Happy Chinese New Year of the Ox
PRACTICE WITH CAUTION
Law Chung Tai v. Sun Profit Logistics (HK) Limited and anr., DCEC No. 606 of 2019, H.H. Judge Levy, 15th July 2020.
The Applicant of this case claimed against his employer, Sun Profit Logistics (HK) Limited (“Sun Profit”) in respect of an accident occurred in the course of employment on 12th September 2018. Falcon Insurance Company (Hong Kong) Limited (“Falcon”) was Sun Profit’s insurer.
Sun Profit did not participate in the legal proceedings and in default of filing of an Answer, Interlocutory Judgment was entered against Sun Profit at the 2nd direction hearing on 20th December 2019. Later on the same day, Falcon issued a joinder summons seeking leave to join-in as the 2nd Respondent.
The Applicant opposed Falcon being joined to contest liability, but took a neutral stance in relation to quantum.
Falcon cited of Wong Shan Shan & Another v. The Incorporated Owners of Yue Wah Mansion & Anor, HCA No. 1086 of 2013, unreported, 28th January 2015 in which the Learned Deputy Judge took the view that there was no requirement for the intervener to show merits in a joinder application.
There is no dispute that Falcon received notice of proceedings on 28th March 2019 and knew the nature of the claim against Sun Profit. On 23rd July 2019 before the 1st direction hearing, Falcon repudiated liability under the relevant insurance policy. Falcon alleged there are number of cases against Sun Profit around the same time and those cases are unusual and extraordinary.
Falcon also knew Sun Profit did not appear at the 1st direction hearing on 23rd August 2019 and the Court directed Sun Profit to serve an Answer to the claim after being served with the Order of the 1st direction hearing.
Before the 2nd direction hearing on 20th December 2019, Falcon obtained the consent from the Applicant’s former solicitors in relation to the joining-in application. Due to procedural oversight, Falcon only issued the summons after Interlocutory Judgment was entered, albeit on the same date.
Having learned the Interlocutory Judgment on 3rd April 2020 and despite Falcon’s suspicious over the various cases against Sun Profit including the present one, Falcon did not seek to challenge the validity of the Interlocutory Judgment.
The Learned Judge ruled that Falcon was facing a valid and enforceable Interlocutory Judgment and following the case of Wong Kam Fai v. Yu Sai Wan and Ors.,  HKDCLR 67 hence its rights to challenge liability is lost by virtue of the Interlocutory Judgment.
In Wong Kam Fai, default judgment had also been entered against the respondents employers before the insurer applied to join in the proceedings pursuant to section 43(3) of the Employees’ Compensation Ordinance, Cap. 282 (“ECO”). The District Judge held that though the insurer in general should have the right to challenge the employment relationship under section 43(3) of ECO, its right, however, “must be affected by the default judgment entered against the 1st and 2nd respondents on liability”. In the absence of an application to set aside the default judgment in Wong Kam Fai, the Learned Judge granted leave to the insurer to deal with the assessment of compensation only.
The rocks on the path are not inevitable.
First, when one receives new instruction from insurer clients, one would have expected those instructing would monitor the progress of a direction hearing. At the very least, those instructing should send somebody to hold a watching brief at the direction hearing even if the insurer clients might have yet to make up the mind whether or not to take over the conduct of the proceedings on behalf of the insured. This is indeed the number one golden rule when one handles litigation matter.
Second, no matter how overwhelmingly legitimate ground the insurer clients may have to decline policy liability in the EC context, the litigator has to remind the insurer clients forcefully on their statutory obligations under the ECO and the legal implication of Lo Siu Wa v. Employees’ Compensation Assistance Fund Board and anr., FACV No. 12 of 2017, 31st January 2018. It is absolutely repugnant to learn that a litigator could have left an EC claim going undefended especially when Falcon also casted doubt on the validity of the claim not to mention the detriment caused to the insurer clients.
Third, irrespective of the delay in taking out the joining-in summons, the facts of this case, or at least what Falcon was arguing is that the Applicant’s claim coupled with others were suspicious, unusual and extraordinary. This certainly renders a legitimate ground for Falcon to apply for setting aside the Interlocutory Judgment hence enhancing the chance of success in its joining-in application. It is puzzled why Falcon did not attempt both in the first place.
Some might say, hindsight is always 20/20. This is exactly why when one advises its insurer clients to decline policy liability especially in the EC context, one has to be very cautious to ensure all the interests of the insurer clients are well protected and the strategy is best planned ahead. One should not lose sight of a default judgment in the EC context does have impact on issues in common law claim. It is capable of giving rise to an estoppel on the issue of employment relationship as it is final and conclusive until the default judgment being set aside.