XCHRX MANSION FIRE ENGINEERING CO. LTD. AND ANOTHER v. YEUNG KWOK FAI

HCA 14403/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 14403 OF 1998

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REASONS FOR DECISION

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1. This is an appeal of the Defendant against the order of Registrar Chu refusing to grant leave to the Defendant to amend his Defence and Counterclaim.

2. The Defendant was employed by the Plaintiffs as the Director and General Manager and his employment was terminated in February 1998.

3. Thereafter the Defendant commenced proceedings in the Labour Tribunal claiming against the Plaintiffs for annual leave pay, bonus and accommodation and entertainment expenses for the three years period prior to the termination of his employment. There is no dispute that in the Labour Tribunal the Defendant had not made any claim for additional bonus.

4. The Labour Tribunal case was settled by way of a consent judgment whereby the Defendant was granted the sum of about $115,000.00 in full and final settlement of his claim against the Plaintiffs. The amount in the original claim was just over $150,000.00.

5. Subsequent to the aforesaid settlement, the Plaintiffs commenced the present proceedings against the Defendant for the sum of about $130,000.00 being money allegedly advanced by the Plaintiffs to the Defendant.

6. By the proposed amendment to the Defence and Counterclaim, the Defendant seeks to introduce the suggestion that he was entitled to be paid the additional bonus for the years ending 31st January 1996 and 31st January 1997, a claim that was not made in the Labour Tribunal proceedings.

7. The Defendant contends that the additional bonus was calculated with reference to the net profit of the Plaintiffs if such net profit exceeded $30 million a year. And hence, so the Defendant claims, the Plaintiffs are obliged to render an account of their net profit to the Defendant so as to enable the Defendant to claim for such additional bonus.

8. The Defendant claims that the Plaintiffs have failed and/or refused to render such an account and hence the set off and a counterclaim in the proposed amendment to the Defence and Counterclaim.

9. The Plaintiffs do not dispute that the alleged additional bonus had not been claimed in the Labour Tribunal proceedings but they contend that the claim is barred by the doctrine of res judicata. As the case raised by the proposed amendment to the Defence and Counterclaim is bound to fail, so the Plaintiffs suggest, the amendment should be refused.

10. The Plaintiffs also invite the court to take into consideration the conduct of the Defendant which they claim would give rise to an estoppel. The Plaintiffs also ask the court to consider the conduct of the Defendant in the present proceeding. It is their suggestion that such conduct should prevent them from successfully asking for indulgence from the court to allow them to make amendment to their pleadings.

11. It is well-established that parties to a litigation must bring every point which properly belongs to the subject of the litigation and is available to the parties in one action.

12. Vigram, V.-C. in Henderson v. Henderson [1843-60] All E.R. at page 378 said the following at page 381 and I quote:

"In trying this question, I believe I state the rule of the court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special case, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence, might have brought forward at the time."

13. There can be no doubt that the Labour Tribunal is a court of competent jurisdiction and that the doctrine of res judicata applies to decisions of the Labour Tribunal. But the Labour Tribunal is a statutory tribunal with limit to its jurisdiction. Section 9 of the Labour Tribunal Ordinance provides and I quote:

"Limitation

1) Subject to a subsection (2), the tribunal shall not have jurisdiction to inquire into or determine a claim or part of a claim if the cause of action arose more than 12 months before the date on which the claim is filed, unless the parties to the claim, by a memorandum signed by them and filed with the registrar, have agreed that the tribunal shall have jurisdiction.

2) When the cause of action in a claim arose partly before and partly after the 12 months period of limitation prescribed by subsection (1), the tribunal may, with the consent of the parties, sever that part of the claim over which it has no jurisdiction and hear and determine the part over which it has jurisdiction.

3) Nothing in this section shall preclude the institution of the proceedings in the Court of First Instance or in the District Court in respect of a claim which, by reason of the expiration of the limitation period described by subsection (1), is not actionable in accordance with this Ordinance."

14. Whilst the limitation period imposed by section 9(1) is not an absolute bar but could be waived by agreement between the parties, the wavier must take a specific form. The extension of the jurisdiction is an exception rather than the rule under the Ordinance.

15. Indeed, in my view, the wording of subsection 3 to section 9 of the ordinance makes it clear that a party is entitled to take proceedings in the Labour Tribunal in respect of a claim or part of a claim when the cause of action arose within the 12 months period and institute proceedings in the District Court or the High Court in respect of the claim beyond the 12 months period. In my view, it is at least arguable that a claimant is not obliged to include all his claims in the Labour Tribunal proceedings if part of his claims falls outside the 12 months period.

16. In my view, the doctrine of res judicata in relation to proceedings in a Labour Tribunal only affects the cause of action properly within the jurisdiction of the Labour Tribunal, either by the express wordings of the section or by agreement between the parties and expressed in the manner stipulated under section 9(1) of the Ordinance or by consent under section 9(2) of the Ordinance.

17. If the Defendant's contention is correct that his claim for additional bonus for the years ending 31st January 1996 and 31st January 1997 relates to a cause of action which arose more than 12 months before the date he filed the claim in the Labour Tribunal proceeding, it is arguable that as a matter of law he is entitled to institute a separate proceedings in the High Court to cover such additional bonus.

18. The decision of the Labour Tribunal in respect of his other items of claim within the jurisdiction of the Labour Tribunal, in my view, could not have any effect on his claim for the additional bonus by reason of the doctrine of res judicata.

19. On the evidence before me I am prepared to hold that the Defendant, exercising reasonable diligence could have found out the net profit of the Defendant for the year ending 31st January 1996 and 31st January 1997.

20. In the normal course of event, the Defendant should have brought forward such claim in any action against the Plaintiffs.

21. But if the Defendant's argument is correct that the cause of action in respect of the claim for the additional bonus did not arise within the 12 months before the Defendant filed his claim in the Labour Tribunal proceedings, such claim would be beyond the jurisdiction of the Labour Tribunal under section 9(3) of the Ordinance. The Defendant, in my view, would be entitled to pursue it separately in the District Court or the High Court.

22. The Plaintiffs are perhaps entitled to argue that the additional bonus in fact arose within the 12 months period. The matter pertaining to this issue can only be sorted out at the trial on properly formulated pleadings.

23. I have considered the other matter raised by Mr. Chan on behalf of the Plaintiffs on the question of estoppel. I am not of the view that the facts of this case gave rise to any operating estoppel against the Defendant to defeat his claim for the additional bonus.

24. At this stage, I am not, of course, to resolve the dispute between the parties. But I am not persuaded that the matters that the Defendant intends to introduce by the proposed amendment to the Defence and Counterclaim are bound to fail. I am also not of the view that the conduct or the alleged conduct on the part of the Defendant, even looked upon in a way most favourable to the Plaintiffs would be a valid ground for refusing the application to amend when the matters that the Defendant intends to introduce by way of the amendment could give raise to an arguable Defence and Counterclaim.

25. Of course, as to the question of whether the net profit of the Plaintiffs for the relevant accounting periods exceeds that $30 million or whether the Defendant is entitled to be paid the additional bonus again could only be properly resolved at the trial.

26. I have considered the arguments advanced by both parties. I am persuaded that the view of Registrar Chu and her decision to refuse to exercise her discretion in favour of the Defendant is faulted.

27. In the circumstances, the appeal against her decision must be allowed. I grant leave to the Defendant to amend his Defence and Counterclaim per the draft annexed to the Defendant's second summons which is dated 2nd June 1999 within 7 days. I also grant leave to the Plaintiffs to amend the reply the Defence and Counterclaim within a further 21 days.