MOHAMMAD MUNIR v. YAU KEI TAK AND ANOTHER

DCEC 251/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 251 OF 2006

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JUDGMENT

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The Claim

1.  The Applicant claims against the 1st Respondent and the 2nd Respondent for employees' compensation under the Employees' Compensation Ordinance, Cap. 282 ("the Ordinance"). The Applicant's case is that the 1st Respondent is his direct employer, that the 1st Respondent is the sub-contractor of the 2nd Respondent and hence the 2nd Respondent is also liable to him under Section 24 of the Ordinance as the principal contractor of the 1st Respondent.

2. The Applicant also appeals against the assessment made by the Ordinary Board of Assessment under a Certificate (Form 7) dated 15 September 2005.

3. It is not in dispute that on 30 April 2004, the Applicant had suffered personal injury by accident while carrying out demolition work at House 26B, Regalia Bay, 88 Wong Ma Kok Road, Stanley, Hong Kong ("the Regalia Bay House"). The Regalia Bay House was then under renovation and the Applicant was required to carry out demolition works there ("the Regalia Bay works").

4.  The 1st Respondent Mr. Yau Kei Tak was present in person during the trial. He took issue mainly on the question of liability. The primary contention raised by the 1st Respondent is that the Applicant was engaged as an independent contractor. In his homemade Answer, the 1st Respondent has not made any admission that he had engaged the Applicant as his independent contractor although he described the 2nd Respondent as the principal contractor of the Applicant. The Answer of the 1st Respondent also contains an averment that the 1st Respondent had acted as the agent of the 2nd Respondent to negotiate "a renovation contract with the Applicant for the Applicant as an independent contractor to carry out various renovation works" at the Regalia Bay House. I consider that the Applicant would have to meet the 1st Respondent's contention that there was no privity of contract between him and the 1st Respondent. It is still a live issue at trial.

5. The 1st Respondent is of course not entitled to make any admission on behalf of the 2nd Respondent.

6.  The 2nd Respondent Unison Contracting Limited ("Unison") has never taken part in these proceedings and was absent during the trial.

Matters not in dispute

7.  Certain matters are not in dispute and I find the facts accordingly.

8. As to the accident, as noted above, i t is not in dispute that on 30 April 2004, the Applicant suffered personal injury by accident out of and in the course of his work at the Regalia Bay House. The Regalia Bay House was under renovation at the time. The Applicant was doing demolition work there.

9. The Applicant was using a large pneumatic drill to remove the tiles from a wall. A piece of marble slab suddenly broke away from the wall. It fell on and cut the Applicant's right wrist. An ambulance was summoned to the scene and the Applicant was taken to the Pamela Youde Nethersole Eastern Hospital for treatment. 

10. As to other background matters, i t is essentially not in dispute that the Applicant first became acquainted with the 1st Respondent while the Applicant was working as a labourer in a construction site at the Lo Wu KCR station extension. The Applicant was then working as an employee for a contractor there. The 1st Respondent was also carrying out works there as a contractor. The Applicant and the 1st Respondent met and exchanged telephone numbers. Later on, when the Applicant's work with that employer was finished, the Applicant worked for the 1st Respondent as the latter's employee. The 1st Respondent employed the Applicant as a casual labourer on a daily rate basis at the rate of $450 per day. The Applicant started working for the 1st Respondent sometime in early March 2004 and worked for about 15 days in total in a period of about a month.

11.  It is also not in dispute that after the Applicant's work at Lo Wu was finished, the Applicant had worked for the 1st Respondent as a casual labourer on a daily rate basis before the Applicant was engaged to work at the Regalia Bay House. The evidence of both the Applicant and the 1st Respondent was not very precise on this aspect and there was a minor conflict of evidence between them. Of these, I would note that despite the conflict in details, in substance there is no dispute that the Applicant had worked for the 1st Respondent as the latter's casual labourer after the Lo Wu works were finished and before the commencement of the Regalia Bay works. It is also not in dispute that there was agreement between the Applicant and the 1st Respondent that the 1st Respondent would pay the Applicant daily wages of $450 for his work.

12. The Regalia Bay House was owned by one Sulton Enterprises Development Limited.

13.  Sulton Enterprises Development Limited had engaged Unison as its contractor to execute renovation works to the Regalia Bay House.

14.  The 1st Respondent and one Mr. Lee Chi Kong were directors and shareholders of A & P (Hong Kong) Engineering Co. Ltd ("APEC").

15.  Mr. Lee Chi Kong is also a director and shareholder of Unison.

Witnesses

16.  The Applicant and the 1st Respondent had both testified. No other witness was called.

Contract of Service or Contract for Service

17. One of the issues at trial is the nature of the relationship (if any) between the Applicant and the 1st Respondent in relation to the Regalia Bay works. In dealing with questions of this nature, the Courts have in the past referred to one helpful article in the Hong Kong Law Journal (1972) Vol.2 No. 2 by Mr. John Rear. There the writer observes:

“Because a person is a “casual labourer” it does not follow that he is working under a contract of service, despite the employer’s control of the manner of the work.  Considering the factors listed above, we may in the building trade observe many of the marks of the self-employed, particularly in the case of the skilled craftsmen who supply their own tools and of whom it is unrealistic to say that the employer may control him by telling him the manner in which he should exercise his skills.  These men hold themselves out for hire and wait to be contacted.  Many are hired not by the contractor of his foreman but indirectly through the offices of a union official.  The employer has no right to demand the man’s exclusive services and frequently he is engaged not generally but for a particular task.  The work is either on a job or a daily basis; a man turns up or stays away as mood and financial necessity take him.

Where there are informal gangs, as there are, for example, in the painting trade, further problems arise.  Where a contractor engages A on the basis that A brings along others to assist him, and A seeks out B and C with whom he regularly teams up, who is the employer of A, B and C? Atiyah has pointed out that in the gang situation there are four distinct possibilities:

(1)     the leader of the gang may be a foreman, in which case all the members of the gang will be treated as employed by the employer of the foreman, who is, in this case, a superior servant with authority to engage inferior servants;

(2)     the leader of the gang may be a servant and the workmen may be sub-servants employed by the leader but not servants of the over-all employer;

(3)     the leader of the gang may be an independent contractor and the members of the gang may be his servants, employed by him under contracts of service;

(4)     the leader of the gang and the men may all be independent contractors vis-à-vis the employer, in which case they may be partners inter se, or there may be no contractual relationship between themselves.”

18. The Courts have also referred to academic authorities on the subject, in particular, Chitty on Contract, Vol. 2, 29th Edition . Paragraphs 39-010 to 39-028 of Chitty supra contain a discussion on the factors for identifying a contract of employment. Paragraph 39-010 of Chitty supra lists out a number of relevant factors, as follows:

“The factors to be considered.  Recent case law suggests that the factors relevant to the process of identifying a contract of employment may usefully be listed as follows:

(1)     the degree of control exercised by the employer;

(2)     whether the worker’s interest in the relationship involved any prospect of profit or risk of loss;

(3)     whether the worker was properly regarded as part of the employer’s organisation;

(4)     whether the worker was carrying on business on his own account or carrying on the business of the employer;

(5)     the provision of equipment;

(6)     the incidence of tax and national insurance;

(7)     the parties’ own view of their relationship;

(8)     the traditional structure of the trade or profession concerned and the arrangements within it."

19.  Paragraph 39-026 of Chitty supra contains the following discourse:

"Labour-only sub-contracting is the practice by which a main contractor on a project secures the labour he requires by contracting with one or more sub-contractors.  It is normally the intention that there will be no contract of employment involved in this sub-contracting relationship.  Labour-only sub-contracting has become widespread in the building industry.  In relation to that industry, successive Finance Acts have made provision for deduction in respect of income tax to be made by main contractors from any payments to labour-only sub-contractors unless the sub-contractor holds a certificate of exemption.  Various different kinds of labour-only sub-contracting arrangement are found in practice, and their legal effects are a matter of difficulty.  There are two main types of sub-contracting arrangement: the two-party arrangement where the worker contracts directly with the main contractor, and the three-party arrangement where there is an intermediary, such as a gang-leader or a sub-contracting company, who contracts with the main contractor to provide labour and with the worker to obtain labour.  In any given case, there may be room for argument about whether the arrangement is of the two-party or three-party type.  If the arrangement is of the two-party type, the contract will normally purport to be a contract for services and not a contract of employment.  The courts have sometimes found that there is indeed no contract of employment in such cases; but the arrangement may be held to fall within statutes dealing with the employment relationship and has even been classified as a true contract of service despite the parties’ clear intention that it should be regarded as a contract for services.  A variant upon the two-party type of arrangement is that whereby the worker contracts as one of a firm of partners; in this case the existence of a contract of employment is clearly negated.  If the labour-only sub-contracting arrangement is held to be of the three-party type, more complex questions arise. The contract between the main contractor and the intermediate sub-contractor will normally not be a contract of employment.  The contract between the intermediate sub-contractor and the worker may be a contract of employment, or a contract for services.  An important decision in favour of the contract of employment analysis was that of the Privy Council on appeal in Lee-Ting Sang v Chung Chi-Keung.  It should follow from the three-party classification of the arrangement that there is no contract (of employment or for services) between the main contractor and the worker; but there may be held to be an employment relationship between them for statutory purposes.  Some statutes have expressly deemed the worker an employee of the main contractor.”

20.  There is an abundance of judicial authorities on the above question. These would include, for example, Market Investigations Ltd. v. Minister of Social Security, (1969) 2 Q.B. 173, Wong Man Luen v. Hong Kong Wah Tung Stevedore Company, CACV 17/1971, 25 October 1971, Wong Po Sin, sister of Wong Man Shun (deceased) v. New Universal Paper Co. Ltd.,  CACV 15/1972,   Lee Ting Sang v. Chung Chi Keung & Another, (1992) 2 W.L.R. 1173, Kent Knitters Ltd. v. Lu Yat Sang & Others, Labour Tribunal Appeal No. 18 of 1991, 18 November 1991, Poon Siu Kuen & Others v. Pine Corporations Ltd., HCLA 71/2001, 10 July 2004, and also the very recent decision of Poon Chau Nam v. Yim Siu Cheung trading as Yat Cheung Airconditioning & Electric Co., FACV No. 14 of 2006, 13 March 2007, which also concerns casual labourers.

Credibility of witnesses

21.  The credibility of the Applicant and the 1st Respondent must be assessed. I do not consider that it is necessarily a simple matter of choosing between the Applicant's version and the 1st Respondent's version. In many cases, the task of the Court may be a simple matter of deciding whether to prefer one version of facts to another. There are few exceptions to the foregoing but there are nonetheless exceptions. In the present case before me, I consider that I would have to decide, for example, whether neither the version of facts put forward by the Applicant nor the version of facts put forward by the Defendant has attained the required standard of proof, which is on a balance of probabilities. On rare occasions, a Court would have to acknowledge its limitations and say that despite the best endeavours being made, it has not been able to make a finding of fact on a particular aspect of the case. Has such a situation arisen on the evidence before me?

22. I accept that there are many unsatisfactory features in the evidence of the 1st Respondent. I do not propose to go into a detailed analysis of his evidence but I consider that some illustrations will suffice. It is his evidence that he was asked by Unison to find someone as the contractor of Unison to carry out the Regalia Bay works. He said however that he was not concerned as to how long the Regalia Bay works were going to take to complete and accordingly it was not his concern as to how many workers the Applicant should bring along to carry out such works. I find this rather odd. The 1st Respondent said that he had on behalf of Unison paid the Applicant the contract sum of $12,000 in respect of the Regalia Bay works, by 3 instalments. He made no written record of that although  his evidence is to the effect that he had made a written record of his payment of $3,700 to the Applicant on a sheet of paper (see Trial Bundle page 15, hereafter "TB15" mutatis mutandis) in which he had made work records of the various workers who had worked for him. He said that he made that written entry of $3,700 as he had to account to Unison for the payment but he could provide no satisfactory answer when he was asked as to why he did not make a similar written record for the payment of the sum of $12,000 to the Applicant, since he would also have to account to Unison for the payment of $12,000 as well. I find all these rather odd.

23. But, what about the evidence of the Applicant?

24. The evidence of the Applicant is that the 1st Respondent had asked him to get two other workers to carry out the Regalia Bay works. Pursuant to the 1st Respondent's request, the Applicant through his friends got into contact with two other workers who, like him, were also Pakistani and who were agreeable to take up the job offer.

25. The Applicant's evidence is that there was an express verbal agreement between him and the 1st Respondent that the latter would pay him daily wages of $450 for his work.

26. The Applicant had given a detailed account of the events that took place on 29 April 2004, the 1st day of the Regalia Bay works. That morning, he met the two other Pakistani labourers at the Prince Edward Road MTR station. They took a taxi to a construction site at Kowloon City where the Applicant had worked for the 1st Respondent before. The 1st Respondent employed the use of a vehicle to carry all three of them to the Regalia Bay House. All the tools and equipment were provided by the 1st Respondent.

27. The Applicant said that inside the Regalia Bay House, the 1st Respondent had agreed with the two other Pakistani workers that he would pay each of them daily wages of $450. The Applicant acted as the interpreter as the two other Pakistani workers did not speak Cantonese.

28. All the above are very well as far as they go. There are however certain features in the evidence of the Applicant that warrant a closer examination.

The Applicant did not keep a record of his work

29.  It is not in dispute that the 1st Respondent had paid the Applicant the sum of $3,700 on about 4 May 2004. According to the 1st Respondent, it was an amount paid to the Applicant for the settlement of his rights in respect of the injury that he had sustained on 30 April 2004. The Applicant said in his evidence that the payment was for his outstanding wages for the work he did for the 1st Respondent before the start of the Regalia Bay works and also for his two days of work at the Regalia Bay House.

30. The Applicant has received primary school education in Hong Kong. He was born on 1979 and came to Hong Kong in 1985 at the age of 6. He has been living in Hong Kong since. When he attained the age of 18, that is, in about 1997, he started working in a factory doing loading and unloading work. In about 1998, he started working as a general labourer on various construction sites. He is skilled in the use of pneumatic drills. His evidence shows that he was a casual labourer taking up odd jobs whenever there was work available for him and when he was available to take it up. In other words, he moved on from one job to another working for different employers at different times and at different places. His evidence also shows that the agreements to work with the previous employers were made in a rather informal manner, mostly on oral basis. That is all very well. That is how casual labourers in Hong Kong work to earn a living.

31.  When the Applicant was questioned about his receipt of $3,700 from the 1st Respondent, he was asked to elaborate to which dates the payment related. He said, in that context, that he was not in the practice of keeping a personal record of the work he did for his employers. All along, he kept nothing in the form of, say, a small notebook to jot down on which date he worked for an employer at a certain site of work. I find this rather odd. In re-examination, the Applicant explained by saying that he did not keep such records as he was illiterate. How, then, is that to be reconciled with his evidence that he had received primary education?

32. I would now turn to another matter.

First contact in respect of the Regalia Bay works

33. In his witness statement, the Applicant stated that it was in the middle of April 2004 that the 1st Respondent first contacted him with a view to engage him to carry out the Regalia Bay works. It is the evidence of the Applicant that the Regalia Bay works actually commenced on 29 April 2004. It appears to me to be rather odd that the 1st Respondent should give such lengthy advance notice to the Applicant to engage him as a casual labourer. The advance notice seems to me to be rather long even one takes into account the fact that the Applicant was required to get two other labourers to do the work. Could it be that the Applicant had tried to take up the Regalia Bay works as an independent contractor for the first time and so that he needed more time to make arrangements for engaging other workers to work for him and to procure the tools and equipment for carrying out the works?

34. I should note that the evidence before me is that the contents of the Applicant's witness statement were duly explained to him before he signed the same. In his examination in chief, the evidence that he was contacted by the 1st Respondent in relation to the Regalia Bay works some time in the middle of April 2004 (see paragraph 5 of his witness statement) was interpreted to him by the Court Interpreter and he did confirm the truthfulness thereof.

35. When the Applicant was asked as to why there was a long lapse of time between the first contact in relation to the Regalia Bay works and the actual commencement of the Regalia Bay works, he said that the reference to the 1st Respondent's contact of him in the middle of April 2004 in paragraph 5 of his witness statement actually referred to some other jobs that he did for the 1st Respondent before the Regalia Bay works. In other words, he had arranged for other casual labourers to work alongside with him for the 1st Respondent even before the start of the Regalia Bay works.

36. I should note that the above is not mentioned in his witness statement nor in his testimony in Court up to that point in time in his examination when the above question was posed to him.

Length of stay of the 1st Respondent inside the Regalia Bay House on 29 April 2004

37. The Applicant said that on 29 April 2004, after he and the two other Pakistani labourers arrived at the Kowloon City construction site, they stayed there for about 1.5 hours before setting off for the Regalia Bay House. Upon arrival at the Regalia Bay House, the 1st Respondent stayed there for 2-3 hours giving instructions of work to them. When questioned why it should take that long for the 1st Respondent to give instructions for the dismantling work, the Applicant said that the 1st Respondent was also giving instructions to other workers/contractors then working at the Regalia Bay House. I should observe that it is possible but somewhat unusual for other renovation works to take place at the same time when demolition works were in progress. Has the Applicant deliberately exaggerated the length of stay of the 1st Respondent inside the Regalia Bay House to persuade the Court that the 1st Respondent had exercised a lot of control over how the works were to be carried out than the 1st Respondent actually did?

38. I would, for the time being, put aside the question of the credibility of the evidence of the Applicant and give some considerations to the factual possibilities of this case, as follows.

39. I consider that the crucial question for me to decide is whether it is proved on a balance of probabilities that there was an employer/employee relationship between the Applicant and the 1st Respondent. If the Applicant were the employee of the 1st Respondent in relation to the Regalia Bay works then he could not be an independent contractor of the 1st Respondent at the same time. If the Applicant were the employee of the 1st Respondent then I am prepared to find that Unison was the principal contractor of the 1st Respondent.

40. I take that I should also consider whether there was a real possibility that somehow the relationship (if any) as between the 1st Respondent and the Applicant was of some other nature. I consider that there is no such real possibility.

41.  I have considered and specifically dismiss the possibility of A & P being a contracting party to the Regalia Bay works. I consider that there is no real possibility of other contracting parties being involved in the Regalia Bay works apart from Unison, the 1st Respondent and the Applicant.

42. I consider, in the circumstances, that I am left with only one question to answer, and that is whether I should accept that the Applicant was the employee of the 1st Respondent in relation to the Regalia Bay works.

43. I consider that it is possible that the 1st Respondent had in fact agreed to pay the Applicant and the two other Pakistani labourers daily wages of $450. If I were to believe that the 1st Respondent had agreed to pay the Applicant such daily wages and had in fact provided the Applicant with the tools and equipment for his work at the Regalia Bay House, then I should find that the contract between the Applicant and the 1st Respondent was a contract of service. It is however equally possible that there was an agreement for the 1st Respondent to pay the Applicant a lump sum of $12,000 to complete the Regalia Bay works, leaving the latter to make his own labour and costing arrangements. I also consider it equally possible that the 1st Respondent had provided the Applicant with the tools and equipments for the Regalia Bay works as the Applicant himself had provided the same.

44. I note that despite the many unsatisfactory features in the evidence of the 1st Respondent, he had nonetheless plainly admitted that he had employed the Applicant in the past as his casual labourer on other jobs, before the Regalia Bay works. As noted earlier, I do have reservations about the credibility of the 1st Respondent. To the extent that I may rely on the demeanour of a witness, I would say that his demeanour did not in the least impress me that he was being truthful. But, having said that, it is also obvious that the 1st Respondent is not the kind of witnesses who are clever and crafty in creating deliberate falsehoods before the Court. He is not a skilful liar. All the dealings between the Applicant and the 1st Respondent prior to the Regalia Bay works were made on an oral basis. There is no documentary proof.  Is there not some valid reasons that the 1st Respondent should admit to his previously employing the Applicant as an employee while making a denial in respect of the Regalia Bay works? It was not suggested to the 1st Respondent that he had failed to obtain proper insurance coverage for employees' compensation for the various workers who had worked for him in the various work projects that he had undertaken, including the Regalia Bay works. The possibility that he is forestalling a common law action will have to be considered. But, it is hardly likely that he would be held negligent. So, why is the 1st Respondent making this denial?

Finding

45. I regret having to come to this decision, but I am not prepared to find that the Applicant was the employee of the 1st Respondent in relation to the Regalia Bay works, nor am I prepared to find that the Applicant was the independent contractor of the 1st Respondent.

46. It follows that I am not prepared to find that the Applicant was the employee or the independent contractor of the 2nd Respondent as well.

47. The Applicant's claim against both the 1st Respondent and the 2nd Respondent will have to be dismissed.

48. In the circumstances, I do not propose to deal with matters relating to quantum.

49. For the sake of completeness, I would make an observation in relation to the Applicant's claim against the 2nd Respondent, as follows.

The requirement of a Section 24(6) notice

50.  The solicitors acting for the Applicant served a written notice on the 2nd Respondent on about 2 July 2005 under cover of a letter dated 5 July 2005 (see TB201-202). Are the requirements of Section 24(6) of the Ordinance thus complied with? If the Applicant cannot get around Section 24(6), his claim against the 2nd Respondent is not maintainable.

51. I have thus examined the letter and the notice at TB201-202 and noted the following.

(a) the name and address of the employee were given. In effect though not in exact wording, the Applicant was stated to be the employee. The solicitors stated that they were acting for the Applicant and I consider that the solicitors' address is acceptable as the "address of the employee" for the purpose of Section 24(6).

(b) the name of the sub-contractor was given in effect. The 1st Respondent was stated to be the employer of the Applicant and the 2nd Respondent was stated to be the main contractor. The address of the 1st Respondent was however not given.

(c) the address of the place of employment of the employee was in effect given.

(d) the particulars (as to the date and place and that it arose from work) of the accident and the injury suffered by the Applicant were given.

(e) the amount of compensation to be claimed was not given although it is abundantly clear that the Applicant intended to claim compensation from the principal contractor.

52. There is therefore no full compliance with the requirements of Section 24(6) of the Ordinance. The matters that are not complied with are minor in nature and in the context of this case, I cannot see how the non-compliance would cause the 2nd Respondent any prejudice. If I have the power to condon such failures, it is likely that I would exercise that power in favour of the Applicant. Do I have that power? In my own rather limited legal research, I have not been able to find any authority in support of the proposition that I have such a power.

53. In this connection, Counsel for the Applicant has referred me to Section 24(1) which provides, inter alia, as follows: "where compensation is claimed from or proceedings are taken against the principal contractor, then, in the application of this Ordinance, references to the principal contractor shall be substituted for references to the employer………". The argument advanced is that the Applicant would have to give notice to the 2nd Respondent pursuant to Section 14 of the Ordinance and that somehow dispensed with the need to serve the notice required under Section 24(6). It was also submitted that Section 24(6) takes away the private right of the Applicant and that the Ordinance should be construed in such a manner so as not to take away that private right unless the intention of the legislature is clear.

54. I cannot agree with the above submissions. To me, plain as plain, Section 24(6) must be strictly complied with for the claim against the 2nd Respondent to become maintainable. The Applicant has no right against the 2nd Respondent save where the legislation so provides. To take the benefit conferred by the statute, the Applicant must comply with the statutory requirements. There is no room for the exercise of any discretion for a failure to comply with the requirements of Section 24(6). The situation is quite unlike that of a failure to give a timely notice or to commence a timely claim for compensation under Section 14, or to make a timely application for the cancellation of an assessment certificate under Section 16B, or to make a timely appeal under Section 18, for which the Court has a discretion to condon, and does often condon, such failures under the statutory scheme of affairs.

Orders

55. In the circumstances, I would make the following orders:

(1)   The Applicant's claim for compensation against both the 1st Respondent and the 2nd Respondent is dismissed.

(2)  It being not established that the Applicant was an employee, the Applicant's appeal under Section 18 of the Ordinance is also dismissed.

(3)    For the avoidance of doubt, neither the 1st Respondent nor the 2nd Respondent shall be required to pay the Applicant's costs for the translation of the documents ordered to be made under the Order herein dated 17 November 2006.

(4)   There be no order as to costs as between the Applicant and the 2nd Respondent.

(5)   There be an Order Nisi that the Applicant do pay the costs of the 1st Respondent in respect of this action to be taxed if not agreed. Unless an application is made to vary this Order Nisi, it shall become absolute in 14 days.

(6)   The Applicant's own costs be taxed in accordance with Legal Aid Regulations.