HU YANGYONG v. ALBA ASIA LTD

HCA 1135/2019

[2025] HKCFI 2484

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1135 OF 2019

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J U D G M E N T

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A.  INTRODUCTION

1.  The plaintiff (“P”) claims against the defendant (“D”) for wrongful dismissal from his employment with D[1].

2.  P was employed by D under an employment agreement dated 6 April 2017 (the “Employment Agreement”).

3.  By a letter dated 7 September 2018 (the “Termination Letter”), D purported to summarily dismiss P.

4.  P claims that the dismissal was wrongful and that he is accordingly entitled to lost wages and benefits under the Employment Agreement, and various other heads of loss.

5.  D’s case is that it was entitled to summarily dismiss P by reason of P’s alleged misconduct and dishonesty in relation to claims for reimbursement of expenses which P made pursuant to the Employment Agreement.

6.  D also counterclaims for losses suffered as a result of P’s alleged breach of contract and fiduciary duties, also in relation to P’s expense claims.

7.  The trial of this matter took place between 19 and 28 February 2025. P was represented by Mr Justin Ho and Mr Brian Lee. D was represented by Mr Ng Man Sang Alan and Mr Billy Mok.

B.  BACKGROUND AND SUMMARY OF PARTIES’ CASES

8.  D is a Hong Kong company engaged in the business of waste management, recycling and environmental services.

9.  At the material times, D formed part of a group of companies headed by a German company, comprising a substantial global enterprise in the field of resource recycling and environmental services; although there was in progress a joint venture project between that group and a Chinese company/group (see further below).

10.  Under the Employment Agreement, P was employed as Chief Operating Officer (Asia) of D starting from 1 June 2017. P was also appointed as a director of D from 31 August 2017.

11.  On the same day as entering into the Employment Agreement with D, P entered into a Service Agreement with Alba Hong Kong Limited[2] (“Alba HK”, which belonged to the same group of companies as D). Under the Service Agreement, P was engaged as an independent consultant to provide various specified services to Alba HK.

12.  The Employment Agreement provided for a fixed three-year term of employment, which could not be terminated before expiry on 31 May 2020, except for good cause (clause 23.11).

13.  The key contractual provision in this action is clause 3(b) of the Employment Agreement, which provided under the heading “Allowances”:

“ (b) Expenses reimbursement

The EMPLOYEE shall be entitled to a reimbursement for the out-of-pocket family expenses which includes (but not limited to) his house rental fee, kid’s tuition and family member home visit travel expenses in Mainland China up to an amount of 20,000 RMB per month. The EMPLOYEE will be reimbursed for such expenses after providing the COMPANY with official tax invoices (Fa Piao).

For expenses exceeding the yearly threshold 240,000 RMB, the EMPLOYEE requires the prior written approval of the COMPANY”.

14.  In addition, clause 2 provided for the reimbursement of business expenses in the following terms:

“ The EMPLOYEE shall be reimbursed for reasonable travel and hotel accommodation expenses in Hong Kong and Mainland China against presentation of original invoices according to the Company travel policies. For domestic airplane travels in between Hong Kong and Mainland China, the EMPLOYEE shall travel economy class, whereas the EMPLOYEE shall be entitled to business class travel on international business trips”.

15.  It is common ground that following the commencement of his employment, P submitted to D monthly expense reports together with supporting invoices in respect of his expense entitlements under clauses 2 and 3(b) of the Employment Agreement. P’s expense reports under clause 3(b) were submitted monthly from July 2017 to September 2018.

16.  D’s case was that P misconducted himself in making expense claims such as to warrant summary dismissal, in the following principal ways (see also the more detailed summary at §95 below):

(1)  In breach of the Employment Agreement and fiduciary duties to act in good faith, P submitted expense reports for monthly expenses supported by invoices which were not issued in the same month as the month of the expense report, in order to fully utilise the monthly threshold of RMB20,000 in clause 3(b) (the “Different Month Complaint”).

(2)  P acted fraudulently by using “other official invoices” in order to meet the monthly threshold of RMB20,000. This includes in particular, that P submitted three invoices or “Fa Piao” issued on the same date by the JW Marriott Hotel with suspicious features (the “3 Hotel Invoices”). It was D’s pleaded case that the 3 Hotel Invoices were “fake”, that P had behaved dishonestly in relation to them, and had provided no credible/plausible explanation for them.

17.  By the time of closing submissions, D made no mention of the Different Month Complaint, such that the focus of D’s justification for summary dismissal was the fraud allegation in relation to “other official invoices” and the 3 Hotel Invoices.

18.  In broad summary, P accepted that many of the invoices that he submitted for reimbursement of expenses under clause 3(b) were not in fact for expenses covered by that clause. His explanation was as follows:

(1)  In June 2017, shortly after his employment commenced, P was told by Mr Stephan Schwarz (“SS”) (who was later the Managing Director of D) inter alia that the invoices submitted for reimbursement under clause 3(b) should be issued in D’s name.

(2)  P later realised that it was difficult to comply with this requirement since invoices for various of his family expenses were unlikely to be issued in D’s name.

(3)  In November or December 2017, P therefore spoke to Mr Zhang Liguo (also known as Dirk Zhang) (“ZL”) who he understood to be the person dealing with his expense claims. P explained the above, and ZL agreed that instead of submitting the actual invoices issued for family expenses, P could obtain invoices from “other sources” issued under D’s name for submission in support of his expense claims. ZL represented that this would be acceptable, and did so with the apparent authority of D.

(4)  In submitting invoices as he did, P relied on ZL’s representation. At all material times P did have genuine family expenses exceeding RMB20,000 per month which were claimable under clause 3(b), and invoices for the same; but for the above reasons P did not submit to D or retain those invoices.

(5)  Further, after P submitted expense reports under clause 3(b), D’s staff reviewed them and the supporting invoices and approved them for payment; thereby further representing to P that the manner in which he was proceeding was acceptable. Induced by and in reliance on this representation, P continued to make claims and submit invoices in the said manner. Accordingly, D is barred by estoppel/waiver/acquiescence from insisting on P’s submission of the actual invoices for family expenses in the name of P or his family member(s), and/or invoices in the same month for which reimbursement was claimed.

(6)  For these reasons, P denied wrongdoing and claimed that his dismissal was wrongful.

C.  WITNESSES

19.  P’s only witness was himself.

20.  D called three witnesses:

(1)  Mr Stephan Schwarz (ie SS), who was appointed director and Managing Director of D on 31 August 2017. At the time of trial, SS was no longer employed by D or its group companies.

(2)  Mr Tobias Huinink, senior adviser of D.

(3)  Ms Lisa Tang (“LT”) who was Office Manager of D at the material times.

21.  D also filed a witness statement of ZL, though in the event ZL did not attend to give evidence.

D.  EVIDENCE AND FACTUAL FINDINGS

22.  In this section, I set out the evidence and my factual findings on the key events relevant to the determination of this action.

D1.  June 2017: Alleged conversation between P and SS

23.  It was P’s case that shortly after his employment commenced in June 2017, SS represented to him at the office of Alba HK that in order to obtain reimbursement for business expenses and family expenses under clauses 2 and 3(b) of the Employment Agreement, P must provide invoices issued under D’s name and on a monthly basis.

24.  SS denied representing that invoices under clause 3(b) should be submitted in D’s name. He said in oral evidence that the requirements for invoices for family expenses were as set out in the Employment Agreement, and that it did not make sense and was unworkable for family expense invoices to be made out to the name of D.

25.  P and SS were cross-examined on this issue, and both teams of counsel levelled detailed arguments as to which version of events should be accepted.

26.  In short, I consider that the most likely factual scenario is that SS did not say to P that the invoices for reimbursement under clause 3(b) should be made out in D’s name, but there was some kind of misunderstanding whereby P thought that was the case; for example that may have been said in relation to business expenses under clause 2, but been misunderstood by P as applying also to clause 3(b).

27.  I do not think that SS would have actually made the representation alleged, since there is simply no reason why SS would represent that claims for family expenses should be supported by invoices made out to D’s name, and indeed such a representation does not make a lot of sense in the context of clause 3(b). However, I also am not persuaded that P gave untruthful evidence on this point, in particular because P apparently had nothing to gain from conducting himself in the way he did in relation to claims under clause 3(b): see further analysis below.

28.  For these reasons, I make factual findings as set out at §26 above.

D2.  November to December 2017: Alleged conversation between P and ZL

29.  In his witness statement, P said that after he began claiming for expenses, he realised that it was difficult for his family expense claims such as his son’s school fees and family transportation and daily expenses to satisfy the requirement of being issued in D’s name. Accordingly, during a business trip in Shanghai around November to December 2017, he discussed this matter with ZL; who P believed had authority on D’s behalf in relation to P’s expense claims

30.  At this meeting, P explained the said difficulty, requested that in order to satisfy the requirement as to how he should claim expenses under clause 3(b), he not submit the actual invoices issued for the relevant family expenses but rather obtain invoices from “other sources” issued under D’s name. ZL agreed.

31.  P was questioned on this at some length, and clarified that the matter was explained to ZL briefly. P did not elaborate to ZL as to what the “other sources” would be, and ZL did not ask. At the time P understood ZL to be the Chief Financial Officer (“CFO”) of AIR (defined below).

32.  As noted above, D filed a witness statement from ZL, though ZL did not attend to give evidence. ZL’s statement said that he did have a discussion with P regarding reimbursement of P’s personal expenses, but it was only on a personal level and in a friendly context where ZL expressed his generic view that reimbursement should not be a problem if the invoices produced by P were genuine. ZL denied any implication that he held a view whereby false accounting was permissible. Further, the ZL statement denied that ZL had authority to represent D in this regard.

33.  The parties levelled arguments as to whether I should accept P’s version of events. My conclusion, reached on a balance of probabilities, is that a conversation between P and ZL did take place along the lines of P’s evidence; in particular P raised with ZL the difficulty of submitting invoices under clause 3(b) in D’s name, suggested using invoices in D’s name from “other sources”, and ZL indicated agreement.

34.  I reach this factual conclusion for the following principal reasons:

(1)  ZL did not appear as a witness, and in the absence of his appearance I attach very limited weight to his statement[3]. In any event, ZL’s statement did admit of a conversation between P and ZL in relation to P’s invoice claims, and I consider that the statement is somewhat “carefully worded” on the accuracy of P’s assertion that ZL agreed to the use of invoices from “other sources”. Importantly, ZL’s statement did not contain a clear denial of a conversation in the terms alleged by P.

(2)  Accordingly, there is no substantial evidence to contradict P’s on this point; and it seems that even ZL was not willing to clearly controvert that evidence in his statement.

(3)  P was reasonably consistent in his case that the conversation with ZL occurred, since complaint was made against him in respect of the 3 Hotel Invoices: see below in relation to P’s email dated 15 August 2018 (in which P invited SS to check the matter ZL) and the September 2018 Meeting. If the conversation with ZL had not taken place, it seems unlikely that P would have invited SS to check with ZL, in his email dated 15 August 2018.

(4)  Although I consider that certain aspects of P’s evidence were less than ideal, I am not persuaded that P was an untruthful witness: see further analysis below.

(5)  I am heavily influenced by the consideration discussed further at Section D4 below, namely that P had nothing to gain from conducting himself the way he did in relation to claims under clause 3(b).

D3.  ZL’s alleged authority to act and make representations on D’s behalf in relation to P’s expense claims

35.  In relation to the matter canvassed in Section D2 above, the parties disagreed as to whether ZL had authority to act and/or make representations on D’s behalf with regard to P’s expense claims under the Employment Agreement. There were detailed arguments on this issue.

Pleaded cases on ZL’s authority

36.  P’s pleaded case was that:

(1)  ZL was at the time the Acting Chief Financial Officer and Financial Controller (Asia) of AIR (defined below), and acted with the apparent authority of D in the November/December 2017 conversation with P.

(2)  By an email dated 29 August 2017 from LT to P (the “1^st LT Email”), D’s board of directors had represented that ZL had the authority of D to deal with all matters related to P’s expense claims under clauses 2 and 3(b) of the Employment Agreement. LT was at that time the Office Manager of ALBA Group plc’s Hong Kong office, who had up to then been the person in charge on behalf of D of P’s expense claims.

37.  D’s pleading denied the alleged authority of ZL. According to D:

(1)  LT was not the person in charge of P’s expense claims at D; she was only responsible for relying messages between P and D with regard to P’s expense claims.

(2)  LT never had any actual or apparent authority to act for D.

(3)  ZL had no authority to make representations on D’s behalf in relation to P’s expense claims. ZL was an employee of Techcent (defined below) at the relevant time; he was not formally appointed by AIR and Acting Chief Financial Officer and/or Financial Controller; he was not an employee of D nor did he hold any senior position at D; and D had not authorised ZL to conduct the relevant discussion with P.

Corporate Structure, Joint Venture, and role of P and ZL

38.  It is necessary at this juncture to consider the evidence on the corporate structure of the group of which D formed a part, including the joint venture project which was in progress at the time of P’s employment with D.

39.  This area of evidence was canvassed in some detail by the parties, and has bearing on the issue of ZL’s authority to make representations on D’s behalf.

40.  The following are notable points:

(1)  D’s annual returns made up to March 2018 to March 2021 show that D’s shareholder is Alba Group plc & Co. KG (“Alba Group plc”), a German company. Alba Group plc is the parent of a group of companies (the “Alba Group”) which comprises a substantial global enterprise operating in the field of resource recycling and environmental services.

(2)  Prior to 31 August 2017, the two directors of D were Mr Axel Schweitzer[4] and Mr Bjorn Stephan Grund. On 31 August 2017: (i) SS and P were appointed as directors of D in their place; and (ii) SS became the Managing Director of D.

(3)  From 2016, the Alba Group was in the process of entering into a joint venture arrangement with a Chinese company, Chengdu Techcent Environment Co, Ltd (“Techcent”), including for the purpose of partnering to expand operations in the Chinese market. Techcent was ultimately owned by the “Deng family”.

(4)  One of the joint venture vehicles utilised for this intended partnership was ALBA International Recycling GmbH (“AIR”, formerly named ALBA CGA Holding GmbH). AIR is a German company with 60% of its shares held by Techcent and 40% of its shares held indirectly by Alba Group plc[5]. Accordingly, the joint venture project was in substance between the Deng family (with 60% shareholding) and the Alba Group (with 40% shareholding).

(5)  Under the intended joint venture arrangement AIR, as a joint venture vehicle, was to hold a number of subsidiary companies including D. SS accepted in cross-examination that D was intended to be an important part of the joint venture, and the “central hub for further China roll-outs”.

(6)  At the material times, a Sale and Purchase Agreement had been entered into pursuant to which the shares in D were to be transferred from Alba Group plc to AIR. However, the Sale and Purchase Agreement contained condition(s) precedent that certain consent of the Environmental Protection Department of the Hong Kong Government had to be obtained, which was never in the event obtained; as a result of which the acquisition was halted by 2020. Accordingly, legal title to the shares in D was never in transferred from Alba Group plc to AIR.

(7)  The consolidated audited accounts of AIR for the period ended 31 March 2017 noted that although the shares in D had not been legally transferred to AIR at that time since consent of the Hong Kong Government had not been obtained, the SPA provided that D belonged to the AIR group and therefore D was included in the consolidated accounts of AIR.

(8)  SS was the Chief Executive Office of AIR from March 2017 to end 2017, and he agreed under cross-examination that he treated D as part of AIR. He also accepted that P, although formally employed by D, reported to him in his capacity as CEO of AIR and also Managing Director of D. Further, the email signature that P used contained a reference to AIR under his name, further indicating that he was regarded as under the umbrella of AIR.[6]

(9)  According to ZL’s witness statement, he was at the material time an employee of Techcent, and was nominated to be the financial controller of AIR, though this appointment was never confirmed. He was never employed by D nor did he hold any position within D[7].

41.  In short, therefore, it is significant that although at the material times D’s parent company remained Alba Group plc, and ownership in D had not been legally transferred to AIR, D was in practice being treated as part of AIR.

Emails from LT

42.  By the 1^st LT Email (dated 29 August 2017 and relied on in P’s pleaded case on authority), LT stated to P (copied to ZL) that “I was told by management that I cannot paid for any AIR expense anymore, if there is any purchase please ask [ZL] (CFO of AIR) for approval. … From now on, all your expense should be go through [ZL]” [underling added].

43.  On the same day, P forwarded that email to SS asking: “To whom shall I talk for my future air tickets booking and expense claim issues?”.

44.  The documents did not contain any reply from SS to this email. When questioned, SS said that he could not recall whether he responded, but he expected that he would have. I consider that more likely scenario is that SS did not respond, and I so find.

45.  When questioned on the 1^st LT Email, LT gave further evidence as to her understanding of ZL’s role. She had referred in that email to ZL as CFO of AIR, since that was her understanding at the time as given to her by management in Beijing. The Mr Jake Li copied to the email was her direct line manager in the Mainland, and CFO of the Chinese parent company[8].

46.  LT said that the direction in her email that P’s expense claims should go through ZL had come from Jake Li. Jake Li thought that since LT was not senior management, there should be another more senior person checking the invoices – namely ZL who was going to be CFO of AIR – before they were sent to SS for approval. LT accepted that there was a multi‑tiered checking process, whereby the invoices would be checked by her, then ZL (as someone more senior and experienced in finance), before being sent to SS for final approval.

47.  A further email exchange took place between P and LT on 5 September 2017, in which P asked LT to whom he should speak to resolve the issue of payment of certain expense claims, ZL or SS. LT replied “Please talk to [ZL], seem to be every payment now went through him for Alba Asia” (“2^nd LT Email”).

Conclusion on ZL’s apparent authority

48.  For the following reasons, I conclude that ZL did have apparent authority to make representations to P on D’s behalf regarding P’s expense claims under the Employment Contract:

(1)  In the 1^st LT Email, LT told P that from now on all expenses should go through ZL, who was also referred to as the CFO of AIR. The wording of that email suggested that this indication came from management. According to LT’s evidence, ZL in fact played a role in the multi-tiered checking process which was applied to P’s expenses claims: see above.

(2)  LT was at the time Office Manager of D. It was D’s own pleaded case that LT was responsible for relaying messages between P and D with regard to P’s expense claims[9]. I therefore consider that the 1^st LT Email contained a representation attributable to D that P should deal with ZL in respect of his expense claims.

(3)  This was reinforced when P forwarded the email to SS, who did not respond; which would tend to suggest no disagreement with the 1^st LT Email.

(4)  This was further reinforced by the 2^nd LT Email, in which LT told P that “every payment now went through [ZL] for [D]”.

(5)  Although ZL had no formal role in D, he was an employee of Techcent (majority shareholder of AIR) and nominated as financial controller of AIR, at a time when D and P were in practice being treated as under the umbrella of AIR: see above. It would therefore not be particularly surprising that ZL would have a role in dealing with P’s expense claims; and indeed ZL subsequently signed to approve certain of the expense reports.

(6)  Mr Ng argued that the 1^st LT Email related only to expenses of AIR rather than D. I am not, however, convinced by this on a full reading of the emails: as noted above D was at the time being treated as under the umbrella of AIR, and further, the 2^nd LT email referred to “every payment … for Alba Asia” ie D.

49.  Even if this conclusion is incorrect, and the above features are insufficient to clothe ZL with the apparent authority alleged, I consider that at the least, the said features show that P had a reasonable basis to believe that he should deal with ZL in relation to his expense claims. This is important because it impacts the question whether P acted honestly or dishonestly in relation to his expense claims; irrespective of whether apparent authority is, strictly speaking, established.

D4.  P in fact incurred family expenses of at least RMB20,000 each month

50.  P gave evidence in his witness statement that his family expenses calculated on accrual basis exceeded RMB20,000 for each month, referring to his son’s school fees divided monthly being RMB12,333.33, and his family home monthly mortgage repayment being RMB13,900.

51.  When questioned as to why he behaved as he did in relation to invoices from “other sources”, P repeatedly reiterated that since his family expenses always in fact exceeded RMB20,00 in each month, he gained nothing from proceeding in the way that he did. It was also P’s evidence that he had available invoices for his genuine family expenses of RMB20,000 per month, which he could have submitted to D under clause 3(b).

52.  P’s evidence included a bundle of documents, disclosed by P during proceedings before the Labour Tribunal, setting out a breakdown of P’s out-of-pocket family expenses for June and July 2018, with supporting materials. These show that in each of those months P incurred expenses over RMB20,000, and attach supporting documents including for major items such as P’s son’s tuition fees and house mortgage loan repayment (which two items alone, when combined, exceed RMB20,000 per month).

53.  In addition, the documents showed that during pre-contractual negotiations for the Employment Agreement and the Service Agreement, P had indicated that a RMB240,000 per year expense benefit mirrored one under his previous employment. By an email dated 21 March 2017 to Carla Eysel (of D’s human resources department), P had made express reference in this context to his son’s tuition of RMB140,000/year, house rental of RMB8,500 per month, and family home visits of RMB20,000 per year, and attached certain supporting documents for such expenses. Mr Ho relied on this material to argue that all along, D well knew that P had monthly expenses claimable under clause 3(b) which would exceed RMB20,000, which helped to explain why P took the view that the submission of supporting invoices was something of a formality.

54.  P’s evidence as to his genuine family expenses of RMB20,000 in every month, was not challenged in cross-examination[10]. Further, it is supported by documentary evidence for at least some of the months in question, and there is no reason to believe that P’s major items of expense would have been less in other months. It is also not, to me, inherently surprising that the threshold of RMB20,000 would easily be met each month, given the broad nature of family expenses which are covered by clause 3(b).

55.  Accordingly, I accept P’s evidence on point and find that:

(1)  P incurred genuine family expenses which exceeded RMB20,000 per month; and

(2)  P had available to him and could have submitted to D invoices reflecting such expenses, pursuant to clause 3(b) of the Employment Agreement.

56.  Mr Ho submitted, and I accept, that this is an extremely significant point in this case. In short, that is because:

(1)  It follows that P had nothing to gain from submitting invoices in the way that he did; since he always in fact had bona fide monthly expenses claimable under clause 3(b) which exceeded the maximum threshold, and for which he could have submitted genuine supporting invoices. Similarly, by submitting claims in the way he did, P caused no loss to D.

(2)  It tends to support P’s version of events generally, namely, that he genuinely believed that submitting invoices in the manner he did was acceptable to D and necessary in an attempt to comply with what D required; since otherwise there was simply no reason for P to have submitted invoices in the way that he did rather than submit genuine invoices for his family expenses.

(3)  Indeed, D has not suggested any plausible reason why P would have submitted invoices in the way he did, other than those given by P. In other words, there is no “case theory” put forward by D that is consistent with a dishonest rather than an honest motivation in P.

D5.  P’s submission of invoices under clause 3(b)/ the 3 Hotel Invoices

57.  As noted above, D’s basis for summary dismissal focusses on P’s use of invoices from “other sources” under clause 3(b), which were said to be non-complaint with the Employment Agreement and fraudulent; and in particular on the 3 Hotel Invoices which D pleaded were “fake”.

58.  The 3 Hotel Invoices (which were also referred to during the trial as “fa piao”) are written in Chinese, but English translations were provided for the trial. They are headed (in translation) “Guangdong Value Added Tax (VAT) General Invoice”. They each bear the same date, 25 January 2018. They each indicate that: the purchaser is D; the seller is the same Marriot Hotel in Foshan; and the taxable product or service is “Catering Services - Meal”. They each bear two chops, apparently from a tax authority and the hotel in question. The invoice numbers are consecutive or very close to each other. The amounts of the invoices are RMB16,000, RMB15,800 and RMB14,800. It is common ground that P submitted the 3 Hotel Invoices in support of his expense reports for family expenses for the months of May, June and July 2018 respectively.

59.  In his witness statements, P said that following and in reliance on his meeting with ZL in November/December 2017, he obtained and submitted invoices obtained from various sources issued under D’s name in support of his expense reports under clause 3(b), and he did not submit or keep invoices for the actual family expenses incurred.

60.  P’s treatment of the 3 Hotel Invoices in his statements, was very short; saying only that these were genuine invoices submitted in accordance with representations made by ZL and/or D.

61.  Under cross-examination, a fuller picture emerged as to the origin and nature of the invoices submitted by P. P said:

(1)  The invoices from “other sources” were in fact for personal expenses incurred by P’s friends. P asked a handful of his friends to let him know when they incurred significant personal expenses, and asked them to procure that the invoices for such expenses be issued in D’s name. P then used such invoices in support of his claims under clause 3(b).

(2)  For the 3 Hotel Invoices, the underlying expenses were actually for his friend’s son’s wedding banquet which took place on 1 January 2018. In accordance with the system described above, P had asked his friend to procure that the said invoices be issued in D’s name, so that he could use them for claims under clause 3(b). He accepted that the transactions reflected in the 3 Hotel Invoices did not represent his own or his family’s expenditure.

62.  P was questioned as to the consistency of his explanations for his use of invoices. Notably:

(1)  P was initially asked whether, following his conversation with SS in June 2017, he always used invoices submitted under D’s name in support of his expense reports. P answered yes.

(2)  However, P was then taken to certain instances of invoices which he submitted in support of expense reports in which either: (i) the invoices were issued to P’s personal name (such as for property management fees); or (ii) the invoices were not issued to any person as payer (ie they were not made out to D’s name or any name at all). During the course of the trial, both teams of counsel provided tables summarising the invoices submitted by P under his expense reports. These showed that there were only a very few instances in category (i), but numerous instances in category (ii) (many of these were for small amounts for transport, but there were also invoices for meals).

(3)  P was questioned as how to the position at (2) above could be consistent with what he was told by SS in June 2017. P’s explanations included that: it was acceptable for invoices to be submitted which were issued to his own name, but his son’s tuition fee would be issued in his son’s name so could not be used; air tickets in his own name would be acceptable but air tickets for his wife or son would not because they would be in his wife or son’s name; for certain other invoices such as highway toll fees, it would not be possible to have them issued in the D’s name or anyone’s name, so it would be acceptable for the invoices to be submitted without being in D’s name or anyone’s name, such that this was done for “smaller amount” invoices.

(4)  Under questioning, P said that the method of using friends’ invoices was employed for around 50 to 60 % of the expense claims which he made under clause 3(b), and this was the only method of procuring invoices from “other sources”. For the other 40-50% of expense claims, some were P’s personal expenses, and for some P managed to arrange to have the invoices issued in D’s name. P accepted that the use of his friends’ invoices in support of his claims was “abnormal”.

(5)  It was also P’s evidence under questioning that he had started using invoices from his friends before he had talked to ZL in November or December 2017; and that that conversation was to confirm that this practice was acceptable. When pressed as to why he had started this practice before speaking to ZL, P referred to the requirement for invoices issued by D, reiterated that he always had RMB20,000 family expenses per month, suggested that this would have been known to D, and said he thought that the submission of the invoices was something of a formality.

63.  In my view, P’s evidence on these points was somewhat unsatisfactory. There is at least some degree of inconsistency between P’s explanation for his use of invoices from other sources - ie that he was told that invoices in D’s name were required - and the evidence referred to in the preceding paragraph. Further, I do not think that P was able to provide an entirely logical and coherent explanation for the way in which he used the invoices. I consider this further in Section F2 below.

D6.  Checking and approval of P’s monthly expense reports and supporting invoices

64.  As noted above, it was part of P’s pleaded case that that after he submitted monthly expense reports under clause 3(b) with supporting invoices, D reviewed these and accepted the invoices as valid supporting documents, then reimbursed P under clause 3(b). Accordingly, D had represented to P that his approach to invoices was acceptable. P relied on this to continue to submit invoices in the way that he did; including using invoices from calendar months different to the month of the report in question, and using invoices from “various sources” issued under D’s name.

65.  D's pleading responded, inter alia, that in reimbursing P’s expense claims up to around mid-2018, D had trusted that P would act honestly and in good faith. Given that all the invoices submitted were in Chinese, which none of D’s senior management grade officers could read, D was unable to cross-check P’s invoices in detail.

66.  The pertinent evidence was as follows:

(1)  P’s expense reports were written in English and the supporting invoices submitted were in Chinese. The expenses reports were in many instances signed as “approved” by both SS and ZL, though some were only signed by SS and some were not signed at all.

(2)  I was referred to certain emails showing that D’s staff such as LT and her assistant Ms Elaine Leung (“EL”) carried out checking of the expense reports and supporting invoices, and raised queries from time to time[11].

(3)  SS’s oral evidence was that since he could not read Chinese, he would not look at the invoices (or if so only skim them over). He relied on his trust in P, who had told him that the invoices were compliant with the contractual clauses. SS said he was the only one with the power to approve the expenses; there were other staff who would check the invoices, but they would only check that the figures added up rather than the quality of the underlying invoices.

(4)  LT gave detailed evidence as to the checking process which was applied, which I consider to be reliable and I accept. There was a multi-tiered checking process whereby LT would check the reports and invoices, following which ZL would check them again, following which they would be sent to SS for approval. LT and ZL could read Chinese, and ZL understood how “fa piao” worked. LT would check both the figures and the invoice contents[12].

67.  The tables of invoices handed up during the trial by both teams illustrated that, if one read the invoices in question, it would become apparent that: (i) numerous of them were not issued in the same calendar month as the report in question; and (ii) numerous of them were made out to the name of D.

68.  I consider this to be a reasonably pertinent feature of the case. Given that D’s staff and/or ZL were carrying out significant checking of the invoices, it should have been readily apparent that a large number of the invoices bore the name of D as purchaser, and in fact very few were made out to P or were otherwise obviously for family expenses. This would or may have seemed somewhat surprising, given that the expenses claimed were supposed to be for P’s family expenses such as tuition fees and rent (referred to in the Employment Agreement).

69.  This is important for two related reasons.

70.  First, it suggests that D’s staff knew or should have known that there was something unusual about the invoices being submitted, or may not have been too concerned with the detail of what was being submitted. At the very least, the invoices did not obviously mirror what one would expect to see for claims for family expenses.

71.  Second, the fact that the claims were approved after checking would have tended to reinforce in P’s mind that what was being done with the invoices was acceptable to D, notwithstanding it being unusual in the sense described above. This was essentially Mr Ho’s submission in closing[13].

D7.  Events leading up to the Termination Letter: March to September 2018

72.  In his witness statement, SS said that poor performance in P’s role as Chief Operating Officer (“COO”) had led to D’s decision to terminate P’s employment. With a view to easing P into such a decision, P and SS discussed termination on 14 March 2018 (the “March 2018 Meeting”). However, P did not agree with D’s decision and threatened to claim outstanding wages for the remaining period of the employment if D were to terminate.

73.  An email from P to SS dated 15 May 2018 contained an account of the March 2018 Meeting, including D’s desire to have early termination of the Employment Agreement due to alleged poor performance, and P expressing that if there was to be early termination in breach of the Employment Agreement he should have outstanding wages for the remainder of the three-year contract[14].

74.  On 23 April 2018, a further meeting (the “April 2018 Meeting”) took place between P, SS, Mr Huinink and D’s lawyer, described by SS as an attempt to reach amicable settlement[15]. P’s email dated 15 May 2018 also recorded the contents of that meeting, including that: apart from the poor performance justification, SS further explained that due to the change of the role of the Chinese shareholder Techcent in the joint venture company AIR, the business development in China could not be implemented by the structure originally planned, which was a further reason why D wished for early termination of the Employment Agreement[16].

75.  According to P, from around late April or May 2018, D began to delay approval and payment of P’s expense claims under the Employment Agreement (such as April 2018 business expenses and June 2018 family expenses). Various emails in the hearing bundles showed P chasing for such payments.

76.  On 1 August 2018, P commenced a claim against D at the Labour Relations Division (Case No.: LR-11-2018-0973), claiming reimbursement of overdue January 2018 business expenses, April 2018 business expenses, and June 2018 family expenses.

77.  P said he was on 8 August 2018 paid the January 2018 and April 2018 business expenses, but other expenses such as those for June and July 2018 remained outstanding despite repeated demands.

78.  SS said that in July 2018 a Chinese-speaking employee checked P’s expense claims for June and July 2018 and discovered irregularities, namely the inclusion of invoices from a month different to the month covered by the expense report; after which D conducted an audit on P’s previous expense claims. This led to the discovery of further “out of month” expense claims, as well as irregularities in relation to the 3 Hotel Invoices.

79.  According to her witness statement, it was LT who was directed by D in July 2018 to cross-check invoices submitted by P for his expense claims for February to May 2018; during which she considered that the 3 Hotel Invoices appeared to be for the same kind of expenses (namely dining fees) on the same day, and were excessive/abnormal/unreasonable.

80.  LT’s statement said that she followed up with P through WeChat as to whether he had underlying documents issued by the Marriott Hotel, and/or a breakdown of facilities used by his family, but these were not forthcoming. There was in evidence a copy of a one-page WeChat message exchange dated 9 August 2018, in which P wrote the following to LT:

“ Dear Lisa: For Marriott expense it is not hotel room expense. It’s expenses for things like dinner, gym, swimming etc. what I had provided is a Chinese official tax invoices (Fa Piao) which was stipulated in the employment agreement as the requirement for reimbursement. I don’t have other breakdowns”

(“P’s WeChat Message”).

81.  LT replied: “Do they have an invoice or something like that, I do not want [SS] use this as an …”, with the remainder of the message not included in evidence[17].

82.  D relies significantly on P’s WeChat Message to LT, which is said to be dishonest in its reference to “dinner, gym, swimming”, and because P did not reveal the “true” position that the invoices were in fact for his friend’s son’s wedding.

83.  P’s response under questioning was that D had only submitted in evidence an incomplete copy of the WeChat exchange and P no longer retained the full version. When it was put to P that he had lied to LT, P answered that the emphasis of LT’s question was on whether the invoices were for accommodation expenses; that wedding banquet guests may use facilities such as those mentioned in the WeChat message; and that the WeChat record was incomplete.

84.  On 10 August 2018, SS sent an email to P stating inter alia that: (i) for out-of-pocket expenses P had submitted “out of month” invoices so as to accumulate RMB20,000 expenses each month, and asking P to pay back the expenses where there was no connection to the relevant period; and (ii) P provided 3 fa piao from the Marriot Hotel, each with the same date, in total RMB46,600, and asking him to provide details of the persons he had invited, the meals which had been ordered, and the reason for this invitation, and the relevant payment documents (credit card receipt).

85.  On 15 August 2018, P sent a responsive email to the following effect:

(1)  Correspondence with Carla Eysel (which P forwarded) showed that the RMB240,000/year expense was a common understanding and mutual agreement accepted during negotiation of the Employment Agreement. P should be able to claim up to RMB20,000 per month or RMB240,000 per year as long as he could provide official fa piao.

(2)  For the 3 Hotel Invoices, the explanation was that P had to provide out-of-pocket expense claims under D’s name for reimbursement; but for expenses such as his son’s tuition and his family member air or train tickets etc, invoices could only be under the name of his family member. P had discussed with ZL, financial director of AIR (who checks and confirms P’s invoice claims) about this issue and agreed with him to use other official invoices (fa piao) he had obtained which were issued under D’s name instead. P invited SS to check with ZL on this, and stated that if it was acceptable to use invoices issued under family members’ name, he would use these to replace the 3 Hotel invoices.

(3)  P’s expense claims and supporting documents were checked and approved by LT/EL/ZL/SS each month before payment and there were no comments. P asked for details as to how these claims and invoices were to be processed in the future.

86.  Also on 15 August 2018, P commenced a claim against D before the Labour Tribunal (LBTC 2470/2018) for overdue June and July 2018 expense payments and interest for late payment of July 2018 wages[18].

87.  On 23 August 2018 D sent a letter to P suspending P from work for 14 days.

88.  On 6 September 2018 a meeting (the “September 2018 Meeting”) took place between P and lawyers acting for D, during which attempts were made to settle the parties’ disputes.

89.  A transcript of the September Meeting was in evidence. The September Meeting was the subject of a Decision of DHJC Le Pichon in these proceedings dated 30 October 2020[19]. Her Ladyship, inter alia, dismissed D’s applications to strike out certain pleadings and expunge evidence on the ground that the September Meeting was conducted on a without prejudice basis. DHCJ Le Pichon held that:

(1)  The communications at the September Meeting were not privileged;

(2)  Even if they had been, an exception to inadmissibility applied since there was “unambiguous impropriety” by D’s representative(s) at the meeting; in that repeated pressure was put on P to settle his claim with D which would otherwise contact the ICAC; and there was indication of intention to destroy allegedly incriminating evidence should P agree to settle his claim with D.

90.  For present purposes, the more directly relevant portions of the transcript are P’s explanations for the alleged irregularities with regard to invoices. These were broadly consistent with his email dated 15 August 2018[20].

91.  D sent to P the Termination Letter dated 7 September 2018, purporting to terminate the Employment Agreement under section 9(1)(a) of the Employment Ordinance (Cap. 57) (the “EO”) on that basis that:

(1)  P repeatedly handed to D claims for monthly expense reimbursements that were not in compliance with clause 3(b) of the Employment Agreement because the submitted invoices (fa piao) were not for expenses covered by the clause; in violation of section 9(1)(a)(iii) of the EO.

(2)  D repeatedly asked P in personal meetings and emails to clarify the nature of the said expenses claimed, but P failed to provide any sufficient explanation, which is a ground for summary dismissal under section 9(1)(a)(i) of the EO.

(3)  The above actions constitute clear and repeated misconduct of P’s contractual duties arising out of clause 6 of the Employment Agreement which is inconsistent with the due and faithful discharge of P’s duties, referring to section 9(1)(a)(ii) of the EO.

92.  Alba HK sent to P a letter dated 10 September 2018 purporting to terminate his service under the Service Agreement with immediate effect. The said letter cited grounds similar to those in the Termination Letter, and stated that it was a common understanding that the Employment Agreement and the Service Agreement were closely tied such that the summary dismissal by D had led to the termination of the Service Agreement under clause VI.2 thereunder.

E.  PRINCIPLES ON SUMMARY DISMISSAL

93.  Section 9(1) of the EO provides that an employer may terminate a contract of employment without notice or payment in lieu:

(a)  if an employee, in relation to his employment:

(i)  willfully disobeys a lawful and reasonable order;

(ii)  misconducts himself, such conduct being inconsistent with the due and faithful discharge of his duties;

(iii)  is guilty of fraud or dishonesty; or

(iv)  is habitually neglectful of his duties; or

(b)  on any other ground on which he would be entitled to terminate the contract without notice at common law.

94.  I am assisted by the broad summary of the principles on summary dismissal in Employment Law and Practice in Hong Kong, 2^nd Edition, 2016, including the following:

(1)  Summary dismissal is justified where the employee has committed a fundamental breach of the contract of employment. It should be regarded as a strong and extreme measure, justified only in exceptional cases. The onus of proof is on the employer to establish that summary dismissal is justified (§6.105)[21].

(2)  Summary dismissal may be justified by an act of gross misconduct by the employee. What amounts to gross misconduct is a question of fact, depending on the circumstances of each case (§6.107).

(3)  Cases involving serious dishonestly tend to justify summary dismissal. The standard of proof is generally a balance of probabilities, but the more serious the allegation, the stronger should be the evidence before the court concludes that the allegation is proved (§6.108). An act of dishonesty will not automatically justify summary dismissal since there are degrees of dishonesty; summary dismissal will only be justified if the dishonest act is such as to constitute a repudiation of the contract of employment (§6.109).

(4)  Breach of duty of good faith and fidelity by the employee can be capable of justifying summary dismissal (§6.110).

(5)  A single act of misconduct is unlikely to justify summary dismissal, unless the misconduct is very serious (§6.113). The cumulative effect of a series of minor incidents may amount to sufficient grounds for summary dismissal (§6.114).

(6)  Habitual neglect of duties; a single act of negligence or incompetence of a serious nature; persistent lateness or unauthorised or unjustified absence; or willful disobedience of a lawful and reasonable order, may all be sufficient justification to justify summary dismissal on appropriate facts (§6.111)[22].

(7)  If the employer has allowed conduct complained of to continue for too long prior to summary dismissal, this may amount to acquiescence such that the behaviour cannot be relied upon as grounds for summary dismissal (§§6.115, 6.116, 6.123).

(8)  The employer may rely on reasons not disclosed at the time of dismissal to justify summary dismissal, and may even justify dismissal by reference to facts only discovered after termination of the employment contract (§§6.117, 6.128).

(9)  If the conduct complained of does not justify summary dismissal, the termination is wrongful (§6.129)

F.  ANALYSIS: WAS D’s SUMMARY DISMISSAL OF P JUSTIFIED?

F1.  D’s grounds for summary dismissal

95.  D’s pleaded grounds for summary dismissal referred to section 9(1)(a) of the EO and can be summarised as follows[23]:

(1)  The expense reports submitted by P for the months of February to May 2018 were not in compliance with the requirements for expense claims. It was commonly accepted business practice and stipulated in clauses 2 and 3(b) of the Employment Agreement that only genuine expenses incurred by P in a particular month would be reimbursed.

(2)  The “Different Month Complaint”: P submitted expense reports for monthly out-of-pocket and business expenses, supported by invoices which were not issued in the same month as the expense report, in order to fully utilise the monthly threshold of RMB20,000, in breach of the Employment Agreement and fiduciary duties to act in good faith

(3)  P acted fraudulently in that:

(a)  According to P’s email 15 August 2018 he used other official invoices in order to meet the monthly threshold of RMB20,000, and he admitted that he had submitted invoices issued under the names of his family members as if the same were issued in his own name in order to meet the monthly threshold of reimbursement.

(b)  P had submitted 3 Hotel Invoices, labelled in D’s pleading as “Fake Fa Piaos”, which were issued on the same date by the same hotel for the same nature of expense ie dining fee; two of which bore consecutive invoice numbers, with the invoice number of the third being very close. Upon being confronted with the Fake Fa Piaos, P provided no credible/plausible explanation for his fraudulent and dishonest act.

96.  In written closing submissions, D’s counsel stated that the gravamen of the complaint justifying summary dismissal was P’s “forgery” of the 3 Hotel Invoices which were said to contain a blatant lie. In particular D argued that:

(1)  Neither P nor D had any relationship with the transaction mentioned in the 3 Hotel Invoices, and P knew that they did not reflect his or his family members’ expenses. P had simply asked his friend to procure the hotel to issue the invoices under D’s name and then used them as proof for reimbursement. To avoid detection, P used the 3 Hotel Invoices on three separate occasions.

(2)  When P submitted these invoices, he must have intended to use them to induce D’s processing staff to accept then as genuine. Apart from the “forgery” committed, P had also presented false claims to D for reimbursement.

(3)  P deliberately lied to LT about the 3 Hotel Invoices in P’s WeChat Message dated 9 August 2018, and contrived his explanation based on conversations with SS and ZL as a defence.

(4)  It is no answer to say that there is no proof that P gained anything from the “forgery”. 50-60% of the total amount of reimbursement claims for family expenses were based on invoices from “other sources”, and there would be significant adverse impact on D. The forged invoices could not be verified or properly audited and would naturally thereafter be used by D to claim deduction of profits tax, thereby contaminating D’s accounting system or prejudicing the deal with D’s joint venture partner to D’s detriment[24].

(5)  P had committed criminal offences, namely, forgery and using a false instrument under sections 71 and 73 of the Crimes Ordinance (Cap.200). The elements of motive and personal gain were irrelevant to those crimes.

(6)  Even more important was the loss of trust in the relationship between P and D arising from the above facts; especially where D had asked P several times to explain the impugned invoices but never received a reasonable answer (as was alluded to by SS in oral evidence).

(7)  P committed fraudulent, dishonest or misguided conduct of sufficient severity to justify summary dismissal.

97.  I pause here to note that although D pleaded that the 3 Hotel Invoices were “fake” and argued that they were “forged”, it was not part of D’s case as run at trial that the invoices were fake or forged in the sense of not having been actually issued by the relevant hotel or not bearing genuine stamps from that hotel and the relevant tax authority; but rather having been fabricated by P or someone else. Such a case was not put to P under questioning, nor was there any evidence from a forensic expert or from the hotel to support such a case. Rather, D’s case that the invoices were “fake” or “forged” was put, at trial, in the way summarised in the preceding paragraph[25].

F2.  Analysis and conclusion

98.  I have given careful consideration to the evidence and arguments in this case, and I do not find it easy to decide whether there was sufficient to justify D’s summary dismissal of P.

99.  However, on balance I am persuaded by P’s arguments. I conclude that D has not discharged its burden of showing that the threshold for summary dismissal was crossed.

100.  My central reasons are as follows.

(1)  As noted above, I find as a fact that P incurred genuine family expenses exceeding RMB20,000 in every month, and that he could have submitted to D invoices for those expenses under clause 3(b). This is a key fact. It follows that P had nothing to gain from behaving as he did, and that D lost nothing in monetary terms. It also follows that P had no reason to behave as he did other than in a belief that it was acceptable; however irregular or unusual that may seem.

(2)  As noted above, I find as a fact that P did have a conversation ZL in November/December 2017, along the lines that he described in oral evidence, ie in which P told ZL that he would use invoices from “other sources”, and ZL agreed with this approach. In this conversation, ZL acted with the apparent authority of D; alternatively, the conversation at least gave P reasonable cause to believe that use of invoices from “other sources” was acceptable to D.

(3)  As also noted above, P’s submission of invoices in his monthly expense reports was checked including by Chinese speaking staff. Payment was made, notwithstanding that it would or could have been apparent that there was at least something rather unusual in that the a large percentage of the invoices identified D as payer even though the claims were supposed to be for P’s family expenses. This would tend to reinforce in P’s mind that the unusual manner in which invoices were being used was acceptable to D. The fact that P knew the invoices would be checked also tends to support P’s case that he was acting honestly.

(4)  The standard of proof for fraud is commensurate with the seriousness of the allegation. Inferences of fraud or serious misconduct are not lightly drawn. I am not persuaded to the requisite standard the P acted with dishonest or fraudulent intent, and I accordingly find that he did not.

(5)  Having said this, there is no doubt that viewed objectively and against a more usual fact-set, what was done with the 3 Hotel Invoices would be highly irregular or unsatisfactory; in the sense that invoices were submitted in a claim for family expenses which did not in truth relate to family expenses at all (but rather were expenses for a friend’s son’s wedding banquet). Further, the underlying expenses did not relate to D at all, contrary to what was specified in the invoices. I accept that this is a feature which calls for serious explanation, could be an indicator of fraud, and could in any event justify summary dismissal in an appropriate case (whether fraudulent or not). A similar point can be made regarding P’s use of invoices from “other sources” more generally.

(6)  However, the facts of this case are unusual. There is some difficulty in making coherent sense of what was done with the invoices. As noted at §63 above, I did not find the scheme of P’s usage of invoices as explained by him to be entirely logical. Having said this, it does not follow necessarily that P was a dishonest witness, and given the other features of this case I am not persuaded that he was. I consider that the most likely factual scenario is that: (i) P was under the impression that he had been requested to submit invoices under clause 3(b) in D’s name; (ii) the alleged conversation with ZL did occur; (iii) P was doing what he could to comply with what he thought was required for the invoices submitted, to the extent that he could (and albeit that there was some degree of “muddling” in the approach); and (iv) the submission of the 3 Hotel Invoices was part of this process, and was done without dishonest intent. I make factual findings accordingly.

101.  I have considered D’s complaint that P failed to provide a sufficient explanation when asked about the 3 Hotel Invoices, and the related complaint that he lied in P’s WeChat messaged dated 9 August 2018. I accept that on the face of the WeChat message, P’s response seems at least unsatisfactory and possibly evasive. However, a complete copy of the WeChat exchanges was not before me, and P provided a fuller response a few days thereafter by his email to SS dated 15 August 2018[26].

102.  In his email dated 15 August 2018, and in the September 2018 Meeting, P provided an explanation which reflected many of the features of his explanation provided at trial: see §§85 and 90 above. In the said email P also invited SS to check with ZL on the issue in question and offered to replace the 3 Hotel Invoices with those for his family expenses.

103.  It is true that it was only in oral evidence that P revealed precisely what he had done with invoices (ie that the invoices from “other sources” were obtained from his friends, and that the 3 Hotel Invoices were for P’s friend’s son’s wedding banquet). I do regard this as unsatisfactory. However, given what P did say in his 15 April 2018 email, I am not persuaded that this omission in his explanation is sufficient to cross the high threshold for summary dismissal.

104.  I have also considered whether P’s conduct in relation to the invoices– even if not fraudulent – was nonetheless sufficient to justify summary dismissal on the basis of a loss of trust and confidence, as D argued. I think that in more usual circumstances, that a COO would consider it acceptable to submit invoices for family expenses which did not in fact relate to family expenses incurred, may well be sufficient to justify loss of confidence warranting summary dismissal. However, I reiterate that the facts are very usual: given the conversation with ZL and the subsequent checking of invoices by D and approval for payment, I am again not persuaded that summary dismissal was justified[27].

105.  In this regard, Mr Ng cited Sinclair v Neighbour (1967) 2 QB 279, for the proposition that conduct short of dishonesty may be sufficient to justify summary dismissal where it is of a grave and weighty character which undermines the relationship of confidence which should exist between employer and employee. I accept that proposition, the application of which is fact-sensitive. The facts of that case were of course different, for example the employee knew that the impugned conduct would not have been permitted by the employer if he had been asked.

106.  D’s complaint that P committed criminal offences under sections 71 and 73 of the Crimes Ordinance, was only raised in closing submissions. I accept Mr Ho’s argument that on the alleged facts the sections are not engaged since the invoices would not be a “false instrument” for the purposes of those provisions. As explained by the Court of Final Appeal in HKSAR v. Chan Kam Ching (2022) 25 HKCFAR 48 at §§85-86, the provisions in question target instruments of spurious authenticity which tell lies about themselves (for example purporting to be made by a person who did not in fact make the instrument). The focus is on the bogus qualities of the instrument itself and not on the truth or falsity of representations made as part of its contents assessed against extraneous facts. It was not part of D’s case that the 3 Hotel Invoices were false in this sense: see §97 above.

107.  For theses reasons, I conclude that there was insufficient basis for D to summarily dismiss P, and it follows that P was wrongly dismissed from his employment with D.

F4.  Additional issues

108.  For completeness, I will refer briefly to three more points which were canvassed but which I do not consider it necessary to address in detail.

109.  First, P argued at some length that D had decided to terminate P’s employment as early as March 2018, and was thereafter simply searching for reasons to do so without paying P his entitlements under the remainder of the Employment Agreement.

110.  I do not consider it necessary to rely on this point in order to find in P’s favour; though I do note that the evidence showed that D wished to terminate P’s employment long before the issue with the 3 Hotel Invoices was discovered, and that changes to business development structure was one of the reasons cited by D in the April 2018 Meeting: see §§72 and 74 above.

111.  Second, Mr Ho made detailed arguments that D’s pleading of fraud was flawed and insufficiently particularised. Since I find for P in any event, I do not need to resolve this point.

112.  However, in the broadest terms I consider that P was by D’s pleadings sufficiently put on notice as to D’s complaint of fraud in respect of invoices submitted under clause 3(b). Since P did not reveal precisely what was done with the invoices until the trial itself, there was a limit to the extent to which D could fully particularise the fraud allegation in its pleadings.

113.  Third, I do not deal in detail with the “Different Months Complaint” which was part of D’s pleaded case, but not referred to in D’s closing submissions. I consider that this point was in effect, not pursued. This was a sensible concession given the evidence that emerged[28]; and that the submission of invoices from different months to the month of an expense report would have been apparent to D’s staff who checked the reports and invoices. Similarly, I consider it unnecessary to deal with P’s pleas of estoppel, acquiescence and waiver which in P’s closing submissions were directed at the Different Months Complaint[29].

G.  COUNTERCLAIM

114.  D counterclaimed for breach by P of the Employment Agreement and fiduciary duties, on the basis of: (a) the Different Month Complaint; and (b) P’s alleged fraudulent/dishonest expense claims.

115.  D’s counterclaim was for RMB80,003.95 in respect of sums which were reimbursed to P for the months of February to May 2018.

116.  For essentially the same reasons as those set out above, I do not accept that P was in breach of the Employment Agreement and/or his fiduciary duties, in the manner pleaded by D.

117.  Further, since I find that P had genuine personal and family expenses claimable under clause 3(b) exceeding RMB20,000 in each month, I do not consider that D suffered loss and damage from any alleged wrongdoing.

118.  Accordingly, I will dismiss the counterclaim.

H.  RELIEF

119.  The relief claim by P comprised the following[30]:

(1)  Damages in respect of:

(a)  lost wages from 1 September 2018 to 31 May 2020 ie HK$2,100,000;

(b)  lost year-end payment from 1 January 2018 to 31 May 2020 ie HK$2,536,066;

(c)  lost private medical insurance from 1 June 2018 to 31 May 2020 ie RMB80,000;

(d)  lost service fees under the Service Agreement from 1 September 2018 to 31 May 2020 ie HK$393,750;

(e)  lost annual leave pay from 1 January 2018 to 31 May 2020 ie HK$158,740;

(f)  lost out-of-pocket family expense allowance from 1 September 2018 to 31 May 2020 ie RMB420,000; and

(g)  lost reimbursement for business expenses incurred until 14 September 2018 ie RMB6,460 and HK$724.10.

(2)  Debts due and owing namely:

(a)  June, July and August 2018 out-of-pocket family expenses reimbursement ie RMB60,000; and

(b)  August 2018 business expenses reimbursement ie HKD5,679.51.

120.  Of these items of relief, subject to the question of liability (considered above), the only items challenged by D were those at §§119 (1)(c), (d) and (f) above[31].

121.  For item (c), lost private medical insurance, clause 3(a) of the Employment Agreement provided that D reimburse P for costs of private medical insurance up to RMB40,000 per year. P claimed that but for the wrongful termination of his employment, he would have had the benefit of such sums. Similarly for item (f), P claimed for the family expenses of RMB20,000 per month that he would have claimed under clause 3(b) for the remainder of the contract term, had the Employment Agreement not been wrongfully terminated.

122.  D opposed items (c) and (f) on the bases that these heads of losses are not claimable in futuro after the Employment Agreement has been terminated, and that they are dependent on a contingency in the sense that they are only payable after P incurs the relevant expenses.

123.  I do not agree. I accept that on a balance of probabilities these items of expenditure would have been incurred by P had the employment continued on foot, in which case P would have been entitled to reimbursement. I consider that the loss of these sums and benefits is a foreseeable and recoverable loss flowing from wrongful termination of the Employment Agreement, and I award these items to P.

124.  As to item (d), P claimed on the basis that as a result of the termination of the Employment Agreement he also lost service fees under the Service Agreement,. Such losses were within the contemplation of the parties at the time of the Employment Agreement and are recoverable. In this regard P pleaded that: there was a common understanding that the service fee under the Service Agreement in fact constituted part of P’s salary for his employment with D; the Service Agreement was merely an administrative arrangement for the payment of part of his salary; P was in fact not required to perform separate tasks under the Service Agreement; the two agreement were closely tied; and termination of the Employment Agreement would constitute good cause for termination of the Service Agreement.

125.  P further argued that the evidence showed that at the time of the negotiation of the agreements the Service Agreement was simply an administrative arrangement for the payment of part of P’s salary (which part was not accepted by Techcent) to be borne in effect by the Alba Group side of the joint venture. P also relied on the letter referred to at §92 above in which Alba HK referred to the close connection between the two agreements and the termination of the Employment Agreement as justification for termination of the Service Agreement.

126.  In short, I do not accept P’s arguments and I do not award item (d). Notwithstanding the evidence on pre-contractual negotiations, I consider that the parties intended the legal relationships to be as set out and specified in the Employment Agreement and the Service Agreement respectively. Accordingly, the service fees did not form part of P’s salary under his employment with D.

127.  Further, given the division of relationships as set out in the two contracts and all the pertinent facts, I do not accept that when entering into the Employment Agreement D had assumed responsibility for losses of the type now claimed (and in circumstances where a claim for lost service fees under Services Agreement may in appropriate circumstances be brought by P against Alba HK): Richly Bright International Ltd v De Monsa Investments Ltd (2015) 18 HKCFAR 232 at §§ 37 to 41.

I.  DISPOSITION

128.  For the above reasons:

(1)  Judgment will be entered for P against D for:

(a)  damages in the amounts referred to at §119(1)above, with the exception of §119(1)(d) (ie service fees under the Service Agreement) which will not be awarded; and

(b)  the amounts due and owing as at §119(2) above; and

(2)  D’s counterclaim will be dismissed.

129.  I will award simple interest on the said sums at the commercial rate from the dates on which the amounts would have been paid but for wrongful termination (in the case of damages) or became due (in the case of debts) to the date of judgment; after which interest will accrue at the judgment rate.

130.  I consider that costs should follow the event. I will order that D pay P his costs of these proceedings, to be taxed if not agreed.

131.  My orders as to interest and costs are orders nisi which will become absolute within 14 days, in the absence of any application to vary.

132.  Any application to vary the orders nisi shall be made in writing within 14 days of the handing down of this Judgment, limited to 5 pages. The opposing party shall have a right of written reply within 10 thereafter, limited to 5 pages. The applying party shall have a right of written reply within 7 days thereafter, limited to 3 pages.

133.  Lastly I thank both teams of counsel for their able assistance in this matter.