LEUNG HUNG CHEUNG v. CHEUNG CHUNG WAI t/a HOME KITCHEN

[English Translation – 英譯本]

HCLA 34/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 34OF 2008

(ON APPEAL FROM LBTC NO. 799 OF 2008)

__________________

__________________

JUDGMENT

Background

1. This is an appeal from the Labour Tribunal.  The appellant (i.e. the claimant in the Labour Tribunal proceedings) was formerly employed by the respondent (i.e. the defendant in the Labour Tribunal proceedings) as a cook.  On 5 January 2008, the claimant quarrelled with another staff member in the kitchen of the restaurant run by the defendant, and he was dismissed on the same day.  On 7 January 2008, the defendant paid to the claimant wages for termination of the employment and also gave him $5,250 being ‘an additional sum of half month’s wages’.  Subsequently, the claimant filed a claim with the Labour Tribunal against the defendant for wages in lieu of notice, severance pay, paid annual leave, wages which had been deducted and alternatively terminal payments.  The claim was dismissed in its entirety by a presiding officer of the Labour Tribunal and the claimant applied to the Court of First Instance for leave to appeal.  Save for the paid annual leave, the appeal on all the items of claim was solely against findings of fact made by the presiding officer and did not involve any point of law.  I therefore granted to the claimant leave to appeal only in respect of the claim for paid annual leave and dismissed the application for leave to appeal in respect of the other claim items.

2. I gave the claimant leave to appeal in respect of the claim for paid annual leave because the presiding officer did not deal with this item in his Reasons for Decision.  The presiding officer is a professional judicial officer and, in normal circumstances, can be assumed to have properly considered all the testimony and other evidence before he made his decision.  However, nowhere in his 6-page Reasons for Decision did the presiding officer mention or deal with this particular item of claim.  He made a detailed analysis of the evidence regarding the defendant’s grounds for dismissing the claimant and the floating bonus.  Then he found that the claimant had been dismissed by the defendant pursuant to section 9 of the Employment Ordinance, and then went on to dismiss the claimant’s entire claim.  In my view, the findings of fact made by the presiding officer can only support his dismissal of the claimant’s claim for wages in lieu of notice, severance pay, wages which had been deducted and the alternative claim for terminal payments.  The presiding officer did not explain why he dismissed the claim for paid annual leave.

3. According to the report (Form 6) submitted by the tribunal officer to the presiding officer, the claimant alleged that in the past two years he had not been given any paid annual leave.  This the defendant did not dispute; he merely disagreed that he had to pay to the claimant compensation for paid annual leave because he was justified in summarily dismissing the claimant.  At trial, the defendant produced a wage receipt (exhibit D-8) to prove that the claimant had received $5,250 being ‘an additional sum of half month’s wages’.  In light of this, the presiding officer dismissed the claimant’s claim for paid annual leave.  I cannot possibly ascertain what the presiding officer had in mind — perhaps he thought that the claimant had been dismissed in accordance with section 9 of the Employment Ordinance, or perhaps he thought that the claimant had received ‘an additional sum of half month’s wages’ as compensation for paid annual leave.

4. Assuming that section 9 of the Employment Ordinance formed the basis on which the presiding officer dismissed the claimant’s claim for paid annual leave, the point of law involved in the present appeal is the proper interpretation of section 41D of the Employment Ordinance.  If the presiding officer dismissed the claim by reason of exhibit D-8, then the point of law involved in the present appeal is whether there was any evidence to support the findings of fact made by the presiding officer at trial.

Interpretation of section 41D of the Employment Ordinance

5. I shall start by looking at the law on paid annual leave.  The right of an employee to enjoy annual leave with pay is conferred by Part VIIIA of the Employment Ordinance.  Section 41A of the Employment Ordinance provides the following definitions for terms used in provisions regarding paid annual leave:

In this Part, in relation to an employee –

“leave year”（假期年）, unless the context otherwise requires, means any period of 12 months –

(a)    commencing on –

(i)   in case the employee is entitled under section 41F(3) to any annual leave, the first day of the close down as regards which the entitlement arose; or

(ii)   in the case of any other employee, the day on which his employment commenced; or

(b)   commencing on an anniversary of such day;

“appropriate day”（適用日）means –

(a)   where the employee becomes entitled under section 41F(3) to any annual leave, the first day of the close down as regards which the entitlement arises or where he becomes so entitled more than once in any period of 12 months, the first day of the more or most recent, as appropriate, of such close downs; or

(b)   where the employee does not become so entitled –

(i)   the day following the end of the employee’s last (or only) leave year; or

(ii)   where there is no such leave year, the day on which his employment commenced.

Put simply, according to the above definitions, except in cases of a shutdown to which section 41F(3) applies, “leave year” means a period of 12 months commencing on the day on which the employment of an employee commenced or commencing on an anniversary of such day, and “appropriate day” means the day following the end of an employee’s last (or only) leave year, or where the employee is employed for less than 12 months, the day on which his employment commenced.

6. Section 41AA(1) of the Employment Ordinance provides that every employee shall be entitled to paid annual leave.  Section 41AA(1), (5) and (8) provides as follows:

(1)      Subject to this Part, every employee who has been in employment under a continuous contract for not less than 12 months shall, in respect of each leave year, be entitled to paid leave (in this Part referred to as “annual leave”) calculated in accordance with subsection (2).

…

(5)      Annual leave to which an employee is entitled –

(a) shall be granted by his employer and be taken by the employee within the period of 12 months beginning immediately after the expiration of the leave year to which it relates;

(b) …

(c) …

…

(8) Where –

(a)    an employer continues to employ an employee after the expiration of a period during which annual leave should have been granted to him and the employer has not granted that leave, then at the option of the employee but subject to paragraph (b) the employer shall (whether or not proceedings have been taken for an offence under section 63(4)(e)) –

(i)       pay to the employee, in addition to any pay due to him, compensation equal in amount to the annual leave pay which he would have received had the leave been granted so as to end on the expiration of the period during which it should have been granted; or

(ii)      grant the employee paid leave equal to the leave which should have been granted;

(b)    an employee opts under paragraph (a) to take paid leave, he shall take the leave on such day or days as may be agreed to by the employer and him or, if there is no such agreement, as shall be specified by the employer.

Under section 41AA(1) of the Employment Ordinance, an employee who has been in employment under a continuous contract for not less than 12 months shall, in respect of each leave year, be entitled to paid annual leave calculated in accordance with the Ordinance.  Section 41AA(5)(a) provides that the leave and pay shall be granted and paid by the employer within the period of 12 months beginning immediately after the expiration of the leave year.  In other words, an employee who is employed during the leave year not only can earn the wages to which he is entitled, but is also entitled to paid annual leave.  At the expiration of the leave year, this right becomes the accrued annual leave with pay which the employee has earned.  The employer shall grant and pay the employee the accrued leave and pay within 12 months beginning immediately after the expiration of the leave year.  Section 41AA(8) further provides that where an employer continues to employ an employee after the expiration of the leave year but has not granted the employee the accrued annual leave with pay in accordance with section 41AA(5), then in addition to paying to the employee any pay due to him, the employer shall, at the option of the employee and as soon as possible, grant the employee the accrued annual leave with pay, or pay to the employee compensation equal to the accrued annual leave with pay.

7. On cesser of employment, the employer is still required to pay to the employee compensation in lieu of the accrued annual leave with pay. Section 41D of the Employment Ordinance provides as follows:

(1)    Where –

(a)    an employee ceases to be employed; and

(b)    annual leave is due to him,

the person by whom he was formerly employed shall, as soon as practicable and in any case not later than 7 days after such cesser, pay to him in respect of the annual leave compensation equal in amount to the annual leave pay he would have received had the leave so due been granted immediately after such cesser.

(2)    Where –

(a)    an employee ceases to be employed;

(b)    the cesser occurs otherwise than on the expiration of a leave year of the employee;

(c)    his contract of employment terminates or is terminated otherwise than under section 9 for any reason whatsoever (including his resignation); and

(d)    the termination occurs at least 3 months after the appropriate day,

…

Section 41D(1) applies to the paid annual leave due to an employee on the expiration of his leave year, i.e. accrued annual leave with pay.  The employer is required to pay to him compensation in respect of the paid annual leave not later than 7 days after the cesser of employment.  Section 41D(2) applies to the paid annual leave to which an employee is entitled before the expiration of his leave year.  However, he must fulfil two other conditions before he is entitled to compensation in respect of the paid annual leave.  The first condition is set out in section 41D(2)(c), i.e. his contract of employment terminates or is terminated otherwise than under section 9 (which allows an employer to terminate the contract of employment without notice) for any reason whatsoever, including his resignation.  The second condition is set out in section 41D(2)(d), namely the employment terminates or is terminated at least 3 months after the appropriate day.

8. There is nothing in section 41D which shows that section 41D(2) overrides section 41D(1).  Instead of being mutually exclusive, sections 41D(1) and section 41D(2) are simultaneously applicable.  In other words, even if an employee is dismissed under section 9, this will not affect his entitlement to compensation in respect of his paid annual leave which has accrued on the expiration of a leave year but which has not been granted.  He will only lose the paid annual leave to which he would otherwise be entitled in respect of the leave year in which he is dismissed.  Similarly, if an employee terminates the contract of employment less than 3 months after the appropriate day, he should not be deprived of the compensation in respect of the paid annual leave which accrued in the preceding leave year but which has not been granted to him.  He will only lose the paid annual leave to which he would otherwise be entitled in respect of the period of less than 3 months.  Taking it a step further, if an employee is not dismissed under section 9 and the termination of employment occurs not less than 3 months after the appropriate day, then the employee is entitled to both compensation in respect of the paid annual leave accrued in the preceding leave year but which has not been granted to him, and also compensation in relation to the paid annual leave to which he is entitled for the leave year in which he ceases to be employed.  Section 41AA(8) makes it clear that any accrued paid annual leave is an entitlement which belongs to and cannot be taken away from an employee.  An interpretation that section 41D(2) overrode section 41D(1), which would result in a deprivation of compensation in respect of the accrued annual leave with pay, would have to be supported by express provisions in section 41D to that effect.  But I cannot find such express provisions.  This being the case, to interpret section 41D(2) as overriding section 41D(1) is against common sense and certainly contrary to the legislative intent behind section 41D.

Discussion

9. On the undisputed facts of the present case, the claimant’s employment began on 5 November 2005 and went on until 5 January 2008 when he was dismissed.  Each of his leave years started on 5 November of a year and ended on 4 November of the following year.  At the time of his dismissal, the 2006/2007 leave year had expired, whereas the 2007/2008 leave year had been going on for less than three months.  The claimant claimed that since his employment began on 5 November 2005, he had never been granted any paid annual leave.  In his Claim Form, i.e. Form 2 he claimed a sum of $5,293.14 being compensation for paid annual leave from 5 November 2005 to 4 November 2007, i.e. compensation for paid annual leave accrued on the expiration of two leave years.  The claimant did not claim compensation for paid annual leave in respect of the year 2007/2008.

10. In his Reasons for Decision, the presiding officer did not explain why the claim for paid annual leave was dismissed.  If the basis of the presiding officer’s finding that the claimant was not entitled to compensation for paid annual leave for the leave years 2005/2006 and 2006/2007 was that his contract of employment was terminated under section 9, then his finding was, with respect, the result of misinterpreting section 41D.  On a proper construction of section 41D, the claimant should not, by reason of his dismissal, be deprived of compensation for paid annual leave accrued in the leave years 2005/2006 and 2006/2007 which had not been granted to him.

11. Furthermore, if the presiding officer’s reason for dismissing the claim for paid annual leave was that the claimant had already received compensation thereof, this finding of fact is, with respect, also open to question.  At the hearing of the appeal, the respondent said that he had produced evidence at trial to prove that on 7 January 2008 he had paid to the claimant $5,250, being ‘an additional sum of half month’s wages’, as compensation for the claimant’s paid annual leave.  He purported to rely on the wage receipt (exhibit D-8) to prove that the claimant received $5,250 as compensation for paid annual leave.  The following was written on the wage receipt (exhibit D-8):

Wage receipt

(1)      second half of December …

(2)      first half of January …

(3)      an additional sum of half month’s wages: 5,250

3 cheques in total …

Receipt acknowledged by: (signature of claimant Leung Hung Cheung) 7-1-08

Note: Item (3) above is wages paid retroactively for holidays/leave, an excess of $648 has been paid.

(signature of Ng Yik Kiu, defendant’s witness) 25-3-08

However, the presiding officer did not address the discrepancies between this exhibit of the defendant’s and the claimant’s evidence before he dismissed the claimant’s claim for paid annual leave.

12. The claimant did not dispute that he had received $5,250, but he denied that he had agreed with the defendant to receive the $5,250 ‘additional sum of half month’s wages’ as compensation for paid annual leave.  Nevertheless, I noticed that, on the wage receipt (exhibit D-8), the date on which the claimant acknowledged receipt was 7 January 2008 and that the note that followed, which was signed only by Ng Yik Kiu, witness for the defendant, bore the date of 25 March 2008.  Ng Yik Kiu’s statement was also dated 25 March 2008, the same date on which he signed exhibit D-8.  In response to my inquiry, the claimant produced his wage receipt.  The contents of that receipt were exactly the same as those of exhibit D-8, except that the note which appeared on exhibit D-8 was missing.  Obviously, the note on exhibit D-8 was added to it subsequently.  In my view, exhibit D-8 is not sufficient to show that the common intention of the defendant and the claimant in paying and receiving the $5,250, the ‘additional sum of half month’s wages’, was that the money represented compensation for the claimant’s paid annual leave with pay.  At trial, the claimant did not produce his wage receipt for the presiding officer’s consideration.  The wage receipt produced by the claimant on appeal is new evidence.  Whether the claimant had received compensation for paid annual leave is a question of fact for the presiding officer to determine.  By virtue of section 35(2) of the Labour Tribunal Ordinance, on an appeal from the Labour Tribunal, the Court of First Instance is not entitled to reverse or vary any determination made by a presiding officer on questions of fact or receive further evidence.  I can only remit the present case to the presiding officer who heard it so that he can make the relevant findings of fact.

Conclusion

13. For the above reasons, it was improper for the presiding officer to dismiss the claimant’s claim for paid annual leave.  Therefore, I allow the appeal in respect of the claim for paid annual leave.  I set aside the order made by the presiding officer on 28 August 2008 dismissing this item of claim and, pursuant to section 35(1)(c) of the Labour Tribunal Ordinance, I remit the present case to the presiding officer who heard it to continue to hear the claim for paid annual leave.  I give the following directions for the hearing:

(1)      Sections 9 and 41D(2) of the Employment Ordinance do not apply to the claimant’s claim for compensation in respect of paid annual leave.  The presiding officer may not dismiss this item of claim solely on the basis of those two sections;

(2)  The presiding officer shall re-hear evidence from the defendant and the claimant on the ‘additional sum of half month’s wages’ of $5,250 and determine whether the common intention of the parties in paying and receiving that sum was that it represented payment of compensation for the claimant’s paid annual leave;

(3)  If the answer to (2) is ‘yes’, whether that sum is equal to the amount claimed by the claimant for compensation for paid annual leave; and

(4)  On the basis of the answers to (2) and (3), determine the claimant’s claim for paid annual leave.

14. I make no order as to costs of the present appeal.  Each party shall pay his own costs.