WONG YICK FOOK JOHNNY v. URBIS (HK) LTD.

HCA 4107/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4107 OF 2000

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J U D G M E N T

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1. In this action, the Plaintiff claimed against the Defendant for damages arising from wrongful dismissal. The claim was initially brought in the Labour Tribunal. By an order dated 5 April 2000, the case was transferred to the High Court. The Plaintiff's case is that he was employed by the Defendant to work as the Defendant's representative in a joint venture company in the mainland called Urbis Guangzhou Garment Company Limited ["Urbis Guangzhou"]. The Defendant became one of the two shareholders in that joint venture company since January 1999. Prior to that, the foreign partner to the joint venture was a related Italian company Urbis S R L. In October 1998, the Defendant took up the position as the General Manager of Urbis Guangzhou. Although he spent most of his time working for Urbis Guangzhou, the Plaintiff said he was actually recruited and employed by the Defendant and worked in accordance with the directions of the Defendant.

2. The terms of employment of the Plaintiff, according to the Plaintiff, were set out in two employment letters containing similar terms dated 5 October 1998, one from the Defendant, the other from Urbis Guangzhou. For administrative reasons, the salary of US$3,100 per month was splitted into two parts, US$2,100 was payable under the letter from Urbis Guangzhou whilst US$1,000 was payable under the letter from the Defendant. The Plaintiff said that in substance, he was employed by the Defendant at US$3,100 per month. The employment was for a period of 3 years from 5 October 1998. The letters contained other terms: six months' probation, one month double pay per year, additional bonus if Plaintiff met the objective of the Defendant, food and accommodation, two weeks annual leave, entitlement to Retirement Scheme and medical, life and accident insurance coverage and all regular holidays in China. The letters also contained the following provision,

"Either you or the Company have to render to the other party a prior notice not less than one calendar month for the termination of this employment."

Both the Plaintiff and the representatives of the Defendant signed on the letters acknowledging agreement to those terms.

3. The employment of the Plaintiff was terminated by a letter signed by Urbis Guangzhou and by the Defendant. That letter stated that the termination took effect on 15 October 1999. The Plaintiff said that the letter was handed to him on 13 October 1999.

Liability

4. The Defendant took the following issues in the pleadings,

(a) the Defendant was not the employer of the Plaintiff and the Plaintiff was employed by Urbis Guangzhou;

(b) the Plaintiff was rightly dismissed by Urbis Guangzou due to his misconducts.

5. Although the Defendant was represented by lawyers up to the date of setting down, the solicitors applied to cease to act and order to that effect was granted on 2 May 2002. The Defendant did not send any representatives to attend the trial and the Plaintiff prove his case in the absence of the Defendant.

6. On the evidence, I am satisfied that the Plaintiff was employed by the Defendant. I accepted his evidence in this regard and based on his evidence, I make the following finding of facts. He was recruited in Hong Kong through an advertisement placed by the secretary of the Defendant. At the job interview in Hong Kong, he met with representatives from the Defendant and he discussed his terms of employment with them. Although he was told at the interview that he would be required to work in a factory in China (in which the Defendant owned about half the shares), he understood that he was sent there as a representative of the Defendant. In addition to the supervision of the factory, the Plaintiff was also responsible for promoting the business of the Defendant in China. He was instructed to report to the representatives of the Defendant in Italy concerning the affairs of the factory. In November 1998, he attended Shanghai to explore business opportunity for the Defendant. In December 1998, he flew to Italy to report to the Defendant regarding situation in China and the operation of the factory. In January 1999, the representatives of the Defendant met the Plaintiff in Guangzhou and promised to confirm the employment of the Plaintiff after probation. On that occasion, they also told the Plaintiff that the Defendant might open other factories in China and the Plaintiff could be posted to those other factories. Those factories were unlikely to be owned by Urbis Guangzhou. Confirmation of the employment of the Plaintiff after probation was given by the Defendant in a letter dated 2 April 1999. In the records of Urbis Guangzhou as to the general and deputy managers, the Plaintiff was described as originally working for the Defendant and posted to the factory by the Defendant. That form was endorsed by the Defendant. All along, the Plaintiff worked as a representative of the Defendant and from time to time, he reported to the Defendant by fax or letters. He also sought to protect the interest of the Defendant and drew their attention to certain irregularities in the affairs of the factory. The Defendant issued invoices to Urbis Guangzhou in respect of "consulting services" provided by the Plaintiff. In those invoices, the Defendant described the Plaintiff as "our Consultant people". The evidence is overwhelming that the Defendant was the employer of the Plaintiff.

7. There are two documents suggested on their face that the Plaintiff was employed by Urbis Guangzhou. The first one is the employment letter issued by Urbis Guangzhou in respect of US$2,100 of 5 October 1998. The second was a Chinese employment contract made between the Plaintiff and Urbis Guangzhou dated 5 October 1998. Those documents were backdated. I accept the Plaintiff's evidence that he received the two employment letters on or about 8 November 1998. Regarding the Chinese employment contract, it was only after mid November 1998 when there were difficulties regarding the arrangement for payment of salaries that the contract was produced. I also accept the explanation of the Plaintiff that these documents were made out for the purpose of facilitating the administrative arrangement for the payment of his salaries. They did not mean to nor could they alter the nature of his employment. Hence, despite those documents, the Defendant remained all along as the employer of the Plaintiff.

8. Although the Plaintiff worked mostly in China, taking all matters into account including the fact that both the Plaintiff and the Defendant are resident in Hong Kong, and the manner in which contract was concluded, I agree with Counsel for the Plaintiff that Hong Kong law applies to the contract of employment. In any event, parties did not put forward any evidence as to foreign law before me.

9. On the second issue, the allegation of misconduct against the Plaintiff, the burden of proof is on the Defendant. As said, the Defendant did not attend the trial and no witness was called on its behalf. In those circumstances, notwithstanding the allegations contained in the witness statements, they could not be part of the evidence. In the absence of any evidence, the Defendant simply failed to discharge its burden and there is no need for me to consider the answers to those allegations by the Plaintiff.

10. The Defendant is therefore liable to the Plaintiff for the early termination of his contract of employment.

Quantum

11. The Plaintiff asked for substantial damages calculated by reference to the benefit he would have obtained during the remaining period under the three years' contract. However, that overlooks the termination provision set out in Paragraph 2 above. According to that provision, either party could have terminated the contract by giving the other party one month's notice.

12. Counsel for the Plaintiff argued that that provision was confined to termination during the probation period. She referred to Clause 7 of the Chinese contract as supporting her submission. In my judgment, given the evidence in the present case, the terms of the contract between the Plaintiff and the Defendant were contained in the letter of employment instead of the Chinese contract. The Plaintiff said in his evidence that the terms of employment were set out in the letter except that the salary should be US$3,100 and the employer should be the Defendant. According to the letters, these terms were accepted by him by signing thereon on 10 November 1998. It was later, some time after mid November, that the Chinese contract was produced for administrative purposes. It is not the Plaintiff's case that the contract has substituted the letters regarding his employment. If he said so, he should be suing Guangzhou Urbis because the Chinese contract purported to state that the latter was his employer. He said that this Chinese contract was a mere instrument to facilitate the administrative arrangement for payment of his salary. Hence, its contents could not affect the terms of his employment with the Defendant. Further, there is no evidence to suggest that when the Chinese contract was executed, the common intention of the Plaintiff and the Defendant was to substitute the terms set out therein for those set out in the letters. Counsel for the Plaintiff has not referred me to any evidence to suggest that the Defendant agreed to such alteration in the terms of employment when the Chinese contract was produced. When the Defendant confirmed his employment by the letter of 2 April 1999, such confirmation was made by reference to the letter of employment instead of the Chinese contract. Therefore, I cannot accept the submission that the governing provision is the one set out in the Chinese contract. On the evidence, I find as a fact that the common intention of the parties was that the terms of employment would be those set out in the employment letter.

13. Counsel for the Plaintiff then referred to the Plaintiff's evidence set out in Paragraph 63 of his witness statement. That was adopted by the Plaintiff in the witness box. He said when his employment was confirmed after probation, Tombolini Fiorella of the Defendant promised him that unless there were serious misconduct on the part of the Plaintiff in the performance of his duties, the Defendant would compensate the Plaintiff according to the three years' contract period if the Defendant terminated the employment of the Plaintiff during that period.

14. In certain circumstances, a subsequent oral promise may override written terms contained in a document. However, I am satisfied that in the present case this piece of evidence could not assist the Plaintiff. In the first place, this is not the pleaded cause of action. The Plaintiff did not plead in the Statement of Claim that by the oral promise, the term of employment as to termination by notice had been altered. In the absence of any express pleading to that effect, the Defendant was not required to deal with such a case. More importantly, such oral promise was not reflected in the letter of confirmation dated 2 April 1999. If such promise had actually been given, why did the Defendant say in that letter that they confirm all the terms in the letter of employment? And why did the Plaintiff not request the point to be clarified, either at that stage or later? Although the Plaintiff has not been cross-examined (because the Defendant did not attend the trial), I am not bound to accept all his evidence (see Kaiifull Investments Ltd v The Commissioner of Inland Revenue, HCIA 8/2001, 4 April 2002, Paras. 29-30; O'Connell v Adams [1973] RTR 150; The Queen v Co Belo, Mag. App. No. 1571 of 1990, 8 January 1991). In the present case, I find that there is an inconsistency between the letter of 2 April 1999 and the Plaintiff's evidence. I should weigh the Plaintiff's evidence against other material placed before me. I find the Plaintiff's evidence in this respect inherently unlikely. It was not suggested by the Plaintiff that he had demanded such promise from the Defendant. Neither did he suggest that he had indicated to the Defendant that he wished to quit his job at the time of the confirmation. In those circumstances, I cannot see why the Defendant would volunteer to give such a promise to the Plaintiff. Apart from the oral assertion of the Plaintiff, I could not find any evidence to support the alleged oral promise. Although the Plaintiff was the only person who had given evidence before me, I do not feel able to accept his evidence that such a promise had been given.

15. Further, even if something had been said regarding termination compensation (which I find to be unlikely), I am not satisfied that the parties intended such conversation to have contractual force overriding the terms of the confirmation letter of 2 April 1999. In this connection, I bear in mind the observations of Lord Moulton in Heilbut Symons & Co. v Buckleton [1913] AC 30 at p. 47:

"Such collateral contracts, the sole effect of which is to vary or add to the terms of the principal contract, are therefore viewed with suspicion by the law. They must be proved strictly. Not only the terms of such contracts but the existence of an animus contrahendi on the part of all the parties to them must be clearly shown. Any laxity on these points would enable parties to escape from the full performance of the obligations of contracts unquestionably entered into by them and more especially would have the effect of lessening the authority of written contracts by making it possible to vary them by suggesting the existence of verbal collateral agreement relating to the same subject matter."

16. I therefore hold that the Plaintiff was bound by the notice provision up to the time when he was dismissed by the Defendant.

17. In those circumstances, damages for wrongful dismissal is confined to remuneration during the notice period (see Lai Foon Yung v. Tin Sum Valley Public Primary School [1985] 1 HKC 372). In the recent case of Semana Bachicha v. Poon Shiu Man [2000] 2 HKLRD 833, Ribeiro JA (as he then was) set out clearly why this was the proper measure of damages a plaintiff could recover in a wrongful dismissal simpliciter situation at p.843E to 844E. See also Lord Hoffmann at Paras. 38 to 42 in Johnson v. Unisys Limited [2001] 2 WLR 1076.

18. Although Counsel for the Plaintiff sought to dispute this proposition initially, after she was referred to these cases, she accepted this to be the law. The case she cited and relied on, Yip Wan-chiu v Magnificent Industrial Ltd [1974] HKLR 183 was dealing with another issue. In that case, the Full Court decided that as the plaintiff's claim was for damages instead of liquidated sum under section 6(1) of the Employment Ordinance, the rule as to mitigation of damages applied. The case was not concerned with the limitation placed on the quantum of damages by a notice provision in the employment contract. I do not find that case to be of any assistance in the present context.

19. It is to be noted that the claim of the Plaintiff is founded solely on wrongful dismissal. Hence it is a case of wrongful dismissal simpliciter. The Plaintiff did not advance any claim for damages for breach of the implied duty of trust and confidence (as in Malik v Bank of Credit and Commerce [1998] AC 20) nor damages for unfair dismissal under Part VI A of the Employment Ordinance, Cap.57. In view of the latest development on the Malik type of claims embodied in the House of Lords decision of Johnson v. Unisys Limited [2001] 2 WLR 1076, it is doubtful if the Plaintiff could succeed in that regard. In any event, there is no evidence pertaining to those kinds of claims.

20. That being so, the Plaintiff is confined to damages in respect of one month's remuneration plus accrued pro-rata annual benefits. The particulars are as follows,

(a) loss of 1 month's salary (converted to HK$) $24,180

(b) double-pay (10/12 x $24,180) $20,150

(c) annual leave (14/26 x $24,180) $13,020

The total is therefore $57,350

21. The Plaintiff should therefore have judgment against the Defendant in the sum of $57,350 with interest thereon from 15 October 1999 at 1% above prime up to date of judgment. After judgment, interest would be at judgment rate. I also make a cost order nisi that the Defendant bears the costs of the Plaintiff, such costs to be taxed if not agreed. The Plaintiff's own costs are to be taxed in accordance with the Legal Aid Regulations.