- Yung Wai Tak Abraham William (“employee”) worked as a company secretary at Nation Resources Limited (“Nation Resources”) before his employment was terminated. During his employment, he also performed work for Natural Daily (NZ) Holdings Ltd (“Natural Daily”), the parent company of Nation Resources.
- Natural Daily was a company established in the Cayman Islands. Following its liquidation, the Grand Court of the Cayman Islands granted provisional liquidators full powers over Natural Daily’s assets. Natural Daily had since ceased operation, despite being previously listed on the Hong Kong Stock Exchange.
- The employee initially brought a claim against Nation Resources and Natural Daily for his termination payments.
- The employee claimed that Nation Resources and Natural Daily were both his employers. Natural Daily asserted that since Nation Resources remunerated the employee and contributed to his mandatory provident fund, Natural Daily was not the employee’s employer.
- The employee challenged the Deputy Adjudicator’s decision at the Labour Tribunal, where Nation Resources was held to be the sole employer based on its mandatory provident fund arrangements, tax returns, pay cheques and pay slips. The employee appealed to the High Court as Nation Resources could not afford to pay the termination payments.
- The issue is whether the employee was Natural Daily’s employee in addition to being Nation Resources’s employee. The employee, in particular, asked the court to pierce the corporate veil by attributing liabilities to Natural Daily.
- A broader issue relates to the use of evidence in support of the employee’s appeal. In particular, the court investigated into matters regarding whether the Deputy Adjudicator objectively considered all surrounding evidence before reaching his conclusion.
Veil-piercing and Contractual Interpretation Issues
- The court held that it was unnecessary to pierce the corporate veil in the current case. What mattered was evidence that showed the existence of the employee’s employment relationship with Natural Daily.
- In ascertaining the true meaning of the employee’s employment contract, the court applied Lord Hoffman’s contextual approach in Investor’s Compensation Scheme.1 The House of Lords in the landmark decision held that contracts must be construed in accordance with the background “matrix of fact” and the meaning of contractual terms must be deduced contextually rather than literally.
Evidence of Employment
- Although neither the employee nor Natural Daily were able to produce the alleged employment contract between the parties, the court did not displace the possibility of another an employment relationship between the parties. Interactions between the employee, Natural Daily and its members during his employment were considered. In particular, the court looked into the email sent by the employee to Natural Daily’s senior members, where the former introduced himself as a newly joined member of Natural Daily. The court regarded such email as a highly credible evidence regarding Natural Daily’s previous advertisement for a company secretary at the company. In addition, the employee was given a name card, with details concerning Natural Daily’s logo, company name, the employee’s name and his role as Natural Daily’s secretary. Where the name card was given by Natural Daily, the court considered it as direct evidence of the employee’s employment by the company.
- It was held that the best evidence of being an employee of a company was the employment contract reached either verbally, in writing or through conduct. However, the court was willing to infer from the background and conduct between employers and employees to determine a relationship of employment and the terms of such relationship. The court cited the Poon Chau Nam case and set out the test for employment, which was to have regard to all features of the parties’ relationship.2 It reviewed the email sent by Natural Daily’s company director to one of the provisional liquidators, where the former assured the latter that the employee was one of Natural Daily’s employees. According to the correspondence, the reason for designating the employee as Nation Resources’s employee was to facilitate efficient operation of the group.
- The court investigated into the employee’s appointment as a committee member of Natural Daily’s Management Committee. The employee was in charge of the legal affairs and company secretarial department as well as the logistics and shipping department. As the employee provided evidence in relation to his management of these affairs, the court held that he could not have been a mere secretary for Nation Resources, which only performed treasury work for Natural Daily. The employee worked for Natural Daily in its daily affairs and engaged in tasks that resembled those which typically occurred between employers and employees. On the whole, the employee was considered by the court as Natural Daily’s employee. It ruled that Deputy Adjudicator made a legal error in treating provisional liquidators’ remarks, which concerned the employee’s role as an outsourced Nation Resources’s employee, as those made by a witness. The court reconsidered the provisional liquidators’ statements and held that they were not sufficient to disprove strong evidence regarding the employee’s status as Natural Daily’s employee. The best interpretation was to consider the employee as both an employee of Nation Resources and that of Natural Daily.
- The court ordered Natural Daily to make payments to the employee with respect to his termination payments, respective interest charges and the employee’s legal costs.
– Catherine Leung, Partner at Lewis Silkin
1 Investor’s Compensation Scheme Ltd v West Bromwich Building Society  UKHL 28