LEUNG LAI BUN v. SAM WOO BORE PILE FOUNDATION LTD.

HCLA 45/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 45 OF 2002

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO. 10081 OF 2001)

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J U D G M E N T

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1. The Claimant (Respondent) used to work for the Defendant (Appellant) as an electrician. His basis salary was HK$18,000.00 per month. His contract of employment came to an end on 3 November 2001. He was given payment in lieu of notice for 7 days. Sometime in early November, after the termination of his contract, his employer paid him a total sum of HK$49,777.50, comprising his October salary, 7 days' wages in lieu of notice, a year-end payment and his pro-rata annual leave pay, as well as a sum of HK$3,180.00 representing his pro-rata November salary.

2. The Claimant then took out proceedings in the Labour Tribunal, claiming that he was entitled to one month's notice or payment in lieu of notice, and that his annual leave pay had been short-calculated. He also claimed severance payment (which he subsequently abandoned).

3. The Labour Tribunal found in the Applicant's favour and awarded him the balance of his wages in lieu of notice as well as the outstanding pro-rata annual leave pay.

4. The Defendant appeals to this Court, and its appeal is limited to three matters, namely, first, whether a document that the Claimant signed when he received the sum of HK$49,777.50 from the Defendant constituted a full and final settlement agreement between the parties so that the Claimant was estopped from making claims in the Labour Tribunal; secondly, whether the alleged settlement agreement was supported by the voluntary payment by the Defendant of a pro-rata year-end payment that the Claimant was not contractually entitled to as consideration for the settlement; and thirdly, whether the outstanding pro-rata annual leave pay had been mistakenly calculated.

5. The first two points can be conveniently dealt with together. In respect of the two sums received by the Claimant from the Defendant in early November following his termination of employment, the Claimant signed two documents prepared by his former employer respectively. They read as follows:

1st Document

"致三和地基有限公司：

本人 梁禮杉(Mr. Leung Lai Bun),香港身份證號碼 XXXXXXX(X)，於一九九九年十二月一日開始受僱於三和地基有限公司，任職機械維修(Electrician)。

現同意接受 貴 公司與本人 於二零零一年十月三十一日終止僱傭合約之事宜及所獲得的補償款項（詳情如下）。

(一)	十月份薪金
	基本薪金: (平均每日薪金$ 18000 ÷ 31天 =	$ 580.65)
		$ 18,000.00
	103小時的超時工資 (每小時HK$115）	$ 11,845.00
		$ 29,845.00
（二）	七天代通知金 （7*HK$ 580.65）(一個月)	$ 4,064.50
（三）	年終酬金
	（每農曆年尾發放，即一月，所以2001年度，按比例計算是由02/2001 - 31/10/2001，共九個月）
	（HK$ 18,000(12 * 9）	$ 13,500.00
（四）	有薪年假
	（每年有7天有有薪年假，由2001年1月至10月31日，共304天。按比例計算，有5.8天有薪假期）欠3天大假
	（304/365 * 7 *HK$ 580.65）	$ 3,368.00
	總共	$ 50,777.50
	扣除 強制性公積金供款	$ 1,000.00
		$ 49,777.50 ========
	實際收取：港幣 四萬九千七百七十七元五角
		簽署
		梁禮杉
二零零 一年十一月12日"

 

2nd Document

"致三和地基有限公司：

本人 梁禮杉(Mr. Leung Lai Bun),香港身份證號碼 XXXXXXX(X)，已收到十一月份三天的薪金，實際離職日期是二零零一年十一月三日。

（詳情如下）。

（一）	十一月份薪金
	基本薪金：(平均每日薪金$ 18000 ÷ 30天=	$ 600.00)
	由十一月一日至三日（$ 600*3）
		$ 18,000.00
	12小時的超時工資（每小時HK$115）
		$ 1,380.00
		$ 3,180.00
	實際收取：港幣 三千一百八十元
		簽署
		梁禮杉
二零零 一年十一月15日"

6. It is the Defendant's case that the first document extracted above constituted a full and final settlement agreement between the parties.

7. I do not agree. First, in my judgment, the parties never reached consensus. According to the undisputed findings of the Tribunal, when the Claimant was given this document to sign by a female staff working for the Defendant, he said that he should be entitled to one month's notice or wages in lieu, and that in calculating his outstanding annual leave pay, three days were missing. Accordingly, at his request, the female staff wrote down on the document against the relevant items the words "(一個月)" and "欠了三天大假" (i.e. the words in bold type in the above extract). He then signed the document. The understanding was that the female staff would take the document to the boss who would, of course, have to consider whether to entertain the Claimant's case.

8. In my judgment, the signature of the Claimant on the document did not amount to an unconditional and unequivocal acceptance of what was offered by the Defendant as embodied in the document. What I have just described above amounted to, in law, the making of a counter-offer by the Claimant to his former employer. His taking the money that was being offered to him together with that piece of document did not take the matter further. This was because according to the findings of fact, that was done with the consent of the female staff who agreed to release the money to the Claimant in those circumstances. In other words, the receipt of money was under protest and subject to the Claimant's counter-offer.

9. This is analogous to the "battle of forms" situation: see Chitty on Contracts (28th ed.) Vol. 1 paras. 2-031 to 2-034. In my judgment, no concluded contract was made in those circumstances.

10. Secondly, despite the contrast in the wordings used in the two documents that were signed by the Claimant, it is the wording of the document in question which must be the focus of attention, in finding out whether on its true and proper construction, it comprised or contained a full and final settlement agreement. The first thing to note is that the document did not say that this was a full and final settlement. Secondly, whilst it referred to the 4 items as "補償款項", none of them really looked like any compensation items. Rather they were items of the Claimant's entitlement upon the termination of his contract, subject to the Defendant's argument in relation to the year-end payment. Thirdly, it could be reasonably construed as an acknowledgment of receipt of monies from the Defendant's side based on the Defendant's own calculations and understanding of the position; it did not amount to an unequivocal acceptance of those calculations and the Defendant's understanding by the Claimant. Further, the handwritten words on the document clearly amounted to a reservation of the Claimant's position.

11. For my part, I would be very reluctant and slow to hold that a document of the present type should have the effect of depriving an outgoing employee his right to payments which as a matter of law he was entitled to receive upon the termination of his employment, which entitlements would from time to time involve detailed analysis of the applicable employment law and legislation before they could be correctly determined.

12. Thirdly, and this ties in with the second issue raised in this appeal, I am of the view that there was no consideration for the alleged settlement agreement. The alleged consideration for the settlement is the payment of the pro-rata year-end payment in the document. According to the Defendant, there was no contractual entitlement, discretionary or non-discretionary in nature, for the making of the year-end payment. This was something voluntary, extra to the contract, and thus provided the necessary consideration for the settlement. This was not the Claimant's entitlement upon his termination of contract.

13. I do not agree. In the subsequent review of the Labour Tribunal's award, the Tribunal clearly found as a fact that there was an implied contractual obligation on the part of the Defendant to make the annual year-end payment to the Claimant. The decision was not subject to any appeal. It is binding on both parties.

14. In any event, there was indeed ample evidence before the Tribunal to enable it to reach the conclusion. It is true that the contract did not make reference to the payment of a year-end payment (年終酬金). But such a payment was indeed made to the Claimant after the completion of his first year of employment. It was again referred to in the document said to comprise a settlement agreement. It was not referred to as any compensation or consideration for the settlement. It was described as a year-end payment, no more and no less. The wording setting out how the year-end payment was to be calculated clearly suggested that this was a contractual entitlement and was payable on a pro-rata basis. The fact that this payment was called a year-end payment in the alleged settlement agreement was by itself evidence of the implied contractual obligation to pay it.

15. The contractual obligation to make the payment need not be expressed; it could be implied: see section 11B(1) of the Employment Ordinance (Cap. 57); Chu Wing v. Quali-hing Enterprise HCLA 21/1993 Patrick Chan J (11 November 1993); Fan Man-yiu v. General Locks & Metalwares Factory Ltd [1984] HKC 486.

16. It is true that in the contract of employment it was printed that "花紅: /". But in my judgment, "花紅"，meaning bonus, is quite different, particularly in Chinese usage, from a year-end payment which is very often referred to as "第13個月糧/酬金" or "雙糧/薪", if it was equivalent to one month's wages. This is borne out by the definition of "end of year payment" ("年終酬金") in section 11A in Part IIA of the Ordinance.

17. In my judgment, the Tribunal was fully entitled to reach its conclusion that there was an implied obligation to pay the end of year payment. In those circumstances, Part IIA of the Ordinance applies to the Claimant under his employment contract with the Defendant: section 11B(1), and further, the presumption that the year-end payment was a non-discretionary and non-gratuitous one pursuant to section 11A(1) of the Ordinance is applicable in the present case, there being no written term in the contract of employment to rebut that presumption.

18. In those circumstances, the year-end payment in the so-called settlement agreement was in fact something earned by the Claimant and formed part of his remuneration, and therefore did not provide the requisite consideration for the alleged settlement.

19. Fourthly, according to the Labour Tribunal's award, a total sum of HK$32,360.80, in addition to the two amounts paid by the Defendant to the Claimant following the signing of the two documents, is payable to the Claimant by the Defendant. In other words, even if one were to treat the year-end payment of HK$13,500.00 as gratuitous and/or discretionary in nature, the amount paid by the Defendant to the Claimant still fell far short of the Claimant's actual entitlement at law upon the termination of his employment. It is trite law that a creditor is not bound by a promise to accept part payment in full settlement of a debt: Chitty at para. 3-107 et seq. Compromise or settlement of a bona fide defence is not a valid option here in favour of the Defendant, because according to the unchallenged findings of the Tribunal, there were no negotiations or discussions whatsoever between the parties prior to the handing-over of the document in question by the female staff to the Claimant for signature, and the female staff had no authority by herself to negotiate. By the time the document with those additional handwritten words was taken by the female staff to her superior for consideration, the Claimant had already signed the document. The Defendant therefore cannot use compromise or settlement of a bona fide defence to supply the missing consideration for the alleged acceptance by the Claimant of a lesser amount in full settlement of the debt owed to him by the Defendant, which is thus not binding on him as a matter of law.

20. So for all these reasons, I am not with the Defendant on the first two issues.

21. The last issue is in relation to the outstanding pro-rata annual leave pay. The Tribunal based its calculations on 7 days' entitlement in the second year of employment, whereas the Defendant says that it should be 6.5 days. At the hearing, the Claimant conceded that the true period was 6.5 days. But Mr Lee, appearing for the Claimant, argued that the difference of 0.5 day is more than sufficiently offset by the actual daily wages of the Claimant that should be used to calculate his entitlement for pro-rata annual leave pay. In computing the daily wages, the Tribunal used a denominator of 365 days to divide the annual income of the Claimant. Mr Lee submitted that the denominator should be 301 days, i.e. 365 days less the statutory holidays and Sundays on which the Claimant need not work. This would of course produce a higher daily rate, and thus Mr Lee's argument.

22. I do not accept this argument. Nothing in section 41C(1) of the Ordinance provides for such a calculation. Secondly, if anything, section 41D(2), dealing with the calculation of pro-rata annual leave pay, actually uses 365 days as the base figure.

23. Thirdly, and in any event, the 301 days' argument is fallacious because an employee is entitled to wages, or earns wages, during the whole course of his employment (unless he is on no-pay or other special leave). Whether on his working days, or Sundays or statutory public holidays, he is entitled to be paid at the same rate even though he does no work on Sundays and statutory public holidays. Of course I am restricting myself to an employee like the Claimant, who was employed on a continuous basis and was paid a monthly salary, as opposed to, say, a daily worker.

24. In those circumstances, it seems to me that the denominator should be 365 days. To use 301 days would mean that the employee did not earn wages on Sundays and statutory public holidays. That cannot be right, at least on the facts of the present case. I reject Mr Lee's argument, and conclude that the Tribunal has over-awarded the Claimant 0.5 day's annual leave pay.

25. The parties are in agreement that in that case, I need not calculate the actual amount that has been over-awarded; they will handle the calculations. For the avoidance of doubt, I should specifically say that in calculating the actual amount, 365 days instead of 301 days should be used as the denominator to work out the daily wages.

26. In conclusion, I would allow the appeal in relation to the annual leave pay calculations. The parties shall work out the actual reduction of the award. I dismiss the rest of the appeal.

27. As regards costs, they should follow the event. I make the following costs order nisi: Given the slightly mixed results, I award 90% of the costs of the appeal to the Claimant; such costs to be taxed if not agreed. The Claimant is legally aided. I order that his own costs be taxed in accordance with the Legal Aid Regulations (Cap. 91). Unless either party applies to vary the costs order nisi within 14 days after this judgment is handed down, it shall become absolute upon the expiry of the 14-day period.

28. Lastly, I would like to thank counsel for their assistance.