HKSAR v. HYUNDAI-CCECC JOINT VENTURE AND ANOTHER

HCMA 530/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. 530 OF 2005

(ON APPEAL FROM TWS 14275 & TWS 14276 OF 2004)

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J U D G M E N T

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1.  This appeal raises the point as to whether a contractual joint-venture, which was not incorporated and was not a partnership, could be prosecuted for a breach of the Construction Sites (Safety) Regulations.

2.  All that need be said about the background is that two large corporations entered a joint-venture agreement to construct a container berth and that, following an accident at the construction site where a worker was said to have fallen more than two metres, a summons was issued against the joint-venture complaining that the joint-venture was the contractor responsible for the site and that as such they had failed to take adequate steps to prevent the fall, contrary to regulation 38B(1) of the Regulations.

3.  A preliminary point was taken below on the basis that the joint-venture was not a separate legal entity susceptible to prosecution.  The magistrate ruled that it could be prosecuted since the definition of contractor, defined in section 2 of the Factories and Industrial Undertakings Ordinance Cap. 59 included a ‘person or firm’, and  ‘firm’ was an ordinary word, not restricted to meaning a partnership, which covered, according to the dictionary’s definition, “a group of people working together to further their interests”.  He made the point that public policy would shy from letting persons or corporations avoid their obligations as to site safety merely by entering such joint-venture agreements and made reference to section 14(2) of the Ordinance, which provided derivative liability for persons concerned in the management of a firm that had been convicted of an offence.  In a word he found that this particular legislation provided an exception to the general rule.  The ruling was compelling.

4.  The common law requires a legal entity in the dock as unincorporated associations cannot be criminally liable.  There is no one to punish.  This is so notwithstanding the definition of the word ‘person’ in section 3 of the Interpretation and General Clauses Ordinance, reads “any public body and any body of persons, corporate or unincorporate, and this definition shall apply notwithstanding that the word ‘person’ occurs in a provision creating or relating to an offence or for the recovery of any fine or compensation”.

5.  The question on this part of the appeal is whether the use of the word firm in the context of this legislation provides an exception to the basic rule.  It was argued that the draughtsman of the provision would have been well aware of the definition of firm in section 6 of the Partnership Ordinance Cap. 38, which provided that “persons who have entered into partnership with one another are, for the purposes of the Ordinance, called collectively a firm”.  The magistrate reasonably noted that this definition was specific to its own Ordinance and that the context of safety legislation allowed for a broader net.

6.  Of course, it would be possible for an Ordinance to depart from the basic rule, especially if the prosecution of a firm was a step on the way to establishing derivative liability of a separate legal entity, such as a man involved in the management of the firm.

7.  However, it seems to me a good point that if the intent behind the legislation was to depart from the basic rule it would have been easy to make that clear and to make provision for the problems that would arise from such a departure.

8.  One such problem, and a fundamental one, is what would happen if the joint venture simply failed to appear in answer to the summons.  We discussed this in court and could find no means of compulsion, no route to proceed in absence.  Likewise, what happens if the joint venture declines to pay any fine imposed.  What process allows for enforcement? These considerations demonstrated the strength of the common law’s objection to prosecuting a non-entity.  I believe they revealed insuperable difficulty.  As Stock J, as he then was, said in Jiang Enzhu v. Lau Wai Hing Emily [1999] 3HKC at page 31,

“to convict an unincorporated association would be a legal nonsense”.

9.  It is thus that, with respect, I differ from the conclusion reached by the magistrate.  In doing so it should not be thought that this licenses the flouting and avoidance of this safety legislation.  The two corporations that made up the joint-venture were each amenable to prosecution.  There would have been no problem, and none has been drawn to my attention, in prosecuting these legal entities.

10.  The respondent argued that Regulation 2(2)(a) required a principal contractor to be identified where there was more than one contractor undertaking construction work at a site, and that difficulties in this regard justified prosecuting unincorporated associations and joint ventures.  It was said that only one principal contractor for a site was envisaged by the legislation.  Whilst that may be so in most cases, it seems to me that a joint venture on a fifty fifty basis could be met by the prosecution of both parties on the basis of joint enterprise, applying the usual principles for joint liability in crime.

11.  I find it hard to envisage a case where it would be more difficult to prosecute the legal entity or entities who came together in the joint-venture, than the joint-venture itself.  Even if I am wrong in that assessment, such difficulty pales into insignificance when compared to the problems of punishing and compelling the attendance of something that has no legal existence.

12.  I appreciate from what I was told by the respondent that there is a history of joint ventures being prosecuted by the Labour Department revealing that they have attended and paid the fines levied upon them.  Such pragmatic concerns cannot, however, support a departure from the basic rule, being based on concession by those running the joint ventures and not on the exercise of the powers of the court.  Criminal proceedings cannot be dependant upon a defendant choosing to join in them.

13.  It is thus that the first appellants succeed on the first ground of appeal.  Grounds two and three remain alive for the second appellant, a man who was the contractor with direct control over the work.

14.  The appellants called no evidence at trial.  The only evidence as to the height from which the worker fell came from him.  He put it at over two metres.  The only evidence about practicability came from an expert called by the prosecution who said it was practicable to take adequate steps to prevent such a fall.

15.  In those circumstances it is surprising that it should now be argued in ground two that there was insufficient evidence as to the depth of the pit into which the worker fell and that the magistrate somehow went wrong in relying on the expert, ground three.  I say it is surprising as the evidence was all one way and there was no evidence called to contradict it or explain it.

16.  The written skeleton argument sets out with clarity the arguments relied upon and I will not repeat them.  Neither will I debate the reasoning of the magistrate which some of those arguments engage.  This appeal is a rehearing and the matter is at large (Chou Shih Bin FACC No. 11 of 2004).  I have a full transcript.

17.  The worker put the depth of the pit at three metres.  He did not measure it.  He was in the pit for about ten minutes before he was rescued.  He had been carrying out his usual metal bending work by its side immediately before he fell and had been on the site some considerable time, both of which must have afforded him with the opportunity to observe the pit prior to his fall.  I remember that he was in pain whilst in the pit but argument that his uncontradicted evidence could not support a finding that the distance he fell was more than two metres was wholly unrealistic.  The idea that cross examination damaged the credibility of this witness so completely that his bona fides could not be trusted is completely at odds with the transcript and assertions that a man like this could not estimate that he had fallen into a pit the depth of which was significantly greater than the height of a tall man was not to be sensibly countenanced.  This was especially so when the nature of the site, and features on it such as the pit in question, cannot have been outside the knowledge of the foremen and managers who must have worked there.

18.  The fact that I have not debated how the magistrate arrived at a similar conclusion is no indication that his assessment of the evidence was not reliable.  I found his reasoning convincing.  I reject the attacks upon it made in the grounds of appeal.  There was nothing in ground two.

19.  Ground three meets a similar swift disposal on both a wide and a specific basis.  On a wide basis, my reading of the expert’s evidence reveals an assertion that it was practical to take adequate steps to prevent a fall into this pit from which he never resiled.  He said that there were many ways of erecting a guard rail to fence the edge of the drop, which is no more than common sense.  He suggested a cantilevered system that avoided penetrating the concrete with bolts and the like.  It was argued that an answer in cross examination (page 100 of the bundle letter R) that the legs of such a system could not be kept away from the straight steel bars undid his suggestion.  I do not consider that the answer bears that weight or conclusion.  If that was to be suggested it should have been pursued and put fairly to the witness.  It was not.

20.  However, one need debate the wider picture no further as the magistrate made a finding, which I now make on the material before me, that a safety line, at the least, could have been erected allowing a worker to connect a safety harness to it.  The expert convincingly rejected suggestions of impracticability put to him in cross examination in this regard.  It was argued that an answer by the worker that a lanyard attached to a safety belt would catch on iron bars protruding from the concrete slab if the lanyard was attached to an anchorage point close to the ground, demonstrated that this was not a practicable proposal.  The expert said that installing the lifeline at a height of about 600 mm would avoid the problem.  There was no evidence to contradict him.

21.  Accordingly, I quash the conviction and sentence of the first appellants and award them their costs here and below (no argument being raised that something that does not exist cannot have their costs).  I confirm the order made in respect of the second appellant and uphold his conviction and sentence.

22.  Let me add that I reached the above position without reference to the onus upon a defendant under section 18(2) of the main Ordinance and without reference to the reverse onus on the statutory defence in Regulation 38H.

23.  In the course of argument junior counsel raised the questions of whether the reverse onus was legal or evidential and of compatibility with the Basic Law.  Not a word in this respect appeared in his grounds of appeal or written argument.  I can and do dispose of this appeal without the need to consider the points as the respondents, on the evidence before me, proved their case beyond a reasonable doubt with ease.  There was no need rely on any reverse burden of any nature to resolve this appeal and I did not do so.

24.  If my decision had been otherwise on ground one I would have raised a question of the adequacy of the fine of $15,000, not because the magistrate did otherwise than apply the usual tariff but because that tariff, eaten away by inflation and the application of “average” fines (which includes those levied upon small contractors), has become outdated.  I would be surprised if anyone thought that fining Hyundai Engineering and Construction Company Limited or the China Engineering Construction Corporation such a sum, whether together or singly, was adequate.