SKYTECH CONSTRUCTION LTD v. LIU SAU WAI

[English Translation — 英譯本]
HCLA 21/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 21 OF 2011

(ON APPEAL FROM LBTC 100 OF 2011)

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J U D G M E N T

1. The Appellant was a sub-contractor of certain maintenance work at Provident Centre in North Point.  On 15 September 2011, the Appellant was ordered by the Labour Tribunal to pay arrears of wages to six workers employed by the sub-sub-contractor, Mr. Lee Chiu Wan  [transliteration for李趙雲], in accordance with section 43C of the Employment Ordinance.  The Appellant now appeals against the order awarded to one of the workers Mr. Liu Sau Wai.

Grounds of appeal

2. It was the Appellant’s case that no arrears of wages were payable to Mr. Liu as he was a sub-contractor instead of an employee of the sub-sub-contractor Mr. Lee.  The Appellant advanced three grounds of appeal.  Firstly, the Presiding Officer Mr. Raymund Chow failed to investigate, in accordance with Section 20(3) of the Labour Tribunal Ordinance, a matter relevant to Mr. Liu’s claim, namely whether Mr. Liu was a sub-contractor of Mr. Lee or a worker employed by him.   

3. Secondly, the Presiding Officer failed to properly and sufficiently consider or rule on the evidence of the present case, as a result of which he erroneously made the finding of fact that Mr. Liu was Mr. Lee’s employee.

4. Thirdly, the Presiding Officer misunderstood the evidence and made erroneous rulings regarding the nature of the HK$25,000 paid by the Appellant to Mr. Liu and the month for which the payment was made. 

Material evidence

5. Mr. Liu testified at the Tribunal that he was asked by Mr. Lee, the sub-contractor, to carry out maintenance work at Provident Centre, specifically to chisel the external walls of a building, at a rate of HK$4 per foot.  Paragraphs C to I and N to Q on Page 94 of the Bundle show that the following dialogue took place during the cross-examination of Mr. Liu by the Appellant’s representative at the Tribunal hearing:     

“Paragraphs C to I:

Court: Alright, Mr. Chiu, please continue.

Question: As you worked as sub-contract workers, on 9 September we calculated with you the outstanding balance and made payment of the same to all of you, so the five of you signed for this particular cheque together.

Court: You worked as sub-contract workers, does it refer to all of you or some of you?

Company representative of the 2^nd Defendant: All those who signed here.

Court: What does “sub-contract worker” mean? Also tell me.

Company representative of the 2^nd Defendant: Acknowledging the wages of those sub-contracted works would be calculated by reference to the area and paid accordingly.

Court: Do you agree with this proposition?

Answer: Agreed.

Court: So the whole question is: Is it correct that you all worked as sub-contract workers and that the wages would be calculated by reference to the area and paid accordingly?

Answer: Correct.

Paragraphs N to Q:

Court: But it is not disputed that Liu Sau Wai was hired by Lee Chiu Wan, is that correct, Mr. Chiu?

Company representative of the 2^nd Defendant: A contractor hired by Lee Chiu Wan. That is not disputed.

Court: It is not disputed that Liu Sau Wai was Lee Chiu Wan’s employee, do you agree?

Company representative of the 2^nd Defendant: Agreed.”

6. The above dialogue shows that there was consensus between the Appellant and Mr. Liu on the following fact: Mr. Liu and his six friends undertook, in the capacity of so-called “sub-contract workers”, a project of chiselling the external walls of the building, for a remuneration to be calculated according to the area of the work done, at the rate of HK$4 per foot as stated by Mr. Liu.  The seven of them (i.e. Mr. Liu and his six friends) worked for the sub-contractor Mr. Lee on this same basis, and the calculation of remuneration by reference to area applied to them all.  Before the Tribunal, the Appellant’s representative claimed that Mr. Liu and his friends were contractors, meaning they were all contractors who worked on their own account without employing anyone. 

 Basis of the Presiding Officer’s decision on employment relationship

7. In his Reasons for Decision, the Presiding Officer did not deal with the question of whether there was an employment relationship at law between the two parties on the basis of the above factual consensus.  Instead, solely on the basis of what the Appellant's representative had said during the cross-examination of Mr. Liu, the Presiding Officer considered that the representative had reconfirmed that Mr. Liu was Mr. Lee's employee, and accordingly ruled that the employment relationship between the parties was beyond dispute.  However, this basis is in dispute.  The confirmation on the relationship between the two parties was made by the Appellant’s representative at Paragraphs N to Q quoted above, but this so-called confirmation was ambiguous.  The Appellant’s representative said on the one hand that Mr. Liu was a contractor hired by Mr. Lee, but agreed on the other hand that Mr. Liu was Mr. Lee’s employee.  I am of the view that the factual consensus of the two parties should be considered in ascertaining their relationship at law.

“Gross sum division” as a form of hiring

8. Ms. Wong, Counsel for the Appellant, submitted that the form of collaboration on which the parties had consensus was known as “gross sum division” in the trade. By this arrangement, several persons jointly undertake a project, with their remuneration calculated collectively according to the total quantity of work completed by them as a group.  If the whole group complete more work, they will earn more; if they complete less work, they will earn less.  During the work period, any member of the group who does not wish to work on a particular day is free to absent himself accordingly.

Analysis

9. Ms. Wong conceded that the workers as a group did not bear much risk pertaining to business operation, but argued that the “gross sum division” method of calculating remuneration would not take into account the quantity of the work completed by each individual.   Ms. Wong submitted that, as a matter of law, the collaboration between Mr. Liu and his friends and Mr. Lee by way of “gross sum division” was such that Mr. Liu and his group were Mr. Lee’s contractors instead of his employees. 

10. An alternative argument put forward by Ms. Wong was that the Tribunal had to conduct further investigation and inquiry before determining the two parties’ relationship at law under such mode of collaboration.

11. In my view, however, the mode of “gross sum division” is but one form of employment.  An employer who does not hire workers collectively by way of “gross sum division” can hire workers individually and calculate the wages of each individual according to the work completed by him.  It is just that an employer who hires workers individually will have to do much more administrative work as he has to identify the work completed by each and every worker.  On the other hand, if the “gross sum division” arrangement is adopted, it will spare the employer a lot of administrative work as the remuneration of workers can be calculated and paid collectively.

12. From the employer’s perspective, hiring workers individually and hiring workers collectively by way of “gross sum division” entail the same consequences, as in both cases the workers are remunerated in accordance with the quantity of work done by them.  From the workers’ perspective, given the equalization effect of calculating remuneration collectively, there is also little difference between being hired by way of “gross sum division” and being hired individually.   However, the “gross sum division” arrangement would accord the employer much administrative convenience.   

13. “Gross sum division” may of course be a relatively loose hiring arrangement because, as long as the work progress of the group of workers as a whole is satisfactory, the employer may not necessarily take action against the occasional absence of one or two of the workers from work.  Nevertheless, even if workers are hired individually, some of them may as well be absent from work for personal reasons.

14. Furthermore, it is not open to employers to adopt the “gross sum division” arrangement in order to avoid their legal obligation to provide employees with welfare and benefits under the law, because, apart from according employers administrative convenience, the “gross sum division” arrangement is no different from employing workers individually; under such arrangement, labour welfare such as paid holidays must also be provided in accordance with the law.   

Verdict

15. By reason of the consensus of the two parties and the above analysis, I hold that, when Mr. Liu was working for Mr. Lee under the “gross sum division” arrangement, Mr. Liu was Mr. Lee’s employee and not his sub-contractor.

16. Ms. Wong submitted that as Mr. Liu did not punch attendance cards, there was no basis for his claim for arrears of wages.  However, Ms. Wong conceded that, before the Tribunal, the Appellant’s representative had never raised the above argument whether in presenting the Appellant’s case or in cross-examining Mr. Liu, and that the argument was merely mentioned in a form, which was one of the documents produced by the Appellant, on which the words “C5 Liu Sau Wai: contractor did not punch cards.” had been written.  It was only in the closing submission that the Appellant’s representative contended that by reason of the fact that Mr. Liu did not punch attendance cards, there was insufficient evidence to show that he had worked for 22 days in July 2010.  However, by that stage it was too late for the Appellant’s representative to put forward that contention, which was therefore rejected by the Presiding Officer.

17. Furthermore, the Presiding Officer’s finding that Mr. Liu had worked for 22 days was a finding of fact, and as the Appellant did not raise the argument when applying for leave to appeal, I will not analyze or rule on it.

18. Finally, the Appellant gave Mr. Liu a cheque for HK$25,000 on 9 September 2010.  The Appellant contended that the Presiding Officer had misunderstood the nature of the cheque and the month for which wages were paid by the cheque.  However, according to the evidence given by the Appellant’s representative before the Tribunal, the HK$25,000 paid to Mr. Liu and his six friends was the outstanding balance payable to them on the basis of the quantity of work done by them (see Paragraphs C to I of the transcript quoted above and Pages 48 and 49 of the Bundle for details).  Therefore, when the Appellant made payment, it knew why it had to do so.

Order

19. In my judgment, Mr. Liu was one of the employees hired by Mr. Lee under the “gross sum division” arrangement and was not Mr. Lee’s sub-contractor.  Consequently, the Appellant’s arguments are unfounded.

20. As for the HK$25,000 paid to the seven workers including Mr. Liu, the Appellant very well knew the reason for payment, namely to settle the outstanding balance of the remuneration to which the seven workers, who had completed their work, were entitled. Accordingly, the appeal lodged in respect of the cheque is also without merit and I therefore dismiss it.

21. I further order the Appellant to pay Mr. Liu costs in the sum of HK$500.

Translated by the Judgment Translation Unit of the Judiciary and vetted by Mr. Edmund Cham, Solicitor.