Cheung Ting Wan and Others v. Ris Computers Ltd.

HCLA000016/1986

BETWEEN

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Coram: Deputy High Court Judge Barnett

Date of Hearing: 10th June 1986

Date of Decision: 20th June 1986

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DECISION

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1. The respondents commenced employment with the appellant on various dates between March 1981 and April 1985. Each respondent had an agreement in writing and each agreement had an identical provision for renumeration, namely a monthly basic salary and double pay. There was an additional provision for the 2nd respondent but it is not material to this appeal.

2. By memorandum dated 2nd July 1981 Alexandra Lee, the Managing Director of the appellant, announced the introduction of a commission scheme. The memorandum reads:

"Commission scheme for non-marketing managers and staff are set out as incentive to motivate staff to achief better sales support.

In view of our current negotiation with various manufacturers, above schemes are recommended for a trial period of twelve months with effect from July 1, 1981.

Please inform all your staff on our scheme accordingly."

3. By memorandum dated 12th December 1981 Mrs. Lee slightly revised the scheme by introducing additional items upon which commission would be payable and increasing the percentage payable on the China Division to 2%. A commission pool was formed and commission accumulated. On 4th February 1983 a payment was made out of the commission pool to the appellant's employees including the 1st, 2nd, 3rd, 6th, 8th and 22nd respondents. The payment covered a period of 12 months, probably the calendar year 1982. The payment exceeded the amount in the commission pool. On 16th January 1984 a further payment was made from the commission pool. On this occasion, the 4th, 5th, 7th, 9th, 10th and 23rd respondents also shared in the payment. The payment was for the year 1983. Only about 2/3 of the accumulated pool was paid out. In 1983 and 1984, the payment was based upon a formula which included factors of seniority and performance.

4. On or shortly before 12th January 1984 the appellant, after resolving to make the payment on 16th January to which I have referred, further resolved that for the future payments would be based upon a new profit scheme. Because it was experiencing financial difficulties and cash flow problems the appellant did not make any payment in 1985 in respect of the year 1984. Consequently, before they were dismissed the 11th to 21st respondents never received any payment other than that to which they were strictly entitled under their written agreements.

5. Upon their dismissal, the respondents sought payment of commission totalling a sum of $126,081.00. Their claim was opposed by the appellant on the basis that the respondents were not contractually entitled to any payment, payment being wholly at the discretion of the appellant. Upon the evidence, however, the Presiding Officer who heard the respondents' claim decided that on a balance of probabilities the respondents' claims were proved. In essence, he held that

6. For the appellant, Mr. Kwok seeks to overturn the decision of the Presiding Officer on 2 principal grounds. First, he contends that the respondents can only show an entitlement to payment of commission if it is established that their agreements were varied. Secondly, he submits that even if any of the agreements were varied, the term of the variation was so vague as to be unenforceable.

7. Dealing first with the 11th to 21st respondents who were employed after 16th January 1984, which was the date of the second payment and the time at which the appellant resolved to replace the commission scheme by a profit scheme, Mr. Kwok says it was impossible for these respondents to show a variation of their agreements. For the respondents, Mr. Mackay invites me to adopt a practical approach. He says that after joining the appellant, these respondents must have been involved in discussion with their fellow employees and become aware of the commission scheme. Therefore although the Presiding Officer did not address himself to the issue, it was reasonable to infer as a fact that these respondents had a reasonable expectation of payment under the commission scheme, and that it was intended by the appellant for the benefit of support staff. Thus, there was an implied term in these agreements. Mr. Kwok, however, points out that to test whether there was such an implied term, the appellant and respondents would have had to be asked at the time of signing the various agreements what provision there was for commission, and they would have had to reply with one voice "in accordance with the commission scheme" or words to that effect. However, there is no question but that from 12th January 1984 onwards the appellant, at least, would have said no such thing because it had by then resolved to introduce the new profit scheme, a different scheme depending upon any profit made by the appellant.

8. I am satisfied that Mr. Kwok is correct. The Presiding Officer did not address himself to the different position of these respondents and it was not open to him to find that they had proved their claims upon the evidence before him.

9. As to the other respondents, Mr. Kwok divided them into various groups depending upon their date of employment. I do not think that it is necessary for me to make any distinction between them because in my view these respondents must all be regarded in the same light. It was Mr. Kwok's contention that each of these respondents had to show a variation of their agreements for which it would be necessary to prove an agreement between each respondent and the appellant, consideration on the part of each respondent, and the precise terms of the new term of the agreement. There is no difficulty, I think, in finding agreement. The appellant introduced the commission scheme. It is a fair and indeed the only inference that the respondents accepted it. Certainly, none of these respondents demurred, none of them left the appellant's employ and none refused payment when it was made to them.

10. The more difficult question is whether or not the respondents gave consideration for the appellant's promise or undertaking to pay commission. Mr. Kwok relies upon the principle established in Stilk v. Meyrick (1809) 2 Camp. 317, that the performance of existing obligations does not constitute consideration. He contends that apart from fulfilling their existing obligations there was nothing extra that these respondents were required, or undertook, to do.

11. Mr. Mackay sought to rely upon certain dicta of Denning, L.J. (as he then was) to the effect that the performance of an existing duty is sufficient consideration. These dicta were revealed in North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. and another The Atlantic Baron (1978) 3 All E.R. 1170, in which Mocatta, J. said (at p.1177):

"Counsel for the yard relied on what Denning L.J. said in two cases dealing with very different subject matters. The earlier was Ward v. Byham (1956) 2 All E.R. 318. There the father of an illegitimate child who had lived with her mother for some years turned the mother out of the house, retaining the child for a while for himself. Later he made an offer to let the mother have the child and pay an allowance of £ 1 a week, provided the child was well looked after and happy and was allowed to decide for herself where she wished to live. When the mother married, the father discontinued payment, but on being sued by the mother he was held liable. The mother was by statute bound to maintain her illegitimate child, but Denning L.J. said that he thought there was sufficient consideration in the promise to perform an existing duty or in its performance. Apart from the fact that the existing duty on the mother was imposed on her by statute law, which I think differentiates the case, the other two members of the Court of Appeal thought that compliance with the special terms of the father's letter, about keeping the child happy and leaving her freedom of choice constituted ample consideration. Again in Williams v. Williams (1957) 1 All E.R. 305 at 307, whilst Denning L.J. said that 'a promise to perform an existing duty is, I think, sufficient consideration to support a promise', nonetheless he went on to find two separate grounds for good consideration for the husband's promise. Similarly Hodson L.J. and Morris L.J. found good consideration for the husband's promise. I do not therefore think either of these cases successfully enables counsel for the yard to avoid the rule in Stilk v. Meyrick."

12. I respectfully agree with Mocatta, J. Therefore, there must be identified something, which is capable of amounting to consideration. In my view, it can legitimately be held that, as the commission scheme was expressed to be as an incentive, the consideration was harder work on the part of the employees. Further, notwithstanding financial difficulties, the respondents stood by the appellant until they were dismissed on economic grounds.

13. I have not overlooked Mr. Kwok's argument that apart from the 2nd and the 22nd respondents, the other respondents in this group were employed after the introduction of the commission scheme. It might be expected, therefore, that an appropriate term would have been written into their agreements. In my view, however, the same considerations apply to these respondents. Even if the same considerations do not apply, I have no doubt that a reasonable tribunal, properly directed, would have had little difficulty in finding on the evidence that there was a suitable implied term in their agreements.

14. Mr. Kwok also argued that the commission scheme was introduced on a trial basis for 12 months and, unless extended by the appellant, would have lapsed upon the expiry of that period. In my judgment, it was a matter of fact for the Presiding Officer to decide whether or not the scheme continued. On the evidence it was certainly open to him so to find and although he did not expressly say so in his decision, the finding is nonetheless implicit.

15. In support of his argument that the new term of the agreements was uncertain and unenforceable, Mr. Kwok points out that there was no formula for distribution so that there were various possibilities ranging from an equal division, to a division taking into account factors such as service or performance. This has the consequence of leaving the term so vague as to be void and of no effect. He referred me to Chitty on Contract 25th ed., paras. 117 and 118. He maintained that it is not for the court to make a contract for the parties.

16. The formulae calculations and for the 1983 and 1984 payments were available and in evidence before the tribunal. These were easy to follow, taking into account as they did basic salary, the period worked by each employee during the year for which payment was being made, seniority and performance. The last was, of course, a subjective factor but nonetheless recognized and accepted by the employees. It is not unusual in cases involving uncertainty to find that that uncertainty is to be resolved by one of the parties. It seems to me that such is the case here.  Accordingly, I am satisfied that there was no uncertainty such as to make the agreement void.

17. For the reasons given above the appeal in respect of the 11th to 21st respondents is allowed. These respondents must repay to the appellant any payment which has been made to them pursuant to the Presiding Officer's decision. The appeal in respect of the 1st to 10th, 22nd and 23rd respondents is dismissed except in relation to quantum. In assessing quantum the Presiding Officer relied on a schedule, prepared by the 4th respondent, which applied a factor of 1.2. For reasons advanced by Mr. Kwok, this was based upon a mistaken appreciation of the use of a similar factor for the 1984 payment. In that instance quite clearly the factor of 1.2 was applied in order to gross up the individual payments which had been calculated for each employee on the basis of the formula I have referred to so as to exhaust the accummulated commission pool. I do not think that it is necessary to refer the matter back to the Presiding Officer. In my view it would be fair to apply the same formula, including the performance factor, as was used for the 1984 payment. I will leave counsel to make the necessary calculation and thereafter those respondents who have been overpaid must make suitable repayment to the appellant.

18. I will hear counsel on costs.

Representation:

Mr. K. Kwok instructed by Clement K.C. Lo & Co. for Appellant/Defendant.

Mr. G. Mackay instructed by Chan, Yung & Chung for Respondents/Claimants