TSANG KAR LEE v. RICH LONG TRANSPORTATION LTD. AND ANOTHER

CACV 193/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 193 OF 2000

(ON APPEAL FROM EMPLOYEES' COMPENSATION
CASE NO. 15 OF 1995)

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REASONS FOR JUDGMENT

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Hon Woo JA (giving the reasons for judgment):

1. At the conclusion of the hearing on 29 November 2000, we allowed the appeal and stated that we would hand down our reasons.

Introduction

2. On 13 December 1994, while Mr Chu Lee Keung was driving a container truck EL9576 in China on his way back to Hong Kong, the truck fell from a bridge onto solid ground below. He sustained fatal injuries and died instantly. The applicant Madam Tsang Kar Lee is the widow of the deceased. She brought the application in this action to claim employee's compensation on behalf of herself and her two sons as dependants of the deceased.

3. The application was made against the 1st respondent as the employer of the deceased and against the 2nd respondent as the principal contractor who provided the work in which the deceased was involved to the 1st respondent. While there was no dispute that the deceased started to drive EL9576 at the beginning of November 1994 for the 1st respondent, that the 1st respondent requested the deceased on the evening of 12 December 1994 to drive the truck to China to pick up goods and that the deceased met with the accident on his return trip from China on 13 December 1994, the respondents' case was that the deceased was not under the employ of either of them, and that when the deceased met with the accident, he was driving the truck as an independent contractor carrying out the work given him by the 1st respondent. That was the central issue between the parties at the trial.

4. The application was heard before District Judge Christopher Chan. After hearing evidence from the parties, on 5 May 2000 the Judge dismissed the application on the ground that the applicant failed to prove that the deceased was an employee of the 1st respondent. He, however, assessed the compensation payable to be $776,500 should he be held to have erred in his decision on liability. He made an order nisi that save for the orders for costs already made in the proceedings that should remain standing, each party should bear its own costs of the action. The respondents applied for the order nisi for costs to be reconsidered and after hearing arguments, on 15 June 2000 the Judge made the order absolute and awarded the costs of the hearing to the applicant.

5. Against the decision on liability, the applicant appealed. The respondents cross-appealed against the Judge's two orders as to costs.

The appeal against dismissal of the claim

6. In his judgment, the Judge mentioned a number of items of the evidence of Pat Hin Po ("Pat"), a common director and shareholder of the 1st and 2nd respondents at the material time, and stated that he had grave doubts and reservations in believing them. He also made various findings of fact, but concluded that in respect of each of them, he could not come to the conclusion whether the deceased was employed by the 1st respondent or whether he was working as an independent contractor for the 1st respondent. He held that the applicant had failed to prove that the deceased was the employee of the 1st respondent and he dismissed the claim.

7. Mr Ramanathan, for the applicant, complained that the Judge should have considered the cumulative effect of these findings instead of concluding that each item of them was neutral to the central issue between the parties. Those findings of fact are summarised below:

(a) The basic terms of the relationship which were agreed between the parties are as follows. The 1st respondent provided the container truck, with responsibility to repair and maintain it. The 1st respondent would make arrangements for the deceased for the issue of the necessary permit for transportation across the border. The deceased would pay for the diesel, toll and bridge fees which would be reimbursed by the 1st respondent. The deceased had to be responsible for traffic fines. For each trip within the HKSAR the deceased would be paid either $150 or $225 depending on the nature of the transportation. For cross border deliveries the gross income would be split and distributed as to 27% to the deceased and 73% to the 1st respondent.

(b) The Judge was not able to make any decision whether there was a minimum salary agreed between the deceased and the 1st respondent. He held that even if there was minimum guaranteed payment, he could not simply rule that there was an employer/employee relationship without considering other factors.

(c) The Judge was not prepared to accept that there was a term agreed between Pat and the deceased that the deceased could take on outside assignment, ie, assignment from people other than the 1st respondent, to transport goods.

(d) The Judge found that for the whole of November 1994 while the deceased was driving EL9576 for the 1st respondent, the deceased only worked on 18 days. He also found that there was no evidence that the deceased had taken on any outside assignment in that month.

(e) At the material time, Pat owned 40% of the shares in the 1st respondent and one Ko owned the remaining 60%. Ko was also a shareholder of another company Rich Long Shipping Co Ltd which was the registered owner of the container truck.

(f) The 2nd respondent had an insurance policy taken out to cover two drivers and one commercial traveller for the year 1994/95, which clearly showed that the 2nd respondent had employed drivers as its own staff. Pat was not able to give satisfactory answer to the questions as to why the 1st respondent did not take out such a policy.

(g) The deceased drove the container truck hired by the 1st respondent and as directed by the 1st respondent. The latter controlled where to go and what time the deceased had to go. The maps picked up from the scene of the accident were drawn purportedly by an employee of the 2nd respondent to give directions and describe the location of the factory where the deceased had to load the goods. The 1st respondent paid all the expenses for repair and maintenance as well as the other charges like fuel, toll etc for the truck. The Judge held that these facts were neutral to the central issue.

(h) The method of collecting instructions was that the account clerk of the 2nd respondent telephoned the deceased to inform him of the job nature. The deceased then drove the container truck to Kwai Chung where the 1st respondent had a box from which the deceased could collect the documents and maps. The deceased did not have to go to the 1st respondent's office. When he completed a trip, he also deposited the documents there. The Judge held that these facts were neutral.

(i) The 1st respondent paid for all expenses and damages involving the container truck. The Judge held that this could not be taken as an indicator of any sort about the relationship between the deceased and the 1st respondent.

(j) The deceased had no business registration, carried no trade name, did not enter into contract through any business entity, made no capital investment and was not concerned with the appreciation or depreciation of assets. The Judge held that these were not sufficient to build up a positive case that the deceased was an employee of the 1st respondent.

(k) In respect of the submission that the deceased was obliged to go for the trip in question even though he had just returned to Hong Kong from a long drive on that day, the Judge held that this fact by itself was not inconsistent with the scheme of retaining a conscientious self-employed driver.

8. It is not entirely correct for Mr Ramanathan to say that the Judge did not consider the cumulative effect of his findings. The Judge said:

"Having examined the different factors in manner set out above, I also tried to consider all the factors together as a whole to see whether on balance of probabilities the deceased could be regarded as employee. The best I can say is that there is insufficient evidence to show that the deceased was performing the services either as an employee or as a person in business in his own account."

9. He held that the applicant failed to discharge the burden of proof that the Employees' Compensation Ordinance, Cap 282 applied and dismissed the application.

10. Before further dealing with Mr Ramanathan's submissions, since this is an appeal on facts, it is important to note the dictum of Godfrey JA in Tang Kwok Ming v Daxprofit Scaffolding Ltd [1999] 1 HKC 657, at page 663E-I:

"The approach of an appellate court to appeals on fact is well-established. An appeal to this court is by way of re-hearing. Accordingly, it is the duty of this court to re-consider all the materials before the judge, to make up its own mind, not disregarding the judgment below but carefully weighing and considering it, not shrinking from overruling it, if on full consideration, it comes to the conclusion that the trial judge's finding was wrong.

But that does not mean that this court will re-try the case. The re-hearing is a re-hearing on the papers. This court will not usurp the function of the trial judge, ie to find the facts. It will certainly not disturb his findings of primary fact where these are based on the credibility of the witnesses or the preference of the evidence of one witness for that of another (although of course it may be willing to disturb inferences of fact drawn from the primary facts, because an appellate court is in as good a position as the trial judge to draw such inferences).

It is important for counsel and solicitors (and for the legal aid authorities) to remember the very limited extent to which this court will interfere in a case in which the appellant seeks to dispute the judge's findings of fact. If it is necessary to disturb an adverse finding of primary fact, the appellant has to demonstrate either (1) that there is no evidence to support it; or (2) that it is contrary to documentary or other incontrovertible evidence which the judge overlooked. It is not enough to show there is little evidence to support the judge's finding, or that it was 'contrary to the weight of the evidence'. The weight of the evidence is a matter for the trial judge. It does not matter how many witnesses say one thing, and how few say the contrary. The judge is perfectly entitled to prefer the evidence of the few to that of the many."

11. Mr Ramanathan submitted that the Judge was wrong in resorting to the burden of proof as the basis to dismiss the applicant's claim, and that the Judge should, in the light of the findings made by him, have come to the conclusion that the deceased was an employee of the 1st respondent. He referred us to Market Investigations v Minister for Social Security [1969] 1 QB 173 where Cooke J said at p 184G-185B:

"... the fundamental test to be applied is this: 'Is the person who has engaged himself to perform these services performing them as a person in business on his own account?' If the answer to that question is 'yes,' then the contract is a contract for services. If the answer is 'no,' then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his tasks."

12. This dictum of Cooke J was expressly approved by the Judicial Committee in Lee Ting Sang v Chung Chi-Keung [1990] 2 AC 374, on appeal from Hong Kong.

13. Mr Ramanathan complained that the Judge's approach in examining each of the indicia of employment or otherwise against each items of his findings of fact and his conclusion that no one factor was "conclusive or decisive" were wrong. He urged us to consider the cumulative effect of the applicable factors and draw proper inferences from the Judge's findings. He submitted that the terms of the agreement between the deceased and the 1st respondent and the evidence clearly revealed that the degree of control exercised by the 1st respondent was indicative of an employee/employer relationship rather than that of an independent contractor.

14. In our view, the Judge was fully entitled to consider the burden of proof of the issues between the parties. In this case, it is indisputable that it was for the applicant to prove that the deceased was working as an employee of the 1st respondent when he met with the accident. On the other hand, it was for the respondents to prove that the deceased was working as an independent contractor at the material time. The Judge plainly disbelieved Pat who was the only witness testifying for the respondents. He said:

"... I found that Mr Pat was not a reliable witness. He was very evasive in answering questions on important issues. I have set out above an extract of the transcript to illustrate this. Very often he queried the question asked. He tried to pick out minor details in the question and tried to divert the questioner's attention. He knew the Applicant's case very well but chose not to prepare the witness statement until the last minute. To put it simply, I have great suspicion what he told the court."

15. The Judge said later:

"As I have stated earlier, I have great reservation in accepting what Mr Pat told me. But, this does not mean that the converse of what he told me must be the truth."

16. Mr Ramanathan sought to argue that the relationship between the deceased and the 1st respondent must be one or the other, either he was an employee or a subcontractor of the 1st respondent. If the Judge did not believe Pat, being the only witness who gave evidence for the respondents, that the deceased was a subcontractor, the only reasonable inference was that the deceased was an employee. Even if Pat had been held by the Judge to have lied, we do not think that the only reasonable inference is that the converse of what he told the Judge must be the truth, for there may be a number of reasons why Pat had lied, such as bolstering up a true defence, in which case no proper inference can be drawn that the deceased was the 1st respondent's employee. We do not think that the Judge must have erred in not drawing the inference as suggested by Mr Ramanathan.

17. However, the Judge seemed to have committed an error after he had concluded that he did not accept that Pat's evidence that there was a term in the agreement made between him and the deceased that the deceased was allowed to take on outside assignment, in the sense that the deceased could use the container truck to transport goods for people other than the 1st respondent. In relation to the prospect of profit or risk of loss on the part of the deceased the Judge passed the following comment on the relationship:

"It could simply be an arrangement to share the gross income with designated job to be carried out by the deceased. This was compatible with the idea of retaining a self-employed sub-contractor. If it were the case of a sub-contractor the deceased could use his own free time to earn more. In that sense, sound management would help."

18. The Judge seemed to have forgotten that he had rejected Pat's evidence that there was an agreement that the deceased could take on outside assignment. If it was not proved that the deceased could take on outside assignment, it was more likely than not that he was working as an employee of the 1st respondent.

19. Moreover, there was a very important finding made by the Judge which he seemed not to have given any consideration. He said, "In November 1994, the deceased worked for 18 days; it was a good opportunity to bring in outside work but we find none in the evidence." Nor did the Judge appear to have considered fully the point made by Mr Ramanathan that "For the trip in question the deceased was obliged to go even though he just returned from a long drive on that day." The evidence of the applicant was that she overheard what the deceased said over the telephone in the evening of 12 December 1994 when he was asked to drive the truck to China to pick up goods. The deceased had just returned home from a long drive and he did not want to go, but as he had been told that the assignment was urgent, he went. Although Mr Kwok, for the respondents, argued that the Judge did not make a finding that the deceased was obliged to go for this trip, there was no indication that the Judge rejected this evidence. He merely commented that this was not inconsistent with the deceased being a conscientious subcontractor. We consider that in the whole tenor of the judgment, the Judge would have accepted this evidence of the applicant, but he was influenced by his view that it was neutral that he felt it unnecessary to make a finding. We take this evidence as indicative that either the deceased was obliged to or felt obliged to take on the assignment of the 1st respondent.

20. The finding of the deceased only working 18 days in November 1994 and the fact that the deceased felt obliged to go on the trip in question, in our view, properly considered, would have enabled the reasonable inference to be drawn that the deceased was working as an employee of the 1st respondent. The Judge considered his own findings to conclude that each item of his findings was consistent or not inconsistent with the case of either party before him. Although he had said that he "tried to consider all the factors together as a whole", he was probably overborne by the large number of items of his findings which could be viewed as neutral to the issue. These two items of fact, however, demonstrate the extent of the control that the 1st respondent had over the deceased in respect of his driving of the truck. It is not only that Pat's evidence about the term of the agreement between him and the deceased that the deceased was entitled to take on outside work not being believed or accepted by the Judge, but that the lack of any evidence that the deceased had taken on any outside assignment despite his only working 18 days in November 1994 for the 1st respondent with the truck leaves open the proper inference to be drawn that he was not allowed to do so. The deceased's obligation or feeling obliged to go in the evening of 12 December 1994 even upon his return to Hong Kong after a long drive, in the light of his not working on outside assignments in November 1994, tips the balance that it was more likely that he was bound by his agreement with the 1st respondent to work upon order being given in the evening of 12 December than that he was a diligent man and was merely trying to earn more in a position of a driver working on his own account.

21. In Lee Ting Sang, Lord Griffiths giving the opinion of the Judicial Committee had this to say at p 383E of the report:

"The district judge accepted a submission on behalf of the respondents that the hours worked by the applicant from 8.00 a.m. to 5.00 p.m. were not worked on a strict basis but the applicant just followed other workers at the site as a matter of convenience. As the Court of Appeal observed, this submission appeared to rely on speculation rather than evidence and was inconsistent with the uncontradicted evidence of the applicant that he would be sacked if he disappeared from the site. This accords with the common sense of the matter for if the applicant was free to come and go at will it is difficult to see how the first respondent could carry out timeous performance of his subcontract."

22. In view of the findings of the Judge that the deceased had only worked for 18 days in November 1994 for the 1st respondent and that there was no evidence that he had done any outside assignment, it would be against common sense that he merely chose not to work during the rest of the days in November 1994 but chose to work after finishing a long drive in the evening of 12 December 1994. Pat's evidence was that it was agreed between him and the deceased that the deceased could take up outside assignment with the truck which had been hired by the 1st respondent on a monthly basis from the owner with all rental and expenses involved to be borne by the 1st respondent, and that if the deceased wished to take on outside assignment he merely had to inform the 1st respondent and the income would have to be shared as to 27% to the deceased and 73% to the 1st respondent. Pat's evidence went further to say that if the deceased refused to take up the work offered by the 1st respondent to be carried out with the truck, the 1st respondent would have to get another driver to do the job. However, he did not elaborate how the 1st respondent would be able to arrange for that other driver to be provided with another truck. No wonder that the Judge rejected his evidence, especially in view of the fact that Pat did not include this agreed arrangement in his witness statement that came into being only very close to commencement of the trial. Similar to Lee Ting Sang, and perhaps even truer, if the deceased had been free to accept or reject the work offered or instructed by the 1st respondent to be performed with the truck, it is difficult to see how the 1st respondent could carry out timeous performance of its subcontract transportation business with another driver and with another truck. The reasonable and proper inference must therefore be that the deceased was working as an employee to drive the truck for the 1st respondent. The Judge, however, failed to draw any inference from these findings of his, and we consider it only just for us to do so. We are not reversing the Judge on his findings of primary fact but drawing proper inferences from his findings and the evidence that he would have accepted which he had failed to draw. As Godfrey JA said in Tang Kwok Ming, we are indeed duty bound to interfere under the circumstances.

The Respondents' Notice

23. The Respondents' Notice is strictly speaking not properly drawn, because it mainly seeks to support the Judge's conclusion in dismissing the claim based on the findings of the Judge, and refers to only a few matters (about the items of evidence adduced by the applicant that had been rejected) that justify it being a proper respondent's notice. It raises four grounds. Ground 1 suggests that the Judge had accepted, and wrongly so, hearsay from the applicant as to the relationship between the 1st respondent and the deceased. The Judge allowed the applicant to relate to the court what the deceased had told her about that relationship. However, her evidence mainly had the effect of the basic terms enumerated by the Judge in his judgment and referred to above in item (a) of his findings. The applicant's evidence that there was a basic salary of $8,000 per month was rejected by the Judge. All other hearsay related by the applicant was accepted by Pat when he gave evidence, and was considered by the Judge to be neutral to the central issue. Ground 1 simply does not help the respondents.

24. Ground 2 is a mixture of points of submission. It starts with the assertion that even if the Judge might not have given sufficient weight or any weight at all to Pat's evidence, the Judge did not err in law nor misdirect himself in finding that there was insufficient evidence to show that the deceased was performing the services as an employee and that the applicant failed to discharge the burden or proof. Our views expressed above have answered this point quite sufficiently and we do not propose to repeat ourselves.

25. Ground 2 also asks this court to accept that the Judge was correct in relying on the burden of proof to decide the case, and that this court should not allow the applicant to shift the burden of proof of absence of liability to the respondents. It asks us not to hold it against the respondents although the Judge did not believe Pat. We do not say that any of these submissions are incorrect. It goes on to point out that the Judge had the benefit of seeing the witnesses and Ground 3 submits that there were items of evidence given by and on behalf of the applicant that the Judge did not accept. However, these pieces of evidence that were rejected did not materially affect the conclusion that we have come to, expressed above. We have not attempted to, nor do we believe we are entitled, in the circumstances of this case, to interfere with the Judge's findings of primary facts based on his observation of how the witnesses testified. What we have been trying to do is to draw the proper inference from the Judge's own findings and the evidence that he would have accepted which he had failed to draw.

26. Ground 4 is that the Judge did not err in law or at all in dismissing the applicant's claim on the ground that there was no such material or fact adduced by the applicant which was capable of being believed or otherwise sufficient for the purpose of establishing the necessary employee relationship. In view of what we have already said, this ground is rejected.

27. At the conclusion of his submissions, Mr Kwok raised a point which he asserted would support a finding of a subcontracting relationship. He referred us to part of the witness statement of Pat which mentioned that the deceased refused two assignments offered by the 1st respondent on 1 and 6 December 1994 and those assignments were given to two other persons driving two trucks different from EL9576. Mr Kwok submitted that according to the travel document of the deceased produced at the trial, the deceased was in China on 1 December 1994 and this documentary evidence supported Pat's evidence that the deceased had the choice of whether to work for the 1st respondent. The Judge had not made any specific reference to these pieces of evidence in his judgment, and Mr Kwok requested us to hold that the Judge should have made a finding in favour of the respondents. In the light of the view held by the Judge of Pat's reliability and credibility as a witness, we do not think that the Judge would have accepted the evidence that the deceased refused to take up the 1st respondent's assignment on 1 December 1994. Had the Judge accepted it, he would have come to the conclusion that the deceased was more likely than not a driver working on his own account. Further, the fact that the deceased was in China on 1 December but not driving EL9576 does not necessarily mean that he had rejected an assignment from the 1st respondent. This point was not mentioned in the lengthy Respondents' Notice and we do not think that it could fairly be raised or could fairly be allowed to affect our judgment.

The cross appeal

28. The cross-appeal only arises for consideration if the appeal is dismissed. As we had allowed the appeal, the whole basis for ordering costs had been changed. We did not need to deal with the cross-appeal and Mr Kwok was asked not to address us on it.

Conclusion

29. We are of the view that looking at all the findings of the Judge and the evidence before him, a proper inference can be, and should have been, drawn that the deceased was working as an employee of the 1st respondent at the time when he met with the accident. We therefore allowed the appeal. We set aside the judgment in favour of the respondents. When Pat testified on behalf of the respondents before the Judge, it became clear that he did not dispute that at the material time of the accident, the deceased's work was that executed by or under the 1st respondent as the subcontractor of the 2nd respondent in the course of or for the purposes of the 2nd respondent's trade or business, within the ambit of s 24 of the Employees' Compensation Ordinance. Mr Kwok did not dispute this. We order that judgment be entered for the applicant against the 1st respondent as employer and the 2nd respondent as principal contractor in the sum of $776,500 as assessed by the Judge. Costs should follow the event. Therefore, we also made an order nisi as to costs here and below in favour of the applicant against both the 1st and 2nd respondents, pursuant to Order 42, rule 5B(6) of the RHC. The applicant's own costs be taxed in accordance with the Legal Aid Regulations.