WONG PO WAH AND ANTOHER v. PACIFIC INSURANCE CO LTD

Headnote

Employees Compensation ordinance, Cap. 282.

(1)     Applicant injured during and in the course of his employment and Respondent i.e. Insurer paid Applicant's employer amount agreed, and approved of by Commissioner of Labour. Employer did not pay applicant.

    Respondent had adequate notice and was held not to be prejudiced after application was filed more than 24 months after the accident.

    Held Section 14(4) of Cap. 282 applied and considerations different when an employer is the Respondent.

        " ..Reasonable excuse for the failure so to give notice.....'' considered.

    Factors relevant to instant case discussed.

    Held applicant failed to establish ''reasonable excuse''.

(2)     Whether payment by Respondent to Employer extinguished applicant's claim.

    Held following KING Tok-on v. LAU Chu-yip and others 1987 H.K.L.R. 126 that there is an absolute right to recover directly from an employer's insurer when the policy of insurance is in force at the time of the accident.

IN THE DISTRICT COURT OF HONG KONG

CIVIL JURISDICTION

EMPLOYEE'S COMPENSATION CASE NO. 308 OF 1987

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D E C I S I O N

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1. Applicant seeks compensation from the Respondent in the agreed sum (should Respondent be held liable) of $17,600.30.

2. Applicant was employed by Hi-Peak Electronics Produce Company and sustained personal injury as a result of an accident arising out of and in the course of his employment. This occurred on the 10th July 1985.

3. Respondent was the indemnifier of the employer under the Employee's Compensation Ordinance Cap. 282 by virtue of Policy No. 10220/1/84/01207.

4. It was an agreed fact as follows:

"In pursuance of Respondent' policy mentioned in paragraph 1B of the application the Respondent paid a sum of 15,238.40 to said Hi-Peak Electronics Produce Company in respect of the compensation payment to the Applicant under the agreement mentioned in paragraph 2B of the amended application".

5. The amended provision referred to in the previous paragraph reads as follows:

"The Respondent do pay compensation agreed upon by Applicant and the said Hi-Peak Electronics Produce Company pursuant to an agreement dated 15/11/85 and approved by the Commissioner of Labour on the 27/11/85 in the sum of $15,238.40 together with sur-charge in the sum of $2,361.90''.

6. The employer having received the money from, its indemnifier did not meet its obligate on to the employee. The Applicant when giving evidence, said the employer gave as his reason that "The bank has eaten the money". The Respondent to the present application paid to its insured, i.e. the employer and understandably :eels that all its obligations have been met.

7. For convenience sake the relevant dates are as follows:

1.     Accident 10/7/85, agreed.

2.     Agreement 15/11/85, agreed.

3.     Agreement approved 27/11/85, agreed.

4.     Two months after the agreement the Applicant claims he spoke personally by telephone to a representative of the insurance comrany.

5.     December 1985 the sum of $15,238.40 was paid to the employer by the Respondent.

8. As I have indicated the Applicant gave evidence and I accept his evidence, (a).as to speaking to the employer endeavouring to obtain payment and (b) that he spoke to a representative of the insurance company.

9. Correspondence flowed as follows:

1.     2nd December 1986 letter. The Director of Legal Aid to Pacific to Respondent.

2.     9th June 1987 letter Director of Legal Aid to Pacific Insurance Company Limited.

3.     17th, July 1987 letter Respondent to Director of Legal Aid.

4.     1st September 1987 Director of Legal Aid replied to letter 17th July.

Such correspondence was produced by agreement.

10. It can be seen that the Respondent had notice of the accident in three respects: (a) from the employer. This is evidenced by the fact that payment was effected to the employee in respect of the Respondent's obligation to indemnify, (b) notice from the Director of Legal Aid on the 9th June, one month prior to the expiry of the statutory time limit of 24 months giving notice. There were enclosed copies of the agreement as approved by the Commissioner of Labour and a sealed copy of the order of the Court making the agreement an order of the Court and a copy of certificate of costs dated the 26th January 1987, (c) Applicant's verbal advice.

11. The time expired on 10th July 1987 being 24 months on the date of the accident and the reply from the Respondent was sent one week later.

12. After this it was not until the 1st September that the letter of the 17th July was :replied to where the Director of Legal Aid took issue with the Respondent's interpretation of Section 44 of the Employee's Compensation Ordinance.

13. The application itself vas dated the 14th October 1987 and appears to have been filed that day. Since then the Applicant appears to proceeded with his claim with all due diligence.

14. The Respondent. denies liability and raises two issues: (1) that the application to the Court by the employee has not been made within 24 months from the occurrence of the accident as provided by Section 4(1) of Cap. 282, (2) that payment of the sum as agreed and approved by the Commissioner of Labour extinguished Respondent's liability.

15. I turn to deal with the time point as taken, and comment first that I am of the view that the Applicant has not sustained prejudice in the presentation, of his substantive defence and if the matter were one in respect of.which Section 14 (1)(b) applied such leave as would be required, and as may be granted by the Court,,would be granted.

16. However, the position is governed by Section 14 (4) which reads as follows:

"The Court may receive and determine any application for compensation in any case notwithstanding that the notice required by subsection (1) has not been given or that the application has not been made in due time as required by that subsection, if it is satisfied that there was reasonable excuse for the failure so to give notice or to make an application as the case may be". (The underlining is mine)

17. The question of notice does not arise in my view, as the Respondent received notice both from the employer and from the Applicant personally. This to my satisfaction.

18. It appears to me that this is a discretionary matter but of course in exercising my, discretion I must have cognizance of the status of and arguments advised by both sides, and act judicially.

"The word reasonable" has in law the prima facie meaning a reasonable in the regard to those existing circumstances of which the actor called onto act reasonably knows or ought to know". Re. a solicitor 1945 KB368 CA at page 371.

19. The parties have not furnished me with any authorities and the only authority I have been able to locate discussing "reasonable excuse" in a similar context, is that of Pascoe v. The Nominal. Defendant (Queensland) (No.2) [1964] Queensland Q.D. P 373 per Mansfield CJ at P 378:

"What is to be determined is whether the Applicant has shown any cause which can be deemed by the Court to be a reasonable excuse. I think this means a cause which a reasonable man would regard as an excuse, a cause consistent with a reasonable standard of conduct, the kind of thing which might be expected to delay the giving of notice by a reasonable man."

20. This comment was in relation to a motor vehicle insurance act and related to a failure to give notice of a claim with the Court having power to extend a statutory period upon being satisfied the failure was caused with "reasonable excuse".

21. The gravaman of decision of the Court of Appeal of Queensland was that the prospective plaintiff failed to satisfy the ones resting upon the Applicant to show "Reasonable excuse" and thereby have the Court exercise its discretion in his favour.

22. In the instant case factors which I consider include:

(1)    Notice was given.

(2)    A letter was received by Respondent 23 months after the injury was caused to Applicant.

(3)    There was no reply to that letter until 24 months and one week and elapsed.

(4)    The Respondent has not suffered prejudice by reason of the application being filed out of time.

(5)    The Applicant being legally advised, must have been aware of the existence of Section 14 but even should - and it was not established this was so it had not been aware this does not constitute: "reasonable excuse".

(6)    Even after receipt of the letter dated 17/7/1987 Applicant did not respond and take action until 1st September 1987 - some 6 weeks.

(7)    The application was not filed until a further 6 weeks had lapsed.

23. The Applicant has not established by any evidence anything which I could accept as constituting "reasonable excuse".

24. In my view even although no Prejudice to Respondent was extant - and Respondent had notice, it is still insufficient to claim that Applicant was waiting for a reply to his solicitors' letter of the 9th June 1987.

25. Applicant has failed to make out its case. On the material before me the onus of establishing "reasonable excuse" has not been met.

26. Application to the Court within 24 months has not been made out accordingly the Applicant cannot obtain the protective "umbrella" of Section 14 (4).

27. The Respondent is entitled to judgment on this ground.

28. As I indicated to the parties at the close of the hearing I would deal with both issues raised by the Respondent in order to give each party the opportunity to consider my views to determine whether any further action should be taken.

29. The sections I am concerned with are Sections 42, 43 and 44 of Cap. 282. I do not propose to re-produce these sections. I have had referred to me the decision of KING Tak-on (by attorney Cheung Yin) v. LAU Chun-yip and Others t/a Kar Run Metal Manufactory and Another 1987 HKLK page 126. This is a decision of the Court of Appeal and I have found it most helpful.

30. It is Mr. Cheung's contention on behalf of the Applicant that both the employer and the Respondent are jointly and severally liable to the employee and there is an absolute right to recover directly from the employer's insurer any amount which the employee would have been entitled to recover from the insured employer.

31. I have been referred to a passage from the judgment of Clough, J.A. appearing at page 131:

"..... For my part I do not consider that the classification of the rights of an employee under an insurance policy governed by ss 42, 43 and 44 of the ordinance as being contractual statutory or a combination of both, as a material consideration here. The material consideration is whether or not the effect of the relevant sections on the relevant policy is to confer on the employee an absolute right to recover directly from the insurer any amount which the employee would have been entitled to recover from its insured employer".

Again at page 135:

".....In short the purpose of Part IV (Cap. 182) seems to me to be to insure that the employee should not be left with a barren award by reason of the employer's defaults and that the insurer should be left to seek redress against the insured employer if the latter is in breach of the terms of the policy of insurance or the requirements of a contract that is uberrimae fidei''.

32. Mr. Edward Li on behalf of the Respondent sought to distinguish the instant case from that determined by the Court of Appeal. In the later case the Applicant also had agreed damages but liability was contested on the basis that the second Respondent, the insurer, had sought to repudiate liability under the policy because of the deliberate understatement of the first Respondent's number of employees and of the wages paid to them. It is the argument as developed by Mr. Li that as it was a voidable policy the action on the part of the insurer occurred subsequent to the accident and that the employee had his rights which were separate and distinct and not defeasible whereas in the instant case the obligations of the insurer were met.

33. The practical effect of KING Tak-on's case would appear to be that an employee has separate claims against both the employer and the insurer and that liability, if the policy has not been cancelled at the time of the accident or avoided by the employer's breach before the accident, then exists jointly and severally. In the instant case the position differs in that the insurer by paying compensation, so it was agreed has the effect to extinguish the employee's right to claim against the insurer separately in that the employee by suing the employer_. directly has stepped into the shoes of the employer. It.was assisted that his right can be no better than that of the employer and that the liability has clearly been met by payment of the amount, as approved, in full.

34. In other words, the argument is that the Court of Appeal were dealing with an avoidable policy, not one were liability had been extinguished and that the absolute right referred to by the Clough, J.A. must be limited so as not to cover all the situations argued by Mr. Cheung on behalf of the Applicant.

35. It appears to me that the position of the Applicant in the instant case is in many ways analogous to that of the Applicant dealt with by the Court of Appeal. In each case there was a contract of insurance, a voidable contract which had not been avoided at the time of the accident. Pacific Insurance Company Limited were liable at the time to the Applicant. The Applicant even although Pacific Insurance Company Limited has met its obligation to the employer found himself in the position of being the possessor of an "empty judgment" as against his employer. Such a situation is not uncommon in cases where joint and several liabilities co-exist and a party who would not be liable primarily or whose liability is founded in other ways finds himself liable to a plaintiff.

36. I believe that as far as general principles are concerned there has been conferred upon the employee in the words of Clough J.A.:

".....an absolute right to recover directly from the insurer....."

and that:

".....the employee should not be left with a barren award by reason of the employer's default......."

and accordingly although the default in the instant case is one as against the employee, i.e. non-payment, that such a default does not derogate from the employee's absolute right vis-a-vis the Respondent.

37. For the reasons earlier indicated there shall be judgment for the Respondent although had I found for the employee I would have assessed compensation in the sum of $17,600.30 with interest at 3.5% from the date of accident until the date of assessment, on $15,238.40 only.

38. It was agreed by the advocates that costs should follow the event. Costs to Respondent, to be taxed in accordance with the District Court Scale.