ALLIDEM MAE G v. KWONG SI LIN

HCLA 4/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 4 OF 2004

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO. 1513/2002)

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J U D G M E N T

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Introduction

1.  This is an employer’s appeal from a decision of the Labour Tribunal (Mr Tony Poon) dated the 12 January 2004 by which he ordered the employer Madam Kwong Sia Lin to pay the applicant Allidem Mae G., who had been employed by her as a domestic helper in her home for a number of years, the sum of $24,518.30 as a long service payment.  The appeal raises two issues.  The first is whether the employer had summarily dismissed the domestic helper within the meaning of s. 9 Employment Ordinance (Cap. 57) (“The Ordinance”) or whether she had in fact terminated her employment by paying her in lieu of notice under s. 7.  If there had been a valid summary dismissal then the helper would not have been entitled to a long service payment.  If the termination was by payment in lieu of notice under s. 7, as the Presiding Officer has found, then a long service payment would be payable.  If I uphold the Presiding Officer then the appeal must fail.  If the employer can show this was a summary dismissal under s. 9 then this would engage the second of the two issues which is whether the helper’s conduct was such as to justify a summary dismissal.  If it does then the appeal must succeed; if it does not then the long service payment and other consequential payments would be payable to the helper.

2.  It is therefore incumbent on the employer in prosecuting this appeal to overcome both hurdles with a failure at the first being fatal to her appeal.

A brief account of the history of the appeal

3.  The helper first applied to the Labour Tribunal for a long service payment in 2002 and on 26 April that year an award was made in her favour.  The employer appealed and on 9 June 2003, Deputy Judge Andrew Cheung (as he then was) set aside the award on the basis that the Presiding Officer (not Mr Tony Poon) had shown bias against her by appearing to have pre-judged the matter in the helper’s favour and he ordered a re-trial before another Presiding Officer.  The matter then came up before Mr Poon and he made the award which is now appealed from.  Leave to appeal from this award was sought from Lam J. who gave leave on 10 June 2004.  The learned judge had before him homemade grounds of appeal by the employer which set out no less than “40 errors in points of law”.  Lam J. has distilled these down to the two matters which I have already identified.

4.  The matter then came before me on 4 April 2005 when the employer, whose case has been argued for her at her request and with my permission by her husband Mr P S Lam, filed a supplementary Notice of Motion regarding an alleged failure by the helper to disclose her address and asking for an order for security for costs.  I dismissed the application and then proceeded to hear the appeal which could not be concluded within the allotted time.  I had heard argument on the question of whether the dismissal had been a summary one (section 9) or by payment in lieu of a notice (section 7).  The sufficiency of the grounds to justify summary dismissal could not, in any event, proceed without a transcript of the evidence before the Tribunal and so the appeal was adjourned part heard to enable the transcript to be prepared.  In the meantime the employer appealed against my ruling refusing her application for security for costs.  Her application for leave to appeal to the Court of Appeal was heard by Rogers VP on 27 June 2005 and refused.

5.  On 6 December 2005, with the transcript of the evidence before the tribunal now available to me, I heard the argument, as to the sufficiency or otherwise of grounds to justify summary dismissal of the helper.  And so it is, by this protracted route, that this application by the helper falls to be decided by me, on appeal from the Tribunal.

The relevant Statutory Provisions

6.  Long services payments are provided for under Part VB of the Ordinance.  Section 31R(1) contains the general provision on such payments and is in the following terms:-

“(1)	Where an employee who has been employed under a continuous contract-
	(a)	for not less than 5 years of service at the relevant date-
		(i)	is dismissed and his employer is not liable to pay him a severance payment by reason thereof; or
		(ii)	subject to subsections (3) to (5), terminates his contract in the circumstances specified in section 10(aa);or
	(b)	terminates his contract and, at the relevant date, he is not less than 65 years of age and has been employed under that contract for not less than 5 years,
	the employer shall, subject to this Part and Part VC, pay to the employee a long service payment calculated in accordance with section 31V(1).”

It is accepted that prima facie the helper in this case was within the provisions of s. 31R(1)(a)(i) but these provisions need to be considered together with s. 31S(1) and s. 31T(1)(a) which are as follows:

“(1)	An employee shall not be entitled to a long service payment by reason of dismissal where his employer, being so entitled by reason of the employee’s conduct, terminates his contract of employment without notice or payment in lieu in accordance with section 9.” (s. 31S(1))
“(1)	For the purpose of and subject to this Part, an employee shall be taken to be dismissed by his employer if, but only if –
	(a)	the contract under which he is employed is terminated by the employer with or without notice or payment in lieu thereof other than in accordance with section 9.” (s. 31T(1)(a))

Section 9 in its material parts says this:

“(1)   An employer may terminate a contract of employment without notice or payment in lieu-

(a)   if an employee, in relation to his employment-

(i)   wilfully disobeys a lawful and reasonable order;

(ii)   misconducts himself such conduct being inconsistent with the due and faithful discharge of his duties

(iii)   is guilty of fraud or dishonesty; or

(iv)   is habitually neglectful in his duties; or

(b)   on any other ground on which he would be entitled to terminate the contract without notice at common law.”

It is also necessary to make reference to parts of sections 6,7 and 8 if only to observe that these sections are overridden by the effect of s. 9 which requires no notice or payment in lieu provided the employer can demonstrate the presence of the conditions set out in sub-sections 1(a) and (b) of the section in order to justify a decision to summarily dismiss an employee.

7.  Section 6 contains all the detailed provisions relating to termination of a contract by notice.  It gives either party to a contract of employment the right at anytime to terminate the contract by giving to the other party:“…notice, orally or in writing, of his intention to do so.”

8.  Section 7 relates to the termination of a contract by payment in lieu of notice.  Section 7(1) says this:

“

(1)

Subject to sections 15 and 33, either party to a contract of employment may at any time terminate the contract without notice by agreeing to pay to the other party a sum equal to the amount of wages which would have accrued to the employee during the period of notice required by section 6.”

9.  Lastly, s. 8 preserves a party’s right to waive the notice provisions (Section 6) or the payment in lieu of notice (Section 7) provisions.  Section 8(b) specifically provides that nothing in sections 6 and 7 can affect the right of a party to a contract of employment to terminate without notice inter alia under s. 9, the terms of which I have already set out.  It is therefore plain that a s. 9 termination, provided it can be justified, is not subject to the terms and restrictions contained in sections 6 and 7.

A brief history of the helper’s employment

10.  The helper had been employed by the employer for over 9½ years during which time she looked after the family including two children and the family dog.  It follows that the helper was in her fifth 2 year contract with the family.  For the purpose of this part of the appeal it is not necessary to go into the detail of the employer’s complaints about the helper’s standard of work and attitude which I will, presently, need to do in considering whether summary dismissal would have been justified.  Whatever the merits of the helper’s work may have been the fact is that her employment was terminated by a letter given to her on the morning of 18 December 2001.  Given its crucial importance to this part of the appeal it is necessary for me to set it out in full:

“	(1)	Shortly after the renewal of your last contract in July 2000, your performance changed drastically from what it had been in the past eight years and your work attitude became insufferably awful.  Even visitors complained to us that you were impolite.  In January 2001, we were surprised to receive a letter from Lilia, your cousin advising us that as you were leaving us, she would like to have your job.  We tried to clarify the situation with you and asked you to confirm your position.  Although you refused to say much, you (1) admitted that your attitude had been poor and (2) confirmed that you would stay until the end of the contract.  We repeatedly asked you why your attitude had become so poor but you never gave us an answer, admitting only that it had been your fault.  We warned you that if your performance and attitude were not back to like those of the first eight years, we would have to terminate your service because we could not tolerate a domestic helper who could not respect her job.
	(2)	There were some improvements since then but your attitude remained unstable and at times awful.  On Sunday evening 16 DEC 01, when you came back, you responded disrespectfully to Mr Lam’s question of how your day had been with a haughty statement that “You Chinese are selfish”.  Then Mr Lam asked you why don’t you go to places like the US where you think the people are good enough for you.  Your reply was that it was exactly what you were doing.
	(3)	You left a note for us that night asking us to give you (a) a letter for you to renew your visa and (b) a reference and support letter for you to find a job.
	(4)	On 17 DEC 01 evening, we reviewed your performance in the past months and warned you again that your performance and attitude remained poor and not up to our expectation.  You admitted (a) that by your poor attitude, you have been showing us your lack of interest I the work with us and (b) that if you had a domestic helper yourself, you would not accept the kind of attitude you have been showing us.  You didn’t apologize for the poor attitude you admitted and you didn’t promise improvement.
	By this letter, we advising you the immediate termination of your service by a month’s salary in lie.    - Kwong Si-lin
	This note and Hongkong Bank cheque No. 168183 for HKD3,900.00.
	Received by Mae G Allidem / 18 DEC 01       06:15 – 09:15
	Plane ticket and payment for 4 days will be ready in 2 days.  Please call for collection.” (italicised words added by hand at the time of the Claimant’s departure)

11.  This letter speaks for itself in terms of the employer’s complaints.  She and her husband had decided that the time had come for the helper to be dismissed and to leave their home, effectively forthwith.  In their mind she was being dismissed summarily by them for the reasons which they had set out in the letter.

What was the nature of the dismissal?

12.  This then brings into focus the first issue in the application before the Tribunal and now before me on appeal.  The Presiding Officer has decided that on its true construction this letter amounted to a termination without notice but with payment in lieu of the required notice under s. 7 and, not a summary dismissal under s. 9.  This being so the long service provisions in s. 31R(1)(a)(i) engaged and the employer was therefore required to make the appropriate payment which the Presiding Officer proceeded to calculate and award, the quantum of which is not in dispute.

13.  In coming to the conclusion that he arrived at the Presiding Officer had regard to and followed the decision of Deputy Judge Jerome Chan (as he then was) in the case of Chak Chong Chi v Maxim’s Caterers Ltd unreported L.T. Appeal No. 25/1992.  The learned Deputy Judge held that only a s. 9 dismissal can deprive an employee of a long service payment and that, even if grounds for summary dismissal exist, a summary dismissal can only be validly effected if the employer gives no notice nor makes any payment in lieu of notice.  In the case before him, the employer had conceded that the dismissal was not one that had been carried out in accordance with s. 9 and so the remarks made by the learned Deputy Judge in this regard were obiter.  He embarked on an analysis, which given the importance of this case to the issues before me, I propose to set out here in full.   [This comes from pages 4, 5, 7, 9 and 10 of the judgment]

“Pursuant to s. 31S(1) and s. 31T(1), if an employment is terminated by the employer in accordance with s. 9, then the employee would have no right to any long service payment.  I am unable to read into either of these 2 sections words to the effect that the section will apply notwithstanding that the termination was effected by the giving of a s. 6 notice or the making of a s. 7 payment, simply because the employer could have, but elected not to, exercise an existing right to terminate the employment in accordance with s. 9.  It is obvious that both section deal; with the manner the contract of employment was in fact brought to an end, and not with what might or could have been the case but was not the case.

In the face of the concluding wordings in s. 31S(1) that the termination is one “without notice or payment in lieu in accordance with section 9”, any contention that the termination described therein also includes a termination with payment in lieu-in accordance with s. 7 defies both logic and common sense.  Such a construction would also violate the clear wordings of s. 9.  The opening words of s. 9 refer to a termination without notice or payment in lieu.  How, then, could it be argued that a termination with payment in lieu is a termination “in accordance with section 9?

Much emphasis has been placed by Mr Ho for the Respondent [employer] on the words “being so entitled by reason of the employee’s conduct” in s. 31S(1).  It is his submission that these words are suggestive of the sufficiency of a right to terminate under s. 9 to give rise to the exclusion.  I do not accept, nor do I accept it is arguable, that the said words can give rise to a construction that would render a mere presence of an unexercised right under s. 9 to be sufficient to bring the exclusion into operation …

Our s. 9 restated the common law grounds for summary dismissal in sub-paragraph (a) and preserve other common law grounds in sub-paragraph (b).  Other common law grounds covered by sub-paragraph (b), which have not been enacted as express statutory grounds, would include situations such as frustration, death or consent on the part of the employee.  It would be most unreasonable if an employee whose employment was terminated by the employer on account of frustration or consent on his part without notice or payment in lieu thereof, should be deprived of his entitlement to long service payment (different considerations may apply to severance payments).  Thus, it becomes necessary to distinguish terminations involving culpability under sub-paragraph (a), with those innocent situations under sub-paragraph (b) for the purposes of long service payments.  Hence the reference to “being entitled by reason of the employee’s conduct” must be retained in the local legislation to qualify a termination in accordance with s. 9.  The phrase, so heavily relied on by Mr Ho, is a clear reference to s. 9(a) to distinguish it from s. 9(b).  The phrase in effect is the same as “being entitled by reason of subsection (a) thereof.

…

It is to be noted that though the archaic doctrine that “an employer, where he dismisses his employee, need not allege any specific act of misconduct on the employee’s.  Part as the ground for the dismissal; it is sufficient if such a ground still exist, whether or not the employer knew of it at the time of the dismissal” (see Chitty on Contracts, Vol II, 26^th ed., para. 3979) survives the local legislation when his English counterpart is obliged, at the pain of statutory penalty, to supply written reasons for dismissal to his employees upon request pursuant to s. 53 of the 1978 Act, it is still necessary for the employer to decide and inform the employee of the mode and ground for the termination i.e. whether it is a termination by notice, by payment in lieu of notice or summary dismissal pursuant to s. 9.  If the termination is one pursuant to s. 9, the employer must expressly states thus in clear terms rather than kept quiet about the fact and gave notice or made payment as if the termination was one under s. 6 or 7, if he is to escape the consequence of payment of severance or long service payment.  If the employer intends to be generous he should state in unequivocal terms that the termination is one under s. 9 and the notice is given, or the payment is made, only on an ex gratia basis.”

14.  The concluding sentence of this passage indicated clearly how an employer can escape the consequences of the long service payment provisions.

15.  Nevertheless, Deputy Judge Jerome Chan’s reasoning could have the effect of causing an injustice to a completely innocent and good employer who having being badly served by, for example, a dishonest employee thereby giving rise to a clear right to summarily dismiss such individual but, out of a kindness purports to pay a month’s salary in lieu of notice would unwittingly open himself up to a claim for a long service payment.  One can see how this can easily arise where the employer, a private individual not familiar with the law, who does not take legal advice adopts such a course.  Such a consequence was foreseen by Findlay J. in the case of Cheung Wan Shing v Kin Win Dyeing Works Ltd LTA No. 101/94 which concerned an employee’s right to severance payment, as opposed to a long service payment, where the statutory provisions are of identical effect.  Of this he observed obiter:

“Is one to conclude that where an employer is entitled to terminate a contract of employment without notice or payment in lieu under section 9, but terminates with payment in lieu of notice, he, by this act of generosity, exposes himself to liability for a severance payment?  This would be very strange, and difficult to accept as the real intention of the legislature, but Mr Chow concedes that there is no dispute that the respondent was dismissed within the meaning of section 31D(1); in his skeleton submission, he put the matter this way: “… because on the evidence before the Tribunal, there is no doubt that [the respondent] was not dismissed ‘without notice or payment in lieu’ in accordance with section 9 … [the respondent] was in fact paid seven days wages in lieu of notice pursuant to his contract of employment.”  I would be reluctant to come to the conclusion that where an employer is entitled to terminate a contract without notice or pay in lieu, but does not do so, and gratuitously pays wages in lieu or gives notice, he takes himself out of the protection of the legislation.  Thankfully, I have concluded that the problem does not arise in this case.”

16.  It seems reasonably clear from the report that in expressing these views he was not referred to Deputy Judge Jerome Chan ‘s judgment supra. and proposal as to how a prudent employer might avoid the problem by making it clear that the payment he was making was ex-gratia.  One cannot tell therefore how Findlay J. would have reacted to such a proposal?

17.  Whereas those judges had the luxury of not having to decide the point I need to come to a firm conclusion one way or the other.

The result

18.  It seems to me that where the scheme of the legislation is to provide for distinct methods for the termination of a contract of employment the ordinance does not enable, in this case, the employer to “mix and match” his options.  He must elect and bear the consequences of that election.  If he goes for an outright summary dismissal he may well be forced to justify that course in a lengthy and hard fought application by the employee in the Tribunal.  In such circumstances he may prefer to adopt the safer option of payment in lieu of notice together with any long service payment that may be due which, relatively speaking, he would not have much difficulty in defending before the Tribunal.

19.  As to Findlay J.’s concerns, which I respectfully share and for the reasons which I have sought to expand upon in paragraph 15 of this judgment Deputy Judge Jerome Chan appears to have provided the appropriate and correct solution.  It should also be remembered that the Labour Department is always willing, and only a telephone call away, to provide employers’ with advice as to the effect and consequences of any course that they may wish to take.  This facility serves to a large extent to ameliorate the harsh consequences that would befall an innocent and generous employer who may decide to “mix and match” a purported summary dismissal with a payment in lieu.

20.  On their true construction therefore the provisions which I have already referred to can only be separately invoked.  Once notice or a payment in lieu is given or made then a dismissal cannot qualify as a summary one under s.9 which in turn means that the provisions as to long service payments in this case must, as a matter of statutory interpretation, take effect.

The consequences of the employer’s letter

21.  I have no doubt that although the employer intended immediate termination of the helper’s employment and said so in terms, this was a termination under s.7 – “By this letter, we advising you the immediate termination of your service by a month’s salary in lieu.”(My emphasis added).  It was not one under s. 9 although, I have no doubt, that the employer and her husband may have felt that they had ample grounds for a summary dismissal.  Nevertheless, the employer’s carefully drafted letter clearly refers to a termination which is immediate by payment of a month’s salary.  The effect of those words must exclude the notion of summary dismissal as contemplated by s. 9.  This being so the Presiding Officer was correct in his reasoning and in the award that he made with the result that this appeal must stand dismissed.

Did the helper’s conduct justify a summary dismissal?

22.  Having decided the matter in the way that I have this is not an issue that now needs to be resolved by me.  Nevertheless, in the event of an appeal and if I were to be held to have fallen into error in my decision on the nature of the dismissal and the effects of the Ordinance on such a dismissal I propose to go on and decide whether the Presiding Officer was correct in saying that, in any event, the evidence would not have justified a summary dismissal.  It is for this reason that I have required a full transcript of the evidence to be prepared.

23.  The Presiding Officer had given brief reasons on this aspect of the matter at the time when he gave judgment and subsequently in his Reasons once the appeal had been entered.

24.  It needs to be remembered that summary dismissal is a draconian step, the effect of which is to deprive the employee of all the protection provided by the Ordinance.  These consequences were recited by Yeung J. (as he then was) in Tsang Tak Chi v China Wall Ltd. HCLA 33/1998.  He put it in this way:

“It is the “capital punishment” in that if the dismissal is justified, the employee will be deprived of all protection provided by the Employment Ordinance.  There will be no wages in lieu of notice, no annual leave pay, no severance payments, no end of year payment, no long service payment no matter how long the employee has been in employment.”

25.  I have now read the evidence before the Presiding Officer.  In the face of this evidence Presiding Officer held that… “Most of the complaints were in relation to general performance and attitude of the Claimant that in my view did not amount to a habitual neglect of duty…  However, I was of the view that what the claimant did was simply not grave enough to justify a summary dismissal of her.”

26.  The brevity of the Presiding Officer’s reasons on this aspect were, I believe, largely due to the fact that he was disposed to decide the application on the basis of the effect of the employer’s letter of termination and so his decision does not have an analysis of the evidence said to support a decision to summarily dismiss which, I have no doubt, it would have contained had the case turned exclusively on this ground which, in the event, did not call for a conclusion by him.

27.  The employer’s case really amounts to a sub-standard course of conduct on the part of the helper.  An attitude towards them which, when taken cumulatively, persuaded them that enough was enough with the result that they took the decision to part company with her.  There is nothing there which, of itself, stands out as a single incident or, a short series of incidents which together, justify the draconian step of summary dismissal.  With this type of employment, where an employer is bringing a complete stranger to live in his or her family home, a considerable degree of give and take is, inevitably, called for on both sides.  The employer in this case had renewed the helper’s contract on 4 separate occasions.  This would indicate a reasonable degree of compatibility.  It would be rare to find complete satisfaction on the part of both employer and employee.  I am satisfied that the evidence demonstrated, as the Presiding Officer found, that there had been a marked slippage in the helper’s performance in the months prior to the termination.  The damage to the rear door to the flat appears to have played a significant part in heightening the employer’s sense of dissatisfaction.  Additionally, the helper had decided to play her cards close to her chest as to whether she was going to ask for a renewal of her contract, which the family found rather frustrating having played fair with her over the years.  They only discovered that she had decided not to from her cousin who had previously been employed by the employer as the family helper.

28.  The grounds justifying summary dismissal appear in s. 9 itself.  These are where the employee:

(i)   wilfully disobeys a lawful and reasonable order;

(ii)   misconducts himself such conduct being inconsistent with the due and faithful discharge of his duties;

(iii)   is guilty of fraud or dishonesty;

(iv)   is habitually neglectful in his duties.

In addition to which the section preserves the common law on summary dismissal by providing that such dismissal may be effected “on any other ground on which (an employer) will be entitled to terminate the contract without notice at common law.”

29.  There are many decided cases on what amounts to conduct which justifies summary dismissal.  A helpful decision in this regard is that of Barnett J. in So Ching v Kwan Hang Ching and Another (1987) 2 HKC 297.  The headnote to the report sufficiently reflects the position:

“	(2)	What must be looked for was whether what was done by the employee was something which was expressly or impliedly a reputation of the fundamental term of contract such as to justify an instant dismissal.
	(3)	The conduct which was relied on by an employer for dismissing an employee might be a single incident, such as one refusal to obey a lawful order, or it might be the cumulative effect of a series of incidents on the part of an employee.”

At common law summary termination is justified for gross misconduct meaning really serious misconduct which would amount to conduct sufficiently grave to amount to a repudiation of the contract by the employee.  Lord Evershed MR in Laws v London Chronicle Newspapers Ltd. (1959) 1WLR 698 and 700 described it as conduct involving “a disregard by the employee of a condition essential to a contract of service.”

30.  It also needs to be remembered that the burden of proving the conduct said to justify such a dismissal lies on the employer.  See for example Chow Koon Sing v Fan Kok Choy LTA 26/1989 and Chong Hau Sai v Mok Kuen Shing and Others LTA 75/1995 (paragraphs 5 and 8 of the judgment).

31.  This court’s approach, sitting on appeal from the Tribunal, is a restricted one.  As to the Tribunal’s findings of fact, which fall within its exclusive jurisdiction, these are not lightly disturbed on appeal.  (Section 25(2) Labour Tribunal Ordinance, Cap. 25).  Such findings can only be overturned if the Presiding Officer’s assessment of the evidence can be shown to be perverse on the primary facts and/or if he has drawn inferences from those facts which were not reasonably open to him.

32.  It seems to me that in this matter the Presiding Officer has applied the correct test in assessing whether summary dismissal was justified and that his conclusion on the evidence was perfectly sensible.  I am in complete agreement with his assessment of the evidence and so, even if, the employer had succeeded on the first issue as to the nature of the termination she would, in any event, have failed on the evidential contest as to whether summary dismissal was justified.  For this additional reason therefore this appeal must stand dismissed with costs, to be taxed from a party and party basis.  There must also be legal aid taxation of the respondent helper’s costs.  The order for costs will be an order nisi in the usual way.