譚滿堂 v. Lucky Dragon Restaurant Ltd.

DCCJ001706/2001

DCCJ 1706/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO.1706 OF 2001

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Coram: Deputy District Judge Anthony Chow

Date of Hearing: 18 July 2001

Date of Handing Down Judgment: 15 August 2001

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JUDGMENT

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INTRODUCTION

1.This claim was transferred from the Labour Tribunal. The Plaintiff's claim was for:

(a)	Wages in lieu of notice for 7 days	$ 4,284.00
(b)	Pro-rata annual leave pay for	6,120.00
(c)	Statutory holidays with pay for	37,332.00
(d)	Balance of long service pay	16,316.70
	Total claim	$64,052.70

2.Neither party was represented. Before the hearing, I explained the procedures and rules to the parties; however, to ensure justice was done, I had to ask the parties questions on several occasions and interrupted their cross-examinations and final submissions.

THE PLAINTIFF'S CASE

3.The Plaintiff started working for the Defendant as an assistant manager on 16th March 1995, at the monthly wage of $18,360.00. Throughout his employment, he had been given 4 rest days per month and 7 days of paid holidays per year.

4.Late afternoon 14th August 2000, Mr. Leung Chun Wah ("Mr. Leung"), one of the Defendant's directors, called the Plaintiff to the VIP room and told him that he would be dismissed. Mr. Leung told the Plaintiff that the Defendant intended to pay him $30,000 as "long service" payment; however, Mr. Leung considered that as insufficient, so he would try to raise this to $50,000.

5.After some discussions, Mr. Leung returned and told the Plaintiff that the company had agreed to pay him $50,000. A document was produced for his signature and a cheque for $50,000 was handed to him.

6.The Plaintiff remembered that the document was similar to the document produced at trial by the Defendant as exhibit D-1, except that the words "(達成和解,互不追究)" were not there. Furthermore, the witness had not yet signed the document.

7.After the Plaintiff read the document, he noticed that 7 days wages in lieu of notice was not included in the content. The Plaintiff asked Mr. Leung, who stated that it was included in the $50,000 payment. Mr. Leung promised that he would ask the defendant company on the Plaintiff's behalf. The Plaintiff was told to return on the evening of the 18th August 2000. The Plaintiff never returned but filed a claim with the Labour Department instead.

THE DEFENDANT'S CASE:

8.The Defendant agreed with most of the Plaintiff's case. The disputes were minor: First, Defendant stated that D-1 was complete as exhibited when it was signed by the Plaintiff and witnessed by one of the director of the Defendant; Second, clause 4 of the employment agreement stipulated that an employee was only entitled to 1 rest day and 1 statutory holiday per month.

9.By the time the Plaintiff joined the Defendant, this was modified to 3 rest days and 1 statutory holidays. Although not specifically stated, the Plaintiff's basic wage already included payment of the 4th rest day.

ISSUES

10.There are two main issues in this matter:

Is the "settlement agreement" enforceable?

If, the answer to (1) is no, how much was the Plaintiff entitled to recover from the Defendant?

IS THE SETTLEMENT AGREEMENT ENFORCEABLE?

11.Section 31R of the Employment Ordinance Cap.57 (the "Ordinance"), stated that an employee was entitled to long service payment, if at the time of dismissal, he had worked for the employer for more than 5 years. There was exemption if the dismissal was pursuant to section 9 of the Ordinance. Although the Defendant made some comments against the Plaintiff's work performance, however, the Defendant adduced no evidence on this point. I therefore found that the dismissal of the Plaintiff was not in accordance with section 9.

12.As the parties had agreed that the Plaintiff's wages at the time of his dismissal was $18,360.00, his long service entitlement in accordance with the calculation stipulated in section 31V of the Ordinance would have been $66,316.70. In other words, for long service payment, the Defendant was under a legal obligation to pay the Plaintiff a sum higher than the payment actually paid as "settlement". The question was whether there was any consideration to make the settlement agreement enforceable?

13.The answer to this question was not as easy as it first appears. The learned author of Chitty on Contract, (28th ed), stated in paragraph 3-056:

"...Much difficulty arises in determining whether a person who does, or promises to do, what he is already in law bound to do thereby provides consideration for a promise made to him. One possible view is that, as he was already bound to do the thing in question, his doing, or promising to do, it has no 'value in the eye of the law': hence it cannot amount to a legal detriment to him, or to a legal benefit to the person already entitled to performance. On the other hand the actual performance of the legal duty may amount to a factual detriment or benefit: it may be a detriment to the party performing the duty since actual performance may be more troublesome to him than the payment of (or the risk of being sued for) damages; while the other party may benefit in the sense of finding his remedy for breach of the duty less beneficial than its actual performance...."

14.Chiu Wing Hang & Others v. B.G. Lighting Co. Ltd. & B.G. Trading Co, Labour Tribunal Appeal No. 67 of 1999, was a recent case in Hong Kong where this doctrine was canvassed.

15.The employer in B.G. Lighting was in financial difficulties, it owed its employees several months of wages. The employer agreed with its employees to repay arrear of wages by instalments and pay future wages on time, if the employees agreed to continue working in the mean time.

16.The employees at first accepted the proposal of the employer; however, a few employees reneged on the agreement and walked off. The employees claimed that the employer was deemed to have terminated their agreement, under section 10A of the Ordinance, for failure to pay wages within 1 month of its due days.

17.At the Labour Tribunal, the Presiding Officer held that the deferred instalment agreement was unenforceable for lack of consideration. On appeal, her decision was set aside. Deputy Judge A. To, inferred consideration from the employee's ability to keep their employments at a time when many employees were losing their jobs.

18.Deputy Judge To, compared the agreement reached between the parties to a composition agreement and found consideration in this type of agreements. In page 5 of his English judgment, Deputy Judge To held:

" It has long been a common practice for the creditor of an impecunious debtor to make an arrangement with him whereby each agrees to accept a stated percentage of his debt in full satisfaction. It would appear at first that payment of a smaller amount cannot be satisfaction of a greater debt as it had occurred to the presiding officer that payment by deferred instalment cannot be satisfactory discharge of the appellants' obligation to pay arrears of wages forthwith. However, the court is always ready to find a consideration to give effect to so reasonable an agreement which provides a practical solution to a real problem. An Agreement to defer payment of wages and to be paid by instalment is far less objectionable than an agreement to accept part of a debt as full and final satisfaction of the entire debt."

19.Deputy Judge To continued to state that, although the question of consideration in composition agreements always raised doctrinal difficulties, the agreements' binding force was well established and unquestionable.

20.B.G. Lighting is binding on me, however the facts of this case differed in almost all relevant aspect of B.G. Lighting.

21.First, the employer in B.G. Lighting was in financial difficulty and was in immediate danger of closing down. There was no evidence of this with the Defendant. In fact, the Defendant was still in business at the time of the hearing.

22.Second, consideration was inferred from the fact that the employees in B.G. Lighting were able to keep their jobs during very difficult times. Here, the Plaintiff was dismissed immediately and an amount less than his statutory entitlement was handed over as "settlement". I cannot infer any consideration from these facts.

23.Third, the Plaintiff was the only employee who was dismissed. There were no other "creditors" who had by mutual agreement foregone part of their debt. The required consideration in composition agreements was also absent in this case.

24.Although the decision of the English Court of Appeal in In re Selectmove Ltd. [1995] 1WLR 474 was rejected by Deputy Judge To in B.G. Lighting; however, its reasoning was not dealt with.

25.In In re Selectmove, a company owed Inland Revenue sums deducted from employee pays as taxes. A director of the company made an agreement with a tax collector that the company will pay all future payments on time and the amount owed will be repaid by instalments. The company was late in its payments and Inland Revenue demanded all payments outstanding. On appeal, the agreement was held to be without consideration and unenforceable.

26.Gibson L.J. carefully considered the development of the doctrine from a line of cases beginning with Foakes v. Beer (1884) 9 App.Cas. 605, to Vanbergen v. St. Edmunds Properties Ltd [1933] 2 K.B. 223; D. & C. Builders Ltd. V. Rees [1966] 2 Q.B. 617 and William v. Roffey Bros. & Nicholls (Contractors) Ltd. [1991] 1 Q.B. 1.

27.The doctrine can best be described in a passage in D. & C. Builders, where Danckwerts L.J. held:

"...(It is) settled definitely the rule of law that payment of a lesser sum than the amount of a debt due cannot be a satisfaction of the debt, unless there is some benefit to the creditor added so that there is an accord and satisfaction."

28.However, in William the English Court of Appeal held:

"(i) if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment by B; and (ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to, complete his side of the bargain; and (iii) B thereupon promises A an additional payment in return for A's promise to perform his contractual obligations on time; and (iv) as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and (v) B's promise is not given as a result of economic duress or fraud on the part of A; then (vi) the benefit to B is capable of being consideration for B's promise, so that the promise will be legally binding."

29.Gibson L.J., in In re Selectmove, refused to extend the William's principle to cover a situation where B's obligation was the payment of money and held that the principle as stated in D. & C. Builders must be preserved.

30.This was especially true when one considered the doctrine in the context of the Ordinance. The purpose of the Ordinance was to give an employee a number of specific benefits, which cannot be contracted out. Section 70 of the Ordinance provided as follows:

"Any terms 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."

31.Section 70 of the Ordinance clearly reflected the legislature's intention that these benefits must be preserved and an employee must not be deprived of them, even if he signed an employment agreement containing terms to the contrary.

32.All of the Plaintiff's claims, including long service payments, annual leave, wages in lieu of notice and statutory holidays' pay were benefits conferred under the Ordinance and covered by section 70 of the Ordinance. If the "settlement" was contained in an employment agreement, it would clearly be void and unenforceable by virtue of section 70 of the Ordinance. If the court allows an employer to extinguish or reduce an employee's rights under the Ordinance merely by use of a document separate from the employment agreement, all employee benefit provisions in the Ordinance could be rendered a nullity.

33.Accordingly, I found I must follow In re Selectmove and B.G. Lightings was distinguished on its facts. The settlement agreement was without consideration and thus unenforceable in law.

HOW MUCH IS THE PLAINTIFF ENTITLED TO RECOVER FROM THE DEFENDANT?

34.I have already dealt with the Plaintiff's entitlement to long service payment and stated he should receive the full amount in the sum of $66,316.70. $50,000 has already been paid. The Plaintiff is entitled to the balance in the sum of $16,316.70.

35.As to wages in lieu of notice, it was agreed that no notice was given, thus 7 days of wages in lieu of notice in the sum of $4,284.00 is due to the Plaintiff.

36.On pro rata annual leave, in accordance with section 41AA of the Ordinance, the Plaintiff was entitled to a total of 45.167 days of annual leaves during his employment period. The Plaintiff alleged that he is owed 10 days of annual leaves on termination.

37.During the hearing, Defendant submitted into evidence the Plaintiff's written employment contract as exhibit D-2. Plaintiff admitted that D-2 contained written remarks on the number of annual leaves actually taken by him during his employment. The number of annual leaves taken amounted to 30 days. Accordingly, Plaintiff was owed 15.167 days of annual leave. However, I am bound by his pleadings and therefore, I could only find that the Plaintiff is entitled to the sum of $6,120.00 as pleaded in the Statement of Claim.

38.Finally, we came to the Plaintiff's claim for statutory holiday pay. Although the claim was clothed in term of statutory holidays pay, in fact statutory holidays had been specifically provided for in the employment agreement.

39.Clause 4 of the employment agreement stipulated that the Plaintiff was entitled to 1 rest day (agreed by the parties that in fact 3 rest days were given) and 1 rest day as substitute for his statutory holiday. Accordingly, the Plaintiff was owed rest days and not statutory holidays. As the amount of the claim would be the same, it did not matter whether the Plaintiff had stated one item of claim rather than the other in his Statement of Claim.

40.Clause 4 of the employment agreement was not an unfamiliar contract term in restaurant employment contracts. This type of clauses had been the subject in two High Court appeals.

41.In Fu Hong Choi v. Ho King Restaurant Ltd. Trading as Ho king Restaurant, LTA No. 131 of 1995, Leong J. (as he then was) held a term of employment agreement purporting to show the employee had agreed to substitute statutory holidays with pay for rest days to be void under section 70 of the Ordinance. It was stated:

"The effect of these sections is that the employer must provide a rest day each week for the employee, although the employee may work for the employer on his rest day on a voluntary basis. However, these rest days are in additional to the statutory holidays which the employee is entitled under s.39 of the Ordinance. It is beyond doubt both under s.17 and s.39 that statutory holidays cannot be substituted by rest days. Another effect of these provision is that no payment can be substituted for statutory holidays...."

42.In Hang Fook Lau Seafood Restaurant O/B Come Koon Investment Ltd. V. Kwok Sik Yuen, LTA No. 2 of 2000, Yuen J. held a term of contract that "the employee is to work on 2 (rest) days a month, the pay for which was included in the basic salary" as void under section 70 of the Ordinance. Yuen J. stated:

"Sections 19 and 20 complement each other. They show that, unless there is unforeseen emergency work, an employee has the right to choose whether or not to work on a rest day even though his employer wants him to work. If an employer wants the employee to work on a rest day, the employer has to "request" the employee to do so, and obviously with any request, the person who receives a request has the freedom to say "Yes" or "No"....

...

Thus by clause 6, it became a term of the contract of employment that the employee had to work on 2 out of 4 rest days a month. Should he fails to do so, he would be in breach of the contract of employment and liable to be dismissed or disciplined.

The effect of this clause is to reduce the right conferred upon every employee by the Ordinance to choose whether to work or to rest on all 4 rest days a month.

It is therefore void under s.70 of the Ordinance, which provides that '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.'"

43.For the same reasons, I found clause 4 of the employment agreement to be void under section 70 of the Ordinance. The Plaintiff is accordingly entitled to recover the full amount of this item of his claim in the sum of $37,332.00.

JUDGMENT

Judgment is for the Plaintiff as follows:

(1)	Wages in lieu of notice	$4,284.00
(2)	Pro-rata annual leave pay	6,120.00
(3)	Statutory holiday/rest day pay	37,332.00
(4)	Balance of long service pay	16,316.70
(5)	Interest at the judgment rate, from 13 October 2000 (the day of claim in the Labour Tribunal) until payment.
(6)	There be no order as to costs.

Representation:

The Plaintiff appeared in person

The Defendant represented by, Mr. Leung Chun Wah, one of its directors