Fok Kall v. Wong Cheung Hon

DCEC851/1999

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES COMPENSATION CASE NO. 851 OF 1999

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J U D G M E N T

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1. In this matter, the applicant, who is a lorry driver by occupation, claims compensation under various sections of the Employees' Compensation Ordinance ("the Ordinance"). Quantum has been agreed, subject to liability, in the sum of $533,824. The sole issue that I need to determine is whether the applicant was an employee of the respondent or whether their relationship was based on a contract for services, the applicant being an independent contractor of the respondent?

2. It is helpful to first set out the principles, which are well-settled, upon which the court must decide on a proper application of the facts to those principles, whether the parties' legal relationship is one of master and servant or merely a contract for services. The Ordinance, of course, only allows for compensation as between master and servant. The applicant, therefore, carries the burden of showing that he was an employee of the respondent. Various tests have been suggested which will assist in determining whether an applicant was an employee or merely an independent contractor. No one test is necessarily conclusive and some of the suggested considerations may have no application to the particular facts of the matter before the court. Each case will have its particular features which will be determinative within the framework of the guidelines suggested by the authorities. With that in mind, I now turn to those authorities.

3. An extremely helpful starting point is the decision of Cooke J. in Market Investigations Limited v Minister of Social Security [1969] 2 QB 173, whose test, which I will set out in a moment, has been approved and applied in a number of subsequent decisions, particularly that of the Privy Council in the Hong Kong case of Lee Ting-sang v Chung Chi-keung [1990] 2 WLR 1173. At pages 184 to 185, Cooke J. suggested the following:

"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 for service. No exhaustive list has been 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 has 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 task."

4. I should also make particular reference to the current edition of Chitty, Volume II, where the learned editors on an analysis of a number of authorities that bear on this issue have set out the main factors or indicia which should be considered in coming to a conclusion based on the evidence before the court. There are 10 factors which have been set out, but I should remind myself that some will have no relevance or little relevance having regard to the facts before me and others, such as that referring to the payment of National Insurance Contributions will be of no assistance and inapposite to the Hong Kong situation. The factors are these (see Volume II, pages 530 to 536, paragraphs 35.08 to 35.23):

"(i) Control and Superintendence

An employer normally has the power to direct and control the work of the employee but the ultimate question is not what specific order or whether any specific orders were given but who is entitled to give the orders as to how the work should be done (see Mersey Docks and Harbour Board v Coggins & Griffiths (Liverpool) Limited)) [1947] AC1, 17. The greater the amount of control exercised over the details of the work to be done the more likely the inference that the relationship is one of employment but the question of control is only one of the factors to be considered and it is far from conclusive.

(ii) The Organisation Test

An employee is usually a regular unit in the organisation of a business. He is an integral part of the firm, not a casual or temporary person engaged only for the purpose of completing a specific task which is accessory to the main business. The question has been posed in a negative form by Cooke J in Market Investigations v Minister of Social Security supra., is the person who has engaged himself to perform these services performing them as a person in business on his own account?

(iii) Power of Selection and Appointment

Usually it is an indication of employment that the employer has the power to select and to appoint his employee but the absence of this power is not conclusive against a contract of employment.

(iv) The Power to Dismiss or Suspend

This is an important indication of the relationship of employment. Although a person may have no right to control the manner in which another does work, if the former can dispense with the services of the latter by giving a certain period of notice, the relationship will normally be one of employment since an independent contractor cannot be dismissed. Nevertheless, other factors can outweigh the power to dismiss.

(v) Payment of Wages or Salary

The payment of wages or salary or of holiday pay is another important pointer to the relationship of employment. Normally a regular fixed sum is payable to an employee but it is possible for an employee to be remunerated solely by tips received or wholly on a commission basis. Similarly, the manner in which the remuneration is to be calculated may point to a contract of employment. The typical employee is paid according to time worked but sometimes an employee may be paid by the piece and sometimes by commission. If, however, payment is by the job, i.e. in relation to a complete task, this points to an independent contractor.

(vi) Supply of Equipment and Ownership of Assets

If one party to the contract supplies the tools, machines or equipment used by the other party, this points to a contract of employment since an independent contractor normally provides these for himself. In Ready Mixed Concrete (Southeast) Limited v Minister of Pensions and National Insurance, an owner-driver of a concrete mixing lorry was held to be an independent contractor largely by reference to his ownership of the lorry despite the fact that the lorry was subject to a hire purchase agreement with an associated company and that the driver was in various senses required to work as part of the company's organisation.

(vii) The Fixing of Times and Place of Work

The power to fix the hours or times when a person is to work or when he is to take holiday is another pointer to a contract of employment. Another is the power to direct where he must work but these factors are not conclusive.

(viii) Personal Performance

A person cannot normally be an employee if he is entitled to delegate the entire performance of his work to another person but a person may possibly be an employee although he himself with the permission of the employer employs assistants to help him.

(ix) The Extent of the Obligation to Work or to Employ

If the contract entitles some person to full-time or exclusive services of the other person, this points to the contract being one of employment but if it is left entirely to one party to the contract to choose whether to do any work or not, for example, a travelling salesman wholly on commission, there is almost certainly not a contract of employment.

(X) Payment of Social Security Contributions and Income Tax

..."

As I have already observed this is of no assistance in a Hong Kong situation and I need not make any further reference to it.

5. These, therefore, are the indicators that I should be considering. Inevitably, it is highly unlikely that in any particular case all the factors which should properly be taken into account will only favour one party. Some factors will favour one and others the other party. Proper weight must be attached to each in the context of the particular case. Some will clearly be more weighty than others. It is unlikely that one will be conclusive of itself above all others. The court must balance the relevant factors and come to a rational view as to which side of the line the relationship falls. In many instances, and this is one of them, the balance is a fine one. There will be weighty considerations favouring both parties. The court will have to weigh these with care and notionally stand back from the evidence to see which way the scales should ultimately fall. This is the exercise that I must now embark upon.

6. Although there are some sharp disputes of fact, overall there is a consensus between the parties as to the factual background to their relationship. What I propose to do is to relate here the relevant evidence as I find it. In instances where there is a dispute as to the evidence, I shall attempt to provide reasons for my conclusion on the facts.

7. Firstly, the accident. It is convenient to deal with this first because apart from the fact that it is the incident which has triggered this application, it has also given rise to the sharpest dispute on the evidence which I am required to resolve. I have already related that the applicant was a lorry driver by occupation. On 23 April 1998, the applicant says that he was the driver of a lorry, Registration No. HC3695. At about 10.30 am, he received a telephone call from a Mr Lai Hon-man, a mainland lorry driver who from time to time the applicant would ask to drive as a substitute for him in circumstances which I must relate more fully presently. The applicant was on his way to a place called Zhangmutou in the general vicinity of Tung Koon, Guangdong. Lai asked the applicant if he could give him a lift to Shenzhen on his way back to Hong Kong. The applicant agreed. The two men met up at Cheun Kee, which is not far away, and after the applicant had loaded a consignment of fruit and vegetables which he would transport back to Fanling Vegetable Market for the respondent, he set off for Shenzhen on his way back. He says he was the driver and Mr Lai was in the front passenger seat next to him. At Lun Gap, Tung Koon, he was driving on the main road doing about 50 kilometres an hour. A van then emerged from a side road in front on him on his near side when he was about 20 or 30 feet from the side road. In order to avoid a collision, the applicant braked and steered to his offside. The lorry struck a raised circular platform in the centre of the carriageway. The platform was one used by traffic policemen to conduct traffic from. Fortunately, there was no policeman standing on it at the time. The collision with the platform caused the lorry to overturn. Initially, he was trapped in the cab of the lorry and had to be removed from it and taken by ambulance to a nearby hospital.

8. The respondent has called a witness, a Mr Lo Hui-kwan, to say that Mr Lai and not the applicant was the driver shortly before the accident and therefore, by implication, that Lai was still the driver moments later when the lorry overturned. Mr Lo says that he had met the applicant on previous occasions and that he could therefore recognise him. He also knew the red lorry that he was driving and knew its number plate. What Mr Lo says is that at or about 11 am, he was in a lorry sitting next to the driver, travelling in the opposite direction. He estimates that they were doing about 60 kilometres an hour. The traffic was not heavy. He could not say what speed the applicant's lorry was doing. As the two vehicles passed each other, he recognised the applicant seated in the passenger seat next to the driver with his left leg up on the dashboard. He estimates that he first saw that it was the applicant when the lorry was about 7 metres away from him. The applicant denies that he was the passenger. He says that he was the driver. I need to resolve this dispute. At the very least, it goes to credit so far as the applicant is concerned and on other aspects of the case, if I resolve this against the applicant, it might affect the issue of whether he sustained this accident in the course of his employment, assuming that I find him to be an employee of the respondent.

9. At first blush, Mr Lo's evidence, which was given with confidence and conviction, may appear to be compelling. This was recognition of somebody that he already knew in a lorry that he also knew. But the contrary case needs to be attended to with care. This was a fairly major road with a number of lorries travelling on it at any given time. What is also particularly significant is that Mr Lo says he first recognised the applicant when the lorries were about 7 metres apart. His vehicle was doing 60 kilometres an hour. The applicant says that when he collided with the platform, he was travelling at about 50 kilometres an hour. Mr Lo cannot give a speed for the applicant's lorry but it is reasonable in the all the circumstances to conclude that both were doing about the same speed in identical traffic conditions. This would produce a closing speed of about 120 kilometres an hour and at 7 metres apart, Mr Lo would have had no more than about three-tenths of a second to digest the information that the front seat passenger, with his leg on the dashboard, was of all people the applicant. Making every allowance for the fact that the two men knew each other, the risk for erroneous recognition (I do not use the expression identification because they already knew each other) is far too great.

10. I have looked at the other evidence which may be capable of corroborating Mr Lo. Miss Ip, who appears for the respondent, says that this is provided by the de-gloving injury sustained to the applicant's left foot. She also points to the fact that glass had to be removed from his foot in some quantities. This type of aftermath is more consistent with an exposed leg put up on the dashboard. Such ex post facto reconstruction in these circumstances is at best speculative. It seems that the de-gloving injury of the left leg is equally consistent with the applicant getting his foot trapped under one of the pedals as he drove the lorry and glass getting into the foot as the lorry turned over and the glass breaking and showering the occupants of the cab.

11. I am afraid the injuries cannot assist Miss Ip. I am unable to accept Mr Lo's evidence. In any event, I am satisfied that the applicant has given a truthful account as to the fact that he was the driver. In coming to this conclusion, I have understood that the burden is on him to demonstrate this on the balance of probabilities, which I am satisfied that he has. I reject Mr Lo's evidence as being mistaken. In this regard, I am bound to say that I thought he had rather gilded the lily when he said that he also saw and recognised the applicant's lorry's registrations, Hong Kong and mainland. To do that and spot the applicant as the front seat passenger from 7 metres at a closing speed of about 120 kilometres an hour is rather overdoing it. At the end of the day, I am uncomfortable about the accuracy of Mr Lo's testimony. He was trying too hard to make out what he hoped would be a convincing case. So this issue is resolved in the applicant's favour.

12. Related to the accident there is also a dispute, on the pleadings at all events, it was not pressed particularly by Miss Ip in her final speech, that the route being taken by the applicant when he met his accident was outside the permitted area for which his lorry had been licensed by the mainland authorities and with this in mind, I have been furnished with a plan to show the various locations that relate to the trial. The applicant says that the route taken by him is certainly within the permitted area and as best as I can judge, it is. But in any event, the respondent has called a Mr Lee Shu-kwan, a colleague, to speak largely on the nature of his and the other driver's working arrangements with the respondent, but in the course of his evidence, he very frankly explained that drivers would go "off-route" if that meant that they could get to the places where they had to pick up consignments and get them back to Hong Kong. The general idea is to pick up as many consignments as possible and thereby maximise their income. If and when they were caught driving on a road for which they were not licensed, then they paid the fine and treated it very much as a business expense. This was the accepted way of carrying out their job.

13. It seems to me that even if the accident occurred at a place not included in the applicant's licence, that fact of itself would not take him out of the course of his employment. He was at the time bringing a consignment of vegetables back to Hong Kong which is what he was paid to do and so, subject to the main issue in the case, the accident and the resulting injuries were in the course of and arose out of his employment, as required by section 5(1) of the Ordinance. And so I also make that finding in the applicant's favour.

14. I now turn to the main parts of the evidence which bear on the precise working relationship between the parties. The applicant had started working as a porter at the Fanling Fruit and Vegetable Market and it was there that he came to meet the respondent, whose wife ran a vegetable wholesale business based at the market. The respondent runs a small fleet of lorries which go to various locations in Southern Guangdong to pick up consignments of fruit and vegetables, and to a lesser extent livestock, which are driven back to Fanling from where they are sold into the Hong Kong wholesale and retail vegetable market. The various locations in Guangdong are, as I understand it, wholesale markets which supply both Hong Kong and the mainland domestic market. The applicant asked the respondent whether he might join his business once he obtained a lorry driver's licence. He already knew other drivers who were part of the respondent's team driving into China. The latter agreed and the applicant started his driving job in about July 1997, some 10 months before the accident.

15. The essential elements of the relationship are the following:

The respondent supplied the lorry which at the time was on hire purchase. In the case of some drivers, the lorry would be registered in the driver's name, although the respondent who would discharge the hire purchase payments was the beneficial owner. In the applicant's case the lorry HC3695 was registered in the respondent's name. The respondent would also pay for the fuel and oil consumed by the lorry and he would pay for servicing and repairs. Additionally, he paid for the vehicle insurance and he arranged and paid for the various permits and licences which enabled the lorry and its driver to operate on the mainland. The applicant would get travel and medical insurance for himself to cover illness or injury in China for a fairly modest monthly premium. It is convenient to observe at this stage that these features taken by themselves would favour a relationship of employer and employee (see factor No. (6) as set out in Chitty above).

16. As to the carrying out of the work, the applicant was very much part of a team of drivers all driving lorries owned by the respondent. They would keep themselves as busy as they could, carrying consignments every day and, if possible, more than one consignment. The applicant has said that he was allocated his daily tasks by the respondent, but I do not think this fairly describes the situation. I have heard from the respondent and also from Mr Lee, and on balance I prefer their evidence on this aspect. Over a period of time, drivers might develop a working relationship with various clients on the mainland who would use their services repeatedly and they would carry consignments for them without the necessity of having to take any instructions from the respondent himself, although on occasions they might be directed by the respondent to bring a particular consignment.

17. To facilitate their work, the team or syndicate of drivers employed a Miss Fok, "Ah-mui", who was based in Shenzhen. She would co-ordinate their activities in order to maximise their joint productivity. Being centrally based and in contact with all the drivers by telephone, she was able to assign a particular driver to the most convenient location to bring back a cargo. Through her co-ordination, they assisted each other, increased their individual productivity and thereby their income, which I shall describe in a moment. The applicant was suggesting that Ah-mui's salary was paid by the respondent, but again I prefer the respondent and Mr Lee's evidence that the cost was shared amongst all the drivers. This feature again by itself would therefore tend to go against the notion of employment and suggests self-employment. That having been said, these features are not of themselves conclusive and need to be weighed one against the others that are relevant.

18. The drivers would work six days a week. Sometimes, they would engage a mainland driver to drive for them if they were tired or unable to drive. This meant that the lorry was in continuous use, that consignments were on the move, and that income was maximised. The respondent says that he disapproved of this practice because mainland drivers are substandard. Notwithstanding his disapproval, this occurred and the applicant has said that he would from time to time use mainland drivers, including Mr Lai, who was his passenger when the accident took place. These drivers would be paid a fee for each piece of driving in the order of $150. The applicant would bear this cost himself. He had suggested that this formed part of the expenses of the business, but I prefer the respondent's version. So this is another feature which tends to favour the view that the applicant was self-employed.

19. The arrangements for payment were as follows:

The applicant, in common with all the other drivers, was not paid a fixed salary. Driver income was entirely related to the number of consignments collected and delivered to Fanling Market. On the road, the drivers were pretty self-contained to the extent that they went to the mainland customers, collected the consignments, received the haulage fees and at the end of each month there would be an accounting between them and the respondent on an individual basis. The applicant kept score, as it were, on a sheet of paper covering each month. These records are at pages 103 to 120 in the Trial Bundle. Income and expenses are recorded there in some detail by the applicant and these records formed the basis of the payments to and from the parties. The applicant would receive 30 per cent of the haulage fees and the remainder would go to the respondent. Most drivers were on this proportion, but in some cases it was 80/20 for reasons which do not matter in this case. The greater share would go to the respondent because he would provide the lorry and pay all the other major expenses which I have already described. The applicant would pay his share of the clerking expenses for Ah-mui and any individual fees for the mainland drivers that he may use on an ad hoc basis. The accounting between the parties would be settled on a monthly basis and the applicant's income would vary from month to month but was usually the order of $23,000 a month. Whilst this is not a case of a fixed monthly wage or salary, the authorities certainly do not preclude this type of remuneration from giving rise to an employer/employee relationship. Whilst one might usually expect the basis of pay to be a big persuasive factor in any particular case, in this instance I judge it to be, relatively speaking, neutral, neither supporting nor necessarily detracting from either party's case. I was told and I accept that this arrangement for payment of non-owner drivers is fairly typical of the cross-border transport industry.

20. I should also address the control and superintendence tests, the power to dismiss or suspend and the organisation tests because they are important factors to be put into the scales and assessed.

21. It is clear that drivers were given a pretty free hand as to which consignments to haul within the team and as between themselves individually and the respondent. The prime consideration was the maximisation of productivity and therefore of income for all concerned. The pool of work was readily identifiable and the drivers knew where to go and get cargoes within their set-up as a syndicate, and so whilst the respondent as the owner of the lorries might be in a position of authority to direct a lorry to a particular location, he rarely did so. There was therefore little control. Drivers knew what to do and they go on with it. There was trust between them and they co-operated with each other.

22. I am of the view that the absence of control here is not perhaps as significant as it might be in other cases, although I can see why the respondent might point to it as a feature favouring his case. It seems to me that the respondent, as the owner of the lorry, did have the ultimate sanction of being able to appoint, as he did in this case, suspend or dismiss a particular driver. This was not dwelt on at all in the evidence, but the inference is there to be drawn from the fact of the respondent's ownership of the lorry. If the applicant had been an unproductive or unsafe driver, he undoubtedly would require him to return the lorry and that would be the end of the relationship. This, therefore, favours the applicant's case.

23. As to the organisation test, this too, in my view, must favour the applicant. His work as a driver was as part of a team or syndicate of drivers all driving lorries owned, licensed, paid for and maintained by the respondent who therefore retained the lion's share of the haulage income. The operation was "organised" around this fleet of lorries belonging to the respondent.

24. These, therefore, are the main aspects of the evidence upon which this issue must be determined. I have already indicated how each of the relevant features of the case should be resolved. Overall, how do the scales fall?

25. As I indicated at the start of this judgment, there are factors going both ways but when I stand back and take stock of the whole picture, I am satisfied that the applicant was an employee of the respondent rather than someone working on his own account. The dominant consideration is that he drove the respondent's lorry, who paid all the fees, fuel and repair costs, thereby enabling the applicant to perform his employment as a driver. The big picture, if I may express it in this way, is of the respondent running a small fleet of lorries owned and paid for by him with a team of drivers working for him. The applicant was part of the respondent's organisation. The unusual features relate to the fact that the applicant/employee together with the respondent and the other drivers contributed to the clerking services of Ah-mui and that he could get a substitute driver which he paid for to do occasional driving on his behalf, but these features when taken as part of everything else that I have referred to, do not serve to change the essential character of the relationship from that of employer and employee.

26. Accordingly, there must be judgment for the applicant in the agreed sum of $533,824.

(Submission re interest award)

27. Interest at half the judgment rate from date of application to judgment and thereafter at judgment rate until paid.

(Submissions re costs)

28. Costs to applicant to be taxed if not agreed. Legal Aid taxation of applicant's costs.