Peter Woo v. Trans-asia Shipping Co Ltd and Another
Read the full judgment text of HCA 3574/1977 on BabelCite. This High Court CFI judgment.
1. These are consolidated actions, but I need deal only with Action No. 3574 of 1977 because my decision in that action necessarily resolves the issues involved in Action No. 3154 of 1977.
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HCA003574/1977
Coram: Barker, J. Date of Judgment: 13th August, 1980. ----------------- JUDGMENT ----------------- 1. These are consolidated actions, but I need deal only with Action No. 3574 of 1977 because my decision in that action necessarily resolves the issues involved in Action No. 3154 of 1977. 2. There has been a sharp conflict between the evidence given by the Plaintiff and by the witnesses called on his behalf and the evidence of the 2nd Defendant and the witnesses called on behalf of the Defendants. Having seen and heard these witnesses and in all the circumstances of the case, I unhesitatingly prefer the evidence of the Plaintiff and his witnesses. 3. The Plaintiff, now 64 years of age, is a man of immense knowledge and experience in shipping and shipping matters. He is a Naval Architect, a Chartered Engineer, an Associate Member of the Royal Institution of Naval Architects, a Member of the Institute of Marine Engineers and, since the institution of these proceedings, a Fellow of the Institute of Arbitrators. 4. Between 1956 and 1966 he worked for Mollers Ltd. ending up as technical manager and stores manager, and, after a brief period with World Wide Shipping Ltd., which finished because of language problems, from 1967 to 1971 he was manager on the shipping side in the Hai An Shipping Co. Ltd., later being promoted to Assistant General Manager. In June 1971 he was appointed manager of the Goldwyn Shipping Co. Ltd. at a salary of $6,000 per month. At the time of leaving Goldwyns he was earning $6,900 per month and had every reason to believe that he would shortly receive a 15% increment, taking his salary to well over $8,000. In all these employments, as indeed in previous employments, as can be seen from pages 345 to 350 of agreed bundle No. 8, he gave every satisfaction. He was and is, in my judgment, a man of ability, integrity and veracity. 5. In 1973, the 2nd Defendant was managing director of the 1st Defendants. The Plaintiff met him because Goldwyns managed a ship called the Golden Rose, which was chartered to the 1st Defendants. There were problems in relation to the charter, and the Plaintiff became quite friendly with him. 6. In 1973 the 2nd Defendant was minded to buy an ageing steamship named the Ru Shan which was laid up in Piraeus. The Plaintiff's advice was sought on the proposed purchase since he knew the ship, and it was given. The Plaintiff thought it was a bad idea and said so. Not only was the ship old and unreliable but when it worked it used an inordinate amount of fuel. The 2nd Defendant, who had no previous experience of owning or managing ships, ignored this advice and bought the ship, and at his request the Plaintiff went, with the 2nd Defendant's younger brother, to Piraeus to assist in taking delivery of the ship, being paid nothing for the trip except his travelling and hotel expenses. The purchase was a disaster. The ship had to go into Malta for repairs, and the Plaintiff flew out, in his leave period, but charging for his work this time, in order to help. Thereafter, though bound for Antwerp, she had to be towed into Gibraltar. Her troubles were by no means over. Once in Luanda, things were so bad that there was no alternative but to tow her to Capetown. Her final foray into difficulty was to run aground in the Philippines. It must have been a considerable relief to the Defendants when she was eventually sold, though the problems caused by the aforementioned crises lingered on for a considerable time. 7. At the beginning of 1974, not unnaturally, the 2nd Defendant was in deep trouble over the Ru Shan. He had no expertise, and very little knowledge as to how to deal with the problem. And so he turned to the Plaintiff, who had both. He wanted the Plaintiff to come to work for the 1st Defendants. A series of discussions took place between the Plaintiff and the 2nd Defendant, at which the Plaintiff made it quite clear that he commanded high wages, which the 2nd Defendant was prepared to pay. The Plaintiff also made it clear that he had unfinished work for Goldwyns which he would have to complete, even if he were to be able to persuade Goldwyns to release him from his contract. He did in fact secure such release, and the final discussion took place between the Plaintiff and the 2nd Defendant at or about the end of April 1974. The Plaintiff was then 57 years old, and he was naturally concerned that if his contract with the 1st Defendants came to an end after four years, he would find it extremely difficult to obtain other work (and I add in parenthesis and by way of anticipation that his concern has been amply justified by later events) and so he insisted on being given the option, if he desired to exercise it, of working for a further four years - to which the 2nd Defendant agreed. The Plaintiff himself typed out the proposed terms of his employment, Document P4. Paragraph 3(b), relating to remuneration, read initially:
But after discussion it was agreed that this figure should be reduced to HK$1,000, and this was duly noted on P4. 8. There has, however, been much controversy about paragraph 1 of P4 which reads:
This clause does not appear in the letter of appointment, page 3 of agreed bundle 1. The Plaintiff says that it was discussed and agreed upon between the parties. The 2nd Defendant says this is not correct, and that he expected that the Plaintiff would carry out one piece of unfinished business with Goldwyns in respect of a ship called the Buena Trader which would last one to two months and then would sever his connections with Goldwyns completely and would devote his time solely to the 1st Defendants, and that it was for that reason that paragraph 1 of P4 did not appear in the letter of appointment. The Plaintiff says he did not put it in the letter because in his estimation the letter dealt entirely with remuneration. This is, of course, not accurate, and yet I believe the Plaintiff. If it had been agreed to delete that clause, I am satisfied it would have been crossed out on P4, like the $2,000 in paragraph 3(b), but it was not. Instead, at the bottom of P4, the Plaintiff wrote:
I find that it was a term of the contract between the parties that the Plaintiff could, if he wished, act as a consultant elsewhere than for the 1st Defendants, provided always that he worked full time for the 1st Defendants. 9. Paragraph 6 of P4 reads
The Plaintiff's explanation for this paragraph was that he did not know anything about the 1st Defendants or their capitalization, that companies can go bankrupt, that he was an old man of some experience and so he wanted the 2nd Defendant's personal guarantee. As he put it "in case the company fails to live up to its full obligation, you will have to be responsible for it", and the 2nd Defendant replied "O.K." 10. Paragraph 6 of P4 is not reproduced in the letter of appointment. At the bottom of page 3, there are the words "Guaranteed by ..." and then signed "Chan Yiu Yam" and "Accepted by ..." and signed "Peter Woo". The 2nd Defendant says that he guaranteed merely the payment of the Plaintiff's wages and not clause 5 of the letter of appointment. I reject the Defendants' evidence on this point. 11. What is the effect in law of this guarantee? In Moschi v. Lep Air Services(1) Lord Reid said at page 344:
12. I find (a) that the 2nd Defendant was a guarantor and (b) that by his guarantee he undertook that the 1st Defendants would perform all the terms of the principal contract, which consisted of paragraph 1 of P4 and all the terms of page 3. 13. And so, armed with this guarantee, the Plaintiff began his work as an Executive Director of the 1st Defendants, his task being to assist the Managing Director. Much of his time during 1974 was spent trying to sort out the problems of the Ru Shan. 14. A number of Board meetings of the 1st Defendants allegedly took place, at which the minutes state that the Plaintiff was present. I am quite satisfied that he was not - nor for that matter was Mr. Kenneth Chan who later became a director. Moreover, in or about January 1976 the 2nd Defendant resigned from his post as Managing Director and was succeeded by Chan Soo Fan. But, although it was the Plaintiff's task to assist the Managing Director, he was never told of this change. 15. The Plaintiff nevertheless carried on with his work, doing everything that required English in the way of litigation, arbitration and shipping practice. From the 15th June to the 6th August 1976 he was in hospital, and even during that period his advice was sought by the Defendants. On coming out of hospital, at his own request and earlier than he should have done, he stayed in an hotel for one month, so as to be nearer to his work. 16. As time went on, it is clear that the 1st Defendants got into financial difficulties. The Plaintiff lent $25,000 in cash to them. They failed to pay his wages and the wages of Kenneth Chan and Kwah Kiek Tik. This failure was so persistent that Mr. Kwah applied for a winding up order against the 1st Defendants, and the Plaintiff, after being given two cheques which were dishonoured, issued a writ and obtained judgment for $59,371.02 against the 1st Defendants. Application was made, supported by an affidavit sworn by Chan Soo Fan to have the judgment set aside. However, this sum was in due course paid. 17. By March 1977, the financial position of the 1st Defendants was such that they were unable to pay their debts as they became due. Notwithstanding this they made what is described as a temporary loan to a company called Jasvon Shipping Co. Ltd. owned by one or more members of the Chan family of $500,000. The circumstances surrounding this loan are far from clear and I made no definite finding about it. I merely record that, with the 1st Defendants' finances being in the parlous state to which I have adverted, it is odd that a temporary loan of this magnitude should have been made. 18. The next relevant thing which happened was that the Plaintiff received a circular, page 62 of agreed bundle 2, addressed to all members of the company and signed by Chan Soo Fan. It reminded them of the office hours, and of the 1st Defendants' intention not to allow them to engage in part-time jobs during office hours. It incensed the Plaintiff, and his reaction was to write on it words which are translated at page 61. This document, i.e. the Plaintiff's copy of the circular, was disclosed on discovery, but it had never been disseminated to anyone else. Nevertheless, the 1st Defendants saw fit to allege, on the strength of this document, that the Plaintiff spread rumours detrimental to the good name of Chan Soo Fan and affected the morale and efficiency of the 1st Defendants by passing written messages concerning her. This allegation was wholly without foundation and was expressly abandoned by counsel for the 1st Defendants at the outset of the hearing. Nevertheless, the fact that it was ever made strengthens my view as to the credibility of the respective parties. 19. Eventually, in desperation, the Plaintiff consulted solicitors who on his behalf wrote a letter of 8th August 1977, page 4 of agreed bundle 1. This is not the letter of a man who is shirking his duties. Such a man would not even have bothered to consult solicitors. Rather is it the letter of a man who is conscientious and is anxious to do his duty but is being prevented from doing so. Reference is made therein to a change of address of the 1st Defendants. In fact they changed their address three times in a very short period. The reason for the moves is far from clear. It was suggested by counsel for the Plaintiff that it was done in order to escape creditors. This may well have been the motive, but it is not necessary for me to make any finding on it. 20. Furthermore, about this time, the Plaintiff had a conversation with the 2nd Defendant's wife, Foo Kam Chu, wherein proposals were made as to the Plaintiff's contract being terminated. There was a dispute as to what these proposals were which there is no need for me to resolve. Finally, on the 30th August 1977 the Plaintiff received a letter, page 6 of bundle 1, dismissing him. It is to be observed that the alleged bad work performance is said to have begun in May 1976 and persisted until November 1976, an allegation which was patently untrue since for much of that time the Plaintiff was either in hospital or convalescing. So far as the penultimate paragraph is concerned, the 2nd Defendant says that he telephoned the Plaintiff from Indonesia and said in effect that the Plaintiff was breaking his contractual obligation, whereupon the Plaintiff gave certain promises as to his future conduct, promises which he did not keep despite being reminded of them by the 2nd Defendant and by Chan Soo Fan. The Plaintiff denies that any such conversation took place, and I believe him. 21. This letter was answered by the Plaintiff's letter of 2nd September 1977, page 7 of agreed bundle 1, an emphatic denial of the charges. Criticism has been made of the contents of this letter, by counsel for the Defendants, but I reject his arguments on this point. There are, it is true, discrepancies between the contents of that letter and his evidence in the box, but that is no surprising after a lapse of nearly three years, and anyway, the discrepancies were minor. And so the Plaintiff's employment with the 1st Defendants came to an end, and apart from some little consultancy and arbitration work, he has been able to find no alternative employment. 22. But the Defendants say that the dismissal was not wrongful. They base this on two grounds, namely (a) that the Plaintiff was allegedly engaged on other work unconnected with his employment with the Defendants, and (b) that he was allegedly and frequently absent from work. 23. I deal first with (a). It is first alleged - and admitted - that the Plaintiff did in fact carry out some consultancy work for Goldwyns after the commencement of his employment with the 1st Defendants, but in view of my findings as to the terms of the contract, this did not amount to any breach thereof. However the gravamen of the Defendants' case under this head is that he formed, together with one Captain Ho, a firm known as Woo & Ho, to which, it is alleged, he devoted much of his working time, and which was in deliberate competition with and/or deliberately taking business away from the 1st Defendants. If this allegation were true, then it is alleged - and indeed conceded by the Plaintiff - that the dismissal would not be wrongful. 24. And so it is necessary to consider the formation and operation of Woo & Ho. Captain Ho was and is a man of considerable experience in maritime matters, and a long-standing friend of the Plaintiff. Whilst the Plaintiff was in hospital in 1976, he was visited by Captain Ho, who suggested that the two of them should form a partnership, which would carry out in the main marine surveying. The Plaintiff agreed. The initial capital was $20,000 of which the Plaintiff provided 51%. The firm was to operate from an office at Room 407 Wing On Life Building, 20 Des Voeux Road, in which room the Plaintiff already had a photocopying business, known as the Hong Kong Photo Services. Captain Ho's role was that he should do the actual surveying and prepare the reports, but as his English was not good, the Plaintiff in his spare time either in the evenings or at the weekends, would go over the reports and correct any grammatical errors. It was never contemplated that the Plaintiff would play any more active role in the running of Woo & Ho. This was the Plaintiff's and Captain Ho's account of the role of the Plaintiff and of the firm. It is challenged by the Defendants on a number of grounds. First it is said that it is inconsistent with the application for business registration, page 252 of bundle 6, wherein the Plaintiff signs himself as partners and manager and the nature of the firm's business is described as "Ship management service and agency, Marine Surveyors and consultants", a description which spans a far wider field than that of marine surveyor. The Plaintiff's explanation is that he described himself as "partner and manager" because he did not want his landlord - i.e. the landlord of Hong Kong Photo Services - to think that he had sublet to Woo & Ho, and secondly it is normal in applying for business registration as in describing the objects of a limited company in the Memorandum of Association to describe the business as widely as possible, just to be on the safe side - and a similar contention was based on the Provisional Profits Tax Return, page 261, and on the Employer's Returns of Remuneration and Pensions, pages 265 to 267 - to which a similar answer was given by the Plaintiff. I accept the Plaintiff's explanation on this point. Then it is said that Woo & Ho did in fact engage in work other than marine surveying, as witness the undoubted fact that in mid 1977 Woo & Ho were appointed general agents for the Union Gulf Line. Captain Ho's evidence, which I accept, was that he obtained this agency through a personal contact unbeknown to the Plaintiff, who had nothing to do with it. I am satisfied that the Plaintiff did not deliberately attempt to compete with the 1st Defendants, nor did he deliberately attempt to take work from them. Indeed, no such work was in fact taken, because the Union Gulf Line operated only from Hong Kong to the Caribbean, a sphere of operations in which the 1st Defendants did not dabble, and in which they had no intention of becoming involved. 25. Did the Defendants know of Woo & Ho? I am quite satisfied that they did. I find that the Plaintiff personally showed Chan Soo Fan the partnership premises at 407 Wing On Life Building, and told her of the existence of the partnership and that he was connected with it, and that she manifested no objection to his being involved with it. And the reason for this lack of objection was that it never occurred to her for one moment that there was any conflict of interest between the activities of Woo & Ho and those of the 1st Defendants. Indeed the 1st Defendants actually instructed Woo & Ho to do survey work for them (see pages 38 and 39 of bundle 2 - signed not by the Plaintiff, but by Chan Kin Hung who did not work under the Plaintiff or for him - though they were dictated by the Plaintiff as Chan's English was poor). Nor in my judgment was there in fact any such conflict. I hold that the Plaintiff's involvement with Woo & Ho did not constitute a breach of his contract of employment with the 1st Defendants. 26. I consider next (b) - the Plaintiff's allegedly frequent absences from work. The evidence of Chan Soo Fan, Foo Kam Chu, the wife of the 2nd Defendant, and the 2nd Defendant, was to the effect that after his return from convalescence, the Plaintiff's attendance at work became steadily worse, so that there would be days when he did not come to the office at all and when he did he would be there for only two hours or so. The Defendants rely strongly on the evidence of Cheung Wan Tan, who was at all material times an office boy employed by the 1st Defendants, and who served tea to the Plaintiff. His evidence was to the same effect as that of the Defendants and their witness, but he went further. He said that after leaving the employ of the 1st Defendants, he visited the premises of Woo & Ho at about the end of May or the beginning of June, looking for business, that he went during office hours and saw the Plaintiff working there, and he gave a detailed description of the office. I am deeply suspicious of his evidence. Following upon the cessation of his employment with the Defendants, he was nevertheless allowed to stay on at their premises, with the use of a desk, and conducted his business at no charge. Furthermore, he was first asked about the matters involved in this case only a month ago, and he was unsure as to dates. If he did visit Woo & Ho's premises (and I am far from satisfied that he did), I hold that he did so after the Plaintiff had been dismissed by the 1st Defendants. 27. The evidence of the Plaintiff, of Kenneth Chan and of Kwah Kiek Tik was to the effect that the Plaintiff was a regular and conscientious attender, and the Plaintiff said that if and in so far as he did work for Woo & Ho it was in his spare time. I accept their evidence. 28. In the result, in my judgment the Plaintiff was not in breach of his contract of employment, and was therefore wrongfully dismissed. 29. It is well settled that, where there are grounds for dismissal, the motives of an employer in dismissing his employee are irrelevant. Having held that, in this case there are no such grounds, I ask why then should the 1st Defendants have dismissed the Plaintiff? The answer is that they were in desperate financial trouble, they had it in mind to get rid of most, if not all, of the staff and they were, to use counsel for the Plaintiff's graphic phrase, thrashing around to find a way of doing so without having to pay any compensation. Hence the circular letter, and the consequent unfounded allegations in the letter of dismissal to the Plaintiff. It follows that the Plaintiff succeeds as against both Defendants. The 1st Defendants made a counterclaim against the Plaintiff, but this was expressly abandoned by counsel for the 1st Defendants. 30. It remains only for me to deal with damages. In my judgment the Plaintiff is entitled to recover his loss of salary from the end of August 1977 to the end of April 1978, that date being the end of the first four year period. Thereafter he is prima facie entitled to loss of salary for another four years. This loss however must be discounted by a number of factors namely:
31. Would the Plaintiff have exercised his option? I am of the view that the chances of his having done so were very high indeed. He is an astute man, and realised what the difficulties would be in getting another job at the age of sixty-one. Moreover, he has a wife and at least one son still in some measure dependent upon him. 32. He has in fact earned $37,300 in arbitration work over the last two years. It was submitted that once this case was over, he might well earn $3,000 per month. I see no basis for this submission and I reject it. He may well earn something, but it will not in my judgment be very much. 33. A calculation has been placed before me on behalf of the 2nd Defendant, which the Plaintiff accepts as a matter of arithmetic. This shows, on the first page a calculation of actual loss from the 1st September 1977 to 31st July 1980, no discount having been made for the non-exercise of the option on the 1st May 1978 and on the second page future loss, no discount having been made for contingencies. 34. In view of my finding that the chances of the Plaintiff's exercising the option were very high, I hold that the Plaintiff's actual loss to the 31st July 1980 was $394,000. I have added a little to the total figure in view of the fact that the Plaintiff would probably have had to pay a small amount of tax on the $37,300 which he had earned by way of arbitration fees. 35. Taking account of all the contingencies to which I have adverted earlier in this judgment, I find that the multiplier for future loss after the 1st July 1980 is twelve months, and the multiplicand, having regard to the possibility of earnings, is $14,000 per month, making a total of $168,000. 36. Thus the Plaintiff is entitled on the claim as against both Defendants to $562,000 with costs, and the counterclaim is dismissed with costs. 37. I add, for the avoidance of any doubt, that I am satisfied that the Plaintiff has taken all reasonable steps to mitigate his damage. 38. It was argued by the Defendants that, following Edwards v. Society of Graphical and Allied Trades(2), I should award no interest on any part of the above sum. I know not why the court appears to have awarded no interest in that case. There seems to have been no argument on the point and Lord Denning, M.R. contented himself by saying that the award should be £3,500 in all, without mentioning interest. It must have been a case on its special facts. In the present case, the Plaintiff has, in my judgment, been kept out of $394,000, and as such is entitled to interest on that figure. Since it is in effect special damage, interest should be at one half of the appropriate full rate, I award interest at the rate of 4? per annum, and there will be judgment accordingly. Representation: Henry Litton, Q.C. and A. Allman-Brown (Deacons) for the Plaintiff. Christopher Young (Official Receiver) for the 1st Defendants. Ronny Tong (Johnson, Stokes & Master) for the 2nd Defendant (1) [1973] A.C. 331 (2) [1971] Ch. 354 |