LAI WO HEUNG v. CHEUNG KONG FUR FTY CO LTD

HCLA 123/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 123 OF 2002

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO. 6186 OF 2002)

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J U D G M E N T

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1. This is an appeal brought by the Defendant, the alleged former employer of the Claimant.

2. The Defendant is a trading company in Hong Kong. A Mr Tuen Mo owns 70% of its shareholding. He runs and controls the Defendant. Mr Tuen Mo also has a company in the Mainland, Cheung Hing Factory Company ("Cheung Hing"), a garment factory. He is Cheung Hing's 100% beneficial owner. Mr Tuen Mo has known the Claimant, a master in garment pattern-making (紙樣師傅), for a long time. In January 2000, through the introduction of a Mr Lam, the Claimant met with Mr Tuen Mo in Shenzhen in the Mainland for a job interview. At the meeting, Mr Tuen Mo did not say expressly or specifically whether he was representing the Defendant or Cheung Hing in interviewing the Claimant. The Claimant gave evidence before the Labour Tribunal that he thought Mr Tuen Mo was representing the Defendant in discussing terms of employment with him. He eventually reached an agreement with Mr Tuen Mo on his employment. He therefore thought that he was employed by the Defendant (through Mr Tuen Mo). However, it is common ground that the Claimant spent most of his time working at the factory of Cheung Hing in the Mainland, and only occasionally came to Hong Kong to assist in the business of the Defendant, particularly during exhibitions.

3. At the trial below, Mr Tuen Mo gave evidence that he was representing Cheung Hing in employing the Claimant. But he accepted that during the meeting in January 2000, he did not make known to the Claimant that he was wearing the hat of Cheung Hing at the interview.

4. At the conclusion of the trial, the Labour Tribunal found in favour of the Claimant, finding that he was indeed employed by the Defendant. It is common ground that the Claimant's employment was summarily terminated on 3 April 2002 without notice or payment in lieu. The Tribunal therefore awarded in favour of the Claimant against the Defendant a sum of $15,000 as payment in lieu of notice and another sum of $21,342.40 as long service payment. The Tribunal also awarded the Claimant costs.

5. Dissatisfied with the decision of the Tribunal, the Defendant applied for a review, which was heard by the same Presiding Officer. An additional point was taken by the Defendant about the jurisdiction of the Labour Tribunal. At the conclusion of the review hearing, the Tribunal dismissed the application and maintained its original finding that the Defendant was the employer of the Claimant. The Tribunal also rejected the argument based on jurisdiction.

6. As a result of the Defendant's application for leave to appeal, the Tribunal prepared a written reasons for decision. In paragraph 13, the Tribunal explained its finding thus:

"	13.	在考慮雙方證供之後，本席裁決申索人得直，在覆核時維持原判。理由如下：
		i)	申索人與被告人之合約是否與長江或長興，其焦點在否端木以長江或長興身份商談。
		ii)	端木當時是長江又是長興老闆，他可以代表長江及長興。
		iii)	申索人在深圳所訂之口頭合約，我相信是與長江訂下的，條件是月薪 $15,000，雙糧及花紅，並在東莞長興工作，在有需要時，要在香港為長江工作，如一年一度之國際皮草展覽會，又在香港出量，因此，我裁決那份是香港合約，因此本審裁處有司法管轄權。
		iv)	被告人本身是長江及長興主要股東，又是兩間公司老闆，他在深圳與申索人談合約時，有雙重身份。端木從沒有說他是代表長興而不是代表長江訂口頭合約（謄本 p. 27 F-1）而申索人相信他是代表長江。至於長興之薪金單據，因為長江與長興都是屬端木的，他可以自由選擇那一間公司長江或長興入賬及發薪的，被告人在他的答[辯]書是曾面陳說：「從兩間公司性質上，本人都是股東，但兩間都是獨立公司，基于此，當兩間公司有事務需要處理時，都會在同一地方處理。」（D-1 - (2)）本席相信那些薪金收據是香港發出及簽收的。"

7. These are not the only reasons that the Tribunal has given in relation to its decisions. In accordance with the requirement in section 22 of the Labour Tribunal Ordinance (Cap. 25), the Presiding Officer has also given oral reasons at the conclusion of the original trial as well as the conclusion of the review respectively. The relevant parts of the transcripts of those hearings are as follows:

“好可惜呢個申[索]人同被告公司係冇一個書面嘅合約，如果有，就大家好清晰嘞，本席亦都覺得奇怪，長江皮草有限公司，咁大間嘅公司，我相信一般嚟講，佢哋係會有書面嘅合約嘅。本席相信申[索]人講嘅，佢係長江公司邀請佢嘅，係有理據嘅。第一，嗰間長興公司百分之七十係由長江皮草有限公司佔有嘅；第二，佢嘅薪水係喺香港發薪水嘅，而係存入喺香港嘅一個銀行戶口嘅；第三，即管有嗰個長興嘅薪水嘅文件，但係好奇怪，嗰個文件唔係直接講話佢係喺長興工作，而嗰個係薪水，而寫嘅係加工嘅錢，因此，本席認為申[索]人係被長江皮草有限公司 ... 僱用嘅，係由端木家倫先生僱用佢嘅，因此，長江皮草有限公司就需要畀一個月嘅通知金畀申索人，同埋畀長期服務金畀申索人，就同埋我下令就係被告公司要畀 1,000 鈫堂費。就關於嗰個解僱嗰度，嗰個申[索]就係不得直嘅 ”（原審判決理由）

“今次嘅審核個主要地方係有兩點嘅，究竟其實嗰個合約雖然口頭做，係申[索]人同長江嘅合約呢，抑或係長興嘅合約？第二，究竟嗰份合約係唔係海外嘅合約呢？抑或係香港嘅合約？

我詳細考慮，特別今次代表公司嘅書面陳詞，加埋喺庭上嘅陳詞，首先我裁決我認為嗰個口頭合約係申索人同長江嘅，代表被告公司嗰個端木先生，喺嗰次嘅會談中，從未講話佢代表長興呢間公司同佢商量佢嘅工作嘅環境、薪水等等。

而申索人認識端木先生係長江嘅僱主，長江嘅擁有人，而係因為一個朋友介紹，同端木先生商量嘅，由頭到尾，佢相信端木先生係代表長江同佢講嘅，所以我相信嗰個口頭合約係申索人同長江做嘅，我亦都認為呢個合約係香港嘅合約，雖然初初談判條件嘅時候係喺深圳度，因為喺嗰個行為度，行為，我指係每個月嘅薪金，係喺香港畀嘅，而呢個薪金係貫徹喺深圳所商量、商談嘅條件嘅，所以，申索人每個月所受嘅薪水，其實就係實踐同長江公司嘅合約，雖然呢個口頭合約係喺深圳度講，雖然申索人佢主要嘅工作係喺東莞長興嗰度。

呢個就係我嘅判決，同埋我亦都下令被告要再畀500鈫堂費。”（覆核判決理由）

8. Before I turn to these reasons given by the Labour Tribunal which Mr Wong, counsel appearing for the Defendant, has mounted serious attacks on, it is necessary to spell out what I perceive to be the issue raised in the present case.

9. In the present case, the crucial question to be answered is: who was the employer of the Claimant? It is common ground that Mr Tuen Mo was not the employer; he was merely acting as an agent when he interviewed and eventually decided to employ the Claimant. This was well known to the Claimant. Indeed, it was the Claimant's case that Mr Tuen Mo was acting as an agent for the Defendant, and thus his employer was the Defendant. He never joined Mr Tuen Mo as a co-employer or the employer in the alternative. On the other hand, Mr Tuen Mo said he was acting as the agent of Cheung Hing in employing the Claimant.

10. The question of whose agent Mr Tuen Mo was at the time of the interview and making the contract of employment must be a question of fact, depending directly on the intention of Mr Tuen Mo as agent and the intention of the intended principal. However, since Mr Tuen Mo was also the effective controlling minds of both the Defendant and Cheung Hing respectively, the question of whose agent he was must ultimately depend on the intention of Mr Tuen Mo at the time. By intention, I am referring to the subjective intention of Tuen Mo, as opposed to any objective intention that may be gathered from the surrounding circumstances. I will come back to the relevance of objective appearances in a moment's time. However, given that agency in the present sense is a question of fact, which must turn on the intentions of the agent as well as his true principal, the focus of investigation must be the subjective intentions of the agent as well as the principal, rather than any so-called "objective" intentions of the two.

11. That this should be the position is by no means surprising: in the case of an undisclosed principal simpliciter (see below) - which this case is not, the third party contracting with the supposed principal may well have had all the reasons on earth to believe that his contracting party was acting as a principal; but if the supposed principal can establish by evidence to the satisfaction of the court, based on the applicable burden and standard of proof, that he did not intend to enter into the subject contract as principal but instead intended to enter into the contract as the agent of somebody - although none of this was made known to the third party with whom he was entering into the contract, the law would, subject to any contrary provisions in the contract, give effect to the subjective (albeit secret and uncommunicated) intention of the agent by recognising the undisclosed principal as indeed a contracting party to the subject contract with the third party. In that situation, the law would at the same time impose on the agent personal liability under the contract in question (unlike the case of an agent acting for a disclosed principal).

12. A fortiori, the case of an unnamed principal - which is indeed the present case¹: the fact that the agent was acting not for himself but for a principal was known to the third party contracting with the agent; however, the principal was unnamed. In that situation, who actually was the contracting party with the third party under the subject contract would ultimately depend on what actually was the intention of the agent (as well as the intention of the unnamed principal for whom the agent was acting). Subject to what I will shortly discuss, there is no place in the above discussion for the introduction of an objective evaluation of the circumstances, in particular, an objective assessment as to whether the agent was, to the outside world (viewed objectively), acting as a principal himself (i.e. the case of an undisclosed principal simpliciter), or acting as an agent for somebody other than the person actually intended by the agent subjectively to be the principal for whom he was acting. (I need not deal with here the slightly more complicated situation where an agent subjectively and secretly intended in his mind when he entered into a contract with a third party to act for somebody, from whom he had yet obtained authority to so act, and the related question of ratification by that third party subsequently of the contract.)

13. Support for the above analysis may be gleaned from Bowstead and Reynolds on Agency (17th ed.) paras 2-065 and 8-070 to 8-074; National Oilwell (UK) Ltd v. Davy Offshore Ltd [1993] 2 Lloyd's Rep. 582, 593-597; Siu Yin Kwan v. Eastern Insurance Co. Ltd [1994] 2 AC 199, 207C-E (PC).

14. What is the relevance, if any, of the objective appearances? Objective appearances are relevant in several ways in the above analysis. Without seeking to be exhaustive, first, the objective appearances - including the pre-contractual as well as post-contractual words and conduct of the parties and the surrounding circumstances - are relevant in assessing the credibility of the witnesses (particularly the agent and the supposed principal) regarding their assertions of what their intentions were at the time. Very often, the best guide to what actually was in the mind of a person is what he said or did contemporaneously.

15. Furthermore, if the contract with the third party was in writing, then what the contract says - construed objectively in the light of the known circumstances, must be accorded much (if not conclusive - given the parol evidence rule²) weight in deciding what the agent's intention was at the time he entered into the contract. To that extent and in that sense, "objective" appearances must be relevant.

16. Secondly, if a person makes representations to a third party, the objective effect of which is that another person has the authority to represent him, then the first-named person will be taken to have clothed the last-named person (the apparent agent) with apparent authority to act as his agent in making a contract with the third party. In that case, if the apparent agent, when he entered into the contract in question with the third party, actually intended on that occasion to act as the agent of someone else, the first-named person may well be regarded as a contracting party to the contract vis-à-vis the third party, regardless of whether the person actually intended to be the principal by the apparent agent would also be regarded as a co-contracting party to the contract. See generally Bowstead, paras. 2-099 to 2-101, on agency by estoppel.

17. What about the subjective understanding or belief of the contracting party as to who he was contracting with? Here, the subjective understanding of the third party may or may not coincide with what a reasonable person, viewing the circumstances objectively, would have concluded regarding the identity of the principal for whom the agent was acting when he contracted with the third party. In other words, the subjective understanding or belief of the third party as to who he was contracting with may or may not be objectively justified. But in my judgment, that is quite irrelevant to the issue under discussion. Whether objectively justified or not, it cannot change the answer to the question of who the third party was actually contracting with - that question has to be answered by examining the subjective intention of the agent and that of his intended principal. However, the subjective understanding or belief of the third party is significant to a separate yet related matter: if the identity of the contracting party is material or important to the third party, then one could end up with a case of unilateral or mutual mistake on identity, in which event the legal result may well be that there is no contract concluded between the parties as their minds do not meet. See generally Chitty on Contracts (28th ed.) vol. 1 para. 5-045 et seq.

18. Bearing the above principles and analyses in mind, I have no doubt that quite unfortunately, in the present case, the Labour Tribunal has failed to focus its mind on the crucial issue: what was the subjective intention of Mr Tuen Mo - his subjective intention, on the facts of the present case, represented not only his own intention as an agent, but also the intention of the intended principal for whom he was acting in entering into the contract of employment with the Claimant. I say this for a number of reasons: first, not only were the above analyses, or something similar to the above analyses, not mentioned in the oral reasons or the written reasons for decision, the crucial issue itself, i.e. what was the intention of Mr Tuen Mo, was also never set out or discussed in the oral or written reasons.

19. Secondly, there was no express or specific finding on the subjective intention of Mr Tuen Mo.

20. Thirdly, any argument that the Tribunal, in finding that the Defendant was indeed the employer, must have impliedly made a finding against Mr Tuen Mo's claim that at the time of the interview his subjective intention was to act for Cheung Hing, must be rejected. This is because if the Tribunal had indeed made such a finding, one would have expected the Tribunal not only to have expressly stated so in its reasons - given the importance of the issue, but also to have made a further finding (which must follow logically from the preceding finding, if it had been made) that the subjective intention of Mr Tuen Mo at the time was to represent the Defendant. For after all, on the facts of the present case, Mr Tuen Mo was either acting for Cheung Hing or the Defendant. He claimed that subjectively, he intended to act for Cheung Hing. If the Tribunal disbelieved his assertion, the inevitable conclusion on the facts of the present case must have been that he acted for the Defendant at the interview. And if that was indeed the conclusion of the Tribunal, there could be no conceivable reason for the Tribunal not to have mentioned it expressly and specifically in its reasons. All this goes to show that the Tribunal did not make any finding regarding what Mr Tuen Mo's subjective intention was at the time, as it did not realize the importance of that question.

21. Fourthly, instead of looking at the subjective intention of Mr Tuen Mo, it is clear from the oral as well as written reasons given by the Tribunal that rather the Tribunal focused on, amongst other things, the subjective understanding and belief of the Claimant as to who he was contracting with, and perhaps also - as Mr Chan, counsel for the Claimant, sought hard to argue at the hearing - the underlying reasons for the Claimant's belief. The Tribunal said repeatedly in the course of the review as well as the reasons that it believed that the Claimant did believe that he was being employed by the Defendant and it found that belief of the Claimant to be justified by the circumstances. All this goes towards demonstrating that the Tribunal did not, with respect, focus on the crucial issue in the present case.

22. For these reasons, the Tribunal's conclusion that the Defendant was the employer of the Claimant is fatally flawed. Moreover, in the absence of a finding, based of course on the totality of the evidence, as to the subjective intention of Mr Tuen Mo when he met and eventually agreed to hire the Claimant back in January 2000, there is no way this Court can tell whether the Defendant was indeed the employer of the Claimant. Put another way, on the existing material before this Court, it is impossible to conclude whether Mr Tuen Mo did intend to represent the Defendant (or Cheung Hing) in hiring the Claimant. Whilst certainly there was evidence pointing either way - both counsel have tried hard at the hearing to highlight to the Court those parts of the evidence favouring their respective contentions, given that the Tribunal has, with respect, failed to appreciate the true and crucial issue in the present case, the whole proceedings below and the investigation carried out by the Tribunal in discharge of its statutory duty in relation to the dispute, were tainted by the lack of focus on the true issue and the misplaced focus on what the Claimant's subjective understanding or belief was and the objective justification thereof.

23. In those circumstances, there is no alternative but to allow this appeal, set aside the orders that have been made by the Tribunal against the Defendant, and order a re-trial. In so doing, I wish to emphasize two matters: first, focusing on the subjective intention of Mr Tuen Mo at the interview in January 2000 does not mean, as I have explained above, that the circumstances, viewed objectively, including both the pre-contractual as well as the post-contractual words and conduct of the parties, are not relevant. Indeed they will be highly useful in testing what Mr Tuen Mo may claim to have been his subjective intention at the time of contracting. I will not repeat myself here. Secondly, the issue raised in the present case is by no means straightforward. It is understandable that the Tribunal, which operated without the benefit of legal assistance, would have failed to appreciate the legal distinctions and niceties involved in the present case. My allowing the appeal should not be regarded as a reflection on the Labour Tribunal's handling of the present case. Both the transcripts as well as the reasons given have demonstrated plainly that the Tribunal has conscientiously sought to discharge its duty and resolve the disputes between the parties in accordance with law and evidence. Unfortunately, this is not an easy case.

24. Given my above conclusion, it is quite unnecessary for me to lengthen this judgment by referring to the other arguments that have been raised ably by counsel on both sides. Moreover, since there is going to be a re-trial, it would not be appropriate for me to comment on these further submissions which are, as it were, "fact-sensitive". Suffice it to say that I tend to agree with Mr Wong that in any event, the reasons given by the Tribunal, particularly the written reasons set out in paragraph 13 of the reasons for decision already extracted above, do not, on a detailed analysis of the facts and evidence, really support the conclusion reached by the Tribunal that the Defendant was the employer of the Claimant. Insofar as may be necessary, I would also adopt this as a ground for my decision in this appeal. I will not repeat here Mr Wong's submissions in relation to this ground, with which I would simply express my general agreement.

25. In summary, I order that this appeal be allowed, the orders and judgment below in favour of the Claimant against the Defendant be set aside, and the claim of the Claimant against the Defendant be remitted to the Labour Tribunal for a re-trial before another Presiding Officer.

26. As regards costs, I have already heard counsel's submissions on a provisional basis. This appeal was strenuously opposed by the Claimant, who was represented by counsel at the hearing. He failed. Costs should follow the event. I therefore order that the Claimant do pay to the Defendant the costs of this appeal; such costs are to be taxed if not agreed. I also order that the Claimant's own costs be taxed in accordance with the Legal Aid Regulations (Cap. 91).

1 It is a matter of classification or labels as to whether one may or should call this a case of undisclosed principal as well.

2 See Bowstead, para. 8-080; Humble v. Hunter (1848) 12 QB 310.