SUN ZHONGGUO v. THE BOC GROUP LTD

HCA 4492/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4492 OF 2001

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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 Shum of 20 November 2002 ordering that certain paragraphs in the Statement of Claim and Answers to the Request for Further and Better Particulars be struck out. The Master in fact ordered that paragraphs 10(d), 12(a), 12(b), 12(e), 12(f), 12(g), 13 and 14, Particulars (a) to (h) of 14 and Particulars of Wrongful Dismissal (a) (b) and (e), Particulars (a), (b), (c), (d), (e)(i), (g), (h), (j) and (o) of 15, 16, 17 and 18 of the Statement of Claim; and the Answers Nos. 1, 2, 3, 7, 8, 10 and 14 to the Request for Further and Better Particulars be struck out. Before me, counsel for the Appellant had made it clear that the Plaintiff would not challenge certain parts of the Order and the parts being struck out which were subject to the appeal were: paragraphs 12(a), (b), (e), (f) & (g), 13 and 14 and its particulars (a) to (h), Particulars of Wrongful Dismissal (a), (b) & (e), particulars (d), (h) & (o) of paragraph 15, paragraphs 16, 17 & 18 of the Statement of Claim and the Answers Nos. 2, 8 & 14 of the Answers to the Request for Further and Better Particulars.

2. This action arose out of an employment contract between the Plaintiff as the employee and the Defendant as the employer. By paragraph 2 of the Statement of Claim, the Plaintiff pleaded that there was an employment agreement in writing dated 22 July 1997. By that agreement, the Plaintiff was employed as Business Manager - (CAT and EAP) and was assigned to work location in the Defendant's branch office in Shanghai for a term of two years commencing from August 1997. The Plaintiff further pleaded that the contract of employment was renewed in August 1999 by another written employment agreement dated 8 August 1999 for another term of 3 years commencing from 11 August 1999. It was further pleaded that this contract of employment of August 1999 was contained in or evidenced by or to be inferred from (a) an employment letter dated 8 August 1999 enclosing a 2-pages accompanying document headed "Terms and Conditions" (the "Employment Letter"); and (b) a booklet entitled "Going Global with BOC - your guide to international assignments" issued by the Defendant to its expatriate employees (the "Guide"). It is further pleaded that by the express terms found in the Employment Letter and the Guide, provisions were expressly made in relation to (a) remuneration; (b) housing allowance; (c) use of company car; (d) medical benefit and personal accident and injury benefit; (e) education of children benefit; and (f) annual leave benefit. In paragraph 8 of the Statement of Claim it is pleaded as an express term of the employment agreement that:

"the agreement shall only be terminated under the following circumstances but not otherwise [emphasis added]

a) By the Defendant giving the Plaintiff six months' notice in writing or the Plaintiff at any time;

b) By the Defendant at any time and summarily without notice in lieu if the Plaintiff commits any serious breach of the regulations contained in the Employment Letter or indulges in conduct detrimental to the Defendant's interest;

c) By the Defendant at any time upon six calendar months' notice in writing to the Plaintiff if there exists circumstances rendering impossible for the employment to continue in the work location;

d) In the circumstances of contract expiring by the Defendant giving six months' notice in writing before expiring date; and if no written notice was given to the Plaintiff six months before the expiring date, the Agreement is automatically renewed."

In paragraph 9 of the Statement of Claim it is pleaded there was an express term that in the event of early termination the Defendant should reimburse unavoidable expenses incurred in consequence of termination and costs of other commitments in anticipation of continued employment. In paragraph 10 of the Statement of Claim it is pleaded that in the event of termination by the Defendant under any circumstances, it was expressly provided in the Agreement that the Plaintiff would be entitled to the benefit of severance pay, repatriation to the USA, disturbance allowance and the benefit of certain partner support budget. The Master had struck out the pleading relating to the partner support budget and there was no appeal on this point.

3. Then there came the controversial parts of the pleading which are in the following terms:

"12.	Further, in order to give business efficacy to the Agreement and/or arising from the mutual intentions of the parties thereto and/or by reason of the previous course of dealings between the Plaintiff and the Defendant since July 1997, the following terms were implied into the Agreement:

a) The Plaintiff was entitled to the 6 months' notice of intention to terminate the employment and to have the employment continued until the expiration of such notice;

b) The Plaintiff was entitled to be provided with all benefits referred to under the Agreement until expiry of his employment or until the end of the 6 months' notice period in case of early termination;

e) In any event, the Plaintiff was entitled to performance appraisal for each and every financial year in accordance with his performance from the Defendant failing which the Plaintiff was entitled to claim compensation arising therefrom;

f) The Defendant would maintain and not, without reasonable and proper cause, so conduct itself as to destroy or seriously damage the relationship of trust and confidence between itself and the Plaintiff;

g) The Defendant would not, without reasonable cause, do anything which would injure the Plaintiff's physical or mental health or harm his professional development.

13.

Further or in the alternative, the Plaintiff avers that the Defendant as an employer owed him a duty of care not to cause injury to his health because the Defendant ought reasonably to have foreseen that such injury to the Plaintiff was likely to result from the unfair manner of dismissal by the Defendant.

14.

By a letter dated 16 January, 2001, the Defendant, with a view to eliminate the Plaintiff for reasons totally unrelated to the Plaintiff, wrongfully and in repudiatory breach of the Agreement, dismissed the Plaintiff from employment with effect from the end of February, 2001. The Plaintiff believes that the real reason for his dismissal was his close association with Mr. Mike Foster and the acquisition of certain operational matters of the Defendant through such association.

Particulars

[In sub-paragraphs (a) to (h), the Plaintiff gave particulars to the effect that one Foster had become aware of certain mal-practices of the Defendant and the information was passed to the Plaintiff. The Plaintiff believed that the Defendant having knowledge of his close relationship with Foster thought that the Plaintiff was a danger to the organization]

Particulars of Wrongful Dismissal

a) The Defendant failed to give the Plaintiff 6 month's notice;

b) Without the Plaintiff's consent, the Defendant requested the Plaintiff not to work starting from the end of February 2001 notwithstanding the continuance of the employment.

e) The Defendant failed and refused to give the Plaintiff a performance appraisal for the year 2000/2001 he would have received but for the wrongful termination and make any compensation for failing to give such appraisal.

15. By reason of the matters aforesaid, the Plaintiff suffered loss and damage.

Particulars

(d)	Annual leave benefit	US$97,200.00
(h)	Loss of use of company car	US$13,634.00
(o)	Compensation for no performance appraisal	US$50,000.00

16.	Further, in breach of the implied terms of the Agreement, the Defendant destroyed or seriously damaged the relationship of trust and confidence between itself and the Plaintiff and also caused injury to the Plaintiff's mental health and harm to his professional development by wrongfully dismissing the Plaintiff.
17.	Further or in the alternative, the Defendant was negligent in that it wrongfully, and in breach of the duty of care owed by the Defendant to the Plaintiff, dismissed the Plaintiff without giving 6 months' notice or it purported to summarily dismiss the Plaintiff without giving sufficient reason and full compensation for his dismissal and further behaved in a way which the Defendant would reasonably have foreseen injury to the Plaintiff.
18.	By reason of the Defendant's breach of the Agreement and/or negligence and/or breach of duty of care, the Plaintiff has suffered vexation, frustration and mental distress and thereby incurred financial loss and suffered damages. The Plaintiff is unable to give full particulars and will seek to give such particulars after discovery."

4. The Answers to the Request for Further and Better Particulars which were struck out and were the subject matter of this appeal are Answers Nos. 2, 8 and 14. They are all in relation to the Particulars of loss and damages under paragraph 15 which had been struck out by the Master. Answer No. 2 relates to the Particulars of loss of annual leave benefit in the sum of US$97,200.00 under paragraph 15. By this Answer, it appeared that the sum of US$97,200.00 was made up of:

" (1) The total of 42 days of annual leave which can be broken down into 3 separate periods of leave by (a) 15 working days; (b) 15 working days; and (c) 12 working days, which are equivalent to (a) 21 calendar days; (b) 21 calendar days; and (c) 16 calendar days respectively.

(2) For each period of leave, the Plaintiff was entitled to allowances on plane tickets calculated at US$15,000.00, i.e. a total of US$45,000.00 for the 3 periods.

(3) In addition, the Plaintiff was entitled to allowances on the accommodation (US$700.00) and car hire (US$200.00) expenses on each day of leave, i.e. a total of US$900.00 per day for the 58 calendar days of leave."

Answer No. 8 was in relation to how the loss of use of company car in the sum of US$13,634.00 was made up. From this answer, it would appear that the Plaintiff claimed that the loss of use of the car was made up with 2 elements, viz. the rental of car and driver at RMB28,080.00 per month, and the parking, fuel and toll expenses at US$500.00 per month. The total period claimed was 3.5 months, i.e. from 1 April 2001 to 15 July 2001. Answer No. 14 was in relation to the loss of $50,000.00 being the amount claimed in respect of compensation for no performance appraisal. It appeared that this figure was an estimation based on the fact that there was no acknowledgment of the Plaintiff's achievement in the previous year and no salary increase was given to the Plaintiff which would normally follow an appraisal.

5. It cannot be in dispute in this case that the express term pleaded in paragraph 8 of the Statement of Claim was intended to be a plea of the term set out in paragraph 9 of the Employment Letter dated 8 August 1999. It is however important to note that while paragraphs 8(a) to (d) of the Statement of Claim correctly summarized the effect of paragraphs 9(a) to (d) of the letter, the express term set out in the letter did not contain the words "but not otherwise" which were added in by the pleader in paragraph 8 of the Statement of Claim. Those words were of crucial importance to this appeal. While it is clearly the contention of the Plaintiff that the effect of paragraph 9 of the Employment Letter was as pleaded, those words were in fact not there. Of course, it was the Defendant's contention that the 4 methods set out in paragraphs 8(a) to (d) were not the only methods for the termination of the contract of employment.

6. It is again not in dispute that the Defendant did send a letter dated 16 January 2001 terminating the Plaintiff's employment. The relevant part of the letter was in the following terms:

" Further to our discussions, I confirm that your contract with BOC China will come to an early conclusion and the requisite 6-month notice period will be effective as of today 16 January 2001.

As discussed, we will target end-February as an agreed time for your departure from BOC. We will then fulfill our obligation by paying out the remaining period of notice that you would not be serving. The other terms relating to early conclusion of the contract will also apply."

7. There is again no dispute that since the letter of 16 January 2001, the Defendant paid the Plaintiff the following sum:

(a) full salary payment between 16 January 2001 to 28 February 2001;

(b) half of the total amount of salary from 1 March 2001 to 15 July 2001;

(c) half of the severance pay'

(d) full amount of the outstanding leave of 30 days; and

(e) full amount of the variable payment for the year of 2000.

In relation to the salary between 1 March 2001 to 15 July 2001 and also the severance pay, the retention of half of the amount was for the purpose of tax provision in accordance with the PRC law. There is really no dispute that after deduction of the tax liability the balance would be paid over to the Plaintiff. There is also no dispute that the Plaintiff, his wife and child would be given business class tickets for repatriation to the USA and the Plaintiff would be given US$3,000.00 for accommodation in the USA upon repatriation. In relation to the company car and driver, the Defendant had provided them for the Plaintiff's use until 31 March 2001.

8. The principles applicable to the striking out pleadings or parts of a pleadings are well known. It is only in plain and obvious cases that the Court should exercise its power to summarily strike out the pleadings. The Court should not be engaged in any trial on affidavits. Normally the Court would assume that the facts asserted in the pleadings sought to be struck out are true. It is only when the Court is satisfied that there is no basis for the pleas and that the pleas sought to be struck out are unarguable and incontestably bad that the Court would strike out the pleas. While the Court would normally decline to strike out where the striking out would involve the Court's resolving a difficult or complex point of law, if upon hearing arguments, the Court can come to a clear view that it is plain and obvious that the plea is not maintainable the Court should not decline to strike out simply because there is a point of law involved.

9. In relation to the application to strike out paragraphs 12(a) & (b) of the Statement of Claim, the Defendant contended that there could not be any implied term in the contract of employment as alleged in these 2 subparagraphs. The Plaintiff of course contended otherwise. On the part of the Plaintiff, it was contended that paragraph 9 of the Employment Letter plainly showed that with the exception of cases falling under paragraphs 9(b)(i) & (ii), the Company must give 6 months' notice to terminate the agreement. In the case falling within sub-paragraph (a), the termination by giving 6 months' notice may be effected without any reason. In the case falling within sub-paragraphs (c) & (d), then even though the relevant circumstances should exist there must still be a 6 months' notice in order to determine the employment. Thus, the Plaintiff's counsel argued that it is at least arguable that as a matter of business efficacy or as a matter of mutual intention or by reason of the previous course of dealings, there ought to be implied the terms set out in paragraphs 12(a) & (b) of the Statement of Claim, which in effect meant that in all circumstances except those set out in sub-paragraph 9(b) of the Employment Letter, the Plaintiff must be entitled to 6 months' notice and that the employment could not be terminated before the actual expiration of the 6 months' notice period.

10. I am of the view that plainly the implied terms pleaded in paragraphs 12(a) & (b) of the Statement of Claim could not have arisen by reason of previous course of dealing between the parties. In relation to the right to determine a contract of employment, apart from the contractual provisions, there are also statutory provisions giving power to both the employer and the employee to determine an employment contract. The relevant legislative provisions are sections 6(1), (2) and & 7(1) & (2) of the Employment Ordinance, which are in these terms:

" 6	(1)	Subject to subsection (2), (2A), (2B), (3) and (3A) and section 15 and 33 [which are not relevant for the present purposes], either party to a contract may at any time terminate the contract by giving to the other party notice, orally or in writing, of his intention to do so."
	(2)	[in effect provided that the length of the notice should be as agreed between the parties in the contract but shall not be less than 7 days]
	(1)	Subject to sections 15 and 33, either party to a contract of employment may at any time terminate the contract without notice by agreeing to pay to the other party a sum equal to the amount of wages which would have accrued to the employee during the period of notice required by section 6.
7	(2)	Either party to a contract of employment, having given proper notice in accordance with section 6, may at any time thereafter terminate the contract by agreeing to pay to the other party such proportion of the sum referred to in subsection (1) as is proportionate to the period between the termination of the contract and the time when the notice given would have expired."

11. Thus it is quite clear that under the Employment Ordinance, the Defendant as employer is entitled to give 6 months' notice to terminate the Plaintiff's employment; or alternatively may be able to make payment of 6 months' wages in lieu of the notice or alternatively as in the present case, give notice in mid January to effect determination of the employment by the end of February and make payment of wages for the period between 1 March 2001 to 15 July 2001. The issue here is whether under this situation there is any further room for saying that there was nevertheless an implied term that the only way of terminating the employment was to continue to employ the Plaintiff until 15 July 2001, the date of expiration of the 6 months' period of the notice given on 16 January 2001.

12. To this issue the Plaintiff's contention was that section 70 of the Employment Ordinance merely made null terms which purported to extinguish or reduce the right, benefit or protection conferred upon the employee under the Ordinance, and hence it would not be against section 70 to have a contractual term to the effect that the right to make payment of wages in lieu of notice under section 7 of the Ordinance was not to be available to the Defendant, the employer. However, the difficulty of the Plaintiff is a more fundamental one. It is plain that the terms pleaded in paragraphs 12(a) and (b) of the Statement of Claim are not express terms. The Plaintiff's contention in effect was that there should be terms implied in the agreement which abrogated the Defendant's rights under section 7 of the Employment Ordinance. It is trite law that terms could not be implied into a contract simply because they are reasonable and no terms could be implied if it is against an express term of the contract. In the present case, although the power to terminate under sections 6 & 7 of the Employment Ordinance is not an express term of the employment contract, yet the rights given are nevertheless rights which the Defendant would be entitled to enjoy unless they are taken away by the terms of the agreement. It is difficult to see why as a matter of business efficacy, there must be a term to exclude the Defendant's statutory rights under sections 6 & 7, nor could I see any reason for saying that as a matter of unexpressed common intention, there must be a term that the Defendant is not to exercise the rights given to it as employer under the 2 sections. In fact, given the nature of a contract of employment being a contract for personal services, it would be quite unreasonable to force the Defendant to accept the services of an employee against its will. Hence, I come to the conclusion that the Master was right in his conclusion that there could not be an implied term as pleaded in paragraphs 12(a) & (b) of the Statement of Claim and the same should thus be struck out.

13. In view of my conclusion that there could not be any implied term in the employment contract to exclude the statutory power to terminate the employment under sections 6 & 7 of the Employment Ordinance, it follows that the Defendant could not be in breach of contract by serving the letter of 16 January 2001. This would be so even though it was in effect alleged in sub-paragraphs (a) to (h) of paragraph 14 of the Statement of Claim that the dismissal was for an ulterior motive. In Chapman v Honig [1963] 2 QB 502 the Court of Appeal held that a notice to quit served by a landlord on his tenant could not be invalidated by the fact that the landlord's motive in serving the notice was to punish and victimise the tenant for giving evidence against the landlord in a previous action. Thus as between the same parties, the exercise of a power under the Ordinance to terminate a contract of employment without cause cannot be invalidated by some alleged ulterior ill motive on the part of person exercising the statutory power.

14. In Reda & Another v Flag Ltd [2002] IRLR 747, the contract of employment provided that the employer was entitled to terminate the employment at any time during the contract period (a) for cause (i.e. misconduct); (b) for unsatisfactory performance; and (c) without cause. However, the contract further provided that the consequence for each type of termination was different. In the case of termination with cause, the employee was merely entitled to be paid his salary up to the date of termination. In the case of termination for unsatisfactory performance, the employee would be entitled to be paid his salary for a further 3-months period (or, if less, for the balance of the contractual term) and also at the discretion of a compensation committee, a proportion of his annual incentive bonus and completion bonus. In the case of termination without cause, the employee would be paid his salary for another 12 months or if less, until the expiry of the contractual term, and again at the discretion of the compensation committee, a proportion of his incentive and completion bonus. While notice must be given for unsatisfactory performance, the contract made no express provision for dismissal without cause. The employer dismissed the employee without cause. The employee sought to argue that the employer was in breach of the contract because the dismissal was for a collateral purpose of avoiding to grant him the benefit of a stock option which the employer would introduce shortly after the dismissal. The Privy Council agreed with the view of the Court of Appeal that the very nature of such a power to dismiss without cause was that its exercise would not have to be justified, and that was the end of the matter. In any case, the Privy Council further took the view that even though the exercise might well be prompted by a desire to avoid granting the benefit of the stock option to the employee, this could not be properly said to be for a collateral purpose because the directors of the employer did not owe the employee any such fiduciary duties. In my view, the same principle must also apply to the case of the power to terminate the contract of employment under sections 6 & 7 of the Employment Ordinance. It is plain that under the Ordinance, neither party exercising such right is required to give any reason for terminating the agreement. Thus, the fact that the Defendant might be prompted to exercise such right by matters set out in the Particulars (a) to (h) of paragraph 14 could not vitiate the exercise of such power to make it a breach of contract.

15. Accordingly, I am also of the view that particulars (a) to (h) of Paragraph 14 should also be struck out. It will also follow from my conclusion on the rights of the Defendant under sections 6 & 7 of the Employment Ordinance that sub-paragraphs (a) and (b) under the Particulars of Wrongful Dismissal should also be struck out.

16. Also since the claim for the loss of use of the company car in paragraph 15(h) as explained in Answer No. 8 of the Request for Further and Better Particulars is predicated on the basis that the Plaintiff was entitled to continue working for the Defendant between 1 April 2001 to 15 July 2001, and further this sort of monitory compensation is not part of the wages payable to the employee if the employer is exercising its right to terminate the employment under sections 6 & 7 of the Employment Ordinance, I am of the view that the Master was also right in striking out paragraph 15(h) and Answer No. 8.

17. The Plaintiff however claimed that at least it was arguable that (1) there was an implied term that the Defendant as employer would maintain and not, without reasonable and proper causes, so conduct itself as to destroy or seriously damage the relationship of trust and conduct between itself and the Plaintiff (of paragraph 12(f) of the Statement of Claim); and (2) the conduct of the Defendant complained of in sub-paragraphs (a) to (h) of the Particulars in paragraph 14 and sub-paragraphs (a) & (b) of the Particulars of Wrongful Dismissal were instances of breach of this implied term.

18. I am prepared to accept that in a contract of employment, there would be an implied term of mutual trust and confidence between the employer and employee. To this extent, in fact, the Defendant did not take issue with the Plaintiff. However, the question is whether in the circumstances of this particular case and in the context of the termination of employment, the implied term would give rise to an obligation that the employer should not exercise its right under sections 6 & 7 of the Employment Ordinance to terminate the employment contract without cause and without 6 months' notice by making the payment of wages as stipulated in section 7 of the Ordinance.

19. In Bachicha v Poon Shiu Man Henry [2000] 3 HKC 452, the appellant employer served a one month notice on his domestic helper employee to terminate her contract. Before the notice expired, the wife of the employer who had often ill treated the employee during the course of her employment, used violence to force the employee to acknowledge and to agree to the notice to terminate her employment. The employee became so afraid that she moved out to a shelter for domestic helpers. The Court of Appeal agreed with the Judge that there was a constructive dismissal in the circumstances and also found that the conduct of ill treatment and the use of violence would also amount to a breach of the mutual obligation of trust and confidence implied in the employment contract for which the Court would award damages. In the course of his judgment Ribeiro JA considered the decision of the House of Lords in Malik v Bank of Credit and Commerce International SA [1998] AC 20 and said that (at page 467 F):

"The Malik decision emphasizes that where the breach does not relate merely to unlawfulness in the termination but involves a breach of some other obligation causing the employees loss going beyond the 'premature termination losses' that usually flow from a wrongful dismissal, damages may properly be recovered in respect of such different or further losses, provided they are causally attributable to the breach and not too remote".

Ribeiro JA further held that (at page 468E):

" a given set of facts may constitute both kinds of breaches giving rise simultaneously to separate entitlements to damages, each independently computed, but subject obviously to the avoidance of any double recovery. The employer's wrongful conduct might constitute a wrongful dismissal (particularly in the form of a constructive dismissal) and at the same time, a breach of the implied trust and confidence term, the latter causing continuing financial loss not confined by the usual wrongful dismissal measure."

In the Balchicha case, in fact the Court of Appeal awarded damages representing the loss of the chance of earning from alternative employment. However, it is important to bear in mind that the Balchicha case is a case of constructive dismissal and it was not a case where the employer had exercised any right to terminate under the Employment Ordinance.

20. The question of the relationship between the implied term of mutual trust and confidence and the right to terminate the contract was considered again in Vincent v South China Morning Post Publishers Ltd [2002] 2 HKC 353. There the employment contract provided that the employer could terminate the service of the plaintiff employee by giving one month notice or payment in lieu of notice. The employer gave one month notice to terminate the employee's employment. The notice would expire 3 weeks before the 5th anniversary of the commencement of the employment with the employer upon which the employee would be qualified for long service payment. The plaintiff employee claimed, inter alia that his dismissal was wrongful and unreasonable and by reason of it he had been deprived of long service payment to which he would otherwise have been entitled under Part VIA of the Employment Ordinance, and he also claimed that in so dismissing him, the employer was in breach of the duty of trust and confidence because the employer had failed to adopt the normal or a fair process of disciplinary action. Deputy Judge Muttrie held that in the circumstances of that particular case although the employee was guilty of some disobedience, a more reasonable course would have been to give the employee a warning and that dismissal was not a reasonable response open to a reasonable employer in the circumstances. Accordingly the employer had failed to show a valid reason for dismissal of the plaintiff and the plaintiff was entitled to be compensated as though he had been dismissed on due notice after his 5th anniversary of commencement of employment under Part VIA of the Employment Ordinance. However, the plaintiff employee's claim for damages for breach of trust and confidence was dismissed because under the contract the employer was entitled to dismiss the employee by giving one month notice and to imply any other requirement before this contractual right could be exercised is against the express term of the contract. On this point, Deputy Judge Muttrie said (at page 373 C-I):

"63.	The circumstances of this case are obviously far different from those in Malik or Bachicha. Here we have a plaintiff who was dismissed on notice according to the terms of his contract of employment, in particular reg 6(a) of the Staff Regulations. There is no question of summary dismissal though it might have been open to the plaintiff to rely on reg 4(c) of its Staff Regulations which allows for summary dismissal for serious misconduct or alternatively on s 9 of the Ordinance. There is no question of constructive dismissal. In fact, if the defendant had dismissed the plaintiff on notice after the 5th anniversary of his commencement of employment there would be no question of wrongful dismissal and no question of remedy. The matter only comes before the court because of Pt VIA of the Ordinance.
64.	There is no doubt that there is, in a contract of employment, a mutual obligation of trust and confidence. The judgment in Malik endorsed it. It is a term implied by law and as such a default rule which the parties are free to exclude or modify. See the judgment of Lord Steyn in Malikat p 45. But in any event an implied term must not contradict an express term of the contract. Here in the contract we have an express term allowing either party to terminate on one month's notice. They can do it on a whim, if they wish. But if the mutual obligation is taken as requiring consultation and warning before dismissal, that contradicts the express term; if takes away the defendant's right to terminate the contract and by the same token, because the obligation is mutual it would no doubt take away the plaintiff's right to terminate the contract, for instance if he saw a better job somewhere else, without some form of consultation with the defendant first. That cannot be right. In any event it would get the plaintiff nowhere. If he had been consulted and warned, and had kept his job, the defendant would still have been under no contractual duty to keep him on, and could still have dismissed him on notice in any event."

21. In Reda v Flag Ltd supra, the employee also raised the breach of duty of trust and confidence in support of his claim for wrongful dismissal by seeking to argue that the employer's decision to terminate the contract was for the ill motive of avoiding having to grant the employee the benefit of the stock option. It was further argued that the employer was bound to preserve the relationship for trust and confidence which ought to subsist between an employer and his employees and not to destroy that relationship by discriminating arbitrarily between its employees by granting some of them valuable financial entitlements and dismissing others in order to avoid having to do so. The Privy Council, agreeing with the Court of Appeal, rejected the employee's argument. Lord Millett giving the opinion of the Council agreed that the contract of employment would contain an implied term that the employer would not without reasonable and proper cause destroy the relationship of trust and confidence which should exist between employer and employee but at the same time made it plain that in common with other implied term, it must yield to the express provisions of the contract. He referred to his own observation in Johnson v Unisys [2001] 2 All ER 801 at 825j that this implied obligation could not sensibly be used to extend the employment relationship beyond its agreed duration, and would further hold that it could not sensibly be used to circumscribe an express power of dismissal without cause.

22. The present case of course differed from the case of Reda v Flag Limited and also Vincent v South China Morning Post Publishers Ltd in that the right of the employers in both Reda's case and Vincent's case to terminate without cause was conferred by an express term of the contract of employment, whilst in the present case the right to terminate without cause by giving notice or making payment of wages in lieu of notice was conferred by the Employment Ordinance. It was sought to argue that in the case where the right to terminate without cause was given by an express term of the contract, because of the operation of the doctrine that no term could be implied which could work contrarily to an express term, there was justification for holding that the duty of mutual trust and confidence which was only an implied term of the contract, could not operate to cut down the right to terminate without cause given by the express term. It was then argued that the situation may at least be arguably different when the right to terminate without cause was not given by express term but by statute. I am of the view that at least in the context of the present case, there could be no sensible difference between the case where the right to dismiss without cause was given by an express term of contract and where it is given by statute. In the latter case, one has to ask the question as to what would be the basis for implying a term of mutual trust and confidence which would work to cut down the statutory right. In such situation, as least in the circumstances of the present case, I do not see on what basis there could be an implied term which would cut down the clear right given by the statute. I do not consider that either the requirement of business efficacy or the doctrine of common intention would require that there should be a term implied so as to cut down or modify this clear statutory right.

23. It is now convenient to deal with the plea in paragraph 12(f) of the Statement of Claim which in effect is a plea of the implied term of trust and confidence. There is no dispute between the parties that such term could be implied into the contact. However, it is to be noted that the only breach of that term alleged in the Statement of Claim was in relation to the termination of contract. It was not alleged that there was any breach of that implied term during the course of employment, thus giving rise to a claim of damages independent from the alleged loss suffered as a result of the Defendant's terminating the Plaintiff's employment at the end of February 2001. In this respect I note that in paragraph 16 of the Statement of Claim, it was only alleged that the act which constituted the breach of the implied term of the duty of trust and confidence and also the term of not injuring the Plaintiff's mental health and professional development was the "wrongful dismissal". In view of my conclusion on the scope of the operation of the duty of mutual trust and confidence, I am of the view that this claim is bound to fail. Accordingly I am of the view that paragraph 12(f) should also be struck out as the plea of this implied term was redundant in the circumstances of the present case.

24. It is also convenient now to deal with the Plaintiff's plea of wrongful dismissal in paragraph 14 of the Statement of Claim. Under the heading of Particulars of Wrongful Dismissal, the Plaintiff had given 5 particulars. Particulars (a) & (b) related to the failure to give 6 months' notice. I have no difficulty in concluding that but for the statutory provision in sections 6 & 7 of the Employment Ordinance, these 2 could be proper particulars of wrongful dismissal. However, if one examines Particulars (c) to (e), it is difficult to see how the same could be Particulars of wrongful dismissal at all. Particular (c) related to the refusal or failure to pay variable compensation or bonus for the year 2000/2001. While the failure to make payment properly due to the Plaintiff under the contract would amount to a breach of the contract of employment, it is difficult to see how this allegation, even if proved, could render the dismissal wrongful in the present case. Likewise, the plea in Particular (d) of the Particulars of Wrongful Dismissal related to the failure to fully compensate the Plaintiff of all the benefits he would have received pursuant to the terms of the employment contract but for the wrongful termination at the time when the contract was effectively terminated. The particulars given under paragraph 15 on the loss and damages would indicate that the Plaintiff's real contention was that the Plaintiff would contend that the Plaintiff ought to be put in the same position as if he had continued to work for the Defendant until 15 July 2001, the expiration of the 6 months from the date of the notice. Again this Particular (d) of Particulars of Wrongful Dismissal would amount to nothing more than a plea that the Defendant had failed to compensate the Plaintiff so as to put the Plaintiff into the same position as if the Plaintiff would stay on with the Defendant till 15 July 2001. Properly understood this could not be a description or a particular to support the Plaintiff's allegation that the dismissal was wrongful. Particular (e) was plainly a separate allegation of breach of an alleged term of the contract which would give rise to a separate claim for damages. It was quite independent from whether the contract was rightfully or wrongfully terminated. Thus properly understood, the Plaintiff's case as pleaded was merely that insofar it was alleged that dismissal was wrongful, the only ground which could be properly relied on by the Plaintiff was the failure to give the Plaintiff 6 months' notice and requiring the Plaintiff to terminate his service before the expiration of 6 months from the day of the 16 January 2001 letter notifying him of the termination of his employment.

25. I now come to the plea in paragraph 12(g) of the Statement of Claim. In this sub-paragraph the Plaintiff pleaded that there was an implied term that the Defendant would not, without reasonable cause, do anything which would injure the Plaintiff's physical or mental health or harm his professional development. I agree that at least it is arguable that this term could be implied in a contract of employment. However, the only act of breach of this implied term as pleaded in paragraph 16 of the Statement of Claim was the alleged wrongful dismissal itself. Since the only alleged act of wrongful dismissal was in effect the employer's exercising its right to terminate under sections 6 & 7 of the Employment Ordinance, I do not think this implied term could have any scope of operation to cut down the employer's statutory right. Accordingly I am of the view that paragraph 12(g) and paragraph 16 do not give rise to any reasonable cause of action and should be struck out.

26. Paragraph 17 purported to plead a cause of action in negligence against the Defendant. The essence of the plea is that the Defendant was negligent in dismissing the Plaintiff without giving the Plaintiff 6 months' notice or without sufficient reason and full compensation for the Plaintiff's dismissal. Insofar as it is alleged that the Defendant had failed to make sufficient payment to meet the requirement for the exercise of the statutory right to dismiss under sections 6 & 7 of the Employment Ordinance, plainly there is a cause of action to recover any short payment. However, I fail to see how this could give rise to any separate tortious duty. Further, insofar as it is alleged the act of negligence was constituted by the exercise of the statutory right to terminate without notice by making payment in lieu, I do not see how the Plaintiff could succeed in an action in tort either (see Johnson v Unisys Ltd [2001] 1 All ER 801 at 821b para 59).

27. I will now come to the plea in paragraph 12(e), sub-paragraph (e) of the Particulars of Wrongful Dismissal under paragraph 14, paragraph 15(o) and Answer No. 14 of the Request for Further and Better Particulars. Whether these pleas are maintainable would depend on whether there is an arguable case to say that there was an implied term that the Plaintiff was entitled to performance appraisal for each and every financial year from the Defendant, failing which the Plaintiff was entitled to claim compensation arising from the lack of performance appraisal, and whether there was any breach of such implied term. Implicit in the Plaintiff's contention was not only that the Defendant was bound to make and give a performance appraisal to the Plaintiff, but also that the Defendant was bound to raise the salary of the Plaintiff or to give some additional benefit to the Plaintiff upon a favourable appraisal of the Plaintiff's performance.

28. The Plaintiff prayed in aid of paragraph 5 of the Terms and Conditions annexed to the Employment Letter which said :

"5. Variable Compensation

You will have the opportunity of earning sixty thousand US dollars as an incentive for the achievement of pre-defined targets for the capture of N2 and O2 contracts.

These targets will be established at the start of each financial year which commences on 1st October.

Awards will normally be communicated in December and paid in the following January.

Performance in excess of these targets will generate additional incentive payments. Correspondingly, failure to achieve these targets may lead to less payment."

29. It is to be noted that under paragraph 15(l) of the Statement of Claim, the Plaintiff had claimed the shortfalls of variable compensation and/or bonus from 1998 to 2001. In fact, the claim for the year 2000/2001 was made on the basis of not only what the Plaintiff had achieved up to the time when he left the Defendant's employ on 28 February 2001 but would also include a further amount reflecting what the Plaintiff would have achieved if he were to be allowed to work until 15 July 2001. Thus, these items of claims would appear to be distinct and separate from the claim based on the implied term that the Defendant must give a performance appraisal of the Plaintiff's work every financial year. There was no application to strike out the claims under sub-paragraph (c) of the Particulars of Wrongful Dismissal and paragraph 15(l) of the Statement of Claim.

30. In paragraph 12 of the Statement of Claim, the implied term on the obligation to give an appraisal of the Plaintiff's performance was said to have arisen from business efficacy or from the mutual intentions or by reason of previous dealings. I cannot see how such obligation could arise from business efficacy or from mutual intentions. Of course such implied obligation may arise from previous course of dealings, although in the present case, the Plaintiff had not given any particulars of the previous course of dealings which he would rely on to support this plea. Again the implicit suggestion that upon a good appraisal the Plaintiff was entitled to be given some financial benefit or an increase of salary could in a suitable case, also be supported by a course of previous dealings although I doubt whether at the end of the day the Plaintiff could adduce sufficiently cogent evidence to justify the Court to find that there was such a term implied from the previous course of dealings that the Defendant must appraise the Plaintiff's performance every year and must, on top of what was provided for by paragraph 5 of the Terms and Conditions, give the Plaintiff some additional benefit or an increase in salary. However, I am not persuaded at this stage that the Plaintiff's contention is completely unarguable.

31. However, the mere existence of an implied term in a contract would not be sufficient to support a cause of action. It is still necessary for the Plaintiff to plead how the term was breached and also the damages arising from the breach. In the present case, the act of breach was "the Defendant failed and refused to give the Plaintiff a performance appraisal for the year 2000/2001 he would have received but for the wrongful termination" and the Defendant's failing to "make any compensation for failing to give such appraisal" (of sub-paragraph (e) of Particulars of Wrongful Dismissal in paragraph No. 14. Thus implicit in such allegation of breach was the suggestion that had the contract not been "wrongfully terminated" then there would come the time when the Defendant would have to give a performance appraisal for the year 2000/2001, and that would then trigger off an obligation to give the Plaintiff the benefit or increase in salary.

32. Since I am of the view that in the present case the Defendant had a right to terminate the contract on 28 February 2001 by giving notice and making payment under sections 6 & 7 of the Employment Ordinance, I am of the view that there could not be an implied term that the Defendant would have to compensate the Plaintiff for the loss of the opportunity to get some benefit arising from there being no performance appraisal because the contract was terminated before the same was due. Accordingly I am of the view that these paragraphs relating to the performance appraisal do not give rise to a viable cause of action and should be struck out.

33. I now come to paragraph 18 of the Statement of Claim. This paragraph pleaded that by reason of the breach of Agreement and/or negligence and/or breach of duty of care, the Plaintiff suffered vexation, frustration and mental distress and thereby incurred financial loss and suffered damages. I have already found that the claim on negligence and breach of duty of care should be struck out. However, even though in effect the whole claim for breach of contract by wrongful dismissal, and breach of implied term relating to trust and confidence had been struck out, there are still remaining claims for breach of contract in relation to the children education support, disturbance allowance and also shortfall of variable compensation and/or bonus (of paragraph 15(i), (k) & (l) of the Statement of Claim). Whether these breaches of contract could give rise to a further claim of general damages for vexation, frustration and mental stress would depend on the remoteness of such general damages. Although in the normal circumstances, such general damages would not be awarded in a breach of contract in failing to pay because the same is too remote, I cannot say that such general damages would never be recoverable. Unlike the claim for injury to mental health under paragraph 16, the claim under this paragraph was not pegged with the wrongful dismissal of the Plaintiff. In the circumstances, although the chances for the Plaintiff to succeed in obtaining such damages would be slim, I do not think that the claim is so hopeless that should warrant the striking out of the whole of paragraph 18.

34. On top of the individual sub-paragraphs under Particulars and Particulars of Wrongful Dismissal, the Master also ordered that paragraph No. 14 to be struck out. It is to be noted that in the Defendant's summons, the Defendant only sought to strike out certain words in the first 7 lines of this paragraph so that the paragraph should read:

"14. By a letter dated 16 January 2001, the Defendant wrongfully and in repudiatory breach of the Agreement, dismissed the Plaintiff from employment with effect from the end of February 2001".

It may well be that in ordering to strike out paragraph No. 14, the Master only intended to strike out those parts which the Defendant had applied to have them struck out. For the avoidance of doubt, in relation to paragraph No. 14, I would order that save for the words set out above in this paragraph and sub-paragraphs (c) and (d) under Particulars of Wrongful Dismissal, the whole of that paragraph No. 14 of the Statement of Claim be struck out.

35. Finally I come to paragraph 15(d) of the Statement of Claim and Answer No. 2 of the Request for Further and Better Particulars concerning the claim for 42 days annual leave benefit. Neither party had addressed me on these paragraphs. The Master had struck out both paragraph 15(c) - claim for annual leave pay for 42 days, and 15(d) - claim for annual leave benefit apparently also in relation to the same 42 days of annual leave. Counsel for the Plaintiff informed me when opening this appeal that the Plaintiff decided not to challenge the Master's decision in striking out paragraph 15(c) but the Master's decision to strike out paragraph 15(d) would still be subject to appeal. I was not told of the reason for the Plaintiff's decision. Apparently the Defendant was willing to pay 30 days annual leave pay to the Plaintiff. There was thus a dispute between the parties as to whether the number of leave days should be 30 or 42 and also there was a dispute as to whether the Plaintiff was entitled to the leave benefit calculated in the manner as alleged in Answer No. 2 of the Request for Further and Better Particulars. Counsel for the Defendant had never addressed me on why the Plaintiff's claim under paragraph 15(d) was not maintainable. In all fairness, counsel for the Plaintiff had not addressed me on this paragraph either. In the end, I do not think that I could adjudicate on the dispute on this issue. Although this is an appeal by the Plaintiff against the Master's decision to, inter alia strike out paragraph 15(d), bearing in mind that the nature of this appeal is a hearing de noval, I am of the view that the proper course is to allow the appeal in relation to this claim.

36. Thus to conclude, I would allow the appeal only to the extent that I would restore:

(i) Paragraph 15(d) and Answer No. 2 of Request for Further and Better Particulars;

(ii) Paragraph 18 subject to the deletion of the words "and/or negligence and/or breach of duty of care"; and

(iii) Paragraph 14 to the extent as I have indicated in paragraph 33 above.

37. Since the Defendant is substantially successful in resisting this appeal, I would make an order nisi that the costs of the appeal should be to the Defendant in any event with certificate for counsel.