YU KWOK FAI v. SING KEE KNITTED BELT PRODUCT LTD

DCEC 164/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 164 OF 2012

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JUDGMENT

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1.  This is an application by the applicant for compensation under sections 9, 10 and 10 A of the Employees’ Compensation Ordinance (Cap 282) (“ECO”). It is not disputed that the applicant suffered personal injuries on 5/5/2010 at the respondent’s new factory in China (廣東省惠州大亞灣).

2.  The issues in dispute are:-

(a) Whether the applicant is an employee or a contractor of the respondent;

(b) Whether the subsequent injuries around 17/12/2010 and 11/8/2011 should be regarded as intervening event; and

(c) Whether the Paper Mills Formula should be applied in this case.

Whether the applicant is an employee or a contractor of the respondent

3.  The principles for determining if there was an employer-employee relationship were set out in the Court of Final Appeal (“CFA”) decision of Poon Chau Nam v Yim Siu Cheung [2007] 1 HKLRD 951.  At p 960-961, paragraph 17, the CFA referred to the Privy Council decision of Lee Ting Sang v Chung Chi Keung which approved of the passage as follows:-

“… 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 service. 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.”

At paragraph 18, the CFA continued: 

“The modern approach to the question whether one person is another's employee is therefore to examine all the features of their relationship against the background of the indicia developed in the abovementioned case-law with a view to deciding whether, as a matter ofoverall impression, the relationship was one of employment, bearing in mind the purpose for which the question is asked. It involves a nuanced and not a mechanical approach, as Mummery J emphasized in Hall v Lorimer (in a passage approved by the English Court of Appeal):

'In order to decide whether a person carries on business on his own account it is necessary to consider many different aspects of that person's work activity. This is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another.'”

4.  In this case, this issue is interwoven with the assessment of creditability of the witnesses, as they gave different accounts to what was agreed and the nature of work.

Assessment of Creditability of the Witnesses

5.  The applicant impressed me as a credible witness.  Although he made mistake as to whether it was a holiday on 3/5/2010, I accept that it was an honest mistake as not much could be gained by saying that it was a working day.  I accept that he did not mention the probation period and the details of the MPF payment because they were the minor details.  It is also possible that they were not mentioned because such matters were not in dispute (the applicant worked for less than 2 months, no MPF account was required to open).

6.  There is a discrepancy between his oral evidence and the evidence in his statements.  In his oral evidence, he said that when the new factory started production, he would be appointed as the production manager.  In the meantime, his work would be a consultant.  In his statement, he said that on 23/3/2010, Ip Chun Ho mainly asked him to solve all the production problems, give advice on production and serve as a consultant.  I find that such discrepancy minor.  It is my findings in the interview that he was first asked to be the production manager.  But as a lot of extended family members working in the factory, the interpersonal relationship in the factory was complicated.  He was not given the title and was asked to work as a consultant instead.  He complied a consultancy report on 6/4/2010 and continued working for the respondent.

7.  The applicant did name himself the consultant of the respondent.  But such title would not alter the job nature of the applicant.  He earned a fixed salary of HK$ 15,000 and worked 6 days a week.  He had fixed working hours.

8.  I do not accept the evidence of Ip Chun Cheong (“RW1”), the youngest son of Ip Tam Sing and the first witness of the respondent.  He was the director of the respondent when he signed his witness statement.  His evidence was vague and he failed to recall a lot of things, including how much he had paid for the purchase of the shares, how much the defaulting party of the transaction had owed him.  He did not remember whether he was in the factory on 5/5/2010, the date of the accident.  But he remembered that he had asked the contractor of the building works what had happened.  At first, he said that he started to investigate the Accident in 2013, after the institution of the proceedings in the District Court.  But when he gave evidence, he said that he asked the contractor about the incident several days after the incident.  He said that he did not attend the office in Hong Kong.  But later he said that he was aware of the job application letter sent by the applicant to the Hong Kong Office when he was in the Hong Kong Office.

9.  RW1 said in his statement that Ip Tam Sing, his father, dismissed the applicant on 1/5/2010 because the applicant was dishonest by selling 3 catalogues of technique information to the respondent, such catalogues were confidential.  However Ip Tam Sing said in the witness box that there was nothing dishonest in buying the 3 catalogues.

10.  RW1 claimed he did not know about uncle Yu.  According to the applicant, uncle Yu was the relative of Ip’s family and the Accident occurred when he tried to pull uncle Yu up the staircase. RW1 said he even asked the contractor the identity of this uncle Yu but no one knew such person.  But IP Tam Sing, his father confirmed that uncle Yu was his in- law.  It is strange that RW1 did not ask his father about the identity of uncle Yu.

11.  His father admitted that his sister, who was working for the respondent, did not have an MPF account and the respondent did not pay the MPF for her.  It is contrary to RW1’s evidence that everyone working for the respondent had an MPF account.

12.  RW1 was hesitant when answering questions and was not forthcoming in giving evidence.  I have no hesitation to reject his evidence.

13.  I do not accept the evidence of the respondent’s second witness Ip Tam Sing (“RW2”), the father of RW1.  He was the director and shareholder of the respondent at the material time.  His evidence was inconsistent.  First, he said that the applicant was engaged and paid on a project basis.  He then changed to pay him on monthly basis.  At cross examination and contrary to his own statement, he agreed that the catalogues supplied by the applicant had no problem and had nothing to do with the integrity of the applicant.  He dismissed the applicant because he could not deliver his service.  He also said that several days before the termination of service of the applicant on 1/5/2010, he gave verbal notice to the applicant of such termination.  Such notice was never mentioned in his witness statement.

14.  RW2 said in the examination in chief that the payment of $3500 was for travelling expense.  But in cross examination, he admitted that no travelling expenses were given to the applicant.  He said that the applicant started working for the respondent before 1/4/2010.  The $3500 was the wages for March, and one day’s wages were deducted from that sum.  Ironically when he was asked several minutes before, he gave a different version and stated that the applicant started working on 1/4/2010.

15.  RW2 also failed to answer as to why the dismissal of the applicant on 1/5/2010 was not mentioned in his letter to the Labour Department dated 22/5/2010, only the applicant’s employee status was denied in the letter.  The termination of relationship should be crucial.  If the respondent had no relationship with the applicant at the time of injury, the respondent should not be liable at all.

16.  I do not accept the evidence of Ip Chun Ho (“RW3”), the third witness of the respondent.  He is the elder brother of RW1.  He described his position as an assistant clerk of the respondent.  But no one assigned him this job title.  He claimed that he was very junior and did some assisting work only, therefore his post was an assistant clerk.  I find that he gave himself such junior position because he wanted to play down his role and authority in the company.  He said that because of his low position, he had no authority to ask the applicant to take over the packaging department.  He had no authority to ask the applicant to continue working in May 2010.  He had no knowledge about the insurance terms of the respondent.  He said that he was never called the “son of the boss” (“太子爺”) except by the applicant.  But in paragraph 11 of the statement of RW1, RW1 described him as 太子爺 three times.  The post of RW1, his younger brother, was clerk at the material time.  It is unreasonable that RW3 was of an inferior position as an assistant clerk, even lower in hierarchy than his younger brother.

17.  RW3’s evidence was vague and he was forgetful of a lot of things, including whether he was in China or not on 3/5/2010.  In answering whether he was aware of the content of the letter dated 22/5/2010 from the respondent to the Labour Department, he was uncertain.  He failed to explain why the secretary Miss Tang knew that the applicant was no longer working for the respondent on 4/5/2010, but that the termination was not mentioned in the said letter to the Labour Department.

18.  RW3 claimed that the message he sent to the applicant was to negotiate a settlement on behalf of the contractor of the building work.  But in the message, he asked the applicant to make an offer “to the company”.  The name of the contractor was never mentioned.  He explained that he might be using an old model mobile phone which had a limitation of the number of words.  Therefore it was not written in the message.  I reject such an explanation. 

19.  Besides, RW3 still stuck to an earlier version by RW2 that travelling expenses would be paid to the applicant and the applicant started working since 1/4/2010.  However RW2 had already changed his evidence and admitted that no travelling expense had been paid to the applicant and the applicant started working on around 23/3/2010. RW3 claimed that the applicant only worked for 2 or 3 days a week and no deduction would be made if he did not work on a particular date.  However, his father admitted that one day’s wages were deducted because the applicant had applied for leave for one day to attend his father-in-law’s funeral.

20.  RW3 also said that he had never told the applicant about the problem of the insurance policy.  However, according to the applicant, RW3 told him that the Accident was not covered under the insurance policy as it occurred in the mainland.  It turned out that there was such a term in the insurance policy and the insurance company did eventually repudiate liability.

21.  I have no hesitation to reject the evidence of RW3.

Finding of facts

22.  I find that the applicant was engaged as a production manager.  He earned a fixed monthly salary of HK$ 15,000 and worked 6 days a week.  There was no financial risk.  He had fixed working hours and was deducted one day’s wages for taking leave to attend the funeral of his father- in-law.  He did not have any travelling allowance.

23.  He was asked to do some consultancy work and gave advice to the operation of the business.  On the date of injury, he was working for the respondent.  His injury was caused by the Accident arising out of and in the course of his employment with the respondent.

24.  As to the respondent’s allegation that his advice was not limited to production problems, therefore he was a “true” consultant and not a production manager.  I do not accept such argument.  The applicant did not limit his advice to production issues as he opined that other administrations of the factory would affect production in the end.

25.  I find that the consultancy report dated 6 April 2010 given by the applicant to RW3 was not in the e-mail form.  If it was in such form, the respondent or RW3 would make enquiry as to why the internal information of the respondent was sent to some unknown persons.  Furthermore, it is strange that RW3 did not try to find out who the sender and the recipient of the e-mail were.

Whether the subsequent injuries around 17/12/2010 and 11/8/2011 should be regarded as intervening event

26.  The applicant suffered two subsequent injuries.  The first one occurred on around 17/12/2010 while he was walking.  The second one occurred on 11/8/2011 while the applicant was using the toilet.  He had another surgery and was discharged on 23/8/2011.

27.  He had second course of physiotherapy at PWH since 15/9/2011.  Sick leaves were granted up to 14/9/2012.

28.  The applicant stated that he fell on both occasions because of his right leg weakness.

29.  Dr N Tang of the Prince of Wales Hospital stated in the medical report dated 30/11/2010 that the “patient reported there was residual right knee pain and weakness” and granted him sick leave till 24/12/2010.

30.  Dr N Tang in the medical report dated 28/9/2011 stated that “on 10/6/2011, x-ray showed the tibial plateau fracture healed but clinically there was residual anterior cruciate ligament instability”. 

31.  Paragraphs 52 and 53 of the Joint Medical Report by Dr Lam Kwong Chin and Dr Pun Kam Wa of Specialists in Orthopaedics and Traumatology dated 31/7/2013 (“the JMR”) stated as follows:-

“52. We note that he had another sprain injury to his right knee about 1 week before the follow–up on 24/12/10. We agree that there was a possibility that this incident had contributed to the ACL instability, but there is not enough information for us to verify.

  53. However, Dr Pun would like to raise yet another possibility that the residual right ACL instability on 10/6/2011 by Dr. Tang, which was in fact the underlying cause of Mr Yu’s first sprain injury in December 2010 and the subsequent domestic fall injury on 11/8/11, might actually persist in spite of previous surgical fracture fixation on 10/5/10.”

32.  There is no suggestion from the respondent that the applicant was negligent and cause the subsequent injuries.

33.  Dr Pun suggested a possibility that the injury in December 2010 was due to the residual right ACL instability which might persist in spite of previous surgical fracture fixation on 10/5/2010.

34.  Miss Leong, counsel for the respondent, submitted that thelegal principles for determining the question of causation was set out in Lee Kin-kai v Ocean Tramping Co Ltd [1991] 2 HKLR 232 at 235I-236C.

(1) Causation is essentially a matter for the judge not for the doctors.

(2) The law and medicine apply quite different standards.  In law there is sufficient causal connection if it is shown on the balance of probabilities that the accident was a substantially contributing cause of the injury.  A cause is sufficient; it need not be shown to be the sole cause.

(3) A judge when considering causation is not only entitled, he is bound, to use his common sense, to approach the question in the same way as would a juror.

35.  Applying the above principles, I find that the two subsequent injuries were substantially caused by the weakness of the leg and there was no negligence on the part of the applicant to break the causation.

36.  Such finding is consistent with the medical opinion that there was residue anterior cruciate ligament instability.

37.  Miss Leong submitted that assuming the applicant had already started working as a waiter/cashier in Mahjong company by 11/8/2011, the liability of the injury on 11/8/2011 should be on the new employer.  I reject such argument as on the date of injuries, the applicant were still on sick leave and had not fully recovered.

Whether the Paper Mills Formula should be applied in this case

38.  Mr Poon, counsel for the applicant, submitted that the Paper Mills Formula should apply and the loss of earning capacity (“LOEC”) is:-

HK$ 15,000 - HK$10,000/ HK$15,000 x 100% = 33.33%

The amount should be:-

HK$15,000 x 72 x 33.33% = HK$360,000

39.  Dr Tang of PWH reported that upon the admission on 5/5/2010, he was found to suffer from right tibial plateau fracture with severe comminution.  The operation was performed on 10/5/2010. He was transferred to Tai Po Hospital (“TPH”) for non –weight-bearing walking exercise on 21/5/2010 and discharged form TPH on 24/6/2010.

40.  According to Form 7 dated 12/12/2012, the applicant was assessed by the Employees’ Compensation Board on 28/11/2012 and was assessed to have a right leg fracture resulting in right knee pain, stiffness, weakness and laxity.  He suffered 15% LOEC permanently caused by the injury. 

41.  According to Form 9 dated 8/5/2013, the applicant’s original assessment on 28/11/2012 was reviewed on 24/4/2013.  His LOEC was increased to 18%.  Notice of appeal against such decision had been filed pursuant to section 18 of the ECO by both parties.  The applicant withdrew such notice of appeal at the trial.

42.  According to the Physiotherapy Report, at the last treatment session on 14/7/2011, “the applicant could walk in full –weight status without support in good stability”.

43.  The applicant fell at home on 11/8/2011.  He had another surgery and was discharged on 23/8/2011.

44.  He had second course of physiotherapy at PWH since 15/9/2011.  Sick leaves were granted up to 14/9/2012.

45.  According to the OT Rehabilitation Outcome Report dated 2/10/2011,

“the applicant totally failed in single leg standing, squatting, crouching, stairs walking, heel walking and tip toe walking”.

46.  According to the JMR on 31/7/2013, “on examination, the applicant could walk in a limping gait unaided, and had a better gait with a stick in left hand.  He could only half squat.  At the lower limbs, he had thinner right thigh muscle and had limited knee flexion (90 degree) and power.”  Dr Lam opined that the LOEC should be 10% if the accident on 11/8/2011 was included, while the Dr Pun opined that the applicant suffered a LOEC of 19%.

47.  Dr Lam’s opinion is that the applicant could still have jobs in the factory as a supervisor or machinery operator, but prolonged weight bearing or climbing is not advisable.  Dr Pun’s opinion is that the applicant may not be able to satisfy job requirements of his pre-injury position in the factory anymore as he can no longer tolerate prolonged standing, walking and climbing.

48.  The applicant had resumed work on 28/9/2012 as a waiter at a Mah-jong club and was earning $10,000 per month at the moment.

49.  In the First Schedule of ECO, a knee injury severe enough to end up in an ankylosis of knee joint in optimum position would be equivalent to 25% LOEC.

50.  The applicant had been unemployed for more than 6 months before the Accident; he had difficulties in finding jobs.  There was no advertisement placed by the respondent.  The applicant only sent his resume to the respondent to try his luck.  He was willing to accept a substantial decrease of wages from HK $25,000 to HK $15,000.  I am convinced that the job market in respect of the nature of work of the applicant was not good.  I accept Miss Leong’s submission that the employer should not be held liable for the lack of job opportunities in respect of the applicant’s industry in Hong Kong or the southern part of China.  It is not in dispute that the applicant did not return to his original job.  But I find that the reason for such failure was substantially due to the poor market conditions of the applicant’s industry.  Taking into account the opinion of Dr Lam, it is not certain that the applicant could not work in the supervisory or managerial level in a factory.

51.  Furthermore, Miss Leong submitted that in order to apply the Paper Mills Formula, it is necessary to have evidence of the wages of work which the applicant is now capable of doing but assessed at the date of the Accident.  In the absence of evidence to that effect, it is not a matter of which the Court is entitled to take judicial notice.  See Mak Tin-chun v Yeu Shing Construction Co Ltd [1991] 2 HKLR 460 at 465B.  (See also Lui Shun Yee v Golden Sea Harbour Restaurant Ltd DCEC No 1473 of 1004 (25/2/2009) and Lau Tat Wai v Ma Kim Chuen DCEC No 629 of 2012 (13/6/2013).

52.  In the absence of such evidence, the Paper Mills Formula could not and should not be applied.

53.  I agree to Miss Leong’s submission and there is no such evidence before me.  The amount of wages of the applicant in the sum of $10,000 was the wages in the year 2015.  I hold that the Paper Mills Formula should not be applied.

54.  I am of the view that 10% is on the low side.  The applicant’s injury was serious.  With reference to the 25% stated in the schedule to ECO and the 19% assessment of Dr Pun, I adopted the figure of 18% as stated in the Form 9.  The amount is calculated as follows:-

$15,000 x 18% x 72 = $194,400

55.  For the sick leave period, I find the period from 5/5/2010 to 14/9/2012 as stated in the Form 9 reasonable:-

$15,000 x 1/30 x 4/5 x 864 = $345,600

56.  The medical expenses were agreed at $11,757.

Conclusion

57.  I grant judgment for the applicant in the sum of HK$551,757, particulars of which are as follows:-

Compensation under ECO	Amount (HK$)
Section 9	194,400
Section 10	345,600
Section 10 A	11,757
Total:	551,757

58.  The applicant is entitled to interest accrued on the compensation at half judgment rate from the date of the Accident to the date of judgment and thereafter at judgment rate until payment.

59.  Costs should follow event, I grant an order nisi that the applicant should have the costs of this application, including any costs reserved, with certificate for counsel, to be taxed if not agreed.  The costs order nisi shall become absolute unless an application for variation is made within 14 days from the date hereof.  The applicant’s own costs to be taxed in accordance with legal aid regulations.

60.  I express my gratitude to counsel for their assistance.