Mak Ching Shan v. Power Max Design Ltd and Others

DCEC 301/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO.301 OF 2008

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BETWEEN

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Coram: District Judge S. T. Poon in Court

Dates of Hearing:  29^th & 30^th September and 21^st October 2009.

Date of Handing Down of Judgment: 23^rd November 2009.

J U D G M E N T

Introduction

1.The Applicant is a carpenter. On 3^rd April 2007, while he was cutting wooden planks with an electric saw, his left thumb was cut and injured. He was at that time working in a renovation project of a house situated at Perkins Road (“Perkins Road Project”).

2.According to the Applicant, he was employed to work in the Perkins Road Project but not sure who his actual employer was. The employer can be one of the Respondents or any two or all of them. On the other hand, the Respondents say that the Applicant was not an employee but independent contractor.

3.As a result of the injuries, the Applicant was granted intermittent sick leave of totalling 125 days. He was assessed by the Medical Assessment Board to have suffered 8.5% loss of earning capacity. The result was affirmed upon re-assessment and the Applicant appealed under section 18 of the Employees’ Compensation Ordinance, Cap. 382 (“the Ordinance”).

4.At the start of this trial, counsel for the parties indicated that should liability be established, the entitlement to sick leave is agreed at 125 days and the loss of earning capacity to be 11%. It is also not in dispute that the accident did happen as alleged.

5.What remained in issue are:

(a)  Was the Applicant an employee or independent contractor;

(b)  If the Applicant was an employee, who was the employer; and

(c)  The income of the Applicant for the purpose of calculating compensations under the Ordinance.

Employee or Independent Contractor

6.The test to be applied for determination of whether a person was an employee or independent contractor has been set out by the Court of Final Appeal[1] in Poon Chau Nam v. Yim Siu Cheung [2007] 1 HKLRD 951. The relevant principles has been summarized squarely in the Headnote, as cited by Mr. Chen, counsel for the Respondents, in his final submission:

“The modern approach to the question whether a person was an employee was to examine all the features of their relationship against the background of the indicia of employment with a view to deciding whether, as a matter of overall impression, the relationship was one of employment.  This involved a nuanced and not a mechanical approach:  painting a picture from the accumulation of detail.  The indicia included the degree of control exercised by the “employer”; whether the person performing the services provided his own equipment; whether he hired his own helpers; what degree of financial risk he took; what degree of responsibility for investment and management he had; and whether and how far he had an opportunity of profiting from sound management in the performance of his task.”[2]

Evidence

Applicant’s case

7.The Applicant testified that he was first introduced to work for the Respondents by a person named “Fai Tsai”. He was employed as a casual worker and his daily wage was HK$750. There was no arrangement of his MPF by anybody.

8.The Perkins Road Project was the third project that he had worked for the Respondents. The first one was at Dynasty Height (“Beacon Hill Project”) and the second one was at Clovelly Court (“May Road Project”). To his knowledge, the 2^nd Respondent (“Mr. Seto”) was the person in charge of the Projects. Mr. Seto would occasionally visit the sites together with the owners and give instructions to the supervisors. He worked at the Beacon Hill Project in November 2006 and the May Road Project in the period between December 2006 and end of March 2007. The date of the accident, 3^rd April 2007, was the third day he worked at the Perkins Road Project.

9.There was a dispute between parties as to whether theApplicant had ever worked at the Beacon Hill Project but counsel agreed that this is only of marginal relevance related only to credibility of witnesses.

10.According to the Applicant, his employer has provided the equipment at the site for the workers’ use, including the subject electric saw. He would however bring along his own light tools, for example, screwdrivers. He was paid every half-month by cheques.

11.The copies of cheques exhibited showed that the cheques were initially issued by the 1^st Respondent but since after February 2007, they were issued by the 3^rd Respondent.

12.In cross-examination, Mr. Chen questioned the Applicant about his working hours. The Applicant gave an answer that his working hours followed basically the guidelines laid down by the “Carpenters’ Association”. However, if we look at what has been described by the Applicant the schedule of a working day, it would be obvious that it is nothing different from that of a normal casual worker has in the decoration industry, that is, 9 to 12 in the morning, 1 hour for lunch, 3:15 for tea and finish work at 6. Whilst I accept that parties did not expressly mention anything about agreed working hours, I do not see it as an unusual feature for an employment of casual decoration workers in Hong Kong.

13.Mr. Chen also suggested to the Applicant that he was quite free to decide whether to work on a particular day. The Applicant did not deny this and added that if he does not work, he will not be paid. On the point of whether mutual obligation is necessary in an employment relationship, Ribeiro PJ had this to say:

“…the absence of a mutual obligation to supply and to take up work, while fatal to the existence of an umbrella contract, is irrelevant to the existence of a contract of employment arising out of a specific engagement.”[3]

The employment described by the Applicant in this case is exactly the same sort of contract of employment arising out of a specific engagement referred to by the learned Judge.

14.On the whole, the evidence of the Applicant is simply that he was employed as a casual worker in a way usual to an ordinary casual decoration/construction worker in Hong Kong similar to the one inPoon Chau Nam. I am of the view that, should this court accept the version of facts of the Applicant in relation to the above matters, an employment relationship can clearly be established in the light of the principles set out above.

15.After the accident, the Applicant submitted his sick leave certificates to Mr. Seto and it is not in dispute that Mr. Seto accepted and retained the same.

16.The Applicant called 2 other witnesses (Mr. Mak and Mr. Ma) to support his case. They were also workers working at the relevant sites at the material times. Save that there was an episode at the time of Mr. Ma giving evidence which Mr. Chen submitted that it should cast serious doubt on the credibility of the Applicant and his witnesses, which I will deal with below in this Judgement, I should say that their evidence on the mode of employment supports the version of the Applicant.

Respondents’ case

17.Mr. Seto testified and gave a totally different version in his evidence. He maintained that the Applicant agreed to a contract fee of HK$30,000 for his work in the Perkins Road Project. The Applicant has no involvement in the Beacon Hill Project and the contract fee agreed for the May Road Project was HK$50,000. The Applicant was not an employee but a sub-contractor. The heavy equipment at the site was provided by the Applicant.

18.There was no written sub-contract or quotation produced by the Respondents. Mr. Seto said the sub-contractor agreements with the Applicant were made orally. Instead, he relied on 2 sets of documents to support his case.

19.Firstly, Mr. Seto produced some tables (“the tables”) showing allegedly the payment records to the sub-contractors of the May Road and Perkins Road Projects in the period between January to May 2007[4]. The tables are said to be compiled by an accounting officer of the 1^st Respondent relying on some written records made by Mr. Seto. There is however no evidence from Mr. Seto as to when the said tables have actually been complied and the whereabouts of his written records.

20.As we look at the contents of the tables, for the May Road Project, there was a total number of 13 different sub-contractors involved with 5 of them described as sub-contractors for “painting work” (denoted as “油”in Chinese) and 4 of them (including the Applicant) as “carpentry work” (denoted as “木” in Chinese). For the Perkins Road Project, 49 different sub-contractors were involved with 16 of them for “painting work” and 21 for “carpentry work”.

21.Bearing in mind that the subject projects are decoration projects for domestic households, it would immediately be apparent that the number of sub-contractors said to be involved are extraordinary.

22.As I have asked Mr. Seto in his evidence, it is difficult to understand why so many different sub-contractors are necessary for doing a single kind of work in the Projects. Mr. Seto sought to explain that even within a particular area of work, it might require different expertise for different products/tasks. With respect, this explanation is far from convincing and against commonsense. In the context of a decoration project for a domestic home, I do not believe that there will be 16 different kinds of painting work involved requiring 16 different sub-contractors of different expertise for satisfactorily accomplishing the same. Likewise, for carpentry works.

23.Mr. Wong, counsel for the Applicant, asked the court to note the bi-monthly payment to the Applicant as evidenced by the copies of cheques issued to the Applicant and recorded in the tables. With the exception of an amount of HK$10,000 paid a month after the accident, all the amounts paid are multiples of $750, the daily wage as alleged by the Applicant. This cannot be a mere coincidence. The amounts paid to the Applicant and other alleged sub-contractors were all in odd figures which were unlikely to be part payments of agreed contract sums.

24.Mr. Seto’s case is that there had been deductions from the agreed contract sums because of defective works of the sub-contractors rendering the total amount paid in the end less than the original agreed lump sums. Those deductions had all been recorded in the tables.

25.The tables did record many such deductions under the column “Remark”. Also, it is not uncommon in the construction industry that upon completion of work by a sub-contractor, a certain amount of money is deducted from the contract sum to reflect the loss of the superior contractor incurred in making good the defects of work of the sub-contractor. Here, the deductions recorded in the tables are mostly of very low amounts, ranging from $200 to $2,125. Many of which are $250 and $300. For the Applicant, $500 is said to be deducted for his defective work in the May Road Project.

26.Although the contract sums for the sub-contractors as recorded in the table are insubstantial (mostly below $20,000 or $10,000), it is still inconceivable as to what the small amount of money deducted represents in relation to the loss incurred or to be incurred by the Respondents resulting from the defective works. The monies, in view of their sizes, could not be the wages for employing other workers to rectify the defects, nor could they be compensations for purchases of replacement items. Mr. Seto, when asked about this in his evidence, was unable to give a reasonable answer.

27.I have the view that, by looking at the tables alone, the version put forward by Mr. Seto that the Applicant was intended to be an independent contractor, in a way similar to other workers named in the tables, is inherently improbable.

28.I have the above view notwithstanding the fact that the Applicant had signed a document[5] (“the declaration”) declaring that he was a self-employed person. This is the other document relied on by the Respondents that I have mentioned above in paragraph 18 herein.

29.The Applicant admitted that he had signed the declaration. However, he denies having any knowledge of the contents in it and suggests also that he signed it under duress.

30.The declaration is in Chinese and specific in its terms. It defies commonsense to suggest that the Applicant has no knowledge as to its contents as it was never his case that he was unable to read Chinese. The allegation against Mr. Seto for asserting threat on him was ambiguous and unconvincing. On this point, I reject the case of the Applicant. I find that the Applicant signed the declaration voluntarily with full knowledge of its contents.

31.There was however a special background under which the declaration was signed. On the day of signing the declaration (5^th July 2007), a total amount of $35,000 was paid by the Respondents to the Applicant. Mr. Seto said it was a loan to the Applicant but the Applicant said it was periodical payment. My view is that, it could not be a loan.

32.As submitted by Mr. Wong in his final submission, by 5^th July 2007, the Applicant had already filed his claims against the Respondents at the Labour Department. It is the Respondents’ case that the Applicant’s claim was false and the Applicant was well aware that it was false. Besides, according to Mr. Seto, all the Respondents have experienced financial difficulties in 2007. Under these circumstances, it again defies commonsense that the Respondents would still lend the money to the Applicant, without even requiring the Applicant to sign an IOU as evidence.

33.On the same day of signing the declaration, the Applicant went to the Labour Department to cancel his claims against the Respondents. There was also a document in standard form signed by the Applicant expressed that the Applicant had received $35,000 as settlement and cancelled the claim.

34.The Applicant in his supplemental witness statement said as he was in financial difficulty and under threat by Mr. Seto, he agreed to receive the $35,000 and cancel his claims filed with the Labour Department against the Respondents.

35.Although I am not convinced that the Applicant has been threatened by Mr. Seto, I accept that the Applicant signed the declaration with a view to receiving the $35,000 immediately, to ease his financial difficulty. The contents in the declaration do not accurately reflect the relationship between the parties as intended by the parties.

36.Concerning the heavy equipment at the site, I reject the case of the Respondents that the Applicant provided the same. As there were many other independent contractors working at the site according to the Respondents’ case, it would be unlikely that a contractor would bring his own valuable heavy equipment for common use of others, bearing in mind that many of the other contractors were also carpenters.

Payments from the Respondents after accident

37.The Respondents paid a total amount of $62,000 to the Applicant after the accident. The Applicant’s case is that apart from $10,000 which was his outstanding wages for the Perkins Road Project, the amount paid was periodic payment for his sick leave. Instead, Mr. Seto said they were loans given to the Applicant.

38.As mentioned above in paragraphs 31 and 32 herein, I do not believe that the $35,000 paid to the Applicant was a loan. For the remaining $27,000, I also do not believe that they were loans in that the Respondents were in financial difficulty at that time. On the other hand, as mentioned under paragraph 15 hereinabove, Mr. Seto accepted the sick leave certificates from the Applicant and retained the same. I find that the said $62,000 represented the periodic payments paid to the Applicant for his sick leave.

39.With the above finding, I have rejected the allegation of the Applicant that $10,000 out of the $62,000 was outstanding wages. The simple reason is that this $10,000, representing wages for more than 13 working days, cannot fit in anywhere in the period between December 2006 and April 2007, in view of the amount already received as wages by the Applicant during the time. Besides, $10,000 is not a multiple of $750.

40.There is a dispute as to whether a sum of $1,500 has been paid to the Applicant as wages for the Perkins Road Project. On this point I prefer the evidence of the Respondents that it has been paid albeit that it is not really relevant to issues in this trial.

The episode and credibility

41.In paragraph 16 hereinabove, I referred to an episode which Mr. Chen submitted that it should cast serious doubt on the credibility of the Applicant and his witnesses. The episode happened during the cross-examination of the Applicant’s witness Mr. Ma. When Mr. Ma was giving evidence in relation to when he first heard of the name “威能”, the Applicant mumbled something at the back of the courtroom. Upon hearing this, Mr. Ma changed his evidence.

42.I have taken into account this episode in considering the credibility of witnesses. As regards the Applicant and his witnesses, I am not satisfied that they have told me the whole truth and in fact I have made findings of facts not in the Applicant’s favour, for example, whether the $10,000 paid after the accident was outstanding wages. However, equally I am not satisfied that Mr. Seto has told me the whole truth in that some part of his version of facts is inherently improbable.

43.As such, the findings of facts in this Judgement rested not on the general credibility of witnesses but forensic evaluation of factual evidence.

The employer

44.Mr. Wong submitted that the 1^st and 3^rd Respondents were in fact controlled by Mr. Seto. All the Respondents had issued cheques for payment of the Applicant. He asked this court to find that all Respondents are liable to compensate the Applicant.

45.There is no direct evidence from the Applicant as to who was his employer in the Perkins Road Project. However, the usual entity to employ workers should be the one who has actually contracted to perform in the project. Before this court the only related evidence is that the 1^st Respondent was the principal contractor of the Projects. I have no reason to disbelieve this.

46.My view is that the crucial fact to determine the identity of the employer in this case is who was the principal contractor. Given the relationships between the Respondents, the fact that a particular Respondent has paid is not an essential factor as financially the Respondents can said to be in unity.

The income of the Applicant

47.Having found that the HK$10,000 was not wages, the amount should not be included for calculation of the Applicant’s income. As a result, the income of the Applicant in the month immediately preceding the date of the accident will be more than the average monthly income earned by the Applicant in the months he was employed by the same employer.

48.The monthly income for calculation of the Applicant’s compensation is therefore $15,750.

Conclusion

49.I find as facts the followings:

(i)  The Applicant was an employee rather than a contractor at the time of the accident;

(ii)  The Applicant was employed by the 1^st Respondent;

(iii)  The daily wage of the Applicant was HK$750;

(iv)  The accident was arising out of and in the course of the employment; and

(v)  The monthly income for calculation of the Applicant’s compensation is $15,750.

50.The Applicant claims under Section 9, 10 and 10A of the Ordinance.

51.Compensation under Section 9 would be HK$15,750 x 48 x 11% = HK$83,160.

52.For Section 10, the amount would be HK$750 x 125 x 80% = HK$75,000. As HK$62,000 has been paid to the Applicant as periodic payment, the outstanding amount under this head to be paid by the 1^st Respondent to the Applicant will be HK$13,000.

53.There is no dispute as to the amount of medical expenses of HK$1,377 under Section 10A.

Order

54.Judgement be entered against the 1^st Respondent in favour of the Applicant in the sum of HK$83,160 + HK$13,000 + HK$1,377 = HK$97,537 with interest thereon at half judgment rate from the date of Application until judgment and thereafter at judgment rate until payment.

55.I make an order nisi that costs of this action be to the Applicant to be taxed if not agreed, with certificate for counsel. Such costs shall be borne jointly and severally by the 1^st, 2^nd and 3^rd Respondents.

56.I note that the Applicant’s claims against the 2^nd and 3^rd Respondents are unsuccessful. However, the main issue in this action is whether the Applicant was an employee or independent contractor. In my view, Mr. Seto and hence the 3^rd Respondent were all along well aware of the fact that the Applicant was an employee but instead of admitting the fact, he chose to put forward a vigorous defence. They should also be responsible for the Applicant’s costs.

57.The Applicant’s own costs be taxed in accordance with Legal Aid Regulations.

Mr. Charles T. C. Wong instructed by Messrs Szwina Pang, Edward Li & Co. for the Applicant.

Mr. Vincent Chen instructed by Messrs Wong & Yip for the Respondents.