TIN SAI CHUEN v. NGAI CHI SHUN

DCEC 259/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 259 OF 2014

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JUDGMENT

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INTRODUCTION

1. This is a claim for compensation under the Employees’ Compensation Ordinance, Cap 282 (“ECO”).

2. The applicant (“Tin”) is a carpenter by trade.  He claims that he was injured in an accident which occurred in the course of his employment with the respondent (“Ngai”) on 18 March 2012.  He was carrying out some renovation work outside Shop 09 on Ground Floor, Empress Plaza, Nos 17-19 Chatham Road, Tsimshatsui (the “shop”) when he fell down from a platform.

3. Ngai disputes that Tin was his employee.  His case is that they undertook the renovation project of the shop (the “TST project”) as business partners.  There is also disagreement as to the amount of compensation payable, if any.

BACKGROUND

4. Ngai is a cement worker.  He and Tin had known each other for about 20 years prior to the accident.  Before the shop renovation project in question, they had worked with each other in many other projects.  So much is not disputed.  However, the parties fundamentally disagree on the nature of their legal relationship.

5. According to Tin, Ngai usually acted as a main contractor for renovation works.  If a project involved carpentry work, Ngai would hire Tin as an employee on the usual or standard terms which applied to his trade.  In particular, Ngai would pay Tin a daily wage.

6. From time to time, Tin would be asked by his clients to take up a project and act as a main contractor.  In those cases he would hire other workers and pay their wages as their employer.

7. On the other hand, Ngai asserts that he and Tin were both independent contractors.  Thus, when Ngai took on a project he would sub-contract the carpentry work to Tin.  Conversely, when Tin found a project which involved cement work, he would sub-contract that portion of the work to Ngai.

8. For the latter case, Ngai gave as an example a residential project at Flat 5B, Block 1, Marina Garden, Tuen Mun (“Tuen Mun project”), which also took place in March 2012.  Tin was the main contractor.  There appears to be no dispute that Tin sub-contracted parts of the work to Ngai, although there is disagreement over the final account.

9. I now turn to the TST project. Ngai was introduced to the tenant of the premises who wished to renovate the interior of the shop.  On 1 March 2012, Ngai went to meet the tenant on site. He was asked to give a quote for the works. 

10. Ngai had no experience in renovating commercial and shop premises.  He was unable to give a quote to the tenant.  So he gave a telephone call to Tin, who was known to him to have such experience, and asked Tin to come to the shop at once.  He wanted Tin’s help in putting together a quote.

11. Tin recalls getting such a phone call on the night in question summoning him to the shop in the middle of his dinner.  When he arrived he saw Ngai talking to a Mr Leung, a representative of the tenant.  According to Tin, Ngai only asked him for advice on some difficult aspects of the carpentry work, not to give a cost estimate or to help Tin in offering a quote to his client.

12. It is not disputed that Ngai, but not Tin, negotiated with the tenant.  Ngai offered a quote of $73,000.  The tenant later asked for a reduction.  After consulting with Tin, Ngai agreed to lower the price to $70,000.  Tin maintains that he knew nothing about the quotes.

13. According to Tin’s testimony, he started work on 11 March 2012.  On 18 March, he attended the site alone, as no one else was working on that day, which was a Sunday.  In fact, and there is no dispute about this, Ngai had invited him and other workers to a barbeque party on the same day, but Tin declined to join.  As a result, nobody witnessed the accident which is said to have happened in the following way.

14. By this time, Tin had nearly completed all the work that had been assigned to him.  All that was left to do was to put up the signboard on the shop front.  He gave evidence that wanted to finish the work at the shop on Sunday so that he could go back to work on the Tuen Mun project on the following day.

15. To reach the signboard, Tin climbed on top of a workbench.  It was around 2.2 metres high.  Whilst he was trying to affix the display boards, the bench suddenly shifted causing him to fall backwards and injure his left leg.

16. At almost the same time Mr Leung arrived on the scene and assisted Tin.  Tin was sent to hospital.  Upon arrival, Tin gave a telephone call to Ngai, who was still at the barbeque, and told him about the accident.

17. Upon examination and treatment, Tin was granted sick leave from 18 March to 20 November 2012.  Although the fracture had healed, the residual pain was such that he had been unable to resume work of any kind.

18. According to Tin, Ngai paid him a visit after the accident.  During the visit, Ngai paid him $7,000 in cash which represented 7 days’ wages (at $900 a day) plus a surplus for medical expenses.

19. On the other hand, Ngai claims that he had made three visits to Tin’s home after the accident.  No money was paid during the first visit.  On the second occasion, near the end of March, Ngai went to retrieve some marble which was stored at Tin’s home for use at the Tuen Mun project.

20. On the third occasion, in early May, Ngai visited with a painter, Mr Tsui Sai Lau, for the purpose of settling the final accounts of the Tuen Mun project and the TST project at the same time.  According to Ngai’s calculation, Tin owed him $22,700 in respect of the Tuen Mun project.  Ngai had also prepared a partnership account in respect of the TST project:-

Item	Amount (HKD)
Painter’s wages	$6,300 ($900 x 7 days)
Electrician’s wages	$8,100 ($900 x 9 days)
Tin’s wages (carpenter)	$9,000 ($900 x 10 days)
Ngai’s wages (cement)	$13,500 ($900 x 15 days)
Glass door	$12,000
Clearing of debris, purchase of timber and other materials	$11,700
Total outlay for the project	$60,600
Profit	$9,400 ($70,000 - $60,600)
Share of profit	$4,700 ($9,400/2)

21. The account shows that a sum of $13,700 (consisting of wages of $9,000 and $4,700 of net profit) was due from Ngai to Tin.  After setting off the accounts of the two projects, Tin owed $9,000 to Ngai.

22. For this reason, says Ngai, at the third visit, Tin paid him $9,000.  Tin also paid the painter $5,000 that was owed to him for his work done in the Tuen Mun project.

EMPLOYEE OR PARTNER? – THE LAW

23. To summarise, the rival contentions which I have to choose between are:-

(1) As contended by Tin, that he was an employee of Ngai in respect of his carpenter’s work ; and

(2) as contended by Ngai, that they were partners in the TST project.

24. I pause here to advert briefly to a third possibility which straddles both contentions, namely, that Tin was employed by the partnership.  It appears quite clear that, at least as a matter of English law, that a partner cannot be an employee of the firm.

25. In Ellis v Joseph Ellis & Co [1901] 1 KB 324, the plaintiff worker was one of the partners of the firm for which he was working for a weekly wage.  The English Court of Appeal held that he was not an employed person contemplated by the Workers Compensation Act 1897 (UK).  The UK Act is the forerunner of the ECO.

26. Recently, in Bates van Winkelhof v Clyde & Co [2014] 1 WLR 2047, the Supreme Court revisited this question.  Although I have not been addressed by counsel on this case, it is safe to say the position as far as English law is concerned has survived the scrutiny of the Supreme Court.

27. In Hong Kong, Ellis v Joseph Ellis & Co has been accepted as good law.  See for example, David Hardy Glynn v Commissioner of Inland Revenue [1988] 2 HKLR 115, at 117, per Rhind J.

28. The general principles for determining whether a particular worker is an employee are well-settled.  As submitted by Mr Jackson Poon, counsel for Tin, I should apply the modern approach laid down by in Poon Chau Nam v Yim Siu Cheung [2007] 1 HKLRD 951 at [17].

29. In that case, the Court of Final Appeal held that the modern approach is to examine all the features of 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.

30. Finally, the Partnership Ordinance, Cap 38, lays down certain rules for determining the existence of a partnership.  I need only refer to s 4(c):-

“(c) the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but the receipt of such a share, or of a payment contingent on or varying with the profits of a business, does not of itself make him a partner in the business; and in particular-

…

(ii) a contract for the remuneration of a servant or agent of a person engaged in a business by a share of the profits of the business does not of itself make the servant or agent a partner in the business or liable as such.”

DISCUSSION OF EVIDENCE

31. At trial, I heard the testimony of Tin and Ngai.  There were no other witnesses. 

32. Earlier, Tin had filed a statement of Madam Tong, his former wife, who was said to be present when Ngai paid him $7,000.  Likewise Ngai had filed a statement of Mr Lau, the painter, which appeared to support his version of the post-accident transactions. 

33. As matters transpired, Madam Tong and Mr Lau were unable or unwilling to testify at trial.  Hence I cannot attach any weight to their witness statements.

34. Curiously, there is a total dearth of documentary evidence, such as tax returns, payrolls, MPF account statements and EC insurance policies.  Unlike similar cases of this kind, no such documents are deployed to shed light on the nature of the relationship between the parties.

35. For the sake of convenience, I shall discuss the evidence under each of the traditional indicia of employment cited by the CFA in Poon Chau Nam, sup cit, at [20].

(1) Degree of control exercised by the employer

36. As may be expected Ngai claims that Tin enjoyed full autonomy in carrying out his part of the work.  Tin says the opposite is true.  However, given the specialised nature of Tin’s work it is quite natural for him to work with no or little supervision.  I am unable to derive much assistance from this factor.

37. Further, there is conflicting evidence before me as to who held a key (or a copy of the key) to the premises in the first few days of work prior to the accident.  I do not propose to rehearse the two versions at length.  It is just one man’s word against the other’s.  There is simply insufficient objective or reliable information to enable me to decide where the truth lies.

38. There appears to be no dispute that on the day of the accident, Tin insisted on attending the premises when his fellow workers joined in a pleasure trip on Ngai’s invitation.  His conduct suggests that he enjoyed a greater degree of freedom than an ordinary employee.  At the same time, however, I am unable to dismiss Tin’s explanation for giving priority to finishing the TST project (see paragraph 14 above) as an obvious untruth.

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

39. On Tin’s version he was simply paid a daily wage of $900 per day for the carpentry work in the TST project.  Ngai maintained that he and Tin entered into a partnership with an equal share in any prospective profit or loss, as the case may be.  This was the agreement that was reached on the night of 1 March 2012.

40. Counsel for Tin invited me to reject Ngai’s story as being less than credible.  The discussion only lasted around 20 minutes.  Likewise, Ngai did not set out the terms of the partnership in any great detail in his witness statement.  Counsel also pointed out, among other things, that the use of round figures in the partnership account (quoted in paragraph 19 above) was inconsistent with a bona fide account.

41. I find that on a balance of probabilities Ngai’s version is more believable.  I do so for several reasons.

42. First, there is nothing inherently improbable for the parties, who were well-known to each other and veterans in their own fields, to reach a deal within the space of 20 minutes.  It was, after all, a modest project.  The main things that they had to agree and decide on were cost and profit.

43. Despite Mr Poon’s criticism, there is in fact only one item in Ngai’s partnership account which might involve an element of rounding up, if any, namely, $11,700 for timber and other materials. It does not give rise to any basis for saying that the whole account was a recent concoction.

44. To my mind, the decisive factor is the undisputed fact that Tin answered Ngai’s urgent call to attend the meeting with the client on the night of 1 March 2012 in the circumstances in which he did.  The only pressing matter was the giving of the quote.  If Tin had simply been an employee who was to receive a daily wage, there would have been no need for his urgent attendance.  He would simply have to turn up for work as and when required.

45. In this regard, I find also Tin’s explanation unsatisfactory.  His alleged role in dispensing ad hoc advice on carpentry is opaque and questionable.  To borrow counsel’s retort, one may ask: what useful advice could he possible offer to complex issues of carpentry in such a short space of time?

46. In cross-examination, counsel asked Ngai why he chose a novel mode of collaboration with Tin (namely a partnership) when he could have taken up the project himself and kept all the profits for himself?  Ngai replied that the TST project was his first commercial assignment, as he no experience beyond residential renovation.  He had no idea how to quote for such a project and how to execute certain aspects of it.

47. I am convinced by Ngai’s answer. In view of his undisputed lack of experience, it stands to reason that he had no choice but to offer a share in the TST project to a more knowledgeable partner together with all the attendant profit and risk of loss.  A new situation calls for a new solution.

(3) Whether the worker was properly regarded as part of the employer’s organization?

48. From the point of view of the tenant (ie the client), it was probably the case that the project was undertaken by Ngai as a sole proprietor.  It did not know the existence of any partnership which might exist between Ngai and others.  Nor did it have any interest to find out.

49. This state of affairs was simply the result of Ngai being the primary or sole point of contact for the client. Out of commercial sensitivity it would have been inappropriate for Tin to make any direct contact with the tenant.  None of this goes to negate the existence of a partnership.

(4) Whether the worker was carrying on business on his own account or carrying on the business of the employer?

50. I have already pointed out that under s 4(c) of the Partnership Ordinance receipt of a profit is prima facie evidence of a partnership.  However, as the proviso (ii) goes on to say, a contract for the remuneration of a servant or agent of a person engaged in a business by a share of the profits of the business does not of itself make the servant or agent a partner in the business or liable as such.

51. I accept Ngai’s evidence that on the third visit to Tin’s home, he settled the final account for the TST project as well as the Tuen Mun project in the manner that he claimed.

52. Given my finding on the agreement between the parties, and the settlement of the partnership account, I would answer this question by saying that Tin was carrying business on his own account, namely, as a partnership of which he was a member.

53. No doubt, Tin carried out some carpentry work for which he was remunerated, at least partially, by reference to a daily wage.  This may be taken to suggest that he was an employee.  However, for reasons which I have analysed in paragraphs 24 to 27 above, it is not open to me to find that he was an employee of a partnership between himself and Ngai.  In this respect, the case is on all fours with Ellis v Joseph Ellis & Co.

(5) The provision of equipment

54. There is no dispute that Tin brought to the site all relevant carpentry tools, including some heavy equipment such as power tools and a workbench.  The parties differ as to who was responsible for the purchase of timber materials.

55. Given the specialized nature of Tin’s job, I do not attach much weight to this factor.  But I note that that the provision of carpentry tools is consistent with Ngai’s explanation as to why he had to bring in Tin as a partner.  Under cross-examination he suggested that Tin would not have been prepared to work for a mere wage because of the large amount of tools he had to bring to the job.  I accept this explanation too.

(6) The incidence of tax and national insurance

(7) The parties own view of their relationship

(8) The traditional structure of the trade or profession concerned and the arrangement within it

56. I will pass over the last three factors as I do not find there was any relevant or helpful evidence given on them.

57. In conclusion I find that Tin was not an employee of Ngai in respect of the TST project.  It follows that the claim for compensation is dismissed in toto.

58. If I were wrong about this, I would have found that Tin was injured by the accident on 18 March 2012 on the premises which arose out of and in the course of the employment with Ngai.

QUANTUM OF COMPENSATION

59. In view of my conclusion as to liability, I will be very brief in dealing with quantum.  In the table below, I will summarise my findings of quantum (on the assumption that I am wrong in my conclusion on liability).

ECO	Max amount claimed (HK$)	Amount found due (HK$)
s 9	$112,320 ie ($900 x 26) x 48 x 10%	$0
s 10	$131,664 ie ($900 x 26)/30 days x 4/5 x 211 days	$0
s 10A	$1,725	$1,725
Total	$150,467	$1,725

60. For the purpose of ascertaining compensation under s 9, I first need to ascertain the compensation payable under ECO s 7(1)(c) for permanent total incapacity.  There is agreement as to the applicable formula except for the amount of monthly earnings (and the percentage of permanent loss of earning capacity).

61. It is clear from the statutory definition of “earnings” in s 3(1) that it is referable only to wages paid by an employer to an employee.  In my opinion, it is important to bear this in mind, as the definition excludes any income that is generated, for example, by undertaking work as an independent contractor doing similar or different work.

62. In the present case, whilst the amount of daily wage is not disputed, the parties differed as to the number of days that I should adopt for the purpose of calculating the monthly earnings.

63. Section 11 of the ECO provides no less than five routes by means of which the monthly earnings of an employee may be arrived at for the purpose of, among other things, s 7.

64. The first route is provided by s 11(1)(a), namely, the earnings for the month immediately preceding the date of the accident.  The formula is simple enough, but I am able to apply it on the facts for the reason which follows.

65. In the present case, Tin claims (although Ngai disputes this) to have been working for an average of 26 days a month for as long as he could remember.  However it is clear that he was constantly moving between jobs, some of which were undertaken by him as a main contractor, rather than an employee.  Take the Tuen Mun project, for example. In particular, there is no evidence of what he had earned “as an employee” in the month before 18 March 2012.

66. The second route is provided for by s 11(1)(b).  It requires the Court to compute the monthly earnings in such manner “as is best calculated to give the rates per month at which the employee was being remunerated during the previous 12 months if he has been so long employed by the same employer, but, if not, then for any lesser period during which he has been employed by the same employer”.

67. Again the problem is that I have not received any evidence as to any specific period when he was earning wages as an employee.  On Tin’s own case, the accident occurred on the seventh day of commencement of work.  I find myself unable to apply the formula under s 11(1)(b).

68. The third and fourth routes are the two alternative formulae set out in s 11(2).  Basically, if the injured worker only worked for a short period of time and there is no practical way to compute the rate of remuneration, the court may adopt one of the two methods prescribed in s 11(2) to ascertain his monthly earnings.

69. That sub-section requires the court to have regarded to:-

(1) 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

(2) 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.

70. Before me, Tin has not adduced any evidence of how much other employed carpenters were earning at any time prior to the accident whether working for the same or other employers.  I am therefore unable to apply the two alternative formulae under s 11(2).

71. That leaves me with s 11(5).  As has been held by the Court of Appeal, the provision lays down a statutorily defined minimum wage to be applied where the earnings of an employee calculated under any of the provisions of s 11 amount to less than the amount specified in the Sixth Schedule: Lai Cheung Kwong v Lo King Sum [2008] 3 HKLRD 643, at [35-37], per Yeung JA.  However, as the judgment makes clear, it is not open to me to adopt the minimum figures by default simply because there is no evidence which enables me to arrive at a calculation under s 11 (2).

72. The upshot is that the amount I would award under ss 9 and 10 is nil.

73. For completeness I would mention that there is also a dispute as regards the permanent loss of earning capacity.  On 12 November 2014, upon review, the Employees’ Compensation (Ordinary Assessment) Board assessed the loss at 1.5%. Tin appeals against the assessment.  Having considered the medical evidence, I would, if necessary, have adjusted the figure upwards to 5%.

CONCLUSION

74. In conclusion, I find that Tin has failed to prove his entitlement to any compensation under ss 9 and 10.  In the event that liability was established, I would only award Tin $1,725, the agreed sum for medical expenses under s 10A.

75. For the reasons given above, I dismiss the application.  Costs of the application are to be paid by the applicant to the respondent, with certificate for counsel.  The applicant’s own costs are to be taxed in accordance with the Legal Aid Regulations.

76. The costs order above is nisi in the first instance.  It will become absolute in the absence of an application to vary it within 14 days from the date of judgment.