HAU SIU MUI v. KAN SIK HUEN AND ANOTHER

DCEC 711/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 711 OF 2002

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J U D G M E N T

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1. Madam Hau was hurt when she was assaulted at work. This is a claim for compensation brought against her employers, the respondents, trading as the now defunct Bauhina Night Club, under the Employees Compensation Ordinance (ECO). Liability is not disputed; what is is the amount she claims. What I have to decide is the income she was earning upon which the compensation may be based and the extent of her injuries, which goes to the extent (if any) of her permanent partial incapacity and how much sick leave she should be entitled to.

2. To call the respondent a night club is probably to over-glamorize what was its function and theme. It was in fact a karaoke lounge situated in Mongkok. Madam Hau was employed under the euphemistic title of PR, but her job description was somewhat more down to earth. Upon entry a customer would be invited by a Mamasan to choose a PR to be his companion during his time at the lounge. Once chosen she would be expected to be his hostess for the duration of his stay, or until he chose to substitute her for another. What this entailed is not clear from the evidence but no doubt friendly, flirtatious behaviour was encouraged. However according to a management rule this was to fall short of sexual intimacy which was expressly forbidden.

3. I was told that when the Bauhina ceased to function records which might establish Madam Hau's employment circumstances were discarded. But in any event I would be surprised if there was any formal documentation, as the turnover of staff was high, particularly amongst the hostesses. There is nothing to say when Madam Hau first began working there; that is disputed. It is agreed however that at the interview when she was taken in nothing was signed; there was no fixed salary and there were no regular hours to be kept. Bauhina was open for 20 hours a day and a hostess was entitled to come and go as she pleased. She was paid by a system under which tickets were distributed to her, but only if she was engaged in entertaining a customer. So if business was slack she received no tickets and therefore no pay even if available to perform her function.

4. The hostesses were paid every Wednesday, based on the number of tickets that each had been awarded between Monday and Sunday of the previous week. This was by open cheque, so that it could be banked or cashed as she chose.

5. A feature of the job which the hostesses were encouraged to pursue was to invite the customer to buy the right to take her away from the Bauhina to be his escort for such period of time as he was prepared to pay. For this she was rewarded with tickets at an enhanced rate. What it was that they then got up to outside the lounge and whether money changed hands for services rendered was a matter for them.

6. The extent to which the hostess was permitted or indeed encouraged to entertain her customer is in material dispute. Madam Hau's case is that invariably the reason a hostess was bought out was for consensual sex or other intimacy for which she would expect to be paid a handsome 'tip' of up to $1,500. If the customer was unable to afford the price of a buyout the hostess was encouraged to gratify him within the premises, and she would be entitled to be tipped for that. That so-called service is disputed. As I have said behaviour regarded as immoral was at least officially not permitted within the premises. But it is conceded that customers satisfied with the hostess' inhouse performance might tip her directly, perhaps $100 or $200, and she was permitted to keep that as her own.

7. It is against that background and those disputed facts that I have to fix upon the income that Madam Hau received during the time she was employed by the Bauhina until the incident giving rise to her claim. The lack of records corroborating one version or another makes it a difficult exercise indeed. About the only pointer comes from Madam Hau's bank statements for the period in question, into which account she says she paid the lion's share of her earnings including tips.

8. It is her case that she began working from January or February 2001 more or less continuously until 29 July 2001, being the date of the assault. She put in long regular hours and performed as part of her job function acts of sexual intimacy in or outside Bauhina as the need arose. She was paid weekly cheques based on the ticketing system as revealed by cheque deposits in her bank account. But to tot up the cheques would be misleading; sometimes she cashed the cheque and paid it in with her other cash gratuities. For the period she says she was employed, she banked according to her statements about $180,000, she says all from earnings. This approximates $30,000 per month, and is what she now claims to be her monthly income at the time of the accident for the purposes of this claim. This figure is materially disputed by the respondents. It is their case that Madam Hau's time at Bauhina was much shorter, that she may have started in March but no earlier. As to what could be earned, they say that for a hostess to earn more than $13,000 per month she has to put in long hours and be exceptionally sought after. Madam Hau they say did not work regularly; they point to her bank statements which, by virtue of ATM activity in Macau, indicate that she habitually visited Macau, presumably to gamble, and of course she could not have been at the Bauhina at work during this time. Furthermore she was not particularly popular and thus not busy when she was at work. It is also disputed that she was entitled to include as income so-called tips paid for services rendered outside Bauhina. If as Madam Hau has claimed she was regularly paid $1,500 for this external activity, a significant amount of her earnings did not derive from her job at Bauhina. What she was paid classifying as income from Bauhina could not have been more than $13,000 to $15,000 per month plus tips earned on the premises; they concede $15,400 per month, plus something for tips.

9. Thus I have to decide:

(a) what was Madam Hau's monthly income? Was it no more than $15,400 plus inhouse tips or was it as much as $30,000? In the calculation,

(b) is she entitled to include the gratuities earned for favours provided to a customer who had paid to take her out from Bauhina?

10. As it is apparent, in the absence of records Madam Hau's bank statements are an important feature of the case. The account for the period in question was active. Most deposits were in cash, in round figures. Some are cheques for exact amounts; many of these are at weekly intervals, banked on Thursday, consistent with their being salary cheques handed out on Wednesday. The history of withdrawals tells its own tale. Many of them are from an ATM at Macau in groups, suggesting an extended gambling session and the need to meet gambling losses. These Macau withdrawals were particularly prevalent in the period after the accident; between 15 September and 5 October there are no fewer than 28 withdrawals, the significance of which emerged in Madam Hau's cross-examination as I shall come to. Not all the deposits were cash or cheques. At least two were remittances, and they total $37,000. By their nature they could not have been salary or tips, at least not directly so.

11. Before moving on from this aspect of the case; what is useful is that both sides agree that a cheque of Bauhina dated 1 August 2001 (a Wednesday) made payable to Madam Hau for $3,034 represented her income (excluding tips) for the last week of her employment with Bauhina. This at least is a marker for what she earned, excluding allowable tips, during that 7 days.

12. I come now to the incident that has given rise to this application. Madam Hau's account is the only eye witness version. She says that a customer to whom she was assigned to be a companion propositioned her for sexual favours. When she refused to oblige he became violent and assaulted her. That is not disputed. The police were called, the assailant was arrested and prosecuted and he was convicted and sent to prison for what he did. What is disputed is how badly hurt she was, and the extent to which she has suffered psychologically. She says she was badly injured over various parts of her body which has crippled her, and there has been a psychological consequence as well as a permanent physical disability which has stopped her from working to date, nearly 3 years later. The respondents' counter is that much of this has been overstated or made up or does not relate back to the assault she was the victim of.

13. Specialists engaged by those representing her in this claim to assess her loss of earning capacity have in turn stated these to be 5% for her orthopaedic impairment, 10% for her neurological impairment and 3 % for her psychiatric impairment, thus a total of 18%.

14. Madam Hau has not worked since the assault, she says because she cannot. She has been given sick leave certificates for a total of 739 days from 29 July 2001 to 3 June 2004 upon which she relies for assessment of her compensation for temporary incapacity. The response to that is that a majority of the days granted relate to injuries or disabilities not attributable to the assault and should thus be disallowed in the calculation. Her claim for permanent partial incapacity is based on her being unable any more to be a PR and thus to be entitled to compensation based on any earning loss much higher than the accumulated 18% I have mentioned. The response to that is that she can go back to work as a hostess and that her permanent partial incapacity earning loss should be limited to 5%.

15. So, having established what Madam Hau's income was preceding the assault, my next task will be to assess the appropriate percentage of permanent partial incapacity and allowable sick leave period.

16. I come now to the evidence; Madam Hau first.

17. Madam Hau adopted as her evidence in chief a witness statement the contents of which I now summarize. She was born in China in 1968 and was thus 33 at the time of the assault, and is 36 now. She is married; there are no children. She came to Hong Kong permanently in late 2000. Prior to that she had worked in several different fields from which she had achieved savings of some $10,000 which she brought with her. She worked briefly as a waitress after she arrived but then took the job with Bauhina, sometime early in 2001. She said that she put in long hours; sometimes working from 12 noon to 6 a.m. and almost every day of the month.

18. Recounting the events of 29 July 2001, she said that she was on duty during the evening when at about 9 p.m. a customer shifted his attention from a hostess looking after him to her and became flirtatious and amorous. He propositioned her, offering money for sex. When she declined he persisted and then became angry and violent. She said he kicked her in the face. He quietened down after that, but after a further refusal assaulted her again. This time he squeezed her breast, punched her in the stomach, kicked her in the thigh and in the region of her genitals and kicked her again in the face. He hit her head against the wall, injuring her neck.

19. Then it was that she was able to escape the room. She complained of the assault to the manager. He proposed mediation, that the customer pay her a 'medical fee' of $500. She declined and the police were called. The customer's conviction was after trial and resulted in a sentence of 4 weeks' imprisonment.

20. In the weeks, months and years following the assault she says she has sought treatment from public and private doctors and hospitals for the various injuries most of which are still disabling. She is restricted in movement; she cannot walk properly, and she suffers continual pain. For that she is on painkillers. She is psychologically impaired. She gets depressed. For that she is on anti-depressants. She has not worked as a hostess since the assault or at all because she cannot.

21. I think it appropriate at this point to interpose in summary form the extensive material comprising the history of the diagnoses and treatment of Madam Hau's various injuries and ailments that she claims have stemmed directly from the assault, and reports from the various specialists who were requested to examine and report on her for the purpose of the compensation action. Immediately after the assault Madam Hau was admitted to A. & E. Kwong Wah Hospital and was to return on the next two days. During these visits she was found to have tenderness in her neck and bruised knees, and she complained of abdominal pains and headaches. For these complaints and others (including one diagnosed as adjustment disorder with mixed anxiety and depressed mood) she has been receiving treatment and follow up treatment at various public hospitals and clinics ever since; this continues. It is worthy of note that one of her complaints which was of pain in her neck and restriction of neck movement apparently did not come to light until about a year after the assault. The adjustment disorder with mixed anxiety and depressed reaction was diagnosed in late 2002.

22. Given the areas of injuries physically and psychologically said to have flowed from the assault the following specialists were requested to examine and report on Madam Hau:

Dr. S.Y. Chung, psychiatrist, appointed by Madam Hau, whom he saw in May 2003;

Dr. F. Shroff, neurosurgeon, appointed by Madam Hau, whom he saw in August 2003;

Dr. P.C. Lee, orthopaedic surgeon, appointed by Madam Hau, whom he saw in March 2003;

Dr. Y.L. Yu, neurologist, appointed by the respondents; he saw Madam Hau in February 2004.

23. Relying on the reports made by the psychiatrist and surgeons engaged by Madam Hau, the specific complaints she claims resulted from the assault are fourfold, namely:

(a) adjustment disorder with mixed anxiety and depressed mood (relying on Dr. Chung's opinion);

(b) headaches (relying on Dr. Shroff's opinion);

(c) aggravation of cervical spondylosis, relying on Dr. Shroff's opinion;

(d) soft tissue injury to her face, abdomen, neck and knees (relying on Dr. Lee's opinion).

24. As I have said the combined assessed impairment by the above comes to 18%. But Dr. Shroff from the witness box said that it would be wrong to deal with the various assessments on a cumulative basis; in his view overall the impairment is 10%.

25. I now return to a summary of Madam Hau's evidence. She was subjected to a searching and if I may say skilful cross-examination.

26. She was taken to various statements and accounts of the assault, including statements made to the police, to the Labour Department and to doctors and others attending to her medical treatment. Asked to explain what are quite material variations and omissions she variously said that some things she had described were not recorded or were put down inaccurately; that she may have been tired or traumatized or confused.

27. She was asked to say again the extent of her injuries and the degree of immobility in the first two months following the assault. She spoke of pains in her head, back and abdomen, of headaches, that she was obliged to walk in a crouching gait, that she had to take frequent rests, that there was a need for quietness and rest, and that for most of that time she was bedridden. But then she was taken to her bank statements wherein were recorded during this time the frequent withdrawals of funds from ATM facilities in Macau which I have referred to, consistent with a punter frequently withdrawing funds on site for gambling. She said she often went to Macau to see her sister who lived there and admitted that yes, when there, she did attend at the casino and gambled. She conceded that in fact her pain and suffering was not, after all, so extreme as to confine her to her bed as she had first attested. It was put to her 'If you are fit to gamble, you are fit to work'. Her response was 'I could not work smoothly at normal pace.' I shall come shortly to a surveillance tape played in Court which belies the truth of that response, and her claim that she was significantly disabled.

28. Taken to her evidence in chief that she worked for nearly every day and more often than not from 12 noon to 6 a.m. she confirmed that was true; then she conceded that she did take time off to go to Macau to gamble as indicated by the ATM withdrawals in Macau. She said the deposits by remittance in her bank account represented moneys transferred from a temporary account in Macau, and represented cash brought from Hong Kong. It was put to her that this was a far-fetched explanation; that the truth of it was that these were gambling winnings and not as she had attested income from Bauhina. She denied that. It was put to her that her income, excluding any money paid to her whilst she was away from Bauhina, that is her cheques from Bauhina and tips paid for services rendered at Bauhina, was never more than $13,000 to $15,000. She disagreed. And she disagreed when it was put to her that any money paid to her by a customer who had 'bought' her out was a private matter between the customer and her; she said that although what happened was nothing to do with the night club, nevertheless it was part of the job to be escorted by the customers who were willing to pay the Bauhina for that. So, tips paid to her during that buyout period were tips earned during the course of the employment.

29. Finally she was taken to the surveillance tape I have already made mention of. This was taken of her on several days in February; the tape of two of such days was played in court. It was taken at a time when, on her account, she was still unable to walk without difficulty or the need to rest, when she suffered frequent headaches, when her neck prevented much movement without pain, when, in short, she was already disabled and unable to function normally.

30. The video portrayed a different tale. She was depicted walking freely and normally without restriction or pain. Sometimes she skipped at a faster clip crossing the road. She negotiated steps up and down without a limp or the need to hold the rail. She spoke on her mobile phone whilst on the move, sometimes holding it in the crook of her neck hands free. When invited to comment on the apparent freedom of mobility she said this was a time when she was engaged in an intense round of physiotherapy which had provided some relief. It was put to her that the video showed that she was caught out lying about her disabilities and her inability to work. She disagreed but said no more than that.

31. Evidence for the respondents going to their version of Madam Hau's income pre the assault was adduced by one of the partners Mr. Kan. He had come to hear of the assault the following day. He was not involved in hiring of staff or of administration generally and did not even know of Madam Hau's existence on the staff until after the event. He said he believed she came to be hired much later in 2001 but conceded that his source of that information was second hand. He had no records to back that up. He said that Madam Hau having given notice of an intention to make a claim under the ECO, it was he on behalf of Bauhina who completed particulars of her employment including salary in the statutory notice known as form 2. He said in the normal course this would have been done by his partner who was more hands on when it came to the accountancy, but he was away at the time. Curiously, he did not make direct reference to her record of employment which was then on file; instead he calculated what he was told the average hostess was expected to earn each day then multiplied that by 22 to get a monthly figure, which he assessed at $15,400. This overall average was of course a purely arbitrary end result, given that the hostesses could come and go as they pleased working long or short hours, and may or may not have been an accurate assessment of the average income of Madam Hau prior to the assault. Nevertheless, as author of the form 2 he told me that the respondents are prepared to treat this amount as what Madam Hau was paid monthly, excluding tips, for inhouse duties performed. But he did not accept as an addendum any 'tips' she says she was paid for services rendered during an outside escort. He said that a hostess bought out was entitled to a percentage of the buyout fee but thereafter what the customer and hostess got up to was not a matter of concern to Bauhina.

32. And so now to findings of fact; first what Madam Hau was earning pre the assault. This perforce cannot be an exact calculation, with all the imponderables of how long she was employed, how much time she put in of the possible 20 hours per day 7 days per week and the amount she received from Bauhina and direct from customers. At the low end is what the respondents concede, being $15,400 per month plus inhouse tips; at the top end is Madam Hau's assessment of $30,000 inclusive of tips, and that includes money paid for services she provided whilst escorting customers who had bought her out.

33. I do not believe I need to make a finding as to when she came to first work for Bauhina. Neither party could be specific and there is no independent evidence. I have an idea it is about March; but length of service does not affect what her pre accident income was. In assessing that I am entitled under the ECO to include tips 'if the employment be of such a nature that the habitual giving and receiving thereof is open and notorious and is recognized by the employer.....'. On Mr. Kan's concession inhouse tips may be included. But what of moneys Madam Hau claims to have been paid whilst escorting customers outside the Bauhina, when she says she was paid up to $1,500 per time? My view is that she should not be permitted to include as a 'tip' moneys paid for services rendered whilst away from the premises, notoriously for sexual favours provided. During this time she was not under the control of Bauhina's management; what customer and hostess got up to and what money changed hands was entirely for them.

34. So, what is the bottom line? The respondents having come up with a purely arbitrary $15,400, I have to consider whether that is enough. I believe, excluding tips, it is. Madam Hau exaggerated her hours of duty. The trips to Macau reveal that she could not as she said have habitually put in the long hours she claims. And disallowing her moneys she says were paid outside the premises for favours provided amounts to a significant trimming. What does help is the size of the cheque paid to her for her last seven days at work - $3,034. That is more or less typical of the amount of her earlier wages' cheques; rounded out on a monthly basis that comes to $13,147. It seems to me as I find that the $15,400 concession is if anything on the generous side. As to inhouse tips; doing the best I can on what is before me I fix these at $1,600 and come thus to a monthly income of $17,000.

35. Next I come to the nature and extent of the injuries to Madam Hau consequent upon the assault and the psychological impairment (if any) arising from it.

36. It is for an applicant in such cases as these to establish the extent of injuries suffered in a work place accident or incident. Thus it is for Madam Hau to satisfy me that the various ailments complained of and reported on and for which she has accumulated the 739 sick leave days were as a result of the assault. In this respect she is in some difficulty for inter alia the following reasons:

(a) her description of what happened to her as set out in her witness statement and confirmed from the witness box is out of all proportion with what she told the police and Labour Department had happened, days after the event;

(b) the hospital records being contemporaneous accounts support the proposition that her witness statement and the evidence are exaggerated and inaccurate versions of events;

(c) her ability to attend the gambling tables of Macau with frequency and regularity in the weeks immediately following the assault suggest that she may not have been entitled to the sick leave certificates made out on her behalf;

(d) whilst complaining that she has been crippled and disabled and psychologically impaired as a result of the assault, the surveillance tape portrays an individual exhibiting none of these unfortunate traits.

37. The combination of these features results in my finding that the applicant was not hurt to the extent she now claims and is not entitled to the level of compensation she is pursuing.

38. On the issue of leave it has been submitted on her behalf that I am bound to accept as irrefutable that she is entitled to be compensated for all the days she claims because practitioners have certified her sick and unable to work for that period, and I should not go behind those findings. I do not think that can be right. It is open to me to find and I do find that the certificates made out do not represent leave granted for injuries suffered in the assault. What the appropriate number of days is is hard to quantify, given the plethora of complaints. The respondents have for the purpose of this claim said that they will accept 1 year as the appropriate period; as I find, it cannot be more than that.

39. Madam Hau's case is that she cannot return to work as a so-called PR hostess. This is against the opinions of the surgeons and psychiatrist who say she can; that is my finding, subject to a permanent partial incapacity which I find to be 5%.

40. Translated into figures, these findings representing the following entitlements:-

Under section 9 (compensation for permanent partial incapacity)
$17,000 x 96 months x 5%	$81,600
Under section 10 (compensation for temporary incapacity)
$17,000 x 12 months x 4/5	163,200
Under section 10A (medical expenses)
As agreed	1,540
	$246,340

41. Thus I find for the applicant in the sum of $246,340.

42. I come to the issue of costs. The order which follows is nisi at first instance. I am told that on 30 December 2003 the sum of $288,000 was paid to Madam Hau as an interim payment, which in fact exceeds the award. This impacts on costs and I order, subject as aforesaid, that the applicant shall have her costs to 30 December 2003 but thereafter costs are to the respondents including for the hearing. The applicant's own costs are to be taxed under the Legal Aid Regulations.