PANG WAI CHUNG v. THE TAI PING INSURANCE CO., LTD. (an overseas company)

1996 No. A10082

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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1. The Plaintiff used to work for Hoi Tat Rubber Factory as a machine operator. On 16 December 1987 he met an industrial accident and as a result his right hand was crushed and the right hand above the wrist was amputated.

2. In the subsequent proceeding arising out of that accident in E.C.C. No. 46 of 1989 he was award $248,721.60 and in High Court Action P.I. No. 793 of 1995 judgment was given in his favour in the sum of $2,241,137.00 together with interests and costs.

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

4. The Plaintiff did not recover the judgment sum, interests and costs from Hoi Tat Rubber Factory. He now sues the Defendant under the policy and under Sections 43 and 44 of the Employees Compensation Ordinance.

5. At the hearing the parties framed issues. The only issue is whether the action is statute barred. The accident occurred on the 16th December 1987, judgment in respect of PI Action No. 793 of 1995 was dated 30 April 1996 and the present action commenced on 4th September 1996.

6. Mr. Cheung of counsel for the Plaintiff submitted that the cause of action accrued when the judgment was pronounced on 30th April 1996. In support of his contention he relied on Sections 43 and 44 of the Employees Compensation Ordinance which are as follows:

"43. Conditions under which liability for payment by insurer arises

(1) Subject to this section, where in relation to an employee there is in force a policy of insurance issued for the purposes of this Part and the employer of the employee becomes liable to pay any sum under this Ordinance or independently of this Ordinance in respect of an injury to the employee arising out of and in the course of his employment, such sum shall forthwith become due and payable by the insurer, including any sum payable in respect of interest and costs, notwithstanding anything to the contrary in the policy of insurance. (Amended 66 of 1993 s. 13)

(2) No sum shall be payable by an insurer under this section-

(a) unless, in the case of compensation agree upon between the employer and an employee under section 16CA, such insurer has consented to pay the sum agreed upon as compensation to the employee; (Amended 66 of 1993 s. 13)

(b) unless, in the case of compensation or damages determined or adjudged by a court or tribunal to be payable to the employee or any other person, the insurer had sufficient notice of the institution in the court or tribunal of proceedings for compensation or damages, as the case may be, to enable such insurer to be added as a party to the proceedings;

(c) in respect of any judgment to pay compensation or damages, while execution thereon is stayed by the court or pending appeal; (Amended 47 of 1995 s. 8)

(d) if before the happening of the accident which was the cause of the injury giving rise to the liability, the policy of insurance was cancelled by mutual consent or by virtue of any provision contained therein; or (Amend 47 of 1995 s. 8)

(e) in respect of the sum liable to be paid under subsection (1) in excess of the available amount covered by the policy of insurance. (Added 47 of 1995 s. 8)

(2A)-(2B) (Repealed 36 of 1996 s. 22)

(3) If sufficient notice of the institution of proceedings for the recovery of compensation or damages is given to an insurer to enable such insurer to apply to be added as a party to the proceedings, the court or tribunal, as the case may be, shall, on such application being made, add the insurer as a party and the insurer shall have the same right to defend the proceedings as if such insurer were the employer.

(4) 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. (Replaced 66 of 1993 s. 13)

44. Right of injured party to proceed against insurer

(1) 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, subject to section 42, 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. (Amended 66 of 1003 s. 14; 47 of 1995 s. 9)

(2) An employee or other person having a claim against the person insured under a policy of insurance issued for the purposes of this Part shall not commence proceedings against the insurer unless he also commences or has commenced proceedings against the person insured. (Added 66 of 1993 s. 14)

(3) Notwithstanding subsection (2), where an employee or other person having a claim against the person insured has reasonable grounds to be satisfied that-

(a) the person insured cannot be readily located in Hong Kong;

(b) the person insured is insolvent; or

(c) the insurer has disclaimed liability under the policy of insurance,

he may take proceedings against the insurer without taking or having taken proceedings against the person insured. (Added 66 of 1993 s. 14)"

He also relied on the case of Wong Po Wah v. Pacific Insurance C. Ltd. [1988] 2 HKLR 417.

7. In Wong Po Wah's case it was held:-

"Section 14(1) of the Ordinance had no application where an agreement under s. 17 had been reached. Once the Commissioner had approved such agreement and it had been made an order of court, the order for payment could be enforced in the same manner as other judgments and orders of the court. Moreover, s. 14(1) could not be said to apply as between an employee and the employer's insurers and there was no room for the application of the 24 month limitation period. (See p. 420G.)

The effect of s. 44 of the Ordinance was to give the employee a statutory right to enforce an insurance policy directly against the insurers as if he were a party to it, notwithstanding that the insurer had paid the employer a sum which had become due and payable by the insurer under s. 43. (See p. 421E.)"

8. Fuad VP in his judgment at 420 said

" 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 sub-s. (2) of s. 43 has been satisfied, once the Commissioner has 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)."

9. Hunter JA at page 422 stated,

"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 insurers. 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 limited for proceedings against the employer should start from the date of the accident because that was when time starts to run.

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 insurers to the employee. That it arises only after quantification is made clear by sub-s. (2). Protection is given to insurers by that sub-section. 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."

10. Thus Section 43 creates a right in the employee and this right arises only after quantification. The cause of action therefore arises when the judgment in the PI case was pronounced which was in April 1996.

11. Mr. Choi of counsel for the Defendant on the other hand submitted that the cause of action accrued once an action can be brought against the insurer. In support of his argument he relied on Tai Hing (a firm) & Another v. Chan Yuk Wan & Another [1997] HKLRD 1148 in which Sears J. held that

"(1) ....

(2) ....

(3) Although the normal rule was that the right to recover an indemnity only arose when the claimant's liability was established, the liability to pay compensation, whether under s.5 or under s.25(1)(b) arose at the same moment in time, ie at the date when the event giving rise to such liability occurred. In this case, it was the happening of the accident, which occurred on 22 January 1990. Section 25(5) probably encompassed the type of event where the proceedings to determine liability might be delayed in some way. (See pp.1150H, 1152F-H.)

(4) the general intention and spirit underlying the Ordinance was that there should be early disposition of the claims. It was clear on a reading of the other sections that the employer knew about and was given notice of the accident which occurred. There was, therefore, no prejudice to him. He had a period of six years, which it itself was a substantial period, to decide whether to bring proceedings for an indemnity. (See pp.11521-1153A.)"

12. In that case Sears J. dealt with the analysis of S.25(1)(b). At p.1152 he said

" I have no doubt that s.25(1)(b) is an indemnity, it has all the hallmarks of an indemnity. The word "indemnity" is used and as far as the subcontractor is concerned, under s.27, it is indeed described as an indemnity. However, the important words, in my judgment, are the opening words: "The employer by whom compensation is payable". An employer is liable to pay compensation on the event which gives rise to his normal liability, which is that found in s.5, which reads:

...if in any employment, personal injury by accident arising out of and in the course of employment is caused to an employee, his employer should be liable to pay compensation....

and those words in my judgment, although put somewhat differently, mean exactly the same as the opening words of s.25(1)(b): "the employer by whom compensation is payable". The words are in contradistinction to those in s.30(2) as the English Act which begins: "If the workman has recovered compensation...". Therefore, on a fair reading of this subsection, the liability to pay compensation whether under s.5 or under s.25(1)(b) arises at the same moment in time, that is, at the date when the event occurs which gives rise to such a liability. In this case, it is the happening of the accident which occurred on 22 January 1990."

13. That case is different from the present case in that in Tai Hing's case Sears J. was dealing with the interpretation of S.25(1)(b) concerning indemnity whereas in the present case we are dealing with conditions under which liability for payment by insurer arises.

14. In S.43(1) if the employer becomes liable to pay any sum under the Employees' Compensation Ordinance or independently of that ordinance, then such sums shall become due and payable by the insurer.

15. S.43(2) states in no uncertain terms that "No sum shall be payable by an insurer under this section

a) ...

b) unless, in the case of compensation or damages determined or adjudged by a court or tribunal to be payable to the employee or any other person, the insurer had sufficient notice of the institution in the court or tribunal of proceedings for compensation or damages, as the case may be, to enable such insurer to be added as a party to the proceedings"

16. So under S.43 the sum has to be quantified and I respectfully agree with the passage in the judgment of Hunter JA which I cited earlier concerning the creation a brand new right in the employee under S.43.

17. In my judgment this action is not statute barred. Hence there be judgment for the outstanding part of the judgment in PI Action 793 of 1995 together with interests and costs as ordered in that case. Costs of this action be the Plaintiff's and the Plaintiff's own costs to be taxed in accordance with the Legal Aid Regulations.

(Wesley Wong)

Deputy Judge of the High Court