TSE YUK TIN AND ANOTHER v. CHEE CHEUNG HING & CO LTD AND ANOTHER

No. 9004 of 1983

                Fatal accident's claim against alleged employer. Application by employer for leave to amend defence by withdrawing an admission that the deceased was so employed at the date of the accident. Application made on eve of trial.

                Held, applying dicta in Steward v. North Metropolitan Tramways Company 16 Q.B.D. 556, Tildesley v. Harper (1878) 10 Ch.D. 393 Cropper v. Smith 26 Ch.D. 700 and Clarapede v. Commercial Union (1883) 32 W.R. 262:

No. 9004 of 1983

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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DECISION

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1. This is an unusual and interesting application. It has been very well and helpfully argued on all sides and I would like to start by expressing my indebtedness to counsel. On its face it looks deceptively simple and innocent. It is simply an application for leave to amend the defence.

2. The application is made, and the claim is brought by personal representatives under the Fatal Accident Ordinance. The allegation is that the deceased met his death when he fell off a scaffolding which collapsed by the negligence of two persons. The 1st defendant is his alleged employer at the time. The Statement of Claim simply contained the assertion: "At all material times pertinent to the matters hereinafter complained of, the deceased was employed by the 1st defendant as a Latex painter engaged in painting" the relevant premises. The 2nd defendant is the Crown who was said to be the owner of the offending scaffolding.

3. In their original defence the 1st defendant simply admitted that paragraph which I have just read. The purpose of the present application is to amend the defence to withdraw that admission, and particularly the admission that the deceased was employed by them. That application, which is strenuously opposed, is made when the case is something like a week away from trial.

4. Now the chronology merits closer investigation and is this. The accident happened on 25th July 1980, when the deceased was painting this school. It seems that he could have been employed by three people. The first is the 1st defendant. The second is their sub-contractor on site, a firm said to be called Maxim. The third possibility is that he was employed by Maxim's sub-contractor, and the 1st defendant's sub-sub-contractor, a firm apparently called Yam Hing. As I said the accident occurred on 25th July and unfortunately he died two days later. The day after that, the 28th July the first form 2 under the Employees Compensation Ordinance came into existence. I should refer briefly to that Ordinance (Cap. 282).

5. Now there are three relevant sections. The first is section 2 which defines an employee as "any person who has ..... entered into or works under a contract of service with an employer". In other words it focuses on the person in the contractual relationship. The second is the definition section, section 3, where employer is given a slightly extended meaning in this sort of situation. Where A is under contract with B, and B the prima facie employer lends A's services to C, B remains the employer for the purposes of the Ordinance. The next relevant section is 15 which puts an obligation on "the employer" to file notification in Form 2 within 3 days of a fatal accident. The last relevant section for this purpose is 24 which in substance says this. Where you have got a main contractor on site, he can be made liable for injuries suffered by a direct employee of his sub-contractor, as if he were an employer for the purposes of the Act. That liability being put upon him by that section "as if" he were an employer, he is also given a right to indemnity against the actual employer.

6. On 28th July the first Form 2 Notification under section 15 was made out. That was signed by maxim, and apparently rendered by Maxim to the 1st defendant. It was followed on the 1st August by a form signed by the 1st defendant as employer, not as principal under section 24. That was the form that was in fact submitted to the proper authority. The matter was then investigated, and on 3rd September an accident report was made out by a Mr. Lee, an inspector: He made some inquiries from the survivors of the accident, principally a man called Kwong Tak who was the foreman, the deceased's elder brother, and a man by the name of Chan Chee Kwong. He got his facts, he says from them and records the employment structure like this, The 1st defendant, he describes as principal contractor; the sub-contractor is May Shing alias Maxim; the direct employer is Yam Hing. The three named persons he described as foreman of Yam Hing or workers of Yam Hing.

7. There was then a coroner's inquest on 1st December. These same people who gave this information gave evidence, particularly Mr. Kwong Tak and the deceased's brother. In evidence they described themselves as employed by the defendants not by Yam Hing. The matter was then brought before His Honour Judge Cameron at the Kowloon District Court on a claim under the Ordinance made against the defendant. The documentation has been put before me this morning. This shows that the claim was made by the dependants on the basis that the deceased was directly employed by the defendant. The matter was not contested by the defendant. It must be pointed out in fairness to them, that it would not have mattered to them if they were sued as direct employer or sued as principal. They would have been equally liable to the plaintiff. It is only in the latter context that they could have claimed the right of indemnity over against one or other of the true direct employers, if it was worth claiming. They did not in fact put the matter in issue. Somebody attended in person on behalf of the 1st defendant's company at the hearing on 22nd July, when an award was made against the 1st defendant by His Honour Judge Cameron. That is the pre-writ history.

8. On 15th July the writ in this action was issued, against the defendants; 1st defendant as the employer and the 2nd the Crown. Of course 10 days later, on 25th July, the third anniversity of the accident passed. Now at that time the 1st defendant had solicitors acting for it on the instructions of its supposed insurers. On 12th September 1983 these solicitors wrote to the 1st defendants pointing out forcibly that in their view the plaintiff in this matter was not their direct employee, and drawing attention to a notice of accident which had been sent in by the defendants (a document I have not seen). The letter goes on in these terms: "Our client (that is the insurer) is of the firm belief that the deceased person was not a direct employee of your company, and as such our client has no obligation to indemnify you in respect of any claim which may be brought by the deceased against you for common law damages. In the circumstances we have instructions from our client to deny liability in respect of the captioned claim our instructions to act for you in respect of this matter have also been aborted". In the light of that letter the defendant company consulted its present solicitors who sought to persuade the original solicitors to change their minds. They refused to do so, and so that the present defence was then put in by the present solicitors in the terms to which I have already referred.

9. The remaining history of the action is this. The defence was in fact filed on 19th October. In December 1983 the matter was set down for hearing. In May of this year an attempt was made to join the insurers as third parties. This came before Mr. Justice Power on 29th May, and was rejected. That was followed by the application before me. The case is now, I think, number 3 in the warned list and liable to come on for hearing next week.

10. Now I have had to put before me a number of familiar statements of principle governing applications for leave to amend, statements which were described by Lord Esher, M.R. in Steward v. North Metropolitan Tramways Company 16 Q.B.D. 556 at 558 as "rules of conduct rather than rules of rigid law". First there is the well known dictum of Lord Bramwell L.J. in Tildesley v. Harper (1878) 10 Ch.D. at 393 at page 396 where he says this: "My practice has always been to give leave to amend, unless I have been satisfied that the party applying was acting mala fide, or that, by his blunder, he had done some injury to his opponent which could not be compensated for by costs or otherwise. I confess that if the present case had come before me I should have had some doubt whether the Defendant had made a bona fide mistake, as the mistake is so very obvious. I should probably have required some affidavit or statement by the solicitor to show that the slip in the pleading was a bona fide one, and it satisfied on that point, I should not have refused leave to amend". The contrast which Bramwell L.J. is drawing here is between acting male fide and a bona fide mistake. I think it is apparent that he is giving fairly board meanings to those two phrases because he is not allowing any room in the middle for conduct which does not fall into one or other of those categories.

11. The next well known statement was in the dessenting judgment of Bowen L.J. in Cropper v. Smith 26 Ch.D. page 700 where at page 711 (I am taking a short extract from a long passage) he says this:

"The question seems to me to be this. Can you by the imposition of any terms place the other side in as good a position for the purpose of having the question of right determined, as they were in at the time when the mistake of judgment was committed? It does not seem to me material to consider whether the mistake of judgment was accidental or not, if not intended to overreach. There is no rule that only slips or accidental errors are to be corrected. "

Now the word "overreach" has a somewhat archaic ring about it nowadays. One suspects that the judge had in mind the taking of some advantage deliberately and particularly the taking of some unfair advantage. The last well known statements are to be found in Clarapede v. Commercial Union (1883) 32 W.R. 262 to which Lord Esher and Bowen L.J. were parties. Lord Esher said this:-

"The rule of conduct for the court in such a case is this. However negligent or careless may have been the first omission, and however late the proposed amendment, the amendment should be allowed if it can be made without injustice to the other side. There is no injustice if the other side can be compensated by costs."

Bowen L.J. uses language very similar to that in Cropper v. Smith. He suggests that the amendment should be allowed "whenever you can put the parties in the same position for the purposes of justice that they were in at the time when the slip was made. Sometimes to correct the error would lead to injustice which could not be cured, as when the witness who could give evidence cannot be got at, or the solvency of one party is doubtful. The question must be whether if the slip is set right, so as to enable the right question to go to trial, the parties will be put into the position they were in before the slip was made. If so, that should be done. In most cases it is a question of costs. "

12. Now those are well known statement of principle which have been cited with approval in a number of recent cases in the Court of Appeal in England and here. Three questions arising out of them have been canvassed before me. The first is whether there is any distinction between pure inadvertence in this context, such as typing mistake, and conscious choice, the conscious adoption of a course of conduct which is later seen to be misconceived or erroneous. Mr. Yu for the 1st defendant, submits that the answer is no. He relies particularly upon passages like that which I just read from Lord Esher, "however negligent" it does not matter: the passages from Bramwell L.J. talking about mala fides: and Bowen L.J.'s emphasis on overreaching. He said that the fact there is a conscious decision is only relevant, if it savours of sharp practice. It has not only to be deliberate, but to be done for the purpose of gaining some unfair advantage. That is his submission.

13. At the other extreme Mr. Fleming for the Crown suggests that if the decision is conscious it should be decisive, and that the court should not allow any withdrawal from a conscious decision so made. 1 believe that the true principle lies somewhere between those two extremes. I hope I am not snowing disrespect to the very eminent 19th century judges whom I have just quoted, if I suggest that their remarks have to be put in their context. In most cases the context was that of an inadvertent mistake. Because for my part I find it difficult to accept that those very eminent gentlemen would have treated as irrelevant the sort of conscious choice which is manifest in the facts before me, a choice to accept as true a false premise: an acceptance of the fact of direct employment as true, which was in fact known to be false (on the view that it is now being put forward) and in the face of a clear warning by the insurer's solicitors. There is a language problem here which I have already adverted to. I am far from sure that Bramwell L.J., for example, would regard that as a bona fide mistake, within his own term of reference. I am not quite sure how Bowen L.J. would react and whether he would regard this as an example of overreaching or not, because I have doubts as to the precise ambit of that word.

14. Conversely it seems to me equally wrong to say that the court never allows a party second thoughts: never allows a fundamental change of direction even after a conscious decision. My understanding of the practice is and always has been, that the court allows a party to withdraw an admission deliberately made or to resile from a conscious choice for good reason, and if good reason is shown. In particular it expects the party to put before it a convincing credible explanation of the circumstances in which the admission was in fact made, which is sought to be said to have been made under a mistake. A typical sort of case is where a party is able to say "yes, when I said this, or when I admitted this, I believe that to be the case, I have now got some totally fresh evidence in my possession which if true suggests that it was not the case, and I want to advance that proposition".

15. In those circumstances the court, I think can readily give leave to withdraw the admission and does so. Conversely if no credible or convincing explanation is given, that is a powerful factor in favour of the exercise of discretion against the application. I am bound to say here I am not happy with the explanation which has been put before me. In substance it is that this defendant always thought that head contractors were responsible for their workmen whether employed direct or not, under the Employees Compensation Ordinance. That is true. It is a fair paraphrase, I think, of section 24. But the problem here is first that this is not employee's compensation at all. Secondly this fact was emphatically emphasised to this defendant by its former solicitors. Thirdly the fact of direct employment is not even irrelevant for the purposes of the Ordinance as I have indicated. Fourthly it is absolutely crucial to the claim which is being made here which is a common law claim. I do not find that explanation really very convincing, because it does not start to explain why these defendant were in October of last year prepared to accept as true, a premise which they then must have known to be false.

16. I have a very uneasy suspicion that this acceptance had very little to do with the plaintiff, and that it had everything to do with the argument that was then going on between this defendant and its insurers: That it was then thought that the defendant would be in a better position to advance its case against its insurers, if in fact it accepted the position that this was direct employment, because that was precisely what the insurers were disputing. I have a strong suspicion that that was stage one of the battle with the insurers. Stage two was the attempt to join them as third party which failed earlier on this year. And stage three is what is before me now. So my first conclusion is that I am not happy with this explanation.

17. The second matter which was much canvassed was the application of Bowen L.J.'s test: Whether "you can put the parties in the same position for the purposes of justice that they were in when the slip was made". The first point canvassed here is limitation. Mr. Yu for the defendants said this. The limitation period here expired on 25th July 1983; it expired before this defendant was ever called upon to plead. The Steward principle simply has no application at all. At that stage the defendant could have raised this point without any objection. It can therefore equally raise the point now. There is no difference. In answer to that Mr. Fung for the plaintiff raises two points. First he prays in aid the pre-writ conduct of the 1st defendant as founding an estoppel in pais against them. He says that that should prevent them from being allowed to make the amendment now. I cannot accept that. The simple test seems to me to be this. Could objection have been taken to a pleading in October of last year which simply said; "no admission are made" to the relevant paragraph in the Statement of Claim. I cannot see that any objection could have been taken. The short answer would have been that Mr. Fung would have put in a Reply raising his estoppel. It may be that he would establish this at the trial, but that is a totally different matter. I do not think that on this application I can have regard to that conduct.

18. The second position that Mr. Fung takes up is that I should simply directly apply Bowen L.J.'s test and compare the position now with the position as it would have been on 21st October of last year. This seems to me to be right. This is a direct application of the suggested test. That now turns upon the effect of section 30 of the Limitation Act. It is in this form that the rule in Steward may now said to have survived.

19. It seems to me that what I have to do is to attempt to assess the plaintiff's chances of getting the limitation period extended under section 30 now and last October. I have to assume that last October a Defence had been put in, in the present terms, asserting that the plaintiff was not employed by them but either by Maxim or by Yam Hing; and that an application was then made to extend the time as against those two defendants, who were then joined in the proceedings. I must also make the assumption for this purpose that both defendants were available and believed to be solvent. I ask myself what the chances were of the application succeeding then in the light of the fact that certainly one of the sub-contractors had to some extent gone along with the attitude of the 1st defendant until that moment and to that extent may have served to have mislead the plaintiff. As compared with the position now, judging the position as best I can, it seems to me that if the application had been made in October of last year it would have been difficult, but would have stood some: chance of success whereas I am minded to think that an application made now would be very difficult indeed and probably have no chance of success. That seems to me to be the limitation position.

20. Secondly it is suggested by the plaintiff and the 2nd defendant that both the principals behind Maxim and Yam Hing are probably untraceable and possibly insolvent. That is advanced upon the basis that Business Names Registration searches have been conducted which produced a nil return in respect of both names. There is I think a very big question mark over the traceability and solvency, for the purpose of claim like this, of both the alleged principals. What is much more difficult to assess is whether there is any difference between their suspected position now and their suspected position last October.

21. The next point taken is that this is an eleventh hour application which must delay the trial. It is certainly must delay the trial. That point could I think be compensated for in interest and costs. If there is any substance in the first two points they could not.

22. The last point which has been taken by Mr. Fung is estoppel in two categories. The first is estoppel by conduct with which I have already dealt. The second is res judicata, Mr. Fung adopted a point I think I first raised with him, because I was troubled as to whether or not the decision of Judge Cameron could not be regarded as res judicata between parties in the light of the principles recently summarised by the Court of Appeal in England in Khan v. Goleccha International (1980) 2 A.E.R. 1t 259. In support of his submissions Mr. Fung put before me this morning the documentation obtained from the Kowloon District Court. I suspect that he has a very arguable point, but I very much in doubt of it is sufficiently clear, at least for the purposes of this application, for me to act upon it. The doubt which I have concerns the point put by Mr. Spencer Bower in his book Res Judicata published in 1924, which was cited by Lord wilberforce in Carl, Zeiss v. Rayner (1967) 1 A.C. 853 at page 964 in these words: "Mr. Spencer Bower in his work on Res Judicata (1924 page 9) states the principle as being 'that the judicial decision was or involved a determination of the same question as that sought to be controverted in the litigation in which the estoppel is raised'". Now there is no doubt at all that the matter could have been raised in the Kowloon District Court. Particularly it would have had to have been raised, if these defendants had sought to claim an indemnity. But the Hoystead principle (Hoystead v. Taxation Commissioner (1926) A.C. 155) has never been extended so far as requiring a party to raise more than his whole case against his opponent: not to requiring a party to raise another claim against somebody else. Behind all this there is the plain and simple fact that it would not have mattered at all before the Kowloon District Court if this defendant had said: "I am not the direct employer, I am only the main contractor"; because he would be liable in any event. So that I am minded to think that this might be an arguable point, and it might prove to be right hereafter, but it is not sufficiently clear for me to act upon it today.

23. So I am in this position. First I am not satisfied that I have got a sufficient or credible explanation of the original mistake. Secondly it seems to me that the plaintiff would now be, if the amendment were allowed, in a marginally worse position that he would have been in October of last year had the point been raised then. The plaintiff is worse off in a way which cannot be compensated for in costs. Now those two factors individually and collectively point in my judgment against the exercise of discretion in this case. So my conclusion is that I must reject this application for leave to amend.