MOHAMMAD SALEEM v. LAU WAI LEUNG t/a LEUNG KEE CO AND ANOTHER

DCEC1558/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 1558 OF 2010

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BETWEEN

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J U D G M E N T

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1.  The applicant applies for compensation under Sections 9, 10 and 10A of the Employees’ Compensation Ordinance, Cap.282 (hereinafter referred to as the ordinance) for injuries sustained at an industrial accident on 26 December 2008 at a warehouse located at Flat D to F, 6th Floor, 428 Cha Kwo Ling Road, Yau Tong in Kowloon (hereinafter referred to as ‘The Warehouse’).

2.  The applicant claimed he was an employee of the 1st respondent, who was a contractor of the 2nd respondent for the management and operation of the warehouse.  The applicant claimed the 2nd respondent was the operator of the Yau Tong warehouse and is liable as the principal contractor under Section 24(1) of the Ordinance.

3.  The respondent failed to acknowledge service of the application and judgment on liability in default was entered on 6 May 2011. The 1st respondent is absent at the hearing.

4.  The respondent denied liability claiming it was not the operator of the warehouse.  Furthermore, it denies the 1st respondent was its sub-contractor at the warehouse and that it was liable to the applicant. 

5.  The 2nd respondent claimed that it had only one warehouse at the relevant time situated in North Point and that the 1st respondent was only one of its delivery and logistics contractors.  The 2nd respondent did not deny the applicant had an accident at the warehouse, but claimed the warehouse did not belong to the 2nd respondent.

The Applicant’s case

6.  The applicant claimed he was an employee of the 1st respondent for over 10 years prior to the accident on 26 December 2008.  That on that day, he went to work at 8.30 am at the warehouse where he had been assigned to work since 2006.  In the morning of 26 December 2008, the applicant was instructed by the 1st respondent to deliver a certain number of rolls of plastic flooring sheets from the warehouse to a customer.  He was assisted by four other co-workers.  He returned to the warehouse in the afternoon and continued to, on the 1st respondent’s instruction, prepare for the next day’s delivery together with his co-workers.  He claimed he was with two other workers working inside the warehouse while the other workers were downstairs preparing for the loading of the plastic flooring sheets for delivery.

7.  At round 5.30 pm, while retrieving plastic flooring sheets at the warehouse, he was hit by rolls of plastic flooring sheets measuring 200 cm in length and 28.5 cm in diameter, weighing 130 kilogramme each, which toppled over and fell on him.  As a result, he sustained left shoulder, left elbow, back, pelvis and bilateral thigh injuries. 

8.  He was admitted into United Christian Hospital after the accident and remained there until he was discharged on 7 January 2009.  He received follow-up treatments at the United Christian Hospital, Caritas Medical Centre and Kowloon Hospital subsequent to the accident.

9.  The applicant claimed he still suffered from residual pain on his left shoulder, left elbow, back, pelvis and thighs.  He further suffers from back pain and claimed he could not walk for more than 3 minutes without experiencing back pain and that he would experience pain on his left hand which he could not lift due to the pain.

10.  Medical reports produced by the applicant showed that he had been followed up regularly at the United Christian Hospital and is still receiving physiotherapy treatments at the United Christian Hospital.  Though his condition has improved compared to the time of the accident, he still has significant pain over the whole of his left upper limb and his lower back.

11.  Since his discharge on 7 January 2009 after the accident, he was admitted into Caritas Medical Centre on 1 February 2009 for one day due to persistent pain over the left forearm, lower back and both thighs.  He was admitted into United Christian Hospital on 8 June 2009 due to pain and was transferred to Kowloon Hospital for further rehabilitation on 18 June 2009. 

12.  He received in-patient treatments at Kowloon Hospital as a patient suffering from chronic pain syndrome.  He was also given physiotherapy and occupational therapy treatments.  He discharged himself against medical advice in spite of the incomplete treatments on 16 July 2009.                

13.  On 8 March 2011, the applicant was admitted into UCH for in-patient treatment of Complex Regional Pain Syndrome of the upper left limb. He was discharged on 14 March 2011 and received physiotherapy treatments.  He is at present followed up at the United Christian Hospital. 

14.  His complaints to the doctors at joint examination in August 2011 were that he suffered persistent pain over the left arm, elbow and hand.  He claimed he was also suffering from pain over the back and the right groin.  Because of the severe pain, he was not able to use his left hand in his daily activities, and that his back pain would be exacerbated by prolonged sitting and standing.  Due to the pain on his back and right groin, he could only walk a few steps with aid and required wheelchair for his outdoor activities.  He is dependant on his friends in his daily activities including bathing, cooking and changing clothes.

The 2nd Respondent’s Case

15.  The 2nd respondent’s director and shareholder, Mr Chow Wai-lam, and his mother, Madam Li Sau-ying, gave evidence on behalf of the 2nd respondent. They denied the 1st respondent was the 2nd respondent’s principal contractor at the warehouse in Yau Tong at the material time.  They denied the warehouse in Yau Tong was a warehouse belonging to the 2nd respondent.  They claimed they have only one warehouse and it is located at North Point.  They denied the 1st respondent was a contractor of the 2nd respondent at the Yau Tong warehouse on the day of the accident.

16.  The 2nd respondent, however, admitted that the applicant was its employee between 1989 and 1997.  There is a letter dated 24 May 1999 in support of this fact (at pages 94 and 94A of the bundle).  On the other hand, Mr Chow denied the 2nd respondent had employed the applicant after 1997, he denied the two documents at pages 95 and 96 were issued by the 2nd respondent even though the second of the document at page 96 was written on the 2nd respondent’s letterhead and both documents bore a chop in the name of the 2nd respondent.   

17.  Mr Chow claimed that the 1st respondent was only one of the delivery and logistics companies the 2nd respondent had used for delivery of its goods and materials to its customers. He claimed he had no knowledge that 1st respondent had used the 2nd respondent’s office address in his business registration address since June 2007 up to the date of cessation of business on 21 February 2011.  Mr Chow denied that the 1st respondent was making deliveries on the 2nd respondent’s instruction on 26 December 2008.  He claimed the 2nd respondent had no delivery orders on 26 December 2008 and  produced documents to show there were delivery orders placed on 22 December and 27 December 2008 only. 

18.  Madam Li admitted the 1st respondent’s use of the 2nd respondent‘s office address in his business registration in June 2007 had her consent.  She further admitted the 1st respondent’s wife (Mr Lau’s wife) is her sister.  She admitted the 2nd respondent was set up and operated by her and her husband since the 1970s.  She claimed that because of her husband’s illness in 2007 she had been playing a non-active role in the business of the 2nd respondent as she had to look after her husband’s daily needs.  She admitted, however, that she would visit the office a few times a week at the time.

19.  Madam Li claimed she was confused when she was interviewed by the labour officer, Mr Lee, on 17 March 2009, when he investigated the applicant’s accident.  She claimed her declaration to the Labour Department was wrong as she had confused the Yau Tong warehouse with the North Point warehouse operated by the 2nd respondent.

The Labour Department’s Accident Report

20.  The accident report was compiled by labour officer Mr Lee Ying-wai on 22 June 2009, after investigation and interviews with the applicant, the applicant’s co-worker, Mr Hussain, Mr Lau Wai-leung  (the 1st respondent) and Madam Li Sau-ying.

21.  In Mr Lee’s report, he said in paragraph 2, that Leung Kee (the 1st respondent) was under contract to Chung Ying Building Materials Company Limited (2nd respondent) for the management of the Yau Tong warehouse and supply of goods transportation service.  He also stated that the applicant was employed by the 1st respondent as a labourer.

22.  Mr Lee found after investigation at the warehouse and interviews of the people concerned that the warehouse was used to store plastic flooring sheets in rolls, that there were no racks or frames for the storage, nor were there any bands or bindings or other implements to stabilise the rolls of plastic flooring sheet, they were merely left standing freely on the floor.  As a result, the rolls of plastic flooring sheets could easily topple; as they were placed closely together, when one of the rolls toppled, it would likely trigger off a domino effect on the rolls of sheets nearby. 

23.  Mr Lee also found no safety instructions and supervision provided to the workers at the warehouse and that in spite of previous incidents of toppling rolls of flooring sheets, the 1st respondent did not take any safety measures at the warehouse for the workers when retrieving flooring sheets for delivery.   

24.  Mr Lee recorded the statements of the four persons he interviewed, they included the applicant, Mr Lau, Madam Li and the applicant’s co-worker, Mr Hussain, their statements were signed by the four persons concerned.  They also declared in the statements that the contents of their declarations were correct and true.

25.  The 1st respondent admitted in his declaration that he was the operation, delivery and management contractor of the 2nd respondent at the Yau Tong warehouse, that all the building materials, floor mats and flooring sheets stored at the warehouse belonged to the 2nd respondent.  He claimed the parties had a long term oral contract for the management of the warehouse.  The 1st respondent (Mr Lau) admitted he had been the 2nd respondent’s contractor for over 10 years and that on the day of the accident he was at the warehouse in the morning working with the applicant and the other workers that the applicant brought in and after delivery to a customer in Yuen Long the applicant had returned to the warehouse to work. 

26.  Mr Lau further claimed that the applicant was an independent contractor of the 1st respondent.  That he would give oral instructions to the applicant on the number of workers required for the next day’s delivery orders and the applicant would get the required manpower to prepare for the delivery.  Mr Lau further admitted in his declaration to the Labour Department that he would give instructions to the applicant the day before delivery the details on the order, including the address for delivery, the type and number of plastic flooring sheets required and the date and time for delivery.  Sometimes the instructions would be given face to face to the applicant when Mr Lau would hand over the documents and delivery notes to the applicant directly, at other times, he would give these documents to the driver of the transportation company hired and the driver would in turn hand them over to the applicant.  He admitted he would rely on the applicant to complete the delivery job.

27.  Mr Lau did not contribute to any MPF for the applicant, neither did he take out an employees’ compensation insurance for the applicant.  He claimed in his declaration that he used to pay the applicant $400 per day and the workers brought in by the applicant $350 per day.  He admitted whenever the applicant leave for a visit of his family in Pakistan, he would find another contractor to take up the work and that the applicant received no paid leave and would be given work when he approached Mr Lau on his return from Pakistan.  Mr Lau also denied that the applicant was working at the warehouse daily.  He claimed he would only be at the warehouse when he was given a job to do and he would work until the job is done. 

28.  Mr Lau also admitted he would often work at the warehouse himself and was responsible for all the work at the warehouse.  He admitted he was the only one who gave instructions to the applicant.  He claimed that the equipments used at the warehouse such as trolleys, pushcarts and pallets were supplied by the transportation company hired by the 1st respondent.  He claimed the applicant was an independent contractor requiring no training from him. 

Findings on Liability

29.  It is not disputed that the applicant claimed the 1st respondent was his employer and that the 1st respondent in his declaration to the Labour Department denied the applicant was his employee.  As the 1st respondent failed to attend the trial, the only evidence from the 1st respondent is drawn from the declaration he made to the Labour Department and from the applicant’s evidence in court and the documents he produced.    

30.  The test to determine whether the applicant was an employee of the 1st respondent is set out in Chitty on Contracts, Hong Kong Special Contracts, at pages 564 to 566, paragraph 7-002.

“This test has recently been applied in Hong Kong in both Chan Ming v Wayfair Investment Limited and Leung Bing v Tanfory Company Limited as Club Bboss as well as in the Court of Appeal in England Julian Smith v Reliance Water Controls Limited.

Some of the factors that have been identified as requiring consideration in determining whether a contract of service or for services exists include:

(i) the extent to which the company has control of the work to be performed;

(ii) the extent to which the worker is part of or integral to the business of the company;

(iii) whether the worker is in business on the worker’s own account, as an entrepreneur or works for another who take the ultimate risk of loss or chance of profit;

(iv) whether there is a ‘mutual obligation’ on the part of the worker to work and on the part of the company to provide work;

(v) the parties’ own views as to the relationship;

(vi) the provision of equipment and;

(vii) the traditional structure of the trade or profession.

No single factor is determinative and a court will balance the various factors suggesting the existence of an employment relationship against the contrary factors, and their relative strength or weakness. “Once the primary facts are found, then it is a pure question of law as to what is the reasonable inference based on the legal interpretation of the contract.” Some factors may be neutral. Some may be entirely irrelevant in a particular case. However, particular importance must be given to any express terms between the parties. Provided they are not a sham they will be a key indicator as to the true nature of the contract. The Court will however disregard the express stipulation made by the two parties if there is objectively an employer-employee relationship.” (p.565-566)

31.  In the Court of Final Appeal case of Poon Chau Ming v Yim Siu Cheung [2007] 1 HKLR 951, Ribeiro PJ held at paragraph 18 of the judgment the following:

“The modern approach to the question of whether one person is another’s employee is therefore to examine all the features of their relationship against the background of the indicia developed in the abovementioned case-law with a view to deciding whether, as a matter of overall impression, the relationship is one of employment, bearing in mind the purpose for which the question is asked. It involves a nuanced and not a mechanical approach, as Mummery J emphasised in Hall v Lorimer (in a passage approved by the English Court of Appeal):

In order to decide whether a person carries on business on his own account it is necessary to consider many different aspects of that person’s work activity.  This is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation.  The object of the exercise is to paint a picture from the accumulation of detail.  The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole.  It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details.  Not all details are of equal weight or importance in any given situation.  The details may also vary in importance from one situation to another.”

32.  Ribeiro PJ further clarified at paragraph 34 of the Court of Final Appeal judgment the difference between umbrella contracts and specific engagements.  In paragraph 35 he said:

“As and when a particular casual job is offered and accepted, the parties enter into a contract in relation to that engagement. That contract may well be classifiable as a contract of employment on an analysis of the type discussed in section B above. Plainly, such a contract does not involve any general obligation to provide or accept work. It comes into existence in relation only to the specific engagement and normally terminates by performance when the engagement is completed. It has nothing to do with the mutual obligation under discussion.

On the other hand, it is possible (although uncommon) for the parties to enter into an overall contract whereby they do undertake mutual obligations to provide and accept work. Such a contract has been called an “umbrella” or “global” contract, to indicate that it is an over-arching and continuous agreement between the parties, encompassing a series of specific engagements within its span. Where an umbrella contract exists, the question may arise as to whether it is a contract of employment (whether or not each specific engagement within its ambit gives rise to its own such contract). Such a question is generally only relevant where a person claiming a particular statutory right needs to establish a period of continuous employment by relying on an umbrella contract and cannot do so merely by showing that he has worked in a series of specific engagements.

An umbrella contract therefore embodies an obligation mutually undertaken by the parties to supply and take up work.  It obviously follows that if no such obligation is undertaken, no umbrella contract comes into existence.  But the fact that there is no umbrella contract does not prevent the court from finding that the parties have nevertheless entered into a contract of employment each time a specific engagement occurs.  And in the ECO context, such a finding suffices. Where the employee is injured in an accident arising out of and in the course of a specific engagement, he is entitled to claim compensation provided that engagement constitutes a contract of employment.”    

33.  Applying the test and the distinction between an umbrella contract and a specific contract, it is clear to me that the applicant had an umbrella contract with the 1st respondent, for according to the applicant he had been working originally for Chung Ying (2nd respondent) alongside with the 1st respondent (Mr Lau) when both of them were employed by the 2nd respondent. Later on Mr Lau became a contractor of the 2nd respondent in the name of the registered business of Leung Kee.  It is the applicant’s case that he became the 1st respondent’s employee after that.  From the evidence of Mr Lau’s declaration to the Labour Department and from the evidence of the applicant, the applicant fulfilled the criteria set out in the test laid down in Chan Ming and Leung Bing and the English Court of Appeal case of Julian Smith v Reliance Water Controls Limited, that the 1st respondent controlled the work to be performed by the applicant.  The applicant was paid a regular $500 per day, even if there were no delivery orders on that day, the applicant would return to work at the warehouse and he would be paid.  He and the casual daily workers were paid individually and personally by Mr Lau.

34.  Furthermore, the applicant received no extra benefits or profits from obtaining co-workers or casual workers on the job and there was a ‘mutual obligation’ on the applicant to work at the warehouse on a daily basis, he received no benefits or profits other than the daily wage and the 1st respondent (Mr Lau) had relied on the applicant to find sufficient labour should the delivery work of the day require more workers.  The applicant regarded the 1st respondent as his employer supported by the letters at page 95 from the 1st respondent certifying the applicant had obtained leave from work to visit his native country, Pakistan, once a year.

35.  In spite of the letter of 4 June 2008 bearing the 2nd respondent’s letterhead and the company chop in the 2nd respondent’s name and signed by the 1st respondent, the 1st respondent claimed the applicant was self-employed and the applicant‘s monthly salary was $13,000.  As the applicant’s remuneration was described as monthly salary in the letter, it indicated he was also regarded as someone engaged by the 1st respondent on a monthly basis.  I therefore find the applicant was an employee of the 1st respondent on the day of the accident and that the accident took place in the course of employment. 

36.  As to the relationship between the 1st and 2nd respondent, from the declaration of Mr Lau to the Labour Department and the declaration of Madam Li Sau-ying, it is obvious the 1st respondent became the 2nd respondent’s contractor in the management and operation of 2nd respondent’s warehouse.  It is also evident that both the 1st respondent and the applicant were the 2nd respondent’s employees before the 1st respondent set up his own business.

37.  The 2nd respondent had a gradual change at the helm when Madam Li’s husband became ill in late 2007.  However, it is clear from Madam Li‘s declaration to the Labour Department, that she was extremely knowledgeable on the operation of the 2nd respondent and the warehouse.  She volunteered the information that the warehouse at Yau Tong contained building materials, flooring mats and plastic floor sheets belonging to the 2nd respondent (Chung Ying).

38.  This declaration was made on 17 March 2009, some 4 months after the accident.  Madam Li claimed in her evidence in court that she was confused at the time of the interview by the labour officer and she was not aware the warehouse mentioned was the Yau Tong warehouse where the accident took place.  She said she had confused it with the North Point warehouse belonging to the 2nd respondent when the labour officer Mr Lee asked her about Chung Ying’s warehouse.

39.  In court she denied the Yau Tong warehouse was Chung Ying’s warehouse.  This was also the evidence of her son, Mr Chow, the present director and shareholder of the 2nd respondent.

40.  I find Madam Li’s claim that she was confused at the interview when she made the declaration perplexing.  The declaration had referred specifically to the Yau Tong warehouse, giving the detailed address of the Yau Tong warehouse, the floor number, the street number and the name of the street.  According to Mr Lee, the labour officer, Madam Li was given an opportunity to read over the declaration before she signed the declaration and she had also confirmed the contents to be true and correct when she signed the document. 

41.  Furthermore, Mr Lee said that Madam Li had been delaying the interview time and again before it finally took place on 17 March 2009. Consequently, when Madam Li was interviewed by Mr Lee, she was prepared at the interview, for it was an arranged interview with the date and time agreed to by both parties.  On that basis, I am not convinced she was confused when she gave the interview or that she was not aware that the warehouse where the accident took place was the Yau Tong warehouse.

42.  I am convinced she knew and admitted in the declaration that the warehouse in Yau Tong belonged to the 2nd respondent and all the goods at the warehouse were the 2nd respondent’s properties, even though the 2nd respondent may not be the direct tenant at the warehouse in the 2nd respondent’s registered company name.  I am convinced that Madam Li knew and understood the labour officer was interviewing her on the accident that happened at the Yau Tong warehouse. 

43.  I am satisfied that Madam Li was kept abreast of the 2nd respondent’s business throughout; after all, she and her husband had set it up in the 1970s, she was deeply involved in its operation.  She had engaged the help of her brother-in-law (Mr Lau) to take up the delivery and the warehouse operation work for many years.  Even though her husband was taken ill in late 2007 and 2008, she admitted she would visit the office a few times a week.  It was not possible that she had no knowledge of the existence of the Yau Tong warehouse which had been in operation for at least 4 years at the time of the accident.  Further, some of the labels on the goods at the Yau Tong warehouse bore the 2nd respondent’s name and address.  I am not persuaded by the explanation that the removal of the label would damage the wrappings.  If the goods belonged to somebody else or was sold to somebody else, the owner’s name could be taped over by the delivery order or the crossing out of the 2nd respondent’s name on the wrappings. 

44.  Based on the aforesaid.  I am satisfied the 2nd respondent was the principal contractor within the definition of Section 24 of the Ordinance and should be liable under Section 24 of the Ordinance to the applicant.

Quantum

45.  The joint expert report clearly set out the complaints and the medical findings of the applicant at the joint examination on 10 August 2011.  Dr Choi agreed with the applicant’s United Christian Hospital’s pain team and the Kowloon Hospital Rehabilitation team’s diagnosis that the applicant suffered from complex regional pain syndrome (CRPS) even though he sustained no bone fractures at the accident.  This means the patient would experience burning pain without stimulation.  Dr Lee on the other hand, pointed out that the pain team’s finding of neuropathic pain with features of CRPS may not be conclusive.  His opinion was, had the applicant not discharged himself on 16 July 2009 from Kowloon Hospital, his condition would have much improved.  Dr Choi, on the other hand, disagreed.  He said, because there was a lapse of 6 months after the injury when the applicant presented himself for treatments at the United Christian Hospital and the Kowloon Hospital in June 2009, the opportunity for a good chance of recovery had passed by then. Therefore, he did not consider the early discharge against medical advice of the applicant on 16 July 2009 of vital importance.

46.  In Dr Choi’s opinion, the applicant suffered from 44 % of impairment of the whole person which included the loss of function and use of the left upper limb and the back and hip injury.  He estimated the loss of earning capacity to be 44%.  Dr Lee, on the other hand assessed the loss of earning capacity to be 20%. 

47.  After hearing and witnessing the applicant’s condition in court, I accept the applicant’s condition contrary to the Medical Assessment Board’s assessment of 3% is a loss of earning capacity of 44% on the basis that he had little education and had been working in Hong Kong as a labourer for over 20 years, and on the basis that he had lost the use of the left hand and he is suffering from back pain resulting in his dependence on a wheelchair. 

Section 9  Compensation

48.  I accept the applicant’s monthly wage was $13,000 based on the letter signed by 1st respondent and the applicant’s own evidence.  He was 39 years old at the time of the accident, therefore the formula is:

$13,000 x 96 x 44 % = $549,120

Section 10  Compensation

                I accept the sick leave allowed by the Medical Assessment Board based on the sick leave certificate issued by the Hospital Authority doctors, which was considered by Dr Choi to be appropriate. Therefore total sick leave period of 746 days is allowed.  The compensation is:

$500 x 746 x 4/5 = $298,400

Section 10A Medical Expenses

49.  I accept the medical expenses paid to UCH and Kowloon Hospital in total were $5,986.

Summary

Interest

51.  Interest on the award to be at 4% per annum from the date of accident to the date of judgment, thereafter at judgment rate until full payment.

Costs

52.  Costs to the applicant to be taxed if not agreed with Certificate for Counsel.  The applicant’s own costs to be taxed in accordance with Legal Aid Regulations.

53.  The applicant’s appeal against the certificate of review of assessment (Form 9) on loss of earning capacity permanently caused by the injury is successful. The assessment of 3% in Form 9 is set aside and replaced by 44% for the reasons given in the judgment.