PANG WAI CHUNG v. THE TAI PING INSURANCE CO. LTD.

Civil Appeal No. 114 of 1998

HEADNOTE

Employees' Compensation Ordinance - Construction of ss. 43 and 44 - Employee's direct claim against employer's insurer - Limitation.

Held: Time begins to run from quantification of damages and has not been advanced by s.44(2) and (3) to commence from the time of the accident.

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

1998, No. 114
(Civil)

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J U D G M E N T

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Nazareth, V.-P.:

1. This is an appeal against the judgment of Deputy Judge Wesley Wong given in the Court of First Instance on 25 March 1998. By his judgment he held that the plaintiff/employee's action was not statute-barred and gave judgment against the defendant/insurer for the outstanding part of the judgment in PI Action No. 793 of 1995 which the plaintiff/employee had secured against the employer.

The facts

2. The facts are quite simple and straightforward and can conveniently be taken from the judgment.

3. The employee used to work for Hoi Tat Rubber Factory as a machine operator. On 16 December 1987 his right hand was crushed in an industrial accident and that part of it above the wrist was amputated.

4. In the two subsequent proceedings arising out of the accident, ECC No. 46 of 1989 and HC Action PI No. 793 of 1995 he was awarded $248,721.60 $2,241,137.00 respectively together with interest and costs in the latter.

5. The defendant at the material time was the insurer of Hoi Tat Rubber Factory. By a policy of insurance issued by the insurer for the purposes of Part IV of the Employees' Compensation Ordinance ("Cap. 282") the insurer agreed to insure Hoi Tat Rubber Factory in respect of its liability towards its employees both under Cap. 282 and independently of Cap. 282.

6. The employee did not recover from the Hoi Tat Rubber Factory the judgment sum, interests and costs awarded to him. He then sued the insurer under the policy and under ss.43 and 44 of the Employees' Compensation Ordinance. The matter came before Deputy Judge Wong in the Court of First Instance as mentioned. As framed by the parties, the only issue was, as it is before us, whether the action was statute-barred. In that context, it is necessary to have regard to have the following short chronology:

The judgment below

7. As to whether the action was statute barred, counsel for the employee below submitted that the cause of action accrued when the judgment in PI Action No. 793 of 1995 was pronounced on 30 April 1996. He relied, in addition to the terms of ss.43 and 44 of Cap. 282, also upon Wong Po Wah v Pacific Insurance Co Ltd [1988] 2 HKLR 417 as authority for the proposition that s.43 creates a right in the employee to recover in his own name directly from the insurer the amount he would have been entitled to recover from the person insured only after quantification of his claim. The judge accepted that submission. In consequence he held that time ran only from the judgment in PI No. 793 and not from the date of the accident. The employee's action was therefore, he held, not statute barred.

The insurer's case

8. The submission of Mr Chan SC who, with Mr Alan Ng, appeared for the appellant/insurer, is in essence this. Wong Po Wah can be put aside. Since 22 July 1993, when the Employees' Compensation (Amendment) 1993 came into effect, the legal position has been materially changed and is regulated not merely by ss.43 and 44 of the Ordinance in their pre-22 July 1993 form, but also by subsections (2) and (3) of s.44. Subsection (2), particularly, makes it clear that whatever the previous position, the post 22 July 1993 position is that an employee can institute proceedings prior to quantification; that the cause of action under subsection (2) is still the same cause of action as originally provided by s.44 (now s.44(1)); and that accordingly limitation runs from the date of the accident so that the employee's claim against the insurer is time barred.

9. As a second ground, in case his first ground fails, Mr Chan relies upon the contention that the employee's claim for costs and interest not having been quantified prior to commencement of his action, it could not have been properly brought.

The employee's case

10. Mr Robert Tang SC, who with Mr Andrew Cheung, appears for the employee, for his part, submits that such a conclusion should be rejected for the following reasons:

11. In addition, by an analogy with what was held in Bradley v Eagle Star Insurance Co Ltd [1989]1 AC 957, Mr Tang submits that a proper construction of s.44(2) and (3) in the light of his four foregoing reasons, is that the employee is put into the shoes of the insurer. Thus, the submission runs, the employee's claim can be seen to be for an indemnity, upon which he would not able to sue until quantification.

As to the insurer's secondary submission, i.e. non-quantification of costs and interest, Mr Tang submits that it is not open to the insurer to rely upon a point taken for the first time at the hearing of the appeal.

Sections 43 and (44) of Cap. 282

12. It is necessary first of all to set out the material provisions of ss.43 and 44:

13. It is important to note that originally s.44(1) stood alone as s.44 until subsections (2) and (3) were added by Ordinance 66 of 1993, whereupon it was renumbered as s.44(1). Prior to being so introduced by Ordinance 66 of 1993, subsections (2) and (3) did not exist.

Effect of Wong Po Wah

14. That which was held in Wong Po Wah and is regarded as relevant here is as follows. First, the following passage from the judgment of Fuad V-P:

And second, that at p.423 C-D of the judgment of Hunter JA:

15. It is not in dispute that as the decision of the Court (Macdougall J, as he then was, agreed), in effect that quantification was in the nature of a condition precedent to the employee being able to sue the insurer, it is binding upon this Court. However, if the statutory position had been materially altered by the subsequent Amendment Ordinance of 1966, plainly Wong Po Wah may no longer be binding.

16. Mr Chan relies on the plain meaning of the words in subsections (2) and (3) of s.44. I have to say that on its face the meaning of subsection (2) seems plainly to be that an employee may commence proceedings against the insurer if he has already commenced or at the same time commences proceedings against the employer. Those conditions could plainly be met prior to judgment i.e. quantification. To displace that meaning would require compelling reasons.

17. Likewise, with respect to subsection (3), which plainly enables an employee to take proceedings against the insurer in the three limited circumstances it specifies, prior to quantification.

18. It is necessary to go to the details of Mr Tang's submission to see if they do provide such compelling reasons.

Analysis

19. It is not in dispute that before 22 July 1993, when s.44(2) and (3) was introduced, ss.43 and 44 gave employees the right to proceed against and recover from insurers who had insured the Cap. 282 Part IV liability of their employers, their injury claims to employee's compensation. That right of an employee to proceed and recover direct from the insurer the amount of the employer's liability to him is conferred primarily by s.44(1). Upon the authority of the Court of Appeal judgment in Wong Po Wah, which was approved by the Privy Council, that right arises upon quantification of the claim, as had been seen. The right is plainly not a procedural right.

20. Turning then to s.44(2) and (3), the former says that the employee shall not commence proceedings against the insurer without having commenced or commencing proceedings against the employer. Section 44(3) mitigates that restriction in the three circumstances it mentions. Clearly, both s.44(2) and (3) are procedural provisions.

21. The right to proceed and recover directly from the insurer can be readily seen to be a vital part of the general scheme and purpose of the Ordinance, particularly Part IV. For instance in the case of insolvent or missing employers, employees are very likely to be left without any compensation if they are not able to proceed and recover directly from the insurers. While, the requirement to first or contemporaneously take proceedings against the employer (and is to be noted not secure judgment), plainly seems a reasonable measure to protect insurers, the complete denial of the employee's right to proceed and recover direct from the insurer where such protection of insurers is unnecessary or cannot be provided by the employee is, in my view, plainly taking matters too far. If it were indeed the intention of the legislation to remove this essential right, it is to be expected that this would have been done in express terms and not in the oblique way contended for. Needless to say, the construction contended for on behalf of the insurers can be seen to be plainly against the spirit and purpose of the legislation.

22. In particular, a procedural provision would not have been used to largely emasculate so essential a right in the scheme and purpose of the Ordinance. Put another way, "the proper approach to the construction of [the legislation in question] is not to decide what label to apply to it, procedural or otherwise, but to see whether the statute, if applied retrospectively, would impair existing rights and obligations" Yew Bon Tew alias Yong Boon Tiew and anor v Kenderaan Bas Mara (PC) [1983]1 AC 553 at 562G-563C. Upon that basis, it seems to me that s.44(2) and (3) ought not to be given retrospective effect so as to nullify a substantive right particularly in so important a respect.

23. The foregoing, in my view, clearly require s.44(2) and (3) to be construed as not effecting the decision of this Court in Wong Po Wah, that the employee's right arises only after quantification. It is not necessary to go further.

24. It remains to mention Mr Chan's fall back ground that part of the employee's claim consisting of interest and costs was not quantified. However, the interest rate was specified by the judge, and it was then a mechanical exercise to determine the result; I did not understand that to be disputed. As to costs, I reject the suggestion that the employee's claim was not quantified because costs have yet to be agreed or taxed, a fortiori, since here also there is no suggestion of any untoward difficulty or dispute about the costs. The submission is not grounded in a proper view of Wong Po Wah or of the effect of the relevant provisions of Cap. 282. I have no hesitation in rejecting it.

25. It remains to say that I do not find it necessary to address Mr Tang's other grounds. I will add only that I am not able to accept his submission that ss.43 and 44(1) give rise to one cause of action, and s.44(2) and (3) to another with time running from the date of the accident only with respect to the latter. It seems to me quite clear that there is only one cause of action, i.e. that created by ss.43 and 44(1), and that it is to this cause of action that s.44(2) brings in a new procedural requirement, but mitigated in the three respects specified in s.44(3).

26. For the reasons I have given the appeal fails. I would dismiss it with a costs order nisi that the respondent is to have his costs of the appeal.

Liu, J.A.:

27. This is an appeal by an insurance company (the Insurers) against the decision of Deputy Judge Wong of the Court of First Instance primarily on the question of limitation. Part IV of the Employees' Compensation Ordinance (the Ordinance) introduced compulsory insurance for workers in a statutory regime which imposes on the insurer a liability to pay an employee. An employee's claim may be, subject to approval, agreed under the Ordinance or quantified in a personal injury action against his employer, not infrequently as a follow-up to an employees' compensation award.

28. On 16 December 1987, the respondent (the Employee) sustained injuries in the course of his employment in an accident. On 30 April 1996, a sum with interests and costs was adjudged by Cheung, J. in a personal injury claim. On 4 September 1996, the Employee commenced this action before Deputy Judge Wong against the Insurers under the provisions of the Ordinance. The Deputy Judge rejected the Insurers' objection founded on limitation, hence this appeal. In this appeal, the Insurers also query the nature of the interests and costs they have to pay. It is submitted that interests and costs have not been quantified.

29. Stripped of all irrelevancies, the short point is: whether the limitation period commenced to run against the Employee from the date of the accident or from the quantification of his personal injury claim as adjudged by Cheung, J. in the Court of First Instance. If it is the former, the Employee's claim as quantified by Cheung, J. is statute-barred in the recovery action taken under the Ordinance and entertained by Deputy Judge Wong, and if the latter, not.

30. The Ordinance came into operation on 1 January 1984. It is not in dispute that the sum quantified by Cheung, J. in the personal injury action is compensation within the meaning of s. 3 of the Ordinance. The provisions in Part IV of the Ordinance relating to the creation of an employee's entitlement or right to recover from the insurer of his employer are s. 42, 43 and 44. These sections are set out below:

31. Ss. 42, 43 and 44 link an employee to the insurer of his employer. S. 42(1) lays down the limit of the insurer's liability to the employee under s. 44. S. 44(1) introduces a deeming provision to the policy of insurance issued for the purposes of Part IV, whereby an employee "shall be entitled to recover ....... directly from the insurer", an "amount which he (the employee) would have been entitled to recover from the" employer under a Part IV insurance policy. An employee's statutory entitlement to recover is made subject to the same limit set by s. 42(1) for the insurer. This deeming provision for a statutory entitlement to recover in s. 44(1) clearly creates a substantive right. Due date for the recoverable amount comes from s. 43(1). S. 43(1) provides that when an employer "becomes liable to pay" his employee for injury sustained in the course of his employment, a sum quantified independently of the Ordinance such as that adjudged in this case by Cheung, J. "shall forthwith become due and payable by the insurer". This sum payable by the insurer under s. 43(1) is therefore due from the date of its quantification. S. 43(2)(c), (d) and (e) deal with the exceptions where the insurer who is not or no longer liable to the employer need not pay. But for these exceptions, to whom then the insurer should pay under s. 43(2)? In these paragraphs (c), (d) and (e) of s. 43(2), the would-be payee could only be the employee. Therefore, from the general tenor of s. 43(2)(c), (d) & (e) and (4), it is reasonably clear that under s. 43(1) the sum is due and payable upon quantification by the insurer, wherever the context requires, to an employee.

32. To sum up: s. 44(1) confers on an employee a statutory entitlement to recover directly from the insurer a sum payable by his employer upon quantification. It is a right given by a clause interpolated in the insurance policy by the deeming provision in s. 44(1), and it is exercisable by the employee as if he were a party to the insurance policy. S. 42(1) limits this liability of the insurer and s. 43(1) sets a time for the sum to fall due and payable by the insurer to the employee, that is to say, when the employer himself becomes liable to pay upon the quantification of the employee's claim. By reference to the insurer's liability to an employee, these sections deal with (i) a direct statutory right to claim which is expressed as an employee's entitlement to recover, (ii) the capacity in which an employee sues, (iii) the ceiling of that claim and (iv) the time when that claim is due and payable by the insurer or when the statutory right may be enforced by the employee.

33. Mr Chan, leading counsel for the Insurers, refers to some decisions only for them to be cast aside. In Wong Po-wah v. Pacific Insurance Company Limited, [1988] 2 HKLR 417 at p 421 J, pp 420 H/I and 423 C/D, it was held that an insurer's liability to pay the employee was a concurrent liability which would accrue upon the quantification of the employee's claim against the employer. The insurer's liability so to pay was described in an earlier case as an absolute liability. See King Tak-on (By attorney Cheung Yin) v. Lau Chun-yip & Others t/a Kar Bun Metal Manufactory & Another, [1987] HKLR 126 at p 132 G. S. 44(1) was held to have created a different and direct right in an employee for suing his employer's insurer via the deeming provision in the policy. See King Tak-on supra p. 134E-F. The decision and reasons in Wong Po-wah were affirmed on appeal to the Privy Council. See Pacific Insurance Co. Ltd. v. Wong Pok-wah [1989] 2 HKLR 267. The position then seemed to be settled, and it was simply this: under s. 44 (the present s. 44(1)) and s. 43(1), an employee had a statutory right to sue the insurer of his employer directly on the force of a deeming provision in the insurance policy issued for the purposes of Part IV of the Ordinance, but no sum would "become due and payable by the insurer" until the employer became liable to pay the same to the employee.

34. Read with the relevant provisions of the Ordinance, the cumulative effect of s. 44(1) and s. 43(1) would seem to be : an employee cannot invoke his statutory entitlement to recover from the insurer as if he were a party to the insurance policy before his claim against the employer is quantified. However, s. 44(1) and s. 43(1) do not say so positively. S. 44(1) merely provides an employee with a right to sue the insurer and s. 43(1) specifies when the insurer's liability to pay arises. Ss. 44(1), 43(1) and 42(1) are provisions creating a substantive right. The cumulative effect of sections 44(1) and 43(1) is that an employee may not exercise his statutory right to enforce a claim before it is quantified. The insurer's liability is limited by s. 42(1). That much seems to be clear with or without the benefit of the decisions cited.

35. The accrual time of a cause of action dictates when an employee's claim could be instituted, but s. 44(1) and s. 43(1) are not strictly of a procedural nature. They are provisions affecting primarily right and liability, and time would run from the accrual of that statutory right. But for the accrual of his statutory right, an employee cannot institute a direct claim against the insurer. The statutory right accrues when the employee's claim is quantified, and therefore an employee may not commence proceedings before quantification. What is quite clear is that sections 44(1) and 43(1) are not essentially procedural.

36. On 22 July 1993, two sub-sections (2) and (3) were introduced by Ordinance 66 of 1993 to the original s. 44, making it s. 44(1). Mr Chan, leading counsel for the Insurers, submits that sub-sections (2) and (3) gave rise to a change of law which would have the effect of repealing or otherwise superseding what was then a pre-existing employee's direct statutory right against the insurer under s. 44(1) and s. 43(1). Counsel concedes that sub-sections (2) and (3) are plainly procedural for enforcing an employee's right to sue, which is sourced to s. 44(1). Put another way, whilst a legal right is created by s. 44(1) (and that much Mr Chan also concedes), s. 44(2) and (3) prescribe the time at which a suit founded on that legal right may be filed. It is contended that the different date for instituting proceedings under these sub-sections (2) and (3) has in effect displaced the pre-existing statutory right created by sub-section (1). It is hard to appreciate how a new or amended procedure could conceivably extinguish the very right which it is designed to serve. That would be also allowing, in common parlance, the tail to wag the dog.

37. The effect of sub-sections (2) and (3) should now be more closely examined. To begin with, in three instances sub-section (3) would clearly enable the employee to "take proceedings against the insurer without taking .......... proceedings against" the employer. This new procedure for enforcement would allow an employee to sue the insurer in the absence of any action taken against his employer, that is to say, before quantification of his claim against the employer. It is arguable that s. 44(3) is not purely a procedural provision as it implicitly substitutes a substantive right for that created by s. 44(1) which has to be exercised at a different time. I do not propose to repeat what I have condemned as irrational for essentially procedural sub-sections to override a "right" sub-section at source.

38. As to sub-section (2), it prohibits an employee from commencing any proceedings against the insurer unless he also commences (not, be it noted, concludes) or has commenced (not, be it noted, has concluded) proceedings against his employer. Again, what, at first sight, might be classified as a procedural provision for enforcement, s. 44(2) in effect regulates the time at which an employee's substantive right to sue the insurer may be exercised, that is to say, an employee may sue before he concludes his action against the employer or before his claim against the employer is quantified. The enforcement dates in s. 44(2) and s. 44(1) are different, and this inconsistency in date in s. 44(2) is said to have overtaken the statutory right created by s. 44(1).

39. Mr Chan submits that this new procedure has, in effect, abrogated the pre-existing statutory right, but on the other hand Mr Tang contends that only a co-existing right to sue is introduced. Mr Chan invites this court to examine the impact of sub-sections (2) and (3) on sub-section (1) of s. 44 in total disregard of the cases decided before the introduction of sub-sections (2) and (3). Mr Chan submits that s. 44(1), (2) and (3) should be looked at together afresh without reference to the ratios of the cases decided solely on the original s. 44, now s. 44(1). For testing the validity of counsel's arguments but without necessarily conceding that he is correct, this is what I now proceed to do.

40. Procedural in nature, of themselves s. 44(2) and (3) could not have created any new right or extinguished any pre-existing right by an employee to recover from the insurer. They could have expressly so provided, but they did not. These sub-sections merely direct the employee as to how he goes about in enforcing his claim. The direct right to sue the insurer under the Ordinance is admittedly sourced to s. 44(1) and s. 43(1). Not only do s. 44(1) and s. 43(1) create a statutory right for an employee and imposed an absolute liability on the insurer, they place that statutory right in a deeming provision interpolated in the insurance policy issued for the purposes of Part IV of the Ordinance. Also, an employee is to sue as if he were a party to the policy. Sub-sections (2) and (3) of section 44 introduce a new procedure and prescribe how a sub-section (1) claim is to be proceeded with. This, Mr Chan has conceded. On that analysis, it is pressed upon us that these essentially procedural sub-sections have in effect brought about a repeal of an employee's direct statutory right to sue after quantification. Before sub-sections (2) and (3) were enacted, s. 44(1) (then s. 44) created an employee's right in a deeming provision and s. 43(1) imposed on the insurer an absolute liability. The right is a wholly statutory one, different from and independent of any contractual relationship or tortious liability. It is a right to sue the insurer direct as well as a right to sue by an employee in his assumed capacity as a party to the insurance policy. What must also not be overlooked is the fact that these primarily procedural sub-sections (2) and (3) do not expressly repeal the statutory right put in place by sub-section (1); nor do they refer to the deeming clause or the insurer's absolute liability. How is it possible to say that a legislative intent to extinguish such a statutory right has clearly been expressed in the language of sub-sections (2) and (3)? Where, in sub-sections (2) and (3), is the insurer relieved of its absolute liability under s. 43(1) to pay after quantification? Could what are conceded to be essentially procedural sub-sections repeal a pre-existing substantive right created by an earlier sub-section? Do these procedural sub-sections in effect displace such an independent statutory right to sue as given by a deeming clause in the insurance policy? Where is the reference made to a purported deletion or modification of the deeming clause in the insurance policy? Where, in sub-sections (2) and (3), is an employee given the right to sue also as if he were a party to the insurance policy?

41. The nature of s. 44(1) is decidedly different from that of s. 44(2) and (3): the former deals essentially with right and the latter primarily with procedure. Their parameters are also different: sub-section (1) creates a statutory right by a deeming provision interpolated in the insurance policy taken out for Part IV of the Ordinance, but there is nothing of the kind in sub-sections (2) and (3). By reference to s. 43(1), s. 44(1) would not allow an employee to invoke his statutory entitlement to recover directly from the insurer unless his claim has been quantified. There is no reference made to s. 43(1) in sub-sections (2) and (3). The language of sub-section (1) is couched in terms of a substantive right, although it may be very loosely said in one sense to regulate the bringing of a suit against the insurer. Sub-section (1) only obliquely regulates the conduct of proceedings. Sub-sections (2) and (3) do not seek expressly to extinguish a pre-existing right or repeal an earlier provision. They allow an employee to enforce his claim at a different stage. The interpretation difficulty arises from the different times at which an employee may sue the insurer. Is that enough to displace the existing direct statutory right in a deeming clause of the insurance policy? It is inconceivable that an alleged legislative intent so to emasculate the effect of sub-section (1) could have been so equivocally left to be implied by these essentially procedural sub-sections (2) and (3).

42. In the end, all would seem to hinge upon the intention of the legislature as expressed by the language of sub-sections (2) and (3). The language of these sub-sections is decidedly not sufficiently compelling to displace the pre-existing direct statutory right to sue the insurer as given by sub-section (1). I am unable to find in sub-sections (2) and (3) of s. 44 any clearly expressed legislative intention to extinguish such an important pre-existing right. Time ran from quantification and the Employee's claim was not statute-barred. That is sufficient to dispose of this appeal.

43. If in fact sub-section (1) and sub-sections (2) and (3) were not mutually exclusive in operation, there would be much to be said for the argument of Mr Tang, leading counsel for the Employee, that subsection (1) on the one hand and subsections (2) and (3) on the other may not be wholly incompatible. Mr Tang submits that the later sub-sections (2) and (3) impliedly creates a new right co-existent with the earlier right created by sub-section (1). However, with all the distressful controversies in the past, it would have been incredible if the vague language in sub-sections (2) and (3) had been calculated to introduce yet another dubious right. For lending support to his contention, Mr Tang further seeks to rely on words "as if the insurer were the employer" which are absent from sub-section (2). The words "as if he were a party (to the insurance policy)" are expressly included in s. 44(1). Mr Tang's attempt to introduce "as if the insurer were the employer" to sub-section (2) cannot be well founded. For the conclusion I have reached, Mr Tang's contention need not be considered.

44. The question that lies at the heart of this appeal is whether a pre-existing statutory right given by a deeming clause interpolated into an insurance policy issued for the purposes of Part IV is abolished by the new sub-sections (2) and (3). For their conflicting interpretations, the parties could derive no support from the different nature and parameters of as well as the overall obscurity generated by the later sub-sections, which I have endeavoured to highlight. In conclusion, from the reading of the equivocal sub-sections (2) and (3), neither of counsel's contended legislative intents obtains and in fact there is ample evidence to suppose that there has been no abolition of the statutory right created by sub-section (1). However, far be it from me to take any conclusive view on s. 44(2) and (3) of the Ordinance; it is quite unnecessary for me to do so in this appeal. The language of sub-sections (2) and (3) is neither clear nor unambiguous to support the purposes for which these sub-sections are respectively said to have been enacted. Unaided by the decisions cited, I am able to conclude that the statutory right in the deeming clause of the insurance policy under s. 44(1) has not been displaced or repealed. Consideration of the full impact of sub-sections (2) and (3) will have to be stood over to another day. In my judgment, the Employee's right given by sub-section (1) has not been shown to be materially affected and time ran from quantification.

45. The remaining points can be disposed of briefly. Sub-sections (2) and (3) may be properly classified as essentially procedural provisions for enforcing a remedy. These sub-sections have not been clearly demonstrated to undermine the statutory right created by sub-section (1). Purely as procedural sub-sections, their retrospective effect could bring about no change to the statutory right in sub-section (1). But insofar as they may arguably be said to have impliedly avoided the Employee's right in a deeming insurance clause under sub-section (1), their legal effect would not operate retrospectively. See Yew Bon Tew alias Yong Boon Tiew v Kenderoon Bao Mars [1983] AC 553. Moreover, it would have been unconventional for these later sub-sections to include no transitional measures if in fact an abolition of a pre-existing statutory right had been envisaged.

46. Costs and interests are quantifiable by set rules and practice. General damages and special damages were awarded by Cheung, J. with interests at different rates. It has not been sought to be argued before us that the proper deduction of the employees' compensation from damages is not a matter of law as opposed to an exercise of discretion. What falls to be decided is whether interests, same as costs, are quantifiable. In my opinion, they are. Mr Tang seeks to make much of the fact that the issue of quantification was not raised before Cheung, J. or Deputy Judge Wong. The amount awarded by Cheung, J. as a quantified sum comprised general damages and special damages, and the parties will return to the judge for determining whether the employees' compensation should be deducted from general damages or special damages. These damages attract interests at different rates of 2% and 6% respectively. It is contended by Mr Tang, counsel for the Employee, that the Insurers should not be allowed to argue the issue of quantification for the first time on appeal. But quantification, if the Employee's contention is sustained, bears upon the court's jurisdiction, in the exercise of which Deputy Judge Wong proceeded to entertain the Employee's claim against the Insurers pursuant to s. 44(1) of the Ordinance. Whether or not quantification was pleaded or canvassed before the Deputy Judge, as a point of jurisdiction for his determination it is open to challenge on appeal.

47. However, Cheung, J. gave judgment for a sum as a quantified award, and it was on that quantification that the Employee commenced proceedings against the Insurers before Deputy Judge Wong. The amount awarded with costs and interests was pleaded in this action as a judgment debt adjudged by Cheung, J. In their defence, the Insurers admitted that "assessment of damages" was made as "employees' compensation" in the judgement handed down. It was pleaded by the Insurers in their defence that "the quantum of damages" was excessive. In his judgment, Deputy Judge Wong allowed the Employee to recover against the Insurers the said judgment debt "after quantification". From first to last, the amount so ordered to be paid by Cheung, J. with costs and interests was and was intended to be a quantified employees' compensation, and from that quantified sum there is no appeal, albeit the parties to the personal injury action will return to Cheung, J. for clarification as to the proper source for deducting the employees' compensation. On these facts, the Insurers are clearly unable now to argue the sum ordered by Cheung, J. to be paid to the Employee with costs and interests on the basis that it was an unquantified amount. This sum with costs and interests as adjudged stands to-day as a quantified sum as it was at the time when Cheung, J. made the award.

48. The Deputy Judge's decision based on the Employee's entitlement to recover from the Insurers is, in my view, correct. I would dismiss this appeal with an order nisi for costs against the appellant.

Leong, J.A.:

49. The respondent was injured on 16.12.1987 in an accident arising out of and in the course of employment. He was awarded employee's compensation against his employer in November 1990. On 30.4.1996, he was also awarded common law damages against his employer but he could not recover the judgment sum from his employer. Some six months later he sued the appellant who was his employer's insurer to recover that sum. The writ was issued on 4.9.1996. He relied on s.43 and s.44 of the Employees' Compensation Ordinance which give rise to the liability of his employer's insurer to pay that sum. At the trial, the issue before the deputy judge was whether the action against the appellant was time barred. The appellant contended that although an employee had a right by virtue of these two sections to sue his employer's insurer directly, that cause of action arose at the time of the accident. That being the case the respondent's action was time barred. The respondent however relied on WONG Po-wah v. Pacific Insurance Company Ltd [1988] 2 HKLR 417 and contended that the cause of action of an employee to sue his employer's insurer directly only arose after quantification of the sum his employer was liable to pay and in his case, that sum was quantified on 30.4.1996 and his cause of action accrued from that date. The writ issued on 4.9.1996 was therefore not time barred.

50. The deputy judge concluded that WONG Po-Wah was the binding authority on the construction of these two sections. He found that the writ on 4.9.1996 was not time barred.

51. The same question is raised before this court: Is the respondent's claim against the insurer time barred? This depends on the construction of s.43 and s.44. S.44 was amended in 1993 by Ordinance No. 66 of 1993 which added subsections (2) and (3) to the principal section. Apart from renumbering it as subsection (1) of s.44, the amendment has not changed the original s.44 or s.43. WONG Po-wah was decided prior to these amendments.

52. S.43 is as follows:

53. Subsections (3) and (4) of s.43 are not relevant for the present purpose. S.44 before amendment provided as follows:

54. Ordinance No. 66 adds these two subsections to s.44:

55. Mr. Warren Chan, S.C., counsel for the appellant, accepts that WONG Po-wah is binding on this court but he says that because of the amendment, that decision no long applies in construing s.43 and s.44. Briefly, his submission is this. The addition of subsections (2) and (3) to s.44 puts a wholly new complexion to s.44(1) when read together with s.43. Section 44(2), require the employee to sue his employer first or at the same time before he sues his employer's insurer. Its purpose is to avoid potential delay caused by proceedings against the employer which might take years to conclude and this is for the benefit of the employee. This accords with the object of the Employees' Compensation Ordinance. The amendment is purely procedural and the effect of WONG Po-wah on s.44(1) has been displaced by the amendment although no new right for the employee has been created. The employee's right to recover from the insurer directly under s.43 in conjunction with s.44(1) is not affected. The consequence of this is the employee who sues his employer's insurer directly is required to sue before quantification and the cause of action accrues from the date of the accident.

56. On the other hand, the submission of Mr. Tang, S.C. counsel for the respondent is this. S.43 and s.44(1) create one statutory cause of action. This is unaffected by the amendments. S.44(2) and (3) create an additional statutory cause of action for the employee to sue the employer's insurer. The former is to sue as if the employee were a party to the insurance policy. This, cause of action only arises after quantification and WONG Po-wah is still the authority on this. The latter is to sue the insurer as if it were the employer and this cause of action arises from the date of the accident. These two causes of action run side by side and the choice rests with the employee. To replace the cause of action which arose after quantification by one which arose from accident would have the effect of curtailing the employee's right. This is inconsistent with s.44(1). If this were the intention of the legislature, transitional provision would have been made to preserve the rights of an employee such as the respondent who as a result of the amendment would be left with little time to sue the insurer. In this case, he only had 5 months from the operation of the amendment to the expiration on 16.12.1996 of the 6 years from the accident to sue. No transitional measures have been provided. The "replacement" construction as suggested by Mr. Chan cannot be the intention of the legislature. The limitation period of the respondent's action remains 6 years from the date of quantification.

57. In my opinion, unless subsections (2) and (3) change the construction of s.44(1) when read with s.43 as decided by WONG Po-wah, the deputy judge must be right in his conclusion on the limitation period of the respondent's claim. If these two subsections neither create a new cause of action nor displace the operation of s.44(1) as construed by WONG Po-wah, they do not affect the employee's right under s.44(1) and s.43.

58. The employee has only one right against his employer's insurer and that is to recover from him the sum the employer is liable to the employee and "due and payable" by him under s.43. To recover that sum directly from the insurer, he has to rely on s.44(1). "The effect of s.44 (now s.44(1)) of the Ordinance is to give the employee a statutory right to enforce the policy directly against the insurer as if he were a party to it" (per Fuad J.A. at p.421 WONG Po-wah). "The effect of s.43 is to duplicate the insurer's obligation. He has the contractual obligation to pay the employer under the policy. He then has the additional statutory obligation to the employee under s.43. Teeth are given to the enforcement of that obligation by s.44 which enables the employee to sue direct" (per Hunter J.A. at p.423, WONG Po-wah).

59. S.43(2) contemplates two ways in which the sum may be quantified. It may be by agreement between the employer and the employee as provided under para. (2)(a) or by determination by a court or tribunal as provided under para. (2)(b). In the former case, the sum is quantified without proceedings and if the employer's insurer consents to the agreed sum, that is the sum recoverable under s.43. In that case, the employee may sue the employer as well as his insurer at the same time directly to recover it. In latter case, the sum is quantified at the conclusion of the proceedings against the employer. It goes without saying that the employee needs to sue his employer first to obtain this quantified sum and to make his employer's insurer pay that sum, he sues the insurer.

60. S.44(2) requires that if an employee sues his employer's insurer, he must also sue his employer either at the same time as or before he sues the insurer. The employee has thus a choice. It would appear that he may sue both at the same time if his case is one falling within s.43(2)(a). Alternatively if no sum has been fixed by agreement, he may sue his employer first and then wait until conclusion of the proceedings against his employer when the sum is quantified before he sues his employer's insurer. That would be a case under s.43(2)(b). In either case, time starts to run from the date of quantification. More importantly, the employee is not obliged in every case to sue his employer at the same time as he sues the insurer. This is not in anyway inconsistent with s.43 and s.44(1) nor with the construction put on them by WONG Po-wah.

61. S.44(3) is there to give relief to an employee who is unable to comply with subsection (2) because the employer has become insolvent or cannot be located. This subsection creates an exception to the requirements under subsection (2) that the employee must sue the employer. This does not affect the right of the employee to sue the insurer directly.

62. In other words, s.44(2) and (3) do not change or add anything to the right of the employee under s.43 and neither do they change s.44(1). In any case, any displacement or, change of existing rights or creation of new rights by statute must be made in clear and unambiguous terms in the legislation. The two new subsections are far from clear in this respect. They no more than set down new procedure in suing the insurer directly. The suggestion that there are two causes of action as a result of the amendment cannot stand. Whether the employee sues under s.44(1) or (2) or (3) it is still to recover the sum which the employer is liable to pay to the employee. That being the case and the amendment being procedural in nature, their retrospective effect does not affect the respondent's claim. The judge's reliance on Wong Po-wah to come to his conclusion that the action against the insurer was not time barred cannot be challenged.

63. On the question of costs and interest on the common law damages awarded against the employer, the sum awarded included interest at the rates ordered by the judge. Interest had been quantified except that it would be a matter of calculation to work out the amount accrued up to the date of judgment and thereafter until payment. S.43 makes it clear that the sum the insurer is liable to pay includes "any sum payable in respect of interest and costs". The same goes with costs. The judge cannot be faulted in his judgment when he said that the award to the respondent includes the interest and costs awarded in the proceedings against the employer by the respondent. I would dismiss the appeal and costs order nisi that the respondent is to have his costs of the appeal.

Nazareth, V.-P.:

64. The appeal is accordingly dismissed with a costs order nisi that the respondent is to have his costs of the appeal.