Lau Pui Sang v. Maxim's Caterers Ltd

HCLA 81/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 81 OF 2005

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO. 10596 OF 2003)

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BETWEEN

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Before: Hon Chung J in Chambers

Date of Hearing: 11 January 2006

Date of Handing Down Decision: 18 January 2006

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D E C I S I O N

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Introduction

1.This is an application for leave to appeal against the decision of the Labour Tribunal (“the Tribunal”) dated 4 November 2005.  Reliance is placed on s. 32(1)(a), Labour Tribunal Ordinance (Cap. 25) which in short relates to an application lodged on the ground that the Tribunal’s decision is erroneous in point of law.

2.This application can conveniently be divided into two parts, one concerning the costs order made by the Tribunal and the other the Tribunal’s decision relating to the putative respondent’s claim lodged against the applicant.  These two matters will be discussed under separate headings below.

3.Before dealing with this application, it is useful to give a summary of the background facts.

Background Facts

4.The applicant is one of the major restaurant groups in Hong Kong and, according to an affirmation filed earlier in this application (concerning an application for stay of execution), operates restaurants and catering services both in Hong Kong and overseas.

5.The putative respondent (“Lau”) was one of the applicant’s employees.  Immediately before his dismissal by the applicant, Lau was the applicant’s manager in charge of the applicant’s restaurant in Tokyo, Japan.  The applicant summarily dismissed Lau on 30 September 2002 on the ground that he has breached a term of employment which was contained in the applicant’s Staff Manual.

6.It was found by the Tribunal that while Lau was still employed as the applicant’s manager, he became involved in a business selling Japanese sweet soup.  The business was operated from a sales counter inside a department store.  Two staff were employed: one prepared the sweet soup and the other was the cashier.

7.There were in fact two editions of Staff Manual.  In the older edition, clause 17.5 provided:

“所有員工不得在外兼任何職業，亦不能經營或合股經營與工作有關之私人業務，亦不得參與經營、管理或合股供應物品給本公司的商號，一經發現，立即解僱，公司方面並不作任何補償。” (emphasis supplied).

In the newer edition, the same clause provided:

“所有員工不得在外兼任何其他職業，亦不能經營、管理或合股任何其他業務。一經證實違規，立即解僱，公司方面將不作任何事先通知或補償。…” (emphasis supplied).

Lau’s Claim in the Tribunal

8.Lau lodged a claim with the Tribunal.  After trial, in a written decision dated 5 March 2004, the Tribunal in essence found for Lau and made an award of HK$260,991.30 (being wages in lieu of notice and long service payment) against the applicant.

9.The relevant facts found by the Tribunal can be summarised as follows:

(a)     Lau was negligent in not reading clause 17.5 and hence was unaware of it at the time he joined the outside business;

(b)    the scale of outside business was as set out in para. 6 above (which the Tribunal also found to be small scale);

(c)     on the other hand, the applicant’s business was a Chinese restaurant;

(d)    accordingly, there was no competition between the businesses;

(e)    Lau held 12 out of 36 units (equivalent to a value of HK$37,200) in the outside business;

(f)     Lau was merely an investor not involved in the daily operation of the outside business;

(g)     the two businesses were over 20 kilometers (and a time-distance of about 30 minutes) apart;

(h)     as regards whether the outside business adversely affected Lau’s performance, Lau’s claim that the outside business never occupied much of his time and he performed duties promptly and diligently was unchallenged by evidence.

10.Based on the above, the Tribunal concluded that the breach was harmless and technical.

The Earlier Appeal

11.The applicant was dissatisfied with the above award and appealed to the court of first instance.

12.In a judgment handed down on 15 September 2005, the court of first instance allowed the appeal.  In doing so, the learned deputy judge was of the view that, despite s. 20(3), Cap. 25, the Tribunal has not investigated relevant matters: paras. 12 to 14, judgment.  Pursuant to s. 35(1)(c), Cap. 25, the matter was remitted to the Tribunal for re-hearing with the following directions:

(1)   the Tribunal was to consider whether the old edition or new edition of the Staff Manual should govern Lau’s employment with the applicant;

(2)   if the Tribunal found the old edition to be the applicable term of employment, the Tribunal was to consider whether Lau has breached clause 17.5;

(3)   if the Tribunal found the new edition to be the applicable term of employment, the Tribunal was to consider whether clause 17.5 constituted an unreasonable restraint of trade clause;

(4)   if the answer to (3) above was in the negative, the Tribunal was to consider whether Lau has breached that clause;

(5)   if the answer to (3) above was in the affirmative, the Tribunal was to consider whether clause 17.5 could be construed as a reasonable restraint of trade clause;

(6)   if the answer to (5) above is in the affirmative, the Tribunal was to consider whether Lau has breached that clause.

(para. 14, judgment).

Re-hearing in the Tribunal

13.After a re-hearing, in a decision handed down on 4 November 2005, the Tribunal upheld its earlier award and made the following costs order:

“[The applicant is to pay the] costs which [Lau] is liable to pay in the [above] appeal proceedings plus $5,000.00”.

First Complaint in this Appeal

14.Several grounds of appeal have been set out in the application.  In gist (as helpfully summarised in the skeleton arguments) the applicant complains that the Tribunal has not answered any of the questions which it has been directed by the court of first instance to answer.

15.This complaint has no merits at all.  The matter can be demonstrated by a quote from the Tribunal’s decision dated 4 November 2005:

“… on lawyer’s advice, Clause 17.5 was amended to specify dismissal without compensation which means summary dismissal according to the Employment Ordinance, Cap. 57.  I accept [Lau’s] evidence that staff were never expressly notified of such change.  I find as far as [Lau] is concerned that the term in the old edition … prohibited outside work only”.

Hence, the Tribunal has made an express finding as to the applicable term of employment which was relevant to the parties’ main dispute.

16.The Tribunal then considered whether the applicable clause amounted to a restraint of trade clause and concluded in effect it was not because the law relating to restraint of trade does not apply to employment relationships while they still continue and only applies to post-employment situations.  I think the Tribunal has fallen into error here but I do not find the error to affect the outcome of this part of the application.

17.The relevant law is in my view correctly stated in Chitty on Contracts (1999) 28^th Ed., para. 17-113:

“Restraints during currency of employment.  It now appears probable that even restraints which operate only during the currency of employment are subject to the doctrine of restraint of trade, at any rate if they have as their objects the sterilising rather than the absorption of a man’s capacity for work, or perhaps are such that one of the parties is so unilaterally fettered that the contract loses its character of a contract for the regulation and promotion of trade and acquires the predominant character of a contract in restraint of trade.  When a contract ties the parties only during the continuance of the contract and the negative ties are only those which are incidental and normal to the positive commercial arrangements at which the contract aims even though those ties exclude all dealings with others, there is probably no restraint of trade … and no question of reasonableness arises; indeed in appropriate circumstances the courts will even imply a restraint, for example that employees, engaged in skilled work and having knowledge of their employers’ manufacturing data, shall not in their spare time carry out similar work for competitors” (emphasis supplied).

18.Based on the above legal principles and on the facts found by the Tribunal: see paras. 6 and 9(a) to 9(h) above, the only valid conclusion (or, using the wordings of s. 35(2)(a), Cap. 25, the only inference of fact) which can be made is:

(a)   insofar as the old edition clause 17.5 was intended to ensure an employee’s capacity for work was not affected by outside work, or not to compete with the applicant’s business (or otherwise to act in breach of an employees’ duty of good faith and honesty), clause 17.5 was not a restraint of trade clause; alternatively, it was not an unreasonable restraint of trade clause;

(b)   because Lau’s capacity for work was unaffected by his outside business, and there was no evidence suggesting he was acting in bad faith or otherwise dishonest, any breach of clause 17.5 did not cause real harm to the applicant and was technical in nature.

The conclusion set out in sub-para. (a) above can equally apply to the new clause 17.5.

19.Hence, the Tribunal’s conclusion that the summary dismissal did not fall within s. 9, Employment Ordinance (Cap. 57) is correct.

20.Because the old edition clause 17.5 only prohibited Lau from becoming involved in businesses “related to his work”, it is in fact quite arguable he was not in breach of that clause because, on the Tribunal’s finding, there was no competition between the two businesses and Lau’s work was not affected.  For present purpose, however, it is unnecessary for a definitive conclusion to be made on this aspect.

21.I also notice that the Tribunal has referred to s. 70, Cap. 57 which reads:

“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”.

In view of the approach set out above, I doubt if there is any real need to resort to s. 70, Cap. 57 (assuming that the provision is properly applicable in this claim).

22.Insofar as it may be argued that some or all of the matters above (which are either unnecessarily or wrongly considered by the Tribunal) should constitute misdirections on its part, I find them not to render the Tribunal’s conclusion arguably unsound.

23.For completeness, I have considered the dismissal can arguably be based on s. 9(1)(a)(i) or (ii) or 9(1)(b), Cap. 57.  There is no need to go into the details.  Irrespective of which provision is relied upon, the matter ultimately turns on whether the applicant can rely on clause 17.5 as a ground for justifying summary dismissal without notice or payment.

24.To sum up, I do not find there is any arguable error in point of law on the Tribunal’s part.  Accordingly, leave to appeal is refused.

Second Complaint in this Appeal

25.The court of first instance has in the judgment handed down on 15 September 2005 ordered Lau to pay the costs of the application for leave to appeal and the earlier appeal.

26.No reason has been given by the Tribunal regarding the following part of its costs order of 4 November 2005:

“[The applicant is to pay the] costs which [Lau] is liable to pay in the [above] appeal proceedings … ”.

This part of the costs order is, to put it as mildly as one can, most unusual.

27.The relevant ground set out in the application is ground (4) which states:

“The learned Presiding Officer erred in law in attempting to oust the jurisdiction of the Honourable Court of First Instance when he ordered that ‘the Applicant had to pay costs equivalent to that of Court of First Instance’ … ”.

28.This ground has been put in a way which is either incomprehensible or invalid.  The Tribunal’s costs order may be argued to be unreasonable or unsupportable (both as regards fact and law).  It may arguably have the effect of depriving the applicant its entitlement to the costs earlier ordered by the court of first instance.  But I do not see how the Tribunal’s costs order can be an attempt to oust the court’s jurisdiction.

Conclusion

29.To conclude, leave to appeal is refused as regards grounds (1) to (3) and (5) to (6) of the application.

30.As stated above, ground (4) of the application as presently worded is invalid.

31.R. 8A(2), Labour Tribunal (General) Rules (Cap. 25A) provides:

“At the hearing of an application for leave to appeal, the Court of First Instance may with the consent of the applicant alter any ground of appeal, or insert any new ground of appeal, in the application for leave to appeal” (emphasis supplied).

The court cannot compel an applicant to consent to an alteration of his ground, or to insert new ground.  But, in relation to a ground which arguably would have merits if it had been properly drafted, it would be too harsh to refuse leave without giving the applicant an opportunity to provide a properly drafted ground.

32.I will therefore give the applicant an opportunity to indicate in writing, within 14 days from the date of handing down of this decision, whether it wishes to replace ground (4) with a differently worded ground relating to the Tribunal’s costs order (and if so, the precisely worded new ground).  Subject to that, leave to appeal as regards ground (4) is refused as well.

33.Finally, I should observe that some of the grounds of the application are either too vague and general to constitute proper grounds.  Ground (2) merely contains a criticism levied against the Tribunal; it is an improper ground for that reason.  I have seen such grounds being drafted by untrained litigants acting in person but I am surprised to see similar drafting by the legal profession.  These grounds should never have been drafted in such manner.

Mr Y C Yeung, instructed by Messrs Raymond Chan, Kenneth Yuen & Co., for the Defendant (Applicant)