Ramos Mirazul a. v. Pro Search (Asia) Ltd
Read the full judgment text of DCCJ 5878/2002 on BabelCite. This District Court judgment was delivered on 13 October 2003.
1. The defendant is a recruitment agency and the plaintiff was one of its consultants between 13th January, 1997 and 31st March, 1998. She was dismissed on the latter date. In this action, she initially claimed her arrears of basic salary for March, 1998, one month's salary in lieu of notice and outstanding commission derived out of income she generated for the defendant. The commission is also called incentives.
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DCCJ005878/2002 DCCJ5878/2002 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 5878 OF 2002 _______________________
___________________________ Coram: His Honour Judge L. Chan in Court Date of Hearing: 2, 3, 6, 7 and 8 October 2003 Date of Handing Down Judgment: 13 October 2003 ___________________________ J U D G M E N T ___________________________ Background 1.The defendant is a recruitment agency and the plaintiff was one of its consultants between 13th January, 1997 and 31st March, 1998. She was dismissed on the latter date. In this action, she initially claimed her arrears of basic salary for March, 1998, one month's salary in lieu of notice and outstanding commission derived out of income she generated for the defendant. The commission is also called incentives. 2.The basic salary for March, 1998 has been paid. Just before the trial, the plaintiff abandoned the claim for salary in lieu of notice. She only pursues the claim for outstanding commission. The defendant used to have a counterclaim, but that has also been abandoned at the start of the trial. The only issue for the trial is whether there is any outstanding commission due from the defendant to the plaintiff. This is a matter of contract. 3.The plaintiff and the defendant had a contract of employment contained in a letter dated 17th December, 1997. The relevant terms in the letter read:
4.The defendant provides two types of service to its clients. They are permanent placements and secondments. For a permanent placement, the defendant's client would directly employ the candidate referred by the defendant and pay the defendant a lump sum service fee for the service. For a secondment, the defendant would directly employ the candidate and send him/her to the client's office to provide service to the client. The client would pay the defendant every month a sum of money representing the salary of the candidate plus a percentage of the salary as the service fee to the defendant. The commission to the plaintiff was paid out of the service fee received by the defendant. 5.The plaintiff says that she is entitled to arrears of commission at HK$218,855.33. The defendant at the commencement of the trial admits that it owes the plaintiff HK$18,822.37 as arrears of commission but not the balance of HK$200,032.96. It says that the latter sum is derived from service fees that were only due from the clients after the departure of the plaintiff from the defendant. The only dispute is thus on whether the plaintiff is entitled to commission derived from service fees that were only due from the defendant's clients after the termination of the plaintiff's employ ("post-termination commission"). 6.The plaintiff's understanding of the method of calculation of the commission is as follows:
7.The defendant has a different understanding which is as follows:
8.Their difference is on the amount of the quarterly target or threshold. Despite this difference, both sides say that the formula for calculating commission has been varied by a verbal agreement with retrospective effect from the beginning of the plaintiff's employment. They have no dispute on the formula as varied and hence the mode of calculating commissions, but they alleged different variations leading to this varied formula. 9.The plaintiff says in her witness statement that in a meeting in early March, 1997, the formula was verbally varied so that the incentive rate was raised from 25% to 33.3% but that the quarterly target or threshold was increased from HK$60,000 to HK$135,000. 10.As a result of the increase in the threshold from HK$60,000 to HK$135,000, it became more difficult for her to earn the first dollar of commission, but if business should be good and with an increase in rate of commission, she could earn more under the varied scheme than the old scheme. The parties agreed at final submissions that if the plaintiff should have generated an income at HK$360,000 in a quarter, the amount of commission produced by old scheme as alleged by the plaintiff and the varied scheme would be the same. Beyond HK$360,000, the new scheme would produce a more generous amount of commission than the plaintiff's old scheme. 11.As noted above, the defendant alleges a different old scheme of calculation with a threshold at HK$180,000. The defendant says that the verbal variation was made in August, 1997 by which the quarterly threshold was reduced from HK$180,000 to HK$135,000 and the rate increased from 25% to 33.3%. According to the defendant, it was also agreed in the same meeting that should the plaintiff's employment come to an end for whatever reason, she would also not be entitled to any post-termination commission. It is also the defendant's case that the plaintiff was never entitled to post-termination commission and her agreement in the August meeting not to have the same after termination only confirmed the then existing arrangement. The plaintiff's case
12.The plaintiff adopted her witness statement as part of her evidence in chief. She referred to her introduction by one Jeffery Tse to George Chan and her meetings with George Chan in Aug. and Nov., 1996. She signed the letter of employment on 17th December, 1996 and started working for the defendant on 13th January, 1997. She said that in March, 1997, the formula for the commission was verbally varied at a meeting she had with George Chan and a fellow consultant one Kan Miu Shun Quina ("Quina Kan"). The variation was that her commission rate was increased from 25% to 33.3% of the total revenue generated by her but that the quarterly target was increased from HK$60,000 to HK$135,000. She said it was further agreed that if a particular advertisement resulted in a successful placement, the expenditure would be borne by the consultant concerned but otherwise, it would be on the account of the defendant. 13.In the course of her work with the defendant, she succeeded in arranging the outright placement and secondment of a total of 16 candidates with various clients as pleaded in paragraph 8 of her amended statement of claim. Though her employment came to an end on 31st March, 1998, the secondments arranged by her and the payments of service fees by the clients continued. She claims that despite the termination of employment, she is still entitled under her contract of employment to commission at HK$218,855.33 derived from the service fees in respect of the secondments arranged by her. 14.The defendant's case is that service fee was payable by the client on a monthly basis upon delivery of invoice. In the course of the secondment period, the plaintiff had to provide human relations supportive service for the client and the seconded staff. If the plaintiff should be dismissed before the end of the secondment period, she would not be able to continue with such service. She would also not be entitled to any post-termination commission out of service fee which was only due from the client after the termination. The plaintiff of course disagrees with this. She says that commission was earned as soon as the secondment arrangement was signed and that was the understanding and practice between her and the defendant. She however accepts that commission would only be paid after the defendant has received the service fee. She also relied on a letter dated 12th February, 1998 issued by the defendant "to whom it may concern" certifying that she had an income of HK$650,153 in 1997 which included commissions earned from the secondment contracts she had signed in 1997 though some of it was not yet payable in 1997. 15.Mr. George Chan of the defendant in paragraph 16 of his Supplementary Statement stated the following human relations supportive duties for the plaintiff:
16.The plaintiff agreed that she had to obtain time sheets and verify attendance of the seconded candidates with the clients as stated in 16.1 above and that was a time consuming duty. But that duty only lasted until the middle of 1997 when it was passed over to one Marcel Lam. Lam was employed in about April, 1997 as a part time staff to provide administrative support to the consultants as the consultants had to do sales work. The plaintiff also agreed that she had to follow up the feedback and queries as referred to in 16.5 and 16.6 above. Apart from these, she denied that she had to attend to the other duties listed in that paragraph. 17.In cross-examination, she confirmed that she had a secondary school education. She had worked for a year as a recruitment consultant in the general and secretarial fields before joining the defendant. Before that, she was in a secretarial job. She therefore had no experience in recruitment in the IT field. In her previous job as a recruitment consultant, she only dealt with outright placements and had no experience in secondment arrangement. On the calculation of incentive, she denied that George Chan had in a meeting in November, 1996 explained to her the original mode of calculation of commission and had written on a piece of paper that the quarterly target at 4 times the basic salary was equivalent to HK$180,000. 18.She also confirmed that at the start of the company, there were just 4 consultants in the defendant; namely George Chan, Jeffery Tse, the plaintiff and Quina Kan. George Chan and Jeffery Tse were doing comparatively senior IT recruitments at the executive level. There was no other staff in the company. She admitted that during the first 3 months, she was mainly assisting George Chan as she had not closed a single placement in that period. She signed the first contract with a candidate for secondment on 2nd May, 1997. Chan also helped her on the job and taught her many things about IT business. 19.She agreed that for the seconded staff as well as the secondment clients, she was the most frequently approached contact point in the defendant. If either of the staff or the client should have any query for the defendant, they would most likely go to her. She was often in touch with clients as well as the seconded staff. They did not know that there was Marcel Lam in the defendant's organization and hence would not contact him. She also said that Marcel Lam only came to the office 2 to 3 days every week and at times spent the whole day there. In fact, all the invoices issued by the defendant to its clients for service fees in respect of placements made by the plaintiff had the plaintiff's name printed at the bottom as the person to whom enquiries should be addresses. The plaintiff's name was only replaced by the name of George Chan after she had been dismissed. The plaintiff explained that if she should receive an enquiry, she would pass it over to Marcel Lam to handle. In re-examination, she said she did not know if these people would have, apart from contacting her, contacted George Chan. 20.She also agreed that the contract between the Standard Chartered Bank and the defendant provided that if any seconded staff should stop working for the Bank, the defendant had the obligation to provide a replacement for the Bank. She agreed that after termination of her employment, she would not be in a position to assist in this task. She also agreed that somebody had to take over her continuing tasks in relation to the seconded staff after her departure, but she said that according to her knowledge, the boss of the company would not give any extra pay to this person for such work. 21.On the variation of the commission scheme, she maintained that it was made in March, 1997 despite at that time she had not yet earned any commission at all. She also disagreed that the calculation was varied in August, 1997 or that it was varied because of the increase in secondment arrangement and there was a lot of follow up human relations supportive work in these cases. She also denied that post-termination commission had been mentioned in the meeting. 22.On the defendant's letter of 12th February, 1998 "to whom it may concern", she agreed that it was issued by the defendant at her request in relation to certain tenancy matters though there is some disagreement on the exact terms of her request. She admitted that she had not received the whole of HK$650,153 in 1997 but denied that the figure included a projection of her income to December, 1998 which was made on the assumption that she would remain in the defendant's employ until then. 23.She was also asked about the meeting on 31st March, 1998 in which her involvement with another recruitment agency Premier Recruitment was discussed. She denied of having lied to George Chan about her investment in that company. She said that she had told Chan in the meeting that she had invested in this company for her mother. The defendant's case
24.The defendant's first witness is Ms. Quina Kan. Miss Kan adopted part of her witness statement as part of her evidence. The remaining part that dealt with the issue of wages in lieu of notice was not relied upon as that claim has been abandoned. She also gave substantial oral evidence to supplement her witness statement. Her oral evidence has in fact been foreshadowed by the Supplementary Statement of George Chan. In order to deal with Ms. Kan's oral evidence, Mr. Ling for the plaintiff also asked for an early adjournment to take instructions before proceeding to cross-examination. 25.Miss Kan said that she joined the defendant about 2 weeks after the plaintiff. She had a basic salary of HK$15,000 per month. Her understanding as to calculation of commission according to the original scheme was the same as that of the defendant, she had to earn a quarterly threshold and then she would be entitled to 25% of the excess as her commission. The quarterly target was at 4 times the basic salary for a quarter or 4 times HK$45,000 or HK$180,000. Regarding the HK$15,000 basic salary, Chan told her that she could treat that as a salary on loan but Chan never asked her for repayment of the same. She then recounted a verbal variation made in a meeting attended to by she herself, George Chan and the plaintiff. She said that this variation meeting took place after June 1997 though she could not remember the exact month. 26.She also said that she used to be in the estate agency business where lump sum commissions were earned as soon as deals were clinched. She originally thought that the same would apply in this trade. However, there were many deals which were on secondment basis and payments of fees were on monthly basis. Since there were many secondment cases, George Chan in the meeting told them that the defendant would reduce the quarterly threshold from HK$180,000 to HK$135,000 and increase the commission rate from 25% to 33%. The variation made the commission scheme more favourable than before. Since the commission was being paid on a monthly basis, she therefore asked Chan in the meeting if she could continue to receive the same after leaving the defendant's employment. Chan's answer was in the negative. He further said that there were many follow up duties after the secondment arrangements were made and secondment was an ongoing task, hence she would not get any post-termination commission. 27.Ms. Kan also said that for secondment cases, one had to follow through the deal. She had to cause an invoice to be issued every month to the client for payment and to ensure that the details in the invoice including the date, the reference number, the addressee, the amount to be charged and the person to whom enquiry should be addressed were all correct. This is probably the time consuming duties listed in 16.1 and 16.2 of George Chan's Supplementary Statement. She also agreed that Marcel Lam was employed to provide administrative support to the consultants and the consultants could pass on to him clerical tasks, but George Chan had told her and the plaintiff that they were to be fully responsible for Lam's error. Lam would come probably on alternate days and spend 1 to 2 hours there. As Lam was still a student, if he had to attend an examination, he would not come at all. After Lam had joined the defendant, she passed to him the task of issuing and posting the cheques to the seconded staff. Lam would also assist her in printing out invoices to clients, but the template was prepared by her and she would also personally attend to the filling in of particulars in the template in the computer. If the particulars of an invoice should remain the same as for the previous month, she could so advise Lam and Lam would cause the new invoice to be printed out for her. However, there could be variations by reason of the seconded staff taking days off and claims for overseas trips. It was her duty to verify all these with the clients and she could not have passed these to Lam. Since the secondments were all made by her, she had to do all the liaison and supportive work. She could not have asked Lam to telephone these people and solve problems for them. 28.She also said that she had the same commission plan as the plaintiff as George Chan always addressed to her and the plaintiff on such matters in a pair. She also said that she and the plaintiff had the same duties because George Chan also addressed them in a pair on their duties. The two of them at the material times were consultants handling recruitment for electronic data processing clients whilst George Chan and Jeffery Tse were handling recruitment at the executive level. 29.She also said that managing seconded staff was just like cradling babies and the signing of the secondment contract was just the beginning of the process. For example, if a seconded staff wanted training subsidy, she would have to look into the matter and seek approval from Chan. If a member of the staff wanted a visa for traveling, she would have to prepare the reference letter for him. If there should be a dispute between the seconded staff and the client, she would have to sort out their problem and soothe the situation into harmony. 30.On the consultant's duties as referred to by George Chan in paragraph 16 of his Supplementary Statement, Miss Kan said that they were all her duties and she had discharged them all though not every seconded staff would require her to discharge each and every one of them. She also said that the clients expected the defendant to socialize with the seconded staff. Since the seconded staff were the defendant's employees and had no sense of belonging to the client, it was important that the consultant of the defendant should socialize with them and keep them happy. She had also attended Christmas parties at the Standard Chartered Bank with the seconded staff. Both the plaintiff and Mr. Chan had been there together with her though they did not attend the same party. She also had to spend time to chat with them to see if they were happy with their working environment. If she did not liaise with the staff, there was also the danger that they might simply be poached by competitors and disappeared without warning. When the seconded staff had complaints on working conditions, she had to enlighten them on how to cope with the situation. Human relations between the seconded staff and the staff of the client was also an area that she had to deal with. All in all, she said that it could take up to 80% of her time to discharge these management duties properly, but she admitted that because she was not very diligent on these matters and she only spent 40% to 50% of her time on them. 31.Regarding the meeting on 31st March, 1998, Miss Kan said that her perception was that the plaintiff had denied to Chan that she had an interest in an outside company (meaning a competitor). She recalled that the plaintiff had said that she was not involved in Premier Recruitment. 32.In cross-examination, she said she first came to know George Chan when she was working in a company called Study Methods International in 1993. She worked in that company for about 1 year and was one of the top sales representatives. Chan also worked in that company but for a shorter period and they had cooperated in a presentation. Their acquaintance then was superficial. After a year, she changed to work for an estate agent. Though the property market fell in March in 1994, she still did it quite well. In about middle to July, 1994, Chan was then working in an executive search company and could lead a team of people. He asked her to join him, but she declined as she wanted to complete her year with the estate agent. In about 1996, she went to Taiwan. By the end of 1996, Chan asked her to join the defendant and she agreed. In these few years, Chan had telephoned her about once every few months to half a year and they had met a few times chatting on the prospect of the business of executive search. 33.She also said that she came to know the plaintiff after joining the defendant and she still regarded the plaintiff as a friend. She described her overall relationship with the plaintiff during the period when they were working together as good save some misunderstanding. On calling candidates. She admitted that she had a clash with the plaintiff on one occasion when she made cold calls on candidates working in the Dah Sing Bank when, unknown to her, the plaintiff had already called these people. Because of this, the plaintiff was very angry. Though she called the candidates without knowing that the plaintiff had called them already, she still thought that it was her responsibility and she bought a gold chain for the plaintiff to demonstrate the sincerity of her apology. On the clients, there was never any competition. If a client wanted a placement, they could both send in their referrals and let the client select. 34.She was heavily cross-examined on paragraph 16 of George Chan's Supplementary Statement. When she was first asked to look at that paragraph which begins with "In or about August, 1997, I reiterated to Mira ......", she said that it was Chan reiterating something to the plaintiff and she could not tell. She was cross-examined on this with a view to show that George Chan did not always address her and the plaintiff on their duties in a pair. She said in answer that she was not comfortable in giving evidence against the plaintiff as they were friends. Thus when she was asked about this paragraph on her first day of evidence, she saw that it was about something said by Chan to the plaintiff, her immediate reaction was to withdraw from that and thus she said she did not know if Chan had said that to the plaintiff. She admitted that there could be occasions when George Chan gave directions to the plaintiff in her absence. She however maintained that Chan mostly spoke to them in a pair. She said that she and the plaintiff were sitting next to each other and if Chan should have reiterated something, she and the plaintiff would have been there listening to it. She clarified that she did not think that paragraph 16 meant that Chan gave all the directions in that paragraph in a particular meeting, Chan had in fact repeated these directions to the two of them on more than one occasion. She also said that she and the plaintiff were sitting so close together that they almost touched each other's elbow and that she could hear her conversations on the phone though she did not want to. 35.She said that she was uncomfortable in giving evidence against the plaintiff as she still regarded the plaintiff as her friend. Though she had signed the witness statement, it was not drafted by her but by George Chan. She signed it as the facts were correct, but she did not suggest improvement to it. She came to give evidence on subpoena. 36.When asked about the time for the meeting on the variation of commission plan, she said that it was after June and should be in July or August or from June to August. She had not clinched any deal in the first 3 to 4 months and only had her first success in a secondment deal in about May or June. In July and August, she had clinched some but not many deals and there was then not too much follow up work on the seconded staff. In this meeting, Chan told them the favourable variations on the threshold and percentage as there were lots of follow up duties to do. She then asked Chan whether she would continue to receive the commission after leaving the defendant's employment but Chan said no. She said that Chan raised the commission threshold and percentage as compensation for not letting them have post-termination commission. Though the variations in the threshold and percentage were to their benefit, she and the plaintiff objected vigorously to the cessation of post-termination commission. In the end, the variation was accepted as they had no choice in it. 37.When she was further cross-examined on the variation at a later stage, she clarified that she had raised the question of post-termination commission with Chan before the meeting as there was a similar problem of entitlement to commission after termination of employment in her previous career as an estate agent. However, there was no firm answer from Chan. She raised this issue again the meeting and Chan said that there would not be such payment. She and the plaintiff objected vigorously as they thought that it was unfair. Chan explained that there was a lot of follow up work in secondment cases and once they left, they would not be able to provide such follow support. Therefore, there would be no post-termination commission. They were unhappy about this, but Chan was firm on it and insisted on his way. She made it clear that it was not a matter that Chan would have given her any free choice though she did not think that if she did not accept it, she would be dismissed. But it appears that it was a matter that she had to accept in the context of a continuous and harmonious employer-employee relationship unless she was to challenge Chan's will and decision and hence the harmony of the relationship. Though she did not challenge Chan's decision, she and the plaintiff were unhappy about the cessation of post-termination commission and the two of them still talked about it privately. Their subsequent discussion of this matter showed their common understanding that there was indeed no post-termination commission. If they were still entitled to it, there does not seem to be any cause for subsequent discussion. In any event, neither she nor the plaintiff had done anything about the variation and the confirmation that there will not be post-termination commission. Though the matter of post-termination commission was only raised by Ms. Kan and not by George Chan initially, Ms. Kan did think that the improvement in the commission scheme was to offset the cessation of post-termination commission. 38.She later confirmed in re-examination that after working with the defendant for a longer period, she did not think that the cessation of post-termination commission was unfair as she then realised that there was a lot of follow up work for secondment cases and the monitoring and supportive duties were important. 39.She was also asked about the duties listed in paragraph 16 of Chan's Supplementary Statement, she confirmed that she had discharged them all. She confirmed in particular that she had discharged the duty to attend the seconded staff's gatherings and functions as stated in paragraph 16.12 in attending gatherings of the seconded staff individually and in groups. When cross-examined on her allocation of time, she said that it was difficult to give exact quantification on how much time was exactly devoted to supporting services as when she was providing support, she was also generating business. She would devout half or less of her daily working hours (8 hours) on making cold calls to potential clients, meeting clients and reading newspapers to find candidates. She further said that making telephone phone calls constituted the bulk of her work. She denied that she had exaggerated the importance of the supporting services. Chan Yim Keung George 40.He referred to the two meetings he had with the plaintiff in August and November, 1996. In the first meeting, he merely canvassed with the plaintiff her background and education and how to position her in the defendant. In the second meeting, he went through her background again and learnt about her then income package. He discussed with her the remuneration package that the defendant was going to offer her which was higher than what she was then earning. She was being given a basic monthly salary of HK$15,000.00 plus a commission. He explained how the commission was calculated by using examples on pen and paper. He had told her that the commission was calculated on a quarterly basis and there was a threshold at four times of her basic salary for a quarter which was HK$180,000. If she could produce income beyond the threshold, she would get 25% of the excess income as commission. He also told her that the principle was for her to get no loess than 25% of the income she produced. The basic salary for a quarter at HK$45,000 was also 25% of the threshold. He accepted that the calculation of commission as expressed in the "Incentive Program (for consultant)" in the employment letter was ambiguous and opened to different interpretation. 41.On the human relations supportive duties as listed in paragraph 16 of his Supplementary Statement, he said that since May, 1997 when they had arranged secondment staff, there was the need for the plaintiff and Ms. Kan to discharge such duties. Every time when he came across such duty, he would advise the plaintiff and Ms. Kan that it was for them to discharge it. He had also mentioned these duties to them form time to time whenever the need arose and he always addressed them together on such matters. 42.On the variation of the income package, he said that he increased their income package from 25% to 1/3 of the total revenue generated by them. He did so by lowering the threshold to HK$135,000 (which was the three times the basic salary for a quarter) and increasing the commission to 1/3 of income in excess of the threshold. He said in his witness statement that he made the variation because the defendant had entered into secondments with clients and that the plaintiff would have to perform human resources management services in respect of the secondment arrangement. He further said that at the meeting when he told them the variation, one of them raised the question of whether post-termination commission would still be payable. He said no and explained that once they left the employment, they would not be able to provide any human relations support. He also told them that the trade practice was that there would be no post-termination commission. 43.On the defendant's letter of 12th February, 1998 "to whom it may concern", it was issued at the request of the plaintiff in relation to certain tenancy matters. Chan however maintained that the figure of HK$650,153 included a projection of the plaintiff's income to December, 1998 on the assumption that she would remain in the defendant's employ until then. 44.He said that after the departure of the plaintiff, he took over the follow up duties. But he did not get any commission out of the service fees due from clients after her departure. Instead, the board voted a special bonus for him in consideration of the follow up work and all his work in respect of this action. 45.On the meeting on 31st March, 1998, he maintained that the plaintiff had lied to him to the effect that she had no interest in Premier Recruitment and the money she put in was just a loan to her mother. 46.In cross-examination, he maintained that he had explained to the plaintiff the mode of calculation of threshold in the second meeting in November, 1996. He said he had used examples and the figure of HK$180,000 was used. He also maintained that he had told the plaintiff that she would get no less than 25% of the income she generated for the defendant. 47.He said that the terms of employment for Ms. Kan were same as those for the plaintiff. On the issue of post-termination commission, he also said that when it was raised by either the plaintiff or Ms. Kan before the August, 1997 meeting, he had already said no to it. When it was raised again in the August meeting by one of them, he again insisted that there would be no such payment. Though they objected to it, he gave his reasons by reference to the follow up duties in secondments and stood firm on it. Eventually the plaintiff and Ms. Kan quieted down and accepted it though they did not expressly say "I agree". He then asked them if there was any further question. When neither of them raised anything, he closed the meeting. He made it clear that if they should have insisted on having post-termination commission, he would not have given them the favourable variation of the commission scheme, he would instead have sorted out the issue of post-termination commission with them by other means. 48.On the duties set forth in paragraph 16 of his Supplementary Statement, he said he did not direct the plaintiff or Ms. Kan to perform all these duties in a particular meeting. He had told them to perform the duties as and when they arose and he had reminded them many times in and out of meetings. He also said that these human relations support duties in secondments were the main consideration for the variation to increase the commission. Though there was no increase in workload or income at or after the August meeting, he decided on the increase because the two consultants were performing well and he wanted to give them an incentive for them to perform better and to improve their loyalty. There were also other considerations for the increase and that included the cessation of accrual of commission upon termination. 49.On the role of Marcel Lam, he said Lam was paid at about HK$40 per hour and he came in about twice a week for about 10 hours in total. He was to discharge some clerical duties for the consultants but the consultants remained fully responsible for his work. Chan took the view that sales work was important but not the most important as it was also important to provide good support with professionalism so that there would be more business and repeat orders. He preferred to take care of the long-term interest of the company than the short-term benefit from sales. He agreed that the follow up duties were not as difficult as clinching deals, however those duties were also important. He disagreed with the plaintiff's suggestion that the variation was by an increase in the threshold and an increase in percentage which compensated each other. 50.In re-examination, he also confirmed that he thought that he had before the August meeting already made known to the plaintiff and Ms. Kan that there was no post-termination commission, furthermore the increase in commission as declared in the August meeting had covered it. He also said that in the August meeting, the plaintiff and Ms. Kan had argued for such commission, but he explained to them the practice of the trade in not giving such commission. Though they had fought for such commission, but their opposition eventually subsided. Findings 51.On the calculation of commission, I find that the employment letter did not exclude post-termination commission. On a strict reading, it also provided that the threshold was four times the basic salary of HK$15,000 per month or H$45,000 per quarter. However, I also find as a matter of fact that Chan did not understand the formula in the letter correctly, he intended to have a threshold at four times the basic salary for a quarter or a total of HK$180,000 and the plaintiff and Ms. Kan knew about this as he had explained it to them. 52.I also accept that Chan did not expect that there would be so many cases of secondment at the commencement of the defendant's business and that by August, 1997, it was obvious that there would be a lot of follow up duties on the part of the plaintiff and Ms. Kan in the secondments. I also accept that the duties set forth in paragraph 16 of Chan's Supplementary Statement were indeed duties that the plaintiff and Ms. Kan had to discharge in relation to the secondments. 53.I also find as fact that the variation of commission scheme was declared by Chan to the plaintiff and Ms. Kan in a meeting in August and the variation was to lower the threshold from HK$180,000 to HK$135,000 and to increase the commission from 25% to 1/3 of the income beyond the threshold. 54.I further find that in this meeting, Ms. Kan had asked Chan whether post-termination commission would be payable and Chan said no. Chan then explained to them that they had follow up duties for the secondments which they could not perform after termination, therefore they would not be given post-termination commission. I also find that Chan eventually prevailed over them and they tacitly accepted his view. Reasons 55.I come to these findings by relying on the evidence of Mr. Chan and Ms. Kan. I in particular find Ms. Kan a truthful witness. She still regarded herself as a friend of the plaintiff and hence was a reluctant witness. She did not come to court voluntarily but was compelled to appear by a subpoena. She did not assist in the drafting of her witness statement but only confirmed its correctness. Her evidence is in fact against her interest as she is still in the defendant's employ and her confirmation of cessation of post-termination commission may one day operate to her disadvantage. She was aware of this. I also reject the plaintiff's evidence to the extent where she differed from Chan or Ms. Kan. 56.I also accept the evidence of Chan and Ms. Kan that the meeting for the variation took place in about August and not in March, 1997. By the end of March, neither the plaintiff nor Ms. Kan had produced any income for the defendant and nobody knew whether the old commission scheme would produce a fair result. There was thus no reason for the defendant to increase the threshold then so as to make it more difficult for them to earn their first dollar of commission. By August, 1997, there were however a number of secondments in place and follow up duties had to be performed for these on-going arrangements. It was therefore reasonable for Chan to have increased the rate of commission for them. 57.I am also of the view that the follow up duties were important for the smooth performance of the secondments and the long-term reputation of the defendant in providing secondments. I accept Ms. Kan's evidence that these duties took up about 40% to 50% of her time. As Marcel Lam was only a part-time administrative assistant coming to the office for about 10 hours a week, he would not have been able to provide too much help for the plaintiff and Ms. Kan. Further, Lam was also responsible for the computer set up. Apart from Lam, there was no other staff to assist the plaintiff and Ms. Kan. If they were not obliged to perform these duties, there would not have been anyone to perform them. 58.I also do not accept the plaintiff's saying that the original threshold for commission was at HK$60,000. That was too low a figure. If the plaintiff and Ms. Kan should have produced an income at this level, the defendant would only have a share of HK$15,000 out of the HK$60,000. It appears to be too small a share for the defendant when compared with its post-threshold share of 75% of the income. There is also a ring of truth in Chan's explanation that he intended the plaintiff and Ms. Kan to have no less than 25% of the income they produced for the defendant. The fact that after the variation, the new threshold was three times the basic salary for a quarter and the rate of commission was increased to 1/3 of the post-threshold income support Chan's case that the variation was to raise their share from 25% to 1/3 of the income they produced. The variation appeared to be a simple and logical increase from a 25% share to a 1/3 share. Chan is of course firmly supported by Ms. Kan on these matters. 59.Mr. Lin, counsel for the plaintiff, submits that it is inherently unbelievable for the defendant to have both lowered the threshold and increased the rate of commission. He makes this point by pointing to the fact that the plaintiff and Ms. Kan had already signed up a fair number of secondments and were already entitled to comfortable amounts of commissions under the old scheme (as alleged by the defendant). There was thus no need to increase the commission by lowering the threshold and increasing the rate. He therefore asked me to find that the variation was by increasing the threshold from HK$60,000 (as alleged by the plaintiff) to HK$135,000 and increasing the rate at the same time. I do not find the defendant's case inherently unbelievable. Chan said he increased the commission to reflect the increase in work as necessitated by the secondments, the number of which was more than what he had anticipated at the start of the defendant's business. His other reasons for the increase were to use it as an inducement for further improvement on their good performance and to improve their loyalty. In the circumstances, I cannot say that the defendant's case on the variation was unbelievable and I repeat my reasons above which lead to my finding. 60.Mr. Ling also said that the confirmation of no post-termination commission would have been an act of sheer folly. I find from the evidence of Ms. Kan that before the August meeting, she had raised this issue with Chan, but she did not think that Chan had given her any clear-cut answer. Chan thought that he had given a clear answer, but Ms. Kan did not seem to have grasped that. That was why she raised it again in the August meeting when the issue of commission was raised again. I accept that if there was no announcement of a favourable variation of commission scheme in this meeting, it would not have been a sensible move from the personnel management perspective to confirm that there would not be any post-termination commission. However, the discussion on this was against the background of the favourable variation. The variation took much of the heat out of the issue of post-termination commission. I therefore do not agree with Mr. Ling's view. 61.Mr. Ling also argued that there was no consensus in the meeting between the plaintiff and the defendant for the cessation of post-termination commission as the plaintiff and Ms. Kan had objected to it and they never confirmed their acceptance. However, I find that the once Ms. Kan raised the issue of post-termination commission, that matter had become part and parcel of the discussion. It would be unreal to treat the variation of commission scheme as a separate and distinct matter from the post-termination commission issue. It was obvious that if the plaintiff and Ms. Kan should have firmly rejected Chan's confirmation of no post-termination commission, Chan would also have withdrawn his more favourable commission scheme. Chan was not obliged to let them have more commission if they should have insisted in having such commission. The variation on commission scheme and the post-termination commission issue had been wrapped up into a single issue regardless of whether the plaintiff and Ms. Kan were entitled to such commission before the August meeting. I also find as a matter of fact that the objection of the plaintiff and Ms. Kan had subsided at the end of meeting and their conduct obvious signified their acceptance of Chan's view on such commission. 62.Mr. Ling further argued that there was no consideration in support of the deprivation of the plaintiff of post-termination commission as when Chan decided to vary the commission scheme, he had not thought about such commission. Chan further said he never thought that the plaintiff and Ms. Kan were entitled to such commission at all. As I have taken the view that the plaintiff and Ms. Kan were entitled to such commission under the employment letter, consideration is required to deprived them of the same. This is so even if Chan should have thought that they were never entitled to such commission. Chan's mistaken understanding of the commission formula in the employment letter could not have changed the plaintiff's position. However, in line with my finding that the variation on commission scheme and the post-termination commission issue had been wrapped up into a single issue, the variation of commission scheme constituted the necessary consideration for the cessation of the post-termination commission. 63.I further find that since the plaintiff had accepted the cessation of post-termination commission and continued with the employment, she had the benefit of continuing with the employment and received the other employment benefits thereunder including commission calculated on a more favourable basis. If she should have refused the cessation of such commission there and then, it was obvious that she would not have been given the favourable variation on calculation of commission and her relationship with Chan and the defendant would have been strained. 64.Assuming that the variation of commission scheme could not be regarded as a consideration for the cessation of the post-termination commission, I still find in the circumstances of this case that her continuation of employment in the then prevailing terms and conditions without any strain on the amicable relationship with Chan and the defendant was a benefit secured by the cessation of post-termination commission. It is clear that if the plaintiff should have insisted on the commission, Chan would not just left the matter there, he would have sorted out this matter by some other means. This could have generated some turbulence in the employment relationship or produced changes in the terms and conditions of employment. In this regard, I follow the reasoning in Williams v. Raffey Bros. & Nicholls (Contractors) Ltd. [1990] 2 WLR 1153 at 1165 C to H and UBC (Construction) Limited v. Sung Foo Kee Limited [1993] 2 HKLR 207. Conclusion 65.In the premises, I order that the defendant do pay the plaintiff HK$18,822.37 on the claim as that is the figure agreed between the parties in the event that I should hold against the plaintiff on post-termination commission. I also order that the defendant do pay the plaintiff interest on the said sum at the judgment rate from the issue of the writ to the date of payment. Since the defendant only agreed to pay this sum to the plaintiff at the start of the trial, I therefore make an order nisi that the defendant do pay the plaintiff costs of this action up to the commencement of this trial and the plaintiff do pay the defendant costs for the trial. I further order that the Plaintiff's own costs be taxed in accordance with the Legal Aid Regulations.
Representation: Present : Mr. LING Chun-wai, Counsel instructed by Messrs Allen & Overy for Plaintiff. Miss Sarah Sin, Counsel instructed by Messrs Haldanes for Defendant. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under DCCJ 5878/2002