KAN WAI MING v. HONG KONG AIRPORT SERVICES LTD

CACV 240/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 240 OF 2010

(ON APPEAL FROM DCEC NO. 1012 OF 2009)

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BETWEEN

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Hon Tang Acting CJHC:

 1.  I have had the advantage of reading Fok JA’s judgment in draft. I agree with it and have nothing to add.

Hon Hartmann JA:

2.  I agree fully with the judgment of Fok JA and have nothing further to add.

Hon Fok JA:

Introduction

3.  This appeal concerns the construction of section 10(4) of the Employees Compensation Ordinance, Cap. 282 (“the Ordinance”) and arises out of the following facts.

4.  On 20 June 2008, the applicant was injured at work.  On 8 September 2009, he brought proceedings under the Ordinance claiming compensation under sections 9, 10 and 10A.  The respondent admitted liability and judgment was entered on 15 October 2009.

5.  Between the date of the accident and 19 March 2010, the respondent paid a total sum of HK$161,410.49 to the applicant broken down as to HK$156,370.49 as periodical payments under section 10 and HK$5,040 as medical expenses under section 10A.  The respondent’s solicitors described those payments in correspondence as having been made “as advance payments on account of periodical payments and medical expenses”.

6.  The hearing of the assessment of compensation took place on 22 and 25 June 2010 before His Honour Judge Simon Leung.  The Judge noted that the major dispute between the parties related to the loss of earning capacity and the sick leave period.  In respect of the former, the applicant claimed 3% permanent loss of earning capacity whereas the respondent argued that it should be nil.  In respect of the latter, the applicant had obtained sick leave for a period in excess of 600 days whereas the respondent argued that sick leave of only four weeks, or alternatively until early June 2009, was appropriate.

7.  On 8 October 2010, the Judge assessed the compensation due to the applicant as follows:

(1)  He held that the applicant had suffered a loss of earning capacity of 0.5%.  In view of the parties’ agreement that the applicant’s pre-accident monthly income was HK$9,789.47, compensation under section 9 was assessed in the sum of HK$3,524.21.

(2)  He found the period of genuine temporary incapacity of the applicant to be 355 days and accordingly assessed compensation under section 10 in the sum of HK$92,673.65.

(3)  He assessed compensation for medical expenses under section 10A in the sum of HK$3,820.

The total amount of compensation was therefore the aggregate sum of HK$100,017.86.

8.  In view of the fact that the compensation assessed fell short of the amount already received by the applicant, the Judge made no award and ordered the applicant to pay the costs of the assessment proceedings.

The issue in this appeal

9.  In this appeal the applicant contends that, by virtue of section 10(4) of the Ordinance, it was not permissible for the Judge to make any deduction from the amount of any compensation payable under section 9 and therefore that he should have made an award in the sum of HK$3,524.41 in favour of the applicant.  Consequently, says the applicant, the Judge should also have ordered the respondent to pay the applicant’s costs of the assessment proceedings.

10.  Section 10(4) of the Ordinance provides as follows:

“In the event of death or permanent incapacity following a period of temporary incapacity whether total or partial, no periodical or lump sum payments paid or payable under this section shall be deducted from any amount of compensation payable under section 6, 7, 8 or 9.”

11.  The issue is therefore whether all of the sums paid by the respondent to the applicant by way of periodical payments under section 10 in the present case fall within the phrase “periodical or lump sum payments paid or payable under this section” so that they cannot be deducted from or set off against the compensation assessed to be payable under section 9.  The applicant’s case is that they do.

12.  On the other hand, the respondent contends that only the sum of HK$92,673.65 is properly to be regarded as constituting “periodical or lump sum payments paid or payable under this section” because that is the sum which the court assessed as compensation under section 10.  Therefore, the respondent contends, section 10(4) of the Ordinance does not prevent the excess sum of HK$63,696.84[1] from being set off against the section 9 compensation so the Judge was right to make no award of compensation.

The scheme of section 10 of the Ordinance

13.  To construe section 10(4) properly, it is necessary to have regard to its context within section 10 and the Ordinance generally.

14.  The purpose of the Ordinance is to provide for the payment of compensation to employees who are injured in the course of their employment.  Different types of compensation are available depending on the severity of the injury.  Such injury may be fatal or non-fatal.  Compensation may be for permanent incapacity or for temporary incapacity.  Such incapacity may be partial or total.  Thus, section 6 of the Ordinance deals with compensation in fatal cases.  Section 7 deals with compensation in cases of permanent partial incapacity.  Section 8 deals with compensation for an employee whose permanent incapacity requires him to have attention to assist him to perform the essential actions of life.  Section 9 deals with compensation payable for permanent partial incapacity.  Finally, section 10 deals with compensation payable for temporary incapacity, whether total or partial.

15.  Section 10(1) provides for payments to be made by way of periodical payments or lump sum where temporary incapacity whether total or partial results from the injury.  Therefore, once temporary incapacity is established, the employer’s obligation to pay periodical payments or a lump sum arises.  The periodical payments are by way of monthly payment.

16.  By section 10(2) a period of absence from duty certified to be necessary by one of the stipulated persons or bodies is deemed to be “a period of total temporary incapacity irrespective of the outcome of the injury”.  A sick leave certificate issued by a registered medical practitioner is the usual manner in which an injured employee obtains such certification to establish temporary incapacity for the purposes of section 10(1).

17.  The presumption that a period of absence from duty so certified is a period of total temporary incapacity is rebuttable: see Yu Tat Kam v Chu Tung Shing & anor, unrep., CACV 25/2008, 8.10.09 at §§23-27.  Thus, under section 16, an employer is entitled to require an employee who is in receipt of a periodical payment under section 10 to undergo a medical examination and if the employee does not do so, his right to compensation is suspended until the examination takes place.  The employer is therefore able to obtain independent medical evidence which he may rely upon to rebut the presumption created by section 10(2).

18.  Section 10(3) provides that periodical payments shall be payable on the same day as wages would have been payable to the employee.  There is a proviso whereby the parties can agree or the court can order that the periodical payments may be made at shorter intervals.  However, the intervals between periodical payments shall not exceed one month.

19.  The duration of the periodical payments is not indefinite.  If an employee receives periodical payments for 24 months (or for a further 12 months, if the court allows in any particular case), section 10(5) of the Ordinance provides that he will no longer be entitled to periodical payments and deems him to have suffered permanent incapacity so that the provisions of sections 7 or 9 will apply to him.

20.  Under section 10(10) of the Ordinance, an employer who without reasonable excuse fails to pay any compensation under the section within a period of 7 days after the date on which such compensation falls due “(whether under subsection (3) or by agreement or by order of the Court)” commits an offence and is liable to a fine.  The 7 days are therefore calculated from either the same day as wages would have been payable (section 10(3)) or the day the parties have agreed periodical payments at shorter intervals (section 10(3)(a)) or the date when the court makes an order for compensation under section 10 (for example, after trial in compensation proceedings).

21.  Prior to an adjudication of the compensation proceedings, the employer is obliged to make periodical payments monthly on the same day wages would have been payable to the employee, unless agreement is reached to pay such periodical payments at shorter intervals.  The obligation is therefore automatic upon a period of absence from duty being determined to be a period of temporary incapacity.  As noted above, this may be deemed by virtue of section 10(2).

The proper construction of section 10(4) of the Ordinance

22.  As noted above, section 10(4) precludes the deduction from any amount of compensation payable under sections 6, 7, 8 or 9 of any periodical payment “paid or payable under this section”.  The appellant’s case on this appeal is simply that the periodical payments made by the respondent to him are periodical payments “paid … under this section” and so cannot be deducted from the compensation payable under section 9.

23.  Mr Kumar Ramanathan SC, leading counsel for the respondent, made the preliminary point that the Judge did not make any deduction in the present case.  Instead, all that the Judge did was to decline to make an award under section 9 on the basis that the periodical payments already received exceeded the total amount of compensation assessed under sections 9, 10 and 10A.

24.  I do not agree that the Judge did not make a deduction.  Each of the sums assessed under sections 9, 10 and 10A were separately assessed by the Judge on different bases and for different types of compensation in respect of discrete consequences of the injuries sustained by the applicant.  The Judge clearly applied the amount already received by the applicant to extinguish the sum assessed under section 9.  There is no doubt that this is a deduction within the meaning of section 10(4).

25.  I agree with Mr Ramanathan that if the prohibition on deductions in section 10(4) were limited to “payable under this section”, this would limit its application to those sums which were duly assessed to be payable as compensation at the conclusion of the assessment proceedings.  In the present case, that would mean that only the sum of HK$92,673.65 (the sum assessed by the Judge as compensation under section 10) would be relevant for the purposes of section 10(4).  I did not understand Mr Damian Wong, counsel for the applicant, to argue to the contrary.

26.  However, developing his submission from the conclusion in the preceding paragraph, Mr Ramanathan contended that the phrase “paid … under this section” is also to be read as meaning the periodical payments paid after having been duly assessed to be payable as compensation at the conclusion of the assessment proceedings.  That is to say, the word “paid” in section 10(4) is qualified as referring only to sums paid after assessment under section 10.

27.  The correctness of this submission lies at the heart of this appeal and is the basis on which, although he accepted that the periodic payments made by the respondent to the applicant in the present case had been paid pursuant to the obligation in section 10(1), Mr Ramanathan contended that section 10(4) did not prevent the Judge from taking the excess sum of HK$63,696.84 into account and setting it off against the section 9 award.

28.  I have no hesitation in rejecting the construction of “paid … under this section” urged on us by Mr Ramanathan.

29.  First, it requires reading into section 10(4) words which are not there.  The words “paid … under this section” are clear and unambiguous and, in my opinion, refer to periodical payments which have been made in satisfaction of the employer’s obligations under section 10 including those payments made under the section before final assessment at trial in compensation proceedings.  There is no justification, in my opinion, for reading into those words the additional qualification called for by the respondent’s construction.  As explained above in the section addressing the scheme of section 10, the obligation to pay periodical payments arises automatically upon a period of absence from duty being determined to be a period of temporary incapacity.  That is what happened in the present case: the applicant tendered sick leave certificates for the period from 20 June 2008 to 19 March 2010 and the respondent made periodical payments on a monthly basis during that period.  Those payments were paid under section 10 and this conclusion is not affected by the respondent’s solicitors’ description of the payments in correspondence as “advance payments on account of periodical payments”.

30.  Secondly, it is trite that, in construing legislation, the court should adopt an interpretation which is consistent with and gives effect to the legislative purpose of the provision under consideration: see Town Planning Board v Secretary for the Protection of the Harbour Ltd (2004) 7 HKCFAR 1 at §29.  In my view, the construction of section 10(4) contended for by the respondent is contrary to the purpose of the Ordinance in two respects.

31.  The purpose of section 10 of the Ordinance was addressed by this Court in Choy Wai Chung v Chun Wo Construction & Engineering Co Ltd [2001] 2 HKLRD 803.  There, Rogers VP (with whom Stock and Le Pichon JJA agreed) considered the mischief which gave rise to the introduction of compensation in the case of temporary incapacity under section 10.  He referred to a statement made by the Commissioner of Labour on the second reading of the Bill which introduced the precursor of section 10(4)[2] and held at pp. 805J-806C:

“Even though the wording of the subsection that was introduced at the time was different from the present wording, I consider that the effect of this section is similar and hence reference may still be made to the mischief sought to be cured.

            It would seem, therefore, that at least one of the mischiefs, which was sought to be cured lay in the fact that the method of calculating compensation under the Ordinance did not cater for the fact that the employee might have a significant period of greater temporary incapacity followed by permanent incapacity of a lesser level. The equivalent of what is now s.10(4) was therefore introduced to provide that no compensation for temporary incapacity should be deducted from compensation payable for permanent incapacity.”

32.  I therefore agree with the submission (made in paragraph 19 of the respondent’s skeleton argument) that the intention of the legislature in enacting section 10(4) of the Ordinance is so that an employee’s compensation for temporary incapacity under section 10 and his compensation for permanent incapacity under section 9 should be kept separate and distinct, and that in case an employee is entitled to both, they cannot be set off against each other.  In my view, the construction urged on us would run contrary to the Ordinance’s purpose of providing for discrete types of compensation each to be separately assessed.

33.  A further respect in which the respondent’s construction is not consistent with the purpose of the Ordinance, in my view, is that it runs contrary to the Ordinance’s intention “to provide quick financial relief to employees incapacitated by work-related injury in a no-fault scheme”: see Yu Tat Kam v Chu Tung Shing & anor (supra) at §25.  The Ordinance’s intention to provide quick financial relief is also reflected in the limit on the duration of periodical payments under section 10 to 24 months (unless extended, but then for not more than a further 12 months).  The fact that the burden rests on the employer to rebut the presumption of temporary incapacity arising from a sick leave certificate is consistent with this intention.  It also follows, in my opinion, that the risk of overpayments being made and the burden of taking any steps to recover such overpayments should lie with the employer.

34.  Thirdly, I agree with the submission of Mr Wong that the wording of section 10(1) itself recognises the possibility that periodical payments may be made for a period which does not exactly match the period for which compensation under section 10 is ultimately assessed.  Section 10(1) refers to:

“… periodical payments hereinafter mentioned, or a lump sum calculated accordingly, having regard to the probable duration, and probable changes in the degree, of the incapacity.”

That wording expressly recognises the possibility that the periodical payments may be made for a period which may be longer than the period ultimately assessed as the period of temporary incapacity so that there may be an overpayment.  Nevertheless, the obligation is imposed on the employer to make periodical payments in accordance with section 10(1) and those periodical payments will be, as a matter of plain language, paid under the section.

35.  The only positive arguments which the respondent could advance to support its construction of the words “paid … under this section” in section 10(4) were that the applicant’s construction would give rise to a risk of abuse of sick leave certificates and that the consequence of such abuse was to afford a possible windfall to an employee.  Neither of these arguments compels me to accept the respondent’s construction of “paid … under this section” in section 10(4).

36.  I have already referred to the employer’s right to require the employee in receipt of a periodical payment to undergo medical examination under section 16 of the Ordinance in order to obtain evidence with which to rebut the presumption arising from sick leave certificates.  A refusal by the employee to submit to such examination will suspend his right to compensation.  It is also open to an employer himself to institute proceedings under the Ordinance to assess compensation and thereby seek a determination from the court of the period for which periodical payments would fall to be made by obtaining a final assessment under section 10.

37.  In any event, it seems to me that the legislature has determined that the risk of abuse should lie on the employer rather than the employee as is evident from the scheme of section 10 (addressed above) and the Ordinance’s purpose of providing quick financial relief to injured employees.

Proceedings to recover excess periodical payments

38.  There was no application before the Judge by the respondent for an order for the excess of HK$63,696.84 to be repaid by the applicant to it and this appeal did not concern the question of whether it was open to the respondent to recover that excess from the applicant.

39.  Various possibilities and bases of claim were mentioned in the course of argument before us, including an application by an employer to make periodical payments by way of interim payments under Order 29 of the Rules of the District Court (applicable to compensation proceedings by virtue of section 21(1) of the Ordinance) which payments could later be adjusted, if necessary, thereby avoiding any windfall: see, in this context, the comments in Poon Chi Kwong v Poon Wing Kee (Metal)(Work) & Anor [2004] 2 HKC 684 at §§23 and 27.

40.  Whilst it is right to observe that section 10(4) of the Ordinance says nothing that touches on the question of a claim for repayment of an excess sum paid by way of periodical payments under section 10, I do not think it appropriate to examine in this judgment whether such a claim would be viable and, if so, on what basis.  The circumstances in which an excess payment might come to have been made are necessarily fact sensitive and could arise in a variety of different scenarios.  The issue should only be decided when it is properly raised.

Previous decisions

41.  Although not addressing the same issue of construction arising in this appeal, two previous decisions of this court were cited to us in which observations have been made on section 10(4) of the Ordinance in terms consistent with the conclusion I have arrived at as to its proper construction.  The first is Choy Wai Chung v Chun Wo Construction & Engineering Co Ltd (supra): see the last sentence of the passage cited above.  The second is Poon Chi Kwong v Poon Wing Kee (Metal)(Work) & Anor where Ma CJHC (as he then was), in describing the operation of section 10 of the Ordinance, said:

“Section 10 of the ECO deals with the aspect of the compensation payable for temporary incapacity, whether total or partial, of any injured worker. This is in contradistinction to a permanent incapacity which is dealt with by the provisions of s 9. … Where permanent incapacity is established, any payments received under s 10 will not be deducted from the entitlement under s 9: see s 10(4).” [emphasis added]

42.  In addition, Mr Wong referred us to a number of District Court cases in which the issue of whether deductions from compensation can or should be made has arisen.  As a preliminary observation, however, none of these cases, which are not in any event consistent with each other, contains a detailed analysis of the question of construction of section 10(4).

43.  In Lai Yuen Hing v Lo Chi Hung t/a Kam Hung Construction Co, unrep., DCEC 14/2000, 16.12.2002, the applicant had received HK$108,700 from the respondents for sick leave between May 1999 and January 2000.  At trial, Deputy District Judge K. Lin held that the applicant’s complaints since May 1999, although genuine, were not the result of the accident for which she was claiming compensation.  Compensation under section 10 was assessed at HK$17,472.  The Deputy Judge held (see §34) that it was only that sum to which section 10(4) applied so that credit should be given for the payments already received and that, since those payments were more than the total amount of compensation assessed under sections 9, 10 and 10A, there would be no award in favour of the applicant.  That conclusion appears to be the same as that reached by the Judge in the present case and must therefore be regarded as wrong in the light of this judgment.

44.  In Tsang Kwong v Mayshing Construction Co Ltd, unrep., DCEC 1026/2003, 16.3.05, the applicant had already received HK$156,400 from the respondent in respect of sick leave.  Compensation of HK$23,040 and HK$25,600 was assessed under sections 9 and 10 respectively, giving a total of HK$48,640.  Without referring to section 10(4) of the Ordinance, Wong DJ held (§26) that:

“… Although there is no provision in the Employees’ Compensation Ordinance to repay the amount in excess, however under O.29 r.17 on application is Court can order repayment of all or part of interim payment. Since the Respondent had in the original answer counterclaimed[,] I take it that the Respondent intended to ask repayment at least in part of the interim payment. In order to avoid duplicity of claim I order the Applicant to repay the balance of money advanced by the Respondent.”

The decision does not appear to address the issue of the construction of section 10(4) and instead appears to proceed on the basis that if an interim payment is ordered an excess may be recovered.  As I have noted, that is not an issue with which this appeal is concerned.  However, insofar as the Judge regarded payments made under section 10 as interim payments, that conclusion cannot stand with the decision of this court in Poon Chi Kwong: see per Ma CJHC at §§19 to 22 and per Lam J at §27.

45.  In Singh Baldwinder v Sino Phil Engineering Services Limited, unrep., DCEC 374/2003, 20.7.07, compensation of HK$26,640, HK$182,632 and HK$2,645 was assessed under sections 9, 10 and 10A respectively.  Deputy District Judge ST Poon noted the provisions of section 10(4) and that the periodical payments already made (in the sum of HK$212,780) exceeded the total amount awarded under sections 10 and 10A, so that the total sum to be awarded by the court should only be HK$26,640, i.e. the full amount of the compensation assessed under section 9.  He did not set off the excess of the periodical payments against the section 9 compensation.  That decision is consistent with the construction of section 10(4) of the Ordinance in this judgment.

46.  Finally, in Fong Sau Lan v Bureau Veritas Consumer Products Services (HK) Ltd, unrep., DCEC 957/2006, 1.8.07, Deputy District Judge A. Yuen gave leave to the respondent to file an Amended Answer seeking to set off an interim payment and to claim an order for repayment in event that the compensation awarded exceeded the amount of the interim payment made.  He held, apparently relying on the court’s inherent jurisdiction, that “if any sum paid is beyond the scope of s. 10 of the ECO, this Court should have power to order for set-off or repayment, depending on the final determination of the award” (§10).  To the extent this conclusion is consistent with Tsang (supra), as it appears to be, I repeat my comments above.

Conclusion

47.  For the reasons set out above, I would allow the applicant’s appeal and substitute for the Judge’s order an order that the respondent pay the applicant the sum of HK$3,524.21 by way of compensation under section 9 of the Ordinance.

48.  I make an order nisi that the respondent should pay the applicant’s costs of this appeal to be taxed if not agreed.  The applicant’s own costs will be taxed in accordance with the Legal Aid Regulations.

49.  As to the costs below, I make an order nisi that there be no order for costs.  This reflects the fact that, in the light of this judgment, the applicant ought to have succeeded in obtaining an award under section 9 but for less than he had claimed and was otherwise unsuccessful below.