By Jeffrey Chan

Hong Kong, 20 November 2025: A High Court judgment in which a senior executive successfully sued his employer for sacking him over alleged “fraudulent” expense claims raises critical questions over employment law and corporate governance. The ruling, which saw the plaintiff win more than HK$5.4 million in damages for wrongful dismissal, provides lessons for companies and employees alike.

The court heard that the plaintiff had been chief operating officer of the Hong Kong arm of a global waste management and recycling group. Under his employment agreement, he was entitled to reimbursement for out-of-pocket family-related expenses – including but not limited to house rental fees, children’s tuition fees, and travel costs for family members to visit relatives in Mainland China – up to RMB20,000 per month.

He was summarily dismissed after submitting claims that were not for his family’s actual spending – specifically, three hotel banquet invoices all dated the same day. The company alleged this constituted fraud and gross misconduct. The executive insisted he had obtained prior oral approval from the firm’s finance team for this practice. Further, he had genuinely incurred more than the reimbursable amount in family expenses every month, meaning he had no motive to defraud the company.

In reaching its decision, the court considered several factors in the plaintiff’s favour:

Existence of “authorisation”: The court accepted the executive’s evidence that he had discussed the practice of using “invoices from other sources” with the firm’s financial controller, who had apparent authority to bind the company and that his agreement made the practice permissible from the executive’s perspective.

No actual gain or loss: Critically, the court found that the executive’s genuine, claimable family expenses (such as his son’s school fees and mortgage payments) exceeded the monthly reimbursement cap of RMB20,000, so he could have claimed the full amount using legitimate receipts. Thus, his method of submitting alternative invoices caused the company no financial loss and eliminated the motive for fraud.

Consistent approval: Over more than a year, the company’s finance staff reviewed and approved the plaintiff’s expense claims, reinforcing his reasonable belief that the practice was acceptable.

After-the-fact justification: There was evidence that the company had sought to terminate the executive’s contract for business reasons months before the invoices dispute. This created suspicion that the expense allegations were a pretext to avoid a costly contract buyout.

The court also noted that under the Employment Ordinance (Cap 57), summary dismissal is an extreme measure reserved for the most serious cases, such as fraud or gross misconduct. The court emphasised that the standard of proof for fraud is high. Given the executive’s belief that he had approval and his lack of dishonest intent, his conduct, while irregular, did not reach the high threshold required for instant dismissal.

The case serves as a timely reminder about corporate compliance and employment rights. Key takeaways for employers include:

• Policies must be clear and in writing: Critical financial controls, especially expense policies, must be unambiguous and documented. Avoid informal, oral approvals that can create legal vulnerabilities.
• Internal controls cannot be passive: Finance staff must actively scrutinise claims. Consistently approving irregular claims without question can be construed as acquiescence, waiving the company’s right to later enforce the rules strictly.
• Exercise dismissal power with extreme caution: Summary dismissal carries a high legal burden. It should not be used as a convenient tool to manage performance issues or avoid contractual severance payments.
• Beware of “apparent authority”: Ensure that reporting lines and authority limits are clear. Companies can be bound by the actions of employees who reasonably appear to others to have decision-making power.

The judgment also contains lessons for employees:

• Compliance is paramount: While the plaintiff won, his practice was risky. Employees should always adhere to written company policies and act with integrity.
• Document important communications: Keep records (emails, messages etc) of any special approvals or agreements regarding your employment terms, as they can be vital evidence in a dispute.
• Know your rights: Understand that summary dismissal is a severe action. If you believe you have been dismissed unfairly, seek legal advice.

The judgment does not condone the submission of inaccurate expense claims. Instead, it serves as a timely reminder to companies that robust internal procedures, consistent enforcement and good faith in decision-making are the bedrock of managing legal risk and exercising the power to dismiss lawfully. In the employer-employee relationship, fairness, clarity, and mutual good faith are essential for a stable and productive partnership.

Jeffrey Chan has been a Partner in BC&C since 2015 and leads the firm’s Insurance and Personal Injury team which advises on legal matters and handles court cases for insurance companies and/or their insured parties. He practices all areas of civil litigation with a particular emphasis on personal injuries and property damage claims, employees’ compensation legislation and insurance-related disputes. He can be contacted at jeffrey@boasecohencollins.com.

Trainee Solicitor Luzia Liu contributed to this article.