HANIN GARMENT MANUFACTORY LTD. v. LAU CHUN FAI and Others

1994 No. LTA 128

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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INTRODUCTION

1. On 25th May 1994, the 9 Claimants lodged various claims in the Labour Tribunal. They named two Defendants : Hanin Garment Manufactory Ltd. ("the Company") and Yeung Chun Kit. By his decision of 6th December 1994, the Presiding Officer decided that such claims as the Claimants had were against the Company. He therefore dismissed their claims against Mr. Yeung.

2. As for the Claimants' claims against the Company, the Presiding Officer dismissed their claims for wages in lieu of notice, but allowed their claims for severance payments, holiday pay and annual leave pay. The Company now appeals, with the leave of Deputy Judge Wong which was granted on 15th February 1995, against the Presiding Officer's finding that such claims as the Claimants had were against the Company. The Company has not served notice of today's hearing on Mr.Yeung, even though he will obviously be affected if the Company's appeal succeeds. If I had been minded to allow the Company's appeal, it would have been necessary for me to adjourn the hearing to enable Mr. Yeung to appear and be represented.

THE ISSUE ON THE COMPANY'S APPEAL

3. The liability to pay severance payments, holiday pay and annual leave pay to employees is on the employee's employer : see sections 31B(1), 40 and 41B of the Employment Ordinance (Cap. 57) ("the Ordinance"). Accordingly, the question which the Presiding Officer had to decide, in order to determine whether the Company or Mr. Yeung was liable for such claims, was whether the Company or Mr. Yeung was the employer of the Claimants within the meaning of the Ordinance. Section 2(1) of the Ordinance provides that the word "employer" means :

"any person who has entered into a contract of employment to employ any other person as an employee and the duly authorized agent, manager or factor of such first mentioned person."

Accordingly, it was necessary for the Presiding Officer to determine with whom the Claimants' contracts of employment were. If they were with the Company, the Company was their employer, though Mr. Yeung would have been their employer as well if he was the Company's authorized agent, manager or factor.

THE FACTS

4. The primary facts were not in dispute before the Presiding Officer. The Claimants all worked in the Company's ironing department. Mr. Yeung was the supervisor of the department. It was he who had interviewed and recruited the Claimants. None of the Claimants were given written contracts of employment. They were paid on piece rates. Mr. Yeung would inform the Company's clerk, Mr. Chui Wai Yung, of the quantity of garments ironed by each of the workers in the department, together with the piece rates for garments in those styles. Mr. Chui would then calculate the total sum payable for the garments ironed by the workers in the department, and that sum would be paid into Mr. Yeung's bank account. Mr. Yeung would then use that sum to pay each of the Claimants the amounts due to them.

5. In my judgment, those facts are equally consistent with two possible scenarios :

(i) The Company had sub-contracted the work of the ironing department to Mr. Yeung, leaving it to Mr. Yeung in his personal capacity to enter into contracts of employment with such workers as he recruited. On this scenario, the Claimants would have been employed by Mr. Yeung, whose remuneration from the Company would have been based in part on the cost of employing workers in the ironing department.

(ii) Whether the Company had sub-contracted the work of the ironing department to Mr. Yeung, or whether the Company had employed Mr. Yeung to work as the supervisor of its ironing department, the Company left it to Mr. Yeung to recruit such staff on the Company's behalf as he chose. On this scenario, the Claimants would have been employed by the Company : rather than dealing directly with the workers in the ironing department over the payment of their wages, the Company would be regarded as having authorized Mr. Yeung to pay their wages to them, and would have paid him a lump sum for that purpose.

THE IDENTITY OF THE CLAIMANTS' EMPLOYER

6. Which of those two scenarios is the correct one ? There is no doubt that the Company regarded Mr. Yeung as its sub-contractor. That was the effect of Mr. Chui's evidence, even though Mr. Yeung's case was that he was not the Company's sub-contractor, and was employed by the Company earning a salary of about $10,000.00 a month. But whether a worker is employed or self-employed does not depend on the label he is assigned or the belief of the parties. In any event, whether Mr. Yeung was the Company's sub-contractor or employee, although relevant, does not, in my view, go to the heart of the case. The true issue is whether Mr. Yeung entered into the contracts of employment with the Claimants on his own account or on behalf of the Company.

7. In deciding that issue, I do not see how the Presiding Officer can be criticised for asking himself the practical question : who were the Claimants actually working for ? There was, in truth, only one answer to that question. Since they were working in the Company's business at the Company's factory (the costs of the running of which were paid for by the Company) and ironing the Company's garments, it looks strongly as if it was the Company for whom the Claimants were actually working. It would be very odd indeed if Mr. Yeung could properly have been described as being in business on his own account. Once Mr. Yeung is seen, as in my view he must on the primary facts, as the Company's employee, then he can only have been acting on behalf of the Company when he recruited the Claimants.

8. There were four other pieces of evidence which, in my view, point to the Company as having been the employer of the Claimants. The first two of them were relied on by the Presiding Officer in his decision :

(i) The Company admitted in its Defence that it had assisted Mr. Yeung in the "retrenchment" of the Claimants by paying a sum for each of the Claimants as their severance payments.

(ii) Included in the sum paid by the Company into Mr. Yeung's bank account was an amount to enable Mr. Yeung to pay for the workers' holiday pay. As the Presiding Officer said in his decision, why would the Company pay these amounts "for people who were the employees of someone else" ?

(iii) The evidence of Mr. Chui was that the premiums for Employees' Compensation insurance were paid by the Company for all the workers who worked on its premises.

(iv) Mr. Yeung's case, which the Company did not dispute, was that Mr. Yeung was told by the manager of the factory that he was to retain only 6 workers in the ironing department. That, no doubt, was why the 9 Claimants were dismissed. The fact that the 9 workers in the ironing department were dismissed on the instructions of the Company is, in my view, another strong indication that it was the Company who was their employer.

9. I note that the Presiding Officer relied on the principle of the law of agency which he regarded as providing that where there is a disclosed principal, it is the principal and not his agent who is liable to be sued. If the Presiding Officer relied upon that principle for determining who the Claimants' employer was, he was wrong. He would, by relying on that principle, have been begging the very question which he had to decide, namely, whether the relationship of principal and agent applied at all when Mr. Yeung recruited the Claimants. However, for the reasons I have given, on the undisputed primary facts, the Presiding Officer was undoubtedly correct to find that the Claimants had been employed by the Company. For that reason, the Company's appeal must be dismissed.

THE CLAIMANTS' CROSS-APPEAL

10. When Deputy Judge Wong heard the Company's ex parte application for leave to appeal on 15th February, there had been no application for leave to appeal by any of the Claimants in respect of such conclusions as the Presiding Officer reached which were adverse to them. Despite that, and even though the Claimants were not present on 15th February, Deputy Judge Wong purported to give the Claimants leave to cross-appeal against the dismissal by the Presiding Officer of their claims for wages in lieu of notice on the basis that the Claimants had been entitled, contrary to the view of the Presiding Officer, to more than 7 days' notice of their dismissal.

11. I do not know where Deputy Judge Wong thought that he derived the power to do that. Rule 8A(2) of the Labour Tribunal (General Rules) provides :

"At the hearing of an application for leave to appeal, the High Court may with the consent of the applicant alter any ground of appeal, or insert any new ground of appeal, in the application for leave to appeal."

If that was the rule under which Deputy Judge Wong purported to act, he was not entitled to do so, because that rule clearly deals only with the grounds of appeal of an applicant who is applying for leave. The Claimants were not applying for leave. Nor was Deputy Judge Wong entitled to grant the Claimants leave to cross-appeal under section 32(1) of the Labour Tribunal Ordinance (Cap. 25), which provides, so far as is material :

"If any party is dissatisfied with an award ...... by the tribunal ...... , such party may, within 7 days after the date on which the award ...... was served on him, or within such extended time as may be allowed by the Registrar of the Supreme Court on good cause, apply to the High Court for leave to appeal and the High Court may grant such leave."

The Claimants did not claim to be dissatisfied with the award, nor did they apply to the High Court for leave to appeal. Since the grant of leave to cross-appeal was made ex parte, the Court now has power, under Ord. 32 r. 6 of the Rules of the Supreme Court, to set it aside. In my judgment, I have no option but to set it aside in view of my conclusion that Deputy Judge Wong had no power to grant it. Mr. Paul Wu, who represents five of the Claimants, does not disagree.

12. However, the Claimants have told me today that they are dissatisfied with the finding of the Presiding Officer that they were not entitled to more than 7 days' notice of their dismissal, which was the finding which caused the Presiding Officer to dismiss their claims for wages in lieu of notice. They now seek leave to cross-appeal against that finding. They are out of time, and only the Registrar has power to extend their time. However, the matter can be remedied in this way. The Claimants can undertake to apply (a) for leave to cross-appeal in the prescribed form, and (b) to apply, no doubt when a transcript of this judgment becomes available, to the Registrar for an extension of time to do so. Although the decision is to be that of the Registrar, it is unlikely, in my view, that that application for an extension will be refused. The Claimants were not immediately represented following the conclusion of the proceedings in the Labour Tribunal; Deputy Judge Wong thought that it was arguable that the Presiding Officer had erred in law on the issue as to the length of their notice entitlement; and I discern no prejudice to the Company if an extention of time is granted. That is because there will be no need for further argument on the issue of notice, since the Company has been able to deploy before me today all the arguments on which it relies on the issue. On the assumption, therefore, that an extension of time is granted, the Claimants can then apply to me for leave to cross-appeal. I would be prepared to grant such leave. Having heard full argument on the cross-appeal today, I propose to set out in this judgment what I would have decided, assuming that the Claimants had not been faced with the technical difficulties to which I have referred. That is the course I adopted in Parfitt v. Hopewell Construction Co. Ltd. (SCTA 5/93), in which the leave to appeal which had purportedly been granted had also been of no effect.

13. The Presiding Officer's conclusion that the Claimants had not been entitled to more than 7 days' notice of the termination of their employment was based on his finding that it was common practice for those employed on piece-rated employment not to be entitled to greater notice than that. There was no evidence before the Tribunal as to what the common practice was, and I assume, therefore, that the Presiding Officer was relying on his own knowledge of the practice in Hong Kong.

14. However, even if the practice was what the Presiding Officer thought it was, I do not think that the Presiding Officer was entitled in law to give effect to his belief as to what the practice was. Section 5(1) of the Ordinance provides :

"Every contract of employment, which is a continuous contract, shall, in the absence of any express agreement to the contrary, be deemed to be a contract for 1 month renewable from month to month."

The Claimants' contracts were continuous contracts. That is because they continued uninterrupted for an indefinite period until terminated by notice. Since their contracts were not subject to an express agreement to the contrary, they were deemed to be contracts for one month renewable from month to month. Section 6(2)(a) of the Ordinance provides that the length of notice required to terminate such contracts, provided that they do not make provision for the length of notice required to terminate them, should not be less than one month. Since the Claimants' contracts did not make provision for the length of notice required to terminate them, their contracts could not be terminated by notice of less than one month. These statutory provisions take precedence over any industrial practice relating to piece-rated employment. If authority was required for that self-evident proposition, it is to be found in the decisions of the District Court in Wong Chi Bun v. Lam Fat Hang [1968] D.C.L.R. 14 and Mak Ping v. New Style Knitting Factory Ltd. [1968] D.C.L.R. 50.

15. For these reasons, I would have allowed the Claimants' cross-appeals, and I would have remitted the case back to the Presiding Officer for him to decide what sums are due to the Claimants as wages in lieu of notice, were if not for the technical difficulties to which I have referred. As it is, the fact that I have set aside Deputy Judge Wong's order granting the Claimants leave to cross-appeal prevents me from making such orders today. The formal order which I therefore make is that the Claimants' cross-appeal be adjourned to a date to be fixed, pending the lodging of an application for leave to cross-appeal in the prescribed form, and an application by the Claimants to the Registrar for leave to extend their time for cross-appealing. I reserve to myself the hearing of any subsequent application for leave to cross-appeal, and the hearing of the cross-appeal itself if that leave is granted. If the Registrar extends the time, both the application for leave to cross-appeal, and the hearing of the cross-appeal itself if leave is granted, can be listed together for hearing at 9:30 one morning, with a time estimate of 15 minutes.