MATHILDE LORRAINE VELLA v. MESSRS. ANDERSON, LIU & CHOO

___________

JUDGMENT

___________

1. The Plaintiff is an American attorney who was employed by the Defendant, a firm of American attorneys. She claims damages for wrongful dismissal, arrears of salary, interest and costs. The Defendant denies the claim on the grounds that the Plaintiff's employment was terminated because she was unco-operative and made statements prejudicial to the Defendant and its partners, that it tendered US$3,268.00 in payment of all monies due which the Plaintiff wrongfully refused to accept and that in the premises the Defendant is not indebted to the Plaintiff in the sums alleged.

2. The two actions now consolidated are exact the same. Having instituted the first, the Plaintiff became aware of the decision of Hunter J. that the labour Tribunal had exclusive jurisdiction and so went to it to have the claim referred to this court, which resulted in the second action.

3. The Plaintiff graduated in 1978 and accompanied her husband when he was posted to Hong Kong by his employer, an American "multinational" corporation. They arrived in April 1982. The Plaintiff who was anxious to preserve her professional skills and increase her limited experience immediately started looking for a position as an attorney. She experienced considerable difficulty. In August she came to meet George Liu, the Defendant's partner resident in Hong Kong; how that came about is in dispute and does net really matter. George Liu thought the Defendant firm might with mutual advantage employ her. The firm had been established that same year, 1982 and was experiencing normal cash flow problems in establishing itself. It was a small firm with 3 partners as indicated by its name. George Liu managed the Hong Kong office, Mr. Yeow Ming Choo managed an office in Chicago and Mr. Anderson resided in New York, but neither he nor any office there figure in these proceedings. Mr. Choo was assisted in Chicago by a Mr. Hed Othman, an attorney. Mr. Liu had been running the Hong Kong office mainly on his own despite frequent absences on business visits. The Hong Kong office needed some additional professional capacity, but could net afford to engage a full time attorney nor to pay expatriate benefits. That suited the Plaintiff too very well. Her husband was in receipt of expatriate benefits from his employers, like passages and housing which meant the Plaintiff did not need then. Also she was already committed to teaching part-tine and taking lessons in Mandarin.

4. George Liu thought he and his wife, who was also an attorney, should meet the Plaintiff and her husband. They met at the Sheraton Hotel about August or early September 1982. It was agreed she would tale up part-time employment with the Defendant for a salary of US$1,000 per month and work about 20 or 25 hours per week. She would not receive any expatriate benefits though she made it plain that she would want to accompany her husband on his vacation to the United States some time prior to June 1983. It was mentioned that later she might be able to go on to full time work at US$2,000 per month. And so the Plaintiff commenced working for the Defendant on the 22nd September, 1982 as an administrative attorney. Her duties were more administrative than legal, with a particular emphasis on bringing the firm's accounts and billing up to date. Although part time she put in very lone hours and favourably impressed George Liu. The Defendant firm had in the meantime been in the process of recruiting another American attorney, John Belcher, to work in the Hong Kong office. He was due to begin in January 1983. At that same time the Plaintiff went on to full time work at US$2,000 per month. John Belcher did net stay long, by mutual agreement he left after about 2 months.

5. The Plaintiff later in the year accompanied her husband on leave, departing on the night of the 26th of March and returning on the 3rd May. She reported to work on 4th May.

6. I will now retrace my steps to consider the matter of payment of the Plaintiff's salary. She had started work as I have said on 22nd September, 1982. No payment was made to her at the end of that month. On or about the 26th of November George Liu gave the Plaintiff her first salary cheque. It was not made clear whether this was for the calendar month of October or for the month beginning 22nd September. In these circumstances I hold that the Plaintiff was entitled to appropriate it to the calendar month of October, and that she did so.

7. The next cheque she received was about the end of November. This was for US$2,000. $1,000 of that must have been the salary for November. There is a dispute about the other $1,000. The Plaintiff says George Liu told her it was a bonus for all the hard work and extra tine she had put in. George Liu says it was an advance payment of the Plaintiff's salary for December. It was unusual for the firm to pay expatriates a bonus, and even more unusual to pay a bonus after only two months service. In addition the firm was still through a period of financial stringency and hardly in a position to make any gratuitous payment; but that would apply equally to advances. On balance I think it was probable that the extra $1,000 was not a bonus, and that it was therefore an advance of the December salary and I so find. That of course left the period 22nd September to 30th September unpaid at that point.

8. It is common ground that thereafter there were no payments of salary until the matters cane to ahead in May 1983, after the Plaintiff returned from her vacation. It is not disputed that it was mutually agreed that interest at 12½% would be paid on the deferred salary. How precisely that came to be agreed was also disputed. The Plaintiff went off on vacation in March apparently content that her outstanding salary would continue to attract interest. I will return to the matter of salary later.

9. On her return after resuming work she mentioned to one of the non-professional staff members, possibly in the hearing of one or two ethers, that she could not afford to purchase a dinner service because she had net been paid for some time. Word of this reached George Liu who was incensed because he felt there was an implication that the firm was broke. He brusquely asked her how much was owing to her and on being told about US$6,000 threw a cheque for that amount at her. Again the versions of the two as to the precise circumstances and mere particularly what was said to each other irreconcilably diverge. George Liu says there had been growing disenchantment with the Plaintiff and her work. The disclosure of non-payment, with its implication that the firm was broke, was in his view an act of unpardonable disloyalty and the last stroke. He decided she had to go and he believed he "terminated" her en that day, but he decided to leave details to Mr. Choo, whom he telephoned the next morning. I am not satisfied that George Liu effectively terminated the Plaintiff's contract of employment on 14th of May and, in any case, that was not seriously pursued.

10. Having received George Liu's telephone call Mr. Choo telephoned the Plaintiff at her home on Sunday May 15. Their versions of what was said conflict. Mr. Choo's object was apparently to terminate the Plaintiff's contract of employment. Again I am not satisfied that he effectively did so, perhaps he not unnaturally wished to soften the blow. In consequence the Plaintiff went to work the following day, May 16, and continued to do se despite the attempts of some of the staff to bar her. She considered, not unreasonably that she was entitled to effective termination, preferably in writing by one of the partners. Ultimately on Saturday, 21st May on returning home she found a telegram from Mr. Choo which she says was the first clear notification of her dismissal.

11. That brings me to the major issue in these proceedings. Was the Plaintiff's dismissal justified? The Defendant contends that it was because, first, she was uncooperative with the partners, the other attorneys and the general staff. And second, that she made statements prejudicial to the interest of the Defendant and its partners.

12. The particulars of the first Ground are that the Plaintiff argued excessively with George Liu, with a personal secretary of his (Peggy) and John Belcher, and was generally obstinate. The evidence shows that she undoubtedly had her own views of how things should be done and expressed them. That is net necessarily a fault in employees; on the contrary one might think they are bound to disclose what they think best for their employers. There is no evidence that she went to the extent of actually refusing to carry out any orders of the firm. This first ground has all the hall marks of an attempt at retrospective rationalisation of the Plaintiff's dismissal. I have no hesitation in rejecting it altogether.

13. In any ease if it had been established that the Plaintiff had been uncooperative and excessively argumentative, and this had been of such a nature as to warrant dismissal, it would have been condoned by the Defendant continuing her employment. (See Halsburys Laws 4th Ld. Vol 16 para. 648.)

14. As to the prejudicial statements alleged, these are of two sorts. First it was suggested in argument, examination and cross-examination that the Plaintiff stated that she had not been paid, and that the implication was that the firm was "broke" and that it was extremely damaging to the morale of staff and the reputation of the firm. In the circumstances in which that statement was node, I do not think that for one moment it could provide the basis of repudiatory breech or dismissal. But it was in any case not pleaded and the Defendant cannot rely upon it.

15. Second, and this was pleaded, it was in substance alleged that the Plaintiff made statements, first to Sandra Adams that on several occasions in February and Larch 1983 that George Liu was sexually active with many women including 3 previous secretaries and that one girl seduced while she was under the influence of alcohol had become pregnant; that 2 secretaries, Verllen and Karen were asked extremely personal "sexually based" questions at their interviews, and that one Sylvia would be paid to be the sexual partner of George Liu and clients of the firm and not for her secretarial and inter-pretation work.

16. Second that statements were made to Chiu Wang Lae that Sylvia was George Liu's mistress and that he also had sexual relations with Peggy, an another secretary.

17. Third that statements were made to Ned Othman about January or February 1983 on several occasions that George Liu had been sexually active with his former secretaries Peggy and Sylvia.

18. Fourth that statements were made to Verllen between February and May 1983 similar to those made to Ned Othman.

19. The foregoing third and four heads of particulars were given with leave after the trial of this action had commenced.

20. It is convenient to begin with the second head of particulars. The Defendant's evidence, as one would expect, came from Chiu Wang Lae. In a trial where so many of the witnesses, despite their conflicting evidence, were not unimpressive (perhaps because no less than 5 of then were attorneys), Mr. Chiu was a witness whose evidence and demeanour impressed me most unfavourably. Although he is no longer employed by the firm, his deference to George Liu was obvious yet he claimed that he did not find it embarrassing to discuss George Liu's personal life with him. He was in that instance clearly untruthful. His memory was prone to convenient and selective failure. In my finding, he was not a reliable witness and I reject his evidence in the present context.

21. As to the fourth head, the Defendant did not pursue the statements alleged to have been made to Verllen, and I will proceed then to the third head, the statements said to have been made to Ned Othman. I have no doubt that the Plaintiff believed that George Liu had been having an affair with Sylvia and that Sylvia and Peggy were providing sexual favours to some of the firm's clients. Her belief was a matter of inference from what she claimed others including George himself said to her and certain observations of hers which suggested to her something was going on. I am, of course, not concerned with the truth or falsity of those allegations nor with whether she was over-imaginative; I am concerned only with whether the statements were made.

22. Fed Othman, as I have said, used to work at the Chicago office and had occasion to visit the Hong Kong office to help out. He did so in January 1983 and at George Liu's request he was accommodated by the Plaintiff and her husband at their home. He also met with the Plaintiff when she visited Chicago during her vacation in April 1983. The Plaintiff did net seek to deny that she raised with him the question of Peggy having an affair with George Liu that she mentioned Sylvia in a context from which I find a similar inference could be drawn, and that she also stated that Verllen was receiving favourable treatment from George Liu. Ned Othman's evidence was that the Plaintiff implied that Peggy was providing sexual favours to clients and to George Liu; that that was her role in the firm; that George Liu imposed himself upon female members of the firm's staff to obtain sexual favours from them; and that Sylvia too provided sexual favours.

23. At this point I propose to consider also the first head i.e. the statements alleged to have been made to Sandra Adams. She is also an American attorney who accompanied her husband to Hong Kong and was employed by the Defendant firm in February 1983. She was asked by George Liu to see the Plaintiff, and claims that she was warned at that initial meeting about George and also told of his relationships with other women. Sandra Adams added that the allegations were repeated many many times in the next month or so before the plaintiff went on vacation, and that they involved Peggy and Sylvia.

24. The Plaintiff flatly denied having made such allegations. The question arises as to why she should do so in Sandra Adams' case while freely conceding them in Ned Othman's. If she is lying it makes little sense to admit the substance of the allegation in relation to Ned Othman and yet deny them in relation to Sandra Adams. It seemed to me that whatever the reasons, there was no love lest between Sandra Adams and the Plaintiff. Also on balance I thought the Plaintiff, the more credible witness, both as to testimony and demeanour. But there is not much in it and I rely to some degree also upon the onus of establishing the allegations being upon the Defendant, in finding that it has not been proved on the probabilities that the statements alleged were made to Sandra Adams. In reaching that conclusion I have taken into account other considerations which also bear upon the matter, including how Sandra Adams obtained the information passed on to George Liu. There was gossip for instance about Peggy even before the Plaintiff joined the firm.

25. However in my finding, the statements alleged were made to Ned Othman and the question therefore arises as to whether these warranted dismissal. It was put to Ned Othman that they were made to him to secure guidance from a senior member of the staff in an extraordinarily delicate and difficult situation. He denied it. Nevertheless on the basis of my findings, the statements were only made to Ned Othman who was the senior attorney then in Hong Kong, employed by the firm, other than George Liu who, of course, was a partner and with whom the Plaintiff could hardy have been expected to raise that particular matter.

26. As to the standard of misconduct constituting repudiatory breach or warranting dismissal. I adopt as the most helpful statement of the law and reference to examples the following passage in paragraphs 3506 and 3507 of the 25th Edition of Chitty on Contracts:

"There is no rule of lay defining the degree of misconduct which will justify dismissal. The test to be applied must vary with the nature of the business and the position held by the employee, and reported cases are therefore only a general guide. The general rule is that if the employed does anything which is incompatible with the due or faithful discharge of his duty to his employer, he may be dismissed without notice, the employee's conduct need not be dishonest, since it is sufficient if it is "conduct of such a grave and weighty character as to amount to a breach of the confidential relationship" between employer and employee. So where a manager of a betting shop borrowed money from petty cash to place a bet in another betting shop, knowing that his employer would not have granted permission for this borrowing had he been asked, the employer was justified in dismissing him summarily, even though the manager put an IOU in the till, and was not surreptitious.

Many of the decisions on misconduct date from the last century, and may be out of accord with current social conditions. However, courts may endeavour to adapt to modern circumstances the principles derived from the older cases, and there is scope for judicial innovation when principles have to be applied to novel situations. Insubordination, breach of confidence in disclosing trade or other secrets, taking a secret commission and drunkenness affecting his duties are kinds of misconduct which have, in the circumstances of the case, justified summary dismissal.

An employee may obviously be dismissed for dishonesty or fraud in his emyloyment. But conviction of a crime is sufficient only if the conduct constituting the crime is inconsistent with the proper performance of his duties as employee. "

27. I would also adopt the dictum of Lord Lopes in PBARCE v. FOSTER (1886) 17 Q.B.D. p.536 at p. 542:

"It is sufficient if it is conduct which is prejudicial or likely to be prejudicial to the interests or to the reputation of the master ......"

Applying the foregoing to the present case, I think that even if established, the complaint that the Plaintiff was uncooperative and excessively argumentative would fall far short of what is required.

28. As to the statements made to Ned Othman, I am satisfied that in fact they did not cause any  prejudice to the interests of the firm. Noreover, as I have said there was in the firm already gossip about Peggy prior to the Plaintiff's arrival. As to reputation, Ned Othman was the only one to whom the statements were made and as would not be unreasonable to assume, he dealt with them most responsibly, dismissing then as lacking credibility and mentioning them to no one. In my view therefore the statements did not amount to misconduct or repudiatory breach.

29. It follows that the dismissal of the Plaintiff was wrongful and that she is entitled to damages. It is not in dispute that this should be equal to the amount of salary for the period of notice of termination that should have been given. However, the contract between the parties did not provide for such period and what it should be is disputed.

30. For the plaintiff it is submitted by Mrs. Olough that on the authorities 3 to 6 months would be the appropriate period of notice. Mr. Anthony Neoh for the Defendant says it should be one month. According to Fridman in The Lodern Law of Contrect (at p. 469) "...... The general rule appears to be that notice need not be more extensive than the period of payment ...... However, the notice, in all cases, must be reasonable; and ...... the position of the parties may be affected by a custom which operates in relation to the particular kind of employment involved".

31. Para. 3491 of chitty on Contract, 25th Ed. , says that

"The General rule is that the length of notice depends on the intention of the parties, revealed in their contracts as to constitutes reasonable notice. All the circumstances, such as type of employment, local, trade or professional custom on the topic, the interval at which remuneration is yaid or the period in relation to which remuneration is stated (e.g. £450 a year) have been regarded as relevant in fixing what amounts to reasonable notice in an individual case. "

32. In both those works as in Halsbury Laws (4th Ed. Vol. 16 page 395) there is a compilation of decided cases in which the reasonable notice required by comma law has been held to range from one month to 12 months, but predominantly between 6 and 3 months. I think such compilations should be viewed with caution and that, as observed in pare. 3491 of Chitty, they do not lay down any rule of law and are merely guides to what may be held reasonable in different circumstances. None of the occupations cited is exactly in point or very close. Moreover no local or professional custom has been brought to my attention, other than that one month seems to be the general practice in Hong Kong, supported by statutory provisions which do not apply to the better paid.

33. The following circumstances have to be considered in this case in addition to the facts that the Plaintiff is an attorney and paid monthly:

(a)	The practice of the firm was to give one month's notice and although this was applied usually to non-professional staff, it had been applied to John Belcher though by mutual agreement and after only 2 months' service.
(b)	The Plaintiff's very short length of service of only 8 months of which 3 months had been part time and some 5½ weeks on vacation.
(c)	The Plaintiff although an attorney was employed primarily as an office administrator.
(d)	As such no lengthy period of handover was required.

34. There are other considerations and also of relevance in my view is the fact that the Plaintiff's employment was secondary to that of her husband's and that her expatriate benefits were provided by his employment. Had her busband been transferred she would have had to accompany him. Her prime concern was keeping up her professional experience and not the job itself. Had she on her part had to give notice I doubt whether 3 to 6 months would have seemed as reasonable as one month. In all the circumstances I think 2 months would be a reasonable period perhaps a little generous in the particular circumstances in Hong Kong. Co-incidentally 2 months severance paid was what he herself suggested to Mr. Choo when he telephoned her on the 15th of May.

35. I proceed then to the next issue, that of leave pay. The Plaintiff says that George Liu promised her leave pay because of all the hard and good work she had put in. George Liu denies this. It is essentially a matter of credibility. But there are other factors that bear upon the matter. The firm was still in financial straits. It was contrary to the firm's practice. It was been specifically agreed before she was employed that the Plaintiff was to be on local terms i.e. without paid leave. Mr. Choo had not been informed of any arrangement for the Plaintiff to receive leave pay, as he should have been. George Liu is a friendly, generous and ebullient person. The plaintiff may have read too much in what he said when expressing satisfaction with her work. In any case the onus is upon her to prove that he promised her leave pay and on the probabilities she has not satisfied me of that. The claim for leave pay must therefore fail.

36. Similarly, I am not satisfied that she was promised a period of work in the Chicago office or indeed that she did work there for any period. The Plaintiff's claim for pay during her visit to Chicago must accordingly also fail.

37. As to when the Plaintiff's employment was terminated, I have already found that Mr. Choo failed to do so on 15th May, 1983. It is clear from the judgment of Buckley, L.J. in Gunton v. Richmond upon-Thames LBC (CA) [1981] 1 Ch. at p.448 that the Plaintiffs cause of action for wrongful dismissal in the circumstances of this case arose on being wrongfully excluded from her employment and not when she received Mr. Choo's telegram which she says unequivocally dismissed her. In my finding she was only effectively excluded on the 19th of May, when Mr. Chui Wang Lae occupied her office. Her contract of employment must therefore be regarded as having been terminated on that day, the 19th.

38. Reverting then to the matter of salary, I have already found that the Plaintiff was paid for the calendar months of October, November and December. In my finding her salary remained at US$1,000 until 31st December 1982. Thereafter it was increased to $2,000 on a full time basis, which is not disputed.

39. As to the period for which salary was due prior to departure on vacation, in my finding, she worked up to and including the 26th March, notwithstanding that she departed that night. It may well be that the time sheets show very little time worked on that and the preceding day. But in my finding the Plaintiff did not log all her work and she was not paid on the basis of minutes worked on each day.

40. I also find that she returned a day early and resumed work on 4th of May, I have already found she is not due any salary for the period 27th March to 3rd May. And finally I have found that her employment terminated on 19th May so that her salary was due up to and including 18th May.

41. I proceed then to the cheque for US$3,268 dated 31st May 1985 which was sent to the Plaintiff and which the cancelled with the notation "void" and returned. to the Defendant. She had earlier asked in writing for a bank cheque or manager's cheque. It is not disputed that there was no express agreement as to the manner of payment under the contract of employment. However her salary was fixed in American dollars and her former 3 payments were made by cheques expressed in American dollars drawn upon American banks. In my finding that was the manner of payment that carne to be accepted as an agreed term by both sides or alternatively that it was an implied term of the contract. The Plaintiff could not therefore unilaterally change it. I find also that the cheque despite its deletions was a good cheque and would have been met. It follows that the amount of the cheque was effectively tendered. However on 29th September, 1983 the Plaintiff's solicitors made it clear they would accept a cheque. The Defendant's solicitors reply on 20th October 1983 was that it would be sent on confirmation that it was in full and final settlement, which was clearly an unacceptable condition.

42. Finally I come to the matter of interest. It is common ground that it was agreed that salary that oral deferred was to attract interest at 12½% per annum be compounded monthly. Therefore deferred salary other than that included in the amount of the cheque i.e. US$3,268, should attract interest at the rate of 12½% per annum compounded monthly. In respect of that amount of US$3,268, in my judgment, the Plaintiff is entitled to the like interest from 20th October when the Defendant's solicitors imposed their unacceptable condition of full and final settlement.

43. As regard damages for wrongful dismissal, the two months' salary should have been paid in lieu of notice in May 1983. That amount should therefore receive interest at a rate of prime plus 2% as agreed on the principles in Komala Deccof v. Perusahaan [1984] HKLR ap.219.

44. There will according be judgment for the Plaintiff for:

(1)	Dages for wrongful dismissal equivalent to 2 months' salary;
(2)	Arrears of salary not yet paid in respect of the period 22nd September 1982 to 31st December 1982 at US$1,000 per month and for the period 1st January 1983 to 26th March 1983 inclusive; and 4th May to 18th May 1983 inclusive at the rate of US$2,000 per month;
(3)	Interest on such arrears of salary at 12½% per annum compounded monthly from the dates payment should have been made save in relation to the US$3,268 tendered, in respect of which interest shall be paid from 20th October 1983 at the same rate; and interest on the damages at a rate of prime us 2% from the 1st June 1983.

45. I will order an enquiry into the amount of damages if the parties so wish. I will now hear counsel as to costs.