CHAN CHEUK TING AND ANOTHER v. ANALOGUE ENGINEERING CO LTD AND ANOTHER

IN THE COURT OF APPEAL

CIVIL APPEAL NO. 13 OF 1986

(ON APPEAL FROM EMPLOYEES' COMPENSATION)

CASE NO. V.E.C.C. NO. 101 OF 1985

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BETWEEN

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JUDGMENT

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Power, J.

1. The appellant, CHAN Cheuk-ting brought a claim for compensation under the provisions of S. 6 of the Employees' Compensation Ordinance, Cap. 282 ("The Ordinance") consequent upon the death of his son CHAN Chi-kin on the 10th of August 1984. The deceased, who was a lift installation mechanic, was electrocuted while working at the 27th floor of Block 1 of the Lok Wah Estate, Ngau Tau Kok. It is not disputed that the accident caused the death and that it arose out of and in the course of his employment. It was common ground that the deceased was an illegal immigrant and that he had obtained employment by using a false identity card.

2. The trial judge was satisfied that, the applicant who was claiming on behalf of himself, his wife and a daughter, all of whom live in mainland China, was the father of the deceased and that all 3 were dependants. The evidence revealed that the deceased was employed by FUNG Yee-chung who was a sub-contractor of the 1st respondent who was in turn, a sub-contractor of Swire Engineering Limited, the 2nd respondent. The judge found, relying upon the evidence of Mr. Fung, that the deceased had earned $19,979,00 in the 12 months prior to his death and using this figure he arrive at the figure of $1,665.00 as the monthly earnings of the deceased.

3. The judge admitted in evidence, when dealing with the contributions which the deceased had made to the dependents, a declaration made by the appellant which stated that the deceased had sent money, clothes and goods to the dependants and that before he died, the deceased had entrusted a Miss CHAN Lai-fan, a sister living in Hong Kong, who was not a dependant, to take money and goods, amounting in value to $200.00 Ren Min Bi per month on average, to support the living of the dependants. It was agreed that $200.00 Ren Min Bi was the equivalent of HK$650.00. It was the evidence of Miss Chan that the appellant was 66 and had retired from the carpentry trade and that his wife, who was 55, was also retired. She said that the dependant daughter was 16 years of age and was a school girl. The judge accepted Miss Chan as an honest and reliable witness. Miss Chan said that, in the course of 4 trips, she had taken money, a TV set, a cassette recorder, 2 wrist-watches, clothes and food to a total value of HK$4,000.00 to the dependants in the year before the deceased met his death. She said that over the 4 years, since the arrival of the deceased, in Hone Kong, she took goods and money to a total value of $14,000.00 to the dependants.

4. The judge arrived at the monthly figure for support by taking the total value of money and goods sent in the last year and dividing it by 12 which gave a figure of HK$340.00. He held that watches, a television set and a cassette recorder were not ordinary "necessities" of life and "trimmed" the figure of $340.00 back to $250.00 which he fixed as the amount of dependency. He clearly arrived at the deduction of $90.00 per month by doing, as court so often have to in matters of this nature, the best he could with the evidence available. We would not criticize him for adopting this approach but do consider that he may have taken too narrow a view when holding that the goods described could not all be included as necessaries. We note also that no weight appears to have been given, in this regard, to the evidence of the appellant that immediately before death the average amount of the contribution was $650.00 per month and to the evidence of Mr. Fung, that the salary of the deceased had been increased from $70.00 per day when he commenced employment to $100.00 per day at some time before the date of death.

5. When assessing the total amount of compensation, the judge ins satisfied that it was proper "to take the total fund available and then to apply to it that proportion of the deceased's earnings that were used to support the dependants. In this case, on the monthly earnings, as I find thhem, of $1,665.00, the maximum compensation would be (S. 6(1)) 84 x $1,665.00 or $139,860.00. The dependency in my judgment is just over 1/7th of the deceased earnings, so that the appropriate compensation would, in my view, be between 1/6th and 1/7th of $139,860.00 which I shall, again, round up to $21,000.00 and which figure would represent 7 years purchase of the monthly contributions to necessities of HK$250.00, which I have found, so that would I be demonstrably wrong in not attempting to apply a multiplier to the various factors, then I venture to suggest the end result is not an unreasonable period for which a bachelor would be likely to be able to remit and need to remit to the family and to its three components, father, mother and sister; if an award is to be made, therefore it will be in the sum of $21,000.00".

6. The judge then turned to consider the question of illegality. He referred to S. 17G of the Immigration Ordinance which provides that

"          A person is lawfully employable for the purposes of this part only if -

                 (a) he is the holder of an identity card;"

He referred also to S. 17I(1) which provides that

" Any person who is the employer of an employee who is not lawfully employable commits an offence and is liable to a fine of $50,000.00 and to imprisonment for 1 year".

It was argued in front of him that, even if the deceased would have been prevented for making a claim for compensation, because the contract of employment was illegal, this did not apply to the dependants because they were proceeding on their own cause of action which was not tainted by the illegality affecting the contract. He was referred to Mak Yuk Kiu v. Tim Shing Auto-radio & another (1981) HKLR 77. Having considered that authority and the Ordinance, the judge held that "there is only one cause of action in respect to any one accident whether or not death results".

7. He then considered the offect of the unlawful employment on this single cause of action. He was required when so doing, to consider the effect of S. 2(2) of the Ordinance which states-

"          If, in any proceedings for the recovery of compensation under this ordinance, it appears to the court that the contract of service or apprenticeship under which the injured person was working, at the time when the accident causing the injury happened, was illegal, the Court may, if having regard to all the circumstances of the case it thinks proper so to do, deal with the matter as if the injured person had at the time aforesaid been a person working under a valid contract of service or apprenticeship".

The judge was satisfied that, the contract of service being illegal, he was called upon to decide whether he would exercise his discretion having regard to all the circumstances of the case. The judge was not impressed by the submission that one matter for his consideration was whether the economic fabric of society was likely to be underminded by reason of the fact that illegal immigrants pay no salary tax. He did not accept that the employment of illegal immigrants by itself poses a threat to Hong Kong's economy and said that there was no evidence that they were paid less than residents or that they took jobs from residents. He accepted that illegal immigrants "put strains upon the Housing Authority, the Police and to some extent on the existence of law and order ....." He was not however, having considered such matters, prepared to hold" that the illegality here was at common law so repugnant to justice or morals" that he would be required to refuse to exercise his discretion in favour of the applicant. He was satisfied that the Immigration Ordinance was the determining factor in relation to its exercise

8. He took into account that the employers had had the benefit of the deceased's labour but did not consider that to be a factor of any real weight. He bore in mind "that the Ordinance is insurance based, that is to say, a per capita premium is charged on an actuarial basis so that, insurers, the ultimate payers, have lost nothing. Indeed the evidence was to the effect that the 1st respondent did arrange all insurances to include that of the deceased". He felt however, that there was danger in giving too much weight to this consideration because "if the applicant recovers from the respondents, the underlying illegality nevertheless remains, and insurers can presumably repudiate their contract leaving the 1st respondent to meet his obligation to the applicant and then be unable to recover his outlay since the policy would be void for illegality". In the outcome he considered that "the insurance point therefore moves through a full cycle and gives no help in showing that the underlying illegality caused no loss to anyone". He felt that he was required to act upon the assumption "that the 1st respondent will suffer the loss, as is indeed the effect of this claim and the indemnity provisions of Cap. 282".

9. The judge was satisfied, properly in our view, on the evidence that in all probability Mr. Fung did not have any reason to believe that lie was employing an illegal immigrant. The evidence disclosed that the 1st respondent, having been given an identity card number which did not belong to the deceased, did insure him. The judge was satisfied that the 1st respondent "and even more so the head contractor (the 2nd respondent) to whom primary liability attaches under the Ordinance were both unaware of the underlying illegality, but will suffer the consequence of it if they are required to meet the claim." The judge stated finally that "In the exercise of my discretion, since the main contractor (the 2nd respondent) is entitled to indemnity from the 1st respondent in any event, and the insurer will be entitled, as a matter of common law, and not simply under the provisions of the policy, of which I am unaware, to avoid liability ab initio, I come to the conclusion that in all these circumstances my discretion should be exercised against the applicants and I so hold; the employment of the deceased was unlawful and the applicants cannot recover against the 1st respondent". The judge then considered the position as against the 2nd respondent, the head contractor, and having considered the provisions of section 24 held that as she head contractor is only liable to pay what the employee can lawfully recover from his immediate employer and as he had held that the immediate employer was not liable to pay, there was no liability on the part of the 2nd respondent.

10. Mr. Mitchell who appeared for the applicant argued five grounds :

11. Mr. Mitchell submitted that the wording of section 17I and section 17G(2) of the Immigration Ordinance made the contract unlawful but that neither section stated or intended that the contract was to be void and unenforceable for all purposes. He submitted that if this was so, i.e. voidness for all purposes, it would not be possible for an injured party to sue an employer on the basis of fiduciary responsibility arising out of the negligence act of the employee. He submitted that it was unthinkable that the law would, in such circumstances, allow an employer to say that there was no contract existing between him and his alleged employee, and that he was, therefore, not responsible for the actions of his employee.

12. Mr. Chung, who appeared for the 1st respondent argued that there was no contract of service, illegal or otherwise, under the Ordinance. It was his submission that the purported contract between the deceased and the employer was void ab initio and that section 2(2) when it spoke of a "contract of service or apprenticeship under which the injured person was working, at the time when the accident causing the injury happened," was referring to an illegal contract that was actually in existence at the time of the accident, i.e. an illegal contract that was not void ab initio but whose illegality arose in connexion with the performance thereof. We were not attracted to this argument. We were satisfied that when legislature used the words "illegal contract" they meant to include not only contracts which here being illegally performed but also those which could be treated as illegal and therefore void ab initio and that s. 2(2) was placed in the Ordinance to give protection to an employee who was doing lawful work under such a contract. We were satisfied that the section was included so that protection was afforded to persons such as the child, in the case of Pounteney v. Turton 34 T.L.R. 103, and the deceased in the present case.

2.    The Ordinance created a new Cause of Action in the dependants

13. Mr. Mitchell argued that, even if the contract was illegal rather than unlawful, this did not in any way affect the dependants as the Ordinance created a new cause of action in them distinct from that created for the workman and that this was not in any way tai ed by illegality. It was argued by Mr. Chung that there is only one cause of action, i.e. that created by section 5 of the Ordinance, and that when dependants sue under section 6 of the Ordinance, they are relying upon that cause of action. He submitted that the cause of action rested on an illegal contract of a kind which was not recognised by the Ordinance and which would not have been enforceable by the workman had he lived and is not now enforceable by the dependants.

14. In R. Letang v. Cooper (1965) 1 Q.B. 232 Diplock, L.J. said at 242:

 

"          A cause of action is simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person."

This statement supports the view that one party can be said to be enforcing the same cause of action as another party only if it falls upon him to prove the same factual situation. If he has to prove a different factual situation, then he is seeking to enforce a different cause of action. The classic example of the enforcement of the same cause of action is where the executors of an estate sue on a cause of action which arose in the life time of the deceased. In such case, they prove exactly the same factual situation as would have had to be proved by the deceased. It seems to us clear that dependants are required to prove a different factual situation from that which the workman would be called upon to prove. The workman would have to prove :

The dependants would be required to prove :

The separate statement of the facts in each cause of action clearly, in our view, indicates that the dependants have a different cause of action from that of the workman. It is, moreover, equally clear that to succeed in establishing their right to compensation under their cause of action, the dependants must, just as would the workman, show a contract of employment recognized by the Ordinance. We were not assisted by Mak Yuk-kiu's case, dealing as it does with the Fatal Accidents Ordinance, as that statute creates a new cause of action in the dependants in which the essential element, i.e. loss of maintenance, is different from the element tainted with illegality, i.e. loss of earnings.

15. We have, for the above reasons, found ourselves in partial agreement with the arguments of both counsel. We are satisfied that the dependants do have an independent cause of action but that, to establish this cause of action, it is necessary for them to prove a contract of employment and that, if the contract is tainted by illegality, the effect on their action will be the same for the dependants as it would have been for the workman.

3.    The discretion of the trial Judge was wrongly exercised

16. The judge refused to exercise his discretion because he considered that contract of insurance would not be binding on the insurer and that, if he exercised his discretion, he would be imposing a substantial financial burden upon the respondents who were innocent parties. We are satisfied that he was wrong in holding that if he had exercised his discretion the contract would not have been enforceable. Section 2(2) expressly provides that a judge has a discretion to deal with the matter "as if the injured person had ..... been a person working under a valid contract of service." If the judge had exercised his discretion and made an order that the employer pay compensation, we are satisfied that no insurer could defeat the scheme of the Ordinance by pleading, when the insured party sued to recover the compensation paid under the order, that he was not liable under the contract of insurance because the contract of service, which the Court had held must be treated as valid, was illegal and unenforceable. That this view is correct seems to us clear from s. 43 of Part IV of the Ordinance which states that where the employer becomes liable to pay any sum under "a policy of insurance for the purposes of this Part" then "such sum shall forthwith become due and payable by the insurer."

17. We are satisfied that a policy required to be treated as valid by virtue of s. 2(2) would have to be treated as valid under Part IV and that the insurer would be required to pay the employer any sum for which he became liable.

18. Section 44, which allows the employee to proceed directly against the insurer, also clearly requires that this must be so. If the employee, in the case of an illegal contract of service with regard to which it would be proper for the court to exercise its discretion in an action against the employer, was forced to bring his action against the insurer, it is unthinkable the insurer would be able to plead successfully that he was not liable because of the illegal contract of service. Clearly once a court exercises its discretion in favour of the employee, then the contract of service for all purposes under the Ordinance, must be regarded as a lawful one.

19. The judge, held that if he did not refuse to exercise his discretion, the innocent defendants would suffer. We are satisfied that he was wrong in so holding. It was urged before us, as it was before the trial judge, by Mr. Leong who appeared for the 2nd respondent, that public policy required the court to refuse to exercise its discretion. We are in agreement with the judge that there is no consideration of policy of such weight that it would require the court to refuse to exercise its discretion. The deceased was performing lawful work. He was covered by a policy of insurance in the performance of the work he was doing. He suffered an injury causing his death in the course of his employment. We see nothing in public policy that would require a court to refuse to exercise its discretion so as to deny the defendants the benefit of the insurance policy. operate for the benefit of his dependants.

4.    The method of calculation of the amount of compensation was wrong

20. The judge calculated the amount of compensation by:

21. Was this a proper method of calculation given the terms of section 6(4) which states that "the amount of compensation shall be such sum ..... as may be determined by the court to be reasonable and proportionate to the injury to the said dependants". The court is required by the section to make an assessment of what is reasonable and proportionate to the injury. We are unable to see how this can properly be done without making what the judge regarded as "an impossible actuarial quadripartite assessment". It is true that such an assessment is difficult and involves the court in a degree of "calculated guesswork" but we are unable to agree that it is impossible. Judges, not infrequently, feel obliged to justify such "calculated guesswork" by saying that they have done the best they can with the material before them. That such approach is not wholly satisfactory does not, we are satisfied, given the words of s.6, permit the court to refuse to undertake it.

22. The approach adopted by the ,judge could result in awards which are manifestly wrong. This can be readily seen if one, for instance, takes the case of an 80 year old parent to whom a deceased worker has been sending 2/3 of his salary. The award would be either the maximum stipulated or 2/3 of seven years' earnings whichever was the greater. This, given the age of the dependant, would clearly not be an amount reasonable and proportionate to the injury. We are satisfied that courts are required, doing the best they can with the evidence they have, to make some form of actuarial assessment. The matter is, however, not of significance in the present appeal as it has not been argued that the result, which was to give seven years' purchase of the monthly contribution, was unreasonable.

23. It was conceded before us that the finding of fact as to the monthly earnings of the deceased were wrong as the calculation was not made in accordance with section 11(1) which provides :

"(a)       for the purpose of the Ordinance, a monthly earnings of the employee at the time of the accident shall be the earnings for the month immediately preceding the date of tile accident ; or

 

(b)       computed in such a manner as is best calculated to give the rate per month at which the employee was being remunerated during the previous 12 months if he has been so long employed by the same employer, but, if not, then for any lesser period during which he has been employed by the same employer;

                whichever calculation is more favourable to the employee. "The Certificate of Employee's Earnings shows that from 11.7.84 to 10.8.84, the date of death, the monthly earning of the deceased was $2,470.00. This figure should have been adopted, in accordance with the provisions of section 11, as it was clearly in excess of the figure arrived at by the averaging calculation adopted by the court. This matter, of course, only affects the maximum amount that might be awarded in accordance with section 6(1)(a) and will have no effect on the final award as it is substantially below the allowable maximum figure.

24. We turn finally to the submission that the amount of monthly remittances was wrongly calculated. Mr. Mitchell submitted that the finding of a remittance of $340.00 per month to the dependants was based on the evidence of Miss Chan and that the evidence in the declaration of the appellant was completely ignored. He referred to this not because he was contending for a greater amount than the $340.00 per month which was established by the evidence of Miss Chan but in order to indicate to this court that the award, even if fixed at the figure of $340.00, rather than the figure of $250.00 assessed by the judge, could not be criticized as being one that erred on the side of generosity. There is some force in this submission as it was arguable that the only evidence as to the amount of support at the time of death was that contained in the declaration of the appellant and that the amount of support should not have been calculated by the averaging method employed. Be that as it may, such a method was employed and no issue is taken with the figure of $340.00 per month which it threw up. Mr. Mitchell submits, however, that that figure should not have been subject to any deduction. He argues firstly that the "amount of compensation" referred to in section 6 is not the same thing as the "provision of the ordinary necessaries of life suitable for persons in his class and position" referred to in section 3. He suggests that it covers all reasonable support being provided and is not limited to necessaries. This bold argument finds no favour with us. We are satisfied that the amount of compensation must be calculated upon the basis of the contributions that were being made to provide for the ordinary necessaries of life as was argued by Mr. Leong. Mr. Mitchell further argued that even if this was so, it would have been proper to have included the watches, television set and the tape recorder as ordinary necessaries of life given that they were being sent, along with the clothing, to the household of retired, aging parents. While we appreciate that there are arguments to the contrary, we consider that, in the circumstances, given the need of retired persons for ways to fill their leisure time, such article can properly be regarded as necessaries.

25. We are satisfied that the appeal must succeed. We fix the rate of contribution and necessaries at $340.00 per month and are satisfied that this should have applied to it a figure of seven years purchase. There will be judgment for the appellant in the sum of $28,560.00.