FU KWONG WOON v. CHAU WOON AND ANOTHER

HEADNOTE

EMPLOYEES' COMPENSATION - permanent partial incapacity - employee unable to return-to pre-accident occupation - whether loss of earning capacity is to be assessed by reference to earnings at the date of accident or at the hearing.

    Held, although the maximum amount that can be awarded for permanent incapacity may be determined by reference to the employee's actual earnings at the date of the accident, when determining the percentage of that amount payable for permanent partial incapacity, the Court should have regard to evidence of earnings in the pre-accident and post-accident occupations as at the date of the assessment.

    Hong Kong Paper Mills Ltd. v. Chan Hin-wu [1981] H.K.L.R. 556 considered.

    Mak Tin-chun v. Yen Shins Construction Co. Ltd. [1991] 2 H.K.L.R. 460 followed.

IN THE DISTRICT COURT OF HONG KONG

CIVIL JURISDICTION

EMPLOYEES' COMPENSATION CASE NO. 285 OF 1988

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IN THE MATTER OF AN APPLICATION BETWEEN:

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JUDGMENT

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1. The applicant in this case ("Mr. Fu") was born in China in or about 1933. He had only three years of education in China and worked as an iron-smith before finally settling in Hong Kong in or about 1961. For virtually the whole of his working life he has worked as a steel-binder on construction sites. He was doing that work for the first respondent on the 30th May 1987, when he had an accident at work. After receiving treatment for his injuries, he resumed his pre-accident work spasmodically and to a very limited extent. In September 1990, as a result of help from the Selective Placement Division of the Labour Department, he obtained employment as a building attendant or watchman. He is still employed in that capacity.

2. On the 26th October 1988 he made an application for compensation under sections 9, 10 and 10A of the Employees' Compensation Ordinance (Cap.282). On the 23rd November 1988, the respondents submitted or consented to judgment in favour of the applicant for such compensation to be assessed. The respondents did not file any answer. No relevant positive issues or questions have been raised by them, or disclosed in any of the documents in their bundle ("RB"), other than the extent of Mr. Fu's loss of earning capacity and the quantum of his claims for temporary incapacity and medical expenses. In the course of the hearing before me the section 10 claim was agreed at the figure of $41,222.22; and the medical expenses were agreed at $983. I am left with the task of assessing the amount of his claim for permanent partial incapacity under section 9 of the ordinance.

3. Although I consider that far too much attention has been concentrated on the causes and extent of Mr. Fu's physical disabilities, and the details of the various medical reports, I wish to express my indebtedness to Miss Choi and Mr. Chan for their very helpful submissions on the approach which should be adopted in determining the degree or percentage of Mr. Fu's loss of earning capacity in this case. In particular, I wish to express my appreciation of their efforts to explain certain authorities which are prima facie binding on me, as well as their suggestions that I should adopt or reconsider two recent decisions of my own in this difficult area of the law. Being aware that one of these decisions is the subject of a pending appeal to the Court of Appeal, I was minded to adjourn this assessment until the outcome of that appeal is known. But, for a variety of reasons, including in particular the delay of three years since the respondents admitted liability in this case, and the fact that significant evidence relevant to Mr. Fu's loss of earning capacity has been placed before the Court, I consider that I should proceed immediately to give my reasons for my decision, and make the appropriate award in this case.

4. It is agreed that Mr. Fu's monthly earnings at the date of the accident were $7,000. The basis of that agreed fact has not been clearly disclosed, and Mr. Chan was anxious that I should not speculate thereon or go beyond that agreed fact. I do not propose to do so. The agreed sum serves to fix the upper limit of the award for permanent incapacity at $341,000. But it does not restrict the scope of the evidence on which a conclusion on the percentage or extent of Mr. Fu's loss of earning capacity can be reached. In large part Mr. Chan's anxiety to restrict the court to the agreed fact stems from his contention that the court can only look at the wages which Mr. Fu might have earned in some other occupation shortly after the accident in May 1987; and should not compare his actual earnings as a watchman at the date of the hearing with those of steel-binders at the same date. In the present case, there are significant differences in the evidence of actual or potential earnings as at the time of the accident and the date of the hearing.

5. At the present time, Mr. Fu earns $4,100 per month as a watchman. This sum consists of his basic salary of $3,950 and a discretionary diligence bonus of $150. Mr. Fu's actual earnings are more or less in line with the average or statistical earnings of watchmen in May 1987 and September 1990 which are set out in the memo of Mr. Lee Kwong-yiu of the Labour Department (p.25AB), dated the 27th September 1990. I do not know whether the latter figures are based on "double-pay" at Chinese New Year. In the absence of any evidence either way, I must, and do, assume that they fully reflect the actual monthly earnings of watchmen in 1987 and September 1990. For all practical purposes, I consider that the possibility of "double pay" at Chinese New Year should be disregarded for comparing Mr. Fu's actual and potential earnings immediately before and after the accident. On that basis the difference would be $4,000 ($7,000 - $3,000) in May 1987. That would indicate a loss of earning capacity of 57.14 per cent, leading to an award of $194,847.40. If one assumes that the Labour Department's statistics of earnings for watchmen are based on payment of an extra month at Chinese New Year, the loss of earning capacity would be reduced to 53.5 per cent. I dismiss this alternative because it is wholly speculative. Whether Mr. Fu would have received "double pay" at Chinese New Year would probably not be known until January or February 1988, some eight months after the accident. Prior to the accident, I find that Mr. Fu did not receive any bonus at Chinese New Year, despite almost 30 years in the industry. He was merely paid for the days when he actually worked.

6. Assuming that Mr. Fu's loss of earning capacity is to be assessed by reference to the evidence of comparative earnings at the date of the hearing, Miss Choi contends that Mr. Fu has suffered a loss of earning capacity of 75.52 per cent, justifying an award of $257,523.70. She relies upon a short-fall of some $12,650 between the current (end of 1991) earnings of steel-binders and Mr. Fu's actual earnings as a watchman. For both of these, I only have the evidence of Mr. Fu. His evidence has not been challeged or contradicted. It is not obviously out of line with information from other sources; and I accept it. I find as a fact that in 1991 experienced steel-binders, such as Mr. Fu, were capable of earning $670 per day. Miss Choi's figures are based upon that daily sum being earned in a 25-day month. There is no evidence that steel-binders take more than the usual or statutory holidays or rest-days. Indeed, Mr. Fu testified that, because of his experience and seniority, he attended for work on other days, even during typhoons. For the purposes of the present case I find that Mr. Fu might reasonably have expected to earn $16,756 per month in 1991 if he had been able to resume his pre-accident work. At the present time, I find that he is capable of earning no more than $4,100 per month plus an extra $3,950 at Chinese New year The difference between $16,750 and $4,100 per month, viz$12,650 indicates a loss of earning capacity of 75.52 per cent, as claimed by Miss Choi. If allowance is made for the fact that since 1990 Mr. Fu has been contractually entitled to an additional month's salary as a bonus at Chinese New Year (Clause 8 of p.26AB), the shortfall would be $12,310, which represents a loss of earning capacity of 73.49 per cent. That would result in an award of $250,609.52.

7. I now return to the question of how Mr. Fu's loss of earning capacity falls to be determined in accordance with the provisions of cap. 282. In the first place, Mr. Chan contends that it cannot exceed 35 per cent, because that is the degree stipulated by the First Schedule for "Ankylosis of shoulder joint in optimum position", and Mr. Fu's shoulder injury falls short of ankylosis In this respect, Mr. Chan relies solely on the provisions of section 9(1) of cap. 282. In my judgment, this is not the correct approach for various reasons. Apart from the fact that Mr. Fu's injury is not confined to restriction of movement of the right shoulder, but includes cervical spondylosis and weakness of grip in the right hand, Mr. Chan's submission, in my respectful view, betrays a blinkered approach to the relevant statutory provisions. It totally ignores the provisions of section 9(1A) of cap.282. It may be that Mr. Fu's neck condition is due to degenerative features present before the accident Dr. Harry Fang thought that the accident resulted in "exacerbation of a chronic condition of the neck." (cf. 4-5 RB) But, even if it was not caused or aggravated by the accident, it is one of the "special circumstances of the employee," just as much as Mr. Fu's age and limited education or training. All of these restrict the scope of the alternative employment, which he is and was capable of undertaking as a result of the accident.

8. In the present case, I merely have evidence of the amount which Mr. Fu is capable of earning as a watchman or lift operator. Dr. Chan Kow-tak considered that he was able to do something more, such as packing or assembling in a factory, or operating a moulding machine. But, I have absolutely no evidence to show what Mr. Fu might expect to earn from such occupations. Dr. Chan thinks that Mr. Fu could be re-trained for better work by attending a rehabilitation centre and vocational training programme. This would take not more than a year, but would oblige Mr. Fu to give up his present employment. Having regard to Mr. Fu's age, and the history of these proceedings, I regard this as a wholly unrealistic solution. It may be the best advice which has been given to Mr. Fu, but it does not help me to decide the degree or percentage of the loss of earning capacity he has suffered as a result of the injury or injuries caused by the accident.

9. Having regard to the totality of the evidence, I find that Mr. Fu is unable to return to his pre-accident employment. In effect, even the respondents' experts agree on this matter. Dr. Chan considered that he could carry' steel rods, but limited his capacity to carrying no more than 30-40 pounds; whereas, I find that Mr. Fu was expected to carry steel rods weighing at least 100 pounds in the course of his pre-accident work. In 1989, he did obtain work on construction sites performing one aspect of a steel-binder's work, namely hooking steel rods. But, such work is only available, if at all, on a casual basis and for no more than 4 to 6 days per month. It's availability is also dependent upon the willingness of other steel binders to work as a team with someone, like Mr. Fu, who is not able to put in 100 per cent of the energy etc required for such lucrative work. In the end, I am left with an injured employee who is incapable of resuming his pre-accident work in the increasingly lucrative occupation of a steel binder in the construction industry. He can only earn a living as a watchman. In my view, the fact that Mr. Fu has suffered a substantial loss of earning capacity is evident from the evidence before me that the earnings of steel binders have more than doubled, whereas those of watchman have increased by approximately 25 per cent. This case is, in my view, eminently one which is to be governed by section 9(1A) of cap.282.

10. In part, Mr. Chan sought to support his contention that Mr. Fu's loss of earning capacity could not exceed 35 per cent by relying on the opinions of various doctors who had examined Mr. Fu, as well as the certificates of Assessment and Review of Assessment (see RB). As for the latter the statutory board assessed Mr. Fu's loss of earning capacity at 1 per cent on the 7th September 1987 and at 3 per cent on the 16th August 1988. In July 1989, Dr. David Lee described those assessments as "ridiculous." (17AB). Having regard to Mr. Fu's medical and work history since the accident, it is difficult to disagree with Dr. Lee's view. I can only assume that the members of the Board were not aware of the effect of section 9(1A) of the statute, or based their assessments on wholly irrelevant criteria or guidelines. The views of these statutory boards are not even supported by any of the experts who have given information on Mr. Fu's condition in this case. Dr. Chan Kow-tak assessed it at 25 per cent (pl3 RB). Dr. Harry Fang thought it should be assessed at 10-15 per cent (p5 RB). With the exception of Dr. David Lee (cf 20 AB), the various doctors seem to have based their opinions on Mr. Fu's loss of earning capacity solely on the extent or degree of his physical disability, without reference to its effect upon his opportunities in the labour market. With respect, they equate physical disability with loss of earning capacity and, for perfectly understandable reasons, do not take account of the criticism of the guidelines for assessing non-scheduled injuries and other remarks of the Court of Appeal in Mak Tin-chun v Yeu Shing Construction Co. Ltd. (Civ. App. No. 101 of 1988; 30 November 1988). It is, somewhat surprising that this important decision of a strong division of the Court of appeal ([1991] 2 HKLR 460) has only recently been reported and has not even been cited in other recent cases, although it has been the subject of two commentaries in the Hong Kong Law Journal. See (1989) 19 HKLJ 249; (1990) 20 HKLJ 105. Of the various medical opinions placed before me, I prefer that of Dr. Lee, because he appears to appreciate that loss of earning capacity in the present context is different from physical disability or "physical impairment of the whole man," a phrase which is frequently found in medical reports without any explanation of its provenance or significance.

11. I turn now to the question whether Mr. Fu's compensation for permanent partial incapacity, having regard to section 9(1A) of cap.282, should be assessed on the basis of the facts prevailing at the hearing (i.e. end of 1991) or at the date of the accident. For convenience I will refer to the former as the "current" facts or circumstances. Although this issue was not really addressed by counsel until Miss Choi's final submissions and Mr. Chan's replies thereto, it was in my view an issue from the outset of these proceedings, and the respondents were given fair and adequate notice of the same by the fact that the unreported judgment of the Court of Appeal in Mak Tin-chun v Yeu Shing Construction Co. was included in the bundle of authorities which Miss Choi prepared for the hearing. Miss Choi's list did not include my decisions in IP Yuen-ngau v. HO Hong-sing and others (ECC No. 218 of 1990; 8th august 1991) and Chow Muk-yung v Dragages et Travaux Publics (ECC No. 142 of 1990; 12th December 1991), where I sought to apply what I believe to be the practical guidelines to be found in Mak Tin-chun v Yeu Shing Construction Co. However Mr. Chan was given ample opportunity to deal with all issues arising from these decisions.

12. To support his contention that the section 9 award should be calculated on the figures for Mr. Fu's earnings at the date of the accident, Mr. Chan relied firstly on the words "at that time" in sections 3, 9(l)(b) and 9(1A) Secondly, he pointed out that the equation suggested by Huggins VP in Hong Kong Paper Mills Ltd v. Chan Hin-wu [1981] HKLR 556 at 560 refers to the "time of the accident." Thirdly, he submitted that in previous cases the courts have adopted the differences in salaries at the date of the accident. Finally, he submitted that section 10 is the only statutory provision dealing with the interval between the accident and the hearing; and to adopt the current earnings would make much depend upon economic fortuity, and possibly operate to the benefit of employers in the event of adverse changes in the economy.

13. To a large extent I accept almost all of these submissions. But, with respect, I do not think that they provide answers to the practical question before the court. The court must determine the loss of earning capacity caused by the injury or injuries at the time of the accident. It does not follow that its assessment of that loss must only be based on evidence of actual and notional earnings at the date of the accident. Indeed, in many of the cases in the past evidence of such notional earnings was simply not before the court. That was the situation in the Hong Kong Mills case. The Court of Appeal arrived at a loss of earning capacity of 50 per cent by accepting the medical evidence that the employee had lost half the use of a leg above the knee and by adding an allowance for his back injury. The court came to its conclusion on the basis of the evidence available at the hearing and by deriving some assistance from the First Schedule. Of course, that case was decided before the enactment of section 9 (l A) of Cap.282. That may not be a sufficient reason for dismissing it as an authority. But, in my view, the enactment of section 9 (1A) opened the door to a consideration of factors going beyond the arbitrary figures in the First Schedule and the actual and notional earnings at the date of the accident, because it requires the court to have regard to the special circumstances of the employee.

14. In the present case, I have taken account of Mr. Fu's age and his previous experience, as well as the nature of his injuries. Furthermore, it is quite clear from the statutory definition of "partial incapacity", and the advice of the Privy Council in Lau Ho-wah v. Yau Chi-biu [1985] 1 WLR 1203; [1987] HKLR 1061, that the court must have regard to the future, as well as the present, when assessing the degree of permanent partial incapacity. As was said by Sir Owen Woodhouse in Lau Ho-wah v Yau Chi-biu, the concept of earning capacity:-

"....is concerned with a continuing state, with the potential of an individual and so very much with the future as well."

In my view, it would be wrong to reject reliable evidence of an applicant's current earnings in the former occupation and similar evidence regarding actual current earnings in the occupation or occupations available to the applicant after the accident. Such evidence enables the court to make a more just and reliable assessment of the applicant's actual and potential loss of earning capacity.

15. Mr. Chan's reliance on the past practice of the courts is understandable. However, I do not think that it supports his arguments on the proper construction of the statute or the approach which the District Court should adopt in exercising this exclusive jurisdiction. In the past, cases were decided on the evidence actually before the court; and it happened that the evidence was confined to actual earnings at the date of the accident. There was simply no evidence of current earnings. The court was, therefore, not in a position to make the projection contemplated by the statute and confirmed by the Privy Council in Lau Ho-wah v Yau Chi-biu. But, on the assumption that these cases decided sub silentio that evidence of current earnings was not admissible because it was irrelevant, they must be regarded as having been overruled by the decision of the Court of Appeal in yak Tin-chun v Yeu Shing Construction Co. Ltd. [1991] 2 HKLR 460 Mr. Chan contended that the Court of Appeal merely decided that the trial judge's findings of fact were unjustified. Strictly speaking, that is the case. But, in my view, it is clear from the order made by the Court of Appeal, and various passages in its judgment (i.e. pp 463 A-C, 465B, 465I, 466J) that it regarded the current earnings in the employee's post-accident and pre-accident occupations as clearly relevant to the question of the percentage of his loss of earning capacity at the time of the accident.

16. Mr. Chan's final argument for restricting the court's assessment to the facts at the date of the accident was to the effect that the statute recognises differences between the employee's earnings at the date of accident and some subsequent time as relevant only in the case of temporary incapacity, i.e. in the context of a claim for periodical payments under section 10 of cap 282. It is true that section 10(1) distinguishes between an employee's earnings at the date of the accident and his earnings "during the period of the temporary incapacity after the accident." But, I do not think that the section affords any support for Mr. Chan's contention. It deals with compensation for temporary incapacity which cannot last for more than 24 months. It assumes in the main that the employee will resume his pre-accident employment at some stage. The prospect of not enjoying any future increases, or suffering other fluctuations arising out of his pre-accident employment, is not really part of the court's exercise, when considering a claim under section 10. In theory, such a situation will not arise. In practice, the manner in which the rather mishmash provisions of section 10 are applied is often open to question, especially when the employee is also seeking compensation for permanent partial incapacity. But whatever may be the correct way of applying those provisions, it is clear that they relate to a temporary state of affairs of finite duration. In the case of permanent partial incapacity the court is required to assess the degree or percentage of the employee's reduced earning capacity "present or future, in any employment which he was capable of undertaking" at the time of the accident.

17. In the present case, I have made certain findings of fact regarding the current earnings of steel binders and those of watchmen. I have done so for three reasons. In the first place, I have done so because I consider that I am following the guidelines, if not the ratio decidendi, of the Court of Appeal in Mak Tin-shun v. Yeu Shing Construction Co. Ltd. Secondly, I have done so because I take the view that the provisions of the Ordinance oblige the court to have regard to the future loss or reduction of earning capacity suffered by the employee in the employment in which he was actually engaged at the time of the accident. Thirdly, I consider that the court should act upon reliable evidence available at the hearing, instead of having to make prophetic estimates of future developments or trends on the basis of evidence which may be out-of-date. It is not uncommon to find a lapse of 3 to 4 years between the accident and the hearing. In my view, no injustice is caused to either party if the court acts upon evidence of current earnings. The maximum amount which the court can award is fixed by reference to the employee's actual monthly earnings at the date of the accident. Cf. section 7. When dealing with a section 9 claim the court has to assess the percentage of that fixed sum which represents the employee's present and future reduced earning capacity. By having regard to current earnings at the hearing, which may be 3 or 4 years after the accident, the court is in a better position to ensure that the employee receives no more and no less than his statutory entitlement.

18. In the present case, I consider that I am left with a choice between the 75.52 per cent suggested by Miss Choi and the 73.19 per cent based on the assumption that Mr. Fu will contiune to enjoy terms of employment which will entitle him to an additional month's salary at Chinese New Year. The difference is very small Even at this late stage, there are or may be imponderable factors of which the court is unaware. Mr. Fu may lose his present job and experience difficulties in obtaining employment on similar terms. In all the circumstances, I consider that justice requires me to err, if at all, in favour of Mr. Fu. I assess his compensation under section 9 of the Ordinance at $257,523.70.