Labour Tribunal orders claimant to provide security payment – speed bump for parties with weak claims

Introduction
Facts
Decision
Comment

Introduction

Since 2014 the Labour Tribunal has had the power to order parties to provide security for awards or orders.(1) The grounds for making such an order are relatively broad and give the tribunal considerable discretion, including making an order for security for a party's costs.

There has been little case law on how this discretion should be exercised. In a 2015 case, an employee was ordered to pay security for payment of an award essentially because they had abused the process.(2) Clearly, the making of such an order against an employee can have a drastic effect on their ability to pursue their claim. A recent decision of the Court of First Instance, Hon Sau Har v Lo Woon Bor Henry T/A Henry Lo & Co Solicitors,(3) sheds some further light on this area of law.

Facts

The claimant was a secretary employed by the defendant (a law firm). She worked for the defendant for less than two years and was dismissed by the defendant with one month's payment in lieu of notice.

The claimant claimed for annual bonus, pro-rata payment for unused annual leave and termination payments. The defendant argued that:

• annual bonus was discretionary depending on the financial situation of the law firm according to the employment agreement;
• the pro-rata payment for unused annual leave should be payable only in the event that the claimant had worked for more than three months in the year she was dismissed; and
• the termination payments should be granted only where the employee has been employed for a period of no less than 24 months, according to law.

In the call-over hearing before the tribunal, the presiding officer explained to the claimant that both the Labour Department and the tribunal officer had informed her that all of her claims lacked merit. The claimant insisted on pursuing her claims, so the defendant applied for an order for payment of security for costs.

The presiding officer made an order for payment of security for costs against the claimant on the basis that "the Claimant could not demonstrate that she has a high degree of probability of success at trial". The claimant did not make the security payment and the presiding officer ordered her claims against the defendant to be dismissed. The claimant appealed against the orders to the Court of First Instance.

Decision

In the Court of First Instance, Deputy High Court Judge Marlene Ng considered whether the order or determination by the tribunal was erroneous in point of law or outside the jurisdiction of the tribunal.

The claimant argued that she had a low income and therefore it would be unfair to impose a security payment order against her. The court considered whether there were any balancing factors which meant that a security payment order should not be imposed on the claimant. Such balancing factors included considering whether the claimant had a strong and valid claim.

The court took the view that the presiding officer had not erred in point of law and agreed that the claimant's claims lacked merit. In summary, the court's reasoning is as follows:

• The claimant clearly had not been employed under a continuous contract for a period of no less than 24 months. Therefore, her claim for termination payments was groundless. The claimant was aware of this as she had said that she intended to drop this claim.
• Relating to the claimant's claim for annual bonus, the claimant did not dispute that the bonus provision was discretionary and binding. Accordingly, the court agreed with the presiding officer's view that the claimant was unlikely to succeed in her argument that the provision should be interpreted in her favour.
• With regards to the claim for annual leave payments, the claimant did not satisfy the requirement of working for more than three months in the year that she was dismissed. This claim clearly lacked merit.

The court also considered the claimant's income level and financial situation, which posed a risk that she may not be able to compensate the defendant's costs in the event that she was not successful in her claims. Meanwhile, the defendant may also have to incur additional costs in seeking to execute any costs order, which would be unfair to the defendant. Therefore, an order for security for costs was "just and expedient" in this case.

Comment

In considering whether an order for security for payment of an award or order should be made, the tribunal would consider the following:

• whether the claimant has sufficient financial means to pay for the defendant's costs if the claimant fails to prove their claim;
• whether the claimant has strong merits in their case; and
• if it cannot be determined that the claimant has a reasonable chance of success in their claim, whether there are any balancing factors which militate against an order for security being made.

When deciding on the amount of the security payment, the tribunal will take into consideration the defendant representative's income and the amount of time expected to be spent on the case by such defendant representative.

The presiding officers have indicated a willingness to invoke this power in cases where they consider that employees are pursuing weak or meritless claims. It should not be forgotten that the tribunal can also make such orders against employers.

For further information on this topic please contact Patricia Yeung at Howse Williams Bowers by telephone (+852 2803 3688) or email (patricia.yeung@hwbhk.com). The Howse Williams Bowers website can be accessed at www.hwbhk.com.

Endnotes

(1) See Section 30(1) of the Labour Tribunal Ordinance.

(2) Lam Che Fu v The Chinese Kitchen (Sai Kung) Ltd.

(3) Hon Sau Har v Lo Woon Bor Henry T/A Henry Lo & Co Solicitors, [2018] HKCU 3914.