HKSAR v. IT & T Careers (HK) Ltd.

HCMA 275/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. 275 OF 2001

(ON APPEAL FROM ESCC 16236 & 16237 of 2000)

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J U D G M E N T

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1. On 23 February 2001 the appellant company was convicted after trial of two charges under sections 57(a) and 60(7) of the Employment Ordinance, Cap 57, of receiving from two job applicants payments other than commission prescribed under Regulation 10(2) and the Second Schedule of the Employment Agency Regulations, Cap 57. They now appeal against those convictions.

2. The facts are set out in the admitted facts submitted to the magistrate under section 65C of the Criminal Procedure Ordinance, Cap 221, and no further evidence was called by either the prosecution or defence. Those facts may be stated as follows.

3. The appellant was formerly known as Country Rise International Ltd and at the material times carried on business as an employment agency known as CountryTECH Recruitment in Gloucester Road, Causeway Bay, interviewing and recruiting job seekers and placing them with client employers. No fee or commission was charged to the job seekers, the client employers being charged commission according to the contractual arrangements between them and the appellant, which varied from client to client.

4. The appellant was approached by a Mr Keith Yam Wan and a Mr Henry Fu Wai-huen in March and April this year respectively with a view to obtaining employment, and on 29 March Mr Yam secured a job through the agency with Lee Kum Kee Ltd, to commence on 2 May with a monthly salary of $27,000.00. He started work with Lee Kum Kee as agreed but resigned on 17 May, having earned a total of $11,379.10. The same day that he obtained the job, 29 March, he signed an agreement with the appellant to the effect that, if he did not remain in the employment for at least 6 months, he would indemnify the appellant by paying them one month's salary. Following his resignation, the appellant demanded payment, and he paid them the sum of $27,000.00.

5. On 20 April, Mr Fu, through the agency, secured a job with New World Telephone Ltd. He was to commence work on 22 April with a monthly salary of $15,000.00, but was persuaded by his existing employer to remain with him and did not report for duty with New World. He informed the agency of this on 25 April. He too had signed an agreement with the appellant, on 19 April, to the effect that, if he were to remain at New World for less than 3 months, he would indemnify the appellant by paying two months' salary. The appellant demanded, and was paid by Mr Fu, the sum of $30,000.00.

6. In both cases the appellant had an agreement with the client employers which included a guarantee to the effect that if the employment is terminated within a period of 90 days they would provide a replacement free of charge, and, if they failed to do so, would credit the client with a percentage of the fee on a sliding scale, from 70% for termination within 30 days, to 30% within 90 days. In respect of Lee Kum Kee, a replacement was found for Mr Yam, and the full fee paid by the client. However, no replacement was provided for Mr Fu at New World and, although an invoice for the fee was sent to the client, no payment was made and the appellant did not pursue it.

7. It is the case of the prosecution that, by receiving the sums paid by Mr Yam and Mr Fu, the appellant was in contravention of section 57(a) of the Employment Ordinance, which reads as follows:

"A licensee shall not, directly or indirectly?

(a) receive from any person on account of having obtained, or in connection with obtaining or seeking to obtain, employment for that person?

(i) any reward of any kind; or

(ii) any payment or other advantage in respect of expenses or otherwise, except the prescribed commission;"

The commission prescribed under the Employment Agency Regulations and the schedule thereto is a maximum of 10% of the first month's salary.

8. The only issue here is whether the sums paid by Mr Yam and Mr Fu can be held to be paid in connection with obtaining employment. It is the case for the appellant that the payments were not in connection with obtaining the employment, for if they had remained in the employment nothing was payable at all, but only in connection with their leaving it. In short, Mr Wong for the appellant says there is no nexus between obtaining the employment and the payment of the money. He submits that the obtaining of the employment has been concluded, and nothing is payable in connection with that, and that the payments here are solely under the separate agreement to compensate the appellant in the event that the applicants do not complete a sufficient length of service with the employers to enable the appellant to collect their full fee. In the case of Mr Yam they might have collected very much more, as his obligation under the agreement was to serve at least 6 months, while the appellant's guarantee to the employer was only 90 days, with the result that, if he had left after, say, 4 months, they would be entitled to his payment as well as their full fee.

9. Mr Wong supports his contention with a number of authorities which have sought to define the meaning of "in connection with". I tend to agree with Mr Tso, for the respondent, that these are only of limited value as they depend not only on their own facts, but on the wording and intention of the statute under consideration. The first of these was Strong & Co. v. Woodifield [1906] AC 448, where the matter under consideration was whether damages paid as a result of an accident to a customer at an inn could, for tax purposes, be deducted as an expense "connected with or arising out of" the trade or business. In deciding this issue, Lord Loreburn LC said, at page 452:

"I think only such losses can be deducted as are connected with in the sense that they are really incidental to the trade itself. They cannot be deducted if they are mainly incidental to some other vocation or fall on the trader in some character other than that of trader. The nature of the trade is to be considered."

10. I have also been referred to the case of North West Traffic Area Licensing Authority v. Post Office [1982] RTR 304, where the question was whether telegraph poles carried by a vehicle equipped with machinery for boring holes for the later erection of the poles, were "required for use in connection with the machine .....". Woolf J, as he then was, came to the conclusion that the poles were not in connection with the use of the machine, but with the operation on which the machine was going to be used. The use of the machine being the first step in the operation, once that was completed, the poles came into the second step.

11. Mr Wong says that a similar situation arises here, that the obtaining of the employment is the first step, and that had been completed before the payments were made. They cannot therefore be in connection with the obtaining the employment.

12. I regret that I find this argument fallacious for two reasons. For the first it is necessary to look at the purpose of the agreements themselves. The sole purpose is clearly to ensure that, should circumstances arise that the employment does not last for a period long enough to enable the appellant to collect their full fee from the employer client, they will be reimbursed by the employee, and will accordingly be paid for the service they have provided in obtaining that employment, come what may. I find it impossible to say that such payment is not therefore in connection with obtaining the employment. To find otherwise would be to do a disservice to the English language and the ordinary meaning of the words.

13. Secondly, the payments were made under the provisions of the agreement, and accordingly directly connected with it. The agreement in turn was made in connection with obtaining the employment. The wording of it makes this clear. It nowhere states that employment has already been obtained and this is a separate agreement, quite the contrary. In the first line it reads:

"We are pleased to notify you that you have the chance to be employed by our client..." (my italics)

And later:

"Therefore, in the event that you take the job offer from our client...." (my italics)

14. It is clear from this that the first stage has not been completed and the agreement cannot be otherwise than in connection with the obtaining of the employment, and cannot be divorced from it as something separate and apart. It accordingly follows that there is a clear nexus between the payment and the obtaining employment by the appellant. Their business is obtaining employment for applicants for fees paid by the employers. In considering the nature of the trade, as Woolf J had to in Strong & Co. above, the requirement of entering into the agreement was very much part of that trade, as it ensured that they would receive payment for the work done by them in their trade.

15. I do not therefore find any merit in the appellant's argument that these payments were made otherwise than in respect of obtaining employment for Mr Yam and Mr Fu, and their receipt of them is clearly in breach of section 57(a) of the ordinance.

16. To find otherwise would in any event be contrary to the clear intention of the ordinance, which is to protect those seeking employment through agencies from being made to pay excessive fees or commissions, under whatever guise, for the services of those agencies, as those seeking such services are frequently in a weaker bargaining position than might otherwise be the case. What the appellant has sought to do here is to protect their own position at the expense of the applicants, by a device which attempts to circumvent the provisions of the ordinance, but, I find, fails to do so.

17. The appeal will accordingly be dismissed.