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HCA 2563/2007
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 2563 OF 2007
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CHAN KWOK HONG |
Plaintiff |
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AXA CHINA REGION INSURANCE COMPANY (BERMUDA) LIMITED |
1st Defendant |
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EMPLOYEES COMPENSATION ASSISTANCE FUND BOARD |
2nd Defendant |
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Before: Hon Fung J in Chambers
Date of Hearing: 13 May 2009
Date of Decision: 19 May 2009
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D E C I S I O N
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1.The Plaintiff applied by summons dated 26 September 2008 for discovery of the file and related documents showing the deliberation and determination of his application to the Employees Compensation Assistance Fund (“Fund”). Other documents sought are no longer relevant.
Background
2.The Plaintiff was a painting worker employed by Vitro (the employer). The employer ran a furniture shop. The Plaintiff injured his back during work at the office of a customer on 16 January 2003. He took out Employees Compensation proceedings against the employer in the District Court (DCEC 908/2003) and was awarded compensation of $148,552 plus interest and costs on 8 August 2005. The employer failed to pay the compensation, and was wound up by the Plaintiff.
3.The employer has taken out an insurance policy in respect of its employees with the 1st Defendant. The 1st Defendant refused to pay the compensation pursuant to the policy contending that it was not a policy in force for the purpose of the Employees Compensation Ordinance (Cap. 282) (“ECO”) as it only covered the business of the furniture shop, but not any decoration business in which the Plaintiff sustained the injury.
4.In March 2006, the Plaintiff applied to the 2nd Defendant for payment by the Fund established under the Employees Compensation Assistance Ordinance (Cap. 365) (“ECAO”) upon the refusal to pay under the policy by the 1st Defendant.
5.On 18 April 2006, the 2nd Defendant made a determination against the Plaintiff on the ground that:
“(The Plaintiff) had not provided evidence that he was unable to recover from the insurer who had issued a policy of insurance which was in force in relation to the Plaintiff at the time of the accident and indemnifying his employer in respect of such liability.”
6.In 15 January 2007, the Plaintiff requested the 2nd Defendant to indemnify him against the costs of the proceedings against the 1st Defendant, but was refused by the 2nd Defendant.
7.On 7 February 2007, the Plaintiff requested the 2nd Defendant to exercise the discretion to assume the right of subrogation upon payment from the fund, but was refused by the 2nd Defendant.
8.On 20 November 2007, the Plaintiff requested the 2nd Defendant to reconsider its determination, and that was also refused.
Statutory framework
9.S. 40(1) of ECO provides that:
“Compulsory insurance against employer's liability
(1) Subject to subsections (1B) and (1C), no employer shall employ any employee in any employment unless there is in force in relation to such employee a policy of insurance issued by an insurer for an amount not less than the applicable amount specified in the Fourth Schedule in respect of the liability of the employer.”
10.S. 42(1) of ECO provides that:
“Insurer's liability
(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.”
and “this Part” means Part IV – Compulsory Insurance – of ECO.
11.S. 43(1) of ECO provides that:
“Conditions under which liability for payment by insurer arises
(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.”
12.S. 44(1) of ECO provides that:
“Right of injured party to proceed against insurer
(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.”
13.S. 16 of ECAO provides that:
“Application by employee etc. for payment from the Fund in relation to unpaid compensation
(1) A person who is unable to recover from an employer payment of an amount of compensation for which the employer is liable may apply for payment of that amount from the Fund.
(2) …
(3) For the purpose of this section a person is not to be regarded as being unable to recover from an employer payment of an amount of compensation for which the employer is liable unless the person has taken such proceedings to recover payment of the amount-
(a) from, wherever applicable-
(i) the employer;
(ii) the principal contractor …; and
(iii) an insurer who has issued a policy of insurance-
(A) which is in force in relation to the injured employee at the time of the accident concerned; and
(B) indemnifying the employer, or the principal contractor mentioned in subparagraph (ii), in respect of such liability; and
(b) as are reasonable in the circumstances, having regard to the likely cost of such proceedings, the resources available to the person and the amount likely to be recovered from, wherever applicable, the employer, the principal contractor and the insurer.”
14.S. 22 of ECAO provides that:
“Determination of applications by the Board
(1) The Board shall in respect of any application under a section of this Part determine-
(a) whether or not it is satisfied as to an applicant's entitlement to apply under that section; and
(b) if so, what amount should be paid from the Fund; and
(c) to whom such amount should be paid,
and shall advise the applicant and any interested person by written notice of its determinations and, in particular, the amount of each payment, if any, to be made from the Fund by virtue of those determinations.”
15.S. 23 of ECAO provides that:
“Costs: Payment in favour of employees
(1) Where the Board has determined an application under section 16 in favour of an applicant then in addition to any amounts of compensation to be paid from the Fund the Board shall, subject to this section, agree to pay from the Fund-
(a) the costs incurred by the applicant in making the application; and
(b) an amount equal to any costs payable to the applicant pursuant to an order of a court for costs against the employer or the employer's insurer in proceedings claiming the compensation.”
16.S. 24 of ECAO provides that:
“Proceedings against the Board where applicant dissatisfied
(1) An applicant who is dissatisfied with a determination of the Board under section 22 may commence proceedings in a court against the Board.
(2) Proceedings under this section shall be commenced by writ.”
17.S. 37 of ECAO provides that:
“Subrogation
(1) Where a payment is made from the Fund under Part IV to any person ("the recipient"), being payment of an amount of compensation or damages which an employer, insurer or third party is liable to pay the recipient, all the rights and remedies of the recipient with respect to-
(a) the compensation or damages existing immediately before the payment are, to the extent of the amount of the payment; and
(b) any sum payable in respect of interest or costs in respect of the compensation or damages are,
transferred to and vested in the Board for the benefit of the Fund.”
Relevant principles
18.The burden is upon the applicant for specific discovery of documents to make out a prima facie case that:
(1) There is in existence a specific document or class of documents;
(2) The party against whom the order is sought has or had the documents in his possession, custody or power;
(3) The document or class of document relates to a matter in question in the action;
(4) Discovery is necessary either for disposing fairly of the cause or matter or for saving costs.
(see Deak & Co (Far East) Ltd v N M Rothschild & Sons Ltd [1981] HKC 78 and O. 24, r.8, RHC).
19.A prima facie case must first be made out for (a) possession, custody or power; and (b) relevance of the specified documents (see Hong Kong Civil Procedure 2009, para. 24/7/1 at p.477).
20.The traditional formulation of the test of relevance is that set out in Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55. However, this formulation must be applied sensibly and with constant regard to what is in issue. As was emphasised by Colman J in O Co v M Co [1996] 2 Lloyd’s Rep 347, 350-351, the Peruvian Guano test has been much misunderstood. The learned judge held that in order to be discoverable:
“the document or class of documents must be shown by the applicant to offer a real probability of evidential materiality in the sense that it must be a document or class of documents which in the ordinary way can be expected to yield information of substantial evidential materiality to the pleaded claim and the defence to it in the broad sense which I have explained. If the document or class cannot be demonstrated to be clearly connected to issues which have already been raised on the pleadings or which would in the ordinary way be expected to be raised in the course of the proceedings, if sufficient information were available, the application should be dismissed.”
21.The approach in O Co v M Co has been accepted by the courts of Hong Kong as the appropriate approach (see Hong Kong Civil Procedure 2009, para. 24/2/10; Yung Yuen Ling Alice v Wong Ming Kan Michael HCA 231/2004 (1 December 2006), paras. 11-12).
22.The relevance of an issue is not dictated by what is pleaded but what ought to be pleaded for the trial of the matter in issue. In Allington Investments Corp & Ors v First Pacific Bancshares Holdings Ltd & Anor [1995] 2 HKC 139 (CA), 144E-145B , Jerome Chan J said:
“With respect, the learned deputy judge fell into error when he held the view that the relevance of an issue can be dictated by a party unilaterally simply by placing it in his pleadings. Even if the opposing party has failed to apply to strike out an irrelevant allegation in the pleadings of the other side, he is not barred from taking the point in an application for specific discovery that an allegation made in the pleadings is irrelevant to the subject matter of the action and ought to be disregarded for the purpose of discovery. The court is certainly not bound to take into account of any immaterial or irrelevant averment of fact improperly inserted into the pleadings by a party… The relevance of an issue, or of a document, is dependent on its substance and contents in the light of the subject matter of the trial; and not simply on its mere presence in pleadings or the existence of a denial of it by a party.”
Pleadings
23.The issue between the Plaintiff and the 1st Defendant is whether the policy in question was in force in relation to the Plaintiff.
24.As against the 2nd Defendant, the Statement of Claim avers:
(1) The 2nd Defendant is under a duty to take into account all relevant circumstances and exercise its powers in a just, fair and reasonable matter;
(2) The 2nd Defendant failed to take into account the relevant circumstances prescribed under s. 16(3) of ECAO;
(3) The 2nd Defendant failed to take into account:
(a) the sum recoverable from the 1st defendant would be to the tune of $164,000 (plus interest and costs);
(b) the proceedings against the 1st Defendant is attendant with substantial litigation risks;
(c) any adverse costs consequence against the Plaintiff would not be covered by s. 23 ECO;
(d) any sum recoverable from the Fund is liable to be eradicated by costs payable to the 1st Defendant;
(e) there is disproportionate litigation risks and undue hardship on the Plaintiff;
(4) The 2nd Defendant could have:
(a) paid the Plaintiff first and in turn exercised the right of subrogation and sought to recover from the 1st Defendant;
(b) indemnified the Plaintiff for costs in the proceedings against the 1st Defendant (as required by the 2nd Defendant);
(5) The 2nd Defendant failed to exercise its power in a just, fair and unreasonable manner.
25.The Plaintiff sought two declaration against the 2nd Defendant:
(1) In rejecting the Plaintiff’s application for payment of the compensation under the Fund, the 2nd Defendant failed to take into account the relevant circumstances under s. 16(3) of ECAO and failed to exercise its power in a just fair and reasonable manner; or alternatively
(2) The Plaintiff is entitled to payment of the compensation (together with interest and costs) under the Fund.
26.The Defence of the 2nd Defendant avers that:
(1) The 1st Defendant is liable to pay the Plaintiff under s. 42 of ECO and its contentions for disputing liability are not properly grounded in law;
(2) The Plaintiff’s application was rejected because he had not provided the 2nd defendant with evidence to prove that he was unable to recover from the insurer who had issued a policy of insurance which was in force in relation to the Plaintiff;
(3) It is denied that the 2nd Defendant had failed to exercise its power in a just, fair and reasonable manner;
(4) The 2nd Defendant was bound to follow the provisions of s. 16 of ECAO in its determination and there is not any additional statutory duties to be exercised;
(5) The alternatives of paying the Plaintiff first subject to the right of subrogation or indemnifying the Plaintiff’s costs in the action against the 1st Defendant are not applicable at all or appropriate in the circumstances.
(6) There is every reason to believe that the Plaintiff has a strong case against the 1st Defendant which is a solvent insurer and it is denied that disproportionate litigation risks or undue hardship would be posed on the Plaintiff;
(7) In the unlikely event that the Plaintiff should fail in its claim against the 1st Defendant, there would be no question of the Plaintiff not being able to show that he was unable to recover from the insurer;
(8) There is no determination nor indication that should the Plaintiff fail in its claim against the 1st Defendant, the 2nd Defendant would not accede to the application under s. 16 ECAO or it would not agree to pay the costs incurred by him in taking recovery proceedings against the 1st Defendant;
(9) Under ECAO, payment from the fund is intended as a last resort and it would be wrong for the 2nd Defendant to make payment where there is a solvent insurer who is liable to pay;
(10) It is premature and unnecessary for the Plaintiff to join the 2nd Defendant in the present action.
Plaintiff’s submissions
27.Mr. Leung, for the Plaintiff, submitted that:
(1) The 2nd Defendant has an undisclosed blanket policy of requiring every applicant to take recovery action against the insurer first before making an application to the Fund which is contrary to s. 16(3) of ECAO;
(2) A private law action asserting a subsisting right may incidentally involve examination of a public law issue;
(3) The Court is concerned with the deliberation of the 2nd Defendant at the time of the determination and not the ex post facto justification in the Defence;
(4) The documents sought may throw light or cause a train of enquiry on the matter;
(5) It is in the interest of justice to require disclosure.
2nd Defendant’s submissions
28.Mr. Wong SC, for the 2nd Defendant, submitted that:
(1) The determination was a “judgment” of the Plaintiff’s entitlement to payment upon consideration of reasonableness on the part of the Plaintiff in not taking recovery action against the 1st Defendant as opposed to a discretion requiring reasonableness in its exercise on the part of the 2nd Defendant;
(2) Judicial review is concerned not with the decision but with the decision making process (see Chief Constable of the North Wales Police v Evans [1982] 1 WLR 1155);
(3) Under a s. 24 writ action, the Court is concerned with the correctness of the determination itself and is empowered to exercise the jurisdiction to determine the application afresh and needs not be troubled with investigation into procedural irregularity, if any;
(4) The pleading of procedural irregularity is a bootstrap argument in introducing an otherwise irrelevant issue;
(5) Even if the documents were relevant, it is not necessary either for fairly disposing of the cause or matter or for saving costs as the determination of the issue between the Plaintiff and the 1st Defendant will finally determine of the 2nd Defendant’s entitlement under ECAO without any further consideration.
Discussion
29.It is common ground between the parties that in considering the present application, the merits of whether there is a policy in force in relation to the Plaintiff is not relevant.
30.Mr. Leung submitted that as disclosed in the pleadings, both the correctness of the determination as well as the decision making process of the 2nd Defendant were challenged.
31.He submitted that although s. 24 of ECAO prescribed a writ action for the challenge of the 2nd Defendant’s determination, both private as well as public law matters could be raised in the action.
32.Mr. Leung referred to Roy v Kensington & Chelsea & Westminster Family Practitioner Committee [1992] 1 AC 624 where the plaintiff doctor bought an action seeking payment of the withheld allowance upon the decision by the committee that he failed to devote a substantial amount of time to general practice as required under the relevant Statement of Fees and Allowances of the National Health Service. The action was struck out by the judge as an abuse of process on the ground that the committee’s finding had been a public law decision which could only be challenged by judicial review. The English Court of Appeal held that the plaintiff had a contract for services with the committee and allowed the appeal. The House of Lords dismissed the appeal by the committee and held that a litigant possessed of a private law right (under statue) could enforce that right by ordinary action notwithstanding that the proceedings would involve a challenge to a public law act or decision. Lord Bridge of Harwich referred to O’Reilly v Macken [1983] 2 AC 237 that as a general rule it would be contrary to public policy and an abuse of the process to permit a person seeking to establish that a decision of a public authority infringed rights to which he was entitled to protection under public law to proceed by way of an ordinary action and by this means to evade the provisions of Order 53 for the protection of such authorities, and said at p. 628G-629A:
“It is appropriate that an issue which depends exclusively on the existence of a purely public law right should be determined in judicial review proceedings and not otherwise. But where a litigant asserts his entitlement to a subsisting right in private law, whether by way of claim or defence, the circumstance that the existence and extent of the private right asserted may incidentally involve the examination of a public law issue cannot prevent the litigant from seeking to establish his right by action commenced by writ or originating summons, any more than it can prevent him from setting up his private law right in proceedings brought against him...”
33.Mr. Leung also to Lord Lowry at p. 653E-G:
The “broad approach” was that the rule in O'Reilly v. Mackman did not apply generally against bringing actions to vindicate private rights in all circumstances in which those actions involved a challenge to a public law act or decision, but that it merely required the aggrieved person to proceed by judicial review only when private law rights were not at stake. The “narrow approach” assumed that the rule applied generally to all proceedings in which public law acts or decisions were challenged, subject to some exceptions when private law rights were involved. There was no need in O'Reilly v. Mackman to choose between these approaches, but it seems clear that Lord Diplock considered himself to be stating a general rule with exceptions. For my part, I much prefer the broad approach, which is both traditionally orthodox and consistent with the Pyx Granite principle [1960] AC 260, 286 as applied in Davy v Spelthorne Borough Council [1984] AC 262, 274 and in Wandsworth London Borough Council v Winder [1985] AC 461, 510…”
34.With respect, s. 24 of ECAO creates a right of action in the dissatisfied applicant and there is no need for the Plaintiff to rely on Roy v Kensington or any exception to O'Reilly v. Mackman to bring a writ action.
35.Insofar as Mr. Leung is relying on the obverse of Roy v Kensington to argue any procedural irregularity before the 2nd Defendant, assuming it to be so without deciding on the point, the question is still one of relevance and necessity.
36.As the Court is empowered to determine the application afresh under s. 24 and come to its own decision on entitlement of the Plaintiff, investigation into procedures before the 2nd Defendant is neither necessary or sufficient in disposing of the matter. Say if there is procedural irregularity, the matter does not rest there as the Court does not simply remit the matter back to the 2nd Defendant. Nor the irregularity ipso facto results in the determination being incorrect, and the Court has to make up its own mind. Say if there is no procedural irregularity, the Court still has to be decide whether it was reasonable for the Plaintiff to take recovery proceedings against the 1st Defendant.
37.I do not think it is either helpful or necessary at this stage to categorize the determination as either a “judgment” (where it is objective and requires a definite answer) or a discretion (where it is subjective choice within a given range) (see Bennion’s Understanding Common Law Legislation, Ch. 13).
38.In the circumstances of this case, I agree that the determination of the issue between the Plaintiff and the 1st Defendant will determine the question of entitlement under the Fund, but perhaps not the issues of costs in the event that the Plaintiff fails against the 1st Defendant.
39.Whereas s. 23 of ECAO does not cover costs payable to the winning insurer, insofar as s. 16(3) is concerned, the reasoning above as to necessity and sufficiency of procedural irregularity applies. Further, the 2nd Defendant never indicated not to reimburse such costs. In the event the Plaintiff loses against the 1st Defendant, the documents sought may (subject to further argument) possibly be relevant on the costs application against the 2nd Defendant. But I do not see the need to deal it now.
40.There remains the suggestion that the 2nd Defendant had an undisclosed policy of requiring every applicant to take recovery action against the insurer first.
41.Mr. Leung referred to early correspondence before judgement in the EC proceedings was handed down where the 2nd Defendant had asked the Plaintiff to take recovery action before seeing the insurance policy in question. Mr. Leung asked the Court to infer there was such a policy of blanket requirement of the applicant to the Fund to sue the insurer first regardless of the terms of the policy, and to pronounce disapproval upon it in the interest of justice.
42.The Secretary of the 2nd Defendant has gone on oath to deny any such policy. It is hardly surprising as any such policy would obviously be contrary to the letter and spirit of s. 16(3) of ECAO. Insofar as Mr. Leung’s concern with eradication of such policy, he is home. Be that as it may, the eradication of any such policy will not provide any guidance as to how a particular application under s. 16(3) is to be determined, as each case will depend on its own facts. The 2nd Defendant accepts that. Hence, I do not think it relevant to labour on the alleged policy.
Conclusion
43.In the event, the application for discovery is refused.
Costs
44.I make an order nisi that the Plaintiff do pay the costs of the application to the 2nd Defendant in any event (by reason of Legal Aid representation). I invite submission of a skeletal costs statement for summary assessment, and comments, if any.
45.Lastly, I thank counsel for their helpful submissions.
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(B Fung)
Judge of the Court of First Instance
High Court |
Mr Leung Wai Man Raymond, instructed by Director of Legal Aid, for the Plaintiff
Mr Horace Wong, SC, instructed by Messrs Gallant Y T Ho & Co, for the 2nd Defendant
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