Jurisdiction - Hong Kong
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Hong Kong – Mind Body (Asia) Limited vs Lee Siu Hung & others – Exclusive Jurisdictions of the Labour Tribunal.

1 July, 2013

 

The Labour Tribunal has exclusive jurisdiction to hear claims for most employment related disputes, and the exceptions include non monetary claims (e.g. injunction) or claims based on a cause of action founded in tort.

 

In this case, the Plaintiff took action in the High Court and claimed against one of the defendants for inter alia breach of fiduciary duties (which alleged to be a claim based on a cause of action founded in tort) and sought for injunctive relief. Apparently, the Plaintiff's claims fell outside the exclusive jurisdictions of the Labour Tribunal. However, the judge in the High Court ruled that all claims made by the Plaintiff fell within the exclusive jurisdiction of the Labour Tribunal and struck out the Plaintiff's case.

Facts


One of the defendants Lee Siu Hung ("Lee") signed an employment contract ("the Employment Contract") with the Plaintiff Mind Body (Asia) Limited ("Mind Body") in April 2006.

 

Mind Body alleged that by resigning from Mind Body on 15 April 2011, and working for another company Noble Spirit Limited trading as Life Solutions, Lee was in breach of –

 

  1. A restraint of trade clause in the Employment Contract, which stated that Lee was prohibited from working in the same trade or industry as Mind Body within 6 months after termination of the Employment Contract;
  2. An express term prohibiting the disclosure or divulgement of any internal information of Mind Body obtained during Lee's employment; and
  3. The following implied terms –

    1. A duty of loyalty and fidelity;
    2. A duty to act in good faith;
    3. A duty to act at all times in the best interests of Mind Body; and
    4. A duty not to put himself in a position of conflict of interest with Mind Body.

 

Mind Body made the following claims against Lee –

 

  1. Damages for breach of employment contract;
  2. Damages for breach of duties as an employee;
  3. An injunction to restrain Lee from engaging in any work in the same trade or industry as Mind Body in Hong Kong within 6 months after termination of his employment with Mind Body;
  4. Damages in lieu of the injunction;
  5. Interests on any damages awarded and payments resulting from account of profits;
  6. Such further and/or other relief; and
  7. Costs. 

 

Issue

 

The issue in this case was whether the High Court was prevented from hearing Mind Body's claims against Lee, in part or in whole, on the ground that they were within the exclusive jurisdiction of the Labour Tribunal by reason of section 7 of the Labour Tribunal Ordinance ("LTO") and its accompanying Schedule?

 

Findings and Reasoning

 

Whether breach of fiduciary duty is a cause of action founded in tort

 

The judge accepted that the breaches of the implied terms set out above consisted of breaches of fiduciary duties.

 

The main point in dispute was whether breach of fiduciary duty was a cause of action arising from tort, and thus fell outside the exclusive jurisdiction of the Labour Tribunal by virtue of paragraph 3 of the Schedule to the LTO.

 

The judge considered that the essence of an employment relationship was contractual, not fiduciary; and where fiduciary duties were seen to exist within an employment relationship, they were imposed by equity, and their scope and extent determined by the contractual terms.

 

After considering various case authorities, the judge concluded that a breach of fiduciary duties was not a cause of action founded in tort. Although the case law had caused the remedy for breach of fiduciary duty to shift closer to that for torts, this did not mean that the nature of a breach of fiduciary duty was tortuous. In addition, various case authorities confirmed that a claim by the employer against an employee or former employee for monetary loss as a result of breach of an express or implied term of the contract of employment or breach of fiduciary duties fell exclusively within the jurisdiction of the Labour Tribunal.

 

Paragraph 3 of the Schedule to the LTO provided that:-

 

"….the tribunal shall not have jurisdiction to hear and determine a claim for a sum of money, or otherwise in respect of a cause of action, founded in tort whether arising from a breach of contract or a breach of duty imposed by a rule of common law or by any enactment."

 

The judge ruled that since a breach of fiduciary duty did not fall within the paragraph, it was not excluded from the jurisdiction of the Labour Tribunal.

 

Whether the remedies Mind Body sought fell within the jurisdictions of the Labour Tribunal

 

The "claim for a sum of money" in paragraph 1 of the Schedule to the LTO includes claims for non-liquidated damages. Thus, all claims for damages by Mind Body fell within paragraph 1. The claim for interest on damages awarded also amounted to a claim for a sum of money.

 

Further, all of Mind Body's claims clearly arose from breaches of express or implied terms of the Employment Contract.

 

It was decided in the case Deutsche Bank AG (Hong Kong Branch) v Daniel Mamadou-Blanco [2012] 3 HKC 176, that in considering whether claims in question were for non-monetary relief and thus fell outside the jurisdiction of the Labour Tribunal, the court might disregard a claim where it amounted to ‘window dressing'. The judge considered that the claim for an injunction against Lee did not serve any real purpose, as Mind Body should have known that the 6-month period would expire before the trial. Thus, the claim could be disregarded.

 

Therefore, the judge ruled that all the claims made by Mind Body against Lee fell within the exclusive jurisdiction of the Labour Tribunal. Mind Body's claims against Lee were therefore struck out.

 

 

 

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