Zhang Qiang v. Cisco Systems (HK) Ltd

HCA 1497/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1497 OF 2010

(TRANSFERRED FROM LBTC 1093/2010)

________________________

________________________

Before:  Mr Registrar K. W. Lung in Chambers

Date of Hearing:  21 November 2017

Date of Decision: 21 November 2017

_______________

D E C I S I O N

_______________

THE APPLICATIONS

1.This is the Plaintiff’s (“P’s”) application by summons dated 26 April 2017 for leave to:

(a) amend the Amended Statement of Claim dated 1 March 2012; and

(b) adduce expert evidence in relation to the tax law in China.

2.The applications are contested and the parties are legally represented.[1]

3.D agrees to P’s application except the following items:

(a) The Plaintiff’s proposed amendments to the ASOC appearing in paragraphs 6, 18i, 22, 25, 31 and 36 of the draft RASOC; and

(b) The Plaintiff’s application to adduce expert evidence in relation to the tax issue in China.[2]

THE FACTUAL BACKGOUND

4.The following facts are raised by P in his written submissions:

(a) P joined Cisco Systems (USA) Ltd in Singapore as a Customer Support Engineer level III in January 2000.

(b) In early 2002, P applied to Cisco Singapore for an internal job opening as a Product Manager with D.  On 2 August 2002, P was presented an initial offer in relation to the job opening by D.

(c) The initial offer was for the position of Customer Support Engineer level III at grade 8 with an annual salary of $443,442.  As P applied to the Product Manager position, P and D entered into a series of discussions in relation to the incorrect position and grading from early 2002 to mid 2002.  D had reaffirmed P that the incorrect position, grading and salary would be rectified once P joined D.

(d) On 23 September 2002, with good faith and trust that D would rectify the issues, P signed and returned the Letter of Agreement on 23 September 2002.

(e) On 23 September 2002, P started to work as a Product Manager in the Beijing office of D.

(f) From late 2002 to August 2006, P had been in discussion with D in regards of the incorrect job position, grading and salary.

(g) In or around June 2004, D asked P whether P would be willing to be re-assigned and moved back to Hong Kong.

(h) In or around end of February 2005, P received a letter dated 24 February 2005 (“2005 Repatriation Letter”) from D that P would be repatriated to Hong Kong from Beijing China and would be put on Hong Kong local payroll with a base annual salary of HK$818,100 and other incentive and compensations.

(i) Prior to signing the 2005 Repatriation Letter, P and D came to the understanding and agreement that the effective date of the annual salary thereunder would be 10 January 2005.

(j) On 13 May 2005, P and D signed the 2005 Repatriation Letter. (“Repatriation Agreement”)

(k) To resolve P’s entitlement on salary, benefits and compensation in regards to the employment under the Letter of Agreement, D offered a Without Prejudice Letter dated 11 August 2006 to P (“Without Prejudice Letter”).

(l) On 18 August 2006, P accepted D’s Without Prejudice Letter.

(m) On 27 September 2006, P made complaints to D that D had failed to pay the amount set out in the Without Prejudice Letter.

(n) D had failed to pay P in accordance to the Without Prejudice Letter.

(o) After the execution of the Repatriation Agreement, D had failed to honor and implement the terms contained within. In particular, D had failed to pay P the agreed salary, allowances and benefits in accordance to the Repatriation Agreement.

(p) In the course of P’s international assignment to work in China, D was liable to ensure that P would pay no more or less tax than he would have to pay had he remained in P’s home country, Hong Kong (“Tax Equalization”).

(q) However, tax payment records indicate that D had failed to pay P’s individual income tax to the relevant China Tax Authority on behalf of P for the following periods:

Year	Month
2002	October – December
2003	January – November
2006	January – July
2009	May

(r) On 8 December 2009, D issued a letter to P alleging that P had committed serious misconduct by being absent from work without authorization.  P was requested to provide medical proof for the period of his absence from work by 11 December 2009.

(s) On 11 December 2009, D issued P a letter of dismissal despite that P had already provided the requisite medical certificates. (“Wrongful Termination”)

(t)   After P’s employment with D was wrongfully terminated, D had failed to pay P the entire contribution to ORSO by D as an employer and by P as the employee in the sum of HK$289,951.37 and HK$527,923.21. (“Wrongful Confiscation of ORSO”)[3]

5.Suffice it to say, D admits their relationship of employment but denies liability to P and counterclaims against him for the expense paid to him for the relocation from Beijing to Hong Kong, which had never taken place and for tax benefit P had unjustly kept under the tax equalization policy agreement between themselves.

DISCUSSION

6.D’s objections to P’s proposed amendments are that they are not relevant to the issues of dispute and are therefore not necessary and that they are time-barred.  D terminated P’s employment on 11 December 2009 and thus the limitation period in relation to all claims expired on 10 December 2015.[4]

Proposed amendments to the ASOC in paragraph 6

7.D’s objection is only in relation to the particulars, not paragraph 6 itself.  The particulars are the underpayment and/or miscalculation mentioned in paragraph 6.  They are the voluntary particulars.  What D is attempting to disallow those particulars is tantamount to striking out of those voluntary particulars.  The reason for D’s submission is the main issue between the parties is over the typing error in respect of the amount that P is entitled to.  However, P is arguing that since D is denying the Settlement Agreement and those particulars are to assist the trial judge to understand the figure in order to resolve the argument over the so-called mistake as raised by D in the Defence and Counterclaim.

8.Taking a holistic view of the disputes between the parties, it is quite obvious that the facts are hotly in dispute at the trial.  Although I find P’s pleadings to be unclear, in particular as to the grounds for the particulars to be put in for explaining the Settlement Agreement, since P has incorporated those particulars in the witness statements, D may have to respond to those facts in the witness statements.  To deny P from pleading his case in court is a very serious infringement of his rights of access to justice.  If I have any doubt, the benefit must be given to P.  I shall therefore allow P to make the amendments as proposed.

Proposed amendments to the ASOC in paragraph 18i

9.Paragraph 18i is P’s claim for the salary and benefit as agreed in the Repatriation Agreement. Paragraph 18i sets out the particulars of the claim. D does not object P’s claim under paragraph 18, but objects only the particulars, saying that they are time-barred. Limitation only relates to the claim, not the particulars.  Since D does not object the claim, the particulars have no time-bar.

Proposed amendments to the ASOC in paragraph 22

10.In this paragraph, P pleaded that his salary had been paid incorrectly, which had impacts on his other benefits, the calculation of which is based on his salary.  The proposed re-amendments set out the particulars.  D’s reason of objection is that the claim is time-barred. However, this objection has the same defect as the other paragraph above. D cannot raise this issue for the particulars.  Even if one considers the claim itself, which D says is time-barred, under O.20, r.5(5), the court might grant leave to amend if the amendment arose out of the facts pleaded and the court should adopt a liberal approach in its determination see Leung King Fook v Eastern Worldwide Co Ltd (No 2) [1997] 1 HKC 524 at 528 per Litton VP (as he then was).  In Tang Hing Kwong & Another v John David Andrew Ip & Another (unreported, HCA 7927/2000, Chow J. 25 September 2014 at §30), the Court also held “one should look at the matter broadly, and apply a degree of common sense in judging whether the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action.”

11.D’s argument cannot be supported.

Proposed amendments to the ASOC in paragraph 25

12.This new paragraph claims against D for the monthly assignment allowance, based upon P’s pleaded case under paragraph 23, which D has no objection.  D now says that this new claim is time-barred. Based upon the authorities of Leung King Fook and Tang Hing Kwong, leave should be given to add this new paragraph.

Proposed amendments to the ASOC in paragraph 31

13.The proposed amendments are alleging that D had failed to pay individual income tax and to amend the month of September to October under the particulars.  There is simply no point to oppose these minor amendments by D.

Paragraph 32 of the ASOC, on court’s own motion

14.However, it comes this Court’s notice that under paragraph 32 of the Amended Statement of Claim, P is attempting to make discovery of documents or information from D.  These should not be pleaded in the pleadings.  P may consider making discovery for those documents and information by way of interlocutory application in this Action.  Pursuant to O.18, r.19 RHC, upon its own motion, this Court strikes out this paragraph.

Proposed amendments to the ASOC in paragraph 36

15.D’s objection is that the claims are new claims, which should be time-barred.  On the same reasons as for paragraphs 22 and 25, supra, they should be allowed.

Expert evidence

16.P’s application for leave to adduce expert evidence at the trial is for the purpose to show to the court that P was liable to pay the tax in the Mainland and the possible sanctions under the PRC law if P were held liable.

17.D opposes this application because this issue is irrelevant to the issues in dispute.  P had never pleaded that he was being prosecuted or claimed by the Mainland government for tax unpaid. P now confirms this to be correct.  D goes further to say that D had paid the tax in Mainland for P and D would adduce the documentary evidence in support.

18.I have raised with P that the most effective way will be for P to make enquiry with the Tax Authority of the Mainland for any outstanding tax liability, which will clear all the issues on which P is seeking leave for expert evidence.  P submits that it will alarm the Tax Authority of the Mainland. I reject this argument. Since there is better way of resolving this issue, the way P is proposing is not saving costs or for a fair trial.  The request must be rejected.  I suggest P and D make a joint enquiry to the Tax Authority of Mainland China to clear this issue.  D agrees to make payments to the Tax Authority if there is any outstanding tax liability of P.

19.I agree with D that the issues raised by P for expert evidence are not raised in his pleadings and they are irrelevant to P’s pleaded case. As such, they are irrelevant and should not be allowed.  See: Wong Hoi Fung v American International Assurance Co (Bermuda) Ltd [2002] 3 HKLRD 507 at 511J and 512A).

COSTS AND ORDER

20.As to the costs of the application, as agreed by the parties, since each side has won part of the applications, there should be no order as to costs for the applications including the costs reserved and for today’s hearing.  As to the costs of and occasioned by the amendments, the costs are to the defendant in any event, to be taxed if not agreed.

21.This Court shall now make an order as follows:

(a) P’s proposed re-amendments are allowed as above;

(b) P’s application for expert evidence is dismissed;

(c) Costs are as per paragraph 20 above.

22.For case management:

(a) P shall file and serve the Re-amended Statement of Claim as allowed within 28 days from the date hereof;

(b) D be at liberty to file and serve the amended Defence and Counterclaim in response thereto and as per D’s summons dated 27 April 2017 by consent within 28 days thereafter;

(c) P be at liberty to file and serve the amended Reply and Defence to Counterclaim in response thereto within 28 days thereafter, in particular on the suggestion of making joint application to the Tax Authority of the Mainland as mentioned in paragraph 18 above;

(d) The parties shall obtain counsel's advice within 28 days thereafter;

(e) All interlocutory applications as may be advised shall be taken out within 14 days thereafter;

(f) Liberty to apply;

(g) Costs of this Case Management Summons hearing (30 minutes) be in the cause.

(h) The Case Management Conference shall be at 10:30 am on 16 May 2018 for the 1^st Case Management Conference.

Mr. Ray Kwan, instructed by Humphrey & Associates, for the Plaintiff

Mr. Richard Hudson and Ms. Jean Lau, of Deacons, for the Defendant