HKSAR v. CHING YEUNG DEVELOPMENT CO LTD

[English Translation – 英譯本]
HCMA 806/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. 806 OF 2002

(ON APPEAL FROM KTS NOS. 5021-5026 OF 2002)

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JUDGMENT

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1. The Appellant company was convicted after trial on six counts of failing to pay wages on time, contrary to sections 23 and 63C of the Employment Ordinance, Cap. 57, Laws of Hong Kong. It now appeals against conviction.

The statutory provisions

2. The relevant statutory provisions are reproduced below:

Section 23:

“Wages shall become due on the expiry of the last day of the wage period and shall be paid as soon as is practicable but in any case not later than 7 days thereafter.”

Section 63C:

“Any employer who wilfully and without reasonable excuse contravenes section 23, 24 or 25 commits an offence and is liable to a fine of $200,000 and to imprisonment for 1 year.”

Background

3. The present case involves three complainants, each of whom have not been punctually paid his wages in respect of two periods, namely for the whole of August 2001 and from 1 to 5 September 2001. Hence the total of six charges against the Appellant.

4. The circumstances surrounding the complainants not having been paid wages punctually are as follows.

5. First, the Appellant is a limited company which publishes newspapers and magazines. These publications are sold by the Appellant’s distributor, and unsold publications are taken back by the Appellant which will also make the relevant refund. The abovementioned three complainants were drivers employed by the Appellant on a monthly basis, and one of their duties was to deliver the publications which were taken back by the Appellant. In June 2001, suspecting that some of its employees, including the three complainants, were stealing magazines taken back from retailers, the Appellant conducted its own investigations. On 5 September 2001, the Appellant reported the matter to the police, suspended the three complainants’ duties and stopped paying them wages for the two periods as specified in the charges. After one week, the three complainants went to the Labour Department for assistance, and a mediation meeting was arranged for them and the Appellant on 16 October 2001. At the meeting, upon recommendation by the Labour Department, the Appellant agreed to pay the outstanding wages to the complainants. Payment was duly made on 24 October 2001. On 19 April 2002, the Labour Department issued a summons against the Appellant in respect of the above matter.

The trial

6. The facts stated above were not disputed by the parties and were admitted as evidence by virtue of section 65C of the Criminal Procedure Ordinance, Cap. 221, Laws of Hong Kong.

7. This notwithstanding, all the three complainants did testify at trial. They asserted their innocence and two of them further insisted that the admissions submitted by the Appellant were made by them against their wishes. However, as the magistrate pointed out in his verdict, the key issue of the present case was not whether the complainants had in fact committed theft. On the contrary, as the Appellant withheld the complainants’ wages by reason of its suspicion that they had committed theft, the Appellant had to prove that the non-payment of wages was neither “wilful” nor “without reasonable excuse”.

8. In this respect, I notice that the Appellant did not call any witness at trial. It relied on a record of hearing that had been agreed by the parties. The hearing was conducted pursuant to section 64(2) of the Employment Ordinance to enable the Labour Department to hear the Appellant’s explanation on the matter before deciding whether to prosecute the Appellant. It appears from the record that the Appellant withheld the complainants’ wages solely because it wanted to set off those amounts against the value of the stolen property; otherwise mention would not have been made of “the need to ascertain actual loss”.[1]

9. In any event, the magistrate concluded that the Appellant’s act was “wilful” and “without reasonable excuse”. The magistrate said:

The making of deductions by an employer from his employee’s wages is subject to the restrictions under section 32. It is wholly unreasonable to say that, in the present circumstances, the employer could withhold the wages in whole or in part.

The magistrate explained the relevance of section 32 as follows:

Section 32(1) of the Employment Ordinance, which concerns restrictions on deductions from wages, provides that no deductions shall be made by an employer from the wages of his employee or from any other sum due to the employee otherwise than in accordance with the Ordinance.

Unlike section 9 or 10, section 32 of the Employment Ordinance does not provide for the preservation of an employer’s common law right to make deductions from his employee’s wages. Only section 32(2)(h) allows the employer to make deductions from his employee’s wages pursuant to any enactment. It can therefore be seen that an employer cannot make any deduction from his employee’s wages otherwise than in accordance with section 32.

I understand that making a deduction from wages is conceptually different from withholding wages. However, section 32 shows that an employer’s right to make deductions from his employee’s wages is considerably circumscribed. I harbour doubts about the employer’s ability to withhold his employee’s wages. The Employment Ordinance contains no provisions allowing the employer to withhold wages. On the contrary, section 23 requires an employer to pay wages as soon as is practicable and in any event not later than 7 days after the wages become due.

The present appeal

10. The Appellant raises a few grounds of appeal, one of which is that the magistrate failed to take into account that the Appellant had never acted in contravention of the Employment Ordinance, in other words, the magistrate failed to give the Appellant credit for what was equivalent to a defendant’s good character. However, as the prosecution has pointed out in its skeleton reply, the Appellant’s good record was something with which the parties had agreed and which had been confirmed in writing, and defence counsel had re-emphasized that point in his closing submissions. Therefore, the fact that a professional magistrate who tried the case alone made no mention of that point in his verdict does not necessarily mean that he had neglected that point altogether. This is the principle established in the case of Fok Tin Yau [1995] 2 HKC 450 (at 455 B-C) to which the prosecution has referred.

11. Furthermore, once the magistrate accepted that the Appellant stopped paying the three complainants because it suspected that they had committed theft, the factual basis of the present case was firmly established, and whether the Appellant’s act was “wilful” and “without reasonable excuse” would depend solely on the proper interpretation and application of the Ordinance, and in this connection the Appellant’s good record or otherwise would be of little relevance. It follows that this ground of appeal must fail.

12. As a matter of fact, the Appellant does not deny that it has “wilfully” stopped paying wages to the complainants. What the Appellant takes issue with was the magistrate’s interpretation of the term “without reasonable excuse”. The Appellant submits that the term has not been formally defined in any statute or case law in Hong Kong, and therefore should be interpreted in a “liberal” manner and in accordance with its “general and ordinary meaning”, which of course includes the Appellant’s subjective standard. The Appellant also contends that the magistrate took into account irrelevant considerations by wrongly applying section 32 of the Employment Ordinance and confusing it with section 23.

13. With respect, I cannot accept the above ground of appeal and related arguments. As the prosecution has pointed out, the long title of the Employment Ordinance makes it clear that the objective of the Ordinance is “[t]o provide for the protection of the wages of employees”, and it is in this context that the provisions of the Ordinance are to be interpreted. The prosecution has referred to the case of Williams v North’s Navigation Collieries [1906] AC 136. Although that case concerned a different statute, the judgment did incisively state the general legislative intent of labour law: “The whole principle upon which this legislation is based is that the workman requires protection, that if not protected he may be overreached” (at 146, line 5).

14. In particular, it has to be pointed out that, given this legislative intent, matters such as the scale of the employer and the vulnerability to losses caused by employees are not factors to be considered in applying the Ordinance. There is nothing to support the Appellant’s contention on appeal that the Ordinance is directed against unscrupulous small-scale businesses. In fact, a large-scale employer may mean a reduction in its employees’ bargaining power, but this is not necessarily the case. Therefore, the scale of the employer cannot be used as a dividing line.

15. The Appellant also mentions that the law cannot just offer protection to the employee and completely neglect the employer’s interest. While I agree with this, I do not think that the relevant legislation can be interpreted from this perspective. In a word, where an employer has incurred loss, he is entitled to seek redress through other legal means, but he cannot turn a blind eye to the provisions of the Employment Ordinance, still less attempt to resolve problems by unilaterally taking the law in his own hands. To quote from the relevant passage in Williams v North’s Navigation Collieries (see above):

“The whole principle upon which this legislation is based is that the workman requires protection, that if not protected he may be over reached; and it is quite consistent with that principle to hold that in any such action brought by him to discover his wages, he may be liable to have the sum found on investigation before the legal tribunal to be due to him by his master diminished by the sum found by the same tribunal on the same occasion to be due by him to his master, and yet at the same time prohibited the master from as it were, substituting himself for the legal tribunal, investigating his own claim against the workman in his own office and deciding in his own favour.

16. As to whether an employee’s subjective understanding of the matter can constitute a “reasonable excuse”, my answer is in the negative, because otherwise it would mean that, no matter how oppressive an employer’s act might be, he would fall outside the purview of the Ordinance as long as he genuinely thought that his act was reasonable. The factual circumstances of course differ from case to case, but the test for determining reasonableness can only be an objective test.

17. In fact, the cases to which the Appellant has referred point quite clearly to an objective test. For example, in Roles v Pascall & Sons [1911] 1 KB 982, Buckley LJ said:

“To my mind ‘reasonable cause’ means some cause to which, as between master and servant, regard may reasonably be paid.

An even clearer statement can be found in the Australian case of Pascoe v The Nominal Defendant (Queensland) (No. 2) [1964] QD 373 per Mansfield CJ. The statement, which was cited in a Hong Kong labour case (DCEC 784/1998), runs as follows:

“Reasonable excuse meant a cause which a reasonable man would regard as an excuse, a cause consistent with a reasonable standard of conduct …

Of course, as pointed out above, this objective standard has to be in line with the legislative intent of the general labour statute, otherwise the statute may lose the effect that it should have.

18. Regarding the magistrate’s reference to section 32 of the Employment Ordinance, I am of the view that the magistrate was merely analyzing the legislative framework of the Employment Ordinance and trying to point out that the Ordinance imposed stringent restrictions, that the rights to be preserved by any enactment or the common law would be expressly provided for (examples being sections 9, 10 and 32(2)(h)), and that all other rights not so provided for should be regarded as having been displaced by the Ordinance. Such an analysis is apparent from the above-cited extracts from his verdict, and I respectfully adopt the analysis.

19. Finally, the prosecution submits that, if an employer refuses to pay wages to an employee because it intends to set off the amount of wages against certain claims that it may have against the employee, then the “withholding” of wages is tantamount to a “deduction” of wages, and such deduction is unlawful unless made in accordance with section 32 of the Employment Ordinance. Therefore, the withholding of wages cannot possibly constitute a “reasonable excuse” under section 63C.

20. This argument is in my view compelling. The prosecution has cited the case of Dalaney v Staples [1991] ICR 331. Although that case concerned the interpretation of a statute in England, the principles established in that case are on all fours with the prosecution’s submission.

21. However, although the record of hearing obtained pursuant to section 64(2) of the Employment Ordinance (see above) clearly indicates that Appellant’s intention of set-off, the magistrate did not make the necessary findings of fact in this regard and instead merely made a general statement that the cessation of payment of wages was related to the alleged theft by the complainants. I shall refrain from making a ruling on this point, otherwise it will go beyond the factual basis of the present case.

Conclusion

22. The Appellant’s appeal against the six offences is dismissed.