LEUNG BING v. TANFORY CO LTD t/a CLUB BBOSS

HCLA 129/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 129 OF 2002

(ON APPEAL FROM LBTC 10733 OF 2002)

____________

____________

_______________

J U D G M E N T

_______________

Introduction

1. This is an appeal against the judgment of the Presiding Officer of the Labour Tribunal entered by consent. The ground of appeal is that the Labour Tribunal has no jurisdiction over the claim which was not a dispute arising out of a contract of employment but out of a contract for services.

2. The Respondent, i.e. the Claimant in the Tribunal below, filed a claim against the Appellant alleging that under the terms of a contract in writing ("the Contract") entered into between the parties, the Appellant agreed to serve as a manager in the Respondent's nightclub for a period of two years. Pursuant to Condition 3 of the Contract, the Respondent paid the Appellant a sum of $200,000 as guarantee for the fees that the Appellant shall receive from the Respondent, being not less than $30,000 per month in accordance with Condition 2. Condition 5 provides that the Appellant shall pay liquidated damages of $400,000 if the Appellant should absent herself without leave or provide similar service to other nightclubs during the term of the Contract. Condition 7 provides that both parties acknowledged that the Contract did not constitute any contract of employment, partnership or agency relationship. For emotional and health reasons, the Appellant absented herself from work from 26 August 2002. On 9 September 2002, the parties agreed to terminate the Contract by the Appellant repaying $100,000 of the sum paid under Condition 3 to the Respondent. The Appellant failed to pay. The Respondent filed a claim in the Labour Tribunal alleging her of breach of contract of employment and sought to recover the said sum of $100,000.

3. At the hearing, the Presiding Officer was alerted to the question whether the Contract between the parties was a contract of service or a contract for services. After some preliminary discussion or conciliation with the parties, the Presiding Officer struck a settlement between the parties whereby the Appellant agreed to make a partial refund of the sum in the amount of $100,000. The Presiding Officer then entered judgment on the terms of the settlement agreement between the parties.

The appeal

4. Ms Fong, counsel for the Appellant, submitted that the Presiding Officer had to satisfy himself that the agreement between the parties was a contract of service before he could assume jurisdiction and adjudicate on the matter or enter consent judgment. She argued that the Presiding Officer made no finding on this issue and that no inference could be drawn from the settlement agreement entered into between the Appellant and the Respondent that the Contract fell within the jurisdiction of the Labour Tribunal.

5. The jurisdiction of the Labour Tribunal is set out in the Schedule to the Labour Tribunal Ordinance. So far as is relevant to the present appeal, the issue is whether the Contract is a contract of service or a contract for services. Ms Fong's argument is premised on Condition 7 whereby the parties themselves acknowledged that the Contract was not a contract of employment. There are a number of factors which determine whether a contract is one of service or one for services. Just to mention a few, these includes the degree of control exercised by the employer, whether the worker's interest in the relationship involved any prospect of profit or business risk of loss and whether the worker was properly regarded as part of the employer's organisation: see Lee Ting Sang v. Chung Chi Keung & Another [1990] 2 WLR 1173. While the parties' intention is one of the important factors, it is not the sole or determinant factor. The true nature of a contract is not to be determined solely by what the parties say it is, but on the sum total of all the considerations. It is ultimately for the Court and not the parties to determine whether in the light of all the circumstances, the contract entered into by the parties is one of service or one for services. Thus, in the present case, Condition 7 is not conclusive.

6. Where the dispute is contested and involves the question of whether a contract is a contract of service or a contract for services, the Presiding Officer will investigate into the true nature of the contract by hearing evidence from the parties and by taking such inquisitorial procedures as he considers necessary. But where the dispute is resolved by consent, as in the present case, the issue would not be fully canvassed or not canvassed at all, the Presiding Officer is entitled to draw the appropriate inference from the very act of the consent and come to the conclusion that the contract is one of service unless the surrounding circumstances are so obvious as to render such an inference impossible. For example, it would not be open to a Presiding Officer to assume jurisdiction over a dispute arising from a contract for delivery of goods by the parties agreeing to settle the outstanding delivery charges as arrears of wages in a contract of employment, when the incidence of a contract of employment is totally lacking. Thus, so long as there is some evidence before the Presiding Officer which would entitle him to come to the conclusion that the contract in dispute could be a contract of service and the parties consent to judgment being entered, it is open to the Presiding Officer to assume jurisdiction without undertaking an inquiry as to the nature of that contractual relationship. The Presiding Officer could not be criticized for failing to discharge his inquisitorial duty. That the parties to the contract had expressly denied their intention to enter into a contract of service is not conclusive as ultimately this is a question for the court as to what is the true nature of that contractual relationship. This is so despite the fact that there are witness statements or even statement of defence denying the existence of a contract of employment. Quite apart from whether these statements are true or not, the witness may not come to proof. These statements are prepared for the purpose of contesting the claim. If the party consents to judgment, the denials in the statements are deemed to have been withdrawn. The inference to be drawn from the act of consent would resolve the disputed issue in favour of a contract of employment and supplement the deficiency in the evidence.

7. Turning to the present case, the Respondent's case was that the parties were parties to an employment relationship and hence the Respondent instituted proceedings in the Labour Tribunal. On the other hand, the Appellant was equivocal as to what was the nature of that relationship. During the conciliation before the Presiding Officer, she used terms which were consistent with an employment relationship, such as employment, dismissal, dismissal without notice, and work, etc. On the other hand, she also relied on Condition 7. It appeared that her concern was whether by partially returning the sum paid, she would be free to take up employment elsewhere. When she was assured that she would, she consented to the settlement. As I have said, the parties' intention as stated in the contract is not determinative of the true nature of their contractual relationship. The Appellant was employed as a manager of the Respondent's nightclub. She and her service was prima facie an integral part of the Respondent's business. This is some evidence in which the court could find in favour of existence of a contract of employment. By their consent and submission to the jurisdiction of the Labour Tribunal, the inference that their contract was a contract of service could be readily drawn. Despite the equivocal stand adopted by the Appellant, there was nothing which negate that inference. Hence, it was open to the Presiding Officer to assume jurisdiction and to enter judgment on the terms of the consent order. In those circumstances, it would be superfluous for the Presiding Officer to hold an inquiry by calling evidence and to make a finding of fact that the parties were parties to a contract of employment before he could assume jurisdiction and approve the terms of a settlement because that issue has been impliedly conceded. Therefore, I hold that the Labour Tribunal has jurisdiction over the Contract. The Appellant's ground of appeal must fail.

8. I note in passing that in response to the Respondent's claim in District Court Proceedings No. DCCJ 6324 of 2002 seeking to recover a loan of $300,000 advanced to the Appellant, the Appellant pleaded that $200,000 was paid to her under the terms of her contract of employment with the Respondent and she counterclaimed for damages for breach of contract of employment. That defence was also settled by Ms Fong who is representing the Appellant in this appeal. The defence shows a total lack of good faith in counsel's argument in this appeal. It never was the Appellant's case that the contract was a contract for services. This appeal is a waste of time. Accordingly, the appeal must be dismissed with costs to the Respondent.