NGAN YU CHIU v. NEW WORLD FIRST BUS SERVICES LTD

HCLA29/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 29 OF 2008

(ON APPEAL FROM LBTC4787 OF 2005)

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J U D G M E N T

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1. This appeal concerns the assessment of compensation under section 32P of the Employment Ordinance, Cap. 57 (“EO”).

2. The background facts are not in dispute.

A.  Background

3. The claimant had since 12 July 1999 been employed by the defendant as a bus driver.

4. On 12 May 2005, the claimant suffered neck injury resulting in neck pain and stiffness.  The Employees’ Compensation (Ordinary Assessment) Board (“the Board”) issued a certificate of assessment dated 26 May 2005 under section 16F of the Employees’ Compensation Ordinance, Cap. 282 (“ECO”), assessing his permanent loss of earning capacity arising from the injury at 2%.  The claimant objected to the assessment under section 16G of ECO.  The defendant received the section 16F certificate on 30 May 2005 and prior to the constructive dismissal on the following day, had notice of the claimant’s section 16G objection.  On 22 September 2005, the Board issued a certificate of review of assessment under section 16G(3) of ECO.  The degree of permanent loss of earning capacity remained the same.

5. In the meantime, on 31 May 2005, the claimant requested that he be allowed to resume work.  The defendant refused unless he could provide a medical certificate certifying that he was fit to do so.  That the claimant was unable to do.  The defendant then treated the claimant as being absent from work and refused to pay him any wages since 1 June 2005.

6. Subsequently, the claimant brought proceedings in the Labour Tribunal against the defendant claiming for, among other things, wages in lieu of notice, long service payment and compensation under section 32P of EO on the ground that his employment was wrongfully terminated without a valid reason and in contravention of section 48 of ECO.  After trial, Presiding Officer Tang allowed his claim on wages in lieu of notice and long service pay.  He held that it was unlawful and unreasonable for the defendant to insist on its request for the production of a certificate of fitness by the claimant before allowing him to resume work because two earlier medical certificates issued by a doctor appointed by the insurance company had certified that the claimant was fit to resume work.  The defendant’s conduct amounted to constructive dismissal of the claimant on 31 May 2005[1].  However, Presiding Officer Tang dismissed the claim under section 32P because he took the view that the constructive dismissal did not contravene section 48 of ECO.

7. The claimant then appealed.  Yam J held that the constructive dismissal contravened section 48 of ECO and allowed the appeal.  The Court of Appeal, by majority, upheld Yam J’s decision and ordered the matter be remitted to the Labour Tribunal for assessment of compensation under section 32P of EO.  An important point to note is that there was no challenge of the finding by Presiding Officer Tang on constructive dismissal on the appeals.  The importance of this point will become apparent in a moment.

8. The matter then went before Presiding Officer Own, who after trial made a nominal award of compensation in the sum of HK$1.

B.  Ground of appeal

9. Not surprisingly, the claimant appealed.  On 25 September 2008, I granted leave to appeal on this ground :

「判決沒有充份考慮被告公司因違反《僱員補償條例》第 48條在2005年5月31日變相解僱申索人，而令申索人不獲發放2005年6月至9月的工資。」

10. Mr Wong, counsel for the defendant, took a preliminary point on jurisdiction.  He argued that under section 32(1) of the Labour Tribunal Ordinance, Cap. 25, an appeal from the Labour Tribunal is permissible only if the Presiding Officer had exceeded his jurisdiction or made an error in law.  But the ground of appeal neither makes any complaint on error of law or jurisdiction.  It is based on facts.  Therefore the appeal does not fall within section 32(1).

11. With respect, I disagree.  If the Presiding Officer failed to adequately take into account the effect of the constructive dismissal when making the assessment, the basis of the nominal award that he eventually made is legally wrong.  That is an error of law which entitles an appellate court to intervene.

C.  The statutory regime

12. An award of compensation made under section 32P is one of the remedies that an employee may be entitled to under the employment protection provisions in Part VIA of EO.  The statutory regime, insofar as it is relevant for present purposes, may be outlined thus.

13. An employee may be granted remedies against his employer under Part VIA where he is dismissed by the employer other than for a valid reason within the meaning of section 32K and in contravention of section 48 of ECO : section 32A(1)(c).

14. Three requirements need to be satisfied before an employer can be held to be liable under section 32A(1)(c).

15. First, the employee is dismissed by the employer.  He shall be taken to be dismissed by his employer when the contract of employment is terminated by his employer with or without notice or payment in lieu otherwise than in accordance with section 9 : section 32B(2).  Termination of the employment contract by the employer includes constructive dismissal.

16. Second, the employee is dismissed other than for a valid reason with the meaning of section 32K.  The absence of a valid reason for dismissal as a requirement is repeated in section 32M(2) and 32P(1).  Both subsections stipulate to the effect that the court or the Labour Tribunal may make an award of compensation if it finds that the employer has not shown a valid reason for dismissal within the meaning of section 32K.

17. Third, the dismissal is in contravention of section 48 of ECO.

18. When these requirements are met and the employer’s liability is established under section 32A(1)(c), the court or the Labour Tribunal may under section 32M(2) :

(a)  make an order for reinstatement or re-engagement under section 32N or an order of terminal payments under section 32O; or

(b)  if no order for reinstatement or re-engagement is made, and whether or not an award of terminal payments under section 32N has been made, make an order compensation under and in accordance with section 32P to be payable to the employee by the employer as it considers just and appropriate in the circumstances.[2] 

19. In determining the amount of the award of compensation, the court or the Labour Tribunal shall take into account the circumstances of the claim : section 32P(2).  The circumstances of a claim include the following factors as set out in section 32P(3) :

(a)  the circumstance of the employer and the employee;

(b)  the length of time that the employee has been employed under the contract of employment with the employer;

(c)  the manner in which the dismissal took place;

(d)  any loss sustained by the employee which is attributable to the dismissal;

(e)  possibility of the employee obtaining new employment;

(f)  any contributory fault borne by the employee; and

(g)  any payments that the employee is entitled to receive in respect of the dismissal under EO, including any award of terminal payments under section 32O.

D.  Presiding Officer Own’s reasoning

20. Presiding Officer Own first considered the circumstances of the claim under section 32P(2) by pointing out that both the parties insisted that the defendant had not dismissed the claimant.  He concluded :

「… 唯一結論本案申索的情況可說是‘錯誤的申索’，而並非有解僱証據支持及申索人意願的追討，此情況十分特殊。」

21. He then went on to consider the factors set out in section 32P(3) individually.  His analysis which is relevant for present purposes can be briefly stated as follows.

22. On the circumstance of the parties (section 32P(3)(a)), he placed much emphasis on the fact that despite Presiding Officer Tang’s finding that there was constructive dismissal, both parties considered that defendant had in fact not dismissed the claimant.  He therefore considered it to be most proper and fair not to make any substantial award.

23. On the manner of dismissal (section 32P(3)(c)), he said that although the defendant’s request for a certificate of fitness was without sufficient legal basis, it was only a general requirement with a view to ensuring passengers’ safety.  It did not amount to any manner of dismissal (解僱方式).

24. On the question if any loss is attributable to the defendant (section 32P(3)(d)), he said the claimant was not paid wages since 31 May 2005 because no work was arranged for him.  But it could not be attributed to the dismissal because the parties did not agree that any dismissal took place on 31 May 2005.

25. On the question if the claimant had to bear any contributory fault (section 32P(3)(f)), he said yes because the claimant should have co-operated with the defendant by producing a fitness certificate, which he had done before.

E.  Effect of the finding on constructive dismissal not fully appreciated

26. In my view, Presiding Officer Own had failed to sufficiently appreciate the effect of Presiding Officer Tang’s finding of constructive dismissal, which was never challenged on the subsequent appeals and hence remained binding on the parties when they appeared before him for assessment.  Its significance is this.  As found by Presiding Officer Tang, it was unlawful and unreasonable for the defendant to insist on the production of a fitness certificate by the claimant before allowing him to resume work.  The defendant’s conduct was a breach of the employment contract, which was so serious that as a matter of law, it amounted to an unlawful termination of the contract whereby the defendant had dismissed the claimant wrongfully.

27. At the risk of repetition, I have to reiterate that this finding of constructive dismissal is binding on the defendant.  I do so because Mr Wong argued that it was reasonable for the defendant to insist on the production of the fitness certificate by the claimant before allowing him to resume work.  He placed particular reliance on the defendant’s statutory duty to ensure that their drivers are fit to drive : see regulation 9 of the Road Traffic (Driving Licences) Regulations, Cap. 374B.  Mr Wong even went on to submit that what the defendant did provided a valid reason within the meaning of section 32K for the constructive dismissal.

28. Mr Wong’s submission completely ignored the fact that the finding of constructive dismissal remains binding on the defendant.  He cannot now re-open the determination by Presiding Officer Tang that the defendant’s request for the production of a fitness certificate by the claimant before allowing him to resume work was unlawful and unreasonable by relying on the statutory duty.  For the same reason, he cannot argue that the defendant’s conduct amounted to a valid reason within the meaning of section 32K.  Indeed, this attempt to raise a valid reason at this stage is not permissible at all.  As set out above, the absence of a valid reason within the meaning of section 32K is one of the three pre-requisites for establishing liability for an award of compensation under section 32P.  It is implicit in the order of the Court of Appeal directing the matter be remitted to the Labour Tribunal for assessment of the award that it was satisfied that the defendant had failed to shown a valid reason for constructively dismissing the claimant on 31 May 2005.  It is now far too late to deny liability by arguing that there was a valid reason for the constructive dismissal.

F.   Errors in Presiding Officer Own’s reasoning

29. I now set out the errors in Presiding Officer Own’s reasoning in greater details.

30. He first erred when he said that there was no evidence of dismissal in support of the claim for compensation.  In particular, he erred when he said that the defendant’s conduct did not amount to any manner of dismissal (解僱方式), which is a direct contradiction of Presiding Officer Tang’s finding on constructive dismissal.  The claim is based on the constructive dismissal in the circumstances as found by Presiding Officer Tang.  He should have proceeded with the assessment accordingly.

31. He then erred when he relied on the parties’ mistaken view that there was no dismissal on 31 May 2005 to support his conclusion that it was right not to make any substantial award of compensation.  Were the employment still alive, as the parties thought, the claimant could not engage in any other form of work or employment[3] and the defendant must provide him with work.  It could not insist on the production of a fitness certificate before allowing him to resume work, which was unreasonable and unlawful.  It follows that because of the defendant’s wrongful conduct, the claimant had been unlawfully deprived of work since 31 May 2005, thereby suffering real and substantial loss, including loss of wages.  A nominal award is plainly wrong in principle.

32. He erred further when he held that the claimant’s loss of wages since 31 May 2005 was not attributed to the dismissal.  He failed to recognize that no work was arranged for the claimant because the defendant had wrongfully insisted on the production of the fitness certificate, which amounted to constructive dismissal.  The loss of wages since 1 June 2005 was of course attributable to the dismissal.

33. Finally, he erred in finding that the claimant had to bear contributory fault because he failed to co-operate with the defendant by producing the fitness certificate.  Mr Wong sought to support this finding by repeating his earlier submission that the defendant is under a statutory duty to ensure that their drivers are fit to drive and the claimant was obliged to co-operate with the defendant by producing the fitness certificate.

34. I am not sure if the evidence is capable of supporting this finding.  The claimant said in his witness statement that he did not meant to be difficult.  He was unable to produce the certificate purely because the doctor refused to issue one.  Presiding Officer Own had not dealt with the claimant’s evidence.  In any event, if, as held by Presiding Officer Tang, the defendant had acted unlawfully and unreasonably in demanding a fitness certificate, the claimant was under no duty to render the co-operation as suggested.

35. Presiding Officer Own’s reasoning cannot stand.  Mr Wong submitted that even that is the case, the court should still dismiss the appeal because no injustice is caused to the claimant.  I disagree.  If the claimant had suffered real and substantial loss, the court must and should intervene.  The nominal award must be set aside.

G.  How to make the assessment

36. The assessment must be just and appropriate in the circumstances of the case.  Of all the relevant circumstances, I think three factors are particularly important.

37. The first factor is the parties’ belief, albeit mistaken, that the employment was still subsisting despite the constructive dismissal on 31 May 2005.  Under the employment contract which they thought was still subsisting, the claimant could not work for others, not even on a part-time basis.  Working for the defendant was his only source of income.  However, because of the wrongful insistence on the production of a fitness certificate, the defendant did not allow him to work.  The claimant had thereby been deprived of wages since 1 June 2005.

38. The second factor is this.  Liability under section 32A(1)(c) of EO is based on, among other things, dismissal in contravention of section 48 of ECO.   The defendant could dismiss the claimant without contravening section 48 after the Board issued the section 16G certificate on 22 September 2005.  Had there been no dismissal on 31 May 2005, which the parties believed to be the case, the defendant’s persistent request for the production of the fitness certificate up to 22 September 2005, though wrongful and capable of amounting to constructive dismissal on that date, would not have contravened section 48.  I think in such special circumstances, the claimant should only be compensated for the loss of wages up to 22 September 2005.

39. I digress to deal with the claimant’s contention that he should also be entitled to the MPF contribution by the employer between 1 June and 22 September 2005, which is 5% of the monthly wages.  This particular item did not feature in the ground of appeal.  I do not think it should be entertained now.  For the same reason, the claimant is not entitled to claim for the annual leave balance between 1 June and 22 September 2005.

40. The third factor relevant to assessment stems also from the parties’ mistaken belief that the claimant was still the defendant’s employee despite the constructive dismissal on 31 May 2005.  Treating the claimant as its employee, the defendant had granted him paid sick leave between 1 and 10 June, 23 and 25 June and 5 and 10 July 2005 and some other periodic payments, totaling HK$7,830.20 and double pay for the entire year of 2005 in the sum of HK$8,740.

41. The claimant agreed that credit should be give to the said sum of HK$7,830.20 when the court makes the assessment.

42. As to the double pay for 2005, the defendant argued that the claimant should only be entitled to double pay for the period between 1 January and 31 May 2005, which is HK$3,615.73.  The overpayment of HK$5,124.27 should be refunded.  The claimant argued that the employment contract did not contain any provision for refund of double pay.  In my view, the claimant should only be entitled to the double pay for 2005 up to 31 May 2005 when he was constructively dismissed.  It is just and appropriate to give credit to the overpayment of HK$5,124.27 when making the assessment.

43. Unfortunately, the parties have been unable to agree on the monthly wages that the claimant would have been entitled to between 1 June and 22 September 2005.[4]  This factual dispute is dependant on further evidence and has to be remitted to the Labour Tribunal for determination[5].  After making the determination, the presiding officer should then assess the award of compensation at the total amount of wages between 1 June and 22 September 2005 minus the said sums of HK$7,830.20 and HK$5,124.27.  The parties disputed in the further written submissions if interest should be awarded.  I will leave this matter to the discretion of the presiding officer.

H.  Orders 

44. I will allow the appeal, set aside the award made by Presiding Officer Own and remit the matter to the Labour Tribunal for assessment as per the directions given in paragraph 43 above.

45. On costs, the parties have already made their submissions.  I think costs should follow the event.  I will therefore order the defendant to pay the claimant costs of the appeal including all costs reserved, to be taxed if not agreed.  The claimant’s own costs are to be taxed in accordance with the legal aid regulations.

[1]  See paragraphs 1 and 2 of the transcripts of the short oral reasons for judgment delivered on 26 January 2006.  It is unfortunate that in the written judgment dated 28 March 2006, the presiding officer did not set out the reasons why he held that the defendant’s conduct amounted to constructive dismissal as he did orally.  The courts hearing the subsequent appeals therefore took it that constructive dismissal based on the defendant’s said conduct was just an implicit finding. 

[2]  See also section 32P(1).

[3]  As per the employment contract signed by the claimant on 10 July 1999.

[4]  So it appears from the further written submissions on 7, 10 and 11 September 2009.

[5]  This court may not receive further evidence in hearing this appeal : section 35(2)(b)(ii) of the Labour Tribunal Ordinance.