ARCHER, HAROLD DEAN v. THE HONG KONG CHANNEL LTD

FAMV No. 7 of 1998

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 7 OF 1998 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM CACV 155 OF 1997)

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DETERMINATION

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Mr Justice Litton PJ:

Introduction

1. This is the determination, by a majority, of the Appeal Committee on an application for leave to appeal made under section 23(1)(b) of the Hong Kong Court of Final Appeal Ordinance, Cap. 484.

2. The matter comes before us in unusual circumstances. The amount in dispute is well below $1 million. The question involved in the appeal is not of great general or public importance. What the applicant says is that through oversight on the part of everyone concerned in the courts below an obvious point of law in his favour has been overlooked, resulting in blatant injustice. Section 22(1)(b) of Cap 484 empowers us to give leave if we are of the opinion that the question involved in the appeal is one which, by reason of its great general or public importance, or otherwise, ought to be submitted to the Court for decision. Counsel for the applicant submits that the words "or otherwise" in s22(1)(b) allows us a wide margin of discretion to correct the wrong.

The facts

3. The bare facts behind the application are these. The applicant was the managing director of the defendant company, and had been so for many years. He was also a shareholder in the company. At a director's meeting held on Saturday 17 June 1995 a resolution was passed to the effect that the applicant's employment "be terminated immediately". By a second resolution at the same meeting the applicant was "removed as managing director" and someone else was appointed in his place. On 5 July 1995 the company sent a letter to the applicant enclosing a cheque for HK$40,000. The letter said:

"As instructed by the Hongkong Channel's Board of Directors, please find enclosed a cheque for one months salary HK$40,000 in lieu of notice.".

4. The company had been in financial difficulties for some time prior to June 1995. The applicant had, on a number of occasions, deferred drawing his salary to enable the company to pay its creditors and was therefore owed salary in arrears at the time of his dismissal. He brought proceedings against the company in the Labour Tribunal but these were transferred to the High Court. Pleadings were ordered. There were claims and counterclaims. The case was tried by Deputy Judge Longley resulting in a judgment in the applicant's favour for $82,356. There was no award of costs in his favour but because the respondent succeeded in its counterclaim (which substantially reduced the award in the applicant's favour) the respondent was given the costs of the counterclaim.

The proceedings at first instance

5. At the hearing before Deputy Judge Longley the applicant was unrepresented. Amongst the various heads of claim in his statement of claim he sought an award under s31R of the Employment Ordinance, Cap 57, for long service payment. Under s31R(1)(a) an employee who has been employed under a continuous contract for not less than the number of years of service at the relevant date, as specified in the Fifth Schedule to the Ordinance, is entitled to long service payment. Where the contract of employment is terminated by payment in lieu of notice in accordance with s7, the "relevant date" is defined in s2 as the date up to which the wages are calculated: in the present case, it would be 17 July 1995. Calculated thus, the applicant would have had 5 years' continuous service and would have been entitled to long service payment: But not so if the "relevant date" was 17 June 1995. This point, now glaringly obvious, was not perceived in the trial court. The definition of "relevant date" in section 2 of the Employment Ordinance was overlooked. This error stands in stark outline when it is appreciated that the trial judge proceeded on the basis that the applicant had contractual entitlement to wages in lieu of notice. In dealing with the applicant's contention that his housing allowance entitlement should be treated as part of his "wages" for the purpose of "wages in lieu of notice", the judge said:

"... the plaintiff received more than his contractual entitlement in respect of wages in lieu of notice. The plaintiff's claim for an additional sum in respect of wages in lieu of notice therefore fails."

6. Had his "contractual entitlement", as defined by statute, been properly calculated, he would have fulfilled the 5-years' continuous service condition and would have succeeded on his long service payment claim.

Appeal to the Court of Appeal

7. The applicant, in effect, lost at first instance and as earlier mentioned had costs awarded against him. Being dissatisfied, he appealed to the Court of Appeal. In his notice of appeal dated 16 July 1997 he raised the issue of long service payment. Paragraph 2, as relevant, reads:

"2. THE GROUNDS OF APPEAL

(a) The learned Deputy Judge erred in taking the date of the Appellant's dismissal as synonymous with the date of termination of his contract of employment, namely, 17th June 1995, and in so doing wrongly concluded that the Appellant's period of employment fell short of the 5 years required to qualify for a long service payment under PART VB Employment Ordinance Cap. 57.

(b) In this respect the learned Deputy Judge failed to take into account sufficiently or at all the following:-

(i) the provisions of ss.5, 6 and 7 Employment Ordinance Cap. 57 which apply in the absence of agreement as to termination of employment by notice.

(ii) that the Appellant's written contract of employment dated 6th July 1990 contained no provisions for termination of employment by notice.

(iii) that the Respondents by a letter dated 5th July 1995 addressed to the Plaintiff enclosed a cheque for $40,000.00 representing one month's salary in lieu of notice.

(c) In the premises the learned Deputy Judge should have found that the effective date of termination of the Appellant's employment was one month after the date of dismissal, namely the 16th July 1995 which means that he was employed for 5 years and 10 days and therefore qualified for a long service payment."

8. The hearing before the Court of Appeal took place on 14 November 1997. The applicant remained unrepresented. He failed on his appeal (except for a minor item of claim relating to his leave entitlement for 1995) and was ordered to pay the respondent's costs of the appeal. As regards his claim for long service payment, all that Liu JA said was this:

"It is unarguable that ... [the applicant] was not effectively dismissed as at 17 June 1995. The plaintiff served the defendant company for less than five years. There is no substance in this complaint."

9. It is not clear from Liu JA's judgment how the employment was effectively terminated on 17 une 1995 unless it was by payment of one month's salary in lieu of notice: In the respondent's pleadings, there was no suggestion that the applicant's contract of employment had been lawfully terminated without notice: for misconduct under s9 of the Employment Ordinance or on any other ground which might have entitled the respondent to terminate the employment without notice at common law.

10. In Nazareth V-P's judgment, dealing with the claim for long service payment, he said this:

"Likewise it is plain, as I have indicated, that his employment terminated immediately upon payment of a month's salary in lieu of notice. Clearly, the judge was right in determining that he was not entitled to a long service payment as his service fell short of the qualifying period of five years".

11. Plainly, if the definition of "relevant date" in s31R(1)(a) of the Employment Ordinance had been brought to Nazareth V-P's attention, he could not have come to the conclusion as he did.

12. Cheung J's judgment did not touch upon the issue of long service payment.

Application for leave to appeal to Court of Final Appeal

13. By notice dated 31 November 1997 the applicant applied to the Court of Appeal for leave under s23(1)(a) to appeal to this Court. The failure of the lower courts to apply correctly the provisions of s31R(1)(a) of the Employment Ordinance was clearly spelt out in his application. This was heard by the Court of Appeal on 19 February 1998. In dealing with that application Nazareth V-P, giving the decision of the Court of Appeal, said:

"What has happened here is that a provision of the Employment Ordinance that is perfectly clear, and that no one suggests causes any difficulty in its interpretation or application, was not relied upon and in consequence overlooked by everyone, by the parties, by the Court of First Instance, by the Court of Appeal, by counsel. Its application or construction in no way can be said to be a question of great general or public importance. Had the case not been transferred by the Labour Tribunal, it is doubtful whether that specialist tribunal would have missed the provision."

14. Here, in effect, the Court of Appeal acknowledges that, as between the parties, a glaring injustice has occurred and the applicant has been deprived of a clear entitlement through oversight. Is this something which ought to proceed to the Court of Final Appeal for correction?

15. The Court of Appeal recognised, of course, that s22(1)(b), by the use of the expression "or otherwise", confers a wide discretion. In this regard, Nazareth V-P said:

"It then comes to whether it 'otherwise ought to be submitted to the [CFA] for decision'. We have given careful consideration to this point. Such authority as has been drawn to our attention suggests that a question should be so submitted only if it is exceptional or presents an unusual feature (see Hui Shiu-wing v Cheung Yuk-lin [1968] HKLR 176). It does not seem to us that the question is exceptional or unusual in any significant way. That the prosecution of a claim upon a deficient legal basis, or that the failure to rely upon the proper legal provision, principle or authority, or that such is overlooked or missed by all concerned, should be good reason for granting leave to appeal to the Court of Final Appeal is questionable to say the least, and has implications that are clearly of concern. It does not seem to us it would be appropriate for us to grant leave.

While for my part I confess that such a conclusion causes me some disquiet, it is to a degree allayed by the knowledge that the Court of Final Appeal itself can grant leave. We think the matter of leave to appeal in the particular circumstances would be best resolved there."

16. It is in these circumstances that the matter comes to us for determination.

The amount involved

17. At first instance, it was admitted by the respondent that substantial arrears of salary were owed to the applicant, but these were set off to some extent against two items in the counterclaim:

(i) The unauthorised drawing of housing allowance beyond the contractual entitlement and

(ii) The unauthorised drawing of a Chinese New Year bonus.

18. The applicant failed on both issues of the counterclaim, with the net result that judgment was awarded in his favour only to the tune of $82,356 together with interest. Counsel submits that the award, taking into account the entitlement to long service payment, should have been $166,991: that is to say, an increase of $84,635. This is not an amount which we can, or should, brush aside as of such insignificance as to be undeserving of attention by the Court. If the position were, as the applicant contends, that this additional sum is his by right almost as a matter of certainty, we plainly should give leave: and put the respondent upon notice that, if it should nevertheless resist the claim, the Court in its final adjudication might well be inclined to order costs against it on an indemnity basis.

Other factors

19. So far, we have proceeded upon the basis that there is, in effect, no answer to the applicant's point. If the contract of employment were terminated by payment in lieu of notice, under the provisions of s7 of the Employment Ordinance, there is no doubt that the "relevant date" for the purposes of s31R(1)(a) is 17 July 1995. The respondent, through counsel, however, says this: The judge, in adjudicating the respondent's counterclaim, made certain findings of fact adverse to the applicant: which facts, if they had been known to the respondent in June 1995, would have entitled the respondent to dismiss him without notice under s9. Counsel therefore says that we, in weighing the applicant's claim to long service payment, cannot fairly proceed upon the basis that the case comes solely within s7: if, arguably, the facts as found by the trial judge could have brought the case within s9, then the entire foundation for the applicant's argument disappears.

20. We are not convinced by this argument. It seems to have been common ground throughout the proceedings in the courts below that the contract of employment had been effectively (that is to say, lawfully) terminated by one month's salary in lieu of notice. The respondent never pleaded a case of dismissal without notice, based upon any of the grounds set out in s9 of the Employment Ordinance. The judges' adverse comments on the applicant, in relation to his fidelity as an employee, related to the two items of the counterclaim (i) the unauthorised drawing of a housing allowance beyond the contractual entitlement and (ii) the appropriation of a Chinese New Year bonus. There, the issue at trial was whether these matters were expressly or impliedly authorised by the board of directors, as the applicant contended, or were unauthorised as the respondent said. Whether the applicant might have been dismissed for misconduct or some other grounds under s9 was never in issue between the parties.

Conclusion

21. We are conscious of the fact that this determination relates purely to an application for leave and any views which we have formed concerning the state of the pleadings or the facts as found by the judge can only be on a preliminary basis. Because of the nature of the proceedings we have discouraged lengthy submissions by counsel. Ultimately, what is for our determination is whether the matter should end right here or proceed further for adjudication by the Court.

22. We have not found this an easy matter. It is possible to have some sympathy for the courts below. The applicant had legal representation for the first time in the hearing before us. The matter has been well argued on both sides. In the courts below, the water was muddied by a large number of issues being stirred: matters which have now become irrelevant, enabling us to see the one remaining issue much more clearly. By a majority, we have concluded that leave to appeal to the Court of Final Appeal should be given to the applicant and we so order. The costs of this application are reserved to the Court of Final Appeal.