Poon Chau Nam v. Yim Siu Cheung t/a Yat Cheung Airconditioning & Electric Co

CACV 86/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 86 OF 2005

(ON APPEAL FROM DCEC NO. 410 OF 2003)

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BETWEEN

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Before : Hon Woo VP, Yeung JA and Yuen JA in Court

Date of Hearing : 4 November 2005

Date of Judgment : 4 November 2005

Date of Reasons for Judgment : 15 November 2005

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REASONS FOR JUDGMENT

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Hon Woo VP:

Introduction

1.The applicant was an air-conditioning technician.  On 18 September 2002, while he was working on an air-conditioner on the roof of Causeway Bay Plaza I, the welding electrode rod which he was using suddenly broke, ejecting fragments injuring his left eye.  He was hospitalized for about one and a half months, and lost about 30% of sight in his left eye and thus 45% of his earning capacity. 

2.He brought an employees’ compensation claim against the respondent.  On 8 February 2005, Deputy District Judge P Li dismissed the claim, finding that there was no employer/employee relationship between the parties.

3.Against the judgment, the applicant appealed. 

4.At the conclusion of the hearing before us, we dismissed the appeal with costs.  My reasons are set out below.

Grounds of Appeal

5.On behalf of the applicant, Mr Neal Clough has raised three grounds of appeal, namely,

(1)    The judge misdirected himself as to the evidence and erred in law in finding that the applicant was not an employee of the respondent.

(2)    The judge erred in his approach to the evidence concerning the fact that the applicant had joined the Mandatory Provident Fund (“MPF”) scheme as a self-employed person.

(3)    The judge erred in law in finding that the applicant was self-employed.

6.Mr Clough was not challenging the judge’s findings of primary facts; rather, he contended that the only reasonable inference from those facts is that the applicant was under the employment of the respondent.  Mr Clough’s main plank was that the evidence of the respondent himself established an employer/employee relationship.  He submitted that the employer/employee relationship was obvious and the finding that the applicant was self-employed was not open on the evidence. 

7.Before going into the evidence, facts and findings, I shall first deal with the applicable law.

The approach of the appellate court

8.The decision of a trial court or tribunal on the issue whether there was an employee/employer relationship is to be regarded by an appellate court as a question of fact determined by the tribunal: Lee Ting Sang v Chung Chi-keung & another [1990] 2 AC 374, at 384G.  It was also established in that case, which was a workman’s compensation case on appeal from Hong Kong to the Privy Council, that such a decision, regarded as a finding of fact, could only be impugned if it could be shown that the tribunal correctly directing itself on the law could not reasonably have reached the conclusion under appeal.  The appellate court’s duty is no more than to examine the findings of fact 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.  See Lee Ting Sang at pp 385C and 386A-B.  This approach has been followed by this Court in Chan Shui Man v Tsang Hing Shan trading as Yick Luen Furniture Design [1991] 2 HKC 243 and Cheng Yuen v The Royal Hong Kong Golf Club [1997] HKLRD 219.

9.Regarding borderline cases, Lord Griffiths in Lee Ting Sang had this to say, at 385E:

“The decision will depend upon the evaluation of many facts and there will be many borderline cases in which similarly instructed minds may come to different conclusions.  It is in such situations that an appeal court must not interfere and it is in this sense that the decision is said to be one of fact.  But an appellate court must not abdicate its responsibility …”

The standard to be applied to determine the relationship

10.The question of the applicable standard in deciding whether there was employer/employee relationship was also dealt with in Lee Ting Sang.  At 382D-G, Lord Griffiths observed:

“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 services.  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.’”

11.In Chan Shui Man, after citing the above passage, which lays emphasis on the importance of the business aspects of the operation of an independent contractor, Fuad VP, delivering the judgment of the Court, stated at 249A-B:

“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.’”

12.In The Royal Hong Kong Golf Club, relating to the issue whether a caddie engaged by the golf club was entitled to wages in lieu of notice and long service payment from the club, this Court was not impressed with the absence of the “business” element on the part of the caddie.  In reversing the decision of the court below that there was a contract of employment, all three members of this Court considered that the key to determining whether an employee/employer relationship subsisted was whether there was one continuing contract throughout the period the plaintiff served as a caddie or whether there was a series of contracts each time he attended at the golf club to act as a caddie.  The Court took the informality of the arrangements and the freedom of caddies to attend whenever they wished to do so as the crucial element in the case.

13.The case went on to the Privy Council [1997] 2 HKC 426.  The decision of the Court of Appeal was affirmed, on the main basis that there was no mutual obligation between the parties.  The club was not obliged to give the caddie any work or to pay him other than the amount owed by the individual golfer for whom he caddied.  And he was not obliged to work for the club and he had no obligation to the club to attend in order to act as a caddie for golfers playing on the club premises.

14.Regarding the “business” element, the observation of Ching JA in the Court of Appeal at page 227B-D is instructive:

“I refer first to the expressions used in many of the decided cases which contrast an employee on the one hand with others who are businessmen or who are described as being in business on their own account on the other hand.  Once it is accepted that the various indicators that have been laid down in the authorities are not to be mechanically applied, it seems to me that there is a danger of defeating the reasons why that should be so by applying too strict a meaning to the words ‘business’ and ‘businessman’.  Like countless others in Hong Kong the plaintiff offered his services without his own helpers, without providing equipment, without risking capital and without management of his activities in any accepted sense of the word.  What happened was that he offered his services on the basis of acceptance by the defendant within the grade that the defendant decided.  He was obliged to wear a uniform.  None of this begins to indicate to me that he was an employee.  He was not guaranteed any work and he was not obliged to attend for work.  While it may not be that he can properly be described as a businessman in my view the accurate description is that he was self-employed.”

15.Mr Clough has also directed our attention to the reference by Nazareth VP to the very useful summary of indicia in Chitty on Contracts, 27^th Ed, Vol 2, para 37-008, which is now contained in the same treatise, 28^th Ed, Vol 2, para 39-009:

(1) the degree of control exercised by the employer;

(2) whether the worker’s interest in the relationship involved any prospect of profit or risk of loss;

(3) whether the worker was properly regarded as part of the employer’s organisation;

(4) whether the worker was carrying on business on his own account or carrying on the business of the employer;

(5) the provision of equipment;

(6) the incidence of tax and national insurance;

(7) the parties’ own view of their relationship;

(8) the traditional structure of the trade or profession concerned and the arrangements within it.

The parties’ view of the relationship

16.In connection with point (7) above, Mr Jeremy Cheung, on behalf of the respondent, in his written submission referred us to Lord Denning MR’s observation in Massey v Crown Life Insurance Co [1978] 1 WLR 1978 at 679H:

“…if the parties’ relationship is ambiguous and is capable of being one or the other, 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.”

17.However, Mr Clough countered by drawing our attention to Ferguson v Dawson & Partners (Contractors) Ltd [1976] 1 WLR 1213, where Megaw LJ stated at p 1222C:

“My own view would have been that a declaration by the parties, even if it were incorporated into the contract, that the workman was to be, or was to be deemed to be, self-employed, an independent contractor, ought to be wholly disregarded—not merely treated as not being conclusive—if the remainder of the contractual terms, governing the realities of the relationship, showed the relationship of employer and employee.  … I find difficulty in accepting that the parties, by a mere expression of intention as to what the legal relationship should be, can in any way influence the conclusion of law as to what the relationship is.  …”

18.It is to be noted that the above is but obiter, for Megaw LJ in the early part of his judgment, at p 1220B expressly rejected the appellant’s contention “that there were no other terms of the contract” than that the worker’s status was to be, or was to be deemed to be, a “self-employed labour only subcontractor.”

Casual workers

19.There was a dissension of opinion on the lack of mutual obligation between the parties as the basis for the determination of the appeal in the Privy Council in The Royal Hong Kong Golf Club because the caddie rendered his services as a casual worker.  Lord Hoffmann, who did not agree with the other four Law Lords on that basis, had this to say, at [1997] 2 HKC 426, p 434G onwards:

“The Court of Appeal allowed the appeal on the ground that the appellant was under no obligation to come to work and the club was under no obligation to provide him with employment.  This was not a point which was taken before the tribunal or on appeal to the judge, Bokhary J.  In my view, the reason why no one gave it any attention was that it did not matter.  If the appellant had to prove that he was employed under a continuing contract, it would have been of great significance.  It was however sufficient for him to show that when working at the club, he had been a casual employee, in the same way as a casual waitress, gardener or labourer, employed from time to time as and when he presented himself for work and the club had work to offer.  Provided that he was an employee of the club at such times as he was actually working, the effect of Sch 1 to the Employment Ordinance (Cap 57) would be to deem him to have been in continuous employment.  And for the purpose of deciding whether he was a casual employee, the fact that neither party was under an obligation to employ or be employed is of course irrelevant.  That is the nature of casual employment.  The whole purpose of Sch 1 was to equate the position of a regular casual employee with that of a person engaged under a continuous contract of employment.

…

Finally, the club rely upon the fact that they treated the caddie differently from those whom they recognized as employees.  He received no holiday pay, insurance cover, bonuses or other benefits.  There is no doubt that the club took the view that the caddies were not employees.  But this is not conclusive.  Their status depends upon the objective facts of their relationship to the club.  The club’s conduct merely showed that it was consistent in denying the caddies the rights to which, as employees, they were entitled.  Such self-serving acts cannot alter their legal status.”

20.Section 2 of the Employees’ Compensation Ordinance, Cap 282 makes reference to casual employment.  The relevant part reads:

“2. Meaning of ‘employee’

(1)  In this Ordinance, unless the context otherwise requires, the expression ‘employee’ (僱員), subject to section 4 and the proviso to this subsection, means any person who has, either before or after the commencement of this Ordinance, entered into or works under a contract of service or apprenticeship with an employee in any employment, whether by way of manual labour, clerical work, or otherwise, and whether the contract is expressed or implied, is oral or in writing:

Provided that the following persons are excepted from the definition of ‘employee’ (僱員) –

(b)  any person whose employment is of a casual nature, and who is employed otherwise than for the purpose of the employer’s trade or business, not being a person employed for the purposes of any game or recreation and engaged or paid through a club and not being a part-time domestic helper; or …”

21.The Ordinance also covers the situation where a casual worker works for two or more employers when dealing with methods of calculating earnings, for section 11(7) reads:

“(7) Where the employee had entered into concurrent contracts of service with 2 or more employers under which he worked at one time for one such employer and at another time for another such employer, his monthly earnings shall be computed as if his earnings under all such contracts were earnings in the employment of the employer for whom he was working at the time of the accident:

Provided that …”

22.Despite the above statutory provisions and Lord Hoffmann’s view in The Royal Hong Kong Golf Club case, as cited above, the fact remains, the majority view of the Privy Council was that the lack of mutual obligations between the parties was decisive of the matter in the circumstances of that case.

The facts and findings

23.There did not seem to be any dispute between the parties on the background and work experience of the applicant and how he came to know and work for the respondent, as stated in the applicant’s witness statement.  Of course, the main issue of whether there was an employer/employee relationship was hotly disputed.  The relevant parts of the applicant’s statement below should therefore be read with that caution in mind:

2.   Prior to the accident I had worked in various fields including welding and selling dried seafood.  I began to work as an air-conditioning apprentice in 1989.  I had served my apprenticeship with Wing On Air-conditioning for four years.  It was during this period that I met YIM Siu-cheung [the respondent] who was my senior.  In tandem with my apprenticeship I took a 3-year evening course at Morrison Hill Technical Institute and was issued with a Craft Certificate in Air-conditioning and Refrigeration on 12 July 1996.  I then worked an (sic) air-conditioning technician.

3.   In September 1993, I left Wing On Air-conditioning and joined Yat Cheung Air-conditioning & Electric Co. “Yat Cheung”, which was set up by YIM Siu-cheung.  After working for Yat Cheng (sic) for one year, I set up my own company.  As the business was poor, I closed my company in 1996 and returned to work for Yat Cheung.  At that time, Yat Cheung employed me as a casual worker.  I worked for Yat Cheung until around November 1997.

4.   In late 1997 I began work as a plumbing worker on construction sites.  Then in March 1998 I worked as an electrician for a company called YDS until the airport project was completed.  For the next 6 months I worked for Po Hing (transliteration) before finally returning to Yat Cheung as a casual worker in February 2001.

5.   I was the only casual worker employed by Yat Cheung.  Yat Cheung had three permanent employees and I worked with them most of the time.  My wages were calculated on a daily basis and my daily wage was HK$550.  I was not entitled to any other allowance or benefit.  My employer did not make any contribution to the mandatory provident fund for me but I did so myself.  I was required to fill in a working time sheet every day after work, stating the working hours and place of each day for calculation of wages, overtime allowance and traveling expenses by the employer.

6.   If there was work, YIM Siu-cheung would inform me of the place of work the night before.  If any tools were needed for the job, I would go to Yat Cheung’ shop at G/F., Block 1, 25 Hang Yip Street, Kwun Tong to collect them.  YIM Siu-cheung would collect myself and the other workers from the shop and drive to the workplace in his van.  Occasionally YIM Siu-cheng (sic) would ask me to purchase spare parts for him but he would always reimburse me for any expenses.

7.   It was always YIM Siu-cheung who assigned work to me.  As the projects he took up were of a rather large scale, we usually worked in a team of two or three.

24.In his judgment, the judge enumerated four aspects of the evidence of the applicant which he found doubtful.  His view of the applicant as a witness was expressed in para 7 of the judgment:

“As I whole, I do not find him reliable.”

25.The judge found the respondent to be frank and direct in giving evidence and concluded that the respondent impressed him as a reliable witness. 

26.The judge then went on under the heading of “Analysis of evidence” to examine various aspects of facts, including the offer of work, the MPF scheme, the payment of wages, the equipment, the supervision and a testimonial written by the respondent. 

27.As to the offer of work, the judge noted the applicant’s admission that there was no obligation for the respondent to offer work.  The applicant could reject the offer although he never did.  The applicant also admitted that he could take up jobs from other companies, without the need to seek the respondent’s permission.  In the period between November 2000 and February 2001, the applicant claimed to be an employee of both the respondent’s company and Po Hing, another company.  He said that he could have a choice as to which employer he would work for but he would prefer to work for the respondent despite the lower pay.  On this the judge stated:

“I find it strange that he could be employed by two employers in concurrent periods.  It is even more strange that he could choose which one to work for.”

28.The judge found that on the aspect of offer of work, the evidence was inconsistent with an employee/employer relationship. 

29.The applicant joined a MPF scheme provided by the Bank of East Asia on 1 December 2000 as a self-employed person.  The applicant’s evidence was that he did so because in November 2000, the respondent had indicated to him that it would be a criminal offence to employ him without joining a MPF scheme.  The respondent did not dispute that there was such a discussion.  The respondent confirmed that he took out a MPF scheme for all the employees of his company in January 2001, but not including the applicant. 

30.The judge found it strange that when the applicant joined the MPF scheme as a self-employed person, that was at the time when he allegedly was an employee of both the respondent and another company.  The judge also considered the possibility that the suggestion made by the respondent to the applicant to join a MPF scheme was to create a sham to evade his responsibilities as an employer.  He found that there was no reason for the respondent to single out the applicant from the MPF scheme taken out by him for all employees of his company but not the applicant.  He accepted the respondent’s evidence that it was the applicant who wished to maintain flexibility and remained as self-employed.  The judge treated this as a strong indication that there was no employer/employee relationship.

31.On the aspect of payment of wages, the judge found that although the applicant was entitled to a daily pay of $550 while he was working for the respondent from 9 am to 6 pm, there was no other benefit.  There was no fixed payday and the applicant was paid quite irregularly and sometimes in arrears of a few months.  The judge found this to be consistent with the evidence of the respondent that the applicant was paid at the end of a project whenever the latter submitted work records.

32.The judge found that there was no work for the applicant in the month of March 2002.  He continued:

“From February to September, the applicant worked for 117 days.  This is consistent with the evidence of the respondent that the applicant was employed when need arose.  It was ‘on a casual as required basis’.”

33.Mr Clough relied heavily on this passage to say that it contradicts the judge’s finding that the applicant was an independent contractor.  I will revert to this later.

34.The judge accepted that the respondent was to supply most of the equipment for the work, especially the heavy equipment.  However, he considered that this factor alone was neither here nor there and it did not advance the applicant’s argument that he was an employee. 

35.The judge accepted the evidence that supervision of the applicant’s work was minimal because the respondent’s workers were all experienced and could make arrangements for themselves.

36.There was a letter dated 4 November 2000 written by the respondent certifying that his company employed the applicant as a technician.  The judge accepted the respondent’s explanation that he wrote the letter at the request of the applicant for the purpose of making some kind of application, as that kind of certification was common in the trade.  The judge referred to a similar certificate issued by the respondent dated 18 September 1997, certifying that the applicant had worked in his company since 1 September 1993.  The judge commented that this earlier certificate was obviously inaccurate as it was the applicant’s evidence that he operated his own company from 1994 to 1996.  The judge accepted the evidence of the respondent that the testimonial was so worded for the purpose of making an application which was likely to be a technician licence and did not consider the letter of 4 November 2000 as being conclusive of the status of the applicant.

The applicant’s arguments

37.Mr Clough’s chief complaint is that essentially, individually and collectively the judge was misled by his misunderstanding of the nature of casual employment at construction sites to conclude that the ability of a worker to have concurrent employers was inconsistent with his being an employee.  The traditional structure of the construction trade in Hong Kong allows for casual workers to have more than one employer and to work as an employee and arrangements such as those the respondent confirmed were in place with the applicant.  Mr Clough submitted that the term “casual labourer” encompasses myriad relationships but in its most common form is a daily rated worker, who works on a particular site for a subcontractor for a day or a few days or until a particular project is finished or as a substitute worker if another worker is unavailable.  He argued that there is no basis for thinking that working for more than one person is inconsistent with being an employee.  He emphasised that casual labourers would often have more than one employer.  He contended that the judge had failed to consider that the Employee’s Compensation Ordinance specifically provides for employees having concurrent employers.  He submitted that the judge had failed to consider the fact that the respondent was in control of the assignment of work and of the work itself and the applicant did not provide his own equipment, he did not hire his own helpers, he took no financial risk, he had no responsibility for investment and management and had no opportunity of profiting from sound management in the performance of his task.  Mr Clough relied on the dictum of Cooke J, referred to above, to say that the applicant was not a person in business on his own account, thus indicating that he was but an employee.

38.Mr Clough also relied on the following facts and evidence to establish the employee/employee relationship.  The applicant was working with other workers at the time of his accident.  Each of the workers ranked equally when they worked together on a particular task.  No one was in charge.  The other workers were employees.  The applicant’s role as a co-worker doing the installation or the repair was the same as any of the other employees of the respondent.  Like the other workers the applicant was daily rated and was paid $550 per day.  The working hours were from 9 am to 6 pm and if he worked beyond that he would be paid overtime.  All tools and equipment were supplied by the respondent, apart from some hand tools that the applicant took in his rucksack.  He worked on whatever particular task at whatever particular site the respondent directed. 

39.Pausing here, it is necessary to point out that Mr Clough was incorrect to compare the pay and the way of payment in respect of the applicant with those of other persons under the respondent’s employ.  The respondent’s evidence was that the wages of the workers under his employ ranged from $10,000 to $12,000 per month and were paid on the 5^th and 20^th of each month.  They were given four paid holidays per month and seven days’ annual leave on top of the other statutory holidays, and they were entitled to double pay and bonus payment too.  He filed tax return for the employees.

40.Mr Clough also relied heavily on the judge’s comment on the fact that from February to September 2002 the applicant worked for 117 days that it is “consistent with the evidence of the respondent that the applicant was employed when need arose” to say that the term “employed” used by the judge contradicted his conclusion that there was no employer/ employee relationship. 

41.While Mr Clough’s comment is understandable to avail himself of every possible argument in favour of the applicant, nevertheless from the context of the judgment, and especially in view of the conclusion reached by the judge, it is clear beyond peradventure that the word “employed” was used in the sense of being engaged.  During oral argument, very fairly and properly, Mr Clough readily accepted this view.

42.The issue to be decided by the judge, and no less by this Court, is, as has been so frequently expressed, an elusive one.  No definition or definitive test has so far been devised, despite the large number of authorities on the subject.  All that the authorities are able to offer is to name various indicia for ascertaining the true relationship between the parties.  Each case must be decided upon its own facts.

43.Mr Clough’s contention about the special features of casual employment in the Hong Kong construction trade is not supported by the evidence.  In particular, there was no evidence before the judge on the general picture of casual employment in the construction trade, nor was there any evidence on what the realities of employment at construction sites were.

44.While a number of the facts referred to by Mr Clough may well support an employer/employee relationship between the parties, those facts are, in the circumstances of this case, equally consistent with the absence of such a relationship. 

45.The judge’s attention was not directed to the provisions of sections 2(a) and 11(7) of the Employees’ Compensation Ordinance, and thus his comments relating to some of the facts understandably did not take those provisions into account.  Nevertheless, a number of facts that he referred to under his “Analysis of evidence” were considered by him, and correctly so, to be consistent with the absence of an employer/employee relationship.  I need only mention a few of them.

46.One aspect was that the daily rated payments receivable by the applicant were unique and if calculated on a monthly basis, would result in a pay higher than the wages of the workers employed by the respondent.  The applicant was not paid as systematically as the respondent’s employees, and he did not enjoy any other benefit or holidays that were made available by the respondent to those employees.

47.Another aspect was that the work given by the respondent to the applicant was not necessarily continuous.  As the judge found, the respondent did not require the applicant to work in the month of March 2002.  This supports the fact that the respondent was not obliged to give the applicant any work, which was inconsistent with an employer/employee relationship.  On the other hand, the applicant was not obliged to work for the respondent, especially in view of the evidence that he had work offered by another company.  The judge considered this lack of obligation on both sides as more consistent with the absence of an employer/employee relationship.  This view can find support in the majority decision of the Privy Council in The Royal Hong Kong Golf Club.

48.Despite the casual nature of the applicant’s engagement by the respondent, the facts relating to the MPF scheme bear significantly on the relationship between the parties.      The applicant’s joining the MPF scheme as a self-employed person, instead of the respondent including him in the MPF scheme taken out by the respondent for his own workers, illustrates clearly that the parties’ own view of the relationship was that the applicant was self-employed.  MPF is generally mandatory for employers and self-employed persons (see section 7 and section 7C of the Mandatory Provident Fund Schemes Ordinance, Cap 485) and it was the statutory obligation of the respondent to join the scheme to cover his employees and the applicant to join a scheme as a self-employed person to cover himself, as failure to do so would subject them to criminal liability (sections 45B and 45C of Cap 485). 

49.The facts found by the judge and his observations are repeated here:

“There was an occasion that he [the respondent] discussed with the Applicant about joining a MPF scheme at the office of Yat Cheung at Kwun Tong.  He told the Applicant that this was mandatory under the law.  He proposed to include the Applicant as an employee but the latter refused.  The Applicant indicated that remaining self-employed allowed more freedom and he could take other jobs.  He did point out to the applicant that the insurance policy would not cover a self-employed person.

He arranged a MPF scheme for all other employees of Yat Cheung in January 2001 … ” [para 6 subparas i and j of the judgment]

“The Applicant maintained that it was the Respondent who told him to join a MPF scheme in November 2000.  His evidence was that the Respondent indicated in November 2000 that it would be a criminal offence to employ him without joining a MPF scheme.  He thus joined a MPF scheme provided by the Bank of East Asia.  He was not aware of the implication of joining a MPF scheme as a self-employed person.  The Respondent did not dispute that there was such a discussion.  He further confirmed that he took out a MPF scheme for all other employees of Yat Cheung in January 2001.  The fact that he did take out a MPF scheme for other employees spoke for itself.  There is no reason for him to single out the Applicant.

Further, according to the MPF document of the Applicant, he joined the scheme on 1 December 2000.  At that time, he alleged that he was an employee of Po Hing as well as Yat Cheung.  It is illogical why he had to join a MPF scheme then if he was an employee of two companies.

Having considered the relevant evidence, I do not think the suggestion made by the Respondent to the Applicant to join a MPF scheme was a sham to evade his responsibilities as an employer.  I accept the Respondent’s evidence that it was the Applicant who wished to maintain flexibility and remained as self-employed.  This fact is a strong indication that there was no employer-employee relationship.” [para 9 subpara (d) of the judgment]

50.Thus it appears clear that it was after the discussion in November 2000 between the parties that the applicant joined the scheme in December 2000 as a self-employed person whereas the respondent joined the scheme in January 2001 to cover his own employees but not the applicant.  There was no evidence that the respondent was reluctant to cover the applicant in the MPF scheme in which the respondent was going to participate for his employees.  On the contrary, his evidence was that he proposed to include the applicant as an employee.  This is not surprising, as they knew each other a long way back since their apprentice days.  But the applicant refused to be so included.  The respondent also took out employees’ compensation insurance to cover only his own employees, but not the applicant.  The judge rejected the applicant’s explanation that he did not realise the legal implication of his joining the MPF scheme as a self-employed person.  There was evidence to show that the applicant operated his own company in between 1994 and 1996.  It cannot be assumed that he was so ignorant as not to appreciate the difference between an employee and an independent contractor.  At least he would not be so ignorant as not to know that an employer is required to take out employees’ compensation insurance cover for all the employees whereas this requirement does not apply to a self-employed person for covering himself.  His joining the scheme as a self-employed person would most likely have been a conscious decision on the part of both parties who appreciated the implications. 

51.This fact is very significant.  Were the parties’ intentions not be respected by the courts to hold that there was an employer/employee relationship, there would be serious ramifications.  The employer respondent would then be liable to criminal sanction for failing to take out employees’ compensation insurance (see section 40 of the Employees’ Compensation Ordinance) and to join the MPF scheme for the employee applicant.  Since the judge found, and correctly so, that there was no intention on the part of the respondent to advise the applicant to join the MPF scheme as a self-employed person for creating a sham, then the representation by the applicant to be a self-employed person contained in his MPF documents and his taking up the position as such, a conscious decision on his part and an agreed arrangement he had made with the respondent, may be regarded by the court, in Lord Denning’s words, as “the best material from which to gather the true legal relationship between” the parties.  Otherwise, where the parties carried out their activities in accordance with their agreed arrangement, as in the present case, but such arrangement was disregarded by the court, a wrong would be done to the respondent which might result in criminal liability being attached to him.

52.By being self-employed, the applicant had the choice to work for whomever and at whatever time as he pleased.  He was not obliged to work for the respondent when asked to do so.  The judge made no mistake to have accepted the respondent’s explanation that the applicant decided to remain self-employed so as to retain flexibility.  The flexibility gave rise to freedom of choice whether to work or not at all or whether to work for a particular contractor.  This flexibility and freedom would not be available had the applicant been obliged to work for the respondent save where the respondent permitted otherwise. 

53.In all the circumstances, I cannot accept Mr Clough’s contention that the relationship of employer/employee was obvious and the finding that the applicant was self-employed was not open on the evidence, or that the only reasonable inference to be drawn from the evidence was that the applicant was an employee of the respondent.  I cannot say that the facts as found by the judge did not justify his finding and conclusion that there was no employer/employee relationship, although those facts may cause another instructed mind to reach a different conclusion. 

Conclusion

54.For the above reasons, I consider that this Court is not entitled to interfere with the judgment.  That was why the appeal was dismissed with costs.

Hon Yeung JA:

55.I agree with the judgment of Woo VP.

Hon Yuen JA:

56.I agree.

Mr Neal Clough, instructed by the Legal Aid Department, for the applicant (appellant)

Mr Jeremy Cheung and Ms Yanky Lam, instructed by Messrs Chiu, Szeto & Cheng, for the respondent (respondent)

(I) Appeal allowed: see FACV14/2006 dated 13 March 2007 (II) Application by the applicant (appellant) to Court of Appeal for leave to appeal to Court of Final Appeal dismissed. Please refer to CACV86/2005 dated 9 March 2006