This article is the third in our series of deep dives into cases which we have handled involving strike out applications. The case in question involves allegations of disability discrimination carried out by the employer, Quasar Engineering Limited (“Quasar”) and the employee's entitlement to claim constructive dismissal.
Case Background
The Claimant commenced employment with Quasar in April 2018 as a Program Director. Initially, he reported to the Chief Executive Officer of Quasar and worked fairly regular hours, enjoying a work-life balance. Due to his outstanding performance, the Claimant was promoted to Global Executive Vice President Commercial ("EVP") in November 2019. As the EVP, the Claimant was responsible for overseeing the commercial side of Quasar's business including, setting up the Global Commercial team and focusing on business development on a global level. Whilst the Claimant did not receive a salary increase at that time, his promotion did entitle him to join the QE Holdings Phantom Equity Stock Option Plan. On 23 December 2019, the Board of Directors of QE Holdings approved the Rules of QE Holdings Phantom Equity Stock Option Plan ("PESO Plan").
In April 2019, Quasar was acquired by the Longreach Group, a private equity firm. This acquisition led to a shift in the company's strategy. Quasar became very focused on achieving short-term goals in the expectation that the company would be resold within a short period of time. The Longreach Group was open in communicating to its employees that they could benefit financially in an eventual sale and that it was in their interests to help the company meet the ambitious goals and targets which the management team had set.
As part of Longreach's strategy to make itself very profitable and appeal to future buyers, it mandated its management to cut costs and to focus on increasing revenues. The Claimant as part of the Commercial Team recommended that Quasar should diversify its client base and invest in product design and technology to reduce their dependency on their major client, Johnson & Johnson (“J&J”), which accounted for 80% of Quasar's profit generation. J&J had imposed exclusivity clauses in their commercial documents requiring that Quasar refrain from dealing with J&J's competitors in respect of the same type of products J&J were obtaining from Quasar. It was agreed that the CEO of Quasar would be responsible for liaising with J&J for the removal of the exclusivity clauses to free up Quasar so it could broaden its client base.
However, the CEO was not able to renegotiate the terms of their contract to remove the exclusivity clause. Instead, it is alleged by the Claimant that Quasar began contracting with J&J's competitors in breach of its contractual obligations which the Claimant took the view was unethical, unprofessional and put the J&J account at risk.
The Claimant also complained of:
- being targeted by Quasar's CEO and that he created a hostile and abusive working environment; and
- Quasar failing to provide to the Claimant sufficient resources and headcount, which led to the Claimant being overworked and his health suffering from not being able to take leave or sufficient rest.
It was Quasar's case that the Claimant had a strained relationship with the Project Management Office (“PMO”) team and it was the CEO's complaint that the Claimant was unable to win over peers and was unable to improve his relationship with the PMO team, a team that the Claimant had successfully established while in his previous role of Program Director. In response, the Claimant alleged that he had difficulty building inter-team trust because the CEO's micro-managing was disrupting the Commercial Teams' communications with the PMO team and with the company's major client J&J.
Additionally, the Claimant raised concerns regarding increased workloads, limited opportunities for leave, and frequent international travel obligations, especially during the COVID-19 pandemic, which significantly affected his health and well-being. The Claimant subsequently received a diagnosis of General Anxiety Disorder, impacting his capacity to work effectively. He alleged that Quasar's management practices during this period were discriminatory under the Disability Discrimination Ordinance ("DDO"), also seeking compensation under the PESO Plan.
Eventually, the combination of excessive working hours, repeated refusals by management to allow him to take time off as annual leave, and frequent lengthy international business trips required during the COVID-19 pandemic created severe strain, ultimately resulting in the Claimant developing General Anxiety Disorder. As his condition deteriorated, the Claimant became unable to work and required medical leave. On 22 December 2022, while the Claimant was still on leave, Quasar informed him of their intention to terminate his employment. However, they stated that they wanted to retain his services as a contractor and provided him with an agreement whereby he would provide services to Quasar as an independent contractor. The Claimant considered his working conditions contributed directly to his anxiety disorder and viewed his subsequent termination as discriminatory under the Disability Discrimination Ordinance (“DDO”), therefore claiming Constructive Dismissal. Consequently, he sought damages for loss of income, emotional distress, and entitlement under the PESO Plan
Analysis
Principles of Strike-Out Applications
The principles governing strike-out applications are well-established. The court should exercise its summary power to strike out only in plain and obvious cases. Disputed facts are taken in favour of the party sought to be struck out, and the burden is on the applicant to establish that it is plain and obvious the claim is bound to fail. The claim must be obviously unsustainable, and the pleadings unarguably bad, making it impossible for the claim to succeed. Additionally, the court has jurisdiction to strike out parts of witness statements that are scandalous, irrelevant, or otherwise oppressive.
Quasar's Strike-Out Application
Quasar sought to strike out several paragraphs of the Claimant's pleadings and witness statement. Specifically, Quasar sought to strike out:
- A paragraph of the Re-amended Notice of Claim (“RANOC”), arguing that the claim for constructive dismissal falls within the exclusive jurisdiction of the Labour Tribunal;
- Paragraphs of the RANOC which referenced: (1) Quasar's act of giving notice to the Claimant whilst he was on paid sick leave, amounting to a repudiatory breach of the employment contract and (2) the Claimant's entitlement to PESO awards as damages, claiming that these paragraphs disclosed no reasonable cause of action and/or are an abuse of process.
- Various paragraphs of the Claimant's witness statement referencing (1) the leadership style of the CEO, (2) the CEO's approach in handling J&J's intellectual property rights and the business relationship between Quasar and J&J, and (3) the Claimant's claim for constructive dismissal, on the grounds that these paragraphs contain inadmissible evidence, are irrelevant, scandalous, or oppressive.
Court's Reasons for Disallowing the Strike-Out Application
1. Constructive Dismissal Claim: The court found that the Claimant's claim extended beyond a simple breach of employment contract. The claim was based on disability discrimination, which is a tort and falls within the jurisdiction of the District Court, not the Labour Tribunal. The court emphasised that the substance of the dispute, not the labels on the pleadings, should be considered. The Claimant's claim that the termination was due to his disability and amounted to constructive dismissal was deemed relevant and within the court's jurisdiction.
2. PESO Claim: The court rejected Quasar's argument that the PESO claim was purely contractual and not an "equal opportunities" claim. The court reasoned that if the Claimant succeeded in his disability discrimination claim, he could potentially recover damages for the loss of PESO entitlement. The issue of causation and remoteness of damages should be determined at trial, not at the strike-out stage.
3. Relevance of Witness Statement Paragraphs: The court found that the paragraphs in the Claimant's witness statement concerning the leadership style of the CEO of Quasar, and the cause of the Claimant's disability were relevant to the issues in dispute. The issues are defined by the pleadings, not by the witness statements. The paragraphs in question are relevant to the Claimant's claims of overwork, workplace bullying, and the Respondent's failure to support his advice on business strategy.
4. Relevance of the J&J exclusivity clause: The court found that the exclusivity clauses from an agreement between Biosense Webster of J&J and Quasar were relevant to the issues in dispute. The existence of the clauses prevented Quasar from supplying goods to J&J's competitors and the Claimant had advised the CEO of the need to invest in technology and diversify its business. Despite the Claimant's proposals, the CEO rejected plans for business diversification. The exclusivity clauses were part of the broader context of the Claimant's disagreements with the CEO's management style and business strategy. The court noted that these issues were relevant to the claims of underperformance and the alleged discriminatory conduct.
Conclusion
The court's decision to dismiss Quasar's strike-out application underscores the importance of considering the substance of the issues in dispute and the relevance of contextual evidence in employment law cases. The Claimant's allegations of disability discrimination and constructive dismissal were deemed relevant and within the court's jurisdiction.
The case highlights the need for employers to consider the broader context of their actions and the potential impact on employees' health and well-being. The court's detailed analysis provides valuable insights into the principles governing strike-out applications and the importance of a fair and thorough examination of the issues at hand.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
