LAI PUI LING suing by her brother and next friend LAI HIN HO v. HO CHI KEUNG AND ANOTHER

HCPI 464/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO 464 OF 2014

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D E C I S I O N

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1.  In this action for damages for personal injury suffered by the plaintiff while wakeboarding, there are two defendants, the owner of the boat and the coxswain. A generally indorsed writ was issued on 12 July 2012. A statement of claim was filed and served on both defendants on 12 September 2013. Interlocutory judgment was entered against the 1^st defendant (the owner) on 3 October 2013 in default of notice of intention to defend. The action proceeded to trial as between the plaintiff and the 2^nd defendant (which included the assessment of damages as regards both defendants). In my judgment handed down on 19 May 2016, I dismissed the action with respect tothe 2^nd defendant, and stated that I would hear the parties before deciding what to do with the default judgment against the 1^st defendant. I have since heard them. The question that I have to decide is whether the default judgment ought to be set aside.

2.  That the court retains a power to set aside a default judgment in circumstances such as these is not in doubt.  Order 13 rule 9 of the Rules of the High Court provides that the court may, on such terms as it thinks just, set aside or vary any judgment entered in default of notice of intention to defend.  The power is not in terms confined to any stage of the proceedings, and is exercisable by the court of its own motion: see Order 1B rule 2.  The rationale for the jurisdiction has been stated by Lord Atkin in Evans v Bartlam [1937] AC 473, 480 as follows:

“The principle obviously is that unless and until the Court has pronounced a judgment upon the merits or by consent, it is to have the power to revoke the expression of its coercive power where that has only been obtained by a failure to follow any of the rules of procedure.”

3.  In the usual run of cases this power is invoked before any trial and, if it is exercised, the claim against the defendant in default will go to trial.  The present case is unusual in that the trial has already taken place although, as far as liability was concerned, it was litigated only between the plaintiff and the 2^nd defendant. There could be no further trial in the action.  The choice is between allowing the default judgment against the 1^st defendant to stand, or setting it aside and entering judgment against the plaintiff instead.

4.  It was averred in the statement of claim that the 1^st defendant was the owner of the boat and the 2^nd defendant was driving it at the time “as the employee, agent and/or servant” of the 1^st defendant. Although there are two defendants, it is clear that there was but one and the same damage suffered by the plaintiff.  The acts of the 1^st defendant said to constitute negligence causing that damage are pleaded in the statement of claim as follows:

“(i) Being the employer and/or principal of the 2^nd Defendant, the 1^st Defendant failed to instruct and/or ensure and/or supervise the 2^nd Defendant to assign another person who is over 18 years of age with the duty of informing him of any accident occurring of the person being towed;

(ii) Being the employer and/or principal of the 2^nd Defendant, the 1^st Defendant failed to instruct and/or ensure and/or supervise the 2^nd Defendant not to drive the Cruiser and tow anyone for the purpose of wakeboarding whilst his ability to operate the Cruiser and tow anyone for the purpose of wakeboarding whilst his ability to operate the Cruiser was impaired by the amount of alcohol he had consumed;

(iii) Being the employer and/or principal of the 2^nd Defendant, the 1^st Defendant failed to instruct and/or ensure and/or supervise the 2^nd Defendant not to tow anyone for the purpose of wakeboarding when the person had consumed alcohol;

(iv) Being the employer and/or principal of the 2^nd Defendant, the 1^st Defendant failed to instruct and/or ensure and/or supervise the 2^nd Defendant not to allow any beginner to participate in wakeboard without wearing a suitable helmet;

(v) Being the employer and/or principal of the 2^nd Defendant, the 1^st Defendant failed to instruct and/or ensure and/or supervise the 2^nd Defendant to maintain a low boat speed when towing a beginner for the purpose of wakeboarding;

(vi) Failing to provide the 2^nd Defendant with any or any adequate supervision as to how to perform his works safely;

(vii) Exposing the Plaintiff or suffering the Plaintiff to be exposed to a risk or injury or loss in which the 1^st Defendant knew of or ought reasonably to have known; and

(viii)  Being the employer and/or principal of the 2^nd Defendant, the 1^st Defendant is vicariously liable for their negligence in the above accident.”

5.  Insofar as the plaintiff asserted vicarious liability on the part of the 1^st defendant for the tort of the 2^nd defendant (ie (viii) above), Mr Kwan on behalf of the plaintiff accepted that, with judgment having been entered in favour of the 2^nd defendant, her case against the 1^st defendant must equally fail.  I think that concession was rightly made.  It would be contrary to reason and principle to maintain a default judgment based on vicarious liability on the part of the principal or employer when the agent or employee has been found not negligent.  On the question of the effect of a judgment adverse to the plaintiff in a prior suit against the employee, the US Supreme Court in Bigelow v Old Dominion Copper Mining & Smelting Co, 225 US 111 (1912) quoted with approval the following language from New Orleans and Northeastern Railroad Co v Jopse, 142 US 18 (1891):

“It would seem on general principles that, if the party who actually causes the injury is free from all civil and criminal liability therefor, his employer must also be entitled to a like immunity. … If the immediate actor is free from responsibility, because his act was lawful, can his employer, one taking no direct part in the transaction, be held responsible? … The question carries its own answer, and it may be generally affirmed that if an act of an employee be lawful, and one which he is justified in doing, and which casts no personal responsibility upon him, no responsibility attaches to the employer therefor.”

Even though the converse may not apply, ie a judgment in favour of the plaintiff in a prior suit against the employee alone does not necessarily bind the employer, the Supreme Court in Bigelow considered that the unilateral character of this estoppel is justified “by the injustice which would result in allowing a recovery against a defendant for conduct of another, when that other has been exonerated in a direct suit”.[1]

6.  The rule was stated in the US textbook, A Treatise of the Law of Judgments (1925), by A C Freeman, at §109 as follows:

“Where the liability of one of two joint defendants is purely derivative, as where a master is joined with his servant and his liability depends entirely upon the rule of respondeat superior, judgment cannot properly be rendered for the servant and against the master since the latter cannot be held liable if the former is acquitted”,

and explained at §469 as

“an exemplification of the broader rule by which one whose liability is wholly derivative may claim the benefit of a judgment in favour of the person from whom his liability is derived, if not based on grounds applicable only to the latter”.

7.  As for (i), (ii), (iv) and (v), each of these paragraphs averred that the 1^st defendant failed to instruct, ensure or supervise the 2^nd defendant so that he would act or refrain from acting in a certain way.  Having regard to my judgment in favour of the 2^nd defendant in which I found such acts or omissions to have been beyond the 2^nd defendant’s duty or not causative of any damage, Mr Kwan conceded that these particulars of negligence are also no longer tenable as against the 1^st defendant.

8.  This leaves (iii), (vi) and (vii).  It was submitted on behalf of the plaintiff that these 3 particulars stand on a different footing because they are independent from the allegations of negligence relating to the 2^nd defendant that this court has rejected.  To assess this contention it is necessary to examine the principles that should be applied in a situation such as this.

9.  In Spencer Bower & Handley, Res Judicata (4^th ed), §9.48, it is stated:

“… At common law where the plaintiff failed against one joint tortfeasor on the merits, and not because of a personal defence, the others could probably rely on a cause of action estoppel because there was only one cause of action.”[2]

10.  Whatever the true position might have been at common law, this does not assist the 1^st defendant.  First, in respect of (iii), (vi) and (vii) above any tort committed by the 1^st defendant would not be a joint one with the 2^nd defendant but several. Secondly, any notion that the cause of action against joint tortfeasors was one and indivisible was abrogated in Hong Kong by s 5 of the Civil Liability (Contribution) Ordinance (Cap 377): see the decisions of Wah Tat Bank Ltd v Chan Cheng Kum [1975] AC 507, 517D and Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 in relation to equivalent provisions in Singapore and Australian Capital Territory respectively.  As such, the liability of joint tortfeasors is joint and several.  They are generally not privy with one another, and judgment in a suit by the plaintiff against one of them does not give rise to an estoppel in a suit against the others: Spencer Bower & Handley, Res Judicata (4^th ed), §9.48; Ramsay v Pigram (1968) 118 CLR 271.

11.  As regards joint tortfeasors and several tortfeasors causing the same damage, in Glanville Williams, Joint Torts and Contributory Negligence (1951), at §19, it was stated:

“… the plaintiff cannot sign a separate final judgment against one who makes default. He may sign interlocutory judgment against him, and the damages are assessed against all the defendants at the trial, including the one who has made default. … If the plaintiff fails against the defendants who appear for a reason that goes to all, the interlocutory judgment must be discharged.”

§18 of the same work was referred to in support of the last sentence in the passage quoted above.  In that paragraph, Professor Williams wrote:

“It seems that where joint tortfeasors are sued together and one of them is successful in a defence that operates to discharge all, his success will enure to the benefit of the other defendants who have failed on the issues joined by them. There is analogy for this rule in the law of contract, but the only authority directly in point on the law of tort is a case in the Year Books.[3] It was an action against A and B for taking goods: A pleaded not guilty and B pleaded title to the goods by gift. The jury found against A, but in favour of B. It was held by the whole court that ‘when the plea that goes to all [namely, B’s plea of title to the goods] is found against the plaintiff the enquiry into the first plea is as if it were void.’ The rule appears to be a sound one, as saving unnecessary repetition of litigation, and might well be extended to several concurrent tortfeasors, though with them there is less scope for its application.”

12.  The premise of the rule as stated seems to be that the co‑defendant in default was a party in the same action.  It might however be argued that since judgment had been entered against him by default, he was no longer a party with whom the plaintiff was in controversy as far as liability was concerned.  Despite being notionally a party to the action, he would not have been involved in the trial of liability.  It might be argued, on that ground, that no estoppel arises in his favour from the judgment after trial.  Support for this argument can be derived from the following passage in the judgment of Fisher J in Taylor v Ansett Transport Ltd (1987) 18 FCR 342, 358 (cited in Spencer Bower & Handley, Res Judicata (4^th ed), at §9.08):

“It seems clear to me that issue estoppel can only be raised by or applied against parties who were in ‘controversy’ at the time when the issue was first determined, either in their favour or adversely to them. If a party was not involved in the litigation of that issue, either because it was not an issue between him and another party to the proceedings, or because he was not a party at all to the proceedings at the time of resolution, then he is not affected by nor can he raise an estoppel.”

13.  As these authorities and arguments have not been canvassed before me, I would prefer not to rest my decision on the rule advanced in Professor Williams’ work for its basis is not entirely clear. But this does not mean that my judgment in favour of the 2^nd defendant is wholly irrelevant for present purposes.  In my opinion it may still take effect, not as of res judicata, but as of precedent.  This avoids the question whether the 1^st defendant is properly to be regarded as privy or party to the adjudication of issues of liability as between the plaintiff and the 2^nd defendant.

14.  By making default in giving notice of intention to defend, a defendant is taken to admit all the allegations in the statement of claim indorsed on the writ: Cribb v Freyberger [1919] WN 22; Hong Kong Civil Procedure 2017, §13/0/10; see also Young v Thomas [1892] 2 Ch 134, 137.  It seems to me the same principle applies here where the statement of claim, albeit not indorsed on the writ, was served prior to entering judgment.  Although under Order 13 rule 2 interlocutory judgment on a claim for unliquidated damages may be entered without a trial, judgment should only be given on the plaintiff’s claim provided the pleaded facts give rise to the relief sought: Lam Chi Fat v Liberty International Insurance [2002] 3 HKLRD 480, §27.  It follows in my view that there is ground for refusing to enter and, if it has been entered, for setting aside, a judgment in default, if the facts averred fail to support the relief sought. 

15.  In the present case where the claim against the other defendant has been tried, the questions that in my view the court should ask itself are these: (1) having regard to the decision in favour of the 2^nd defendant as a matter of precedent, are the facts averred in the statement of claim reasonably capable of supporting a judgment against the 1^st defendant? (2) if not, is it reasonably possible that, given the opportunity, the plaintiff could have averred sufficient facts capable of supporting the judgment? These are in substance not dissimilar to the test put forward by Mr Kwan on behalf of the plaintiff, namely, that a default judgment should not be set aside unless the reasons for the failure of the plaintiff at the trial against the defendant who appeared are so overwhelming as to make the plaintiff’s case against the defendant who did not appear completely unarguable.

16.  Turning to the first of the 3 particulars in question, ie (iii), §§37 and 38 of my judgment in favour of the 2^nd defendant are relevant, which read:

“37. … [Counsel for the plaintiff] submitted that the 2^nd defendant was negligent in failing to ensure that nobody involved had consumed alcoholic drinks. …

38.    Having regard to the entire circumstances of the case, I am unable to accept Mr Wong’s submission.  The plaintiff was an adult in her late 20s.  Mr Ho and his colleagues were probably also in the age range of late 20s to early 30s.  They were independent, educated adults of full ability who could reasonably be expected to take care of themselves and to avoid taking part in water sports if they felt unwell or unfit.  They hired the boat and hired the 2^nd defendant as a coxswain.  There is no suggestion that Mr Ho had specified that the coxswain had to be capable of and responsible for giving them training or instructions on wakeboarding.  A coxswain (or, for that matter, any person on the boat) might, as a matter of common sense, suggest that a passenger did not take part in water sport such as wakeboarding if the passenger was obviously unfit.  But save in extreme circumstances, in my view neither the 2^nd defendant’s duty of care nor his contractual power extended to dictating who could and who could not wakeboard in the afternoon.  On the contrary, it was the wakeboarders who decided who wished to wakeboard and whose turn it was to do so.  There is in any event no evidence that the plaintiff would, more probably than not, have heeded a reminder for her not to wakeboard that afternoon merely because she had had some beer.”

17.  In my view, particular (iii) does not disclose any cause of action because in the light of my conclusion of law on the 2^nd defendant’s duty of care and contractual power, there is no basis to suggest, and it cannot arguably be said, that the 1^st defendant, either as owner of the boat or as employer or principal of the coxswain, owed a duty to instruct, ensure or supervise the coxswain not to tow anyone for the purpose of wakeboarding when the person had consumed alcohol.  Mere ownership of the boat is not enough to fix the 1^st defendant with personal liability.  There is no suggestion that the 1^st defendant was present at the scene or had any relevant independent knowledge of the circumstances surrounding the accident.  The facts averred disclose no personal duty of care owed by the 1^st defendant.  It seems to me that this allegation fails in the same way that (i), (ii), (iv) and (v) are conceded by the plaintiff to have fallen away.

18.  As for particular (vi), namely, that the 1^st defendant failed to provide the 2^nd defendant with any or any adequate supervision as to how to perform his work safely, the essence of what would allegedly be “safe” is to be found in the various allegations made against the 2^nd defendant, such as the failure to provide a helmet and driving too fast, which have been rejected in my previous judgment.  Although this allegation is framed as a breach of an independent duty, it is analogous to vicarious liability in that it is premised on the implied allegation that the 2^nd defendant had performed his work in an unsafe manner — an allegation that I had rejected in §40 of my previous judgment.  Accordingly it would also in my opinion be contrary to principle and justice to allow judgment to stand against the 1^st defendant on this ground, when the 2^nd defendant has been exonerated after trial on all the specific allegations that he had performed in unsafe ways.

19.  Particular (vii) complained that the 1^st defendant exposed the plaintiff or allowed the plaintiff to be exposed to a risk of injury or loss of which the 1^st defendant knew or ought reasonably to have known.  Although framed as a particular breach of duty, this is in truth a general allegation without any additional averment of fact.  In §40 of my previous judgment, I concluded:

“It is in my view difficult to identify a part of the system that was particularly and inherently unsafe. It is easy to say with hindsight that the plaintiff would not have sustained injury at all if she was prevented from wakeboarding, or that her injuries might have been less severe if she had put on a helmet. But even now the precise cause of the accident is not clear. It does not seem to me right to impose on the 2^nd defendant a duty in effect to see to it that the participants were not injured. As Bokhary PJ said in Luen Hing Fat Coating & Finishing Factory Ltd v Waan Chuen Ming (2011) 14 HKCFAR 14 at §30, ultimately it is necessary to stand back and take a holistic view of foreseeability, proximity and the need to be satisfied that it would be fair, just and reasonable to impose a duty of care. The passengers were not the 2^nd defendant’s employees. Rather, he was their contractor engaged to provide services of a limited scope. If the plaintiff fails (as in my opinion she has) to establish negligence on the basis of the more particular allegations of negligence discussed above, there is no basis to impose a general duty and to hold that it was breached simply because the plaintiff had sustained injuries.”

20.  On the facts averred by the plaintiff, the same legal conclusion is in my view inescapable.  Ownership of the vessel by the 1^st defendant alone could not impose on him any relevant additional duty to those of the 2^nd defendant.

21.  I am therefore driven to the conclusion that on the basis of the facts averred and the legal conclusions I have reached in my previous judgment, particulars (iii), (vi) and (vii) are not capable, taken singly or in combination, of supporting the default judgment against the 1^st defendant.  Nor is there any suggestion that there are additional averments that could reasonably be made that could sustain a finding of breach of an independent duty on the part of the 1^st defendant. This is not surprising given that on the evidence adduced on behalf of the plaintiff at trial, there was no contact at all between the wakeboarders and the 1^st defendant.  This is accordingly not a case where the plaintiff can credibly say there are other allegations which she could have put into the statement of claim but which she did not because she had already obtained judgment by default.

22.  Mr Kwan submitted that since the default judgment here was a regular judgment, the court should, in deciding whether or not to set it aside, pay regard to the discretionary circumstances such as why the default occurred; the defendant’s conduct after he had notice of the proceedings; an explanation of any delay in making the application; and any prejudice caused to the plaintiff or third parties.  In my opinion these factors may have more significance in the usual, pre‑trial situation where the defendant is only required to show a real prospect of success, although even then merits is often said to be the dominant factor.  In the present type of case, where the defendant can show that the plaintiff has no arguable case at all in light of the judgment in favour of a co-defendant, those factors can in my view have but little weight.

23.  For these reasons the default judgment against the 1^st defendant must in my judgment be set aside.  To dispose of the action formally, the statement of claim should be struck out as against the 1^st defendant and judgment entered for dismissal of the action as against him.  On a nisi basis, I would let the costs fall where they lie and thus make no order.  The plaintiff’s own costs are to be taxed in accordance with the Legal Aid Regulations.