Full Rich Engineering Co. Ltd. v. Chan Wai Leung and Another

DCEC786/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES COMPENSATION CASE NO. 786 OF 2001

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R U L I N G

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1. This is an unusual application which is connected to another case for employees' compensation, DCEC 638/2001 in which the applicant in this matter is the respondent in 638/2001.

2. I should first set out the issues in 638/2001 as they presently appear from the papers in that matter. In that case, a Mr Wong Shun-kam is claiming compensation from these applicants on the basis that he was employed by them on works that they had been contracted to do at the Old Kai Tak Airport and that on 19 October 1999, in the course of his employment with them as a welder, he fractured amongst other things his right index finger. The Answer in those proceedings by the applicants is quite unremarkable. They have pleaded that they did not employ Mr Wong but that he was an employee or, alternatively, a subcontractor of a Mr Chan Wai-leung and a Mr Ip Wah-kui, and that the relationship between Mr Chan and Mr Ip and themselves was that of contractor and subcontractor.

3. In order to get a better understanding of Mr Wong's case that he was an employee of the applicants, a request for further and better particulars was served on Mr Wong. The reply, which perhaps is not as full as it could be, alleges an oral contract of employment and that its terms are to be found in the statutory Form 2 submitted by the applicants to the Labour Department. No doubt consideration will be given by the applicants' solicitors as to whether an order should be sought from the court for the request to be answered more fully and with more precision.

4. This then brings me to the application in these proceedings in which Mr Chan and Mr Ip are respondents. The subject matter of this application relates to the claim made against the applicants in DCEC 638/2001. By this application, the applicants repeat the substance of their answer in 638/2001 and claim, inter alia, an indemnity from these respondents should they be found liable to pay compensation to Mr Wong in 638/2001.

5. Perhaps not surprisingly, the solicitors for the respondents have taken out this summons under Order 18, rule 19 to strike out this application on the ground that it discloses no cause of action, it is frivolous, vexatious and/or is an abuse of the process of the court.

6. Mr Leung for the respondents submits that they must succeed. These applications for employees' compensation are essentially for the purpose of enabling injured workmen to claim compensation as provided for in section 5 of the Employees' Compensation Ordinance.

7. Mr Sam Yeung for the applicants submits that this is not the only basis for making a claim under the Employees' Compensation Ordinance. He draws attention to Rule 16 of the Employees' Compensation (Rules of Court) Rules which is in these terms:

"Method of Application

(1) An employee or an employer or any other person who desires the determination of any question arising out of an accident in which compensation is or might be claimed shall lodge with the Registrar of the Court a written application in Form 1, 2 or 3 in the Schedule accompanied by particulars containing:

(a) a concise statement of the circumstances in which the application is made and the relief or order which the applicant claims, or the question which he desires to have determined;

(b) the full name and address of the applicant, and the name and address of the respondent.

(2) If the application is made by an employer it shall be accompanied by a statement whether he admits his liability to pay compensation or denies such liability and whether the admission or denial is total or partial, and if he admits or denies liability partially, the statement of the extent to which he admits or denies liability. In the case of a denial of liability, the grounds shall be stated."

8. Mr Yeung relies in particular on the wide terms in which the Rule is drafted to provide for applications by employee/employer or any other person. He says the subject matter of this dispute falls within the terms of this Rule and of section 25 of the Employees' Compensation Ordinance, more of which presently.

9. It is clear from the three forms in the Schedule and referred to in Rule 16(1) that the Rule contemplates a variety of circumstances in which an application may be made. Form 1 is for an injured employee to claim compensation, Form 2 is for fatal cases where a family is making a claim and Form 3, under which this application is made, is for what is described in the form as a general application.

10. When I heard the argument on Friday, Mr Yeung was content to leave the matter there, largely based on the width of Rule 16. Today, as I came to deliver my ruling, he has enlarged his submission to rely on section 25(1)(b) which he now puts at the forefront of his case in resisting this striking out application. I need to recite section 25(1) which is as follows:

"Remedies Against Both Employer and Third Party

(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 subcontractor 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."

11. Particular reliance is placed on section 25(1)(b). Mr Yeung submits that the ordinance expressly permits him to take this course. How can his client, he asks rhetorically, be struck out in those circumstances? He would wish to see the respondent's Answer to this application. Depending on the Answer, he will either ask the court to adjourn the application to await the outcome of 638/2001 or, if necessary, ask the court to consolidate both matters and, in effect, treat this application like a third party proceeding in respect of 638/2001.

12. Mr Leung for the respondents submits that section 25 does not have the effect contended for by Mr Yeung. In my judgment, the effect of section 25, which must be read as a whole, is to give the injured employee the right to claim damages at common law against a third party in addition to claiming compensation under this ordinance from his employer or from the principal contractor under section 24 of the ordinance. That is the starting point (see section 25(1)(a)). Subsection (1)(b) then allows the employer - in this instance the applicant here sued as the employer in 638/2001 - to recover what he may be ordered to pay in employees' compensation proceedings from the third party by suing the third party for an indemnity in a separate ordinary common law action or by joining in the injured employees' common law action against the third party.

13. I am reinforced in this view by considering the remainder of section 25 which is clearly referable to the employee making a claim for common law damages. The section does not have the effect of permitting the purported employer starting a separate employees' compensation application against a third party to claim an indemnity against that third party.

14. In a case such as this, the proper course to adopt is for the employer to institute third party proceedings in the employees' compensation application in which he is sued as employer and to claim his indemnity in that application. What is proposed here by Mr Yeung is outside the scope of section 25; he has failed to show a cause of action in this application. I therefore propose to strike it out and leave it to him, if so advised, to bring third party proceedings in 638/2001.

15. So that is my ruling and I would have thought that costs must follow the event. You cannot resist an application for costs in those circumstances.