BLANKA DIAMONDS (PVT) LTD v. VAN ELS

048-SLLR-SLLR-2004-V-3-BLANKA-DIAMONDS-PVT-LTD-v.-VAN-ELS.pdf


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BLANKA DIAMONDS (PVT.) LTDvVAN ELSSUPREME COURTG. P. S. DE SILVA, J.
WIJETUNGA, J.
BANDARANAYAKE, J.
SC 120/97SC SPL LA 181/97CA 601/96JANUARY 22, 1998MARCH 17, 1998APRIL 3, 1998
Employees Trust Fund Act No. 46 of 1980 – Liability on the employer tocontribute to ETF- Who is an employer – Terms and conditions in the letter ofappointment – Applicability of section 114 Evidence Ordinance – ContractualNexus.
The 1st respondent, a Belgium national was employed as the ManagingDirector of the appellant company incorporated in Sri Lanka and approved bythe Board of Investment. The Board of the Employees Trust Fund required theappellant company to settle the ETF dues. The appellant company sought toquash that decision by way of a writ of certiorari in the Court of Appeal. Theapplication to the Court of Appeal was dismissed on a technical objectionraised.
The appellant company sought and obtained special leave to appeal from theSupreme Court on the question whether the appellant company was theemployer of the 1 st respondent.
It was contended that, the 1 st respondent was offered employment with theappellant company as its Managing Director by a document signed by one PChairman of a Company incorporated in Belgium – ZP was the Chairman ofboth Companies. It was alleged that there was no contractual nexus betweenthe appellant and the 1st respondent and that the appellant Company was notthe employer.
The appellant com;'.any further contended that, in terms of the letter of appointmentthe 1st respondent received his salary in Belgian Francs in Belgiam and a cost of
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living allowance in Sri Lanka payable in Sri Lankan Rupees. The letter ofappointment of the 1 st respondent was issued under the hand of the Chairmanof Z Company. In the circumstances, it was contended that Z Company wasthe employer of the 1st respondent and not the appellant company.
Held
On an examination of the documents, it appears that the 1st respondentwas an employee of the appellant company. The letter of appointment isself contradictory as regards the question of the 1st respondent'semployer; in that while the definition refers to a Belgian Company as theemployer, under scope of employment, it states that, the employee shallbe employed by the company as Managing Director – which is an obviousreference to the appellant company.
The Z company is not registered in Sri Lanka nor does it have anyoperations in this country. The only connecting link between the twocompanies is the Chairman.
In the letter of appointment, under the heading “proper law" it is statedthat “the agreement should be governed by the law in force in Sri Lankaand the employer agrees to submit to the jurisdiction of the Courts of thatState.
If as contended Z company was the employer, there was no need for theLaws of Sri Lanka to have been the law applicable to the contract ofemployment and for the employee to agree to submit to the jurisdictionof the Courts of Sri Lanka.
The liability to make contributions to the ETF cannot be waived.
The only common factor was that there was a Chairman for bothcompanies; but his status in the appellant company does not confer onhim the privilege of making use of his dual capacities as Chairman of tworespondent companies incorporated under the Laws of Belgian and SriLanka to foist upon the Sri Lanka company as Managing Director who issaid to be an employee of the Z company.
The 1st respondent did not perform any services for the BelgiumCompany as he was recruited to the post of Managing Director of theappellant company, which he has served in Sri Lanka.
Nowhere has the appellant claimed that it was a subsidiary.
The Z company could select such an employee for appointment to theappellant company, if so requested by the latter, but in that event the ZCompany would be acting in the capacity of an agent of the appellantcompany for such selection and no more. The contract of employmentbetween such selectee and the employer would then have to be betweenthe 1 st respondent and the appellant company.
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Per Wijetunga, J.
‘The appellant having used the services of the 1st respondent as itsManaging Director there can be no doubt that the only disenable contractwhich can be implied is between the appellant and the 1 st respondent".Per Wijetunga, J.
“If in fact the 1st respondent was an employee of Z Company and hisemoluments paid by that company, the appellant could easily haveprovided to Court proof of such payments by the Z Company as theChairman of the appellant company was the Chairman of the ZCompany. The presumption under section 114 of the EvidenceOrdinance could be drawn”.
Per Wijetunga, J.
“The letter of appointment to my mind is a clumsy attempt atcircumventing the laws applicable to workmen in Sri Lanka, by resortingto the subterfuge of purporting to define the ‘Company’ to mean theBelgium Company, though the very document offered the 1 st respondentemployment with the appellant company in Sri Lanka, as its ManagingDirector".
APPEAL from the judgment of the Court of Appeal reported in 1997-1 Sri LR 360.
Case referred to:
Carson Cumberbatch & Co. Ltd v Nandasena – 11 NLR 73R. K. W. Gunasekera with J. C. Weliamuna for appellantChula Bandara for 1st respondent.
Shavindra Fernando SSC for 2nd respondent.
Cur.adv. vult
May 6, 1998.
WIJETUNGA, J.The appellant, a company duly incorporated in Sri Lanka andapproved by the Board of Investment, is carrying on the businessof gem cutting and polishing for export to Belgium. The 1strespondent who is a national of Belgium was employed asManaging Director of the appellant company from 01.06.92 to23.02.95. He claims that the contributions due to the EmployeesTrust Fund (ETF) on his behalf for the above period of employmenthad not been remitted by the appellant. The ETF Board, by itsletters dated 27.07.96 (P6), 18.08.95 (P8), 29.08.96 (P15) and29.08.96 (P16) required the appellant to settle all ETF dues, failing
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which legal proceedings would be instituted for the recovery of thesame. Thereupon, the appellant invoked the jurisdiction of theCourt of Appeal for the issuance of a mandate in the nature of a writof Certiorari to quash the decisions/directions of the 2ndrespondent in regard to the complaints of the 1 st respondent, andfor the issuance of a mandate in the nature of a Writ of Prohibitionpreventing the 2nd respondent from proceeding further against theappellant. The decisions/directions aforesaid were those containedin the letters marked (P6), (P8), (P15) and (P16).
The Court of Appeal, by its judgment dated 04.04.97 (‘A’), heldthat the appellant had failed to make a full and frank disclosure ofall matters to Court, had been remiss in complying with itscontractual obligations to Court and to disclose vberrima tides andproceeded to dismiss and reject the application in limine with costsin a sum of Rs. 10,500/= payable to the 1st and 3rd respondents.
By the present application, the appellant had sought leave toappeal from the judgment of the Court of Appeal aforesaid. On theapplication being supported, this Court had granted special leave toappeal on the question whether on the facts available to Court, ..eappellant company was the employer of the 1st respondent.
The facts relevant to this matter are briefly as follows:- The 1 strespondent was offered employment with Blanka Diamonds (Pvt)Ltd. of Phase III, IPZ, Katunayake, Sri Lanka (appellant) with effectfrom 01.06.92, as its Managing Director, by the document marked(P2), by Fr. Van den Eynde & Zonen B.V.B.A., (Belgian company),said to be a body corporate in Belgium. The said letter ofappointment was signed by Patrick Van den Eynde the Chairmanof the Belgian company. Patrick Van den Eynde is the Chairman ofboth the appellant company as well as the Belgian companyaforementioned. It is the position of the appellant that, in terms ofclause 4 of the letter of appointment (P2), the 1st respondentreceived his salary in Belgian francs in Belgium but was alsoentitled to a cost of living allowance in Sri Lanka which was payablein either Sri Lankan rupees or in Belgian francs.
The 1st respondent was issued with a letter of suspension dated20.02.95 (P3) under the hand of the Chairman of the Belgiancompany. His services were terminated on 23.02.95 by the letter oftermination (1R2) – (English translation (1R3)), which too is signed
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by Patrick Van den Eynde as Business Manager of the Belgiancompany as well as of the appellant company.
The appellant states that the 1st respondent made a complaint,to the Deputy Commissioner of Labour, Negombo by letter dated05.05.95, regarding his EPF and ETF contributions, which matter isyet pending.
Thereafter, the 2nd respondent Board directed the appellant tosettle all arrears of ETF contributions in respect of the 1strepondent, by the letters referred to above. The appellant took upthe position that it is not the employer of the 1st respondent. Whenthreatened with legal action by the ETF Board by (P15) and (P16),the appellant made Application No. 601/96 to the Court of Appeal,for Writs of Certiorari and Prohibition, which was dismissed asaforementioned.
The Employees Trust Fund Act No. 46 of 1980 (Cap. 622)defines an 'employer' in Section 44 in the following terms:“employer’ means any person who employs, or on whose behalfany other person employs, any workman and includes a body ofemployers (whether such body is a firm, company, corporation ortrade union) and any person, who on behalf of any other person,employs any workman, and includes the legal heir, successor inlaw, executor or administrator and liquidator of a company and inthe case of an unincorporated body, the President or the Secretaryof such body, and in the case of a partnership, the managingpartner or manager".
It was the contention of learned counsel for the appellant that itwas the Belgian company and not the appellant who was theemployer of the 1st respondent. He referred us to the definitioncontained in the 1st respondent’s letter of appointment (P2) whichstates that "throughout his letter, except where otherwise
requiredthe company means Fr. Van den Eynde & Zonen
B.V.B.A., Pelikaanstraat 62, 2018 Antwerpen, Belgium,” He furtherdrew our attention to the application made by the 1st respondent tothe Labour Tribunal of Negombo (P17) wherein the 1st respondentreferred to two employers, viz. (1) Blanka Diamonds (Pvt) Ltd., and(2) Fr. Van den Eynde & Zn. B.V.B.A. and claimed that he was“employed by the 2nd Employer as the Managing Director of the 1 stEmployer Company from 1st June 1992”. He submitted, therefore,
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that there was no contractual nexus between the appellant and the1st respondent and the appellant consequently was not theemployer of the 1st respondent, within the meaning of the definitioncontained in the ETF Act.'
Even on an examination of the very documents submitted by theappellant, it appears that the 1st respondent was an employee ofBlanka Diamonds (Pvt) Ltd., the appellant company. The letter ofappointment (P2) is itself self-contradictory as regards the questionof the 1st respondent’s employer, in that, while the definition refersto the Belgian Company as the employer, under scope ofemployment it states that “the employee shall be employed by thecompany as Managing Director" which is an obvious reference tothe appellant company.
The letter of appointment further states that the 1st respondentis offered “employment with Blanka Diamonds (Pvt) Ltd. of PhaseIII, IPZ Katunayake, Sri Lanka". Admittedly, the Belgian company isnot one registered in Sri Lanka nor does it have any operations inthis country. It is referred to in this application as “a body corporatein Belgium and having its registered office in Antwerp in Belgium.”The only connecting link between the two companies is theChairman, Patrick Vas den Eynde who is the Chairman of theBelgium company as well as the appellant company. As the 1strespondent was clearly not the Managing Director of the Belgiancompany, the company referred to in paragraph 3 of (P2) mustnecessarily be the appellant company and the reference therein tothe “Management of the Company” too should be to theManagement of the appellant company.
Again at paragraph 14 thereof, under the heading “proper law” itis stated that “this Agreement shall be governed by the law in forcein Sri Lanka from time to time and the Employee hereby agrees tosubmit to the jurisdiction of the Courts of that State.” If, ascontended, the 1st respondent was an employee of the Belgiancompany, there was no need for the law of Sri Lanka to have beenthe law applicable to the contract of employment and for theemployee to agree to submit to the jurisdiction of the courts of SriLanka.
It is ironical, therefore, in that context, that the appellant choseto state in paragraph 7 of its amended petition dated 30.09.96 in
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the Court of Appeal inter alia that “the Belgium law requirestermination of a workman within three days of suspension.Accordingly on 24th February, 1995, the services of the 1strespondent was terminated by his employer the BelgiumCompany”, which is in the teeth of the above provision of theagreement.
The letter of suspension (P3), in not less than three places,refers to the 1st respondent as “Managing Director of BlankaDiamonds (Pvt) Ltd.", and that he is suspended from that post.Once again, in the charges brought against the 1st respondent by(P4) dated 24.02.95, it is repeatedly stated that the 1st respondentacted in his “position of Managing Director of Blanka Diamonds(Pvt) Ltd.”
In fact, in (P4) under the heading "Overview of the proof ofabove charges” it is stated in paragraph 2 as follows:- “Proof ofcharge (2): engaging the company into illegal acts.
On February 18th Mr. Van Els introduced an illegal paymentsystem for the personnel of Blanka Diamonds (Pvt) Ltd. in order toavoid the payment of EPF contributions for new employees”. Thisfurther supports the position that he was doing so in his capacity asManaging Director of the appellant company.
Thus, the sole basis of the petitioner’s claim that the 1strespondent was not its employee is the letter of appointment (P2),to the contents of which reference has already been made.
The letter (P12) dated 19.02.93 addressed by the 1strespondent to the Chairman/Managing Director, Blanka Diamonds(Pvt) Ltd., FTZ, Phase III, Katunayake, (which the presentManaging Director of the appellant company admits, in his affidavitdated 11.02.97 filed in the Court of Appeal, was voluntarily given bythe 1st respondent), is also very revealing. It states in paragraph 1that “I wish to inform you that I have been receiving all my duesfrom Blanka Diamonds (Pvt) Ltd. for services rendered by me asper the terms of the agreement from the date of commencement ofmy employment. Further, I wish to mention that as you are alreadymaking contributions towards a Social Security Scheme outside SriLanka on expatriate officers, I do not expect you to contributetowards EPF on ETF in Sri Lanka on my behalf.”
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It had been written to the Chairman/Managing Director of theappellant company over two years prior to the termination of the 1 strespondent’s services and acknowledged inter alia the receipt of alldue's from the appellant company for services rendered by the 1 strespondent and seeks to exempt the appellant company frommaking contributions to the EPF/ETF in Sri Lanka. This is implicitacknowledgement of the fact that the appellant company was theemployer of the 1st respondent and was obliged in law to makeEPF/ETF payments on behalf of the 1st respondent. Whether suchpayments can be avoided by agreement between employer andemployee is another matter, which will be dealt with presently, butthat letter supports the position that there was consensus betweenthe appellant and the 1st respondent as regards the employer-employee relationship.
As regards the liability to make contributions to the ETF, therecan be no waiver of contributions by agreement between employerand employee as section 16(1) of the ETF Act provides that “theemployer of every employee to whom this Act applies shall, inrespect of each month during which such employee is employed bysuch employer, be liable to pay in respect of such employee, to thefund, on or before the last day of the succeeding month, acontribution of an amount equal to 3 per centum of the totalearnings of such employee from his employment under suchemployer during that month”.
Learned counsel for the appellant submits that if the Belgiancompany was only an agent for Blanka Diamonds (Pvt) Ltd., thenthere is no necessity for the Belgian company to sign the letter ofappointment and thereafter to suspend and terminate the 1strespondent. He states that all vital decisions pertaining to thepetitioner have been taken by the Belgian company. It is indeed inregard to its connection with the Belgian Company that theappellant has concealed itself with a veil of secrecy. As statedabove, the Chairman of both companies is one and the sameperson. The recruitment of the 1st respondent as the ManagingDirector of the appellant company has been done in Belgium andthe argreement signed by the parties is in itself contradictory asregards the status of the 1st respondent vis-a-vis the twocompanies. On the one hand, in the definition clause it is sought to
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refer to the Belgian company as the ‘company’ referred to in theagreement, but in the self-same document the word ‘company’ hasbeen used to mean Blanka Diamonds (Pvt) Ltd., the appellantcompany. This is perhaps why the 1 st respondent referred to twoemployers in his application to the Labour Tribunal. Clearly, the 1strespondent did not perform any services for the Belgian companyas he was recruited to the post of Managing Director of theappellant company, which he has admittedly served in Sri Lanka.Nowhere has the appellant claimed that it was a subsidiary of theBelgian company.
In fact, when the 1st respondent claimed in paragraph 6 of hisaffidavit dated 03.12.96, filed in the Court of Appeal, that
“ (a) Fr. Van den Eynde & Zonen B.V.B.A. is the Parentcompany based in Belgium which owns 99.9% of theissued share capital of the petitioner company and Mr.Patrick Van den Eynde is the Chairman of the said parentand the petitioner companies.
(b) The said Parent Company selected me as the ManagingDirector of the petitioner company and a letter ofappointment dated 1st June, 1992 marked ‘P2’ by thepetitioner, was issued by the parent company on behalf ofthe petitioner. ”
the present Managing Director, by his counter affidavit dated11.02.97, categorically stated that the Belgian company does nothold any shares in the appellant company, (in proof of which heannexed a certificate issued by the Chairman of that company),and further denied that the letter of appointment was given onbehalf of the appellant or that the Belgian company is the parentcompany as alleged by the 1st respondent.
Thus, the appellant’s position undoubtedly is that these twocompanies are distinct legal entities, operating independently ofeach other in two different countries.
The question then arises as to the capacity in which the Belgiancompany purported to offer employment to the 1 st respondent asManaging Director of the appellant company. Admittedly, there wasno legal nexus between the two companies. The only common
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factor was that Patrick Van den Eynde was the Chairman of bothcompanies. The Articles of Association of the appellant companyshow that he is one of the ‘Life Directors’. But, his status in theappellant company does not confer on him the ‘privilege’ of makinguse of his dual capacities as Chairman of two different companiesincorporated under the laws of Belgium and Sri Lanka, to foist uponthe Sri Lankan company a Managing Director who is said to be an‘employee’ of the Belgian company. The Belgian company couldselect such an employee for appointment to the appellant company,if so requested by the latter. But, in that event, the Belgian companywould be acting in the capacity of an agent of the appellantcompany for such selection and no more. The contract ofemployment between such selectee and the employer would thenhave to be between the 1st respondent and the appellantcompany.
The letter of appointment (P2), to my mind, is a clumsy attemptat circumventing the laws applicable to workmen in Sri Lanka, byresorting to the subterfuge of purporting to define the company tomean the Belgian company, though the very document offered the1st respondent employment with the appellant company in SriLanka, as its Managing Director. The evidence of the appellantcompany having employed the 1 st respondent is so overwhelmingthat a contract of employment between them must necessarily beimplied, despite the contents of this dubious document (P2).
I see no difficulty in applying the principles laid down in CarsonCumberbatch & Co. Ltd. v Nandasena (1) on which learned counselfor the appellant heavily relied, to the facts of this case. That caserecognizes (at page 81) that ‘employ’ means ‘use the services of’ aperson and states (at page 82) “that when the first part of thedefinition of the term ‘employer’ speaks of ‘a person who employsa workman’ it contemplates a person who employs another undera contract of services, express or implied", (emphasis added).Again, (at page 84) the Court has expressed the opinion that “theperson referred to as a person employing a workman in each of thethree limbs of the definition is intended to refer to a person who isunder contractual obligation to the workman”. In the instant case,the appellant having used the services of the 1st respondent as itsManaging Director, there can be no doubt that the only discernible
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contract which can be implied is between the appellant and the 1strespondent. Though a strenuous attempt was made to show thatthere was no contractual obligation on the part of the appellanttowards the 1st respondent, the material aforementioned clearlyindicates that in truth and in fact, it was the appellant companywhich employed the 1st respondent as its Managing Director.
Even the letter of termination – English translation (1R3) -shows that Patrick Van de Eynde has signed in dual capacities, i.e.as ‘Business Manager of the Belgian company as well as of theappellant company, making specific reference to the fact that the1st respondent had functioned as the Managing Director of theappellant company.
Though the 3rd respondent produced in the Court of Appealmarked (3R4), a copy of a letter addressed by the 1st respondentto the Director, Enforcement Unit, ETF Board dated 07.12.95,enclosing four schedules containing details of his salary particularsfor the years 1992 to 1995, the present Managing Director of theappellant company, in his counter affidavit dated 11.02.97, wascontent to merely deny that the 1 st respondent was an employee ofthe appellant and to state that the appellant not being the employerof the 1st respondent, was not in a position to comment thereon asit was not in possession of the payment schedules. This was in theface of the 1st respondent’s categorical assertion in his affidavitdated 03.12.96 that he was paid his salary in Belgian francs to hisbank account in Luxembourg through a bank account of theappellant in Switzerland and that his living allowance was paid inSri Lanka by the appellant in both Rupees and American Dollars asper schedule marked (1R1).,
If, in fact, the 1st respondent was an employee of the Belgiancompany and his emoluments were paid by that company, theappellant could easily have provided to Court proof of suchpayments by the Belgian company, as Patrick Van den Eynde wasthe Chairman of both companies and was in a position to furnishsuch particulars from the Belgian company. In thesecircumstances, the Court is entitled to draw the presumption underillustration (f) of section 114 of the Evidence Ordinance, against theappellant.
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For the reasons aforesaid, I hold that on the facts available to
Court, the appellant company was the employer of the 1strespondent.
The appeal is accordingly dismissed with costs in Rs. 10,500/=each, payable to the 1 st and 2nd respondents.
G.P.S. DE SILVA, C. J. – I agree.
BANDARANAYAKE, J. – I agree.
Appeal dismissed.