Ascertaining an employee's intention behind misconduct in summary dismissal cases

Mr Patrick Cheung ("Mr Cheung") was the Financial Controller of TCC International Limited ("TCCIL"), which is the main shareholder of TCC International Holdings Limited ("TCCIH"), a company that wholly owned Hong Kong Cement Co Ltd ("Appellant"). When assisting TCCIL to determine the quantity of excess right shares to apply on behalf of TCCIL in a rights issue exercise, Mr Cheung sought legal advice following his supervisor's instructions. However, Mr Cheung honestly misunderstood the legal advice and made a wrong decision, the rectification of which caused loss to TCCIL. Mr Cheung was subsequently summarily dismissed on the basis that he had committed gross negligence in carrying out his duties. Mr Cheung commenced a claim against the employer in the Labour Tribunal for wrongful termination, claiming that the summary dismissal was not justified.

The Labour Tribunal took the view that in light of Mr Cheung's position and experience and the potential consequences from his mistake, there was sufficient evidence on the face to support a case of summary dismissal. However, it was still necessary to consider the extent of the individual's responsibility arising out of his error and whether there was reasonable explanation for such error. As Mr Cheung had honestly misunderstood and erroneously believed the legal advice, such conduct did not show that he had an intention not to be bound by the employment contract's terms. Therefore, the employer could not summarily dismiss the employee under either the Employment Ordinance ("EO") or common law.

The CFI agreed with the Labour Tribunal and dismissed the Appellant's appeal. The CFI considered that the Labour Tribunal's finding that Mr Cheung misunderstood the legal advice in relation to the key question was not perverse or irrational. Also, when considering whether it was justifiable to summarily dismiss an employee on the basis of gross misconduct, the employer needed to ascertain why the employee committed such conduct. Without such consideration process, it was difficult to determine objectively whether the employee manifested an intention not to be bound by the employment contract. An employee could only be summarily dismissed if it was clear that he/she manifested such intention by conduct.

As a takeaway point, employers should exercise due care before deciding to summarily dismiss an employee. They should take into account of all relevant factors and undergo a process to ascertain why an employee committed the misconduct in question. Any mitigating factors or explanations offered by the employee may be relevant.