TSANG TAK CHI v. CHINA WALL LTD.

HCLA 33 of 1998

Headnote

Employment Ordinance - Section 9 Summary Dismissal for misconduct.

Summary dismissal by reason of one single act of misconduct is justified only in very exceptional circumstances.

The Court may have to balance the impact of the summary dismissal on the employee with the effect of the employee's misconduct on the employer to decide if summary dismissal is justified.

HCLA 33 of 1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 33 OF 1998

(On appeal from Labour Tribunal Claim No. 924 of 1998)

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J U D G M E N T

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1. The respondent, Tsang Tak chi started working for the appellant, China Wall Ltd. in 1986 as a foreman. In 1994, the respondent was appointed as a director of the appellant.

2. On 16.12.1997, the respondent was summarily dismissed.

3. The respondent brought proceedings in the Labour Tribunal claiming against the appellant for i) one month's wages in lieu of notice, ii) annual leave pay, iii) end of year payment and iv) long service payment.

4. The claims for annual leave pay and end of year payment were conceded. The learned Presiding Officer found that the respondent had been unfairly dismissed without notice. He therefore also awarded the sums of $18,700.00 as wages in lieu of notice and $140,769.00 as long service payment to the respondent.

5. The appellant was not satisfied with the awards. Hence the present appeal.

6. It is fair to say that the only issue involved in this appeal was whether the appellant was justified in summarily dismissing the respondent, there being no argument on the amount of the claim. If the summary dismissal was justified, the respondent's claim must fail and the appeal succeeds.

7. The immediate cause for the dismissal of the respondent was the alleged unauthorised sale of two milling machines belonging to the appellant. There was also allegation that the respondent had disturbed the operation of the company by throwing a metal mould during an argument. This aspect was not pursued as such. In any event, it is not a matter of any significance.

8. According to the respondent, in early December 1997, the owner of a metal shop came to the appellant's factory and expressed the wish to buy two old milling machines. The respondent obtained the consent from the only other director and major shareholder of the appellant, a Mr. Ng that the two machines could be sold for $2,000.00 each and that the proceeds of the sale could be used as entertainment fee for the fellow workers.

9. The two machines were then sold the removed from the factory premises on 13.12.1997. When Mr. Ng returned from an overseas trip in the afternoon, he was angry that the machines should be sold in his absence. There was then an argument between the respondent and Mr. Ng.

10. On 16.12.1997, the respondent informed Mr. Ng that the proceeds of the sale, namely $4,000.00 had been deposited into the company's account, Mr. Ng then summarily dismissed him.

11. The appellant, on the other hand suggested that the respondent had sold the two machines at a very low price without the consent of the other shareholders. The respondent only deposited the proceeds of the sale 4 days after he was confronted. There was then serious arguments to the extent that the police was notified. The appellant thus dismissed the respondent summarily.

12. At the trial, the respondent called a witness to confirm that he had asked Mr. Ng for his consent to sell the machines. The witness also heard Mr. Ng agreeing to sell the machines at a price that would be sufficient to buy a dinner for the staffs. The witness did not hear any agreement on the exact price of the machines to be sold.

13. Mr. Ng admitted that the respondent had visited him to ask about the selling of the machines. Mr. Ng admitted that the machines were for sale. He also confirmed that he had said that the price of the machines should at least be sufficient to cover a dinner for the staffs. He denied however that he had agreed to the sale price.

14. In his reason for decision, the learned Presiding Officer made the following findings:-

"The Claimant and DCR (Mr. NG) are the only directors of the company. They did not hold formal meetings and talking between the 2 directors made decisions. It is obvious that the DCR has given a green light to the sale of the machines by the Claimant that they have agreed on the price. Even if the price has not been agreed, it is clear that no one is paying much attention to the price since these machines have been bought in 1986, more than 10 years ago. They were old, lack of maintenance and not used by the workers. Hence the sales with the authority of the board of directors."

15. In this appeal, the appellant suggested that the finding that the respondent had the authority to sell the machines was against the evidence. It was suggested that the respondent was not authorised to sell the machines and that the appellant had not agreed to the selling price.

16. Mr. Lam, on behalf of the appellant pointed out an answer given by the respondent to the learned Presiding Officer when he agreed with the suggestion that he did not have the authority to sell the machines for the company.

17. It is only fair that one should look at the evidence of the respondent in its entirety. He was always saying that he had asked Mr. Ng about the sale of the machine and Mr. Ng agreed that the proceeds could be used for a feast. The witness for the respondent, Mr. Lo Bing Shing also confirmed that the respondent had asked Mr. Ng about the sale of the machines and Mr. Ng responded by saying. "Yes, the proceeds could be used for meals for the staffs."

18. Indeed, Mr. Ng himself also confirmed that the respondent had asked him if the two machines were for sale. Mr. Ng responded by saying they were if the price was correct. He also confirmed that on being asked about the price, he said casually that the sale price must be sufficient to pay for a dinner.

19. On the evidence, the learned Presiding Officer was entitled to conclude as he did that the respondent was in fact authorised to sell the machines in question.

20. One of the witnesses called by the respondent at the hearing was Mr. Au Yeung Hiu Kwong of a surveyor firm. Mr. Au Yeung said the machines in question were old. They had no spare part and could not function. He was of the view that the machines worth about $4,000.00 for two in the market.

21. The appellant complained that Mr. Au Yeung's evidence was wrongly accepted as that of an expert, particularly when the surveyor report was only prepared by secondary school graduates. It was also suggested that the learned Presiding Officer had not allowed the appellant to obtain and produce its own surveyor report and thus had failed in his duty to properly investigate matters relevant to the claim.

22. Section 27 of the Labour Tribunal Ordinance stipulates that the rules of evidence shall not apply to proceedings in the tribunal, which may receive any evidence, which it considers relevant.

23. In the light of the aforesaid section, there could not be any valid complain against the decision to admit the evidence of Mr. Au Yeung, including the surveyor report produced by him.

24. The surveyor report itself had set out in details the reasons for arriving at the market price of the machines in question. The learned Presiding Officer had heard evidence not just from the witnesses for the respondent, but witnesses from the appellant as well. All the witnesses confirmed that the machines had not been used for a long time. They were old, had no maintenance and could not used.

25. Section 20 of the Labour Tribunal Ordinance obliges the presiding officer to investigate any matter which he may consider relevant to the claim. The extent to which such investigation should be made depends on the facts of each case. One must not lose sight of the fact that hearings in the Labour Tribunal should be swift and informal so that labour disputes can be resolved in a fast and cheap manner.

26. The learned Presiding Officer had allowed both parties to adduce evidence on the price of the machines. Technically, the burden was on the appellant to prove that the price for the machines was exceptionally low even if it was a relevant issue.

27. The respondent had been advised to render such assistance to the appellant as might be necessary to enable the appellant to seek expert's opinion on the matter. The evidence suggested that the respondent did render some assistance even though such assistance was in fact not adequate for the appellant to actually locate the machines for examination by the expert.

28. There had been a lapse of about two months from the time when the question of expert's opinion was mentioned until the disposal of the case by the learned Presiding Officer. The appellant could have taken the opportunity to prepare an expert report with or without the assistance of the respondent.

29. The learned Presiding Officer could only make enquiry on the evidence presented by the parties. He had no obligation to make inquiry independent of such evidence. The appellant chose not to present any evidence from the expert on the fair price of the machines in question. The learned Presiding Officer was entitled to, as he did rely on the evidence presented by the respondent to adjudicate on the matter in dispute.

30. I have considered the nature of the dispute between the parties as well as the evidence relevant to such dispute. The way in which the learned Presiding Officer handled the case cannot be faulted.

31. In any event, I do not consider the question of the price of the machines and whether their sale by the respondent was done with the authority of the appellant too significant a matter.

32. To deny the respondent's claim, the appellant must satisfied the Tribunal that the summary dismissal of the respondent was justified under section 9 of the Employment Ordinance.

33. Section 9 of the Employment Ordinance provides:-

"An employer may terminate a contract of employment without notice or payment in lieu-

(a) if an employee, in relation to his employment-

(i) wilfully disobeys a lawful and reasonable order;

(ii) misconducts himself such conduct being inconsistent with the due and faithful discharge of his duties;

(iii) is guilty of fraud or dishonesty; or

(iv) is habitually neglectful in his duties; or

(b) on any other ground on which he would be entitled to terminate the contract without notice at common law."

34. The appellant, through Mr. Lam indicated that the only ground to justify the summary dismissal was the "misconduct" of the respondent in selling the machines in question at a low price without the consent of the appellant.

35. Even if it was right that the respondent had sold the machines without the expressed authority of the appellant and that the sale price was an exceptionally low one, that per se did not mean that the summary dismissal against the respondent was justified.

36. There was not enough evidence to show that the respondent was guilty of the misconduct stipulated under section 9 of the Employment Ordinance to deserve summary dismissal.

37. The selling of the machines without authority at a low price could be the result of mistake or misunderstanding. It could be the result of ignorance, carelessness or even recklessness.

38. But summary dismissal is a very serious step to take against any employer. It is the "capital punishment" in that if the dismissal is justified, the employee will be deprived of all the protection provided by the Employment Ordinance. There will be no wages in lieu of notice, no annual leave pay, no severance payments, no end of year payment, no long service payment no matter how long the employee has been in employment.

39. Immediate dismissal of an employee by reason of one single act of misconduct, in my view can only be justified in very exceptional circumstances. It may also be necessary to balance the impact of the summary dismissal on the employee with the effect of the employee's "misconduct" on the employer to decide if summary dismissal is justified.

40. Lord Maugham made the following observation in Jupiter General Insce. Co. v. Shroff [1937] All E.R. 67 at page 73,

"Their Lordships recognise that the immediate dismissal of an employee is a strong measure, and they have anxiously considered the evidence with a view to determine the question whether the trial judge was right in his finding that the respondent was guilty of gross negligence, which, coupled with his conduct at the interview of Dec. 21, was sufficient to justify his dismissal. On the one hand, it can be in exceptional circumstances only that an employee is acting properly in summarily dismissing an employee on his committing a single act of negligence; on the other, their Lordships would be very loath to assent to the view that a single outbreak of bad temper, accompanied, it may be, with regrettable language, is a sufficient ground for dismissal. Sir John Beaumont, C.J., was stating a proposition of mere good sense when he observed that in such cases one must apply the standards of men, and not those of angels, and remember that men are apt to show temper when reprimanded. Placing, however, all proper weight on these considerations, their Lordships have yet to determine, in view of the facts found. By the trial judge, apart, of course from the vital finding that the circumstances justified dismissal, whether the misconduct of the respondent was not such as to interfere with and to prejudice the safe and proper conduct of the business of the company, and therefore to justify immediate dismissal. It must be remembered that the test to be applied must vary with the nature of the business and the nature of the position held by the employee, and that decisions in other cases are of little value."

41. In the present case, the respondent had served the appellant for over 10 years. There was no allegation of previous misconduct. There was no suggestion of dishonesty. The only suggestion, to take the appellant's case at its highest, was the selling of two very old machines at low prices which might have the effect of causing financial loss of at most $10,000.00 to the appellant.

42. Was such conduct serious enough to justify summary dismissal of the respondent so as to deprive him of the sum of almost $160,000.00, the major part of which represented his long service payment ? I think the answer to the question is clear.

43. As Mr. Pun on behalf of the respondent quite rightly pointed out, the appellant could have sued the respondent for negligence or breach of fiduciary duties in order to recover the loss of $10,000.00 if the allegation against him could be substantiated.

44. I am not persuaded at all that the learned Presiding Officer had come to a wrong decision at all.

45. In the circumstances, the appeal must be dismissed.

46. I also make an order nisi that the appellant is to pay the costs of the appeal to the respondent to be taxed if not agreed. The order on costs will be made absolute 14 days after the handing down of this judgment.

47. The respondent's own costs is to be taxed in accordance with the Legal Aid Regulations.