KWAN HANG CHING AND ANOTHER v. SO CHING T/A SOUTH SEA CO.

IN THE HIGH COURT OF JUSTICE

HONG KONG

LABOUR TRIBUNAL APPEAL NO. 12 OF 1987

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D E C I S I O N

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1. This is an appeal from the Labour Tribunal. In the tribunal, the two claimants sought, amongst other things, wages in lieu of notice and severance pay.

2. The defendant contended that the dismissal of the two claimants was justifiable under section 9 of the Employment Ordinance and that, in any event, the dismissal was not for reasons of redundancy.

3. The case for each claimant was virtually identical. Consequently, although Madam Kwan, the 1st claimant, is not represented on this appeal, she, in effect, has the benefit of the submission of Mr. Chan who appeared on behalf of the 2nd claimant.

4. In the tribunal, the Presiding Officer found in favour of the two claimants and made awards. While the finding in favour of the claimants is now the subject of appeal, the quantum of the awards is not challenged. As the awards are the subject of appeal, the defendant of course becomes the appellant and the claimants become the respondents. I shall, however, continue to refer to them as claimants and defendant respectively.

5. Seven grounds of appeal have been lodged; the first five grounds deal with the summary dismissal and the other two grounds relate to the question of redundancy. The first ground is a general ground and it reads as follows:

"1. The learned presiding officer erred in law in finding that the conduct of the claimants in persistently reporting late for work, disobeying a lawful and reasonable order of their supervising foreman and being absent from work without leave, did not amount to such misconduct as would entitle the defendant to dismiss the claimants under section 9 of the Employment Ordinance."

6. The following four grounds are really an elaboration upon this general ground which, I think, is principally relied upon by Mr. Lau, who appeared for the defendant.

7. Mr. Lau reminded me that the common law rules relating to dismissal prevail in Hong Kong. Section 9 of the Employment Ordinance puts this beyond any doubt because it is in effect a codification of those rules and expressly provides for any other common law rule to apply. Mr. Lau then took me through various textbooks such as Freeland on the Contract of Employment and Avins on Employee's Misconduct. The extracts which he read from these books, based largely upon 19th Century cases in England, illustrate the considerable harshness of the common law rules. They show that no warning need be given to an employee about a particular incident of misconduct and they show that no reasons for dismissal need be given to him.

8. For the claimants, Mr. Chan sought to demonstrate that the effect of these rules has been ameliorated by more modern thinking. He took me to a useful statement of the principles in Hepple and O'Higgins on Employment Law, this is to be found at paragraph 523. These principles are based on more modern case law. Mr. Chan submitted that in the light of these principles, the presiding officer was right in his decision to find in favour of the claimants.

9. I think that, at the end of the argument, there was really no disagreement between Mr. Lau and Mr. Chan upon the law but rather upon its application by the presiding officer. The theme running through both the textbooks and the cases is that the contract between an employer and an employee is no more than an ordinary contract and it must be treated according to usual contractual principles. What must be looked for, therefore, is whether what has been done by an employee is something which is expressly or impliedly a repudiation of the fundamental terms of the contract such as to justify an instant dismissal.  Authority for this is to be found in at least two cases; Pepper v. Webb,⁽¹⁾ which followed an earlier case, Laws v. The London Chronicle (Indicator Newspapers) Limited.⁽²⁾ In the latter case, Lord Evershed, M.R. said at page 700:-

"To my mind, the proper conclusion to be drawn from the passages I have cited and the cases to which we have been referred, is that since a contract of service is but an example of contracts in general so that the general law of contract will be applicable, it follows that the question must be if, summary dismissal is claimed to be justifiable, whether the conduct complained of is such as to show the servant to have disregarded the essential conditions of the contract of service. It is, no doubt, therefore, generally true that wilful disobedience of an order will justify summary dismissal since wilful disobedience of a lawful and reasonable order shows a disregard, a complete disregard, of a condition essential to the contract of service, namely, the condition that the servant must obey the proper orders of the master, and that unless he does so the relationship is, so to speak, struck at fundamentally."

Later in the same case, he said at page 701:

"I think it is not right to say that one act of disobedience, to justify dismissal, must be of a grave and serious character. I do, however, think (following the passages which I have already cited) that one act of disobedience or misconduct can justify dismissal only if it is of a nature which goes to show (in effect) that the servant is repudiating the contract, or one of its essential conditions; and for that reason, therefore, I think that you find in the passages I have read, that the disobedience must at least have the quality that it is "wilful": It does (in other words) connote a deliberate flouting of the essential contractual conditions."

I emphasize the last words.

10. The conduct which is relied upon by an employer for dismissing an employee may be a single incident, such as one wilful refusal to obey a lawful order, or it may be the cumulative effect of a series of incidents on the part of an employee. This is illustrated by Pepper v. Webb to which I have just referred and which might well be termed "the last straw case". But that case no more than followed a principle which was laid down almost a hundred years ago in Boston Deep Sea Fishing and Ice Company v. Ansell.⁽³⁾

11. Mr. Lau contends, therefore, that while none of the single incidents relied on here perhaps warranted summary dismissal, taken together, they do. The presiding officer was therefore wrong in his decision as he did not consider the cumulative effect of the claimants' behaviour.

12. I must, first, I think, consider the proper approach to cases of this nature. I hold it to be this. A presiding officer should make findings of fact as to whether the conduct complained of took place and if so, the circumstances in which that conduct occurred. As was put to me by way of illustration, there is, perhaps, a difference between an employee whose place is on a production line and whose late arrival, if only by a few minutes, will cause considerable disruption, compared with a clerk in an office who works semi-independently and whose late arrival in the morning will not have a commensurate disruptive effect. Having considered those matters, the presiding officer should then go on to consider whether the conduct amounted to a repudiation of the contract or flouted the essential contractual conditions.

13. What, then, was the evidence in this case and how did the presiding officer deal with it and apply the law? It was not disputed that from 1st January 1986 until their dismissal on the 25th March, nearly three months later, the claimants were persistently late by up to 13 minutes. It was not disputed that on the 24th March, both claimants were absent without leave. It was not disputed that on the 21st March, both claimants failed to obey a proper instruction of their foreman. It was disputed as to whether absences on the 24th February and the 4th of March by the 1st and 2nd claimants respectively, took place without notice or leave.

In his decision, the presiding officer said this:-

"In order to justify the summary dismissal, the defendant has tried to prove with timecards that the claimants were habitually late to go to work. There is however no evidence or even allegation that the claimants were ever warned against this, while the later attendance was only for a few minutes on the average and fairly constant. One would easily wonder if it was actually condoned or connived at. Defendant has also accused the claimants of disobeying orders and absence without leave. Only the respective incidences of 21st March and 24th March are mentioned in the evidence, which as isolated events in the long history of the claimants' employment in the defendant's firm (1st claimant since 1980 and the 2nd claimant since 1975) would, in my view, be far short of being grave enough to warrant an instant dismissal without notice or compensation."

14. In my view, that is unsatisfactory. There is no proper finding of the effect or otherwise of the lack of warning about lateness. There is no consideration of the circumstances in which the refusal to obey an order took place and the circumstances in which the absence on the 24th March took place. There is no finding at all about earlier absences. There is no consideration of the cumulative effect of misbehaviour. Then, with respect, the presiding officer went completely off track. He said:

"Without going into the Hansards, I would imagine that the Employment Ordinance as a piece of social legislation in its general provisions for a notice period for the termination of employment by either party is intended to preserve security of employment and livelihood as well as a social and economic stability in a laissez-faire society like Hong Kong."

15. The Employment Ordinance may or may not have an element of provision of security. In passing I would observe that only yesterday, there was debate in the Legislative Council about employment legislation in Hong Kong. It appears that those who have the employees' interest at heart are pressing for legislation, similar to that relating to unfair dismissal in England, to be introduced into Hong Kong. There is apparently a reluctance on the part of Government to introduce it. I say no more than this and I do not think that I misrepresent the position. The Employment Ordinance in Hong Kong does, and does to a very large measure, protect employees against abuses by employers. The English legislation, as I understand it, whatever may be its intention, has the effect of protecting employees against the proper consequences of their abuses.

16. However, whatever may be the position, it seems to me to be wholly irrelevant in the light of the procedure which I mentioned earlier - through which a presiding officer should go in dealing with a case of summary dismissal. I am satisfied therefore that the presiding officer misdirected himself in dealing with the question of summary dismissal in this case.

17. Before leaving the question of summary dismissal, I should mention that Mr. Chan argued that the burden of proof is on an employer to show that summary dismissal was justified. He said that the presiding officer clearly and correctly found that burden had not been discharged and that it is why the presiding officer found in favour of the claimants. With that I disagree.  In two Labour Tribunal Appeals last year, i.e. To Kin-wah v. Shui Hing Co.⁽⁴⁾ and Lau Sze-hon v. Shui Hing Co.,⁽⁵⁾ Mayo J. found that an employee must prove first that his employer terminated the contract and secondly that the dismissal was not for cause. That proposition was accepted by Mortimer J. in Pao Yee-wah v. Chung Wai Stationery Factory Ltd.⁽⁶⁾ I see no reason why I should not follow it.

I turn then to the question of redundancy. Ground 6 reads:-

"6. In finding that the defendant had failed to prove that the claimants were not dismissed by reasons of redundancy, the learned presiding officer erred in law in that he improperly took into account that the substitute worker was a male worker and paid on a monthly salary rather than at a piece rate, and further misconstrued Section 31(2)(c) of the Employment Ordinance."

18. In the reasons given for his decision on the question of redundancy, the presiding officer said this:-

"Here, we have on evidence two very long standing employees being dismissed on some inadequate grounds, who were soon to be substituted for by a single person called Lai Kin-chung who can be described as a worker of a different kind for, unlike the claimants, he is a male worker and paid a monthly salary rather than at piece rate."

19. The sex of a worker and the method of his or her remuneration might conceivably be relevant but, in any event, I do not think that this or any of the other arguments put forward by Mr. Lau, show sufficient ground for saying that the presiding officer misconstrued S. 31(B) of the Ordinance by reading "worker" for "work". That ground of appeal therefore fails.

Ground 7 - the final ground of appeal reads:-

"7. The learned presiding officer erred in law in finding that the claimants were dismissed by reason of redundancy in that in so finding, the learned presiding officer misconstrued the evidence or alternatively failed to take into account relevant evidence, namely

(1) the volume of the defendant's orders

(2) the advertisement for replacement

(3) the employment of a substitute."

20. The only other finding or consideration given to redundancy by the presiding officer was a single sentence. That sentence reads:-

 "It is further alleged that even the foreman of their department (the assembling department) has been transferred out of the department without a replacement."

21. Yet before the presiding officer was a respectable body of evidence, as set out in this ground of appeal. The evidence may not have been sufficient to rebut the presumption of redundancy, particularly having regard to Mr. Chan's elaborate analysis of the evidence, but at least that evidence should have been considered. In failing to consider the evidence, it is quite clear to me that the presiding officer erred in law.

22. I do not think that I should upsurp the function of the Labour Tribunal by drawing inferences from evidence which is not in dispute. Apart from the evidence which is not in dispute, there is, as I have already indicated, evidence which has not been canvassed and which might well, after it has been dealt with by witnesses, take on a different complexion e.g. the documentary exhibits relating to the defendant's order documents. I think the proper course is for me to remit the case to the Labour Tribunal for a new trial, and that I do.

23. I mentioned earlier in my decision that the first claimant, Madam Kwan is not represented. Madam Kwan made one point to me when I afforded her the opportunity of doing so. She pointed out that on the 15th March 1986, the foreman Lai Tak apparently attempted to vary the basic daily wage paid to the two claimants. The effect of that was to, or would have been, to reduce considerably the claimants' daily average earnings. This matter was not canvassed either by the presiding officer or by counsel. It seems to me however that it might be of considerable relevance for four reasons:-

(1) If as a result of this action on the part of the foreman, there was a new contract between the parties, the earlier misconduct of the claimants would be irrelevant;

(2) even if no new contract was concluded, the offer by the foreman suggests that the defendant was not concerned about the claimants' earlier conduct;

(3) and here the balance swings the other way, the offer might be an expression of displeasure at, or a warning about, the earlier misconduct.

(4) it might be an indication of a redundancy situation.

24. As I said, I am remitting the case to the Tribunal for a re-trial. The presiding officer might wish to take this matter into consideration.

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(1) (1969) AUER 216

(2) (1959) 1WLR 698

(3) (1889) 39 Ch.D.339

(4) L.T.A. No. 9/85

(5) L.T.A. No. 10/85

(6) L.T.A. No. 45/85

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