Salleh Abu Baker v. Anway Ltd

HCA 2359/2019

[2021] HKCFI 3407

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2359 OF 2019

(Transferred from Labour Tribunal Claim No. LBTC 2813/2019)

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J U D G M E N T

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INTRODUCTION

1.In the present proceedings, the Plaintiff, as ex-Chief Executive Officer of the Defendant (his contract of employment having been transferred from Sky Connection Limited (“Sky Connection”) as part of a corporate reorganization to the Defendant) claims that he had been wrongfully terminated by the Defendant by giving only 3 months’ salary in lieu of notice.

2.The Plaintiff’s case is that contrary to the written terms of his employment contract with the Defendant, he had concluded an oral agreement with the Defendant back in 2004 (through its executive director Mr Patrick Lam) to the effect that Clause 3 of the employment contract were to be deleted and replaced by a reasonable period of notice.  The Plaintiff further pleads that a reasonable period means notice of “18 to 24 months” or such other reasonable period as the Court may find.

3.The employment contract between the Plaintiff and the Defendant dated 14 November 2003 provides, inter alia, that:

“6. Termination of Service

Either party may terminate employment under this agreement by giving three (3) months’ notice in writing or three (3) months’ salary in lieu of notice.

However, the Company will also reserve its legally permissible right to terminate employment at any time without notice or payment in lieu of notice if you are guilty of any act of dishonesty or serious misconduct or negligence of duty.

Interpretation of the terms hereinabove contained shall be in accordance with the provisions of the relevant sections of the Employment Ordinance.

12. Non-Compete Undertaking

You will not for a period of thirty six (36) months from the date of termination of employment under this Agreement either solely or jointly with or as an employee, servant or agent of or for any other person, firm or corporation directly or indirectly:

(a) Employ any person who at the time of termination of your employment or at any time within eighteen (18) months previously was an employee of any member of the Company;

(b) Solicit business for yourself or any person, firm or corporation other than the company from any customer of the Company or an Associated Company any time during the thirty six (36) months of your employment.”

4.The Plaintiff signed the employment contract on 24 November 2003.  The Plaintiff’s evidence is that he found the 3 years non-compete undertaking clause too oppressive but as he had little choice during the SARS pandemic period, he agreed to the terms and signed the employment contract.

5.The Plaintiff’s case is that the non-compete undertaking clause has the practical effect of severely handicapping, if not outright preventing, him from joining a competitor.  The Plaintiff gave evidence that, on several occasions between October to December 2004, Mr Patrick Lam of the Defendant orally represented that the 3month notice period clause was to be dispensed with, and either party would instead be entitled to terminate the Plaintiff’s employment by giving reasonable notice or payment in lieu of such notice.

6.The Plaintiff said that in about October 2004, he raised to his then direct supervisor, Mr Patrick Lam, the concern that it would be unfair if he could lose his job on 3 months’ notice, but would be restricted in seeking comparable employment for 3 years.  Mr Patrick Lam then told the Plaintiff that he did not think a 24-month notice period was a problem, and when the Defendant decided to let the Plaintiff go, they would definitely pay the Plaintiff enough.

7.Further, in around mid-November 2004, the Plaintiff asked Mr Patrick Lam if the Plaintiff could look forward to a new written contract of employment.  Mr Patrick Lam stated, inter alia, that the Defendant would not want to let the Plaintiff go upon giving the Plaintiff just 3 months’ notice and that the Plaintiff should trust Mr Patrick Lam and that not everything needed to be in written form.

8.Then, sometime in mid-December 2004, the Plaintiff suggested to Mr Patrick Lam that a written fixed term employment contract would be helpful in case Mr Patrick Lam was promoted.  Mr Patrick Lam stated, inter alia, there was no room for him to be promoted; a written contract was a formality; that the Defendant was a traditional Chinese company that valued trust and honour; and that verbal commitments were as good as gold.

9.Based on the above conversations, the Plaintiff said that he had reached an oral agreement with the Defendant to vary the 3 months’ notice period clause and in reliance of the same, he never thought of pursuing his career elsewhere by giving Sky Connection or the Defendant a 3 months’ notice of termination.  He also never raised again with Mr Patrick Lam the issue of requiring a new fixed term contract or amending the employment contract.

10.The Defendant, through Mr Patrick Lam, denies the existence of such oral variation of the 3 months’ notice period clause.  Mr Patrick Lam is very clear that he did not dispense with the 3 months’ notice period clause.  He might have said words to the effect that the Defendant would take care of its employees including the Plaintiff, but he had not agreed on any variation to the employment contract with the Plaintiff.

11.Hence, it can be seen that this case turns heavily on the credibility of the parties including the relevant witnesses’ testimony in court.

APPROACH TO ASSESSING ORAL TESTIMONY

12.In Lee Fu Wing v Yan Paul Po Ting [2009] 5 HKLRD 513, Deputy High Court Judge Au (as he then was) at p 524 helpfully set out the well-established approach on assessment of witnesses as follows:

(1) whether the party’s case is inherently plausible or implausible;

(2) whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable;

(3) where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests.  This is relevant to the assessment of his overall credibility; and

(4) the demeanour of the witnesses.

13.Lord Bingham in his book The Business of Judging at pp 5 – 6 insightfully said:

“Let me then turn to the central questions. Faced with a conflict of evidence on an issue substantially effecting the outcome of an action, often knowing that a decision this way or that will have momentous consequences on the parties’ lives or fortune, how can and should the judge set about his task of resolving it? How is he to resolve which witness is honest and which dishonest, which reliable and which unreliable? How, as between competing experts in a field not his own, is a judge to determine where the truth lies? Is our existing way of resolving expert conflicts the best way? I shall begin by considering the resolution of issues of primary fact, the choice between first-hand eye-witnesses. Then I shall turn to expert evidence.

The normal first step in resolving issues of primary fact is, I feel sure, to add to what is common ground between the parties (which the pleadings in the action should have identified, but often do not) such facts as shown to be incontrovertible. In many cases, letter or minutes written well before there was any breath of dispute between the parties may throw a very clear light on their knowledge and intentions at a particular time ….

The most compendious statement known to me of the judicial process involved in assessing the credibility of an oral witness is to be found in the dissenting speech of Lord Pearce in the House of Lords in Onassis v Vergottis. In this he touches on so many of the matters which I wish to mention that I may perhaps be forgiven for citing the relevant passage in full:

‘Credibility’ involves wider problems than mere ‘demeanour’ which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problem. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person, telling something less than the truth on this issue, or, though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so, has his memory correctly retained them? Also, has his recollection even subsequently altered by unconscious bias or wishful thinking or by over-much discussion of it with others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.

Every judge is familiar with cases in which the conflict between the accounts of different witnesses is so gross as to be inexplicable save on the basis that one or some of the witnesses are deliberately giving evidence which they know to be untrue. There are, no doubt, witnesses who follow the guidance of the Good Soldier Sveyk that ‘The main thing is always to say in court what isn’t true,’ as a matter of principle, but more often dishonest evidence is likely to be prompted by the hope of gain, the desire to avert blame or criticism, or misplaced loyalty to one or other of the parties. The main tests needed to determine whether a witness is lying or not are, I think, the following, although their relative importance will vary widely from case to case:

(1) the consistency of the witness’s evidence with what is agreed, or clearly shown by other evidence, to have occurred;

(2) the internal consistency of the witness’s evidence;

(3) consistency with what the witness has said or deposed on other occasions;

(4) the credit of the witness in relation to matters not germane to the litigation;

(5) the demeanour of the witness.

The first three of these tests may in general be regarded as giving a useful pointer to where the truth lies. If a witness’s evidence conflicts with what is clearly shown to have occurred, or is internally self-contradictory, or conflicts with what the witness has previously said, it may usually be regarded as suspect. It may only be unreliable, and not dishonest, but the nature of the case may effectively rule out that possibility.” (Emphasis added).

14.I find the above guidelines helpful and will apply the same in assessing the credibility of the Plaintiff’s and the Defendant’s respective cases.

15.The Court starts with an analysis of the contemporaneous documentary evidence.  I agree that in the twenty-first century where electronic communications via emails and phone messages are prevalent, “most agreements or discussions which are of legal significance, even if not embodied in writing, would leave some form of electronic footprint” (see Blue v Ashley [2017] EWHC 1928 (Comm) at §65 per Leggatt J.)

ANALYSIS

16.Having heard the oral testimony of the witnesses and having regard to the conduct of the parties, the contemporaneous documents and the parties’ submissions, on balance, I am of the view that the parties did not form any oral agreement to vary the 3-months notice period clause.  I come to this view for a number of reasons.

17.First and foremost, in paragraph 34 of the Plaintiff’s own witness statement, he said:

“…I accept that whilst Patrick said he did not think 24 months was a problem, he did not unequivocally confirm that the 3-Month Notice Clause was substituted by a 24-month notice, I took his comment to mean that a 24-month notice could well be reasonable but did not commit Sky Connection to it at that point.” (emphasis added.)

18.Hence, it is clear to this Court that putting the Plaintiff’s case to its highest, there were some sort of discussion about the 3 months’ notice period clause and the period of 24 months were suggested in the course of such discussion.  However, there was no concluded agreement on that occasion.

19.Given that there was no commitment from Sky Connection and the Plaintiff knew about it, that really should be the end of the analysis.

20.Secondly, during cross-examination, the Plaintiff agreed that throughout the discussion, Patrick Lam did not agree or promise that (1) the 3 months’ notice period clause should be canceled or superseded and (2) the Plaintiff’s employment could only be terminated by giving notice of 24 months or notice of reasonable length.

21.Thirdly, in my judgment, the Plaintiff’s letter dated 14 May 2019, negates the existence of the alleged oral conversations.  In the said letter, the Plaintiff expressly stated, inter alia, that:

“The gist of the points I made to Patrick on several occasions then included:

(a) The peculiar features of the duty free franchise business. Of particular relevance was the all-important yet delicate tasks of preparing sales and financial forecasts and submissions for tender awards.

(b) Duty free franchises were typically open to tender at 5 to 6 years’ intervals, each awarded for a 5-year term, renewable for 1-3 years.

(c) For a position that called for my experience and expertise, seeking to employ or be employed would often be a matter of perfect timing.

(d) Length of notice of termination in my case was a reciprocal matter that equally affected both parties. I also made known my view that a reasonable notice of termination either way ought to be 18 to 24 months.

...

Despite gentle reminders from me, Patrick did not tell me what he thought would be a reasonable length of notice for my case.” (Emphasis added.)

22.In my view, this letter indicates that at no point in time did Mr Patrick Lam agree to a variation of the 3 months notice period clause.  It appears that the truth is that the Plaintiff was genuinely concerned about the 3 months’ notice period clause and he did make known his view on what should be the reasonable period of notice for termination, but Mr Patrick Lam did not get back to him.

23.Mr Kwong for the Defendant is right that the Plaintiff both in his Statement of Claim (Paragraph 4(c)) and Witness Statement (Paragraph 33) had stressed that during the first discussion in Cannes in October 2004, Mr Patrick Lam indicated that “he did not think 24 months’ notice would be a problem”.  Had this been true, the Plaintiff would have mentioned this in the letter in order to convince the Defendant to pay him 24 months’ salary in lieu of notice.  Instead, the Plaintiff did not mention in the letter that Patrick Lam thought 24 months’ notice was acceptable to the Defendant.  What happened was that despite gentle reminders from the Plaintiff, Mr Patrick Lam did not actually tell the Plaintiff what he thought would be a reasonable length of notice.

24.Mr Kwong for the Defendant also correctly pointed out that during cross-examination, the Plaintiff confirmed that the letter “recapped exactly what Patrick said”.  In such circumstances, I reject the Plaintiff’s case that Mr Patrick Lam of the Defendant ever said that he thought 24 months was not a problem.  I find the Plaintiff’s evidence on this to be not credible. 

25.Further, in the Statement of Claim (Paragraph 4(b)) and the Plaintiff’s Witness Statement (Paragraph 32), the Plaintiff mentioned that during the conversation in October in Cannes, he said to Mr Patrick Lam that “he considered 24 months a reasonable length of notice.”  However, in the letter dated 14 May 2019, the Plaintiff said he “made known [his] view [to Patrick Lam] that a reasonable notice of termination either way ought to be between 18 to 24 months.”  I agree that there is a discrepancy.  During cross-examination, the Plaintiff said that he only wanted Mr Eric Ma to appreciate that he would be agreeable to a more reasonable notice period.  However, Mr Kwong is right that the Plaintiff did not seek to point out to Mr Eric Ma that he considered 18 to 24 months to be reasonable.  Instead, the Plaintiff wrote that he told Mr Patrick Lam that 18-24 months was reasonable.

26.Fourthly, I do not find a 24-month notice period of termination makes any common and commercial sense.  First, from the perspective of the Plaintiff himself, he had to give a 24 months’ notice or pay 24 months’ salary in lieu if he were to switch to another job with a different company.  It is not immediately clear as to why any employer would have waited for two years before an employee could commence working.  It is equally difficult to fathom as to why an employer would allow a senior employee to have a 24 months’ period to handover or to facilitate smooth transition to his or her successor. 

27.Mr Kwong for the Defendant also makes the following points:

(1) Mr Patrick Lam and the Plaintiff, being seasoned business executives, would not have agreed on an undefined “reasonable” period. Such vagueness was impractical and is a recipe for litigation.

(2) It is inherently improbable that Mr Patrick Lam would agree to vary the Plaintiff’s termination notice period to 24 months or a “reasonable” period, thereby making the Plaintiff a conspicuous exception not only within the Defendant but also in the duty-free industry.  The Plaintiff’s evidence is that the notice period as prescribed in his employment contract with DFS Taiwan was about 3 to 6 months.

(3) As a matter of common sense, Mr Patrick Lam would not have made any decision hastily on the spot without consulting other directors of the Defendant, including Mr Andrew Wong, Mr Peter Lam and Mr Simon Szeto.

(4) A notice period of 24 months was prohibitively lengthy.  It was submitted that knowing that he was still in the prime of his career as of 2004, and that he would be put in a disadvantaged position in terms of switching jobs and bargaining with Sky Connection, it would be strange for the Plaintiff to have agreed to a 24 months’ notice period.

(5) Clause 12 of the employment contract would not have prevented the Plaintiff from joining a company with a pre-existing franchise, which would have no commercial need to solicit any staff or supplier of Sky Connection.  It is also questionable whether the clause would even pose a problem to the Plaintiff in the scenario where Sky Connection was unable to have its franchise at the Hong Kong International Airport renewed and the Plaintiff wanted to join the new franchisor.  Sky Connection would have no business in this scenario and would not have any commercial interest in blocking its former employees from joining the new franchisor.

(6) Further, the Plaintiff admitted that Clause 12 would not have the practical effect of prohibiting him from working for a company that carried on duty free operation overseas.  It was submitted that in light of the Plaintiff’s immense global experience, he would have no difficulty in securing a senior managerial position with an operator that carried on duty free operation overseas.

(7) The Plaintiff also admitted that he was happy to sign the employment contract and did not complain about the clauses on termination notice and non-competition.  In the circumstances, Mr Patrick Lam had no reason to be sympathetic with him as alleged (see paragraph 31 of the Plaintiff’s Witness Statement.)

(8) If the Plaintiff were genuinely concerned about the length of the non-compete period under Clause 12, he should have sought to reduce the non-compete period, not to increase the termination notice period.  If the Plaintiff wanted pecuniary compensation, he could have negotiated a lump-sum payment.  There was no commercial rationale or necessity, from anyone’s perspective, for a 24-month notice period.

28.I agree with Mr Kwong’s submissions.

29.Fifthly, Mr Kwong for the Defendant also made the point that there is no question that both the Plaintiff and Mr Patrick Lam were sophisticated and seasoned business executives.  It is strange that the alleged consensus or agreement to vary notice period clause of the employment contract was not evidenced by a single piece of document or electronic footprint.

30.Sixthly, in respect of the second and third discussions that took place in November 2004 in Hong Kong, in paragraph 37 of the Plaintiff’s Witness Statement, he stated that:

“I understood that [Patrick Lam] might want to be flexible and not commit to any particular length of notice as reasonable.” (Emphasis added.)

31.Mr Kwong for the Defendant submitted that without any intention to commit, it is hard to see how the Plaintiff could have genuinely thought that Mr Patrick Lam intended to enter into a binding legal relationship.

32.Further, when the Plaintiff was cross-examined on the two conversations in Hong Kong in November 2004, he admitted that Mr Patrick Lam did not specifically agree or promise that (1) the clause on the 3-month notice period should be cancelled or superseded and (2) the Plaintiff’s employment could only be terminated by giving notice of 24 months or notice of reasonable length.

33.Seventhly, Mr Chau for the Plaintiff fairly accepted that the Plaintiff was not claiming a 24-month notice period but only a reasonable period.  He invited the Court to decide on what period would constitute a reasonable period.  However, this begs the question as to what is the Plaintiff’s pleaded case on a reasonable notice period? The Court cannot just arbitrarily pluck a figure from the air.  The Plaintiff has not adduced industry evidence as to what constitutes a reasonable period.  He only said that 18 to 24 months is reasonable.  But the Court has not been informed of the basis for a 18 to 24 months’ notice period.  This is particularly so in view of the Plaintiff’s own evidence that when he worked with DFS Taiwan, the notice period was normally about 3 to 6 months.  This Court also notes the Plaintiff’s evidence that there is no agreement or commitment from Mr Patrick Lam as to what constitutes a reasonable period.

34.Even if the Plaintiff’s evidence were to be accepted (which I find rather difficult for the reasons I gave above), it only means that the Plaintiff proposed that a reasonable period of notice should be given but the parties never agreed on what would be a reasonable period.  In such circumstances, I am of the view that it would not be correct for the Court to arbitrarily decide on the length of a notice period that would be considered reasonable without any evidential basis.

35.Mr Kwong for the Defendant has helpfully referred this Court to the case of Raj Kumar Mahajan v HCL Technologies (Hong Kong) Ltd, unrep., HCA 1510/2004, 14 April 2011 where Recorder Jat SC held that 3 months’ notice was reasonable to terminate the employment of the managing director of a listed company.  In reaching this conclusion, the learned Recorder held that the notice period contained in a pervious employment provided a good indicator as to what constitutes “reasonable notice period” in the circumstances (see §90).

36.Finally, I accept that Mr Patrick Lam is a straightforward witness and his evidence is credible.  I accept his evidence that he could not have made such a decision without consulting his fellow directors or without the human resources department being informed.  I also find it hard to believe that Mr Patrick Lam would have agreed to a reasonable period without the same being defined.  That would only create uncertainty and the risk of potential disputes.

37.I also find it hard to believe that for contractual matters of such importance, Mr Patrick Lam would have told the Plaintiff that a written contract was just a formality.

38.Mr Chau for the Plaintiff submitted that the letter dated 14 May 2019 clearly shows that there is an oral agreement otherwise the Plaintiff’s immediate reaction would not have been to write to set out his version of events and it is inherently improbable that the Plaintiff concocted a lie on 14 May 2019. That may well be true.  But as I have set out above, the 14 May 2019 letter did not state that there is any oral agreement.  In fact, as analysed above, the contents of the 14 May 2019 letter point in the opposite direction.

39.Mr Chau for the Plaintiff also submitted that there was no immediate denial of the Plaintiff’s case as set out in the 14 May 2017 letter as Mr Eric Ma must have consulted Mr Patrick Lam before issuing his reply letter to the Plaintiff.  I am not convinced that that must necessarily be the case.  By that time, Mr Patrick Lam had left his position with the Defendant and it is equally explicable that Mr Eric Ma simply consulted the employment contract and the human resources department to collate information for the purpose of making the short reply to the Plaintiff.

40.Mr Chau for the Plaintiff also submitted that Mr Patrick Lam gave more reasons in the High Court proceedings as to why it is said that he did not have the alleged conversations with the Plaintiff as compared to his witness statement lodged in the Labour Tribunal proceedings.  In my view, this is not probative.  It is true that the only reason he previously gave for not believing that the alleged promises were something he said was very simply that it would be a departure from the group’s default notice period. However, during cross-examination, he further elaborated on this and gave additional reasons (for example, the alleged promises were unrealistic).

41.Mr Chau submitted that if at the Labour Tribunal stage Mr Patrick Lam had considered that these additional reasons were relevant and cogent, he would have included them in his Labour Tribunal witness statement.  The additional reasons were only created ex post facto sometime between the Labour Tribunal and the present proceedings.  I disagree.  Mr Patrick Lam, when being cross-examined, was perfectly entitled to reflect on the matter and give additional or supplemental reasons.  One must bear in mind that the preparation and conduct of a Labour Tribunal proceedings is not as formal as a High Court proceedings. 

42.For all the above reasons, I do not find the Plaintiff’s case of an oral agreement to vary Clause 6 of the employment contract to be credible.

43.As such, it is not necessary for this Court to deal with the issue of apparent authority of Mr Patrick Lam and the issue of estoppel, as relied upon by the Plaintiff.

DISPOSITION

44.Accordingly, I make an order that the Plaintiff’s claims are dismissed.

45.Further, the Plaintiff is to pay the costs of and occasioned by this action to the Defendant, to be taxed on a party to party basis, with a certificate for one counsel, if the parties cannot reach any agreement on costs.

46.The above costs order nisi will be made absolute within 14 days hereof unless the parties take out an application to vary the same within the 14-days period.

47.Finally, it remains for this Court to thank Mr Chau for the Plaintiff and Mr Kwong and Mr Jiang for the Defendant for their helpful assistance.

Mr Ian Chau, instructed by Wong, Hui & Co, for the Plaintiff

Mr Alan Kwong and Mr Jiang Zixin, instructed by George Hui Legal, for the Defendant