SUI MEI KUEN AND OTHERS v. FORTUNE WIGS MANUFACTURING LTD

DCCJ001028/1973

IN THE DISTRICT COURT HONG KONG

HOLDEN AT KOWLOON

CIVIL JURISDICTION

ACTION NO. 1028 OF 1973

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Between: SUI MEI KUEN, WONG SHUN HEUNG, MA SAU MAN, TAM MEI KUEN, KWONG YUEN TING, YUI KWAI LAN and KWONG TUT CHUN Plaintiffs
and
FORTUNE WIGS MANUFACTURING LIMITED Defendant

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Coram: J.J. Rhind, D.J.

Date of Judgment: 22 September 1973

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JUDGMENT

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1. Each of the first six Plaintiffs was employed by the Defendant under a “continuous contract” within the meaning of S.2A(1) of theEmployment Ordinance, Cap. 57, and in the absence of any agreement to the contrary, the length of notice required for the Defendant to terminate thosecontracts was one month by virtue of the provisions of S.4(1) and S.5(2) of the Ordinance.

2. All of them were employed on making wigs at piece work rates, and none of them had worked for the Defendant for less than severalmonths when, on 28th December 1972, the Defendant suddenly sent them all home without any good cause or previous warning. The evidencediscloses that the Defendant then shut down its operations, with the result that there was no further work for the Plaintiffs todo. Although the Plaintiffs all appear to have been ready, willing and able to return to work, the call never came, and whilst inmid-January the Defendant paid them for the work they had done up till 28th December, they have received nothing further.

3. It being clear that the Defendant by its conduct terminated their contracts without notice on 28th December, the question of theirentitlement to damages arises.

4. As, despite reasonable efforts to that end, none of the Plaintiffs was able to find alternative employment before 9th February 1973,there is no doubt that, whatever approach the Court adopts in determining damages, the Plaintiffs will be entitled to an award ofat least the equivalent of one month’s earnings. Moreover, Mr. Fairbairn for the Plaintiffs has expressly limited their claims tothe amount of one month’s earnings.

5. Thus, such questions as whether the Plaintiffs’ damages should be regarded as liquidated or unliquidated are of no practical consequencein view of the particular facts of this case, but, as Mr. Fairbairn has gone to considerable trouble in presenting arguments to theCourt on the nature of the award in this type of case, I consider it would be desirable for me to record my views on his submissions.

6. In the present case, following a Practice Direction of Judge Cons, which complemented his decision in Ma Mou Leung v. Dollar Motors Ltd, 1969 D.C.L.R. 21 to the effect that an employee’s claim for wrongful dismissal without notice was one for unliquidated damages, the Deputy Registrarentered interlocutory judgment for the Plaintiffs in default of any defence, and ordered that damages should be assessed. It wasfor the purpose of assessing damages that the case came before me.

7. Mr. Fairbairn disputed the correctness of the Deputy Registrar’s action in entering interlocutory judgment rather than final judgmentfor one month’s salary in lieu of notice. Moreover, Mr. Fairbairn ventured to urge that the Court need not stop at awarding liquidateddamages only, but could also award unliquidated damages as well. As he put it, the Ordinance creates a scheme of statutory compensationparallel and alternative to common law damages but not exclusive of common law damages. This so-called statutory compensation wouldin effect be the same thing as liquidated damages, the quantum being one month’s wages. He would concede however that any amountawarded for liquidated damages would have to be deducted from the unliquidated damages. A situation analagous to what he appearsto have in mind is that obtaining under the Workmen’s Compensation Ordinance where any statutory compensation which the employeris required to pay under that Ordinance is off-set against any amount he has to pay for common law damages.

8. However, unless Mr. Fairbairn can get past first base, which entails demonstrating that the wrongfully dismissed employee is entitledto liquidated damages amounting to one month’s salary, any consideration of the possible relationship between liquidated and unliquidateddamages becomes otiose.

9. In my view, the argument that the Ordinance entitles the employee to claim liquidated damages received its quietus well and trulywith the Dollar Motors decision (supra). Last year I arrived at a contrary conclusion in Lee Chi-fai v. Sunrise Knitting Factory Limited, Tsuen Wan Civil Action No. 198 of 1972, but that was per incuriam, and I now acknowledge that the part of my judgment to that effectwas wrong.

10. Having myself fallen into the trap, I know how easy it is to assume that S.6(1) of the Ordinance creates a right for the party whosecontract has been wrongfully terminated without notice to claim a fixed amount of damages or compensation. However, the Dollar Motorsdecision points out quite correctly that really the section creates no such right but merely incorporates into the contract for thebenefit of both parties a privilege which until then had been enjoyed by the employer alone, namely the right to buy his way outof the contract at any stage for a pre-determinable sum.

11. Mr. Fairbairn questions whether S.7(a) of the Ordinance was taken into account in arriving at the Dollar Motors decision as thereis no express reference to it in the judgment. As he says, S.7(a) refers to a party’s bright to notice or to payment in lieu of notice.”However, the apparent effect of those words taken in isolation is rather different from their effect when taken in the context ofthe whole of the words in the paragraph in which they appear. Section 7(a) reads as follows:-

“Nothing in section 5 or 6 shall be taken –
(a) to prevent either party to a contract of employment from waiving, at the time notice is required to be given for the purposesof sub-section (2) or (3) of section 5, his right to notice or to payment in lieu of notice;”

12. It can readily be seen that S.7(a) by itself creates no new rights. It is a provision dealing solely with the waiver of rights, andto find out what are the rights which can be waived, one has to look outside the confines of S.7(a). It appears to be a provisioninserted in the Ordinance ex abundante cautela to ensure that the concept of waiver was preserved, but it totally begs the questionof what the rights are which can be waived.

13. At the most, one might argue that S.7(a) appears to presuppose that the Ordinance has created a right to payment in lieu of notice,but one searches the Ordinance in vain to find where this right has been created. The nearest one gets to a source for such a rightis S.6(1), but the Dollar Motors decision shatters that illusion.

14. Even as the Ordinance stood at the time of the Dollar Motors decision, it could be clearly demonstrated that S.6(1) did not automaticallygive the wrongfully dismissed employee an entitlement to fixed compensation of one month’s salary in lieu of notice. At that timeS.6(1) read:-

“Either party to a contract of employment may at any time terminate the contract without notice by paying to the other partya sum equal to the amount of wages which would have accrued to the employee during the period of notice required under sub-section(2) or paragraph (b) of subsection (3) of section 5. whichever period is appropriate in the case.”

15. So long as the word “paying” stood as it did in that subsection, one could at least mount an argument for interpreting it as meaning”being required to pay” but even that possibility has been removed since the amendment to the Ordinance in 1971, substituting thewords “agreeing to pay” for “paying”.

16. In a case like the present one, there is no scope for pretending that the employer “agreed to pay” the employees a month’s wageseach when they were wrongfully dismissed, but without such an agreement at the time of their dismissal section 6(1) can have no applicationto their claim.

17. Again, Mr. Fairbairn wondered whether the learned judge in the Dollar Motors decision had overlooked yet another provision of theOrdinance, this time S.16(2)(b).

18. S.15(2)(b) is to the effect that where an employee’s contract is terminated, the amount his employer must pay him includes “the sum(if any) payable under section 6”. Because of the words “(if any)” such a provision is obviously of assiatance to the employee onlyto the extent that section 6 confers some benefit on him. Unless the employer has agreed to pay the employee a month’s wages at thetime of termination, it is difficult to see how S.15(2)(b) will be of any avail to the employee.

19. Although the preamble to this Ordinance describes it as one, “To provide for the protection of the wages of employees ……”, itstarted off by according even-handed treatment to employers and employees alike on the question of the damages payable by the partywrongfully terminating a contract of employment. The Dollar Motors decision established that the wrongfully dismissed employee couldclaim only for his actual loss, and then came the decision in Juno Revolving Restaurant Ltd. v. Patty Kwok Hoi-chun V.D.C. C.J. Action No. 2383 of 1970 which made it clear that what was sauce for the goose was also sauce for the gander when it heldthat where the employee was the one responsible for wrongfully terminating the contract then the wronged employer could claim onlyfor his actual loss and not for fixed compensation of one month’s wages. Section 6 and 7 of the Ordinance applied to employer andemployee equally producing identical results for whoever happened to be the claimant. Those sections applied to, “Either party toa contract of employment …..”

20. Section 15, though, dealing as it does with payments to or deductions from an employee at the termination of his contract has alwayshad, as a matter of drafting necessity, to make separate provision for the employer’s and the employee’s position. However, untilit was amended in 1971, the section still exemplified the even-handed approach which characterised sections 6 and 7. On the one hand,if it was the employee who was wrongfully dismissed, the employer had to pay him under S.15(2)(b) “the sum (if any) payable undersection 6”, whereas, on the other hand, if it was the employee who had wrongfully terminated the contract, the employer by virtueof S.15(3) could deduct from any wages due, “such sum as the employee is liable to pay under section 6”. Although the words “(ifany)” which appear in S.15(3), I do not regard this as being of any significance as both provisions, by completely begging the questionof what is due under S.6, throw the back to S.6 to ascertain what sum, if any, is due to the party claiming, and as I have alreadyindicated S.6 confers equal entitlement on the employer and the employee.

21. However, after the JUNO Revolving Restaurant case, S.15(3) was altered in such a way that instead of at least even-handed treatmentbeing meted out to employer and employee, the Ordinance has now become one where the balance has been tipped in favour of the employer.

22. If the employee walks out on him without giving notice, the employer can now automatically deduct the equivalent of a month’s salaryfrom any sums due to him from the employee, even though the employer might hire a substitute worker the some day and suffer no lossof profits whatsoever. By contrast the employee’s position remains as it was, so that, if he gets another job on the day he is wrongfullydismissed, he gets nothing.

23. This state of affairs has come about by an amendment to S.15(3) which now provides as follows:-

“In addition to any deduction which may be made under section 21, and subject to any order made by a court, an employermay deduct from any sum payable under subsection (1) to an employee who terminates his employment otherwise than in accordance withsection 5 or section 6 such sum as the employee would have been liable to pay if he had terminated his employment in accordance withsection 6.”

24. Thus, it can be seen that now if the employee who should have given a month’s notice wrongfully terminates without notice, an employerholding any sums for him is deemed entitled to deduct a month’s wages in lieu of notice.

25. To restore reciprocity of treatment between employer and employee, it would now be necessary to amend S.15(2)(b) somewhat along thefollowing lines:-

“(b) where an employee’s employment has been terminated otherwise than in accordance with section 5 or 6 such sum as the employerwould have been liable to pay if he had terminated the employment in accordance with section 6”

26. If, as an article at page 123 of 1973 H.K.L.J. states, the Hon. Commissioner of Labour in introducing the amendment to S.15(3) intothe Legislative Council stated that it introduced no new principle, then I can only presume that his remark must have been foundedon bad legal advice for the amendment appears to implement a startling change.

27. If anyone should seek to argue that the inclusion of the words ” …… subject to any order made by a court, ……” in S.15(3),as now amended, still might result in an employer ultimately retaining no more than unliquidated damages assessed according to ordinaryCommon Law principles, then all I can say is that it is singularly obscure, clumsy and haphazard means of achieving that object.Let the legal draftsman state his intention plainly instead of resorting to riddles.

28. The introduction of this Ordinance with its lofty preamble …(illegible) of the wrongfully dismissed employee remains what it hasalways been, namely, to claim unliquidated damages only. As the Ordinance fails to confer on the employee any entitlement to liquidateddamages, statutory compensation or any similar pre-determinable award, the argument that the employee now gets parallel benefitsin the form of fixed compensation and common law unliquidated damages fails to get off the ground.

29. To return to the facts of the present case, each of the six Plaintiffs who gave evidence satisfied me that she was entitled to unliquidateddamages equivalent to at least her previous month’s earnings. I say “at least” advisedly, for there is authority at page 263 of Batt’sThe Law of Master and Servant (5th Edition) to the effect that the quantum of damages due to a wrongfully dismissed employee entitledto one month’s notice is not limited to what he or she would have earned in a month, but is what he or she might have been expectedto earn from the previous employer right up till the time of finding alternative employment, even though that might be far in excessof a month.

30. Thus in the present case, it is arguable that the Plaintiffs’ quantum of damages is what they might have been expected to earn forthe period 28th December 1972 to 9th February 1973.

31. On that line of reasoning, if employers wrongfully dismiss their employees without agreeing to pay wages in lieu of notice, the formermight ultimately find themselves liable to pay unliquidated damages way in excess of the wages due merely for the appropriate periodof notice.

32. However, in the present case the employees have limited their claims to the equivalent of one month’s wages, so I will limit my awardof damages to that amount.

33. On the basis described above, the damages I award to each of the Plaintiffs is as follows:

1st Plaintiff $700.00
2nd Plaintiff $600.00
3rd Plaintiff $1,000.00
4th Plaintiff $800.00
5th Plaintiff $1,200.00
6th Plaintiff $600.00

34. I award costs against the Defendant on Scale V.

(J.J. Rhind)
District Judge

Representation: