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                                                                                                      by Case

                                                                        Employees' compensation — whether worker
                                                                       engaged as an independent contractor under a
                                                                          contract for services or employee under a
                                                                        contract of employment — whether accident
                                                                         arose out of or in the course of employment

                                                                          Lam Sik v Sen International Ventures
                  Background                                                    Corporation (HK) Ltd,
                                                                        District Court, Employees' Compensation
                  A worker employed by a hotel sustained injuries                    case No 127/92
                  to his shoulder and arm after falling inside the
                  garbage room in which he was working. Al-                           Judge Bokhary
                  though there was some discrepancy as to the                 Judgment dated 14 February 1994
                  sequence of events leading up to the accident, the
                  court held that the worker lost consciousness and
                  fell as a result of the worker having become
                  fatigued due to the strenuous nature of his           worker had been engaged as an independent
                  employment. The matter came before the court          contractor, no statutory compensation was pay-
                  when the worker claimed employees' compensa-          able to the worker. The basis upon which this
                  tion under the provisions of the Employees'           submission was made was that the provisions of
                  Compensation Ordinance (Cap 282).                     the Employees' Compensation Ordinance applied
                                                                        only to employees, and not contractors, who were
                  Employee or independent contractor?                   injured in the course of their employment.
                                                                            In support of its claim that the worker was not
                  The hotel argued from the outset that, as the         an employee, the hotel relied on a written agree-
                                                                        ment in which the worker was engaged as a
                                                                        "contractor" for the purposes of "daily garbage
                                                                        collection and cleaning services". Under the
                                                                        terms of the agreement, the worker was to be
                                                                        paid a monthly "contracting fee" of $3,500.00. In
                                                                        addition to detailing the nature and frequency of
                                                                        the work, the agreement provided that the con-
                                                                        tractor was not eligible for staff welfare benefits
                                                                        or entitled to claim damages or compensation
                                                                        under the Fatal Accidents Ordinance, Law Re-
                                                                       form (Miscellaneous Provisions) Ordinance or
                                                                        Occupier's Liability Ordinance.
                                                                            In order to decide the issue, the court noted
                                                                        that there was no single test that had ever been
                                                                        devised which could categorically determine
                                                                       whether a person had been engaged as an
                                                                        employee or as an independent contractor. In
                                                                        support of this conclusion, the court cited the
  Garbage worker: independent employee or contractor?                   decision of Lee Ting-sang v Chung Chi-keung &

Hong Kong Lawyer May 1994
                                                                                                                           Case by Case.'

  Anor[1990] 1 HKLR764. In this decision the Privy       fact been replaced by a contract for services.
  Council, after approving the approach adopted              The court found alternative support for its
  by Cooke J in Market Investigations v Minister of      finding in the decision of the Privy Council. In
  Social Security [1969] 2 QB 173, held that at the      Australian Mutual Provident Society v Chaplin
  end of the day the question was one that boiled        (1978) 18 ALR 385, the board held that a party
  down to whether or not a worker could be               could not expect to rely on terms or expressions
  properly regarded as a person who had under-           which pointed to an independent contractual
  taken to perform his services as a person in           relationship, where the contract, viewed as a
  business on his own account.                           whole, amounted to one of employment. In this
      The court went on to hold that the fact that the   regard, the court held that it was of no assistance
 worker was:                                             for the hotel to insist on having regard to the use
  » not required to wear a uniform                       of terms such as "contractor" and "contracting
  • not entitled to employee benefits                    fee" in the agreement, in circumstances which
  • not required to report when coming on or off         overwhelmingly pointed to an employment rela-
      duty                                               tionship between the parties concerned.
  « not subject to supervision
      paid in cash rather than autopay and               Was the accident work-related?
  • required to find a replacement to undertake
      his duties on any day which he took off,           The court noted that the provisions of the Em-
  did not in any way advance the argument that the       ployees' Compensation Ordinance applied only
 employee was working as an independent con-             to those accidents which "arose out of and in the
 tractor on his own account. The court reached
 this conclusion after observing that the features
 relied on by the hotel were just as reconcilable
 with a garbage collector working as an employee
                                                               . Piaget. True values never change.
 as they were with a person engaged as an
 independent contractor.
     The terms of the service agreement, which
 were relied on by the hotel as conclusively
 establishing an independent contractual relation-
 ship, were also considered at length by the court.
The court noted that the injured worker had
 initially been engaged as an employee for a term
 of one year as a "part-time casual labour[er]" with
 "wages" being payable at the rate of $3,200 per
month. After the expiry of the one year term, the
worker was subsequently re-engaged under a
 "service agreement". The terms of the service
agreement substantially replicated the conditions
under which the worker had been employed                       Tanagra
                                                               18K gold
previously.                                                    mechanical
     In giving regard to the fact that the garbage             or quartz
collector was illiterate, the court found that it was
not open to the hotel to rely on an agreement, the
contents of which had been misrepresented to
the worker. To reach this conclusion, the court
found that the worker had been led to believe that,
                                                                            JOAILIER EN HORLOGERIE DEPUIS 1874
apart from a small increase in wages, he was being
re-engaged for a further year under the same
terms as before. On the basis of this finding, the                                  PBM (UK) Limited
court held that the hotel had failed to establish               701, Alexandra House, 16 Chater Road, Hong Kong. Tel: 522 0139
that the former employment relationship had in

                                                                                                          Hong: Kong Lawyer May 1994
                    course of the employment".                                     quagmire of arguments and counter-arguments.
                          In determining whether the accident arose in                 It was implicit in the approach taken by the
                    the course of the employment; the court adopted,               court that it was not of much assistance for
                    with approval, the dicta of Windeyer j in Weston               employers to draft detailed 'service agreements'
                    v Great Boulder Gold Mines Go Ltd(1964) 112 CLR                in circumstances where they amounted to no
                    30. in that case, the court held that any unex-                more than employment contracts in disguise. The
                    pected event: that happened to an employee at                  fact that the employee had been previously
                    work amounted to an accident occurring during                  employed under a written employment contract
                    the course of employment. Although Bokhary J                   helped the court in holding that the service
                    did ponder whether there might be special cir-                 agreement which purported to replace it was
                    cumstances in which the general principle es-                  nothing more than an employment contract which
                    poused in Weston might need to be qualified, he                had been re—labelled.
                                                    went on to hold that there         The court also found it unnecessary to deter-
                      ,: )»v5v:<%y'•?:-'. '.:-.••'. was nothing before the court   mine the validity of clause 11 of the service
                    V •-);':£§) :v%R;v/' to suggest that the employ-               agreement which provided that the employer:
                                                    ee's injuries happened other
                                                    than during the course of           ''shall not be liable for any damages or com-
                                                    employment.                        pensation under the Fatal Accidents Ordi-
                                                        Having found that the          nance, the Law Reform (Miscellaneous Provi-
                                                    accident happened during           sions) Ordinance, the Workman's Compensa-
                                                    the course of employment,          tion Ordinance, the Occupier's Liability Ordi-
                                                    the court went on to exam-         nance or otherwise howsoever (whether under
                                                    ine whether or not the inju-       statute or at common law or in equity) by or in
                                                    ries had arisen out of the         any consequence of any accident, loss or
                                                    employee's employment.             injury".
                                                    The court noted that inju-
                                                    ries arising as a result of         Leaving aside the provisions of the Control of
                                                    fatigue had previously been     Exemption Clauses Ordinance (Cap 71), it would
                                                    cited by the House of Lords     appear to be an oversight on the part of the
                                                    in Davidson. v McRobb [1918]    Employees' Compensation Ordinance that there
                  SgyftllfeiSMSSSiSf-l              AC 304 as an example of an      are no express provisions which make void any
                                                    accident which might be         scheme or arrangement which attempts or pur-
                   considered as arising out of employment. In                      ports to circumvent the compensation provisions
                   addition, the court looked to the provisions of                  of the ordinance. By contrast, s70 Employment
                   s5(6) Employees'Compensation Ordinance. This                     Ordinance (Cap 57.) puts the matter beyond
                   subsection provides that in the absence of evi-                  doubt by providing that any term of an employ-
                   dence to the contrary, any accident arising in the              ment contract which attempts to negate or reduce
                   course of employment will be deemed also to                      any benefit conferred on an employee by the
                   have arisen out of the employment. In finding                    ordinance shall be void.
                   that there was no evidence acceptable to the                        The finding that the worker was an employee
                   court that was capable of rebutting the presump-                also has wider implications than simply eligibility
                   tion, the court held that the accident arose out of             for statutory compensation. By virtue of s4 Em-
                   and in the course of the employee's employment.                 ployment Ordinance, every employee is entitled
                   The court awarded the worker compensation                       to the statutory benefits and protections accorded
                   amounting to $95.797.                                           by the provisions of the ordinance. Furthermore,
                                                                                   any employee who works not less than 18 hours
                   Wider issues                                                    per week will be entitled, as of right, to a wide
                                                                                   range of benefits ranging from a mandatory rest
                   The decision by Bokhary DJ is certainly to be                   clay each week to a long-service payment. It was
                   welcomed for the manner in which she adopted                    in order to avoid granting such statutory benefits
                   a common sense approach in determining issues                   and compensation payments that the employer
                   which are more often than not characterised by a                devised a scheme which purported to transform

Hong Kong Lawyer May 1994

 his employees into a group of independent             impact on the many other employees in Hong
contractors. Not only did the scheme fail by a long    Kong who arc denied their statutory rights and
shot, it would also have entailed the employer         entitlements by virtue of similar schemes. Per-
committing a number of serious statutory of-           haps the time has come for the government to
fences in failing to pay his employees the statu-      take steps to ensure employees are granted their
tory entitlements under the provisions of various      employment benefits rather than leaving the matter
employment-related statutes.                           to be decided on a case-by-case basis by the
    By being awarded employees' compensation,          courts.
the decision certainly worked in favour of the
employee concerned. On a less positive note is                                     Michael Downey
the fact that the decision will have only a marginal          Employment Law International (HK) Ltd

                                                                      Case management — judge has wide discretion
                                                                       in granting directions — directions interfered
                                                                        with by Court of Appeal only if judge acted
                                                                            outside jurisdiction or plainly wrong

                                                                           Korea Building Material Trading
                                                                                    Corporation v
                                                                           Hong Kong Dongil Trading Co Ltd
                                                                             Civil Appeal No 198 of 1993
                I n November 1993, the judge in charge of the          Hon MacDougall, VP, Litton and Godfrey, JJA
                  commercial list gave certain directions as to the        Judgment dated 24 February 1994
               future course of this action, including directions
              that the case be set down for trial within 28 days
              and that witness statements he exchanged within
              35 days. The defendant appealed, contenciing            so, for the directions to be varied.
              that these directions were premature since there            Order 25 rl and O38 r2A Supreme Court Rules
              were outstanding matters relating, inter alia, to       confer a wide discretion to grant directions in
              security for costs and the date of trial was unfixed    whatever form the court considers appropriate in
              (prior to the hearing of the appeal, the date for       the circumstances. The lawyers for parties do not
              trial was fixed for May 1994). The defendant            always get on with the case in the manner best
              argued that the usual and proper practice was for       calculated to serve the interests of their clients
              the time for exchanging witness statements to be        and of the efficient management of the business
              so many days before commencement of the trial.          of the court. It has become increasingly common
                   In dismissing the appeal Mr Justice Godfrey JA     to expect the court, of its own motion when
              commented on the role of judges in making               necessary, to take part in 'case management':
              directions and the role of the Court of Appeal on
              appeals from such orders.                                  [I]t has become necessary for judges to adopt a
                   He concluded that the judge at first instance          'hands-on' approach to case management to
              had made no error of principle nor had he been             ensure that the needs of the litigants in the case
              otherwise plainly wrong: Ash more v Corporation            before them, and of litigants in other cases
              of Lloyd's [1992] 1WLR 446 (HL), Carrian Invest-           waiting to come on, are properly and effec-
              ment Ltd v Price Waterhouse (Appl28 of 1993).              tively met.
              Accordingly, the defendant's correct course was
              to apply to the judge in charge of the commercial                                            George Own
              list and to ask, giving some justification for doing                                 Lovell White Durrant

                                                                                                    Hong Kong Lawyer May 1994
 n OCf5 t \n nr-p.
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                                                                                       Money Lenders Ordinance —
                                                                                  enforceability of loan and security —
                                                                                    rights of subrogation — damages,
                                                                                   aggravated damages and exemplary
                                                                                  damages for assault and intimidation

                                                                                     Wong Kwai Fun v Li Fung
                                                                                 Supreme Court of Hong Kong 1986
                                                                                           No A5810

                                                                                           Mr Justice Woo
                                                                                    Judgment dated 28 January 1994
                            he defendant was persuaded by the plaintiff
                            to borrow HK$l48,500 with an annualised
                     interest rate of some 400%. As security for the       ment and mesne profits for wrongful occupation.
                     loan, the defendant wrote six post-dated cheques      Mr Justice Woo decided that the defendant should
                     and signed a power of attorney authorising a third    repay the loan subject to some deductions, but
                     party to sell his apartment and to receive the        that this should be set off against HK$400,000
                     proceeds. When the defendant failed to meet the       awarded to the defendant as damages for the
                     first payment, the plaintiff threatened the defend-   defendant's injuries, pain and suffering and loss of
                     ant that he and his family would be killed. The       earning capacity, together with aggravated
                     threats continued and the plaintiff, or his agents,   damages and exemplary damages.
                     assaulted the defendant and his family verbally
                     and physically. The defendant signed an agree-        The Money Lenders Ordinance
                     ment to sell the apartment to the third party who
                                                                           The Money Lenders Ordinance (Cap 163) pro-
                                                                           vides that no agreement for the repayment of
                                                                           money lent by a moneylender or for payment on
                                                                           interest on money so lent, and no security given
                                                                           to any moneylender in respect of any such
                                                                           agreement or loan, shall be enforceable unless
                                                                           the documents required by the ordinance are
                                                                           made and copies of them are given to the
                                                                           borrower. This was not done. Furthermore, the
                                                                           ordinance provides that any person who lends or
                                                                           offers to lend money at an effective rate of interest
                                                                           which exceeds 60% per annum commits an
                                                                           offence and that no agreement for repayment,
                                                                           interest or security in respect of such agreement
                                                                           should be enforceable. By reason of the exces-
                                                                           sive rate of interest, the loan, the power of
                                                                           attorney, the sale agreements and the security
   Money lender unable to enforce security in extortionate                 were held to be illegal and unenforceable as
                        transaction                                        being in contravention of s24 Money Lenders
                     in turn signed an agreement to sell the property to   Ordinance.
                     the plaintiff. The defendant's family had to move
                     apartment temporarily and the defendant, after        Re-opening the transaction
                     two suicide attempts, spent many months in
                     hospital.                                             The judge was empowered by s25(l) Money
                         The plaintiff commenced an action claiming        Lenders Ordinance to re-open extortionate trans-
                     against the defendant for possession of the apart-    actions so as to do justice between the parties. Mr

Hong Kong Lawyer May 1994
Justice Woo decided that HK$146,500 should he              damages would be awarded to compensate the
paid by the defendant to the plaintiff having de-          victim for pain and suffering and exemplary dam-
ducted payments made by the defendant for ''legal          ages would be awarded to teach the culprit that
costs". The judge would not allow interest, since          "tort does not pay". The fear and depression
this would enable any person lending money with            suffered by the defendant causing him to attempt
extortionate interest rates to earn interest, either as    to commit suicide, together with the physical
charged or, if the loan were to fail, then at a            assaults and batteries on the defendant, his wife
reasonable bank rate. This would put the plaintiff         and daughter, led Mr Justice Woo to condemn the
in a position where he would be no worse off than          plaintiffs behaviour. He awarded HK$200,000
if he had acted lawfully despite his culpability for       damages for the defendant's injuries, pain and
attempting to charge extortionate interest.                suffering and loss of earning capacity, including
                                                           aggravated damages for the injury to his feelings
Subrogation                                                and to his pride and dignity and a further
                                                           HKS200,000 exemplary damages for the plaintiff's
The plaintiff claimed that he had a right of subrogation   actions. After discharging the loan of HK$146,500
 under two mortgages created by the defendant or           this left a balance of HK$253,000 payable by the
alternatively that the properly was subject to a           plaintiff to the defendant,
charge by way of subrogation in his favour. The
plaintiff had paid the purported purchase money                                        John Lumley-Holmes
for the property as the assignee. Part of the money                                    Lovell White Durrant
was used to discharge the two mortgages. He
therefore argued that he had stepped into the shoes
of the mortgagee and was entitled to a right of
subrogation. The judge found that the plaintiffs
claim for subrogation failed since there was no
evidence that he had paid anything out of his own
pocket for the discharge of the two mortgages. The
money was in fact from the Hongkong and Shang-
                                                                                  Unveiling The Facts
hai Banking Corporation and they would be enti-
tled to the right of subrogation. Furthermore, the
equity of the situation was not. in the plaintiff's
                                                                 Quick Results Investigation Agency Limited
favour. He had mortgaged the property to the
Hongkong and Shanghai Banking Corporation caus-                                Handling ALL kinds
ing a blot on the defendant's title. This forced the                                   of
defendant to make a compromise with the bank to
                                                                       commercial and private investigations
avoid being open to the risk of having the property
subject to the mortgage created by the plaintiff in
favour: of the bank or subject to the bank's charge                         PLEASE CONTACT YOUR
by subrogation. In addition, there was the added risk
of incurring more costs, including an order for costs                                AND EARS"
which might be awarded against him in favour of                                          IN             :      "
the bank.
                                                                        HONG KONG AND CHINA.
Assaults and intimidation
                                                                               Mr Lawrence Yip
The judge held that threats of physical violence                     8/F., Suite C. Thomson Comm. Bldg.,
being uttered in close proximity of one's residence,               No. 8, Thomson Rd., Wanchai, Hong Kong.
if reasonably believed by those inside the residence                              Fax: 866 1489
to be able to be carried out, are actionable torts.
Furthermore, threats and intimidations can consti-
tute a tort and be actionable when they cause illness
                                                                     (24-Hour Hotline: 885 7823)
following nervous shock. In such a case actionable

                                                                                                   Hong Kong Lawyer May 1994
                                                                        Misdirection by the trial judge on a number of
                                                                        issues. The defendant's departure from Hong
                                                                        Kong after an arson attack was consistent with
                                                                        an intention to flee. The departure was not a
                                                                        finding of an intention to flee the jurisdiction
                                                                        amounting to an admission of guilt as in R v
                                                                        Chan Kwok-Keung [1990] HKLR 359. Appeal
                                                                        was dismissed pursuant to the proviso to s83( 1)
                                                                        Criminal Procedure Ordinance,
                            gfr-%i wsswsp^s
                                                                                                  (R v Yu Chun Man,
                                                                                                  CA No 435 of 1993)

      Theft                      The defendant was properly convicted on a charge of obtaining property by
                                 deception when he presented a winning betting ticket which did not belong to him
                                 and he received payment. A person acts dishonestly if he made a claim on the ticket
                                 knowing or believing that he was not entitled to do so. The Crown does not have to
                                 prove that the person from whom the property was obtained suffered a loss, as this
                                 is not an clement of the   offence.

                                                                       (S v Cheung Wai Wan, MA No 979 of 1993)

                                 The liability of a registered owner of a motor vehicle under the Fixed Penalty (Traffic
                                 Contraventions) Ordinance does not contravene Article 11(1) Bill of Rights because
                                 breach of the ordinance is not a criminal offence. The differential treatment of
                                 vehicles owned by the Crown and other vehicles is not inconsistent with Article 10 and
                                 22 Bill of Rights. The departure from ''literal equality" is legitimate and justified in
                                 accordance with the principle in R v Man Wai-Keung (No 2) [1992] 2HKCLR 207.

                                                       (R v William Alan Terence Crawley, MA No 909 of 1993)

      Sentencing                For the possession of an ID card belonging to another, the tariff sentence of 15
                                months applies if it can be established that the offence is linked with an immigration
                                offence (R v So Man King [1989] HKLR 142). How the necessary link is established
                                will depend on the facts and circumstances of the case — inferences may be drawn
                                or some may require a Newton hearing. Where the two offences are not connected,
                                a sentence of three months is appropriate. It is irrelevant to the sentence as to
                                whether the offender is an overstayer or an illegal immigrant.

                                                                        (R v Shamim Nawaz, MA No 804 of 1993)

                                                                                                          Christina Ma
                                                                                                 Senior Crown Counsel

Hong Kong Lawyer May 1994
 Ca se by Case

                                                                         The Disciplinary Committee of The Law Society

          MISCONDUCT                      On 24 November 1993 a Discipli-                ensure that she was no longer
          »         to       to           nary-Tribunal found five complaints            held out as a consultant to a firm
                                          substantiated against Au Yeung Wai             of solicitors when she was sus-
                                          Yu, Lina. The complaints were as               pended from practice.
                                          follows:                                       Ms Au Yeung formerly practised
                                          • consistent failure to reply to let-      as a sole practitioner of Au Yeung &
                                               ters from the Law Society re-         Co.
                                              garding complaints made against            Ms An Yeung did not admit the
                                              her and to respond adequately          complaints and the tribunal found
                                              to the Law Society's requests for      the complaints substantiated after
      Au Yeung Wai Yu Lina                     information                           the hearing. The tribunal ordered
                                          • consistent failure to reply to let-      that the respondent be suspended
      Tribunal Members                        ters from other solicitors, to fol-    from practice for 18 months and
      Graham D Morrison                       low up on client matters, and to       thereafter not to be permitted to prac-
      Maurice Lee                             s u p e r v i s e her employees        tice except as an employee for two
      David C Lee                             sufficiently                           years and that she pay the Law Soci-
                                          » failure to comply with an under-         ety's costs.
                                              taking to send documents
                                          » failure to comply with an under-             Hilbert Ka of Lo & Lo appeared for
                                              t a k i n g in a conveyancing          the Law Society.
                                              transaction, and                           The respondent appeared in per-
                                              failure to take proper action to

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