涂志強 v. 合生公司 (商號) and Another

DCEC 40/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 40 OF 2010

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Coram: Deputy Judge J. Wong (in Court)

Date of Hearing: 14 and 15 March 2011

Date of Handing Down Judgment: 27 May 2011

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JUDGMENT

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Introduction

1.This is an employee’s compensation case.  Quantum has been agreed at $172,000. There are two questions left to be decided by this Court.

(a) Preliminary point: The proceedings have not been served upon the 1^st Respondent, can judgment be entered against it? Did the 2^nd Respondent join in the proceedings as if it were the employer, and as such, may be held directly liable to the Applicant?

(b) Substantive point: Subject to (a), can the Applicant prove his case on liability against the 2^nd Respondent?

Background

2.The Applicant was and is a PRC resident.  On 15 January 2008, he came to Hong Kong by a two-way permit.

3.He said that he went to Wo Hop Shek in Fanling to seek for jobs, but was injured on 19 January 2008 in the course of an employment.  He received treatment in hospital here.

4.On 25 January 2008, he went to the police and reported the matter. Later, he was charged with breach of condition of stay. He was convicted and sentenced for imprisonment for 6 weeks.  Upon having finished the sentence, he was expelled back to PRC.  However, he later came to Hong Kong again to seek compensation of the said injuries.

5.Legal aid was granted to the Applicant.  Two actions were subsequently issued.

(a) DCMP 127/2010 on 15 January 2010.

(b) The present proceedings on 18 January 2010.

6.By DCMP 127/2010, the Applicant sought leave from the Court to sue the Employee Compensation Assistance Fund Board (“the Board”), as if it were the employer, for compensation because:

“(a) the Plaintiff’s [the Applicant’s] employer cannot be identified or, if identified, cannot be found; and

(b) for any reason, cannot be served with proceedings; and

(c) no policy of insurance is known to be in force in relation to the employee [the Applicant].”

(Originating Summons under DCMP 127/2010)

7.The Board took the view that DCMP 127/2010 ought to be stayed and it should join in the present proceedings.  In the supporting affidavit filed herein on 24 March 2010, the Board’s solicitor deposed that:

“2. I make this affidavit in support of the Intervener’s application to join as the 2^nd Respondent in these proceedings.

3. The Intervener is a statutory body set up in 1991 under the Employees Compensation Assistance Ordinance, Chapter 365 of the Laws of Hong Kong (‘The Ordinance”) the functions of the Intervener include holding the Employees Compensation Assistance Fund upon trust, administering the Fund and considering applications from employees and others for payment of compensation in relation to employment-related injury.

4. In the present proceedings, the Applicant alleges that he was employed by the Respondent as an interior decoration and general worker on 19^th January 2008. The Applicant claims employees’ compensation for the injuries that he sustained in as industrial accident which allegedly happened on that day while he was working in the course of his employment with the Respondent in Fanling, New Territories.

5. On 21^st December 2009, JCC Cheung & Co. acting for the Applicant herein wrote to the Intervener stating that the Applicant was about to commence proceedings to claim employees’ compensation in relation to the said accident but they were unable to identify or locate the employer. They notify the Intervener that the Applicant intended to invoke s. 25(3) of the Ordinance to initiate employees’ compensation proceedings against the Intervener as if it were employer…

6. On 16^th January 2010, the Applicant took out an Originating Summons under D.C. M. P. No. 127 of 2010 (“the DCPM”) against the Intervener seeking leave to issue employees’ compensation proceedings against the Intervener as if it were the employer on the ground that :-

(a) The Applicant’s employer cannot be identified or, if identified, cannot be found;

(b) For any reason, cannot be served with the proceedings, and

(c) No policy of insurance is known to be in force in relation to the employee…

7. Notwithstanding the commencement of the DCMP, the Applicant started the present proceedings against the Respondent on18th January 2010, i.e. two days after the DCMP were taken out.

8. To allow the two sets of proceedings (i.e. the DCMP and the present proceedings) to run in parallel is obviously a waste of costs and time. We therefore suggested to the Applicant’s solicitors that in order to stop further costs from escalating, the Intervener would make an application to join as an additional Respondent in the present proceedings in return for the Applicant to stay the DCMP …..

9. On 9^th March 2010, JCC Cheung & Co. accepted our proposal…..

10. Given the issues herein and the fact that there was no insurance policy known to be in force at the material time which covered the Applicant should the Applicant obtain judgment against the Respondent, there is a real risk that the Intervener will face a potential application from the Applicant for payment from the Fund under s. 16 of the Ordinance.

11. By reasons of the matters aforesaid, I respectfully submit that the intervener has an interest in the outcome of the proceedings and for the sake of safeguarding the interests of the Fund, it is imperative for the Intervener to join as a party.

12. …...”

8.Thereafter,

(a) On 26 March 2010, under DCMP 127/2010, it was ordered by consent that:

“1. All further proceedings in this action be stayed against the Defendant until the determination of the Application for Employees’ Compensation under DCEC No. 40 of 2010;

2. Parties to restore this matter within 21 days thereafter;

3. ….”

(b) On 30 April 2010, in the present proceedings, it was ordered that:

“1. Leave be granted to the Intervener, the Employees Compensation Assistance Fund Board, to join as an additional Respondent in these proceedings and the Application be amended accordingly by adding the name of the Intervener as the 2^nd Respondent;

2. The 2^nd Respondent do file and serve an Answer within 21 days from the date hereof;

3. …

5. Applicant’s application for substituted service be adjourned sine die with liberty to restore;

6. …”

(c) Further, in relation to the said application for substituted service of the proceedings upon the 1^st Respondent, the Applicant’s solicitors pursued it on 25 June 2010, but it was declined by the Court. Nothing has been done further thereof.

9.The parties hereto, that is, the Applicant and the Board (hereinafter referred to as “the 2^nd Respondent”), thereafter continued to prepare their case for trial, including discovery and exchange of witness statements.

10.Later, on 28 October 2010, by consent, it was ordered, inter alia, that:

(a) No expert evidence on liability and quantum was to be adduced.

(b) The reports of the Applicant’s treating government hospitals and clinics were adduced as agreed evidence.

(c) Leave was granted to set down the action for trial in the fixture list with 2 days reserved before a bilingual judge.

11.When parties appeared before me at trial, they informed me that quantum had been agreed, leaving liability to be disputed.  Further, Mr. Horace Wong, SC for the Board raised the said preliminary point to be decided by the Court. 

12.Upon hearing Counsel’s argument on the preliminary point, I reserved my ruling to be delivered.  Nonetheless, in order not to waste time and costs, I asked the parties to continue with the substantive point, namely, parties’ argument on liability.

Ruling

13.Upon consideration all the evidence, authorities and submissions of them, I have decided to rule against for the Applicant on both the preliminary point and the substantive point.  In the end, the action herein is dismissed.

Preliminary point

14.To answer the preliminary point, apart from the background of the case as set out above, one needs to understand some basic concept of the local employees’ compensation infrastructure.  In Hong Kong, when an employee is injured in the course of the employment, he may sue against his employer for employees’ compensation.  All employers are legally obliged to take out insurance for such compensation.  It is hoped that all employees will have some minimum protection because in the end, it is usually the insurance company who will pay up the employees’ compensation.  However, the employer may disappear, or has forgotten to ensure a valid insurance policy, and so forth.  To provide further protection to the employees, the Board was set up.

15.Briefly, when an employee has obtained an empty judgment for employee compensation against his employer, the former may apply to the Board under s. 16 of the Employees Compensation Assistance Ordinance (Cap. 365) (“ECAO”) for payment.

16.Since the Board may ultimately pay the compensation, it from time to time, joins in the proceedings as a party.  S. 25 and s. 25A of ECAO are the relevant provisions for the present purpose.

“S. 25(1) This section applies to any claim against an employer for compensation where …..

(a) the employer –

(i) cannot be identified or, if identified, cannot be found;

(ii) is insolvent;

(iii) is dead or in the case of a company, has been dissolved, wound up or struck off the register; or

(iv) for any reason, cannot be served with proceedings; and

(b) no policy of insurance is known to be in force in relation to the employee.

(2) Subject to this section, proceedings for any claim against an employer to which this section applies may issue against the Board as if it were the employer.

(3) Proceedings against the Board under this section shall not issue unless the court is satisfied, on application made on notice to the Board, as to the matters specified in subsection (1)(a) and (b).

(4) Where proceedings are brought against the Board under this section, the rights and liabilities of the employer in respect of the compensation the subject of the proceedings are vested in and transferred to the Board.”

“S. 25A If proceedings have been initiated to claim compensation or damages (whether initiated before, on or after the commencement of this section), the Board may apply to the court to be joined as a party to the proceedings as follows –

(a) Where no policy of insurance is known to be in force at the time of the accident to which the proceedings relate, the Board may apply to the court to join in the proceedings as a party in accordance with Order 15, rule 6 of the Rules of the High Court (Cap 4 sub. Leg. A) or Order 15, rule 6 of the Rules of the District Court (Cap 336 sub. Leg. H), as the case may require, to take over the defence as if it were the employer in the proceedings if –

(i) the employer cannot be identified or, if identified, cannot be found;

(ii) the employer is insolvent;

(iii) the employer is dead or has been dissolved, wound up or struck off the register;

(iv) the employer, for any reason, cannot be served with the notice of proceedings; or

(v) at any time when the employer fails to attend the hearing, leaving the claim uncontested;

(b) where no policy of insurance is known to be in force at the time of the accident to which the proceedings relate and the employer is present at the proceedings, the Board may apply to the court to join in the proceedings as a party in accordance with Order 15, rule 6 of the Rules of the High Court (Cap 4 sub. leg. A) or Order 15, rule 6 of the Rules of the District Court (Cap 336 sub. leg. H), as the case may require;

(c) where the insurer concerned is insolvent, the Board may apply to the court to join in the proceedings as a party in accordance with Order 15, rule 6 of the Rules of the High Corut (Cap 4 sub. leg. A) or Order 15, rule 6 of the Rules of the District Court (Cap 336 sub. leg. H), as the case may require.

17.Indeed, when the Applicant commenced DCMP 127/2010, he was relying on s. 25 ECAO.  He was saying, inter alia, that the employer could not be found, and as such the proceedings could not be served and there was no insurance policy taken out to cover the subject accident.  He wanted leave from the Court so that the Board could be sued as if it were the employer.

18.On the other hand, regarding the present proceedings, the Applicant ran a different case. He said that he was employed by the 1^st Respondent at the material times. His solicitors further relied on similar facts as in DCMP 127/2010 to apply for substituted service of the proceedings upon the 1^st Respondent. Then, the 2^nd Respondent applied to join in under s. 25A ECAO and O. 16 r. 5 RDC.

19.With the above in mind, I take the following views.

(a) When the 2^nd Respondent was ordered to be joined in the present proceedings, it was done so in the capacity of an Intervener only, and not “as if it were the employer”. It is apparent from the wordings of the order (See paragraph 8(b) above).

(b) The basis of the 2^nd Respondent asking for joining in is also apparent, namely, it “…will face a potential application form for payment from the Fund under s.16 of the Ordinance...”

(c) If the 2^nd Respondent had been treated as if it were the employer, there would be no need for the Applicant to pursue his application for substituted service of the proceedings upon the 1^st Respondent any more.

(d) The 2^nd Respondent’s stance over the matter was also made clear in its Answer to the Applicant’s claim that “於2008年1月19日，上述申請人，即答辯人的僱員，在受僱期間因工作遭遇意外以致身體受傷。”(Paragraph 1 of the Application filed herein on 18 January 2010):

“1. Paragraph 1 of the Application is denied and the Applicant is put to strict proof thereof. The 2^nd Respondent specifically avers that the 1^st Respondent did not exist at all at the material time of the alleged accident. Alternatively, the 2^nd Respondent avers that the 1^st Respondent had been abandoned or closed down for a number of years prior to the alleged accident… ”

(e) Mr. Yip further told me that the 2^nd Respondent had taken up the proceedings to such an extent that it would be wrong to suggest that it was not taking up the proceedings as if it were the employer. However, he was unable to pinpoint any specific conduct on the part of 2^nd Respondent. I further find that its stance has always been that: the Applicant has to prove his case on liability against the 1^st Respondent and it would wait for the application for payment under s.16 ECAO. Its Answer made such position clear. The action or agreement as per paragraph 10 above does not go against such stance. Agreeing on the quantum with the Applicant is nothing more than a sensible act of saving time and costs as well as making sure that only reasonable compensation would be paid to the Applicant from the Board ultimately, but of course, subject to the proof of liability.

(f) Mr. Yip also attempted to persuade me to rule in favour of the Applicant on the preliminary point because “to hold otherwise would defeat the purpose of the Employees Compensation Assistance Ordinance, Cap.365”. With respect, I disagree. I do not consider that the 2^nd Respondent is trying to hide away from its obligation to provide protection for the employees in Hong Kong. However, Mr. Wong, SC did raise a valid point that we have to face. Perhaps, on future occasions, those acting for the employees like the Applicant in similar situation，should decide carefully the course of action to be adopted, pay attention to the difference between different provisions regarding join-in of the proceedings by the Employees’ Compensation Board and make sure that the same will be spelt out clearly on the order itself.

20.Hence, I agree that no judgment is to be entered against the 1^st Respondent as proceedings have not yet served upon it, and as the 2^nd Respondent was only ordered to be joined in as an Intervener, it cannot be held liable directly to the 1^st Respondent as if it were the employer.

21.Having ruled against the Applicant on the preliminary point, it suffices to dispose the present proceedings. Nonetheless, I would still move on to decide on the substantive point.  

Substantive point

22.Both Counsel identified 3 sub-issues under the question of liability.  Due to their stance taken as per the preliminary point, they employed different terminology. However, they were more or less the same.

(a) In the words of Mr. Yip at his Opening Submission:

“Substantive Issues at stake

12. …..

a) Whether the Applicant was under any employment as the time of the accident;

b) Whether the accident ‘arouse out of and in the course of the employment’;

c) Whether the Court should exercise its discretion to allow the Applicant to recover compensation as if he were employed under a valid contract of service.”

(b) On the other hand, Mr. Wong, SC, identified them in his Closing Submission as:

“3. .....

a) Whether the Applicant was an employee of R1 (“1^st Issue”);

b) If the answer to the 1^st Issue is “yes”, whether the accident concerned “arouse out of and in the course of” the Applicant’s employment with R1 (“2^nd issue”); and

c) If the answer to the 2^nd Issue is “yes”, whether the Court should exercise its discretion under section 2(2) of the ECO to allow the Applicant to recover compensation under that ordinance as if he had been employed under a valid contract of service (there should be no dispute that the Applicant was not lawfully employable in Hong Kong and that his employment was accordingly illegal under Hong Kong law) (“3^rd Issue”).”

23.Both sub-issues (a) and (b) of both Counsel are factual one to be proved by the Applicant.  Upon consideration, I am of the view that he has failed me to come up with the standard on balance of probabilities.

(a) It is very unlikely that the Applicant was working for the 1st Respondent at the material times.

(i) No business registration of the 1st Respondent was located.

(ii) The 1st Respondent was said to be situated in a piece of land owned by the Scout Association of Hong Kong; and upon enquires, it replied that, inter alia, that it did not have any knowledge of it.

(iii) The police did investigate into the matter. It provided the following information:

“1. It was an abandoned hut located in Wo Hop Shek Village, Fanling with no house no. whatsoever could be found outside. Only a signboard with Chinese character 『合生』 (no English name) hung outside the hut.

2. When our officers conducted enquiries in the vicinity, a locate villager surnamed “LAU” told us that the said factory has been closed down for over 30 years.

3. ……”

(letter of 15 March 2010)

(iv) A police officer was summoned to attend the hearing before me and confirmed more or less the same information in (iii) above.

(v) The Legal Aid Department (“DLA”) also sent somebody to check, but no useful information could be retrieved.

“The big wooden board was found missing. Search was conducted at the open grass area just outside the house (photo 59) and finally a wooden board was found lying below some grass.

…”

(site visit report dated 3 July 2008)

(vi) It is the Applicant’s case that “王先生” was the person he dealt with in those days that he worked. In the words of Mr. Wong, SC of which I agree,

“31. So it would appear that the Applicant somehow chooses to bring the present proceedings against R1 simply because he had found a signboard bearing the two words “合生” outside the Hut that he worked. This is clearly a most flimsy basis for making the claim that R1 was his employer. It is not known when the signboard was erected outside the Hut and it is not known who erected it. If the Hut had been used by any company or factory that bears the words “合生” as part of its name, it is not known what exactly is the name of the company or factory. But more importantly, it is simply not known, if any such factory or company existed at any time, whether it existed at all during the time when the Applicant was employed by Mr. Wong.”

(Mr. Wong’s Closing Submission)

(b) It is important for the Applicant to provide accurate information to the authorities concerned so that his employer can be identified. However, either his reliability or honesty is in question.

(i) He started to tell the police on 25 January 2008 the followings:

“問5: 你不知道顧主的資料，同埋聯絡方法？

答5: 我只知道他是王先生，聯絡電話6266 7321，當日我見他駕駛一架私家車，車牌係3700，有沒有英文字母我不太清楚。”

(ii) No one could be located by the telephone number and the incomplete vehicle registration number.

(iii) A few months later, the Applicant recalled something more. It triggered DLA to write on 9 May 2008:

“ Please be informed that the applicant now discloses that the full registration number of the involved vehicle was LW 3700. We believe this new information may assist your further investigation.

Please kindly let us know the result of your further investigation in due course. Please also kindly let us know whether any action has been taken to find out (i) the identity of the registered holder of telephone number 6226 7321; and (ii) whether the registered holder was the applicant’s employer.

……”

(iv) The police relied on 13 May 2008:

“1. ……

2. During our investigation, the subject has failed to disclose the first two letters of the registration number of the said vehicle. Therefore, we do not have sufficient information to conduct further investigation at that moment. On the other hand, we have made phone calls to the holder of telephone number 6266 7321 and it is known that the service of the number has been terminated.

……”

(v) 1 month later, the vehicle registration number(s) went further complicated. The attendance note dated 23 June 2008 of DLA recorded that:

“AP [The applicant] phone up for enquiry of the progress of his application. I asked him to clarify the registered number of his employer’s vehicle (whether it was LW 3600 or LW 3700) as in his latest letter to us, the number LW 3600 was revealed to us for the first time. AP stated that his employer used vehicle LW 3600 to take him to the working place for once during the course of employment. The vehicle 3700 was used to take him to the hospital after the accident.

I asked AP the reason why he did not tell the police that there were two vehicles involved as in the police statement, only the information of 3700 was recorded in connection of the vehicle. AP explained that he had told the police that there were two vehicles and also the registration number of 3700 and 3600 but the police only wrote down the number of 3700.

I asked AP the reason why he never mentioned to us, either on the phone or at (encl 43, AP’s letter) that there were two vehicles involved. AP explained that the omission was due to his poor education.

……”

(vi) I got a further new registration number when the Applicant testified before me. He told this Court that Mr. Wong drove him to work on 15 January 2008 by a car with the number “WF 3600”. He drew it on a paper and produced it as exhibit A1. Such information was clearly contradictory to (b) (i) above. Upon questioned, he explained that he had told the police both 3600 and 3700. It was the police who decided to state 3700 only. Although the Applicant asked the police why he did so, the latter either said that it was not relevant or did not answer him at all. He did not pursue the matter further. With respect, and such explanation is far from believable.

(vii) To conclude, was it 3700? LW 3700? LW 3600? One car or 2 cars? WF 3600? It appears that the Applicant was not trying to help the authorities concerned to identify his employer, but confusing them.

(c) An employee is to be remunerated. How was the Applicant paid? I do not consider that the Applicant has given this Court a satisfactory answer.

(i) He told the police the followings:

“問6: 你係合生內負責甚麼工作，你的工作時間，有沒有收過工錢？

答6: 我在合生內負雜務工作，每天的工作大約由上午8時至下午5時30分。我1月18日當日由王先生給我港幣900元工錢。”

(ii) However, he deposed another version in his witness statement herein:

“6. 第二天工作完畢，王先生走來給我400元工資便走了。

7. 第三天，姓喻的同鄉走了，王先生又帶了一位姓熊的來這裡工作。每天中午，王先生都會給我們一個飯盒作為午餐，早上及晚上則要自己安排膳食。

8. 第四天，我照常回到鐵皮屋工作，王先生再給我700元工資。 ……”

(iii) Upon being cross-examined as to the above inconsistency, he claimed that both versions were correct because he was only asked by the police how much he was paid per day and how many days he had worked before 18 January 2008.

(iv) Such explanation again is not satisfactory. As observed by Mr. Wong. SC:

“……

One only need to read question 6 in the police statement …… to see that that was simply not what he was asked. In any event, it makes no sense for the police officer to ask him how many days he worked before 18 January 2008, when the police officer was clearly aware that the Applicant had worked for Mr. Wong from 15 January to 19 January 2008, and that the accident happened on the 19^th. In any event, between 15 January and 18^th January 2008, there were 4 days (not 3 days) and if the Applicant received his wages on the 18^th, he should have been paid $1,200 if the police officer were seeking to put words into the Applicant’s mouth by doing his own calculation.”

(paragraph 21 of Mr. Wong,
SC’s Closing Submission)

(d) Hence, due to the above, I cannot be satisfied on balance that the Applicant was under any employment at all at the material times.

(e) There is medial evidence before this Court that the Applicant attended the A&E Department of Prince of Wales Hospital on 19 January 2008. He received an emergency operation the next day and was discharged on 25 January 2008.

“The medical findings were:-

1. Left eye injury with decreased vision.

2. Corneal was hazy.

3. Blood in anterior chamber.

The mode of injury ……

x was compatible with sharp object infliction.

o could not be determined.

……”

(Medical Report dated 29April 2008)

(f) Nevertheless, how was he injured?

(i) He told the doctor and nurse that he slipped and fell which hiking. He was injured by an iron stick in 2mm diameter. (Progress and Treatment record on 19 January 2008 at 8:15 p.m. and Nursing record on the same date at 10:30 p.m.)

(ii) However, when he was discharged. It was recorded that:

“……

left eye injury walking downhill and hit against iron wired fence ……”

(iii) Under cross-examination, he admitted that he did lie to the nurse, doctor and hospital because he did not want to reveal his illegal working. As suggested by Mr. Wong, SC, the more important point for our purpose was that he could come up story with details whenever it suited his interest or convenience.

(iv) The story did not stop there. On 25 January 2008, he told the police that:-

“…… 進行割鐵工作時弄傷2眼 ……”

(v) In the site visit report of DLA dated 3 July 2008, it was recorded that:-

“A/P told me that he was employed by a Mr. Wong to do the internal renovation of the house. One of his eyes was injured by some iron fragments while he was fixing a grinding machine.”

(vi) Facing clarification sought, the Applicant attempted to explain his work in some details. However, I do not consider that he has given us a satisfactory answer.

“48. In Court and upon re-examination, the Applicant sought to reconcile the two versions by saying that he had used the grinding machine, which he had fixed in the morning, to cut some angled iron at the time of the accident. This is a most unbelievable story. The way the Applicant described the grinding machine shows that it had a circular sanding disc connected to a handle. The so-called grinding machine was clearly a sanding or grinding device. The sanding disc was not a circular saw fitted for cutting, and it is inconceivable that anyone would try to use a sanding disc to cut an angle iron. The Applicant’s evidence in this regard is quite incredible.”

(Closing Submission of Mr. Wong, SC)

(g) Hence, again on balance, I am not satisfied that the “injuries” suffered by the Applicant was arouse out of and in the course of the employment of the 1^st Respondent, 王先生 and/or any employer at all.

23.Having made factual findings in sub-issues (a) and (b) against the Applicant, his claim must collapse. However, even if they were decided in his favour, I further take the view that he would still lose his case under sub-issue (c).

24.Regarding that sub-issue, both Counsel agreed that it was a matter within the discretion of the Court to be decided on the facts of this case.  Section 2(2) of the Employees’ Compensation Ordinance (Cap. 282) provides that:

“If, in any proceedings for the recovery of compensation under this Ordinance, it appears to the Court that the contract of service …… was illegal, the court may, if having regard to all the circumstances of the case [emphasis added] it thinks proper to do, deal with the matter as if the injured person had at the time aforesaid been a person working under a valid contract of service ……”

25.Useful discussion can be found in the case of Yu Nong Xian v. Ng Ka Wing [2007] 4 HKLRD 159:

“Whether to exercise s.2(2) discretion

(2) (Per Tang JA) The discretion under s.2(2) of the Ordinance would be exercised. Having regard to the public policy regarding unemployable persons performing lawful work, allowing compensation claims by illegal employees was more conducive to serving such policy. In order to stop illegal employment, it was important to target and deter greedy employers, by hitting them in the pocket. …… lawfully employable, but, not uncommonly, was not prosecuted. If P’s claim were refused, D1 would get off scot-free. If a claim was allowed, an employer like D1 was likely to surface, either due to more serious efforts to trace him or a bankruptcy petition freezing his bank accounts (Chung Man Yau & Another v Sihon Co Ltd [1997] HKLRD).

(3) Given that D1 was uninsured, the Fund Board’s potential liability to P was relevant to the exercise of the discretion. But its weight had to be balanced against all other considerations. Provided X had “exhausted legal and financially viable means of recovery” under s.16(3) of the Employees’ Compensation Assistance Ordinance (Cap. 365) (the ECAO), the burden would fall on the Fund Board, which had a right of subrogation against employers under s.37 ……

(4) (Obiter) The Fund Board could help fight illegal employment by actively enforcing its right of subrogation against employers under s.37 of the ECAO. The Government might also, if it saw fit, address the problem of illegal employees claiming against the Fund Board following the exercise of discretion under s.2(2) by amending legislation to prevent recovery from the Fund Board by unemployable workers. ……

(5) (Per Cheung JA) The Court should exercise the discretion in P’s favour. It would take an extremely cynical and indeed harsh view to say that public policy should deprive an employee who was physically injured or killed in an industrial accident from recovering compensation from an employer who knowingly employed him to carry out lawful work despite his lack of permission to work in Hong Kong …….

(6) (Per Cheung JA, disagreeing with Tang JA that the Fund Boards’ potential liability was relevant to the s.2(2) discretion) Irrespective of insurance coverage, an employer was still primarily responsible to compensate his employees. X was doing lawful work. The Fund Board’s potential liability to satisfy an award was separate from and not relevant to the s.2(2) discretion at this stage of proceedings ……

(7) (Per Johnson Lam J, disagreeing with Tang JA that Fund Boards’ potential liability was relevant to the s.2(2) discretion) The primary focus regarding the s.2(2) discretion should be the position as between the employer and the employee. Employees’ compensation proceedings determined the liability of the employer, not that of the Fund Board. Consideration should be given to the need to amend the ECAO to provide for a second-tier discretion concerning claims made against the Fund Board, after the s.2(2) discretion had been exercised in favour of an applicant.’

26.When Yu Ngon Xian was further taken to the Court of Final Appeal, in refusing the application for leave to appeal, Mr. Justice Ribeiro PJ said that:

“5. Secondly, Mr. Wong invites us to grant leave with a view to laying down principles as to how the s2 (2) discretion should be exercised. He lists a number of questions raising a series of policy considerations which he suggests the Court should pronounce upon as relevant or otherwise. We do not consider this a practicable or sensible task for the Court to undertake. The discretion in s2 (2) is in the widest terms and is necessarily to be exercised on the facts of each case, involving its own mixture of discretionary factors. In any event no basis has been shown in this case for interfering with the Court of Appeal’s exercise of discretion on the well-known grounds required for any such intervention.”

27.Bearing in mind the above guidance, I do not consider it proper to exercise my discretion for the Applicant:

(a) The 1^st Respondent (or 王先生) knew that the Applicant was not lawfully employable.

(b) The Applicant also knew that he was not lawfully employable.

(c) There could be no prosecution against the 1^st Respondent.

(d) The Board would pay the compensation.

(e) The Board would not be able to go against the 1^st Respondent for subrogation.

(f) The Applicant provided incorrect and/or insufficient information to the authorities concerned to chase his “employer”.

I should also add that I would have come to the same conclusion in the exercise of my discretion irrespective of whether (d) and (e), i.e. the potential liability of the 2^nd Respondent to pay the Applicant’s claim, are taken into account or not.

Costs

28.Having dismissed the action herein, I see no reason why costs should not follow the event.  There will be a costs order nisi that the Applicant shall pay the costs of the 2^nd Respondent, including Certificate of Counsel for the hearing on 14 and 15 March 2011, to be taxed, if not agreed.  The Applicant’s own costs are to be taxed in accordance with Legal Aid Regulations.

Mr. Arthur Yip instructed by M/s JCC Cheung & Co. for Applicant

1^st Respondent, absent (proceedings not yet served)

Mr. Horace Wong, SC, instructed by M/s Gallant Y.T. Ho & Co. for 2^nd Respondent

Please refer to CACV107/2011 for the relevant appeal(s) to the Court of Appeal.

Please refer to CACV107/2011 for the relevant appeal(s) to the Court of Appeal.

Please refer to CACV107/2011 for the relevant appeal(s) to the Court of Appeal.