Legal update: Liquidators in the Labour Tribunal

To prevent legal costs making it prohibitive for employees to pursue claims relating to their employment, lawyers are not able to represent clients in Labour Tribunal proceedings.  Where a party is a company, under Hong Kong law, only an “officer or servant” of that company has a right of audience.  But what if the company is in liquidation? Is a liquidator an “officer or servant” of a company in liquidation and can they therefore appear in Labour Tribunal proceedings?

In any voluntary liquidation (unlike compulsory liquidations), there would be no automatic stay imposed on Labour Tribunal proceedings commenced by an employee (section 186 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) does not apply to voluntary liquidations). Liquidators would therefore be drawn into Labour Tribunal proceedings without the employee first having to obtain leave from the High Court. In many cases, liquidators will be assisted by section 8A of the Labour Tribunal Ordinance (Cap. 25) (“LTO”).  This section provides that the Labour Tribunal does not have jurisdiction to hear any claim brought by way of a winding-up petition or any claim submitted to proof in winding-up proceedings.  If the employee had submitted a proof in the liquidation, the Labour Tribunal will no longer have jurisdiction to hear the employee’s dispute.  This is consistent with the premise that a liquidator should deal with claims against the company being wound up.

However, what if the employee did not file a proof of debt in the liquidation (perhaps in error or in the belief he/she has a practical advantage in the Labour Tribunal)? How can a company in voluntary liquidation be represented in those Labour Tribunal proceedings?

Pursuant to section 23 of the LTO, only an “officer or servant” of a company has a right of audience in the Labour Tribunal.  There is no reference to a liquidator of a company having right of audience. In this regard, it is trite that a liquidator acts as agent of a company in liquidation when commencing or defending legal actions in the company’s name.  Remember also that legal representation is not allowed and thus a liquidator could not instruct solicitors to attend.

There is some English authority which suggests that the Courts can “in appropriate circumstances” declare that a liquidator is an officer of the company.  On that basis, it would be arguable that the Labour Tribunal should construe section 23 of the LTO to consider a liquidator as an “officer” of a company in liquidation for the purposes of Labour Tribunal proceedings.  However, it is doubtful that those English authorities could be readily applied in Hong Kong. These authorities declared liquidators as “officers” only for the purposes of specific sections in the UK’s Companies Act 2006. Similarly in Hong Kong, the Companies Ordinance (Cap. 622) provides that a liquidator may be regarded as an officer for specific purposes (for example in section 622). The fact the legislation appears to limit liquidators being regarded as officers to those specific situations supports the view that a liquidator would not otherwise be considered as an officer.

From a first glance at one Hong Kong authority, it would appear help is at hand. The case of Ho Lan Fong v Lam Gook held that the categories of person who have a right of audience before the Labour Tribunal are not exhaustive and the Labour Tribunal has inherent jurisdiction to regulate who can have a right of audience.  Given this, it would seem that the Labour Tribunal could exercise its inherent jurisdiction and discretion to grant a right of audience to liquidators generally.  However, the position is not clear given a contrasting decision: in the case of Tsui Chung Fai v Kwok’s Fashion Limited, Lam J (as he then was) relied on the Court of Appeal’s decision in Kone Elevator v Senfield Ltd and ruled differently. Lam J ruled that “the common law power to grant leave to someone other than those provided for in the subsection to represent a corporate litigant in the [Labour Tribunal] was arguably abrogated”, thus effectively stripping the Labour Tribunal’s jurisdiction grant liquidators a right of audience.

There is a clear lacuna in section 23 of the LTO in that there is no direct provision dealing with who can appear on behalf of a company in voluntary liquidation in respect of a claim where no Proof of Debt has been submitted.  We understand that it is common practice for the liquidators to appear at the Labour Tribunal on behalf of a company in these circumstances.  However, there is no clear legal basis to resist any opposition to a liquidator appearing.  Liquidators could consider relying on the Labour Tribunal’s powers and active duty to investigate relevant matters and its powers to examine witnesses on oath or otherwise as a mechanism to make submissions on behalf of a company in voluntary liquidation.  Overall, section 23 of the LTO should be amended to specifically include liquidators of a company in liquidation where the claim is not stayed and remains in the jurisdiction of the Labour Tribunal.  This would ensure that the company could be properly represented to safeguard the interest of its creditors.

Robin Darton / Tim Au

The above is not intended to be relied on as legal advice and specific legal advice should be sought at all times in relation to the above.

Tanner De Witt is the only law firm in Hong Kong that is ranked in the top tier for both employment and restructuring/insolvency in both Legal 500 and Chambers and Partners. If you wish to contact us in this regard, the following partners will be happy to assist:

Ian De Witt
Partner — Insolvency and Restructuring | Email

Robin Darton
Partner — Insolvency and Restructuring | Email

Kim Boreham
Partner — Employment| Email

Russell Bennett
Partner — Employment| Email

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.