NG KAR FOOK BRIAN v. ON PO BLEACHING AND DYEING FTY. LTD

HCLA43/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO.43 OF 2002

(On Appeal from Labour Tribunal Claim No. LBTC 1775 of 2002)

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J U D G M E N T

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Introduction

1. This is an appeal against the order of the presiding officer dated 14 May 2002 whereby he entered judgment in favour of the respondent for (1) wages in lieu of notice of HK$35,000.00, (2) arrears of wages of HK$294,451.60, (3) end of year payment of HK$33,945.20 and (4) severance pay of HK$350,000.00, totalling HK$713,396.80.

2. The respondent commenced his employment with the appellant on 1 March 1978. Since January 1992, he had been working as manager of the appellant's factory in Zhongshan in the Mainland. The appellant began to fall in arrears of wages in 2000. On 19 December 2001, the respondent and eight other colleagues terminated their employment with the appellant on the ground of constructive dismissal. In early 2002, they brought proceedings in the Labour Tribunal. In the event, the appellant reached settlement with all of them except the respondent.

3. At the trial before the presiding officer on 14 May 2002, the representative of the appellant admitted liability on the respondent's claims but sought to raise a set off. It is common ground that between December 1998 and December 2001, the respondent received cash advances from the appellant totalling RMB$454,236.32 but the appellant alleged that he failed to tender records of or account for them. The presiding officer took the view that the matters giving rise to the set off fell outside the jurisdiction of the Labour Tribunal and declined to hear the same.

4. Dissatisfied, the appellant now appeals.

Grounds of appeal

5. The appellant accepting that it is a case of constructive dismissal, does not seek to disturb the presiding officer's award made on the respondent's claim. It relies on four grounds of appeal. The principal ground is Ground 1, which reads :

"(a) the Presiding Officer erroneously conclude that the defence of set off raised by the Applicant was bound to fail as it is unconnected with the claim of the Respondent; and

(b) the Presiding Officer erroneously conclude that if the defence of set off raised by the Applicant is to stand, the claim of the Applicant should be commenced in other civil courts.

(c) The Presiding Officer failed to investigate sufficiently or at all, into the matter regarding whether the Applicant's Counterclaim satisfy the requirements set out in Section 7 and Schedule 1(a) Labour Tribunal Ordinance pursuant to Section 20(3) Labour Tribunal Ordinance before the Presiding Officer declined jurisdiction of the Counterclaim, or in the alternative, the Presiding Officer erred in law by concluding the aforesaid matter to the irrelevant."

6. Mr Chung, counsel for the appellant, accepted that Ground 1(a) is maintainable only if the matters giving rise to the defence of set off fall within the jurisdiction of the Labour Tribunal in the first place. Grounds 1(b) and 1(c) basically address the same point of jurisdiction, which is the very bone of contention between the parties in this appeal.

Jurisdiction of the Labour Tribunal

7. The Labour Tribunal has jurisdiction to inquire into, hear and determine a claim for a sum of money which arises from, inter alia, the breach of a term, whether express or implied, of a contract of employment : see section 7(1) of the Labour Tribunal Ordinance and paragraph 1 of the Schedule.

8. It is common ground that in the course of his duty as manager, the respondent received cash advances from the appellant from time to time. The appellant's case concerning the cash advances, in summary, is this. A Mr Lo Kwai Po ("Mr Lo") was responsible for the accounting matters of the factory. Payments could only be made when the related items were signed by Mr Lo and the respondent jointly. And records of such payments must be tendered. The relevant instructions were contained in a fax dated 5 June 1995 sent to the respondent ("the Fax"). This practice applied to the cash advances in question. But contrary to the express instructions, the respondent obtained the cash advances although the related vouchers contained only his signature. The respondent's case is that either the signature of Mr Lo or his would suffice. And he had already tendered records of the advances to the appellant's accountant. He denied that he had pocketed the advances, which were all applied twoards the appellant's business.

9. Mrs Yew, counsel for the respondent, submitted that any liability to account for the cash advances on the part of the respondent arose out the cause of action of money had and received. This must be right. But I am unable to accept her further submission that money had and received is the only cause of action available to the appellant. Arguably, the appellant is able to mount a case on breach of the employment contract thus. It is common ground that the appellant in the course of his duty might receive cash advances. The respondent had, however, failed to follow the express instructions relating to the cash advances as evidenced by the Fax. He was therefore in breach of the implied term of the employment contract to obey the lawful and reasonable order within the scope of his employment relating to the cash advances : see Chitty on Contracts, (28th edn), Vol.2, para.39-054 at p.821. The respondent is therefore liable for the damages arising from the breach thereof. Further or alternatively, in order to give business efficacy to those express instructions, a term may be implied that when cash advances were made in the event of non-compliance by the respondent, he is liable for any loss suffered by the appellant as a result thereof.

10. The presiding officer did not state his reasons for declining jurisdiction to hear the set off. Presumably, he must have concluded that the matters complained of did not arise from any breach of a term of the employment contract, whether express or implied. With respect, this conclusion is wrong. The presiding officer had therefore erred in law in declining jurisdiction to hear the set off.

11. Mrs Yew contended that even if the set off fell within the jurisdiction of the Labour Tribunal, the presiding officer had already made thorough investigation and found that the respondent was not liable to account. It should be noted that at the trial below, the appellant's representative sought to raise several matters to support his contention that the claimant could well have been dismissed summarily. Those matters included the allegation that the respondent had failed to account for those advances. Mrs Yew sought to place reliance on the following passage in the presiding officer's judgment :

"Regarding the advances, they were business related, and even if proved, should not be pleaded in these proceedings as set-off against arrears of wages. If these matters had not been followed up in the last 5 years, I should not allow the Defendant to raise them here as a general defence. Mr Ng testifies that he never pocketed any of these cash advances and I have no reason not to believe him in the absence of more specific and concrete evidence form the Defendant about this matter."

12. I am unable to accept Mrs Yew's submission for a number of reasons. First, the presiding officer was dealing with the respondent's evidence in the context of summary dismissal. He did not make any specific finding whether for the cash advances in question, joint signatures were required or whether records had been tendered by the respondent. Indeed, it is unlikely that he had those matters in mind as he had already declined jurisdiction to hear the set off. Second, the finding that the respondent had not pocketed the advances was made in the absence of more specific and concrete evidence from the appellant. But the presiding officer had already declined jurisdiction. It is therefore not surprising that the presiding officer had not proceeded to conduct the necessary investigation into the appellant's case. For example, he had not asked the respondent to respond to the Fax (exhibited as part of Exh.D-11), which clearly affects his credibility. Indeed, the presiding officer had made no mention of the Fax in his judgment. In the circumstances, I doubt if his finding that the respondent had not pocketed the advances can stand at all. Third, any suggestion that the appellant could not rely on its case on cash advances to set off the respondent's claim as they are unrelated matters cannot stand. This is certainly not Mrs Yew's submission. In my view, the presiding officer has jurisdiction to hear the matters relating to the set off, determine the extent of the respondent's liability, if any, and then order a set off of any sums found due from him against the award made in his favour.

13. For the above reasons, this appeal succeeds on Ground 1(a) and (b). In the event, it is not necessary to address Ground 1(c) any further. Grounds 2 and 3 can be dealt with briefly. They relate to the findings or lack of the findings by the presiding officer on different matters relating to the set off. These matters have to be investigated further and I do not propose to express any view on them. Ground 4 is not pursued any more and can be ignored.

Conclusion

14. I will allow the appeal. But I will not set aside the award, which is not challenged. I will instead order that there be a stay of execution of the award up to the extent of the set off pending further order by the court or by the Labour Tribunal. The set off will be remitted to the Labour Tribunal for re-trial before another presiding officer. For completeness, I wish to mention this. As noted, money had and received is a possible cause of action. However, the appellant may not pursue this restitutionary claim in the Labour Tribunal. If it wishes to do so, at the hearing for re-trial, it should apply to the presiding officer for a transfer of the matter to the District Court.

15. There will be a costs order nisi that the appellant shall have the costs of this appeal, to be taxed if not agreed.