CHAN WAI YIN v. WONG SAU PING, ADA t/a EVERGREEN TRANSPORTATION CO AND ANOTHER

DCEC97/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 97 OF 2004

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J U D G M E N T

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Background

1.  This is a fatal employees’ compensation case where the widow Chan Wai-yin claims employees’ compensation against the 1st Respondent as a result of fatal traffic accident on 28 June 2002 to her husband Yu Tak-tim, the deceased.

2.  It is not in dispute that the deceased was a cross-border container truck driver and that on 28 June 2002 he was driving a container tractor bearing Hong Kong registration number GH5094 and China registration number 粵Z.SJ03港 (hereinafter called “the vehicle”) travelling from Shantou to Shenzhen, when he met the tragedy.

3.  The 1st Respondent had not responded to these proceedings save that she had previously sent a note to the Labour Department denying any employment relationship between her and the deceased.

4.  The 2nd Respondent contests both the liability and quantum in this case.

Issues

5.  The two main issues before this court are: 

(a)    was the deceased an employee of the 1st Respondent or an independent contractor at the time of accident;

(b)    what was the average monthly earnings of the deceased prior to the accident, or what was the earnings of the deceased in the month immediately prior to the date of accident.

Applicant’s case

6.  As the deceased had died, the Applicant and Mr Lee, an old friend of the deceased are the only witnesses for the Applicant.

7.  According to the Applicant, the deceased had told her that he was employed by the 1st Respondent.  She was also told that the 1st Respondent had refused to contribute to MPF scheme and had refused to file any tax returns for the deceased as his employer.  She had therefore asked the deceased to file a tax return describing himself as an independent contractor.

8.  According to the witness statement of the Applicant, the deceased told her that the 1st Respondent was responsible for all payments regarding the obtaining of the driving licence of the deceased in the PRC, providing the vehicle (including all road tax, petrol, insurance and repair), arranging all necessary authorisation papers and permits for the vehicle and the deceased to commute between Hong Kong and Mainland.

9.  Applicant also says that the vehicle was registered in Hong Kong under the name of Wong Sau-ping, Ada, i.e. the name of the 1st Respondent.

10.  Applicant says to her knowledge, the said Wong Sau-ping, Ada, was the boss of this deceased and the deceased addressed her as Mrs Yip, or Ada, or boss.

11.  Applicant says that the deceased had no fixed working hours and every time on receipt of instructions from the said Wong Sau-ping at any time, the deceased was required to go to the company’s car park or the designated place to collect the vehicle, tractor and/or other necessary documentation for performance of his duties.

12.  Applicant says that sometimes the deceased had to spend overnight in Mainland waiting to clear the customs and would spend the night in quarters provided by the company.

13.  Applicant says every time the deceased finished a journey he would have to fill in a form provided by the 1st Respondent regarding the route taken during the journey and all expenses incurred during the journey.  She said the deceased told her that he had to claim salary relying on this document.

14.  Applicant has exhibited a form dated 8 April 2002 which spelled out the route of the journey, expenses such as oil, customs fee, toll fee, parking fee, tunnel fee, telephone fee, tyre examination fee, car registration plate, client name, container number, etc.  Applicant says the deceased told her that the company on receipt of these forms will compile lists like the ones applicant exhibited to her witness statement on pages 34 and 36 of the trial bundle to calculate wages payable to the deceased for the month.

15.  Applicant said usually the deceased did not retain copies of these documents but shortly before the accident, the deceased did tell her that as the wages paid by the 1st Respondent to him appears to be incorrect, he had asked the 1st Respondent for copies of the documents to check the computation of his wages.

16.  Applicant also exhibited to her witness statement the bank passbook of the Hong Kong and Shanghai Banking Corporation account of the deceased.  According to her, there were the marked entries of salary from 興利, the deceased’s previous employer to the deceased from 7 June 2000 to 20 January 2001, earning on average $21,000 per month.

17.  Applicant also pointed out in her witness statement that since 24 March 2001 when the deceased was employed by the 1st Respondent, his salary from 24 March 2001 to April 2002 were also marked in the said passbook.  She said she was told by the deceased that as he was not familiar with driving in Mainland, the 1st Respondent had provided mainland drivers to him to lead him the way and/or drive part of the journey in the Mainland but the deceased would have to pay for these drivers.

18.  Applicant said according to the record, total salary of the deceased from the 1st Respondent for the period was $290,848 and the total salary for the mainland driver was $12,100.  The average income for the deceased prior to the accident was therefore $21,021.72 per month.  She said salary of the deceased for the month of April 2002 was $24,000.

19.  Applicant said the 1st Respondent has failed to pay salary to the deceased for May and June 2002.  She said for these two months, the deceased had job every day and therefore should earn no less than $21,021.72 per month for these two months.

20.  Applicant said that salary of the deceased was dependent on the number of journeys undertaken and number of containers transported at the instructions of the 1st Respondent.  She said there was no partnership relationship between the deceased and the 1st Respondent.

21.  Applicant said that when the deceased died, the Applicant, their son, his parents and his maternal and paternal grandmother survived him.

22.  Applicant said since the accident, the 1st Respondent had paid her in total $125,000 including $75,000 for funeral expenses.

23.  In Court, the Applicant disagreed to the suggestion by counsel for the 2nd Respondent that the deceased could take up orders from other transportation company or that he was actually working in partnership with the 1st Respondent.

24.  She explained that she picked up the job records sheets from some grassland underneath the flyover where the accident took place.  Applicant said she had already produced all documents and job records which she found at the scene and at home.

25.  Applicant said she knew all telephone orders the deceased received from the 1st Respondent because she heard him address the caller as Mrs Yip, or Ada, or 老闆娘 or names of other colleagues on phone.  On receipt of these calls, the Applicant said the deceased would go out.  Applicant says the deceased could not refuse taking any orders from the 1st Respondent.  Applicant said although she saw the deceased fill out the said journey particulars and expenses forms at home and stapled them with the actual expenses receipts, she could not find any expenses receipts at home.

26.  Applicant agreed that for the period 10 June 2002 to 21 June 2002, the deceased did not leave Hong Kong.  She said that during this time the vehicle that the deceased used to drive was to be replaced and there was some documentation that needed to be done during this period in order that the new vehicle can cross the border.

27.  Mr Lee Man-tung, the deceased’s long time friend, also gave evidence.  He confirmed his witness statement which stated that the deceased did tell him that he worked for the 1st Respondent.  He also said the deceased told him that his salary was equal to 25.7% of the fee received from clients and that all expenses such as oil, toll fee were paid by the company.

28.  He was further told that the deceased could stay at the company’s quarters in Shenzhen and save the overnight accommodation fee.

29.  Mr Lee said the deceased told him that he earned on average $20,000 - odd per month.

30.  He further said that the deceased told him that the employer had arranged Mainland drivers to assist them but they had to pay for these drivers.

31.  Mr Lee admitted on cross-examination that as he had never been a cross-border driver himself and that his knowledge came from others in the trade, that he was not too familiar with the trade of cross-border drivers himself.

32.  He said to his understanding the deceased was an employee of the 1st Respondent.  He said he had not heard of a self-employed cross-border driver who hired a vehicle for business on his own account in this cross-border transportation business.  He said the deceased had no vehicle of his own.  He also said that the deceased told him that he did use services of different Mainland drivers and had to pay for them.

Respondents’ case

33.  The 1st Respondent did not respond in these proceedings.

34.  The 2nd Respondent did not call any witness at trial although they contested the existence of employment relationship between the deceased and 1st Respondent and/or the stated monthly earnings of the deceased at the time of accident by the Applicant.

Liability

35.  In determining whether the employment relationship existed between the deceased and the 1st Respondent, I find the passage of Cooke J in Market Investigations Limited v Minister of Social Security (1969) 2QB 173, 184-185 cited by counsel for the Applicant useful.

36.  The same reads: 

“The fundamental test to be applied is this:  is the person who has engaged himself to perform these services performing them as a person in business on his own account.  If they understood that question is yes, then the contract is a contract for services.  If the answer is no, then the contract is a contract of services.  No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in a particular case.  The most that can be said is that control will, no doubt, always have to be considered, although it can no longer be regarded as the sole determining factor and the factors which may be of importance are such factors as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has and whether and how far his opportunity of profiting from sound management in the performance of his task.”

37.  It was said that the indicia of Cooke J was adopted by the Privy Council in Lee Ting Sang v Chung Chi Keung and Another (1990) HKLR 764, 767 - 768 and that applying the test there that on evidence before this Court there was this employment relationship between the deceased and the 1st Respondent.

38.  Ms Li, counsel for the Applicant, said that the following factors supported that there was employment relationship between the deceased and the 1st Respondent.  In her submission, she quoted: 

(a)     that the 1st Respondent was the owner of the vehicle driven by the deceased for his work at time of the accident;

(b)     the deceased was only allowed to drive the cross-border vehicle provided by the 1st Respondent ;

(c)     that the 1st Respondent paid money regularly into the deceased’s account;

(d)     the deceased had to keep records of expenses to account to the 1st Respondent;

(e)     the deceased’s earnings were calculated net of expenses; and

(f)      the 1st Respondent had not produced any documents or records to show the deceased was her business partner.

39.  Counsel for the Applicant agreed that the deceased stated to the Inland Revenue in the 2001/2002 tax return that he was a independent contractor, the express agreement between the deceased and the 1st Respondent that there was to be no MPF contribution from the 1st Respondent, the notice from the 1st Respondent to the Labour Department denying the employment relationship, all pointed to the other direction than the existence of an employment relationship between the deceased and the 1st Respondent.  However, she urged this Court to ignore the fact that the deceased had previously described himself as an independent contractor.  She quoted the case of Chan Kwok Kin v Mok Kwan Hing and Another (1990) 2 HKC65 at 70 - 71 pages and said that: 

“The subjective beliefs and intention of, or labels used by, the parties are of no appreciable weight.  The matter must be decided objectively.”

40.  She also submitted that relying on the case of Chan Kam Wing v Esprit Container Transportation (China) Limited DCEC4/2000, an employment could exist without the existence of an employment contract between the parties and that in the case of Tsang Kar Lee v Rich Long Transportation Limited and Another CACV193/2000, the Court of Appeal had applied the facts cumulatively to support employment relationships did exist in the absence of an employment contract.

41.  Counsel for the Applicant invited the Court to place no weight on the denial note by the 1st Respondent to the Labour Department as she did not come forward and testify, nor did she file anything to support her contention.

42.  She further submitted that the 1st Respondent was always evading liability.  She evaded tax liability by not filing tax return, by wrongfully notifying the Business Registration Office that the business ceased in February 2002 when they still carried on business, she did not take out insurance for the deceased and she had tried every means to avoid liability to pay compensation to the Applicant here.

43.  It was said further that the 1st Respondent was dishonest and that she filed the untrue and inaccurate Notice of Cessation of Business to Business Registration Office.

44.  Counsel for the Applicant asked this Court to draw adverse inference against the 1st Respondent.  She relied on the case of Court of Appeal in Li Sau Keung v Maxcredit Engineering Limited and Another [2004] 1 HKC434 and the Court of First Instance case of Ip Man Shan Henry v Ching Hing Construction Company Limited (No. 2) and Others (2003) 1 HKC256 at 307(E).

45.  Counsel for the 2nd Respondent submitted however that the 1st Respondent has ceased business since 19 February 2002, i.e. prior to the accident.  He also submitted that as the deceased was dishonest in declaring a smaller yearly income to the Inland Revenue Department and declaring himself to be an independent contractor, although his subjective belief at the time was an employee.  It was said that his evidence should not be accepted.

46.  He also queried why the Applicant would have in her possession the documents in trial bundle pages 109, 110 and 111.  He asked this Court not to accept her evidence in court, i.e. that she had picked them up one to two days after the accident on the grassland underneath the flyover as she told the Court.

47.  Counsel for the 2nd Respondent also said that by filing an understated income with the Inland Revenue Department, the Applicant is now estopped from saying that the deceased actually earns $21,000 per month.

48.  He also said that as Mr Lee was not an expert in the cross-border driver trade, little weight should be attached to his evidence and further, that what the deceased told him was only hearsay.

49.  He also said that the registration of the vehicle in Mainland was in the name of another company called 青海江源貨運有限公司 and the Public Security Bureau had described the deceased as the driver of this company after the fatal accident.  He further said that in the 來往香港集裝箱拖車出境簽證簿, the vehicle was registered under the name of 青海江源貨運有限公司 and further that the words 江源 appeared on the vehicle.

50.  He said coupled with the note of the 1st Respondent, the lack of MPF arrangement, the tax return filed by the deceased, the fact the deceased was in possession of the job records, the fact that he has to pay for his own mainland drivers and that he got a split of the income from the business orders he performed, etc., all suggested that he was actually a partner with the 1st Respondent and not an employee.

51.  It is always a finding of fact in each case whether an employment exists.

52.  On evidence before this Court, on the balance of probabilities, I am satisfied that the employment existed between the deceased and the 1st Respondent.  Clearly, the 1st Respondent at the material time had the exclusive use of the deceased, and if the deceased did not drive for the 1st Respondent, he could drive for no one as a cross-border truck driver.

53.  I rely on the cited case of Chan Kwok Kin that no matter what the subjective intention of the deceased or any party, the matter must be decided objectively and that the intention of the parties are of no appreciable weight.  The note by the 1st Respondent to the Labour Department and/or the tax return by the deceased was therefore not of much significant value.

54.  Here, at the time of the accident, the deceased was driving the vehicle registered in Hong Kong under the 1st Respondent’s name.

55.  Evidence from the Applicant, though hearsay, is the best evidence available in the circumstances.

56.  Having had the benefit of seeing both the Applicant and the said Mr Lee in court, I find them both credible and reliable witnesses and accept their evidence.  I accept therefore that in this case, the 1st Respondent had provided to the deceased for his use in driving as his employee, the truck, the trailer, the parking fee, toll fee, fuel, vehicle insurance, repair and maintenance and other motor expenses, necessary cross-border licences, permits, documentation, all at the cost of this 1st Respondent and all the responsibility of the 1st Respondent.

57.  The deceased could not drive other vehicles across the border, nor can he refuse orders from the 1st Respondent or take orders from other than the 1st Respondent.  The evidence in this respect came from the Applicant and Mr Lee and was totally unchallenged.

58.  The deceased further has no power to hire anyone to assist him in the discharge of his duty, and that even for these mainland drivers, they were all selected and arranged by the 1st Respondent.  The 1st Respondent did have total control on the choice of people who were able to manoeuvre the vehicle in question.

59.  The Applicant, in court, explained how some of these documents came about and the Court did not find anything unusual about this explanation.  And I accept that these were the circumstances under which the Applicant or the deceased had these documents in question.

60.  Here, the income of the deceased was totally dependent on the amount of business given to him by the 1st Respondent.  The deceased could only drive the vehicle across the border and no other vehicle.  The circumstances surrounding the working conditions of the driver in this case was actually quite similar to that of the driver in the case of Chan Kam Wing, and I find the judgment of Andrew Cheung J, in that case very helpful.

61.    Clearly, the deceased here was earning a living by working for the 1st Respondent rather than working as a cross-border driver operating a business on his own with all the risks attached.

62.  It was unchallenged evidence that when the Applicant chased the 1st Respondent for the salary of the deceased for May and June 2002, the 1st Respondent replied that she needed time to do the computation.  Clearly, the 1st Respondent was still operating the business then, i.e. after the notice of cessation.

63.  Further, although the registration of the vehicle in Mainland and as appeared on the cross-border documentation was in the name of 青海江源貨運有限公司, it was unchallenged that the vehicle registered with the Transport Department in Hong Kong was under the name of the 1^st Respondent.

64.  In addition, in this case, although the mainland driver was paid by the deceased, the driver was arranged and was therefore selected by the 1st Respondent, whom therefore had control of the choice of people driving, even as assistant driver.  The deceased here only had part of the job records for the purpose of clarifying.

65.  I find as fact that the deceased here only kept the job records for the purpose of clarifying his earned income with the 1st Respondent.

66.  Further, according to the said Mr Lee, as the job had partly been performed by this assistant driver, it was only logical that the deceased should have to pay the salary of this driver out of his own pocket.

67.  Having found there was an employment relationship between the deceased and the 1st Respondent, I have no doubt also that at material times, deceased was driving as per instructions of the 1st Respondent.  The conduct and behaviour of the 1st Respondent clearly supported this conclusion.

68.  Counsel for the 2nd Respondent said that as the import/export manifest dated 27 June 2002 stated that the unloading place of the container was in Shenzhen, the accident might have occurred not out of and in the course of employment.  There is, however, the unchallenged evidence from the Applicant before this Court that she received this phone call from the deceased in the morning of 27 June 2002 and was told that he was instructed to go to Shantou.  The fact that the accident happened at this place at Shen Shan Freeway, 34 kilometres plus 900 metres en route from Shantou to Shenzhen, is consistent with the deceased’s trip to Shantou.  Further, there is nothing inconsistent between the act of transferring goods from Hong Kong and loading the goods in Shenzhen first and going to Shantou later in the day.

69.  I am satisfied on the facts of this case that the accident did arise out of and in the course of employment with the 1st Respondent.

Quantum

70.  Applicant seeks to rely on section 11(1) of the Employees’ Compensation Ordinance on the applicable earnings where earnings are calculated based on the average over the past 12 months or the month preceding the accident.

71.  Counsel for the Applicant submitted that the last recorded salary of $25,000 was the deceased’s salary, but this was clearly, according to the Applicant, salary for the month of April 2002, i.e., not for May, the month immediately preceding the accident.

72.  Coming to the assessment of the average earnings for the 12 months preceding the accident, counsel for the Applicant submitted that the average income per month was $21,021.72.  She derived the figure from all the deposits in the bank passbook of the previous 12 months.  She asked the Court not to adopt the stance put forward by counsel for the 2nd Respondent, i.e. to disregard the cash deposit entries from unknown sources.  She said in the absence of evidence that the deceased did have other source of income, this must be right.  Her submission partly was based on the evidence from the Applicant that she had made contemporaneous entries in the bank passbook of the deceased as to the nature of these entries.  On this point, counsel for the Applicant said had the Applicant not made the entries contemporaneously but only for the purpose of this proceedings, she would have put “恒業Tim人工 ”  instead of “Tim人工” as now appeared in the copy bank passbook.  The notes as they stood clearly showed they were the Applicant’s contemporaneous records.

73.  She also submitted that had the cash deposits been disregarded, then the deceased would have no income for the month of December 2001, January 2002 and March 2002.  This could not have been right.

74.  I must say I am persuaded by counsel for the Applicant on this computation of average monthly earnings and I find the same stood at $21,021.72.

75.  The deceased was aged 33 at the time of the accident.  Accordingly, the Applicant is entitled to have compensation assessed at 84 months of the deceased’s average monthly salary pursuant to section 6(1)(a) or the statutory maximum, whichever is the lowest.  Thus, compensation would be $1,764,000 (i.e. $21,000 x 84) plus interest.

76.  Coming to funeral expenses, it is not disputed that the 1st Respondent had paid $75,000 towards this end, according to the Applicant’s evidence.  Section 6(5) of ECO clearly stipulates that “where death results from the injury, reimbursement of the reasonable funeral expenses of the employee not exceeding $35,000 shall be paid by the employer to any person who has paid the expenses.”

77.  It therefore follows that as the 1st Respondent had paid $75,000, she is no longer liable under the section 6(5) of the ECO to pay further sums for reimbursement of the funeral expenses.

78.  Accordingly, the total compensation payable by the 1st Respondent to the Applicant shall be: 

(a)    the said sum of $1,764,000;

(b)   interest on the said sum $1,764,000 from the date of accident to the date of judgment at half judgment rate

(i.e. $1,764,000 x 5.375% x 4	351	= $470,438.30) and
	365

 (c)   interest on the said sum of $2,234,438.30

(i.e. $1,764,000 + $470,438.30) at judgment rate to date of satisfaction.

Apportionment

79.  By the letters of renunciation the other members of the family have produced to this Court, these other members of family have waived their right to compensation.

80.  The apportionment therefore will be 50% to the Applicant and 50% to the infant son, each share being $1,117,219.1.

81.  Although counsel for the Applicant asked the Court to deal also with the 1st charge on legal aid, I think it is best that I leave the matter to the instructing solicitors of the Applicant.

82.  I make an order that $1,117,219.1 be paid to the infant son, the same shall be paid by the 1st Respondent into court and for the other sum of $1,117,219.1, the same to be paid to the Applicant via the Applicant’s solicitors, i.e. Messrs Szwina Pang, Edward Li and Co., subject to the first charge of the Director of Legal Aid.

83.  Further, although counsel for the Applicant asked that I approve the monthly sum of $6,000 to be paid out of the moneys payable to the infant out of court.  In the absence of any affidavit to that effect from the Applicant, I think it is just prudent that I await the proper Order 80 application filed and supported by the affidavit of the Applicant.

84.  As for costs, counsel for the Applicant asked for costs of the proceedings including all costs reserved against all Respondents, while counsel for the 2nd Respondent submitted that there should be no order as to costs.  He said that the 2nd Respondent has a duty to safeguard the public fund, and in the face of the tax return of the deceased claiming to be an independant subcontractor, they had joined in.

85.  There is no doubt that had the 2nd Respondent not intervened and joined as a party to these proceedings, judgment would be entered against the 1st Respondent much earlier.  Whilst I am not saying that the 2nd Respondent had been unreasonable in joining as a party to oversee the interests of the public fund, I do not see why, in the circumstances, that when judgment has been entered against the 1st Respondent, that costs should not follow the event.  The Applicant and the infant should not be asked to bear the costs of the proceedings subsequent to the 2nd Respondent being joined as the 2nd Respondent in the proceedings.

86.  I adopt the stance of Master Lung in the case of Lau Tuen Ping v Lai Wei Kwong trading as Sun Chiu Kwong (Sheung Shui) Construction Material and Another HCPI1221/2000, judgment delivered on 15 April 2003.  I therefore order that costs of the proceedings, including all costs reserved on common fund basis with certificate for counsel, be paid by the 1st Respondent to the Applicant, the same to be taxed if not agreed and that all costs of the proceedings (including all costs reserved) on common fund basis with certificate for counsel from and including 22 April 2005, be paid by the 2nd Respondent, the same again to be taxed if not agreed.  Applicant’s own costs to be taxed in accordance with Legal Aid Regulations.

87.  As for the costs of the apportionment hearing, the same shall be borne jointly and severally by the 1st Respondent and the 2nd Respondent on common fund basis, the same to be taxed if not agreed.  Applicant’s own costs to be taxed in accordance with Legal Aid Regulations with certificate for counsel.