Case Document

100%Judiciary

HCA000792/2001

HCA 792/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 792 OF 2001

__________________

BETWEEN
	LEUNG YUNG	Plaintiff

	AND

	FIRST PACIFIC DAVIES (CHINA) LIMITED	1st Defendant
	FIRST PACIFIC DAVIES INTEGRATED PROPERTY SERVICES (GUANGZHOU) LIMITED	2nd Defendant

________________

Coram: Hon Ma J in Court

Date of Hearing: 18 - 20 September 2002

Date of Judgment: 26 March 2003

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J U D G M E N T

______________

Facts

1.The Plaintiff's claims in this action are concerned with events that took place from 1996 to 1998.

2.The Plaintiff is a skilled electrical and mechanical engineer. He was born on 21 January 1954 and obtained a Higher Certificate of Mechanical Engineering in 1976 at what was then the Hong Kong Polytechnic. Both Defendants were, from 1996 to 1998, part of the First Pacific Davies Group which carried on business providing services in relation to nearly all aspects of real property around the world. The first Defendant carried on business with an emphasis on Mainland China ("the PRC"). The second Defendant was a company incorporated in Guangzhou, carrying on business there and was a subsidiary of the first Defendant.

3.In August 1996, the Plaintiff was employed by the first Defendant as Chief Engineer in relation to a project in Guangzhou in which the first Defendant was involved, providing property services to a developer of a building complex there. The relevant building was the Guangzhou Peace World Plaza. The terms of the Plaintiff's employment with the first Defendant were set out in a letter of employment dated 5 August 1996 ("the 1st Letter of Employment") which contained the following terms:

(1) The Plaintiff was employed as Chief Engineer, to be posted at the Guangzhou Peace World Plaza.

(2) He was employed on local PRC terms.

(3) Clause 1 thereof stated that the Plaintiff's employment commenced on 19 August 1996.

(4) By Clauses 2 and 3, the Plaintiff's salary was stated to be $25,000 a month, reviewable annually, with an overseas allowance of $8,000 a month.

(5) By Clause 4, the Plaintiff was entitled to an annual bonus equal to his base salary and overseas allowance payable upon completion of twelve months' service.

(6) Clause 5 stated that the Plaintiff's accommodation in Guangzhou would be provided by the developer of the Guangzhou Peace World Plaza.

(7) By Clause 14, it was stated that the proper law of the contract was the law of the PRC.

(8) By Clause 15, it was stated that all (PRC) tax payable on the Plaintiff's salary, bonus and overseas allowance would be paid directly by the developer.

(9) By Clause 16, it was stated that the probationary period for the contract would be three months.

(10) There were other terms relating to passage, leave, provident fund etc that need no elaboration at this stage.

4.The Plaintiff was well regarded and it was eventually recommended that his position be confirmed after the said probationary period. This was done on 10 December 1996. It is not entirely clear whether or not the Plaintiff only worked at the Guangzhou Peace World Plaza. It seems he may also have done some work in Shanghai, but the vast quantity of his work would have been done in relation to the Guangzhou Peace World Plaza. After all, the developer was largely to pay his expenses.

5.In April 1997, the Plaintiff resigned. By a memorandum dated 15 February 1997, the Plaintiff gave notice of termination, citing "family affairs". His resignation was accepted by the first Defendant by letter dated 23 April 1997.

6.In November 1997, the Plaintiff rejoined the First Pacific Davies Group as a technical manager. It is common ground that he did, but one of the main issues in the present case are the terms of this employment. I will deal further with this below (for the time being, I will just continue with the non-contentious aspects of the facts). It is of course the re-engagement of the Plaintiff that is the focus of this action.

7.The Plaintiff's position was once again confirmed after his probationary period. By a letter dated 3 April 1998 from the Director of Human Resources of the second Defendant to the Plaintiff, he was informed that he had successfully completed his probationary period and he was accordingly enrolled in the company's medical, provident fund and insurance schemes.

8.The Plaintiff was again based in Guangzhou under this second employment. For his accommodation, the Plaintiff entered into a tenancy agreement to rent a flat there for two years from 12 November 1997 to 11 November 1999 at a rent of HK$6,000 a month payable on the 15th of each relevant month. The tenancy agreement (in Chinese) is dated 10 November 1997 entered into between one Wong Mui Ching (as the landlord) and the Plaintiff (as the tenant) ("the Tenancy Agreement"). A security deposit of $12,000 was payable upon signing the Tenancy Agreement together with one month's pre-paid rent, totalling $18,000 in all.

9.In the second half of 1998, the Plaintiff's employment was terminated by the second Defendant (or the first Defendant according to the Plaintiff). His last date of employment was 14 September 1998. Another major factual issue which has to be resolved is when the Plaintiff was actually informed his employment was terminated.

10.After the Plaintiff was informed that his contract of employment would be terminated (as from 14 September 1998), he was given a cheque for $144,801.86 from the second Defendant. This sum represented what the second Defendant calculated was due to the Plaintiff upon the termination of his employment. The details of the sums making up this figure were contained in a letter dated 20 July 1998 from the second Defendant to the Plaintiff. In receiving the cheque, the Plaintiff signed this letter on 24 July 1998, on the face of it expressly confirming and accepting the contents thereof.

11.Having outlined the basic facts to this action (which are either common ground or indisputable on the materials before the court), I now identify the Plaintiff's claims in the action.

The Plaintiff's claims

12.The Plaintiff's claims can be broadly classified into three parts.

13.Claim 1:-

(1) As pleaded, the Plaintiff claims $257,820.24 being the amount allegedly due to him under his employment contract upon termination.

(2) This sum is broken down as follows as pleaded in paragraph 14 of the Amended Particulars of Claim:-

"Description of Claim

Dates

Calculation

Amount claimed

1. Annual Leave of 1/7/1998-14/9/1998 HK$46,500/30 x 3.7 HK$5,735.00

(3+1.5/30x14)days

2. Deposit and advance rental of quarters 12/11/1997 HK$6,000 x 3 HK$18,000.00

3. 15% salary deduction 11/1997 HK$5,812.00

12/1997-6/1998 HK$6,975 x 7 HK$54,639.00

4. Deduction of last salary payment 24/7/1998 HK$25,072.24

5. One month provident fund 12/1997 HK$1,012.00

6. One month wages in lieu of notice HK$53,000.00

7. Salary in arrears 14/7/98-14/9/98 HK$94,550.00

TOTAL: HK$257,820.24"

============

14.Claim 2:-

(1) This claim arises from an alleged failure on the part of the first Defendant to provide to the Plaintiff a testimony certifying that he was employed by the first Defendant as a Chief Engineer from September 1996 to September 1998. It is alleged that the Plaintiff had requested such a testimony from Mr David Wong, the Chief Executive Officer of the first Defendant, in or about early January 1999.

(2) It is said that the first Defendant unreasonably refused to provide this testimony with the result that "the seniority of the Plaintiff in engineering field is seriously jeopardized". It is asserted that a job opportunity was lost in 1999 as a result of this failure.

(3) The Plaintiff claims loss of earnings from 14 September 1998 to when he reaches the age of 60 years. His claim is quantified at $9,253,500.

15.Claim 3: -

(1) By reason of the first Defendant's unreasonable deduction of tax from his salary (as particularised under Claim 1), the Plaintiff's attempts to clarify the same and the first Defendant's wrongful dismissal of the Plaintiff, undue stress has been caused to him. The Plaintiff feels he has been unfairly discriminated against and his dignity infringed. The alleged wrongful termination of the employment has also caused family disharmony as well as financial loss.

(2) The Plaintiff claims damages to be assessed.

The present action

16.Initially in 1998, the Plaintiff claimed against the first Defendant in the Labour Tribunal for outstanding salary and made other claims (Claim No. LBTC 8708 of 1998). This claim was transferred to the District Court in 1999 (being Civil Action No. 1102 of 1999). On 7 February 2001, HH Judge Lok gave leave to the Plaintiff to amend his Particulars of Claim and also transferred the whole action to the Court of First Instance.

17.The trial of the action took place before me from 18 to 20 September 2002. The Plaintiff, who at one stage had been legally represented, was in person at trial. The Defendants were represented by Mr Keith Yeung.

18.The Plaintiff gave evidence in the course of the trial. For the Defendants, testimony was provided by:-

(1) Miss Tang Pui Wah (also known as Elise Tang) ("Miss Tang"), an officer at the material time with the Human Resources Department of First Pacific Davies Property Management Ltd ("FPDPML"). This company is now known as FPDSavills Property Management Limited. FPDPML handled all human resources matters for group companies such as the first and second Defendants.

(2) Louise Li Lam Chun ("Miss Li"), also an officer of the Human Resources Department of FPDPML at the relevant time.

(3) Kwok Tze Pong, Ricky ("Mr Kwok"), who was a Director of both the first and second Defendants.

(4) Kong Yiu Wing, Henry ("Mr Kong") who had been an Associate Director with the second Defendant in 1998.

19.Before I deal with the actual claims made by the Plaintiff in detail, I should first resolve the issue of the terms of the Plaintiff's employment in November 1997 when he rejoined the FPD group, identify who were his employers within that group and then ascertain the date when notice was given to the Plaintiff terminating his employment.

The terms of the Plaintiff's employment and the termination of that employment

20.In order to determine the validity of the Plaintiff's claims, it is first necessary to resolve two factual areas which were very much in dispute between the parties:-

(1) The applicable terms of the Plaintiff's employment when he rejoined the First Pacific Davies Group in November 1997 and the identity of his employer.

(2) The date the Plaintiff was informed his employment was to be terminated (this is particularly relevant to the period of notice that the Plaintiff received for the termination of his employment).

21.It was the Plaintiff's case that on 5 November 1997, before he rejoined the First Pacific Davies Group, he discussed the terms of his employment with someone in the Personnel (Human Resources) Department of the first Defendant at its offices located at Vicwood Plaza in Central. It was his evidence that the terms of his employment would be the same as those contained in the 1st Letter of Employment, save that his monthly salary would be revised to $40,500 a month and his monthly overseas allowance would be $6,000 a month.

22.According to the Plaintiff, as these two aspects were the only changes to the 1st Letter of Employment, he did not therefore insist on a new employment contract been prepared. It was also his evidence that the employer remained as the first Defendant. He commenced work on 5 November 1997 attending at the Guangzhou offices of the first Defendant.

23.There were, however, other terms later agreed between him and the first Defendant. According to the Plaintiff (see in particular paragraph 9 of his witness statement), another agreement was made on or about 10 November 1997 in which the first Defendant (through a Mr Wong Kai Sang (also known as Cliff Wong)("Mr Wong")) agreed with the Plaintiff that the $18,000 which the Plaintiff had paid for the leased premises in Guangzhou (see paragraph 8 above) would later be reimbursed to him. Mr Wong allegedly told the Plaintiff that under the terms of his employment contract with the first Defendant, his accommodation in Guangzhou would be provided by the "Developer". The Plaintiff never identifies this "Developer" but he presumably means the developer of the Guangzhou Peace World Plaza. The Plaintiff also alleges that Mr Wong agreed that as far as any tax payable in the PRC was concerned, the first Defendant would be responsible for it.

24.It is interesting to note that the allegations that the Plaintiff's accommodation would be provided by the "Developer" and the first Defendant would be responsible for meeting the Plaintiff's tax liability to the PRC tax authorities, were not pleaded (even in the amended Particulars of Claim) and only surfaced when the Plaintiff served his witness statement for trial.

25.The Defendants dispute the Plaintiff's version of the applicable terms of his employment when he was re-employed in November 1997.

26.According to the Defendants, the terms of the Plaintiff's employment were contained in a letter of employment dated 13 November 1997 ("the 2nd Letter of Employment") which stated, inter alia, as follows:

(1) The employer was identified as the second Defendant.

(2) The Plaintiff was employed as a Technical Manager for the second Defendant on "overseas posting terms". This is to be contrasted with the 1st Letter of Employment in which the Plaintiff was hired on a local PRC terms.

(3) The Plaintiff's employment was to commence on 6 November 1997.

(4) His salary was $40,500 a month, to be revised on 1 January 1999 and on each anniversary date thereafter. The salary would be paid directly into his bank account in Hong Kong.

(5) The Plaintiff was to be paid an overseas allowance of $6,000 a month, also to be paid directly into his bank account in Hong Kong.

(6) The Plaintiff was also given a housing allowance of $6,500 a month, again to be paid into his bank account in Hong Kong.

(7) As for tax, it was stated:-

"You will be responsible for the maximum tax rate of 15% on your personal income, which will be deducted from your monthly autopay and withheld by this office for payment direct to the Tax Authority in PRC. The Company will be responsible for any tax above the 15%."

(8) As to the Plaintiff's bonus entitlement at Chinese New Year, it was stated that an annual bonus of one month's salary and overseas allowance would be paid at Chinese New Year. Such payment would be pro-rated for any incomplete year of service.

(9) The governing law of the employment contract was Hong Kong law (presumably to reflect the fact that, unlike the 1st Letter of Employment, the Plaintiff was now engaged on expatriate terms).

(10) The probationary period was to be three months.

(11) Termination of the employment (beyond the probationary period) was to be by three months' notice or three months' salary in lieu of notice.

27.The Plaintiff insisted that he never received the 2nd Letter of Employment and denied that his employment as from November 1977 was governed by these terms. The letter of course does not bear his signature unlike the 1st Letter of Employment.

28.No direct evidence was given by the Defendants as to whether the Plaintiff actually received the 2nd Letter of Employment. However, the Defendants' case is that the inference to be drawn from all the facts is that the Plaintiff must have received this letter. In addition, reliance is placed by the Defendants on a Statement of Facts signed by Mr Wong on 22 December 1998 in the Labour Tribunal proceedings, in which he said that all the terms of the Plaintiff's employment (being those contained in the 2nd Letter of Employment) were stated orally to the Plaintiff before his employment commenced. This Statement of Facts is the subject of a hearsay notice.

29.In my judgment, I find that the terms of the Plaintiff's employment in November 1997 were those contained in the 2nd Letter of Employment and I therefore reject the Plaintiff's evidence when he says otherwise. I make this finding based on the following reasons:-

(1) While the Plaintiff was insistent that he was employed by the first Defendant, the 2nd Letter of Employment of course named his employer as the second Defendant. When, after the probationary period of three months was completed, the second Defendant sent the letter dated 3 April 1998 to the Plaintiff confirming his employment with it, no queries were raised by the Plaintiff in relation to this. Indeed, the Plaintiff himself corresponded with the second Defendant regarding his employment: see his letter dated 3 August 1998 when he complained about his payment of $144,801.86 (I shall be referring to this letter further below).

(2) All of the Defendants' internal documentation relating to the Plaintiff's employment also showed that he was employed by the second Defendant (for example, the Report for Duty Form, internal memoranda, the Plaintiff's Performance appraisal etc).

(3) It is also significant here that one of the name cards used by the Plaintiff in the course of his employment showed that he was employed by the second Defendant.

(4) The relevance of all these references to the second Defendant is that it supports the Defendant's case that the Plaintiff was employed by the second Defendant, which is contrary to the Plaintiff's version that he was employed by the first Defendant, thus lending weight to the conclusion that the Plaintiff's employment was governed by the terms of the 2nd Letter of Employment.

(5) It will be recalled that it was very much the Plaintiff's case that as far as accommodation was concerned, this was to be provided by the "Developer". This person was never identified by the Plaintiff and, as I have said, presumably meant the developer of the Guangzhou Peace World Plaza. Under the 1st Letter of Employment, it was an express term of the Plaintiff's employment that his accommodation in Guangzhou would be provided by the developer of that building complex. This was because the Plaintiff's services were required predominantly for that project and that developer. When he was re-employed in November 1997, he was not based at that building (as he himself accepted when he gave evidence). This is consistent with what Mr Kwok said in his evidence about the Plaintiff's re-employment in November 1997. He contrasted two types of employment contracts. One was a "developer" contract in which the first or second Defendant would provide employees to work for a particular developer exclusively, with that developer paying all the costs and expenses of employing such employees, such as tax and accommodation. The 1st Letter of Employment was such a contract. On the other hand, there were employment contracts which were on "central management" terms, meaning that an employee would be employed to look after a portfolio of various developers and not be assigned to any particular one. The 2nd Letter of Employment was such a contract. Miss Li confirms this in her evidence as well.

(6) I have already mentioned the 3 April 1998 letter from the second Defendant to the Plaintiff confirming his position in the company following his probationary period. The Plaintiff makes no mention of a probationary period in his version of the terms of his re-engagement in November 1997. Indeed, if the Plaintiff's version were correct, it must follow that no probationary period was appropriate since this employment would just have been a continuation of his previous employment (which was the Plaintiff's case). Yet, if the Plaintiff were correct, it is surprising that nothing was said by him after receiving the 3 April 1998 letter. This is again indicative that, contrary to what he says, the Plaintiff's employment with the second Defendant from November 1997 was a new contract. Miss Tang in her evidence regarded the Plaintiff as a "new" employee.

(7) By a letter dated 15 June 1998 from the second Defendant to the Plaintiff in which notice was given to the Plaintiff that his employment with the second Defendant would be terminated as from 15 September 1998, express reference was made to the second Letter of Employment. When the Plaintiff was asked why at that stage he did not ask to see a copy of the 2nd Letter of Employment (if he did not have one as he alleges), he could not really give a sensible answer. He said he was suspicious but he was not interested in obtaining a copy. One of the reasons given for this was that as he believed he was not employed by the second Defendant, he was therefore not interested in getting a copy of the 2nd Letter of Employment. I am not impressed by this testimony. In my judgment, the Plaintiff did not ask for a copy of the 2nd Letter of Employment because he already had one.

(8) Even if for any reason, the 2nd Letter of Employment had not been received by the Plaintiff, I find that the terms of his employment were explained to him when he met Mr Wong before his employment commenced. I have already referred to the Statement of Facts signed by Mr Wong in the Labour Tribunal proceedings:- see paragraph 28 above. While I accept Mr Wong has not given evidence in the trial of this action, there is documentary evidence supporting what he says in the Statement of Facts. I have been shown a document headed "Personnel Requisition" prepared by Mr Wong which sets out the following details:-

(a) That the Plaintiff was employed by the second Defendant.

(b) His salary, overseas allowance and housing allowance was as stated in the second Letter of Employment.

(c) That the Plaintiff was a "foreigner" (meaning that he was employed as an expatriate).

(d) That tax (if this was beyond 15%) would be payable by the second Defendant. In other words any tax up to 15% would be to the Plaintiff's liability.

(9) This document was, according to Miss Tang when she gave evidence, prepared by Mr Wong and it was on the basis of this document that she prepared the 2nd Letter of Employment. I infer from this that Mr Wong must at some stage have talked to the Plaintiff about the terms of his employment and agreed these terms with him, in order for Mr Wong to have prepared the "Personnel Requisition" form. All the terms in this document are consistent with the terms as stated in the second Letter of Employment, but not with those alleged by the Plaintiff.

(10) I have already highlighted some of the discrepancies in the Plaintiff's version of events. I would just mention another in this context. If, as the Plaintiff alleged, the "Developer" was obliged to provide him with accommodation while he was in Guangzhou, no explanation was given, first, as to why this should be so when on his own admission, the Plaintiff was not working exclusively or almost exclusively for the developer of the Guangzhou Peace World Plaza and secondly, why he had to enter into the Tenancy Agreement separately.

30.I do not believe the Plaintiff either when he asserts that another oral agreement was made with Mr Wong on or about 10 November 1997 in relation to the reimbursement of the $18,000 paid by him under the Tenancy Agreement. First, there is no evidence, documentary or otherwise, to support this assertion. I accept of course after his contract with the second Defendant was terminated, the Plaintiff did write to the second Defendant claiming the sum of $18,000:- see his fax dated 15 July 1998 to Miss Tang and his letter dated 3 August 1998 to the second Defendant. However, no mention was made in those letters of any agreement in relation to the $18,000 to justify his claims, as one would have expected if an agreement did in fact exist. Secondly, according to the Plaintiff's evidence, this agreement was made when he was told by the representative of the first Defendant that pursuant to his employment contract with the first Defendant, the Plaintiff's accommodation in Guangzhou would be provided by the developer. I have already queried why the developer would wish to do this in relation to the second employment when the Plaintiff was not going to work exclusively for him. Thirdly, this term is not consistent with the term regarding housing allowance in the 2nd Letter of Employment. The Plaintiff was to be paid $6,500 monthly as was in fact the case. How he chose to spend it was up to him. Just as the second Defendant would not be concerned with the question whether the Plaintiff actually used the whole of the allowance and therefore could not complain where (as in the present case) his monthly rental was less than $6,500, so equally it could not have been concerned with the exact terms of any tenancy that the Plaintiff had entered into. The alleged oral agreement just does not make sense in the circumstances.

31.I now turn to the issue of the date when the Plaintiff was informed that his employment would terminate.

32.The Defendants' case is that by a letter dated 15 June 1998, the Plaintiff was given three months' notice of termination of his employment (pursuant to the notice requirement of the 2nd Letter of Employment). The letter stated that the termination would take effect as from 15 September 1998 (meaning therefore that the last day of the Plaintiff's employment was 14 September 1998). The reason for terminating the Plaintiff's employment was increasing dissatisfaction on the second Defendant's part over his performance. Reference was made to a letter dated 17 April 1998 in which the Plaintiff was warned about his poor working attitude following his failure to attend a meeting in Guangzhou. I have also been referred to an internal memorandum dated 22 April 1998 from Mr Kong to Mr Dickie Wong (the Managing Director of the first and second Defendants) in which is contained more complaints about the Plaintiff's behaviour. His working attitude was described as "totally unacceptable" and it was recommended that he be dismissed. By another internal memorandum dated 10 June 1998 from Mr Kwok to Mr Kendrew Leung (the Deputy Managing Director of FPDPML who oversaw the operation of both Defendants), it was recommended that the Plaintiff's employment be terminated.

33.According to Mr Kwok, he then instructed Miss Tang to prepare a termination letter. This was duly prepared by Miss Tang and post-dated to 15 June 1998 (when the letter was expected to be handed over to the Plaintiff). The letter was signed by Miss Li, using her married name, on behalf of the second Defendant. The letter was then given to Mr Kwok. Miss Tang also prepared a memorandum dated 13 June 1998 to the Plaintiff referring to 15 June 1998 letter and informing the Plaintiff that his last date of work was 14 September 1998. I shall deal further below with this memorandum.

34.On 15 June 1998, Mr Kwok travelled to Guangzhou and personally handed this letter to the Plaintiff. According to Mr Kwok, the Plaintiff disagreed that his work performance had been inadequate.

35.By another letter dated 13 July 1998 from the second Defendant to the Plaintiff (again signed by Miss Li), the Plaintiff was advised that he was released from his employment with immediate effect. He was also informed that his salary would be paid until 14 September 1998. According to Mr Kong, what led to this letter was that although that the Plaintiff's employment had been terminated with three months' notice by the said letter dated 15 June 1998, the Plaintiff continued to show up at the second Defendant's offices at Guangzhou, always making complaints to Mr Kong. Mr Kong said that he personally handed the 13 July 1998 letter to the Plaintiff at the second Defendant's offices when he saw him there on that day. Mr Kong gave evidence saying that 13 July 1998 was a Monday. He had returned to Guangzhou on Sunday night as was his habit (having spent the weekend with his family in Hong Kong). In cross-examination, it was put to Mr Kong that he was not telling the truth.

36.The 13 July 1998 letter informed the Plaintiff that he should contact Miss Tang to arrange a time to collect the termination payments that were due to him. On 15 July 1998, the Plaintiff faxed to Miss Tang a copy of the Tenancy Agreement claiming the rental deposit he had paid. I have already referred to this fax in paragraph 30 above.

37.According to Miss Tang, she calculated the amount due to the Plaintiff upon termination of his employment and arrived at the said figure of $144,801.86. In her witness statement, she set out the computation of this figure as follows:

" HK$

Salary up to and including 13th July 1998

(HK$40,500 ÷ 31days x 13 days) 16,983.87

Overseas allowance up to and including 13th July 1998

(HK$6,000 ÷ 31days x 13 days) 2,516.13

Housing allowance up to and including 13th July 1998

(HK$6,500 ÷ 31days x 13 days) 2,725.81

Wages in lieu of notice

(Salary + overseas allowance + housing allowance x 2 months) 106,000.00

Annual leave pay in lieu of notice

(HK$40,500 + HK$6,000 ÷ 365 days x 12 x 3 days) 4,586.30

Prorata bonus for the year 1997 (December 1997)

(HK$40,500 + HK$6,000 ÷ 12 months x 1 month) 3,875.00

Prorata bonus for the year 1998 (January to June 1998)

(HK$40,500 + HK$6,000 ÷ 12 months x 6 months) 23,250.00

Outstanding annual leave pay for the period December 1997 to June 1998

(HK$40,500 + HK$6,000 ÷ 365 days x 12 x 6.5 days) 9,936.99

Less: 15% PIT Deduction

(Total aforementioned items less housing allowance x 15%) (25,072.24)

(HK$167,148.29 x 15%)

144,801.86"

===========

38.These details were more or less set out in a letter dated 20 July 1998 which again she prepared for Miss Li's signature. As she readily acknowledged when examined in chief, it contained a mistake in that the wages in lieu of notice were calculated only up to 13 September 1998 when the termination date was in fact 14 September 1998.

39.After Miss Li signed the 20 July 1998 letter and the cheque for $144,801.86 had been prepared, according to Miss Tang, she then arranged to meet the Plaintiff.

40.On 24 July 1998, Miss Tang met the Plaintiff at the Vicwood Plaza premises. According to Miss Tang, after raising some queries about 15% deduction on account of income tax and queries as to why the rental deposit was not included, the Plaintiff signed the letter under a chop which stated "Confirmed and Accepted by:" and took away the cheque.

41.I have so far dealt with the Defendants' version of the events regarding the termination of the Plaintiff's contract. For his part, the Plaintiff says this:-

(1) He denies having received the 15 June 1998 letter from Mr Kwok in Guangzhou on that day. According to him (at least initially in the trial), this letter was not received until early September 1998 when Mr Kwok met him in Guangzhou. Nor did he receive the 13 July 1998 letter from Mr Kong on 13 July 1998 either.

(2) The first time he heard about the termination of his employment was on 20 July 1998 (according to his witness statement) or 22 July 1998 (when he gave evidence), when a staff of the first Defendant (whom he did not identify) telephoned him to inform him that his contract of employment would be terminated.

(3) The Plaintiff accepts that on 24 July 1998, he met Miss Tang at her office, although he said that this was at Cityplaza in Tai Koo Shing. There and only then was he given the 13 July 1998 letter as well as the 20 July 1998 letter. In support of the fact that he only received the 13 July 1998 letter then, the Plaintiff drew my attention to the fact that on his copy of that letter, there is a chop "Confirmed and Accepted by:", underneath which he had signed and inserted the date "24 July 1998".

(4) According to the Plaintiff, he protested about the amount due to him but eventually signed the 20 July 1998 letter in order to obtain the cheque for $144,801.86. Notwithstanding the contents of the two letters, the Plaintiff further says that he reached a mutual agreement presumably with Miss Tang, that he would actually continue to work until 14 September 1998.

(5) Next, the Plaintiff sent a letter dated 3 August 1998 to the second Defendant asserting that there ought to have been $136,381.90 more due to him upon termination. There are a number of observations that should be made in relation to this letter. First, as already stated above, the letter was addressed to the second Defendant, not the first Defendant (whom, it will remembered, the Plaintiff insisted was his employer). Secondly, it made express reference to the 15 June 1998 letter, thus indicating that the Plaintiff must have had this letter at that time. This is to be contrasted with his testimony that he only received this letter in early September 1998. Thirdly, the various items identified by the Plaintiff in support of his claim that an additional HK$136,000,381.90 was due to him, comprised annual leave, the rental deposit and advance payment of HK$18,000.00, the 15% deductions that were made from his salary by the second Defendant each month on account of PRC tax and a miscalculation of one day in relation to his notice period. No mention was made of provident fund, arrears of wages or wages in lieu of notice.

(6) In early September 1998, the Plaintiff met Mr Kwok at the Guangzhou offices of the second Defendant. At that meeting, Mr Kwok allegedly said to the Plaintiff that if he did not accept the deductions made from the Plaintiff's salary on account of tax, his services would be terminated. When the Plaintiff refused to accept this, only then was he given the 15 June 1998 letter. This was how the Plaintiff articulated his case in his witness statement, and this is also reflected in paragraph 12 of the Amended Particulars of Claim. As will be seen presently, this changed in the course of his testimony.

42.In my judgment, on the issue of the termination of the Plaintiff's employment, I accept the Defendants' version of events as set out above and reject the Plaintiff's version (except where this is supported by documents). My findings of fact therefore include the following :-

(1) The 15 June 1998 letter giving the Plaintiff three months' notice of termination of his contract, was given to the Plaintiff that day by Mr Kwok. I reject the allegation that the Plaintiff only received this in or about September 1998 or at any time subsequent to 15 June 1998.

(2) The 13 July 1998 letter was also given to the Plaintiff personally, this time by Mr. Kong, on 13 July 1998.

(3) The 20 July 1998 letter providing details of the payment of HK$144,801.86, was given to the Plaintiff on 24 July 1998 by Ms Tang. He signed that letter as well as, I accept, the 13 July 1998 letter that day. In relation to the 13 July 1998 letter, I find that, although Mr Kong gave him a copy of the letter on 13 July 1998, it was only on 24 July 1998 that he signed his confirmation and acceptance of it (presumably to obtain payment of the said sum of HK$144,801.86).

43.I have accepted the Defendants' version of events essentially for the following reasons:-

(1) It is consistent with the contemporaneous documentation before me. For example, the 15 June 1998 letter came about as a result of the second Defendant's dissatisfaction over the Plaintiff's performance at work. The internal memoranda leading to the 10 June 1998 one from Mr Kwok to Mr Kendrew Leung, place in context the 15 June 1998 letter.

(2) The chronology of events as advanced by the Defendants makes sense. On the other hand, for example, it does not seem to me to make any sense for the second Defendant to have waited until September 1998 before handing the 15 June 1998 letter to the Plaintiff. This is not to say that such a happenstance was impossible but in my view, simply unlikely.

(3) All this has to be contrasted with the inability of the Plaintiff in his evidence satisfactorily to explain important inconsistencies or omissions. As regards the 15 June 1998 letter, for example, it will be recalled that express mention was made of this in the 3 August 1998 letter sent by the Plaintiff to the second Defendant. He must have had the 15 June 1998 letter by then at the latest. When confronted with these inconsistencies, the Plaintiff's version became that he remembered receiving the 15 June 1998 letter before he wrote the 3 August 1998 letter, having got it from Mr Kong. He said he had requested Mr Kong for a copy when he noticed that the 15 June 1998 letter was expressly referred to in the 13 July 1998 letter. When confronted with the fact that this version was inconsistent with what he had hitherto been asserting (in particular reference was made to paragraph 12 of the Amended Particulars of Claim) the Plaintiff's only explanation was to say that he had forgotten. In my view, this attempt to put forward a version of events so as to try to make it consistent with the contemporaneous documents was particularly hollow given the way which it emerged and was highly unsatisfactory in my view. I have little hesitation in rejecting it.

(4) In addition, as far as the 13 July 1998 letter was concerned, the Plaintiff's version was that he did not receive this until 24 July 1998. Yet, its existence and his having received it on 13 July 1998 were consistent with the 15 July 1998 fax he himself sent to Ms Tang (see paragraph 36 above).

(5) It is not entirely clear whether at the end of the day, the Plaintiff was still maintaining that the alleged meeting with the Mr Kwok in early September took place. Whichever way, it was a highly unlikely, if not bizarre, event. Quite why the 15 June 1998 letter was only handed to the Plaintiff that day (especially after the correspondence subsequent to 15 June 1998) is not readily explicable. Equally strange is the allegation that at the meeting, Mr Kwok told him that his employment would be terminated if he did not accept the deductions that had been made to his salary on account of tax. By then, his employment had already been terminated, so this new slant was quite inexplicable as well.

(6) Lastly, I should just refer back to the memorandum dated 13 June 1998 which Ms Tang had prepared for sending to the Plaintiff (see paragraph 33 above). It was not entirely clear from the Defendants' evidence when this memorandum was sent to the Plaintiff but the Plaintiff said, for his part, that it was received some time in mid to late August 1998. At one stage of his evidence, he insisted that this was the first time he learned of the termination of his employment. Yet, this version is inconsistent with the 3 August 1998 letter as well. That letter from the Plaintiff demonstrated that he must have been fully aware at that time that his employment would be terminated as on the 14 September 1998. I make reference to this aspect of the evidence in order to highlight again the unsatisfactory nature of the Plaintiff's testimony as a whole.

44.I have now dealt with the issues of the terms of the Plaintiff's employment when he rejoined the First Pacific Davies Group in November 1997 as well as the circumstances of the termination of his employment. I have done so at some considerable length as they are relevant to the resolution of the claims made by the Plaintiff in this action, in particular Claim 1 and because the issues occupied some considerable time at the trial. I now move on to the resolution of the Plaintiff's claims.

Claim 1

45.Here, I refer back to the way the Plaintiff has identified the various aspects of this claim in his pleading:- see paragraph 13(2) above. I propose to deal with each aspect bearing in mind my findings of fact contained in the previous section.

46.Annual Leave (paragraph 14(1) of the Amended Particulars of Claim)

(1) Under the 2nd Letter of Employment, the Plaintiff was entitled to 18 days leave for each year of completed service. In the event (as in the present case) of an incomplete year, his leave entitlement would be prorated to 1.5 days for each completed month of service.

(2) The Plaintiff has been paid all his annual leave entitlements up to and including June 1998. There is no dispute about that. He has also been credited with three days' annual leave in relation to July and August 1998 and that is reflected as part of HK$144,801.86 he received on 24 July 1998. In view of my findings as to when he was given a notice of termination of his employment, he is entitled to no more.

(3) The Plaintiff's claim is for annual leave in respect of July to September. This is wrong. He has already been paid for July and August 1998. He is not entitled to any annual leave in relation to September 1998 because his employment terminated on 14 September 1998 and therefore this was an incomplete month.

(4) This claim is therefore dismissed.

47.The rental deposit and advance payment of HK$18,000.00 (paragraph 14(2) of the Amended Particulars of Claim)

I have already found that no agreement was made in relation to this aspect as alleged by the Plaintiff. This claim is dismissed.

48.Deduction from salary of 15% on account of tax (paragraphs 14(3) and (4) of the amended Particulars of Claim)

(1) The Plaintiff claims that any tax payable on his part to the PRC authorities was the responsibility of the first Defendant (or the second Defendant) and that it was not his responsibility. He refers to the 1st Letter of Employment in which the tax liability in the PRC was to be borne by the Developer as well as the alleged oral agreement made on or about 10 November 1997.

(2) Here, I have already found as a fact that the terms of the Plaintiff's employment as from November 1997 were contained in the 2nd Letter of Employment. There, it was an express term that 15% of his salary would be deducted each month on account of PRC tax :- see paragraph 26(7) above. I have also rejected the oral agreement alleged to have been made on or about 10 November 1997:- see paragraph 30 above.

(3) This tax liability was capped at 15% so as to reflect the maximum tax liability he would have incurred if he had been employed to work in Hong Kong (this being a common feature in employment contracts to attract people to work outside Hong Kong). In fact, the tax liability payable on the Plaintiff's salary was in the region of 30% and this liability was met by the second Defendant. I have seen documents emanating from PRC tax authorities showing the tax liability on the Plaintiff's salary and the fact that the second Defendant paid this. Ms Li confirms as much in her testimony.

(4) Thus, the second Defendant was entitled to make the 15% deductions from the Plaintiff's monthly salary on account of PRC tax, which was in fact paid by it.

(5) Mr Yeung, acting in all fairness to the Plaintiff (as one would expect and for which I am grateful), then pointed out a potential problem for his client. He referred to sections 32(1) and (70) of the Employment Ordinance, (Cap. 57) which state:-

"32. Restriction on deductions from wages

(1) No deduction shall be made by an employer from the wages of his employee or from any other sum due to the employee otherwise than in accordance with this Ordinance."

..........

70. Contracting out

Any term of a contract of employment which purports to extinguish or reduce any right, benefit or protection conferred upon the employee by this Ordinance shall be void."

(6) However, I am ultimately of the view that sections 32(1) and (70) are insufficient in the present case to allow the Plaintiff to recover in relation to this part of his claim.

(7) In arriving at this conclusion, I do not decide the legal issue whether or not these sections operate to render void the provisions in the 2nd Letter of Employment allowing the second Defendant to make deductions. I assume that they do. Although Mr Yeung has submitted these sections do not render the deductions void, I have not heard sufficient argument before me as to the application of these provisions to contracts of employment which are performed outside Hong Kong, and especially to the liability of employers to make payment to relevant tax authorities abroad. I note here it is a common feature of tax legislation in many countries worldwide that deductions made from salary by employers are compulsory. The matter becomes even more complex when one considers in the present case that the second Defendant was a company incorporated in the PRC. I have also not been addressed on the relevance, if any, of the Contracts for Employment Outside Hong Kong Ordinance, Cap. 78. Section 4(2)(c) of the Employment Ordinance states that the Ordinance does not apply to employees as defined in the Contracts for Employment Outside Hong Kong Ordinance, save for Part IVA thereof. The Plaintiff, I would just repeat, was unrepresented so he was unable really to contribute much to this interesting point.

(8) The reason it is not necessary for me to decide this legal issue is that even if it were to be assumed that the deductions on account of tax could not be made in the present case by reason of sections 32(1) and (70) of the Employment Ordinance, this does not mean that the second Defendant could never recover the amount it paid towards the Plaintiff's tax liability in the PRC. It is pleaded in the Re-Amended Defence that in circumstances where the second Defendant has discharged (being compelled to do so) what otherwise would be a legal liability falling on the Plaintiff, he must be liable to indemnify the second Defendant. The principle relied on here is succinctly stated at paragraph 15-001 of Goff and Jones : The Law of Restitution (6th ed.), "In general, anybody who has under compulsion of law made a payment whereby he has discharged the primary liability of another is entitled to be reimbursed by that other".

(9) Compulsion here means compulsion by law: see Goff and Jones at paragraph 15-002. I accept that the usual cases to which this principle is applied are, as the distinguished authors of that work have identified, relief of property from distress, assignment of leases and abatement of nuisances:- see paragraph 15-003. However, these categories are not exhaustive.

(10) In my view, compulsion as a matter of foreign law is covered by this principle as well. I derive some assistance from the case of Indian and General Investment Trust Limited v Borax Consolidated Limited [1920] 1 KB 539 in this context. In that case, at 548-549 and 550-551, Sankey J said:

" Now it may be stated as a general proposition of English law that an agreement by A. to pay B. a certain sum is not discharged by the payment to B. of a sum of less than amount and the payment to C. of the balance, unless (1.) this position is created by statute or common law, or (2.) by stipulation express or implied between the parties.

.............

As to (2.). Is there any stipulation express or implied between the parties upon which the defendants can rely to justify the position they have taken up? 'It is open in all cases for parties to make such agreement as they please as to incorporating the provisions of any foreign law with their contracts .... If a contract made in England by English subjects or residents, and upon which payment is to be made in England, has to be performed in part abroad, it might not be unreasonable to assume that the mode in which any part of it has to be performed abroad was intended to be in accordance with the law of the foreign country, and to construe the contract as incorporating silently to that extent all provisions of a foreign law which would regulate the method of performance, and which were not inconsistent with the English contract': per Bowen LJ in Jacobs v. Crédit Lyonnais. (1) Now admittedly there is no express stipulation, and in my view the Court would not be justified in reading into this English contract an implication that the plaintiffs agreed that the provisions of an American Taxing Act should be enforceable against them in England. The implication is just the other way. The contract expressly provides that it shall be construed and that the rights of all persons claiming thereunder shall be regulated by the law of England. The railroad company agreed to be bound in all things by the jurisdiction of the English Courts, and that service of the writ upon the defendants in London should be deemed to be good and effectual service of the writ upon the railroad company. It is impossible to hold that a contract so expressed impliedly incorporates a right in the railroad company to deduct American income tax from the sums they have agreed to pay in London in accordance with English law."

(11) In the Indian and General Investment Trust Limited case, the absence of an express stipulation that an overseas taxing statute would be applicable thus permitting deductions, was fatal, but in the present case there was such an express stipulation in the 2nd Letter of Employment.

(12) The Plaintiff disputed that he was liable to pay PRC tax anyway so that in any event, it was wrong, so he alleged, for the second Defendant to have made any deductions at all. He relies here on the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation on Income ("the Arrangement").

(13) The Plaintiff relies in particular on Articles 3(1) and (2) of the Arrangement, which state:

"(1) Subject to the provisions of paragraph 3 of this Article, salaries, wages and other similar remuneration derived by a resident of One Side in respect of an employment shall be taxable only on that Side unless the employment is exercised on the Other Side. If the employment is so exercised, such remuneration as is derived therefrom may be taxed on the Other Side.

(2) Notwithstanding the provisions of sub-paragraph (1) of this paragraph, remuneration derived by a resident of One side in respect of an employment exercised on the Other Side shall be taxable only on the first-mentioned Side if:

(i) the recipient stays on that Other Side for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned; and

(ii) the remuneration is paid by, or on behalf of, an employer who is not a resident of that Other Side; and

(iii) the remuneration is not borne by a permanent establishment or a fixed base which the employer has on that Other Side."

(14) The Plaintiff has produced a chart to demonstrate that in 1998 he only spent 144 days in the PRC (in fact he has miscalculated and it is much more than that). However, even on the assumption that this is accurate, the exempting provisions of Article 3 of the Arrangement do not apply. The exception only applies if the employer was not a resident of the "Other Side" (i.e. the PRC: see Article 3(2)(ii)). In the present case, the second Defendant was incorporated in the PRC.

(15) For the above reasons, this claim is dismissed.

49.Provident Fund (Paragraph 14(5) of the Amended Particulars of Claim)

(1) The claim is for one month in relation to December 1997 and the claim amounts to $1,012.

(2) However, it is clear from records that the Plaintiff's entitlement for December 1997 in relation to provident fund was taken into account when he was paid the sum of $6,574.13 by the second Defendant on 19 September 1998, being his provident fund termination benefit. I think the Plaintiff eventually accepted this.

(3) Accordingly, this claim is likewise dismissed.

50.Wages in arrear and in lieu of notice (paragraphs 14(6) and (7) of the Amended Particulars of Claim)

(1) As part of the $144,801.86 he received on 24 July 1998, the Plaintiff received his salary up to and including 13 September 1998. Whether one chooses to call this arrears of wages or wages in lieu of notice, does not matter. If, as I have found, the Plaintiff was given three months' notice pursuant to the provisions of second Letter of Employment (by his being handed the 15 June 1998 letter that day), he is entitled to be paid only up to 14 September 1998. It would of course have been different if the Plaintiff's version of when he received his notice of termination was correct, since the three months' termination notice period would have started as from then.

(2) The only mistake made by the second Defendant was that payment was made to the Plaintiff only up to 13 September 1988 whereas the expiry of the three months notice fell on 14 September 1998. Mr Yeung accepted this. The value placed by the Plaintiff on the one day is $1,709.67, as stated in 3 August 1998 letter.

(3) The Plaintiff is therefore entitled to that sum in respect of this claim.

51.For the above reasons, the Plaintiff is entitled to judgment in the sum of $1,709.67 in respect of Claim 1.

Claim 2

52.Although this is by far the largest of the Plaintiff's claims, it can be disposed of quite shortly.

53.It will be recalled that it was the Plaintiff's case that in January 1999, he asked Mr David Wong to give him a testimony certifying that from September 1996 to September 1998, he had been employed by the first Defendant as Chief Engineer. It is said that Mr David Wong refused since there were legal proceedings afoot then. As a result, the Plaintiff's job prospects were said to have been seriously jeopardized and indeed he claims he lost a job opportunity in July or August 1999. Reference here was made to two letters dated 20 July 1999 and 3 August 1999 from a company called Lick Hang Engineering Company Ltd.

54.I dismiss this Claim for the following reasons:-

(1) The Plaintiff could point to no contractual obligation on the part of the first Defendant (or the second Defendant) to provide him with a reference or testimony. Indeed, as a matter of law, there is no such obligation and this cannot be implied into any employment contract.

(2) In any event, even assuming everything else in the Plaintiff's favour, no causative link can be shown between any breach and the loss and damage alleged to have been suffered. As a matter of common sense alone, I fail to see how the absence of a testimony or reference can lead to the inability of the Plaintiff to find work.

(3) I have not ignored the said letters from Lick Hang Engineering Company Ltd., but while admittedly, reference was made to the absence of a testimony of his previous employment in these letters, this statement in the letters without any elaboration is in my view insufficient to found the rather ambitious claims the Plaintiff makes here.

Claim 3

55.As a matter of law, it has to be accepted that the remedy of damages for breach of a contract of employment is not restricted to just damages for wrongful dismissal. Damages can be ordered on the basis of a breach of the implied obligation of mutual trust and confidence between employer and employee: see Malik v Bank of Credit and Commerce International SA [1998] AC 20; Bachicha v Poon Shiu Man Henry [2000] 3 HKC 452.

56.To this extent, cases like Bliss v South East Thames Regional Health Authority [1987] ICR 700 (relied on by Mr Yeung) and the case of Addis v Gramophone Company Ltd [1909] AC 488 (which was referred to in the Bliss case), will now have to be seen in a different light.

57.The point does not arise in the present case, however. Quite simply, for the reasons contained elsewhere in this Judgment, I do not find that the Defendants had been at fault in any way (apart from the said sum of $1,709.67).

58.This Claim is accordingly dismissed as well.

Outcome

59.I give judgment to the Plaintiff in the sum of $1,709.67. All other claims are dismissed.

60.In the circumstances, I make an order nisi that the Defendants should have the costs of this action to be paid by the Plaintiff such costs to be taxed if not agreed.