Re Madam Yau Chuk Ying

HCB000073A/1981

Bankruptcy - Termination of employment of Employees - acts constituting a repudiation of contract on the part of the Employer - position of the Official Receiver in such circumstances.

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Coram: The Hon. Mr. Justice Mayo in Court

Date: 15 October 1982

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DECISION

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1. The Official Receiver made an application to the court for directions concerning various proofs of debt which were lodged in this bankruptcy by employees of a restaurant business at Shatin and a retail shop of Chinese products. Madam Yau Chuk Ying was the sole proprietor of both of these businesses.

2. By an Order dated the 26th June, 1982, which was subsequently amended, Mr. Justice Liu ordered that issues he framed between one of the employees of each of the businesses and Madam Yau to determine when the respective employee had been dismissed. For the purposes of each of the framed issues the employee was to be treated as, the plaintiff and Madam Yau as the defendant. Before dealing with the merits of this application I would observe that it appeared to be common ground between all parties concerned that neither of the employees referred to in the Orders had been specifically dismissed by either firm. It was however evident that if any directions given were to be meaningful it would be necessary to determine whether the contract of service of either employee had been terminated by implication having regard to all of, the surrounding circumstances. Mr. Robertson who was representing the Official Receiver requested me to deal with the application in this manner and Mrs. Osborne, who was representing the employees, likewise agreed to this approach. Madam Yau was unrepresented. During the course of the proceedings she indicated that she had not dismissed the employees in question and this reinforced my view of the matter that I should determine the issue as to whether these employees' services had been terminated by implication rather than deciding whether Madam Yau had dismissed either employee.

3. There were a large number of employees of the Kwok Fu Restaurant (hereinafter referred to as the restaurant) and a smaller number of employees of the Kwok Fu Chiu Products (hereinafter referred to as the shop). The Official Receiver proposed to treat these cases as test cases and apply the principles I laid down for all of the other employees concerned.

4. Because of the approach I have adopted to these proceedings it is desirable that I should provide a short background to them. Madam Yau had been experiencing financial difficulties for some time prior to the employees' of the restaurant making an approach to the Labour Department about their wages being in arrears. This approach was made on the 1st July, 1981 and a Petition for a receiving order to be made against Madam Yau was lodged in the Court on the 15th July. Prior to the restaurant discontinuing business on the 30th June the bailiffs had on several occasions attended at the restaurant premises and had seized goods and chattels belonging to the restaurant. In addition to this, evidence was given to the effect that suppliers of food stuffs had for some time only been supplying food to the restaurant on the basis of cash being paid on delivery. Bailiffs had also on several occasions attended at the shop and it is very obvious that the business was in' financial difficulties.

5. I decided, with the agreement of the parties, that the best way of conducting these proceedings would be to hear the evidence of the employees of both the restaurant and the shop and then hear Madam Yau's case. One reason for adopting this approach was that Madam Yau experienced a considerable amount of difficulty in separating the various issues and directing her attention to each separate case.

6. Madam Yeung Mui Chu gave evidence that she was a clerk in the Accounts section of the shop. On the 27th June the bailiffs attended at the shop and seized the contents thereof. The effect of this was to effectively bring an end to the trading activities of the shop. Madam Yeung said that she was employed upon month to month terms and her wages were paid twice monthly on the 1st and 15th days of the month. She agreed that she had received her wages for the period from the 1st to the 15th of June 1981 but that she had received no payment since then. When the bailiffs attended at the shop on the 27th June she remained at the shop and continued her work in the Accounts section. Notwithstanding the fact that the shop was no longer trading there was still some work to be done in the Accounts section making up the records of the shop. She was definite in her evidence that neither Madam Yau nor Mr. Wan Kung Lok, the manager of the shop, had ever terminated her employment. On the contrary Mr. Wan had by his conduct clearly indicated that she should continue with her work and she understood that other employees had received similar instructions. She continued with her duties until the 16th of July which was the date when representatives from the Official Receiver's office came to the shop and took it over. She did however concede that in the period shortly before the Official Receiver cane to the shop she did not have much work to do in the Accounts office if indeed she had any at all. She claimed however that she had attended the shop throughout this period. She also agreed that there had been various attempts at discussions or negotiations and that she had received a message that Madam Yau had proposed a meeting with employees of the shop on the, evening of the 3rd July. However she had waited at the shop with other employees for Madam Yau to arrive and as she had not come by 11.00 p.m. all of the employees including herself had departed. Madam Yeung also made reference to the problems which had arisen at the restaurant at Shatin and she was clearly aware that employees of the restaurant were placed in a similar predicament to herself and her colleagues. Madam Yeung claimed to be entitled to her wages up to the date when the Official Receiver took over the shop on the 16th July. Mr. Hung Ming Shuen, a salesman at the shop, gave similar evidence to that of Madam Yeung. He was claiming wages for a similar period. His evidence was similar to Madam Yeung's and Supported hers on essential details. I do not propose commenting in any detail on his claim for arrears of wages because unlike Madam Yeung his claim is not being treated as a test case.

7. Mr. Yip Wai Lun, who was an assistant chef at the restaurant, was the other employee whose test case is the subject of this application. Like Madam Yeung he was employed on a monthly basis and no written terms were deduced as evidence of the contract of employment. He was also paid twice monthly on the 1st and 15th days of each month. He said that on previous occasions the bailiffs had entered upon the restaurant and seized goods and chattels but notwithstanding this the restaurant had continued to trade and customers were served with food. However when the bailiffs levied execution on the 30th June the business had discontinued. He gave evidence that he and his colleagues had not received their wages for the period from the 1st June to the 15th June. They had decided to remain at the restaurant overnight on the 30th June. On the next day the employees went to the Labour Department and a meeting was arranged with Madam Yau. At this meeting Madam Yau had referred to her financial difficulties and had signed a document containing a promise that arrears of wages would be paid on the 3rd July. She also had made reference to negotiations which had been proceeding for another party to purchase the business in the hope that it could be continued thus providing employment for the employees. Madam Yau had failed to implement her promise to make payment and there had been a further discussion with a representative of the Labour Department when he had relaid a message to the employees that Madam Yau would fulfil her promise on the 7th July. This further promise had not been fulfilled. Mr. Yip agreed that after the restaurant had closed on the 30th June he and. his colleagues had hot performed any work whatever and the reason he gave for this was that he had received no instructions from the head chef to do any work. Madam Wong Lai Chun, a cashier at the restaurant, was called to corroborate Mr. Yip's evidence. On all the essential details Madam Wong gave similar evidence to Mr. Yip. The final witness to give evidence for the employees was Mr. Wong Woon Ming a captain at the restaurant. He gave similar evidence to Mr. Yip However in cross-examination he admitted that the main reason why the employees had remained at the restaurant was that they were seeking to preserve the assets of the restaurant. He did however confirm that after the closure of the restaurant none of the workers did any work.

8. Madam Yau gave evidence. In addition to this she submitted to me various letters which I made available to Mr. Robertson and Mrs. Osborne. Madam Yau gave rather conflicting and unsatisfactory evidence which was not of much assistance in resolving the essential issues which have to be determined. She said that the employees of the restaurant had proved to be unsatisfactory and that many of them had approached her for loans. She had been compelled to grant the requests which had been made as she was faced with the alternative that if she refused their requests they would absent themselves from their work. She did not even agree that the salaries of employees had been in arrears. She said that when she offered to make payments to them on the 3rd of July the workers had refused her offer. She did not go so far as to claim that she had offered to make payment to them of all wages due and owing to them. She chose to deal in generalities and' was not prepared to specifically direct her attention to any details. In any event she did agree that she had not dismissed the employees or any of them. She made reference to fact that she had had negotiations or discussions with a Mr. Cheung and that he had taken advantage of her position. If I understood her correctly she was attempting to fix the blame for almost everything which had transpired upon him.

9. To enable me to deal with the law in this rather difficult area it is necessary for me to make specific findings of fact. I found all of the employees who gave evidence to be truthful and reliable witnesses. There were no significant disparities between themselves. On the other hand I regret that I did not find Madam Yau to be a very satisfactory witness. I do not know whether she was deliberately attempting to mislead the court or whether she is unable herself to fully recollect the essential details of what transpired. Be that as it may where there are conflicts between the evidence given by any of the employees on the one part and Madam Yau of the other part I am much more disposed to accept the testimony of the employees. I find as a fact the restaurant employees did not receive their wages for the period from the 1st of June to the 15th of June or for any period thereafter.  I also find as a fact that the employees of the shop did receive wages up to the 15th of June but received no wages thereafter.

10. I also find as a fact that the shop ceased trading on the 27th of June.  I am also satisfied that the manager of the shop Mr. Wan had given instructions to the employees to continue with their work notwithstanding the fact that some of the employees had little or no work to do. Equally I am satisfied that the employees obeyed this instruction and continued to regard their employment as continuing up to the 16th of July which was the date when the Official Receiver attended at the premises and instructed the employees to leave. At first sight it might appear to be rather odd that the employees should have agreed to remain in their jobs from the 27th of June to the 16th of July even though the shop had ceased trading. It will however be noted from the earlier part of this decision that Madam Yau had been experiencing financial difficulties for some time and that on previous occassions she had succeeded in resolving these difficulties. It may well have been the case that the employees were still optimistic that Madam Yau would get over the problems which were being experienced and that the shop would be able to resume normal trading. I find that the employees of the shop did receive specific instructions to remain in their jobs and they agreed or elected to continue their employment. I have considered the position: concerning Madam Yeung. She worked in the Accounts Office and did have some work to do certainly during the earlier part of the period. It is true to state that some of the other employees, particularly the salesmen in the shop may have had little or no work to do. I do not though consider that it is necessary or desirable to attempt to distinguish the position between Madam Yeung and the other employees. As I have said they were instructed to continue working and they agreed to accept these instructions.

11. The position concerning the restaurant employees is rather different. I accept as a fact that many or most of the restaurant employees remained at the restaurant premises after it ceased business on the 30th of June. However there is a vital difference between the situation of the restaurant employees and the shop employees. None of the restaurant employees who gave evidence claimed that anyone in authority requested them to continue with their work. I regard this as being a matter of some importance. I do not think on any fair interpretation of the evidence that it can be established that the restaurant employees did any work after the 30th of June. I accept that they remained at the premises.   There was a meeting on the 1st of July and Madam Yau made various promises including a promise to pay the workers their arrears of wages on the 3rd of July. I have no hesitation in accepting the evidence of the employees who gave evidence in: this connection that this is what transpired and I reject Madam Yau's evidence to the contrary, to the effect that the workers refused to accept their wages as was claimed by Madam Yau.

12. I have given careful consideration to the evidence of the restaurant employees who gave evidence and I am satisfied that although they remained at the restaurant premises after the 30th of June, they not only did not do any work but also did not regard themselves as being on the premises as employees after that date. The captain, Mr. Wong, admitted in cross-examination that the main reason the employees remained at the restaurant was to protect the assets of the restaurant. I accept that this was in fact the case. In coming to this conclusion I have also borne in mind the fact that none of the employees claimed that they had received instructions to continue work. The closure of the restaurant would, in my opinion, have amounted to a repudiation by Madam Yau of the respective contracts of employment and the employees were in a position to choose whether they would continue their employment or discontinue it. On the facts as I understand them the employees adopted the latter course and chose not to continue with their work. The reality of the situation was that they regarded the restaurant premises as being a base where they could foregather and discuss and decide what collective action should be taken by them. In addition to this they were taking measures to safeguard whatever assets remained at the premises.

13. Both Mr. Robertson and Mrs. Osborne made most helpful submissions. Because of the rather restrictive findings of facts that I have made much of the case law cited to me does not have a direct relevance or bearing on the circumstances of this particular case. Mr. Robertson submitted that the failure of an employer to pay wages to employees constituted a unilateral breach of the contract of employment. The question though which has to be decided is whether such a breach amounts to a repudiation of the contract and whether such a repudiation brings the contract to an end or whether such a repudiation has to be accepted by the employees. There have been a proliferation of cases on this subject in England and most of these cases have been brought with a view to proceedings in industrial tribunals which have rules and procedures which are different to anything which exists in the colony. I have not been able to derive a great deal of assistance from these cases. In particular some of the cases which were cited to me related to constructive dismissal of an employee by himself. I am not prepared to draw any analogy that the position of an employer is the converse of that of an employee and accordingly these cases were of very little assistance. I also found that I was able to derive very little assistance from the case of Gunton v. the London Borough of Richmond ⁽¹⁾.   I found it to be impossible to reconcile the judgments of the three Lord Justices, so far as it related to the issues arising in the present case. Some assistance can however be obtained from the judgment of Lord Justice Salmon in the case of Denmark Productions Ltd. v. Boscobel Production Ltd. ⁽²⁾.   He had this to say concerning the position of an employee after there has been a unilateral repudiation of a                          contract of employment.

Lord Justice Salmon again considered this problem in a later case Decro-Wall International S.A. v. Practitioners in Marketing Ltd. ⁽⁶⁾ At page 369 he said:

"If the master, in breach of contract, refuses to employ the servant, it is trite law that the contract will not be specifically enforced.  As I hope I made plain in the Denmark Productions case, the only result is that the servant, albeit he has been prevented from rendering services by the master's breach, cannot recover remuneration under the contract because he has not earned it. He has not rendered the services for which remuneration is payable. His only money claim is for damages for being wrongfully prevented from earning his remuneration. And like anyone else claiming damages for breach of contract he is under a duty to take reasonable steps to minimise the loss he has suffered through the breach. He must do his best to find suitable alternative employment. If he does not do so, he prejudices his claim for damages. I doubt whether, in law, a contract of service can be unilaterally determined by the master's breach. Perhaps the servant could sit still whilst the contract ran its course with the knowledge that the contract was, in law, still alive.  But, in practice, this knowledge could be of little real comfort to him because he would be failing to take reasonable steps to minimise his loss - and since a claim for damages is his only money remedy, he would be prejudicing that claim by doing nothing. Accordingly he would, as a rule, be far better off to treat his contract as if it were at en end; and this is usually what happens."

14. Lord Sachs L.J. considered this problem in the case of Hill v. C.A. Parsons & Co. Ltd ⁽⁷⁾ . At page 318 of the report of the case, he made it clear that an innocent party must have a right to accept any repudiation there may be as a pre-condition to termination. Stamp L.J. also appeared to accept this position.

15. I consider that it is necessary to have regard to the factual situation which pertained. In my view a very different situation prevailed at the restaurant premises to that which existed at the shop. At the restaurant the employees had not received their wages since the beginning of June and they should have received a payment in the middle of the month. No doubt they would have been restless. It may well be the case that they did continue working with some measure of normality up to the end of June. They did not continue working after the 30th of June and I am satisfied that by their conduct they accepted Madam Yau's repudiation of their contract of employment. Their continued presence at the restaurant, in the absence of any instructions to continue work, did not constitute employment in any real sense of the term. They simply attended at the restaurant premises as a convenient meeting place and to protect the assets of the restaurant which had not already been removed.

16. On the other hand, the situation at the shop was very different. When the shop discontinued business on the 27th of June the wages of the employees were not in arrears. Payment of their wages for the period from the 15th of June to the 30th of June was not due until the end of the month. It may well have been the case that the employees considered that there was every likelihood that they would receive their wages in due course. They also received instructions from Mr. Wan to continue with their work. I do not consider that it was unreasonable for the employees of the shop to remain at the shop from the 27th of June to the 16th of July, When the Official Receiver attended at the premises on the 16th of July the employees wages would only have been in arrears for a period of 16 days. On the available case law I am doubtful whether it could be successfully argued that Madam Yau had at that stage repudiated the employees' contract of employment. In any event, even if she had I do not think that the employees had accepted any such repudiation.

17. I am required under this application to give directions to the Official Receiver. I will do so by reference to the two trial cases. For the reasons I have given I direct that Madam Yeung continued as an employee of the shop until the Official Receiver took over on the 16th of July. On that day she was requested by the Official Receiver to leave the premises and she complied with that request. Her employment terminated on that day. As regards Mr. Yip the Assistant Chef at the restaurant I direct that his employment came to an end on the 30th of June. I received considerable assistance from both Mr. Robertson and Mrs. Osborne and I order that their costs will be paid out of this estate.

(1)    (1980) 3 A.E.R. page 577.

(2)    (1968) 3 W.L.R. 841.

(3)    (1950) 15 Q.B. 576.

(4)    (1830) 6 Bing. 354.

(5)    (1847) 1 Exch. 295.

(6)    (1971) W.L.R. 361.

(7)    (1972) Ch. 305.

Representation:

Mrs. Osborne (D.L.A.) for Plaintiff

Mr. A. Robertson for Official Receiver

Defendant, Madam YAU CHUK YING, in person.

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Corma: The Hon. Mr. Justice Mayo in Court.

Date: 19 November 1982

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ADDENDUM

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18. In pursuance of the powers of review reposed in me by the Ordinance and having considered Mr. Robertson's further submission I order that the following addendum be added to my Decision dated the 15th October.

19. By the 16th July 1981 the employees were entitled to assume that Madam Yau had repudiated their contracts of employment. In particular 4 weeks salary was then outstanding. Added to this was their knowledge of the problems of the employees at the restaurant premises. When the Official Receiver entered the premises his prime concern was to safeguard the assets of the business - He did not dismiss the employees. He asked them to leave and they complied with his request. Their acceptance of this request constituted an acceptance of Madam Yau's repudiation by their contract of employment.

Represetation:

Mrs. Osborne (D.L.A.) for Plaintiff

Mr. A. Robertson for Official Receiver.