WONG KAI FUN v. SUN ON LOGISTICS LTD AND ANOTHER

DCEC 5/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 5 OF 2013

-------------------------

-------------------------
JUDGMENT
-------------------------

BACKGROUND

1. Mr Wong, the applicant, was at the material time a container truck driver, and he claims that Sun On Logistics Limited (“Sun On”), the 1^st respondent, was his employer.  There is no dispute that Mr Wong suffered personal injuries in a work-related accident which occurred on 27 March 2012 after he fell from a height of about 1.5 meters from a container. He claims compensation pursuant to the Employees’ Compensation Ordinance (“Ordinance”).

2. Sun On’s participation to these proceedings was only limited to its filing of an answer, a list of earnings, a list of documents and an appearance by its director in the first directions hearing. In the answer, Sun On denies that Mr Wong was its employee and asserts that he was an independent contractor.  It further asserts that Mr Wong had flexible working hours and that Mr Wong had employed third parties to do Sun On’s outsourced delivery work.

3. As a result of Sun On having taken no further steps in the proceedings after the filing of a list of documents on 19 July 2013, the Employees’ Compensation Assistance Fund Board (“Board”) later applied to intervene and was, by an order dated 4 March 2015, allowed to be joined in these proceedings as the 2^nd respondent.

4. In its answer, the Board admits the accident but puts Mr Wong to strict proof of his assertion of having been Sun On’s employee and the amount of compensation that he should receive under the Ordinance.

5. At the trial, Sun On was absent. After having been satisfied that Sun On had been served with the Notice of Hearing given by the court, I proceeded to the hearing of the trial in its absence.

Issues

6. The issues which arose for the determination at trial are :-

(1) Was Mr Wong an employee of Sun On, or an independent contractor carrying on business on his own account? If he was an employee,

(2) The amount of compensation payable under ss. 9, 10 and 10A of the Ordinance.

WAS MR Wong an employee of Sun On, or an independent contractor carrying on business on his own account?

Legal Principles

7. There is no dispute between the parties that in order to determine an employer-employee relationship, a modern approach as espoused in the case of Poon Chau Nam v Yim Siu Cheung [2007] 2 HKC 135 – in which Ribeiro PJ, in his leading judgment, has considered and followed the approach approved by the English Court of Appeal in Hall v Lorimer [1992] 1 WLR 939 – is to be adopted. This approach places an emphasis on many different aspects of an employee’s work activity that includes an examination of all the features of a working relationship against the background of the indicia 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 thus requires an application of a nuanced and not a mechanical approach by evaluating an accumulation of details of different weight or importance before one should paint a picture of an overall effect of a situation. Next, the overall effect should be appreciated by standing back from the detailed picture which has been painted by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole: See Poon Chau Nam [2007] 2 HKC 135 at 144G-145C, where a passage stated by Mummery J in Hall [1992] 1 WLR 939 at 944 was also quoted. 

8. I will apply these principles to the analysis of Mr Wong’s working relationship with Sun On.

Features of the working relationship

9. Before trial, a witness statement of a Mr Wong Mun Ming (“Intended Witness”) was filed on behalf of Mr Wong, but I was told that due to personal reasons, he could not attend the trial to testify.  Thus, Mr Wong was the only witness in these proceedings. 

10. According to Mr Wong, he had been a container truck driver for some 20 years since about 1993 until the accident. Since 10 September 2011, through the introduction of a friend, he started working for Sun On as a container truck driver because of the guaranteed monthly basic salary of $15,000 it would pay.  Although he had signed some papers at the interview, he could not however recall whether or not he had signed any employment contract.

11. Mr Wong stated in evidence that his monthly wages were paid-  apart from three occasions to be referred to in §15 below-  in cash in usually 3 instalments with his basic salary of $15,000 to be paid in two instalments of $7,500 each.  The balance of Mr Wong’s remaining wages would be paid to him the following month after they had been calculated. The calculations, Mr Wong stated, were based on the rates the parties had agreed in respect of the type of deliveries that he did.  For example, $120 for delivering an empty container and $150 for a loaded one, $100 for delivering in Yuen Long area; and $280 for quarantine inspection.

12. Mr Wong also said that, for the purpose of calculating his earnings, he was required to record in two documents the details of his deliveries,  a “Driver’s Work List” (司機工作表) (“Driver’s List”) and a “Daily Transportation List” (拖運日報表) (“Transportation List”). 

13. The information Mr Wong was required to record in a Driver’s List included the dates (of delivery), clients’ name,  containers’ numbers,  types of containers, places or companies from and to which containers were collected and delivered, expenses incurred for the deliveries – which completed information would enable Sun On to calculate the total amount of Mr Wong’s wages. Mr Wong further said that since Sun On was responsible for the payment of the expenses incurred in the course of his delivery, an amount of around $2,000 to $3,000 would usually be advanced to him to meet these expenses until such sum had been almost depleted before another advance payment of a similar amount would be paid to him. These advance payments, Mr Wong said, would also be recorded in a Driver’s List. 

14. The Transportation List was to record the expenses incurred for the deliveries. However, Mr Wong had also recorded in a Transportation List total wages that he had calculated that he had earned each day by summating all the deliveries that he had done according to the information he had recorded in the Driver’s List.

15. The three occasions that his wages had not been paid in cash were the payments of $20,690 on 13 December 2011, $21,300 on 16 Jan 2012 and $14,000 on 11 April 2012, which were made by Sun On transferring them into his wife’s Hang Seng Bank account. It was originally mentioned in Mr Wong’s witness statement that there were only two occasions that payments had been made in this way. The one additional occasion was later referred to in Mr Wong’s testimony when he discovered from the record that he found in his handwritten notebook that was later produced in court as Exhibit “A2” (“Notebook”).  Mr Wong further explained that the reason why his wife’s account had been used instead of his was because he had, in a hurry, mistakenly given to Miss Chan of Sun On his wife’s bank account when he was asked to provide his bank account for payment of wages.  He stated that his average monthly wages were in the sum of $28,312.

16. Mr Wong also testified under cross-examination by Miss Leong, counsel for the Board, that neither Sun On nor himself had made any contributions to the Mandatory Provident Fund scheme (“MPF”) during his 6-month’s employment by Sun On although the same Miss Chan had mentioned during the job interview that Sun On would arrange payment of the MPF contributions. Mr Wong further said that whenever he inquired about it, he was simply told that Sun On were in the process of arranging for such payment.

17. Mr Wong also disclosed under cross-examination that no tax return in respect of his earnings that he received from Sun On had been filed because, he believed, based on the filing of such documents by his former employer, “保捷倉運有限公司” (“Former Employer”), that the filing was an employer’s responsibility. Referring to the copies of Employer’s Return of Remuneration filed by the Former Employer for the period between 19 February 2010 and 28 July 2011 produced as Exhibit “A1”, Mr Wong emphasized that his status had been described as an employee in these document when he was at that time also engaged by the Former Employer as a truck driver doing a similar type of job. He demurred that there was no reason for him in wanting to change an arrangement of hitherto being an employee to that of an independent contractor when he shifted to work for another company.

18. Mr Wong also stated in his witness statement that he did not need to bring any tools. The truck (“Truck”), PY4388, that he had been designated to drive for work was owned by Sun On. (The documents in fact show that a shareholder of Sun On owned the Truck at the material time.)  Sun On was also responsible for the payment of all expenses incurred during the deliveries including maintenance and expenses of the Truck such as parking fees, diesel fuel supplied by a company and even a traffic penalty ticket in relation to Mr Wong’s driving offence committed when driving the Truck.

19. Mr Wong had adduced in the proceedings not only the Driver’s Lists and the Transportation Lists for some of the months, but had disclosed a number of documents such as shipping documents and various receipts for the miscellaneous expenses that Miss Leong suggested belonged to Sun On.  Mr Wong’s explanation was that the Driver’s Lists were photocopies that he had made and kept before they were submitted to Sun On for calculating his wages. The other documents had been left in the Truck before the accident. After the injury when he was in hospital, he later learnt that Sun On had engaged the Intended Witness to drive the Truck. As he thought these documents might be needed in the intended compensation proceedings, he therefore asked the Intended Witness to remove the documents from the Truck for his safekeeping.

20. Although Mr Wong’s working hours had not been expressly stipulated, his daily routine required him to arrive at Sun On’s warehouse at Tuen Mun of around 7:30 am in order to get the Truck before receiving assignments and instructions from Sun On in relation to the deliveries to be done for the day.  He worked long hours and would only finish at around 10 pm.  He did not have any fixed holidays but his day off was to be specified by Sun On. He worked about 27 to 28 days a month.

Analysis of the relationship

21. Mr Wong gave evidence in a straight forward manner.  I find him a credible witness, and accept his evidence.

22. On the evidence, I find that Mr Wong was not left on his own in deciding how he should carry out his delivery work but Sun On decided which, if any, deliveries should be assigned to Mr Wong. He was not free to work for another company but solely worked for Sun On with leave days to be subject to the arrangement of Sun On.  Mr Wong was not free to decide his working hours because the work demand required him to pick up the Truck every morning at 7:30 am from Sun On’s warehouse, and he did not finish work until about 10 pm at night. There is also no evidence that he had hired anyone to help as Sun On seems to be alleging in its answer.

23. He did not deliver containers in his own tools but used Sun On’s Truck. All the expenses incurred in the course of his delivery work were borne by Sun On, which even paid Mr Wong’s penalty for the traffic offence.  Mr Wong worked without bearing any financial risk, investment or management obligations and reaped no financial rewards beyond his monthly basic income of $15,000 and the earnings based on the actual deliveries that he carried out.

24. I find that the payment of his earnings by cash is wholly consistent with - as evidenced by the records shown in the various Driver’s Lists and also records that Mr Wong made in the Notebook that he later produced in court - the cash advancements Sun On paid to Mr Wong to defray miscellaneous expenses incurred in the course of the delivery. I do not regard the three bank transfers into his wife’s account as having any bearing on Sun On’s usual method of paying Mr Wong earnings by cash.

25. It is now recognized that the features of the parties’ working relationship, according to the modern approach adopted in Poon Chau Nam, should be examined against the background of the indicia of employment to determine whether, as matter of overall impression, the relationship was one of employment. Not all the details in the picture are of equal weight or importance in any given situation.  Thus, I should examine whether other features emerging in the evidence may indicate that Mr Wong was engaged as an independent contractor as opposed to an employee.

26. One of such contrary indicia is the alleged failure on the part of Sun On and Mr Wong in making MPF contributions. Even if I should accept it is indeed the case that Sun On was in breach of the statutory requirement in having failed to make the MPF contributions, does it alter the overall picture that Mr Wong was working under a contract of employment?  I do not consider much weight should be attached to this for firstly there is no connection between the absence of an employment relationship with a failure in making MPF contributions. Secondly, equally significant, is the absence of evidence that Mr Wong had made his own arrangement for an MPF scheme as a self-employed person, which may provide contrary indicia pointing to his self-employed status.

27. A mention should also be made of Miss Leong’s suggestion in relation to the absence of a filing of any tax return in respect of Mr Wong’s earnings. For the same reasons given in respect to the MPF contributions, I do not regard that this feature carries sufficient weight to affect the overall evaluation of the relationship between Mr Wong and Sun On. It is noted in particularly that Mr Wong, before working for Sun On, had indeed been engaged, as evidenced by Exhibit “A1” referred to in §17 above, as an employee rather than as an independent contractor when he worked as a container truck driver for the Former Employer.  Mr Wong had also forcefully asserted in his testimony that there was no reason for him to have changed his status as an employee with the Former Employer to an independent contractor when he started working for Sun On whilst he was in both cases engaged in the same occupation of being a container truck driver. This, in my view, may be a pointer to the fact that Mr Wong has regarded himself as an employee at the material time.

28. One final observation that needs to be briefly mentioned is the suggestion made by Miss Leong, counsel for the Board, in her closing submissions in relation to the removal of the documents belonging to Sun On. It has been suggested that since Mr Wong was able to ask the Intended Witness to remove those documents, he was clearly dealing with those documents as if the documents belonged to him. Further, the fact that the Intended Witness had been assigned as a replacement driver of the Truck and was able to remove those documents under Mr Wong’s instruction, it seemed to indicate, Miss Leong submitted, that the Intended Witness was the “third party” Mr Wong had “outsourced” as Sun On have contended in their answer.

29. On Mr Wong’s evidence, which I accept, the Intended Witness was hired by Sun On to replace him since Mr Wong was no longer able to return to work after the accident. There is no evidence that the Intended Witness was hired by Mr Wong. I do not regard the supposedly improper removal of the documents belonging to Sun On as equating to the control by Mr Wong over the documents.

30. In conclusion, having objectively viewed the evidence as a whole and applied the indicia of employment evaluated in the foregoing, I form an overall impression that the features of the working relationship of the parties resoundingly point to an employer-employee relationship.

31. In the circumstances, Mr Wong was Sun On’s employee and Sun On is liable to pay compensation to him.

SECTION 9 COMPENSATION

32. The main issue that arises for determination under this item of compensation is the appropriate percentage of the loss of earning capacity to be applied for assessing Mr Wong’s compensation for the permanent partial incapacity.

33. Unlike most of the injured employees in the employees’ compensation proceedings where they would be examined by the relevant Employees’ Compensation Assessment Board for assessing their loss of earning capacity, Mr Wong, quite unusually, did not have such an examination and assessment.  

34. Thus, the starting point for the assessment will be the examination of the opinions set out in the three medical reports of the medical specialists - Dr Kan Yiu Ting (“Dr Kan”), the neurosurgeon, Dr Peter Ho (“Dr Ho”), the psychiatrist and Dr Lo Siu Sing (“Dr Lo”), the ENT specialist - whose reports are adduced as evidence and are not challenged. I accept the medical findings and opinions set out in these reports.

35. It is not in dispute that Mr Wong suffered a concussion, hemorrhage in the brain, and fractured temporal bones from the accident. He was hospitalized for about 14 days and granted sick leave from the date of the accident on 27 March 2012 until 18 July 2014, a total of 27.7 months.

36. Dr Lo examined Mr Wong on 21 November 2013. In his report, he opined that Mr Wong suffered no significant hearing loss and the left tinnitus did not affect speech discrimination with associated disability. He further opined that 2 weeks would have been a reasonable period of sick leave for the ENT-related symptoms.

37. Dr Kan examined Mr Wong on 13 December 2013 and opined that Mr Wong had suffered a “very severe” head injury with significant psychomotor impairments, which various impairments on the whole person was found to have been aggregated at 9% with cognitive impairment, symptoms of headache, giddiness and tinnitus respectively assessed at 5%, 1% and 3% of the whole person.  Dr Kan opined that Mr Wong would be unsuitable to work as a heavy vehicle driver because of the giddy spells.  Dr Kan concluded that Mr Wong’s neurological status had reached a stage where no further neurosurgical and ENT treatments would be required. Dr Kan opined that Mr Wong had suffered a 20% of loss of earning capacity.

38. Dr Ho examined Mr Wong on 19 December 2013 and found that Mr Wong had suffered from an adjustment disorder with mixed anxiety and depressive reaction. However, Dr Ho opined that the impairment on Mr Wong’s daily functioning is in the mild range and Mr Wong was still able to perform most daily activities. Although Mr Wong reported to have experienced symptoms of organic hallucinations, Dr Ho did not find that Mr Wong’s daily functioning and concentration had been significantly repaired. He opined that Mr Wong’s working capacity as a container driver would be likely affected by symptoms arising from his neurological condition rather than his psychiatric condition. He opined that a period of 6 to 9 months of sick leave would have been reasonable purely from a psychiatric perspective and that Mr Wong had suffered 3% impairment of the whole person and 5% loss of earning capacity.

39. It is not in disputethat Mr Wong was 45 years old at the time of the accident, and had received education up to Form 5.  He had previously worked as a messenger, a courier and a store keeper, but had worked as a container truck driver in the 20 years before the accident. According to Mr Wong, after his sick leave expired in July 2014, he attended a 2-day course in October 2014 to enable him to work as a security guard. In around February 2015, he started looking for employment and found his present job as a security guard in which he has been working since March 2015, earning a salary together with bonus of about $7,840 a month

40. Mr Wong’s injury, being a head injury, is, undisputedly a non scheduled injury (i.e. an injury not specified in the First Schedule of the Ordinance). Thus, the provisions of s.9 (1) (b) of the Ordinance will govern the assessment of the loss of earning capacity, which is, by assessing the percentage of the compensation which would have been payable in the case of permanent total incapacity “as is proportionate to the loss of earning capacity permanently caused by the injury in any employment which the employee was capable of undertaking at that time…”. The relevant consideration is not the seriousness of the injuries but the effect of the injuries on the earning ability of an employee. The medical opinions are useful but ultimately it is for the court to assess the percentage of loss of earning capacity and to come to its own conclusion.

41. Section 9 (1) (b) however is also subject to sub-s (1A) that provides that the amount of compensation “shall be such percentage of the compensation which would have been payable in case of permanent total incapacity as is proportionate to the loss of earning capacity permanently caused by the injury or injuries in any employment which, having regard to those special circumstances, the employee was capable of undertaking at that time”.

42. Based on the above evidence, Mr Lin, counsel for Mr Wong, submitted that none of the percentages of loss of earning capacity opined by the specialists should be adopted in assessing the loss of earning capacity in this case for such percentages are limited to Mr Wong’s medical disability and they fail to accurately and fairly reflect the true percentage of loss Mr Wong has suffered.  Mr Lin, though he did not expressly refer to s.9 (1A) of the Ordinance in his opening, he had later referred to the existence of special circumstances as provided in s.9 (1A) and submitted that these facts would justify the use of the formula (“Paper Mills Formula” ) propounded  in Hong Kong Paper Mills Ltd v Chan Hin Wu [1981] HKLR 556 as modified by Lui Kwong Yan v Shui Hing Decoration Works & Anor [1993] 1 HKLR 168  in calculating a higher percentage of loss of earning capacity.

43. Miss Leong however contended that the Paper Mills Formula should not be adopted in the light of the percentages of loss of earning capacity  ranging from the highest of 20% opined by Dr Kan to 3% to  5%  opined by Dr  Ho and even a nil percentage loss by Dr Lo. Instead, the adoption of a median figure, she suggested, of the combined loss of earning capacity of 23% to 25%, which is 24%, would be more appropriate.

44. On the evidence, I accept that Mr Wong has suffered, according to Dr Kan’s report, a neurological impairment of giddy spells that has prevented Mr Wong from returning to his pre-accident occupation as a container truck driver. Further, based on Dr Kan’s opinion that Mr Wong’s neurological status had reached a stage where no further treatment would be needed, I consider that Mr Wong has suffered a partial incapacity of a permanent nature within the definition in s.3 of the Ordinance, which defines such incapacity “as reduces his earning capacity, present or future, in any employment which he was capable of undertaking at that time”.

45. This leads me to a consideration of what employment Mr Wong is capable of undertaking despite his incapacity. Although I have accepted that Mr Wong has been unable to continue working as a container truck driver since the accident, I consider that – given his educational qualification of Form 5 as well as his previous working experience as a messenger and courier - he should be able to earn more from an alternative field of employment as a messenger, courier, and a general office clerk than from his present occupation as a watchman, as Miss Leong has, correctly, suggested.

46. How much would Mr Wong have been able to earn in this field of employment at the time of the accident in March 2012?  Mr Wong should have been able to earn a reduced wage - according to the wage statistics of March 2012 in respect of the wages of messenger/office assistant and general office clerk - in the range of  $9,484 (for messenger/office assistance)  to $11,916 (for general office clerk).

47. The median wage of $10,700 (by averaging $9,484 and $11,916) would appear to be Mr Wong’s reduced income after the accident. This reduced wage, when compared to the wages Mr Wong earned before the accident - be they $28,086 as Miss Leong suggested or $28,312 as Mr Wong asserted – shows that Mr Wong had suffered a rather substantial reduction of wages.

48. It should be noted that one should caution against equating actual earnings, whether in alternative employment as at the date of the accident or in the relevant employment at