YU NONGXIAN v. NG KA WING AND ANOTHER

CACV 270/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 270 OF 2006

(ON APPEAL FROM DCEC NO. 548 OF 2004)

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JUDGMENT

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Hon Tang VP:

Introduction

1.  Two issues are involved in this appeal.  First, whether the deceased was the employee of the 1^st respondent at the material time.  Secondly, whether, since the deceased was not lawfully employable the court should exercise its discretion in the applicant’s favour under section 2(2) of the Employees’ Compensation Ordinance, Cap. 282 (“the Ordinance”).

Employment

2.  Liu Hon-keung (“the deceased”) was admitted into Hong Kong from the Mainland on a two-way permit on 3 May 2002.  He was permitted to remain until 31 July 2002.

3.  Unfortunately, on 2 June 2002, the deceased plunged to his death from the external wall outside the flat on the 8^th Floor, No. 19, Hung Wan Street, To Kwa Wan (“the flat”).  He was engaged in installing scaffolding in connection with certain demolition work at the time.

4.  It is common ground that the deceased was not lawfully employable in Hong Kong.  It was a condition of his stay that he should not be engaged in any employment, whether paid or unpaid.  Regulation 2 of the Immigration Regulations, Cap. 115A.  Under section 41 of the Immigration Ordinance, Cap. 115, it is an offence for any person to contravene a condition of stay.  Upon conviction, such a person is liable to a fine of $50,000 and two years’ imprisonment.

5.  It is also an offence for any employer to employ a person who is not lawfully employable, the employer of an employee who is not lawfully employable is liable to a fine of $350,000 and to imprisonment for three years.  Section 17I(1) of the Immigration Ordinance.

6.  In Secretary for Justice v Ho Mei-wa [2004] 3 HKLRD 270 at 272, the Chief Judge explained the sentencing policy with regard to such offences:

“(1)   The sentencing policy with regard to s.17I offences is, it must be recognised, based largely on deterrence.  The offence under that section is a strict liability one.  It has been referred to as not a ‘truly criminal’ offence, as it is an offence that does not involve dishonesty nor malicious intent.  See here: A-G v Yip Man Cheong [1989] HKLR 547.  Rather, the offence is very much one that reflects a social concern and the immigration policy in Hong Kong.  One facet of the public policy behind this offence is that workers from abroad (and this includes especially the Mainland) should not be permitted to take away employment opportunities that should belong to available and willing workers who are permanent residents of Hong Kong or who are otherwise permitted to work and live here.  Another facet, just as important, is the discouragement of persons entering Hong Kong to seek employment when they are not entitled to work here.  It matters not whether such persons enter or stay in Hong Kong illegally or do so in breach of their conditions of stay: see A-G v Wong Chung Lee [1996] 2 HKCLR 159.”

7.  In HKSAR v Li Chang-li [2005] 1 HKLRD 864, Yeung JA sitting in another decision of this court said:

「39. 為了更有效地打擊非法勞工、保障本地工人的就業機會和避免低下層勞工的工資被過份壓低，法庭要以較嚴厲的方式處理管有偽造或他人身份證罪的判刑，否則失業和貧富懸殊的情況勢將惡化、赤貧家庭數目會增加，由之而起的社會問題亦會日趨嚴重。」

8.  The effect of these decisions is that both the employee and the employer would be given immediate custodial sentences.

9.  Following the accident, there was a coroner’s inquest in April 2003.  At the inquest the 1^st respondent gave evidence and also cross-examined witnesses.

10.  The coroner concluded on the evidence before him that he was satisfied on the balance of probabilities, indeed beyond reasonable doubt, that the 1^st respondent was the employer of the deceased.  However, no reliance was or could be placed on this conclusion at trial or before us.

11.  This appeal concerned the claim brought by the deceased’s dependents under the Employees’ Compensation Ordinance, Cap. 282 (“the Ordinance”).

12.  The claim was initially brought against the 1^st respondent alone.

13.  The 1^st respondent was not insured under the Ordinance.  However, section 25B(1)(a) of the Employees Compensation Assistance Ordinance, Cap. 365 (“the ECAO”) required the applicant to serve a notice on the 2^nd respondent, the Employees Compensation Assistance Fund Board (“the Board”), which was joined on its application in June 2005.

14.  According to Ms Brenda Fen Lee’s affirmation filed on 3 June 2005 on behalf of the Board in support of the intervener:

“7.     It appears from the documents provided by the Applicant’s Solicitors that there is no sign showing that the Respondent is still traceable and / or that he is interested in defending the claim. …”

15.  District Judge Chow dismissed the applicant’s claim because he took the view that the applicant had failed to prove that the deceased had been employed by the 1^st respondent.

16.  The evidence before the learned judge included hearsay evidence in respect of which a hearsay notice was given on 8 September 2005 by the applicant.  The notice contained 21 items and included a Chinese declaration made by Ng Keung and a Chinese declaration made by Fu Suk-mui (“Madam Fu”), both dated 3 June 2002, a copy of a Chinese declaration made by the 1st respondent dated 4 July 2002, as well as a copy of the transcript of the coroner’s court proceedings.  The declarations were given to the Labour Department.

17.  At the coroner’s inquest, amongst others, Ng Keung, Madam Fu as well as the 1^st respondent gave evidence.

18.  It is to be noted that the 2^nd respondent also gave a hearsay notice dated 30 November 2005, amongst the documents included under the notice, were the same declarations by Ng Keung, Madam Fu and the 1^st respondent, as well as a copy of the transcript of proceedings in the coroner’s inquest.

19.  Two witnesses gave evidence at trial, the widow (the applicant) as well as her son, Mr Liu Tung Ngok（廖東岳）.

20.  This is what the learned judge said in his judgment about the hearsay evidence:

「15.  本案的文件匣載有其他證人的證人聲明書，但該些證人都沒有出庭作證，因此本庭對於該些聲明書的內容，不予以重視。

16.  基於上述的理由，本庭裁定申請人未能提供足夠的證據，證明在意外發生時第一答辯人是死者的僱主，因此本庭撤銷申請人針對第一答辯人的申請。」

21.  Essentially, the learned judge disregarded the declarations because the makers had not given oral evidence before him.

22.  Such evidence should not have been excluded on the ground that it was hearsay unless:

“(a)    a party against whom the evidence is to be adduced objects to the admission of the evidence; and

(b)     the court is satisfied, having regard to the circumstances of the case, that the exclusion of the evidence is not prejudicial to the interests of justice.”

Section 47(1)(a) and (b) of the Evidence Ordinance.

23.  Section 49 of the Evidence Ordinance is also relevant.  It provides:

“49.	Considerations relevant to weighing of hearsay evidence
	(1)	In estimating the weight, if any, to be given to hearsay evidence in civil proceedings the court shall have regard to any circumstances from which any inference can reasonably be drawn as to the reliability or otherwise of the evidence.
	(2)	For the purposes of subsection (1), regard may be had, in particular, to the following-
		(a)	whether it would have been reasonable and practicable for the party by whom the evidence was adduced to have produced the maker of the original statement as a witness;
		(b)	whether the original statement was made contemporaneously with the occurrence or existence of the matters stated;
		(c)	whether the evidence involves multiple hearsay;
		(d)	whether any person involved had any motive to conceal or misrepresent matters;
		(e)	whether the original statement was an edited account, or was made in collaboration with another or for a particular purpose;
		(f)	whether the circumstances in which the evidence is adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight;
		(g)	whether or not the evidence adduced by the party is consistent with any evidence previously adduced by the party.”

24.  With respect to the learned judge he had apparently overlooked both provisions.

25.  He had also overlooked the fact that the 2^nd respondent had also served a similar hearsay notice.  Moreover, that under Order 38 Rule 21, had the 2^nd respondent wished to do so, it could have applied to cross-examine the makers of these declarations.  The absence of such an application may explain why the makers were not called.

26.  Mr Horace Wong, SC, who appeared on behalf of the 2^nd respondent, submitted that no application was made under Order 38 rule 2, because the 2^nd respondent was content to rely on the inconsistency or inherent improbability in the hearsay evidence, which goes to the weight to be put on such evidence.

27.  Of the hearsay evidence, the most important was that of Madam Fu.  According to her declaration, which was given the day following the accident to the Labour Department, she was the wife of the son (Ng Keung) of the owner of the flat.  She said a notice had been served by the Buildings Department requiring the canopies on the exterior wall of the flat to be demolished.  She said she called the person whose name appeared on a card which her sister-in-law had received.  Madam Fu said the name on the card was Ng Ka-wing, and that it contained a contact telephone number 9140-9896.  She said she called that number and spoke to Mr Ng who agreed that he would demolish all the canopies for $3,500.  She then arranged with the 1st respondent to go to her unit on Sunday, 2 June 2002.  She was not at home on 2 June 2002 but her husband Ng Keung was at home.

28.  In the declaration, she was asked whether the card showed the name of any company.  She said that after the accident, the police had taken away that card, so she could not remember the name of the company or its address.  She claimed, however, that she called the number and spoke to Ng Ka-wing.

29.  Mr Wong relied principally on the fact that Madam Fu had given the wrong telephone number in her declaration.  The telephone number, which appeared on the card, which was produced by the police at the inquest, was 9109-4623.  That card, however, was in the name of Ng Ka-wing, and contained the address B, 2/F., Kwai Fung Building, 5 Ping Lai Path, Kwai Chung, as well as the name of the company, namely, Shun Fat Decoration Designs Co. (“Shun Fat”).

30.  The card also contained the handwritten words「$3,000包全部」，which, according to Madam Fu, were written by her sister-in-law.

31.  But, according to Madam Fu, because they had an extra canopy, she later agreed on the telephone with Mr Ng that the all inclusive fee should be $3,500.

32.  Ng Keung’s declaration simply said that on the day of the accident, he was at home and three workers came and one of them fell to his death.

33.  The declaration of the 1^st respondent, was given on 4 July 2002.  His residential address was the address appearing on the card which Madam Fu gave to the police, namely B, 2/F., Kwai Fung Building, 5 Ping Lai Path, Kwai Chung.  He said Shun Fat was a one-man company, and he was that person.  That the business of his company included the demolishing of canopies, and that it had been established for about two years.  He said that in April or May, he had been to 13 streets in To Kwa Wan, including Hung Wan Street, to distribute his cards because he was told by a friend, whom he did not wish to identify, that there were canopies to be demolished.  He said he inserted the cards into the letter boxes on the ground floor but that whilst doing so, he was asked by some persons how much the demolishing of canopy would cost and he said some persons did call him to ask about the price, and he had told them that the costs for one canopy was $3,000.  But when they asked whether he could demolish all the canopies for $3,000, he said no.  He said he had nothing to do with the demolition work at the flat on 2 June 2002.

34.  In her evidence at the inquest, Madam Fu said when she called the number on the card she asked whether the person whom she spoke to was Mr Ng, and that person said yes.

35.  At trial, Liu Tung Ngok, the son of the deceased, who was the 2^nd witness, said that he was given 5 identical name cards bearing the name Ng Ka-wing by the police.  They were produced without objection.

36.  I note Mr Wong’s point that Madam Fu made a mistake about the telephone number.  However, I believe his submission that there might have been another Mr Ng who had given a card to Madam Fu or her sister-in-law to be highly improbable.  Madam Fu might have made a mistake about the telephone number because by the time she gave her declaration, she no longer had the card, but I have no reason to think that she would have given the wrong card to the police.

37.  Mr Wong referred to the fact that at the coroner’s inquest, 3 out of 8 witnesses had the surname “Ng”, and submitted that “Ng” is a common surname and it was equally probable that another person with the surname “Ng” might have left a card and it was this other Mr Ng that Madam Fu had called.  I do not believe that to be at all probable.

38.  Moreover, as the production of the five business cards by the son of the deceased showed, which was confirmed by the declaration of the 1^st respondent himself, he had left more than one card.  If there was another Mr Ng, it was unlikely that he would have only given one card to Madam Fu’s sister-in-law and that that card had disappeared.

39.  As for the 1^st respondent’s denial of any involvement with the demolition work at the flat, I do not accept Mr Wong’s submission that he had no motive to conceal or misrepresent matters.  If he was the employer he had every reason to do so.  On the other hand, I do not believe Madam Fu had any motive to conceal or misrepresent matters.  If there was another Mr Ng, she had no reason to conceal that fact.

40.  On such evidence, I am of the view, after taking into account the consideration under section 49 of the Evidence Ordinance that on the balance of probabilities, the 1^st respondent was engaged to do the demolition work at the flat on 3 June 2002 for $3,500.

41.  Having regard to the 1^st respondent’s evidence that his was a one-man company, I have no reason to believe that the deceased was not an employee.  If the deceased was an independent contractor, it would have been in the interest of the 1^st respondent to say so.  It is clear from his evidence at the inquest that he was aware of the difference between employment and sub-contracting.

42.  Mr Horace Wong drew attention to the fact that the deceased had worked as an independent contractor in the Mainland.  Even so, there is no evidence to show that the deceased worked as an independent contractor in Hong Kong.  He was not lawfully employable in Hong Kong and he had been in Hong Kong less than a month when he died.  It was unlikely that he was an independent contractor.  So on the evidence before us, I am satisfied on balance of probabilities that the deceased was employed by the 1^st respondent at the time of the accident.

43.  At trial the applicant also relied on the evidence given at the coroner’s inquest.  The most important evidence at the inquest was the evidence of Madam Fu.  I am of the view that even without such evidence, the applicant has proved on the balance of probabilities that the deceased was Ng’s employee at the time of the accident.  However, the evidence at the inquest gave further support.

44.  Mr Wong submitted that evidence at the inquest was not admissible as hearsay evidence.  Here, we are not concerned with the decision or verdict of the coroner, but the evidence given by Madam Fu, and the other evidence given at the inquest.

45.  Mr Wong referred to Bird v Keep [1918] 2 KB 692, a decision of the English Court of Appeal.  There, the court was concerned with the record of the coroner’s inquisition, as well as the Certificate of Death, and it was held that such was not admissible evidence.

46.  But Bird v Keep was not a case in which the evidence given at the coroner’s inquest was sought to be admitted as hearsay evidence.  In 1918, such hearsay evidence would not have been admissible.

47.  In Bird v Keep,

“… The ground upon which the record of the inquisition was tendered in evidence was that it was a public document made by the authorized agents of the public, in the course of official duty, and respecting facts which were of public interest or required to be recorded for the benefit of the community: see Duke of Beautfort v . Smith (6) ;  Sturla v . Freccia. (7) …”  Swinfen Eady MR at 698.

48.  But Mr Wong submitted that the true basis for the court’s refusal to accept evidence at a coroner’s inquest was because it was irrelevant.  Mr Wong relied on the following statement in the judgment of Bankes LJ at page 703:

“In my opinion the finding of the coroner’s jury as to the cause of death was not relevant to any issue which the learned county court judge had to determine. He had to decide upon the evidence before him what the cause of death was. It cannot be relevant to that inquiry that he should be informed what a coroner’s jury thought of the matter upon materials which were before them but which were not and could not be placed before the county court judge.”

49.  Mr Wong submitted that evidence at coroner’s inquest were inadmissible because they were irrelevant to the inquest, although they could legitimately be used for the purposes of cross-examination at trial.

50.  Thus he submitted that even if the 1^st respondent had said at the inquest that the deceased was his employee, such evidence would be inadmissible at trial because the evidence was irrelevant to the inquest.  Mr Wong referred to section 44 of the Coroners Ordinance, Cap. 504 and submitted that whether the 1^st respondent was the employer of the deceased was irrelevant for the purpose of the inquest under section 27.  With respect, even if (I so assume but do not decide) such evidence was irrelevant to the inquest, it could not be regarded as irrelevant in a claim for employee compensation.  Whether such evidence should be admitted is regulated by section 47 and its weight by section 49 of the Evidence Ordinance.

51.  Mr Wong accepted that he knew of no statement in any book dealing with hearsay evidence supporting his submission that evidence given at a coroner’s inquest is an exception to section 47 of the Evidence Ordinance.  He submitted, however, section 47 could not override the common law rule (exemplified by Bird v Keep) that any evidence given at the coroner’s inquest could not be relied on as hearsay evidence.

52.  But, before the Civil Evidence Act 1968, hearsay evidence was (with certain irrelevant exceptions) inadmissible in civil proceedings.  The Civil Evidence Act 1968 overrode the general common law prohibition of hearsay evidence.  I cannot see why evidence at a coroner’s inquest should be an exception.

53.  I am so clearly of the view that Mr Wong’s submission is wrong that I would not deal with other authorities cited by him in support of his interpretation of Bird v Keep.

54.  Therefore, insofar as the judge ignored the evidence given before the coroner, he was also mistaken.

55.  I turn to deal with the evidence of the son of the deceased.  It is clear from para. 13 of the judgment, the learned judge thought that the son had embellished his evidence.  I agree with Mr Wong’s submission that this is a finding of primary fact and insofar as the learned judge rejected the embellished evidence, we cannot interfere.  But that would make no difference and would not affect my conclusion that the deceased was employed by the 1^st respondent.

56.  This is what the learned judge said at paras. 13 and 14 of his judgment:

「13.  在被問及為何不提及第一答辯人時，廖東岳停頓頗久，然後說他認為提及梁桂仙已足夠。如果這是事實，他不應該停頓那麼久，而應該立刻把答案出來。本庭不相信這是真實的解釋，本席裁定，廖東岳他不是誠實的證人。基於上述的理由，本席對補充證人陳述書的內容完全不予以重視。

14.  證人陳述書的第15段、第16段、第17段都有提及第一答辯人，但是因為梁桂仙女士，肖南生和肖細祥都沒有出庭作證，因此本席對於上述的證據不予以重視。」

57.  It is clear from para. 13 that he rejected the evidence of the son which was supplied for the first time in his supplemental statement and which sought to directly implicate the 1^st respondent.

58.  However, in para. 14 of the judgment the learned judge rejected the son’s evidence contained in paras. 15 to 17 of his first witness statement not because of his lack of credibility but because the persons mentioned by him in his 1^st witness statement had not given evidence.

59.  In those paragraphs the son said Madam Leung Kwai-sin（梁桂仙）gave him $5,000 for the family of the deceased.

60.  In the son’s oral evidence at trial, he said he was given $5,000 by Madam Leung Kwai-sin who told him that the money came from the 1^st respondent.    According to him, Madam Leung was by reputation the 1^st respondent’s mistress「二奶」.  I am mindful that they are multiple hearsay which affect their weight, section 49(2)(c) of Evidence Ordinance.

61.  Insofar as he refused to accept such evidence because Madam Leung was not called, I believe that was not a good enough reason.  Since the 1^st defendant had denied liability it was hardly likely that any person who had acted on his behalf would be willing to give evidence on the applicant’s behalf.  As for the other 2 persons, the son explained that they were illegal workers and were not willing to come to Hong Kong for fear that they would be sent to prison.  Having regard to the judge’s reason for rejecting the part of the son’s evidence (based on the supplemental statement) because he regarded them as embellishment and the fact that when dealing with the son’s evidence based on the first witness statement he relied on a completely different reason, I believe we are entitled to have regarded to such evidence.  Such evidence supported the evidence of Madam Fu (both hearsay and at the inquest) on the 1^st respondent’s involvement with the demolition work.  Such evidence also adds weight to the inference which I am prepared to draw that the deceased was an employee of the 1^st respondent.

62.  So I am of the view that the accident arose out of and in the course of the deceased’s employment with the 1^st respondent.

Discretion

63.  I turn to deal with the question of discretion and section 2(2) of the Employees’ Compensation Ordinance:

“(2)   If, in any proceedings for the recovery of compensation under this Ordinance, it appears to the Court that the contract of service or apprenticeship under which the injured person was working, at the time when the accident causing the injury happened, was illegal, the Court may, if having regard to all the circumstances of the case it thinks proper so to do, deal with the matter as if the injured person had at the time aforesaid been a person working under a valid contract of service or apprenticeship.”

64.  Mr Wong commended to us the approach of the Federal Court of Appeal in Canada in the case of Re Still v Minister of National Revenue 154 DLR (4^th) 229:

“... the doctrine of illegality rests on the understanding that it would be contrary to public policy to allow a person to maintain an action on a contract prohibited by statute ... In the present case, the public policy dimension manifests itself in two ways. The first is reflected in the strongly held belief that a person should not benefit from his or her own wrong. This is an alternative way of expressing moral disapprobation for wrongful conduct. The second rests in the understanding that relief should not be available to a party if it would have the effect of undermining the purposes or objects of the two federal statutes which are involved in this judicial review application. While on the one hand we have to consider the policy behind the legislation being violated, the Immigration Act, we must also consider the policy behind the legislation which gives rise to the benefits that have been denied, the Unemployment Insurance Act.”

65.  In Chung Man-yau & Anor v Sihon Co. Ltd. [1997] HKLRD 1221, the court was concerned with a claim based on loss of earnings from unlicensed hawking, and the question was whether the illegality of unlicensed hawking should be a bar to recovery.  Here, we are primarily concerned with a claim brought by an employee against an employer.  But Chung Man-yau provided a helpful illustration of the court’s approach to illegality, namely:

“The court must examine all the circumstances - the nature of illegality complained of, the moral and criminal culpability and the plaintiff’s conduct. Also any relevant legislation must be considered. Having done that the court must decide whether in all these circumstances it would affront the public conscience or offend the ordinary right-thinking citizen if compensation for the loss concerned is awarded.  p. 1227D, Mortimer VP

..... there is always a public policy consideration involved. That, I think, appears from the decision of the Supreme Court of Victoria in Mills v. Baitis [1968] VR 583 and the impressive array of authorities cited by that court in support of the view which it took of the law ..... The broad question seems to be: would it be more offensive to the notions of justice held by right-thinking people generally to allow a plaintiff to recover in light of the actual illegality involved or would it be more offensive to such notions to refuse them a remedy?”  At p.1229I-J, Bokhary J

66.  The parties have proceeded on the basis that both the employer and the employee were aware that the deceased was unemployable.  I accept that in the exercise of our discretion we must have regard to the policy behind the legislation being violated as well as the observations in Chung Man-yau quoted above.

67.  It is necessary to identify the public policy considerations.  Mr Wong relied on two.  First, the deceased was unemployable and the important observations made by the court in Ho Mei-wa and Li Chang-li regarding such employment.  Secondly, the fact that Ng was uninsured and that the burden might well fall on the Board.

68.  Mr Patrick Lim, who appeared for the applicant, relied on Chan Cheuk Ting and Another v Analogue Engineering Co Ltd and Another [1986] 2 HKLRD 935 and Lee Mui Fong v Wong Kit Man and Others, DCEC 455 of 2002, unreported, dated 18 November 2005.

69.  Chan Cheuk Ting was a decision of this court.  There the deceased was an illegal immigrant and that he had obtained employment by using a false identity card. His employer was not aware that the deceased was unemployable.  The employer was insured.  Power J (as he then was) in giving the judgment of the court rejected the argument that:

“19.   … public policy required the court to refuse to exercise its discretion (under section 2(2)). We are in agreement with the judge that there is no consideration of policy of such weight that it would require the court to refuse to exercise its discretion. The deceased was performing lawful work. … He suffered an injury causing his death in the course of his employment. We see nothing in public policy that would require a court to refuse to exercise its discretion so as to deny the defendants the benefit of the insurance policy. …”

70.  Lee Mui Fong was a decision of District Judge To in November 2005 and was to similar effect.

71.  In response, Mr Wong submitted that:

“… Where the worker is covered by insurance, this would be a powerful answer to any argument based on illegality: when the risk is insured, illegality matters little practically in terms of the allocation of the burdens of compensation.  Insurance companies cover their insurance risks by spreading the same over the premiums they collect, and in a scheme that is backed by insurance the burdens are spread out actuarially.  To put it bluntly: they received the premium, they got to pay.”

72.  Mr Wong submitted that in a case where the employer had the means to satisfy the judgment, that would also be a very relevant consideration.

73.  So Mr Wong seemed to accept that the important public policy behind the legislations making the employment of the deceased illegal might not by itself be a sufficient reason for the court to exercise its discretion against the employee under section 2(2) of the Ordinance.

74.  I believe the public policy would not be served by disallowing claims by illegal employees.

75.  If an unemployable employee suffers injuries in the course of his employment, and he has a remedy under the Ordinance, he is likely to come forward and make a claim.  In that case he would probably be available as a witness for the prosecution of the employer.  If no compensation is payable, the employee would not come forward at all.  In that case the employer is very likely to get off scot-free.  Here, we are concerned with a fatal injury but I do not believe it should be regarded differently from a non-fatal injury.

76.  Mr Wong submitted that the availability of compensation would attract holders of two-way permits to come to Hong Kong to work illegally.  However, I believe the primary inducement to an illegal worker must be the higher wages in Hong Kong.

77.  I believe that in order to stop illegal employment, it is important to target the employers.  Unlike illegal employees who are likely to be driven by necessity, employers are usually driven by greed.  A good deterrent for a greedy person is to hit him in his pocket.  In the present case, the evidence showed that the 1^st respondent paid the 3 persons much less than what he stood to gain from his contract.  So it was highly lucrative for him.

78.  In the present case, if the applicant was not allowed to recover from the 1^st respondent, the 1^st respondent would have got off scot-free.  There was no prosecution.  Criminal prosecution is often difficult because of the requirement of a higher standard of proof and the lack of evidence, especially when the employee has no incentive to testify.

79.  In this case, we do not know whether or not the 1^st respondent would be able to pay all or part of the compensation.  We have no reason to believe that the 1^st respondent is destitute.  The fact that he was refused legal aid when he had an obvious defence to the proceedings, namely he was not the employer, suggests that he might have some means.

80.  It is said that he is no longer traceable, but from the evidence available to us, it does not appear that serious effort had been made to trace him.  Normally, a claimant would only make serious effort to find the defendant after judgment.  Moreover, if judgment is obtained and not satisfied, and there is a petition for bankruptcy, the 1^st respondent’s bank accounts would be frozen and very often that would bring a person who has gone underground to the surface.  So between the applicant and the 1^st respondent, there is every public policy reason to permit the applicant to recover.

81.  However, it is said that in the event that the 1^st respondent is unable to pay, the 2^nd respondent would be liable under the ECAO, although it would have the right of subrogation under section 37.  Mr Horace Wong submitted that under the ECAO, once judgment is obtained against the 1^st respondent, and if the applicant satisfies the requirement of section 16(3) of the ECAO (that is to say, after he has exhausted “legal and financially viable means of recovery”.  See item for Finance Committee of Legislative Council (for discussion on 21 June 2002)), the Board would be liable to pay out of the Fund established by section 7 of the ECAO (“the Fund”).  It is unnecessary for me to decide whether that is so or not, I have not heard sufficient submission on the point.  However, I am prepared to assume that Mr Wong is right, so that if the 1^st respondent is unable to pay, the 2^nd respondent would be liable to do so under the ECAO.

82.  The Board was meant to be funded by a levy on insurance premium, however it has had to borrow substantial sums from the government, mostly because of the insolvency of an insurance company.  It is nevertheless reasonable for us to proceed on the basis that any payment by the Board would be a burden on the community as a whole, because the additional insurance premium would increase the cost of doing business in Hong Kong.  It was not the Board’s case that the borrowing was necessitated by such claims.  However, the evidence shows this case is not unique, according to Ms Patricia Yim Wai-man, the Secretary of the Board, the total estimate for the known cases was “not less than $14 million”.

83.  The Ordinance was passed in 1991.  At the time the question of persons working illegally in Hong Kong was not as serious as it has become.  But, we have to deal with the position as it now stands.

84.  Speaking generally, it is not easy to decide how much weight should be given to the fact that the Board might have to pay part or all of the compensation.  There is the practical question of how to determine whether the employer has the means to pay.  Presumably that has to be decided at the same time as the claim for employee compensation since the discretion under section 2(2) has to be exercised at that time.  No doubt, once it is known that the discretion would or might be exercised against the employee if the employer was unable to pay, some employers would go underground, others will claim that they have no means.  What if the employer could pay some but not all the damages?  Would it not be contrary to public policy to allow such an employer to escape liability completely?

85.  It is not the job of the Board to fight illegal employment, but they could help in the fight if they take the right of subrogation under section 37 seriously.  It may be that subrogation proceedings will be costly.  But determination to pursue the illegal employer for his last cent will help fight illegal employment.  An applicant must also take all reasonable and financially viable means of recovery.

86.  Mr Wong accepts that in the end it is a matter for our discretion, the learned judge not having exercised his discretion.

87.  I do not believe it would offend the ordinary right-thinking citizen if the applicant is allowed to recover from the 1^st respondent.  Having regard to the public policy regarding illegal employment, I believe allowing recovery is also conducive to serving such public policy.  As for the possibility of recovery against the Board, I believe the present procedure whereby (I do assume) recovery would follow the exercise of the discretion under section 2(2) is unsatisfactory.  Section 2(2) has a longer history than ECAO, and was not enacted with ECAO in mind.  Now that claims by unemployable persons against the Board is recognised as a problem, no doubt government would, if it sees fit, take measure to deal with the matter, for example, by not permitting recovery against the Board by unemployable employees.  In 2002, amendments (not directly related to illegal employment) were passed to protect the Fund.  So amendment is a possibility.

88.  ECAO was enacted to protect uninsured employees. It would be ironic if it has the effect of “depriving” some uninsured employee of his claim against his employer.  Nevertheless the fact that the compensation may have to be paid by the Board is a relevant consideration.  But its weight has to be balanced against all the other consideration.

89.  After careful consideration, and after having regard to all the circumstances of the case including the matters relied on by Mr Wong, I am of the view we should exercise our discretion under section 2(2) in the applicant’s favour.

90.  After we have reserved our judgment, by letter dated 23 July 2007 the applicant indicated that in the event of the appeal being allowed, in lieu of assessment she was willing to accept the statutory minimum compensation of $303,000 under section 6(2) of the Ordinance.  By letter dated 30 August 2007, we were informed on behalf of the 2^nd respondent that it had no objection to such a course being taken.

91.  Accordingly, I would allow the appeal with costs against the 2^nd respondent, and made an order that the 1^st respondent pays the applicant compensation in the sum of $303,000 together with interests at half the judgment rate from the date of the application, namely, 21 May 2004 until judgment.  The applicant’s costs to be taxed in accordance with Legal Aid Regulations.

Hon Cheung JA:

92.  I agree with the judgment given by Tang VP and the reasons he gave on the issues of evidence and discretion.  I would make the following additional observation on the issue of discretion.

Section 2(2)

93.  Section 2(2) of the Employees’ Compensation Ordinance (Cap. 282)(‘ECO’) confers a discretion on the Court to treat a person employed under an illegal contract as if he was employed under a valid contract. 

The primary focus

94.  In considering this section, my view is that the focus must be first on the primary relationship of the employer and the employees.  In this case the applicant sued the employer.  She did not seek to sue the Employees’ Compensation Assistance Fund Board (‘the Board’) established under the Employees Compensation Assistance Ordinance (Cap. 365) (‘ECAO’).  It was the Board who applied to be joined in this case.  Irrespective of the position of the Board, the Court must decide whether as between the employee and his employer, the latter is entitled to claim employees’ compensation from the employer. 

Definition of illegal contract

95.  The first issue is the definition of illegal contract.  This Court (Silke JA Power and Nazareth JJ) in Chan Cheuk-ting v. Analogue Engineering Co. Ltd. and Another [1986] HKLR 935 held that,

‘when the legislature used the words “illegal contract” they meant to include not only contracts which were being illegally performed but also those which could be treated as illegal and therefore void ab initio and that s. 2(2) was placed in the Ordinance to give protection to an employee who was doing lawful work under such a contract.’  (emphasis added)

96.  Hence for the purpose of defining the illegal contract under section 2(2) any suggested distinction between different types of illegal contracts in terms of its formation and performance such as, for example, a child labourer or a Hong Kong employee selling pirated goods or a visitor illegally performing work in Hong Kong should be rejected. 

Public policy

97.  What is most important, for the purpose of exercising the discretion in favour of the employee, is, as Chan Cheuk-ting shows, whether the employee was doing lawful work under that contract.

98.  I am acutely aware of the long line of authorities from Holman v. Johnson (1775) 1 Cowp 341, 98 ER 1120 to the more recent decision of Taylor v. Bhaill 50 Con LR 70 (Decision : 1/11/1995) where the courts maintained the principle that while the refusal of the court to enforce illegal contracts often leads to injustice and unjust enrichment of the defendant, the justification is not based on any principle of justice but rather of policy.

99.  While I would not go as far as what Burrough J graphically said about public policy in Richardson v. Mellish 2 Bing 252 that ‘It is a very unruly horse, and when once you get astride of it you never know where it will carry on’ or what Cave J said in In re Mirams [1891] 1 QB 594 that ‘judges are more to be trusted as interpreters of the law than as expounders of what is called public policy’, I will certainly regard as good sense the view of Evershed MR in Cleaver v. Mutual Fund Life Association [1892] 1 QB 147 at 151 that ‘the application of the rule ought to be narrowly watched, and ought not to be carried a step further than the protection of the public requires’. 

100.  Under the ECO a worker would only be entitled to make a claim for employees’ compensation when he sustained injuries or death.  The ECO is an ordinance which allows an employee to recover compensation on a ‘no fault’ basis so long as the injury or death was the result of an incident that arose out of and in the course of the employment.  The authority obviously recognized the social need for this type of legislation : an employee who met such a misfortune should not be without redress. 

101.  In my view, in the context of a modern Hong Kong which is by all accounts a caring society, it would take an extremely cynical and indeed harsh view to say that public policy should deprive an employee who was physically injured or killed in an industrial accident from recovering compensation from an employer who knowingly employed him to carry out lawful work despite his lack of permission to work in Hong Kong.

102.  How would an exclusion of the claim in such a situation protect the local work force?  On the other hand, if compensation is allowed, how would the integrity of the legal system be affected?  It is said that to allow compensation will encourage more illegal workers to work here.  But how many of these workers were injured or killed in the course of their employment which was the prerequisite before they could claim compensation?

103.  These questions are asked to show that one cannot simply say ‘public policy requires the claim to be rejected’, it is necessary to go further and ask what is the mischief that the public policy wishes to avoid?  The situation is quite different from the case of an illegal worker claiming wages from his employer where, without expressing a concluded view on the matter, because of the rice bowl consideration, public policy may require the claim to be excluded.  In my view it is precisely because the so called public policy does not provide the justification for exclusion of employees compensation that this Court in Chan Cheuk-ting held that

‘there is no consideration of policy of such weight that it would require the Court to refuse to exercise its discretion.’

104.  In that case the employer had effected an insurance for his employees but I do not regard the presence of insurance coverage to be the distinguishing feature which resulted in this Court overturning the decision of the first instance and exercising the discretion in favour of the employee.  Irrespective of whether an employer has provided insurance coverage for his employees or not, he is still personally responsible towards the employees for the compensation.  In this case the deceased like the worker in Chan Cheuk-ting was doing lawful work.  I cannot see why this Court should not follow the previous decision in Chan Cheuk-ting and exercise the discretion in favour of the applicant.

The position of the Fund

105.  An employee or his family must exhaust all attempts to recover the award against the employer before he could seek payment from the Employees’ Compensation Assistance Fund (‘the Fund’).  The Fund is governed by a separate legislation, namely, the ECAO which was enacted in 1991 well after the enactment of the ECO in 1953.  If the primary responsibility to compensate the employee lies with the employer, I do not see how, for the purpose of exercising the discretion under section 2(2), the Fund has any bearing on this issue. 

106.  While section 2(2) of the ECO requires the Court to consider all the circumstances of the case in the exercise of discretion, I do not see how the potential liability of the Fund which may or may not arise depending on the outcome of the recovery proceeding against the employer can be considered a relevant factor in the exercise of the discretion at this stage of the proceedings.  In my view whether on one hand an employee can recover from the employer and whether on the other hand he can seek payment from the Fund are two separate matters. 

107.  Even if, for the purpose of argument, the potential liability of the Fund to satisfy the award is a relevant factor, I would nonetheless still exercise the discretion in favour of the applicant.  If the authority does not wish illegal workers to recover payment from the Fund, then surely this can be achieved by legislative means.

108.  In Chen Xiu Mei v. Li Siu Wo [2007] 1 HKLRD 331, Deputy District Judge E Yip refused to exercise the discretion in favour of an illegal worker.  I note that Chan Cheuk-ting was not cited in the judgment.  As the appeal for this case is pending, I would refrain from commenting on it.  It is sufficient to say that this Court is not bound by it.

Conclusion

109.  I would also allow the appeal with costs to the applicant.

Hon Lam J:

110.  I agree with the judgments of Tang VP and Cheung JA. For my part, the most difficult point in this appeal is how the discretion under Section 2(2) of the Employees’ Compensation Ordinance should be exercised in a case where the Employees’ Compensation Assistance Fund Board had to intervene due to the possibility that compensation may have to be paid by the fund under the Employees Compensation Assistance Ordinance.

111.  For the reasons given by Cheung JA, I agree that notwithstanding the intervention by the Board, the primary focus should still be the position between the employer and the employee. The Employees Compensation proceedings are proceedings determining the liability of the employer, not proceedings determining the liability of the fund.

112.  Further, like Tang VP, I find the present procedure to be unsatisfactory. I also support the suggestion that consideration should be given to see if there is any need for amending the Employees Compensation Assistance Ordinance to provide for a second tier discretion when claims were made against the fund even though discretion has been exercised in favour of an applicant in the Employees Compensation proceedings.

Hon Tang VP:

113.  The appeal is allowed with costs against the 2^nd respondent.  The 1^st respondent is ordered to pay the applicant compensation in the sum of $303,000 together with interests at half the judgment rate from the date of the application, namely, 21 May 2004 until judgment and thereafter at the judgment rate.  The applicant’s costs to be taxed in accordance with Legal Aid Regulations.  The applicant is to have the costs below against the 1^st and 2^nd respondents.