TSE CHIU v. 郭健 AND OTHERS

CACV 109/2021, [2023] HKCA 970

On Appeal From [2021] HKDC 191

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 109 OF 2021

(ON APPEAL FROM DCEC NO 1141 OF 2018)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.  This is the 2^nd Respondent’s appeal against the judgment of Deputy District Judge Charles Wong dated 19 February 2021 (“the Judgment”), whereby the Judge found that the Applicant was an employee of both the 2^nd and 3^rd Respondents at the time of the accident, and awarded him employee’s compensation in the amount of HK$363,280.67 plus interest thereon.

BACKGROUND FACTS

2.  The Applicant, born in 1952, was a cross-border container tractor driver by occupation.

3.  The 1^st Respondent is the father of the 2^nd Respondent. The 3^rd Respondent is a company incorporated in Hong Kong on 27 April 2015. The 2^nd Respondent was a director and shareholder of the 3^rd Respondent on the date of the accident. All 3 Respondents were engaged in the business of transportation or delivery of goods/containers between Hong Kong and Mainland China.

4.  In about July 2014, the Applicant, through a friend, came to meet the 1^st Respondent, and orally agreed to work as a cross border container tractor driver. The Applicant started work on 1 August 2014. He was assigned to drive a tractor with registration mark SH1826 (“the Tractor”), which was registered in the name of the 2^nd Respondent. The Applicant was required to collect/deliver containers between Tsing Yi or Tuen Mun in Hong Kong and Shenzhen Bay or Sha Tau Kok in Mainland China. He took delivery orders from the 1^st and/or 2^nd Respondents via a WeChat Group called “海東支援車隊”, and was paid HK$200 to HK$400 per container delivered depending on the delivery location. In addition, he also made some money on the side from buying and selling petrol across the border, earning approximately RMB5,000-6,000 per month.

5.  At about 1:30 pm on 6 June 2017, the Applicant was working at Tsing Yi Cargo Examination Compound. Whilst trying to close the back door of a container mounted on the Tractor, he fell from the Tractor with his head landing on the ground. He suffered a fracture to his skull and bleeding from his ears.

THE APPLICATION

6.  On 24 May 2018, the Applicant made an application in the District Court, DCEC 1141/2018, to claim compensation under the Employees’ Compensation Ordinance, Cap 282 (“the Ordinance”). The claim was originally made against the 1^st and 2^nd Respondents only, each said to be “trading under the name of 大眾國際物流運輸公司 or Kwok’s Int Logistics Limited[1]”. The application was subsequently amended so that the 3^rd Respondent became a respondent to the application. At §1 of the Re-Re-Amended Application dated 17 June 2020, the Applicant pleads that –

“On 6 June 2017, personal injury by accident arising out of and in the course of employment was caused to the Applicant, an employee employed by the Respondents. The 1^st and 2^nd Respondents were carrying on business in the name of 大眾貨櫃運輸公司. The 1^st Respondent is the father of the 2^nd Respondent. As to the 3^rd Respondent, the Applicant’s salaries were from time to time paid by the 3^rd Respondent during the material time. Alternatively, the 1^st and 2^nd Respondents were the employers of the Applicant … and the subcontractors of the 3^rd Respondent.”

7.  The Respondents denied that the Applicant was their employee. In their Amended Answer dated 2 September 2020, the Respondents plead (inter alia) the following:

(1)  The 2^nd Respondent is the director of the 3^rd Respondent (§2(b)).

(2)  The 3^rd Respondent Company is a company incorporated with limited liability under the laws of the HKSAR carrying on the business of logistics (§2(c)).

(3)  The 1^st and 2^nd Respondents did not employ the Applicant themselves or through any servant or agent or authorised person/company, either directly or indirectly (§3(a)).

(4)  The 1^st and 2^nd Respondents did not make any salary payment to the Applicant (§3(b)).

(5)  In or about July 2014, the 2^nd Respondent in his capacity as a director of the 3^rd Respondent and on behalf of the 3^rd Respondent negotiated and reached a cooperation agreement with the Applicant to work as an independent contractor (§4).

(6)  The 3^rd Respondent and the Applicant, who worked as an independent contractor, were in a cooperation agreement for carrying on the business of logistics only, and the Applicant at all material times was not an employee of the 3^rd Respondent (§5).

(7)  The 3^rd Respondent did not make any contribution to MPF for the Applicant, or make any payment of statutory holidays, annual leave or sick leave to the Applicant (§6).

(8)  The 3^rd Respondent, upon receiving payments from customers, would distribute the profits by issuing cheques to the Applicant (§7).

THE JUDGMENT

8.  At the trial, the Judge heard evidence from the Applicant and a colleague (Chan Chung Man) on the Applicant’s side, and the 1^st and 2^nd Respondents on the Respondents’ side. Quantum was not in dispute. Compensation under ss 9, 10 and 10A of the Ordinance in the amount of HK$363,280.67 was agreed.

9.  By the Judgment handed down on 19 February 2021, the Judge upheld the Applicant’s claim against the 2^nd and 3^rd Respondents, but dismissed his claim against the 1^st Respondent.

10.  The Judge formulated the issues to be determined by him as follows:

“(1) Whether [the Applicant] was an employee of the respondents or an independent contractor of R3?

(2) If the applicant was an employee, which respondent(s) was/were the employer(s)?

(3) Whether the Accident happened in the course of [the Applicant’s] employment with the 1^st, the 2^nd, and/or the 3^rd respondent?”[2]

11.  In finding that the Applicant was an employee and not an independent contractor, the Judge took into account the following factors:

(1)  the degree of control exercised by the Respondents[3];

(2)  the payment of wages or other remuneration[4];

(3)  the Applicant’s prospect of profit or risk of loss[5];

(4)  the provision and ownership of the Tractor[6]; and

(5)  the 2^nd and 3^rd Respondents’ payment of outgoing expenses[7].

12.  At §35 of the Judgment, the Judge concluded that the Applicant was an employee of the 2^nd and 3^rd Respondents:

“I have taken into consideration the fact that the respondents made no contribution of MPF and made no payment of statutory entitlements (i.e. statutory holidays, annual leaves or sick leaves) to [the Applicant], but on the totality of the evidence, I find that [the Applicant] was not carrying on business on his own account but carrying out work on the business of R2 and R3. It follows that at the time of the accident, [the Applicant] was in the course of employment with R2 and R3.”

13.  The Judge also found that the 1^st Respondent was not an employer of the Applicant[8]. Since there is no appeal against this finding of the Judge, it is not necessary to further consider this aspect of the Judgment.

THE APPEAL

14.  By a Notice of Appeal dated 18 March 2021, the 2^nd and 3^rd Respondents appealed against the Judgment, raising 3 grounds of appeal:

(1)  The Judge erred in law in ruling that the 2^nd Respondent’s evidence was inconsistent, went against his pleaded case, made no commercial sense, and was erratic, and the 2^nd Respondent made up his evidence as he went along. The Judge also wrongly ruled that the Applicant was an employee of the 2^nd and 3^rd Respondents (“Ground 1”).

(2)  The Judge erred in law in finding that the 2^nd Respondent together with the 3^rd Respondent were the employers of the Applicant without considering the fact that the 2^nd Respondent was only an officer (namely, director) of the 3^rd Respondent supervising the Applicant on behalf of the 3^rd Respondent, which was an independent legal entity. The 2^nd Respondent could not be an employer of the Applicant at the same time when the 3^rd Respondent was ruled to be an employer of the Applicant as well (“Ground 2”).

(3)  The Judge erred in law and in fact on the status of the Applicant as an employee instead of an agent/contractor (“Ground 3”).

15.  On 25 August 2021, the 3^rd Respondent was wound up on a petition presented by the Applicant. On 19 November 2021, a consent summons was filed by the Applicant’s solicitors and the 3^rd Respondent’s provisional liquidators for (among other things) the dismissal of the 3^rd Respondent’s appeal. An order in terms was made on 24 November 2021.

16.  Accordingly, the 2^nd Respondent is the only remaining appellant in the present appeal.

GROUND 1

17.  We shall first deal with Grounds 1 and 3 before dealing with Ground 2.

18.  Under Ground 1, the 2^nd Respondent complains about 2 matters or findings by the Judge, namely:

(1)  the Judge’s finding that “R1 and R2s’ evidence [was] inconsistent, goes against the pleaded case and makes no commercial sense. I find that their evidence is erratic and they have made up their case as they went along”[9]; and

(2)  the Judge’s finding that the Applicant was an employee of the 2^nd and 3^rd Respondents.

19.  In respect of the complaint mentioned at §18(1) above, the Judge’s finding was made in the context of his assessment of the evidence of the 1^st and 2^nd Respondents concerning the issue of the Applicant’s prospect of profit or risk of loss. The Judge took into account the following matters in making the said finding:

(1)  The Respondents relied on an undated and unsigned handwritten note which stated that the Applicant’s profit share was 70% of the delivery fee. The Judge rejected this part of the Respondents’ evidence because the alleged 70% share was not borne out by the accounts produced by the Respondents, was not the pleaded case of the Respondents, and was not set out in the witness statements of the 1^st and 2^nd Respondents. The 2^nd Respondent also had difficulty in explaining the circumstances surrounding the making of that document. Further, as noted by the Judge, there appeared to be overlapping handwritten marks on the word “70%”, which suggested a rewriting of or an amendment to the number. However, the 2^nd Respondent denied knowledge as to how the document was prepared, and when pressed as to why he could not produce the original of the document, merely answered that he considered it unimportant and was probably with the accountant[10].

(2)  The Respondents provided other versions of how the profits were shared between the parties (70:30 in favour of the Applicant for business solicited by the Applicant for the 3^rd Respondent, and HK$500-HK$900 to the Applicant for business referred to the 3^rd Respondent by the Applicant and he used the 3^rd Respondent’s vehicle[11]), but the accounts produced by the Respondents showed that on many occasions the Applicant was only paid HK$200 out of the total delivery fee of HK$550 per container[12].

(3)  There was no evidence that the Applicant shared profits with the Respondents. The Applicant did not know how much the Respondents charged their clients, and was not provided with any quotations or invoices for fees paid by the Respondents’ customers. All the profits were for the Respondents’ account. Apart from making some money on the side from buying and selling petrol across the border, the Applicant gained no financial reward beyond his agreed daily rates[13].

(4)  The 2^nd Respondent stated that there were other profit sharing arrangements, including (1) the 3^rd Respondent 70: Driver 30; (2) 50% each for the 3^rd Respondent and Driver. These were, however, neither pleaded nor put to the Applicant. The 2^nd Respondent further stated that the Applicant had requested a reduction in the fee split from 70:30 to 50:50 because the 50:50 split was more advantageous to the Applicant. This allegation was also not pleaded, and was not reflected in the accounts produced by the Respondents. When being cross-examined on the Respondents’ pleaded case that the Applicant would be paid HK$500-HK$900 for each trip of transportation of goods where the business was referred to the 3^rd Respondent by the Applicant and he used the 3^rd Respondent’s vehicle[14], the 2^nd Respondent stated that the amount paid to the Applicant took into account the tractor rental cost but he was unable to give any breakdown. The Judge also took note of the fact that in the original Answer filed by the Respondents, it was stated that if the 3^rd Respondent sub-contracted business to the Applicant, the 3^rd Respondent would pay a sum of $1,200 to the Applicant. The Judge considered that the Respondents’ case on how the Applicant was remunerated had shifted[15].

20.  In our view, on the evidence and materials before the Judge, it was open to him to make the adverse finding about the 2^nd Respondent’s evidence referred to in §18(1) above. There is no proper basis for the 2^nd Respondent’s argument that the Judge “erred in law” in making the said finding.

21.  In respect of §18(2) above, the contention that the Judge erred in law in finding that the Applicant was an employee of the 2^nd and 3^rd Respondents is a bare, general complaint without particulars. In any event, it is well established that a finding that a person is an employee of another person rather than an independent contractor should be treated as a finding of fact by an appellate court: see Poon Chau Nam v Yim Siu Cheung (2007) 10 HKCFAR 156 at §22, per Ribeiro PJ:

“It is ‘firmly established that the question of whether or not the work was performed in the capacity of an employee or as an independent contractor is to be regarded by an appellate court as a question of fact to be determined by the trial court.’ Accordingly, so far as the trial judge’s classification of the contract is concerned, an appellate court can only intervene on Edwards v Bairstow grounds. In other words, a finding that an employer-employee relationship does or does not exist can only be interfered with on appeal if it can be shown that the tribunal misdirected itself in law or came to a decision which no tribunal, properly directing itself on the relevant facts, could reasonably have reached.”

22.  Insofar as the 2^nd Respondent seeks to characterise the question of whether the Applicant was an employee of the 2^nd and 3^rd Respondents as a question of law, such characterisation is incorrect. We shall further consider the issue of whether the Applicant was an employee or an independent contractor under Ground 3 below.

GROUND 3

23.  Under this ground, the 2^nd Respondent contends that the Judge erred in law and in fact on the status of the Applicant as an employee instead of an agent/contractor. In the Notice of Appeal, the 2^nd Respondent relies on 4 matters in support of this ground of appeal:

(1)  the Judge erred in holding that the reward for the Applicant was a fixed wage despite the fact that the Applicant’s reward was based on the orders assigned to him;

(2)  the Judge erred in holding that the Applicant’s reward was not profit sharing;

(3)  the Applicant had contributed to the costs of maintaining and repairing the Tractor and paid fixed penalty tickets for speeding and illegal parking which the 2^nd Respondent argues “should never be performed by a salaried employee”; and

(4)  the Applicant had to contribute 50% of the monthly fee known as “拖頭入線費” which the 2^nd Respondent also argues “should not be performed by a salaried employee”.

24.  None of the above complaints has merits.

25.  In respect of §23(1) above, the Judge did not make any finding that the Applicant was paid a fixed wage. The Judge found that the Applicant’s wages were calculated based on an agreed rate of $200-$400 per container delivered depending on the route/destination, and he also made some profits from the side business of buying and selling petrol across the border[16].

26.  In respect of §23(2) above, the Judge accepted the evidence of the Applicant concerning the calculation of his wages, and rejected the evidence of the 2^nd Respondent concerning the alleged profits sharing arrangements between the Applicant and the 3^rd Respondent. It was open to the Judge to accept the evidence of the Applicant and reject the evidence of the 2^nd Respondent. We do not see that the Judge erred either in law or in fact in finding that the reward for the Applicant was not profit sharing.

27.  In respect of §23(3) above, the Applicant gave evidence that he once paid $12,000, being a portion of the costs of repair of the Tractor which was damaged in a traffic accident in Nanping (南平) in February 2015. The Applicant said that he agreed to make the payment because he accepted a degree of responsibility for the accident due to his careless driving [17]. The Applicant also said that he paid fixed penalty tickets for illegal parking, speeding and other traffic offences (save that the 2^nd or 3^rd Respondents would occasionally pay up to 2 traffic tickets per month[18]). The Applicant accepted that illegal parking, speeding and other traffic offences were the responsibility of the driver, and said that it was the general practice of the trade that container tractor drivers would be responsible for such fines[19]. The Judge was entitled to accept the Applicant’s evidence on these matters[20]. We do not see that the aforesaid payments by the Applicant would lead, or necessarily lead, to the conclusion that the Applicant was not an employee but was an independent contractor.

28.  In respect of §23(4) above, the Applicant gave evidence that he agreed to pay 50% of the “拖頭入線費” at the rate of HK$2,000 per month upon the request and insistence of the 2^nd Respondent, who claimed that the Applicant had made a bigger profit as a result of the change in the petrol price differential between Hong Kong and Mainland China[21]. Again, the Judge was entitled to accept the Applicant’s evidence on this matter[22], and the comment in §27 above applies equally to this part of the Applicant’s evidence.

29.  In his written submissions, the 2^nd Respondent has sought to challenge other findings of fact by the Judge which however have not been raised in the Notice of Appeal. The 2^nd Respondent is not entitled to rely on grounds which are not raised in the Notice of Appeal, and those grounds will therefore not be considered in this judgment.

30.  For the above reasons, Grounds 1 and 3 of appeal are rejected.

GROUND 2

31.  Under Ground 2, the 2^nd Respondent complains about the Judge’s finding that both he and the 3^rd Respondents were employers of the Applicant at the same time. The 2^nd Respondent argues that he was only an officer (namely, director) of the 3^rd Respondent supervising the Applicant on behalf of the 3^rd Respondent, which was an independent legal entity, and he could not be an employer of the Applicant at the same time when the 3^rd Respondent was ruled to be an employer of the Applicant as well.

32.  The Applicant commenced to work as a cross-border container tractor driver and collect/deliver containers upon the instructions of the 1^st or 2^nd Respondent on 1 August 2014[23]. At that time, the 3^rd Respondent had not yet been incorporated. It was only incorporated on 27 April 2015. Plainly, the 3^rd Respondent could not have been the employer of the Applicant during the period from 1 August 2014 to 26 April 2015. The Judge found that the 3^rd Respondent was an employer of the Applicant on the date of the accident (6 June 2017), but made no finding as to when the 3^rd Respondents became his employer. None of the parties suggested that the Applicant was at any time seconded by the 2^nd Respondent to work for the 3^rd Respondent, or that there was a novation of the employment contract between the 2^nd Respondent and the Applicant such that the 3^rd Respondent became an employer of the Applicant. In holding that both the 2^nd and 3^rd Respondents were the Applicant’s employers at the time of the accident, the Judge did not mention the fact that the 3^rd Respondent was not incorporated until about 9 months after the Applicant had started work, and apparently had overlooked the significance of this fact. There was also no analysis by the Judge as to how he came to the conclusion that the 3^rd Respondent was an employer of the Applicant, beyond stating that “… on the totality of the evidence, I find that [the Applicant] was not carrying on business on his own account but carrying out work on the business of R2 and R3. It follows that at the time of the accident, [the Applicant] was in the course of employment with R2 and R3”. In our view, the Judge’s finding that the 3^rd Respondent was an employer of the Applicant on the date of the accident is open to question.

33.  These having been said, for the purpose of the present appeal, the important question is not whether the Judge was correct to find that the 3^rd Respondent was an employer of the Applicant, but whether the 2^nd Respondent was the Applicant’s employer at the time of the accident. On the evidence and materials before the Judge, we consider that he was clearly correct to find that the Applicant was at all material times since 1 August 2014 up to the date of the accident an employee and not an independent contractor. In view of the Judge’s finding that the 1^st Respondent only worked as a driver and assisted the 2^nd Respondent in his business but was not the Applicant’s employer, the inevitable conclusion is that the 2^nd Respondent was the Applicant’s employer at the time when he commenced work on 1 August 2014. It was not the 2^nd Respondent’s case at the trial, nor is it suggested in the 2^nd Respondent’s Notice of Appeal, that the Applicant’s employment relationship with him had somehow been terminated or changed prior to the date of the accident. All along, the 2^nd Respondent’s case has been that the Applicant was an independent contractor.

34.  At the hearing of the appeal, Mr Bong Kwan sought to argue that the 2^nd Respondent entered into a pre-incorporation contract on behalf of the 3^rd Respondent with the Applicant. In support of this argument, he referred the Court to the oral evidence of the Applicant that sometime after the commencement of his employment, he had been told by the 1^st and 2^nd Respondent that in future, he should use the name “大眾貨櫃運輸公司” whenever there was a need to do so (… 但係大眾貨櫃運輸公司嗰個名係曾經郭健同埋郭家傑就話畀我知以後個公司有乜嘢，就寫呢個名，但係就最初我上工嗰陣時候就唔係呢個名嘅，我同佢上工嗰陣時，佢曾經用佢嗰啲貨櫃拖頭紙就叫做六通 (譯音) 嘅，六通貨運公司嘅，後來佢就冇用嗰嗰隻，就叫我哋以後就用大眾個名，呢啲後期嘅，但係我唔知呢間公司係乜嘢，只不過佢兩父子提供畀我，話用呢個名，我就寫呢個名)[24]. However, the 3^rd Respondent’s Chinese name is “大眾國際物流有限公司”, not “大眾貨櫃運輸公司”. We are unable to see how the aforesaid evidence relied upon by Mr Bong Kwan can support his argument that the 2^nd Respondent entered into a pre-incorporation contract on behalf of the 3^rd Respondent with the Applicant. Mr Bong Kwan also faintly suggested that there was subsequent ratification of the contract by the 3^rd Respondent. However, there was no evidence of any ratification adduced at the trial. In any event, the 2^nd Respondent has not raised any ground of appeal in his Notice of Appeal that the Judge ought to have found that the 2^nd Respondent entered into a pre-incorporation contract on behalf of the 3^rd Respondent with the Applicant, or the 3^rd Respondent subsequently ratified any such contract entered into by the 2^nd Respondent on its behalf.

35.  The fact that the 2^nd Respondent was a director of the 3^rd Respondent takes the 2^nd Respondent’s case no further.

36.  Overall, notwithstanding our reservation on the Judge’s finding that the 3^rd Respondent was an employer of the Applicant, we do not consider that this matter would detract from the Judge’s finding that the 2^nd Respondent was the Applicant’s employer at the time of the accident. Ground 2 of appeal is rejected.

DISPOSITION

37.  The 2^nd Respondent’s appeal is dismissed with costs to the Applicant, to be taxed if not agreed. The Applicant’s own costs shall be taxed in accordance with legal aid regulations. We have been informed that the 2^nd Respondent has received an offer of a legal aid certificate on 10 August 2023, but no legal aid certificate has yet been issued to the 2^nd Respondent. In the event that a legal aid certificate shall be issued to the 2^nd Respondent and the legal aid certificate shall cover the costs of the hearing of the appeal, we direct that the 2^nd Respondent’s own costs shall likewise be taxed in accordance with legal aid regulations.