Mak Chi Sing v. A & A Continental Commodities Ltd

CACV000107/1983

BETWEEN

-------

Coram: Roberts, C. J.,Leonard, V. P. & Jones, J.

Date of Judgment: 23rd, 24th August 1983 and 8th September 1983

__________

JUDGMENT

__________

Roberts, C. J.:

1. This is an appeal against a mandatory interlocutory injunction granted by Mayo, J. in Chambers on 5th July, 1983.

2. By that order, the defendant was directed to "provide a banker's guarantee acceptable to the civil court of Doha, Qatar to guarantee the payment of sums up to US$242,212.00 to Khalid Corporation in the event that Khalid Corporation obtains judgment in its favour against the Defendant herein in Case No. 91/403 in the Civil Court of Doha, Qatar."

3. The judge further ordered that there be a stay of execution of this order pending the hearing of the appeal.

History of Events

4. The defendant is a limited company registered and operating in Hong Kong. Its Managing Director is Mr. S. C. Chiu. Late in 1980, the defendant entered into a management agreement with a company incorporated in Qatar, known as the Khalid Corporation ("Khalid"). By the terms of this agreement the defendant undertook to employ its own assets and personnel in the operation of Qatar Arab Continental Trading ("Qatar Arab") a division of Khalid.

5. The management agreement was terminated with effect from end of 1982 by mutual agreement, the defendant being succeeded as manager of Qatar Arab by King Lung Gold Traders Limited from 1st January, 1983.

6. On 27th December, 1982, Khalid, which had filed a claim against the defendant in the Civil Court in Qatar, obtained an order from that court preventing the departure from Qatar of Mr. WONG Kwok Kuen, a director of the defendant then present in Qatar. This order was apparently not served on Mr. Wong, who was allowed to leave Qatar after undertaking to remit funds to settle Khalid's claim against the defendant within 10 days.

7. In January 1983 when Mr. Wong failed to fulfil his undertaking, no doubt on the ground that it had been extracted from him under duress, Khalid, apparently without legal authority, seized the plaintiff's passport. And on 13th April, Khalid obtained from the Civil Court in Qatar a restraining order against the plaintiff, prohibiting him from departing from Qatar and impounding his passport. The object of such an order can only be to put pressure on the defendant in relation to Khalid's claim.

8. On 24th May, the same Court cancelled the order prohibiting the plaintiff from leaving Qatar "on the condition that he furnishes a financial guarantee for the sum claimed".

9. The plaintiff is thus unable to leave Qatar, unless he provides a guarantee of the kind required. He has no financial resources to enable him to do so. He therefore seeks, by virtue of these proceedings, an order from the Hong Kong courts that the defendant should provide such a guarantee.

10. To put his argument in dimple terms, the plaintiff asserts that at all material times he was employed by the defendant, that he has lost his liberty because he has become an innocent pawn in the dispute between the defendant and Khalid; and that the defendant as his employer owes him an obligation to take the necessary steps to furnish the guarantee and so restore his freedom of movement.

History of Hong Kong Action

11. On 9th June, 1983, the plaintiff issued a writ, which was subsequently amended on 18th June. In this he seeks damages for breach of the contract of employment entered into between him and the defendant on 7th September, 1981 and various other forms of relief, including paragraph 3, which reads as follows : -

"An order that the Defendant do provide a banker's guarantee acceptable to the civil court of Doha, Qatar, to guarantee the payment of sums up to US$242,212.00 to Khalid Corporation in the event that Khalid Corporation obtains judgment in its favour against the Defendant herein in Case No. 91/403 in the civil court of Doha, Qatar."

Grounds of Appeal

12. Mayo J. issued a mandatory interlocutory injunction on the terms sought by the said paragraph 3. The defendant argued on appeal that the judge was wrong to do so, on three main grounds : -

Was the plaintiff employed by the defendant?

13. Unless the plaintiff can show that he has an arguable case that he was a servant of the defendant at the relevant times, he must fail, since his claim depends on the existence of the contractual relationship of master and servant between the plaintiff and defendant.

14. In his affidavit of 4th June, the plaintiff asserts that he has been employed from about 7th September, 1981 by the defendant as a General Manager and that about 10th February, 1982, he was sent to Qatar by the defendant as a management consultant to administer Qatar Arab.

15. In support of this contention, he produced a letter dated 1st May, 1982, signed by Mr. S.C. Chiu, the "Managing Director" of the defendant, certifying that the plaintiff "is employed by us as General Manager since September 7, 1981." The letter went on : -

"We are sending him to Doha, Qatar to assist in the management of Qatar Arab Continental Trading."

16. In February 1982, a telex above the name of S.C. Chiu, was sent to representatives of Khalid saying : -

"Mr. Danny Mak, formerly our General Manager of Dubai will report to Doha office for his new General Manager post on February 10, 1982."

17. By a further telex dated 11th February, Mr. S.C. Chiu thanks Khalid for "understanding my decision to send Mr. Mak to Doha."

18. Mr. Brendan NG, a director of the defendant, in his affidavit of 29th June, 1983, denied that the plaintiff was employed by the defendant as a General Manager or had ever been an employee of the defendant.

19. Mr. Ng attempts to explain Mr. Chiu'sletter, describing the plaintiff as employed by the defendant, as being worded in that manner in order to comply with the requirements of the Immigration Department in Qatar.

20. I take this paragraph of Mr. Ng's affidavit as an implicit admission that Mr. Chiu's letter was untrue and intended to mislead the authorities in Qatar as to the plaintiff's status.

21. This affidavit also seeks to explain the two telex referred to above as being sent by Mr. Chiu "in his personal capacity". As the first telex refers to Mr. Mak as being "our General Manager of Dubai" and is addressed to Khalid, with which the defendant was then linked under a management contract, it is difficult to accept this explanation.

22. In 1983, the plaintiff was authorized by the defendant to negotiate with Khalid, in conjunction with lawyers appointed by the defendant for the settlement of the claim and for the plaintiff's release.

23. We are satisfied that the plaintiff has established that he has an arguable case that he was employed by the defendant, during the period when the defendant's management agreement with Khalid was in force and Khalid's claim relating to the debt is said to have arisen.

Employer's duty

24. The plaintiff has argued that, where an employee is held liable to pay a debt owed by his employer to a third party, or to furnish security for the payment of that debt, the employee has a right toe indemnified by his employer. This obligation is implied, it is said, by virtue of the relationship of employer and employee.

25. There is no doubt, and it is not disputed by the defendant, that the plaintiff has been restrained from leaving Qatar by reason solely of the fact that Khalid and the Doha Court regard the plaintiff as an employee of the defendant; and wish to use his enforced presence in Qatar as a means of putting pressure on the defendant to make funds available in Qatar to satisfy any judgment against the defendant which Khalid may obtain in the Qatar Courts. It is conceded that the plaintiff has not personally been guilty of any criminal or civil misconduct; and that the restraining order against him has been made solely because he is an employee of the defendant.

26. In paragraph 3473 of the 25th Ed. Vol. II of chitty on Contract, p. 696, it is stated that -

"The relationship of employment imposes a duty on the employer to indemnify or reimburse the employee against all expenses, losses and liabilities incurred by the employee in the execution of his employer's instructions, or within the authority granted to him by the employer, or during the reasonable performance of his employment ....."

27. The natural meaning of the words "indemnify" or "reimburse" suggests that this principle is intended to apply only where servant has expended money on behalf of his employer or is about to be called upon to do so. In the Liberian Insurance Agency v Mosse 1977 22 LL LR 560, for example, an employer was held liable to indemnify his employee for the costs and damages awarded, in an action taken against the employee, in relation to his employer's business, by a foreign court.

28. The plaintiff, however, has to go further, and establish that the obligation of an employer extends to a duty to indemnify his employee against the requirement of foreign court that the employee should furnish security for the settlement of a judgment if this is obtained against his employer.

29. We have not been referred to any authority which widens s the duty of the employer in the manner sought. Yet, in principle, why should this not be done?

30. If the plaintiff had been sued for breach of contract, in relation to the defendant's business, he would have been entitled on the authorities to reimbursement by the defendant, if he had paid the damages or costs, or to an indemnity against any such expense if he had not.

31. In this instance, an employee is, in effect, being forced to regain his liberty of movement by giving security to a foreign court for his employer's debt, if this is found by the foreign court to have been established. In case this should be thought to be a novel concept, it is to be observed that the defendant in an action in Hong Kong may be detained under Order 44A if he is about to leave the jurisdiction of the court until the action is determined, unless he can furnish sureties or a deposit of the sum claimed and costs, though this power would not extend to an employee of the defendant.

32. If an employer would have to infemnify his employee against a judgment debt, is there any reason why, in principle, he should not be required to furnish a guarantee to pay any amount ordered against him by the court, when such a guarantee is demanded of his servant?

33. We do not need to decide this difficult question here. It is sufficient for a plaintiff who seeks an interlocutory injunction to show, as we find he has done, that he has an arguable case.  We recognize that the relief for which he contends may well involve an extension of the duty of an employer beyond its former frontiers. Fortunately, the courts have often shown themselves to be ready to adapt the law as changing circumstances require.  We do not say that, at the trial of the action, the plaintiff would necessarily succeed; only that he has an arguable case.

Grant of Mandatory Injunction

34. Having concluded that, on the first two principal issues, the plaintiff has established an arguable case, we have to consider whether a mandatory interlocutory injunction should properly be issued in such circumstances as these.

35. It is not disputed by either party that the effect of issuing a mandatory injunction in the terms sought would be to accord to the plaintiff the most important of the forms of substantive relief which he seeks in the action.

36. The main justification for the grant of an interlocutory injunction is to preserve the position which exists at the time of the making of the material application, although it is open to a court, in exceptional cases, to grant by way of interlocutory relief the substantive remedy which is claimed in the writ - see Woodford v Smith (1976) 1 WLR 8o6 at p. 817.

37. The plaintiff has argued that in this case, in contrast to the usual position, the claim for relief in the principal action will be nullified if no injunction in the terms sought is granted. This is an argument of force if it is necessary to consider whether the balance of convenience requires that an interlocutory injunction should be granted, in accordance with the principles of American Cyanamid v Ethicon Ltd. 1975 AC 395, which appears to us to apply to mandatory as well as to prohibitory injunctions, though the former are also subject to the additional considerations posed in Morris v Redland Bricks Ltd. (1970) A. C. 652.

38. In our view, however, the question of striking a balance of convenience does not arise here. The authorities make it clear that an interlocutory injunction, which will have the effect of disposing of a substantive claim in the main action, will be granted only if the court is of the opinion that the defendant has no real chance of succeeding at the trial - see Manchester Corp v Connolly (1970) 1 Ch 420 (Court of Appeal).

39. We certainly could not take such a view. There are two substantial issues which would have to be resolved at the trial; namely whether the plaintiff was the defendant's servant at the relevant times and whether, in law, an employer is under an implied duty to his employee of the kind alleged by the plaintiff. Although we have decided that the plaintiff has an arguable case on each of these issues, so indeed has the defendant.

Conclusion

40. Thus we are driven to the conclusion on the authorities, though with deep regret in view of the plaintiff's unfortunate situation in Qatar, that this is not a case in which an interlocutory injunction ought to be granted. So the appeal must succeed, and the order of Mayo, J. must be quashed.

41. The appellant must have the costs in the hearings before Mayo, J. and before this court.

Representation:

Charles, Ching, Q.C., William Stone, instructed by P.H. Sin & Co. for Appellant/Defendant

D. Chang, Q.C., Sammy Lee, instructed by Deacons, for Respondent/Plaintiff