Think twice before filing an employment related claim directly to the High Court

Case background

The Plaintiff, Lo Wai Keung, was a former employee of Hannover Rück SE, the Defendant. The Plaintiff issued court proceedings in the High Court claiming that the Defendant was in breach of its statutory duty pursuant to the Employment Ordinance (“EO”) when it terminated his employment. He also claimed that there had been a breach of the contractual obligations owed to the Plaintiff including the Defendant’s internal code of conduct and that he suffered damage to his reputation because of his dismissal which he claimed was unreasonable causing him to suffer a loss of income and benefits.

The first instance decision

Following the issuance of the Amended Statement of Claim (“ASOC”), the Defendant applied to strike out the Plaintiff’s claim on the basis that by commencing the claim in the High Court there was an abuse of process as the Labour Tribunal had exclusive jurisdiction over a claim of money arising from the breach of a term of the employment contract.

In the strike out application, the Defendant argued that there was no claim founded in tort nor was this a mixed claim founded in both tort and contract. The Plaintiff used counsel to draft his pleadings and upon being served with the summons and supporting affirmation to strike out the claim, the Plaintiff sought to improve his pleadings by claiming that there were tortious elements in his Answers to Further and Better Particulars (“Answers to the F&BPs”).

The Plaintiff’s case was that the Answers to the F&BPs should be considered as part of his pleadings and that there were references therein to defamation as a cause of action. The Plaintiff submitted that even if there was no specific reference to “a defamatory statement” or “libel” in the pleadings, there were nonetheless references to statements and the author of statements that were defamatory in nature. The Plaintiff argued that his pleadings contain sufficient references to a tortious claim which caused the case to fall outside of the Labour Tribunal’s exclusive jurisdiction.

The Master found in the Defendant’s favour in the strike out application, noting that as counsel had drafted the ASOC, if there was a tortious claim, it should have been clearly set out.

The Plaintiff then applied to appeal the strike-out decision which was heard in February 2023.

The appeal decision

The Plaintiff’s appeal application was heard by the Honourable Mr Justice Yeung J on 1 February 2023 and his decision was handed down on 17 February 2023. The Court having analysed the Plaintiff’s ASOC, was not convinced that he had pleaded any tortious claim.

The Plaintiff’s position in the appeal was that the ASOC and the Answers to F&BP contain a claim for: (i) defamation resulting in damages being suffered to the Plaintiff’s reputation; and (ii) the tort of malfeasance. The Plaintiff’s counsel at the appeal hearing also raised the question on whether the ASOC could be amended so that it properly pleaded a claim in tort. The Plaintiff’s primary position was that the facts in support of the two tortious claims were adequately pleaded in the ASOC, but that if deemed necessary, the Plaintiff should be afforded the chance to amend his ASOC and a striking out of the claim was a matter of last resort.

The appeal was dismissed on the basis that even if amendments were made to the ASOC, such amendments would not work within the structure of the ASOC and would not be sufficient to assist the Plaintiff to formulate a tortious claim.

The judge’s view was that it was plain and obvious that the substance of the Plaintiff’s claim was founded on an alleged breach of the Employment Contract giving rise to a claim of unlawful dismissal, a failure to comply with the provisions of the EO, or for remedies under Part VIA of the EO. They were all within sections 1(a), 1(b) and 7 of the Schedule to the Labour Tribunal Ordinance. There was no claim for a sum of money, or otherwise in respect of a cause of action, that was founded in tort. The judge dismissed the appeal and awarded costs of the appeal to the Defendant.

Commentary and key takeaways

It is important to note that under Order 18 rule 19 of the Rules of the High Court, the Court should only exercise its summary powers to strike out any writ or pleadings in plain and obvious cases. Disputed facts are considered in the favour of the party against whom the application is made. Therefore, persuading a Court to strike out a claim in its entirety is a rare outcome in the Hong Kong courts. The obvious advantage to a defendant able to persuade the court to strike out a claim is that the time and costs needed to make such an application are a fraction of the costs which would be involved in defending a case up to trial.

This case highlights the essential factors to bear in mind when considering whether one should issue a strike-out application on the basis that dispute falls within the exclusive jurisdiction of the Labour Tribunal:

1. The Labour Tribunal has exclusive jurisdiction over a claim for a sum of money, whether liquidated or unliquidated arising from, amongst others, (a) the breach of a term of a contract of employment and (b) a failure to comply with the provisions of the EO.

2. 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 falls outside the Labour Tribunal’s jurisdiction.

3. In deciding the jurisdiction issue, the Court should look at both the pleaded causes of action and relief sought.

4. Mixed claims founded both in employment contracts and torts are excluded from the Labour Tribunal. Similarly, a mixed claim for monetary and non-monetary relief, even though based on a breach of contract or of the EO, fall outside the jurisdiction of the Labour Tribunal.

5. The proper approach of the Court is to look at the substance of the dispute and not the labels put on the pleadings.

6. Once the Court is satisfied that the case before it should be within the exclusive jurisdiction of the Tribunal, the court must strike out the claim. The Court of First Instance does not have any power, whether under statute or its inherent jurisdiction, to transfer or refer the matter to the Labour Tribunal.