Ng Chung Man Joe v. Rever Expression Salon Ltd

DCCJ 600/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 600 OF 2004

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BETWEEN

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Coram :  Her Honour Judge C.B. Chan in Court

Dates of Trial :  15^th , 18^th , 19^th and 20^th October 2004

Date of Judgment :  15^th December 2004

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J U D G M E N T

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1.This is a claim by the Plaintiff against the Defendant first filed in the Labour Tribunal for arrears of wages and commission particulars of which are:-

A.	Arrears of Wages in the sum of $23,800.00
	Wage period –
		01/03/2003 – 31/03/2003    $6,000
		01/04/2003 – 30/04/2003    $6,000
		01/05/2003 – 31/05/2003    $6,000
		01/06/2003 – 29/06/2003    $6,000
B.	Arrears of Commission from May to June    $30,596.00

2.The Plaintiff was not legally represented throughout these proceedings.   At the Labour Tribunal in relation to item B of the claim a sum of $24,457.99 was paid into Court by the Defendant in satisfaction of this claim and was subsequently paid out to the Plaintiff.

3.At the Labour Tribunal, the Defendant filed a Counterclaim against this claim.    The whole action with item A of the claim and the Counterclaim was transferred to the District Court and became the action herein.

4.The Plaintiff filed the Statement of Claim and the Defendant filed the Defence and Counterclaim.  The Plaintiff’s Statement of Claim refers to 4 points as follows:

(1)    REVER EXPRESSION SALON LTD 已停止替本人的強積金供款及同時亦扣起本人所供之所有強積金供款，直至本人於2003年6月離職後才發現，但有關款項已由積金局代本人收回。

(2)    2002年10月起，直至2003年6月份本人離職止，REVER EXPRESSION SALON LTD 亦經常性沒有按照合約所訂下之日期發放薪金。另外，所發放之薪金亦不是全數，只是發放一部份。

(3)    2003年3月REVER EXPRESSION SALON LTD在未得本人同意，單方面提出減薪，理由是本人之工作表現不理想。

(4)    2003年6月初本人離職後，REVER EXPRESSION SALON LTD亦沒有按照勞工處所訂下之法例，於本人離職後14天內發放所有之欠薪。

5.In the Closing Submission of the Defendant’s Counsel she submits that the Defendant relies on the breach by the Plaintiff of Clauses 5, 6 (a)(i),(ii) and (3) of the General Conditions of Employment and claims against the Defendant for:

（1）HK$209,215.60 being the amount stipulated in Clauses 10(b)and 11(a)

（2）damages for breach of the aforesaid Clauses

The Defendant called 4 witnesses at the trial of the Counterclaim including Tjan Yuen Mi Vickie Amanda（DW1）, Yuen Chi Ming（DW2）, Fung Yuet Sheung Barbara（DW3）and Pang Bo Ling（DW4）.

6.In paragraph 1 of the Reply filed by the Plaintiff, the Plaintiff pleaded that as regards paragraph 7 of the Defence, the Plaintiff resigned from his employment with the Defendant as a consequence of the Defendant’s breach of the Employment Contract as stated in the Statement of Claim.  In paragraph 4 of the Reply the Plaintiff denied that he had wrongfully breached clause 10 (b) and 11 (a) of the Employment Contract.  It was pleaded that it was the Defendant that breached the Employment Contract as stated in paragraphs 1 – 4 of the Statement of Claim.  It was pleaded that for that reason, the Plaintiff was under no obligation to reimburse or be penalized for any amount to the Defendant as alleged in the Defence.    

7.The Defendant at the trial applied to amend the Defence and Counterclaim to plead that on about mid February 2003 the Defendant gave oral notice to terminate the employment of the Plaintiff in the post of Art Director.   As there was no commensurate evidence of this disclosed in the witness statement of the witness who was alleged to have given such oral notice, this application to amend was refused.   As the pleaded case of the Defendant did not disclose any defence to the claim in respect of the arrears of salary due to the Plaintiff in his post as Art Director, the Defendant admitted the claim and agreed to judgment being entered in respect of the remaining item of claim.  Judgment was entered for the Plaintiff in the sum of $21,000. in respect of item A of the claim.  

8.The trial proceeded on the Counterclaim.

Evidence of Tjan Yuen Mi Vickie Amanda

9.She came into employment with the Defendant on 17 July 2000.   The Plaintiff at that time was the Manager of Rever (Hennessy Road) Salon Ltd.   He was a top stylist as well as a Manager.  The Plaintiff signed the employment contract with the Defendant at page 21 to 23 of the Bundle of Documents BD2.   When this contract was signed between the Plaintiff and the Defendant Ms. Chan was not as yet in employment with the Defendant.     The Contract incorporates the General Conditions of Employment at pages 24 – 29 of the Bundle of Documents 2 (“BD – 2”) and the English version, the official version is at pages 30 to 33 of BD - 2.   At the end of 2000, the Plaintiff took on the post of Art Director but this appointment was not made public to the staff.  This appointment came about when the Defendant found that the Plaintiff was not suited to be a Manager.   The Defendant had to employ another staff to assist the Plaintiff as Manager.  In time the Defendant directed the Plaintiff to the work of Art Director at the end of 2000.   He took on this role informally until December 2001 when he formally took on the post of Art Director.   When this change took place, the Plaintiff and the Defendant agreed that the Plaintiff would in lieu of the post of Manager be given the post of Art Director.  He was given the sum of $6,000 p.m. for this post apart from which he received an increased percentage of commission of the gross takings from his clients.  The commission was increased to 50%.   These change in terms were mutually agreed between the Plaintiff and the Defendant.

10.Ms. Chan stated that even before the Plaintiff’s formal appointment as an Art Director at the end of December 2001, the Plaintiff was found not suited for the post of Art Director.   However, the Defendant gave the Plaintiff that post as Ms. Chan thought that he could train the Plaintiff and through her supervision he would improve.  However it was found that the Plaintiff’s performance in this post was inadequate. 

11.One of the duties of an Art Director was to train younger hairstylists in hairstyling by means of workshops.   From Dec. 2000 to the end of 2001, the Plaintiff did not do many workshops.   The Plaintiff failed to meet expectations as he failed to run workshops at regular intervals.  He did perform his function to a small degree.  However he failed to meet the expectations.   The last of such was when he participated was in the Miss Hong Kong contest in August 2002.   In November it was found that he used this title to do other things.  

12.In February 2002, he was told to organize a workshop to train the hair wash assistants.    The Plaintiff failed to do that.   On 1^st June 2003, the Defendant issued a letter to the Plaintiff at pages 3-5 terminating his employment in his post as Art Director.  However, even before that, from March 2003 the Defendant had failed to pay the Plaintiff’s salary in the sum of $6,000 p.m. as Art Director.  From that date the post and the work of Art Director was taken from the Plaintiff and his salary had been reduced by the sum of $6,000 p.m. 

13.On the 25^th June 2003, the Plaintiff gave notice of termination of employment to the Defendant and failed to turn up for work on the 27^th June but turned up for work for a few hours on the 28^th June.  

14.After the Plaintiff gave notice of termination of employment, the Defendant sent notices to all of the Plaintiff’s clients informing them that the Plaintiff has left the employ of the Defendant.   They discovered that about 80% of the letters sent out to the clients were returned because the address of the client was found to be incorrect.   Subsequently it was discovered that the addresses of these clients in the Defendant’s records had been tampered with.  However it is the Defendant’s evidence that these records were under lock and key and the Plaintiff did not have the key.   The Receptionist and the Manager of the Central Salon had the key.

15.Ms. Chan stated that Clause 11 of the General Conditions of Employment was there to protect the Defendant against loss of clients when an employee has worked for the Defendant for a long time and has a large following of clients.   Further there is a system of apprenticeship in force where young men and women are trained to be hairstylists from an early age.  Through the process of training the Defendant enables them to develop their clientele.   The Defendant regards these clients as the Defendant’s asset.  

16.Ms. Chan admitted that the Defendant had been late in paying salary to their employees.   The delay did not go beyond 7 days.  The notice of termination of employment at page 3 of BD-2 was made known to other staff.

Evidence of Yuen Chi Ming

17.He gave evidence that the Plaintiff did not organize workshops when requested by Ms. Chan.  The last workshop the Plaintiff organized was in August 2002.  He gave evidence of how other members of staff were unhappy about the plaintiff’s assignment of work as an Art Director.  He stated that the Plaintiff did not give clear directions.  He was bad tempered.  Under cross-examination by the Plaintiff, he stated that he did not say that the Plaintiff did not do the work of an Art Director, merely that he did not organize workshops.

Evidence of Fung Yuet Sheung Barbara

18.She worked from the end of June 2003 to September 2003, she worked in the Central Branch of the Defendant Salon.  She telephoned clients of the Plaintiff to confirm their addresses.   She telephoned between 100 to 200 clients pursuant to client record cards.  Some of them said that they received a letter from the Plaintiff informing them that he now worked for another Salon in Central.  There is no evidence as to the timing of the telephone calls to clients.  It must have started after receipt of the returned notice from the post.  As the notices must have been sent after the 25^th June and the Plaintiff left the Defendant’s employment on the 29^th June these calls are likely to have been made after the 29^th June.  The evidence does not point to the fact that the Plaintiff sent these letters to his client before he left the Defendant’s employment.  She found some of the addresses of these clients in the record cards had been altered.   The clients who said they received a letter from the Plaintiff is that at page 173, 175, 177, 179, 329 331 and 332 in the BD 2.  Under cross-examination by the Plaintiff she confirmed that these record cards were locked in a cupboard.  The Receptionist and the Manager have the key to the cupboard.  Everyday after work, no one could get the key to the cupboard except him or her. 

Evidence of Pang Bo Ling

19.She is a Receptionist at the Lan Kwai Fong Branch of the Defendant Company.  In July 2003 she worked in the Central Branch of the Defendant Company.   She was asked to telephone the Plaintiff’s clients to confirm their addressees.  She telephoned about 100 of them.  Their addresses were all altered.  When she telephoned the clients and told them that the Plaintiff left the employ of the Defendant, they would tell her that the Plaintiff has gone to work for Triple Edge Salon.  The clients who say that the Plaintiff has sent them a letter related to his departure from the Defendant are those whose names are at pages 297, 296, 288, 282, 330, and 337 of the BD 2.  There is no evidence as to when the clients received these letters from the Plaintiff.  However, as this witness commenced work at the Salon in Central in July 2003, these phone calls would have been made well after the Plaintiff left his employment with the Defendant and after the Defendant’s notices to the Plaintiff’s clients had been returned in the post.  

Evidence of the Plaintiff

20.He gave evidence that he now worked in Triple Edge at D’Aguilar Street, Central.   Within one year of his resignation from the Defendant, he worked freelance or in casual work at Triple Edge.  He started to work for them freelance in mid July 2003.   It is stated in a letter from Beauty Harvest Limited dated 14 July 2004 at page 20 of BD 2 that the Plaintiff worked for them free-lance from July 2003.   He received 40% commission when working with Triple Edge.   If his clients telephoned him he would either do their hair at Triple Edge or at the client’s home.   His earnings from Triple Edge for the first year when he worked there did not come up to the bracket when he would have to pay income tax.

21.In relation to the Defendant’s records of his clients, he did not take these.  Throughout the years of work, he maintained contact with his clients.  Many of them he had known for 10 odd years.  They telephoned him and asked him about his new employment.   When they heard about that, his clients would go to his new place of work.   When they go to his new place of work, he asked them whether they wanted to give their record to his new employer.  He stated that he had never sought to solicit or cause his clients at the Defendant to go to his new place of work.  It is when they telephoned to ask him where he worked that he would tell them about his new place of work.  From the evidence of DW3 and DW4,  it seems that the number of clients who have said that they received written notices from the Plaintiff were only few in number, thirteen to be exact, in comparison to the number of clients contacted.  It is highly likely that the Plaintiff was truthful that he had not copied the Defendant’s records of his clients during his employment with the Defendant.

22.In relation to his employment with the Defendant, he stated that he had never wanted to leave the Defendant’s employment.  However the Defendant reduced his salary and reduced his range of duties so as to affect his income.  He refused these terms.  That was why he wanted to leave his place of work. 

23.He stated that he had not signed any agreement with his new company.   He worked for them only on a freelance basis when his own clients looked for him.  Then he would go to Triple Edge to serve his client.   He did not want to breach Clause 11 of the General Conditions of Employment.  He did not enter into any agreement with his new employer until one year after he left the Defendant’s employment. 

24.In relation to the training fee, he thinks it is unreasonable to require him to pay it because it is necessary for any employer to train their staff. 

25.Before he became an Art Director with the Defendant, he worked as a Manager.  There was no job description of an Art Director.   He disagreed that he had not faithfully performed his duties as an Art Director.   Before he was appointed as an Art Director there was no such post.  Ms. Chan did not give him a job description as an Art Director.   The post was created as a payment mechanism when they took away his post as Manager.   He stated that in December 2002 they had a demonstration to show the hairstyles.  He demonstrated a few hairstyles.  The purpose was to create interest for hairstylists to see if they would attend workshops.  The response was cool because the hairstylist did not feel they wanted to bring in new techniques.  In relation to the accusation from the Defendant that he did not perform his duties as Art Director, from November 2002 onwards, he stated that the Defendant had not paid his MPF contributions and did not pay his salary on time.  He asked Ms. Chan about it.  She said she would pay him when she had cash in sums of $10,000.   He asked her if she could give him a fixed date for payment.  She did not do so.  She kept giving him extra work for many promotions for the Defendant in the newspapers and magazines.  That kept him from his work.   In his post as Art Director, he had to promote the Defendant and to do promotions in magazines.   Under cross-examination by the Defendant’s Counsel, the Defendant’s Counsel showed a circular where the Defendant held a workshop in January 2003 and the Plaintiff was one of the trainers.   This is in direct contradiction to Ms. Chan and Mr. Yuen’s evidence that the Plaintiff did not do workshops since August 2002.   

26.The Issues

The 1^st Issue

27.In relation to the evidence that the Plaintiff did not carry out his tasks as Art Director, the evidence of the Plaintiff shows that there has not been the post of Art Director before his appointment to that post.   There is no job description prepared by the Defendant for that post.  Ms. Chan failed to give a comprehensive description of the job duties of the Plaintiff in that post.  The allegation of Ms. Chan and Mr. Yuen was that the Plaintiff had failed to carry out the workshops for hairstylists.  However, in the course of the evidence of the Plaintiff that it became clear that the duties in the post of Art Director included promotion of the Defendant in the magazines and other publications.  The Plaintiff had completed promotion projects of the Defendant in magazines and other publications.

28.The Plaintiff stated that promotion projects for the Defendant took his time away from hairstyling.  This would affect his income.   The fact that the Plaintiff failed to run as many workshops as Ms. Chan had hoped does not amount to the fact that the Plaintiff had failed to fulfil the duties of his post as Art Director.  Whether the Plaintiff had failed to fulfil his role as Art Director has to be considered in the context of all the duties of Art Director and a comprehensive appraisal of his performance be conducted.  No such evidence had been provided to enable such an appraisal to be made.   

29.In the midst of the cross-examination of the Plaintiff, the Defendant’s Counsel brought out the Circular marked Exh D1.  This Circular discloses a workshop held in January 2003 wherein the Plaintiff trained hairstylists.   This contradicted the evidence of Mr. Yuen that the Plaintiff did not take part in any workshop since August 2002.  It further contradicted the evidence of Ms. Chan that since November 2002 the Plaintiff refused to improve when he was asked to take on workshops.  I found the evidence of Ms. Chan and Mr. Yuen related to the performance of the Plaintiff to be lacking in particulars and substance.  The Plaintiff stated in evidence that he did run workshops and arising from this it seemed that the hairstylists were not interested in attendance and showed little interest.  That was why the workshops were not continued in the face of the lack of interest. 

30.Ms. Chan, DW1 gave evidence that before the formal appointment of the Plaintiff as Art Director, he was doing the work of Art Director.   She found that his performance as Art Director was not satisfactory and between the end of 2000 to December 2001 he did not hold too many workshops.   Despite that she appointed him as Art Director.   She failed to give him a job description in the post of Art Director with clear guidelines as regards the number of workshops to be organized in a year.   She was not able to give evidence of the precise dates when she gave instructions to him to organize a workshop and he failed to do so.  She did not state why he did not do so.    In my view her evidence in relation to his failure to respond to her request  is not sufficient for the finding to be made that the Plaintiff had failed to fulfil the role and post of Art Director.  

31.It seems to me that Ms. Chan’s accusations and complaints against the Plaintiff were emotive and lacked particulars.  I find the evidence of Ms. Chan to be one-sided and lacking in objectivity.   She failed to adduce clear evidence to enable the Court to form an objective appraisal of the performance of the Plaintiff.  Further she did not disclose all the evidence at the outset and only disclosed an important piece of evidence in Exh D1 in the course of cross-examination of the Plaintiff.  I do not accept the allegations of the Defendant against the Plaintiff as contained in the letter of dismissal dated 1^st June 2003.   I accept the evidence of the Plaintiff that he did a lot of promotional work for the Defendant as Art Director and it is clear that he did conduct some workshops.   I find that the Defendant had failed to establish that the Plaintiff did not fail to carry out the role and duties of Art Director. 

The 2^nd Issue

32.The evidence of Ms. Fung and Ms. Pang show that the address of the Plaintiff’s clients in the Defendant’s index cards had been tampered with.  These cards were kept under lock and key.  The Receptionist and the Manager keep the keys.  The allegation that the Plaintiff had conspired with the Receptionist to alter the addresses on the index cards is a serious allegation.   Cogent evidence has to be adduced to show that the Plaintiff was a perpetrator.   There is no direct evidence that the Plaintiff himself made the alterations in the index cards or caused the Receptionist to do so.   Because of the seriousness of the allegation, on the evidence before me I am not able to infer from the evidence that he tampered with the addresses of his clients in the index cards or that he had conspired with the Receptionist to do so.

The 3^rd Issue

33.The contract of employment entered into between the Plaintiff and the Defendant commencing on 1^st October 1999 at pages 21 – 23 of BD 2 had been revised by agreement between the parties as referred to in the evidence of Ms. Chan and the Plaintiff.   Instead of the post of Manager the Plaintiff was given the post of Art Director with a salary of $6,000 and given commission of 50% of gross takings per month.   By terminating the Plaintiff’s post of Art Director, the Defendant had unilaterally reduced the range of duties of the Plaintiff and reduced his salary.   In “Terminating Employment” edited by Michael Patterson, published by Asian Law Journal, on the chapter on Constructive Dismissal: Specific Terms and Conditions at page 40 under the section “Job Content and Status” it states,

“Many constructive dismissal cases are the result of employers’ attempts to change or modify the content, hours or location of the work which employees do.  Such changes will be lawful only if they are authorised by, or fall within the terms of the employment contract, or if the employee has (expressly or impliedly) consented to the variation.  The crucial issues are therefore: the scope of the employer’s contractual authority; and, if the variation falls outside of that authority, whether the change insisted upon is sufficiently serious so as to amount to a fundamental and repudiatory breach of contract.” 

34.At page 47 under the paragraph entitled “Last Straw” and “Squeezing Out” it says,

“    Finally, we must refer briefly to the other major areas in which the obligation to maintain trust and confidence has had an important bearing.  Where an employee is being “squeezed out” or is left in considerable doubt as to his or her future, there may be breaches of express or implied terms of the contract of employment. …

. . . where an employee is demoted from his position as manager, with a resultant change in his salary structure, the loss of an office to himself, and the withholding of a salary increase which was received by colleagues, he may be constructively dismissed. . .” 

35.At page 40 of the same book under the heading “Destroying the Job” it states,

“If an employer’s actions effectively change the essential nature of an employee’s job, it is likely that there will be a repudiation of the contract”.  

36.Under section 10A of the Employment Ordinance it states,

“(1)    Without prejudice to the rights of an employee under common law, an employee may terminate his contract of employment without notice or payment in lieu of notice if any wages are not paid within one month from the day on which they become due to him under section 23”

37.There is no dispute that the Defendant had failed to pay wages in the sum of $6,000 p.m. from March 2003 until 30^th May 2003. The Plaintiff is entitled under s. 10A of the Employment Ordinance to terminate his contract of employment without notice or payment in lieu of notice.  When the Defendant on 1^st June 2003, served on the Plaintiff a notice of termination of employment related to the Plaintiff’s post as Art Director, the Defendant unilaterally altered the terms of the Plaintiff’s terms of employment without the Plaintiff’s consent.  This is because the Plaintiff’s post as Art Director is part of the package of his responsibilities, and the posts held by him under his contract of employment.  The Plaintiff is also paid for that post.  By terminating the Plaintiff’s employment in that post, the Defendant actually reduced the posts held by the Plaintiff, and reduced his salary with the resultant loss of status of the Plaintiff in the eyes of his colleagues when this lost of his post is made known to his colleagues.  These were “fundamental” breaches of the terms of employment of the Plaintiff.   It is stated at page 25 of the book Terminating Employment, the following,

“…only serious or “fundamental” breaches of contract will support an allegation of constructive dismissal.  There are two types of fundamental breach:-

1.    A breach of a central provision of the contract, or “condition”.  The most obvious example of this is the provision regarding payment of wages or salary.  Other “conditions” have been held by the courts to include: hours of work, status, place of work and job duties. . .

The question whether a particular breach of contract by an employer amounts to a “fundamental breach” will depend on the circumstances of the case and in particular the effect of the breach upon the employee. 

Examples include:

·    The unilateral introduction of changes to the terms and conditions of employment”

38.I find that the Defendant had unilaterally changed the essential terms of employment and therefore repudiated the contract of employment with the Plaintiff.

The 4th Issue

39.From the evidence of the Plaintiff and in the course of the trial he had made clear that he was relying on the words “(other than by wrongful termination by the Company)” on the last line of Clause 6 (a) of the General Conditions of Employment”.   Further, in paragraph 1 of his Reply, the Plaintiff pleaded “the Plaintiff resigned from his employment with the Defendant as a consequence of the Defendant’s breach of the Employment Contract as stated in the Statement of Claim.”  Again in paragraph 4 of the Reply the Plaintiff denied its liability under clause 10(b) and 11 (a) of the Employment Contract and pleaded that “It is the Defendant in this matter that breached the Employment Contract as stated in paragraph 1-4 of the Statement of Claim.”

40.In his evidence, the Plaintiff stated as referred to aforesaid, that he only resigned because the Defendant reduced his salary and his duties.   I find therefore that the Plaintiff had accepted the repudiation of contract by the Defendant in giving his notice of termination of employment on the 25^th June 2003.   Although constructive dismissal was not specifically pleaded yet the material facts for such had been pleaded.   This is a situation of constructive dismissal by the Defendant. 

The 5^th Issue

41.In para 24-013 of Chitty on Contract 29^th Edition, it states,

“Acceptance of repudiation.  Where there is an anticipatory breach, or the breach of an executory contract, and the innocent party wishes to treat himself as discharged, he must “accept the repudiation.”” 

In other words, when an innocent party accepts the repudiation of a contract, he is discharged from the performance of the contract. 

42.In para 24-047 of Chitty on Contract at page 1398 it states referring to the House of Lords decision in Photo Production Ltd v Securicor Transport Ltd.,

“where the innocent party elects to terminate the contract, i.e. to put an end to all primary obligations of both parties remaining unperformed – that “(a) there is substituted by implication of law for the primary obligations of the party in default which remain unperformed a secondary obligation to pay money compensation to the other party for the loss sustained by him in consequence of their non-performance in the future and (b) the unperformed primary obligations of that other party are discharged.”

43.In the light of the aforesaid, the Plaintiff who is the innocent party is discharged from the unperformed primary obligations in the Contract. 

44.Clause 6 of the General Conditions of Employment state,

“. . .In order to safeguard the Company’s clientele, goodwill and name and to protect the Company’s legitimate proprietary interests the Employee covenants that he will not without the prior written consent of the Company (such consent to be withheld only in so far as may be reasonably necessary to protect the legitimate interests of the Company) after the termination of his employment under this Agreement for whatever reason (other than by wrongful termination by the Company)”

45.It would seem that Clause 6 would not apply where the Defendant were found to have wrongfully terminated the Plaintiff’s employment.  Further the imposition in Clauses 10 (b) and 11 (a) of payment by the Employee of the cost of the inhouse training as stated therein would not apply.   Clause 5 of the General Conditions of Employment would also be discharged.   The Defendant pleaded case relied on these express terms of the Contract.   I therefore find that the Defendant is not entitled to claim damages against the Plaintiff for breach of Clause 5, 6(a) (i), (ii) and (iii), pursuant to Clauses 10(b) and 11 (a) of the General Conditions of Employment.      

The 6^th Issue

46.Rever (AMA) Salon Ltd v Kung Wai For Danny & Ors (No.2) turns on a totally different scenario and facts where the conduct of the employees were serious.   In that case it was decided that the contents in Clause 5 and Clause 6 of the General Conditions of Employment are not unenforceable.   However, Clauses 10 and 11 (a) were not considered in that Judgment.   Even were I wrong in coming to my finding that the Plaintiff is discharged from observing his obligations in the General Conditions of Employment, I am of the view that Clauses 10 (b) and 11 (a) are in restraint of trade and are void.   Paragraph 155 of Rever (AMA) Salon Ltd v Kung Wai For Danny (No.1) [2003] 2HKC states,

“155. The following are general propositions:

(a)    notwithstanding the term of the contract of employment, an employer is not  entitled to protection from mere competition by a former employee;

(b)    an employee is entitled to benefit from any personal skill or experience acquired whilst in the services of a former employer;

(c)    clauses which restrict the employee from taking employment of his choice after he has left his employer will be struck down unless the employer can show that they:

(i)    protect his legitimate interests;

(ii)    are reasonable in all the circumstances.”

47.Clause 10 (b) requires the Employee who leave the employment of the Defendant to pay the cost of his inhouse training as provided by Clause 11 (a).   The cost of training required to be paid will be calculated as a sum equivalent to six times the average aggregate monthly remuneration earned by the Employee during the six months immediately preceding termination of the employment.    Although it further states that the Employer may at its absolute discretion allow the Employee to withhold payment of a portion of such inhouse training.  However Clause 10 (b) and Clause 11 (a) is in contravention of these principles because they:

(a)    restrict the Employee’s freedom to take alternative employment in that the Employee would have to pay a sum equivalent to his last six months earnings if he terminated his employment.   This is a substantial sum and it could not be doubted this clause would restrict the Employee’s freedom of seeking alternative employment.  Although the reasons for the existence of this clause is to protect the proprietory interest of the Defendant which is extremely vulnerable as the Defendant could easily lose the clients attended to by the Plaintiff upon the Plaintiff’s termination of employment, yet the effect of this clause could have dire consequences for the employee.  The Employee who had been unfairly treated may by virtue of this clause, be deterred from terminating his employment because he or she is liable to pay the amount stipulated in Clause 11 (a).

(b)    require the Employee to compensate the Employer for the training he received.   The principle (b) cited at paragraph 155 of the judgment in Rever (AMA) Salon Ltd v Kung Wai For Danny (No.2) aforesaid is breached.   It is in effect requiring the Employee to compensate for the benefit of the skill or experience he gained whilst working for the Defendant.  Most of the inhouse training is through the system of apprenticeship, that is a junior in training observing and assisting the work of a hairstylist.  This aspect of inhouse training is part of the benefit of experience and personal skill gained through this system.  An apprentice is no less a worker and the experience and skill gained as an apprentice is that gained by a worker. Hence I find that this clause enabling the Defendant to seek compensation under Clause 10(b) and 11(a) directly contravenes the Common Law Principle referred to aforesaid at para 155(b) of the Judgment.  

48.The explanation of Ms. Chan that these clauses are not frequently invoked is not the point.   The mere existence of this clause is a deterrent for Employees from seeking alternative employment and is in restraint of trade.

49.As Clause 10 (b) and 11 (a) could be invoked even when there are no breaches of other terms of the General Conditions of Employment, therefore, in my view these clauses are not reasonable.  Further the amount required to be paid is such a large sum that it is not commensurate with the cost of inhouse training which an employer has to provide an employee over the years.   I therefore find that these clauses are in restraint of trade and void.  

50.Hence, even were I wrong in coming to the conclusion that the Plaintiff is discharged from his obligations in the General Conditions of Employment, the damages for breach of such could not be computed in accordance with Clauses 10 (b) and 11 (a).   Only nominal damages could be allowed.  

51.In Rever (AMA) Salon Ltd v Kung Wai For Danny & Ors (No.2) referred to by the Defendant’s Counsel paragraph 150 refers to an “Implied duty of fidelity” at common law.   It states, “There is an implied duty that an employee shall not whilst so employed poach his employer’s customers …” there is no evidence in this case that the Plaintiff had poached the Defendant’s customers during the period of his employment with the Defendant.   Even if there is such evidence, which is not the case, I find for the sake of completeness that as there is no clear evidence of loss to form the basis for any assessment of damages, the damages to be awarded could only be nominal damages.  

52.Having found aforesaid, I make the following order in relation to the Counterclaim, Counterclaim dismissed with costs of the Counterclaim to the Plaintiff to be taxed if not agreed.

Representation :

The Plaintiff, in person, present.

Ms. Tung Sau Yee Sylvia instructed by Messrs K.Y. Lo & Co. for the Defendant.