In a landmark decision, the Court of Appeal in 7-Eleven Malaysia Sdn Bhd v Ashvine A/P Hari Krishnan (Civil Appeal No. W-02(IM)(NCVC)-629-04/2022) (“7-Eleven case”) has held that employees cannot sue their employers for damages for unfair dismissal in the civil court, as this is a claim that must be ventilated through the statutory mechanism provided, ie: the Industrial Court.
Donovan Cheah, Yannie Th’ng and Sean Ferdinand Ng acted for the employer-appellant, 7-Eleven Malaysia Sdn Bhd (“Company”) in this matter.
Brief facts
- The Respondent (“Employee”) was employed by the Company as a Senior Manager of Human Resources in October 2019.
- In February 2021, the Employee had to report to the General Manager of Human Resources (“GM”).
- As her supervisor, the GM had concerns about the Employee’s performance and raised this with her. The Employee did not accept the feedback and claimed she was being bullied and harassed.
- For her final performance assessment, the Employee was given a grade “C” (Inconsistent Performance), but still received a performance bonus.
- Unhappy with her performance assessment, the Employee resigned in May 2021. In her resignation letter she alleged that she resigned because she was treated unfairly and was being bullied and harassed.
- The Employee then demanded from the Company the sum of RM4.5 million for alleged depression, shame, harassment and trauma. The Employee then increased her demand to RM71.1 million after the Company rejected her first demand.
- When the Company refused to give in to the Employee’s demands, the Employee then filed the suit in the High Court against the Company, claiming over RM96 million comprising:
- RM6,032,956.40 representing the alleged employment benefits of the Employee for 20 years;
- RM10,000,000.00 as damages for constructive dismissal
- RM10,000,000.00 as damages for the tort of intentionally causing emotional distress
- RM10,000,000.00 as damages for tort of harassment and bullying
- RM10,000,000.00 as damages for negligence in appointing, retaining and monitoring the recruitment of employees; and
- RM50,000,000.00 as exemplary damages.
At the High Court
The Company applied to strike out the Employee’s claim on the basis that it was a frivolous, vexatious and an abuse of process of the Court due to the exorbitant and unsubstantiated claim, and that the High Court lacked the jurisdiction to hear the Employee’s constructive dismissal claim.
The High Court dismissed the Company’s striking out application, holding that:
- the Industrial Relations Act 1967 does not out the jurisdiction of the civil courts in hearing unfair dismissal cases; and
- the colossal sum claimed by the Employee cannot amount to being an abuse of the process of the Courts as “there is no law against excessive claims”.
The Company appealed to the Court of Appeal.
Court of Appeal’s Decision
Findings of the Court of Appeal:
- The Employee’s claim is essentially a claim for damages for constructive dismissal. Her allegations on the tort of harassment and bullying were at best merely “building blocks” for a complaint of constructive dismissal.
- Given that the Employee’s claim was in substance a constructive dismissal claim, the Employee should have sought her remedy from the Industrial Court which is the statutory tribunal enacted specifically to deal with these disputes.
- Although the Industrial Relations Act 1967 does not expressly oust the jurisdiction of the civil courts in hearing the claims of dismissed employees, it is important that the statutory mechanism and remedies that can be granted by the Industrial Court must be pursued as intended by Parliament. The remedy available from the Industrial Court is to designed to compensate the dismissed employee for the loss of employment.
- Taking guidance from the Federal Court’s decision in Fung Keong Rubber Manufacturing (M) Sdn Bhd v Lee Eng Kiat [1981] 1 MLJ 238, the Court of Appeal reiterated the principle that an employee who filed their case under common law in the civil courts is only entitled to “meagre damages” in form of contractual payments such as salary in lieu of notice. Given that the Company has paid everything that is due to the Employee under her employment contract, there was nothing left for the civil courts to grant her.
- The Court of Appeal agreed and endorsed the High Court decision of Ng Siang Teik v Chow Tat Ming & Ors [2010] MLJU 1907, which struck out an employee’s claim for exorbitant damages. Although the claim there was founded on the tort of conspiracy and defamation, the High Court held that the employee was in substance pursuing a claim for damages for wrongful dismissal. The High Court held that the employee should have gone to the Industrial Court, since his remedy is limited under common law and the High Court did not have jurisdiction to grant damages for injury to reputation and emotions, or for loss of future earnings.
- The Court of Appeal noted the High Court’s decision in Alan Thomas Bohlsen v Draftworldwide Sdn Bhd [2009] 8 MLJ 461, which granted damages to an employee for a constructive dismissal claim. The Court of Appeal took the view that Bohlsen was wrongly decided, and had effectively usurped the statutory role, function and jurisdiction of the Industrial Court. The Bohlsen case also did not appear to have considered the Federal Court’s decision in Fung Keong Rubber.
- Similarly, the Court distinguished its earlier decision in Ng Kim Fong v Menang Corporation (M) Berhad [2020] MLJU 644, where it allowed the employee’s claim for retirement benefits as per her employment contract. There, the Court of Appeal made it clear that the amount awarded was not compensation for loss of employment, but was a contractual claim for retirement benefits. There was no parallel between Ng Kim Fong and the 7-Eleven case.
As such, the Court of Appeal held that it was an abuse of process for the Employee to seek damages for loss of employment via the civil courts. The Employee had circumvented the statutory process specifically established to hear claims for wrongful dismissal or loss of employment.Since the Employee’s remedy in common law before the civil courts is limited to contractual payments, and none are owing to her, the Employee’s claim for RM96 million was unmaintainable as a matter of law. It was the court’s bounden duty to have the suit struck out because the claim has no prospect of success and is an abuse of the process.
Key Takeaways
The key question determined by the Court of Appeal was this:
“Whether it is an abuse of process for an employee who claims that they have been dismissed without just cause or excuse, to file a common law action to claim damages, instead of pursuing the statutory dispute resolution?”
In the opening paragraph of the judgment, the Court of Appeal noted that this question that arose in this appeal is one of relevance and importance to employment law and practice in Malaysia, and rightly so.
The impact of the Court of Appeal’s decision can be summarised as follows:
- An employee who seeks remedies for unfair dismissal should file a representation under section 20(1) of the Industrial Relations Act 1967, so that the dispute can be determined by the Industrial Court.
- If the employee chooses to go to the civil courts instead, their remedies are limited to contractual payments such as salary in lieu of notice. The civil courts cannot grant damages for loss of future earnings, compensation for loss of employment, or injury to reputation or emotions.
- If the employee goes to the civil courts to claim monetary compensation for unfair dismissal, this is an abuse of process which warrants the claim being struck out.
Employers can breathe a sigh of relief that colossal damages such as those pleaded by the Employee are not claimable as a matter of law. However, this does not mean that the rights of employees are not protected. Depending on the employee’s salary and length of service, the monetary compensation that can be awarded by the Industrial Court in an unfair dismissal claim can still be significant, especially compared to other jurisdictions.
The Court of Appeal’s grounds of judgments are available here.
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This article was written by Donovan Cheah (Partner) and Sean Ferdinand Ng (Associate). Donovan has been named as a recommended lawyer for labour and employment by the Legal 500 Asia Pacific for 2017-2022, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.
Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations. Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation. Have a question? Please contact us.
