Jerry Chen v. Whirlpool (Hong Kong) Ltd

CACV 325/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 325 OF 2005

(ON APPEAL FROM HCPI NO. 787 OF 2001)

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BETWEEN

Before : Hon Cheung JA, Tang JA and Barma J in Court

Date of Hearing : 22 and 23 June 2006

Date of Judgment : 14 July 2006

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J U D G M E N T

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Hon Cheung JA :

1.This is the plaintiff’s appeal from the judgment of Suffiad J who dismissed his action against the defendant for damages for personal injuries suffered by him in a traffic accident.  The judge decided on the issue of liability.

Facts

2.The plaintiff is a very able person.  He belongs to the generation of Mainland Chinese whose education after high school was disrupted by the Cultural Revolution.  However he managed to enter university after the university public entrance examination was reintroduced in 1977.  After graduation he worked in the Mainland for a few years and later went to Hong Kong and New Zealand.  He worked for multi-national companies both in New Zealand and in Hong Kong. 

3.On 10 December 1997 the plaintiff entered into a contract of employment with the defendant (‘the contract’).  The defendant is a Hong Kong company and is a member of Whirlpool Group of companies of the United States.  Whirlpool is a world-known manufacturer of home appliances.  The contract provided that the plaintiff was to be based in Shanghai with responsibilities to Whirlpool Narcissus (Shanghai) Co. Ltd. (‘WN’).  WN is a joint venture between the Whirlpool Group and the well-known Shanghai Narcissus Co. which is a Mainland company. 

4.On 13 October 1998 the plaintiff flew from Shanghai to Beijing in order to attend a conference held in a resort on the outskirt of Beijing.  The conference was organised by the commercial department of WN.  The plaintiff was met at the Beijing airport and driven to the resort in a car driven by Mr. Zheng Guo Bin (‘Zheng’) who was employed by WN and was stationed at the Beijing branch office of WN.  The plaintiff was injured on the journey when the car had a head-on collision with a car coming from the opposite direction.  The judge found that the accident was caused by the negligent driving of Zheng. 

5.The plaintiff claimed employees’ compensation from the defendant in Hong Kong.  The defendant made payment into court in the employees’ compensation proceedings.  Settlement was reached by the parties for HK$2,294,015.75.  The plaintiff issued the present common law action against the defendant.

Contract of employment

6.In the court below lengthy evidence was adduced on why the plaintiff’s contract of employment was with the defendant when he was required to work for WN.

7.The judge found that the plaintiff was headhunted by WN to work for WN.  The judge held that the reasons why the contract was with the defendant were

(1) At the time when the contract was entered into, the Whirlpool Group was in the process of, but had not yet gained control of WN.

(2) The plaintiff himself did not wish to be employed by a Mainland company.

(3) The plaintiff was engaged as an expatriate staff of Whirlpool with duties to work in the joint venture project namely, WN.

8.The judge further found that the plaintiff never did any work for the defendant and was never asked to do so.  He was never asked to and had never made any report to the defendant.  The defendant had no control or authority over WN nor any responsibility for it.  The defendant, apart from being the employer of the plaintiff, did not have any control or supervision over the work that the plaintiff did for WN.

General and temporary employer

9.In the court below the judge found that the defendant was the general employer of the plaintiff and WN was the employer pro hac vice.  He held that the service of the plaintiff was completely transferred to WN.  The transfer included the duty of care owed by the defendant as an employer to its employee.  He held that WN was responsible for the safety of the plaintiff instead of the defendant.  The reliance on ‘employer pro hac vice’ was, of course, not the only basis of the judge’s decision.  I will deal with this issue first.

10.‘Employer pro hac vice’ was translated by Lord Denning MR in Savory v. Holland & Hannen & Cubitts (Southern) Ltd. [1964] 1 WLR 1158 as meaning ‘employer for the time being’.  It is a nineteenth century concept that a servant of a general employer may be transferred to a temporary employer so as to become for the time being the servant of the temporary employer, see Denham v. Midland Employer’s Mutual Assurance Ltd. [1955] 2 Q.B. 437. 

11.Lord Denning in Denham described this concept as a useful device to put liability on the shoulders of the one who should properly bear it, but it does not affect the contract of service itself.  He said :

‘No contract of service can be transferred from one employer to another without the servant’s consent : and this consent is not to be raised by operation of law but only by the real consent in fact of the man, express or implied.’

12.This concept apparently began its life in Mersey Docks and Harbour Board v. Coggins & Griffith (Liverpool) Ltd. [1947] AC 1 where a third party injured by a worker sued the temporary employer of the worker for damages.  This concept was also applied to cases where a worker sued the temporary employer for damages sustained by him in the course of his employment : see Garrard v. A E Southey and Co. and Standard Telephone and Cables Limited [1952] 2 Q.B. 174, Denham, O’Reilly v. Imperial Chemical Industries Ltd. [1955] 1 WLR 1155 and Gibb v. United Steel Co. Ltd. [1957] 1 WLR 669. 

13.The modern cases showed that the court was reluctant to make a decision simply on the basis of this legal concept.  For example, in Savory Diplock LJ stated that :

‘ The question for the court is not whether the plaintiff was in the category of servant to the defendants pro hac vice.  The only question is whether in all the circumstances the defendants used reasonable care for the safety of the plaintiff.  The doctrine of master and servant pro hac vice today seems to me to be relevant only to a question of vicarious liability : it is a mere adjunct of the doctrine of respondeat superior for determining whether A is the superior of B.’ 

14.Morris v. Breaveglen Ltd. trading as Anzac Construction Co. [1993] IRLR 350 is another modern authority in which the English Court of Appeal also showed a reluctance to embrace this concept.  Beldam LJ held that :

‘ In relying on such cases it is, in my view, essential to distinguish those cases in which the court has to consider which of two possible defendants is vicariously liable for the acts or omissions of the employee causing damage to a third party from cases in which the employee is himself injured by a failure to take reasonable care for his safety and in which the court is concerned to decide whether his general employer, or the particular employer, owed to him a duty not to expose him to unnecessary risk of injury. It does not, of course, follow that in every case only one of two possible ‘employers’ will be responsible to him. There may well be cases in which an employee who suffers injury can show a breach by his general employers of a duty owed to him and at the same time that the work on which he is employed is so closely connected with work being done by another contractor that that contractor too owes him a duty to take care for his safety.’ 

15.Morris is a case where the injured worker sued his general employer for damages in respect of work-related injuries. 

My view

16.Personally I prefer not to decide the case simply on the basis of a rather old legal concept when modern labour legislations have imposed obligations on employers such as, for example, the requirement of compulsory insurance to be effected by the employer.  This concept does not sit well with the personal nature of an employer’s duties. 

17.In my view a better approach will be to identify who is the employer who has entered into the contract with the employee and then decide whether in the circumstances of the case the employer breached its duty of care towards the employee.  The fact that the employee is asked to work for another entity and takes orders from that entity is only one of the factors to be taken into account in considering whether the employer’s duty of care has been breached or not. 

18.This approach is supported by Cook v. Square D Ltd. [1992] ICR 262 where the English Court of Appeal at 268 stated that

‘It is clear that in determining an employer’s responsibility one has to look at all the circumstances of the case, including the place where the work is to be done, the nature of the building on the site concerned (if there is a building), the experience of the employee who is so despatched to work at such a site, the nature of the work he is required to carry out, the degree of control that the employer can reasonably exercise in the circumstances, and the employer’s own knowledge of the defective state of the premises, as referred to in that last passage of the speech of Lord Denning.’

19.In that case an electronics engineer employed by an English company was sent on an assignment to complete the commissioning of a computer control system in Saudi Arabia.  He was injured while working in Saudi Arabia.  He sued his employers for damages for negligence.  The court found that liability was not established. 

20.The only caution I would like to make in respect of this case is that it should not be taken as an authority to say that because the employee is working in a country or area outside the control of the employer, the employer would not by this fact alone be held responsible.  As Lord Denning observed in Smith v. Austin Lifts Limited [1959] 1 WLR 100 at 117

‘ .... employers who send their workmen to work on the premises of others cannot renounce all responsibility for their safety. The employers still have an overriding duty to take reasonable care not to expose their men to unnecessary risk. They must, for instance, take reasonable care to devise a safe system of work, see General Cleaning Contractors Ltd. v. Christmas [1953] A.C. 180: and if they know or ought to know of a danger on the premises to which they send their men, they ought to take reasonable care to safeguard them from it. What is reasonable care depends, of course, on the circumstances, see Wilson v. Tyneside Window Cleaning Co. [1958] 2 Q.B. 110.’

Defendant as the employer

21.The judge found that the defendant was the employer of the plaintiff.  Proceeding on this basis I would examine whether the defendant had breached his duty of care as an employer towards the plaintiff. 

22.The starting point is that an employer is required to provide a safe system of work for the employee.  This duty is personal to the employer and cannot be delegated.  This principle is found in the classic case of Wilsons & Clyde Coal Company v. English [1938] AC 57 where Lord Thankerton at page 64 stated this :

‘First —If the master retains control, he has a duty tosee that his servants do not suffer through his personal negligence, such as (1) failure to provide proper and suitable plant, if he knows, or ought to have known, of such failure; (2) failure to select fit and competent servants; (3) failure to provide a proper and safe system of working; and (4) failure to observe statutory regulations; but,

Second — If he delegates his duty to take care of the safety of his servants to competent subordinates, his responsibility in respect of his primary common law duty ceases, unless there is proof of knowledge by him not acted upon; so that the master’s liability in respect of his common law duty may be said to depend on the extent of his interference.’

23.The second proposition is that the employer is liable for another’s tortious act if he expressly directs him to do it or if he employs that other person as its agent and the act complained of is within the scope of the agent’s authority : Wong Wai Hing & another v. Hui Wei Lee [2001] 1 HKLRD 736 applying Colonial Mutual Life Assurance Society Ltd v. Producers and Citizen’s Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41.

Contractual obligation

24.In this case the defendant was specifically required under the contract to provide a car and driver to the plaintiff.  Clause 7 of the contract stated that :

‘You will be entitled to a car and driver which you may use at your discretion seven days per week.’

25.In my view it is important to understand the precise nature of this contractual obligation.  This is not an unusual term and is one of the perks provided to a high ranking officer of a corporation.  The obligation means that the defendant has to provide a reasonably safe car and a reasonably competent driver to the plaintiff.  The obligation does not mean that the defendant must ensure that the plaintiff will not suffer any accident while he was travelling in the car.  Otherwise this contractual provision would impose an absolute obligation on the defendant to ensure for the safety of the plaintiff.  This cannot be the intention of the parties.  The defendant can discharge this contractual obligation by either providing its own car and driver to be used by the plaintiff or it can ask a hired car company to undertake this task so long as it has taken reasonable steps to satisfy itself that the car is reasonably safe and the driver is reasonably competent.  If the defendant had fulfilled this obligation, then I cannot see how the defendant could be said in breach of this term or its duty as an employer towards the plaintiff if the plaintiff was injured in a traffic accident.  In terms of the nature of the obligation, there is no substantial difference between this contractual term as properly understood and the employer’s duty to provide a safe system of work.  Both requires the employer to provide a reasonably safe car and reasonably competent driver.

26.In view of the contractual arrangement for the plaintiff to work for WN, this obligation was, of course, undertaken by WN but in terms of proper legal analysis, this obligation was undertaken by WN for and behalf of the defendant.  Hence the rules relating to the non-delegable nature of the duty of care and the principal liable for the acts of the agent will apply.

The plaintiff’s case

27.Mr. Neoh S.C. appearing with Mr. Chong, as counsel for the plaintiff, has very skillfully reduced the complex issues into a narrow focus.  He submitted that liability against the defendant can be established as follows : the defendant arranged for its contractual obligation of providing the car to be performed by WN on the defendant’s behalf.  Zheng was an employee of WN.  Zheng’s negligence, which was admitted, is therefore, attributable to WN.  Hence, WN’s (or its employee’s) negligence would be the negligence of the defendant.

The flaw in the argument

28.I must say that on first brush this appears to be a very attractive basis on which liability of the defendant can be grounded.  However, on proper analysis, the flaw in this argument is that it failed to distinguish the personal liability of WN in discharging the contractual obligation or the duty of care on the one hand and the vicarious liability attributable to WN by reason of its own employee’s negligence on the other hand.  If Zheng was negligent, WN would no doubt be liable as his employer towards a third party namely, the plaintiff.  This is because of the vicarious liability attached to WN by reason of the negligence of its own employee carrying out work for and on its behalf.  However, this is not in the nature of a failure of a personal responsibility by WN in discharging the contractual obligation or the duty of care which it had undertaken on behalf of the defendant. 

29.This point can be illustrated as follows.  If, for the purpose of argument, WN was the employer of the plaintiff and if the plaintiff was to sue WN for negligence arising from the negligent driving of Zheng, in the absence of any special factors, I cannot see how WN can avoid liability.  But this is simply because of the operation of vicarious liability.  It would be a different consideration if the plaintiff was to sue WN for breach of the contractual obligation or employer’s duty of care towards him as an employee.  The mere fact that Zheng was negligent would not have assisted him.  The plaintiff must establish that WN was negligent in the first place in respect of those obligations.  In the context of this case this means establishing that it had failed to ensure either the car was reasonably safe or that the driver was reasonably competent.

30.The position will not be different if WN was not the plaintiff’s employer but was merely discharging the contractual obligation or duty of care towards the plaintiff for and on behalf of the defendant. 

Duty discharged

31.Under the contract the plaintiff was required to travel within China and elsewhere for his work.  No doubt the plaintiff was in the course of his employment at the time of the accident but again this factor would not by itself render WN personal liable because the ultimate question still depends on whether WN had been in breach of the duty which it had undertaken on the defendant’s behalf in providing a reasonably safe car and a reasonably competent driver to the plaintiff.  In this case the evidence showed that Zheng was a Beijing resident and had a driven licence for two years.  During this period he had never been involved in a traffic accident.  Zheng had always been the person chosen to drive executives of WN when they were on business in Beijing.  In my view WN had properly discharged this duty when it chose Zheng to be driver.  The available evidence showed that he was a reasonably competent driver to be given the task by WN to transport the plaintiff.

32.If WN had not been in breach of this duty then I cannot see how the defendant can be rendered liable for the injuries sustained by the plaintiff in the accident. 

Conclusion

33.This is a short point and the case really turns on this short point.  Despite the extremely persuasive arguments of Mr. Neoh, in my view the judge was clearly right to find that the defendant was not liable towards the plaintiff.

34.It is unfortunate that the plaintiff cannot recover against the defendant because obviously his wish when he entered into the contract with the defendant was to hold the defendant liable in case of mishaps.  However, he just does not have a legal basis to sustain a course of action against the defendant. 

35.Accordingly, the appeal is dismissed.  I will make an order nisi that the plaintiff is to bear the defendant’s costs of the appeal.  The plaintiff’s own costs are to be taxed in accordance to Legal Aid Regulations.

36.I would like to thank counsel for their assistance.

Hon Tang JA :

37.I agree.

Hon Barma J :

38.I agree.

Mr. Anthony Neoh, S.C. and Mr. K. M. Chong, instructed by Messrs Christine M. Koo & Ip, for the Plaintiff

Mr. John Bleach, S.C. and Mr. Stewart K. M. Wong, instructed by Messrs Clyde & Co., for the Defendant