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Chan Shui Man v. Tsang Hing Shan t/a Yick Luen Furniture Design

Read the full judgment text of CACV 98/1991 on BabelCite. This Court of Appeal judgment was delivered on 19 November 1991.

1. Mr. Chan Shui Man ("the applicant") appeals against the order of Judge Moylan dated 29th May 1991 dismissing his application against Mr. Tsang Hing Shan ("the respondent") who trades as Yick Luen Furniture Design, for compensation under the Employees' Compensation Ordinance, Cap .282.

Case No.CACV 98/1991
Court
Court of Appeal
Date19 Nov 1991
Judge—
Case Document
100%Judiciary

CACV000098/1991

IN THE COURT OF APPEAL 1991 No. 98
  (Civil)

BETWEEN

CHAN SHUI MAN Applicant
(Appellant)

AND

TSANG HING SHAN trading as YICK LUEN FURNITURE DESIGN

 Respondent
(Respondent)

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Coram: Hon. Sir Derek Cons, Ag. C.J., Fuad, V.-P., and Clough, J. A.

Date of Hearing: 13 November 1991

Date of Judgment: 19 November 1991

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JUDGMENT

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Fuad, V.-P. (giving the judgment of the Court) :

1. Mr. Chan Shui Man ("the applicant") appeals against the order of Judge Moylan dated 29th May 1991 dismissing his application against Mr. Tsang Hing Shan ("the respondent") who trades as Yick Luen Furniture Design, for compensation under the Employees' Compensation Ordinance, Cap.282.

2. We would mention here that after the judge had delivered his reserved judgment, counsel appearing for the applicant (not Mr. Hingorani who represented him before us) sought and was granted leave to appeal. Leave was not necessary (vide s.23 of the Ordinance).

3. The sole question that arises on this appeal is whether the judge was right or wrong when he held that the applicant had failed to establish that at the material time he was an "employee" within the meaning of that expression in the Ordinance. Lord Griffiths, giving the judgment of the Privy Council in Lee Ting Sang v. Chung Chi-keung [1990] 2 AC 374 (an appeal from Hong Kong), made it clear, at p.384 E-G, that in a case such as the one before us -

"....where....the relationship has to be determined by an investigation and evaluation of the factual circumstances in which the work is performed, it must now be taken to be firmly established that the question of whether or not the work was performed in the capacity of an employee or as an independent contractor is to be regarded by an appellate court as a question of fact to be determined by the trial court."

4. In the written answer the respondent filed when served with a copy of the application, he averred, inter alia, that the applicant "was not the employee of my company. He was just a self-employed person." He also said: "All of his income was derived from the work of furniture contracted to him" and "My company would provide free lunch and paid leave to employees but not to [the applicant] because he was a self-employed person rather than one of my company's employees." This is the stand the respondent has taken all along.

5. The respondent operates a business in Kowloon manufacturing and selling furniture. In October 1988 one of the respondent's three regular employees went to China for a holiday. He was in fact away for about 20 days. The respondent needed a temporary replacement and his advertisement in a newspaper attracted the applicant who was interviewed by the respondent. The applicant produced his name card. On the top left hand corner was printed "YAN WO DECORATION & DESIGN ENG." and, in the middle, the applicant's name. On the bottom left hand corner there was an address in Stanley, with telephone and pager numbers appearing opposite.

6. According to the respondent's testimony, as soon as he saw what was on the card, he tol-d the applicant: "We do not employ bosses" but he was persuaded to take him on because the applicant said he was unemployed and asked for a favour. In indicating his decision, the respondent repeated that he did not employ bosses, adding "... but my employee has got permission from me to take leave in order to visit China. The electric saw table is unoccupied so I will contract it to you." He said that he had emphasised to the applicant that he would only be allowed to use the electric saw table while his absent employee was on leave.

7. It is clear that the judge accepted the respondent's evidence - the first meeting between the parties had not been related in the same way by the applicant.

8. While the applicant worked on the respondent's premises, the respondent gave him rough drawings showing the item of furniture he was to make, and its dimensions. Materials were supplied by the respondent and the parties agreed each time how much the applicant was to be paid for a particular piece of furniture he was to make.

9. The respondent was unrepresented in the lower court proceedings and before us. And so perhaps it was not too surprising that the following important facts related by the respondent in evidence-in-chief had not been put to the applicant -

"It had also been stated clearly to him that if he had done something wrong, he should pay me compensation i.e. if the furniture was not completed in accordance with my drawing, he would pay me compensation. He, being a contractor had to bear responsibility for items not made in accordance with the drawings whereas my employees did not have to. That is all."

However, counsel representing the applicant at the hearing elected not to cross-examine the respondent on these matters; nor did she apply for the applicant to be recalled so that he could deal with what had been said. Therefore, although the position is not wholly satisfactory, and the evidence far from precise, we are unable to accept that the judge erred in any way in taking this evidence into account.

10. On 17th November 1988, while the applicant was using the electric saw in the respondent's work place, he injured his hand quite badly. It is not very clear how long he had been working there when the accident happened but the applicant testified that it had been "for more than two months."

11. While the applicant was still attending hospital as an out-patient, on 16th December 1988, he signed a document [it became Exhibit 6] which, translated into English reads -

        "I, CHAN SHUI-MAN, sustained injuries at contracted work. This matter has nothing to do with the Yick Luen Furniture Design and I am thankful to Mr. TSANG. HIN-SHAH for his financial assistance of ten thousand dollars.

This document is made as proof."

12. Unfortunately, we would observe here, the evidence regarding the circumstances in which the $10,000 was paid over to the applicant, and now that sum was arrived at, is not at all clear. The respondent put the document to the applicant in cross-examination and he said that he had been "forced" to sign it, explaining that by "forced" he meant that he was told that he would only get the money if he signed the paper. Counsel for the applicant did  not clarify the matter in her cross-examination of  the respondent.The only fact that does seem clear is that the respondent had lent the applicant a tota1 of $4,000 in all up to 1st November 1988, and that he was paid $5,790 for his work.

13. This is how the judge summarized his findings of fact -

( i )

 the respondent did not wish to hire, and expressly told the applicant that he would not hire, a "boss";

( ii )

 out of consideration for the applicant who was out of work, the respondent did him a favour by allowing him to use the work place and "contracted" to him orders that had been placed with him. "A boss would not 'employ', using that term with its meaning for the Employees' Compensation Ordinance, another boss" [sic]

( iii )

 the applicant did not have fixed working days or fixed working hours (this was one reason why he had given his name card with his contact numbers on it to the respondent) so that the respondent might call to see if he might undertake a job early or late. The applicant worked on the furniture he was making after the hour at which the employees of the factory had finished and no money for this "overtime work" was paid;

( iv )

 unlike the respondent's employees who were  entitled to statutory public holidays, leave and meals in return for fixed hours of work and rates of pay the applicant was entitled only to the contracted price for the item he made;

( v )

 the applicant was engaged only to do specific jobs;

( vi )

 the pay for those specific jobs was set in advance  by agreement between the applicant and the respondent

( vii )

 although the materials to be used in the making of a particular item of furniture were supplied by the respondent he did not control the applicant in his work - on the contrary, the applicant was to be responsible to compensate the respondent for any materials spoilt or not properly used in his maufacturing the piece of furniture;

(viii)

 the very large difference between the wages the respondent was paying to his employees and the payment the applicant received for the work done on 15 days and the fact that the worker the applicant had replaced had returned to his job on his return from leave in China showed that in the absence of a substitute worker the respondent was prepared only to do a favour to an unemployed "boss" and give him work on specific jobs;

(ix)

 While Exhibit 6 of itself could not exclude the operation of the provisions of the Employees' Compensation Ordinance, and whilst recognizing that when he signed it the applicant was grateful for any monetary assistance given, it had embodied the reality of the situation, namely that whilst using a tool of the respondent, in the respondent's factory and working on a job given to him by the respondent, the applicant was in truth operating as an independent contract carpenter making items of furniture contracted to him by the respondent.

The judge then set out the factors he had taken into consideration in applying what he called "the fundamental test to determine the issue", as follows -

"Factors for Applicant being Employee Worked in Respondent's factory.

Factors for his being independent contractor Had hand tools of his own.

Used tools of the. Respondent. Applicant liable to recompense Respondent for badly [sic].

Respondent provided material for,making the furniture.

Applicant did not have fixed hours or days of work.

Respondent found the job he gave Applicant to do. Paid for each satisfactory completed job.

Applicant took over the work bench of an employee of the Respondent who was on leave. was told, from the beginning, expressly, that he would not be taken into employment, as he was a "boss".

Applicant was taken on during the absence on leave of an employee. No meal allowance. No statutory holidays off with pay. No overtime payment for time worked outside the hours of Respondent's employees.

Conditions wholly different from, although work of similar nature to, those employed by the Respondent."

14. The main ground of appeal is that the judge "erred in law and in fact when he ruled that the applicant was engaged by the respondent as an independent contractor under a contract for services and was not an employee of the respondent."

15. As to the principles upon which an appellate court must approach a case such as the one before us, in the Lee Ting Sang case, Lord Griffiths stressed, at p.385 E-F:

"Their duty is no more than to examine those facts with a decent respect for the tribunal appealed from and if they think that the only reasonable conclusion on the facts found is inconsistent with the determination come to, to say so without more ado."

16. Mr. Hingorani recognized that, to succeed, he would have to persuade us that the facts found by the judge (about which there is no challenge) point so plainly to the applicant being an employee within the meaning of the Ordinance, that the judge's conclusion that he was an independent contractor was one which was not reasonably maintainable.

17. In Lee Ting Sang's case, at p.382, Lord Griffiths said that the proper approach to the construction of the expression "contract of service" which occurs in the definition of the word "employee" in s.2 of the Ordinance was to apply English common law standards to determine the question whether the workman was worxing as an employee or as an independent contractor. He went on to say -

        "What then is the standard to apply? This has proved to be a most elusive question and despite a plethora of authorities the courts have not been able to devise a single test that will conclusively point to the distinction in all cases. Their Lordships agree with the Court of Appeal when they said that the matter had never been better put than by Cooke J. in Market Investigations Ltd. v. Minister of Social Security [1969] 2 Q.B. 173, 184-185:

'The fundamental test to be applied is this: "is the person who has engaged himself to perform these services performing them as a person in business on his own account?" If the answer to that question is "yes," then the contract is a contract for service. If the answer is "no," then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the   relative weight which the various considerations should carry in particular cases.The most that can be said is that control will no doubt always.have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.'"

18. In his judgment Judge Moylan mentioned that he had read Lee Ting Sang's case. Although he did not refer to any part of Lord Griffiths' judgment, there can be no doubt that he sought to apply it.

19. In the light of the facts of the present case, it is helpful to cite, from Cooke J.'s judgment in the Market Investments case, the paragraph which immediately follows the one cited by Lord Griffiths-

"The application of the general test may be easier in a case where the person who engages himself to perform the services does so in the course of an already established business of his own; but this fact is not decisive, and a person who engages himself to perform services for another may well be an independent contractor even though he has not entered into the contract in the course of an existing business carried on by him."

20. It is perfectly clear, on the facts found by the judge, that the respondent never intended to engage the applicant as an.employee and that this was made plain to the applicant from the beginning.To what extent is the actual intention of the parties relevant to the determination of the issue which divided the parties at the hearing of the application? Of course, their intention cannot be conclusive for they may not have achieved what they intended. On this aspect of the case, we consider that a decision of the Privy Council referred to in the Case Comment by Mr. E.R. McCormick in HKLJ (1991) Vol.21 p.109 (and mentioned by the judge in his judgment) is instructive. Australian Mutual Provident Society v. Chaplin and another (1986) 18 ALR 385 was an appeal to the Privy Council from South Australia. There, the question was whether Mr. Chaplin was a person employed under a contract of service so as to be entitled to certain benefits under a statute. One of the clauses in his contract of service with the society provided –

3. The relationship between the Society and yourself is that of Principal and Agent and not that of Master and Servant."

21. As to the effect of this clause, Lord Frazer of Tullybelton, giving the judgment of the Board, said this at p. 389 –

"Clearly cl 3, which, if it stood alone, would be conclusive in favour of the Society, cannot receive effect according to its terms if they contradict the effect of the agreement as a whole. Nevertheless, their Lordships attach importance to c1 3, and they consider.tnat the following statement by Lord Denning MR in Massey v. Crown Life Insurance Co. (4 November 1977, unreported) correctly states the way in which it can properly be used: 'The law, as I see it, is this: if the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label upon it ... On the other hand, if their relationship is ambiguous and is capable of being one or the other [ie either service or agency], then the parties can remove that ambiguity, by the very agreement itself which they make with one another. The agreement itself then becomes the best material from which to gather the true legal relationship between them."

After a detailed examination of the written agreement as a whole, their Lordships (at p.392) concluded that the Society had not attached a false label to the contract, "... the label attached by cl 3 is entirely consistent with the contract as a whole."

22. The facts here were somewhat unusual, and the determination of the question whether the true relationship between the parties was or was not that of employer and employee presented the judge with a difficult task. It must be acknowledged that some of the factors which the judge thought pointed to the applicant being an independent contractor could be accounted for if the respondent had taken the applicant on as an employee, but on different terms because he was to work for him temporarily. On the other hand, while some of the factors discussed by the judge could be regarded as neutral, none of them were inconsistent with the categorization of the relationship contended for by the respondent.

23. However, the fact that the applicant had accepted the engagement on terms that he would be paid on the basis of a previously agreed amount for each item of furniture he made (we do not think that the applicant could be classed as a "piece-worker" as that expression is ordinarily understood) and the fact that he would have to "compensate" the respondent for any work done badly, point strongly to the applicant being an independent contractor although they are not absolutely inconsistent with his being an employee.

24. We feel unable to say that on a proper evaluation of the facts found by the judge, the only reasonable conclusion is that the applicant was the respondent's employee for the purpose of the Ordinance.

25. The appeal is therefore dismissed.

(Sir Derek Cons)
Ag. Chief Justice		   (K.T. Fuad)
Vice-President		    ( P.G. Clough)
Justice of Appeal

Representation:

Mr. Jeevan Hingorani (Director of Legal Aid) for the Appellant/Applicant.

Respondent in person.