Key takeaways

• Employers with management located outside of Hong Kong should have an efficient system to ensure immediate notification of the receipt of important documents such as court documents.
• Once a claim or complaint is received by an employer, it is important to act quickly. Employers that are unfamiliar with the court process in Hong Kong should immediately seek legal advice once they become aware of actual or impending legal proceedings as there is often limited or no flexibility in the procedural process once a party fails to comply with a court order.
• While Hong Kong has a reputation as an employer friendly jurisdiction, this case serves as a reminder that the Labour Tribunal has real bite.

In more detail

In the case of Aubrey Mark Edward v. Catheon Gaming (HK) Ltd [2024] HKCFI 3597, the Court of First Instance dismissed an application by a former employer ("Company") for leave to appeal against the award of the Labour Tribunal.

Background

On 21 March 2022, Mr. Aubrey ("Mr. A") and the Company entered into an agreement entitled "Independent Contractor Agreement" ("Agreement"), under which Mr. A agreed to act as chief executive officer in exchange for a remuneration package. This remuneration package included a sign-on bonus, "recurring fees" paid on a monthly basis, and participation in a Long-Term Incentive Plan (LTIP), pursuant to which he was to be granted a certain amount of tokens (a form of cryptocurrency).

On 12 January 2024, Mr. A brought a claim in the Labour Tribunal against the Company, alleging that he had been constructively dismissed and that the Company had repudiated the Agreement by unilaterally changing his job title, failing to pay the sign-on bonus, and unilaterally declaring a 50% reduction of his monthly wages. He claimed that he was an employee and not an independent contractor of the Company and sought wages in lieu of notice, his sign-on bonus, and the value of the unvested tokens under the LTIP.

The Labour Tribunal sent a written notification of the claim to the Company's registered office address, which was also the address of its company secretary.

Tribunal proceedings

The Tribunal held a call-over hearing on 2 February 2024. The presiding officer was satisfied that the Company had received sufficient notice of the claim and proceeded to hear the claim in the absence of the Company. The Tribunal awarded Mr. A HKD 39,846,582.34, comprising wages in lieu of notice, the sign-on bonus, and the value of the unvested tokens ("Award").

The Company applied to set aside the Award and on 7 June 2024, its application was heard. The Tribunal ordered that the Award should be set aside on condition that the Company made a payment in of HKD 365,162 to the Tribunal by 5 July 2024. The Tribunal further directed the Company to file witness statements and documents thereafter. The Tribunal's order of 7 June 2024 expressly provided that should the Company fail to comply with the condition of payment in, the Award would stand and the hearing scheduled for 12 September 2024 would be vacated.

The Company failed to make any payment in by 5 July 2024 and pursuant to the Tribunal's order of 11 July 2024, the Award stood. The Company wrote to the Tribunal on 9 September 2024 to explain that it had the financial security to pay the payment in and asked that the setting aside order of 7 June be reinstated. The Tribunal replied by letter on 7 October 2024, stating that the Award stood.

Court of First Instance decision

The court's view was that the Company's application to appeal against the Award was procedurally incorrect.

The Company had in fact followed the correct Tribunal procedure under section 21A of the Labour Tribunal Ordinance for the setting aside an award made in the absence of a defendant. The application was successful, pending the satisfaction of the condition of payment in. However, the Company's failure to make the payment in could not then render it appropriate for it to launch an appeal against the Award instead. Additionally, there was no basis to grant leave for appeal under section 32 of the Labour Tribunal Ordinance (appeal on a point of law).

For more information, please contact tess.lumsdaine@bakermckenzie.com.