ARCHER, HAROLD DEAN v. THE HONG KONG CHANNEL LTD

FACV No. 8 of 1998

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 8 OF 1998 (CIVIL)

(ON APPEAL FROM CACV No. 155 OF 1997)

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J U D G M E N T

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Chief Justice Li:

1. I have read the judgment of Mr Justice Litton PJ and agree with it. For the reasons he gives, I would make the orders he proposes.

Mr Justice Litton PJ:

Introduction

2. The background facts can be briefly stated. The appellant, plaintiff at the trial, was one of the founders of the respondent company. He did not, however, hold a majority of its shares. Under an employment agreement dated 6 July 1990 he became the managing director and served as such until 17 June 1995 when the directors of the company met. A resolution was then passed that the appellant be dismissed immediately and another director should replace him as managing director. On 5 July 1995 the company sent him a cheque for HK$40,000 under cover of a letter which said:

" As instructed by the Hongkong Channel's Board of Directors, please find enclosed a cheque for one months salary HK$40,000 in lieu of notice.".

3. The company had been in financial difficulties for some time prior to June 1995. The appellant had, on a number of occasions, deferred drawing his salary to enable the company to pay its creditors and was therefore owed salary at the time of his dismissal. He brought proceedings against the company in the Labour Tribunal but these were transferred to the High Court. Pleadings were ordered. There were claims and counterclaims. The case was tried by Deputy Judge Longley resulting in a judgment in the appellant's favour for $82,356. He was not awarded costs, but because the company had succeeded in its counterclaim (which substantially reduced the award in the appellant's favour) it was given the costs of the counterclaim.

The proceedings at first instance

4. At the hearing before Deputy Judge Longley the appellant was unrepresented. Amongst the various heads of claim in his statement of claim he sought an award under section 31R of the Employment Ordinance, Cap 57, for long service payment.

5. Under section 31R(1)(a) an employee who has been employed under a continuous contract for not less than the number of years of service at the relevant date, as specified in the Fifth Schedule to the Ordinance, is entitled to long service payment. It is common ground that the number of years of service as at the relevant date, for the purposes of this case, was five years. One then goes to the definition of relevant date in section 2 and finds that where the contract of employment is terminated by payment in lieu of notice in accordance with section 7, the relevant date is the date up to which the wages are calculated: In the present case, it would be 16 July 1995 if the sending of the cheque for $40,000 and its acceptance, as salary in lieu of notice, had the effect under section 7 of terminating the contract of employment as at that date. Calculated thus, the appellant would have had 5 years' continuous service and would have been entitled to long service payment: But not so if the relevant date was 17 June 1995, or some other date prior to 6 July 1995 (the fifth anniversary of the plaintiff's commencement of employment). This point was, however, overlooked in the trial court. In his consideration of the appellant's various claims the judge did not have the statutory definition of relevant date in section 31R(1)(a) in mind.

Court of Appeal

6. In his notice of appeal to the Court of Appeal the appellant specifically raised the point that the effective date of termination of his employment was 16 July 1995 and accordingly the trial judge had erred in failing to make an award under section 31R(1)(a) for long service payment. The point was, however, rejected by the Court of Appeal: Once again, the statutory definition of relevant date in section 31R(1)(a) was overlooked.

7. In his judgment, Liu JA said this:

"Throughout, the provisions of the Employment Ordinance, Cap. 57 applied. The plaintiff was thus liable to dismissal on payment in lieu of notice pursuant to s.7 of that Ordinance".

8. Despite the fact that the appellant was paid on 5 July 1995 his monthly salary in lieu of notice, Liu JA nevertheless held that the appellant was "effectively dismissed as at 17 June 1995" (the date of the director's meeting) and accordingly failed to qualify for long service payment under section 31R(1)(a).

9. Nazareth V-P said this:

"... it is plain ... that his employment terminated immediately upon payment of a month's salary in lieu of notice. Clearly, the judge was right in determining that he was not entitled to a long service payment as his service fell short of the qualifying period of five years."

10. Likewise, Nazareth V-P had overlooked the statutory definition of relevant date.

11. Cheung J agreed with the two Justices of Appeal on this issue and did not deal with it separately in his judgment.

Application for leave to appeal to Court of Final Appeal

12. By notice dated 31 December 1997 the appellant applied to the Court of Appeal for leave to appeal to this Court. The failure of the lower courts to give effect to the statutory meaning of relevant date in section 31R(1)(a) was clearly spelt out in his application. This was heard by the Court of Appeal on 19 February 1998. In dealing with that application Nazareth V-P, giving the decision of that Court, said:

"What has happened here is that a provision of the Employment Ordinance that is perfectly clear, and that no one suggests causes any difficulty in its interpretation or application, was not relied upon and in consequence overlooked by everyone, by the parties, by the Court of First Instance, by the Court of Appeal, by counsel."

13. The Court of Appeal nevertheless refused to grant leave to appeal.

14. Leave having been given by the Appeal Committee on 21 May 1998 for the appellant to appeal to this Court, it is here, at the final appellate stage, that the point falls for determination for the first time.

Right to long service payment

15. The appellant's right to long service payment under Part VB of the Employment Ordinance focuses upon one point: Did the sending of the cheque for $40,000 on 5 July 1995 as "one month's salary in lieu of notice", and the acceptance by the appellant of that cheque, have the effect in law of terminating the contract of employment as at the date up to which the salary was calculated, namely 16 July 1995? If it did, the appeal must succeed: subject to the point that this issue was raised far too late in the day and ought not to be entertained by this court at all.

Termination of contract of employment under section 7

16. The primary facts are not in dispute. As mentioned earlier, on 17 June 1995 the directors of the company met and a resolution was passed that the appellant's employment with the company be terminated immediately and another director should replace him as managing director. There was no suggestion that the appellant was being dismissed for cause such as misconduct, habitual neglect in his duties or dishonesty: reasons which would have justified the termination of the contract of employment without notice or payment in lieu of notice under section 9 of the Ordinance. The resolution passed at the 17 June meeting purported to dismiss the appellant immediately. The dismissal, though purporting to take effect immediately, left unresolved the question whether the employer was terminating for cause or in breach of contract or on some other basis. The next thing that happened, relevant to the case, was the sending of the cheque for $40,000 by the company on 5 July 1995 expressed to be a "cheque for one month's salary ... in lieu of notice".

17. Section 7 of the Employment Ordinance provides:

"(1) ... either party to a contract of employment may at any time terminate the contract without notice by agreeing to pay to the other party a sum equal to the amount of wages which would have accrued to the employee during the period of notice required by section 6."

18. Under section 6(2) the length of notice required to terminate the contract in this case was one month.

19. At trial, it was never the respondent's contention that the payment of the $40,000 in lieu of notice did not have the effect of lawfully terminating the appellant's contract of employment. It would have been surprising if such a contention had been raised, for it would have contradicted the clear intent of the letter of 5 July 1995. The appellant, on his part, did not lodge his claim on the basis of damages for unlawful dismissal. He merely said that the payment of $40,000 on 5 July 1995 was not enough to satisfy the requirements of section 7 as the wages referred to in that section included his housing allowance. He averred that he had not drawn his housing allowance for the month ending 16 July 1995. The judge found against him on the facts and held that the appellant's claim "for an additional sum in respect of wages in lieu of notice" failed.

20. The issues at trial were somewhat diffused. The appellant was not legally represented. But one thing is clear. The respondent had raised no positive case of termination of the contract of employment on grounds other than those raised in its own letter of 5 July 1995: payment of salary in lieu of notice. The trial judge dealt with the case on that basis. And likewise the Court of Appeal.

"Agreeing to pay"

21. Counsel for the respondent now says that the case was never one of termination under section 7, for section 7 speaks of either party terminating the contract by agreeing to pay to the other the requisite sum and here, counsel says, there was no agreement. She relies on Yip Wan-chiu v. Magnificent Industrial Ltd. [1974] HKLR 183 where the majority (McMullin and Pickering JJ) held that under the then section 6(1) of the Employment Ordinance (the equivalent, for practical purposes, of our section 7) the words "agreeing to pay" did not simply mean "offering to pay" or "undertaking to pay", and unless the other party accepted the offer no termination of a contract of employment under that section could take effect. Huggins J dissented on this issue. He said:

"It would not have required a statute to lay down that a contract of employment, like any other contract, can be terminated by mutual consent and I find nothing in the section which is indicative of a situation involving such consent".

22. It is not necessary for us to resolve this issue because of the way the case proceeded in the courts below. In tendering the cheque for $40,000 the respondent was clearly purporting to terminate the contract under section 7. No other basis for terminating the contract was envisaged by the tender of the cheque. The appellant on his part accepted that cheque. In his claim against the respondent he did not put forward a case of a claim for damages for unlawful dismissal, giving credit for the $40,000 in diminution of his claim. He pleaded section 7 as the legal foundation of his claim, and said in effect: "I accept that you are entitled to terminate the contract under section 7 by tendering to me a sum equal to the wages which would have accrued to me during the month following your letter; I accept the $40,000 as salary, but you have omitted to pay me my housing allowance (without which my entitlement to wages as defined in the Ordinance is incomplete), so I claim for the shortfall under section 7 as my full entitlement". This, on any view of the statute, constitutes agreement under section 7. Moreover, having regard to the way the matter proceeded in the courts below, if assent by the appellant be a necessary ingredient for the effective termination of the contract under section 7 then such assent must be implied from the appellant's conduct generally, whatever might have been the legal effect of the dismissal on 17 June had it stood on its own. Furthermore, whatever the ambiguities might have been at trial with regard to the legal basis for the termination, by the time the case reached the Court of Appeal, termination under section 7 was concretized and it is far too late in the day for this court to search for some other basis.

Effective termination of contract of employment

23. Counsel for the respondent argues that had the point now raised on final appeal - the statutory definition of relevant date in section 31R(1)(a) - been put forward at trial, the respondent might have countered the point by avoiding section 7 altogether and pleading, for instance, a case of termination for cause under section 9. This argument is untenable. Nothing prevented the respondent from pleading a case of dismissal for cause under section 9, if the facts warranted such a case. The simple fact is that no such case was put forward and it matters not that the significance of termination under section 7, in relation to a long service payment claim by the appellant under section 31R(1)(a), was not perceived by the respondent at trial. The case having proceeded from beginning to end on the basis of a termination under section 7, both parties are fixed with its legal consequences.

24. Having reached this juncture, the objection by the respondent of the new point being raised so late falls by the wayside. Whilst it is right to say that a final appellate court would rarely entertain a fresh point like this on appeal, nothing prevents this court from righting an obvious wrong as there are no facts which need investigation before the point can properly be resolved.

Conclusion

25. It is common ground that if the appellant succeeds in this appeal, the award for long service payment should be in the sum of $75,410. I would so order, together with interest thereon from the date of the writ. This would, of course, be in addition to the judgment for $90,927 already ordered by the Court of Appeal.

26. As we have not heard submissions on the rate of interest, nor on the costs following on this appeal being allowed, the parties should be invited to lodge written submissions (copied to each other) on these two matters within 21 days of the handing down of the court's judgment.

Mr Justice Ching PJ:

27. I agree.

Mr Justice Bokhary PJ:

28. I agree with my brother Litton's judgment and would, for the reasons which he gives, allow the appeal so as to make the orders which he proposes.

Sir Anthony Mason NPJ:

29. I also agree.

Chief Justice Li:

30. The Court, being unanimous, allows the appeal and makes the orders set out in the conclusion to the judgment of Mr Justice Litton PJ.