Case Detail

DCEC 1141/2018

[2021] HKDC 400

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 1141 OF 2018

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IN THE MATTER OF AN APPLICATION BETWEEN

	TSE CHIU	Applicant
and
	郭健	1^st Respondent
	郭家傑 (KWOK KA KIT DANNY)	2^nd Respondent
	KWOK’S INT LOGISTIC LIMITED	3^rd Respondent

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Before:

Deputy District Judge Charles Wong in Chambers (Open to the Public)

Date of Hearing:	16 March 2021
Date of Decision:	16 March 2021

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DECISION

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1. This is a case of employees’ compensation where I have made a costs order nisi to be made absolute within 14 days. The applicant has taken out a summons to vary the costs order nisi.

2. The costs order nisi made was against the 2^nd and 3^rd respondent in favour of the applicant and the 1^st respondent’s costs was to be paid by the applicant to be taxed if not agreed with certificate for counsel and the applicant’s own costs to be taxed in accordance with the Legal Aid Regulations.

3. The applicant’s counsel, Mr Hu, has invited me to consider the reasonableness in joining the 1^st respondent in this case. He has relied on the case Fung Chun Man v Hospital Authority [2012] 1 HKC 531 in which Bharwaney J held at paragraphs 5 to 7 of the judgment:-

“5. …The court must, in each case, determine whether or not it was reasonable for the plaintiff to proceed against the successful defendant. If it was, the unsuccessful defendant may be ordered to pay the successful defendant’s costs, either directly, via a Sanderson order, or indirectly, via a Bullock order. As explained by Vaughan Williams LJ stated in Besterman v British Motor Cab Co. Ltd. [1914] 3 KB 181 at p.187, such costs form part of the reasonable costs of the action:
“… The proper way is – do not join any defendant unreasonably; if the facts are such that it is reasonable to join them both and reasonable to be in a state of uncertainty as to which of the two is the really guilty one, then it is part of the reasonable costs of the action that the costs of the action which you have launched against one of those defendants, and who has succeeded in defending himself, should be borne by the man who is to blame.”
As was made clear in the English Court of Appeal decision in Goldsworth v Brickell [1987] 1 CH 378, the authority of the court over costs is very wide and the suggestion in the 1985 Edition of The Supreme Court Practice (repeated at marginal note 62/1/6 of Hong Kong Civil Procedure 2012) that a Sanderson or Bullock order will not be made where there are different causes of action is not sustained by the authority of Mulready v Bell [1953] 2 All E. R. 215 which dealt with a very special case.
6. The classic case where a Sanderson or Bullock order is made is where the unsuccessful defendant blames the successful defendant and causes the plaintiff either to join the successful defendant or to continue the proceedings against the successful defendant. However, even absent such circumstances, it may be reasonable for the plaintiff to join the unsuccessful [sic] defendant, in cases where the plaintiff is faced with a denial of liability by the unsuccessful defendant and the real risk that the unsuccessful defendant may either be absolved from liability or unable to satisfy any judgment that may be obtained against him. In such circumstances, if the plaintiff is in possession of evidence that can implicate the successful defendant, evidence that is neither tenuous nor speculative nor far-fetched, it would be reasonable for the plaintiff to join or to proceed against the successful defendant and the court, at the conclusion of such a case, may, in the exercise of its discretion over costs, make a Sanderson or Bullock order.
7. In the context of actions in tort, it does not matter that the claim against the successful defendant was not make in the alternative but was a separate and independent cause of action. Although a Sanderson or Bullock order is unlikely to be made in a case of successive and unrelated torts by different tortfeasors causing different damage, whether tortfeasors jointly caused the same damage or whether they separately caused different damage or only one of them caused the damage may only be known after a final determination by court. In exercising its discretion whether or not to make a Sanderson or Bullock order, the court would have regard to all the circumstances of the case and the state of the evidence to determine whether or not it was reasonable for the plaintiff to pursue the successful defendant. In making its decision, the court must be careful not to lose sight of the uncertainties surrounding the case before its conclusion (per Bokhary J., as he then was, in Lee Lai Ha & Anor. v. Hong Sau Ling & Anor. [1993] 1 HKLR 86).
It may be reasonable for the plaintiff to join the unsuccessful defendant, in cases where the plaintiff is faced with a denial of liability by the unsuccessful defendant and the real risk that the unsuccessful defendant may either be absolved from liability or unable to satisfy any judgment that may be obtained against him. In each(such?) circumstances, if the plaintiff is in possession of evidence that can implicate the successful defendant, evidence that is neither tenuous nor speculative nor far‑fetched, it would be reasonable for the plaintiff to join or to proceed against the successful defendant and the court, at the conclusion of such a case, may, in the exercise of its discretion over costs, make a Sanderson or Bullock order.

In exercise of(exercising?) its discretion whether or not to make a Sanderson or Bullock order, the court would have regard to all the circumstances of the case and the state of the evidence to determine whether or not it was reasonable for the plaintiff to pursue the successful defendant. In making its decision, the court must be careful not to lose sight of the uncertainties surrounding the case before its conclusion.”

4. Mr Hu has also relied on Chong Ngan Seng v. China Harbour Engineering Co Ltd., CACV 54/2012, 25 September 2013, unreported, at §§32-33.

5. Having heard Mr Hu’s submission, I accept that the applicant in the commencement of these proceedings was faced with uncertainty as to which respondent was the employer. In fact, the 1^st respondent did take a role in recruiting the applicant. He was involved in the running of the daily business and administration of the 3^rd respondent. He was also a party to the WeChat group and from time to time gave instructions to the applicant.

6. I also accept that there was a real risk of the applicant not being able to prove against the 3^rd respondent and being left with either the 1^st and 2^nd respondent as his employer. Hence, the joining of the 1^st respondent was reasonable.

7. I accordingly make a costs order to be varied as follows:

“The 2^nd and 3^rd respondents do pay the applicant and the 1^st respondent’s costs of these proceedings, including this application and any costs previously reserved, to be taxed if not agreed, with certificate for counsel. The applicant’s own costs to be taxed in accordance with the Legal Aid Regulations.”

( Charles Wong )
Deputy District Judge

Mr Derek Hu, instructed by Siao, Wen and Leung, assigned by the Director of Legal Aid, for the applicant

Mr Leon Tang, instructed by Francis Kong & Co, for the 1^st, 2^nd and 3^rd respondents

DCEC 1141/2018

[2021] HKDC 191

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 1141 OF 2018

________________________

IN THE MATTER OF AN APPLICATION BETWEEN

	TSE CHIU	Applicant
	and
	郭健	1^st Respondent
	郭家傑（Kwok Ka Kit Danny）	2^nd Respondent
	Kwok’s Int Logistics Limited	3^rd Respondent

________________________

Before:

Deputy District Judge Charles Wong in Court

Dates of Hearing:	21 to 25 September 2020
Date of Judgment:	19 February 2021

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J U D G M E N T

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1. The applicant (“Tse”) was a 65 years old cross-border container tractor driver at the time of the accident. At about 1:30 pm on 6 June 2017, when he was working at the Tsing Yi Cargo Examination Compound he fell from the rear platform of a container mounted on a tractor. It is Tse’s case that the cause of his fall was due to the malfunction of the backdoor and locking system of the tractor. As a result of the fall, Tse suffered a fracture to his skull and bleeding from his ears. He was referred to neurosurgery after admission to Princess Margaret Hospital on 6 June 2017. From 6 June 2017 to 1 November 2018 he was granted 514 days of sick leave. He attended 17 sessions of physiotherapy between 9 August 2017 and 8 March 2018. His hearing and balancing ability were also affected by the accident. The Employee’s Compensation (Ordinance Assessment) Board (“the Board”) assessed Tse to have suffered head injury resulting in residual headache and residual unsteadiness in gait. His permanent loss of earning capacity caused by the Accident was assessed to be at 3%. There is no appeal against this decision.

2. The respondents were alleged to be the owner(s) of the container truck and employer(s) of Tse. The 1^st respondent, Kwok Kin (郭健) (“R1”) is the father of the 2^nd respondent, Kwok Ka Kit Danny (“R2”). The 3^rd respondent, Kwok’s Int Logistics Limited, (“R3”) is a private company with limited liability incorporated in Hong Kong carrying out the logistics business. R2 is the sole owner and director of R3.

MATTERS NOT IN DISPUTE

3. The accident is not disputed. The respondents admits that on 6 June 2017 at the time of the accident, Tse fell from the tractor with registration number SH1826 (“the tractor”), whilst trying to close the back door of the container mounted thereon.

THE ISSUES

4. Quantum has been agreed and the issues before the court are as follows:-

(1)  Whether Tse 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 Tse’s employment with the 1^st, the 2^nd, and/or the 3^rd respondent?

THE APPLICANT’S CASE

5. Tse has worked as a driver since he graduated from secondary school. After briefly following his father to work in the trading industry, Tse started his career as a driver. He has since driven light goods vehicles, buses and tractors for over 10 years. Tse then started his own business by driving a 16 tons lorry as delivery driver for the over 10 odd years. Subsequently, he worked as a jack-hammer truck driver at the construction site.

6. In July 2014, through a friend Lau Wai Kong (劉偉光), Tse met with R1 and orally agreed with R1 to work as a cross Hong Kong and mainland border container tractor driver. The oral agreement was for Tse to work for both R1 and R2. Tse and R1 agreed the salary and commenced work on 1 August 2014. Tse was assigned to drive tractor SH1826 between Tsing Yi or Tuen Mun to Shenzhen bay or Sha Tau Kok. Since R2 ran his business in the name of R3, so far as Tse was concerned, he was under the employment of all three respondents.

7. Tse drove SH1826 from specific sites to pick up and deliver containers on the instructions of R1 and R2 since 1 August 2014. So far as Tse was aware, the tractor was owned by R2. Tse was paid $200 to $400 per container delivered depending on the delivery location. With the advice and consent of R2, Tse earned the price difference in the buying and selling of petrol across the border. He earned on average at around RMB5, 000 to RMB6, 000 per month for selling petrol. His earnings for the month immediately preceding the accident was $23,800.

THE RESPONDENT’S CASE

8. The respondents’ case is that R1 and/or R2 never employed Tse and R3 had merely entered into a cooperation agreement with him as an independent contractor for the provision of logistics services. The respondents did not make any salary payment or MPF contributions for Tse. They made no payment to Tse for statutory holidays, annual leave or sick leave.

9. Tse was given his share of the service fees upon completion of delivery of goods in advance, even before receipt of the service fees from customers. The payment of service fees was partly by way of cash and partly by way of cheque. All of which were deposited into Tse’s bank account.

THE WITNESSES

10. Apart from Tse himself, Tse called Chan Chong Man (陳中文) (“Chan”), a former co-worker, who worked for the respondents. R1 and R2 gave evidence.

THE LEGAL PRINCIPLES

11. In determining whether a person is an employee or independent contractor, the CFA has set out the relevant indicia to be considered in Poon Chau Nam v Yim Siu Cheung t/a Yat Cheung Air Conditioning and Electric Co [2007] 1 HKLRD 951 §§11 to 18 as follows:-

(1)  the degree of control exercised by the employer;
(2)  the payment of wages or other remuneration;
(3)  whether the worker’s interest in the relationship involved any prospect of profit or risk of loss;
(4)  nature of employment activity (ie skill required in the claimed independent operation);
(5)  whether the worker was properly regarded as part of the employer’s organisation;
(6)  whether the worker was carrying on business on his own account or carrying on the business of the employer;
(7)  the provision/ownership of equipment/tools;
(8)  the incidence of tax and national insurance (eg the filing of income tax forms, statutory Form 2 and MPF payments);
(9)  the parties’ express intention of their relationship;
(10)  freedom to delegate work or hire workers;
(11)  mutuality of obligation (ie what degree of responsibility for investment and management he has); and
(12)  the traditional structure of the trade or profession concerned and the arrangements within it.

12. It was further clarified at §§11-13 of Poon Chau Nam’s case that degree of control covered:-

(1)  The master’s power of selection of his servant;
(2)  The payment of wages or other remuneration;
(3)  The master’s right to control the method of doing the work; and
(4)  The master’s right of suspension or dismissal.

THE ANALYSIS

The degree of control exercised by the respondents

13. The respondents managed the business and hired other drivers including Chan to carry out cross border delivery work. Tse took delivery orders and carried out delivery works when receiving instructions from R1 and/or R2 via a WeChat Group called “海東支援車隊”. Tse was neither acquainted with any of the respondents’ clients nor would he liaise with them. He hired no assistant and had to personally handle each delivery.

14. Tse was directed by R2 to park the tractor at the designated roadside and waited in Yuen Long, albeit for convenience, Tse would drive the tractor and park it closer to his residence. It is not disputed that Tse could only use the tractor to deliver the respondents’ orders. Tse had to follow R1 and R2’s instructions regarding the destination for delivery. He required R2’s approval before taking leave. Tse could only go off work when he had completed all the deliveries assigned to him.

15. Further, Tse had to personally carry out the work assigned to him and did not hire others to help. His work dates were decided by the respondents and it is obligatory for him to accept works assigned to him by the respondents and carry out work orders until he had completed all the assigned deliveries.

16. Mr Tang, counsel for the respondent submits that Tse could freely accept or reject jobs due to the nature of his income. I disagree. One must look at the reality of the nature of work. When Tse is not at work, he is on standby and expected to take orders on short notice. He is the designated registered driver for SH1826 and he is obliged to carry out his assigned duties if he was to keep the job. I find that R2 and R3 had a high degree of control over Tse’s work.

THE PAYMENT OF WAGES OR OTHER REMUNERATION

17. Tse was assigned jobs at an agreed rate between $200-$400 per empty container depending on the number of containers delivered and the destination. Tse states that he agreed with R1 the rate at - ‘九龍300, 新界200, 鹽田400’. This was confirmed by R1 in court - ‘新界落蛇口200, 九龍落蛇口300, 九龍沙頭角400”. For customers referred by Tse, he would receive half of the business fees. He was regularly paid once a month by way of cash or cheque issued by R3 or Madam Tsang Ling (R1’s wife and R2’s mother) who worked for R3 as a book keeper. Tse was paid before the respondents had received payment from the customers. Receipts were issued to Tse on a monthly basis. Some receipts bear R3’s chop. Some receipts for Tse’s monthly fees provided by the respondents contained the term “salary receipts (薪給收據)”. Some of R3’s monthly statements revealed that money paid to Tse were “wages (出糧/運費人工)” or simply “人工” which signifies that the respondents have considered Tse to be an employee. R2 tried to explain why the term “salary receipts (薪給收據)” was used by stating that the receipts were internal documents for accounting purpose only and the terms were adopted as requested by the accountant. R2 contended that the term “人工” (salary) in the monthly statements were only used for the sake of simplicity to distinguish the item from other amounts such as delivery fees. The term “出糧” (providing wages) was also repeatedly used in the respondents’ documents. Had the parties been in a cooperation profit, sharing basis, referring to the share of profit, the term “分潤” (分配利潤) or “拆賬” should have been used. It made no sense to use the term “人工” and “出糧” unless the respondents had considered the relationship with Tse to be one of employer and employee.

18. When being cross-examined on the authenticity of some of the unsigned version of the receipts with amendments, R2 was unable to provide any explanation and stated that they were handled by the accountants. R2 made no attempt to obtain the originals from the accountant.

19. When being cross-examined on why R3’s company chop was stamped on one of the receipts with the deletion of the words “人工” was made, R2 stated for the first time that it was Tse who requested not to include him as staff for tax purpose. This allegation was not put to Tse. The significance of this evidence suggests that but for Tse’s request, R2 and R3 were set to include Tse as their employee. The authenticity of these deletions and the receipts were clearly in issue and regrettably the respondents’ accountant was not called to give evidence to explain these documents and the originals were not made available for closer examination.

TSE’S PROSPECT OF PROFIT OR RISK OF LOSS

20. The respondents sought to rely on a hand written note stating that Tse’s profit share was at 70% of the delivery fee. This sheet was not signed and the alleged 70% share was not borne out by the accounts. This was not the respondents’ pleaded case. This was also not set out in the respondents’ witness statements and R2 in examination had difficulty in explaining the circumstances surrounding the making of this document. Further, there appeared to be an overlapping handwritten marks on the percentage ‘70%’. This suggests rewriting and amendments to this number. R2 in cross-examination denied knowledge about how the document was prepared. When pressed as to why he could not produce its original, he answered that he considered it unimportant and it was probably with the accountant.

21. The respondents also provided other versions as to how the profit were shared between the parties. In the Amended Answer, the version were (1) If Tse solicits business for R3, the profit is split 70:30 in Tse’s favour; and (2) if the business is referred to Tse by R3 and Tse uses R3’s vehicle, then Tse shall pay a sum of $500 – $900 to R3, depending on the distance of the trip, and keep the rest as commission. However, the respondents’ record of account in the form of the driver’s work sheet shows that on many occasions Tse was only paid $200 for the total delivery fee of $550 per container.

22. Apart from the perks of pocketing the difference in gas price, there is no evidence that Tse shared profits with the respondents. Tse did not know how much the respondents charged their clients. Tse was not provided with any quotations and invoices for fees paid by the respondents’ customers. Although R1 states that Tse should know how much the respondents charged their clients, R2 admitted that Tse was not told how much the respondents charged their clients. All the profits were for the respondents’ account. Apart from the benefits of the gas sale, Tse gained no financial reward beyond his agreed daily rates.

23. R2 in examination also stated that there were other profit sharing arrangements, including (1) Company 70: Driver 30; (2) 50% each for company and driver. These were neither pleaded nor put to Tse. R2 states that Tse had requested a reduction in the fee split from 70:30 to 50:50 because the 50:50 split was more advantageous to Tse. This allegation was not pleaded and is not reflected in the accounts. When being cross-examined on the respondents’ pleaded case of the rate at $500-$900, R2 stated that it took into account the tractor rental cost but he was unable to give any breakdown. It is also noted that the original Answer states if R3 sub contracts business to Tse, R3 shall pay a sum of $1,200 to Tse. The respondents’ case on how Tse was to be remunerated had shifted. Having heard the evidence, I find R1 and R2s’ evidence to be 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. R2 juggled the figures to suit this case of there being a tractor rental agreement.

24. In any event, it is not disputed that Tse gets paid regularly on a monthly basis before the respondents had received payment from their customers. Perhaps with the only exception that when Tse fails to record delivery or fails to produce delivery notes to R3, then Tse will not get paid.

25. In general, Tse is not required to shoulder any risk for clients not making payment. This defies any notion that Tse and R3 were in a cooperation relationship, as it made no commercial sense for R3 to pay Tse his share of profit even before R3 had received payment from the customers and assume all the risk of not getting paid. In my judgement, the evidence shows that Tse bore minimal financial risks for the loss of business, and this is more in line with Tse being an employee rather than an independent contractor.

THE PROVISION AND OWNERSHIP OF THE TRACTOR

26. It is not disputed that at the time of the accident, Tse drove tractor SH1826 as provided by R2. R2 was the registered owner of SH1826. The motor insurance policy was taken out by R2. R2 was responsible for the general repair and maintenance of the tractor and R1 and/or R2 decided on the garage for the necessary repair works of the tractor.

27. The respondents alleged that the SH1826 was let by the respondents to Tse in return for a higher rate of distribution in profit in each trip of delivery of containers. Tse denies there to be any such rental agreement.

28. There was no written rental agreement for the alleged tractor rental. There was no evidence that R2 or R3 have received any rental income from Tse for the alleged rental of the tractor. It makes no commercial sense for R2 to rent the tractor to Tse but not receive any rental income in return. Further, it is not disputed that Tse was only allowed to use the tractor to deliver orders from the respondents. To Tse, a rental agreement did not bring him any additional benefit. For R2, there is no account produced for the alleged rental agreement. No tax return have been produced to account for the rental. There is no particulars provided for the alleged letting agreement, for instance, how the rate for the letting of the tractor was calculated. From the evidence, I am not satisfied that there was any letting agreement for the tractor SH1826 and I find that the tractor was provided by R2 to Tse for the business of R2 and R3.

R2 AND R3 PAYS FOR THE OUTGOING EXPENSES

29. R2 and R3 paid for the Approval Notice for the vehicle and driver from the Guangdong Public Security Bureau (中港兩地牌); and R1 and/or R2 paid for and gave directions to Tse to renew the Vehicle Licence for the PRC (國內行車證).

30. Disbursements incurred in the course of the work were borne by the respondents. These included fees for the issue of necessary permits for Tse to drive the Tractor across the border, engine fuel fees, toll fees, parking fees, tunnel fees, dockyard gate entrance fees “入場費 or 閘費” , repair and maintenance fees. These fees were reimbursed to Tse on a monthly basis. Motor insurance was also under R2’s name and paid by R2.

31. That said, Tse paid for 50% of the monthly subscription fees “拖頭入線費” at $2,000 per month. According to Tse this was to partly set off his gains in the gas selling operation.

32. Tse and the respondents shared the traffic accident repair expenses. On one occasion, for a traffic accident in Nanping (南平) $25,000 was incurred for the tractor’s repair costs. R2 or R3 paid 50% of this repair expenses and Tse paid for the rest.

33. In general, Tse paid for fixed penalty tickets including speeding and illegal parking tickets. R2 or R3 would occasionally pay for up to two traffic tickets per month.

34. Had Tse been an independent contractor, these expenses would have been the outgoing expenses for Tse’s own business. I find that R2 and/or R3 making a contribution to these expenses goes against the notion of Tse being an independent contractor.

CONCLUSION

35. 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 Tse, but on the totality of the evidence, I find that Tse 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, Tse was in the course of employment with R2 and R3.

THE CASE AGAINST R1

36. R1 may have negotiated and confirmed the terms of employment with Tse on behalf of R2. R1 himself was also a cross-border driver. He was not a director of R3. He was also assigned orders by R3. I find that R1 worked as a driver and assisted in R2’s business as a driver. Tse did not take orders from R1, as R1 only takes orders for factory goods and Tse did not accept factory goods orders. Whilst R1 may have taken part in the administration of R3, as he helped to get drivers like Tse and joined the WeChat Group “海東支援車隊”, from the evidence, it is unsubstantiated that he was a sub-contractor of R3 and I am not satisfied that R1 was the employer of Tse.

QUANTUM

37. Quantum is not disputed. It is agreed that Tse sustained head injuries and bleeding from his ears. Quantum under ss 9, 10, and 10A of the Employees’ Compensation Ordinance (Cap 282) (“ECO”) is agreed at $363,280.67. The agreed breakdown are as follows:-

Section 9 compensation

38. Tse’s monthly earnings for the month immediately preceding the accident was $23,800.00. He was over 56 years of age at the time of the accident, a lump sum equal to 48 months’ earnings should be used for calculating Tse’s compensation under s.9 of the Ordinance.

39. The permanent partial loss of earning capacity is therefore at $23,800.00 x 48 months x 3% = $34,272.

Section 10 compensation

40. From 6 June 2017 to 1 November 2018, Tse was granted 514 days of sick leave.

41. Compensation under s 10 of the Ordinance is therefore at $23,800.00 x 4/5 x 514 days / 30 days = $326,218.67.

Section 10A compensation

42. As of 20 June 2019, the medical expenses incurred by Tse is about $2,790.

43. The total EC compensation is therefore agreed at:-

$34,272 (s 9) + $326,218.67 (s 10) + $2,790 (s 10A) = $363,280.67

ORDER

44. I awarded Tse $363,280.67 against R2 and R3 with interest at half the judgment rate from the date of the accident to the date of judgment and thereafter at the judgment rate until payment. Tse’s case against R1 be dismissed.

COSTS

45. I make a cost order nisi against R2 and R3 in favour of Tse and R1’s costs shall be paid by Tse to be taxed if not agreed, with certificate for counsel. Tse’s own costs to be taxed in accordance with the Legal Aid Regulations. In absence of any application for variation, this costs order shall be made absolute in 14 days from the date hereof.

	(Charles Wong)
	Deputy District Judge

Mr Derek Hu, instructed by Siao, Wen and Leung, assigned by the Director of Legal Aid, for the applicant

Mr Howard Tang, instructed by Francis Kong & Co, for the 1^st to 3^rd respondents

DCEC 1141/2018

[2020] HKDC 749

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

EMPLOYEES’ COMPENSATION CASE NO 1141 OF 2018

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BETWEEN
	TSE CHIU	Applicant
and
	郭健	1st Respondent
	郭家傑（KWOK KA KIT DANNY）	2nd Respondent
	KWOK’S INT LOGISTICS LIMITED	3rd Respondent
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Before: Her Honour Judge Phoebe Man in Chambers (Open to Public)

Date of Hearing: 1 September 2020

Date of Decision: 7 September 2020

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DECISION

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FACTUAL BACKGROUND

1. The applicant (“Mr Tse”) worked as a China-Hong Kong container driver (中港貨櫃司機).

2. On 6 June 2017 at about 1:30 pm, Mr Tse met with an accident when he was attending to and attempting to close the back door to a container mounted on the container tractor (owned by the 2^nd respondent). It is alleged that the back door and its locking system were dilapidated and defective. Mr Tse fell from the Tractor and landed on his head, sustaining injuries to his head and other parts of his body, including skull fracture and bleeding from his ears (the “Accident”).

3. Mr Tse claimed that at the time of the Accident, the 1^st and 2^nd respondents were carrying on business in the name of 大眾貨櫃運輸公司. The 3^rd respondent was a limited company which paid the salary of the applicant. Mr Tse claimed that he was employed by the 3^rd respondent (or alternatively by the 1^st and 2^nd respondents, who were the subcontractors of the 3^rd respondent) and claimed employees’ compensation against the respondents.

4. In support of his claim, Mr Tse’s case was that all out of pocket expenses were reimbursed by the respondents and that he was required to carry out deliveries as ordered by the respondents.

5. The 1^st and 2^nd respondents denied they were the employers of the applicant or that they had paid salary to the applicant. It is the respondents’ case that the applicant was an independent contractor and the 3^rd respondent and the applicant would share the service fees paid by the customers for each delivery made.

PROCEDURAL BACKGROUND

6. The pre-trial review (the “PTR”) was held on 9 January 2020. The 5-day trial was originally fixed to commence on 25 February 2020. At the PTR, parties (both represented by counsel) confirmed to the court that they were ready for trial and no further application would be taken out.

7. In accordance with previous directions given, the applicant had served their written opening submissions on the respondents on 12 February 2020.

8. The original trial was however vacated and adjourned due to the General Adjournment Period (the “GAP”) and refixed to 21 September 2020.

APPLICATION

9. In late August 2020, the 1^st to 3^rd respondents (together, the “respondents”) took out the following summonses:-

(a) Summons dated 19 August 2020 for leave to file 3 witness statements:
(1) the 2^nd supplemental witness statement of Kwok Ka Kit Danny (the 2^nd respondent),
(2) the supplemental witness statement of Kwok Kin (the 1^st respondent) and

(3) the witness statement of Tsang Ling;

(together, the “New Witness Statements”)
(b) Summons dated 25 August 2020 for leave to Amend the Answer.

10. The applicant opposes both summonses.

EXPLANATION FOR NOT HAVING TAKEN OUT THE APPLICATIONS EARLIER

11. Mr Tsang, counsel for the respondents accepted that the respondents had to provide reasons for why the application was taken out at such a late stage.

12. The major reason was that during the GAP, the respondents had a change of counsel. Counsel taking on the case had a different view and considered it necessary to file further additional witness statements.

13. The respondents said that due to the pandemic, further instructions could not be taken until 28 July 2020.

14. In other words, the delay was nothing else but the respondents’ own doing.

LEGAL PRINCIPLES

15. Parties agreed on the applicable legal principles on the late admission of witness statements. In Yeung Shuk Mei v Choi Sun Man & Anor[1], Registrar Lung (as he then was) set out the relevant authorities:-

“10. The relevant legal principles are trite. P has submitted the following authorities:

(a) Hong Kong Civil Procedure 2017 Vol. 1 §38/2A/10 on the jurisdiction of the court to allow supplemental witness statement to be served;
(b) Parsad v Great Wealthy Engineering Co Ltd [2012], HKLRD 705 §§6-7 where the court must balance the primary aim of securing the just resolution of the dispute in accordance with the substantive rights of the parties and other factors such as the right of a party relying on relevant evidence, probative value of the evidence, disruptions to the trial and prejudice to the other party;

(c) Chen Jinhui v Wong Kam San and Others (unreported, HCA 1524/2012, 29 April 2016, §29) the burden being on the applicant to give satisfactory explanation why indulgence should be given to the applicant;

(d) Tang Chung Wah v Jonathan Russell Leong and Others (unreported, HCA 169/2011, 15 April 2014, §19) the nature of the dispute between parties should be taken into account;

(e) Liu Wai Keung v Liu Wai Man now known as Liu Hiu Nam Vikki (unreported, HCA 1106/2011, 22 March 2013, §§11-13) where the court has to consider the probative value of the supplemental witness statement;

(f) Million Decade Ltd v Tung Fai also known as Dong Hui (unreported, HCA 1062/2013, 15 September 2015, §11) where the court will require the applicant to set out the factors in support of the application; and

(g) Evergreen (FIC) Ltd v Golden Cup Industries Ltd t/a Super Star Group (unreported, HCCT 14/2015, 26 July 2016) where the court, having considered the probative value of the evidence, allowed the application for serving supplemental witness statement at less than one week before trial.

D has no dispute with the above authorities, but has also cited the following authorities:
(h) Order 1A, r. 4 RHC of the Court’s powers of active case management;
(i) Nam Ching Wun v Tsun Un Pawn Shop & Ors (unreported, HCA 2151/2008, 7 October 2014 §§54-58) where the court emphasized that late applications should not receive the court’s sympathy if such application for admission of witness statement is the deliberate act of the applicant without good explanation and it would raise a new dimension or focus or shift the litigation goalposts, causing serious prejudice to the other party;

(j) Man Fong Hang v Man Ping Nam & Ors (unreported, HCA 7935/1998, 15 July 2003 §11) where the court adopted the UK approach to deal with non-adherence to time limits contained in the rules or directions of the court. However, this case has, in §12 set out the way the court should act as stated by Sir Thomas Bingham MR: “Ultimately, it is a balancing exercise and the court has to consider all relevant factors on the facts and circumstances of the particular case before it. No single factor can be regarded as decisive or conclusive….”;

(k) Talent Weaving Dyeing & Printer Ltd v Able Billion Textiles Ltd [2013] 2 HKLRD 478 at §5) where the court set out the legal principle that a witness statement must only contain such material facts as a witness is able to prove of his own knowledge and must not contain inadmissible evidence, or any statement of information or opinion without leave of the Court; and
(l) Vastco Textile Ltd v Super Glory Corporation Ltd (unreported, HCA 1678/2009, 11 October 2011, §3) where the court held that the test as to whether the material sought to be expunged is whether the parts of the statement are material to the issues in dispute and the relief claimed.

11. This Court will also bear in mind the legal principles in its exercise of its judicial discretion. Interlocutory applications are usually matters for the court’s discretion in case management for a fair trial of the matter. The court will bear in mind the following factors in its exercise of discretion:
(a) Order 1A, r.2(2), the underlying objectives;
(b) the court’s duty to prevent abuse for a fair trial; and

(c) the court being guided by the authorities of the higher courts.

Lam Sai Wan v Minloy Ltd. (unreported, HCA 31/2014, 18 October 2016). See also Wing Mou Construction Co Ltd v Cosmic Insurance Corporation Ltd & Mansion Holdings Ltd (unrep. HCCT 40/2001, 20 June 2002) where the Court of Appeal stated at §15:
“(5) The exercise of the court’s discretion in any given case depends on a number of factors…… No exhaustive list of factors can be enumerated but I would suggest the following will regularly feature: the individual prejudice to the parties in the event an order is or is not made, the stage that the action has reached when the application is made, any delay in making the application and any delay that may be caused should an order be made. What weight the court will give to any particular factor will depend on the precise form of the order or orders sought.
(6) Ultimately, the discretion is exercised, …… as with any exercise of discretion by the court, orders should only be made where necessary, just and convenient.”

12. The court’s discretion must not be exercised mechanistically, which is also the remark of the Court of Appeal in Chan Cheung Ming Jacky v Siu Sin Man (formerly known as Siu Kit Ling [2014] 5 HKLRD 89 in deciding that delay alone in the application for subpoena, it remarked: “27. The second caveat we have is about the comment of Poon J at para 6 of his judgment on the possibility of an application being dismissed on the basis of delay alone. Whilst we would not rule out this possibility entirely, one must always bear in mind Order 1A Rule 2(2). As with the exercise of other kinds of discretion, the exercise of case management power must be with reference of the facts and circumstances of the case before the court. There is no place for the application of a mechanical rule that the court will invariably refuse an application simply because a party is guilty of serious delay without any good explanation. The court must conduct an overall balancing exercise.”
13. In Wing Fai Construction Company Limited (in Compulsory Liquidation v Yip Kwong Robert & Others (2011) 14 HKCFAR 935 at §75(5), the Chief Justice adopted the following legal principles on delay:

“I would also adopt what was said by Neuberger J in Annodeus[2] regarding the court’s consideration of delay:- “Ninthly, it appears to me that it is normally relevant to consider the following factors. First, the length of the delay; secondly, any excuses put forward for the delay; thirdly, the degree to which the claimant has failed to observe the rules of court or any court order; fourthly, the prejudice caused to the defendant by the delay; fifthly, the effect of the delay on trial; sixthly, the effect of the delay on other litigants and other proceedings; seventhly, the extent, if any, to which the defendant can be said to have contributed to the delay; eighthly, the conduct of the claimant and the defendant in relation to the action; ninthly, other special factors of relevance in the particular case.”

ANALYSIS

16. Bearing in mind the relevant legal principles, I turn to whether the objections made by the applicant to the admission of the New Witness Statements are valid.

Delay

17. There is no dispute that the application is late. By the time of the hearing of the application, there were only 3 weeks left before the commencement of the trial.

Relevance

18. The main issue in dispute was whether the applicant was an independent contractor. The applicant’s case is that he was an employee and would be ordered by the respondents to make deliveries and he was not responsible for any expenses.

19. The content of the proposed 2^nd supplemental witness statement of the 2^nd respondent includes:-

(1) an explanation in detail (29 paragraphs spanning more than 7 pages) the modus operandi of the 3^rd respondent;

(2) how the 3^rd respondent received and shared the service fees with the applicant for orders that the applicant chose to accept;
(3) how the operating expenses were shared amongst individual drivers and the 3^rd respondent;
(4) how the WeChat messages and working records only acted as a platform to link up the customers and individual drivers; and
(5) how individual drivers were paid.

20. The proposed supplemental witness statement of the 1^st respondent mainly sought to corroborate and overlap with the evidence of the 2^nd respondent. One additional area related to how the 1^st respondent invited the applicant to work with the 3^rd respondent.

21. I am of the view that the explanations sought to be put in on the initial understanding reached between the applicant and the 1^st respondent and the modus operandi of the 3rd respondent are relevant to the issues in dispute.

22. Another issue in dispute was the nature of the payments by the 3^rd respondent to the applicant. The proposed witness statement of Tsang Ling (wife of the 1^st respondent) sought to give evidence in 5 paragraphs on how she received service fees from the customers and distributed them to individual drivers in accordance with the 3^rd respondent’s working records. She also explained how the 1^st respondent instructed her to issue cheques to the applicant as advance payment of his service fees. I am of the view that this evidence is relevant in the determination of whether there was an employment relationship between the applicant and the respondents.

23. The relevance of the New Witness Statements is not disputed by the applicant.

Sufficiency of explanation

24. The respondents changed counsel after the PTR on 27 June 2020. It is of course the prerogative for the respondents to engage counsel of their own choice. However, this right does not rank over and above the applicant’s right to not be ambushed at the eleventh hour.

25. None of the evidence contained in the New Witness Statements only recently arose because of a change in circumstances. All of the information could have been provided much earlier. I consider this new round of witness statements to be very much an afterthought (perhaps after receipt of the applicant’s Opening Submissions) caused by insufficient previous preparation by the respondents. There is no dispute that the delay is purely caused by the respondent themselves by their decision to change counsel at a late stage, after the original trial date.

26. The PTR was on 9 January 2020. The trial would have commenced in February 2020. Previous counsel’s advice would have been known at the latest in February 2020. The respondents did not decide to change counsel until 6 months later and did not manage to take instructions for new witness statements until 28 July 2020. I do not accept that the pandemic could be sufficient justification for the delay in taking instructions. Even though there was a pandemic, instructions needed not be taken via face-to-face meeting. Telephone conference or even video conference would have served the same purpose.

27. There is no evidence before the court on the 5 months of inactivity between the PTR (January 2020) and the day when the respondents instructed new counsel (June 2020).

28. I am of the opinion that the requirement for a full account and satisfactory explanation for the lateness of the application had not been fulfilled.

Do the New Witness Statements raise a new dimension to the respondent’s defence?

29. Mr Tsang argued that the New Witness Statements sought to be put in raised no new dimension to the respondents’ defence. He said that it had all along been the respondents’ case that the applicant had worked with the 3^rd respondent on a profit-sharing basis. The respondents had not changed their case or advanced any new case in the new witness statements.

30. I do not agree that just because the content of the New Witness Statements is consistent with the line of defence so far put forward, there is no new dimension raised:-

(a) the new evidence contained replies to matters raised in the applicant’s witness statement which was not before raised by the respondents, e.g. how the cryptic WeChat messages are to be understood.
(b) The New Witness Statements contained substantial new evidence raised, the 2^nd supplemental witness statement of the 2^nd respondent alone comes to 12 pages long. The proposed supplemental witness statement of the 1^st respondent is 8 pages long. --- This is to be contrasted with the fact that originally the witness statements of the 1^st respondent and 2^nd respondent consisted of 3 sentences of 1 page each. These original witness statements of the 1^st and 2^nd respondents only contained to a bare denial that there was any employment relationship between the applicant and the respondents. The 2^nd respondent subsequently filed a supplemental witness statement of 2 pages. More than 90% of the content sought to be put in in the New Witness Statements did not feature in these original witness statements.
(c) Tsang Ling was a new witness and the evidence raised by her was completely new.

31. Previously, with the bare denials in the original witness statements, the respondents were effectively simply putting the applicant to strict proof. With the New Witness Statements, there would be multiple bases of challenge. In such circumstances, Mr Tsang’s argument of there being no new dimension rings hollow and is rejected.

Disruption to the trial

32. Ms Chung for the applicant had informed the court that if leave were granted for the respondents to put in the New Witness Statements, they would be seeking leave to put in further witness statements within 14 days, just 7 days before the trial. The suggested tight time frame is of course to avoid the possibility of the trial being adjourned.

33. Mr Tsang submitted that instead of filing supplemental witness statements, the applicant could just lead evidence during examination-in-chief to reply to the matters raised in the New Witness Statements. With the amount of new evidence raised, it is unrealistic for Mr Tsang to argue that the applicant should just lead oral evidence. With the amount of new evidence involved, there will be immense uncertainty to what the applicant would say by way of oral evidence. Such uncertainty would lead to a risk of either side seeking an adjournment in the middle of the trial. This is clearly undesirable. It would only be fair that the applicant be afforded an opportunity to take instructions and consider putting in evidence in light of the New Witness Statements.

34. With the indication from the applicant, it seems that even if the respondents were allowed to put in the New Witness Statements, the trial could proceed on the original dates. However, whether the original 5 days reserved would be sufficient in light of the new evidence is another matter. It is likely that with 5 witnesses (1 being new), the evidence might not be finished within the original allocated time, bearing in mind cross-examination will now be substantially longer with the new evidence from both sides. There is a real possibility that the trial may need to be adjourned part-heard.

Prejudice to the applicant

35. I do not agree with the respondents’ submission that there is no prejudice caused to the applicant that cannot be compensated by costs.

36. One of the most obvious prejudice to the applicant is the fact that the applicant had already filed his written opening submissions in February 2020 pursuant to the court’s previous directions. The applicant’s counsel had set out his case in detail and applied the evidence to the appropriate tests on whether someone was an employee or an independent contractor. A detailed analysis on the evidence was also carried out whereby the deficiency of the respondents’ evidence was pointed out (in paragraphs 38 onwards in the opening submissions). On the face of it, the new evidence in the New Witness Statements seem to correspond with a lot of the arguments made in the opening submissions.

37. I consider it to be immensely unfair if the respondents would be able to “patch up” any deficiency in their evidence after having sight of how the applicant is going to run his case.

Fairness

38. Mr Tsang is correct in saying that a court of law seeks to adjudicate on the real issues and disputes between the parties, and if possible, technical and procedural rules should not stand in the way of allowing the parties to raise their real claims or defences before the court for adjudication.

39. However, Mr Tsang agrees that this principle is not be-all and end-all nor is it inevitably the paramount or superior principle that overrides the underlying objectives of reasonable expedition, procedural economy, cost-effectiveness and fairness between parties as enshrined in order 1A of the Rules of the High Court.

40. As put by Master Marlene Ng (as her Ladyship then was) in Liu Chen v Chan Poon Wing and Anor[3]:-

“In the administration of justice, apart from substantive fairness, fairness and justice of the litigation procedure is also a necessary component, and hence the court must be vigilant to ensure procedural fairness.

41. The applicant had been ready for trial since January 2020. The respondents also indicated their readiness at the PTR. The trial was only unfortunately vacated and adjourned for more than 7 months due to the pandemic and the GAP. The applicant should not unnecessarily be denied his chance to have his claims under the employees compensation scheme adjudicated as soon as possible. Any further delay to the applicant’s right to proceed with trial caused by the trial being part-heard is clearly unjustifiable and unacceptable.

42. I also took into account the fact that the applicant was represented by the Legal Aid. The trial being rendered part-heard would inevitably lead to increased costs which might ultimately be borne by public funds.

Prejudice to the respondents if the new witness statements are not admitted

43. I recognize that the respondents would be inevitably prejudiced by not having the new witness statements admitted into evidence. However, as set out in the Court of Appeal case of Chan Wing Cheung, Allan v Ho Shu Yee, Susana[4]:-

“9. … ‑

(1) While it can be accepted that the Defendant will inevitably be prejudiced by not having witness statements admitted into evidence, the Judge had to balance this prejudice against the prejudice caused to the Plaintiff in allowing them in at this very late stage. The Plaintiff would be prejudiced by having to face an inevitable adjournment of a trial that had been fixed for hearing a very long time ago. This was recognized by the Judge, rightly in my view, as being sufficient to constitute serious prejudice.
(2) The predicament that the Defendant finds herself in is entirely of her own making. As I have already remarked, the question of the loans allegedly made to the Plaintiff (the main issue in this action) was one that must have been obvious to the Defendant since at least the pleadings stage. Despite having said (in the 4th Checklist) that proofs were taken and that effectively she was ready for trial, the Defendant has waited until almost the last possible moment to introduce witness statements that contains substantial matters.

(3) It is a theme running through Mr Lam’s submissions that the only real prejudice suffered by the Plaintiff was one that could be compensated for in costs. I have real doubts about this submission. Quite apart from the fact that the Defendant is legally aided (so that the benefit of any costs order may be limited), the Defendant suffers the prejudice of not having the trial take place at the scheduled time. This is often overlooked when matters are adjourned.

(4) In any event, where an indulgence is sought from the Court, it would be a rare case indeed that this would be given, even on terms as to costs, without a satisfactory explanation being given to justify the grant of the indulgence. The fact that this represents in the present case the first time that an indulgence had been sought by the Defendant is neither here nor there.”

I respectively adopt the above which are applicable also to the present case.

DISPOSITION

44. In view of the above, having taken into account and balancing all of the relevant factors, the respondent’s summons dated 19 August 2020 is dismissed.

45. In relation to the summons dated 25 August 2020 for leave to Amend the Answer, after Ms Chung’s confirmation that the preparation of the applicant’s case is not prejudiced, I allowed the amendments with adjustments agreeable to both parties.

COSTS

46. The 1^st to 3^rd respondents do pay the applicant costs of and occasioned by the summons dated 25 August 2020, to be taxed if not agreed. The applicant’s own costs be taxed in accordance with the Legal Aid Regulations.

47. The 1^st to 3^rd respondents do pay the applicant costs of and occasioned by the summons dated 19 August 2020, to be taxed if not agreed. The applicant’s own costs be taxed in accordance with the Legal Aid Regulations.

( Phoebe Man )
District Judge

Ms Chung Wai Yi, of Messrs. Siao, Wen And Leung, assigned by DLA, for the applicant

Mr Raymond W.N. Tsang, instructed by Messrs. Francis Kong & Co., for the 1^st to 3^rd respondent

[1] Unrep HCA 2308/2012, 9 August 2017, Registrar Lung.

[2]Annodeus Entertainment v Gibson, unreported, Chancery Division, 2 February 2000.

[3] Unrep HCPI 779/2006, 7 October 2009

[4] Unrep CACV 393 of 2004, 10 January 2005

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