LEUNG KAM WAH v. FUNG YUK CHING YVONNE t/a HONG KONG TRANSPORTATION CO

HCLA43/2006

  IN THE HIGH COURT OF THE

   HONG KONG SPECIAL ADMINISTRATIVE REGION

   COURT OF FIRST INSTANCE

    LABOUR TRIBUNAL APPEAL NO.43 OF 2006

    (ON APPEAL FROM LBTC 5676 OF 2005)

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J U D G M E N T

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A.  Introduction

1. By a Chinese agreement entitled “承判貨運業務協議” dated 1 September 2003 (“the Agreement”), the defendant engaged the claimant as a Mainland and Hong Kong cross-border lorry driver.  The engagement began on 24 July 2003 and terminated on 15 July 2005.  Thereafter, the claimant commenced proceedings in the Labour Tribunal against the defendant for various sums under the Employment Ordinance, Cap. 57.  The defendant denied liability, alleging that the claimant was not her employee. 

2. The Presiding Officer first found that the parties’ own view was that the engagement did not constitute an employment relationship.  However, he pointed out that the parties’ view was only one of the factors to be taken into account.  He then went on to look at other indicia and eventually found that the claimant was the defendant’s employee.  He therefore allowed the claim and awarded the claimant a total sum of HK$45,421.70. 

3. The defendant now appeals against liability only.  She raises four grounds of appeal, which really boil down to one contention only : the claimant was not her employee. 

B.  The approach

4. The modern approach to the question whether one person is another’s employee is to examine all the features of their relationship against the background of the indicia developed in the case-law with a view to deciding whether, as a matter of overall impression, the relationship is one of employment, bearing in mind the purpose for which the question is asked.  It involves a nuanced and not a mechanical approach : Poon Chau Nam v. Yim Siu Cheung (2007) 10 HKCFAR 156, per Riberio PJ at paragraph 18 at pp. 167F-168B. 

5. The indicia, as established by the case law, include the degree of control exercised by the one said to be 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; whether and how far he had an opportunity for profiting from sound management in the performance of his task; and the parties’ own views as to the relationship.  The list is not exhaustive.  No single factor is determinative and the weight of a given factor may vary from case to case. 

C.  The indicia of employment

6. In my view, the facts, which are either not disputed or capable of being seriously disputed, clearly shows that the claimant was the defendant’s employee. 

7. The defendant provided the lorry driven by the claimant.[1]  Despite the express provision of the Agreement,[2] the defendant was also responsible for the maintenance of the lorry. 

8. The defendant paid all the expenses pertaining to the business when the claimant performed his work.[3]  She even pre-paid the claimant a monthly cash allowance of HK$1,000 to cover expenses including pager, telephone, and parking.[4]  The defendant also paid for the registration fees for the claimant when he registered as her cross-border lorry driver. 

9. The defendant was solely responsible for the expenditure of her business.  The claimant did not make any contribution to or investment in her business. 

10. The claimant undertook no financial risk in the business.  Mr Chow, counsel for the defendant, submitted that by virtue of Clause 4 of the Agreement, if an accident happened while the claimant was performing his work, the claimant might be responsible for 24% of the damages caused, corresponding to the 24% profit that he shared under the Agreement.  In my view, Clause 4 deals with a very specific situation.  After all, accidents are not daily occurrences.  And in any event, the extent of the claimant’s liability is very limited.  It hardly amounts to any undertaking of real financial risk in the defendant’s business. 

11. The work of all lorry drivers engaged by the defendant, including the claimant, was arranged by her.  The claimant could not arrange any person to work on his behalf.  He had to perform the work arranged forthwith.[5]

12. The Presiding Officer found that the defendant exercised control as an employer over the claimant.  This finding is supportable by :

(a)  the claimant had to obtain the defendant’s instruction before crossing the border;

(b) the defendant from time to time issued work instructions to the claimant; and

(c) the claimant had to inform the defendant before he took leave. 

13. The claimant was entitled to 24% of the fees collected by the defendant from the clients after deducting all the necessary expenses.[6]  However, he did not take part in the defendant’s negotiations with clients about the fees charged by her.  In fact, he did not know how much the defendant was going to charge or had charged the clients.  He did not if the amounts set out in the accounts for calculating the sums payable to him were the actual fees charged by her.

14. Under Clause 6 of the Agreement, the claimant was entitled to receive orders on his own and could use the defendant’s lorry with her consent but had to pay 74% of the fees received to her.  Mr Chow submitted that this is inconsistent with employment.  However, despite the express provision, the reality is that throughout the engagement, the work given to claimant by the defendant was so substantial that it took up the bulk of his time.  He could hardly receive any order on his own.  And it is not in dispute that in fact he had never taken up any private order, as it were.  Clause 6 is, in my view, of little significance in reality. 

15. Mr Chow submitted that under Clause 5 of the Agreement, the claimant was responsible for his own insurance as a driver.  The claimant was also responsible for the expense of the health card and driving licence in the Mainland.  These are his own operational expenses.  I disagree.  In my view, they are nothing more than the expenses that the claimant had to incur in order to qualify as a Mainland Hong Kong cross-border lorry driver. 

16. Mr Chow referred to a calling card that the claimant showed to the defendant at the time of interview in 2002, purportedly showing that he ran his own transport company.  The claimant’s evidence is that that company had already ceased business at the time and he used the calling card for convenience.  His evidence that there was no business registration certificate for that company was not challenged.  And the claimant entered into the Agreement in his personal capacity.  The Presiding Officer did not make any finding on this calling card.  But I do not think it matters.  For when this card is considered with the whole picture in mind, it does not displace the overall objective impression that the parties did have an employer-employee relationship. 

17. Finally, there were certain arrangements that were, prima facie, inconsistent with an employment relationship.  The defendant did not make any MPF contribution.  Sums paid to the claimant were described by the defendant as payments to a non-employee in tax returns.  The defendant did not pay the claimant his shares of the fees within 7 days after the same were due, which should have been the case if they were wages.  The defendant did not give the claimant any annual leave or statutory holiday.  But as rightly pointed out by the Presiding Officer, these arrangements were all explicable by the parties’ subjective view that the engagement did not amount to an employment relationship.  It did not sufficiently alter the objective picture, painted by all the indicia, of an employment relationship between the parties.  This brings me to the main argument relied on by Mr Chow.  

D.  The parties’ agreement as to their relationship

18. Mr Chow strongly relied on the expressed agreement by the parties as stipulated in Clause 2 of the Agreement that the claimant was not the defendant’s employee.  He submitted that the parties entered into the Agreement in arms length voluntarily, there being no evidence to show that the claimant was coerced, threatened or tricked at the time.  Since it is not a sham, the Agreement itself is the best material from which to gather the true relationship between the parties : see Julian Smith v. Reliance Water Controls Limited [2003] EWCA iv 115, per Scott Paker LJ at paragraph 11.  Mr Chow effectively contended that the parties’ view as to their relationship should be accorded the most significant if not the determinative weight in determining the parties’ relationship. 

19. It is well settled that it is for the court and not the parties to evaluate the facts and determine their true legal relationship : Chan Kwok Kin v. Mok Kwan Hing & Another [1991] 1 HKLR 631, per Clough JA at p. 636A-B.  Thus the parties’ own view, even agreement, as to the relationship is but one factor that the court takes into account. 

20. Where the relationship is highly ambiguous and it is not at all clear that the person claims to be an employee is in fact an employee, the parties’ express agreement as to the status of that person may be important : Massey v. Crown Life Insurance Co. [1978] 2 All ER 576, per Lord Denning at p. 580a-b.  However, if there is objectively an employer-employee relationship, the express stipulation of the parties cannot prevail : Poon Chau Nam, per Ribeiro PJ at paragraph 57.

21. Here, contrary to Mr Chow’s submission, there is no ambiguity.  The objective evidence clearly established that the claimant was the defendant’s employee.  The parties’ express stipulation does not carry such heavy a weight as he has contended. 

22. The Julian Smith case offers little assistance to the defendant.  On a fair reading of the judgment, I do not think Lord Scott Baker had laid down a proposition to the effect that whenever an agreement is not a sham, then it is the best material to determine the parties’ relationship.  The observation in paragraph 11 of his judgment is confined to the facts of that case only.  For there are cases where the agreement in question was not a sham, such as where the parties genuinely but mistakenly believed that no employment relationship existed between them, the court nevertheless came to a different view after an objective evaluation of all the circumstances.

E.  Conclusion

23. For the above reasons, this appeal is dismissed.

24. On costs, counsel agreed that they should follow the event.  I therefore order that the claimant shall have the costs of the appeal, including all costs reserved, to be taxed if not agreed.  The claimant’s own costs are to be taxed in accordance with the Legal Aid Regulations.

[1]   As per Clause 4 of the Agreement.

[2]   Clause 4 of the Agreement.

[3]   As per Clause 3 of the Agreement.

[4]   As per Clause 3 of the Agreement.  The evidence shows that the allowance was subsequently increased to HK$1,500.

[5]   As per Clause 6 of the Agreement.

[6] As per Clause 1 of the Agreement.