Lam Chun Choi v. Standard Chartered Bank (Hong Kong) Ltd

HCLA 15/2015

LABOUR TRIBUNAL APPEAL NO 15 OF 2015

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO 3631 OF 2013)

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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 Labour Tribunal (“the Tribunal”) dated 27 April 2015 whereby the Tribunal dismissed the claim of the appellant (the claimant) and awarded costs against him.  Leave to appeal was given on 26 June 2015 (appeal on point of law: s 32, Labour Tribunal Ordinance (Cap 25)).

Background

2.The appellant was formerly employed by the respondent (“the Bank”) as the Bank’s group legal counsel (29 January 2007 to 5 November 2010).

3.He was summarily dismissed with wages in lieu of notice; the reason given by the Bank for the dismissal was that his performance was not up to standard.

4.Before his dismissal, the appellant was put on a performance improvement plan (this was preceded by an interim review in 2010) (“PIP”). At the end of the PIP, the appellant was assessed to have failed to achieve the expected performance.  The Tribunal in effect agreed with this assessment, and with the manner in which the Bank effected the dismissal of the appellant.

5.As has been found by the Tribunal, a set of “Hong Kong Employee Discipline Procedures” (“HKEDP”) became part of the employment contract between the appellant and the Bank. HKEDP is in gist a set of provisions concerning the disciplinary procedure and sanctions for deficiencies in the “conduct” or “performance” of the Bank’s employees.

Issues in this appeal

6.The main ground of appeal is:

“… [the Tribunal] wrongly held at trial that the Appellant was not entitled to be protected by the elaborated [HKEDP] … ” (para 1, appellant’s written submissions).

7.The relevant parts of the Tribunal’s reasons for decision on which the above ground is based read:

“… the [Bank] rightly pointed out words should be given their ordinary and natural meaning … and that the word ‘discipline’ carries the connotation of some specific pattern of misbehaviour that needs to be improved. … disciplinary procedures should apply only to cases of conduct related performance instead of performance in general” (para 61 thereof);

“In my view, the proper interpretation of the disciplinary procedures is that they indeed apply only to conducts or conduct related performance issues but not poor performance in general” (para 63 thereof).

The factors taken into account by the Tribunal in support of the above conclusion were:

(a) arrangements for providing copies of evidence and investigation findings, for attending hearings and for representation by colleagues are only intended for misconducts or conduct related performance issues;

(b) it is unlikely all performance issues would require disciplinary proceedings.

8.In this appeal, the Bank seeks to uphold the above conclusion of the Tribunal.  Besides relying on the language used by the HKEDP, the Bank also relies on:

(1) the Tribunal’s finding of fact regarding the appellant’s sub-standard performance (para 3 and 4 above);

(2) whether HKEDP was applicable was in essence a finding of fact;

(3) the issue is academic and does not significantly impact on the quantum which may be awarded in the appellant’s favour even if he succeeds;

(4) the background factual matrix supports the Tribunal’s above conclusion;

(5) before the commencement of his claim in the Tribunal, the appellant did not raise the issue now raised.

Has the tribunal misdirected itself re : HKEDP ?

9.The Bank’s first argument (para 8(2) above) is that:

“… whether the HKEDP applies here on the facts is essentially a question of fact” (para 22, Bank’s skeleton arguments).

10.I disagree.  It is trite law:

(a) “construction” of the terms of a contract (especially a written contract) is the process (sometimes referred to as interpretation) by which the court arrives at the meaning to be given to the language used by the contracting parties;

(b) the construction of written instruments is a question of mixed law and fact;

(c) the meaning of an ordinary English word, of technical or commercial terms and of latent ambiguities, and the discovery of the relevant circumstances surrounding the contract, are questions of fact;

(d) but the true meaning of the words in an instrument arising out of the language used and the surrounding circumstances becomes a question of law.

(Chitty on Contracts (2015) 32^nd Ed, Vol 1, para 13-041 to 13-049)

11.Bearing the above in mind, the process should involve (at least partly) a point of law (rather than a point of pure fact).  That being the case, it is open to this court to examine if the Tribunal has committed any error in its construction process (quoted above).

12.The Bank, in support of the Tribunal’s conclusion, also repeats the factors taken into account by the Tribunal (para 7(a) and (b) above) (para 23f ii and iii, Bank’s skeleton arguments).  But a proper understanding of HKEDP shows that these factors are ill-founded.

13.HKEDP makes clear it does not apply to every act of the Bank’s employees.  First, “minor conduct and performance issues” are expressly excluded.  Under “General Principles”:

“[minor] conduct and performance issues should be managed on an ongoing basis by line Managers … ” (para 2.1 thereof)

(through measures like “appraisal” and, where appropriate, PIP).

14.The “General Principles” then continue to delineate when the “formal disciplinary process” will be commenced:

“… [it will be commenced] where conduct or performance fails to improve to required standards despite informal improvement processes … ”.

The other reason for commencing the formal process is:

“… where the concerns about conduct or performance are sufficiently serious to warrant immediate disciplinary action” (para 2.1 thereof; see also para 17(b) and (c) below).

15.Further to the relatively clear provisions regarding when the “formal” process will be commenced, it is also important to note that the above- (and below-) quoted passages consistently use the two words “conduct” and “performance” (emphasis to these words in the quotes above and below are supplied).  In addition, the provisions also mention the possibility of an improvement:

“to required standards”

of the “conduct” or “performance” on the part of the employee concerned.  All these are consistent with HKEDP intending to cover both:

(1) “conduct” (involving misdeeds such as wilful disobedience, dishonesty or conflict of interest); and

(2) “performance” (involving behaviour such as incompetence, neglect of duty or general sloth or indolence).

16.The process of a “disciplinary hearing” is also expressly provided for.  Again under “General Principles”, the relevant provision reads:

“An investigation should be conducted by the Bank where necessary … before deciding whether to proceed to a disciplinary hearing”.

Furthermore,

“The amount of investigation required will depend on the nature of the allegations and will vary from case to case”

(para 2.1 thereof).  Thus, a disciplinary hearing does not automatically commence (whether it be a “conduct” or a “performance” issue).

17.The other provisions of HKEDP are also consistent with the above conclusion (para 15(1) and (2) above):

(a) the matters pertaining to a disciplinary hearing (mentioned in para 7(a) above) only arise only where a decision has been made to commence such a hearing (para 2.1, 3.0 to 5.0 thereof);

(b) the provisions regarding “disciplinary sanctions” again clearly contemplate the possibility of performance (or conduct) improvement:

“[in relation to ‘formal verbal warning’] If an Employee does not meet acceptable standards of conduct or performance … The warning will be disregarded for disciplinary purposes after 6 (six) months … ”;

“… the Employee’s progress against these objectives [which may be set by the Manager] will be reviewed”;

“[in relation to ‘first written warning’] In cases of more serious misconduct or unsatisfactory performance, or where … the Employee continues to fail to meet acceptable standards … ”;

“[in relation to ‘final written warning’] If the Employee’s misconduct or unsatisfactory performance is sufficiently serious … but it will be disregarded for disciplinary purposes after 12 (twelve) months … ”;

“[in relation to ‘dismissal’] … gross misconduct and gross incompetence … OR … an Employee’s conduct or performance fails to improve to the prescribed standards … ”

(para 6.0 thereof) (emphasis supplied);

(c)  the definitions separately given by HKEDP to the respective phrases “gross misconduct” (which include dishonesty, theft or fraud, violence, breach of confidential information, competing with the Bank’s business, forgery and so on) and “gross incompetence” (which means “serious negligence … which has, or may have, seriously damaged the Bank”) (para 7.0 thereof);

(d) “in the case of performance, [the employee should be advised] of the steps which [he/she] needs to take to improve to acceptable standards … ” (para 9.0 thereof).

18.In light of the above, the Tribunal has obviously committed an error concerning a point of law; namely, it erred in its construction of whether HKEDP can apply also to “poor performance in general”.

19.The Bank’s second argument (para 8(1) above) is that the Tribunal’s decision cannot be impugned where it has not been shown that the factual conclusion(s) it reached could not have been reached if it had properly directed itself in law.

20.I cannot agree with this argument.  Once the Tribunal (wrongly) concluded that HKEDP has no place in its decision, logically (and in fact, judging from the tenure of its reasons for decision) the Tribunal has not considered any of the matters (outlined in para 13 to 17 above) which it ought to have considered.  These include (but are not limited to):

(1)  whether the alleged performance of the appellant was sub-standard within the meaning of the HKEDP provisions, and if so, whether it falls within (or outside) “minor performance issues”;

(2)  if the answer to sub-para (1) above is in the affirmative, whether that still entitled the Bank to summarily dismiss the appellant;

(3)  if the appellant’s performance was sub-standard and fell outside “minor performance issues”, whether the Bank was obliged to investigate into the matter for discipline purposes;

(4)  if it was found that the Bank was not obliged to so investigate, the Tribunal should give its reasons for such finding;

(5)  if it was found that the Bank was obliged to (and did) so investigate, whether the Bank has also complied with the other provisions of HKEDP upon the completion of such investigation;

(6)  if it was found that the Bank was obliged to (but did not) so investigate, whether that still entitled the Bank to summarily dismiss the appellant;

(7)  whether the Bank was obliged to proceed to a disciplinary hearing before summarily dismissing the appellant.

21.The Bank’s third argument (para 8(2) and (4) above) is that the Tribunal was entitled to find (as a fact) that HKEDP did not apply to the appellant’s case, in light of the surrounding circumstances. Insofar as the Tribunal might have done so (which, as will be explained in para 22 below, the Tribunal has not), the Tribunal has not mentioned what those circumstances were, and how they would enable the Tribunal to come to such conclusion.

22.The so-called “surrounding circumstances” relied on by the Bank (as the appellant correctly points out) were post-contract behaviour, practice or belief on the Bank’s part.  It is settled law they are inadmissible for the purpose of construction: Chitty, para 13-129 (citing James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 572); none of the recognized exceptions is applicable here.

23.To conclude, by reason of the above matters, there has been:

(a) misdirection (para 15(1) and (2) and 18 above);

(b) non-direction (para 20 and 21 above),

on the part of the Tribunal.

24.Finally, the Bank argues that the appeal only concerns a matter which is largely academic (para 8(3) above).  This is because (so the Bank argues):

“… even if [the appellant] prevails and HKEDP is applicable, the quantum involved is very small” (para 24, Bank’s skeleton arguments).

25.However, even on the Bank’s case, the amount of loss potentially recoverable by the appellant will not be less than $60,000 or so (as accepted by the Bank during the appeal hearing), or $31,000 or so (para 27, Bank’s skeleton arguments).  Either of those amounts cannot properly be regarded as nominal (or academic).

26.The Bank’s argument summarized in para 8(5) above has no substance because the appellant’s failure to raise the present issue is not relied on as constituting any waiver or estoppel.

Conclusion

27.This appeal is allowed.  The Tribunal’s order dated 27 April 2015 is set aside and the appellant’s claim is remitted to the Tribunal to be heard by another presiding officer.

Other matters

28.The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the judgment and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

Costs order nisi

29.There is no apparent reason to depart from the usual rule that costs should follow the event.  There will accordingly be a costs order nisi pursuant to Ord 42 r 5B(6) that:

(1) the costs of this appeal be paid by the Bank to the appellant, to be taxed if not agreed;

(2) the Tribunal’s costs order is also set aside and the costs before the Tribunal are to follow the event of the hearing de novo before the Tribunal.

Mr Erik Shum, instructed by Francis Kong & Co., for the claimant(appellant)

Mr Jose Maurellet and Mr Alexander Tang, instructed by Simmons &  Simmons, for the defendant (respondent)