In a recent judgment¹ handed down by the High Court on 18 June 2025, the court was asked to determine whether an employer's summary dismissal of an employee was justified and once again emphasised that summary dismissal must only be exercised in the most serious and extreme cases of employee misconduct.

The Plaintiff, Mr Hu, was employed as Chief Operating Officer of the Defendant company on a three-year fixed-term contract starting from June 2017. On 7 September 2018, the company sent a termination letter to Mr Hu, terminating his employment pursuant to section 9(1)(a) of the Employment Ordinance, on the grounds that Mr Hu had repeatedly handed to the company claims for monthly expense reimbursements that were non-compliant with the requirements under his employment contract because the invoices submitted were not for expenses covered by the relevant contractual clause and that, when asked to explain the nature of the expenses, Mr Hu failed to provide sufficient explanation. The company considered Mr Hu's conduct to be inconsistent with the due and faithful discharge of his duties and that it was entitled to terminate his employment without notice or payment in lieu.

Mr Hu sued the company for substantial damages and the claim was transferred from the Labour Tribunal to the High Court in 2019. The trial of the action took place in February 2025 and the judgment was handed down in June 2025.

Under the terms of Mr Hu's employment contract, he was entitled to reimbursement for out-of-pocket family expenses up to RMB 20,000 per month, upon the provision of official tax invoices (Fa Piao).

By the time the case came to trial, the focus of the dispute was on three hotel Fa Piao (in the sums of RMB 16,000, RMB 15,700 and RMB 14,800) which Mr Hu had submitted for reimbursement, purporting to be invoices for family expenses but which, as it turned out, were invoices his friend had procured to be issued in his name for his friend's son's wedding banquet at the hotel. Those invoices, while genuinely incurred, were not incurred by Mr Hu for his family and thus were not "forged" as such but, nevertheless, they did not represent Mr Hu's genuine family expenses.

Mr Hu's evidence was that it was difficult for him to procure official Fa Piao in respect of family expenses (such as his son's school fees, and family transportation and daily expenses) and thus he had discussed the issue with a member of staff (ZL) whom he understood to be the person dealing with his expense claims. ZL agreed that, instead of submitting the actual invoices issued for family expenses, Mr Hu could obtain Fa Piao from "other sources" issued under his name for submission in support of his expense claims (the Arrangement).

The court found that, as a matter of fact, Mr Hu's family expenses genuinely exceeded the contractual threshold of RMB 20,000 per month. In fact, his son's school fees and mortgage repayments alone already exceeded RMB 20,000, and he had nothing to gain from the Arrangement. However, he did admit at trial that the Arrangement was "abnormal".

In around March 2018, the company discussed termination of Mr Hu's employment with him, due to his poor performance in his role as COO. Mr Hu did not agree with the company's decision to terminate his employment and threatened to claim outstanding wages for the remaining period of his fixed-term contract. In or around July 2018, the company's office manager (LT) discovered irregularities in relation to the three hotel Fa Piao. When she made enquiries with Mr Hu about them, he told her the Fa Piao were not for hotel rooms but for "things like dinner, gym, swimming etc". At that point in time, he did not come clean about the Arrangement, nor did he reveal the true nature of the Fa Piao to LT.

By August 2018, Mr Hu commenced (i) a claim against the company at the Labour Relations Division for reimbursement of overdue business expenses and family expenses and (ii) a claim against the company at the Labour Tribunal for overdue expense payments and interest for late payment of July 2018 wages.

The question for the trial judge was whether the company was justified in summarily dismissing Mr Hu in light of his conduct. In determining this question, the court found it to be difficult, as the facts were unusual:

"I think that, in more usual circumstances, a COO would consider it acceptable to submit invoices for family expenses which did not in fact relate to family expenses incurred, may well be sufficient to justify loss of confidence warranting summary dismissal. However, I reiterate that the facts are very unusual: given the conversation with ZL and the subsequent checking of invoices by [the company] and approval for payment, I am again not persuaded that summary dismissal was justified".

The judgment contains a useful summary of the key principles on summary dismissal (from Employment Law and Practice in Hong Kong, 2nd Ed, 2016), as follows:

(1) Summary dismissal is justified where the employee has committed a fundamental breach of the contract of employment. It should be regarded as a strong and extreme measure, justified only in exceptional cases. The onus of proof is on the employer to establish that summary dismissal is justified. In assessing whether or not the employee's conduct justifies summary dismissal, the question is whether the act or acts complained of are of a sufficiently serious nature as to amount to a fundamental breach of the contract; put another way, whether the employee committed an act of gross misconduct. The acts 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.

(2) Summary dismissal may be justified by an act of gross misconduct by the employee. What amounts to gross misconduct is a question of fact, depending on the circumstances of each case.

(3) Cases involving serious dishonesty tend to justify summary dismissal. The standard of proof is generally a balance of probabilities, but the more serious the allegation, the stronger should be the evidence before the court concludes that the allegation is proved. An act of dishonesty will not automatically justify summary dismissal since there are degrees of dishonesty; summary dismissal will only be justified if the dishonest act is such as to constitute a repudiation of the contract of employment.

(4) Breach of duty of good faith and fidelity by the employee can be capable of justifying summary dismissal.

(5) A single act of misconduct is unlikely to justify summary dismissal, unless the misconduct is very serious. The cumulative effect of a series of minor incidents may amount to sufficient grounds for summary dismissal.

(6) Habitual neglect of duties; a single act of negligence or incompetence of a serious nature; persistent lateness or unauthorised or unjustified absence; or wilful disobedience of a lawful and reasonable order, may all be sufficient justification to justify summary dismissal on appropriate facts. The mere act of failing to obey a lawful and reasonable order will not, in all circumstances, merit summary dismissal.

(7) If the employer has allowed the conduct complained of to continue for too long prior to summary dismissal, this may amount to acquiescence such that the behaviour cannot be relied upon as grounds for summary dismissal.

(8) The employer may rely on reasons not disclosed at the time of dismissal to justify summary dismissal and may even justify dismissal by reference to facts only discovered after termination of the employment contract.

(9) If the conduct complained of does not justify summary dismissal, the termination is wrongful.

Having found the company was wrong in summarily dismissing Mr Hu, the court awarded him damages of approximately HK$5.4 million comprising lost wages and end-of-year payment for the remainder of his contract, lost private medical insurance, annual leave pay, expenses allowance and reimbursements. The company was also ordered to pay Mr Hu's costs of the proceedings.

This case underscores just how fact-sensitive it can be when the issue of whether or not summary dismissal is justified is being determined by the court. Summary dismissal has previously been described by the court as "capital punishment"² and employers must exercise caution and take legal advice before making a decision to impose such severe punishment on employees.

1. Hu Yangyong v. Alba Asia Limited [2025] HKCFI 2484.
2. Tsang Tak Chi v. China Wall Limited (Unreported, HCLA 33 of 1998, 21 December 1998).