Euro Search (Hong Kong) Ltd v. Snow Lake Capital (HK) Ltd

HCA 989/2015

[2018] HKCFI 402

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 989 OF 2015

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J U D G M E N T

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Introduction

1.The plaintiff Euro Search (Hong Kong) Limited (“P”) is a company incorporated in Hong Kong.  At all material times P provided and still provides headhunting and recruitment services in Hong Kong, Singapore and Beijing.

2.The defendant Snow Lake Capital (HK) Limited (“D”) is a company incorporated in Hong Kong.  D is and was, at all material times, an investment advisory corporation registered with the Securities and Futures Commission in Hong Kong.

3.There is no dispute that D engaged the services of P to search for suitable candidates that D wished to employ.

4.As set out at para 1 of the statement of agreed facts, P and D entered into two written agreements dated 18 January 2011 and 22 July 2013 respectively, pursuant to which P agreed to provide, and D agreed to engage, the recruitment and headhunting services of P.

5.It is agreed that P and D entered into the 1^st written agreement on 18 January 2011 (“the 1^st agreement”).  The 1^st agreement expired on 17 January 2012.

6.P and D entered into the 2^nd written agreement on 22 July 2013 (“the 2^nd agreement”).  The 2^nd agreement expired on 21 January 2014.

7.It is also agreed that after the 2^nd agreement expired D requested P on 17 February 2014 to focus on recruiting an investment analyst from Hony Capital with experience in the healthcare market. 

8.It is also agreed that pursuant to D’s request P introduced Mr Victor Li (also known as Mr Li Lin) (“Victor Li”) to D.  On 29 September 2014 D and Victor Li entered into an employment contract (“the employment agreement”).  The date of Victor Li’s commencement of employment with D was 3 November 2014.

9.It is also agreed that on 14 January 2015 D paid a sum of US$76,590.40 to P.

10.P’s claim against D is for the outstanding headhunting and recruitment fees with interest which P claims are owing by D.  D denies that P is entitled to any further sums.

The agreed issues

11.The parties have agreed the issues to be decided as follows:

(1) Was there any binding agreement between P and D concerning P’s recruitment and headhunting services in respect of Victor Li provided to D, and if so, what are the terms of the agreement? 

(2) If there was no binding agreement between P and D, was D unjustly enriched at P’s expense?

(3) What, if any, is the sum due from D to P?

12.As has been agreed, issue (2) only arises if it is found that there was no binding agreement between P and D concerning P’s recruitment and headhunting services in respect of Victor Li provided to D.  Issue (2) does not arise if it is found that there was a binding agreement. 

The witnesses

13.I heard evidence from Pun Chiu (“Pun”), the managing director of P.

14.I also heard evidence from Sean Ma (“Sean”), Victor Li and Fiony Tam Pui Yi (“Fiony”).  Sean is the Chief Executive of D and wholly owns D.  Fiony is the Chief Operating Officer and the Chief Financial Officer of D.

Issue (1)

15.The question to consider is whether there was a binding agreement between P and D concerning P’s recruitment and headhunting services in respect of Victor Li provided to D.  The request made by D to P to focus on recruiting an investment analyst from Hony Capital with experience in the healthcare market was made on 17 February 2014 and after the 2^nd agreement had expired.  If there was a binding agreement, it is necessary to consider what the terms of that agreement was.

16.Mr Martin Ho, for P, made it clear that P’s primary case was that after expiry of the 2^nd agreement D continued to request and P agreed to continue to provide recruitment and headhunting services to D.  He submitted that there was an offer and acceptance by correspondence between the parties. It is P’s case that that there was a binding agreement reached by conduct as manifested in the email correspondence between the parties.  Mr Ho submitted that a binding agreement by conduct was established by way of D’s offer by the request made on 17 February 2014 and the corresponding acceptance by P by its email on 24 February 2014.

17.It is also P’s case that the core terms as pleaded at para 4 of the statement of claim were implied or incorporated into the binding agreement.

18.As set out in the agreed chronology, shortly after the 2^nd agreement expired, on 17 February 2014 D requested P to focus on recruiting an investment analyst from Hony Capital with experience in the healthcare market.  On 24 February 2014 P emailed D the name of a candidate namely, Victor Li from Hony Capital.  On 27 February 2014 D asked for a copy of Victor Li’s resume and asked P to set up an interview with Victor Li.

19.On 4 March 2014 D interviewed Victor Li.

20.On 29 September 2014 D entered into the employment agreement with Victor Li.  Victor Li’s employment with D commenced on 3 November 2014.

21.The recruitment and headhunting services provided by P to D were successful. 

22.Although the request to recruit and the successful recruitment of Victor Li was made after the expiry of the 2^nd agreement, it is clear from the evidence of Sean and Fiony that they expected that D would have to pay P for the services provided by P to D in the recruitment of Victor Li. 

23.In his witness statement (at para 15) Sean said that at the time that he requested Marrisa Peng (“Marrisa”) of P to focus on a healthcare candidate from Hony Capital he was fully aware that the 1^st and 2^ndagreements had expired.  In cross-examination he said something different.  When cross-examined, Sean said that when he requested P in February 2014 to provide recruitment services he was not aware that the agreements had already expired.  He also said in cross-examination that he assumed at that time that the contractual relationship between P and D was as per the previous relationship. 

24.In re-examination Sean said that he had made a mistake and relied on what he had said in his witness statement. 

25.On the two different versions given by Sean on this matter, I prefer and accept his evidence given by him in cross-examination.  His firm and unambiguous answer given by him in cross-examination was that he was not aware at the time that he made the request to P in February 2014 that the written agreements had expired and that he assumed at that time that the contractual relationship between P and D was as per the previous relationship.  I find that at that time when the request was made in February 2014 Sean was proceeding on the assumption that the contractual relationship between the parties was still ongoing.  The 2^nd agreement in fact expired on 21 January 2014 and it is not surprising that when he made the request shortly thereafter on 17 February 2014 he was proceeding on the assumption that the previous contractual relationship was still continuing.

26.I would also observe that Fiony said in evidence that there was no reason for her to think that P would not be charging for its services requested by D in February 2014.

27.I was referred by Mr Ho to para 2-029 of Chitty on Contracts Vol 1 (32^nd edn) where it is stated:

“ An offer may be accepted by conduct. For example, an offer to buy goods can be accepted by supplying them; an offer to sell goods made by sending them to the offeree, can be accepted by using them, and an offer contained in a request for services can be accepted by beginning to render them …. But conduct will only amount to acceptance if it is clear that the offeree’s alleged act of acceptance was done with the intention (ascertained in accordance with the objective principle) of accepting the offer. …”

28.In G Percy Trentham Ltd v Archital Luxfer Ltd and others [1993] 1 Lloyd’s Rep 25, Steyn LJ said at 27:

“ The fact that the transaction was performed on both sides will often make it unrealistic to argue that there was no intention to enter into legal relations. It will often make it difficult to submit that the contract is void for vagueness or uncertainty.”

29.And at 29 Steyn LJ said:

“ In a case where the transaction was fully performed the argument that there was no evidence upon which the Judge could find that a contract was proved is implausible. A contract can be concluded by conduct.”

30.Mr Anthony Chan, for D, submitted that Trentham is distinguishable and has no application in this case where P is alleging that it has fulfilled its side of the bargain whereas D has not as it has not paid the full amount which P claims to be entitled to. 

31.It was also submitted by Mr Chan that as there was no discussion between the parties on an essential term namely, the price to be paid, the contract was void for uncertainty.  He further submitted that none of the terms sought to be relied on should be implied or incorporated.

32.Each case, of course, depends on its own facts. 

33.In my view, Trentham is an illustration of the proposition that if both parties proceeded to perform the contract, it will be unrealistic to argue that there was no intention to enter into legal relations and that the contract is void for uncertainty or vagueness. 

34.I would observe that although in Trentham the court was considering fully executed transactions, Steyn LJ observed at 27 that:

“ In this case fully executed transactions are under consideration. Clearly, similar considerations may sometimes be relevant in partly executed transactions.”

35.In my view, P has clearly fully performed its side of the agreement by providing its recruitment and headhunting services to D in respect of the candidate that D successfully hired namely, Victor Li.  On P’s case, D has partially performed its side of the agreement by making part payment in the sum that it received.  

36.I am satisfied and find that in February 2014 when D requested P to focus on recruiting an investment analyst from Hony Capital with experience in the healthcare market and P agreed to do so, there was clearly an intention to enter into legal relations.  I am satisfied and find that there was a binding agreement between P and D concluded by conduct (“the Feb 2014 agreement”).

37.The next question to consider is what the terms of the Feb 2014 agreement was.

38.At para 2-030 of Chitty on Contracts Vol 1 it is stated that:

“ Establishing the terms of contracts made by conduct. Where an offer or an acceptance or both are alleged to have been made by conduct, the terms of the agreement may be more difficult to ascertain than where the agreement was negotiated by express words. The difficulty may be so great as to force the court to conclude that no agreement was reached at all. But sometimes the court can resolve the uncertainty by applying the standard of reasonableness or by reference to another contract (whether between the same parties or between one of them and a third party) or even to a draft agreement between them, which had never matured into a contract.”

39.In Balmoral Group Ltd v Borealis [UK] Ltd & others [2006] EWHC 1900 (Comm) Christopher Clarke J observed at para 348:

“ Whether or not one party’s standard terms are incorporated depends on whether that which each party says and does is such as to lead a reasonable person in their position to believe that those terms were to govern their legal relations. The Court has to determine what each party was reasonably entitled to conclude from the acts and words of the other: McCutcheon v David Macbrayne Ltd [1964] 1 W.L.R. 125, 128; Kendall & Sons v Lillico & Sons [1969] 2 A.C. 31; Hollier v Rambler Motors (A.M.C. Ltd) [1972] 2 Q.B. 71. The question is one of fact to which prior authority may form an uncertain guide.”

40.I would also refer to what Lord Reid said in McCutcheon v David Macbrayne Ltd [1964] 1 WLR 125 at 128 when dealing with whether terms should be implied into a contract:

“ … If two parties have made a series of similar contracts each containing certain conditions, and then they make another without expressly referring to those conditions it may be that those conditions ought to be implied. If the officious bystander had asked them whether they had intended to leave out the conditions this time, both must, as honest men, have said ‘of course not.’”

41.Pun gave evidence that the terms as pleaded at para 4 of the statement of claim (“the core terms”) were P’s standard terms and conditions for its provision of recruitment services to its customers.  The core terms as pleaded are:

“ (1) By way of Clause 1, that the Plaintiff will be the recruiting firm for the Defendant to conduct the requested recruitment as specified in the Agreement. It was further agreed that in the event the Defendant, or its affiliates or associated companies, employ a candidate(s) introduced by the Plaintiff within the first twelve months of the first date of introduction, the Defendant shall be liable for the full payment of the recruitment fee(s) due to the Plaintiff.

(2) By way of Clause 3.1 in the 1^st Agreement, that in consideration of the Plaintiff’s provision of services, the Defendant will pay the Plaintiff ‘the recruitment and search fees at 25% of the first year’s aggregate cash compensation of the successful candidate’.

‘First year’s aggregate cash compensation’ is defined as ‘the annual basic salary accepted in writing by the candidate on joining the [Defendant], sign‑on bonus, guaranteed bonus, if any, that are paid to the candidate for joining the employment with the [Defendant]’.

(3) By way of Clause 3.2, that the Defendant shall pay the said recruitment and search fees as stated on the Plaintiff’s invoice value and currency. Such fees is payable within 30 days from the date of invoice.

(4) By way of Clause 3.3, that all fees payable to the Plaintiff shall be unconditional and pay by the Defendant in full, without set-off or counterclaim whatsoever.

(5) By way of Clause 3.4, that the Plaintiff may impose an interest charge for any delay in payment at the rate of 1.5% per month from the date of each outstanding invoice until the same has been paid in full.”

42.Although para 4(2) of the statement of claim pleads that the term pleaded therein was in Clause 3.1 of the 1^st agreement, it is clear that what was pleaded was Clause 3.1 of the 2^nd agreement and not Clause 3.1 of the 1^st agreement. This was confirmed by Mr Ho.

43.There are some differences in Clause 3.1 of the 1^st agreement and Clause 3.1 of the 2^nd agreement.

44.Clause 3.1 of the 1^st agreement provides that:

“ 3.1 In consideration of the requested search, the Client will pay Euro Search the recruitment and search fees at 25% of the first year’s aggregate cash compensation of the successful candidate. ‘First year’s aggregate cash compensation’ means the annual basic salary accepted in writing by the candidate on joining the Client, sign‑on bonus, guaranteed bonus, commissions, allowances, benefits-in-kind and other elements of compensation that are convertible into cash term, if any, that are paid to the candidate for joining the employment with the Client, but not any discretionary bonus to be paid at the end of the year.”

45.Clause 3.1 of the 2^nd agreement provides that:

“ 3.1. In consideration of the requested search, the Client will pay Euro Search the recruitment and search fees at 25% of the first year’s aggregate cash compensation of the successful candidate. ‘First year’s aggregate cash compensation’ means the annual basic salary accepted in writing by the candidate on joining the Client, sign‑on bonus, guaranteed bonus, if any, that are paid to the candidate for joining the employment with the Client.”

46.It will readily be seen that, as submitted by Mr Chan, Clause 3.1of the 2^nd agreement is different from Clause 3.1 of the 1^st agreement as follows:

(1)   In the 2^nd agreement, the words “commissions, allowances, benefits-in-kind and other elements of compensation that are convertible into cash term” which are in Clause 3.1 of the 1^st agreement are omitted; and

(2)   The words “but not any discretionary bonus to be paid at the end of the year” which are at the end of Clause 3.1 of the 1^st agreement are omitted.

47.It does not appear to me that substantial changes to Clause 3.1 were made in the 2^nd agreement.  The first change is simply to omit from the definition of “First year’s aggregate cash compensation” other types of compensation which are convertible into cash terms.  The second change is to omit the specific reference that any discretionary bonus to be paid at the end of the year is not to be included in the definition of “First year’s aggregate cash compensation”.  It is common ground between the parties that any discretionary bonus to be paid to the candidate at the end of the year is not to be included for ascertaining the recruitment fee that D had to pay under both the 1^st and 2^nd agreements.

48.It was submitted by Mr Chan that as there were different versions of Clause 3.1 it could not be said that the core terms were standard terms and conditions of P. 

49.It was also submitted that on the email correspondence in July 2014 when a request was made to recruit another candidate, P agreed to charge recruitment fees on a different basis.  The evidence on this can be found in the email exchange between D and P from 27 July 2014 to 30 July 2014.  Pun denied in evidence that P ever agreed to charge recruitment fees on a different basis than what had previously been agreed with D.

50.Sean requested P to search for a 1^st year investment banking analyst by his email on 27 July 2014 sent to Marrisa. She replied on 28 July 2014 agreeing to do so.  By his email dated 30 July 2014 to Marrisa, Sean said:

“ To make the position more interesting, let’s offer a US$500k ‘guarantee’ 1st year package for this analyst position:

Title: Investment analyst

Base salary: US$180k

Guaranteed bonus (1st year, minimum): US$320k”

51.By an email sent on 29 July 2014 Fiony wrote to Marrisa stating, inter alia:

“1. …

2. …

3.   Regarding the recruiting fee, it will be based on the base salary of US$180K only, excluding any ‘guarantee’ bonus or others.”

52.On the next day, 30 July 2014 at 11:17 am, Sean wrote to Fiony by email which was copied to Marrisa, Pun and others stating:

“ Regardless if its take home or not, the first year bonus is $320k. No need to provide this kind of detail at this early stage!”

53.On 30 July 2014 at 1:45 pm Marrisa wrote to Sean and Fiony with copy to Pun and others stating:

“ Well noted Sean and Fiony.

We will not mention compensation details when we approach the candidates at the very early stage”

54.Pun was cross-examined about these emails and it was put to her that D had agreed to charge recruiting fees for that other candidate based only on the base salary and excluding any guaranteed bonus.   It was suggested that by using the words “Well noted” in the email of 30 July 2014 Marrisa had agreed to this.  This was denied by Pun.

55.Marrisa did not give evidence before me.  It is not absolutely clear that when Marrisa said “Well noted” in the above email whether she was replying to both of the emails from Sean and Fiony or only addressing the email from Sean.  On a balance of probabilities, it seems to me, and I so find, that Marrisa was responding to both Sean’s and Fiona’s emails as she mentioned both of their names after using the words “Well noted”.  Apart from that email, there is no evidence of an agreement by P to charge recruitment fees based only on basic salary.

56.Whatever may have been the agreement at the end of July 2014 in respect of another candidate, that does not, in my view, assist D as the Feb 2014 agreement was already concluded by conduct in February 2014.

57.As set out above, Clause 3.1 of the 1^st and 2^nd agreements are differently worded although, as I have said, the changes are not substantial.  I am not satisfied on the evidence that the core terms were the standard terms and conditions of P.

58.I would also observe that although Pun said that the core terms are P’s standard terms and conditions there is no evidence that it was known to D that these were P’s standard terms and conditions. 

59.Be that as it may, the 2^nd agreement was closest in time to the Feb 2014 agreement.  There is no doubt that P expected to be paid for its services and that D proceeded on the assumption that P would be paid.  Sean proceeded on the assumption that the contractual relationship between the parties was still continuing when requesting P’s services in February 2014.  In my judgment, the officious bystander would have regarded the core terms as being the terms that the parties must have intended to govern their contractual relationship when D made the request for recruitment services to P on 17 February 2014.  I am satisfied and find that the core terms were incorporated into the Feb 2014 agreement.  

60.Issue (1) is resolved in favour of P.  As I have found that the Feb 2014 agreement was a binding agreement between P and D, issue (2) does not arise.  

Issue (3)

61.To determine what sum, if any, is due from D to P, it is necessary to consider Clause 3.1 and the employment agreement.

Clause 3.1

62.I turn to the construction of Clause 3.1 of the 2^nd agreement which I have found was incorporated into the Feb 2014 agreement.

63.The applicable principles are well settled and not in dispute.

64.As Lord Hoffmann NPJ said in Jumbo King Ltd v Faithful Properties Ltd & others (1999) 2 HKCFAR 279 at 296:

“ The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve.”

65.In Leung Ka Lau v Hospital Authority (2009) 12 HKCFAR 924 Ribeiro PJ said at para 37:

“ The parties also accept (in my view correctly) that construction of those documents should be approached applying the well‑known principles stated in Jumbo King Ltd v Faithful Properties Ltd, where Lord Hoffmann NPJ described the process as ‘an attempt to discover what a reasonable person would have understood the parties to mean’ which involves ‘having regard, not merely to the individual words [the parties] have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve’. Furthermore, as his Lordship stated in Investors Compensation Scheme Ltd [v] West Bromwich Building Society, the interpretation of a document involves ‘ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.”

66.The background facts that are admissible on the question of the construction of a document are limited to objective facts (per Le Pichon JA in Ng Chun Kong v First Star Development Ltd [2007] 3 HKLRD 281 at para 28).

67.It is clear that declarations of subjective intent are inadmissible in the construction of a document.

68.As I have said, the core terms were incorporated into the Feb 2014 agreement.  There is no dispute as to the proper construction of Clauses 1, 3.2, 3.3 and 3.4.  The crux of the dispute between the parties is the proper construction of Clause 3.1.

69.It is clear that by Clause 3.1 D has agreed to pay P the recruitment and search fees at 25% of “the first year’s aggregate cash compensation” of the successful candidate.  Victor Li was successfully recruited by D for P and it is clear that D was obliged to pay D the recruitment and search fees at 25% of “the first year’s aggregate cash compensation” of Victor Li. 

70.The meaning of “the first year’s aggregate cash compensation” of the successful candidate is set out in Clause 3.1 as:

“ the annual basic salary accepted in writing by the candidate on joining the Client, sign-on bonus, guaranteed bonus, if any, that are paid to the candidate for joining the employment with the Client”

71.Pun gave evidence of her subjective understanding of what Clause 3.1 meant and said that she thought P would be able to charge a fee at 25% of the entitlement package that was offered to the candidate by the Client for his full service after 12 months.  Her subjective understanding of the meaning of Clause 3.1 is clearly irrelevant and inadmissible for the purpose of the construction of Clause 3.1.  Sean’s understanding of what Clause 3.1 meant is also irrelevant and inadmissible for the purpose of the construction of the clause.

72.Mr Chan submitted that the “first year’s aggregate cash compensation” comprises of two components:

(1) the annual basic salary accepted in writing by the candidate on joining the client; and

(2) sign-on bonus, guaranteed bonus, if any, that are paid to the candidate for joining the employment with the client. 

73.Mr Chan emphasized that the first component was the annual basic salary that was accepted in writing by Victor Li on joining D and the second component was any sign-on bonus, guaranteed bonus, if any, that are paid to Victor Li for joining the employment with D.  It was submitted that the first component ie the annual basic salary was qualified by the words “accepted in writing by the candidate on joining the Client” whereas the second component ie sign-on bonus, guaranteed bonus, if any, was qualified by the words “that are paid to the candidate for joining the employment” with D.  He emphasized that the relevant bonuses in the second component are bonuses that are paid for joining the employment with D. It does not include a discretionary bonus or a performance related bonus. 

74.As I have said, it is common ground that discretionary bonuses are excluded in the definition of “the first year’s aggregate cash compensation”.

75.Mr Ho submitted that the punctuation namely, the comma just before the words “sign‑on bonus, guaranteed bonus, if any, …” (“the comma”) in Clause 3.1 demonstrates that the qualifying phrase at the end of Clause 3.1 “that are paid to the candidate for joining the employment with the Client” applies to all sorts of cash compensation which the candidate would receive including his base salary and not just to the “sign‑on bonus, guaranteed bonus, if any, ….”  He further submitted that Mr Chan’s contention would only be correct if there was the word “and” in place of the comma in Clause 3.1 so that it would have said “First year’s aggregate cash compensation means the annual basic salary accepted in writing by the candidate on joining the Client, and sign-on bonus, guaranteed bonus, if any, that are paid to the candidate for joining the employment with the Client”.

76.I am unable to accept Mr Ho’s submissions.  In my view, Mr Chan’s submissions are clearly right.  I reject Mr Ho’s submissions and accept Mr Chan’s submissions on the proper construction of Clause 3.1.

77.The recruitment fee that is payable is clearly 25% of “the first year’s cash compensation” which is defined in Clause 3.1 as comprising of two components. 

78.The first component is the annual basic salary which is accepted in writing by the candidate on joining the Client.  It is the annual basic salary which he has agreed to accept and not what he will actually receive at the end of the first year.   That is plain in my view.  He may never earn the full annual basic salary but what is important is that it is the annual basic salary which is accepted in writing on joining the client.

79.The second component deals with sign on bonus, guaranteed bonus, if any.  This is qualified by the phrase “that are paid to the candidate for joining the employment with the Client” at the end of Clause 3.1.  These are bonuses, if any, that are paid to the candidate for joining the client. 

80.I would observe that if, as Mr Ho submitted, the qualifying phrase applies to all sorts of cash compensation including the candidate’s annual basic salary, the words “accepted in writing by the candidate on joining the Client” after the words “annual basic salary” would be otiose and wholly unnecessary.  I reject Mr Ho’s submissions. 

The employment agreement

81.It is necessary then to consider the employment agreement to determine the recruitment fee that D should pay to P for the successful recruitment of Victor Li.

82.Clause 4 of the employment agreement sets out the compensation and benefits to Victor Li.

83.Clause 4.l provides that from the date of commencement D agrees to pay to Victor Li an annualized base salary of US$300,000.  This is clearly the annual basic salary which would fall within the first component of the definition of “the first year’s aggregate cash compensation” in Clause 3.1.  25% of US$300,000 is the sum of US$75,000 which sum with interest has already been paid by P to D.

84.Clause 4.2 of the employment agreement provides that Victor Li would be eligible to receive an annual discretionary incentive namely, a discretionary bonus, payable in accordance with and in the manner as set out in Clause 4.2.  There is no dispute that this is a discretionary bonus which would not be relevant in calculating the recruitment fee payable by D to P.

85.The dispute between the parties is on the proper construction of Clause 4.3.  This provides that:

“ 4.3 The Employee will be eligible to receive a First Year Guarantee Bonus (the ‘Guarantee Bonus’) of US$700,000 subject to the terms and conditions set forth below:

(a) The Employee has the obligation to fulfill his employment duties and terms under this Agreement from the Date of Commencement to 31 December 2015 (the ‘Full First Year Service’).

(b) The Company has no obligation to pay the Employee any Guarantee Bonus in full or pro-rata if the Employee has not completed the Full First Year Service.

(c) The Guarantee Bonus will be subject to the same bonus payment and deferred terms stated under Clause 4.2 (a) and (b).

For the avoidance of doubt, the Employee will not be eligible to receive any Guarantee Bonus for his service to the Company from 1 January, 2016 and thereafter.  All Bonus after 31 December, 2015 will then be subject to Clause 4.2.”

86.It is P’s case that the said sum of US$700,000 falls within the definition of “the first year’s aggregate cash compensation” in Clause 3.1.  It is D’s case that it does not.

87.The undisputed evidence is that Victor Li signed the employment agreement on 29 September 2014 and commenced his employment with D on 3 November 2014.  He worked for D as an associate for nearly 2 years being mainly responsible for the healthcare sector. 

88.Victor Li said that apart from the annual base salary that he was eligible to receive, he was also eligible to receive a first year guarantee bonus of US$700,000 which he said was discretionary and subject to the terms and conditions set out in Clause 4.3.  His subjective understanding that the said bonus was discretionary is neither relevant nor admissible for the purpose of the construction of the employment agreement.

89.It is also undisputed that on 24 February 2016 D informed Victor Li by letter that upon review of his performance he would not receive any guarantee bonus or other discretionary bonus for 2014 and 2015 but that his annual base salary of US$300,000 would remain unchanged. 

90.On the unchallenged evidence, Victor Li only received US$348,333 as his total salary from 3 November 2014 to 31 December 2015 which included the annual base salary for his first year of service from 3 November 2014 to 2 November 2015.  He has not received any guarantee bonus or any other bonus for his service period from 3 November 2014 to 31 December 2015.  This is undisputed.

91.Victor Li tendered his resignation letter on 15 September 2016 to D thereby terminating his employment with D as from 15 November 2016.

92.Mr Chan submitted that the guaranteed bonus of US$700,000 set out in Clause 4.3 was not payable to Victor Li either on his signing the employment agreement on 29 September 2014 or upon the commencement of his employment on 3 November 2014.  As Mr Chan submitted, the employment agreement did not say that the bonus was payable to Victor Li upon his signing the employment agreement or upon the commencement of his employment on 3 November 2014.  It was his submission that Clause 3.1 of the Feb 2014 agreement did not catch this bonus as it was not paid or payable to Victor Li as an incentive to join D. 

93.It was further submitted that Victor Li was only eligible to receive the first year guarantee bonus of US$700,000 subject to the terms and conditions set out in Clause 4.3(a) to (c).  As to (a), he had the obligation to fulfil his employment duties from date of commencement ie 3 November 2014 to 31 December 2015 (the full first year service).  As to (b), D had no obligation to pay Victor Li any guarantee bonus in full or in part or pro-rata if Victor Li has not completed the full first year service.  As to (c), the guarantee bonus would be subject to the same bonus payment and deferred terms stated under Clause 4.2(a) and (b). 

94.It is also important to consider Clause 4.2(a) and (b) which provide:

“… The Bonus will be payable to the Employee in the manner set forth below:

(a) One-half (1/2) of the Bonus, if any, shall be payable to the Employee on or before March 15 of the calendar year following the year in which it was earned (the ‘Bonus Payment Date’). He must be employed by the Company and have not given notice of resignation as of the date the Incentive Bonus is paid to receive an Incentive Bonus.

(b)   Subject to the Employee’s continued employment with the Company, one-half (1/2) of the remaning Bonus will be payable on each of the first two (2) anniversaries of the Bonus Payment Date (the ‘Deferred Bonus’).  The Deferred Bonus will notionally be invested in Class I of Snow Lake China Offshore Fund, Ltd. (the ‘Offshore Fund’), whereby the value of the Deferred Bonus may increase (or decrease) based on the return (positive or negative, exclusive of management fees and performance fees), that would have been realized on an equivalent investment in Class I of the Offshore Fund.”

95.Mr Ho submitted that as Victor Li did complete his full first year of service with D, he was entitled to receive the first year guarantee bonus of US$700,000.  I am unable to accept Mr Ho’s submission.

96.As is clearly provided in Clause 4.3, Victor Li’s entitlement to the bonus of US$700,000 was not unconditional.  It was clearly subject to the terms and conditions set out therein.

97.I accept Mr Chan’s submission that as set out in Clause 4.2(a) one-half of the bonus was payable to Victor Li on or before 15 March of the calendar year following the year in which it was earned, ie on or before 15 March 2016.  The other half of the bonus was payable subject to Victor Li’s continued employment with D as set out in Clause 4.2(b).  It was payable on each of the first two anniversaries of the bonus payment date mentioned in Clause 4.2(a) namely, on or before 15 March 2017 and 15 March 2018.  It was also provided in Clause 4.2(b) that the other half of the bonus would be notionally invested in the fund mentioned therein whereby the value of the other half of the bonus may increase or decrease.

98.It seems to me to be clear that the bonus of US$700,000 in Clause 4.3 of the employment agreement was not the type of bonus caught by Clause 3.1 of the Feb 2014 agreement.

99.Reliance was also placed by D on an email sent from Sean to Victor Li on 29 September 2014 where Sean said:

“ … I understand that you are giving up your 2013 bonus, but hopefully the US$1 million guarantee package in 2015 is sufficient to cover that ….”

100.It was submitted by Mr Ho that the employment agreement was entered into by Victor Li pursuant to Sean’s representation that Victor Li’s first year’s entitlement would be the “US$1 million guarantee package”.  Mr Ho submitted that the minimum sum that Victor Li was entitled to was the sum of US$1,000,000 which was the annual basic salary of US$300,000 and the first year guarantee bonus of US$700,000.

101.I am unable to accept Mr Ho’s submissions.  It is clear from the email correspondence on 29 September 2014 that by the time that email was sent by Sean to Victor Li the employment agreement had already been signed by Victor Li.  What is stated in Sean’s email could not be a representation made by Sean to induce Victor Li to enter into the employment agreement.  I so find.

102.In my judgment P was only entitled to receive 25% of the annual basic salary of US$300,000 as the recruitment fees for recruiting Victor Li for D.  P has already received this sum with interest prior to the commencement of this action.

103.I dismiss P’s claims against D.

104.I also make an order nisi that P do pay D its costs of the action, such costs to be taxed, if not agreed.

Mr Martin Ho, instructed by Michael Pang & Co, for the plaintiff

Mr Anthony Chan, instructed by Holman Fenwick Willan, for the defendant