LKK TRANS LTD v. WONG HOI CHUNG

FACV No. 14 of 2005

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

 FINAL APPEAL NO. 14 OF 2005 (CIVIL)

(ON APPEAL FROM CACV No. 116 of 2004)

_______________________

Between:

_______________________

_______________________

 J U D G M E N T

_______________________

Chief Justice Li:

1.  I agree with the judgment of Mr Justice Ribeiro PJ.

Mr Justice Bokhary PJ:

2.  Having had the benefit of reading it in draft, I respectfully agree with the judgment of Mr Justice Ribeiro PJ.  And I add only a brief concurrence.  I preface such concurrence with an acknowledgement of the assistance which I have derived from the judgments of the District Court (Her Honour Judge C B Chan) and the Court of Appeal (Rogers VP and Hartmann and Reyes JJ) and the arguments of Mr Denis Chang SC for the appellant employer and Ms Audrey Eu SC for the respondent employee.

3.  Of the two questions identified by the Appeal Committee as questions of law which arise in the present case, I say no more on the first than this.  Ms Eu is plainly right in conceding that s.10(5) of the Employees’ Compensation Ordinance, Cap. 282, would not preclude the sort of apportionment contended for by Mr Chang.  So I turn to the second question identified by the Appeal Committee, which comes to whether the Ordinance, purposefully construed as a whole and in context, permits such apportionment.

4.  Employees’ compensation can be for death or for incapacity.  Incapacity may be temporary or permanent and, whether temporary or permanent, may be total or partial.  Death is dealt with by s.6.  Permanent total incapacity is dealt with by s.7 while permanent partial incapacity is dealt with by s.9.  Temporary incapacity whether total or partial is dealt with by s.10.  Each of those four sections speaks of “where” the condition which it deals with - death, permanent total incapacity, permanent partial incapacity and temporary incapacity whether total or partial - results from the injury.  But the apportionment contended for on the appellant employer’s behalf involves reading “where” as if it meant something like “to the extent that” or “in so far as”.

5.  I do not say that there can be no context in which it would be appropriate to give the word “where” that sort of reading down.  But the obvious object of the Employees’ Compensation Ordinance is speedily and with considerable certainty to provide urgently needed no-fault and compulsorily-insured compensation to injured employees or the families they leave behind.  And that is not a context in which I see any warrant for resorting to that sort of reading down in order to permit apportionment and thus introduce the delay and uncertainty which apportionment would generally entail.  For those reasons and the reasons given by Mr Justice Ribeiro PJ, I answer the second question against the appellant employer.  It suffices for full employees’ compensation that the injury was a cause (even if not the sole cause) of the death, permanent total incapacity, permanent partial incapacity or temporary incapacity whether total or partial.

Mr Justice Chan PJ:

6.  I agree with the judgment of Mr Justice Ribeiro PJ.

Mr Justice Ribeiro PJ:

7.  The question which arises for decision in the present appeal is as follows:  Where an employee is injured in an accident at work resulting in permanent incapacity which is caused both by that injury and by a pre-existing disease, should the court limit the entitlement to Employees’ Compensation by apportioning the incapacity attributable solely to the injury as distinct from the disease?  Both the Judge (DCEC 153/1999, H H Judge C B Chan; 23 March 2004) and the Court of Appeal (CACV 116/2004, Rogers VP, Hartmann and Reyes JJ; 26 November 2004) have answered it in the negative.

The accident

8.  The accident occurred on 29 April 1997.  The respondent, who was a delivery worker (then 43 years of age), fell from a goods lorry on which he was working, injuring his left hip on the concrete floor. 

The injury and incapacity

9.  The Judge found that the fall had caused a subchondral fracture of the left femoral head.  The respondent was also found to have been suffering from a pre-existing degenerative disease known as avascular necrosis (“AVN”) affecting both hips.  This is a condition whereby the femoral head becomes necrotic and deformed because of a loss of blood supply, leading to osteoarthritis of each hip.  Medical examination indicated that in May 1997, the respondent was suffering from early AVN in his right hip but that his left hip showed AVN with a collapse of the femoral head.

10.  On 14 July 1998, he underwent surgery.  A rotational osteotomy was performed to reposition the left femoral head so that weight would be borne by that part of the bone which retained undamaged cartilage cover.  In consequence, the respondent suffered a shortening of his left leg which eventually required a 5 cm shoe lift.

11.  The Judge found that the fracture injury caused by the accident had aggravated and accelerated the process of the AVN and necessitated the operation which resulted in the leg-shortening.  The finding was therefore that both the work-related injury and the pre-existing disease were concurrent contributing causes to the respondent’s permanent partial incapacity.  While the evidence showed that some three years or so after the accident, the condition of the respondent’s right hip severely deteriorated, the doctors’ view was that this was unconnected with the accident and the Judge made it clear that she was solely concerned with the incapacity resulting from the injury to the left hip.

12.  The respondent was on sick leave and received periodical payments for 36 months between the date of the accident and 28 April 2000.  This was the maximum of such periodical payments allowed under s 10(5) of the Employees’ Compensation Ordinance, Cap 282 (“the Ordinance”). 

13.  On 15 December 2000, the Assessment Board certified that as a result of his “left hip injury resulting in deformity, pain and stiffness”, the respondent had suffered a 40% loss of earning capacity caused by the injury.  On 21 February 2001, after reviewing the assessment, the Board issued a certificate stating that his “left hip injury resulting in pain, stiffness and leg shortening” had led to a 60% loss of earning capacity permanently caused by the injury.

14.  Application was made to the Judge for a further revision of the assessment under s 9(1A) of the Ordinance.  That provision permits the court in certain cases to revise upwards the percentage of the loss of earning capacity permanently caused by the injury where the special circumstances of the employee have made the impact of such injury substantially more severe than the incapacity acknowledged in the assessment or specified in the Ordinance.

15.  The Judge held that such a revision was required by the respondent’s special circumstances and substituted an assessment of  90% permanent partial incapacity caused by his left hip injury.  In so doing she took it into account that the respondent had been a delivery worker since coming to Hong Kong in 1979; that he had returned to work in April 2000 but proved unable to do the light jobs he was given, leading to his dismissal in March 2002; that he was unable to stand or walk or even sit for long periods; that he could not use buses or mini-buses because of severe pain caused by jolting and so needed to use taxis or private cars as a means of transport; and that his education on the mainland extended only to Primary 6, leaving him without the qualifications or experience to take on sedentary clerical jobs which might have been considered a possibility.  In summary, the Judge found that the respondent’s incapacity made his labour effectively unsaleable in the market and took his residual earning capacity to be not more than 10%.

The award

16.  The compensation awarded by the Judge under s 9 of the Ordinance came to $1,138,233.38 ($17,565.33 pre-accident monthly salary x 72 x 90%).  In making this award, the Judge did not apportion any part of the incapacity to the pre-existing left hip AVN and rejected the argument that the degenerative disease should be seen as a supervening cause of the incapacity, overtaking and nullifying the effects of the injury.  This approach was upheld by the Court of Appeal. 

This appeal

17.  The appellant now invites the Court to find that the courts below were wrong in principle.  The “supervening cause” argument mentioned above is not now pursued.  However, it is submitted that the injury and the pre-existing AVN were concurrent causes of the incapacity and that, as a matter of construction of the Ordinance, there ought to be an apportionment of the incapacity attributable to the injury, with the compensation payable limited accordingly.  The Court is asked to remit the case to the Judge at first instance for such apportionment.

Section 10(5) of the Ordinance

18.  Section 10(5) provides:

An employee who has received periodical payments under this section for a period of 24 months from the date of the commencement of the temporary incapacity or for such further period being not more than 12 months as the Court may allow in any particular case shall no longer be entitled to periodical payments under this section but shall be deemed to have suffered permanent incapacity and the provisions of section 7 or 9, as the case may be, shall apply to the employee.  (Italics supplied)

19.  While the position is not entirely clear, on one reading of the judgments,  the italicised words of s 10(5) may have been taken by the Judge and by Reyes J in the Court of Appeal to create a presumption as to causation which precludes attributing any part of a claimant’s incapacity to causes other than the work-related injury. 

20.  Thus, the Judge stated:

“The deeming provision under section 10(5) of the Ordinance applies to the Applicant to show that permanent partial incapacity resulted from the injury caused by the accident.” (§52(1))

21.  Reyes J’s discussion of s 10(5) arose in the course of responding to the “supervening cause” argument then being advanced by Mr Bharwaney for the appellant  His Lordship summarised it as follows:

“If the permanent incapacity was not the result of injury, but of a pre-existing disease, LKK should not (Mr. Bharwaney reasons) bear the costs of disablement.” (§34)

Reyes J was therefore dealing with a more extreme version of the causation argument now advanced, but a causation argument nonetheless.  He held (§39) that s 10(5) was sufficient to dispose of that argument on the following reasoning:

“ECO s.10(5) is clear.  Upon expiry of a maximum of 36 months, the partially incapacitated employee who has been receiving periodical payments as a result of his accident is deemed to be permanently injured.  In that case, ECO s.9 ‘shall apply’ to the employee.  That plainly means that the partial incapacity is to be treated as if it were a permanent condition resulting from the injury such that ECO s.9 applies.

There would be little point in the deeming provision otherwise.  If the only objective of ECO s.10(5) was to stop periodical payments, it would have been more straightforward to have said so expressly.  The deeming provision is only apposite if the legislative intent was to make ECO s.7 or 9 automatically applicable in respect of the workplace injury.” (§§37-38)

22.  This led the Appeal Committee to certify as one of the questions for decision, the following:

Where permanent partial incapacity may be due to more than one cause, does s 10(5), when it applies, preclude the court from approaching such incapacity on the basis that it is partly due to causes which are unrelated to the injured worker’s employment?

23.  In my view, the answer to this question is “No”.  To the extent, if at all, that the Judge and Reyes J may have reached a contrary conclusion, I am respectfully unable to agree with them.

24.  In some cases, it may not be possible to determine for some considerable time what is the extent and degree of any permanent incapacity resulting from an employee’s injury.  Medical treatment or surgical intervention may avoid or significantly reduce such incapacity.  The employee’s condition may in any event take months to stabilise. 

25.  It is in this context that s 10 of the Ordinance operates.  The employee is treated in the interim as suffering from a temporary incapacity and receives periodical payments under s 10(1).  If it becomes clear that his incapacity is in fact permanent, the periodical payments cease and that incapacity is assessed, with the employee becoming entitled to the corresponding lump sum compensation payable under ss 7 or 9 of the Ordinance.  Section 10(4) provides that none of the periodical payments previously made should be deducted from such lump sum compensation. 

26.  By s 10(5), the Ordinance places a 24 month limit (or with the court’s leave, a 36 month limit) on the payment of non-deductible periodical payments as an interim measure.  Where the incapacity, previously treated as temporary, has endured for two or three years, it is deemed for the purposes of compensation to be permanent so that the employee “shall no longer be entitled to periodical payments” under s 10.  Instead, his incapacity, now deemed to be permanent, is to be assessed under ss 7 and 9.  The object s 10(5) is therefore to deem the permanence of the incapacity.  It does not operate to deem causation.

27.  It is true that s 9 begins with the words: “...... where permanent partial incapacity results from the injury the amount of compensation shall be”, going on to prescribe the sums payable.  Section 7 is in similar terms in relation to permanent total incapacity.  Those words are needed because ss 7 and 9 operate independently and not merely in situations where s 10(5) is engaged.  Where the opening words referred to above apply, that is, where permanent total or partial incapacity result from the injury, ss 7 or 9 are triggered.  Those words therefore stipulate the conditions for the independent operation of those sections.  They do not come within the deeming provisions in s 10(5) which bear solely on the permanent status of the incapacity.  When s 10(5) states that “the provisions of section 7 or 9, as the case may be, shall apply to the employee”, it is concerned merely with prescribing the machinery for quantifying the lump sum compensation, given that the incapacity has been deemed to be permanent.

28.  Section 10(5) therefore does not constitute a reason for excluding the apportionment contended for by the appellant.

The appellant’s argument in favour of apportionment

29.  Liability to pay Employees’ Compensation is created by s 5(1) of the Ordinance which is in the following terms:

Subject to [matters not material], if in any employment, personal injury by accident arising out of and in the course of the employment is caused to an employee, his employer shall be liable to pay compensation in accordance with this Ordinance.

30.  Plainly, this section requires a causal connection first, between the employment and the accident (so that the accident arises “out of” the employment) and between the accident and the injury suffered by the employee: the accident must cause the injury.  None of this is controversial.

Section 9(1)(b)

31.  The argument developed by Mr Denis Chang SC (appearing with Mr Mohan Bharwaney for the appellant) relies on s 9(1)(b) and, in particular, on the words I have italicised below:

“(1) Subject to subsection (1A) [not presently material], where permanent partial incapacity results from the injury the amount of compensation shall be ......

(b) in the case of an injury not specified in the First Schedule, such percentage of the compensation which would have been payable in the case of permanent total incapacity as is proportionate to the loss of earning capacity permanently caused by the injury in any employment which the employee was capable of undertaking at that time: Provided that – 

(i) in the case of injury to any part of the body specified in the First Schedule not amounting to the loss of that part, the loss of earning capacity permanently caused by that injury, expressed as a percentage, shall not exceed the appropriate percentage specified in the First Schedule in respect of the loss of such part;

(ii) in the case of injury not specified in the First Schedule, the loss of earning capacity permanently caused by such injury shall be assessed as a percentage having regard so far as possible to the scale of percentages specified in that Schedule and to the Note thereto.”

32.  Mr Chang accepts that where the accidental injury is one of two concurrent causes of the incapacity (the other not being work-related, such as the left hip AVN in the present case), this does not prevent the employee from satisfying all the conditions of s 5 and so establishing liability to pay Employees’ Compensation.  This is in line with the Court of Appeal’s decision in Lee Kin Kai v Ocean Tramping Co Ltd [1991] 2 HKLR 232, in which it was held that for the purposes of the Ordinance, the accident as a cause of the injury (and the attendant incapacity) is sufficient, there being no need to show that it is the sole cause.

33.  However, Mr Chang argues that when one comes to the stage of assessing the compensation, the words in s 9(1)(b) italicised above mean that an award can only be made in respect of the incapacity caused by the injury and not any incapacity resulting from other causes.  Having held that liability is established under s 5, the court, he argues, must perform the additional task of excising that part of the incapacity due to extraneous causes before assessing compensation only by reference to the apportioned, injury-related incapacity.

No basis for apportionment

34.  I am unable to accept the appellant’s argument. 

35.  In the appellant’s Supplemental Case, it is submitted that: “There is in principle nothing unfair about apportioning that part of the incapacity, resulting from the injury at work, from that part of the incapacity resulting from other causes”.  Although Mr Chang disavowed the contention that his construction of the Ordinance is required as a matter of fairness, it appears to me that the argument is in substance an appeal to some notion of “fairness” to the employer.  The implicit suggestion is that it is only fair that the compensation payable by an employer should be confined to compensation for incapacity caused by injury arising out of the employment for which, in broad terms, the employer is responsible.  Where part of the incapacity is due to a pre-existing disease not related to the employment, this should not be laid at the employer’s door.

36.  Such a notion is closely allied to a concept which forms no part of the statutory scheme, namely, that of the employer’s fault.  If it were a fault-based scheme, the legal focus would be on the circumstances of the claimant’s employment in which the injury arose, and the argument that the compensation should relate only to consequences tied to those circumstances would have much force.  But, as everyone agrees, the Employees’ Compensation scheme is a no-fault scheme aimed at giving quick financial relief to employees incapacitated by work-related injury.  It is a scheme whereby the community, through the cost-sharing device of compulsory insurance, permits employees so incapacitated to look to their employers for compensation having regard to the extent of the incapacity suffered, regardless of any fault on the part of the employer and regardless of the circumstances in which the work accident arose.  The focus is, in other words, on insurance-based compensation aimed at alleviating the incapacitated employee’s hardship rather than on compensation confined in a manner which reflects the employer’s fault.

Absence of statutory provisions in support of apportionment

37.  The self-contained nature of the statutory scheme has long been recognized.  As Sir Alan Huggins V-P put it in Hong Kong Paper Mills Ltd v Chan Hin-wu [1981] HKLR 556:

“There is a great difference between a claim for damages in negligence at Common Law and a claim for compensation under the Workmen's Compensation Ordinance.  Workmen's compensation must be assessed solely under the statutory provisions and, unless the Ordinance provides for a reduction of the basis compensation specified, no reduction may be made.” (at 558)

The Court of Appeal held in that case that in the absence of express provision, the common law duty to mitigate could not be imported into the statutory scheme.  A claimant who had refused to have an operation which, on the medical evidence, would have resulted in a significantly reduced permanent incapacity was nonetheless held entitled to full compensation.

38.  As was pointed out by Ms Audrey Eu SC (appearing with Mr Y L Cheung for the respondent), the Ordinance makes this clear from the outset.  Section 5(1) (set out above) which creates the liability makes it clear that it is a liability “to pay compensation in accordance with this Ordinance”.  It is within the four corners of the statute that one must look.

39.  For the appellant to succeed, it must therefore identify the provisions of the Ordinance which establish the alleged requirement of apportionment.  The words of s 9(1)(b) relied on are insufficient.  They undoubtedly require a causal relationship to exist between the incapacity and the injury.  But that is not enough for the appellant’s purposes.  As Mr Chang accepted, the injury need not be the sole cause for there to be liability under the Ordinance.  Section s 9(1)(b) merely reiterates the undoubted requirement of a causal connection but nowhere does it address the situation where the incapacity is due in part to a concurrent extraneous cause.  Nowhere does it suggest that in such a situation, the court must take the additional step of apportioning the incapacity between the two causes and confine the compensation payable accordingly.  As was pointed out in the course of the hearing, the appellant’s argument requires the section to be re-written to insert words which do not exist in the text.  Instead of merely saying “Where permanent partial incapacity results from the injury the amount of compensation shall be –” the section has to be re-written to read “To the extent that permanent partial incapacity results from the injury the amount of compensation shall be –”. 

40.  The appellant is unable to point to any provision of the Ordinance in support of the alleged apportionment requirement.  On the contrary, there are powerful indications that, on the true construction of the Ordinance, no room exists for any such apportionment.

Provisions militating against apportionment

41.  Leaving aside cases of temporary incapacity, the combined effect of a work-related injury and a pre-existing disease may be the death, permanent total incapacity or permanent partial incapacity of the employee.  In the last category, the permanent partial incapacity may be due to an injury which is listed in the First Schedule (in which case compensation would be governed by s 9(1)(a)) or to a non-scheduled injury (governed by s 9(1)(b), set out above).  A glaring weakness of the appellant’s argument in favour of apportionment is that it has no prospects of success at all in relation to the first three of the four categories mentioned: the statutory language leaves no room for apportionment in relation to fatal cases, to cases of permanent total incapacity and to cases of permanent partial incapacity involving scheduled injuries. 

42.  Thus, if the employee dies by the combined effect of the work-related injury and a pre-existing disease, compensation is fixed in mandatory terms.  By s 6 (read together with the Sixth Schedule), the “amount of compensation payable to the members of the family of the employee shall be” the lump sum calculated in the manner prescribed, subject to a statutory maximum in relation to the monthly earnings used as a multiplicand and a statutory minimum (of $303,000) in relation to the overall award.  Apportionment of the compensation is provided for by s 6A, but only in relation to how the award is to be shared among eligible family members.  There is simply no room for suggesting that the prescribed amounts of compensation are subject to reduction to take account of an extraneous concurrent cause of the death.  Such apportionment, if permissible, might obviously take the payment below the prescribed minimum award, but such an eventuality is plainly not envisaged.

43.  Exactly the same points can be made in relation to cases where permanent total incapacity results from the injury in combination with a pre-existing disease.  Compensation is there fixed by s 7 together with the Sixth Schedule, again in mandatory terms, and again with an unqualified statutory minimum payment of $344,000.

44.  The same applies to cases of permanent partial incapacity resulting from injuries listed in the First Schedule.  Thus, s 9(1)(a) states that

“where permanent partial incapacity results from the injury the amount of the compensation shall be in the case of an injury specified in the First Schedule, such percentage of the compensation which would have been payable in the case of permanent total incapacity as is specified therein as being the percentage of the loss of earning capacity caused by that injury.” 

45.  So, for example, where injury causes the employee to become totally paralysed or permanently bedridden (conditions listed in paras 5 and 6 of the First Schedule) the Ordinance specifies that the applicable percentage loss is 100%.  And where the employee loses an arm between elbow and shoulder it specifies that this constitutes a 75% or 80% loss of earning capacity (depending on which is his preferred hand): First Schedule, para 11.  There is no ground for suggesting that these prescribed percentages can be reduced if it can be shown that a pre-existing disease also contributed to the paralysis, to the bedridden condition or to the loss of an arm. 

46.  Mr Chang did not seek to argue that apportionment could be ordered in such cases.  He confined his argument to the category of permanent partial incapacity caused by non-scheduled injuries.  He was, however, unable to suggest any reason why there should be such a distinction: why there should be a legislative policy requiring apportionment in relation to incapacity due to non-scheduled injuries while ruling out apportionment in respect of all the other categories of incapacity.

47.  It is plain that the Ordinance intends no such distinction.  It makes provision for a category of non-scheduled injuries because the classes of injury which may result in permanent partial incapacity are of almost infinite variety.  The First Schedule therefore does not pretend to cater expressly for every such class.  Instead, s 9(1)(b) provides for a non-scheduled injury to be proportionately assessed as a percentage against the standard of permanent total incapacity.  The proviso to that section stipulates that assessments should proceed so far as possible by analogy with the scale of percentages in the First Schedule and, where a percentage incapacity is specified for loss of the relevant body part, such percentage must be taken as the maximum assessable incapacity in relation to a non-scheduled injury involving that body part.  In other words, it is clear that the Ordinance intends that the same approach should, so far as possible, be adopted in relation both to scheduled and non-scheduled injuries resulting in permanent partial incapacity.  The idea that apportionment should apply to the second category but not the first runs counter to the clear legislative intent.

Conclusion

48.  It is accordingly my view, in agreement with the Judge and the Court of Appeal, that there is no basis for requiring apportionment to reflect the existence of a pre-existing disease as a concurrent cause of the employee’s incapacity.  I would therefore dismiss the appeal with costs.

49.  In the course of argument, decided cases on the assessment of compensation involving employees who were victims of a second or subsequent accident were cited.  Those cases raise quite separate questions and it should be emphasised that this Judgment does not in any way address those issues.

50.  The Court was also invited to make certain pronouncements concerning the effect of medical certificates in the context of s 10(2) of the Ordinance.  As such matters do not presently arise for decision, that invitation was declined.

Sir Ivor Richardson NPJ:

51.  I agree with the judgments of Mr Justice Bokhary PJ and Mr Justice Ribeiro PJ.

Chief Justice Li:

52.  The Court unanimously dismisses the appeal with costs and makes an order that the respondent’s costs be taxed in accordance with the Legal Aid Regulations.