Able Engineering Company Ltd v. Po Hing (Hing Yip) Engineering Co Ltd

HCA 1037/2022

[2024] HKCFI 3492

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1037 OF 2022

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J U D G M E N T

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The application

1.This is the hearing of the Defendant’s appeal from the order of summary judgment granted by Master YW Hew (“the Master”) on 3 July 2024.

2.The evidence filed on the summary judgment application is:

a.  The Affirmation of Yau Kwok Fai dated 14 March 2024 on behalf of the Plaintiff (“Yau 1”) ;

b.  the 2^nd Affirmation of Man Kong Keung dated 17 May 2024 on behalf of the Defendant (“Man 2”) ;

c.  the 2^nd Affirmation of Yau Kwok Fai dated 12 June 2024 on behalf of the Plaintiff (“Yau 2”).

3.I have the advantage of written reasons of the Master. However, counsel informed me that the arguments were put somewhat differently below in terms of statutory interpretation, and the interpretation point is central.

Undisputed Factual Background

4.A joint venture between the Plaintiff, namely Able Engineering Company Limited (“Able Engineering”), and Build King Construction Limited was the main contractor for the development of Cingleot Premium Logistic Centre at Kwo Lo Wan, Hong Kong International Airport (“the Development”). Able Contractors Limited (“Able Contractors”) was a sub-contractor of Able Engineering. The Defendant, (“Po Hing”) was in turn a sub-contractor of Able Contractors for the rebar fixing of the Development.

5.Po Hing did not pay its workers’ wages in relation to the Development between December 2021 and January 2022. Po Hing’s unpaid workers claimed payment from the superior contractors pursuant to s.43C of the EO.

6.Able Engineering paid HK$25 million to Able Contractors on 4 January 2022.

7.From 18 January 2022, Ringtone Limited (“Ringtone”) became the employer of the relevant workers, and Ringtone was a subcontractor of Able Contractors.

8.Able Contractors paid the outstanding wages of most of the workers on 17 January and 21 February 2022, and 2 workers were paid by Ringtone, who was reimbursed by Able Contractors by way of set off.

9.By its Amended Statement of Claim, Able Engineering sought repayment of HK$17,607,186.45 from Po Hing. By the time of the hearing before the Master, it was accepted that one payment by Ringtone to a worker was not the responsibility of Po Hing and that amount was deducted from the judgment sum.

Summary judgment: legal principles

10.The principles for granting summary judgment pursuant to Order 14 of the Rules of the High Court, Cap 4A (“RHC”) are not disputed.

11.The statement of claim must be good and complete in itself; any defect or omission cannot be corrected or supplemented by the affidavit: see Tan Khay Chuen and Anor. v Ko Ping Shun Benson (CACV 238/2015, 8/7/2016, unrep.) at §§23-25.

12.Once the plaintiff is able to show a prima facie case, the defendant bears the burden of showing that there are triable issues: see Cloudy Rosy Ventures Ltd v Sun Shaofeng [2024] HKCA 250 at §31.

13.The defendant’s affidavit must condescend upon particulars and should, as far as possible, deal specifically with the plaintiff’s claim and affidavit, and state clearly and concisely what the defence is, and what facts are relied on to support it: Hong Kong Civil Procedure 2025 at §14/4/4.

14.In Toy Major Trading Co Ltd v Hang Shun Plastic Toys Ltd [2007] 3 HKLRD 345, Ma CJHC (as he then was) held at §12 that to convince the court there exists a triable issue, “the defendant is expected to show a fair probability or reasonable grounds that a bona fide defence exists.”

15.Where a defendant can satisfy the court there are circumstances that ought to be investigated, unconditional leave to defend ought to be granted: Cloudy Rosy Ventures (supra.) at §32.

16.An appeal from a Master under RHC O. 58 is a rehearing: Hong Kong Civil Procedure 2025 at §58/1/2.

The Issues Raised on Appeal

17.The Pleading Issue: Po Hing argues that the pleaded case is inadequate to justify judgment, and cannot be rescued by affidavit evidence.

18.The Factual Issue: Po Hing claims that there is a triable issue as to who in fact paid the outstanding wages to Po Hing’s employees.

19.The Right to Sue Issue: Po Hing claims that Able Engineering does not have a right to sue under ss. 43C and 43F of the Employment Ordinance (Cap. 57) (“the EO”).

20.There is an overlap between these issues, and I consider it to be most helpful to examine the legislative scheme first.

The relevant EO provisions

21.I must consider the legislative framework which governs Able Engineering’s claim against Po Hing.

22.In the context of unpaid wages by an employer subcontractor, section 43C(1) of the EO provides for the joint and several liability of the principal contractor, and any superior sub-contractors to the employer sub-contractor in respect of the unpaid wages. Counsel for Able Engineering, Mr Lin, referred to this as “the Liability Provision”:-

“(1) Subject to this Part, if any wages become due to an employee who is employed by a sub-contractor on any work which the sub-contractor has contracted to perform, and such wages are not paid within the period specified in section 23, 24 or 25, as the case may be, such wages shall be payable to the employee—

(a) where the sub-contractor has contracted with the principal contractor, by the principal contractor; and

(b) where the sub-contractor has contracted with a superior sub-contractor, by the principal contractor and every superior sub-contractor to the sub-contractor, jointly and severally.” (emphasis added)

23.Section 43D provides for an unpaid employee of an employer sub-contractor to serve a notice on the principal contractor, who in turn must serve a copy of that notice on every superior subcontractor to the employer subcontractor of which he is aware.

24.Section 43F of the EO (which Mr Lin has called “the Recovery Provision”) provides that:-

“(1) If a principal contractor or superior sub-contractor pays to an employee any wages under section 43C, the wages so paid shall be a debt due by the employer of that employee to the principal contractor or superior sub-contractor, as the case may be.

(2) Any principal contractor or superior sub-contractor who pays to an employee any wages under section 43C may either—

(a) claim contribution from every superior sub-contractor to the employee’s employer or from the principal contractor and every other such superior sub-contractor as the case may be; or

(b) deduct by way of set-off the amount paid by him from any sum due or which may become due—

(i) to any sub-contractor to whom he has sub-contracted all or any part of work that he contracted to perform being work upon which the employee was employed, and

(ii) in respect of the work that he has sub-contracted.

(3) For the purposes of this section any amount –

(a) paid by a principal contractor or a superior sub-contractor by way of contribution under subsection (2)(a), or

(b) deducted by a principal contractor or a superior sub-contractor from any sum due by him by way of set-off under subsection (2)(b),

shall be deemed to be payment by the principal contractor or superior sub-contractor who has paid the amount by way of contribution or by the superior sub-contractor who has suffered a deduction from any sum due to him by way of set-off to an employee of wages under section 43C.” (emphasis added)

The parties referred to s.43F(3) as “the Deeming Provision”.

25.Under s.43C, any superior contractor to the employer becomes liable for unpaid wages when served with a s.43D notice.

26.Under s.43F(1), any superior contractor to the employer who makes direct payment of the wages is owed a debt by the employer.

27.Under s.43F(3), any relevant contribution under (2)(a) or any relevant set-off under (2)(b) is deemed to be payment of wages under s.43C. By virtue of s.43F(1), the relevant superior contractor is owed a debt by the employer.

28.The central issue of interpretation in this case is the nature of the contribution required by s.43F(2)(a) to trigger the Deeming Provision.

29.Mr Tam on behalf of Po Hing submitted that s.43F(2)(a) applies only to a contribution sought by a superior contractor to the employer after that superior contractor had made payment of the outstanding wages. I note from the Master’s Reasons below that this argument was initially made before the Master (see paragraphs 6, 17) but was apparently conceded during argument (see paragraph 17). Nevertheless, the point is really the crux of the appeal now. I have regard to the Master’s views at paragraphs 9-16, with which I largely agree, but I provide my own views as follows.

30.As a matter of natural language, I do not read s.43F(2)(a) as applying only to a contribution sought by a superior contractor after that superior contractor had made payment of the outstanding wages. It seems to me to be broad enough language to cover a prior contribution.

31.The purpose of these statutory provisions seems to me to be to ensure:

a.  that workers are protected and are entitled to claim payment from any contractor up the chain from their non-paying employer;

b.  that all superior contractors to the employer bear equal responsibility to ensure that payment is made; and

c.  that, at the end of the day, the primary burden of payment rests on the employer, who becomes indebted to any superior contractor who has made payment.

32.I am unable to see any reason why, having regard to these purposes, a contractor who funds the payment of wages in advance but does not actually directly pay the wages should be in any worse position than a contractor who provides funds to the direct payer after the payment. It may be that a prior contribution is required in order to enable the paying superior contractor to make payment of the wages.

33.Mr Tam submits that the legislature cannot have intended that a contributor should make payment without knowing what the paying contractor would pay and must have intended some form of request identifying the amount for the contributor to pay. He submits that within the contractor-subcontractor relationship, there may be a complicated account with many different mutual debts, so that a general payment without an individual request would not necessarily be referable to a wages payment and would not be “commercially logical”. Mr Tam asks rhetorically what would happen if a principal contractor pays funds a year earlier, before the unpaid wages issue even arises, then the subcontractor pays the wages, can the principal contractor say that he contributed? Mr Tam says this would create an uncertainty that the legislature cannot have intended.

34.Mr Tam further submits that ss.43F(2) and (3) would not be required if anyone who pays can sue the employer.

35.I am unable to accept those submissions.

36.Mr Lin points out that ss.43F(2) and (3) not only provide for a contributor to step into the shoes of the direct payer as creditor of the employer to the extent of the contribution, but also provides the same for a person who has suffered a deduction by way of set-off from the sums owed to him in respect of relevant work. He further submits that a deduction by way of set-off is a unilateral act which takes account of the prior mutual dealings between the direct payer and the subcontractor. I see no reason why there would be a legislative intention for prior dealings to be relevant for the purposes of set-off, but not for the purposes of contribution. Indeed, even if a prior payment was made by one contractor to another for a purpose other than the payment of wages, and then a joint and several liability subsequently arose under s.43C to pay outstanding wages, I see no reason why the contractors should not agree to treat such prior payment as a contribution.

37.Clearly, whether or not a prior payment is made for the purposes of contributing to a wages payment, or whether the relevant contractors agree that a prior payment should be treated as such a contribution, is a matter of fact.

The Pleading Issue

38.Able Engineering’s pleaded case is at §§7-9 of the Amended Statement of Claim (“ASOC”):-

“(7) Since around December 2021 and January 2022, [Po Hing] had failed to pay its and/or its sub-contractors’ employees wages in relation to the Development and notices of such outstanding wages had been given to [Able Engineering] on divers dates during the said period of time.

(8) In compliance with Section 43C, [Able Engineering] had settled the outstanding wages to numerous employees of [Po Hing] and/or [Po Hing]’s sub-contractors amounting to the total sum of HKD 17,620,386.45 (the “Sum”) between around December 2021 and January 2022.

(9) According to Section 43F(1), the Sum is a debt due by [Po Hing] to [Able Engineering].”

39.Po Hing argues that the claim pleaded is that Able Engineering made “direct payment”, that factually such plea is not correct, and the Court can only consider whether the pleaded case is established, without reference to an alternative case put in the affidavit evidence.

40.I of course accept that the Court can only decide whether Able Engineering has established a prima facie case in respect of the pleaded claim.

41.I also accept that Able Engineering has not pleaded the detail of the arrangements which have been set out in affidavit evidence as to the direct payment of the wages by Able Contractors and/or Ringtone, and the prior payment by Able Engineering to Able Contractors.

42.However, it seems to me that the pleas of (1) settlement by Able Engineering of the outstanding wages under s.43C, and (2) Po Hing’s liability under s.43F(1), are adequate to cover the situation. It is Able Engineering’s case that the outstanding wages were settled; Able Engineering’s prior payment was, as matter of law, a contribution pursuant to s.43F(2)(a); that contribution is deemed by s.43F(3), as a matter of law, to be payment of the wages. The material facts were pleaded, the particulars and points of law were not pleaded. Peripherally, I note that Po Hing did not seek any particulars of the pleaded claim, and that the detailed facts as to payments are not disputed.

43.I do not accept that there is a material deficiency in the ASOC.

The Factual Issue

44.Po Hing by Mr Tam submits that there is a factual issue as to whether Able Engineering paid the workers.

45.I note that the original Defence filed ran a counterclaim based on oral representations as to an ability on Po Hing’s part to claim overtime rates of pay from Able Engineering. Indeed, most of Yau 1 was concerned with responding to the pleaded defence as to such counterclaim. By the time of the hearing before the Master, Po Hing sought to amend its defence according to the draft exhibited to Man 2 to delete the entirety of the counterclaim, and plead simply:

“3C Paragraphs 8 to 11 is denied:-

(i) It is specifically denied that [Able Engineering] had settled any “outstanding wages”, whether as alleged or at all. It is averred that the payment of any “outstanding wages”, whether as alleged or at all, if found, were made by one [Able Contractors] and one [Ringtone]; and

(ii) It is specifically denied that the Sum is a debt due by [Po Hing] to [Able Engineering] under Section 43F(1) and that [Po Hing] has failed and/or refused to pay the Sum or any part thereof to [Able Engineering]. It is averred that [Able Engineering] has no right to rely on Section 43F to sue [Po Hing], whether as pleaded or at all.

3D For the abovesaid, and it is averred that [Able Engineering] is not entitled to any relief, whether as pleaded or at all.

3E Further and/or alternatively, even if contrary to the abovesaid that [Able Engineering] is found to have paid anything to any of [Po Hing]’s employee, whether as alleged or at all, it is not admitted that the Sum represents “outstanding wages”, whether as alleged in paragraph 8 or at all. [Able Engineering] is put to strict proof especially that the Sum paid is wages that was due to [Po Hing]’s employee within Section 43C.”

46.It may be seen that the only positive case sought to be pleaded by Po Hing was that the outstanding wages had been paid by Able Contractors and Ringtone.

47.Man 2 only gave the following relevant evidence:

“5 … I am advised and believe that [Able Engineering] has no right to sue [Po Hing], whether as alleged or at all. I am also advised and verily believe that, insofar as any “outstanding wage” is concerned, if there had been any payment made to [Po Hing]’s employee, they are either made by [Able Contractors] or [Ringtone].”

48.Yau 1 paragraph 31(d) avers that:

“On 4 January 2022, Able Engineering advanced to Able Contractors a sum of HK$25 million, which included reimbursement of Able Contractors’ said payment of the wages of the workers employed by Po Hing.”

49.Yau 1 provided payment records in relation to the 4 January 2022 payment, and the later payments by Able Contractors to the workers.

50.Man 2, filed in response, contained no positive case to challenge Yau 1’s evidence that Able Engineering had contributed the full amount paid in discharge of the outstanding wages.

51.Mr Tam suggests that there is doubt over the facts. He relies on the language used in Yau 1 paragraph 31 as to Able Contractors having “initially advanced” the sum for the wages, with Able Engineering giving “reimbursement” to Able Contractors. However, Mr Tam points out, Able Engineering relies on a payment made to Able Contractors before Able Contractors paid the workers. Mr Tam submits that there is a need for factual investigation warranting trial.

52.However, I note that Yau 1, in the same paragraph 31, also exhibits the payment records. These records have founded the undisputed factual matrix (as set out above) that Able Engineering made payment to Able Contractors first, and Able Contractors made payment to the workers. The most that can be said is that Mr Yau has used inaccurate language in the body of Yau 1 but is clearly not misleading anyone by such language where the exhibited payment records lead to the position that no one is in any doubt as to the payer or payee or date of all relevant payments.

53.There is no triable issue as to the identity of the payer, or payee, or dates of relevant payments to the workers, or payment by Able Engineering to Able Contractors.

54.The only available evidence is to the effect that the sum paid by Able Contractors to make the wage payments to the workers (and in respect of two employees, through Ringtone) was borne and paid by Able Engineering.

The Right to Sue Issue

55.Having regard to my views stated above on the meaning of “contribution” for the purposes of s.43F(2)(a), and the uncontested evidence that Able Engineering paid HK$25 million on 4 January 2024 in respect of the wages, I find that Able Engineering made a contribution under s.43F(2)(a) to the payment of the outstanding wages owed by Po Hing to its workers.

56.It is then a matter of law:

a.  to apply s.43F(3) to reach the conclusion that Able Engineering is deemed to have made the payment of the outstanding wages; and

b.  to apply s.43F(1) to reach the conclusion that Po Hing is indebted to Able Engineering for the amount of outstanding wages paid.

57.It follows that Able Engineering has a right to sue Po Hing for the debt.

Order

58.Accordingly, I dismiss the appeal. As submitted by counsel, should this be the outcome, costs follow the event. The Defendant is to pay the Plaintiff’s costs of the appeal, with certificate for one counsel, to be taxed if not agreed.

Mr Kenny Lin and Mr Jason Kung, instructed by Simon C.W. Yung & Co., for the Plaintiff

Mr Oscar Tam, instructed by Wong & Lawyers, for the Defendant