TAN HUA NING v. TAM WAH SUNG

1999 CACV No. 48

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

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J U D G M E N T

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Keith J.A. :

Introduction

1. At about 8:15 p.m. on Friday 6th September 1996, Tan Fa Zhan ("the deceased") was travelling in Guangdong when the boat in which he was a passenger collided with another boat. The deceased was injured and subsequently died. He left his parents and his grandmother as his dependants. In due course, his father applied for compensation under the Employees' Compensation Ordinance (Cap. 292) ("the Ordinance") against the deceased's employer on behalf of himself and the deceased's other dependants. On 15th January 1999 in the District Court, Judge Christopher Chan gave judgment in favour of the deceased's dependants, and awarded them compensation of $666,681.50 plus interest. The deceased's employer now appeals.

The facts

2. The deceased was born and brought up on the mainland. He had always lived on the mainland as well. He was employed by Hop Kee Importers and Exporters Company ("Hop Kee"), a business registered in Hong Kong under the Business Registration Ordinance (Cap. 310). Its sole proprietor was Tam Wah Sung ("Mr. Tam"). He was the deceased's uncle. As its name suggests, Hop Kee's business was that of import and export.

3. In addition, Hop Kee was the partner of Jiangmen Investment Company in a joint venture whose business was to produce cigarette bobbin paper in a factory in Guangdong for sale on the mainland. The vehicle through which the joint venture carried on its business was a joint venture company established for that purpose ("the joint venture company"). The deceased was employed by the joint venture company as well as Hop Kee, though his monthly salary from the joint venture company was far less than his monthly salary from Hop Kee.

4. One of the issues in the case was where the deceased "entered into" his contract of employment with Hop Kee. What was not disputed was that he was employed by Hop Kee to represent Hop Kee's interest in the joint venture. He played no part in that part of Hop Kee's business which was carried on in Hong Kong, i.e. its import and export business. However, in the document which set out the terms of his employment with Hop Kee, he was described as Hop Kee's representative "to be stationed at ... [the] Factory, as assistant general manager". In other words, he was employed by Hop Kee as assistant general manager of the factory in connection with his position as the representative of Hop Kee in the joint venture.

5. According to an accident report submitted by the joint venture company, the deceased left the factory by car on the afternoon of 6th September. There were conflicting versions of what he was intending to do. In insurance claim forms submitted by the joint venture company, it was asserted that the deceased had gone to Tai Shan Ha Chuen to press for payment for goods which had been or were to be supplied. On the other hand, in the accident report submitted by the joint venture company, it was stated that he had gone to Tai Shan Ha Chuen to look for ideas for the design and decoration of a new factory for the joint venture's business. The accident occurred while the boat on which the deceased was travelling was going from Tai Shan to Tai Shan Ha Chuen.

The application of the Ordinance to injuries sustained outside Hong Kong

6. Section 30B(2) of the Ordinance provides:

"This Ordinance also applies where personal injury by accident arising out of and in the course of employment is caused to an employee outside Hong Kong where the employee's contract of employment is entered into in Hong Kong with an employer who is a person carrying on business in Hong Kong."

One of the arguments developed on Hop Kee's behalf before the judge was that if the Ordinance was to apply to an accident which occurred outside Hong Kong, the employee had to have been employed in that part of the employer's business which was carried on in Hong Kong. Since the deceased was only employed in that part of Hop Kee's business which was carried on outside Hong Kong, the Ordinance did not cover the accident in which the deceased met his death. The judge rejected that construction of section 30B(2), and there is no appeal from that finding.

7. However, the transcript of the hearing shows that another argument was advanced. That was that on the evidence the judge should have found that, although Hop Kee carried on business in Hong Kong, the deceased's contract of employment with Hop Kee had not been "entered into" in Hong Kong. It looks as if the judge did not appreciate that this was one of the arguments advanced on behalf of Hop Kee, because he said that Hop Kee's counsel "did not dispute that the deceased was employed in Hong Kong". To be fair to the judge, that is what he was told by the dependants' solicitor. In the circumstances, however, it is open to this court to decide for itself the issue which the judge did not decide, since the primary facts which relate to this issue were not challenged.

8. On this issue, the only evidence was that of Mr. Tam. His witness statement was treated as his evidence-in-chief. Para. 8 recorded that he had met the deceased in Xinhai City on the mainland in about March 1991. That was when an "oral agreement" for the employment of the deceased was made. Para. 9 went on to say that a letter of employment was later signed by the deceased and Mr. Tam on behalf of Hop Kee setting out the terms of his employment which had previously been agreed. That letter was signed by the deceased while he was in Hong Kong, en route to France for a training course arranged by Hop Kee.

9. Mr. Tam was not cross-examined on this evidence. It may be that the dependants' solicitor was not alive to the point which was going to be taken on Hop Kee's behalf. After all, the point was not expressly spelt out in Hop Kee's answer to the application, and in any event Mr. Tam's witness statement was only sent to the dependants' solicitor the previous day. However, even if the point had been foreseen, the only other evidence on the point could have come from the deceased, and he was by definition not available to give it.

10. In the light of Mr. Tam's unchallenged evidence, the submission of Mr. Anthony Ismail for Hop Kee (who like Mr. Chan Chi Hung for the dependants did not appear in the District Court) was that the deceased did not enter into his contract of employment in Hong Kong. He entered into it on the mainland in March 1991, and the only thing which happened in Hong Kong was the subsequent written confirmation of what had orally been agreed on the mainland.

11. I cannot accept this argument. The letter which was signed by the deceased and Mr. Tam in Hong Kong was produced to the judge. There are a number of things in the letter which show that it was intended to be the contract of employment under which the deceased was to continue to be employed, even though it may also have been confirmation of some of the terms which had been orally agreed previously:

(i) The letter was headed in Chinese characters which can be translated as either "employment letter" or "employment agreement". It was intended to contain the terms of the contract of employment, and both the deceased and Hop Kee were to retain copies of it.

(ii) The letter did not say that it was confirming terms which had previously been agreed, or confirming the relationship of employer and employee which had been in existence since the previous March. Although the letter may have been doing both these things, it referred to Hop Kee as "now" agreeing to employ the deceased.

(ii) The letter referred to terms of the deceased's employment which not even Mr. Tam had said had been agreed previously, viz. that the deceased's position was to be the assistant general manager of the factory, and that he had to give three months' notice of his resignation.

12. In reaching this conclusion, I have not overlooked two points which Mr. Ismail made about section 30B(2): the words are "entered into", not "signed", and the words "contract of employment" are not preceded by the word "written". In addition, the definition of "employee" in section 2(1) of the Ordinance is "any person who has ... entered into or works under a contract of service ... whether the contract ... is oral or in writing". The point is that even if the deceased had first entered into a contract of employment which had been agreed orally in March 1991, he nevertheless subsequently entered into a written contract of employment when he signed the letter in January 1992, and that had the effect of superseding the oral agreement under which he had been employed hitherto.

13. Accordingly, I am satisfied on the balance of probabilities, having regard to the primary facts which were not in dispute, that at the time that the deceased sustained the injuries which resulted in his death, he was employed by Hop Kee under a contract of employment which had been entered into in Hong Kong.

The liability to pay compensation

14. If Hop Kee was to be liable to pay compensation for the deceased's death, the accident had to have arisen "out of and in the course of the [deceased's] employment": see sections 5(1) and 30B(2) of the Ordinance. It is here that one of the deeming provisions in the Ordinance comes into play. Section 5(4)(g) provides that for the purpose of the Ordinance

"an accident to an employee shall be deemed to arise out of and in the course of his employment if it happens to the employee while he is, with the express or implied permission of his employer, travelling by any means of transport for the purposes of and in connection with his employment between Hong Kong and any place outside Hong Kong or between any place outside Hong Kong and any other such place."

Accordingly, the question was whether, when he was on the boat going from Tai Shan to Tai Shan Ha Chuen, he was travelling "for the purposes of and in connection with his employment". It was for the dependants to prove that, because the burden of proving that an accident arises out of and in the course of the employment is on the employee: see Yuen Wai Ling v. Ocean Shipping and Enterprises Ltd. [1984] HKLR 425.

15. The transcript of the hearing shows that two arguments were developed on Hop Kee's behalf before the judge on this issue. The first argument was that, on the assumption that the deceased had been on business at the time of the accident, he had been on the business of the joint venture company and not on that of Hop Kee. In my opinion, the judge was entirely right to reject this argument. Obviously, the state of the evidence permitted the judge to conclude that, if the deceased was on business, he was on the business of the joint venture company, whether he was collecting debts or viewing designs. However, the fact that the deceased was on the business of the joint venture company at the time of the accident does not mean that he was not travelling for the purposes of and in connection with his employment by Hop Kee. It is true that he was employed by the joint venture company as well as Hop Kee, and that he was employed by Hop Kee to represent Hop Kee's interest in the joint venture. But Mr. Ismail's beguiling argument ignores the fact that he was also employed by Hop Kee as assistant general manager of the factory. If he was on the business of the factory at the time of the accident, he must have been travelling for the purpose of and in connection with his employment by Hop Kee (as well as his employment by the joint venture company).

16. The second argument which was developed on Hop Kee's behalf before the judge was that it had not been proved that the deceased was travelling on business at all when he was going by boat from Tai Shan to Tai Shan Ha Chuen on the evening in question. Mr. Ismail contended that the judge did not appreciate that this argument was being advanced, because he said that Hop Kee's counsel "did not contest that [the purpose of the trip] was for business. The only dispute was for whose business". For his part, Mr. Chan argued that what the judge was saying was that if the deceased was to be regarded as having been travelling on business when he was on the boat from Tai Shan to Tai Shan Ha Chuen, the only remaining issue was on whose business he was travelling.

17. I agree with Mr. Ismail's reading of the judgment. I acknowledge that there are a number of passages in the judgment in which the judge referred to arguments which went only to the issue of whether the deceased was travelling on business when he was on the boat from Tai Shan to Tai Shan Ha Chuen - as well as to arguments which went to that issue and other issues. But the fact that the judge referred to such arguments does not show that he appreciated that they went to that issue. Nor was there any analysis in the judgment of the arguments which went only to that issue. And at the end of the day, one cannot get away from the words which the judge used - namely, that it was not contested that the deceased had been travelling on business, and that the only (not the only remaining) dispute was for whose business.

18. In my opinion, it is open to this court to decide for itself the issue which the judge did not decide. That is because there was no challenge to the evidence from which the primary facts which relate to the issue were to be inferred. The basis for asserting that it had not been proved that the deceased was travelling on business at the time of the accident is simple. The accident occurred on a Friday evening, there was nothing to suggest that the deceased had any business appointments that evening, and the deceased did not work on Saturdays except on business trips. Would the deceased have been going on a Friday evening to a factory to get design and decoration ideas or to a customer to collect debts?

19. However, the evidence was that the deceased was travelling with Ng She Ming at the time. The accident report submitted by the joint venture company had referred to Mr. Ng as the manager of a firm of estate agents who had accompanied the deceased to Tai Shan to visit other factories to get design and decoration ideas for the new factory. The fact that Mr. Ng was with the deceased at the time of the accident strongly suggests that the deceased was on a business trip at the time.

20. Moreover, six days after the accident, Mr. Tam completed an accident report form, in which he stated that the accident had occurred while the deceased was on a business trip. It is to be noted that in his witness statement Mr. Tam said that he had no personal knowledge about the purpose of the deceased's trip to Tai Shan Ha Chuen during which the accident occurred. He was not cross-examined on any of that at the trial. I accept that an admission of a fact by someone who has no personal knowledge of the fact is of limited evidential value, but I reject the contention that it is of no evidential value at all. It would be open to the court to conclude that the admission is based on what the witness was told by others. It is therefore open to the court to infer that there were things which Mr. Tam was told which led him to believe that the deceased had been travelling on business at the time of the accident. That is some evidence that the deceased was indeed travelling on business at the time of the accident. That was the approach taken by the court at first instance in United Ford Development Ltd. v. Fung Yin Yee Shirley [1993] 2 HKLR 290, and the Court of appeal said that that approach could not be faulted: see pp. 295 (line 29) - 296 (line 8), p. 296 (lines 36-42) and p. 297 (lines 11-12).

21. I appreciate that Mr. Tam may have had his own interests to serve in admitting that the deceased was on a business trip at the time. After all, Hop Kee was insured against claims for compensation under the Ordinance, and in view of the family relationship, Mr. Tam may have wanted the claim against Hop Kee to succeed. But the fact remains that Mr. Tam's admission can be treated as some evidence that the deceased was travelling on business at the time.

22. Having considered these factors with care, it has been proved to my satisfaction, on the balance of probabilities, that the deceased was indeed travelling on business at the time of the accident.

Conclusion

23. For these reasons, I think that the judge was right to give judgment in favour of the deceased's dependants, and for my part I would dismiss this appeal. At present, I see no reason why costs should not follow the event, and the order nisi I would make as to costs is that Hop Kee must pay to the dependants their costs of this appeal, to be taxed in accordance with the Legal Aid Regulations if not agreed.

Leong J.A.:

24. I agree that the appeal should be dismissed. I wish to add a few words. In my opinion, the document signed on 6th January, 1992 in Hong Kong between the deceased and Tam Wah Sung of Hop Kee Importers and Exporters Company (Hop Kee) is a contract of employment entered into in Hong Kong. It is not a record of the deceased's oral terms of employment prior to 6th January 1992. I come to this conclusion for these reasons. Firstly, the document starts with the title "Employment Agreement" and it states: " ... our company now (or better translated as hereby) agrees to employ Mr. Tan Fa Zhan as Hop Kee Importers and Exporters Company's representative to be stationed at Jiangmen Xinti Cigarette Bobbi Paper Processing Factory, as assistant general manager ..." followed by terms as to remuneration and notice of termination of employment. Then at its conclusion, it declares that "this employment agreement is in duplicate, the employee and employer each holds one copy". There can be no doubt from the document itself that the parties must have regarded this as a contractual document creating an employer and employee relationship between them. Secondly, the document contains terms as to the position and rank of the deceased and notice of termination which are not in the oral agreement asserted by Tam Wah Sung in his evidence. Tam Wah Sung's assertion that the document is a record incorporating all the terms of the oral agreement without any alteration, addition or deletion cannot be true.

25. Thus, on 6th January 1992 the deceased entered into a new contract of employment in substitution of his former agreement. The facts that he was born, educated and had never been abroad and that prior to 6th January 1992 was employed in the Mainland on oral terms are irrelevant. On the day of the accident, the deceased was employed under this contract which he had entered into in Hong Kong.

26. The trial Judge in his judgment said the parties were not disputing that the contract of employment was entered into in Hong Kong. He made no determination on this issue. However, the parties say that it was not the case. To that extent the Judge might have come under some misapprehension because when counsel for the deceased's dependants told the Judge in his opening that this was not disputed, counsel for Hop Kee took no issue until his final submission. Be that as it may, the evidence before the Judge was such that if the Judge had applied his mind to it, he would probably have come to the same conclusion that the contract of employment was entered into in Hong Kong.

27. On the question whether the accident arose out of and in the course of the deceased's employment, Mr. Ismail counsel for Hop Kee accepted that if the deceased was travelling on business of Hop Kee when he met the boat accident, the deceased suffered injury as a result of an accident arising out of and in the course of his employment. The question was whether he was travelling on the business of Hop Kee and not for the joint venture. In my opinion, it is not necessary that he should be travelling at the time solely on the business of Hop Kee. It would be sufficient so long as he was on a business within the terms of the written employment contract with Hop Kee even though he might be travelling at the same time on the business of the joint venture. The Judge might, as he said in his judgment, have found some difficulty when confronted with the evidence, but there was evidence for him to conclude that the deceased was on a business trip for Hop Kee when he met the boat accident.

28. The Judge was right to award compensation to the deceased's dependants.

Nazareth V-P:

29. I have to say that I have not found it as easy as Leong JA and Keith JA apparently have, to accept the respondent's main ground that the January 1992 letter constituted a written contract of employment that superseded the earlier oral agreement. The acceptance of that ground, of course, provides the basis of the application of the Employees' Compensation Ordinance; without it the Ordinance would not apply. There is no question but that there was an oral agreement of employment between the appellant (Hop Kee) and the deceased entered into on the Mainland in about March 1991 and that the deceased served under it for almost a year. That agreement and service under it continued without a break until the deceased apparently fortuitously, on his way to receive some training in Paris, visited Hong Kong in January 1992 on which occasion the written letter was signed. The employment continued thereafter and apparently so did the earlier terms, with one exception. I shall come to the latter shortly.

30. The March 1992 letter, it is true, did contain a number of expressions that may be thought to be more appropriate to a contract or agreement of employment than to a letter confirming an earlier oral contract, i.e. "... my company now agrees to employ Mr Tan Hua Ning ...", the heading "Employment Letter", the absence of any patent reference to the recording of a previous agreement, and the absence of any back dating of the letter to March 1991. I have to say that I do not find these matters to be of significant weight, given that the parties were quite clearly acting informally and without the benefit of any legal advice. Nor do I find the other matters relied upon by counsel for the respondent to be of any significant assistance to his case, i.e. that the letter could have been mailed or faxed to the deceased in China for signature, and that it was under the letterhead of the appellant, which gave an address in Hong Kong.

31. One aspect of the background was also of significance. This is that Mr Tam, because of his family or clan relationship to the deceased, may have wanted the claim against Hop Kee to succeed. On the other hand, the insurer was no doubt in control of the litigation and the legal representation in the matter would presumably have ensured that any interest of Mr Tam did not unduly operate against it.

32. But there remains the apparently additional term included in the letter. This was that the deceased had to give 3 months notice if he wished to resign. It is not clear what period of notice he would have had to give under the oral agreement, but it seems to me that it can be assumed that this would not have been as much as three months. The change must represent a significant alteration in the terms which, technically at least, would have operated as a counter offer in the context of pre-contract negotiations; and here as resulting in a new contract. The other minor difference in terms, if such it be, was the omission in Mr Tam's evidence of the terms of the earlier oral contract of mention that the deceased was to be the assistant general manager, which was included in the letter. This might have been through oversight and does not appear to me to be particularly significant. But it nevertheless does lend some support to the conclusion that the contract in the letter was new and also different from the oral contract earlier concluded, a fortiori given that Hop Kee was represented and counsel would be expected to pick up any omission of that sort.

33. It also seems to me that where there is scope to properly do so in the particular circumstances, a generous view and construction ought to be adopted in line with the object and purpose of the Ordinance, i.e. to provide employment benefits, which of course embrace death benefits.

34. In the end, therefore, I do not think I would be justified in dissenting from the view Leong JA and Keith JA have taken of the foregoing matters. In all other respects I entirely agree with them and the costs order nisi proposed.

35. The appeal is accordingly dismissed and there will be an order nisi that the respondent Hop Kee must pay the dependants their costs of the appeal and that their own costs are to be taxed in accordance with the Legal Aid Regulations.