XU YI JUN v. GF CAPITAL (HONG KONG) LTD

HCA 2563/2017

[2019] HKCFI 2945

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2563 OF 2017

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D E C I S I O N
(Leave to Appeal)

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Introduction

1.  On 30 September 2019, this Court handed down a judgment dismissing both P’s and D’s appeal against the Master’s decision on 20 November 2018 (“Judgment”).  I shall adopt the same definitions therein, save indicated otherwise herein.

2.  On 14 October 2019, P issued her present summons with a draft Notice of Appeal (“Notice”), to seek leave to appeal against the Judgment.  The draft grounds of appeal (“Grounds”) were set out under a total of 5 headings.  After P issued her leave application, D has lodged its own notice of appeal (under CACV502/2019) on 28 October 2019, against this Court’s decision in respect of Determinations 1 and 2.  Ms Lau has however indicated on behalf of D that purely for the sake of the case proceeding expeditiously, D does not intend to pursue its appeal should P fail to obtain leave to appeal.

3.  Essentially, two main headings of the Grounds concern the issue of (1) whether the 2016 Guaranteed Bonus was an “end of year payment” (EOYP) or part of P’s “wages” and (2) whether, in the statutory and contractual context, D was entitled to an equitable set-off, if D’s counterclaim meet the requirements of equitable set-off.

4.  Suffice to say, upon reading the parties’ respective submissions, I am prepared to grant leave.  I am of the view that P’s appeal has a reasonable prospect of success.

5.  In particular, it was submitted by Mr Alder that section 32 of the Employment Ordinance prohibited the 2016 Guaranteed Bonus being set off irrespective of whether the Bonus constituted “wages” or an “EOYP” and that this Court failed to consider his submissions on section 32 in the Judgment and made no reference to section 32 in the Judgment.

6.  It is true that this Court made no reference to section 32 of the Employment Ordinance in paragraph 69 of the Judgment and that Mr Alder’s arguments had not been set out.  This Court did not finally determine the effect of section 32 and simply granted unconditional leave for D to defend as, in the Court’s view, D has raised an arguable defence of equitable set-off, which is a substantive defence. 

7.  How Mr Alder’s arguments arose before this Court had been set out by Ms Lau in her submissions.  Nonetheless, the section 32 arguments were put forward by Mr Alder at the hearing, and on reflection, I accept that I should have referred to those arguments instead of simply indicating in paragraph 70 of the Judgment that I agree with the Master, in that if D were to succeed with its equitable set-off defence, then it would not be a case of D making a “deduction”, whether from wages, or from EOYP.  In fact, as seen in paragraph 51 of Master’s Decision, Mr G Lam who appeared for P at that time, was prepared to accept that so far as wages were concerned, it was at least open to D to run an argument of equitable set-off. 

8.  Mr Alder has referred to this Court a number of authorities.  In particular, he submitted that this Court is bound by the substantive ruling of law in Scout Association of Hong Kong v Li Tak Wai [2017] HKCA 437; [2018] 1 HKLRD 682; HCMP 3055/2016 (20 January 2017).

9.  Chu JA has said in her judgment[1] :

“32. Section 32 of the Employment Ordinance is about arrangements for deduction of wages and provides that an employer can only deduct an employee’s wages under specified circumstances and the amount deducted must not exceed that specified in the Ordinance. It can be seen from its express provisions that section 32 restricts the circumstances in which an employer may adopt deduction of wages to offset the compensation payable to him by his employee to only those permitted by the Ordinance. Section 32 does not negate, nor does it limit or diminish an employer’s legal right to pursue compensation from his employee, nor does it limit the power of the court to assess the amount of compensation. In other words, section 32 does not in any way affect an employee’s liability to compensate his employer for damage to or loss of the employer’s goods or property, nor does it affect the employer’s legal right to compensation in such circumstances”

10.  In fact, section 32 was held to be not applicable to the issues in the Scout Association case and that there was no deduction of wages or sums due and payable to the defendant, as seen in paragraph 33 of Chu JA’s judgment:

“33. In the present case, it is not in dispute that the Scout Association did not deduct Mr Li’s wages or sums due and payable to him (for example, payment in lieu of notice for dismissal, compensation for paid annual leave). It is by way of litigation that the Scout Association demanded Mr Li to return the supplies and equipment or pay an equivalent amount as compensation. In the judgment, the trial judge merely set off the amounts of the parties’ successful claims. Therefore, section 32 of the Employment Ordinance is irrelevant to the issues in the case and, thus, inapplicable. Further, as stated above, section 32 does not limit or diminish the amount of compensation the Scout Association may pursue from Mr Li for the loss of supplies and equipment. The trial judge did not err in his judgment in this regard, and there was no breach of the Employment Ordinance.”

11.  As seen in the above case, although the employee was paid payment in lieu of notice of dismissal and compensation for paid annual leave, the employee made a claim against the Scout Association for various other sums said to be owed to him in the course of his employment, including arrears of wages for attendance on rest days.  This was then followed by Scout Association making a claim against the employee, and the trial judge did in the end order a set off of the amounts of the parties’ successful claims.  The facts of the Scout Association case are in a way not dissimilar to the present case and in that case, it was held section 32 was not relevant to the issues therein.

12.  In any event, as said earlier, I should have referred to the section 32 arguments in the Judgment and I am prepared to grant leave to appeal to P.

13.  As for costs, I am not persuaded that that P’s legal arguments are so strong that this Court should deviate from the usual order and to order costs of this leave application be to P’s.  I make the usual order that costs be in the cause of the appeal.