LUI KWONG YAN v. SHUI HING DECORATION WORKS AND ANOTHER

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J U D G M E N T

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Penlington, J.A.:

1. This is the judgment of the Court.

2. This is an appeal against a decision of Judge Evans given in the District Court on the 14th January 1992 in which he awarded compensation to the appellant under the Employees' Compensation Ordinance, Cap. 282 ("the Ordinance") as a result of an accident which occurred on the 6th July 1983 wherein the applicant injured his back. Liability was not contested by either respondent and the question before the judge was purely a question of assessment of compensation under s. 9 of the Ordinance for permanent partial disability.

3. The judge found the applicant had been hospitalised for 10 days after the accident and subsequently a prolapsed intervertebral disc was removed with anterior spinal fusion. After this the appellant made a partial recovery but complained of back pain when he sat or walked for any length of time.

4. There were three doctors who gave evidence, Dr. Sun Kai Hoi who was a medical officer specialising in orthopaedics at the Tang Siu Kin Ngor Clinic, Dr. Yeung Po Sun, an orthopaedic surgeon called for the appellant, and Dr. Fali Shroff who gave evidence for the respondents. The judge accepted the evidence of Drs. Yeung and Sun to the effect that the appellant suffers considerable disability and can no longer carry on the type of heavy manual work he was doing at the time of the accident. He is now employed as a security guard. Dr. Shroff suggested that perhaps the appellant, while suffering some pain, was not disabled to the extent that he claims. However the judge found as a fact, which is not challenged, that the appellant is now only capable of working as a security guard. He is therefore entitled to be compensated on the basis that he can undertake work of that nature and will never be able to resume his previous occupation.

5. The judge found that at the time of the accident the appellant was earning $300 per day and he took an average of 24 working days per month which gave his pre-accident wage as $7,200 per month. The judge also accepted evidence that in the period April to July 1988 a security guard was earning $3,000 to $3,300 per month. If the appellant had been employed as a security guard at the time of the accident he would probably have been earning $3,150 per month.

6. At the time of the accident, which is the date upon which compensation must be assessed, the amount prescribed by s. 7 of the Employees' Compensation Ordinance for permanent total incapacity was $394,000. The question raised on this appeal is what proportion of that sum should be awarded to the appellant under s. 9 of the Ordinance.

7. That section, so far as it is relevant, reads as follows:

" 9. (1) Subject to subsection (1A), where permanent partial incapacity results from the injury the amount of compensation shall be -

(a)    (not relevant)

(aa)    (not relevant)

(b)    in the case of an injury not specified in the First Schedule, 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 in any employment which the employee was capable of undertaking at that time ;

Provided that -

(i) (not relevant)

(ii) in the case of injury not specified in the First Schedule, the loss of earning capacity permanently caused by such injury shall be assessed as a percentage having regard so far as possible to the scale of percentages specified in that Schedule and to the Note thereto."

The judge said that he accepted the evidence given by Dr. Yeung when he came to an opinion that the loss of earning capacity suffered by the appellant was approximately comparable to that for a fusion of the hip. This is listed in the First Schedule as resulting in a 35% loss of earning capacity. Against that figure the judge then also considered the formula which was set out by Sir Alan Huggins, V.P., in Hong Kong Paper Mills Ltd. v. Chan Hin Wu [1981] HKLR 556 at pp. 559 and 560. He said:

"It is common ground that the injury is not specified in the First Schedule. It is also common ground that the Judge rightly calculated the compensation payable in case of permanent total incapacity at $63,840. The solicitor for the workman did not, indeed, ask for an award based upon a loss of earning capacity of 100% but on a loss which 'approaches 100%'. With the utmost respect to the draftsman and the Legislature I am not even sure that s. 9(1)(b) makes sense in the context. A percentage cannot be proportionate to a loss; it can be equal to a loss, or one may have a proportion which is equal to the proportion which one earning: capacity bears to another earning capacity, and I can only deduce that the equation which was intended was

	a
Compensation payable =	-  x c
	b

where	a	is the earning capacity at the time of the accident in any employment of which the workman is now capable,
	b	is the earning capacity at the time of the accident, and
	c	is the compensation payable upon permanent total incapacity."

Applying that formula here would give figures of

$3,150	= 43.75%
$7,200

and this would give compensation of $172,375. However since that case s. 9 has been amended to include s. 9(1)(a) the proviso (ii) of s. 9(1)(b) and s. 9(3) and s. (9)(4) have been added. Mr. Rodney Pritchard, who appears here for the appellant, argues that the formula set out by Sir Alan Huggins at p. 560 of Hong Kong Paper Mills Ltd. v. Chan Hin Wu simply cannot be right. He submits it must be a misprint. The effect of applying the formula as set out is that if an injured worker gets a good job after the accident he will receive more compensation than the worker who, as a result of the injury, can only obtain a very low paid job. On the facts here the loss of earning capacity and loss of earnings is the same. The appellant's earnings fell by 56.25% as a result of the accident and capacity is therefore 56.25%. This is which he says should have been applied his loss of earning using the formula in Hong Kong Paper

That formula was correct in this case although it could well in other cases, such as Lau Ho Wah v. Yau Chi Biu [1987] HKLR 1061. The facts there were unusual in that as a result of a fall the plaintiff had suffered brain damage and there was general agreement that this was serious and constituted a permanent loss of earning capacity of some 60%. However the plaintiff obtain another job at a higher wage than his pre-accident earnings. The appellant was awarded compensation of 60% in the District Court but in the Court of Appeal this was reduced to nil on the basis that he had failed to show any loss of earning capacity. Sir Owen Woodhouse, delivering the judgment of the Privy Council in allowing the appeal, said at 1063:

"In ordinary language the concept of earning capacity is certainly not limited to the present or to be measured by some immediate and possibly quite fortuitous achievement. It is concerned with a continuing state, with the potential of an individual and so very much with the future as well. Secondly, the significance attached to the post-accident earnings has effectively resulted in the statutory references to loss of earning capacity being read down to mean an actual loss of earnings."

Mr. Pritchard pointed out that s. 9(1)(b)(ii) has been amended since the decision in Hong Kong Paper Mills Ltd. v. Chan Hin Wu. The proviso then read:

"(ii) in the case of injury not specified in the First Schedule the loss of earning capacity permanently caused by such injury shall, so far as possible, be assessed in conformity with the scale of percentages specified in that Schedule".

The words "in conformity with" have been replaced by "having regard as far as possible" to the First Schedule. This is a clear direction that the percentage payable for the nearest relevant injury in the schedule should not have the same importance in the assessment calculations as before.

8. For the respondents Mr. Ramanathan said that this was not an exceptional case and that the court should not favour the application of a rigid formula. Here Dr. Yeung has equated the injury with a fused hip giving a 35% loss of capacity. The actual loss of earnings is 56.25%. The judge has found the percentage of loss of earning capacity as 40% which is between those two figures and cannot be said to be unreasonable. He stresses that the legislature has referred not to loss of earnings but to "earning capacity". Section 9(4) clearly indicates that actual earnings are not to be the sole test.

9. We are satisfied that the judge has not applied the correct test. We agree with Mr. Pritchard that the formula laid down by Sir Alan Huggins in Hong Kong Paper Mills Ltd. v. Chan Hin Wu must contain a misprint and that the judge has not applied the correct percentage of actual loss of earnings of 56.25% when he compared that with the 35% for the nearest appropriate injury in the First Schedule. If he had done so we have no doubt that he would have arrived at a figure higher than the 40% which he awarded. Taking into account all the evidence in this matter we consider that an award of 50% of the amount payable for total incapacity would have been appropriate. This gives a figure of $221,625. We shall therefore allow the appeal and substitute that figure for the amount awarded by the judge under s. 9 of the Ordinance. In handing down this judgment we shall make an order nisi for costs to the appellant and appellant's own costs to be taxed in accordance with Legal Aid Regulations.