SHIU YING KWONG v. PO ON AND ANOTHER

IN THE DISTRICT COURT OF HONG KONG

CIVIL JURISDICTION

EMPLOYEES' COMPENSATION CASE

NO. 322 of 1988

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REASONS FOR DECISION

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1. On the 9th January 1987, Mr. Shiu Ying Kwong ("the Applicant") sustained personal injury arising out of and in the course of his employment by the 1st Respondent, a sub-contractor engaged by the 2nd Respondent. The Applicant's wrist was fractured, resulting in permanent partial incapacity and temporary incapacity within the scope and meaning of sections 9 and 10 of the Employee's Compensation Ordinance (Chapter 282). On the 22nd December 1988, the Director of Legal Aid ("D.L.A."), acting on behalf of the Applicant commenced proceedings for awards under sections 9, 10 and 10a of Chapter 282. These proceedings have had an unfortunate and obequared history, in spite of the fact that the essential issues of liability and quantum have not been seriously disputed by the Respondents. They have culminated in a dispute over the costs of a summons, filed on the 14th November 1989, by which the Respondents sought to obtain a stay of all further proceedings on the ground that the parties had agreed upon terms of settlement. Ordinarily, a decision of a District Judge on the costs of an application in Chambers would be of no interest to anyone except the immediate parties. In this case, however, the submissions of counsel have touched upon questions of much wider interest and importance to the general conduct of proceedings under Chapter 282. Accordingly, I have decided to adjourn this matter into court.

2. On the 15th March 1989, the Respondents admitted liability and, by consent, judgment was entered in favour of the Applicant against the Respondents. The rest of the application was adjourned to the 29th March 1989, when it was further adjourned sine die, with liberty to restore. On the 21st August 1989 the D.L.A. asked for the application to be restored for trial in consultation with the parties' solicitors diaries". That was done on the 11th October 1989, when notice of trial for assessing compensation was sent to the parties lawyers. The trial was fixed for the 16th November 1989.

3. In the meantime, the D.L.A. wrote a "without prejudice" letter, dated the 7th August 1989, to the Respondents' solicitors, setting out his claims under sections 9 and 10 of Chapter 282, and indicating that he was prepared to advise the Applicant "to forget about the Section 10A Claim". In customary contractual language, this was merely an invitation to treat, as the letter clearly stated "that any offer you may make will require specific instructions from our client as to settlement". The Respondents' solicitors replied on the 25th September 1989 in the following terms:-

"    .. ... We have instruction to accept the term therein in settlement of this case. Costs are to be taxed if not agreed.

    In the meantime, we are writing to our client to enquire whether any advance payment has been released to your client."

4. On the 30th September 1989, the D.L.A. replied to that letter in the following terms:-

" ..... We have taken instructions from our client. Our client has instructed acceptance of the offer you have made in terms of our letter dated 7th August 1989.

    We would be obliged if you could provide to us details of the alleged advance payment as soon as possible so that we may prepare the necessary consent summons for filing in Court."

Subject to the provisions of Chapter 282, I am in no doubt that an unconditional agreement to settle or compromise the Applicant's claims was concluded on receipt of that letter. The Respondents' offer in their letter of the 25th September 1989 was not qualified or in any way conditional upon the amount of the advance payment, as the D.L.A. later sought to suggest. The amount of such payment, was merely relevant to satisfaction of any order made on the basis of the agreed settlement, It did not suspend, or vitiate the existence of the agreed settlement.

5. It is now clear from letters from the DLA dated the 3rd and 10th November 1989 and from the Respondents' solicitors dated the 8th November 1989, which were placed before me by consent, that the Applicant sought to claim more under section 10 than had been previously claimed and agreed on his behalf. He did so on the basis that his monthly earnings were $7,840, instead of the figure of 7,280 stated in the Respondents' List of Earnings, filed on the 20th March 1989, and in the letter from the D.L.A. dated the 7th August 1989. He was contending that his monthly earnings should be calculated on the basis of 28, instead of 26, working days. (In the original application it was alleged that his monthly earrings were $8,400. The basis of that sum was not particularised, but was presumably 30 days at $280 per day.)

6. By the letter dated the 10th November 1989 the D.L.A. clearly asserted that there was no concluded agreement, and that he would proceed with the assessment fixed for hearing on the 16th November 1989. The weekend intervened and the Respondents eventually filed the present summons, dated the 13th November 1989, at about 3.30 p.m. on the following day. About 15 minutes later they received the letter dated the 14th November 1989 in which the D.L.A. stated that the Applicant "has now instructed that he does accept that there was an agreement to settle", and endorsed a form of consent Application, embodying the terms of settlement reached in September, but leaving the costs of the Respondent's summons for the stay to be determined by me at the hearing fixed for the 16th November 1989.

7. Apart from pointing to the fact that service of the summons and delivery of the letter on the 14th November 1969 "crossed" at some time in the afternoon, Mr. McCormick resisted the claim for costs on the basic ground that there never was a binding agreement to settle the Applicant's claims prior to the filing of the summons, because certain provisions of Cap. 282 prevent the parties from making binding agreements to settle or compromise claims under the Ordinance. In support of his argument he referred me to sections 17, 18A and 31 of the Ordinance, and the case of Yeung Hung v. Yee Fat Transportation Company [1962] DCLR 67. In so far as this case decides that the District Court has no power to approve or sanction a settlement between the parties for a sum which is less than the minimum sum specified by the Ordinance, I would respectfully agree with, and adopt, that decision. But in my respectful view, it is not an authority to support the wider proposition that the parties to legal proceedings can never settle or compromise those proceedings by reaching agreement on certain disputed issues of fact.

8. In view of the wide terms of section 31(l), I do not think that the various statutory provisions, designed to ensure, that an employee receives his or her statutory entitlements, can be confined to agreements reached before the employee has had an opportunity to obtain independent legal advice. If, as it appears to do, section 31 imposes some fetter on the free power of an employee of full age and capacity to reach a fair and reasonable settlement by a contract or agreement with his or her employer, it seems to me that such fetter continues to operate even after the employee has obtained independent legal advice and applied to the Court for compensation under the Ordinance. But, it must be recognized that the statutory fetter is not absolute, in the sense that it completely deprives the parties to legal proceedings of their normal freedom to agree to terms of settlement. Indeed, Section 17(1) positively encourages employers and employees to enter into agreements as to compensation in certain situations! And the Court's power to cancel such agreements is not absolute, but restricted to the situations mentioned in section 17B(l) of Cap. 282.

9. The second point to note is that, although the general tenor of the Ordinance is one of extreme jealousy for the rights of the employee, the language used to supposedly restrict the freedom of the parties to settle differences by agreement is not uniform. On the contrary, it is somewhat imprecise. The proviso to Section 17(1) states that the agreed compensation "shall not be less than the amount payable under Sections 7, 9 and 10." According to Section 17B(1)(a), the Court may cancel such an agreement if the "sum .... was or is not in accordance with the provisions" of the Ordinance. Section 31(1), in effect nullifies contracts or agreements which purport to "remove or reduce the liability of any person to pay compensation under the provisions" of the Ordinance. If these various phrases refer to the amount of compensation, which the Court would be bound to award, after an assessment based upon evidence adduced at a full hearing, there would simply be no point in seeking to settle most claims without a hearing. The parties would not know whether their agreement was valid without inviting the Court to conduct the hearing they wish to avoid, unless the agreed amount equals. or exceeds the maximum amounts specified in Sections 6(1), 7(1), 8(4), 36C and 36J. It might be possible to settle some section 9 claims (permanent partial incapacity); but those under Sections 10 and 10A could not be settled because the Ordinance imposes no financial limits on such claims.

10. As a matter of statutory interpretation, I do not think that Section 31 can be confined to agreements which purport to reduce liability to sums below the minimum amounts to be found in Sections 6(2), 7(2) and 11(5) of the Ordinance. The language of those provisions is clear and emphatic. To restrict the scope of Section 31 in this way would deprive it of all legislative effect. Nevertheless, and particular in view of the terms of Section 17(1), I consider that the Court should be slow to come to the conclusion that the section deprives it of jurisdiction to make orders, based on the agreement of the parties, where the amount of compensation payable "under" or in accordance with" the provisions of the Ordinance depends upon unknown, uncertain, or disputed facts, such as the age of the employees; his "monthly earnings (s.10(1)) or "months' earnings" (s.7(1));the number of his "dependants or the extent of their dependency; whether the employer provides any or adequate medical treatment (s.10A(4)); or whether the injury or death results from "a deliberate self-injury" addiction to or influence of drugs or alcohol, or serious and wilful misconduct of the employee (of s. 5(1)(b), (2) and (4)). These cover situations which would oblige the Court, after a full hearing, to award no compensation whatsoever, or disallow a claim. With the exception of some injuries resulting in "death or serious incapacity" - yet another example of vague terminology - the Ordinance, does-not allow. the Court to reduce the amount of compensation - (of s. 5(1)(b)). Apart from that imprecise provision, the Court has no power to apportion compensation, according to concepts of contributory negligence or other fault on the part of the claimant, or even the inherent uncertainties of the case. In general, compensation is payable on an "all-or-nothing basis."

11. Given these uncertainties, recognised by various provisions of the Ordinance, I do not think that Section 31 disables the parties front coming to a settlement whereby the employee obtains compensation in an amount in excess of the minimum, if any, stipulated by the Ordinance, but conceivably less than he or she might obtain after a full hearing. If the disputed issue of fact is one which gives the Court the alternative of making no award at all, I consider that a settlement which gives the employee some compensation would be consistent with the general policy of the Ordinance, and the legislature's obvious jealousy for the rights of employees. Section 31(1) renders null and void any contract or agreement in so far as it "purports to remove or reduce the liability of any person to pay compensation under the provisions" of Cap. 282. In my view, that section does not prohibit any agreement which seeks to establish and determine the amount of a disputed claim, so long as the agreed amount is not less than would be due to the employee under the various provisions of the Ordinance on the basis of the facts agreed between the parties.

12. A few simple examples can be given to illustrate the point. It the employee was earning $8,000 at the time of the accident, and suferedd permanent total incapacity (S.10), he would be entitled to $384,000, if aged 56, or $394,000, if aged 55. If his age is disputed, I consider that nothing in the Ordinance would prevent the parties agreeing to an award of, say, $390,000. If, in addition to his age being disputed, it is suggested that his monthly earning were $7,000 instead of $8,000, he might be entitled to no more than $336,000. In my view, it would be open to the parties to agree on that sum, or some other sum less than the $394,000, which is the potential maximum under the Ordinance. If one introduces, other disputed facts which might result in no award being made at all, in principle there is no reason why the parties should be prevented from agreeing an award which appears to be less than the empolyee's prima facie entitlement. The very essence of a compromise or settlement is to achieve some mutual benefit by substituting certainty for what is uncertatin or disputed.

13. In the present case, the only matter which his ever been in dispute is the number of the Applicant's working days each month. The daily rate of earnings has never been disputed; namely $280 per day. Whether his monthly earning should have been based on 26 or 28 working days, the agreed amount is well above the minimum specified by Section 11(5) of the Ordinance. The dispute over the number of days only arose some 4 or 5 Weeks after the amounts of compensation had been agreed between the parties' legal representatives. On the basis of the facts agreed in September, the Applicant would have received no less than his strict entitlement. Accordingly, in my view, the agreement reached at that time was not invaidated by Section 31of the Ordinance. It has not been sugrested that the DLA did not have authority to compromise the outstanding claim. The mere fact that a date had not been fixed for the hearing of the assessment could not, in my view, affect the authority of the DLA to reach a settlement, which could then be placed before the Court in the form of a consent order. Indeed, in his letter of the 30th September 1989, he stated that he had instructions from the Applicant to accept the terms of settlement. There was, in my view, no reason why an order of the court could not have been obtained at the beginning of November. The temporary charge in instructions could not, in my view, alter the finality of the agreed settlement which had already been reached. I very much doubt whether the Applicant's late and short-lived assertion that his monthly earnings be calculated on the bssis of 28 working days would have amounted to a sufficient reason for cancelling the agreement under Section 17B of the Ordinance assuming that he had come to the same agreement with his employer before he sought legal advice.

14. In the present case, I consider that the Respondents were fully justified in seeking a, stay of these proceedings on the basis that they had effectively been brought to an end in September 1989. when they eventually received confirmation from the DLA that the Court would be invited to make a consent order in the terms agreed in September 1989, they should, perhaps, have sought to withdraw their application. But, that is a view which insults from the advantage of hindsight. As the DLA had not previously made clear that his unwillingness to file a consent order was due to a belief that the agreed terms of settlement were not binding on the parties because of Section 31, it was reasonable for the Respondents to issue and pursue their application for a Sony.

15. Section 31(1) of the Ordinance invalidetes agreements which purport to reduce the amount of compersation due on the basis of admitted or undisputed facts. Provided the amount agreed is above the minimum figures laid down by the Ordinance, an agreement to compromise or settle a disputed claim is not, in my view, prohibited by the section, In future cases, where a settlement is reached on terms which applear to be less than the employee's strict entitlement, it may be prudent to follow the practice in the case of settlements of claims by infants and other persons under disability. When inviting the Court to make a consent order, an affidavit or other form of explanation should be provided by the parties' legal advisers, so that the Court can be satisfied that the agreement does not purport to remove or reduce the employer liability to pay compensation.