In Ng Yan Kit Alfred and Another v. Ever Honest Industries Ltd and Another [2022] HKCFI 1834, the Court of First Instance (CFI) confirmed that the approach to considering penalty clauses in Law Ting Pong Secondary School v Chen Wai Wah [2021] HKCA 873 should be followed in Hong Kong.
Background
The employee was a vice president and director of the defendant companies.
Clause 6 of the Employee's 2016 Letter of Employment ("Subject Clause") provided:
“The Group cannot dismiss you within three years upon the commencement of this employment agreement. If the Group dismisses you within three years after this employment agreement commences, you will be paid two whole years’ salary as compensation. If this employment is terminated by you within three years, one month’s written notice or one month’s salary in lieu of notice is required, and after resignation, you will not be allowed to work in an organisation that is in the same or relevant industry or the compensation of two whole years’ salary will not be granted.”
The employee was dismissed on 1 April 2016, with three months' payment in lieu of notice, annual leave payment and end of year bonus. The employee subsequently brought a claim in the Labour Tribunal (LT) for 24 months' salary under the Subject Clause.
Original LT Decision
The LT considered, among other things, whether the Subject Clause was a penalty or a liquidated damages clause, and held that "…since there is no evidence to show that the parties have attempted to...
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