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Client Alert Hong Kong High Court Confirms Jurisdiction of January 2020 the Labour Tribunal Does Not Include Tort Claims

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Client Alert Hong Kong High Court Confirms Jurisdiction of January 2020 the Labour Tribunal Does Not Include Tort Claims Dispute Resolution / Employment & Compensation Hong Kong Client Alert Hong Kong High Court confirms jurisdiction of January 2020 the Labour Tribunal does not include tort claims Summary A recent High Court decision in Woo Kwok Ping v. The Incorporated For further information, please contact: Management Committee of Tsuen Wan Trade Association Primary School (14/01/2020, HCA1523/2013) [2020] HKCFI 186 ("Decision") has illustrated Rowen McKenzie Partner some of the legal principles involved in determining the Labour Tribunal’s +852 2846 2103 jurisdiction over employees’ monetary and non-monetary claims. The case [email protected] discusses what claims fall within and outside the jurisdiction of the Labour Roberta Chan Tribunal and has affirmed, among other things, that the Labour Tribunal does Partner not have jurisdiction over any claim in respect of a cause of action founded in +852 2846 2492 tort, whether arising from a breach of contract or a breach of a duty imposed [email protected] by a rule of common law or an enactment. Background The Defendant, The Incorporated Management Committee ("IMC") of Tsuen Wan Trade Association Primary School, runs the subject aided school (the "School") receiving subvention from the government. The Plaintiff was employed as a principal of the School pursuant to an employment contract (the "Contract") that incorporated by reference the Education Ordinance (Cap 279) (EDO) and its subsidiary regulations, two Codes and a Guide. The School summarily dismissed the Plaintiff on 27 July 2013 after issuing reminders and warnings to the Plaintiff for misconduct. The Plaintiff took the view that IMC failed to follow the statutory procedure for termination of a principal in accordance with sections 55 to 57 of the EDO. The Plaintiff commenced the action at the High Court on 20 August 2013 for wrongful dismissal on the following grounds: 1. IMC failed to comply with sections 55 to 57 of the EDO by dismissing her before the Permanent Secretary for Education (the "Permanent Secretary") had withdrawn approval of the Plaintiff or given approval for another principal. This amounted to a breach of the Contract. 2. The Plaintiff’s misconduct did not satisfy the requisite standard of seriousness to warrant dismissal under the two Codes pursuant to the EDO and IMC had failed to follow the procedures prescribed under the two Codes in dismissing the Plaintiff. This amounted to breaches of the Contract which incorporated the two Codes and a breach of statutory duty. 3. The Plaintiff’s misconduct did not satisfy the grounds for dismissal under section 9 of the Employment Ordinance (Cap 57) (EO). This amounted to breach of the EO. Among other things, the Plaintiff sought a declaration that the summary dismissal was unlawful and wrongful and of no effect ("1st Prayer"), an injunction to restrain IMC from dismissing her from the post of principal without the Permanent Secretary’s approval or action upon such dismissal ("2nd Prayer"), an injunction to compel IMC to exhaust the procedures under the two Codes of the EDO before taking any action against the Plaintiff ("3rd Prayer"), and damages to be assessed including loss of salary and provident fund ("4th Prayer"). The procedural history of the action is rather complicated. For the purpose of this client alert, we shall focus solely on the issue of jurisdiction ("Jurisdiction Issue") only and will not discuss the issue on costs. Although the action commenced in 2013, the Jurisdiction Issue was only first raised by a Master at the first case management conference in October 2018. Since the Jurisdiction Issue was not taken forward, the Master directed the parties to put forward their arguments before the listing judge at the third case management conference in July 2019. At the hearing on 28 November 2019, Hon Au Yeung J had to decide whether the claim fell within the exclusive jurisdiction of the Labour Tribunal. In handing down its Decision of 14 January 2020, the Court held that the Labour Tribunal did not have jurisdiction over the case. The Judge affirmed the following key points: 1. The Labour Tribunal has exclusive jurisdiction over a claim for a sum of money, whether liquidated or unliquidated, arising from the breach of a term of a contract of employment and the failure to comply with the provisions of the EO. 2. The Labour Tribunal does not have jurisdiction over any claim in respect of a cause of action founded in tort, whether arising from a breach of contract or a breach of a duty imposed by a rule of common law or by any enactment. Mixed claims founded both in employment contracts and torts are excluded from the Labour Tribunal. A mixed claim for monetary and non-monetary reliefs, even though based on breach of contract or of the EO, falls outside the jurisdiction of the Labour Tribunal. 3. When deciding whether the Labour Tribunal has any jurisdiction over a claim, the Court will look at the substance of the dispute and not the labels put on the pleadings. The Court should assess whether the other claims brought by the plaintiff are merely “window dressing” such that the real claim actually lies within the Labour Tribunal’s exclusive jurisdiction. 4. There should be a distinction between jurisdiction and forum for trial. At the time the claim is filed, the Court will decide whether a claim falls within the jurisdiction of the Labour Tribunal. On the other hand, the forum for trial is determined at the time the issues are crystallized or when there are changes in circumstances after filing of the writ. The Judge also made the following observations: 1. The present action is based on breach of the Contract which includes breach of the EO and all breaches of the statutes incorporated into the Contract. An indispensable part of the Plaintiff’s case turned on the applicability of section 55 to 57 of the EDO as mentioned above. The effect of these sections is that as long as a principal does not lose his or her approval, he or she is entitled to hold office until the Permanent Secretary decides otherwise. The IMC does not have the independent power to remove a principal from office. The Permanent Secretary can only withdraw his or her approval for the principal on the limited grounds in section 56 of the EDO. 2 Baker McKenzie January 2020 2. The Plaintiff’s cause of action is breach of duty under an enactment, which constitutes a tort claim, and is thus a mixed claim excluded from the Labour Tribunal at the time the writ was filed. 3. The 2nd and 3rd Prayers seek injunctions. At least two statutory reliefs were open to the Plaintiff upon failure to follow the termination procedure under sections 55 to 57 of the EDO, including (1) reinstatement of her position as principal under section 32N of the EO and (2) damages as covered by the 4th Prayer. 4. The Labour Tribunal can grant reinstatement as a final relief but, unlike the High Court and District Court, it has no power to grant interim relief or injunctions. As a matter of fact, the Plaintiff obtained an interim injunction from the High Court along the lines of the 2nd Prayer at an earlier stage of the proceedings and the judge had considered that the Plaintiff did not have a frivolous or vexatious claim. The rationale for the interim order was that damages would not be an adequate remedy for depriving the security of tenure of the Plaintiff afforded by section 55, which showed that the 2nd Prayer was not window-dressing. 5. Where there is an issue on jurisdiction in an action in the Court of First Instance (or District Court), the claimant or counterclaimant should consider seeking a stay of proceedings of the court for a few weeks in order to launch a claim at the Labour Tribunal. The parties should submit a concise and joint statement of the parties to the Labour Tribunal www.bakermckenzie.com informing the Tribunal of the existing court case and seek a transfer (if appropriate) of the claim or counterclaim in court. If the Labour Tribunal Suite 3401, China World Tower 2 takes up the claim, the claim or counterclaim in the originating court can 1 Jianguomenwai Dajie be dismissed. If the Labour Tribunal transfers the case, the stay of the Beijing 100004, China existing action can be uplifted. Tel: +86 10 6535 3800 Fax: +86 10 6505 2309 Take-away for Employers 14th Floor, One Taikoo Place 1. When proceedings are brought by an employee, the first issue for 979 King’s Road, Quarry Bay Hong Kong SAR, China employers to consider is whether the employee has commenced the Tel: +852 2846 1888 proceedings in the correct forum. The starting point is that the Labour Fax: +852 2845 0476 Tribunal should generally have exclusive jurisdiction over a claim arising from the breach of a term of a contract of employment. Mixed claims Unit 1601, Jin Mao Tower involving a breach of the employment contract and a cause of action 88 Century Avenue, Pudong based on torts are excluded from the jurisdiction of the Labour Tribunal. Shanghai 200121, China Tel: +86 21 6105 8558 2. Employers should seek legal advice on the pleaded causes of actions Fax: +86 21 5047 0020 and reliefs sought. In assessing whether an employee's claim lies within the Labour Tribunal’s exclusive jurisdiction, the Court will look at the substance of the dispute and not the labels on the pleadings. 3. As shown in the Decision, the Court has the general power to direct This client alert has been prepared for clients and professional associates of Baker & McKenzie.
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