CITIPOST (ASIA) LTD v. JULIAN ROBERT HOLLIDAY

cacv 111/2004

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 111 of 2004

(on appeal from HCA NO. 3393 of 2003)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This is an appeal from a judgment and order of Yam J of 24 March 2004 whereby he ordered that the proceedings herein be stayed pending the final determination of the Labour Tribunal dispute between the plaintiff and the defendant and that the costs of the hearing before him should be to the defendant in any event.  At the conclusion of the hearing of this appeal this court dismissed this appeal with costs to the defendant with reasons to be handed down in writing.

The defendant’s employment

2.  The defendant was employed by the plaintiff under a contract of employment dated 1 February 2002.  He was engaged as the managing director at a salary of $90,000 per month.  The defendant claims that he was constructively dismissed from the plaintiff’s employment and therefore left the employment on 25 June 2003.  On the other hand the plaintiff avers that it dismissed the defendant for cause on 26 June 2003.  Which party is correct remains to be decided. 

3.  On 28 July 2003 the defendant filed a claim in the Labour Tribunal claiming $1.7 million being 19 months pay from 1 June 2003 to 31 January 2005.  On 13 August 2003 the plaintiff filed a defence in the Labour Tribunal and on 18 August it filed submissions for the case to be transferred from the Labour Tribunal to the Court of First Instance.  It also filed a counterclaim.  Following that there was a hearing in the Labour Tribunal on 22 August 2003 during which there were submissions on behalf of the plaintiff that the matter should be transferred to the Court of First Instance.  The matter was adjourned to 10 October 2003, the Presiding Officer apparently indicating that he had concerns that the matter should be transferred.

The claim made in this action

4.  The writ in this action was issued on 11 September 2003.  Following that the defendant took out the summons that was heard before Yam J seeking an order that the writ and service thereof should be set aside and a declaration that in the circumstances of the case the court had no jurisdiction over the defendant in respect of the subject matter of the claim or the relief or remedy sought in the action.  Consequent upon that when the matter came back before the Labour Tribunal on 10 October 2003, the Presiding Officer adjourned the matter pending the outcome of the application before the judge.

The statement of claim

5.  The statement of claim in this action recites a number of passages from the defendant’s employment contract and in particular it sets out 4 categories of covenants which it refers to as the Restrictive Covenant.  They are:

(a)	a covenant that during the employment by the plaintiff and at all times thereafter the defendant would not divulge to any other party any trade secret or confidential information;
(b)	a covenant not to compete with the plaintiff, seemingly unrestricted in area but limited for a period of 1 year following termination of the employment;
(c)	a covenant not to solicit customers and potential customers of the plaintiff for a period of 6 months following the termination of the employment;
(d)	a covenant not to solicit or hire or assist in the hire of employees of the plaintiff within 6 months following termination of the employment.

In addition it is alleged that the defendant owed fiduciary duties.

6.  There then follows an allegation that in breach of an implied term, or perhaps a number of them, or alternatively fiduciary duty: the defendant had charged a number of items which were items of personal expenditure to the plaintiff.  These items totalled the sum of $20,521.93.  There are allegations that the defendant wrongly claimed to have worked when he was in fact on leave.  There is an allegation which apparently leads nowhere that the defendant had sought to have the plaintiff’s employees certify to the Inland Revenue that the plaintiff was working for a United Kingdom company.  There are then allegations that the defendant had denigrated the plaintiff in the eyes of its major customers.  There then follows some vague and totally unparticularised reference to “the Plaintiff’s commercial confidential information”.  There are allegations that the defendant has approached and solicited employees of the plaintiff to resign and join a new company which he had set up and that he had approached and solicited 3 of the plaintiff’s customers to use the new company’s services.  There is a further vague and unparticularised reference to the defendant having used the “plaintiff’s confidential commercial pricing and customer’s information”. 

7.  The prayers for relief are of significance.  There is a claim for a declaration that the defendant is bound by the Restrictive Covenant and a prayer for an injunction to restrain the defendant from breaching the Restrictive Covenant.  There is also a claim for the sum of $20,521.93 and damages and interest.

The judgment below

8.  In the judgment below the judge referred to section 7 of the Labour Tribunal Ordinance (“the Ordinance”) and the Schedule thereto and the fact that it provided that the Labour Tribunal should have exclusive jurisdiction in respect of a claim for a sum of money which arises from the breach of a term, whether express or implied, of the contract of employment.  After analysing the plaintiff’s claims in this action the judge came to the conclusion that the only matter which was outside the exclusive jurisdiction of the Labour Tribunal was the injunctive relief claimed by the plaintiff.  In my view the judge was correct.  Indeed, nearly a year has passed since the judge heard the matter and it can now be said that the injunction claim, limited as it is to the Restrictive Covenant in the contract of employment, is now a matter of history.  The periods of the Restrictive Covenant have now expired save for clause 7 which prohibits the divulgence of confidential information.  But as already indicated, any claim in respect of confidential information must, on the state of the allegations and evidence adduced so far, be ignored.  As was conceded by Mr Yuen SC, who appeared on behalf of the plaintiff, the allegations in the statement of claim neither identify the information which is said to be confidential nor do they specify, as opposed to making non specific allegations, any breach of confidentiality.  There is also the difficulty, acknowledged by Mr Yuen in the course of argument, that former employees cannot be restrained from using knowledge that would be regarded as part of his general fund of personal knowledge, skill and experience gained in the ordinary course of carrying out his employment.  Indeed, Mr Yuen acknowledged that the pleading did not contain the necessary allegations to found a breach of confidence action.  In those circumstances, it seems to me that the allegations in respect of confidential information would fall to be struck out should any such application be made.

This appeal

9.  On this appeal Mr Yuen sought to argue that the claims made in this action fell outside the scope of the jurisdiction of the Labour Tribunal because they did not relate to a sum of money.  Although in the skeleton submissions filed on behalf of the plaintiff it appears in paragraphs 9 in 10 and thereafter that the contention on behalf of the plaintiff was that the phrase “a sum of money” only covered a liquidated sum and did not extend to an unliquidated demand, when Mr Yuen was asked in argument whether he contended that the phrase meant a liquidated demand in the strict legal sense of the word, as for example set out in paragraph 808 of Halsbury’s Laws of England, 4^th Edition, Vol 12(1), Mr Yuen said that he did not.  He sought to suggest that it meant something similar but not so precise.

10.  In the skeleton submissions this court’s attention was drawn to a range of cases whereby different judges had pronounced upon the matter, some indicating that there was an undesirable divergence of views.  In National Ebauch Ltd v Rishi Kaumar Bhatnagar [1981] HKLR 140 Roberts CJ posed the question “Is a claim for liquidated damages ‘a sum of money’ within the meaning of that Schedule?”  Having posed that question which may be regarded as asking whether liquidated damages fell within the compass of a broader category, as opposed to asking a question along the lines “Does ‘a sum of money’ mean a liquidated sum?”he then went on to say:

“	It seems to me that the ordinary meaning of the phrase ‘a sum of money’ is that it is an ascertained sum.  This view, so far as the Labour Tribunal Ordinance is concerned, is reinforced by the passages to which I have referred in the Explanatory Memorandum, which indicate that the intention of the Legislature was to exclude claims for unliquidated damages.  This seems to me to be in accordance with the general intention of the Ordinance, which was to provide a simple informal forum without lawyers to deal with relatively simple claims which can be easily quantified.
	I have, therefore, come to the conclusion that a claim for a sum of money arising from a breach of contract, does not include a claim for unliquidated damages.”

11.  Although Roberts CJ had been Attorney-General at the time of the introduction of the Bill leading to the enactment of the Labour Tribunal Ordinance, there appears to be a quantum leap in the reasoning between the requirement that there should be an ascertained sum, or in other words a quantified sum, and the holding that the Ordinance required there to be a liquidated sum.  The ability to quantify a claim easily does necessitate that the claim must be for a liquidated amount.

12.  Roberts CJ’s decision, which was apparently delivered ex tempore, was considered some 2 years later by Hunter J (as he then was) in Panalpina (Hong Kong) Ltd v Ulrich Haldemann [1983] HKLR 275.  Hunter J said at page 278B:

“	But to say that damages are unliquidated is not to say that they are general in the pleading sense, or at large.  With very few exceptions, e.g. loss of reputation, and more recently loss of a holiday, damages for breach of contract are not general but special, and have to be precisely particularised and quantified.  Contracts of service are no exception to this.  The claim here was thus properly particularised and quantified.  In an attempt to defeat this application and to bring himself specifically within the National Ebauch decision the defendant applied for leave to amend the counterclaim (inter alia) by deleting the particulars.  But when I pointed out that these particulars were essential to the claim, whether it was pursued in this court or before the Labour Tribunal, the application for leave to amend was abandoned.
	In my judgment the phrase ‘sum of money’ must be construed in the light of the fact that practically every claim for ‘breach of a term … of a contract’ will be for damages unliquidated in law but quantified in practice.  It follows, I think that the phrase must cover such claims.  I agree with Roberts, CJ that the legislature anticipated a ‘quantified’ claim and a claim that was ‘ascertained’ or ascertainable.  But I regret that I cannot agree that this makes the claim one for liquidated damages, or that it limits the tribunal’s jurisdiction to such claims.  This conclusion seems to me to be supported by para. 3.  No claim ‘founded in tort’ can be for liquidated damages.  It may contain a calculated or special damages element; but the bulk is likely to be for general damages.  I am much comforted to know that the same conclusion was reached by O’Connor, J on 18th December 1979 in Stewart and Others v The Hong Kong Philharmonic Society Limited HC Civil Action No. 3031/79.  Unfortunately as this decision was not reported, it was not cited to Roberts, CJ.”

13.  The decision of O’Connor, J in Stewart and Others v The Hong Kong Philharmonic Society Limited is not available in the High Court library and the case file has long since been destroyed.  Thus no further help can be had from that.  I would add that it is clear from Hunter J’s judgment that he felt himself driven to the conclusion to which he came despite the fact that his clear preference would have been to decide the outcome of the matter before him the other way.  Furthermore, it is most unlikely that such a distinguished judge as Hunter J would have disagreed with Roberts CJ, who was still at the time Chief Justice, without giving careful thought to the matter, and, indeed Hunter J’s judgment was reserved.  I would respectfully agree with it.

14.  In my view it would be quite wrong to interpolate into the Schedule of the Ordinance that the claim must be for a liquidated amount.  That would be to read words into the statute that are not there.  Any claim must, as Hunter J pointed out, be fully particularised.  As the passage quoted above emphasizes, that must be so whether the claim is one made in a court or in the Labour Tribunal.  In my view this is borne out by the provisions of section 12 of the Ordinance which read as follows:

“	A claim shall contain-
	…
	(c)	the sum of money claimed by each claimant or person represented;
	(d)	such particulars of the claim as shall be reasonably sufficient to inform the defendant of the grounds for the claim and of the manner in which the amount claimed by each claimant or person represented has been calculated.”

15.  The reference in subsection (d) to the amount claimed being calculated appears to me to mean that the claim must be quantified but not necessarily, and in most cases not, liquidated.  Colloquially one might refer to a quantified claim as liquidated, as might be suspected was the case in the Explanatory Memorandum, but if the term is used with precision most claims for breach of contract of employment would not be liquidated.  One might add that it is most likely that the claim for damages in the National Ebauch case, was probably unquantified in the pleading as it stood as it was a claim based on an implied term for inducing other employees to breach their contracts.  This no doubt gave the impression of being a claim for general damages but on analysis it would be appreciated, as Hunter J pointed out, that eventually the plaintiff would have had to quantify its claim.

16.  In my view the approach of the judge below was correct.  In the final analysis this was a matter of the exercise of his discretion.  I do not see that it has been shown that he has erred either in fact or in law which would justify this court interfering with the exercise of his discretion.  Be that as it may, I have, for the reasons which I have endeavoured to set out, no doubt that the claims made by the plaintiff in the present proceedings do fall within the exclusive jurisdiction of the Labour Tribunal.  The claim in respect of the injunction would now appear to be irrelevant, specifically on the pleadings and prayers for relief as they now stand.  The fact that the plaintiff has not quantified its claim cannot take the matter out of the jurisdiction of the Labour Tribunal.  Furthermore, I can see no apparent reason why the Labour Tribunal should refuse to exercise jurisdiction in the matter and transfer it to the Court of First Instance.  Of course, that is a matter for the Labour Tribunal to consider and on which to reach its own conclusion.  Certainly the claim for the return of the allegedly wrongly claimed expenses is a matter which would be much more suitable for the Labour Tribunal to decide than the Court of First Instance.  The minimal amount of that claim would make any exercise of trial of that matter in the High Court far more costly than any award could possibly be.

Hon Le Pichon JA:

17.  I agree.