HUI TSUI CHING AND OTHERS v. GRAND UNION MOTOR INSURANCE CO LTD

Road traffic - Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272) - requirements in respect of policies.

Sections 4(1) and 6(1)(b) of the Ordinance, when read together, do not require that a person who is driving a vehicle as an employee of the owner shall be covered against third-party risks in respect of his personal liability.

Since by virtue of proviso (i) to s.6(1)(b) a policy is not required to cover liability in respect of death or injury sustained by a person in the employment of a person insured by the policy where the death etc. arises out of and in the course of that employment, such persons cannot resort to s.10(1) even where a co-employee was the driver of the vehicle.

John T. Ellis v. Hinds [1947] K.B. 475 and Lees v. Motor Insurers' Union [1952] 2  Lloyd's Rep. 210 applied.

BETWEEN

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JUDGMENT

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Fuad, J.A.:

1. This is an appeal from the judgment of Hunter J. dated 6 November 1986 on an important point of law arising out of the construction of the Motor Vehicles Insurance (Third Party Risks) Ordinance, Cap.272 ("the ordinance"), the relevant provisions of which are in virtually identical terms to successive United Kingdom Road Traffic Acts. His decision was in favour of the Defendant, Grand Union Motor Insurance Company Ltd. ("Grand Union") and the six Plaintiffs now appeal.

2. The agreed facts upon which the judge reached his decision are meticulously set out in 13 numbered paragraphs in his judgment. I will summarise only the essential facts.

3. Some five years ago, Mr. Law Chung Wing was engaged as a sub-contractor for plumbing installation work on a site at Gin Drinker's Bay. On 20 February 1982, five men employed by him were being driven to the work site by Mr. Hui Ting Hang, also one of Mr. Laws employees, in a van owned by him. Mr. Hui lost control of the vehicle on Kwai Chung Road and there was an accident. Two of the men being driven by Mr. Hui died as a result of the injuries they received, and three of the men were injured.

4. At the material time there was in force, in respect of the van, motor insurance with Grand Union who are authorised insurers for the purpose of s.6 of the Ordinance. Mr. Hui was driving the vehicle with Mr. Law's permission, and in the course of his employment. Mr .Hui was an "authorised driver" within the terms of the policy.

5. The deaths of the two men, and the injuries of the other three men, arose out of and in the course of their employment with Mr. Law. The three men who were injured were awarded compensation under the Employees' Compensation Ordinance, Cap.282, as was the estate of one of the men who died. The claim for compensation under that Ordinance for the estate of the other deceased has been adjourned sine die.

6. Five separate actions were instituted in the High Court against Mr. Law and Mr. Hui, claiming damages for Mr. Hui's negligence, respectively by the three injured men and the personal  representatives of the two men who met their deaths. In each action judgment was obtained against Mr. Law and Mr. Hui, damages were later assessed, and costs in their favour taxed. Grand Union had obtained leave to join in each of the actions and took part in the several assessments of damages.

7. None of the judgments against either Mr. Law or Mr. Hui have been satisfied. The damages assessed (upon which interest was also awarded) and the taxed costs were as follows:

8. The action out of which this appeal arises was instituted on 8 June 1985 against Grand Union by the personal representative of the two men who died (the 1st, 2nd and 3rd Plaintiffs) and personally by the three injured men (the 4th, 5th and 6th Plaintiffs) to recover the fruits of the judgments they obtained in the five High Court actions.

9. The Plaintiffs' claims in this action are founded upon s.10(1) of the Ordinance and, for reasons which will appear, they seek to pray those provisions in aid only in respect of the judgments obtained against Mr. Hui.

10. Section 10(1) of the Ordinance is in the following terms:

"10. (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 judgmen 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.

............"

11. As will have been seen, for the Plaintiffs to bring themselves within s.10(1), they had, inter alia, to establish (a) that there was a "liability covered by the terms of the policy" and (b) that the judgments had been obtained in respect of a liability "required to be covered by a policy under s.6(1)(b)."

12. Mr. Law was named as the policy-holder in the relevant policy. The provisions of the policy with which we are concerned are to be found in "SECTION II - LIABILITY TO THIRD PARTIES" and are as follows:

''1. The Company will ..... indemnify the Insured against all sums including claimants costs and expenses which the Insured shall become legally liable to pay in respect of
(a)	death of or bodily injury to any person
(b)	.......
where such death or injury or damage arises out of an accident caused by or in connection with
(i)	the Motor Vehicle or the loading or unloading of the Motor Vehicle
(ii)	.....
2.     The Company will ..... indemnify any Authorised Driver, or at the request of the Insured any person (other than the person driving) in or getting into or out of the Motor Vehicle against all sums including claimant's cost and expenses which such Authorised Driver or person shall become legally liable to pay in respect of
(a)	death of or bodily injury to any person;
(b)	.......
where such death or injury or damage arises out of an accident caused by or in connection with the Motor Vehicle ............"

13. The relevant exceptions to Section II are expressed in this way:

"The Company shall not be liable

(a)	under sub-sections 2 or 3 to indemnify any person -
	(i)	unless such person shall observe fulfil and be subject to the Terms of this Policy insofar as they can apply
	(ii)	if such person is entitled to indemnify under any other policy
(b)	in respect of death of or bodily injury to any person arising out of and in the course of such person's employment by the person claiming to be indemnified under this Section
............."

14. The judge concluded, that on a true construction of the policy, read together with s.6(2) of the Ordinance, Mr. Hui was entitled to claim indemnity under Section II in respect of the sums he had been held legally liable to pay to the various Plaintiffs. It therefore followed that each was "a liability covered by the terms of the policy" within s.10(1) of the Ordinance. This finding had been challenged by Grand Union by their Respondent's Notice but the challenge was abandoned at the hearing of this appeal.

15. Hunter J. went on to hold, however, that upon the proper interpretation of the Ordinance, s.10(1) did not allow the Plaintiffs themselves, to enforce Grand Union's obligation under the policy to indemnify Mr. Hui; although this particular policy extended cover to him personally this was not "required" by the Ordinance.

16. In so holding, the judge followed the decision of Lord Goddard L.C.J. in Lees v. Motor Insurers' Union ⁽¹⁾ and the authorities applied in that case, which he considered had been reaffirmed by the House of Lords in Lister v. Romford Ice and Cold Storage Co. Ltd.⁽²⁾, expressing the view that the decision of the High Court of Singapore in China Insurance Co. Ltd. v. Teh Lain Lee ⁽³⁾ could not be regarded as persuasive authority to the contrary. I would mention here that Mr. Litton, for the Plaintiffs, no longer relies on the Singapore case in support of his submissions.

17. The Plaintiffs are not content with the judge's finding (which must be regarded as being in their favour) that Mr. Hui would be entitled, under the policy, to claim indemnity from Grand Union. They say that the authorities upon which the judge's decision was based were wrongly decided and that, on the true construction of the Ordinance, the liability incurred by Mr. Hui was a liability which was required to be covered by the policy so that Grand Union were liable under s.10(1) of the Ordinance to satisfy the judgments they had obtained against Mr. Hui. They had conceded all along that the effect of proviso (i) to s.6(1)(b) of the Ordinance was to preclude direct resort to Grand Union in respect of the judgments obtained against Mr. Law.

18. It will here be convenient to read the relevant parts of ss.4 and 6 of the Ordinance. It is the proper construction of these provisions which will govern the result of this appeal. They are in these terms:

"4.(1) Subject to the provisions of this Ordinance it shall not be lawful for any person to use, or to cause or permit any other person to use, a motor vehicle on a road unless there is in force in relation to the user of the vehicle by that person or that other person, as the case may be, such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Ordinance

........."

"6.(1) In order to comply with the requirements of this Ordinance, a policy of insurance must be a policy which -
(a)	is issued by an authorized insurer; and
(b)	insures such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle on a road: Provided that such a policy shall not be required to cover-
	(i)	liability in respect of the death arising out of and in the course of his employment of a person in the employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment; or
	........."

19. Mr. Litton submits that s.4(1) of the Ordinance, in plain terms, makes it an offence for a driver to use a vehicle on a road unless there is in force, in relation to the user by him, a policy of insurance in respect of third party risks which complies with s.6. Therefore when a driver has incurred liability in respect of the death or bodily injury of a third party by the use of a vehicle on a road (as Mr. Hui had done here), and he belongs to the class of persons specified in the policy as being entitled to be indemnified in respect of such liability, then, prima facie, the protection of the Ordinance is afforded to those third parties. In view of the objects of the Ordinance, any exemption from the requirements for compulsory third party insurance must be narrowly construed.

20. Mr. Litton goes on to submit that where death or bodily injury arises out of and in the course of employment, the exemption applies only where the person who incurred the liability is the employer of the injured third party. Thus Mr. Law has the benefit of the exemption but Mr. Hui does not.

21. Mr. Litton contends that the reasoning of Lord Goddard in Lees v. Motor Insurers' Union⁽¹⁾ was wrong in that he misconstrued s.35(1) of the Road Traffic Act 1930. In that case, the policy taken out by a company indemnified the company but did not indemnify the driver personally. The policy excluded liability where an accident to a third party arose out of and in the course of his employment by the company, an exemption in terms of, and justified by, s.36(1)(b) of the Act. An accident occurred and a servant of the company was killed. It arose out of and in the course of his employment with the company. The servant's widow sued the defendants and the grounds for the claim were precisely those put forward in our case.

22. Before I refer to passages from the judgment of Lord Goddard, I would mention that s.35(1) of the Act he was considering is the precise equivalent of s.4(1) of our Ordinance, and s.36(1)(b), with its proviso, corresponds exactly with our s.6(1)(b) and proviso (i). As to the probable reason for the exemption in the proviso, Lord Goddard makes the following comment (one which echoed similar comments in some of the other cases cited to us). At p.212 he said:

"One may suppose that at the time when this Act was passed, which was imposing new and in some cases very substantial burdens upon the owners of vehicles by requiring compulsory insurance, it was thought that it would be right to exclude, from the persons who could claim, persons in the employ of the owner if the injury or death was caused in the course of their employment, because those persons would be compensated under the Workmen's Compensation Acts."

23. At page 213, Lord Goddard has this to say:

"Let us see, when the accident took place, what the position was. Goode was driving the vehicle, and he was therefore the person who was using the vehicle. There was in force in relation to the user of the vehicle by Goode a policy of insurance in respect of third-party risks which complied with the requirements of the Act, because there was a policy taken out in respect of this motor car which indemnified the assured against all the sums which he should be deemed to be liable pay in respect of death or bodily injury to any person arising out of the use of the motor vehicle.

Now, the Divisional Court has decided that what has to be covered by insurance is the use of the vehicle, not the person using the vehicle. The words are quite clear: 'unless there is in force in relation to the user of the vehicle by that person .... a policy of insurance.' The two oases to which I refer as laving that down in this Court are John T. Ellis Ltd. v. Hinds [1947] K.B. 475; 80 L1.L. Rep. 231, and Marsh v. Moores, [1949] 2 K.B. 208. I do not think it is necessary for this judgment to read the passages from those judgments. It is enough to refer to those cases, and to say that they lay down that it is the user of the vehicle which has to be covered by insurance. It is said here that Goode, the driver, ought to have had a policy insuring him. That is exactly what was argued in the case of Sutch v. Burns, (1943) 76 Ll.L.Rep. 203, which the Divisional Court overruled in John T. Ellis, Ltd. v. Hinds. Mr. Justice Atkinson stated his view there that the policy covered the driver. We held in John T. Ellis. Ltd. v.Hinds that that was no so. What it did cover was the user of the vehicle and if there was a policy in force covering the  user of the vehicle at the time when it was on the road that was in compliance with the Act. [Emphasis added.]

Supposing Goode had been prosecuted on this day for driving an uninsured vehicle, what would his answer be? His answer would be: 'I am not driving an uninsured vehicle. I am driving a vehicle belonging to my mater. My master has a policy in force, and that policy covers the user of this vehicle on the road, because it provides my master with cover by insurance against any accident liability which he might become liable to by reason of the use of the vehicle on the road.' Therefore, I cannot see at all that Goode committed any offence or was in breach of Sect. 35 of the Act, as there was a policy in force which complied with Sects. 35 and 36 of the Act."

24. Lord Goddard then remarks that the difficulty in the case before him was that the person who was injured (misreported "insured'') was a servant of the assured, and therefore excluded not only by the terms of the policy (as we have seen, the position is different in our case) but also by the terms of the Act. He added: "Perhaps it would be more accurate to say that the owner of the vehicle was not required to insure against liability for injury caused to someone in his service. Put it was nevertheless a policy in force in respect to the user of the vehicle."

25. After discussing Richards v. Cox⁽⁴⁾ where the policy (like the one we have in our case) indemnified the driver himself, Lord Goddard said, at p.214:

"But I do not find in this policy any such terms, and that is why, as I say, I think it is unfortunate that rights of injured persons should depend upon fine points and should really turn upon the precise wording of a policy.

I am unable to hold here that there was not a policy in force which did comply with the Act and did cover all persons whom the Act requires to be covered. It excludes only employees of the assured, and the underwriters are entitled to exclude them under Proviso (i) to Sect. 36(1)(b). The liability in this case, therefore, is a liability which was not required to be covered by a policy of insurance. A policy of insurance was taken out by the master to cover the user of the vehicle, and therefore the vehicle was an insured vehicle when it was being used at the time the accident happened. The liability which was then incurred was not one which was required to he covered by insurance, and therefore the master was not  liable. I can find no provision in the Act which requires the servant to have a separate policy, because as I say the policy in force taken out by the master covered the use of the vehicle except in respect of persons who by the Act were not to get the benefit. I regret that they do not get the benefit of any indemnity."

26. Mr. Litton contends that Lord Goddard's judgment was flawed because in the passage on p.213 which I emphasized he had omitted the words "by that person" after holding that the policy covered "the user of the vehicle", suggesting, in effect, that he had overlooked the presence of those additional words in s.35(1) of the Act.  Mr. Litton submitted that where a servant uses a vehicle by driving it, a policy covering the user of the vehicle by his master cannot be regarded as a policy covering the user by him.

27. If Lord Goddard misconstrued the effect of the statutory provisions he was considering, he was not alone for, as we have seen, he was following authority. In John T, Ellis v. Hinds ⁽⁵⁾ a company owned a van which was driven by a boy of 17 years of age who did not have a driving licence and who was too young to obtain one. I will not discuss that part of the case which concerned the issue whether, on the facts, the exemption from liability in terms of the policy had been satisfied so that the policy was rendered ineffective. The Divisional Court held, that where a person who causes or permits another person to use his vehicle holds a policy covering such user, he commits no offence if there is not in existence a separate policy in relation to that other person.

28. Before I cite passages from the judgments given in the Divisional Court which are relevant to this appeal, I think it is interesting to note, as another report of John T. Ellis v. Hinds shows ⁽⁶⁾, that the point I am addressing was allowed to be raised after the Court had given judgment on the other issue in the ease and the appeal was re-opened for the matter to be fully argued.

29. At pp. 484-485 of the K. B. report (5), Lord Goddard said:

"Dealing now with the second branch of Mr. O'Malley's argument, it was not disputed that at the material time any liability of the appellants for personal injury caused by the negligent driving of their servant was covered by a policy unless the exception clause applied. Mr. O'Malley argued, however, that it was necessary that there should be in force a policy which would also have covered the liability of the driver; admittedly there was no such policy and therefore he contended that the appellant company had not complied with s.35 of the Act, and were guilty of an offence on that ground. The section provides that it shall not be lawful to use, or to cause or permit any other person to use, a motor vehicle on a road unless there is in force in relation to the user of the vehicle by that person or that other person as the case may be, such a policy of insurance as complies with the Act. It is to be observed that the section says nothing about driving: it refers to the use of the vehicle. No doubt the owner of a car who drives himself uses the vehicle, but so he does if it is driven on his account by his servant. Where the statute deals with matters relating to driving, for instance in ss. 5, 9 and 15, it uses the word 'drives.' A person who rides in his car while it is being driven by someone else or who sends his driver out with his motor vehicle on business, uses, but does not drive, the vehicle. In the latter case, clearly, he causes his driver to use the vehicle. If when the owner is driving, or the car is being driven by a servant on the employer's business, so that the owner would come under a liability if death or personal injury is caused to a third person by the negligence of the driver, and the liability of the owner is covered by insurance, in our opinion it is clear that there is in force in relation to the user of the vehicle whether by the owner or driver, a policy of insurance. The appellants in this case were using the vehicle which was being driven by their servant. If their liability for accidents was covered, there was in force a policy in relation to the user of the vehicle by another person although that person's separate liability would not be covered. If the owner of a car who has covered his own liability by a policy lends it to a friend he will commit an offence unless either his own policy extends to cover liability incurred by the friend while driving, or the friend has a policy which will indemnify him while he is driving another person's car. It is not unusual for an owner to effect a policy which covers only liability incurred either by himself alone or by himself and another named person;  in such a case use of the car by any other person would not be covered by the policy."

30. Humphreys J., at pp. 487-488, dealt with the matter in this way:

"With regard to Mr. O'Malley's second line of argument I agree with the judgment delivered by my Lord, but I will add a few words of my own. In this case the driver of the motor vehicle, McDonald, was unlicensed and uninsured. He was driving the vehicle on a road and was employed for that purpose by the appellants. In my opinion the appellants would have had no defence to a charge under s.4, sub-s. I, of the Road Traffic Act, 1930, of having so employed him while he was unlicensed.

The question, however, in this case, as stated, is whether the appellants also committed an offence against s.35, in permitting him to use the vehicle on the road while he was not covered by insurance. He was undoubtedly one of the persons falling within the expression 'persons using the vehicle on the road.' Now it is, I think, manifest that not everyone using such a vehicle is required to be covered by insurance. A mere passener may be said to use the vehicle while he is being given a lift; a person to whom the owner lends his car for the day, with the services of his driver, is one, at least, of the users of the vehicle on that day. If the driver and owner are insured, no one would contend that the borrower, in that case also requires to be covered. The reason, as I think, is that it is not any particular person who uses who is required by s.35 to be insured: what is required is that the use on the road by the person or persons in fact using, should be covered by insurance in respect of third-party risks.

In the present case, the appellants, as the owners, had a policy which indemnified them against any liability which might be incurred by them in respect of death or bodily injury to any person, arising out of the use on the road of the vehicle. That policy was, therefore, one which complied with the requirements of s.36, sub-s. I, of the Act. The contention of Mr. O'Malley is that something further is required by s.35, namely, an insurance indemnifying the driver McDonald. I find nothing in the section to support that contention. I think the true view of the section is that what must be covered by insurance in respect of third-party risks is the use on the road of the vehicle by the driver."

31. John T. Ellis v. Hinds was followed by a Divisional Court again presided over by Lord Goddard: Marsh v. Moores⁽⁷⁾. Lynskey J. gave the leading judgment. There, a company was covered by insurance against third party risks for social, domestic and business purposes. The policy contained a clause exempting the insurers from liability if the vehicle was being driven, with the company's consent, by a person known by the company to be disqualified from holding a licence or one who had never been licensed. The son of the Managing Director of the company, as its servant, was driving on his father's instructions. The son had with him a girl (his cousin) who, to his knowledge had never had a licence to drive. The son allowed his cousin to take over the wheel while he kept control of the handbrake.

32. At p.213, Lynskey J. said:

"The first question raised by these contentions is: what is the true construction of s.35, sub-s. I, of the Road Traffic Act, 1930? Does that section require that there should be a policy of insurance in force which covers the personal liability of the driver, or is it sufficient that there should be a policy in force covering the then user of the car in respect of third party risks? This question was considered by this court in John T. Ellis v. Hinds."

33. In discussing that case, Lynskey J. refers to the judgment of Humphreys J., and adds:

"As a result of this decision, the question we have to consider in these cases is not whether Patricia Moores or John Moores was insured in respect of her or his personal liability, but whether, if a third party had sustained injuries as a result of the user of the car in the circumstances set out in the cases, such third party could have recovered damages in respect of such injuries from the company and whether the company were indemnified in respect of such damages under their policy of   insurance."

34. Lynskey J. (Lord Goddard and Birkett J. agreed) held on the facts that the use of the vehicle on the road in the circumstances shown was a user in relation to which there was a policy of insurance in respect to third party risks which complied with the requirements of the 1930 Act.

35. So far as we have been made aware, these authorities remained unchallenged until Lord Denning considered the point in his dissenting judgment in Romford Ice and Cold Storage v. Lister ^(8). Mr. Litton relies heavily on Lord Denning's views which closely reflect his submissions before us. For this reason I think it is desirable to read all that Lord Denning had to say on the matter, between pp.193 and 195. After setting out the text of s.35(1) of the 1930 Act, Lord Denning said:

"The problem is to apply that section to the various cases which arise when a servant is driving a motor-vehicle belonging to his master. It seems to me that when a master employs a servant to drive his motor-vehicle and the servant drives it in the course of his employment, then the master is using the vehicle and so is the servant. Both of them are using it. In such cases it is important to distinguish between the master's user and the servants user. So far as the user by the master is concerned, if he can point to an effective policy of insurance which covers the user by him of the vehicle at the material time, then no offence is committed by the master. That was the position in John T. Ellis Ltd. v. Hinds, when a youth of 16 drove a car for his employers without having a driving licence. The employers were in fact quite innocent people. The youth had deceived them into thinking that he was of age and held a driving licence. Upon examining the insurance policy the court held that the user by the employers was covered by the policy because they did not know that the youth did not hold a driving licence. They were, therefore, not guilty of an offence. But the youth himself was, I think, clearly guilty of an offence under the section. The user of the vehicle by him (as distinct from the user by his employers) was not covered by insurance. He could not escape by relying on their innocent use of the vehicle when his own use of it was guilty.

Next take the case where a servant is driving a car on a frolic of his own outside the course of his employment. In that case the servant is using the car but the master is not using it; nor is the master causing or permitting it to be used. The master is not caught by section 35(1) at all. He is not bound to have a policy covering such user: see the observations of Lord Goddard C.J. in Ellis v. Hinds, when commenting on Sutch v. Burns. The driver is, however, caught by section 35(1) because he is a person using the car and his user ought to be covered by insurance. He is guilty of an offence unless he has taken out a policy covering his user, which he will not usually have done. The injured party will not suffer, however, because it is a case where the Act requires the liability to be covered by insurance and, as such, the Motor Insurers' Bureau will pay the injured party just as if the driver had taken out a policy as he ought to have done.

The present case is the difficult one when a servant injures a fellow-servant. Suppose that a servant, whilst driving in the course of his employment, runs down a fellow-servant in the road. In that case the master is using the vehicle and so is the servant. Both are using it. But the effect of the section is different for each. We must consider the master's user separately from the servant's user. (1) The master's user. So far as the master's user is concerned, he is not bound to have a motor policy which covers injury to his own employees: see section 36(1)(b)(i) of the Act. The reason is, no doubt, because his responsibility to his own employees is discharged by his contribution to the National Insurance Fund or by his employers' liability policy. (2) The servant's user. So far as the servant's user is concerned, there must, I think, be a policy in force which covers him in case of injury to his fellow-servants. The section says that it is not lawful for him to use a motor-vehicle on the road unless there is in force, in relation to the user by him, such a policy of insurance against third party risks as complies with the Act. When you are considering the user by him, the fact that he is a servant is irrelevant. His user must be covered just the same as if he were not a servant. The policy must cover his user of the vehicle, no matter whom he runs down. It makes no difference that he runs down a fellow-servant. He must be covered for that risk. (3) The master's causing or permitting. The section also makes it an offence to 'cause or permit any other person' to use a motor-vehicle on the road unless there is in force, in relation to the user by that person, such a policy of insurance as complies with the Act. When that section is applied to the use by a servant, it is plain that a master must not cause or permit his servant to use the lorry unless there is in force, in relation to the servant's user, a policy which complies with the Act; that is, a policy such as I have described under (2) above, which covers injuries to his fellow-servants. This means that an employer's motor policy, in order to comply with the Act, should be extended so as to cover cases where his servants, whilst driving in the course of their employment, cause injuries to others, including their fellow-servants.

I appreciate that in Lees v. Motor Insurers' Bureau Lord Goddard C.J. held that a servant need not be covered for injury to his fellow- servants: but he seems to have approached the case on the footing that, in such a case, there was only user by one person, namely, the master, and that, so long as there was a policy in force in relation to the master's user, the Act was satisfied. I am quite clear, however, that, in addition to the user by the master, there is at the sane time a user by the servant. Under the Act there must be a policy in force in relation to the servant's user also, and this must cover fellow-servants. The authority of Lees v. Motor Insurers' Bureauis is greatly impaired by the fact that, when an appeal was brought to this court, the bureau did not resist it, but perferred to pay the widow her full claim and costs. I do not think that the decision in Lees v. Motor Insurers' Bureau was correct."

36. Despite Lord Denning's careful reasoning, when that case went to the House of Lords, sub nom. Lister v. Romford Ice and Cold Storage Co. Ltd^.(2) , their Lordships seem to have had no doubt about correctness of the authorities relied upon by Mr. Tang on behalf of Grand Union. Their Lordships' remarks were clearly obiter but, of course, must be given great weight. I should here refer to the terms of one of the paragraphs of the Defence in that case:

"7A . It was an implied term of the defendant's employment that he should not be required by the plaintiffs to do anything unlawful and in particular that he should not be required drive unless there was in force in relation to use of the vehicle such a policy of insurance as would provide him with the indemnity which s. 36(1) of the Road Traffic Act, 1930, requires. The said term is to be implied by law." [Emphasis added]

37. Lord Morton of Henryton, at p. 582, citing John T. Ellis v. Hinds ⁽⁵⁾ and Lees v. Motor Insurers' Bureau ⁽¹⁾ , said, of that part of para. 7A to which I have added emphasis: "This ..... seems to be based on a misconception. The Road Traffic Act, 1930, does not compel the employer to provide an indemnity for the driver personally."

38. At p.593, Lord Tucker, referring to the same two authorities (the correctness of which he noted had not been challenged) said: "Para. 7A is based on the erroneous assumption that the ..... Act imposes an obligation on the employer to take out a policy which will cover the personal liability of the servant while driving in the course of his employment."

39. Viscount Simonds touched upon the point inferentially at p.574 when he remarked that the second part of para. 7A had been validly answered by the appellant by averring that the Act did not require that a policy of assurance shall betaken out which provides the driver of a vehicle with an indemnity against all the consequences of his own negligence.

40. In his interesting and forceful submissions, Mr. Litton gives a number of examples of ways in which he suggests the Ordinance operates in differing circumstances. I will not refer to them all. He points out that where the owner of a car employs someone else to drive it, the employer (a) uses it on a road, through his servant and (b) has caused and (c) has permitted his servant to use the vehicle. But the servant also has used it on the road. If the employer is covered by a policy which indemnifies only him in respect of third party risks, he has complied with s.4(l) in relation to his own user. However, Mr. Litton. argues, the servant will have breached s.4(l) because in relation to the user by him ("that other person" referred to in s.4(1)) there is no policy in force; the insurer has only undertaken to indemnify the employer. It therefore followed that the employer has also been in breach of s.4(1) since he has not complied with all its requirements in permitting his servant to use the vehicle, and in relation to the latter user there was no policy of insurance in force.

41. Mr. Litton acknowledges that in the vast majority of cases it would be of no great consequence to a person injured by the servant's negligence if the policy indemnified only the policy-holder since the injured person would be able to recover damages against him as being vicariously liable for his servant's negligence, and would be able to resort direct to the insurer to satisfy the judgment under s.10.

42. Mr. Litton, however, was able, it seems, to give only one instance where real injustice to the injured person might arise - where the employer of a driver is a diplomat against whom judgment based on his vicarious liability might be impossible to obtain (as a result of a claim for diplomatic immunity). Then, unless the policy also indemnified the servant in respect of third party risks, a judgment against the servant could not be recovered direct from the insurer under s.10.

43. While it is true that an unscrupulous diplomat might prevent a judgment being obtained against him so that an injured person could not satisfy one of the conditions precedent in s.10(1), however, if he happened to be the diplomat's servant he would not be able to satisfy another condition precedent for the operation of that section because, by virtue of proviso (i) to s.6(1)(b), the diplomat's policy, if he had one, could exclude his liability to his servant in the circumstances envisaged by the proviso.

44. As to the position where, as here, the policy gives extended cover to a servant when driving his master's vehicle, Mr. Litton contends that the Ordinance, properly construed, will allow the injured person to succeed against the insurer for it was difficult to see how the proviso to s.6(1)(b) could apply as between the injured person happened also to be one of the master's servants had nothing to do with the driver's liabilitv incurred by the use of the vehicle on the road. In such circumstances, Mr. Litton says, in terms of s.10(1), judgment will have been obtained against a person insured by the policy and the judgment would be in respect of a liability which is prima facie required to be covered by the policy. The driver was one of a class of persons specified in the policy. But the liability of the driver did not arise out of and in the course of the injured servant's employment with the driver.

45. With regard to proviso (i) to s.6(l)(b), Mr. Litton argues that when it speaks of "liability in respect of the death ....." this is clearly a reference back in para.(b) to the liability of "such person, persons or classes of persons" as may be specified in the policy. The proviso, therefore, cannot be construed so that whenever an employee is injured by the use of a motor vehicle and there is an employer to whom the employee can turn for compensation, the requirements for compulsory insurance do not apply. Between fellow-employees, it is suggested, where the negligent employee (as in this case) is "a person insured by the policy", the proviso has no application because the injured employee is not a person in the employment of a person insured by the policy.

46. Mr. Litton goes on to submit that since in the present case the driver had incurred liability to the Plaintiffs, the only question was whether that liability was required to be covered by a policy under s.6(1)(b). He argues that this question cannot fairly be answered by asking whether someone else (here, the policy-holder) might be under liability.

47. As to John T. Ellis v. Hinds ⁽⁵⁾, Mr. Litton submits that the case focussed upon the owner's liability under s.35(1) of the Act, and was decided upon the application of the exception clause in the policy; the Court did not address the issue whether the driver had committed an offence against the statute by using a vehicle without having a policy of insurance in relation to the user of the vehicle by him. What was said about the driver's own position must therefore be regarded as obiter.

48. Since the Divisional Court was well aware of the fact that the boy who was driving was himself uninsured it seems to me that if the proposition in the forefront of Mr. Litton's submissions be right, the owner would inevitably have been convicted.

49. In presenting the arguments on behalf of the Plaintiffs, Mr. Litton strongly pressed upon us the injustice that would result if we were to hold in favour of Grand Union in the circumstances we have here. But I think Mr. Tang is right in urging us to bear in mind that there are other avenues which can be pursued (less expeditious, it is true) by persons who find themselves in the position of the Plaintiffs; they can pray in aid the Third Parties (Rights against Insurers) Ordinance, Cap.273.

50. Employees who are injured by the negligent driving of their master's vehicles cannot avail themselves of the s.10 procedure where proviso (i) to s.6(1)(b) of the Ordinance applies. This is, as Mr. Tang points out, essentially where the suggested injustice lies. If this restriction is to be regarded as outdated and unsatisfactory (perhaps, because compensation recoverable under the Employees' Compensation Ordinance, Cap.282, will often be far less than damages awarded in common law negligence actions) this is a matter for the legislature to address.

51. On this aspect of the matter, I agree with Mr. Tang that in the light of the proviso, and the manifest policy behind it, it would be strange if the legislature required compulsory insurance by a person in the position of Mr. Hui for the benefit of the very employees who could lawfully be excluded from the protection of Mr. Law's policy.

52. It seems to me to be unlikely in the extreme that it was intended that in any given situation the rights of an injured employee under the Ordinance should depend upon whether the master himself, or a co-employee, happened to be driving at the material time.

53. There is the cogent point, too, about the position of corporations. Many vehicles used on the roads are owned by limited companies. Such a vehicle will inevitably be driven by one of the company's employees. The construction of the proviso put forward on behalf of the Plaintiffs would mean that it could never apply to corporations.

54. With every respect to Mr. Litton's very full submissions, I have not been persuaded that the authorities applied by Hunter J. were wrongly decided. As we have seen, they received powerful, though obiter, support in the House of Lords, and I note that none of the text-book writers have questioned the correctness of these decisions. I respectfully adopt the reasoning employed in them which I find cogent and compelling. There is, thus, little more that I need say.

55. For my part, I find no difficulty in discerning what is meant by the plain language employed in s.4(1)  of the Ordinance: there must be insurance cover against third party risks for the user of the vehicle on any given occasion. And the section is not concerned only with the person who uses etc the vehicle. There must be effective cover for the purposes for which the vehicle is then being used.

56. Like the judges who decided the cases cited to us, I find nothing in s.6(1)(b) (with which, of course, s.4(1) must be read) that requires an employee in the place of Mr. Hui to have a separate policy, or to be covered by a policy (as he in fact was) which indemnified him for his personal liability.

57. As regards the effect of proviso (i) to s.6(1)(b), I respectfully agree with, and adopt, Lord Goddard's reasoning in Lees v. Motor Insurers' Union ⁽¹⁾, at p.214. In my view, on the ordinary meaning of the words employed, had the relevant cover not extended to Mr. Hui's own liability, and had he been prosecuted for an offence contrary to s.4(1), he would have had as complete a defence to the charge as it is conceded Mr. Law had, for he would have been able to say that the Ordinance did not require the policy to cover anyone's liability in respect of death or bodily injury sustained by a person in the employment of "a person" (Mr. Law) insured by the policy where the death etc. arises out of and in the course of that employment. That is how I think the proviso must be read.

58. It therefore follows that s.10(1) of the Ordinance cannot avail the Plaintiffs because Mr. Hui's own liability was not required to be covered by a policy under s.6(1)(b).

59. If I had come to a contrary conclusion, I would not have thought it right to disturb what must, I think, fairly be regarded as law which has been settled for the past 40 years or so. Moreover, the relevant provisions of the U.K. Road Traffic Acts 1930 and 1934 have been re-enacted in essentially similar terms, first by the Act of 1960 and then by the Act of 1972 presently in force. The Hong Kong Ordinance has been on our statute book since 1951, and while it has been amended many times, the provisions with which we are concerned have remained unchanged.

60. I would not have been disposed to uphold this appeal because the Plaintiffs are not left without remedy (although they have been denied the convenience of a resort to s.10(1) of the Ordinance) and such a decision would have, what to my mind are highly undesirable, but inevitable, consequences. A decision contrary to the settled line of authorities would mean that while it is being given there will be employers and employees who will be committing offences contrary to s.4(1) which have not to date been recognised as such. If this wide and unexpected field of potential criminal liability is to be opened up, I think it should be done by an informed legislature and not by the Courts.

61. In my judgment, Hunter J. reached the right decision and I would dismiss the appeal.

62. [Since, as the judgments which follow will show, we are all agreed the appeal is dismissed, and we make an order nisi that Grand Union shall have the costs of the appeal. We make no order in respect of the Respondent's Notice. We direct "Legal Aid taxation" in relation to the Plaintiffs.]

Clough, J.A.:

63. I agree.

Power, J.:

64. I agree.

(1)    [1952] 2 Lloyd's Rep. 210

(2)    [1957] A.C. 555

(3)    [1977] M.L.J. 1

(4)    [1943] A.C. 121

(5)    [1947] K.B. 475

(6)    [1947] Lloyd's Rep, 231

(7)    [1949] 2 K.B. 208

(8)    [1956] 2. Q.B. 180

Mr. Robert Tang, Q.C. and Mr. Geoffry Ma (Liang, Ng, Lie & Lai) for the Resnondent/Defendant.