李德強 v. 大家樂集團有限公司

HCLA 44/2017

[2018] HKCFI 889

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 44 OF 2017

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO 3910 OF 2016)

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DECISION

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1.  This is the Defendant’s application for leave to appeal against the Order of Mr Daniel W S Chan, Deputy Presiding Officer of the Labour Tribunal, made on 19 December 2017 (“the Order”) confirming, upon review, the award made by him on 11 October 2017 ordering the Defendant to pay the Claimant the amount of HK$243,913.50 (“the Award”), being Item (C) in the Claimant’s Form of Claim in respect of what have been referred to as the “Restricted Shares”.

BASIC FACTS

2.  The facts relevant for the purpose of the present application can shortly be stated as follows.  The Claimant entered into a written contract of employment with the Defendant on 8 January 2007 (“the Employment Contract”), under which he was employed as a Senior Manager with a basic monthly salary and a monthly allowance calculated at a certain percentage of his basic salary.  The Employment Contract also provided that either party could terminate the employment with 2 months’ written notice or payment of 2 months’ basic salary in lieu of notice.  In 2012, the Claimant was promoted to the position of Assistant Director of the Defendant.

3.  In 2013, the Defendant’s board of directors resolved to establish a Share Award Scheme (“Scheme”) in respect of the ordinary shares of the Defendant, and approved the Rules Relating to Share Award Scheme (“Scheme Rules”), which were amended in November 2015.

4.  In the Scheme Rules, an “Eligible Person” is defined to include, inter alia, any individual being an existing director, employee or officer of the Company.  The following provisions of the Scheme Rules are relevant for the present purpose:-

“5.7(a) … in the event that the Selected Participant ceases to be an Eligible Person at any time prior to the Vesting Date by reason of … (ii) termination of the Selected Participant’s employment or early termination of the contractual engagement with the Group by reasons of misconduct or otherwise pursuant to law or employment or engagement contract … any outstanding Award not yet vested shall be treated according to Schedule 1 to the Scheme, unless the Board determines otherwise at its absolute discretion.

“5.9 For the avoidance of doubt:

(a) a Selected Participant shall only have a contingent interest in the Award which are referable to him subject to the vesting of such Award in accordance with paragraphs 5.6, 5.7 and 6.1;

(f) in the event a Selected Participant ceases to be an Eligible Person on the relevant Vesting Date and the Award in respect of the relevant Vesting Date shall lapse or be forfeited pursuant to the Scheme, such Award shall not vest on the relevant Vesting Date and the Selected Participant shall have no claims against the Company or the Trustee …

9  Any dispute arising in connection with the Scheme shall be referred to the decision of the Board who shall act as experts and not as arbitrators and whose decision shall be final and binding.

12.1  The Scheme shall not form part of any contract of employment between the Company or any Subsidiary and any Eligible Person, and the rights and obligations of any Eligible Person under the terms of his office or employment shall not be affected by his participation in the Scheme or any right which he may have to participate in it and the Scheme shall afford such Eligible Person no additional rights to compensation or damages in consequences of the termination of such office or employment for any reason.

12.8  Save as specifically provided herein, the Scheme shall not confer on any person any legal or equitable rights (other than those constituting and attaching to the Award Shares themselves) against the Group directly or indirectly or give rise to any cause of action at law or in equity against the Group.”

5.   In Schedule 1 to the Scheme, it is provided that, in the event mentioned in Scheme Rule 5.7(a)(ii), “All outstanding Award not yet vested shall be forfeited on the effective date of such Selected Participant ceasing to be an Eligible Person”.

6.  Pursuant to the Scheme, the Defendant granted to the Claimant a number of Restricted Shares in 2014, 2015 and 2016.

7.  On 12 September 2016, the Defendant dismissed the Claimant by paying him 3 months’ basic salary in lieu of notice (“the Dismissal”).

8.  On 3 November 2016, the Claimant commenced proceedings against the Defendant in the Labour Tribunal, LBTC 3910/2016, claiming, inter alia, a sum of HK$243,913.50 representing the value of the unvested Restricted Shares granted to him by the Defendant in 2014, 2015 and 2016.

9.  By the time of the trial, the only outstanding issue related to the aforesaid claim, which was upheld by the Deputy Presiding Officer.  As can be seen from his Reasons for Decision dated 10 April 2018 (“Reasons for Decision”), the Deputy Presiding Officer, found, inter alia, that:-

(1)  the Dismissal of the Claimant was unreasonable, unfair, without reasonable ground, and not honest or bona fide;

(2)  there was to be implied into the employment contract between the Defendant and the Claimant a term to the effect that the Defendant could not exercise the power of dismissal in order to avoid the Claimant being eligible to receive the benefit of the Restricted Shares under the Scheme (“Anti-Avoidance Implied Term”);

(3)  one of the principal or main reasons behind the Dismissal of the Claimant was to avoid the Claimant being eligible to receive the benefit of the Restricted Shares under the Scheme, that being the only reasonable inference to be drawn on the facts; and

(4)  the Claimant was entitled to recover the value of the unvested Restricted Shares, which was a contractual benefit, in the amount of HK$243,913.50.

10.  The Deputy Presiding Officer accordingly made the Award of HK$243,913.50 in favour of the Claimant against the Defendant, together with interest thereon and costs.

11.  The Defendant’s application for review of the Award was rejected by the Deputy Presiding Officer on 19 December 2017.

12.  By its Application for Leave to Appeal on Point of Law dated 29 December 2017 (“the Application), the Defendant applies for leave to appeal against the Order.  As stated in paragraph 19 of Ms Seto’s Skeleton Argument, the Defendant’s proposed grounds of appeal, as stated in the Application, are as follows:-

(1) The Order is outside the jurisdiction of the Labour Tribunal, in that the Claimant’s claim in respect of the Restricted Shares does not arise from the breach of any term of the Employment Contract (Ground 1).

(2) The Deputy Presiding Officer erred in finding that the Scheme formed part of the Employment Contract (Ground 2).

(3) The Deputy Presiding Officer erred in finding that the Employment Contract contained an implied term of anti-avoidance in relation to the discretionary share award under the Scheme (Ground 3).

(4) The Deputy Presiding Officer erred in finding a cause of action in respect of the Restricted Shares, which is contrary to Clauses 5.7, 5.9, 12.1 and 12.8 of the Scheme Rules (Ground 4).

(5) The Deputy Presiding Officer erred in finding that the expert determination clause in Clause 9 of the Scheme Rules is invalid and unenforceable (Ground 5).

(6) The Deputy Presiding Officer erred in making an award of the equivalent monetary value of the Restricted Shares at the time of the award, contrary to the nature of the share award granted by the Defendant to the Claimant under the Scheme (Ground 6).

(7) The Deputy Presiding Officer finding’s that the Dismissal was unreasonable and unfair is irrelevant, unnecessary, and serves to blur and confuse the real issue in question, namely, whether the Defendant was in breach of any express or implied term of the Employment Contract (Ground 7).

13.  In addition, the Defendant wishes to propose the following additional grounds of appeal or reasons for grounds of appeal after having considered the Reasons for Decision and the relevant transcript:-

(1) The Deputy Presiding Officer erred in finding that the Defendant did not give notice to the Claimant as to the Scheme Rules, and that the Claimant did not agree to the Rules (Ground 8).

(2) The Deputy Presiding Officer erred in finding that Clause 12.1 and 12.8 of the Scheme Rules are invalid and unenforceable on the ground of public policy (Ground 9).

(3) As part of Ground 1, the Deputy Presiding Officer further erred in refusing to exercise his discretion to deal with the issue raised by the Defendant at the review stage concerning lack of jurisdiction on the grounds that the Defendant’s representative had confirmed that the Tribunal had jurisdiction to hear this matter and that the Defendant had waived its right to take issue on jurisdiction.

(4) As part of Grounds 1, 4 and 5, the Deputy Presiding Officer further erred in refusing to exercise his discretion to deal with the issues raised by the Defendant at the review stage concerning lack of jurisdiction, as well as Clauses 9, 12.1 and 12.8 of the Scheme Rules.  His finding that the Defendant “intentionally or deliberately” failed to disclose or raise those grounds despite allegedly knowing the same is not supported by the evidence, and in any event, was never put to the Defendant during the review proceedings.

(5) As part of Ground 7, the Deputy Presiding Officer’s finding that the Dismissal did not have any valid reason under Section 32K of the Employment Ordinance is irrelevant, unnecessary, and serves to blur and confuse the real issue in question, namely, whether the Defendant was in breach of any express or implied term of the Employment Contract.

DISCUSSION

14.  Under Section 32 of the Labour Tribunal Ordinance, Cap 25, if any party is dissatisfied with an award, order or determination by the tribunal on the ground that the award, order or determination is – (a) erroneous in point of law; or (b) outside the jurisdiction of the tribunal, such party may, within a prescribed time, apply to the Court of First Instance for leave to appeal and the Court of First Instance may grant such leave.

15.  In respect of Ground 1, I do not consider that the Tribunal does not have jurisdiction to hear the Claimant’s claim in respect of the Restricted Shares.  The Deputy Presiding Officer treated the Claimant’s claim as one for breach of an implied term of the Employment Contract, namely, the Anti-Avoidance Implied Term, and found, inter alia, that such term should be implied into the Employment Contract and the Defendant acted in breach thereof.  While I see that there could be a reasonable debate on whether (i) the Anti-Avoidance Implied Term ought to be implied into the Employment Contract, (ii) the Defendant acted in breach of the Anti-Avoidance Implied Term, and (iii) the proper measure of damage and quantification of the damages, I am unable to see how it can be said that the Tribunal has no jurisdiction to hear and determine the Claimant’s claim for breach of the Employment Contract.  Even if, for the sake of argument, the Deputy Presiding Officer reached wrong conclusions on the various issues mentioned above, that does not mean the Tribunal has no jurisdiction in relation to the claim.

16.  In respect of Ground 7, I do not consider the Deputy Presiding Officer’s finding that the Dismissal was unreasonable and unfair is irrelevant or unnecessary.  That finding is relevant to the Deputy Presiding Officer’s further finding that one of the principal or main reasons behind the Dismissal of the Claimant was to avoid the Claimant being eligible to receive the benefit of the Restricted Shares under the Scheme, that being the only reasonable inference to be drawn on the facts (see paragraphs 22 and 23 of the Reasons for Decision).  In other words, the finding that the Dismissal was unreasonable and unfair is a step towards the finding of a breach of the Anti-Avoidance Implied Term, which is one of the critical issues to be determined in relation to the Claimant’s claim against the Defendant in respect of the Restricted Shares.

17.  On the face of it, Ground 8 raises an issue of fact.  However, Ms Seto contends that the Deputy Presiding Officer’s finding that there was no evidence showing that the Claimant was informed of and agreed to the Scheme Rules is wrong, and that there was in fact ample evidence before the Tribunal to that effect.  I am prepared to grant leave to appeal on this ground, limited to the questions of (i) whether there is any evidence which showed that the Claimant was informed of and agreed to the Scheme Rules, and (ii) if some such evidence existed, whether the Deputy Presiding Officer was nevertheless justified to find, in paragraph 55 of the Reasons for Decision, that the Scheme Rules were not binding on the Claimant.

18.  In addition, I consider Grounds 2, 3, 4, 5, 6 and 9 raise issues of law and are reasonably arguable.  I therefore grant leave to appeal in respect of those grounds.  Having come to this conclusion, it would not be appropriate for me to express any further views on the merits of those grounds, which will have to be fully ventilated at the hearing of the appeal proper.

19.  In all, leave to appeal is granted in respect of Grounds 2 to 6, 8 (as explained in paragraph 17 above), and 9, as well as the additional argument referred to in paragraph 13(4) above as part of Grounds 4 and 5 only.

20.  In relation to the question of costs, I make an order that 80% of the Defendant’s costs of this application shall be in the cause of the appeal, with the balance 20% being attributed to those grounds on which leave to appeal has been refused and in respect of which there be no order made.