Tang Chau Yuet v. Fu Kin Po t/a Best Kitchen and Another

[English translation – 英譯本]
DCEC 28/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 28 OF 2008

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Coram: Deputy District Judge Clement Lee in Court

Dates of Hearing: 7 & 8April, 2010

Date of Delivery of Judgment: 9April, 2010

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J U D G M E N T

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Background

1.The Applicant Mr. Tang Chau Yuet (hereinafter as “the Applicant”) lodged a claim against the 1^st Respondent and the 2^nd Respondent pursuant to sections 9, 10 and 10A of the Employees’ Compensation Ordinance (Cap. 282).

2.Mr. Chan, counsel for the 1^st and 2^nd Respondents, agreed that should the Court find that the 2^nd Respondent was the employer of the Applicant, the 1^st Respondent being the principal contractor of the 2^nd Respondent or the one who subcontracted the project to the latter, would be obliged to compensate the Applicant in accordance with section 24 of the abovementioned Ordinance.

3.Therefore, there were two issues in the present case. Firstly, whether there was any employer-employee relationship between the 2^nd Respondent and the Applicant? Secondly, what were the Applicant’s monthly earnings if his earnings were calculated on the basis of the second part of section 11(2) of the Ordinance?

4.The Applicant gave evidence in court and called no other witness. The 1^st and 2^nd Respondents also testified in court. The 2^nd Respondent also called one Mr. Leung Kwok Wing (transliteration) as his witness to give evidence.

The Accident

5.On 20^th June 2007, the Applicant carried out renovation work inside a bathroom at Flat D, 10^th Floor, Block 7, Phase 9 of Whampoa Garden. The type of work he was assigned to was the removal of the ceramic tiles, commonly known as the tiles, of the toilet walls. The Applicant carried an electric hand drill in his hands and stood on a bathtub to remove the tiles on the walls near the ceiling. When the electric hand drill was operated against the tiles, the resulting impact caused the Applicant’s feet to slip and his hands to lose hold of the electric drill. The electric hand drill dropped on the fingers of the Applicant’s right hand, injuring the middle finger of his right hand. The major injuries sustained by the Applicant included: laceration and injuries at the nail bed of the middle finger of the right hand and fracture of bones of the same finger.

Gist of the Applicant’s evidence

6.The written evidence and the testimony of the Applicant can be summarized as below:

(1)   It was the first day the Applicant worked at the above premises. He had never worked for the 1^st or 2^nd Respondent before.

(2)     The Applicant was introduced to work at the above premises by a person named “Ah Keung” the night before. That night Ah Keung told the Applicant that one Mr. Chung was looking for a worker to demolish the tiles. The job would take one or two days. An appointment was made for the Applicant to meet Mr. Chung at a designated time and place and for him to be driven by Mr. Chung to Whampoa Garden to do the job.  The Applicant said that it was the trade practice and also Ah Keung’s practice that a daily wage of $500 would be paid, so he did not confirm with Ah Keung whether the daily wage was $500 or not. Believing that the wage would be $500 per day, he agreed to do the work.

(3)   At around 9:15 am on that day, the Applicant met Mr. Chung (i.e. the 2^nd Respondent) for the first time. Nothing particular was mentioned about whether the daily wage was $500 or not. The Applicant believed that Ah Keung had agreed with the 2^nd Respondent that his daily wage would be $500. However the 2^nd Respondent did mention to him that the working hours were from around  9 am to 6 pm.

(4)   The Applicant also said that his trade was “drill operation”, which was using an electric drill for indoor demolition. The pay was $500 daily in accordance with the trade practice and the working hours were from 9 am to 6 pm. The wage was to be paid at the end of a day’s work. Therefore when he met the 2^nd Respondent, he did not confirm with him whether the daily wage was $500 or not. He simply accepted the job and started working.

(5)   The 2^nd Respondent gave him instructions to remove the tiles in the toilets of the master room and the guest room. So he used the electric hand drill provided by the 2^nd Respondent to remove the tiles. He had worked in both toilets to remove the tiles. The accident happened at around 11 am. After it happened, the 2^nd Respondent was also present at the scene. The Applicant had tried to continue with the work but he found the pain so unbearable that he told the 2^nd Respondent about the accident. The Applicant then left for medical treatment.

(6)   The Applicant did not have any helper and he earned a fixed daily wage of $500. In his mandatory provident fund account, some earnings were on the basis of a self-employed person and some were on that of an employee. His daily wage was maintained at $500 for the past 4 or 5 years. Having worked an average of 26 days per month, his average monthly earnings were $13,000. He had pay slips for some earnings, but not for the other earnings. But he did not file any tax return. He did not know much about it. He only gathered that on the level of his earnings, he did not have to pay tax after deducting the allowances.

7.The written evidence and the testimony of the 1^st Respondent can be summarized as below:

(1)   He admitted that the 2^nd Respondent was his sub-contractor who subcontracted the work of “demolition of the wall tiles and floor tiles in 2 rooms and removal of the furniture/cabinet” for a price of $5,522 from him.

(2)     He angrily said that he had made it clear to the staff of the insurance company that the policy should cover those un-named employees of the sub-contractor. But for some unknown reasons, it only covered him and his clerk.

(3)   For all projects that he sub-contracted, he would sub-contract different types of work.

(4)   After he sub-contracted the abovementioned work to the 2^nd Respondent, what then happened was none of his business.

8.The written evidence and the testimony of the 2^nd Respondent can be summarized as below:

(1)   Before the incident, one “Ah Fung” introduced the Applicant to work at the above premises. He discussed with Ah Fung that the remuneration would be calculated on the basis of $3.5 per foot. If the worker brought along his own electric drill to work, the remuneration would be $4.5 per foot. But Ah Fung indicated that the Applicant did not have any electric drill so his remuneration should be calculated on the basis of $3.5 per foot. The 2^nd Respondent believed that Ah Fung would convey the message to the Applicant. Ah Fung also complimented that the Applicant was “very good” at tiles removal.

(2)   In the morning of that day, when the 2^nd Respondent drove the Applicant to work, he confirmed with him that Ah Fung had already mentioned that the remuneration would be $3.5 per foot. The 2^nd Respondent also said that the remuneration would be “calculated daily”. Moreover, the task of demolishing the tiles in a toilet should be finished by 4:30 pm on the very day it started.

(3)   He gave instructions to the Applicant to demolish the tiles at the toilet of the master room, and another worker was assigned to do the same job in the toilet of the guest room. He then left the premises. At around 11 am, he received a phone call from Mr. Leung Kwok Wing saying that the Applicant had an accident. On that day Mr. Leung called the 2^nd Respondent twice to talk about the incident in which the Applicant sustained injuries.

(4)   In the above project, he also sub-contracted the task of demolition of tiles to Mr. Leung Kwok Wing at $3.5 per foot.

(5)   He did not mention to the Applicant that the daily wage would be $500 or that the area for demolition was about 200 sq. feet. Nor did he mention that the remuneration would be about $700 per day or that the working hours would be from 9 am to 6 pm.

9.The written evidence and the testimony of Mr. Leung Kwok Wing, the witness for the 2^nd Respondent, can be summarized as below:

(1)   He was sub-contracted with the tile removal work of the guest room toilet at a remuneration of $3.5 per foot. The surface area of the wall of the guest room toilet was about 200 sq. feet and the total wage for the work was $700.

(2)   At around 10 am in that morning, he met the Applicant for the first time. Each then started working on his own. He did not talk to the Applicant again before the accident. After the accident happened, he informed the 2^nd Respondent of it. That was the only occasion on the day and he never had another phone conversation with the 2^nd Respondent. He worked until some time after 5 pm when he finished his work and left the above address. He also mentioned that if he did not go to work or when he was about to leave, he would have to “obtain leave” from the 2^nd Respondent.

The Applicable Law

10.I am of the view that the legal principles laid down by the Court of Final Appeal in Poon Chau Nam [2007] 1 HKLRD were applicable to the present case:

“Regarding the question of the existence of an employer-employee relationship, it is a matter of overall impression against the background of the indicia of employment. As to the question of a global contract, in particular where casual workers are involved, a contract of employment could arise on two different levels: (a) a global contract; and (b) contracts out of specific engagements. To prove the existence of the former, a mutuality of obligation to supply and take up work is required to be found; but it is irrelevant to the latter. Even in the absence of a global contract, there can be a contract of employment based on a specific engagement.  As for casual workers, a mutuality of obligation to supply and take up work does not have to exist to qualify them as ‘employees’; see Employees’ Compensation Ordinance (Cap. 282) s. 2(1).”

11.Furthermore, the Court of Final Appeal conducted a detailed analysis of the factors to be considered before an overall impression is formed. Those factors include: “(1) whether the alleged employer exercised the requisite degree of control an employer would have over the alleged employee’s work; (2) whether the alleged employee might obtain a profit or had to bear a risk of loss arising out of the work; (3) whether the alleged employer was properly regarded as part of the alleged employer’s commercial organization; (4) whether the alleged employee was carrying on business on his own account or carrying on the business of the alleged employer; (5) whether the alleged employee provided his own equipment for the work; (6) whether the alleged employer bore for the alleged employee the incidence of tax and insurance; (7) the parties’ own view of the relationship; (8) whether the traditional structure of the trade or profession concerned and the practices within it assisted in the understanding of the matter.”

12.Admittedly, even before the case of Poon Chau Nam, similar criteria have been adopted and similar analysis made in a series of labour tribunal appeals, first by the late Jerome Chan J in the case of Tse Lam  (HCLA 150/1995), then by Deputy Judge Lam in Siu Koon Fung (HCLA 1/2002) and also by Deputy Judge Andrew Cheung in Wong Chi Yung (HCLA 108/2002). Eleven criteria have been relied upon in those cases to analyze the evidence in question in order to form an overall impression, and they are still used today. They are now cited as follows:

“The determination of the existence of an employer-employee relationship must be made after the consideration of  various indispensable tests. Any other form of investigation taking a shortcut from this approach cannot be relied upon where the issue is in dispute. The indispensible tests mentioned above, derived from precedents over the past one hundred years, are summarized as follow:

(1)   Whether the alleged employer had the degree of control over the task of the alleged employee which was commensurate to his capacity as the employer?

(2)   Whether the alleged employee provided his own equipment for the task?

(3)   Whether the alleged employee hired his own helpers for the task?

(4)   Whether the alleged employee took any financial risk and the nature / degree of it?

(5)   Whether the alleged employee had an opportunity of profiting from sound management in the performance of his task?

(6)   Whether the alleged employee bore any responsibility for investment and management, and the nature / degree of it?

(7)   Whether the alleged employee was properly regarded as part of the alleged employer’s organization?

(8)   Whether the alleged employer bore any responsibility in relation to insurance and tax for the alleged employee?

(9)   Whether the alleged employee was carrying on business in the trade in question?

(10)   What was the parties’ own view of their relationship?

(11)   Whether the traditional structure of the trade or profession concerned and the practices within it would assist with the understanding of their relationship?”

Analysis of evidence and findings of facts

13.I will first deal with the differences in respect of the material facts before dealing with the “eleven criteria”.

14.The two parties have different accounts of what happened in the case in relation to the following matters. The first difference related to the remuneration. The Applicant alleged that the daily wage was $500 whereas the 2^nd Respondent alleged that it was calculated on the basis of $3.5 per foot, amounting to $700 for a surface area of about 200 square feet. The second factual dispute was the working hours. The Applicant said it was from 9 am to 6 pm whereas the 2^nd Respondent alleged that it was not fixed and everything was simply calculated on the basis of $3.5 per foot. I am of the view that as far as the “eleven criteria” are concerned, these disputes are not crucial. Most importantly, it was an undisputed fact that the Applicant did in fact started with the removal of tiles and would be paid afterwards. Whether he was paid on a daily basis or by piece rate (by measurement) was more relevant to the question of quantum than the issue of employment.

15.Having said that, I still need to make findings on factual issues. Having considered the evidence of both parties, the supporting documents, the demeanors of the witnesses in court and the submissions, I find that the Applicant is a credible and reliable witness. Although he was rather slow when giving evidence and often spoke with a “lazy pronunciation” and occasionally in broken sentences, he was natural and sincere in court. He did not load his testimony with fancy phrases and was not evasive. The Applicant’s account of a daily wage of $500 was not shaken throughout the hearing. If adopted, it would result in a lesser amount of compensation than the 2^nd Respondent’s version of $700. With respect to what he said in his written affirmation that his daily wage was $500 and on a 6-day week, he would work 26 days in a month, earning an average of $13,000 per month, he explained reasonably that the arrangement was not a verbal agreement with the 2^nd Respondent, but a usual practice of the type of work he did and the way he was employed for the past 4 to 5 years. He emphasized that the practice was to pay $500 for a day’s work and he worked on average 26 days per month for the past 4 to 5 years. Such unspecified details happened to coincide with the 2^nd Respondent’s account where only a vague rate of $3.5 per foot was mentioned with the exact number of feet unspecified. Moreover, there was no evidence from the Respondents regarding the average pay for the type of work in question and the number of working days in a month in accordance with the trade practice.

16.On the contrary, the witnesses for the Respondents, in particular the 2^nd Respondent himself and Mr. Leung, were not direct when answering questions. They always emphasized that the Applicant was a sub-sub-contractor and that the mutual understanding was that he was a sub-sub-contractor. They appeared to be strained and repetitive in court. The discrepancies in their testimonies are highlighted below.

17.The 2^nd Respondent never mentioned in the documents facts such as that the surface area was 200 sq. feet. He said in court for the first time that it was 200 sq. feet.  Adding to the removal of tiles of walls on four sides (where one of the walls had space for an entrance) the chiseling of floor slabs, one party estimated that it was 200 sq. feet and the other party estimated that it was 300 sq. feet. So on the basis of $3.5 per foot, the difference in remuneration would be $350. This difference was quite significant so far as a grass-root worker or a small-scale sub-contractor like the 2^nd Respondent was concerned.

18.Secondly, the 2^nd Respondent did not mention in the documents that a worker would be paid $4.5 per foot if he carried his own tools. Nor did he mention in the documents that he had told the Applicant that the surface area of the toilet was about 200 sq. feet. Mr. Chan on behalf of the Respondents urged the Court to take into account when evaluating this omission the lack of representation when the 2^nd Respondent prepared the documents. That I do not agree. First of all, this issue was a material factual issue about the calculation of remuneration. Any lay person without legal knowledge would know how to give an account of it. Moreover, the Defence made by the 2^nd Respondent is a detailed document, which was not prepared perfunctorily.

19.Thirdly, the 2^nd Respondent and Mr. Leung only had two conversations with him over the phone, but Mr. Leung said there was only one conversation.

20.Fourthly, the 2nd Respondent said in paragraph 3(3) of his Defence that: “After the Applicant was injured, I suspected that he was not professional enough and asked him to stop working. But the Applicant said it was no big deal and insisted that he could finish the task on his own. He pressed on for another half an hour before he told me that he had to rest. Then he left the premises.” The above description not only shows that the Applicant had direct conversation with the 2nd Respondent, and also that the 2nd Respondent did return to the scene. But in court, the 2nd Respondent changed to say that he did not have any direct conversation with the Applicant and that he only talked to him through Mr. Leung. He even denied that he had ever returned to the scene. But Mr. Leung never mentioned anything such as that he conveyed messages such as asking the Applicant to stop, that the Applicant said that it was no big deal and could finish the task on his own, or that he told the 2nd Respondent that the Applicant had to leave the premises after pressing on for half an hour.

21.Fifthly, in his Defence dated 25^th September 2008, the 2^nd Respondent simply emphasized that the Applicant sub-contracted the project for a price of $3.5 per foot. But he said in court that the remuneration was to be calculated “on a daily basis”. How could the Applicant’s pay be calculated daily: In accordance with the length of tiles he removed each day until he finished the whole task? To do so would be an affront to logic and common sense.

22.Consequently, with the exception of the unchallenged evidence, I accept the evidence of the Applicant and reject that of the Respondents and their witnesses.

23.The next issue is the application of the “eleven criteria”. Criterion (1) is: Whether the alleged employer had the degree of control over the task of the alleged employee which was commensurate to his capacity as the employer? As in the abovementioned case of Poon Chau Nam, the relevance of the control test is relatively low in the present case, it was because the 2^nd Respondent said in his evidence that “Ah Fung” also complimented the Applicant for being “very good” at tiles removal. Therefore, there was no need for the 2^nd Respondent to supervise the Applicant or give instructions to him on the steps of tiles removal. As to the working hours, the 2^nd Respondent in fact had strict requirements on the Applicant as to the working hours or the finishing time. The Applicant’s account was from “ 9 am to 6 pm” and the 2^nd Respondent also said that he believed the task of removing the tiles inside a toilet should be completed in one day. Mr. Leung also said that the task of tiles removal was finished shortly after 5 pm on that day. Therefore the argument as submitted by the Respondents that a daily wage of $500 would cause the worker to drag on with the work procedures could not stand. Since the evidence of both parties shows that the respective task in a project of this scale would take one and at most two days, any employer, the 2^nd Respondent included, would not allow the task to take longer than the reasonable time. Moreover, it is an undisputed fact that it was up to the 2^nd Respondent to decide what type of task should be assigned to and how much be paid to the Applicant daily.

24.Criteria (2) and (3): Whether the alleged employee provided his own equipment for the task? Whether the alleged employee hired his own helpers for the task? It was not disputed that the 2^nd Respondent provided the electric hand drill. I do not believe the allegation that the 2^nd Respondent had raised with the Applicant that he would be paid $4.5 per foot if he brought his own tools. Moreover, the Applicant did not hire any helper. Admittedly, whether the remuneration was $500 or $700, it would be impractical for him to hire a helper.

25.Criteria (4) to (7): Whether the alleged employee took any financial risk and the nature / degree of it? Whether the alleged employee had an opportunity of profiting from sound management in the performance of his task? Whether the alleged employee bore any responsibility for investment and management, and the nature / degree of it? Whether the alleged employee was properly regarded as part of the alleged employer’s organization?

26.As far as the whole small-scale removal work was concerned, the 2^nd Respondent took up the project for $5,522. It was the business of the 2^nd Respondent. The evidence shows that the 2^nd Respondent could make a profit out of it without staying on site to help with the removal. His profit was about $1000 odd whereas the Applicant’s fixed daily wage was only $500. The Applicant was not entitled to any spilt or share of profit, and did not have to bear any risk for the business. With such and other factors, it gets more and more likely that the Applicant was an employee.

27.Criterion (8): Whether the alleged employer bore any responsibility in relation to insurance and tax for the alleged employee? The Applicant did not file any tax return for his earnings in the past. This might be a matter the Inland Revenue Department would need to follow up. Most importantly, in relation to the contention of working on average 26 days each month, the Respondent did not put forward another average figure. Furthermore, the 1^st Respondent at one stage said angrily that he did not know why the coverage of the insurance policy he subscribed was limited to the 1^st Respondent and his clerk only when it should include the employees of the sub-contractors. Therefore, it had in fact occurred to the 1^st Respondent that he might have to compensate for the injuries sustained by the employees of the sub-contractors. It should also be mentioned that in Poon Chau Nam, the Court of Final Appeal considered that even if the so-called employee or applicant joined the mandatory provident fund as a self-employed person, the overall impression of an employer-employee relationship would not be affected.

28.Criteria (9) to (11) are: Whether the alleged employee was carrying on business in the trade in question? What was the parties’ own view of their relationship? Whether the traditional structure of the trade or profession concerned and the practices within it would assist with the understanding of their relationship? The evidence shows that the Applicant did not have any business registration and was not carrying on any business in this trade. As for the parties’ own view of their relationship, I understand that the Respondents considered the Applicant as a sub-sub-contractor but I do not agree with them. It did not matter how the parties label the relationship, it was an overall impression formed having regard to objective factors. Regarding the trade practice, I have accepted the Applicant’s version in this regard and do not wish to repeat that.

29.In light of the above paragraphs and having considered the above criteria, my overall impression is that the Applicant was the employee of the 2^nd Respondent. It follows that any agreement or arrangement of self-employment that attempts to evade an employer’s liability for employees’ compensation shall be null and void under section 31(1) of the Employees’ Compensation Ordinance.

Quantum of compensation

30.In respect of the method of calculation of compensation under section 9, the Applicant was 36 years old when the accident happened. Both parties agreed that the second part of section 11(2) should be adopted as the basis which I now cite as follows: -

“Where by reason of the shortness of the time during which an employee has been in the employment of his employer or of the casual nature of the employment, or of the terms of employment, it is impracticable to compute the rate of remuneration of such employee at the date of the accident, regard may be had to the average monthly amount which, during the 12 months previous to the accident, was being earned by a person of similar earning capacity in the same grade employed at the same work by the same employer, or, if there is no person so employed, by a person of similar earning capacity in the same grade employed in the same class of employment and in the same district.”

31.The Court of Appeal conducted an analysis of this basis in the case of Lai Cheung Kong  [2008] 3 HKLRD 645.

32.As stated above, I have accepted that for the four or five years before the accident, the average monthly income of the Applicant was HK$13,000.

33.The Certificate of Assessment also shows that the Applicant’s permanent total incapacity resulting from the injury is 0.5%. According to the First Schedule of the Employees’ Compensation Ordinance, where the fingers suffered 0.5% of injury, there was a 0.5% loss of earning capacity. This indicates that the Ordinary Assessment Board under the Employees’ Compensation Ordinance, which made this assessment of 0.5% loss of earning capacity, made an assessment that was both appropriate and in accordance with the laws. For an ordinary claim under the Employees’ Compensation Ordinance, the court will make an assessment on his loss of earning capacity as it deems appropriate according to the extent of his injury only if the injury sustained by the applicant is not listed in the First Schedule at all. But as the injury of Mr. Tang is already listed in the Schedule, I accept that he has lost 0.5% of his earning capacity. Therefore, he is entitled to the following compensation under section 9: $13,000 x 96 months x 0.5% = $6,240.

34.As to the compensation under section 10, which was the compensation for temporary loss of earning capacity, both parties agreed that the Applicant took 46 days of sick leave. Therefore, he is entitled to the following compensation under section 10: $13,000 / 30 days x 46 x 4/5 = $15,946.67.

35.Lastly, for the calculation of compensation for medical expenses under section 10A, both parties agree that the Applicant has paid medical expenses totaling $1,260.

Conclusion

36.The following is a breakdown of the quantum of compensation:

Section 9	$6,240
Section 10	$15,946.67
Section 10A	$1,260
Total	$23,446.67

37.The 1^st Respondent and the 2^nd Respondent are jointly and severally liable to pay the Applicant the above amount.

Interest

38.The Applicant is hereby awarded interest on the sum claimed for the period between the date of the accident and the date of award, i.e. today at a rate of 50% of the judgment rate. For the interest incurred from today up to the full settlement of the sum, the full judgment rate applies.

39.As to costs, costs shall follow the event. So in the present claim, the costs shall be to the Applicant.  The 1^st and 2^nd Respondents shall pay costs to the Applicant. If the parties cannot reach an agreement, the costs shall be taxed by a master. I agree and allow Counsel’s certificate to the Applicant.

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

Mr. Jackson Poon, instructed by Messrs. Huen and Partners, for the Applicant.

Ms. Katherine Chan, instructed by Messrs. Martin Law & Co, for the 1st and 2nd Respondents.

Translated by the Judgment Translation Unit of the Judiciary and approved by Mr. P. Y. Lo, Barrister-at-law.