TING KWOK KEUNG v. TAM DICK YUEN t/a TAM DICK YUEN ENGINEERING AND OTHERS

DCEC 382/1998

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 382 OF 1998

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JUDGMENT

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1. The Applicant brings the present application against the Respondents to claim employees' compensation for the injuries suffered by him as a result of an industrial accident on 19th July 1996 at 148-178 Yeung Uk Road, Hong Kong ("the Site"). According to the Answer filed, the Respondents contend that the Applicant was only an independent contractor when he was working at the Site at the time of the accident, and further that the Applicant is not entitled to the compensation alleged in the Application. Hence, the main issues in the present case are:

(i) was the Applicant an independent contractor or an employee when he was working at the Site at the time of the accident? and

(ii) in the case that the Applicant was an employee at the material time, what is the amount of compensation that the Applicant is entitled to claim as a result of the subject accident?

Evidence adduced in the trial

(i) The Applicant's evidence

2. The Applicant himself testified in the trial. He was aged 30 at the time of the accident, and he started to work as a welder since 1980. In around the year 1990, the Applicant was acquainted with one Lau Chun Pang ("Pang") and his brother Lau Chun Kong ("Kong"), and he usually worked for them as a welder and metal worker. In July 1996, Pang asked the Applicant to work for the 1st and 2nd Respondents at the Site. The Applicant agreed, and he was responsible for erecting a metal hoarding around a building at the Site which was going to be demolished. His daily wage was $550 and he also had meal allowance of $100 a day.

3. On the second day of work, Pang and the 1st Respondent herein, Tam Dick Yuen ("Tam"), approached the Applicant and Kong to ascertain whether the latter were interested in sub-contracting the hoarding work at the Site for a sum of $410,000. The Applicant and Kong agreed and the relevant parties signed a written sub-contract about three days later. This was the first time that the Applicant had sub-contracted work from others. However after one or two days, Tam and Pang informed the Applicant and Kong that there would be a change in the plan of the hoarding work. As the Applicant was of the view that the proposed revised work could not be completed before the scheduled date, there was some heated discussion between the parties about such issue. Consequentially, the Applicant decided to back out from the sub-contract. As the hoarding work was quite urgent at that time, Pang urged the Applicant to continue to work at the Site. The Applicant agreed and he continued to work as an employee there. A few days thereafter, the Applicant injured himself in the subject accident.

4. Shortly after his release from hospital, the Applicant made a statutory declaration pursuant to the provision in the Factory and Industry Undertaking Ordinance, Cap. 59 before a factory inspector Mr. Lo Yiu Keung. When he was asked by Mr. Lo as to whether he was an employee, the Applicant replied that he was a "Chau Sam Sha" responsible for contacting workers to work at the Site. The Applicant also added that there was an oral agreement under which he was given a sum of $410,000 for his work at the Site. A few days later, the Applicant made a supplemental statutory declaration stating that:

(i) the contract sum should be $610,000;

(ii) the contract had been voided due to some changes in the work after the "incident"; and

(iii) he did not know what happened to the sub-contract after the accident, but he was given wages for his 16 days of work prior to the accident.

5. When he was questioned in the trial as to why he did not clarify the true relationship between the parties in the first statutory declaration, the Applicant replied that he did mention about the cancellation of the sub-contract to the factory inspector. He was told that he could make a supplemental statement at a later stage and so he did not press the factory inspector to amend the statement to reflect the true relationship in the first interview. Further, Kong, Tam and Pang had contacted him shortly after his release from hospital and asked him not to reveal the whole truth about the accident to the Labour Department, otherwise the Applicant would not be able to get any compensation. By that time, the Applicant had just been released from hospital and he was confused, and so he did not state fully the true relationship of the parties in the first statutory declaration.

6. Upon the advice of the staff of the Labour Department, the Applicant also lodged a claim in the Labour Tribunal to claim for unpaid wages and wages in lieu of notice payment against Tam, Kong, Pang and the 2nd Respondent. The claim was finally settled, and Tam and Kong each agreed to pay the sums of $10,000 and $3,000 respectively to the Applicant.

7. As a result of the subject accident, the Applicant is suffering from persistent pain and numbness in the right leg. He also suffers from frequent headaches, pain in the right side of the face, back and right thigh. By reason of such disabilities, he is unable to walk for more than 20 minutes on level ground or 10 minutes on slope. Furthermore, he needs to get up and to stretch his back after sitting for more than 30 minutes. He is also unable to carry weight of more than 10 pounds.

8. After the accident, the Applicant resumed to work for Tam for a brief period of 25 days in a construction site in which the 2nd Respondent was the principal contractor. Thereafter, the Applicant also worked for one day as a casual labourer in the new airport site and one day as a public light bus driver. However, he could not continue with such kinds of employment because of the pain in the leg. Starting from 1st April 2000, the Applicant has been working as a sales representative for a printing company earning a monthly income of about $6,800 to $6,900 including commission.

9. Another worker working at the Site at the time of the accident, Kam Chun Kam ("Kam"), also testified on behalf of the Applicant. Through the introduction of the Applicant, Kam came to work at the Site earning a daily wage of $550 plus food allowance. The Applicant told him that the Applicant and Kong had sub-contracted the metal hoarding work at the Site. However after working there for a few days, Kam heard that the Applicant, Pang and Tam had some argument concerning changes in the work plan, and after that the Applicant decided to back out from the sub-contract. On the next day, Kong did not turn up to work, and the Applicant played mahjong with the other workers at the Site. As the work was quite urgent by that time, Pang finally agreed that the Applicant could continue to work as an employee there. Kam worked

for a total of two to three weeks at the Site, and it was Kong who paid him his wages.

10. The Applicant also relies heavily on the contents of the Notice by Employer of an Accident to an Employee, commonly known as the Form 2, signed by the 2nd Respondent in respect of the subject accident. According to this form, the 2nd Respondent admitted that the Applicant was one of its employees earning a monthly salary of $16,900 at the time of the accident. Further, the Applicant received sick leave payment, being two-thirds of the monthly salary stated above, from the 2nd Respondent as if he was an employee at the time of the accident.

(ii) The Respondents' evidence

11. The Respondents called a total of 4 witnesses to testify in the trial: Pang, the factory inspector Mr. Lo Yiu Keung, Kong and Tam.

12. Pang was the first one to testify. According to him, he was working as a site supervisor for Tam in the construction of hoarding and covered walkway at the Site at the time of the accident. After Tam was awarded such sub-contract from the 2nd Respondent, Pang on behalf of Tam offered to further sub-contract such work to the Applicant and Pang's brother Kong. The parties finally reached an agreement and they signed a written sub-contract to confirm the same. According to the recollection of Pang, the sub-contract contained the following terms:

(i) the sub-contract sum was about $300,000 to $350,000;

(ii) the Applicant and Kong had to supply simple tools and safety equipment to the workers;

(iii) the employees' compensation policy taken out by the 2nd Respondent for the work had to cover the employees of the Applicant and Kong;

(iv) Pang was responsible for supplying certain construction materials for the hoarding work; and

(v) the work had to be completed in 35 to 40 days' time and there would be a daily penalty of about $5,000 to $10,000 for any delay.

13. According to Pang, this was the first time that Tam had sub-contracted hoarding work to the Applicant and Kong, and it was also Tam's idea that the sub-contract should be reduced into writing. About ten days after the making of this sub-contract, the 2nd Respondent's architect proposed a change in the work plan. In response to such proposal, the Applicant demanded an increase in the contract price, but Pang persuaded him to proceed with the work first. It was Tam who mainly negotiated with the Applicant and Kong relating to this variation of the terms of the sub-contract, and the parties also agreed that the completion date should be postponed. After that, the Applicant injured himself in the subject accident, and Kong continued with and completed the sub-contract work within the scheduled time.

14. Prior to the project at the Site, Pang, Kong and the Applicant had sub-contracted hoarding works at two other sites known as Ko Chiu Road and Lyndhurst Terrace. In these two sites, the main contractors would pay wages to Pang, Kong and the Applicant and their workers twice a month. In the case that Pang, Kong and the Applicant worked on a particular day at the sites, they would also get their shares of the wages. After the completion of the project, the main contractors would pay them the contract sum less the amount of wages already paid pursuant to the aforesaid arrangement, and the Applicant, Kong and Pang would then share such balance, less other expenses, in equal shares. Pang had also transferred a sum of $20,000 to the Applicant's bank account representing the Applicant's share of the profit in the said sub-contracts, and he also produced a bank transfer receipt to support his claim.

15. If the same arrangement was adopted at the Site, it is arguable that the Applicant might be working both as an employee and a sub-contractor at the time of the accident. To deal with such possible scenario, the Applicant applied to join Kong as the 3rd Respondent in the proceedings. Leave was granted and the hearing was adjourned to enable the 3rd Respondent to defend the application.

16. After the adjournment of the hearing, the factory inspector Mr. Lo Yiu Keung testified on behalf of the Respondents. He was responsible for investigating the subject accident, and he took two statutory declarations from the Applicant. According to Mr. Lo, he recorded all the answers given by the Applicant in the said statutory declarations. It was his practice to record all the material statements made by the interviewee, but he could not recall the details of all the conversations between the Applicant and him in the two interviews. Further, the Applicant in his second statutory declaration clarified that the sub-contract was voided after the "incident", and Mr. Lo understood the Applicant to mean the accident by the use of such word.

17. Kong also testified on behalf of himself and other Respondents. He confirmed that he and the Applicant had sub-contracted the hoarding work at the Site from Tam at a contract price of $400,000. The parties had signed a written sub-contract, but he had lost his copy of such document. After the subject accident, the 2nd Respondent proposed some slight changes in the work plan, and consequentially the contract price was adjusted upwards to $460,000 with no change in the scheduled completion date. He maintained that there had been no proposal to change the work plan prior to the accident, and nobody had threatened to stop the work because of such proposal. Further, he and the Applicant each had to arrange for a group of workers to work at the Site, however after the accident, Kong took over the Applicant's group of the workers at the Site.

18. Kong also confirmed that he, the Applicant and Pang had previously sub-contracted hoarding works at two other sites known as Ko Chiu Road and Lyndhurst Terrace. The arrangement as outlined by Pang in respect of the other two sites was also adopted at the project at the Site. In other words, the main contractor and Tam would pay salary to the workers of the Applicant and Kong twice a month. If the Applicant and Kong worked at the Site, they would also receive their shares of the salary. After the completion of the project, the main contractor and Tam would give them the contract sum, less the salary advanced, to the Applicant and Kong, who in turn would share the profit, if any, equally. Kong mentioned that this was a normal practice adopted in the trade.

19. After the accident, Kong met the Applicant and gave him his salary for the days that he had worked at the Site. Kong also agreed to take over the sub-contract from the Applicant. After the completion of the project, Kong received the balance of the contract sum from Tam. He had not made the calculation and so he did not know exactly whether he made a profit out of the sub-contract, though he suspected that no profit was made. Kong had not paid any money to the Applicant as the latter's share of profit in the sub-contract. Further according to Kong, some of tools used at the Site belonged to the Applicant, but he did not make any arrangement to return the same to the Applicant after the completion of the project.

20. Tam, the 1st Respondent herein, was the last person to testify on behalf of the Respondents. He was a sub-contractor of the 2nd Respondent in respect of the hoarding work at the Site, and he also confirmed that the Applicant and Kong had further sub-contracted such work from him. As this was the first time for such kind of sub-contracting on the part of the Applicant and Kong, the parties had signed a written sub-contract the terms of which were drafted by Pang. It was not his idea that the contract should be reduced into writing. Tam kept the original of the sub-contract, however after the completion of the work, he thought that such document was no longer useful and so he did not make an effort to keep the same. Prior to the accident, the architect of the 2nd Respondents proposed changes in the work plan of the hoarding work, and as a result there was an upward adjustment of the contract price and a postponement of the completion date. According to Tam, the Applicant and Kong accepted the change in the plan without any protest, and the discussion on the subject was only a brief one. The variation of the terms of the sub-contract was not reduced into writing.

21. The 2nd Respondent could not recall exactly the amount of the contract price. At one stage, he stated that the original contract price was $400,000, and the remuneration for the additional work was $60,000. When he was questioned about the inconsistency between such piece of evidence and the material contained in his witness statement, he changed his evidence and stated that the original contract price was in the region between $300,000 to $350,000, and the final contract price was adjusted upwards to a figure in the region of $400,000 to $460,000. After the accident, Pang made a report to the 2nd Respondent. By that time, Tam did not know that a sub-contractor was not entitled to claim employees' compensation if he injured himself in an industrial accident.

Assessment of the evidence

22. I find the Applicant to be a truthful and honest witness. He was able to tell the court detailed and specific evidence about the discussion between Tam, Pang, Kong and him relating to the proposed change in the plan of the hoarding work, and his evidence remained unshaken after the lengthy cross-examination by the Respondents' counsel. Further his account of events is also supported by other corroborative evidence. Firstly, his testimony is supported by the independent and impartial evidence of his second witness Kam. Kam gave detailed evidence about the heated discussion between the relevant parties about the change in the work plan, and how the Applicant threatened to cease to work at the Site by playing mahjong with other workers. Kam does not have any interest in the proceedings, and his evidence remained unshaken after cross-examination. Under such circumstances, the court cannot simply ignore his evidence.

23. The Applicant's evidence is also supported by the conduct of Pang and the Respondents after the accident. Firstly, Pang informed the 2nd Respondent after the accident that the Applicant was an employee. The 2nd Respondent readily accepted such information and filed a Form 2 stating that the Applicant was one of his employees earning a monthly income of $16,900. Normally, I would not attach too much weight to the contents of such kind of Form 2. The main contractors may have relied on wrong information given to them and as a result the statements that they put down in such forms may not be very reliable. However in the present case, the information was supplied by Pang to the 2nd Respondent. Pang was an experienced supervisor who had full knowledge about the relationship between the various parties, and yet he informed the 2nd Respondent that the Applicant was an employee. This certainly supports the Applicant's case.

24. In order to tailor his evidence to suit the defence, Pang testified that he did not appreciate the distinction between a sub-contractor and an employee and the legal implication of such distinction, and so he described the Applicant as an employee. However, being an experienced supervisor who has been engaged in the trade for 20 years, it is very difficult for me to accept that he could have been so ignorant about such matter. Further, the 2nd Respondent readily made sick leave payment to the Applicant as if he was an employee, and hence I accept that the Applicant was only an employee at the time of the accident.

25. I have also considered that the Applicant was in fact either an employee of Tam or Kong, and yet he was described as an employee of the 2nd Respondent in the Form 2. However as there might be a certain period of confusion after the Applicant backed out from the sub-contract, it was quite possible that the parties were not quite certain about the identity of the Applicant's employer at the time of the accident. In my judgment, the crucial fact is that all the relevant parties accepted that the Applicant was an employee at the material time, and not a sub-contractor.

26. Furthermore, the Applicant's status as an employee is also supported by other facts. Firstly, Kong did nothing whatsoever to share any profit or do anything signifying that the Applicant was his partner in the sub-contract. He did not even attempt to finalise the financial account for the project at the Site, or to return any tools which Kong said belonged to the Applicant. Kong simply dealt with the sub-contract as if he was the sole contractor, and that the Applicant was not his partner at the time of the accident. Secondly, Tam or Pang insisted to have the sub-contract be reduced into writing. However after the discussion about the change in the work plan, the parties did not make any attempt to reduce the revised term into writing. Furthermore, the written sub-contract, with very much coincidence, was lost by all the parties. This certainly indicates that the relationship of the parties had changed after the said discussion and the parties did not regard the original written sub-contract as significant any more.

27. The Respondents are relying heavily on the contents of the Applicant's two statutory declarations to discredit his evidence. However having taking into account the Applicant's condition after his release from hospital, and the conversations between the Applicant and Pang, Kong and Tam before the first interview, I do not find it unreasonable that the Applicant did not give a full account of the relationship of the parties in the first statutory declaration. As Mr. Lo had told him that he could always come back to make a supplemental declaration, it would be quite sensible for the Applicant to approach Pang, Kong and Tam again before the making of a further supplemental statement. I also accept the Applicant that he was not referring to the accident when he used the word "incident" in his second statutory declaration. Indeed if the Applicant were to say that the sub-contract was voided after the accident, I cannot see why it was necessary for the Applicant to make a further statutory declaration, as such would have no effect on his claim for employees' compensation.

28. In contrast, the evidence given by the Respondents' witnesses, Pang, Kong and Tam on the crucial factual issues is full of conradictions. Firstly, Kong avoided all the incidents of discussion concerning proposed changes in the sub-contract before the accident, and he maintained that no change was proposed prior to the accident and everything went smoothly by that time. He also emphasized that there was no change in the scheduled completion date. This is simply inconsistent with the evidence given by Tam and Pang, who testified that there had been proposal to change the work plan prior to the accident and with a postponement of the scheduled completion date. Indeed, Pang went so far as to say that he at one stage had to persuade the Applicant to continue with the work.

29. The discussion on the change of the work plan is a crucial factual issue in the present case, as it was the Applicant's case that, only after such discussion, he changed his status from a sub-contractor to an employee. Pang, Kong and Tam were persons who were deeply involved in the discussion and so it is very difficult to understand that why they gave conflicting evidence on such important issue. Further, there are other material inconsistencies in their evidence. Firstly, Tam testified that it was Pang's idea that the sub-contract should be reduced into writing, however Pang gave evidence that it was indeed Tam's idea. Secondly, Tam's evidence relating to the contract price of the hoarding work in court is different from his evidence on the same subject in his witness statement. Again it is very difficult to understand why they made such mistakes in their evidence, and hence I do not believe that they were telling the truth.

30. Furthermore, the Respondents' evidence is also inconsistent with the conduct of their witnesses after the accident. If the Applicant was indeed a sub-contractor at the time of the accident, the following questions would certainly arise: why did Pang describe the Applicant as an employee to the 2nd Respondent and supply the figure for his monthly salary? Why did the 2nd Respondent make sick leave payment to the Applicant as if the latter was an employee? Why did Kong not return the Applicant's tools to him after the completion of the project? Why did Kong not take any steps to finalise the financial account for the work under the sub-contract? As I have mentioned above, the conduct of the Respondents' witnesses after the accident certainly supports that the Applicant was only an employee at the time of the accident, and hence I disbelieve the evidence of the Respondents' witnesses in this regard.

31. The Respondents are also relying on the bank transfer receipt to prove that the Applicant had previously sub-contracted other works at the Ko Chiu Road site and the Lyndhurst Terrace site. However, I accept the Applicant's evidence that the money transferred was indeed bonus to the Applicant for his work as a supervisor at the said two sites. Hence, this piece of evidence does not advance the Respondents' case any further.

32. There is also one more matter that I would like to address on the issue of liability. According to the evidence of the Applicant and Kam, it was Pang who agreed to let the Applicant to continue to work at the Site as an employee after he had quitted the sub-contract, and it was also Pang who made a report to the 2nd Respondent after the Applicant injured himself in the accident. As Pang was all along a supervisor working for Tam, it is reasonable for me to make a finding that Tam, the 1st Respondent herein, was the direct employer of the Applicant at the time of the accident. Although Kong had at some stage taken over the sub-contract, there was no direct evidence to show that Kong was the Applicant's employer at the time of the accident. Hence the judgment in the present case would only be entered against the 1st and the 2nd Respondents, and not the 3rd Respondent.

Quantum

33. By a revised Certificate of Compensation Assessment dated 23rd April 1998, the Applicant was assessed by the Employees' Compensation (Ordinary Assessment) Board to have suffered a permanent loss of earning capacity of 6.5%. The Applicant is not satisfied with such assessment and so he has lodged an appeal against such assessment under section 18 of the Employees' Compensation Ordinance.

34. To substantiate his claim, the Applicant has also called one Dr. David H.F. Cheng to testify on the issue of quantum. According to Dr. Cheng, the Applicant has suffered a trochanteric fracture of the right femur as a result of the accident. By reason of such injury, the Applicant is suffering from the following permanent disabilities:

(i) weakness of right lower limb;

(ii) severe muscle wasting of the right thigh amounting to 3.5 cm;

(iii) lower back pain;

(iv) walking with a slight limp; and

(v) difficulty in squatting down.

In the opinion of Dr. Cheng, it is not suitable for the Applicant to return to his pre-accident occupation of a welder in construction site, and instead he can only take up alternative employment such as driver, gas station worker and messenger. Further, Dr. Cheng assesses the Applicant to have suffered a loss of earning capacity of 10.4%. In the trial, the Respondents have not called their expert, Dr. Chan Kok Tak, to challenge Dr. Cheng's evidence.

35. As I believe that the Applicant is a truthful and honest witness, I accept that he has taken all reasonable steps to mitigate his loss by taking up an alternative employment with the highest possible income. As confirmed by Dr. Cheng, the Applicant may have to take constant rests after one or two hours of driving, and so it may not be possible for him to work as a professional driver. In such case, I would adopt the income of the Applicant's present employment in assessing the compensation of permanent partial incapacity.

36. I also accept that the Applicant's pre-accident monthly salary was $16,900, as such figure was supported by the independent evidence of Kam, the contents of the Form 2 and the sick leave payment made by the 2nd Respondent after the accident.

37. Adopting the formula as set out in the case of Hong Kong Paper Mills Ltd. v. Chan Hin-wu [1981] HKLR 556 as perfected in the subsequent case of Lui Kwong-yan v. Shui Hijng Decoration Works and Anr. [1993] 1 HKLR 168, the court has to ascertain the wages for the work that the employee is now capable of doing but assessed at the date of the accident. According to the statistics provided by the Applicant, the general consumer price index covering the period from 1996 to 2000 can be listed as follows:

year on year rates of change in CPI index: -

1997 July + 6.5%

1998 July + 2.7%

1999 July – 5%

2000 July – 2.2%

38. As the Applicant's current monthly earnings in the year 2000 is $6,900. The said earnings in the past years would have been as follows:

2000 $6,900

1999 $7,055.20 ($6,900 97.8%)

1998 $7,426.50 ($7,055.20 95%)

1997 $7,231.26 ($7,426.50 102.7%)

1996 $6,790 ($7,231.26 106.5%)

39. Accordingly, the Applicant's claim under section 9 for compensation of permanent partial incapacity can be assessed as follows:

$16,900 - $6,790 $16,900

x $16,900 x 96 = $970,560

40. Further, his claim under section 10 for compensation of temporary incapacity can be assessed as follows:

(i) for the sick leave period from 20th July 1996 to 19th July 1997 accident:

$16,900 x 12 x 2/3 = $135,200

(ii) for the sick leave period from 20th July 1997 to 31st August 1997:

$16,900 x 106.5% x 43/30 x 2/3 = $17,198

Total : $152,398

41. The Applicant's compensation of medical expenses under section 10A has been agreed at $3,511.

42. Based on the aforesaid, I can assess the compensation payable to the Applicant as follows:

(i)	section 9 compensation:	$970,560
(ii)	section 10 compensation:	$152,398
(iii)	section 10A compensation:	$ 3,511
less payment advanced to the Applicant:		$146,000
	Total :	$980,469

In short, I accept entirely the assessment of compensation as suggested by the Applicant's counsel, Mr. Shum, in his final submission.

43. I therefore allow the Applicant's appeal against the revised Certificate of Compensation Assessment dated 23rd April 1998. I also grant judgment in favour of the Applicant against the 1st and the 2nd Respondents in the sum of $980,469. I further award interest on the said sum at half the existing judgment rate, 5.99%, from the date of the accident to the date hereof and thereafter at judgment rate. The claim against the 3rd Respondent is dismissed. I also make an order nisi that: (i) the Applicant is entitled to the costs of this Application, including the costs previously reserved, with certificate for counsel against all the Respondents; and (ii) the Applicant's own costs to be taxed in accordance with legal aid regulations. The order nisi is to be made absolute after the expiration of 14 days from the date of the handing down of this judgment.