WAN SHU PUI AND OTHERS v. AU YUK LUN AND ANOTHER

HCA252/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.252 OF 2000

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J U D G M E N T

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1. This is an appeal against the decision of Master de Souza giving summary judgment to the 3rd plaintiff against the defendants in the sum of $420,028.00 with interest and costs.

2. The case is an employment dispute, originally brought in the Labour Tribunal and later transferred to the this court. The 1st defendant was at all material times the sole proprietor of a firm of solicitors and the 2nd defendant was a service company, of which he was a director. The three plaintiffs were employed by the 2nd defendant to work in the 1st defendant's firm. We are here only concerned with the 3rd plaintiff who was employed as an administration secretary.

3. The 3rd plaintiff says that she was employed from 1987 to 1989 and again from 1990 to 1999. By April 1995, her salary had risen to $32,000 per month. Since about mid-1996, the defendants defaulted in payment of her salary. Her salary for December 1998 was only paid in instalments between 13 April and 15 June 1999. After that, no salary was paid, but the plaintiff continued to work until 23 September 1999 when she terminated her contract of employment under section 10A of the Employment Ordinance, Cap.57. She claims the following :

Arrears of wages	$291,266.00
Year end payment	$19,200.00
Annual leave pay	$39,144.00
Lunch allowance	$1,306.00
Travelling expenses	$300.00
Payment pursuant to section 10A	$32,000.00
Severance/Long service payment (less provident fund contributions by defendants)	$36,812.00
Total	$420,028.00

4. The 3rd plaintiff further says that she worked on after her salary ceased to be paid because she was trying to be "understandable". However, one Priest Cheung approached her on behalf of the defendants in September 1999 and asked her to waive all arrears and agree to a reduction in salary. He also told her that if she did not agree, she would not get anything at all. That was what decided her to leave and to file a claim in the Labour Tribunal.

5. The 1st defendant has filed various affirmations and exhibits, including a "defence information" filed with the Labour Tribunal, and a draft defence. There is also an Amended Statement of Claim in High Court Action No.19026 of 1999, brought by the defendants against the plaintiffs in which they claim damages for breach of contract and/or negligence, damages for conspiracy to cause the 1st defendant to be struck off the roll of solicitors, damages for loss of business, loss of profit, return of lunch allowances and damages for wrongful detention of documents. In fact there is an application to consolidate the two actions, adjourned pending the outcome of the Order 14 proceedings.

6. From the draft defence and the pleading in the other action, it appears that the defendants' case against the 3rd plaintiff, which is largely the same as that against the other plaintiffs, is as I set out below. There is other evidence in the affidavits and exhibits to which I will refer as necessary.

7. The 3rd defendant was employed since 1983.

8. There was an oral agreement between the 1st defendant and the 2nd plaintiff on behalf of all the plaintiffs that their pay would be cut in half with effect from October 1998, and that all arrears (if any) would be set off by utilising the provident fund managed by Manulife. Therefore, no arrears of wages are due.

9. As to travelling expenses, there was no general agreement for reimbursement, but those employees who had the duty of sending documents could claim it. The claims had to be approved by the 1st defendant but the plaintiffs (including the 3rd plaintiff) did not get them approved, and in any event through their breach of trust some $300,000.00 went missing from the office account in 1998-1999.

10. As to annual leave pay, the defendants all took their holidays, so no leave pay is due. Through their negligence or breach of contract, the records were destroyed or lost.

11. The 3rd plaintiff, along with the others, in breach of trust, or in breach of contract, or by negligence, all more clearly particularised in the other action, caused loss to the defendants. Therefore they are not entitled to year end bonus.

12. The plaintiffs terminated their respective contracts of employment in June 1999 when they received payment out of their provident funds, but they remained in the office with the intention of causing loss and damage to the 1st defendant and getting him struck off the roll. Therefore there was no termination under section 10A, and they are not entitled to that and nor are they entitled to long service or severance pay.

13. As to lunch allowance, this was payable in consideration of the plaintiffs staying in the office, on duty, over the lunch period to deal with queries and answer the telephone; but they locked themselves in and did neither.

14. The defendants also counterclaim, mainly by adopting their claims in the other action, but also, if the plaintiffs are successful in proving that their contract of employment continued until 23 September 1999 without giving notice, for one month's payment in lieu.

15. Order 14 rule 3 places the threshold onus on the defendants to show that there is a triable issue. The court will test the credibility of an affidavit asserting a triable issue against the conduct of the defendants and contemporary documents. See Murjani v. Bank of India [1990] 1 HKLR 586. In Ng Shou Chun v. Hung Chun San [1994] 1 HKC 155, Godfrey JA said :

"...I would sound a note of caution about Murjani which has come to be cited in almost every case under O 14 or O 86 to justify the plaintiff in asking the court to embark on a mini trial of the action on affidavit evidence. That is not a proper course for the court to take. It will in future be sufficient for the court to ask itself the simple question : 'Is what the defendant says credible?'. If so, he must have leave to defend, if not, the plaintiff is entitled to summary judgment. The issue is not whether the defendant's assertions are to be believed, it is whether those assertions are believable."

Godfrey JA, on the same theme in the leading case of Man Earn Limited v. Wing Ting Fong [1996] 1 HKC 225, said :

"Unless it is obvious that the defence put forward by the defendant is 'frivolous and practically moonshine', Order 14 ought not to be applied : see Codd v. Delap (1905) 92 LT 510 per Lord Lindley at 511."

16. However, this does not mean that the court must disregard the background. To the extent that it can look at the defendant's own conduct and the contemporaneous documents, without embarking on a mini-trial on affidavit evidence, Murjani is still good law. Or, as Bokhary JA put it in Re Safe Rich Industries Limited, Civil Appeal No.81 of 1994, unreported, 3 November 1994 :

"The test at the summary stage is indeed as simple as whether the defendant's assertions are believable. But it must be recognised - because failure to recognise it would create a debt-dodgers' charter - that whether the defendant's assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute."

17. I am obliged to both counsel for their full written arguments which made up for the problems caused by the optimist who had this hearing listed for a one-hour appointment. I am particularly obliged to Miss Wong, for the 3rd plaintiff, for her helpful chart setting out various points of evidence from the defendants which, she says, are incredible. I do not need to rehearse them all but will mention some.

18. The main head of the plaintiff's claim is for arrears of wages. In support of this, she produces a letter "To whom it may concern", signed by the 1st defendant and dated 2 July 1999 which confirms that the 3rd plaintiff was employed by his firm since 8 August 1991 and that her monthly salary is $32,000. This is simply inconsistent with the 1st defendant's allegation of an agreement for a reduction of salary by 50%. It is also massively improbable that if such an agreement ever came into being, it would not be in writing. It is no use for the 1st defendant to argue that increases in salary, over the years, had not been documented; that is all very well, but an employee whose salary is increased is not going to complain, whereas an employee whose salary is reduced is likely to do so and any prudent employer will surely, for his own protection, put such an agreement in writing. It must not be forgotten that the 1st defendant is a solicitor. So the allegation of an oral agreement to reduce salary is simply not believable.

19. The 1st defendant put forward an explanation concerning the letter of 2 July 1999 in a late 6th affirmation which, after hearing argument, I excluded. Technically I should not therefore refer to it; but I will say, lest I am later found to have been wrong in excluding the affirmation, that a statement by a solicitor that he signed a letter put before him without checking its contents is hardly credible.

20. The 1st defendant says that year end payments were not due because the firm was running at a loss. Again, this is contradicted by a document, namely, the letter of 8 August 1990, which provided for 13 months' payment per annum after completion of the first full year of employment. There is no provision for the extra payment to be linked to the firm's performance. Further it appears to have been paid in the tax years ending from 1997 to 1999 according to the employer's return of remuneration and pensions paid.

21. The lunch allowances likewise appear to have been paid, according to the same return, in the tax years ending in 1997 to 1999. If the plaintiff was not giving consideration for these payments, one wonders why they were continued.

22. As to annual leave, the 1st defendant can only say that it was taken but there are no records; the plaintiffs, or all of them, are blamed for that.

23. The allegations of misconduct, including fraud and breach of trust are mainly aimed at the 2nd plaintiff and, so far as the 3rd plaintiff is concerned, are very sketchy and seem to be based mainly on her association with the 2nd plaintiff. There is evidence that a report was made to the police; there is no evidence of any follow-up. There is suspicion, but no substance. Assertions of suspicion of theft or embezzlement are not sufficient for a defendant to discharge the burden of showing a triable issue or some other reason for trial; see Bank of India v. Murjani, above.

24. Overall it seems clear to me that the defendants' defence to the 3rd plaintiff's claim is not believable, when taken against the background particularly of the documents. The Master was right to give judgment. The appeal is dismissed with costs nisi to the 3rd plaintiff, to be taxed if not agreed.