LUI LIN KAM AND OTHER v. NICE CREATION DEVELOPMENT LTD

CACV 205/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 205 OF 2003

(On appeal from Labour Tribunal Appeal No. 106 of 2002)

______________

______________

_______________

J U D G M E N T

_______________

Hon Yuen JA:

1.  I have had the benefit of reading in draft the judgment of Tang JA and I agree with the views he has expressed and the orders he has proposed.  As the Labour Tribunal Presiding Officer considered that he was bound by the dictum in David Hot Blocking Press Ltd v Ho King Yam [1996] 1 HKC 270, he did not examine the evidence to determine (a) whether the claimants’ evidence (that they had in fact worked throughout the “break” between written contracts) should be accepted, or (b) if he did not accept that piece of evidence, whether a global contract could be made out on the rest of the evidence.  Apart from oral allegations, circumstantial evidence may also be examined to see if it supports the oral evidence, e.g. whether the defendant had ever advertised for long-term workers to fill the vacancies left by the claimants after an 18-month contract had finished, whether there had ever been any staff changes at the restaurant despite the system of 18-month contracts (save e.g. for workers being unavailable through ill health, or retirement due to age), etc..

Hon Tang JA:

2.  The defendant is the owner of a restaurant.  The 2^nd claimant and the 3^rd claimant were employed by the defendant as a vice captain and a waitress respectively until 15 March 2001 when their employments were terminated by notice dated 14 February 2001.  The notices were given because according to the defendant the restaurant needed redecoration and its scale of operation would be reduced thereafter.

3.  The appeal concerned the payment of severance payment under section 31B of the Employment Ordinance, Cap. 57 (“the Ordinance”), which, for the purpose of the appeal, depends on whether the 2^nd and 3^rd claimants had been “employed under a continuous contract for a period of not less than 24 months ending with the relevant date” which is 15 March 2001.  It may be helpful to mention that to come within the protection of the Ordinance, a claimant must have been employed under a contract of service as opposed to a contract for service.  If he was employed under a contract of service, the length of his employment governs the benefits available to him under the Ordinance.  In this appeal, the sole question is the length of the such contracts, calculated in accordance with the First Schedule (“Schedule 1”).

4.  Under section 3(1) of the Ordinance, continuous contract means:

“… a contract of employment under which an employee is deemed by virtue of the provisions of the First Schedule to be in continuous employment.”

5.  Because of its importance to this appeal, Schedule 1 is set out below:

“1. (a) The provisions of this Schedule are to ascertain whether or not any contract of employment is a ‘continuous contract’ for the purposes of this Ordinance. 

(b) In the case of a contract of employment existing at the commencement of this Ordinance, such period of employment next preceding the date of commencement of the Ordinance as may be necessary shall be taken into account in order to ascertain whether or not the contract of employment is a continuous contract.

2. Subject to the following provisions, where at any time an employee has been employed under a contract of employment during the period of 4 or more weeks next preceding such time he shall be deemed to have been in continuous employment during that period.

3.      (1)  For the purposes of paragraph 2, no week shall count unless the employee has worked for 18 hours or more in that week, and in determining whether he has worked in any hour the provisions of sub-paragraph (2) shall apply.

(2)  If in any hour the employee is, for the whole or part of the hour-

(a) incapable of work in consequence of sickness or injury; provided that any such incapability in excess of 48 hours is supported by a certificate issued by a registered medical practitioner or registered dentist; or (Amended 5 of 1995 s. 11)

(b) absent from work in circumstances such that, by law, mutual arrangement or the custom of the trade, business or undertaking, he is regarded as continuing in the employment of his employer for any purpose,

then, save as provided in paragraph 4, that hour shall count as an hour in which he has worked.

4. Where an employee is absent from work for the whole or part of any hour-

(a) because of a strike (which is not illegal) in which he takes part; or

(b) because of a lock-out by his employer,

that hour shall not count as an hour in which he has worked, but the continuity of his period of employment shall not be treated as broken by any such absence.

5. 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 employment.

6. For the purposes of this Schedule, any reference to hours in which an employee has worked shall mean hours in which he has worked for his employer whether or not the hours were worked under the same or another contract of employment with that employer and whether or not they were consecutive hours.  (Replaced 41 of 1990 s. 23)

7. In this Schedule, unless the context otherwise requires – ‘lock-out’ (閉廠) and ‘strike’ (罷工), respectively, have the meanings assigned to them in the

Trade Unions Ordinance (Cap. 332);

‘week’ (星期) means a week ending with Saturday.”

6.  An earlier hearing of the appeal was adjourned, at the suggestion of the court, to enable the claimants to apply for legal aid.  The 2^nd claimant has applied for and obtained legal aid, and appeared before us by counsel.  The 3^rd claimant, however, did not appear at the hearing of the appeal.

7.  Since there is no material difference in their circumstances, I will concentrate on the 2^nd claimant.

8.  The 2^nd claimant worked for the defendant from 23 October 1996 until 15 March 2001.  There were apparently three written contracts of employment between the 2^nd claimant and the defendant.  The last contract was dated 15 October 1999 for 18 months, which was terminated pre-maturely on 15 March 2001.  He had signed an earlier contract with the defendant dated 1 February 1998 also for 18 months, with an extension up to 31 August 1999.  However, he continued to work for the defendant until the end of September 1999.  It appeared that there was an earlier contract of employment dated 23 October 1996, for a fixed term of 18 months.

9.  It is the defendant’s case that there was a break of employment for 2 weeks between 1 October 1999 and 15 October 1999.  It was the 2^nd claimant’s case before the Labour Tribunal that he had worked during those 2 weeks.  However, this factual dispute was not resolved by the Presiding Officer, because he did not find it necessary to do so.

10.  The Presiding Officer found in favour of the 2^nd and 3^rd claimants on the basis that under Schedule 1, a break of 4 weeks was required before the continuity of the employment could be said to have been broken.  He did so following (as he was bound to do) the decision of Yam J in David Hot Blocking Press Ltd.  Since the decision by the Presiding Officer, in Wong Man Sum v Wonderland Sea Food Restaurant o/b Long Yield Co Ltd, HCLA 133 of 2002, unreported, 10 June 2005, Yam J explained that his dictum has been misunderstood and what he meant was that a break of 1 week was sufficient.

11.  Deputy Judge Lam (as he then was) was also of the view that a break of working less than 18 hours within 1 week is sufficient to break the continuity of employment for the purpose of Schedule 1.  I agree.  That is supported by the plain language of Schedule 1.

12.  That being the case, the question whether there was indeed a break of 2 weeks will have to be remitted to the Labour Tribunal for decision.  For the rest of this judgment, I will proceed on the basis that there was indeed a break of 2 weeks between 1 October 1999 and 15 October 1999.

13.  The judge accepted that the two contracts dated 1 February 1998 and 15 October 1999 individually fell short of 24 months, however, he was able to find that there was continuous employment for a period of not less than 24 months, in favour of the claimant because he found that there was a global contract covering the two contracts.

14.  The judge said:

“… from the indisputable facts in the present case that there was an agreement or tacit understanding between the Claimants and the Defendant in September 1999 that they would be re-engaged after the expiry of the contracts of 1 February 1998 as they eventually did on 15 October 1999.”  para. 21

15.  In para. 22 of his judgment, he said:

“… It seems to me that the whole point of this arrangement of successive contracts was a scheme to avoid liabilities for severance payment or long service payment.  DW3 admitted as much in his testimony.  In these circumstances, taking the defence case to its highest, the so-called break at the Disputed Period was an artificial one.  It is clearly a case caught by Section 32A(1)(a) of the Employment Ordinance reading together with Section 32B(1)(b).  The Defendant clearly intended to extinguish or reduce the Claimants’ right to severance payment or long service payment.”

16.  Then, in para. 23, he said:

“… As I said the inescapable conclusion on the evidence before the Tribunal was that there was at least a tacit understanding between the Claimants and the Defendant that they would continue to work for the Defendant after the expiry of their second contracts.  This amounted to a global contract situation (see Para. 13 of my judgment in Wong Man Kwan and the cases cited in Para. 40 of that judgment).  Insofar as the Defendant could show that there was an agreement to break the continuity of the contract to extinguish the right of the Claimants to severance payment or long service payment, that would be contrary to Part VI A and void under Section 70 of the Employment Ordinance.  In those circumstances, I am of the firm view that in the eyes of the law, the employment of the Claimants was regarded as continuing despite the alleged absence from work during the Disputed Period.”

17.  He went on to say in para. 24:

“I am glad to come to this conclusion because if the law were otherwise, an employer could easily escape liabilities under Part VI A by offering to re-engage an employee after a short break.”

18.  In Wong Man Kwan and Others v Chun Shing Holdings Ltd [2003] 3 HKLRD 403, an earlier decision of the judge, he dealt in some detail with the concept of a global contract.  He said:

“13.     … it is important to distinguish between two issues which might arise in the context of casual workers.  Sir Christopher Slade identified the two issues in Clark v Oxfordshire Health Authority [1998] IRLR 125 at p. 127 as follows:

(a)   whether or not each individual engagement has given rise to a contract of employment between the parties ...;

(b)   whether or not the general engagement constituted a continuing overriding arrangement which governed the whole of their relationship and itself amounted to a contract of employment ... A contract of the latter nature is frequently referred to as a ‘global’ or ‘umbrella’ contract.

Mutuality of obligation as discussed is essential to issue (b) but not to issue (a). The concept of ‘global contract’ was explained by Slade LJ in Hellyer Brothers Ltd v McLeod [1987] IRLR 232 at pp. 238-239 as follows:

The concept of a global contract of employment ... may become relevant in cases where the evidence discloses what on the face of them was a series of contracts for service or services entered between the same parties and covering a substantial period of time. On the particular facts of such a case it may be open to the Industrial Tribunal properly to infer from the parties’ conduct (notwithstanding the absence of any evidence as to any express agreement of this nature) the existence of a continuing overriding arrangement which governed the whole of their relationship and itself amounted to a contract of employment. Such a contract is frequently referred to as a ‘global’ or ‘umbrella’ contract.

In McMeechan v Secretary of State for Employment [1997] IRLR 353 at p. 356, Waite LJ said:

Temporary or casual workers pose a particular problem of their own, in that in their case there will frequently be two engagements (to use a neutral term) which the tribunal may be called upon to analyse. There is the general engagement, on the one hand, under which sporadic tasks are performed by one party at the behest of the other; and the specific engagement on the other hand which begins and ends with the performance of any one task. Each engagement is capable, according to its context, of giving rise to a contract of employment.

14.    It is, therefore, legally possible that during each individual engagement (viz when the worker was actually working) there was a contract of employment even in the absence of a global contract. On that scenario, when the worker was not occupied in a single engagement, the want of mutuality of obligation in terms of future engagement would negate the existence of any global contract and break the continuity of contract of employment. This was the reason why in Clark v Oxfordshire Health Authority [1998] IRLR 125, the Court of Appeal remitted the matter back to the Industrial Tribunal to consider issue (a) notwithstanding that it decided against the worker on issue (b).”

19.  In Wong Man Kwan, as noted, the judge said:

“Mutuality of obligation as discussed is essential to issue (b) but not to issue (a).”

20.  Issue (a) is important because if a contract was not a contract of service, in other words, not a contract of employment, but a contract for service, the Ordinance would have no application.  But, it is not necessary to consider whether there was mutuality of obligation, because whether the contract was a contract of service or a contract for service, mutuality of obligation must necessarily be present, since the relationship is contractual.

21.  Here, I am not concerned with issue (a).  I am concerned with whether there was a global contract which covered more than one of the individual engagements of 18 months.  Before dealing with the question whether there was a global contract, I should deal with the concept of continuous employment under Schedule 1.

22.  As Lord Hoffmann has made clear in Cheng Yuen v The Royal Hong Kong Golf Club [1997] HKLRD 1132 at 1139 E to G:

“The whole purpose of Schedule 1 was to equate the position of a regular casual employee with that of a person engaged under a continuous contract of employment.”

23.  Put very briefly, a person who has worked for a minimum of 18 hours per week for 4 continuous weeks would be regarded as having been employed on a continuous contract.  That is so, even if each new day was the subject of a new contract of service for the day.  Any week in which he has worked for less than 18 hours would not count and would break the continuity of his employment, subject to the provisions of para. 3(2) which would enable an hour or part of an hour not worked to be counted as an hour worked.  Also para. 4 would enable an hour or part of an hour during which the employee was absent from work not to break the continuity of his employment.

24.  In other words, it does not matter that a person was employed on a casual daily basis.  Provided such casual employment continued for a period of 4 weeks or more, during which he had worked a minimum of 18 hours each week, he would be regarded as having been in continuous employment.  It does not matter that there was no mutual obligation to work or to offer employment on a day to day basis.  Take the case of a factory which was in the habit of hiring casual workers on a daily basis from persons who presented themselves at the factory gate each morning for the purpose.  If a casual worker is chosen for a day, there is a contract of service for the day.  In this hypothetical case, I proceed on the basis that the contracts were of service and not for service.  In other words, they were contracts of employment.  If a man has been chosen 4 weeks in a row and worked at least 18 hours a week, he would be regarded as having been in continuous employment for 4 weeks.  It does not matter that the factory was not obliged to choose him.  Nor that he was not obliged to offer himself for work.  If such a person happened to be chosen continuously for 24 months, he would qualify for the benefits which are available to a person who has been in continuous employment for a continuous period of 24 months.  There is no need for a global contract.  If for any reason the casual worker was not picked for 7 consecutive days because he did not offer himself for work or that he was simply not chosen, then his period of continuous employment would have been broken.  The factory was perfectly entitled not to choose the same person for more than 3 consecutive weeks, or more than 18 consecutive months, because it did not wish to incur the obligations of such continuous employment.

25.  Although the primary purpose of Schedule 1 is to enable casual workers to be regarded as being in continuous employment, its language is flexible enough to cover fixed term contract.  For example, if a person is employed on a fixed term of 24 months, under which he is entitled to 2-week leave every year, the 2-week leave would not break the continuity because under para. 3(2) he would be regarded as continuing in his employment “by law” or by “mutual arrangement”.

26.  Here the 2^nd claimant’s contract of service was ostensibly for 18 months only, with a break of 2 weeks, between each such contract.  Of course, whether there was in fact a break remains to be decided, but for present purpose, I proceed on the basis that there was such a break.  So unless the break can be ignored, the claimants had not been employed for continuous periods of not less than 24 months.  The judge was of the view that the break could be ignored because there was a global contract covering the 2 periods of 18 months.  In this context, it does not matter that the 2^nd claimant actually worked 20 months instead of 18 months under the contract dated 1 February 1998.

27.  To constitute a global contract there must be the irreducible minimum of mutual obligation otherwise there will be no contractual link between the individual engagements with the result that there would be no global contract.

28.  In Clark v Oxfordshire Health Authority [1998] 1 IRLR 125, Mrs Clark worked for the Oxfordshire Health Authority as a staff nurse in the authority’s “nurse bank”.  She had no fixed or regular hours of work but was offered work as and when an appropriate temporary vacancy occurred at any one of the hospitals within the authority’s area.  She worked for the nurse bank between 21 January 1991 and 27 January 1994 when she alleged that she was dismissed.  There was a break from 23 August 1992 to 25 October 1992 during which she provided no service and had 4 weeks’ leave.  She did not work for a week in November 1992, or for 3 weeks in January and 2 weeks in April 1993.  An industrial tribunal found that she worked for the nurse bank on a casual basis, that she was not an employee within the statutory definitions and that therefore she could not pursue a claim for unfair dismissal.  The tribunal found that there was no obligation on the authority to offer her work and no obligation upon her to accept work when it was offered.  If she was not offered work, there was no action she could take to require the authority to offer her work.  She had no entitlement to any pay when she did not work and no entitlement to holiday pay or sick leave.  The tribunal concluded that although there were factors which pointed towards a conclusion that she was an employee, the “mutuality of obligation” which is an essential feature of a contract of employment was missing.

29.  On appeal, the Employment Appeal Tribunal (“the EAT”) held that the lack of mutuality of obligation was a significant factor but must be seen in the context of the other terms and conditions of the contract.  On that basis, the EAT concluded that, properly construed, the contract between Mrs Clark and the authority was a global contract of employment.  The appeal was allowed by a majority decision after the majority rejected the authority’s argument that the decision of the industrial tribunal was based upon a mixture of fact and law, that there was no misdirection in law and, therefore, the EAT could not interfere.

30.  The Court of Appeal allowed the appeal and remitted the case to the industrial tribunal.  Sir Christopher Slade in delivering the judgment of the court said:

“22     Mutuality of obligation

In my judgment, two decisions of this court are authority, binding on us, for the proposition that no ‘contract of employment’ within the definition contained in s.153(1) of the 1978 Act (whether it be given the extra-statutory name ‘global’ or ‘umbrella’ or any other name) can exist in the absence of mutual obligations subsisting over the entire duration of the relevant period. In Nethermere, supra, all three members of the court were agreed that there must be mutual legally binding obligations on each side to create a contract of service.

Stephenson LJ, having made certain observations on the obligations required of an employer, summarised those required of an employee (at 245, 20).

‘The obligation required of an employee was concisely stated by Stable J in a sentence in Chadwick v Pioneer Private Telephone Co Ltd [1941] 1 All ER 522, 523D: ‘A contract of service implies an obligation to serve, and it comprises some degree of control by the master.’ That was expanded by MacKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497. 515: ‘A contract of service exists if these conditions are fulfilled. (i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service.’ Of (iii) MacKenna J proceeded to give some valuable examples, none on all fours with this case. I do not quote what he says of (i) and (ii) except as to mutual obligations: ‘There must be a wage or other remuneration. Otherwise there will be no consideration, and without consideration no contract of any kind. The servant must be obliged to provide his own work and skill.’ There must, in my judgment, be an irreducible minimum of obligation on each side to create a contract of service. I doubt if it can be reduced any lower than in the sentences I have just quoted…’

Kerr LJ said at 247,38:

‘The inescapable requirement concerning the alleged employees however - as Mr Jones expressly conceded before this court - is that they must be subject to an obligation to accept and perform some minimum, or at least reasonable, amount of work, for the alleged employer. If not, then no question of any ‘umbrella’ contract can arise at all, let alone its possible classification as a contract of employment or of service. The issue is therefore whether the tribunal’s findings and conclusions show that they took account of this essential requirement.’

Dillon LJ said at 250, 60:

‘For my part I would accept that an arrangement under which there was never any obligation on the outworkers to do work or on the company to provide work could not be a contract of service.’

In Hellyer, supra, this court followed the principles thus established in Nethemere. It held (at 243, 71) that, looking at the totality of the facts found or otherwise referred to in the decision of the industrial tribunal, ‘they were such that no person acting judicially and properly instructed as to the law could have inferred that, at times when there was no subsisting crew agreement, the parties were still subject to mutual contractual obligations sufficient to found a global or umbrella contract of employment.’ It considered that on the material before the Appeal Tribunal there was ‘only one decision to which as a matter of law they could properly have come, namely, that on the relevant date none of the first applicants was employed by Hellyers under a contract of employment and that none of them was dismissed’.”

31.  Sir Christopher Slade then dealt with the submission on behalf of Mrs Clark that:

“… in the modern labour market the court should set the ‘irreducible minimum’ of mutual obligation required to found a global contract at a low level and that there was a sufficient structure of mutuality in the present case.”  para. 39.

And he said at para. 41:

“On the findings of the industrial tribunal, the authority was at no relevant time under any obligation to offer the applicant work nor was she under any obligation to accept it. I would, for my part, accept that the mutual obligations required to found a global contract of employment need not necessarily and in every case consist of obligations to provide and perform work. To take one obvious example, an obligation by the one party to accept and do work if offered and an obligation on the other party to pay a retainer during such periods as work was not offered would in my opinion, be likely to suffice. In my judgment, however, as I have already indicated, the authorities require us to hold that some mutuality of obligation is required to found a global contract of employment. In the present case I can find no such mutuality subsisting during the periods when the applicant was not occupied in a ‘single engagement’. Any obligation of confidentiality binding her during such periods would have stemmed merely from previous single engagements. Apart from this, no continuing obligation whatever would have fallen on the authority during such periods.”

32.  However because of a new argument which was raised by Mrs Clark for the first time in the Court of Appeal, namely that the specific engagement during which she was allegedly dismissed was itself a contract of service which could provide for a claim for unfair dismissal, the matter was remitted to the tribunal for decision.

33.  It may also be helpful to look at the case of Hellyer Brothers Ltd v McLeod and Ors [1987] 1 WLR 728.  The facts can be taken from the head notes:

“The first applicants, three trawlermen, had sailed exclusively for one company and the second applicants, two other trawlermen, had sailed exclusively for another company, for many years. The voyages generally lasted for several weeks with short periods ashore in between. The applicants’ terms of engagement were regulated by a series of crew agreements beginning at the start of each voyage and ending when the vessel returned to port. As part of the general decline in the trawler fishing industry from 1977 onwards the two companies (the employers) reduced the number of their vessels until in January 1984 they took their entire fleets out of service. The first applicants applied to industrial tribunals for redundancy payments claiming that they had been dismissed. In the first case the tribunal, considering a preliminary point as to jurisdiction, found that the applicants had been free to work for owners other than the employers and that the employers were not bound to re-engage them after the completion of a voyage although in practice the employers generally called up the same men and refrained from poaching other owners’ men.  The tribunal, by a majority, held that there had been a succession of short term contracts over a very long period and that, in reality, at January 1984, each of the applicants, even though not currently employed under a subsisting crew agreement, was employed under a continuous contract of employment which was to be inferred from all the circumstances and which gave rise to continuing mutual obligations sufficient in law to support the existence of such a continuing contract which had been brought to an end by dismissal when it was announced that the employer’s fleet was to be taken out of service. In the second case the industrial tribunal found substantially the same facts and came to the same conclusion. The employers’ appeals were allowed by the appeal tribunal. The second applicants were refused leave to amend their answer to allege that they had been employed under a series of fixed term contracts and that there had been a deemed dismissal under section 83(2)(b) of the Employment Protection (Consolidation) Act 1978 in March 1983.”

34.  The judgment of the court was delivered by Slade LJ who said at 748:

“The primary facts thus recorded showed that the first applicants were in practice generally available for work in between crew agreements, if work were offered to them and, indeed, that they had worked exclusively for Hellyers for a number of years. In broad terms they further amply demonstrate the continuation of a relationship of sorts between the trawlermen and Hellyers during the intervening periods. However, having carefully studied the whole of the decision, we can find no facts found or otherwise referred to from which it could properly be inferred that the men had ever placed themselves under a legally binding obligation to make themsleves available for work for Hellyers in between crew agreements or to refrain from seeking or accepting employment from another trawler owner during such periods.

The principal route by which the majority appear to have sought to justify the inference of such an obligation was by referring to

‘evidence which showed that permission to have a trip off was in practical terms needed and that therefore the reality must be that crew asked for permission if they were in fact employed and obligated to [Hellyers] which was the situation.’

All the first applicants had given evidence (see paragraph 3(7) of the decision, ante, p. 744A-B) that ‘if they wished to have a trip off sea they would either ask the skipper or the ship’s runner for that trip off.’ Mr. Kemp had given evidence to the effect that when ‘on a particular incident in November 1981 he left his vessel for personal reasons he negotiated a trip off,’ though Mr. Margerison said that, when he left for a trip off in 1978, he did not seek or obtain Hellyers’ consent.

It may well be that, in practice, the permission of Hellyers to have a trip off was habitually sought. However, it does not by any means follow from this that this was because of any contractual obligation. There is another obvious reason why trawlermen would have wished to ensure that Hellyers had no objection to their seeking temporary employment elsewhere. As all the first applicants told the tribunal (see paragraph 3 (7), ante, p. 744F-G), ‘if they did not become known and established the chances of getting regular work were blighted if not extinguished.’ This evidence as to trips off did not suffice to justify the inference that the men had placed themselves under a legally binding obligation of the relevant nature.

No more did any of the other facts referred to in the decision of the industrial tribunal justify such an inference. On the contrary, the evidence of the first applicants themselves, in our judgment, negatives such an inference. The effect of their evidence (referred to in paragraph 3(7), ante, p. 744F) was indeed that ‘they were Hellyers’ men who regarded themselves as such and that other firms. . . would not offer them work.’ However, as is also recorded in that paragraph, ante, p. 744E-F ‘all men admitted at some stage during their cross-examinations that if they had wished to they could have signed on and worked for any other employer either on the fish dock or elsewhere. . .’ In so far as this ‘admission’ amounted to an admission of a point of law, it could not bind the first applicants. In our judgment, however, it is both relevant and important for these reasons. It shows clearly that each of the first applicants accepted that Hellyers by their conduct had never led him to suppose that he was not free in law to sign on and work for other employers in between crew agreements and that he never did so suppose. In the face of this admission, and in the absence of facts pointing to a different conclusion, we do not see how it is possible to infer from the parties’ conduct the existence in between crew agreements of a trawlerman’s obligation to serve, which is part of the ‘irreducible minimum of obligation’ on the part of the employee required to support the existence of a contract of service.”

35.  Then, at page 751, he continued:

“For completeness, we should perhaps mention some of the further matters from which Mr. Samuels submitted the existence of a global contract of employment could properly be inferred. In his submission, the very length of time over which the relationship of each of the first applicants with Hellyers had subsisted, coupled with the desirability of maintaining a stable crew to which Mr. Dalrymple had referred in evidence, raised such an inference. We cannot agree. Though the series of short term crew agreements had continued in sequence for a long time, and it was no doubt desirable in everyone’s interest that stable crews should if possible be maintained, the existence of this series does not show that there was any umbrella contract which imposed mutual obligations between each man and Hellyers, during such terms as the short term contracts were not subsisting. The same comment can be made on the first applicants’ evidence (on which Mr. Samuels relied) that, if they did not become known and established as Hellyer’s men, ‘the chances of getting regular work were blighted if not extinguished.’”

36.  These authorities show that there must be an irreducible minimum of obligation on each side to create a global contract.  I have quoted from these authorities at length to show that a high expectation on the part of the employee, even when shared by the employer, of “re-employment” after the break, is not sufficient to create a global contract.  Indeed, even virtual certainty of re-employment is not sufficient if there was no mutual obligation in the sense explained by Sir Christopher Slade in Clark.  Here, although the individual engagements were contracts of service, unless they were covered by a global contract, they fell short of 24 months.  The judge referred to page 120 K to T and 138 P to 139 F of the typed transcript.  They should be considered together with page 158 G to 159 G, also in the evidence of DW3:

Transcript 120 K to T:

「答： 因– –公司嘅合約係年半，到年半就要停佢嘅職嘞，即係佢合約年半吖嘛。

問： 係。

答： 咁一到年半就唔用佢嘞，自動離職嘞，當，張合約呀，公司都係咁嘅主意，亦都係，合約都係咁寫。

問： 點解隔咗十五日又返番嚟做呢？

答： 即係可以講得係話到年半就停止佢，過一段時間又可以請番佢。

問： 你話過一段時間可以請番佢？

答： 喀，喀，喀。

問： 目的係乜嘢？

答： 即係佢係年半約吖嘛，到約就公司係要佢離職，咁就變咗話佢係做．．．

問： 但係你唔係真係想佢離職，你想佢返番嚟做吖嘛，不過你話隔一段時間吖，點解要咁做呢？

答： 因為我哋公司始終都係要請人喇，即係佢離開咗公司之後，咁請人都可以請番佢囉，即係。

問： 公司都諗住請番佢哋嘅，不過一定要做到年半就停？

答： 係。

問： 係咪咁樣呀？

答： 即係公司就– –我哋可以畀佢– –畀我哋就可以請番佢哋，但係佢一定要停，即係到合約滿就要離職。」

Transcript 138 P to 139 F

「問： 而家被告係咪聲稱，即係C2同C3就係99年9月30號就離開公司，跟住就到10月16號先返嚟做呀？

答： 係。

問： 係點解會有咁嘅安排呀？

答： 但係我哋合約，就我– –就要十八個月自動就係當離職嘞，咁就安排，我叫任何舖頭每一個員工都係十八個月合約就要自動要– –即係自動斷嘞，咁就再重新請咩嘢人，我一定要佢哋就要離開舖先嘅，重新請咩嘢人，咁梗係人事部嗰度去安排喇。

問： 人事部邊個負責呀？

答： 潘生喇，頭先潘生就人事部。

問： 點解十八個月呢，你嘅合約要？

答： 因為我哋同行業嘅，即係我哋嗰個行業講，即係話就個個– –我哋個行規過咗十八個月合約咋，而家。

問： 未喎，我未聽過咁嘅行規喎。

答： 咁我哋開會時，佢好多張– –嗰啲合約都係寫十八個月喎。

問： 點解十八個月，點解唔係十九個月，點解唔係兩年呀，點解唔係三年呢？

答： 即係我開嗰啲同業會，大家嗰啲同業就係咁樣，係咁樣；即係我哋有個同業會開嘛，我都有出席呀。

問： 點解呢？點解要十八個月呢？

答： 佢話有陣時兩年就即係長期服務金呀，即係咁樣。

問： 即係兩年就有長期服務金問題？

答： 係，佢咁講，佢同業會咁同我講，即係我去開會吖嘛。

問： 同埋遣散費，係咪呀？

答： 即係佢話長期服務金，即係咁樣，即係話。」

Transcript 158 G to 159 G

「問：    你而家上緊法庭做證人。你留心聽，如果成日要我重複啲發問嘅問題，拖延咗審訊時間，咁你被告公司要負責嗰個額外嘅訟費，你留心聽住呀。你哋同啲員工簽啲僱傭合約就為期十八個月，跟住休息幾日，跟住又再簽– –續約，簽過新嘅合約，再繼續做，點解要咁樣安排呀？

答： 呢個就– –你話點樣安排呢？就整．．．

問： 點解咁樣安排呀？

答： 整個酒樓行業，即係跟隨呢種風氣，跟隨呢種風氣，整個酒樓行業嘅風氣。

問： 唔好講整個酒樓行業嘞，有好多酒樓唔係咁做。我而家問你哋，點解你哋酒樓要咁做？你回答喇，文生。

答： 我回答就係跟隨個酒樓嘅風氣，係咁樣做呀。

問： 咁你有– –你都知點– –為咗乜嘢先得，酒樓風氣？我都話咯，我冇證據顯示成個行業，間間都係咁做呀，你哋點解要咁做吖？就算你話人哋嘅風氣係咁，你點解要跟？為咗乜嘢呀？你講唔講得出有任何業務上嘅理由，需要咁做？

答： 我理由就跟隨酒樓嘅風氣，即係你公司嘅管理方面．．．

問： 我已經聽到你嘅答案喇。

答： 係。

問： 你唔係話有咩嘢風氣，有啲人賣5毫子一碟點心，你就跟個風氣，你自己都做緊生意，都知道點解，係咪吖？有個理由先得，你都有個理由？

答： 理由都係為咗嗰個健全嘅管理。

問： 點解會管理易啲呢？你無端端要完咗合約，又再簽過咪搵嘢嚟做？點樣會對個管理會健全啲呀？文生，唔該你作答喇。點解要十八個月，又唔係兩年，又唔係兩年半，又唔係三年呢？

答： 因為我公司個制度嚟嘅。

問： 咁你梗有原因，公司制度詁點解要咁做呢？文生，你作答吖。

答： 係。

問： 點解又有咁嘅制度呀？文生，你答唔答到呢個問題呀？如果你答唔到，就話答唔到嘞，你唔出聲，我唔知你會唔會答。

答： 我答唔到畀你。

問： 你有冇從啲高層或者董事會度聽過，點解有咁嘅制度呀？

答： 呢個就係公司制度，我哋就係按照嗰個合約去做嘅啫，法官大人。

問： 而家問你點解有咁嘅制度吖嘛，你都冇答到我，你話答唔到；咁你答唔到，冇辦法喇。其實每次合約完，又會唔會好似你話裝修嗰次，其實都預咗佢哋會返嚟做？

答： 哦，呢個我就交帶下屬做嘅啫，細則問題就。

問： 呢個唔係細則問題，呢個係大原則問題。嗱，唔好– –你唔好再逃避問題吓，你係公司嘅經理，你交得畀你屬下做，你就清楚個原則喇，我唔係問你細節問題，我問你大原則問題。你頭先答到嘛，關於3月中裝修一個月，你可以答到，好肯定話係預咗佢哋返嚟做吖嘛，如果佢哋返嚟，你一定會請佢哋嘛。點解你以前啲合約，你答唔到呀？你呢個問題，你一定要答呀，文生。

再講多次，你頭先作供關於話3月，01年3月中裝修一個月，又完咗一個合約，但係你就話如果佢哋返嚟做，就一定會請佢哋。對於以前每個十八個月嘅合約完咗之後，個安排係咪一樣諗住咁樣，雖然話斷開咗幾日？

答： 斷開咗嗰啲，需要到，佢要求到，我哋都畀佢返嚟做。」

37.  With respect to the judge, I cannot agree that on such evidence it is an inescapable inference that there was a global contract.  I doubt even whether the evidence would enable any such inference to be drawn.  Nor was that the evidence of the 2^nd claimant.  So far as the 2^nd claimant was concerned his case was that he worked during the 2 weeks and I have not been referred to any relevant evidence from him bearing on the question of a global contract.

38.  It is quite obvious from the evidence that the defendant had adopted the practice of entering into employment contracts of 18 months only with its employees, with the view to avoid liability to pay, for example, severance pay.  Insofar as the right to such payment depended on a continuous contract for 24 months, the defendant was acting perfectly within its legal right not to employ a worker for a continuous period of 24 months.  I am concerned with the legal rights of the parties and not with the morality of such a practice.  No doubt many employers will be guided by their self interest and they would wish to employ their employees on a long term basis for the sake of good morale and loyalty.  But provided an employer was acting within the law, he is also entitled to the full measure of the law.

39.  Booth and Others v United States of America [1999] IRLR 16 is a case where the applicants were employed by the United States Army as maintenance workers.  I take the facts from the headnotes:

“The facts

The three applicants were employed by the United States Army as maintenance workers. In each case, they had been employed under a series of fixed-term contracts for a total period in excess of two years but with a gap of about two weeks between each contract.

At the end of each contract, the employees were informed in writing of the termination and paid any outstanding holiday pay or other benefits. After a break which the employers insisted was not less than two weeks, they completed new application forms and other documentation for employment and were engaged under new contracts. When the employees returned to work, they were given the same employee number and used the same tools and clothing provided by the employers and the same lockers.

The applicants’ claims for redundancy payments and/or unfair dismissal compensation were dismissed by employment tribunals on the grounds that they did not have the requisite period of continuous employment. The tribunals concluded that the breaks between contracts did not fall within s.212(3)(c) of the Employment Rights Act, which provides that any week ‘during the whole or part of which an employee is - absent from work in circumstances such that, by arrangement or custom, he is regarded as continuing in the employment of the employer for any purpose … counts in computing the employee’s period of employment.’”

40.  The judgment of the EAT was given by Morison J, and this is what he said at page 17:

“For the USA, it was argued with force that the question at issue was simply whether the arrangements made achieved the purpose they were designed to achieve. For all that we knew, there might be good and sound reasons why the USA was not willing to employ local staff to work on their bases if the staff acquired statutory rights which might make their employment unattractive, for a variety of reasons, or just simply uneconomic. ‘By arrangement’ implied a meeting of minds. Here, one could say that the USA never intended the employment to be continuing during the break; indeed, the whole purpose of the break would otherwise have been defeated. It does not follow that because the USA made certain administrative arrangements of the kind referred to that there was some kind of understanding that, by reason thereof, the employment relationship continued during the break period. It was submitted that for there to be a custom it must be a custom of the trade, some kind of implied contract that employment would continue, and there was no evidence to support such a finding. The issue before the industrial tribunal required them to look at all the facts and decide whether a custom or arrangement had been established. On the facts, they concluded that there was none; we could not and should not interfere with their decision.

It seems to us that the expression ‘by arrangement’ at least requires that something was said or done by the employers such as to justify the conclusion that the parties regarded the employment relationship as continuing despite the termination of the contract of employment. The industrial tribunal will, ex hypothesi, be considering the question at issue after there has been a termination of a contract, and a break followed by re-employment. Thus, it will have the advantage of the benefit of hindsight when deciding whether this was by arrangement. We respectfully agree with what was said by the EAT in Letheby & Christopher v Bond [1988] ICR 480, at 486, where they said:

‘What the tribunal have to look at is whether, when the absence from work takes place, the parties regard the employment as still continuing.’”

41.  Mr Lawrence Ng, appearing for the 2^nd claimant, submitted that Booth is distinguishable because there at the end of each of the fixed term contracts, the employer had paid all outstanding holiday pay or other benefits.  Mr Ng submitted that was not the case here because before the break on 1October 1999, the 2^nd claimant had not been paid the severance pay which was payable to the 2^nd claimant because he had worked continuously since 23 October 1996.

42.  Non-payment of accrued benefits can sometimes be evidence that the contract of employment was continuing despite a relevant break.  That was the case in Wishart v National Coal Board [1974] ICR 460.  There between 1946 and 1960 the employee worked at a colliery for the National Coal Board, the employers. Between March 1960 and October 1961 he worked for a different employer, the company, but he then returned to his previous employment until he was dismissed for redundancy in February 1973. Throughout his employment with both employers, the employee was a member of the employers’ mineworkers’ pension scheme.

43.  It was held that by retaining the employee as a member of the mineworkers’ pension scheme the employers, by custom or implied arrangement, regarded him as continuing in their employment for the purposes of the pension scheme and that, accordingly, paragraph 5 (1) (c) of Schedule 1 to the Contracts of Employment Act 1972 applied and the employee was entitled to a redundancy payment based on the total period of his employment with both employers.

44.  In my opinion, even assuming that severance payment was indeed payable on 30 September 1999, the non-payment was not evidence that the employment was regarded as continuing.  The payment was not made either because the employer did not regard itself as liable to pay or that wrongly it had failed to pay.

45.  It follows from the above that I am of the view that on the facts available, the judge was not entitled to find that there was a global contract.  No fact having been found by the Labour Tribunal in this regard, (the facts might not have been fully explored because the Presiding Officer saw no need to do so) and having regard to the fact that there was no decision whether the 2^nd claimant had worked during the disputed period, I am of the view that the matter must be remitted to the Labour Tribunal for decision.

46.  The judge also relied on section 32A(1)(a) of the Ordinance.  But it is clear that under section 32A(1)(a), an employee is only protected if he had been employed:

“… under a continuous contract for a period of not less than 24 months ending with the relevant date.”

In this case, if he had been so employed, he would have been entitled to the severance pay.  If he had not been so employed, section 32A(1)(a) can have no application.  The judge said in para. 22 of his judgment:

“… It seems to me that the whole point of this arrangement of successive contracts was a scheme to avoid liabilities for severance payment or long service payment. DW3 admitted as much in his testimony. In these circumstances, taking the defence case to its highest, the so-called break at the Disputed Period was an artificial one.”

47.  With respect, I cannot agree.  There is nothing unreal about the break (if, in fact, there was a break).  It was designed to break the continuity of employment.  An employer is entitled to arrange its affairs to take advantage of the provisions of Schedule 1.  I conceive it to be my duty to uphold his right to do so.

48.  Nor do I believe section 70 of the Ordinance helps.  Section 70 provides:

“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.”

49.  I do not believe that entering into successive contracts with the appropriate breaks so that they do not constitute a continuous contract is covered by section 70 at all.  As I have explained, the employer was only doing what it was entitled to do under the Ordinance.  Nor can I ignore the 2 weeks’ break.  It was adopted to break the continuity of employment.  Provided there was a real break of 2 weeks and there was no global contract covering more than one period of 18 months, it must be given the effect which it was designed to have.

50.  We granted leave to the 2^nd claimant to file out of time a respondent’s notice to support the judgment on the additional ground that the employer had admitted that there was no break in the continuity of employment because in the employer’s return of remuneration and pensions submitted for the year ended 31 March 2000, the period of employment was stated to be from 1 April 1999 to 31 March 2000 without any break.  However, I agree with Mr Chu that the employer is entitled to an opportunity to deal with this matter which had not been raised before the Presiding Officer.  This is a matter for the Presiding Officer to consider.

51.  I would allow the appeal and remit the matter to the Labour Tribunal for decision.

52.  I would also make a costs order nisi, that the costs of the appeal to follow the cause in the Labour Tribunal.

53.  The 2^nd claimant’s costs should be taxed in accordance with the Legal Aid Regulations.

Hon Kwan J:

54.  I agree with the judgment of Tang JA.  I only wish to add the following.

55.  On the hearing of the appeal, we granted leave to the 2^nd claimant to rely on a respondent’s notice out of time.  It was contended that the decision of the judge that the continuity of the employment of the 2^nd claimant shall not be treated as broken during the period of 1 to 15 October 1999 should be affirmed on the additional or alternative ground by reason of the employer’s return of remunerations and pensions submitted for the year ended 31 March 2000.  This employer’s return stated that the period of employment of the 2^nd claimant was from 1 April 1999 to 31 March 2000, without stating any break in between.

56.  Mr Lawrence Ng argued for the 2^nd claimant that the statement in the employer’s return constituted an admission of the defendant employer there was no break in the continuity of employment.  The transcript showed that the 2^nd claimant had produced various employer’s returns to the Presiding Officer but none of the defendant’s witnesses were questioned about the statement in the relevant return relating to his period of employment.  I do not think a clear inference can be drawn from this return that there must have been no break in the continuity of employment, not knowing the circumstances in which the form was completed.  This matter would require investigation by the Presiding Officer.