DCEC 310/2006
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
EMPLOYEES’ COMPENSATION CASE NO. 310 OF 2006
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BETWEEN
CHEUNG KA HUNG
Applicant
(張家雄)
and
KOK TAT LOGISTICS
Respondent
TRANSPORTATION CO., LIMITED
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Coram: Deputy District Judge J Ko in Court
Date of Hearing: 3 and 4 March 2008
Date of Judgment: 4 March 2008
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J U D G M E N T
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1. This is the applicant’s application for compensation under the Employees’ Compensation Ordinance.
2. This case was originally put on the running list with direction that the trial should not come on before 13 November 2007. The respondent’s former solicitors obtained an order to cease to act for the respondent. The respondent then applied to postpone the trial. On 10 December 2007, the District Judge adjourned the trial to yesterday for a two days trial.
3. The respondent is absent at this trial. The relevant accident happened on 19 May 2005 and the application was filed on 4 March 2006. In view of the long time that has elapsed, the fact that the respondent has already postponed the trial once, and this trial was fixed in the presence of the respondent’s representative, I am satisfied that I should proceed with the trial in the absence of the respondent.
The Applicant’s case
4. According to the applicant, he was a China-Hong Kong cross-border lorry driver employed by the respondent at the time of the accident. His employment with the respondent began on 29 May 2004 and the respondent provided him with the use of a lorry bearing registration number GK8600.
5. On 19 May 2005, he met with an accident whilst driving the lorry to deliver goods from Shaoguan City (韶關市) to Hong Kong on the instruction of the respondent. When he reached the junction of the Jihe Expressway (機河高速路,) a light goods vehicle suddenly cut into his lane. He applied brake and swerved to the right and lost control of his lorry. Eventually, the lorry tipped over on the expressway and he sustained personal injuries as a result.
6. Section 5 of the ordinance provides that if in any employment, personal injury by accident arising out of and in the course of the employment is caused to an employee, his employer shall be liable to pay compensation in accordance with the ordinance.
7. By his application, the applicant applied for compensation against the respondent under sections 9, 10, 10A and 10AA of the ordinance. The applicant’s solicitor has confirmed at the trial that the applicant abandons his application under sections 10A and 10AA.
8. In the answer filed, the respondent denies liability. It is alleged that the applicant was not the respondent’s employee but an independent contractor, and the accident is not admitted. The respondent also filed a list of earnings which is at variance with the applicant’s pleaded case.
9. The main issues in this case are therefore:
(a)
Whether the applicant was an employee of the respondent?
(b)
How did the accident happen, and most importantly in the present context, whether the accident arose out of and in the course of the applicant’s employment with the respondent?
(c)
What was the applicant’s monthly earnings at the time of the accident?
(d)
If the respondent is liable under the Ordinance, what is the amount of compensation payable?
(a) Whether the applicant was an employee of the respondent?
10. The modern approach to the question whether one person is another’s employee is to examine all the features of their relationship against the background of the indicia developed in the 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: per Ribeiro PJ at paragraphs 9-18 in Poon Chau Nam v Yim Siu Cheung trading as Yat Cheung Air-Conditioning and Electric Company [2007] 1 HKLRD 951.
11. Two influential English first instance decisions were noted by Ribeiro PJ. In Ready Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance [1968] 2 QB 497, MacKenna J identified three conditions for the existence of a contract of employment at p.515 as follows:
(a)
The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master.
(b)
He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master.
(c)
The other provisions of the contract are consistent with its being a contract of service.
12. In Market Investigations Limited v Minister of Social Security [1969] 2 QB 173, Cooke J said at pp.184-185:
“… 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 the answer to that question is ‘yes’, then the contract is a contract for services. If the answer is ‘no’, then the contract is a contract of service. 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 particular cases. 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 that factors which may be of importance are such matters 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 he has an opportunity of profiting from sound management in the performance of his task.”
13. In the present case, the following features of the relationship between the applicant and the respondent are relevant:
(a)
The respondent, as its name suggests, is in the transportation business and relies on people like the applicant to deliver goods for it. In other words, the task performed by the applicant formed an integral part of the respondent’s business.
(b)
The applicant was not involved in the management of any business. He did not hold any business registration and did not subscribe for his own MPF. He could not engage his own helpers or delegate his work to other drivers.
(c)
According to the applicant, the agreement reached orally between him and the respondent’s director, Mr Chan Yau-ching, at the interview held in early May 2004 was one of employment. This is consistent with the newspaper advertisement which prompted the applicant to contact the respondent in the first place. It was stated in the advertisement that the respondent was seeking “urgent employment” (急聘) of China-Hong Kong drivers.
(d)
There is a written agreement entitled “租用車輛合約” dated 22 May 2004 whereby the respondent purportedly rented GK8600 for the applicant’s use as an independent contractor at the yearly rental of $50.
First, a party’s description of the relationship is not determinative of their relationship. It is for the court and not the parties to determine the legal nature of their relationship: see Chan Kwok Kin v Mok Kwan Hing [1991] 1 HKLR 631 at 635-636.
Secondly, I accept the applicant’s testimony that he protested when he was asked to sign the said written agreement as it was at variance with the oral agreement reached at the interview. However, he had already given his licences and documents to the respondent to apply for documentations for delivering goods in the PRC and it would take months to cancel such application. Since he had to support his family, he could not afford not to sign the agreement and go without income for months.
Thirdly, I find the written agreement a sham as it is not consistent with the newspaper advertisement and the rental of $50 a year was wholly unrealistic.
(e)
The respondent provided the applicant with the use of the lorry, which was the equipment required by the applicant to perform his duties. The lorry was registered under the name of Mr Chan (the respondent’s director). According to the applicant, the respondent was responsible for the maintenance of the lorry.
(f)
According to the oral agreement as evidenced by the monthly statements issued by the respondent, the applicant would be paid a percentage of the freight as return for delivering the goods on the instruction of the respondent. For example, he would be paid 26% of the freight for delivering goods weighing between 5-10 tonnes. According to the applicant, he would receive $5,000 from the respondent from time to time to defray the expenses associated with such deliveries (such as fuel, parking fees, road tax, etc.). In other words, the applicant bore no financial risk of the business.
(g)
The applicant had to comply with the instructions of the respondent and was not allowed to use the lorry to carry goods for others. He would receive instructions from the respondent in the afternoon for deliveries on the next day. He would be told when and where to pick up goods and to whom and where he should deliver them. He could not refuse the respondent’s instructions. For example, he was obliged to use the lorry, which is capable of carrying 16 tonnes of goods, to carry goods under 3 tonnes, although he would be then be paid a higher percentage of the freight. Another example would be that he was obliged to do deliveries in Hong Kong when there was no cross-border work for him.
(h)
Although the applicant was not given any statutory holidays, he had to apply for vacation leave from the respondent.
(i)
The written agreement dated 13 May 2005 whereby the applicant agreed to compensate the respondent $13,000 for damaging the lorry is not indicative of the applicant being an independent contractor. In any event, I accept the applicant’s testimony which is supported by the invoices subsequent issued by the respondent that this was a sham agreement and no payment was in fact made.
14. The overall impression I derive from the above features is that their relationship is one of employment. I therefore hold that the applicant was employed by the respondent at the time of the accident.
(b) How did the accident happen?
15. The accident is evidenced by the photographs submitted. The applicant’s injuries are consistent with the medical evidence adduced. No evidence has been adduced to challenge the applicant’s case. I accept that the accident happened in the way alleged by the applicant, and the accident arose out of and in the course of the applicant’s employment with the respondent.
16. Although the accident happened outside Hong Kong, the ordinance is still applicable as the contract of employment was entered into in Hong Kong and the respondent was carrying on business in Hong Kong at the material time: see s.30B(2) of the ordinance.
(c) What was the monthly earnings of the applicant at the time of the accident?
17. The applicant’s solicitor has taken me through the monthly statements issued by the respondent and calculated the applicant’s monthly earnings to be:
(a)
$16,521.24 for April 2005, (i.e., the month immediately preceding the date of the accident); and
(b)
$14,971.39 for the previous 12 months.
By section 11(1) of the ordinance, I shall adopt the figure of $16,521.24, which is more favourable to the applicant, for calculation of the compensation payable by the respondent.
18. The applicant’s solicitor has confirmed that since there is no evidence of any pay rise, the applicant is not pursuing any adjustment under section 11(1)(a) of the ordinance.
(d) If the respondent is liable under the ordinance, what is the amount payable?
19. According to the certificate of assessment issued on 4 April 2007 by the Employees’ Compensation (Ordinary Assessment) Board, the applicant suffered from multiple injuries resulting in herniated discs L3/4, L4/5 and L5/S1. The periods of absence from duty necessary as a result of the injury were from 23 May 2005 to 16 February 2006, from 7 August 2006 to 13 December 2006, and from 8 February 2007 to 26 March 2007. The loss of earning capacity permanently caused by the injury was assessed to be 5%.
20. The certificate is evidenced of the matters stated therein: see s.16H of the ordinance. Moreover, the period of absence from duty certified by the board is deemed to be a period of total temporary incapacity irrespective of the outcome of the injury: see s.10(2) of the ordinance. Since there has been no appeal, the assessment is final and binding on the parties: see Ng Ming Cheong v Mass Transit Railway Corporation [1997] 3 HKC 413 at 419.
21. The compensation payable under section 9 of the ordinance for the permanent partial incapacity resulting from the injury is therefore $79,301.95 (i.e., $16,521.24 x 96 x 5%).
22. The compensation payable under section 10 of the ordinance for temporary incapacity is $229,771.49 (i.e., $16,521.24 ¸ 26 x 452 x 4/5).
Conclusion
23. For the above reasons, the respondent as the applicant’s employer is liable to pay the applicant compensation in the sum of $309,073.44 (i.e., $79,301.95 + $229,771.49).
24. Interest is awarded at half the judgment rate from the date of the accident.
25. There shall therefore be judgment in favour of the applicant against the respondent in the sum of $309,073.44, together with interest thereon at half the judgment rate from the date of the accident.
(Discussion re costs)
26. Costs normally follows the event. I order the respondent to pay the applicant’s costs of this case, to be taxed if not agreed. The applicant’s own costs is to be taxed in accordance with Legal Aid Regulations.
J Ko
Mr Ng Man-kin, of Messrs Kwok, Ng & Chan, assigned by the Legal Aid Department, for the Applicant
Respondent, in person, absent