The limitation period for claims against a third party pursuant to section 25(1)(b) of the Employers Compensation Ordinance

Tai Hing (A Firm) & Anor v. Chan Yuk Wan & Anor [1997]

3 HKC 155 (High Court)

Facts

An employee of the plaintiffs died as a result of a car accident on 22 January 1990. An application on behalf of the widow for employees' compensation was made in December of that year, and at the hearing on the 27 February 1992, compensation was awarded pursuant to the Employees' Compensation Ordinance (Cap. 282). On 4 April 1997, a writ was issued by the plaintiffs claiming an indemnity against the defendants for the compensation which they had paid further to the order of 27 February 1992.

The issue of whether the writ had been issued after the expiration of the relevant limitation period was tried as a preliminary issue.

The right to indemnity

The right of indemnity against a third party derives from section 25(1)(b) of the Employees' Compensation Ordinance. This section gives the employer by whom compensation is payable a right of action against a third party, where such third party also has a legal liability to pay damages to the employee, for the recovery of any sum which the employer is obliged to pay as a result of the accident.

The period of limitation

It was held that the three year limitation period in relation to personal injury claims imposed by section 27 of the Limitation Ordinance was not applicable to this type of action.

The judge was of the opinion that this claim under section 25(1)(b) of the Employees' Compensation Ordinance was correctly characterised as a claim for indemnity. Accordingly, the period of limitation should be six years from a particular event, this being the limitation period prescribed by section 4(1)(d) of the Limitation Ordinance for actions to recover a sum 'by virtue of any Ordinance'.

Commencement of the limitation period

The judge rejected the argument that the six year limitation period should run from the date when the employer became liable to pay ie. 27 February 1992, the date of the order for compensation.

He considered that the correct approach was to analyse the precise wording of the statutory provision giving rise to the indemnity. The judge commented that section 25(1)(b) of the Employees' Compensation Ordinance uses the word 'indemnity' and concluded that the right of action thereby afforded to the employer is undoubtedly an indemnity. He considered that the opening words of the section are the most important: 'the employer by whom compensation is payable'. The judge explained that these words are identical in meaning to those used earlier in section 5 of the same Ordinance. Section 5 provides that where personal injury is caused to an employee by an accident arising out of and in the course of employment, '...his employer should be liable to pay compensation...'.

These words are in contradistinction to the opening words of section 30(2) of the equivalent English statute: 'If the workman has recovered compensation...'. Accordingly, whilst under the English statute, the liability of the employer arises upon the recovery of compensation by the employee, the judge concluded that the liability of the employer to pay compensation whether under section 5 or under 25(1)(b) of the Hong Kong Ordinance arises at the same moment in time asthe occurrence of the event giving rise to the liability.

On that analysis, the limitation period commenced on the date of the accident, 22 January 1990. The writ was therefore out of time and struck out as being statute-barred.

Implications

This decision has clarified both the nature of a claim under section 25(1)(b) of the Employees' Compensation Ordinance and the position regarding the applicable period of limitation. It is clear now that such a claim is a claim for indemnity and is subject to a limitation period of six years from the date of the event giving rise to the liability.