YU HON TONG, THOMAS v. EAGLE STAR CONSULTANTS LTD

Small Claims Tribunal - jurisdiction over actions relating to contracts between Principal and Agent and within statutory monetary limit - Matters connected with disputes between employee and employer come under the exclusive purview of Labour Tribunal - Relationship is determined by the law and not by the label which the parties choose to put on the contract - Question of fact as to whether a contract is one for service or of service.

SMALL CLAIMS TRIBUNAL ORDINANCE

IN THE COURT OF APPEAL

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J U D G M E N T

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1. This is an appeal from a decision of a Small Claims Tribunal (S.C.T.).

2. Facts are fairly simple. By a contract dated 1/6/86 and a supplementary Agency Agreement of 9/6/86 the Appellant (Defendant in S.C.T.) was appointed as Consultant/Representative of the Respondent (Claimant in S.C.T.) under the Terms and Conditions contained in those documents. The relationship between the parties was of short duration and came to an end in November 1986. On 14/1/87 the Respondent brought an action in S.C.T. against the Appellant on a debt which resulted from the difference between its advances to and commission earned by the Appellant. Hearing was set down for 7/5/87 and, as the Appellant was absent on that day, judgment was given against him in the sum of $7,563.82. He later claimed, without supporting proof, to be ill on 7/5/87 and succeeded in having that judgment set aside. A new trial was thus held on 20/7/87 and on completion the Adjudicator ordered that his previous decision in Respondent's favour should stand. It is against that order that the Appellant now appeals.

3. The Appellant appeared in person and, with obvious knowledge of the law, advanced various grounds, factual and legal, in support of his case. Those grounds, wide and varied as they are, can conveniently be lumped into 3 groups: (1) the Adjudicator's bias, (2) want of jurisdiction by S.C.T. and (3) illegal money lcnding by the Respondent.

4. It is pertinent to mention at the outset that both sides were cognisant of the powers of the High Court under Section 29(2) of S.C.T. Ordinance, Cap. 338 which says:

"On an appeal under Section 28 (on any ground involving a question of law alone or on the ground that the claim was outside the jurisdiction of the Tribunal) the High Court may:

(a) draw any inference of fact; and

(b) make such order as to costs and expenses as it thinks fit, but may not

        (i) reverse or vary any determination made by the tribunal on questions of facts; or

        (ii)receive further avidence.

5. Relying on S. 29(2) b(ii) above, I hold that since the Appellant's point that advances made to him by the Respondent were in breach of the Money Lender Ordinance, Cap. 163 (Ground 3) was not raised at S.C.T., it is not allowed to be brought out in this appeal. Nevertheless, for the sake of argument I say that that submission falls in error because Respondent's case comes within the exempted provision of the relevant ordinance which says:

Section 3 - Part II and III shall not apply to ...., as respects a loan specified in Part 2 of the First Schedule, any person who makes such loan.

6. First Schedule, Part 2 - Exempted loans.

5 - A loan made by a company registered under the Companics Ordinance ...... whose ordinary business does not primarily or mainly involve the lending of money, in the ordinary course of business.

7. As regards the two remaining grounds, they are dealt with as follows:

8. Ground 1 - The Adjudicator's bias

9. The Appellant complained that the Adjudicator (a) refused to grant him permission to issue sub-poena on witnesses, (b) failed to supply him with a free copy of the Respondent's written statement to S.C.T. and (c) omitted to take into consideration his legal authorities. On these points I say that under (a) leave of the Adjudicator or indeed any presiding judge to a litigant to issue witness sub-poena is not normally required; under (b) payment should generally be made in accordance with the prevailing scale of fees to obtain copies of documents filed with a court or tribunal, and under (c) it is the Adjudicator's prerogative as to what legal points to consider before arriving at his decision. For these reasons I find that the Appellant's complaints against the Adjudicator are unfounded and reject them.

10. Ground 2 - Want of jurisdiction

11. It is known to all concerned that the Labour Tribunal has exclusive jurisdiction over labour disputes, i.e., those connected with employment or relationship between eaployce and employer. The governing provision is in Section 7 of Labour Tribunal Ordinance, Cap. 25 which reads:

"7. (1) The tribunal shall have jurisdiction to inquire into, hear and determine the claims specified in the Schedule.

(2) Save as is provided in this Ordinance, no claim within the jurisdiction of the tribunal shall be actionable in any court in Hong Kong."

The relevant Schedule says:

"1. 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 an overseas contract as defined in the Contracts for Overseas Employment Ordinance.

12. The Adjudicator's awareness of the jurisdiction of the two types of tribunal can be found in his Reasons for Decision. He said:

"This tribunal states right away that the claimant considers the advance financing was pursuant to any agency agreement whereas the defendant contented that the agreement was one of employment contract therefore not within the jurisdiction of this Tribunal but a matter for the Labour Tribunal. There has been argument whether the agreement was an agency agreement or whether it was an employment contract. The claimant said it was an agency contract but the defendant said it was an employment contract."

13. The Appellant contended that he was the Respondent's employee, so that the forum for the determination of the Respondent's claim in its capacity as his employer ought to have been the Labour Tribunal and the hearing at S.C.T. was therefore ultra vires. He cited the following grounds to substantiate his alleged employee/employer relationship with the Respondent:

1) REMUNERATION The Appellant claimed that he was in receipt of monthly salary of $3,500.00, which was subject to deduction for unsatisfactory sale performance or incompetence, such as the forfeiture of $1,000 from his pay of October 1986. As this topic and, indeed anything concerning monthly salary, was not mentioned in the court below, it is new evidence that cannot, as laid down in the aforesaid S. 29(2) of S.C.T., be introduced in an appeal. It is consequently disregarded.

14. On the question of financial arrangement between the parties the terms and conditions of the contract and the agency agreement contain these clauses:

                (a) Agreement - Section B: Advanced Commission - Financing

    1.     The Company may on the request of the Eagle Representative at its discretion make loans by way of advances against commission hereunder to the Eagle Representative at a maximum amount of HK$[ ] in any one calendar month ("Advances").

    5.     So long as any Advances are outstanding hereunder all commission to which the Eagle Representative may be entitled from the Company shall be retained and set off against the amount of such Advances.

     6.      Upon termination of this Agreement prior to the end of the Financing Period all outstanding Advances shall become immediately due and payable.

(b)    Contract - 1) Advance Commission or (Financing) Advance commission will be at the rate of HK$3,500.00 per month, subject to the monthly validation cuota of Basic Annualized Commission HK$7,000.00. During the period of receiving advance commission, all the commission produced from your business will be used to off-set that advance that has been paid to you. The above monthly Basic Annualized Commission is calculated according to First Year Annualized Commission on new Business only.

2) Annual Leave The leave entitlement is 2 weeks per year.

3) Working Hours The office hours are: 8:15 a.m. - 5:30 p.m. Mon. to Fri. 9:00 a.m. - 12:00 p.m. Saturday.

4) Termination of Agreement Fifteen days of notice for termination must be given either by you or Eagle Star Consultants Ltd.

c) Agency Agreement - Section A: Consideration 1. Subject to the Conditions hereinafter mentioned, the Eagle Reoresentative shall, during the term of his Agency Agreement, be entitled to receive as consideration for his services hereunder, commission calculated in accordance with the rates of commission applicable to each Policy and advised to the Eagle Representative by the Company on its published Schedules of Commission.

    Eagle Representative's commission balance shall be calculated at the end of each month and be payable to or recoverable from the Eagle Representative during the following month.

15. The Appellant said that the so-called "advance financing" made by the Respondent to him came within the definition of wages of the Employment Ordinance, Cap. 57 Section 2 which says:

"Wages means all remuneration, earnings, allowances, tips and service charges, however designated or calculated capable of being expressed in terms of money, payable to an employee in respect of work done or to be done under his contract of employment."

16. This point was not dealt with by the Adjudicator, apparently because he rejected the Appellant's contention of being the Respondent's employee. For my part, I fail to see how advances or loan made by the Respondent to the Appellant, in the absence of other evidence, can be said to lie within the ambit of wages as legally defined.

17. Following the termination of the agreement the Respondent prepared a statement of the Appellant's account (Exhibit C3 of S.C.T.) which is reproduced below:

Balance due to Eagle Star Consultants Ltd as at 28/2/87 is HK$7,563.82.

18. Mr. Pennicott, for Respondent, referred to the contents of the agency agreement, Section A, clause 3b that "upon termination, of this Agreement no further commission will be payable save as provided in sub-clauses (c), (d) and (e). (These sub-clauses are in respect of the death, retirement or ill-health of a representative) and explained that it was the Respondent's generous gesture to continue to credit the Appellant's account with commission for a few months subsequent to the severance of relationship between them in November 1986. On this aspect the Adjudicator said in his decision that:

    "It has not been disputed that the amount of money stated in Exhibit C3 was correct. .... From Exh. C3 one can see from June 86 to October 86 the claimant has made financial advancements to the defendant to the amount of $14,500.00. Commission earned by the defendant from August 86 to February 87 at various sums come to $6,936.18 and the balance in February 87 was $7,563.82 due to the claimant and this is the sum being claimed by the claimant .............. The crux of the matter is that the claimant has advanced sums of money to the defendant to enable him to set up his cwn business so that he could solicit business for the claimant."

2) CONTROL - The Appellant maintained that the Respondent exercised control over him in these areas:

a) under the contract: working hours and annual leave

b) under the agreement: prohibition on advertising, giving rebate, selling life assurance for other companies, assigning his rights etc.

c) other matters: fine of $10.00 for lateness to work and instruction to approach the wealthy and professional classes as potential clients.

19. The Appellant rounded off his submission by saying that the way and manner in which he performed his duties were restricted by the Respondent and, furthermore, since he had not taken out a Business Registration Certificate to denote that he carried on business of his own, his contract with the Respondent was one of service.

20. On this issue the Respondent relied on the Adjudicator's findings which are as follows:

"There was mention of working hours in the agreement. That only indicated the time during which the defendant can go to the claimant's office to make use of the facilities provided by the claimant for the defendant.

    The defendant may have entered into a friendly non legally binding agreement that whenever anyone turns up later than a certain hours for briefing he will have to pay $10.00 for tea or things of this nature but that is not binding in law and this Tribunal considers this to be a separate arrangement independent of the contract concerned. Again the provision of a desk and a phone for use by the defendant should not be taken that the defendant is a servant. The claimant is only interested in given results.

    No doubt there has been advice that it is not advisable to solicit business from hawkers and taxi drivers but that can only be taken as an advice. Furthermore office space in Hopewell Centre where the claimant's office situate is an expensive building and if dependant spent time to get business from person whose income is not good enough the claimant will eventually loss out. After all the claimant has given out money as advance commission and there is nothing for them to protect their own interest. From the tone of the case the claimant is interested in given results.

    Under Clause 18 the defendant is not allowed to assign any right or interest in the agreement without the written consent of the claimant. This I take it that it is necessary to protect the image of the claimant. So were clause 13 and clause 14.

    Then come to the issue of annual leave. The claimant said that he would allow the defendant 2 weeks leave per year. But the 2 weeks leave was without pay because there was no case of "pay" involved."

21. Points of law on (a) the criteria in support of a contract for service and one of service and (b) the legal authorities relating to the determination by the courts of a particular kind of contract from the conduct and/or intention of the parties can be found from:

22. 1) Halsbury's Laws of England, 3rd ed., Vol. 25 paragraph 87S which says:

        "In general the distinction between a contract of service and a contract for work and labour or for services is similar to that which exists between a contract of service and a contract of agency, namely, that in the case of a contract of service the master not only directs what work is to be done but also controls the manner of doing it, whereas, in the case of a contract for work and labour or a contract for services, the employer is entitled to direct what work is to be done, but not to control the manner of doing it."

2) Facchial v. Brycon (1952) 1 TLR 1386 in which Denning LJ, said in his judgment at p. 1386 that "the parties cannot by the mere words in their contract turn it into something else. Their relationship is determined by the law and not by the label which they choose to put on it" ("Commissioner of Customs and Excise v. Ports Finance (1952) 1 TLR 797). This ratio decidendi was followed in "Addiscombe Garden Estates Ltd. and another v. Crable and others" (1958) 1 Q.B. 513.

23. 3) "Wong Man Luen v. Hong Kong Wah Tung Stevedore Co." (1971) HKLR 390, where it was held, inter alia, that "control over the manner of performance of the work, although a matter for consideration, was not decisive, and the fundamental test in determining whether a person was performing services under a contract "of service" or "for services" was whether that person was performing the services as a person in business on his own account and thus under a contract for services. The status of being in business on one's own account implies the possibility not only of profit but also of loss."

24. The Respondent laid great emphasis on the privy Council's case of "Australian Futual Provident Society v. Allan and another" (1978) 52 ALJR p. 409 in which it was held that:

"Held: (1) On the true construction of the relevant provisions of the written agreement between the parties, C. was not an employee under a contract of service, but was in the position of an agent of the appellant. Although the parties could not, by fixing a label to their relationship, alter the truth of its real nature, nonetheless since there was no reason to think that cl. 3 of section I of the agreement which section bore the heading 'General Terms of Appointment as an A.M.P. Representative') provided: - 'The relationship between the Society and yourself is that of Principal and Agent and not that of Master and Servant was a sham, and the agreement involved some ambiguity, proper weight should be given to the terms of that clause. Nor, as was submitted on behalf of C., could any reliance in C.'s favour be placed on a clause in the agreement providing for the termination of his appointment, or on certain negative prohibitions in other clauses; these were equally consistent with the relationship being one of principal and agent.

25. Mr. Pennicott also stressed that the Adjudicator had decided on points of facts which, under s. 29(2) of S.C.T. Ordinance, could not be reversed or varied by the High Court. The concluding part of that decision reads:

"After looking at the evidence as a whole this Tribunal does not consider that this case is a case of contract of employment but a contract of agency. The Defendant fails to return the money which the Claimant lent him as advance commission. ...... judgment of 7/5/87 still stands....."

26. In my view, the appeal does not raise any general question of law. No doubt a number of decided cases was referred to in the course of argusent which I consider to be only as examples of facts that have been treated by the courts as indication for or against a contract of service. In my judgment the Adjudicator reached his conclusion after having resolved some ambiguities, such as those on working hours and annual leave, and after having asked himself whether on the whole of evidence a contract for service or of service existed. His judgment is clearly on questions of facts with which under the law, I cannot interfere. I would add that, from the evidence, there is no justification for me to draw an inference of fact contrary to the Adjudicator's views.

27. It has been said that if the relationship of the parties was ambiguous and capable of being either service or agency, then the ambiguity could be removed by the agreement which they made with each other. In the present case, support on this point can be found in clause 22 of the Agency Agreement which says.

"Nothing contained herein shall be construed to create the relationship of employer and employee ......between the company, Eagle Star and the Eagle Representative".

28. In the light of the foregoing I uphold the Adjudicator's decision and dismiss the appeal.