LEE MAN YEE NORMAN v. INTERNATIONAL CONTRACTORS SUPPLY LTD

HCA 916/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 916 OF 2014

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J U D G M E N T

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Introduction

1.  The is an appeal by the defendant (“D”) against the decision of Master H Au-Yeung dismissing D’s summons for, among other things, that this action be stayed and referred to the Labour Tribunal pursuant to section 7(1) and (2) paragraph 1(a) of the schedule to the Labour Tribunal Ordinance.

Brief Background

2.  At this stage, D’s defence had not yet been filed, but it was not disputed that the Plaintiff (“P”) was employed by D under an employment agreement dated 3 March 2008, with the title “Project Coordinator” (“Employment Contract”). As of the date of hearing before this court, P remained D’s employee.

3.  In about August 2011, according to P, he introduced a project, which was to be tendered by MTR (“Project”), to D’s 2 directors, a Mr Feldman and Mr Fleisher.

4.  According to P, both directors had agreed on behalf of D that if P could successfully obtain the Project for D, D would pay him 5% of the contract price of the Project as his commission (“Agreement”).

5.  Thereafter, P said he prepared all the tender documents and submitted the tender package to MTR on behalf of D in December 2011.  In the same month, he was promoted to become D’s Project Manager.

6.  On about 9 March 2012, P said he was informed by MTR that the tender was successful but MTR raised some clarifications which were then answered by him.  P said on 12 March 2012, he met with Mr Fleisher and a commission agreement letter signed by Mr Fleisher was issued by D to P (“Commission Agreement Letter”).  On the same day, however, after apparently having discussed with Mr Feldman, Mr Fleisher then proposed to P certain amendments, including varying the 5% commission to 3-4%, depending on whether both parts or just one part of the Project was awarded to D, and D agreed to these amendments (“Amendment Agreement”).

7.  On 14 March 2012, MTR sent a letter to D for both parts of the Project.  As a result, P said he was entitled to the agreed 4% commission of the total contract price of the Project, such commission amounting to about HK$1.87m.

8.  On divers dates between 27 December 2013 to 11 March 2014, P said he had issued 4 invoices to D for commissions calculated at 4% of the respective payments received by D from MTR.

9.  As he had received no payment from D, he issued the writ in the present action on 26 May 2014.

10.  D issued the summons for stay and referral to the Labour Tribunal   on 27 June 2014 (“Stay Summons”).

11.  The Stay Summons was heard on 2 September 2014. There was no supporting affirmation filed in relation to the Stay Summons by D.  The Master dismissed the Stay Summons on the same day of the hearing and handed down the reasons for his decision on 17 September 2014 (“Reasons”).

12.  D’s Notice of Appeal (“Notice”) was issued out of time, but P had agreed to the time extension and a consent order was later granted by the court.

Relevant Provisions in the Labour Tribunal Ordinance

13.  The Labour Tribunal has jurisdiction over a claim for a sum of money which arises out of a breach of a term of a contract of employment under section 7(1) and paragraph 1(a) of the Schedule of the Labour Tribunal Ordinance (“Ordinance”).  Further, section 7(2) states that save as provided in the Ordinance, no claim within the jurisdiction of the Labour Tribunal shall be actionable in any court in Hong Kong.

14.  The Labour Tribunal may, however decline jurisdiction over a claim and transfer the matter to the Court of First Instance, the District Court or the Small Claims Tribunal under section 10 of the Ordinance.

15.  However, under paragraph 3 of the Schedule to the Ordinance, the Labour Tribunal shall not have jurisdiction to hear and determine a claim for a sum of money, 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.

16.  Thus, save for a claim for a sum of money in respect of a cause of action founded in tort, a claim for a sum of money arising out of a breach of a term of a contract of employment should be commenced in the Labour Tribunal.

Correct Approach

17.  In the Reasons,  Master Au-Yeung had set out why he was of the view that the Court of First Instance would not have any power, whether under the statutes or in its inherent jurisdiction to transfer or refer the matter to the Labour Tribunal.  Mr Millar, appearing on behalf of D, did not make any further submissions on this point at the hearing before this court, although a transfer was still being sought in the Notice in the  event that this court were to grant a stay.  However, it was clear that the main order sought by Mr Millar was an order for stay of the present action, or in the alternative, the action be struck out.  In the circumstances, I am of the view there is no need for this court to consider the issue of jurisdiction on transfer/referral.

18.  The court has an inherent jurisdiction to stay all proceedings before it which are obviously frivolous or vexatious.  The inherent jurisdiction is preserved by section 16(3) of the High Court Ordinance, and is separate to that which exists under Order 18 rule 19 – the two may be invoked cumulatively or alternatively, and further in pursuance of its inherent jurisdiction, the court may strike out a statement of claim[1].  It has further been said that the inherent jurisdiction of the court enables it to make decisions for the economic, expeditious and just disposal of actions, and accordingly, the courts are becoming increasingly vigilant to ensure wastage of court time and resources does not occur and that an action is kept “on track” for resolution of the real disputes.[2]

19.  So far as striking out was concerned, although the Stay Summons was not issued under Order 18 rule 19, but under section 7 of the Ordinance and the inherent jurisdiction of the court, Master Au-Yeung was of the view that those general principles under Order 18 rule 19  of RHC should still be applicable with appropriate modifications, and  as set out by  him[3], which  so far as the  present application is concerned, are:

(i)     The court should only strike out P’s claim if it is plain and obvious that the claim is in the exclusive jurisdiction of the Labour Tribunal;

(ii)    Or looking at it another way, P’s assertion that his claim is not made on the basis of his employment agreement must be obviously unsustainable or impossible (as opposed to improbable ) to succeed before the court should strike his claim out;

(iii)   Disputed facts are to be taken in favour of P and the facts pleaded in the statement of claim are presumed to be correct.

20.  Even though the court may have wider powers to stay and/or strike out in its inherent jurisdiction and not limited to those under Order 18 rule 19, I agree with what was set out above.  In any event, I am of the view that the court should only exercise its summary powers in plain and obvious cases, where it is appropriate for the economic, expeditious and just disposal of the action.

21.  Mr Millar had also submitted that that the test in paragraph 19 (i) above should be the reverse, that unless P’s claim is clearly not within the jurisdiction of the Labour Tribunal, then it should be struck out or stayed, as the case may be.

22.  I have to say I do not agree with Mr Millar’s proposition.  In the present case, it is D who is making the application to stay and/or strike out, and the burden must be on D to demonstrate to this court that it is plain and obvious that this court has no jurisdiction, or that P’s claim is within the exclusive jurisdiction of the Labour Tribunal.

Discussion

23.  Pursuant to Order 58 rule 1 of RHC, the appeal before this court was by way of rehearing.

24.  As before the Master, the only pleadings before this court were the statement of claim and P’s answers to D’s request for further and better particulars.  D did not file any affidavit evidence to support the Stay Summons, nor had he sought leave to adduce any evidence on appeal.

25.  Whether P’s claim is within the exclusive jurisdiction of the Labour Tribunal will depend on whether P’s claim against D arises out of a breach of a term of “a contract of employment”, or a separate agreement.

26.  Mr Millar had argued that P’s statement of claim did not actually plead a separate agreement, or a separate contractual entitlement to commission and the court should not infer such from its pleadings.

27.  The Employment Contract entered into between P and D is a simple one, and the duties set out therein to be performed by P were “generally described ”as  :

(i) Supervise and maintain site operation

(ii) Coordinate with all teams, and

(iii) Respond to user inquiries for technical support

28.  I accept that the above duties may not be exhaustive, and that an employment contract may be constituted by various documents, eg policies and handbooks of the employer may be incorporated into employment contracts, and further an employment contract may be varied from time to time with the agreement express or implied of both parties.

29.  However, as I have pointed out to Mr Millar, at this early stage, without the defence or any affidavits having been filed by D, there was simply no evidence from D as to what other duties P was subject to as an employee, apart from those duties generally described in the Employment Contract, save that there was no dispute his job title had been changed.

30.  Mr Millar had also submitted that if not for P’s employment by D, he would not have been in a position to learn of the Project, or to have made any preparation or have done any work in respect thereof, whether on his own account or on behalf of D, to correspond with MTR, attend meetings with MTR representatives or indeed to receive payment.  

31.  Whether P would have learnt of the Project had it not been for P’s employment or not, P had clearly pleaded in his statement of claim that preparing documents for the tendering of the Project was not within P’s job duties stipulated under the Employment Contract[4], and that he started preparing the tender documents in his own spare time.[5]

32.  The Agreement P relied on and pleaded in respect of his claim in was first of all what was said by Mr Fleisher during the conference in August 2012, which was later reduced in writing by the Commission Agreement Letter, and later after agreed amendment, the Amended Agreement (collectively referred to as “Commission Agreement”).

33.  Further, P also pleaded that he had issued 4 invoices to D for the commissions due to him. 

34.  Mr Millar had referred to Sir Jack Jacob and Ian S Goldrein on Pleadings : Principles and Practice 1990 that P had not pleaded in the statement of claim a separate commission agreement, and that P did not plead that the work allegedly done by P in relation to the tender documents was done in his spare time, only that he started in his spare time.

35.  Mr Chen did not dispute that material facts relied on by a plaintiff for his cause of action should be pleaded.  In the present case, P’s cause of action was a contractual claim, and Mr Chen submitted the material facts would be the contract, ie the Commission Agreement and the damages which had been pleaded.  Further Mr Chen pointed out that there had been no defence filed by D yet, and if D were to file a defence disputing jurisdiction, it would only then become necessary for P to plead, which he could do in reply, the Commission Agreement being a separate agreement from the employment agreement. 

36.  I accept Mr Chen’s submission in this respect. In any event, in my view, P’s pleading was clear enough in that he was relying on the Commission Agreement and not the Employment Contact, and he had clearly pleaded that preparing the documents for the tendering of the Project was not within his job duties stipulated in the Employment Contract.   

37.  Further, as I had pointed out to Mr Millar, there was no evidence to dispute that P had issued 4 invoices in his own capacity to D for the commissions pursuant to the Commission Agreement, or that D had received them.   Indeed, it would seem unusual for it to be a term of P’s employment that P would need to issue invoices to D for any remuneration.

38.  Mr Millar himself had said, putting it at its highest, P’s claim was that while he was an employee of D by a contract of service, he also entered into a contract for services with D in respect of the Project, and that he would be simultaneously an employee and independent contractor.

39.  Mr Millar had also made submissions  on  those 6 “features of relationship” mentioned in  Poon Chau Nam v Yim Siu Cheung (2007),  10 HKCFAR 156 and referred to by Mr Chen in his skeleton submissions and submitted that here when P prepared and did work for the tender of the Project, he clearly did so as D’s employee.  What Mr Chen had submitted, and what was said in Poon Chau Nam by the Court of Final Appeal, was that the modern approach to the question of whether a person was an employee was to examine all the features of their relationship against the background of the indicia of employment with a view to deciding whether, as a matter of overall impression, the relationship was one of employment.  The list of indicia was not meant to be exhaustive.

40.  Mr Chen had relied on the above case only to support his submission that in relation to the Commission Agreement, whether that was part of P’s contract of service, or a separate contract for services, the court would need to consider all the factual matrix.

41.  I accept that P had remained an employee of D under a contract of service throughout the period that he alleged that the Commission Agreement was a separate contract for service with D.  In my view, P’s case is arguable.  As pointed out by Master Au-Yeung, and which I agree, it is plainly inappropriate for the court to make any findings at this early stage.

42.  In the above circumstances, D has not been able to satisfy this court that it is plain and obvious that P’s claim should be within the exclusive jurisdiction of the Labour Tribunal.

43.  I will dismiss D’s Notice.  I order that costs of the appeal to be paid by D.  As the hearing before this court was a re-hearing and there was no new evidence, I agree with the Master’s view that there was no need for counsel’s attendance.  I direct such costs are to be summarily assessed on paper.  P to lodge his statement of costs within 7 days, and D to lodge his list of objections within 7 days thereafter.

[1] Para 18/19/12, at pg 432,  Hong Kong Civil Procedure 2014, Vol 1

[2] Para 18/19/12 , at pg 433, supra

[3] See para 16, Reasons, PB: Tab 10

[4] See para 8 of the statement of claim, PB: Tab 1

[5] Para 7 of the statement of claim, supra