AU HUNG LIT v. NGUY CAN & FILS (CHINA) CO LTD

HCLA 41/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEALNO. 41 OF 2004

(ON APPEAL FROM LBTC 1787/2003)

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DECISION

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1.  This is the defendant’s application for leave to appeal against an award of the Labour Tribunal made by consent on 7 May 2004.

Background

2.  Briefly stated, the background leading to this leave application is as follows.

3.  On 28 February 2003, the claimant issued a claim in the Labour Tribunal against the defendant, claiming for arrears of wages, wages in lieu of notice, end of year pay, severance payment and long service payment totalling $623,301.30.  The claimant’s case is that he had been constructively dismissed under section 10A of the Employment Ordinance.

4.  The first hearing took place on 22 March 2003 when the case was adjourned to 7 May 2003 for mention.  The case came before another Presiding Officer on the second hearing.  On both occasions, the defendant was represented by a Mr So Ka Bo.  While Mr So claimed himself to be a manager of the defendant at the hearings, the affirmations filed in the present leave application reveal him to be a staff of RICL Corporate Service Limited and is unrelated to the defendant.  No reason has been given as to why the defendantsaw fit to sendMr So to the hearings as its authorized representative.

5.  At the second hearing, the claimant and the defendant acting by Mr So reached agreement on the settlement of the case.  They signed on a Chinese document(“the Chinese agreement”) prepared by the Tribunal Officer based on their agreement.  Under the terms of the Chinese agreement, the defendant was to pay the claimant $500,000 by 10 equal monthly instalments to commence on 1 June 2003.  They also signed on an English letter (“the Letter”) drafted by a firm of solicitors for the defendant and faxed to the Tribunal.  In the Letter, the claimant agreed, in consideration of the defendant agreeing to pay him $500,000 by 10 equal instalments as referred to in the Chinese agreement and upon full payment of 10 instalments to be received in good order, to confirm, inter alia, that he was an employee of a company called Concept Garment (Cambodia) Co Ltd (“CGC”) between 1 April 1998 and 21 September 2002.

6.  Having regard to the Chinese agreement, and after confirming with the parties their understanding and agreement to the terms therein, the Presiding Officer made an award in terms of the Chinese agreement in full and final settlement of the claimant’s claim.  It does not appear from the transcript that the Letter had been placed before the Presiding Officer.

The leave application

7.  The defendant had paid the first to fourth instalments, but defaulted in paying the rest.  Consequently, the claimant applied for and was issued a certificate of award and proceeded to petition for the winding-up of the defendant under HCCW 160 of 2004.  Probably prompted by the winding-up petition, the defendant applied on 13 April 2004,almost a year after the making of the award by consent, for an extension of time to appeal against the award. On 15 April 2004, the acting Registrar, High Court granted the extension of time.

8.  In the Amended Application for Leave to Appeal, the defendant raises two grounds.  The first is that the claimant was employed by CGC and as CGC is a company incorporated and carries on business in Cambodia, the Labour Tribunal has no jurisdiction to entertain the dispute.  The second is that the settlement between the claimant and the defendant was entered into under a mistake of law, namely, the defendant was the employer of the claimant by reason of paying the claimant’s wages on behalf of CGC.

9.  I will deal with the two grounds in turn.

The jurisdictionof the Labour Tribunal

10.  The jurisdiction of the Labour Tribunal is governed by section 7 and the Schedule of the Labour Tribunal Ordinance(“LTO”). Section 7(1) of the LTO provides that:

“The tribunal shall have jurisdiction to inquire into, hear and determine the claims specified in the Schedule”.

11.  Paragraph 1(a) of the Schedule to the LTO refers to:

“A claim for a sum of money which arises from –

(a)  the breach of a term, whether express or implied, of a contract of employment, whether for performance in Hong Kong or under a contract to which the Contracts for Employment Outside Hong Kong Ordinance (Cap 78) applies”.

12.  In Matheson PFC Limited v. Simon Jansen [1994] 2 HKC 250, the Court of Appeal held that the Labour Tribunal’s jurisdiction under paragraph 1(a) of the Schedule is limited to two specific types of employment: (i) a contract to be performed in Hong Kong, and (ii) an overseas contract that falls within the Contracts for Employment Outside Hong Kong Ordinance, cap.78.

13.  Section 4(1) of the Contracts for Employment Outside Hong Kong Ordinance provides that Cap 78 covers “contract of employment entered into in Hong Kong…, by which a person in Hong Kong enters or agrees to enter into the service of another who is not in Hong Kong and not carrying on business in Hong Kong, where the contract is to be performed, whether wholly or partially, outside Hong Kong”.

14.  There is no dispute that the claimant was the defendant’s employee from February 1993 to 31 March 1998.  As from 1 April 1998, the defendant’s case is that the claimant was employed by CGC until he resigned in September 2002.  It is not in dispute that CGC is incorporated in and carries on business in Cambodia.  Although the defendant and CGC are separate legal entities, they are related companies. Mr Nguy Sy Ty is both a director and shareholder of the defendant and a shareholder of CGC. It is also common ground that between 1998 and 2002, the claimant worked in Cambodia.

15.  At the first Tribunal hearing, Mr So informed the Tribunal that in about March or April 1998, as a result of an agreement between Mr Nguy and the claimant, the claimant became employed by CGC as its factory manager.  Mr Nguy Sy Ty also said in his affirmation filed in this leave application that it was on his recommendation that CGC decided to employ the claimant.  Given thatMr Nguy was then a shareholder in both companies andas the claimant was then working for the defendant in Hong Kong, prima facie and in the absence of evidence to the contrary, the claimant’s contract of employment was entered in Hong Kong.

16.  In the circumstances,even assuming that the defendant was not the claimant’s employer from 1998 to 2002, the claimant’s contract of employment with CGC was one entered into in Hong Kong by which he agreed to enter into the service of CGC, who is not incorporated in Hong Kong and not carrying on business in Hong Kong, and the contract was performed outside Hong Kong.  As such, it is an overseas contract that falls within the Contracts for Employment Outside Hong Kong Ordinance, over which the Tribunal has jurisdiction under paragraph 1(a) of the Schedule to the LTO.

17.  To the extent it is suggested that because CGC is a foreign corporation such that the Tribunal does not have jurisdiction over it, that is untenable.  The present claim is brought against the defendant and it had entered appearance in the proceedings.  Clearly, the Tribunal has jurisdiction over the defendant and also has jurisdiction to make an award binding upon the claimant and the defendant. Whether the Tribunal has jurisdiction over CGC is irrelevant to the present dispute between the claimant and the defendant. 

18.  The first proposed ground of appeal is therefore plainly unarguable.

Mistake of law

19.   The second proposed ground of appeal is that the settlement agreement was entered into under a mistake of law.  The mistake of law is said to be that by paying the wages of the claimant for CGC, the defendant was an employer within the meaning of the Employment Ordinance, cap.57.

20.  Previously, mistake of law is not a ground for re-opening an agreement. In the context of payments made under mistake of law, the law now recognizes a remedy to recover the payment: Kleinwort Benson Ltd v Lincoln City Council [1998] 4 All ER 513.  It is arguable in view of the House of Lords’ decision in Kleinwort Benson Ltd that a contract may be avoided on the ground of mistake of law: Chitty on Contracts (28^th edition) vol. 1 para.5-034.

21.  However, in the context of compromises and settlements, the position at common law and equity is that if, with a view to avoiding or terminating disputes, a compromise or family arrangement has been fairly entered into without concealment or imposition on either side, and with no suppression of what is true, the court will not disturb the arrangement, even though the parties may have greatly misunderstood the situation and mistaken their rights: Halsbury’s Laws of England (4^th edition Reissue) vol. 32 para.23.

22.  There is nothing in the materials before the court to suggest that the circumstances under which the defendant came to sign the Chinese agreement merit a departure from the general proposition set out above. There is nothing to show that the claimant knew the defendant was under some misapprehension of its legal position, or had in any way encouraged the defendant into so acting.

23.  Additionally, there must be considerable doubts on the defendant’s assertion that it was acting under a mistake of law.  Whatever may have been said by the Presiding Officer on the first hearing, it was some one and a half months before the second hearing. Any effect it might possibly have on the defendant would have been dispelled by the second hearing.  As to the second hearing, what was said by the Presiding Officer on who might be regarded as an employer under the Employment Ordinance was minimal.  More importantly, the question of whether the defendant was the claimant’s employer was clearly a matter of great concern to the defendant.  This is apparent from the statement of defence it put before the Tribunal.  It had also insisted on the claimant declaring in writing that he was employed by CGC and had further taken the trouble of seeking assistance from a firm of solicitors to draft the Letter setting outthe declarations. Indeed, the settlement did not come about until some hours after the parties attended before the Presiding Officer. The suggestion that the defendant in compromising with the claimant, was under the influence of what the Presiding Officers had said about the definition of employer has no credible basis.

24.  The second proposed ground is therefore not born out by the facts of the case.

Conclusion

25.  For the reasons mentioned above, the defendant’s intended appeal does not involve any arguable point of law or jurisdiction. Accordingly, the application for leave to appeal is dismissed.