Peter Ward v. Harting (HK) Ltd
Read the full judgment text of DCCJ 2744/2004 on BabelCite. This District Court judgment.
1. This case arises out of a contract of employment between the plaintiff as employee and the defendant as employer. The defendant applies for an order setting aside the writ, and order setting aside the service of the writ, or alternatively a declaration that the court has no jurisdiction over the defendant in respect of the subject-matter of the claim. The defendant says that the subject-matter of the claim is exclusively within the jurisdiction of the Labour Tribunal.
Cited by 3 cases · Cites 1 case
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DCCJ2744/2004 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 2744 OF 2004 --------------------- BETWEEN
------------------- Coram : His Honour Judge Muttrie in Chambers Date of Hearing : 9th September 2004 Date of Ruling : 27th September 2004 ------------------- Ruling ------------------- 1.This case arises out of a contract of employment between the plaintiff as employee and the defendant as employer. The defendant applies for an order setting aside the writ, and order setting aside the service of the writ, or alternatively a declaration that the court has no jurisdiction over the defendant in respect of the subject-matter of the claim. The defendant says that the subject-matter of the claim is exclusively within the jurisdiction of the Labour Tribunal. 2.The plaintiff is a Hong Kong resident. The defendant is a Hong Kong company, but it is part of an international group of companies. It is apparently not in dispute that the plaintiff was employed by the defendant as a Plant Production Manager at the defendant’s plant in Zhuhai, PRC, from about 3 July 2000 to about 11 July 2002. 3.The plaintiff’s claim as indorsed on the Writ is for damages for breach of contracts of employment made between the period from about 24June 2000 to about 4 August 2000 between the plaintiff and the defendant and for breach of statutory obligations owed to the plaintiff by the defendant during the plaintiff’s period of employment with the defendant and/or on termination of the plaintiff’s employment by the defendant on or about 11 July 2002. 4.The plaintiff’s case as pleaded in his Statement of Claim is as follows. The parties entered into an oral employment agreement on about 24 June 2000. It was agreed that the plaintiff would be paid a total of $120,000.00 per month whereof $42,000.00 was basic salary, $40,000.00 was performance-related bonus, $22,500.00 was housing allowance and $15,500.00 was school allowance. This was agreed on the assurance of the defendant’s director that the plaintiff could expect to receive an average of $120,000.00 per month total and that he could expect to receive the full bonus of $40,000.00 even if his target sales figure was not reached, so long as he made all possible efforts to achieve that target. Throughout his employment he always made all possible efforts to achieve the target. 5.The oral agreement was followed by a written contract of employment, which the plaintiff says was entered into on the basis that the oral agreement would be honoured. The written contract provided for payment of an annual performance bonus of up to $480,000.00. In fact the plaintiff was paid bonus at $40,000.00 per month for the period from 3 July to 30 September 2000. 6.The relevant clause is Clause 4.04 which provides:
7.The defendant by a letter dated 11 April 2002 terminated the plaintiff’s employment with effect from 11 July 2002. But in breach of the oral contract the defendant did not pay the plaintiff the bonus of $480,000.00 for the fiscal year ended 30 September 2001 and the pro-rata bonus for the period to 30 June 2002. There are also claims for medical insurance premium and travelling and entertainment allowances. The total claim is for $918,349.92. 8.In the alternative the plaintiff avers that it would be inequitable not to enforce the oral agreement on the basis that he was led to believe, by the defendant’s director, that he would receive a total average remuneration of $120,000.00 per month. Jurisdiction of the Labour Tribunal 9.Section 7 of the Labour Tribunal Ordinance, Cap 25 provides inter alia:
10.The Schedule provides inter alia that the Tribunal has jurisdiction to hear:
11.There are two issues here. The first is whether the contract between the parties is a contract for performance in Hong Kong. The second is whether the claim is for the failure of the defendant to comply with the provisions of the Employment Ordinance. Contract for Performance in Hong Kong 12.The written contract of employment provides at clause 3.01 that the Employee (the plaintiff) shall, during the continuance of his employment,
the Company being the plaintiff. At Clause 3.03 it provides:
13.The plaintiff’s evidence is that he worked in Zhuhai. His hours were from 8.30 a.m. to 5:30 p.m. but he was usually in his office by 5:30 a.m. and often did not leave until 9:30 p.m. He had self-contained accommodation within the staff quarters of the factory complex. 14.There is evidence from one of the defendant’s staff to the effect that the plaintiff was paid partly in Hong Kong and partly in Zhuhai, to minimise his own tax liability. He was a Hong Kong resident with a Hong Kong identity card and has an address here to which he returned every Friday evening to spend the weekends with his family who resided there. On Saturdays mornings he attended the defendant’s office in Hong Kong to deal with company matters. He also claimed expenses for business trips to Hong Kong to perform duties on behalf of the defendant there. Exhibits show some of the work which he claimed to have done whilst in Hong Kong. 15.It is argued for the plaintiff that his contract of employment was not for performance in Hong Kong. Following Matheson PFC Ltd v Jansen [1994] 2 HKC 250, the Labour Tribunal has no jurisdiction to hear and determine his claims. That case dealt with a contract which had been performed entirely outside Hong Kong; though its terms gave the employer the discretion to require the employee to work at any other place in any country, he had been required to work in Indonesia throughout the period of his employment. The Court held that the jurisdiction of the Tribunal did not extend to an employment contract to be performed outside Hong Kong. 16.The defendant however refers to Preen v Industries Polytex Ltd., Labour Tribunal Appeal No. 171 of 1995 in which Yeung J held that the Tribunal retains jurisdiction over disputes of contract of employment even if the performance is to take place partly outside Hong Kong, so long as the employer and employee remain substantially connected to Hong Kong. The defendant says that the situation here is similar. 17.Ultimately the court has to decide whether the contract is “for performance in Hong Kong”. In both cases cited the courts took into account not only the terms of the contract but also where the performance was actually carried out. So the decision is largely a factual one. In Jansen the court took into account the fact that performance was entirely in Indonesia. Liu JA took the view, obiter, that “a contract to be performed partly outside and (possibly) partly in Hong Kong….would not come within the specified relationship….in para 1(a) of the Schedule”. In Preen the judge referred to this obiter dictum but held that the Tribunal retained jurisdiction, i.e. the contract was for performance in Hong Kong if that performance was to take place partly outside Hong Kong, so long as the employer and employee remained substantially connected to Hong Kong. He took the view on the facts that even though Preen was physically in Macau most of the time,
18.I also note that in Preen the employee was provided with a housing allowance to allow him to live in Hong Kong; he was to travel to Macau on a daily basis; and although he was provided with a flat in Macau he was only required to stay there on certain days of the week to ensure smooth production. 19.In the instant case, the contract required the plaintiff to be based in Zhuhai and he did in fact live in factory quarters there, five days a week. His job was to run the factory, i.e. perform his side of the contract in Zhuhai. I do not see that the fact of his having to go back and liaise with his head office in Hong Kong on Saturday mornings as leading to the implication that he was doing his job and performing his side of the contract in Hong Kong. It is true that he was partly paid in Hong Kong. Included in his package was a housing allowance but since, according to his curriculum vitae he worked in Hong Kong since 1995 and had the address in Heng Fa Chuen, he was already established at that address in Hong Kong and was not recruited from outside. In any event it appears that the whole structure of remuneration was geared to minimise tax so I do not see that the fact of payment partly in Hong Kong, of whatever elements of the package, affects the question of where the contract was to be performed. 20.It seems to me that on the facts of this case the contract must be held to be one which was not “for performance in Hong Kong” in terms of the Schedule. Therefore, it does not come within the exclusive jurisdiction of the Tribunal on that ground. Failure of the defendant to comply with the provisions of the Employment Ordinance 21.The defendant’s argument is that if the plaintiff is claiming a contractual bonus, that comes within the definition of “end of year payment” in section 11A of the Employment Ordinance. It is payable in accordance with the provisions of section 11E. Failure to pay is a breach of the provisions of the Ordinance. Therefore paragraph 1(b) of the Schedule applies, and the Tribunal has jurisdiction. If the plaintiff is claiming that the bonus payments are really part of his remuneration package under the original oral agreement, they are “wages” and as such must be paid before termination in accordance with section 23 or after termination in accordance with section 25; so non-payment is again a breach of the provisions of the Ordinance. 22.The plaintiff’s argument on this is that the case is concerned primarily with what contractual terms were agreed. The defendant’s position seems to be that only the written contract of employment applies, and not the alleged oral agreement. But, says counsel, this was only part of ongoing negotiations as to how the remuneration package would be structured; the written contract is a working document. This question is one for the trial of the action; but the defendant is asking the court to pre-determine the contractual issue of whether what the plaintiff claims is in fact a contractual bonus. The essential question is, what was the basis of the contract; and that is not something which comes within paragraph 1(b) of the Schedule. Further the basis of the contract is a matter for trial and in deciding that only Tribunal had jurisdiction, I would effectively be deciding that matter. 23.Mr Clough noted that I commented in the course of the hearing that breach of the Ordinance was not pleaded. So far as the Statement of Claim goes that is right but, as noted above the indorsement on the Writ includes a claim for breach of statutory obligations. 24.The plaintiff appears to be saying that the contract was partly written and partly oral, and that the original oral agreement that he would get $40,000.00 per month by way of performance bonus, whether or not performance targets were achieved still applies even though the written contract provides for the bonus to be discretionary; and further or alternatively that he was led by the defendant’s director to believe that he would get this bonus in full, so that it would be inequitable not to enforce the oral agreement. Presumably some kind of estoppel is rearing its ugly head, though it might need to be pleaded differently. 25.I am not sure how far any argument based on the oral agreement will go, given the provisions of Clause 12.01 of the written contract, namely
26.However that, and any question of equity is a matter for trial. They are in my view difficult points of law, on which the parties need legal representation and which could well have led the Tribunal, if this case had been brought before it, to decline jurisdiction under section 10; see the comment of Penlington JA in Jansen at 259G. But if the Tribunal has exclusive jurisdiction it must exercise that jurisdiction until it declines it. I cannot say that because the Tribunal would probably decline jurisdiction, the matter must stay before this court. 27.Ms Kendall’s argument that the plaintiff’s claim is based either on failure to pay contractual bonus or failure to pay wages, and is either way a claim based on breach of the Ordinance is attractive at first glance. But it seems to me that the true questions before the trial court will be what were the terms of the plaintiff’s contract, and was it breached. Only if there was a breach of contract, be it to pay contractual bonus or to pay wages, could there be a breach of the Ordinance. If the Tribunal does not have exclusive jurisdiction to decide whether there was a breach of contract, because the contract was not for performance in Hong Kong, it is difficult to see how it can have exclusive jurisdiction to decide whether there was a consequent breach of the Ordinance. 28.Accordingly it seems to me that I cannot find that the Labour Tribunal has exclusive jurisdiction in this matter, so the defendant’s summons is therefore dismissed with costs to the plaintiff. 29.I will deal with costs. The parties have addressed me on costs and agree that, although this ruling is to be handed down, the costs order will be final. The defendant was seeking indemnity costs if it had succeeded, but it did not and so the only question is whether the plaintiff should have a certificate for counsel. It is true that Ms Kendall, the defendant’s solicitor, represented the defendant perfectly competently but to my mind serious questions of law were involved which would have justified either side in instructing counsel. So the plaintiff will have a certificate for counsel.
Mr. Neal Clough instructed by Messrs. Henry H.C. Wong & Co. for the Plaintiff. Ms. Susan Kendall of Messrs. Baker & McKenzie for the Defendant. |
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