SIU MEI MEI v. CHIAU FENG WAREHOUSE TRANSPORTATION CO. LTD.

DCEC685/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 685 OF 2000

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JUDGMENT

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[1] The applicant is the widow of Lee Tang Kwong. The application is made on behalf of herself, two minor children and the deceased's mother.

Agreed facts

[2] It is agreed between the parties that:

[3] Lee Tang Kwong died on 21st August 1999, as the result of a traffic accident in China.

[4] At the time of the accident, the deceased was driving a container truck FM1954.

[5] The deceased was in the course of his work when he met with the fatal accident.

Agreed quantum

[6] It is agreed between the parties that, if liability could be established, the statutory compensation under Section 6 of the Employee's Compensation Ordinance Cap.282 at

$21,000 x 84 months = $1,764,000

would be payable.

[7] The applicant would be entitled to interest on the sum of $1,764,000 from the date of the fatal accident to the date of the award.

The issues

[8] The only issue of fact is whether the deceased was the respondent's employee, or an independent contractor, at the time of the fatal accident.

[9] The only issue on quantum is the interest rate to be applied.

Undisputed facts

[10] The following facts were not disputed by either party, and are found to be facts of the case.

[11] The deceased was engaged by the respondent to drive FM 1954.

[12] There was no discussion on the terms under which the deceased was to be engaged.

[13] There was no written contract.

[14] There were no fixed working hours.

[15] There was no basic salary.

[16] The respondent's coordination officer (RW3) would contact the deceased with work orders. The deceased could also contact RW3 to ask for work orders.

[17] The deceased did not have to attend at the respondent's office when he had no orders to attend to.

[18] The respondent paid for repairs, maintenance, parking and miscellaneous charges relating to FM 1954.

[19] The deceased was not required to park FM 1954 at any designated car park.

[20] The deceased could decide on his own route when carrying out transport orders.

[21] The deceased could carry out his orders at his own pace, provided he met the shipping company's deadline for loading goods on board.

The applicant's case

[22] The applicant's case was that at the time of the deceased's death, he was driving the respondent's truck, FM 1954, on the respondent's business, during the course of his employment with the respondent as a piece-rated employee.

[23] The deceased was the beneficial owner of FM 1954 until March 1999, when he sold the truck to the respondent. The respondent paid part of the purchase price to the deceased, and took up the payment of the remaining hire purchase installments from 25th March 1999.

[24] The deceased commenced work with the respondent as an employee in April 1999.

[25] The deceased was not in the position to refuse any orders to transport containers assigned by the respondent.

[26] The deceased was bound to take up orders from the respondent only. The trade practice was that he could not accept orders from others.

[27] While the deceased was to have 2 leave days per month, he had been refused leave when he asked for it.

[28] His remuneration was based on 27% of the price of transport orders assigned to him by the respondent.

[29] The deceased was carrying on the respondent's business when driving the truck FM 1954.

[30] The deceased had not obtained any Business Registration Certificate, nor was he connected to any other business.

[31] The respondent provided the truck FM 1954 for the deceased's use.

[32] The deceased had filed no tax return or arranged insurance on his own behalf.

[33] He considered himself to be the respondent's employee.

[34] He had to provide his services personally.

The evidence for the applicant

The applicant's first witness

[35] The applicant's first witness (AW1) was the deceased's friend. He joined the respondent company with the deceased in April 1999.

[36] Prior to this, there was a meeting at the respondent's office, attended by the deceased, AW1, one of the respondent's director (RW1) and the respondent's coordination officer (RW3). During the meeting, RW1 agreed to buy both the deceased's and AW1's trucks. RW1 also agreed, without discussion of the employment terms, to hire both the deceased and AW1 as China-Hong Kong cross border truck drivers.

[37] In accordance with trade practice, AW1 understood that their terms of employment would be that they were to be paid at 27% of the price of jobs completed. All miscellaneous expenses, like fuel, road and bridge tolls would be paid for by the respondent. There were no fixed working hours. These were in fact the terms under which AW1 and the deceased worked for the respondent.

[38] It was not specifically stated that the deceased and AW1 could not accept assignments from other sources, but AW1 considered that to be understood, in accordance with trade practice.

[39] If AW1 or the deceased were to refuse to accept the orders placed by RW3, AW1 was of the opinion that they could be dismissed.

[40] Neither of them could engage other drivers to carry out their work in China.

[41] Their main concern at the meeting was the sale of their trucks to the respondent. AW1 only realized that RW1 was personally buying his truck when he went with RW1 to the Transport Department to effect the change of ownership.

[42] AW1 left the respondent in May 1999.

[43] After the deceased passed away, AW1 went with the deceased's brother (AW2) to the respondent's office. RW1 told them that the deceased was never the respondent's employee, and that no employee's insurance had ever been arranged for any of its drivers. RW1's offer to pay an ex-gratia payment was refused as being below AW2's expectation.

[44] The applicant's case relied heavily on AW1's evidence.

The applicant's second witness

[45] The applicant's second witness (AW2) is the deceased's elder brother. He allowed the deceased to use his name to register FM1954, in order to facilitate the hire purchase arrangements. He was aware that the deceased sold the truck and became the respondent's employee. His evidence was that the deceased put off transferring the truck to the respondent's name because the deceased was too busy.

[46] AW2 is the sole proprietor of Hat Yat Transport Co. The deceased was never a partner of that company. The deceased was his employee at one time, but had ceased to be so employed some 5 years ago. Since then the deceased had no further connections with Hat Yat. AW2 allowed the deceased to use Hat Yat's monthly statement forms while the deceased was working as an independent contractor.

[47] AW2's company had no business dealing with the respondent. There were no orders received from the respondent, nor did the respondent ever pay AW2 any transport fees.

[48] AW2 received $40,000 from the respondent's representative, while attending to the deceased's funeral matters in China.

[49] AW2 attended at the respondent's with AW1, to discuss compensation. RW1 denied that the deceased was ever the respondent's employee. AW2 was not aware of the terms under which the deceased had worked for the respondent.

[50] AW2 refused RW1's offer of ex-gratia payment as being below his expectations.

The applicant's third witness

[51] The applicant's third witness (RW3) is the deceased widow, the applicant. She was aware that the deceased had sold his truck to the respondent, and had become the respondent's employee, since April 1999.

[52] AW3's evidence was that while the deceased was supposed to have 2 days leave per month, when the deceased applied to take leave, permission was refused. The respondent arranged all work orders for the deceased. From April 1999, up to the time of his death, the deceased had not worked for any one else, except the respondent.

[53] The deceased hired no help. He had not applied for business registration.

[54] AW3 did not enquire into the deceased's terms on employment with the respondent.

[55] She was not aware of the deceased's financial situation or of how the price of FM 1954 had been spent. It was not placed into the deceased's bank account.

[56] The deceased income was not stable.

The respondent's case

[57] The respondent's case was that the deceased was an independent contractor.

[58] The respondent, on receiving orders from clients, would contact the deceased through RW3, its coordination officer.

[59] FM 1954 was hired from RW1, one of the respondent's directors, and assigned to the deceased's use. The respondent exercised no control over the deceased, except that he could not let others drive FM 1954 in China, as this would violate permit conditions. There were no fixed hours for work. The deceased need not report to the respondent's office in between jobs.

[60] The deceased was paid 27% of the transport price, after the respondent had made some deductions for overhead charges. The deceased's profit would increase if he agreed to take more orders.

[61] The respondent never regarded the deceased as an employee. He was an independent contractor in co-operation with the respondent.

[62] The respondent understood the deceased to be the proprietor of Hat Yat Transport Co., and dealing with the respondent as a separate business entity on the deceased's own account.

[63] Prior to the accident, RW1 had agreed to resell FM 1954 to the deceased. The deceased was given an increase from 27% to 30% to reflect the depreciation value. At the time of the accident, the respondent was still paying the miscellaneous expenses of FM 1954 as an interim measure. By the time of the accident, RW1 no longer regarded FM 1954 to be his, or under hire to the respondent.

[64] The respondent had filed no tax return for the deceased, nor did the respondent arranged for employee's insurance for him, as the deceased was not an employee.

[65] Under trade practice, a driver could be engaged as an employee, or an independent contractor. The respondent was only prepared to engage independent contractors, to avoid adverse legal implications, should a driver become involved in illegal activities, like smuggling.

[66] The deceased had to provide his services personally, as the China permit did not allow any but the named driver to drive the truck.

The evidence for the respondent

The respondent's first witness

[67] The respondent's first witness (RW1) is one of the respondent's directors. His evidence was that the deceased had co-operated with the respondent under a company name in 1997.

[68] In March 1999, he interviewed AW1 and the deceased, and decided to buy their trucks. He informed them that the respondent would never hire any drivers as employees, but would only co-operate with them by giving them orders for transport work. He insisted that they should obtain their own business registration. There was never any indication to the deceased and AW1 that they must accept the respondent's orders, or else they would be dismissed. There was no discussion on holidays.

[69] RW1 left details like routing and transport fees to be discussed between the deceased, AW1 and RW3, the respondent's coordination officer.

[70] The co-operation started in April 1999.

[71] Every month, the respondent would pay the deceased a lump sum on account for miscellaneous expenses. There was also an amount for mobile telephone charges, and $1,800 for car parking in Hong Kong.

[72] RW1 did not consider the deceased to be part of the respondent's organization. He considered the deceased to be carrying on a business of his own. If the deceased should accept outside hire, he should reimburse the respondent at the agreed rate of 73% of the transport fees. RW1 only arranged employee's insurance for 3 full time staff in the respondent's office.

[73] RW1 hired the truck FM 1954 to the respondent. The respondent assigned it to the use of the deceased.

[74] RW1's evidence was that in May 1999, the deceased indicated to RW1 that he wished to resume ownership of FM 1954. In June 1999, RW1 agreed to re-sell the truck to the deceased. He agreed to give the deceased 6 months to repay the price. The deceased had made no repayment up to the time of his death.

[75] RW1 first made reference to the re-sale in his evidence during the trial.

[76] The respondent continued to provide repair and maintenance, until such time as RW1 was repaid.

[77] It was RW1's evidence that he offered the same terms to the deceased, AW1 and another driver Luk Kin Hung (RW2).

The respondent's second witness

[78] The respondent's second witness (RW2) co-operated with the respondent as a container truck driver, working as an independent contractor from June 1999.

[79] He operated his own transport company, with business registration taken out in 2000. He provided his own insurance.

[80] The respondent provided him with a truck and was responsible for all repairs and maintenance.

[81] RW2 received no basic salary. He was paid 27% of the price of transport orders.

[82] There were no fixed working hours. RW3, the respondent's coordination officer would call RW2 at his home an hour before an order had to be carried out. RW2 could not refuse an order unless there were some urgent or private matters. If RW2 refused orders too frequently, he might loose a client. There were no holidays.

[83] RW2 was not aware of the other drivers' terms of engagement with the respondent.

[84] In June 1999, he attended a meeting in which RW1 and RW3 reminded the drivers, including the deceased and two other drivers, to arrange for business registration, and to arrange their own insurance. At that time, the deceased, RW2, and one of the other drivers had no business registration certificate.

[85] As far as RW2 was concerned, there was not much difference between being self-employed and being an employee.

The respondent's third witness

[86] The respondent's third witness (RW3) was the respondent's coordination officer from 1997 to 2000. He distributed the orders received from the respondent's clients among the drivers who were in co-operation with the respondent.

[87] The respondent employed 5 employees at its office, 3 full-time and 2 part-time. They had to attend at the office punctually at fixed working hours, and enjoyed 7 days annual leave.

[88] All the respondent's drivers were independent contractors, self-employed proprietors in their own rights. They need not attend at the respondent's office. They were paid 27% of the transport price, after the respondent had made a deduction for overhead. The respondent was responsible for the maintenance and repairs of the trucks, some of them belonging to the respondent, others on hire.

[89] The respondent did not prohibit the drivers from accepting outside orders, but such orders must be reported to the respondent. The drivers can hire a substitute when working in Hong Kong. There was no designated parking place in Hong Kong. There was no control over the routes.

[90] RW1 had discussed the terms of co-operation with all the contractors, emphasizing that the respondent was acting in partnership with their respective companies, and not with the drivers in their personal capacities. Because the drivers were not in the respondent's control, the working hours and holidays were not discussed.

[91] RW1 agreed to buy AW1's and the deceased's trucks, in RW1's personal capacity.

[92] RW1, based on the reports made by the drivers to RW3, would calculate the amount due to each driver. All along, the respondent considered itself to be dealing with Hat Yat, and not with the deceased personally. RW3 was under the impression that both AW1 and the deceased were working under Hat Yat's name when dealing with the respondent from April 1999.

[93] RW3 was aware that the deceased had asked to be an employee, but RW1 refused the request.

[94] At the time of the fatal accident, the deceased had, with the knowledge and consent of RW3, switched jobs with another driver who was also working for the respondent. The respondent's consent was not strictly necessary, but it must be informed, as clients would want to keep track of their goods.

Assessment of the evidence

[95] In the present application, where there was no written contract, whether the deceased was an employee or an independent contractor of the respondent is a question of fact. It must be determined by the investigation and evaluation of the factual circumstances in which the work is performed. (Lee Ting Sang v. Chung Chi Kung & another [1990] 2WLR 1173.)

[96] The following factors have to be considered.

1. Degree of control

[97] The applicant's case was that the deceased had no right to refuse the respondent's work orders. Refusal could lead to dismissal.

[98] The evidence from both sides agreed that such a term had not been referred to in the meeting in March 1999, before the deceased and AW1 joined the respondent. AW1 understood it to be trade practice. RW3 had also told AW1 that AW1 could not refuse the respondent's orders.

[99] AW3's evidence was that the deceased was not allowed a day off, when he asked for it.

[100] I accept the evidence of AW1 and AW3, and find it as a fact of the case that the deceased could not refuse the respondent's orders.

[101] Although it was not specifically mentioned, AW1 considered it as trade practice, and so a term of their employment with the respondent, that neither he nor the deceased could accept transport orders from others. They must provide their services exclusively to the respondent.

[102] The evidence for the respondent was that such drivers could accept orders from other sources, as long as the respondent was informed of the arrangement, and receive 73% of the agreed rate. In other words, the drivers would not benefit to any greater extent than simply carrying out the respondent's orders.

[103] There is no evidence that the deceased had access to any other truck to which he was the named driver in the China route permit. To work as a cross border driver, he could only drive FM 1954. This is found as a fact of the case.

2. Prospect of profit or risk of loss

[104] It is agreed and found as a fact of the case that FM 1954 was assigned by the respondent to be driven by the deceased exclusively, while in China. All repairs, maintenance and miscellaneous charges, including parking fees, were paid by the respondent. The deceased was paid 27% of the transport charges. He was not responsible for investment or management. There was no financial risk to the deceased.

[105] Even if he had done so, the deceased could not profit from accepting outside orders, as he could only retain the agreed 27% of the transport price.

[106] It is found as a fact that the deceased would not profit from sound management, nor would he suffer from risk of loss from bad management.

3. Whether the deceased was properly regarded as part of the employer's organization.

[107] The respondent emphatically denied that any of its drivers, including the deceased, was part of its organization.

[108] The deceased considered himself as part of the organization, as he worked exclusively for the respondent.

[109] However, this kind of work arrangement could also be true of contract drivers, so this part of the evidence is not conclusive, and can only be regarded as neutral.

4. Whether the deceased was working on his own account or carrying on the business of the employer

[110] AW1 and RW2 agreed that the deceased did not have any business registration as late as June 1999. This is accepted and found as a fact of the case.

[111] In January 1999, the deceased had issued monthly statements using his elder brother's business stationery. There is no evidence that he continued to do so since April 1999. There is no evidence that he had ever refused the respondent's orders or undertaken outside work since joining the respondent.

[112] It is accepted and found as a fact of the case that the deceased was not operating on his own account, but was carrying on the business of the respondent's, from the time he joined the respondent in April 1999.

5. Provision of equipment

[113] The applicant's case was that the respondent provided the truck FM 1954 for the use of the deceased, in the course of his work with the respondent.

[114] The respondent's case was that RW1 was the beneficial owner at the time when the deceased joined the respondent. RW1 hired the truck to the respondent without hire charges. In June 1999, RW1 agree to re-sell it the deceased. Since then, ownership had reverted to the deceased. However, the respondent continued to provide for the repairs, maintenance and miscellaneous charges. There is no evidence to substantiate this reversion of ownership. It was never referred to in RW1's statement, and was only revealed in his oral evidence. Even if there had been a reversion of ownership, which is not accepted, it did not affect the deceased's position with the respondent as at April 1999, as it was subsequent to the event of his joining the respondent.

[115] It is accepted and found as a fact of the case that the respondent provided the truck FM 1954 for the deceased's work with the respondent. This is of significant importance in the evaluation of the factual circumstances under which the work was performed.

6. Arrangements for filing of tax returns or provision of insurance coverage.

[116] It is accepted and found as a fact of the case that the respondent had made no arrangements for the filing of tax returns or provision of insurance coverage for the deceased.

7. The respondent's and the deceased's own view of their relationship.

[117] The respondent considered the deceased to be an independent contractor. The deceased considered himself to be a piece-rated employee.

[118] However, the parties own view of their relationship is not of significant importance in this case.

8. The traditional structure of the trade concerned and the arrangement within it

[119] The trade practice was such that either system of an independent contractor or of an employee could operate. This test is of no assistance in the present application.

9. Whether there was an obligation on the part of the employee to provide his services personally

[120] It is accepted and found as a fact of the case that the deceased must provide his services personally.

Finding

[121] Taking all aspects of the evidence in the case together, I find as a fact that the deceased was an employee of the respondent, and was on the respondent's business, during the course of his employment, at the time of the fatal accident.

Quantum

[122] Quantum had been agreed, under Section 6 of the Employee's Compensation Ordinance Cap.282, at $1,764,000.

Order

[123] There is judgment for the applicant in the sum of $1,764,000, with interest at judgment rate from 21st August 1999 to judgment date.

Costs to the applicant.

The applicant's own costs be taxed in accordance with Legal Aid Regulations.