Case Detail

DCEC 153-154 & 241-246/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 153 OF 2004

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IN THE MATTER OF AN APPLICATION BETWEEN

	LI YUEN YAU acting for herself and other members of the family, namely, TSO HON YING and TSO CHING YI, of TSO PAK KUEN, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2nd Respondent

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IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 154 OF 2004

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IN THE MATTER OF AN APPLICATION BETWEEN

	LEE CHIU LAN acting for herself and other members of the family, namely, CHAN LORRAINE, CHAN KING FAI and CHAN WAI YING, of CHAN SHING TONG, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2nd Respondent

------------------------

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 241 OF 2004

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IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of IGNATOVA LYUDMILA MIKHALOVNA acting for herself and other members of the family of IGNATOV ALEKSANDR GRIGOREVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2nd Respondent

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IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 242 OF 2004

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IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of MIKHAYLISHINA OLESYA IGOREVNA acting for herself and other members of the family of MIKHAYLISHIN ANATOLIY BOGDANOVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2nd Respondent

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IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 243 OF 2004

------------------------

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of SHERSTYUK IRINA SERGEEVNA acting for herself and other members of the family of SHERSTYUK PAVEL YURIVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2nd Respondent

------------------------

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 244 OF 2004

------------------------

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of STEPANOVA VALENTINA KONSTANTINOVNA acting for herself and other members of the family of KUZNETSOV YURIY ANATOLEVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2nd Respondent

------------------------

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 245 OF 2004

------------------------

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of POZDNYAK OLGA LVOVNA acting for herself and other members of the family of POZDNYAK NIKOLAY IVANOVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2nd Respondent

------------------------

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 246 OF 2004

------------------------

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of TROFIMOVA OKSANA VLADIMIROVNA acting for herself and other members of the family of TROFIMOV GERMAN EVGENEVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2nd Respondent
------------------------

Before: His Honour Judge Alex Lee in Chambers

Dates of Hearing: 2 May & 6 June 2013

Date of Decision: 28 June 2013

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DECISION

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I. INTRODUCTION

1. This is about a series of employees compensation claims (“the ECC”) under the Employees Compensation Ordinance, Cap 282 (“the Ordinance”) relating to a sea accident occurred on 12 March 2002 in Kwai Chung which resulted in the death of eight seamen including two locals and six Russians.

2. The proceedings had a protracted history and it subsequently led to an action in the High Court between 1^st respondent (“R1”) as the plaintiff, the 2^nd respondent (“R2”) as the 1^st defendant, the Ming An Insurance Co (HK) Ltd (“Ming An”) as the 2^nd defendant and the Shipowners’ Mutual Protection and Indemnity Association (Luxembourg) (“the Association”) as the third party.[1]

3. The High Court action was eventually settled[2] and one of the terms of the settlement was that Ming An assumed the liability of R2 and undertook to pay R1’s costs in the District Court in defending the ECC and in opposing the indemnity application by R2 with certificate for counsel. The basis of taxation of the aforesaid costs, however, was to be determined by a District Court Judge in chambers. That is the reason why the case has come before me. R1 asks that the taxation be done on indemnity basis and R2 says that it should party and party.

II. THE ECC AND THE INDEMNITY APPLICATION

4. All of the eight deceased were the employees of R1 which was the contractor of a company called Leader Marine. Leader Marine was a sister company of R2. R2 in turn received the dredging work from Hong Kong International Terminal Limited (“HIT”). Although there was no direct contractual relationship between R1 and R2, the evidence suggests that R2 was the principal contractor within the meaning of the Ordinance.

5. The trial of the ECC was heard before Deputy District Judge Kwok (as he then was) (“the learned judge”) on 19 January 2007. The stance taken by the respondents at that trial was somewhat strange. On the one hand, there was no acceptance of liability from either R1 or R2. In particular, R1 did not admit that it was the employer and R2 did not admit that it was the principal contractor. The applicants were therefore put to straight proof. On the other hand, the applicants’ claims were unchallenged. Although R1 and R2 were separately represented by counsel and solicitors, there was no cross-examination of any of the applicants’ witnesses by counsel. Moreover, there was not a shred of evidence adduced by either of the respondents to seek to challenge, undermine or at least explain the evidence of the applicants. Counsel for the respondents did not make any submissions or take issue on any of the matters canvassed by counsel for the applicants. Therefore, the trial, which involved eight deceased with large sums of compensation at stake, only lasted for one day. In the event it came as no surprise that the learned judge gave judgment for the applicants and awarded compensation, interest and costs in their favour.

6. Towards the end of that trial, Mr Lin, counsel for R2, indicated to the learned judge that R2 would seek indemnity from R1 under s 24(2) of the Ordinance. On the application of Mr Kwok, counsel for R1, the issue of indemnity was adjourned pending the judgment on liability and quantum. When the application for indemnity was heard before the learned judge on 27 June 2007, Mr Kwok realistically did not seek to argue against indemnity. However, he asked that the indemnity be stayed pending the outcome of the High Court action.

7. Briefly stated, R1’s case against R2 and Ming An in the High Court action was as follows. Under its main contract with HIT, R2 had to procure insurance for the purpose of the Ordinance covering all of its and Leader Marine’s sub-contractors whereas under the sub-contract between Leader Marine and R1, R1 had to procure its own marine insurance against all risks under common law relating to the sub-contract. As a result, R2 took out an insurance policy with Ming An (“the Ming An Policy”) covering both “legal liability in respect of such bodily injury or death under the Ordinance and independently of the Ordinance”. R1 also took out an insurance policy with the Association (“the Association Policy”) which covered, among other things “Common Law crew claims”. However, after the accident Ming An, purportedly relying on an “other insurance” clause contained in the Ming An Policy which was against double insurance, refused to take up the defence of R1 on the ground that R1 had taken out the Association Policy[3]. On the other hand, the Association took the view that the Association Policy covered only common law liability in respect of the vessel insured. Therefore, R1 was left on their own without any insurance cover for the ECC. Whilst Ming An refused to take up the defence of R1, they nevertheless took up the defence of R2. R1 alleged that that decision of Ming An was irrational, as the position of R2 should be the same as R1 insofar as double insurance was concerned.

8. As mentioned earlier, the High Court action was settled on a non-prejudicial basis so that both Ming An and the Association had to contribute to the compensation and damages relating to the accident. There is no need for me to go into the details of the settlement agreement.

III. THE RELEVANT LEGAL PRINCIPLES

9. There is no real dispute as to the applicable legal principles. The default position as regards taxation between litigants is the party and party basis. However, the court has a broad discretion as to how costs should be paid and whether indemnity costs should be ordered. For the indemnity basis to apply there must exist some “special or unusual features” to justify it: Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114. What may amount to “special or unusual features” has been broadly described and examples from case authorities include, but not limited to, situations where the proceedings were “scandalous or vexatious”, or had been initiated, prosecuted or defended “maliciously” or for an “ulterior motive” or that the proceedings were conducted in such a way that it constituted an “affront to the court”. In the above examples, the emphasis is on the conduct and motive of the losing party. The relevant conduct, however, is not only restricted to the way the litigation was contested, but may also include the events leading to the institution of the proceedings. See generally Hong Kong Civil Procedure 2013, at §62/App/12.

IV. RELEVANT CONSIDERATIONS

Peripheral matters

10. In view of the legal principles stated above, for the present purpose the issue before the Court is indeed a narrow one. The Court should focus on the conduct of the respondents in the ECC and the reasons or motives, if any, behind their respective conduct. I understand that counsel for R1 and R2 do not disagree that this is the correct approach.

11. In the present case, I do not consider it relevant whether Ming An was correct that they could rely on the clause against double insurance or whether it was rational for them to take up just the defence of R2 but not also that of R1. I am also not concerned with the relative liability of Ming An and the Association or how much each of them was to pay pursuant to the settlement agreement. Still less am I concerned with the relative merits of the cases of the parties in the High Court action. The High Court action was not before me and it had already been settled.

12. Furthermore, I do not consider it relevant that the respondents had made no admissions in the ECC save and except that each of the deceased met with personal injuries causing death by accident on that fateful day. Generally speaking, a defendant in an action is entitled to put the plaintiff to strict proof and the mere exercise of that right, without more, is not unreasonable and can hardly afford a basis for awarding indemnity costs in the event that judgment is given for the plaintiff. I also bear in mind that what is now in dispute is the basis of taxation between the respondents, not the basis of taxation between the applicants and the respondents.

Contentions of the parties

13. In my view, the crux of the matter is whether R1 was forced to incur costs in the ECC at the behest of R2 or as a result of the way R2 conducted itself and if so, whether the conduct of R2 is so unreasonable that it constitutes an affront to the court which justifies indemnity costs.

14. In this regard, the contentions of the parties are as follows:-

(i) For R1, their position had been that the deceased were their employees and they had told R2 about this. As far as R1 was concerned, they could see no defence to the ECC. However, they were precluded from making admissions because of what they had been told by the solicitors acting for R2/Ming An. In order not to prejudice their potential claim for insurance cover, R1 had to dance to the tune of Ming An which had taken over the defence of R2. Mr Kwok even went so far as to submit that Ming An should not have defended the ECC at all. Rather, so the submission goes, Ming An should have settled the ECC first and then, if they so desired, argued with R1 over the question of statutory indemnity under the Ordinance. If that course had been taken, then all the unnecessary delay could have been avoided. Moreover, Mr Kwok submitted that R1 had to instruct solicitors and counsel to appear at that trial to safeguard R1’s position as R1 had been warned by R2 before trial that there would be an application for indemnity against R1 under the Ordinance. Mr Kwok submitted that R1 had to incur costs in the ECC solely because of the unreasonable conduct of R2.
(ii) For R2, Mr Lin submitted that R1 had been provided with a copy of the Ming An Policy since September 2004 and there was nothing in it which would have precluded R1 from making admissions in the ECC. Moreover, instead of instructing solicitors and counsel to appear in the ECC, R1 could have elected to accept liability or simply not to do anything. It was not a case where Ming An had dictated what R1 should do. Whether the deceased were in fact the employees of R1 was a point that could only be taken by R1. However, instead of making a bare denial, R1 had put forward a false case in their answers to the applications that the six Russian deceased were employed by someone else. Furthermore, R1 tried to mislead the court by filing of a witness statement in support of the false case. In the circumstances, Mr Lin submitted, that the court should not condone such conduct of R1 by awarding indemnity costs. Mr Lin emphasized that it was not the case that R2 refused to pay the costs of R1. They had already agreed to do so. The issue was only about the basis of taxation.

The events prior to the trial

15. In order to gauge the validity of the above contentions, it is necessary to review some of the correspondences between the respondents and the documents filed by them prior to the trial of the ECC:-

(i)   Since 20 April 2003, the solicitors acting for R1 had been asking for a copy of the Ming An Policy from the solicitors then acting for R2/Ming An. However, despite repeated requests, no such copy was provided until 22 September 2004 and that was done only after a court order demanding disclosure.[4]
(ii)    On 12 February 2004, the applications of the ECC in respect of the two local deceased were filed.[5]
(iii)    On 13 May 2004, R2 filed their answers to the applications of the two local employees. Save and except that the two local deceased met with personal injury causing their death by accident, the answers were a bare denial.
(iv)    On the same day as they filed their answers, the then solicitors of R2/Ming An wrote a letter to the solicitors of R1.[6] The contents of the letter are important and I quote it in full as follows:-
“We write to inform you of the position we are taking in the above EC applications.
We attached herewith two Answers to be filed by us on behalf of the 2^nd Respondent for your attention. You will note that we have not admitted the employment relationship of the Deceased, Tso Pak Kuen and Lee Chou Lan with you. We have also made no admission towards the 1^st and 2^nd Respondents’ respective capacities as the sub-contractor and principal contractor.
Although we deny your client’s entitlement for a complete indemnity from our client in respect of the above Applicants’ claim, we write to put on record that in the event you do successfully establish your entitlement to an indemnity from our client, please take note we will take issue with any admission you make at this stage without our approval. We therefore expect the Answer you file on behalf of your client will not be inconsistent with our understanding of the legal position between your client and ours.”
(“Emphasis supplied”)
(v)    On 15 May 2004, R1’s solicitors wrote to the then solicitors of R2/Ming An and informed that all the eight deceased seamen were its employees. Besides, it was also said that,
“… there was no issue on the employer-employee relationship, the occurrence of accident and the fatalities arose out of and in the course of employment. However, we note your letter dated 13^th May 2004, and accordingly have prepared two draft Answers in respect of DCEC Nos. 153-154 of 2004 consistent with the stance taken in Zen’s Answers”.[7]
(vi)    On 10 March 2004, the applications of the ECC in respect of the six Russian deceased were filed.[8]
(vii)   On 18 May 2004, R1’s solicitors wrote to the then solicitors of R2/Ming An. R1’s solicitors referred to their letter dated 15 May 2004, enclosed their draft answers to the applications of the six Russian deceased and sought R2’s comments on the draft answers. All the six draft answers were similar in that the applicants were put to strict proof save and except that the six deceased met with personal injury causing by death on the day in question.
(viii)   On 2 June 2004, the then solicitors of R2/Ming An filed their answers to the applications of the six Russian deceased. Again, there was no admission save and except that the six Russian deceased met with personal injury causing their death by accident. However, R2 also put up a positive assertion that the deceased were employed by someone else. Each one of the six answers filed by R2 contained the following paragraph:-
“It is denied that the Deceased was employed by the 1^st Respondent at the time of the accident. The 2^nd Respondent avers that the Deceased was employed by the Maritime Agency Primtanco at the material time.”
(Emphasis supplied)
(ix)    On the same day as they filed their answers, the then solicitors of R2/Ming An wrote a reply letter to R1’s solicitors saying that they were not in a position to comments on R1’s draft answers. Moreover, it was said in that letter that:-
“Nonetheless, we would like to take this opportunity to inform you of the position we are taking in the above EC applications.
We attached herewith six Answers to be filed by us on behalf of the 2^nd Respondent for your attention. You will note that we have not admitted the employment relationship of the six deceased seafarers with you. We have also made no admission towards the 1^st and 2^nd Respondents’ respective capacities as the sub-contractor and principal contractor.
Although we deny your client’s entitlement for a complete indemnity from our client in respect of the above Applicants’ claim, we write to put on record that in the event you do successfully establish your entitlement to an indemnity from our client, please take note we will take issue with any admission you make at this stage without our approval. We therefore expect the Answer you file on behalf of your client will not be inconsistent with our understanding of the legal position between your client and ours.”
(Emphasis supplied)
It can be seen that the above passages were in almost identical terms to those contained in their previous letter dated 13 May 2004.
(x)    On 3 June 2004, R1 filed their answers in respect of all the eight applications. It is noted that R1 religiously followed the line of defence taken by R2. In respect of each of the employees, there was only an admission about the injury leading to death by accident. There was no admission about the employment. In the case of the six Russian deceased, just like R2, R1 also averred that the Russians were employed not by R1 but by the Maritime Agency Primtanco at the material time.
(xi)    On 25 April 2006, R2 filed for the purpose of the ECC statements of Ms Shirley Leung who was one of their directors. There was one statement for each of the applications. For the deceased Tso Pak Kuen, Ms Leung said,
“Mr. Tso Pak Kuen, deceased recruited as a fitter by the 1^st Respondent was deployed to work on board the “A. M. Vella” …”
As regards the deceased Chan Shing Tong, Ms Leung said,
“Mr Chan Shing Tong, deceased was thereby recruited as a Captain by the 1^st Respondent to work on board the “A.M. Vela” …”
As regards the six Russian deceased, Ms Leung’s statements were all similarly worded and contained the following paragraphs:
“4. Since about 1^st November 1997, the 1^st Respondent had appointed Maritime Agency Primtanco to recruit the crew in Russia from time to time to fill in vacancies of various posts for “A.M. Vella” and other vessels of the 1^st Respondent. The update or current Crew Management Contract was signed between the 1^st Respondent (as manager stated therein) and Maritime Agency Primatanco as (manning agency) on 1^st November 2001, In the Crew Management Contract, the word “seafarers” meant the Russian crew.
5. According to Clause 6.1 of the Crew Management Contract, “the seafarers wages, which are shown in the appendix will be account for the master every month and paid to the seafarers direct.
……….
7. On [date], the [Name], deceased (hereinafter referred to as “the Deceased”) signed the Agreement of Employment and agreed to be bound by the Crew Management Contract.
8. Since then, the Deceased commenced work on board “A.M. Vella” for the 1^st Respondent. “A.M. Vella” worked in Taiwan for another project of the 1^st Respondent before she proceeded to Hong Kong in December 2001. He wages of all the Russian crew of “A.M. Vella” were at that time paid by Quantum Offshore & Costal Engineering Company Ltd. (hereinafter referred to as “Quantum”), commercial representative of the 1^st Respondent in Taiwan, for and on behalf of the 1^st Respondent. Thereafter the 1^st Respondent reimbursed Quantum for the paid wages.
……….
10. Since “A.M. Vella” arrived Hong Kong in or about December 2001, the 1^st Respondent had paid the wages to the Russian crew including the Deceased directly in cash.”

Consideration

16. Mr Lin referred the Court to the terms of the Ming An Policy and took the point that, as Ming An had not taken up the defence of R1, there was nothing in that policy which would have prevented R1 from making admissions in the ECC. Mr Kwok did not gainsay this. However, Mr Kwok submitted that the two letters from the then solicitors of R2/Ming An dated 13 May 2004 and 2 June 2004, both of them written before R1 filed their answers, had changed the legal landscape.

17. In my judgment, the course of events and what was said in the aforesaid two letters had significantly reduced the relevancy of the Ming An Policy. My reasons are as follows:-

(a) R2/Ming An had been reluctant to provide a copy of the Ming An Policy to R1. A copy was eventually provided only pursuant to a court order demanding disclosure made on 22 September 2004. By the time, R1 had already filed their answers;
(b) it is clear from the correspondence that R1 had been anxious to preserve their position vis-a-vis Ming An. That was the reason why R1’s solicitors had been copying their draft answers to R2/Ming An and kept the latter informed of the progress of the case. R1’s solicitors only ceased copying documents as a result of the protest of the then solicitors of R2/Ming An made in the letter dated 7 March 2006; and
(c) despite the fact that there was nothing in the Ming An Policy which would have prohibited R1 from making admissions, in the aforesaid two letters R1 was warned by the then solicitors of R2/Ming An about making admissions “without our approval”. It was also said by the then solicitors of R2/Ming An that “we therefore expect the Answer you file on behalf of your client will not be inconsistent with our understanding of the legal position between your client and ours.” Upon an objective and reasonable reading of the letter, the underlying meaning of this sentence was obvious, namely that R1 would risk losing their indemnity from Ming An, even if their entitlement to indemnity could be established, if R1 adopted an inconsistent approach in their defence.

Therefore, it was not the case, as Mr Lin seems to suggest, that R1 could have made whatever admissions they liked without affecting their prospect of obtaining indemnity from Ming An. The aforesaid two letters plainly suggested the contrary.

18. Mr Lin submitted that for the present purpose there was a distinction between Ming An and R2. It is submitted that the Court should be looking at the conduct of R2, which is a party before the Court, rather than Ming An, which is not.

19. With respect, I am unable to accept this submission. In my judgment, for present purpose no realistic distinction could be made between R2 and Ming An. Even assuming that R2 should not be equated with Ming An, it is not open to R2 to say, as a matter of both fact and law, that what the then solicitors did in relation to the ECC was not also done on R2’s behalf and with R2’s authority. In the present context, one is mainly concerned with the conduct of the parties through the agency of their legal representatives. As regards the two aforesaid letters, whilst it was not stated explicitly on whose behalf they were written, it is clear that its author was writing in the duo capacity as the legal representative of both R1 and Ming An:-

(a) Ming An had taken over the defence of R2 since 8 April 2004 at the latest so that in reality Ming An was conducting the defence in R2’s name.[9] Even though Ming An may have funded the defence, the solicitors also acted for R2 in the ECC;
(b) the author of the letters referred to the Answers which were “to be filed by us on behalf of the 2^nd Respondent”; and
(c) the author also referred to the event that R1 was able to establish their entitlement to “the indemnity from our client”, which could only be a reference to the Ming An Policy.

20. On the basis that what the then solicitors of R2/Ming An did was done on behalf of and with the authority of R2 (and Mr Lin did not suggest the contrary), the question then is whether there were any special or unusual features in the present case which justify indemnity costs being awarded against R2. In my judgment, the answer is in the affirmative. My reasons are as follows:-

(a) On 13 May 2004, when the then solicitors of R2/Ming An copied to R1’s solicitors R2’s answers to the applications of the two local employees, R1’s solicitors were not invited to comments on those answers. It was simply said that the answers that were “to be filed by us on half of the 2^nd Respondent”. The answers were in fact filed on the same day and therefore R1 had virtually been given no time to respond. After that, despite what was said by R1’s solicitors in their letter dated 15 May 2004, R2/Ming An did not see fit to amend their answers. The clear message from R2/Ming An to R1, objectively and reasonably inferred, was that R2/Ming An would make no admissions even though they had been told that there was not a defence case.
(b) What R2/Ming An said in their answers to the applications of the six deceased is telling. Firstly, they had already been told by R1 that the six deceased were R1’s employees. Secondly, the positive case (that the Russians were employed by someone else) did not appear in any of R1’s draft answers provided to R2/Ming An for comments. Thirdly, the positive case was formulated without R1 being consulted. Fourthly, the positive case, even if sustainable, should have been run by R1 (who would have known better) rather than R2. Fifthly, even though R2/Ming An knew that R1’s original case was merely one of non-admission, yet R2/Ming An decided to go ahead and file their answers as they were.
(c) On balance of probabilities, I infer that the purpose of R2/Ming An was to influence R1 in their defence. This is on the basis of the following acts done on behalf of R2/Ming An through their then solicitors: (i) providing R1 with copies of R2’s answers which were said “to be filed”; (ii) warning R1 repeatedly not to make any admissions “without our approval”; (iii) saying that they “therefore expect” R1 not to file an inconsistent answer; (iv) filing their answers before R1 did which contained an argument which, even if sustainable, should have been run by R1 instead.
(d) On balance of probabilities, I find as a fact that R1’s conduct of the defence in the ECC had in fact been influenced by the aforesaid two letters and the answers filed by R2/Ming An in that R1 was forced to defend the ECC when they would have done otherwise.
(e) I do not accept the argument that R1 could have conceded liability in the ECC. That was not a realistic option open to R1. From R1’s perspective, they risked their potential indemnity claim against Ming An if they did so, as they had already been told the stance of R2 and warned that any admission made without approval would be taken issue with. This is especially so when the warning was repeated even after R1 had informed that there was in fact no issue of the employer-employee relationship or other conditions of compensation.

(f) Despite the answers filed by R1, I note that Ms Leung said that the two local employees were “recruited” by R1. I note also that her statements contained no representations that the Russians were not employed by R1 but by Maritime Agency Primtanco at the material time. R1 had eventually not adduced any evidence to support the positive case at the trial. I also remind myself that the Court is dealing with the matter of costs between the two respondents, not those between the applicants and the respondents.
(g) Given that R2 had also instructed solicitors and counsel to attend the trial of the ECC and to make an application for indemnity under the Ordinance, it is only fair that R1 should also engage solicitors and solicitors to attend the ECC in order to protect their interest.

V. CONCLUSION

21. In all the circumstances, I am satisfied that the conduct of R2/Ming An in the present case constitutes a special or unusual feature so that it is appropriate for the court to exercise its discretion to award indemnity costs to R1: (i) in defending the eight ECC and (ii) in opposing the s 24 indemnity application (including the costs in the two summonses filed on 6 and 25 June 2007 respectively in relation to the indemnity application as ordered by the learned judge on 6 August 2007), with certificate for counsel. I so order.

22. I also make an order nisi that the costs of R1 in the present application be paid by R2, to be taxed if not agreed, with certificate for counsel, on party and party basis.

	( Alex Lee )
	District Judge

Mr Tim Kwok instructed by Christine FL Ip & Young, for the 1^st respondent in DCEC 153-154/2004 & DCEC 241-246/2004

Mr Kenny CP Lin instructed by Munros, for the 2^nd respondent in DCEC 153-154/2004 & DCEC 241-246/2004

[1] HCA 2393/2007

[2] By way of a consent order dated 3 November 2012

[3] See the letter from the then solicitors acting for R2/Ming An dated 8 April 2004

[4] See the letter from the solicitors for R2/Ming An dated 22 September 2004

[5] DCEC 153/2004 & DCEC 154/2004

[6] See the letters from the solicitors of R2/Ming An dated 13 May 2004

[7] See, eg, letter from R1’s solicitors to the solicitors of R2/Ming An dated 15 May 2004

[8] DCEC 241-246/2004

[9] See the letter from Messrs DLA to the solicitors acting for the applicants dated 8 April 2004 in which it was said, “We are instructed to act for the 2^nd respondent [Zen Pacific] upon the instructions of our client, [Ming An] in respect of all the above proceedings.”

DCEC 153-4 & 241-6/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 153 OF 2004

_______________

IN THE MATTER OF AN APPLICATION BETWEEN

	LI YUEN YAU acting for herself and other members of the family, namely, TSO HON YING and TSO CHING YI, of TSO PAK KUEN, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 154 OF 2004

_______________

IN THE MATTER OF AN APPLICATION BETWEEN

	LEE CHIU LAN acting for herself and other members of the family, namely, CHAN LORRAINE, CHAN KING FAI, CHAN WAI YING, of CHAN SHING TONG, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 241 OF 2004

_______________

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of IGNATOVA LYUDMILA MIKHALOVNA acting herself and other members of the family of IGNATOV ALEKSANDR GRIGOREVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 242 OF 2004

_______________

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of MIKHAYLISHINA OLESYA IGOREVNA acting herself and other members of the family of MIKHAYLISHIN ANATOLIY BOGDANOVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 243 OF 2004

_______________

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of SHERSTYUK IRINA SERGEEVNA acting herself and other members of the family of SHERSTYUK PAVEL YURIVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 244 OF 2004

_______________

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of STEPANOVA VALENTINA KONSTANTINOVNA acting herself and other members of the family of KUZNETSOV YURIY ANATOLEVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 245 OF 2004

_______________

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of POZDNYAK OLGA LVOVNA acting herself and other members of the family of POZDNYAK NIKOLAY IVANOVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 246 OF 2004

_______________

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of TROFIMOVA OKSANA VLADIMIROVNA acting herself and other members of the family of TROFIMOV GERMAN EVGENEVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

________________

Coram: Deputy District Judge A. Kwok in Chambers

Date of Hearing: 27 June 2007

Date of Delivery of Judgment: 6 August 2007

DECISION

Background

1. Following a hearing on the assessment of the applications of compensation by the above 8 Applicants against the 1^st and 2^nd Respondents (respectively as “R1” and “R2”) under the Employment Compensation Ordinance, Cap.282. (“the Ordinance”), I made an order dated 20 March 2007 in favour of all the Applicants and granted their applications for the statutory awards with interest and costs. The Applicants herein are the widows or the lawful attorneys of the widows and/or family members of those 8 Deceased Persons who were members of the crew on board a Dredger which collided with a container ship during an accident in Hong Kong waters on 12March, 2002. All the 8 Deceased Persons were killed in the accident and they were all, as I found, crew members or employees employed by R1 to work on board the Dredger. The clear and unequivocal evidence as I found was that at all material times, R1 was the direct employer of those 8 Deceased Persons and also the sub-contractor to the principal contractor, namely R2.

2. Under s. 24 of the Ordinance, R2 (as principal contractor) is also liable to pay the same compensation to the Deceased Persons as employees or their family members as in fatal cases as if R2 were the direct employer of 8 Deceased Persons.

3. At the close of submission in the hearing, Mr. Lin, counsel for R2 orally informed this court that it was the intention of R2 to claim an indemnity against R1 for the claims by the Applicants under s.24 (2) of the Ordinance in the event that judgments were entered in favour of the Applicants. Indeed, Mr. Lin have developed his arguments citing statues and authorities in support thereof. Mr. Kwok, counsel for R1 however opposed the application and said he was not prepared to argue the point at the time and he sought to have this argument adjourned until the judgment on liability and quantum of the compensation was handed down by the court. In the end, I acceded to Mr. Kwok’s request and I allowed his application and made an order that the arguments shall be revisited by both parties once the judgment was handed down and as soon as counsels could be heard. As this is a matter between the two Respondents alone and does not concern the Applicants, on the application of the counsel for the Applicants, I excused his attendance from the ensuing arguments.

4. Before the parties came back for further submissions on 27 June, 2007, R1 took out 2 Sumonses. The first Summons, filed on 11 June, 2007, asked for a stay of the indemnity under s.24 of the Ordinance to be made by the court whereas the second Summons, filed on 25 June, 2007, only one clear day before the hearing, asked for a stay of R2’s application for indemnity. Despite the fact that there was before me 2 Summonses, Mr. Kwok had made it clear in his submission that the evidence and arguments was the same for both summonses.

R2’s claim for s. 24 Indemnity

5. In support of the application for indemnity, Mr. Lin relied on Hip Hing Construction Co Ltd v. Wong Leung Tak & Anor [1990] 2 HKC 119 which held that an employee was given an additional remedy under s. 24 of the Ordinance which did not restrict his remedy under s. 5 and the combined effect of ss. 5 and 24 was that both the employer and the principal contractor were severally liable to pay compensation to the employee for the same injury. Under s. 24(2), however, the principal contractor is given the right to be indemnified by the employer. The case further held that the principal contractor’s entitlement to indemnity from the employer under s. 24(2) of the Ordinance was unqualified and not defeasible by any defence of negligence or breach of statutory duty by the principle contractor. The Court of Appeal held also that the principal contractor was entitled to an order for indemnity even though it was an oral, rather than written, application.

6. Although in Hip Hing Construction Co Ltd (supra.), the Court of Appeal first held that in the absence of an express provision in s 24 and any English authority, the principal contractors could not claim costs incurred in the compensation proceedings as part of his indemnity, later in Mak Wing Fai v. Chevalier (HK) Ltd [1999] 3 HKC 677, the Court of Appeal has apparently reconsidered the point and finally held that the principal contractor, if sued, can recover under s. 24(2) not only the compensation he pays to the applicant but also his costs. R1 did not take issue over the conflicting decisions on whether the indemnity also covers costs and I accept Mr. Lin’s submission that the right of indemnity under s. 24(2) of the Ordinance extends to the costs incurred by the principal contractor in the compensation proceedings.

7. Based on the above authorities, Mr. Lin submitted that under s. 24(2) of the Ordinance, R2 has an indefeasible entitlement to a full indemnity from R1 and thus is entitled to an order for full indemnity. In reply, Mr. Kwok did not seek to argue against the weight of the authorities. Rather, he focused on the grounds for stay applications which he said were justified in the circumstances. To these grounds I shall later refer in due course. In the meantime, I have no difficulty to hold that R2 is entitled to claim for full indemnity under s 24(2) in the present proceedings.

Stay of Execution

8. On behalf of R1, Mr. Kwok prefaced his submission by pointing out that this court, like High Court, has jurisdiction to stay proceedings and the execution of a judgment and order. The order is made generally in the exercise of the court’s discretionary inherent jurisdiction. In reply, Mr. Lin said he was prepared to assume (but without conceding) that the court retains an inherent jurisdiction, in suitable cases, to make orders staying executions. In the course of the arguments, I was also referred to by both parties to a number of District Court decisions where clearly indicated that there were instances where the court has in the past exercised its inherent jurisdiction in granting or refusing to stay the execution of a judgment and order. I therefore decided to approach the question of stay on the basis that this court has the requisite inherent jurisdiction.

9. In Credit Lyonnais v SK Global Hong Kong Ltd. (CACV 167/2003) Ma CJHC held that:

“…the court retains an inherent jurisdiction, in suitable cases, to make orders staying executions quite apart from those situations expressly permitted under the Rules of the High Court…By the term “suitable cases” are meant those situations in which the inherent jurisdiction of the court is required to be exercised so as to avoid injustice, prevent abuse, preserve the dignity of the court or to facilitate the administration of justice.”

9. The question still remains whether R1 can successfully argue that this is one of those suitable cases. In Credit Lyonnais (supra.), Ma CJHC also pointed out that the existence of an inherent jurisdiction to stay execution must not be confused with the exercise of it. The starting point is that normally the successful party should be able to take all legitimate measures to enforce that judgment and it is only in exceptionally circumstances when the court would deprive a successful party of the fruits of the judgment he has obtained except on good grounds being shown. It follows that the discretion to stay ought to be exercised sparingly.

10. It is R1’s case that R2 entered into a contract for dredging work with Hong Kong International Terminal Ltd (“HIT”) in 2001 and through its sister company Leader Marine Contractors Ltd (“Leader Marine”), R2 then subcontracted the dredging work wholly to R1. Under the Main Contract with HIT, R2 had to procure insurance for the purpose of the Ordinance as specified in the Special Conditions of Contract Clause 13 in the joint names of HIT, R2 and all of its Sub-Contractors i.e. including R1 whereas under the Sub-Contract, R1 had to procure its own marine insurance in the joint names of HIT, R2 and itself against all risk of loss and damage, together with protection and indemnity liabilities including, among other items, personal injury and loss of life in respect of marine vessels operated during the Sub-Contract works. As a result, R2 had procured employees’ compensation insurance policy from the Ming An Insurance Company (Hong Kong) Ltd (“Ming An” policy) and R1 had procured Marine Hull Policy from Ming An and Protection and Indemnity Insurance from Shipowners Mutual Protection and Indemnity Association(“SOP” policy).

11. After the accident, there has been a series of correspondence between R1 and its solicitors, R2, Ming An’s solicitors and SOP’s solicitors. I do not need to go into the details suffice it to say that Ming An relied on an “other insurance” clause and informed R1 that they should go to claim SOP instead and would take over conduct of defence on behalf of R2 only. On the other hand, SOP’s solicitors takes the view that the SOP policy does not cover the statutory liability under the Ordinance but common law liability in respect of the vessel insured. The reality is R1 is at the moment left without any cover under both policies as a named insured after judgment was entered against it.

13. As can be seen from the arguments between the two insurers, R1’s claim against Ming An is hotly disputed. The question of liability of Ming An towards R1 revolves around the final and proper interpretation of the “other insurance” clause under its policy and the ambit of the coverage under the SOP policy which is certainly not the function of this court and which is certainly difficult to assess or even predict without the benefit of hearing the full arguments. Only one thing is certain: if SOP’s interpretation of the policy is held to be correct and its policy covers common law liabilities only, Ming An can no longer rely on the “other insurance” clause to refuse the claim by R1. In this connection, looking at the plain wordings of the SOP policy, it seems to be the case that the marine insurance only covers common law liabilities and not any statutory liabilities under the Ordinance. It states that cover, in relation to crew claims, extends to include common law crew claims. It specifically does not mention or refer to ant statutory liability or liability under the Ordinance. R1 thus appears to have, on the face of it, a claim of substance against Ming An for an indemnity against its liability in the present proceedings.

15. Circumstances to stay the execution of a judgment or order vary and are non-exhaustive but include the existence of cross claims between the parties. (see Credit Lyonnais (supra.) para. 5 of the Judgment)Mr. Lin contended that Ming An is not a party to this action. It would not be a correct exercise of discretion to take into account a potential claim by R1 against a non-party at the expense of the judgment creditor. However, as Mr. Kwok rightly pointed out, in the present proceedings, Ming An have already taken over the conduct of proceedings on behalf of R2 under the terms of the Ming An policy. The s. 24 indemnity to R2 is in effect an indemnity to Ming An. Based on the special relations between R2 and Ming An, I hold that Ming An is not a non-party as such but is, for all intent and purposes, a de facto party of the proceedings.

12. The decision in Canada Enterprises v. MacNab Ltd. [1976] 1 WLR 813 is the authority that the court could exercise its power to stay on proof of a relationship between parties. In another case Orri v. Moundreas, [1981] Com LR 168, an unreported decision of Mustill J. from the Queen’s Bench Division (Commercial Court), it was held that there can be cases where the court will look behind the corporate structure, piercing the corporate veil as it were, at one or both parties to find the person truly at interest, and then exercise its power to grant a stay, as the justice of their mutual relations may demand. (also cited with approval in Credit Lyonnais (supra.) per Ma CJHC at para. 5(2) of the Judgment)

13. In Burnet v. Francis Industries Plc [1987] 1 WLR 802 (a case dealing with the UK equivalent RHC O.47, r.1), Bingham LJ spoke of a number of factors that the court has to take into account in deciding whether the special circumstances do exist in order to stay execution.

“The present situation may be described schematically this way. A sues B and obtain judgment. B is associated with C. C has an unresolved claim against A. B seeks a stay of execution of A’s judgment to await the outcome of C’s claim against A.

…

First, it is relevant to consider the nature of A’s claim….

Second, it is relevant to consider the extent of the identity between C and B.

The more closely they are identified, the more like a true counterclaim C’s independent claim against A becomes.

Third, it is relevant to consider the interrelationship of the respective claims by A against B and by C against A, for the same reason.

Fourth, it is relevant to consider the strength of C’s claim. The more obvious it appears that A will have to pay C eventually, the less likely it is that he will be prejudiced by a denial of the fruits of his judgment against B in the short term.

Fifth, it is relevant to consider the size of C’s claim relative to A’s…

Sixth, it is relevant to consider the likely delay before the merits of C’s claim against A will be the subject of adjudication.

Seventh ( and including various factors that I have already mentioned), it is relevant to consider the extent of prejudice to A if he is denied the fruit of his judgment until C’s claim is determined.

Lastly, it is relevant to consider the risk of prejudice to C if B makes payment to A under the judgment. That will be particularly relevant if it is shown that there is a risk of the fruits of the judgment being removed from the jurisdiction, or dissipated within the jurisdiction. It is of obvious relevance if A is a British resident with ample means to satisfy any judgment C may recover against him. …”

14. Although in this case, the parties are not schematically the same as described in the above analysis, the principles which are fallen to be applied are highly relevant for my consideration. When I come to review the factors that have been mentioned in the context of this case, I am of the view that they are mostly resolved in favour of granting the stay of execution. I have already expressed my view over the strength of R1’s claim against the insurer, Ming An. It is common ground that Ming An was behind R2 and in effect had the conduct of proceedings. The kind of close and special relationship between R2 and Ming An in this case has rendered the separate and independent claim by R1 against Ming An more like a counterclaim scenario between the same parties in an action. The size of R1’s claim would be exactly the same as the indemnity ordered in this case (excluding costs and interest).

15. On the other hand, I agree with Mr. Lin that the risk of prejudice to R1 is relatively small if it were to indemnify R2 or for that matter, Ming An, first under the judgment. Ming An is a large insurance company with ample means and there is simply no basis to suggest that the fruits of the judgment would be removed out of the jurisdiction or dissipated within the jurisdiction. On the contrary, Mr. Lin criticized R1 for failing to show any evidence of any financial hardship that would be caused to their business if the application to stay were to be refused.

16. As I understand from the affirmation of Shirley Leung, the director of R1, filed on 4 June, 2007, the prejudice to R1 is not financial. She believed that the s. 24 indemnity is not in truth an indemnity to R2 but rather it is a premature benefit to Ming An which must in effect be offset by the R1’s claims for indemnity for employee’s compensation and common law liability.

17. There is no prejudice to R2, one way or another. In my judgment, applying all the factors into consideration, I am of the view that this is one of those exceptional cases where it is just and convenient to stay the execution of the s. 24 indemnity in the circumstances.

18. By reason of this decision, I do not think its is necessary for me to go further and deal with the another Summons for stay of application for s. 24 indemnity. R2 to be indemnified by R1 for all the compensations paid to any Applicant pursuant to the order dated 20 March, 2007;

Order

19. In summary,

(1) R2 to be fully indemnified by R1 for all the compensations paid to any Applicant together with all the costs and interests incurred pursuant to the order dated 20 March, 2007;

(2) R1 do file a claim against Ming An under the contract of employees’ compensation insurance within 42 days;

(3) the indemnity order in paragraph 22(1) hereinabove be stayed until determination of the pending claim or further order and R1 do pay interest for the amount to be indemnified at half judgment rate until determination of the pending claim or payment in full as the case may be;

(4) Costs to R1 for the hearing of both Summonses on 27 June, 2007 with certificate to counsel, to be taxed, if not agreed.

(Signed)
Anthony Kwok
Deputy District Judge

Representation:

Mr. Tim Kwok instructed by Messrs. Christine F.L. Ip & Young for R1

Mr. Kenny Lin instructed by Messrs. Dibb Lupton Alsop for R2

DCEC 153-4 & 241-6/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 153 OF 2004

______________________

IN THE MATTER OF AN APPLICATION BETWEEN

	LI YUEN YAU acting for herself and other members of the family, namely,TSO HON YING and TSO CHING YI, ofTSO PAK KUEN, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

______________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 154 OF 2004

______________________

IN THE MATTER OF AN APPLICATION BETWEEN

	LEE CHIU LAN acting for herself and other members of the family, namely,CHAN LORRAINE, CHAN KING FAICHAN WAI YING, of CHAN SHING TONG,deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

______________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 241 OF 2004

______________________

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of IGNATOVA LYUDMILA MIKHALOVNAacting herself and other members of the family ofIGNATOV ALEKSANDR GRIGOREVICH,deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

______________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 242 OF 2004

______________________

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of MIKHAYLISHINA OLESYA IGOREVNAacting herself and other members of the family ofMIKHAYLISHIN ANATOLIY BOGDANOVICH,deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

______________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 243 OF 2004

______________________

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of SHERSTYUK IRINA SERGEEVNA acting herself and other members of the family of SHERSTYUK PAVEL YURIVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

______________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 244 OF 2004

______________________

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of STEPANOVA VALENTINA KONSTANTINOVNA acting herself and other members of the family of KUZNETSOV YURIY ANATOLEVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

______________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 245 OF 2004

______________________

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of POZDNYAK OLGA LVOVNAacting herself and other members of the family ofPOZDNYAK NIKOLAY IVANOVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

______________________

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 246 OF 2004

______________________

IN THE MATTER OF AN APPLICATION BETWEEN

	TING KAM YUEN, the lawful attorney of TROFIMOVA OKSANA VLADIMIROVNA acting herself and other members of the family of TROFIMOV GERMAN EVGENEVICH, deceased	Applicant
	and
	VIATECH ENGINEERING LIMITED	1^st Respondent
	ZEN PACIFIC CIVIL CONTRACTORS LIMITED	2^nd Respondent

______________________

Coram : Deputy District Judge Anthony Kwok in Court

Date of Hearing : 19 January 2007

Date of Delivery of Judgment : 20 March 2007

______________________

J U D G M E N T

______________________

1. This is an assessment of compensation under the Employment Compensation Ordinance Cap.282. (“the Ordinance”) The applicants are the widows or the lawful attorneys of the widows and/or family members of 8 Deceased Persons who were members of the crew on board a Dredger which collided with an container ship in Hong Kong waters on 12March, 2002. The Dredger eventually capsized and sank and all the 8 Deceased Persons were killed during the accident. (“the Accident”)

2. According to the applicants’ cases, all the 8 Deceased Persons were crew members or employees employed by the 1^st Respondent to work on board the Dredger. They were killed in the Accident which was arising out of and in the course of their employment. At all material times, the 1^st Respondent was a sub-contractor within the meaning of the Ordinance to a principal contractor within the meaning of the Ordinance namely the 2^nd Respondent.

3. In its Answers to the Applications, the 1^st Respondent denies or does not admit that it was the employer of the 1^st to 8^th Deceased. The relationship between the 1^st Respondent (as sub-contractor) and the 2^nd Respondent (as principal contractor) is also not admitted on pleadings by both Respondents.

4. In view of the above, it was naturally anticipated that there would be serious and vigorous arguments proffered by both Respondents on the issue of liability in the hearing. It turned out however that both Respondents were only running no more than what could be described at best a “negative” defence. There was effectively no cross-examination at all of any of the witness called by the Applicants in the trial; there was not a shred of evidence adduced by either of the Respondent during the trial in order to seek to challenge, undermine or at least explain the evidence of the Applicants. In the face of the overwhelming evidence tendered by the Applicants, counsels for both Respondents simply did not make any submission or take issue on any of the matters which have been so carefully canvassed by the detailed submission made by Mr. Raymond Leung, counsel on behalf of all the Applicants, both on the issue of liability as well as quantum.

5. My task in determining this case which involves all the 8 Applicants has thus been rendered relatively straightforward as a result. In an effectively uncontested case such as the present, it is convenient to reproduce in this judgment, the carefully prepared submission of the Applicants which encapsulated the background of the Applications, the Accident, the relevant statutory provisions as well as the legal and factual issues on Liability whenever its appropriate.

6. Mr. Leung prefaced his submission by introducing the background of the present claims:

“ Background
1. The 8 Deceased Persons were members of the crew on board a ship (A.M. Vella), which was a Trailer Suction Hopper Dredger (the “Dredger”). It was designed to suck up mud and/or sediments from seabed and to convey the same to a disposal site.
2. The Dredger was licensed as a local vessel by the Director of Marine (Licence No. M21684Y) [CB/1].
3. All 8 Deceased Persons were employees of R1. They were deployed to work on the Dredger. Only Tso Pak Kun and Chan Shing Tong are local Chinese.
4. The remaining 6 Deceased Persons were from Russia. They were working on the Dredger under work permits granted by the Immigration Department. The visa applications were supported by R1 as their employers.
5. In the evening on 12.3.2002, a collision occurred at Ma Wan Channels (within Hong Kong waters) between the Dredger and an inbound container ship “M.V. Kota Hadiah”.
6. As a result, the Dredger capsized and sank and the 8 Deceased Persons were killed.”

7. The evidence of the deaths of the 8 Deceased Persons during the accident were succinctly summarized and set out in Mr. Leung’s submission. Each Deceased Person was described according to his post in the Dredger. The events of the discovery and retrieval of the dead bodies or human remains by the police and the subsequent identification by the Project Manager of the 1^st Respondent or DNA analysis by the Government Chemist were established which clearly proved the deaths of the 8 Deceased Persons.

“ 11. The deaths were fully investigated by police and the salient facts are contained in the Death Report submitted to the Coroner [CB/60].
(a) The dead body of IGNATOV (Electrical Engineer, the 1^st Deceased) was retrieved by SPC 16668 off northwest of Brothers Island at 8:35 a.m. on 13.3.2002 [Witness 20 CB/71]. It was identified by Leung Chi Chung (Project Manager of R1) on the same day (see Witness 32 at [CB/74]; Police Statement of Leung at [CB/3] and Death Certificate [Q1-DCEC241/76]).
(b) The dead body of KUZNETSOV (Master, the 2^nd Deceased) was retrieved by PC 33442 at Northwest of Siu Mo To (one of the Brother Islands) at 9:45 a.m. on 17.3.2002 [Witness 24 at CB/72] and identified by Leung on the following day (see Witness 32 at [CB/74] and Police Statement of Leung [CB/8] and Death Certificate [Q2-DCEC244/68].
(c) The dead body of SHERSTYUK (3^rd Officer, the 3^rd Deceased) was retrieved by SPC 14006 at 8:01 a.m. on 17.3.2002 in the vicinity of Siu Mo To [Witness 25 at [CB/72] and identified by Leung on the following day (see Witness 32 at [CB/74], Police Statement of Leung [CB/8] and Death Certificate [Q2-243/61A].
(d) The dead body of MIKHALISHIN (2^nd Engineer, the 4^th Deceased) was retrieved from water under the Tsing Ma Bridge by SPC 13767 at 9:35 a.m. on 19.3.2002 [Witness 30 at CB/73] and was identified on the same day by Leung (see Police Statement of Leung [CB/9] and Death Certificate [Q1-242/79]).
(e) The badly decomposed and headless body of POZNYAK (2nd Officer, the 5^th Deceased) was retrieved from the sea (at Marine Police Operational Chart Box 1504A at Kau Yi Chau) by Station Sergeant Lui at 5;45 p.m. on [2]8.6.2002. i.e. 3 months after the accident (see Witness 34 at [CB/75] and Pol 155 compiled by DSPC 10637 [CB/40]). The dead body was beyond recognition but the identity was established subsequently by DNA evidence (see Summary at [CB/62] and Death Certificate at [Q2-DCEC245/67]).
12. In due course, the wreckage of the Dredger was salvaged from the seabed in or about February 2003. Some unidentifiable human remains and an unidentifiable and decomposed corpse were retrieved after inspection carried out in Hong Kong (see Witnesses 33 to 39 at [CB/74]).
13. The wreckage of the Dredger was then sent to Panyu (PRC) for ship breaking. The worker(s) discovered 2 skulls and some more human remains in the course of ship breaking work (Witness 40 40 at [C/76]).
14. The human remains and the unidentifiable corpses referred to in Paragraphs 12 and 13 were submitted to Government Chemist for DNA analysis.
(f) The unidentified human remains were confirmed to come from TROFIMOV (cook) and Tso Pak Kuen (fitter).
(g) The decomposed body referred to in Paragraph 14 above was confirmed to be that of Chan Shing Tong (Extra Master (local)).
15. Death Certificates have been issued (see Tso Pak Kuen [Q1-153/61]; Chan Shing Tong [Q1-154/36] and TROFIMOV [Q2-246/78]).

8. The contractual relationship between the 1^st Respondent as the subcontractor and the 2^nd Respondent as the principal contractor were analysed by Mr. Leung in his submission. Based on the internal as well as the external admissions made by both the Respondents in their contemporaneous correspondences with the Labour Department and between themselves and in the absence of any clarification or explanation by any of the Respondent, I accept Mr. Leung’s submission and find that their contractual relationship was clearly established. (see Applicants’ submission, para. 16-19)

“ 16. In about November 2001, R2 (as principal contractor) was engaged by Hong Kong International Terminal Limited to dredge the seabed at or near the container terminal 4 and 6 in Kwai Chung and deposit the dredged spoil at a marine deposit site off the Hong Kong International Airport in Lantau Island (the “Dredging Work”).
17. Neither R1 nor R2 has produced the principal contract and sub-contract(s) for the Dredging Work.
18. However, it appears that R2 sub-contracted the Dredging Work to one Leader Marine Contractors Ltd (“Leader”), which in turn sub-contracted the same work to R1
19. The relationship between R1 (as sub-contractor) and R2 (as principal contractor) is not admitted on pleadings. However, such relationship between them is beyond dispute and in fact has previously and repeatedly been admitted by R1 and R2.
(a) Admission made on the draft Form 2 under cover of R2’s letter to R1 dated 18.3.2002 [CB/102].
(b) R1 informed Labour Department on 19.3.2002 that R2 was principal contractor [CB/111];
(c) R2 wrote to Commissioner of Labour on 19.3.2002 admitting to be principal contractor appointed by Hong Kong International Terminal Limited [CB/113];
(d) R2 wrote to Labour Department on 25.3.2002 and referred to R1 as its sub-contractor [CB/116];
(e) Admissions made by R2 on Forms 2 (dated 22.4.2002) actually filed with Labour Department in respect of the 1^st to 4^th Deceased [CB/197-231].
(f) R1 wrote to R2 on 16.10.2002 enclosing Forms 2 (in draft) for all 8 Deceased Persons referring to R2 as the principal contractor [CB/137-185]
(g) The P&I Policy referred to R2 as main contractor [CB/191].
(h) R1 informed Labour Department on 1.11.2002 that
“The position of Zen Pacific as the principal contractor is beyond any reasonable doubt and so are their obligations and responsibilities” [CB/196]

9. As rightly pointed out in the submission, under s.24 of the Ordinance, the 2^nd Respondent (as principal contractor) is also liable to pay the same compensation to the Deceased Persons as employees or their family members as in fatal cases as if the 2^nd Respondent were the direct employer of 8 Deceased Persons.

10. Despite the denials by the 1^st Respondent as Employer of the 8 Deceased Persons in this trial, there were however contradictory evidence both in the forms of direct admissions by the 1^st Respondent in its dealings with the Labour Department after the Accident as well as its applications for work permit for the Russian Crew as their employer before the Accident. As said, the 1^st Respondent did not even attempt to deal with any of these evidence.

11. Suffice it for me to reproduce below the documentary evidence which have been relied upon and highlighted by Mr. Leung in his submission:

“ 21. R1 denies or does not admit that it was the employer of the 1^st to 8th Deceased. However, it is beyond any doubt that R1 was their employer.
22. There is no written contract between R1 and Tso Pak Kuen (8^th Deceased).
a. However, R1 paid his salary and filed Tax Return as employer of Tso Pak Kuen in 2001 [Q1-DCEC153/47] and 2002 [Q1- DCEC153/48].
b. In the letter dated 16.10.2002, R1 sent R2 draft Form 2 in respect of Tso Pak Kuen (then reported missing) admitting to be D1’s employer therein [CB/137 & 180]
23. There was no written contract between R1 and Chan Shing Tong (7^th Deceased).
a. However, R1 paid salary to Chan Sing Tong and filed Tax Return as employer of Chan Shing Tong [Q1-DCEC154/37];
b. In the letter dated 16.10.2002, R1 sent R2 draft Form 2 in respect of Tso Pak Kuen (then reported missing) admitting to be D1’s employer therein [CB/137 & 180].
24. In respect of the Russian Crew (1^st to 6^th Deceased), it is also beyond dispute that R1 was their employer.
a. R1 (through its agent in Russian (Primtanco) signed contract with each Russian crew.
IGNATOV (Electrical Engineer, 1^st Deceasd) [CB/204]
KNZNETSOV (2^nd Deceased, Master) [Q2-DCEC244/27]
SHERSTYUK (3^rd Deceased, 3^rd Engineer) [CB/222]
MIKHAYLISHIN (4^th Deceased, 2^nd Engineer) [CB/213]
POZDNYAK (2^nd Officer, 5^th Deceased) [Q2-DCEC245/47]
TROFIMOV (Cook, 6^th Deceased) [Q2-DCEC 246/39].
b. In a letter from R1 to R2 dated 16.4.2002, R1 admitted the employment relationship with each of the Russian crew and provided R2 with copies of their work permit.
c. More importantly R1 also said therein that “We [R1] have managed to obtain the employment contracts signed between the four deceased [i.e. 1^st to 4^th Deceased] and Primtanco (acting for and on our behalf) and forward herein as further and better particulars” [CB/129-130] .
d. R1 (as employer) obtained work permit for the Russian Crew and represented to the Immigration Department that it would be the employer of the Russian Crew [CB/95-100].
e. On the Application Form for work permits R1 signed as employer [Q1- DCEC241/35-41]; Q1-DCEC242/39-45; Q2-DCEC243/44; Q2-DCEC244/32-38; Q2-DCEC245/36-42; Q2-DCEC246/48-54].
f. R1 paid salary to the Russian Crew and remitted money direct to the family of each crew [CB/123-128].
g. R2 informed Labour Department on 25.3.2002 that R1 was the employees of all 15 crew members on board the Dredger [CB/116].
h. R2 again referred to R1 as the direct employer of the crew in a letter to Labour Department dated 7.5.2002 [CB/132].
i. R2’s solicitor (Dibb Lupton Alsop) repeated to Labour Department on 15.10.2002 that R1 was the direct employer of the missing seafarers (5^th to 8^th Deceased) [CB/135].
j. R1 prepared and sent R2 draft Forms 2 under cover of R1’s letter dated 16.10.2002. In the draft Forms 2, R1 admitted to be the employer of all 8 Deceased Persons. [CB/136-185].
k. R1 also provided R2 with the List of Earnings of each Deceased. [CB/196].

12. Despite the position maintained by the 1^st Respondent all along before the present applications, there has been a significant change of the stance adopted by both Respondents after the commencement of the pleadings as shown by the documents. Mr. Leung had endeavoured, in his submission, to provide an insight, if not a clear answer, to this paradox by drawing my attention to their correspondence over the matter.

“ 25. It is instructive to note that R1 only started to raise issue that it was the employer after a dispute had arisen as to the alleged failure of R2 (principal contractor) to procure insurance cover for Employees’ Compensation (see R1’s letter dated 23.10.2002 [CB/187] and dated 1.11.2002 [CB/196] to Labour Department).
26. It is also ironical that R1 wrote to R2 on 16.4.2002 [CB/130] in the following terms:
“We could indeed appreciate your carefulness in preparation for this claim case and would most certainly contribute as much as we can to assist you as far as this matter is concerned. Nonetheless, it is explicitly stated in the Seventh Schedule, Part II in the sub-contract for the dredging and disposal of sediment at Kwai Chung Container Port terminal 4/6, that the responsibility to provide Employees’ Compensation insurance rests with the Contractor, we fail to see any reason for your delay in initiating such a straight forward employees’ compensation claim”

13. Based on the above analysis, there is no doubt in my judgment that the 1^st Respondent was clearly the employer of all 8 Deceased Persons. I totally agree with Mr. Leung that the allegation in the Answers that the Russian Crew were employed by The Maritime Agency Primtanco (in Russian) is nothing but a bare assertion and was contradicted by the evidence.

14. As to the question of whether the Accident arose out of and in the course of employment, under s.5(4)(a) of the Ordinance,

“an accident arising in the course of an employee’s employment shall be deemed, in the absence of evidence to the contrary, also to have arisen out of that employment.”

15. Mr. Leung have identified the followings in support of his submission that all the Deceased Persons died in the course of employment:

“ 12. R1 provided lodging to all 8 Deceased Persons on the Dredger [CB/95].
13. The Deceased Persons were obliged to stay on board the Dredger, which operated round the clock.
14. In the premises, the 1^st to 8^th Deceased died in the course of employment whether or not each of them was actually on watch or on duty (see London and North Eastern Rly Co. –v- Brentnall [1933] AC 489).”

16. According to the undisputed evidence, it is clear that the 1^st to the 8^th Deceased died in the course of employment. By operation of the presumption in s.5(4)(a) of the Ordinance, the Accident arose out of the employment.

17. In this trial, the local Deceased Persons TSO Pak-kuen and CHAN Shing-tong were respectively acting by his widow, LI Yuen-yau (AW1) and LEE Chiu-lan (AW2) representing herself and the members of the family. In the case of the Russian Crew, their members of the families are acting by Mr. TING Kam-yuen (AW3), the Secretary of the Hong Kong Seaman Union. Mr. Ting has been authorized by Powers of Attorney and their claims are funded by Legal Aid. The three witnesses were called upon to testify and each adopted his/her statement(s) filed with the court. As said, none of them was subject to any cross-examination by the Respondents.

18. Mr. Leung has also relied on the following provisions and legal definitions in the Ordinance which are relevant for the purpose of the present claims: (para. 10)

(a) In a fatal case, the definition of “employee” is extended to include “a reference his legal person representative, or to members of his family or any of them” (s.2 of Cap. 282);
(b) “members of the family” is defined to include, inter alia, a spouse and cohabitee, a child, a parent or and grandparent of the deceased (s.2 of Cap. 282).
(c) The relevant parts of Section 5 of Cap. 232 provides that :
…….
(d) Section 29(1) of Cap. 282 provides that:
“This Ordinance shall apply to masters, and seafarers who are employees within the meaning of this Ordinance and are members of the crew of a Hong Kong ship. . “
“Hong Kong ship includes any ship or vessel registered or licensed in Hong Kong”.

19. The application of the Ordinance to the present cases which concern the family members of the crew members of a Dredger registered in Hong Kong is never an issue. Based on the above, I find that the liability of the 1^st Respondent as the employer and the 2^nd Resopnedent as the principal contractor to the 1^st Respondent has been firmly established.

20. Concerning the assessment of the quantum of the compensation, in fatal cases, under s.6 of the Ordinance where death results from injury, then, subject to section 6A regarding apportionment, the amount of compensation payable to the members of the family of the employee shall be as follows:

(i) In the case of an employee under 40 years of age at the time of accident – 86 months earnings ;
(ii) In the case of an employee over 40 years of age but under 56 at the time of the accident – 60 months’earnings;
(iii) In the case of an employee over 56 years of age at the time of the accident – 36 months earning.

21. Under s.11 of the Ordinance, the earning for computing the compensation is based on the earning of the previous month prior to the accident or the average earning of the previous 12 months (or shorter periods) during which the employee is employed by the employer, whichever is more favourable to the employee.

22. In all 8 cases, the claim is based on the earnings of the respective Deceased in February 2002. Accordingly, the award under s.6 (1) is as follows:

(a) TSO Pak- kuen(DCEC 153/2004) – Fitter (aged 36)
HK$14,000 x 36 months = HK$504,000.
(b) CHAN Shing-tong(DCEC 154/2004) – Extra Master (aged 60)
HK$21,000 (statutory maximum) x 36 months = HK$756,000.
(c) IGNATOV(DCEC 241/2004) – Electrical Engineer (aged 49)
US$1,330.38 x 60 months = US$79,822.80
(d) MIKHAYLISHIN(DCEC 242/2004) – 2^nd Engineer (aged 37)
US$1,848.71 x 84 months = US$155,291.64
(e) SHERSTYUK(DCEC 243/2004) – 3^rd Officer (aged 25)
US$1,848.71 x 84 months = US$155,291.64
(f) KNZNETSOV(DCEC 244/2004) – Master (aged 62)
US$2,302.93 x 36 months = US$82,905.48
(g) POZDNYAK (DCEC 245/2004) – 2^nd Officer (aged 30)
US$1,599.30 x 84 months = US$134,341.20
(h) TROFIMOV (DCEC 246/2004) – Cook (aged 36)
US$1,087.38 x 84 months = $91,339.92

23. The statutory maximum of $35,000 of funeral expenses under s. 6(5) is also claimed in the cases of the two local Deceased Persons. There shall be an additional award together with interest to their widows in the same amount under this head in those 2 cases. (DCEC 153-4/2004)

24. The apportionment of the amount of the compensation and interest shall be calculated in accordance with the relevant paragraph in the 7^th Schedule in the Ordinance in relation to the relationship of the family members and their ages at the trial. Regarding to the compensation and interest of the award under section 6(1), the apportionment in each case shall be as follows:

(a) TSO Pak- kuen(DCEC 153/2004) –
LI Yuen-yau (wife aged 43) 50%;
TSO Hon-ying (son aged 13) 50% x ½;
TSO Ching-yi(daughter aged 11) 50% x ½ ( para.5, Sch. 7)
(b) CHAN Shing-tong(DCEC 154/2004) –
LEE Chiu-lan (wife aged 56) 50%;
CHAN Lorraine (daughter aged 34) 50% x 1/3;
CHAN King-fai (son aged 31) 50% x 1/3;
CHAN Wai-ying (daughter aged 27) 50% x 1/3 (para. 5, Sch. 7)
(c) IGNATOV (DCEC 241/2004) –
IGNATOV Ludmila Mikhaylovna (wife aged 54) 50%;
IGNATOV Olga Alexandrovna (daughter aged 25) 45%;
KREKCHA Victoria Gennadyevna(stepdaughter aged 32) 5% (para. 10, Sch. 7)
(d) MIKHAYLISHIN(DCEC 242/2004) –
MIKHAYLISHINA Olesya Igorevna (wife aged 39) 50%;
MIKHAYLISHIN Denis Anatolevich (son 15) 45%;
PROPISNOV Roman Valerevich (stepson aged 20) 5% (para. 10, Sch. 7)
(e) SHERSTYUK (DCEC 243/2004) –
SHERSTYUK Irina Sergeevna (mother aged 51) 95% x ½;
SHERSTYUK Yury Pavlovich (father aged 52) 95% x ½;
SHERSTYUK Sergey Yurevich (brother aged 24) 5% (para. 14, Sch. 7)
(f) KNZNETSOV(DCEC 244/2004) –
STEPANOVA Valentina Konstantinovna (wife aged 58) 100% (para. 1, Sch. 7)
(g) POZDNYAK (DCEC 245/2004) –
POZDNYAK Olga Lvovna (wife aged 32) 50%;
POZDNYAK Nina Nikolayevna (daughter aged 13) 50% x ½ ;
POZDNYAK Svetlana Nikolayevna (daughter aged 12) 50% x ½ (para. 5, Sch. 7)
(h) TROFIMOV(DCEC 246/2004)
TROFIMOV Oksana Vladimirovna (wife aged 36) 50%;
TROFIMOV Dmitriy Germanovich (son aged 12) 50% x ½ ;
TROFIMOV Mikhail Germanovich (son aged 9) 50% x ½ (para. 5, Sch. 7)

25. The award in each case shall be with interest thereon at half judgment rate from the date of accident until date of award, and judgment rate thereafter until payment.

26. Costs to be to each of the Applicant with certificate to counsel, to be taxed, if not agreed. Applicants’ own costs to be taxed in accordance with Legal Aid Regulations.

27. After the closing submission, counsel for the 2^nd Respondent informed me that it was the intention of the 2^nd Respondent to claim an indemnity against the 1^st Respondent for the claims by the Applicants in this proceeding under s.24(2) of the Ordinance. Counsel for the 1^st Respondent however sought to have the argument adjourned until the judgment on liability and quantum of the compensation was handed down. In the end, by consent of both parties, I allow the application and I made an order that the matter shall be heard after the judgment and I anticipate that the hearing shall be re-convened as soon as counsel can be heard.

(Anthony Kwok)
Deputy District Judge

Representation:

Mr. Raymond Leung instructed by Messrs. Simon Si & Co (assigned by Legal Aid) for the Applicants

Mr. Tim Kwok and Mr. Matthew Tse instructed by Christine F. L. Ip & Young for the 1^st Respondent

Mr. Kenny Lin instructed by Messrs. Dibb Lupton Alsop for the 2^nd Respondent

TING KAM YUEN v. VIATECH ENGINEERING LTD AND ANOTHER

Related cases with same parties

Files (3)

“	Background
	1.	The 8 Deceased Persons were members of the crew on board a ship (A.M. Vella), which was a Trailer Suction Hopper Dredger (the “Dredger”). It was designed to suck up mud and/or sediments from seabed and to convey the same to a disposal site.
	2.	The Dredger was licensed as a local vessel by the Director of Marine (Licence No. M21684Y) [CB/1].
	3.	All 8 Deceased Persons were employees of R1. They were deployed to work on the Dredger. Only Tso Pak Kun and Chan Shing Tong are local Chinese.
	4.	The remaining 6 Deceased Persons were from Russia. They were working on the Dredger under work permits granted by the Immigration Department. The visa applications were supported by R1 as their employers.
	5.	In the evening on 12.3.2002, a collision occurred at Ma Wan Channels (within Hong Kong waters) between the Dredger and an inbound container ship “M.V. Kota Hadiah”.
	6.	As a result, the Dredger capsized and sank and the 8 Deceased Persons were killed.”

“	11.	The deaths were fully investigated by police and the salient facts are contained in the Death Report submitted to the Coroner [CB/60].
		(a)	The dead body of IGNATOV (Electrical Engineer, the 1^st Deceased) was retrieved by SPC 16668 off northwest of Brothers Island at 8:35 a.m. on 13.3.2002 [Witness 20 CB/71]. It was identified by Leung Chi Chung (Project Manager of R1) on the same day (see Witness 32 at [CB/74]; Police Statement of Leung at [CB/3] and Death Certificate [Q1-DCEC241/76]).
		(b)	The dead body of KUZNETSOV (Master, the 2^nd Deceased) was retrieved by PC 33442 at Northwest of Siu Mo To (one of the Brother Islands) at 9:45 a.m. on 17.3.2002 [Witness 24 at CB/72] and identified by Leung on the following day (see Witness 32 at [CB/74] and Police Statement of Leung [CB/8] and Death Certificate [Q2-DCEC244/68].
		(c)	The dead body of SHERSTYUK (3^rd Officer, the 3^rd Deceased) was retrieved by SPC 14006 at 8:01 a.m. on 17.3.2002 in the vicinity of Siu Mo To [Witness 25 at [CB/72] and identified by Leung on the following day (see Witness 32 at [CB/74], Police Statement of Leung [CB/8] and Death Certificate [Q2-243/61A].
		(d)	The dead body of MIKHALISHIN (2^nd Engineer, the 4^th Deceased) was retrieved from water under the Tsing Ma Bridge by SPC 13767 at 9:35 a.m. on 19.3.2002 [Witness 30 at CB/73] and was identified on the same day by Leung (see Police Statement of Leung [CB/9] and Death Certificate [Q1-242/79]).
		(e)	The badly decomposed and headless body of POZNYAK (2nd Officer, the 5^th Deceased) was retrieved from the sea (at Marine Police Operational Chart Box 1504A at Kau Yi Chau) by Station Sergeant Lui at 5;45 p.m. on [2]8.6.2002. i.e. 3 months after the accident (see Witness 34 at [CB/75] and Pol 155 compiled by DSPC 10637 [CB/40]). The dead body was beyond recognition but the identity was established subsequently by DNA evidence (see Summary at [CB/62] and Death Certificate at [Q2-DCEC245/67]).
	12.	In due course, the wreckage of the Dredger was salvaged from the seabed in or about February 2003. Some unidentifiable human remains and an unidentifiable and decomposed corpse were retrieved after inspection carried out in Hong Kong (see Witnesses 33 to 39 at [CB/74]).
	13.	The wreckage of the Dredger was then sent to Panyu (PRC) for ship breaking. The worker(s) discovered 2 skulls and some more human remains in the course of ship breaking work (Witness 40 40 at [C/76]).
	14.	The human remains and the unidentifiable corpses referred to in Paragraphs 12 and 13 were submitted to Government Chemist for DNA analysis.
		(f)	The unidentified human remains were confirmed to come from TROFIMOV (cook) and Tso Pak Kuen (fitter).
		(g)	The decomposed body referred to in Paragraph 14 above was confirmed to be that of Chan Shing Tong (Extra Master (local)).
	15.	Death Certificates have been issued (see Tso Pak Kuen [Q1-153/61]; Chan Shing Tong [Q1-154/36] and TROFIMOV [Q2-246/78]).

“	16.	In about November 2001, R2 (as principal contractor) was engaged by Hong Kong International Terminal Limited to dredge the seabed at or near the container terminal 4 and 6 in Kwai Chung and deposit the dredged spoil at a marine deposit site off the Hong Kong International Airport in Lantau Island (the “Dredging Work”).
	17.	Neither R1 nor R2 has produced the principal contract and sub-contract(s) for the Dredging Work.
	18.	However, it appears that R2 sub-contracted the Dredging Work to one Leader Marine Contractors Ltd (“Leader”), which in turn sub-contracted the same work to R1
	19.	The relationship between R1 (as sub-contractor) and R2 (as principal contractor) is not admitted on pleadings. However, such relationship between them is beyond dispute and in fact has previously and repeatedly been admitted by R1 and R2.
		(a)	Admission made on the draft Form 2 under cover of R2’s letter to R1 dated 18.3.2002 [CB/102].
		(b)	R1 informed Labour Department on 19.3.2002 that R2 was principal contractor [CB/111];
		(c)	R2 wrote to Commissioner of Labour on 19.3.2002 admitting to be principal contractor appointed by Hong Kong International Terminal Limited [CB/113];
		(d)	R2 wrote to Labour Department on 25.3.2002 and referred to R1 as its sub-contractor [CB/116];
		(e)	Admissions made by R2 on Forms 2 (dated 22.4.2002) actually filed with Labour Department in respect of the 1^st to 4^th Deceased [CB/197-231].
		(f)	R1 wrote to R2 on 16.10.2002 enclosing Forms 2 (in draft) for all 8 Deceased Persons referring to R2 as the principal contractor [CB/137-185]
		(g)	The P&I Policy referred to R2 as main contractor [CB/191].
		(h)	R1 informed Labour Department on 1.11.2002 that
			“The position of Zen Pacific as the principal contractor is beyond any reasonable doubt and so are their obligations and responsibilities” [CB/196]

“	21.	R1 denies or does not admit that it was the employer of the 1^st to 8th Deceased. However, it is beyond any doubt that R1 was their employer.
	22.	There is no written contract between R1 and Tso Pak Kuen (8^th Deceased).
		a.	However, R1 paid his salary and filed Tax Return as employer of Tso Pak Kuen in 2001 [Q1-DCEC153/47] and 2002 [Q1- DCEC153/48].
		b.	In the letter dated 16.10.2002, R1 sent R2 draft Form 2 in respect of Tso Pak Kuen (then reported missing) admitting to be D1’s employer therein [CB/137 & 180]
	23.	There was no written contract between R1 and Chan Shing Tong (7^th Deceased).
		a.	However, R1 paid salary to Chan Sing Tong and filed Tax Return as employer of Chan Shing Tong [Q1-DCEC154/37];
		b.	In the letter dated 16.10.2002, R1 sent R2 draft Form 2 in respect of Tso Pak Kuen (then reported missing) admitting to be D1’s employer therein [CB/137 & 180].
	24.	In respect of the Russian Crew (1^st to 6^th Deceased), it is also beyond dispute that R1 was their employer.
		a.	R1 (through its agent in Russian (Primtanco) signed contract with each Russian crew.
			IGNATOV (Electrical Engineer, 1^st Deceasd) [CB/204]
			KNZNETSOV (2^nd Deceased, Master) [Q2-DCEC244/27]
			SHERSTYUK (3^rd Deceased, 3^rd Engineer) [CB/222]
			MIKHAYLISHIN (4^th Deceased, 2^nd Engineer) [CB/213]
			POZDNYAK (2^nd Officer, 5^th Deceased) [Q2-DCEC245/47]
			TROFIMOV (Cook, 6^th Deceased) [Q2-DCEC 246/39].
		b.	In a letter from R1 to R2 dated 16.4.2002, R1 admitted the employment relationship with each of the Russian crew and provided R2 with copies of their work permit.
		c.	More importantly R1 also said therein that “We [R1] have managed to obtain the employment contracts signed between the four deceased [i.e. 1^st to 4^th Deceased] and Primtanco (acting for and on our behalf) and forward herein as further and better particulars” [CB/129-130] .
		d.	R1 (as employer) obtained work permit for the Russian Crew and represented to the Immigration Department that it would be the employer of the Russian Crew [CB/95-100].
		e.	On the Application Form for work permits R1 signed as employer [Q1- DCEC241/35-41]; Q1-DCEC242/39-45; Q2-DCEC243/44; Q2-DCEC244/32-38; Q2-DCEC245/36-42; Q2-DCEC246/48-54].
		f.	R1 paid salary to the Russian Crew and remitted money direct to the family of each crew [CB/123-128].
		g.	R2 informed Labour Department on 25.3.2002 that R1 was the employees of all 15 crew members on board the Dredger [CB/116].
		h.	R2 again referred to R1 as the direct employer of the crew in a letter to Labour Department dated 7.5.2002 [CB/132].
		i.	R2’s solicitor (Dibb Lupton Alsop) repeated to Labour Department on 15.10.2002 that R1 was the direct employer of the missing seafarers (5^th to 8^th Deceased) [CB/135].
		j.	R1 prepared and sent R2 draft Forms 2 under cover of R1’s letter dated 16.10.2002. In the draft Forms 2, R1 admitted to be the employer of all 8 Deceased Persons. [CB/136-185].
		k.	R1 also provided R2 with the List of Earnings of each Deceased. [CB/196].

“	25.	It is instructive to note that R1 only started to raise issue that it was the employer after a dispute had arisen as to the alleged failure of R2 (principal contractor) to procure insurance cover for Employees’ Compensation (see R1’s letter dated 23.10.2002 [CB/187] and dated 1.11.2002 [CB/196] to Labour Department).
	26.	It is also ironical that R1 wrote to R2 on 16.4.2002 [CB/130] in the following terms:
		“We could indeed appreciate your carefulness in preparation for this claim case and would most certainly contribute as much as we can to assist you as far as this matter is concerned. Nonetheless, it is explicitly stated in the Seventh Schedule, Part II in the sub-contract for the dredging and disposal of sediment at Kwai Chung Container Port terminal 4/6, that the responsibility to provide Employees’ Compensation insurance rests with the Contractor, we fail to see any reason for your delay in initiating such a straight forward employees’ compensation claim”

“	12.	R1 provided lodging to all 8 Deceased Persons on the Dredger [CB/95].
	13.	The Deceased Persons were obliged to stay on board the Dredger, which operated round the clock.
	14.	In the premises, the 1^st to 8^th Deceased died in the course of employment whether or not each of them was actually on watch or on duty (see London and North Eastern Rly Co. –v- Brentnall [1933] AC 489).”

(a)	In a fatal case, the definition of “employee” is extended to include “a reference his legal person representative, or to members of his family or any of them” (s.2 of Cap. 282);
(b)	“members of the family” is defined to include, inter alia, a spouse and cohabitee, a child, a parent or and grandparent of the deceased (s.2 of Cap. 282).
(c)	The relevant parts of Section 5 of Cap. 232 provides that :
	…….
(d)	Section 29(1) of Cap. 282 provides that:
	“This Ordinance shall apply to masters, and seafarers who are employees within the meaning of this Ordinance and are members of the crew of a Hong Kong ship. . “
	“Hong Kong ship includes any ship or vessel registered or licensed in Hong Kong”.

(i)	In the case of an employee under 40 years of age at the time of accident – 86 months earnings ;
(ii)	In the case of an employee over 40 years of age but under 56 at the time of the accident – 60 months’earnings;
(iii)	In the case of an employee over 56 years of age at the time of the accident – 36 months earning.

(a)	TSO Pak- kuen(DCEC 153/2004) – Fitter (aged 36)
	HK$14,000 x 36 months = HK$504,000.
(b)	CHAN Shing-tong(DCEC 154/2004) – Extra Master (aged 60)
	HK$21,000 (statutory maximum) x 36 months = HK$756,000.
(c)	IGNATOV(DCEC 241/2004) – Electrical Engineer (aged 49)
	US$1,330.38 x 60 months = US$79,822.80
(d)	MIKHAYLISHIN(DCEC 242/2004) – 2^nd Engineer (aged 37)
	US$1,848.71 x 84 months = US$155,291.64
(e)	SHERSTYUK(DCEC 243/2004) – 3^rd Officer (aged 25)
	US$1,848.71 x 84 months = US$155,291.64
(f)	KNZNETSOV(DCEC 244/2004) – Master (aged 62)
	US$2,302.93 x 36 months = US$82,905.48
(g)	POZDNYAK (DCEC 245/2004) – 2^nd Officer (aged 30)
	US$1,599.30 x 84 months = US$134,341.20
(h)	TROFIMOV (DCEC 246/2004) – Cook (aged 36)
	US$1,087.38 x 84 months = $91,339.92

(a)	TSO Pak- kuen(DCEC 153/2004) –
	LI Yuen-yau (wife aged 43) 50%;
	TSO Hon-ying (son aged 13) 50% x ½;
	TSO Ching-yi(daughter aged 11) 50% x ½ ( para.5, Sch. 7)
(b)	CHAN Shing-tong(DCEC 154/2004) –
	LEE Chiu-lan (wife aged 56) 50%;
	CHAN Lorraine (daughter aged 34) 50% x 1/3;
	CHAN King-fai (son aged 31) 50% x 1/3;
	CHAN Wai-ying (daughter aged 27) 50% x 1/3 (para. 5, Sch. 7)
(c)	IGNATOV (DCEC 241/2004) –
	IGNATOV Ludmila Mikhaylovna (wife aged 54) 50%;
	IGNATOV Olga Alexandrovna (daughter aged 25) 45%;
	KREKCHA Victoria Gennadyevna(stepdaughter aged 32) 5% (para. 10, Sch. 7)
(d)	MIKHAYLISHIN(DCEC 242/2004) –
	MIKHAYLISHINA Olesya Igorevna (wife aged 39) 50%;
	MIKHAYLISHIN Denis Anatolevich (son 15) 45%;
	PROPISNOV Roman Valerevich (stepson aged 20) 5% (para. 10, Sch. 7)
(e)	SHERSTYUK (DCEC 243/2004) –
	SHERSTYUK Irina Sergeevna (mother aged 51) 95% x ½;
	SHERSTYUK Yury Pavlovich (father aged 52) 95% x ½;
	SHERSTYUK Sergey Yurevich (brother aged 24) 5% (para. 14, Sch. 7)
(f)	KNZNETSOV(DCEC 244/2004) –
	STEPANOVA Valentina Konstantinovna (wife aged 58) 100% (para. 1, Sch. 7)
(g)	POZDNYAK (DCEC 245/2004) –
	POZDNYAK Olga Lvovna (wife aged 32) 50%;
	POZDNYAK Nina Nikolayevna (daughter aged 13) 50% x ½ ;
	POZDNYAK Svetlana Nikolayevna (daughter aged 12) 50% x ½ (para. 5, Sch. 7)
(h)	TROFIMOV(DCEC 246/2004)
	TROFIMOV Oksana Vladimirovna (wife aged 36) 50%;
	TROFIMOV Dmitriy Germanovich (son aged 12) 50% x ½ ;
	TROFIMOV Mikhail Germanovich (son aged 9) 50% x ½ (para. 5, Sch. 7)