CIANO, VILMA JOY B. v. CHEUK KAM WAN

IN THE SUPREME COURT OF HONG KONG

LABOUR TRIBUNAL APPEAL NO. 78/95

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J U D G M E N T

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1. This is an appeal against the decision of the Presiding Officer of the Labour Tribunal dismissing the appellant's claim for wages in lieu of notice of dismissal, annual leave pay, airticket, food and travelling expenses and official expenses.

2. By an employment contract dated 12th September 1993 in the standard written form, the respondent hired the appellant from the Philippines as a domestic helper. The terms of this contract required that the appellant must reside and work at the respondent's residence and not work for any other employer and the respondent must not require the appellant to work for other person.

3. The appellant obtained a work permit from the Immigration Authority Hong Kong to come to Hong Kong to work and this stipulates the contract number and that change of employer is not permitted. On her arrival in Hong Kong on 26th May 1994, the appellant was permitted to land and stay until 26th May 1995 or two weeks after termination of her contract and her condition of stay is that change of employer is not permitted.

4. The appellant arrived and stayed with her sister for two weeks before she was able to meet the respondent. The respondent took her to the residence of a Mr. Fung and since then she worked at the premises of Mr. Fung both as his domestic helper and assistant in his shop. She was paid by Mr. Fung. The appellant's evidence is that she was directed by the respondent to work for this Mr. Fung. The respondent's version is that the appellant never reported work to her and she did not direct her to work for Mr. Fung.

5. The learned President Officer found that whether the appellant went to work for Mr. Fung as a result of direction from the respondent not material in so far as no change of employer was permitted under the contract and the work permit.

6. The appellant told the learned President Officer that she had no knowledge that she was not allowed to change her employer. The learned Presiding Officer at the hearing told the appellant that he rejected her lack of knowledge in any case, though he did not mention this finding in his reasons for decision.

7. The learned Presiding Officer found the performance of the contract was illegal in that the appellant had contravened the condition of stay and her work permit. The contract was thus an illegal one which in his opinion could not be enforced by a court. He dismissed the claim accordingly.

8. On appeal, Mr. Hui for the appellant submitted that there was no dispute that the contract when formed was legal and conceded that the performance of the contract was illegal. He submitted that whether the contract could be enforced by the appellant depended on whether the appellant knew the performance was illegal. The learned Presiding Officer was obliged to make a finding of fact that the appellant had such knowledge but he was wrong in making no such finding or he drew the wrong inference from the appellant condition of stay in Hong Kong that the appellant had such knowledge.

9. Mr. Hui further submitted that the learned Presiding Officer was wrong not to make a finding on whether the appellant was directed by the respondent to work for Mr. Fung and had erred in deciding that this issue was not material since whether the appellant is a party to the illegal performance depends on the outcome of that finding.

10. In B. &. B. v. Viennese Fabric v. Losane Ltd. (1952) 1 AER 909, at p. 913 Jenkins J. in considering illegal performance of a valid contract had this to say:

"It is plain from Anderson Ltd. v. Daniel that illegality in the performance of a contract may avoid it although the contract was not illegal an initio. That being so, one has to consider whether the mode in which the contract was performed or purported to be performed, in this way suffice to turn it into an illegal contract."

11. Thus, it is the mode of performance which determines whether the contract is illegal.

12. On the question of knowledge, Mr. Hui referred to para. 16 of Volume 16 of Halsbury's of England (4th Edition) for the proposition that if the purpose of the contract is legal from the outset but is illegally performed, whether the employee can enforce the contract depends on where he knows of or colludes in the illegality. He cited Davidson v. Pillay (1979) in support.

13. In Davidson v. Pillay, the Employment Appeal Tribunal, referring to Tomlinson v. Dick Evans "U" Drive Ltd. (1978) IRLR. 77, stated the law on enforcement of a contract of employment which has been illegally performed and it is this: where both the employer and the employee are parties to the illegality and have knowledge of it, the employee cannot enforce the contract. But, where the employer is guilty of the illegal act or only the employer has the illegal intention, and it is not shown that the employee is a party to the illegal act or illegal intention, the employee can still enforce the contract to which he is innocent party.

14. In Newland v. Simon and Willer (Hairdressers) Ltd. (1981) IRLR. 359, the Employment Appeal Tribunal in dealing with the same point had this to say:

"However, in the present case, the Industrial Tribunal found that the material contract of employment entirely lawful on outward appearance and capable of lawful performance was nevertheless being performed illegally by the employer by fictitious entries in his books of account. In those circumstances, quite clearly the contract was tainted with illegality in so far as the employer was concerned, who knew perfectly well what he was doing and was consequently disentitled in law from relying upon the contract.

In the view of the majority of this Appeal Tribunal, the question whether the employee is in her turn in such circumstances also affected by the illegal performance of the contract by the employer depends upon whether she was a party to or knew of her employer's illegality. If she did take part in or continued working knowing of the illegal mode of performance by her employer of her contract of employment, then she too was affected by that illegality and cannot now rely upon the statutory rights to which she would otherwise be entitled under the relevant legislation.

The majority of us think that these principles are clearly part of the Common Law ..."

15. Thus, the appellant's knowledge is a relevant consideration in the present case.

16. It is clear from the record that the appellant knew the terms of her contract, the condition of her work permit and the condition of her stay in Hong Kong, all of which prohibited her from being employed by another employer or work at a different place. It was obvious to her that a breach of the conditions would result in her repatriation. Nevertheless, the appellant started work and continued to do so for a person different from the respondent and resided at a place other than the place stipulated. The appellant had not performed the contract in the only way allowed by law. The course of event tainted the contract with illegality. The contract is no less unenforceable as that would have been a contract the initial term of which provided for working for another person at a different address which would have been prohibited.

17. The learned Presiding Officer was entitled on such evidence to conclude that irrespective of whether the respondent directed the appellant to work for Mr. Fung, the way in which the contract was performed sufficed to turn it into an illegal contract and the appellant was a party to and well aware of the illegal performance.

18. The rejection of the appellant's claim of lack of knowledge is a clear finding by the learned Presiding Officer of knowledge on the part of the appellant. The learned Presiding Officer's finding of fact on knowledge cannot be disturbed. His conclusion that the contract of employment is illegal cannot be upset.

19. Mr. Hui then submitted that even if the appellant was party to the illegal performance and was aware of the illegality, she should nevertheless be entitled to enforce her claims under the contract. He submitted that the appellant was directed by the respondent to work for another person. The conduct of the respondent was more reprehensible than the appellant and it would not be fair if the appellant was not allowed to pursue her claims. He submitted that the finding of the learned Presiding Officer on whether the respondent had done so is important and the learned Presiding Officer erred in not making such a finding.

20. He relied on Hewcastle Catering Ltd. v. Ahmed and Elkamah (1991) IRLR. 473. In this case, the Court of Appeal considered the question of enforcement of an illegal contract and Lord Justice Beldom, referring to the test in Thackwell v. Barclays Bank Plc, said (at p. 477)

"Lord Justice Nicholls approved the test applied by Mr. Hutchison in Thackwell's case that whether there had been illegality of which the court ought to take notice should depend on whether in all the circumstances it would be an affront to the public conscience if by affording him relief the court was seen to be indirectly assisting in or encouraging an criminal act ...

Lord Justice Bingham agreeing with the other two Lords Justices, said at p. 1134B:

'Where issues of illegality are raised the courts have (as it seems to me) to steer a middle course between two unacceptable positions, on the one hand it is unacceptable that any court of law should aid or lend its authority to a party seeking to pursue or enforce an object of agreement which the law prohibits. On the other hand it is unacceptable that the court should on the first indication of unlawfulness affecting any aspect of a transaction, draw up its skirts and refuse all assistance to the plaintiff, no matter how serious his loss nor how disproportionate his loss to the unlawfulness of his conduct.'

He went on:

'the cases to which Kerr and Nicholls LJ have referred are valuable, both for the statement of principle which they contain and for the illustrations which they give of the courses which courts have in fact steered in different factual situations. But I think that on the whole the courts have tended to adopt a pragmatic approach to these problems, seeking where possible to see that genuine wrongs are righted so long as the court does not thereby promote or countenance a nefarious object or bargain which it is bound to condemn'"

21. The Court of Appeal in the end held that the courts will not assist the plaintiff who has been guilty of illegal (or immoral) conduct of which the courts should take notice. However, the defence of ex turpi causa will not succeed where the defendant's conduct in participating in an illegal contract on which the plaintiff sues is so reprehensible in comparison with that of the plaintiff that it would be wrong to allow the defendant to rely upon it.

22. The appellant came to Hong Kong the first time in May 1995 and the contract was her first foreign employment. The respondent was her first employer in Hong Kong. That being so, if she was directed by the respondent to work for someone else, she might have felt bound to oblige even though she knew it would not be legal. Her will would have been overborne. The respondent' s conduct would be so reprehensible in comparison with that of the appellant that it would not be right to deprive the appellant of remedy. Whether the appellant could enforce the contract depends on a finding of fact on whether the respondent had so directed the appellant. In considering whether to shut off the appellant from her remedy, there ought to be such finding of fact.

23. The appeal is therefore allowed and the case remitted to the Labour Tribunal for determination on this limited issue i.e. whether the respondent had directed the appellant to work for Mr. Fung and at Mr. Fung's address and according to this finding of fact to determine the claims by the appellant.

24. There should be no order as to costs and the appellant's own costs to be taxed in accordance with Legal Aid Regulations.