LENGLER WERNER v. HONG KONG EXPRESS AIRWAYS LTD

HCLA 29/2018

[2021] HKCFI 1333

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 29 OF 2018

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO 376 OF 2018)

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BETWEEN

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JUDGMENT

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1.  This is the appeal lodged by Hong Kong Express Airways Limited (the “Appellant”) under section 32 of the Labour Tribunal Ordinance Cap 25 against the decision of Deputy Presiding Officer dated 27 November 2018 (the “Decision”) allowing the claim of Mr Lengler Werner (the “Respondent”). Leave to appeal was granted by this Court on 19 February 2019.

2.  The appeal was originally set down to be heard on 4 February 2020. That hearing was adjourned due to the general adjournment of court proceedings occasioned by the COVID-19 pandemic.  During the re-fixed hearing on 9 September 2020, the Respondent was absent.  I however had concern about the service of the notice of the appeal hearing, and whether the Respondent had been notified of the hearing.  I gave some directions in that regard.  The hearing was adjourned.  Steps have since been taken by the Appellant to notify the Respondent of this hearing.  The appeal has been relisted before this Court.    

3.  Mr Lawrence Cheung appeared for the Appellant.  The Respondent remained absent.

The background, and the Decision

4.  The facts of this case have been set out by the Deputy Presiding Officer in her Reasons for Decision of 3 January 2019 (the “Reasons”).  I highlight the following matters.

5.  The Respondent used to be employed by the Appellant as a pilot.

6.  On 3 November 2017, an oral dispute took place between the Respondent and two other captains of the Appellant (the “3 November Incident”).  The Appellant as a result carried out an internal inquiry against the Respondent.  The Respondent was suspended from flying duties between 10 November and 28 December 2017 during the interim.

7.  On 28 December 2017, the internal inquiry had not been completed.  Upon his enquiry, the Respondent was informed that two warning letters would be sent to him.  At that point, the Respondent tendered his letter of resignation.  He stated therein that what the Appellant had done legally constituted a constructive dismissal.

8.  Subsequently, the Respondent commenced proceedings before the Labour Tribunal against the Appellant.  He sought arrears of wages, wages in lieu of notice, and overtime pay.  The Appellant counterclaimed for wages in lieu of notice.

9.  After trial, the Deputy Presiding Officer allowed the Respondent’s claim, made an award in the total sum of HK$417,159.40 with costs against the Appellant (the “Award”), and dismissed the Appellant’s counterclaim.

The bases of the Decision

10.  At §20 of the Reasons, the Deputy Presiding Officer set out the following issues:

“ (a) Whether the [Appellant] could rely on the 3 November Incident to suspend the [Respondent] And whether the [Respondent] can rely on Section 11 of the [Employment] Ordinance to terminate the employment by not giving any notice or payment in lieu of notice?

(b) Whether the [Appellant’s] suspension constituted a constructive dismissal of the [Respondent]?  If yes, what would be the damages out of the same?”

11.  The effects of the Deputy Presiding Officer’s findings and rulings were that:

(a) On the 1^st issue, given the relevant minor nature of the 3 November Incident, the Appellant was not entitled to rely on section 11 of the Employment Ordinance Cap 57 (the “Ordinance”) to suspend the Respondent, but that the Respondent was entitled to rely on section 11(2) to terminate the contract of employment within notice or payment in lieu; and

(b) On the 2^nd issue, even if her conclusion on the 1^st issue was not correct, the Appellant had constructively dismissed the Respondent.

The grounds of appeal

12.  I have granted the Appellant leave to appeal on the following two points of law:

“ (a) The learned Deputy Presiding Officer had erred in law by considering and applying Section 11 of the [Ordinance] to the subject suspension of the [Respondent’s]duties at the trial below, and erroneously reached the conclusion that the [Respondent] was entitled to terminate his employment with the [Appellant] relying on Section 11(2) of the Ordinance without notice or payment in lieu of notice.

(b) The learned Deputy Presiding Officer had erred in law in holding that the [Appellant] had committed repudiatory breaches of the Employment Agreement between the parties and that the [Respondent] was therefore constructive dismissed by the [Appellant].”

The first point of law

13.  Sections 11(1) and (2) of the Ordinance provide that:

“11. Suspension from employment in certain cases

(1) Notwithstanding any other provision of this Ordinance or of any other law, an employer may without notice or payment in lieu suspend from employment any employee for a period not exceeding 14 days—

(a) as a disciplinary measure for any reason for which the employer could have terminated the contract of employment under section 9;

(b) pending a decision by the employer as to whether or not he will exercise his right to terminate the contract of employment under section 9; or

(c) pending the outcome of any criminal proceedings against the employee arising out of or connected with his employment:

Provided that where such criminal proceedings are not concluded within the period of 14 days such suspension may be extended till the conclusion of the criminal proceedings.

(2) An employee who is suspended from employment under subsection (1) may at any time during the period of his suspension, notwithstanding sections 6 and 7, terminate his contract of employment without notice or payment in lieu.”

14.  I note the literal wording of section 11.  It relates to “suspension from employment”.  It permits an employer under some circumstances to “suspend from employment any employee”.  On the face of the section, it is not concerned with any partial suspension from part of an employee’s duties.

15.  I note also that sections 11(1)(a), (b) and (c) concern suspension in the circumstances of potential section 9 dismissal and criminal prosecution.  In that context, and viewed objectively, the Legislature mostly probably is dealing there with suspension from employment, but not mere suspension from partial performance of duties. 

16.  That distinction between suspension from employment and mere suspension from partial performance of duties was recognised by Mr Recorder Edward Chan SC in Wu Man Kwong v Asia Culture Broadcast Co. Ltd, unrep, HCLA 1/1998, 29 January 1999.  In that case, the employee concerned (the appellant therein) was a production controller, and as such had been assigned to head and to supervise a television station of the respondent at Kodah House.  The presiding officer found that the respondent suspended the duty of the appellant as production supervisor and that the salary of the appellant was also reduced by 1/3.  In relation to that partial suspension of duties, the learned Recorder pointed out at §8 of his decision as follows:

“ I would like to point out that as the presiding officer had found that the arrangement was a suspension of the duties of the appellant as production supervisor with a reduced salary, this kind of suspension was very different from ‘suspension from employment’ referred to in section 11 of the Employment Ordinance, which envisaged the suspension of the rights and obligations of the contract of employment so that the employee was not required to do any work and the employer was not required to pay the employee. Hence I do not consider that the arrangement had infringed section 11 of the Ordinance.”

17.  In Yeung Chung Ming v Commissioner of Police, unrep, CACV 13/2006, 13 February 2007, the Court of Appeal was concerned with the legality of section 17 of the Police Force Ordinance Cap 232 whereby the Commissioner of Police is authorized in the case of interdiction to withhold a proportion of the pay of the officer concerned.  In the course of the judgment, Tang VP cited with approval the following passage from Warrington LJ in Wallwork v Fielding [1922] 2 KB 66, that:

“ If the employed is suspended from his functions as an employed person, it seems to me the effect of that is to suspend the relation of employer and employed for the time being; to excuse the servant or the employed person from performing his part of the contract, and at the same time to relieve the employer from performing his part of the contract.”

Indeed, at §82 of the Judgment, Tang VP observed, in relation to section 11 of the Ordinance, that:

“ In the case of an employment contract, not involving the government, section 9 of the Employment Ordinance preserves the common law power of summary dismissal. Thus, for example, an employer who believes his domestic employee has stolen from him might summarily dismiss the domestic employee. Of course, the dismissal could be contested, and if the employer turned out to be wrong, he would be liable to pay damages to the employee. Depending on whether the theft was indeed established, the dismissal may or may not be justified. But if justified, the domestic employee would not be entitled to be paid following the dismissal. Nor, if instead of dismissal, the contract was suspended under section 11 of the Employment Ordinance.”

18.  The distinction between suspension from employment and suspension from partial performance of duties is also apparent from the contractual documents between the Appellant and the Respondent:

(a) The express terms of the Respondent’s employment could be found in the following documents:

(i) the Employment Agreement of 31 March 2015 (the “Employment Agreement”)

(ii) the Employee Handbook (the “Employee Handbook”); and

(iii) Conditions of Service for Cockpit Crews (the “Conditions of Service”);

(b) §8 of the Employment Agreement provided as follows:

“ Suspension

The company reserves the right to suspend the Employee from work during any investigation or during disciplinary or grievance proceedings.”

(c) §9.5 of the Employee Handbook dealt with suspension:

(i) the first paragraph thereunder dealt with suspension from part of an employee’s duties, that:

“ Pending disciplinary action, the employee may be suspended from part of his duties, and may or may not be required to perform other duties.”

(ii) The immediate next paragraph dealt with suspension from employment, that:

“ Pending disciplinary action, the employee may be suspended from employment for a period not exceeding 14 calendar days. In the event of suspension pending the outcome of any criminal proceedings against the employee, the period of suspension may be extended ...”

19.  In the present case, there was no dispute that the Respondent’s employment had not been suspended, but only his flying duties.  He continued to be paid his basic salary of HK$75,000, his Market Based Allowance (General) of HK$24,000 and his Guaranteed Market Based Allowance (Productivity) of HK$27,500 per month during the period of suspension of his flying duties.  Any reduction in what he received related to overtime or productivity bonus estimated at HK$20,000 per month.

20.  For the reasons set out above, I hold that section 11 of the Ordinance has no application in the present case.  The Respondent was not entitled to invoke or rely upon section 11(2) of the Ordinance.  In my view, the first point of law is made out. 

The second point of law

21.  The learned Deputy Presiding Officer’s decision on the 2^nd issue identified by her, namely that the Appellant’s conduct constituted constructive dismissal, is one of mixed law and facts. 

22.  On an appeal which touches on findings of facts, §S1/32/2 of Hong Kong Civil Procedure 2021 Volume 2 summarizes the relevant considerations as follows (with authorities omitted):

“ … It does not mean that a finding of fact is always immune from challenge on appeal. For it is well established that the court who hears an appeal on errors of law only does have jurisdiction to interfere and quash a factual determination: (1) which is based on a finding of fact or inference from the facts which is perverse or irrational; or (2) where there is no evidence to support the decision; (3) where the decision was made by reference to irrelevant factors, or without regard to relevant factors, or (4) there was a failure to discharge the statutory duty to investigate and such failure has given rise to injustice, in that a fair and proper determination of the claim cannot be attained … It is not necessary to identify a specific error law, if the decision cannot be supported, the appellate court will infer that the decision-making authority misunderstood or overlooked relevant evidence, or misdirected itself in law.”

23.  Having concluded at §28 of the Reasons that the Respondent was entitled to rely on section 11(2) of the Ordinance, the learned Deputy Presiding Officer says at §29 that:

“ In any event, even if this is not correct, with the reasons set out below, I am of the view that [the Appellant] had constructively dismissed the [Respondent].”

24.  The learned Deputy Presiding Officer then proceeds to consider the 2^nd issue identified by her.

25.  On the law on constructive dismissal, the learned Deputy Presiding Officer correctly cited Chen Xiang v China Daye Non-Ferrous Metals Mining Ltd [2018] HKCA 212 (at §32 of the Reasons), wherein Chu JA observed at §23 that:

“ If an employer does a repudiatory act, causing an employee to reasonably believe that it is impossible to continue to work for the employer, the employer’s act may constitute dismissal in law or ‘constructive dismissal’. In these circumstances, the employee may choose to accept the repudiation of the contract, treat himself as dismissed and the employment contract as terminated, and claim compensation from the employer.”

26.  The learned Deputy Presiding Officer then recited certain facts.  In particular, she observed that the HR Department approached the Respondent on 15 December 2017 and informed him that the investigation procedure was still ongoing, but that the Respondent was for 14 days until 28 December 2017 “completely left in the dark with no communications at all from the [Appellant]”(§§37 and 38).

27.  At §43 of the Reasons, the learned Deputy Presiding Officer states that:

“ In my view, the key question to be asked is simply whether, under the [Ordinance] and the Employment Contract, the [Appellant] could suspend the [Respondent] in the present situation.”

28.  But then even in that context and at that stage, the learned Deputy Presiding Officer remains affected by her decision that the Appellant had no right to suspend the Respondent (§§42 and 48).  In particular, at §48, the learned Deputy Presiding Officer repeats her ruling earlier that she does not regard the 3 November Incident as serious enough to fall within a gross misconduct, and that the Appellant had no right to suspend the Respondent. 

29.  The learned Deputy Presiding Officer has with respect drawn no distinction between a partial suspension of duties and a suspension of employment, and has failed to consider §9.5 of the Employee Handbook in that light.  She has further failed to consider or place weight on the fact that §9.2 of the Employee Handbook separately provides for a set of disciplinary procedure for “Minor Offences”.

30.  Then the learned Deputy Presiding Officer considers Ludgate Insurance Co Ltd v Citibank [1998] Lloyd’s Rep IR 221.  She concludes that at §51 that:

“ In conclusion, after having considered all the evidence and the submissions of the parties, I accept the [Respondent’s] contention that there had been sufficient ground for holding that a constructive dismissal has been established, namely, by the conduct of the [Appellant] of suspending the [Respondent’s] flying duties since 10 November until 28 December 2017 with no apparent justification or progress, together with the fact that the [Respondent] was not being contacted since 15 December in which I regard this silence or inaction on the part of the [Appellant] as being unfair, unreasonable and unacceptable, and such conduct also breached the implied terms of the employment contract that an employer has to maintain the relationship of trust between employer and employee, and not to exercise an employer’s right and discretion arbitrarily, capriciously or inequitable [sic].”

31.  Once the suspension issue is taken out of the formula, I do not believe that the evidence could possibly justify the conclusion that the Appellant had exercised any right or discretion arbitrarily, capriciously or inequitably, or that there had been repudiatory breach on its part.

32.  The learned Deputy Presiding Officer then refers to Bashir v Brillo Manufacturing Co. (1979) IRLR 295 and held that the drop in the Respondent’s income also, viewed separately or cumulatively, constituted a repudiatory breach.

33.  But that drop in income cannot be considered in isolation.  It has to be considered in conjunction with the issue as to whether the Appellant was entitled to suspend part of the Respondent’s duties.  If it was, that drop again, whether separately or cumulatively, could not possibly constitute any repudiatory breach by the Appellant.

34.  In my view, for all the reasons set out above, the learned Deputy Presiding Officer’s decision that the Appellant had committed a repudiatory breach could not be supported, whether in law or facts.

35.  In my view, the second point of law is also made out.

Disposition

36.  For the reasons set out above, I allow the appeal.  I set aside the Award.

37.  In respect of the Appellant’s counterclaim, no specific leave to appeal has been sought.  Mr Cheung invited me to make no order in that regard in any event.  I make no order in respect of the counterclaim.

Costs

38.  I see no reason why the costs of the appeal should not follow the event.  I order that the Respondent should bear the costs of the appeal.  I refer to the Appellant’s Statement of Costs dated 4 May 2021 submitted after the hearing.  In my view, the Respondent should not solely bear the costs occasioned by the adjournment of the hearing on 4 February 2020 (which was caused by the pandemic).  I am of the view that counsel’s total fees are on the high side.  I am also not sure that “preparation of documents” should be undertaken by a consultant of Mr Tse’s seniority. I summarily assessed the costs at HK$150,000.