WONG CHI CHING v. BOCOM INTERNATIONAL HOLDINGS CO LTD

CACV 113/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 113 OF 2015

(ON APPEAL FROM HCA NO. 362 OF 2014)

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REASONS FOR JUDGMENT
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Hon Lam VP :

1. I respectfully agree with the judgment of Cheung JA. I also agree that Yu Hoi Po v Act International [1996] 4 HKC 377 was wrongly decided and should not be followed.

Hon Cheung JA :

I.  The appeal

2. Deputy High Court Judge B Chu (now B Chu J) struck out the plaintiff’s claim under Order 18, rule 19(1)(b) and (d) of the Rules of the High Court and the inherent jurisdiction of the Court.  She also dismissed the plaintiff’s action.  The plaintiff now appeals.

II.  The plaintiff’s pleaded case

3.1.  Between 19 April 2004 and 4 December 2008, the plaintiff was employed by the defendant as the Deputy Manager of the defendant’s Equity Capital Markets Department (‘ECM Department’).  The plaintiff was dismissed by the defendant by reason of redundancy with effect from 5 December 2008.

3.2.  When the plaintiff was employed by the defendant, she was a licensed representative of the defendant and its subsidiaries to carry on for the defendant Type 1 (Dealing in Securities) and Type 6 (Advising on Corporate Finance) regulated activities.  During the plaintiff’s employment with the defendant, the plaintiff was entitled to bonuses.

3.3.  The plaintiff pleaded that the defendant was a wholly-owned subsidiary of the Bank of Communications Co. Ltd. and an intermediary under Securities and Futures Ordinance (Cap. 169) (‘SFO’) registered for regulated activities Types 1, 2, 4, 5, 6 and 9 and was subject to,

(1)  the ‘Management, Supervision and Internal Control Guidelines’ (‘the Internal Control Guidelines’) published by the Securities and Futures Commission (‘SFC’) under section 169 of the SFO in April 2003;

(2) the ‘Fit and Proper Guidelines’ published by the SFC under section 399 of the SFO in September 2006; and

(3) the ‘Additional Fit and Proper Guidelines for Corporations and Authorized Financial Institutions applying or continuing to act as Sponsors and Compliance Advisers’ (‘the Sponsor Guidelines’) published by the SFC under section 399 of the SFO in September 2006.

3.4. The plaintiff pleaded that the defendant had in breach of the implied terms of the contract of employment and/or its duty of care owed to the plaintiff, employed two individuals, namely a Mr Wan (‘Wan’) as managing director, and a Ms Au (‘Au’) as a principal engaged in sponsorship, which resulted in the plaintiff losing the bonus that she would have earned from various projects but for the defendant’s breaches.  These two persons are unfit individuals who caused the defendants to lose these projects.

3.5.  This is how she pleaded the breach and her loss :

‘ The Implied Term of the Employment Contract

23. It is an implied term of the 1^st Employment Contract and the 2^nd Employment Contract that the Defendant would not, without reasonable and proper cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between the Plaintiff and the Defendant.

The Defendant’s Duty of Care towards the Plaintiff

24. Further, at all material times from 19 April 2004 to 4 December 2008, the Defendant owed a duty to the Plaintiff to exercise due care and skill to employ fit and proper persons.

25. In discharging its duty of care and skill the Defendant had to act in compliance with, inter alia, the Internal Control Guidelines, the Fit and Proper Guidelines and the Sponsor Guidelines referred to in paragraphs 14 to 22 above.

The Defendant’s Breach

26. In or about April 2007, the Defendant appointed Mr. Wan Ten Lok (‘Mr Wan’) as its Managing Director.

27. At the time of Mr. Wan’s Appointment,

27.1 Mr. Wan had been the subject of an investigation conducted by the Securities and Futures Commission for about 27 months;

27.2 Mr. Wan was unable to transfer his accreditation and approval as a responsible officer with the Defendant;

27.3 Mr. Wan was not duly registered with the Securities and Futures Commission; and

27.4 Mr. Wan was not a fit and proper person to perform the duties of a Managing Director.

28. In the premises the Defendant breached the implied term stated in paragraph 23 above and/or its duty of care stated in paragraphs 24 to 25 above.

Particulars of breach

28.1 Failing to ensure that the firm only employs persons who are fit and proper (ie financially sound, competent, honest, reputable and reliable) to perform the duties for which they are employed;

28.2 Failing to ensure that the firm only employs persons who are duly registered with the SFC as required; and

28.3 Failing to ensure that the firm only employs persons who have the ability to carry on the regulated activity competently, honestly and fairly.

29. After Mr. Wan’s engagement by the Defendant, the Defendant was involved as a co-lead manager with Macquarie Securities Limited in a project to list the Bio Beauty Group Ltd. (“Bio Beauty”) on the Stock Exchange of Hong Kong.

30. During the course of the Defendant’s work on this project, Mr. Wan in late 2007 or early 2008 improperly released confidential information concerning Bio Beauty to the press, causing Bio Beauty to sue Mr. Wan.

31. Thereafter, as a result of Mr. Wan’s conduct aforesaid, the Defendant and its subsidiary, which had regularly been invited by Macquarie Securities Limited and other institutions to join in their syndicates as a co-lead manager or a co-manager, was no longer invited to do so, causing loss of business to the ECM Department of the Defendant, and consequent loss of bonus to the Plaintiff.

32. As a result of the Defendant’s breach of the implied term stated in paragraph 23 above and/or its duty of care stated in paragraphs 24 to 25 above arising out of the Defendant’s employment of Mr. Wan, the Plaintiff suffered loss and damage as a result of losing the bonus that she would have earned from the following projects but for the Defendant’s breaches aforesaid.

Particulars of loss and damage

Particulars of loss and damage
	Project	Estimated Bonus (HK$)
32.1	China Railway Construction Corporation Limited	273,813
32.2	China South Locomotive & Rolling Stock Corporation Limited	69,888
32.3	Honghua Group Limited	62,239
32.4	Want Want China Holdings Limited	122,305
32.5	Solargiga Energy Holdings Limited	14,810
32.6	Maoye International Holdings Limited	56,181
32.7	Asia Cement (China) Holdings Corporation	27,844
32.8	Central China Real Estate Limited	26,813
32.9	China Shanshui Cement Group Limited	30,069
Total		683,962

33.  Further, in or about 2007, the Defendant appointed Ms. Au Fung Lan (“Ms. Au”) as a principal.

34.  At the time of Ms. Au’s Appointment, the Defendant was in breach of the implied term stated in paragraph 23 above and/or its duty of care stated in paragraphs 24 to 25 above in employing Ms. Au as a principal engaged in sponsorship:

34.1 Ms. Au had not played a substantial role in advising a listing applicant as a sponsor in at least two completed IPOs on the Main Board and/or GEM Board of the SEHK; and

34.2 The SFC had not exercised its discretion to grant Ms. Au a dispensation from strict compliance with the requirements on eligibility.

34.3 Ms. Au was not competent to perform her duties.  As a result the Defendant was dismissed as a sponsor in 2 further projects, causing loss of business to the ECM Department of the Defendant and consequent loss of bonus to the Plaintiff.

35.  As a result of the Defendant’s breach of the implied term stated in paragraph 23 above and/or its duty of care stated in paragraphs 24 to 25 above arising out of the Defendant’s employment of Ms. Au, the Plaintiff suffered loss and damage as a result of losing the bonus that she would have earned from the following projects but for the Defendant’s breaches aforesaid.

Particulars of loss and damage
Project		Estimated Bonus (HK$)
35.1	Youyuan International Holdings Limited	2,012,400
35.2	Foremost Group	864,000
Total		2,876,400

36.  Alternatively, the Plaintiff claims damages for loss of a chance of earning the bonuses stated in paragraphs 32 and 35 above.’

III.  Further background

4.1. After the plaintiff had left the employment of the defendant, she had signed a Settlement Letter dated 10 December 2008 prepared by the defendant which set out the details of the plaintiff’s ‘final payments’, namely salary for December 2008, payment in lieu of untaken annual leave, payment in lieu of short notice, severance payment and contributions to MPF.  It was stated in the last paragraph of the Settlement Letter :

‘ Please signify your confirmation and acceptance by signing and returning the duplicate copy of this letter. You should note that the compensation package outlined above is that to which you are contractually and statutorily entitled. You should confirm that you have no remaining claims against the Company and agree to waive and release the Company from any claims.’

(‘Waiver/Release’)

4.2.  Notwithstanding the plaintiff signing the Settlement Letter, on 30 December 2010she filed a claim in the Labour Tribunal against the defendant for alleged outstanding balance of bonus payments under her contract of employment for the years ending 2004, 2005, 2006, and 2008, in the total sum of about HK$3,964,146.03 (‘the LT Claim’).  The defendant later filed its defence to the plaintiff’s LT Claim.

4.3.  On 18 January 2011, the defendant applied for the transfer of the LT Claim to the High Court under section 10 of the Labour Tribunal Ordinance Cap 25 (‘LTO’) on the basis, among other things, thatthe claim involved complicated legal issues and expert evidence.  The plaintiff opposed the transfer but the Presiding Officer of the Labour Tribunal made an order to transfer the LT Claim to the High Court and it became a High Court action on 21 August 2012 (‘the 1^st HC claim’).

4.4.  Directions were then given for the filing of pleadings.  The plaintiff claimed, among other things, in her amended statement of claim filed on 2 January 2013 in the 1^st HC claim, a total of about HK$4,002,708.77 being the alleged outstanding balance of bonus payments for the years ending 2004, 2005, 2006 and 2008 under her contract.

4.5.  The defendant filed its defence on 8 February 2013, and on the same day a notice of sanctioned payment was filed by the defendant.

4.6.  The plaintiff’s claim in the 1^st HC claim was settled on 7 March 2013 by her accepting the sanctioned payment of HK$1,800,000.

4.7.  About six months later, on 16 November 2013, the plaintiff’s solicitors wrote to the defendant seeking damages for the loss of bonus which she claimed she would have earned under her contract of employment had it not been for the defendant’s employment of Wan and Au.  The amount of damages claimed in this letter was HK$5,381,818.

4.8.  The defendant denied the claims.  The plaintiff eventually issued the writ and statement of claim in the present action.  Shortly thereafter the defendant issued the present application to strike out.

IV.  The striking out

5.1.  The defendant applied to strike out the plaintiff’s claim on the following four grounds :

(1) The plaintiff’s present claim fell within the jurisdiction of the Labour Tribunal and the High Court has no jurisdiction in relation to the claim (Ground 1);

(2) The plaintiff’s present claim constituted an abuse of process as the purported claim could and should have been raised by the plaintiff in the earlier 1^st HC claim (Ground 2);

(3) The plaintiff was in any event not entitled to pursue the present action by virtue of her prior agreement to waive and release the defendant from all her claims except her medical claim during the notice period (Ground 3);

(4) The plaintiff’s claim was also liable to be struck out on the basis that it was out of time (Ground 4).

5.2. The Judge acceded to the striking out on all these grounds.

V.  Principle

6. It is not necessary to repeat the well-established principles on striking out.  It is sufficient to state that as the application to strike out will drive the plaintiff from the judgment seat before her day in court, the Court will only accede to the application in plain and obvious cases.

VI.  The real dispute

7. Mr Earl Deng, counsel for the plaintiff (who did not appear below) has with diligence addressed the findings that were made against the plaintiff.  But, as was the focus at the hearing of the appeal, the dispute in this case is whether the present claim amounts to an abuse of process by reason of res judicata in the wider sense, which is often described as the Yat Tung abuse (based on the case of Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581) which applied Henderson v Henderson (1843) 3 Hare 100, 67 ER 313, [1843-60] All ER Rep 378 (‘the Henderson abuse’).  I will deal with this topic in detail later on.  But before that, I will briefly address the other grounds relied upon by the defendant in striking out the present claim.

VII.  The other grounds

1)  Jurisdiction of the Labour Tribunal

8.1.  The Judge had correctly identified that the relevant provisions of the LTO for this issue are sections 7(1) and (2), sections 10(1) and (2) and the Schedule thereof.

8.2.  Section 7(1) states that the tribunal shall have jurisdiction to inquire into, hear and determine the claims specified in the Schedule. 

8.3. Section 7(2) then provides that, save as is provided in the LTO, no claim within the jurisdiction of the tribunal shall be actionable in any court in Hong Kong.

8.4.  Further, under section 10(1), the tribunal may, at any stage of proceedings, if it is of the opinion that for any reason the claim should not be heard and determined by it, decline jurisdiction.  Then section 10(2) states that the tribunal may, when it declines jurisdiction under subsection (1), transfer the claim to the Court of First Instance, the District Court or the Small Claims Tribunal, in such manner as may be prescribed.

8.5. The Schedule of the LTO sets out the claims which the tribunal shall have jurisdiction to inquire into, hear and determine, and under paragraph 1, this includes a claim for a sum of money which arises from the breach of a term of a contract of employment, the breach of a term of a contract of apprenticeship or the failure of a person to comply with the provisions of the Employment Ordinance, the Minimum Wage Ordinance or the Apprenticeship Ordinance, and under paragraph 2, a claim for contribution under section 26(2) of LTO.

8.6.  Paragraph 3 of the Schedule is important :

‘ Notwithstanding paragraphs 1 and 2, the tribunal shall not have jurisdiction to hear and determine a claim for a sum of money (whether liquidated or unliquidated), or otherwise in respect of a cause of action, founded in tort whether arising from a breach of contract or a breach of a duty imposed by a rule of common law or by any enactment.’ (emphasis added)

8.7.  Mr Anthony Chan, counsel for the defendant, argued before the Judge that, although in the present case the plaintiff’s pleaded claim included both contract and tort, in reality, it is a contractual claim based on the plaintiff’s employment relationship with the defendant and comes under the exclusive jurisdiction of the Labour Tribunal. 

8.8.  The plaintiff disagreed that the plaintiff’s claim is in reality a contractual claim.

8.9. The Judge accepted the defendant’s submission.  She held that :

‘ 52. In any event, having considered the pleadings in the 2^nd SOC, I am of the view that there was in reality no practical difference between the two claims and any judgment given in favour of P in respect of the Contractual Trust and Confidence Claim would fully satisfy her Breach of Duty Claim, and I accept Mr Chan’s submission that P’s latter claim was no more than “window dressing”.

53. In the above circumstances, the Breach of Duty Claim, being in reality a contractual claim, should also fall within section 1(a) of the Schedule to LTO and the exclusive jurisdiction of the Labour Tribunal, and accordingly, P’s 2^nd HCA or the present action, which was wrongly issued in the High Court, should be struck out.’

8.10.  In my view, for the purpose of this appeal, it is not necessary to decide whether the present claim is in reality nothing but an employment claim in contract.  I am prepared to assume that there is an alternative and separate cause of action in tort which takes the case outside the ambit of the LTO.

8.11. Mr Chan has also raised a new point on appeal that the present claim is not known in law but without elaboration.  Again it is not necessary to go into this issue.

2)  Release

8.12.  The plaintiff’s case on the Settlement Letter is that before she signed it, she was assured by the defendant that the settlement did not cover the issue of bonus which was to be dealt with later separately.  The Judge found this to be inherently incredible in that as the plaintiff had by then demanded the payment of bonuses, there was no reason why she should not specify the exclusion of bonus from the settlement and instead had only chosen to exclude medical expenses from the settlement.  Accordingly, the Judge accepted the defendant’s submission on release.

8.13.  I am again prepared to hold that this issue involves dispute of facts which may not be properly resolved in a striking out application.

8.14. Mr Deng further submitted that the settlement was not supported by consideration in that by the time the settlement was effected, the plaintiff’s employment had already been terminated and the consideration for the settlement was past consideration.  Mr Chan on the other hand argued that there was good consideration by reason of the executory contract and the mutual release of each party’s rights to performance or rights to damages under the contracts. These are new arguments not canvassed below.

8.15.  Again I am prepared to assume that the settlement was not supported by consideration and is therefore not effective as a release of the defendant’s liability.

3)  Time bar

8.16.  The Judge held that since the plaintiff’s present claim is a contractual claim, the cause of action accrued and the limitation period began to run as soon as there was a breach of contract.  The Judge held that the breach of contract occurred from the time of employment of Wan and Au in 2007 so that by the time of the commencement of the present action on 4 March 2014, more than six years had elapsed and the plaintiff’s claim was thus time barred under section 4(1)(a) of the Limitation Ordinance.

8.17.  Again in the light of my acceptance, for the purpose of this appeal, that the plaintiff’s claim may be based on tort, it is not necessary to express a view on limitation.

VIII.  Abuse of process

9.1.  As I said earlier, the real dispute in this appeal is on abuse of process.  The principles have been succinctly summarized by Ma CJ in Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72 at 114.  The following extracts are relevant for this appeal :

‘ 83(3) It must therefore be essential when striking out a claim on this basis (and thus preventing a litigation of that claim) that an abuse is found to exist in seeking to raise in subsequent proceedings claims or issues which could and should have been raised in earlier proceedings. This abuse will usually take the form of the other party being “vexed” (or in some cases, the terms “oppressed”, “unjustly harassed” or “unjustly hounded” are used) by the subsequent set of proceedings: Johnson v Gore Wood & Co, 31A-B.

(4) The abuse can also take the form of the administration of justice being brought into disrepute: see Chiang Lily, 256D-G ([58]) referring to Hunter v Chief Constable of the West Midlands Police [1982] AC 529.  With the procedural reforms introduced by the Civil Justice Reform in 2009, the courts in Hong Kong must now, when exercising their procedural powers, increasingly bear in mind not just the parties before them in any particular litigation but also the position of other litigants in the court process.  RSC O.lA r.1(f) states as one of the underlying objectives of the court’s procedural powers under the Rules to be “to ensure that the resources of the court are distributed fairly”.

(5) In examining aspects such as abuse, the court is concerned with balancing interests: not just those of the litigants before it, but also taking into account the other interests involved in the administration of justice.  It is important therefore here to emphasise that when the court is dealing with the Henderson v Henderson type of abuse, it is not looking at an absolute bar to litigation such as issue estoppel or cause of action estoppel.  On the contrary, in considering this type of abuse, the court is required to assess a number of factors and balance competing interests.  See here, Bradford and Bingley Building Society, 1490F–H. ….’

9.2. As Ma CJ further observed in the situation of Henderson abuse, first, the party whose claim is to be struck out does not have his day in court yet and second, an appellate court is obliged to pay sufficient regard to the decision of the court below and should be reluctant to interfere where the decision is based on the assessment or balancing of a number of factors.

9.3.  In the present case, the plaintiff has not given any explanation why she only commenced her present claim in 2014.  She has certainly not said that it was only at the time of the commencement of the present action that she became aware of the facts which give rise to the claim.  It is of note that she was legally represented after her claim was transferred from the Labour Tribunal to the High Court.  Certainly by 16 May 2008 the SFC had found Wan guilty of misconduct and further confirmed its finding on 9 September 2009: see Decision dated 7 October 2011 of the Securities and Futures Appeals Tribunal which dismissed, among other things, Wan’s appeal.  What was advanced on behalf of the plaintiff is the technical difficulties of including the tort claim in her application before the Labour Tribunal.  This is by reference to paragraph 3 of the Schedule of LTO which prevents a tort claim from being brought in the Labour Tribunal.  But on the authority of Dataprep (H.K.) Limited v. Kuo Chi-yung, Peter [1974] HKLR 383, the plaintiff could have included the tort claim and applied for a transfer of the case to the High Court.  Briggs CJ stated at 391 that,

‘ On the other hand, I do not think that it is necessary that the Labour Tribunal must be satisfied that it has jurisdiction to entertain a claim before it makes an order declining jurisdiction and transferring that claim to the District or Supreme Court.

  ……

A very good reason for making an order for transfer could well be lack of jurisdiction or a doubt as to jurisdiction.

When therefore the Tribunal considers it lacks jurisdiction it can either so rule leaving the aggrieved party to appeal under section 32 to the District Court or it can make an order of transfer to the District or Supreme Court.’

9.4.  Likewise Huggins J held at 395 that,

‘ … However, I see no reason why a claim brought bona fide in the tribunal but which after enquiry the tribunal thinks it has no jurisdiction to hear and determine should not be transferred under s. 10. Besides cases like the present, where questions arise under s. 9. one can visualise cases which might prove to be founded upon a contract for services and not upon a contract of service: the tribunal would have to decline jurisdiction, but I am of opinion that those claims could be transferred so that the claimants would not be forced to institute new proceedings in theappropriate court.’

9.5. Mr Deng then argued that based on the authority of Yu Hoi Po v Act International Ltd [1996] 4 HKC 377, even after the transfer of the claim to the High Court, the High Court has no jurisdiction to deal with claims outside the jurisdiction of the Labour Tribunal.  This is what Seagroatt J said at 379 of Yu Hoi Po,

‘ When s 10 of the Labour Tribunal Ordinance is invoked to transfer a claim to the High Court it is a transfer of jurisdiction. The claim itself remains confined to that which the tribunal has jurisdiction to entertain in the first instance and although it becomes subject to the jurisdiction and rules of the High Court for the purposes of its progress and resolution, it does not change its character. The schedule to the Ordinance continues to govern the nature and extent of the claims permitted.’

9.6. In my view, this is an unduly restrictive view of the jurisdiction of the High Court which is a Court of unlimited jurisdiction.  This approach will in effect encourage multiplicity of actions by requiring an applicant to file a fresh High Court action pleading a claim not within the jurisdiction of the Labour Tribunal instead of including all the claims in a single application.  This is not conducive to a speedy, efficient and economical disposal of litigation as required under the Civil Justice Reform.  I am of the view that Yu Hoi Po was wrongly decided and should not be followed.

9.7.  In any event, even if, for the purpose of argument, Yu Hoi Po precluded the tort claim to be included in the Labour Tribunal claim, there is no reason why the plaintiff could not have issued a fresh writ on the tort claim at the same time of the transfer and then applied for consolidation of the two actions.  The plaintiff relied on the emerging law which extends the employer’s liability towards the employee in terms of economic loss suffered by the employee as a result of the employer’s breach.  Although the nature of breach in this case is different, the emerging principle had already been canvassed at the time of the transfer of the claim in Tadjudin v Bank of America National Association [2010] 3 HKLRD 417.

9.8.  Mr Deng then argued that there was only a short period of four months between the transfer and the acceptance of the sanctioned offer.  But again, the plaintiff was legally represented during this period and by the time of the acceptance of the sanctioned offer on 7 March 2013, the Appeals Tribunal had already delivered its decision on 7 October 2011 which should have alerted the plaintiff to the possibility of raising the tort claim.

9.9. Whilst the tort claim is not an issue that has been litigated before, one has to balance this factor against the other factors such as the requirement that the plaintiff should raise all the claims at one go, particularly those based on the same employment relationship, instead of doing it piecemeal by way of a subsequent proceeding after the first set of proceeding had been compromised; the fact that the defendant is vexed by the subsequent proceeding; the knowledge of the plaintiff of facts which give rise to the subsequent claim; the plaintiff being legally represented; the waste of court resources in addressing the disputes of the parties in a piecemeal manner and the lack of explanation by the plaintiff on why the subsequent proceeding had not been brought earlier.  Bearing in mind these factors, in my view the Judge was correct to strike out the plaintiff’s claim.

IX.  Conclusion

10. Accordingly the appeal was dismissed with costs to the defendant.

Hon Yuen JA :

11. I agree with Cheung JA’s Reasons for Judgment.