CHEUNG CHI KEUNG v. THE HOSPITAL AUTHORITY

HCA 3838/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3838 OF 2003

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J U D G M E N T

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Introduction

1.  This is an action for damages for wrongful termination of a contract of employment.  The Plaintiff began his employment with the Hospital Authority (“HA”) in November 1992 as an Accounting Officer I.  As from 18 March 1994, he was promoted to the rank of General Manager (Financial Services) and was employed under the terms and conditions of a letter of appointment of the same date.  The relevant part of the letter of appointment was in the following terms:

“	On appointment to this new post, your employment will be  upon the terms and conditions of this letter, HA Personnel Policies and Procedures Manual (“PP&PM”) and HA rules and regulations (“Regulations”), subject nevertheless to the HA’s right to revise the PP&PM and the Regulations from time to time.  Please note that in the event of conflict between this letter, the PP&PM and the Regulations, this letter shall prevail.
	…
	6.	Termination
		Either you or the HA may terminate this employment by giving to the other 2 months’ written notice or by paying 2 months’ wages (i.e. basic monthly salary, cash allowance and if applicable, other regular allowances) in lieu of notice.  The HA may also terminate your employment without notice for cause.”

The PP&PM was subsequently replaced by the Hospital Authority Human Resources Policies Manual (“HRPM”) which came into effect on 26 July 1994.

2.  On 27 March 2002, Dr Shum, the Hospital Chief Executive (“HCE”) of Kwai Chung Hospital issued a written warning under chapter J1.4.1(b)(ii) of the HRPM against the Plaintiff for providing inaccurate/misleading information and providing false/misleading information to the Finance Sub-committee.  The warning included an advice that if the Plaintiff failed to achieve a satisfactory standard of conduct and performance, he would be liable to disciplinary actions under chapter J1 of the HRPM.  The Plaintiff appealed against that written warning on 8 April 2002.  A year later, his appeal was dismissed by the Staff Appeals Committee on 24 March 2003 after due investigation.

3.  In the meantime on 23 April 2002, the Plaintiff was transferred to the post of Financial Manager (Special Duties) with responsibility for special projects for the Financial Management Centre of the Kowloon West Mega Cluster of the HA.  On 23 January 2003 the HA initiated disciplinary procedures under chapter JI of the HRPM against the Plaintiff for unsatisfactory work performance.  The Plaintiff was invited to attend a meeting on 30 January 2003 to make oral submission but no legal representation would be allowed or to make written submission on or before 7 February 2003.  The meeting was postponed to 2 April 2003 at the request of the Plaintiff’s solicitors, Messrs Wilkinson & Grist (“W&G”).  A series of correspondence ensued between W&G and the HA’s solicitors, Messrs Johnson, Stokes & Master (“JSM”).  Among other complaints made in the correspondence, W&G complained that the HA had no authority to deny the Plaintiff of legal representation at the meeting.  Eventually, W&G made a written submission on behalf of the Plaintiff on 28 March 2003.  On 1 April 2003, W&G informed the HA that the Plaintiff would not attend the meeting as no legal representation was allowed. 

4.  Subsequently, the investigation committee concluded that the Plaintiff’s performance was unsatisfactory and recommended the termination of his contract of employment with wages in lieu of notice.  The recommendation was endorsed by the Cluster Chief Executive (the “CCE”) and personally approved by the then Chief Executive (“CE”), Dr William Ho on 25 April 2003.  The Plaintiff’s contract of employment was formally terminated on 30 April 2003 with payment of two months’ wages and allowance in lieu of notice in accordance with the termination clause in his letter of appointment of 18 March 1994.

5.  On 18 June 2003, the Plaintiff lodged a claim against the HA at the Labour Tribunal.  In his amended form of claim, the Plaintiff claimed damages including his remuneration up to the date of his retirement and sought an order that the HA to disclose the reason for the termination of his employment.  The HA filed a defence that the Plaintiff was dismissed because of unsatisfactory performance.  The action was then transferred to the High Court on 10 October 2003.

6.  The Plaintiff’s primary claim is that the HA’s termination of his employment by notice was a wrongful breach of his contract of employment.  Alternatively, he claims that the terms and conditions of his employment entitled him to the benefit and protection of detailed disciplinary procedures which the HA had invoked but not completed on 30 April 2003.  In other words, he claims that the procedures put a limit on the HA’s power to dismiss him and he was entitled to remain in employment until completion of the disciplinary procedures.  In the circumstances, the Plaintiff says the termination amounted to a repudiation of his contract of employment which repudiation he has now accepted.

7.  This trial is a trial on liability only.  If I should find the HA liable for breach of contract, there will be a separate trial on damages.

The contractual documents incorporated into the contract of employment

8.  Before considering the Plaintiff’s claims, it would be convenient to determine what were the contractual documents which had been incorporated into the Plaintiff’s contract of employment.  Under the terms of the letter of appointment, the PP&PM or the HRPM which subsequently replaced it and the HA Regulations had been incorporated into the contract.  It is common ground that the provisions of the HRPM are applicable to the Plaintiff’s contract of employment, but it is not entirely clear what HA Regulations had been incorporated into the contract and are applicable and relevant to the present dispute.  In the amended statement of claim, the Plaintiff pleaded that the HA was in breach of the Human Resources Administration Manual (the “HRAM”) and the Finance and Accounting Regulations (the “FAR”).  He argued that these were the HA Regulations which had been incorporated into his contract of employment.

9.  The HRAM relied on by the Plaintiff had not been referred to in the Plaintiff’s letter of appointment.  It only came into existence in December 1994, nine months after the date of the Plaintiff’s appointment.  It is well established that statements or events occurring after a contract has been entered into cannot be used to interpret the contract: per Lord Reid in Whitworth Street Estates Ltd v Miller [1970] AC 583 at 603D-F and per Ackner LJ (as he then was) in Robertson and Another v British Gas Corporation [1983] IRLR at paragraph 17. 

10.  Furthermore, chapters A1.1, A1.2 and A1.4 of the HRAM are in the following terms:

“	A1.1	This manual sets out the procedures in handling human resources administration matters of the Hospital Authority (HA) employees and civil servants working in HA. …”
“	A1.2	This manual is to be read in conjunction with the Human Resources Policies Manual (HRPM).”
“	A1.4	This manual is designed primarily for the use of the Human Resources function of Hospitals and Hospital Authority Head Office (HAHO).”

11.  On the other hand, chapters A1.1.1 and A1.3.1 of the HRPM provide as follows:

“	A1.1.1	This manual states the human resources policies that the Hospital Authority has enacted for its effective operation.  A separate Administration Manual will be developed to provide procedures to assist in the implementation of these policies.”
“	A1.3.1	All employees in the hospitals and in the HAHO can have access to this manual on request.  This manual is intended for internal use only and should be widely distributed by hospitals to enable managers and staff access.”

12.  From these provisions, it is clear that HA employees are to be given ready access to the HRPM but not the HRAM which is for use of human resources function only.  By way contrasting the provisions in the HRAM with those in the HRPM, it is clear that the HRAM is a guide for use of the human resources personnel in the head office of the HA in handling human resources administration matters of the HA employees and civil servants working in the HA and is not intended to be a contractual document giving rise to rights and obligations between the HA and its employees, let alone it had not been incorporated into the Plaintiff’s contract.  Another significance of chapter A1.1.1 of the HRPM is that as at the date of the HRPM, i.e. 26 July 1994, the HRAM was not in existence.  This lends further confirmation to my view that the HRAM could not have been incorporated into the Plaintiff’s contract of employment.   Hence, I reject the Plaintiff’s argument that the provisions of the HRAM form part of the terms and conditions of his contract.

13.  Likewise, the FAR relied on by the Plaintiff was dated 26 January 1999, five years after the Plaintiff’s employment commenced.  It had not been expressly incorporated into his contract.  For similar reasons as above, it cannot be used to interpret the contract and could not have formed part of the contract of employment.  According to Mrs Wena Pang, the General Manager (Administrative Services) of the HA, the FAR pertains to financial matters within the HA and is not relevant to the termination of the Plaintiff’s contract.  In addition, it is clear from the provisions in the FAR that the purpose of the FAR is to lay down guidelines and standing rules for performing financial and accounting functions and to provide guidance for budget controllers.  Chapters 1.1.1 and 1.1.3 provide as follows:

“	1.1.1	The Financial and Accounting Regulations (the “FARs”) which set out key responsibilities of Budget Controllers and lay down general guidelines and standing rules for performing financial and accounting functions are drawn up by the Hospital Authority under the Draft Memorandum of Administrative Arrangements.”
“	1.1.3	The FARs together with the Accounting Policies, Internal Accounting Control and Operating Procedures, Accounting Circulars and Financial Delegation Manual form the collective body of guidance pertaining to financial matters within the Hospital Authority.  …”

Likewise, I reject the Plaintiff’s argument that the provisions of the FAR form part of the terms and conditions of his contract.

14.  Mr Dykes SC, counsel for the Plaintiff, has not referred me to any other HA Regulations which contain provisions on termination.  Thus, I consider only the HRPM and the letter of appointment are relevant in this dispute.

The HRPM

15.  It would be helpful if I should at this stage give a bird’s eye view of the HRPM.  The HRPM consists of 14 Sections.  I have already quoted chapter A1.1.1 of Section A which sets out the purpose of the HRPM.  The HRPM covers all aspects of employment from recruitment to termination.  Chapter B1.2.1 of Section B defines the various types of employment: permanent employment, contract employment and temporary employment.  Chapters B1.3 to B1.4 deal with conditions of full-time permanent employment.  There is no dispute that the Plaintiff was employed on permanent full-time terms which is defined under chapter B1.3.1 as an employee who enters into a contract of service with the HA for an unspecified period of time on a full-time basis.  Chapters B1.3 to B1.4 contain no provision for termination.  Chapters B1.5 to B1.7 deal with contract employment and chapter B1.6.6 provides that the HA or a contract employee may at any time terminate the contract by giving the prescribed period of notice or by payment of wages in lieu.  This termination provision is not relevant in the present case as the Plaintiff was not a contract employee.  Chapters B1.8 to B1.9 deal with temporary employment and trainee employment, which is not relevant in this dispute.  Thus, there is no applicable provision under the HRPM providing for termination of the Plaintiff’s employment by notice or payment in lieu of notice.  The only provision on this mode of termination is to be found in the Plaintiff’s letter of appointment dated 18 March 1994. 

16.  Section J of the HRPM provide for matters relating to discipline.  An employee is liable to disciplinary procedure if he has committed a minor offence and the sanctions or disciplinary actions are counselling, warning, deduction of wages, stoppage or deferment of increment: chapter J1.4.  An employee who is alleged to have committed a gross misconduct or is alleged to have shown unsatisfactory performance despite appropriate counselling and coaching will be subject to investigation.  If the case against the employee is substantiated, he will be subject to similar disciplinary actions as above or dismissal or such other action as may be appropriate: chapter J1.5 and chapter J1.6.1 respectively.  In addition, the HCE or the CE, as appropriate, may also decide in an appropriate case to convene a Committee of Inquiry.  The Committee of Inquiry will establish the facts of the case and give its recommendation as to the appropriate disciplinary action to the HCE or the CE.

17.  Section K is about termination of employment.  Chapter K3 deals with involuntary termination initiated by the HA under five specific circumstances, namely during an employee’s probation, for reasons of an employee’s poor health, for an employee’s misconduct, for an employee’s unsatisfactory performance and by reason of redundancy.  There are provisions in the HRPM providing for the grounds for such termination and specific procedural provisions as to how termination under each of those five specific circumstances is to be effected.  Of relevance to this case is chapter K3.5.1 which provides that the HA may dismiss an employee without notice or payment in lieu and accrued benefits (except annual leave accrued on the completion of a leave year) after due process of inquiry if an employee has committed gross misconduct in relation to his employment or has shown unsatisfactory performance despite appropriate counselling and coaching.  Termination by notice is also one form of involuntary termination insofar as the recipient of the notice is concerned.  But this mode of termination is not covered by chapter K3. 

18.  This is a classic example of an employer of a large institution setting out its personnel or human resources policies, laying down detailed procedures governing the implementation of those policies and laying down detailed disciplinary procedures to protect employment and to prevent arbitrariness and abuse of power by senior employees against their subordinates.  Having set out the above background, I now turn to consider the Plaintiff’s claims.

the claim for wrongful dismissal

The HA’s rights to terminate employment

19.  This is a claim for wrongful dismissal.  As a matter of law, the courts are not concerned with the rightness or wrongness of a dismissal or with whether the employer has acted unreasonably or capriciously in dismissing the employee.  A dismissal is wrongly only if it is in breach of the contract of employment.  In Malloch v Aberdeen Corpn [1971] 1 WLR 1578, Lord Reid said at 1581:

“At common law a master is not bound to hear his servant before   he dismisses him.  He can act unreasonably or capriciously if he so chooses but the dismissal is valid.  The servant has no remedy unless the dismissal is in breach of contract and then the servant’s only remedy is damages for breach of contract.”

Thus, at common law, an employer may terminate a contract of employment with his employee in accordance with its terms or for cause.  Such termination is not wrongful.

20.  A contract of employment usually contains a provision as to the length of notice required to terminate the contract.  In the absence of such express agreement, the law implies an obligation on both parties to the contract to give reasonable notice of an intention to terminate the employment relationship.  A contract may therefore be terminated by notice or payment in lieu of notice in accordance with the terms of the contract.  With the enactment of employment protection legislation which prescribes the length of notice required to terminate a contract, it has become unnecessary to resort to this implied obligation.  Section 6 of the Employment Ordinance provides that either party to a continuous contract of employment may terminate the contract by giving to the other party such notice in accordance with their contract of employment being not less than seven days’ notice.  Section 7 provides that alternatively either party may terminate the contract by giving to the other party payment in lieu of notice.  The right to terminate by notice or payment in lieu under sections 6 and 7 is available to both the employer and the employee.  This statutory right of termination under section 6 or section 7 is subject to modification by contract to the extent that the contractual right is not inconsistent with the statutory right under the Employment Ordinance.  Thus, the parties may by agreement agree to a period of notice being more than seven days.  The parties may also by agreement define the circumstances under which such notice may be given, for example, that the notice shall be in writing, etc.  In these regards, the Plaintiff and the HA have by agreement modified their statutory rights to the extent that the notice shall be two weeks’ notice in writing.  To these extents, the parties’ contractual right to termination by notice have merged with their statutory right.  It is not necessary for me to consider the HA’s statutory right to termination by notice under sections 6 and 7 of the Employment Ordinance.

21.  Termination for cause is a remedy available to the employer when an employee is in serious breach of the contract of employment.  In addition, an employer has a statutory right to terminate the contract without notice or payment in lieu under section 9 of the Employment Ordinance.  This right may be exercised if an employee wilfully disobeys a lawful and reasonable order; misconducts himself; is guilty of fraud or dishonesty; or is habitually neglectful in his duty or on any other ground on which the employer would be entitled to terminate the contract without notice at common law.  This statutory right overlaps to a large extent with the employer’s common law right to terminate a contract for cause.  However, this statutory right of termination is also subject to modification by contract to the extent that the contractual right is not inconsistent with the right under the Ordinance.  For example, the parties may by contract specify events upon the default of which the employer may summarily dismiss the employee for cause or prescribe the procedure to be followed before the power to dismiss for cause may be exercised.  In the instant case, the parties have by agreement incorporated into their contract the HRPM which specified, for example in chapter K3.5.3, that an employee’s continued absence for more than seven consecutive working days without permission or reasonable excuse as a default event which justifies summary dismissal.  The HRPM also prescribes detailed disciplinary procedures to be taken if the HA should wish to inflict any disciplinary action including dismissal for cause on its employees.  The provisions in the HRPM are not inconsistent with the HA’s statutory right to terminate an employee’s contract for cause and have therefore modified the HA’s statutory rights to termination under the Employment Ordinance to the extent that the HA’s statutory right to terminate the employment for cause may only be exercised after conclusion of the disciplinary proceedings recommending termination. 

22.  Thus, the HA has both a statutory right and a contractual right to terminate a contract of employment for cause without notice or to terminate a contract by giving notice or payment in lieu of notice without cause or without specifying any cause.  There is a clear distinction between the two modes of termination, which I shall briefly describe as termination for cause and termination by notice respectively.  The central legal issue in the Plaintiff’s principal claim is the extent to which the HA’s right to terminate a contract of employment by notice has been modified by the HRPM.  This raises the question of interpretation of the Plaintiff’s letter of employment and the relevant provisions of the HRPM.  The central factual issue in dispute is whether the Plaintiff was dismissed for cause.

Whether the HA may exercise its right to terminate employment by notice independently of the disciplinary proceedings under the HRPM

23.  So far as is relevant to the present dispute, the Plaintiff’s employment was subject to the HRPM and the letter of appointment dated 18 March 1994.  It is also a term of the letter of appointment that in the event of conflict between the letter of appointment and the HRPM, the letter of appointment shall prevail.  Under the termination clause of the letter, the HA may terminate the Plaintiff’s employment by giving two months’ notice or payment in lieu of notice or the HA may terminate the employment for cause.  The letter of appointment is silent as to what constitutes proper cause for termination.  Section J of the HRPM provides detailed disciplinary procedures to be followed in the case of disciplinary action for minor offences, unsatisfactory performance and gross misconduct.  The disciplinary action in respect of the latter two offences may lead to termination under chapter J1.5.2.  Chapter J1.10.1 provides that if an employee is to be dismissed, the procedure in chapter K3 on involuntary termination will apply.  Chapter K3.5.1 provides that the HA may dismiss an employee without notice or payment in lieu and accrued benefits after due process of inquiry, if the employee has committed gross misconduct in relation to his employment or has shown unsatisfactory performance despite appropriate counselling and coaching. 

24.  Mr Dykes SC submitted that there is no conflict between the HRPM and the termination clause.  He argued that they are not inconsistent with one another and they co-exist.  He referred me to the English Court of Appeal in Gunton v Richmond-upon-Thames, L.B.C. [1981] 1 Ch 448, which is heavily relied on by the Plaintiff in his alternative claim.  The plaintiff in that case was employed under a letter of appointment providing for termination by one month’s notice on either side and the letter also incorporated a disciplinary code.  Mr Dykes SC relied on the following dicta of Buckley LJ at 462 in support of his argument that the HRPM and the termination clause are not inconsistent:

“The adoption of the disciplinary regulations does not appear to me to be in any respect inconsistent with the continued power of the council to dismiss the plaintiff on a month’s notice upon grounds other than disciplinary grounds.  I am, however, myself of the opinion that the adoption of the disciplinary regulations and their consequent incorporation in the plaintiff’s contract of service did disenable the council from dismissing the plaintiff on disciplinary grounds until the procedure prescribed by those regulations had been carried out.”

For the purpose of this part of his argument, Mr Dykes was relying on the first sentence of the dicta I quoted above.  Mr Huggins SC, counsel for the HA, did not seek to argue that the HRPM and the letter of appointment are inconsistent.  He also relied on this dictum.  But despite this superficial accord, counsel are in disagreement.

25.  What Mr Dykes SC sought to argue further is this.  The HA is in a special position as a statutory body with an establishment of employees, most of whom were, and some still are, civil servants who had the benefit of disciplinary codes which were entrenched in codes where decisions were amenable judicial review.  He submitted that it would be surprising if the HA would not wish to ensure civil servants and their non-civil service colleagues receive roughly equal treatment when it came to disciplinary investigations.  He said it would not be right for the HA to devise elaborate codes of discipline which, when used, could be withdrawn when the procedures did not go to the liking of management.  He further argued that as chapter J1.10.1 of the HRPM provides that where an employee is to be dismissed, the procedures in chapter K3 will apply and chapter K3.5.1 requires that an employee could only be dismissed upon due process of inquiry which means an inquiry by a Committee of Inquiry appointed under chapter J1.5.2.  Hence, Mr Dykes SC argued that the HA is not entitled to choose between dismissal after due inquiry by a Committee of Inquiry or dismissal after investigation by an investigation committee under chapter J1.5.2 or dismissal by notice in accordance with the letter of appointment.  If I understand him correctly, his argument was that the HRPM could only be read consistently with the letter of appointment, if the right to terminate the employment by notice could only be exercised as a result and after the conclusion of the disciplinary proceedings under the HRPM.

26.  I think Mr Dykes SC’s argument based on governmental antecedents of the HA was history.  HA’s employees, like the Plaintiff, are employed on terms of the letter of employment, the HRPM and HA Regulations.  These documents set out exclusively the terms and conditions of their employment.  The Plaintiff’s and the HA’s rights and obligations were governed by these documents.

27.  As for HA’s position as a statutory body, I do not think that merits any special consideration.  Though Mr Dykes SC did not argue along this line, I may as well point out that it has been well established that statutory bodies as employers are treated no differently from those in the private sector.  This was unanimously held by all the three judges of the English Court of Appeal in Gunton v Richmond-upon-Thames, L.B.C. [1981] 1 Ch 448.  Lord Shaw said at 460-F:

“Mr Goudie contended that a peculiar and special status attached to the plaintiff’s position as clerk to the governors because it was a public office.  He submitted also that public authorities stood in a special and more responsible situation in law in regard to contracts with employees than did ordinary employers.  With all respect to the products of his research and his persuasive presentation of them, I find no warrant for either proposition.  There are situations in which the impact of some statutory provisionon the status of an employee gives rise to special considerations and consequences.  The relationship between the council and the plaintiff was free from such trammels.  The only peculiarities it presents arise from his conduct in the performance of his duties while he was at the college and the excursions in law which he has pursued since he left that institution.”

Buckley LJ said at 470-F:

“Mr Goudie referred us to a number of cases in which employers of persons in the public service, such as school teachers, were held to be disentitled to dismiss employees otherwise than in accordance with particular procedures or upon limited grounds.  I do not find those authorities helpful in the present case, in which, as it seems to me, the plaintiff’s rights were purely contractual.  They were not entrenched by any statutory or other extra-contractual provisions.  Nor, in my opinion, was the discretionary power of the council to dismiss the plaintiff on a month’s notice limited in any way apart from the terms of the contract of employment itself relating to disciplinary matters.”

Brightman LJ at 473-E:

“The plaintiff’s counsel sought to argue that there was some special law which applied to contracts of service entered into by a statutory authority with its employees.  He called it an aspect of administrative law.  A statutory authority, he submitted, could not give an employee notice of dismissal without some good reason.  Such a notice would be ultra vires, because a statutory authority had a statutory duty to act with propriety.

I accept that a statutory authority has to act reasonably and that it should exercise reasonably its statutory powers to hire and fire its servants.  But I do not know of any principle of law which confers on a public employee a greater security of tenure than is enjoyed under a comparable contract of employment with a non-statutory authority.”

28.  These dicta establish that while public authorities as exemplary employers stand in a special and more responsible situation in law in regard to contracts with its employees than do ordinary employers, in the absence of any specific statutory provision to the contrary, the rights and obligations of the public authorities and its employees are governed by their contracts of employment in ways no different from those in the private sector.  Mr Dykes SC was unable to refer me to any statutory provision by which the employment of any HA employees were entrenched by law or other extra-contractual provisions.  In the circumstances, whether the HA is entitled to terminate the contract is a matter which has to be determined on the true construction of the letter of employment and the HRPM.

29.  Chapter K3.2.1 specified five specific circumstances of involuntary termination, namely: during an employee’s probation; for reasons of an employee’s poor health; for an employee’s misconduct; for an employee’s unsatisfactory performance and by reason of redundancy.   Notice is required in relation to termination during probation, termination for reasons of poor health and termination on ground of redundancy, but not in relation to termination for gross misconduct or unsatisfactory performance.  Termination by notice is not treated as involuntary termination in chapter K3.2.1, but in my opinion, it is a form of involuntary termination as far as the recipient of the notice is concerned.  In view of the termination clause in the letter of employment, it is obvious that the circumstances set out in chapter K3.2.1 under which employment may be terminated are not exhaustive.  It can hardly be argued that the provisions in chapter K3.2.1 for involuntary termination for cause means that the only circumstances in which the HA can exercise its right to terminate by notice or by payment in lieu are those prescribed in chapter K3.2.1.  That interpretation would mean that effectively there is no right to terminate by notice other than for one of the specific grounds in chapter K3.2.1.  It would also mean that the HA may only terminate the employment of the Plaintiff by notice for reason of his poor health or for reason of redundancy, otherwise the contract is indeterminable by the HA except for cause.  Such an interpretation would be in conflict with the termination clause under the letter of employment. Reading the contract of employment and the HRPM as they stand, I do not think these documents could convey such a restrictive meaning to their readers.  I do not think it could have been the parties’ common intention to limit the HA’s freedom to terminate the contract by notice in this manner.  Had it been the HA’s intention to do so, it could have easily expressed itself unequivocally in the letter of appointment.  Furthermore, even if it were possible to construe the HRPM with such a restrictive meaning, it would result in a conflict between the letter of employment and the HRPM with the result that the letter of appointment shall prevail and the restrictive meaning must of necessity be excluded.  

30.  In Johnson v Unisys Ltd [2001] UKHL 13, the employee was summarily dismissed following allegations concerning his conduct.  His letter of engagement provided:

“If you decide to leave Unisys Ltd you are required to give the company four weeks’ notice; equally, the company may terminate your employment on four weeks’ notice … In the event of gross misconduct, the company may terminate your employment without notice.”

In addition, the letter also referred to the employee handbook which stipulated expressly that “The company reserves the right to make payment in lieu of notice.”  The employee sued the employer for wrongful dismissal alleging his dismissal was in breach of an implied term of his contract of employment that the employer would not conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of trust and confidence between itself and the employee, such as dismissing him without reasonable and proper cause or a fair hearing.  Though the existence of this implied term has been affirmed by the House of Lords in Mahmud v Bank of Credit and Commerce International SA [1998] AC 20, Lord Hoffman held that in the face of the express provision that the employer was entitled to terminate the employee’s employment on four weeks’ notice without any reason, it was very difficult to imply a term that the employer should not do so except for some good cause and after giving him a reasonable opportunity to demonstrate that no such cause existed.

31.  In my view, the facts in Johnson v Unisys Ltd are indistinguishable from those of the present case.  The provisions in the termination clause in the two letters of appointment are in similar terms and both referred to disciplinary procedures contained in other documents expressly incorporated into the contracts.  The only difference between the two cases is that the employer in the present case is a public body and Unisys Ltd was probably not.  As I have explained that difference is immaterial and could not lead to a wholly different interpretation of the contractual documents.  Though Johnson v Unisys Ltd was about implication of a term into a contract and not about construction of document, if Lord Hoffmann found it difficult to imply such a term in that case, on a similar factual situation I would also find it difficult to construe the right to terminate a contract by notice and the right to terminate for cause are not distinct and separate rights exercisable at the option of the HA.  Johnson v Unisys Ltd supports the above intention I ascertain from the letter of employment and the HRPM.

32.  Reading the letter of appointment alongside Section J and Section K of the HRPM, I am quite unable to find any conflict between the two documents.  The HRPM is wholly silent on the mode of termination by notice.  I am quite unable to read into the termination clause an implied term that the HA’s right to terminate the Plaintiff’s employment by notice could only be exercised as a result of disciplinary proceedings in accordance with the HRPM.  On the other hand, the termination clause is silent as to what constitutes sufficient cause for termination without notice.  On a true construction of the two documents, I find that the HRPM supplements the termination clause by supplying the details of the necessary disciplinary proceedings and procedures in order to bring about a termination for cause.  Section J defines the disciplinary offences, the commission of which would result in termination for cause and provides the detailed procedures governing the disciplinary proceedings leading to such termination.  Section K provides the procedure for such termination.  Thus the HA has on the one hand, a right to terminate the employment by notice or payment in lieu and on the other, a right to terminate the employment for cause by taking up disciplinary proceedings in accordance with Section J of the HRPM and if termination is appropriate the procedures in accordance with Section K.  That is the only reasonable way the termination clause and the HRPM could be read consistently with one another.

33.  Thus, despite the Plaintiff was employed on permanent terms, a term meaning employment for an unspecified period of time on a full-time basis, his employment may be terminated either by notice or for cause as provided by the termination clause.  The HA’s right to terminate the Plaintiff’s employment by notice or payment in lieu is a distinct and separate right from the disciplinary provisions in Section J of the HRPM.  But if the HA opts to terminate the Plaintiff’s employment for cause, whether in exercise of its statutory right under section 9 of the Employment Ordinance or pursuant to the contractual right provided in the termination clause, it has to follow the procedures in Section J and Section K of the HRPM.  If the HA opts to terminate the employment by notice, the provisions in the HRPM are just inapplicable and irrelevant.    I do not think the right of the HA to terminate the employment of its employee by notice is in any way subject to the existence of a good cause determined by disciplinary proceedings in accordance with the HRPM. 

Whether the Plaintiff’s employment was terminated for cause or by notice

34.  It is the HA’s primary contention that it was entitled to choose not to dismiss the Plaintiff for cause but to dismiss him by payment in lieu of notice.  Mr Huggins SC submitted that the HA was entitled to choose not to invoke the provisions in chapter K3.2.1 even in a factual situation in which the HA considered that the Plaintiff’s performance was in fact unsatisfactory.  In other words, the HA was entitled to avoid dismissal on the disciplinary ground of unsatisfactory performance by exercising instead its right to terminate without cause by notice.  I agree with that submission.  It was the HA’s prerogative to determine whether to terminate an employee’s employment for cause even where a cause exists or to terminate without cause or without specifying any cause by giving him two months’ notice or payment in lieu.  If the HA opts for the latter option, it has to pay the employee two months’ wages in lieu of notice and accrued benefit.  But in the case of the former, the HA has to go through the entire disciplinary process, reach a finding by the investigation committee or a Committee of Inquiry that the employee has shown unsatisfactory performance despite appropriate counselling and coaching and subject to the employee’s right to appeal to the Staff Appeals Committee being dismissed.  Even if the HA is successful, the employee may still challenge the finding of the investigation committee or Committee of Inquiry in a court of law.  That course will take much longer and will cost more and the HA will have to subject itself to the uncertainty of litigation and possibility of adverse publicity.  The benefit of such a course to the employee is that he is entitled to receive all his accrued benefits, to work through the notice period or to receive payment in lieu and if his performance has indeed been unsatisfactory, he is spared of the stigma.  The question in this case is whether on the fact, the HA did exercise its right to terminate the Plaintiff’s employment by payment in lieu of notice.

35.  The HA initiated disciplinary proceedings against the Plaintiff by serving on him a memorandum dated 23 January 2003 advising him that an investigation was being conducted in accordance with chapter J1.6 of the HRPM for his unsatisfactory performance despite where appropriate counselling and coaching.  The memorandum contained particulars of six incidents of unsatisfactory performance.  HA’s solicitors engaged in correspondence with the Plaintiff’s solicitors and received their written submission.  The investigation committee concluded that the case against the Plaintiff was established but recommended termination by payment in lieu of notice.  The conclusion of the report is in the following terms:

“After due process under chapter J1.6 of Human Resources Policies Manual, it has been established that the employee’s performance was unsatisfactory despite where appropriate counselling and coaching.  It is recommended that his employment with the Hospital Authority be terminated by payment in lieu of notice.”

From the above conclusion and recommendation, it is obvious that the investigation committee made a finding of fact that the Plaintiff’s performance was unsatisfactory despite where appropriate counselling and coaching.  But the investigation committee did not recommend dismissal in accordance with chapter K3.5.1 which the HA would otherwise be entitled to in view of the finding of the investigation committee.  In my view, its recommendation was nevertheless a sanction or disciplinary action open to the HA under the “such other action” limb of chapter J1.5.2 (see paragraphs 38 to 40 below).

36.  Then on behalf of Dr Lily Chiu, the HCE of Kwai Chung Hospital who headed the investigation committee and concurrently the CCE, Mrs Pang wrote to the CE recommending termination of the Plaintiff’s employment by wages in lieu of notice in accordance with HRPM.  The memorandum was sent via the CCE, Dr Lily Chiu to the Head Office of the HA.  An officer of the Human Resources department, Mrs Chung, wrote a minute to the CE, via the Deputy Director (Human Resources) (the “DD(HR)) in the following terms:

“Please see the enclosed report regarding the termination of the above-named employee. Having reviewed the report, the recommendation by CCE and HCE to terminate the employee by wages in lieu of notice in accordance with HRPM is recommended for your approval, pls.”

Mrs Chung’s recommendation was supported by the DD(HR).  The then CE, Dr William Ho, personally approved the termination on 25 April 2003.  In Mrs Pang’s memorandum and Mrs Chung’s minute, they both used the phrase “termination … in accordance with HRPM”.

37.  Subsequently, the CCE issued a letter of termination to the Plaintiff dated 30 April 2003.  The letter reads as follows:

“	Termination of Employment
	We regret to inform you that notice is hereby given to terminate your employment with effect from 30 April 2003 by paying two months’ wages in lieu of notice.  Your last date of service will be 30 April 2003 and you shall not come to work on 1 May 2003.  Up to the last day of service, you have earned 0.56 days’ annual leave which will be encashed to you. …”

The formula “in accordance with HRPM” was not used in this letter.

38.  Mr Huggins SC argued that the formula “in accordance with HRPM” in Mrs Pang’s memorandum and Mrs Chung’s minutes were inherently ambiguous and did not mean that the Plaintiff’s employment was terminated under disciplinary grounds in accordance with Section J of the HRPM or indeed pursuant to any disciplinary provision for termination in the HRPM.  He submitted that the formula was consistent in the context of this case in the sense of being in conformity with the HRPM, or in line with the HRPM, and not in conflict with the HRPM.  He argued that had the termination been pursuant to a disciplinary provision in the HRPM as argued by Mr Dykes SC that could only have been for unsatisfactory performance, in which event the HRPM disciplinary provisions provided for termination without notice and without payment in lieu of notice and accrued benefits.  He further argued that the HA was free not to take any disciplinary action after the investigation and the HA did not.  He submitted that the termination without cause and by payment in lieu of notice was not a disciplinary action.

39.  With all respect to Mr Huggins SC, I do not agree.  On the facts, there is no dispute that disciplinary procedure in the form of an investigation was commenced under chapters J1.5 and J1.6.  There is no dispute that the investigation was completed with the finding of fact that the Plaintiff had shown unsatisfactory performance despite where appropriate counselling and coaching and the investigation committee recommended termination of the Plaintiff’s employment with notice.  Under chapter J1.5.2, a number of options were open to the HA depending on the severity of the offence.  These include verbal or written warning, stoppage or deferment of increment, deduction of wages, dismissal and such other action as may be appropriate.  In my view, “such other action” includes a wide variety of options, such as regular reviews of the employee’s performance, or a requirement that he attends training or counselling or termination by notice, which is a lesser sanction than termination without notice.  Termination by notice is nevertheless an involuntary termination as far as the recipient of the notice is concerned.  It is a punishment in that the person loses his job, even though he loses it in accordance with the terms of the contract to which he has agreed.  Chapter K3.5.1 is drafted in permissive and not mandatory terms that “the HA may dismiss an employee without period of notice or payment in lieu and accrued benefits …, if the employee has committed gross misconduct in relation to his employment or has shown unsatisfactory performance despite appropriate counselling and coaching.”  Chapter K3.5.1 being the sanction provision must be read subject to and consistently with chapter J1.5.2 which provokes the sanction.  In my opinion, on a true construction of the HRPM, chapter J1.5.2 sets out the available options upon a finding of unsatisfactory performance.  On the other hand, chapter K3.5.1 gives the HA a discretionary power to dismiss without notice but not a mandatory duty to do so upon finding of unsatisfactory performance.  It prescribes the maximum sanction that may be inflicted.  In my view, it would be monstrous to assume that upon a finding of unsatisfactory performance, dismissal without notice and accrued benefit is the only option and it is not open to the HA to inflict the lesser sanction such as verbal or written warning or termination with notice, which is nevertheless a form of “less disgraceful capital punishment”.  That interpretation is inconsistent with chapter J1.5.2. 

40.  The investigation committee was supposed to investigate into the alleged disciplinary offence, to make finding of facts and to recommend appropriate disciplinary action to be taken.  It could not have been the investigation committee’s business to recommend termination not as a disciplinary action but as a recommendation of good management.  If in fact that was what the investigation committee intended, it would have made the finding of fact and then recommend no disciplinary action to be taken but suggest to the CE to consider terminating the Plaintiff’s employment because of exigency of service or for good management.  But that was not what the investigation committee did.  On the facts, according to the evidence of the CCE, whose opinion represented the opinion of the investigation committee, she considered that in view of the Plaintiff’s long service and seniority it would be more appropriate to dismiss the Plaintiff by notice instead of dismiss him for cause so as to enable the Plaintiff to retain his accrued benefit which he would not be entitled had he been dismissed for cause.  In my view, the investigation committee must have considered the offence serious but not of such a severity as would justify dismissal under chapter K3.5.1 in all the circumstances.  In that context, the investigation committee must have recommended termination as a sanction under the “such other action” limb in accordance with chapter J1.5.2 of the HRPM and not as a recommendation of good management.  In my view, there is no doubt that the termination was a disciplinary action inflicted as a result of the disciplinary proceedings for some cause which the investigation committee thought was justified, i.e. perceived unsatisfactory performance.  That was the reason behind the termination.  The Plaintiff was dismissed by reason of perceived unsatisfactory performance, or more precisely by reason of a finding by the investigation committee that he had shown unsatisfactory performance despite where appropriate counselling and coaching.  The CE accepted that recommendation and terminated the Plaintiff’s employment by payment in lieu of notice with accrued benefit.  The crucial question remains that despite the termination was a sanction, in view of the way the Plaintiff was dismissed, was he dismissed for cause?

41.  Mr Dykes SC referred to the HA’s defence filed in the Labour Tribunal in which the reason given by the HA for the dismissal was the Plaintiff’s unsatisfactory performance.  He submitted that this show that the employment of the Plaintiff was terminated for cause.  On the other hand, Huggins SC argued that that defence was filed by the HA in anticipation of a claim under section 32A of the Employment Ordinance and that the Plaintiff was dismissed by reason of his unsatisfactory performance.  To that submission, Mr Dykes SC’s reply was that the HA cannot switch between termination by notice and termination by reason of the Plaintiff’s conduct as and when it suits its defence.  Either there was a reason for the Plaintiff’s dismissal or there was none.

42.  Part VIA of the Employment Ordinance gives limited employment protection to an employee who has been employed under a continuous contract for a period of not less than 24 months.  Section 32A(1) provides that if such an employee is dismissed because his employer intends to extinguish or reduce any right, benefit or protection conferred or to be conferred upon the employee by the Ordinance, the employee is entitled to certain remedies prescribed under the Ordinance.  Section 32A(2) provides a presumption that the employee is taken to have been dismissed because the employer intends to extinguish or reduce any right, benefit or protection conferred or to be conferred on the employee, unless the employer shows a valid reason for that dismissal within the meaning of section 32K.  Section 32K sets out five valid reasons, namely:

(a)	the conduct of the employee;
(b)	lack of capacity or qualifications of the employee;
(c)	redundancy or other genuine operational requirements;
(d)	contravention of law if the employment were to continue; and
(e)	any other reason of substance.

In Vincent v SCMP Publishers Ltd [2003] 4 HKC 119, the Court of Appeal held that if an employer proves that the termination was by reason of one of the five facts mentioned in section 32K, then the statutory presumption would be rebutted without any additional discretionary consideration as to whether it was reasonable to have terminated the contract or whether there should have been some formal procedural process first.  On the facts, I have no doubt that a case of termination by reason of the employee’s conduct under section 32K has been made out.  I do not have to take the further step of finding whether the termination was justified or was wrongful. The finding of the investigation committee was that it was justified but it does not recommend dismissal without notice but instead recommended termination by notice.  The Plaintiff’s stance is, rightly or wrongly, he was dismissed for cause and was entitled to a claim under the principle in Gunton.

Conclusion

43.  I think on the issue whether the termination was for cause or by notice, the question whether the termination for cause was justified or not is irrelevant.  The only question is how was the termination brought about.  In my view, it is just a question of form.  This may sound artificial, but it is no more artificial than the distinction between adequacy and sufficiency of consideration and the distinction between a written contract for disposal of an interest in land which is valid and an oral contract which is not.  This is a case where the form dictates the consequence.  Different consequences flow from the two forms of dismissal.  If an employee is dismissed for cause, he leaves his employment with a stigma of an under-performer.  He does not have a good reference to show to his prospective employers.  He may have difficulties in accounting for his previous employment.  On the other hand, if he is dismissed by notice, he has a clean record to show to his prospective employers and his former employer cannot pass any unduly adverse comment on his performance.  Besides, he is entitled to notice or to payment in lieu of notice.  In addition, in the instant case, if the Plaintiff were dismissed for cause, he would not be entitled to payment of two months’ salary with allowance and accrued benefits, which are not insubstantial in view of his long service.  

44.  On the facts of the present case, it is beyond dispute that the Plaintiff’s employment was terminated by payment in lieu of notice.  That was the mode of termination recommended by the investigation committee, approved by the CE and carried out by the CCE.  The letter of termination expressly stated that the Plaintiff’s employment was terminated by paying two months’ wages in lieu of notice.  No cause was assigned to the termination and nothing was mentioned about the conclusion of the investigation committee.  The termination was clearly the exercise by the HA of its right to terminate by notice under the termination clause of the letter of appointment and not the right to terminate for cause, despite the background of disciplinary proceedings.  The HA refrained from exercising its right to terminate the Plaintiff’s employment for cause and elected the soft option of terminating his employment by notice. Given the background of disciplinary proceedings, the termination with notice was a disciplinary action under the “such other action” limb.  Hence, the underlying reason was the Plaintiff’s unsatisfactory performance but the HA chose not to use that as a cause to dismiss the Plaintiff and the HA was entitled to do so.  Accordingly, I find that the termination took the form of termination by notice and not termination for cause, even though it was inflicted as a disciplinary action for the underlying reason that the Plaintiff’s performance was unsatisfactory.  The Plaintiff was entitled to two months’ notice and he received the appropriate payment in lieu.  That must necessarily mean the end of his claim for wrongful dismissal.

The claim under Gunton v Richmond-upon-thames, LBC

45.  The Plaintiff’s alternative claim is that even if the HA was entitled to terminate his employment by giving him notice or payment in lieu, such notice or payment could not be given so long as disciplinary proceedings against him were continuing.  This is a claim based on the English Court of Appeal’s decision in Gunton v Richmond-Upon-Thames, London Borough Council [1981] 1 Ch 448.  Mr Dykes SC submitted that the disciplinary proceedings were far from near completion.  No Committee of Inquiry has been appointed to investigate the allegation of unsatisfactory performance and the untimely termination also deprived the Plaintiff of his right to appeal in accordance with the HRPM.  On the other hand, Mr Huggins SC submitted that Gunton v Richmond-Upon-Thames, London Borough Council was impliedly overruled by Johnson v Unisys Ltd [2003] 1 AC 518.  Before going to Johnson v Unisys Ltd,I shall first turn to Gunton v Richmond-Upon-Thames, London Borough Council and see what has that case decided.

The principle in Gunton v Richmond-Upon-Thames, London Borough Council

46.  The plaintiff in Gunton v Richmond-Upon-Thames, London Borough Council was appointed by the defendant council as a college registrar under a contract of service terminable by one month’s notice on either side.  A disciplinary code which prescribed a procedure for dismissal of employees on disciplinary grounds was subsequently adopted by the council and formed part of the plaintiff’s contract.  In November 1975, the plaintiff’s superior recommended his dismissal from the council’s service and commenced disciplinary proceedings prescribed by the regulations.  Before the prescribed procedures had been fully complied with, the council gave him one month’s notice of termination and informed him that he was not required to attend work while under notice.  The plaintiff brought an action for a declaration that the council’s purported termination of his appointment was void.  The court granted the declaration and on the plaintiff electing to claim damages at common law ordered an inquiry as to damages on the basis that the plaintiff was entitled to remain in the council’s employment until retirement.  On appeal by the council, the Court of Appeal essentially upheld the judge’s decision on the declaration but varied his order in relation to the assessment of damages.  Shaw LJ dissented but concurred in the result.  Both Buckley and Brightman LJJ held that the effect of the incorporation of the disciplinary regulations into the plaintiff’s contract of service was that the plaintiff could not lawfully be dismissed on a disciplinary ground until the procedure prescribed by the regulations had been carried out.

47.  After dismissing the trial judge’s view that the effect of incorporation of the disciplinary code into the plaintiff’s contract was to fetter the council’s power to dismiss the plaintiff by notice, Buckley LJ held that the effect of the code was to modify the council’s right to termination on disciplinary grounds to the extent that this right might only be exercised after conclusion of the disciplinary procedure which supported the termination, while the council’s right to terminate by notice upon grounds other than disciplinary remains intact.  He said at 462:

“I feel unable to accept this view, for it seems to me that the express term about notice in the letter of appointment should only be treated as modified, if at all, by regulations subsequently adopted by the council to the extent that such regulations are irreconcilable with the continued operation of the express term.  The adoption of the disciplinary regulations does not appear to me to be in any respect inconsistent with the continued power of the council to dismiss the plaintiff on a month’s notice upon grounds other than disciplinary grounds.  I am, however, myself of the opinion that the adoption of the disciplinary regulations and their consequent incorporation in the plaintiff’s contract of service did disenable the council from dismissing the plaintiff on disciplinary grounds until the procedure prescribed by those regulations had been carried out.” (emphasis added)

In applying the above principle to the facts of the case, Buckley LJ said at 470:

“In the present case, in my view, the council could, on January 13, 1976, have determined the plaintiff’s contract of service on February 14, 1976, without assigning any reason, or for any given reason other than a disciplinary reason.  They did not, however, do so.  It is common ground that the letter of January 13, 1976, purported to relate the plaintiff’s dismissal to disciplinary matters.  Mr Mitchell, as I understood his argument, submitted that that circumstance was not significant; the plaintiff received one month’s notice, which was all that he was entitled to insist upon.  As I have already indicated, I feel unable to accept that view because, in my opinion, the effect of the incorporation in the contract of the disciplinary regulations was to entitle the plaintiff not to be dismissed on disciplinary grounds until the disciplinary procedures prescribed by the regulations had been carried out.”  (emphasis added)

48.  From the above dicta, it is clear that Buckley LJ saw no inconsistency between the disciplinary regulations and the council’s right to terminate the employment by notice.  The two could co-exist.  In fact, he went as far as to say at 470 that on the facts in that case, the council could have lawfully terminated the plaintiff’s employment by notice if it had not assigned any disciplinary ground.  That dictum was obiter.  However, it is obvious that a material fact in that case was that the plaintiff was dismissed by notice on disciplinary grounds and it was on that basis that Buckley LJ held “the effect of the incorporation in the contract of the disciplinary regulations was to entitle the plaintiff not to be dismissed on disciplinary grounds until the disciplinary procedures prescribed by the regulations had been carried out.”  In other words, the incorporation of the disciplinary regulations did not have the effect of disentitling the council from dismissing the plaintiff by notice without specifying any disciplinary ground. 

49.  Brightman LJ concurred with Buckley LJ and said at 472:

“That letter was admittedly wrongful because the council were not entitled by the contract to dismiss the plaintiff on a disciplinary ground without observing the agreed disciplinary procedures, which by an oversight and without any practical injustice to the plaintiff, were in this case disregarded.” (emphasis added)

He continued at 473:

“The only problem on this aspect of the case which arises is that the plaintiff’s letter of appointment from the council stated that “Your appointment will be terminable by one month’s notice on either side;” while at the same time the contract of employment incorporated “Regulations as to Staff Discipline” applicable to allegations of inefficiency, misconduct or indiscipline.  These regulations have the effect of defining the steps required to be taken in the interests of the employer and the employee before the head of department can recommend dismissal to the appropriate committee of the council.  The result was that the council had under the contract a right to dismiss the plaintiff on one month’s notice, but they could not lawfully act on a recommendation for dismissal on a disciplinary ground unless the disciplinary procedure had been followed; the completion of this procedure was a condition precedent to a valid recommendation for dismissal on a disciplinary ground.”  (emphasis added)

What Brightman LJ found wrongful was the dismissal on a disciplinary ground without allowing the disciplinary proceedings to run their course.  He recognised that the council had the right to terminate the employment by notice and impliedly held that right could have been exercised if the termination was by notice simpliciter without specifying a disciplinary ground or without specifying any grounds.

50.  Shaw LJ dissented but concurred with the result.  He saw no conflict between the council’s right to terminate the contract of employment by notice and the disciplinary regulations.  He held the right to terminate by notice and the right to terminate for cause under the disciplinary regulations were separate and independent rights.  The employer was free to terminate by either mode, but if he should do so by the former, he may have difficulties in justifying the dismissal as not being unfair under the UK employment protection legislation which has no equivalent in our laws.  He said at 457:

“How is this code as to dismissal for breaches of discipline to be reconciled with the express provision for the termination of the plaintiff’s contract of service by one month’s notice on either side?  A possible solution is that the code extends or varies that express provision where the council purports to dismiss on disciplinary grounds, but that in any other circumstances the contract of service may be determined by reference to the express provision. This, however, would produce a grotesque result, for it would mean that the council could, without assigning any reason, terminate the plaintiff’s employment by a month’s notice, but could not, if they complained of misconduct on his part, determine that employment save by what might prove a long protracted process.  As this apparent contractual anomaly lies at the root of the matters to be resolved in examining the judgment which is appealed, I think it as well to indicate at the outset the view which I have formed as to the interaction of the stated contractual term of notice and the procedure in relation to dismissal for breaches of discipline which it is accepted forms part of the plaintiff’s contract of employment.  For myself, I do not consider that the regulations as to staff discipline were designed to deprive the council of their contractual power to determine the contract of service by one month’s notice; nor in my view did they have that result.  If, however, the council exercised that right and were called upon before an industrial tribunal to justify a dismissal on some disciplinary ground as being fair, it might be very difficult for the council to establish that the dismissal was not unfair if the code had not been followed.  … On the other hand, if the code had been fully observed, the onus on the council to demonstrate that the dismissal was fair would be relatively easy to discharge.” (emphasis added)

Shaw LJ seemed to be of the view that the council had an unqualified right to terminate the employment by notice on any ground, disciplinary or otherwise, even though while disciplinary proceedings were still on-going.

51.  On the facts of that case, it was not clear if the notice of termination issued by the town clerk included any express reference to termination on disciplinary grounds, but the case was argued on the basis that it was.  Thus the majority view of the Court of Appeal was that the council was not entitled to dismiss the plaintiff on a disciplinary ground until the completion of the disciplinary proceedings which supported the dismissal.  That must have been what was decided in that case.  However, it can also be noted from the dicta I quoted above that the unanimous, albeit obiter, view was that the council could have dismissed the plaintiff by notice without specifying any grounds or without specifying any disciplinary grounds. 

52.  The next authority along this line relied on by Mr Dykes SC is Janciuk v Winerite [1998] IRLR 63.  In that case, the Employment Appeal Tribunal summarised the principles governing an assessment of the consequences of non-compliance with contractual disciplinary procedures.  The plaintiff was summarily dismissed with two weeks’ wages in lieu of notice, though his contract of employment only entitled him to one week’s notice.  He claimed he was entitled to the benefit of a disciplinary procedure and if that had been followed, there was a chance that he would not have been dismissed.  The Tribunal held:

“Some contracts of employment require the employer to follow a disciplinary procedure before notice of dismissal can be given.  In other words, the disciplinary procedure acts as a brake on the giving of notice.  In such a case, the employer would be acting in breach of contract if he gave notice terminating the contract without first having followed the correct procedure.”

53.  It is not clear from the judgment if the plaintiff was dismissed on a disciplinary ground.  As that case quoted and followed Gunton, I assume that the plaintiff was dismissed on a disciplinary ground but with wages in lieu of notice.  That decision did not add anything to Gunton.  If the above dicta were taken to cover a case where the employee was dismissed by notice simpliciter without specifying any disciplinary ground, I would consider the decision too wide and inconsistent with the unanimous obiter opinion of Gunton and would respectfully differ from it.

54.  Mr Huggins SC submitted that Gunton was in conflict with the decision of the House of Lords in Johnson v Unisys Ltd [2003] 1 AC 518.  I have briefly quoted the facts in Johnson v Unisys Ltd.  They are broadly similar to those in the present case.  The plaintiff claimed that he was dismissed in breach of various implied terms of his contract.  The main one was the implied term of trust and confidence affirmed by the House of Lords in Mahmud v Bank of Credit and Commerce International SA [1998] AC 20, i.e. the employer would not without reasonable cause conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of trust and confidence between itself and the employee.  The judge struck out the claim as disclosing no reasonable cause of action.  The plaintiff’s appeals to the Court of Appeal and then to the House of Lords were dismissed on the ground that he had no realistic prospect of overcoming the obstacle of remoteness of damages. 

55.  The impact of incorporation of a disciplinary procedural code into a contract of employment was considered by Lord Hoffmann, with whom Lord Bingham and Lord Millett agreed.  Lord Hoffmann said at paragraphs 60 to 66 as follows:

“	60	There is one further point.  During the argument there was some discussion of whether the provisions for disciplinary hearings were express terms of Mr Johnson’s contract and what the consequences would be if they were……
	61	Section 1(1) of the 1996 Act provides that upon commencing employment, an employee shall be provided with “a written statement of particulars of employment”.  This includes, but is not limited to, the “terms and conditions” of employment …  Section 3(1) then provides that a statement under section 1 shall include a “note … specifying any disciplinary rules applicable to the employee …
	62	Consistently with these provisions, Mr Johnson was written a letter of engagement which stated his salary and summarised the terms and conditions of his employment … It was however accompanied by the employee handbook, …
	63	So did the disciplinary procedures constitute express terms of the contract of employment?  Perhaps for some purposes they did.  But the employee handbook has to be construed against the relevant background and the background which fairly looms over the disciplinary procedure is Part X of the 1996 Act.  The whole disciplinary procedure is designed to ensure that an employee is not unfairly dismissed.  So the question is whether the provisions about disciplinary procedure which (to use a neutral phrase) applied to Mr Johnson’s employment were intended to operate within the scope of the law of unfair dismissal or whether they were intended also to be actionable at common law, giving rise to claims for damages in the ordinary courts.
		…
	66	My Lords, given this background to the disciplinary procedures, I find it impossible to believe that Parliament, when it provided in section 3(1) of the 1996 Act that the statement of particulars of employment was to contain a note of any applicable disciplinary rules, or the parties themselves, intended that the inclusion of those rules should give rise to a common law action in damages which would create the means of circumventing the restrictions and limits which Parliament had imposed on compensation for unfair dismissal.  The whole of the reasoning which led me to the conclusion that the courts should not imply a term which has this result also in my opinion supports the view that the disciplinary procedures do not do so either.  It is I suppose possible that they may have contractual effect in determining whether the employer can dismiss summarily in the sense of not having to give four weeks’ notice or payment in lieu.  But I do not think that they can have been intended to qualify the employer’s common law power to dismiss without cause on giving such notice, or to create contractual duties which are independently actionable.”

56.  Mr Huggins SC submitted that the conclusion reached by Lord Hoffmann that the disciplinary procedures were not intended to create contractual duties which are independently actionable is in conflict with Gunton.  I think in reading these dicta, one must bear in mind that Johnson v Unisys Ltd was decided against the background of employment protection legislations in the UK, such as the Employment Rights Act 1996 which do not apply in Hong Kong.  It was against that material background that the disciplinary procedures in that case were construed.  As Mr Dykes SC rightly pointed out, it was in that context that Lord Hoffmann and Lord Millet felt it would be inappropriate for the common law to develop another remedy for what was in effect a claim for unfair dismissal. Thus Lord Hoffmann’s dicta in paragraph 66 of that case that disciplinary procedures did not give rise to a common law action in damages were made in the context of the regime of employment protection available in the UK and may not have application to Hong Kong.  However, Lord Hoffman’s conclusion that the disciplinary procedures may have contractual effect in determining whether the employer can dismiss the employee for cause without having to give notice or payment in lieu and that the disciplinary procedures were not intended to qualify the employer’s common law power to dismiss without cause by giving notice are clearly conclusions reached on construction of documents by applying principles of construction which are applicable to Hong Kong.  In my opinion, the above dicta of Lord Hoffmann in fact lend support to Shaw LJ’s dissenting opinion in Gunton. 

57.  Gunton was cited in argument in the House of Lords.  It was not referred to in any of the speeches of the House of Lords, but equally, it was not criticised.  On the basis of what I consider Gunton has decided, I do not think that decision is inconsistent with Johnson v Unisys Ltd.  I think Gunton is still good law.  To recap, the ratio decidendi of that case is that where a disciplinary code has been incorporated into a contract of employment, the employer is not entitled to dismiss the employee on a disciplinary ground until the disciplinary proceedings have been completed.  However, the court also held unanimously, albeit obiter, that an employer could nevertheless dismiss the employee by notice without specifying any grounds or without specifying any disciplinary grounds.  This obiter view has the support of the House of Lords’ decision in Johnson v Unisys Ltd. 

Conclusion

58.  Returning to the facts of the present case, in view of the finding of fact I made in paragraph 44, this case was very close to Gunton, but is clearly distinguishable.   The termination was a disciplinary action.  The underlying reason for the termination was the Plaintiff’s unsatisfactory performance.  But that reason was never used as a cause to dismiss him.  Instead, the termination took the form of termination by payment in lieu of notice in accordance with the termination clause.  On this fact, this case is clearly distinguishable from Gunton. 

59.  Had the HA chosen to dismiss the Plaintiff for cause, Gunton clearly applies.  The Plaintiff would have appealed to the Staff Appeals Committee.  He would not have been dismissed forthwith.  At the end of the appeals procedure, he would either have his name cleared or had the finding of the investigation committee confirmed.  Whatever the outcome, he would then be terminated by notice or payment in lieu.  He would be entitled to compensation under the principle in Janciuk v Winerite.  But this is not the case as the HA had chosen to dismiss him by notice and chosen not to disclose to him that his dismissal was a form of disciplinary action.  As a result, the Plaintiff was deprived of his right to appeal against the recommendation of the investigation committee.

60.  However, had the HA informed the Plaintiff that he was dismissed by notice as a form of disciplinary action, he too would have appealed to the Staff Appeals Committee and he was entitled to.  But such an appeal would be academic if Gunton is inapplicable for the dismissal was not for cause.  Should I extend Gunton to cover a situation such as this when the employer exercised his right to terminate the employment by notice instead of on disciplinary ground when the employee was dismissed by reason of but not for disciplinary ground?

61.  It is the employer’s prerogative to terminate a contract by notice just as it is the employee’s to do so.  The only limitation for the employer is that under the Gunton principle he may not do so if he chooses to terminate for disciplinary grounds unless and until the disciplinary proceedings are concluded.  Even if the Plaintiff were successful in his appeal before the Staff Appeals Committee, the HA may nevertheless capriciously choose to dismiss him by notice at the end of the appellate procedures, just as Lord Reid said in Malloch v Aberdeen Corpn.  The HA has a contractual right to terminate the employment by giving two months’ notice in writing or payment in lieu without cause.  Prior to the conclusion of the disciplinary procedures, it decided to terminate the Plaintiff’s contract by payment in lieu of notice without cause.  Though the termination was the result of disciplinary proceedings and a form of disciplinary action, in terminating the Plaintiff’s employment by notice, the HA was doing no more than exercising its right to terminate the contract in accordance with its terms.  In the circumstances, the background of disciplinary proceedings leading to the termination faded into insignificance as if the whole disciplinary procedures had never begun or had been abandoned.  The HA can never claim to have dismissed the Plaintiff for cause and cannot exercise its discretion to terminate the Plaintiff’s employment without giving him notice and his accrued benefits under chapter K3.5.1.  The HA has to pay the Plaintiff wages in lieu of notice and all his accrued benefits and give him a clean plate to begin anew.  The HRPM does not disentitle the HA from terminating the employment of the Plaintiff by notice or payment in lieu of notice prior to completion of the disciplinary procedures.  In the circumstances, the disciplinary proceedings had faded into the background.  I can see no reason to extend the ratio decidendi in Gunton beyond its present confines to the factual situation in this case.  

62.  Whether a contract of employment is terminated for cause or by notice is a matter of form.  The HA chose to terminate the Plaintiff’s contract of employment by notice and has effectively done so.  For this reason, the present case is clearly distinguishable from Gunton.  There is no justification to extend the ratio decidendi in Gunton beyond its present confines.  In my opinion, the unanimous obiter opinion of the English Court of Appeal in Gunton is a correct statement of the law.  It is supported by Lord Hoffmann’s dicta in Johnson v Unisys Ltd.  In the circumstances, the Plaintiff’s claim under the principle in Gunton must fail. 

Breaches of the HRPM and other obligations

63.  Mr Huggins SC invited me to make further finding in respect of the Plaintiff’s allegations of breaches of the HRPM and other contractual documents even if I were to find against the Plaintiff on both of his claims in the not unlikely event that the matter would be taken further.   He conceded that if I were to find in favour of the Plaintiff’s claim under the principle in Gunton,the disciplinary proceedings had not been concluded as the Plaintiff was deprived of his right to appeal to the Staff Appeals Committee.  On the other hand, it is Mr Dykes SC’s submission that disciplinary proceedings were far from completion.

64.  It is Mr Dykes SC’s submission that the Plaintiff could only be dismissed after due process of inquiry under chapter K3.5.1 which involved the disciplinary proceedings set out in Section J.  He submitted that under the provisions in Section J and Section K, the Plaintiff is entitled to the following:

(a)	“Appropriate counselling” before any disciplinary action was contemplated: chapter J1.6.1;
(b)	Information about the nature of the case against him during an investigation: chapter J1.5.2;
(c)	The right to make submissions on the case against him during an investigation: chapter J1.5.2;
(d)	Consideration of the case against him: chapter J1.5.2;
(e)	Appointment of a Committee of Inquiry if, at the end of the investigation, the investigation committee wanted to recommend dismissal: chapter J1.10.1;
(f)	The chance to bring a HA staff member to the Committee of Inquiry: chapter J1.5.3(ii);
(g)	Adjournments (not more than two) of the proceedings upon giving notice of valid reasons: chapter J1.5.3(iii);
(h)	Notice of the case against him and an opportunity to make a defence: chapter J1.5.3(iv):
(i)	The right to be heard and the right to have the investigation appropriately investigated in accordance with the procedures in Section J: chapter J1.3.1;
(j)	The Committee of Inquiry to establish facts and make specific recommendations in a report: chapter J1.5.3(v);
(k)	The “deciding authority” (i.e. the HCE) to review the report and make a decision: chapter J1.5.3(v);
(l)	The right to appeal against any disciplinary action that the Plaintiff considers “unfair”: chapter J1.11.1 (investigation only); and
(m)	The right to appeal against unfair termination procedures: chapter K3.9.1 (termination only).

65.  The Plaintiff said that the disciplinary procedures broke down at the very latest after the investigation report was completed on 25 April 2003 after the HCE sent his recommendation to the CE that he be dismissed and had the CE’s approval.  His major claims for breaches of the HRPM and other contractual documents are as follows:

(i)	No Committee of Inquiry convened;
(ii)	The Plaintiff was denied proper access to documents;
(iii)	HA’s refusal to await the Staff Development Report;
(iv)	The Plaintiff was denied legal representation at the meeting;
(v)	HA’s refusal to postpone the meeting;
(vi)	Investigation was not properly authorized;
(vii)	No investigation meeting ever held;
(viii)	Lack of proper inquiry or determination by the investigation committee;
(ix)	No counseling and coaching;
(x)	Failure to document and file investigation report; and
(xi)	Dismissal not properly authorized by the CE.

No Committee of Inquiry.                  

66.  Mr Dykes SC argued that the HA’s failure to convene a Committee of Inquiry under chapter J1.10.1 on or before 25 April 2003 was by far the most serious fault and is fatal to the case of the HA.  His argument is as follows.  Chapter J1.10.1 provides that “if the employee is to be dismissed, the procedure in chapter K3 on Involuntary Termination will apply.”  Hence he argued that the result or the desired result of the disciplinary procedures dictates the particular procedure to followed.  In the case of unsatisfactory performance and if dismissal is sought or if it appears that dismissal may be a possibility, then the procedure in chapter K3 will apply.  Chapter K3.5.1 provides as follows:

“

K3.5.1

The HA may dismiss an employee without period of notice or payment in lieu and accrued benefits (except annual leave accrued on the completion of a leave year) after due process of inquiry, if the employee has committed gross misconduct in relation to his employment or has shown unsatisfactory performance despite appropriate counselling and coaching.”

He argued that if it appears that dismissal will not necessarily result, then an investigation under chapter J1.5.2 is the way to proceed.  But, where a Committee of Inquiry is not convened at the outset but the investigation reveals a case that may warrant dismissal after all, then a Committee of Inquiries needs to be appointed if dismissal is to be sought because of chapter J1.10.1.

67.  Mr Dykes SC further reinforced his view as to the proper procedures by arguing that the inquiry by a Committee of Inquiry is a higher level of investigation which carries with it additional procedural safeguards appropriate to the seriousness of the consequence that would flow from an inquiry.  He said it would be contrary to the intention of setting out detailed procedures which are to be operated fairly if a Committee of Inquiry and its procedural safeguards could be avoided by management choosing the investigation route or even by picking and choosing cases to go one route and others to go by another.  He submitted that the investigation process is appropriate only to imposition of minor disciplinary actions such as warnings, deduction of wages and deferment of increment etc which do not need the approval of a deciding authority under chapter J1.8.1.  Lastly he said an employee is entitled to know that disciplinary procedures are being held with a view to termination so that he can appeal if he feels unfair.  Mr Dykes SC submitted that the requirement under chapter K3.5.1 that a dismissal may lawfully be made after due process of inquiry means after a due process of inquiry by a Committee of Inquiry formed under chapter J1.5.2.  Hence, he argued that as the investigation was not conducted by a Committee of Inquiry the Plaintiff was dismissed without due process.  He argued that had the Plaintiff been told that the investigation commenced on 23 January 2003 was an investigation which if substantiated was going to lead to a recommendation of dismissal, then he would have invoked chapter K3.9.1 and pointed out the significance of chapter J1.10.1.

68.  With all respect to counsel, I think Mr Dykes SC’s interpretation of the various chapters of the HRPM was aimed at reaching the Plaintiff’s desired result that a Committee of Inquiry must be held if an employee is to be dismissed.  The scheme of disciplinary procedures he suggested is highly commendable.  However, such a construction is not, in my view, supported by the language used in the various chapters of the HRPM and cannot be achieved without re-drafting the relevant chapters of the HRPM.

69.  I think the starting point to examine the disciplinary scheme is chapter J1.5.2 which authorises the investigation by an investigation committee or an inquiry by a Committee of Inquiry.  That chapter provides as follows:

“

J1.5.2

When an employee is alleged to have committed a gross misconduct, the HCE or CE, as appropriate, will cause an investigation to be carried out as is appropriate in the circumstances.  The employee will be informed of the nature of the case against him and be given the right to make submissions.  If the employee fails or refuses to submit his case, the investigation may proceed notwithstanding such failure or refusal.  Where the case is considered substantiated after the investigation, one or more of the following disciplinary action may, depending on the severity of the offence, be taken against the employee: verbal or written warning, stoppage or deferment of increment, deduction of wages to the extent permitted by the Employment Ordinance, dismissal from service and such other action as may be appropriate.  The HCE or CE, as appropriate, may also decide, in an appropriate case, to convene a Committee of Inquiry.”

This chapter authorises the HCE or CE, as appropriate, to cause an investigation.  It makes no distinction between investigation or a Committee of Inquiry.  It empowers the HCE or CE, as appropriate, to convene a Committee of Inquiry in an appropriate case, without defining what cases are appropriate for investigation by a Committee of Inquiry.  Clearly, whether to cause an investigation to be carried out by an investigation committee or by a Committee of Inquiry is solely a matter of discretion for the HCE or CE as appropriate.  The chapter then authorises, if the case is substantiated after the investigation (not inquiry), a whole range of disciplinary actions including dismissal.  There is no limit placed on what the disciplinary action the investigation committee may recommend and what disciplinary actions are exclusively reserved for recommendation by the Committee of Inquiry.  The two-tier system of investigation and inquiry as suggested by Mr Dykes SC is simply not supported by the language used in the chapter.  Besides, according to the Oxford English Dictionary, the words “investigation” and “inquiry” are synonymous and may be used interchangeably.  “Investigate” is defined as meaning “to examine or inquire into … to make an inquiry into…” and “investigation” is defined as “the action of investigating: the making of a search or inquiry …”.  Likewise, it defines “inquire” as meaning “investigate” and inquiry” as meaning “investigation.”  In my view, the word “after due process of inquiry” in chapter K3.5.1 do not have the significance which Mr Dykes SC wished to attach to them.  I think those words mean no more than the investigation process under Section J, whether by an investigation committee or Committee of Inquiry.   To give to the chapters the meaning which Mr Dykes SC asked me to construe would require a complete re-writing of chapter J1.5.2.

70.  In desperation, I think, Mr Dykes SC sought reliance on an earlier version of Section J and Section K of the HRPM to salvage his interpretation.  Under the May 1999 version, chapter J2.5.1(c) read as follows:

“	J2.5.1	(c)	(i)	The Head of Department will review the alleged gross misconduct or unsatisfactory performance and interview the employee.
			(ii)	If after investigation, the Head of Department is of the opinion that the employee needs to be reprimanded, he will reprimand the employee at departmental level by issuing a writing warning.
			(iii)	If the Head of Department considers the alleged gross misconduct or unsatisfactory performance as serious enough to warrant dismissal, a Committee of Inquiry will be appointed to investigate the alleged gross misconduct or unsatisfactory performance.”

The July 1994 version of chapter K3.6.1 is identical to the current version of chapter K3.5.1.  It also used the phrase “after due process of inquiry.”  However, Mr Dykes SC argued that chapter J2.5.1(c)(ii) and (iii) envisaged a process of investigation to be followed by a Committee of Inquiry if dismissal was contemplated.  Hence, he submitted that the disciplinary procedure that was in place prior to 3 January 2001 provided for the two- tier system, under which the first tier of investigation could not lead to dismissal but the second tier of inquiry could lead to dismissal and the words “after due process of inquiry” meant after due process of inquiry by a Committee of Inquiry.  Hence he submitted that Mr Huggins SC’s interpretation of that phrase in chapter K3.5.1 could not be right for if it were the HA could unilaterally remove a fundamental protection of its employees against dismissal for cause.  He submitted that had that been the intention of the HA, it would have amended the phrase in the current version of chapter K3.5.1 to read “after due process of inquiry or investigation.”

71.  I agree with Mr Dykes SC’s interpretation of the May 1999 version of chapter J2.5.1(c).  However, any argument based on the old version of chapter J2.5.1 is like a double edge blade, but in my view, it cuts much deeper against the Plaintiff than against the HA.  Looking at the two versions, the only reasonable inference one could draw is that the HA intended to do away with the cumbersome two-tier system clearly stipulated in the old version and replace it with a one-tier system consisting of two alternative routes, leaving it to the discretion of the HCE or CE, as appropriate, to decide down which route the investigation should take.  Had the HA intended to restrict the phrase “after due process of inquiry” to inquiry by Committee of Inquiry, it may as well leave the May 1999 version in place.  Why should it re-write the entire chapter in the way it did?  Thus the May 1999 version of chapter J2.5.1(c) indeed reinforces the interpretation I give to the current version of chapter J1.5.2. 

72.  According to Dr Lily Chiu, the CCE, whether to appoint a Committee of Inquiry depends on whether the case is simple or complicated and Committee of Inquiry is to be convened for complicated cases.  She said the present case was a straightforward one and supported by the report from an independent firm of accountants.  Hence, it was not necessary to convene a Committee of Inquiry.  Her evidence accurately reflects the practical approach adopted by the HA which is consistent with the provision of chapter J1.5.2.  Accordingly, I find on a true construction of chapter J1.5.2, the HA was free to choose either the investigation committee route or the Committee of Inquiry route.  The fact that the HA chose the former did not constitute any breach of the HRPM.

73.  Even if the failure to convene a Committee of Inquiry constituted a breach of the HRPM, I think there is no truth in the Plaintiff’s allegation that had he realised the serious consequence of the investigation, he would have invoked chapter K3.9.1 and pointed out the significance of chapter J1.10.1.  He was given a copy of Section J of the HRPM.  Chapter J1.5.2 was written in simple language.  Given his level of education, he could have no difficulties to appreciate that dismissal is one of the possible consequences of the investigation.  He took the matter seriously and engaged one of the best firms of solicitors to represent him and argue with the HA on procedures and legal representation at the hearing.  What he said simply could not be true.

74.  Before leaving this topic, there is a minor complaint related to the HA’s failure to convene a Committee of Inquiry.  The Plaintiff complained of unilateral change by the HA of an employment protection under the HRPM.  The short answer is that by accepting the terms of the letter of appointment, the Plaintiff has accepted that his employment was subject to the HRPM and subject to the HA’s right to revise the HRPM from time to time.  There is nothing unfair in such an agreement.  The essential terms of the Plaintiff’s employment were unchangeable without his consent.  The provisions in the HRPM and the HA Regulations relate mainly to procedural matters.  As far as disciplinary proceedings are concerned, the alterations to the HRPM only affected procedural matters.  Any finding by the investigation committee or Committee of Inquiry is just an internal matter.  It may affect the action which the HA may choose to take against an employee but its finding is not binding on the employee.  An employee dismissed on disciplinary ground upon the finding of the investigation committee or Committee of Inquiry may still challenge that finding in a court of law in an action for wrongful dismissal.

No proper access to documents 

75.  The Plaintiff complained that he was only given limited access to some of the files he asked to examine but was refused access to the file of Mr Michael Mak relating to his payment arrangement kept by the Kwai Chung Hospital up to 23 April 2002.  The HA refused to allow him access to that file as that file was not a subject matter of the disciplinary proceedings against the Plaintiff.  There is no evidence from the Plaintiff as to how that file is relevant to the disciplinary proceedings.  In the Staff Development Review prepared by the HCE of Kwai Chung Hospital, Dr Shum passed some adverse comments about the Plaintiff’s handling of the payment arrangement of an officer assigned to special duties.  Presumably, that officer was Mr Mak.  However, it is clear from the HA’s letter of 23 January 2003 that Mr Mak’s payment arrangement was not one of the subject matters of the investigation.  The Plaintiff may be aggrieved by Dr Shum’s comments, but the investigation was not an appropriate venue for him to vent his criticisms against the HCE.  That matter was simply irrelevant.  The Plaintiff was unable to show any breach of obligation on the part of the HA, or unfairness by denying him access to the file of Mr Mak, or any loss flowing from such denial.

HA’s refusal to await the Staff Development Report

76.  The Plaintiff complained that the HA refused to look into his contention that the allegation of unsatisfactory performance should have been dealt with in the context of staff development report for the relevant years.  The staff development report is an annual appraisal of a staff’s performance, whereas the unsatisfactory performance being investigated was related to specific events set out in the memorandum of 23 January 2003.  Unsatisfactory performance, if established, would be something which could properly be reflected in the report, but that does not mean the HA could not investigate into the allegation until the report was prepared.  The two are separate exercises.  The Plaintiff’s pleaded case based on Gunton is that there was a contractual obligation to comply with disciplinary procedures before termination on disciplinary ground, but the he was unable to show any contractual obligation requiring the HA to complete the report before embarking on any disciplinary proceedings.  The staff development report was not part of the disciplinary procedures.  Mr Dykes SC also argued that the Plaintiff was not given the opportunity to make submissions about the staff development report in the investigation.  As Mr Huggins SC rightly pointed out, not only was this complaint not pleaded, it was also factually incorrect as there was nothing to stop the Plaintiff from making that submission in writing or orally during the meeting if wished to do so, but he chose not to.  I consider there is no substance in this complaint of breach of obligation.

Denial of legal representation at the scheduled meeting

77.  The Plaintiff complained that he was not allowed legal representation at the intended hearing on 2 April 2003.   Mr Dykes SC submitted that although the HRPM does not provide for legal representation during an investigation or in an inquiry before a Committee of Inquiry, it does not exclude it and it was unfair that while the investigation committee had sought and relied on legal advice in its decision making process the Plaintiff was denied a chance to have his own legal input in the process, including the opportunity to comment on it.

78.   The short answer to the Plaintiff’s complaint is that the hearing on 2 April 2003 was an internal investigation.  The HA was entitled to set its own rules.  There was no obligation under the HRPM or as a matter of common law to allow legal representation at any stage of this internal investigation.  There was no plea by the Plaintiff that the result of the investigation would have been any different had he been allowed legal representation.  It could hardly be said that refusal of legal representation is self-evidence of unfairness.  Legal representation is expressly excluded in disciplinary proceedings under the Civil Service Regulations.  Legal representation is also excluded in proceedings in the Small Claims Tribunal and Labour Tribunal, which are judicial proceedings.  Furthermore, the Plaintiff offered no evidence as to the unfairness caused by the absence of legal representation.  In fact, he abandoned his right to attend the hearing.  Lastly, in the context of a Gunton claim, there is neither a plea nor any evidence that had he been allowed legal representation, the investigation could have taken a day longer.  I am satisfied that there was neither breach of the HRPM nor unfairness nor evidence of any damage flowing from the HA’s refusal to allow the Plaintiff to have legal representation at the hearing.

Refusal to postpone meeting

79.  The Plaintiff complained that the HA refused to postpone the meeting until after completion of the staff development report for 2002/03 and receipt of Mr Michael Mak’s file.  As the staff development report was a separate annual exercise and not relevant to the disciplinary proceedings and Mr Michael Mak’s payment arrangement was not a subject matter of the disciplinary proceedings, the Plaintiff had no reasonable ground to request for adjournment.  Nevertheless the meeting scheduled for 30 January 2003 was adjourned to 2 April 2003 at the Plaintiff’s request.  The Plaintiff did not advance further ground or request for adjournment.  He just chose not to attend the meeting.  I consider the complaint groundless.

Investigation was not properly authorised

80.  Mr Dykes SC challenged Dr Chiu who headed the investigation committee that she had not informed the CE the option of Committee of Inquiry route.  Dr Chiu denied and said that she had been in constant contact with the CE and all these matters relating to the Plaintiff had been discussed with the Legal Department of the HA.  Quite apart from that, in this case the HCE was the appropriate authority under chapters J1.5.2 and J1.8.1 to decide whether to convene a Committee of Inquiry or to conduct an investigation.  The HCE at the material time was Dr Shum and then Dr Chiu as his successor.  The decision to investigate instead of convening an inquiry by a Committee of Inquiry was one which was within the authority of Dr Shum to make and Dr Chiu to adopt.  The CE had been appraised of the available options and the investigation by an investigation committee was properly authorised.  The investigation was properly authorised.

No investigation meeting ever held    

81.  The Plaintiff complained that there was a breach of the HRPM as no investigation meeting was ever held.  The facts were that after the HA refused to allow the Plaintiff to attend the meeting with his solicitors, the Plaintiff replied through his then solicitors that he would not attend the meeting on 2 April 2003.  As a result, no meeting was held on that day.  There was no legal requirement to hold any meeting on that day.  The investigation committee had conducted its investigation and informed the Plaintiff the matters which show unsatisfactory performance on his part in the memorandum dated 23 January 2003.  The HA then invited the Plaintiff to attend a meeting on 30 January 2003 which was later re-scheduled to 2 April 2003.  The invitation is in the following terms:

“Please be informed that you may make submissions EITHER verbally by attending a meeting on 30 January 2003 at 3 pm in Hospital Governing Committee Meeting Room of Kwai Chung Hospital OR in writing before 5 pm on 7 February 2003.  Please note that you can only attend the meeting by yourself and no legal representative would be allowed as this is only an internal process.”

The Plaintiff’s solicitors had exchanged correspondence with the HA’s solicitors and had sent them a written submission on the Plaintiff’s behalf.  The Plaintiff chose not to attend the meeting. 

82.  Mr Huggins SC submitted that there was nothing to be achieved by the investigation committee attending the meeting. I agree.   The meeting was intended to be a hearing at which another panel of investigators, would listen to any oral evidence or representations which the Plaintiff might choose to make.  The Plaintiff chose not to attend.  The panel could not have given any input to the investigation.  It was pointless for the panel to meet as the Plaintiff had indicated he would not attend.  I think the failure to hold a meeting on 2 April 2003 as such did not constitute any breach of the HRPM, the real issue is whether there was any proper determination or investigation by the investigation committee.  To that issue, I now turn.

Lack of proper inquiry or determination by the investigation committee

83.  Mr Dykes SC criticised the investigation as not being a proper and independent inquiry in that the decision of the investigation committee was the decision of Dr Chiu alone and the investigation committee was not an independent body.  The investigation was initially led by Dr Shum, the HCE of Kwai Chung Hospital who also authorised the investigation.  Dr Shum retired on 31 March 2003, two days before the scheduled meeting which the Plaintiff declined to attend.  Then Dr Chiu took over the investigation.  The other members of the team were a staff member of the Human Resources Department, Ms Charlene Kong from the Finance Department and occasionally a staff member from the Legal Department.  These four members constituted the investigation committee.  Subsequently Miss Charlene Kong was released from the committee as a result of the Plaintiff’s complaint.  Mr Wayne Tsang, Mr Daniel Wong and Ms May Li were appointed to interview the Plaintiff at the meeting to be held on 2 April 2003.  It should be noted that they were not members of the investigation committee.  Their intended function was to listen to what the Plaintiff had to say if he attended the meeting.  According to Dr Chiu, not only that those three members never met as there was no meeting on 2 April 2003, they did not even participate in the decision of the investigation committee.  They did not form part of the investigation committee.  Thus, Mr Dykes SC was absolutely correct.  What purported to be the report of the investigation committee was the report prepared by the Legal Department of the HA on the recommendation of Dr Chiu alone, presumably based on the investigation of Dr Shum and the investigation committee. 

84.  The Plaintiff’s second complaint is the lack of independence or impartiality of the investigation.  The complainants of the Plaintiff’s unsatisfactory performance were Mr Clifton Chiu and Dr Shum.  Mr Clifton Chiu was not a member of the investigation committee.  He had no input to the ultimate decision.  Dr Shum was one of the complainants and he led the investigation committee until his retirement two days before the scheduled meeting on 2 April 2003.  This fact was not known to the Plaintiff until trial.  However, Mr Huggins SC submitted that as the Plaintiff declined his invitation to amend the statement of claim so as to plead to the effect of Dr Shum’s presence in the investigation committee, I should take no account of that evidence and it has no relevance to assessment of damages.  Technical as Mr Huggins SC’s submission may be, he is right because it would be unfair to take that evidence into account as the HA was deprived of the opportunity of calling Dr Shum to rebut any suggestion of partiality.  However, in my view, for reasons as I shall explain, that evidence will not have any bearing on the conclusion I am about to reach.

85.  The Plaintiff also complained that his immediate supervisor, Ms Charlene Kong, who issued the memorandum dated 23 January 2003 accusing him of unsatisfactory performance was one of the members of the investigation committee since April 2002 until he discovered and complained of her involvement in the investigation.  Ms Kong was his supervisor in respect of one of the incidents complained of, namely, failure to file time sheets.  Ms Kong was not the Plaintiff’s supervisor in respect of the other five incidents.  Even in respect of the incident relating to the filing of time sheet, what Ms Kong did was no more than to inform him of the complaint via the memorandum.  She was not the complainant in respect of that incident.  In any event, upon his complaint, Ms Kong cease to be involved in the investigation and she had no further input to the report of the investigation committee.  I do not think the Plaintiff’s complaint on this ground justified.

86.  The inquiry or investigation is an internal inquiry in accordance with the HRPM.  The HA’s duty under chapter J1.5.2 of the HRPM is “to cause an investigation to be carried as was appropriate in the circumstances.”  Unlike in the case of a Committee of Inquiry, the HRPM does not contain detail provisions as to the constitution of the investigation committee.  The investigation may even be carried out by a single officer appointed by the HCE or CE, as appropriate.  The investigation is an internal procedure.  The person or committee charged with the duty of investigation is not a body which is under a duty to act judicially.  Its function is fact finding and not adjudication as if it were an arbitrator determining a dispute between Dr Shum as complainant and the Plaintiff as a defendant.  It is an investigation by an employer into the alleged misconduct of his employee and to make a decision as regards that employee, but the finding of the investigation committee is not binding on the employee.  A dismissal for cause recommended by a single investigator or an investigation committee and accepted by the CE may be reviewed by a court of law.  In my view, the rules of natural justice do not apply, though these rules provide the standard of good practice.  The maxim nemo judex in causa sua has no application to such an internal investigation.  Thus, the fact that Dr Shum led the investigation committee for a substantial period of time and that Ms Charlene Kong was on the committee for part of the time during its investigation did not as such render the investigation improper.  On the fact, Dr Shum and Dr Chiu had all the documents necessary for them to investigate and to make the decision and must have been well advised of the law by the Legal Department.  In my view, the conduct of the investigation was not in breach of the HRPM.  The Plaintiff has given no evidence to show that the investigation was improper or any damage flowed from the improper conduct of the investigation.

No counselling and coaching. 

87.  According to Mr Clifton Chiu, the then chairman of the Hospital Governing Committee of Kwai Chung Hospital, he complained to the HCE about the Plaintiff’s performance.  He complained that the Plaintiff was not listening, responding or reciprocating to the needs of other colleagues; that he was opinionated and prevented his finance staff from being helpful to other managers.  He counselled the Plaintiff in the course of work in the form of professional communication.  The Plaintiff was the secretary to the Finance Subcommittee of Kwai Chung Hospital.  Yet Mr Chiu said he had to instruct the Plaintiff what documents and schedules had to be annexed to the agenda for meeting and what to do with annual reports, profit and loss statements etc.  He had to mediate dispute between the Plaintiff and Mrs Wena Pang about handling of patients’ valuables.  He counselled both the Plaintiff and Mrs Wena Pang in the presence of the HCE.  Mr Chiu recounted on one occasion after a finance subcommittee meeting and in the presence of the HCE and a hospital administrator he commented on the Plaintiff presenting a misleading schedule to the finance sub-committee and when he was about to counsel the Plaintiff, the Plaintiff became angry and left.  Mr Chiu also recalled there were three private counselling sessions, but the Plaintiff was not receptive to his counselling and even refused to attend the last of the sessions.   Though Mr Chiu admitted he did not had in mind that the counselling and coaching were with a view to disciplinary proceedings and he had not reduced the advice into writing, I think the counselling and coaching was sufficient for the purpose of the disciplinary offence.

88.  The Plaintiff’s evidence was that he had never been counselled or coached before he was issued the notice dated 23 January 2003 informing him of the investigation.  But he had not filed any evidence to contradict Mr Chiu’s evidence.  I find the Plaintiff’s complaint of lack of counselling and coaching was unspecific. He was unable to particularise what counselling and coaching he expected.  He was vague and evasive in his evidence.  On the contrary, Mr Chiu gave evidence in a straight forward and convincing manner.  I prefer Mr Chiu’s evidence.  Though Mr Chiu did not go into specifics as to what precise counselling and coaching he gave to the Plaintiff, I think his evidence is adequate.  The Plaintiff was a senior manager and not a junior clerical officer.  No more than a gentle reminder would have been sufficient for him to take the initiative to improve himself or to find ways to improve his performance.  Besides, the level of counselling or coaching is purely a matter of discretion for the management. It is not appropriate for me to examine the adequacy of such counselling and coaching.  As for the Plaintiff’s argument that the HA had to counsel or coach him in relation to every particular or specific allegation of unsatisfactory performance before instituting any disciplinary proceedings, I find that absurd.  The offence is coached in general terms in chapter J1.6.1.  If the Plaintiff were right, there could never be any disciplinary proceedings in relation to any particular type or any specific complaint of unsatisfactory performance except for a second occurrence of that specific type of conduct and only after the employee had been counselled or coached in relation to the first occurrence of it.  It should also be recalled that the Plaintiff was given a written warning by Dr Shum on 27 March 2002 against which he had unsuccessfully appealed. The warning contained an advice that if he failed to achieve a satisfactory standard of conduct and performance, he would be liable to disciplinary action under Section J of the HRPM.  That was the clearest evidence of counselling and coaching.  I am satisfied that the Plaintiff’s complaint of lack of counselling and coaching is groundless.

89.  Besides, even assuming that the HA could not lawfully terminate the Plaintiff’s employment by notice until conclusion of the disciplinary proceedings, I fail to see how breach of the obligation to counsel and coach could give rise to any claim for damages.  If the Plaintiff suffered any damage, it must have arisen because of the dismissal and not the breach of the HRPM.  Those damages fall to be determined according to the principle in Janciuk v Winerite if the ratio decidendi in Gunton is applicable.

Failure to document and file investigation report

90.  The Plaintiff alleged that there was a breach of chapter J1.2.3 which requires all disciplinary processes should be properly documented and filed.  Apart from criticising Mr Clifton Chiu’s evidence that his counselling and coaching was not recorded in writing, the Plaintiff was unable to offer any evidence to show lack of documentation or filing.  Indeed all correspondence between the HA’s and the Plaintiff’s solicitors, the investigation report of the investigation committee, Dr Shum’s warning letter of 27 March 2002, the staff development report which contained complaints against the Plaintiff’s unsatisfactory performance had all been disclosed to the Plaintiff.  The inference must be there was adequate filing of the disciplinary processes.  In addition, according to Dr Chiu, in relation to the disciplinary process, there were other privileged documents not produced in Court which had been filed.  I consider Mr Clifton Chiu’s verbal counselling and coaching prior to disciplinary proceedings was a matter of evidence and did not form part of the disciplinary processes which had to be documented and filed.  In my opinion, the Plaintiff’ complaint is not substantiated.  Besides, there is no evidence of any loss and damage suffered by the Plaintiff as a result of the alleged breach.

Dismissal not properly authorized by the CE

91.  I have ruled that the HARM and the FAR were not contractual documents and their provisions did not form part of the terms and conditions of the Plaintiff’s employment.  The Plaintiff sought to place reliance on section 9.4 of the FAR which provided that all staff termination or resignation should be properly approved by authorized personnel and the procedures as laid down in the HRAM should be followed.  The Plaintiff’s argument is that at the time of his dismissal, Dr William Ho was on sick leave and could not have authorized his dismissal.  However, the unrefuted evidence is that Dr William Ho was the CE at all material times.  Though Dr William Ho fell ill to SARS on or about 23 March 2003 and did not resume full duties until 30 April 2003, he was discharged from hospital on around 10 April 2003 and did carry out some of the administrative duties of the CE whenever his condition permitted.  The Plaintiff admitted that Dr William Ho signed the minute approving his dismissal.  His argument seemed to be that as Dr Ko Wing Man was then the acting CE, Dr William Ho had no authority to approve his dismissal.  There is no evidence to suggest that Dr William Ho was discharged from performing his duties as the CE.  I can see no reason how it could be said that the substantive holder of the office has no authority to discharge the duties of that office while a deputy has been appointed to act in his absence.  The deputy only derived the authority as the CE upon delegation by the substantial holder of that office.  If the substantial holder chose to reserve any of the duties and functions of that office, he was at liberty to do so.  On the facts, Dr William Ho chose to discharge some of his administrative duties and personally authorized the Plaintiff’s dismissal.  The Plaintiff’s dismissal was properly authorized.

Conclusion

92.  Save for the admitted breach that the Plaintiff was deprived of his right to appeal against the decision of the investigation committee in recommending the termination of his employment by notice, none of the matters complained of by the Plaintiff amounted to breaches of the HRPM or that any loss or damage flowed from the alleged breaches. 

conclusion

93.  On a proper construction of the Plaintiff’s letter of appointment and all the relevant contractual documents, the HA has a right to terminate the Plaintiff’s employment for cause and a separate and distinct right to terminate the employment by notice.  If the HA chooses to exercise its right to terminate for cause, it is bound by the terms of the contract of employment to comply with the disciplinary procedures under Section J and Section K of the HRPM and to allow the procedures, including the appellate procedure, to run their full course before the termination.  On the other hand, the right to terminate the employment by notice is a separate and distinct right.  It is a reciprocal right which may be exercised by both parties to the contract.  The exercise of this right is not subject to the disciplinary procedures in the HRPM.  It may be exercised without cause.  It may be exercised unreasonably or even capriciously.  The only requirement for the exercise of that right is that the appropriate notice or payment in lieu of notice must be given.  Such termination is not wrongful and is consistent with the unanimous obiter opinion of Gunton v Richmond-upon-Thames, L.B.C. [1981] 1 Ch 448 which has the support of Lord Hoffmann’s dicta in Johnson v Unisys Ltd [2003] 1 AC 518.  The ratio decidendi in Gunton is only applicable to termination for cause but not to termination by notice as such termination is not, as a matter of law, wrongful.

94.  Whether a contract of employment is terminated for cause or by notice is a matter of form.  The HA chose to terminate the Plaintiff’s contract of employment by notice and has effectively done so.  The present case is distinguishable from Gunton for this reason.  Though the termination was the result of disciplinary proceedings and a form of disciplinary action, in terminating the Plaintiff’s employment by notice, the HA was doing no more than exercising its contractual right to terminate the contract in accordance with its terms. In the circumstances, the background of disciplinary procedures leading to the termination faded into insignificance as if the whole disciplinary procedures had never begun or had been abandoned.  There is no reason to extend the ratio decidendi in Gunton to the factual situation in this case. 

95.  The Plaintiff’s employment was lawfully terminated by notice.  He has failed to show that the termination was otherwise wrongful.  As the Plaintiff’s employment was not terminated for cause, his claim under the Gunton principle must fail.  Accordingly, the Plaintiff’s action is dismissed with a cost order nisi that he shall pay the HA’s costs.