VSC BUILDING PRODUCTS CO LTD v. KONO INSURANCE LTD

HCA 947/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 947 OF 2005

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J U D G M E N T

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1.  This is an application to amend the defence.

2.  The trial of the action has been fixed for 4 December this year with two days reserved.  The trial is to take place immediately after the trial of another action, a personal injuries action.

3.  The two actions are related in that in the personal injuries action, a workman says that he has been injured at work.  He was employed by a subcontractor of the plaintiff in the present action.  (The plaintiff itself was a subcontractor.)

4.  The plaintiff in the present action sues its own insurer in respect of an insurance policy regarding its liability under the policy to indemnify the claim of an employee of a subcontractor like the plaintiff in the personal injuries action.

5.  The application to amend is a late one.  It seeks to raise formally the defence that the plaintiff has, in breach of a condition in the policy, failed to notify the insurer of the accident in time.  Knowledge of the plaintiff of the accident therefore becomes a crucial matter.

6.  In the proposed amendment, the defendant seeks to establish knowledge in a number of ways.  First, it alleges actual knowledge on the part of the plaintiff.  Secondly, it alleges imputed knowledge via the subcontractor who employed the injured employee.  Thirdly, the insurer runs an argument that if there was no effective system of communication and reporting between the plaintiff and its subcontractor in question, the plaintiff could not hide behind its ignorance of the accident due to the lack of such a communication or reporting system in the circumstances of the case to escape from its duty under the policy to notify the insurer immediately of the happening of any such accident.

7.  The defendant says that the relevant evidence has already been contained in the witness statements that have been filed and exchanged in these proceedings.  In particular, it relies on a witness statement filed last year on its behalf by a Miss Lui.  Amongst other things, she referred to a telephone conversation between herself and a former foreman in the employ of the subcontractor, who had apparently had a telephone conversation with the injured employee shortly after the alleged accident.

8.  The defendant says that that telephone conversation gave the foreman the requisite knowledge of the happening of the accident.  By reason of the foreman’s knowledge, the defendant says, the subcontractor also gained knowledge of the accident.

9.  The defendant also relies on a witness statement prepared by the foreman in the related employees’ compensation proceedings which referred to the telephone conversation in question.

10.  The Court has been informed by the defendant at today’s hearing that the foreman has left the employment of the subcontractor and cannot be located despite efforts by the insurer to locate him.  Apparently, if this application to amend is allowed, the defendant will file a hearsay notice in relation to his witness statement made in the employees’ compensation proceedings.  (The defendant has confirmed with the Court that it would not seek to extract from the injured employee at the trial of the personal injuries action, which it has been allowed to take part in, evidence regarding such telephone conversation or knowledge on the part of the subcontractor.)

11.  The defendant also relies on the relationship between the plaintiff and the subcontractor to say that there must have been put in place such a system of communication and reporting, and the plaintiff must have known of the happening of the accident from the subcontractor.

12.  It is trite that an amendment should be refused if it is a futile one, particularly if it is a late application.

13.  I will take the three alternative ways the defendant has sought to establish knowledge in turn.  First, actual knowledge:  having had the benefit of very detailed submissions from counsel as well as from Mr Tam appearing for the defendant this morning, and having reviewed the evidence or proposed evidence that has been filed with the court, I can find no or insufficient evidence to suggest any actual knowledge on the part of the plaintiff at the material time of the happening of the accident.

14.  I do not think therefore this first way of establishing knowledge has any reasonably arguable chance of success at trial if it is allowed to be run.

15.  As regards the second way of establishing knowledge, ie  imputed knowledge from the subcontractor, I can see an arguable case here.  Whether the alleged knowledge of the foreman can be taken as the knowledge of the subcontractor, and further, whether the knowledge of the subcontractor, if any, can be taken as imputed knowledge of the plaintiff, are matters that should be thrashed out properly at trial.  There is, on the face of it, some evidence to suggest that the injured employee has had a telephone conversation with the foreman in question.  The contents of the telephone conversation would be something that requires exploration at trial.  I am not prepared at this stage to say that the defendant would definitely fail on this point.

16.  Thirdly, about the suggestion that the plaintiff cannot hide behind its ignorance caused solely by its own failure to put in place a proper system of reporting and communication between itself and the subcontractor so as to escape from its duty to notify the insurer of any accident at work, this is an interesting proposition of law.  Unfortunately, Mr Tam, appearing for the defendant, has failed to cite to the Court any authorities in support of this proposition.  The authority he cited to me, namely Hong Kong Resort Company Limited v St Paul Fire & Marine Insurance Company, HCA 4853/1991, 20 November 1992, Saied J, does not support his proposition.  The case was concerned with whether the knowledge of a subordinate official in a limited company could be treated as the knowledge of the company itself.  The English case referred to in that case, namely Evans v Employers Mutual Insurance Association Limited [1936] 1 KB 505, was also on the same subject matter.

17.  One is here concerned not with the internal knowledge, as it were, between a company employer and a junior employee of the company.  One is here concerned with the suggested imputed knowledge of a principal contractor by reason of the actual knowledge of its subcontractor.

18.  As presently advised, and in the absence of any authorities to support the proposition put forward by Mr Tam on behalf of the defendant, whilst the argument raised is ultimately a question of construction of the terms of the policy, I am not satisfied that the proposition is reasonably arguable.  I also bear in mind that this is a fairly late application.  Any doubt in this regard should be resolved in favour of the plaintiff, the recipient of this very late application to amend.

19.  The primary considerations in this type of late application are first, the merit of the proposed amendment, which I have just dealt with, and secondly, and maybe more importantly, the presence or absence of any real prejudice to the other side.

20.  Having considered the circumstances of the case, in terms of prejudice, I do not think allowing the defendant to run a case of knowledge, or a case of imputed knowledge, to be more exact, would cause the plaintiff any real prejudice.  The evidence is basically there already.  If the foreman could be located, quite obviously he would have to be called to give evidence.  If he could not be located, his witness statement in the employees’ compensation proceedings would have to be relied on, and the weight to be given to the contents of his witness statement would really be a matter for the trial judge.

21.  So far as I can see, the case of the plaintiff on the question of knowledge and imputed knowledge is quite clear on the existing evidence filed, and Mr Bharwaney SC for the plaintiff has not suggested this morning that his client would need to put in any further witness statement in case the amendment is allowed in whole or in part, but if he should ask for such leave to do so, the application would be most readily granted.  We have slightly less than three months before the commencement of trial.  I believe, in the circumstances of the case, the time remaining would be sufficient to accommodate the filing of such further evidence, if any.

22.  Absent any real prejudice, the case must be decided upon the general principle that a court of law seeks to adjudicate on the real issues and disputes between the parties and, if possible, technical and procedural rules should not stand in the way of allowing the parties to raise their real claims or defences before the court for adjudication.

23.  So for all those reasons, I am prepared to allow the application to amend to the extent that a case of imputed knowledge is permitted to be run at trial.

24.  There are some other minor amendments which are not controversial.  They are also allowed as well.  In other words, the amendment to paragraph 3 may go in as well, and so far as the plea of repudiation in paragraph 13 is concerned, I will allow it to go in.  As to the legal effect of that plea, that will be a matter for trial.

25.  As to the rest of the amendments, they are allowed to the extent I have just indicated.

[Submissions on costs]

26.  As regards costs, the defendant has come to court asking for indulgence.  It must pay for the indulgence it has managed to obtain.  So costs of and occasioned by the application to amend, including the costs of the aborted hearing on 31 August 2009 and today’s hearing, be paid by the defendant to the plaintiff in any event.