Lam Yau Kuen v. Easy (Hang Fung) Transportation Co Ltd and Another
Read the full judgment text of DCCJ 1/2006 on BabelCite. This District Court judgment.
1. The Plaintiff claims against the 1 and 2Defendants (“D1” & “D2) for:
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DCCJ 1/2006 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 1 OF 2006 ____________ BETWEEN
____________ Coram: Deputy District Judge W.C. Li in Court Date of Trial: 23rd November 2006 Date of Handing Down Judgment: 5th December 2006 __________________ JUDGMENT __________________
1.The Plaintiff claims against the 1 and 2Defendants (“D1” & “D2) for:
2.This was a case transferred from the Labour Tribunal to the District Court for trial. Both the Plaintiff and the Defendants were unrepresented at the trial, albeit, the Defendants were legally represented hitherto, until “Notice to act in person” was filed on the evening before trial. A trial bundle had been prepared by the former solicitors of the Defendants. 3.The Plaintiff responded to a newspaper advertisement of the Defendants in June 2001 looking for lorry drivers between Hong Kong and Mainland China. He met Mr. Lee Chun Chung (“Lee”), who was also the authorized representative of the 2 defendants here in the trial today, and they discussed the terms of the employment. The Plaintiff would be paid 27% of the gross incomes from the work done and he would be provided by the Defendants with a container lorry, a trailer and equipment together with a telephone allowance of $500 per month, and pay day would be on the 26th day of each month. The Defendants supplied the work and also provided the time schedule and details of the work to be done by the plaintiff. Lee asked the Plaintiff to register a business name with the Business Registration Office and an agreement would be signed between the Defendants using the name of D1 and the Plaintiff using his business or style name of Kwan Kee Transportation Company (“Kwan Kee”). The registration of the Plaintiff’s business name was done by Lee for and on the Plaintiff’s behalf. The Plaintiff started work and drove the Defendants’ container lorry registration No. JE 2403 between Hong Kong and the mainland on 14 June 2001 after signing an agreement with D1 (“the 1st Agreement”) using the name of Kwan Kee. D1 said the 1st Agreement was for a term of 2 years. No duration term appeared in the 1st Agreement save that it was stated in Clause 4 therein that the Plaintiff must not breach the agreement for a period of 1 year, otherwise D1 had the right to claim the last 30 days of business as damages. Clause 5 provided that the Plaintiff was required to give D1 1 month’s notice for termination of the agreement. Clause 10 provided that if the Plaintiff was in breach and terminated the agreement, the Plaintiff would be responsible for all expenses in the cancellation of all related documents in the mainland. It was also stipulated in the 1st Agreement that the lorry under the name of D1 would be hired to the Plaintiff, and if there were any traffic accident, all the expenses including compensation and repair in excess of the insurance and compensation received would, subject to agreement between the parties, be equally borne by D1 and the Plaintiff. 4.In May 2005, the Defendants, using the name of D2, signed a new contract, effective from 1 June 2005, with the Plaintiff who again used the name of Kwan Kee (“the 2nd Agreement”). The 2nd. Agreement basically had the same terms as the 1st Agreement. Again it was stipulated that D2 would hire the lorry under its name to the Plaintiff. This was the same lorry registration number JE 2403. The Plaintiff continued his work driving the same container lorry between Hong Kong and mainland China. 5.On 24 October 2005, the Plaintiff was dismissed by D2. He was dismissed without 1 month’s notice or 1 month’s wages in lieu of notice. The Plaintiff case was that on 23 October 2005, he was not provided by D2, despite repeated request, an advance payment of money that enabled him to pay for the road and bridge tolls for his trip to the mainland. He waited on 23 October 2005 for the money to enable him to make the trip but to no avail. The following day, he was asked to return the ignition keys and the lorry back to D2. The Defendants’ case was that the Plaintiff had refused to drive the lorry on 23 October 2005 despite having an order to go to mainland China to collect a container for delivery to the Container terminal in Hong Kong, and the lorry was still found in its parking lot by 4.00 p.m. on 23 October 2005, and for this reason, the Plaintiff’s employment was terminated on 24 October 2005. The Defendants produced a letter dated 26 October 2005 from a company called Yat Sing Resources Company Limited (“Yat Sing”) to D2. The letter stated that Yat Sing had given an order to D2 to send a 20 foot container to Yat Sing’s Wai Chow handbag factory in the mainland to collect goods for customs clearance by noon time, and to deliver the container to the HIT6 Container Terminal in Hong Kong before midnight. The letter said the job was not completed the same day and Yat Sing reserved the right to claim for damages, and that damages were under under calculation. Yat Sing’s letter also said it was seriously considering whether or not to continue its co-operation with D2. The Plaintiff cross-examined Lee on the authenticity of this letter. Lee agreed that it was only a warning letter and no damage was actually claimed or paid by D2 to Yat Sing. Lee also agreed that D2 had delivered Yat Sing’s container promptly on 24 October 2005. 6.The Defendants filed a joint Defence. They denied that the Plaintiff was their employee and relied on the terms of the 1st and 2nd Agreements that expressly stated that the Plaintiff trading as Kwan Kee was entering into a contract for service with D1 and D2. The 1st and 2nd Agreements expressly stated that the relationship between the Plaintiff and D1 and D2 would not give rise any employer-employee relationship whatsoever. The Defendants’ case was therefore that there was no employer-employee relationship, hence the Plaintiff was not entitled to any of the employment benefits under the Employment Ordinance, Cap. 57. The Defendants also counterclaimed the Plaintiff for $5,418.60. The Defendants said the Plaintiff had borrowed $12,000 from the Defendants. There was a sum of $2,521.60 incurred to cancel the plaintiff’s documents in the mainland after termination of their contract, and after deducting the wages owing to the Plaintiff for October 2005 in the sum of $9,103.00, the balance due from the Plaintiff was $5,418.60. 7.In Paragraph 9 of the Defendants’ Defence, the Defendants said if the court found that the 1st and 2nd Defendants were liable to the Plaintiff for all or parts of the sums claimed, the Defendants sought to have the amount of the counterclaim deducted from the judgment sums awarded to the Plaintiff. Other than general denial of the Plaintiff’s rights to his claims, the Defendants did not contest the quantum of claim. The Defendants did not deny that both D1 and D2 were acting jointly in contracting with the Plaintiff at all relevant time from 2001 to 2005. 8.The Plaintiff testified and adopted the contents of his statement of claim, and the contents of his witness statement to be his evidence in court. The Plaintiff called 2 witnesses to testify to the fact that the Plaintiff and his 2 witnesses all worked for the Defendants under similar circumstances. They testified (inter alia) that (1) they worked as directed by the Defendants, and if they had to take leave, they had to inform the Defendants in advance; (2) their lorries were provided by the Defendants; (3) they earned 26% of the gross incomes as their wages, and they had no share in any loss or profit arising out of this business; (4) they were the assigned drivers to their assigned vehicles and could not engage others to drive for them; (5) they took no part in the management and they were not in business; (6) they had no idea if the Defendants had taken out labour insurance for them but they knew the Defendants had made tax returns on their incomes; and (7) they were the employees of the Defendants. One of the Plaintiff witnesses, Mr. Liu Ngai Pun (“Liu”) who had signed a similar contract with the Defendants save that it was signed in his own name, albeit he was also required by the Defendants to register a business name under the Business Registration Ordinance, made a claim against the Defendants in the Labour Tribunal for wages in lieu of notice, annual leave pay and statutory holiday payment. Judgment was given in the Labour Tribunal in Liu’s favour that he was an employee of D2 and was entitled to 1 month’s wages in lieu of notice, annual leave pay and statutory holiday pay under those circumstances. This part of the Plaintiff evidence was not challenged in the trial. 9.Under Section 70 of the Employment Ordinance, Cap.57, any term of a contract of employment which purports to extinguish or reduce any right, benefit or protection conferred upon the employee by the Employment Ordinance shall be void. In effect, it matters not what form the contract takes. If it is a contract of service, it remains a contract of service even though the written agreement purports to be a contract for service and expressly states that the employee does not have all the rights and benefits of an employee under the Employment Ordinance. 10.Sec. 32 of the Employment Ordinance, Cap. 57, also imposes restriction on the employers on deduction of wages from the employees. Under Sec. 32(1)(b), where there was deduction for damage to or loss of goods, equipment or property belonging to or entrusted to the employee, where such damage or loss is directly attributable to the employee’s neglect or default, the total amount recoverable by deduction in any one case shall not exceed the equivalent in value of the damage or loss suffered by the employer or $300, whichever is the less; and the total of such deduction in any one wage period shall not exceed one quarter of the wages payable to the employee in respect of that wage period. It is in fact a criminal offence under Sec. 63B for any infringement of Sec. 32, punishable with a fine at Level 6 and to imprisonment for 1 year. 11.There is also a statutory presumption under Sec. 31Q of the Employment Ordinance, Cap. 57, that an employee who has been dismissed by his employer shall, unless, the contrary is proved, be presumed to have been so dismissed by reason of redundancy. The Defendants did not call any evidence to rebut this presumption in the trial. 12.Sec. 9 of the Employment Ordinance, Cap. 57, provides that an employer may terminate a contract of employment without notice or payment in lieu if (inter alia) an employee willfully disobeys a lawful and reasonable order, misconducts himself such conduct being inconsistent with the due and faithful discharge of his duties, and/or is guilty of fraud or dishonesty. 13.The followings are the issues of this trial. (1) Was the Plaintiff’s contracts with the Defendants a contract of service or a contract for service? In other words, if it was a contract of service, the Plaintiff was an employee and entitled to all the rights and benefits under the Employment Ordinance, Cap. 57. If it was not, then the Plaintiff was an independent contractor as stipulated in the contracts and his claims against the Defendants would fail. (2) Was the Plaintiff’s dismissal a summary dismissal under Sec. 9 of the employment Ordinance? If it was, then no notice or wages in lieu of notice was required to be given by the Defendants. It was expressly provided in the agreements that 1 month’s notice was required to be given for termination and the parties did not take issue that 1 month’s notice of termination was required for either side to terminate the contract. So, if the Plaintiff had been wrongfully dismissed, i.e. it was not a summary dismissal under Sec. 9, the Plaintiff would have to pay 1 month’s wages in lieu of notice. (3) Was the Defendants entitled to withhold the Plaintiff’s wages for expenses related to traffic accidents and for the registration of a business registration name? (4) Was the Plaintiff entitled to severance payment on termination by the Defendants besides his entitlement to annual leave pay and statutory holiday pay? If it were a summary dismissal under Sec. 9, the Plaintiff would not be entitled to severance payment. If it was not, the burden of proof is on the Defendants to rebut on a balance of probabilities that it was not a redundancy situation and that the Plaintiff was not entitled to severance payment. (5) Were the Defendants jointly and severally liable to the Plaintiff as his employers? 14.The first question is of crucial importance in this case. Whether a relationship was a contract for service or one of contract of service is a complicated one. In Davies v. Presbyterian Church of Wales (1986)1 WLR 323, it was held that if the relationship was solely dependent on the true construction of a written document, this was a question of law. In Lee Ting Sang v. Chung Chi Keung & Another (1990) 2 WLR 1173, the Privy Council held that if the relationship has to be determined by an investigation and evaluation of the factual circumstances in which the work was performed, then it was a question of fact. The fundamental test was established in Market Investigation Limited v. Minister of social Security (1962) 2 QB 173 (approved in the case of Lee Ting Sang (supra)), where Cooke J. stated the test as follows : “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 contact is a contract of service”. There is no exhaustive list of the relevant factors to be considered and no strict rules as to the relative weight each factor should carry in a particular case. The court has to perform a balancing exercise in weighing the relevant factors. 15.The relevant factors in this case I considered were control, integration, provision of equipment, hiring of own helpers, profit and loss, and the freedom to attend to other work. Control includes the power to decide how things are to be done, the way it should be done and the means to be employed in doing the work and when and the place it should be done. It appears in this case that the Defendants had almost total control in these features. The agreements had expressly stated that the lorry hired to the Plaintiff was for the Defendants’ transportation use only or for the Defendants’ designated use, the Defendants were to provide the goods or business to be transported, the Plaintiff was to be the designated driver and no other driver was allowed, the Plaintiff was not allowed re-hire the lorry, the Plaintiff had to obey the Defendants and follow the routes to be taken as directed by the Defendants, and the Plaintiff must not take leave unless 1 advance working day’s notice was given. As for Integration, the question is whether the person is part and parcel of the organization (Bank Voor Handel en Scheepvaart N.V. v. Slatford & Another (1953) 1 Q.B. 248 adopted in Ng Pik Yuk v. Wai Tai Knitwear Ltd. LTA No. 49 of 1987). Under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business; whereas, under a contract for service, his work, although done for the business is not integrated into it but is only an accessory to it (John & Harison Ltd. v. Macdonald & Evans (1952) 1 TLR 101(adopted in Leung Kam Fat & another v. Jonathan’s Fashion Manufacturing Ltd. LTA No. 14 of 1988). Both Defendants here were in the transportation business and they had engaged drivers and provided container lories for their trade. My view is that the Plaintiff and the other drivers employed by the Defendants were performing work which formed an integral part of the Defendants’ business. The provision of equipments is obvious in this case. The lorry and the trailer were all provided by the Defendants. The hiring of helpers is also obvious in this case. The Plaintiff could not delegate his job of driving the Defendants’ lorry to others. He must do it personally. Most important of all, does the Plaintiff run the risk of incurring losses? There is no profit or loss as far as the Plaintiff was concerned. The agreements provided for a fixed income for the Plaintiff based on a percentage of the total incomes from the work done with the use of the lorry. The agreements also expressly stipulated that the Plaintiff was not concerned with any losses that were incurred to the Defendants’ business with the lorry and the Defendants were to pay the Plaintiff’s wages in any event. As for the freedom to perform other work, there was an agreement between the Plaintiff and D1 on 24 May 2004 where some of the terms of employment were varied. Mainly it was an agreement to vary the percentage that the Plaintiff would receive as his wages, and to provide that the Plaintiff could take outside work using the lorry but priority must be given to do the Defendants’ orders first, and 24 hours prior notice and approval must be obtained from the Defendants. The Plaintiff testified that although the 1st Agreement had been varied to permit taking outside orders, he had not had a single outside order during all the relevant time. This evidence was not challenged by Lee in the trial. In these circumstances I took the view that the Plaintiff would have sufficient orders or work to do and that he had little or no time left to take outside orders. The variation in May 2004 to allow the Plaintiff to take outside orders would be insignificant. The expenses in running this lorry also appeared to be the Defendants’. The fuel costs, road and bridge tolls, the maintenance and repair costs were not the Plaintiff’s concern. It was not his vehicle after all. In both the 1st and 2nd Agreements, the Defendants acknowledged that the lorry was under their names. This is a case that the court has to determine by an investigation and evaluation of the factual circumstances in which the work was performed whether the Plaintiff was an employee or an independent contractor. This has to be a finding of facts and not a question of law (Lee Ting Sang supra). All the factors in this case pointed to the direction that this was a contract of service and not a contract for service. This is so despite the express words in the agreements that the parties were not entering into an employer-employee relationship and the agreements expressly stated that the employee did not have the rights and benefits of an employee. These express stipulations in a contract of employment are void by law. Sec. 70 of the Employment Ordinance protects an employee from any attempt by an employer who tries to avoid their statutory duties as an employer by contracting out. Having considered these relevant factors, I found that the Plaintiff was the Defendants’ employee at all relevant time. I would find in the Plaintiff’s favour that he was entitled to all rights and benefits under the Employment Ordinance, Cap. 57. For this reason, the Plaintiff was entitled to have judgment to his claims for annual leave pay and statutory holiday pay that he had been deprived for the years that he had worked for the Defendants. 16.The second question relates to whether the Plaintiff was summarily dismissed by the Defendants. The Plaintiff case was that the Defendants refused to provide him with the expenses that he needed to drive the lorry into the mainland. From the evidence, it appeared that these expenses were usually advanced to the Plaintiff and had to be accounted for when wages were calculated on pay day. The Plaintiff said he waited for the advance until 3-4 p.m. on 23 October 2005 but to no avail. The Defendant’s case was that the Plaintiff had refused to take the order to drive the lorry to the mainland, and at 4.00 p.m., the lorry was still at its parking lot. The Defendants’ case was that they had missed an order on 23 October 2005 because of the Plaintiff’s insubordination, and their customer, Yat Sing, wrote a letter to register its complaint and sought to reserve their right to damages. Damages were said to be under calculation. The Plaintiff challenged the authenticity of the letter purportedly written by Yat Sing. The Plaintiff pointed out it was a fact known to him that Yat Sing’s container was delivered promptly on 24 October 2005. The Defendants had not produced any other document to show the events following Yat Sing’s complaint and how Yat Sing’s claim for damages had been resolved. Lee, the Defendants’ representative in the trial, agreed that Yat Sing’s container was promptly delivered on 24 October 2005 and the letter from Yat Sing that he had shown to the court was in fact a warning letter. I was not convinced that Lee was being truthful in his evidence. Yat Sing’s letter was not worded as a warning letter. It was a letter seeking damages. It gave the impression that damages had occurred and were under assessment. Lee’s later explanation that it was a warning letter was not credible. I would expect the Defendants to show some correspondence or at least an apology letter they had written to Yat Sing in reply to show how the matter was eventually resolved. The sole letter from Yat Sing did appear to be put in by the Defendants to mislead the court. On the evidence, I was not convinced that this was a case of insubordination. I preferred the Plaintiff evidence that he had not been provided with the advance he needed to drive the lorry on 23 October 2005. I took the view that this was a deliberate act on the part of the Defendants, and was merely meant as an excuse to dismiss the Plaintiff summarily. I would find in the Plaintiff’s favour that in these circumstances, the Defendants had no ground to dismiss the Plaintiff without notice or 1 month’s wages in lieu of notice. The Plaintiff used his last month’s wages as the basis for his claim for 1 month’s wages in lieu of notice. $18,876 was the Plaintiff’s complete month wages for September 2005. I see no reason why the Plaintiff should not have a full month’s wages, using the amount of his last month’s pay, in lieu of notice for his termination of employment. 17.On the 3rd question whether the Defendants were entitled to withhold the Plaintiff’s wages for the costs related to traffic accidents and for the payment of business registration fees, I think Sec. 32(1)(b) and Sec. 63B of the Employment Ordinance, Cap. 57, would provide the answers here. The simple answer to this question is no and it might be a criminal offence to do so. The Defendants did not submit any documents to show the relevant expenses incurred in relation to these expenses. It was only known that as a matter of facts these amounts had been deducted from the Plaintiff’s wages. According to the 1st and 2nd Agreements, the expenses related to the traffic accidents, were to be met from the insurance monies and from compensation received, if any, and any excess not covered by insurance and compensation monies, would, subject to agreement between the Plaintiff and the Defendants, be borne by Plaintiff and the Defendants equally. The Defendants did not produce any account or receipts relating to such expenses and had simply deducted and withheld monies from the Plaintiff’s wages. This would not be proper and the Plaintiff would be entitled to his claims for refund. As for the fees for business registration, it was entirely the Defendants’ own idea to require the Plaintiff to register a business name before they would employ the Plaintiff. The Defendants were under a misapprehension that if the Plaintiff had a business registration name, that would mean the Plaintiff was a business and he would not be an employee but an independent contractor. This would only be a futile attempt in furtherance of a scheme to deprive workers of their entitlement under the employment law. It was wholly unconscionable and I would find that the Defendants were not entitled to withhold the Plaintiff’s wages to cover the fees for business registration. 18.On the 4th question as to whether the Plaintiff was entitled to severance payment, the Defendants had the burden of proof to show on a balance of probabilities that the Plaintiff was dismissed for reasons other than redundancy. The Defendants had not discharged this burden at all. By virtue of Sec. 31Q of the Employment Ordinance, Cap. 57, the Plaintiff was presumed to have been dismissed for reason of severance. By their Defence, the Defendants only disputed whether the Plaintiff was an employee. In Par. 9 of their Defence, they stated that if the court found the Plaintiff to be their employee, they would ask for the amount of the counterclaim to be deducted from the sum/s awarded to the Plaintiff. On this basis, the Plaintiff ‘s claim for severance payment would succeed. 19.On the 5th question as to whether both D1 and D2 should be jointly and severally liable for the Plaintiff’s claims, the evidence in this case pointed to the direction that the Plaintiff was employed by the 2 Defendants who were associated companies under Sec. 31K of the Employment Ordinance, Cap. 57. Sec. 31K(1) provided that “where the employer is a company, any reference in this part to re-engagement by the employer or by any associated company, and any reference in this part to an offer made by the employer shall be construed as including a reference to an offer made by an associated company”. The Employment Ordinance also provided in Sec. 31D(2) that An employee shall not be taken for the purposes of this part to be dismissed by his employer If - (a) his contract of employment is renewed, or he is re-engaged by the same employer under a new contract of employment; and (b) the renewal or re-engagement takes effect immediately on the ending of his employment under the previous contract”. The Plaintiff was provided with the same container lorry that was described in the 1st and 2nd Agreements to be registered under the name of the employer, the work was the same without any break in between and the Plaintiff was effectively working for the same company or companies. In any event the Defendants filed a joint Defence and had at no time disputed the claim that they were acting jointly for the purpose of the Plaintiff’s claims. The Defendants also had the benefit of legal representation before trial as well. Under Section 31D(1)(a) of the Employment Ordinance, Cap. 57, it provides “For the purposes of and subject to this part, an employee shall be taken to be dismissed by his employer if but only if, - (a) the contract under which he is employed is terminated by the employer with or without notice or payment in lieu thereof other than in accordance with section 9”. This is exactly the case of what we have here. The Plaintiff’s employment was terminated without notice or payment in lieu, and the dismissal was not a summary dismissal under section 9 (par. 16 supra). I would therefore answer this last question in the affirmative. 20.On the Defendants’ counterclaim, the Plaintiff agreed that there were loans of $10,000 from the Defendants in November 2004 but these amounts had all been repaid by May 2005. The Plaintiff said there were $2000 that was not a loan but advances given for running the lorry in the course of employment. The way the Plaintiff and the Defendants dealt with the monies between them appeared to have a pattern of settling monies due and owing as they worked out their monthly accounts. I would think it was more likely that any loan and outstanding advances had been settled when they had these accounts sorted out between them. There was no proper record here to show to the court. I would therefore not allow the Defendants’ counterclaim on the alleged loan. The Defendants sought to deduct the costs of cancellation of permits in the mainland from the monies due to the Plaintiff. According to Clause 10 of the 1st and 2nd Agreements, the Defendants were only entitled to do that if the Plaintiff was in breach of contract. This was not the case here. For these reasons, I therefore dismiss the Defendants’ counterclaim. 21.I am therefore satisfied that the Plaintiff has proved his claims and is entitled to the monies for the 6 items claimed in the total amount of HK$183,081.78. Judgment is therefore entered in favour of the Plaintiff as against the 1st and 2nd Defendants jointly and severally for the sum of HK$183,081.78. Interest is ordered to be paid by the 1st and 2nd Defendants to the Plaintiff on the judgment sum at judgment rate from the date of the Plaintiff’s claim on 24 November 2005 at the Labour Tribunal up to the date of handing down of this judgment, and interest is also ordered to be paid by the 1st and 2nd Defendants to the Plaintiff at judgment rate from the date of handing down to the date of full payment of the judgment sum. As cost follows the event, I also order the 1st and 2nd Defendants to pay the Plaintiff’s costs of this action and in the counterclaim. The Plaintiff was not legally represented. I would make a cost order that the 1st and 2nd Defendants do pay the Plaintiff costs assessed at $8,000.00. This Cost order Nisi to be made absolute 14 days after handing down of this Judgment.
The Plaintiff: not legally represented, appeared in person The 1st and 2nd Defendants:not legally represented, represented by Mr. Li Chun Chung |