Madam Chung Yuk King v. Fund Wealth Building Materials Holding Co. Ltd. and Others

DCEC590/1998

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES COMPENSATION CASE NO. 590 OF 1998

____________________________________

____________________________________

________________

J U D G M E N T

________________

1. The applicant is the widow of the late Mr Leung Chung-hing who was fatally injured in the course of his employment on 24 February 1998. He had been employed as a member of the crew of a dumb lighter, the "Sumlac No. 2", which had delivered a cargo of bricks to Shenzhen on 23 February and then docked at a nearby fishing port.

2. On the 24th, it was discovered that the lighter required repairs and so he was despatched onshore to purchase spare parts. Whilst in the process of getting to the place where he was to make his purchase, he was hit by a speeding motorcycle and died from his injuries two days later.

3. There are three respondents before the court. The 1st Respondent was thought to be the deceased's direct employers but then it appeared that this may not have been correct and so the 2nd Respondent was brought in. It is now in liquidation. The 1st Respondent is no longer trading and has not taken part in the proceedings.

4. The 3rd Respondent is the 1st Respondent's insurer and in view of its potential liability in this matter, should it be held that the 1st Respondent was the deceased's employer, it has been allowed to be joined as a respondent to protect its interest and to address the argument that it is the 2nd Respondent and not its insured, the 1st Respondent, who should be found to be the deceased's employer at the time when he was killed.

5. And so before me the applicant has been represented by Ms Lee who has submitted that according to the evidence, I should come to the conclusion that is in fact the 2nd Respondent who was the employer and accordingly the case against the 1st Respondent should stand dismissed.

6. Mr Simon Leung who appears for the insurer gladly supports that submission and he does so for the reasons Ms Lee has put forward. Both counsel have most helpfully put in skeleton arguments which set out their reasons for that conclusion.

7. The 2nd Respondent, who as I say is in liquidation, is not represented and the Official Receiver has written to say that he does not intend to appear or to make any representations. As a result, this is very much a one-sided trial where both counsel seek a finding against the 2nd Respondent.

8. All the evidence is contained in the Trial Bundle. I have formally admitted the documents into evidence and the widow has given evidence in order to attest to the truth of her witness statement. This has therefore been very much a paper trial, requiring me to analyse the effect of the various documents.

9. I am not prepared to merely rubberstamp counsel's submissions. In any event, the applicant still bears the burden of proving her case. Before I consider that evidence, I should mention that so far as the 2nd Respondent is concerned, I entered judgment against it on 25 October last year in default of appearance and in default of compliance by it of an order dated 19 April that it file an Answer to the application and a list of the deceased's earnings. That order, although strictly speaking concluding the issue of liability as between the applicant and the 2nd Respondent which would inter alia include the allegation of its employment of the deceased, I consider in these rather unusual circumstances that it is desirable that this issue and the question of whether the death arose out of the employment should be proved on the evidence.

10. I now come to the argument. Once the 1st Respondent had denied in its Answer that it had employed the deceased, further enquiries showed that it was the 2nd Respondent who had been paying the deceased's wages. In view of that it was joined in order to face the allegation that in the alternative it had been the employer. The 2nd Respondent was, as I have already mentioned, wound up, the order having been made on 16 February 2000, and so on 21 August 2000 the requisite leave was obtained from the High Court to continue the application notwithstanding the winding up order.

11. In the statutory Form 2, it was the 1st Respondent who had described itself as the deceased's employer and it was this that prompted the applicant to bring the case against it. The insurer's involvement in this matter derives from the fact that it underwrote Employees' Compensation Policy ECA-98-0037386 (B26) which covered the 1st Respondent and/or its subsidiary companies during the period that is relevant to this application. There is no doubt that there has been some confusion over the extent of the cover provided by this policy and I have been shown a number of documents relating to how that confusion, and indeed mistake, came about. It is not necessary for me to consider that issue here simply because it has no bearing on the identity of the deceased's employer.

12. The matter really starts with an agreement dated 31 December 1997 (B55) whereby the 1st Respondent contracted with the 2nd Respondent to lease five dumb lighters including the "Sumlac 2" on which the deceased served to the 2nd Respondent. Just prior to that, on 18 December 1997, the 2nd Respondent had sold these lighters to the 1st Respondent who then proceeded to lease them back to the 2nd Respondent by that subsequent agreement. The leasing charge was $250,000 per annum.

13. All the records that I have seen, and these appear to be comprehensive, show that the deceased had since August 1997 until his death been paid his wages by the 2nd Respondent (see page A51 and A19-22). If confirmation be needed to show that the 1st Respondent did not pay his wages, the Salaries Tax Return filed by the 1st Respondent for the year ended 31 March 1998 shows that it had no employees (B57). Its bank statements show that since its account was opened in mid-January 1998, the account has been inactive. The 1st Respondent came into being on 8 December 1997 (see C45 being the Certificate of Incorporation on Change of Name). It is clear that the 1st Respondent was not an active trading company.

14. There is nothing in the evidence to suggest that the 2nd Respondent transferred its business to the 1st Respondent and there is no contract of employment or anything of that sort between the deceased and the 1st Respondent. The only matter in common between these two respondents is that they have Mr Wen Ru-ching as a director (see C60 and C67) but in the circumstances this has no effect on the issue before me.

15. The only matter that I need to refer to is the letter at C68 from the 1st Respondent to the Legal Aid Department representing the applicant which explains why in Form 2 the 1st Respondent has been described as the deceased's employer. This all relates back to the confusion over the insurance policy where the intention had been to cover the workmen on the "Sumlac 2" in that policy. In fact, the policy did not achieve that. This, I am satisfied, is why a mistake has been made in Form 2 as to who employed the deceased.

16. The evidence, in my judgment, is all one-way. For the reasons that I have drawn attention to which are also the reasons which have most helpfully been urged upon me by both counsel, it was the 2nd Respondent and not the 1st Respondent who was the deceased's employer at the time of his death. Accordingly, the application against the 1st Respondent must stand dismissed.

17. The next issue is whether the fatal injuries arose out of the deceased's employment with the 2nd Respondent. This can only admit of one answer which is that they did. He was on his way to buy spare parts in order that the vessel that he was employed on should be repaired.

18. Consequently, there must be judgment against the 2nd Respondent on liability and I must now go on and assess the appropriate compensation.

19. Before I do so, I should also formally dismiss the application against the insurer, the 3rd Respondent. Consequent upon the dismissal of the application against the 1st Respondent, it no longer has any potential liability in the proceedings and accordingly no further locus in this matter.

20. Mr Leung has indicated that should I decide this matter in his client's favour, he would not be seeking costs against the applicant or any other party. Accordingly, I make no order as to costs as between the 3rd Respondent and the other parties in the application.

21. Having dismissed the application against the 1st Respondent, one would normally say that costs should follow the event and the unsuccessful applicant should pay the 1st Respondent's costs but in view of the fact that the 1st Respondent has effectively ignored these proceedings save for filing an answer, I consider the most appropriate order to be no order as to costs as between the applicant and the 1st Respondent.

22. I now turn to the question of compensation. Ms Lee has put in a written submission in support of an award of $1,018,080. Mr Leung for the insurer has prepared a submission which he put in de bene esse in the event that I should find the 1st Respondent liable in this matter. He contends for an award of $617,400 and even suggested an approach which would only leave the applicant with a sum of $205,800.

23. In view of the fact that I have found for the 1st Respondent and dismissed the claim against it, I suppose that strictly speaking Mr Leung's submission on quantum is no longer before me in any formal sense because as from the dismissal of the claim against the 1st Respondent, the insurer's interest has also lapsed. As a result, there is no longer any adversarial contest between Ms Lee and Mr Leung on quantum. Nevertheless, that having been said, I must look at Ms Lee's submission critically.

22. Her submission is as follows:

1) The deceased was born on 6 December 1956 and was aged 41 at the time of his death (C2). The applicable amount of compensation payable in a fatal injury to a man of his age was 60 months of his earnings capped at a maximum of $18,000 a month (6th schedule, section 6(1)(b)).

2) At the time of his death, the deceased had been employed by the same employer from 18 July 1997 and over a period of 7 months and 8 days he was paid a total sum of $150,496 (B53b). His average monthly earnings were:

$150,496 divided by 7.27 months equals 20,796.

3) Thus on a whole dependency basis, the maximum amount of compensation recoverable under the Ordinance would be:

$18,000 multiplied by 60 equals 1,080,000.

4) Madam Cheung was partially dependent on the deceased at the time of his death. She worked as a cleaner at a sandwich bar and earned $6,900 a month (C44).

5) According to her witness statement, the deceased used to give her about $7,000 a month for household expenses. Of her earnings she spent about $2,000 on herself and used the balance to pay household expenses which amounted to $12,250 a month (B4). The largest item of expenditure was to service the mortgage loan on the property in which they lived (C38 & 43).

6) It is submitted that the widow's dependency would be:

Mortgage	-	9,000
Management fees	-	470
Rates	-	300
Half of utilities	-	340
Half of food expenses	-	750
A third of household expenses	-	100
Total :	$	10,960

7) Her dependency at the time of the accident would be:

$10,960 minus $4,900 equals $6,060.

8) The widow was aged 40 at the time of the deceased's death (C1). An appropriate multiplier for loss of dependency would be 14 and her loss of dependency would be:

$6,060 multiplied, multiplied by 14 equals $1,18,080.

9) Since this is lower than the statutory maximum, the court is invited to award compensation at $1,018,080 with the usual order for interest and costs.

23. The only matter in her analysis which has caused me concern is the fact that she has left in the mortgage of $9,000 at the full rate, as she has the management fees, when a perfectly respectable argument might be raised to the effect that the widow's dependency in respect of those items which bear directly on the expenses in the upkeep of their matrimonial home should be in the proportion in which they shared those outgoings from their respective earnings when the deceased was alive.

24. Whilst I can see the force of such an approach, it is certainly not one that I am required to take by section 6 of the Ordinance. I hold the basis taken by Ms Lee for calculating the widow's dependency as one which not only accords with the reality of the situation but is also in keeping with the terms of section 6. Accordingly, there must be an award to the applicant in the sum of $1,018,080 together with interest thereon at half the judgment rate from the date of the application until today and thereafter at the judgment rate until payment.

25. The applicant must have her costs of the application against the 2nd Respondent to be taxed on a party and party basis together with Legal Aid taxation of all her costs with certificate for counsel.