SIU YIN KWAN AND ANOTHER v. EASTERN INSURANCE CO. LTD.

C.L.No. 6 of 1988

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. The history of this action is set out in the judgment of the Privy Council of 9th December 1993. The Privy Council ordered that the case be remitted to me for assessment of the amount due. The hearing before me today is that assessment. The Defendant ("Eastern") is now represented by one of its directors, Tung Kie Wei, pursuant to an order made by Mr. Registrar Gould on 24th February 1994. He contends that no sum is due from Eastern to the Plaintiffs at all by way of damages at common law for negligence.

2. The Privy Council declared that the Plaintiffs were entitled to an order in their favour pursuant to the Third Parties (Rights Against Insurers) Ordinance (Cap. 273). Having regard to the language of section 2(1) of the Ordinance, that declaration entitles the Plaintiffs to an order that the rights of Axelson Co. Ltd. ("Axelson") against Eastern under the policy of insurance between Axelson and Eastern dated 27th June 1983 in respect of Axelson's liability to the Plaintiffs be transferred to and vest in the Plaintiffs. Mr. Tung maintains that Eastern should not be prevented from raising against the Plaintiffs such defences as it would otherwise have had against Axelson. In my view, Eastern should be permitted to do that. The effect of the declaration is merely to put the Plaintiffs in the same position vis-a-vis Eastern as Axelson would have been.

EASTERN'S PRIMARY DEFENCE

3. The primary defence which Mr. Tung contends Eastern would have had against Axelson is based on condition 6 of the policy. That condition prohibited Axelson from making any admissions without Eastern's consent. It is said that an admission of liability to pay compensation under the Employees' Compensation Ordinance (Cap. 282) ("the ECO") was made on behalf of Axelson (albeit on behalf of Axelson's agents, Richstone Industries Co. Ltd. ("Richstone"),as well) by Axelson's and Richstone's solicitors at a hearing before Judge Li on 22nd May 1985 in proceedings brought by the Plaintiffs for compensation under the ECO. Since that admission, to the extent that it was made on Axelson's behalf, was a breach of condition 6 of the policy, Mr. Tung claims that Eastern is entitled to repudiate the policy.

4. In my view, this defence cannot succeed for two reasons. First, the finding of fact which I made at the original trial was that Eastern did not object to the admission being made on Axelson's behalf. What Eastern objected to was the admission being made on Richstone's behalf, because a judgment against Richstone would have amounted to a finding that Richstone was the employer of the crew. Since Eastern did not object to the admission being made on Axelson's behalf, there was no breach of condition 6 because, despite Mr. Tung's argument to the contrary, the admission must be treated as having been made with Eastern's consent. That is what the majority of the Court of Appeal held. Kempster J.A., said at p. 18 of the transcript of the judgments, that the admission, insofar as it was made on Axelson's behalf, "would ... have been made with the authority of the insurers". Sir Derek Cons ACJ agreed with the judgment of Kempster J.A. Eastern did not seek to pursue any appeal from this finding to the Privy Council.

5. Secondly, I found as a fact at the trial that Eastern had formally disclaimed liability under the policy on 6th November 1984. The admission was therefore made after Eastern's formal disclaimer of liability under the policy. The Court of Appeal unanimously held that in these circumstances it was not open to Eastern to complain that the admission constituted a breach of condition 6. At p. 18 of the transcript, Kempster J.A. said :

"... the admission was made after Eastern's disclaimer of liability under the policy and, in consequence, they cannot complain of a subsequent breach by the insured."

And at p. 38 of the transcript, Litton J.A. said :

"... having [disclaimed liability under the policy] it was not open to Eastern to complain that the insured had made admissions or sought to compromise their liability with the claimants."

Eastern did not seek to pursue any appeal from this finding either to the Privy Council.

6. In any event, if Eastern had been able to rely on the admission as constituting a breach of the policy, Mr. Tung accepts that it would not have prevented the Plaintiffs recovering compensation under the ECO. That was what the majority of the Court of Appeal held was the effect of Sections 43(1) and 43(2) of the ECO.

EASTERN'S SECONDARY DEFENCE

7. Mr. Tung contends that because Eastern was not a party to the proceedings brought by the Plaintiffs against Captain Gary's representatives and Axelson for damages for negligence, Eastern is not bound by the interlocutory judgment entered for the Plaintiffs against Axelson, which is final and binding on the issue of negligence unless and until it is reversed on appeal. Eastern has, it is said, never had the opportunity to argue, as Axelson could have done but chose not to, that Axelson's employees had not been negligent, and that accordingly no question of vicarious liability on Axelson's part could have arisen.

8. There is, in my view, a short but decisive answer to that point. Condition 6 of the policy entitled Eastern to take over the conduct of the proceedings on behalf of Axelson if it chose to. It decided not to. It may be that it decided not to because it believed, or was advised, that Richstone, not Axelson, might be held to be its insured. It may be that it decided not to because an admission of liability had been made. But the fact that what it believed, or what it was advised, turned out to be wrong, or the fact that the admission made it more difficult to dispute the allegations of negligence, are, in my view, beside the point. Its decision not to intervene in the proceedings means that it is not now open to it to complain that it was deprived of the opportunity to defend the Plaintiffs' action against Axelson.

THE AMOUNT DUE

9. It was common ground at the trial that the Plaintiffs were each awarded compensation under the ECO of $242,000.00, together with interest which had been calculated up to 18th January 1988 as amounting to $36,336.47, together with costs which had been taxed at $48,812.50 for the 1st Plaintiff, and at $48,255.00 for the 2nd Plaintiff. It was also common ground that the Plaintiffs obtained interlocutory judgment against Axelson for damages at common law for negligence. The damages of the 1st Plaintiff were assessed at $589,081.00 together with costs which had been taxed at $125,906.50, and interest which had been calculated up to 18th January 1988 as amounting to $47,958.93. The damages of the 2nd Plaintiff were assessed at $443,000.00, together with costs which had been taxed at $125,906.50, and interest which had been calculated up to 18th January 1988 as amounting to $47,958.93.

10. The Plaintiffs do not maintain their claims for both compensation under the ECO and damages at common law for negligence. Accordingly, the Plaintiffs do not claim the sums of $242,000.00, or interest on those sums, though they maintain their other claims, including their claims for the taxed costs of the proceedings under the ECO. In addition, they claim interest on their damages at common law from 19th January 1988, their taxed costs of the proceedings at common law from 20th November 1987 being the date of judgment, and their taxed costs of the proceedings under the ECO from 29th November 1985 being the date of the award. In my view, the Plaintiffs are entitled to all these sums. They are, for convenience, set out in para. 8 of Mr. Chow's skeleton argument, and I give judgment for the Plaintiffs against Eastern for those sums.