Chen Rongbin and Another v. Heng Xin China Holdings Ltd
Read the full judgment text of HCLA 12/2019 on BabelCite. This HCLA judgment was delivered on 28 October 2020.
1. Before the court are the applications by:
Cited by 1 case · Cites 5 cases
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HCLA 12/2019, HCLA 13/2019 and [2020] HKCFI 2744 HCLA 12/2019 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE LABOUR TRIBUNAL APPEAL NO 12 OF 2019 (On appeal from LBTC 2150/2018) _________________________ BETWEEN
_________________________ AND HCLA 13/2019 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE LABOUR TRIBUNAL APPEAL NO 13 OF 2019 (On appeal from LBTC 2190/2018) _________________________ BETWEEN
_________________________ AND HCLA 14/2019 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE LABOUR TRIBUNAL APPEAL NO 14 OF 2019 (On appeal from LBTC 2190/2018) _________________________ BETWEEN
_________________________ Before: Hon Lisa Wong J in Chambers (Open to Public) Date of Hearing: 22 October 2019 Date of Decision: 28 October 2020 _________________________ D E C I S I O N _________________________ Applications 1.Before the court are the applications by:
Background 2.The following facts were either found by the Presiding Officer in the 2150 Decision or the 2190 Decision or were not disputed or put in dispute by the parties. 3.At all material times, Holdings was a company listed on the GEM Board of the Stock Exchange of Hong Kong and Management was a wholly owned subsidiary of Holdings. 4.Mr Chen was in Holdings’ employ as its Executive Director, Vice Chairman and Chief Executive Officer pursuant to an undated letter of employment (“Chen’s Contract”) from 21 July 2016 until 20 April 2018 when he was summarily dismissed by Holdings. 5.Mr Cheung was in Holdings’ employ as its Chief Risk Officer pursuant to a letter of employment dated 1 June 2017 (“Cheung’s Contract”) from 1 June 2017 until 25 April 2018 when he was summarily dismissed by Holdings. Cheung’s Contract was entered into by Mr Cheung and Mr Chen on behalf of Holdings. Prior to his employment with Holdings, Cheung had entered into an employment agreement in or around March 2017 with JTI Securities Limited (“JTI”), another wholly owned subsidiary of Holdings, to serve as its General Staff from 1 April 2017. Mr Cheung continued to work for, and receive salary from, JTI after the commencement of his employment with Holdings. 6.Mr Li was in Holdings’ and/or Management’s employ as a driver pursuant to an undated letter of employment issued under the letterhead of Management (“Li’s Contract”) from 1 August 2016 until 25 April 2018 when he was summarily dismissed by Holdings / Management. Li’s Contract was entered into by Mr Li and Mr Chen on behalf of Holdings and/or Management. 7.Insofar as it is material, clause 7 of Chen’s Contract, clause 3 of Cheung’s Contract and clause 9 of Li’s Contract all provided under the heading “Termination” as follows:
8.By shareholders’ resolution passed at Holdings’ Extraordinary General Meeting on 20 April 2018, Mr Chen was dismissed with immediate effect. A notice of termination was purportedly served on Mr Chen by email on 25 April 2018. That email, however, did not contain any attachment. 9.On 25 April 2018, Holdings also served notices of termination with immediate effect on Mr Cheung and Mr Li. No reason was given for the termination in either of the notices. 10.In the proceedings below, the following reasons were put forward by Holdings and Management for the terminations:
Broad issues and Tribunal’s conclusions 11.The issues arising for the determination by the Labour Tribunal (“Tribunal”) were:
12.The Tribunal answered question (1) above in the positive with respect to both Management and Holdings[8] and question (2) above in the negative with respect to all of Mr Chen, Mr Cheung and Mr Li[9]. Proposed grounds for appeal 13.By the Application for Leave to Appeal on Point of Law (Form 14) dated 6 August 2019 (“HCLA 12 Application”), Holdings contended that the 2150 Order is erroneous in point of law in that:
14.For the sake of completeness, I should also mention that Holdings’ written submissions in support of the HCLA 12 Application sought to raise the following additional proposed grounds for appeal:
15.It is provided in s 32(2) of the LTO that an application for leave to appeal shall, inter alia, be in the prescribed form, which shall set out the grounds of appeal and the reasons in support of such grounds. 2150 Purported Grounds 9 to 12 are, however, not included in the HCLA 12 Application. They are hence, strictly speaking, not entitled to be considered for not having been raised according to the requirement of s 32(2). I shall address them, but very briefly, only for the sake of completeness. 16.By the Application for Leave to Appeal on Point of Law (Form 14) dated 6 August 2019 (“HCLA 13 and 14 Applications”), Management and Holdings contended that the 2190 Order is erroneous in point of law in that:
17.At the hearing of the HCLA 13 and 14 Applications, Management and Holdings abandoned 2190 Grounds 3 and 4. Requirements for leave to appeal 18.The LTO stipulates, by s 32(1), that the Court of First Instance may grant leave to appeal from an award, order or determination by the Tribunal if any party is dissatisfied with such an award, order or determination on the grounds that it is erroneous in point of law or outside the jurisdiction of the Tribunal. It is not suggested that either of the 2150 Order or the 2190 Order is outside the jurisdiction of the Tribunal. The question raised by these applications for leave to appeal is whether the Presiding Officer had erred in law in making the 2150 Order and the 2190 Order. 19.It is trite that in seeking leave to appeal, the applicant has to show that the intended appeal on the ground(s) identified is arguable. See, for instance, Chan Kwok Hung v Hotel Panorama Co Ltd, HCLA 30/2009, unreported, 19 November 2009, per Chu J (as she then was) at [13]. 20.The appellate approach in an appeal on law turning on the inference to be drawn from the primary facts established is set out in Kwong Mile Services Ltd v Commissioner of Inland Revenue (2004) 7 HKCFAR 275, per Bokhary PJ at [37] as follows:
21.See also 馮皓嵐訴威達製品有限公司, HCLA 6/2011, unreported, 14 October 2011, per Deputy High Court Judge Au-Yeung (as she then was) at [38]-[40]. 22.As observed by Bokhary PJ in Kwong Mile Services Ltd also at [37], it is understandable that those attacking the fact-finding tribunal’s conclusion would stress the third proposition, while those defending that conclusion stress the first two. 23.The Tribunal’s conclusion is contradicted by the true and only reasonable conclusion in the following circumstances:
See again Kwong Mile Services Ltd at [32]-[34]. HCLA 12 Application 2150 Grounds 1, 2, 7 & 8 - validity of Mr Chen and Mr Cheung’s respective remuneration packages 24.Holdings contended that the Presiding Officer erred in ruling that the failure to obtain approval from the board of directors and the Remuneration Committee established in accordance with the GEM Listing Rules did not affect the validity of the remuneration packages of Mr Chen and Mr Cheung. In Mr Chen’s case, it was further complained that the Presiding Officer failed to distinguish between the roles and authorities of the shareholders and the board of directors. In particular, the Presiding Officers erred in holding that the agreement between Mr Chen and a major shareholder on Mr Chen’s remuneration package could override the function of the Remuneration Committee. 25.First, Mr Chen’s remuneration package was not an agreement merely between himself and a major shareholder. In his findings, the Presiding Officer referred to Mr Chen’s case that on or before 21 July 2016, Mr Chen met with Mr Lim, the then Chairman of Holdings, and they agreed on Mr Chen’s remuneration package and signed Chen’s Contract[10]. 26.The Presiding Officer then went on to make the factual finding that there was in fact agreement between Mr Chen and Holdings (as opposed to a major shareholder of Holdings) on Mr Chen’s remuneration package:
27.Holdings did not put forward any argument to suggest that the Presiding Officer committed any error in reaching the above factual finding. 28.Second, there is nothing in the Terms of Reference of the Remuneration Committee to suggest that the remuneration package of each individual director or employee in senior management was subject to the approval of the Remuneration Committee. Instead, its mandate was to, inter alia, submit proposals to the board of directors for the policy on remuneration of all directors and employees in senior management[12]. There is, therefore, no basis to suggest that the remuneration package of either Mr Chen or Mr Cheung was invalid due to the absence of specific approval by the Remuneration Committee. 29.Third, and in any event, it is trite that persons contracting with a company and dealing in good faith have always been entitled to assume that acts within the company’s constitution and powers have been properly and duly performed, and were not bound to enquire whether acts of internal management have been regular. This is known as the “indoor management rule”. See Royal British Bank v Turquand 119 ER 886; Grand Trade Development Ltd v Bonance International Ltd [2001] 2 HKLRD 759, per Le Pichon JA at [31]. There is no reason why the “indoor management rule” should not apply in Mr Chen’s and Mr Cheung’s case. Holdings did not put forward any argument to the contrary. Accordingly, it is not open to Holdings to now challenge (a) the remuneration package of Mr Chen (which was agreed by Mr Chen and Holdings’ then Chairman, Mr Lim) and (b) the remuneration package of Mr Cheung (which was agreed by Mr Cheung and Holdings’ then Executive Director, Vice Chairman and Chief Executive Officer, Mr Chen) on the basis of any irregularities in the internal management of Holdings. 30.2150 Grounds 1, 2, 7 and 8 thus have no merit. 2150 Grounds 3-5 - Failure to investigate? 31.Holdings argued that the Presiding Officer failed to investigate into the following matters:
32.Contrary to Holdings’ argument, the Presiding Officer has already sufficiently dealt with these matters in the 2150 Decision. 33.First, with respect to Holdings’ allegation that Mr Chen failed to carry out a reasonable order resolved by the board of directors, the Presiding Officer has already conducted a detailed analysis of the evidence before him in the 2150 Decision at [11]-[15] and concluded at [16] that there was nothing unreasonable in Mr Chen’s conduct in the circumstances that Holdings was in at the material time:
34.There is no ground for Holdings’ complaint that the Presiding Officer failed to investigate in this regard. 35.Second, the issue of Mr Chen’s remuneration package has already been dealt with in paragraph 26 above. In particular, it is the Presiding Officer’s factual finding that Mr Chen and Holdings did validly agree on Mr Chen’s remuneration package[14]. Further, as highlighted by the Presiding Officer, Holdings did in fact continue to pay for the rent of Mr Chen’s residence and the driver’s salary without making any complaint with regards to Mr Chen’s remuneration package during the two years he was employed by Holdings[15]. 36.Third, in relation to the complaint that Mr Chen habitually neglected his duties as the Chief Executive Officer of Holdings, this again has been sufficiently addressed in the 2150 Decision at [17]. In particular, the Presiding Officer considered the evidence of Mr Chen’s business trips on behalf of Holdings and Mr Chen’s attendance at all of Holdings’ general meetings and board meetings, and concluded that Holdings failed to prove that Mr Chen did not devote sufficient time in the discharge of his duties. 37.Holdings complained that the Presiding Officer failed to inquire into why Mr Chen had to spend most of his time in an internal investigation by Holdings when he was not a member of the relevant special investigation committee. However, Holdings did not explain how Mr Chen’s involvement in the inquiry would in any way affect the Presiding Officer’s finding that Holdings failed to prove that Mr Chen did not devote sufficient time in the discharge of his duties. In any event, it is not suggested that Mr Chen committed any misconduct for being concerned with the internal investigation. 38.Holdings further argued that the Presiding Officer failed to investigate why there was no login record on Mr Chen’s desktop computer in Holdings’ office. It is unclear what Holdings hoped to achieve from such investigation. There is nothing in Chen’s Contract that required Chen to regularly, or at all, log into his desktop computer at Holdings’ office[16]. 39.Fourth, with regards to Holdings’ complaint that the Presiding Officer failed to inquire into why Mr Chen had to ask Holdings’ solicitors to procure air-tickets for him, the Presiding Officer had before him paragraph 4 of Mr Chen’s Supplemental Witness Statement where Mr Chen explained that:
40.While Holdings noted that this was different from the usual practice for claiming reimbursement[17], it did not put forward any argument as to how this constituted serious misconduct on the part of Mr Chen to justify his summary dismissal. Nor did Holdings explain the purpose of the investigation that the Presiding Officer is said to have failed to carry out. 41.Fifth, contrary to Holdings’ contention, the issues of Mr Cheung’s employment by JTI and Mr Cheung’s devotion of time in discharge of his duties were adequately analysed and determined by the Presiding Officer. In particular, the Presiding Officer made the following findings in the 2150 Decision at [18]:
42.2150 Grounds 3 to 5 are therefore unarguable. 2150 Ground 6 - Written notice of termination of employment 43.Holdings argues that its two motions dated 5 February and 15 March 2018 respectively for the removal of Mr Chen from Holdings constituted written notices of termination of Mr Chen’s employment and the Presiding Officer failed to make findings to that effect. 44.Holdings’ argument in this regard is contradicted by the evidence and further makes no sense. 45.First, the two motions cannot be construed as written notices of termination as they were still subject to voting by Holdings’ shareholders at the Extraordinary General Meeting, the outcome of which was not predictable at the time when the two motions were issued. It is also worth highlighting that in the two announcements by Holdings concerning these two motions, the following caveats as to what was to be done with the two motions were included, which further demonstrated that they could not have been construed as written notices of termination of the relevant employments:
46.Second, the position now put forward by Holdings is contradicted by Holdings’ own contemporaneous documents in that it was expressly stated in Holdings’ email to Mr Chen dated 9 May 2018 that the notice of termination of Mr Chen’s employment was issued on 25 April 2018, rather than on either 5 February or 15 March 2018:
47.2150 Ground 6 thus has no merit. 2150 Purported Grounds 9 and 10 - Nature of Chen’s Contract and Mr Chen’s duties 48.In its written submissions, Holdings complained that the Presiding Officer failed to investigate into (a) the true nature of Chen’s Contract and (b) the principal differences between a breach of fiduciary duty in the capacity as a director and in the capacity as an employee. Neither of these grounds is in the HCLA 12 Application. 49.Holdings did not explain or elaborate on the relevance or significance of the two alleged failures to the validity of the 2150 Order. Mr Chen’s claim is a straightforward enforcement of his employment contract with Holdings. In particular, Mr Chen’s entitlement to payment in lieu of notice in the event of termination by Holdings is expressly provided for in clause 2 of Chen’s Contract and does not depend on the nature of his employment or duties:
50.2150 Purported Grounds 9 and 10 are therefore unarguable. 2150 Purported Grounds 11 and 12 - Failure to decline jurisdiction? 51.Pursuant to s 7 of and schedule (1) to the LTO, the Tribunal shall have exclusive jurisdiction over a claim for a sum of money, whether liquidated or unliquidated, which arises from, inter alia, the breach of a term of a contract of employment. 52.Under s 10 of the LTO, 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. The Tribunal may, when it declines jurisdiction, transfer the claim to the Court of First Instances, the District Court or the Small Claims Tribunal in such manner as may be prescribed. 53.Holdings did not dispute that the Tribunal has jurisdiction over Mr Chen’s claim under Chen’s Contract. In its written submissions, Holdings argued that the Presiding Officer failed to consider the gravity of the allegations raised in Holdings’ defence[18]. 54.In the proceedings below, Holdings made an application to the Tribunal for the transfer of Mr Chen’s claim to the Court of First Instance on the ground that the case involved a substantial counterclaim by Holdings against Mr Chen for breach of fiduciary duty and/or common law and statutory duty of care in his capacity as the Executive Director and Chief Executive Officer of Holdings[19]. The application was refused by the Tribunal. 55.It is said that the Presiding Officer misdirected himself that the case was not complicated[20]. Again, these grounds are not in the HCLA 12 Application. 56.Holdings did not explain or elaborate on how the Presiding Officer failed to properly exercise his discretion in refusing to decline jurisdiction. While it is asserted that the case was complicated, Holdings did not develop on how the matter was therefor not suitable to be disposed of by the Tribunal. The central issue in the claim concerning Mr Chen, namely whether Mr Chen committed any serious misconduct, was sufficiently dealt with by the Presiding Officer in the 2150 Decision for the reasons already given above. 57.In the circumstances, there is no ground to challenge the Presiding Officer’s exercise of his discretion not to decline jurisdiction. 58.2150 Purported Grounds 11 and 12 thus have no merit. HCLA 13 and 14 Applications 2190 Ground 1 - Joint and several liability of Management and Holdings 59.Contrary to Management and Holdings’ contention[21], the Presiding Officer’s finding that Management and Holdings are jointly and severally liable did not depend upon whether or not the two companies are separate legal entities. Rather, it was based on the Presiding Officer’s finding that Mr Li was jointly employed by both Management and Holdings[22]. 60.As a matter of law, joint employment was recognised in Wong Kit Yee v Capital Globe Ltd, CACV 63//2016, unreported, 15 March 2017, per Lam VP at [4]. In particular, it was held that it is possible that, on the special facts of a particular case, the arrangement between the companies involved and the employee in question is such that, in light of the other surrounding circumstances, the court can properly come to the conclusion that there is in law a joint employment: both the company which enters into a written contract of employment and the company which actually uses the services of the employee are employers. However, the mere fact that services were provided to an associate company within a group is, without other cogent indicia of joint employment, not sufficient to lead to such conclusion. 61.See also Yung Wai Tak Abraham William v Natural Daily (NZ) Holdings Ltd [2020] HKCFI 2067, per Deputy High Court Judge To at [45]-[50]. 62.On the facts, the Presiding Officer found in the 2190 Decision at [15]-[16] that there was a joint employment of Mr Li by Management and Holdings for the following reasons:
63.Management and Holdings did not put forward any argument to suggest that the Presiding Officer committed any error in making the above findings. 64.2190 Ground 1 thus has no merit. 2190 Ground 2 - Validity of Li’s employment 65.Management and Holdings contended that the Presiding Officer failed to investigate and consider that Mr Chen had no authority to sign any agreements on behalf of Management and thus erred in not considering the legality of Li’s Contract (presumably only insofar as Management was concerned)[24]. 66.This complaint is contradicted by Management’s and Holdings’ own evidence. In this regard, Mr Gao expressly admitted Mr Li’s employment with Management and/or Holdings during cross-examination in the proceedings before the Tribunal:
67.In light of the Presiding Officer’s findings in the 2190 Decision at [15]-[16] as set out above, there is no reason why the “indoor management rule” should not apply in Mr Li’s case. See again Royal British Bank v Turquand 119 ER 886; Grand Trade Development Ltd v Bonance International Ltd [2001] 2 HKLRD 759, per Le Pichon JA at [31]. Management and Holdings did not advance any argument against the application of the principle either. That being the case, the irregularities, if any, of the internal management of Management and/or Holdings did not invalidate Li’s Contract. 68.2190 Ground 2 is therefore unarguable. Disposition 69.In the premises, I dismiss Management’s and Holdings’ applications for leave to appeal under HCLA 12/2019, HCLA 13/2019 and HCLA 14/2019. 70.I make no order as to costs.
Ms Yantl SC Sze, instructed by STN Law Office, for the defendant (in HCLA 12/2019) and the 1st and 2nd defendants (in HCLA 13 & 14/2019) [1] Which amounts are not in issue if liability is confirmed. [2] Which amount is not in issue if liability is confirmed. [3] See 2150 Decision at [6]. [4] See 2150 Decision at [7]. [5] See 2190 Decision at [1], [9]-[10]. [6] See 2190 Decision at [2(1)]. [7] See 2150 Decision at [3]; 2190 Decision at [2(2)]. [8] See 2190 Decision at [15]-[16]. [9] See 2150 Decision at [20]; 2190 Decision at [17]. [10] See 2150 Decision at [4]. [11] See 2150 Decision at [9] [12] See Terms of Reference of the Remuneration Committee at [8]. [13] See 2150 Decision at [16]. [14] See 2150 Decision at [9]. [15] See 2150 Decision at [9]. [16] See, in particular, clause 3 of Chen’s Contract: “During your appointment with the Company, you shall devote reasonable time, effort and attention to the business of the Company and act for the benefit of the Company and its shareholders. You shall observe the hours of work and public holidays in the location of work to which to which [sic] you are assigned to. You shall not without the approval of the Board, be engaged in other business which is in direct competition with the business of the Company.” [17] See paragraph (v) of Holdings’ witness statement. [18] See Holdings’ Skeleton in support of the HCLA 12 Application at [48]. [19] See Holdings’ application to the Tribunal dated 11 September 2018. [20] See Holdings’ Skeleton in the HCLA 12 Application at [49]-[50]. [21] See Management and Holdings’ Skeleton in support of the HCLA 13 and 14 Applications at [8]. [22] See 2190 Decision at [15]-[16]. [23] See 2190 Decision at [15]-[16] [24] See Management and Holdings’ Skeleton in HCLA 13 and 14 Applications at [9] [25] See Transcript for LBTC 2190/2018 at 60 F-H. |
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