YIP KWONG TO v. UNITED WATERS U.W. HOLDING HONG KONG LTD

HCLA 24/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL No. 24 of 2011

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO. 3886 OF 2010)

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BETWEEN

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D E C I S I O N

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Introduction

1.  This is an application for leave to appeal against the award of the Labour Tribunal (“the Tribunal”) dated 11 August 2011 whereby the claimant was awarded $367,661.58 being the amount of pro rata contractual “additional annualized fixed payment” (“the contractual annual payment”).  The applicant was the defendant.

2.  Two grounds have been put forth in the amended grounds of appeal:-

(a)  the contractual annual payment was void by reason it prevented proportional payment under s. 11F, Employment Ordinance (Cap. 57) and hence contravened s. 11B(2), Cap. 57;

(b)  the finding of fact to the effect the claimant did not breach his employment contract was perverse or irrational.

3.  The relevant background facts are these.  The claimant was employed as the defendant’s chief executive officer of its subsidiary since October 2009.  He gave notice to resign in June 2010 and left in September 2010.

Ground 1: Interpretation of Contract

4.  The relevant contractual provision can be found in Appendix A of the written employment contract.  The relevant parts read:-

“The [claimant] will receive annual cash compensation as set out below:

…

Additional ‘annualized*’ fixed payment of USD80,000 paid on the 31^st of January every year, first year payment on the 31^st of January 2010 will be on pro-rata basis.

…

*By definition, it means the [claimant] will entitle a pro-rata payment of the relevant benefits if [he] leaves [the defendant] in the middle of a year” (emphasis supplied).

5.  As stated above, the applicant’s case concerns the interaction between the above contractual clause and ss. 11B(2) and 11F, Cap. 57.  Those provisions stipulate:-

“11B.(2)… any term or condition of the contract of employment which purports to prevent the payment under section 11F of a proportion of the end of year payment shall be void”;

“11F.(1) Subject to subsections … (1B), where, in the case of an employee to whom this Part applies who has not been employed by the same employer for the whole of a payment period but has been so employed for a period of not less than 3 months in the payment period-

(a) the contract of employment is terminated -

(i) at any time during the payment period; or

(ii) on the expiry of the payment period

…

(1B) Subsection (1)(a) shall not apply where a contract of employment is terminated -

(a) by the employee …; or

(b) in accordance with section 9 [summary dismissal]”.

6.  The applicant argues that:-

(1)  the word “leaves” in the contractual clause must include both the claimant’s resignation and his dismissal by the defendant; and

(2)  the phrase “in the middle of a year” must mean the date 31 July of every year (it being common ground between the parties the payment period ended on 31 January of every year).

Because the contractual clause did not provide for pro rata payment, the contractual annual payment would not be payable (on pro rata basis) if the employment contract should be terminated other than on 31 July.

7.  When considering the above argument, I am prepared to proceed on the assumption the defendant’s argument set out in para. 6(1) above is correct.

8.  However, because of the reasons set out below, I find the argument set out in para. 6(2) above to have no merit.  There is no sensible reason to infer that the phrase was intended to mean “on 31 July of every year” and not “on any date during a year”.  On the contrary, there are good reasons for construing the phrase to have the latter meaning.

9.  It is obvious the contractual annual payment was included as part of the incentive package (other benefits having the same effect were tax subsidy, employer’s mandatory provident fund contribution, “annualized” housing allowance and travel expenses).  The latter meaning set out in para. 8 above will make the incentive package even more attractive to the claimant and hence make commercial sense (he would still be entitled to the benefits even if the employment contract was terminated with notice).  In this connection, it should be noted that the employment contract required a 3-month notice period for resignation and thus there should be no abrupt termination.

10.  It should also be noted, as a matter of fact, the claimant was paid pro rata contractual annual payment for the period from 1 October 2009 to 31 January 2010.  This is because the relevant contractual provision expressly provided for such payment for the employment period up to 31 January 2010.

11.  Secondly, the phrase is also applicable to “annualized” housing allowance (payable at US$2,700 per month in arrears on the last Thursday of every month).  If the phrase meant “on 31 July of every year”, it will mean housing allowance would not be payable if the employment contract was terminated other than on that date.  Again, there is no sensible reason for such construction; and this supports a contrary conclusion (that is, the phrase should mean “on any date during a year”).

Ground 2: Perverse or Irrational Findings of Fact

12.  The written submissions are economical in relation to this ground.  No reason has been given in support.  The applicant has not elaborated on this ground during the hearing either.

13.  The Tribunal’s findings of fact were based on evidence adduced by the claimant (which it preferred over that adduced by the applicant).  The approach and analysis adopted by the Tribunal cannot be faulted.  There is therefore proper basis for the findings.

Conclusion

14.  The application for leave to appeal is refused.