B + B CONSTRUCTION LTD. v. SUN ALLIANCE AND LONDON INSURANCE plc.

FAMV No. 26 of 2000

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS (CIVIL) NO. 26 OF 2000

(ON APPLICATION FOR LEAVE TO APPEAL FROM
CACV NO. 18 OF 2000)

_____________________

_____________________

__________________________

DETERMINATION

__________________________

Mr Justice Chan PJ :

1. This is an application for leave to appeal to the Court of Final Appeal. Although the Notice of Motion relies on both limbs under section 22(1) of the Hong Kong Court of Final Appeal Ordinance, Cap. 484, the main arguments before this Committee have focused on the question whether the applicant is entitled to appeal as of right.

2. The applicant (the plaintiff) which was a building contractor, had sub-contracted part of its piling works to one Pak Kee Transportation Co Ltd (Pak Kee). This contract required Pak Kee to provide an insurance cover for Pak Kee's employees and the employees of its sub-contractors. It also required Pak Kee to take out an insurance policy in the joint names of the applicant and Pak Kee. This was not done.

3. In fact, Pak Kee had already taken out a policy with the defendant in its sole name. The relevant provisions in the policy are as follows: (1) in its typed out part (the Schedule), the Insured was described as "Pak Kee and his contractors"; (2) it was expressed to cover claims in respect of injury to "any employee in the Insured's immediate service", (3) details of Pak Kee's employees were set out in the same Schedule, and (4) in the printed part of the policy, "the Insured's liability to employees of contractors to the Insured" was excluded. It can be seen at once that these provisions give rise to a problem in their construction and this has led to the present proceedings.

4. In the event, one of Pak Kee's employee, a Mr Cheung, was injured at work due entirely to the negligence of the applicant's employees. Pak Kee was ordered to pay employee's compensation with interest and costs to Mr Cheung (totalling $219,848.95). In a subsequent High Court action, Mr Cheung obtained an award of common law damages ($759,797.05) with interest and costs against the applicant. In the third party proceedings to that High Court action, the applicant was also ordered to pay Pak Kee what the latter had paid to Mr Cheung as employee's compensation and Pak Kee's costs in the third party proceedings and in defending the High Court action.

5. In the present action, the applicant seeks an indemnity against the defendant insurer for all the said compensation, damages, interests and costs purportedly under the policy taken out by Pak Kee with the defendant. The applicant, invoking both Order 14 and Order 14A of the Rules of the High Court, applied for judgment against the defendant. The defendant took out an application to strike out the applicant's claim under Order 18 rule 19 and further and/or in the alternative, for a determination of the questions of law set out in the application under Order 14A. These summonses were heard together. The parties agreed that the decision of the court would be dispositive of the action. Yam J gave judgment for the applicant, but the Court of Appeal allowed the appeal and on its own initiative inserted in the order which it made a declaration to the effect that the defendant was not liable to the applicant under the policy.

6. The Court of Appeal refused leave to appeal to the Court of Final Appeal. The applicant now seeks leave to do so. Since the total amount sought to be recovered exceeded $1 million, the real issue is whether the decision of the Court of Appeal was a final order or judgment for the purpose of section 22(1)(a). Ms Gladys Li SC for the applicant argued that it was and hence the applicant is entitled to appeal as of right.

7. For the purpose of obtaining leave under section 22(1)(a), we have adopted, as the Privy Council had under the old regime adopted, the application test in deciding whether an order of the Court of Appeal is a final or interlocutory order. This involves an examination of the nature of the application to see whether the order made upon such application would, whether it fails or succeeds, determine the whole action. In considering the nature of the application, it is necessary to look not only at its form, e.g., under which order or rule of court it is made, but also the purpose and substance of the application and the issues to be determined by the court.

8. In their applications, the parties relied on Order 14, Order 18 rule 19 as well as Order 14A. An order made pursuant to an application for summary judgment under Order 14 or for the striking out of an action for disclosing no reasonable cause of action under Order 18 rule 19 has always been regarded as interlocutory. Such an order would not have the effect of finally disposing of the cause or matter if the outcome is in favour of one party and not the other. It is on the application of Order 14A that the bone of contention lies. Ms Li submitted that Order 14A is a proper procedure for a determination by the court of a question of law or construction of a document which will finally determine the entire cause or matter between the parties. Both parties issued their respective summonses under that order and as required by rule 1(3)(b), had agreed that the court's decision upon a construction of the policy would finally dispose of the controversy between them. Although the Court of Appeal did not expressly refer to Order 14A, its decision was in substance a judgment made under that order and was a final judgment. Ms Audrey Eu SC for the defendant argued that the fact that an application is made, albeit by consent, under Order 14A does not necessarily mean that the court will deal with it under that provision. In the present case, the parties did not, as the Court of Appeal said when refusing leave to appeal, apply to the court "to treat their summonses as summonses for judgment, as they could have done". Their applications were treated as interlocutory applications. The parties' consent could not convert the nature of their applications.

9. Order 14A rule 1 provides:

"(1) The Court may upon the application of a party or of its own motion determine any question of law or construction of any document arising in any cause or matter at any stage of the proceedings where it appears to the Court that -

(a) such question is suitable for determination without a full trial of the action; and

(b) such determination will finally determine (subject only to any possible appeal) the entire cause or matter or any claim or issue therein.

(2) Upon such determination the Court may dismiss the cause or matter or make such order or judgment as it thinks just.

(3) The Court shall not determine any question under this Order unless the parties have either -

(a) had an opportunity of being heard on the question; or

(b) consented to an order or judgment on such determination."

10. In order to invoke Order 14A, certain criteria must be satisfied: it must be shown that it is a suitable case for this procedure, that the determination on the question of law or construction of the document is one which will finally determine the entire cause or matter and that the parties have consented to abide by the determination (or have had an opportunity to be heard on the question). But the court may not make such a determination if it does not consider that it is a suitable case to take such a course. This can be the situation where, for instance, the court does not agree that its decision will have the effect of finally resolving the controversy between the parties, or there are serious disputes of fact or the trial may take place very shortly. If however the court does proceed to hear the application on the basis that its determination will have the effect of finally disposing of the cause or matter before it, an order made pursuant to such an application should be regarded as a final order for the purpose of section 22(1)(a). The application which the court proceeds to hear on that basis would satisfy the application test. Whatever the outcome of the application, the order made will finally determine the action. After all, it is the intention of the parties and the court that such a decision would put an end to the dispute instead of requiring the parties to go through the trouble and expense of a full trial.

11. The present case depends solely on the construction of the insurance policy in question. Both parties saw fit to invoke Order 14A and jointly sought a determination by the court on this issue. They had agreed and intended that the court's decision, subject no doubt to any right of appeal, will finally resolve the dispute between the parties. That was the purpose they came before the court. While it is accepted that Yam J's judgment and the order of the Court of Appeal did not make any express reference to their decisions being made pursuant to Order 14A, both the judge and the Court of Appeal in substance considered and determined the matter under Order 14A. They considered the matter of construction carefully and thoroughly on the basis that their decisions would finally dispose of the dispute between the parties. The fact that the parties also invoked Order 14 and Order 18 rule 19 does not alter the position. The applications resulting in the order in question were in substance applications by which each party sought an order from the court which would be determinative of the whole action. There were only two possibilities : an order determining the whole action in favour of the plaintiff or an order determining the whole action in favour of the defendant. Either way the whole action would be determined. We think that the order of Court of Appeal must be regarded as a final order within the provision of section 22(1)(a). The applicant is entitled to appeal as of right.

12. For these reasons, we grant leave to appeal and order that the costs of this application be costs in the appeal.

Representation: