HONG KONG MING WAH SHIPPING CO LTD v. SUN MIN

FAMV No. 30 of 2005

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

 MISCELLANEOUS PROCEEDINGS NO. 30 OF 2005 (Civil)

(ON APPLICATION FOR LEAVE TO APPEAL FROM

CACV No. 37 of 2004)

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D E T E R M I N A T I O N

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Mr Justice Ribeiro PJ:

1.  This application was dismissed by the Appeal Committee on 12 January 2006 with reasons to be given later.  The reasons are now provided as follows.

2.  The Employment Ordinance, Cap 57 (“the Ordinance”), gives a measure of employment protection to employees who become pregnant.  Provided that the requirements relating to continuous employment and the giving of notice of pregnancy are satisfied, such an employee is entitled to a period of maternity leave and may be entitled to four-fifths of her normal pay.  Additionally – and this is central to the present application – s 15(1)(a) prohibits termination of the employment during the maternity period.  It provides:

"	(1)	Subject to subsections (1A) and (1B) [which are not presently relevant] -
		(a)	after a pregnant employee has served notice of pregnancy on her employer, the employer shall not terminate her continuous contract of employment otherwise than in accordance with section 9 during the period from the date on which her pregnancy is confirmed by a medical certificate to the date on which she is due to return to work on the expiry of her maternity leave or the date of cessation of pregnancy (otherwise than by reason of confinement)......"

3.  It should be noted that s 15(1)(a) prohibits all forms of termination of the contract of employment by the employer with the sole exception of a termination in accordance with s 9.  Section 9 preserves the common law right of an employer summarily to dismiss an employee for misconduct.  Any other form of termination by the employer – whether this occurs lawfully in accordance with the terms of the contract or wrongfully and in breach of the contract – is prohibited.

4.  Where an employer dismisses the pregnant employee in contravention of the statutory prohibition, s 15(2) imposes a liability to pay the employee sums which she would have been entitled to under the Maternity Protection provisions of the Ordinance.  Moreover, by s 15(4), such an employer also commits an offence punishable by a fine.

The facts of the present case

5.  The present case involves a claim by the respondent against her employer, the applicant, under s 15(2) on the footing that she had been dismissed after giving due notice of pregnancy.

6.  The respondent began working for a state-owned mainland corporation called China Merchants Holding Co Ltd (“CMH”) in 1994.  In 1998, she was transferred by CMH to work for the applicant, a Hong Kong subsidiary of CMH.  After an interlude when she worked for a fellow Hong Kong subsidiary of CMH, she resumed her employment with the applicant in August 2000.

7.  The respondent became pregnant and (after taking advice from the Labour Department) served notice of such pregnancy on the applicant on 17 December 2001.  The notice stated that her expected date of confinement was 23 April 2002 and that she intended her maternity leave to commence on 15 February 2002.  It was duly supported by a medical certificate and was a valid notice for the purposes of the Ordinance.

8.  The applicant’s response was to inform her on the next day, 18 December 2001, that she was to be transferred back to the mainland to work at Shekou for a mainland subsidiary of CMH called Shekou Ming Wah Shipping Co Ltd  (“SKMW”) with effect from 17 January 2002 (ie, a month later).  On 25 December 2001, she received notices from the applicant requiring her to report to SKMW on 17 January 2002 and to return all company effects to the applicant before then.  By her letter of 27 December 2001, the respondent informed the applicant that she was unwilling to accept the transfer.  She did not in fact appear as instructed at Shekou on 17 January and was consequently treated by the applicant as having left the company.

The central issue

9.  The central issue in the Labour Tribunal was whether the applicant had terminated the respondent’s contract of employment so as to be caught by s 15(1)(a) and so as to trigger liability to pay her the sums specified in s 15(2).

10.  The presiding officer (Mr Douglas Yau) accepted the applicant’s evidence that it had always been the understanding between the respondent and CMH that her posting to Hong Kong would be for 3 to 5 years and that it had been expressly agreed that the applicant could require the respondent to be transferred to another company in the CMH group.  He also accepted that the intended transfer was not motivated by her pregnancy but by the fact that the PRC work visa issued to the respondent was due to expire on 14 April 2002.  The presiding officer held that the applicant’s demand that she move to a job with SKMW in Shekou was not a termination of her contract of employment with the applicant. 

11.  The respondent successfully appealed to the Court of First Instance where Deputy High Court Judge Poon (HCLA 9/2003, 27 January 2004) held that the presiding officer had erred in concluding that there had been no termination.  That conclusion was upheld by the Court of Appeal (CACV 37/2004, Yeung and Tang JJA and Yam J, 2 March 2005), dismissing the applicant’s appeal.

The present application

12.  Mr Alan Hoo SC appears with Mr Johnny S L Mok for the applicant.  He seeks to argue that the proposed appeal has a general importance in that it raises issues concerning employees who are transferred by state-owned corporations on the mainland to work in the HKSAR for a Hong Kong subsidiary in the light of certain policies adopted on the mainland and acknowledged by the HKSAR authorities in relation to such employees.

13.  While the arguments were put in various ways, two main grounds were advanced in support of this leave application. 

(a)

The first involves the argument that the order to be transferred to Shekou was not a termination but a lawful and reasonable order (particularly in the light of s 17I of the Immigration Ordinance discussed below).  Accordingly, it is said that in refusing to be transferred and thereafter failing to report for duty at Shekou, the respondent was acting in breach of her contract, justifying her dismissal under s 9 of the Ordinance and excluding any liability under the maternity protection provisions (“the termination point”).

(b)

The second involves the contention that even if the order for transfer constituted a termination by the applicant of its contract of employment with the respondent, the court should construe s 15(1)(a) liberally in the light of its objectives, concluding that it does not apply where the transfer envisaged the continued employment of the employee by another company in the mainland group in accordance with the established policies mentioned above (“the construction point”).

14.  Although the termination may be thought to be logically anterior, it will be analytically convenient to deal first with the construction point.  But before doing so, we note that neither of these points reflects the way in which the presiding officer reached his decision.  He concluded that there was no termination apparently on the basis that it was “merely an internal transfer” which did not involve termination of the respondent’s contract of employment with the applicant.

15.  In so holding, the presiding officer was plainly wrong in law, as was held by the courts below.  While it would have been correct to say that it was a transfer internal to the group, it was untenable to suggest that it was proposed to achieve this without terminating her employment with the applicant.   The evidence plainly showed (and Mr Hoo concedes) that if the respondent were transferred to Shekou, her contract of employment with the applicant would to come to an end and she would no longer be entitled to any of the benefits thereunder.  As we have seen, by letter of 25 December 2001, the applicant required her to hand over all company effects, including the keys to her quarters prior to the transfer date.  She would thereafter be employed on Shekou terms, the nature of which were not in evidence and which, prima facie, were likely to be different, being terms of employment to be carried out in a different city subject to a contract governed by a different law.  That their employment relationship was terminated by the order for transfer was acknowledged by the applicant in the form dated 17 December 2001 (the date of the transfer letter sent to the respondent) filed with the Inland Revenue Department.  It gave particulars of the respondent’s leaving, declaring that this was occurring “on termination of Hong Kong employment” and that it was “very unlikely” that she would return.

The construction argument

16.  Section 15(1)(a) stipulates that “the employer shall not terminate her continuous contract of employment otherwise than in accordance with section 9 during the [relevant] period”.  There is no ambiguity.  The duty is placed on the employer who is the other party to the contract of employment with the pregnant employee.  It is that particular contract which must not be terminated in contravention of the section.  If it is, then liabilities under s 15(2) arise.  Any obligations that may or may not be owed by the respondent to CMH or to any of the mainland authorities under mainland law are not relevant to the Hong Kong employer’s obligations or the employee’s rights under s 15.  

17.  The object of the maternity protection provisions is limited.  They confer on the pregnant employee the right to remain in employment and, subject to certain conditions, to receive the prescribed payments during the period of protection.  There is no basis for cutting down this limited protection by pointing to an offer of alternative employment under a new contract with some other entity, albeit an entity which is a member of the same group of companies. 

18.  In relation to maternity protection, there is no equivalent to s 31C(3) of the Ordinance which, in some cases, excludes severance payments where an employee has unreasonably refused an offer of suitable alternative employment.  It is instructive to consider the terms of that provision: 

“	An employee shall not be entitled to a severance payment by reason of dismissal if, not less than 7 days before the relevant date, the employer has made to him an offer in writing to renew his contract of employment, or to re-engage him under a new contract, so that in accordance with the particulars specified in the offer the provisions of the contract as renewed, or of the new contract, as the case may be, as to the capacity and place in which he would be employed, and as to the other terms and conditions of his employment, would differ (wholly or in part) from the corresponding provisions of the contract as in force immediately before his dismissal, but-
	(a)	the offer constitutes an offer of suitable employment in relation to the employee;
	(b)	the offer constitutes an offer of employment no less favourable to the employee than hitherto; and
	(c)	the renewal or re-engagement would take effect on or before the relevant date,  and the employee has unreasonably refused that offer.”

19.  If it had been the legislative intent to exclude maternity protection where alternative employment was offered, one would expect issues such as those covered by s 31C(3) to be addressed, particularly as to ascertainment of what the provisions of the new contract would be, the capacity and place in which the employee would be employed, the extent to which the new terms would differ from the old, whether the new job would be suitable employment in relation to the employee, whether the terms offered are no less favourable to the employee than hitherto and whether it is relevant to ask if refusal of the offer is unreasonable.  Plainly, in the severance pay context, for an employer in Hong Kong to avoid liability on the basis of having offered the dismissed employee a job, it would still have to satisfy the prescribed statutory conditions even if the alternative employment offered is with another company in the same group. 

20.  It is not reasonably arguable that by some purported notion of purposive construction, the court should exclude the statutory benefits so unambiguously conferred, simply because there is an offer of employment in a group company.  On the present facts, there was no evidence at all of the terms of employment offered in Shekou.  In her statement submitted to the Tribunal, the respondent had indicated concern that her salary would be reduced to one-third of what she was earning in Hong Kong, but the terms of the Shekou employment were simply never explored.

The termination point

21.  Turning to the termination point, if the order for transfer was not a termination and s 15(1)(a) was not engaged then it would be quite correct to say that the order to move to Shekou was a lawful and reasonable order, particularly in the light of the Tribunal’s finding that it had expressly been agreed that the applicant could give such an instruction.  It would then follow that disobedience of that order could justify a s 9 dismissal.  However, these propositions all depend on the premise that there was no termination and that s 15(1)(a) was not engaged.  It begs the central issue in the case.  If it was a termination and the section engaged, such an order would obviously not be lawful and the applicant would be liable under s 15(2) (as well as potentially under s 15(4)).  The respondent’s subsequent failure to report for work at Shekou could not thereafter constitute disobedience of a lawful and reasonable order and no dismissal under s 9 could be justified. 

22.  In discussing the construction point above, we have held that, at least prima facie, the transfer order was a termination and s 15(1)(a) was engaged.  Unless the applicant can displace that conclusion, the termination point comes to nothing.  Mr Hoo seeks to advance an argument for such displacement.  But it is a point not raised either before the magistrate or the judge at first instance.  A question obviously arises as to whether it is open to the applicant to raise it now as a possible basis for leave to appeal. 

23.  The new argument relies on s 17I of the Immigration Ordinance which provides that a person “who is the employer of an employee who is not lawfully employable commits an offence” punishable by a fine of $350,000 and imprisonment for 3 years.  Section 17G(2) states that a person is “lawfully employable for the purposes of the Ordinance” only if he or she falls within one of the specified categories, including a “holder of an identity card and who has not breached any condition of stay (if any) imposed on him under this Ordinance”. 

24.  The respondent’s PRC passport contained a mainland exit endorsement permitting her to be absent from the mainland up to 14 April 2002.  The Immigration Department adopted the same date when limiting her permission to remain in Hong Kong.  As the respondent’s expected date of confinement was 23 April 2002, Mr Hoo argued that compliance by the applicant with s 15(1)(a) of the Ordinance meant that it would have to continue employing the respondent beyond the date of her permitted period of stay in Hong Kong, during which the respondent would not be “a person lawfully employable”, and therefore placing the applicant in jeopardy of prosecution under s 17I(1) of the Immigration Ordinance.

25.  It was argued that the court ought therefore to hold that the order for her transfer was a lawful and reasonable order since it was made with a view to complying with s 17I.  Although he disavowed a submission that had been made in writing that the court should “disapply” s 15(1)(a) in the light of s 17I on the basis that Art 42 of the Basic Law required compliance with the laws of Hong Kong, his argument can only make sense if the court were to hold that the s 15(1)(a) obligation should be displaced to give preference to the application of s 17I.

26.  This is an argument with many premises and facets that have never been explored in the Tribunal or the courts below either on the facts or as a matter of law.  Mr Hoo invited us, for instance, to assume that there could be no extension of the exit endorsement by the mainland or Hong Kong but this cannot be assumed.  Whether and in what circumstances an extension to accommodate a pregnancy, particularly in the light of the alleged conflict of statutory duties, was not explored in the Tribunal and is a matter on which the respondent may well have wished to adduce evidence if it had properly been raised.  Section 35(2)(ii) of the Labour Tribunal Ordinance, Cap 25, prohibits the reception of new evidence by courts on appeal.  And as we held in Flywin Co Ltd v Strong & Associates Ltd (2002) 5 HKCFAR 356, a decision repeatedly applied:

“......where a party has omitted to take a point at the trial and then seeks to raise that point on appeal, the position is as follows. He will be barred from doing so unless there is no reasonable possibility that the state of the evidence relevant to the point would have been materially more favourable to the other side if the point had been taken at the trial.” (at 369)

27.  As a matter of law, the existence, if any, of the alleged conflict of duties under the two Ordinances has never been argued and is a matter on which the Court would have no assistance from judgments of the intermediate appeal courts.  It is by no means clear that an employer who, in compliance with his statutory duty under s 15(1)(a), continues to employ an employee beyond the date of her limit of stay could be held liable under s 17I in the light of the statutory authority (and indeed the imposition of a statutory duty) to continue such employment emanating from the former provision.  This is not an issue which arises now for decision but illustrates why we are not prepared to permit the termination point to be raised for the first time in the Court.

28.  Accordingly, the application stands dismissed with costs.