LEE SIN YEE SHEREE v BOLLYMAN LIMITED

HCLA 19/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 19 OF 2014

(ON APPEAL FROM LBTC NO 1804 OF 2013)

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J U D G M E N T

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INTRODUCTION

1.  The Claimant (“Miss Lee”) claimed against the Respondent (“Bollyman”) at the Labour Tribunal for various heads[1] of compensation.  After hearing a trial for 5 days, the Presiding Officer[2] awarded a total sum of HK$432,158.85 in favour of Miss Lee.  This is the appeal by Bollyman against the Presiding Officer’s awards. 

2.  The major issue at trial is whether Miss Lee was an employee of Bollyman during the relevant period of time[3].  It is Bollyman’s contention that Miss Lee was at the material times an employee of Bollyman’s associate company in the USA, Bollyman Express Inc (“BEX”), rather than Bollyman.

BACKGROUND

3.  Bollymanis a company incorporated in Hong Kong in 2007.  Mr Chan Shu Yin Burton (“Burton Chan”) was and still is the sole director of Bollyman.

4.  At the material time, Burton Chan operated many different companies, including Bollyman and other companies, namely, Aerosup Inc (Hong Kong and China), Aerosup Inc (US), Aerosup Inc (Philippines), Yongfu Int’l Freight (China) Ltd, etc.

5.  Miss Lee was and is a US citizen who was declared bankrupt by the Hong Kong Court in February 2008. She joined Bollyman as a “Project Director” in August 2009. 

6.  In or about March 2010, Burton Chan tasked Miss Lee to set up a company in the US and as a result, BEX was incorporated in April 2010 with its principal executive office address in New York City.  BEX was and is a subsidiary company of Bollyman and the setting up of it was funded by Bollyman.

7.  On their business cards, Burton Chan was named as BEX’s “CEO” and Miss Lee was named as BEX’s “Sr.VP – Corporate Strategy & Int’l Business, Country Director – Americas”.  Miss Lee was a shareholder of BEX but she had made no financial contribution to BEX.

8.  The respective cases of Miss Lee and Bollyman were summarized by the Presiding Officer in his Reasons for Decision[4] as follows:

“Miss Lee’s Case

7. Miss Lee mentions that in August, 2009 she was employed by the Defendant through an oral agreement with Mr. Chan, the director of the Defendant. On 1^st January 2011, she was deployed to New York to setup an affiliate company, the Bollyman Express Inc. (the ‘Bollyman US’). She was the shareholder and Chairman/CEO of it; however, the ownership, management and organization of the business had always been stayed with Mr Chan.

8. Miss Lee confirms that she made no financial contribution to Bollyman US, and never paid for any of its shares; all the funds were paid from Hong Kong. It was not her idea to set up or wind up Bollyman US.

9. Later Bollyman US became a big disappointment and suffered substantial financial loss. It was wound up and Miss Lee was terminated. The Defendant fails to pay her the above items on termination and now she claims the same.

The Defendant’s Case:

10. Basically, the Defendant argues that Miss Lee was employed by Bollyman US. The Defendant agrees that Miss Lee was appointed by the Defendant as Project Director for overseas projects in August 2009. Then, as Miss Lee was a US citizen and the Defendant intended to expend its business in US, Miss Lee was deployed to US to setup Bollyman US. It was agreed between Miss Lee and Mr Chan that Miss Lee would be employed by Bollyman US as its President and CEO after its establishment. Between August 2009 to March 2010, Mr Chan borrowed money from the Defendant then paid to Miss Lee personally as her salary. After the establishment of Bollyman US, Miss Lee was directly employed by it and Mr. Chan did not pay her any more. There was no legal relationship between Miss Lee and the Defendant.

11. According to Miss Ho, the Defendant’s witness, at 2^nd March 2010, she went to the Defendant’s office to handle its employees’ bank accounts. She met up with Miss Lee, and Miss Lee told her that she was not an employee of the Defendant and it would not be necessary for Miss Ho to assist her to open a bank account.  Miss Ho said, over the years, she still could recognise Miss Lee and recall the whole incident out of her memory.”

FINDINGS OF THE PRESIDING OFFICER

9.  The Presiding Officer carefully analyzed the documentary evidence, in particular, the email records between various parties during the relevant time.  He then came to the following findings :

(a)  Burton Chan was the person-in-charge and mastermind of over 15 companies, including Bollyman and BEX;

(b)  Burton Chan utilized Bollyman as a vehicle to play active role among other companies;

(c)  All along, Miss Lee reported to Burton Chan and Burton Chan gave her work orders;

(d)  Burton Chan made the financial arrangement to meet the expenses and payroll of BEX and Miss Lee had made no financial contribution to BEX;

(e)  Miss Lee was employed by Bollyman before she was deployed to work in the US; and

(f)  There is no evidence to show the employment contract between Miss Lee and Bollyman had ever been terminated.

10.  From the above findings the Presiding Officer concluded that there were only three possible scenarios regarding the employment of Miss Lee, namely:

(a)  All along since August 2009, Miss Lee was employed by Bollyman, either in Hong Kong or in the US, as the employment contract between them continued and had never been terminated; or

(b)  Bollyman was one of the co-employers of Miss Lee as her employment contract with Bollyman had never been terminated; or

(c)  Burton Chan utilized Bollyman as an agent to employ Miss Lee and gave her orders to work for his business.  Bollyman was therefore an employer of Miss Lee under Section 2 of the Employment Ordinance Cap 57.

11.  It follows that, the Presiding Officer concluded, one way or the other, Bollyman should be considered as Miss Lee’s employer.

12.  The Presiding Officer also rejected Bollyman’s suggestion that the employment between Bollyman and Miss Lee had been transferred to BEX as there was no evidence to support such suggested transfer.

APPLICABLE PRINCIPLES

13.  A party’s right to appeal against an award, order or determination by the Tribunal is limited to questions involving points of law or excess of jurisdiction[5].  On such appeal, the appellate Court may draw any inference of fact, but may not (a) reverse or vary any determination made by the Tribunal on questions of fact or (b) receive further evidence[6].

14.  In Reyes Elena E v United States Marine Corps, Marine Security Guard Detachment, American Consulate General, Hong Kong[7], Lam J (as Lam VP then was) had this to say[8]:-

“Although the identity of employer is basically a question of fact and Section 32 of the Labour Tribunal Ordinance restricts appeals from the Tribunal to errors of law and jurisdiction, in certain cases findings of fact could be challenged as errors of law. I only need to refer to what I said in Kiawchansaeng, Renu v Ho Kim Kay Canny, HCLA 78 of 2001, Para.5,

‘If a finding of fact is one in which there is no evidence to support or with which the evidence is inconsistent or one in which no reasonable Tribunal could reach or one which was based on a disregard or misunderstanding of the evidence, such finding would be considered as an error of law (see Cheng Yuen v. Royal Hong Kong Golf Club [1997] 2 HKC 426; Andayani v. Chan Oi Ling [2000] 4 HKC 233).’ ”

GROUNDS OF APPEAL

15.  Bollyman originally put forward 9 grounds of appeal in its application for leave to appeal.  At the ex parte hearing of the leave application, I granted leave to appeal in respect of 5 out of the 9 grounds of appeal.

16.  I shall deal with the grounds of appeal in turn.

Ground 1: Failure to have regard to relevant factors

17.  The first ground of appeal is that the Presiding Officer has overlooked or fundamentally misunderstood the evidence.  Mr Leung, counsel for Bollyman, submitted that no reasonable tribunal having properly understood and analyzed the evidence could reach the conclusion that Miss Lee was Bollyman’s employee at the material time.

18.  The complaints of Bollyman under this ground focused on certain findings of the Presiding Officer in particular. 

19.  Firstly, the Presiding Officer has wrongly come to the view that there was no evidence to support that Miss Lee was instructed to set up BEX and then she was employed by it as its President and CEO upon its establishment; and the original plan of the parties was that Bollyman funded BEX to set up a delivery business between the US and China to make profit.

20.  Secondly, the Presiding Officer has wrongly come to the view that there was no “independent evidence” to support Bollyman’s contention that Miss Lee was one of the senior management members of BEX, directly employed by BEX and titled President and CEO since 2010, drawing a monthly salary of approximately US$5,000 from BEX as staff salary.

21.  Thirdly, the Presiding Officer has wrongly disregarded the significance of Miss Lee’s informed decision to declare her income under the employment of BEX rather than Bollyman.

22.  Fourthly, the Presiding Officer did not explain sufficiently his reasons in dispelling the evidence of Ms Ho, a witness for Bollyman saying that Miss Lee had told her that she was not an employee of Bollyman. 

23.  With respect to Mr Leung, in my view, the above findings or views of the Presiding Officer, even if they were reached from the Presiding Officer’s misunderstandings of the evidence, would not be sufficient to entitle this court to alter the Presiding Officer’s factual finding that Miss Lee was an employee of Bollyman.

24.  The most important consideration of the Presiding Officer was the fact that Miss Lee was unquestionably employed by Bollyman in August 2009 and there was no termination of the employment whatsoevr.  The above findings or views of the Presiding Officer Bollyman complained of can have little bearings on this core consideration.

25.  Regarding the rejection of Ms Ho’s evidence, although the Presiding Officer did not specify what emails or documents her version does not tally with, he did say that he only places very little weight on Ms Ho’s evidence as the incident Ms Ho referred to in her evidence happened in March 2010 and she had made no contemporaneous record on it.

26.  As submitted by Mr Ng, counsel for Miss Lee, the Presiding Officer has rejected Bollyman’s case but accepted Miss Lee’s case.  The Presiding Officer found that all along, Miss Lee had been employed by Bollyman notwithstanding that she was tasked with the duty to set up BEX in New York and was paid an extra of US$5,000 from the account of BEX.  And such findings are consistent with undisputed evidence and contemporaneous documents[9].

27.  The case of Bollyman rested on an alleged common understanding between Burton Chan and Miss Lee that after BEX was set up, Miss Lee would be employed by BEX instead of Bollyman. Miss Lee had in her evidence denied such an understanding whereas Burton Chan did not give evidence to prove Bollyman’s case.  The Presiding Officer is perfectly entitled to reject Bollyman’s case by saying that there was no evidence to prove the same.

28.  Bollyman did not give any explanation as to why the monthly payment of HK$30,000 so called “Hong Kong Subsidies” was paid by Bollyman rather than BEX to Miss Lee. 

29.  Miss Lee had listed out the working tasks given by Burton Chan to undertake works for Bollyman and other companies of Burton Chan as mentioned under paragraph 4 herein.  There were emails from Burton Chan help proving the same.

30.  I am not satisfied that the finding of the Presiding Officer that Miss Lee was employed by Bollyman at the material time was one that there is no evidence to support or with which the evidence is inconsistent or one in which no reasonable Tribunal could reach or one which was based on a disregard or misunderstanding of the evidence.  On the contrary, I find such finding very much consistent with the evidence before the Presiding Officer.

31.  Ground 1 of the appeal has no merit.

Ground 2 and 3: Failure to discharge statutory duty to investigate and material misunderstanding of Miss Lee’s case

32.  Mr Leung submitted that in merely identifying three possible scenarios in which to find Bollyman liable without making any definitive finding one way or the other, the Presiding Officer had failed to discharge his statutory duty to investigate.  Without any explicit finding or reference to the basis in this regard (i.e. be it lifting the corporate veil or by virtue of agency), one cannot see whether the Presiding Officer’s conclusion was reached by correctly analyzing the situation and making all the appropriate finding of facts.

33.  In my view, the Presiding Officer’s postulation of the three possible scenarios was unnecessary and I share Mr Leung’s view that there was insufficient basis to reach any finding that Burton Chan employed Miss Lee through Bollyman as an agent.

34.  However, I do not agree that by putting forward the three scenarios the Presiding Officer had failed to discharge his duty to investigate.

35.  First of all, the use of different companies for business by Burton Chan is a clear indication of his intention not to assume personal liability in respect of the businesses conducted by the companies he held.  Such personal liability he avoided must include the liability as an employer. 

36.  Mr Leung has referred me to an observation made by A Cheung J (as Cheung CJHC then was) in Lee Thai Lai v Wong Chung Kai t/a Kai Hing Trading Company & Anor [10]:

“5. … One possible basis is that the Tribunal lifted the corporate veil of the 2^nd Defendant. That seems to accord best with paragraph 5 where the Tribunal opined that the 2^nd Defendant was really a corporate legal entity used as an instrument (工具) for employing the Claimant, and the 1^st Defendant remained the employer.

6. However, lifting the corporate veil would be problematic in the present case. The general rule of company law is that a company is a separate legal entity from its controlling shareholders and directors: Salomon v Salmon & Co. [1897] AC 22, even in a one-man company situation. The company is neither an agent nor a trustee of its shareholders in respect of the company’s assets, business and affairs. The corporate veil may only be lifted in very limited circumstances. The relevant legal principles have been discussed in Gower and Davies’ Principles of Modern Company Law (7^th ed.) 184 etseq; Gore-Browne on Companies (44^th ed.) paras 1.3.1 and 1.3.2. Without seeking to be exhaustive, the normal circumstances for lifting the corporate veil are the prevention of the corporate form from being used for the purposes of fraud, or as a device to evade a contractual or other legal obligation. On the other hand, using a corporate structure to avoid the incurring of any legal obligation in the first place is not objectionable; the court’s power to lift the corporate veil does not exist for the purpose of reversing such avoidance so as to create legal obligations: China Ocean Shipping Co. v Mitrans Shipping Co. Ltd [1995] 3 HKC 123. The court cannot lift the veil merely because it considers that justice so requires: China Ocean Shipping Co. at page 128B/C to F/G (per Nazareth VP).

7. Quite plainly, in the present case, no fraud was alleged and no finding of fraud was made. More importantly, this is not a case where the corporate form of the 2^nd Defendant was used as a device to evade a contractual or other legal obligation owed to the Claimant as an employee … As has been made clear by the Court of Appeal in China Ocean Shipping Co., using a corporate structure to avoid the incurring of a legal obligation in the first place is not objectionable. In other words, it is not objectionable for Mr Wong to use the 2^nd Defendant, a one-man company owned and controlled by himself, to employ the Applicant in the first place.

8. In short, if the legal basis for holding Mr Wong liable was the lifting of the 2^nd Defendant’s corporate veil, that was erroneous because no circumstances existed, according to the evidence before the Tribunal and according to the Tribunal’s own findings of fact, to justify the lifting of the corporate veil of the 2^nd Defendant.”

37.  As such, the Presiding Officer was clearly wrong in concluding that Bollyman employed Miss Lee as agent for Burton Chan being a possible scenario.

38.  Nonetheless, the rejection of the third scenario as a possible one does not render the Presiding Officer’s finding incomplete.  The Presiding Officer has found that Miss Lee was employed by Bollyman in August 2009 and such employment had never been terminated.  In that case, it was in effect the finding of the Presiding Officer that at the material times, before the constructive dismissal by Bollyman, Miss Lee was still under the employment of Bollyman.  It would be unnecessary for the Presiding Officer to move on to postulate the three possible scenarios.

39.  Although the Presiding Officer did not make any definite finding on the three possible scenarios, I am of the view that this is unnecessary and the failure of which does not affect his finding that Bollyman was the employer of Miss Lee.

40.  Grounds 2 & 3 are without merit.

Ground 4: Transfer of employment

41.  Bollyman had in its closing submission at trial raised the alternate defence that Miss Lee’s employment with Bollyman would nevertheless have been transferred to BEX upon its incorporation. On this proposition Bollyman relied on two cases namely, Dandan Zhang v Quorum Associates Limited[11] and Law Shiu Kai v Dynasty International Hotel Corp &Ors[12] .

42.  Mr Leung submitted that the Presiding Officer had not attempted to address this issue but simply stated that there being “no evidence” to support such a transfer and he rejects the argument that the employment had ever been transferred.

43.  Whether there was a transfer of employment was a matter of fact.  The authorities cited by Mr Leung only expressed that in certain situations the employment period of a previous employment can be brought along to a purported new employment for the purpose of the calculation of employment benefits.  In the present case, as it was the finding of the Presiding Officer that the employment by Bollyman of Miss Lee had never been terminated, there was simply no room for any so called transfer of employment to take place.

44.  The Presiding Officer has expressly rejected such argument and there is no ground to attack his finding.

Ground 5: Jurisdiction

45.  This ground of appeal has raised a question of jurisdiction on the sum of US$12,900 (i.e. HK$100,620) claimed by Miss Lee against Bollyman as reimbursement of compensation paid by her to the landlord for early termination of the 3-year fixed term lease of 118 Elizabeth Street, New York guaranteed by Miss Lee.

46.  Bollyman’s objection was that BEX, rather than Bollyman, was the entity privy to the corresponding lease.  The lease was obviously for the benefit of BEX and its business (rather than Bollyman or its business).  Any cost of early termination of the lease must logically be borne by BEX, rather than Bollyman.  Mr Leung submitted that this part of the dispute should be a contractual claim as between Miss Lee and BEX in any event, rather than an employment claim between Miss Lee and Bollyman and thus beyond the limited jurisdiction of the Labour Tribunal prescribed under Section 7 of the Labour Tribunal Ordinance Cap 25.

47.  In his Reasons for Decision[13], the Presiding Officer has expressly ruled that it was part of the employment agreement between Bollyman and Miss Lee that her expenses and BEX’s expenses would be reimbursed by Bollyman to Miss Lee.  The Presiding Officer came to this conclusion by referring to some email correspondences between Miss Lee and Miss Chan[14]. The Presiding Officer is entitled to make such finding based on the evidence. The claim for reimbursement of expenses in an employment agreement is clearly within the jurisdiction of the Labour Tribunal.

48.  Ground 5 is equally without merit.

DISPOSITIONS

49.  For the above reasons, Bollyman’s appeal must be dismissed and I so order. 

50.  I make costs order nisi that costs of the appeal be to Miss Lee to be taxed if not agreed.  This costs order nisi shall become absolute upon the expiry of 14 days from the date of this judgment unless either party applies to vary the order nisi within such period.

51.  I thank counsel for their valuable assistance.

Mr Alan M S Ng, instructed by Kelvin Cheung & Co, for the Claimant (Respondent)

Mr Paul H M Leung leading Mr Tony Chow, instructed by C L Chow & Macksion Chan, for the Defendant (Appellant)