CHU HEI MAN, QUALIA v. DYNASTY WORLD HOLDINGS LTD.

HCLA 58/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. HCLA 58 OF 1999

(On Appeal from Labour Tribunal Claim No. LBTC 7171 of 1998)

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REASONS FOR JUDGMENT

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This is an appeal against the finding of the Labour Tribunal that the Appellant left employment voluntarily and hence she was not entitled to wages in lieu of notice or pro rata year end payment.

2. The Appellant was employed as a sales supervisor by the Respondent on 4 December 1997 earning a monthly income of $6,300 plus commission. She ceased to be so employed on 5 August 1998 and on that day she received a total of $13,116 from the Respondent representing her last salary and commission. She signed on a salary receipt which was marked with 4 Chinese characters meaning "voluntary resignation".

It is the Appellant's case that the manager of the Defendant ("Mr Wong") presented her on 5 August 1998 with two letters: a reference letter and a termination letter and in summary, he said as follows:

"If you choose the termination letter, you cannot have the reference letter, but if you do choose the reference letter, you will not be paid the wages in lieu of notice."

The Appellant chose the reference letter. She said she had no choice and she could not attend an interview for a job without a reference letter. In her written statement accepted by the Tribunal as her evidence, she said that when she later learnt from the Labour Department that a reference letter could not be a substitute for wages in lieu of notice, she decided to lodge claim.

3. The evidence for the Respondent largely confirmed the Appellant's case except that Mr Wong said that the termination letter was originally intended to be a warning letter on the Appellant's performance. He considered that the Appellant had a choice over the matter which she did choose and it was not right for her to have first taken the advantage of reference letter and later turned round to claim against the Respondent. He considered everybody should be responsible for what he/she has done and accept the consequences.

4. As the learned Presiding Officer observed, the central issue of the case is who in reality terminated the contract of employment. If there is no dismissal in law and in fact, Sections 7 and 11 of the Employment Ordinance, Cap. 57, concerning rights of wages in lieu of notice and year end payment cannot apply. In both cases, there must be a dismissal before one can begin to consider compensation under these two heads.

5. According to the Reasons for Decision by the learned Presiding Officer: -

'The general principle of law is that an employee who resigns as a result of being given an option either to do so or be dismissed is usually said to have been constructively dismissed. (Penprase v. Mander Bros Ltd. [1973] IRLR 167)

In the present case, however, the Defendant did not simply told the Claimant to resign or she be sacked. What is more, a reference letter was offered and the presence of this factor also distinguishes this case from the general principle and the authority cited above. In Sheffield v. Oxford Controls Company Ltd. [1979] ICR 396, the English Employment Appeal Tribunal held that "where an employee was threatened that if he did not resign, he would be dismissed and the threat caused the resignation, that amounted to a dismissal in law; but where the resignation was brought about not by the threat of dismissal but by other factors such as the offer of financial benefits, there was no dismissal; that, accordingly, since the employee had agreed satisfactory terms upon which he was prepared to resign so that the threat of dismissal was not in fact the cause of his resignation, he had not been dismissed and the industrial tribunal's decision was correct.

In such circumstances, the principle that if an employer gives an employee the alternative of resigning or being dismissed and the employee opts to resign, there is a dismissal in law is not always applicable.

Another authority which supports the above proposition is the Court of Appeal case Martin v. Glynwed Distribution Ltd. [1983] ICR 511 where the Court had reversed the findings of the Employment Appeal Tribunal and affirmed the findings of the Liverpool Industrial Tribunal that an employee who was told that an enquiry into an accident in which he had severely damaged the employer's vehicle would probably result in his dismissal and that it would be in his best interest to resign was not dismissed by the employer but that he had voluntarily terminated his employment.

Reading the findings and conclusion of the industrial tribunal as cited in the case, it is observed that one of the reason why it was held that there was no dismissal and the employee terminated his own employment voluntarily is that there was some advantage to the employee in resigning rather than being dismissed. In paragraph 8 of the tribunal's reason as cited in p. 517 supra, the advantage to the resigning employee are as follows:

"Firstly, by giving the month's notice which he was allowed to do, he would clearly get a month's pay, whether he would have to work for it, or have it in lieu of notice ... Secondly, it must as indeed the [employers] pointed out, had been better for the employee to resign in the circumstances than be summarily dismissed. In the former event there would be less knowledge about what had happened and when seeking another job it would be better for him to be able to say simply that he had resigned rather than that he had been sacked..." '

I am satisfied that the Tribunal followed good law.

6. Then the learned Presiding Officer considered the Appellant's case: -

In my judgment, the Claimant in the present case, like Mr Martin, was not without choice. Besides the option to resign, she was offered a reference letter which she carefully considered and finally accepted for her own reasons. Clearly, the reference letter is a "consideration" to her agreement to resign.

In such a case, I find that the real cause of the resignation is not the threat of dismissal. Applying the principle in the Shieffield's case supra, it is the state of the mind of the resigning Claimant that she was willing and contended to resign. Using the same approach adopted by the industrial tribunal in the Martin's case above, I concluded that the state of the mind of the Claimant was that there was obvious advantage in choosing to accept a reference letter and it would be better for her to say to any prospective employer simply that she had resigned rather than she had been sacked. She must, as I find, have carefully considered the content of the termination letter and in particular, the adverse comment over her performance. I can see that there was certainly some benefits to the Claimant in exercising her option to resign, and in so doing, she had taken all the circumstances into account and although she may first be placed in a dilemma, she finally made her choice voluntarily. I therefore hold that there is no dismissal in law. Accordingly, the Claimant was not entitled to claim her statutory rights of wages in lieu of notice and year end payment.

7. Whether the Appellant voluntarily accepted the reference letter and hence agreed to resign forthwith is a matter of fact. The Tribunal heard the witnesses and considered all the relevant evidence. The learned Presiding Officer did not believe the Appellant when she said she felt she had no choice. I have no reason from the face of the record to find that the learned Presiding Officer came to an unjustified conclusion. There is, therefore, no reason nor power for me to disturb the decision of the Tribunal.

8. In the premises, the appeal is dismissed with costs to the Respondent to be taxed if not agreed.