TEMPRA VIRGINIA PIDO v. COMPASS TECHNOLOGY CO LTD AND ANOTHER

DCCJ 3498/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3498 OF 2008

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DECISION

1.  Compass, the 1st Defendant, is an electronics manufacturing company in Hong Kong.  The plaintiffs in these 8 actions were former employees of Compass recruited from the Philippines.  Toledo, the 2nd Defendant, was said to be the person in charge of processing engineering of Compass at the material time.  According to Compass, Toledo was then the Director of Quality Assurance.

2.  Compass applies to strike out the statements of claim and to dismiss these actions.  The applications were, as they should be, heard together.

3.  The applicable principles are trite.  The applications will be allowed only if the claims are obviously unsustainable for any of the grounds stated under O.18, r.19 of the Rules of the District Court.

Background

4.  In 2004, Toledo interviewed the employees in the Philippines.  There they signed contracts with Compass to be employed to work in Hong Kong as engineers at salaries between HK$18,000 and HK$21,000 (“the 1^st contracts”).

5.  Compass submitted the 1^st contracts to the Immigration Department in Hong Kong (“the Department”).  The Department approved and issued employment visas to Compass to bring these employees from the Philippines to Hong Kong.

6.  The fact was that each of the employees also signed another contract with Compass.  The terms of the second contracts were identical to the first ones except for the salaries (“the 2^nd contracts”).  The salaries under the 2^nd contracts were about half of those under the 1^st contracts.  The salaries that the employees in fact received were those under the 2^nd contracts.

7.  In 2005, armed with the letters from Compass repeating the false salaries, the employees had their visas extended by the Department.

8.  The matter came to light in 2007.  Toledo was prosecuted for conspiring in the employment of the employees at wages lower than those approved by the Department in granting the employment visas. He was convicted as charged after trial and sentenced to 6 months’ imprisonment by the Shatin Magistracy (Case No. STCC 7239).  Similar charges were not pursued against Compass.  This also ended the working relationship between the employees and Compass.

9.  In March 2008, 7 of the employees, together with 3 others not being parties to these actions, filed claims with the Labour Tribunal against Compass (LBTC 1152/2008).  The claims were for underpayment of wages on the basis that the salaries under the 1^st contracts were the contractual salaries.  The employees’ claims were eventually struck out for want of prosecution.

10.  The order striking out the employees’ claims in the Labour Tribunal was dated September 2008.  But prior to that, the employees also commenced the present actions in August 2008.

11.  In November 2008, Compass took out these applications for striking out.  In the same month, the Plaintiffs obtained leave to amend their statements of claim.  Toledo was joined as a defendant and their pleadings were amended to its present forms.

The pleaded case

12.  The amended statements of claims in these 8 actions are almost identical.  The cause of action is the tort of conspiracy.  It is alleged that Compass combined with Toledo to recruit the employees to work for Compass by unlawful means.  The conspiracy is said to be one between Compass and Toledo and the unlawful means was the fraud on the Department to obtain the employment visas.

13.  The pleaded basis is as follows:

(1)  During the interviews, Toledo induced the employees to sign the 1^st contracts.

(2)  Compass submitted the 1^st contracts to the Immigration Department.  The salaries were within the approved range for imported workers and the Department issued the employment visas.

(3)  Some of the employees signed the 2^nd contracts at the same time when they signed the 1^st contracts or shortly afterwards.  Some signed the 2^nd contracts after they had arrived at Hong Kong.

(4)  The employees had little choice but to accept the 2^nd contracts, having no other employment, families to support at home, and being dependent upon Compass for their livelihood and accommodation in Hong Kong.  The wages offered, although only about half the approved rates, were still higher than what they could earn in the Philippines.

(5)  Compass therefore profited by employing the employees at wages lower than those on which the employment visas had been granted.

(6)  The employees have suffered loss and damage being the difference in the amount of wages under the 1^st contracts and the amount actually paid.

The application

14.  Compass used to complain that the claims have failed to identify precisely the cause of action alleged against Compass.  Mr Kat for Compass accepted that this is no longer in issue after the last amendment of the statements of claim.

15.  Nevertheless, these actions, Compass contends, ought to be dismissed as being frivolous or vexatious and/or abusive of court process for the following reasons:

(1)  The statements of claim cannot be cured by amendment.

(2)  The employees have signed written statements to the Department and/or given their evidence on oath or by way of affirmations to the court in Case No. STCC 7239/2007 which directly contradict the matters now pleaded as the basis for their claims against Compass.

(3)  In particular, the employees signed their first contracts knowing them to be false, as parties to a conspiracy to obtain employment visas by fraud upon the Director of Immigration, and knowing that their true salaries were to be the lower ones.

(4)  The employees suffered no loss.

Discussion

16.  Mr Kwok for the employees described this as essentially a case of exploitation of imported employees.  As a result of the conspiracy, the employees agreed to, and did, serve Compass but were paid less than what they should have been entitled to.  The salaries under the 1^st contracts that the Department approved provide the measure of what the employees should have been entitled to and therefore the extent of their loss.

17.  Indeed the pleadings (particularly para.7 thereof and as summarised under paragraphs 13(4) above) give the impression that the employees contracted to work for the salaries under the 1^st contracts but only to be offered or to find out that they had little choice but to accept the lower salaries under the 2^nd contracts afterwards.

18.  The affidavits filed by their solicitor on their behalf somehow reinforce such impression.  Invariably, the affidavits say:

“5.   The Plaintiff duly worked for the 1^st Defendant but was paid the salary of HK$10,000.  The only contract that the 1^st Defendant submitted to the Immigration Department, and on which the visas was granted for the Plaintiff to come to Hong Kong was at the salary of [HK$18,000.00-21,000] per month.  The salary of HK$10,000.00 may have been mentioned but it is the Plaintiff’s case that the binding salary is that in the contract approved by the Immigration Department. The Plaintiff would not be privy to information on the market rate for salaries in Hong Kong; that was the responsibility of the Immigration Department in granting the visa.  It is correct that the 1^st Defendant later required the Plaintiff to sign a contract of a lower salary, but that was after the Plaintiff had entered Hong Kong and was totally dependent upon the 1^st Defendant for all the terms of [her/his] existence in Hong Kong.  Because of [her/his] immigration status, [she/he] was not free to find any other work in Hong Kong.  The 1^st Defendant was in a position of undue influence, when imposing a salary lower than that stipulated in the contract which had been approved by the Immigration Department.”  (emphasis added)

19.  It should be noted that contrary to their solicitor’s affidavits, not all the employees were asked to sign the 2^nd contracts after they had arrived at Hong Kong.  Some of the employees signed the 2^nd contracts at the same time as they signed the 1^st contracts while some signed them shortly after the interviews.

20.  But more importantly, contrary to the impression so created, the employees had confessed in writing to the Department to the following effect:

(1)  During the interviews by Toledo, they were actually offered, and they agreed, to work for the lower salaries.

(2)  They signed the 1^st contracts with Compass for the higher salaries, knowing them to be false, and merely for the purpose of obtaining their employment visas.

(3)  They signed the 2^nd contracts with Compass for the lower salaries as offered to and accepted by them.

(4)  They were paid the lower salaries as agreed.

(5)  They applied to extend their visas by submitting Compass’ letters confirming their employment at the higher but bogus salaries.

21.  The employees were charged with Toledo as parties to the conspiracy to defraud the Department for obtaining the employment visas.  The employees were eventually spared on condition that each would give evidence for the prosecution.  Nevertheless each of them remained named as the conspirator in each count of charge against Toledo.

22.  In the criminal proceedings, the Magistrate accepted the employees’ evidence.  In convicting Toledo, the Magistrate found, in particular, that the employees in fact agreed to work for Compass for the lower salaries; and the 1^st contracts were manufactured merely for the applications for their employment visas.

23.  The employees now claim that they are effectively victims of the conspiracy originated as one between Compass and Toledo and due to which they suffered loss.

24.  Mr Kat argued that it is an abuse of process of this court for the employees to claim that they have lost the benefits of the 1^st contracts which they knew and admitted were for the sole purpose of obtaining their employment visas.  This was what the employees did in the Labour Tribunal.

25.  On the date of commencement of these actions, the employees’ claims in the Tribunal had been adjourned sine die and were still pending.  There was on that date multiplicity of proceedings in respect of the same subject matter.  This was per se abuse of the court process.

26.  But Mr Kat mainly argued that allowing these actions to proceed would give rise to a risk of factual findings inconsistent with those in the criminal proceedings, which were based on the Magistrate’s acceptance of the employees’ evidence on oath.

27.  So far as the employees are seeking to substantiate the impression so created by paragraph 7 of their pleadings as mentioned above, I agree with Mr Kat.

28.  Mr Kwok pointed out that Compass and the employees were not parties to the criminal proceedings.  The employees were merely witnesses.  Factually this is correct.  But if Mr Kwok is suggesting that the employees are therefore not bound by the findings of facts in the criminal proceedings on the basis of what they said on oath, I cannot agree.

29.  Much was also argued about the res judicata principle.  Mr Kat submitted that it is an abuse of process for the employees to re-litigate their claims for the benefits of the 1^st contracts, which had been disposed of by the regular orders of the Labour Tribunal, by these actions in the guise of an action on the cause of conspiracy.  He submitted that Compass should not be vexed twice in respect of the same claim.

30.  The res judicata principle may apply in its narrow and broad sense: see Henderson v Henderson [1843] 3 Hare 100, 145; Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581, 590; Johnson v Gore Wood & Co [2002] 2 AC 1, 31.  But by striking out the claims for want of prosecution (for want of appearance of the employees), the Tribunal had disposed of the employees’ claims without embarking on adjudication of their merits.

31.  In terms of res judicata proper, the employees are, in my view, neither re-litigating what had been adjudicated nor litigating what could and should have been raised for adjudication in the earlier proceedings.

32.  The employees’ enforcement of the 1^st contracts in the Labour Tribunal would have doomed to fail, had the claims not been struck out.  In his supplemental submissions, Mr Kwok seemed to accept the difficulty in the employees’ pursuing a contractual claim on the basis of the 1^st contracts.  Needless to say, the Tribunal has no jurisdiction over a common law claim in the tort of conspiracy.

33.  The above having been said, is it therefore obvious that the employees have no case in claiming in the tort of conspiracy?

34.  Mr Kwok emphasized that the employees are neither claiming in contract nor seeking to enforce the 1^st contracts in the present actions.  Mr Kat acknowledged that as a matter of pleading but his position was that the claims remain those for the benefits of the 1^st contracts under the guise of the conspiracy cause.

35.  Mr Kwok submitted that the reference to the salaries under the 1^st contracts relates only to the measure of damages for the pecuniary loss.  He referred to the case of Lonrho Plc v Fayed (No.5) [1993] WLR 1489 (CA).

36.  In Lonrho (No.5), the plaintiffs (individuals and the company) alleged that the defendants were guilty of a conspiracy to injure the plaintiffs and that the plaintiffs had suffered damage.  No particulars of the damage were given.  The action was struck out on the ground of abuse of process.  The plaintiffs appealed and applied for leave to amend the pleadings by giving particulars of, among others, pecuniary loss of the company.

37.  The English Court of Appeal allowed the appeal to the extent of the company’s claim for pecuniary loss caused by the alleged conspiracy.  It was in this context that the Court expressed the view that a plaintiff injured by a conspiracy must prove pecuniary loss, though if he proves actual pecuniary loss the damages are at large in the sense that they are not limited to a precise calculation of the amount of such loss actually proved: see Lonrho (No.5) at 1494B-G.

38.  The issue in the present cases is whether the employees can be said to have suffered pecuniary loss due to the conspiracy.  As mentioned above, it was submitted on behalf of Compass that the employees have suffered no loss due to the conspiracy and the cause of action will not be complete: see Clerk and Lindsell on Torts (19^th ed) at 25-116.

39.  Mr Kat submitted that without becoming parties to the conspiracy, the employees would not have come to be employed and to earn the salaries under the 2^nd contracts, not to mention to expect to be paid the salaries under the 1^st contracts.  The employees managed to come to work here and got what they were offered and what they accepted.  Therefore they have suffered no loss.

40.  The employees’ solicitor explained the employees’ understanding when agreeing to work for Compass.  The affidavits invariably say:

“3.   …… it was the 1^st Defendant who hired Plaintiff.  The Defendants prepared all the documents and submitted them to the Immigration Department with the purpose of obtaining the Plaintiff’s labour and skills……

……      

5.     …… The Plaintiff would not be privy to information on the market rate for salaries in Hong Kong; that was the responsibility of the Immigration Department in granting the visa……

……

10.   …… each Plaintiff admitted …… in taking part in the scheme to obtain visas, it was all at the demand of the 1^st Defendant …… Each Plaintiff expected the 1^st Defendant to observe the requirements of the Hong Kong Government and likewise expected the Hong Kong Government to enforce those standards, as required under the Migration for Employment Convention.  The Plaintiffs believed that they were taking part in a scheme to work legitimately in Hong Kong.”

41.  Mr Kat observed that despite the standard introductory paragraph in each of the affidavits, the employees’ solicitor never actually stated the source of his information to enable him to depose to such effect.  Strictly, O.41 of the Rules of the District Court has not been complied with.  Yet in the circumstances where it was the employees’ solicitors who spoke on behalf of them, I am not minded to say that this is so fatal that such parts of the affidavits should be disregarded.

42.  It is indeed the pleaded case of the employees that they were induced to sign the 1^st contracts (para.4 of the amended statements of claim) and therefore taking part in the conspiracy.  There is no suggestion that the employees had confessed having knowledge about the meaning and significance of the false salaries under the 1^st contracts when they were signed, apart from that the salaries were so stated and the contracts were so arranged by Compass for the purpose of obtaining the employment visas.

43.  Indeed the employees got what they were offered and what they accepted for working for Compass.  But pertinent to the alleged inducement is the question of whether they could have chosen not to accept Compass’s offer at the time, had they realised the truth then.  In that case, the employees’ agreeing to take part in the conspiracy and to work for Compass was the consequence of the conspiracy now pleaded.  So was the eventual loss to the extent of the difference between their salaries and what they should have been entitled to in serving Compass.

44.  In the circumstances of the present cases, the question is not as simple as whether the employees are entitled to claim that they have suffered loss as a result of the conspiracy of which they were parties.

45.  The employees admitted that the salaries under the 2^nd contracts were higher than what they could earn in their home country.  Mr Kat went further by referring to the evidence tending to show that there was in fact no substantial difference between the salaries paid to the employees and those prevailing in Hong Kong for local employees in similar positions; and hence no exploitation.  Yet for the purpose of an application like the present ones, this is probably not the kind of exercise that the court should carry out.

46.  Policy arguments were also raised on behalf of the employees.  However, these remain, as these could only be, civil actions for damages for pecuniary loss as pleaded.  Whether the claims should be allowed depends on whether they stand the test of legal and factual proof, not as a public policy measure.

47.  For the reasons explained above, I am not satisfied that the employees’ claim for loss due to the conspiracy originated between Compass and Toledo is obviously unsustainable.  The existence of the pecuniary loss and the measure of the damages for such loss should be matters for trial.

Conclusion and order

48.  The applications for striking out in each of these actions are dismissed.

49.  Mr Kwok suggested that costs upon dismissal of the applications should be awarded to the employees on an indemnity basis.  I do not agree.

50.  Costs of and occasioned by these applications, including any costs reserved, be to the employees.  Costs shall be taxed, if not agreed, with certificate for counsel.  The employees’ own costs shall be subject to legal aid taxation.

51.  I also make the following directions:

(1)  leave to Compass and Toledo to file and serve Defence within 28 days from the date hereof;

(2)  leave to the employees to file and serve Reply, if any, within 21 days thereafter;

(3)  parties are directed to comply with O.25 and Practice Direction 5.2 upon the close of pleadings.