LEUNG SUK FONG PEGGY v. THE PRUDENTIAL ASSURANCE CO LTD

HCME11/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MINOR EMPLOYMENT CLAIMS ADJUDICATION BOARD

APPEAL NO. 11 OF 2010

(ON APPEAL FROM MINOR EMPLOYMENT CLAIMS

ADJUDICATION BOARD CLAIM NO. 0616 OF 2010(A))

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J U D G M E N T

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INTRODUCTION

1.  In a case decided in the 1970s, the English Court of Appeal accepted that in the world of insurance, “it is very common indeed to have freelance agents”[1]. Locally, the trade practice appears to be the same[2]. But the issue as to whether an insurance agent engaged by an insurer is its employee and hence the correctness of the industry’s view of the relationship is seldom tested in courts.  Mr Yu, SC, for the defendant in this appeal, is only able to cite three unreported cases where the courts had dealt with the issue very briefly.  They all answered the issue in the negative[3]. Mr Yu however readily accepted that those findings were made without much analysis because, unlike what transpires here, there was no frontal attack on the nature of the parties’ relationship.  This appeal therefore appears to be the first opportunity for the court to examine the issue more closely.  It arose in this way.

2.  The defendant is an insurance company.  The claimant was one of its agents.  She was so engaged pursuant to an agreement dated 5 June 2008, which took effect on 1 June 2008 (“the Agreement”).  The Agreement was terminated by the defendant with effect from 3 April 2010.

3.  Clause 2.6 of the Agreement expressly stipulated that :

“It is hereby expressly agreed and understood that nothing under this Agency Agreement or any other agreement, rule, regulation or terms of service is intended or intended to be construed as being capable of giving rise to an employment contract or contract of service.”

4.  Notwithstanding Clause 2.6, the claimant lodged the present claim with the Minor Employment Claims Adjudication Board (“the Board”) for arrears of wages, statutory holiday pay and annual leave pay totaling HK$3,068.40 on the basis that she was an employee.  After trial, the Board found that she was not and dismissed her claim.  The Board gave full reasons for its decision on 12 November 2010.

5.  On 23 February 2011, I granted the claimant leave to appeal.

WHEN CAN AN APPELLATE COURT INTERFERE?

6.  Given the small monetary value of the claims[4], the parties in most of the appeals from the Board, like the claimant herein, act in person.  My own experience in dealing with these appeals leaves me with the impression that parties acting in person do not always understand the nature of the appeal or appreciate the limitations the court has in hearing it.  I will therefore take this opportunity to say a few words about the circumstances in which an appellate court can interfere with a decision of the Board.  Potential appellants who act in person should pay need to what I am going to say before deciding to bring an appeal[5].

7.  A great majority of the parties acting in person appeal because, upon a careful analysis of their complaints, they are dissatisfied with the findings of facts made by the Board.  Occasionally, they seek to adduce further evidence which for some reasons was not made available before the Board.  They invariably ask the court to review or re-evaluate the evidence in its entirety or partially and come to a finding favourable to them.  However, that is simply impermissible for two reasons.

8.  First, the court can only entertain an appeal if it involves a question of law alone : see section 31(1)(a) of the Minor Employment Claims Adjudication Board Ordinance[6]. Findings of fact do not involve any question of law.  Nor, as seen below, will they normally give rise to any error of law.

9.  Second, the court may not reverse or vary any determination made by the Board on questions of fact or receive further evidence : see section 32(2).

10.  Exceptionally, a finding of fact by the Board may give rise to an error of law with which an appellate court is entitled to interfere, when it can be shown that the Board had either (a) misdirected itself in law or (b) come to a decision which no tribunal, properly directed on the relevant facts, could reasonably have reached : Edwards (Inspector of Taxes) v Bairstow & Another [1956] AC 14, per Viscount Simonds at p.29.  When an attack is based on ground (b), the court will act with extreme caution.  The court cannot substitute its own conclusions as to the effect of the evidence for those of the Board, save where the Board’s view of the fact is one which could not reasonably be entertained : Lee Tim & others v Chow Suk Ching t/a Wang Chong Co, CACV164/1996, unreported, 18 February 1997, per Godfrey JA (as he then was).  Where the facts are such that it would be reasonable for similarly instructed minds to come to different conclusions, the court cannot interfere with the Board’s evaluation of the facts.  The court can and should interfere if, and only if, the only reasonable conclusion on the facts found is inconsistent with the determination : Chan Kwok Kin v Mok Kwan Hing & Anor [1990] 2 HKC 65, per Clough JA at p.69E.  The burden on the appellant to persuade the court to interfere with a finding of fact on ground (b) is a heavy one : O’Kelly and Others v Trusthouse Forte P.L.C. [1984] QB 90, per Sir John Donaldson at p.123B-D.

THE PRESENT APPEAL

11.  Turning to the present appeal, the only ground of appeal in substance is whether, contrary to the Board’s finding, the claimant was the defendant’s employee.  This is eminently a question of fact : see Lee Ting Sang v Chung Chi Keung & Another [1990] 1 HKLR 764, per Lord Griffiths at p.768I[7]. A finding that an employer-employee relationship did or did not exist can only be interfered with by an appellate court on Edwards v Bairstow grounds : see Poon Chau Nam v Yim Siu Cheung (2007) 10 HKCFAR 156, per Ribeiro PJ at p.169A-B.

12.  The Board first referred to the approach laid down in Poon Chau Nam, supra.  It next identified eight factors for consideration.  It then discussed the evidence and came to various findings.  It finally concluded that the claimant was not the defendant’s employee.

13.  In my view, the Board’s general approach cannot be flawed.  It had also correctly directed itself on the applicable law.  The bulk, if not the whole, of the claimant’s contentions is directed at various findings of fact made by the Board.  I need not dwell on details.  Suffice it to say that having considered her submissions with care, I am not satisfied that any of the Edwards v Bairstow grounds has been made out save and except one particular point, to which I will return in a moment.  Subject to that caveat, I do not see any basis to interfere with the Board’s findings at all.

14.  Indeed, the Board’s conclusion that the claimant was not the defendant’s employee is a correct one, which is well supported by the applicable principles properly applied to the findings made.  I will explain why.

15.  In Poon Chau Nam, supra, per Ribeiro PJ stated at para.18 :

“18. The modern approach to the question whether one person is another’s employee is therefore to examine all the features of their relationship against the background of the indicia developed in the abovementioned case-law with a view to deciding whether, as a matter of overall impression, the relationship is one of employment, bearing in mind the purpose for which the question is asked. It involves a nuanced and not a mechanical approach, …”

16.  When applying the approach, the court will look at all the relevant factors arising from the particular circumstances of the case.  In Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173, Cooke J said at pp.184-185 :

“…No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.”

17.  The eight factors which the Board had identified as being relevant to the question of employment are discussed below.

(1)     Extent of control

18.  It is common ground that the defendant had no restriction on where, when, how and how often the claimant performed her work.  She had every liberty to decide for herself how, when and where to work and to find her potential clients.  The lack of restriction points quite decisively against any employment relationship. 

19.  The defendant did ask the claimant to attend training sessions and meetings and to use the marketing leaflets, product inserts and policy proposals developed by the defendant in order to ensure quality, which was required by the Hong Kong Federation of Insurers.  The claimant argued that the defendant exercised control over her by means of the meetings, training sessions and achievement of sales target within a certain period.  The Board found that the only control that the defendant had was over the quality of the claimant’s work.  I agree. Such control is necessary to ensure that the claimant’s performance would meet the standard required as the defendant’s agent.  It is not control over her as employee.

(2)     Prospect of profit return and risk of loss

20.  The claimant agreed that she had no fixed monthly salary.  It all depended on the insurance policy that she was able to sell.  Her monthly income fluctuated during the entire contract period.  In a particular month, she received no income at all when she sold no policy.  Irrespective of her income, she was required to and did pay her up-line manager HK$300 per month to share his secretary’s salary.  She also needed to pay for her own travelling expenses for meeting with her clients.  If any of her clients withdrew the insurance policy, she might need to reimburse the defendant the medical examination fees for the client.

21.  The evidence overwhelmingly supports the Board’s finding that the claimant bore considerable risks financially on her own in performing the work as the defendant’s agent, which is wholly inconsistent with an employee’s status.

(3)     Integral part of the organization

22.  The Board found that the claimant was an integral part of the defendant’s organization.  This points to a possible employment relationship but I do not think it carried much weight in the overall context of the parties’ relationship.  Nor did the Board.

(4)     Mutual obligation to work and to provide work

23.  The claimant agreed that the defendant did not provide work to her.  She looked for her own business and clients.  As righty found by the Board, this is a strong factor militating against any suggestion of an employment relationship.

(5)     Provision of equipment

24.  The defendant provided office accommodation, furniture, computer and fax machine for the claimant’s use.  The claimant argued that it was analogous to an employer providing equipment to his employee.  The Board found that what the defendant did was to provide convenience to her and other agents when they came to its office to work.  After all, the defendant’s office was not her principal place of work where she solicited her business.  I agree.

(6)     Incidence of taxation and insurance

25.  In her tax return, (Notification of Remuneration paid to persons other than Employees), it was clearly stipulated that she was not an employee.

26.  The defendant made contributions to the claimant’s occupational retirement scheme.  But as rightly found by the Board, it is a wholly neutral factor because the defendant could so contribute “whether or not there is a contract of employment between [the claimant] and [the defendant] : see section 3(5) of the Occupational Retirement Schemes Ordinance[8].

(7)     The parties’ own view as to the relationship

27.  The defendant maintained that it was a principal-agent relationship.  The claimant claimed that she had all along considered herself to be an employee.  Such contention is contrasted by her own concession that she had never raised the issue of statutory holiday or annual leave, and the fact that she learnt from the insurance courses before qualifying as an insurance agent that it was a principal-agent relationship.  The Board found that the claimant knew full well that the Agreement was not an employment agreement.  The Board is entirely correct.

(8)     Traditional structures of the trade

28.  The Board found that from the perspective of the traditional structure of the trade, there exists no employment relationship between insurance companies and its agents. I am not sure if this finding is supported by the evidence adduced before the Board.  But even assuming that the Board erred on this point, I do not think the overall impression of the parties’ relationship changed a bit.

ORDERS

29.  For the above reasons, I dismiss the appeal.

30.  I have already heard the parties on costs provisionally.  Costs should follow the event.  The defendant is represented by two counsel.  Mr Yu submitted that it was necessary to engage two counsel because of the importance of the case to the defendant.  That I fully accept.  But without any disrespect to Mr Yu, I think a reasonably competent junior counsel, like Mr Man, his junior here, can argue the matter with no difficulty.  In exercising my discretion, I will not allow a certificate for two counsel.

31.  I order the claimant to pay the defendant costs of this appeal, to be taxed on a party and party basis if not agreed.