王焯華 v. FIVE STAR WINE LTD.

HCLA35/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO.35 OF 2001

(On appeal from Labour Tribunal Claim No. LBTC 7290 of 2001)

-----------------------

-----------------------

-------------------------------------------------------------

REASONS FOR JUDGMENT

--------------------------------------------------------------

Appeal

1. This is an appeal by the defendant against the award of the Labour Tribunal dated 23 April 2001 whereby the presiding officer, after trial, entered judgment for the claimant in the total sum of $93,349.50. The award consisted of six items, namely, (1) wages in lieu of notice of $15,000, (2) arrears of wages of $8,677.40, (3) annual leave pay of $8,081.90, (4) end of year payment of $22,838.90, (5) sickness allowance of $28,258.00 and (6) commission of $10,493.30. The defendant sought to appeal against the award on items (1), (2), (4) and (6) only. Leave to appeal was granted on 28 June 2001. On 23 November 2001, I dismissed the appeal with costs. These are my reasons.

Background facts

2. The circumstances giving rise to these proceedings may be summarised as follows.

3. Pursuant to a letter of employment dated 30 April 1998, the claimant began his employment with the defendant as a sales manager on 1 May 1998 with a basic salary of $20,000 per month and commission at 8% of the sale volume. He was also entitled to double pay of one month basic salary. With effect from 1 October 1998, his basic monthly salary was reduced to $15,000. There was a factual dispute as to whether the basic salary was further reduced to $10,000 in March 2000.

4. On 21 May 2000, the claimant was hospitalised for acute labyrinthritis and was discharged on 18 July 2000. He was granted sick leave up to 1 August 2000 which was extended to 13 August 2000. It is not in dispute that he was not paid any sickness allowance under the Employment Ordinance. On 2 August 2000, he sent a notice of constructive dismissal to the defendant to take effect if the defendant did not pay him, inter alia, the sickness allowance, within seven days. In the event, the defendant did not make any payment. The presiding officer found that the claimant had thereby been constructively dismissed and awarded one month wages in lieu of notice.

5. The claimant complained that he was not fully paid for the months of April and May 2000. On 16 May 2000, he was only paid $10,000 for the wages of April. His wages for 1 - 20 May was $9,677.40 but he was only paid $6,000 on 17 June 2000. The defendant alleged that the parties had verbally agreed in March 2000 to reduce the basic salary to $10,000 per month. There was only a shortfall of $666.76, which the defendant was willing to pay. The presiding officer found that there was no reduction in wages as alleged and awarded the arrears claimed in full.

6. On annual leave pay, the defendant argued that while the claimant had not taken any annual leave, he was not entitled to such leave because his office hours were always flexible and he never worked on Saturdays. The presiding officer found no substance in this defence and rejected it.

7. On double pay, the defendant denied liability on the ground that due to poor business in 1999, by a notice dated 25 January 2000, all employees had been informed that no double pay would be payable. The claimant like other employees agreed. The claimant denied and said that he had in fact refused to sign on the document to indicate his consent. The presiding officer again accepted the claimant's version of the events.

8. On sickness allowance, the defendant alleged that the claimant absented himself since May 2000 and hid himself in the Mainland. There was no way to contact him and the defendant had been unable to pay him sickness allowance. The evidence showed that the defendant knew that the claimant had been hospitalised and a Mr Chang, who represented the defendant in the proceedings below, even pay him a visit at the hospital once. The defendant had also received the notice of constructive dismissal. But it refused to pay up as it had serious doubts about the invoices handled by the claimant. There were quite a number of them for which the customers defaulted in payment after delivery. A meeting arranged by the Labour Department took place in September 2000. At the meeting, those invoices were shown to the claimant. In the end, the parties could not resolve their differences. In the proceedings below, the defendant raised the allegation of fraud. The matter had been adjourned for police investigation but the police did not find anything against the claimant. At trial, those invoices had been produced as evidence. The presiding officer rejected the contention that the claimant could not be located.

9. Commission, it was accepted by the parties, were payable on settled invoices. In its defence statement, the defendant alleged that the invoices for the commission claimed had not been settled yet. But at trial, it was accepted that those invoices had in fact been paid in full. The defendant denied its liability, arguing that due to the loss occasioned by the default invoices handled by the claimant, his commission was liable to be deducted. This was rejected by the presiding officer.

10. In summary, the presiding officer resolved and the factual disputes including whether there was further reduction in wages and waiver of double pay in favour of the claimant.

Main ground of appeal

11. Originally, Ms Po for the defendant contended that the presiding officer had erred in not investigating the issue whether the defendant was entitled to summarily dismissed the claimant on the ground of fraud. But in the course of submissions, she accepted that as a matter of fact, the defendant did not dismiss the claimant. She therefore abandoned this ground.

12. The main ground of appeal is premised on the contention that the presiding officer had failed to investigate into the allegation of fraud over the defaulted invoices. This allegation of fraud, Ms Po submitted, related to the credibility of the parties. And their credibility underpinned their respective case on the factual disputes. Thus without investigating into the matters relating to fraud, the presiding officer erred in accepting the claimant's version of the events. His findings on the factual disputes could not be sustained.

13. Mr Ng for the defendant disagreed. He submitted that the presiding officer had already discharged his duty to investigate into the allegation of fraud. His findings could not be flawed.

Failure to investigate?

14. Section 20(3) of the Labour Tribunal Ordinance imposes a duty on the presiding officer to investigate in all relevant matters. Matters may be relevant to the central issues in dispute or some collateral issues like credibility. The presiding officer has to identify those matters and the related issues and determine the scope of inquiry. Different matters obviously call for different treatments. In the present case, the allegation of fraud affected credibility and credibility alone. The invoices in question had been produced and were obviously before the presiding officer. The case had been adjourned for the defendant to adduce evidence in support of the allegation of fraud, but apparently, apart from the invocies and the police statements, nothing further had been produced. The defendant had reported the police but nothing was found against him. That the presiding officer had taken into account. He was quite entitled to do so provided that he did not thereby abandon his own duty to investigate. He had questioned the parties on this matter and they did state their stance generally. And the presiding officer accepted the claimant's version. It is true that the presiding officer had not gone through or made enquiry with the parties on each of the invoices. But I am of the view that what the presiding officer had done was enough in the circumstances when the allegation of fraud only related to credibility. The position would be quite different if the claimant were claiming on those invoices, which would entail a closer examination of each of the invoices. Thus, I reject the submission that the presiding officer had not properly investigated into the allegation of fraud. It follows that the attack on his findings on the factual disputes must fail.

Constructive dismissal and other issues

15. Further, I accept Mr Ng's submissions that there are matters that can be decided quite independently of any finding on credibility arising from the allegation of fraud. The first matter is constructive dismissal. In my view, the defendant was clearly guilty of a fundamental breach of its obligation as an employer. It had not paid the claimant sickness allowance pursuant to section 36(1) of the Employment Ordinance. Its first excuse that it could not locate the claimant could hardly be sustained. It all along knew that the claimant was hospitalised and Mr Chang had even visited him once. It should have no difficulty in locating him so as to pay him the sickness allowance. The finding by the presiding officer in this regard must be right. The defendant's main contention was that it refused to make or withheld payment pending discussions and possible resolution of the matters relating to the defaulted invoices. This contention is clearly unmeritorious. At the material times, the defendant was merely suspecting the claimant's integrity over those invoices. Such unsubstantiated suspicion could not possibly justify a breach on its part of the contractual obligation under the employment contract and the statutory duty under the Employment Ordinance of not paying him sickness allowances. The claimant was entitled to regard himself as having been constructively dismissed when the defendant refused to pay his dues upon demand. Secondly, there is clearly no defence to the claim for commission. Thirdly, subject to quantum, there is likewise no defence to the claim for annual leave pay.

Conclusion

16. For the above reason, I dismissed the appeal with costs.