YARDWAY MOTORS LTD v. TAM SIU LUN

HCA 4158/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4158 OF 2001

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J U D G M E N T

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1. This is an action for an indemnity or contribution in respect of compensation paid by the plaintiffs under the Employees' Compensation Ordinance against the defendant who is said to be liable in negligence for the accident giving rise to the payment under that Ordinance.

2. The action comes about in this way. The plaintiffs run a substantial business selling and servicing and repairing heavy goods vehicles. In 1995 the defendant purchased a lorry tractor from them and thereafter had them service and repair it. He drove the lorry himself.

3. On the 17th August 2000 he took the lorry in to the plaintiff's premises as the left rear wheel was noticeably hot. Following the usual practice he parked outside the workshop in an area known as the vehicle reception area. He was attended to by a Mr Wong, a service supervisor, and a mechanic Mr Lai.

4. The defendant had parked behind a coach in the vehicle reception area. The coach had required some simple tasks to be carried out to its electrics, which involved a mechanic attending the bulbs in the lights at the rear of the vehicle. He had open its rear door to do this.

5. Mr Lai asked the defendant to return to the driver's seat of his lorry. He himself went underneath the lorry to inspect the wheel and to listen for any air leaks to the pneumatic braking system. He shouted to the defendant to release the handbrake, engage gear, not start up but press the footbrake. The defendant did as he was told.

6. Having been under the vehicle for a couple of minutes Mr Lai emerged to find the defendant standing by the wheel. He told the defendant that the wheel had to be removed and that accordingly the trailer attached would have to be unhitched. He told him to drive away and return for repair once he had left the trailer elsewhere and away from the plaintiff's premises.

7. Mr Lai then walked away leaving the defendant with Mr Wong who had remained present from the beginning. He expected that the defendant would then drive off, though he did not see him climb back into his lorry. In fact the defendant did not do so but went with Mr Wong to look at some new vehicles that were for sale. Mr Wong left him once he had taken him to see them.

8. The defendant then returned to his vehicle intending to drive it away. He needed to run the engine for some time in order to attain the necessary pneumatic pressure to work the brakes. He said that this took ten minutes. The evidence revealed that the length of time depended on the presence and nature of leakages in the system.

9. When he had last left the cab of his lorry he had left the handbrake off and the gear engaged.

10. Instead of sitting himself in the cab he stood on the bottom outside step and leaned in to turn on the ignition. The engine fired and the lorry lurched forward as it was in gear.

11. The front of the lorry trapped the mechanic who was working at the rear of the coach against its rear door. Sadly, he died of his injuries.

12. These facts have not really been in dispute and they are the facts that I find. The defendant did seek to distance himself from blame by saying he could not remember exactly when he was told to drive away and that he did not know if Mr Lai was still working on the vehicle when he went off and that he was away for longer than was the case. For reasons I shall give later I rejected this evidence.

13. The deceased mechanic, Mr Cheung Tsz Cheong, left dependants. They intimated proceedings against the plaintiffs pursuant to the Employees' Compensation Ordinance under which the plaintiffs as employers were liable to pay compensation for the death occurring in the course of the deceased's employment without proof of fault. It is agreed that the plaintiffs paid out $1,230,494 in respect of this claim and their costs. The dependants brought no other claim, although in theory it is still open to them to do so.

14. The plaintiffs thus bring this action against the defendant seeking an indemnity or contribution in respect of their payment of $1,230,494.

15. The bare relation of the facts reveals that the defendant was negligent and that his negligence was the major cause of the accident. Turning the ignition on without checking the state of the brake and gear was fraught with danger, especially when he had left the brake off and the gear engaged but a short time before. He well knew the garage and the fact that mechanics went about their business on vehicles parked in the vehicle reception area.

16. The issue of whether the defendant was negligent was a dead one, and the defendant's counsel, Miss Christina Lee, realistically conceded this to be so. The live issue was whether the plaintiffs were negligent as well and if so to what extent.

17. The attack on the plaintiffs was twofold. Firstly, they were said to be negligent because they allowed the deceased to work in the vehicle reception area without taking proper precautions to ensure his safety and secondly it was said that Mr Lai, having ordered the defendant to put the vehicle in the condition it was without brake and in gear, bore a responsibility to ensure that this was remedied at the end of his inspection.

18. In relation to the first line of attack the defendant points to various safety measures that the plaintiffs took after the accident at the behest of the Labour Department. These included notices to employees and drivers setting out rules to ensure safety; the employment of a traffic controller for the area; the provision of reflective jackets and traffic cones and extra speed limitation signs and stoppers. This last matter refers to a purpose made object placed against the tyre of the vehicle inhibiting movement, like putting a brick against your wheel.

19. I am quite satisfied that the lack of most of these measures before the accident was no part of its cause. However, and importantly, there was one way in which it was convincingly argued that the plaintiffs had been negligent in respect of mechanics working on vehicles in the vehicle reception area. There was a good argument that a safe system of work there would ensure a suitable distance between a vehicle being worked on and its neighbour; that this would be required as movement, whether accidental or deliberate of the neighbouring vehicle could put a mechanic at risk; that accidental movement was foreseeable in circumstances where vehicles were being inspected, such inspections involving release of the brake and engaging gear and the starting up and running of engines; that the provision of a cone and an instruction to place it about ten feet or so away from the rear of the vehicle being worked on would ensure that the next vehicle in line kept a safe distance.

20. In other words there was a cheap and easy safety measure that would have prevented an accident of this type had it been adopted. Accordingly I do find the plaintiffs to have been negligent in respect of the accident in this regard.

21. It was argued by the plaintiffs that the defendant's act of turning on the ignition from outside the cab without checking the gear and brake was not reasonably forseeble. I disagree. Starting up a motor vehicle when it has been left in gear, and having it lurch forward, is a common hazard. The risk of it occurring in the context of inspection and repair is very much the greater. The running of an engine in the context of repairs at a garage, as well as the need to do so for charging the pneumatic brake systems of heavy vehicles, is a commonplace. Against this background the action of a man starting an engine without bothering to sit in the driver' seat is going to occur, and forseeably so, when he does not intend immediately to drive the vehicle. This type of accident was, in my judgment, reasonably foreseeable.

22. As regards the allegations of negligence against Mr Lai, for which the plaintiffs would be vicariously liable, it was conceded on behalf of the defendant that if his version of events was correct, in that he told the defendant to drive off as soon as he emerged from under the lorry and that he then left the scene, then there was nothing that he could reasonably be blamed for doing or not doing. It would have been unreasonable to expect him to climb into the cab and put the gear in neutral himself or to tell the professional lorry driver how to move off safely.

23. I was satisfied that Mr Lai's version of events was true. He was a good and straightforward witness whom I judged to be doing his best to tell the truth. The defendant, in stark contrast, was a man desperate to diminish his role in this sad case. His original witness statement contained a ludicrous story of how he slipped and his hand caught and engaged the ignition. He retracted this and admitted that he had lied. He did not want to countenance what was obvious, namely that he spoke with Mr Lai about what he had found on inspection when Mr Lai emerged from under the lorry and it was then that he was told to drive away. He was a witness who retreated behind the excuse of a lack of memory when he was cross examined. His assertion that he did think about whether it was safe to turn on the ignition at the time he did it as he concluded that it was safe to assume that Mr Lai had taken it out of gear and put the handbrake on was a palpable lie.

24. Accordingly, I found no negligence in Mr Lai.

25. This accident was very nearly all the fault of the defendant. He must bear nearly all the blame. In my judgment a just apportionment of liability would be 12.5% to the plaintiffs and the balance to the defendant.

26. Contributory negligence by the deceased was pleaded. No one has argued for it. On the facts I find none. He was merely going about his normal duties and no act or omission of his caused his death.

27. Having found that both the plaintiffs and the defendant were negligent what are the legal consequences?

28. The plaintiffs argued that s. 25 of the Employees' Compensation Ordinance provided them with a right of contribution against the defendant (referred to in the section as the third party) and the defendant argued that no right of contribution arose at all as it was indemnity or nothing and no indemnity was available as the plaintiffs were also negligent in respect of the death.

29. The plaintiffs further argued that if s. 25 was unavailable then the Civil Liability (Contribution) Ordinance applied to the situation and provided them with a right of indemnification in the circumstances. The defendant contended that this Ordinance had no application.

30. Let me deal with s. 25 argument first. The section reads as follows:

"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 s. 24 in the case of an employee employed by a sub-contractor, 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."

31. There is no binding Hong Kong authority on these issues raised before me. H H Judge McMahon, sitting as a deputy judge of the Court of First Instance, in Wong Yat Chiu v Chan Kwok Wa [1999] 2 HKLRD dealt with a similar circumstance but found on the facts no negligence in the third party. However, he remarked by the way that had he found such negligence he would have denied the negligent employer a remedy under s. 25, as the section only provided for an indemnification of a non negligent employer. He reviewed the available cases.

32. The first was Cory & Son v France [1911] 1 K B 114 in which the Court of Appeal held that the equivalent English Legislation in to s. 6 of the Workmans Compensation Act 1906 would not allow an employer to recover an indemnity from a third party when the employer's own negligence had caused or contributed to the accident giving rise to the compensation paid to the employee.

33. The second authority was from the High Court of Australia on an appeal from the Supreme Court of New South Wales called Public Transport Commissioner of New South Wales v J Murray-More [1975] 132 CLR 336. It followed Cory & Son v France in construing New South Wales legislation which was in effectively identical terms to the English legislation.

34. The judgments in these decisions were based variously upon a construction of the words "creating a legal liability in some person other than the employer" (which are common to our s. 25 and their legislation) as being exclusive of a situation where an employer was himself liable at common law to pay damages in respect of the event giving rise to the payment of the employee's compensation; upon a construction that looked to legislative intent and found no intent to indemnify a wrongdoer in respect of his own wrong and upon a view that the legislation was to do only with a scheme of compensation of which no part was designed for the adjustment of rights between tortfeasors.

35. Both of these cases were decided in the context of different statutory provisions and against the background of different contribution legislation. When Cory was decided there was no provision in English law for contribution between joint tortfeasors and the Act dealing with contribution in New South Wales at the time of the Public Transport case was in different terms to our Hong Kong Ordinance. In both cases the legislation in question provided that a workman could sue both his employer under the Act and any third party who was otherwise liable in damages for his injury but that he could not recover both employees' compensation and damages. In both cases the word "indemnified" was used in the legislation when it came to considering the rights of the employer liable to pay employee's compensation against a third party also liable for the relevant injury.

36. Hong Kong, by the Workmen's Compensation Ordinance enacted in 1953, adopted identically worded legislation in this regard. However, this was repealed and replaced by the present s. 25 in 1982.

37. Importantly, the use of the word "indemnified" was dropped and replaced in a differently worded section by a right in the employer against the third party "for the recovery of any sum which he is obliged to pay as a result of the accident".

38. It has been common ground that the overriding legislative intent behind this part of the legislation is one that prevents an employee (or his dependants in a fatal case) recovering twice over. It has also been common ground that in practice it usually works out that the common law damages are greater than the employee's compensation and that credit is always given for any employee's compensation in computing the employee's damages in his action against the third party.

39. It is thus that one starts, in the situation before me, with the consideration that if the dependants had chosen to sue at common law and all three parties had been litigating, then contribution would have taken place between the plaintiffs and the defendant in respect of the common law action and the employee's compensation would have been credited against those damages. The result would have been that the burden of paying the amount recovered by the dependants would have been apportioned between the plaintiffs and the defendant in the shares I have found them to be liable. That would, it seems to me, be a fair and just result.

40. The defendant's argument that this cannot be achieved in the absence of the dependant's common law action is thus one that is not immediately attractive. Rights between employer and third party in these circumstances should not, it is said, depend on the chance and unpredictable actions of others.

41. In Cory the judgment of Vaughan Williams LJ spoke of an anxiety by the legislature that "because it thinks it just, the wrong doer who has by his wrong action brought about the result should not get off scot free". He made it clear at the end of his judgment that, as general words were used, he could construe the section to avoid this result. Adopting the same approach here would result in a construction that favoured contribution and not just indemnity. It would, in my judgment, offend justice if the slightly negligent employer paid the bill whilst the grossly negligent lorry driver went scot free.

42. Given that the amendments to s. 25 removed the word "indemnified" and used the new formula and given what I perceive to be the legislative intention behind these provisions I do construe s. 25(1)(b) as entitling the plaintiffs to contribution.

43. I reject the argument that the words "in circumstances creating a legal liability in some person other than the employer" refer only to a liability in such other persons to the exclusion of the employer. It is worthy of note in passing that these words are still used to set the scene for the modern Australian legislation which specifically allows for contribution as well as indemnity in these circumstances (see I & J Foods v Bergzam unreported 40158 of 1996 in the Court of Appeal, New South Wales).

44. I also reject the argument that the legislation is not concerned with adjusting the rights between the employer and the third party. These sections deal with the situation where both are liable and the adjustments that should be made accordingly. The right of indemnity that is conceded by the defendant is in itself an adjustment of his rights vis a vis the plaintiffs. What good reason is there for the adjustment not being a full one that allows for the loss to fall where the blame lies?

45. I also decline to interpret the word "any" in the phrase "for the recovery of any sum which he is obliged to pay as a result of the accident" to mean "all" in this context. It is to be noted that there is a proviso in the subsection that provides that the amount recoverable against the third party thereunder "shall not exceed the amount of damages, if any, which in the opinion of the court would have been awarded to the employee". Thus if, which is possible, the likely damages payable by the third party are less than the employee's compensation, the section envisages a payment to the employer by the third party of a sum less than he paid to his employee.

46. Returning to Wong Yat Chiu v Chan Kwok Wa, reference was made to s. 9(3) of the Civil Liability (Contribution) Ordinance. It was construed in a way that was said expressly to negative an intention to allow contribution. The section reads as follows:

" 9(3) The right to recover contribution in accordance with s. 3 supersedes any right, other than an express contractual right, to recover contribution (as distinct from indemnity) otherwise than under this Ordinance in corresponding circumstances; but nothing in this Ordinance shall affect-

(a) any express or implied contractual or other right to indemnity; or

(b) any express contractual provision regulating or excluding contribution, which would be enforceable apart from this Ordinance (or render enforceable any agreement for indemnity or contribution which would not be enforceable apart from this Ordinance)."

47. The argument appears to be that because the Civil Liability (Contribution) Ordinance contains separate contribution provisions which are not to affect indemnities, such as the one in s. 25, s. 25 cannot also confer a right of contribution. If I have the argument right then it is one that I decline to follow.

48. The opening words of the sub section raise the question of whether the right to recover contribution under s. 3 of the Civil Liability (Contribution) Ordinance supersedes the right to contribution that I find s. 25 to confer. It may seem an academic question as the plaintiffs would recover contribution one way or another, but it engages similar considerations to the second way in which the plaintiffs put their case, namely that if s. 25 does not provide a right to contribution then the Civil Liability (Contribution) Ordinance does.

49. Section three of the Ordinance provides:

"....any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise)."

50. Those words clearly allow for a right of contribution by the plaintiffs if both they and the defendant are liable in respect of the same damage. It does not appear that the application of this provision, independently of what s. 25 may mean, was argued for in Wong Yat Chiu v Chan Kwok Wa.

51. At first blush one may think that the parties were liable for different damage, one being a liability to pay under the scheme of compensation and the other liable to pay damages at common law or under fatal accident legislation.

52. However, s. 2(3) of the Ordinance provides:

" A person is liable in respect of any damage for the purposes of this Ordinance if the person who suffered it (or anyone representing his estate or dependants) is entitled to recover compensation from him in respect of that damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise)."

53. The plaintiffs argue, in the event of a finding of negligence against them, that the dependants are entitled to recover compensation from both themselves and the defendant. That is clearly right. They say that the compensation in both cases is payable in respect of damage suffered, which was the loss of the support of the deceased. I believe that to be right. Accordingly I am persuaded that they are both liable in respect of the same damage and that section three of the Ordinance is thus engaged.

54. In resisting this conclusion the defendant argued that the damage was not the same and that the situation did not meet the test in Howkins & Harrison v Tyler [2001] Lloyd's Rep PN 1, where Sir Richard Scott V-C said:

" But it seems to me that a simple test should be applied to identify a claim capable of being one to which the 1978 Act can apply. That test is this: Suppose that A and B are the two parties who are said each to be liable to C in respect of "the same damage" that has been suffered by C. So C must have a right of action of some sort against A and a right of action of some sort against B. There are two questions that should then be asked. If A pays C a sum of money in satisfaction, or on account, of A's liability to C, will that sum operate to reduce or extinguish, depending upon the amount, B's liability to C? Secondly, if B pays C a sum of money in satisfaction or on account of B's liability to C, would that operate to reduce or extinguish A's liability to C? It seems to me that unless both of those questions can be given an affirmative answer, the case is not one to which the 1978 Act can be applied. If the payment by A or B to C does not pro tanto relieve the other of his obligations to C, there cannot, it seems to me, possibly be a case for contending that the non-paying party, whose liability to C remains un-reduced, will also have an obligation under s. 1(1) to contribute to the payment made by the paying party."

55. It was thus that much time in argument was spent posing different situations where the three parties made different payments in order to see if a debit to one credited the other under the provisions of the Employees' Compensation Ordinance. I need not relate the examples but can state the result by saying that the Ordinance did not always achieve this end. The conclusion was puzzling because it was common ground that in practice the end was achieved. The answer, again common ground, was that it was the operation of the common law in conjunction with the Ordinance that allowed this to be so, as generally when it comes to compensation for personal injury, including death, the common law turns its face against double recovery and, in particular, payments of employees' compensation clearly thereby fall to be treated as benefits whose nature calls for deduction in order to achieve proper compensation and not overcompensation.

56. It was thus the case that I judged that the test in Howkins & Harrison v Tyler was satisfied and the plaintiffs were thus entitled to recover contribution under the Civil Liability (Contribution) Ordinance.

57. By s. 9(3) the right to recover contribution in accordance with s. 3 supercedes any right to contribution otherwise that under the Civil Liability (Contribution) Ordinance in corresponding circumstances. The corresponding circumstances I take to be those where two parties are liable in respect of the same damage. Given my finding that the plaintiffs and the defendant were so liable in the situation covered by s. 25, it follows that the plaintiffs will recover under the Civil Liability (Contribution) Ordinance.

58. Accordingly there will be judgment for the plaintiffs in the sum of $1,076,682.25 (7/8ths of $1,230,494), with interest thereon at the judgment rate from the date of payment made by the plaintiff to the dependants until payment by the defendant and an order nisi for the defendant to pay the plaintiffs' costs.