CHEUNG HUNG YUK v. CHIU CHAN AND OTHERS

HEADNOTE

                (1) Whether the District Court has jurisdiction to entertain a claim for indemnity by superior sub-contractor and inferor sub-contractor against a third party under section 24 of the Employee Compensation Ordinance when such claims exceed $60,000 the normal jurisdictional limit.

                (2) What procedure is to fellow once the Court assums jurisdiction.

                (3) Whether it is too late of the day to convert the third party into a respondent under Rule 22 (3) thereof after the sub-contractors have settled the claim against them with the employee (applicant) but on terms that the proceedings are merely stayed insofar as the applicant is concerned.

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

EMPLOYEES' COMPENSATION 167 OF 1984

_____________________

__________________

-----------------------------

EX TEMPORE RULING

-----------------------------

1. This is a Ruling on the application for indemnity under claim by two levels of both a superior sub-contractor, R2 and the relatively inferior sub-contractor R1 against the 1st named Third Party CHOW Chung-lun on the ground that the said CHOW (hereinafter call the Third Person) was the direct employer of the deceased's person. Both R2 and R1 have settled the claim by the applicant to the sum of $74.000 payable by each. These sums, on its own or as an aggregate, of course, exceed $60,000 the normal District Court jurisdictional limit. The jurisdictional matter before me turns on therefore the interpretation of the Employees' Compensation Ordinance and the rules thereunder with a view to ascertaining the true intention of the Legislature.

2. Section 24 (1) thereof renders the principal contractor liable to pay compensation under Cap. 282 in the event' of injury sustained to an employee of his sub-contractor. Sub-section (2) perhaps the key sub-section provides "(2) where the principal contractor is liable to pay compensation under this section, he shall be entitled to be indemnified by any person who would have been liable to pay compensation to the employee independantly of the section."

3. Sub-section (7) further provides "(7) where a claim or application is made by virtue of this section against a principal contractor, the principal contractor shall give notice thereof to the sub-contractor specified in the notice served on the principal contractor under sub-section (6), who shall thereupon be entitled to intervene in any application made against the principal contractor."

4. Rule 22 thereof lays down the procedure where a sub-contractor desires to intervene. Such intervention will inevitably and eventually lead to the Courts decision on either to refuse the intervention with costs or to join the Third Pasty as a Respondent to the application.

5. Section 24 (7) casts the duty on the principal contractor to give notice of claim by the applicant to a sub-contractor who shall be entitled to intervene in the application.

6. Under Rule 23 if the sub-contractor with notice does not intervene, "he shall be deemed to admit the validity of any order against the principal contractor whether such order is made by consent or otherwise, and his own liability to indemnify the principal contractor ..."

7. Reading the relevant provisions of both the Ordinance and the rules as a whole as above quoted, it is not difficult to perceive that the question of compensation as well as the issue of indemnity were intended for the District Court rather than for 2 or more different levels of Court. It must have been within the true contemplation of the Legislature to avoid duplication of proceedings and incurring unnecessarily additional costs particularly when the same parties, the same circumstances and the same or part evidence will be involved, or at least substantially part or the same as far as indemnity goes. It will not be in accordance with common sense that in those circumstances 2 sets of proceedings should be had as in the case of section 25 which is intended to cover the situation of injuries caused by the negligence of a third party in an "action" which was held in LEUNG Sil by Sir Alan Huggins (Huggins D.J. as he then was) not to include a Workman Compensation Application as Employee Compensation was then known. Incidentally I incline to agree with Mr. Patrick Chan's  submission that LEUNG Sil has not been: overruled by the 1982 amendments to section 25.  A look at the Bill thereto fortifies my view that it has not been so overruled. The word "action is used in the Bill as distinct from "application.

8. Now I turn to Mr. Yung's submission, that is, that first of all to the effect that Third Party proceedings in this connection has no application to a section 24 situation but merely applies to section 25. With every respect, that cannot be true, as rightly pointed out by Mr. Chan. Section 24 (7) which is part of the provisions on, inter alia, indemnity specifically included the word "to intervene" which co-relates to "intervention" under Rule 22 (3) that obliges to Court either to refuse the intervention or simply to join the Third Party as a Respondent. Little persuasion is necessary to lead me to the opinion that Third Party proceedings were not intended to be limited to section 25 but extended to section 24 as well. Then there is the submission of Mr. Yung's that it is too late of the day to join or to change the status of his client the Third Party from a third party to a respondent at this late stage of the proceedings particularly when R2 and R1 had already settled the claim with the applicant themselves. Mr. Chan most properly and candidly conceded that the naming of the Third Party as a third party was rather misconceived as he ought to have been named a respondent to begin with. The answer to this submission can really be found in Rule 24 read in conjunction with Rule 23 with the net result that the Court may at any stage of the proceedings convert a third party to a respondent under Rule 23.

9. Finally I have to consider the question whether such a conversion would result in undue embarrassment or prejudice to the Third Party. I think not in the circumstances of this case. The main issue between the parties, that is R2 and R1 on the one hand and the Third Party the other was really the true relationship of the Third Party and the deceased and that of the Third Party and R1 which in normally foreseeable circumstances do not turn on evidence from the applicant such as medical evidence or circumstances of death or the question whether the accident arose from and in the course of employment. Even if some evidence turns on or from the applicant's side, there will be amble time for the Third Party to look into that aspect and to apply for subpoenae if necessary as I do not anticipate the indemnity issue will come up for trial until at least 2 months from now.

10. In the event, I rule that the District Court does have jurisdiction to entertain the issue of indemnity in the circumstances of this application by R2 and R1.

11. To save the length of this Ruling, I shall deal with the matter of costs in my notes of proceedings and similarly the procedural matters to follow.

12. I would like to say that I am indeed indebted to Mr. Patrick Chan who has very ably and usefully rendered the necessary assistance to me which assistance makes a prompt ruling possible. Incidentally, now that R2 and R1 had settled the Applicant's claim, there is also the question whether it is too late of the day for such conversion. Again, I think not. Because oven technically Mr. Patrick Chan has taken care that the settlement between R2 and R1 and the applicant was so termed that the proceedings in respect of the applicant have merely been stayed and the Court is therefore non functus.

13. I should add that under section 24 (2) R2 and R1 do not need to incur a judgment debt in order to claim an indemnity as entitlement to indemnity arises once they become liable to pay compensation.