Case Detail

HCLA000046/1997

HCLA 46 of 1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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BETWEEN
	PAN WEN TSAI	Appellant

	AND

	WING LUEN UNIVERSAL LAUNDRY LIMITED	Respondent

____________

Coram: Deputy Judge Li in Court

Date of Hearing: 4 August 1998

Date of Judgment: 4 August 1998

Date of written Judgment: 6 August 1998

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J U D G M E N T

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There were two appellants in this appeal. The first and second appellants were respectively the first and fifth claimants before the Labour Tribunal. The record shows that the second appellant withdrew his appeal after leave to appeal had been granted; hence his case is no longer a concern. What remains is the first appellant ("the appellant"). At the hearing of the appeal, the appellant appeared in person. The respondent company was unrepresented and so abandoned its right of representation.

2. According to the Reasons for Decision by the learned presiding officer, the appellant as the first among six claimants prayed for (1) wages in lieu of notice of termination and (2) severance payment. The appellant's case is that he had been employed as a shift leader in the respondent laundry factory from October 1988 until February 1997 when he and the other claimants were told that work was no longer available. Both items of claim were dismissed after a full trial at which the respondent company was absent. The Tribunal found that there was no employee-employer relationship between the appellant and the respondent. In approaching this issue, the learned presiding officer stated that she took into consideration "the authorities of Lee Tin Sang v. Chung Chi Keung [1990] 1 HKLR 764 and Leung Kam Fat v. Jonathan Fashion Manufacturing Limited, LTA 14 of 1988. The burden of proof was on C1 to establish an employer-employee relationship. The label used by the parties was not important. It was the substance that matters. A single piece of evidence is not conclusive." She also took "all documentary proof into account and the history of relationship between the parties." Apart from the question of burden of proof, I have no doubt that the learned presiding officer adopted the correct approach.

3. The Reasons for Decision of the Tribunal then went on to identify nine indicia of employer-employee relationship between the appellant and the respondent. These are countered by four indicia of contractor relationship. The learned presiding officer observed that the probabilities of the appellant being an employee and that of the appellant being a contractor were equally balanced. Since the standard is proof on the balance of probabilities, the Tribunal naturally came to the conclusion that the appellant's alleged status as an employee could not be established. In the premises, it goes without saying that the appellant could not benefit under the Employment Ordinance, Cap. 57 for wages in lieu of notice of termination and severance payment.

4. Neither I nor the appellant would have any quarrel with the learned presiding officer over the indicia of employer-employee relationship cited in the Reasons for Decision. The most essential indicia are:-

a) since 1993, the appellant was described in the respondent company's tax returns as employee;
b) the appellant had been enjoying all the statutory employee benefits whilst working for the respondent company;
c) the appellant had no power to hire workers; the wages of the appellant and the workers under him were calculated and paid directly by the respondent company; and
d) the appellant did not have to provide tools.

5. The appellant, of course, denies that the indicia of contractor relationship were valid. These are:-

(i) the appellant filed tax returns for profits tax and was given a business registration number in respect of his work with the respondent company;
(ii) since 30 April, 1991, the appellant had a written agreement with the respondent company and the Tribunal found that this agreement had not been cancelled;
(iii) under the said written agreement, the appellant had to pay compensation to the respondent company for products badly made and the appellant did at least once pay such compensation; and
(iv) under the said written agreement, the appellant was remunerated, on top of piece rate wages, by a fixed "leader's allowance" at initially $4,000 per month which was later reduced to $3,000 per month which lesser rate prevailed till termination in 1997.

6. I would have thought that (i) is a strong indication. But this tends to be cancelled out by the respondent's tax returns specifying the appellant as an employee. The effect of (ii) as a reliable indication of contractor status, really, depends on the substance of the agreement, viz. (iii) and (iv). As to (iii), if one regards this liability of the appellant to pay compensation for wrongly made products as distinct from the general liability of an employee to compensate his employer for damage done to the employer's goods and materials, it would indeed be an indication against the appellant's claim. It is (iv) that I feel uneasy about. The monthly amount of $3,000 over and above the wages he was entitled for production work done by himself is supposed to be the return for the appellant's business. However, such fixed allowance should not be lightly regarded as business profits.

7. In Wong Sai-yee v. Kong Kwan (1988) 1 H.K.L.R. 367, the appellant in that case was the person in charge of a production department in a saw mill. He recruited the workers for the department. He could also dismiss them. He worked together with his workers. There were no fixed working hours for the appellant or workers in that case. The appellant in that case was paid piece rate like the other workers but he received an extra $10 per day. At the end of each wage period, the appellant would submit an account to the management of the saw mill who would issue a cheque to him, he would then pay the workers according to their respective output. When the appellant claimed employee compensation for injuries suffered at work, the District Court found that he was an independent contractor. In a relatively short judgment of the Court of Appeal, Barker J.A. set out the facts of the case, stated that control was an important factor but not the essential factor, then said at p. 369,

"The appellant was part of the respondent's organization.
"But that is by no means the end of the case. One has to consider whether the appellant's interest in the relationship involved any prospect of profit or risk of loss. It is submitted on behalf of the respondent that the appellant could by careful and skilful management reduce the number of workers needed to carry our the requisite tasks and therefore the profit to him would have increased. This is sheer speculation, unsupported by evidence. Furthermore we can see no risk of loss. (Emphasis added.)
"Another helpful approach is that postulated by Cooke, J. in Market Investigations v. Minister of Social Security [1969] 2 Q.B. 173 at p. 184: "Was the appellant carrying on business on his own account?' In our opinion he was not. He was working exclusively for the respondent, on the respondent's premises, using the respondent's machinery to work on the respondent's materials. True it is that he had wide powers of engaging and dismissing workers, but so do senior officials in companies who are clearly employees. The reality of the situation appears to be that, as the leader of a gang, he was a foreman and that he and the workers were all employed by the respondent."

8. Comparing all factors and circumstances of this case with those in Wong Sai-yee v. Kong Kwan, it is not difficult to see that the appellant herein has an even stronger claim to be an employee than the foreman in Wong Sai-yee v. Kong Kwan. I would have no difficulty in concluding that the appellant herein was an employee of the respondent company.

9. However, this is an appeal from the Labour Tribunal. According to s. 32 of the Labour Tribunal Ordinance, Cap. 25, an appeal lies on point of law or jurisdiction only. S. 35(2)(b) of the Labour Tribunal Ordinance, Cap. 25 expressly prohibits me from reversing or varying any determination made by the tribunal on questions of fact or receiving further evidence. In Ready Mixed Concrete (South East) Pty Ltd. v. Minister of Pensions and National Insurance [1968] 2 Q.B. 497 at p. 512., MacKenna J said,

"It may be stated here that whether the relation between the parties to the contract is that of master and servant or otherwise is a conclusion of law dependent upon the rights conferred and the duties imposed by the contract."

Indeed, similar observations can be found in numerous Hong Kong and English authorities. Nonetheless, in Lee Tin-Sang v. Chung Chi-keung & another [1990] 1 HKLR 764, a case for employee compensation which went to the Privy Council, Lord Griffiths said at p. 768,

"where, ...the relationship has to be determined by an investigation and evaluation of the factual circumstances in which the work is performed, it must now be taken to be firmly established that the question of whether or not the work was performed in the capacity of an employee or as an independent contractor is to be regarded by an appellate court as a question of fact to be determined by the trial court." (Emphasis added.)

Lord Griffiths went on to say, at p. 769,

"it was held in a series of decisions in the Court of Appeal and in the House of Lords under the English Workmen's Compensation Acts that a finding by a County Court judge that a workman was, or was not, employed under a contract of service was a question of fact with which an appellate court could only interfere if there was no evidence to support his finding."

10. In the premises, where the trial court has adopted the correct approach and evaluated the evidence thoroughly as in this case, an appellate court should not impose its own judgment even though it comes to a different conclusion on the same evidence. Interference on the basis of lack of evidence in support of the original decision is rarely a real option because in the majority of cases in which employee status is in issue, there is almost always some indicia pointing to contractor status. On the other hand, an appellate court has a paramount duty to guide, if not to correct, lower courts and to see that justice is done to the parties. Where, as in this case, an appellate court believes that the lower court would probably see the case in a different light had it been shown the wisdom of earlier decisions, every opportunity should be given to the lower court to re-consider.

11. The other problem I face in this case is that even if I am bold enough to substitute the decision of the learned presiding officer with my own conclusion that the appellant was an employee of the respondent company, the Reasons for Decision of the Tribunal does not state what findings of facts have been made after trial. In the absence of primary facts, I cannot rely upon s. 35(2)(a) of the Labour Tribunal Ordinance, Cap. 25 to draw any inference of facts. So even if the appeal is allowed, the matter has to be referred back to the Tribunal for determination of the amount of wages in lieu of notice of termination and severance payment.

12. S. 35(1) provides that an appellate court may allow an appeal, dismiss an appeal or remit the matter to the Tribunal with directions. In as much as the appellant seeks on this appeal a ruling or finding on his alleged employee status, it is not an appropriate for me to allow or dismiss the appeal. Accordingly, I must and do set aside the decision of the Tribunal and remit the appellant's claim back to the Tribunal with a direction for re-trial before another presiding officer. No doubt the Tribunal will re-consider all the evidence in the light of the wisdom I have referred to. Since the appellant acts in person, I make no order as to costs on this appeal.

Z. E. Li

Deputy Judge

Representation:

Appellant (Claimant) PAN Wen-tsai, In Person (Present)

Respondent (Defendant) Wing Luen Universal Laundry Ltd., In Person (Absent)

PAN WEN TSAI v. WING LUEN UNIVERSAL LAUNDRY LTD.