CHAN HON WING AND 21 OTHERS v. HUNG TAT WAREHOUSE TRANSPORTATION AND SHIPPING CO LTD

HCMP 1846/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1846 OF 2008

(ON AN INTENDED APPEAL FROM HCLA NO. 34 OF 2007)

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D E C I S I O N

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1.  The defendant is the employer of the claimants.  The defendant was in the transportation business and the claimants were the defendant’s lorry drivers.  The defendant paid the claimants:

a.  a basic monthly salary which was of a fixed sum ($3,000);

b.  a certain amount for each journey driven hauling containers. 

2.  It is common ground that the basic salary and the payment for the hauling of containers were calculated and added up at the end of each calendar month and paid together.

3.  The payment for the haulage of the container has been described as a commission. 

4.  Commission is not defined in the Employment Ordinance, Cap. 57, although “wages” is defined.  The definition included “commission” but not:

“(c)  any commission which is of a gratuitous nature or which is payable only at a discretion of the employer;”.

5.  According to the Shorter Oxford English Dictionary, a “commission” is:

“A payment to an agent proportional to the amount involved in a transaction, a percentage on the amount involved.”

However, a similar payment to an employee, such as a salesperson, is often called a commission.

6.  On 18 June 2007, the presiding officer of the Labour Tribunal awarded HK$1,219,234.73 to the claimants in respect of holiday and annual leave pay which included the so-call “commission” pursuant to the section 41 and section 41C of the Employment Ordinance prior to their repeal in 2007.  Other sums not relevant to the present appeal were also awarded and have already been paid to the claimants.

7.  On 8 October 2007, the defendant paid the sum of HK$1,219,234.73 into court in compliance with the condition of Recorder Paul Shieh SC for a stay of execution of the award of the presiding officer. 

8.  On 3 September 2008, Deputy Judge To dismissed the appeal from the Labour Tribunal.  Deputy Judge To decided that the claimants’ claim fell within sections 41(2) and 41C(2) of the Employment Ordinance, namely that the “commission” constituted either “piece rates” or “wages” within the meaning and for the purposes of sections 41(2) and 41C(2). 

9.  On 16 September 2008, Deputy Judge To granted a stay of execution of his judgment pending final determination and disposal of the application for leave to appeal on condition that the defendant further pay into court a sum of $200,000 to cover interests and legal costs.  This sum has duly been paid into court.

10.  The defendant wishes to appeal to this court. Under section 35A o the Labour Tribunal Ordinance, Cap. 25.  The application for leave must be made within 7 days of the decision and leave to appeal may be granted:

“… if the Court of Appeal considers that a question of law of general public importance is involved …”. 

11.  This is an application for leave to appeal out of time.  There was delay because the defendant took the view that the absence of a stay of execution would render the appeal nugatory, and a stay of execution was only granted by Deputy Judge To on 16 September 2008.  The defendant also applies for a stay pending the final determination of the appeal.  The defendant had requested an oral hearing in the event that the court was not prepared to grant leave on paper.  There was thus an oral hearing.  I have had the benefit of full and able submissions by Mr Julian Chan for the defendant and Mr Eric Shum for the 9^th claimant.

12.  The appeal involves the interpretation of section 41 and section 41C of the Employment Ordinance prior to their amendment in 2007.  The relevant sections provided:

“41.   Rate of holiday pay

(1)  Holiday pay shall be a sum equivalent to the wages which the employee would have earned on a full working day.

(2)  Notwithstanding subsection (1), where an employee is employed on piece rates or where the daily wages of an employee vary from day to day, the holiday pay shall be a sum equivalent to the average daily wage earned by the employee, and for the purposes of this subsection the average daily wage shall be the average of the daily wages earned by the employee on each day on which he worked during every complete wage period, comprising not less than 28 days and not more than 31 days, immediately preceding or expiring on the holiday or first day of the holidays.

……

41C.  Rate of annual leave pay

(1)  Annual leave pay shall, subject to subsection (2), be a sum equivalent to the wages which the employee would have earned if he had worked every day during the period of annual leave.

(2)  Where an employee is employed on piece rates or where the wages of an employee vary from day to day, the annual leave pay shall be calculated by reference to the average daily wage earned by the employee, and for the purposes of this subsection the average daily wage shall be the average of the daily wages earned by the employee on each day on which he worked during every complete wage period, comprising not less than 28 days and not more than 31 days, immediately preceding or expiring on the first day of the annual leave or on the day on which the contract of employment terminates, as the case may be.”

13.  These sections have been amended as the result of the decision of the Court of Final Appeal in Lisbeth Enterprises Ltd v Mandy Luk [2006] 9 HKCFAR 131. 

14.  Mr Julian Chan submitted that there does not appear to be any direct authority on the meaning of “piece rates”.  He submitted that “piece rates” refer to the rates one received when one is engaged in piece work.  As the Shorter Oxford English Dictionary defined “piecework” as “work paid for by the amount produced”, piece rate has no application here because the hauling of containers produced nothing.  He submitted also that a transport worker such as a collie who is paid on the number of bags of rice carried by him from a vessel to the go-down would not be covered by section 41(2) or section 41C(2).  That is so notwithstanding that such a worker would be covered for other purposes by the Employment Ordinance.  For example, he would be entitled to holiday with pay under section 39.  The restriction on pay-in-lieu of holiday under section 40A would also apply to him.  But if Mr Julian Chan is right, he is not entitled to holiday pay under section 40 of the Employment Ordinance.  That makes no sense at all.  I do not believe that could have been the intention of the legislature.  Nor do I believe the language of the relevant sections compel me to that conclusion.

15.  Mr Julian Chan traced holiday pay to the Industrial Employment (Holidays with Pay and Sickness Allowance) Ordinance.  That Ordinance only applied to workers in an industrial undertaking pursuant to section 3 of that ordinance.  These beneficial provisions were eventually extended to non-industrial workers by sections 41 and 41C.  He has referred me to the Hong Kong Hansard, Reports of the Legislative Council sittings dated 25 April 1973, page 741, where the then Commissioner of Labour, the Hon. Mr Paul Tsui said that the proposed amendments would repeal the Industrial Employment (Holidays with Pay and Sickness Allowance) Ordinance so that:

“all manual workers and all non-manual workers earning up to $1,500 a month – irrespective of whether he or she is employed in an industrial undertaking – will receive the same benefits”.

16.  Mr Julian Chan referred to section 24(1)(b) of the Industrial Employment (Holidays with Pay and Sickness Allowance) Ordinance (enacted in 1955), which provided for “case of a worker whose wages are calculated by … the piece”.

17.  He submitted:

“It is clear that this must be a reference to an industrial worker producing pieces of product in a factory (e.g. a piece of furniture, clothing, machinery).”

18.  With respect, I do not agree.  “Industrial undertaking” had been defined in the Factories and Industrial Undertakings Ordinance, Cap. 59 as enacted in 1955 to include:

“(f)  the transport of passengers or goods by road or rail, or inland waterway, including the handling of goods at docks, quays, wharves, and warehouses, and the carriage of coal and building material and debris;” .

Section 3(1) of the Industrial Employment (Holidays with Pay and Sickness Allowance) Ordinance was applicable:

“… to every person engaged under a contract of service or apprenticeship in an industrial undertaking …”

as defined in the Factories and Industrial Undertakings Ordinance.

19.  Section 24(1)(b) of the Industrial Employment (Holidays with Pay and Sickness Allowance) Ordinance covered the assessment of average daily earnings of:

“a worker whose wages are calculated by the hour, the day or the piece”.

20.  Collies with their tallies were a common sight in 1955.  I cannot believe the reference to payment by the piece was restricted to pieces of products produced.  Payment according to the number of containers hauled is payment on piece rates.  If Mr Chan is right a sewing worker who is paid by the number of garments sewed would be paid by piece rate, but not the worker who irons the garment prior to packing.

21.  It follows that Deputy Judge To must be right on sections 41(2) and 41C(2) and the award by the presiding officer cannot be disturbed.  So for these reasons, I would refuse leave to appeal.

22.  I turn to consider sections 41(1) and 41C(1).  Mr Julian Chan submitted that Lisbeth is authority that:

“these subsections are directed to what the employee would have earned but commission involves what the employee might have earned (depending on whether the contractual requirements for entitlement to commission is satisfied)”.

23.  Lisbeth turned on its own facts.  As Rogers VP explained in Lam Pik Shan v Hong Kong Wing On Travel Service Ltd [2008] 3 HKC 578:

“1.  … the Court of Final Appeal came to the conclusion that the provisions in the Employment Ordinance, Cap. 57 relating to commission were unworkable where the commission was calculated at rates that varied on a monthly basis.”

24.  As the result of that decision, the Employment Ordinance has been amended.  However Lisbeth remains the binding authority on the interpretation of the unamended sections 41(1) and 41C(1).  In Lisbeth, the employee who worked in the health and beauty club operated by the company was entitled not only to a salary but also to a commission on sales made by her.  The contractual commission was calculated on a monthly basis, payable according to fluctuating monthly result on a sliding scale.  The Court of Final Appeal held that such commission lacked “the requisite quality of dailiness”, which was required for the calculation under sections 41(1) and 41C(1).

25.  It was in that context that Bokhary PJ said (with the concurrence of the other members of the court):

“23.  … (section 41(1) and section 41C(1)) are directed to what the employee ‘would’ have earned.  But commission involves what the employee might have earned, depending on whether the contractual requirements for entitlement to commission are satisfied.”

26.  However, Bokhary PJ left open the possibility:

“24.  … that sections 41(2) and 41C(2) can be read to cover contractual commission accruing and calculated on a daily basis in amounts varying from day to day, those subsections do not cater for commission.  It follows that holiday pay and annual leave pay form a context which requires that the word ‘wages’ be read as excluding commission save possibly for commission accruing and calculated on a daily basis in amounts varying from day to day.”

27.  So the fact that such commission “might” as opposed to “would” be earned would not necessarily make section 41(1) or section 41C(1) inapplicable.

28.  Mr Julian Chan further submitted that the requisite requirement of dailiness requires the commission to be accrued and calculated on a daily basis.

29.  It is clear from the evidence that the number of containers hauled were calculated on a daily basis, and that they would be paid at the end of the month.  Mr Chan submitted that the amount payable must be calculated on a daily basis, being merely calculable on that basis is not enough.  I see no difference between calculable and calculated in this context.  Indeed, according to the Shorter Oxford English Dictionary “calculable” means “able to be calculated”. 

30.  In Lam Pik Shan, a tour operator’s employees were compensated by a basic salary and tips which were calculated on a daily basis.  Le Pichon JA (with the concurrence of the other members) said that the case was not about commission and that:

“20.  … tips received from tour participants would fall squarely within the statutory definition of “wages”.  The real question is whether a workable mode of calculation exists for working out the net tips and whether it can be said to accrue daily.”

31.  Le Pichon JA said:

“21.  … Not only is the rate of recommended tips made on a per person per day basis, the tips the tour guide/escort had to defray in the foreign country are also expressed in a similar fashion.  Even if the tour guide does not receive his tips until the end of the tour, given that the duration of the tour is a fixed number of days, the net tips per day can be said to ‘accrue’ on a daily basis and are readily calculable on the same basis.”

32.  Thus was Lisbeth distinguished in Lam Pik Shan.

33.  Here, also, we are not concerned with such commission.  Although the defendant has chosen to describe the payment as commission.  Comments on “commission” found in Words and Phrases Legally Defined, 4^th edition would suggest that the payments are more akin to wages than commission (though calculated by the piece of work done).

“Commission is prima facie the payment made to an agent for agency work, usually according to a scale-it may be an ad valorem scale, but not necessarily an ad valorem scale.  It is … the most general word that can be used to describe the remuneration paid to an agent for an agency work other than a salary.”  Drielsma v Manifold [1894] 3 Ch 100 at 107, CA, per Davey LJ

“A commission is a sum or percentage allowed to an agent or salesman for his services – Macquarie Dictionary.  It might also be described as a payment to an agent proportional to an amount involved in a transaction or a percentage of the amount involved in a transaction – see Shorter Oxford English Dictionary.”  Brown v Commissioner of Taxation [2001] FCA 596 at [108], BC200102688, per Emmett J

34.  But it does not matter.  I do not believe anything is gained by describing the payment as commission.  In any event, there is no doubt that the claimants are contractually entitled to them and they must be regarded as part of the wages.  It is true that the claimants would be paid although no work would be done.  But that is the nature of a holiday with pay.  The worker is paid although he was not working. 

35.  I do not believe Lisbeth assists the defendant, I would refuse leave to appeal.  I am of the opinion that no point of great general importance is involved in this appeal, and in any event, I am of the opinion that on the authorities, the appeal is doomed to fail.  Nor would I grant an extension of time.

36.  Mr Julian Chan informed me that in the event of an adverse decision his client wished to apply for a rehearing before a two-men court and that for the purpose, they wished to have a stay of payment-out for the money in court pending the determination by the two-men court.  I express no view on whether an appeal to a two-men court is possible.  See 59/14/22 Hong Kong Civil Procedure 2009. 

37.  In the circumstances of this case, I would not grant a stay.  I agree with Mr Shum that the claimants have been kept out of their money for too long.

38.  I would dismiss the application with costs to the claimants.  The costs of the 9^th claimant, who is represented, shall be taxed if not agreed.  The 9^th claimant’s costs are also to be taxed in accordance with the Legal Aid Regulations.  In relation to the claimants in person, I would fix their costs at the sum of $500 per person.