LI HON MAN AND ANOTHER v. CRYSTAL KNITTERS LTD.

HCA 9169/98
HCA 7028/98
HCA 5524/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9196 OF 1998
ACTION NO. 7028 OF 1998
ACTION NO. 5524 OF 1998

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(Actions consolidated by Order of Master Poon dated 22 October 1998)

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J U D G M E N T

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Nature and history of proceedings

1. In these consolidated actions, the First and Second Plaintiffs, Mr. Li Hon Man and Ms. Chan Lai Ha, were previous employees of the Defendant, Crystal Knitters Limited, both being employed in the Human Resources Department, the First Defendant in the position of Senior Human Resources manager and the Second Defendant in the position of Human Resources officer. In December 1997, their respective contracts of employment with the Defendant were terminated, leading to proceedings the subject of these consolidated actions. The Plaintiffs' claims for various payments arising from the termination of their employment fall within the jurisdiction of the Labour Tribunal. The Defendant counterclaims for a number of reliefs necessitating, rather unfortunately, the transfer of the Plaintiffs' original Labour Tribunal claims to the High Court.

2. The history of these proceedings commenced with the filing of Claims in the Labour Tribunal by the First and Second Plaintiffs respectively on 6th and 7th January 1998 under LT1050/1998 and LT1223/1998. On the 8th April 1998, the Defendant commenced High Court action HCA5524/98 against the First and Second Defendants. On the 15th April, Mr. P.C. Yu, Presiding Officer of the Labour Tribunal declined jurisdiction to hear LT1223/98 under s.10 of the Labour Tribunal Ordinance and ordered the case to be transferred to the the High Court to be heard with HCA5524/98. Upon transfer, LT1223/1998 became HCA7028/98. On 16th April 1998, Mr. P.C. Pang, Presiding Officer of the Labour Tribunal, ordered LT1050/98 to be transferred to the High Court to be dealt together with HCA5524/98. Upon transfer, LT1050/98 became HCA9169/98. By an Order made by Master Poon on 22nd October 1998, the three High Court actions were consolidated with Mr. Li and Ms. Chan as the First and Second Plaintiffs and Crystal Knitters Limited as the Defendant in the consolidated action.

First Plaintiff's employment

3. The First Plaintiff is currently employed as Human Resources Consultant by IMA Systems Consultants Ltd., a company established after his employment with the Defendant was terminated and of which he is a shareholder. He has been specializing in human resources management since 1985, having obtained a Master Degree in Human Resources Management from Salford University. He was employed by the Defendant and commenced working as a manager in its Human Resources Department on 2nd May 1994. There is some dispute as to the date and his position when he first joined the Defendant but this is not of significance. There was initially no written contract of employment. Instead, his initial employment was governed by an oral agreement made between him and Mr. Andrew Lo, executive director of the Defendant. Later, the First Plaintiff and the Defendant entered into a written contract of employment dated 27th October 1995 in which the First Plaintiff's terms of employment since 2nd May 1994 were included. Under the heading "Notice Period', it was provided that each party must give to the other two months' notice to terminate the contract, or in lieu of giving notice might make payment to the other of the salary in respect of which notice was required or any part thereof. Under the heading "Termination", it was provided that the contract might be terminated forthwith by the Defendant without notice or payment in lieu if the First Plaintiff at any time in relation to his employment:-(a) willfully disobey any lawful and reasonable order or demand or request of a senior officer of the Defendant; (b) was guilty of fraud or dishonesty; or (c) was habitually neglectful of his duties. This is largely declaratory of the provisions of s.9 of the Employment Ordinance. It was further provided that the First Defendant should abide by other terms and regulations contained in the Employee Handbook and the Company Policy. The First Defendant further agreed that he would not during the continuance of the contract nor after the termination thereof disclose any confidential information and documentation of the Defendant including but not limited to financial statements, technical information, research data and trade secrets to any person or company without the written authorization of the Defendant.

4. The First Plaintiff's monthly salary was HK$30,000 when he entered into employment with the Defendant on 2nd May 1994. This was increased to HK$33,000 as from 1st April 1995, to HK$35,650 as from 1st April 1996 and to HK$38,500 as from 1st April 1997.

5. The Defendant is a member of the Crystal Group beneficially owned and controlled by Mr. Kenneth Lo and his wife Mrs. Yvonne Lo. As at 1st December 1997, the Human Resources Department employed the following four persons other than the Plaintiffs, namely, Mr. Ernest Chan (Senior Human Resources Officer), Mr. Gabriel Tan (Human Resources Officer), Ms. Jovi Chan (Human Resources Officer) and Ms. Catherine Chan (Human Resources Assistant). At all material times, the department served the following six companies of the Crystal Group, namely, the Defendant, Crystal Sweaters Limited, Crystal Apparel Limited, Crystal Holdings Limited, Elegance Industrial Limited and Varallo Enterprises Limited all situated within the Crystal Industrial Building at 71 How Ming Street, Kwun Tong, Hong Kong. The role of the department was basically to handle all personnel matters of the Hong Kong staff totaling over 400.

First Plaintiff's claim

6. The First Plaintiff's employment was terminated in December 1997. By the Amended Statement of Claim dated 5th November 1998, the First Plaintiff alleges that on or about 8th December 1997 Mr. Kenneth Lo orally notified him that he would be dismissed by the Defendant effective from 1st January 1998 due to a restructuring scheme of the Defendant. In other words, he was dismissed by reason of redundancy and his employment was terminated without being given two months' notice. It is further alleged that Mr. Lo orally agreed with him that he would be entitled upon his dismissal to the following benefits, namely: (a) salary for December 1997, (b) accrued leave for 17 days, (c) annual bonus equivalent to two month's salary, (d) payment in lieu of notice equivalent to two month's salary, and (e) severance payment calculated in accordance with s.31G of the Employment Ordinance. The First Plaintiff further alleges that on or about 17th December 1977 Mr. Lo orally agreed with him, amongst other things, that he was entitled to payment in lieu of accrued annual leave. Further or in the alternative to these oral agreements, the First Plaintiff relies on his contract of employment, the Defendant's standard employees' policy and Manual, and the Employment Ordinance for the above benefits. Alternative to severance payment, the First Plaintiff claims that he is entitled to an award of terminal payment for unreasonable dismissal under s.32O of the Employment Ordinance. The Plaintiff had already been paid his salary for December 1997.

7. In these proceedings, the First Plaintiff claims against the Defendant for the following items:

(a) payment in lieu of accrued annual leave (17 days) in the sum of HK$21,817;

(b) annual bonus (equivalent to two month's salary) in the sum of HK$77,000;

(c) payment in lieu of notice (equivalent to two month's salary) in the sum of HK$77,000; and

(d) severance payment in the sum of HK$55,000, alternatively pro rata long service payment in the sum of HK$27,500.

8. By the Amended Defence And Counterclaim dated 26th January 1999, the Defendant denies the oral notification and agreements alleged by the First Plaintiff. It denies that the First Plaintiff was dismissed by reason of redundancy. The Defendant instead alleges that Mr. Kenneth Lo orally dismissed the First Plaintiff on 5th December 1997, that on or about 20th December 1997 the First Plaintiff requested to resign instead of being dismissed in order to save face, and that Mr. Lo accepted his request and resignation which took effect on 23rd December 1997. It is alleged that Mr. Lo only told the First Defendant that termination payment, if any, would be calculated and paid according to the Employment Ordinance.

9. The Defendant admits the First Plaintiff's claim for item (a) subject to any set-off arising from its Counterclaim, but disputes (b), (c), (d) and the First Plaintiff's entitlement to the whole month salary for December 1997. On the 4th day of trial (22nd March 2001), Mr. Kenneth Chan, Counsel appearing for the Defendant, indicated that the Defendant would no longer dispute the First Plaintiff's entitlement to the whole month salary for December 1997 which had already been paid to the First Plaintiff. The Defendant thus no longer pursues its counterclaim for 8 days salary (i.e. 24th-31st December 1997). Subsequently in its final submission, the Defendant no longer disputes item (b), leaving only items (c) and (d) in issue. The Defendant disputes the First Plaintiff's entitlement to items (c) and (d) on a number of grounds, namely, (1) the Defendant is entitled to summarily dismiss the First Plaintiff under s.9 of the Employment Ordinance, (2) the First Plaintiff resigned, (3) in respect of the claim for severance payment there was no redundancy, and (4) in respect of the alternate claim for pro rata long service payment the First Plaintiff was employed for less than five years.

10. The central issue on the First Plaintiff's claim is therefore: was the First Plaintiff dismissed in the manner alleged by the First Plaintiff, or did he resign in the manner alleged by the Defendant? The Defendant raises a further question: was the First Plaintiff dismissed summarily by reason of his misconduct? The First Plaintiff raises two further questions: was he dismissed unreasonably in which event he claims for compensation for unreasonable dismissal; was he dismissed for redundancy in which event he claims for severance payment.

Second Plaintiff's employment

11. The Second Plaintiff is now employed by IMA Systems Consultants Ltd. as Business Development Manager. She graduated from Hong Kong Baptist University in 1995 with a bachelor degree in Business Administration (Major in Human Resources Management). She entered into a written contract of employment with the Defendant. The standard provisions of the contract were largely similar to those contained in the First Plaintiff's contract of employment. The Second Plaintiff began her employment as an officer in the Defendant's Human Resources Department on 30 August 1995. She worked under the First Defendant.

12. The Second Plaintiff's monthly salary was HK$9,500 when she joined the Defendant company. This was raised to HK$10,300 on 1st April 1996, to 11,500 in about July 1996, to HK$13,500 in around April 1997 and to HK$15,000 in about September 1997.

Second Plaintiff's claim

13. She claims that she was orally dismissed with immediate effect by Mr. Kenneth Lo acting on behalf of the Defendant during her sick leave on 31st December 1997. By the Amended Statement of Claim, she claims the following:

(a) the sum of HK$3,500 (equivalent to 7 days wages) for dismissal during sick leave under s.33(4BA)(b) of the Employment Ordinance;

(b) the sum of HK$1,500 (equivalent to 3 days sick leave allowance for the period from 1st to 3rd January 1998) under s. 33(4C) of the Employment Ordinance;

(c) payment in lieu of accrued annual leave (2 days) in the sum of HK$1,000;

(d) severance payment in the sum of HK$23,333 or in the alternative pro rata long service payment in the sum of HK$11,667 and compensation under s. 32P of the Employment Ordinance.

14. By it Amended Defence And Counterclaim, the Defendant disputes the claim under (a), (b) and (d). Subject to any set-off arising from the Counterclaim the claim under (c) is not disputed. On the fourth day of trial (22nd March 2001), Counsel for the Defendant indicated that (a) to (c) were not in dispute subject to the question of number of days in the case of (b), leaving otherwise only (d) in issue. However in its final submission, the Defendant admits only (b) and (c) and disputes (a) in addition to (d). The Defendant disputes these remaining claims on the ground that the Second Plaintiff was summarily dismissed by the Defendant with immediate effect on 31st December 1997. It disputes that the Second Plaintiff was dismissed by reason of redundancy or unfairly. By its Amended Counterclaim, the Defendant claims to recover a sum of HK$15,000 paid to the Second Defendant purportedly as payment in lieu of notice. This is no longer pursued at trial.

Defendant's counterclaim

15. In the Amended Counterclaim, a large number of claims are made by the Defendant against both Plaintiffs. At the conclusion of trial, the Defendant maintains only the following claims and withdraws the rest of its Counterclaim against the Plaintiffs, save interest and costs:

(1) As against the First Plaintiff -

(i) A declaration that the First Plaintiff is in wrongful possession of

(a) the software programs including the 'recruitment application', 'CHRIS System', "Company Handbook, Company Profile, Fire Safety' (pursuant to paragraphs 11(b)(C), 12 and 13 of the Amended Defence And Counterclaim);

(b) the First Plaintiff's employment contract and personal records (pursuant to paragraph 6 of the Amended Defence And Counterclaim);

(c) the Video tape which recorded the speech delivered by Mr. Kenneth Lo on 28th December 1997 (pursuant to paragraph 14(a) of the Amended Defence And Counterclaim);

(d) the e-mails of the Defendant; and

(e) the reference letter signed by Mr. Andrew Lo (pursuant to paragraph 16(c) of the Amended Defence and Counterclaim).

(ii) An order that the First Plaintiff do forthwith return the items mentioned above.

(2) As against the Second Defendant -

An order that the Second Plaintiff do forthwith return the items mentioned above.

(3) As against the Defendants jointly and severally -

(i) the sum of HK$66,786.21, being expenses for replacing the Defendant's Human Resources Department;

(ii) the sum of HK$36,929, being expenses for reinstating the data and system of the Defendant's Human Resources Department; and

(iii) the sum of HK$13,958, being expenses for investigating and verifying other breaches and torts committed by the Plaintiffs.

16. These claims are denied by the Plaintiffs in their Amended Reply and Defence to Counterclaim. A large number of allegations are made by the Defendant against the conduct of the Plaintiffs which are disputed by the Plaintiffs. The Plaintiffs gave evidence. A large number of witnesses who are senior staff and directors of the Crystal Group were called to give evidence.

Language and witness statements

17. In view of the large number of witnesses who are all Chinese speaking and who in the majority provided their original statements in Chinese, and particularly in view of the fact that the Plaintiffs were not legally represented at trial, I ordered with the consent of the parties during the trial that the proceedings should primarily be conducted in Chinese. Otherwise, the trial would be substantially prolonged. I further ordered, with the consent of the parties that the all witness statements subject to any question as to relevance or admissibility, should stand as evidence-in-chief of the witnesses. In so directing, I am mindful of the extent of controversy between the parties and that credibility of the witnesses are in issue and that in such cases it is generally inappropriate to order witness statements to stand as evidence in chief: see Lord Donaldson M.R. in Mercer v. Chief Constable of Lancashire [1991] 1 WLR 367 at 371E-H, Keith J. (as he then was) in Hanwa Kozai (HK) Co. Ltd. v. Hangyiu Ltd. [1995] 1 HKLR 333 at 335 and Kaplan J. in Cheung Kai Wing v. Mok Sheung Shum t/a Mak Sum Kee & Anor (Tugu Insurance Co. Ltd, Third Party) [1993] 2 HKC 113 at 128. In directing a witness statement or part thereof to stand as evidence in chief of the witness under O.38 r.2A(7)(a) of the Rules of High Court, regard should be had to all the circumstances of the case and particularly to the degree of controversiality and to issues of credibility which might be involved. In the present case, a paramount consideration was the fact that the Plaintiffs were not legally represented at trial. It would also be unfair to the Defendant to order only the Plaintiffs' witness statements to stand as evidence-in-chief. These proceedings would otherwise be substantially prolonged and the length of trial would become disproportionate to the size of the claims. In these exceptional circumstances, I allowed all witness statements to stand as evidence-in-chief.

18. I shall first deal with the claim made by the First Plaintiff.

First Plaintiff's evidence-in-chief on termination

19. In chief, the First Plaintiff gave evidence that during his employment he worked very hard and paid substantial efforts in his work. On 8 December 1997, Mr. Kenneth Lo orally told him that the Defendant had decided to dismiss him as the Defendant intended to restructure the company. Mr. Lo agreed on behalf of the Defendant that the Defendant would pay to him the following upon his dismissal:-

(a) salary for December 1997;

(b) accrued annual leave for 17 days;

(c) annual bonus which was equivalent to 2 months' salary;

(d) payment in lieu of notice which would be equal to 2 months' salary;

(e) severance payment to be calculated in accordance with s.31G of the Employment Ordinance.

On or about 17 December 1997, Mr. Lo on behalf of the Defendant orally promised:-

(a) to pay him money in lieu of his accrued annual leave of 17 days as per his request;

(b) that he would stay home and standby for any assistance which the Defendant might require for the period 23rd December 1997 to 31st December 1997. In other words, his employment with the Defendant would be formally terminated after 31 December 1997.

20. He contends that even if there had been no agreement on severance payment terms he would still be entitled to severance payment as he was dismissed by the Defendant by reason of redundancy. In support of this contention, he relies on an e-mail dated 17 December 1997 from Mr. Kenneth Lo in which Mr. Lo stated that he would take up the First Plaintiff's post as Human Resources Manager. He also relies on an undated report entitled "Crystal Group of Companies Staff Assessment and Action Report" in which the reason of termination of his employment was stated "laid off." He further relies on an internal memo of the Defendant dated 5th December 1997 in which the poor operation environment was described by Mr. Lo as a "very serious crise(sic) to Crystal."

21. He refutes the Defendant's contention that he requested to resign or resigned on his own accord, and the allegation that he was summarily dismissed due to misconduct. He gave evidence that during his employment no one had told him that he had acted in any way unsatisfactory, no one had given any warning to him with regard to his job performance, let alone warning of dismissing him summarily prior to the termination of his employment. He considers that he had worked with great initiative and devotion. This, according to the First Plaintiff, is evidenced by the fact that he was granted salary increments each year, the compliments stated on the notification of salary increase dated 24th April 1996 and the notices of year end income dated 18th January 1995 and 7th February 1996 respectively. He also relies on an e-mail dated 9 December 1997 from Mr. Kenneth Lo to other staff wherein it was said that the First Plaintiff was leaving in good faith and that both the Defendant and the First Plaintiff would like to keep a good relationship. Finally, the First Plaintiff relies on a reference letter dated 19th December 1997 and signed by Mr. Andrew Lo. The letter was positively worded. In particular, it was stated as follows: "He is found to be an honest, responsible, creative and diligent manager...he always proved himself to be knowledgeable in management and perform(sic) up to the satisfaction of Directors."

Kenneth Lo's evidence-in-chief on termination

22. Mr. Lo gave evidence in chief that the First Plaintiff took over the post of Human Resources manager from one Mr. Albert Lau after the First Plaintiff joined the Defendant. This seems to be contrary to paragraph 5 of the Amended Defence but is not of significance. He referred to what was described as "Crystal Culture" promoted by the Defendant since 1994 to develop a positive working attitude amongst its staff, emphasizing that superiors should counsel and motivate, colleagues should be respectful and encouraging to each other, problems should be solved positively and speedily through face to face discussions, and the passive use of lengthy documentation to bypass problems or to evade responsibility should be avoided. In accordance with this culture, Mr. Lo himself believes in co-ordination and objects to reproach. Previous lengthy employment contracts and written warnings were done away with so as to emphasize self-motivated discipline on the part of staff.

23. According to Mr. Lo, the conduct and performance of the First Plaintiff had become worse and worse by September 1997. There were many complaints by various departments. Despite his attempt to counsel and warn the First Plaintiff, the situation did not improve. He then discussed the matter with the other directors in September 1997 and it was unanimously resolved to employ a new manager to replace the First Plaintiff. In about November 1997, Mr. Sunny Wong was recruited by the Defendant to replace the First Defendant at a much higher salary.

24. In early December 1997, Mr. Lo called the First Plaintiff to his office and told him that the Defendant had decided to dismiss (辭退) him with immediate effect because he had repeatedly made mistakes in his work, the majority of staff were dissatisfied with his bad working attitude, and despite his repeated counseling and warning the First Plaintiff's performance had become worse. According to Mr. Lo, the First Plaintiff admitted that his temper was bad. He had learned that the Defendant was looking for a manager to replace him and had made his own arrangement. The First Plaintiff expressed the hope that the Defendant would provide a reference letter to him, regarding him as resigning of his own accord as of the end of December 1997 but not being dismissed by reason of the Defendant's dissatisfaction with his work performance, and would compensate him according to labour legislation. Mr. Lo then acceded to the First Plaintiff's requests. He informed the First Plaintiff that before the new manager had familiarized himself with the work and could completely take over the job he would personally assist the Human Resources Department and would be acting nominally as its manager. The time given for this meeting, namely, early December 1997 seems to be at slight variance with the Amended Defence wherein, as seen from above, it is alleged that Mr. Lo orally dismissed the First Plaintiff on 5th December 1997 and that it was on or about 20th December 1997 that the First Plaintiff requested to resign.

25. Mr. Lo said that when he temporarily took over the Human Resources Department, he found that the staff were lax in their work and always late. By mid December their conduct became worse, absenting themselves from work without notice. Mr. Sunny Wong complained to him that the entire Department were "playing tricks"- the staff arrived late and left early, they came in and out freely, they could not be assembled to operate the Department in a normal manner. This however must be after 22nd December 1997 as Mr. Wong did not commenced work until 23rd December 1997. Towards the end of December, Mr. Wong expressed to Mrs. Yvonne Lo his worry that the Defendant's personnel operation system would be affected and that calculation of wages might be delayed. As a result, Mr. Lo called a meeting with Mrs. Lo and others. It was suspected by them that the First Plaintiff instigated this chaos.

26. On about 17th December 1997, Mr. Lo was handed by his secretary Ms. Beta Wong a reference letter prepared by the First Plaintiff. Mr. Lo refused to sign the letter in which according to him there were unjustified words of praise. He told Ms. Wong to inform the First Plaintiff that a reference letter would be given to him on the last day of his employment at the end of December. Ms. Wong later reported to Mr. Lo that she had related the message to the First Plaintiff through the Second Plaintiff. According to Mr. Lo, he did not then know of and had not approved the reference letter signed by Mr. Andrew Lo.

27. On about 20th December 1997, in order to control the situation Mr. Lo notified the First Plaintiff that his leaving would commence on 23rd December and that the period till the end of December would be calculated as his paid annual leave. It is said that the First Plaintiff then agreed to formally resign on 23rd December.

28. There is thus a conflict of evidence between the First Plaintiff and Mr. Lo on how the First Plaintiff's employment was terminated. This is further complicated by conflict of evidence between the Plaintiffs and the other witnesses called by the Defendant on a number of related issues.

Was the First Plaintiff dismissed summarily?

29. In my view, this question is not open to the Defendant in that it is the Defendant's case that the First Plaintiff requested Mr. Lo to allow him to resign instead of being dismissed so as to save face, and that Mr. Lo approved the request and accepted the First Plaintiff's resignation. In other words, the First Plaintiff was not dismissed by the Defendant, summarily or otherwise. Mr. Chan for the Defendant cites the following passage from Halsbury's Laws of Hong Kong, Vol.10(2), para.145.457:

"The common law rule relating to summary dismissal is that, provided good cause for dismissal in fact existed, it is immaterial whether or not it was known to the employer at the time of dismissal. A summary dismissal can therefore be justified by facts only ascertained by the employer subsequently to the dismissal, and on grounds differing from those alleged at the time."

30. He further relies on Yeung Chee-kiu v. Lam Chee t/a Yau Fat Furniture Co. [1966] HKDCLR65 for the proposition that it is open to the employer to prove misconduct other than the reason given by him to the employee at the time of dismissal. In my view, they are not applicable in that according to the Defendant's case the First Plaintiff resigned; he was never dismissed. Nevertheless, whether the Defendant had valid grounds to dismiss the First Plaintiff summarily at the time when the First Plaintiff's employment was terminated, and indeed whether the Defendant was undergoing a restructuring scheme at around that time will be relevant surrounding circumstances in the factual enquiry as to the manner in which the First Plaintiff's employment was terminated. I shall therefore first examine the incidents of conduct on the part of the First Plaintiff which, according to Mr. Lo, were referred to at the Defendant's informal board meeting in September 1997 and later relied on by Mr. Lo in December 1997 to justify dismissal.

Philip Suen's incident

31. This is neither pleaded nor referred to in Mr. Kenneth Lo's witness statement. It is not entirely clear when this took place. Mr. Lo referred to this as one of the incidents he had afterwards discussed with the First Plaintiff. Mr. Suen was the manager of a U.S. subsidiary of the Defendant or the Crystal Group. According to the First Plaintiff, Mr. Suen extended the probation period of an employee, then reduced his/her salary and finally dismissed him/her. He then proposed to use the reduced salary and 7 days to calculate terminal payment. He however later agreed with the First Plaintiff to use the unreduced salary and 1 month for the calculation. When questioned, Mr. Lo agreed that the First Plaintiff's advice was right but questioned the way he handled Mr. Suen who was his superior. According to Mr. Lo, Mr. Suen complained afterwards that he could not deal with the First Plaintiff who, according to Mr. Suen, "always use the law to argue." The First Plaintiff disagreed that he argued with Mr. Suen who was not called to give evidence.

Sherman Lau's incident

32. Again this incident is neither pleaded nor referred to in Mr. Kenneth Lo's witness statement. Similarly it is not clear when this incident took place. Mr. Lo referred to this as another incident he had afterwards discussed with the First Plaintiff. During the Defendant's annual conference in Manila, according to Mr. Lo, one Mr. Sherman Lau quarreled with the First Plaintiff who declined his request to rent a conference room to continue a meeting in the evening for budget reasons, despite the request of Mr. Frankie Wong, a director of the Crystal Group. When asked whether he had heard that the conference room was already booked and that the First Plaintiff told Mr. Wong of the same, Mr. Lo said that the incident was related to him differently. He heard that the First Plaintiff argued despite Mr. Wong's request, and that the First Plaintiff refused the request because no arrangement had been made beforehand nor was it anticipated in the budget. Mr. Lo later told the First Plaintiff that his refusal was unreasonable and that he should at least first ask his superior. Mr. Lau was not called to evidence. The evidence regarding this incident is neither clear nor satisfactory.

Shih Man Yu's incident

33. It is pleaded in paragraph 9 (b) of the Amended Defence And Counterclaim that on 17th December 1996, the First Plaintiff refused to pay employment compensation to a worker despite so ordered by Mr. Frankie Wong. It is further pleaded that the First Plaintiff would falsify personnel record to frustrate such compensation claim of the injured worker if anyone continues challenging his decision. In paragraph 5(b) of the Amended Reply And Defence to Counterclaim, the First Plaintiff pleads that he was reluctant to make payment to the worker before full investigation as to why he attended work during his injury leave. The First Plaintiff did later make payment to the worker after receiving instructions from the Defendant.

34. From the evidence, it would appear that the worker one Mr. Shih Man Yu who was then 18 tears of age was employed as a washing worker. He was injured during his work on 29th August 1995. Employees' compensation was claimed on his behalf. The Employees' Compensation (Ordinary Assessment) Board assessed, inter alia, the period from 29th August 1995 to 22nd December 1995 as the period of absence from duty necessary as a result of the injury and the Labour Department certified that compensation in the sum of HK$25,908.91 in respect of periodical payment was payable to the worker. The insurance company subsequently paid this sum to the Defendant.

35. According to Mr. Li Kam Por, TSC manager of the Defendant, the worker was an experienced washing worker and his subordinate. At his request and with the worker's consent, the worker came back to work when he was injured and was paid his normal daily wages during the injury period. Mr. Li made the request because of the need of the time but did so without consulting the Human Resources Department. He did not know whether this might contravene labour legislation and might expose his company to legal liability. According to Mr. Li, the First Plaintiff refused to release compensation on the basis that the worker was paid full wages during the injury period. When the matter reached Mr. Frankie Wong, the First Plaintiff still insisted on his refusal and even said that should the worker complain to the Labour Department he would at all costs destroy the worker's attendance record during the injury period in order to prove that the company had already released compensation to the worker. According to Mr. Li, Mr. Wong did not wish to quarrel with the Plaintiff and went straight to Mr. Kenneth Lo. Only afterwards was the compensation released to the worker. In cross-examination, Mr. Li said that he approached the First Plaintiff on 16th or 17th December 1996. He disagreed that the First Plaintiff explained to him that the compensation should not be released to the worker before full investigation as asking the injured worker back to work might contravene the law. He insisted that the First Plaintiff mentioned destruction of attendance record more than once in his presence. He added that after the meeting with the First Plaintiff in the morning, he considered the matter so serious that he had a message typed by his subordinate Ms. Tam Kit Yi, a TSC officer employed by his company, and sent it to Mr. Wong with copies to, inter alia, one Mr. Nori Yu. He then went straight to Mr. Frankie Wong for assistance. The document on the face of it was dated 17th December 1996. According to Ms. Tam, she typed this document for Mr. Li in December 1996 but has no knowledge whether this was in fact sent out. The First Plaintiff does not admit the authenticity of this document which did use odd language when referring to, according to Mr. Li, the suggestion of the First Plaintiff to destroy attendance record. Further, according to Mr. Li's witness statement, the First Plaintiff only made such a suggestion after the matter had reached Mr. Wong. It also seems contrived to send this message when Mr. Wong was almost next door to Mr. Li and when Mr. Li was going to see him straight away. Mr. Li did not refer to this document in his witness statement. Neither did Mr. Wong refer to this document in his evidence. Only Mr. Yu referred to this document in his witness statement but in cross-examination he could not remember when this document was sent to him. During cross-examination, Mr. Kenneth Lo was referred to this document and he gave the following answer - he asked his colleague whose identity he could not recall to find this document; he knows nothing further about the document. According to Mr. Li, Mr. Yu joined the meeting between him and Mr. Wong but left before the First Plaintiff arrived. At the meeting, according to Mr. Li, the First Plaintiff repeated his suggestion to destroy attendance record and refused to release compensation to the worker despite Mr. Wong's instructions. However, Mr. Li agreed that it was contrary to "Crystal Culture" to ask the injured worker back to work and that the First Plaintiff could have a different stand on payment of compensation. At the end of the day, it seems that Mr. Li's allegation that the First Plaintiff was a ruthless person without professional ethics is pinned on, according to him, the First Plaintiff's suggestion to destroy attendance record.

36. Mr. Wong, director of the Crystal group and of two of its companies, namely, Crystal Apparel Limited and Elegance Industrial Limited, gave evidence that the First Plaintiff and Mr. Li argued on payment of compensation to the worker before him. He decided that the company should not withhold payment. According to him, the First Plaintiff insisted on his view that payment of compensation would constitute double payment to the worker. In response to his view that the worker would be entitled to lay a complaint or claim with the Labour Department, the First Plaintiff indicated that he would destroy the worker's attendance record during the injury period so that the wages paid could be said to be payment of compensation. Mr. Wong did not insist on his decision because, according to him, the First Plaintiff was stubborn. Instead, he went to seek the intervention of Mr. Kenneth Lo who, after reviewing the matter, considered that Mr. Wong's decision should be maintained. In cross-examination, Mr. Wong said he was not sure if the First Plaintiff explained to him that compensation payment should be withheld because it was unlawful to ask the injured worker back to work during his injury period. He disagreed that the First Plaintiff suggested to conduct an investigation first. However, at the end of cross-examination, he said while he was not sure the First Plaintiff might have mentioned that it would be better to investigate rather to make a decision then. He insisted that the First Plaintiff mentioned about destruction of record and added that this was mentioned in the presence of Mr. Li. To Mr. Wong, the matter was merely one of disagreement between the First Plaintiff and Mr. Li. Although Mr. Wong was the First Plaintiff's superior in terms of corporate hierarchy, the First Plaintiff's immediate superior at the time was either Mr. Kenneth Lo or Mr. Andrew Lo. In re-examination, Mr. Wong thought that it was childish to suggest destruction of record as the worker's attendance was well documented.

37. Mr. Kenneth Lo did not refer to this incident in his witness statement. He was however cross-examined by the First Plaintiff on this. According to Mr. Lo, Mr. Wong went to see him, complaining that the First Plaintiff refused to follow his instruction and suggested amending attendance record rather than making compensation payment. He subsequently saw the First Plaintiff who told him that this was a serious matter in that the company might be prosecuted and fined for contravening labour law. Mr. Lo decided to pay the compensation to the worker notwithstanding that Mr. Li might be wrong in what he did. Mr. Lo did not personally hear any suggestion from the First Plaintiff to destroy or amend attendance record. What he found most objectionable was that the First Plaintiff did not listen to Mr. Wong.

38. Mr. Nori Yu, Senior Administrative Manager of the Defendant, also referred to this incident. His evidence is vague and does not advance the matter further. According to him, he only heard of the incident from Mr. Li in a meeting with the latter and Mr. Wong and had otherwise nothing to do with it.

39. In cross-examination, the First Plaintiff explained his concern in making compensation payment to the worker before full investigation, that is, it was against the law to ask an injured worker to work during injury leave. Releasing compensation payment would amount to an admission that the employer deliberately asked the injured worker to work during injury leave. He considered that as a responsible Human Resources manager he should first find out how this came about and who was responsible and should not release payment before full investigation. Later, Mr. Frankie Wong and Mr. Kenneth Lo decided that they should release the payment to the worker despite the First Plaintiff's insistence that this should not be done before investigation. According to the First Plaintiff, Mr. Lo said anything could be fixed by money. Out of disappointment and a sense of grievance but without meaning it, he said if everything could be fixed by money they might as well tear off the worker's work card and consider him never been back to work during injury leave. To him, the matter was one of law and should not be covered up and resolved by money. Though he disagreed with the decision he finally had to follow the instructions to pay. He said, and it is not disputed by the Defendant, that he had no personal benefit in going against the view of Mr. Lo.

40. On the whole, I prefer the evidence of the First Plaintiff regarding this incident. As head of the Human resources Department, he was justified to be concerned about the incident in the interest of both the employer and the employee, and to advise against payment before investigation. Mr. Wong, who was not the First Plaintiff's immediate superior and who acknowledged that the Human Resources Department was more knowledgeable and experienced in compensation matters, did not according to his evidence insist on his decision. In all the circumstances, I am not satisfied that the First Plaintiff disobeyed, willfully or otherwise, any lawful and reasonable order, demand or request of his employer. In fact, he did in the end follow Mr. Lo's instructions to pay although he disagreed with it. I also accept his explanation regarding the allegation of destruction of attendance record made against him. This is a grave allegation which is, in my view, illogical and devoid of common sense in that in the very first place the First Plaintiff was concerned about possible contravention of the law by the company. It is unconvincing to suggest that he was prepared to break the law himself. As Mr. Wong said, it was childish to suggest destruction of attendance record as the worker's attendance was well documented. I am not convinced that the document dated 17th December 1996 is what it purports to be. In the circumstances, I am not persuaded that this incident could have justified summary dismissal of the First Plaintiff. In any event, the Defendant had full knowledge of this incident which took place a year before the termination of the First Plaintiff's employment. No action was taken against the First Plaintiff after this incident. Mr. Lo only subsequently spoke to the First Plaintiff in a general context regarding the Crystal Culture way of doing things.

Nori Yu's incident

41. It is pleaded in paragraph 9(c) of the Amended Defence And Counterclaim that the First Plaintiff purposedly stayed unco-operative as a result of which the Defendant's Administrative Department was forced to avoid the First Plaintiff and his Human Resources Department and to arrange staff training and recruit workers through Hong Kong Productivity Council and Employees Re-training Board. The First Plaintiff denies that they were unco-operative and avers instead that Mr. Yu, manager of the Administrative Department, had acted against the policy of the company by making direct requests to Hong Kong Productivity Council, and that the Human Resources Department had at Mr. Yu's requests applied to Employees Re-training Board for recruitment of staff.

42. It is common ground that according to company policy it was for the Human Resources Department to organize staff training and to recruit staff. Regarding staff training, it would appear that on one occasion in 1995 or 1996 Mr. Yu approached the First Plaintiff and asked for coordination in staff training. As the First Plaintiff was then preparing a kit of training programs, he did not accede to Mr. Yu's request for the time being. A few months later Mr. Yu approached Hong Kong Productivity Council directly for assistance. Mr. Yu accepts that subsequently the Human Resources Department did participate in organizing training programs. Regarding staff recruitment, Mr. Yu does not disputes that the Human Resources Department did approach Employees Re-training Board for recruitment although, according to him, this was initiated by the Administrative Department. In response to Mr. Yu's suggestion, the First Plaintiff agreed to dispense with written applications. From the e-mails produced by the Defendant, the First Plaintiff appeared to have been responsive to Mr. Yu's suggestions. Mr. Kenneth Lo also refers to what he was told by Mr. Tennyson Chau, Mr. Yu's superior, regarding this incident. Mr. Chau was not called to give evidence. In any event, Mr. Lo's evidence in this regard is vague and general and do not advance the matter further. On the evidence, I am not convinced that the First Plaintiff was unco-operative.

Peter Chan's incident

43. This incident is pleaded in paragraph 10(b) of Amended Defence And Counterclaim. It is alleged that the First Plaintiff neglected to imput data of employees who had left the Defendant causing the Defendant to continue paying ex-employee for 6 months, resulting in a loss of HK$124,000 to the Defendant. According to the evidence, Mr. Chan was the general manager of Dongguan Changping Cima Garment Factory in the Mainland, a member of the Crystal Group. By an e-mail dated 2nd May 1997, Mr. Chan informed one Ms. Jacqueline Leung of the Human Resources Department that the employment contracts of two employees of the factory were terminated with effect from 1st May 1997. The e-mail was copied to the First Plaintiff. No Employee Action Reports regarding these terminations which were required by company policy and prescribed in Crystal Group's regulations called "Crystal Regulations Manual" were supplied to the Human Resources Department. It was the responsibility of the factory or the Administration Department to prepare and supply such Reports to the Human Resources Department. The ex-employees were continued to be paid until the error was discovered by the Human Resources Department through an internal audit whereupon the First Plaintiff immediately informed the Defendant's management of the same. The Human Resources Department had subsequently recovered the over-payments. Though the matter was addressed to Ms. Leung, the First Plaintiff did not shun his responsibility for his oversight as head of his department. He denied that he deliberately took no action because there were no Employee Action Reports. According to Mrs. Yvonne Lo, this was not a big deal and she did not pursue the matter further. Mr. Kenneth Lo on the other hand considered this a major neglect of duties. Mr. Timmy Chan, Financial Manager of the Defendant, also considered that it was the responsibility of the Human Resources Department to chase for the Reports. This is an isolated incident. I am not satisfied on the evidence that the First Defendant was habitually neglectful in his duties.

Other incidents

44. There are other incidents of misconduct pleaded against the First Plaintiff in the Amended Defence And Counterclaim. However, Mr. Kenneth Lo did not specifically rely on them and, in some cases, could not have relied on them when he spoke to the First Plaintiff in December 1997 as these other incidents allegedly occurred afterwards. For these reasons, they would not assist in the factual enquiry as to the manner in which the First Plaintiff's employment was terminated in December 1997. In any event, I am not satisfied that these other incidents on each own or in combination could have provided valid grounds for dismissing the First Plaintiff summarily. I shall deal with these other incidents later on if and when they become relevant.

45. I am not satisfied that the incidents specifically relied on by Mr. Kenneth Lo on each own or cumulatively could have justified the Defendant to dismiss the First Plaintiff summarily. In does however appear that the First Plaintiff did not get on particularly well with some of his senior colleagues, and more particularly those he described as "6th floor men" headed by Mr. Frankie Wong and including Mr. Tennyson Chau, Mr. Nori Yu, Mr. K.P. Li and Mr. Peter Chan who amongst others, according to Mr. Kenneth Lo, had made complaints against him. The "6th floor men" largely belonged to the Administrative Department which, according to the First Plaintiff, regularly competed for power against the Human Resources Department and took every chance to pick on him. According to the First Plaintiff, Mr. Frankie Wong also had a personal grudge against him and had vowed to get rid of him. These allegations were denied by his complainants. To them the First Plaintiff was arrogant, disrespectful, quarrelsome, uncompromising and uncooperative. I find the truth lying somewhere in between.

46. There is no doubt that the First Plaintiff insisted on strict compliance with company policy, rules and regulations. He was insistent on the proper way of doing things and was persistent in what he considered to be right, at the expense of flexibility and harmony. The real concern of the management was his work attitude and his ability to communicate with others. These were considered by the management to be more important than whether what was done was right or wrong. According to "Crystal Culture", described by Mr. Kenneth Lo as the highest policy statement of the Crystal Group, problems should be resolved harmoniously and flexibly through discussion, negotiation, co-ordination and team work. The superior should be approached if any problem remained unresolved. While he accepted that normally company regulations and manuals had to be followed and that no clear guidance had been given where there was a conflict between such and "Crystal Culture", Mr. Lo believed that a good Human Resources manager should not have found this a problem. All these might well have been the Defendant's considerations leading to the termination of the First Plaintiff's employment, but I am not satisfied that they provided sufficient grounds for summary dismissal. There is also some dispute as to whether Mr. Lo had ever issued any warning to the First Plaintiff. According to Mr. Lo, he took over from Mr. Andrew Lo as the First Plaintiff's immediate superior during the last year of the First Plaintiff's employment. This is disputed by the First Plaintiff but I do not find it of significance. According to Mr. Lo, he orally reproached the First Plaintiff regarding Sherman Lau's incident in 1995 and Shih Man Yu's incident in 1996. The First Plaintiff took these more as counseling from a boss as well as a fatherly figure. Mr. Lo however admits that he had never issued any written warning to the First Plaintiff, and that according to "Crystal Regulations Manual" up to two written warnings had to be issued to an employee before termination of his employment. Similarly Mr. Andrew Lo who was the First Plaintiff's immediate superior for at least two years only orally hinted to the First Plaintiff complaints from others and considered it too much to write a warning letter. According to him, both he and Mr. Kenneth Lo at one stage thought that the First Plaintiff could improve. Indeed, the First Plaintiff had been granted salary increments each years although according to Mrs. Yvonne Lo, during the period 1995 to 1997, everyone except those on probation had been granted salary increments and the compliments stated on notices of salary increment and year end income were standard computer print-outs. This confirms my finding that up to the Defendant's informal board meeting in September 1997, while there were insufficient grounds to dismiss the First Plaintiff summarily, the Defendant was dissatisfied with the First Plaintiff.

Board meeting September 1997

47. In September 1997, an informal board meeting was convened by Mr. Kenneth Lo, attended by the directors including Mrs. Yvonne Lo, Mr. Andrew Lo, Mr. Frankie Wong and Mr. Wong Kam Chiu. The purpose of the meeting was to discuss the work attitude and performance of the First Plaintiff. They discussed the complaints that had been received about the First Plaintiff and unanimously decided to replace the First Plaintiff. They felt that the First Plaintiff was not suitable for the job. According to Mr. Frankie Wong, they decided to terminate the First Plaintiff's employment in the normal way by giving him notice. He however felt that this was equivalent to firing the First Plaintiff. According to Mr. Kenneth Lo, they only decided not to use the First Plaintiff, to fire him but did not decide on the details as to how to do it. It was also decided that a newspaper advertisement was to be placed for the recruitment of a new Human Resources manager. On the evidence, while the board was unhappy with the First Plaintiff and decided to replace him, they had not decided to dismiss him summarily.

Recruitment of Sunny Wong

48. In November 1997, Mr. Sunny Wong was recruited as the Defendant's new Human Resources manager at a much higher salary. He however did not commence work until 23rd December 1997. The First Plaintiff alleges that Mr. Wong was not recruited to replace him and that he was dismissed by reason of redundancy.

How was the First Plaintiff's employment terminated?

49. How the First Plaintiff's employment was terminated is a matter of controversy between the First Plaintiff and Mr. Kenneth Lo. There is now no dispute that they met to discuss the matter on 8th and 17th December 1997. Between these dates, there were at least two meetings of the Human Resources Department held respectively on 9th and 16th, both chaired by Mr. Lo. There were exchanges of e-mails between Mr. Lo and the First Plaintiff on 9th and 17th. Both were extensively cross-examined.

In cross-examination, the First Plaintiff gave the following evidence:

Mr. Lo told him at the meeting on 8th December 1997 that he would take over his duties as a re-engineer and that the Defendant would instead recruit a trainer. He had by then almost completed his job as a re-engineer in the company and, according to his understanding, the trainer was not to replace him. Consequently, Mr. Sunny Wong was not recruited as his replacement irrespective of Mr. Wong's title as Human Resources manager. According to him, Mr. Lo told him that the Defendant would restructure the company and dismiss him. He asked Mr. Lo whether he was being laid off and to be paid accordingly. Mr. Lo answered in the positive. This occurred to him subsequently as dismissal by reason of redundancy. According to the him, Mr. Lo also said he would inform the others that the First Plaintiff was resigning rather then being laid off. This was first alleged by the First Plaintiff in cross-examination. However according to the First Plaintiff, at a subsequent meeting of the Human Resources Department, Mr. Lo informed all staff of the department that he was being laid off by the company. This should be the meeting held at 10:30 a.m. on 9th December 1997 the minutes of which were produced as Exhibit D15. The First Plaintiff's allegation of lay-off however is not reflected by the minutes according to which Mr. Lo simply reported that the First Plaintiff would leave by the end of the year. Further, in the e-mail sent out at 3:59 p.m. on the same day by Mr. Lo to managers or those above the manager grade, Mr. Lo informed them that the First Plaintiff wanted to resign and that he would take over the First Plaintiff's role until the new manager arrived and could take up the responsibility. He also indicated that the First Plaintiff was leaving in good faith and that the company would keep a good relationship with the First Plaintiff. The e-mail was copied to the staff of the Human Resources Department. It thus appears odd that if Mr. Lo had told the staff of the Human Resources Department in the morning that the First Plaintiff was to be laid off, they were told in the afternoon that the First Plaintiff wanted to resign. Later on in the afternoon, Mr. Lo further referred to sending a resign form to the First Plaintiff in an e-mail sent at 4:10 p.m. The First Plaintiff explained that the e-mails were not important to him as he had already reached an oral agreement with Mr. Lo.

50. Similarly, according to the minutes of the meeting of the Human Resources Department held on 16th December 1997, Mr. Lo simply reported that the First Plaintiff would leave at the end of the month. The minutes were produced as Exhibit D16.

51. According to the First Plaintiff, the meeting between him and Mr. Lo on 17th December 1997 was about his lay-off payment. He referred to paragraph 4) of an e-mail sent by him to Mr. Lo at 5:55 p.m. wherein it was recorded as follows: " As agreed, you will issue a reference letter as well as my termination payment to me by the end of this month....". The e-mail was expressed to be a recapitulation of what was discussed at the meeting. According to the First Plaintiff, the main points discussed at the meeting were recorded in the e-mail. He said that at the meeting they recapitulated their agreement made on 8th December 1997. As there was no written record of this agreement, he deliberately sent this e-mail to Mr. Lo for him to respond. According to the First Plaintiff, Mr. Lo could not decide everything within the Defendant and he sent out the e-mail for protecting his own interest. Indeed, the Second Plaintiff confirmed that it was well-known in the company that only what was decided by Mrs. Yvonne Lo would be final. Mr. Lo would need to seek confirmation from Mrs. Lo. However, other than the reference to termination payment, there was nothing in the e-mail which reflected what the First Plaintiff said. In particular, there was no reference to lay-off or severance payment.

52. I should add that according to the Second Defendant, during the first meeting of the Human Resources Department, Mr. Kenneth Lo informed them that the department would be restructured, that after the first Plaintiff's departure a new manager would be recruited to be responsible for training, and that he would take over the responsibility of Human Resources manager. According to her, Mr. Lo said that the First Plaintiff was to be laid off but he said so quickly as if he were embarrassed. She later agreed that Mr. Lo had by e-mails made clear to them that he only temporarily took over the role of Human Resources manager until the new manager could take over the responsibility.

In cross-examination, Mr. Lo gave the following evidence:

He agreed that there was a meeting between him and the First Plaintiff on 8th December 1997. It is noteworthy that the First Plaintiff put the following case to Mr. Lo regarding what was said by the latter at this meeting, namely, Mr. Lo told him that he did not get along with many others, that many complained against him, that he had made a lot of people unhappy, that it would be unhappy for everyone including himself and difficult for Mr. Lo if he stayed on, and that the company would wish him to go. This is in stark contrast to the First Plaintiff's pleaded case and the evidence that he has given. In response, Mr. Lo agreed that he told the First Plaintiff that he did not get on well with others and that more and more in the company complained about his work attitude. Despite his counseling and reproach and to his disappointment, the First Plaintiff did not improve. He raised with the First Plaintiff the several incidents I have addressed earlier and said that the Human Resources Department did not perform according to "Crystal Culture" and had failed in their duties. He said there were complaints that he had put up too much with the First Plaintiff. Consequently, Mr. Lo told the First Plaintiff that he had decided to dismiss (辭退) him as of that day. According to Mr. Lo, the First Plaintiff then said he did everything for the company. Mr. Lo said that this was not an excuse and that the situation was a difficult one for him. The First Plaintiff then asked to resign instead so as to preserve his credentials when applying for a new job. Mr. Lo agreed. It is also noteworthy that the First Plaintiff put the following case to Mr. Lo: "I said since the company had already made a decision, there was nothing I could do. You said you would compensate me in accordance with labour legislation". In response, Mr. Lo said this only meant compensation for resignation.

53. Mr. Lo denies that he told the staff of the Human Resources Department that the First Plaintiff was laid off by the company at the meeting on 9th December 1997.

54. According to Mr. Lo's understanding, the term "terminal payment" referred to in paragraph 4) of the e-mail sent by the First Plaintiff to him at 5:55 p.m. on 17th December 1997 meant payment in lieu of accrued annual leave and annual bonus. Mr. Lo did not disagreed that according to "Crystal Regulations Manual", the First Plaintiff would not have been entitled to annual bonus if he resigned. He however said that according to his understanding which might be wrong he had to pay.

55. I shall now refer to three other matter which may throw light on the dispute regarding the termination of the First Plaintiff's employment, namely, the reference and resignation letters, the Staff Assessment And Action Report of the First Plaintiff, and whether the Defendant was in fact restructured resulting in a redundancy situation.

The reference and resignation letters

56. According to Ms. Wong Yuk Chu, secretary to Mr. Kenneth Lo, in the morning of 17h December 1997 the Second Plaintiff gave her the First Plaintiff's draft reference letter and a draft resignation letter, asking her to pass on the same to Mr. Lo for his signature and to return the same to her afterwards. These letters which are both unsigned are produced as D3 and D4 respectively, the first one being dated 17th December 1997 and bearing the letterhead of Crystal Group Limited, the second one being dated 31st December 1997. Later on Mr. Lo asked her to inform the First Plaintiff that he disagreed with the content of the draft reference letter and would issue another reference letter to the First Plaintiff on the formal date of termination. She accordingly asked the Second Plaintiff to notify the First Plaintiff. In his witness statement, Mr. Kenneth Lo gave the same evidence save that there was no reference to such a draft resignation letter. In cross-examination he added that there was such a draft resignation letter. According to Ms. Wong, she asked the Second Plaintiff to inform the First Plaintiff of Mr. Lo's response. These allegations are denied by the Plaintiffs. The First Plaintiff denies that he had prepared the draft resignation letter and indeed the Plaintiffs dispute the authenticity of this document. The Plaintiffs deny that the draft reference letter was given to Mr. Lo either through Ms. Wong or at all on 17th December 1997.

57. According to the First Plaintiff, as Mr. Lo had promised to give him a reference letter by the end of December, he continued to chase Mr. Lo for it up to the day when he left the company, that is, 22nd December 1997. As he was not required to report back to work as from 23rd of that month, he prepared a draft reference letter and a calculation of his compensation on a piece of paper for Mr. Lo. On 22nd December 1997, he asked the Second Plaintiff to hand them in a sealed envelope to Mr. Lo. The draft reference letter is produced as Exhibit D3. When questioned, he said that the date appearing on the draft was wrong. He also accepted that he never mentioned this piece of paper containing the calculation before in his evidence. He said he did not make a copy of this document. Mr. Kenneth Lo denies that the draft reference letter or any terminal payment calculation was given to him by the Second Plaintiff on 23rd December 1997. When cross-examined by the Second Plaintiff, Ms. Wong said she could not remember whether on 24th and 27th December 1997 the Second Plaintiff asked her whether Mr. Kenneth Lo had signed the reference letter and the terminal payments. She could not remember whether she told the Second Plaintiff that Mr. Kenneth Lo would amend the draft reference letter by using more general wordings and would prepare another reference letter. Further, she could not remember if she told the Second Plaintiff that the terminal payments were already signed by Mr. Kenneth Lo and Mr. Andrew Lo.

58. The First Plaintiff further alleges that upon his request, Mr. Andrew Lo signed a reference letter prepared by him. This reference letter is dated 19th December 1997 and bears the letterhead of the Defendant, and its content is the same as that of the draft reference letter produced as Exhibit D3. The First Plaintiff explains that it was normal to ask both his immediate and indirect superiors to provide reference letters. According to Mr. Andrew Lo, he told the First Plaintiff that the reference letter should be signed by Mr. Kenneth Lo. The First Plaintiff then told him that Mr. Lo had agreed to his resignation and to provide him a good testimonial. As Mr. Kenneth Lo was not available at the time, the First Plaintiff asked him to sign in place of Mr. Kenneth Lo. Upon discovering that the reference letter was subsequently used by the First Plaintiff to prove that he was laid off rather than being dismissed, Mr. Lo felt that he was cheated. The First Plaintiff denies that he had misled Mr. Andrew Lo into signing the reference letter. In cross-examination, Mr. Lo repeatedly stated that he could not remember whether the First Plaintiff told him that as the First Plaintiff's immediate superior he should sign a reference letter. He signed the letter, according to him, in order to help the First Plaintiff to find a job. He did that as a friend and superior for the sake of "好呢好去" meaning "coming and leaving on good terms". He said he then only knew that the First Plaintiff was dismissed but not the details.

Staff Assessment And Action Report

59. The First Plaintiff relies on a signed by undated Action Report which bears the handwriting "laid off" to show that he was in fact laid off by the Defendant. This document was provided by the First Plaintiff on discovery. According to the "Crystal Regulations Manual", an Action Report would have to be prepared for every employee when he left the company. According to the First Plaintiff, this Report was prepared by an employee of the Human Resources Department on 20th or 21st December 1997 and he made a copy of it as evidence. He thought that the Report was prepared by the Second Plaintiff because apart from the signature it was in the Second Defendant's handwriting. He recognized the signature as that of Mr. Andrew Lo. He said that a report as such would be prepared as a matter of standard procedure by the Human Resources Department and no specific instructions were required. All Action Reports would go through him and those concerning managerial grade or above would be passed on to Mrs. Yvonne Lo. He did not know who instructed the Second Plaintiff to prepare the Report and could not tell where the assumption of lay-off came from. According to the Second Defendant, she prepared the Report and took it to Mr. Andrew Lo on 21st December 1997 for his signature. Mr. Lo signed the Report in her presence and then returned the same to her. When she was told by the Defendant's Counsel that 21st December 1997 was a Sunday, she said she might have mistaken the date.

60. According to the Defendant, they do not have the original or any copy of this Report in their possession. Mr. Andrew Lo did not refer to this Report in his witness statement. When he was asked by the Defendant's Counsel, he said that the signature appearing on the Report looked like his signature. When referred to the writing "laid off" in the Report, he said he definitely would not have signed the Report. In cross-examination, he said that Action Reports should be sent by the Human Resources Department to Mrs. Yvonne Lo and not him. Later on, he said the Report should go to Mr. Kenneth Lo although he would be approached if Mr. Kenneth Lo was not around. He could not remember whether the Second Plaintiff took the report to his room for his signature in December 1997. When asked again later whether the Second Defendant took the First Plaintiff's Action Report to him for signature around 20th December 1997, he said "definitely cannot remember, definitely no lay-off because company is expanding".

Whether the Defendant was restructured?

61. I have come to the conclusion that in fact the Defendant had not been restructured resulting in any redundancy situation. The First Plaintiff raises a number of matters including events taking place after December 1997 to show that he was in fact dismissed by reason of redundancy. He advances several contentions: that Mr. Kenneth Lo would take over the job of Human Resources manager after he left, that the Human Resources Department was reducing in size and costs, that eventually the Human Resources Department was combined with another department, that Mr. Lo in an internal memo admitted that the Defendant was in a crisis, that he was employed as a re-engineer and the newly employed Human Resources manager was a trainer. It is accepted that the burden rests on the Defendant to prove on the balance of probabilities that the First Plaintiff was not dismissed by reason of redundancy. I now deal with these matters and the Defendant's response thereto.

1. In an internal memo of the Defendant dated 5th December 1997, Mr. Kenneth Lo described the poor operation environment as a "very serious crise(sic) to Crystal".

(a) In cross-examination, the First Plaintiff agreed that there was no reference to any reduction of workforce in the memo. On the contrary, the departmental budget prepared for the year 1998 by the Human Resources Department projected an increase based on an anticipated increase in workload. This can be seen from the Defendant's 1998 Budget Overhead. The total payroll of the department had in fact increased from the year 1997 to the year 1998. This can be seen from Exhibits D18 and D18A.

(b) The Business turnover and payroll of the six companies within the Crystal Group served by the Human Resources Department had in fact increased for the year 1998. The First Plaintiff however points out that the business turnover of the Defendant had dropped in the year 1997 as compared with the year 1996. In response, Mr. Kenneth Lo points out that the Defendant had no real turnover of its own. It held quotas and its turnover depended on the turnover of Crystal Sweaters Limited. In any event, the drop was not substantial.

2. The First Plaintiff relies on what he was allegedly told by Mr. Kenneth Lo on 8th December 1997, that is, Mr. Lo would take over his duties as a re-engineer and that the Defendant would instead recruit a trainer. He thus understands that Mr. Sunny Wong was not recruited as his replacement notwithstanding his title as Human Resources manager.

Mr. Lo denies this and his denial is more consistent with the contemporaneous e-mails and meeting minutes of the Human Resources Department.

3. By the e-mail sent by Mr. Kenneth Lo to the First Plaintiff at 1:15 p.m. on 17th December 1997, it was stated that Mr. Lo had taken up the First Plaintiff's job as Human Resources manager, and that the existing staff of the Human Resources Department would handle the day to day operations.

In my view, this statement is taken out of context. By the e-mail sent by Mr. Lo at 3:59 p.m. on 9th December 1997, he informed the management that as the First Plaintiff was resigning, he would take over the role of Human Resources manager until the new manager arrived and could take up the responsibilities. This was a temporary measure occasioned by the transition and it is contrary to the evidence to suggest that Mr. Lo was to take over the First Plaintiff's job or responsibilities other than as a transitional measure.

4. In the First Plaintiff's Staff Assessment And Action Report, the cause of termination or discharge was given as "laid off".

As explained later, I am not satisfied that I can rely on this document.

5. The First Plaintiff further contends that in 1998, the Human Resources Department and the Administrative Department were combined to form one under one Human Resources manager. He relies on a chart of the Human Resources Department produced by the Defendant that as of 31st December 1998 the two departments were combined and reported to one Human Resources manager. Mr. Raymond Lau, Chief Financial Officer of the Corporate Finance Department of the Crystal Group, explained by reference to the chart that there was no restructuring of the company by combining the Human Resources Department and another department. According to Ms. Cheris Sun, assistant manager (personnel) of the Defendant, the department involved was the General Affairs Section which handled the management and security of the Crystal Industrial Building. Mr. Lau attributed the situation to the departure in early 1998 of the Corporate Financial Controller under him, namely, one Mr. Kelvin Leung, to whom the Senior Administrative Officer of the other department one Mr. Edward Yeung previously reported. After the departure of Mr. Leung, Mr. Yeung reported to Mr. Lau for several months as Mr. Leung's replacement was not familiar with administration. Later on and in or about June or July 1998, Mr. Lau told Mr. Kenneth Lo and Mrs. Yvonne Lo that he could no longer oversee the General Affairs Section at the same time. Mr. Lo then asked Mr. Raymond Ho who was then the Human Resources manager to oversee Mr. Yeung at the same time. According to Mr. Lo, this situation continued for slightly over a year. On the evidence, I am satisfied that the workload of the Human Resources Department had not been reduced. On the contrary, the Human Resources manager took on additional responsibilities. There was no merger or combination of the two departments as a result of which the workforce of the Human Resources Department was reduced.

6. The First Plaintiff finally relies on the change in the job title of the Human Resources Department. As compared with the position in 1997, the title of the staff of the Human Resources Department in 1998 had changed: a manager (M2 grade) instead of a senior manager (M1 grade), one officer (02 grade) and two assistant officers (03 grade) instead of three officers (02 grade). There were also differences in the job title of other posts as can be seen from Exhibits P2, P4 and D17. The salary of the officer was less than that of the Second Plaintiff. The salary of Mr. Raymond Ho was less than that of the First Plaintiff. Mr. Kenneth Lo explained that the difference in job title was merely one in name, there being no difference in job responsibilities. The salary of individuals depended on market situation. From 1998 onwards, there has been no reduction in the number of positions in the Human Resources Department. Mr. Sunny Wong was paid a much higher salary (HK$50,000). Mr. Wong was succeeded by Mr. Stanley Fong on 11th February 1998 who was also paid a higher salary (HK$41,000). Mr. Fong was succeeded by Mr. Raymond Ho on 16th May 1998. Mr. Ho was succeeded by Ms Angela Lee. Presently, Mr. Paul Wong, a non-executive director, temporarily oversees the Human Resources Department while the Defendant is looking for a new manager. There are two assistant managers, three officers, two clerks and one temporary clerk with the Human Resources Department making a total of eight in comparison with the total number of six when the First Plaintiff left the Defendant company.

62. On the evidence, I am satisfied that there did not exist a redundancy situation in December 1997 or thereafter. Mr. Sunny Wong, the new Human Resources manager, was recruited in November 1997 to replace the First Plaintiff. Mr. Lo took over the Human Resources Department only temporarily. I am also satisfied that the Defendant was not in any financial crisis. In line with the increase of turnover and payroll of the Crystal Group, the workload and workforce of the Human Resources Department had not been diminished. There had been no restructuring of the Defendant or the Human Resources Department resulting in any redundancy situation.

Findings

63. Having evaluated the evidence of these witnesses, I have come to the following findings. At the meeting on 8th December 1997, pursuant to the decision of the board Mr. Kenneth Lo told the First Plaintiff that the Defendant had decided to dismiss (辭退) him by reason of his work performance but not redundancy. The First Plaintiff asked to resign instead on the basis that Mr. Lo would issue a reference letter to him and to compensate him according to labour legislation. Mr. Lo agreed and acceded to his request. I am not convinced by the First Plaintiff that Mr. Lo told him that the Defendant had decided to dismiss him because the Defendant intended to restructure the company. From the surrounding circumstances and the events leading up to the termination including the various incidents I have referred to, the informal board meeting, the recruitment of Mr. Sunny Wong, the contemporaneous documents including the e-mails on 9th and 17th December 1997, the minutes of the two meetings of the Human Resources Department on 9th and 16th December 1997 and subsequent events, I am not satisfied that the First Plaintiff's employment was terminated in the manner as alleged by him. Indeed the case put by him to Mr. Lo which I have referred to earlier contradicts his version of events. According to Mr. Lo when he gave evidence at trial, the compensation agreed to be paid to the First Plaintiff was compensation for resignation, and the words "termination payment" referred to in the e-mail dated 17th December 1997 meant payment in lieu of accrued annual leave and annual bonus. I prefer the evidence of Mr. Lo. I therefore hold that the First Plaintiff is entitled to payment of his annual bonus which the Defendant has now conceded.

64. In view of the above findings, the First Plaintiff is not entitled to payment in lieu of notice or severance payment. Further, the First Plaintiff is not entitled to claim for unreasonable dismissal. Lastly, the First Plaintiff is not entitled to any long service payment.

65. As for the draft reference letter, I prefer the evidence of Ms. Wong and Mr. Lo to that of the Plaintiffs. Although Ms. Wong is still employed by the Crystal Group, I find her a reliable witness. The events described by Ms. Wong are more consistent with the manner in which the First Plaintiff' employment was terminated. As for the reference letter signed by Mr. Andrew Lo, I am not satisfied that the First Plaintiff deliberately set out to mislead Mr. Lo into signing this letter. I am not satisfied on the evidence that the First Plaintiff knew of Mr. Kenneth Lo's response to his draft reference letter by then. As Mr. Andrew Lo was his immediate superior for at least two years, it was not illogical for him to approach Mr. Lo when Mr. Kenneth Lo was not available. According to Mr. Andrew Lo, he knew that the First Plaintiff was dismissed and he signed the letter as a friend and superior in order to help the First Plaintiff to find a job. He felt cheated because the letter was used by the First Plaintiff for a redundancy claim. I am however not satisfied that this was the First Plaintiff's original intention in obtaining the reference letter.

66. As for the First Plaintiff's Staff Assessment And Action Report, the evidence concerning the same is unclear and unsatisfactory. The Report was not properly filled in and no satisfactory explanation was given as to the cause of termination or discharge stated therein. It was not sent to Mr. Kenneth Lo for signature in the first place notwithstanding that he was the person who was directly involved in the termination of the First Plaintiff's employment. Mr. Andrew Lo's evidence is also vague and unsatisfactory. On the evidence, he must have signed the Report, but I am not satisfied that he signed the Report in the knowledge that he was acknowledging the cause of termination or discharge as stated therein. He had little or no involvement with the termination of the First Plaintiff's employment after the board meeting in September 1997. He only knew that the First Plaintiff was dismissed but not the details. In all the circumstances, I am not persuaded that I can rely on this document to find that the First Plaintiff was laid off by the Defendant.

67. I shall now deal with the Second Plaintiff's claim and the Counterclaim. As there is no dispute that the Second Plaintiff was dismissed by the Defendant and the Defence to the Second Plaintiff's claim largely overlaps with the Counterclaim against the Plaintiffs, I shall next consider the Counterclaim.

'Recruitment application'

68. The Defendant seeks a declaration that the First Plaintiff is in wrongful possession of the above software program and an order against both Plaintiffs to return the same. This is pleaded to be a program developed by the development tool "Microsoft Access" for the purpose of storing confidential information including interviewer's comments after interviewing interviewees.

69. According to Mr. Carl Ting, Assistant General Manager of the Corporate Information Services Department of the Defendant, at the end of December 1997 his department was instructed by the management to investigate into the system of the Human Resources Department. He subsequently reported to Mrs. Yvonne Lo. According to him, his colleague one Mr. Edward Tso discovered that a data directory called "HR Share" was set up in the personal computer of Mr. Ernest Chan previously of the Human Resources Department. This, according to him, would enable data to be shared but it is not known who had access to this directory. Mr. Tso further discovered the above program but without data in this directory. The author of this program is not known. The Plaintiffs are not knowledgeable about this directory or program. The Defendant's evidence is vague and unsatisfactory. I am not convinced that the alleged directory and program were set up and written without the authority or knowledge of the Defendant. In any event, I am not satisfied that either of the Plaintiffs is in possession of the alleged program.

'CHRIS System'

70. The Defendant seeks a declaration that the First Plaintiff is in wrongful possession of a copy or copies of this software program and seeks an order against the Plaintiffs to return the same. It is pleaded that the First Plaintiff through Mr. Ernest Chan copied this program thereby infringing the intellectual property right in the original source code thereof belonging to Skyblue Professional Computer Services Company. This is denied by the First Plaintiff.

71. The 'CHRIS System' was developed by Skyblue by using "Microsoft Access" for the Defendant to calculate staff leave and wages. It was mainly used by the Human Resources Department. According to Mr. Ting, a program similar to this program but developed by using another programming development language ("Power Builder") and without the logo of the Crystal Group was found in a personal computer for developing the "CHRIS System" next to the desk of Mr. Ernest Chan who was responsible for co-ordinating the installation of the "CHRIS System". Mr. Ting agrees that Skyblue's staff from time to time installed the System program onto this computer. He had not checked if the similar program was installed by them to test the System. He does not know if the computer was to be installed for Mrs. Yvonne Lo. On the evidence, I am not satisfied that the First Plaintiff is in possession of any copy of the above program or any similar program. Mr. Ernest Chan was not called to give evidence. His statement and list are at best ambiguous. Even Mrs. Yvonne Lo does not know what Mr. Chan had written down in the list. In any event I prefer the First Plaintiff's evidence in this regard.

"Company Handbook, Company Profile, File Safety"

72. The Defendant seeks a declaration that the First Plaintiff is in wrongful possession of the above software programs and seek an order against the Plaintiffs for the return of the same. It is pleaded that the First Plaintiff purposedly concealed the above programs and refused to deliver up the same to the Defendant. This is denied by the First Plaintiff.

73. According to the First Plaintiff, the above multimedia programs were developed for the Defendant by Mr. Gabriel Tan previously of the Human Resources Department. He had authority from the Defendant to instruct Mr. Tan to develop these programs. These programs were publicly demonstrated in the Defendant's annual general meeting held in March 1997. Neither Mrs. Yvonne Lo nor Mr. Ting could remember the demonstration of these programs at the annual general meeting. The First Plaintiff had not taken them away when he left the Defendant Company. I accept the First Plaintiff's evidence and am not satisfied that he is in possession of these programs. Mr. Gabriel Tan was not called to give evidence. His statement and list are at best ambiguous. In any event, I prefer the First Plaintiff's evidence.

Employment contract and personal records

74. As the First Plaintiff was a party to his employment contract, no reason has been advanced by the Defendant as to why he cannot retain a copy of it. There is no evidence that he is keeping the original. Contrary to the Defence, the Defendant does have the personnel file of the First Plaintiff which is included in the Defendant's bundle of documents at trial.

Video tape

75. This is a video tape recording the annual dinner of the Defendant held on 28th December 1997. It recorded a speech given by Mr. Kenneth Lo on that occasion. The tape was taken by Ms. Chan Chui Bing of the Human Resources Department and passed on by her to the Second Plaintiff. It is alleged that the Second Plaintiff stole the tape and passed it onto the First Plaintiff who later declared that he would use the tape to prove redundancy at the Labour Tribunal.

76. According to the Plaintiffs, the tape was passed onto the First Plaintiff for his general enjoyment since he had not attended the event which he helped to organize. The Second Defendant says she had no intention to steal the tape and never intended to rely on it for the purposes of these proceedings. The First Plaintiff did not use the tape for the purpose of these proceedings and is prepared to return the tape to the Defendant.

e-mails

77. The First Plaintiff admits that he had made copies of e-mails of the Defendant for the protection of his own interest. There is no evidence that he instigated his previous subordinates of the Human Resources Department to divulge the same to him after he had left the Defendant company. There is also no evidence that he has used these e-mails otherwise than for the purposes of these proceedings. They are however documents containing internal information of the Defendant. Except those exchanged between the parties in connection with the termination of employment, they should be returned to the Defendant after the conclusion of these proceedings.

Reference letter

78. Although I have found that the First Plaintiff did not deliberately set out to mislead Mr. Andrew Lo into signing this letter, since the First Plaintiff should know by now that Mr. Kenneth Lo did not agree to its content and that Mr. Andrew Lo did not sign the letter with authority, the same should be returned to the Defendant.

79. Expenses in replacing the Human Resources Department, in reinstating the data and system and in verifying records

80. The Defendant alleges that the Plaintiffs jointly and severally incited other staffs to break their terms of employment paralysing the entire Human Resources Department in the following manner:

1. harbouring other employees of the department in falsifying records, cheating the Defendant of salary;

2. divulging confidential information of the department, causing loss and damages to the Defendant;

3. tampering and/or destroying the computer data and information of the Defendant and inciting other employees to do the same, causing loss and damages to the Defendant;

4. the First Plaintiff has infringed certain intellectual property of Skyblue whereby exposing the Defendant to vicarious liability for such wrongs;

5. the First Plaintiff purposedly concealed the 'Company Handbook, Company Profile, Fire Safety' computer programs and refused to deliver up the same to the Defendant; and

6. the Plaintiffs enticed and/or influenced other staffs of the department to commit a series of unlawful acts.

81. I have already concluded points 4 and 5 against the Defendant. I shall now deal with the other points. I should first mention that Mr. Kenneth Lo in cross-examination has accepted that the Defendant's claim for expenses has nothing to do with the Second Plaintiff.

Point 1

82. This is a serious allegation which is sorely lacking in particulars and strenuously objected to by the Plaintiffs. Mrs. Yvonne Lo agreed in cross-examination that there was nothing in the statements of Mr. Ernest Chan and Mr. Gabriel Tan which points an accusing finger at the First Plaintiff. Indeed, she agreed that they were never asked whether the First Plaintiff concealed their misdeeds. Mr. Kenneth Lo in cross-examination also accepted that the Second Plaintiff had nothing to do with the misdeeds of Mr. Ernest Chan and Mr. Gabriel Tan. Point 1 is therefore not established.

Point 2

83. I am not satisfied on the evidence that the Plaintiffs initiated or established a separate fax LANs (Local Area Networks), or that upon leaving dismantled such. The Defendant's evidence is unsatisfactory and I accept the evidence of the Plaintiffs. According to the First Plaintiff, an independent fax machine was installed with the knowledge and approval of the Defendant. The Winfax fax system was installed jointly by Mr. Ernest Chan in conjunction with personnel from the Computer and Administrative Departments.

84. Equally, I am not satisfied that the Plaintiffs initiated or established a PC LANs with independent index "HR Share". The Defendant's case is unclear. According to Mr. Ting, the Human Resources Department did not set up its own PC LANs. In any event, the Plaintiffs are not knowledgeable about the "HR Share".

85. I have already dealt with the Defendant's allegation regarding the 'recruitment application'. The Plaintiffs are not knowledgeable about this software program.

86. I am not satisfied on the evidence that the Plaintiffs initiated or exchanged with others their "PIN". In cross-examination, Mrs. Yvonne Lo retracted from her statement and did not suggest that the Plaintiffs had exchanged their passwords with others, or that between 29th and 30th December 1997 the Defendant's computer was remotely operated with data transmitted out in the "PIN" of the Second Plaintiff. She knew all along that the Second Plaintiff's computer knowledge was poor.

87. Point 2 hence fails.

Point 3

88. I am not satisfied that the Plaintiffs had tampered or destroyed the computer data or information of the Defendant, or had incited others so to do. According to the First Plaintiff, he handed over all computer-related elements to the Defendant on 22nd December 1997. They were then checked by Ms. Carol Tai, the computer operation officer of the Defendant. According to Mr. Ting, upon checking the computers including those of the Plaintiffs on 31st December 1997, all e-mails and directories were found deleted. However, in cross-examination, he accepted that there was no evidence of previous storage or deletion. I am not convinced that the Second Defendant had the temptation, time or chance to destroy everything in her computer prior to her sudden dismissal on 31st December 1997. Further, after she was told by Mr. Kenneth Lo of her dismissal, the file directories of her computer were checked and disabled by a staff of the Information Services Department of the Defendant.

89. According to Mr. Kenneth Lo, after he took over the Human Resources Department, the staff of the department were lax and frequently late. Later, they even took leave without notice. Mr. Sunny Wong complained that the staff did not co-operate and the department could no longer operate normally. The Defendant sought leave to admit the witness statement of Mr. Wong as evidence on the ground that he was beyond the seas or that he could not by reasonable diligence be found. Two affirmations in support of the application had been served on the Plaintiffs. I am satisfied that the Defendant had proved on the balance of probabilities that Mr. Wong could not by reasonable diligence be found and would allow the statement to be admitted. The statement of Mr. Wong who had not been cross-examined however is of limited weight. I am not satisfied that the Defendant has proved that the Plaintiffs orchestrated the stoppage of the entire Human Resources Department on 29th and 30th December 1997 or sabotaged the information and data of the entire department. According to the Second Defendant, she worked past midnight for the Defendant's annual dinner on 28th December 1997 and was on sick leave on 29th and 30th December 1997. The First Plaintiff was asked to stand by at home as from 23rd December 1997 and did not return to the Defendant company until 31st December 1997.

90. I am therefore not satisfied that Point 3 is proved.

Point 6

91. I have already dealt with the Defendant's allegations regarding the video tape and the Defendant's e-mails. On the evidence, I am not persuaded that they were stolen from the Defendant through the staff of the Human Resources Department. As for the other allegations contained in paragraphs 14 and 44 of the Amended Defence And Counterclaim, I am not satisfied that they are proved on the evidence.

92. In conclusion, the Defendant has failed to prove that the Plaintiffs jointly or severally incited other staffs to break their terms of employment. In the circumstances, the Defendant is not entitled to the expenses claimed. I now come to deal with the Second Plaintiff's claim.

Second Plaintiff's dismissal

93. There is no dispute that the Second Defendant was dismissed by Mr. Kenneth Lo acting on behalf of the Defendant. The issues between the parties are: whether the Second Defendant was dismissed during her sick leave, whether she was dismissed by reason of redundancy and whether she was unreasonably dismissed.

94. I shall shortly deal with the claim for severance payment.

Dismissal by reason of redundancy?

95. The Second Plaintiff considers that she was dismissed by reason of redundancy because she believes that no one was employed in place of her. She also relies on the internal memo of the Defendant in which the poor operation environment was described by Mr. Kenneth Lo as posing a very serious crisis to the Defendant. For the reasons that I have given earlier in connection with the First Plaintiff's claim for severance payment, I am satisfied that the Second Plaintiff was not dismissed by reason of redundancy. I am satisfied on the evidence that her previous responsibilities were taken over by new staff of the Human Resources Department. Consequently, she is not entitled to severance payment.

96. According to the Second Plaintiff, from 23rd December 1997 she and her colleagues in the Human Resources Department worked very hard in preparing for the company's annual dinner to be held on 28th December 1997. After the dinner she stayed behind up to 1:00 a.m. on 29th December 1997. She felt so sick in the morning of that day that she finally decided to take sick leave. At 9:40 a.m. she sent an e-mail from home to her colleagues Mr. Ernest Chan and Ms. Jovi Chan and asked them to forward the same to Mr. Sunny Wong notifying him of her leave application. She did not sent the e-mail directly to Mr. Wong because she did not yet have his e-mail address.

97. On 30th December 1997, she went to see a doctor who recommended her sick leave for the period from 29th to 31st December 1997. According to her, she telephoned her office but Mr. Wong was not at his desk. On the same day, upon the instruction of Mr. Kenneth Lo, Mr. Sunny Wong telephoned the Second Defendant and other staff of the Human Resources Department and asked them to attend a special meeting summoned by Mr. Kenneth Lo and Mrs. Yvonne Lo to be held on 31st December 1997. The Second Plaintiff also told Mr. Wong that she was on sick leave.

98. On 31st December 1997, the Second Plaintiff returned to office. She submitted the medical certificate to the sick leave form collection tray of the Human Resources Department. She then met Mr. Kenneth Lo and was told that the Defendant had decided to dismiss her with immediate effect by reason of her poor performance. She told Mr. Lo that she was still on sick leave and that the Defendant could not dismiss her on that date. However, Mr. Lo still dismissed her on that day. She therefore considers that she was dismissed during her sick leave. According to Mr. Lo, he immediately dismissed her on the basis of poor performance. However, upon being told that she was on sick leave and that the company could not dismiss her, he asked her to submit a medical certificate and told her that the dismissal would take effect on the last day of her sick leave. Mr. Nori Yu's evidence contained in his witness statement is to a similar effect.

99. On 1st January 1998, she still felt unwell and went to see another doctor who advise her that she should take sick leave for another three days.

100. On 2nd January 1998, she wrote a letter to Mr. Lo putting on record her dismissal on 31st December 1997.

101. In a letter dated 7th January 1998 from Mr. Sunny Wong to her, it was stated that after she was dismissed she asserted that she was in the middle of a sick leave. It further stated that Mr. Lo allowed her to adduce medical certificate so as to effect the termination of her employment on the last day of her sick leave. She was urged to forthwith produce medical certificate to the Human Resources Department to establish the effective termination date to the last day of her sick leave. In default of her failure to produce medical certificate within three days the Defendant would consider the effective day of termination as 31St December 1997 when she was dismissed. As she considered that she was dismissed on 31st December 1997, she did not submit any further medical certificate to the Defendant.

102. On the evidence, I am satisfied that the Second Plaintiff was dismissed on 31st December 1997. In this regard, I find the evidence of the Second Plaintiff more reliable. Indeed, the Defendant pleads in paragraph 45 of the Amended Defence And Counterclaim that "... Mr. Lo did rightfully dismiss the 2nd Plaintiff summarily with immediate effect on 31 December 1997 ...".

103. The Defendant contends that Mr. Kenneth Lo did rightfully dismiss the Second Plaintiff summarily for the following reasons:

A. In contravention of her terms of employment, the Second Plaintiff purposedly absent herself from work during the period from 29th to 31st December 1997 without notifying her immediate superior Mr. Sunny Wong or Mr. Kenneth Lo. The Second Defendant and the other staff of the Human Resources Department had concertedly absent themselves from work on 29th and 30th December 1997, crippling the Human Resources Department and seriously jeopardizing the normal operation of the Crystal Group.

B. The Second Plaintiff did not cooperate with her new superior Mr. Sunny Wong.

C. Points 1, 2, 3 and 6 under the heading "Expenses in replacing the Human Resources Department, in reinstating the data and system and in verifying records" in connection with the Counterclaim. I have already dealt with these points and concluded in favour of the Second Plaintiff.

Point A

104. I accept the Second Plaintiff's evidence and am not persuaded that she purposedly absent herself from work without notifying Mr. Wong or Mr. Lo. Neither am I convinced that she acted in concert with other colleagues to absent herself from work. She was genuinely sick and the Defendant's case is one based on suspicion. She did not, and I so find, deliberately acted in contravention of any company regulation regarding sick leave. She had done her best to notify her superior.

Point B

105. In his statement, Mr. Sunny Wong stated that the staff of the Human Resources Department including the Second Plaintiff were uncooperative. He gave the following example. When he enquired with the Second Plaintiff for information regarding the Group's subsidiaries and line management chart, she responded by saying that there were over a hundred companies within the Group and asked for particular companies that Mr. Wong was looking for. Later on, she randomly left a few company kit boxes inside his office. The Second Plaintiff says that while she could not remember the incidents cited against her, she had no intention of being uncooperative. She had never received any complaint or warning from Mr. Wong. Mr. Wong also made general allegations against the staff of his department as a whole, but they are not specific allegations against the Second Plaintiff. The Second Plaintiff disputes Mr. Wong's observations about her in that as from 23rd December 1997 when Mr. Wong joined the Defendant, he had only about one day and two half days to come into contact with her. There is no evidence that she left office without notice or made outward data transmission.

106. I accept the Second Plaintiff's evidence regarding her attendance during the period from 22nd to 27th December 1997. As she explained, the "CHRIS System" was not fully developed by then and the information provided thereby was incomplete. During this period, she was slightly late for one morning.

107. On the evidence, I am not satisfied that the Defendant was justified to dismiss the Second Plaintiff summarily. In effect, the Defendant wrongfully terminated the Second Plaintiff's employment.

Sick leave

108. S.33(4B) provides:

"No employer shall terminate a contract of employment of an employee under section 6 or 7 on any sickness day taken by the employee in respect of which sickness allowance is payable under this section"

109. S.6 provides for termination by notice and s.7 provides for termination by payment in lieu of notice. Neither however applies here where the contract of employment was terminated wrongfully. Regrettably I have come to the conclusion that s.33(4B) does not apply and that the Second Plaintiff is not entitled to the sum of HK$3,500 claimed under s.33(4BA)(b).

Unreasonable dismissal?

110. During employment, the Second Plaintiff's performance had never been questioned. Her monthly salary had been increased four times during the period of her employment for slightly over two years. In addition, she had been chosen by the Defendant to attend two training courses in December 1997. On 19th December 1997, she was also encouraged by Mr. Kenneth Lo to continue serving the Defendant and was assured another salary increase in April 1998. Her contract of employment was, as I find, wrongfully terminated. In all the circumstances, I consider it just and appropriate to make an award of terminal payments to be paid by the Defendant to the Second Plaintiff under s.32O of the Employment Ordinance, the Defendant having failed to show a valid reason for the dismissal under s.32K. The terminal payments awarded are as follows:

(a) payment in lieu of notice (one month salary) if the same or an equivalent sum has not been paid to the Second Plaintiff;

(b) annual bonus if the same or an equivalent sum has not been paid to the Second Plaintiff; and

(c) pro rata long service payment in the sum of HK$11,667.

111. As the Second Plaintiff is not entitled to rely on s.33(4B), she is not entitled to claim an award of compensation under s.32P of the Employment Ordinance.

Summary

112. On the First Plaintiff's claim, I would order the following to be paid by the Defendant:

(a) payment in lieu of accrued annual leave (17 days) in the sum of HK$21,817.00; and

(b) annual bonus (equivalent to two month's salary) in the sum of HK$77,000.00.

113. On the Second Plaintiff's claim, I would order the following to be paid by the Defendant:

(a) the sum of HK$1,500.00 (equivalent to 3 days sick leave allowance for the period from 1st to 3rd January 1998) under s.33(4C) of the Employment Ordinance;

(b) pro rata long service payment in the sum of HK$11,667.00 under s.32O of the Employment Ordinance;

(c) annual bonus if the same or an equivalent sum has not been paid to the Second Plaintiff; and

(d) payment in lieu of notice (equivalent to one month's salary) if the same or an equivalent sum has not been paid to the Second Plaintiff.

114. On the Defendant's counterclaim, I would order the return of:

(a) the Video tape;

(b) the e-mails of the Defendant (except those exchanged between the parties in connection with the termination of employment) after the conclusion of these proceedings and any appeal therefrom; and

(c) the reference letter dated 19th December 1997 signed by Mr. Andrew Lo.

Costs

115. I would also make the following order nisi as to costs:

(a) there be no order as to costs as between the First Plaintiff and the Defendant; and

(b) the Second Plaintiff has half of her costs of her claim and the costs of the counterclaim.