The recent decision of the Hong Kong Court of First Instance in Hu Yangyong v Alba Asia Limited [2025] HKCFI 2484 has reinforced the high threshold for summary dismissal – summary dismissal will only be justified if there is gross misconduct by an employee.

Background

By an employment agreement dated 6 April 2017 (the “Employment Agreement”), the Plaintiff was employed as the former Chief Operating Officer of the Defendant, a Hong Kong company. The Employment Agreement provided for a fixed three-year term of employment, which could not be terminated before expiry except for good cause.

Under the terms of the Employment Agreement, the Plaintiff was entitled to reimburse his out-of-pocket family expenses of up to RMB 20,000 per month upon provision of official invoices to the Defendant.  

By a letter dated 7 September 2018 (the “Termination Letter”), the Defendant summarily dismissed the Plaintiff under section 9(1)(a) of the Employment Ordinance (Cap.57) (the “EO”), citing that the Plaintiff misconducted himself and was dishonest in relation to his claims for reimbursement of expenses. The Defendant’s case was that, to fully utilise the monthly threshold of RMB 20,000, the Plaintiff:

• Submitted invoices which were not issued in the same month as his reimbursement claim; and
• Submitted “other official invoices”. For instance, the Plaintiff submitted three invoices issued on the same date by a hotel with suspicious features  – the underlying expenses did not relate to the Plaintiff’s family at all

The Plaintiff denied wrongdoing and put forward the following explanations:

• The Plaintiff was told by a staff member of the Defendant that the invoices submitted for reimbursement should be issued in the Defendant’s name. However, the Plaintiff later found it difficult to comply with this requirement as invoices for his family expenses were unlikely to be issued in the Defendant’s name
• Upon discussion with a staff member of the Defendant (“ZL”), whom the Plaintiff understood to be the person handling his reimbursement claims, ZL agreed that the Plaintiff could submit invoices from “other sources” issued under the Defendant’s name instead of the actual invoices issued for his family expenses
• In submitting his invoices, the Plaintiff relied on ZL’s representation
• The Plaintiff, at all material times, did have genuine family expenses exceeding RMB 20,000 per month which could be reimbursed under the Employment Agreement
• The Defendant’s staff reviewed both the Plaintiff’s claims and the invoices before approving them, thereby further representing to the Plaintiff that his conduct was acceptable. In reliance of this representation, the Plaintiff continued to make claims and submit invoices in the said manner

Legal Principles on Summary Dismissal

The circumstances that an employer may terminate a contract of employment without notice or payment in lieu (i.e. summarily dismiss an employee) are delineated in section 9(1) of the EO. The court also reaffirmed the general principles on summary dismissal: summary dismissal constitutes a strong and extreme measure, warranted only in exceptional circumstances. The burden of proof is on the employer to justify the summary dismissal on a balance of probabilities; however, the more serious the allegation, the stronger the evidence must be before the court. This may be the case when the employee has committed a fundamental breach of the contract of employment, for example: gross misconduct by the employee, serious dishonesty, and breach of duty of good faith and fidelity.

The Court’s findings

The court noted that, based on the unusual fact scenario, it was not easy to determine whether summary dismissal of the Plaintiff by the Defendant was justified. Nonetheless, on a balance of probabilities, the court concluded that the Defendant failed to discharge its burden of justifying the summary dismissal. The court’s reasoning was as follows:

Genuine family expenses incurred: the Plaintiff did genuinely incur monthly family expenses exceeding RMB 20,000, which he was entitled to be reimbursed under the Employment Agreement. The Plaintiff’s conduct resulted in no personal gain, nor did it cause any monetary loss for the Defendant. The Plaintiff’s conduct also suggests that he genuinely believed his conduct was permissible, however unusual it may seem.

Authority of the Defendant’s employees: the Plaintiff did, as a fact, inform ZL that he would use invoices from “other sources”, to which ZL agreed. In that conversation, ZL was found to have acted with the apparent authority of the Defendant; alternatively, the conversation at least gave the Plaintiff reasonable grounds to believe that such conduct was permitted.

Subsequent inspection and verification of the invoices: the Plaintiff’s reimbursement claims and supporting invoices were routinely reviewed and approved by relevant staff members of the Defendant. Despite the peculiarity that the majority of the Plaintiff’s submitted invoices identified the Defendant as payer, no questions were raised by the Defendant’s staff. This not only reinforced the Plaintiff’s belief that the invoices he submitted were acceptable, but the fact that the Plaintiff knew the invoices would be checked also supported his case that he was acting honestly.

Despite the irregularities with the invoices, inferences of fraud or serious misconduct are not lightly drawn. Thus, the court was not persuaded that the Plaintiff acted with dishonest or fraudulent intent.

As a result, summary dismissal was not justified, and the Plaintiff was wrongfully dismissed by the Defendant. The Plaintiff was awarded with payments he would have been entitled to receive had he not been wrongfully dismissed.

Notably, prior to issuing the Termination Letter, the Defendant had wished to terminate the Plaintiff’s employment prematurely on the basis of poor performance and change of corporate structure. Subsequently, the Plaintiff was summarily dismissed on the grounds of misconduct and dishonesty in relation to his reimbursement claims.

Implications and Significance

This case reiterates that summary dismissal would only be justified in serious situations, namely that the act(s) of the employee must go to the root of the contract, so as to indicate an unwillingness to be bound by the original terms of the contract.

This case also illustrates the risks that may arise when informal decisions from individuals with apparent authority of the company deviate from established internal policies. As such, employers should formulate clear and coherent internal policies, and regularly circulate such internal policies to employees to reinforce policy compliance.

The full judgement can be accessed here: https://legalref.judiciary.hk/lrs/common/search/search_result_detail_frame.jsp?DIS=169764&QS=%28%7BAlba%7D+%25parties%29&TP=JU