SUN MIN v. HONG KONG MING WAH SHIPPING CO LTD

          CACV 37/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 37 OF 2004

(ON APPEAL FROM HCLA 9 OF 2003)

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REASONS  FOR  DECISION

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Hon Tang JA (giving the Reasons for Decision of the Court):

1. On 1 February 2005, we dismissed the defendant’s appeal.  We indicated that we would give our reasons in due course and this we now do.

The facts

2. This appeal concerns the claimant’s claim against the defendant under Part III of the Employment Ordinance (“the Ordinance”).

3. If the claimant was employed under a continuous contract of employment by the defendant at the material time, she was entitled to maternity leave under Part III.

4. Section 15 of the Ordinance prohibited the termination of such employment except under section 9, namely, summary dismissal for cause.

5. So the principal issues between the claimant and the defendant were :

(1)	was the claimant employed under a continuous contract of employment with the defendant,
(2)	had her contract been terminated, and
(3)	if so, whether it had been terminated in accordance with section 9.

6. It was the defendant’s case that the contract of employment contained a term whereby it was entitled to transfer the claimant back to the Mainland for employment with an associated company.  The presiding officer found that there was indeed such a term (“the term”). 

7. By notices dated 17 and 18 December 2001 respectively, the defendant notified the claimant that with effect from 18 January 2002, she would be transferred to a related company of the defendant in Shekou, namely, Shekou Ming Wah Shipping Company Ltd (“SKMW”).  SKMW was a subsidiary of the defendant.  The presiding officer also found as a fact that the defendant was unaware of the pregnancy when the decision to transfer was made.

8. The claimant refused to accept the transfer, and after taking advice from the Labour Department, she gave the defendant a written refusal on 27 December 2001.  The defendant, however, insisted on her transfer. 

9. On 20 March 2002, the claimant commenced her claim against the defendant in the Labour Tribunal.

The defendant’s case on appeal

10. There was a division of labour between Mr Alan Hoo SC and Mr Johnny Mok (leading and junior counsel for the defendant, respectively). Mr Hoo addressed us on paragraph 1 of the notice of appeal as well as the grounds in the supplementary notice of appeal whereas Mr Mok addressed us on paragraphs 2, 3, 4 and 5 of the notice of appeal.

11. The argument of Mr Hoo can be summarised as follows.  First, Deputy Judge Poon (“the Judge”) was wrong in concluding that there was a contract of employment between the claimant and the defendant.  He should have found that there was a contract of employment between the claimant and “China Merchants Holdings Co Ltd, or the China Merchants Group, a Mainland State Enterprise”.  Secondly, that if there was a relevant contract of employment between the claimant and the defendant within the meaning of section 15(1), the proposed transfer of the claimant “being a state official sent to work in Hong Kong (see endorsement on claimant’s exit pass) to SKMW, being a subsidiary of the defendant, did not constitute a determination of the claimant’s employment”.

12. Mr Mok’s submission can be summarised as follows.  The defendant had not terminated the claimant’s employment actually or constructively but that “by refusing to be transferred, or report to work, the claimant had wilfully disobeyed a lawful and reasonable order of an employer, or had misconducted herself or had been habitually neglectful in her duties, or otherwise on other grounds under section 9 of the Employment Ordinance such as would entitle the claimant’s employment to be terminated”.

The decision of the court

13. We will deal with Mr Mok’s arguments first.  We do not believe it is now open to the defendant to argue that the claimant’s employment had been terminated by the defendant under section 9 of the Ordinance.  That was not the defendant’s case before the Labour Tribunal.  Nor was the matter so argued before the Judge.  It is now too late to take this point.  Moreover, we do not believe the point is sound. 

14. According to Mr Mok, the notices of transfer were not notices of termination.  There was no termination until or unless the claimant actually reported for duty at Shekou.  But because she failed to do so the defendant was entitled to terminate her contract summarily.  We do not believe that can be right.  The defendant had shown by its conduct that the claimant was not permitted to continue to work for the defendant after 31 December 2001.  We believe it is clear that it was the service of the notice of transfer together with the defendant’s insistence on the transfer notwithstanding the notice of pregnancy which amounted to a termination of the contract of employment between the claimant and the defendant. 

15. We turn to deal with Mr Hoo’s submissions.  Was there a continuous contract of employment between the claimant and the defendant?

16. In aid of this argument, by summons, the defendant sought admission of new evidence.  Mr Hoo argued that on the basis of the new evidence, there should be a new trial.  He also argued that having regard to the inquisitorial nature of the proceedings in the Labour Tribunal, the presiding officer ought to have investigated into the question whether or not there was a contract of employment between the defendant and the claimant.

17. But that was not a point which was raised in the statement of defendant.  Indeed, in the statement of defendant the “date of first employment of claimant;” was given by the defendant as 14 April 1998.  It is true that in the document which was annexed to the statement of defendant, it is possible to say that the fact that the claimant was on secondment to Hong Kong was raised.   Further, as recorded in the oral reasons given by the presiding officer (p. 141 of the transcript) at the first hearing, one of the defences raised by the defendant was that the claimant was not the defendant’s employee.  However, that defence was not pursued.  Instead, the defendant argued that the claimant had not been dismissed by the defendant and that the transfer to Shekou was an internal transfer in accordance with the term.

18. The defendant argued that having regard to the inquisitorial nature of the proceedings in the Labour Tribunal, the Labour Tribunal ought to have enquired into this question.  We were referred to passages in Chan Suk Bing Angie v. Harbour Phoenix Ltd & Anor [1992] 2 HKC 459 and Leung Wan Kee Shipyard Ltd v. Lik Shau Foo & Ors [1995] 3 HKC 229 on the duty of the Labour Tribunal to investigate.

19. The power or duty to investigate must be treated with common sense.  The extent of investigation must depend on all the circumstances.  As Le Pichon J (as she then was) said in Re Sea Wave Hair Design Holdings Ltd [1999] 4 HKC 409 at 412F, the Labour Tribunal was meant to provide a summary and speedy resolution to claims within the Ordinance.  In the circumstances of this case, we do not agree that the presiding officer had failed to perform his duty when he did not investigate a point which had been abandoned or not pursued by the defendant.

20. There was nothing in the evidence before the presiding officer which should have prompted him to investigate further into this issue.  The fact that the evidence before the presiding officer was insufficient to make out a case on this point is reinforced by the fact the defendant sought leave to adduce additional evidence.  Mr Alan Hoo accepted that such additional evidence was required before he could make out a case that the contract of employment was not made between the defendant and the claimant.

21. We have refused permission to adduce additional evidence.  We said we would give our reasons later.  The reasons can conveniently be given here.  First, there was no attempt to seek leave to adduce additional evidence before the Judge.  If this was a point which was open to the defendant to take on appeal from the Labour Tribunal, the defendant ought to have taken it on appeal to the Court of First Instance.  That had not been done.

22. Secondly, section 35(2) of the Labour Tribunal Ordinance provides that the Court of First Instance may not “receive further evidence”.  It may be that if an appeal is on the ground that the presiding officer ought to have investigated into a matter, it is possible for evidence to be admitted to show that had the proper investigation been done, the result of the further investigation would have made a difference to the outcome.  Outside this limited purpose, we do not believe further evidence can be received.  Even treating the application on that basis, that not having been done before the Judge, we do not believe it is a right to allow the defendant to do so on appeal to the Court of Appeal.

23. Thirdly, the evidence is sought to be adduced to show first, there was no contract of employment between the claimant and the defendant.  Secondly that the contract of employment was between the claimant and China Merchants Group (“CMG”).  Thirdly that the transfer was not a termination of any relevant contract of employment between the claimant and the defendant.  As already noted, the defendant is seeking a trial de novo.

24. In the statement of defendant, there was no denial that there was a contract of employment between the claimant and the defendant.  In fact that was well supported by the evidence before the presiding officer.  Such evidence included information furnished by the defendant to the Inland Revenue Department dated 17 December 2001 whereby the defendant notified the Inland Revenue Department that the claimant’s employment with the defendant would cease on 31 December 2001.  Mr Hoo accepted that for tax and accounting purposes, the claimant was treated as an employee of the defendant.

25. Both before the Labour Tribunal and before the Judge, it was not disputed that the claimant was employed under a continuous contract of employment with the defendant, see paragraph 21 of the Judge’s judgment.  Indeed, it was conceded by counsel then acting for the defendant before the Judge, that the claimant’s employment came to an end as a result of the notices of transfer.  We believe the concession was rightly made.  So we would not permit the defendant to argue that there was no continuous contract of employment or that there was no termination of the claimant’s employment.

26. The defendant also took the point that this type of employment was special in that it involved so-called “internally transferred personnel” from the Mainland to Hong Kong of personnel who had joined a state-owned enterprise or group such as the CMG in the present case.  It was said although their terms of employment may differ from one work unit to another, they were subject to the terms of employment imposed by the group for internally transferred personnel. 

27. However Mr Hoo conceded that such state-owned enterprise could by better arrangement of their affairs, ensure that no contract of employment existed between its personnel and its independent work units.  But here, as noted, for accounting and tax purposes, the claimant was treated as an employee of the defendant.  In such circumstances, we did not think it right to permit additional evidence on appeal, even if we have the power to do so.

28. A further argument raised on behalf of the defendant is that the Judge was not entitled to interfere with the presiding officer’s finding of fact that the transfer did not amount to a termination of the claimant’s contract of employment.

29. This point was raised by the claimant in paragraph 7 of her amended application for leave to appeal on point of law dated 19 March 2003 :

“7.  The learned Presiding Officer erred in law in failing to hold that the alleged transfer of the Claimant to work for a separate legal entity in the PRC necessarily involves and/or is dependent upon the termination of the Claimant’s employment in Hong Kong with the Defendant, which termination is admitted by the Defendant in the Notification.”

No objection was taken to this point before the Judge.  Rightly so.  The conclusion of the presiding officer that the notices of transfer did not amount to a termination of the claimant’s contract of employment was either a question of law or a question of mixed law and fact. 

30. The legal consequence of the notice of transfer was the subject of the appeal before the Judge.  Indeed as we have said it was conceded before the Judge that as a result of the notice of transfer, the claimant would no longer be employed by the defendant but instead would be employed by its subsidiary company in Shekou.  The correct conclusion from these facts which were found by the presiding officer is that there had been a termination of the claimant’s contract of employment with the defendant.

31. Mr Hoo submitted that because section 15(4) created a criminal offence, it should be construed strictly in favour of the employer.  The criminal sanction was imposed to better protect the employee and our interpretation should not undermine that.  Anyway, the fact that the decision to transfer was made when the defendant was unaware of the claimant’s pregnancy is irrelevant to a claim for compensation under section 15.  Nor do we think we should give any strained interpretation to continuous contract of employment so as to exclude from its ambit a transfer to a subsidiary company outside of Hong Kong.  Mr Hoo referred us to section 32E in Part VIA of the Ordinance.  But this section does not apply to claims made under Part III.  The Judge had referred back to the Labour Tribunal the claimant’s claim for severance payment.

32. As for Mr Hoo’s point that because of immigration control, it might become illegal for an employer to continue to employ a pregnant employee whose permission to remain in Hong Kong has expired.  Whether this would amount to a defence to a criminal prosecution is unnecessary for us to decide.  But there was no evidence before the Labour Tribunal to show that it would have been illegal for the defendant to continue to employ the claimant.  Nor was the point taken before the Judge.  Anyway, the point is fact sensitive.  It is too late to seek a new trial so that the point could be taken. 

33. We do not need to deal with the Judge’s decision on constructive dismissal which, as the Judge said, was strictly speaking not necessary for his decision. 

34. For the above reasons, we believe the Judge’s conclusion that the defendant had terminated a continuous contract of employment with the claimant, after receipt of the notice of pregnancy, otherwise than in accordance with section 9 was correct.  Hence, the appeal and the application to adduce fresh evidence were dismissed with costs.