WONG TAK CHEUNG AND OTHERS v. STAR FAIR ELECTRONICS COMPANY LIMITED

IN THE SUPREME COURT OF HONG KONG

LABOUR TRIBUNAL APPEAL NO.36 OF 1984

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BETWEEN

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JUDGMENT

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1. This is an appeal against an award made by the Labour Tribunal. It is necessary to recount shortly the facts of the case, which are as follows. The appellant company, a manufacturer of radios and the like, in mid-April 1984 had 146 employees on its production line. By mid-April 1984 that number had been reduced to 105 through non-replacement of employees who left. On 25th August 17 employees were dismissed, bringing the total down to 88. The remaining employees felt there was no good reason for those dismissals. The appellant is a family company, and the employees learned that the Managing Director and his brothers who were also directors had applied to emigrate to Canada. They recalled the introduction of restrictions which they considered progressively eroded their conditions of service. They became anxious that their employers were running down the factory in preparation to emigrate to Canada. They feared for their jobs. So on the morning of 28th August 1984 they asked to talk to the Managing Director. He went and saw them about noon on that day and agreed to meet them after lunch.

2. During the lunch break he discussed the matter with his senior staff and as a result went off to see a Labour Officer. He says the Labour Officer advised him that it would be better not to see the employees himself, there being some suggestion of a "commotion". Instead the Labour Officer went himself to see the employees. He told them the Managing Director would meet them the following day, the 29th August at 10 a.m. On the 29th the employees as was normal commenced work at 8 a.m. and continued until 10 a.m., when they stopped to meet the Managing Director. But the Managing Director did not appear. It seems that he felt, perhaps not unreasonably, that he could not discuss the matter with all 88 employees, and suggested that they send representatives. The employees, for their part, were reluctant to do so as they feared the representatives would be exposed to victimization.

3. At about noon that day, some of the employees saw the Managing Director leaving with his brief case, and there was an unfortunate incident in which the lift he was using was detained for 10 to 15 minutes by a few employees. The police were called. It was agreed that the employees would appoint representatives who would meet the Managing Director at 2 p.m.

4. Then there was some difficulty about the Labour Officer attending the discussions as the employees felt he might be biased towards the management who had called him in. Discussions nevertheless proceeded that afternoon, and not having been concluded were adjourned to the following morning. The employees, however, did not resume work on the production line; it seems their representatives were in and out consulting them as indeed were the management being consulted by their representatives. Again the discussions were adjourned to the following day.

5. On the following day, the 30th August, the discussions were resumed with the employees again not working but being consulted by their representatives. The employees went back to work at 4 p.m. At 5.30, as usual, the employees finished work and then went outside to await the outcome of the discussions.

6. What was being discussed was the dismissal of the 17 employees and, more importantly, some amendments to the management's factory regulations which were suggested by the employees. About 6 p.m., the Managing Director decided that the employees' amendments were unacceptable and adjourned the discussions to the following day. When the employees outside were told of this there was some sort of "commotion". The Factory Manager says he heard the Managing Director ask the employees to come back to talk on the following day. The Factory Manager also says that he went out to talk with the employees and told them to resume work first and then to continue with the discussions. He says about 20 of the employees said they would not resume work. He went back and reported to the Managing Director. The Managing Director then convened a Board Meeting which decided that the entire production team should be dismissed. A notice to the effect was drafted and put up at the entrance to the factory. It caused great surprise to the employees when they arrived for work next morning and not only saw the notice but found the factory doors closed. Later that morning, at about 10 a.m., a further notice was put up notifying the employees to go to the Labour Department if they wanted to apply for re-employment. On the 2nd September the employees found another notice had been put up outside the factory saying they were formally dismissed as from 1.30 p.m. on 28th August.

7. 68 of the employees were not re-employed, and made claims in the Labour Tribunal, inter alia, for severance payments on the ground of redundancy, and for wages for the 3½ days from 28th August to 31st  August. The Presiding Officer found for the claimants and awarded them a total of $264,142.90, inter alia for the two foregoing claims.

8. The appellant appeals against that award in respect of the two claims. It is convenient to begin with that concerning the wages awarded for the 3½ days preceding the 1st September. The somewhat obscure ground in relation to this was promptly clarified by Mr. Rodney Griffith, who appeared for the appellant and succinctly put it in the following way. Section 2 of the Employment Ordinance (Cap.57) defines wages as remuneration for work done; no work was in fact done for most of the 3½ days preceding the 1st September. So no wages are due. Furthermore, Mr. Griffith points out, the Presiding Officer in his finding concluded his consideration of the particular matter in the following terms:

"In view of the fact that the claimants were in fact dismissed on the 31st August 1984, the defendant must pay their wages except the "attendance allowance" for those 3½ days including the 31st August 1984 because they have the right to work that day. I am satisfied on balance of probability that the claimants have proved their claim for arrear of wages of those 3½ days, I, therefore, enter judgment for their amounts claimed minus the "attendance allowance".".

Mr. Giffith contends that the employees' "right to work that day" had nothing to do with the particular issue.

9. Now it is true that no work was done for most of that period, as the employees worked only from 8.30 to 10 a.m. on the 29th and from 4 to 5.30 p.m. on the 30th. But as the Presiding Officer found, there was a lot going on at the material time, the employees had to be consulted by their representatives, and at some stage one of the directors told the employees it would not matter if they did not work but asked them to remain at their work stations. There was some evidence given on the employees' behalf, that the supervisors withdrew and did not assign any work to them. On the part of the management it was said that the employees were told by 7 supervisors to return to work. The Presiding Officer rejected the evidence given for the appellants and held that the management had not really pressed the employees to return to work. Indeed the Presiding Officer made specific reference to one of the directors telling the employees that it did not matter if they did not work provided they returned to their work stations. It is implicit in the Presiding Officer's findings that he came to the conclusion that the management had acquiesced in the employees' action in attending to the discussions rather than the production line. That inference from the facts seems to me to be not only entirely reasonable, but right. I do not think Mr. Griffith's submission that there was a deliberate refusal to work on the part of the employees can be accepted. He referred to the incident of the lift and to the Factory Manager's statement that on the evening of the 30th, 20 employees said that they would not go back to work. He also referred to the employees' conduct subsequent to their dismissal which actually resulted in the appellant obtaining an injunction against them. Mr. Griffith submitted that all this was going on while demands were being made of the management to accept amendments to their factory regulations; that accordingly although no express threats were made or return to work stated to be conditional on acceptance of those demands, the implication quite clearly is that there was a strike, a wilful refusal to work. I have considered that submission carefully, but I remain of the opinion that the Presiding Officer's finding was not unreasonable and that he was entitled to draw the inferences that he did. I will return to aspects of the matter in another context.

10. Reverting then to the definition of wages, I cannot accept that in such an incidental, oblique way, the legislature meant to limit wages only to hours or periods during which work was actually performed, or indeed to so regulate the entitlement to wages. The purpose of the definition, in my view, is simply to indicate what sort of remuneration is referred to where the expression "wages" occurs in the Ordinance. The entitlement to such wages in my view remains to be regulated by the I contractual relations between the parties, subject, of course, to any statutory provisions that bear upon the point. It has not been suggested that there are any such statutory provisions (apart from the definition under consideration) or that the contractual terms of service preclude the payment of wages for the period in question. As I read the Ordinance, it does not modify the fundamental basis of employment i.e. that it is a contract, and that wages are due under the contract and not under the Ordinance, notwithstanding the protective provisions of the Ordinance designed e.g. to ensure that employees do receive their wages.

11. I accordingly reject the relevant ground of appeal.

12. I proceed then to the major ground of appeal against the award of severance payments which was clarified and presented by Mr. Griffith under the following heads : first, that the employees went on strike, which resulted in self-dismissal; second, that the appellant summarily dismissed the employees, which it was entitled to do because of their withdrawal of labour; and third, that even if the employees were in fact dismissed on the ground of redundancy, because the appellant was entitled to dismiss them for withdrawal of labour without notice, no severance payment is due.

13. Under the first head it is submitted that the claim for severance payment under section 31B can only succeed if there is a continuous contract. Under section 3(1) of the Ordinance, what constitutes a continuous contract has to be determined in accordance with the First Schedule. Paragraph 4 of the First Schedule provides that:

The expression "(which is illegal)" cannot, it is submitted, be declaratory for that would mean all strikes in Hong Kong are illegal. On the assumption that is not declaratory, then if the strike was illegal the clear implication of paragraph 4 is that continuity has been broken.

14. It becomes necessary therefore to determine whether there was a strike and whether it was illegal. Paragraph 7 of the First Schedule gives to "strike" the meaning it has in the Trade Unions Ordinance (Cap.332). "Strike", which although by some quirk, according to Mr. Griffith, is nowhere used in that Ordinance, is there defined in the following way :

"'Strike' means the cessation of work by a body of persons employed acting in combination, or a concerted refusal, or a refusal under a common understanding, of any number of persons employed, to continue to work for an employer in consequence of a dispute, done as a means of compelling their employer or the employer of any other person or body of persons, or any person or body of persons employed, to accept or not to accept terms or conditions of or affecting employment.".

15. Mr. Griffith made a detailed analysis of the legality or otherwise of strikes in England and in Hong Kong, submitting forcefully that they are illegal unless valid notice of termination of the contract is first given, and entitle employers to dismiss striking workers. In that context Mr. Griffith observes that the removal of the distinction between "illegal" and "legal" strikes in the Contract of employment Act 1963 by the Redundancy Payments Act 1965 has not been reflected in the Ordinance or other Hong Kong law, which actually preserves the distinction in paragraph 4 of the First Schedule, notwithstanding that it was enacted in 1968, some three years after the Redundancy Payments Act 1965. Whatever be the merits of this legal submission, regrettably, it does not get off the ground for there clearly was, in my view, no strike by the employees. I will examine that matter further in the context of the factual basis of the three heads of submission later.

16. Proceeding then to Mr. Griffith's submission on the second head, he referred to sections 9 and 31C(1) of the Ordinance which are in the following terms:

17. Mr. Griffith does not seek to rely on paragraph (a)(i) or (ii) of section 9 because of the appellant's factory regulations which require 7 days' notice in writing to be given of any alleged misconduct. But he contends that the employees withdrew their labour during the 3½ days preceding the 1st September, and that even if this did not constitute a strike, it entitled the appellant to dismiss the workers summarily. He relies upon Simmons v. Hoover 1977 ICR 61 at p.77 as authority for the proposition that conduct referred to in section 31C(1) as entitling the employer to dismiss without notice includes a strike. On the other hand, he says, if the withdrawal of labour did not amount to a strike, it is such a fundamental breach of contract as to entitle the employer to accept it as a repudiation by the employee (Simmons v. Hoover at p.73), and to terminate the contract without notice under section 9(b).

18. Now the evidence of the employees' absence from work, which I shall consider in detail later, is that it was in the nature of a single act and not anything like habitual negligence. It is clear from Laws v. London Chronicle 1959 WLR 698 that there is no fixed rule of law defining the degree of misconduct which will justify dismissal; disobedience must at least have the quality that it is wilful, a deliberate flouting of an essential contractual condition which amounts to repudiation of the contract.

19. It is implicit in the Presiding Officer's findings that he did not accept that the conduct of the employees was of such a nature and I entirely agree with him.  Furthermore even if the employee's conduct had amounted to repudiation, in my view, far from accepting the repudiation, the appellant with full knowledge of their failure to work affirmed the contract of service by allowing the employees to continue working between 4 p.m. and 5.30 p.m. on the 30th August. It cannot therefor rely upon the employees' prior conduct (para.1593 Chitty on Contracts 25th ed.).

20. Finally on the third head of his submission, Mr. Griffith contends that if there is conduct entitling the employer to dismiss without notice, no severance payment is payable even if the employee has been dismissed by reason of redundancy. For that proposition he finds support in section 31C(1) of the Ordinance, Simmons v. Hoover at pp.68 and 81, Grunfelds Law of Redundancy, 1st edition, p.123, and paras.676 to 678 of the 4th edition of Hepple and O'Higgins Employment Law. Again, whatever the force of that legal submission, it lacks the factual basis of such conduct as entitled the employer to dismiss without notice.

21. I come then to the factual basis of the three heads of submission i.e. the conduct of the employees, which I have already considered in the context of the employees' entitlement to wages for the 3½ days preceding the 1st September. To what I have already said in that context, I will add that the evidence of the events of the 28th, 29th and 30th August do not reveal any semblance of confrontation. The employees worked on the morning of the 29th and again in the late afternoon of the 30th. There were no threats expressed or implied, no suggestion of a return to work being conditional upon acceptance of the employees' suggested amendments to the factory regulations; above all there is no evidence that the employees refrained from work as a means of compelling their employer to accept their amendments or to do anything else. There was no refusal to obey lawful instructions. The nature of the questions put to the appellant's witnesses by the employees at the hearing before the Presiding Officer do not indicate any sort of militant attitude. There is no evidence that the management objected to the employees not working during the discussions, at least no evidence that the Presiding Officer accepted. I should add that the Presiding Officer gave for his rejection of the evidence given on behalf of the appellant reasons that seem to me entirely valid. Far from the management objecting to the employees' action, they appear to have permitted  the employees to attend to the discussions rather than the production line as I have already said, and to resume work at 4 p.m. on the 30th August.

22. So far as evidence to the contrary is concerned I consider the Presiding Officer was quite right in dismissing the lift incident as not being of particular significance. The Factory Manager suggested that supervisors at some time requested the employees to go back to work but in that connection I note that the Presiding Officer rejected the evidence of the appellant's witnesses, and in any event found that the situation was confused in that respect. I also do not accept Mr. Griffith's submission that the employees' conduct subsequent to their dismissal on 31st August is relevant to the issue of whether there was a strike. Following their dismissal they apparently picketed the premises or otherwise acted in a manner that enabled the appellant to secure an injunction against them.

23. It follows that in my view the Presiding Officer's conclusion implicit in his findings i.e. that there was no strike or conduct which warranted summary dismissal is both reasonable and right. I see no reason why his conclusion should be regarded as unsatisfactory. Mr. Griffith's foregoing three submissions must therefore fail.

24. Mr. Griffith also submitted that the Presiding Officer misconstrued the effect of section 31Q, which provides for the purposes of severance payments that an employee who has been dismissed by his employer shall, unless the contrary is proved, be presumed to have been so dismissed by reason of redundancy. He contends that the diminishing figures of employees employed on the production line do not establish an intention to close down the factory or to cease or diminish requirements under section 31B(2)(a) and (c). He submits that following the dismissal of the 68 workers the management advertised for additional workers, and ought not to be blamed if they could not obtain any; that on the contrary, the appellant's advertisement shows that the factory operations were to be continued. Further he submits that if additional evidence is taken now it should establish that the management has in fact no intention of running down the factory; and that no orders have been transferred to other associated factories. As against that, at the hearing evidence was given before the Presiding Officer that the total of employees dropped even further than has been mentioned, to 40 at the time of the hearing in October 1984. Having regard to this further diminution in the number of workers and to the fact that the Managing Director had obtained immigration approval to migrate to Canada and that at least two of his brothers who were directors had also applied to migrate, I think the Presiding Officer's conclusion that the dismissal of the employees was just an excuse to make them redundant was not unreasonable. But it is not necessary to put it as high as that. It is for the appellant to displace the presumption under section 31Q. The Presiding Officer held that the appellant has not done so. I entirely concur in that view, and find that there is no merit in this ground.

25. The Presiding Officer not only found that the presumption under section 31Q had not been rebutted, but as indicated, he also found on the balance of probability that all the employees claming severance payments were in fact dismissed by reason of redundancy. By that he no doubt meant that their dismissal was attributable wholly or mainly to the employer's intention to cease to carry on the business or to the fact that the requirements of the business for employees were expected to cease or diminish within the meaning of section 31B(2) and the definitions of "cease" and "diminish", to which he referred. Those provisions and definitions are in the following terms:

That the Presiding Officer chose to consider the presumption under section 31Q and the extended meaning or scope of redundancy under section 31B(2) more or less in conjunction, does not in my view detract from either of his conclusions i.e. that the presumption under section 31Q had not been displaced, and that the employees were dismissed by reason of redundancy. Both stand independently and neither has been shown by Mr. Griffith to be unsound.

26. Mr. Griffith invited me to remit the case back to the Labour Tribunal to retry the issue of redundancy. I can see no good reason to do so and must accordingly decline.

27. For the foregoing reasons the appeal is dismissed. I propose to order costs to the respondents subject to what counsel may have to say, if anything.