HKSAR v. PHYSICAL HEALTH CENTRE HONG KONG LTD

HCMA 54/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO HCMA 54 OF 2015

(ON APPEAL FROM STS 1596 OF 2014 TO STS 1599 OF 2014 )
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JUDGMENT
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1.  This judgment deals with the Appellant’s application for a certificate under section 32(2) of the Hong Kong Court of Final Appeal Ordinance, Cap.484.

2.  The Appellant Company was convicted after trial by Special Magistrate Ms Leung Nga-yan on 4 summonses for non-payment for Statutory Holiday Pay[1] to their employee Madam Sheung (常惠貞女士) and fined $2,500 for each summons.

3.  The appeal against conviction for the 4 summonses was heard on 21 July 2015 and dismissed on 25 August 2015 with the judgment being handed down on the same day.

4.  By a Notice of Motion dated 21September 2015, the Appellant Company seek to apply for a certificate under section 32(2) of the Hong Kong Court of Final Appeal Ordinance that the following point of law of great and general importance was involved in the decision relating to the 4 summonses:

“While a contractual term agreed between an employer and an employee to the effect that payment of any statutory holiday pay in any given month is to be included in that month’s monthly minimum remuneration of the employee is legitimate under the Employment Ordinance (Cap 57), whether the operation of the doctrine of estoppel by convention to clarify, add to, or vary an employment contract to the above effect contravenes Section 70 of the Employment Ordinance, (Cap.57).”

5.  The Respondent opposes the application on two grounds.  That it was made out of time, and that the decision of this court does not involve a point of law of great and general importance.

DISCUSSION

Delayed application

6.  Practice Direction 2.2 stipulates that

“Applications for a certificate to the Court of Final Appeal or the Court of First Instance that the decision involves a point of law of great and general importance should be made immediately after the judgment is given from which the appeal is to be brought.”

7.  There was thus a delay in the Appellant Company’s application.

8.  I find that there is a failure to comply with the requirement in Practice Direction 2.2 for the applicant to make the certificate application “immediately”, but I find that the delay is not a gross delay.  I find that this slightly late application should be entertained.  I therefore do grant leave for the Appellant Company to apply for the certificate despite the non-compliance.

POINT OF LAW OF GREAT AND GENERAL IMPORTANCE

Background

9.  The Appellant Company operate fitness and beauty centres (舒適堡) in Hong Kong.  Madam Sheung had been working for them as a masseuse under a continuous contract for a period of 15 years between 14 September 1998 and 31 October 2013. 

10.  According to the Employment Contract, a monthly commission was paid for the massage service rendered, as well as for the sale of beauty products and courses.  Subject to performance, Madam Sheung would also be paid various bonuses such as attendance bonus (勤工), award (達標獎金), other allowances (車津) and year-end bonus(雙糧).  In any event, Madam Sheung would earn a minimum guaranteed monthly commission (包佣) of $10,000, subject to deduction for absence due to sickness or lateness.   

11.  It is Madam Sheung’s evidence that throughout her employment period, the Appellant Company had not paid her Statutory Holiday Pay.  Wages would only be generated when she worked.  There was no basic salary. 

12.  Documentary evidence showed that Madam Sheung’s wages were calculated on the actual hours of work she had done (按工計算).  The payroll advice and payment slips clearly showed that only the earned commission and the awarded bonuses (按工計算) were paid to Madam Sheung. No Statutory Holiday payments had ever been made throughout the 16 months between July 2012 and October 2013 employment period, being the period covering the 4 summonses. 

13.  The learned Special Magistrate accepted Madam Sheung’s evidence and found against the Appellant Company. 

14.  On appeal, I found that based on the payment calculation records for the 3 months relevant to the appeal, it is clear that the Appellant Company was only concerned about Madam Sheung’s work hours and her sale of beauty products and courses when calculating the month’s commission payment.  The amount of the various bonuses was invariably trivial.  The calculation of the commission payments was therefore based entirely on her work hours or number of clients she had. The Appellant Company never even considered paying Statutory Holiday Pay to Madam Sheung[2]. 

15.  I also found that since the documentary records showed that the calculation of Madam Sheung’s commission payments never included payments for Statutory Holiday Pay, whether Madam Sheung had asked about, or demanded the Appellant Company to pay, her the holiday pay would not prove that the commission payments had in fact included the holiday pay, nor can the company evade their liabilities under the relevant Ordinance provisions to pay her the Statutory Holiday Pay[3].

16.  I found that there was an irresistible inference, based on the documentary records showing how the Appellant Company had calculated Madam Sheung’s commissions, that the company had not explained to Madam Sheung, and so Madam Sheung could not have agreed to, the minimum commission payments being inclusive of any Statutory Holiday Pay[4]. 

Discussion

Estoppel by convention

17.  Estoppel by convention constituted the Appellant’s first ground of appeal. 

18.  It was the Appellant Company’s contention that:

“The learned Magistrate erred in failing to consider the application of the legal principle of estoppel by convention which would disentitle PW1 (the employee of the Defendant) from claiming the alleged outstanding statutory holiday pay upon the following undisputed evidence given by PW1 herself which was accepted by the learned Magistrate,

(1) That PW1 for the whole period of her employment with the Defendant from 1998 to 2013 was not paid any of the subject statutory holiday pay;

(2) That PW1 for the said whole period did not in any way ask for or demand any payment of the said statutory holiday pay (AB/78-79/para.8).”

19.  This ground was dealt with at paragraphs 24 to 31 of my judgment.  The following is my translation of the said paragraphs:

“24. In gist, according to the case of Unruh v Seeberger (2007) 10 HKCFAR 31, the elements of estoppel by convention comprises of three elements:

(1) The parties entered into a legal relationship on the basis of a common but mistaken assumption. The said common assumption could be implied by parties’ conduct;

(2) There was an attempt by one party to depart from the said common assumption; and

(3) The other party would suffer detriment if the opposite party were allowed to set up rights inconsistent with the said common assumption.

25. My view is that, even on the basis that the Appellant Company and Madam Sheung did mistakenly assume that the commission already included her Statutory Holiday Pay, and that the doctrine of estoppel by convention is applicable as to their legal relationship, thus affecting the employment relationship that is based on the Employment Contract, it would still be impossible to have any effect as to the Appellant Company’s legal responsibilities under the Employment Ordinance.

26. The legal basis of the summonses in this case is based upon the Employment Ordinance, any person or entity in breach of its provisions will be prosecuted and sentenced if convicted.

27. The Appellant Company does not dispute, nor can they dispute, that there are no clauses in the Employment Contract dealing with the Statutory Holiday Pay that Madam Sheung would be entitled to receive under the Employment Ordinance, and that which the Appellant Company is required by law to pay.

28. Furthermore, according to section 70 of the Employment Ordinance, any term of a contract of employment which purports to extinguish or reduce any right, benefit or protection conferred upon the employee by the Ordinance shall be void. As explicit contractual terms cannot purport to extinguish or reduce the protection granted under the Ordinance, nor can any implied term or terms inserted by way of the operation of other legal doctrines.

29. If this ground of appeal should succeed, it would mean that employers would not enter into any employment contract with their employees, and would wait until the employees make their claims, and then rely on the doctrine of estoppel by convention to point out that the rights of the employee under the Employment Ordinance had been extinguished as a result of the employee accepting the wages and not raising any dispute, therefore the employer would not be liable to payments such as Statutory Holiday Pay, and would not be criminally responsible for any breach of the provisions in the Employment Ordinance. I find that this is not an acceptable outcome.

30. Based on the same reason, estoppel by convention also does not amount to a reasonable excuse for the Appellant Company to not comply with the law requiring the payment of Statutory Holiday Pay.

31. I find against the Appellant on their first ground of appeal.”

20.  I include section 70 of the Employment Ordinance here for ease of reference:

“Any term of a contract of employment which purports to extinguish or reduce any right, benefit or protection conferred upon the employee by this Ordinance shall be void.”

21.  In their reliance on the doctrine, the Appellant Company is saying that by operation of the doctrine of estoppel by convention, the employee is estopped from claiming for what would have been rightfully hers by the provision of the Employment Ordinance.

22.  I find that the proposition of the legal rights granted to an employee under the provisions of the Employment Ordinance can be extinguished by operation of the doctrine of estoppel by convention entirely without merit.

23.  The question of law posed by the Appellant Company is based on the premise that the mistaken assumption between the parties was "legitimate". If that is the case, section 70 would not have been invoked in the first place. If the mistaken assumption was to alter the parties' employment relationship such that the employee's rights or benefits are reduced or extinguished, then section 70 is invoked and the variation is rendered void. The wording of the section is clear and unequivocal.

24.  As Ms Lam for the Respondent states in her submissions:

“11. Even if [the] doctrine of estoppel by convention applies, the core issue is what had been agreed between parties. It is submitted that if what had been agreed (by express term) or by implication (here the Applicant relied on the estoppel by convention in this specific case) is legitimate, i.e. the employees’ statutory holiday pay had been included in the remuneration, then section 70 of the Employment Ordinance would not come [into] play. On the other hand, if what had been agreed (either by express term, or by implied term) is sought to extinguish or reduce the right of the employee to statutory holiday pay, such term would be void by reason of section 70 of the Employment Ordinance. This is a trite proposition.”

25.  I find, therefore, that the question as posed does not present a point of law of great and general importance and I refuse the Appellant Company’s application accordingly.