YU CHI KONG v. CHAN SIK PAN AND OTHERS

FACV Nos 4 and 5 of 2001
(Consolidated)

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 4 OF 2001 (CIVIL)

(ON APPEAL FROM CACV NO. 108 OF 2000)

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J U D G M E N T

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Chief Justice Li:

1. I agree with the judgment of Mr Justice Bokhary PJ.

Mr Justice Bokhary PJ:

Introduction

2. There are two appeals before the Court in this case. They have been consolidated. Both are from the judgment of the Court of Appeal in a single appeal. That appeal was from the judgment of the Court of First Instance of the High Court in a single action.

3. That action arose out of an accident at work. The accident occurred on 21 August 1992 in a building which was undergoing renovation, namely Windsor House in Causeway Bay. Mr Chan Sik Pan was a fire installations technician. He was standing on a platform in order to work on a fire duct on the ceiling of a staircase landing. This work involved the use of a pair of chain pliers. The pliers broke. This led to Mr Chan losing his balance. The platform on which he was standing had no guardrails. As a result he fell off the platform and was injured. Mr Chan blames his employer. But who was his employer?

4. The main contractor for the renovation works was OLS International Ltd. OLS International subcontracted part of the renovation works to Carrier Hong Kong Ltd. The part so subcontracted included all the fire installations works. Carrier Hong Kong sub-subcontracted all the fire installations works to Wylam's Services Ltd ("Wylam"). Mr Leung Kwok Chau and Mr Yu Chi King each became involved in the fire installations work. In what capacity they were each so involved is in dispute. By or through a Mr Tong Kin Hung, Mr Chan was recruited to work on the fire installations works. So recruited, Mr Chan started work on those works on 11 August 1992. As I have indicated, his accident occurred on the 21st of that month.

5. Section 15 of the Employees' Compensation Ordinance, Cap. 282, obliged Mr Chan's employer to give the Commissioner of Labour notice of Mr Chan's accident. The form prescribed for giving notice of such an accident is Form 2 in the Schedule to the Employees' Compensation Regulations. On 8 October 1992 Wylam gave the Commissioner notice in Form 2 of Mr Chan's accident.

6. After so notifying the Commissioner, Wylam entered into two agreements with Mr Chan to make periodical payments to him in respect of compensation under s.10 of the Employees' Compensation Ordinance for temporary incapacity. One of these agreements is dated 14 January 1993. The other is dated 26 May 1993. Wylam made two such periodical payments to Mr Chan.

7. On 16 August 1994 Mr Chan commenced employees' compensation proceedings in the District Court, seeking employees' compensation under heads other than that of temporary incapacity. In his Application, he named Wylam as his employer and Carrier Hong Kong as principal contractor. In its Answer, Wylam denied that it was Mr Chan's employer. Mr Chan later amended his Application to bring in Mr Leung. Later still Mr Chan re-amended his Application to bring in Mr Yu as well. So by the time the Application had been re-amended, the averment thereunder was that Wylam, alternatively Mr Leung, further alternatively Mr Yu was Mr Chan's employer.

8. On 2 July 1999 the employees' compensation proceedings came to an end when Mr Chan accepted the $250,000 jointly paid into court by Wylam, Mr Leung and Carrier Hong Kong in respect of his claim for employees' compensation.

9. That left Mr Chan's common law action in the Court of First Instance for damages in negligence for breach of employer's duty of care. Mr Chan had commenced this action on 5 July 1995. Initially he sued Wylam alone. But he then amended to join Mr Leung because Wylam pleaded that Mr Leung was the employer. And he then re-amended to join Mr Yu because Mr Leung pleaded that Mr Yu was the employer. So by the time Mr Chan's Statement of Claim had been re-amended, the averment thereunder was that Wylam, alternatively Mr Leung, further alternatively Mr Yu was Mr Chan's employer.

Result at first instance

10. The trial of the action was split. The issue of quantum has still to be tried. The issue of liability came on for trial before Deputy Judge Z.E. Li in December 1999. On 3 February 2000 the judge gave judgment on the issue of liability. He: (i) held that Wylam was Mr Chan's employer; (ii) found Wylam liable to Mr Chan in negligence for breach of employer's duty of care; (iii) entered judgment in favour of Mr Chan against Wylam for damages to be assessed; (iv) dismissed the claim against Mr Leung and Mr Yu; and (v) awarded costs in favour of Mr Chan, Mr Leung and Mr Yu against Wylam.

Result in the Court of Appeal

11. Wylam appealed to the Court of Appeal, making Mr Chan, Mr Leung and Mr Yu the respondents to that appeal. On 31 July 2000 the Court of Appeal (Leong JA as he then was and Wong and Woo JJA) allowed Wylam's appeal so as to set aside the judgment against it. On Mr Chan's respondent's notice which had contended that Mr Yu would be liable to Mr Chan as his employer if Wylam was not, the Court of Appeal entered judgment for Mr Chan against Mr Yu. The Court of Appeal made an order nisi that the costs before and below it be borne by Mr Yu. Finally the Court of Appeal gave liberty to apply on the issue of quantum.

Relief sought from this Court

12. Wylam is insured. Neither Mr Leung nor Mr Yu are insured. They may not be substantial. Before us Mr Yu, like Mr Chan himself, is on legal aid. Mr Leung is in person. By the Court of Appeal's leave, both Mr Chan and Mr Yu now appeal to this Court against the Court of Appeal's judgment. Mr Chan made Wylam and Mr Yu the respondents to his appeal. Mr Yu made Mr Chan, Wylam and Mr Leung the respondents to his appeal. As I mentioned earlier, these two appeals have been consolidated. Mr Chan and Mr Yu ask this Court to reinstate the judge's judgment. Failing that, they ask this Court to order a new trial on the issue of who was Mr Chan's employer. Wylam asks this Court to affirm the Court of Appeal's judgment.

13. In asking us to reinstate the judge's judgment, Mr Patrick Fung SC for Mr Chan and Mr Mohan Bharwaney for Mr Yu submit that the judge's finding that Wylam was Mr Chan's employer is supported by the evidence and ought not to have been disturbed by the Court of Appeal. Mr Ruy Barretto SC for Wylam contests this submission, arguing that the Court of Appeal was justified in holding that Mr Yu was Mr Chan's employer.

14. In asking us at least to order a new trial on the issue of who was Mr Chan's employer (if we are not prepared simply to reinstate the judge's judgment), both Mr Fung and Mr Bharwaney rely on the fact that (unbeknown to the Court of Appeal until the time when it was asked to grant leave to appeal to this Court) the judge had prevented Mr Yu from going into the witness-box. The judge's reason for doing this must have been because he felt able, even without taking Mr Yu's testimony, to decide in Mr Yu's favour that Wylam rather then Mr Yu was Mr Chan's employer.

15. Mr Barretto opposes a new trial on several bases. I will deal with them in due course.

16. When Mr Leung, who appeared in person, was invited to address the Court, he said that he did not wish to say anything. When that invitation was repeated, he said that he thought that the Court of Appeal was right. Of course if Mr Barretto succeeds in his argument that the Court of Appeal's judgment should be affirmed, then that would serve not only Wylam's purposes but Mr Leung's purposes too.

Judge's reasons

17. Referring to Mr Leung and Mr Yu, the judge said:

"Because those two defendants without compulsory insurance could not employ anyone, it is not open to the court in the circumstances of this case to find that Mr Leung or Mr Yu was the employer of Mr Chan."

He then immediately went on to say:

"In the premises, I find that there was a contract of employment between Mr Chan and Wylam."

18. Just because someone did not take out the insurance which an employer had to take out, it does not mean that he cannot have been the employer. The Court of Appeal was plainly right when it held that the judge's reasons were wrong. Anticipating that the Court of Appeal would so hold, Mr Chan's legal advisers had filed a respondent's notice setting out other reasons why they said that Wylam was Mr Chan's employer.

Court of Appeal's reasons

19. In setting aside the judge's finding that Wylam was Mr Chan's employer and substituting for it a finding that Mr Yu was Mr Chan's employer, the Court of Appeal thought there was "overwhelming" evidence that Mr Yu was Mr Chan's employer. But in granting leave to appeal to us, the Court of Appeal said:

"As far as the merits of Mr Chan' s proposed appeal are concerned, Mr Fung relied on the fact that there was no part of our judgment which dealt with the ground raised in paragraph 5A of the Amended Respondent's Notice. That paragraph referred to various admissions made by Wylam that it was the employer of Mr Chan. Although we do not accept that the so-called admissions availed Mr Chan in attaching liability to Wylam, we are not disposed to say that the ground was so lacking in merit that leave should not be granted. We are further impressed with the fact that Mr Yu was not allowed to continue with his evidence before the judge. Perhaps the judge had come to a tentative view that Mr Yu would not be found liable so that his continuing with his evidence was quite unnecessary. Anyhow, Mr Yu should not be deprived of an opportunity to raise the points which he now raised which had not been dealt with by the judge or by us in our former judgment."

In fact, the judge had not merely prevented Mr Yu from completing his evidence but had prevented him from giving any evidence at all.

20. Let us turn to the evidence which the Court of Appeal had regarded as overwhelming evidence that Mr Yu was Mr Chan's employer. First, the Court of Appeal said that there was clear evidence that:

"1. Mr Yu daily gave Mr Chan as well as other workers including Mr Chan's colleague Mr Ng Chi-hung, instructions as to what fire installation work was to be done and where and how the work should be carried out at the site;

2. Mr Yu distributed tools daily to Mr Chan and other workers for the day's work and he kept the keys to the tool room;

3. Mr Yu supervised Mr Chan and other workers on their work progress;

4. Mr Yu gave Mr Chan instructions to sign an attendance book at the site for the purpose of calculating wages according to attendance;

5. Mr Yu paid Mr Chan and Mr Ng Chi-hung their wages and if there was a short fall, Mr Yu would make up the difference;

6. Mr Yu never told Mr Chan or Mr Ng Chi-hung he was the foreman at the site; and

7. Mr Yu and Mr Leung knew each other many years and they had been working at construction sites together where Mr Yu was Mr Leung's subcontractor."

21. Next, the Court of Appeal said that there was clear evidence that:

"1. Mr Yu obtained the fire installation work in March 1992 by subcontracting from Mr Leung who had obtained the work from Wylam. Under his subcontract, Mr Yu was responsible for hiring workers, supply of tools and material;

2. Mr Yu had full control of the fire installation work at the site except that Mr Leung would occasionally inspect the site to check work progress and quality of work;

3. Mr Yu had signed receipts for payments by Mr Leung. These payments were for construction costs and Mr Yu described himself as subcontractor in these receipts;

4. Mr Yu was paid by Mr Leung according to the progress of work and the number of workers at work. When Mr Leung requested Mr Yu to speed up the work, Mr Yu demanded that the night workers should be paid double;

5. Mr Yu signed an income and expenditure account on 17 October 1993 confirming his fees and three receipts in November, December 1993 and January 1994 acknowledging receipt of the balance of the fees due to him; and

6. In July or August 1994, Mr Yu signed a memorandum prepared by Mr Leung to clarify their relationship and Mr Yu admitted in the memorandum that Mr Chan was his employee at the time of the accident."

22. Finally, the Court of Appeal said:

" There was also clear evidence that Wylam had subcontracted the installation work to Mr Leung and Wylam had no control over the work of Mr Leung or any worker employed by Mr Leung or Mr Yu to work at the site. Neither could Mr Leung employ any worker to work at the site on behalf of Wylam. As to why Wylam signed the Form II after the accident, Wylam's explanation is this. First, the accident occurred at the site and secondly, in the past, they had asked their insurance company to pay compensation to injured workers of their subcontractors and the insurance company did so. Because of these, they thought they were responsible for the accident and accordingly prepared the documents and paid Mr Chan compensation."

Whether the judge's judgment should be reinstated

23. Now let us turn to paragraph 5A of Mr Chan's Amended Respondent's Notice. This paragraph reads:

"That the judgment be affirmed on the additional ground that there is ample evidence (either by way of admissions by Wylam or in the form of circumstantial evidence) to support the finding that Wylam was the employer of Mr Chan. Such evidence can be summarised as follows:-

(i) the workers' attendance book

(ii) Form 2 under the Employees' Compensation Ordinance (Cap. 282)

(iii) Agreements between Wylam and Mr Chan dated 14 January 1993 and 26 May 1993 for payment of compensation

(iv) Admissions by a Miss Ng of Wylam

(v) Letter from Wylam to Carrier Hong Kong Ltd dated 15 June 1993

(vi) the evidence of a Mr Wong, a director of Wylam who gave evidence to the effect that he had informed the insurance company that Mr Chan was an employee of Wylam

(vii) the payment into court by Wylam and other parties in favour of the Plaintiff under Employees' Compensation Case 502 of 1994."

24. To those seven items an eighth was added by Mr Chan's amended supplemental printed case, where it is said that in addition to those seven items, Mr Chan:

"...will also rely on the "Objection to the Compensation assessed by the Commissioner for Labour" dated 27th November 1993 submitted by Wylam to the Labour Department as one further item of evidence to show that Wylam was the employer of Mr Chan. The objection was made under section 16G of the Employees' Compensation Ordinance. By this document, Wylam exercised its right as a dissatisfied employer requesting for a review of the assessment by the Employees' Compensation (Ordinary Assessment) Board in an attempt to reduce the amount of compensation payable by it under sections 9 and 10 of the Employees' Compensation Ordinance regarding the extent of permanent partial incapacity and temporary incapacity respectively. This step taken by Wylam is strong evidence to show that Wylam was in fact Mr Chan's employer being affected by the original assessment and interested in the outcome of the review."

25. No tribunal of fact receiving evidence at first-hand has yet made any assessment of credibility or indeed any finding of fact. In the absence of assessments of credibility and findings of fact on the material matters, I do not feel able to conclude that Wylam was Mr Chan's employer. So I do not favour our taking the course of reinstating the judge's judgment against Wylam.

Whether the Court of Appeal's judgment should be affirmed or a new trial should be ordered

26. The remaining options are of either affirming the Court of Appeal's judgment against Mr Yu or ordering a new trial.

27. Mr Barretto argued on Wylam's behalf that the judge did no more than advise Mr Yu, as a litigant in person, not to give evidence, and that Mr Yu had exercised a free choice to accept that advice and not give evidence. What the transcript shows makes that argument untenable. Mr Yu was on his feet at the Bar table saying that he proposed to give evidence. The judge told Mr Yu to sit down. And the judge announced that he would treat Mr Yu as having no evidence to give.

28. Doubtless the judge was well-intentioned when he took the course of preventing Mr Yu from giving evidence. But that course was an incorrect and unfortunate one which involved a fundamental violation of the rules of natural justice.

Rules of natural justice violated: test for deciding whether to order a new trial

29. How is it argued that a new trial can nevertheless be avoided?

30. Mr Barretto begins by attempting to equate the present situation with the usual ones in which a new trial is sought. I do not think that can be done. In the present case, there has been a violation of the rules of natural justice in that a man has been denied an opportunity to be heard in the witness-box at the trial of a case in which he is a party. That is a fundamental violation of the rules of natural justice. A case of the present kind goes beyond those in which a new trial is sought on the basis of a ruling which wrongly excluded evidence at the trial or of fresh evidence discovered after the case had been decided at first instance. In a case of the present kind, an appellate court would naturally be more ready to order a new trial. Of course even in a case where there has been a fundamental violation of the rules of natural justice, an order for a new trial can be witheld. But in general it ought not to be witheld in such a case unless it is perfectly plain that exactly the same result would be reached even after a proper trial.

31. When it was put to him that that might be the correct test, Mr Barretto did not shrink from submitting that, from what it seems that Mr Yu would say in the witness-box and what could be set against that, no tribunal of fact could ever justifiably resolve the "employer" issue in Mr Yu's favour no matter what testimony he might give. On the material before the Court, this submission proves too bold and cannot be sustained. I am not unmindful of the difficulties of a trial nearly ten

years after the relevant events, but justice nevertheless demands a new trial in the present case.

Result: a new trial

32. In the result, I would allow the appeal to set aside the Court of Appeal's orders and would order a new trial ? between Mr Chan, Wylam, Mr Leung and Mr Yu ? on the issue of who was Mr Chan's employer. The finding that the employer, whoever it or he was, is liable to Mr Chan will stand. The new trial can be before any judge of the trial court.

33. The parties at the new trial will be, as I have indicated, the original four parties, namely Mr Chan, Wylam, Mr Leung and Mr Yu. The matters to be explored will be those raised by the pleadings as they stand or as they may be amended. Mr Fung informed us that he would, if there is a new trial, seek to erect an estoppel on Wylam's section 16G objection (which we were informed resulted in a reduction of the assessment of Mr Chan's disability from 15% to 14%). This, Mr Fung would contend, estops Wylam from denying that it was Mr Chan's employer. No such estoppel has yet been pleaded. Leave to amend any party's pleading is a matter to be dealt with by a first instance judge or a master.

34. I have been careful to avoid saying anything which might prejudice the new trial. What I think can be said to the advantage of the new trial and any appellate proceedings to which it may give rise is this. For many years now, the way in which workers are engaged to work in the building industry in Hong Kong has given rise to difficulty in determining whether any given person is an independent contractor or an employee and, if so, whose employee. Plainly, a trial judge ought in deciding any case of the present kind to make full and careful findings of fact, both as the relevant practice and as to the specific circumstances of the case itself.

Costs

35. As to costs, I would make an order nisi that the costs here and in the courts below be in the cause of the new trial. Any party wishing to challenge this order nisi should send in written submissions (copied to the other parties) within 21 days from today. The Court will decide on the basis of the written submissions received within this period. If no written submissions are received by the expiry of this period, the order nisi will become absolute. In any event, an order is made for legal aid taxation of Mr Chan's and Mr Yu's costs.

Mr Justice Chan PJ:

36. I agree with the judgment of Mr Justice Bokhary PJ.

Mr Justice Ribeiro PJ:

37. I agree with the judgment of Mr Justice Bokhary PJ.

Sir Thomas Eichelbaum NPJ:

38. I agree with the judgment of Mr Justice Bokhary PJ.

Chief Justice Li:

39. The Court allows the appeal to set aside the Court of Appeal's orders, and orders a new trial ? between Mr Chan, Wylam, Mr Leung and Mr Yu ? on the issue of who was Mr Chan's employer.

As to costs, the Court makes the order nisi and directions and the order for legal aid taxation set out at the conclusion of Mr Justice Bokhary PJ's judgment.