XCHRX MAK KIN CHEUNG v. CHAN MAN LOK

1995 No.PI631
(1991 No. A2177)
AND (1991 No.A2329)

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is an appeal from the order of Master O'Donnell dated 12 September 1995 dismissing the application of M.I.B. to be joined as a defendant in the consolidated actions brought by the plaintiff against CHAN Man Lok ("Chan") in H.C.A. 2177 of 1991 ("the 1st action") and the employers and contractors in H.C.A. 2329 of 1991 ("the 2nd action") respectively. At the conclusion of the hearing on 11th October 1995, I dismissed the appeal and affirmed the learned Master's order. The reasons appear below.

Chronology of events

(a) The accident

2. Over 7 years ago, the Plaintiff who was a member of a road works team, was severely injured when a car driven by Chan crashed into a stationary vehicle belonging to the employers or contractors responsible for the road works behind which the Plaintiff was working. As a result, the Plaintiff commenced the 1st and 2nd actions referred to above.

(b) MIB's interest

3. The car driven by Chan was covered by an ordinary private car insurance policy issued by Sun Alliance who defended the 1st action acting through Masons. Chan's defence is that there was a white car which cannot now be traced ("the phantom vehicle") cut into his path without warning, causing him to swerve. If Chan is believe and the phantom car was totally at fault, MIB would have to pay for the fault of the untraced driver. Accordingly, from the outset, MIB had a possible financial interest in the outcome of the proceedings. MIB's position then was that it insisted that "all avenues of legal redress [be] exhausted before it [would] entertain the claim". See the letter from Union Insurance written on behalf of MIB dated 8th April 1991.

(c) Sun Alliance

4. The Plaintiff prosecuted the two actions as required by MIB. However, on 26 July 1991, Sun Alliance who had been defending the 1st action, took out an originating summons against the policy holder in H.C.M.P. 3541/1991 for a declaration that it was entitled to avoid the policy because of non-disclosure and misrepresentation under section 10(3) of the Motor Vehicles Insurance (Third Party Rules) Ordinance, Cap.272. This application was dismissed by Woo, J. because it was made outside the prescribed period of 3 months.

5. On 2 November 1992, Sun Alliance took out another originating summons against the Plaintiff, the car owner and the defendants in the 2nd action in H.C.M.P. 3541/1992 for a declaration to avoid the policy against them. On 15 December 1992, it took out another originating summons seeking similar relief against Chan (H.C.M.P. 4105/1992).

6. Although the liability of satisfying any judgment obtained in the 1st action could ultimately fall on MIB if Sun Alliance succeeded in obtaining the declarations sought, MIB did not require the Plaintiff to contest Sun Alliance's application. Further it refused to fund the Plaintiff to do so.

7. On 23 April 1993, declarations were made in favour of Sun Alliance in uncontested proceedings. Notwithstanding that the policy was declared void, Masons remained as solicitors of record for another 20 months until 6 January 1995 since which date Chan has not been legally represented.

(d) MIB's application for joinder

8. MIB issued a summons for joinder under Order 15 rule 6(2)(b)(ii) of the rules of the Supreme Court on 16 February 1995. It issued another summons on 4 September 1995 and sought more extensive relief including the right to file a defence.

9. Order15 rule 6(2)(b) gives the Court a wide discretion to order

"(ii) any person between whom and any party to the cause or matter there may exist a question or issue arising out of a relating to or connected if any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties' to the cause or matter."

10. Two main reasons have been advanced by MIB for joinder. The first arises from the position in which MIB now finds itself because of an "agreement" it has reached with Sun Alliance following the court order which voided the policy. The second is apportionment. I will deal with these in turn.

MIB and Sun Alliance's "agreement"

11. After the court order in the uncontested proceedings was made, differences arose between MIB and Sun Alliance as to the application of the "insurer concerned" principle which would have a bearing on whether damages awarded in respect of liability for driving the vehicle in question will ultimately be borne by Sun Alliance or MIB. MIB and Sun Alliance have apparently agreed between themselves that MIB will meet any unsatisfied judgment against Chan to the extent of his contribution, without prejudice to any right of re-imbursement on the part of MIB to be determined by arbitration between MIB and Sun Alliance.

12. In his written submissions, Counsel for MIB stated that in effect MIB becomes the successor of Sun Alliance in terms of participation in the action. This would appear to echo what Masons had suggested some 3 years' earlier. On 29 April 1993, a few days after Sun Alliance had obtained the declarations, its solicitors, Masons, informed the Director of Legal Aid ("DLA") of the court order and that they had written to MIB "asking them to confirm when [MIB] will take over conduct of the proceeds". Some 7 months earlier, Masons had expressed the view in a letter of 4 September 1992 to DLA that MIB ought to take over and conduct the defence in the 1st action and that they would be writing to MIB to that effect.

13. However, in the course of argument, counsel for MIB distanced himself from that view. He made it plain that MIB was not applying to take over Sun Alliance's case so that it is not a question of making arrangements for Chan's defence such as legal representation. MIB wished to be a defendant in its own right. It was submitted that if MIB took over Chan's defence, it would have to run the phantom vehicle point which would be directly contrary to its interests. It therefore had to be independent of Chan.

14. Counsel for the plaintiff and Counsel for the defendants in the 2nd action have drawn my attention to the seemingly unusual nature of the agreement between MIB and Sun Alliance. Under the Domestic Agreement between MIB and the Insurers authorised to carry motor insurance business in Hong Kong, the Insurer (i.e. Sun Alliance in this case) is obligated to pay if the judgment remains unsatisfied by the judgment debtor under clause 3.

15. This would appear to be so even where the policy had been obtained by fraud, misrepresentation etc. If a dispute were to arise between MIB and the Insurer Concerned, such dispute is to be resolved by arbitration, but unless and until there is a ruling in favour of the Insurer Concerned, it remains responsible. That analysis appears to be borne out by the terms of the Domestic Agreement.

16. Prima facie, the agreement reached between MIB and Sun Alliance reverses the order of liability that would have prevailed under the Domestic Agreement. Quite why this was done is not apparent from the evidence. I need not be concerned with the reasons except when, as here, the agreement is somehow advanced as a reason why MIB should be joined as a party.

17. In the normal situation where the insurer defends the action, it is settled law that MIB is not a "necessary" party. See White v. London Transport [1971] 2Q.B. 721. Both Lord Denning M.R. and Stamp L.J. expressed the view (at pp. 727D-E, 728E) that if it were a question of discretion, it ought not to be exercised in favour of MIB. Therefore in the absence of any explanation as to why Sun Alliance ceased to defend the 1st action and why it was necessary to depart from the provisions of the Domestic Agreement, I do see that the existence of the agreement between MIB and Sun Alliance puts MIB in any better position to be joined as a defendant as that agreement plainly could not have come about without MIB's willingness to be party to it. In other words, it was in a sense procured by MIB.

Apportionment

18. Although it was initially urged that justice could not be done if no one was allowed to represent Chan, as noted above, MIB is not interested in representing Chan. Rather, as I understand it, it wishes to be in a position to argue against Chan's main defence which is the phantom vehicle point.

19. At the forefront of MIB's submissions and I perceive it to be the only point seriously pressed by MIB, is that there would be no one before the Court to defend apportionment as between Chan and the defendants in the 2nd action. The submission here is that if Chan and the defendants in the 2nd action were held to blame in the proportions 90% and 10%, then although under the principle set out in White v. London Transport op.cit. at 725H-726A, the plaintiff could seek to recover 100% of the damages from the defendants in the 2nd action, that principle cannot apply in the present case because these defendants could seek contribution from MIB. In these circumstances, it was argued that it would manifestly be unfair to MIB if no one in there to argue apportionment.

20. As counsel for the plaintiff pointed out, the short answer to this lies in the special position of MIB. I was referred to Bingham's Motor Claims at p.768 where, in summary, it is stated as follows.

21. Where another tortfeasor is liable (such as the defendants in the 2nd action in the present case), then as MIB is only required to meet unsatisfied judgments, it is not under an obligation to meet or contribute to any judgment which another tortfeasor is liable for and is able to satisfy. This is so even where the uninsured driver is partly to blame. A contribution judgment obtained by the other tortfeasor against the uninsured driver cannot be enforced against MIB in separate proceedings or otherwise. SeeCampbell v. McFarland and Armagh VDC [1972] NI 31.

22. That being the case, I do not accept MIB's contentions on the apportionment point.

Other reasons

23. Counsel for the plaintiff and counsel for these defendants in the 2nd action have advanced additional reasons (which I accept) that go to show that it would not be "just and convenient" to join MIB as a defendant which I will mention briefly.

(a) no prejudice to MIB

24. It was part of the apportionment argument raised by MIB that the case may not be presented sufficiently forcefully against the construction companies. There is no merit in this submission since under clause 8(c) of the MIB Agreement, the plaintiff is bound to take all reasonable steps to pursue those defendants. Moreover under clause 8(d), MIB may require the plaintiff to take certain steps in the action. Non-compliance by the Plaintiff could entitle MIB to decline to indemnify.

(b) no issue or question

25. No issue between MIB and the Plaintiff or between the defendants and MIB has been identified. That being the case, and given that it does not wish to stand in Chan's shoes, it is difficult to see what role MIB is to assume if it were made a defendant.

(c) conflict of interest

26. If MIB were to be made a defendant, it would still retain its right under the MIB Agreement to give directions to the plaintiff. It is plainly undesirable for MIB to play a dual role.

(d) prejudice to the defendants in the 2nd action

27. MIB is in possession of confidential information imparted to it by the plaintiff. Vis-à-vis the defendants, this would be an unfair advantage.

Conclusion

28. For the reasons set out above, I find no merit in MIB's application. Accordingly the appeal against Master O'Donnell's order is dismissed with costs.