廖建和AND OTHERS v. TREASURE CONSULTANTS LTD AND OTHERS

HCLA 66/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 66 OF 2003

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NOS.
6439, 4722, 5874, 6440, 6498 AND 5794/2002)

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J U D G M E N T

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1. In this appeal, the 5th and 6th Defendants seek to set aside the award of the Labour Tribunal made against them on 17 May 2003. By that award, the Presiding Officer held that the 5th and 6th Defendants were to be jointly and severally liable together with the 1st, 3rd and 4th Defendants in respect of annual leave payments, holiday payments, severance payments (or in the case of the 6th Claimant, long service payment), payment in lieu of notice and annual bonus due to the Claimants.

2. Although leave to appeal was sought on behalf of 2nd to 6th Defendants, I only granted leave to the 5th and 6th Defendants. Hence, the validity of the award vis-à-vis the 1st, 3rd and 4th Defendants would not be affected by whatever this court is going to decide in this appeal. In other words, the Claimants can still enforce the award against the 1st, 3rd and 4th Defendants irrespective of the outcome of this appeal.

3. The relationships between the parties were summarized by the Presiding Officer as follows in Paragraphs 5 to 7 of his careful and detail Reasons for Decision of 12 August 2003. It was written in Chinese and I quote,

"5. 各申索人均為貨櫃車司機，在不同時期分別為D1、D2、D3及D4被告工作。（為免有任何疑問，“工作”在此之意義為中立，並不表示申索人以“僱員”或“非僱員”之身份工作。）此案其中一個關鍵，為各申索人是否如申索人所聲稱為D1至D4被告之僱員，抑或如被告所聲稱，申索人只為非僱員或獨立合約工作者或提供承包服務。

6. 毫無疑問，D1、D2、D3及D4被告為互相有關連之公司，亦與D5及D6被告人有密切關係，各被告之關係，將於下文列出。

7. D5及D6被告於D1至D4被告公司均直接或間接有利益。而亦有表面證據顯示D3被告公司實際由D5及D6被告人擁有及控制，及為D5及D6被告人之替身 [alter ego] 。因此，D5及D6被加入為被告人以決定他們是否須代入D3之位置而須負上任何法律責任。"

4. The Presiding Officer found the Claimants to be employees instead of independent contractors. As regards the liabilities of the 3rd and 4th Defendants as employers, the Presiding Officer's analysis appears at Paragraph 42 of his Reasons for Decision,

"42. D3與D4被告人之法律責任：-

(1) D3表面上看來與東寶集團（包括D1與D4被告公司）並非相聯公司，其董事分別為鄔、區與柯。其實，他們三人本身為東寶集團之僱員，於D3經營期間仍然繼續受僱東寶集團，及從東寶集團支取薪金。鄔作為管理車隊及司機之車長，實為D4被告公司之僱員，其名片（C2-19文件），顯示鄔為D4被告公司之經理。

(2) D3及其代表鄔先生，以及D1、D2及D4被告林應邦先生（“林”）一直認為D3為鄔、區與柯擁有的公司，而並不屬於東寶集團，而D3在公司註冊署之紀錄，只顯示Glenwood及Topland（兩家於BVI成立之公司）為其股東。在審訊開始前Glenwood及Topland之擁有人均一直不為人所知，直至負責註册Glenwood與Topland之公司註冊代理Comsec Management Limited之負責人Anthony Chiu（“趙”）呈交有關文件後，才真相大白，發現Glenwood為D5擁有及操控之公司，而Topland為D6擁有及操控之公司。D5及D6透過BVI離岸公司而擁有及操控D3被告公司之情況，連D1、D2及D4被告公司之代表林先生亦被蒙在鼓裏。

(3) D3之核數報告（由1999年11月15日（成立日期）至2001年3月31日）（D3-14文件）顯示，D3所收取之拖運費與付予司機之報酬完全相等，為數$7,981,739.00，而本身所收取之「管理費」可謂微乎其微（de minimis），只有每月HK$2,000.00，共$12,000.00（僅為生意額之約0.15%）。而根據證人作供，D3唯一的客戶只為D4被告公司或東寶集團，D3所收的款項，亦是「左手來，右手去」，用作支付司機的薪酬，故此，D3只是D4支付報酬予司機之輸送管。

(4) D5與D6被告人辯稱他們將會把D3被告公司之股份轉讓予鄔、柯和區三人，但實際上，股份並未有轉讓予他們三人，亦無任何文件顯示他們三人與D5及D6被告人之間有此協議。本席不接受此辯稱。

(5) 而於1999年期間，當時正有其他司機向D1被告公司以僱員身份提出申索，包括LBTC9888/1999，鄧偉球對D1被告公司提出申索（見D-（z-1）文件）。

(6) 綜合所有有關證供及文件，本席作出以下裁決：-

(a) D3只是代D4被告公司與各申索人簽署D3合約，而真正之僱主實為D4被告公司。

(b) 因此，由2000年1月起，D3及D4均須負上作為僱主之法律責任。（D3雖然為D4之代理人，但因為以自己之名義簽署與各申索人簽署D3合約，仍須負上法律責任。）

(c) 而且，D1並未在1999年9月將其生意轉讓予D4時（或於其後任何時間）以任何方式終止D1與各申索人之僱傭關係，故D1在1999年9月後仍然須負上僱主之法律責任。

(d) 另一方面，雖然D4在1999年9月在D1將業務轉讓予D4後才成為僱主，但因為D1或D4並未有根據《業務轉讓（債權人保障）條例》第4條在憲報及報章刋登任何業務轉讓通告，故此，根據該條例第3條，承讓人（即D4）仍須承擔一切由於出讓人（即D1）在經營該業務時所欠下的債項及所產生的義務（英文版為 "obligations"，應譯為“責任”）。

(e) 於2000年各申索人之僱傭合約於不同時間被終止時，表面上為D3所僱用，但真正的僱主為D4，但D1亦未終止與各申索人的僱傭關係。故此，D1、D3及D4均須承擔終止各申索人僱傭合約所產生的法律責任（如有的話）。"

5. As regards the 5th and 6th Defendants, the Presiding Officer held in Paragraphs 70 to 72 of his Reasons for Decision,

"XIV. D5與D6之法律責任

70. 根據各方之證供及文件證據，表面上D3為鄔、區與柯之公司，獨立於東寶集團，但實際上D3為D5與D6擁有及控制之公司，D3之成立及存在，只是製造一個假象，以顯示D3並非與D4或其他東寶集團有關連之公司，目的為令D4可逃避其作為各申索人（及其他司機）之僱主之法律責任，另一方面，D5與D6亦利用D3作為屏障，以令致任何司機提出之追討或申索每只可對D3提出，而D3本身只是一家無資產之公司，其收入亦是“左手來，右手去”作為支付司機之酬金。鄔、區與柯當時仍然為東寶集團之僱員，而車隊及司機則是透過鄔管理及操縱，而鄔為D4之經理。故此，D3實為D5與D6製造出來之假局（sham）或假象（facade）。關鍵是於此案，能否揭開D3被告公司之面紗（lifting the corporate veil），而令致D5及D6，其幕後擁有及操縱者，承受D3之法律責任。

71. 有關此方面之法律，撮要為：若一家公司被用作逃避法律責任或只是一個假局或假象，或公司只不過是幕後操控人之替身（alter ego），則可以揭開公司面紗。

72. 本席裁定於此案中，D3只是D5與D6製造出來的一個假局或假象，用作：-

(1) 隱藏真正之僱主身份，即D4；

(2) 為任何司機（包括申索人）可能提出之追索或申索提供一道屏障，以令致司機只能向D3（一家本身無資產之公司）追討，而不能向D4（或其他東寶集團之公司追討）；

(3) 運用鄔、柯、區作為門面之掩飾（fronts），向司機及外界虛假及不忠實地申述D3與東寶集團或D5與D6並無關連及為一獨立於東寶集團或D5與D6之公司；及

(4) 利用D3接收D2之司機之協議（因為此接受未必構成業務轉讓），藉此將各申索人及其他司機於D2合約約滿時所累積之僱傭期或年資中斷，及/或隱瞞真正之僱主，由於D1與D4之間之業務轉讓協議，由D1轉為D4之事實。

D5與D6此等行為透過不正當及不忠實之方式去實施，包括作出虛假之申述，而各申索人之權益亦因而受到損害或受到風險。D5與D6之行為在法律上可構成串謀訛騙或串謀損害申索人之經濟利益。在此等情況下，應揭開D3之公司面紗，而要求D5與D6承擔D3之法律責任。"

6. By way of background, the 2nd and 4th Defendants had previously sought leave to appeal in the same case. The applications were dismissed by this court in HCLA 107 and 115 of 2002 on 1 August 2003.

7. Coming back to the present appeal, on 16 September 2003, this court granted leave to appeal to the 5th and 6th Defendants on the following grounds,

"1. The learned Presiding Officer, in coming to the conclusion that D3 was controlled by D5 and D6 had erred in failing to enquire sufficiently, failing to consider sufficiently the evidence and/or failing to apply the correct law in this issue (see paragraph 42(2) and (4)). Had the learned Presiding Officer enquired sufficiently and/or considered sufficiently the evidence of this issue and/or applying the correct law, the learned Presiding Officer ought to have found that D3 was in effect controlled and managed by Mr Woo, Mr Or and Mr Au.

...

3. In lifting the corporate veil of D3 and holding D5 and D6 liable as employer, see paragraphs 70 to 72, the learned Presiding Officer had erred in failing to enquire sufficiently or failing to consider sufficiently the evidence of and erred in law in the issues of:-

(a) the existence of D3 was a sham and/or facade;

(b) whether the existence of D3 was to allow D4 to evade liabilities as employer;

(c) if the existence of D3 was to allow D4 to evade liability (which is denied) as employer, whether it can be said that D5 and D6 used D3 as a sham and/or facade so to make them liable as employer by lifting the corporate veil of D3 in the light of the findings in paragraphs 71, 72(1) and (2) in that the learned Presiding Officer had found that D3's existence was for the purpose of hiding the employer identity of D4;

(d) whether D5 and D6 were the effective controllers of D3;

(e) whether D5 and D6 had used Mr Woo, Mr Or and Mr Au to falsely and dishonestly represent to the claimants and outside world that D3 had nothing to do with D5 and D6 and the East Noble Group.

(f) whether the relation between D5 and D6 and the East Noble Group on the one hand and D3 on the other hand relevant to the liabilities of D3 and/or D4 as employer;

(g) whether D5 and D6's said conduct (paragraph 72) can be said to be beyond reasonable doubt, a conspiracy to defraud the claimant's economic interest, risks and benefit;

Had the Presiding Officer inquired, considered sufficiently and/or applied the evidence and law correctly in the aforesaid issues, the Presiding Officer ought to have found in favour of the Appellants in each of the aforesaid issues and hold D5 and D6 not liable as employer."

8. In addition, in the course of the appeal, on the application of Mr Yip, the court allowed the 5th and 6th Defendants to rely on the following additional ground,

"In holding D5 and D6 liable, the Presiding Officer erred and exceeded in jurisdiction to find and to hold D5 and D6 liable on tortuous basis, namely that "D5 and D6 via improper and dishonest methods to practice false misrepresentation and all the Claimants' rights and interest were damaged and risked" which amounted to conspiracy to damage the Claimants' economic interest."

9. I will first deal with the additional ground. The jurisdiction of the Labour Tribunal is prescribed by Section 7 of the Labour Tribunal Ordinance and the Schedule thereto. Paragraph 3 of the Schedule provides that the tribunal shall not have jurisdiction to hear and determine a claim for a sum of money, or otherwise in respect of a cause of action, founded in tort. Hence, the Labour Tribunal does not have any jurisdiction to entertain any claims in tort. Mr Ma has no quarrel with that proposition.

10. The Presiding Officer did not explain clearly in Paragraph 72 of his Reasons for Decision whether he held the 5th or 6th Defendant liable on account of contract or tort. He observed that the conducts of the 5th and 6th Defendants could constitute conspiracy to defraud or to injure the economic interests of the Claimants. He also referred to fraudulent misrepresentations by these defendants. All these are indicative of the Presiding Officer having tortious liabilities in his mind. The last sentence of that paragraph referred back to piecing of corporate veil of the 3rd Defendant.

11. It must be remembered that the doctrine of piecing the corporate veil does not by itself provide a cause of action. It is a doctrine that can be relied upon to ignore the separate legal personality of a company to attach liabilities to those behind that company. Such liabilities can be liabilities in contract or liabilities in tort or for that matter, any other kinds of liabilities.

12. As far as the Labour Tribunal is concerned, its jurisdiction does not extend to tortious liabilities. Hence, insofar as the references to those tortuous elements by the Presiding Officer are meant to be read as holding the 5th and 6th Defendants liable on account of tort, he was acting outside jurisdiction. Therefore the award cannot be maintained on the ground of liabilities stemming from the torts of misrepresentation or conspiracy.

13. In the present context, the primary obligation to pay annual leave payments, holiday payments, severance payments (or in the case of the 6th Claimant, long service payment), payment in lieu of notice and annual bonus to the Claimants must stem from their contracts of employment. Although the claims are governed by the statutory provisions, they arose from the underlying contracts of employment. Hence, the crucial question is who was the party to the contract of employment, viz. who was the employer of these Claimants.

14. On the Presiding Officer's own findings in Paragraphs 42(6)(a) and (b) and 72(1), the 3rd Defendant was set up as a façade to conceal the identity of the real employer who was the 4th Defendant. Hence, insofar as the contracts of employment are concerned, the piecing of the corporate veil rendered the 4th Defendant liable as the real employer of these Claimants.

15. However, the Presiding Officer did not stop there. He went on to hold that as the 5th and 6th Defendants were those behind this scheme of evading the 4th Defendant's liability as the real employer, the effect of the piercing of corporate veil is to render these two gentlemen personally liable as well. Now this is a step which I have immense difficulty in adopting. Was the Presiding Officer saying that by virtue of what they did, the 5th and 6th Defendants somehow became the employers of these Claimants? If that was what the Presiding Officer meant to hold, how could that sit with his own finding that the real employer was the 4th Defendant? I do not think there is any evidence to suggest that the 5th or 6th Defendants had personally undertaken any dealings with these Claimants that could remotely suggest to the latter that the former were their employers. As a matter of fact, the 5th and 6th Defendants were joined as parties to the case on the Tribunal's own motion. The only matter referred to by the Presiding Officer was the 5th and 6th Defendants' involvement in this scheme of concealment.

16. I have read the Reasons for Decision of the Presiding Officer several times. As I said, the Presiding Officer went to great length in giving reasons for his decision and analyzing each and every issue carefully. I commend him for that. However, with respect, I think he confused liability for tort with liability under the contract of employment in holding the 5th and 6th Defendants liable. On a fair reading of his Reasons for Decision, I do not think he came anywhere near to holding the 5th and 6th Defendants liable as employers of the Claimants. What he did was to hold that because they were the masterminds behind this dishonest scheme of concealment, they should be liable as well as the 3rd and 4th Defendants. Unfortunately, in so doing, he unconsciously treaded beyond the realm of liabilities as employers (which is properly within his jurisdiction) to the realm of tortious liabilities (which is outside his jurisdiction). If the Presiding Officer had asked himself at all time whose liabilities as employer had been concealed, he would have realized that according to his own findings, it must be that of the 4th Defendant. There is no question of the 5th and 6th Defendants being jointly and severally liable with the 4th Defendant as co-employers. This analysis is consistent with the approach adopted by the court in Yukong Line Ltd v Rendsbury Investments [1998] 2 BCLC 485 regarding the personal liability of a director involving in a scheme of hiving off the assets of a company to evade liability. It was held in that case that the doctrine of piecing of corporate veil cannot be utilized in such circumstances to render the director personally liable as party to the original transaction.

17. Once the focus is placed on the real issue that could properly be determined in the Labour Tribunal, viz. who was the real employer of these Claimants, it can readily be seen that the award against the 5th and 6th Defendants cannot be sustained.

18. Mr Ma however contended that the liabilities of the 5th and 6th Defendants could be upheld on the doctrine of undisclosed principal. He contended that since the finding of the Presiding Officer was that the real employer was the 4th Defendant, the 3rd Defendant could only be held liable as the agent for the 4th Defendant on account of the doctrine of undisclosed principal. He relied on Para. 9-002 of Bowstead and Reynolds on Agency, 17th Edn. Mr Ma argued that on the facts of the present case, by failing to disclose to the Claimants that the 4th Defendant was the real employer, the 3rd Defendant was in the position of an agent under an undisclosed principal scenario.

19. That may or may not be correct. However, I fail to see how that could lead to the conclusion that the 5th and 6th Defendants could be rendered liable as employers of the Claimants. They acted neither as agents nor principals in respect of the employment of the Claimants.

20. It might be possible to argue that since the Presiding Officer held that the 3rd Defendant was the alter ego of the 5th and 6th Defendants (see Paragraph 7 of his Reasons for Decision), insofar as the 3rd Defendant participated in a fraudulent scheme to defraud the Claimants, the 5th and 6th Defendants were liable as joint tortfeasors. But that would be within the province of tortious claims which the Labour Tribunal has no jurisdiction to adjudicate upon. Hence, the award cannot be sustained on this ground. It might also be possible to argue that a director would be liable on account of constructive trust if a scheme of corporate structures is employed to strip a company that owed primary obligations to some creditors of its asset to evade liability when the court could properly find that the receipt by the transferee should be treated as the receipt by the director personally (see Trustor AB v Smallbone [2001] 1 WLR 1177). However, that would again be a claim outside the jurisdiction of the Labour Tribunal.

21. Mr Ma relied on the case of Creasey v Breachwood Motors Ltd [1993] BCLC 480 where the court held that the principle of lifting of corporate veil can be evoked so that a transferee of a business could be liable for the liability of the transferor if the purpose of the transfer was a deliberate shifting of the assets of the transferor into the transferee in total disregard of the transferor's duties to protected creditors. It is to be noted that in that case, both the transferor and the transferee were limited companies and their shareholders and directors were the same. However, the court did not hold that directors involved would be personally liable.

22. Hence, even if Creasey is good law, its application in the present context could not assist the Claimants vis-à-vis the 5th and 6th Defendants. At the most, it could be applied to render the 4th Defendant liable.

23. Further, Creasey was disapproved by the English Court of Appeal in Ord v Belhaven Pubs [1998] BCC 607 at p. 616. There is also a very interesting discussion in an article in the Company Lawyer by Mr Damiel Bromilow, Creasey v Breachwood Motors: mistaken identity leads to untimely death (1998) 19 Co Law 198. Mr Ma referred to HKSAR v Leung Yat Ming [1999] 2 HKLRD 402 at p. 406 where Mayo JA (as he then was) appeared to cite Creasey as authority for the wide proposition that where the justice of case requires it, it is permissible to go behind the corporate veil particularly where it is a cloak of deception. There are also two recent cases in Hong Kong on the topic: Liu Hon Ying v. Hua Xin State Enterprise (Hong Kong) Limited [2003] 3 HKLRD 347; Lee Sow Keng Janet v Kelly McKenzie Ltd DCCJ 2303 of 2002, Judge HC Wong, 29 July 2003. Since it is unnecessary for me to reach a final conclusion on the point and counsel did not address me on all the relevant authorities, I will leave it for decision in the future.

24. It follows that the appeal by the 5th and 6th Defendants must be allowed and the award against them set aside. I order accordingly.

25. It is apparent from the above that I do not find it necessary to consider at length the other grounds raised by Mr Yip. Even assuming that there is evidence justifying the factual conclusions of the Presiding Officer, he should not have held the 5th and 6th Defendants to be liable as employers. I therefore need not discuss whether there was evidence before the Presiding Officer to justify those factual conclusions. Mr Yip said there was no evidence and the Presiding Officer had misdirected himself by failing to consider some highly relevant matters. Mr Ma contended otherwise.

26. As regards costs, I will make a costs order nisi that the 4th and 6th Claimants shall bear the costs of the 5th and 6th Defendants in relation to this appeal. I make no order as to costs vis-à-vis the other Claimants since they only played a very passive role in the appeal and the joinder of the 5th and 6th Defendants were not their ideas.