LAU PUI MAN v. FORFAN ALUMINIUM ENGINEERING CO. LTD.

DCEC 543/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO. 543 OF 2001

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JUDGEMENT

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1. The Applicant suffered from an accident to his right foot on the 27th September 2000. He claims that at the time of accident he was an employee of the Respondent and he was injured in the course of his employment. He claims compensation under the Employees' Compensation Ordinance in respect of his partial loss of earning capacity and sick leave allowance. As the Applicant has applied to review the assessment of his permanent disability, parties agree that I should first rule on liability and leave the issue of quantum to be assessed at later stage if I find in favour of the Applicant.

2. The Respondent disputes liability on two grounds:-

(a) The Applicant was not its employee on 27th September 2000, but a contractor of the company;

(b) The accident did not arise out of and in the course of employment with the Respondent.

3. The first issue before me is whether the Applicant was an employee of the Respondent at the material time. As it is conceded by the Respondent that the Applicant was a contractor, I have to consider all the relevant facts to determine if he was a contractor or an employee in truth.

The Applicant's Case

4. I first consider the evidence of the Applicant. He said that he was employed by the Respondent many years ago. About 5 years before the accident, he left his employment with the Respondent. He joined the Respondent again in July 2000, first as a contractor. It was on about 1st September 2000 when he changed to work as an employee of the Respondent with a monthly salary of $16,000.00. His work involved working both in Hong Kong and PRC. There is no documentary evidence as to the change of employment record. The Applicant admitted that he had no staff card or staff number. He had not received payment of salary through auto-pay as he was injured in the first month of his employment. During cross-examination, he agreed that he was on probation.

5. The Applicant also admitted that he signed the application for payment including p.46 of the bundle. He was put that these were forms used by contractors for obtaining payment. The Applicant said he paid no attention as his main concern was to get paid. If the amount was accurate, he would sign it. It was not disputed that these applications were not filled by him but the Applicant admitted that he signed all of them. It is noted that the application at p.40 of the bundle shows that the Applicant obtained an advance payment of "糧" from the Respondent for buying of tools. The payment was effected on around 17th August 2000. In the payment voucher appearing at p.43 of the bundle, the Applicant was described as "判工".

6. It is noted that in the application for payment at p.46 of the bundle, there is a cross reference to p.49. It shows that the Applicant was claiming payment for three other workers as well. The application shows that it is an application under a contractor agreement.

7. Another application appears at p.65 of the bundle. It is in the same form of application as at p.46, but the box against contractor contract has not been marked. The payment description referred to "workers (工人) and buying of materials". There is a reference to a contract sum of $17,611.50. The Applicant in his evidence said "工人" should read as "人工". He did not explain why and I do not accept his view.

8. The Applicant was also cross-examined on his name card. The Respondent put to him that the format of his name card was not the one used by the Respondent's staff, nor did the Respondent approve the format. The Applicant admitted that the name card was printed by himself but he said the format was approved by RW1 when he was employed by the Respondent years ago. He did not consider it necessary to apply for approval again. He printed those name cards during his visit to PRC and it was for identification purposes. It is noted that the format of his name card is different from the usual format adopted by the Respondent for its staff and the name of the Respondent as printed is wrong.

9. The Applicant also produced his reports, P-1, recording his work done in PRC factory from 22nd September to 27th September 2000. He said he had to fill out those reports when he worked in PRC but not in Hong Kong. These reports had not been disclosed until the hearing. The Respondent denied having received these reports before.

10. The Applicant said he was instructed to go to the PRC factory of the Respondent between 22nd September and 27th September 2000. He was to return to Hong Kong on 27th September 2000. He left the factory before lunchtime and went to the city center. There he had a meal and then he went to the bus station, only to find that the bus had just left. Since he had to wait for the next bus, he made use of the time to look for some metal accessories to prepare for future works. The Applicant admitted that he was not instructed specifically to source for metal accessories by the Respondent.

11. When he was looking at one of the shops, The Applicant noticed a person approaching him suspiciously. The Applicant moved sideway and slipped. As a result, his right foot was injured. He then went to see a bonesetter in that area before he returned to Hong Kong. His evidence here is different from his case as stated in the Application filed herein. Paragraph 3(3) reads:-

On 27th September 2000, the applicant whilst in the course of employment in China, he was hit by a man and fell down because of something slippery on the floor. As a result, the applicant sustained right heel injury.

12. During cross-examination, the Applicant admitted that what he wrote down in the Application herein is not entirely accurate. The Applicant admitted that he was never hit by a man.

13. When the Applicant returned to Hong Kong, he called to the Respondent by phone. The call was received by one Ms. Chan Lai Hung of the Respondent. The Applicant admitted that he did not inform Ms. Chan of the place of accident because it was none of her business. He wanted to first discuss the matter with his boss, RW1, and to ask him if the Respondent had insurance coverage for its staff working in PRC.

14. The Applicant never did talk to his boss on this matter. He was interviewed by RW2 after the accident. He admitted during cross-examination for telling RW2 that he slipped on a banana skin and hit a motor cycle, which he admitted was not true. He also admitted that he did not inform RW2 the whole incident, explaining that he had to reserve the truth for discussion with RW1. He said that he did not state clearly the place of accident because of the insurance matter.

15. As for the consent letter at p.35 (the translation appears at p.37), the Applicant said he had no alternative but to sign it. After the accident, the Respondent did not pay him any sickness allowance. He needed money and had to sign the letter. The Respondent concedes that it does not rely on this document as defence. The Applicant said that the payment ledger at p.38 referred the payment of $8,000.00 as "因工受傷賠償15天". He submitted that it is evidence of his employment with the Respondent.

The Respondent's Case

16. The Respondent called Mr. Chan Chun Kam ("RW1"), who is the director and shareholder of the Respondent as well as the boss as referred to by the Applicant. He confirmed his statement at p.23A-C. RW1 said that the Applicant was employed by the Respondent in 1995 as the department head of the stainless steel section. His employment was terminated in November 1995 because of his performance and that he could not maintain good working relationship with his co-workers. The Respondent had printed name cards calling himself manager of the Respondent and did not stop using such name cards even after being warned.

17. In July 2000, the Applicant approached RW1 and asked for a working opportunity. Due to the past unhappy relationship, the Respondent only agreed to sub-contract the installation of metal gate work to the Applicant. As the quotation by the Applicant was on the high side, it was agreed that the contract sum had to be assessed on man-day and amount of work. Hence the Applicant had to record the number of workers and pay daily to work out the contract sum. RW1 denied that he had ever employed the Applicant in 2000.

18. The installation work ceased in September 2000 because the factory in PRC could not manufacture sufficient iron gate. RW1 denied that he instructed the Applicant to go to the PRC factory. The Applicant did inform him that he wished to go to the PRC factory to visit his ex-colleagues and to see if the gates were of the correct specification. He wanted to check the work progress of the production to enable a smooth installation. RW1 admitted that the Applicant carried some samples to the PRC factory for the Respondent on volunteer basis. Yet the Applicant was not instructed to source for any metal accessories in PRC.

19. After the accident, the Applicant did inform the staff of the Respondent that he was injured. As he was not an employee of the Respondent, DW1 did not agree to report this injury to the insurance company. The Applicant visited the Respondent's office on many occasions. To prevent disruption to the office running, DW1 agreed to pay the Applicant $8,000.00, but not to be regarded as employees' compensation.

20. The second witness of the Respondent is the manager, Chan Lai Fan ("RW2"). She further explained that the Respondent only agreed to sub-contract work for installing stainless steel gate at Tin Kuen House to the Applicant. RW2 denied that the Applicant was an employee of the Respondent in 2000.

21. According to RW2's evidence, on 28th September 2000, the Applicant came to see her and informed her that he was injured at Sheung Shui area and subsequently said he was injured in PRC when he slipped on a banana skin and hit a motorcycle. She refused to file a claim with the insurance company as the Applicant was not an employee of the Respondent. But the Applicant repeatedly requested the Respondent to file a claim for the injury with the insurance company. Reluctantly, the Respondent agreed to settle with the Applicant by paying him $8,000.00 with the sole intention to stop the Applicant's nuisance.

22. RW2 further explained some payment procedure of the Respondent. She said that all employees would be paid by auto-pay. The form such as p.46 is one used by the Respondent for payment to sub-contractors only. It is filled by staff of the Respondent. The total contract price referred therein was the agreed contract sum, or, if on alternate work (代工), they would count the number of workers and days of work and pay them accordingly. The individual workers of the contractor would be paid by the contractor and the Respondent would not be involved.

23. During cross-examination, the Applicant put to RW2 that she approved his name card at p.25 (which he used in 1995) and said he claimed disbursement from her. But RW2 denied she had approved the same.

24. The Applicant also put to RW2 that in September 2000, he had working card, which RW2 again denied. RW2 also denied having received any claim by the Applicant for the traveling disbursement to PRC for the trip in September 2000.

25. On the sum of $8,000.00, RW2 said she only compared the wage of a worker in similar trade and picked a figure. She said the Applicant originally asked for more, i.e. $18,000.00.

26. The third witness of the Respondent is Leung Tat Kwong ("RW3"). He is a project manager of the Respondent and was assigned to manage the contract work at Tin Kuen House. There were 3 sub-contractors, including the Applicant to install the stainless steel gate. The contractors would bring their own equipment except the big machines such as welding machine which were provided by the Respondent.

My Findings

27. Was the Applicant an employee of the Respondent? The starting point is to assess the evidence of the witnesses. The Applicant admitted that he had lied to RW2. In the whole process of cross-examination, the Applicant changed his evidence from time to time to suit his case. And in his summing up, he said he wanted to help the Defendant by shifting the liability to the insurance company. It is obvious that he is not a reliable witness and his evidence cannot be relied upon. He also admitted that he had not been telling the whole truth to RW2. There is no reason for his lies, which further shows the uncredibility of his evidence.

28. Further, it was not denied that the Applicant was a sub-contractor of the Respondent when he re-joined Respondent in July 2000. He said he only became an employee of the company in September. I do not see any reason for the change and there is no documentary proof either.

29. I found that RW1 is a credible witness and I believe his evidence that the Applicant was dismissed for his misconduct in 1995. With such misconduct, I believe that RW1 would not employ the Applicant again.

30. There is some documentary reference to the Applicant's saying that he went to PRC to work and he were to return to the company. And the consent letter did mention compensation for injury during work. But I must look at all the evidence generally. I am not convinced that this is admission by RW2 that the Applicant was an employee.

31. On the application for payment, the word "糧" is used. This could mean wages or contractual payment. I have to look at the whole document to interpret the term. The application is clearly marked as an application for payment by sub-contractors, and there is no doubt about it. There is also reference to the contract sum and payment effected. All these clearly show that the document is a claim form by contractors and the contents are payment for contractors.

32. Though the payment was calculated by reference to man-day, this is not exceptional in construction work. This fact has some bearing in a consideration of the true nature of the contract, but I would first concentrate on the agreed arrangement.

33. I also accept the evidence of RW1 and RW2 that because the quotation of the Applicant was too high, they required the Applicant to submit the man-day to calculate the contract sum. I rule that the arrangement between the Applicant and the Respondent was as given by the evidence of RW1, namely a contractor to carry out installation work of stainless steel iron gate. I do not believe the evidence of the Applicant that he was instructed by RW1 to go and work at PRC factory.

34. Notwithstanding the label of a contract, the court has to look at the true nature of the contract. Counsel for the Respondent referred me to the case of Lee Ting Sang v. Chung Chi Keung [1990] HKJR 764. There is not a test that will conclusively point to the determination in all cases. Adopting the test by Cooke J. in Market Investigation Ltd. v. Minister of Social Security [1969] 2 QB 173 at 184, the fundamental test is "whether the person who has engaged himself to perform these services performing them as a person in business on his own account? If the answer to that question is "yes", then this contract is a contract for service. If the answer is "no" then the contract is a contract of service."

35. No exhaustive list can be compiled of the considerations that are relevant in determining the question. Matters such as control, who provides the equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of investment and management he has and whether and how far he has an opportunity of profiting from sound management in the performing of his task are all matters to be considered.

36. The strongest case in assistance of the Applicant is the judgment of Mr. Justice Yeung in Wong Chi Wo and others v. Cheng Muk Yung trading as Cheng Muk Yung Steel Binding Engineering HCLA55 of 1995. In this case, the Appellant argues that the 1st Respondent is a sub-contractor and employer of the other Respondents. The arrangement is that when the Appellant obtained a job, he would seek the assistance of the 1st Respondent. The 1st Respondent may have been in the trade for a longer period and was able to obtain the service of other workers in the same field. He would arrange for other workers to work on the job as well. The Appellant would pay the 1st Respondent for the job based on the number of workers working on the job or on the quantity of works completed. The 1st Respondent would pay the workers whom he recruited based on the prevailing daily wage as the Union prescribed. Mr. Justice Yeung agrees that the arrangement speaks loudly of a sub-contract situation.

37. But Mr. Justice Yeung went on to consider the special features of the arrangement. The 1st Respondent was also a worker himself. He was a manual labourer doing identical work to the other workers. He had no discretion in deciding how much to pay each worker. And even when the 1st Respondent was paid on the quantity of works completed, the works only referred to the manual labour provided by the workers and there was a fixed union rate; the chance of the 1st Respondent making any significant profit or suffering any significant loss was negligible. In fact, it was also found that the Appellant would never suffer any loss if the Appellant were to keep his promise to pay.

38. The above case is exceptional in that the 1st Respondent only arranged workers to work for the Appellant. He was not earning any profit. It was then ruled that while he was engaged as a sub-contractor, he should be regarded as a head-worker of a foreman. As Mr. Justice Yeung describe it, the case can be described as one of many borderline cases in which similarly instructed minds may come to different conclusions.

39. In our case, I have very limited evidence. The Applicant is not a reliable witness, as I have ruled, and I do not believe his evidence that he had been employed at all. The only evidence from the Respondent shows that he claimed payment by reference to the number of man-day in the site, which included his pay. Looking at the evidence before, I note that the Applicant did invest in the transaction by borrowing money from the Respondent in order to buy equipment. If he was a pure worker, there was no need for him to buy the tool. And if we look at the contract sum, it is obvious that the Applicant was paid in stage. There is no reference to a payday. It tallies with the relation of a contractor. Neither is there any suggestion that the Respondent knew or had a say on the wages of other workers engaged by the Applicant. So the Applicant was in control of a small operation. I was not told of his involvement.

40. On the balance, I find that the Applicant is only a contractor of the Respondent. I therefore dismiss his claim.

41. I do not have to go on to rule the argument whether the Applicant was injured in the course of his employment. For completeness, I would also make a ruling. I accept the evidence of RW1 and RW2 that they did not send the Applicant to work in PRC. The Applicant only went to meet his former colleagues. He was not working for the Respondent at that time. And even on the Applicant's case, he was not instructed to source for accessories. He was only wandering around to kill time. Even on his case, which I do not believe, he was not working at the time of injury.

42. I would give an order nisi of costs to the Respondent to be made absolute within 14 days.