Sun Min v. Hong Kong Ming Wah Shipping Co Ltd

HCLA9/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO.9 OF 2003

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO.
LBTC2540 OF 2002)

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Coram: Deputy High Court Judge Poon in Court

Date of Hearing: 27 January 2004

Date of Judgment: 27 January 2004

Date of Handing Down Reasons for Judgment: 5 February 2004

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REASONS FOR JUDGMENT

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Introduction

1.This is an appeal against the order of the Presiding Officer of the Labour Tribunal dated 15 January 2003, dismissing the appellant's claims under various provisions of the Employment Ordinance ("the Ordinance"), namely :

(1) a sum equivalent to one month wages (section 15(2)(b));

(2) maternity leave pay for 10 weeks (section 15(2)(c));

(3) severance payment (section 31B);

(4) terminal payment (section 32O); and

(5) compensation (section 32P).

2.Leave to appeal was granted by me on 9 April 2003 on Grounds 1 to 5, 7 and 8 as set out in the Amended Notice for Leave to Appeal filed on 19 March 2003. On 27 January 2004, at the conclusion of the hearing, I allowed the appeal, set aside the order, entered judgment on item (1) for HK$18,500 and item (2) for HK$34,687.50 of the above claims, and remitted the balance of the claims to the Labour Tribunal to determine if the appellant was entitled to :

(a) severance payment and if so, how much; and

(b) terminal payment and/or compensation on the finding that the respondent had contravened section 15(1) of the Ordinance and if so, how much.

3.These are the reasons of my decision.

Background facts

4.The background facts giving rise to these proceedings are summarized below.

5.A Mainland citizen, the appellant began her employment with China Merchants Holdings Co. Ltd ("CMH") in the Mainland in about 1994. On 14 April 1998, she was seconded to Hong Kong and took up employment with the respondent, one of CMH's local subsidiaries. In November 1999, she was further seconded to another local subsidiary of CMH, China Merchants Transportation Holdings Co. Ltd ("CMTH"). On 1 August 2000, she was transferred back to the respondent and had since been working there until the present dispute arose. She last occupied the position of deputy manager in the respondent's commercial department, earning a monthly wage of HK$18,500, inclusive of basic wage and allowances. There was no written employment contract throughout her employment with the respondent.

6.On 13 October 2001, the appellant served on the respondent a medical certificate dated 12 October 2001, confirming her pregnancy and 23 April 2002 as the expected due date. On 17 December 2001, the appellant served on the respondent a notice of pregnancy dated 15 December 2001 pursuant to section 12(4) of the Ordinance. It was the appellant's case that the respondent's personnel manager then told her that with effect from January 2002, she would no longer work in the present position and would commence working for a related company in Shenzhen. She told him that might violate the law.

7.By two notices dated 17 and 18 December 2001 ("the Notices"), the respondent notified the appellant that with effect on 18 January 2002, she would be transferred back to a related company of the respondent in Shenzhen. She was asked to report duty to the Shenzhen company on that date. It was the appellant's case that she received the said notices only on 25 December 2001. Separately, by a form dated 17 December 2001 given pursuant to section 52(5) of the Inland Revenue Ordinance, Cap.112 ("the Form"), the respondent notified the Inland Revenue Department ("IRD") that the appellant's employment would cease on 31 December 2001. It is not clear from the evidence before me when the respondent gave the Form to IRD.

8.The appellant refused to follow the direction of transfer. After taking advice from the Labour Department, she gave the respondent a written refusal on 27 December 2001. The respondent however insisted that she must follow the direction. In the end, the appellant did not report duty to the Shenzhen company on 18 January 2002.

Proceedings below

9.In March 2002, the appellant lodged her claims with the Labour Tribunal. She alleged that the respondent was not entitled to transfer her to the Shenzhen Company after she had served the notice of pregnancy. When she refused to accept the transfer, the respondent unlawfully dismissed her. The respondent was thus liable under the Ordinance as claimed.

10.The respondent contended that the appellant was well aware of the fact that both CMH and the respondent were entitled to transfer her back to CMH's subsidiary in the Mainland within three to five years after her secondment to Hong Kong. Such was in fact an express term of the employment contract ("the Term"). On 8 October 2001, that is, four days before the appellant served the medical certificate of her pregnancy, the respondent had already decided to transfer her back to the Mainland because her working visa was due to expire shortly (in April 2002). The decision to transfer had nothing to do with her pregnancy at all. The responsible officer was not even aware of her pregnancy. As it was the appellant who refused to accept the transfer, the employment contract was terminated not by the respondent but by the appellant herself. Consequently, she was not entitled to the claims.

11.The Presiding Officer favoured the respondent's version of the events. Dismissing the appellant's claims, he found that the Term existed and the transfer, a mere internal arrangement, did not constitute a termination of the appellant's employment with the respondent.

The Term

12.Before turning to the substance of this appeal, I first dispose of a point which has now become non-contentious. At the proceedings below, the inquiry was focused primarily on whether the Term existed. In this appeal, the appellant initially sought to challenge the Presiding Officer's finding that it did. But Mr Ng, counsel for the appellant, eventually abandoned this ground of appeal in the course of his submissions.

Maternity protection

13.In this appeal, the appellant is invoking the protection that the Ordinance bestows upon her as a pregnant employee. It is therefore useful to first examine briefly the relevant provisions.

14.I begin with the maternity protection under Part III of the Ordinance. The statutory scheme insofar is relevant to this appeal is set out below.

15.Section 12 of the Ordinance provides :

" (1) A female employee employed under a continuous contract immediately before taking any leave under this Part shall be entitled to maternity leave under this Part.

...

(4) Before taking leave, a female employee who intends to take any period of maternity leave under subsection (2) shall give notice of her pregnancy and of her intention to take maternity leave to her employer after her pregnancy has been confirmed by a medical certificate; the presentation of a medical certificate to the employer by the female employee confirming her pregnancy shall be a notice for the purpose of this subsection.

..."

16.Once the notice under section 12(4) is given, the following prohibition against termination of the pregnant employee's employment by the employer under section 15(1) is activated :

"(1) Subject to subsections (1A) and (1B)-

(a) after a pregnant employee has served notice of pregnancy on her employer, the employer shall not terminate her continuous contract of employment otherwise than in accordance with section 9 during the period from the date on which her pregnancy is confirmed by a medical certificate to the date on which she is due to return to work on the expiry of her maternity leave or the date of cessation of pregnancy (otherwise than by reason of confinement);

(b) if a pregnant employee has served such notice on her employer immediately after being informed of the termination of her contract of employment where the termination was made otherwise than in accordance with section 9 by her employer, the employer shall immediately withdraw the termination or notice of termination in which event the termination or notice of termination shall be treated as if it had not taken place."

In short, the employer cannot terminate the pregnant employee's continuous employment after service of the pregnancy notice unless there are grounds justifying summary dismissal under section 9 of the Ordinance.

17.Section 15(1A) is not applicable here. Section 15(1B) stipulates, inter alia, that an employer who terminates the continuous contract of employment of the pregnant employee shall be taken for the purposes of section 15(1)(a) to terminate the contract otherwise than in accordance with section 9, unless the contrary is proved.

18.If the employer contravenes section 15(1), section 15(2) inflicts upon him the liability to pay the employee :

"(a) the sum which would have been payable if the contract had been terminated by the employer under section 7 provided that she has not received any such payment under that section;

(b) a further sum equivalent to the amount of wages which would have accrued to the employee during a period of 1 month; and

(c) where the employee is or would have been entitled to maternity leave pay, maternity leave pay for 10 weeks."

In these proceedings, the appellant is claiming relief under paragraphs (b) and (c) only.

Employment protection

19.Another form of protection that a pregnant employee enjoys can be found in Part VIA of the Ordinance. Pursuant to section 32A(1)(c), the employee may be granted remedies under Part VIA if she is dismissed by the employer other than for a valid reason within the meaning of section 32K and in contravention of section 15(1). Remedies include a terminal payment if the court or the Labour Tribunal considers it just and appropriate in the circumstances under section 32O and an award of compensation under section 32P. In determining whether to make an award of compensation, the court or the Labour Tribunal shall take into account all the circumstances of the claim : section 32P(2). Circumstances are further defined in section 32P(3). Here, the appellant is claiming both a terminal payment and an award of compensation as remedy.

The central issue

20.I now come to the central issue of this appeal, which is this. After the appellant, a pregnant employee, had under section 12(4) of the Ordinance served on the respondent a notice of her pregnancy and her intention to take maternity leave, was the respondent, a Hong Kong company, entitled to rely on the Term to transfer her to a related company in Shenzhen? Put in a slightly different way, the question is : did the Notices given in the circumstances of this case and/or the purported transfer constitute a termination of the employment by the respondent, thereby triggering the application of sections 15(1) and 32A(1)(c) of the Ordinance? In order to succeed in this appeal, the appellant must prove that the respondent had terminated her continuous employment in contravention of section 15(1).

Termination by the respondent

21.It is not in dispute that the appellant was employed under a continuous contract by the respondent. It is accepted by the respondent, through its counsel, Mr Lau, that when the appellant presented the medical certificate on 12 October 2001, that certificate constituted a notice for the purposes of section 12(4). (At the very latest, such notice was given by the appellant on 17 December 2001.) In the circumstances, unless section 9 was prayed in aid (which was not), the respondent could not terminate her employment during the period from 12 October 2001 (when the medical certificate was received) to the expiry of her maternity leave or the date of cessation of pregnancy (otherwise than by reason of confinement).

22.This brings me to examine the legal effect of the Notices. When the respondent issued the Notices, it was no doubt exercising its right under the Term to transfer the appellant to the Shenzhen company. Upon such transfer, her employment with the respondent would, as rightly conceded by Mr Lau, necessarily come to an end. (This is confirmed by the Form, by which the respondent notified IRD that the appellant's employment would cease on 31 December 2001. When the Form was given, the respondent had already decided to transfer the appellant to the Shenzhen company.) Thus analysed, the Notices were, legally, notices of termination of the appellant's employment.

23.According to the appellant's case, she was entitled to one month notice of termination. The respondent said that there was no agreement on the notice period. But even on the respondent's case, by operation of the law, one month notice of termination was required : see sections 5(1) and 6(2) of the Ordinance. The Notices asked the appellant to report duty to the Shenzhen company one month later on 18 January 2002. The respondent had, by virtue of the Notices, given the appellant one month notice of termination.

Contravention of section 15(1)

24.The respondent was not entitled in the circumstances to terminate the appellant's employment. It is no doubt caught by section 15(1) of the Ordinance. From a global and perhaps laymen point of view, the respondent had regarded the transfer as an internal arrangement within the CMH group, which was unreasonably refused by the appellant. Such a subjective view, however, ignores the legal effect of the Notices as described above. It is simply not an answer to the contravention at all.

25.In my view, the Presiding Officer had erred in law in finding that the respondent had not terminated the appellant's employment. It is beyond doubt that the respondent had done so in contravention of section 15(1) of the Ordinance. The Presiding Officer should have come to this conclusion on the evidence before him.

26.For these reasons, the Presiding Officer's order of dismissing the appellant's claim for her entitlement under sections 15(2)(b) and (c) cannot stand. I accordingly set aside that part of his order and enter judgment on those claims, the quantum of which is not in dispute.

Remedy under Part VIA

27.The appellant was dismissed by the respondent in contravention of section 15(1). But as can be seen from paragraph 19 above, whether the appellant is entitled to any of the remedies under Part VIA depends on firstly, whether there was a valid reason for dismissal within section 32K and secondly, all the circumstances of the case. The claims for a terminal payment and an award of compensation cannot be determined in the absence of the requisite inquiry. Accordingly, they must be remitted to the Labour Tribunal for further investigation and determination.

Other submissions

28.In light of my holdings above, it is strictly not necessary for me to deal with counsel's other submissions including the contention that the respondent was guilty of constructive dismissal. However, for completeness, I will briefly state my views as follows.

29.First, on constructive dismissal. If, contrary to my earlier finding, the Notices did not constitute termination notices, the respondent was nevertheless guilty of constructive dismissal. The direction of transfer given by the respondent in exercising its right under the Term, if acted upon, would result in a termination of the appellant's employment on its part in contravention of section 15(1) of the Ordinance. The appellant was entitled not to accept the unlawful direction. When the respondent did not retract, it had committed a fundamental breach of contract. The appellant could legitimately terminate the employment. Upon such constructive dismissal, the appellant is entitled to invoke section 15(1). Mr Lau argued that constructive dismissal does not amount to a termination by the employer within the meaning of section 15(1). I disagree. If that were the case, it would create a loophole. An unscrupulous employer might then force a pregnant employee who has served a pregnancy notice to leave employment on her own by all sorts of unreasonable and even unlawful conduct, without any liability under the maternity protection and employment protection provisions. That cannot possibly be the legislative intent.

30.Second, on the Presiding Officer's failure to carry out investigation on the Form. I agree that the Form is material and the Presiding Officer had erred in not carrying out the necessary investigation regarding the Form, including the circumstances under which it was sent, why it was sent and the effect thereof.

31.Third, on the Presiding Officer's failure to hold that the Term was void under section 70 of the Ordinance. Section 70 provides :

"Any term of a contract of employment which purports to extinguish or reduce any right, benefit or protection conferred upon the employee by this Ordinance shall be void."

I do not think the Term, on its wording, is caught by section 70. What is unlawful and not permissible under the Ordinance is the reliance and invocation of the Term in the circumstances of this case.

32.Fourth, on the Presiding Officer's taking into account an irrelevant matter. The Presiding Officer found that when the respondent's responsible officer applied to CMH on 8 October 2001 to transfer the appellant, he was not aware of her pregnancy. It is not clear from his Reasons for Decision how such a finding would impact on his determination of the claims. For my part, I do not consider that a relevant matter at all. For there is no doubt that when the Notices, which were in substance notices of termination, were issued, the respondent had been served with the pregnancy notice and was therefore aware of the appellant's pregnancy.

Severance payment

33.I have thus far disposed of the more controversial parts of this appeal. I now come to the remaining question of severance payment. Upon the termination by the respondent, whether by virtue of the Notices or constructive dismissal, the appellant is prima facie entitled to severance payment under section 31B of the Ordinance. Her secondment to CMTH between November 1999 and July 2000 did not break the continuity of her employment with the respondent, thereby depriving her the entitlement to severance payment. For it is accepted that CMTH is an associated company of the respondent within the meaning of section 31K of the Ordinance. To resist the claim for severance payment, the respondent bears the burden to prove that the appellant was not dismissed by reason of redundancy : see section 31Q.

34.The Presiding Officer had not made the necessary inquiry to see if the appellant was dismissed by reason of redundancy. The claim for severance payment has to be remitted to the Labour Tribunal for further investigation and determination.

Conclusion

35.For the above reasons, I made the order as set out in paragraph 2 above.

Representation:

Mr Lawrence Ng, instructed by Messrs Y.T. Chan & Co., for the Appellant

Mr Lawrence Lau, instructed by Messrs Holman Fenwick & Willan, for the Respondent