CHEN RONGBIN AND ANOTHER v. HENG XIN CHINA HOLDINGS LTD

HCLA 12/2019, HCLA 13/2019 and
HCLA 14/2019 (Heard together)

[2020] HKCFI 2744

HCLA 12/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 12 OF 2019

(On appeal from LBTC 2150/2018)

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BETWEEN

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AND

HCLA 13/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 13 OF 2019

(On appeal from LBTC 2190/2018)

_________________________

BETWEEN

_________________________

AND

HCLA 14/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 14 OF 2019

(On appeal from LBTC 2190/2018)

_________________________

BETWEEN

_________________________

_________________________

D E C I S I O N

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Applications

1.  Before the court are the applications by:

(1) Heng Xin China Holdings Limited (“Holdings”), the defendant in Labour Tribunal Claim No 2150/2018 commenced by its former employees, Mr Chen Rongbin (“Mr Chen”) and Mr Cheung Chun Yin Alexander (“Mr Cheung”), for leave to appeal against the decision made by Mr Jeremy Law, Deputy Presiding Officer (“Presiding Officer”), on 26 July 2019, refusing to review his earlier decision delivered orally on 3 June 2019 with written Reasons for Decision handed down on 9 October 2019 (“2150 Decision”), by which the Presiding Officer ordered Holdings to pay Mr Chen and Mr Cheung various sums totalling HK$495,205.47 and HK$127,328.76 respectively[1] (“2150 Order”) for the wrongful dismissal of Mr Chen and Mr Cheung on 20 April 2018 and 25 April 2018 respectively; and

(2) Heng Xin Management Limited (“Management”) and Holdings, the 1^st and 2^nd defendants respectively in Labour Tribunal Claim No 2190/2018 commenced by their former employee, Mr Li Chun Wui (“Mr Li”), for leave to appeal against the decision made by the Presiding Officer also on 26 July 2019, refusing to review his earlier decision delivered orally on 3 June 2019 with written Reasons for Decision handed down on 9 October 2019 (“2190 Decision”), by which the Presiding Officer ordered Management and Holdings to jointly and severally pay Mr Li various sums totalling HK$99,114.64[2] (“2190 Order”) for the wrongful dismissal of Mr Li on 25 April 2018.

Background

2.  The following facts were either found by the Presiding Officer in the 2150 Decision or the 2190 Decision or were not disputed or put in dispute by the parties. 

3.  At all material times, Holdings was a company listed on the GEM Board of the Stock Exchange of Hong Kong and Management was a wholly owned subsidiary of Holdings.

4.  Mr Chen was in Holdings’ employ as its Executive Director, Vice Chairman and Chief Executive Officer pursuant to an undated letter of employment (“Chen’s Contract”) from 21 July 2016 until 20 April 2018 when he was summarily dismissed by Holdings.

5.  Mr Cheung was in Holdings’ employ as its Chief Risk Officer pursuant to a letter of employment dated 1 June 2017 (“Cheung’s Contract”) from 1 June 2017 until 25 April 2018 when he was summarily dismissed by Holdings.  Cheung’s Contract was entered into by Mr Cheung and Mr Chen on behalf of Holdings.  Prior to his employment with Holdings, Cheung had entered into an employment agreement in or around March 2017 with JTI Securities Limited (“JTI”), another wholly owned subsidiary of Holdings, to serve as its General Staff from 1 April 2017. Mr Cheung continued to work for, and receive salary from, JTI after the commencement of his employment with Holdings.

6.  Mr Li was in Holdings’ and/or Management’s employ as a driver pursuant to an undated letter of employment issued under the letterhead of Management (“Li’s Contract”) from 1 August 2016 until 25 April 2018 when he was summarily dismissed by Holdings / Management. Li’s Contract was entered into by Mr Li and Mr Chen on behalf of Holdings and/or Management.

7.  Insofar as it is material, clause 7 of Chen’s Contract, clause 3 of Cheung’s Contract and clause 9 of Li’s Contract all provided under the heading “Termination” as follows:

“Notwithstanding anything hereinbefore contained, your service hereunder may be terminated by the Company without notice or payment in lieu of notice:-

(i) if you wilfully disobey a lawful and reasonable order of the Company or are guilty of any gross default or misconduct in connection with or affecting the business of the Company; or

(ii) in the event of any breach or non-observance by you of any of the stipulations herein contained which is detrimental to the Company’s interest…”

8.  By shareholders’ resolution passed at Holdings’ Extraordinary General Meeting on 20 April 2018, Mr Chen was dismissed with immediate effect.  A notice of termination was purportedly served on Mr Chen by email on 25 April 2018.  That email, however, did not contain any attachment.

9.  On 25 April 2018, Holdings also served notices of termination with immediate effect on Mr Cheung and Mr Li.  No reason was given for the termination in either of the notices.

10.  In the proceedings below, the following reasons were put forward by Holdings and Management for the terminations:

(1) With regards to Mr Chen, it was Holdings’ case that:

(a) Mr Chen entered, on behalf of Holdings, into a tenancy agreement for his private use without the approval of Holdings’ board of directors;

(b) Mr Chen entered into Li’s Contract to hire Li as driver for his private use without the approval of Holdings;

(c) Mr Chen entered into Cheung’s Contract to hire Cheung as a “shadow employee” (“影子員工”) without the approval of Holdings;

(d) Mr Chen did not devote sufficient time in the discharge of his duty;

(e) Mr Chen claimed for reimbursement of expenses through Holdings’ solicitors; and

(f) Mr Chen failed to carry out a reasonable order given by Holdings’ board of directors, the failure of which caused serious loss to Holdings and put Holdings in crisis[3].

(2) With regards to Mr Cheung, it was Holdings’ case that:

(a) Notwithstanding a previous order by Holdings’ then Chairman, Mr Lim Tong Yong (“Mr Lim”), that no director or employee of Holdings shall be employed by, or receive any salary from, any of Holdings’ subsidiaries, Mr Cheung was concurrently employed by both Holdings and JTI; and

(b) Mr Cheung failed to observe the working hours stipulated in Cheung’s Contract[4].

(3) With regards to Mr Li, it was Management’s and Holdings’ case that:

(a) There was no valid employment contract between Mr Li on the one hand and Management and/or Holdings on the other.  Mr Chen, not being a director of Management, procured Li’s Contract without the knowledge or approval of Mr Gao Yang (“Mr Gao”), who was the director of both Management and Holdings.  Holdings also denied having received any service by Mr Li;

(b) After Mr Chen was dismissed, Mr Li failed to observe the working hours stipulated in Li’s Contract[5].

Broad issues and Tribunal’s conclusions

11.  The issues arising for the determination by the Labour Tribunal (“Tribunal”) were:

(1) Whether there was any employment relationship between Mr Li on the one hand and each of Management and Holdings on the other hand[6];

(2) Whether Mr Chen, Mr Cheung and/or Mr Li committed any serious misconduct during their respective employment such that Management and/or Holdings, as the case may be, was entitled to terminate Chen’s Contract on 20 April 2018 and Cheung’s Contract and Li’s Contract on 25 April 2018 without notice or payment in lieu pursuant to s 9 of the Employment Ordinance (Cap 57) (“LTO”)[7].

12.  The Tribunal answered question (1) above in the positive with respect to both Management and Holdings[8] and question (2) above in the negative with respect to all of Mr Chen, Mr Cheung and Mr Li[9].

Proposed grounds for appeal

13.  By the Application for Leave to Appeal on Point of Law (Form 14) dated 6 August 2019 (“HCLA 12 Application”), Holdings contended that the 2150 Order is erroneous in point of law in that:

(1) The Presiding Officer failed to consider the governance requirements of a GEM Board listed company in relation to the authority and duties of the Remuneration Committee (“Remuneration Committee”) that had been set up by Holdings in accordance to Articles 5.34 and 5.35 of the GEM Listing Rules (“2150 Ground 1”).

(2) The Presiding Officer failed to distinguish between the roles of the shareholders and the board of directors of a company (“2150 Ground 2”).

(3) The Presiding Officer failed to consider whether Mr Chen and Mr Cheung had, in relation to their employment, (a) wilfully disobeyed a lawful and reasonable order of Holdings, (b) committed a misconduct by failing to duly and faithfully discharge their duties; and/or (c) habitually neglected their duties, all of which would have entitled Holdings to summarily terminate the employment of Mr Chen and Mr Cheung without notice at common law, or alternatively pursuant to Chen’s Contract and Cheung’s Contract (“2150 Ground 3”).

(4) The Presiding Officer failed to consider Holdings’ entitlement to summary dismissal of Mr Chen and Mr Cheung (“2150 Ground 4”).

(5) The Presiding Officer failed to investigate and/or give reasons as to why Holdings was not entitled to summarily dismiss Mr Chen and Mr Cheung in such circumstances (“2150 Ground 5”).

(6) The Presiding Officer failed to correctly interpret clause 2 of Chen’s Contract as to the requirement of “notice in writing”, and in failing to take into account that Mr Chen was notified in writing as early as in February 2018 (“2150 Ground 6”).

(7) The Presiding Officer failed to consider that Mr Chen’s remuneration as a director of Holdings should have been determined by the Remuneration Committee and further approved by the board of directors.  The Presiding Officer failed to consider if the remuneration of Mr Chen was invalid in the absence of any validly determined and approved remuneration through the process required by the GEM Listing Rules (“2150 Ground 7”).

(8) The Presiding Officer failed to consider that Mr Cheung’s remuneration as a senior managerial staff of Holdings should have been approved by the Remuneration Committee and reported to the board of directors.  The Presiding Officer failed to consider the validity of Mr Cheung’s Contract in the absence of any validly determined remuneration through the process required by the GEM Listing Rules (“2150 Ground 8”).

14.  For the sake of completeness, I should also mention that Holdings’ written submissions in support of the HCLA 12 Application sought to raise the following additional proposed grounds for appeal:

(1) The Presiding Officer failed to investigate the true nature of Chen’s Contract (“2150 Purported Ground 9”).

(2) The Presiding Officer failed to investigate the various capacities of Mr Chen and distinguish between his duties in different capacities (“2150 Purported Ground 10”).

(3) The Presiding Officer failed to consider the gravity of the allegations in the defence (“2150 Purported Ground 11”).

(4) There was a misdirection of law regarding complexity of the case and the Presiding Officer failed to decline jurisdiction and transfer the case to either the District Court or the High Court (“2150 Purported Ground 12”).

15.  It is provided in s 32(2) of the LTO that an application for leave to appeal shall, inter alia, be in the prescribed form, which shall set out the grounds of appeal and the reasons in support of such grounds.  2150 Purported Grounds 9 to 12 are, however, not included in the HCLA 12 Application.  They are hence, strictly speaking, not entitled to be considered for not having been raised according to the requirement of s 32(2). I shall address them, but very briefly, only for the sake of completeness.

16.  By the Application for Leave to Appeal on Point of Law (Form 14) dated 6 August 2019 (“HCLA 13 and 14 Applications”), Management and Holdings contended that the 2190 Order is erroneous in point of law in that:

(1) The Presiding Officer failed to take into account that Management and Holdings are separate legal entities and that Mr Chen was not a director of Management (“2190 Ground 1”).

(2) The Presiding Officer erred in accepting that Li’s Contract is valid.  The Presiding Officer failed to consider Li’s Contract void for want of authority (“2190 Ground 2”).

(3) The Presiding Officer failed to consider whether Mr Li had, in relation to his employment, (a) wilfully disobeyed a lawful and reasonable order of Management and/or Holdings, (b) committed a misconduct by failing to duly and faithfully discharge of his duties; and/or (c) habitually neglected his duties, all of which would have entitled Management and/or Holdings to summarily terminate the employment of Mr Li without notice at common law (“2190 Ground 3”).

(4) The Presiding Officer failed to consider Management’s and/or Holdings’ entitlement to summary dismissal of Mr Li (“2190 Ground 4”).

17.  At the hearing of the HCLA 13 and 14 Applications, Management and Holdings abandoned 2190 Grounds 3 and 4.

Requirements for leave to appeal

18.  The LTO stipulates, by s 32(1), that the Court of First Instance may grant leave to appeal from an award, order or determination by the Tribunal if any party is dissatisfied with such an award, order or determination on the grounds that it is erroneous in point of law or outside the jurisdiction of the Tribunal.  It is not suggested that either of the 2150 Order or the 2190 Order is outside the jurisdiction of the Tribunal.  The question raised by these applications for leave to appeal is whether the Presiding Officer had erred in law in making the 2150 Order and the 2190 Order.

19.  It is trite that in seeking leave to appeal, the applicant has to show that the intended appeal on the ground(s) identified is arguable.  See, for instance, Chan Kwok Hung v Hotel Panorama Co Ltd, HCLA 30/2009, unreported, 19 November 2009, per Chu J (as she then was) at [13].

20.  The appellate approach in an appeal on law turning on the inference to be drawn from the primary facts established is set out in Kwong Mile Services Ltd v Commissioner of Inland Revenue (2004) 7 HKCFAR 275, per Bokhary PJ at [37] as follows:

(1) In an appeal on law only, the appellate court must bear in mind what scope the circumstances provide for reasonable minds to differ as to the conclusion to be drawn from the primary facts found. 

(2) If the fact-finding tribunal’s conclusion is a reasonable one, the appellate court cannot disturb that conclusion even if its own preference is for a contrary conclusion.

(3) But if the appellate court regards the contrary conclusion as the true and only reasonable one, the appellate court is duty-bound to substitute the contrary conclusion for the one reached by the fact-finding tribunal.

21.  See also 馮皓嵐訴威達製品有限公司, HCLA 6/2011, unreported, 14 October 2011, per Deputy High Court Judge Au-Yeung (as she then was) at [38]-[40].

22.  As observed by Bokhary PJ in Kwong Mile Services Ltd also at [37], it is understandable that those attacking the fact-finding tribunal’s conclusion would stress the third proposition, while those defending that conclusion stress the first two.

23.  The Tribunal’s conclusion is contradicted by the true and only reasonable conclusion in the following circumstances:

(1) It is based on a finding of fact or inference from the facts which is perverse or irrational.

(2) There was no evidence to support it.

(3) It was made by reference to irrelevant factors or without regard to relevant factors.

See again Kwong Mile Services Ltd at [32]-[34].

HCLA 12 Application

2150 Grounds 1, 2, 7 & 8 - validity of Mr Chen and Mr Cheung’s respective remuneration packages

24.  Holdings contended that the Presiding Officer erred in ruling that the failure to obtain approval from the board of directors and the Remuneration Committee established in accordance with the GEM Listing Rules did not affect the validity of the remuneration packages of Mr Chen and Mr Cheung.  In Mr Chen’s case, it was further complained that the Presiding Officer failed to distinguish between the roles and authorities of the shareholders and the board of directors.  In particular, the Presiding Officers erred in holding that the agreement between Mr Chen and a major shareholder on Mr Chen’s remuneration package could override the function of the Remuneration Committee.

25.  First, Mr Chen’s remuneration package was not an agreement merely between himself and a major shareholder. In his findings, the Presiding Officer referred to Mr Chen’s case that on or before 21 July 2016, Mr Chen met with Mr Lim, the then Chairman of Holdings, and they agreed on Mr Chen’s remuneration package and signed Chen’s Contract[10].

26.  The Presiding Officer then went on to make the factual finding that there was in fact agreement between Mr Chen and Holdings (as opposed to a major shareholder of Holdings) on Mr Chen’s remuneration package:

“陳先生入職時所要求的薪酬，住房及司機等待遇都是被告公司於聘用陳先生時所接受的。被告公司不能以該待遇沒有經薪酬委員會批准這理由來否認雙方就服務報酬上的共識。被告公司在聘用陳先生的兩年期間也沒有向陳先生提出他的待遇上的問題，也爲陳先生支付了兩年的房租和司機的薪資。按照陳先生入職時已於天璽一單位居住，而陳先生的前僱主亦是在其聘用陳先生期間爲陳先生支付租金及司機的費用，陳先生要求被告公司給予他相同的待遇並無不合理之處，也比較可信。此外，根據被告公司於2018年5月9日向陳先生發出的電郵，公司按程序收回陳先生任職時所提供之住所，並要求他盡快交回物業並確保物業在簽訂租約時之維修狀態下交吉交回，並要把由2018年4月21日起之租金歸還給被告公司，因此，被告公司當時與陳先生的通信裡是承認有爲陳先生提供住所至2018年4月20日的。”[11]

27.  Holdings did not put forward any argument to suggest that the Presiding Officer committed any error in reaching the above factual finding.

28.  Second, there is nothing in the Terms of Reference of the Remuneration Committee to suggest that the remuneration package of each individual director or employee in senior management was subject to the approval of the Remuneration Committee.  Instead, its mandate was to, inter alia, submit proposals to the board of directors for the policy on remuneration of all directors and employees in senior management[12]. There is, therefore, no basis to suggest that the remuneration package of either Mr Chen or Mr Cheung was invalid due to the absence of specific approval by the Remuneration Committee.

29.  Third, and in any event, it is trite that persons contracting with a company and dealing in good faith have always been entitled to assume that acts within the company’s constitution and powers have been properly and duly performed, and were not bound to enquire whether acts of internal management have been regular.  This is known as the “indoor management rule”.  See Royal British Bank v Turquand 119 ER 886; Grand Trade Development Ltd v Bonance International Ltd [2001] 2 HKLRD 759, per Le Pichon JA at [31].   There is no reason why the “indoor management rule” should not apply in Mr Chen’s and Mr Cheung’s case.  Holdings did not put forward any argument to the contrary.  Accordingly, it is not open to Holdings to now challenge (a) the remuneration package of Mr Chen (which was agreed by Mr Chen and Holdings’ then Chairman, Mr Lim) and (b) the remuneration package of Mr Cheung (which was agreed by Mr Cheung and Holdings’ then Executive Director, Vice Chairman and Chief Executive Officer, Mr Chen) on the basis of any irregularities in the internal management of Holdings.

30.  2150 Grounds 1, 2, 7 and 8 thus have no merit.

2150 Grounds 3-5 - Failure to investigate?

31.  Holdings argued that the Presiding Officer failed to investigate into the following matters:

(1) whether Mr Chen wilfully disobeyed a lawful and reasonable order of Holdings by refusing to carry out the project approved by the board of directors;

(2) whether Mr Chen abused his power as Chief Executive Officer of Holdings in procuring fringe benefits for himself;

(3) whether Mr Chen habitually neglected his duties as the Chief Executive Officer of Holdings;

(4) why Mr Chen had to ask Holdings’ solicitors to procure air-tickets for him;

(5) whether Mr Cheung failed to duly and faithfully discharge his duties and/or habitually neglected his duties in failing to attend Holdings’ office.

32.  Contrary to Holdings’ argument, the Presiding Officer has already sufficiently dealt with these matters in the 2150 Decision.

33.  First, with respect to Holdings’ allegation that Mr Chen failed to carry out a reasonable order resolved by the board of directors, the Presiding Officer has already conducted a detailed analysis of the evidence before him in the 2150 Decision at [11]-[15] and concluded at [16] that there was nothing unreasonable in Mr Chen’s conduct in the circumstances that Holdings was in at the material time:

“本席認爲，一位上市公司的行政總裁及董事，有責任爲公司的資產把關。若他就公司的部分投資項目有疑問，他應向董事會反映，而不是盲目遵從其他董事的意見。本席認爲，陳先生於2018年1月23日向董事會發表他的疑問是盡了他作爲董事的責任。陳先生的問題，他的表達方式，及問題的内容並無不合理之處。考慮到公司當時的情況，及公司的資產曾被別人挪用的背景，陳先生額外審慎處理投資項目的撥款事宜，以及對相關交易及項目盡行調查並無不合理之處。考慮到被告公司代表所提供的採購合同並不是陳先生當時要求的採購合同，本席認爲，陳先生當時就相關交易提出疑問並不算阻礙公司投資項目，更不能稱之爲令公司蒙受損失的行爲。考慮到被告公司當時的情況，被告公司以陳先生不執行董事會決議爲由罷免陳先生是不合理。”[13]

34.  There is no ground for Holdings’ complaint that the Presiding Officer failed to investigate in this regard.

35.  Second, the issue of Mr Chen’s remuneration package has already been dealt with in paragraph 26 above.  In particular, it is the Presiding Officer’s factual finding that Mr Chen and Holdings did validly agree on Mr Chen’s remuneration package[14].  Further, as highlighted by the Presiding Officer, Holdings did in fact continue to pay for the rent of Mr Chen’s residence and the driver’s salary without making any complaint with regards to Mr Chen’s remuneration package during the two years he was employed by Holdings[15].

36.  Third, in relation to the complaint that Mr Chen habitually neglected his duties as the Chief Executive Officer of Holdings, this again has been sufficiently addressed in the 2150 Decision at [17].  In particular, the Presiding Officer considered the evidence of Mr Chen’s business trips on behalf of Holdings and Mr Chen’s attendance at all of Holdings’ general meetings and board meetings, and concluded that Holdings failed to prove that Mr Chen did not devote sufficient time in the discharge of his duties.

37.  Holdings complained that the Presiding Officer failed to inquire into why Mr Chen had to spend most of his time in an internal investigation by Holdings when he was not a member of the relevant special investigation committee.  However, Holdings did not explain how Mr Chen’s involvement in the inquiry would in any way affect the Presiding Officer’s finding that Holdings failed to prove that Mr Chen did not devote sufficient time in the discharge of his duties. In any event, it is not suggested that Mr Chen committed any misconduct for being concerned with the internal investigation.

38.  Holdings further argued that the Presiding Officer failed to investigate why there was no login record on Mr Chen’s desktop computer in Holdings’ office.  It is unclear what Holdings hoped to achieve from such investigation.  There is nothing in Chen’s Contract that required Chen to regularly, or at all, log into his desktop computer at Holdings’ office[16].

39.  Fourth, with regards to Holdings’ complaint that the Presiding Officer failed to inquire into why Mr Chen had to ask Holdings’ solicitors to procure air-tickets for him, the Presiding Officer had before him paragraph 4 of Mr Chen’s Supplemental Witness Statement where Mr Chen explained that:

“我多次隨同公司聘請的律師去山西太原追查公司資金被挪用案件，去新疆哈密處理公司合作專案的歷史問題，去福建進行鋰電池合作專案的盡職調查，律師統一訂機票，訂酒店，再向公司結算，不知道有何不妥，不跟一些董事一起訂坐頭等艙還有錯嗎？”

40.  While Holdings noted that this was different from the usual practice for claiming reimbursement[17], it did not put forward any argument as to how this constituted serious misconduct on the part of Mr Chen to justify his summary dismissal. Nor did Holdings explain the purpose of the investigation that the Presiding Officer is said to have failed to carry out.

41.  Fifth, contrary to Holdings’ contention, the issues of Mr Cheung’s employment by JTI and Mr Cheung’s devotion of time in discharge of his duties were adequately analysed and determined by the Presiding Officer.  In particular, the Presiding Officer made the following findings in the 2150 Decision at [18]:

“…本席裁斷，張先生的僱傭合約並沒有列明張先生不能在被告公司的子公司任職或受薪，而事實上，張先生當時的月薪已較市場上的首席風險管理官爲低，所以本席裁斷，張先生他當時是被被告公司安排在本公司和子公司兩間公司任職和受薪，而不是他主動要求的。此外，張先生的僱傭合約列明，張先生須於被告公司指定於香港或中國的地點工作，但該合約並沒有指明張先生必須於被告公司的辦公室内工作，所以被告公司批評張先生一個月沒有出現於公司超過五日的指控並不成立。再者，文件夾中有不少即時文件，舉例C2-18，證明張先生當時有履行其職務，包括處理公司和律師行，公司秘書及聯交所的英文通信文件，撰寫公司第三季業績報告等（C2-25），其中也有電郵證明張先生曽把他草擬的回應聯交所提問信寄給陳先生及高先生過目，所以綜觀案件中的文件，張先生任職被告公司期間是有履行其職務的。”

42.  2150 Grounds 3 to 5 are therefore unarguable.

2150 Ground 6 - Written notice of termination of employment

43.  Holdings argues that its two motions dated 5 February and 15 March 2018 respectively for the removal of Mr Chen from Holdings constituted written notices of termination of Mr Chen’s employment and the Presiding Officer failed to make findings to that effect.

44.  Holdings’ argument in this regard is contradicted by the evidence and further makes no sense.

45.  First, the two motions cannot be construed as written notices of termination as they were still subject to voting by Holdings’ shareholders at the Extraordinary General Meeting, the outcome of which was not predictable at the time when the two motions were issued.  It is also worth highlighting that in the two announcements by Holdings concerning these two motions, the following caveats as to what was to be done with the two motions were included, which further demonstrated that they could not have been construed as written notices of termination of the relevant employments:

“本公司正在就書面提議的合法性及程序規格尋求意見。待核實及於獲得所需意見後，董事會將會處理書面提議内所列明之事項，且本公司將於有需要時就書面提議，及（如適用）將予召開藉以考慮及酌情通過該等決議案之提議召開之股東特別大會而作出進一步公告”

“本公司正在就合適行動尋求意見。於就書面提議獲得所需意見後，董事會將會處理書面提議内所列明之事項，及（如適用）建議是否召開提議召開之股東特別大會及刊發進一步公告”

46.  Second, the position now put forward by Holdings is contradicted by Holdings’ own contemporaneous documents in that it was expressly stated in Holdings’ email to Mr Chen dated 9 May 2018 that the notice of termination of Mr Chen’s employment was issued on 25 April 2018, rather than on either 5 February or 15 March 2018:

“由于根据二零一八年四月二十日举行之股东特别大会之投票结果，你已被罢免为本公司副主席，行政总裁，执行董事及薪酬委员会成员，并实时生效。并且，本公司已于二零一八年四月二十五日经电邮向您发出通知其职务已撤除。”

47.  2150 Ground 6 thus has no merit.

2150 Purported Grounds 9 and 10 - Nature of Chen’s Contract and Mr Chen’s duties

48.  In its written submissions, Holdings complained that the Presiding Officer failed to investigate into (a) the true nature of Chen’s Contract and (b) the principal differences between a breach of fiduciary duty in the capacity as a director and in the capacity as an employee.  Neither of these grounds is in the HCLA 12 Application.

49.  Holdings did not explain or elaborate on the relevance or significance of the two alleged failures to the validity of the 2150 Order.  Mr Chen’s claim is a straightforward enforcement of his employment contract with Holdings.  In particular, Mr Chen’s entitlement to payment in lieu of notice in the event of termination by Holdings is expressly provided for in clause 2 of Chen’s Contract and does not depend on the nature of his employment or duties:

“Your service with the Company shall be for an initial term of [three] year renewable automatically for successive terms of [one] year each commencing from the day next after the expiry of the then current term of appointment, subject to termination by either party at any time by serving prior notice to the other party no less than three (3) calendar months’ notice in writing or payment in lieu of notice or as provided below…”

50.  2150 Purported Grounds 9 and 10 are therefore unarguable.

2150 Purported Grounds 11 and 12 - Failure to decline jurisdiction?

51.  Pursuant to s 7 of and schedule (1) to the LTO, the Tribunal shall have exclusive jurisdiction over a claim for a sum of money, whether liquidated or unliquidated, which arises from, inter alia, the breach of a term of a contract of employment.

52.  Under s 10 of the LTO, the Tribunal may, at any stage of proceedings, if it is of the opinion that for any reason the claim should not be heard and determined by it, decline jurisdiction.  The Tribunal may, when it declines jurisdiction, transfer the claim to the Court of First Instances, the District Court or the Small Claims Tribunal in such manner as may be prescribed.

53.  Holdings did not dispute that the Tribunal has jurisdiction over Mr Chen’s claim under Chen’s Contract.  In its written submissions, Holdings argued that the Presiding Officer failed to consider the gravity of the allegations raised in Holdings’ defence[18].

54.  In the proceedings below, Holdings made an application to the Tribunal for the transfer of Mr Chen’s claim to the Court of First Instance on the ground that the case involved a substantial counterclaim by Holdings against Mr Chen for breach of fiduciary duty and/or common law and statutory duty of care in his capacity as the Executive Director and Chief Executive Officer of Holdings[19].  The application was refused by the Tribunal.

55.  It is said that the Presiding Officer misdirected himself that the case was not complicated[20].  Again, these grounds are not in the HCLA 12 Application.

56.  Holdings did not explain or elaborate on how the Presiding Officer failed to properly exercise his discretion in refusing to decline jurisdiction.  While it is asserted that the case was complicated, Holdings did not develop on how the matter was therefor not suitable to be disposed of by the Tribunal.  The central issue in the claim concerning Mr Chen, namely whether Mr Chen committed any serious misconduct, was sufficiently dealt with by the Presiding Officer in the 2150 Decision for the reasons already given above. 

57.  In the circumstances, there is no ground to challenge the Presiding Officer’s exercise of his discretion not to decline jurisdiction.

58.  2150 Purported Grounds 11 and 12 thus have no merit.

HCLA 13 and 14 Applications

2190 Ground 1 - Joint and several liability of Management and Holdings

59.  Contrary to Management and Holdings’ contention[21], the Presiding Officer’s finding that Management and Holdings are jointly and severally liable did not depend upon whether or not the two companies are separate legal entities.  Rather, it was based on the Presiding Officer’s finding that Mr Li was jointly employed by both Management and Holdings[22].

60.  As a matter of law, joint employment was recognised in Wong Kit Yee v Capital Globe Ltd, CACV 63//2016, unreported, 15 March 2017, per Lam VP at [4].  In particular, it was held that it is possible that, on the special facts of a particular case, the arrangement between the companies involved and the employee in question is such that, in light of the other surrounding circumstances, the court can properly come to the conclusion that there is in law a joint employment: both the company which enters into a written contract of employment and the company which actually uses the services of the employee are employers.  However, the mere fact that services were provided to an associate company within a group is, without other cogent indicia of joint employment, not sufficient to lead to such conclusion.

61.  See also Yung Wai Tak Abraham William v Natural Daily (NZ) Holdings Ltd [2020] HKCFI 2067, per Deputy High Court Judge To at [45]-[50].

62.  On the facts, the Presiding Officer found in the 2190 Decision at [15]-[16] that there was a joint employment of Mr Li by Management and Holdings for the following reasons:

“15. 本席判斷，申索人的書面僱傭合約的簽約方雖然是第一被告公司，而陳先生並沒有在第一被告公司擔任任何職位，但這並不能否定申索人和第一及第二被告公司的僱傭關係。事實上，申索人任職時所接送的乘客主要是陳先生以及第二被告公司的人員。在他任職期間，第一被告如常向申索人支薪，兩間被告公司均接受了申索人的服務。雖然支薪的是第一被告公司，但第二被告公司的人員向申索人發出解僱電郵，而不是第一被告公司向申索人發出該電郵。考慮到第一被告公司是第二被告公司的全資子公司，主要負責聘請集團行政人員，司機或處理相關雜務或行政工作，本席判斷第一及第二被告公司在有關的時分都是申索人的僱主，雙方存在僱傭關係。

16. 雖然第二被告公司的高先生及林主席較少使用申索人所駕駛的車輛，他們當時用的是另外一部車輛，但本席認爲，陳先生當時作爲第二被告公司的行政總裁，是有足夠的授權去聘請申索人作爲第二被告公司的司機。本席亦接受申索人的證供，指他任職期間絕大部分時間都是接載第二被告公司的人員或客人。這個過程維持了一年多的時間，高揚先生也多次代第一被告公司簽署了相關支票支薪給申索人，所以，本席認爲申索人和第一及第二被告公司都存在僱傭關係”[23]

63.  Management and Holdings did not put forward any argument to suggest that the Presiding Officer committed any error in making the above findings.

64.  2190 Ground 1 thus has no merit.

2190 Ground 2 - Validity of Li’s employment

65.  Management and Holdings contended that the Presiding Officer failed to investigate and consider that Mr Chen had no authority to sign any agreements on behalf of Management and thus erred in not considering the legality of Li’s Contract (presumably only insofar as Management was concerned)[24].

66.  This complaint is contradicted by Management’s and Holdings’ own evidence.  In this regard, Mr Gao expressly admitted Mr Li’s employment with Management and/or Holdings during cross-examination in the proceedings before the Tribunal:

“[Mr Gao:] 係，我而家同你講嘞，無論你 [i.e. Mr Li] 係恒芯管理有限公司 [i.e. Management] 聘請返嚟嘅員工,定係由恒芯中國控股有限公司 [i.e. Holdings] 聘請返嚟嘅員工，我都承認你係我哋公司嘅員工，但係都已經同法庭講得好清楚嘞，你係陳荣斌先生濫用職權咁樣去請返嚟嘅人嚟嘅。咁你要清楚嘅一點就係話，冇話你係一個非法嘅人，咁但係嘞，亦都係承認咗嘅一點就係由陳荣斌先生佢喺冇通知到恒芯管理有限公司嘅懂事，即係唯一懂事高先生嘅情況之下，就係將你招聘咗返嚟嘅。佢咁樣就係濫用咗佢嘅職權。”[25]

67.  In light of the Presiding Officer’s findings in the 2190 Decision at [15]-[16] as set out above, there is no reason why the “indoor management rule” should not apply in Mr Li’s case.  See again Royal British Bank v Turquand 119 ER 886; Grand Trade Development Ltd v Bonance International Ltd [2001] 2 HKLRD 759, per Le Pichon JA at [31].  Management and Holdings did not advance any argument against the application of the principle either.  That being the case, the irregularities, if any, of the internal management of Management and/or Holdings did not invalidate Li’s Contract.

68.  2190 Ground 2 is therefore unarguable.

Disposition

69.  In the premises, I dismiss Management’s and Holdings’ applications for leave to appeal under HCLA 12/2019, HCLA 13/2019 and HCLA 14/2019. 

70.  I make no order as to costs.