Lessons from a Costly Wrongful Dismissal Case in Hong Kong

Introduction

Handling employee expense claims may seem like routine administration, but as the recent Hong Kong case of Hu Yangyong v Alba Asia Ltd [2025] HKCFI 2484 demonstrates, mismanaging irregularities or relying on informal practices can create serious challenges, particularly when employers later seek to justify summary dismissal. In this case, Alba Asia Limited (Alba Asia) summarily dismissed its senior executive (Mr Hu) over alleged misconduct relating to expense claims. The Court, however, found that the dismissal was not justified and awarded Mr Hu over HK$5 million in damages.

Facts of the case

Mr Hu was employed as Chief Operating Officer of Alba Asia under a three-year fixed term contract commencing on 1 June 2017. The contract included entitlements to reimbursement of family and business expenses, subject to specified limits and documentation requirements.

On 7 September 2018, Alba Asia summarily dismissed Mr Hu alleging misconduct and dishonesty related to expense claims. Alba Asia alleged that Mr Hu had submitted invoices that were either unrelated to the claimed expenses or fabricated, including several "out-of-month" invoices and three invoices from a hotel that appeared suspicious.

Mr Hu denied wrongdoing. He maintained that he had incurred genuine family expenses exceeding the monthly cap, but had used alternative invoices based on internal guidance and approval. Mr Hu argued that he had been told to submit invoices in Alba Asia's name and had relied on the apparent authority of a senior finance officer within Alba Asia's group who approved the practice. Over time, Alba Asia had reviewed and approved his claims despite the irregularities. Mr Hu claimed he gained no financial benefit from the method used and that Alba Asia's own conduct contributed to the situation.

Mr Hu brought a claim for wrongful dismissal, seeking damages for lost wages, benefits and unpaid reimbursements for the remainder of the contract. Alba Asia counterclaimed for alleged breaches of contract and fiduciary duties.

The law on Summary Dismissal

In Hong Kong, an employer may summarily dismiss an employee without notice or payment in lieu only in the limited circumstances set out in section 9 of the Employment Ordinance. These include where the employee wilfully disobeys a lawful and reasonable order, engages in misconduct inconsistent with the due and faithful discharge of their duties, is guilty of fraud or dishonesty, is habitually neglectful of their duties, or commits any other act that would justify termination without notice at common law.

The burden is on the employer to prove that the employee's conduct was sufficiently serious to warrant summary dismissal. Whether the conduct amounts to gross misconduct is a fact-specific inquiry that depends on the circumstances of each case. The standard of proof is the balance of probabilities, but more serious allegations require correspondingly stronger evidence.

Decision of the Court

The Court acknowledged that determining whether there was sufficient justification for summary dismissal in this case was not easy, as the facts of the case were unusual. However, after considering the evidence from both parties, it ultimately ruled in favour of Mr Hu.  The key reasons for this decision were:

• No financial gain or loss: Mr Hu had incurred genuine family expenses exceeding the monthly reimbursement cap and could have submitted valid invoices. He gained nothing financially from using alternative invoices, and Alba Asia suffered no monetary loss.

• Belief in acceptability of conduct: Mr Hu had discussed the use of alternative invoices with a senior figure within the Alba Asia's group, who appeared to have authority and approved the approach on behalf of Alba Asia. This, combined with Alba Asia's ongoing approval and reimbursement of the claims, reinforced Mr Hu's belief that the practice was acceptable.

• Invoices were reviewed and approved: The invoices submitted by Mr Hu were reviewed by staff who were familiar with Alba Asia's reimbursement process. This suggested that the staff knew or should have known about the unusual nature regarding the invoices. Despite the irregularities, the claims were approved and paid, which further supported Mr Hu's belief that the practice was permissible.

• No dishonest intent: While the use of invoices from unrelated sources was irregular, the Court was not satisfied that Mr Hu acted dishonestly in the context of this case.

• No breach of contract or fiduciary duties: Alba Asia argued that Mr Hu's conduct undermined the relationship of trust and amounted to criminal offence of forgery. However, the Court found that while the invoices submitted by Mr Hu were irregular, his actions were neither dishonest nor malicious. Alba Asia's own conduct, such as prior approvals of the expense claims and internal communications, contributed to the situation. Furthermore, the invoices in question were not false instruments in the legal sense (they were not fabricated documents).

In conclusion, summary dismissal was not justified in the circumstances. Alba Asia's counterclaim was dismissed as well. Mr Hu was awarded a sum exceeding HK$5 million, which included wages and benefits payable for the remainder of his three-year fixed-term contract.

Takeaways for employers

Summary dismissal should only be used in serious situations. Employers must be able to show that the employee's conduct was so serious that it justified summary dismissal. Allegations of dishonesty or misconduct need to be supported by strong and credible evidence and not just procedural issues or assumptions.

Clear and consistent application of internal policies are essential. If staff routinely approve irregular claims or offer informal guidance, employees may rely on that, which can weaken the employer's position later on any alleged breach of policies. 

Employers should also act promptly when concerns arise, keep proper records and carry out fair and thorough investigations before taking disciplinary action including summary dismissal.

The judgment can be found here.