NG WAI YU AND OTHERS v. CHONG HOU YUE FORMERLY T/A EVER RICH KNITTING FACTORY

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

LABOUR TRIBUNAL APPEAL NO. 58 OF 1989

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J U D G M E N T

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1. This is an appeal from the Labour Tribunal.

2. The Respondents (C1 - C6) were employed by the Appellant as sewing workers on piecework in his factory. On the 3rd April 1989 they filed a claim for sums of money allegedly due to them on the basis that they had been constructively dismissed, having been laid off for a longer period than was lawful. On the 21st September 1989 a Presiding Officer of the Labour Tribunal awarded wages in lieu of notice to all the claimants and in addition awarded severance pay to C1, on the basis that all the claimants had been constructively dismissed by way of lay-off in breach of contract.

3. The Appellant applied for leave to appeal, indicating in the notice of application that there had been an (unspecified) error of law on the part of the Presiding Officer. Supplemental grounds of appeal were settled by counsel and filed on the 13th November 1989.

4. Leave to appeal was granted by this court on the 20th November 1989.

5. The case for the claimants before the Labour Tribunal was straight forward. According to them, there was very little work for them during December 1988. By the end of that month, they were the only workers left. On the 30th December, the foreman said that there was no more work and sent them home, saying that if there was work she would be in touch. The claimants duly went home. Up to the 27th January, no work was forthcoming for C1, C2, C3 or C4. C5 and C6 had only three days work (on the 9th, 10th and 11th January) sewing samples. All the claimants reported to the Labour Department on the 27th January and the proceedings began.

6. Under s. 11(3) of the Employment Ordinance,

"... an employer may lay-off an employee for such periods as are expressly agreed in, or may be implied from, the contract of employment:

Provided that the period of lay-off shall in no case exceed a total of 12 normal working days in any period of 4 consecutive weeks."

7. Section 10 of the Employment Ordinance reads, so far as is material, as follows:

"An employee may terminate his contract of employment without notice or payment in lieu -

(a) ....

(b) ...

(c) on any ... ground on which he would be entitled to terminate the contract without notice at Common Law."

8. It follows that the combined effect of sections 11(3) and 10 (c) is that an employer who lays off an employee for more than 12 normal working days in any period of 4 consecutive weeks is in breach of his employment contract, such breach entitling the employee to terminate the contract without notice at Common Law on the basis of constructive dismissal. (See Joe England, "Industrial Relations and Law in Hong Kong" 2nd Edition, p.192 and the judgment of Rhind J., (page 7) in Ying Cheong Shoe Mfy. v. Yam Yuk-bing & another, L.T.A. No. 102 of 1986)

9. The Presiding Officer accepted the evidence of the claimants and held that they had been constructively dismissed.

10. In presenting the case for the Appellant before this court, Mr. Andy Hung stated that the only two issues were :

"(1) Whether the finding of constructive dismissal was correct and;

(2) Whether the award of severance pay to C1 was correct."

11. For practical purposes, the cases of C2 - C6 inclusive were identical and I shall deal with them together.

12. The first ground set out in the supplemental grounds of appeal related to the following passage in the judgment of the Presiding Officer:

"The claimants evidence was to the effect that they all left at the end of December on the instruction of the foreman since there was no more work for them. They testified that they had been kept waiting for almost a full month without any work. Two of their members were recalled for 3 days or 3 mornings' work in mid-January. There was no dispute in the defence evidence that this was in fact the position and that work was not expected until after the Chinese New Year, which falls on 6/2/89."

13. It was alleged on behalf of the Appellant that in finding that "there was no dispute in the defence evidence" the Presiding Officer had "failed to or sufficiently direct himself to the evidence of the Defendant and his witness."

14. In support of that ground, Mr. Andy Hung for the Appellant submitted that there was a dispute on the facts. As to that contention, the record of the proceedings shows that from the outset the Appellant was constantly changing his ground, so that the Presiding Officer was hard put to it to discover what the nature of the defence was. He said in his judgment:

"It was really difficult to see the nature of the defence as most of the issues were not in dispute. On top of that Defendant seemed rather unsure even at the hearing stage as to whether he would admit to some of the other items."

15. He then went on to say:

"The case proceeded on the basis that no agreement for settlement had been reached except as for the holiday items."

16. It is clear from the record that the Presiding Officer did proceed on the basis that the claimants were put to proof of their case. He did not say in his judgment that the facts were admitted. What he said was that there was no dispute in the defence evidence.

17. The record shows that the evidence of the Appellant indicated that he had no personal knowledge of the matters referred to in that paragraph of the judgment of which complaint was made. He said, however, that he thought that the claimants had left at the end of December, though a couple might have left a day or so earlier. He agreed that C5 and C6 had returned to work for a few days in January 1989.

18. Madam WONG Shun-wo, (referred to by the Presiding Officer as "the foreman") gave evidence for the Defendant. She said, in relation to the claimants: "They left around the end of December 1988 because there was not enough work. We had work after Chinese New Year." The witness went on to say that she had recalled two of the claimants, who returned for a few days: she could not remember when. She was questioned about that by the Presiding Officer as follows:

"Q. You said you had called only 2 of them to return ... and that you had other people there besides those two workers. Who were the other workers?

A. Our company's other workers. I control who was to work and who was to rest. We had more than these 6 sewing workers at the time.

Q. Why didn't you send for all the workers?

A. We didn't need to ... the only sewing work available was some simple sample work. You do not need 10 people there to do just sample work."

19. It will be seen from the foregoing that the defence evidence, far from contradicting the evidence of the claimants, tended to confirm it. There is no justification for the allegation that the Presiding Officer failed to direct himself to the defence evidence.

20. The second ground set out in the supplemental Grounds of Appeal reads as follows:

"2. Notwithstanding the Defence dated 30th May 1989 filed by the Defendant, the learned presiding officer failed to or sufficiently to enquire on the issues as to why the claimants left their employment around end of December 1988 and why the claimants did not return to the factory to work during the period from end of December 1988 to 27th January 1989."

21. In support of this ground, Mr. Hung prayed in aid s. 20 (3) of the Labour Tribunal Ordinance Cap. 25 which reads:

"(3) The Presiding Officer shall investigate any matter which he may consider relevant to the claim, whether or not it has been raised by a party."

22. In the defence dated the 30th May 1989, the Appellant said:

"Although there was not enough work in January, the factory had large quantities of sample work: that was the beginning of the business of the next year. Every worker had to participate in preparing the samples. The wages were calculated on a daily basis. Every year the practice is the same. But this year the 6 workers in question refused, for reason unknown, to return to their work post in the factory when asked to do so and instead went outside to work for other employers. The foreman was forced to seek other workers to help out. Furthermore, the factory had come to its annual closing session and had already distributed wages for January just before the Chinese New Year Holidays."

23. The evidence, including the defence evidence, showed that the workers were sent home at the end of December because there was no work for them. Up to the 27th January only two claimants were called in for three mornings. It was only after the claimants had accepted their constructive dismissal and after the employer had heard from the Labour Department that the Appellant asked them to return to work. There was ample evidence before the Presiding Officer upon which he could find the facts which he did find. There was no need for him to start enquiring into the question whether it was a trade custom to switch the sample work in January. Even if there were such a custom, all the evidence showed that there was no work of any kind offered to the claimants. The question whether they had unreasonably refused to do sample work did not arise. Such work, on the evidence, was not offered to them.

24. There was no merit in the second ground of appeal.

25. The third and fourth grounds of appeal alleged that the Presiding Officer erred in finding the evidence sufficient to show constructive dismissal and to show that the first claimant was entitled to severance pay.

26. In fact the record shows that there was ample evidence upon which the Presiding Officer could find that there had been constructive dismissal. It followed from that finding that the first claimant was entitled to severance pay, since she had been laid off within the meaning of s. 31E of the Employment Ordinance and it was common ground that she had been employed for not less than 24 months (s. 31B, Employment Ordinance). In relation to the question of constructive dismissal Mr. Hung drew my attention to the decision in Western Excavating (E.C.C.) Ltd.v. Sharp (1978) 1 QB 761. That decision related to unfair dismissal under the Trade Union and Labour Relations Act 1974. In his judgment, at page 769, Lord Denning MR restated the well settled Common Law on constructive dismissal as follows:

"If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, and the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer's conduct. He is constructively dismissed."

27. There is nothing in the decision which can assist the Appellant in this case. There is no merit in the third and fourth grounds of appeal.

28. I now turn to the fifth ground of appeal, which applies only to the first claimant (C1). It reads as follows: -

"5. Further or in the alternative, the learned presiding officer erred in finding that the 1st claimant was constructively dismissed or laid off on 27th January 1989 in that he failed to direct himself to the evidence that the 1st claimant was on maternity leave between 5th January 1989 and 28th January 1989."

29. There can be no doubt that the question of maternity leave was very much in the mind of the Presiding Officer. He had to consider a claim by C1 for maternity leave pay under s. 15(2) of the Employment Ordinance and he devoted several paragraphs of his judgment to that. In the event he dismissed the claim but that part of his decision is not the subject of an appeal. In his judgment, he says:

"On the notice provision under s.12(4), the C1 testified that she handed over doctor's certificate and the Statutory Declaration to the Defendant Company on 5/1/89 (Ex. A) and later handed in a further medical certificate (Ex. B). These matters were never in dispute and I accept the C1 evidence on this point."

30. In his defence the Appellant said that all six claimants had refused to return to work when asked to do so. That is not consistent with a contention that C1 was on maternity leave. Later in the defence, he said of C1 "she did not ask the factory for leave after her maternity leave had ended". That could be taken as an indication that C1 had taken maternity leave. In paragraph 6 of a form headed "Statement of Defence" in relation to C1, the Appellant said: "C1 was pregnant, on 5-1-89 received pay and notified factory of maternity leave, but up to present date failed to cancel leave. She quits the job of her own accord clear premeditation".

31. The evidence of C1 in relation to maternity leave was that on the 5th January she handed in statutory declaration form and doctor's certificate to her employer. The doctor's certificate, dated 29th November 1988, showed that C1 was pregnant, that the expected date of confinement was the 25th February 1989 and that antenatal leave, starting from 28th January 1989 was recommended. With that certificate as part of exhibit A is another certificate showing that she had a normal delivery, apparently on the 22nd February.

32. C1 said in evidence: "Just before I had my maternity leave I went to the Labour Department and with their assistance I sent Defendant a copy of my Notice of Claim for severance pay".

33. It appears from the record that C1 went to the Labour Department on the 27th January, so her evidence clearly indicates that on the 5th January she was expecting to start her maternity leave on the 28th January as recommended by the doctor. By the 28th, she had accepted constructive dismissal.

34. When he cross-examined C1, the Appellant put it to her that she had been asked to return to work. This was not consistent with a claim that she had been on maternity leave.

35. In his own evidence, the Appellant said "As for C1 maternity leave, she had left before that". His evidence there showed that her maternity leave had not yet started when she terminated her employment. The Appellant agreed to pay maternity leave pay to C1 and in the next breath he said that her claim for that pay should be denied on the basis that she was not qualified for maternity leave (an issue with which this court is not concerned).

36. Mr. Hung addressed this court on the basis that C1 was on maternity leave from the 5th January when she gave notice of her intention to take the leave. That assumption is without foundation. All the evidence points to fact that the leave was to start on the 28th. The 5th ground of appeal was misconceived.

37. The sixth and last ground of appeal reads:

"6. The learned presiding officer erred in awarding (a) wages in lieu of notice to the claimants and (b) severance pay to the 1st claimant."

38. That ground adds nothing to what has gone before. I mention it because Mr. Hung stated at the hearing that if there was a constructive dismissal he would not attack the decision to award wages in lieu of notice. He effectively abandoned ground 6 except in so far as it indicated that the awards of wages in lieu of notice and of severance pay must necessarily fall with the findings of fact upon which they depended. Mr Andrew Cheung, counsel for the fifth Respondent, in citing Ying Cheong Shoes Mfy.v. Yam Yuk Bing & another (supra) on the question of unfair dismissal, felt it his duty to draw to my attention the fact that in the course of his judgment in that case, Rhind J. had held that wages in lieu of notice were not payable in a case of constructive dismissal. Counsel also pointed out that in Cheng Pak Yan and another v. Wui Yip Asphalt Co., LT Appeal No. 49 of 1986, Hooper J., had come to the opposite conclusion. All parties in the case before me proceeded on the basis that wages in lieu of notice were payable in the event of constructive dismissal, so that the question did not fall for decision in this appeal.

39. The appeal is accordingly dismissed.