Green Light Multiplex Co. Ltd (Formerly Known As Green Light Marketing Co. Ltd and Glm International Ltd) v. Lam Shi Yan
Read the full judgment text of HCA 2128/2015 on BabelCite. This High Court CFI judgment was delivered on 16 August 2024.
1. This trial involves an employment dispute, in which the plaintiff claims against the 1 st defendant for damages for breach of certain implied terms of the employment agreement between them dated 10 June 2010 ( “the Employment Agreement” ), breach of duty of fidelity and good faith, and breach of fiduciary duties. The 1 st defendant counterclaims against the plaintiff for performance bonus and salaries.
Cited by 2 cases · Cites 5 cases
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HCA 2128/2015 and HCA 2294/2017 [2024] HKCFI 2101 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 2128 OF 2015 ACTION NO. 2294 OF 2017 (TRANSFERRED FROM LABOUR TRIBUNAL CLAIM NO. LBTC 2383 OF 2017) _________________
(Consolidated pursuant to the Order of Master Hui dated 10 January 2018) _________________
_________________ JUDGMENT _________________ 1.This trial involves an employment dispute, in which the plaintiff claims against the 1st defendant for damages for breach of certain implied terms of the employment agreement between them dated 10 June 2010 (“the Employment Agreement”), breach of duty of fidelity and good faith, and breach of fiduciary duties. The 1st defendant counterclaims against the plaintiff for performance bonus and salaries. 2.Leave to discontinue against the 2nd defendant has been granted by consent on 8 March 2021. Be that as it may, he has given evidence at the trial in support of the 1st defendant’s case. In order to avoid confusion, the 2nd defendant will be referred to as “Mr Ho” herein. B. UNDISPUTED/INDISPUTABLE FACTS 3.The plaintiff was established in 1991 and has all along been carrying on business in lighting. 4.Mr Gordon Lai (“Mr Lai”) is the founder and Managing Director of the plaintiff. At all material times, he was actively involved in the management, operation and affairs of the plaintiff, and was, inter alia, personally responsible for signing cheques and making payments on behalf of the plaintiff.[1] 5.On around 10 June 2010, the plaintiff and the 1st defendant entered into the Employment Agreement, pursuant to which the 1st defendant became an employee and General Manager of the plaintiff. The 1st defendant remained the plaintiff’s General Manager until 7 November 2014. 6.As the General Manager of the plaintiff, the 1st defendant was responsible for the daily management and performance of the plaintiff, including logistics and administrative matters. His responsibilities also included interviewing potential new employees, signing quotations to be issued to potential clients, signing purchase orders and project management. 7.The 1st defendant was accountable to Mr Lai, and he reported to Mr Lai while he was still working for the plaintiff. 8.Before the 1st defendant joined the plaintiff, the latter was mainly in the business of lighting components supply, but was not involved in project lighting business. 9.Having joined the plaintiff, the 1st defendant procured Abacus Lighting Limited (“Abacus”) to become a supplier of lighting products (high-mast lighting) for the plaintiff. In his capacity as the General Manager of the plaintiff, he also secured Abacus to enter into an agreement with the plaintiff in November 2013 pursuant to which Abacus granted the plaintiff the exclusive right to purchase, promote and resell (in Hong Kong and Macau) the products and services manufactured and/or sold by Abacus (“the Exclusive Distributor Agreement”). 10.The Exclusive Distributor Agreement was effective from 1 December 2013 for 3 years (that is, until 30 November 2016). 11.On 29 September 2014, the 1st defendant tendered a resignation letter to the plaintiff, in which he stated that he would be resigning from his position as General Manager with effect from 19 December 2014. 12.The 1st defendant eventually left the plaintiff on 7 November 2014 with the consent of the plaintiff. C. THE PLAINTIFF’S CASE – AN OVERVIEW 13.The plaintiff’s case may be summarised as follows. 14.As the General Manager of the plaintiff, the 1st defendant owed fiduciary duties to the plaintiff. 15.It was implied in the Employment Agreement, inter alia, that the 1st defendant :
16.In breach of his fiduciary duties and/or implied terms of the Employment Agreement, the 1st defendant has wrongfully induced or procured Abacus to breach the Exclusive Distributor Agreement by wrongfully terminating the same in October 2014, and caused Abacus to appoint Pinetum Lighting Limited (“Pinetum”) as its exclusive distributor in Hong Kong and Macau instead. 17.But for the 1st defendant’s said breach, the plaintiff would have continued to be the exclusive distributor of Abacus products and services in both Hong Kong and Macau at least until 30 November 2016. 18.By reason of the 1st defendant’s said breach, the plaintiff has lost business opportunities (which depended on supplies from Abacus) in:
19.As a result, the plaintiff has suffered loss of profit in both the Univision Project and the HKZM Bridge Project. 20.Further, in breach of his fiduciary and other duties, the 1st defendant has unlawfully and wrongfully interfered with the plaintiff’s business relationship with Chat Horn Engineering Limited (“Chat Horn”), which was the main contractor involved in a project concerning the design, supply, installation, testing and commissioning of Abacus Highmast lighting systems and fittings for Pitch No.2, 3 and 4 under the Happy Valley Underground Stormwater Storage Scheme (“the Happy Valley Project”), by causing Chat Horn to cancel its purchase order placed with the plaintiff. While the plaintiff eventually managed to resurrect this project by successfully causing Chat Horn to withdraw its cancellation of purchase orders placed with the plaintiff, the plaintiff had suffered damages because its representatives had to travel overseas to seek support from various people. 21.Moreover, the 1st defendant had breached his fiduciary duties and implied terms of the Employment Agreement by wrongfully diverting a mature business opportunity in a project known as “the P533 Project” (which involved the design, supply and delivery of tunnel lighting mimic control panel for P533 South Runway road light control)[2] to Automatic Engineering Limited (“Automatic Limited”). The majority shareholder of Automatic Limited was Mr Wong Wai Chiu Julian (“Mr Julian Wong”), who was also the majority shareholder of Pinetum. 22.As a result, the plaintiff has suffered loss of profit. 23.The 1st defendant was also in breach of his fiduciary duties and implied terms of the Employment Agreement by causing or procuring the plaintiff to supply lighting control products to Automatic Limited on consignment (“the Consignment Arrangement”) which was to the detriment of the plaintiff. As Automatic Limited eventually had returned part of the goods supplied under the Consignment Arrangement to the plaintiff, the plaintiff had suffered damages. 24.In further breach of his fiduciary duties and implied terms of the Employment Agreement, the 1st defendant has wrongfully disclosed confidential information of the plaintiff to Pinetum, which as a result was able to obtain the sub-contracts in a project involving the replacement of lighting for Underpass (West Bound) at Route 5 and Route 11 near Wei Wan Street, Discovery Park, Tsuen Wan (“the Discovery Park Project”). 25.But for the said breach on the part of the 1st defendant, the plaintiff would have obtained the works in the Discovery Park Project. As a result, the plaintiff has suffered loss of profit. D. THE 1ST DEFENDANT’S CASE – AN OVERVIEW 26.The 1st defendant’s case may be summarised as follows. 27.The 1st defendant had more than 30 years’ experience in the lighting field, especially in, among others, project lighting and high mast lighting. He had good connection in the project-lighting industry. 28.In 2010, Mr Lai persuaded the 1st defendant to join the plaintiff, which the 1st defendant did on 10 June 2010. 29.Before the 1st defendant joined, the plaintiff was mainly involved in selling lighting components. 30.After the 1st defendant has joined the plaintiff, he was in charge of its daily management. As its General Manager, the 1st defendant built up the plaintiff’s sales and project management team. He had hired various staff members who were all answerable to him. 31.Although the 1st defendant was the General Manager of the plaintiff, he did not owe any fiduciary duties to the plaintiff. 32.The 1st defendant had developed the plaintiff’s project-lighting business, and had brought in business, customers and suppliers. For example, he had been the sole contact for Abacus – a major manufacturer and supplier of lighting columns and high-masts in the Hong Kong and Macau markets for many years. He had been able to secure Abacus to become a supplier of the plaintiff. Subsequently, he even signed on behalf of the plaintiff the Exclusive Distributor Agreement. 33.The Employment Agreement contained the following implied terms:
34.The 1st defendant’s good working relationship with the plaintiff rapidly deteriorated when Mr Lai began to strip him of his powers and responsibilities in around mid-2014. For example:
35.Mr Lai’s actions and dismissive attitude severely undermined the trust and confidence between the plaintiff and the 1st defendant, who had no choice but to resign on 29 September 2014. 36.The plaintiff’s unilateral change of the 1st defendant’s duties and the aforesaid undermining of trust and confidence of the employment relationship entitled the 1st defendant to treat himself as having been constructively dismissed. The 1st defendant had accepted the plaintiff’s repudiatory breach on 29 September 2014. 37.Since the 1st defendant had been forced out of the plaintiff, he began to make plans for his own future, including exploring future co-operation with Pinetum upon Mr Julian Wong’s invitation. 38.While during the 1.5 months (between late September 2014 and 6 November 2014) the 1st defendant had had discussions with suppliers and taken preparatory steps for his next venture, he had ceased and withdrawn from the discussions and preliminary thoughts of mutual co-operation with others after the plaintiff had issued to him a warning letter dated 14 November 2014 which threatened to sue him. Particularly, he had never in fact joined Pinetum. 39.In relation to Abacus, there was no breach of fiduciary duties at all on the part of the 1st defendant. Abacus did not terminate the Exclusive Distributor Agreement in 2014 as alleged, nor did it replace the plaintiff with Pinetum. It was natural for Abacus to have concerns that the plaintiff might not have sufficient knowledge to continue to serve as its exclusive distributor after the 1st defendant’s resignation. It was a commercial decision on the part of Abacus to replace the Exclusive Distributor Agreement with a non-exclusive distributor agreement (dated 13 May 2015) (“the Non-Exclusive Distributor Agreement”). 40.As far as the plaintiff was concerned, the Univision Project was still at a preliminary stage. At the end of the day, the project was awarded to Mak Hang Kei due to their experience, and the 1st defendant had nothing to do with it. The plaintiff was also unable to prove its alleged profit. 41.The HKZM Bridge Project was not a maturing business opportunity as such. It was at preliminary stage only. Furthermore, there was no requirement that the project must use Abacus products. 42.At the end of the day, Celex LED Technology Limited (“Celex”) was awarded the project because this company had quoted the lowest price. 43.In relation to the Happy Valley Project, the plaintiff failed to prove that the alleged expenses had indeed been incurred. Nor could it prove that such expenses had anything to do with “resurrecting” the Happy Valley Project. 44.The plaintiff did not get the P533 Project because of reason which was within the knowledge, choice and control of the plaintiff and/or Mr Lai, and was unrelated to the 1st defendant. Further the P533 Project was not a maturing business opportunity. 45.For the Discovery Park Project, the 1st defendant was not the person who approved the quotations (“the Discovery Park Quotations”). There was no evidence that the 1st defendant had had any confidential information in relation thereto. Furthermore, it was only at a preliminary stage, and the plaintiff would have difficulty to work on the project in any event due to the departure of the 1st defendant as well as Mr Marco Chan. 46.On the 1st defendant’s counterclaim, the plaintiff had not paid him performance bonus, nor did it pay him the full amount of 3 months’ salary. 47.Parties had compiled a non-agreed list of issues. Despite what the name of the list suggests, the disagreements between the parties are actually relatively minor. I will set them out as follows, even though some of the matters need not be resolved at the end of the day by reasons of this Court’s findings and how the parties ran their respective cases as the trial progressed:
48.The general principles applicable to the assessment of credibility of witnesses are trite, and I have summarised the same in Hu Lan v David Golden [2023] HKCFI 873 as follows:
49.Contemporaneous documentations and inherent probabilities are even more important in a case such as the present when the relevant events took place around a decade ago. 50.The plaintiff has called a total of 4 witnesses, namely, Mr Lai, Mr Daniel Wong, Mr Steven Banks (“Mr Banks”) and Mr Tony Cher Kim Joo (“Mr Cher”). 51.At all material times, Mr Lai was the majority shareholder of the plaintiff. He therefore has interest in the outcome of this court action. 52.Generally speaking, while as a whole Mr Lai’s evidence is more credible than that of the 1st defendant and of Mr Ho, I find that the Court has to be careful when considering Mr Lai’s evidence because:
53.Mr Daniel Wong is the current General Manager of the plaintiff. He has impressed this Court as a straight forward and candid witness, who was not argumentative at all. 54.Hence, generally speaking, this Court would accept his evidence. 55.Mr Banks has travelled all the way to Hong Kong specifically for the purpose of this trial. There is absolutely no reason why his truthfulness should be doubted. Indeed, Mr Lee for the 1st defendant also accepted that Mr Banks is an honest witness. 56.Mr Cher was the Regional Marketing Manager of Schreder (China) Lighting Industrial Company Limited (“Schreder China”) at the material time. He also came to Hong Kong specifically to give evidence at the trial. 57.Mr Lee submitted that Mr Cher has given a clear impression that he was giving evidence favourable to the plaintiff, and that this is explicable due to the long term working relationship between their companies. With respect, this submission is not understood:
58.I am of the view that Mr Cher is no doubt an honest witness. There is no reason why he had to come all the way to Hong Kong to give false evidence for the plaintiff. Indeed, he has impressed this Court that whenever he was not sure about anything, he had no hesitation in telling the Court that he could not recall the matter. He has given the Court a strong impression he was only trying his best to provide the Court with the best evidence which he could properly give. I accept his evidence. F3. The 1st defendant’s witnesses 59.Apart from himself, the 1st defendant has also called Mr Ho as his witness. 60.Mr Lee invited the Court to accept the 1st defendant’s evidence. I regret to say without hesitation that I decline to do so, because it is apparent that the 1st defendant is not truthful at all. 61.There are many examples which may render support to the above finding. For the present purpose, it is adequate to refer to the followings:
62.One of the very important aspects which Mr Ho’s supplemental witness statement was to cover was to explain the operation of the Consignment Arrangement. According to the 1st defendant’s case, Mr Ho was the person who proposed and carried out the whole arrangement. However, surprisingly, when Mr Ho started to give evidence, he had to correct quite a number of details of the alleged arrangement as stated in his supplemental witness statement. That has caused great concern on the part of this Court as to the reliability of his evidence. 63.Further, in Mr Ho’s 1st witness statement, he stated clearly that the terms and conditions of the quotation dated 25 February 2014 under the Consignment Arrangement (“the Automatic Consignment Quotation”) had been discussed at the sales meeting of the plaintiff held in or about February 2014 which was attended by all staff including Mr Lai. However, when he was cross-examined in Court, Mr Ho stated that he did not discuss the content of the said quotation with anyone other than Mr Lai. When the plaintiff’s counsel pointed out to him that his evidence in Court was inconsistent with that contained in his witness statement, Mr Ho explained that although the matter was raised in the sale meeting, it was he who did all the talking, and no one other than Mr Lai had responded to him in the meeting. He said the 1st defendant and other staff members only answered “唔” and “哦” respectively. I am not impressed by Mr Ho’s attempt to reconcile his evidence at all. In my view, he was more interested in defending his own version of event than telling the Court the truth. F4. Conclusion on credibility of witnesses 64.For the above reasons, generally speaking I would prefer the evidence given by the plaintiff’s witnesses over those given by the 1st defendant and Mr Ho. 65.However, that does not mean that the Court should invariably accept the evidence adduced by the plaintiff and reject the evidence adduced by the 1st defendant. After all, the Court should place great emphasis on documents and contemporaneous evidence. Each issue should be considered separately on the above basis. G1. Implied Terms of the Employment Agreement 66.Both sides contended that certain terms had been implied into the Employment Agreement. 67.In Tadjudin Sunny v Bank of America, National Association (CACV 12/2015, unreported, 20 May 2016), it has been held by the Court of Appeal that:
68.As far as the implied terms advocated by the plaintiff are concerned, it is provided in Chitty on Contracts: Hong Kong Specific Contracts, Vol.1 (7th edition (2022)) at Chapter 12 that:
69.At all material times, the 1st defendant was the General Manager of the plaintiff. In my view, there is little doubt that the terms set out in [15] were indeed implied into the Employment Agreement. 70.I now turn to consider the implied terms as suggested by the 1st defendant (see [33] above). 71.In support of the implied term referred to in [33(1)] above, Mr Lee relied on Employment Law and Practice in Hong Kong (2nd ed, 2016) at §3.045 which stated that:
72.I accept that such a term was indeed implied. 73.He then cited the case of D A Coleman v S and W Baldwin [1977] IRLR 342 and submitted that the employer must not unilaterally change the nature of the employee’s job duties, including by way of removing important duties from the employee. 74.In D A Coleman, the employee, Mr Coleman, had been employed by the employer, which carried on business as wholesale greengrocers, since 1940. Mr Coleman had progressed: by around 1972 – 1973, he was doing all the buying of the greengrocery which the employer dealt in. In 1976, when Mr Coleman was on holiday, the duties of buyer were discharged by another member of the staff. It appears that that other staff member had done well with the buying job, so much so that the employer decided to continue with the arrangement despite Mr Coleman’s return from his holiday, and as a result that other member of the staff was assigned to do all the purchasing from the market from then on. Mr Coleman then decided to resign. The issue was whether he should be treated as having been constructively dismissed. The Employment Appeal Tribunal held that:
75.With respect, I do not agree that this authority supports Mr Lee’s contention to its fullest extent. At most, it can only be said that there is an implied term that the plaintiff would not unilaterally change the whole nature (as opposed to just “the nature”) of the 1st defendant’s job. The change must be fundamental in order to be protected from the perspective of the employee. 76.It is also quite bold for the 1st defendant to suggest that an employer cannot vary, take away or add different responsibilities, duties and/or powers. These suggested terms are way too wide and general to be accepted. 77.The 1st defendant also advocated that there should be an implied term that he would not be demoted. Mr Lee has not cited any authority in support of this contention. Be that as it may, I accept that this proposed term may be implied into the Employment Agreement, provided the change of title would lead to a fundamental change to the whole nature of the job. 78.The 1st defendant also submitted that there should be an implied term that the plaintiff shall not hinder, obstruct or prevent the performance of his duties and responsibilities as General Manager. Mr Lee based this proposed implied term on the employer’s duty of trust and confidence. On my part, I take the view that Mr Lee’s argument means that there is no need to imply another term as suggested other than the trite implied duty of mutual trust and confidence. 79.Lastly, the 1st defendant argued that there should be an implied term that the plaintiff shall give prior notice of any changes in the plaintiff’s personnel to the 1st defendant and/or shall consult him upon such changes. With respect, I do not accept such an argument. While the 1st defendant has been given the title of General Manager, and had been entrusted with the overall responsibility on the daily management and performance of the plaintiff, this would not change the fact that the 1st defendant was just an employee who had to report to Mr Lai, who, in reality, was his boss. To imply the proposed term into the Employment Agreement would in effect be elevating the 1st defendant’s status as a quasi-partner of Mr Lai. This cannot be right. 80.Despite the fact that the 1st defendant was appointed as the General Manager of the plaintiff, he denied that he owed any fiduciary duties to the plaintiff. 81.In Bloch and Brearley, Employment Covenants and Confidential Information (4th ed (2018)) at §§4.5-4.6, the learned author stated that:
82.In the present case, the 1st defendant was the General Manager of the plaintiff. According to the 1st defendant’s own case, he was recruited by the plaintiff to, inter alia, expand the plaintiff’s business into the project lighting business. Mr Lai also wanted him to introduce and bring over all his business connections with suppliers and customers in the project lighting industry to the plaintiff. Taking these matters into account, I have little doubt that the 1st defendant did owe fiduciary duties to the plaintiff. G3. The plaintiff’s alleged breach of the Employment Agreement and constructive dismissal 83.The 1st defendant claimed that the plaintiff had breached the implied terms of the Employment Agreement and that he had been constructively dismissed by the plaintiff because his powers and duties in the plaintiff had been chiselled away since around August 2014. He relied on the following matters:
84.Mr Lai denied that he had deliberately planned and carried out any action to undermine the 1st defendant’s position. 85.When the Court considers whether Mr Lai had indeed done anything deliberately to undermine the 1st defendant’s position and status in the plaintiff, it is important to bear the following matters in mind:
86.In my view, the above surrounding circumstances show that it is inherently improbable that Mr Lai would do anything against the 1st defendant, whether deliberately or otherwise. Destroying the relationship between the plaintiff and the 1st defendant would be nothing but detrimental to the benefit of the plaintiff. There is simply no reason for the plaintiff or Mr Lai to do that. 87.Furthermore:
88.In Mr Lee’s closing submissions, the 1st defendant further relied on an allegation that after he tendered his resignation letter on 29 September 2014, he was informed by Mr Lai’s secretary on 2 October 2014 that he (the 1st defendant) was no longer having any authority to sign quotations or purchase orders for new transactions on behalf of the plaintiff with immediate effect. 89.It is not entirely clear as to the relevance of this part of the allegations, because according to the 1st defendant’s pleaded case, he had been constructively dismissed on 29 September 2014, and there is no alternative pleaded case that he was constructively dismissed by virtue of the plaintiff’s alleged restriction from 2 October 2014 onwards.[9] 90.In any event, since the 1st defendant had resigned, I do not think there was anything wrong on the part of the plaintiff even if it had indeed taken away part of the 1st defendant’s authority, not to mention that, as a matter of fact, I do not accept the 1st defendant’s case that he had been deprived of his right to sign quotations on behalf of the plaintiff. This is because, if that was indeed the case:
91.To conclude, I hold that the plaintiff’s action or course of conduct allegedly leading up to the 1st defendant’s departure from the plaintiff did not constitute repudiatory breach of the Employment Agreement and/or constructive dismissal of the 1st defendant. G4. The time when the Employment Agreement came to an end 92.Given the above conclusion reached by this Court, there is no doubt that the Employment Agreement only came to an end on 7 November 2014 when the 1st defendant left the plaintiff earlier than originally planned as agreed by Mr Lai. 93.It goes without saying that the duties which the 1st defendant owed to the plaintiff did not change despite his tender of resignation on 29 September 2014. G5. Abucus – was the 1st defendant in breach of his duties 94.As aforesaid, the 1st defendant tendered his resignation to the plaintiff on 29 September 2014. 95.On the next day, the 1st defendant and Mr Banks, Finance Director of Abacus, had had a drink gathering. 96.There was a factual dispute between the parties as to what had been discussed between Mr Banks and the 1st defendant during this drink gathering. I will deal with this matter later. However, before I do so, it is necessary to set out a number of emails exchanged between the 1st defendant and Abacus from early October 2014 to mid-October 2014 first:
97.It should also be mentioned at this point that the 1st defendant has all along denied that he has ever joined Pinetum. He only admitted that he had had a plan to do so when he met Mr Julian Wong of Pinetum for dinner in early October 2014 but such a plan, he alleged, had never materialized. 98.As explained in the earlier part of this Judgment, the 1st defendant’s evidence was self-contradictory and unbelievable in this regard and I have no hesitation in rejecting the same. Apart from those matters which I have mentioned in section F3.1 above, it should also be noted that, in the 1st defendant’s email dated 5 October 2014, he had stated categorically that the name of his new company was Pinetum, and it is simply undeniable that he was already working for Pinetum at the material time in causing Abacus to appoint Pinetum as its “approved sole distributor for Abacus exterior lighting solutions in Hong Kong and Macau”. 99.Coming back to the drink gathering on 30 September 2014, the 1st defendant submitted that it was nothing other than a casual chat during which he informed Mr Banks that he might be joining another company after leaving the plaintiff, and that it was Mr Banks who insisted that the 1st defendant should send him the details of his new company so that Abacus could continue its business relationship with him. 100.The 1st defendant also said that Mr Banks’ request had led to the 1st defendant’s email dated 5 October 2014 in which the address of Pinetum was provided. 101.The 1st defendant’s evidence in this regard is, again, totally unbelievable. One only has to make reference to the said email sent by the 1st defendant to Mr Banks on 5 October 2014, in which the 1st defendant was already asking Mr Banks to issue an authorization letter as soon as possible so as to confirm Pinetum’s status as Abacus’ sole distributor in Hong Kong and Macau, to realise that the 1st defendant’s evidence was just a pack of lies. 102.On the other hand, Mr Banks’ evidence makes much more sense, which I accept. According to him, the 1st defendant told him that the 1st defendant was one of the owners of the plaintiff and that various projects of the plaintiff were in fact the 1st defendant’s own projects, which would be brought to a new company because the plaintiff would be moving away from the Highmast products market. Indeed, it was Mr Banks’ evidence that he had decided that Abacus should terminate the Exclusive Distributor Agreement with the plaintiff only because of such a representation made by the 1st defendant but not otherwise. 103.On 22 October 2014, Mr Parsonage sent an email to the 1st defendant who then forwarded to Mr Lai. It reads:
104.The “attached letter” as referred to in the preceding paragraph, which was also signed off by Mr Parsonage, reads:
105.On the face of it, the letter issued by Abacus shows that the reason why Abacus wanted to terminate the Exclusive Distributor Agreement was the 1st defendant’s departure from the plaintiff which could mean that the plaintiff no longer had the expertise to discharge its duty under the Exclusive Distributor Agreement. However, Mr Banks explained in court that Abacus in fact decided to terminate the said agreement and to do business with the 1st defendant’s new company only because he (Mr Banks) was told by the 1st defendant that the plaintiff would no longer be in the highmast business. Hence, although it is unexplained as to why the termination letter was written in such a way, I accept the plaintiff’s case that the Exclusive Distributor Agreement was only terminated because of 1st defendant’s active inducement, rather than his mere departure from the plaintiff. 106.In this regard, the 1st defendant raised a number of further arguments:
107.In my view, such arguments made by the 1st defendant are futile, because, according to the evidence of Mr Banks and Mr Lai (both of which I accept), from the plaintiff’s and Abacus’ respective points of view, Abacus treated (and the plaintiff accepted) the Exclusive Distributor Agreement as having come to an end as a matter of reality in the period between January and May 2015. Mr Banks further confirmed in court that Abacus had treated Pinetum as its exclusive distributor in the same period, even though no goods had actually been sold to Pinetum. Indeed, Mr Parsonage had issued an authorization letter on 13 October 2014 and appointed Pinetum as Abacus’ sole distributor in Hong Kong and Macau. There could not be two exclusive distributors at the same time. 108.In other words, as a matter of fact, the plaintiff had lost its right as sole distributor of Abacus in Hong Kong and Macau in January 2015, if not earlier. 109.In my view, the plaintiff’s loss of such a right was plainly because of the 1st defendant’s active procurement/inducement. In fact, he lied to Mr Banks for this purpose. Such actions on the part of the 1st defendant were apparently done in breach of his duty of fidelity and fiduciary duties owed to the plaintiff. 110.Insofar as it is the 1st defendant’s argument that Abacus did not breach the Exclusive Distributor Agreement, I disagree, because Abacus was not entitled to terminate such an agreement by giving notice in 2014 by relying on Clause 12 thereof which provides that:
111.As far as the plaintiff’s loss is concerned, it is its pleaded case that but for the 1st defendant’s aforesaid breach, Abacus would not have wrongfully terminated the Exclusive Distributor Agreement and the plaintiff would have continued to be the exclusive distributor of Abacus products and services both in Hong Kong and Macau at least until 30 November 2016, and would have been awarded and be able to complete the Univision Project and the HKZM Bridge Project. I will deal with these projects in Sections G6 and G7 below. 112.Risking to state the obvious, the 1st defendant’s reliance on the case of Kao Lee & Yip v Koo Hoi Yan [2003] 3 HKLRD 296 (at [57]) and his argument that he was only taking preparatory steps in contemplation of life after leaving the plaintiff is very bold and totally misplaced, for it is clear that he had gone far beyond the reasonable and acceptable limits. 113.Before I leave this topic, I should also say a few words on the project list which the 1st defendant sent to Mr Banks by his email dated 5 October 2014 as attachment (“the Project List”). 114.It is the plaintiff’s case that the Project List contained confidential information. On the other hand, the 1st defendant claimed that all information in the said list could be obtained in the public domain, and therefore did not constitute trade secret as such. 115.The actual project list which was sent by the 1st defendant to Mr Banks has not been placed before the Court at all. When Mr Banks was shown a table of the plaintiff dated 14 October 2015 (which was the only table in the trial bundle that might be of the same kind as the Project List in question), he told the Court that the Project List which he received from the 1st defendant was not similar to the said table, and that the Project List contained less details than the said table. 116.In such circumstances, this Court is unable to make any findings as to what exactly the Project List contained. Neither could the Court draw any inference on its content. Hence, the conclusion is that the plaintiff failed to prove that the Project List contained any trade secret as such. 117.It is the plaintiff’s case that but for the termination of the Exclusive Distributor Agreement, the plaintiff would:
118.The plaintiff relied on its quotation dated 23 July 2014 (“the Univision Quotation”) issued to Univision Engineering Limited (“Univision Limited”) for the supply and installation of Abacus products at the consideration of $2,110,000, which Mr Peter Chan of Univision Limited signed and returned on 25 August 2014, and alleged that because of its loss of exclusive distributor status, Univision Limited was able to engage, and indeed subsequently engaged, Mak Hang Kei (HK) Construction Limited (“Mak Hang Kei”) to supply Abacus products for the Univision Project. As a result, the plaintiff alleged that it had suffered from loss of gross profit in the sum of $271,652.21. 119.The 1st defendant alleged that the Univision Quotation was not a binding contract as such, and was only evidence of preliminary interest for further negotiation on the part of Univision Limited. Parties were free to change their mind until a formal contract was entered into. Further, since the plaintiff was subsequently engaged by Mak Hang Kei for undertaking part of the Univision Project, the plaintiff’s alleged loss was avoided in whole or in part. 120.Be that as it may, it was not really undisputed by the parties that:
121.It must be borne in mind that if the Exclusive Distributor Agreement was still effective at the material time, no company other than the plaintiff could have supplied Abacus products to Univision Limited for the Univision Project. 122.In other words, Mak Hang Kei could not have been awarded with the sub-contract but for the fact that the plaintiff was no longer the exclusive distributor of Abacus products in Hong Kong. 123.Viewed in such light, even if the Univision Quotation was not a binding contract as alleged by the 1st defendant, that does not really matter. The crucial facts are that Univision had decided to use Abacus products (as demonstrated by its execution of the Univision Quotation and its subsequent purchase of the same from Mak Hang Kei), and that Univision Limited had no choice but to purchase from the plaintiff. 124.Hence, the plaintiff must have suffered loss by reason of its loss of the purchase contract with Univision Limited. 125.The 1st defendant’s allegation that the plaintiff did not have the expertise to install the Abacus products cannot hold water, as demonstrated by the engagement of the plaintiff by Mak Hang Kei for the installation work. 126.The 1st defendant also relied on Univision Limited’s letter dated 23 June 2020 in its defence of this claim. This letter, which was signed off by Mr Peter Chan, reads:
127.The 1st defendant’s reliance on this letter must be futile because it does not address the point that Mak Hang Kei could not even enter the race for the Univision Project (by suggesting to use Abacus products) but for the termination of the Exclusive Distributor Agreement. 128.The 1st defendant also argued that the plaintiff had failed to mitigate its loss in that:
129.While the 1st defendant did plead “failing to mitigate” in paragraph 64(2) of the Re-Amended Defence and Counterclaim, it was actually pleaded in the following way:
130.It can be seen that the defence of “failing to mitigate” was pleaded in relation to the plaintiff’s sub-contract with Mak Hang Kei. It has nothing to do with the alleged failures referred to in [128] above, which had never been expressly pleaded. In my view, it is very unfair if the 1st defendant is allowed to rely on new grounds of defence in such a way. 131.In any event, I accept Mr Lai’s evidence that, as a businessman, his priority was to maintain good relationship with Abacus, and he was not minded to resort to litigation as a matter of course. He’d rather to have a non-exclusive distributor agreement than totally nothing. 132.To conclude, the 1st defendant should be held liable for the plaintiff’s loss of profit in supplying Abacus products for the Univision Project. 133.According to the evidence of Mr Daniel Wong, the plaintiff had suffered a loss of gross profit calculated as follows:
134.I accept Mr Daniel Wong’s evidence despite Mr Lee’s challenge on his evidence. 135.The 1st defendant’s argument that the plaintiff had suffered a loss which was less than the above by reason of its having been engaged by Mak Hang Kei is misplaced. This is because, as Mr Daniel Wong explained, the above calculation only took into account the profit which could have been earned by supplying the Abacus products concerned. 136.Hence, the 1st defendant should be liable to the plaintiff in the sum of $271,652.21. 137.The plaintiff’s case may be summarised as follows. 138.The plaintiff had already begun to provide design and submission services for BYME (E & M Contractor of the HKZM Bridge Project) back in November 2013 and all such services were rendered by using Abacus products. 139.By an email dated 31 July 2015, Mr Grover Ho, a Sales and Marketing Executive of the plaintiff, sent a quotation (“the BYME July Quotation”) to Mr Chan Kin Keung of BYME (“Mr Chan”) and Mr Leung Chun Ming of BYME (“Mr Leung”). 140.By an email dated 3 August 2015, Mr Chan replied to Mr Daniel Wong as follows:
141.In the period between 3 August 2015 and 7 August 2015, the parties were finalising the quotation for the HKZM Bridge Project. 142.On 7 September 2015, Mr Grover Ho sent a revised quotation (“the BYME September Quotation”) to Mr Chan and Mr Leung upon BYME’s request. The fact that BYME had asked the plaintiff to issue the said quotation means that the vendor of the HKZM Bridge Project, the Highways Department, had approved the use of Abacus products in the said project. 143.By an email dated 15 September 2015, Mr Leung asked Mr Grover Ho to “proceed the material and drawing submission accordingly”. BYME also sent a purchase requisition dated even date to the plaintiff, seeking to purchase lighting pole fittings (Beghelli) and light pole (Abacus) from the plaintiff in the quantity and at the price as per the BYME September Quotation. 144.However, because of the plaintiff’s loss of its exclusive right regarding the sale of Abacus products in Hong Kong, BYME was able to engage, and did engage, another company which outbid the plaintiff for the supply of Abacus products for the HKZM Bridge Project. 145.As a result, the plaintiff suffered a loss of gross profit in the sum of $2,292,196.64, which is calculated as follows:
146.The 1st defendant denied liability in relation to the alleged loss. It was asserted, inter alia, that[11]:
147.The 1st defendant also disputed quantum. It was said that the costs quoted from Abacus was at least US$376,209 (i.e. $2,934,430.20). 148.In my view, the 1st defendant’s various lines of defence on liability are misconceived. 149.First, whether the 1st defendant was ever involved in the HKZM Bridge Project while he was still in the employment of the plaintiff is totally irrelevant because the plaintiff’s claim in this regard is not premised upon what the 1st defendant did or omitted to do on behalf of the plaintiff in the said project. 150.Second, I do not think the plaintiff has to prove that the vendor or main contractor or anyone else has specified that Abacus products must be used in the HKZM Bridge Project before the plaintiff could establish liability against the 1st defendant. I agree with Mr Chiu for the plaintiff that it is enough in the circumstances where:
151.Third, neither is the fact that Abacus had continued its supply of products to the plaintiff at the material time relevant. The crux of the matter is that the plaintiff was no longer the exclusive distributor of Abacus products, and as a result, it had to face competition with other companies which could also supply Abacus products in Hong Kong. 152.Fourth, it is not fatal to the plaintiff’s claim even if the BYME September Quotation was not a binding contract. In fact, realistically, it was exactly because the said quotation was not a binding contract that BYME was able to switch to another supplier (Celex) which had outbid the plaintiff[12]. This is exactly the complaint of the plaintiff: it would not have been lost to anybody else as far as the supply of Abacus products is concerned but for the termination of the Exclusive Distributor Agreement. In this regard, it must be borne in mind that BYME had indicated its acceptance of the plaintiff’s “final offer” back on 3 August 2015, “subject to approval from SOR” (Schedule of Rate). Hence, I accept the plaintiff’s case that but for the 1st defendant’s breach, it is more likely than not that the plaintiff would have been awarded the HKZM Bridge Project. 153.The 1st defendant (together with Mr Ho) alleged that BYME was still inviting for quotations from various suppliers in around January 2016. However, they could not produce any documentary evidence in support. I therefore do not accept their mere say-so as I find that they are generally speaking incredible witnesses. In any event, I do not think that would affect my analysis of the plaintiff’s claim. 154.The 1st defendant also alleged that the plaintiff had failed to mitigate its loss. It was pleaded in paragraph 65(5) that:
155.What the 1st defendant is now trying to argue is that the plaintiff had failed to mitigate in that:
156.As discussed under section G6 above, in the circumstances where the alleged reasonable steps had not been expressly pleaded, I am of the view that the 1st defendant should not be allowed to rely on such steps. 157.To conclude, I am of the view that there was undoubtedly a real or substantial chance that the plaintiff would have been awarded the contract but for the 1st defendant’s breach. 158.I now turn to quantum. 159.To recap, the plaintiff claims for loss of gross profit in the sum of $2,292,196.64, which is calculated as follows:
160.The contract sum of $5,387,090.00 was made up of:
161.Mr Lee argued that the above quotation of $5,387,090.00 had never been accepted by BYME and therefore it could not be used to prove the damages suffered by the plaintiff. With respect, this argument has overlooked the following matters:
162.I therefore accept the contract sum put forward by the plaintiff. 163.The 1st defendant then argued that the costs quoted from Abacus was at least US$376,209 (i.e. $2,934,430.20). 164.Mr Daniel Wong also agreed to this figure[14]. 165.Mr Lee went further to argue that the plaintiff has not even obtained a quotation from Abacus on the costs of the 5M poles. In this regard, I accept Mr Daniel Wong’s evidence that when he calculated the costs of the 5M poles, he simply adopted the costs of the 6M poles. What Mr Daniel Wong did makes sense to me, because it is evident that the price quoted by the plaintiff in the BYME September Quotation for 5M lamp pole double arm was as same as that quoted for 6M lamp pole single arm. Furthermore, even if the costs of the two types of lamp poles are not the same, logically (and there is no evidence showing otherwise), the cost of the 6M lamp pole must be more than the 5M lamp pole. In other words, there is no ground for the 1st defendant to allege that the plaintiff has claimed more than it is entitled to. 166.Mr Lee then challenged Mr Daniel Wong’s calculation of transportation costs on the basis that there is no detailed explanation as to how it was arrived at. He asked the Court to find that the level of costs should be higher. However, he has provided no basis in support of his assertion. 167.As I explained earlier, I find that Mr Daniel Wong is an honest witness. I therefore accept his evidence on transportation costs. 168.Lastly, Mr Lee submitted that, while Mr Daniel Wong accepted in Court that the actual number of products used or purchased may vary from the amounts stated in the Purchase Requisition because of the situation at the site, there is no evidence that the variation would be minimal. Insofar as it is his submission that, as a result, the plaintiff has failed to prove its claim, I disagree. I accept Mr Daniel Wong’s evidence that the variation, if any, would be minimal. I therefore find that the Court should adopt the figures in the Purchase Requisition for the purpose of ascertaining the loss suffered by the plaintiff. 169.I therefore come to the conclusion that the plaintiff has suffered from a loss of gross profit in respect of the HKZM Bridge Project in the sum of $2,223,408.44, which is calculated as follows:
170.Chat Horn is the main contractor involved in the Happy Valley Project, and placed purchase order with the plaintiff, which was supposed to supply certain floodlights for the said project. 171.On 21 October 2014, Abacus wrote to Chat Horn as follows:
172.On 4 November 2014, Performance in Lighting Singapore Pte. Ltd (“PILS”), a supplier of those floodlights, also informed Chat Horn that:
173.As a result, Chat Horn wrote to the plaintiff on 25 November 2014 as follows:
174.The plaintiff then spent time and costs to save the Happy Valley Project, which was achieved when Chat Horn withdrew the cancellation of its purchase order on 3 December 2014. It was pleaded in paragraph 29 of the Re-Amended Statement of Claim that:
175.The plaintiff therefore claims against the 1st defendant for the followings[15]:
176.While the 1st defendant initially denied the plaintiff’s claim in his pleading, he frankly admitted in Court that when he chased Mr Banks for an authorisation letter from Abacus by his emails on 13 October 2014 (see [96(4)] and [96(5)] above), he was minded to make sure that:
177.While the 1st defendant tried to shift the blame to Chat Horn by saying that it was Mr Edmond Kong of Chat Horn who chased him for the said authorisation letter, I do not consider this matter relevant at all. 178.In the course of cross-examination, the 1st defendant also stated initially[16] that he could not recall whether he did pass the authorisation letter which he received from Abacus to Mr Edmond Kong. In the light of the circumstances, I am of the view that this only reflects badly on his credibility. 179.The 1st defendant also gave evidence in Court that he only told PILS that he was going to leave the plaintiff, and did not mention anything else. I reject his evidence in that regard. Given how aggressive he was in diverting away the plaintiff’s exclusive distributor right as demonstrated above, I hold that it is more likely than not that he must also have persuaded PILS not to supply further products to the plaintiff for the Happy Valley Project. 180.To conclude, I am satisfied that the defendant was in breach of his contractual and fiduciary duties owed to the plaintiff. 181.What remains to be considered is whether the plaintiff has proved its damages. 182.As aforesaid, it is the plaintiff’s case that it has incurred $10,000 for a trip to Singapore and another $20,000 for his trips to Shanghai, so as to talk to PILS and Abacus respectively. 183.In the plaintiff’s Answers to the 1st defendant’s Request for Further and Better Particulars of the Statement of Claim, the plaintiff further pleaded that:
184.I am of the view that the plaintiff has failed to prove the alleged damages for the following reasons:
185.It is the plaintiff’s case that the 1st defendant has diverted a mature business opportunity from the plaintiff to Automatic Limited in the following circumstances. 186.On 26 May 2014, Gammon E&M Limited (“Gammon Limited”) issued an Instruction to Sub-Contractor (“the Gammon Instruction to Sub-Contractor”), and instructed the plaintiff to carry out a series of work. 187.The Gammon Instruction to Sub-Contractor expressly referred to the plaintiff’s quotation dated 11 February 2014 (“the P533 February Quotation”) which quoted an amount of $430,000. 188.On 25 February 2014, the plaintiff issued a Letter of Intent (“the P533 Automatic Letter of Intent”) to Automatic Limited regarding the P533 February Quotation and accepted Automatic Limited’s quotation price of $358,500. 189.On 11 September 2014, the plaintiff issued a revised quotation (“the P533 September Quotation”) to Gammon Limited which was signed by the 1st defendant and quoted a price of $535,500. 190.On 15 October 2014, the 1st defendant sent an email (“the Email to Gammon”) to Mr Tony Tsz Kin Chau (“Mr Chau”) of Gammon Limited, and stated that:
191.It is the plaintiff’s case that the 1st defendant had full knowledge of the terms of the P533 February Quotation, the P533 Automatic Letter of Intent and the P533 September Quotation, and that the plaintiff had already been instructed by Gammon Limited to carry out the works referred to above. The drawing submission prepared by the plaintiff had also been reviewed by the architect. 192.As a result of the 1st defendant’s aforesaid email, Gammon Limited subcontracted the works under the P533 Project to Automatic Limited, and thereby causing the plaintiff’s loss of chance to continue working for Gammon Limited under the said project. 193.The plaintiff therefore claims against the 1st defendant for loss of gross profit in the sum of $71,500 (on the basis of the P533 February Quotation) or alternatively $109,020 (on the basis of the P533 September Quotation). G9.2 The 1st defendant’s case[18] 194.The P533 Project was part of a wider project concerning the south runway of the Hong Kong International Airport, and it was Mr Ho who was responsible for this project. 195.The plaintiff initially submitted the P533 February Quotation to Gammon Limited in February 2014, which was tentatively accepted by Gammon Limited, which gave preliminary instructions to the plaintiff to carry out the works in the Gammon Instruction to Sub-Contractor. However, those preliminary instructions were subject to revision and further agreement. 196.The P533 Project concerned the provision of tunnel lighting control on which the plaintiff had no expertise. It was intended by the plaintiff that Automatic Limited, which was experienced in tunnel lighting control, would be engaged by the plaintiff as a lighting sub-sub-contractor/supplier to carry out the project, which was known to Gammon Limited at all material times. 197.The plaintiff submitted the P533 September Quotation as a revised quotation in September 2014 upon Gammon Limited’s request for additional works/materials to be done/supplied in relation to the P533 Project. However this revised quotation was not accepted by Gammon Limited. 198.After the 1st defendant has left the plaintiff, the plaintiff continued to discuss with Mr Wong of Automatic Limited regarding a revised quotation. There were also requests from the plaintiff to obtain a reduction in Automatic Limited’s quoted prices as well as better payment terms. However, Mr Lai did not follow the matter up upon his receipt of a revised quotation from Automatic Limited and as a result no agreement was reached between the plaintiff and Automatic Limited. 199.On 2 January 2015, Gammon Limited wrote to the plaintiff (“Gammon’s Withdrawal Letter”) as follows:
200.Hence, the withdrawal of the plaintiff from the P533 Project had nothing to do with the 1st defendant at all. It was due to the plaintiff’s failure to follow up the project and to accept Automatic Limited’s revised quotation. 201.Furthermore, the P533 Project was not a maturing business opportunity and the plaintiff’s quotation was subject to further revision and discussion. As no formal contract had been signed, Gammon Limited was free to change its mind, and was not obliged to award the work to the plaintiff. 202.The 1st defendant did not gain any profits, salary and/or commission from Automatic Limited as a result of Gammon Limited’s decision to directly work with Automatic Limited. 203.In any event, the opportunity relating to the P533 Project was not brought to the 1st defendant by virtue of his employment with the plaintiff. 204.Further, the plaintiff cannot recover any alleged loss that it had failed to mitigate. 205.Mr Lee for the 1st defendant has made quite a number of different arguments which I will deal with in turn below. 206.First, it was said that according to the evidence of the 1st defendant himself and of Mr Ho, the 1st defendant had little involvement in the P533 Project, and that the only involvement on the part of the 1st defendant was the issuance of the Email to Gammon. 207.In my view, whether it was the 1st defendant or Mr Ho who was in charge of the P533 Project is totally irrelevant. The focus of the plaintiff’s complaint was the issuance of the Email to Gammon, and the right question to ask is who issued that email and why that was done. 208.In fact, the argument that the 1st defendant was not responsible for the P533 Project in the first place only reinforces the plaintiff’s case that the purpose of the said email was to divert the business opportunity to Automatic Limited: If there was any need to communicate with Gammon Limited in relation to the P533 Project, it was normally done by Mr Ho who was the main person responsible for this project. 209.Second, Mr Lee argued that the plaintiff’s role in the P533 Project was as an intermediary, given no one in the plaintiff had sufficient expertise to handle the project, and as a result the plaintiff was not the one which in fact provided the substantive services to Gammon Limited. 210.With greatest respect, this again is an irrelevant matter. It is undisputed that Gammon Limited knew about this arrangement (including the fact that Automatic Limited was the plaintiff’s sub-contractor) all along, and had not raised any objection against it. 211.In any event, this cannot justify the issuance of the Email to Gammon. 212.Third, it was argued on behalf of the 1st defendant that the Gammon Instruction to Sub-Contractor were preliminary instructions and did not constitute mature business opportunity. 213.The short answer to this argument is that it cannot be disputed that Gammon Limited had already given instruction to the plaintiff to start working under the Gammon Instruction to Sub-Contractor which reads:
214.It can be seen that the allegation that the instruction was “preliminary” is simply contradicted by the Gammon Instruction to Sub-Contractor itself. 215.Moreover, the 1st defendant’s own evidence at paragraph 75 of his 1st witness statement as follows should be noted:
216.Furthermore, if the said instruction was in such a preliminary stage and that there was no obligation on the part of Gammon Limited to engage the service of the plaintiff, there was no need for Gammon Limited to issue a “formal notification of withdrawal of the Instruction” (see Gammon’s Withdrawal Letter quoted in [199] above). 217.The fact that further changes to the instructions were required subsequent to the issuance of the Gammon Instruction to Sub-Contractor is, in my view, irrelevant, and would not affect the view expressed above, because the existence of those changes does not necessarily mean that the instructions given in the Gammon Instruction to Sub-Contractor were preliminary nor does it mean that the business opportunity was not mature at the time. 218.Fourth, it was argued that because of the numerous comments made by the Airport Authority, the plaintiff had to revise its quotation, which led to the issuance of the P533 September Quotation, and that Gammon Limited had not accepted the new price quoted by the plaintiff. 219.Insofar as it is argued that because the new price had not yet been agreed and therefore there was no mature business opportunity, I disagree, for it is undisputed that instructions to work had already been given by Gammon Limited to the plaintiff. 220.Further, as pointed out by Mr Chiu for the plaintiff, Gammon Limited did not mention about the plaintiff’s price in the Gammon’s Withdrawal Letter at all as the reason for withdrawal of instructions. 221.In my view, the 1st defendant’s argument in this regard is only relevant as far as quantum is concerned, which I will further consider below. 222.Fifth, Mr Lee pointed out that even if the plaintiff proceeded with the P533 Project, its profit margin would be minimal. He quoted the 1st defendant’s witness statement as follows in support:
223.What the 1st defendant in effect was saying by virtue of the above was that not only did he not breach his duties to the plaintiff, he was actually doing something good for the plaintiff’s interest. 224.In paragraph 49(3) of the Re-Amended Defence and Counterclaim, the 1st defendant pleaded the followings in response to paragraph 34(3) of the Re-Amended Statement of Claim (which was the paragraph under which the Email to Gammon was quoted in full):
225.It can be seen that the alleged good intention was not pleaded at all. In my view, the 1st defendant is not allowed to rely on such a material matter in his witness statement without including it in his pleading. 226.Even if the Court is obliged to consider this part of the 1st defendant’s evidence, I have no hesitation to reject such evidence and hold that the alleged good intention is an after-thought on the part of the 1st defendant because if he had had such a good intention, he would have included it in his Re-Amended Defence and Counterclaim when he pleaded his case in relation to the Email to Gammon. 227.Sixth, the 1st defendant argued that the Email to Gammon did not cause the plaintiff to lose the P533 Project. He suggested that the real causes were:
228.In my view, these cannot be the real reasons because:
229.While this Court has rejected the reasons suggested by the 1st defendant, I bear in mind that, after all, it is the plaintiff which bears the burden of proving the link between the Email to Gammon and the Gammon’s Withdrawal Letter. 230.When considering this question, it should be borne in mind that the Gammon’s Withdrawal Letter cited “lack of resources” as the reason why the instructions to the plaintiff were withdrawn. 231.However, if that was the real reason, it is strange that there was no prior warning issued by Gammon Limited, which, if any, would normally have been referred to in the Gammon’s Withdrawal Letter. 232.Furthermore, given the limited role which the plaintiff played in the P533 Project, I wonder what “resources” would be required for the purpose of carrying out the work according to the Gammon Instruction to Sub-Contractor, as such work would be done by the plaintiff’s sub-contractor – Automatic Limited. Indeed, in the 1st defendant’s 1st witness statement, he had the following to say at paragraph 75:
233.Having considered all the relevant evidence, I hold that it is more likely than not that Gammon Limited decided to withdraw its instructions to the plaintiff in the P533 Project because of the Email to Gammon. 234.Seventh, the 1st defendant stated that he did not make any personal gain out of the P533 Project, and therefore he had no motive to cause Gammon Limited to withdraw its instructions to the plaintiff. 235.In my view, it is clear that the intention of the 1st defendant when he issued the Email to Gammon was to cause Gammon Limited to withdraw its instructions to the plaintiff in the P533 Project. That was clearly what he wanted to achieve as reflected in the Email to Gammon. Whether the 1st defendant has made any personal gain as a result is neither here nor there. 236.As far as the 1st defendant’s motive is concerned, it should be remembered that:
237.Given the relationship between Automatic Limited and Pinetum, it is not difficult to infer that the 1st defendant was trying to assist Automatic Limited in getting a sub-contract from Gammon Limited directly and kicking the plaintiff out of the picture. Whether at the end of the day Automatic Limited could successfully get the sub-contract and whether Automatic Limited could make any profit out of it is another matter which is totally irrelevant. 238.I therefore find that:
239.The question of quantum may well be a more difficult issue as far as the P533 Project is concerned. 240.It is evident that Gammon Limited had initially accepted the P533 February Quotation (for the sum of $430,000). 241.However, because of subsequent comments made by the employer on the technical side of the work, the P533 February Quotation had to be revised, and as a result, the plaintiff issued the P533 September Quotation (for the sum of $535,500). 242.A comparison of the two quotations shows that most of the items were the same, save that there is an additional item “Supply Relay Control circuits for Manual override control” in the P533 September Quotation. Be that as it may, for all the pre-existing items, the plaintiff had adjusted the price of each of them upwards. 243.It is undisputed that Gammon Limited had not accepted the P533 September Quotation before the instructions were withdrawn in January 2015. 244.It is unclear as to why the plaintiff was entitled to increase the price as quoted in the P533 February Quotation. It is also unknown as to whether the additional item in the P533 September Quotation was appropriate in the circumstances. 245.However, since all the items in the P533 February Quotation were still included in the subsequent P533 September Quotation despite the comments made by the employer of the P533 Project, it can be inferred that the original items were not affected at all despite the subsequent development of the project. 246.I am of the view that the fairest way to assess damages in relation to the P533 Project is to rely solely on the P533 February Quotation and disregard the P533 September Quotation. 247.In that regard, the plaintiff alleged that the amount of damages should be in the sum of $71,500 calculated as follows:
248.It seems that Mr Lee is challenging the above calculation on the basis that it is highly unlikely that there are no other costs which have to be incurred by the plaintiff. However, it is the 1st defendant’s own case that the plaintiff was just an intermediary and all the works were in fact done by Automatic Limited. 249.I therefore accept that the plaintiff has suffered a loss of $71,500 by reason of the 1st defendant’s breach of duties. G10. The Discovery Park Project 250.The plaintiff’s pleaded case may be summarised as follows. 251.On 16 October 2014, the plaintiff issued a quotation to Kum Shing (K.F.) Construction Company Limited (“Kum Shing”) for the supply of luminaries of Schreder for the Discovery Park Project, that is, the Discovery Park Quotation (at the price of $444,185) (“the Kum Shing Quotation”). 252.On 27 October 2014, the 1st defendant met Mr Karl Reynders, the Chief Regional Officer of Schreder Singapore Pte Limited, and Mr Cher of Schreder China, which was one of the plaintiff’s suppliers, at Sheraton Hotel (defined as “the 2014 Schreder Meeting”). 253.At the said meeting, the 1st defendant handed out the Pinetum Name Card to Mr Reynders and Mr Cher and persuaded them to do business with Pinetum. 254.By reason of the 1st defendant’s position as the General Manager of the plaintiff and the fact that he had signed the Discovery Park Quotations on behalf of the plaintiff, the 1st defendant had full knowledge of the terms of the said quotations, the parties thereto, and the plaintiff’s intention to act as a sub-contractor in the Discovery Park Project. Be that as it may, he, acting as General Manager of Pinetum, met representatives of Schreder, and persuaded them to do business with Pinetum. 255.The plaintiff had also wrongfully disclosed information to Pinetum, namely, information relating to the plaintiff and/or its customers and/or its suppliers and/or trade secret (e.g. costing). 256.Given the fact that Pinetum was an extremely new company to the lighting industry, and considering the close proximity between the departure of the 1st defendant from the plaintiff and Pinetum being awarded sub-contracts which the plaintiff had been pursuing, it can be inferred that the 1st defendant must have disclosed confidential information of the plaintiff which he obtained by virtue of his being the General Manager thereof to Pinetum, and/or used such information to assist Pinetum in obtaining the sub-contracts in the Discovery Park Project (which Pinetum indeed successfully did). 257.But for the 1st defendant’s breach, the plaintiff would have obtained the works as stipulated in the Discovery Park Quotation, and as a result the plaintiff has suffered loss of gross profit in the sum of $88,837 ($444,185 x 20%). G10.2 The 1st defendant’s case 258.The 1st defendant accepted that he did have discussions with Mr Julian Wong about the possibility of working together through Pinetum. That was only a preparatory step which he was entitled to take for his future occupation, and in the course of which he had never disclosed to Pinetum any information and/or trade secrets (including but not limited to costing of the plaintiff). However, he alleged that such discussions were preliminary, and his initial thoughts had never been materialized. He had never been employed by Pinetum nor Mr Julian Wong. Neither had he occupied any position whether paid or unpaid within Pinetum. He had also never obtained any payment or remuneration (in any form) from Pinetum. Nor did he ever own Pinetum, whether legally or beneficially. 259.Furthermore, he did not make contact with Kum Shing regarding the Discovery Park Project at all. He had never solicited Kum Shing to withdraw their business with the plaintiff. Instead, it was Kum Shing which had actively invited quotations from various lighting suppliers and sub-contractors. Moreover, by the time the plaintiff submitted its tender for this project on 16 October 2014, he had already tendered his resignation and his responsibilities as General Manager of the plaintiff had been removed. He had never been involved in the preparation of the tender for the said project. 260.It cannot be inferred that he must have disclosed confidential information of the plaintiff to Pinetum by the mere fact that Pinetum managed to obtain the sub-contracts in the Discovery Park Project. 261.Kum Shing had only previously engaged the plaintiff to provide lighting for a few minor lighting projects in the past, and had never engaged the plaintiff to provide tunnel lighting, which was the type of lighting required for the Discovery Park Project. It is more likely than not that the plaintiff would not have been awarded the Discovery Park Project anyway. 262.As I see it, the plaintiff relied on two complaints against the 1st defendant as far as the Discovery Park Project is concerned:
G10.3.1 The 2014 Schreder Meeting 263.There were 4 persons who had attended this meeting, and out of which only the 1st defendant and Mr Cher have given evidence at the trial. 264.As aforesaid, despite his initial denial in his witness statement, the 1st defendant admitted in Court that he did hand out the Pinetum Name Card to the representatives of Schreder. However, he said that Schreder was minded to set up a company in Hong Kong and recruited him as the General Manager of this new company. As I held above, I am of the view that this evidence, which is also denied by Mr Cher, is totally incredible. 265.What is left is Mr Cher’s evidence, which I found to be credible. However, all he could say about the 2014 Schreder Meeting were that:
266.In particular, Mr Cher did not say that the 1st defendant had ever persuaded Schreder in the said meeting not to supply any products to the plaintiff, whether in relation to the Discovery Park Project or otherwise. 267.It should also be noted that, unlike the Abacus scenario in which the 1st defendant apparently had assisted Pinetum in snatching the exclusive distributor right from the plaintiff, there is insufficient evidence to establish that the plaintiff had such a right as far as Schreder is concerned:
268.That being the case, while I have no doubt that the 1st defendant has breached his fiduciary duties and duty of fidelity and good faith owed to the plaintiff by presenting the Pinetum Name Card while he was still under the employment with the plaintiff, I do not think the plaintiff could advance its claim on the Discovery Park Project by relying on the 2014 Schreder Meeting. G10.3.2 Disclosure of confidential information to Pinetum 269.In a gist, what Mr Chiu is arguing is that, it can be inferred that the 1st defendant had disclosed the Kum Shing Quotation to Pinetum (so that the latter could ultimately outbid the plaintiff and obtained the Discovery Park Project) on the basis of the following matters:
270.The problem with the plaintiff’s claim is that there is no evidence as to why Kum Shing awarded the Discovery Park Project to Pinetum instead of the plaintiff. It may or may not be because Pinetum had successfully undercut the plaintiff. It is therefore a quantum leap for the plaintiff to say that simply because Pinetum had got the project and the 1st defendant was already working for Pinetum at the material time, the Court could make the inference as suggested by the plaintiff. It should also be noted that, while it is evident that the 1st defendant did persuade Schreder to work with Pinetum, Mr Cher did not say that the 1st defendant had ever asked Schreder not to do business with the plaintiff anymore. 271.That being the conclusion, without disrespect to counsel, I am not minded to deal further with the question as to whether the 1st defendant had knowledge about the Kum Shing Quotation which parties had argued extensively on. 272.The plaintiff’s claim on the Discovery Park Project is therefore rejected. G11. The Consignment Arrangement 273.Under this head, the plaintiff claims that the 1st defendant, in breach of his fiduciary duties and/or the Employment Agreement, has wrongfully caused or procured the plaintiff to supply lighting control products to Automatic Limited on consignment, despite the fact that the plaintiff has never had any policy or practice to sell goods on such a basis. 274.But for the 1st defendant’s breach of duties, the plaintiff would not have ordered the subject goods from Tridonic (Shanghai) Co. Ltd. (“Tridonic”). 275.The plaintiff therefore claims against the 1st defendant for the sum of $203,000, being the value of the unsold and returned goods which the plaintiff was unable to re-sell and had to be written off. G11.2 The 1st defendant’s case 276.The 1st defendant alleged that:
277.It was further averred that a comparison between the value of the returned goods ($203,640) and the value of the good consigned ($484,265) shows that more than half of the consigned goods had been sold. 278.Moreover, the returned goods could have been resold easily. 279.First of all, I must say that the 1st defendant’s case that the plaintiff has had a policy and practice to sell and deliver products from Tridonic to purchaser on consignment (i.e. the Consignment Practice) is totally unbelievable and I reject the same, for this assertion is contradictory to Mr Ho’s evidence that he “came up with the idea of marketing Tridonic products by way of consignment in or around late 2013”[20]. 280.I also do not accept Mr Ho’s evidence that there was a need in 2014 to set up the Consignment Arrangement for the purpose of keeping the plaintiff’s right to sell Tridonic products, because according to his own evidence:
281.In the course of his submissions, Mr Lee emphasised that Mr Ho was the one who was responsible for the Consignment Arrangement and that while the 1st defendant’s signature appeared in the Automatic Consignment Quotation, it was just an electronic signature affixed by Mr Ho. It is unclear what purpose Mr Lee wanted to or could achieve:
282.What requires more analysis is the question as to whether Mr Lai had approved the Consignment Arrangement back in late 2013 to early 2014 which led to the issuance of the Automatic Consignment Quotation in February 2014. 283.In this regard, while the 1st defendant’s case is that such an approval had been given, Mr Lai denied that and alleged that he only knew about the Consignment Arrangement for the first time when Automatic Limited delivered a Goods Return Note to the plaintiff on 27 October 2014. 284.Having carefully considered the evidence adduced and the submissions of both sides, I have come to the conclusion that it is more likely than not that Mr Lai has indeed given his approval for the Consignment Arrangement back in late 2013/early 2014 for the following reasons:
285.The plaintiff relied on the Salary Payment Advice dated 7 November 2014 (“the Salary Payment Advice”) to argue that Mr Lai did not know about the Consignment Arrangement because the plaintiff (Ms Tsoi) was still asking the 1st defendant for a copy of the Automatic Consignment Quotation on his last day of work. I do not accept that this argument may assist the plaintiff, because even if Ms Tsoi really did not have a copy of the said quotation, that does not mean that Mr Lai had no knowledge about the said arrangement back at the time before Ms Tsoi joined the plaintiff. 286.The plaintiff further relied on the following emails and submitted that they show that the 1st defendant did not have authority to enter into the Consignment Arrangement on behalf of the plaintiff:
287.However, it can be seen that all that Mr Lai was querying was the payment term. Contrary to what the plaintiff pleaded[23], Mr Lai did not query about the Consignment Arrangement as such by virtue of the email as pleaded in paragraph 40(6A) of the Re-Amended Statement of Claim. Indeed, it would be contrary to the plaintiff’s own case if he had done so because Mr Lai stated that he only knew about the Consignment Arrangement in October 2014. 288.Hence, the aforesaid emails cannot shed light on the crucial question – whether Mr Lai had approved the Consignment Arrangement in late 2013/early 2014. At most, they could be used to show that it was acknowledged that Mr Lai did not know about the payment term of 90 days as opposed to the usual 30 days. But that is not the issue. 289.The above finding would be adequate to dispose of this claim. 290.Having said that, I should further add that:
291.For the above reasons, the plaintiff’s claim in this regard is rejected. G12. The 1st defendant’s counterclaim 292.The 1st defendant counterclaimed against the plaintiff for performance bonus on the basis of Clause 8 of the Employment Agreement and his monthly salary during the notice period, and for damages for the plaintiff’s breach of the Employment Agreement. 293.As I have found that the plaintiff has not breached the Employment Agreement at all, I will only deal with the first two heads of claims. 294.Clause 8 of the Employment Agreement provides that:
295.In support of his claim, the 1st defendant has produced a table setting out the plaintiff’s gross profit for the period between January 2014 and September 2014 on the basis of figures which the 1st defendant gathered from Ms Lai in September 2014 (“the Calculation Table”). According to the calculation therein, 5% of the gross profit of the said period would amount to $196,520.78. 296.The plaintiff has not adduced any evidence to dispute the correctness of the Calculation Table. 297.However, it is argued by Mr Chiu for the plaintiff that the 1st defendant is not entitled to any performance bonus because:
298.As far as the 1st argument is concerned, I note that Clause 8 of the Employment Agreement is rather straight forward. Apart from stipulating how gross profit is calculated, it only provides that the 1st defendant is entitled to 5% of the gross profit earned by the plaintiff as his performance bonus. It does not say that the 1st defendant has to complete a full financial/calendar year before he is entitled to performance bonus. Indeed, the plaintiff’s argument that the 1st defendant is not entitled to pro rata performance bonus is akin to saying that there is an implied term that performance bonus would only be granted on full-year basis, which is not pleaded at all. 299.I therefore reject this argument. 300.The 2nd argument is not an answer to the 1st defendant’s counterclaim for performance bonus at all, because there is no monthly breakdown in the audited report. It cannot serve to challenge the accuracy of the Calculation Table. 301.Insofar as it is alleged that the bad performance of the plaintiff between October 2014 and March 2015 was attributed to the 1st defendant’s breach of duties, I am of the view that the damages caused by such breach had been considered and awarded (if proved) separately. It would in effect amount to double-counting if the Court takes this into account again here. 302.In Mr Lai’s witness statement, he also mentioned that the 1st defendant should not be entitled to any performance bonus because Clause 6 of the Employment Agreement provides that:
303.Mr Chiu did not refer to this clause in his closing submissions at all in support of the plaintiff’s defence to the 1st defendant’s counterclaim. I will therefore assume that this argument is no longer relied on. In my view, such an approach taken by Mr Chiu is wise, because:
304.To conclude, I would allow the 1st defendant’s counterclaim for performance bonus for the sum of $196,520.78. 305.The basis of the 1st defendant’s claim for outstanding salary for the 3 months’ notice period is that he has been constructively dismissed by the plaintiff. 306.As I have ruled against the 1st defendant in relation to his claim of constructive dismissal, his claim for outstanding salary should also be dismissed. 307.By reasons of the aforesaid, I allow the plaintiff’s claims against the 1st defendant for the following amounts:
308.The said total amount should be set-off against the 1st defendant’s counterclaim for performance bonus in the sum of $196,520.78. 309.The 1st defendant is therefore liable to pay the plaintiff the net sum of 2,370,039.87. 310.By way of two amendments to its pleadings, the plaintiff has abandoned quite a number of other claims against the 1st defendant. However, it seems that this Court does not have to take those abandoned claims into account when considering the appropriate costs order at this stage because:
311.Having considered the partial success of the plaintiff’s claim and of the 1st defendant’s counterclaim, I provisionally take the view[24] that:
312.Furthermore, it is noted that the plaintiff’s solicitors have failed to comply with the following parts of the court order made at the Pre-Trial Review (“the PTR Order”)[25]:
313.The plaintiff’s solicitors admitted by their letters to the Court dated 16 January 2024 and 26 January 2024 respectively that it was their fault. In the latter letter, they have undertaken:
314.As far as the electronic bundles are concerned, the preparation thereof would not have been done by the 1st defendant’s solicitors but for the inaction on the part of the plaintiff’s solicitors. It was only because of such inaction that the 1st defendant’s solicitors had to do it and incur costs. I see no reason why the 1st defendant should be asked to bear such costs. 315.With all the above in mind, I make the following costs order nisi :
316.The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.
Mr Byron Chiu, instructed by K. M. Lai & Li, for the plaintiff Mr Adrian Lee, instructed by Hampton, Winter & Glynn, for the 1st defendant [1] While Mr Lai maintained in his evidence that he had a low level of involvement in the business of the plaintiff, the matters referred to in [4] had in fact been admitted by the plaintiff by virtue of paragraph 5 of the Amended Reply which expressly admitted paragraph 5(2) of the Amended Defence and Counterclaim. The plaintiff is bound by its pleadings. [2] For the avoidance of doubt, when the term “P533 Project” is used in this Judgment, it is only referring to the part concerning the design, supply and delivery of tunnel lighting mimic control panel for P533 South Runway road light control, but not “the main contract” (as described by the plaintiff) nor the “wider P533 Project” (as described by the 1st defendant) which the plaintiff was already involved in [3] In this regard, I would disregard his inability to answer a number of questions raised by Mr Lee concerning the legal effect of certain documents which I accept that he, as a layman, was not in a position to answer [4] Paragraph 33 of the 1st defendant’s 1st witness statement [5] Counsel translated it as “初步萌芽階段” during cross-examination [6] Paragraph 12-052 [7] Paragraph 12-056 [8] Paragraph 12-058 [9] Paragraphs 25 and 29 of the Re-Amended Defence and Counterclaim of the 1st defendant [10] Some words were bolded as per the original email [11] Paragraph 65 of the Re-Amended Defence and Counterclaim [12] The 1st defendant’s written closing submissions dated 16 February 2024, at paragraph 198 [13] See [140] above [14] Paragraph 12 of Mr Daniel Wong’s supplemental witness statement [15] Paragraph 50 of the Re-Amended Statement of Claim [16] Upon being further cross-examined, the 1st defendant admitted that if he had received the authorization letter, he would have passed it over to Mr Kong [17] The Further and Better Particulars were given in respect of the Statement of Claim which had subsequently been amended twice. When those particulars were given, it was still the plaintiff’s pleaded case (at paragraph 25(2) of the Statement of Claim) that “Representative of the plaintiff visited Abacus Lighting Ltd at Shanghai for 3 times to convince it to continue supplying products to the plaintiff for the Happy Valley Project”. [18] Paragraphs 47 – 51 and 68 of the Re-Amended Defence and Counterclaim [19] This has been defined to mean the Consignment Arrangement made with Automatic Limited [20] Paragraph 42 of Mr Ho’s supplemental witness statement [21] Paragraph 75 of the 1st defendant’s supplemental witness statement [22] See footnote 1 above [23] The plaintiff pleaded in paragraph 40(6A) of the Re-Amended Statement of Claim that: “By an email dated 24 June 2014 (Subject: Automatic Account), Lai raised the consignment issue to the 1st Defendant […]” [24] See Union Base Limited v Tsang Shek Tong trading as Hawaii Engineering Company [1998] 2 HKC 349 as to the appropriate approach when both parties succeed [25] The Court has not lost sight on the plaintiff’s initial inaction in relation to paragraph 9 of the PTR Order. However, it may well be appropriate for the Court not to take further action because, at the end of the day, three of those documents have been lodged on time, and the remaining one was only lodged one working day late. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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