CHEUNG TAK HING v. 文佑德經營泉興裝飾公司 AND ANOTHER

DCEC 1809/2018

[2020] HKDC 1150

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 1809 OF 2018

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IN THE MATTER OF AN APPLICATION BETWEEN

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JUDGMENT

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A. INTRODUCTION

1.  In this action, the applicant claims against the 1^st respondent for compensation under sections 9, 10 and 10A of the Employees’ Compensation Ordinance (Cap 282) (“the Ordinance”). 

2.  The accident occurred on 6 September 2016.  According to the applicant, he was at the time employed by the 1^st respondent as a renovation worker, and was working in Room 2902, Shun Hei House, Siu Hei Court, Tuen Mun, New Territories, Hong Kong (“Unit 2902”).  The applicant claims that in the course of his work, a wall collapsed and crushed his left hand.

3.  The 1^st respondent disputes liability.  He denies being the employer of the applicant, and contends that the applicant had all along been a self-employed independent contractor. Accordingly, the 1^st respondent says that the applicant is not entitled to any compensation under the Ordinance. 

4.  Alternatively, even if the applicant was the 1^st respondent’s employee (which the 1^st respondent denies), the 1^st respondent contends that “demolishing of wall” was not part of the applicant’s job duties, and that the injury was attributable to the serious and wilful misconduct of the applicant within the meaning of section 5(3) of the Ordinance.  Accordingly, the 1^st respondent submits that the applicant should not be entitled to any compensation under the Ordinance in any event. 

5.  Lastly, the 1^st respondent disputes quantum if liability is established.  His main dispute is on the applicant’s monthly earnings at the time of the accident.

6.  The 1^st respondent was legally represented from 4 July 2019 to 3 September 2019.  During the said period, the 1^st respondent had filed his supplemental witness statement and a supplemental list of documents.  Apart from the aforesaid period, the 1^st respondent has been acting in person throughout this action. 

7.  As there was no valid insurance policy in force for the alleged accident, and that the 1^st respondent was not legally represented at the time and would likely appear in person at trial, the Employees Compensation Assistance Fund Board (“the Board”) has joined in as the 2^nd respondent in this action since 21 May 2020.

8.  The trial took place before me on 25 to 27 November 2020.  The applicant was represented by counsel Mr Patrick Szeto.  The 1^st respondent was acting in person.  The Board was represented by counsel Mr Tony Chow.

B. ASSESSMENT BY THE EMPLOYEES’ COMPENSATION (ORDINARY ASSESSMENT) BOARD

9.  The applicant was assessed by the Employees’ Compensation (Ordinary Assessment) Board on 20 June 2018.  The assessment was subsequently reviewed on 22 September 2018.  According to the Certificate of Review of Assessment (Form 9) dated 5 October 2018:-

(a) the injury was “left hand crush injury resulting in left middle finger pain, stiffness, weakness, scar and numbness”;

(b) a total of 713 days of sick leave were deemed necessary as a result of the injury; and

(c) loss of earning capacity was assessed to be 9%.

10.  There has been no further appeal against the above assessment.

C. THE ISSUES

11.  There are three main issues required to be determined in the present action, namely:-

(a) Whether the applicant was an employee of the 1^st respondent at the time of the accident (“the 1^st Issue”);

(b) If the 1^st Issue is decided in the affirmative, whether the injury to the applicant was attributable to the serious and wilful misconduct of the applicant (“the 2^nd Issue”); and

(c) If the 2^nd Issue is decided in the negative, what the monthly earnings of the applicant was at the time of the accident (“the 3^rd Issue”).

12.  Mr Chow indicated to me that the Board would assist the court in relation to the 1^st Issue and the 3^rd Issue, and would adopt a neutral stance in respect of the 2^nd Issue.

D. THE WITNESSES

13.  There were only two witnesses at trial, namely the applicant and the 1^st respondent.

14.  I find the applicant generally to be an honest witness.  It is true that in certain parts of his witness statements, his description of his past working history and income may not be entirely accurate in the light of his elaboration under cross-examination. However, I am of the view that his evidence is generally credible, especially when considering all the other relevant circumstances and evidence available.

15.  Mr Chow drew my attention to the applicant’s two previous amendments in respect of his monthly earnings in the pleadings, and submitted that the fact that the applicant was prepared to lie about his earnings (by lowering the same) in this action to facilitate his application for public housing has undermined the credibility of his evidence as a whole. However, I note that the applicant has eventually come clean and explained the reasons behind the amendments.  The applicant was lowering his claims at the time under the mistaken belief that this was necessary for his public housing application.  I am prepared to accept his explanation in this regard.  More importantly, as will be seen below, on the crucial issues, I find that the applicant’s evidence to be more credible and reliable than the 1^st respondent’s evidence, and the applicant’s evidence is also generally supported by other collaborating evidence.

16.  On the other hand, I do not find the 1^st respondent to be a reliable witness.  He admitted that he has poor memory.  During cross-examination, he kept on introducing new evidence which he had not previously mentioned in his written statements.  For instance, despite not mentioning a word in his previous witness statements, the 1^st respondent kept on suggesting that the applicant’s work was of poor quality under cross-examination.  When challenged by Mr Szeto that if the applicant was really that poor in performance as the 1^st respondent had suggested, why the 1^st respondent had kept given him work for the past 20 years, the 1^st respondent could not provide any satisfactory answer. 

17.  I am also of the view that the 1^st respondent may not have disclosed all the relevant documents in this action.  For example, during cross-examination, the 1^st respondent admitted that there may be other documents which may shed light on the monthly earnings of the applicant (for instance, from the 1^st respondent’s alleged accountant).  The 1^st respondent also tried to adduce further evidence in his closing submissions (which I have indicated that I would not consider).  In fact, I find it hardly convincing that the 1^st respondent could have filed tax information to the Inland Revenue Department setting out the alleged annual payment to the applicant for the entire years without any documentary records.  This either shows that the 1^st respondent has not disclosed all the relevant documents, or that the figures stated in the documents submitted to the Inland Revenue Department may not be reliable.

18.  When being challenged, the 1^st respondent frequently explained that he is not familiar with legal matters and that he is not legally represented.  However, as I have pointed out above, the 1^st respondent was legally represented for a period of time (albeit short).  Importantly, the 1^st respondent had filed a supplemental witness statement and a supplemental list of documents when he was legally represented.  He should accordingly be well aware of his duty of discovery in litigation. 

19.  The above are just examples (not exhaustive) to explain why I have concluded the 1^st respondent’s evidence to be unsatisfactory.  Overall, I find that the 1^st respondent had not been telling the whole truth before the court.  He had been trying very hard to portray the applicant as being a self-employed independent contractor. Some of his evidence is inherently contradictory.  In so far as his evidence contradicts with the evidence of the applicant, I prefer the evidence of the applicant.

E. THE 1^ST ISSUE – WHETHER THE APPLICANT WAS AN EMPLOYEE OF THE 1^ST RESPONDENT

RELEVANT LEGAL PRINCIPLES

20.  The relevant legal principles on determining whether a person was an employee are well-established.  In Poon Chau Nam v Yim Siu Cheung [2007] 1 HKLRD 951, the Court of Final Appeal emphasized that the court should examine all the features of the relationship against the background of the indicia of employment with a view to deciding whether, as a matter of overall impression, the relationship was one of employment.  This involved a nuanced and not a mechanical approach.  The indicia included the degree of control exercised by the “employer”; whether the person performing the services provided his own equipment; whether he hired his own helpers; what degree of financial risk he took; what degree of responsibility for investment and management he had; and whether and how far he had an opportunity of profiting from sound management in the performance of his task.

21.  It is well settled that it is for the court and not the parties to evaluate the facts and determine their true legal relationship.  The parties’ own view, even agreement, as to the relationship is just one of the factors that the court will take into account in such evaluation:- Leung Kam Wah v Fung Yuk Ching Yvonne t/a Hong Kong Transportation Co. HCLA 43/2006, 23 April 2008, at §19 (per Poon J, as he then was).

THE PRESENT CASE

22.  Having considered all the evidence, I have no hesitation in arriving at the conclusion that the applicant was an employee of the 1^st respondent at the time of the accident for a number of reasons.

23.  First, the 1^st respondent had a high degree of control over the work of the applicant:-

(a) The 1^st respondent was responsible for assigning work to the applicant.  During cross-examination, the 1^st respondent admitted that if the applicant did not accept the work assigned to him, he would never assign any further work to the applicant again.  The 1^st respondent also admitted that the applicant generally always accepted the job he had assigned to him over the years (apart from 2013 to 2014 when the applicant claimed that he deliberately cut down his work for the purpose of applying for public housing).

(b) The applicant had to follow the instructions and orders of the 1^st respondent and his wife, Madam Mok (“Mok”).  This is illustrated in the various recorded messages sent by Mok to the applicant (as helpfully summarized by Mr Szeto in his closing submissions), including the one made in early September 2016 shortly before the accident, in which Mok requested the applicant to go and work at Unit 2902 the next day.  It should also be noted that the applicant all along addressed Mok as “事頭婆”.

(c) The 1^st respondent admitted that apart from water and electricity work, the 1^st respondent also requested the applicant to do other types of work from time to time.  If the applicant was only an independent contractor engaged by the 1^st respondent to do water and electricity work, it begs the question as to why the applicant could be and was indeed requested to do such other work (such as demolishing work).

24.  The degree of control the 1^st respondent had exercised over the applicant identified above is plainly inconsistent with the 1^st respondent’s assertion that the applicant was only an independent contractor engaged by the 1^st respondent.

25.  Secondly, all the equipment used by the applicant for carrying out the work was supplied and owned by the 1^st respondent.  In this regard, I note that there is conflict of evidence between the applicant and the 1^st respondent as to who owned and supplied the equipment.  I have no hesitation in rejecting the evidence of the 1^st respondent for the following reasons:-

(a) There is no dispute that the equipment was at all material times stored at the 1^st respondent’s shop.

(b) The 1^st respondent admitted in cross-examination that the equipment could be used by other staff or workers engaged by the 1^st respondent.

(c) After the accident, the 1^st respondent has not returned the equipment to the applicant.

26.  Thirdly, the 1^st respondent bore all the financial risk involved in the work.  The applicant did not need to look for customers, and he was not involved in the negotiation with the customers directly.  Further, the 1^st respondent said in cross-examination that the applicant had once damaged a basin during his work and it had costed him several thousand dollars.  If the applicant was merely an independent contractor, there is no reason why the applicant was not responsible for the damage.  The applicant was only responsible for carrying out the instructions given by the 1^st respondent and there is no evidence showing that the applicant bore any financial risk in respect of his work done for the 1^st respondent.  In fact, there is also no evidence that the applicant needed to incur any capital for his work.

27.  Fourthly, it is the applicant’s evidence that he was paid every half a month in cash, and the salary was calculated on the basis on his daily rate and the number of days of work.  On the other hand, the 1^st respondent denies this.  In this regard, despite the 1^st respondent’s case that the applicant was not paid in the way described by the applicant, he has adduced no evidence to show how the applicant had been paid throughout the years.  It is inconceivable that the 1^st respondent did not maintain any documentary records showing payment to the applicant for each project if the applicant was indeed a self-employed independent contractor.  It should also be noted that the applicant’s evidence is that he would not receive more if the 1^st respondent obtained more profits in the project.  The applicant’s evidence in this regard was not challenged in cross-examination.

28.  Fifthly, the nature of the relationship between the applicant and the 1^st respondent and the way the applicant carried out his work clearly pointed to the existence of an employment relationship:-

(a) Apart from limited occasions, the applicant had only worked for the 1^st respondent for the past 20 years. 

(b) The applicant never hired his own workers in carrying out the job assigned by the 1^st respondent. From time to time, he worked with other workers engaged and assigned by the 1^st respondent.

(c) The applicant did not take part in the negotiation of the fees charged on the 1^st respondent’s customers, which were all fixed by the 1^st respondent and/or Mok.

(d) Even between the applicant and the 1^st respondent, according to the 1^st respondent’s evidence, the applicant did not have any say in the fees the applicant charged.

(e) The applicant was given a key to access the 1^st respondent’s shop.

(f) The applicant has never had his own company or business registration.

(g) In one of the recorded messages sent by Mok to the applicant, Mok described payment to the applicant as “糧”.

(h) The telephone records of the applicant indicated that there were telephone calls between Mok and the applicant on regular basis.

29.  Last but not least, in one of the documents submitted by the applicant for the purpose of applying for public housing, the 1^st respondent had signed and acknowledged that he was the employer of the applicant.  Whilst under cross-examination, the 1^st respondent claimed that he has no recollection as to the circumstances under which he signed the document, he admitted that he signed the document and wrote the Chinese characters “老板” (sic) underneath his signature.

30.  Whilst some of the facts stated above, when viewed individually and separately, may be equivocal, when considered collectively, all these facts plainly point to the inevitable conclusion that the applicant was working as an employee of the 1^st respondent at all material times. 

31.  In coming to the above conclusion, I have not overlooked the evidence submitted by the 1^st respondent. For example, I note that the 1^st respondent has produced a one-page document allegedly prepared by his accountant.  On the said document, there was a self-serving statement that the applicant was an independent contractor.  I have also noted that in the tax documents submitted, the 1^st respondent had described and claimed the applicant to be an independent contractor.  The applicant gave evidence that he was not aware of all these documents at the time, and his evidence was not challenged.  In any event, such documents are only one of the factors I should take into account in the evaluation.  The court always looks at substance rather than form, and the fact that the 1^st respondent considered or described the applicant to be an independent contractor is not conclusive.  In the light of the overwhelming evidence identified above, I am of the view that the applicant was clearly an employee of the 1^st respondent at all material times.  I should add that in so far as there is inconsistence between the evidence of the applicant and the 1^st respondent on their working relationship, I prefer the evidence of the applicant and reject the evidence of the 1^st respondent.

F. THE 2^ND ISSUE – SERIOUS AND WILFUL MISCONDUCT?

32.  I have no hesitation in concluding that the subject accident occurred in the course of the applicant’s employment with the 1^st respondent.  The applicant was specifically instructed to work in Unit 2902 by Mok in one of the recorded messages.  There is also no dispute that the applicant was instructed to carry out some work on the “collapsed” wall.  It should be noted that the applicant had been asked to do demolishing work for the 1^st respondent from time to time in the past.

33.  Whilst there is dispute on whether the applicant was specifically asked to demolish the “collapsed” wall, there is no dispute that the applicant did so in the course of carrying out the work assigned to him.  The conduct of the applicant can hardly be described as “serious and wilful misconduct” in any event:- see Leung Har Chai v Lamma Transportation Company Limited CACV 207/2012, 10 October 2013, at §69.

34.  Under section 5(4)(b) of the Ordinance, it is stated that for the purpose of the Ordinance, “an accident to an employee shall be deemed to arise out of and in the course of his employment, notwithstanding that the employee was at the time when the accident happened acting in contravention of any statutory or other regulation applicable to his employment, or of any orders given by or on behalf of his employer, or that he was acting without instructions from his employer, if such act was done by the employee for the purposes of and in connection with his employer’s trade or business.”

35.  In the premises, I find that the work carried out by the applicant at Unit 2902 which resulted in his injury was for the purposes of and in connection with the 1^st respondent’s business.  The accident arose out of and in connection with the applicant’s employment with the 1^st respondent, and there is plainly no evidence in support of any alleged serious and wilful misconduct on the part of the applicant.

G. THE 3^RD ISSUE – MONTHLY EARNINGS OF THE APPLICANT

36.  Under section 11(1) of the Ordinance, the monthly earnings of an employee at the time of the accident shall be the earnings:-

(a) for the month immediately preceding the date of the accident; or

(b) computed in such manner as is best calculated to give the rates per month at which the employee was being remunerated during the previous 12 months if he has been so long employed by the same employer, but, if not, then for any lesser period during which he has been employed by the same employer.

37.  The applicant’s evidence is that he was earning $1,250 per day for the month immediately preceding the date of the accident.  The applicant also contended that he worked for 26 days per month at the time.

38.  Mr Chow drew my attention to the fact that the figures of $1,250 and 26 days are self-serving, and there is lack of documentary evidence in support.  He is correct, but that does not mean that the court cannot accept such evidence.  It is not uncommon for renovation workers to be paid in cash and based on daily rate and the number of working days.  It is also not uncommon for renovation workers not to have documentary evidence in support of such payment of salary.  More importantly, I find that the applicant’s case to be supported by other evidence.

39.  First, in respect of the figure of $1,250, the 1^st respondent accepted under cross-examination that this was the then market daily rate for the equivalent job.  The figure is also generally consistent with relevant average daily rate for the equivalent job published by the Census and Statistics Department.

40.  Mr Szeto also drew my attention to the declaration made by the applicant to the Labour Tribunal dated 31 October 2016 (ie shortly after the accident).  In the said declaration, the Applicant had already stated his daily rate to be $1,250.  Whilst this may also be self-serving, Mr Szeto correctly pointed out that at the time, no litigation had been commenced and there is nothing to suggest that the applicant was not telling the truth at the time.  Mr Szeto also pointed out that there was no suggestion put forward to the applicant to the effect that he was exaggerating the daily rate in the declaration at the time for any purpose.

41.  Secondly, in so far as the figure of 26 working days is concerned, the applicant’s evidence is also generally consistent with the 1^st respondent’s evidence that between April and June 2016, the applicant was working about 20 days a month.  Mr Szeto pointed out to me that the telephone records produced also show that the applicant had had regular and frequent conversation with the 1^st respondent and/or Mok in the few months preceding the accident.  This also lent support to the applicant’s case that he worked for many days a month shortly before the accident.

42.  In the premises, I am prepared to accept the applicant’s evidence that immediately preceding the accident, he was working for 26 days a month, at a daily rate of $1,250.  In other words, the monthly earnings of the applicant for the month immediately before the accident should be $32,500 ($1,250 x 26).

43.  In so ruling, I necessarily reject the 1^st respondent’s evidence that the applicant was not paid by daily rate.  As I have pointed out above, I do not find the 1^st respondent’s evidence to be reliable.  If the applicant was indeed paid other than based on fixed daily rate, there must be some documentary evidence to record the amount of payment made to the applicant in the month immediately preceding the accident.  No such record has been produced in the present action, and no explanation has been provided on the absence of such evidence. 

44.  In the light of my finding above, it is not necessary for me to consider the average monthly salary of the applicant in the past 12 months immediately before the accident under section 11(1)(b) of the Ordinance.  Mr Szeto agreed that the figure could not have been more favourable to the applicant than the figure above.

45.  To complete the picture, I should also mention that the 1^st respondent has also relied on the documents referred to in paragraph 31 above.  On these documents, it was stated that a total of $163,300 was paid to the applicant for the financial year from 1 April 2015 to 31 March 2016.  Mr Szeto criticized the figures to be highly unreliable and not supported by any documentary evidence.  He submitted, and I agree, that it is very surprising that there is not a single document produced in support of the alleged figures, especially given that this is a very live issue in this action.  Further, the 1^st respondent admitted to have poor memory and it is inconceivable that the 1^st respondent could have come up with the annual figures without any documentary records in support.  I have reservation on the reliability of the figures stated on these documents.  I note that even the 1^st respondent was not able to explain how these figures came about under cross-examination.

46.  In any event, I am of the view that it is not necessary for me to decide whether the figures stated on such documents are accurate or not, as these documents covered a separate period of employment.  The fact that the applicant was earning less for the previous financial year (2015-2016) does not mean that he could not have earned more in the subsequent month of August 2016, especially it is the applicant’s evidence (which was agreed by the 1^st respondent) that the amount of work may vary from month to month over a year (the applicant said there is “淡旺季” in a year).

H. THE AMOUNT OF COMPENSATION AWARDED

47.  Based on my findings above, the amount of compensation awarded to the applicant under the Ordinance should be as follows.

SECTION 9

48.  As the monthly salary of the applicant at the time of the accident exceeded the statutory limit, the statutory limit applicable at the relevant time (ie $26,070) should be applied. 

49.  The amount of compensation awarded under section 9 of the Ordinance should accordingly be as follows:-

$26,070 x 72 (the applicant was 44 at the time of the accident) x 9% = $168,933.60

SECTION 10

50.  A total of 713 days of sick leave was granted by the Employees’ Compensation (Ordinary Assessment) Board on Form 9 (the figure was agreed to be accurate by Mr Szeto and Mr Chow).  Accordingly, the amount of compensation awarded under section 10 of the Ordinance should be as follows:-

$32,250 x 713/30 x 4/5 = $613,180

SECTION 10A

51.  The 1^st respondent should also be liable to pay the medical expenses of the applicant for the medical treatment in respect of the injury.  Based on the documents adduced, and taken into account the $800 the 1^st respondent had paid on behalf of the applicant, the compensation awarded to the Applicant should be $12,316.

TOTAL AWARD

52.  In the premises, the 1^st respondent is liable to pay compensation of $794,429.60 to the applicant under the Ordinance.

53.  The applicant should also be awarded interest on the above sum at half judgment rate from the date of the accident (6 September 2016) to the date of this judgment, and thereafter at judgment rate until full payment.

I. COSTS

54.  As the applicant has succeeded in the present application, I make an order nisi that the 1^st respondent should pay the costs of the applicant, to be taxed if not agreed, with certificate for counsel. 

55.  In respect of the position of the Board, it is important to recognise the role of the Board in this type of proceedings.  In Wo Chun Wah v Employees Compnesation Assistance Fund Board (2019) 22 HKCFAR 495, Ribeiro PJ stated the following at §45:-

“45. The Board’s role was properly recognised by the Trial Judge:

In participating in the proceedings, the Board’s function is neither to contest the employee’s claim in place of the employer nor to help save public funds, but is to ensure that employees in need can obtain such damages as they are entitled.  The Board has a duty to screen out unmeritorious or inappropriate claims to ensure (inter alia) that this assistance mechanism will not be abused, its recipients will not exaggerate their claims, and public funds will not be used for improper purposes.  Therefore, unless it is necessary to contest false claims or suspected fraudulent claims, the Board should not adopt an antagonistic attitude in the proceedings.  It should act as a filter and adopt an impartial attitude in the proceedings so as to assist the court in coming to a correct ruling.”

56.  Ribeiro PJ further stated (at §§46-47) that the general starting point should be no order as to costs between the applicant and the board, irrespective of whether the board sought to test the case as to liability, quantum or both.  A different costs order might be warranted on particular facts.  For example when the board’s conduct is unreasonable or misconceived or unjustifiably antagonistic, unnecessarily prolonging the intervention, or otherwise untoward, the court may order the board to pay the applicant’s costs.

57.  In the present case, I find the Board’s intervention to be necessary.  This is particularly so given that the 1^st respondent has been acting in person.  The Board has a duty to ensure that the applicant would not exaggerate his claims and that the public funds would not be used for improper purposes. 

58.  I am also of the view that the Board has assisted the court in testing the applicant’s case on both liability and quantum.  In particular, Mr Chow has fairly pointed out the evidence which I should pay attention to in respect of both the applicant’s case and the 1^st respondent’s case.  The fact that the Board ultimately did not recommend the court to accept the applicant’s entire case does not mean that the Board has been acting unreasonably.  I find that there is nothing in this case which warrants the departure from the general position.

59.  Accordingly, I make an order nisi that there be no order as to costs as between the applicant and the Board. 

60.  Mr Chow has not sought costs against the 1^st respondent, and accordingly I make an order nisi that there be no order on costs as between the 1^st respondent and the Board.

61.  I further order that the applicant’s own costs be taxed in accordance with the Legal Aid Regulations.

62.  As both Mr Szeto and Mr Chow have specifically reserved their position on costs, the above costs orders are made on nisi basis.  Such order nisi will become absolute 14 days after the date of this judgment unless an application for variation has been made within the said period.

J. OTHER MATTERS

63.  At the conclusion of the trial, I had indicated to the parties that the judgment would be written in English.  I also informed the 1^st respondent that an interpreter would be available at the time of delivery of the judgment, if the 1^st respondent requires such service.

64.  Lastly, I thank counsel for their assistance to the court.