CHENG TAI LOK and Another v. TAI LEE TRANSPORTATION CO.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

LABOUR TRIBUNAL APPEAL NO. 108 OF 1994

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J U D G M E N T

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1. This is an appeal by the Claimants, Cheng Tai Lok and Leung Kwai Man against the decision of the Presiding Officer of the Labour Tribunal dismissing their claims against the Defendant Tai Lee Transportation Company (Tai Lee) for wages in lieu of notice and long service payment.

2. The Claimants' case was that they had been in the employment of the Defendant since February 1975 (for Cheng) and August 1983 (for Leung) respectively and that they were both summarily dismissed on 8th of November 1993. They claimed that the summary dismissal was not justified and hence their claim for 26 days wages in lieu of notice and long service payment.

3. The defendant in its defence, raised a number of matters:-

1. The defendant company owned by Mr. Cheng Chor Leung, was only established in August 1992 and prior to that the claimants were only working for another company also called Tai Lee Transportation Co. registered in the name of Mr. Cheng Ching Yu, the father of Mr. Cheng Chor Leung and the claimants had not been employed by the defendant under a continuous contract for the requisite period of time to qualify them for long service payments under PART VB of the Employment Ordinance.

2. The claimants were independent contractors and not employees of the defendant and were therefore not entitled to make any claim under the Employment Ordinance.

3. The claimants were not sacked by the defendant and they just left the employment of their own.

4. It was not in dispute that Cheng started working for the father's company in February 1975 and Leung started in August 1983. It was also not in dispute that the father's company bearing the business registration No. 266422-000-02 was established in 1933 by Mr. Cheng Ching Yu and it ceased business on 31st of July 1993. The defendant, bearing the business registration No. 16164642-000-08 was established by Mr. Cheng Chor Leung on 8th of August 1992.

5. The father's company and that of the defendant had the same name in English, Tai Lee Transportation Co. although there was a slight variation in their Chinese names. The father's company was called (大利水陸運輸公司) which literally means Tai Lee Land and Sea Transportation Company whereas the defendant's name was just (大利運輸公司 ). But in a particular document Exhibit C2, the names (大利水陸運輸公司 ) and (大利運輸公司 ) were used interchangeably.

6. Mr. Cheng Chor Leung, the owner of the defendant, is the son of Mr. Cheng Ching Yu and before setting up his own company, he was working for his father in his company. In one of the documents C2, he put down his signature as the employer or person in charge and he also described his post as that of the manager.

7. Paragraph 5 of the First Schedule to the Employment Ordinance dealing with continuous employment provides as follows:-

"If a trade, business or undertaking is transferred from one person to another, the period of employment of an employee in the trade, business or undertaking at the time of the transfer shall count as a period of employment with the transferee, and the transfer shall not break the continuity of the period of employment."

8. One of the issues that the Presiding Officer had to decide was whether there had been a transfer of business from the father, Mr. Cheng Ching Yu to the son, Mr. Cheng Chor Leung. If there had been a transfer of business, the claimants' period of employment with the father's company shall count as a period of employment with the defendant.

9. Mr. Cheng Chor Leung was 50 years of age. The was no evidence as to how old Mr. Cheng Ching Yu was. Bearing in mind the age of Mr. Cheng Chor Leung and the fact that he started his company in 1933, it might not be difficult to conclude that the father must be quite advanced in age and would be unable to carry on with the business. The father's company was in the same business as that of the defendant and they had the same names. The father's company ceased business about one year after the defendant's business had been set up. Before he set up his own business, he was working in the father's business and he described himself as the person in charge or the manager. Those were clear indication that the defendant intended to make use of the goodwill of the father's business. On such evidence, it was in my view not difficulty to infer that the father intended to pass on the business to the son.

10. In his statement, Mr. Cheng Chor Leung, the sole proprietor of the defendant suggested that although he worked in his father's company prior to August 1992, he was not responsible for the administration of his father's business. He started off as a driver and only later assisted the person in charge, a manager surnamed Lam in the management of the affairs at the pier. He also said he was not in a position to make decision of any kind and he only received a monthly salary of $10,000.00. He said when he set up his own business, he 'stole' his father's business name, meaning he used the name without authority in order to be able to survive.

11. I found the content of the Mr. Cheng's statement difficult to believe. The companies were in the same business and operated in the same area. It would not be possible for him to use his father's business name without the permission and/or knowledge of his father. The suggestion that he did not hold any responsible position in his father's company also contradicted the contents of the document C2.

12. It appeared that the case was conducted before the Presiding Officer purely on the basis of statements submitted by the parties. There was hardly any cross-examination by either parties nor by the Presiding Officer.

13. In his decision, the Presiding Officer concluded that Paragraph 5 of the First Schedule to the Employment Ordinance did not apply because the two companies were co-existing for a period of about one year and there were different addresses and were owned by different proprietors. With respect, such matter are of little relevance in the determination of whether there had been a transfer of business. A transfer of business must necessarily involves more than one owner and the different addresses was not a matter that should attract too much weight, particularly in the document C2, the address of the business was described as the ToKwaWan Pier. Further a transfer of business does not necessarily take place overnight. It may well be a gradual process over a period of time. In the instant case, it was an arrangement for a son to take over the business of the father. It would be perfectly logical for the father to allow the son some time to ensure that the business could be well taken over by the son before the father would cease altogether.

14. I am mindful of my powers on appeal under the Labour Tribunal Ordinance. But on the facts present to the Labour Tribunal, the more probable inference to be drawn was that there had been a transfer of business from his father to the defendant and that the claimants' period of service with the father's company ought to have been included as their period of service for the defendant.

15. The Presiding Officer, in concluding that the claimants were independent contractors and not the employees of the defendant, made the following findings:-

"Thus insofar as their being engaged with the defendant is concerned, they had no fixed number of working hours or rest days, and, most importantly, they were contented with having no paid statutory holidays or annual leave etc."

16. While the matters referred to by the Presiding Officer can not be said to be entirely irrelevant, they are not significant matters in determining if the relationship between the claimants and the defendant was that of a contract of service or a contract for services.

17. There are well established 'tests' in determining if a person is an employee. The 'control test' in Gibb v. United Steel Companies Ltd. [1957] 2 All E.R. 110., Whittaker v. Minister of Pensions [1967] 1 Q.B. 156 and Beloff v. Pressdram [1973] 1 All E.R. 241. The 'organisational test' in Stevenson, Jordan and Harrison Ltd. v. MacDonald and Evans (1952) 1 TLR 101. The 'multiple test' in Ready Mixed Concrete v. Minister of Pensions (1968) 2 Q.B. 497 and the more recent 'entrepreneurial test' in Market Investigations Ltd. v. Minister of Social Security (1969) 2 Q.B. 497 and Airfix Footwear Ltd. v. Cope (1978) ICR 1210.

18. In the Market Investigations Ltd. case (supra), a company employed women on a part-time basis to do market research, they could work as they chose, but according to a set pattern. It was held that the women were employees and not employed in business 'on their own'. In the Airfix Footwear Ltd. case (supra), the applicant was a home-worker making heels for shoes manufactured by the respondent company. She was provided with the necessary equipment and material, and work in accordance with instructions given to her. The EAT upheld a finding that she was an employee.

19. The claimants were no more than labourers basically, making deliveries according to instructions from the defendant. All the equipment and means of transport were provided by the defendant. The place of work and the nature of the work were all decided by the defendant. Their salaries were based on the number of items that they had delivered with a minimum pay of $8,000.00 a month. If the Presiding Officer had applied the proper test, he would not have come to the conclusion that the claimants were independent contractors even if they could decide when to or when not to work as alleged by the defendant.

20. In my view, the Presiding Officer erred in law in concluding that the claimants were not employees of the defendant on the materials before him.

21. The Presiding Officer had also failed to have regard to the documents produced by the claimants, C2 and C4 which documents clearly supported the suggestion that the claimants were employees and not independent contractors.

22. The Presiding officer also found that there had been no sacking of the Claimants by the defendant. The Claimants' case was that they were not expected to work on Sundays. On 6th of November, 1993, Mr. Cheng, the proprietor of the defendant asked them to return to work on the 7th of November 1993 which was a Sunday. The claimants refused and when they returned to work on the 8th of November 1993, they were summarily dismissed by Mr. Cheng. The defendant, on the other hand suggested that Mr. Cheng informed the claimants on the 8th of November 1993 that there were insufficient work for them and the claimants then asked for their wages. The claimants then left and did not return for word afterwards.

23. As I have said earlier, the entire case appeared to have proceeded on the basis of statements from the parties and their witnesses. There was hardly any questioning of the witnesses by the other [WY1]parties or by the Presiding Officer. However in his statement D1, the defendant described the events on the 6th to the 8th of November 1993 as follows :-

"On 6th of November 1993, I told them there was work for them the next day. But they said they had engagement and could not come. On the 8th of November 1993, there was more man power than work. Thus we did not need a lot of workers, otherwise their pay would be substantially reduced after equal sharing"

24. Unfortunately, such matters as to what in fact happened on the 8th of November 1993 had not been explored in greater details. Even on the statement of the defendant, it could well be argued that when the claimants was told there was insufficient work and the defendant did not need a lot of workers, they in effect had been dismissed by the defendant. If the claimants had been dismissed on the 8th of November 1993, then they certainly were entitled not to return to work thereafter.

25. Section 20 of the Labour Tribunal Ordinance provides that the Presiding Officer shall investigate any matter which he may consider relevant to the claim, whether or not it has been raised by a party.

26. Whether the claimants had been dismissed was clearly a relevant matter to the claim. The Presiding Officer, in my view had not investigated or investigated adequately the circumstance in which the claimants stopped working for the defendant. His decision that the claimants had not been dismissed by the defendant was unsupported by evidence.

27. Having reached the conclusion aforesaid, the appeal must be allowed. I order that the decision of the Presiding Officer be set aside. The case is to be remitted back to the Labour Tribunal for a re-trial before another Presiding Officer.

28. As the claimants are not legally represented, I make no order as to costs on the appeal.