TSANG KWONG TONG v. TENNILLE DECORATION & DESIGN LTD AND OTHERS

CACV 42/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 42 OF 2006

(ON APPEAL FROM DCEC NO. 645 OF 2003)

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J U D G M E N T

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Hon Cheung JA:

1.  I agree with the judgment of Tang JA on liability and the judgment of Kwan J on quantum.

2.  The appeal is accordingly dismissed with costs to the applicant.

Hon Tang JA:

3.  On 14 July 2001, the applicant suffered injuries whilst demolishing an iron frame at Room 704, Eastern Harbour Centre, Quarry Bay, Hong Kong (“the site”).

4.  The critical issue in this appeal concerns the identity of his employer.

5.  It is the 2^nd respondent’s case that at the material time, the applicant was the employee of the 3^rd respondent, who was in turn the sub-contractor of the 1^st respondent.

6.  The 2^nd respondent is the insurer of the 1^st respondent and was granted leave by Judge Lok on 1 August 2003 to join as the 2^nd respondent.

7.  The 2^nd respondent would not be liable as the insurer of the 1^st respondent, under section 43(1) of the Employees’ Compensation Ordinance (“the Ordinance”), Cap. 282, unless the 1^st respondent was the direct employer of the applicant.

8.  So far as the applicant is concerned, it does not matter who was his direct employer.  If it was the 1^st respondent, the compensation would be paid by the 2^nd respondent as the 1^st respondent’s insurer.  If it was the 3^rd respondent, who was uninsured, the compensation would be paid out of the Employees Compensation Assistance Fund.

9.  After a trial which lasted three days, District Judge Chow held that the 1^st respondent was the direct employer of the applicant.

10.  This is the 2^nd respondent’s appeal against that finding.

11.  However, the 2^nd respondent also appealed against the assessment of permanent loss of earning capacity.  The applicant opposed this part of the appeal.

12.  The 3^rd respondent was unrepresented in the appeal.  However, he was not concerned with the appeal on the loss of earning capacity.  If he should be found liable as the direct employer of the applicant, he had the same interest as the 2^nd respondent in seeing the compensation reduced.

13.  At the trial, the applicant, the 2^nd and the 3^rd respondents were all represented by counsel.  The 1^st respondent did not take part in the proceedings.

14.  The trial judge found as a fact that the 3^rd respondent was not the employer of the applicant.  He found that the applicant was the employee of the 1^st respondent.  The judge came to the conclusion, which he did, essentially because he accepted the evidence of the 3^rd respondent, who had given evidence before him.

15.  Briefly stated, the 3^rd respondent’s evidence was that on 6 July 2001, a friend (Mr Chan Ho Shing) rang him up, saying that the company of his friend (a Mr Chow) had a job to do, namely, to dismantle an iron platform.  The 3^rd respondent was asked whether he was interested in helping on the next day (which was a Saturday); the daily wage was $700.  The 3^rd respondent was willing to help and went to the site the following day and met a foreman surnamed Yau, whom he had seen for about three times previously.  At about 3 pm on the same day, his right leg was injured, and he was unable to finish his job.  However he told Mr Chan after he had to see his doctor, that he would complete the job the following week.  But by the 13 July 2001, he had not fully recovered.  So he told Mr Chan of his situation.  Mr Chan then told him to look for a worker to replace him.  He rang up the applicant and asked him if he could find somebody who could do the job.  The applicant said there was no need to find anyone, he was free and he would come to work on the following day.  But the applicant wanted to be paid $900 per day.  The 3^rd respondent told him that he had to ask the boss about it.  The 3^rd respondent then rang up Mr Chan and told him what the applicant wanted.  Mr Chan rang off, and about 10 minutes later, Mr Chan called the 3^rd respondent and told him that there was no problem.  The 3^rd respondent then rang up the applicant saying that there was no problem.  He then had tea with the applicant next morning, after which he took the applicant to the site to work.

16.  It was the 3^rd respondent’s evidence that, so far as this particular piece of work was concerned, he was working as a casual worker himself.  The job was a small one which would have taken two days to finish.  Indeed the evidence was that it was whilst the applicant was trying to finish the job on 14 July 2001, that he had an accident.

17.  However, the 3^rd respondent was also a sub-contractor and conducted the sub-contracting under the trade name of Wor Shun Engineering Company.

18.  There was no evidence from the 1^st respondent.

19.  Mr Walker Sham, who appeared on behalf of the 2^nd respondent, accepted that it was open to the judge to accept the evidence of the 3^rd respondent.  That being a finding of fact, this court would normally not be entitled to interfere.

20.  However, Mr Sham submitted, the acceptance by the judge of the evidence of the 3^rd respondent is flawed.  That is so because he had failed to consider the evidence of the applicant.  In particular, the evidence of the applicant, both in chief and under cross-examination, that the agreement over the daily wage of $900 was made by the 3^rd respondent without interruption and in the same telephone conversation.  Mr Sham submitted that the failure on the part of the judge to consider this discrepancy, rendered the judge’s acceptance of the evidence of the 3^rd respondent suspect.

21.  Mr Sham referred to para. 11 of the judgment and submitted that where the judge referred to the differences in the evidence between the 3^rd respondent and the applicant, he did not have in mind the important difference in relation to how the agreement over the daily wage of $900 was made.

22.  I am prepared to accept that there is no direct reference in para. 11 to this discrepancy.  However, I am not prepared to accept that this in any way undermined the decision of the judge.  This is what the judge said in para. 12 of the judgment:

“12.   There is no direct evidence to contradict the evidence of the 3^rd Respondent regarding how he looked for the Applicant to work in his replace.  I accept his evidence.  I reject the 2^nd Respondent’s submission that he had a complete discretion regarding the amount of wages to be paid to the Applicant.  He did ask for the approval of Mr. Chan before agreeing to pay the Applicant $900 per day.”

23.  It is clear from this paragraph that the judge was aware of the importance in the evidence of the 3^rd respondent over how the daily wage of $900 was agreed.  The fact that he did not specifically refer to the evidence of the applicant on this aspect of the case in para. 11 or 12 of his judgment does not lead me to conclude that the judge had forgotten about this piece of evidence.

24.  The other criticism which Mr Sham made of the judgment related to the payment by the 1^st respondent to the applicant by cheque on eleven occasions over ten months of a total sum of $144,000.  He submitted that the judge had overlooked section 24 of the Ordinance whereby a principal contractor was equally liable to pay compensation to the employee of his sub-contractor.  He submitted, therefore, the payment of the sum of $144,000 by way of employee’s compensation, was consistent with the 1^st respondent being the principal contractor of the 3^rd respondent.

25.  I do not believe it is right to say that the judge had overlooked section 24 because submissions based on section 24 were made to the judge, and it is clear from para. 8 of his judgment that he was aware that the payments by the 1^st respondent could have been made by the 1^st respondent either as employer or as principal contractor.

26.  However, it is to be noted that under section 24(2), the principal contractor is entitled to be indemnified by the sub-contractor.  There is no evidence that there was any attempt by the 1^st respondent to ask the 3^rd respondent, either to pay the compensation in the first place to the applicant directly, or to indemnify the 1^st respondent, after the 1^st respondent had paid the applicant.  So the fact that the 1^st respondent had paid this large amount of money to the applicant is evidence which the judge was entitled to take into account.  Moreover, it is quite clear from the judgment that the judge referred to this in answer to the submission made on behalf of the 2^nd respondent, that the sum of $5,000 paid by the 3^rd respondent into the applicant’s bank account, supported the 2^nd respondent’s case that the 3^rd respondent was the employer of the applicant.  What the judge was basically saying was that if the payment of $5,000 by the 3^rd respondent supported the case that he was the employer, the payment by the 1^st respondent of the much larger amount might also support the case that the 1^st respondent was the employer.  As I have said there was no evidence of any attempt on the part of the 1^st respondent to be indemnified by the 3^rd respondent.

27.  Moreover, although the evidence is not very clear, it does appear that both the applicant and the 3^rd respondent regarded the $5,000 paid by the 3^rd respondent as a loan.  In any event, although this evidence is capable of supporting the case that the 3^rd respondent was the direct employer of the applicant, the judge who has had the advantage of seeing both the applicant and the 3^rd respondent giving evidence before him, was entitled to accept the 3^rd respondent’s evidence.

28.  The facts in this case are rather unusual.  There was the 3^rd respondent’s evidence that he worked on the site for the 1^st respondent for two days only.  The first day was 7 July 2001 when he injured his leg.  The 2^nd day was 14 July 2001, when he was asked to make sure that the applicant would not demolish the wrong iron frame.  He was paid for these two days.  If the 3^rd respondent was a sub-contractor, it is difficult to see why the 1^st respondent should agree to pay an additional $900 per day to the applicant.  There was suggestion that the 3^rd respondent had other workers working on the site.  But that has been denied by the 3^rd respondent.  Apart from the suggestion put to him in cross-examination, which is not evidence, there was no evidence to this effect.

29.  The other evidence relating to the identity of the employer came principally from the applicant.  His evidence is equivocal.  After all, initially, the application was made against the 1^st respondent alone on the basis that the 1^st respondent was his employer.  It is however to be noted that in his statement to the Labour Department, dated 30 October 2001, he did say the principal contractor was the 1^st respondent, and he was employed by the 3^rd respondent’s company.  But both in his affirmation made in support of his application to join the 3^rd respondent, as well as in his oral evidence, he said he might have been an employee of the 1^st respondent.

30.  So far as the 1^st respondent is concerned, it submitted the Form 2 pursuant to section 15 of the Ordinance.  Had the 3^rd respondent been the direct employer of the applicant, Form 2 should have been submitted by the 3^rd respondent, and the 1^st respondent named as the principal contractor in section C of Form 2.  Form 2 was submitted on 6 August 2001.  However, in the notice of accident given by the 1^st respondent to the 2^nd respondent, dated 30 August 2001, in answer to the question:

“Is the insured person in your direct employ?  If not, please give Name and Address of Contractor.”,

the 1^st respondent gave the firm name of the 3^rd respondent as the contractor.  Thus, the documents emanating from the 1^st respondent are also equivocal on the identity of the employer.

31.  Having regard to the totality of the evidence, I am of the view that the finding made by the trial judge, based on his assessment of the evidence, is not one which this court is entitled to interfere.  That being the case, I would dismiss the appeal and uphold the judge’s finding that the 1^st respondent was the employer of the applicant.  In relation to the appeal on quantum, I agree with the judgment of Kwan J and would also dismiss that appeal.

Hon Kwan J:

32.  I agree with the judgment of Tang JA for the reasons he gave that this court should not interfere with the finding of the trial judge that the 3^rd respondent was the employee of the 1^st respondent, and that the applicant was recruited by the 3^rd respondent to work for the 1^st respondent as his replacement.

33.  The 2^nd respondent also appealed against the judge’s finding on quantum, which included an award based on a loss of earning capacity of 18%.  It was contended that the loss of earning capacity under section 9 of the Employees’ Compensation Ordinance, Cap. 282 should be assessed at 5%, alternatively, at 12%.

34.  18% was the assessment of the Employees’ Compensation (Ordinary Assessment) Board (“the Board”) upon a review under section 16G, when the earlier assessment of the Board of 5% was varied to 18%.  This assessment was upheld by the judge.  The injury stated in the earlier certificate, for which 5% loss of earning capacity was assessed was: “Left shoulder and bilateral wrist injury resulting in pain, stiffness and numbness”.  The injury stated in the certificate on review was: “i) Left shoulder injury resulting in left shoulder pain; ii) fracture of bilateral distal radius resulting in pain and stiffness of both wrists.”

35.  The alternative percentages put forward by the 2^nd respondent as appropriate are founded on the assessment of the doctors engaged by the applicant and by the 2^nd respondent.  The applicant’s doctor, Dr. Lee Po Chin, assessed his loss of earning capacity at 12%.  The 2^nd respondent’s doctor, Dr. Lam Kwong Chin, assessed the loss of earning capacity at 5%.  Neither doctor was called to give evidence at the hearing, or any of the other doctors who had treated or examined the applicant.

36.  It was contended that the judge’s finding should be varied because he had applied the wrong test in dealing with the appeal of the 2^nd respondent against the assessment of 18% loss of earning capacity made by the Board.  The appeal was pursuant to section 18.  In paragraph 25 of his judgment, the judge set out the relevant test as that being the cancellation of a certificate considered by the Court of Appeal in Liu Ah Sai v. Yiu Lian Dockyards Ltd. [1996] 4 HKC 244.  He referred to the certificate considered by the Court of Appeal as one issued in “Form 9”, and stated that the certificate is liable to cancellation if it is proved that the certificate was issued in ignorance of, or under a mistake as to, the true nature or the extent of the injury, otherwise the District Court cannot interfere with the award of the Commissioner for Labour.

37.  The judge was in error here.  The certificate considered by the Court of Appeal in Liu Ah Sai as one liable to cancellation at 251H to 252H, in which the court quoted the provisions in section 16B(1), was the certificate of the Commissioner, not the certificate of the Board.  The certificate of the Commissioner is in Form 6, whereas the certificate of the Board is in Form 9.

38.  The confusion might have arisen due to the Amended Answer filed by the 2^nd respondent, in which it was stated that it intended “to seek leave from the Court to appeal against the Certificate of Review of Compensation Assessment (Form 6) issued on 3 April 2003 pursuant to section 18 of the Employees’ Compensation Ordinance”.  Nevertheless, the certificate that the judge was clearly concerned with at the hearing was Form 9, as acknowledged at the start of paragraph 25 of his judgment, and the appeal was one brought under section 18.  Under section 18(3), on an appeal under this provision, the District Court may confirm or vary any assessment of the Board, or may substitute its own assessment, and may determine the amount of compensation payable and may make such order in respect thereof.

39.  The correct test to apply for an appeal brought pursuant to section 18 against an assessment of the Board made under section 16D or 16G, is that stated in Chan Kit v. Sam Wo Industrial Manufactory [1989] 1 HKC 115 at 118D to E, per Hunter JA:

“… the court’s jurisdiction appears to be appellate. But one has then to remember that these boards are acting on their own knowledge. They hear no evidence. They keep no record. They give no reasons so that they provide no material which explains the basis of their approach. They only produce a result. Although the procedure by way of appeal may be properly so described in order to bring about a reversal of their decision if the court is so minded, it is plain that a court approaching this matter has really got to start afresh.”

40.  As the judge had applied the wrong test, which was the test for cancellation of the Commissioner’s certificate pursuant to section 16B, the appellate court should interfere and consider if the assessment of 18% loss of earning capacity made by the judge should be varied.

41.  The injury of the applicant found by the Board is not an injury specified in the First Schedule to Cap. 282, for which a percentage is given for loss of earning capacity due to permanent partial incapacity resulting from the injury.  Section 9(1A) provides that where permanent partial incapacity results from an injury, whether or not an injury specified in the First Schedule, and the percentage of the loss of earning capacity assessed in relation to that injury in accordance with subsection (1) would be substantially less than the percentage of the loss of earning capacity permanently caused by the injury in the special circumstances of the employee, including, (i) the nature of the injury in relation to the nature of his former usual employment; and (ii) his qualifications, previous training and experience, the amount of compensation shall be 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, having regard to those special circumstances, the employee was capable of undertaking at that time.  Examples in which the court considered there were special circumstances of the employee so that the case was governed by section 9(1A) are Chan Kam v. Standard Chartered Bank Hong Kong Trustee Ltd. [1991] 2 HKLR 455; Mak Tin Chun v. Yeu Shing Construction Co. Ltd. [1991] 2 HKLR 460; and Fu Kwong Woon v. Chau Woon & Anr. [1992] 1 HKC 562.

42.  The circumstances of the applicant are clearly such that his case should be considered under section 9(1A).  These matters are set out in some detail in paragraphs 28 and 29 of the judgment.  There is no reason to disagree with the findings of the judge that whilst the applicant can perform works of similar type as a decoration or metal worker, due to his symptoms and residual disabilities, the applicant cannot resume his pre-accident duties as a skilled metal worker which required lifting heavy weights, his choice of work was greatly reduced, he often lost his jobs and his employments tended to be short, and he has suffered substantial loss of earnings.

43.  The percentages of 5% which Dr. Lam came up with and 12% which Dr. Lee arrived at for loss of earnings are, incidentally, identical to their respective percentages for impairment of the whole person.  As stated in Yip Fong Ming v. Joint-Effort Engineering Co. & Anr. [1989] 1 HKC 505 at 509D, physical condition is not the only factor affecting the earning capacity of a person.  One does not know the reason why, in the case of the applicant, the doctors had arrived at the same percentages for loss of earning capacity and for impairment of the whole person.  It does not appear from their reports that the special circumstances of the applicant, required to be considered in section 9(1A), had been taken fully into consideration.  In particular, it did not appear that the doctors had compared the earnings from such employment that the applicant is capable of with his impairment, and the earnings that he would be able to make but for the injury (Yip Fong Ming, supra. at 510F).

44.  The Board on review arrived at 18% as the loss of earning capacity.  Mr. Sham has attacked this assessment as inappropriate, relying on a statement in Dr. Lam’s report that the 18% was “mostly based on limitation in wrist flexion (said to be 50%)”, whereas range of movement of the wrists was satisfactory throughout.  In an earlier part of his report, Dr. Lam had quoted an entry of 13 March 2003 in the medical records of the orthopaedics and traumatology clinic which read: “Right wrist flexion 50% only – 8%; left wrist flexion 50% only – 8%; left shoulder impingement – 2%”.  The three percentages add up to 18.  The medical records were not produced in evidence.

45.  The doctor in the orthopaedics and traumatology department of Pamela Youde Nethersole Eastern Hospital gave a medical report dated 23 May 2003, which was put in evidence.  This doctor mentioned that the Board held an assessment on 13 March 2003 and gave 18% permanent disability for the left shoulder and bilateral wrist injury.  He made no mention of any breakdown which accounted for the 18% and gave no explanation how this percentage was arrived at.

46.  It would not be right to speculate on the component figures that made up the 18%.  If the 2^nd respondent was minded to challenge the assessment of the Board on the basis that the component figures were in error, it was incumbent on this party to adduce all relevant evidence before the court.

47.  Where no reasons are given by the Board, as is usually the case, the court hearing an appeal under section 18 ought not to speculate and “can only judge an assessment by testing the validity of its conclusions against the total available evidence” (Chan Kam v. Standard Chartered Bank Hong Kong Trustee Ltd., supra. at 458).

48.  Looking at this assessment against the totality of the available evidence, and the special circumstances of the applicant which the court is required to consider under section 9(1A), it does not appear that an 18% loss of earning capacity is in any way inappropriate.  Notwithstanding the judge had applied the wrong test, I am not persuaded that his assessment of loss of earning capacity should be varied.  I would also dismiss the appeal on quantum.