Owyang Loong Shui Ivan v. Winco Paper Products Co., Ltd
Read the full judgment text of HCLA 13/2017 on BabelCite. This HCLA judgment was delivered on 5 June 2018.
1. This is an appeal by the defendant (“ the Company ”) against part of the award of the Labour Tribunal (“ the Tribunal ”) concerning salary adjustment and costs for expert reports.
Cited by 2 cases · Cites 7 cases
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HCLA 13/2017 [2018] HKCFI 1228 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE LABOUR TRIBUNAL APPEAL NO 13 OF 2017 (On appeal from Labour Tribunal Claim No LBTC 224 of 2015) ____________
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___________________ J U D G M E N T ___________________ A. BACKGROUND 1.This is an appeal by the defendant (“the Company”) against part of the award of the Labour Tribunal (“the Tribunal”) concerning salary adjustment and costs for expert reports. 2.The claimant (“Mr Owyang”) was the former CEO of the Company from 1 August 2003 to 30 September 2014. The employment relationship terminated on 30 September 2014 with immediate effect by the chairman of the defendant, Mr Wong Yu Hong (“Mr Wong”). 3.On 19 November 2014, the Company caused its solicitors to deliver a Termination Payment Cheque of $492,901.71 to Mr Owyang as termination payment together with a schedule of calculation. 4.Mr Owyang disagreed with the calculation and brought a claim at the Labour Tribunal for balance of salary in lieu of notice, annual leave pay, long service pay and balance of salary adjustment. 5.After trial, the Tribunal essentially accepted the case of Mr Owyang. The material findings were as follows:
6.It was the Company’s case before the Tribunal that, even on Mr Owyang’s calculation of monthly salary by reference to the Salary Adjustment Documents, the Company had actually overpaid a sum of $270,460 (“the Sum”). The Sum formed part of a cheque for $400,920 dated 20 September 2012 to Auloong Limited (“the Cheque”). 7.The Tribunal, however, held that it could not deduct the Cheque amount from the amount due to Mr Owyang. It was for the Company to bring another claim for the Sum in another court. The reasons were that:
8.In the end, the Tribunal awarded Mr Owyang, amongst others, a sum of $200,460 for salary adjustment and $131,987.10 for costs. 9.Pursuant to leave granted by this court on 5 July 2017, the Company now appeals against the Tribunal’s decision on 2 grounds:
B. LEGAL PRINCIPLES ON LEAVE TO APPEAL FROM THE TRIBUNAL 10.Section 32(1) of the Labour Tribunal Ordinance (Cap 25) (“LTO”) provides that a party dissatisfied with an award may apply for leave to appeal to the Court of First Instance on the grounds that the award is (a) erroneous in point of law or (b) outside the jurisdiction of the Tribunal. 11.The Presiding Officer has a statutory duty to investigate any matter which he may consider relevant to the claim, whether or not it has been raised by a party: section 20(3) LTO. Failure to discharge this duty is a ground of appeal: Wai Mei Lai Stella v Viya Pramita, HCLA 3/2010, 28 June 2011, §16(3), Au J:
C. GROUND 1 – FAILURE TO INVESTIGATE THE SUM 12.For the purpose of this appeal, the Company does not challenge the finding that Mr Owyang’s monthly salary was $150,000 at the time of termination of employment and that there had been salary adjustments on the basis of the Salary Adjustment Documents from 2003 to 2014. 13.The Sum comprised 2 parts: $200,460 and 2 payments totalling $70,000. C1. Nature of the Sum 14.The Company claims that Mr Owyang had received a total of 10 payments for $400,920 between 2011 and 2015 but he omitted to include the Cheque for $400,920 in his calculations. Had he included that payment, subsequent payments would accordingly be moved downwards by one entry:
15.Applying $400,920 towards item D (salary adjustment of $200,460), there was thus an overpayment of $200,460. In the premises, Mr Ho SC submits that no outstanding salary was owing to Mr Owyang in respect of August and September 2014 and item D should have been dismissed by the Tribunal. 16.Mr Owyang admits receiving the Cheque but alleges at this hearing that it might have been a bonus. He refers this court to Exhibit D15 which was a statement from the chartered accountants (HH Lam & Co) for the Company dated 9 February 2015. It confirmed that “based on our audit evidence”, the Company has paid Mr Owyang “annual salary and Auloong Limited’s agency fees” for the years between 2007 and 2014. It then set out 9 payments of $400,920 which Mr Owyang was said to have received for the financial years ending 31/3/2012 to 31/3/2014. 17.HH Lam & Co continued to state that:
18.Exhibit D15 tallied with the Tribunal’s finding that Mr Owyang’s salary was raised to $150,000 since 2011. 19.Mr Owyang asserts that when his employment was terminated, he was not allowed to return to his office to collect his belongings. Accordingly, he was not able to show the purpose of the Cheque. 20.Moreover, Mr Owyang asserted that the Company had been “flip-flopping” at the Tribunal. I agree because:
21.Mr Ho SC, however, submits that the payments of $400,920 was so regular as to form a payment pattern. He invites this court to exercise its power under section 35(2)(a) LTO to draw the inference that the Cheque was really an “overpayment” which should have been taken into account in computing the total amount owed to Mr Owyang. 22.In my view, Exhibit D15 did show “regularity” in the amount of each payment and the total paid for basic salary and agency fees matched the agreed terms. However, the time interval between payments and the number of payments in each financial year varied and could hardly give rise to a “pattern”. 23.More importantly, I find there to be a dispute of fact as to the nature of the Cheque. Given the alleged financial difficulty of Mr Wong and the irregular payments of the agency fees, it was not clear how the Company could have paid agency fees to Auloong Limited in advance or bonus to Mr Owyang. HH Lam & Co, as an independent third party, did not find there to be a 10th payment representing salary or agency fees. Mr Owyang’s belated suggestion (made for the first time in his oral submission at this hearing) that the Sum was a bonus or the Company’s “flip-flopping” may affect each party’s credibility, but that is a matter for the Tribunal and not for this court. C2. Error of law in the Presiding Officer’s handling of the Sum 24.The way the Presiding Officer dealt with the Cheque as set out in paragraph 7 above was erroneous as a matter of law. 25.Firstly, the Company did not just raise the issue at the end of the trial but did so as early as 11 February 2015 in the statement of Mr Lee Yak Mau. The Cheque was amongst Exhibit D28. 26.Secondly, the Presiding Officer misunderstood the Company’s case on the Cheque as a payment in advance of Mr Owyang’s salary for August and September 2014. Properly understood, the Company’s case was that the Cheque amount ought not to have been left out in the calculation of the termination pay. 27.Thirdly, the Presiding Officer held that the Cheque amount could not be deducted from Mr Owyang’s claims because Auloong Limited was not a party to the proceedings in the Tribunal. This holding was flawed and contradicted her express finding that Auloong Limited was an agent receiving salary on behalf of Mr Owyang. 28.Mr Ho SC rightly drew this comparison: Auloong Limited was no different from any family member or bank who received salary in accordance with the instructions of Mr Owyang. It would not be necessary to bring in the family member or bank in order to decide if Mr Owyang had been overpaid by the Company. 29.Fourthly, the Presiding Officer failed to appreciate that the Sum should be considered as a defence of set-off, which would have the effect of extinguishing the claim in whole or in part. 30.In Karpex (HK) Ltd v Yasmine Printing (China) Ltd [2008] 1 HKLRD 199, the Court of Appeal held at §§9-10 that set-off is a well-recognised defence and summarised the 3 categories of set-off as follows:
31.The question as to what is a set-off is to be determined as a matter of law and not by the form of pleading: Hanak v Green [1958] 2 QB 9 at 26 (cited with approval in Karpex at §9). 32.The Presiding Officer failed to appreciate that the Cheque amount (being a liquidated amount) fell within the first category of set-off and could amount to a defence in law to all of Mr Owyang’s claim. 33.Failure to investigate that defence amounted to an error in law: 陳漢訴祥興建造有限公司, HCLA 31/2003, 17 September 2003, §§6-8. 34.Fifthly, the Presiding Officer mischaracterized the Company’s case on the Sum as a counterclaim. At the trial, the Company’s primary position was that Mr Owyang failed to establish his claim for salary adjustment; alternatively, the Sum constituted a defence of legal set-off. Either of these contentions sought to reduce or extinguish Mr Owyang’s claims but neither of them were meant to seek any money award for the Company. The lack of a counterclaim or a demand (as suggested by Mr Owyang) did not mean that the Company could not rely on overpayment as a defence of set-off. 35.At this hearing, Mr Owyang relies on the authority of 律政司司長訴李錦志, HCSA 5/2011, 2 September 2011, §§3-6, To J, for the proposition that the Tribunal had no jurisdiction to deal with a claim for overpayment of salary by an employer to an employee as it was not a claim which arose from the breach of a term of a contract of employment: paragraph 1(a) of the Schedule to LTO. 36.The “overpayment” in that case was a stand-alone claim. In view of my ruling that the Presiding Officer had mischaracterized the Company’s reliance on the Cheque as a counterclaim (as opposed to defence), 律政司司長訴李錦志has no application. 37.Sixthly, the Tribunal mischaracterized the Company’s case on overpayment as a claim in tort. If the Company really had a counterclaim, the cause of action was for money had and received or unjust enrichment. It was never the Company’s case that Mr Owyang committed any civil wrong for which the Company sought damages in tort. The Tribunal plainly had jurisdiction to deal with the Company’s defence on the overpayment. C3. Defence of set-off for $70,000 38.The Company says that a sum of $30,000 and $40,000 (both forming part of the Cheque) were mistaken payments arising from wrong computation stated in 2 of the Salary Adjustment Documents. The table of Second Reconciliation (p 455 of the hearing bundle) set out clearly the basis of the calculation. 39.The mistaken payment of HK$40,000 arose as follows:
40.The mistaken payment of HK$30,000 arose as follows:
41.A payment made under a causative mistake is prima facie recoverable by the payor on the basis of restitution for unjust enrichment: Goff & Jones: The Law of Unjust Enrichment(9th ed 2016), §9-131. 42.Mr Owyang submits that the issue on these 2 sums was not raised at the trial and there was no evidence to suggest that those 2 payments were made by mistake. I do not think so. The issue was raised in the statement of Mr Lee Yak Mau. The Presiding Officer failed to deal with it as part of the issue of overpayment. 43.For the same reasons given in Section C2 above, the Presiding Officer erred in law in failing to consider these 2 payments in the defence of set-off. 44.The proper order is to allow the appeal in relation to the issue of overpayment of the Sum as a defence of set-off and remit the issue to the Tribunal for investigation. D. GROUND 2 – WRONG AWARD OF COSTS FOR A HANDWRITING REPORT D1. Legal principles for awarding costs in the Tribunal 45.According to section 28(1) LTO,
46.Costs are in the discretion of the Tribunal and cannot be appealed against unless the Tribunal has erred as a matter of principle: Yung Mei Chun Jessi v Merrill Lynch (Asia Pacific) Ltd, HCLA 22/2011, 11 January 2012, §67, Au-Yeung J. D2. Relevance of the expert evidence 47.A party can only adduce expert evidence if it is relevant to an issue and the issue is something that requires expert opinion on. 48.The expert report examined the genuineness of Mr Wong’s signature on an agreement dated 22 June 2010 (“the Agreement”) concerning the sale of the Company’s share in a company called Himmer Winco. The Salary Adjustment Documents and Board Minutes dated 22 June 2010 were, together with other documents, used as samples for the expert’s comparison. 49.Mr Owyang explained in this way:
So Mr Owyang adduced an expert report to defend his own reputation, to rebut Mr Wong’s denial of his signatures and to show that Mr Wong knew about the joint venture. 50.Mr Ho SC submits that the Company never alleged that the Salary Adjustment Documents were not signed by Mr Wong in the proceedings. He also refers to the fact that the Presiding Officer obtained express confirmation from Mr Chung, the Company’s representative, that the Salary Adjustment Documents were signed by Mr Wong. 51.With respect, when viewed in the context that Mr Owyang was suddenly terminated, faced unfounded allegations of misconduct and the Company’s denial of his salary being $150,000 per month, reason 2 would reasonably give rise to Mr Owyang’s concern that Mr Wong was disputing the authenticity of the Salary Adjustment Documents. Mr Owyang could not be blamed for thinking that he had to strictly prove Mr Wong’s signatures. I place little weight, however, on the confirmation of Mr Chung at the trial because it came after the expert evidence was adduced. 52.But was the expert report relevant to any issue? 53.Firstly, Mr Owyang was dismissed by the Company with payment of salary in lieu of notice. All of his claims (paragraph 4 above) evolved around a core issue: whether or not the basis for computation should be Mr Owyang’s basic salary of $50,700 or $150,000 per month. Neither the Company’s Statement nor Supplemental Statement raised any issue as to Mr Owyang’s mismanagement of the Company, still less an issue in connection with the Agreement. 54.Secondly, the expert received instructions on 17 November 2015, long before issues of misconduct were first raised in the witness statement of Mr Wong filed on 9 January 2017. Mr Owyang explains that back in October 2014, the Company was already challenging his relationship with Ting & Co, which was tantamount to challenging the authenticity of the Board Minutes. This explanation plainly shows that the expert report did not relate to any issue. 55.Thirdly, it was not Mr Wong’s signatures on the Board Minutes or Salary Adjustment Documents that were examined by the handwriting expert. These documents were only used as samples for comparison and the signatures thereon were presumed to be Mr Wong’s. 56.Accordingly, the expert report was not relevant to any issue, reason 1 or reason 2. 57.However, the Tribunal had used the expert evidence. In §26 of the Judgment, the Presiding Officer found that the expert had confirmed that the Salary Adjustment Documents and the Board Minutes were both signed by Mr Wong. She had plainly misunderstood the matter in dispute and the true subject matter of the expert report. That amounted to an error of law. 58.For lack of relevance and error of law, the award of costs relating to the expert evidence must be set aside. 59.Mr Ho SC has properly pointed out to this court that at one point at the trial, Mr Chung for the Company apparently indicated that he had no objection to the invoice of HK$120,000 (Transcript/100N). However, that indication could hardly bear any weight given my findings on lack of relevance and error of law on the part of the Presiding Officer. 60.As a reminder to the Tribunal, it is important for the Presiding Officer to define, at a pre-trial hearing, the issue for an expert (eg an aspect of foreign law) or, where handwriting expert evidence is required, to identify the relevant document to be examined, before permitting a party to adduce expert evidence. The other party should be given the opportunity to file an expert report as well. 61.Further, although there is no ceiling imposed by the Ordinance in terms of costs of an expert report, proportionality of expert costs to the amount at stake ought to be taken into account when exercising discretion to decide the amount of costs. E. CONCLUSION 62.I order as follows:
F. COSTS 63.As a matter of principle, costs of an appeal should follow the event and be to the successful party. However, the court may, in a labour appeal exercise discretion not to order costs against a respondent employee even if the appellant employer is wholly successful and is without fault. This applies where eg the employee is unrepresented on appeal and has not put forward a case in bad faith (ie a false, frivolous or vexatious claim or false evidence) and has not misbehaved himself in the conduct of the litigation; or he is a passive respondent in the appeal. To the contrary, if he is legally represented on appeal, he knows of the consequence of costs and he no longer litigates with the expectation of low-costs adjudication. The rationale has been set out in Ali Shoukat v Hang Seng Bank Ltd. at §§21-24, 20 June 20015, Deputy Judge To (as he then was).
64.The Company “flip-flopped” before the Tribunal in its case on the overpayment, but this appeal was wholly fought on legal issues. The Company did not achieve the full objects of the appeal in respect of Ground 1. It insisted on having its appeal on Ground 1 allowed instead of agreeing to a re-trial as raised by the court. It was wholly successful on Ground 2 though. 65.The Company’s costs for the most important part of identifying arguable points of law and deciding to engage senior counsel would have been incurred before Mr Owyang was served with notice of the appeal. The grounds of appeal and submission were very comprehensive right from the leave stage. 66.However, whilst counsel’s thorough preparation and succinct arguments have greatly assisted this court, the amount of costs claimed was double the amount at stake in this appeal. There was absolutely no justification for incurring such disproportionate costs and having 2 counsel. It was oppressive to an ex-employee. 67.On the other hand, there is nothing to show that Mr Owyang conducted his trial or this appeal in bad faith. But for the Tribunal falling into error, each party could have his/its case processed with little costs. 68.Mr Owyang was initially legally represented. He explained that with limited experience in litigation and not being fully informed of the nature of the appeal, he had instructed his ex-solicitors to accept service. No work was rendered by his solicitors. When he received the written submission of the Company, he was informed of the potential costs of the appeal, so he decided to act in person. 69.However, his appointment of solicitors would have given the other party expectation that he would be legally represented. So he could not have expectation of low-costs adjudication. He could not be said to be a passive respondent either. He had admittedly received legal advice in preparing his own written submission. He made no concession after receiving the Company’s submission for the appeal. That said, he conducted the appeal in person with proper focus and wasted no time of the court. He was partly successful in respect of Ground 1. 70.Taking all circumstances into account, Mr Owyang should not bear costs of the appeal in relation to Ground 1. On a nisi basis, I order him to bear costs of $20,000 in relation to Ground 2. 71.I thank Mr Ho SC and Mr Jeff Chan for their able assistance.
Mr Ambrose Ho, SC leading Mr Jeff Chan, instructed by Shirley Lau & Co. LLP for the appellant (defendant) The respondent (claimant) appeared in person | |||||||||||||||||||||||||||||||||||||||||||||
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