AZHAR HUSSAIN v. GAN ASSURANCES IARD COMPAGNIE FRANCAISE D’ASSURANCES ET DE REASSURANCES INCENDIE, ACCIDENTS ET RISQUES DIVERS

DCCJ3087/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3087 OF 2005

J U D G M E N T

1.  This is the hearing of a third party proceedings wherein the defendant claims against the 1st third party for indemnity in respect of the amount adjudged to be paid by the defendant.  The amount outstanding in respect of a judgment sum in DCEC917/2003 (hereinafter referred to as “the DCEC Judgment”) in the sum of HK$92,878.03.  The plaintiff in the main action was the applicant in DCEC917/2003 (hereinafter referred to as the “the DCEC action”).

2.  The applicant claimed employees’ compensation from the 1st third party, being the employer, and the 2nd third party, being the principal contractor.  The 2nd third party had made periodical payments to the plaintiff in the total sum of HK$206,400.  The plaintiff was granted judgment in the DCEC action in the total sum of $299,278.03.  The judgment in the DCEC action ordered the 1st and 2nd third parties, being, respectively, the 1st and 2nd respondents, to pay the balance of the judgment sum of HK$92,878.03.  Owing to the fact that the 1st and 2nd third parties failed to pay the outstanding sum in the DCEC judgment, the plaintiff took out this action against the insurer, the defendant.  The defendant took out the third party proceedings against the 1st third party on the basis of section 43(3) of the Employees' Compensation Ordinance, which states:

“Where under this part an amount is paid by the insurer which would, but for this section, not be payable under the policy of insurance, the employer is liable to pay that amount to the insurer.”

3.  The defendant’s basis for claiming that it is not liable to pay on the insurance policy is that the 1st third party failed to comply with Claim Settlement Condition A.  This condition states:

“Claims, Notification Demands, etc. 

In the event of any occurrence which may give rise to a claim under the policy, the insured shall immediately give notice thereof in writing to the company with full particulars.”

4.  The defendant also states that the insuring clause of the policy provides, inter alia, that,

“the due observance and fulfilment of the terms of this policy insofar as they relate to anything to be done or not to be done or to be complied with by the insured.  These shall be conditions precedent to any liability of the company to make payment or to provide indemnity under this policy.” 

5.  There is no dispute that the 1st third party had breached Claims Settlement Condition.  The defendant states that but for the provisions of the Employees' Compensation Ordinance they are not liable to pay the sum adjudged by the judgment of this court under the policy of insurance.  Hence it is entitled to be indemnified by the 1st third party.  The 1st third party’s only defence is that even though it has breached clause A of the Claims Settlement Conditions, and observance of this condition is a condition precedent to the defendant’s liability under the insurance policy, the defendant has not suffered any prejudice arising from this breach and hence cannot deny liability under the policy.  This is the only issue contended by the 1st third party. 

6.  In respect of this issue, the defendant’s counsel relies on the judgment in Chan Yiu Sun v Yip Kim Cheung & Ors (Euro-America Insurance Limited, Third Party).  This judgment refers to a line of authorities and came to the conclusion that the insurer did not have to show prejudice as a basis for denying liability on an insurance policy where the insured has breached a condition thereof where observance of the condition is a condition precedent of the insurance policy.  On the basis of that authority, it is clear that the issue raised by the 1st third party cannot stand.  I, therefore, have to give judgment for the defendant against the 1st third party.