SUNWAR CHET KUMAR v. AWIS MUHAMMAD AND ANOTHER

DCPI 1202/2024

[2025] HKDC 1391

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

PERSONAL INJURIES ACTION NO 1202 OF 2024

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BETWEEN

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DECISION

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The Summons

1.  The 2^nd Defendant (“D2”) seeks cessation as a party in this action pursuant to Order 15 Rule 6(2)(a) of the Rules of the District Court, Cap 336H (“RDC”) by way of a summons filed on 27 March 2025.

2.  The D2 served the said summons on the Plaintiff (“P”) and the 1^st Defendant (“D1”). The D1 did not appear at the call over hearing on 11 April 2025. Directions for substantive argument were given to P and D2 only.

3.  Mr Mok, solicitor for the P, did not lodge and serve his written submissions as directed. He chose to rely on the affidavit in opposition[1].

Background

4.  This is a personal injury action arising from a vehicle collision on Shek O Road at 11:50 pm on 13 December 2021. The P was one of five passengers on board a vehicle UA9089, which was hit by another vehicle, KA 1767 driven by the D1 carrying 6 passengers. As pleaded in the Statement of Claim, KA 1767 swerved across double white lines into the opposite direction, resulting a head-on collision with UA9089 (“the Accident”). As of today, a total of 11 personal injury claims have been commenced in the District Court by the driver and the passengers of UA9089 and the passengers of KA 1767.

5.  Shum Chun Yin (“SCY”) was the registered owner of KA 1767, the holder and the only named driver of the motor insurance policy insured by the D2 (“the Motor Policy”). SCY said he had rented KA 1767 to Mian Mohammad Mahmood (“Mian”) for the period from 10 – 16 December 2021 for $1,800. SCY was unaware how the D1 ended up beingthe driver at the time of the Accident. In view of this, the D2 claimed there was non-disclosure of material fact and thus seeking a declaration in HCMP 1981 of 2022 to avoid the Motor Policy pursuant to section 10(3) of the Motor Vehicle Insurance (Third Party Risks) Ordinance, Cap 272 (“Cap 272”). On 7 February 2023, by consent of the D2 and SCY, the said declaration was duly granted (“the Avoidance Declaration”).

6.  On 19 April 2024, the P issued the Writ of Summons of this personal injury action.

7.  The D2 said it was only alerted to this personal injury action by the P’s letter dated 12 September 2024, enclosing a consent summons for the 1^st Checklist Review hearing scheduled for 26 September 2024. Since the liability of an insurer to satisfy judgments against persons insured persons subsists under section 10(1) of Cap 272, the D2 applied for an order to join as a defendant in this action by way of summons filed on 25 September 2024. Section 10(1) of Cap 272 reads,

“10. Duty of insurers to satisfy judgments against persons insured in respect of third party risks

(1) If, after a certificate of insurance has been issued under section 6(3) in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under section 6(1)(b) (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any law relating to interest on judgments.” [emphasis added]

8.  In the affidavit of Lee Shuk Ling Linda[2], in support of the joinder application, apart from the fact that SCY has leased KA 1768 to Mian, she further provided the following:

(a) The D1 refused to give a police statement and had pleaded guilty to a charge of careless driving at the call over stage.

(b) The majority of the passengers on board had also refused to give a statement to the police.

(c) SCY and the D2 reported to the police and ICAC respectively.

9.  By the order of Master Jocelyn Leung dated 4 October 2024, the D2 was joined as a defendant.

This Application

10.  The D2 stated that, upon reviewing its internal record, it has noticed the P did not comply with section 10(2)(a) of Cap 272 since no notice was served by the P on the D2 within 7 days from the issuance of the Writ of Summons. The deadline of notifying the D2 fell on 26 April 2024, starting from the issuance of Writ of Summons on 19 April 2024. For this reason, the D2 applied for an order to cease being a party to this action on grounds that satisfaction of the judgment obtained by the P, if any, has been avoided due to the P’s breach of section 10(2)(a) of Cap 272.

11.  Section 10(2)(a) of Cap 272 reads,

(2) No sum shall be payable by an insurer under the foregoing provisions of this section—

(a) in respect of any judgment, unless before or within 7 days after the commencement of the proceedings in which the judgement was given, the insurer had notice of the bringing of the proceedings; …” [emphasis added]

12.  It is fair to say such notice need not be in any prescribed form, usually, a plaintiff (same as the P here) will serve a document known as Notice to Insurer together with the Writ of Summons and other relevant documents on the insurer (the D2 here). I shall refer the notice as stated in section 10(2) above generally as “the Notice”.

13.  It is on common ground that the registered address of the D2 has been changed since 26 January 2018. The previous registered address was Suite 3603 – 3605, One Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong (“the Previous Address”), whereas the current address is 20^th Floor, Vertical Sq, 28 Heung Yip Road, Wong Chuk Hang (“the Current Address”).

14.  The P admitted the Notice was once served on the D2 at the Previous Address by way of registered post on 23 April 2024. The P’s solicitors then said they had received a telephone call from a staff of the D2 on 25 April 2024 informing them the Notice had been served incorrectly to the Previous Address. The P’s solicitors then served the Notice again on the D2 by ordinary post to the Current Address on 25 April 2024.

15.  The P’s position is precisely that the Notice was served to the D2 within 7 days from the issuance of the Writ of Summons to the Current Address.

16.  It is worth noting that in both the P’s affirmations in opposition, namely, the affirmation of Muhammad Rehman Riaz[3] and affidavit of Mok Yiu Wang[4], the P did not exhibit any document as to proof of service of the Notice served by registered post on 23 April 2024. The only alleged proof of service was a cover letter exhibited in both affirmations dated 25 April 2024 sent to the Current Address.

17.  Having said that, Mr Mok submitted Order 3 rule 2(5) of the RDC shall be applicable in computing the 7-day period. The deadline of the 7-day period shall fall on 28 April 2024, not 26 April 2024.

18.  Mr Mok further argued, that it is hard to believe that when the joinder application was taken out as early as 25 September 2024, the D2 took a substantial period of time to discover the Notice was not served in accordance with section 10(2) of Cap 272. Anyhow, the D2 should have knowledge of the commencement of this action, and it shall remain as a party to the action.

19.  In the alternative, the D2 also relies on the Avoidance Declaration that D2 has successfully avoided the liability under the Motor Policy.

20.  Mr Mok did not submit on this point otherwise.

Issues

21.  In light of the above arguments, the issues to be determined are as follows:

(i) computation of the 7-day period pursuant to section 10(2) of Cap 272;

(ii) proof of service of the Notice to the D2; and

(iii) the effect of the Avoidance Declaration.

Analysis

22.  The application for ceasing to be a party is governed by Order 15 rule 6(2)(a) of the RDC. The Court may order any person to cease to be a party should the person who has improperly joined or unnecessarily made a party or who has for any reason to cease to be a proper or necessary party.

Computation of the 7-day time limit

23.  Mr Shum, counsel for the D2 submitted the applicable law in computation of the 7-day time period should be section 71(1)(a) of the Interpretation and General Clauses Ordinance, Cap 1. Section 71(1) reads,

“71. Computation of time

(1)In computing time for the purposes of any Ordinance—

(a) a period of days from the happening of any event or the doing of any act or thing shall be deemed to be exclusive of the day on which the event happens or the act or thing is done;

…

(d) where an act or proceeding is directed or allowed to be done or taken within any time not exceeding 6 days, no public holiday, gale warning day or black rainstorm warning day shall be reckoned in the computation of that time.”

24.  Since the 7-day period exceeds 6 days, public holidays including Sundays will be counted. According to the above, the deadline of the 7-day period prescribed in section 10(2) of Cap 272 shall fall on 26 April 2024.

25.  On the other hand, Mr Mok submitted, Order 3 rule 2(5) of the RDC shall be applied instead, it reads,

“2. Reckoning periods of time (O. 3, r. 2)

…

(5) Where, apart from this paragraph, the period in question, being a period of 7 days or less, would include a specified day, that day shall be excluded.

(6) In this rule—

specified day

(指明日子) means—

(a) a Saturday;

(b) a general holiday[5];

(c) a gale warning day as defined by section 71(2) of the Interpretation and General Clauses Ordinance (Cap. 1);

(d) a black rainstorm warning day as defined by that section; or

(e) (if the act in question is required to be done at an office of the Court) another day on which the office is closed.”

26.  Mr Mok said the Writ of Summons was issued on 19 April 2024, a Friday. Applying Order 3 rule 2(5) of the RDC, the following Saturday and Sunday shall be excluded, the 7-day time limit shall expire on 28 April 2024.

27.  I reject Mr Mok’s submission. Mr Shum is right to apply section 71 of Cap 1 because it governs computation of time for the purpose of any Ordinance. Order 3 of the RDC only falls into the category of any period of time fixed by RDC, or by any judgment, order or direction for doing any act. (See Order 3 rule 2(1) of RDC).

28.  On this point, the deadline of the 7-day period shall be 26 April 2024.

Proof of service

29.  The only evidence that the P is able to demonstrate prove service is a copy of the letter dated 25 April 2024 (the day before the deadline) bearing the Current Address, which was allegedly sent by ordinary post on the same day. (see Exhibit marked “MRR-1” in the Affirmation of Muhammad Rehman Riaz)

30.  When the Notice was sent by ordinary post on 25 April 2024, there exists a possibility that it may not arrive at the D2 by 26 April 2024, unless there is proof of service or otherwise.

31.  In absence of evidence, the deeming provision in paragraph 2 of the Practice Directions 19.2 comes into play. Delivery in the ordinary course of post under inter alia, in District Court, shall be deemed, subject to proof to the contrary, to have been effected in the case of ordinary post, on the 2^nd working day after posting.

32.  That said, the best case for the P, to have served the Notice to the D2 on 25 April 2024 by ordinary post shall be deemed to have effected on 27 April 2024 (Saturday), one day after the expiry of the 7-day period.

33.  In this regard and solely on this point, the P has failed to comply with section 10(2)(a) of Cap 272 that the Notice was served on the D2 out of time.

34.  Mr Mok submitted, given D2’s participation in this action, it ought to have noticed and acknowledged the P’s claim. This argument could not be substantiated because the notice period expressly stated in section 10(2)(a) of Cap 272 is a statutory requirement. The Court has no power to extend the time for giving notice to an insurer under this section.

35.  I will add, as submitted by Mr Shum, the clear intention of section 10(2)(a) of Cap 272 is to ensure that a judgment cannot be enforced against an insurer who had no notice of the proceedings. The reason for this provision can only be to enable an insurer who faces a potential claim for payment under the judgment to join in the proceedings and establish any defence that may be available. (See Tan Chou t/a Wah Ngai v March Insurance (unrep HCMP 1128/1990, 7 May 1991).

36.  In this respect, solely relying on the P’s non-compliance with section 10(2)(a) of Cap 272, the D2’s duty to satisfy judgment obtained by the P has already been exonerated.

The Avoidance Declaration

37.  Mr Shum put forth another reason that the Avoidance Declaration serves as a basis freeing the D2 from the duty under section 10(1) of Cap 272. Mr Mok did not make submissions to the contrary.

38.  Section 10(3) reads,

“(3) No sum shall be payable by an insurer under the foregoing provisions of this section, if, in an action commenced before, or within 3 months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration that, apart from any provision contained in the policy, he is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact, or by a representation of fact which was false in some material particular, or, if he has avoided the policy on that ground, that he was entitled so to do apart from any provision contained in it:

Provided that an insurer who has obtained such a declaration as aforesaid in an action shall not thereby become entitled to the benefit of this subsection as respects any judgement obtained in proceedings commenced before the commencement of that action, unless before or within 7 days after the commencement of that action he has given notice thereof to the person who is the plaintiff in the said proceedings specifying the non-disclosure or false representation on which he proposes to rely, and any person to whom notice of such an action is so given shall be entitled, if he thinks fit, to be made a party thereto.”

39.  To start off, section 10(1) of Cap 272 states a general obligation that an insurer has to satisfy judgment (i.e. to pay to persons entitled to the benefit of the judgment) obtained by a third party, often victims of traffic accidents, irrespective whether the insurer is entitled to avoid or cancel the policy.

40.  However, an insurer can be released from its obligation to satisfy judgments according to section 10(1) of Cap 272 if it has obtained a declaration pursuant to section 10(3) of Cap 272 that the policy was issued through non-disclosure of a material fact or false representation. Such declaration gives effect to a specific motor insurance policy be avoided or cancelled.

41.  Section 10(3) of Cap 272 also provides a mechanism that allows an insurer to obtain the same declaration from Court so as to avoid its liability under section 10(1) of Cap 272. Time is crucial because in this situation, an insurer who intends to avoid liability shall, before or within 3 months from the commencement of the personal injury claim relating to the accident, obtain such declaration from Court.

42.  In addition, to refrain an insurer from weaponizing such declaration as a tool to avoid paying damages awarded in judgments obtained by third parties, there is one more criterion to be fulfilled in the proviso of section 10(3) of Cap 272. When an insurer applies for such declaration and when the personal injury action stemming from the related traffic accident has commenced, an insurer shall give notice to the third party (the plaintiff therein) before or within 7 days of the application of declaration. In the notice, an insurer has to specify the non-disclosure or false representation that he proposes to rely on. That third party (the plaintiff thereof) can be made a party to the insurer’s application for declaration, if necessary.

43.  In the present case, the Avoidance Declaration was successfully obtained on 7 February 2023, at a post - accident stage and before the commencement of this personal injury action on 19 April 2024. The D2 has satisfied the time requirement of section 10(3) of Cap 272. The proviso of section 10(3) does not apply because at time of application of the said declaration, this personal injury claim has not been commenced.

44.  I agree with Mr Shum that the Avoidance Declaration was obtained in compliance with the requirements of section 10(3) of Cap 272. The D2 will have the right to be “entitled to the benefit” of avoiding its duty under section 10(1) of Cap 272. In other words, the D2’s interest in this action has extinguished.

Conclusion

45.  I have no hesitation in concluding the D2’s duty under section 10(1) has been exonerated on both grounds. The D2 is not a necessary party to this action, and I so order that the D2 shall cease to be a party hereto.

Costs

46.  I find nothing here to deviate from the usual costs order. I shall make a costs order that the P to pay the D2’s costs of the D2’s summons filed on 27 March 2025, including all costs reserved and with certificate for counsel, to be taxed if not agreed.

47.  For reason that the D1 did not participate in this application, and upon confirmation from both Mr Shum and Mr Mok that no issue on costs would arise between them, I order there be no order as to costs between the D1 and the D2.