THE QUEEN v. MOLESWORTH LIMITED

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

MAGISTRACY CRIMINAL APPEAL NO. 950 OF 1988

_______

-----------------------------------------

REASONS FOR JUDGMENT

-----------------------------------------

1. On the 20th August this year, the Appellant Messrs. Molesworth Limited was convicted in the Magistrates Court at Central on an information that on the 4th april 1987 being an employer in Hong Kong, it employed an employee there being in force in relation to such employee a policy of insurance issued by an insurer for the full amount of its liability under the Employees' Compensation Ordinance, Cap. 282, and independently of that Ordinance for any injury to such employee by accident arising out of and in the course of his employment contrary to section 40(l) and 40(2) of the Employees Compensation Ordinance, Cap 282.

2. It became clear during the course of the hearing that the person whom it was alleged was the employee concerned was a Mr CHAN Kwok-keung who gave evidence as PW1 for the Crown. He claimed to be employed by the Appellant as an assistant Kung Fu instructor and produced to the Court a document in Chinese characters, Exh. P3, entitled "Contract for Employee Paid on Film Basis", which is undated but which he said he signed before the 4th April. Also exhibited was a translation The contracting parties stated on this document are Party A Molesworth Limited and Party B Leung Shiu Hung Production Company (CHAN Kwok-keung). At the end of this document, below the printed words Party A Molesworth Limited under the heading "contracting parties" there appears a chop, purporting to be the chop of Molesworth Limited and there also appears an apparent signature of one Wu Suet-yuen above the words "authorised signature". Under Party B there appears a signature, and an address,which PW1 claimed to be his mother's address where he also lived. There also appears an identity card number purporting to be his. The document also bears what appears to be the chop of Leung Shiu Hung Production Company and there is another signature above the words "authorised signature'' Mr Chan could not remember when he signed this document but he did say that when he signed it the chops cadre not there. He testified that a number of named persons were present but with the exception of PW2 Lung Mau Hung none of these persons was called to give evidence and who or what they were remains something of a mystery. One thing that is certain is that apart from PW2, none of them is alleged to have signed any of the documents in this case. Mr Chan said he was introduced to the company by LEUNG Shiu-hung and added that LEUNG Shiu-hung and LUNG Mau-hung are the same person. Mr Chan said he was not present when the words setting out Party B were added to the contract. He claimed he had started working on the movie "Operation Angel" on the 14th or the 15th of March 1987 but he did not know the exact date. In cross-examination he denied that he was working for Leung Shiu Hung Production Company. He admitted that payments were made to him by LUNG Mau-hung.

3. Mr LUNG Mau-hung (PW2) gave evidence and testified that it was his signature under the chop of Leung Shiu Hung Production Company. However, like Mr Chan he also claimed to be employed by Molesworth Limited. He claimed to be present when the contract, Exh. P3, was signed but stated that although he knew Mr Chan was signing the contract, he did not see it. He admitted that the chop in respect of Party A was not placed on the contract on the same date that Mr Chan signed the contract. He claimed that his own signature was on the contract because there had been amendments to it. He testified that he only noticed the purported chop of Molesworth after the shooting of the film began. He admitted that it was possible to say under cross-examination that he himself was not under the employment of any one because he was the sole proprietor of a company. The Business Registration Certificate of Leung Shiu Hung Production Company showed him to be a free-lance director and martial-arts instructor.

4. During the course of the hearing the prosecutor sought leave to adduce in evidence two forms, Exh. P4 and P5 provided for under the Employees' Compensation Ordinance, each being a. "NOTICE BY EMPLOYER OF THE DEATH OF AN EMPLOYEE OR OF AN ACCIDENT TO AN EMPLOYEE RESULTING IN DEATH OR INCAPCITY". These two documents purport to be signed by CHOI Suk yin, Amy and both bear a circular chop purporting to be that of Molesworth Limited. In Exh. P4, she is stated to, have, signed as "manager" and the words sole proprietor "partner" and "officer" are deleted whilst in Exh. P5 she is stated to have signed as ''producer'' and the above four words have all been deleted. The first bears the date "11th April 1987" and the second "2nd June 1987". The employee named in the form in each case is Mr CHAN Kwok-keung accident is stated as having occurred on 4th April 1987 the nature of the injury is described as "spinal injury'' and the. description of how the accident happened on Exh. P4 is ''fallen down from a height", and on Exh. P5 is ''slipped and fell down from the podium of the 1/F during the arrangement of some positions''.

5. The admission of these two documents was strenuously contested at the trial on the grounds that they were not admissible under section 22 of the Evidence, Ordinance, Cap. 8, but fter hearing arguments and evidence the Learned Magistrate ruled that they were admissible in evidence as being an admission against the interest of the appellant made by their authorised agent Madam CHOI Suk-yin whose authority he inferred. He also accepted that they were admissible under section 22 of the Evidence Ordinance. It had been conceded that they were not ''public documents''.

6. Also admitted as Exh. P6 was a carbon copy of a letter purporting to be signed by Mr CHAN Chun-chow for the Commissioner of Labour dated the 24th March 1988 and addressed to ''the Manager, Molesworth Limited'', requesting information as to whether the necessary insurance policy existed in respect of Mr CHAN Kwok-keung. It also requested certified copies of the employee's record concerning Madam CHOI Suk-yin and another lady and information about them. It also requested certified copies of employment contract kept by Molesworth Limited in relation to Mr CHAN Kwok-keung and Mr LEUNG Mau-hung, PW1 and PW2. . There was no evidence to the effect this letter was ever posted or delivered to the defendant company or that a reply was received. Indeed the evidence was that no reply was, received.

7. A further document was admitted into evidence, Exh. P7, purporting to be a letter by Moloesworht Limited to PW1 signed by Theresa Wu above the words "authorised signature" stating that Mr CHAN Kwok-keung was covered by an insurance policy of HK$300,000 and that the company was pressing the insurance company to assess the amount of compensation. It also contains a statement that in the meantime the company had decidee, on a moral basis, to make certain payments to Mr CHAN Kwok-keung including a figure for salary.

8. In a reserved judgment delivered eight days after the hearing was over, the Learned Magistrate stated that he acepted that much of the evidence of PW1 and PW2 was confusing on the issue of salary and that he would not have been prepared to find an employee/employer relationship between PW1 and the defendant company without the supporting evidence contained in Exhs.P3, P4, P5 and P7.

9. Mr CHENG Huan, who appears for the appellant on the appeal, properly points out that the admission of these exhibits was essential to the Magistrate's decision to convict the defendant company.

10. His first ground of appeal attacks the Magistrate as having erred in law in admitting and/or in relying on the contents of Exhs. P3, P4, P5 and P7 for the reasons which are now set out.

11. So far as Exh. P3 is concerned, the complaint is :-

" i) there was no sufficient evidence that the person "Wu Suet-yuen'' mentioned in thesaid exhibit was an employee of the company;

ii) there was no sufficient evidence that the said person 'had authority to, act on behalf of the company;

iii) the contents of the said exhibit were clearly hearsay.''

12. In my view those grounds are clearly sustainable. It was essential for the prosecution to establish that the alleged contract of employment had been made or executed on behalf of the Appellant by an authorised agent. The Memorandum and Articles of Association of the Defendant company were not exhibited. There was no evidence that Mr Wu was an employee of the defendant company or that he had authority to execute documents under a chop of the defendant company,or that the chop on the document was indeed the chop of the defendant company.

13. Miss Evelyn Pau, for the Crown, could only rely upon the evidence of PW1 and PW2 to support the Crown's contention that this was a contract made between Mr CHAN Kwok-keung and the Appellant. Even the Magistrate was not satisfied that that was enough. Although shequotes no authorities, Miss Pau, for the Crown, suggests that the person who signed on behalf of the company had ostensible authority to do so.

14. The capacity of employees of companies to enter into transactions which would bind their companies is a question which ahs raised difficulaties in the past and given rise to apparently conflicting and inconsistent views being expressed in several cases. The law was clarified however by the judgment of the Court of Appeal in Freeman Lockyer (a firm) v. Buckhurst Park Properties (Mangal) Limited and Another (1964) 1 All E.R. p. 630 which was approved again by the Court of Appeal in Hely-Hutchinson v. Brayhead Limited & Anor (1967) 2 All E.R. 98 and more recently by the House of Lords in Armagas Ltd. v. Mundogas S.A. (H.L.(E)) (1986) W.L.R. 1063. Diplock L.J. in a most lucid judgment in the Freeman Lockyer case explained the law as follows:-

"To entitle a contractor to enforce against the company a contract entered into on behalf of the company by an agent who had no authority to do so, 4 conditions must be fulfilled viz (a) a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced must have been made to the contractor; (b) the representation must have been made by a person or persons who had 'actual' authority to manage the business of the company either generally or in respect of those matters to which the contract related; (c)the contractor must have been induced by the representation to enter into the contract; and (d) the company must not have been deprived under its Memorandum or Articles of Association, of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to the agent to enter into a contract of that kind.''

15. In my view those words reflect the position today in Hong Kong. The evidence in the present case came nowhere near establishing that Mr WU Suet-yuen had authority actual or ostensible to sing on behalf of the defendant company.

16. There is a report in the Hong Kong Law. Reports, Vol. 19 at P. 1 on the subject of the use of a firm chop. It is the case of CHAN Shau-nam v. The Wing Cheung Lung Firm. However, that authority can be distinguished from the present case because it was a civil case and it related to a firm had the chop had been placed on a document by the person-in-charge of a business with full powers of management and who had been entrusted with the chop.

17. That authority is of no assistance to the Crown in the present case where it had to be established beyond reasonable doubt that a limited liability company, had entered into a contract with the alleged employee PW1.

18. The grounds for contending that Exhs. P4 and P5 should not have been relied upon are as follows:-

" i) the learned magistrate failed to consider whether the contents of the exhibits were freely and voluntarily given;

ii) there was no sufficient basis for the learned magistrate to infer that Madam Choi was acting as the 'duly authorised agent or the agent of the Defendant company' (page 29);

iii) there was no sufficient basis for the learned magistrate to infer that the person PW5 spoke to (when he visited Molesworth Ltd.) was the same person who allegedly signed the said exhibits;

iv) there eras no sufficient evidence for the learned magistrate to conclude that 'all reasonable steps have been take to find Madam Choi' and therefore the learned magistrate erred in finding that Section 22(a) and(b) of the Evidence Ordinance were satisfied;

v) there was no sufficient evidence for the learned magistrate to conclude, that Madam Choi had personal knowledge of the employer/employee relationship between PW1 and the Defendant company (page 29).''

19. The Magistrate as I have said ruled both these documents to be admissible on two grounds: 1) that they constituted an admission against the interest of the defendant company and 2) under section 22 of the Evidence Ordinance, Cap. 8.

20. So far as his first ground is concerned he said:

"From the evidence of PW5 that he visited the office of Molesworth Ltd, at the same address as appears on both PP4 & PP5 and there spoke to a person who identified herself as Madam Choi Suk Yin I infer that this was the same person as signed on PP4 & PP5. From the evidence of PW4 of the telephone calls she made to Madam Choi Suk Yin concerning the submission of PP4 and the subsequent submission of PP5 I infer Madam Choi was acting as the duly authorised servant or agent of the Defendant company.

21. PW5, a Labour Inspector is recorded as testifying (omitting passages which the Magistrate disregarded as hearsay):-

"On 20.8.87 I went to the office of Molesworth Ltd. Flat 601-602, 8, Hysan Avenue, Hong Kong Bank Building, Causeway Bay. I saw a lady called Choi Suk Yin there........ I wrote a letter. dated 24.3.88 to Molesworth Ltd. I look at a carbon copy of that letter. I seek to produce it"

22. Despite objection the Magistrate ruled this carbon copy of a letter was admissible in evidence as Exhibit P6. The Magistrate then records the evidence as follows:-

"Q. Did you receive any' reply fromthe company?

A. No.

I telephoned to the company several times. I was not able to locate Madam Choi. I paid a visit to Molesworth Ltd and the premises were locked at 9.10 a.m. this morning.

XXD

Q. Who told you' to go there this morning?

A. P.W. 3.

I was alone.

Q. Recall when you made these calls?

A. Cannot remember exact dates.

Q. You never kept a written record of your contact with Madam Choi?

A. We have a file.

Just this morning you were told to give evidence

Court : I kept notes of my phone calls to Molesworth Ltd.

No re-examination.''

23. The evidence of PW4, an Assistant Labour Officer, (again omitting passages which the Magistrate ignored as hearsay), is recorded as follows:-

"I look at PP4 & PPS - I sec "Choi Suk Yin, Amy" on PP4 & PP5. (leading by consent).

Q. On 29.5.87 did you receive a phone call from Choi Suk Yin?

A. Yes.

......................

I received another phone call from Miss Choi at the end of August.

^{.....................}

No cross-examination.''

24. With respect to the magistrate it was not open to him to infer on this sort of evidence that the person the witness spoke to was the same person who signed the Exhibits. I agree with subground (iii).

25. With respect to the Magistrate it was not open to him on this sort of evidence to infer that Madam Choi was acting as the duly authorised servant or agent of the Defendant company, I agree with subground (ii) of the grounds of appeal. Neither was there sufficient evidence to bring the documents within the conditions prescribed in section. 22 of the Evidence Ordinance.

26. It is unnecessary for me to deal with subground (i).

27. So far as Exh. P7 is concerned, the ground of appeal is simply that the contents of the said exhibit were hearsay.

28. There was in the case of all these documents, upon which the Magistrate relied, no evidence to establish that the documents were the documents of the defendant company. There was no evidence that any of the persons who signed on the documents had actual or ostensible authority to sign on behalf of the company or that the 'chop' was the chop of the company.

29. But even if he was satisfied that these were the documents of the Defendant company, it is difficult to see how he could find that there was no policy of insurance as required in view of the terms of Exhs. P4, 5 and 7.

30. There being insufficient evidence to sustain the conviction I allowed the appeal and quashed the conviction.