Chan Sik Pan v. Wylam’s Service Ltd and Others
Read the full judgment text of CACV 17/2003 on BabelCite. This Court of Appeal judgment was delivered on 13 October 2004.
1. I have had the benefit of reading in draft the reasons of Le Pichon JA. I agree with them. There is nothing I can usefully add.
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cacv 17/2003 & CACV 66/2003 in the high court of the hong kong special administrative region court of appeal civil appeal nos. 17 & 66 of 2003 (on appeal from HCPI No. 648 of 1995) _________________________ BETWEEN
_________________________ Before: Hon Rogers VP, Le Pichon and Yuen JJA in Court Date of Hearing: 13 October 2004 Date of Judgment: 13 October 2004 Date of Handing Down Reasons for Judgment: 27 October 2004 _________________________ REASONS FOR JUDGMENT _________________________ Hon Rogers VP: 1.I have had the benefit of reading in draft the reasons of Le Pichon JA. I agree with them. There is nothing I can usefully add. Hon Le Pichon JA: 2.This is an appeal from the judgment of Suffiad J dated 16 December 2002 in a retrial ordered by Court of Final Appeal on liability only. The 3rd defendant was found to be the plaintiff’s employer and the plaintiff’s claim against the 1st and 2nd defendants was dismissed. At the conclusion of the appeal hearing, the appeal was dismissed with costs with written reasons to be handed down later which we now do. Background 3.The plaintiff who was a skilled fire installation worker sustained personal injuries in the course of employment at a construction site in Windsor House on 21 August 1992. The plaintiff did not know as a fact who his employer was at the time of the accident. Initially, he sued the 1st and later added the 2nd and 3rd defendants on the basis that one of them must have been his employer at the time. At the trial below, the plaintiff’s primary case was that the 1st defendant was his employer, relying on the matters the judge identified in paragraph 8 of his judgment:
The plaintiff also relied on estoppel. 4.The 1st defendant’s stance was that he had merely subcontracted the wet part of the fire installation works to the 2nd defendant who had sub-subcontracted the labour and small metal parts to the 3rd defendant. The relationship that existed between the 1st, 2nd and 3rd defendants was a situation commonly known as “chau sam sha” in the trade. It was submitted that the plaintiff was the employee of the 3rd defendant who was the “sam sha” or sub-subcontractor. The 2nd defendant ran a similar case. 5.While the 3rd defendant accepted that a “chau sam sha” situation did exist between the defendants, he maintained that he was not a sub-subcontractor, that his position was akin to that of a head worker and, as such, was an employee himself and argued that he, the plaintiff and all the other workers were the employees of either the 1st defendant or the 2nd defendant, depending on the true relationship between them. The evidence
6.On 8 June 1992 Carrier (Hong Kong) Limited (“Carrier”) as the primary subcontractor of the project at Windsor House entered into a secondary subcontract with the 1st defendant who was described as the secondary subcontractor. From the recitals, it is clear that the main contractor was OLS International Ltd. The secondary subcontract works were for the “supply, installation, supervision, testing and commissioning of Fire Services System” (“the fire installation works”). 7.The 1st defendant was a contractor registered with the Fire Services Department to carry out fire installation works and held the necessary license. Carrier subcontracted the fire installation works in relation to the project to the 1st defendant who, through its agent United Company, subcontracted the wet part of it to the 2nd defendant and the dry part to another subcontractor. The 1st defendant entered into the subcontract with the 2nd defendant on the understanding that the 1st defendant would have the necessary insurance which would extend to and cover workers employed by the subcontractors. 8.Having entered into his contract with the 1st defendant for the wet part of the fire installation works, which included all the material for pipes, spare parts, tools and labour, the 2nd defendant entered into an agreement with the 3rd defendant who agreed to provide the labour and small metal parts of the fire installation works at an agreed lump sum of $780,000. An arrangement was made with a hardware shop which allowed the 3rd defendant to obtain tools and small metal parts on credit to be paid for by the 2nd defendant first but these expenses would ultimately be deducted from the amount due to the 3rd defendant under the subcontract. The 3rd defendant agreed that as a “sam sha” he recruited all the workers, provided them with tools and instructed them what to do and where to do it. 9.The 2nd defendant was provided with name cards by the 1st defendant describing the 2nd defendant as a foreman of the 1st defendant. These were used when he was introduced to representatives from Carrier and at site meetings with those representatives, he would represent the 1st defendant. It was not made known to Carrier that the 2nd defendant was a subcontractor of the 1st defendant. 10.Prior to August 1992, the 3rd defendant employed only four to five workers including himself on site. The decision as to the number of workers was the 3rd defendant’s. The 3rd defendant supervised and instructed the workers himself although the 2nd defendant would liaise with the 3rd defendant concerning the works and monitored the quality and progress of work done. The 2nd defendant paid the 3rd defendant periodically according to the value of the works completed. The 3rd defendant signed receipts for payments made. It was the 3rd defendant who paid the workers their wages. 11.At the end of July 1992, the 2nd defendant was contacted by Joe Wong of the 1st defendant. He was informed that as the project had been delayed by heavy rains that summer, the owners were anxious to catch up. They requested that 30 workers be engaged to work on the day shift and if necessary night work should also be carried out to ensure completion by October. The 2nddefendant relayed this request to the 3rd defendant who replied to the effect that the original subcontract between them did not contemplate night work and if that were to be done, the 3rd defendant would require to be reimbursed the night work payment to workers. 12.The owners not only agreed to the 3rd defendant’s condition but also promised a bonus to all the contractors down the line. The 2nd defendant stood to receive $150,000 as his share of the bonus. He, in turn, promised to pay $100,000 out of that to the 3rd defendant. 13.Carrier requested that a written record be kept daily of the workers on site. That resulted in the attendance book being brought into existence. All the workers working at the site were required to sign the attendance book each day since payment of wages during the special arrangement would depend upon the headcount of the workers working on the site. The 2nd defendant made the following entry on the front page of the attendance book:
14.The 2nd defendant’s explanation for this was that as Carrier had requested that a record of workers be kept and as it only recognised the 1st defendant as its subcontractor on site because it was the 1st defendant who held the necessary licence, the 2nd defendant considered it appropriate to describe the workers who were required to sign that the attendance book as the 1st defendant’s employees. 15.The special arrangement lasted less than two months. There was a conflict of evidence as to whether tools for the additional workers were provided as per the arrangement that was already in existence between the 2nd and 3rd defendants referred to in paragraph 35 of the judgment which was the 2nd defendant’s evidence (and in this connection, it is to be noted that the first reference in paragraph 43 to the “3rd” defendant is plainly a typographical error the “2nd” defendant) or whether they would be provided at the expense of the 2nd defendant as was the evidence of the 3rd defendant. 16.The plaintiff was one of the additional workers brought to work as a result of the special arrangement. When the plaintiff reported for work, the 3rd defendant told him that he had to sign the attendance book whenever he reported for work. According to the plaintiff, the 3rd defendant held the key to the tool room where the workers also changed, took the workers to the works site, gave instructions to them and also inspected the work done. He was of the view that as the 3rd defendant had hired him, the 3rd defendant could also fire him. The accident occurred within about 10 days of the plaintiff working at the site.
17.After his discharge from hospital in December 1992, the plaintiff went to the Labour Department and was told that the 1st defendant had, as the employer, already reported the accident. A Form II had been filed on 8 October 1992 by the 1st defendant giving notice of the accident pursuant to section 15 of the Employees Compensation Ordinance, Cap. 282 (“the Ordinance”). That form named Carrier as the principal contractor. The plaintiff was told to take his sick leave certificate to the 1st defendant’s office which he did in December 1992. He was seen by a Miss Ng who told him that the 1st defendant was his employer. He was then taken to see a Mr Wong to whom he gave the sick leave certificate. 18.Meanwhile the 1st defendant made a claim on its insurance policy relating to compensation for the plaintiff. Whilst the 1st defendant did have an insurance policy, it only realised that that was restricted to direct employees of the 1st defendant and did not cover workers of subcontractors when the insurance company rejected the claim for compensation made on behalf of the plaintiff on 1 December 1992. In the past and up until the time of the claim made on behalf of the plaintiff, the insurance company had never questioned claims made by the 1st defendant. However, on that occasion, it required employment records from the 1st defendant and when these could not be provided, the insurance company rejected the claim. 19.The judge found that after that, in January 1993, the Labour Department contacted Mr Wong regarding the plaintiff’s complaint that he had not received his sick leave compensation. When Mr Wong explained that the plaintiff was the employee of the 1st defendant’s subcontractor, he was told that even if the 1st defendant were “a principal contractor”, it remained liable to compensate the plaintiff and if it did not do so it would be prosecuted. That Mr Wong was so advised this was supported by a letter dated 9 January 1993 from the Labour Department to the 1st defendant. It was in those circumstances that the sick leave compensation came to be paid to the 1st defendant in January and May 1993. 20.At about that time, the 1st defendant was encountering difficulties with Carrier who was withholding further payment to the 1st defendant until the issue of compensation was resolved because Carrier had been named as the principal contractor on Form II. The 1st defendant found itself in a quandary having regard also to what they had been told by the Labour Department. It therefore decided to reply to Carrier by letter dated 15 June 1993 stating that the plaintiff was its “employee … within the meaning of the legislation” but that he was no longer an employee of the 1st defendant as at the date of that letter. 21.On 19 November 1993, the Employees’ Compensation (Ordinary Assessment) Board (“the Board”) issued a certificate of assessment assessing the plaintiff’s loss of earning capacity to be at 15%. At about that time, the 2nd defendant happened to mention to Mr Wong that he had seen the plaintiff transporting or lifting cloth. That was the basis of the objection filed by the 1st defendant pursuant to section 16G of the Ordinance on 27 November 1993. It was Mr Wong’s evidence that the objection had been lodged by the 1st defendant not as the direct employer of the plaintiff but as the principal contractor. However, the printed form which referred to the party objecting as the employer was never amended or corrected when it was filed. As a result of the re-assessment, the plaintiff’s loss of earning capacity was reduced from 15% to 14% on 4 March 1994. 22.Sometime in 1993, the 3rd defendant arranged to have tea with the plaintiff and the 2nd defendant. The purpose of this meeting was to enable the 2nd defendant to make an offer to the plaintiff to settle the whole matter at $500,000 on behalf of the 1st defendant. The plaintiff wanted twice that amount and nothing came of that meeting. 23.In about October 1993, the 2nd defendant and the 3rd defendant settled the final accounts between them for the project, with the 2nd defendant paying a further $189,179 to the 3rd defendant. 24.On 16 August 1994, the plaintiff made a claim for employee compensation in the District Court against the 1st defendant and Carrier as employer and principal contractor respectively. Whilst admitting that Carrier was the principal contractor, the 1st defendant denied that it was the employer and in its defence in the present High Court proceedings, the 1st defendant asserted that the 2nd defendant and/or the 3rd defendant was the plaintiff’s employer. The 2nd defendant in turn alleged that the 3rd defendant was the plaintiff’s employer. As a result, the plaintiff amended his claim for compensation under the Ordinance on 30 November 1996 and 2 April 1998 by suing the 2nd defendant and 3rd defendant as employer in the alternative. 25.On 19 June 1999, the 1st defendant, the 2nd defendant and Carrier (but not the 3rd defendant) made a joint payment into court of $250,000. After receiving advice from his solicitors based on the reassessment made by the Board, the plaintiff accepted the payment into court which brought the employee compensation claim to an end. The judgment below 26.The judge made the following findings:
27.Those findings were made in the light of the judge’s assessment of the evidence. The judge had found some aspects of the evidence given by Mr Wong and the 2nddefendant to be somewhat unsatisfactory. In paragraphs 69 and 75 of his judgment, the judge explained that this was due to the fact that he was left with the distinct impression that there was a scheme (involving the 1st defendant and the 2nd defendant) to hide the fact, at least from Carrier, that the 2nd defendant was a subcontractor of the 1st defendant but holding himself out to be its foreman and that the reason for that was the fact that it was the 1st defendant who held the necessary licence for fire installation works. It also followed that the 2nd defendant did not want to divulge the fact that the 3rd defendant was his subcontractor. 28.Other matters which weighed with the judge in reaching his findings included the judge’s acceptance of Mr Wong’s evidence that prior to the claim for compensation lodged with the insurers on behalf of the plaintiff, the 1st defendant had never experienced any difficulties with insurance claims and as to what Mr Wong had been told by the Labour Department in January 1993, namely, that even as a principal contractor, the 1st defendant was still liable to pay sick leave compensation to the plaintiff. More importantly, and pivotal to his findings, was the fact that the 3rd defendant did not dispute that there was an agreement between him and the 2nd defendant to supply labour and small metal parts at a lump sum of $780,000. As the judge explained (at paragraph 80 of his judgment),
29.On estoppel, it was said that the 1st defendant was estopped from denying that it was the employer because it had filed an objection to the assessment made by the Board of a 15% loss of earnings capacity, causing the Board to reassess the loss to 14%. The plaintiff, relying on the reassessment, accepted the payment of $250,000 made by the 1st and 2nd defendants together with Carrier in settlement of his claim for employee’s compensation. 30.The judge rejected the plaintiff’s case based on estoppel for two reasons. First, the judge found that the plaintiff was relying on the downward reassessment and not on the fact that the 1st defendant was stated to be the employer on the objection form. Secondly, at all material times up to the settlement of the employee compensation claim, the issue as to who was the plaintiff’s employer remained a live issue. There was no question of the plaintiff being misled by any representation from the 1st defendant that it was the plaintiff’s employer. This appeal 31.The 3rd defendant’s appeal was confined to the judge’s finding that the 3rd defendant was the plaintiff’s employer. The plaintiff advanced an additional ground of appeal based on estoppel. I will first deal with these in turn.
32.Mr Wong who appeared for the 3rd defendant challenged the judge’s finding that the 3rd defendant was the plaintiff’s employer. Although in his written submissions Mr Wong had raised a number of matters, at the appeal hearing, his substantive point was that the judge had erred in failing to make a finding of fact that the special arrangement that came into effect in August 1992 changed the underlying relationship of the 1st, 2nd and 3rd defendants in the project. Implicit in the submission was an acknowledgement that the judge was correct in his finding of the underlying relationship prior to the special arrangement. It was the judge’s finding that the 1st defendant had subcontracted the wet part of the fire installation works to the 2nd defendant who had then sub-subcontracted the labour and small metal parts to the 3rd defendant. On that analysis, the 3rd defendant was a sub-subcontractor with the necessary consequence that the plaintiff was the 3rd defendant’s employee. 33.It was submitted that once the special arrangement came into effect, that relationship changed and had to be reassessed. As the plaintiff was only recruited to work at the site after the start of the special arrangement, that reassessment would effectively determine who the plaintiff’s employer was. Mr Wong referred to a passage in the evidence of the 2nd defendant relating to the special arrangement:
Mr Wong submitted that once the special arrangement came into place, the 3rd defendant’s employees ceased to be his employees and became employees of the 1st or 2nd defendant. 34.I do not see that that was so and certainly nothing in the transcript the court has been referred to compelled such a conclusion. The special arrangement was nothing more than the 3rd defendant agreeing to put more workers than had originally been envisaged on the job and therefore completing it in a shorter time. He (the 3rd defendant) would be reimbursed additional expense that had to be incurred in respect of overtime or night work since that had not been taken into consideration in the original quotation. It was on that basis that the 3rd defendant was eventually paid as appears from his evidence:
As noted in para 23 above, the final accounts between him and the 2nd defendant were settled on that basis. 35.In my view, nothing in the special arrangement altered the underlying relationship between the 1st, 2nd and 3rd defendants. The special arrangement was but a temporary arrangement to cope with the need to have additional workers on the job to complete it by October. It could not and did not have the effect of altering the 3rd defendant’s role in the project and making him and the additional workers employees of the 1st defendant. 36.Mr Fung SC who appeared for the plaintiff placed reliance on the 8 matters set out in paragraph 8 of the judgment cited in paragraph 3 above. But in making his findings of fact, the judge had considered each of those matters in the light of the evidence and in particular, the explanations given and the circumstances in which they came into existence. It has not been shown that the judge had overlooked any of those matters or had misapprehended their effect. 37.In my view, the judge’s findings are unimpeachable and I would uphold them. Given those findings, there is but one conclusion, namely, that the 3rd defendant was the plaintiff’s employer. Estoppel 38.The plaintiff’s case on estoppel was premised on the fact that only “an employer” and no one else had the locus to file an objection under section 16G of the Ordinance as it existed. Unless that is a correct statement of the law, the plaintiff’s case on estoppel, whether by representation or by convention, cannot succeed. It is accordingly necessary to consider the relevant statutory provisions. 39.Section 16G provides:
Who then is “the employer” for the purposes of section 16G? To answer that question, it is necessary to consider section 24 which provides as follows:
40.For the purposes of the Ordinance, having regard to section 24 and the definitions of “principal contractor” and “sub-contractor” in section 3 of the Ordinance, the 1st defendant was the “principal contractor” vis-à-vis the 2nd defendant and the 3rd defendant who were the “sub-contractors”. That much is clear. Since compensation was claimed from the 1st defendant by the plaintiff, in the application of the Ordinance and therefore section 16G, references to the principal contractor i.e. the 1st defendant shall be substituted for references to the employer. In other words, in applying section 16G the reference to “the employer” has to be read as if it had been substituted by “the principal contractor”. Accordingly, it must follow that the 1st defendant as principal contractor has locus to file an objection under section 16G. That being so, the plaintiff’s case on estoppel must fail. Hon Yuen JA: 41.I have had the benefit of reading in draft the Reasons for Judgment of Hon Le Pichon JA and I agree with them. I would only elaborate on one point. 42.Mr Fung SC for the plaintiff submitted that there could only be one principal contractor in a contract and that Carrier, and not the 1st defendant, was the only principal contractor here. With respect, I do not agree. It is clear from the definitions of “principal contractor” and “sub-contractor” in sections 3 and 24 of the Employees Compensation Ordinance that a person is liable under s.24 to compensate employees (whether of his own immediate sub-contractor, or any other sub-contractors down the line) who are injured in the course of doing the work that he (that person) has undertaken. In other words, liability as a principal contractor follows the scope of work undertaken by that person. There could therefore be many “principal contractors” against whom an injured employee can make a claim under s.24. The smaller the scope of work undertaken by his own employer, the more “principal contractors” there would be. 43.That is clear from sections 3 and 24. Section 3 provides:
Section 24 has been reproduced in paragraph 39 of Hon Le Pichon JA’s judgment. I would only emphasize the following parts of that section stating that “principal contractor” refers to:
44.Section 3 provides:
45.Thus in the present case, the 1st defendant had undertaken to perform fire installation work. He had sub-contracted part (the wet part) of that work to the 2nd defendant. Assuming that the 2nd defendant himself had an employee who was injured, the 1st defendant would be liable as principal contractor under s.24 as the 2nd defendant was a sub-contractor under paragraph (a) above, as he had entered into a contract with the 1st defendant to perform the wet part of the fire installation work which the 1st defendant had undertaken to perform. 46.The 2nd defendant then sub-contracted part (the labour and small metal part) of his work to the 3rd defendant. The 3rd defendant’s employee having been injured, the 1st defendant would be liable as principal contractor under s.24 as the 3rd defendant was a sub-contractor under paragraph (b) above, as he had entered into a contract to perform part of the work which the 2nd defendant (who was a sub-contractor within paragraph (a) above) had undertaken to perform.
Mr Patrick Fung SC and Mr Tim Kwok, instructed by Messrs W K To & Co., for the Plaintiff/Appellant in CACV 66/2003 Mr Ruy Barretto SC and Mr Ng Man Sang, Alan, instructed by Messrs Charles Yeung Clement Lam Liu & Yip, for the 1st Defendant Leung Kwok Chau, the 2nd Defendant in person (present) Mr Wong Chi Kwong, instructed by Messrs Waller Ma Huang & Yeung, for the 3rd Defendant/Appellant in CACV 17/2003 |
Further hearings and rulings under CACV 17/2003