A recent Court of Appeal case held that overpayments of periodical payments under section 10 of the Employees' Compensation Ordinance (ECO) could not be set off against compensation payable under section 9.

In Kan Wai Ming v Hong Kong Airport Services (CACV 240/2010), the employer had made advance payments to the employee of just over $161,000 comprising $156,000 as periodical payments and about $5,000 as medical expenses. After trial, the court assessed total compensation at just over $100,000; approximately $3,500 for s.9 (Compensation in case of permanent partial incapacity) and $93,000 for s.10 (Compensation in case of temporary incapacity).

Since the amount awarded after trial was less than the total advance payments made by the employer, the employee's claim was dismissed with costs.

The employee appealed and argued that by virtue of s.10(4) ECO, it was not permissible for the Judge to make any deduction from the amount of compensation payable under s.9. In other words, any overpayments made under s.10 could not be set off against any amounts payable under s.9. Even though the employer had paid more than the total amount of compensation awarded, it could not use any overpayment of periodical payments to cover its obligation under s.9. The employer was still obliged to pay $3,500 under s.9. The Court of Appeal agreed with the employee and overturned the judgment of the lower court.

S.10(4) ECO provides that "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 under section 6, 7, 8 or 9."

The employer argued that only the sum of $93,000 is 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 s.10. Therefore s.10(4) does not prevent the excess sum of $64,000 from being set off against the s.9 compensation.

The Court of Appeal dismissed such argument and held that the words “paid…under this section” were clear and unambiguous, and refer to periodical payments which have been made in satisfaction of the employer’s obligations under s.10 including those payments made under the section before final assessment at trial. If it eventually turns out that the employer has paid more periodical payments than the amount assessed, he can seek an order for repayment or issue separate proceedings for recovery.

This judgment is important because most insurers and practitioners have followed the practice of setting off the total sum of advance payments against the total amount of compensation payable.

However, it seems that such method of calculation will no longer be allowed. In future, if employers wish to prevent abuse of sick leave certificates, they could make use of s.16 ECO (Medical examination and treatment) to compel an employee to undergo a medical examination to obtain evidence to rebut the presumption arising from sick leave certificates.

They could also pay periodical payments by way of interim payments, so that the total compensation amount can be adjusted later if necessary. In this way, an employer can seek credit for the entire interim payment as it will not be a periodical payment under s.10 ECO.

Click here for table