CHENG YUEN v. THE ROYAL HONG KONG GOLF CLUB

Headnote

Employment Ordinance. Whether there was a contract of employment between a golf club and a caddie. Decision on particular circumstances.

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JUDGMENT

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Nazareth V-P:

1. The respondent ("Cheng") was a caddie at the Deep Water Bay golf course of the appellant "the Club" from September 1986 to October 1995, when the arrangement he had with the Club was terminated. In consequence he filed a claim in the Labour Tribunal for wages in lieu of notice and a long service payment under the Employment Ordinance. The Labour Tribunal found in his favour and awarded him the sum of $33,840.00 claimed.

2. The Club appealed to the High Court and its appeal was dismissed by Mrs Justice Bokhary. From that dismissal it has appealed to this Court.

3. There has always been really only one question in these proceedings: was there a contract of employment between Cheng and the Club? Section 2 of the Employment Ordinance defines "contract of employment" as "any agreement, whether in writing or oral, express or implied, whereby one person agrees to employ another and that other agrees to serve his employer as an employee ...". It is not in dispute that if there was a contract of employment, Cheng would be entitled to the amount awarded. In the legal way that question is put, it is this: was the contract one of service or a contract for services? Or, put another way, was Cheng an employee or an independent contractor?

4. As will be seen, it is far from easy to define a contract of employment, or the relationship of employer and employee. The courts have not in the event been able to formulate a satisfactory test or definition. They have instead settled for indicia, which as that expression suggests, are merely indications or guidance. I shall return to these after outlining the facts, to which I now turn.

5. The primary facts, as the judge pointed out, are not in dispute. Cheng's circumstances were no different to the few hundred other caddies registered at the Club's three golf courses. Indeed, it is the implications of that large number of caddies registered, whose circumstances and conditions are accepted as being the same, that has caused the Club's concern. Cheng became a caddie at the Club's Deep Water Bay golf course by filling in an application form. It does not shed any light on whether he was an employee or an independent contractor. There was no written contract. His application having been accepted, Cheng was assigned a number, allocated a locker, provided with a uniform and showed his duties by one of the Club's junior professionals.

6. It was up to Cheng, as it was to any other caddie, whether he turned up at the course at all, and how long he stayed if he did turn up. In practice, however, he turned up almost every day of the week arriving in time for the first golf session which began at 6 o'clock in the morning and going home at about 5 o'clock in the afternoon.

7. Like other caddies he would have to wait his turn to work. He would work if a member needed his services. He would receive payment immediately after at the going rate set by the Club for each round he worked. There was no guarantee that there would be work for him or any other caddie. If the weather was bad or there were few players around for whatever reason, then there might be no work. In practice, however, it seldom happened that Cheng went a day without any work at all. On average, he would actually work, as opposed to waiting around for work, for four hours a day and earn about $180 per day. Caddies were not provided with other benefits normally provided by the Club to its other employees, e.g. insurance cover, holidays, staff pension, sick pay, holiday pay, any other pay or Chinese New Year bonus.

8. Payments to caddies, including Cheng, were made by the Club which monthly debited each of the members concerned for the caddie service which the member had utilised, with precisely the same amount, calculated at the same rate at which they paid the caddies. There was an element of subsidy in this regard as the Club did not recover the administration costs of the scheme.

9. A standard form of letter that caddies at the Club's Fanling golf course had to sign contained the following:

"I agree that should the Club accept me as a caddie I will throughout hold and continue to hold the status of a self-employed person and that the arrangement between me and the Club shall not, in any event or circumstances, constitute or be construed as a relationship of employer and employee, of principal and agent, of joint venturers or of partners, or of any other relationship of whatsoever nature, save and except that of independent contractors. I further acknowledge that I will not be entitled to any benefits offered or to be offered by the Club to its employees (whether permanent or temporary), including without limitation, the benefits of any pension scheme, any employer's liability insurance, medical insurance, life insurance, bonus or commission."

However, Cheng was never asked to sign such a document.

10. Also, the following notice in English and Chinese dated January 1995 was displayed at the Club's premises:

          In the eyes of law, caddies are independent contractors, not an employee. As caddies are employed by individual golfers and without any employment relationship with the Club, caddies cannot made any Employees' Compensation claims against the Club. If a caddie is hit by a golf ball, he should report the accident to the Security Department who will record the facts, and should claim against the one who hit the ball. The Club will not be responsible for any Employees' Compensation claims."

11. At the Fanling golf course, caddies were graded. There were three grades, 1st class, regular, and bag carrier. If three bad reports were made against a particular caddie, he would either be demoted or asked not to come to serve. Those then were the primary facts.

12. Turning now to the proceedings, the presiding officer in the Labour Tribunal and the judge below, both approached the matter in terms of the indicia settled upon by the courts for the purpose of identifying a contract of employment. It is only necessary to outline those resorted to by the judge. She cited the following dicta of Cooke J in Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173, of which the Privy Council said in an Hong Kong appeal (Lee Ting-sang v Chung Chi-keung [1990] 2 WLR 1173 at 1176) that the matter had never been better put than by Cooke J at pp 184-185:

"The fundamental test to be applied is this: 'Is the person who has engaged himself to perform these services performing them as a person in business on his own account?' If the answer to that question is 'yes,' then the contract is a contract for services. If the answer is 'no,' then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task."

13. The judge also adopted the very useful summary of indicia in the 27th Edition of Chitty on Contracts, vol. II para 37-008 pp 703-704:

"Recent case law suggests that the factors relevant to the process of identifying a contract of employment may usefully be listed as follows :

The judge then very properly analysed the circumstances of this case by reference to the dicta of Cooke J and the indicia it contained, concluding that:

14. The judge then proceeded similarly to test this case by the indicia in Chitty, which largely duplicated what was contained in Cooke J's dicta. The only exception identified by Mr Stone QC for the Club, was expressed in the following way by the judge:

15. With respect, while caddies being an integral part of the employer's organisation may be some indication of an employer/employee relationship, in the circumstances of the present case, the fact that caddies are an integral part of a golf club, it has to be said, is equally consistent with them entering into individual contracts with members for their services, and the Club acting as agent in making payments on the members' behalf in the context of a scheme designed also to secure good order and certain standards. Moreover, there was no evidence that caddies are "by no means casually or temporarily engaged merely for the purpose of completing some specific task ancillary to the Club's main activity".

16. As to the Club's defence of agency, what the judge said was this:

17. Although the Presiding Officer in the Labour Tribunal rightly observed that the consideration of the indicia was not to be a mechanical process, it is apparent that both he and the judge overly concerned themselves with the indicia and not sufficiently with the particular and somewhat unusual arrangements and the direct evidence in this case.

18. There are plainly very good reasons why the Club might not have wished to employ caddies and decide to merely regulate the arrangements, standards and conditions upon which they were allowed on to its golf course to offer their services. There is no good reason disclosed in the material before us for rejecting the evidence that that was what the Club sought to do. On the contrary, the evidence is that such was the arrangement, with payment to the caddie by the Club being made as agent for their individual members. Why the Club should not be a "loss making agent", i.e. subsidise the service is not at all clear. That is what most clubs do - provide many services for their members while absorbing some if not all of the costs.

19. In respect of another factor, control, which in the past was regarded as particularly important, the judge, echoing the view of the Presiding Officer, said this:

"First, as to control, there was here control to the extent of putting caddies in uniform, grading them and even demoting them. That is suggestive of an employer-employee relationship."

In his submission, Mr Sarony QC for Cheng took the matter a good deal further. He pointed to the following dictum from Mersey Docks and Harbour Board v Coggins & Griffiths [1947] AC 1 at 17:

"... the ultimate question is not what specific orders, or whether any specific orders, were given but who is entitled to give the orders as to how the work is to be done."

He identified the following elements of control: the Club recruits the caddies, trains the caddies, says how their work shall be performed, controls for whom a caddie shall caddie, pays the caddies, has the power to discipline the caddies, has the power to dispense with their services if the Club is not satisfied with the manner in which they perform them.

20. Undoubtedly, there was control, but it was the control that was consistent and necessary for the Club's scheme of which there was direct evidence which was neither disputed nor contradicted. And in that regard, it is clear that in the caddies' actual work or provision of services, it would be the playing member who availed of the work or services who would be in control (as opposed to the Club's control of standards and arrangements). In that specific respect, on the strength of the authorities there cited, it is said in para 37-010 of vol. 2 of the 27th edn of Chitty on Contracts that -

"The greater the amount of control exercised over the details of the work to be done, the more likely is the inference that the relationship is of employment".

If a contract of employment there was, it would have to be one on the part of the member using the caddie's services; and that is a result that is not only absurd but consistent only with a contract for services.

21. Upon the primary facts that, I repeat, are not in dispute, there can, in my judgment, be only one inference: that there were only contracts for services on the part of the members who engaged the caddies, and certainly not a contract of employment by the Club. And what, one might ask, were the terms of the contract of employment if such contract there was? The caddie need never have turned up for work at all and yet would not breach the supposed contract. He could be demoted upon three complaints by members or told not to come and serve, but, on the evidence, never have the "contract" terminated. Furthermore, upon the supposed terms of employment, he could take up other employment elsewhere and after many years return and caddie for a year or even somewhat less to claim a long service payment under the Employment Ordinance and presumably other benefits under that Ordinance. In the latter context, Mr Sarony was constrained to concede that a contractual relationship of employment might not arise until a critical period of caddying had been actually performed. That confirms the defective basis of Cheng's claim.

22. His appeal, however, does not quite end here for the judge sitting in appeal, as she was, approached the matter also upon the limited scope for intervention by an appeal court. She did so by reference to the Privy Council judgment in Lee Ting-sang, which, as already seen, was concerned the same question as this appeal, i.e. whether a workman was employed under a contract of service. It was pointed out there that it had been repeatedly held that:

" ... a finding by a county court judge that a workman was, or was not, employed under a contract of service was a question of fact with which an appellate court could only interfere if there was no evidence to support his finding ... in O'Kelly v. Trusthouse Forte Plc. [1984] Q.B. 90 the Court of Appeal ... held that whether or not a waiter was employed under a contract of employment within the meaning of the Employment Protection (Consolidation) Act 1978 was a question of mixed fact and law, and that the finding of an industrial tribunal on this issue, from which an appeal lay on a point of law only, could only be impugned if it could be shown that the tribunal correctly directing itself on the law could not reasonably have reached the conclusion under appeal."

Referring to her conclusion that Cheng was an employee of the Club, the judge added:

"But even if I leaned towards the opposite conclusion, it would nevertheless be quite impossible for me to say that no tribunal correctly directing itself on the law could reasonably have reached the conclusion under appeal."

However, I have been driven to a conclusion contrary to that reached below, and it is in my view the only reasonable conclusion that can be reached on the primary facts. Consistent then with Lee Ting-sang and the judgment of this Court in Chan Kwok-kin v Mok Kwan-hing and another [1991] 1 HKLR 631 (in which the former was considered as can be seen from the citation in the judgment of Mayo JA in this appeal), this Court is obliged to intervene and allow the appeal.

23. In having to do so, one cannot but have some sympathy for the respondent Cheng, who is 83 years old. He worked on a daily basis for almost ten years and it may be that the legislature would have wanted to provide the long service payment to all who provide labour or service for long periods, had there been a satisfactory and practical basis for doing so. But it seems that it is only a contract of employment that has been found to afford such a basis. At any rate, that is the basis upon which the long service payment in the Employment Ordinance is provided. And that is the basis upon which this Court has to decide this appeal.

24. Before I leave this matter, I have also to say that I have not found it necessary to canvass or rely upon the numerous authorities, many concerned with similar circumstances but all in some degree different, which the unstinting industry of counsel and those behind them has revealed. For all those and the extremely thorough written and oral submissions, I record my gratitude.

Mayo JA:

25. I accept the validity of the submission made by Mr Stone QC for the appellant that the key to determining whether an employer and employee relationship subsisted was whether there was one continuing contract throughout the period when the respondent served as a caddy or whether there was a series of contracts each time he attended at the Golf Club to act as a caddy.

26. All of the evidence was indicative of the latter situation pertaining.

27. I say this because on a realistic assessment of the position what the appellant was doing was providing a system whereby caddies could perform their duties for members of the Club.

28. The appellant did not provide the respondent with remuneration. Its function was to lay down the terms of employment and then provide the administrative arrangements whereby members could pay for the services rendered to them.

29. I also accept that one of the errors fallen into by both the Presiding Officer and the judge was to adopt an approach to the case law which was insufficiently flexible.

30. The relationship in the present case was to some extent different to any of the cases which were cited to the judge or indeed to us and it was not feasible to place undue reliance upon the decisions in any of these cases.

31. The crucial element in this case was in my view the informality of the arrangements and the freedom of caddies to attend whenever they wished to do so.

32. I found it to be significant that Mr Sarony QC for the respondent argued that some caddies might be employees while others might not. The situation would almost entirely be governed by the extent of the caddies attendance at the Golf course. I cannot accept that this can be right. Whether a relationship of employer and employee subsists is a matter of considerable importance to the parties. It would be surprising if the main criteria whereby this could be determined on the facts of the present appeal was by the number of attendances by any particular caddie.

33. Having reached this conclusion the final matter which has to be determined is whether we are justified in interfering with the judge's determination of this issue. We would certainly not be justified in simply substituting our interpretation of the position to the conclusion reached by the Presiding Officer and Mrs Justice Bokhary. However the approach to be adopted was considered by Clough JA on p634 of Chan Kwok-kin v. Mok Kwan-hing and Another [1991] 1 HKLR 631.

34. This is a correct analysis of the law. Applying it to the present case I have come to the conclusion that we should interfere with the judge's decision and that this appeal should be allowed.

Ching, J.A.:

35. I have read the judgments of Nazareth, V.P. and Mayo, J.A., and I agree with their conclusion that the Plaintiff was not an employee of the Defendant. I add a few words only to amplify upon the reasons for my agreement.

36. I refer first to the expressions used in many of the decided cases which contrast an employee on the one hand with others who are businessmen or who are described as being in business on their own account on the other hand. Once it is accepted that the various indicators that have been laid down in the authorities are not to be mechanically applied, it seems to me that there is a danger of defeating the reasons why that should be so by applying too strict a meaning to the words "business" and "businessman". Like countless others in Hong Kong the Plaintiff offered his services without his own helpers, without providing equipment, without risking capital and without management of his activities in any accepted sense of the word. What happened was that he offered his services on the basis of acceptance by the Defendant within the grade that the Defendant decided. He was obliged to wear a uniform. None of this begins to indicate to me that he was an employee. He was not guaranteed any work and he was not obliged to attend for work. While it may not be that he can properly be described as a businessman in my view the accurate description is that he was self-employed.

37. I can see no difficulty in regarding the Plaintiff as having entered into a separate contract with the player each time he went out onto the course as a caddy. Indeed I am sure in my own mind that that was the position. There was, however, no contract of employment with the Defendant.