LAM CHI FAT v. LIBERTY INTERNATIONAL INSURANCE

CACV 421/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 421 OF 2002

(ON APPEAL FROM HCA NO. 3232 OF 2001)

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J U D G M E N T

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Hon Rogers VP :

1. I agree with the judgment of Cheung JA.

Hon Le Pichon JA :

2. I agree with the judgment of Cheung JA.

Hon Cheung JA :

3. This Court dismissed the appeal with costs to the plaintiff at the conclusion of the hearing. These are my reasons for the dismissal.

The facts

4. The plaintiff was a painter and a mason in a construction site. On 10 March 1992 he sustained personal injuries in the course of his work when the platform he was working on collapsed.

5. Pursuant to section 15 of the Employees' Compensation Ordinance ("the Ordinance"), Foo Yan Construction Co. ("Foo Yan") served a statutory notice (Form 2) to the Commissioner for Labour informing him of the injury of the plaintiff. In this notice Foo Yan was stated to be the employer of the plaintiff. The notice was signed by Mr. So Kam Siu Kenneth ("Mr. So") as the sole proprietor of Foo Yan.

6. Foo Yan had effected an insurance policy with the predecessor of the defendant in the present action covering the personal injuries and death sustained by the employees of Foo Yan.

7. On 9 November 1993 the plaintiff commenced proceedings in the District Court seeking compensation under the Ordinance against Mr. So trading as Foo Yan as the 1st respondent and Lui Yu Chung ("Mr. Lui") as the 2nd respondent. The application pleaded that the plaintiff was an employee employed by Mr. Lui who was a subcontractor to Mr. So, the principal contractor.

8. Neither Mr. So nor Mr. Lui defended the application. Judgment was obtained against them and compensation in the sum of HK$208,901.00 was assessed in favour of the plaintiff.

9. On 28 December 1994 the plaintiff commenced an action against Mr. So and Mr. Lui in the High Court seeking common law damages against them for the damages he suffered in the accident ("the personal injuries action"). Paragraph 1 of the Statement of Claim expressly pleaded that the plaintiff was employed by them as a painter.

10. Judgment on liability in default of acknowledgement of service by Mr. So and Mr. Lui was obtained by the plaintiff. The damages were subsequently assessed against Mr. So only at HK$1,499,840.00 together with interest. Mr. So was further ordered to pay the costs of the action. The plaintiff was unable to satisfy the judgment from Mr. So. Mr. So was declared a bankrupt. The judgment against Mr. Lui was subsequently set aside and the action against him discontinued on the plaintiff's own application.

11. The plaintiff then commenced the present action against the defendant seeking payment of the judgment sum from the defendant. Ma J (as he then was) found for the plaintiff. The defendant now appeals against the decision.

The Ordinance

12. Under the Ordinance every employer is required to effect an insurance policy in favour of its employee. The claim by the plaintiff against the defendant is based on section 44(1) of the Ordinance. The whole of section 44 is as follows :

“ (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.

(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 commended proceedings against the person insured.

(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."

13. The relevant part of section 42 referred to in section 44(1) is section 42(1) which provides that,

“ (1) Notwithstanding anything in a policy of insurance issued for the purposes of this Part, an insurer is liable, in a proceeding under section 36LA or 44, for the amount of the liability of the employer not exceeding the available amount covered by the policy of insurance."

14. Section 43 is also a relevant section. Section 43(1) provides that,

“ (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."

15. Section 43(2) sets out the conditions for the sum to be payable under section 43(1). These conditions include, among other things, the insurer being given sufficient notice of the institution of proceedings for compensation or damages by the employee so as to enable the insurer to be added as a party to the proceedings (section 43(2)(b)).

The law

16. This Court in Pang Wai Chung v. Tai Ping Insurance Co. Ltd. [1999] HKLRD 354 had stated that the right of an employee to proceed and recover direct from the insurer the amount of the employer's liability to him was conferred primarily by section 44(1).

17. In Leung Chack v. Asia Insurance Co. Ltd. [1991] 2 HKLR 496 this Court, by a majority decision, affirmed the dismissal of an application by an employee of a sub-contractor to seek payment from the insurer under section 44 (now section 44(1)) of the Ordinance. The principal contractor had effected an employees' compensation policy with the insurer. This Court held that the employee of the sub-contractor was not entitled to seek payment from the insurer when the policy was expressly confined to the employees of the principal contractor.

The issues

18. The parties had not sought to re-argue the ambit of section 44(1), namely, whether it extends to a claim by an employee of a sub-contractor. The issues raised in this case are : first whether the plaintiff was an employee of Mr. So so as to entitle him to sue the insurer under section 44(1) and second whether sufficient notice had been given to the insurer. I shall confine myself to these two issues.

Mr. So as the employer

19. Mr. Lin, counsel for the defendant, argued that by the plaintiff's own case he had not been shown to be an employee of Mr. So. He referred to the Statement of Claim which pleaded that Mr. So and Mr. Lui were the principal contractor and sub-contractor respectively; there was a contract of employment between the plaintiff and Mr. Lui; and the accident was caused, among other things, by the breach of contract of employment on the part of Mr. Lui only.

20. He further referred to the application by the plaintiff's solicitor to amend the Statement of Claim after the judgment was obtained to plead that the plaintiff was employed by Mr. So and not Mr. Lui. The solicitors had filed an affirmation stating that the plaintiff was misled by the Labour Department and had erroneously considered Mr. Lui to be his employer. The true position was only discovered from Mr. So's letter to the solicitors after judgment was obtained. In this letter, Mr. So confirmed that he was the employer.

21. Mr. Lin further referred to the evidence of the plaintiff in the assessment of damage where he admitted that he claimed Mr. Lui was his employer in the Employees Compensation proceedings and the Personal Injuries Case because that was what he thought at that time.

Judgment against Mr. So

22. In my view there is no merit in this appeal. On the question of employment, the most important aspect of the case is that judgment had been obtained by the plaintiff in the personal injuries case against Mr. So. The cause of action of the plaintiff against him had been merged in the judgment. If one asks what was the cause of action of the plaintiff, the answer must be damages sustained by the plaintiff as a result of breach of a duty of an employer towards his employee. The plaintiff had put at the forefront of his claim against Mr. So and Mr. Lui an express and unequivocal plea that he was employed by both of them as a painter.

23. While there were references in the Statement of Claim to Mr. So as the principal contractor and Mr. Lui as the sub-contractor of the plaintiff and the plaintiff had pleaded a contract of employment with the 2nd defendant and the breach of this contract, equally some general words were used which were capable of being construed as referring to Mr. So as an employer as well. It was pleaded that "it was duty of the defendants to ....... provide and maintain a safe and proper system of work". It was further pleaded in the Particulars of Negligence that Mr. So and Mr. Lui were both in breach of the obligation to provide a safe and proper system of work.

24. By making default in giving notice of intention to defend the defendant admits all the allegations in the statement of claim indorsed on the writ (Cribb v. Freyberger [1919] W.N. 22) : see note 13/0/10 of Hong Kong Civil Procedure 2002. In this case Mr. So must have admitted that he was an employer of the plaintiff and had failed to provide, among other things, a safe system of work for the plaintiff.

25. The proper time for the defendant to challenge the employment relationship was at the time when it received the writ in the personal injuries case. The plaintiff's solicitors had served the Notice to Insurer when the writ was issued. The defendant had received this notice and had actually instructed its solicitors to respond by a letter of 16 January 1995. This letter challenged the plaintiff's claim that he was an employee of Mr. So. The defendant clearly was entitled to take over the defence of Mr. So, yet it had chosen not to and let judgment in default be entered against Mr. So. If the defendant chose not to take over the proceedings, it had to take the risk that Mr. So might be found liable as an employer particularly when Mr. So himself admitted this both in the Form 2 and by reason of his default in the personal injuries case.

26. In my view what was pleaded in the Statement of Claim was capable of sustaining a cause of action against Mr. So based on an employment relationship between the plaintiff and Mr. So. Where a judgment had already been obtained on a basis which is capable of sustaining such a cause of action, the court is not to conduct a post-judgment examination of the claim by the plaintiff when there was no previous traverse of issues either by way of pleadings or by way of evidence at the time of the judgment. The judgment remains a binding judgment. There was no attempt to set aside the judgment. There was no appeal against the judgment either.

27. Whatever was said by the plaintiff in the assessment of damages hearing had no effect on the judgment which was already entered against Mr. So. As a matter of fact he further stated in the evidence that he was not sure who his employer actually was. Likewise what the plaintiff's solicitors had said in the subsequent application to amend the Statement of Claim had no effect on the judgment either.

Proper Notice

28. The claim that the defendant had not received a proper notice under section 43(2)(b) of the Ordinance is equally unmeritorious. One may indeed ask what more is required when its solicitors actually raised the issue of employment in the response.

Conclusion

29. The appeal was accordingly dismissed with costs to the plaintiff. The plaintiff's own costs is to be taxed in accordance with Legal Aid Regulations.