STAR EXPRESS LTD. v. CHENG TAK AND OTHERS

No. 86 of 1998
(Labour Tribunal Appeal)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(On appeal from Labour Tribunal Claim No. 3884 of 1998)

____________

________________

J U D G M E N T

________________

1. The Appellant operates a tourist couch service and the respondents were its couch drivers. Under the contract of their employment, the Respondents received a basic salary, tips, parking fees and a couch cleaning allowance. In 1996, the Appellant dismissed the Respondents and paid them severance/long service payments, wages in lieu of notice, statutory holiday pay and annual leave pay on the basis of their basic salary. The Respondents claimed that the tips, parking fees and couch cleaning allowance should be included as part of their wages for the purpose calculating the severance/long service payments etc. The Presiding Officer held that the tips and parking fees formed part of the wages of the Respondents and awarded the Respondents the balance of their severance/long service payments, wages in lieu of notice, statutory holiday pay and annual leave pay on that basis. Against that decision, the Appellant now appeals.

Tips:

2. The first ground of appeal relates to the "tips" which the Presiding Officer held was part of the drivers' wages. Miss Lai, on behalf of the Appellant, submitted that the Presiding Officer failed to consider or sufficiently consider the Employees Regulations, which states that the "tips" is gifted by the tourists through the appellant company and is gratuitous in nature. She further submitted that the Presiding Officer failed to consider whether the "tips" is recognised by the Appellant as part of the Respondents' wages. She said this failure rendered the Presiding Officer's finding erroneous and the matter should at least be remitted back to the Labour Tribunal for further enquiries by the Presiding Officer.

3. It is obvious from his very well reasoned judgment at pages 49 to 53; the Presiding Officer has enquiries into the nature of the "tips". The Presiding Officer said he spent a lot of time in investigating the nature of the "tips"; and I have no doubt that he had. He referred to the Employees Regulation. He cited the regulation which provided that the "tips" would not be recognised as part of the employees' wages. He referred to and cited the definition of "tips and service charges" in section 2 of the Employment Ordinance. He referred to Exhibit D-4, which is the Regulation for Drivers in Chinese. That document also contained a provision that "tips" were not part of the employees' wages. Then the Presiding Officer said all these supported the Appellant's case. Thus the Presiding Officer had in his mind the issue whether the tips were recognised by the Appellant as part of the Respondents' wages; that was why he said that the definition in section 2 supported the Appellant's case.

4. However, as the trial proceeded, the Presiding Officer said he discovered that it was questionable whether the so called "tips" are tips and service charges as defined by section 2 of the Employment Ordinance. He then devoted two and half pages of his judgment dealing with the evidence and his finding as to the nature of the "tips". At page 51 of the bundle, he held:

"The court/tribunal does not look at the label of a payment to determine the true nature. The principle is established in case when the court/tribunal evaluate the true nature of payment labelled as overtime, bonus, travelling expenses and determine whether it is wages in truth. All the circumstances has to be taken into account to determine what payment that is."

The Presiding Officer was clearly correct in his approach. Though he did not cite any authority, he must have in his mind the following dicta of Deputy Judge P. Chan, as he then was, in Yan Tak Cheung v. Famous Horse Garment Factory Limited and Belsen Company Limited, Labour Tribunal Appeal No. 3 of 1992:

"In my view, there is no magic in the word "allowance". It is not defined anywhere in the Ordinance. The parties, particularly laymen, may call a certain payment or benefit "allowance". But the label is not conclusive. It is not what the parties call it but what it is in substance that matters. One has to look into the nature of the payment, the reasons therefor, and the circumstances or conditions under which such payment is made. It is a question of mixed law and fact."

5. The Presiding Officer then analysed the nature of the "tips" and held:

"Based on those analysis I found that the tips paid by the defendant to the claimant are not tips and service charges as defined in the Employment Ordinance but wages. Then whether or not the claimant recognise it as wages is irrelevant. It is only the true tips and services charges paid to an employee that the employer is entitled not to recognise it as part of the wages. As for the true wages, it is not open to an employer not to recognise it as wages for calculating the employee's entitlement under the Employment Ordinance, and any provision to that effect must be void under section 70 of the Employment Ordinance."

The Presiding Officer found that upon the true analysis the so called "tips" were not tips and service charges as defined in section 2 of the Employment Ordinance but were true wages. He then proceeded to hold that for true wages, it was not up to the employer not to recognise it as part of the employee's wages. Thus, he clearly had in mind the definition of "tips and service charges" in section 2 and the importance of recognition by the employer before such tips and service charges could be regarded as wages.

6. Was the Presiding Officer correct in finding that the "tips" are true wages? Section 35(2) of the Labour Tribunal Ordinance, Cap. 25, provides that on an appeal from the Labour Tribunal, the High Court may not reverse or vary any determination made by the Tribunal on questions of facts. However, the conclusion to be drawn from those facts is a question of law. Thus, while I may not vary the Presiding Officer's finding of fact, but if I find his conclusion as to the true nature of the "tips" drawn from those facts wrong, I am entitled to correct it as the issue is a mixed question of law and fact.

7. The Presiding has made the following finding of facts as regards the "tips":

(1) Tourists did not know the amount of tips paid to the claimants

(2) When the account office is preparing the budgeting for a tour, they would include an amount as tips. But the tourist would not be informed of the amount.

(3) In fixing the amount of tips at the budgeting, the defendant would follow roughly a table agreed between the Tourist Association and the Tourist Bus Driver Association and has been produced as part of C2.

(4) After each tour, the claimants would claim a tip according to the said table. But the amount paid would not be exactly the amount of tips in the budget.

(5) The amount of tips payable is related to work done and depends on distance travelled, number of passengers and the amount of luggage carried, and duration.

8. The Presiding Officer then applied the test that a payment is wages if it is paid on account of work done or work to be done. He held:

"The test if a payment is wages must be whether it is on account of work done or work to be done under the contract of employment. Apply this test, I ask myself what is the nature of the tips paid to the claimants. It is obvious that it is not a payment by the tourist. It is a payment coming from the defendant divided from the tour fare received from the tourists. Such an arrangement is not known to the tourist and does not need the consent of the tourist. It is to my mind clearly a payment of wages, a payment in recognition of their work done. It is a payment to the claimants because the basic wages is lower than the market and without the tips, the claimants would not be happy to work for the defendant. Therefore the defendant has to pay them an amount equivalent to the tips they would be received by the drivers working for other tourist company. As such it is an operational payment from the defendant and must be wages for the claimants."

I consider the test applied by the Presiding Officer correct and he made full and proper inquiries into the issue. His reasons for finding that the tips were wages impeccable and was fully supported by the evidence.

9. Miss Lai submitted that the Presiding Officer failed to take into account that in accordance with the Employees' Regulations, average basic salary of the employees was used for calculating the amount of year end double pay. I do not think this could advance her appeal any further. The amount of end of year payment, as it should properly be called, is a matter of contract. Only in the absence of agreement, then section 11D of the Employment Ordinance provides that it shall be one month's wages. Here, obviously, there was an agreement by virtue of the Employees' Regulation that it shall be one month average basic wages. This complaint is unjustified.

10. For the above reasons, I find that the Presiding Officer correct to include "tips" as part of the Respondents' wages.

The Parking Fees

11. The second ground of appeal relates to the parking fees, which Miss Lai, for the Appellant, argued was a reimbursement and should not be treated as forming part of the respondents' wages. The drivers received a monthly parking fees of $450. According to the Appellant, the purpose of the payment was to reimburse the drivers for parking the tourist couches in metered parking spaces. No receipts need be produced and indeed no receipts could be available. This evidence was not accepted by the Presiding Officer. I shall not take them into account as I consider I am bound by the Presiding Officer's finding of fact. In addition to this $450, the drivers may claim reimbursement in respect of all receipted parking. This was not in dispute.

12. The Presiding Officer accepted the evidence of the respondents. Hereunder are the extracts from the transcript of what the respondents said in respect of the parking fees:

Cross examination of the First Respondent (at page 10 - 11):

Court: 泊車咪費?

A. To subsidise our parking fees. When we go to a site, we have to pay the parking ourselves. No reimbursement.

Q. Parking fee, $450 it is to be paid to government.

Initially, they were claimed from company. When the amount becomes too large, we set a limit. So we finally pay them a sum and if they do not have enough, they have to foot it themselves. Not part of their wages?

A. Where we were to work, we had to park. This is for our parking fees.

Examination in chief of the Second Respondent (at page 13 - 14)

I had been employed as driver in Defendant. Joined in 1/1/97. $5,500.00 basis. $750 抹車 and 咪表, ..... $450 parking.

Cross-examination of Second Respondent (at page 15)

Q. Any income beside basic and tips?

A. Yes. Tips by client. Cleaning and parking fees. The guide selling souvenir. Red packet for Chinese New Year. Bonus.

At the review (at page 45 to 46)

R1: I was paid $450 each month. I use to pay parking meter.

R2: Usually I use it to buy lunch box. If it is reimbursement, Claimant (Defendant?) should pay me more.

R3: I do not treat this as parking fees. I use to buy lunch. I have to be responsible for no parking ticket. If charge, I paid myself.

R5: $450 - no mention that we have to park meter. I treat the $450 as allowance.

13. On these facts, the learned Presiding Officer found that the fees were remuneration for work done or work to be done under the contract of employment. He held:

"The claimants said the parking fee is fixed and payable to them irrespective of whether they used the money to pay parking meter. They were paid every month and no application form has to be filed. The Defendant agrees that the Claimants did not have to fill up any application form, but their foreman filled up the form for them. But that is not to their knowledge.

It is not in dispute that the claimants were also entitled to claim reimbursement for car-park fees. It was when they parked into car-park where receipts could be issued.

Looking at the evidence of the defendant company representative and the claimants, I accept the evidence of the claimants that the parking fees is a fixed payment to the claimant. The Defendant would not care if $450.00 is sufficient or how it was used. It makes commercial sense to save a lot of argument as there is no receipts for parking meter. With this money the claimants worked out their own way to stop their bus without infringing the law. The time for parking is part of their working time. This payment is related to works and works to be done. Accordingly it is part of the wages."

14. Even on the evidence, there was a split among the Respondents as to how they spent the allowance. Apart from the First Respondent, all the other Respondents gave no clue as to the purpose of the parking fees. It was called "parking fees". This label is not conclusive, but is of prima facie value. In effect, the First Respondent said the money was intended to defray parking meter charges incurred in the course of his work. He said he had to take tourists to locations and had to park the tourist couch and pay the parking charges. He said "Where we were to work, we had to park. This is for our parking fees." His evidence is therefore consistent with the evidence of the Appellant which the Presiding Officer rejected. The Second Respondent said if it were reimbursement the Appellant had to pay him more. Thus impliedly, he recognised that in the course of performing his duty he had to park the tourist couch and incur parking charges. It is interesting to note that both the First and Second Respondents mentioned "park meters" or "咪表". Thus they acknowledged that the money was for parking meters. The evidence of the other Respondents was ambiguous. Putting their evidence together at the highest, they treated the parking fees as part of their wages, but no reasons were given. That some of the Respondents chose to park in a metered parking space without paying or to drive around without parking and then use the money on lunch boxes was entirely a matter for those employees. But that does not change the nature of the parking fees.

15. The real question is what was the purpose for which the money was given by the Appellant and received by the Respondents, and not how the Respondents used or treated the money. The Appellant's evidence was rejected by the Presiding Officer. However, the evidence of the First Respondent which was accepted by the Presiding Officer supported the Appellant's contention. That was the only evidence about the nature of the payment. Further, it was a small amount, being about $17 a day on a 26 day basis. It was sufficient to cover about an hour parking charges in busy areas. It was about right for a day's on street parking whereas off-street parking expenses would be reimbursed on production of receipts. The allowance must be a genuine pre-estimate of on street parking expenses. Indeed the Presiding Officer said that "it makes commercial sense to save a lot of argument to give a fixed allowance, as there is no receipts for parking meter".

16. Parking must be part and partial of the Respondents' duty as drivers. Their basic salary and tips must have included an element for parking the tourist couches. It would be unrealistic to imagine that the Respondents were employed to drive only and not to park and that on top of those wages, they were to be paid parking fees for parking the tourist couches they drove. That could not be right. In my view, the only reasonable conclusion that could be drawn from the evidence is that the allowance was a genuine pre-estimate of meter parking charges or on street parking charges and is of the nature of a reimbursement. Off street parking charges were reimbursed separately on the basis of actual receipts. In the light of the above, it is difficult to see how the finding of the Presiding Officer is supported by the evidence.

17. Whether the parking fees were reimbursement is a mixed question of fact and law. If the evidence does not support the conclusion of the Presiding Officer, I am at liberty to substitute it with my own. Accordingly, I find that the parking fees were reimbursements and should not be included as part of the Respondents' wages for the purpose of calculating their entitlements to severance/long service payment, wages in lieu of notice, statutory holiday pay and annual leave pay.

18. Accordingly, I allow the appeal only to the extent that the award of the Presiding Officer be reduced by excluding the parking fees from the wages as a basis for calculating the Respondents' award. I therefore reduce the awards as follow:

Costs:

19. I have resolved the issue of the tips against the Appellant but the issue of the parking fees in its favour. The value of the parking fees is about 10% of the value of the tips but results in a reduction of the Respondents' award by about 18%. Having regard to that and the amount of time spent in arguing the two issues, I consider that the Appellant should bear 60% of the costs of the appeal. I therefore make costs order nisi that the Appellant shall bear 60% of the costs of this appeal, including the costs of the application for leave to appeal; and the Respondents' own costs to be taxed in accordance with Legal Aid Regulations.