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Attorney General v Official Receiver

Judgment Cited authorities 17 Cited in Precedent Map Related
Vincent
Judgment Date17 April 1986
Year1986
Judgement NumberCACV4/1986
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)
CACV000004/1986 ATTORNEY GENERAL v. OFFICIAL RECEIVER

CACV000004/1986
IN THE COURT OF APPEAL 1986, No. 4
(Civil)

BETWEEN

ATTORNEY GENERAL

AND

OFFICIAL RECEIVER

__________________

Coram: Sir Alan Huggins, V.-P., Kempster, J.A & Nazareth, J.

Date of Hearing: 20 & 21 March 1986

Date of Judgment: 17 April 1986

___________

JUDGMENT

___________

Sir Alan Huggins, V.-P.:

1. This is an appeal against the order of Jones, J. upon a summons for directions in proceedings for the compulsory winding-up of five insurance companies. In the court below it was in issue whether the application to the judge was properly made by summons, and it was held that it was - by virtue of s.200(3) of the Companies Ordinance The point has not been pursued upon the appeal, so that we have heard no argument upon it. Nevertheless I wish to express my doubt whether the "directions" contemplated by s.200(3) were intended to encompass anything more than directions as to the conduct of the proceedings. Had the application been by Originating Summons not only might other interested parties have had notice of it but we should have had evidence before us on a number of relevant matters. As it is, we are told that the official Receiver has received notice of claims against one or more of the companies from third parties who say that they are entitled to demand unliquidated damages from the companies by reason of the existence of policies of compulsory insurance taken out by divers owners of motor vehicles and employers. We are asked to assume that each of the companies is insolvent, and it is common ground that the material date for ascertaining whether a debt may be proved in a winding up is the date of the winding-up order.

2. Jones, J. in a careful judgment decided that unliquidated claims brought pursuant to the Employees' Compensation Ordinance could properly be proved, but that claims under the Motor Vehicles Insurance (Third Party Risks) Ordinance could not. The Attorney General appeals on behalf of the Director of Social Welfare in respect of the claims under the latter Ordinance, the Director being interested by reason of the new Traffic Accident Victims Assistance Scheme, under which the third parties may be granted compensation from the Director if they do not recover it from the insured owners or from the companies.

3. Any right to claim in the winding-up stems from s.264 of the Companies Ordinance :

"

 In the winding up of an insolvent company the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and to debts provable and to the valuation of annuities and future and contingent liabilities as are in force for the time being under the law of bankruptcy with respect to the estates of persons adjudged bankrupt, and all persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company may come in under the winding up, and make such claims, against the company as they respectively are entitled to by virtue of this section."

We therefore have to turn to the Bankruptcy Ordinance. The relevant sub-sections of s.34 are :

"

 (1) Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust shall not be provable in bankruptcy."

"

 (3) Save as aforesaid, all debts and liabilities, present or future, certain or contingent, to which the debtor is subject at the date of the receiving order, or to which he may become subject before his discharge by reason of any obligation incurred before the date of the receiving order, shall be deemed to be debts provable in bankruptcy."

Mr. Smith for the Official Receiver contends that the order of those sub-sections is material in that what appears to be an exception to the general rule is placed first and thus takes on a special significance, whilst Mr. Tong for the Attorney General urges that sub-s.(1) is in the nature of a proviso, which ought to be strictly construed. That might be material, because the vital words appear in sub-s.(1), namely "demands arising by reason of a contract".

4. First we have to consider what is the nature of the demands against the companies which are here in issue. Clearly there was no privity of contract between the third party claimants and the insurance companies: those contracts were made by the insurers with the insured. But for the statute the third parties could have no right to proceed against the insurers. However, the protection which the Legislature intended to afford to third party victims of traffic accidents by imposing on users of motor vehicles an obligation to insure against third party risks could only be fully effective if a direct right of action against the insurers were conferred. As I understand it, third party claims must be brought under s. 10(1). The only other provision in the Ordinance which gives a right of indemnity, is s.6(2), but (in so far as it is concerned with rights rather than liabilities) that is concerned with the right of a "person specified in the policy" other than the insured himself to claim in his own name against an insurer. Such persons would have no privity of contract and at Common Law would have no right to sue under the policy for an indemnity if a third party claim were made against him. The effect of the equivalent English provision (s.36(4) of the Road Traffic Act, 1930) was discussed in Guardian Assurance Co. Ltd. v Sutherland 1939 2 All E.R 246, a case concerned with the right of an insurer to avoid a policy issued in reliance upon representations which were shown to have been false. In the course of his judgment Branson, J. said of s.36(4) at p. 250D :

"

 The section does not, in my opinion, impose any statutory liability upon the insurer. It only gives to 'persons specified' a statutory right, which, apart from statute they did not possess, to sue upon the contract. This is on all fours with the right given by the Third Parties (Rights Against Insurers) Act, 1930, to third parties in the event of bankruptcy or winding up of persons insured, and the rights given by the Road Traffic Act, 1934, s.10, to persons who have recovered judgment against persons insured."

Section 10(1) of the Road Traffic Act 1934 is in the same terms as s.10(1) of the Motor Vehicle Insurance (Third Party Risks) Ordinance and accordingly it is argued that the right given by the latter provision is on all fours with that given by s.36(4) of the Road Traffic Act 1930, namely a statutory right to sue the insurer where the third party has obtained a judgment against any person insured by the policy, that is to say against the policy holder or against any other "person specified in the policy". Mr. Smith fairly points out that Branson, J. was not concerned with s.10(1) of the Road Traffic Act 1934, and there is an obvious distinction (whether material or not) between conferring a right to sue upon a contract and conferring a right to sue upon a judgment given in an action upon the contract. We have, of course, no evidence before us that judgments have been obtained in the present case against the persons protected by the relevant policies or, if they have, whether they were judgments for damages which have been assessed or for damages which have yet to be assessed. Only in the latter case would the demands against the companies under s.10 be for liquidated damages. It is not disputed that such judgments would be based upon a claim in tort and would be against the Defendants as tortfeasors and not as parties to a contract. It is argued that the third parties would have no right to sue under the statute were the companies not "insurers" by virtue of the contracts, and that cannot be gainsaid. Is it enough to justify holding that the demands arose "by reason of" the contracts? Undoubtedly the contracts were a sine qua non for liability, but the liability itself arose under the statute. On behalf of the Attorney General it is urged that, if the contracts were a sine qua non for liability, they were necessarily a reason for the demands, even if the liability did not arise under the contracts but under the statute.

5. Mr. Tong seeks to support his argument by reference to the provisions of the Employees' Compensation Ordinance, which is said to be in pari materia. Jones, J. took the view that the wording of the two statutes was sufficiently different to force upon him the distinction which he made between them, and at least at first sight there is ground for that view: the scheme of the Employees' Compensation Ordinance is clearly to make statutory amendments to those contracts of employment to which it relates, with the result that the right of a workman to sue his master's insurer directly is a right which arises under the contract itself. Thus ss.43(1) and 44 provide:

"

 43(1). Subject to this section, where in relation to an employee there is in force a policy of insurance 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."

"

 44. 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 be entitled to recover in his own name, as though he
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