HUI TING HANG v. GRAND UNION MOTOR INSURANCE COMPANY LTD.

Insurance - Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap.272) - claim by authorised driver under policy against insurer for indemnity in respect of damages awarded against him in favour of fellow servants.

Upon the true construction of s.9 of the Ordinance, read with s.6(1)(b) as a whole including proviso (i), in respect of liability of the kind mentioned in proviso (i), an insurer is entitled to rely upon conditions in the policy that would avoid liability because the effect of those provisions is that they only invalidate conditions of the kind described in s.9 in so far as they apply to third party claims against which insurance is compulsory.

Decision of High Court affirmed.

IN THE COURT OF APPEAL

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J U D G M E N T

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Fuad, V.P.:

1. This is an appeal by the Plaintiff from the dismissal by Nazareth J. on 17th December 1987 of his summons for summary judgment under R.S.C. O.14 against the Defendant.

2. Unusually, Nazareth J.'s Order simply dismissed the Plaintiff's summons with costs and did not go on to give unconditional leave to defend. This the judge was empowered to do under O.14, r.7 Before us, the parties have agreed that this Court should enter judgment in favour of whichever party succeeds on the appeal, without prejudice to any further rights of appeal. Since in the controversy between the parties all the relevant factors are common ground and its resolution depends entirely on a point of law, this sensible arrangement will save costs.

3. The history of the matter goes back to 1982. On 20th February of that year, the Plaintiff in the present action, Mr. Hui Tine Hang an employee of a Mr. Law Chung Wing was driving a number of Mr. Law's other employees to a work site at Gin Drinker's Ray in a van owned by Mr. Law. There was an accident on Kwai Chung Road and five of Mr. Law's employees were injured, two of the men later dying of their injuries.

The essential facts were that:

(a) at the material time there vas, in force, in respect of the van, comprehensive motor insurance with Grand Union Motor Insurance Company Ltd. ("Grand Union") who is the Defendant in this action;

(b) Grand Union were authorised insurers for the purposes of s.6 of the Motor Vehicles Insurance (Third Party Risks) Ordinance, Cap.272 ("the Ordinance");

(c) Mr. Hui_. was driving the vehicle with Mr. Law's permission, and in the course of his employment. Mr. Rui was an "authorised driver" within the terms of the policy;

(d) the deaths of two of the men, and the injuries of the other three men, arose out of and in the course of their employment with Mr. Law;

(e) five separate actions were instituted against Mr. Law and Mr. Hui, respectively by the three injured men and by the personal representatives of the two men who died of their injuries. Judgments were entered against Mr. Law and Mr. Hui, jointly and severally, and damages were assessed. None of the five judgment debts (including, taxed costs) has been satisfied.

4. On 8th June 1985 the judgment creditors in respect of the five actions joined together in an action against Grand Union to recover the fruits of their judgments. They relied on s.10(l) of the Ordinance. The action came on for hearing before Hunter J. (as he then vas) and was dismissed on 6th November 1986. His judgment is reported at [1987] H.K.L.R. 116 and the judgment of this Court upholding his decision is reported at [1987] H.K.L.R. 811.

5. The action with which we are concerned was instituted by Mr.Hui against Grand Union on 26th May 1987 It is founded on the fact that the relevant insurance policy expressly provided that Grand Union would, subject to the limits of liability in the jurisdiction clause of the policy, indemnify any authorised driver against all sums including costs and expenses which the authorised driver became legally liable to pay in respect of the death or bodily injury to any person where such death or injury arose out of an accident caused by or in connection with the motor vehicle 811 the material facts are pleaded, and indemnity is sought in respect of the liability established in each of the five actions to which reference has been made The amounts due to the victims of the accident, at the time the present proceedings were instituted, totalled something like $2.2 millon.

6. For the purposes of the O.14 summons, it was agreed between the parties (and has now been formally conceded on behalf of Mr. Hui) that he was in breach of certain conditions which were stated in the policy to be conditions precedent to Grand Union's liability to indemnify him.

7. As Nazareth J. saw it, the question which arose, and upon hick the decision on the O.14 summons turned, was whether Grand Union was disallowed from relying upon the relevant condition precedent clause in the policy, by s.9 of the Ordinance, read with s.6(1)(b).

8. I will now read the provisions of the Ordinance to which the judge referred and which he interpreted.

9. Section 6(1)is as, follows:

"6. (1) In order to comply with the requirements of this Ordinance a policy of insurance must be a policy which-

(a) is issued by an authorized insurer; and

(b) insures such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by shim or them in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle on a road:

Provided that such a policy shall not be required to cover -

(i) liability in. respect of the death arising out of and in the course of his employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment; or

(ii) [Deleted, 22 of 1976, s 3]

(iii) any contractual liability."

Section 9 is in these terms:

"9 Any condition in a policy or security issued or given for the purposes of this Ordinance, providing that no liability shall arise under the policy or security, or that any liability so arising shall cease, in the event of some specified thing being done or omitted to be done after the happening of the event giving rise to a claim under the policy or security, shall be of no effect in connexion with such claims as are mentioned in section 6(1)(b):

Provided that nothing in this section shall be taken to render void any provisions in a policy or security requiring the person insured or secured to repay to the insurer or the giver of the security any sums which the latter may have become liable to pay under the policy or security and which have been applied to the satisfaction of the claims of third parties."

10. After reviewing the submissions made by counsel on behalf of Mr. Hui (in effect that the reference in s.9 to "such claims as are mentioned in section 6(1)(b)" had application only to that part of the subsection which occurred before the proviso) the learned judge said that it seemed to him that in s.9 the reference to "such claims as are mentioned in s.6(1) (b)" could only mean claims arising out of the liability mentioned in s.6(1)(b). In his view, that liability was not to be identified by simply referring to the main part of paragraph (b) without reference to the entire subsection including the proviso which must be be part of paragraph (b). While it was possible to differentiate between a proviso and the preceding provision it limited, there was nothing to that effect provided in s.6(1)(b) or s.9. Section 6(1)(b) read as a whole or even paragraph (b) read as a whole (i.e. inclusive of its proviso) revealed clearly enough that the liability required to be insured was "any liability which may be incurred ... "other than "in respect of ... employment... and contractual liability".

11. I interpose to say that a re-draft of the whole of s.6(1) in the following way (although more clumsily drawn) would give precisely the same meaning to the subsection without resorting to the proviso formula:

"6.(1) In order to comply with the requirements of this Ordinance, a policy of insurance must he a Policy which -

(a) is issued by an authorised insurer; and

(b) insures such person, persons or classes of persons as may be specified in the policy in respect of any liability (other than (i) liability in respect of the death arising out of and in the course of his employment of a person in the employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment and (ii) any contractual liability) which may be incurred by him or them in respect of the death of or bodily injury to any person caused by pr arising out of the use of the motor vehicle on a road."

12. The judge concluded that upon the true construction of the words "such claims as are mentioned in section 6(1)(b)" in s.9 they referred to the liability mentioned in s.6(1)(b) as limited by the proviso thereto. It followed that the claims in respect of the deceased and injured persons were not such claims as are mentioned in s.6(1)(b) because all of them turned upon liability in respect of death or injury arising out and in the course of employment.

13. I will say at once that in my judgment Nazareth J. was right to reject the contention advanced to him on behalf of the Plaintiff that the words "such claims as are mentioned in section 6(1) (b) which occur in s.9 immediately before the proviso to that subsection should be construed without reference to what is contained in proviso (i) to s.6(1)(b). It seems clear to me that proviso (i) is a true proviso and its effect is to except out of the preceding part of s.6(1) (b) that which, but for the proviso, would have been in it. Put another way, but for proviso (i), the earlier part of s.6(1)(b) would have embraced the subject-matter of the proviso.

14. Mr. Mills-Owens, who did not represent the plaintiff in the Court below, submitted that there was no justification for reading the relevant words in s.9 as being limited only to liability in respect of compulsorily insurable risks for, by reason of proviso (i), s.6(1) was also concerned with liability which was not required to be insured against.

15. Mr. Mills-Owens contrasted the wording employed in s.9 with that used in the following sections:

s.10(1):"... in respect of such liability as is required to be covered by a policy under section 6(1)(b)";

s.11:".. such liability of that person as is required to be covered by a policy under section 6(1),(b)";

s.12(1):"...as respects such liabilities as are required to be covered by a policy under section 6(1)(b)";

s.13"..such liability as is required to be covered by a policy under section 6(1)(b)",

and submitted that if that was what was meant, the formula used in s.9 would have been the same.

16. Mr. Mills-Owens also pointed out that in s.206(2) of the U.R. Road Traffic Act 1960, in the provisions broadly equivalent to our s.9, the formula such liabilities as are required to be covered by a policy under section ...is to be found. He argues that change in the law from the earlier provisions which were the same as our s.9 was to be assumed. He also emphasised that our Ordinance had been amended many times since its enactment and yet the formula in s.9 had remained the same, despite the amendments to the English statutes for which our law had been derived. What I will call the new formula is retained in s. 148(2) current statute in force in the U. K., Road Traffic 1972.

17. As the learned judge pointed out, the construction which found favour with him has some support in SHAWCROSS ON MOTOR INSURANCE (2nd Edition) where the authors comment on s.38 of the Road Traffic Act, 1920 of the U.K. (repealed) from which our s.9 derives. (The same comment is made in the 1st Edition). At page 220 we find:

"4. Shall be of no effect. ' - This should be read as if followed by the words ('subject to Proviso to this subsection'). The limited operation of this subsection must be stressed. It only invalidates conditions of the type described in so far as they apply to third party claims against which insurance is compulsory (d)[i.e. those specified in subsection.(I)(b) of section 36.]

5. 'In connection with such claims as are mentioned in paragraph(b) of subsection, (I) of section 36. The claim referred to are claims in respect of the liability of the assured for the death of or bodily injury to certain third parties."

The learned judge also referred to the support to his views provided HALSBRURYS LAWS OF ENGLAND (3rd Edition)Vol. 22, para. 763; and (4th Edition) Vol. 25, para. 769. I will not read those paragraphs.

18. I would add here, that a measure of support to the learned judge's interpretation is given by the decision of English Court of Appeal in Jones v. Birch Brothers [1933] 2 K. B. 597, a case not cited to the judge. I have in mind what Greer L.J. had to say at the foot of p.612 and the top of p.613 which I will not read.

19. About that case, Mr. Mills-ownes says that Greer L.J.'s observations were very tentatively expressed. About SHAWCROSS and HALSBURY, he draws attention to the fact that no authorities are cited to the propositions formulated.

20. In construing s.9 of the Ordinance one has to bear in mind the purpose for which the legislation was enacted, It was, of course, to require compulsory insurance in certain circumstances but not in respect of all persons for, right from the start, there was an exclusion of employees from compulsory cover. Despite the different wording in ss.10, 11, 12 and 13 to which I have drawn attention, it would be a strange result if the reference to s.6(1)(b) in those sections were to be construed differently from the reference to s.6(1)(b) in s.9.

21. I do not understand the substance of the law in the U.K. affecting the matter before us to have been chanced by the Act of 1960. As I see it, all that happened was that under the U.K. Consolidation of Enactments (Procedure) Act 1949 (see the Long Title to the Road Traffic Act 1960) the drafting of the words we have to consider was improved upon. In s.38 of the U V. Act of 1930 (as in our s.9) there vas a reference to "claims" whereas better drafting would have referred to "liabilities", for the expression "any liability" is used in s.36 of the U.K. Act (as in our s.6). It will be seen that I have agreed with the judge's reasoning on page 5 of the transcript of his judgment on this aspect of the matter.

22. To give effect to the words in s.9 of the Ordinance which occur immediately before the proviso, in my view, the reference to "claims" must be taken as a reference to claims in respect of any liability of the insured against which he is required to be covered by insurance by reason of s.6(1)(b) read as a whole, with its provisos As I have mentioned, as I read them, the English Acts and the derivative H.K. Ordinance, have, in this context, always and only heen concerned with compulsorily insurable liability and as I interpret our Ordinance, an insurer can rely on conditions precedent which would defeat a claim on the policy in other cases.

23. In my judgment, Nazareth J. came to the right conclusion I would therefore dismiss the appeal and propose that the Plaintiff's action be dismissed and judgment entered in favour of the Defendant with the costs of the action

Hunter J.A.:

24. I agree that this appeal fails for the reasons given by my Lord. There can I think to be no room for doubt that when the United Kingdom Parliament enacted s.38 of the Road Traffic Act 1930 upon which our s.9 is based, it was not intending to rewrite the law of insurance generally, or indeed to do anything more than was necessary to render effective the policy of compulsory third party road traffic cover. Unless insurers rights to rely upon a post accident breach of condition were restricted, the third party could well find himself without cover. The third party who was intended to benefit from this restriction in s.38 was the same third party in whose favour cover was mandatory under what is now our s.6. This was the sole purpose of s.38 and' is the sole purpose of our 9. That view was readily taken by the English Courts between 1930 and 1934. 1 have in mind the view of MacKinnon J. expressed in Revell v. London General Insurance Co. (1934) 50 at p.114 and that of Greer L.J. in the case of Jones v. Birch Brothers to which my Lord has referred.

25. I think it unfortunate that the tidying up operation that was carried out in England in 1960 was not carried out in Hong Kong so that we are now left with a misleading contrast in the language between s.9 taken from the 1930 Act and the language in ss.10, 11, 12 and 13 taken from the 1934 Act. But the reason for this can be seen clearly to be historical. It is impossible on this account to attribute to the legislature any intention to change or enlarge the meaning of s.9.

26. I reach this conclusion because I can see no escape from it. I do it without any pleasure at all. It is an unfortunate fact in this case that by reason of their employment none of the Plaintiffs fall within that privileged class of persons labelled third parties in the road traffic legislation.

Penlington, J.A.:

27. I also agree that the appeal must be dismissed for the reasons that have already been given. I do so with the greatest reluctance as here workers have been killed or grievously injured by the negligence of a fellow worker. They have brought proceedings but for reasons which I am sure they will be quite unable to understand, have no effective remedy.

28. It is also to be noted that the accident occurred prior to the 1st January 1984 when employee's compensation insurance became compulsory and I understand that there was no such insurance in this case.

29. However, I am satisfied that that situation is one which must be left to the legislature as to the law and for the executive to consider the position of the persons injured and the dependants of those killed.