NG SIK KAI v. LUI WING LOK t/a WING WAH OIL SHIP CO

HCPI 1030 /2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO 1030 OF 2015

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D E C I S I O N

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1.  This is the defendant’s application to set aside a default judgment.  The defendant is not disputing that the judgment was regular, and is seeking the court to exercise its discretion taking into account all the circumstances of the case, including the merit of the defence.

BACKGROUND

2.  This is a personal injury claim.

3.  The defendant conducts the business of re-fuelling of vessels at sea and has a fleet of oil carrier boats. The plaintiff was a sailor working on one of the oil carriers.  An accident occurred during a refuelling procedure at sea on 26 October 2012 and the plaintiff suffered a personal injury.

4.  The plaintiff applied for Employees’ Compensation on 2 August 2013.  The plaintiff’s solicitors wrote on 31 December 2013: “We are instructed that our client will admit liability leaving compensation to be assessed…”  Judgment on liability on the EC claim was entered on 8 January 2014 and the claim was settled on 2 March 2017 for a sum of HK$474,000.

5.  The writ of the current common law claim was issued on 25 September 2015 and the Statement of Claim and Statement of Damages were filed and served on 3 May 2016.  The defendant failed to file and serve a defence.  Default judgment was therefore entered on 18 July 2016.

6.  The defendant took out the current application on 11 October 2016.

THE DEFENDANT’S CASE

7.  The defendant claimed that he had a good defence.  His strongest case was that the plaintiff had not been working in the course of employment at the time of the accident.

8.  According to the defendant’s affirmation, there was a “Standard Procedure” to conduct the business.  In summary, the intended purchaser would contact the defendant first to negotiate the price and terms of the transaction.  Once this was agreed, the defendant would notify the crew of one of his oil carriers.  Later in the day, the purchaser would directly contact the oil carrier to arrange for the meeting up of the vessels for the refuelling etc.

9.  The defendant submitted that all business transactions would go through him and the crew of the oil carriers were forbidden to have any direct business dealings with the purchasers.

10.  The defendant’s case was that on 26 October 2012, he did not conduct any transactions with the purchaser boat in question and he never authorised the crew, including the plaintiff, to refuel the purchaser boat.  He alleged that this was the crew’s “scam” to conduct business behind his back, secretly selling fuel (which has undergone volume expansion due to change in temperature) for their own profit.

11.  In support of this, the defendant has produced his business records which showed no business order for the plaintiff’s oil carrier on 26 October 2012.

12.  A more striking piece of evidence was what the defendant said about the purchaser in question on the day of the accident.  This purchaser was a new customer and the defendant had refuelled another of the purchaser’s boat just the day before the accident.  However, there was a dispute in price after the refuelling procedure which led to an unpleasant standoff between the purchaser’s boat and the defendant’s oil carrier.  This was eventually resolved but the defendant has instructed his crew not to make further deals with this customer.

13.  The defendant has also submitted two affirmations from the other two crew members of the oil carrier, namely the captain and the engineer.  Both confirmed the existence of the “Standard Procedure” and, whilst falling short of confessing that there was a “scam”, confirmed that they did not follow the “Standard Procedure” on the day of the accident in that they had directly dealt with the purchaser without the authorisation of the defendant.  They claimed that they intended to call the defendant to obtain authorisation before the refuelling commenced but the accident had happened before that.

14.  The defendant further submitted that there were only 3 crew members on the oil carrier and that the plaintiff has been working for him for more than 14 years, so there was reason to believe that the plaintiff must be aware of this “scam” and was part of it.

15.  The defendant also raised other points of defence including working condition / shift system and safety training etc., but these were more minor points.

THE PLAINTIFF’S CASE

16.  The plaintiff’s case is that the defendant has filled in the “Form 2” already admitted liability in the EC claim so should not be allowed to re‑litigate the same points.

17.  He also denied any knowledge in any “Standard Procedure” or any “scam” as he was the lowest ranking crew member.  He also raised disputes on the work condition / shift system and safety training, but again, these were more minor points.

LEGAL PRINCIPLES

18.  The legal principle under the circumstances is well established under Order 13 rule 9 of the Rules of the High Court: the court has discretionary and unconditional power to set aside the default judgment entered regularly. The major consideration is the merit of the defence:

“there is no point to re-open a mater without merit since that would only pointlessly postpone the inevitable…” (Bokhary JA (as he then was) in Premier Fashion Waes Ltd & Another v Chow Cheuk Man & Li Hing Chung (third party) [1994] 1 HKLR 377 at 380).

It is not enough to show a merely “arguable” defence that would justify leave to defend under O14.  The defendant must show that he has a “real prospect” of success.  To do so, he must satisfy the court that his case and the evidence that he adduces in support of it is potentially credible and carries some degree of conviction.” (Hong Kong Civil Procedure 2017, Vol 1, paragraph 13/9/14)”

19.  Further, the court does not automatically set aside a default judgment just because the defendant has demonstrated that his defence has a “real prospect” of success.  The court has to take into account of all circumstances, e.g. reasons the default occurred, length of delay, conduct of the defendant after making the application, prejudice to the other parties etc. (Hong Kong Civil Procedure 2017, Vol 1, paragraph 13/9/13)

20.  As far as the law on vicarious liability is concerned, the “close proximity” test is applicable as laid down in Ming An Insurance Co (HK) Ltd v Ritz Carlton Ltd (2002) 5 HKCFAR 569.  Litton NPJ (as he then was) stated:

“Hence in seeking an answer to the question “Is the servant’s wrongful act so closely connected with his employment that it would be fair and just to hold the employer vicariously liable?” it must be remembered that the issue is not free standing, and matters such as the servant’s duties at the time when the tort occurred, whether he was acting in the interest of the employer or solely for himself, et cetera, are still relevant.”

DECISION

21.  The defendant’s strongest defence was that the plaintiff was knowingly involved as part of a “scam” when he was injured.  If this could be established, there would be no question that the plaintiff has been acting solely for himself at the time.

22.  Mr. Wong Ting Kwong, counsel for the plaintiff, attacked the credibility of the evidence, especially those from the affirmations of the two crew members.

23.  In doing so, it seems to me clear that this must be a case where “the ultimate outcome would depend on whose evidence is believed and no provisional view of the probable outcome of the action can be found without a trial, the appropriate test to determine whether the defendant has a real prospect of success is whether the defence “could well be established” at trial. (Allen v. Taylor [1992] 1 P.I.Q.R. 255 at 259)” (Hong Kong Civil Procedure 2017, Vol 1, paragraph 13/9/14)

24.  The circumstances surrounding the accident, including what happened on the day before with the purchaser in question, are something that merit investigation.  The defendant has clearly demonstrated that the defence has a “real prospect” of success: he has adduced “potentially credible” evidence before the court and it would not be fair and just to deny the defendant an opportunity to argue his case and present his evidence at trial.

25.  The plaintiff’s strongest argument was that the defendant did admit liability at the EC claim. However, as the case and the evidence was never argued in the EC proceedings, it is not a “re‑litigation” as such.  I would nevertheless imagine that the defendant would need to explain this decision given his stance now.  There may well be many reasons why an employer wishes to settle an EC claim.

26.  As for the other circumstances in this case, the defendant explained that this was a one‑off incident of genuine mistake.  Once the defendant received the judgment, he took immediate action seeking legal assistance and the current Summons was taken out within 3 months.  The defendant also explained the difficulties in obtaining the full picture of the events on 26 October 2012, especially regarding obtaining evidence from the two crew members.

27.  The plaintiff argued that the defendant has already made an allegation of the “unauthorised” nature of the re‑fuelling incident as long ago as 6 August 2013 in a letter from the defendant’s solicitors.

28.  I accept that there is some delay in the investigation of the case but I also appreciate that, if the defendant’s case is true, there may be reluctance from the crew members to provide what might be seen as “self-incriminating” evidence.  Such evidence is somewhat crucial to the merit of the defence.  I see no evidence to show that there is any calculated or malicious intent in the defendant’s conduct.

29.  One may also argue that there is also some delay in taking out the current application but I agree with the defendant that this should not cause any prejudice to the plaintiff.  Indeed, the plaintiff did not raise any argument on prejudice.

30.  I am therefore minded to set aside the default judgment. Under such circumstances, the plaintiff has asked the court to give a conditional leave to defend by making an order for a payment into court.

31.  However, given the circumstances of the case and the apparent innocent nature of the defendant’s conduct, I do not think that this case falls within those “rare” circumstances when the court might see the need “to encourage the proper future conduct of the litigation and to provide a measure of security to the plaintiff.” (L&M Specialist Construction Ltd [2000] 3HKLRD 262)

32.  As for costs, the defendant is seeking an indulgence due to his mistake so I see no reason why he should not pay the costs.

ORDER

33.  I would give the following order:

a)   The Interlocutory Judgment dated 18 July 2016 be set aside;

b)   The defendant be at liberty to defend the action by filing and serving his defence within 7 days of this order;

c)   There be an order nisi for the costs of and occasioned by this application be to the plaintiff to be taxed if not agreed, with certificate to counsel; and

d)   Plaintiff’s own costs be taxed in accordance with Legal Aid Regulations.