Court of Appeal: Abuse of process for an employee to claim compensation for wrongful dismissal via the civil courts instead of the Industrial Court

There has always been an unresolved question of whether a dismissed employee could bring a civil claim against his or her former employer, instead of or even in addition to a wrongful dismissal claim at the Industrial Court.

The courts have never previously expressly ruled out the possibility of such claims — theoretically this could be a claim for damages, breach of contract, or loss of potential earnings — and the threat of such claims have also sometimes been used by high-ranking or C-suite employees as a bargaining chip when negotiating lucrative severance packages.

More confusion arose as a result several High Court decisions, and the 2020 Court of Appeal decision in Ng Kim Fong v Menang Corporation (M) Berhad [2020] MLJU 644, where the court granted the employee damages for breach of contract in the form of payment of her contractual retirement benefits.

However, the recent Court of Appeal decision in 7-Eleven Malaysia Sdn Bhd v AH Krishnan [Civil Appeal No. W-02(IM)(NCVC)-629-04/2022] has finally provided much-needed clarity on this situation. In short, the Court of Appeal ruled that a wrongful dismissal (loss of employment) claim should be brought via the Industrial Court, and that a civil suit where the employee seeks monetary compensation via a common law action ought to be struck out as being an abuse of process of the court.

Brief facts

In the 7-Eleven case, the employee (“the Employee”) was employed by 7-Eleven Malaysia Sdn Bhd (“the Company”) as its Senior Manager of Human Resources, reporting to the General Manager of Human Resources.

The Employee’s supervisor had some concerns about her performance, which he raised with her on several occasions. The Employee alleged that her supervisor’s appraisal was unfair, and that she was being bullied and harassed by her supervisor.

All this led to the Employee resigning on 3 May 2021, and her resignation letter made certain allegations directed at her supervisor. The Company accepted her resignation via a letter dated 4 May 2021, and responded to the allegations via a letter dated 20 May 2021.

The Employee’s claim for RM96.9 million in damages

Despite subsequent correspondence between the parties’ respective lawyers (the Employee initially claimed via her lawyers the sum of RM4.5 million as damages and RM500,000 for depression, shame, harassment, and trauma), the dispute remained unresolved, and the Employee filed a civil suit in the Kuala Lumpur High Court on 26 October 2021.

The Employee’s claim is essentially founded on a complaint that, as a result of her supervisor’s actions, she had been constructively dismissed. In her suit, the Employee claimed reliefs amounting to RM96,932,956.40, comprising among others, damages for breach of contract and loss of future earnings for 20 years, damages for constructive dismissal, damages for the tort of intentionally causing emotional distress, damages for the tort of harassment and bullying, and general and exemplary damages.

The High Court’s ruling on the Company’s application to strike out the claim

The Company contended to the High Court that the Employee’s claim could only be pursued in the Industrial Court via Section 20(1) of the Industrial Relations Act (“the Act”) (essentially a representation by an employee that he considers that he has been dismissed without just cause or excuse), and that the civil suit was an abuse of process, and filed purely to annoy the Company.

The Company applied for the suit to be struck out and dismissed.

The High Court disagreed with the Company, and the High Court Judge took the view that although the Employee was entitled to pursue a wrongful dismissal claim via the Industrial Court, the High Court nevertheless had jurisdiction to deal with and determine the Employee’s claim for damages.

In its grounds of judgment, the High Court found that “the provisions of the Industrial Relations Act does not oust the jurisdiction of the civil courts in determining issues of unjust dismissal or constructive dismissals”.

Court of Appeal’s conclusions

For the purposes of this article, I will focus on the Court of Appeal’s findings in relation to whether or not an employee can bring a civil action for monetary compensation as a result of a wrongful dismissal. I will however mention in passing some of the other more interesting observations and findings.

The Court of Appeal concluded that the Employee “chose not to lodge a complaint under Section 20(1) of the Act” and that “it is obvious that [she] was advised to file a civil suit instead”.

The Court of Appeal said that “the substantive issue in this appeal is whether the [Employee]’s claim for constructive dismissal, which ought or could have been pursued via Section 20(1) of the Act, can be brought together with other purported causes of action and filed as a common law claim for substantial damages”.

The Court of Appeal widely cited the Federal Court decision in Fung Keong Rubber Manufacturing (M) Sdn Bhd v Lee Eng Kiat & Ors [1981] 1 MLJ 238 (FC) (“Fung Keong Rubber”). In Fung Keong Rubber, the Federal Court concluded that an employee “cannot sue for wounded feelings or loss of reputation caused by a summary dismissal”. The Court of Appeal in the 7-Eleven case therefore concluded that the Employee’s claim under the tort of emotional distress was unmaintainable.

The Federal Court in Fung Keong Rubber also said that it would be futile for an employee to sue for wrongful dismissal at common law, as the potential damages “are rather meagre” and “in practice the damages are limited to the pay which would have been earned by the workman had the proper period of notice been given”.

In the present case, the Court of Appeal found that — even if the case proceeded to trial and the Employee successfully proves that she was constructively dismissed — the Employee would not even be entitled to the potentially “meagre” damages as described by the Federal Court in Fung Keong Rubber, as in this case she had already been paid all that was due to her under her employment contract.

The Court of Appeal took the opportunity to distinguish some previous decisions related to the issue in this case. In particular, the Court pointed out that in the earlier Court of Appeal decision in Ng Kim Fong v Menang Corporation (M) Berhad [2020] MLJU 644, it was made clear that the amount awarded was “not compensation for loss of employment” but only the contractual claim for retirement benefits. The employee in Ng Kim Fong was forced to resign having worked for more than 27 years, and therefore lost her retirement benefits.

In view of the above, the Court of Appeal in the 7-Eleven case concluded that —

  • the Employee should have brought a claim under Section 20(1) of the Act to be decided in the Industrial Court;
  • the Employee’s civil claim was “a clear manifestation of an abuse of process”; and
  • a civil suit by a dismissed employee who chooses not to pursue the statutory dispute resolution mechanism/process via the Industrial Court, and who brings a common law claim for monetary compensation for loss of employment ought to be struck out as being an abuse of process of the court.

One thought on “Court of Appeal: Abuse of process for an employee to claim compensation for wrongful dismissal via the civil courts instead of the Industrial Court

  1. Teknik Elektro 13 June, 2023 / 4:14 pm

    Does the Court of Appeal view the act of an employee seeking compensation for wrongful dismissal in the civil courts as an abuse of process?

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