Hui Kwok Hang v. Lam Chan Shing and Others

HCA000532/1976

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO. 531 OF 1976

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ACTION NO. 532 OF 1976

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ACTION NO. 935 OF 1976

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Coram: Li, J. in Chambers

Date of Judgment: 29th September 1977 at 3.35 p.m.

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JUDGMENT

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1. This is an appeal by the Mutual Underwriters Limited, hereinafter referred to as the Appellant, to be joined in the Defence in the consolidated Actions No. 532 of 1976 and No. 935 of 1976 against the Registrar's dismissal of their application to be joined as a Defendant.

2. The facts giving rise to this appeal are as follows. The appellant is an insurer of vehicle No. BD 475 which was involved in a traffic accident on the 9th June 1973 when two persons were killed. The personal representatives of the two deceased promptly took action against the driver as well as the owner of the vehicle. Writs were is sued on the 17th March 1976 and notice of the claim was given to the appellant on the 6th March 1976 under section 10 of the Motor Vehicles Insurance (Third Party Risks) Ordinance, Cap. 272. On the 29th July 1976 the 2nd defendant, who was the owner of the vehicle, entered an appearance and on the 30th September 1976 filed the first defence denying liability, inter alia, on the ground that the 1st defendant was neither a servant or agent nor permitted driver of the 2nd defendant, the owner. It was further alleged that there was no negligence on the part of the 1st defendant. On the 21st October 1976 judgment was given against the 1st defendant, the driver, in default of appearance. On the 3rd June 1977 the plaintiff applied and obtained leave to with draw the action against the 2nd defendant, the owner. The plaintiff then applied for assessment of damages against the 1st defendant. What followed can be envisaged. Then the appellant applied to be joined as a defendant before the Registrar. The summons was dismissed on the 19th July 1977, hence this appeal.

3. On the affidavit of Mr. Suen Yan Kit, the manager of the appellant, it is alleged that the appellant had a pecuniary interest because of the notice given under section 10 of Cap. 272. The effect is that if damages were assessed against the 1st defendant the next step for the plaintiff is to bring an action against the appellant if the appellant refuses to pay the damages so assessed. All that is required of the plaintiff to prove is that the 1st defendant was either an agent, servant, or was driving with the permission, of the 2nd defendant, the owner, against whom the action had been withdrawn.

4. The appellant's case is that the appellant has a pecuniary interest because of the circumstances and that had the action taken its normal course against the 2nd defendant, the appellant would be able to step into the shoes of the 2nd defendant and then contest first of all liability (by denying negligence, by alleging contributory negligence, by denying that the 1st defendant was driving with the permission of the 2nd defendant or was a servant or agent of the 2nd defendant) and lastly the appellant stepping into the shoes of the 2nd defendant may also contest the quantum of damages. Now that the action against the 2nd defendant has been withdrawn, the appellant, and indeed the 2nd defendant as well, will be deprived of the opportunity to contest any of these points except the point that the 1st defendant was driving with the permission of the 2nd defendant.

5. I do not feel that the question of liability on account of negligence, of contributory negligence is of great importance since the 2nd defendant was not present at the scene of the accident. There may or may not be witnesses to testify as to contributory negligence on the part of the deceased or the lack of negligence on the part of the 1st defendant. However, the quantum of damages remains an important issue. It has been argued before me that in this respect it is up to the appellant to step into the shoes of the driver, the 1st defendant, either to apply to have the judgment against the 1st defendant, either to apply to have the judgment against the 1st defendant satisfied or at the same time to contest the quantum of damages when it comes to be assessed. If the appellant fails to contest the question of liability at the trial of the issue between the plaintiff and the 1st defendant, the appellant is quite open to claim indemnity from the driver, the 1st defendant. Whatever steps they have taken in respect of the action against the 1st defendant would be without prejudice to their claim of waiver. In the case of Australian & Eastern Insurance Company Limited against Luen Fat Hong in No. 1201 of 1972 where Mr. Commissioner Yang, as the then was, held that taking up the defence of the insured driver did not operate as a waiver on the part of the insurance company to claim indemnity. Another case cited is Cheung For-kuen v. Tang Wai-kwong (1977) Hong Kong Law Journal, Vol.7 Part 2 in No. 2350 of 1975, at page 275, which is far more in line with this case. In that case my Brother Trainor held,

With great respect to my brother judges, I have cited to me, another case before the Court of Appeal viz: Chan Lam-chun v. The National Insurance Company in No. 57 of 1976 whereby the majority of the Court of Appeal held that the very moment an insurance company steps into the shoes of the driver to defend an action, the insurance company has waived its right to an indemnity. Between these decisions I have to bow to the decision by the Court of Appeal and hold that there is a waiver if the insurance company - the appellant in this case - should step into the shoes of the driver, the 1st defendant, and apply for the judgment to be set aside and start to fight the action again. That would be a step which would be detrimental to the appellant in one way or another and the appellant is forced to this position by virtue of a withdrawal of the action against the 2nd defendant.

6. But a waiver is not entirely the point that has influenced my decision in this case. That is not entirely the only point. In my opinion the case should be heard on its own merits. If the appellant were to step into the shoes of the driver, the 1st defendant, and fight the action, one must consider the conflict of interest. One must also observe that one of the owner's defences is that the 1st defendant, the driver, was neither his agent nor his servant, nor was there any permission given the driver to drive the insured vehicle. As such, one can envisage that if the appellant were to step into the shoes of the driver, the appellant would have to adduce evidence that the driver drove the vehicle with out the permission of the owner or was not the agent or servant of the owner. Agency or permission is the only justification for the driver, the 1st defendant, to be covered by the insurance policy. Such evidence, had it been allowed to be adduced, would be against the interest of the driver. If the insurance company would, by right, be able to step into the shoes of the driver, the 1st defendant, and probably against his will, such evidence would be adduced against his will without separate legal representation.

7. In another case I tried some months ago, I made the remark, albeit obiter to the effect that it would be unfair for an insurance company to step into the shoes of a driver, to deny liability, and then later on come back and say that the driver had driven without permission. That amounted to allowing the insurance company to have two bites of the cherry. In the converse if the insurance company, that is the appellant in this case, were not allowed to be joined as a defendant, the appellant would be deprived of the opportunity to first of all deny liability on the ground that there was no permission given to the driver to use the vehicle.

8. My attention is brought to the case of Gurtner v. Circuit (1968) Queen's Bench Division at page 602, in which Lord Justice Diplock said:

"Clearly the rules of natural justice require that a person who is to be bound by a judgment in an action brought against another party and directly liable to the plaintiff upon the judgment should be entitled to be heard in the proceedings in which the judgment is sought to be obtained. A matter in dispute is not, in my view, effectually and completely "adjudicated upon" unless the rules of natural justice are observed and all those who will be liable to satisfy the judgment are given an opportunity to be heard. In the case of an ordinary insurer, this does not arise in practice, since the standard terms of a third-party liability policy give to the insurer a contractual right to conduct the defence of the running-down action in the name of the assured. But as I read his judgment in the Fire Auto & Marine case, John Stephenson J. would have allowed an ordinary insurer to be added as a party to a running-down action if the policy of insurance did not contain such a term. And this, I think, would be right."

I have been invited to read the converse to the latter bit of this dictum in the sense that had there been an insurance policy allowing the insurer to step into the shoes of the insured person, the insurance company should not be allowed to be joined as a defendant. I must confess that I am unable to reach this conclusion. For one reason, the driver of the vehicle is not an insured person unless he is one of the permitted drivers or an agent or servant of the insured; That is precisely the point in issue.

In this particular case, had the 2nd defendant been allowed to remain as the defendant, the appellant would be able to step into his shoes and contest, first of all, the question of liability on the ground that there was no permission to drive and, secondly, at the same time, concurrently, to contest the quantum of damages. As it stands, the plaintiff has seen fit - for good reasons, I'm sure - to discontinue the action against the 2nd defendant, the owner, thereby depriving the appellant of at least one of his defences viz: either not to contest the question of liability on the ground of no permission or to forego any contest as to quantum of damages. As I understand it, even as the matter now stands, the plaintiff still has to go against the appellant if the appellant refuses to pay the damages that are assessed, and that requires a second action. As I said that the whole merits of the case can be disposed of in one action and that the case should be heard on its full merits without prejudice to any party, I am of the opinion that in the interest of justice the appellant should be allowed to be joined as a defendant and have the matter tried and the whole merits of the case heard. Accordingly, I would allow the appeal and allow that the appellant be joined in the consolidated action as a defendant.

Representation:

Present : M. Asome (D.L.A.) for plaintiffs

R. Tang and W. Yeung (Chan & Ho) for applicant