Shum Ying Wai Stephen and Others v. Edutec International Ltd.

HCLA000007/1986

BETWEEN

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Coram: Deputy High Court Judge Barnett

Date of Hearing: 1 May 1986

Date of Judgment: 6 May 1986

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JUDGMENT

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1. The appellant has 3 broad grounds of appeal against the decision of the Presiding Officer. First, it challenges the basis upon which annual leave pay was awarded.

2. Secondly, the appellant argued that there was no evidence to support the finding that the claimants were entitled to annual bonus. Even if they were, the quantum awarded is in issue.

3. Thirdly, it is said that the Presiding Officer was wrong to find that the 1st claimant was entitled to a rate of 6.5% as commission.

4. All grounds, of course, were put forward on the basis that the Presiding Officer erred in law; either because there was no evidence to support his findings, or because he misconstrued the evidence.

Annual Leave Ray

5. The contracts of the 1st and 2nd claimants were identical. They provided:

6. The 3rd claimant's contract provided for a monthly salary and:

7. The Presiding Officer found that the basic pay together with guaranteed commission formed part and parcel of their monthly earnings and that leave pay should be calculated accordingly. For the appellant, Mr. Lau contended that this was a matter of construction of contract, that that is a matter of law and that the Presiding Officer had wrongly construed the contract.

8. Mr. Lau, having referred to Chitty on Contracts (pares. 765, 766, 769 and 823) asked whether it was possible to say that, after looking at the factual matrix, leave pay could be based on the global sum of salary and commission. He pointed out that double pay was based on salary, thus leaving an ambiguity as to the basic amount of pay, and that there was no provision in the contracts for leave pay.

9. For the claimants, Mr. Bharwaney said that the 3rd claimant's double pay had been awarded on the basis of salary and guaranteed commission. He contended the right approach was to ask what wold have been the remuneration contemplated in substitution for annual leave, and that the answer could only be salary and guaranteed commission. This was the sum which would be paid each month and do not matter.

10. I am persuaded that the Presiding Officer was correct. I can see no other construction he could put on contracts of this nature. It might have been different if the contracts had prescribed the subject matter and rate of commission. But they did not. I dismiss this ground of appeal.

Bonus

11. There was evidence that a bonus of 1% of the gross profits of the China trade was paid for 1983. The claimants sought a similar bonus for 1984, they having been with the appellant throughout that year.

12. Mr. Lau's argument was that the Presiding Officer, having found that the payment of the bonus was not contractual but discretionary, later in his judgment said "... it was something by way of an implied term, that the claimants should be entitled to a share ..." This is inconsistent, contradictory and unsupported by evidence.

13. Mr. Bharwaney conceded that there were no express terms in the contract and that the entitlement to bonus could not be the subject of an implied term. He suggested, however, that contracts are dynamic not static matters. Their terms can change as performance continues although the parties usually do not sign further contracts or documents in respect of these changes. The changes became incorporated in the contracts by course of dealing between the parties. He submitted that this had occurred in this case and, when the Presiding Officer spoke of an "implied term" he was speaking loosely to lay persons and effectively meant a term incorporated in the contracts.

14. In the normal course, Mr. Bharwaney said, the claimants would have received the bonus for 1984. It was in the nature of a contractual entitlement payable upon completion of a year's work, comparable to a gratuity which is payable upon satisfactory completion of a contract.

15. Upon a careful reading of the Presiding Officer's judgment, I have come to the conclusion that Mr. Lau has misinterpreted the Presiding Officer. The paragraph on p.4 of the judgment (p.206 of the bundle) which was the words "not contractual and discretionary" is clearly introductory to this particular head of claim. In it, the Presiding Officer is reciting the appellant's case as disclosed by documents C6, C15 and C20. It is only in the following paragraph that he finds as a fact "that it was something by way of an applied term" and specifically refers to the defence being that payment was discretionary. Thus, there is no contradictory finding.

16. I accept Mr. Bharwaney's contention that the Presiding Officer was, in effect, finding that there was a contractual term between the parties. On the evidence, it was open to him to do so.

17. Even if I am wrong in my reading of the judgment, I would still find against the appellant.

18. There was evidence that the bonus was subject to the auditing of the appellant's accounts. Further, the memorandum of 29th September 1984 (page 101 of the appeal bundle) shows that the bonus is assessed on personal working performance, loyalty and staff seniority. It was on evidence such as this that, according to Mr. Lau, the Presiding Officer found payment of the bonus to be discretionary. That was a finding of fact justified by the totality of the evidence before him. I cannot disturb that.

19. I confess I find it difficult to see how it could then be further found that payment of the bonus was an "implied term" and that the claimants "were entitled" to it. But it is arguable bonus would be paid in the absence of indication to the contrary.

20. In assessing quantum, the Presiding Officer found that in 1983 the claimants had received a bonus equivalent to about one months basic pay. Further, for 1984, he found the bonus for the 1st and 2nd claimants should be calculated by reference to a two-fold increase in gross profit over 1983. As to the former, the appellant says there was no evidence to support the finding; as to the latter, the evidence was misconstrued.

21. Although there was an abundance of figures before the Presiding officer there was no clear statement of how the bonus admittedly paid for 1983 was arrived at. It was alleged to be 1% of the gross profits on the China trade but there was no clear evidence as to the amount of profits for the year in question. As Mr. Bharwaney said, therefore, the Presiding Officer was doing the best he could on the material before him - a situation commonly faced by the courts.

22. The 1st claimant's bonus for 1983, paid in September 1984, was $3431 as compared with his salary in 1984 of $3500 per month; the 2nd claimant's bonus was $3364 and salary $3150 per month; the 3rd claimant's bonus was the equivalent of about $5400 and his salary $5500. This justified, in my view, a finding of "equivalent to about one month's basic pay in or about September or October 1984 for the year 1983".

23. The remaining question, then, is whether the Presiding Officer erred in finding there was a two-fold increase in gross profit for 1984. Mr. Lau pointed out that 2 witnesses gave evidence for the appellant, one of whom referred to a 50% increase in gross profit, the other to a two-fold increase in sales. Profit and sales are not the same, said Mr. Lau, so, in the absence of other evidence, there was no evidence to sustain a finding of a two-fold increase in profit.

24. Profit must bear a relationship to sales. In the absence of evidence from the appellant of a change in the rate of profit, Mr. Bharwaney contended that the Presiding Officer was entitled to infer that gross profit increased twofold. He relied upon Hemns v. Wheeler ⁽¹⁾ for authority that, if an inference is possible on the evidence, it is not for an appellate court to interfere.

25. I am unable to say that the inference which must have been drawn by the Presiding Officer, if he accepted the evidence of gross sales, was impossible.

26. The appeal in relation to bonus is also dismissed.

Commission

27. This can, I think, be dealt with shortly.

28. The only specific reference to 6.5% appears in the 1st claimant's closing address. Notwithstanding s.27 of the Labour Tribunal Ordinance, this was not evidence. Certainly, the appellant was not afforded the opportunity to cross-examine upon it.

29. Otherwise, there were copious undigested and indigestible figures. Mr. Lau and Mr. Bharwaney bravely attempted to analyse these figures, all of which were before the Presiding Officer and for whom I have the greatest sympathy because he did not have the benefit of professional assistance. Nonetheless, I am unable to comprehend how the rate of 6.5% could have been arrived at. It is a precise figure and should be susceptible of some reasoned explanation. In the absence of that explanation I am unable to hold that it was a legitimate finding.

30. I allow this ground of appeal and, subject to hearing counsel, remit the claim back to the Presiding Officer for him to reassess the rate of commission payable to the 1st claimant in respect of commission on gross profits of the China trade.

31. I will hear counsel on costs.

(1) (1948) 2 K.B. 61

Representation:

Mr. Walter Lau instructed by Chan, Yung & Chung for the applicant (Defendant)

Mr. M. Bharwaney instructed by K.W. Ng & Co. for the respondent (Claimants)