TO KWOK SHEUNG v. KWAN YIU KEE FINISHING WORK CO. LTD. AND ANOTHER

DCEC66/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES' COMPENSATION CASE NO.66 OF 2001

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JUDGMENT

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Background:

[1] On 16/5/1999, the Applicant was injured by a falling piece of concrete while he was working on a construction site known as Laguna Grande Redevelopment Project Phase II (the "Project"). The Second Respondent was the main contractor and the First Respondent was the blockwork, plastering, screeding and tiling subcontractor of the Project. At the time of the injury, the Applicant was 50 years old.

[2] The parties agreed that the Applicant suffered a 5 cm cut on his right forearm. He was admitted to the Queen Elizabeth Hospital on 16/5/1999 and was released on 20/5/1999. On 21/3/2001, the Employees' Compensation (Ordinary Assessment) Board issued a Certificate of Review of Assessment confirming that the injury had caused the Applicant to suffer a 2% permanent loss of earning capacity. The Applicant was given sick leaves from 16/5/1999 to 7/6/2000. The Applicant was earning HK$22,100.00 immediately prior to his injury.

[3] The Applicant was claiming compensation in accordance with various sections of the Employees' Compensation Ordinance Cap. 282. Prior to the hearing, the parties confirmed that there was no appeal of the Employees Compensation (Ordinary Assessment) Board's assessment and quantum had been agreed at HK$197,872.00, net of advance payments and inclusive of interest. The only issue to be decided was liability.

The Applicant's Case:

[4] The Applicant alleged that he had been a tile fitter for 30 years prior to his injury. On or about April or May 1999, the Applicant's brother told him that there was a vacancy for a tile fitter in the Project. On 3rd or 4th May 1999, the Applicant went to the construction site and his brother introduced him to an "Ah Chung" (Mr. Wong Yin Chung hereinafter referred to as "Mr. Wong"). The Applicant did not know Mr. Wong's full name, only that he was the person responsible for collection of wages for workers in the same group.

[5] In his witness statement, the Applicant alleged that his wages were calculated in accordance with the number of 'squares' (100 square feet) of tiles he fitted. His average earning was HK$850.00 per day. The work done was measured by "Uncle Ming" (Mr. Liu Wai Ming hereinafter referred to as "Mr. Liu"), one of the First Respondent's foremen. After the measurement, Mr. Liu would pay the appropriate wages to Mr. Wong and he would then distribute these wages to the workers.

[6] It was the practice of all tile fitters to bring their own tools, including power cutters and breakers, to their jobs. The contractor would supply the tiles and mortars. The group would consist of 3 to 4 workers and each would be solely responsible for the tile work in a particular kitchen or washroom.

[7] A few days after the Applicant started working in the Project, Mr. Wong stated he was moving to another one of the First Respondent's sites in Ma On Shan. A few days after Mr. Wong left the Project, Mr. Liu told the Applicant that henceforth he was assigned to collect wages for his group. Since someone had to do it, the Applicant did not object to the assignment.

[8] The first time wages were due to the Applicant was sometime in June 1999, almost a month after his injury. On that day and in subsequent wage payment days, Mr. Liu would telephone the Applicant and told him to meet a Mr. Mak Weng Un ("Mr. Mak") in the First Respondent's site office. The wages were paid by cash cheques drawn on the First Respondent's bank account. The Applicant would cash the cheques at a nearby branch of the First Respondent's bank.

[9] When the wages were collected, the Applicant had to sign a receipt prepared by Mr. Mak. The Applicant alleged that he had never been shown any of the wage calculations and he had never heard of a company called Sing Fai Construction Company.

[10] The Applicant stated that he had never made any profit on the wages he collected for the group. He merely distributed the wages in accordance with the work done by each member and if there were any surplus or shortfall, each member of the group would share equally on the same.

[11] Since his injury, the Applicant had received a sum of HK$40,360.00 from the First Respondent.

The Respondents' Case:

[12] The Respondents stated that the Second Respondent was the principal contractor for the Project and had subcontracted the blockwork, plastering, screeding and tiling works to the First Respondent. The First Respondent in turn sub-subcontracted the works to Shing Fai Construction. Shing Fai then sub-sub-subcontracted the works in each tower of the Project to various sub-sub-subcontractors. Mr. Wong was the sub-sub-subcontractor for tower 8 of the Project.

[13] At the time of the Applicant's injury, the First Respondent seconded one of its employees, Mr. Liu, to Shing Fai as site supervisor of all of the sub-sub-subcontractors. Additionally, the boss of Shing Fai, Mr. Mak Weng Un ("Mr. Mak") had a very close relationship with the owner of the First Respondent and at the relevant time, the First Respondent also employed him as a project supervisor.

[14] The sub-sub-subcontractors, including Mr. Wong, were paid by actual work done. For each 100 square feet of tiles fitted, the sub-sub-subcontractors would be paid HK$600.00. However, 5% of the payments would be withheld for remedial work. The sub-sub-subcontractors would also be paid for 'substitute works'. Substitute works occur when finished tile work had to be dismantled and refitted due to reasons other than the sub-sub-subcontractor's fault or where other sub-sub-subcontractors needed additional workers to assist them. For substitute works, the sub-sub-subcontractor would be paid a fixed rate of HK$730.00 per worker per day.

[15] All sub-sub-subcontract payments for tower 8 were paid to Mr. Wong or the Applicant and never directly to any of the workers.

[16] On or about May 1999, Mr. Wong told Mr. Liu that he no longer wanted to continue with the sub-sub-subcontract work on the Project and stated that the Applicant would take over his sub-sub-subcontract obligations. Mr. Wong also told Mr. Liu to pay all subsequent contract payments directly to the Applicant.

[17] A few days prior to the Applicant's injury, the Applicant had taken over the sub-sub-subcontract works in place of Mr. Wong and had continued the tiling work with 2 to 3 workers. Even after his injury on 16/5/1999, the Applicant had continued to collect all sub-sub-subcontract fees until all tiling works in tower 8 was completed.

[18] In addition to the sub-sub-subcontract fees, Shing Fai also lent the Applicant certain sums of money due to sympathy towards the Applicant's injury. The Applicant was required to repay these payments.

[19] The Applicant was not required to attend the work himself. After the Applicant's injury, he continued to collect the sub-sub-subcontract sums from the First Respondent even though he had not been working at the Project personally. The First Respondent had no control on the Applicant's workers. If progress were slow, Mr. Liu would direct the Applicant to increase the pace. The First Respondent had no control on when they would report to work or when they could take leaves. The First Respondent had never filed any income tax forms for the Applicant.

The Issues:

[20] The main issue of this matter is whether the relationship between the parties was one of a contract for employment or a contract of employment.

The Law:

[21] Whether a relationship was a contract for service or one of contract of service is a complicated one. In Davies v. Presbystrain Church of Wales [1986] 1 WLR 323, it was held that if the relationship was solely dependent on the true construction of a written document, this was a question of law. In Lee Ting Sang v. Chung Chi Keung & another [1990] 2 WLR 1173, the Privy Council held that if the relationship has to be determined by an investigation and evaluation of the factual circumstances in which the work was performed, then it was a question of fact.

[22] The fundamental test on this question was established in Market Investigation Ltd. v. Minister of Social Security [1962] 2 QB 173 (approved in Lee Ting Sang, (supra)), Cooke J. stated the test as follows: "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 service. If the answer is 'No', then the contract is a contract of service."

[23] In Construction Industry Training Board v. Labour Force Ltd. (1970) 3 AER 220, approved by Nazareth J. (as he then was), in Leung Kam Fat and others v. Jonathan's Fashion Manufacturing Ltd., LTA No.14 of 1988, it was noted that this question often requires the court to perform a balancing exercise in weighing the relevant factors, each may be pointing to different directions. In Market Investigations Ltd. (supra), it was held that there was no exhaustive list of the relevant factors and no strict rules as to the relative weight each factor should carry in a particular case.

[24] Some of the tests that had been applied by the courts included:

(1) CONTROL

Control includes the power to decide how things are to be done, the way it should be done and the means to be employed in doing the work and when and place that it should be done. Per Mckenna J. in Ready Mix Concrete (South East) Ltd. v Minister of Pensions and National Insurance [1968] 2 QB 497; adopted in Ng Pik Yuk v. Wai Tai Knitwear Ltd. LTA No. 49 of 1987, Leung Kam Fat and others v. Jonathan's Fashion Manufacturing Ltd.(supra), and Wong Sai Yee v. Kong Kwan [1988] HKLR 367.

(2) INTERGRATION

The question is whether the person is part and parcel of the organization. Bank Voor Handel en Scheepvaart N.V. v. Slatford and another [1953] 1 QB 248; adopted in Ng Pik Yuk (supra), Leung Kam Fat (supra) and Wong Sai Yee (supra).

Under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business; whereas, under a contract for service, his work, although done for the business, is not integrated into it but is only accessory to it. John & Harrison Ltd. v. Macdonald & Evans [1952] 1 TLR 101; adopted in Leugn Kam Fat (supra).

(3) PROVISION OF EQUIPMENT

Per Cooke J. in Market Investigation Ltd. (supra); approved in Lee Tying Sang (supra).

(4) HIRING OF OWN HELPERS

Per Cooke J. in Market Investigation Ltd. (supra); approved in Lee Tying Sang (supra).

(5) PROFIT AND LOSS

What degree of financial risk the person performing the services 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 performance of his task. Per Cook j. in Market Investigations Ltd. (supra); approved in Lee Ting Sang (supra), followed in Leung Kam Fat (supra) and Wong Sai See (supra).

(6) FREEDOM TO ATTEND WORK

Cheng Yuen v. The Royal Hong Kong Golf Club, Civil Appeal No. 146 of 1996, CA.

Findings:

[25] Prior to balancing and weighing the relevant factors, it was necessary for me to deal with several matters.

The Applicant's Remuneration:

[26] Although in paragraph 6 of his witness statement dated 7/7/2001, the Applicant stated:

"I was given to understand that my salary was about $850.00 per day. It was not a fixed salary, $850 was just an average sum of what I would get. The usual practice of my trade is to have the salary quantified by measuring the number of 100 square feet of tiles fitted. The mechanism at Laguna Grande was that a person called Ming Shuk (Uncle Ming), who I believe was a site foreman of Kwan Yiu Kee, would come to the site to inspect and take measurements, then he would notify Ah Chung of the actual receivable payroll. After collecting the payroll. Ah Chung would distribute the salary amongst our group of workmen in accordance with the actual work done by each individual workman." Emphasis added

[27] In his testimony in court however, the Applicant stated categorically that his salary was a fixed sum of $800.00 per day. This was clearly contrary to the Applicant's own witness statement, and inconsistent with the testimonies of Mr. Liu and Mr. Mak.

[28] Finally, the various wage payments received by the Applicant on behalf of the workers were not divisible by $800, suggesting that the wages were not measured in accordance with work days. Although the Applicant stated that the First Respondent would pay the workers tea money on each payday, his testimony on how the alleged tea money was distributed were confusing and unbelievable.

[29] At first, the Applicant testified that the workers would know who had paid for tea and they would get repayment from the tea money. This suggested that the tea money was in fact a repayment of money already incurred by the workers; however, the Applicant later testified that the tea money was shared equally amongst the workers, suggesting that it was a bonus issued by the First Respondent.

[30] Ms. Lee, counsel for the Respondents submitted that the Applicant changed his story on how he was paid to make his claim of being the First Respondent's employee more convincing. Having balanced all of the relevant factors, I agree with Ms. Lee's assessment and it was my finding that at the relevant time the Applicant was paid by the number of squares or 100 square feet of tiles fitted and not by a fixed daily rate.

The Form 2s filed by the First and Second Respondent.

[31] In both Form 2s, the First Respondent was listed as the Applicant's employer. If my finding confirms that the content in the Form 2s represented an admission of the true relationship between the Applicant and the First Respondent, there would have been no need to complete the balancing exercise.

[32] In explanation to the contents of the Form 2s, Mr. Leong Wai Man ("Mr. Leong"), one of the First Respondent's foremen on the Project, testified that he was the person responsible for filling out the Form 2s on behalf of the First and Second Respondents. Mr. Leong explained that prior to the Applicant's injury, all of the Form 2s he filled out were for employees of the First Respondent or employees of the sub-sub-subcontractors. The Applicant's injury was the first occasion that he had to deal with injury of an independent contractor.

[33] Mr. Leong also stated that he was under the false belief that the First Respondent had an obligation to complete Form 2s for all injured workers, irrespective of whether they were employees of or independent contractors. Due to this mistaken belief, Mr. Leong completed the Applicant's Form 2 in the same manner as if he was one of the First Respondent's employees.

[34] There were no salary records for the Applicant since he was not an employee of the Respondent. Mr. Leong had to ask another plasterer for their average daily wage. In accordance with the Plasterers' Association's publication, the average daily wage was HK$850.00. Mr. Leong then multiplied it by 26 days to get HK$22,100.00 and that was the figure he used as the Applicant's monthly salary in both Form 2s.

[35] Mr. Leong also testified that although he had seen the Applicant working with Mr. Wong, he really did not know the relationship between the Applicant and Mr. Wong. Mr. Leong stated that at the time of the Applicant's injury, he did not know that the Applicant had changed his status from an employee to taking over Mr. Wong's position as the sub-sub-subcontractor for Tower 8.

[36] Mr. Liu testified that he was the person responsible for finding and engaging sub-sub-subcontractors and it was him who engaged Mr. Wong. When Mr. Wong decided to leave the Project, he introduced the Applicant as his replacement. At the time of the Applicant's injury, Mr. Leong did not know that the Applicant had replaced Mr. Wong as the Tower 8 sub-sub-subcontractor.

[37] Mr. Lok did not seriously challenge Mr. Leong's testimony in his cross-examination. Mr. Leong confirmed that he was not responsible for hiring sub-sub-subcontractors. Mr. Liu was in fact, the only person who knew anything about it. Having balanced all of the circumstance, I found that the content of the Form 2's were filled-in by Mr. Leong under the mistaken belief that the Applicant was an employee of Mr. Wong. Accordingly, the content of the Form 2's could not be relied upon as documentary evidence of the true relationship between the parties, at the time of the Applicant's injury. It will be necessary for me to embark on an investigation and evaluation of the factual circumstances in which the work was performed by the Applicant.

Control:

[37] The Applicant testified that there was in fact very little control placed on the workers. They usually worked from 8:30 a.m. to 4:30 p.m., but there was no one who told them that was their working hour. It was just their usual practice.

[38] As to Mr. Liu, the Applicant testified that for the few days that he actually worked on the Project, he was required to report to Mr. Liu on the number of workers working that day. If there were mistakes made by the workers, Mr. Liu would tell the Applicant and he would in turn instruct the workers in the group to correct the mistakes. When there were substitute works to be done, even after the Applicant was injured and was no longer working on the Project, Mr. Liu would still tell the Applicant and he would arrange a worker to take care of the substitute work.

[39] Although Mr. Liu stated that he had the power to select, it was restricted to power to select the sub-sub-subcontractors and not the individual workers in the group. That was left to the sub-sub-subcontractor themselves.

[40] Mr. Leong had an even smaller role in the day-to-day operation of the Applicant's work. The Applicant stated that he only saw him once or twice before his injury. All Mr. Leong did was to tell the Applicant that the gaps between certain tiles were too wide.

[41] The workers in the group also underwent substantial changes after Mr. Wong left the Project. The Applicant testified that when he first joined Mr. Wong on the Project, his brother was not working on the Project; however, after Mr. Wong left, his brother and a few of his villagers also worked in his group. Accordingly, it appears that the Applicant had influence on who was to be hired even after he was injured.

[42] Taken as a whole, I found that the Respondents had very little control on how the work was to be performed and who was to perform it.

Integration:

[43] It was common ground that the tiling work in each tower in the Project was assigned to an individual group. Although each group may be required to correct mistakes made by other groups, but over all, the tiling work in Tower 8 was independent of the other towers.

[44] In accordance with the Applicant's own testimony, there were in fact little supervision by staffs of the First Respondent. I therefore found that the Applicant's work was not an integral part of the First Respondent's business.

Provision of Equipment:

[45] The Applicant testified that it was the custom of the trade that tile fitters would bring their own equipments. The equipments included electric cutters, breakers and hand tools. Mr. Liu testified that while that was true for subcontractors, equipments would be provided to the First Respondent's employees.

[46] In view of the fact that the First Respondent had no tile fitters of its own, no comparison could be made and this factor was of no assistance to me.

Hiring of Own Helpers:

[47] The Applicant had testified that when he first joined Mr. Wong's group, Mr. Wong had 2 to 3 members and he was alone. Thereafter, the Applicant's brother and a few of his own villagers joined his group. In effect, the Applicant had the power to hire his own workers and have done so.

Freedom to Attend Work:

[48] The parties agreed that there was no time clock and the First Respondent had very little control over who reported to work on any given day. The only control was Mr. Liu asking the Applicant how many in his group was working on that day. This was clearly consistent with a contract for service and not with a contract of service.

Profit and Loss:

[49] The Applicant's allegation was that when he started working on the Project, he was the newest member of the group. However, when Mr. Wong left the Project a few days later, Mr. Liu selected him to receive wages on behalf of the workers. When the Applicant was cross-examined by Ms. Lee on this point, he was unable to provide a credible answer.

[50] Mr. Liu, on the other hand, testified that Mr. Wong had introduced the Applicant as the person taking over the sub-sub-subcontract work on Tower 8 and therefore after Mr. Wong left, Mr. Liu continued to look to the Applicant when it came time for wage payments. I found Mr. Liu's version of the story much more convincing and I accept his version as correct.

[51] Additionally, given the fact that I have already found that the Applicant's remuneration was measured per square or 100 square feet of tiles fitted (not per day as alleged in the Applicant's testimony), it was possible for the Applicant to earn a profit through careful management of his workers, if he paid his workers on a fixed daily rate. More importantly the reverse was also true, it was possible for the Applicant to incur a loss if he failed to manage his workers properly.

[52] However, in Wong Chi Wo and Others v. Cheung Muk Yung Trading as Cheung Muk Yung Steel Binding Engineering, HCLA 55 of 1995, where one of the workers recruited other workers of the same trade to work on the site and had paid them in accordance with the union's fixed daily rate, while he collected remunerations based on quantity of work completed, Mr. Justice Yeung stated:

"The suggested arrangement between the Appellant and the First Respondent was by no means uncommon in the building industry in Hong Kong. The Appellant, having obtained a job, seek the assistance of the First Respondent who was basically a worker himself. Perhaps he had been in the trade for a long period and was able to obtain the service of other workers in the same field. He would then arrange for other workers to work on the job as well. The Appellant would pay the First Respondent for the job based (on) the number of workers working on the job or on the quantity of works completed. The First Respondent would then pay the workers whom he had recruited, based on the prevailing daily wage of the workers as the Union of the particular trade decided from time to time. There was indications that at the material time, the daily wage set by the Union of the steel binders in Hong Kong was $750 a day.

The aforesaid suggested arrangement speaks loudly of a sub-contract situation...." Emphasis added

[53] Irrespective of his finding that this type of arrangements was typical of a contract for service, Mr. Justice Yeung considered 5 factors and decided not to overturn the Presiding Officer's finding that the worker was an employee. The 5 factors considered by Mr Justice Yeung were :

(1) The worker was also a worker himself, working with the other workers everyday;

(2) The worker had no discretion in deciding how much to pay each worker. The union had fixed a daily rate which everyone in the field had to follow;

(3) The worker was a manual labourer, in the same trade and doing the same work as all other workers;

(4) Irrespective of the basis of the calculation of remuneration, it was reflective of the value of the manual labour involved, having regard to the fixed union rate. Therefore the chance of the worker making any significant profit or suffering any significant loss was negligible; and

(5) Since there was a fixed union rate that was known to everyone in the trade, therefore it was not correct to suggest that the worker had absolute control over what amount to pay the other workers. The contractor knowing the union's going rate had conducted his business with reference to the same.

[54] There were two consistent considerations throughout the 5 factors: First, there was a fixed union rate. Second, the worker had worked along side the other workers he recruited.

[55] Here the facts were substantially different. First, although there was an average daily rate published by the Plasterers' Association, it was not a fixed rate. It was common ground that the First Respondent had paid $730 per day for substitute work and it was the Applicant's testimony that he was paid $800 per day. All were different from the published average daily rate of $850. Second, the Applicant had continued to collect wages after he was no longer working on the Project.

[56] The Applicant's explanation for continuing to collect wages for the other workers was that someone had to do it. However, it must have been extremely inconvenient to receive attendance detail from the workers and comparing the same with the wage payments. Also there must have been expenses incurred traveling to the site office to receive the wage cheque, then traveling to the bank to cash the cheque and returning to the site to distribute the same to the workers or depositing them into the workers' accounts.

[57] I found it difficult to accept that the Applicant's explanation, especially given the fact that the Applicant's story on how he was selected by Mr. Liu as replacement for Mr. Wong was considered. If the Applicant's story was true, there was no reason why another worker could not have been selected to replace the Applicant after he was injured.

[58] The only credible and logical explanation was that the Applicant was in fact a sub-sub-subcontractor and had continued to receive substantial profit from his employees' work on the Project.Accordingly, I found that at the time of injury, The Applicant was not an employee of the First Respondent and his claims under The Employees' Compensation Ordinance are dismissed.

Order:

(1) The Applicant's applications are dismissed.

(2) Costs is to the Respondents, with certificate for counsel, to be taxed on party/party basis unless agreed.

(3) The Applicant's own costs are to be assessed in accordance with the Legal Aid Regulations.