Lourdes Medical Services Sdn Bhd v Lalitha A/P Subramaniam (WA-25-378-12/2021)

MAHKAMAH PERUSAHAAN MALAYSIA - RESPONDEN PERMOHONAN SEMAKAN KEHAKIMAN NO.: WA-25-377-12/2021 Dalam perkara Aturan 53 Kaedah-kaedah Mahkamah 2012 iaitu permohonan LOURDES MEDICAL SERVICES SDN BHD untuk semakan kehakiman dan suatu perintah certiorari Dan Dalam perkara mengenai keputusan Awad Mahkamah Perusahaan No.: 1296 Tahun 2021 bertarikh 6 September 2021 yang diperintahkan oleh Mahkamah Perusahaan bagi Kes Mahkamah Perusahaan No.: 4/4- 1939/20 Dan Dalam perkara mengenai Seksyen 20 Akta Perhubungan Perusahaan 1967. Dan Dalam perkara mengenai Aturan 53,

MAHKAMAH PERUSAHAAN MALAYSIA PERMOHONAN SEMAKAN KEHAKIMAN NO.: WA-25-378-12/2021 Dalam perkara Aturan 53 Kaedah-kaedah Mahkamah 2012 iaitu permohonan LOURDES MEDICAL SERVICES SDN BHD untuk semakan kehakiman dan suatu perintah certiorari Dan Dalam perkara mengenai keputusan Awad Mahkamah Perusahaan No.: 1297 Tahun 2021 bertarikh 6 September 2021 yang diperintahkan oleh Mahkamah Perusahaaan bagi Kes Mahkamah Perusahaan No.: 4/4-1940/20 Dan Dalam perkara mengenai Seksyen 20 Akta Perhubungan Perusahaan 1967. Dan Dalam perkara mengenai Aturan 53,

MAHKAMAH PERUSAHAAN MALAYSIA PERMOHONAN SEMAKAN KEHAKIMAN NO.: WA-25-379-12/2021 Dalam perkara Aturan 53 Kaedah-kaedah Mahkamah 2012 iaitu permohonan LOURDES MEDICAL SERVICES SDN BHD untuk semakan kehakiman dan suatu perintah certiorari Dan Dalam perkara mengenai keputusan Awad Mahkamah Perusahaan No.: 1298 Tahun 2021 bertarikh 6 September 2021 yang diperintahkan oleh Mahkamah Perusahaan bagi Kes Mahkamah Perusahaan No.: 4/4-1941/20 Dan Dalam perkara mengenai Seksyen 20 Akta Perhubungan Perusahaan 1967. Dan Dalam perkara mengenai Aturan 53,

MAHKAMAH PERUSAHAAN MALAYSIA JUDGMENT [1] There are before me four separate judicial review applications, which, by the consent of all parties concerned, are heard together. The four cases are WA- 25-376-12/2021 (“JR No. 376”), WA-25- 377-12/2021 (“JR No. 377”), WA-25- 378-12/2021 (“JR No. 378”) and WA-25-379-12/2021 (“JR No. 379”). [2] I will first deal with JR No. 376. JR No. 376: The Factual Background [3] The applicant is an entity that operates several establishments that provide medical services, including polyclinics, known as “Lourdes Polikinik”. It has multiple branches in Klang Valley. [4] The 1st respondent, Mohamad Sahrul, is a former employee of the applicant. [5] By a letter of appointment dated 18.12.2012, the 1st respondent was offered employment with the applicant as a despatch. The employment was with effect from 17.12.2012. The 1st respondent’s duty as a despatch involved handling the delivery and collection of various documents for the applicant and its patients. [6] The applicant’s case is as follows. [7] During the COVID-19 pandemic, the Government of Malaysia announced a nationwide lockdown with effect from 18.3.2020 (“the MCO 2020”). According to the applicant, the lockdown had led to the applicant going through a serious economic downturn. As a result, the applicant suffered difficulties to continue with its business operation. [8] The impact of the MCO 2020 caused further concerns. The applicant’s financial position was further weakened. The clinics within the applicant’s management could no longer operate 24 hours. It had impacted the applicant’s revenue and profitability by almost 70%. [9] Given the circumstances, the applicant decided to restructure its operation to ensure its survival. Owing to the reduced operations of the applicant’s polyclinics, the position of a Despatch is no longer feasible. The applicant then decided to phase out the role entirely. [10] The applicant then issued a letter of retrenchment to the 1st respondent dated 1.4.2020 (“the termination letter”). The termination letter inter alia states as follows: We wish to inform you that as part of the Company’s rationalization exercise, the Management has decided that it would not be feasible for the Company to continue the business and has decided to cease operations. In the circumstances we have no alternative but to retrench you with effect from 1st April 2020. As such, you are not required to report to work with immediate effect and you will receive salary [in] lieu of notice in accordance with the terms set out in your letter of employment less any statutory deductions. [11] Aggrieved by the retrenchment, the 1st respondent made a representation of unfair dismissal under s 20 of the Industrial Relations Act 1967 (“IRA”). The representation was subsequently referred to the Industrial Court. At the Industrial Court [12] In its Award, the Industrial Court ruled that the dismissal of the 1st respondent was without just cause and excuse. It then ordered the applicant to pay a sum of RM30,720 as backwages and compensation in lieu of reinstatement to the 1st respondent. [13] The grounds of judgment of the Industrial Court can be summarised as follows. Failure to prove actual redundancy situation [14] According to the learned Chairman of the Industrial Court, the applicant had failed to explain the nature of the rationalisation exercise that the management of the company carried out, which warranted the retrenchment of the applicant. The termination letter did not mention that the redundancy of the applicant was due to the surplus of labour. [15] The learned Chairman found that the 1st respondent was a long-serving employee of the applicant. However, the applicant failed to show how the 1st respondent was selected for the purposes of the retrenchment. There was no mention of the selection criteria used by the applicant before the 1st respondent was selected for retrenchment. [16] In any event, the Industrial Court took cognisance that from the evidence of COW-1, the alleged serious economic downturn had only purportedly reached a low point in the following months after the imposition of the MCO 2020. In the circumstances, the learned Chairman was of the view that the 1st respondent was abruptly retrenched with no acceptable reasons. According to the learned Chairman: But the claimants were all retrenched within 14 days from the date of the MCO even before the company could feel and experience the impact of the MCO. No documents adduced to support the rationalisation exercise [17] Before 1.4.2020, there were no known documents available from the applicant that it was indeed embarking on a rationalisation exercise. The learned Chairman found that the only known contemporaneous document concerning the exercise was the termination letter. [18] A careful reading of the termination letter revealed that there was a complete lack of information on the purported rationalisation exercise undertaken by the applicant. The applicant's reduced revenue is not conclusive [19] The Financial/Profit and Loss statement produced by the applicant showing a significant drop in the revenue could not be taken as an acceptable ground for the retrenchment exercise. [20] The Industrial Court found that under Direct Cost, the doctors were paid incentives. Although there was a slight dip in April 2020, the month of May showed a healthy increase in the incentive paid out to the doctors. In any event, the operation costs, manpower expenses, staff salaries and allowances and staff uniform expenses showed a significant increase in the months of April and May as compared to January, February and March 2020. According to the learned Chairman, the increase in expenses and pay-outs signified that the applicant was financially healthy. [21] The Industrial Court further found that the director’s remuneration for April 2020 remained the same amount of RM30,000 as in January, February and March 2020. [22] There were also increased electricity charges in April and May 2020, suggesting significant activities for the applicant. [23] According to the learned Chairman of the Industrial Court, the applicant should have taken measures to initiate financial austerity as an immediate first step before resorting to the retrenchment of the employees. The applicant offered reinstatement to the 1st respondent [24] It is the pleaded case of the applicant that it was prepared to reinstate the applicant to his respective position and pay backwages. In para 10(a) of its Statement in Reply, the applicant averred as follows:

Sometimes in November 2020, the Company wrote to this Honourable Court that the Company is now in a position to reinstate the Claimant to his respective position and pay the backwages that were due to the Claimant. The attempt to reinstate did not materialise as the applicant had maintained its position at the Industrial Court that the dismissal of the 1st respondent was with just cause or excuse. [25] The learned Chairman found it difficult to reconcile the applicant’s earlier position that the 1st respondent’s position had become redundant but later found it fit to reinstate the 1st respondent. According to the Industrial Court, the applicant could not argue that the 1st respondent’s retrenchment was bona fide and that his dismissal was with just cause and excuse. The fact that the job was available not long after the retrenchment meant that the 1st respondent was at all material times not redundant in the applicant company. [26] In the circumstances, the Industrial Court accepted the 1st respondent’s version that his job was not redundant. At the High Court [27] Aggrieved by the Award, the applicant commenced this application for judicial review for an order to quash the same. [28] The application is supported by the affidavit of Choo Theam Yew in Encl 3 (“AIS-3”). Encik Choo is the Country Head of the applicant company. [29] Before me, learned counsel for the applicant submitted that there are two main issues to be determined by this Court, which were wrongfully answered by the Industrial Court. They are:

Whether there was a genuine need for the reorganisation or realignment exercise; and

Whether the applicant was redundant and, if so whether his selection for retrenchment was made in accordance with the general principles of retrenchment. [30] As to the first issue, learned counsel for the applicant highlighted that the applicant’s witness, COW-2, testified that since March 2020, the applicant’s operation had suffered a downturn owing to the MCO 2020 due to the spread of the Covid-19 pandemic. Learned counsel for the applicant submitted that the Industrial Court had committed an error of law in arriving at its conclusion by not looking at the applicant's financial figures in a comprehensive manner. [31] In short, learned counsel contended that the Industrial Court had analysed the financial figures in isolation with another and came to an erroneous conclusion. [32] According to learned counsel, an example of this error can be seen in respect of the Doctor’s Incentive Allowance. Learned counsel contended that the Industrial Court had omitted to consider a significant decline in the incentive/allowance paid out in April 2020 and May 2020 compared to the preceding months. Learned counsel also highlighted that the Industrial Court had entirely failed to appreciate that under the same heading of “Direct Cost”, the Doctors’ Salaries were reduced from approximately RM100,000 (for January, February and March 2020) to only RM12,000 (for April and May 2020). [33] Secondly, in ruling that the increased electricity charges in April and May 2020 meant that there were “significant business activities” for the applicant, the Industrial Court – according to learned counsel – had arrived at this conclusion in the absence of any evidence whatsoever. Learned counsel submitted that simply because the was an increase does not mean “significant business activities”. [34] In the circumstances, it is the applicant’s case that a holistic perusal of the applicant’s financial figures would be a more appropriate approach that should been taken by the Industrial Court. Relying on the judgment of Zawawi Salleh J (later FCJ) in Shahirman Sahalan & Ors v Natseven TV Sdn Bhd & Anor [2010] 1 LNS 1333, learned counsel submitted that business loss and grave financial distress are “accepted reasons for undertaking a retrenchment exercise”. [35] On the issue of whether the applicant had acted “hastily” when it decided to retrench the 1st respondent, learned counsel for the applicant submitted that it is not necessary for the applicant to suffer significant losses for the entire year to suggest that the retrenchment was made with ill intentions. Learned counsel then referred me to the judgment of the Industrial Court in Sarawak Shell Bhd v Ismail Sahat & Ors [2002] 2 ILR 371. The case carries the proposition that the mere fact that a business is profitable does not disentitle a business organisation from making management decisions to reorganise its business and operations, which might result in a surplus workforce and the need to carry out a retrenchment. [36] Learned counsel for the applicant also highlighted another case of the Industrial Court in Mamut Copper Mining Sdn Bhd v Chau Fook Kong @ Leonard & Ors [1997] 2 ILR 625. It was held that cost and control and staff reorganisation for better economy and efficiency are, in themselves, legitimate reasons for retrenchment. The Industrial Court further held there is no pre-condition that the same must be preceded by losses suffered by the company. [37] On the second issue, learned counsel for the applicant submitted that the Industrial Court had committed an error of law in failing to consider that the applicant had entirely eliminated the role of the Despatch within its operations. COW-1, Shila Vadivelu, the applicant’s Clinic Manager, testified in her evidence that in a bid to save costs, the 1st respondent’s position was eliminated due to redundancy. Up to the last date of hearing before the Industrial Court, the 1st respondent’s role was not replaced. [38] In any event, learned counsel for the applicant contended that there is evidence that in the absence of the 1st respondent, the despatch job was taken over by the applicant’s driver, one Encik Suresh. [39] Since the evidence of COW-1 that the role of despatch was eliminated was not challenged during her testimony, learned counsel for the applicant submitted that it must, therefore, be taken as true; Aik Ming (M) Sdn Bhd & Ors v Chang Ching Chuen & Ors & Anor Case [1995] 2 MLJ 770 CA. On the offer of reinstatement [40] On 12.11.2020, the applicant offered to reinstate the 1st respondent through an email on an even date. The 1st respondent offered the reinstatement at the same branch. The offer includes the payment of backwages from May to October 2020 for the sum of RM12,288. [41] Learned counsel for the applicant submitted that the applicant had acted reasonably when it offered to reinstate the 1st respondent. Relying on the judgment of the Court of Appeal in Hong Leong Equipment Sdn Bhd v Liew Fook Chuan & Anor Appeal [1996] 1 MLJ 481 CA, learned counsel submitted that reinstatement is the primary remedy in industrial law. The Court of Appeal further held that the workman's acceptance of the reinstatement offer or an unreasonable rejection of it must be treated as having put an end to the dispute. No duty to explain the rationalisation exercise [42] Finally, learned counsel for the applicant submitted that the learned Chairman of the Industrial Court had erred in concluding that there is a legal obligation to explain what was the rationalisation exercise that the applicant had carried out that warranted his retrenchment. [43] On the contrary, learned counsel submitted that it is trite that an employer is not obliged to warn or consult his employees prior to an impending retrenchment. The reason is this. According to learned counsel, such a failure does not render the retrenchment of a workman mala fide. Learned counsel cited N Vijayan Nagarajan v Siebel Systems (M) Sdn Bhd [2006] 1 ILR 385 as an authority to the said proposition. [44] For the aforesaid reasons, learned counsel for the applicant urged this Court to conclude that the Industrial Court had committed several errors of law, which warrants an interference from this Court. Analysis [45] The gist of the applicant’s complaint, as I can see it, is that the applicant is putting the Industrial Court at fault for failing to consider the effect of the Covid-19 pandemic, which according to learned counsel, had changed the business dynamics and forced the applicant to embark on a rationalisation exercise. [46] But the first question that comes to my mind is whose burden is it to establish with concrete and cogent proof that actual redundancy on which the dismissal is grounded? I believe the answer to this can be found in the judgment of the Court of Appeal in Woo Vain Chan v Malayawata Steel Bhd [2016] 2 MLJ 848 CA. [47] In delivering the judgment of the Court of Appeal, Abang Iskandar JCA (as the learned PCA then was) said: The burden is on the employer to come to the court with concrete proof to establish that the employee is actually redundant, that he is discharged as surplus age to the company’s requirement. There must be actual redundancy before a dismissal premised on the ground of redundancy could be grounded. Merely by showing that the company was undergoing restructuring exercise will not suffice. In order to bite, it must be further exhibited through evidence that the exercise had impacted on the job function in such a manner that ‘it was reduced to such an extent that he was considered redundant’. In other words, the exercise had rendered the employee a surplus to the manpower requirement of the company. If such a situation is successfully borne out by the evidence as led before the court, then an employee so affected could be validly retrenched or his services terminated on that ground. [48] Applying the said proposition to the facts of the case, the burden therefore lies on the applicant to show that the Covid-19 pandemic had impacted the job function of the 1st respondent to the extent that the job function of the 1st respondent “was reduced to such an extent that he was considered redundant”. [49] Now, let us go through the facts:

The MCO 2020 took effect on 18.3.2020.

The termination letter was dated 1.4.2020, barely two weeks after the MCO was enforced.

According to COW-1, the 1st respondent’s workload was taken over by Encik Suresh, the driver.

The 1st applicant was offered reinstatement vide an email dated 12.11.2020. [50] Learned counsel for the applicant referred me to Shahirman Sahalan and argued that business loss and grave financial distress are accepted reasons for undertaking a retrenchment exercise. I do not think that I am going to quarrel with the proposition. It is, to my mind, an accurate statement of the law. [51] However, the facts in Shahirman Sahalan are quite different. In that case, the financial position of the 1st respondent, Natseven TV, was that it was unable to fulfil its financial obligations towards its creditors and the creditors had commenced applications under the then s 218 of the Companies Act 1965 (s 218 Notices) to wind up the 1st respondent. It is under this undisputed evidence that the learned Judge agreed with the finding of the Industrial Court that Natseven TV “had proven the need to reorganize its operations which was done bona fide”. [52] Applying the law to the facts of the case, there is no evidence before the Industrial Court that the applicant was on the brink of being wound up due to business loss and grave financial distress that would have warranted a reorganizational exercise. [53] Even in Sarawak Shell Bhd, a case relied on by learned counsel for the applicant, the Industrial Court held that where the decision to retrench the employees was preceded by a reorganisation exercise, it follows that the bona fides of the said exercise will similarly also be subject to the scrutiny of the court. [54] Having said that, this Court takes note that the retrenchment exercise against the 1st respondent was undertaken barely two weeks after the enforcement of the MCO 2020. With respect, I agree with the learned Chairman of the Industrial Court that the exercise was done hastily “even before the company could feel and experience the impact of the MCO”. [55] Learned counsel for the applicant invited me to look into the applicant’s financial accounts in a more holistic manner. But then again, how holistic could it be when a decision was made by the applicant to retrench the 1st applicant after two weeks of the enforcement of the MCO 2020? From this perspective, I can only conclude that the applicant was jumping the gun, so to speak, by making an assumption without being clinical at the initial impact of the MCO 2020. Considering that the decision was made within a span of two weeks after the enforcement of the MCO 2020, I can only conclude that it was based on mere surmise and conjecture and not evidence. [56] The Court of Appeal in Telekom Malaysia Kawasan Utara v Krishnan Kutty a/l Sanguni Nair & Anor [2002] 3 MLJ 129 CA observed as follows: A finding based solely on conjecture, surmise or suspicion is a finding based on no evidence. [57] While I am not prepared to conclude that the hastiness of the applicant was actuated by malice or mala fide, there exist enough vitiating factors in the form of arbitrariness and capriciousness or even victimisation with the meaning of the ratio on Sarawak Shall Bhd, which I respectfully agree. [58] There is another aspect of learned counsel for the applicant’s argument that I need to address. It is this. COW-1 testified that 1st applicant’s workload was taken over by the applicant’s driver. What does this imply? The English Court of Appeal in Chapman & Ors v. Goonvean & Rostowrack China Claw Co. Ltd. [1973] 2 All ER 1063 CA held that when there are other people who replaced the dismissed employee, a redundancy situation cannot arise. [59] In Bayer (M) Sdn. Bhd. v. Ng Hong Pau [1999] 4 AMR 3913 CA, the Court of Appeal referred to Chapman and held that: It is our view that merely to show evidence of a re-organization in the appellant is certainly not sufficient. There was evidence before the court that although sales were reduced, the workload of the respondent remained the same. After his dismissal, his workload was taken over by two of his former colleagues. Faced with these evidence, is it any wonder that the court made a finding of fact that there was no convincing evidence produced by the appellant that the respondent's functions were reduced to such an extent that he was considered redundant. Since the despatch work was undertaken by Encik Suresh, on the authority of Chapman and Bayer (M), a redundancy situation could not have arisen. [60] This issue is inextricably linked with the offer of reinstatement vide the email dated 12.11.2020. The fact that the 1st respondent was offered reinstatement within seven months of being made redundant confirmed the finding of the learned Chairman of the Industrial Court that the retrenchment exercise was made in haste. Findings [61] On the aforesaid grounds, my findings are as follows:

There was no real redundancy. The retrenchment exercise was tainted with the existence of vitiating circumstances such as arbitrariness, capriciousness and victimisation.

The retrenchment of the 1st respondent was without just cause or excuse. [62] Since the Industrial Court did not commit any reviewable error in its conclusion that there was no redundancy, my decision on JR No. 377, JR No. 378 and JR No. 379 will, therefore, be the same. [63] The Awards in all the cases are not tainted with Anisminic error or Wednesbury unreasonableness to warrant a curial intervention. [64] The applications are therefore dismissed with costs of RM3,000 for each case. Tarikh: 31 Januari 2024 (WAN AHMAD FARID BIN WAN SALLEH) Hakim Mahkamah Tinggi Kuala Lumpur. Pihak-pihak: Bagi Pihak Pemohon : Vijayan Venugopal, Benedict Ngoh Ti Yang, Thye Yong Wei Tetuan Shearn Delamore & Co. Bagi Pihak Responden :