Wong Man Kwan and Others v. Chun Shing Holdings Ltd
Read the full judgment text of HCLA 29/2002 on BabelCite. This HCLA judgment was delivered on 7 March 2003.
1. Whether a worker is engaged under a contract of service or contract for service has been described as an elusive question which the court has to resolve from time to time. Such question often arises in the context of Employees' Compensation Cases as well as Labour Tribunal Claims. The present appeal emanated from Labour Tribunal Claim No.2958 of 2001 and the main issue is whether several causal workers were employees working under contracts of service. The Presiding Officer held that the Clai
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HCLA 29/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE LABOUR TRIBUNAL APPEAL NO. 29 OF 2002 (ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO. LBTC 2958 OF 2001) ________________________________________________
________________________________________________ Coram: Deputy High Court Judge Lam in Court Date of Hearing: 20 February 2003 Date of Judgment: 7 March 2003 _______________ J U D G M E N T _______________ 1.Whether a worker is engaged under a contract of service or contract for service has been described as an elusive question which the court has to resolve from time to time. Such question often arises in the context of Employees' Compensation Cases as well as Labour Tribunal Claims. The present appeal emanated from Labour Tribunal Claim No.2958 of 2001 and the main issue is whether several causal workers were employees working under contracts of service. The Presiding Officer held that the Claimants were not working as employees for the Defendant and dismissed their claims. The Claimants appealed against that decision, leave having been granted on 11 October 2002. 2.Although the appeal was heard in Chinese, I have decided to write this judgment in English because I propose to discuss a number of English authorities in this judgment and I think the point may be of some general application. The 2nd Claimant is represented by counsel and written submissions were written in English. I believe his lawyers would interpret and explain this judgment to the 2nd Claimant. As to the other claimants and the Defendant, if they wish, they can apply in writing to court within 7 days from the handing down of this judgment for an appointment with the court interpreter to have this judgment interpreted to them. Background 3.The four Claimants worked for the Defendant as container truck drivers inside the container terminal of Modern Terminal Limited ["MTL"]. They had worked in such capacity for quite some time, C1 since 1997, C2 since 1994, C3 and C4 since 1999. They worked in night shifts, between 7.00 pm and 7.00 am. 4.The Defendant had two classes of drivers working for them. The first class consisted of regular drivers. There is no question that those were employees of the Defendant. They received a monthly salary and had to attend the workplace even if no job was assigned to them. They had to be responsible for the maintenance and upkeep of the vehicles. They had other benefits including holidays. 5.The second class consisted of casual drivers (the Defendant's witnesses called those contract drivers 判頭司機). They were not obliged to work every day. They were in effect a pool of reserve drivers. Since the demand for drivers for each day was irregular, depending on the requirement of MTL, if the Defendant did not have sufficient regular drivers to meet the demand of MTL, the Defendant would contact these casual drivers and ask them to work. They would be paid by reference to a daily sum of $727.00 which, according to the evidence of a defence witness, DW7, was higher than the average daily pay of the regular drivers at $434.00. But they did not enjoy other benefits. They had no holidays and the Defendant said they could turn down work at their own will. They did not have to be responsible for maintenance and upkeep of the vehicles. 6.In terms of works, apart from the duty to maintain and upkeep the vehicles, there did not appear to be much difference between the two classes of drivers. Both classes of drivers had to follow the instructions of the Defendant in the performance of their duties. They did not have to bring along any equipment for their works and the vehicles and gasoline were provided by the Defendant. They received payments for their services (though calculated in different manner) and there was no risk of loss being sustained by either class of drivers. 7.The Claimants belonged to the second class. The Defendant's contention was that they were not employees. The Claimants said they were. Despite the fact that they were casual drivers, the Claimants had been working consistently for the Defendant on average about 20 to 25 days per month. They rarely turned down works. According to the finding of the Presiding Officer, due to the satisfactory performance of these Claimants, the Defendant had a priority in turning to them for additional drivers when the demand for drivers could not be met by its regular drivers. 8.Unfortunately, due to the introduction of MPF by the Government in late 2000, the dispute as to the status of these Claimants surfaced. MTL wished to ensure all drivers worked within its terminal had complied with the legislative requirements concerning MPF and required the Defendant to submit MPF information regarding its drivers by 31 January 2001. As a result, the Defendant demanded the casual drivers to subscribe to MPF schemes as self-employed persons. The Claimants regarded this demand as wrongful since they considered themselves as being employed by the Defendant. They therefore refused to accede to the request. Because of that, the Defendant cut down the engagements of the Claimants since December 2000. In February 2001, C1, C2 and C4 only worked for 2 days, C3 did not work at all. 9.The Claimants regarded themselves as being laid off on 13 February 2001 and lodged claims in the Labour Tribunal on 24 April 2001 for wages in lieu of notice, annual leave pay, statutory holidays and in the case of C1 and C2 severance pay or alternatively long service payments. Decision of the Presiding Officer 10.The Presiding Officer regarded the crucial issue in the case as whether the Claimants were employees of the Defendant. He decided that issue against the Claimants and dismissed their claims on that basis. He came to that conclusion by reference to the proposition that there must be mutual obligation between the parties before there could be any employment: the employer must be under a duty to provide casual jobs to the employee and the employee must be under a duty to the employer to undertake such work (see Para. 33 of his written reasons for decision). He found that there was an absence of such mutual obligation in the relationship between the Claimants and the Defendant. He also referred to the difference between the regular drivers and the casual drivers and held that it was a difference in substance. 11.This is a case where a worker would not get paid if he did not work. I believe the Presiding Officer might have had in mind the irreducible minimum of mutual obligation necessary to create a contract of service alluded to by Lord Irvine LC in Carmichael v National Power Plc [1999] 1 WLR 2042 at p. 2047. 12.The Presiding Officer considered this question of mutual obligation by analyzing, inter alia, the evidence of two witnesses: DW5 and C5 (who did not lodge any appeal), two other casual drivers. From their evidence, the Presiding Officer concluded that there was no mutual obligation between the casual drivers and the Defendant. The Presiding Officer also found as a fact that the Claimants were aware of the difference between the terms of their engagement and those of the regular drivers and inferred that the Claimants knew that neither the Claimants nor the Defendant owed each other any binding obligations in terms of providing works and undertaking the same. The irreducible minimum of mutual obligation 13.In my judgment, before one considers the question of mutuality of obligation, it is important to distinguish between two issues which might arise in the context of casual workers. Sir Christopher Slade identified the two issues in Clark v Oxfordshire Health Authority [1998] 1 IRLR 125 at p. 127 as follows,
Mutuality of obligation as discussed is essential to issue (b) but not to issue (a). The concept of "global contract" was explained by Slade LJ in McLeod v Hellyer Brothers [1987] IRLR 232 at p. 238-9 as follows,
In McMeechan v Secretary of State for Employment [1997] IRLR 353 at p. 356, Waite LJ said,
14.It is therefore legally possible that during each individual engagement (viz. when the worker was actually working) there was a contract of employment even in the absence of a global contract. On that scenario, when the worker was not occupied in a single engagement, the want of mutuality of obligation in terms of future engagement would negate the existence of any global contract and break the continuity of contract of employment. This was the reason why in Clark v Oxfordshire Health Authority, the Court of Appeal remitted the matter back to the Industrial Tribunal to consider issue (a) notwithstanding that it decided against the worker on issue (b). 15.In the context of Employment Compensation cases, usually the court would only need to consider issue (a). The usual situation would be that a worker was injured when he was working for the defendant. It would not be strictly necessary to consider issue (b) which entails an examination of the relationship between a worker and the defendant over a broader spectrum. Hence, one finds little discussion of this issue of mutuality of obligation in such context and cases on casual workers decided in that context must be read in this light. 16.On the other hand, when the dispute between the parties is related to rights and obligations under the Employment Ordinance, issue (b) could be important when a prerequisite for a certain right is that the employee has been employed under a continuous contract of employment for a period of time. Such prerequisite can be found in respect of the claims of these Claimants for holiday pay (see Section 40 of the Employment Ordinance), annual leave (Section 41AA), severance pay (Section 31B) and long service payment (Section 31R). 17.As regards the claim for wages in lieu of notice, the case of the Claimants is based on dismissal by the Defendant, a concept difficult to apply to a casual worker without any global contract if the employer simply did not re-engage the worker. Lord Denning MR said in Wiltshire County Council v National Association of Teachers [1980] ICR 455,
To the same effect is the judgment of Ackner LJ. See also Brown v Knowsley Borough Council [1986] IRLR 102; Chan Lok Mei v Sze Chi Sing, MECA No.9 of 1995, 22.1.1996. Dismissal in the context of severance payment is different in respect of fixed term contract, see Section 31D (1)(b). 18.The lack of mutuality was also a point discussed in the Privy Council in Cheng Yuen v Royal Hong Kong Golf Club [1997] HKLRD 1132. Lord Slynn referred to this point in dismissing the appeal at p. 1138G to I,
19.In his dissenting judgment, Lord Hoffmann examined the position of a casual worker at p. 1139E to G,
20.As to the effect of the First Schedule of the Employment Ordinance, Lord Slynn did not expressly dealt with the same in his speech. Mr Yeung, counsel for the 2nd Claimant, argued that it was because Lord Slynn's focus was that the caddie's contract of service, if any, was made with the golfer instead of the club. Judging from what His Lordship said at p. 1139A to B, that observation seems to be correct. But the fact remains the speech of Lord Hoffmann was a dissenting judgment and as such does not represent the ratio decidendi in that case. Of course, the view of Lord Hoffmann must be considered by this court with great respect. 21.At one stage, I was puzzled by the fact that Lord Hoffmann was also a member of the House of Lords in Carmichael v National Power Plc and His Lordship agreed with the judgment of Lord Irvine. At p. 2051, Lord Hoffmann apparently accepted that mutuality of obligation was essential,
However, the words highlighted by me are significant. They show that Lord Hoffmann merely decided that there was no contract of employment by the mere general engagement at the beginning of the relationship. His Lordship did not find it necessary to deal with the situation after the guide has worked for some time. 22.The same observations can be made with regard to two other recent decisions on mutuality of obligation, Clark v Oxfordshire Health Authority and Stevedoring & Haulage Services v Fuller [2001] IRLR 627. In Clark, the matter was remitted to the industrial tribunal and one of the issues to be decided was whether the specific engagement amounted to a contract of service (see p. 130). In Fuller, although the Court of Appeal declined to remit this issue to the tribunal, Tuckey LJ said that further proceedings specifically putting the case on the basis of successive ad hoc engagements were contracts of employment could be started if necessary. See also McLeod v Hellyer Brothers [1987] IRLR 232. 23.It would therefore appear that neither the English authorities on mutuality of obligation nor Cheng Yuen finally disposed of the issue whether a casual worker can satisfy the requirement of being employed under a continuous contract if he actually worked under successive ad hoc engagements for the number of weeks and hours as required under the First Schedule. The authorities only decided that without mutuality of obligation, there could not any "global" or "umbrella" contract of employment. 24.The correlation between the concept of continuity of contract of employment and entitlement to statutory rights and benefits in the context of casual workers is highlighted in Paras. 1-2128 and 1-2129 of Sweet & Maxwell's Encyclopedia of Employment Law. I would just quote from part of Para. 1-2129,
25.Conversely, if the ad hoc engagements are not interrupted by lengthy intervening periods to take the case of a casual worker outside the deemed continuity under the First Schedule (see Section 3(1) of the Employment Ordinance), there is no need to resort to the concept of "global" contract. 26.Although the English legislation also contained the concept of continuity, the relevant statutory rules are different from those in the First Schedule. The crucial paragraphs in Hong Kong are Paragraphs 2, 3 and 6 of the First Schedule.
27.The combined effect of Paragraphs 2 and 3 is that so long as an employee has worked for 4 weeks preceding the relevant date and worked at least 18 hours for each week, he would be deemed to be in continuous employment, or in other words, deemed to be employed under a continuous contract. 28.Paragraph 6 makes it clear that it does not matter that the employee was working under different contracts and there were gaps in between so long as he worked for the same employer. Hence, if there were a successive series of ad hoc engagements which, on proper analysis, amounted to successive contracts of employment, an employee is entitled to add them together to make out a case of continuous employment by showing he has worked for the same employer for 4 consecutive weeks with at least 18 hours of work in each week. 29.On the other hand, if a casual worker cannot show that, he might have to resort to the concept of "global contract". If he could establish a case of "global contract", he would be able to rely on Paragraph 2(b) of the First Schedule and argue that the absence from work was by mutual agreement and should also be counted as working hours. For this purpose, the question of mutuality of obligation is important. 30.Therefore, the absence of mutuality of obligation is not necessarily fatal to all the claims of the Claimants. The Presiding Officer should have approached the claims by first asking whether the Claimants worked as employees for the Defendant in respect of each engagement. If they were, he should then consider whether the test for continuity of employment in the First Schedule could be satisfied without any global contracts. It is only when a Claimant needs to rely on Paragraph 2(b) of the First Schedule the mutuality of obligation is essential. 31.The Presiding Officer therefore misdirected himself in law in regarding the lack of mutuality of obligation as decisive of all the claims. This would only dispose of the claim for wages in lieu of notice. For the reasons given in Paragraph 17 above, the employment of the Claimants cannot be regarded as terminated by the Defendant in the absence of global contracts. I observe that Section 5(1) could not assist the Claimants because in the absence of global contracts, each engagement of the Claimants was confined to the duration of that particular engagement, viz. the employment (if any) only lasted as long as that particular shift. This would be an agreement contrary to the presumption of a monthly contract in that sub-section. For the other claims, the primary issues are whether there was any contract of services and whether the requirements of the First Schedule had been satisfied. The Presiding Officer did not deal with those issues other than by reference to the lack of mutual obligation. The errors in the finding of the Presiding Officer as to lack of mutuality 32.As mentioned, the Presiding Officer placed reliance on the evidence of DW5 and C5 in coming to the finding of lack of mutuality of obligation between the Claimants and the Defendant. Since this is a finding of fact, this court can only interfere if the finding is one which could not be reasonably entertained on the evidence before the tribunal or if the Presiding Officer made any error of law in the fact finding process. 33.The Presiding Officer referred to DW5's evidence that when the latter ceased his relationship with the Defendant and told DW6 of the same, DW6 did not prevent him from doing so and neither did DW5 demand a notice of termination or payment in lieu of notice from DW6. Since DW5 left on his own initiative, I fail to see the significance of the latter observation. Further, the mere fact that DW5 gave notice to DW6 as to the cessation of relationship is an indication that at least DW5 regarded that there was an ongoing relationship and notice had to be given. 34.As regards C5, his evidence was that when he stopped working for the Defendant between May and October 2000, he had notified the Defendant about one week in advance. After he had completed his decoration job for others, he resumed working for the Defendant upon giving notice to the Defendant. Again, one might ask if there was no commitment between the parties, why did C5 need to give advance notice to the Defendant for suspension of his service. 35.One might say that C5 gave such notice to maintain a good relationship with the Defendant, but that cannot be said in respect of DW5 as he was terminating his relationship with the Defendant in circumstances similar to the Claimants in this appeal. On the whole, based on the summary of the evidence as recorded in the written reasons for the decision (I was not supplied with the transcript of proceedings), I am of the view that no tribunal of fact can reasonably come to the conclusion that there was no mutuality of obligation merely on the strength of the evidence of these two witnesses. At the most, their evidence was neutral on this point. 36.However, apart from DW5 and C5, there were other defence witnesses giving evidence on this issue, see the summary of the evidence of DW6 and DW7. The Presiding Officer accepted their evidence (see Paragraph 36 of his reasons for decision). Unfortunately, in coming to that conclusion he mistakenly thought that the evidence of DW5 and C5 corroborated their evidence (see Paragraph 38 of his reasons). In so concluding, the Presiding Officer misunderstood the effect of the evidence of DW5 and C5 and made an error of law in his weighing of the evidence (see Andayani v Chan Oi Ling [2000] 4 HKC 233 at p. 239D). This court can therefore intervene. Disposal of the appeal 37.In O'Kelly v Trusthouse Forte Plc [1983] ICR 728, Lord Donaldson MR gave a very useful reminder as to the function of an appellate court which is only empowered to entertain appeal on points of law at p. 764B to D,
This should be read together with the dicta of Waite J approved by the Court of Appeal in McLeod v Hellyer Brothers [1987] IRLR 232 at 241,
38.Mr Yeung invited this court to reach its own conclusions on the facts and make an award in favour of the Claimants. In my judgment, properly directed in law, the tribunal should approach the claims in the following manner in identifying the nature of the relationship between the parties,
After answering these questions, if the Presiding Officer found that there was a continuous contract of employment in respect of a claimant either by way of a series of separate contracts or a global contract, he would then have to consider whether the other statutory requirements regarding each of his claims were satisfied, e.g. in the context of the claim for severance payment, whether there was a situation of lay-off as defined in Section 31E, as well as quantification of the claims. 39.Due to the errors of law pinpointed above, the decision of the Presiding Officer must be set aside. However, I am not satisfied that this is a case where I can properly draw my own conclusions on some essential findings and substitute the decision of the Presiding Officer accordingly. On the question of the legal nature of the relationship in respect of each individual engagement, the Presiding Officer should consider all aspects of the relationship, no single factor being in itself decisive and each of which may vary in weight and direction, and having given such balance to the factors as seems appropriate, determine whether a particular claimant was carrying on business on his own account, or in the present context supplying services to the Defendant as a self-employed person. It is primarily a balancing exercise which an appellate court could intervene in limited circumstances. I would again respectfully repeat what Lord Donaldson MR said in O'Kelly at p. C to E,
40.I do not think this is a case where no reasonable tribunal could conclude that the relationships between the Claimants and the Defendant were contracts for services. Each case must depend on its own facts and given the approach of the Presiding Officer adopted in his Reasons for Decision, I am not certain that I have a full picture of all the relevant evidence. The Presiding Officer mentioned the evidence of DW7 that the daily remuneration of the Claimants were higher than that of the regular drivers and that the Claimants were aware that the Defendant did not file any returns for salary tax in respect of them. The Presiding Officer also disbelieved the Claimants about their professed ignorance of statutory benefits of an employee. He found they were aware that they were not entitled to those benefits in their agreements with the Defendant. These are relevant factors to be taken into account. Whether these factors could be outweighed by other relevant factors I cannot tell. What had been said between the parties and their understanding when the Claimants were engaged might also be relevant and I do not know whether evidence had been led in relation to these matters. On the question of mutuality of obligation, I have no means to assess whether the evidence of DW6 and DW7 would be preferred if the Presiding Officer had not made the errors as to the evidence of DW5 and C5. The Presiding Officer should also consider whether the course of dealings between the parties can import any mutual obligation to support a "global contract" as in Nethermere (St Neots) Ltd v Gardiner [1984] ICR 612 and Airfix Footwear v Cope [1978] ICR 1210 (contra. Stevedoring & Haulage Services v Fuller [2001] IRLR 627). In such circumstances, I should not usurp the function of the Labour Tribunal. 41.I therefore allow the appeal and set aside the award of the Presiding Officer. For reasons given, I have to remit the case in respect of the four Claimants back to the Presiding Officer to decide the case in accordance with the approach I set out above and I leave it to him to decide whether he needs to hear further evidence from the parties. In any event, the parties should be entitled to make further submissions to him in the light of this judgment. Since the Defendant did not appear to resist the appeal, I make an order nisi that the party who ultimately succeeds in the Labour Tribunal shall have the costs of this appeal.
Representation: Mr Dominic Yeung, instructed by Kwok, Ng & Chan, for C2 C1, Wong Man Kwan, in person, present C3, Li Chin Fung, in person, present C4, Li Ping Lam, in person, present Respondent, Chun Shing Holdings Limited, absent |
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