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Legal Update

Latest Court of Appeal Decision Confirms No Deduction for Overpaid Periodical Payments

30 May 2011
Mayer Brown JSM Legal Update


In its decision handed down today, the Court of Appeal held that overpaid sick leave payments made under section 10 of Employees' Compensation Ordinance (ECO) cannot be used to set off compensation under other sections of ECO.

Brief Facts

In Kan Wai Ming v Hong Kong Airport Services Limited (CACV 240/2010), the Applicant appealed against the decision of Judge Simon Leung who denied the Applicant any compensation on the basis the sick leave payments and reimbursement of medical expenses received by him exceeded the total amount of compensation he was entitled to under ECO. The Applicant relied on section 10(4) of the ECO which provided that no sick leave payment paid or payable under section 10 (compensation for temporary incapacity) shall be deducted from any amount of compensation payable under section 9 (compensation for permanent partial incapacity). The Applicant therefore contended that notwithstanding the overpayment of sick leave payment under section 10, the Judge should have awarded the assessed compensation under section 9 in favour of the Applicant.

The Ruling of the Court of Appeal

The Applicant was successful in his appeal. The Court of Appeal held that the lower court should not have deducted the sick leave payments from the total EC award, which has the effect of deducting the overpaid sick leave payment under section 10 from compensation under section 9, which is prohibited by section 10(4). The Court of Appeal ruled that the Applicant's entitlement to compensation under section 9 and section 10 were separate and distinct and that in case an employee entitled to both, they cannot be set off against each other. Section 9 of the ECO provided for a discrete type of compensation to be separately assessed. The Court said that such deduction would be contrary to ECO's intention of providing quick financial relief to employees. The Court also made it clear that the position will be the same even if the Respondent had labelled the overpaid sick leave payment as "interim payment".

The Court of Appeal also gave some guidance to employers to prevent abuse of sick leave and periodical payments. One of the mechanism available to employers to prevent overpayment altogether is section 16 of the ECO , which empowers an employer to order for an employee to attend a single medical examination. A further tool available to employer is that an employer can institute a separate proceeding under the ECO to assess compensation and seek a determination from the court of the period for which periodical payment would fall to be made by obtaining a final assessment under section 10.

The judgment however did not mention the issue of whether repayment would be ordered against an applicant in circumstances where there is such over payment.

For inquiries related to this Legal Update, please contact:

Marina Fung ( )

Learn more about our Hong Kong office, Employment & Benefits, Insurance & Reinsurance and Litigation & Dispute Resolution practices.

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