Chan Hau Hin and Others v. Wan Chung Construction Co. Ltd.

HCLA000038X/1998

HCLA 38/1998

Headnote

Employment Ordinance - Liability of the principal contractor for the arrears of wages due from a sub-contractor to his employee.

Pursuant to Section 43D (1) of the Employment Ordinance, the Commissioner of Labour is empowered to grant an extension of an additional period of not exceeding 90 days after the expiration of the period of 60 days from the date on which the wages become due to an employee of a sub-contractor for him to serve a notice in writing on the principal contractor, holding the principal contractor liable for the wages owed to them by the sub-contractor.

In arriving at the date on which the wages become due, consideration shall be given to the circumstances of each individual case, and it shall be decided according to one of the situations specified in Sections 23, 24 or 25 of the Employment Ordinance.

[English Translation-英譯本]

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPELLATE JURISDICTION

LABOUR TRIBUNAL APPEAL No.38 OF 1998

(On appeal from Labour Tribunal Claim No. LT 1031 of 1998)

	Chan Hau Hin Cheung Tung Chi Lee Tsz Chow	Claimant (Respondent)
	AND
	Wan Chung Construction Co. Ltd.	Defendant (Appellant)

Coram: The Hon. Mr. Justice Yeung in Court

Date of hearing: 26 November 1998

Date of Judgment: 4 December 1998

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JUDGMENT

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1. The appellant, Wan Chung Constructuion Co. Ltd. (hereinafter called "Wan Chung Co."), was the principal contractor of the History Museum in Tsim Sha Tsui.

2.Wan Chung Co. sub-contracted part of the project to Tsang Wai Tat trading in sole proprietorship as Hop Lee Engineering Co. (hereinafter called "Tsang Wai Tat"). The three respondents were concrete breakers employed by Tsang Wai Tat to work at the aforesaid place.

3.The respondents alleged that Tsang Wai Tat had defaulted on payment of wages due to them in relation to the aforesaid project. On 5th November, 1997, they pressed Tsang Wai Tat for payment of wages in arrears after they had ceased to work, but in vain. Therefore, on 26th January, 1998 they issued a notice to Wan Chung Co. stating that they would seek to recover arrears of wages pursuant to Section 43D (1)/ Section 43H (1). At the same time when the aforesaid notice was issued, the Commissioner of Labour also permitted the respondents an additional period of 90 days to serve the notice on Wan Chung Co. Wan Chung refused to make the relevant payments. Accordingly, the respondents filed a claim in the Labour Tribunal on 26th February, 1998. The Presiding Officer of the Labour Tribunal made an award after trial against Wan Chung Co. in favour of the respondents, each in the sum of $ 70,969.75 arrears of wages, totalling $ 212,909.25.

4.Wan Chung Co. now appeals against this decision. The grounds are as follows:-

(1) Pursuant to Section 43D (1) of the Employment Ordinance, where an employee of a sub-contractor is not paid by his employer and seeks to recover wages from the principal contractor, he must serve a notice on the principal contractor within 60 days from the date on which the wages become due. Although the Commissioner of Labour may permit an additional period not exceeding 90 days, the Commissioner must do so before the 60-day period expires, otherwise the permission would be invalid. When the Commissioner permitted the respondents an additional period of 90 days to serve the notice on Wan Chung Co., the 60-day period had already expired. Accordingly, the extension of time granted by the Commissioner was invalid and the notice was invalid, too. The respondents were not entitled to claim against Wan Chung Co. by virtue of the Employment Ordinance.

(2) The respondents issued another notice to Wan Chung Co. on 26th February, 1998. There was discrepancy between the contents of this notice and the notice dated 26th January, 1998. In the notice dated 26th February, 1998, the respondents alleged that each of them was owed $58,970 in wages whereas in the notice dated 26th January, 1998, they alleged that each of them was owed $70,969.75. The Presiding officer had failed to make proper enquiries into the said discrepancy before deciding on the truth of the matter. Neither could the information provided by the respondents accurately show that the amount of arrears of wages was $70,969.75 as alleged. The Presiding Officer had also failed to notice that the information provided by the respondents were inconsistent with their calculations of arrears of wages.

5. The respondents ceased to work on 5th November, 1997. Pursuant to Section 24 of the Employment Ordinance, wages shall be paid within 7 days on completion of the contract of employment.

6. M. Lam, counsel for Wan Chung Co. said that the last working day of the respondents was 5th November, 1997, the arrears of wages would therefore have to be paid on the same day. Notice in writing issued under Section 43D (1) of the Employment Ordinance must be served within 60 days from 5th November, 1997, that is before 4th January, 1998. Should the Commissioner of Labour grant an extension of time, such decision must be made before that day. Otherwise, it would be invalid.

7. The last working day of the respondents needed not necessarily be on the same day when wages became due to them. The date on which wages become due has to be decided in accordance with one of the situations specified in Sections 23, 24, or 25 of the Employment Ordinance. In the present case, the Presiding Officer had failed to consider this point. Nor did the information supplied disclose in detail as to which of the three situations specified in Sections 23, 24, or 25 applies in the present case. In certain cases, this might be very significant. For example, where the termination of an employment contract is by payment of wages in lieu of notice, the period of notice might have to be included when deciding on the date on which wages become due. By the same analysis, in the case of constructive dismissal, the period of notice required to be given by an employer to an employee might also have to be considered when deciding on the date on which wages become due.

8. In the present case, "the last working day" and "date of dismissal/leaving employment" stated in items 17, 18 of a statement submitted to the Labour Tribunal by the respondents were 5th November, 1977. The respondents also wrote down the four characters "project completed".

9. If the respondents ceased to work on 5th November, 1997 because the relevant project completed on that day, Section 24 of the Employment Ordinance would then apply. It would also mean that it was the date on which the wages became due, and that the 60-day period of notice as prescribed by Section 43D of the Employment Ordinance should be counted therefrom. Mr. Lam therefore alleged that the period of notice would expire on 4th January, 1998. Before that day, Wan Chung Co. had not received any notice from the respondents, nor did the Commissioner permit an additional period allowing the respondents to serve a notice out of time. According to Section 43D (2), Wan Chung Co. shall not be liable for the arrears of wages in question.

10. In the present case, the exact date on which the wages became due, in my judgment, is not significant. I assume the suggestion of Mr. Lam that the date on which the wages became due was 5th November, 1997 is correct, and that the 60-day period as referred to in Section 43D (1) of the Employment Ordinance expired on 4th January, 1998.

11. However, I do not accept Mr. Lam's argument that unless the permission by the Commissioner to extend the time was granted within 60 days from the date on which the wages became due, it would otherwise be invalid.

12. The Commissioner of Labour is empowered to permit an extension of the relevant period for 90 additional days as provided by Section 43D of the Employment Ordinance. The same Ordinance does not provide that the permission for extension of time must be granted within the first 60 days.

13. Mr. Lam submitted that unless an extension of time is required to be granted within 60 days after the wages become due, an employee might otherwise apply to the Commissioner for an extension of time only long after the 60 days period has expired. If the Commissioner grants the permission, the employee may then seek to recover wages in arrears from the principal contractor by virtue of the Employment Ordinance only several years after the incident. That would be extremely unfair to the principal contractor.

14. The scenario as described by Mr. Lam was by all means imaginary. The additional period that the Commissioner may permit under Section 43D (1) of the Employment Ordinance cannot exceed 90 days. The said additional 90 days and the 60 days after the date on which the wages become due correlate with each other. The notice served on the principal contractor under Section 43D (1) of the Employment Ordinance by the employee cannot be issued beyond the period of 150 days from the date on which the wages become due. The additional period of 90 days refers to the additional 90 days that immediately follow the said 60 days, instead of the 90 days in any other period.

15. The relevant Ordinance has given the Commissioner an absolute discretion to permit an extension of an additional period of not exceeding 90 days when the period of 60 days after the date on which the wages become due as prescribed by Section 43D (1) of the Employment Ordinance expires. The Commissioner had exercised the discretion. The appellant had no ground for objection. Nor did I have the power to interfere with it.

16. I should not ignore the purpose of the Employment Ordinance, which is, as clearly stated in its introduction, " to provide for the protection of the wages of employees, to regulate general conditions of employment and employment agencies, and for matters connected therewith".

17. In considering and interpreting the provisions of the Employment Ordinance, the Court must take into consideration the intention of the legislature to protect the wages of employees.

18. I should not ignore the fact that the general working public has inadequate knowledge of the provisions and it would be easy for them to neglect the requirements by law. If the Commissioner were not empowered to extend the time after the 60 days period has expired, it would cause injustice to the employees, and seriously undermine the effect of the legislation to protect the wages of the employees.

19. The Court, of course, should not totally disregard the interest of the principal contractor. If the period of notice were to be extended for too long, the principal contractor might have released the "retention moneys" relating to the project in full to the sub-contractor or destroyed the relevant documents or both parties might have clearly accounted for their rights and obligations. If the principal contractor were still held liable for the wages due to the employees from the sub-contractor, it would cause injustice to the principal contractor.

20. However, I have also considered that the period within which an employee serves a notice on the principal contractor under Section 43D (1) of the Employment Ordinance, in any event, cannot exceed 150 days after the date on which the wages become due. As such, it is unlikely that permission by the Commissioner to extend the time for an employee to serve a notice on the principal contractor would cause injustice to the principal contractor.

21. Moreover, as Mr. Lam had very properly and fairly pointed out to the Court, Section 72 of the Interpretation and General Clauses Ordinance (Cap 1) has provided for the power of a public officer to extend time as follows: -

" Where in any Ordinance a time prescribed for doing any act or taking any proceeding and power is given to a court, public body, public officer or other authority to extend such time, then the power may be exercised by the court, public body, public officer or other authority although the application for the same is not made until after the expiration of the time prescribed."

22. In court proceedings, if the application for an extension of time is made after the original period has expired, the Court may still extend the period of time. (Rule 5 of Order 3 --- the High Court Rules)

23. There is some legislation that specifically provides that an application for extension of time must be made before the original period expires. Such legislation has been subject to criticism and the Court has expressed reservation on the inflexible approach in dealing with application for extension of time. (See the judgment of` Robert Goff J. in Carmel Exporters (Sales) Ltd. v. Sea Land Services Inc. [1981] 1 W.L.R. 1061 at p 1079)

24. I do not agree with the submission of Mr. Lam that if the employees of a sub-contractor fail to serve a notice on the principal contractor within the statutory period of 60 days after the date on which the wages become due, the statutory protection conferred on them by the Employment Ordinance to claim against the principal contractor for arrears of wages would be lost.

25. Wan Chung Co. fails in its 1st ground for appeal.

26. The establishment of the Labour Tribunal by the government of Hong Kong is to provide a simple, inexpensive and expedient procedure to resolve labour disputes. The Tribunal has its specified jurisdiction. The procedure and practice adopted by the Tribunal are different from an ordinary court. In the Labour Tribunal neither party is entitled to be represented by lawyer (Section 23 of the Labour Tribunal Ordinance). Inquiries shall be conducted by a tribunal officer before hearing for preparation of the summary of facts relating to the claim (Section 14). There must be conciliation before hearing (Section 15). The hearing shall be informal and generally the rules of evidence shall not apply (Section 20, 27). Most important, pursuant to Section 20 (3) of the Labour Tribunal Ordinance, the presiding officer has a duty and shall investigate any matter relevant to the claim, whether or not it is raised by a party.

27. In the present case, the respondents served two notices on Wan Chung Co. pursuant to Section 43(D) of the Employment Ordinance. In the first notice dated 26th January, 1998 it was stated that each of them had been defaulted on payment of wages in the sum of $58,970. In the second notice dated the 26th February, 1998, it was stated that the amount of wages that each of them had been defaulted was $70,969.75. The period of claim for this notice was 10 days shorter than the first notice.

28. The respondents had never explained why in the second notice the claimed amount was higher although the period of claim was shorter. The Presiding Officer had not made any enquiries into the aforesaid inconsistency either.

29. Although the representative of Wan Chung Co. had not made any complaint about the said inconsistency at the hearing, the Presiding Officer shall, by law, investigate to find out the truth.

30. In addition, the method of calculation used by the respondents in arriving at the claimed amount was clearly erroneous. The respondents adopted the respective unit rates of $45, $31, and $18 for breaking concrete of 2", 1 1/2" and 1" thick as the basis of calculating the claimed amount. However, according to the evidence of Mr. Chan Hau Hin, the 1st respondent, the remuneration that they were entitled to receive from Tsang Wai Tat pursuant to the agreement was calculated on the unit rates of $43, $29 and $16. The higher unit rates were paid only to Tsang Wai Tat by Wan Chung Co., and it had nothing to do with the respondents.

31. The aforesaid has significant effect on the amount of claim to which the respondents are entitled. Yet, the Presiding Officer had totally overlooked it.

32. The respondents pointed out to me in court that there were some other workers other than the three of them who were also entitled to the claim. They would also seek to recover it from Wan Chung Co. on behalf of these other workers, and they would also distribute to them the additional wages obtained.

33. If the other workers alleged they were entitled to recover wages in arrears from Wan Chung Co., they must personally take out the claim, and cannot simply do it through somebody else. Otherwise, neither the issue on liability nor the issue on the amount of award can be made clear. That would be against justice.

34. I firmly believe that the Presiding Officer had failed to make proper enquiries at the hearing as to the amount of claim to which the respondents were entitled, thereby resulting in an erroneous amount of claim awarded. This must be rectified. The proper way to do is to remit the case to the Labour Tribunal for the Presiding Officer to make proper enquiries into the amount to which the respondents were each entitled before making an award afresh on the basis of the result of the enquiries.

35. The Wan Chung Co. succeeds in its 2nd ground for appeal. Accordingly, the appeal is allowed.

36. The case is remitted to the Labour Tribunal for the Presiding Officer to decide on the amount of wages in arrears to which the respondents were each entitled.

37. Having considered the nature and background of this case, I make no order as to costs of the appeal. The above costs order nisi shall become absolute 14 days after this judgment is handed down.

	( Wally Yeung)
	Judge of the Court of First Instance

Representation:

Mr. Paul Lam, instructed by Messrs. Lee & Chan for Appellant.

Respondents, Mr. Chau Hau Hin, Mr. Cheung Tung Chi and Mr. Lee Tsz Chow, appearing in person