CACV 55/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 55 OF 2000
(ON APPEAL FROM DCCJ 1546/99)
____________________

BETWEEN

EVELYN SEMANA BACHICHA Plaintiff

and

POON SHIU MAN HENRY Defendant

____________________

Before: Hon Godfrey VP, Rogers and Ribeiro JJA in Court

Date of Hearing: 16 June 2000

Date of Judgment: 18 July 2000

_________________

JUDGMENT
_________________

Ribeiro JA:
This is an appeal involving an employment dispute between
the plaintiff, a domestic helper from the Philippines, and her employer,
the defendant.

Proceedings having been commenced by the plaintiff in the

Labour Tribunal on 1 December 1998, the matter was transferred (for
 — 2 —

reasons mentioned later) to the District Court on 7 January 1999. After a

three day trial at which neither party was legally represented, H H Judge
C B Chan gave judgment for the plaintiff on 10 September 1999, holding
that she had been constructively dismissed and awarding her damages
totalling $51,629.00, plus interest and fixed costs in the sum of
HK$896.00.

The defendant appeals against that judgment on two

principal grounds. First, he contends that the parties had reached a
binding settlement agreement at a conciliation meeting at the Labour
Department on 20 October 1998, which should have precluded her claim
(but which agreement the Judge wrongly ordered to be set aside).
Secondly, he contends that the quantum of the damages awarded cannot
be justified.

The plaintiff also appeals, complaining that the costs

awarded should not have been confined merely to fixed costs.

A. The facts found by the Judge

At the trial, there was a considerable conflict of evidence.

Most of the events giving rise to the dispute concerned incidents
involving the plaintiff and Wong Wai-kwan (“Madam Wong”), the
defendant’s wife, who on a day-to-day basis acted as the plaintiff’s boss.
The Judge accepted all the plaintiff’s evidence and rejected conflicting
evidence given by the defendant or by Madam Wong.
 — 3 —

The Judge’s findings, including her finding of constructive

dismissal, are not the subject of appeal. The issues raised by Mr Luiz da
Silva Pedruco, appearing on the defendant’s behalf, concern the legal
consequences which flow from her findings. Accordingly, the facts may
be summarised as follows, taken largely from the Judge’s recitation of the
plaintiff’s evidence.

The contract whereby the plaintiff took up employment with

the defendant was dated 30 September 1997 and appears to have been
signed by the plaintiff on 7 October 1997, verified by a Philippines
Labour Attache. It was of a two year duration commencing from the date
of the plaintiff’s arrival in Hong Kong, at the monthly salary of
$3,860.00, terminable on one month’s notice or payment in lieu. Material
clauses included the following, namely :-

(1) Clause 3, which required the plaintiff to work and reside in the
defendant’s residence at G/F, 3B Lok Lo Ha Village, Fo Tan, New
Territories.

(2) Clause 6, which drew attention to the plaintiff’s entitlement to all

rest days, statutory holidays and paid annual leave as specified in
the Employment Ordinance.

(3) Clause 8, which obliged the defendant to pay or reimburse to the

plaintiff :-
 — 4 —

“the costs of preparing all necessary documents, which include

medical examination fees, authentication fees by the relevant
Consulate, visa and other processing fees”.

(4) Clause 11, which provided for termination by notice or payment in

lieu as follows :-

“Either party may terminate this contract by giving not less

than one month’s notice in writing or by paying the equal
number of month’s wages in lieu.”

(5) Clause 13, which provided :-

“In the event of termination of this contract, both the Employer

and the Helper shall give the Director of Immigration notice in
writing within 7 days of the date of termination. A copy of the
other party’s written acknowledgment of the termination shall
also be forwarded to the Director of Immigration.”

(6) Clause 14, which stated : -

“Should both parties agree to enter into a re-engagement

contract, the Helper shall, before any such further period
commences and at the expense of the Employer, return to his/
her place of origin for a paid/unpaid vacation of not less than 7
days, unless prior approval for extension of stay in Hong Kong
is given by the Director of Immigration.”

(7) Clause 16, dealing with contractual variations as follows :-

“Save for the following variations, any variation or addition to

the terms of this contract during its duration shall be void
unless made with the consent of the Commissioner for Labour
in Hong Kong:
 — 5 —

(a) a variation of the Employer’s residential address stated

in clause 3 by mutual agreement and upon notification
in writing being given to the Director of Immigration;

(b) a variation of the period of employment stated in clause

2 through an extension of the said period by mutual
agreement.”

On 26 February 1998, the Plaintiff came to Hong Kong to

commence work. It follows that in the ordinary course, her contract
would have run until 26 February 2000.

However, the employment relationship lasted only just over

6 months before the plaintiff’s constructive dismissal. It is in fact clear
that from the start, the plaintiff was subjected by her employers to an
oppressive and exploitative work regime, in disregard of her legal rights.
The Judge described her working conditions as follows :-

“ ...... her employer and his wife had 2 children, one boy aged
9 and one girl aged 8. They also had two dogs as well as 20
boxes of pet mice. The animals were kept on the balcony.

Her female employer was always ba tempered with her.

Even for a small matter she would get angry with her, push her,
shout at her and pull her hair. The two kids were always
kicking her and punching her.

She had a lot of work each day. She woke up at 6 a.m.

in the morning. Her work included taking the 2 dogs for walks
3 times a day; washing and cleaning 20 boxes wherein the pet
mice were kept including putting in the feed and fresh water.
Cleaning the balcony and things therein, taking the daughter to
school from Fo Tan to Yau Ma Tei; washing clothes, ironing,
cooking breakfast, lunch and dinner, general cleaning of the
house; tidying up; helping the children to bathe; help the
d˚
 — 6 —

children with their home work; washing the dishes and pots and
pans after meals. She had to cook for the two dogs in the
evening and feed them before taking them out for a walk. She
often found that she would not finish work until late into the
evening because of the volume of work.

On her rest days, she was required to work from 6 a.m.

until 10:30a.m. before she could go out. When she returned at
8:30 p.m. she had to work until mi night ......

...... she was required to clean three other premises from

time to time. The addresses were:

1. Flat C, 10th Floor, Hope Yick Centre in Hop Yick Road,

Yuen Long, N.T.

2. Flat E, 3rd Floor, Block E, On Ning Building, Shatin

Centre, N. T.

3. Flat B4, 23rd Floor, in a flat in Pok Fu Lam near St.

Paul's College.

In respect of above three premises she had to clean the floor, all
the windows, cabinets, walls, kitchen and bathroom.

She was feeling very tired all the time. Of course, she
was unhappy. She denied the allegation of the Defendant that
she was slow in her work. She stated that there was just too
much work to do.”

Madam Wong was unhappy with the plaintiff’s work. It

appears that her dissatisfaction had much to do with her own notions of
status and of a perceived lack of respect shown by the plaintiff. For
example, as found by the Judge:-

“She found the Plaintiff's ability to understand her was very

low. She found the Plaintiff was impolite because she did not
greet her and her children ‘Good Morning’ each morning. She
d˚
 — 7 —

felt that was the appropriate way for the Plaintiff as a domestic
helper to behave. The Plaintiff stated that she did not
intentionally fail to say ‘Good Morning’ but she was usually
very occupied with work and was so busy that she failed to say
‘Good Morning’ only sometimes. DW1 also stated that she
asked her daughter as to whether the Plaintiff smiled when she
saw the daughter when picking her up from school and the
daughter had informed her that she did not. DW1 stated that
when they take the daughter to school together, when the
Plaintiff got off the bus, the Plaintiff did not say goodbye to
her.”

Madam Wong also complained that the plaintiff was too

slow in her work and accused her of lacking security consciousness.
However, none of these complaints were of any weight and in truth,
Madam Wong had apparently, for whatever reason, developed somewhat
violent feelings of personal antagonism towards the plaintiff. She
decided to replace the plaintiff with a new domestic helper from the
Philippines and was informed by an employment agency on 26 August
1998 that the replacement would be arriving in early October.

Madam Wong thereupon gave the plaintiff notice to

terminate her employment. A handwritten letter dated 1 September 1998
and signed by the defendant was handed to the plaintiff (according to the
defendant on 30 August, but according to the plaintiff on 2 September)
stating that her last day of work would be on 30 September 1998. The
plaintiff was pressed to sign at the foot of the letter under the words
“Accepted & agreed”. She refused.
 — 8 —

On 6th September 1998 Madam Wong again pressed the

plaintiff to sign, leading to an incident described as follows by the Judge:-

“On the 6th Sept. 1998, DW1 asked the Plaintiff to sign it. She
insisted that the Plaintiff signed it then. The Plaintiff refused.
DW1 lost control because she was very angry with her. She
pushed the Plaintiff and the Plaintiff fell and she hit against the
metal arm of the sofa and her right rib got hurt. When the
Plaintiff got up, DW1 pulled her hair many times and spat on
her face. Then the Plaintiff told DW1 that she wanted to
telephone the agency to ask if she signed the one month's
notice or not. She did not tell the agency that DW1 had hurt
her as DW1 was standing next to her. The agency told the
Plaintiff to sign it. The Plaintiff signed it.”

It was the plaintiff’s evidence that she was very frightened

by this episode. When, on 8th September 1998, Madam Wong instructed
her to prepare to go to clean the flat in Shatin, the plaintiff refused on the
basis that such work would be a breach of her visa conditions. The
plaintiff called the police, telling them that she was very scared of her
employer. After the police left, Madam Wong vented her anger on the
plaintiff, pushing her and “pointing her finger on her cheeks”. This led to
the plaintiff again summoning the police, after which she became too
scared to remain at her employer’s premises and moved instead to a
shelter for domestic helpers run by the Philippines Consulate.

On the basis of the abovementioned facts, the Judge found

that the plaintiff had been constructively dismissed on 8 September 1998.
As I have indicated, that conclusion and the findings which underlie it are
not challenged.
 — 9 —

B. The alleged compromise

Mr Pedruco argued that the plaintiff was precluded from

bringing her claim because, even assuming that she had been
constructively dismissed, the parties had subsequently entered into a
binding agreement whereby all claims had been settled. He also
complained that his client had been prejudiced by the Judge deciding to
enter into the question of whether the compromise agreement should be
set aside without proper notice to his client. I shall deal first with the
substantive complaint before considering the procedural objection.

There is no doubt that a document which purported on its

face to be an agreement compromising all the plaintiff’s claims was
signed by the parties. The question is whether the Judge was right to hold
that such agreement had to be set aside. In my view, she was.

The agreement relied on was signed on 20 October 1998 at a

conciliation meeting conducted at the Labour Department by a Labour
Relations Officer (“the Officer”) and attended by the plaintiff, the
defendant, Madam Wong and a representative of the Philippine Consulate
who helped with translation.

The document states that the plaintiff agreed to accept the

sum of $975.00 in cash in full and final settlement of all claims against
the defendant. It was signed by the Officer as witness.
 — 10 —

The evidence was that before the document was signed, the
Officer had informed those present that she was not a judge and could not
resolve disputed factual allegations. However, she indicated a
willingness to offer advice as to the parties’ rights on the basis of facts
which were undisputed. It appears that she then proceeded on the footing
that whereas the plaintiff’s allegations of constructive dismissal were
contested and therefore outside her ambit, it was not in dispute that the
employer had given the plaintiff a month’s notice and that the plaintiff
had, during that period, left her employers’ premises.

It seems that it was on that basis that the Officer told the
plaintiff that the latter had a net financial liability to her employer as a
result of her walking out on her job and that it was in her interests to
accept her employer’s offer of air and bus fares back to the Philippines in
settlement of her claim.

This advice, which echoed the defendant’s own assertions at

the meeting, obviously failed accurately to convey the legal position. As
a matter of commonsense, legal advice cannot be given on the foundation
of only such part of the facts as may happen to be undisputed. The
disputed facts, subsequently found by the Judge in our case to have been
proved and not now challenged, entirely changed the picture: the
employee did not wrongfully walk out on her employers, she was
unlawfully driven out of her job and so had been constructively
dismissed.
 — 11 —

The plaintiff had been led to believe that she was in law
taken to have walked out on her job and had consequently incurred a net
liability to the defendant, her claim being disregarded. She therefore
signed the compromise agreement in the mistaken belief that it
represented a concession by her employer going beyond anything she was
entitled to. She would not have signed the document if she had realised
that her version of events would be entertained and if accepted, would
lead to liability falling on the defendant.

Given the Judge’s unchallenged finding of constructive

dismissal, the fact that the plaintiff was labouring under such mistake
must have been known to the defendant since he knew the facts behind
the plaintiff’s leaving, which constituted the constructive dismissal.

The defendant argued that any misrepresentation was made

by the Officer and was not attributable to the defendant. The Judge
rejected this submission. She applied In re Roberts [1905] 1 Ch 704,
where a family solicitor was held to be the common agent of members of
a family being simultaneously advised. It was held that wrong advice
given by such solicitor as to the rights of any of the family members,
inducing them to enter into an agreement with the others would be
grounds for setting aside such agreement.

I doubt whether this is a sufficiently similar case to justify a

finding of agency. Nonetheless, in my view, the compromise agreement
 — 12 —

cannot be allowed to stand because it was, in the circumstances, an

unconscionable bargain.

The Privy Council in Hart v O’Connor [1985] AC 1000,

explained the doctrine of unconscionable bargains in the context of the
principles of equity as follows :-

“In the opinion of their Lordships it is perfectly plain that

historically a court of equity did not restrain a suit at law on the
ground of ‘unfairness’ unless the conscience of the plaintiff was
in some way affected. This might be because of actual fraud
(which the courts of common law would equally have
remedied) or constructive fraud, ie conduct which falls below
the standards demanded by equity, traditionally considered
under its more common manifestations of undue influence,
abuse of confidence, unconscionable bargains and frauds on a
power. (cf Snell's Principles of Equity, 27th ed (1973), pp 545
et seq) An unconscionable bargain in this context would be a
bargain of an improvident character made by a poor or ignorant
person acting without independent advice which cannot be
shown to be a fair and reasonable transaction.” (at p 1024)

Lord Brightman, who gave the advice of the Board, stressed

(at pp 1024 and 1028) the need, not merely for inequality and an
improvident bargain, but also an element of equitable fraud,
victimisation, taking advantage, overreaching “or other description of
unconscionable doings” to justify intervention by the court.

In my judgment, such unconscionability was present in this

case. Neither party was legally represented when the agreement was
signed. The plaintiff was a person with an economic and social
disadvantage, and with a marked inequality of bargaining power, when
 — 13 —

compared with her employer. At the meeting, the defendant, while

knowing full well the circumstances which, as the Judge later found, led
to the plaintiff being driven out of her job, contended that the plaintiff
was liable to compensate him for walking out of the job and sought and
obtained the Officer’s support for his position. In consequence, the
plaintiff was led to accept an improvident agreement limiting her
compensation to a paltry $975 in purported full and final settlement of all
claims against the defendant. The employer therefore took advantage
both of the ignorance of the plaintiff and of the Officer’s faulty advice to
secure for himself an oppressive bargain by unconscionable means. To
my mind, this suffices to bring the case into the exceptional class of cases
where the court will intervene to set the bargain aside. In Arrale v
Costain Civil Engineering Ltd [1976] 1 Lloyd’s Rep 98 at 102-103, Lord
Denning MR applied the principles in a similar case involving an
employee purportedly signing away common law rights of suit. (See also
generally, Chitty, op cit, §7-075 to §7-088).

Turning to the procedural complaints, Mr Pedruco argued

that the Judge’s determination of the application to set aside the
agreement had taken the defendant by surprise and that he was prejudiced
by not having had the opportunity of calling the Officer in question.

I do not consider that complaint justified. The matter came

before the Labour Tribunal on two occasions. Each time, the defendant
sought to rely on the compromise agreement and each time the plaintiff
 — 14 —

indicated that she had entered that agreement under a misapprehension as

to the viability of her claim for constructive dismissal. The Presiding
Officer transferred the matter to the District Court on the express and sole
ground that his tribunal lacked jurisdiction to deal with setting aside the
settlement agreement.

It is therefore impossible to see how the defendant can have

been taken by surprise when, at the start of the District Court hearing the
first issue raised by the Judge was as to whether the agreement should be
set aside. The defendant had ample opportunity to arrange for the Officer
to give evidence. He did not ask for any adjournment and did not tell the
Judge that he wanted to call the Officer.

Moreover, Mr Pedruco was unable to indicate what material

evidence not before the Judge the Officer would have been called to give.
Before this Court, there appeared to be no dispute as to what had
transpired at the conciliation meeting, the relevant facts being as set out
above. I am therefore unpersuaded that any prejudice was suffered by the
defendant as a result of the Judge determining the setting aside issue at
the start of the hearing,

The award of damages

The Judge’s award totalling $51,629.00 (plus interest and

fixed costs) comprised (i) $46,577.00 representing damages for
constructive dismissal equivalent to the wages payable under the
employment contract between the date of the constructive dismissal (8th
 — 15 —

September 1998) and the date of the judgment (10th September 1999);
(ii) outstanding wages of $1,672.00 for the period from 27th August 1998
to 8th September 1998; (iii) $1,305.00 representing the air fare back to
the Philippines; (iv) $400.00 as reimbursement for a medical examination
payable under clause 8 of the contract; and (v) reimbursement of
$1,675.00 representing the air fare to Hong Kong paid for by the plaintiff
plus a day’s travel allowance of $30.00 to cover the expenses of her travel
to Hong Kong.

The only surviving ground of appeal in the defendant’s

Notice of Cross-Appeal is that the Judge was “wrong in law in holding
that the Plaintiff has suffered continuing financial losses as a result of the
constructive dismissal.” The appeal is therefore limited to challenging
the award of $46,577.00 as damages for constructive dismissal mentioned
above. That was an award which the Judge based on the decision of the
House of Lords in Malik v Bank of Credit and Commerce International
SA [1998] AC 20 and the question is therefore whether on the present
facts, the Judge’s award is justified by the principles referred to in that
authority. As Malik is a recent decision in an area where the law is still
developing, it is necessary to examine the principles presently discernible
from the cases.

C. Damages for wrongful dismissal

Before the Malik decision, discussion of the remedy at

common law for breach of an employment contract tended to focus
 — 16 —

almost exclusively on damages for wrongful dismissal. Such relief was

generally modest in nature and extent. As it is put in Chitty, 28th Ed,
§39-179 :-

“The normal measure of damages is the amount the employee

would have earned under the contract for the period until the
employer could lawfully have terminated it, less the amount he
could reasonably be expected to earn in other employment.”

That principle reflects two well-established rules as to the measure of

damages for breach of contract. The first is that an award of damages
aims at placing the innocent party financially in the same position he
would have been in if the contract had been duly performed. Thus, in
Radford v De Froberville [1977] 1 WLR 1262 at 1268, Oliver J stated as
follows :-

“As to principle, I take my starting point from what, I think, is

the universal starting point in any inquiry of this nature - that is
to say, the well known statement of Parke B in Robinson v.
Harman (1848) 1 Exch 850, 855 which is in these terms:

‘The rule of common law is, that where a party sustains

a loss by reason of a breach of contract, he is, so far as
money can do it, to be placed in the same situation, with
respect to damages, as if the contract had been
performed.’”

The second well-known principle reflected in the usual

measure of damages for wrongful dismissal is expressed in Chitty, op cit,
§27-036, as follows :-

“If the defendant fails to perform, when he had an option to

perform the contract in one of several ways, damages are
 — 17 —

assessed on the basis that he would have performed in the way

which would have benefited him most, e.g., at the least cost to
himself.”

Applying those principles, it has long been the case that

where an employer repudiates a contract of employment by wrongful
dismissal and where the contract could otherwise have been lawfully
determined by giving proper notice or making payment in lieu, damages
for the wrongful dismissal are measured by what the employee would
have received if the employer had instead lawfully terminated the
employment by such notice or payment in lieu. One does not, for
instance, compute the damages by postulating that the employer would
have kept the employee in the job until the contract lawfully expired
(assuming that damages so computed would have been greater). Such
principles continue to govern cases which one may describe as involving
“wrongful dismissal simpliciter”.

D. The Malik decision

What the Malik decision stresses is that the remedy in

damages for breach of a contract of employment is not restricted to
damages for wrongful dismissal. The general measure of damages rules
in the law of contract are applicable to other types of breaches giving rise
to other types of pecuniary loss.

Thus, in Malik, the plaintiffs’ entitlement to notice money

and statutory redundancy pay was not in issue (see [1998] AC 20 at 33
 — 18 —

and 44). The nature of their claim was summarised by Lord Steyn (at p
43) as follows :-

“The claim was for damages for pecuniary loss allegedly

caused by the bank’s breach of an implied contractual
obligation of mutual trust and confidence. The foundation of
the claim was the assertion that the bank had been operated in a
corrupt and dishonest manner and that, despite the personal
innocence of the employees, they have subsequently been
unable to obtain employment in the financial services industry.
The applicants described their claims as being for ‘stigma
compensation.’”

The House of Lords upheld the existence of the implied obligation relied
on. In Malik the term took the form of “an implied obligation to its
employees not to conduct a dishonest or corrupt business”, but as Lord
Nicholls pointed out (at pp 34-35), such a term was :-

“ ...... no more than one particular aspect of the portmanteau,

general obligation not to engage in conduct likely to undermine
the trust and confidence required if the employment
relationship is to continue in the manner the employment
contract implicitly envisages.”

Lord Steyn also stated the obligation in general terms, based on

formulations developed by the lower courts, as follows :-

“It is expressed to impose an obligation that the employer shall

not:

‘without reasonable and proper cause, conduct itself in a

manner calculated and likely to destroy or seriously
damage the relationship of confidence and trust between
employer and employee:’ see Woods v W M Car
Services (Peterborough) Ltd [1981] ICR 666, 670
 — 19 —

(Browne-Wilkinson J), approved in Lewis v Motorworld

Garages Ltd [1986] ICR 157 and Imperial Group
Pension Trust Ltd v Imperial Tobacco Ltd [1991] 1
WLR 589.”

Given the generality of the implied duty, breaches may involve conduct
taking many forms. Lord Nicholls (at p 35) put it as follows :-

“The trust and confidence required in the employment

relationship can be undermined by an employer, or indeed an
employee, in many different ways ...... The conduct must, of
course, impinge on the relationship in the sense that, looked at
objectively, it is likely to destroy or seriously damage the
degree of trust and confidence the employee is reasonably
entitled to have in his employer. That requires one to look at all
the circumstances.”

As Lord Steyn put it (at p 46) :-

“ ...... the implied obligation as formulated is apt to cover the

great diversity of situations in which a balance has to be struck
between an employer’s interest in managing his business as he
sees fit and the employee’s interest in not being unfairly and
improperly exploited.”

However, the obligation has its limits (p 53):-

“ ...... the implied mutual obligation of trust and confidence

applies only where there is ‘no reasonable and proper cause’ for
the employers conduct, and then only if the conduct is
calculated to destroy or seriously damage the relationship of
trust and confidence.”

If a breach of the implied obligation is established, the usual requirements

of establishing causation linking the breach with a loss that is not too
remote and taking due mitigation into account, will apply :-
 — 20 —

“In order to succeed at trial the applicants will have to establish

not only a breach of the obligation, which caused them
financial loss, but also that such loss is not too remote......
Mitigation is, of course, another potential limiting principle to
the employees’ claims.” (per Lord Steyn at pp 49-50)

E. Malik and Addis

There was much discussion in their Lordships’ speeches (and

also subsequently in cases like Johnson v UNISYS Ltd [1999] ICR 809) of
the extent to which the earlier House of Lords decision in Addis v
Gramaphone Co [1909] A.C. 488 was inconsistent with the approach
adopted in Malik. As Lord Nicholls (at p 38) stated of Addis :-

“...... The case [i e, Addis] is generally regarded as having

decided, echoing the words of Lord Loreburn LC, at p 491, that
an employee cannot recover damages for the manner in which
the wrongful dismissal took place, for injured feelings or for
any loss he may sustain from the fact that his having been
dismissed of itself makes it more difficult for him to obtain
fresh employment. In particular, Addis’s case is generally
understood to have decided that any loss suffered by the
adverse impact on the employee’s chances of obtaining
alternative employment is to be excluded from an assessment
of damages for wrongful dismissal ...... ”

He distinguished Addis (at p 39) as follows :-

“In my view these observations cannot be read as precluding

the recovery of damages where the manner of dismissal
involved a breach of the trust and confidence term and this
caused financial loss. Addis v Gramophone Co Ltd was
decided in the days before this implied term was adumbrated.
Now that this term exists and is normally implied in every
contract of employment, damages for its breach should be
assessed in accordance with ordinary contractual principles.
 — 21 —

This is as much true if the breach occurs before or in

connection with dismissal as at any other time.”

Lord Steyn also distinguished Addis (at p 51) :-

“There is a common proposition in the speeches of the

majority. That proposition is that damages for breach of
contract may only be awarded for breach of contract, and not
for loss caused by the manner of the breach. No Law Lord said
that an employee may not recover financial loss for damage to
his employment prospects caused by a breach of contract. And
no Law Lord said that in breach of contract cases compensation
for loss of reputation can never be awarded, or that it can only
be awarded in cases falling in certain defined categories.
Addis’s case simply decided that the loss of reputation in that
particular case could not be compensated because it was not
caused by a breach of contract: Nelson Enonchong, ‘Contract
Damages for Injury to Reputation’ (1996) 59 MLR 592, 593.
So analysed Addis’s case does not bar the claims put forward in
the present case.”

The basis upon which the House of Lords in Malik

distinguished the Addis decision illuminates the principle that their
Lordships were laying down. Addis was decided solely on the basis of a
wrongful dismissal, the implied trust and confidence term not having then
been adumbrated. It was therefore what I have referred to as a “wrongful
dismissal case simpliciter”.

The plaintiff in Addis was employed by the defendants as

manager of their business at Calcutta for a fixed weekly salary plus a
commission on the trade done. He could be dismissed by six months’
notice. The employer terminated the employment by giving him six
months’ notice, immediately appointed a successor and prevented him
 — 22 —

from continuing to act manager. This was a wrongful dismissal since the
employers thereby deprived him of a chance to earn commission. In such
circumstances, the House of Lords confined his remedy to damages
representing the commission he was estimated to have lost.

In other words, in Addis the breach related simply to the

unlawfulness of the termination. The employer failed properly to operate
the notice provisions of the contract so as to enable the employee to earn
his due salary and commission over that period or to compensate him
fully in lieu. The contract damages principles mentioned above therefore
dictated that he be compensated by being awarded the commission which
he would have earned if the contract had been lawfully performed by the
employer properly invoking the notice provision.

The Malik decision emphasises that where the breach does

not relate merely to unlawfulness in the termination but involves a breach
of some other obligation causing the employee loss going beyond the
“premature termination losses” that usually flow from a wrongful
dismissal, damages may properly be recovered in respect of such
different or further losses, provided they are causally attributable to the
breach and not too remote.

This approach to contract damages, namely, one which

relates the quantum of recoverable damages to the particular breaches
constituting the cause of action, was recently stressed by the House of
Lords in a different context in Banque Bruxelles Lambert SA v Eagle Star
 — 23 —

Insurance Co Ltd [1997] AC 191. That was a case about the extent of the
liability for breach of contract of a valuer who had provided a lender with
a negligent overvaluation of property offered as security for the loan.
Lord Hoffmann, with whom the other Law Lords agreed, stated (at p 210)
as follows :-

“Much of the discussion, both in the judgment of the Court of

Appeal and in argument at the Bar, has assumed that the case is
about the correct measure of damages for the loss which the
lender has suffered. The Court of Appeal began its judgment, at
pp. 401-402, with the citation of three well known cases
(Robinson v. Harman (1848) 1 Exch. 850, 855; Livingstone v.
Rawyards Coal Co. (1880) 5 App.Cas. 25, 39; British
Westinghouse Electric and Manufacturing Co Ltd v
Underground Electric Railways Co. of London Ltd. [1912] A.C.
673, 688-689) stating the principle that where an injury is to be
compensated by damages, the damages should be as nearly as
possible the sum which would put the plaintiff in the position in
which he would have been if he had not been injured. ...... I
think that this was the wrong place to begin. Before one can
consider the principle on which one should calculate the
damages to which a plaintiff is entitled as compensation for
loss, it is necessary to decide for what kind of loss he is entitled
to compensation. A correct description of the loss for which the
valuer is liable must precede any consideration of the measure
of damages. For this purpose it is better to begin at the
beginning and consider the lender's cause of action.”

Accordingly, it is necessary in the employment context first to identify

the specific obligation breached and the extent of loss caused by the
breach before considering what damages are recoverable under the
measure of damages rules. As Lord Hoffmann stated in the Eagle Star
case (at p 212) :-
 — 24 —

“In the case of an implied contractual duty, the nature and

extent of the liability is defined by the term which the law
implies.”

Adopting this approach, one sees that the House of Lords’ restricted view
of what damages were available in Addis flowed from the fact that the
claim was founded simply on wrongful dismissal. That decision
therefore does not encompass and should not be taken to exclude the
recoverability of differently calculated damages based on breach of a
different obligation, resulting in a different kind of pecuniary loss.

In my view, it follows from the foregoing analysis that a

given set of facts may constitute both kinds of breaches giving rise
simultaneously to separate entitlements to damages, each independently
computed, but subject obviously to the avoidance of any double recovery.
The employer’s wrongful conduct might constitute a wrongful dismissal
(particularly in the form of a constructive dismissal) and at the same time,
a breach of the implied trust and confidence term, the latter causing
continuing financial loss not confined by the usual wrongful dismissal
measure. This was recognised in Malik (at p 36) by Lord Nicholls as
follows :-

“The starting point is to note that the purpose of the trust and
confidence implied term is to facilitate the proper functioning
of the contract. If the employer commits a breach of the term,
and in consequence the contract comes to an end prematurely,
the employee loses the benefits he should have received had the
contract run its course until it expired or was duly terminated.
In addition to financial benefits such as salary and commission
and pension rights, the losses caused by the premature
 — 25 —

termination of the contract (‘the premature termination losses’)

may include other promised benefits, for instance, a course of
training, or publicity for an actor or pop star. Prima facie, and
subject always to established principles of mitigation and so
forth, the dismissed employee can recover damages to
compensate him for these promised benefits lost to him in
consequence of the premature termination of the contract. ......
Exceptionally, however, the losses suffered by an employee as
a result of a breach of the trust and confidence term may not
consist of, or be confined to, loss of pay and other premature
termination losses. Leaving aside injured feelings and anxiety,
which are not the basis of the claim in the present case, an
employee may find himself worse off financially than when he
entered into the contract. The most obvious example is conduct,
in breach of the trust and confidence term, which prejudicially
affects an employee’s future employment prospects. The
conduct may diminish the employee’s attractiveness to future
employers.”

F. Applying the principles to this appeal

In my judgment, the conduct of the defendant, through

Madam Wong to whom he had delegated day-to-day supervision of the
plaintiff employee, was such as to constitute both a constructive dismissal
and a breach of the implied trust and confidence term. As described in
detail by the Judge, the plaintiff was subjected to an oppressive work
regime, denied proper rest days to which she was lawfully entitled and
regularly pressed to obey work instructions which were neither
reasonable nor lawful. She was subjected to physical and psychological
abuse of a degrading and frightening nature culminating in the incidents
of 6th and 8th September 1998 which constituted a constructive
dismissal. In my view, such conduct, taken as a whole and culminating in
 — 26 —

such constructive dismissal, was also clearly inconsistent with and

calculated to undermine the trust and confidence required for the
employment relationship to continue in the manner that the employment
contract implicitly envisaged.

Such conduct by employers is wholly unacceptable. This is

particularly so in relation to a class of employees such as foreign
domestic helpers who often find themselves in a peculiarly vulnerable
state, being foreigners and possibly newcomers to Hong Kong, unable to
speak the local language, without family or friends here, having little
money and being wholly dependent on their employers for food, shelter,
income and eventual repatriation. In this context, the implied obligation
of mutual trust and confidence is of particular importance, as Lord
Nicholls noted (at p 37) :-

“An employment contract creates a close personal relationship,

where there is often a disparity of power between the parties.
Frequently the employee is vulnerable. Although the
underlying purpose of the trust and confidence term is to
protect the employment relationship, there can be nothing
unfairly onerous or unreasonable in requiring an employer who
breaches the trust and confidence term to be liable if he thereby
causes continuing financial loss of a nature that was reasonably
foreseeable.”

Plainly, in consequence of her employer’s conduct the plaintiff is entitled

to damages for wrongful dismissal on the usual measure. She is also
entitled to damages to the extent that she suffered any additional
pecuniary loss which is not too remote as a result of the defendant’s
 — 27 —

breach of the implied trust and confidence term by driving her out of her
employment in the circumstances discussed.

The Judge found that she had indeed suffered such

additional loss as follows :-

“The Plaintiff’s ability to enter into the job market to mitigate

her loss was curtailed as it is not easy to obtain the Immigration
Department’s approval to process any contract of employment
which she may enter into whilst she is staying in Hong Kong in
order to await the outcome of her action until such time as her
case is completed. This was reasonably foreseeable by the
Defendant as the policy of the Immigration Department which
renders it difficult for a foreign domestic worker to process a
contract of employment in Hong Kong under circumstances as
in this case is generally known. Although the Plaintiff states
that she has since June been permitted by the Immigration
Department to seek employment in Hong Kong owing to the
fact that she has been called as a witness in a criminal trial and
has to remain in Hong Kong until then, she states that she had
not been able to find alternative employment until now. ......”

As neither of the parties was represented below, it is perhaps unsurprising

that the evidence as to such loss was only minimally explored. The
plaintiff testified that she did not start looking for a replacement job until
June 1999 :-

“Because I am not allowed to look for a job unless, until this

case has been finished.”

Mr J F D Collins, who appeared for the plaintiff on the

hearing of the appeal, submitted in his skeleton argument that it was a
 — 28 —

matter of notoriety (in no pejorative sense) that a foreign domestic helper

who leaves her employment before the end of her contract :-

“ ...... will inevitably face an uphill battle to obtain Immigration

Department approval of new employment, if she can find any,
and only after a prolonged period during which the onus will
effectively be on her to convince the Immigration Department
that she is deserving of its ‘special consideration’ - ie she will
have to show that she was justified in leaving, and that will
usually only be possible if she is unequivocally successful in
labour claim litigation against her employer. ......”

Hong Kong has now had the benefit of the services of

foreign domestic helpers over many years so that the basic employment
arrangements affecting such helpers are a matter of general public
knowledge. The Judge would, in my view, have been entitled to take
judicial notice of such general employment arrangements for example, to
the extent of noticing that there is strict Immigration Department control
over foreign domestic helpers; that any attempts such helpers may make
to change employment before the end of a current contract are subject to
close scrutiny; that there has been a widely publicised policy against
“job-hopping” by such helpers; and that foreign domestic helpers who are
dismissed may be subject to the so-called “14 day rule” whereby they are
repatriated on very short notice.

Such matters of general notoriety obviously do not amount

to specific evidence of decisions affecting a particular employee’s
immigration status in any particular case. However, I would nonetheless
be prepared to accept as a matter of commonsense and in the absence of
 — 29 —

contrary evidence that an employer’s accusation that a foreign domestic

has walked out on the job in breach of contract, is likely to militate
against that helper obtaining Immigration Department permission to seek
fresh employment, even where the accusation is denied and the helper
contends that she has been constructively dismissed by the employer. I
would also expect, again as a matter of simple commonsense, that an
employee whose employment is lawfully terminated without any
unfavourable allegations made against him or her, would have better
prospects of securing Immigration Department permission to seek fresh
employment, such prospects being real and substantial and not merely
speculative.

No one from the Immigration Department was called to give

evidence on this question. I would, however, not expect an officer of the
Immigration Department to be able to testify to more than a policy of
reviewing each case on its merits and of applying rational criteria to
decisions affecting the foreign domestic helper’s ability to remain in
Hong Kong and to seek fresh employment. While I would expect such an
officer to confirm that adverse allegations by an employer may have a
potentially negative impact, I would not expect him to say that
permission to take on a new job would have been given as a matter of
course in the absence of such adverse allegations. Everything would no
doubt depend on the circumstances of the particular case to be given
careful consideration.
 — 30 —

On the available evidence and applying the approach

described above, it is my view that there was insufficient evidence to
justify the Judge’s award of damages for constructive dismissal (which I
take to have been awarded on the basis of a concurrent breach of the
implied trust and confidence term). I am unable to see a basis for holding
that such breach of the trust and confidence term in fact caused the
plaintiff to suffer loss of the entirety of the anticipated earnings from an
alternative employment over the period in question.

In my judgment, what the evidence does establish is that as a

result of the defendant’s constructive dismissal and the allegations made
against her prior to her vindication by the Judge (together constituting the
defendant’s breach of the trust and confidence term), the plaintiff was
deprived of a significant and not a merely speculative chance of securing
alternative employment with the permission of the Immigration
Department during the period between 8 September 1998 and June 1999.

The Judge’s award must accordingly be varied to reflect loss

of a chance of securing the relevant earnings rather than actual loss of
such earnings. I am also of the view that the Judge erred in taking as the
relevant period of compensation the period up to the date of the
judgment. Since permission was in fact granted to the plaintiff by the
Immigration Department to seek alternative employment in June 1999
(because the plaintiff’s testimony as a witness in an unconnected murder
case was sought), the adverse effects of the breach must be taken to have
 — 31 —

ended in June. No additional period should be allowed after that date to

allow time for a job-search since there would have been no recovery in
respect of such a period if the contract had been lawfully terminated.

The Judge found that loss of earnings from alternative

employment was foreseeable. While I do not think that the Judge was
justified in going so far, the evidence in my view clearly shows that loss
of a chance of securing alternative employment with Immigration
Department permission was a foreseeable consequence of the defendant’s
breach. Both employer and employee were undoubtedly fully aware of
the close control exercised by the Department over the plaintiff’s
immigration status and employment prospects, as reflected by Clauses 13
and 14 of her contract of employment. It must have been obvious that a
constructive dismissal would directly put the plaintiff’s status and
prospects into question.

Damages for loss of a chance fall to be assessed by

application of the principles laid down in cases like Chaplin v Hicks
[1911] 2 KB 786 and Allied Maples v Simmons & Simmons [1995] 1
WLR 1602. In our case, this requires the court, doing the best it can, to
quantify the plaintiff’s loss on the basis of a robust assessment of the risk
that the Immigration Department may in any event have refused the
plaintiff permission to secure alternative employment even if there had
been no breach by the defendant.
 — 32 —

In my view, the risk of such refusal should be reflected by an

award which takes the total wages which the plaintiff would have earned
over the period from 8 September 1998 to 8 June 1999 (taken as a
convenient 9 month period, since the evidence is unclear as to when in
June permission to work was given) at the monthly salary of $3,860.00,
discounted by 50%. Such an award would cover both the constructive
dismissal and breach of the trust and confidence term. Arithmetically,
such award comes to $17,370.00 which, in my judgment, should stand in
place of the Judge’s award of $46,577.00 under this head.

The appeal as to costs

Although the Judge’s decision was wholly in favour of the

plaintiff, the Judge only awarded her fixed costs in the sum of
HK$896.00, representing the clerical and filing fees incurred in bringing
the proceedings.

Under Order 62 r 28A of the Rules of the High Court (made

applicable in the District Court by r 9 of the District Court Rules) a taxing
master is given discretion when taxing the costs of a litigant in person,
subject to specific limitations set out in the rule, to allow such costs as
would have been allowed if the work and disbursements to which the
costs relate had been done or made by a solicitor on the litigant’s behalf.

In fixing the costs at $896.00 the Judge pre-empted any

claim by the plaintiff at the taxation stage for costs under O 62 r 28A. It
seems clear that such pre-emption was inadvertent and that the Judge
 — 33 —

simply never turned her mind to the question, not having been prompted
to do so by either of the litigants in person. It therefore appears that the
Judge did not in reality exercise her discretion in deciding to make an
order for fixed costs. It is indeed difficult to see any reason on the facts
of the case for imposing an a priori limitation to recoverable costs.
Accordingly, in my view, this court should set aside the Judge’s order for
fixed costs and, exercising the discretion afresh, order that the costs
below be paid by the defendant to the plaintiff to be taxed if not agreed,
leaving it open to the taxing master, if necessary and if thought
appropriate, to allow more than the sum of $869.00 in respect of the
proceedings in the District Court.

As to the costs of this appeal, the defendant has succeeded to

the extent of having the award of $46,577.00 in respect of the relevant
head of damages reduced to the sum of $17,370.00. However, his
attempt to overturn the Judge’s decision altogether on the basis of the
compromise agreement and on the basis that no damages at all under this
head should have been awarded have failed. The plaintiff has succeeded
on her appeal as to costs. In such circumstances, I consider that the
plaintiff should have 75% of her costs of the appeal as a whole and that
an order nisi to such effect should be made.

Rogers JA:
 — 34 —

I agree.

Godfrey VP:

I also agree.

(Gerald Godfrey) (Anthony Rogers) (R.A.V. Ribeiro)

Vice President Justice of Appeal Justice of Appeal

Mr James Collins instructed by Messrs Clarke & Kong assigned by DLA

for the Plaintiff

Mr Luiz da Silva Pedruco instructed by Messrs Angela Wang & Co for

the Defendant