RALF BORCHERT v. DRMYO LTD AND ANOTHER

HCA 2234/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2234 OF 2007

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D E C I S I O N

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1.  There is a summons by the plaintiff to amend the statement of claim.  It is opposed by the 2nd defendant.  There is also a summons by the 2nd defendant to strike out the action or the bulk of the action.

2.  The plaintiff claims that he was an employee of the 1st and 2nd defendants.  He claims arrears of salary at $519,818.  He also claims six months’ salary at $990,214 as damages for constructive dismissal. 

3.  In addition, he also claims that the 2nd defendant has made fraudulent or reckless misrepresentations.  The alleged misrepresentations were that the 2nd defendant would provide funding to the business which employed the plaintiff so that the business could operate and discharge its financial obligations.  The plaintiff says that he was induced by these representations to enter into the employment agreement and to remain in the employment despite the lack of funding.  However, the 2nd defendant did not provide sufficient funding.  The plaintiff therefore suffered loss and damage. 

4.  The plaintiff also wants to add a claim of breach of collateral contract by way of amendment.  He proposes to plead that the 2nd defendant’s agreement to provide funding to the business amounted to a collateral contract with him.  However, the 2nd defendant breached this contract and he suffered loss and damage.

5.  For the misrepresentation claim and the claim for breach of collateral contract, he quantified his loss also at $519,818; namely, the amount of arrears of salary.

Ground for striking out the employment claims

6.  The 2nd defendant wants to strike out the action and oppose the plaintiff’s summons to amend.  Alternatively, he wants to strike out the employment claims for want of jurisdiction in this court.  He relies on section 7 of the Labour Tribunal Ordinance and the schedule thereto.  The relevant parts of section 7 and the schedule are:

“7(1)   The tribunal shall have jurisdiction to inquire into, hear and determine the claim specified in the Schedule.

(2)   Save as is provided in this Ordinance, no claim within the jurisdiction of the tribunal shall be actionable in any court in Hong Kong.

Schedule

(1)  A claim for a sum of money which arises from -

(a)  the breach of a term whether expressed or implied, of a contract of employment, whether for performance in Hong Kong or under a contract to which the Contracts for Employment Outside Hong Kong Ordinance (Cap 78) applies. 

(3)   Notwithstanding paragraphs 1 and 2, the tribunal shall not have jurisdiction to hear and determine the claim for a sum of money, or otherwise in respect of a cause of action, founded in tort whether arising from a breach of contract or a breach of a duty imposed by a rule of common law or by any enactment.”

7.  The claims for arrears of salary and damages for constructive dismissal are claims for sums of money arising from breaches of a contract of employment.  They are claims within the scope of paragraph 1(a) of the schedule to the ordinance and are not actionable in this court.

8.  The plaintiff opposes the striking out of the employment claims on two grounds.  The first ground is under Order 12 rule 8 of the Rules of the High Court.  On the second ground, the plaintiff says that this court can exercise jurisdiction over the employment claims made in this action. 

First ground to oppose striking out

9.  Order 12 rules 7 and 8 provide:

“(7)    The acknowledgement by a defendant of service of a writ shall not be treated as a waiver by him of any irregularity in the writ or service thereof or in any order giving leave to serve the writ or extending the validity of the writ for the purpose of service. 

(8)(1) A defendant who wishes to dispute the jurisdiction of the court in the proceedings by reason of any such irregularity as is mentioned in rule 7 or on any other ground shall give notice of intention to defend the proceedings and shall, within the time limited for service of a defence, apply to the court for –

(a) an order setting aside the writ or service of the writ on him; or

(b) an order declaring that the writ has not been duly served on him; or

(c) the discharge of any order giving leave to serve the writ on him out of the jurisdiction; or

(d) the discharge of any order extending the validity of the writ for the purpose of service; or …

(g) a declaration that in the circumstances of the case the court has no jurisdiction over the defendant in respect of the subject matter of the claim or the relief or remedy sought in the action, or

(ga)    an order staying the proceedings, or

(h) such other relief as may be appropriate.”

10.  The plaintiff thus says that it is now too late for the 2nd defendant to invoke Order 12 rule 8 as witness statements have already been exchanged in this action.  However, counsel for the 2nd defendant submits that Order 12 rule 8 has no application to employment claims which are within the exclusive jurisdiction of the Labour Tribunal.

11.  Counsel for the 2nd defendant referred me to Rothmans of Pall Mall (Overseas) Limited and Others v Saudi Arabian Airlines Corporation [1981] 1 QB 368 at 375F to 376B where Mustill J said:

“The next issue is whether a party can, by waiver, concede to the court the jurisdiction to entertain actions which by virtue of article 28 ought properly to have been instituted elsewhere.  For this purpose, two situations must be distinguished.  The first exists where an action is brought in respect of a matter which in the ordinary way the court would have no jurisdiction to entertain, but where it is not precluded from doing so if no objection is taken.  Thus, for example, if a plaintiff obtains leave under R. S. C. Ord. 11, in a case where it should not have been granted, the action can properly proceed unless an application is made to set aside the writ and service.  The objection is one which can be waived, and the entry of an unconditional appearance is an example of such a waiver.

The second situation exists where the objection is not simply that the matter lies outside the jurisdiction of the court, as conferred by the common law or by statute, but is one in respect of which jurisdiction has been actively withdrawn from the court and conferred on another tribunal.  The position in such a case is stated by Asquith L. J. in Wilkinson v Barking Corporation [1948] 1 KB 721, 724:

‘It is undoubtedly good law that where a statute creates a right and, in plain language, gives a specific remedy or appoints a specific tribunal for its enforcement, a party seeking to enforce the right must resort to that remedy or tribunal, and not to others’.”

12.  Asquith LJ further said in Wilkinson v Barking Corporation at 725:

“The real answer to the plaintiff’s contention under this head can be put in several ways:  No act of the parties can create in the courts a jurisdiction which Parliament has said shall vest, not in the courts, but exclusively in some other body.  Nor again can a party submit to, so as to make effective, a jurisdiction which does not exist, which is perhaps another way of saying the same thing.”

13.  Counsel for the 2nd defendant submits that the jurisdiction to try claims that are within the scope of paragraph 1(a) of the schedule to the ordinance is exclusively in the tribunal.  There is no such jurisdiction in this court and no party can create such jurisdiction in this court by submission or waiver of objection. 

14.  Counsel for the plaintiff, however, referred to section 10 of the ordinance which provides:

“(1)   The tribunal may, at any stage of proceedings, if it is of the opinion that for any reason the claim should not be heard and determined by it, decline jurisdiction.

(2) The tribunal may, when it declines jurisdiction under subsection (1), transfer the claim to the Court of First Instance, the District Court or the Small Claims Tribunal, in such manner as may be prescribed.”

15.  Counsel thus submits that this court has jurisdiction to entertain claims that are within the jurisdiction of the Labour Tribunal.  I do not agree.  I do not think section 10 of the ordinance permits this court to exercise jurisdiction generally over claims that are within the exclusive jurisdiction of the tribunal.  This court would only have jurisdiction if the claim should be transferred by the tribunal to it under section 10 of the ordinance. 

16.  I agree with counsel for the 2nd defendant and hold that Order 12 rule 8 of the Rules of the High Court does not apply to claims that are within the exclusive jurisdiction of the tribunal.  It is not too late for the 2nd defendant to apply to strike out the employment claims for want of jurisdiction.

Second ground to oppose striking out

17.  For the second ground, counsel for the plaintiff relied on Shanghai Land Holdings Limited (in Receivership) v Chau Ching Ngai and Another HCA2704/2003 where Waung J did not strike out a claim that was within the jurisdiction of a tribunal.  In that case the statement of claim had to be served out of jurisdiction and the tribunal had no jurisdiction to make such order.  Waung J said in paragraph 28 of the decision:

“28.  …  When a defendant is outside the jurisdiction in relation to employment contract claim, the Labour Tribunal has no jurisdiction to issue and sanction a service out of proceedings.  That right of ordering service out of jurisdiction is given only to the High Court.  The High Court therefore is the appropriate jurisdiction to deal with employment dispute where the defendant is outside the jurisdiction.  Section 10 of the Labour Tribunal Ordinance expressly provides: (1) that the Labour Tribunal can decline jurisdiction; and (2) can transfer the dispute to the High Court.  I have been told that the appropriate claim has been lodged with the Labour Tribunal, but the Labour Tribunal however is not able immediately to deal with it and it would only deal with it next week.  I expect the Labour Tribunal to recognise its lack of jurisdiction to give remedy to the plaintiff because of the fact that the defendant is physically outside the jurisdiction, and because of the tribunal’s inability to order service out.  The Labour Tribunal therefore is obliged to transfer the claim to the High Court.  If it does not, then it would be wrong in law and this court will correct such error.  So, the employment contract point on the lack of jurisdiction of the High Court to deal with this claim is a non-point.  In my view the High Court plainly has jurisdiction.”

18.  In that case the employment claim had already been lodged with the tribunal and would be dealt with by the tribunal in the following week.  The learned judge was anticipating a transfer of the claim by the tribunal to this court pursuant to section 10 of the ordinance so that this court could order service of the proceedings outside jurisdiction.  The peculiarity in that case does not exist in this action and the employment claims herein have not been lodged with the tribunal.  That case therefore offers no assistance to the plaintiff here.

19.  The plaintiff also relies on Gain Hill (Hong Kong) Limited v Li Kin Yip and Another [2006] 4 HKLRD 186 where Sakhrani J did not stay the action for want of jurisdiction.  In that action the plaintiff had dismissed its former employee, the 1st defendant, for misuse of confidential information.  The plaintiff then brought the action for an injunction to restrain the use of such information to solicit its customers and for damages for breach of confidence and breach of employees’ duties to be assessed.  The 1st defendant relied on section 7 of the Labour Tribunal Ordinance and applied for a stay of the action.  Sakhrani J dismissed the application.  The learned judge analysed the relationship between paragraphs 1 and 2 of the schedule to the ordinance on the one hand and paragraph 3 on the other.  He said in paragraphs 39 to 41 of the decision:

“39.  The words “Notwithstanding paras. 1 and 2” in para. 3 of the Schedule must mean something.  The meaning is in my view clear.  In spite of the fact that the Labour Tribunal has jurisdiction under paras. 1 and 2, the Labour Tribunal shall not have jurisdiction to determine a claim for a sum of money in respect of a cause of action “founded in tort whether arising from a breach of contract or breach of duty imposed by a rule of common law …”. 

40.  Here, there is an overlap between the claim in para. 1 and the claim in para. 3 of the Schedule.  The claim for damages for breach of confidence is founded both in contract and in tort.  It would fall within para. 1(a) as being within the jurisdiction of the Labour Tribunal but it would be excluded from the jurisdiction of the Labour Tribunal under para. 3 as being a claim for a sum of money in respect of a cause of action “founded in tort whether arising from breach of contract or a breach of duty imposed by a rule of common law …”.  The intention of the Legislature was to exclude such claims from the jurisdiction of the Labour Tribunal.

41.  In my judgment, the plaintiff’s claims are not within the exclusive jurisdiction of the Labour Tribunal.  The 1st defendant’s summons is dismissed.”

20.  In the present action, the claims of arrears of salary and damages for constructive dismissal are purely claims of breach of employment contract.  They are not tortious claims.  They are within the exclusive jurisdiction of the tribunal and are not excluded by paragraph 3 of the schedule to the ordinance.  The plaintiff therefore cannot rely on Gain Hill. 

21.  Since the two employment claims aforesaid are within the exclusive jurisdiction of the tribunal and this court has no jurisdiction over them, I strike them out from this action as against the 2nd defendant.

The misrepresentation claim

22.  Regarding the claim of misrepresentation, counsel for the 2nd defendant submits that the alleged representations are merely statements of intention and do not constitute misrepresentation.  Furthermore, counsel submitted that from case management point of view, it is more convenient for all claims in this action to be heard by the Labour Tribunal instead of leaving the misrepresentation claim in this court. 

23.  Counsel for the plaintiff, however, submits that a statement of intention may also be considered a misrepresentation of an existing fact if the person making the representation did not, in fact, intend to do what he said or knew that he did not have the ability to do so (see paragraph 6-010 Chitty on Contracts 30th edition Vol 1).

24.  I agree with counsel for the plaintiff.  The misrepresentation claim cannot be struck out now and has to go to trial.  I also do not think I should strike out this claim for convenience of case management as the Labour Tribunal has no jurisdiction to try such claim. 

The summons to amend

25.  Regarding the amendment, counsel for the 2nd defendant argues that the proposed amendments merely embellish the plaintiff’s present claim and do not change the nature of the case as against the 2nd defendant.  I disagree.  The amendments can extend the misrepresentation claim and also adds a claim for breach of a collateral contract.  These claims should go to trial.  I therefore allow the summons to amend.

Costs

26.  I now deal with costs.  Since the 2nd defendant has succeeded substantially on the summons to strike out, I order that the plaintiff do pay the 2nd defendant 70% of the costs of that summons.  For the summons to amend, I order the plaintiff to pay the 1st and 2nd defendants the costs of and occasioned by the amendments save that the 2nd defendant do pay the plaintiff the cost of the argument of the summons.  I apportion the time spent for arguing the summons to amend at one-tenth of the time of the hearing.