Wrongful Dismissal In Hong Kong: Lessons For Employers Across Asia

In a region where employment law is increasingly scrutinised, the risks of summary dismissal (i.e. a dismissal without notice, and with immediate effect) continue to present a live issue for companies across Asia.

In Hu Yangyong v Alba Asia Limited [2025] HKCFI 2484, the Hong Kong Court of First Instance recently ruled in favour of a senior employee who was summarily dismissed for alleged dishonesty over his expense claims. The Court found the dismissal was wrongful, ordering the company to pay the employee's salary and benefits for the remainder of his fixed-term contract.

This case is a critical reminder that summary dismissal is a high-risk, "nuclear option" for employers, justified only in exceptional cases. The judgment highlights that even where an employee's conduct is highly irregular, a dismissal may be deemed wrongful if the company cannot prove dishonest intent, or if management has previously approved or turned a blind eye to the practice. Importantly, it is worth remembering that act of dishonesty will not automatically justify summary dismissal.

In this article, we examine the risks of summary dismissal and highlight the importance of clear, consistently enforced internal policies.

Background of the dispute

The Plaintiff, Mr. Hu, was employed as the Chief Operating Officer (COO) of Alba Asia Limited on a three-year fixed-term contract. His employment agreement included a generous clause allowing him to be reimbursed for up to RMB 20,000 per month in "out-of-pocket family expenses" upon providing official tax invoices (fa piao). Examples of "out-of-pocket family expenses" have been provided for in the contractual clause. The key contractual provision in contention is extracted below:

"(b) Expenses reimbursement
The EMPLOYEE shall be entitled to a reimbursement for the out-of-pocket family expenses which includes (but not limited to) his house rental fee, kid's tuition and family member home visit travel expenses in Mainland China up to an amount of 20,000 RMB per month. The EMPLOYEE will be reimbursed for such expenses after providing the COMPANY with official tax invoices (Fa Piao)."

In September 2018, the company summarily dismissed Mr. Hu, alleging he had acted fraudulently by submitting invoices for reimbursement that were not for his actual family expenses. The central issue involved three hotel invoices, which Mr. Hu admitted only in cross-examination that those were for a friend's son's wedding banquet, not his own family expenses.

Mr. Hu's defence was unconventional but ultimately successful. He argued:

1. He misunderstood that all invoices had to be issued in the company's name, which was impractical for personal family expenses like his son's school fees.
2. He sought and received permission from more senior personnel (i.e. the Chief Financial Officer, who was found to have apparent authority) to use invoices from "other sources" to claim his allowance.
3. Crucially, he proved that his actual, legitimate family expenses consistently exceeded the RMB 20,000 monthly cap and this was known to the company before the commencement of his employment. Therefore, he had nothing to gain financially (and conversely, the company had nothing to lose) from this strange procedure; he was simply claiming money he was already entitled to, albeit through an improper method.
4. The company's own staff had been checking and approving, through a multi-tier process, these irregular submissions for months, thereby acquiescing to the practice.

The Court's decision

The Judge sided with Mr. Hu, finding the summary dismissal was unjustified. The reasoning provides several crucial lessons for employers.

• No dishonest intent: The Court's most significant finding was that Mr. Hu did not act with dishonest or fraudulent intent. The "nothing to gain" argument was extremely persuasive. Because he was entitled to the money anyway, his actions were seen not as an attempt to defraud the company, but as a clumsy and irregular attempt to comply with what he believed was an approved process.
• Management's "apparent authority": The Court found that the manager who approved Mr. Hu's method had "apparent authority" to do so, binding the company. The fact that payment was made to reimburse Mr Hu's submitted invoice after multi-tier approval and checking reinforced Mr Hu's mind that the unusual manner in which the invoices were being used was acceptable to the company
• Pretext for dismissal: The evidence showed the company wished to have an early termination of Mr. Hu's employment for "poor performance" and due to corporate structural change months before the expense issue was formally raised. This suggested that the company was searching for a reason to avoid paying out his fixed-term contract, which weakened its credibility.

Key takeaways for clients

This judgment provides a powerful, practical guide for employers. The following five lessons are critical for mitigating the risk of a successful wrongful dismissal claim.

• Summary dismissal is a high-risk tool requiring strong evidence. The Court reaffirmed that summary dismissal is a "nuclear option" reserved for only the most serious misconduct that fundamentally destroys the employment relationship. Allegations of dishonesty, in particular, require correspondingly strong and credible evidence. An employer's belief that an employee has behaved badly is not enough; the conduct must be so severe that it legally justifies immediate termination. In other words, the full factual matrix must be considered.
• Investigate the "why" – motive and context can be decisive. Before alleging fraud, employers must consider the employee's motive and the surrounding context. In this case, the fact that the employee had nothing to gain financially from his convoluted process was the single most persuasive point. It completely undermined the allegation of dishonesty. The context—that the company had approved his claims for months notwithstanding that the unusual feature of those claim was apparent —was equally important.
• Build your defence with clear and consistently applied policies. Your internal policies are your first line of defence, but only if they are clear, practical, and consistently enforced. This case shows that having a policy is not enough; if it is ignored or informally modified in practice, it becomes almost impossible to rely on later.
• Informal practices and acquiescence can override formal policies. This is a critical risk area. The actions of superiors, managers and administrative staff can legally bind the company. Here, a senior personnel's informal approval and the finance team's routine payment of irregular claims created a new "accepted practice." By turning a blind eye (acquiescence), the company lost its right to suddenly enforce the strict letter of the contract. In practice, it would be prudent in such circumstances for the company to at least issue a warning to the concerned employee to signal that such conduct, although previously tolerated, will no longer be acceptable going forward. This would be in line with the holdings in See Ying Kee Safes & Furniture Ltd v Wong Yam Tak; Lam Ping Wai v Lee Yuet Lam.
• A fair process is non-negotiable – investigate promptly and thoroughly. This new takeaway is perhaps the most crucial. A defensible dismissal is not just about what the employee did, but how the employer handled it.

1. Act promptly: Concerns must be addressed as they arise. The company's delay in raising the issue until after termination talks had begun made the investigation look like a pretext, fatally weakening its case.
2. Investigate fairly: A thorough and impartial investigation must be conducted before any decision is made. This includes clearly outlining the allegations to the employee and giving them a genuine opportunity to respond.
3. Document everything: Maintain clear records of policies, communications, approvals, and every step of the investigation. The lack of a clear paper trail confirming the company's rules and its objections left it vulnerable.

While employers are entitled to protect their business from dishonest conduct, this case is a stark reminder that wrongful dismissal claims are not won by instinct, but by evidence and process. In the fast-paced business environments of Hong Kong and Asia, companies must take care to implement clear internal policies, enforce them consistently, and ensure that any disciplinary action is procedurally fair and legally defensible.

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.