FOR POR v. SUM SHUK CHING

HEADNOTE

EMPLOYEES' COMPENSATION - Employees Compensation Assistance Ordinance 1991 (Ord. No. 34 of 1991) - Employees Compensation Assistance Fund Board - whether Board should be joined as party to application for compensation under Employees' Compensation Ordinance (Cap. 282).

Applicant injured when a passenger in vehicle driven by owner - owner alleged to be employer of applicant - owner deceased - adminstratrix contending that applicant not employed by deceased -  deceased not insured in accordance with Part IV of Cap 282 applicant seeking to add Board as respondent.

Held: Applicant had not shown an arguable case for joining Board as additional party, since applicant's prospects of obtaining payment under Ord. No. 34/91 depended upon exercise of discretion by Board after an award or judgment had been obtained from a court or tribunal; Board could only be held legally liable if it is substituted for the alleged employer as respondent.

IN THE DISTRICT COURT OF HONG KONG
CIVIL JURISDICTION
EMPLOYEES' COMPENSATION CASE NO. 172 OF 1991

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IN THE MATTER OF AN APPLICATION BETWEEN:

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REASONS FOR DECISION

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1. On the 24th April 1991, Mr. Fok Por ("the applicant") filed an application for compensation under the Employees' Compensation Ordinance (Cap. 282) in respect of an accident which occurred on the 12th May 1989. The respondent is the widow and administratrix of the estate of Li Sing Keung ("the deceased") who, it is alleged, was the applicant's employer at the time of the accident. By a summons dated the 23rd January 1992, the applicant seeks leave to re-amend his amended application and to join the Employees Compensation Assistance Fund Board ("the Board") as a co-respondent. This application has given rise to a number of novel and complicated problems, the solutions to which may be of interest to a wider audience. Accordingly, having heard argument in chambers, I have adjourned into open court to give the reasons for my decision. In order to appreciate some of the problems, a brief chronology of events and a summary of the function and powers of the Board will be given. For the purposes of the present application the facts are derived from the application, the respondent's answer, and an affirmation filed in support of the summons. But, I must emphasise that these are no more than provisional findings, since certain matters are in issue, and the trial is due to take place at the end of May of this year.

2. On the 12th May 1989 the applicant was a passenger in a lorry, owned and driven by the deceased. He sustained serious injuries when the lorry collided with a bus. The deceased was killed in the accident. At the material time, the deceased was then insured under a Commercial Motor Vehicle Policy, covering the vehicle and liability to third parties. But, it expressly excluded liability in respect of death or bodily injury to any person "arising out of and in the course of" that person's employment by the insured. The applicant alleges that at the time of the accident he was employed by the deceased as a delivery worker. This is disputed by the respondent. But, even if the applicant was an employee of the deceased, it appears that there was no policy of insurance covering the deceased's liability to the applicant such as is required by Part IV of Cap. 282. In summary, unless the deceased's estate is sufficient to meet any liability to the applicant as the applicant's employer, the applicant has no real prospect of obtaining satisfaction of any judgment he may obtain in the present proceedings. In essence, it is the contention of the applicant, who has been represented by the Director of Legal Aid from the outset of these proceedings, that this difficulty can be overcome by joining the Board as a party, having regard to statutory provisions governing the Board's functions and liabilities. I will now endeavour to summarise the effect of these provisions.

3. The Board owes its existence to section 3 of the Employees Compensation Assistance Ordinance 1991 (Ordinance No.34 of 1991 "the Ordinance") which came into operation on the 1st July 1991. The Board is a body corporate having perpetual succession and capable of suing and being sued. Its powers and functions may be described as administrative, determinative or quasi-judicial, and advisory, (sections 4, 5 and 6). One of its functions is to hold upon trust and administer, "in accordance with the objects" of the Ordinance, the Employees Compensation Assistance Fund ("the Fund"), established by section 7 of the Ordinance. The objects-of the Ordinance can be ascertained from the preamble which states that it is :-

"... to provide for the protection of the entitlement of employees and others to compensation or damages for employment - related injury; for the protection of employers against default under policies of insurance in respect of their liability for such compensation or damages; for the establishment of a board and a fund for those purposes; and for incidental or connected matters."

   In the main, the Fund comprises monies received from the Employees' Compensation Insurance Levies Management Board, which is another body corporate created by statute (Ordinance No. 33 of 1990). The latter receives levies out of the premium income from the compulsory insurance policies required by Part IV of Cap. 282. These levies only became payable in 1990. In due course the Fund is likely to be augmented by sums recovered as a result of the Board's rights of subrogation and other powers conferred by Part V of the Ordinance. But, for the time being, I think that I should take notice of the fact that the Fund may not be sufficient to meet the Board's liabilities in full. This is recognised by section 26 of the Ordinance, which sets out the order of priority of various claims. The Board may entertain claims by employees (s. 16); by employers on their own behalf (s. 17); or on behalf of an employee (s. 18) if the employer's insurer is insolvent. Priority is given to claims by employees; and by reference to the date of the accident (s. 26(2)(c)).

4. Basically, there are two ways whereby an employee, such as the applicant, can become eligible to receive a payment from the Fund. The first requires the employee to show that he is unable to obtain payment of compensation or damages ordered to be paid by some judgment or order of a court or tribunal, or by virtue of some agreement or other provision of cap. 282 (section 16 (2 (a)). The second method is to take legal proceedings against the Board by virtue of section 25 of the Ordinance. The present application by the applicant is based on this section, which appears to make the Board the statutory assignee or transferee of all the rights and liabilities of an employer. It is not easy to reconcile this section with other provisions of the statute; or to see how, if at all, it fits in comfortably with the general scheme and the powers and functions of the Board. Although the alleged accident occurred before the Board came into existence, I am satisfied by the provisions of the Ordinance as a whole, and section 33 in particular, that it does operate retrospectively so as to render the Board potentially liable to make payments to victims of work-related accidents, which occurred on and after the 1st January 1984.

5. On behalf of the applicant Miss Choi advanced various reasons for joining the Board as a party to these proceedings. Her main concern appeared to be a desire to avoid further uncertainty and delay in securing compensation for the applicant by having to make a claim against the Fund under section 16 of the Ordinance. She also apprehended that further delay and expense would result if the Board were to make its own enquiries. This possibility might become a realistic probability because of a fear that the respondent, not being legally represented, might not seriously contest the applicant's claims to compensation. On behalf of the Board Miss Tung pointed to the undesirability of depleting the Fund by incurring the unnecessary cost of instructing lawyers in respect of claims which could and should be made against the Board in accordance with the more informal procedure envisaged by sections 16 and 21-24 of the Ordinance.

6. I fully appreciate Miss Choi's concern in this matter. Reducing delays, and the anxiety inherent therein, as well as keeping legal costs to a minimum are all laudable aims, which can often be achieved by joining all interested parties in one set of proceedings. But, quite apart from the incongruity of seeking to sue a statutory board of which the Director of Legal Aid is an ex-officio member I am not persuaded that this is a proper case for adding the Board as a party to these proceedings. The Board does not wish to be joined, in spite of its potential liability to the applicant. Accordingly, the applicant must show that there is some compelling reason, or a good arguable case, for joining the Board as a party to these proceedings. At least, the applicant must show that the Court would have jurisdiction to make some order against the Board, at the end of the day, either in addition to an order against the respondent, or as an alternative to making no order against the respondent. In the present case, it is clear that the applicant cannot demonstrate any prospect of satisfying either of these tests. Although the Ordinance amends Cap. 282, it does not make the Board additionally liable, in the same way that principal contractors or insurers can be made liable (Cf. sections 24, 28 and 44 of Cap. 282). And, if the applicant fails to prove that he was employed by the deceased, or that his accident occurred in that context, the Board would be under no obligation to compensate him. In short, there is no point in joining the Board as a party to the present proceedings, because the Court cannot make any effective order under Cap. 282 against the Board.

7. The only way that the applicant can obtain such an order against the Board is by virtue of section 25, which reads as follows:-

"(1) This section applies to any claim against an employer for compensation or damages where -

(a) the employer -

(i) cannot be identified or, if identified, cannot be found;

(ii) is involvent;

(iii) is dead or in the case of a company, has been dissolved, wound up or struck off the register; or

(iv) for any reason, cannot be served with proceedings; and

(b) no policy of insurance is known to be in force in relation to the employee

(2) Subject to this section, proceedings for any claim against an employer to which this section applies may issue against the Board as if it were the employer.

(3) Proceedings against the Board under this section shall not issue unless the court is satisfied, on application made on notice to the Board, as to the matters specified in subsection (1)(a) and (b).

(4) Where proceedings are brought against the Board under this section, the rights and liabilities of the employer in respect of the compensation or damages the subject of the proceedings are vested in and transferred to the Board

8. Where there is an employment relationship, the section enables the Board to be held liable as if it were the employer, if the latter cannot be traced or is not worth "powder and shot" and is not insured. In the present case, I am satisfied as to the matters specified in subsection l(a)(iii) and (b). Accordingly, proceedings against the Board may issue as if it were the applicant's employer. But, it does not follow that the Board should be added as a party to these proceedings; because subsection (4) clearly provides that the rights and liabilities of the true employer are vested in and transferred to the Board once proceedings have been brought against the Board. The applicant's summons seeks an order that the Board "be joined as a Co-Respondent" in the present proceedings. It does not seek an order that the Board be substituted for the respondent as the only party. Apparently, the applicant wishes to preserve his claims against the respondent in case the deceased's estate is sufficient to meet any award. In the absence of a clear undertaking to abandon all claims against the deceased's estate I do not think that it would be right to join the Board as a party to these proceedings. In short, I do not think that the Ordinance allows an employee to maintain legal proceedings against an employer and the Board at the same time. Section 25 obliges an employee to make an election. It is unnecessary for me to decide whether that election must be made before proceedings are commenced or can be made later by an appropriate amendment or other application.

9. I do not think that the possibility that the Board may have to consider an application to satisfy wholly or in part, an award under Cap. 282 (or a judgment for damages) is sufficient to justify making the Board a party to these proceedings. If the applicant is unhappy with the Board's decision, in the purported exercise of its powers under section 22, he may institute proceedings against the Board in any court. (Cf. section 24). Admittedly, the Ordinance is curiously silent on the remedies available to an employee under that provision. But, apart from section 25, it is, in my view, yet another indication that the Board is not to be directly involved in ordinary litigation of the present kind; and is to be spared the need to expend its limited financial resources on the legal costs of defending legal proceedings before the courts.

10. In my judgment, the general scheme of the Ordinance is that the Board should serve as a last resort for obtaining payment of compensation or damages legally awarded to employees, only after it has been shown that attempts to obtain satisfaction have failed because of the insolvency of the employer or his insurer. Even then, the amount to be paid from the Fund, and whether any payment should be made, are matters left to the discretion of the Board. With the exception of cases which fall within section 25, there is no question of any entitlement on the part of employees to a payment from the Fund. In my view, section 25 is really designed to deal with the situation where an employee has an indefeasible claim against an employer, who is uninsured, and cannot be effectively sued. The section relieves an employee of the pointless task of proceeding against the employer or his estate, and enables him to obtain an order against the Board, which the Board must honour like any other party. In my view, this is the only exception to the discretionary feature of the Board's functions; and is probably justified by the fact that the Board will have ample opportunity to carry out inquiries of the kind envisaged by section 22 by reason of the fact of being a party to the proceedings.

11. Section 25 is included in part IV of the Ordinance. The Board's discretionary power to determine entitlement and the amount, if any, to be paid from the Fund (section 22) applies "in respect of any application under a section of "Part IV. At first sight, this would suggest that after an order of a court is made against the Board under section 25, the Board can conduct its own review and decide what, if any, amount should be paid from the Fund. In my judgment, this is not the case. The Board's discretionary functions are confined to applications made under section 16, 17 or 18 of the Ordinance. It would be somewhat absurd to give the Board a free hand to review and disregard or vary an order of a competent court, made in proceedings to which the Board was a proper party by virtue of section 25. The matter is not free from doubt but I consider that the words: "subject to section 25 in section 21 indicate a legislative intention that sections 21 to 23 only apply to "applications" under sections 16 to 18 and not to "proceedings" brought against the Board under section 25. In my view, the Board must honour in full any order or award made by virtue of section 25; subject only to the priority provisions of section 26.

12. For the aforesaid reasons, I am satisfied that there is no good reason for adding the Board as a respondent to these proceedings; and the applicant's application is dismissed.