CHIU KWOK HUNG BAN v. NG FU WING t/a WING KEE AQUARIUM ENG CO AND OTHERS

CACV 83/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 83 OF 2010

(ON APPEAL FROM DCEC NOS. 887 OF 2002 AND 317 OF 2004
(CONSOLIDATED) )

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DCEC 887/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 887 OF 2002

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DCEC 317/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 317 OF 2004

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IN THE MATTER OF AN APPLICATION BETWEEN

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(Consolidated pursuant to the Order dated 5^th December 2005)

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J U D G M E N T

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Hon Rogers VP:

1.  I agree with the Judgment of Le Pichon JA and the orders she proposes.

Hon Le Pichon JA:

2.  This is an appeal by the applicant from an order of HH Judge E. Yip of 1 February 2010 and his decision on costs of 26 March 2010.  The matter related to the applicant’s claim for compensation pursuant to the Employees’ Compensation Ordinance, Cap. 282 in respect of injuries sustained in the course of employment.  At the conclusion of the hearing judgment was reserved which we now give.

Background

3.  On 30 November 2000, the applicant, then aged 33, was working as a painter in a renovation project at an HSBC automatic teller machine centre and fell from a height of about 3 feet when climbing the wooden ladder.  The fourth respondent was the principal contractor for the project.  The third respondent was its subcontractor who, in turn, had subcontracted the work to the second respondent.

4.  The first respondent was a party to the action because he had signed “Form 2” which gave statutory notice of the accident to the Commissioner for Labour as required by the Ordinance and in which it was stated that he was the applicant’s employer.  The first respondent’s line of business was the construction and maintenance of fish tanks.

5.  The second respondent has not participated in this action and a default judgment was entered against him in March 2006.

6.  The judge found that the first respondent had signed Form 2 because he had been misled by the second respondent into believing that the applicant was his employee.  He also found that the second respondent rather than the first respondent was the applicant’s employer.

7.  The judge ordered the second, third and fourth respondents to pay the plaintiff compensation in the sum of $173,429 together with interest thereon at judgment rate from the date of the accident (i.e. 30 November 2000) to the date of judgment, but excluding the periods from 30 November 2000 to 1 January 2004 and from 19 May 2006 to 22 June 2009.  He ordered the applicant to pay the first respondent’s costs of the action and declined to make a Sanderson or Bullock order in respect of the first respondent’s costs.  He further awarded the applicant only 25% of his costs, such costs to be paid by the third and fourth respondents.

This appeal

8.  Five issues arise on this appeal.

(1)   The basis for calculating the applicant’s income

9.  It was common ground that the applicant was earning $800 a day at the time of the accident.  He had been working as a painter for 15 years and had reached the level of a master.  The judge rejected the applicant’s evidence that on average he was working 20 working days a month before the accident and found his monthly income to be $7,200, based on the 9 days he had been employed by the second respondent to work on the project before the accident happened.

10.  Section 11(2) of the Ordinance provides:

“ (2) Where by reason of the shortness of the time during which an employee has been in the employment of his employer or of the casual nature of the employment, or of the terms of employment, it is impracticable to compute the rate of remuneration of such employee at the date of the accident, regard may be had to the average monthly amount which, during the 12 months previous to the accident, was being earned by a person of similar earning capacity in the same grade employed at the same work by the same employer, or, if there is no person so employed, by a person of similar earning capacity in the same grade employed in the same class of employment and in the same district.”

The parties are agreed that this provision is applicable in the present case.

11.  The Form 2 submitted to the Labour Department had reported an average of 22 working days a month.  That meant monthly earnings of $17,600.  But the applicant did not rely on that statement in Form 2.  Rather, his claim was based on 20 working days only or earnings of $16,000 a month at the time of the accident.  That appears from his witness statement which the applicant confirmed to be true and adopted as part of his evidence.  The judge rejected that evidence.

12.  It seems from §§15 and 16 of the judgment that the only reason he did so was because the applicant had never filed a tax return:

“15. Whilst the 4^th Respondent has no duty to put up a positive case, Mr. Kwong submits that the Applicant’s income at the relevant time might be less than $9,000 a month (or $108,000 a year as the threshold of taxable salary tax) so that no tax return was filed. Mr. Wong assumes, in the absence of evidence, that there were reasons, not sinister ones, for the failure to file a tax return.

16. I do not believe the Applicant’s case of “22 working days”. He worked 9 days up to the date of the accident. His income for the purpose of the present action is therefore $7,200 (i.e., $800 x 9).”

13.  The judge appeared to have inferred from the non-filing of tax returns that the applicant’s earnings were below $108,000 which was the threshold for salaries tax.  That assumption was made in the face of the applicant’s frank acknowledgment during cross-examination that he knew he should have filed a tax return.  The relevant evidence appears from the following passage from the transcript:

“	Q:	Mr Lee (Mr Chiu?), as you had a salary of $16,000, then you should have paid tax, correct?
	A:	No, I did not file tax return.
	Q:	You have never filed a tax return?
	A:	No.
	Q:	No. For what reason, why did you not file a tax return?
	A:	No reason, because we were casual workers. That means we did not earn a fixed amount each month.
	Q.	Hmm. But you told the court that your average salary in one year was $16,000.
	A:	Hmm.
	Q:	Then your average income was high enough to oblige you to file tax return. You knew about this, correct?
	A:	Yes.”

14.  The judge’s reasons for rejecting the applicant’s evidence are far from apparent.  In fact, none can be discerned from the judgment other than that the judge appeared to have accepted the submission of Mr Kwong (who appeared for the fourth respondent) that the applicant’s income might be below the threshold.  In light of the applicant’s unambiguous evidence to the contrary, I do not consider it open to the judge not to accept that evidence in the absence of good reason.

15.  Mr Kwong submitted that the judge was entitled to disbelieve the applicant because of the absence of any documentary evidence such as tax returns, payment receipts and bank statements.  First and foremost, that was not the reason given by the judge.  In any event the fourth respondent had never sought discovery of such documents and, in fact, during the trial, counsel for the fourth respondent had declined the opportunity of requiring the production of the applicant’s savings passbook.

16.  In my view, there was no valid reason for the judge to have rejected the applicant’s oral evidence of his average earnings at the time of the accident happened based on 20 working days a month.  There is nothing inherently improvable or out of the ordinary as to the number of days he claimed to have worked a month and it is worth noting that he did not seek to adopt the higher figure of 22 days that had been stated in the Form 2 which would have been to his advantage.  In contrast, there was no logic or reason in adopting 9 days as the average number of days worked a month since that appears to be based on nothing more than sheer happenstance: the applicant happened to have been able to work on this project for only 9 days because the accident then intervened.

17.  In my view, the judge’s approach is unsustainable.  There is ample evidence to support a finding that on average the applicant had worked 20 days a month immediately prior to the accident and the judge should have so found.  On that basis, compensation under section 10 is as follows:

               $16,000 x 12/365 x 492 (days) x 4/5 = $207,044.38

(2)   The Hong Kong Paper Mills formula

18.  Since it was common ground that if the applicant were successful on (1) above, he must also succeed on this issue, it is unnecessary to go further than to state that in the present case, in assessing the percentage of loss of earning capacity under section 9 of the Ordinance, the Hong Kong Paper Mills formula (taken to mean the formula as modified in Lui Kwong Yan v Shui Hing Decoration Works & Another [1993] 1 HKLR 168) applies.  Applying that formula, the applicant’s loss of earning capacity falls to be assessed at 59.4%.  This results in compensation of $912,384 under section 9.

(3)   Interest for the period between 30 November 2000 and 1 January 2004

19.  The applicant challenged the judge’s exclusion of interest for this period of a little over 3 years.  The accident occurred on 30 November 2000.  The period for which interest was excluded included the limitation period of 2 years as that period did not expire until 30 November 2002.  To exclude interest for the period allowed by statute for the bringing of a claim must be wrong in principle.

20.  As regards the period between 30 November 2002 and 1 January 2004, the salient events were the following.  The first respondent first raised the issue of the second respondent being the applicant’s direct employer on 3 October 2002.  Then followed a series of unsuccessful attempts by the applicant’s solicitors to locate the second respondent.  Inquiries were also made of HSBC in November and December 2002 to ascertain the contractual capacities of the first and second respondents in terms of principal contractor/contractor/sub-contractor and as a result, the applicant learned that the fourth respondent was involved.  The fourth respondent only admitted that it was the principal contractor on 29 January 2003 (which was after the expiration of the limitation period) but was not forthcoming as to the identity of its subcontractor.

21.  In the event, the applicant had to apply by summons dated 1 March 2004 to join the second, third and fourth respondents to the application which was strenuously resisted by the third and fourth respondents.  Deputy District Judge J Ko allowed the joinder, albeit accepting that there had been some delay in prosecuting the amended summons.

22.  During the hearing, Mr Kwong was prepared to concede that there had been no delay up to 30 September 2003.  The significance of that date was not explained.  Given that joinder was allowed on a summons taken out on 1 March 2004, I see no reason for disallowing interest for any part of the period up to 1 January 2004.  The applicant succeeds on this issue.

(4)   Sanderson or Bullock order

23.  The judge refused to make either a Sanderson or Bullock order and ordered the applicant to pay the first respondent’s costs. In his notice of appeal dated 14 April 2010, the applicant sought an order that there be no order as to costs between the applicant and the first respondent.  This was amended in the amended notice of appeal to a Sanderson or Bullock order.  The first respondent does not oppose the making of a Bullock order but opposes the application for a Sanderson order.

24.  A Sanderson or Bullock order may be appropriate if a party has had difficulty in ascertaining which defendant to sue and has properly sued two defendants in the alternative but succeeds against only one.  If the court orders that the costs be paid by the unsuccessful defendant to the successful, this is normally called a Sanderson order.  Alternatively, the court may order that the costs be paid by the plaintiff and then have them included in the latter’s bill against the unsuccessful defendant, in which case it is properly called a Bullock order.

25.  As the second respondent has not been located, the practical difference between the two orders in the present case is whether the applicant or the first respondent should have to pay the other party his costs and thereafter seek to recover them from the second respondent, assuming the latter can be found and has the means to pay.  As the first respondent does not oppose a Bullock order, the only question is whether this is an appropriate case for a Sanderson order inasmuch as the applicant appears to have changed his stance during the hearing of the appeal and now seeks a Sanderson order.

26.  The first respondent was joined at the outset because he had signed Form 2.  On 2 October 2002, the first respondent’s solicitors wrote to the effect that the first respondent was neither the applicant’s employer nor the contractor at the accident location and according to their information, the applicant’s employer was the second respondent. In his witness statement dated 9 June 2006, the first respondent explained why this was so and how he came to sign the Form 2.  At the time of the accident, the first respondent had sub-contracted part of works in relation to an aquarium project in Wanchai to the second respondent.  He was informed by the second respondent that one of his workers (the applicant) had sustained injuries at work.  The first respondent mistakenly thought that the applicant was a worker working on the Wanchai aquarium project and contacted his insurers.  When the agent and the second respondent presented an already completed Form 2 for his signature, the first respondent signed the document but did not read it.  The substance of this explanation corroborated that which had been given in a letter to the Commissioner for Labour dated 3 July 2002 which was disclosed to the applicant on 3 June 2008.  The trial took place at the end of December 2009.

27.  It is apparent from that chronology that since the first respondent’s very first communication (through his solicitors) with the applicant, he has been consistent in his stance and explanation as to why the second respondent (and not the first respondent) was the applicant’s actual employer.  Moreover, it has been the applicant’s own case that his employer was the second respondent and it is clear that the first respondent was not involved in the chain of subcontracts for the project.  Also, between 30 May 2008 and 10 August 2009, the first respondent’s solicitors have repeatedly invited the applicant to discontinue his action against the first respondent.  In those circumstances, while I consider the first and second respondents were properly joined as respondents initially, there was and could be no justification for the applicant not to have discontinued his action against the first respondent by the time the 2002 letter to the Commissioner for Labour was disclosed if not earlier, when the first respondent filed his witness statement.  Accordingly, a Bullock order and not a Sanderson order would be appropriate in the present case.

(5)   Whether the applicant should be awarded only 25% of his costs

28.  Given that the applicant has succeeded on most of the issues raised on this appeal, he should be entitled to all his costs as against the second, third and fourth respondents.

Order

29.  I would order that the appeal be allowed and the parties are directed to submit agreed minutes of order for approval.

30.  So far as the costs of this appeal are concerned, I propose that there be an order nisi that:

(a)   the applicant do pay the first respondent his costs; and

(b)   the second, third and fourth respondents do pay the applicant his costs.

 

Hon Stone J:

31.  I agree with the judgment of Le Pichon JA.

Hon Rogers VP:

32.  Accordingly, there will be an order in terms of §§29-30 above.