WONG PO WAH v. PACIFIC INSURANCE CO LTD.

Employees' Compensation Ordinance, Cap. 282 - ss. 14, 43 and 44 - position where insurer pays employer sum due to injured employee but sum not passed on to employee.

The 24 month time limit prescribed by s. 14(1) has no application to the exercise of the right of an injured employee to proceed against the insurer under s.44.

An injured employee may, under s.44, recover from the insurer any amount which he would have been entitled to recover from his insured employer notwithstanding that the insurer has paid the employer a sum which has become due and payable by the insurer under s.43.

Observations upon methods which insurers might adopt to safeguard their position.

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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 an employee whose claim under the Employees' Compensation Ordinance, Cap. 282 ("the Ordinance") was dismissed by His Honour Judge Caird in the District Court on 9th February 1988.

2. The following chronology of events gives the history of the mattes:

3. The application made on behalf of the Employee, when it was filed, asked the Court to assess compensation under ss. 9, 10, 10A and 11 (3) of the Ordinance but when the hearing began before the judge on 22nd January 1988 the relief sought was, by leave, amended so that the order prayed for was that the Insurers should pay the compensation agreed upon and approved by the Commissioner, plus surcharges, a total of $17,600.03.

4. The injured Employee was the only person to give evidence before the judge. He said that he had asked his Employer for the money due to him about 10 days after the agreement had been concluded. He kept on being put off. He had contacted the Insurers some two months after the agreement had been drawn up and had been told that his Employer had been paid the sum due under the policy. When he confronted his Employer he was told the bank had "eaten the money". The Employee has never been paid.

5. The application proceeded upon the basis of a proposition which was then common ground, that s.14 of the Ordinance (the relevant parts of which are in the following terms ) applied:

"14.(1) Except where otherwise provided by this Ordinance, proceedings for the recovery under this Ordinance of compensation for an injury shall not be maintainable unless notice of the accident has been given to the employer by or on behalf of the employee, in the manner hereinafter ''provided, as soon as practicable after the happening thereof and before the employee has voluntarily left the employment in which he was injured, and unless the application for compensation with respect to such accident (being an application to the Court by an employee under section 18A(2)) has been made within 24 months from the occurrence of the accident causing the injury or, in the case of death, within 24 months from the date of death:

Provided that .....

(2) .....

(3) .....

(4) The Court may receive and determine any application for compensation in any case no that the notice required by subsection (1) has, not been given, or that the application has not been made in due time as required by that subsection, if it is satisfied that there was reasonable excuse for the failure so to give notice or to make an application as the case may be."

6. In his reserved judgment, the judge reviewed the facts and the reasons put forward on behalf of the Employee for the delay in applying to the Court and said, for reasons that he gave, that he could not be satisfied that the Employee had shown a reasonable excuse. He held that the Insurers were entitled to judgment on this ground.

7. The judge then went on to consider the other ground of opposition raised by the Insurers, that having paid the Employer the sum due under the policy, their obligations had come to an end, and expressed the view, that the Employee had the right to proceed directly against the Insurers notwithstanding the payment to the Employer, under ss. 42-44 of the Ordinance.

8. Miss Gladys Li and Mr. Kemal Bokhary (neither of whom appeared in the Court below) represented, respectively, the Employee and the Insurers before us. We gave leave to Miss Li to resile from the stand taken on behalf of the Employee at the hearing and to argue that s. 14 of the Ordinance had no application to the Employee's attempts to obtain compensation direct from the Insurers.

9. It seems to me quite clear that s.14(1) of the Ordinance has no application where an agreement under s.17 has been reached. As between the Employee and the Employer once the Commissioner has approved the agreement under s.17(5) and it has been made an order of the Court under s. 17(13) then the order for payment can be enforced in the same manner as other judgments and orders of the Court by virtue of s. 21(1).

10. Can, however, s. 14(1) be said to apply as between an employee and the insurers, so that the 24 month time limit has effect? in my view one has first to have regard to the words with which s.14(1) begins. "Except where otherwise provided by this Ordinance sections 43 and 44 do not, as I read them, come into play unless and until the amount due to an employee have been quantified in one of the ways provided for in the Ordinance. In our case, since para. (a) of subsection (2) of s.43 has been satisfied, once the Commissioner had approved the agreement, it became binding on the employer (s.17(11)) so that he had, for the purpose of s.43(1), become liable to pay a sum under this Ordinance; then "such sum shall forthwith become due and payable by the insurer" This is by operation of law and does not depend upon any application being made to the Court. Thus it seems to me, there is no room for the application of the 24 month limitation in the second part of s.14(1).

11. When one looks at the order drawn up under s.17(3) of the Ordinance one sees, as one would expect, that it is the Employer who is ordered to pay the Employee the amount stipulated in the agreement made between them. The order could have been enforced against the Employer in any one of the ways it is possible to enforce orders for the payment of money by way of execution.

12. I now turn to consider Part IV of the Ordinance. Section 44 of the Ordinance is in these terms:

"Every policy of insurance issued for the purposes of this Part shall be deemed to provide that any employee or other person having a claim against the person insured in respect of the liability in regard to which such policy was issued shall be entitled to recover in his own name, as though he were a party to the policy, directly from the insurer any amount which he would have been entitled to recover from the person insured."

13. I will not repeat what the Court said about the combined effect of ss.42, 43 and 44 of the Ordinance in King Tak on v. Lau Chun Yip and others [1987] H.K.L.R. 126. That case was not one in which an agreement had been reached under s.17. Here the conditions set out in s. 43 under which liability for payment by the Insurers arose were satisfied. As 1 have already indicated para. (a) of subsection. (2) of s.43 did not stand in the way of the Insurers liability since it is clear from what happened that they "consented to pay the sum agreed upon as compensation to the employee."

14. As Clough J.A. pointed out in King Tak On's case, the clear intention of the legislature was to provide a means of guaranteeing the payment of compensation to an employee who becomes legally entitled to it. The effect of s.44 of the Ordinance is to give the Employee a statutory right to enforce the policy directly against the Insurers as if he were a party to it. It is apparent, I think, that in inserting (in 1984) a new Part IV into the Ordinance (in which Part s.44 occurs) the legislature felt it necessary to give an employee greater protection than was, and still is, provided by s.28 of the Ordinance which relates to the right of an employee when the employer becomes insolvent.

15. The Insurers would have been entitled, I think, to resist the direct enforcement of the order of 31st July 1986 made under s.17(13) of the Ordinance because it was not addressed to them and so it seems to me that the procedure adopted here was perfectly sensible once the Insurers failed to respond positively to the letter dated 9th June 1987 from the Director of Legal Aid. I think that the terms of s.18A of the or dinance are wide enough to found the Court's jurisdiction.

16. One can well appreciate the force of Mr. Bokhary's submissions, and the Insurers' stand is perfectly understandable. They have paid most of the amount due to the Employer. I accept that only clear words in the statute would justify the Court concluding that they must pay again. Mr. Bokhary submits that if the legislature had intended that the Insurers should be liable to pay again despite the fact that they have discharged their contractual duties under the policy, it would have said so. He asked the Court not to read the general words in s.44 to have the effect contended for by Miss Li. Mr. Bokhary argues that the section does not require the Insurers to ensure that an employer, once he has received the money due under a policy, hands it over to his employee.

17. I have reached the conclusion, harsh though it may seem to the Insurers, that they are bound to make payment to the Employee notwithstanding the earlier payment to the Employer, As I read s.44, although the Insurers had discharged their liability to the Employer, they had not discharged the concurrent liability they owed to the Employee which is imposed by that section.

18. To guard against the unfortunate position in which the Insurers find themselves, it is, no doubt, open to the insurer to insist upon evidence that the employer had paid his employee before releasing the sum due under the policy. Where an employer has not paid his employee and is waiting for the insurance money to enable him to pay, the insurer can arrange that the money due under the policy is paid direct to the injured employee, or decline to hand the money over unless he is given an acknowledgment in writing from both the employer and the employee.

19. It may be that the true answer to an insurer's problem lies in s.13. I will read the relevant parts of that section:

"13. (1) .....

(2.) Except where otherwise provided by or under this ordinance, any other compensation payable under this ordinance shall be paid to the Court, and any sum so paid shall

(a) be paid by the Court to the person entitled thereto; or

(b) if the compensation is payable under the provisions of section 7, 8 or 9 or is a lump sum payable under the provisions of section 10, be invested, applied or otherwise dealt with by the Court for his benefit in such manner as the Court thinks fit:

Provided that -

(i) where periodical payments are payable under the provisions of section 8(2)(b) or section 10, such payments may be paid by the employer direct to the employee; and

(ii) where compensation, has been agreed and approved in accordance with the provisions of section 17, the Commissioner may direct in writing that the compensation shall be paid by the employer direct to the employee.

(3) .....

(4) The receipt of the Registrar of the Court shall be a sufficient discharge in respect of any amount paid to the Court under the provisions of this Ordinance."

20. I do not think it is necessary to decide whether or not these provisons apply to insurers as well as to employers, but to avoid the possibility of being called upon to pay twice, where the circumstances allow, insurers can insist upon seeing the Registrar's receipt (or the employee's receipt where, as here, the Commissioner has authorised direct payment to the employee) before releasing the insurance money to the employer or, ex abundanti, I suppose, they could themselves pay the money into Court.

21. I would therefore allow the appeal and invite argument as to the sum (and any interest) the insurers should be ordered to pay the Employee and as to the costs' order that we should make.

Hunter, J.A.:

22. I agree that this appeal be allowed. I have no doubt that s.14 on its true construction applies only to proceedings by an employee against an employer for the determination of a claim for compensation, and not to proceedings brought by an employee against his employer's insurers. To my mind, a reading of ss.14 and 43 shows that in the words of s.14, the Ordinance "otherwise provides" in the case of insurer. The first and most fundamental point is that the Ordinance gives two quite different dates for the accrual of the relevant causes of action. The cause of action against an employer accrues in the words of s.5: "If, in any employment, personal injury by accident arising out of and in the course of the employment is caused to an employee, his employer shall ....be liable to pay compensation in accordance with the provisions of the Ordinance." That liability, therefore, accrues upon the happening of the accident, to pay compensation thereafter to be assessed.

It is therefore totally appropriate, first that notice should be given by the employee to the employer, which is the first requirement of s.14; and secondly that a time limit for proceedings against the employer should start from the date of the accident because that was when time starts to run.

23. The insurers' position is totally different. The matter can be seen from three sections. First, s.40(1) which imposes the requirement of compulsory insurance. Secondly, s.43 which creates a brand new right in the employee. This arises as my Lord has pointed out, only after quantification because it arises when the employer "becomes liable to pay any sum under this Ordinance" and then it goes on "such sum shall forthwith become due and payable by the insurer; as I read that section plainly by the insurer to the employee. That it arises only after quantification is made clear by subsection (2). Protection is given to insurers by that subsection. Significantly where the compensation has been assessed in proceedings, the protection is that the insurers had "sufficient notice of the institution" of the proceedings so as to become a party to it. The Ordinance is clearly not envisaging proceedings in the first instance against the insurer direct at all. Where there are proceedings for determination against the employer, the insurer has the option to intervene if he thinks the matter is not being properly conducted.

24. So there are two quite different forms of protection given to the employers and insurers under these two different sections. It is simply going to create a headlong conflict if one trys to make the time provisions of s.14 relevant to insurers. Secondly, one notices that s.14 refers to proceedings under s. 18A(2). Those are proceedings for determination by the Court. Section 18A notices three forms of determination: (1) determination by certificate; (2) determination by agreement, and (3) determination by the Court. The first two are dealt with in subsection (1), and the third in subsection (2). Determination by the learned judge erred in finding that s.14 was applicable here. Court must be determination against the employer. So I have no hesitation in concluding that although the point was not properly taken in the Court below, the learned judge erred in finding that s.14 was applicable here.

25. As far as the principal point is concerned, I think that Mr. Bokhary is right when he submitted that the effect of the legislation is to produce here composite, policy within the words of Lord Greene, M.R. in General Accident Corporation v. The Midland Bank [1914] 2 K.B. 388 at page 405. The effect of s.43 is to duplicate the insurer's obligation. He has the contractual obligationto pay the employer under the policy. He then has the additional statutory obligation to pay the employee under s.43. Teeth is given to the enforcement of that obligation by s.44; which enables the employee to sue direct. Mr. Bokhary submits that by payment, his clients discharged their obligation under the policy. I cannot accept that. What they did was to discharge one of their obligations, not both. The Ordinance in no way requires, in Mr. Bokhary's words, an insurer to pay twice. What the Ordinance requires is that the insurer should make one effective payment of the sum needed to settle the compensation payable to the employee which the insurer by the combined effect of the policy and the Ordinance is under obligation to bring about. The obligation is upon him to find an effective way of making that payment. If he fails, he pays for his administrative mistake. It may be that as my Lord points out, his fallback is to use the provisions of s.13. But there must be many ways in which an insurer can ensure that the sum he pays in these circumstances reaches it proper and rightful destination. It may be that if insurers have learned a painful lesson in this case perhaps, having regard to the sum involved, it has not been a very expensive one.

Macdougall, J.:

26. The principal argument that has been addressed to us on this appeal was not advanced before the learned judge below. Had it been raised and properly argued before him it is quite likely that this appeal would not have been necessary. However that may be, having heard the very able argument that has been advanced by Miss Li, I can only say that I agree with my Lords for the reasons that they have stated that this appeal should be allowed. There is nothing that I can usefully add.