LEUNG CHUNG LAN LORRAINE v. MERRILL LYNCH (ASIA PACIFIC) LTD

DCCJ 5145/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5145 OF 2013

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DECISION

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Introduction

1. This is the application by the defendant by summons filed on 14 February 2014 for an order that the statement of claim be struck out under Order 18 rule 19 of the Rules of District Court on the ground that it discloses no reasonable cause of action, is frivolous or vexatious or is otherwise an abuse of process of the court.  At the conclusion of the hearing, judgment was reserved which I now give. 

Background

2. The plaintiff is a former employee of the defendant.  By a resignation notice dated 23 March 2005, the plaintiff resigned from the defendant.  Her contract of employment with the defendant ended on 21 April 2005.

3. By a deed of trust dated 1 July 1989 as subsequently amended by 12 amending trust deeds (the “Trust Deed”), the defendant established a formal scheme under trust called the Merrill Lynch (Asia Pacific) Provident Fund (the “Scheme”) to provide retirement and other benefits for eligible Hong Kong staff of the defendant. At the time the trust was established, there were 4 individual trustees.  Since 16 January 1998, the trustee under the Trust Deed has been HSBC Trustee (Hong Kong) Limited (the “Trustee”).  For present purposes, as the plaintiff’s contract of employment ended on 21 April 2005, it is the Twelfth Amending Trust Deed dated 26 April 2000 that is applicable.  I shall examine in more detail below the relevant provisions of the Trust Deed. 

4. On 15 October 1993, the Occupational Retirement Schemes Ordinance, Cap 426 (“ORSO”) came into force.  It is the governing legislation for the regulation of voluntary occupational retirement schemes operating in or from Hong Kong.  The governing body of the ORSO schemes is the Mandatory Provident Fund Schemes Authority (the “Authority”).

5. Under the Scheme, eligible Hong Kong staff of the defendant is entitled to certain benefits (the “Scheme Benefits”).  It is the defendant’s case that upon the termination of the plaintiff’s contract of employment, a sum of $189,225.80 (the “Sum”), being the Scheme Benefits the plaintiff was entitled to, was paid to the plaintiff on or about 19 May 2005.

6. The plaintiff’s case is that in or around 2011 and on the suggestion of her husband, she decided to consolidate a number of pension funds from different organizations she had previously worked for.  One of these pension funds arose from her employment with the defendant.  The plaintiff alleged that in or about November 2011, she first contacted a lady called Ada at Mercer (Hong Kong) Limited (“Mercer”), the administrator of the Scheme, and was told by Ada that she had already been paid the Sum by a cheque mailed to her residential address on or about 19 May 2005.  The plaintiff denied that she had ever received the cheque and maintained that she was never paid the Sum.

The plaintiff’s claim

7. On 31 December 2013, the plaintiff commenced the proceedings herein by way of a writ of summons.  In the statement of claim, the plaintiff states that she “need[s] to claim HK$189,225.80” “for the ORSO retirement scheme after [she] left the company on 21 April 2005”.  The plaintiff acted in person, and the statement of claim did not spell out the basis of the claim.

Procedural history

8. To put the matter in context, I shall set out below a brief procedural history of this action before I consider the merits of the defendant’s application. 

9. On 3 January 2014, the plaintiff served the statement of claim on the defendant.

10. On 16 January 2014, the defendant filed the acknowledgment of service. 

11. On 14 February 2014, the defendant took out the strike out summons.  On the same day, a First Affirmation of Lau Pui Wai (“Lau’s 1^st Affirmation”), the compensation manager of the defendant, was filed in support of the strike out application. 

12. On 19 February 2014, the plaintiff made an application for legal aid for the first time, which was rejected by the Director of Legal Aid (the “DLA”) on 21 February 2014.  On the same day, the plaintiff made an application for legal aid for the second time, which was rejected by the DLA on 10 March 2014. 

13. Meanwhile, the plaintiff filed 3 affidavits dated respectively 3 March 2014, 26 March 2014 and 2 April 2014. 

14. By a notice to act dated 7 April 2014, Messrs Weir & Associates represented the plaintiff, and prepared an affirmation dated 4 April 2014 for the plaintiff (the “plaintiff’s Affirmation”).  This Affirmation sets out for the first time the basis of the plaintiff’s claim, which seems principally to be a trust claim.  It is also alleged therein that a renewed legal aid application based on that affirmation would be made. 

15. In reply, the defendant filed the 2^nd Affirmation of Lau Pui Wai on 11 June 2014 (“Lau’s 2^nd Affirmation”). 

16. On 8 April 2014, the plaintiff made an application for legal aid for the third time, which was rejected by the DLA on 17 June 2014.

17. On 24 September 2014, the plaintiff made a fourth attempt to apply for legal aid, which was rejected by the DLA on 14 November 2014.

18. The multiple attempts by the plaintiff to apply for legal aid explain why this application was heard 11 months after the strike out application was made. 

19. Since 27 September 2014, the plaintiff has been acting in person, and has filed 4 further affidavits dated respectively 26 September 2014, 28 October 2014, 11 November 2014 and 19 December 2014.  After the defendant’s counsel filed his skeleton argument on 6 January 2015, the plaintiff filed two further affidavits dated respectively 6 January 2015 and 7 January 2015.  Pursuant to the order of Master R Lai dated 8 April 2014, it was ordered that no further affidavitsmay be filed without the leave of the court.  The aforesaid affidavits of the plaintiff were therefore filed without the leave of the court.  However, at the beginning of the hearing, Mr Chau, counsel for the defendant, indicated that the defendant had no objection to the filing of these affidavits.  I have, accordingly, considered all the affidavits filed by the plaintiff including those filed without the leave of the court.

20. In the hearing on 12 January 2015, the plaintiff appeared in person.  At the beginning of the hearing, the court inquired of the plaintiff as to whether or not she required the assistance of an interpreter at the hearing.  The plaintiff told the court that she was conversant with English and did not require the assistance of an interpreter.  Having satisfied myself that the plaintiff was able to conduct the hearing in English, I proceeded to hear the parties in English.

Applicable principles

21. The applicable principles for striking out a pleading are well established.  It is only in plain and obvious cases that the court should exercise its summary powers to strike out a pleading under Order 18, rule 19 of the Rules of District Court. There should be no trial upon affidavit.  Disputed facts were to be taken in favour of the party sought to be struck out.  Nor should the court decide difficult points of law in striking out proceedings.  The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out.  On the other hand, the court has power to strike out frivolous or vexatious proceedings.  A proceeding is frivolous when it is not capable of reasoned argument, without foundation or where it cannot possibly succeed, and it is vexatious when it is oppressive and/or lacks bona fides.  Also, the process of the court must be used bona fide and properly and must not be abused.  The court will prevent the improper use of its machinery, and will, in a proper case, summarily prevent its machinery from being used as a means of vexation and oppression in the process of litigation: see Hong Kong Civil Procedure 2015, paras 18/19/4, 18/19/8 and 18/19/10. 

The plaintiff’s trust claim

22. As noted above, the basis of the plaintiff’s claim can only be gleaned from the plaintiff’s Affirmation.

23. It seems that the true basis of the plaintiff’s claim is a “claim in trust”: see paras 11-19 of the plaintiff’s Affirmation.  This claim is based on a sentence in a letter dated 5 December 2013 from the defendant to the Authority (the “Letter”), which reads, “The [Defendant], acting in the capacity of a custodian of the scheme assets, would issue the cheque [in respect of the Scheme Benefits] accordingly and send to Mercer, whereafter Mercer would mail the cheque directly to the employee” (Underlining provided). 

24. Relying on the underlined part of the sentence, the plaintiff claims that the defendant is either a “trustee of [her funds]” (para 11 of the plaintiff’s Affirmation), or alternatively, if the defendant did not “directly” “[take] on the obligations of a trustee”, a “fiduciary”, “as it was the [Defendant] who admits to having issued the cheque to [the Plaintiff] in 2005” (para 15 of the plaintiff’s Affirmation). 

25. In my view, to assess the viability of the plaintiff’s claim in trust, one should examine the legal framework regulating the plaintiff’s entitlement to the Scheme Benefits.

26. As noted above, the Scheme was established by the defendant by the deed of trust dated 1 July 1989 as subsequently amended by 12 amending trust deeds. 

27. It should be noted that the defendant has never acted as the trustee under the Trust Deed at all material times.

28. The plaintiff’s entitlement to the Scheme Benefits arose solely out of the Trust Deed.  The Trust Deed contained, inter alia, the following express terms:-

(1) Under clause 5(a) of the Trust Deed, the Trustee shall administer the Scheme in accordance with the Trust Deed and the Rules of the Scheme (the “Rules”) attached to the Trust Deed;

(2) under Rule 2 of the Rules, the plaintiff was one of the beneficiaries of the Scheme by virtue of her employment with the defendant;

(3) under clause 9(c) of the Trust Deed, the Trustee shall be responsible for paying out of the funds, moneys, and assets from time to time held upon the trusts of the Scheme (the “Fund”) the benefits prescribed by the Rules;

(4) rule 11 of the Rules set out the calculation of payment of Scheme Benefits to an employee leaving employment (otherwise than on death, disablement or retirement on the normal retirement date);

(5) under Rule 14 of the Rules, no person for the time being entitled to the receipt of any benefit under the Rules shall be entitled to claim it more than 2 years after it has fallen due, provided that the Trustee may thereafter in their absolute discretion either pay all or any part thereof to the person who would have been entitled to the receipt of such benefit if the 2-year period had not expired or credit such benefit to the Fund if they think fit;

(6) rule 18 is an important rule and should be set out in full:-

“Nothing in this Deed or in these Rules shall constitute a contract of employment or be consideration for employment of any employee or give any employee the right to be retained in the employ of any of the Employers. In any action brought by a Member against an Employer no damages shall be recoverable in respect of the loss of any benefit to which he may claim to be entitled under the Deed and these Rules.” (emphasis provided)

29. Thus the effect of Rule 18 of the Rules is that the plaintiff cannot recover from the defendant any damages in respect of the loss of any benefit to which she may claim to be entitled under the Deed and the Rules.

30. Furthermore, since the Trustee (which is a separate legal entity) is responsible for paying out of the Fund the benefits prescribed by the Rules, any claim for non-payment or under-payment of the Scheme Benefits can only be a claim for breach of trust under the Trust Deed against the Trustee. 

31. Accordingly, if the plaintiff has any claim for non-payment or under-payment of the Scheme Benefits, such a claim can only be made under the Trust Deed against the Trustee.  As noted above, the defendant has never acted as a trustee under the Trust Deed at all material times.  The defendant was not responsible for paying the Scheme Benefits to the plaintiff.  The defendant therefore cannot be in breach of any trust or fiduciary duties. 

32. In my view, the plaintiff’s claim against the defendant for the Sum, which on her own case was her entitlement to the Scheme Benefits, must fail.

33. In Ali Shoukat v Hang Seng Bank Limited, HCLA 112/2004, unrep, 20 June 2005, where the scheme in question is almost identical to the Scheme in the present case (see paras 4-5), reading all the provisions of the trust deed and the relevant rules, Deputy High Court Judge To (as he then was) held (at para 11) that “any claim a beneficiary may have with respect to an alleged under-payment of the Scheme Benefits can only be a claim for breach of trust under the Trust Deed against the Trustee and not his employer.”

34. I accept the submission of Mr Chau that Ali Shoukat is indistinguishable from the present case, and that the plaintiff’s purported trust claim against the defendant must fail. 

35. In light of the express provisions of the Trust Deed and the Rules, the Letter does not advance the plaintiff’s case.  It has been clarified in subsequent correspondences that the defendant’s role was limited to a delivery agent of the Scheme Benefit cheques: see paras 13-15 of Lau’s 2^nd Affirmation.  In any event, the phrase “custodian of the scheme assets” is vague and the Letter obviously cannot be a proper basis for any claims. 

36. For the above reasons, I hold that the plaintiff’s claim in trust, which appears to be the essence of her claim against the defendant, cannot possibly succeed and must be struck out.  For completeness, I will consider the other grounds relied on by the defendant to strike out the plaintiff’s claim. 

The plaintiff’s contract claim

37. The basis of the plaintiff’s contract claim is unclear.  Although paras 6-10 of the plaintiff’s Affirmation were grouped under the heading “claim in contract”, no particulars of the basis of the contractual claim are given therein or anywhere else.  Indeed, in para 21 of the Plaintiff’s Affirmation, the Plaintiff went so far as to suggest that the defendant should not have proceeded to approach her claim as one based on contract. 

38. Mr Chau submits that such a contract claim will face the following insurmountable hurdles:-

(1) It is not possible to imply into the employment contract an equivalent obligation by the defendant to pay the Scheme Benefits;

(2) Such a claim would be within the exclusive jurisdiction of the Labour Tribunal by virtue of section 7 of the Labour Tribunal Ordinance, Cap 25 (the “LTO”) and the Schedule thereto;

(3) Such a claim would in any event be time-barred by virtue of section 4(1) of the Limitation Ordinance, Cap 347 (the “LO”).

39. I shall deal with each of these grounds in turn. 

No contractual entitlement

40. Before dealing with the first ground, it should be noted that the plaintiff has failed to adduce any evidence, and there is therefore no evidence before the court, that it is a term of her contract of employment with the defendant that the defendant would also be responsible for paying the Scheme Benefits to her.  In the absence of such a term, the defendant cannot be in breach of contract for any alleged failure to pay the Scheme Benefits to the Plaintiff.

41. Furthermore, as noted above, by the express provision of the Trust Deed, in any action brought by the plaintiff against the defendant, “no damages shall be recoverable in respect of the loss of any benefit to which he may claim to be entitled under the Deed and these Rules.”  In light of this provision, it is not possible to imply into the contract of employment a term that the defendant is also responsible for paying the Scheme Benefits to the plaintiff. 

42. Accordingly, it is not possible for the plaintiff to have any contractual claim against the defendant for any alleged non-payment or under-payment of the Scheme Benefits.

Exclusive jurisdiction of the Labour Tribunal

43. Pursuant to section 7(1) and paragraph 1(a) of the schedule of the LTO, the Labour Tribunal has jurisdiction over a claim for a sum of money which arises from the breach of a term, whether express or implied, of a contract of employment.  Section 7(2) of the LTO further states that save as is provided in the LTO, no claim within the jurisdiction of the Labour Tribunal shall be actionable in any court in Hong Kong.  

44. Mr Chau has referred me to Ngan Yu Chiu v New World First Bus Services Limited, DCCJ 824/2009, unrep, 19 April 2000, where H H Judge Anthea Pang (as she then was) struck out a claim for damages for an employer’s breach of its express and implied obligations under its contract of employment with the employee on the ground that such a claim was within the exclusive jurisdiction of the Labour Tribunal.  In striking out the claim, the learned judge considered and applied (at para 19) the relevant authorities in particular the decision of the Court of Appeal in Citipost (Asia) Ltd v Julian Robert Holliday, CACV 111/2004, unrep, 8 February 2005 and Gain Hill (Hong Kong) Ltd v Li Kin Yip & Anor [2006] 4 HKLRD 186.

45. Citipost Asia Ltd v Julian Robert Holliday is authority for the proposition that a claim for unliquidated damages for breach of a term, whether express or implied, of a contract of employment is a claim within the exclusive jurisdiction of the Labour Tribunal: Gain Hill (Hong Kong) Limited v Li Kin Yip & Anor at para 26 per Sakhrani J.  It was further held by the Court of First Instance in Borchert v Drmyo Ltd [2010] 1 HKC 168 that the court has no jurisdiction over claims which are within the exclusive jurisdiction of the Labour Tribunal: at para 21 per Deputy High Court Judge L Chan (as he then was). 

46. In the present case, if it is a term of the plaintiff’s contract of employment with the defendant that the defendant was also responsible for paying the Scheme Benefits to her, then the plaintiff’s claim in contract against the defendant for the Sum is a claim for a sum of money which arises from the breach of a term, whether express or implied, of a contract of employment.  In the premises, the plaintiff’s claim in contract against the defendant for the Sum is within the exclusive jurisdiction of the Labour Tribunal. Applying Citipost, Gain Hill and Borchert, I hold that this court has no jurisdiction over such a claim which must accordingly be struck out.

47. Although pursuant to section 10 of the LTO the Labour Tribunal may decline jurisdiction over a claim and transfer the claim to the Court of First Instance, the District Court or the Small Claims Tribunal, that provision is not relevant and does not assist the plaintiff because no claim has been commenced by the plaintiff against the defendant in the Labour Tribunal.

Time bar

48. Pursuant to section 4(1)(a) of the LO, actions founded on simple contract cannot be brought after the expiration of 6 years from the date on which the cause of action accrued.

49. In this case, pursuant to Rules 6 and 11 of the Rules, the plaintiff is immediately entitled to the Scheme Benefits upon leaving employment, ie on 21 April 2005.  The cause of action had therefore accrued on 21 April 2005, more than 6 years before the plaintiff commenced the claim herein on 31 December 2013.  Her claim is therefore barred by section 4(1)(a) of the LO and must be struck out.

Whether the plaintiff has been paid the Sum?  

50. Given the conclusion I reached above, it is not necessary for me to decide whether the plaintiff has been paid the Sum.  For completeness, I shall deal with it.

51. In my view, the plaintiff’s claim that the Sum has not been paid to her is fraught with difficulties. Whilst due to the lapse of time some of the documentary evidence cannot be found, the best available evidence provided by the defendant shows that a cheque for the Sum was indeed mailed to the plaintiff and that there was no stale cheque: see exhibits marked “KL-3” and “KL-4” to Lau’s 1^st Affirmation.   

52. On the other hand, on the plaintiff’s evidence, it was not until in or around November 2011 that she first contacted Mercer regarding her entitlement to the Scheme Benefits.  That was more than 6 years after her contract of employment had ended on 21 April 2005.  In her affirmation, the plaintiff gave no clue as to what action she had taken during the period from 21 April 2005 to November 2011 in respect of her entitlement to the Scheme Benefits.  It should be noted that the plaintiff made no allegation that she was unaware of her entitlement to the Scheme Benefits. 

53. However, as I said in paragraph 50 above, given the conclusion I reached above, it is not necessary for me to decide this issue. 

Order

54. For the reasons given above, I order that the statement of claim be struck out and the plaintiff’s action be dismissed.

55. There is no reason why costs should not follow the event.  I make a costs order nisi that the plaintiff pays the defendant costs of this action (including costs of this application), to be taxed if not agreed, with certificate of counsel.

56. Last but not least, I thank Mr Chau for his helpful assistance to the court.