PUN WAI MING v. 曾仲佳

DCEC 946/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO. 946 OF 2006

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J U D G M E N T

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Background

1.  Mr. Pun works as driver of a lorry between Hong Kong and Mainland China.  He was injured when he was alighting from his lorry which he had stopped at the Customs point at Man Kam To in China.  Mr. Pun said he slipped and fell, injuring his left elbow as a result.  He seeks compensation under the Employees Compensation Ordinance from Mr. Tsang, who he claims to be his employer. 

2.  Mr. Tsang denies that Mr. Pun was his employee.  He claims that Mr. Pun had agreed to work for him as an independent contractor under a co-operation agreement.  Mr. Tsang also denies that the injury sustained by Mr. Pun resulted from an accident arising out of and in the course of employment, even if he were an employee.

Issues

3.  The issues which arose for determination at trial are :

(1)   whether Mr. Pun was an employee of Mr. Tsang, or an independent contractor carrying on business on his own account;

(2)  whether Mr. Pun sustained injuries in the manner he claimed, in the course of his employment;

(3)   if Mr. Pun had sustained injuries in the course of his employment, the amount of compensation payable.

Whether Mr. Pun was an employee of Mr. Tsang, or an independent contractor carrying on business on his own account

Legal principles

4.  I can add very little to and hence respectfully adopt the words of Ribeiro PJ (in Poon Chau Nam v. Yim Siu Cheung (2007) 10 HKCFAR) when describing the often difficult task of the court in deciding whether or not a person is an employee of another.

"In the great majority of cases, deciding whether or not A is B’s employee presents little difficulty.  Most people take up jobs which are regular and stable, doing the work assigned to them, supervised by the boss and receiving regular wages and other benefits in return.  They are obviously employees.  However, in certain instances, the answer to the question whether an employer-employee relationship exists is elusive, as recognized by Lord Griffiths in Lee Ting Sang v. Chung Chi Keung v. Another [1990] 1 HKLR 764, at 766G.

This has proved to be a most elusive question and despite a plethora of authorities the courts have not been able to devise a single test that will conclusively point to the distinction [between an employee and an independent contractor] in all cases."

5.  The modern approach to the question whether a person is an employee, as adopted in the case of Poon Chau Nam  (supra) itself, is to examine all the features of their relationship against the background of the indicia of employment with a view to deciding whether, as a matter of overall impression, the relationship was one of employment, bearing in mind the purpose for which the question is asked.  The passage of Mummery J’s judgment in Hall v. Lorimer [1992] 1 WLR 939 at 944, cited in the judgment of Ribeiro PJ in Poon Chau Nam, provides the most useful guidance in the task which the court undertakes :

"In order to decide whether a person carries on business on his own account it is necessary to consider many different aspects of that person's work activity.  This is not a mechanical exercise of running through items on a checklist to see whether they are present in, or absent from, a given situation.  The object of the exercise is to paint a picture from the accumulation of detail.  The overall effect can only 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.  It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details.  Not all details are of equal weight or importance in any given situation.  The details may also vary in importance from one situation to another.”

Factual evidence on relationship

6.  Adopting the approach described above, it is essential to find first the features of the working relationship between Mr. Pun and Mr. Tsang.

7.   There are aspects of their relationship which are not disputed.  Mr. Pun  drove a 24-ton truck which was owned and provided by Mr. Tsang.  Mr. Tsang owned a total of 4 of such trucks all employed in the use of Mr. Tsang's business of providing transport of goods between Hong Kong and China.  Mr. Tsang received orders from his clients, and assigned orders to Mr. Pun.  Mr. Pun was paid fixed fees for each consignment or transport, depending on the destination and distance of the journey.  The agreed rates were, for example, HK$1800 for deliveries to Guangzhou and Shunde,  HK$1500 for deliveries to Pan U, HK$1000 for the Donguan area, and HK $800 for Shenzhen.  The transportation charges payable by the clients were negotiated and determined by Mr. Tsang. Mr. Pun had to pay for the petrol cost and road toll charges.

8.  Other aspects of the working relationship between Mr. Pun and Mr. Tsang are disputed.  These relate to whether Mr. Pun had to bear any maintenance costs in respect of the truck, and whether the parking fees were paid for by Mr. Tsang.  There is also a dispute as to whether Mr. Pun could use the truck for purposes other than for the transportation of goods on Mr. Tsang's orders, and whether Mr. Pun hired workers or helpers for his tasks.

9.  Mr. Tsang relies on a written agreement made between Mr. Pun and himself, bearing date 10 April 2005.  This is described as a "Co-operation Agreement" ("Agreement"), and sets out the terms and conditions of Mr. Tsang's provision of the truck to Mr. Pun.  These include terms that Mr. Tsang was responsible for providing business, whereas Mr. Pun was responsible for the related operating costs and the operation of transportation.  It provides that Mr. Pun undertakes the work on a fixed rate basis in the absence of an employment relationship.  Under the terms of this Agreement, Mr. Pun is to complete the work provided by Mr. Tsang responsibly and expeditiously, and to be responsible for the maintenance and custody of the truck provided by Mr. Tsang, including repair costs up to HK $1000 and 50% of the excess of such repair costs.  The Agreement further provides that in the interim that Mr. Tsang cannot provide work to Mr. Pun, Mr. Pun may decide on his own volition to accept other transportation work.  There is no provision for Mr. Pun to share with Mr. Tsang in any way the fee for such other work.  Mr. Pun cannot delay the work assigned by Mr. Tsang, and in the absence of any orders, the truck is to be parked at a location provided by Mr. Tsang or at a location determined by Mr. Pun, and the parking fees required are to be paid for by Mr. Pun.  Under the Agreement, Mr. Tsang is only responsible to provide motor vehicle insurance for the truck, and Mr. Pun is to be responsible for his own insurance for accidental death or injury.

10.  There is no dispute that the Agreement was signed by Mr. Pun.  Nor is there dispute that Mr. Pun only signed the Agreement on 29 April 2005, when Mr. Pun was in the hospital after the accident in question which occurred on 28 April 2005.  However, according to Mr. Tsang, he had shown Mr. Pun earlier, on about 16 December 2004, a copy of an agreement signed by another of Mr. Tsang's independent contractor drivers, Mr. Kai, ("Mr. Kai's Agreement") which was the same as the Agreement, and Mr. Pun had already agreed to the terms then.  Mr. Tsang claims that he then drew up the Agreement for Mr. Pun to sign, but despite making an earlier appointment on 10 April 2005 for Mr. Pun to sign the Agreement, it was never actually signed until 29 April 2005.

11.    According to Mr. Tsang's evidence, he first met Mr. Pun on about 16 December 2004, upon introduction by one of Mr. Tsang's contractors, Mr. Tse.  The meeting was arranged for the purpose of exploring whether there could be business opportunities between Mr. Tsang and Mr. Pun.  According to Mr. Tsang, Mr. Tse and Mr. Tsang briefly explained to Mr. Pun at the meeting the mode of business operation between Mr. Tsang and Mr. Tse in relation to cross border transportation, and Mr. Tsang proposed that if agreement could be reached, he and Mr. Pun could adopt the same mode of business.  According to Mr. Tsang's evidence, he then explained to Mr. Pun the details of the working arrangement proposed.  Mr. Tsang would provide the truck to Mr. Pun.  Mr. Pun would be a contractor of Mr. Tsang.  Mr. Pun would be responsible for the operation of the truck and the related charges for its operation.  Mr. Tsang may from time to time request Mr. Pun to deliver the goods for Mr. Tsang's clients to a designated place.  The more service Mr. Pun provided, the more he would earn.  Mr. Pun had the right to use the truck to provide service to his own customers.  Mr. Pun would provide the fuel for the use of the truck, be responsible for the maintenance of the truck, any penalty or fine for any traffic offense, any damage to the truck (unless not caused by accident), toll and miscellaneous fees, as well as insurance for his own personal injury and injury of any of his employees. 

12.  According to Mr. Tsang, Mr. Pun expressed agreement to all the above terms.  They then went to have breakfast together, in the course of which Mr. Tsang obtained a signed copy of Mr. Kam's Agreement from his car which he used as his mobile office, and showed Mr. Kam's Agreement to Mr. Pun.  According to Mr. Tsang, Mr. Pun read Mr. Kam's Agreement and said that he was agreeable to the terms set out therein.  Mr. Tsang explained that he would provide a clean copy incorporating the same terms for Mr. Pun to sign later, and Mr. Pun agreed.

13.  Mr. Tsang claims that Mr. Pun started work in early January 2005, and Mr. Tsang had contacted Mr. Pun several times to sign the Agreement, but they were both busy.  They finally arranged to meet on 10 April 2005, which was the reason why Mr. Tsang put this date in the Agreement.  However, Mr. Pun was not available on the scheduled date, and it was only after the accident when Mr. Tsang arranged to meet with Mr. Pun in the hospital that he took the Agreement to Mr. Tsang to sign, which he did.

14.  According to Mr. Pun, when he was in the hospital after the accident, he had asked Mr. Tsang for a loan of HK $20,000.  When Mr. Tsang came to the hospital to see him on 29th April 2005, he showed him the Agreement and asked him to sign it.  Mr. Pun claims that he signed the Agreement under financial pressure, thinking that Mr. Tsang would give him the advance of HK $20,000 if he signed the Agreement, but in fact  the loan was never made.  He denies that there ever was ever an appointment scheduled on 10 April 2005 to sign the Agreement, as Mr. Tsang alleges.

15.   Mr. pun

15. After hearing the testimony given by Mr. Tsang and Mr. Pun, I prefer Mr. Tsang's evidence relating to the circumstances leading to the preparation of the Agreement and its final execution by Mr. Pun on 29 April 2005.  I accept Mr. Tsang's account of his meeting and discussions with Mr. Pun as inherently more probable on a balance of probabilities, compared to Mr. Pun's bare denial of his earlier meeting with Mr. Tsang and Mr. Tse, and his suggestion that the Agreement was only given to him for the first time on 29 April 2005, when he signed it immediately. 

16.  I accept therefore that Mr. Tsang and Mr. Pun had discussed the terms of their working arrangement, and that the essential rights and obligations of the parties were as set out in Mr. Kam's Agreement, which was shown to Mr. Pun and read and accepted by him. Counsel for Mr. Pun points out that the Agreement signed by Mr. Pun contains an additional sentence at the end which was not contained in Mr. Kam's Agreement.  I am prepared to exclude this additional provision from the terms of the agreement made between Mr. Tsang and Mr. Pun, on the basis (as Counsel for Mr. Pun suggests) that it was not part of the agreement made between Mr. Pun and Mr. Tsang, but nothing in fact turns on this inserted provision at all. 

17.  My acceptance of the Agreement, however, does not mean that I accept that Mr. Pun is an independent contractor undertaking transportation of goods for Mr. Tsang, and not an employee, simply because the Agreement declares it so.  The authorities are clear that it is for the court and not the parties to determine the legal nature of their relationship, such that the parties' own description of their relationship is not determinative (Chan Kwok Kin v. Mok Kwan Hing [1991] HKLR 631). 

18.  Mr. Pun denies that he had ever been required to pay for maintenance or repair costs.  He also claims that he had never accepted any transportation work for clients other than Mr. Tsang's clients and pursuant to his orders.    I accept the submissions made by Counsel for Mr. Tsang that the court should not simply focus on what had actually occurred but should look at the obligations by which the parties were bound (Express & Echo Publications Ltd. v. Tanton [1999] I.C.R. 693).  The Agreement provides clearly that Mr. Pun is responsible for the maintenance of the truck, as well as part of the cost of repairs.  The Agreement also confers on Mr. Pun the power to accept other transportation work in the event that Mr. Tsang does not provide work for him.  If a contractual term is not enforced, it does not justify a conclusion that such a term is not part of the agreement.  In the light of Mr. Tsang's evidence on how the Agreement was negotiated and accepted by Mr. Pun, which I accept, I accept as a fact that Mr. Pun has the duty to bear the costs of maintenance and repairs and is entitled to undertake other transportation work.

19.  I also accept that the parking fees were borne by Mr. Pun, as there is nothing in the running account documentation produced at trial which shows that these were included in the amounts sought to be reimbursed from Mr. Tsang on a monthly basis, and the Agreement provides that the costs for parking are to be borne by Mr. Pun.

20.  Whether Mr. Pun could and did hire helpers is another contested matter.  The Agreement does not contain any provision in this respect.  Mr. Pun himself denies that he had hired any helper.  However, according to Mr. Tsang, Mr. Pun had hired a driver in China named "Ah Kwai" to assist him.  Although the truck is registered with the Hong Kong and Mainland Chinese control points as being driven by Mr. Pun, and travel documents of the driver have to be checked at control points, Mr. Tsang's evidence is that it is not unusual for a Hong Kong driver to hire a substitute driver to take over the driving of the vehicle after crossing the border control points.  According to Mr. Tsang, this arrangement is profitable for the Hong Kong driver because the wages of a Mainland driver are very low, and by hiring a Mainland driver, the Hong Kong driver can either return to Hong Kong to do casual work or otherwise do his own work in China.  It is not in dispute that Mr. Pun resided with his family in China.

21.  According to Mr. Tsang, he had on one occasion met Mr. Pun during a meal in China, and on that occasion, Mr. Pun had introduced Mr. Tsang to Ah Kwai, and had informed Mr. Tsang that Ah Kwai was the employee Mr. Pun had hired to assist him in delivering goods in China.

22.  Mr. Li Fu Pen also gave evidence on behalf of Mr. Tsang.  Mr. Li works in China.  His job is to prepare customs declaration forms for clients supplying goods to entities in Hong Kong.  According to Mr. Li, he was working in the loading area just outside Customs and Excise at Man Kam To in China on 28 April 2005, and supervised workers loading goods of a company named Loong Hai on to a lorry.  It is not disputed that Loong Hai was the company which was delivering goods to Mr. Tsang's client in Hong Kong, on the consignment which was being delivered by Mr. Pun on the day in question.  The loading process took about 20 to 30 minutes.  Mr. Li's evidence is that during this process, he handed some documents for the goods to the driver of the lorry.  About 2 hours later, Mr. Li received a telephone call and was requested to bring the customs declaration documents for the Loong Hai consignment of goods to the Customs checkpoint for inspection by Customs.  According to Mr. Li, when he brought these documents to Customs, found the lorry and handed the documents to the driver, he noticed that the driver was Mr. Pun but was not the same driver he had seen inside the lorry at the loading area earlier on.

23.  Mr. Tsang relies on Mr. Li's evidence to support his contention that Mr. Pun had hired an assistant to drive Mr. Tsang's lorry, and that it was this assistant who drove the lorry to the loading area on 28 April 2005, as witnessed by Mr. Li.  This is denied by Mr. Pun.

24.  Counsel for Mr. Pun submits that Mr. Li's evidence is ambiguous and inconclusive.  It is submitted that Mr. Li did not say that he saw any one driving the lorry at the loading area.  Mr. Li did not speak to the person he saw in the lorry and did not find out whether he was the driver.  Moreover, Mr. Li's evidence is that he did not pay much attention to the drivers in the course of his work in the loading area, as there were so many different drivers at the location each time.  Counsel for Mr. Pun submitted that Mr. Pun could not benefit by arranging for his assistant to drive any distance without crossing the border.  It is counsel's submission that there is a real risk that Mr. Li was mistaken when he said that the driver of the vehicle in the loading area was not Mr. Pun.

25.  It is not for the court to speculate what commercial or other practical benefit Mr. Pun could obtain by hiring an assistant to drive the lorry after it crossed the border into China.  Suffice it to say that from the evidence, it does not appear to be an impossible task for an assistant driver to be involved at some stage of the transportation.  There is no reason why Mr. Li should lie in his evidence, although I accept that there is no clear evidence that someone other than Mr. Pun had driven the vehicle into or out of the loading area.

26.  On the question of the general credibility of Mr. Pun, I would mention here that he had not been entirely forthright in the evidence he presented to the court in these proceedings.  In his witness statement made on 16 September 2007, Mr. Pun claimed that he was granted sick leave of 141 days in total, from 28 April 2005 to 15 September 2005.  He made a supplemental statement on 18 April 2008, but did not correct the number of days of sick leave.  It was only after Mr. Pun's legal advisers asked for a Statement of Mr. Pun's travel records that it was revealed that he had left the hospital in Hong Kong to go to China on 30 April 2005, and only returned to Hong Kong on 3 May 2005.  He may have good reasons to return to China but he did not volunteer the fact that he had in fact left the hospital for the days in question, until trial or until after the disclosure of the Statement of his travel records from the Hong Kong Immigration Department.  It also appears from the evidence that Mr. Pun had no hesitation in suggesting to Mr. Tsang that they should claim that Mr. Pun was an employee of one of Mr. Tsang's clients in order to obtain the benefit of insurance coverage.  This in my view affects Mr. Pun's credibility.

27.  Having regard to the conflicting evidence of Mr. Tsang, Mr. Li and Mr. Pun, I consider that there may be some ring of truth to Mr. Tsang's account of his meeting with Mr. Pun and Ah Kwai, and the fact that Mr. Pun had a driver to assist him in China.  Whether, and how, this affects my decision on the relationship between Mr. Tsang and Mr. Pun will be dealt with below.

28.   Mr. Pun Mr. pun

28. Having found the features of the parties' working relationship, I now proceed to examine such features against the background of the indicia of employment to determine whether, as a matter of overall impression, the relationship was one of employment.  To use Mummery J's graphic description, the picture painted has the following details.

29.  Mr. Tsang owned and provided the truck which was driven by Mr. Pun.  There is no evidence that Mr. Pun made any contribution to the capital of Mr. Tsang's business of providing transportation of goods between Hong Kong and China.  It was Mr. Tsang who negotiated and managed the orders received from his clients, including the determination of the rates of the transportation fees payable by the clients.  Mr. Tsang decided on the orders to be assigned to Mr. Pun and the other drivers. Mr. Pun was paid fixed fees for each consignment or transport he undertook, which fees depended on the destination and distance of the journey.  The expenses which Mr. Pun had to bear were the actual cost, road toll charges, maintenance costs in respect of the truck, and the parking fees.  This feature itself is inconsistent with a contract of service.  However, there is no suggestion or evidence that Mr. Pun had any share of or right to the profits of the transportation business, or that he had to bear any share of losses.  Mr. Pun could use the truck for purposes other than for the transportation of goods on Mr. Tsang's orders, and Mr. Tsang did not object to Mr. Pun hiring a driver to assist him in China.  Mr. Pun did not require supervision or control over the manner of carrying out his work.  He could decide on the route to be taken.

30.  The next step in the approach suggested by Mummery J is to evaluate the overall effect of the detailed picture, by viewing it from a distance and making a considered, qualitative appreciation of the whole.  Not all the details in the picture are of equal weight or importance in any given situation, and the details may vary in importance from one situation to another.

31.  In my opinion, the details which bear more importance in the picture painted of the relationship between Mr. Tsang and Mr. Pun are, first, that the transportation business belonged to Mr. Tsang who managed it and determined the charges payable by the clients without any consultation with Mr. Pun, and Mr. Pun bore no financial risks.  The only financial rewards reaped by Mr. Pun were his remuneration based on the journeys which he made.  It is fair to say that his pay may be reduced if fuel costs rise, or if there should be an increase in the amount of the toll and other charges which he had to bear.  However, I would not consider this to be the same as bearing the losses of the business or as contributing to the capital of the business as such.  I would regard it more as being related to whether the remuneration package under the working arrangement is attractive to the driver.  Similarly, it appears from Mr. Tsang's evidence that on occasions, Mr. Pun received from clients directly additional payments if there should be a change in the route required by the client, or if there should be delay in the transportation not attributable to Mr. Pun.  Again, I would regard this more as a perquisite to the driver, than as necessarily contradictory to a contract of employment.

32.  The second feature relates to control.  It is now recognized that the absence of control in the manner of doing the work does not, in itself, determine the absence of a contract of employment.  Whilst Mr. Pun has relative freedom in his work, in the choice of the routes to take, and to the extent even of being able to hire a driver to assist him (as Mr. Tsang maintains), Mr. Pun has to deliver the goods expeditiously, within the time specified by Mr. Tsang and, according to Mr. Tsang's evidence, Mr. Pun has to give priority to Mr. Tsang's orders.  Mr. Pun can accept transportation orders from other parties, but that does not contradict the existence of a contract of employment between Mr. Tsang and Mr. Pun in the context of the Employees Compensation Ordinance, which includes casual employment within the definition of "employee".

33.  The fact that Mr. Pun can hire a driver to do his work creates more difficulties.  If Mr. Pun can delegate his work to Ah Kwai, instead of providing his own skill and service in the performance of his work under his agreement with Mr. Tsang, it may be inconsistent with their relationship being a contract of service. However, the evidence presented in this case is not clear as to how Ah Kwai was involved in Mr. Pun's work, or the extent to which Ah Kwai was involved.  According to Mr. Tsang, when he was introduced to Ah Kwai, Mr. Pun had simply said that Ah Kwai was employed by Mr. Pun "to assist him to deliver goods" in China.  Mr. Tsang did not elaborate further what this meant.  Mr. Li's evidence does not shed further light on this.  He only said that on one occasion, he had seen someone other than Mr. Pun in the lorry whilst it was in the loading area.  He did not say that someone other than Mr. Pun was driving the lorry on the day in question.  I do not consider that there is sufficient evidence for me to find that Mr. Pun had delegated his driving services to someone else, to the extent that it can support the existence of a contract for services.

34.    Having evaluated the overall effect of the details accumulated from Mr. Pun's work activity under his arrangement with Mr. Tsang, the picture which emerges and the overall impression which it gives is that Mr. Pun was working for Mr. Tsang's business under a contract of service. 

Whether Mr. Pun sustained injuries in the manner he claimed, in the course of his employment

35.  Having heard the parties' evidence and reviewed the contemporaneous documents including the ambulance report and the hospital reports relating to the injuries sustained by Mr. Pun, I accept Mr. Pun's evidence that his injury was sustained because he slipped when he was alighting from his lorry at Man Kam To.  The only evidence from Mr. Tsang is that Mr. Pun had telephoned him to say that he had been injured when he was trying to get over some railing after alighting from the lorry.  I do not regard this as sufficient to show that the accident did not arise in the course of Mr. Pun's employment, bearing in mind the wide test as to whether an accident arose out of and in the course of an employee's employment for the purpose of seeking compensation.  In Lam Sik v. Sen International Ventures Corp (HK) Ltd.[1994] 3 HKC 405, the test in the earlier case of Kavanagh v. Commonwealth (1960) 103 CLR 547 was applied:

"… anything at all that happens to a man while he is at work happens in the course of his employment and if it happens unexpectedly, it is an accident in the course of the employment."

The amount of compensation payable

Section 9

36.    According to the Certificate of Assessment issued by the Employees' Compensation (Ordinary Assessment) Board dated 25 September 2006, against which there is no appeal, Mr. Pun was assessed to have suffered 3% permanent loss of earning capacity. 

37.  The parties accept, for the purposes of calculation of the compensation payable, that Mr. Pun's net earnings for March 2005 are $10,437. 

38.  The amount payable under s.9 of the Ordinance is accordingly $10,437 x  96 x 4% = $40,078.

Section 10

39.  The parties agree that the period of sick leave for which Mr. Pun is entitled to claim compensation is 2 months 18 days.  The compensation payable under s. 10 is: $10,437 x 2 months 18 days x 4/5 =   $21,709.

Section 10A

40.    The parties also agree the sum of $1,320 as medical expenses.

Summary

41.  The total compensation payable to Mr. Pun is :

(1)	loss of earning capacity	$40,078
(2)	sick leave payment	$21,709
(3)	medical expenses	$  1,320
		$63,107

42.  Mr. Pun is entitled to interest from the date of the accident to the date of payment, as well as the costs of the action, to be taxed if not agreed, with certificate for Counsel.  There is dispute as to the costs of the first day of the hearing, when the matter was adjourned for the parties to take instructions on figures relating to Mr. Pun's net earnings.  As the adjournment resulted in Mr. Pun's net earnings being reduced from $16,000 as originally claimed to $10,437, I consider that the appropriate order for the costs reserved relating to the adjournment should be that such costs be borne by Mr. Pun.  Mr. Pun's own costs are to be taxed in accordance with the Legal Aid Regulations.