable. 

75.  In the present case, the employer’s statement of claim only asserted that he had paid compensation to the members of the employee’s family, and did not plead specifically that they were also dependants or beneficiaries of the employee’s estate.

76.  However, materials supplied to the court on its request after the hearing of the appeal showed that the members of the family to whom the employer paid compensation were in fact the employee’s dependants (see in particular the Discharge Form signed by the members of the family - who were identified as the spouse, father and mother of the employee - in which they acknowledge that “in the event common law proceedings are commenced against [the employer] and/or other party arising out [of] the said incident, we hereby agree full credit in the said sum of HK$1,145,494.00 be given and deducted from the sum of damages awarded in favour of us or other dependants of the deceased ...”).  Although not explicitly set out, it was presumably on this material that the trial judge referred to the members of the family as the employee’s “dependants” in paragraph 13 of his judgment. 

77.  On this basis, there was commonality of liability and therefore, the employer was entitled to claim contribution from the third party under the CLCO.  

Hon Rogers VP:

78.  In the circumstances this appeal is dismissed and there is an order nisi of costs in favour of the plaintiff.