VII. Bankr.ptcy or winding up of employer under contract with insurers (8 5). a. Text of § 5. Section 5. (1) Where any employer has entered into a contract with any insurers in respect of any liability under this act to any workman, then, in the event of the employer becoming bankrupt, or making a composition or arrangement with his creditors, or, if the employer is a company, in the event of the company having commenced to be wound up, the rights of the employer against the insurers as respects that liability shall, notwithstanding anything in the enactments relating to bankruptcy and the winding up of companies, be transferred to and vest in the workman, and upon any such transfer the insurers shall have the same rights and remedies and be subject to the same liabilities as if they were the employer, so, however, that the insurers shall not be under any greater liability to the workman than they would have been under to the employer. (2) If the liability of the insurers to the workman is less than the liability of the employer to the workman, the into a steam engine belonging to a cotton factory, where such work is done under contract by a firm of engineers. Wrigley v. Bagley [1901] 1 K. B. (Eng.) 780, 84 L. T. N. S. 415, 70 L. J. K. B. N. S. 538, 65 J. P. 372, 49 Week. Rep. 472, affirmed in [1902] A. C. 299, 71 L. J. K. B. N. S. 600, 66 J. P. 420, 50 Week. Rep. 656, 86 L. T. N. S. 775, 18 Times L. R. 559. The fixing of an iron roof by a subcontractor for a builder, the evidence showing that this was no part of the latter's business. Bush v. Hawes [1902] 1 K. B. (Eng.) 216, 71 L. J. K. B. N. S. 68, 85 L. T. N. S. 507, 66 J. P. 260, 50 Week. Rep. 311. The erection by a contractor of coal-hauling machinery at the power station of an electric railway company. Brennan v. Dublin United Tramways Co. [1900] 2 I. R. (Ir.) 241. The erection by a contractor of a retain ing wall to protect the track of a railway. Dundee & A. Joint R. Co. v. Carlin (1901) 3 Sc. Sess. Cas. 5th series, 843, 38 Scot. L. R. 635, 9 Scot. L. T. 55 (servant run over by train). The work of a man employed by a window cleaning company, who was injured while cleaning the windows of the defendant, a firm of tailors. Dempster v. Hunter (1902) 4 Sc. Sess. Cas. 5th series, 580, 39 Scot. L. R. 395, 9 Scot. L. T. 450. The following operations have been held not to be "merely ancillary" to the business of the defendant: Work done by a subcontractor for a firm workman may prove for the balance in the bankruptcy or liquidation. (3) There shall be included among the debts which, under § 1 of the preferential payments in bankruptcy act 1888, and 4 of the preferential payments in bankruptcy (Ireland) act, 1889, are, in the distribution of the property of a bankrupt and in the distribution of the assets of a company being wound up, to be paid in priority to all other debts, the amount, not exceeding in any individual case £100, due in respect of any compensation the liability wherefor accrued before the date of the receiving order or the date of the commencement of the winding up; and those acts and the preferential payments in bankruptcy amendment act, 1897 shall have effect accordingly. Where the compensation is a weekly payment, the amount due in respect thereof shall, for the purposes of this provision, be taken to be the amount of the lump sum for which the weekly payment could, if redeemable, be redeemed if the employer made an application for that purpose under the first schedule to this act. (4) In the case of the winding up of a company within the meaning of the stannaries act 1887, such an amount as aforeof building contractors, who habitually made contracts for the demolition of old buildings on the site of which new ones were to be constructed. Knight v. Cubitt [1902] 1 K. B. (Eng.) 31, 50 Week. Rep. 113, 18 Times L. R. 26, 71 L. J. K. B. N. S. 65, 66 J. P. 52, 85 L. T. N. S. 526. The erection of signals for a new railway siding by a contractor. Burns v. North British R. Co. (1900) 2 Sc. Sess. Cas. 5th series, 629, 37 Scot. L. R. 448, 7 Scot. L. T. 408 (workman was run over). Work done in the course of his employment by a servant of a contractor for the collection and delivery of goods conveyed by a railway for a through rate. Greenhill v. Caledonian R. Co. (1900) 2 Sc. Sess. Cas. 5th_series, 736, 37 Scot. L. R. 524, 7 Scot. L. T. 458 (servant injured while transferring a barrel from a lorry to a goods. train). Carting work done by the servant of a firm of contractor, who were under contract to do all the carting work in connection with a factory. Bee v. Ovens (1900) 2 Sc. Sess. Cas. 5th series, 439, 37 Scot. L. R. 328, 7 Scot. L. T. 362 (factory owner held liable). Work done by a carter in the employ of a railway company, while he was engaged in transporting the goods of the defendants, a firm of sausage makers, to a station on the railway. M'Govern v. Cooper (1902) 4 Sc. Sess. Cas. 5th series, 249, 39 Scot. L. R. 102, 9 Scot L. T. 270. said, if the compensation is payable to a miner or the dependents of a miner, shall have the like priority as is conferred on wages of miners by § 9 of that act, and that section shall have effect accordingly. (5) The provisions of this section with respect to preferences and priorities shall not apply where the bankrupt or the company being wound up has entered into such a contract with insurers as aforesaid. (6) This section shall not apply where a company is wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company. [This section is merely an elaboration of 5 of the original act.] b. Proceedings under this section. pensation has no right against the estate of his bankrupt employer who has entered into a contract with an insurer as to liability under the compensation act, and the fact that the insurance company is also insolvent does not alter the situa tion.22 Upon an employer's becoming bankrupt, the right which he has or his trustees in bankruptcy have against the insurance company are transferred to, and vested in, the workman, and the employer has lost his right of indemnity against the insurance company.23 Where an injured employee of a colliery had been receiving compensation, and the assurance company in which the employers were insured consequently went into liquidation, and shortly after the colliery also went into liquidation, it was held that the employee was entitled to a In the case of the winding up or bank-sation after deducting 25 per cent in acsum equal to the annuity of his compenruptcy of an employer who is insured, 5 of the act gives the workman only the same right against the company that the employer had; and if the rights of a member of a mutual insurance company have been legally terminated, the workman has no rights against the company.2 An injured workman entitled to com20 In King v. Phoenix Assur. Co. [1910] 2 K. B. (Eng.) 666, 80 L. J. K. B. N. S. 44, 103 L. T. N. S. 53, 3 B. W. C. C. 442, where the 22 Re Pethick [1915] 1 Ch. (Eng.) 26, 84 policy of insurance contained a clause re- L. J. Ch. N. S. 285, 112 L. T. N. S. 212,. quiring disputes between the insurers and [1915] W. C. & Ins. Rep. 5, [1915] H. B. R.. the employer to be submitted to arbitra- 59, [1914] W. N. 403, 59 Sol. Jo. 74. Neville;. tion, and there was a genuine dispute, it J., took the position that the result of § 5 was held that an injured employee could is to deprive a workman of his rights not take proceedings in the county court against his employer's estate where the to have compensation awarded from the latter had been insured, since all of the company until the dispute had been sub-employer's rights against the insurer were mitted to arbitration and an award had been made. 20 21 An appeal lies to a divisional court from an order of a county judge giving a workman a charge upon moneys due from an insurer to the employer. Kniveton v. Northern Employers' Mut. Indemnity Co. [1902] 1 K. B. (Eng.) 880, 18 Times L. R. 504, 71 L. J. K. B. N. S. 588, 50 Week. Rep. 704, 86 L. T. N. S. 721; Morris v. Northern Employers' Mut. Indemnity Co. [1902] 2 K. B. (Eng.) 165, 71 L. J. K. B. N. S. 733, 66 J. P. 644, 50 Week. Rep. 545, 86 L. T. N. S. 748, 18 Times L. R. 635. In those cases the applications were held not to be maintainable; the reasons assigned being that the workmen were merely subrogated by the statute to the rights of the employers, and that, having regard to the circumstances involved and the terms of the contracts between the employers and the insurers, it was clear that, at the time when the applications were made, there was no fund in respect of which the insurers were liable to the employers. 21 Daff v. Midland Colliery Owners' Mut. Indemnity Co. (1913; H. L.) 82 L. J. K. B. N. S. (Eng.) 1340, 109 L. T. N. S. 418, 29 cordance with the assurance company act 1909, 7, and the amount which the colliery had paid the workman before it went into liquidation was not to be deducted.24 Charges incurred in obtaining an award are not preferential debts within the meaning of § 5, subsec. 3.25 Times L. R. 730, 57 Sol. Jo. 773, [1913] W. N. 256, 6 B. W. C. C. 799. transferred to the workman; and to hold otherwise, and say that the liability of the employer remains because it is not expressly released under the section would enable the workman to proceed against the employer, having, by the transfer of the em ployer's rights against the insurance company to himself, deprived the employer of the benefit of the contract that he has entered into with the insurer. 23 The trustees in bankruptcy of the employer of an injured workman have no right to repayment from an insurance company of sums paid to the workman as compensation on account of his injury, since the rights of the employer have been transferred to the workman, and whatever may be the right of the workman, the employer has no longer any right to indemnity.. Craig v. Royal Ins. Co. (1915; Div. Ct.) 84 L. J. K. B. Ñ. S. (Eng.) 333, 112 L. T. N. S. 291, [1915] W. C. & Ins. Rep. 139, [1915]' H. B. R. 57, [1914] W. N. 442. 24 Re Law Car & General Ins. Corp.. (1913) 110 L. T. N. S. (Eng.) 27, 58 Sol.. Jo. 251. 25 Re Jinks (1914; K. B. Div.) 137 L. T. Jo. (Eng.) 320. Appeals from orders of the county | court judge relative to payment to the workmen by insurance companies in which the bankrupt employer was insured lie to the divisional court, and not to the court of appeal; 26 and an appeal from the decision of the county court judge, awarding a lump sum to an injured workman against the receiver or liquidator of the employer, does not lie to the court of appeal.27 In the cases cited in the subjoined note, all of which arose out of the same transaction, the court discusses a number of questions involving § 6 of the British Columbia workmen's compensation act of 1902, which is similar to § 5 of the English act of 1897, with the exception that jurisdiction is given to a judge of the supreme court, instead of to the judge of the county court.2 28 VIII. Liability of third person whose negligence causes the injury (8 6). a. Text of $ 6. Section 6. Where the injury for which compensation is payable under this act was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect thereof 26 Leech v. Life & Health Assur. Asso. [1901] 1 K. B. (Eng.) 707, 70 L. J. K. B. N. S. 544, 84 L. T. N. S. 414, 17 Times L. R. 354, 49 Week. Rep. 482, 3 W. C. C. 202; Kniveton v. Northern Employer's Mut. Indemnity Co. (Div. Ct.) [1902] 1 K. B. (Eng.) 880, 71 L. J. K. B. N. S. 588, 86 L. T. N. S. 721, 50 Week. Rep. 704, 18 Times L. R. 504, 4 W. C. C. 37; Morris v. Northern Employer's Mut. Indemnity Co. [1902] 2 K. B. (Eng.) 165, 71 L. J. K. B. N. S. 733, 86 L. T. N. S. 748, 66 J. P. 644, 50 Week. Rep. 545, 18 Times L. R. 635, 4 W. C. C. 38. 27 Homer v. Gough [1912] 2 K. B. (Eng.) 303, 81 L. J. K. B. N. S. 261, 105 L. T. N. S. 732, 5 B. W. C. C. 51. 28 In Disourdi v. Sullivan Group Min. Co. (1909) 14 B. C. 256, it is held that this provision of the act cannot be invoked, unless the insurer has admitted his liability, or has been found by a competent tribunal to be liable. In this case the insurer was proposing to contest his liability. In Disourdi v. Sullivan Group Min. Co. (1909) 14 B. C. 273, the application of the workman for an order that the employer and the insurers proceed to the trial of an issue with him was refused on the ground that any right which he might have against the insurers must be decided in an action commenced in the ordinary way. In Disourdi v. Sullivan Group Min. Co. (1910) 15 B. C. 305, on the ground that (1) The workman may take proceedings both against that person to recover damages, and against any person liable to pay compensation under this act, for such compensation, but shall not be entitled to recover both damages and compensation; and (2) If the workman has recovered compensation under this act, the person by whom the compensation was paid, and any person who has been called on to pay an indemnity under the section of this act relating to subcontracting, shall be entitled to be indemnified by the person so liable to pay damages as aforesaid; and all questions as to the right to and amount of any such indemnity shall, in default of agreement, be settled by action, or, by consent of the parties, by arbitration under this act. [Section 6 of the original act provided as follows: [Section 6 of the original act provided compensation is payable under this act was caused under circumstances creating a legal liability in some person other than the employer, to pay damages in respect thereof, the workman may, at his option, proceed, either at law against that person to recover damages, or against his employer for compensation under this act, but not against both; and there was no privity of contract between the workman and the insurer of the employing company, it was held, after the company had become insolvent, that he could not, by any proceedings taken in his own name, establish the liability of the insurer to the company, and that the liability must be ascertained by the liquidator of the company. The decision of Macdonald, C. J. A., proceeded upon the ground that the liability of the insurer could not be ascertained in such an action as he was maintaining. "The creation of the charges alone, without reference to that part of the section which gives a remedy for enforcing it, effects the subrogation mentioned in the English cases.' The view expressed by Irving, J. A., was that the liability of the insurers could be determined only in an action in which the liquidator of the insolvent company should be plaintiff. Martin, J. A., was of opinion that an action in the supreme court, could not be deemed an application to a "judge of the supreme court," in the sense of the statutory provision. en In the same cases an action to obtain a declaration that the workman was titled to a first charge on the moneys to which his employer was entitled, and for an order for payment, was held to have been rightly dismissed. The dismissal by the trial judge was rested on the ground that there was no privity of contract between the workman and the insurers. if compensation be paid under this act, the employer shall be entitled to be indemnified by the said other person.] b. Joint liability of employer and third person. As to liability of third person whose negligence caused the injury under the American statutes, see post, 225. The effect of 6, subsec. 1 of the act, is that although an injured workman may proceed against either his employer or the person liable for damages, there cannot be a recovery both of compensation and of damages, and the recovery of one terminates the right to proceed for the other.29 So a workman who has obtained an award for the payment of compensation cannot subsequently maintain an action against the third person whose negligence caused the accident.30 And the father of a workman who for three years had received full compensation from his employers, and who subsequently died as the result of his injuries, cannot thereafter bring an action based on fault, against a third person 29 Where a workman made no claim and took no proceedings under the act, but merely reported the accident in the ordidary way, and was informed that he was entitled to compensation, and afterwards received the maximum amount payable under the act, he will be deemed to have "recovered" compensation, and will be barred from proceeding against the person liable in damages for his injury. Mahomed v. Maunsell (1907; C. C.) 124 L. T. Jo. (Eng.) 153, 1 B. W. C. C. 269. 30 Tong v. Great Northern R. Co. (1902; Div. Ct.) 86 L. T. N. S. (Eng.) 802, 66 J. P. 667, 18 Times L. R. 566. 31 Gray v. North Britain R. Co. (1914) 52 Scot. L. R. 144, 8 B. W. C. C. 373. 32 Woodcock v. London & N. W. R. Co. [1913] 3 K. B. (Eng.) 139, 82 L. J. K. B. N. S. 921, 109 L. T. N. S. 253, 29 Times L. R. 566, [1913] W. N. 179, [1913] W. C. & Ins. Rep. 563, 6 B. W. C. C. 471. This action was brought in the divisional court. Rowlatt, J., said: "The right to recover damages in respect of a personal injury is one indivisible right, and when the statute says the workman is not entitled to recover damages, unless it divides the right to recover damages, it must mean that he is barred of his remedy for any common-law damages which flow from the injury which he has traced to the negligence of the defendants. I do not think that the statute allows any other than that interpretation. The present case in volves a curious position. It is not without its hardship to the plaintiff, but I am bound to say that I do not see any ground for doubting that in law he must fail in the claim which he makes against the railroad company." whose negligence was alleged to have caused the injury.31 Where a workman in a colliery also carried on a small farm, and while occupied as a collier was injured by the negligence of a third person, and recovered compensation from his employer, he cannot thereafter bring an action for damages against the third party and recover damages for injuries which he has suffered as a farmer, although such damages were not included in the compensation.32 The acceptance of payments by the injured workman from a person other than the employer, who was alleged to be liable for negligence, although no action has been commenced and such liability is not admitted, precludes the workman, under § 6, subsec. 1, from obtaining compensation from the employer. 33 And the fact that a workman expressly reserves his right to compensation does not affect the result.34 But a servant who, having received one payment under the act without qualification, which payment was offered voluntarily by the employer, refused to sign any 33 A workman is precluded from obtaining compensation from his employer under the act, when he has made a claim for compensation against a person other than his employer, alleged to be liable for negligence, and has received various payments in satisfaction of his claim, although he has not resorted to legal proceedings and no legal liability is admitted. Page v. Burtwell [1908] 2 K. B. (Eng.) 758, 77 L. J. K. B. N. S. 1061, 99 L. T. N. S. 542. 34 Where an injured workman has made a claim for damages at common law against a person other than his employers, and, without having taken legal proceedings, has received a payment in settlement of his claim, he is barred from claiming compensation against his employers; and this result is not prevented by a clause in the receipt given by him, reserving a right to claim compensation from his employers. Mulligan v. Dick (1903) 6 Sc. Sess. Cas. 5th series, 126, 41 Scot. L. R. 77, 11 Scot. L. T. 433. A workman in the employment of carting contractors, who was injured while employed under a contract between the contractors and a railway company, and who, under reservation of all claims he might have for compensation against other parties, asked for and accepted from the contractors a payment in full of all claims against them, under any statute or at common law, in respect of the injury, is barred by the terms of § 6 from thereafter claiming compensation under the act from the undertakers. Murray v. North British R. Co. (1904) 6 Sc. Sess. Cas. 5th series, 540, 41 Scot. L. R. 383, 11 Scot. L. T. 746. c. Employer's right to indemnity from third person. other receipt except subject to the reservation "without prejudice," subject to which other payments were received, has not exercised the option referred to in The employer is entitled to indemnity 6 so as to preclude him from proceed- against any third person whose negliing against the other person liable for gence causes injury to his workman, for the injury.35 And a workman injured which injury the employer is obliged to by the neglect of a third person, who pay compensation,37 including fellow received compensation from the employ-workmen of the injured employee.38 er, expressly reserving his right against But he cannot maintain an action for the third person, and agreeing that if indemnity against third persons whose he recovers damages he will reimburse negligence combined with that of his the employer for the amount of compen- own servants to produce the injury.39 sation received from him, has not "re- And no indemnity is recoverable from a covered compensation" so as to preclude third person, where such person is in him from proceeding against the third no wise liable to the workman.4 person in damages.36 35 Oliver v. Nautilus Steam Shipping Co. | [1903] 2 K. B. (Eng.) 639, 72 L. J. K. B. N. S. 857, 89 L. T. N. S. 318, 19 Times L. R. 697, 52 Week. Rep. 200, 9 Asp. Mar. L. Cas. 436. 40 The phrase "creating a legal liabilinently reasonable from the point of view of both workman and employer and in the interests of both." 37 Dickson v. Scott [1914] W. C. & Ins. Rep. (Eng.) 67, 30 Times L. R. 256, 7 B. W. C. C. 1007. In Daily News v. McNamara (1913) 7 B. W. C. C. (Eng.) 11, an employer recovered a judgment in a divisional court for the full amount of compensation which he was obliged to pay to the widow of a deceased workman, from a third person whose negligence caused the death of the workman. 38 Fellow workmen through whose negligence another workman is injured are included in the words "some person other than the employer," and are liable for the indemnity provided for in § 6. Lees v. Dunkerley Bros. (1910) 103 L. T. N. S. (Eng.) 467, 55 Sol. Jo. 44. And see Bate v. Worsey [1912] W. C. Rep. (Eng.) 194, B. W. C. C. 276. 5 39 Cory v. France [1911] 1 K. B. (Eng.) 114, 80 L. J. K. B. N. S. 341, 103 L. T. N. S. 649, 27 Times L. R. 18, 55 Sol. Jo. 10, 11 Asp. Mar. L. Cas. 499. 36 Wright v. Lindsay [1912] S. C. 189, 49 Scot. L. R. 210, 5 B. W. C. C. 531. The lord justice clerk said: "Now, the question in the circumstances of this case is, whether the pursuer has SO 'recovered' compensation that he is barred from proceeding in his action. Looking to the arrangement made it appears to me that what the pursuer has received is not compensation recovered under the act. It is of the nature of a sum advanced by the employers under conditions which exclude the idea of its being a final acceptance of compensation under the act. The arrangement is in every sense reasonable and humane. The employer knows that if his servant cannot get damages from the alleged wrongdoer, he must provide compensation. But, as the litigation for damages is a long and protracted proceeding, he arranges with the workman, 'I will give you now what corresponds to what would be my liability, so that you may be supported, 40 A firm of stevedores is not entitled but you must engage to me to return me to be indemnified by a colliery company what I advance if you are successful in for the compensation which they are comgetting the fuller compensation from the pelled to pay to one of their workmen on wrongdoer.' I am of opinion that payments account of injuries received by him, caused made under such an arrangement are no by the brakes on one of the company's bar to action at law." Lord Salvesen said: wagons being insufficient to control the "Where a payment is made by an employer wagon as it was returned down a gradient to his workman on the footing that he shall up which it had been drawn in order to be be entitled to recover damages at common emptied in the vessel, the company not law against third parties, and that the being responsible for the unusual strain sums which the employer has disbursed to which the brakes were put in descending are to be repaid out of any damages which the gradient, which was greater than the he may so recover, I think the case is wagons were subjected to while employed entirely different. The compensation so on the company's own business. Kemp v. paid is in the nature of an advance by Darngavil Coal Co. [1909] S. C. 1314, 46 the employer for the maintenance of the Scot. L. R. 939; Caledonian R. Co. v. Warpursuer pending proceedings to make good wick (1897) 25 R. (H. L.) 1, 35 Scot. L. R. his claim, and is only accepted as in full 54, followed. Elliott v. Hall (1885) L. R. of the workman's right under the act 15 Q. B. Div. (Eng.) 315, 54 L. J. Q. B. N. against his employer in the event of his S. 518, 34 Week. Rep. 16, distinguished. claim against the third party being unsuc- Lord Pearson observed: "The accident hapcessful. I cannot think that it was ever pened during the time when the haulage intended that the act should make inef- contract was suspended, and during the fulfectual an arrangement of this kind, emi-filment of the contract of loading, to which |