[Archive] Impact of a CFA ruling on the employee compensation mechanism

DRAFT LegCo Question No. 1

Date of sitting : 14 May 2001

Asked by : Hon Bernard CHAN

Replied by : SEM

Question :

On 20 February this year, in a case involving a fatal industrial accident, the Court of Final Appeal ruled that even if the deceased did not have any established habit of saving money during his lifetime, it was open to the court to make an estimate of the wealth which the deceased would have probably accumulated in his future days but for the accident causing his death, and use this as the basis for determining the amount of compensation payable to his dependants in this respect. In this connection, will the Government inform this Council:

of the impact of the precedent on the compensation mechanism for deaths and injuries of employees; and
whether the precedent will pose greater financial pressure on the Employees Compensation Assistance Fund in future; if so, of the solution that the relevant authorities have?

Reply:

Madam President,

Section 20(2)(b)(iii) of the Law Amendment and Reform (Consolidation) Ordinance provides that damages payable to an employee who died in the course of duty covers the loss of wealth which the deceased would have accumulated. In assessing such loss, the court will take into account the income and expenditure of the deceased person, the age when he died, and the wealth he would have accumulated if not for the accident which took his life, etc. Since the Ordinance came into force in 1986, the High Court already has a number of precedents awarding damages, including to those who did not have any established habit of saving money, in respect of loss of wealth that would have been accumulated.
Regarding a case of award of damages in a fatal industrial accident, the Court of Final Appeal (CFA) ruled in February this year that although the deceased was not able to accumulate any wealth due to his heavy family burden, the fact that he was a thrifty and hardworking person who was not hooked on any bad habits, his parents were already very old and his children were about to complete their schooling formed the basis for it to arrive at an inference that if not for the accident, the deceased would have accumulated wealth by the time he would otherwise have died. The rulings on damages in respect of the loss of such wealth by the Court of Appeal and Court of First Instance were therefore affirmed.
It is clearly stated in the ruling of the CFA that in deciding whether damages should be awarded for loss of accumulated wealth, whether the deceased has a record of saving before his death was not a condition antecedent. The court has to make analysis based on the established facts and estimate the wealth the deceased would probably have accumulated if he had been alive before making a ruling on damages.
In the case concerned, the CFA has only elaborated on the related provisions of the Law Amendment and Reform (Consolidation) Ordinance but did not alter the mechanism for calculating damages. Basing on this, we are of the opinion that the ruling should be supported since it can provide the grief and poverty stricken dependents of the deceased with a more reasonable compensation which can help relieve their hardships. It would not have any impact on the compensation mechanism for deaths and injuries of employees.
As the ruling of the CFA did not constitute a change of the calculation basis for damages and that there have only been a small number of such cases, it is estimated that they would not pose a great financial pressure on the Employees Compensation Assistance Fund (ECAF). Indeed, if all employers took out insurance for their employees and bear their legal obligation, there is no need to draw on the ECAF at all. The current financial problem faced by the ECAF could be attributed to a number of causes, the most important one being that there have recently been three major common law cases with damages exceeding $10 million. Besides, as a result of a drop in employees' compensation insurance premium, levy income has decreased in recent years. The Administration is presently reviewing the Employees Compensation Assistance Scheme and enforcement has been stepped up. We will do what we can to try to maintain a breakeven balance sheet.