LEE YAM LOI v. LEUNG YIU CHI t/a SUN WAI ENGINEERING CO AND OTHERS

HCPI 703/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 703 OF 2006

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BETWEEN

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J U D G M E N T

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1.  In this matter, the plaintiff’s claim against all three defendants have been settled for HK$1,250,000 (inclusive of interests) plus costs to be paid by the defendants in full and final settlement.

2.  As between the defendants, the three defendants have also agreed between themselves that each defendant is to bear one‑third of the settlement sum and costs to the plaintiff subject only to the resolution of the outstanding issue in the Third Party proceedings as between the 1^st defendant and the Lapton Electric & Machinery Ltd (“Lapton”) who is both the 3^rd defendant as well as the 1^st Third Party in these proceedings, and also the Contribution Notice issued by Lapton against the 1^st defendant.

3.  The claim against the 2^nd Third Party has already been discontinued by the 1^st defendant in the Third Party proceedings.

4.  Therefore this judgment deals only with the outstanding issue between the 1^st defendant and Lapton in the Third Party proceedings and arising from the Contribution Notice served by Lapton on the 1^st defendant claiming contribution against the 1^st defendant.

Background

5.  On 9 September 2003, the plaintiff, a 43 year old air‑conditioning system installation worker suffered from an accident resulting in injuries while at work inside the interior of a construction site in a building known as Citylink Plaza, Shatin Station Circuit, Shatin (‘the Site”).

6.  At the Site, Lapton was a main contractor.

7.  Both the 1^st defendant and the 2^nd defendant were sub‑contractors of Lapton at the Site.

8.  The plaintiff was an employee of the 2^nd defendant.

9.  It was alleged that the person who caused the injury to the plaintiff was a welding worker employed by the 1^st defendant.

10.  However, the 1^st defendant denies he had any of his welding workers working at the Site at the time of the accident. It is the 1^st defendant’s case that he had sub‑contracted all the welding works to the 2^nd Third Party and that the person who had caused the injury to the plaintiff may have been a worker of the 2^nd Third Party.

11.  These allegations are no longer of any great significance and need not be determined since the plaintiff’s case has now been settled. They are repeated here only because they form the background to the dispute between the 1^st defendant and Lapton in the Third party proceedings and the Contribution Notice.

12.  After the accident to the plaintiff which occurred at the Site, Lapton, having obtained Public Liablity Insurance from Concorde Insurance Co. Ltd (“Concord”) at the material time on behalf of and covering itself as well as all its sub‑contractors on the Site, made an approach to Concorde in respect of the accident to the plaintiff. However, that was turned down by Concorde on the basis that the accident to the plaintiff was not covered by the policy issued by Concorde.

13.  The Writ in this case was issued by the plaintiff some time in 2006, but it was not until September 2007 that the 1^st defendant came to know of the claim by the plaintiff against the 1^st defendant when he received a letter from the plaintiff’s solicitors dated 12 September 2007.

14.  The reason that the 1^st defendant did not know of the claim by the plaintiff earlier was due to the fact that the name of the 1^st defendant as well as its address was wrongly stated in the Writ when it was originally issued and it was only in January 2008 that the Writ was amended with leave, such that the correct name and address of the 1^st defendant was put on as a result of the amendment.

15.  In April 2008 the 1^st defendant, for the first time ever, asked Lapton for a copy of the insurance policy covering the time of the accident to the plaintiff which Lapton had obtained from Concorde.

16.  It was not until January 2009 that Lapton was able to provide a copy of the relevant insurance policy to the 1^st defendant after it was ordered by the Master in November 2008 to provide same to the 1^st defendant. The reason for that delay was said by Lapton to be due to the fact that Lapton was unable to find its own copy of the insurance policy and had to seek out its insurance agent to obtain a copy of same before it could provide such copy to the 1^st defendant. Lapton does not deny that there had been some delay by them in complying with the order of the Master to provide a copy of the insurance policy to the 1^st defendant.

17.  The Third Party Notice herein was issued by the 1^st defendant against Lapton and the 2^nd Third Party on 6 October 2008, before the 1^st defendant had been given a copy of the insurance policy by Lapton.

18.  After having been furnished with a copy of the insurance policy, the 1^st defendant never made any claim against Concorde arising from the accident to the plaintiff on that insurance policy.

The Third Party claim by 1^st defendant

19.  The claim by the 1^st defendant is for a full indemnity against Lapton on the basis of an oral agreement between them made in 1996.

20.  The terms of the oral agreement pleaded in paragraph 4(a) of the Third Party Notice (which was ordered to stand as the Statement of Claim in the Third Party proceedings) was that the parties had agreed that Lapton shall take out adequate liability insurance coverage to protect the 1^st defendant against possible claims by third parties for injuries suffered during the construction for the projects subcontracted by Lapton to the 1^st defendant including works at the Site.

21.  It was pleaded by the 1^st defendant that he had contributed to the insurance premium paid to the insurers for the coverage, in this case Concorde.

22.  It was also pleaded by the 1^st defendant that to give business efficacy to the oral agreement between the parties, there were implied terms that :

(a)  Lapton shall furnish the 1^st defendant with sufficient information/detail relating to the third party liability insurance so that when claims were brought against the 1^st defendant, as in the present case, the 1^st defendant could submit the claims to the insurer for processing and handling; and

(b)  Lapton, either through its insurer or by itself, shall reimburse/indemnify and save the 1^st defendant harmless from all claims by third parties for injuries, including the plaintiff’s claim, occurred during the works by the 1^st defendant at the Site.

23.  The 1^st defendant alleged that Lapton was in breach of the oral agreement between them in the following ways :

(a)  Lapton refused to provide any details or information relating to the third party liability insurance policy including the identity of the insurer to the 1^st defendant; and

(b)  alternatively, Lapton failed to procure the third party liability insurance policy to protect the 1^st defendant against the plaintiff’s claim.

Lapton’s defence to the claim by the 1^st defendant

24.  Lapton admits that there was an oral agreement between Lapton and its various sub‑contractors including the 1^st defendant to the effect that Lapton would take out a Contractors’ Public Liability Insurance Policy annually to cover the various works sub‑contracted by Lapton to its various sub‑contractors in any site in Hong Kong.

25.  It was pleaded by Lapton that it was further agreed that :

(a)  the insurance cover would not cover liability against claims for death, bodily injury, illness or disease by employees of  the sub-contractors of Lapton; and

(b)  the various sub-contractors of Lapton would contribute to the premium for the insurance cover in proportion to the value of their sub‑contracted works by Lapton.

26.  It is not disputed that Lapton did take out a Contractor’s Public Liability Insurance cover under Policy No. 1PL/19347/03 for the period from 3 April 2003 to 2 April 2004 with Concorde (“the Policy”).

27.  The Policy named Lapton and specifically those sub‑contractors of Lapton named in the schedule including the 1^st defendant as being the insured under it.

28.  It is also not in dispute that the amount of contribution paid by the 1^st defendant had been received by Concorde and for which Concorde had sent a written receipt and/or acknowledgement to the 1^st defendant.

29.  The Policy contained an express term in clause 4.6 that Concorde, as the insurer :

“shall not indemnify the Insured in respect of :-

4.6.1  liability in respect of death, bodily injury, illness or disease suffered by :-

(a)  any person employed by any insured party for the purpose of execution of insured contract or any parts thereof; and

(b)  any person to whom part or parts of the insured contract have been sub-contracted including but not limited to self-employed sub-contractors.”

30.  Seemingly, it was upon this clause that Concorde refrained from accepting responsibility for the accident to the plaintiff in December 2005 when approached by Lapton.

31.  On the basis stated above, Lapton says that it should not be liable to the 1^st defendant for the Third Party claim.

Disputed factual issue

32.  As can be seen from the pleaded cases of the 1^st defendant and Lapton, the factual issue in dispute between them takes on a very narrow compass.

33.  The main dispute between them goes to the terms of the oral agreement made in 1996, namely, what was agreed between them in their oral agreement as to what insurance policy or coverage should be taken out by Lapton on behalf of itself and all its sub‑contractors including the plaintiff.

Evidence of the 1^st defendant

34.  The evidence of the 1^st defendant given in court relating to the disputed factual matter is as follows.

35.  In paragraph 8 of his witness statement (which witness statement was adopted as his evidence in chief) the 1^st defendant stated the oral agreement between him and Lapton to be as follows :

“[Lapton] agreed to take out adequate liability insurance coverage to protect [the 1^st defendant] against claims by Third parties for injuries suffered during construction works done by the 1^st defendant at construction sites, including the Site”.

36.  This was elaborated on when the 1^st defendant gave evidence from the witness box. He said in evidence that in 1996 when he received the payment slip from Lapton, he noticed that there were deductions from the amount which Lapton should pay him as a sub-contractor. He then made enquiries with Chan Wing Wing of Lapton as to the deductions. He was told by Chan Wing Wing that the deductions was used to purchase insurance.

37.  When the 1^st defendant told Chan Wing Wing that he had already got his own “labour insurance” (which was clarified by the 1^st defendant to mean employees compensation insurance), Chan Wing Wing told him that the deductions were for taking out “third party insurance” to cover the 1^st defendant and the 1^st defendant’s workers if injury was caused to others or damage to other people’s property and that would cover or prevent the 1^st defendant from bankruptcy if sued.

38.  That is the evidence of the 1^st defendant pertaining to the terms of what was agreed by them in the oral agreement.

The evidence from Lapton

39.  The evidence from Lapton came from its director, Chan Wing Wing.

40.  The oral agreement as to the taking out of insurance coverage is contained in paragraphs 4, 5, 6 and 7 of his witness statement.

41.  In a nutshell, his witness statement was that the oral agreement was to the effect that Lapton would take out a Contractor’s Public Liability insurance to cover the liability to Lapton and all its other sub‑contractors in the course of their work as sub-contractors of Lapton including the 1^st defendant.

42.  For Lapton and all its sub‑contractors to join in one policy would mean a reduction of the premium for each of them as opposed to each taking out a separate policy.

43.  It was also agreed that Lapton would pay the premium first and then be reimbursed by each of the sub‑contractors at the end of the year each of their share of the premium calculated in accordance with the proportion of the sub‑contracted work.

44.  Lapton did take out the Policy with Concorde which was a Contractor’s Public Liability Policy.

45.  It was an express term of the oral agreement between them that the insurance policy taken out would not cover the employees or servants or agents of the 1^st and 2^nd defendants who would remain responsible for insuring against liability for the acts of their own employees.

46.  Chan Wing Wing adopted his witness statement as his evidence‑in‑chief.

47.  In the witness box, Chan Wing Wing elaborated on the contents of his witness statement.

48.  He said in evidence that prior to 1996, Lapton had the experience of being claimed by a third party for damages due to having damaged the property of that third party. As a result of that experience, Lapton called a meeting with all of its sub‑contractors in his office.

49.  At the meeting, he proposed to the sub‑contractors and clearly stated that all of them together with Lapton to take out a Public Liability insurance policy in respect of the projects undertaken so as to protect all of them against any accident causing damage to third parties.

50.  That proposal was agreed to by all the sub‑contractors and the arrangement was left to Lapton to take out “third party insurance” for the purpose of protecting all of them from damage claims by third parties.

Assessment of evidence and Finding of Fact

51.  There is no dispute that the oral agreement between the 1^st defendant and Lapton took place back in 1996 and that nothing was put in writing as to evidencing the terms of that oral agreement.

52.  I have the greatest doubt that they can clearly remember with any accurate detail the actual oral wording used when that oral agreement was made as to the obtaining of insurance coverage apart from the general term “third party insurance”. The term “third party insurance” is used both in the evidence of the 1^st defendant as well as that of Chan Wing Wing and most likely their discussion would have employed that term in the way that it was understood by each of them.

53.  In a case of this nature detail wording in respect of the oral agreement is of importance because insurance coverage can take on many different forms of insurance cover. However, where the exactness of wording is important or essential to the agreement reached between the parties as to what type of insurance coverage is to be taken out, one would expect that some form of writing is used to record that agreement.

54.  In this case, no such writing exists. From that I can infer that the parties were not unduly concerned with the detailed wording of the oral agreement as to the precise type of insurance coverage to be obtained.

55.  This is further supported by the fact that the 1^st defendant had never asked to see a copy of the policy taken out by Lapton on behalf of itself and all of its sub‑contractors even though the 1^st defendant was making annual contribution to the premium paid on the insurance policy so taken out by Lapton year after year since 1996.

56.  It was only until the 1^st defendant became aware of the plaintiff’s claim against it in this present case, that the 1^st defendant asked Lapton for a copy of the Policy, and that was only in April 2008 although the 1^st defendant became aware of the claim in September 2007.

57.  As for the discussion culminating in the obtaining of insurance by Lapton on behalf itself and all of its sub-contractors, I prefer the evidence of Chan Wing Wing that the discussion was made in his office after he had called a meeting with all of the sub‑contractors and that it was only when all of the sub‑contractors had agreed to join in with Lapton to take out “third party insurance” that Lapton went ahead to obtain the Public Liability Policy which was then renewed year after year.

58.  This aspect of the evidence from the 1^st defendant seem to suggest that it was only after he noticed deductions made from his payment slip from Lapton that he made enquiries from Chan Wing Wing and was then told that the deductions were for his share of the premium in taking out “third party insurance”.

59.  I cannot accept that Lapton would have taken out Public Liability Insurance on behalf of the 1^st defendant without his prior agreement along with all the other sub‑contractors.

60.  This evidence of the 1^st defendant, in my view, simply highlights the fact that he has little, if any, memory of what had happened leading up to the obtaining of the Public Liability Insurance by Lapton.

61.  I therefore find that on the evidence adduced, it was unlikely that the oral agreement would have gone any further than agreeing to obtain what is known in the construction trade in general parlance to be “third party insurance”.

62.  I accept the evidence from Lapton that all the sub‑contractors including the 1^st defendant agreed to share the premium which was to be calculated on the ration of the sub‑contracted works assigned to each of them by Lapton.

63.  I also find that it was agreed by all that one policy was to be taken out by Lapton but that Lapton and all the sub‑contractors would be the insured parties under that policy.

64.  As for the extent of the coverage in respect of the policy to be taken out, for the reasons given above, I find that the agreement related only to the taking out of “third party insurance” generally with nothing specific being agreed on as to the extent or coverage of the policy to be taken out by Lapton on behalf of itself and all of its sub‑contractors.

Determination on the Third Party claim by the 1^st defendant

65.  On the facts as found above, the agreement was for Lapton to obtain “third party insurance” on behalf of itself and all of its sub‑contractors.

66.  The evidence shows that Lapton did take out the Policy which is a Contractor’s Public Liability Policy.

67.  It is not unusual in the construction trade for such a Public Liability Policy to be referred to as “third party insurance” in common parlance, in the much same way as the 1^st defendant, when giving evidence, referred to the employees’ compensation insurance as “labour insurance”.

68.  Accordingly, when it was agreed between Lapton and all its sub‑contractors including the 1^st defendant that Lapton would take out “third party insurance” on behalf of all concerned, that agreement had been carried out by Lapton in taking out the Contractor’s Public Liability Policy which thereafter was renewed year after year.

69.  On that basis there was no breach by Lapton of the oral agreement.

70.  Whether or not the 1^st defendant had misunderstood the term “third party insurance” to mean something other than the Public Liability Policy taken out by Lapton is neither here nor there. Even if that was the case, that is no basis for alleging that Lapton was in breach of the oral agreement between them. Nor would it constitute any breach by Lapton.

71.  On the evidence given by the 1^st defendant, there is simply nothing in what was agreed between him and Lapton to suggest that the insurance taken out by Lapton fell short of what was agreed between them.

72.  That, no doubt was fully appreciated by the legal advisers of the 1^st defendant which accounts for the plea by his legal advisers as to an implied term arising from the oral agreement that the Lapton was to hold harmless the 1^st defendant from all claims by third parties including the plaintiff’s claim herein.

73.  From the evidence and the finding made above, there is simply no basis upon which such an implied term can be inferred.

74.  As for the second alleged breach relied on by the 1^st defendant, the evidence in the case showed that although there was some delay, ultimately Lapton did provide a copy of the Policy to the 1^st defendant some time in January 2009.

75.  Even considering that there was a delay of about 10 months, that would not have availed the 1^st defendant since even after the 1^st defendant was provided with a copy of the Policy, no attempt had been made by the 1^st defendant to submit this claim to Concorde for processing and handling.

76.  That is hardly surprising since Concorde had already turned down the request by Lapton as early as December 2005 on the basis that the Policy did not cover this accident to the plaintiff.

77.  For the reasons given above, I find that there was no breach of the oral agreement by Lapton and the 1^st defendant’s claim against Lapton in the Third Party proceedings must be dismissed.

78.  That however, is not the end of the matter in so far as this judgment is concerned. There is still the contribution issue arising from the Contribution Notice served by Lapton on the 1^st defendant and seeking contribution from the 1^st defendant in respect of the accident to the plaintiff.

79.  I turn now to deal with the Contribution Notice.

Contribution Notice

80.  The Contribution Notice was issued pursuant to the Civil Liability (Contribution) Ordinance, under section 4(1) of which the basis of apportionment “shall be such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage in question”.

81.  It is not disputed that the court ought to take into account both the seriousness of the respective parties’ faults as well as their causative relevance in deciding on the amount of the contribution.

82.  In the present case, the accident to the plaintiff occurred when the plaintiff was standing on a ladder adhering strips of insulation sheets on an air duct.

83.  At the same time, a welder working nearby to where the plaintiff was, was carrying out welding works on a chiller pipe.

84.  The plaintiff suddenly suffered an electric shock and fell from the ladder sustaining severe head injuries.

85.  The Accident Investigation Report prepared by factory inspector suggests that the plaintiff may have come into contact with the chiller pipe being welded or that the electrode used by the welder may have come into contact with the air duct which the plaintiff was working on.

86.  Two recommendations were made by the Accident Investigation Report as follows :

(a)  the fixing of an automatic voltage regulator; and

(b)  placing the electrode holder (used in the welding) in a container made of insulating material.

87.  It would therefore appear that neither of those two recommendations had been implemented at the time the accident happened.

88.  It was submitted by Lapton that in this case, since the 1^st defendant was the sub‑contractor for the water pipe installation, and the welding works being carried out on the chiller pipe being part of the water pipe installation works, the welder, whether he was an employee of the 1^st defendant, or whether he was employed by the sub‑sub‑contractor of the 1^st defendant, the 1^st defendant ought to have properly monitored the welding works being carried out on the Site.

89.  It was further submitted by Lapton that had there been proper monitoring of the welding works by the 1^st defendant, and on the evidence of the 1^st defendant that he agreed with the two recommendations made in the Accident Investigation Report, this accident may well have been avoided.

90.  On that basis, it is the case of Lapton that whether in terms of fault or culpability, or whether in terms of causative relevance, the 1^st defendant should be clearly responsible for failure to take the two safety precautions recommended in the Accident Investigation Report.

91.  Lapton therefore submits that the 1^st defendant ought to indemnify it in full as to Lapton’s one-third liability and costs in respect of the plaintiff’s claim as well as Lapton’s own costs in defending the plaintiff’s claim.

Determination on Contribution Notice

92.  In coming to a determination on the Contribution Notice, while it is true that the 1^st defendant has a duty to be responsible for ensuring that safety precautions are taken in respect of the works sub-contracted to the 1^st defendant by Lapton, one must not lose sight of the fact that Lapton, being the main contractor on the Site is itself also under a duty to ensure safety on the Site.

93.  Indeed the duty of the main contractor may even be greater than that of any of the sub‑contractors since it is to the main contractor that the authorities look to when serious safety breaches occur on any construction sites.

94.  Moreover, if criminal prosecutions are taken for such safety breaches, it will usually be against the main contractor of the site in question.

95.  In the present case, as a result of the accident and the subsequent investigation by the Labour Department, two letters were sent to Lapton by the Labour Department to the effect that Lapton had failed to observe their statutory duties on the Site and that criminal prosecution were being contemplated by the Labour Department.

96.  Indeed, under cross‑examination, the Project Engineer of Lapton, Mr Tsang Ying Man, agreed with the contents and the findings by the Labour Department that Lapton, as the main contractor, had a statutory duty to observe and to ensure safety on the Site.

97.  Therefore on that evidence of Mr Tsang that Lapton had also been at fault in failing to ensure proper safety measure to be taken on the Site in respect of this accident to the plaintiff, the basis for Lapton’s entitlement to a full indemnity from the 1^st defendant no longer exist.

98.  Since both Lapton as well as the 1^st defendant had seen fit to agree to being one‑third to blame in respect of the accident to the plaintiff (with the 2^nd defendant also bearing one‑third of blame), I do not see fit, given the circumstances in this case, to alter or change that apportionment already agreed to by all the defendants.

99.  Accordingly, the Contribution Notice issued by Lapton against the 1^st defendant is also dismissed.

Costs

100.  The 1^st defendant has failed in its claim on the Third Party proceedings and in like manner Lapton has failed in its attempt to obtain a full indemnity from the 1^st defendant on the Contribution Notice.

101.  There will accordingly be a costs order nisi that each of the 1^st defendant and Lapton are to pay their own costs both in the Third Party proceedings and also on the Contribution Notice.