LEUNG WAI PONG v. TANG HON KONG t/a KIN WAH DECORATION CO

DCEC 237/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 237 OF 2007

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IN THE MATTER OF AN APPLICATION BETWEEN

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J U D G M E N T

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1.  This is a simple claim for employees’ compensation.  However, the complication arises as the accident occurred on the first day of work of the Applicant, and so there is an issue as to how to calculate his earnings for the purpose of assessing the compensation under the provisions of the Employees Compensation Ordinance, Cap. 282 (“the ECO”).

2.  On 16 May 2006 at about 4:00pm in the afternoon, the Applicant, whilst in the course of his employment with the Respondent, was working at a site at Flat 25, 7^th floor, Block B, Proficient Industrial Centre, Wang Chiu Road, Kowloon Bay (“the Site”).  The Site was actually an office which was under decoration by that time.  When the Applicant was operating an electric saw to cut wooden splint for building a working platform, he cut his left hand resulting in various injuries to all the 5 fingers of his left hand.  Operation with debridement of wound, flexor tendon repair, extensor tendon repair, open reduction and fixation were performed on the same day.

3.  Liability is not contested in the present case, and the main dispute between the parties relates to the calculation of the Applicant’s monthly income.  As the parties accept that the daily wage of a carpenter like the Applicant was $700, the disagreement now focuses on the appropriate number of working days for the purpose of calculating the monthly earnings of the Applicant under the provisions of the ECO.

Evidence at the trial

(i)  The evidence of the Applicant’s case

4.  The accident happened on the first day when the Applicant started to work for the Respondent.  According to the testimony of the Applicant, he was a skilled carpenter involved in interior decoration work earning a daily wage of $700 before he worked for the Respondent.   For a period of 2 to 3 years prior to the accident, he had been working continuously for about 28 days a month.   As he had good contacts, he kept on receiving offers for work, and he worked at different sites without any break in between.  The Applicant seldom took any rest, and he sometimes worked up to 30 days a month.

5.  When he worked for the Respondent, he was told by the Respondent that the work at the Site was urgent.  The Respondent also told him to work everyday at the Site if possible.

6.  After the accident, the Applicant could not work as a carpenter.  He could not handle fine carpentry works and could not lift heavy objects by reason of the stiffness and the weakness of his left fingers.  He had registered with the Labour Department in the hope of finding a suitable employment but without any success.  The Applicant has been holding a licence to drive private vehicles and small lorries for about 20 years, but he claims that he cannot take up the job of a professional driver by reason of his injuries.

7.  According to the Applicant, all the wages received by him prior to the accident were paid in cash, and there was no documentary evidence to prove the actual amount of his income.  Neither had he reported his earnings to the Inland Revenue Department.

8.  The second witness for the Applicant was a plumbing and electrical technician, Mr. Law Lit Ping, who was working with the Applicant at the Site.  He gave evidence about the progress of the various works at the Site at the relevant time.

(ii) The evidence of the Respondent’s case

9.  The Respondent also testified at the trial.   According to him, he had engaged a substitute worker, Mr. Au Wah Cheung (Mr. Au”), to take up the work of the Applicant after his accident on 16 May 2006.  For such substitute worker, the Respondent paid him a sum of $18,200 covering his work for a period of about 2 months from 16 May to 15 July 2006.  In other words, the number of working days should be about 13 a month.

10.  Apart from running the business of an interior decoration work contractor, he also worked for other contractors as a carpenter himself.  For the past few years, his average working days were 20 a month.  This included the works in his own sites as a contractor and in other sites as a causal worker.  For the other carpenters, unless they were skilled workers, the average working days would be less than 20 days a month.  In particular in the years 2005 and 2006 when the market for decoration work was not good, a carpenter could only work on average 13 to 15 days a month.

11.  In the Form 2 Notice given by the Respondent to the Labour Department, it was stated that the monthly income of the Applicant was $18,200.  This was calculated on the basis that the Applicant worked 26 days a month ($700 x 26 days).  When the Respondent was asked about the reason why he put down such figure in the Notice, he explained that the Applicant’s monthly income and the average number of working days in the Form 2 were actually written down by a staff of the insurer of his employees’ compensation policy.  He told that staff that a carpenter could work a maximum of 26 days a month, but that did not reflect the true picture of the carpenters in the trade including the Applicant.  He signed the Form 2 without realizing the implication of the contents in that document.  Further, even if a causal carpenter wanted to work 26 days a month, this was quite impossible as there were different types of works at a decoration site, such as demolition work, electrical work and painting work, which were all interlinked.  If a particular kind of work was not finished, the site would not be ready for other workers to carry out their works.  As delays in decoration work were quite common, there was no guarantee that there was work for a particular kind of workers at the site on a particular day.    Further, causal workers worked at different sites, and so logistically, it was very difficult to keep the diaries of such kind of workers full at all times.

Method of calculating the earnings of short-term employee under the ECO

(i)  The statutory provisions

12.  Based on the above evidence, I proceed to ascertain the monthly earnings of the Applicant for the purpose of assessing his compensation under the ECO.

13.  S. 11 of the ECO provides the method of calculating the earnings of an injured worker:

(1)   Subject to this section, for the purposes of this Ordinance the monthly earnings of an employee at the time of the accident shall be the earnings –

(a)   for the month immediately preceding the date of the accident; or

(b)   computed in such manner as is best calculated to give the rates 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.

………

(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 a 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.

………

(5)   Where the earnings of an employee calculated under any of the provisions of this section amount to less than the amount specified in the second column of the Sixth Schedule shown opposite section 11(5) specified in the first column of that Schedule per month, the earnings of such employee shall, for the purposes of this Ordinance, be deemed to be the amount specified in the second column of the Sixth Schedule shown opposite section 11(5) specified in the first column of that Schedule per month.

………”

14.  When Ms. Pinto, counsel for the Applicant, made the final submission after hearing the evidence in April, she submitted that in ascertaining the monthly income of a causal worker who injured himself on the first day of his work, the court is entitled, by virtue of s. 11(1)(a) of the ECO, to adopt the earnings of that worker for the month immediately preceding the date of the accident, or by virtue of s. 11(1)(b), to take into account the average income of that worker for the period of 12 months preceding the accident, whichever calculation is more favourable to the worker concerned.  This is the case even if that worker was working for other employers before the accident.  Whichever method to be adopted in the present case, Ms. Pinto submitted that the average number of working days for the Applicant at the time of the accident should at least be 26 days a month.  Multiplied that with the daily wage of $700, the earnings of the Applicant should be $18,200 a month.

15.  On the other hand, Mr. Kwok, counsel for the Respondent, submitted that s. 11(1) is only applicable if the injured worker worked for the same employer before the accident, which was not the case for the Applicant.  S. 11(2) is also not applicable because, despite the shortness of time during which the Applicant had been in the employment of the Respondent, it is practicable to compute the rate of the Applicant by reference to the income of the substitute worker Mr. Au.  As Mr. Au worked at the Site for a total of 26 days in a period of 2 months, the average number of working days should be 13 a month.

16.  Mr. Kwok also argued in the alternative that, if s. 11(2) is applicable in the present case, there is simply no evidence to support a determination of the Applicant’s monthly earnings under any of the 2 methods prescribed in the said subsection.  As the Applicant had not by then adduced any evidence of a similar worker in the same grade in the same class of employment and in the same district, the Applicant has failed to discharge the burden of proving his earnings under s. 11(2).   In such circumstances, the best evidence available is the earnings of the substitute worker Mr. Au, and monthly earnings of the Applicant should therefore be in the sum of $9,100 ($700 x 13 days).

(ii) Case law

17.  After hearing the submissions, I reserved my judgment.  On 28 April 2008, Mr. Kwok wrote to the court requesting to have the opportunity to make further submissions in the light of the recent Court of Appeal’s decision in Lai Cheung Kwan (translated) v Lo King Sum (translated) & Anr., unreported, CACV No. 202 of 2007 (decision on 3 March 2008).   As a result, a further hearing was fixed before myself on 28 July 2008.  Before the resumed hearing and on 13 June 2008, the Court of Appeal handed down another judgment on appeal in Or Wing Ming v Ho Bing Chi trading as Tin Kei Decoration Engineering Co., unreported, CACV No. 319 of 2007, which is another case about the assessment of monthly earnings for short-term employees.

18.  The facts in the said 2 cases are very similar to those in the present case.  In Lai Cheung Kwan, the applicant was a causal maintenance worker and he injured himself on his first day of work with the respondent.  In Or Wing Ming, the applicant was a carpenter and he injured himself after working for about half a month for the respondent.  In assessing the monthly earnings of the injured workers, the same trial judge in both cases refused to adopt the average monthly income of the injured workers for the period of 12 months preceding the accident, as the injured workers were working for other employers by that time.  The trial judge then tried to ascertain the monthly earnings by reference to the income of other comparable workers under s. 11(2).  However as there was no such evidence before the court, the trial judge also refused to apply the method in s. 11(2).  As the last resort, the trial judge adopted the minimum monthly earnings as provided for in s. 11(5) and assessed the compensation on that basis.  In both cases, the Court of Appeal held that such approach was wrong.

19.  After perusing these 2 judgments, I can perhaps try to summarise some of the legal principles in assessing the monthly earnings of short-term employees as follows:

(i)  the methods of assessing the monthly earnings under ss. 11(1)(a) and 11(1)(b) are only applicable if the injured worker worked for the same employer for the relevant periods under the said sub-sections.  In other words, if the worker injured himself on the first day of his work, his income earned by working for the other employers before the accident is not directly relevant in assessing the worker’s income at the time of the accident (per Cheung JA in Lai Cheung Kwan, paras. 6-9 and Yuen JA in Or Wing Ming, para. 24);

(ii)  the object of s. 11(5) is to provide a minimum protection to an employee in the case that his monthly income is less than the amount prescribed in the statute, and the court should not therefore adopt this figure as the monthly income even if there is not much evidence about the earnings of other comparable workers for assessing the employee’s income under s. 11(2) (per Yeung JA in Lai Cheung Kwan, paras. 35-37, per Yuen JA in Or Wing Ming, para. 26);

(iii)     if the injured worker only worked for a short period of time and there is no practical way to compute the rate of remuneration, the court has to adopt the methods prescribed in s. 11(2) to ascertain his monthly earnings, and it is the duty of the court to make such factual finding based on whatever evidence before the court (per Yeung JA in Lai Cheung Kwan, para. 37); and

(iv) in order to assist the court in assessing the monthly earnings of short-term employees under s. 11(2), practitioners should ensure that there is sufficient evidence before the court for the purpose of such assessment exercise (per Yuen JA in Or Wing Ming, para. 31).

20.  In Or Wing Ming, the injured worker worked for about half a month before the accident, and so there was disagreement in the Court of Appeal as to whether the court should take into account the income of the injured worker of that particular half month in assessing the monthly earnings under s. 11(1)(b), or whether the court should just apply the method in s. 11(2) in the assessment exercise.  However as the Applicant in our present case injured himself on the first day of his work, both counsel agree that only s. 11(2) is applicable. Hence, the 2 Court of Appeal’s decisions have saved a lot of arguments in the present case.

21.  As emphasised by Yuen JA in Or Wing Ming, practitioners should ensure that there is sufficient evidence to assist the court in assessing the earnings under s. 11(2).  When the trial resumed before me on 28 July 2008, both counsel therefore agreed that leave should be given to both parties to adduce further evidence at the trial.  This was certainly the appropriate course to take and leave was granted accordingly.

Assessment of the evidence

22.  The evidence was therefore heard in 2 stages, and all the evidence adduced by the parties has been summarised above.

23.  There are 2 methods of calculating the income under s. 11(2): the first one is take 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; and the second one is, if there is no person so employed, to take 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 in the same class of employment and in the same district.   As there is no evidence before the court about the earnings of similar carpenters employed by the Respondent before the accident, the first method of calculation is not applicable.

24.  For the second method, there are 3 figures I can adopt in the present case.  The first one is $18,200 which is based on the average working days of 26 a month.  The evidence in support of such figure comes from the oral testimony of the Applicant and the information provided in the Form 2.  The second figure is $14,000 which is based on the average monthly working days of 20.  According to the Respondent, he  and the other skilled carpenters in the trade would work on average 20 days a month, and this provides the evidential basis for such figure.   The last figure is $9,100 which is based on the average monthly working days of 13.   According to the Respondent, the substitute worker Mr. Au worked on average 13 days a month at the Site after the Applicant’s accident, and the other unskilled workers in the trade also worked on average 13 to 15 days a month.  Such evidence provides the evidential basis for the last figure of $9,100.

25.  Having carefully considered the evidence, I refuse to adopt the first figure of $18,200 based on the following reasons.  Firstly, the Applicant testified that he was able to work 26 days a month because he had very good contacts with other contractors and workers in the trade.  However, there is no evidence that the other workers in the trade could similarly work up to 26 days a month.

26.  Secondly, I have great reservation about the truth of the Applicant’s evidence relating to his income.  The Applicant and his employers should have reported his earnings to the Inland Revenue Department.  In particular, the Applicant had had relatively stable employment when he worked in a luxurious development for over a year after the SARS crisis in 2003, and yet no tax return has been produced to substantiate the Applicant’s evidence about his previous earnings.  Neither has the Applicant provided any other documentary proof, such as bank statements, wages receipts or MPF contribution records, to support his claim.  This certainly undermines the creditability of his evidence. 

27.  In my judgment, the Applicant has exaggerated his evidence about the number of his working days.  In his oral testimony, he worked on average 28 days a month continuously for a period of 2 to 3 years, and sometimes he even worked for 30 days a month.  These figures are even more than the number of working days mentioned in his witness statement which is 26.  However, the Applicant was only a casual worker and he had to move from site to site for his work.  As delays in interior decoration works were common and there were also other logistical factors which would be beyond the control of the Applicant, I accept the Respondent’s evidence that it was quite impossible for causal workers such as the Applicant to work 28 days a month continuously for such a long period of time.  Hence, I do not find that the oral testimony of the Applicant and the information provided in the Form 2 are reliable for the court to assess the Applicant’s earnings under s. 11(2).

28.  I also reject the lowest figure of $9,100.  According to the evidence, the substitute worker Mr. Au worked at the Site for 20 days in the first month and 6 days in the second month after the Applicant’s accident.  The workload in the second month was relatively light, and it was possible for Mr. Au to take up other causal works in the second month.  Hence, a causal worker like the Applicant should have been able to work for more than 13 days a month.  Further, the Respondent testified that only unskilled workers worked for 13 to 15 days a month.  As the Applicant was a skilled carpenter with considerable experience, it was possible for him to have more works.

29.  In my judgment, the appropriate figure to be adopted in the present case is $14,000 which is calculated on the basis of the average monthly working days of 20.  The reasons for adopting such figure are three-fold.  Firstly, the evidence shows that the substitute worker Mr. Au was able to work 20 days at the Site in the first month immediately after the Applicant’s accident.  This shows that casual carpenters could work up to 20 days a month by that time.  Secondly, the Respondent accepts that skilled workers like himself was able to work up to 20 days a month.   The Applicant was a carpenter with considerable experience, and so I find that a comparable worker like the Applicant should have been able to work 20 days a month.  Thirdly, by reason of the nature of his work, a causal worker would have to move from site and site and he had to make adjustments to his diary to suit the progress of the works at different sites.  Taking into account factors such as common delays in decoration works and other logistical factors as mentioned above, I would think that 20 working days a month would be reasonable for a carpenter like the Applicant.  Hence, I calculate the Applicant’s earnings on the basis of 20 working days a month and arrive at the figure of $14,000 ($700 x 20 days).

S. 9(1A) and the Paper Mills formula

30.  Upon review, the Applicant had been assessed by the Employees’ Compensation (Ordinary Assessment) Board (“the Board”) to have suffered 17% loss of earning capacity.  The Applicant appeals against such assessment.  According to Ms. Pinto, there are special circumstances in the present case to justify a higher percentage of loss of earning capacity under s. 9(1A) of the ECO.

31.  S. 9(1A) reads:

“Where –

(a) permanent partial incapacity results from an injury or a combination of injuries (whether or not specified in the First Schedule); and

(b) the percentage of the loss of earning capacity specified or assessed in relation to that injury or combination of injuries in accordance with subsection (1) would be substantially less than the percentage of the loss of earning capacity permanently caused by the injury or injuries in the special circumstances of the employee, including, without limiting the generality of the foregoing –

(i)   the nature of the injury or injuries 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 or injuries in any employment which, having regard to those special circumstances, the employee was capable of undertaking at that time.”

32.  If a case falls within s. 9(1A), the court would generally apply the Paper Mills formula (as laid down in Hong Kong Paper Mills Ltd. v Chan Hin Wu [1981] HKLR 556, and subsequently modified in Lui Kwong Yan v Shui Hing Decoration Works & Anr. [1993] 1 HKLR 168) in assessing the percentage of loss of earning capacity.  To a great extent, whether s. 9(1A) and the Paper Mills formula are to be applied will depend on the court’s finding of the earnings of the injured worker at the time of the accident and the earnings of the alternative employment that the worker was able to take up in view of his injuries.  If the difference in percentage is substantially more than the percentage assessed by the Board or that prescribed in the First Schedule of the ECO, the court would probably apply s. 9(1A) and the Paper Mills formula in assessing the loss of earning capacity.

33.  The injuries suffered by the Applicant as a result of the accident include:

(i)    amputation of the tip of the left thumb;

(ii)  laceration of the left index finger;

(iii)    cut extensor tendon of the left middle finger, cut ulnar digital nerve and probably digital artery;

(iv)    fracture subluxation of the proximal joint of the left ring finger, cut extensor tendon and probably ulnar digital nerve; and

(v)  laceration of the left little finger with tendon cut.

A photograph showing the injuries is included in page 145 of the trial bundle.

34.  According to the Applicant, he is still suffering from the following disabilities as a result of the accident:

(i)    there are paraesthesia and numbness of the entire left upper limb affecting him about once a day with each attack lasting 3 to 4 minutes, which would improve after mobilization and self-massage;

(ii)  there is pain over the whole left middle and ring fingers and proximal joint area of the little finger;

(iii)    the pulp of the left thumb is sensitive to touch;

(iv)    the proximal joints of the left middle and ring fingers are stiff;

(v)  there is morning stiffness over the left little and index fingers, which would improve after mobilization;

(vi)    the left hand grip is weak; and

(vii)  the movements of the left fingers are clumsy.

The medical experts of both parties find that the complaint mentioned in item (i) is pre-existing disability which is unrelated to the accident.

35.  By reason of the weakness of the left hand grip and inability to handle tasks which require fine and coordinated movement of the fingers of the left hand, both medical experts agree that the Applicant is not able to resume his pre-accident job as a carpenter.  For the alternative employments, both experts suggest that the Applicant can take up jobs such as general cleaning worker, warehouse attendant, courier, petrol station attendant and security guard.

36.  Though the Applicant had registered himself with the Labour Department to look for jobs, he was not able to find any employment after the accident.  The Applicant has been holding a valid driving licence for private vehicles and small lorries for about 20 years.  Although he had had the experience of driving a car after renewing his driving licence in September 2007, the Applicant claims that he cannot work as a professional driver by reason of his disabilities.  Neither had he reported his disabilities to the Transport Department.

37.  Despite my finding above that the Applicant has exaggerated his evidence about the number of working days, I accept that he cannot work as a professional driver after the accident.  Undoubtedly, the Applicant has suffered very serious injuries, and as a result a few fingers of his left hand become stiff, his left hand grip is weak and he cannot make a full grip with his left hand.   According to both medical experts, these are all genuine complaints.  Although the Applicant can still perhaps drive with such disabilities, I do not think that he can drive in a prolonged manner and work as a professional driver.  Further, safety is a major concern for professional drivers.  The Applicant’s disabilities would cause him to encounter difficulty in holding the steering wheel of a vehicle, in particular the much bigger and heavier steering wheel of a lorry.  The problem may become more serious if the Applicant has to react quickly in an emergency.  If a prospective employer knows about his disabilities, I do not think that he can even get a job of a professional driver by reason of such safety concern.

38.  I also have reservation as to whether the Applicant can take up the job of a cleaner as he has difficulty in wringing dry a towel.  In such circumstances, I am of the view that the Applicant can only take up the job of a security guard or an office assistant in view of his disabilities.

39.  The statistics in June 2006 (ie. the time of the accident) show that the average monthly salaries of guards are in the region from $6,000 to $7,500 and those of office assistants in the region from $6,500 to $8,500.  In determining the income of the alternative employment, I take the higher average monthly salaries of the office assistants.  However, the earnings of office assistants would vary according to the nature of business of the employers.  If the business is more sophisticated, the demand for the relevant office assistant would be higher and so would also be his income.  As the Applicant is not a person who has received a lot of education and he spent most of his working life as a carpenter, I adopt the mean figure of $7,500 as the income of the alternative employment.

40.  Even if I were wrong and the Applicant can drive in a prolonged manner, I do not think that the result of the case would be very much different.  The statistics show that drivers engaged in the delivery of goods and in the service sector received high salaries in the region from $10,000 to $14,000.  This is not surprising as professional drivers engaged in the delivery of goods would have to drive big lorries and they may be expected to assist in the manual delivery works.  It is clear that the Applicant would have difficulty in performing these tasks in view of his disabilities.  For the drivers in the service sector, for example in the hospitality business, I would imagine that such drivers must be able to communicate with simple English, and I doubt whether the Applicant, with his limited education, would be able to cope with such job.  For the other jobs which have no such demands as specified above, for example drivers in the motor vehicles repair and service industry, the average monthly salary was only $8,249, which was not very much higher than those of the office assistants.

41.  Adopting the mean figure of $7,500, the Applicant has suffered 46% reduction in his income.  This is a substantial reduction.  Further, the Applicant is not a person who has received a lot of education and his tool of trade came very much from his experience as a carpenter.  Now with the disabilities suffered as a result of the accident, the Applicant has actually lost his main asset in term of his earning capacity.  Hence, taking into account factors such as the nature of the injuries of the Applicant, his qualifications, previous training and experience, I hold that there are special circumstances in the present case to justify the application of s. 9(1A).

Quantum of the compensation

42.  The Applicant was aged 46 at the time of the accident, and so the compensation for permanent partial incapacity under s. 9 can be assessed as follows:

$14,000 x ($14,000-$7,500) x 72 months =    $468,000   $14,000

43.  The Applicant was granted sick leave for 10.2 months and there is no dispute about the reasonableness of the length of the sick leave period.  Hence, the compensation for temporary incapacity under s. 10 is as follows:

$14,000 x 10.2 months x 4 = $114,240   5

44.  The compensation for medical expenses under s. 10A is agreed at $7,760.

45.  I also accept the evidence of the Respondent that he had made an advance payment of $20,000 to the Applicant.  The quantum of compensation can therefore be summarised as follows:

(i)	s. 9 compensation :	$468,000
(ii)	s. 10 compensation :	$114,240
(iii)	s. 10A compensation    :	$   7,760
Less   :	advance payment    :	$ 20,000
	Total  :	$570,000

46.  Hence, I grant judgment in favour of the Applicant for the said sum.  I also make the following order nisi:

(i)    there be interest on the judgment sum at the rate of 4,125% per annum, which is half the existing judgment rate, from 16 May 2006 to the date hereof and thereafter at judgment rate; and

(ii)  the costs of this action be to the Applicant with certificate for counsel.

The order nisi shall be made absolute 14 days after the date of the handing down of this judgment.

47.  Finally, I would like to express my gratitude to both counsel for all the assistance that they have rendered to this court.