XCHRX U BA LA v. KONG CHUN SING t/a HOP HING SAW MILL

DCEC267/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES COMPENSATION CASE NO. 267 OF 2000

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R U L I N G

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1. This is an application on behalf of the applicant for the 2nd respondent to make specific discovery of the documents or classes of documents listed in the applicant's solicitor's letter dated 18 July 2001, page 65. The request is an extensive one but before I attend to the detail of the matter, it is helpful to recite the background against which the application is made, much of which appears in the affidavit of Mr Kerry made in support of the summons.

2. The applicant is the brother of the deceased, Captain Maung Maung Aung, Master of the cargo vessel Feliz Trader which sank in a storm in the South China Sea on 30 April 1999 en route to Hong Kong from the Malaysian port of Bintulu with a cargo of lumber on board. During the course of the voyage, the cargo began to shift as a result of heavy seas and the Feliz Trader started to take water and to list badly. Once it became clear that she was in danger of sinking, the deceased ordered the crew to abandon ship and take to the liferaft. Before the crew was eventually rescued, the liferaft had capsized and had to be righted a number of times. The deceased was lost overboard during the night of 30 April in the course of a capsize of the raft which occurred on three or four occasions that night.

3. The Feliz Trader had been owned by Fortune Navigation SA of Monrovia, Liberia, and flew the Panamanian flag, but that company was removed from the Liberian register of companies for non-payment of annual fees on 1 February 1994. It was restored to the register on 1 November 2000 about which I shall be required to say more presently.

4. Fortune Navigation SA was incorporated in Liberia on 17 May 1988 and the Feliz Trader (then registered as the Flores Schooner) was purchased by it on 15 June 1990, the acceptance of sale being signed on its behalf by the 2nd respondent, Mr Kong Chun Sing (see page 43). The deceased had been purportedly employed as from 30 December 1996 by Fortune Navigation (Agency) Company (see pages 39 and 40) describing themselves as owners or agents of the Feliz Trader.

5. The issue which gives rise to this application for discovery comes about in this way. It is submitted by Mr Smith SC for the applicant that Fortune Navigation SA did not exist when the deceased started his employment on the ship on 30 December 1996, it having been annulled as a company as from 1 February 1994. Therefore, it was not in existence and therefore it could not have been the deceased's employer.

6. Unaware of that information, the applicant's solicitors issued this application for employee's compensation against Fortune Navigation SA as 1st respondent and Mr Kong, trading as Hop Hing Saw Mill, as 2nd respondent, both being described in the application as owners and/or operators and/or managers of the Feliz Trader, they having engaged the deceased through Burmaster Shipping Agent Company Limited of Hong Kong.

7. The matter then became complicated when it became clear that Fortune Navigation SA had been removed from the Liberian register which only came to the applicant's solicitor's attention after the proceedings had been issued. The issue in the application itself, given the background that I have just described, is whether the 2nd respondent was the deceased's true employer. In support of that proposition, Mr Smith has invited me to consider the following features which he submits makes the 2nd respondent amenable to an order of discovery in relation to the documents and/or classes of documents now sought.

8. Although Mr Yin for the 2nd respondent has as part of his reply sought to suggest that this court, when exercising its jurisdiction under the Employees' Compensation Ordinance, does not have the power to make orders for discovery which, if he is correct in that submission, would defeat this summons in limine and might therefore, as a matter of logic and convenience, need to be ruled on at the outset, nevertheless, I propose to go on and rehearse Mr Smith's submissions on the merits first, which I would need to do in any event particularly where any ruling of mine may be the subject of an appeal. I am required to address both the question of jurisdiction and the merits.

9. Mr Smith, referring to the contents of Mr Kerry's affidavit and its exhibits, points to the fact that Fortune Navigation (Agency) Company has as its business address No. 1, Area 40, Tuen Mun (see page 47 being the seaman's identity card). That is precisely the same address from where the 2nd respondent carries on business as Hop Hing Saw Mill (page 48, the business registration certificate). He reinforces this by drawing attention to Lloyd's Maritime Directory for 1999 where the entry for the Feliz Trader, page 52, shows the managers as Hop Hing Saw Mill and the owners as Fortune Navigation SA care of Hop Hing Saw Mill, page 52. The agency agreement between Fortune Navigation SA and the manning agents Burmaster Shipping Agent Company Limited, through whose services the deceased was introduced and employed, gives the 2nd respondent's business address as the address of Fortune Navigation SA.

10. He submits that the contract of employment with the deceased which was signed by Fortune Navigation (Agency) Company can reasonably be supposed to be another trading name of the 2nd respondent. From those basic facts, Mr Smith says that all roads lead to the 2nd respondent as the individual who is the person behind and controlling the ship and employing its crew, including of course the deceased as Master. From that, he then relies on the principle enunciated in Kelner v Baxter [1866] 2 LRCP 74 which is to the effect that where the purported principal, in this case Fortune Navigation SA, was not in existence when the contract was signed, the agent, in this case the 2nd respondent, will be personally liable on the contract. Mr Smith accepts that in order to obtain an order for discovery, he must inter alia show at least a good prima facie case that on the available evidence the 2nd respondent is the employer and that if he is, he should be required to produce the documents asked for, which, as the employer and owner of the ship, he should have in his possession or at the very least have had in his possession.

11. It is submitted that the documents which have been requested go to the heart of the issue in the application as to whether the 2nd respondent was the deceased's employer and that by disclosing them the 2nd respondent will assist in establishing that case.

12. Mr Yin, in a series of highly persuasive submissions, has taken a number of points which he says support the case against disclosure. On the merits of discovery as opposed to the issue of jurisdiction, which I will leave to the end, he says the matter divides itself into two parts. The first concerns the question whether on the material before the court the applicant has done enough as a question of fact and having regard to the law applicable to discovery shown that the 2nd respondent is to be treated as the employer by agency or operation of law, or by default, to use that expression in an untechnical sense, so as to become amenable to the order sought. This is the fundamental and most difficult part of the exercise that I have to resolve. The second part, provided the applicant gets over the first hurdle, relates to precisely what should be disclosed in a case where extensive discovery is demanded. Insofar as the court would not order discovery in respect of documents or classes of documents which the party against whom an order is sought would never be expected to possess or to have possessed by virtue of his or its situation or status in the particular litigation, Mr Yin's analysis of a two-stage exercise is helpful.

13. He submits that Mr Smith has not come close to demonstrating that his client is a candidate for the role of the deceased's employer so the applicant is bound to fail on that issue and therefore the 2nd respondent should not be troubled to go on affidavit to deal with such matters.

14. In respect of the submission that this is a situation covered by Kelner v Baxter supra, he draws attention to Tyman's Limited v Craven [1952] 2 QB 100, a decision of the Court of Appeal in England. In that case, a company which had failed to perform its statutory duties, though continuing to trade, was struck off the Companies Register and was therefore dissolved. During the period of its dissolution, an application was made in the company's name to a county court for the grant of a new lease to it. The hearing was adjourned and before it was resumed, the company's name had been restored to the register by order of the Companies Court. At the adjourned hearing of the application for a new lease, a preliminary objection was taken that as the company had not been in existence when the application was first made, the application was a nullity and could not be entertained. The County Court judge held in favour of that objection and refused to hear the application.

15. On appeal, his decision was set aside. It was held that by virtue of section 353(6) of the Companies Act 1948, under which the company had been restored to the register, had the effect that the company should be deemed to have continued in existence as if its name had not been struck off. This, held the Court of Appeal, was effective to validate retrospectively all acts done in the name or on behalf of the company during the period between its dissolution and the restoration of its name to the register and that accordingly the County Court had jurisdiction to consider the application for a new lease.

16. From that, Mr Yin goes on to submit that this decision, based on a subsection of the English Companies Act 1948, must have the same effect as decisions made by the Liberian authorities in allowing the restoration to the register of Fortune Navigation SA on 1 November 2000. Their order would therefore validate retrospectively all acts done in its name during the period of its dissolution and its restoration to the register, thereby fixing it with its liabilities as the deceased's employers under his contract of employment dated 30 December 1996. That is done, says Mr Yin, by virtue of the fact that in the absence of evidence before the court as to Liberian company law, he is entitled to the benefit of the principle, and I suppose legal fiction, that Hong Kong law is the same as Liberian law and this is therefore the effect of the equivalent in the Hong Kong Companies Ordinance of section 353(6) of the English Companies Act.

17. That very bold submission is not one which I am prepared to accede to. Clearly Tyman's Limited v Craven supra was decided on narrow statutory grounds which I cannot, without more, simply transpose to what may or may not have been the effects of Company Law in Liberia between 1994 when the company was dissolved and November 2000 when it was restored. And I also do not find it necessary to take the route suggested by Mr Smith insofar as he seeks to rely on Kelner v Baxter.

18. If I may say so, the answer here is provided by the terms of Order 24, rule 7 itself under which the summons is brought. The principle which Mr Yin also referred to is to be found in the notes to Order 24, rule 7, which in its material parts is in these terms (see the foot of page 400 of Hong Kong Civil Procedure 2001).

20. I must apply those principles to the present material before the court. It seems to me that Mr Smith has made out such a case. Mr Kong, the 2nd respondent, is an all-pervading presence. Before the ownership of the ship, he signed the acceptance for its sale to Fortune Navigation SA. Everything relating to its operations as a trading vessel appear to happen from the business premises at Tuen Mun.

21. I have already drawn attention to the features which support that conclusion in describing the factual background to this summons. All roads really do lead to Mr Kong. All three tests have been amply satisfied. In such circumstances, I am content to hold that I therefore do have the jurisdiction to order discovery of these documents from Mr Kong. I should also observe that Mr Yin's submission that the fact that Mr Kong's business address is the common denominator is not to be treated as significant and should be viewed in the same way as the address of a former solicitors or accountants which frequently contained the addresses of many companies is entirely inapposite. In those circumstances, those addresses are to be viewed as a bare or registered address. In this case, these premises are active trading premises for the saw mill for which saw mill the Feliz Trader would transport lumber and which was also the address from which the vessel was managed through either Fortune Navigation SA or Fortune Navigation (Agency) Company. This presents a completely different state of affairs.

22. Mr Kong must therefore make discovery.

23. The question now is for me to decide the extent of that disclosure in the face of the requirement that discovery should only relate to documents that are relevant to the issues apparent on the pleadings and must be limited to matters which will provide for the just, economical and expeditious resolution of the action. With that in mind, I turn to the letter at page 64 which contains the request.

24. On a first reading of this letter, I had considered that much of the requested material really did fall outside the ambit of the issues in the case, which is whether Mr Kong trading as the saw mill was in fact the deceased's employer. Much of this appeared to go to other types of claim, such as a personal injury action or a cargo claim and was therefore much too wide for present purposes. With that in mind, I invited Mr Smith to go through every item to explain how each related to the issue of the ownership of the vessel and/or the employment of the deceased.

25. Not surprisingly, Mr Smith accepts that there is an overlap in the relevance of much of what is asked for in this litigation and in any other litigation that may be contemplated involving these or other related parties concerning the loss of life and the loss of this vessel. Mr Smith is content to say that all he needs to show is relevance for the purposes of this application and that the respondent is protected by the undertaking implied in all matters of discovery as to the restricted use of discovered documents. As a matter of principle Mr Smith is right, but I apprehend that I ought to interpret relevance in the context of the very narrow issue raised in this application, rather strictly. I believe that much of what has been requested is the product of the indiscriminate use of an admiralty lawyer's word processor rather than the result of a concentrated effort to isolate documents or classes of documents which bear on the issue in this case. This is the exercise which I must now undertake.

26. I direct disclosure of the following items requested in the letter: Items 1 to 6 inclusive, 13, 14c, 14d, 14e, 14j, 24, 29, 30, 32, 33 and any other documents not included in the foregoing which relate to the 2nd respondent's dealings with Fortune Navigation SA or documents showing that he was an office holder of that company or was otherwise involved in the running of its affairs.

27. This disclosure must be in terms of the summons and should be provided within 42 days of notice by the court of the availability of the transcript of this judgment. To order more would be unnecessary for the resolution of the central issue in the application.

28. That therefore is the order that I make on the summons, which I make on the basis that this court, in Employees' Compensation Ordinance applications, has jurisdiction to make orders for discovery which I apprehended it has done since it was established as a court in 1953. Nevertheless, Mr Yin has taken the point on jurisdiction which I should now rule on.

29. His submission is based on what he says is a true reading of section 21(1) of the Employees' Compensation Ordinance which provides for the jurisdiction of the court in employees' compensation cases in conjunction with section 50 and Order 1, rule 2, of the District Court Rules. Section 21(1) reads as follows:

"Save as is provided in this Ordinance and any rules made thereunder, the District Court shall, upon or in connection with any question to be investigated or determined thereunder, have all the powers and jurisdictions exercisable by the District Court in or in connection with civil actions in such Court in like manner as if the Court had by the District Court Ordinance (Cap. 336) been empowered to determine all claims for compensation under this Ordinance whatever the amount involved and the law, rules and practice relating to such civil actions and to the enforcement of judgments and orders of the Court shall mutatis mutandis apply."

30. Mr Yin then goes to section 50 which gives the Chief Justice power to make rules to regulate proceedings before the court. Turning to the District Court Rules, Mr Yin refers in particular to Order 1, rule 2, which is in the following terms:

"(1) Subject to this rule, these Rules shall effect in relation to all proceedings in the Court.

(2) These Rules shall not have effect in relation to proceedings of the kinds specified in column 1 of the following Table (being proceedings in respect of which rules may be made under the enactments specified in column 2 of that Table).

TABLE

(2A) These Rules shall not have effect in relation to proceedings under Part III of the Landlord and Tenant (Consolidation) Ordinance (Cap.7).

(3) These Rules shall not have effect in relation to any criminal proceedings other than any criminal proceedings to which Order 62 applies.

(4) In the case of the proceedings mentioned in paragraphs (2), (2A) and (3), nothing in those paragraphs shall be taken as affecting any provision of any rules (whether made under the Ordinance or any other Ordinance) by virtue of which the Rules of the District Court or any provision thereof is applied in relation to any of those proceedings."

31. From that, he submits that the effect of Order 1, rule 2, is to exclude the District Court Rules from Employees' Compensation Ordinance applications. I do not accept that proposition. There is no doubt that the Employees' Compensation Ordinance contains its own set of rules established under section 50 of the Employees' Compensation Ordinance but these do not purport to be exhaustive. The effect of Order 1, rule 2, is that where the Employees' Compensation (Rules of Court) Rules cover a particular aspect of practice and procedure in the conduct of an Employees' Compensation application, then those rules are to be applied. But where those rules are silent, then it seems to me that by virtue of the general provisions of section 21(1) of the Employees' Compensation Ordinance the court is entitled to look to the District Court Rules and to apply those rules.

32. The Employees' Compensation (Rules of Court) Rules do not provide for discovery. They merely provide under Rule 18 for requests for particulars. These rules provide a concise code for dealing with the peculiar aspects of employees' compensation litigation which does differ somewhat from an ordinary civil action based on contract or tort and it appears that these rules were enacted to provide for the particular idiosyncrasies, if I may express it in that way, of an employees' compensation application. They are not intended to be exhaustive and all-encompassing and that is made clear by Order 1, rule 2(4), of the District Court Rules which accords with the spirit and intent of section 21(1) of the Employees' Compensation Ordinance.

33. Mr Yin makes one other point which is that Order 24, rule 3, in the High Court speaks of discovery against any party to a cause or matter "whether begun by writ, originating summons or otherwise". The equivalent of the District Court Rules only refers to discovery in respect of a cause or matter began by "writ or originating summons". The expression "or otherwise" has been omitted. Mr Yin says this must have been deliberate. He then reminds me that proceedings under the Employees' Compensation Ordinance are started by an application and not by writ or originating summons which he says has the effect of excluding Employees' Compensation Ordinance applications from the ambit of Order 24.

34. It matters not for present purposes that the expression "or otherwise" is missing from the District Court Rules where clearly the intention of the Employees' Compensation Ordinance, the District Court Ordinance and the rules made under both ordinances contemplates that an employees' compensation application should be litigated like any other civil action in the District Court, subject only to the relatively few and discrete requirements of the Employees' Compensation (Rules of Court) Rules. Had the legislation intended to exclude employees' compensation applications from the application of Order 24 discovery, it would have said so expressly rather than by the apparent absence of the expression "or otherwise" from the District Court version of Order 24.

35. I am satisfied therefore that a judge in this court has the power in an employees' compensation application to order discovery under Order 24 of the Rules of the District Court and that the order for discovery which I have made in the course of this ruling should apply to all the other employees' compensation applications which are related to the sinking of the Feliz Trader.

36. I had indicated to counsel that I would be making an order nisi for costs so I now do so. I seems to me that where the applicant has substantially succeeded in the application for discovery that the appropriate order for costs is applicant's costs in the cause. I have decided not to make an outright order for costs in favour of the applicant because this, of course, is very much an interlocutory application and really the matter ought to abide the outcome of the application on its merits, but I intend to protect the applicant from ever having to pay the respondent's costs because, of course, the applicant has succeeded so substantially in this application and so I take the view that the appropriate order is applicant's costs in the cause which will be an order nisi in the ordinary way.

37. There will be two other orders: an order for Legal Aid taxation and certificate for counsel.