MOHAMMAD LATIF v. WING CHI CONSTRUCTION ENGINEERING CO LTD AND OTHERS

DCEC656/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 656 OF 2001

____________

____________

__________________________

DECISION ON COSTS

__________________________

Introduction

1. This is an application by the Applicant ("A") for employees' compensation as a result of injury suffered in an accident on 12th April 2001 arising out of and in the course of employment ("Accident").

2. In his Application filed on 21st August 2001, A asserted that the 1st Respondent ("R1") was his direct employer at the material time. The 2nd Respondent ("R2") in its Answer admitted that R1 was its sub-contractor but pleaded that A was employed by the 3rd Respondent ("R3") (then not yet a party to the proceedings). By a summons filed on 24th September 2002, R2 applied for R3 to be joined as a respondent in the present proceedings. By the Order of His Honour Judge Muttrie dated 30th September 2002, R3 was so joined.

3. R2's solicitors issued a Notice to Insurer to the 4th Respondent ("R4"), R3's insurer, on 8th October 2002. By a summons filed on 10th December 2002, R4 applied to join as a respondent in the present proceedings. Pursuant to the Order of His Honour Judge Muttrie dated 13th December 2002, R4 was so joined. R4 filed its Answer on 16th December 2002 and took issue with R2's position by contending that A's employer was R1.

4. R3 in its Answer filed on 7th January 2003 admitted that it was A's employer. A consequently re-amended its Application on 28th January 2003 by pleading that R1 was A's employer, that R1 was R2's sub-contractor and that R3 was the subcontractor of R1. However, if R3 were found by the court to be A's employer, A would claim for employees' compensation against R3. R2 amended its Answer on 17th June 2003 asserting that R3 was A's employer but denying that R3 was the sub-contractor of R1 or the sub-sub-contractor of R2.

5. On the first day of trial, A's claim was compromised by way of a Consent Order which provided inter alia that :

(a) the issue of certificate for counsel for A be reserved for argument;

(b) the issue of R4's costs be reserved for argument.

6. After hearing submissions from Mr Clough, counsel for A, and Mr Bharwaney, counsel for R2, I granted certificate for counsel in favour of A. Thereafter, A took no further part in the proceedings.

7. As agreed by Mr Bharwaney, Mr Gidwani, counsel for R4, and Mr Lau, counsel for R1 and R3, the remaining issues were :

(a) whether R4 was entitled to have their costs of the main proceedings paid by R2 ("Costs Issue");

(b) whether R4 was entitled to intervene and participate in R2's contribution proceedings against R3 pursuant to section 24 of the Employees' Compensation Ordinance Cap.282 ("Ordinance") ("Joinder Issue");

(c) whether R2's discontinuance of its claim for contribution against R4 was a conditional discontinuance and if so, whether such was permissible ("Discontinuance Issue").

8. Mr Gidwani asked for an adjournment until the second day of the trial hearing to enable him to consider R4's position in light of the Consent Order. Neither Mr Bharwaney nor Mr Lau objected and I granted the adjournment as requested.

9. On the second day of the trial hearing, both Mr Bharwaney and Mr Gidwani agreed that the first matter to be considered was whether R4 be entitled to adduce evidence on the issue of who was the direct employer of A at the material time in respect of the Costs Issue. In a separate ruling, I granted leave to R4 to adduce evidence on the Costs Issue but the issue to be tried was to be restricted to whether R1 or R3 was at the time of the Accident the direct employer of R4 ("Employer Issue").

10. As a result of my ruling, all counsel agreed it was inappropriate to deal with the matter of R2's contribution proceedings against R3 or the Joinder Issue pending the determination of the Employer Issue. Mr Lau confirmed that R1 and R3 did not wish to participate in the hearing of the Employer Issue. Mr Lau and Mr Bharwaney had no objection to R2's contribution proceedings against R3 be adjourned sine die with liberty to restore and costs reserved and I granted such order. R1 and R3 ceased to participate in the present proceedings upon the making of such order.

11. R2's solicitors filed a Notice of Discontinuance on 2nd July 2003. Mr Gidwani informed the court that he would not pursue the Discontinuance Issue at this stage pending the determination of the Costs Issue.

Costs Issue

12. Both Mr Bharwaney and Mr Gidwani agreed that, subject to the court's discretion, the decision on the Costs Issue must necessarily turn on the finding in respect of the Employer Issue. Mr Gidwani submitted that if the court finds R3 to be A's employer at the material time, there should be no order as to costs between R2 and R4. Mr Bharwaney submitted that in such scenario, whilst there should be no order as to costs between R2 and R4 in the main proceedings, R2 should be entitled to costs of the argument on costs. Both Mr Bharwaney and Mr Gidwani agreed that should the court find R1 to be A's employer, then R2 should pay R4's costs of the main proceedings as well as the hearing on costs.

13. Mr Bharwaney and Mr Gidwani are agreed as to the admissibility and authenticity of the documents in Part 4 of the Trial Bundle ("TB") for the trial of the issue for the Costs Issue. R4 also produced a bundle of documents on costs ("CB") which largely comprised court documents and solicitors' correspondence. I note that a number of without prejudice (not Calderbank) letters as well as correspondence between R4's solicitors and Mr Gidwani have been included in CB. Whilst legal professional privilege was a matter for R4 to waive, without prejudice protection cannot be waived unilaterally. Without prejudice correspondence are generally not admissible at a court hearing for argument on costs (see Rush & Tomkins Ltd v Greater London Council [1989] 1 AC 1280 and The National Commercial Bank, Ltd, Hong Kong Branch v Kanishi (Far East) Ltd & anor HCMP5045/2000, Ma J (unreported, 11th February 2002)). Such correspondence should not have been included in CB. In any circumstances, neither counsel referred to them in their submissions and I do not propose to place any weight or give any consideration to them.

14. Two witnesses were called on the Costs Issue : A gave evidence for R4 and Ms Yan Miu Li ("Yan") gave evidence for R2. Paragraphs 1-10 and 18-19 of A's witness statement were adopted as part of his evidence-in-chief. Yan also adopted her witness statement as part of her evidence in chief.

A's evidence

15. A gave evidence that he had worked in the construction field in Hong Kong as a worker for a number of years and had over 15 years' driving experience. He started to work for R1 on 1st August 2000 through the introduction of his friend, Mr Mohammad Younas ("Younas"), who brought him to the Tung Chung Site (NL9/98) ("Site"). R1's foreman, Mr Lau Ying Man ("Lau"), interviewed him and spoke to him in Chinese and Younas interpreted for him in the Urdu language. Lau recruited A and gave him a job as a dump truck driver for R1. A's salary was HK$9,000.00 per month with HK$3,000.00 travelling allowance. He normally worked from 8:00 am to 6:00 pm and for 28 days a month. Frequently, he had to work overtime with overtime pay.

16. Normally, A went to work by bus to the Site with his friend Ahmad Shakil early in the morning, which he also did on 12th April 2001, ie the date he had the Accident.

17. A said that since he worked for R1, his wages were paid by R1 through bank auto-pay and sometimes by cheque deposit into his bank account. However, in February 2001, he found his MPF record was made out in the name of R3 (TB p.30) and in March 2001, his salary auto-pay was made by R3. When A got his MPF document in February 2001, he and his colleagues (about 12 of them) all asked about R3 as they worked for R1. A person from the office came and told them through Younas' interpretation that both companies (ie R1 and R3) belonged to one owner. "Owner is one, name is two [companies are two]". The one who interpreted for A told him that the MPF contribution was deducted/paid by R3 but A said he was recruited by R1. When A was asked in cross-examination as to whether there was any difference afterwards and what he did thereafter, A said his work was just driving vehicle. When asked whether he/the workers accepted the change, A said it had nothing to do with them as they were workers. He did not refuse to work after the change and no one else objected. Nobody raised any question that R3 might not pay the salary.

18. A's witness statement stated that he was never notified of any employer transfer arrangement from R1 to R3 and he did not consent to this change. He said nobody asked anything of him.

19. A confirmed that after February 2001, R3 paid A's salary by deposit in his bank account. When asked about what happened in March 2001, A said he received the MPF payment record (TB p.31). Nothing happened, A said, "as what could they do". Nobody asked questions because everybody knew the "owner was one", as they were told.

20. A knew that if a person were injured on duty, the injured person would get sick leave payment. A gave his first two sick leave certificates to Lau, the foreman at the Site. When he got a further sick leave certificate in June 2001, A brought the same to the office of "the company where he used to work" and spoke with Yan. He came to know it was the office of R1 and R3 - "same worker work for [R1] and same worker work for [R3]". Yan made a photocopy of the sick leave certificate. When A asked for payment for his sick leave through a friend, he was told through his friend that there was no authorisation for payment.

21. In June 2001, R1/Yan sent A to the office of R2 because no report of the Accident had been made to R2. He went to R2 to tell them he worked in "this company" and to explain why a report of the Accident had not been made. R2 asked for a report with the sick leave certificates. A confirmed that he received the letter from R2 dated 15th June 2001 (TB p.23) requesting for a written explanation for the late reporting of the Accident. A's report given to R2 was at TB pp.25-26. A said that the report was made by his friend Mr Mukhtar (or someone else) for him as A did not know the language. R2 reported to the Labour Department. Eventually, on 21st September 2001, A received a cheque dated 10th September 2001 in the sum of HK$26,400.00 from R3 as periodical payment. When asked in cross-examination whether he received the cheque from R3 because R3 was his employer, A answered that the offices of R1 and R3 were at one place. He was told that R1 and R3 both had the same owner.

22. When A was asked whom he regarded as his employer at the time of the Accident, he said "the boss which was before same Wing Chi".

Yan's evidence

23. Yan was employed by R3 on 1st December 2000 to work in its accounting department. She is not an accountant. She sometimes handled staff/personnel matters. Prior to 1st December 2000, Yan was employed by Royal City Engineering Limited ("RCEL"), which had no connection with R1 or R3. RCEL shared the same office at Room 501, Keybond Commercial Building, 38 Ferry Street, Yaumatei, Kowloon with R1 and R3. Other than sharing the office and the rent, there was no commercial or ownership connection between them. The office was about 500 square feet with 7 seats occupied by Yan and several girls, who were employed by R3. There was no signboard at or outside the office to identify R1 or R3. The wooden front door had no sign on the same other than the room number.

24. R2 was the principal contractor of the reclamation project at the Site. R1 was the sub-contractor responsible for dumping materials into the designated reclamation area and for the provision of necessary machinery and equipment (including loading and lifting vehicles at the Site) and workers. R3 was the sub-sub-contractor providing manpower to R1. R3 would issue monthly invoices to R1 for the provision of such manpower but Yan had not seen such documents (TB pp.77-85). R2 was aware of and agreed to this sub-contract arrangement. Yan said R1 and R3 had the same boss, ie both companies had the same directors and shareholders.

25. In Yan's witness statement, she said that A was employed by R1 from 1st August 2000 to 30th November 2000 and thereafter A joined R3 on 1st December 2000. The transfer arrangement was made after consent had been obtained from A, which Yan in her evidence explained to mean that there was no feedback from the Site of any objection. Yan confirmed that such transfer arrangement was made prior to her employment with R3. Her boss informed her of the arrangement shortly after she started to work for R3, saying that it was due to the introduction of the MPF requirements. Yan was not responsible for planning the transfer arrangement and she did not know how the transfer arrangement was effected. She knew that the boss told the foreman on site that all employees would be transferred to R3 starting from 1st December 2000 but she was not present when those instructions were given. Under cross-examination, Yan confirmed that she did not know what instructions the boss gave to the foreman, what explanation the foreman gave to the workers and whether the workers understood the transfer arrangement. When asked as to what steps were taken to ensure the workers understood the transfer arrangement, Yan said that they would know after they had signed the contracts. But she did not know what steps were taken if the workers did not sign. She said that she was not responsible for these matters, so she did not know. She knew that there was someone who could speak the language at the Site.

26. Yan said all employees were to sign employment contracts with R3, an example of which was Lau's employment contract with R3 dated 1st December 2000 (TB p.72). Yan did not draft the contract and she was not present when Lau signed the same. She agreed that the contract contained a provision for the giving of notice of termination and she confirmed that such provision could be found in her own employment contract as well. She expected that a similar requirement would be imposed on A by R3 although she did not know whether he signed any employment contract with R3. Yan did not know whether the requirement for notice of termination in the employment contract was explained to A or whether R1 had previously imposed a similar requirement. She did not know whether A was given any notice of termination by R1. Yan said that the employment contracts were sent to the Site but she did not know whether A had read it or not. Yan thought written contracts were necessary so as to let the workers know the "conditions" of the company.

27. Thereafter, R3 paid the employer's MPF contributions. Yan said that she signed the MPF pay records (TB pp.30-31) but she did not prepare the same. She believed that such documents were given to A as such documents were sent down to the Site. Yan said her colleague prepared the MPF enrolment form for A at TB p.49. She said A should have received the Manualife Provident Funds MPF membership certificate issued on 11th March 2001 (TB p.61). Yan did not prepare and had not seen the salary record at TB p.44. She confirmed that salary was paid directly into A's bank account by R3 and A should receive a payment slip each month from his bank. Yan said the employer's return for the year ended 31st March 2001 (prepared by R3) was signed by her and sent to A.

28. Yan did not receive any report of the Accident on 12th April 2001. She later became aware of the Accident when A and his interpreter friend attended R3's office at Keybond Commercial Building and handed to her a sick leave certificate. Yan had not received any sick leave certificate of A from the foreman or any other person. As far as she was aware, no payment had been given to A then.

29. Yan accepted that communications with A were difficult. She understood part of what his friend said when this person spoke in Chinese. But sometimes his friend spoke in English.

30. Yan personally enquired with Lau as to whether there was the Accident and Lau replied that he knew A's foot/leg was injured on 12th April 2001. R3 immediately informed R2 of the Accident upon becoming aware of the same. Yan was required to give to R2 A's personal details but R2 did not ask about A's employer. R2 only asked for any further sick leave certificate which had not yet been shown to them. Yan had not seen the Form 2 completed by R2 (TB pp.2-6). Yan had no recollection of asking A to go to R2 in June 2001 despite being shown A's report to R2 which stated that A found out through Yan that R3 was not the main contractor and she instructed A to approach R2 in respect of the Accident (TB pp.25-26).

31. Thereafter A's representative(s) (different from the one who accompanied A when he attended the office) had on many occasions telephoned to ask for advance payment of salary for the work injury. Yan took most (at least 4-5 times) of the calls. A also came to the office 2-3 times to press for payment. Yan stated in her witness statement that R3 did not make any payment as R3 was unable to confirm that the Accident was work-related.

32. Yan said when R2's solicitor interviewed R3, R2's solicitors advised that even if there were as yet no confirmation that the Accident was work-related, the employer was still obliged under law to pay work injury advance payment of salary. Therefore R3 arranged for A to attend R3's office and Yan personally handed to A a cheque in the sum of HK$26,400.00 on 10th September 2001 (TB p.62) for periodical payments for work injury. Yan said the payment was made by R3 because R3 was A's employer.

33. However, no notification was made to R4. Yan said that they had notified R2 who was the main contractor and as R2 was insured, there was no need to inform R4. Yan said that she was not involved in effecting the change of the name of the insured from R1 to R3 in respect of the employees' compensation insurance policy taken out by R1 with R4.

The law

34. Section 3(1) of the Ordinance defines "employer", in the case where the services of an employee are temporarily lent or let on hire to another person by the person with whom the employee has entered into a contract of service, the latter shall be deemed to continue to be the employer of the employee whilst he is working for that other person.

35. It was R2's contention that R3 was A's employer at the material time and the fact that R3 seconded A to work for R1 at the Site did not, under the above definition, affect its legal position as A's employer. R4 denied the relevance of this provision as it contended that R1 was A's employer.

36. Mr Bharwaney did not cite any legal authority on the Employer Issue, stating that the legal position is straightforward : there must be express or implied consent by the employee for the transfer of employment from one employer to another.

37. Mr Gidwani cited a number of authorities, the principal one of which was Nokes v Doncaster Amalgamated Colliers Ltd [1940] AC 1014. In that case the court made an order for the amalgamation of two companies. The coalminer continued to work at the same colliery and received wages from the transferee company but throughout believed that he worked for the transferor company which had ceased to exist as a result of the court order. It was held that the coalminer's contract of service with the transferor company at the time of amalgamation did not automatically became a contract of service between the coalminer and the transferee company.

38. Viscount Simon LC said at pp.1018 and 1020 as follows :

"It is, of course indisputable that ... the benefit of a contract entered into by A to render personal service to X cannot be transferred by X to Y without A's consent, which is the same thing saying that, in order to produce the desired result, the old contract between A and X would have to be terminated by notice or by mutual consent and a new contract of service entered into by agreement between A and Y." [p.1018]

"It will be readily conceded that the result contended for by the respondents in this case would be at complete variance with a fundamental principle of our common law - the principle, namely, that a free citizen, in the exercise of his freedom, is entitled to choose the employer whom he promises to serve, so that the right to his services cannot be transferred from one employer to another without his assent ..." [p.1020]

39. Lord Atkin also said at pp.1026 and 1033 as follows :

"My Lords, I confess it appears to me astonishing that apart from overriding questions of public welfare power should be given to a court or anyone else to transfer a man without his knowledge and possibly against his will from the service of one person to the service of another. I had fancied that ingrained in the personal status of a citizen under our laws was the right to choose for himself whom he would serve : and that this right of choice constituted the main difference between a servant and a serf." [p.1026]

"My Lords, I should have thought that the principle that a man is not to be compelled to serve a master against his will is just as deep-seated in the common law of this country, ..." [p.1033]

40. In Denham v Midland Employers Mutual Assurance Ld [1955] 2 QB 437, an employer engaged a contractor to do work on his land and he provided his unskilled labourer to help with the work. The labourer continued to be paid by the employer who alone had the power to dismiss him, but he worked with the contractor's workers and received instructions from the contractor. The labourer was killed due to the negligence of the contractor or his servants. Question arose as to whether the contractor's liability for damages should be covered by an employer's liability policy in respect of liability to any person under a contract of service with the contractor or under a public liability policy. It was held that the labourer's contract of service was all along with the employer and the contractor was merely a temporary employer. Lord Denning cited the Nokes case (supra) and said at p.443 that "[n]o contract of service can be transferred from one employer to another without the servant's consent : and this consent is not to be raised by operation of law but only by the real consent in fact of the man, express or implied ..."

41. In Smith and anor v Blandford Gee Cementation Co Ltd [1970] 3 All ER 164, a coalminer worked for the respondent until 1959 when he was transferred to a colliery of the National Coal Board and signed a signing-on form. However, the respondent continued to exercise the ordinary functions of employer at the colliery, such as hiring/firing, payment and day-to-day control and operated a pension scheme for coalminers. Subsequently, the National Coal Board dispensed with the service of the respondent as contractor and they in turn terminated the coalminer's contract. It was held that in 1959 the effect of the signing-on form was that there came into existence a contract of service between the coalminer and the National Coal Board. However, on the facts, the respondent was estopped from denying that he was the coalminer's employer.

42. Lord Bridge at p.160 noted that the tribunal in considering whether there had been a novation of the contract of service to the respondent made reference to a task work agreement which was never disclosed to the coalminers. He then said :

"To my mind, it runs counter to a fundamental principle that a man's contractual position, particularly in such a vital matter as the identity of the master whom he is to serve, shall be crucially affected by an agreement between two other parties, the terms of which are never communicated to him."

43. Lord Parker CJ, in the context of the transfer of an employee to a temporary employer, said at p.163 that :

"The contract of service cannot be assigned unilaterally; there must be a discharge of the old agreement of service and a novation, a new contract formed. When one is considering the question of whether there was evidence to support a new contract, I do not think that one approaches the matter on the same lines as one does in considering vicarious liability. There is no such heavy burden."

44. Mr Gidwani next cited Romero v Auty (as liquidators of Westbury Joinery Co Pty Ltd) (in liq), an unreported judgment of Warren J of the Australian Supreme Court of Victoria delivered on 3rd November 2000. In that case 13 applicants claimed remuneration from the company by proofs of debt on the basis that they were its employees. The issue was whether they were employees of Westbury Joinery Co Pty Ltd or of its group company Westbury Joinery Services Pty Ltd (which had insufficient assets to meet the claims of the applicants as priority creditors). It appeared to be agreed that Westbury Joinery Services Pty Ltd was the corporate vehicle whereby the company paid moneys to it for the payment of payroll and related matters, eg bonus, superannuation payments and employee entitlements. Westbury Joinery Services Pty Ltd paid the labour and associated costs of the company but had no significant assets. Such costs were met by transfer of funds from the company for that purpose.

45. Warren J said :

"The courts have taken the view that the totality of the relationship should be considered ...... It has been held, further, that the belief of the employees as to the question of their employer is admissible and is entitled to weight by the court ...... Ultimately, the whole of the circumstances surrounding the employment relationship including the subsequent conduct of the parties is relevant to the assessment to be made by the court. Of course, documents are relevant but not necessarily determinative. Ultimately the decision rests on the nature of the business in which the relevant employee worked and conversations and conduct at the time of the original engagement of that employee ......

The authorities have held that a contract of service cannot be transferred or novated from one employer to another without the consent of the employee. Further, the employee's consent must be the real consent of the employee and not a constructive consent raised by operation of law ...... I am satisfied on the evidence before me that the employees engaged by the company did not either expressly or impliedly consent to the transfer of their employment to Westbury Joinery Services at the time of the incorporation of the latter subsequently. Furthermore, it is apparent that no new contract of employment was created or entered into by any employees nominating Westbury Joinery Services as the employer. In addition, it is to be observed that no redundancy payments were made by the company and no accrued entitlements were paid out by it upon purported termination of employment of the employees and the transfer of such employees' contracts of employment to Westbury Joinery Services.

Insofar as documents such as pay advice slips, group certificates and superannuation documents may have referred to a new or different employer, namely Westbury Joinery Services an implied assignment does not arise : see Smith v Blandford, supra; Denham v Midland Employers, supra ...... Furthermore, a number of the applicants were persons with little or no commercial sophistication and who had limited abilities with respect of the speaking of the English language. Such persons were at a disadvantage. As a matter of mere common sense and fairness it would be iniquitous to impose an implied assignment upon such persons' employment arrangements ......

An additional matter warrants consideration. Of the applicants who were cross-examined a consistent picture was described of the working environment, the uniform adopted and the signage of the workplace. The applicants portrayed a picture of employment that led me to conclude that they genuinely believed they were employed by [Westbury Joinery Co Pty Ltd]. I accept that belief and attribute it significant weight in determining that the applicants were employed in fact by the company."

46. In Bolwell v Redcliffe Homes Ltd and anor [1999] IRLR 485, the plaintiff was a self-employed labourer who worked for the 1st defendant at a site. The site grounds were acquired by the 1st defendant and the house on that site was acquired by the 2nd defendant (the sole director of the 1st defendant) and his wife. The plaintiff was under orders of the 1st defendant's site manager who frequently asked him to work at the 2nd defendant's house. The 1st defendant charged the 2nd defendant for that work. The plaintiff suffered injury whilst working at the house and brought proceedings against the defendants.

47. In that case the plaintiff knew nothing of any purported change in the identity of his employer from the 1st to the 2nd defendant. Simon Brown LJ said :

"I do not say that there will never be a case in which it could properly be said that a person's employer was someone other than he supposed it to be. The circumstances, however, would have to most unusual and certainly this could never come about merely, for their own purposes, his present employers and some other party choose from a given date to regard him as having switched employment ......"

The English Court of Appeal rejected the 2nd defendant's post-accident conduct, eg personally paying the plaintiff's wages for his final week's work and his subsequent sick pay, and claiming indemnity under his (and not the 1st defendant's) employer's liability policy, as being sufficient. The 2nd defendant had other employees, so his having such policy was natural. The plaintiff was taken on by the 1st defendant and clearly regarded himself at all times as being in the company's employment. All the work he did was at the direction of the 1st defendant's site manager and he also worked at the company's houses on the site.

48. Mr Gidwani also cited Gloria Weaving and Knitting Factory Ltd v Lam Hau Yee & ors [1992] 2 HKC 497. However, I am unable to draw assistance from that case which largely dealt with matters of constructive dismissal of employees and arguments on frustration, affirmation, waiver and estoppel in relation to employment contracts.

49. Whilst I am indeed grateful for Mr Gidwani's diligence in referring me to the above authorities, I think that Mr Bharwaney is right in that the legal position is simple and undisputed. The court has to consider all the circumstances of the employment relationship to determine whether the employee has given express or implied consent (ie real and not constructive consent by operation of law) for the transfer of his employment from one employer to another.

50. The only point on which I depart from Mr Bharwaney's submissions on the law is in respect of his warning against reliance on the Australian and English cases discussed above on the basis that those cases were concerned with the need to guard against the derogation of employees' rights by informal transfers of employment, which, it was argued, was not the case here. I accept that each case must be decided on its own facts. However, I do not find the legal position stated in the above paragraph to be in any way inconsistent with principles enunciated in the above cases. Further, it is clear that Bolwell's case is not a case on employee's contractual rights but rather a claim by the employee for compensation for personal injury. Simon Brown LJ cited Smith & anor v Blandford Gee Cementation Co Ltd (supra) with approval, saying that although such case "was in the different context of deciding whether the employee had an industrial tribunal claim for a redundancy payment, but the principle must hold equally good in the present position".

Analysis

(1) December 2000/January 2001

51. Mr Bharwaney submitted that the evidence, both documentary and viva voce, clearly indicated that there was express/implied consent by A in respect of the change of employer from R1 to R3 at the latest by February/March 2001. Although it was R1, R2 and R3's common case that A's employment was transferred from R1 to R3 on 1st December 2000, the evidence suggested that the transfer was effected in February 2001. He submitted that the precise date was unimportant as the transfer was in any event effected prior to the Accident.

52. Mr Gidwani, on the other hand, submitted that an important feature was that the time of the transfer was unknown. R2's case started with 1st December 2000 as the date of the transfer but, as stated above, it was suggested in Mr Bharwaney's closing submissions that the transfer could have been effected in February/March 2001. A continued to receive salary from R1 until January 2001 and the first salary payment by R3 was in March 2001. Mr Gidwani submitted that such difficulty in ascertaining when the transfer was effected illustrated weakness of the allegation of transfer of employment.

53. In my view, the evidence on the alleged transfer of employment on 1st December 2000 is unreliable and has no weight. It is clear from A's evidence that he was ignorant of any possibility of a transfer of employment from R1 to R3 prior to February 2001. Yan's evidence was equally unhelpful for she had no knowledge (other than the bare assertion given to her by her boss) of the transfer arrangement which was said to have been effected prior to her commencement of employment with R3. There was no evidence of the boss' instructions to the foreman, the foreman's explanation to the workers (if any), the steps (if any) that were taken to ensure that the workers (some of whom, like A, did not understand either English or Chinese) understood what they were told, and the workers' understanding of the explanation (if any). The foreman, Lau, gave a witness statement for R2 in the main proceedings, but was not called as a witness.

54. It was also clear from the evidence that A did not sign any new employment contract with R3 and in December/January 2001, his salary was still paid by R1. MPF contributions were not paid until February 2001. In such circumstances, applying the above legal principles, I find that there was no effective transfer of A's employment from R1 to R3 in December 2000/January 2001 and A had not during that period given any consent, implied or express, for the same.

(2) Pre-Accident circumstances

55. Is there any effective transfer of employment in February/March 2001? To put it in another way, did A expressly or impliedly consent to the transfer of his employment from R1 to R3 in February/March 2001?

56. Mr Bharwaney submitted that both the pre- and post-Accident conduct of A and R3 clearly suggested that A expressly (or alternatively, impliedly) accepted such transfer of employment. He regarded it illuminating that A and his colleagues complained of the MPF contribution/deduction and the payment of salary by R3 in February/March 2001. On being explained that "owner is one, name is two [companies are two]", A raised no further objection then or thereafter to the payments being made by R3 in place of R1.

57. Mr Bharwaney also submitted that the relevant documents supported R2's contention that there was an effective transfer of employment as follows :

(a) R1's employer's return for the year ended 31st March 2001 to the Inland Revenue Department in respect of A (TB p.7) covered A's employment period from 1st August 2000 to 30th November 2000. It was suggested that this clearly showed that A's employment with R1 ceased some time before the Accident.

(b) There was no evidence of the source of A's salary record as shown at TB p.44. However, by comparing the information on this document against A's bank statements (TB pp.8-21), it was evident that R1 had been consistently late, sometimes for over 2 to 3 months, in paying A's salary. As salary payment must be an important matter to any employee, R1 was not such a good and valuable employer that A would not wish to lose.

(c) The salary record at TB p.44 and A's bank statements (TB pp.8-21) revealed that after the Accident, R3 paid A's salary earned before the Accident (TB pp.13-15).

(d) The MPF pay records (TB pp.30-31) as disclosed by A (therefore indicating that they were in his possession) showed the description of the employer as R3 and a deduction of the employee's contributions for MPF. The MPF pay record provided in February 2001 (TB p.30) provoked A and his colleagues to make enquiries. The position was made clear by March 2001 when the second MPF pay record (TB p.31) was received that A's employer was R3.

(e) The MPF scheme employee enrolment form (TB p.49) for A was completed by R3. The MPF arrangements showed that A as employee agreed to deductions out of his salary and R3 as employer made employer's contributions. These deductions and contributions took place with full knowledge of both parties with resulting detriment and benefit to both parties. Mr Bharwaney submitted that this was of critical importance in respect if the issue of the transfer of employer from R1 to R3.

(f) The MPF scheme membership certificate (TB p.61) in respect of A was a valuable document as it was proof of his entitlement of a benefit under the MPF scheme, another indication that R3 must have been the employer. Therefore, on this document alone, there was more than ample evidence of A's implied/express consent to the transfer of employment from R1 to R3.

(g) The invoices issued by R3 to R1 for the provision of manpower for work at inter alia the Site (TB pp.73-90) proved incontrovertibly that the transfer of employment was not a sham arrangement. It was purely a management decision following corporate reorganisation with the same group due to the introduction of the MPF scheme.

(h) Lau clearly signed an employment contract with R3 (TB p.72). Mr Bharwaney argued that it was reasonable to infer from the evidence that A did not sign a similar employment contract due to language problems. Nothing sinister could be inferred and it was probably administrative mismanagement on the part of R3, which could not detract from R3's legal position as A's employer.

58. On the other hand, Mr Gidwani argued that the tax returns submitted after the Accident were of limited evidential value. He further submitted the MPF documents and the enrolment of A in R3's MPF scheme could not validate the alleged transfer. The bank statements merely proved the payment of salary and the fact of late payment but did not prove the transfer of employment. These documents/conduct at most showed A's actual or constructive notice of the identity of the party who paid his salary but they could not mean that A had consented to the alleged transfer, bearing in mind his background and language limitations. Mere continuance to work after the alleged transfer did not mean that A expressly or implicitly consented or waived any of his rights arising out of the alleged transfer.

59. Mr Gidwani pointed out that Lau had the benefit of a written contract with rights and obligations expressly provided for, including a requirement to give notice of termination. But A had not been asked to enter into a similar contract of service with R3 in place of his previous employment relationship with R1. Mr Gidwani submitted that there was no evidence that A's employment contract with R1 was properly determined. Indeed, Yan's statement to R4's solicitors was to the effect that A was not required to sign a new contract because he could not read Chinese, ie he would not have understood anyway (TB p.131 and 136). There was no unequivocal conduct pointing to a new contract with R3.

60. Mr Gidwani further submitted that there was in fact no evidence of the alleged transfer, whether by novation, assignment or otherwise. Yan was unable to assist as she did not know what explanation had been given by the foreman to A. A could understand neither English nor Chinese and his demeanour in giving evidence showed how difficult it was to communicate with him. Mr Gidwani submitted that any interpretation was questionable. The primary question was whether A consented to payments being made by R3 or his employment being transferred to R3. A's witness statement (adopted in his evidence) unequivocally denied that he was ever notified of the alleged transfer of employment and confirmed that he had never consented to such alleged transfer. Mr Gidwani suggested that Yan's evidence provided the perfect answer to R2's contention of a valid transfer.

61. Mr Gidwani pointed out that there was no evidence that the inquiry on MPF/salary matters by the co-workers touched on the alleged transfer. He queried whether A was explained his rights. Perhaps all that A was concerned with was that he would be paid. There was no evidence and at the very least A did not know about the transfer and how it was done.

62. In my view, the starting point is A's evidence although all the circumstances of the employment relationship need to be considered. Mr Bharwaney argued that as A's employment with R1 was based on an oral arrangement, their words and conduct must be looked at objectively to see if consent for the transfer of employment from R1 to R3 could be inferred. He submitted that clearly R1/R3 had passed this threshold test. On the other hand, relying on Romero's case (supra), Mr Gidwani submitted that A's beliefs and conduct are admissible and are entitled to weight by the court. In my view, A's evidence as to his perceptions and his conversations and conduct at the material time (which were all matters of fact) are clearly relevant.

63. Having considered A's evidence, I am of the view that that he presented a consistent picture of employment which indicated that he was employed by R1. He was recruited by R1. Whether before or after the alleged transfer of employment, he continued to work at the same Site, did the same work, took instructions from the same foreman and drove the same dump truck. He used the same work permit from R2 for working at the Site (TB p.22) on which R1's name was stated. In short, R1/R3 continued to hold A out as R1's worker. In his evidence, A repeatedly said he just drove the vehicle (ie the dump truck provided by R1). He said that the change had nothing to do with him; he was just a worker. A had initial doubts about payment of salary and MPF contributions/deductions by R3 but became satisfied on being assured that R1 and R3 had the same owner and there being no changes to his daily operation.

64. Whilst it is clear that A and his colleagues were told of the change from R1 to R3 in making financial arrangements, there is no evidence of any further explanation bringing home to A that the identity of the employer was changed. A did not give evidence of any such explanation and he did not say he had any such understanding from the documents. Indeed, he said he was not conversant with either English or Chinese. Yan said she did not know of any such explanation as she was not responsible for such matter. Thus, nothing other than the financial arrangements was changed.

65. Yan's evidence is instructive in this respect. When asked as to what would indicate that the workers understood the transfer of employment, Yan said it was their signing of the employment contracts with R3 and she regarded that the employment contract was necessary so that the workers might know the conditions imposed by R3. This, however, was clearly lacking in relation to A. Mr Bharwaney brushed this aside as mere mismanagement. But Yan in her statement to R4's solicitors stated that in fact a Chinese employment contract was prepared for A but he did not sign the same as he did not know Chinese (TB pp.131 and 136). This showed that even R3 regarded that an employment contract was necessary to formalise the transfer of employment and this is consistent with Yan's evidence. Further, it is also clear that, irrespective of the cause of A's failure to sign the employment contract, A never formally acknowledged any employment contract with R3. There was also no evidence forthcoming from R3 or A that the terms of the employment contract (which presumably formed the alleged new employment relationship between A and R3) had been explained or brought home to A. Consistent with the tenor of A's evidence and even more instructive, A still regarded "the boss which was before same Wing Chi" as his employer at the time of the Accident in April 2001.

66. Mr Gidwani referred to the obscurity of purpose in establishing R3 even in the context of the introduction of the MPF scheme. He suggested that there appeared to be no commercial advantage in establishing R3 as R3 had to pay the same MPF contributions as R1 had R1 continued to employ the workers. However, I find it insufficient to infer any improper motive on the part of R1/R3. What is interesting is that R3 had no income of its own to pay the workers (including A) and had to rely on the transfer of funds from R1 pursuant to invoices issued by R3 to R1 (see Yan's statement to R4's solicitors - TB pp.128-129 and 134). In practical terms, R1 actually paid the salary of the workers purportedly provided by R3. Even so, I do not find the above arrangement itself determinative of whether A was employed by R1. However, it is not inconsistent with such proposition and is part of the factual matrix to be considered.

67. I therefore find, on the balance of probabilities, that the pre-Accident circumstances indicate that A did not expressly or impliedly consent to the transfer of employment from R1 to R3. The salary and MPF documents merely indicated A's assent to such payments being made by R1's group company, R3, and in no way reflect his express or implied consent to a change of employer. I have considered and do not find the documents determinative.

(3) Post-Accident circumstances

68. Mr Bharwaney submitted that the post-Accident circumstances also corroborated R2's contention that there was an effective transfer of employment from R1 to R3. He analysed the relevant documents as follows :

(a) Although the initial Form 2 (TB pp.2-6) completed by R2 stated R1 as A's employer, it is clear from Yan's evidence that she rendered no input in respect of the preparation of this document. Any weight to be placed on this document must be marginal as it came from a third party (R2) who had no personal knowledge of the matter. In any event, Form 2 had been amended to reflect that R3 was the employer (TB pp.37-41).

(b) R2 as principal contractor did not make the initial periodical payments to A. It was R3 who paid the same by cheque in the sum of HK$26,400.00 to A (TB p.62), so R3 must be A's employer. Such conduct was strong corroboration of the transfer of employment in February 2001.

(c) A's written report of the Accident to R2 made no mention of R1 but referred to R3. Clearly, A regarded R3 as his employer.

69. Mr Bharwaney further submitted that R3's failure to report the Accident to R4 should not tell against R3 because Yan said that R2 as the principal contractor had insurance coverage and had reported to their insurers.

70. Mr Gidwani submitted that two features were illuminating in this matter. First, the Application issued 4 months after the Accident never pleaded that R3 was A's employer. If A had genuinely given consent for the transfer of employment to R3, one wondered why R3 was not so named in the Application, which position was maintained throughout the proceedings. Secondly, it took about a year for R2 to join R3 as an additional respondent.

71. Mr Gidwani submitted that the amendment to Form 2 was done after litigation was in progress and was of little evidential value. Even if there were some semblance of relevant conduct, such conduct was cast in doubt by the fact that A never mentioned R3 in his application for employees' compensation.

72. I have carefully considered A's evidence. Even post-Accident, he did not mention that his employer was R3 and he still regarded work matters as distinct from financial matters. He reported his work injury to his foreman at the Site, Lau. He tendered his sick leave certificates to Lau. He brought his sick leave certificate to Yan at the office of "the company where he used to work". Later, A came to know R1 and R3 shared the same office.

73. I further find that A's report to R2 as prepared by Mr Mukhtar or someone else on A's behalf equivocal. From the report, it was clear that A reported to Lau and expected "my employer" (without identifying whom) to report the matter to the Labour Department. The reference to R3 in the report was in relation to uncertainty over which entity was the main contractor of the Site. A previously thought R3 was the main contractor but was subsequently informed by Yan that it was R2 who was the main contractor. Hence Yan instructed A to approach R2. "Employer" and "main contractor" are different roles and I do not find that A's erroneous belief that R3 was the main contractor necessarily suggested that he regarded R3 was his employer.

74. On the balance of probabilities, I also do not find the payment of periodical payments by R3 definitive. Consistent with the tenor of A's evidence, he regarded financial matters as being dealt with by R3. That did not mean that he accepted R3 as his employer. On this aspect, A's evidence was that the office of R1 and R3 were at one place and they both had the same owner. Further, R3 had refused to make payment all along but, according to Yan, payment was eventually made after intervention and advice of R2's solicitors. This can hardly be regarded as a spontaneous and independent act of R3.

75. It is also undisputed that R2 in Form 2 regarded R1 as A's employer (TB pp.2-6) and it was only some time afterwards during the course of litigation and through involvement of R2's solicitors that Form 2 was amended to state R3 as the employer (TB pp.37-41). Further, R3, despite having made periodical payments under advice from R2's solicitors, never informed its own insurer, R4, of the Accident. I find this most odd as although R2's solicitors advised R3 in relation to periodical payments, there had never been any assurance from R2 or R2's insurers that they would reimburse such payment made by R3. The notice to R4 was eventually only given by R2's solicitors. Again, given the involvement of R2's solicitors, R3's conduct need to be carefully scrutinised in weighing the evidence.

76. If post-Accident conduct is to be looked at, then one cannot ignore the fact that A's persistent position was that R1 was his employer at the material time. The Application, the Amended Application, and the form completed by A dated 26th February 2002 for the Labour Department being exhibit "CSK-4" of A's affirmation dated 21st August 2002 (CB pp.32(34) - 32(44)) all reflect the same consistent stance.

77. Looking at the evidence as a whole, I find, on the balance of probabilities, that the post-Accident circumstances also do not show that A expressly or impliedly consented to the transfer of employment from R1 to R3.

(4) Employee's compensation insurance and other considerations

78. R1 took out employees' compensation insurance policy with R4 for the period of insurance from 7th July 2000 to 6th July 2001 (TB p.45). Such policy only covered the liability towards employees of one insured, namely, R1. On 8th December 2000, the insurance cover for R1 was brought to an end and from that onwards, the policy was changed to cover R3 instead.

79. Mr Bharwaney submitted that the court should approach this matter with care, bearing in mind that R1 had transferred employees' insurance coverage to R3. If R1 was found to be A's employer, there is a real risk that A and other employees (similarly transferred to R3) would be deprived of employees' compensation insurance protection. Any coverage to be obtained subsequent to such finding can only be prospective cover, and R1 might be in breach of statutory obligations or commit offences as a result thereof. The court should not be swayed by the existence of insurance coverage by R2.

80. Mr Bharwaney submitted that, similarly, it did not bear contemplation as to what would happen to the MPF contributions if R1 and not R3 were found to be the employer; in short, he submitted that the consequences would be difficult, if not impossible, to unravel.

81. Mr Bharwaney further submitted that whilst the court should also be jealous to guard against the deprivation of employees' rights, such as long service payments and other entrenched rights as a result of years of work, it should be remembered that A only worked for R1 since August 2000 and was therefore free of such concerns. He argued that there was no basis for the court to approach this matter other than R1 and R3 had proper motives. Indeed, Mr Bharwaney submitted that the court should guard against R4 as insurer making use of the slack management of R3 in failing to have A sign the employment contract to obtain a windfall escape from liability for which they received premium payments.

82. On the other hand, Mr Gidwani submitted that the change of the insured under R4's policy on 1st December 2000 from R1 to R3 did not mean that A was indeed validly transferred to work for R3 from that date onwards. The only effect for the change was to confer the benefit of the policy to those employees who were either employed by R3 (eg Yan) or validly transferred to the employment of R3 (eg Lau). For those who were not validly transferred to R3 (eg A), they were still validly covered by R2's insurance policy which covered employees of all sub-contractors of all tiers. Even if there were no insurance coverage by R2, A would be covered by the Employees' Compensation Assistance Fund.

83. Mr Gidwani argued that the employees' compensation policy and the MPF arrangements were not relevant and, in particular, he disagreed that the consequences of unravelling the alleged transfer justified a lower threshold test in establishing such transfer. Whatever motive R1/R3 had in change of the name of the insured in the insurance policy was not canvassed in evidence, at least not from Yan. In any event, she had no relevant knowledge and her evidence based on information from others should carry no weight.

84. Mr Gidwani rejected any suggestion of improper motive on the part of R4. R3 was pulled into the proceedings not by A but by R2. R3 never gave any notice of the Accident to R4 who was deprived of a chance to investigate the matter. Thus, R3's admission that it was A's employer was the very reason why R4 joined in the proceedings. However, he submitted it was difficult to understand what purpose would be served by the alleged transfer. R1 and R3 were owned by the same shareholders and shared the same office. Although there was a brief suggestion that it was due to the introduction of the MPF scheme, it made no sense for R1 to transfer its workers to R3 and then for R3 to second the workers back to R1 to work at the same Site for the same project. The alleged transfer did not make any practical difference to A's employment, such as his duties, hours, place of work and income and R1 still held A out (by virtue of A's work permit at the Site) as R1's worker.

85. Having carefully considered the evidence, I am of the view that there is insufficient evidence to find either R1/R3 or R4 to having approached this matter with improper motives. The sole question is whether the transfer of employment from R1 to R3 was brought home to A and whether he impliedly or expressly consented to the same. Whilst I agree that the fact that R3 made MPF contributions in respect of A and that the name of the insured in respect of the employees' compensation policy was changed from R1 to R3 are part of the factual matrix to be considered, I cannot accept that any difficulty in the unravelling exercise or the consequences of the unravelling exercise should R1 be found to be A's employer at the material time necessarily dictate a finding that R3 be the relevant employer. I see no basis for such unwarranted tying of the court's hands from ascertaining the true reality of A's employment at the material time.

86. Whilst the transfer of the name of the insured from R1 to R3 under the employees' compensation policy might reflect their hope of a transfer of employment, there is no evidence before me that A was made aware of such change. Indeed, there was no evidence that A knew of the employees' compensation policy. In the circumstances, it cannot be said that such change brought home to A the transfer of employment and consequently indicate his express or implied consent to such transfer.

Conclusion

87. On the basis of the totality of the evidence before me, I consider that R1 was and remained the employer of A at the time of the Accident. Given the nature of R1's business and the work performed by A, the conduct of the parties at the material time, the control of R1 over A's work and R1's provision of equipment and instructions to A in respect of his work, R1's holding out to R2 of A being its worker, R1 being the entity to whom A reported as employee, A's understanding of his employment situation as stated in his evidence, Yan's understanding and beliefs as stated in her evidence as well as her lack of personal knowledge, the lack of an employment contract by A with R3, the various payments to A and the MPF contributions, and the matters as shown by employment-related and insurance-related documents in respect of R3 and the other evidence discussed above, I am satisfied that A did not expressly or impliedly consent to the transfer of his employment from R1 to R3. Insofar as the documents referred to R3 as employer, I find that A was either unaware of them or A regarded them as being related to financial arrangements and no further. It must be remembered, as was admitted by Yan, that communication with A was not easy as he did not understand either the English or Chinese language. In such situation it was incumbent to show that he understood the transfer of employment and I find that there is no sufficient evidence of the same. A's evidence showed that he still regarded R1 as his employer although payments were to be arranged through R3.

88. As I have determined that the identity of A's employer was R1, I order that R2 do pay R4's costs of the action (ie the main proceedings) as well as the costs of the argument on costs to be taxed if not agreed together with certificate for counsel. As regards costs of the adjournment on the first day of the trial hearing, Mr Bharwaney did not object to the adjournment and, indeed, both Mr Bharwaney and Mr Gidwani made use of the adjournment to prepare written submissions and list of authorities on the Costs and Joinder Issues. The appropriate order for costs for the adjournment should be in the cause.