The Judicial Committee of the Privy Council Decisions

Privy Council Appeal No. 29 of 1997

 

Cheng Yuen Appellant

v.

The Royal Hong Kong Golf Club Respondent

 

FROM

 

THE COURT OF APPEAL OF HONG KONG

 

---------------

REASONS FOR REPORT OF THE LORDS OF THE

JUDICIAL COMMITTEE OF THE PRIVY COUNCIL

OF THE 19th June 1997, Delivered the

28th July 1997

------------------

 

Present at the hearing:-

Lord Browne-Wilkinson

Lord Slynn of Hadley

Lord Lloyd of Berwick

Lord Steyn

Lord Hoffmann

  [Majority Judgment Delivered by Lord Slynn of Hadley]

 

-------------------------

 

1. From September 1986 Mr. Cheng acted as a caddie for golfers at the Deep Water Bay course of the Royal Hong Kong Golf Club ("the Club").  In October 1995, when aged 82 or thereabouts, he was told that he was no longer required.  He was given no monetary compensation and so he brought a claim against the Club before the Labour Tribunal.  He claimed that he was an employee of the Club and he asked for 26 days' wages in lieu of notice and a long service payment in view of his length of service.  The Club's defence was that he was not an employee but an independent contractor so that he could not take advantage of the Employment Ordinance (Cap. 57) which in section 2 defines "contract of employment" as "any agreement, whether in writing or oral, express or implied, whereby one person agrees to employ another and that other agrees to serve his employer as an employee ...".  The Tribunal found in his favour and awarded him $33,840; Mrs. Justice Bokhary in the High Court upheld that decision.  The Court of Appeal allowed the Club's appeal and set aside the award in favour of Mr. Cheng.  On 20th May 1987 he was given special leave to appeal to their Lordships' Board which at the end of the oral hearing announced that they would advise Her Majesty that the appeal should be dismissed and that their reasons would be given subsequently.

 

2. The Tribunal in its decision found that Mr. Cheng had no written contract.  He had filled in an application form which stated:-

"... that misrepresentations are sufficient cause for dismissal.  I further understand my responsibility towards the Royal Hong Kong Golf Club caddie organisation.  I will conduct myself in a proper manner and act with respect towards the Club members, employees and property."

 

3. Other caddies, but not he, signed a letter stating that they were independent contractors "willing to caddie for your members, guests [etc.]" and agreeing that they were self employed and that "the arrangement between me and the Club shall not, in any event or circumstances, constitute or be construed as a relationship of employer and employee ...".  In January 1995 the Club posted a notice to the effect that "caddies are independent contractors, not an employee.  As caddies are employed by individual golfers and without any employment relationship with the Club, caddies cannot make any Employees' Compensation claims against the Club".  Neither the letter nor the notice constituted terms of Mr. Cheng's contract with the Club though they indicated the terms on which other caddies were employed but it is said that if other caddies were not employees because of these documents, the implication in the absence of clear evidence the other way is that so was he.

 

4. The Tribunal found that Mr. Cheng was given a number, a locker and a uniform.  He worked only when he wished to though in fact he went to the Club everyday.  He then waited with other caddies (of whom at the Club's various courses there were some 600) for his turn "to offer the aforementioned service to the members".  There was no guarantee that he would get any work though it was agreed that he averaged two rounds a day at a payment of $90 per round.   At  the  end of each day he was paid in cash by the Club which debited the member concerned who repaid the Club the amount paid to Mr. Cheng.

 

5. The Tribunal considered some of the many cases which have indicated the appropriate test to be used in deciding whether a person is an employee under a contract of service or an independent contractor, such as Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions & National Insurance [1968] 2 QB 497 and Market Investigations Ltd. v. Minister of Social Security [1969] 2 Q.B. 173 together with Chitty on Contracts (26th ed.) and Upex The Law of Termination of Employment (4th ed.).  It found that in the relationship between the Club and Mr. Cheng there existed the kind of control to be expected by an employer over an employee constituted by the provision of uniform, the giving of instructions as to what the duties entailed and the disciplinary power to reduce a caddie in grade or to dismiss him.  The Club benefited indirectly from the payment and collection of fees paid to the caddie who could not be said to be engaged in business on his own account.  These factors, the Tribunal found, outweighed the indication to be drawn from the fact that he did not get the benefits normally provided by an employer for an employee such as insurance cover, holidays, sick leave and a pension scheme.  The Tribunal said:-

"... on balance I found that the Claimant was an employee to the Defendant rather than an independent contractor."

 

6. In the High Court Bokhary J. considered the primary facts found by the Tribunal and the indicia indicated both in Cooke J.'s judgment in Market Investigation and in Chitty.  The learned judge found these indicia to be either neutral or supportive of the claim that Mr. Cheng was an employee of the Club.  She rejected the suggestion that the Club merely collected monies and paid the caddies as agents for the members so that the caddies were to be seen as employees of the members.  She concluded:-

"The idea of a club setting itself up as a money-losing agent is unconvincing.  What is convincing is the idea of a club providing a range of services, some of which may be subsidized, to its members."

 

7. She directed herself on the basis of their Lordships' opinion in Lee Ting sang v. Chung Chi-keung [1990] 2 AC 374 that:-

 "... even if I leaned towards the opposite conclusion [i.e. that Mr. Cheng was not an employee of the Club], it would nevertheless be quite impossible for me to say that no tribunal correctly directing itself on the law could reasonably have reached the conclusion under appeal."

 

8. In the Court of Appeal Nazareth V.-P. said that he could see good reason why the Club might wish to regulate "the arrangements, standards and conditions upon which they [the caddies] were allowed onto its golf course to offer their services" and to make payment to the caddies as agent for individual members.  He added:-

"... it is clear that in the caddies' actual work or provision of services, it would be the playing member who availed of the work or services who would be in control (as opposed to the Club's control of standards and arrangements)."

 

9. On the primary facts there could only be one inference "that there were only contracts for services on the part of the members who engaged the caddies, and certainly not a contract of employment with the Club".  Reminding himself of the judgment in Lee Ting sang (supra) he said:-

"I have been driven to a conclusion contrary to that reached below, and it is in my view the only reasonable conclusion that can be reached on the primary facts."

 

10. Mayo J.A. thought that all the evidence was indicative of a series of contracts with the player each time Mr. Cheng attended at the golf club to act as a caddie:-

"I say this because on a realistic assessment of the position what the appellant was doing was providing a system whereby caddies could perform their duties for members of the Club."

 

11. Accepting that the question whether work was performed as an employee or as an independent contractor was to be regarded by an appellate court as a question of fact to be determined by the trial court he quoted from the judgment of Clough J.A. in Chan Kwok-kin v. Mok Kwan-hing and Another [1991] 1 H.K.L.R. 631, 634:-

"In accordance with well-settled principles this court must not  interfere with the judge's evaluation of the facts and

impose a second opinion if the case is a borderline one where it would be reasonable for similarly instructed minds to come to different conclusions.  On the other hand, this court is obliged to interfere if it concludes that, as Lord Radcliffe observed in Edwards v. Bairstow [1956] AC 14 (HL) at p.39 (cited in Lee Ting-sang at p.1179E-F) `... the only reasonable conclusion on the facts found is inconsistent with the determination come to, ...'"

 

Ching J.A. agreed:-

"I can see no difficulty in regarding the Plaintiff as having entered into a separate contract with the player each time he went out onto the course as a caddy.  Indeed I am sure in my own mind that that was the position.  There was, however, no contract of employment with the Defendant."

 

12. The appellant says that the Court of Appeal had no right to interfere with the decision of the Labour Tribunal and of the High Court.  The Tribunal directed itself correctly in law and came to a conclusion on the evidence which cannot be said to be perverse, indeed on the evidence it came to the right conclusion that the appellant was an employee under a contract of service with the respondent and not an independent self employed business man working under a series of contracts for services.

 

13. By sections 32 and 35 of the Labour Tribunal Ordinance (Cap. 25) an appeal lies to the High Court only where the award, order or determination of the Tribunal is "(a) erroneous in point of law; or (b) outside the jurisdiction of the tribunal;".  On appeal the High Court may allow or dismiss the appeal or remit the matter to the tribunal.  Whilst it may "draw any inference of fact" it may not "reverse or vary any determination made by the tribunal on questions of fact".  The Court of Appeal in its turn may grant leave to appeal to a party dissatisfied with the decision of the High Court if it "considers that a question of law of general public importance is involved" (section 35A(1)).

 

14. It is thus plain that the primary findings of fact by the Labour Tribunal must be accepted.  Moreover as Lord Griffiths in giving the opinion of their Lordships' Board in Lee Tang sang (supra) at page 384:-

 

"Whether or not a person is employed under a contract of service is often said in the authorities to be a mixed question of fact and law.  ... where, as in the present case, 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.  At first sight it seems rather strange that this should be so, for whether or not a certain set of facts should be classified under one legal head rather than another would appear to be a question of law. ... [but] in O'Kelly v. Trusthouse Forte Plc. [1984] Q.B. 90 the Court of Appeal ... held that whether or not a waiter was employed under a contract of employment within the meaning of the Employment Protection (Consolidation) Act 1978 was a question of mixed fact and law, and that the finding of an industrial tribunal on this issue, from which an appeal lay on a point of law only, could only be impugned if it could be shown that the tribunal correctly directing itself on the law could not reasonably have reached the conclusion under appeal."

 

15. Having considered a number of authorities relied on by the courts below in that case Lord Griffiths continued at page 388:-

"Their Lordships conclude that reliance upon these two dicta culled from cases of a wholly dissimilar character, may have misled the courts below in their assessment of the facts of this case and amount in the circumstances to an error of law justifying setting aside what are to be regarded as concurrent findings of fact.

 

  Their Lordships are further of the opinion that the facts of the present case point so clearly to the existence of a contract of service that the finding that the applicant was working as an independent contractor was, to quote the words of Viscount Simonds in Edwards v. Bairstow [1956] AC 14, 29, `a view of the facts which could not reasonably be entertained' and is to be regarded as an error law."

 

 

In Edwards v. Bairstow [1956] AC 14 Viscount Simonds at page 29 said:-

"For it is universally conceded that, although it is a pure finding of fact, it may be set aside on grounds which have been stated in various ways but are, I think, fairly summarized by saying that the court should take that course if it appears that the commissioners have acted without any evidence or upon a view of the facts which could not reasonably be entertained."

 

16. Lord Radcliffe at page 36 in reviewing the power of the Court of Appeal to set aside a decision said:-

"I do not think that it much matters whether this state of affairs is described as one in which there is no evidence to support the determination or as one in which the evidence is inconsistent with and contradictory of the determination, or as one in which the true and only reasonable conclusion contradicts the determination.  Rightly understood, each phrase propounds the same test.  For my part, I prefer the last of the three ..."

 

17. In regard to findings of fact by the commissioners in that case he added at page 39:-

"Their [the courts'] duty is no more than to examine those facts with a decent respect for the tribunal appealed from and if they think that the only reasonable conclusion on the facts found is inconsistent with the determination come to, to say so without more ado."

 

18. It seems to their Lordships in the present case that the Labour Tribunal proceeded on the basis that there was a contract of employment between the Club and Mr. Cheng and considered only the question whether that contract was one of service or for the provision of services in the light of the authorities.  In so doing the Tribunal undoubtedly considered with care the authorities on the test to be adopted in drawing this distinction.  What it did not do, however, was to consider sufficiently or at all the question as to whether the contract (if any) between the Club and Mr. Cheng was of a different nature and whether, if there was a contract of employment (whether of service or to provide services), it was with individual golfers rather than with  the  Club.  In so proceeding it seems to their Lordships that the Tribunal misdirected itself in a way which justified the Court of Appeal setting aside the findings of the Tribunal and the High Court.

 

19. If the Tribunal had considered the alternative possibilities it seems to their Lordships that the "true and only reasonable conclusion [to which the Tribunal could have come] contradicts that determination" that Mr. Cheng was an employee of the Club.  Mr. Cheng was not an employee of the Club whether on a continuing basis or by separate contracts, like a casual worker, each time he actually worked.  In the language of Viscount Simonds (supra) the Tribunal accepted "a view of the facts which could not reasonably be entertained". 

 

20. It is to their Lordships clear that the only reasonable view of the facts is that the arrangements between the Club and Mr. Cheng went no further than to amount to a licence by the Club to permit Mr. Cheng to offer himself as a caddie for individual golfers on certain terms dictated by the administrative convenience of the Club and its members.  Thus he was required to wear a uniform, to behave well on the Club premises and to charge a fee per round at a scale uniform for all caddies which was fixed and collected by the Club and paid to the caddies.  The Club was not, however, obliged to give him work or to pay him other than the amount owed by the individual golfer for whom he caddied.  Conversely he was not obliged to work for the Club and he had no obligation to the Club to attend in order to act as a caddie for golfers playing on the Club premises.  He did not receive any of the sickness, pension or other benefits enjoyed by employees of the Club nor indeed any pay over and above that resulting from particular rounds of golf for which the golfer was debited by the Club even if as a matter of machinery the Club handed the fee to Mr. Cheng.

 

21. There was thus between him and the Club no mutual obligation that the Club would employ him and that he would work for the Club in return for a wage.  Conversely Mr. Cheng did, when his turn came in the line, offer to caddie for an individual golfer, who if Mr. Cheng was accepted by him, was responsible ultimately for the payment of the caddying fees.  It was that golfer who, subject to the Club's rules, could tell the caddie what he wanted and how he wanted it done during the round of golf.  Their Lordships do  not  accept  the view of the High Court that it was artificial to regard the Club as an agent collecting the fee and guaranteeing its payment to the caddie.  Far from being artificial it seems a perfectly reasonable and sensible course to have taken and not to be inconsistent with Mr. Cheng not being an employee under a contract of employment with the Club.

 

22. There is no reason why there should not be a separate contract of employment each time Mr. Cheng agreed to act as caddie for a particular golfer and whether that was a contract of service or for the provision of services it is not necessary to decide.  What is clear, however, is that on the primary findings of fact made by the Labour Tribunal the Court of Appeal was entitled to decide that the only reasonable view was that Mr. Cheng was not employed under a contract of service by the Club.

 

23. Their Lordships accordingly for these reasons advised Her Majesty that this appeal should be dismissed.  The appellant must, if the respondent wishes to enforce it, pay the respondent's costs before their Lordships' Board.

 

 

-------------------------------------

 

Dissenting Judgment Delivered by

Lord Hoffmann

 

24. The Labour Tribunal (Mr. Ernest Lin) decided that the appellant was an employee of the Golf Club.  In arriving at this conclusion, he had regard to a number of well-established indicia for the existence of a contract of employment.  These included the admitted facts that the Club had selected the appellant as a caddie, trained him, equipped him with a uniform and locker upon its premises, determined his rate of payment, established the system on which he would be allocated to individual members to carry their clubs, exercised disciplinary powers over him, paid him and had the right to dispense with his services.  In my view, Mr. Lin was not merely entitled to make the finding which he did but it was the only reasonable finding in the circumstances.

 

25. The Court of Appeal allowed the appeal on the ground that the appellant was under no obligation to come to work and  the  Club  was under no obligation to provide him with employment.  This was not a point which was taken before the Tribunal or on appeal to the judge, Mrs. Justice Bokhary.  In my view, the reason why no one gave it any attention was that it did not matter.  If the appellant had to prove that he was employed under a continuing contract, it would have been of great significance.  It was however sufficient for him to show that when working at the Club, he had been a casual employee, in the same way as a casual waitress, gardener or labourer, employed from time to time as and when he presented himself for work and the Club had work to offer.  Provided that he was an employee of the Club at such times as he was actually working, the effect of Schedule 1 to the Employment Ordinance would be to deem him to have been in continuous employment.  And for the purpose of deciding whether he was a casual employee, the fact that neither party was under an obligation to employ or be employed is of course irrelevant.  That is the nature of casual employment.  The whole purpose of Schedule 1 was to equate the position of a regular casual employee with that of a person engaged under a continuous contract of employment.

 

26. The Club argue that despite the various indicia upon which the Tribunal relied, the only proper conclusion was that he was merely licensed by the Club to ply for hire on the course.  I think that not only was Mr. Lin entitled to reject this interpretation of the arrangements between him and the Club but that it is quite unreal.  The Club explain the fact that they paid the appellant by implying an agency on behalf of the members.  They explain the fact that even if the member did not pay his dues, the appellant would have been entitled to claim payment from the Club by implying a contract of guarantee of the member's obligation.  The need for these implications shows the artificiality of the Club's construction.  The fact was that the appellant had to work for the person to whom he was allocated according to the Club's system at a rate of pay fixed by the Club and in the manner determined by the Club.  This seems to me far removed from the status of either an independent contractor or a casual employee of the individual member.

 

27. Finally, the Club rely upon the fact that they treated the caddie differently from those whom they recognised as employees.  He received no holiday pay, insurance cover, bonuses or other benefits.  There is no doubt that the Club took the view that the caddies were not employees.  But this is  not  conclusive.  Their status depends upon the objective facts of their relationship to the Club.  The Club's conduct merely showed that it was consistent in denying the caddies the rights to which, as employees, they were entitled.  Such self-serving acts cannot alter their legal status.

 

28. I would therefore have humbly advised Her Majesty that the appeal should be allowed and the decision of the Tribunal restored.

 

© CROWN COPYRIGHT as at the date of judgment.