Wong Pak Alias Yee Yick Poy v. Ng Po Chui

HCA005463A/1981

Application to set aside default judgment - Personal injuries claim in running down action - Insurance company delaying application to set aside default judgment in mistaken belief entitled to avoid liability for compulsory third party risks - Principles on which discretion to set aside to be exercised.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

_____

BETWEEN

_____

Coram: Rhind, J.

Date: 29 April 1982

___________

JUDGMENT

___________

1. While Mr. Wong, the plaintiff, was crossing Shaukiwan Road on the evening of 13th September 1980, he was knocked down by a private car driven and owned by Mrs. Ng, the defendant. As the result of that accident, Mr. Wong sustained injuries.

2. At the time of the accident, Mrs. Ng's car was properly insured against compulsory third party risks with Panin Insurance Co. Ltd. ("the insurance company"). No later than the 18th September 1980, the insurance company received notification from Mrs. Ng about the accident (Exhibit "MC2" to the affidavit dated the 2nd April 1982 of Mok Chim refers).

3. Before issuing a writ to claim damages for his injuries, Mr. Wong's solicitors on the 17th June 1981 gave the insurance company the customary notice in accordance with section 10(2)(a) of the Motor Vehicles (Third Party Risks) Insurance Ordinance, Cap. 272 that proceedings were going to be brought. Then the writ was in due course filed on the 12th August 1981, and Mrs. Ng was served with it personally on the 15th August, 1981.

4. There being no appearance entered or acknowledgement of service returned, Mr. Wong's solicitors caused interlocutory judgment to be entered in their client's favour on the 18th September 1981. That interlocutory judgment was in the usual form for damages which were to be assessed.

5. The next step in the litigation occurred on the 10th March 1982 when Mr. Wong's solicitors filed a Notice of Appointment of Assessment of Damages which was to the effect that damages would be assessed before a registrar on the 19th April 1982.

6. For the first time, there were now stirrings on the other side. On the 26th March 1982, solicitors filed a notice to act for Mrs. Ng. That was followed three days later by a summons to set aside the interlocutory judgment of the 18th September 1981, and to grant Mrs. Ng leave to file a defence.

7. That summons was heard by a registrar on the 14th April 1982. He dismissed it. As a matter of urgency in view of the appointment fixed for the 19th April to assess damages, Mrs. Ng's solicitors appealed against the dismissal of their summons. That appeal came on before me on the 16th April 1982. Mr. Wong's solicitors agreed to the request from Mrs. Ng's solicitors that the time for service of the notice of this appeal should be abridged so that I was able to go straight ahead with hearing the appeal on its merits.

8. Immediately at the close of the hearing, I dismissed the appeal, giving brief oral reasons for so doing, and at the same time I indicated to the parties that I would in due course reduce my reasons into writing. The effect of my decision was to clear the way for the hearing of the assessment of damages to proceed on the 19th April 1982.

9. A more common or garden running down claim than Mr. Wong's would be difficult to imagine. Mrs. Ng did all that could be expected of her by notifying the insurance company of the accident, and then Mr. Wong's solicitors fulfilled all their obligations by notifying the insurance company of the impending proceedings and then serving Mrs. Ng with the writ once it was filed. Everything points to a routine case, conventionally handled, at least in so far as Mr. Wong, his legal advisers and Mrs. Ng were concerned. In the course of any given year, insurance companies conducting compulsory motor vehicle third party insurance business in Hong Kong must collectively process hundreds, if not thousands of claims sharing the characteristics of the present case, namely that a pedestrian gets knocked down in the street.

10. There is nothing to suggest that any responsibility whatsoever attaches to Mrs. Ng for allowing judgment by default to be entered. On the material before me she appears to have acted the same as any average motorist would in her position: after the accident she left the matter in the hands of her insurance company to deal with.

11. Although the summons to set aside the default summons and for leave to defend was in Mrs. Ng's name, the reality of the matter is that it is the insurance company which seeks to have those steps taken.

12. No explanation whatsoever has been tendered as to why the insurance company failed to take any steps prior to the 18th September 1981 (the date of the interlocutory judgment) to prevent interlocutory judgment being entered.

13. At most, the insurance company has explained how on the 28th September 1981 it became aware of information which it believed (erroneously, as events turned out) had the effect of exonerating it from all liability under the policy. Thus, rather than explaining how it allowed judgment to be entered by default in the first place, the insurance company has in effect confined its efforts to trying to explain why it did not come to court earlier to have the judgment set aside. The lackadaisical attitude of the insurance company in allowing judgment to be entered by default in the first place is a circumstance which the court can take into account in deciding whether to exercise its discretion to set the judgment aside.

14. The information which had come the insurance company's way on the 28th September 1981 was that on the 13th January 1981 Mrs. Ng had pleaded guilty before a magistrates' court to using the vehicle with a defective tyre in the incident which gave rise to Mr. Wong's claim.

15. For some reason, the insurance company's assistant underwriting manager got it into his head that because having a defective tyre was a breach of a provision in Mrs. Ng's policy about taking all reasonable steps to maintain the vehicle in an efficient condition this in some way brought about an end to all liability on the insurance company's part.

16. Irrespective of what the position might be between the insurance company and Mrs. Ng, there is no doubt that the insurance company is directly liable to Mr. Wong to satisfy any judgment he gets against Mrs. Ng in respect of his bodily injuries. Even were it to turn out that the insurance company is able to avoid or cancel the policy as against Mrs. Ng, this would in no way affect Mr. Wong's entitlement to have his judgment satisfied by the insurance company (see section 10(1) and section 12(1)(b) of Cap. 272).

17. That was the law in Hong Kong on the 28th September 1981, and that has been the law in Hong Kong ever since compulsory third party motor insurance first came into effect here in 1951 when Hong Kong copied legislation which had been in force in England since 1934.

18. How the insurance company's assistant underwriting manager came to be so mistaken I do not know. It was speculated before me that confusion might have arisen in his mind on account of the position which existed in Hong Kong with regard to passengers in an insured's own vehicle prior to June 1977. There was no compulsory insurance for such passengers then, and insurance companies were able to escape liability on judgments by relying on exemption clauses in their policies on such matters as defects in the vehicle: see e.g. The Oriental Fire and General Insurance Co. Ltd. v. Cheuk Ma Yee.⁽¹⁾

19. That has been a matter of history since June 1977 when passengers inside an insured's vehicle got exactly the same compulsory third party protection as individuals outside the vehicle.

20. Whatever the reason for his doing so, the fact remains that the assistant underwriting manager caused the insurance company to write to Mrs. Ng on the 14th October 1981, purporting to repudiate all liability under the policy in respect of the accident. In doing that the insurance company imagined it was washing its hands of all aspects of the claim. The logic of this position was, of course, that the insurance company ignored the proceedings between the parties, with the result that the interlocutory judgment stood unchallenged.

21. The assistant underwriting manager had not felt the need for any lawyer's guidance in deciding that the insurance company would try to escape liability by a purported repudiation. However, when it turned out that his letter of the 14th October 1981 to Mrs. Ng did not staunch the flow of court documents in the present proceedings which were finding their way to the insurance company's office, he became alarmed.

22. Various hearsay notices under the Evidence Ordinance were issued by Mr. Wong's solicitors in conjunction with their notice dated the 10th March 1982 for an appointment for assessment of damages. On coming into possession of one of those hearsay notices, the assistant underwriting manager decided the time had come for the insurance company to consult its solicitors.

23. I will here quote the assistant underwriting manager's own words: "It was only upon receipt of legal advice from Messrs Woo, Kwan, Lee and Lo, the company's solicitors on the 25th March 1982 that I became aware of the provisions of the Motor Vehicle Insurance (Third Party Risks) Ordinance, Cap. 272". Mr. Wong's solicitor contends that statement is incredible, coming as it does from the assistant underwriting manager of a Hong Kong company writing motor vehicle third party insurance. Taken literally, I agree, the statement would be incredible, but I presume what he really meant was that the 25th March 1982 was the first time he became aware of the effect of the provisions of Cap. 272 on the instant case.

24. To have any hope at all of succeeding on its application to get the judgment set aside, the insurance company needed to show for a start that there was an arguable defence in whole or in part to Mr. Wong's claim. This the insurance company was able to do. Initially an affidavit was filed on behalf of the defence, disputing Mr. Wong's claim in its entirety, and also pleading contributory negligence. Before me counsel for Mrs. Ng/the insurance company conceded that there is not a complete defence to the action, but contended that Mr. Wong was guilty of contributory negligence. The Court accepts that in an appropriate case a default judgment will be set aside to allow an issue of contributory negligence to be tried: Burns v. Kondel.⁽²⁾

25. On the test most favourable to the insurance company, having once established that there was an arguable defence in whole or in part to the action, the insurance company, so long as it paid any costs thrown away, would be entitled to have the default judgment set aside, despite any delay, unless to do so would result in irreparable mischief. A test to that effect is to be found in the old case of Atwood v. Chichester.⁽³⁾ I tend to doubt whether the courts nowadays would adopt such an indulgent tend to doubt whether the courts nowadays would adopt such an indulgent attitude towards delay. In the words of Lord Denning M.R. in Revici v. Prentice Hall Incorporated and others,⁽⁴⁾ where he commented upon Atwood v. Chichester:

"Nowadays we regard time very differently from what they did in the nineteenth century. We insist on the rules as to time being observed. We have had occasion recently to dismiss many cases for want of prosecution when people have not kept to the rules as to time."

26. These days I think the courts would perform a general balancing exercise to see whether it was reasonable in all the circumstances to set the judgment aside.

27. Even on the old Atwood v. Chichester test, which I regard as too favourable to a defendant, the insurance company would still fail in the instant case.

28. Accidents giving rise to personal injuries frequently occur in a split second while confusion reigns. Because eye-witness testimony is usually so important in this type of case and taking into account the frailty of human recollection, the law provides a comparatively short limitation period for the bringing of personal injuries claims. As an exception to the general rule laid down by section 4(1)(a) of the Limitation Ordinance, Cap. 374 that actions founded on tort can be brought within six years of the cause of action arising, section 27(1) of that same Ordinance provides that where the damages claimed are in respect of personal injuries the limitation period is three years only.

29. Of modern times, starting with the landmark decision of Allen v. Sir Alfred McAlpine and Sons Ltd,⁽⁵⁾ the courts have made it abundantly clear that they are no longer willing to tolerate delays, particularly in the hearing of personal injuries cases, because delay militates against a fair trial, as the more the witnesses' memories become impaired with the passage of time, the less becomes the likelihood that the court will be able to establish the truth of what happened.

30. Were the default judgment to be set aside now, it would result in the irreparable mischief that a trial will take place at a time when the memories of the witnesses will be six months more stale than they need otherwise have been. Such a trial will almost inevitably be less fair than it would have been if heard earlier because the chances of the court arriving at the truth have been diminished. The policy of the law in setting its face against delays calls for implementation in the context of applications to set aside default judgments just as much as it does in other areas such as striking out actions for want of prosecution.

31. In performing a balancing exercise I do not think a court could see its way to lending its assistance to an insurance company displaying the degree of inexcusable incompetence manifested in the circumstances of the present case. As Gail Stevenson and another v. Chartered Bank,⁽⁶⁾ illustrates, the courts do not expect infallibility and will overlook some mistakes resulting in delay, but, on the other hand, the courts do expect at least marginal competence from professionals, which would include insurance underwriters, who seek relief from the consequences of their errors.

32. For the reasons set out above, the appeal was dismissed with costs.

(1) (1981) H.K.L.R. 41

(2) (1971) 1 Lloyd's Rep. 554, C.A.(4) (1969) 1 All E.R.

(3) (1878) 3 Q.B.D. 722

(5) (1968) 2 Q.B. 299 C.A.

(6) (1977) H.K.L.R. 165

Representation:

Mr. B. Chain (Woo, Kwan, Lee & Lo) for appellant/defendant

Mr. Sullivan of (D.L.A.) for respondent/plaintiff