Treasure Land Property Consultants Ltd. t/a Treasure Land Property Consultants v. Barick Chung

CACV000266/1998

CACV 266/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 266 OF 1998

(On appeal from DCCJ No. 19441 of 1996)

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Coram : Hon. Godfrey, Rogers, JJ.A. & Burrell, J. in Court

Date of hearing : 11 February 1999

Date of handing down judgment : 9 March 1999

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J U D G M E N T

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Rogers, J.A. :

Introduction

1. This is an appeal from a judgment of H.H. Judge Muttrie by leave of the Judge against a judgment of his dated 18th March 1998 whereby he dismissed Plaintiff's claim against the Defendant. The Plaintiff appeals against that dismissal but the Defendant does not appeal against the dismissal of the counter-claim.

The background

2. The Plaintiff carries on business as an estate agent. The Defendant was employed by the Plaintiff under a contract dated 1st June 1994. He was employed as a marketing executive in the commercial division. The Defendant's salary was HK$6,000 per month and, in addition, he was to be paid sales commission. The amount of the sales commission was not indicated in the employment contract, although it was stated that the employer had the absolute right to alter the scale from time to time. The contract also provided that it could be terminated by one day's written notice by either party.

Agreement dated 1st December 1994

3. There was a further Agreement which was dated 1st December 1994. Clause 1 of that Agreement provided that the Plaintiff would provide a course of training for a period of one and a half years from 1st December 1994 to 30th June 1996 inclusive.

4. The Agreement then went on to stipulate that the Defendant bound himself to work for the Company for a further period of one and a half years, i.e. starting from the end of the period when the course of training was being provided. The Agreement referred to these two terms together as being the "total period". The total period was thus, under the terms of the Agreement, a total of three years.

5. Under Clause 3(b), the Defendant covenanted with the Plaintiff, amongst other things, that he would "..... attend such courses organised are recommended by the (Plaintiff) .....". This provision on its face is ungrammatical and when read literally does not make sense but the best sense which can be made of it is, perhaps, if it is read : "attend such courses as are organised and recommended by the (Plaintiff)".

6. A further covenant by the Defendant under Clause 3 was under sub-clause (d) that he would pay the Plaintiff a monthly amount being one third of his total monthly salary (including basic salary, commission and consultancy fee) arising under the employment terms and that this payment would be the tuition fee. The sub-clause then went on to say that the amount would be due and payable monthly either in advance or in arrears and would terminate upon the expiry of the total period.

7. The effect of this Covenant by the employee would, if valid, be that the employee would have bound himself to pay one third of his total remuneration, whatever that might be, for a total period of three years for tuition which extended for one and a half years.

8. The Plaintiff's obligation under the Agreement of 1st December 1994 was under Clause 4 :-

"4. The Company hereby covenants with the Employee as follows :

(a) That the Company will during the said term cause him to be trained by organising and designing such training courses from time to time as required."

The findings of the Judge in the Court below

9. The learned Judge in the Court below was confronted with a difficulty that he found the main witnesses for each of the parties unreliable. He said :-

"I did not find either Mr. SUEN [the Managing Director of the Plaintiff] or the Defendant very trustworthy. I would not wish to buy property from either of them. It is necessary to look at the evidence of both of them in the light of the established facts and what other witnesses, some of them more independent, have had to say."

10. The Judge then went to hold that there were courses which were organised and provided but that he considered that they were of a very basic nature.

11. The Judge found as a fact that the Defendant did not attend any courses after 22nd August 1994 and having taken into account the evidence of all the witnesses that the Defendant had been told by Mr. Suen that he need not attend the courses. He pointed out in passing that the Defendant had not been scolded for not attending courses nor were any tuition fees or other payments claimed from the Defendant until his contract of employment with the Plaintiff was terminated. The Judge summarised the matter by saying that the Defendant's non-attendance was with the consent and concurrence of Mr. Suen who was the Managing Director and in effect the "boss" and the brains of the Plaintiff company. The Judge then went on to hold :-

"..... There was no benefit to the Defendant, because in effect once the Plaintiff had consented to his non-attendance the courses were not held out to him to attend.

Another way of looking at the position is to say that once the Plaintiff through Mr. SUEN agreed that the Defendant need not attend the courses, it accepted that they were valueless to him. In other words the consideration was unreal or illusory."

12. In my view, in the light of the Judge's findings of fact, his conclusion is unassailable. As I have already indicated, the Plaintiff company had undertaken to organise and design training courses from time to time as required. Clearly, on the Judge's findings, the Plaintiff had not organised or designed any training courses which were required, in the sense of being appropriate let alone necessary. On the Judge's findings, such courses as were available were not courses which were required for the Defendant or which the Defendant himself required or which were appropriate or necessary for the Defendant. There was thus no consideration given by the Plaintiff.

13. No point has been raised on behalf of the Defendant arising from Section 32 of the Employment Ordinance, Cap. 57, Laws of Hong Kong. In those circumstances, the observations which I now make are purely by way of comment and without the benefit of legal argument. Attention was, however, drawn to Section 32(1) by the Court. That section provides that "no deductions shall be made by an employer from the wages of his employee or from any other sum due to the employee otherwise than in accordance with this Ordinance."

14. It may well be that the payments covenanted by the Defendant to be paid to the Plaintiff would fall foul of these provisions. Certainly on the facts found by the Judge, the Agreement of 1st December 1994 would appear to be wholly inequitable. The amounts covenanted to be paid by the Defendant would seem to be extraordinary. Furthermore, there appears to have been little intention to deduct those amounts whilst the Defendant's employment continued. It would seem from the course of conduct adopted by the Plaintiff that the Agreement by the Defendant to pay a third of his total remuneration was something that was to be held as a threat against the Defendant to be carried into effect when the Plaintiff and the Defendant fell out.

15. The Agreement of 1st December 1994 was followed by an Agreement of 3rd April 1995. That differed from the previous Agreement only to the extent that the training period had been more accurately defined as 1st December 1994 to 31st May 1996, since that was a period of 1 1/2 years. The other change to the Agreement was that the further period had been extended to 4 1/2 years. The total period thus becoming a period of 6 years. Since the training period and the covenants by the Plaintiff were identical to the previous Agreement, the only effect of this new Agreement was that the Defendant bound himself to the Plaintiff for a further 3 years and bound himself to pay a third of his salary for a further 3 years for no further benefit. It may also be mentioned that there does not on the face of the Agreements appear to be any extension of the period of notice required to be given by the Plaintiff should it desire to dismiss the Defendant. This later Agreement of 3rd April 1995 appears to me to be equally, if not more, unsupportable than the previous Agreement.

16. It is with no regret that I would dismiss the appeal.

17. I would propose that this appeal be dismissed and that an order nisi as to costs be made that the Defendant should have his costs of this appeal to be taxed if not agreed. The Defendant's costs must also be taxed for the purposes of the Legal Aid Regulations.

Burrell J. :

18. I agree. The pivotal finding of fact by the learned judge below was that on or before 22nd August 1994, Mr Suen told the Defendant that he need not attend any more training courses and further that the Defendant did not, in fact, attend any such classes thereafter. Implicit in that finding is the fact that, at that time, Mr Suen did not consider training courses for the Defendant as necessary for him. He was adequately trained already.

19. The reality of this appeal is that it succeeds or fails on the issue of consideration. It is submitted by Counsel for the Plaintiff that the detriment to the promisee is found in Clause 4(a) of the original training course agreement dated 1st December 1994, namely that the company "will cause him to be trained" ... "by organizing courses" ... "as required'. It is submitted that the mere provision of courses is sufficient to amount to consideration. It is not.

20. Such consideration, which Counsel for the Plaintiff claims is to be found in Clause 4(a) is, given the facts of this case, plainly illusory. It is not a question of, as he submitted, a bargain still being a bargain even it is a bad bargain to one of the parties. It goes further than that. A promise to provide courses which both parties know at the time of the contract are unnecessary and will not be attended is a promise of no value at all. The Plaintiff has given nothing (the courses were being run in any event) and the Defendant has received no benefit.

21. The matter ends there. However, it is worthy of additional comment to note that, given the facts as found by the learned judge, the true effect of the clause on which the Plaintiff relies as consideration is that it operates as a device whereby the Plaintiff can, at any time, (such as when the relationship between the parties turns sour or when the Defendant lands a "big deal" earning him high commission) deduct 33% of the Defendant's total remuneration. He can do this for six years, during which time it has been impliedly accepted that the Defendant will not be required to attend any training courses. The inequity of this leaves one open mouthed.

Godfrey, J.A. :

22. In Horwood v. Millar's Timber and Trading Company, Limited [1917] 1 KB 805 Warrington L.J. says this (at p.313) of the contract there under consideration :

"I am happy to think that it is very seldom that so oppressive a contract as this comes before these Courts, and I am happy also to think that our decision to-day may put an end to similar transactions in future."

23. Scrutton L.J., in similar vein, says this (at p.316) :-

"I am of the same opinion, and desire, in view of the importance to the public of the subject-matter of this case, to express my opinion in my own words. The only thing that has made me hesitate as to whether I should do so is that I am doubtful whether I can express my judgment in language of sufficiently judicial moderation in view of the facts of this case."

He referred (at p.317) to the decision of the Divisional Court in that case, noting that it :-

"..... took the view which jumps to the eyes on looking at the document that it was contrary to public policy."

So he held, and concluded (at p.319) :-

"..... I have the greatest pleasure in delivering this judgment."

24. In giving the Divisional Court's decision (reported at [1916] 2 KB 44) Lush J. said (at p.51) :-

"The law has always jealously guarded the right of a servant to the wages he has contracted for, and his right to live free from any restrictions as to the mode in which and the place at which his wages are paid."

25. Now, look at the contractual provisions relied on by the employer in our case, held in terrorem by the employer over the employee; not enforced at all while he was working for the employer, but used as a weapon of oppression to exact from the employee one third of his total remuneration earned in the job under the pretence that this represented consideration for his "tuition". As Atkin L.J. said, in Hepworth Manufacturing Company v. Ryott [1920] 1 Ch. 1 (at p.32) of the clause in the employee's contract there under consideration :-

"I think it was intended to give a hold upon the employee, and to my mind it was entirely unreasonable and unfair; I consider this a most unconscionable clause, and I am very glad, therefore, to think that such an agreement can be brought before the Court, and that the Court will refuse to enforce it."

26. The judge below in our case came to the conclusion that the "consideration", given in the form of tuition provided, or supposedly provided, for the employee in return for this harsh, oppressive and utterly unreasonable covenant for the sacrifice of a substantial part of his remuneration, was unreal and illusory and no consideration at all.

27. I agree with the judge. Like Scrutton L.J. in Horwood's case cited above "I have the greatest pleasure in delivering this judgment". I, too, would dismiss this appeal, with the order as to costs proposed by Rogers, J.A.

Representation:

Mr. Bernard Mak (M/s. Patrick Chung & Co.) for Plaintiff

Mr. C.Y. Li (M/s. Michael Cheuk, Wong & Kee assigned by Director of Legal Aid) for Defendant