ZHU LI v. MAYER BROWN JSM (a firm)

HCMP 2574/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 2574 OF 2013

(ON AN INTENDED APPEAL FROM DCCJ NO. 977 OF 2012)

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Hon Macrae JA (giving the judgment of the court):

Introduction

1.  The defendant is a firm of solicitors in Hong Kong.  The plaintiff is a lawyer from Mainland China who is not qualified to practise law in Hong Kong.  She started working for the defendant in the Hong Kong office sometime in September 2010 as a legal assistant.  For reasons which will become clear in this judgment, we express no views on the legal nature of the working relationship between the plaintiff and the defendant.

Application to Strike Out

2.  The plaintiff issued a Writ of Summons in the District Court on 22 March 2012, seeking monetary and other relief against the defendant as a result of certain alleged events in the course of that working relationship.  On 2 May 2012 the defendant took out a summons applying to strike out the Writ and Statement of Claim under Order 18 rule 19, and for other alternative orders under Order 12 rule 8 and Order 14A of the Rules of the District Court.  On 9 May 2012, the plaintiff served an Amended Statement of Claim on the defendant.  She also filed an affidavit dated 22 May 2012 in which she said that it was undisputed between the parties that there was no employment contract and that the defendant was deliberately misinterpreting her pleadings.

3.  The defendant’s summons was heard on 28 June 2012 by Deputy District Judge Nancy B Y Leung, with the plaintiff appearing in person and the defendant being represented by leading and junior counsel.

4.  At the hearing Miss Lisa Wong SC, leading counsel for the defendant, abandoned the alternative applications under Order 12 and Order 14A so that the only application which remained for determination was the application to strike out.  The thrust of the defendant’s argument was that the alleged causes of action, as pleaded by the plaintiff in the Amended Statement of Claim, all arise out of an employment contract and/or breaches of an employment contract and/or under the Employment Ordinance, Cap 57 which, in so far as they are monetary claims, fall within the exclusive jurisdiction of the Labour Tribunal and, in so far as they are claims for the relief of an apology and for an order for an investigation report on certain alleged misconduct of a partner of the defendant, are claims for remedies not known to the law or not available to such causes of action.

5.  The plaintiff argued:

(1) that there was never any contract of employment between the parties;

(2) that her claims are based on breach of contract but not breach of an employment contract;

(3) that her claims for payments under the Employment Ordinance are not based on a contract of employment or breach thereof, nor on non-compliance with provisions of the Employment Ordinance, but are based on the overriding authority of the Employment Ordinance which involves the construction of the Employment Ordinance by the court;

(4) that as to her claims for an apology and an investigation report, these are matters of relief and remedies, the appropriateness of which could only be decided after considering all relevant facts and applicable law, and not at that stage of the proceedings;

(5) that her claims for an apology and for medical expenses are founded in tort and therefore do not fall within the jurisdiction of the Labour Tribunal.

The Judge’s Decisions

6.  The judge delivered her decision on 7 September 2012 (“the 1^st Decision”), in which she held:

(1) that orders for an apology and for an investigation report are not remedies known to or available in the relevant areas of the law in Hong Kong;

(2) that the claims for damages for breach of contract and other monetary claims as pleaded in the Amended Statement of Claim, are claims based on an employment contract or breaches thereof or otherwise made pursuant to provisions in the Employment Ordinance which applies only to a contract of employment;

(3) that as a matter of prudence, if she were to take into account the affidavit evidence, the evidence shows that the terms agreed between the parties were for an employment relationship; and

(4) that in relation to the claim for medical expenses, there is nothing in the pleadings to suggest that this claim is being advanced as a claim in tort; and that if the claim is being advanced as a breach of contract, then the claim is one based on breach of an employment contract.

7.  The judge made an order that the Amended Statement of Claim be struck out and the action be dismissed, and an order nisi that costs of the action be paid by the plaintiff, to be taxed if not agreed, with certificate for counsel for the hearing.

8.  Both parties applied to vary the costs order nisi. The plaintiff also applied for leave to appeal against the 1^st Decision.  In support of her applications, the plaintiff filed her 2^nd affidavit dated 20 September 2012 and 3^rd affidavit dated 25 March 2013, in which she adduced additional evidence on the arrangements by which she came to work in the defendant’s Hong Kong office and how the parties had never regarded their relationship as one of employment (“the fresh evidence”), in addition to dealing with the grounds of her applications.  The judge delivered her decision on 27 September 2013 (“the 2^nd Decision”).  She rejected the admission of the fresh evidence in the 2^nd and 3^rd affidavits of the plaintiff as it did not satisfy either condition 1 or condition 2 of the test in Ladd v Marshall [1954] 1 WLR 1489. She maintained her costs order nisi save to the extent that the costs of the action be summarily assessed.  She also refused leave to appeal.

Application for Leave to Appeal

9.  The plaintiff now applies to the Court of Appeal for leave to appeal, relying on the following grounds:

(1) that the judge wrongly found that the parties disagreed whether the contract in question is a contract of employment when she should have found that it was undisputed that there was no contract of employment;

(2) that the judge was wrong in holding that the contract was one of employment and wrong to have relied on the affidavit of Noeleen Mary Farrell dated 8 May 2012 filed on behalf of the defendant while failing to have due regard to the pleadings and the plaintiff’s affidavit evidence;

(3) that the judge was wrong by looking at the pleadings only in deciding whether the claims fall within the exclusive jurisdiction of the Labour Tribunal in that the inherent jurisdiction of the court is being invoked;

(4) that the pleadings do not plainly disclose claims based on breach of an employment contract, especially when it was undisputed that there was no employment contract;

(5) that the claim for medical expenses was not one based on breach of an employment contract but was a claim in tort;

(6) that the judge was wrong to rule out its jurisdiction to hear the plaintiff’s claims for payment under the Employment Ordinance as the claims were not based on an employment contract;

(7) that the judge was wrong to consider whether the remedies for an apology and for an investigation report were available without fully examining the relevant facts and law, and that in any event the judge should have considered whether the causes of action rather than the remedies existed;

(8) that the judge wrongly exercised her discretion in striking out the pleading in that it was not a plain and obvious case for doing so, when the viability of the causes of action was fact-sensitive;

(9) that the judge was wrong to consider the issue of the admissibility of new evidence in refusing leave to appeal in that the new evidence was irrelevant to the grounds why leave should be granted; and

(10) that the judge should not have allowed a certificate for senior counsel in that it was neither necessary nor proper for the defendant to engage senior counsel for the application to strike out.

10.  The plaintiff also filed an affidavit dated 4 October 2013 in support of the present application in which she said that the defendant deliberately misinterpreted the Amended Statement of Claim when it had never been disputed between the parties that there was no contract of employment, that leading counsel at the hearing of the summons to strike out refused to be drawn on the nature of the contract between the parties, and that the defendant had unnecessarily and improperly engaged senior counsel to appear at the hearing when no difficult questions of fact or law were involved.

The Amended Statement of Claim

11.  The basis of the defendant’s application, that the causes of action as pleaded by the plaintiff were within the exclusive jurisdiction of the Labour Tribunal, was made clear in the summons and in the supporting affidavit.  After the summons had been issued, the plaintiff amended the Statement of Claim.

12.  In paragraph 1, instead of averring that the plaintiff was “employed” by the defendant, it is now pleaded that the plaintiff “worked for” the defendant.

13.  In paragraph 4, by two secondment letters dated 9 August and 3 September 2010 respectively, a contract (“the Contract”) was entered into between the parties.

14.  The paragraphs that follow refer to certain terms of the Contract, certain alleged misconduct of a partner of the defendant, her reporting thereof to the defendant, and the alleged events leading to the suspension on 9 September 2011 by the defendant of “the secondment and the employment without contractual or legal basis” (paragraph 10).

15.  Further events led to the termination of the Contract by the defendant on 12 March 2012 without legal ground, without notice and without compensation to the plaintiff (paragraph 20).

16.  In paragraph 21, it is averred: “By … suspending the secondment and the employment, the Defendant caused injury to the reputation and feeling of the Plaintiff.  Further and alternatively, the Defendant violated the Employment Ordinance (CAP 57) concerning suspension from employment if the suspension was made under the Employment Ordinance.”

17.  In paragraph 22, it is pleaded: “Since the Plaintiff reported the Misconducts, the Defendant has been threatening by disgraceful means to harm the Plaintiff’s career and reputation, as well as financially on various occasions.  As a result, the Plaintiff has suffered insomnia, palpitation and depression.”

18.  In paragraph 23, the plaintiff pleads breach of the Contract and her loss and damage resulting therefrom.

19.  In paragraph 24, it is averred: “By terminating the Contract without notice and without compensation, the Defendant deprived the Plaintiff of the right, benefit and protection conferred upon an employee by the Employment Ordinance (CAP 57).  Under the Employment Ordinance, the Plaintiff is entitled to payment in lieu of notice … , long service payment … or alternatively severance pay, … and annual leave payment …”

20.  In paragraph 25, the plaintiff avers that she claimed loss and damage for breach of the Contract and for payment under the Employment Ordinance which the defendant failed to pay.

21.  Paragraph 26: “Since the investigation of the Misconducts reported by the Plaintiff directly led to the suspension from employment and termination of the Contract, the Plaintiff also requested the Defendant to provide an investigation report to the Plaintiff.  The Defendant refused to do so.”

Nature of Pleaded Claims

22.  It is true that the plaintiff has not made any reference to an “employment contract” or a “contract of employment” as such in the Amended Statement of Claim.

23.  On the one hand, the plaintiff has removed the reference to having been employed by the defendant in paragraph 1 of the Amended Statement of Claim, and avers in paragraph 4 that her relationship with the defendant was defined by the Contract (being the 2 secondment letters).  On the other hand, she goes on to plead the suspension of that relationship by the defendant as a suspension of the secondment and employment, that the suspension was a violation of the Employment Ordinance, and that as a result of the wrongful suspension and/or termination of that relationship (being one of secondment and employment), she is entitled to damages and various payments under the Employment Ordinance.

24.  Therefore, reading the Amended Statement of Claim as a whole, one is left in no doubt that the plaintiff is pleading her relationship with the defendant as one of employment, and that the Contract which governs that relationship was, as pleaded, a contract of employment.

25.  Further, section 4 of the Employment Ordinance provides:

“(1) Subject to subsection (2) and section 69, this Ordinance applies to every employee engaged under a contract of employment, to an employer of such employee and to a contract of employment between such employer and employee …”

26.  Under section 2 of the Employment Ordinance, “contract of employment” is defined as:

“any agreement whether in writing or oral, express or implied, whereby one person agrees to employ another and that other agrees to serve his employer as an employee and also a contract of apprenticeship”.

27.  The existence of the pleaded claims for payments under the Employment Ordinance reinforces the reading of plaintiff’s pleaded claims as being founded on a contract of employment.  In this regard, the plaintiff relies on Cantor Fitzgerald Europe v Jason Jon Boyer (Unrep) HCA 1160 of 2011, 29 February 2012, Reyes J, to support her contention that her pleaded claims for payments under the Employment Ordinance are not based on a contract of employment but rather on the overriding authority of the Employment Ordinance.  The contract in that case between Cantor Fitzgerald Europe and Mr Boyer was a contract of employment as a result of which the Employment Ordinance applied and overrode the contrary provisions in the contract in so far as they did not give Mr Boyer the option to terminate the contract by making payment in lieu of the requisite notice period.  That case is no authority for the plaintiff’s apparent proposition that the Employment Ordinance could govern or override a contract which (as the plaintiff contends in her submissions) is not a contract of employment but could somehow give rise to claims under the Employment Ordinance for a non-employment contract.

28.  In these circumstances, each of the monetary claims, in so far as they are pleaded as being based on the Contract, the breaches thereof, or the Employment Ordinance or the violation thereof, is a claim for a sum of money which arises from the breach of a term of a contract of employment or from the failure of a person to comply with the provisions of the Employment Ordinance, as specified in paragraph 1 of the Schedule to the Labour Tribunal Ordinance, Cap 25.  Pursuant to section 7 of the Labour Tribunal Ordinance, the Labour Tribunal has jurisdiction over these claims, which are not actionable in any other court.  Therefore the judge was entirely correct in striking out these monetary claims, as pleaded.  We will deal with the claim for medical expenses later on in this judgment.

29.  We pause here to emphasise that in expressing our view that the monetary claims ought to be struck out, we express no views as to whether the working relationship between the parties, and any contract between them, was one of employment or not.  Nor do we express any views on the merits of such claims.  We have come to the conclusion that these monetary claims, simply as a matter of pleading, appear as claims based on a contract of employment over which the District Court has no jurisdiction and therefore ought to be struck out.

30.  This leads us to some of the factual matters raised in the plaintiff’s affidavits (extrinsic to the pleading) and the related grounds of appeal: her assertions, and the evidence in support thereof, that the contract between the parties was never one of employment, and that the defendant appreciated and never disputed that it was not a contract of employment.  It is trite law that a pleading must by itself convey with sufficient clarity the causes of action being relied on, and the allegations in support, to enable the other party to understand the case he has to meet and respond to them appropriately.  In determining an application under Order 18 rule 19(1)(a), extrinsic evidence is not admissible, and it is normal practice to consider the pleading on its own.  Although extrinsic evidence is admissible where an application is made under Order 18 rule 19(1)(b)-(d) or where the court’s inherent jurisdiction is invoked, as in this case, the issue before the judge remained primarily a matter of pleading, namely, whether the claims as pleaded were based on a contract of employment.  That issue was to be resolved by looking at the pleading on its own, and affidavit evidence from the plaintiff to the effect that the contract was an employment contract, or that the parties never regarded it as an employment contract, does not assist the plaintiff.  The reason for this is that even if the plaintiff’s assertions were accepted as true, she had chosen to plead her claims as being founded on an employment relationship, and such pleaded claims before the District Court ought still to be struck out.

31.  Therefore the judge was correct in her primary approach to the application, by looking at the Amended Statement of Claim alone, and decided, also correctly, that the monetary claims as pleaded were based on a contract of employment.  Where the judge fell into error was when she, as a matter of prudence (probably in deference to the plaintiff’s submissions that she should: see paragraph 17 of the 1^st Decision), went on to decide whether the Contract was a contract of employment.  That was never an issue for determination in the summons before the judge (including those applications under Order 12 and Order 14A which were abandoned).  Nor should it have been, as the issue whether the relationship between the parties amounted to employment was a mixed question of fact and law which could only be decided after all the relevant evidence of that relationship had been admitted and considered, and at this stage, the full facts were simply not before the court.  Given that the application to strike out was based on the alternative grounds under Order 18 rule 19(1)(b)-(d) and the court’s inherent jurisdiction, it was open for the judge to look at the affidavit evidence, but she should have concluded that the extrinsic evidence did not assist in the determination of what was essentially a point of pleading, and should not have attempted to make a determination of the separate and different issue of whether, as a matter of fact and law, the Contract was one of employment.  If the plaintiff’s affidavit evidence had any relevance, it was to highlight the embarrassing nature of her pleading, in circumstances where the plaintiff was one the hand asserting that there was no contract of employment in materials extrinsic to her pleading, while on the other hand, she appeared to be relying on a contract of employment in the pleading itself.

32.  We note that the plaintiff has complained that leading counsel for the defendant at the hearing refused to be drawn on the defendant’s position as to whether the Contract was one of employment.  We also note that nowhere in the papers before us in these proceedings has the defendant expressed a position on that issue.  We make no comment on the defendant’s stance, save that in the light of that stance, it may also have been inappropriate for the judge to have said in passing in paragraph 14 of the 1^st Decision that the parties disagreed that the Contract was one of employment.

33.  As to the claim for medical expenses, we agree with the judge that in so far as the plaintiff asserts that her claim was based on tort, it is not apparent from the pleading itself that the claim was so based, and if so, what cause of action in tort is being relied on, and that in so far as the claim may be read as being based on contract, then it would have been a monetary claim based on a contract of employment, and within the exclusive jurisdiction of the Labour Tribunal.  Either way, the claim is liable to be struck out.

34.  As to the non-monetary claims, the judge was correct in holding that the relief of an apology and an investigation report into the alleged misconduct of a partner of the defendant is not known to, and not available in, the areas of the law with which this case is concerned.  The plaintiff’s ground that the judge should have considered what causes of action rather than remedies existed does not take her proposed appeal any further, since her causes of action, as pleaded, ought to be struck out in any event, for the reasons given above.

35.  As to the plaintiff’s argument that her claims are fact-sensitive and should not be struck out at this stage, the defendant’s summons was never concerned with the substantive merits of her claims (eg whether the contract was one of employment, whether the defendant was in breach of that contract and what loss the plaintiff may have suffered).  The issue was primarily whether the plaintiff had pleaded claims over which the District Court had no jurisdiction or should otherwise be struck out as disclosing on reasonable cause of action as a matter of pleading.

36.  We agree with the plaintiff that a pleading should be struck out only in a plain and obvious case.  While the court is generally reluctant to strike out an action if the pleading can be cured by amendment, we note that the ground of the defendant’s application was made clear in the summons and the supporting affidavit, that the plaintiff subsequently took steps to amend her pleading, but despite the afore-mentioned circumstances, she chose to persist in making repeated averments of “employment” in her pleading and in making claims under the Employment Ordinance.  The result was a pleading which disclosed no reasonable causes of action that were justiciable in the District Court in its original jurisdiction.  In these circumstances, we see no ground for interfering with the judge’s exercise of discretion in striking out the action.  Although the judge erred in attempting to resolve the issue of whether the Contract was one of employment, it did not affect her primary decision that the plaintiff’s claims as pleaded ought to be struck out.

37.  As to the plaintiff’s complaint that the judge’s ruling on the admissibility of the fresh evidence was irrelevant to her application for leave to appeal, suffice it to say that this ground has no bearing on the proposed appeal and that we do not in any case disagree with the judge’s ruling.  In any event, the evidence, even if admitted, would not have made a difference to the determination of the summons which, as we explained above, depended on a consideration of the pleading by itself.

38.  As to the plaintiff’s proposed appeal against the judge’s decision to allow a certificate for senior counsel for the hearing of the summons, we note that the course of alleged events which led to the present proceedings stemmed from the plaintiff’s complaint about the alleged misconduct on the part of a partner of the defendant, and that the claims included the relief of an order for an apology and for an order of an investigation report into the alleged misconduct, which must be a matter of great concern to the defendant.  We also note that the judge has refused to allow a certificate for two counsel.  In these circumstances, we regard the judge’s costs order as being well within the proper exercise of her discretion and do not see any ground for interference.

39.  We hereby determine the plaintiff’s application for leave to appeal without a hearing on the basis of written submissions only under Order 59 rule 2A(5).  For the reasons given above, we dismiss the application with costs.  As the application is entirely without merit, we also make an order under Order 59 rule 2A(8) that no party may request this determination to be reconsidered at an oral hearing inter partes under Order 59 rule 2A(7).

40.  We make an order nisi that the plaintiff is to pay the defendant’s costs of this application and that the costs of the defendant be assessed summarily at $40,000.  Any party who seeks to vary the order nisi shall lodge a written submission within seven days hereof, failing which the order shall become absolute.  The other party may lodge a response within seven days thereafter.