Huen Fook Nam v. Pentalpha Enterprises Ltd
Read the full judgment text of HCA 15860/1999 on BabelCite. This High Court CFI judgment was delivered on 15 June 2006.
1. This is an employment claim transferred from the Labour Tribunal. The Plaintiff was employed as a sales director of the Defendant. He alleged that he was constructively dismissed by the Defendant and claimed arrears of wages and commission, wages in lieu of notice, severance payment, annual leave pay, reimbursement of business expenses and an inquiry of outstanding commission due. The Defendant denied liability and counterclaimed for over-payment of commission and damages for breach of dut
Cited by 3 cases
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HCA 15860/1999 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 15860 OF 1999 (On transfer from Labour Tribunal Claim No. LBTC 3266 of 1999) __________ BETWEEN
__________ Before: Deputy High Court Judge To in Court Dates of Hearing: 18 - 21 July 2005 and 22 - 24 March 2006 Date of Judgment: 15 June 2006 ______________ J U D G M E N T ______________ introduction 1.This is an employment claim transferred from the Labour Tribunal. The Plaintiff was employed as a sales director of the Defendant. He alleged that he was constructively dismissed by the Defendant and claimed arrears of wages and commission, wages in lieu of notice, severance payment, annual leave pay, reimbursement of business expenses and an inquiry of outstanding commission due. The Defendant denied liability and counterclaimed for over-payment of commission and damages for breach of duty. The Defendant and associated companies 2.The Defendant is one of the subsidiaries of Global-Tech Appliances Inc, a company listed in the New York Stock Exchange since April 1998. It was formerly known as Wing Shing International Limited. 3.The Defendant was incorporated on 19 March 1991. It was a family business with Mr Sham Kwong Ho as the chairman (the “Chairman”) and his son, John Sham, as its president. The Chairman was the ultimate authority of the company while John Sham had control of its day-to-day management and operation. The Chairman’s wife, Madam Hui Wai Chun was a director of the Defendant. She did not know much English, but she signed payment vouchers, purchase orders, cheques, commission application forms and some other documents. 4.The following were members of the senior management of the Defendant who were featured in this action. Mr Vicky Tai who used to be the Plaintiff’s equal but was promoted to the position of Vice President in charge of sales and marketing responsible for supervising the Plaintiff and members of two other sales teams for Europe and America. Mr Lee Cheok Yuen was the Director of Human Resources. Ms Becky Yung was an executive secretary and personal secretary to John Sham. The Plaintiff’s marketing assistant was Ms Tisa Lau. 5.In late 1999, sometime after the present action commenced, John Sham incorporated Pentalpha (Hong Kong) Limited to take over the business of the Defendant. Since then, the Defendant effectively ceased trading and its staff were transferred to Pentalpha (Hong Kong) Limited. The background and the parties’ case 6.The Plaintiff had a strong marketing background. In 1995, he applied for a position as purchasing manager in the Defendant’s company. He was interviewed by the Chairman. Presumably the Chairman was very much impressed by the Plaintiff and offered him a more senior position of General Manager. The Chairman also arranged a dinner to introduce the Plaintiff to his son, the President. The Plaintiff signed a contract of employment prepared by the Defendant (the “1995 Contract”) and commenced his employment as General Manager on 2 October 1995 at a monthly salary of $50,000. 7.Three months later, the Plaintiff’s position was changed to Executive Director – Asia Division at a basic monthly salary of $30,000 plus commission. He signed a second contract dated 10 January 1996 (the “1996 Contract”) for a term of one year effective from 16 January 1996. The Plaintiff said that the change was a promotion with substantial increase in income by way of commission; but the Defendant said it was a demotion because the Plaintiff was not fit for the position of a General Manager. Whether the change was a promotion or demotion is not material to the central issue in dispute. 8.It is common ground that the Plaintiff’s employment continued upon expiry of the 1996 Contract on 15 January 1997 without the parties entering into another written contract and that the Plaintiff’s responsibility was extended to the account of one Australian company, VB Distributors Pty Ltd (“VB Distributors”) on a non-exclusive basis. 9.It is also common ground that on 4 September 1998, John Sham issued a reminder to the Plaintiff about the signing of the 1998 Contract and a warning in connection with his performance and another memo on 7 September 1998 discounting the Plaintiff’s sales to VB Distributors (the “VB Sales”) by 65% for the purpose of calculating the Plaintiff’s annual sales volume. The Plaintiff’s case is that he wrote down his objections on that letter and the memo and returned them to John Sham who accepted them without any response and that at a meeting on 20 September 1998 John Sham told him to ignore his letter of 4 September 1998. That was denied by the Defendant. 10.On 29 January 1999, the Plaintiff lodged a complaint to the Labour Department against the Defendant for non-payment of commission. Nine days later, the Plaintiff took combined annual leave with the Chinese New Year Holiday from 8 to 24 February 1999. When he returned to his office on 25 February 1999, he was locked out by the Defendant. The Plaintiff then took sick leave from 3 March until 28 April 1999. On 5 March 1999, the Plaintiff’s assistant, Ms Tisa Lau was dismissed by the Defendant by giving her a month’s wages in lieu of notice. In mid March 1999, the Defendant cancelled the auto-pay arrangement for payment of salary into the Plaintiff’s bank account. By a letter dated 1 April 1999, the Defendant informed the Plaintiff to collect his salary in person at the office but that letter could not be delivered to the Plaintiff. On 29 April 1999, the Plaintiff filed his claim with the Labour Department. By a letter dated 3 May 1999 to the Defendant, the Plaintiff alleged that he was constructively dismissed by the Defendant for non-payment of wages. The issues 11.The Plaintiff’s pleaded case is based on the 1996 Contract which he alleged was continued on an on-rolling basis until the termination of his employment in May 1999 with the inclusion of the account of VB Distributors within his area of responsibility and that his commission in respect of the VB Sales was to be calculated according to the terms of the 1996 Contract. 12.The Defendant’s pleaded case is difficult to understand. As the evidence revealed, its instructions to its solicitors were initially given by Lee Cheok Yuen who had not the faintest idea what the dispute was about. At a later stage, Becky Yung replaced Lee Cheok Yuen as the instructing officer and introduced some meaningful amendments to the defence. The pleadings were then approved by the Defendant’s directors in the United States who, presumably, were ignorant about this case. The defence looked like a composition exercise. Some of the facts pleaded were contrary to the Defendant’s own documents and practically most of the allegations were unsupported by evidence and abandoned at trial. Lee Cheok Yuen who would be an important witness was not called to give evidence. Essentially, the Defendant’s case is that the 1996 Contract continued for a term of one year until 15 January 1998 and then to the end of March 1998 when it was replaced by a third contract (the “1998 Contract”) under which the Plaintiff had to achieve a benchmark or threshold sales volume of US$3,100,000 before he would be entitled to commission at a reduced rate. Despite agreement having been reached, the Plaintiff deliberately delayed signing the 1998 Contract. In respect of the commission for the VB Sales, the Defendant’s case is that the parties had entered into a separate commission agreement at the rate of US$0.50 per piece of goods sold. The Defendant counterclaimed for over-payment of commission. It also pleaded that the Plaintiff was in breach of his contract of employment for being incompetent and negligent, being complained of by customers, losing the Defendant’s documents, absence without leave and over-claiming commission. But it does not appear to be part of the Defendant’s case that it accepted those breaches as the Plaintiff’s repudiation of the contract of employment entitling the Defendant to terminate the Plaintiff’s contract of employment. 13.The issues are:
The facts 14.Except for the issue of constructive dismissal, the dispute between the parties is mainly factual. Hence my assessment of credibility of the parties’ witnesses is critical. Credibility of witnesses 15.The Plaintiff gave evidence and called no other witnesses. The Defendant called two witnesses, John Sham and Becky Yung. 16.The Plaintiff is a man in his fifties with wide exposure and full of experience of life and society. Except for a few occasions in which he demonstrated evasiveness in the witness box, he appeared to be an impressive witness. However, when his evidence is tested against the totality of evidence and incontrovertible documents, I find he was not telling the truth. Much of his case is based on his contemporaneous hand-written objections written on John Sham’s memo and letter to the Plaintiff and the Plaintiff’s written letters and memos, which the Plaintiff said were given to John Sham or placed on his desk and accepted by John Sham without a word. On a proper analysis of the evidence, I find those documents were all concocted for the purpose of building up a false case against the Defendant. 17.On the other hand, John Sham was a young man, less experienced in life than the Plaintiff. He was put in high position by his father. He impressed me even in the witness box as a very arrogant person. He denied having received the hand-written objections and other documents as alleged by the Plaintiff. He was not the type of boss who would quietly swallow the rudeness of his employee. Had he received those hand-written objection from the Plaintiff as the Plaintiff alleged, I have no doubt that he would have dismissed the Plaintiff if not on the first occasion at the latest on the second occasion. On his own evidence, he virtually abolished the Plaintiff’s commission since April 1998. As the Employer’s Return of Remuneration and Pensions in respect of Plaintiff for the year ending 31 March 1998 show, the Plaintiff’s commission accounted for about 57% of his total income. Though salary reduction appeared to have been the theme in the employment market at the time as a result of the Asian economic crisis, the reduction was unreasonable and unconscionable. But however much I disapprove of his conduct, I think John Sham was telling the truth. His evidence is corroborated by Becky Yung’s. I find John Sham a credible witness and I accept his evidence. 18.Becky Yung was in Court throughout the proceedings. She heard John Sham’s evidence and the Plaintiff’s and she also made notes. I bear in mind that she is still under the employ of the Defendant’s group of companies and may be subject to some pressure to give evidence in conformity with John Sham’s. Some aspects of her evidence did not tally with John Sham’s but they were reconcilable. Her evidence about a meeting in September 1998 in which John Sham confronted the Plaintiff about the commission in respect of the VB Sales is significant. Her evidence and the Plaintiff’s were in such a direct conflict that I have to accept the evidence of one and reject the evidence of the other. Becky Yung’s evidence was supported by contemporaneous and incontrovertible evidence while the Plaintiff’s was not. I accept Becky Yung’s evidence which also has the effect of discrediting the Plaintiff. 19.In conclusion, I find John Sham and Becky Yung were credible witnesses and I accept their evidence. I do not believe the Plaintiff where his evidence conflicts with John Sham’s and Becky Yung’s. This assessment of credibility is not a comfortable decision to reach, especially as I take the view that John Sham was an extremely high handed, arbitrary and even ruthless employer and that the Plaintiff was driven out of his job by John Sham’s very unreasonable and unconscionable conduct. He even took the trouble to transfer the Defendant’s business to another newly incorporated company so as to take its assets out of reach of the Plaintiff should the Plaintiff succeed in this action. But the conclusion that the Plaintiff was concocting documents to build up a false case against the Defendant in retaliation is both compelling and inescapable. Putting up a false case with the use of concocted documents is not anything that the Court would countenance. The 1996 Contract 20.Four clauses of Section (II) of the 1996 Contract are relevant. These clauses have an impact on the subsequent employment relationship of the parties. 21.Clause 1 defined the Plaintiff’s geographical area of marketing responsibility to be Asia which did not include Australia. The Australian market was under the responsibility of the marketing team for America. 22.Clause 6 provided that the Plaintiff’s monthly salary was $30,000 plus commission at a scale of 5% to 1% diminishing with increase in sales volume. The same clause also stipulated that the Defendant would provide the Plaintiff with at least one sales assistant or marketing executive. Pursuant to this clause, Ms Tisa Lau was employed as the Plaintiff’s assistant. 23.Clause 7 provided that either party may terminate the contract by giving a month’s notice or wages in lieu of notice to the other party. 24.Under Clause 15, the contract would expire on 15 January 1997 and would be “renewed every year with written consent and acceptance from both parties”. The effect of this clause is that the Plaintiff’s employment would terminate upon expiry of the term unless the contract was renewed by mutual consent in writing. The arrangements after 15 January1997 25.Upon the expiry of the 1996 Contract, the parties did not enter into any written contract. But it is common ground that the 1996 Contract was extended. That of course must have been extended by words of the mouth. John Sham said it was extended for one year to 15 January 1998 and then to 31 March 1998 on similar terms. The Plaintiff’s case went further. His case is that seven days prior to the expiry of the 1996 Contract, he and John Sham reached an oral agreement that thereafter the contract “will be renewed automatically and annually on on-rolling basis” on similar terms and, in due course, with inclusion of VB Distributors within his area of marketing responsibility. I shall deal with the commission in respect of the VB Sales separately. The Plaintiff prepared a note dated 9 January 1997 addressed to the Defendant setting out the above verbal agreement (Exhibit P-1) and placed it on John Sham’s desk. He did not hear any response from John Sham. 26.The note read:
The effect of the change was that instead of being a fixed term contract renewable upon mutual consent as it was under the 1996 Contract, the contract as renewed became one of indeterminable duration which will be renewed annually and automatically on a on-rolling basis unless determined by mutual written consent. The change demonstrated a significant twist in the permanency of the Plaintiff’s employment, though in any event, it may be terminated by either party giving to the other party one month’s notice. 27.But twenty months later, in response to John Sham’s letter of 4 September 1998 about the 1998 Contract and the letter of 7 September 1998 about discounting the Plaintiff’s VB Sales for the purpose of calculating his annual sales volume, the Plaintiff sent two type-written letters, both dated 10 September 1998 to John Sham expressing objection. In those letters, he did not mention the verbal agreement or his handwritten note of 9 January 1997. Instead, he emphasized that the 1996 Contract was “still effective by conduct and behaviour of acceptance on on-rolling basis” in one letter (Exhibit P-3) and “still effective on on-rolling basis by conduct and behaviour of acceptance” in the other (Exhibit P-7). The allegations contained in those two letters were inconsistent with the existence of the alleged verbal agreement and the handwritten note of 9 January 1997. This cast doubt on the veracity of his evidence about the verbal agreement to extend the 1996 Contract to one which is automatically renewed on a on-rolling basis. 28.The difference in this aspect of the Plaintiff’s case from the Defendant’s case is not of much significance. Whichever version of the case I accept, the next issue is whether the contract as extended was revised in the form of the 1998 Contract. For the reasons as I have given above and having regard to the totality of the evidence, I consider the Plaintiff’s version not credible and find that Exhibit P-1 is a recent concoction for the purpose of building a false case against the Defendant. The 1998 Contract 29.I now turn to the parties’ case about the making of the 1998 Contract. According to John Sham, about a month before April 1998, John Sham had a discussion with the Plaintiff in his office about the 1998 Contract. He suggested introducing a benchmark of US$3,100,000 based on the Plaintiff’s annual sales from 1 April 1997 to 31 March 1998 and the Plaintiff had to attain this benchmark before he would be entitled to commission on a diminishing scale from 2% to 0.5% in respect of sales over and above the benchmark. He also imposed on the Plaintiff liability for 50% of the interest in respect of sales orders secured by him which were not fulfilled due to default of the buyer. According to John Sham, the Plaintiff nodded in agreement. Then he called Becky Yung into his office and instructed her to draft the 1998 Contract. About a week later, Becky Yung prepared the 1998 Contract based on the 1996 Contract and gave it to the Plaintiff for signature. In the 1998 Contract, the Plaintiff’s position was changed to “Director of Sales & Marketing, Asia Division” instead of “Executive Director of Sales & Marketing, Asia Division”. By inadvertence, Becky Yung neglected to update the term relating to Plaintiff’s annual leave entitlement in respect of his two years’ service as a result his annual leave entitlement was effectively reduced to that of a new entrant under the 1998 Contract. The Plaintiff did not sign and return the copy of the 1998 Contract despite Becky Yung’s repeated reminders. 30.In September 1998, Becky Yung reported the Plaintiff’s default in signing the 1998 Contract to John Sham. On John Sham’s instruction, Becky Yung prepared a reminder and warning letter to the Plaintiff dated 4 September 1998. She handed the letter personally to the Plaintiff. The letter read:
31.The Plaintiff denied having ever discussed the 1998 Contract or the new commission terms with John Sham, or about reduction of his title from “Executive Director” to “Director”, or ever been given a copy of the 1998 Contract in April 1998. His case is that it was not until a date in September 1998 that he found the 1998 Contract on his desk. He considered the reduction in commission, the change in the title of his position and the reduction in his annual leave entitlement unreasonable. Then a few days later, he received the reminder and warning letter dated 4 September 1998. He was very angry. He disagreed with the complaint about his handling of the company’s documents and found it objectionable to have to report to the Vice President. He wrote the following reply in capital letters on John Sham’s letter of 4 September 1998:
The Plaintiff took a photocopy which he produced as Exhibit P-2 and gave the original to John Sham in person. There was no discussion between them on that occasion. 32.It is common ground that on 7 September 1998, John Sham issued a memo to the Plaintiff about discounting his VB Sales in calculating his annual sales volume. The note read:
According to John Sham, he had discussed the discount with the Plaintiff prior to the issue of the memo and the Plaintiff agreed to the discount. 33.The Plaintiff denied there was such a discussion. His evidence is that upon receipt of the memo, he wrote down his objection in bold ink in capital letters on the memo and gave it back to John Sham. He wrote:
34.Then according to the Plaintiff, on 10 September 1998, he wrote a formal letter to John Sham repeating his refusal and non-acceptance of the terms of the 1998 Contract, which is Exhibit P-3 which I have mentioned earlier. In the letter, he emphasized that he had never signed or agreed to the terms of the 1998 Contract and accused John Sham of purposely dating back the contract to 1 April 1998. In the second and third paragraphs of that letter, the Plaintiff wrote:
35.On the same day, the Plaintiff also wrote a separate letter regarding the commission in respect of the VB Sales, i.e. Exhibit P-7 which I have referred to earlier. He alleged John Sham’s memo as unreasonable and unacceptable. He denied having ever agreed with John Sham about discounting his VB Sales. 36.Then, according to the Plaintiff, on 20 September 1998 he had a discussion with John Sham about the letter of 4 September 1998. He discussed about the new commission rate, explained his handling of documentation and complained about having to report to the Vice President and the reduction of his title. He said that at the end of the discussion, John Sham told him to ignore the letter of 4 September 1998. 37.Mr Li, counsel for the Plaintiff, submitted that John Sham’s evidence of reaching agreement on the 1998 Contract in a meeting which lasted for half an hour as moonshine. He said there were substantial changes in the employment terms to be agreed which could not be concluded in half an hour. I think there were not much to be discussed. There were only two changes in the terms of employment: introduction of a benchmark and a reduced rate of commission. All the other terms of employment were unchanged. There was nothing to be discussed. John Sham was just dictating his new terms to the Plaintiff. 38.Mr Li also doubted John Sham’s evidence that the Plaintiff accepted the revised terms without making counter proposals. At the time, reduction of wages was the theme of the day in view of the Asian economic crisis. The Defendant had three sales teams. The commission rate given to members of the other teams was lower than that given to the Plaintiff. The Defendant obviously did not find favour with the Plaintiff and elevated Vicky Tai to the position of Vice President above him and required him to report to Vicky Tai, a matter which the Plaintiff could not hide his feeling of indignation in the witness box. The Plaintiff had no choice, but either to take it or leave it. I do not think this aspect of John Sham’s evidence incredible. Half an hour was more than adequate for the purpose. 39.Mr Li queried why John Sham did not sign the 1998 Contract first before it was given to the Plaintiff for signature. He contrasted the 1998 Contract with the signing of the 1995 and 1996 Contracts. John Sham said it was his practice. I think what John Sham said was not incredible. The Plaintiff and the Defendant were total strangers prior to 1995. The 1995 Contract was in the form of an offer letter written to a job applicant. It was natural to have it signed before issue. The 1996 Contract represented a significant change in their employment position. It was a demotion according to the Defendant. At least it represented a termination of the 1995 Contract. It was also reasonable to have it signed before issue. The circumstances surrounding the Defendant signing the two contracts in the form of offer letters provided no parallel for the signing of the 1998 Contract. 40.Mr Li submitted that the 1998 Contract was a creation after the event because the benchmark could not have been ascertained until a few months after 1 April 1998 and could not have been available a month before 1 April 1998 when the contract was allegedly discussed according to the Defendant’s case. He further submitted that the benchmark was wrong as the Plaintiff’s total sales for the year ending 31 March 1998 was US$2,900,000 instead of US$3,100,000. John Sham’s answer was that the value of US$3,100,000 was a pre-estimate only. To that answer, Mr Li’s criticism was that it was grossly unfair. It certainly was. Not only that, the revised commission rate and the benchmark were unconscionable. But I am not concerned with fairness of a commercial agreement but with the true fact and the legal consequence on those facts. The value of US$3,100,000 was obviously an estimate as that figure was mentioned before it could be available. However, the very fact that it was out of line with the true annual sale by such a margin adds more weight to John Sham’s evidence that it was a pre-estimate and not a concoction after the event. Indeed I would have been more cautious or even skeptical of John Sham’s evidence if the two figures tallied precisely. 41.Mr Li criticised John Sham’s evidence as being inconsistent with Becky Yung’s in that according to John Sham he discussed the 1998 Contract with the Plaintiff in the absence of Becky Yung but according to Becky Yung she was present at the meeting. I think counsel misunderstood the evidence. The evidence was that John Sham discussed the 1998 Contract with the Plaintiff in the absence of Becky Yung and after having reached agreement, he summonsed Becky Yung into his office and gave her instruction to draft the 1998 Contract by repeating to her what had been agreed. Their evidence is reconcilable. 42.However, there is one aspect of the Defendant’s case which is inherently incredible. The effect of the 1998 Contract is that it abolished the Plaintiff’s commission and made it practically difficult for the Plaintiff to earn any commission, unless he surpassed his sales volume of the previous year. As shown in the Employer’s Return of Remuneration and Pensions in respect of the Plaintiff for the year ending 31 March 1998, the commission he earned for that tax year was $464,223 as compared with his salary of $349,000. The would-be reduction in income under the 1998 Contract was as much as 57%. It is difficult to imagine that had there been any discussion about those terms the Plaintiff would have simply nodded his head in agreement. It casts doubt whether in fact the discussion was a pure concoction of John Sham and Becky Yung. 43.But most importantly, when the Plaintiff’s evidence is tested against incontrovertible documentary evidence, I find the Plaintiff’s evidence could not be true and that the John Sham’s evidence is consistent with the contemporaneous documentary evidence. The Plaintiff said he first saw the 1998 Contract a few days before he received John Sham’s letter of 4 September 1998. However, when the Plaintiff’s commission applications submitted before September 1998 were examined, I find that in respect of invoices issued prior to 1 April 1998, the commission was invariably paid within a few days of application. There were three applications made on 8 June, 18 June and 3 August 1998 in respect of invoices issued in May and June 1998. Those applications were rejected or not entertained. This is consistent with the Defendant’s case that those applications did not meet the benchmark requirement. This shows that the accounts department was operating on the basis of the 1998 Contract. The irresistible inference is that John Sham must have discussed and agreed with the Plaintiff about the new commission terms under the 1998 Contract and informed the accounts department before June 1998. Another significance of those applications is that they were made as early as June 1998 for invoices issued in May. If the Plaintiff had not been paid his commission for three months by September 1998, he must have enquired and must have been informed by the accounts department or by John Sham that he was not entitled to commission because of the benchmark requirement. This casts grave doubt on his evidence that he was not aware of the 1998 Contract. The Plaintiff’s case is even more incredible than the Defendant’s case of drastic reduction in commission. I think the truth was that the Plaintiff unhappily and reluctantly submitted to the unfavourable terms through lack of bargaining power. 44.John Sham denied having received the Plaintiff’s handwritten objections on his letter and memo of 4 and 7 September 1998 (Exhibits P-2 and P-6). He said had he been shown the handwritten objections on his letter and memo, whether directly or indirectly, he would have asked the Plaintiff to go into his office, scolded him, asked him whether the Plaintiff wished to continue to work for the Defendant and would have dismissed the Plaintiff if he should reply in the negative. The Plaintiff said that he did not regard writing on his boss’ letter rude and that was what he used to do in the United States. I think otherwise. It would have been normal for a senior officer to endorse on the document of his subordinate, but not the other way round especially when the endorsement amounted to a rejection of the proposal or instruction contained in the document. I consider the Plaintiff’s handwritten objections on his boss’ formal letter and memo rude and offending or at least that John Sham subjectively found it to be so. Given John Sham’s very arrogant attitude, I have no doubt that if the events had occurred in the way the Plaintiff described, John Sham would have done exactly what he said. John Sham was not a wee child as the Plaintiff would have me to believe. It is impossible for me to believe that John Sham would have swallowed the two rude handwritten objections on his letter and memo quietly and told the Plaintiff to forget about his letter of 4 September 1998. 45.A special feature of the Plaintiff’s case is that every aspect of his case is supported by documents issued by him and given to John Sham or placed on his desk and to which John Sham did not respond. Copies of those documents were produced by the Plaintiff but they were not discovered from among the Defendant’s documents and the receipt of those documents was strenuously denied by John Sham. Earlier on, I have rejected the Plaintiff’s evidence that he had given John Sham a handwritten note (Exhibit P-1) confirming their verbal agreement that the 1996 Contract was continued on a on-rolling basis. Likewise, I reject the Plaintiff’s evidence about having sent John Sham his hand-written objections on John Sham’s letter and memo (Exhibit P-2 and P-6) and his letters (Exhibits P-3 and P-7) dated 10 September 1998. 46.I also reject the Plaintiff’s evidence that at a meeting on 20 September 1998 John Sham told the Plaintiff to ignore his letter of 4 September 1998. A lot of things happened in September 1998. John Sham complained about the Plaintiff’s poor handling of documentations as a result of which the Vice President could not follow up on his work. John Sham discovered the Plaintiff had over-claimed commission (see paragraphs 52 to 60). The Plaintiff refused to report to the Vice President. John Sham said this was not a principle he could compromise. Thus, I do not accept the Plaintiff’s evidence that John Sham had told him to ignore the letter of 4 September 1998. 47.Having rejected the Plaintiff’s evidence about those documents (i.e. Exhibits P-1, P-2, P-3, P-6 and P-7) and having tested the parties’ case against incontrovertible documents, I am satisfied that John Sham and Becky Yung were telling the truth. I accept their evidence. 48.Another aspect of the Plaintiff’s case is that the Defendant withheld and delayed payment of commission. There were five sets of commission applications in June, August and September 1998 in respect of invoices issued as early as March 1997. The Plaintiff said he had not been paid commission in respect of those applications and he resubmitted them on 12 January 1999 and obtained a receipt stamp dated 12 January 1999. The defence case is that those applications were not submitted until 12 January 1999 and in one lot. There was no dispute that the Plaintiff was entitled to commission in respect of those applications and the commission was promptly paid within a week on 19 January 1999. As the documents show, with the exception of that lot of applications and two other applications the payment of which was withheld pending the Plaintiff’s agreement to deduct the overpaid commission in respect of the VB Sales, the Defendant paid its commission within a relatively short time of the application. Except for that lot of applications, the other applications did not bear a receipt stamp. This is unusual. It is also interesting to note that the Plaintiff lodged a complaint of non-payment of commission to the Labour Department on 29 January 1999, which must have been made without the Defendant’s knowledge. The Defendant paid the commission promptly without knowledge that a complaint had been made. In the light of the totality of the evidence and my assessment of the Plaintiff’s credibility, I find that the late submission of those five sets of application was made by the Plaintiff to engineer a case of late or non-payment of commission. 49.Mr Li raised some legal arguments that if ever there was the 1998 Contract, it was invalid. Firstly, he submitted that the 1998 Contract was not a new contract but a revision of an existing contract. The revision was so unfavourable that he queried how John Sham could have induced the Plaintiff to agree to the revision and what provided the consideration. The answer is one of political reality which I have already considered. Salary reduction was a recurrent theme at the time due to the Asian economic crisis. As I have already mentioned, the employment market was against the Plaintiff and his position in the Defendant was not strong. He had no bargaining power. The Plaintiff had no choice. The Defendant could at any time give a month’s notice to terminate the Plaintiff’s employment if the Plaintiff did not accept the new terms. The Plaintiff’s choice was either to take it or leave it. As for consideration, the Defendant’s agreement to continue the Plaintiff’s employment on the new terms or the Defendant’s forbearance from exercising its right to terminate the employment provided the necessary consideration. This may be nothing but a peppercorn, but is nevertheless sufficient as a matter of law. 50.Mr Li argued that the 1998 Contract was void for uncertainty as the very important term regarding salary was missing in the 1998 Contract. I am bewildered by such a submission. With respect, Mr Li has allowed himself to be confused between a contract being an agreement as a meeting of the mind and a contract being a document evidencing such an agreement. Unless prescribed by law, a contract need not be in writing. A contract of employment may be made orally. It is true that the document recording the terms of 1998 Contract had not been signed by the parties and on that document the term as regards salary was missing. But on the fact, there was no dispute that the parties understood the salary was $30,000 as before. There was no dispute that the Plaintiff received his $30,000 every month thereafter as before. I do not think that 1998 Contract was void for uncertainty of term. 51.Mr Li referred to paragraph 9(bb) of the Re-Amended Defence in which the Defendant pleaded that the Plaintiff had accepted the 1998 Contract “by performance.” Mr Li submitted that this is a plea of contract by conduct and that the court will only imply a contract by conduct if the conduct unequivocally referred to the contract sought to be inferred and not a contract which might be referable. He quoted the case of Shanghai Tongji Science & Technology Industrial Co Ltd and Casil Clearing Ltd [2004] 7 HKCFAR 79 at 95H-96D. With respect to Mr Li, in the context of the pleading, I think the Defendant was pleading that the Plaintiff had by his conduct accepted the amended terms of the contract and not that a new contract, one which had never existed before, has been brought into existence by conduct, as in the case of a passenger boarding a bus. The parties were already in a contractual relationship. On the facts as I have found, the parties discussed and agreed on a revision of the terms of the employment. They continued their contractual relationship on the basis of the 1998 Contract. The Defendant rejected the Plaintiff’s application for commission in respect of sales made after 1 April 1998 as the Plaintiff had not achieved the benchmark. For thirteen months, the Plaintiff continued his employment with the Defendant. Such conduct was consistent with his having accepted the 1998 Contract. I dismiss Mr Li’s argument as being misconceived. Commission for the VB sales 52.It is common ground that the account for VB Distributors was originally outside the Plaintiff’s geographical area of responsibility. Upon the representation of the Plaintiff that he had good connections with the owners of VB Distributors who were Japanese, that they were interested in purchasing breadmakers from the Defendant and that he could generate good sales, John Sham agreed in May or June 1997 to assign the account of VB Distributors to the Plaintiff on a non-exclusive basis. The Australian market, in which VB Distributors was located, was within the responsibility of the American sales team and the profit margin in Australia and America was much lower than that in Asia. Hence according to John Sham, it was agreed between him and the Plaintiff that the commission rate for the VB Sales was US$0.50 per piece and that the rate of 5% on sales value under the 1996 Contract was inapplicable. The Plaintiff’s case is that the parties agreed that the commission rate for the sales to VB Distributors was the same as that under the 1996 Contract. He produced his hand-written letter dated 28 August 1997 recording this oral agreement (Exhibit P-4). He sent a further hand-written letter dated 15 September 1997 as re-confirmation when VB Distributors placed order (Exhibit P-5). In both letters he wrote that the commission was “as per the terms and conditions stipulated in the Employment Agreement signed by both of us on January 10, 1996”. 53.Then, according to John Sham, in about June 1998, as he was processing the Plaintiff’s commission application in respect of the VB Sales, he discovered that the Plaintiff was claiming commission at the rate of 5% of the sales value instead of US$0.50 per piece. He summonsed Becky Yung to his office, explained to her the commission terms in respect of the VB Sales and instructed Becky Yung to verify with the accounts department the Plaintiff’s commission claims for the past few months. 54.Becky Yung obtained a printout dated 28 July 1998 showing the Plaintiff’s sales list. She found the Plaintiff had obtained commission in respect of four sales to VB Distributors at the rate of 5% on the sales value instead of at the rate of US$0.50 per piece which resulted in an over-claim and over-payment of $112,877. She reported her finding to John Sham in his office. It so happened that the Plaintiff was also present. When John Sham confronted the Plaintiff with the over-claim, the Plaintiff did not assert his right to commission at 5% of sales value, but just smiled and nodded his head. In view of the date of the printout, this meeting must have taken place in about July or August 1998 and in any event some time before 4 or 20 September 1998. The Plaintiff’s evidence is total denial. 55.Mr Li vigorously attacked the credibility of John Sham’s evidence about that separate commission agreement. Firstly, he submitted that the Defendant’s defence as tendered by Lee Cheok Yuen at the Labour Tribunal and in the original defence in this action was that the Plaintiff was not entitled to commission for sales to VB Distributors and that in the original defence the Defendant even alleged that the Plaintiff induced Hui Wai Chun to approve his commission claims, thereby suggesting fraud on the part of the Plaintiff. He queried the genuineness of the present defence which was introduced four years after the initial defence was filed. In addition, he submitted that John Sham was changing his evidence in firstly asserting that the commission rate for sales to VB Distributors was agreed at US$0.50 and later adding that it was also subject to the benchmark. This is a very weighty allegation. However, on the facts, John Sham’s evidence about the commission rate at US$0.50 per piece is not a recent allegation. He instructed Becky Yung about the commission rate and to verify the Plaintiff’s commission claim in June 1998. That evidence is supported by the date of the printout of the Plaintiff’s sales list which was not contested by the Plaintiff. I think Lee Cheok Yuen probably acted without seeking proper instruction from John Sham. As the evidence revealed, Lee Cheok Yuen was also the person who initially gave instructions to the solicitors acting for the Defendant. It was at a later stage when Becky Yung took over from Lee Cheok Yuen who had left the Defendant’s employment that amendments to the defence were made. I draw no adverse inference against John Sham or Becky Yung for the late amendments to the defence. I do not think John Sham was changing his evidence by adding the point about the benchmark. On the defence case, the question of benchmark was not relevant in respect of sales before April 1998 and it was in respect of commission for those sales that John Sham instructed Becky Yung to verify. But then the benchmark was applicable after April 1998 and that was the defence to the Plaintiff’s claim for commission in respect of sales made after 1 April 1998, including sales to VB Distributors. It is also implicit from John Sham’s letter to the Plaintiff dated 7 September 1998 that the benchmark was applicable to sales to VB Distributors made after 1 April 1998. I do not think he could be criticised of changing his evidence. 56.Mr Li also criticised John Sham’s evidence as inconsistent with Becky Yung’s. He submitted that it was John Sham’s evidence that upon reaching agreement with the Plaintiff about the commission rate for VB Sales he expected Becky Yung to inform the accounts department. However, it was Becky Yung’s evidence that she first learned about the commission rate in June 1998 when John Sham told her to verify if the Plaintiff had over-claimed. The evidence was indeed conflicting, but either of them could have been genuinely mistaken without damage to their honesty. In view of the inconsistency, I would assess the evidence in the light most favourable to the Plaintiff, i.e. on the basis of Becky Yung’s evidence. 57.I shall now analyse the evidence of the parties in respect of that meeting. Firstly, Becky Yung’s evidence is supported by a contemporaneous printout dated 28 July 1998 at 11:38 pm. Though the timing was peculiar, I think it could be explained. There could be no doubt that Becky Yung obtained the printout as a result of John Sham’s discovery of an irregular claim. The benchmark did not apply to those sales as they were made before April 1998. It must have been the commission rate which struck John Sham as being questionable. John Sham did not make this up for the purpose of this trial. He instructed Becky Yung about the rate in June 1998 and Becky Yung calculated the commission based on that rate. This evidence points to consistency of John Sham’s conduct with there being a commission agreement at the rate of US$0.50 per piece. If John Sham had instructed Becky Yung to verify the Plaintiff’s commission claims and if Becky Yung had discovered the irregularity, she must have reported the irregularity to John Sham. It must then follow that John Sham must have confronted the Plaintiff on a suitable occasion. On the question whether there was this confrontation and what happened during the confrontation, the evidence of Becky Yung and John Sham are so diametrically opposed to those of the Plaintiff that their evidence could not be reconciled except on the basis that either party was not telling the truth. Naturally, when the Plaintiff was so confronted, if there had been a commission agreement in terms of the 1996 Contract, he would have asserted that agreement. On the evidence of John Sham and Becky Yung, he did not. He only smiled and nodded his head. I take that to be an implied admission that his claim was in breach of his agreement with John Sham that his commission was calculated at US$0.50 per piece. I am driven to reject the Plaintiff’s evidence and accept Becky Yung’s and John Sham’s evidence. 58.Mr Li referred to four sales invoices to VB Distributors issued between October 1997 and March 1998 and in respect of which the Defendant paid the Plaintiff commission at the rate of 5% of the invoice value. He said that the Defendant did not deduct the overpayment and continued paying the Plaintiff the commission he earned. Hence, he submitted that the Defendant’s payment of commission under those invoices supported the Plaintiff’s case and negatived the Defendant’s case. However, those were the first sales to VB Distributors. The payments were made by the Defendant on 12 January and 9 April 1998. The Defendant’s case is that its accounts department was unaware of the specific commission agreement and overpaid the Plaintiff in accordance with the calculation made by the Plaintiff. John Sham became aware of the irregularity in June 1998 when the Plaintiff submitted another commission application in respect of the VB Sales. He instructed Becky Yung to verify the Plaintiff’s commission applications in the previous months and discovered the over-claim and overpayment. The accounts department did attempt to recover the overpayment from the Plaintiff. Even according to the Plaintiff’s evidence he was asked by the accounts manager to sign an acknowledgement on one of his commission application forms for setting off the overpayment, but he refused. In the light of the totality of evidence, especially the Plaintiff’s implied admission of the over-claim when confronted by John Sham, I dismiss Mr Li’s argument. 59.The greatest weakness of the Defendant’s case is that despite that the commission rate for the VB Sales was agreed in May or June 1997, John Sham did not mention the commission rate in respect of VB Sales during the discussion with the Plaintiff about the 1998 Contract and did not incorporate the rate into that contract. However, having regard to the totality of evidence and my assessment of the credibility of the witnesses, I consider this was an oversight on the part of John Sham. As the contract was drafted by Becky Yung and as she did not know about the commission rate until June 1998, she could not have incorporated that commission rate for VB Sales into the 1998 Contract without having been so instructed by John Sham. 60.Accordingly, I find that when John Sham agreed to assign the account of VB Distributors to the Plaintiff, John Sham and the Plaintiff agreed that in view of the peculiar circumstances, the Plaintiff’s commission rate for the VB Sales was US$0.50 per piece and that the rate under the 1996 Contract was inapplicable. I also accept John Sham’s evidence that in June 1998 he discovered the Plaintiff had over-claimed his commission in respect of the VB Sales and he confronted the Plaintiff sometime towards the end of July or in August 1998 and the Plaintiff impliedly admitted the over-claim. Furthermore, the Plaintiff’s entitlement to commission in respect of the VB Sales after 1 April 1998 was also subject to his first fulfilling the benchmark requirement. The Plaintiff’s term of employment as regards payment of commission 61.On my finding, prior to 1 April 1998, the Plaintiff was entitled to commission at the rate of US$0.50 per piece in respect of the VB Sales or at the rate as stated in Clause 6 of the 1996 Contract in respect of all other sales. Since 1 April 1998, the Plaintiff’s entitlement was subject to his achieving the benchmark total annual sale of US$3,100,000 and his commission rate in respect of VB Sales was US$0.50 per piece and that in respect of all other sales was at the reduced rate as stated in Clause 6 of the 1998 Contract. For the purpose of calculating the benchmark, the VB Sales would be discounted by 65% with effect from 7 September 1998. But this additional term has no bearing in this case. Circumstances leading to the termination of the Plaintiff’s employment 62.On 22 January 1999 Lee Cheok Yuen issued a circular announcing that the Chinese New Year holiday for the Defendant would commence from 14 February 1999 until 22 February 1999. On 26 January 1999, the Plaintiff applied for and was granted annual leave by John Sham from 8 to 13, 23 and 24 February 1999. Thus, effectively, the Plaintiff was off duty from 8 to 24 February 1999 and due to resume duty on 25 February 1999. On 29 January 1999, the Plaintiff lodged his complaint at the Labour Department against the Defendant for non-payment of commission. Presumably, this complaint was brought to the attention of John Sham while the Plaintiff was on leave. That must also have been what the Plaintiff intended. On John Sham’s instruction, Becky Yung changed the lock to the Plaintiff’s office on 8 February 1999. 63.When the Plaintiff returned to the office after his leave expired on 25 February 1999, he was locked out of his office. His marketing responsibility was assigned to the Vice President and the Director of Research and Development. His incoming telephone calls were diverted away from him. Neither John Sham nor Lee Cheok Yuen was at the office. The Plaintiff was given a letter issued by Lee Cheok Yuen informing him that in view of his dispute about the commission, John Sham gave him additional paid leave until 27 February 1999 (28 February 1999 was a Sunday) and invited him to a meeting on 1 March 1999. The Plaintiff hanged around till the end of the day. He returned to the office on 26 February 1999, but could not find Lee Cheok Yuen or John Sham. He gave a letter to John Sham through his secretary and complained about being locked out of his office. The Plaintiff attended the office on 1 March 1999, but neither Lee Cheok Yuen nor John Sham was there to hold the meeting with him. 64.On 3 March 1999, the Plaintiff was found to be suffering from tendonitis and was given sick leave by a private medical practitioner from 3 March to 11 March 1999. On 11 March 1999, the Plaintiff attended a conciliation meeting with Lee Cheok Yuen in the Labour Department. From 12 March to 10 April 1999, the Plaintiff was given sick leave by a psychiatrist for suffering from adjustment reaction. In mid March 1999, the Defendant cancelled the auto-pay arrangement for payment of salary into the Plaintiff’s bank account. On 1 April 1999, Lee Cheok Yuen wrote to the Plaintiff and informed him to collect his salary in person at the Defendant’s office. But this letter could not be delivered to the Plaintiff. On 12 April 1999, the Plaintiff was admitted to Queen Mary Hospital for depression. He was discharged from the hospital on 28 April 1999. During the period while he was on sick leave or was hospitalized, he informed the Defendant of his sick leave and sent copies of his sick leave certificates to the Defendant by fax. Upon his discharge from the hospital, he applied for two days annual leave without pay for 29 and 30 April 1999. The Plaintiff did not have to go to work on 1 and 2 May 1999, which were public holidays. Then on 3 May 1999, the Plaintiff sent a letter to the Defendant alleging that he had been constructively dismissed. the plaintiff’s claims Arrears of commission 65.The Plaintiff claimed outstanding commission in the amount of $9,281.07 for the year 1997, $858,212.26 for the year 1998 and $818,970.00 for the year 1999. The claim for the year 1999 was based on information currently available to the Plaintiff and is subject to inquiry should the Plaintiff be successful. 66.The Plaintiff’s claim for the year 1997 was in respect of one sale invoice, No 3270, issued to Ocean Peace Co Ltd on 10 February 1997, but no application for commission had been made by the Plaintiff until 18 December 1998. As the sale was effected in 1997, the commission term under the 1996 Contract was applicable. The Defendant does not dispute liability for this claim. The commission calculated by the Plaintiff in the commission application form and approved by the Defendant was $9,267.30. The amount claimed in this action was $9,281.07. The difference between the Plaintiff’s claim in this action and in the application form was due to the difference in exchange rate of the US dollar adopted by the Plaintiff. I consider the rate he used in the application was more reflective of the exchange rate at the time and allow his claim in the amount of $9,267.30. 67.In his statement of claim the Plaintiff set out the total sales to the various clients for the year 1998 without showing when the sales were effected. The Plaintiff’s claim for commission for the year 1998 is difficult to assess because on my finding of fact there was a change in the terms relating to commission on 1 April 1998, which included a benchmark of US$3,100,000. The Plaintiff was not entitled to commission in respect of sales after 1 April 1998 as there was no dispute that he had not achieved the benchmark. I could only do the best I could from the invoices produced by the parties. Wherever possible, I shall adopt the exchange rate as quoted by the Plaintiff in his commission application form which is more reflective of the exchange rate of the US dollar at the time. 68.In respect of the sales to Tiger Corporation, the Plaintiff claimed a total sales of US$319,581.06. However, only two sales under invoices S4972/98 and S4985/98 were effected before 1 April 1998. The total sales under those two invoices were US$122,264.64. The commission due was HK$47,316.42 (US$122,264.64 x 5% @ 7.74). The Defendant does not dispute liability for commission for those two sales. The application for commission in respect of those sales was made on 18 May 1998 and approved, but was withheld due to the Plaintiff’s over-claim in respect of the commission for the VB Sales. The Plaintiff is not entitled to commission in respect of the other sales to which the benchmark applied and he had not achieved the benchmark. 69.In respect of the VB Sales, only four sales were effected before 1 April 1998. Those invoices were S4929/98, S4950/98, S4951/98 and S4986/98. The quantities sold under those four invoices were 13,000 pieces. Commission for Invoice No S4986/98 had not been accounted for by the Defendant. The commission calculated at the exchange rate of $7.745 per US dollar as adopted by the Plaintiff in his commission application form was HK$50,342.50 (US$0.50 x 13,000 @ 7.745). The Plaintiff was not entitled to commission in respect of the other VB Sales as he had not achieved the benchmark, even without taking into account the 65% discount on the sale for the purpose of calculating his annual sales effective from 7 September 1998. 70.The Plaintiff claimed a total sale of US$90,750 to Shun Hing Electric Works & Engineering Co Ltd under three invoices. Except for Invoice No S4945/98 dated 27 February 1998, all sales were effected after 1 April 1998 to which the benchmark applied. The commission under Invoice No S4945/98 was HK$235.50 (HK$4,710 x 5%). 71.The Plaintiff claimed commission in respect of sales to Malaysia Electric Corporation Berhad in the total amount of US$75,108.64 under two invoices, No S4835/98 and S5181/98. Invoice No S4835/98 in the amount of US$45,796.64 was issued to Malaysia Electric Corporation Berhad. The amount of commission earned under this invoice was HK$17,723.30 (US$45,796.64 x 5% @ 7.74). Invoice No S5181/98 was issued to Malaysia Electric Corp (HK) Ltd, which is presumably an associated company of Malaysia Electric Corporation Berhad. The amount in the invoice was US$29,312, but the Plaintiff was not entitled to commission in respect of this invoice as it was issued on 2 June 1998 to which sale the benchmark was applicable. 72.The Plaintiff claimed commission in respect of Invoice No S4973/98 for sale to Ocean Peace Co Ltd in the amount of US$27,400. The transaction was effected on 11 March 1998. The amount of commission earned was HK$10,603.80 (US$27,400 x 5% @ 7.74). 73.The Plaintiff claimed commission in respect of two sales to Tescom Denki Co Ltd in the amount of US$121,794. The Plaintiff was entitled to commission under Invoice No S5025/98 in the amount of US$61,194 which was issued on 27 March 1998. The amount of commission was HK$23,682.08 (US$61,194.00 x 5% @ 7.74). He was not entitled to commission under the other invoice, No S5069/98 in the amount of US$60,600 issued on 21 April 1998 for not having achieved the benchmark. 74.The Plaintiff claimed commission for sales to Otaki (Hong Kong) Ltd under six invoices totalling US$105,657.20. Only two invoices were issued before 1 April 1998. Invoice No S4838/98 was issued on 7 January 1998. Commission for this sale had already been paid to the Plaintiff on 9 April 1998. This was a repeated claim which must be disallowed. Invoice No S4981/98 in the amount of US$39,982.20 was issued on 14 March 1998. The amount of commission earned was HK$15,473.11 (US$39,982.20 x 5% @ 7.74). The Plaintiff is not entitled to commission in respect of the other invoices which were issued after 1 April 1998 for not having achieved the benchmark. 75.The Plaintiff also claimed commission for sales to Twinbird Corporation and Peace Port Co Ltd. But these transactions were made after 1 April 1998 and the Plaintiff was not entitled to commission for not having achieved the benchmark. 76.The Plaintiff’s commission claim for the year 1999 was based on a total sale of US$2,320,755.32. That was far below the benchmark even without taking into account the 65% discount in respect of sales to VB Distributors with effect from 7 September 1998. He was not entitled to commission for the year 1999. As the Defendant could not have achieved the benchmark, it is not necessary to order an inquiry or an account of outstanding commission due. 77.Based on the above calculation, the total amount of commission earned by the Plaintiff was HK$174,644.01 ($9,267.30 + $47,316.42 + $50,342.50 + $235.50 + $17,723.30 + $10,603.80 + $23,682.08 + $15,473.11). 78.The Defendant’s case in respect of the commission claim is that the Plaintiff earned commission in the amount of $1,104,523.76 and had been paid $902,743.35 with $111,780.41 outstanding. It alleged that the Plaintiff had been overpaid $112,877 in respect of four invoices issued to VB Distributors, namely S4654/98, S4655/98, S4656/98 and S5767/98, which was more than enough to set off the Plaintiff’s commission claim. While I am satisfied on the evidence of Becky Yung that the Plaintiff had been overpaid $112,877 in respect of the four invoices, the Defendant had not shown how the Plaintiff’s commission in the amount of $1,104,523.76 was calculated. The Defendant’s assertion in the defence is not supported by any evidence or calculation. On the other hand, by reference to the Plaintiff’s claim, I was able to calculate the amount of commission due which is higher than the amount the Defendant admits to be outstanding. Accordingly, I reject the Defendant’s defence. I find that the amount of commission earned by the Plaintiff was HK$174,644.01. After setting off the over-payment in the amount of $112,877, the amount of commission due to the Plaintiff is HK$61,767.01. Outstanding salary 79.In paragraph 9(i)i) and 9(i)v) of the Defence, the Defendant pleaded that it was ready and willing to pay the Plaintiff’s wages and four cheques had been prepared for the Plaintiff’s collection in the Defendant’s office. Presumably, those cheques covered payment of the Plaintiff’s salary up to the end of April 1999. Accordingly, the Defendant has admitted liability for the Plaintiff’s wages up to the end of April 1999. I would also hold the Defendant liable for wages for the first two days of May 1999. 80.There is no dispute that the Defendant stopped payment of the Plaintiff’s salary since 16 March 1999 and the Plaintiff had not received his salary for the period between 16 March and 3 May 1999. The Plaintiff was on sick leave from 3 March to 28 April 1999. The Defendant could have pleaded that the Plaintiff was not entitled to be paid wages for the above period and in the alternative that if he was entitled to any payment it would be sickness allowance under section 35 of the Employment Ordinance, which is fourth-fifths of the Plaintiff’s regular salary. Had the matter been before a Presiding Officer, the above deficiency in pleading would have been taken care of. However, the Defendant is legally represented. In the light of the state of the pleading, I shall assess the Plaintiff’s claim for full salary from 16 March to 28 April 1999 and from 1 to 2 May 1999, the Plaintiff having taken two days annual leave without pay on 29 and 30 April 1999. Accordingly, I assess the Plaintiff’s outstanding salary to be $45,419.35 ($30,000 x 16/31 + $30,000 x 28/30 + $30,000 x 2/31). Constructive dismissal 81.Counsel of both parties have no disagreement that the classic statement of Lord Denning in Western Excavating (ECC) Ltd v Sharp [1978] ICR 221 is a correct statement of the legal principle on constructive dismissal. Though short of a formal dismissal by his employer, an employee may treat himself as being dismissed by his employer if the conduct of his employer amounted to a significant breach going to the root of the contract of employment and the employee accepts the breach as a repudiatory breach. However, the employee must accept the breach prompty or he may be taken to have affirmed the breach. Lord Denning said at 226:
82.The conduct relied on by the Plaintiff are:
Save for the failure to pay commission and salary, the Defendant does not dispute the above conduct. 83.In respect of the first three grounds, Mr Li submitted that this was the worst treatment that could be meted out to an employee and that it was beyond argument that the Plaintiff had been constructively dismissed. The Defendant locked out the Plaintiff from his office, assigned his work to other employees, diverted his incoming telephone calls and failed to meet him to discuss their dispute on 1 March 1999. The message conveyed by the treatment on 25 February and 1 March 1999 was unequivocal. There was no more work for the Plaintiff. On such evidence, the Plaintiff was entitled to consider himself as having been constructively dismissed on 1 March 1999. 84.However, on the facts, the Plaintiff did not consider his employment as having been terminated on that day. He went home. He took sick leave for two months. During those two months, he considered he was bound by his contract of employment. He faxed his sick leave certificates to the Defendant. Eventually, on 30 April 1999, he wrote to the Defendant to apply for no pay annual leave. He wrote as follows:
The tone of the memo was amicable. The Plaintiff signed his name over his title of Executive Director. He sought permission to take three days leave without pay. The memo conveyed to its reader that the Plaintiff considered he was still bound by his contract of employment. On an objective view, the Plaintiff had not accepted the Defendant’s conduct as repudiatory. Two months was a long time, though the Plaintiff was on sick leave and was hospitalised during that period. In the meantime, the Defendant had kept the contract alive. It paid the Plaintiff’s wages up to 15 March 1999. It offered to pay the Defendant’s wages thereafter by cheque at the Defendant’s office. I find that on an objective view, the Plaintiff must be taken to have affirmed the contract. In fact, the Plaintiff never relied on those treatments as the ground for constructive dismissal. It was raised by counsel in argument only. 85.In fact, the ground relied on by the Plaintiff for constructive dismissal was the Defendant’s non-payment of wages for the period from 16 to 31 March 1999. In his letter dated 3 May 1999, the Plaintiff wrote:
86.The circumstances surrounding the non-payment of the Plaintiff’s salary were as follows. The Defendant used to pay the Plaintiff salary through auto-pay direct into the Plaintiff’s bank account until early March 1999 when the dispute between the Plaintiff and the Defendant became apparent. The Plaintiff absented himself and faxed his sick leave certificates to the Defendant. The Defendant’s case is that since meeting the Plaintiff at the conciliation meeting in the Labour Department on 11 March 1999, the Defendant had lost contact with the Plaintiff. It was under those circumstances that the Defendant stopped the auto-pay arrangement and wrote to the Plaintiff on 1 April 1999 requiring him to attend the Defendant’s office in person to collect his pay cheque. This letter could not reach the Plaintiff because the address was incomplete and, in any event, the Plaintiff had moved out of that address. 87.On 12 April 1999, the Plaintiff issued a memo to the Defendant by fax in connection with his sick leave. He also complained of non-payment of his salary and reminded the Defendant of its breach of the Employment Ordinance. He wrote as follows:
On the same day, the Plaintiff was admitted to Queen Mary Hospital where he was hospitalised until 28 April 1999. According to the Plaintiff, he had to surrender his mobile telephone and pager. I have no doubt he had to as this is a standard practice in all hospitals because mobile telephone and pager affect the operation of electronic equipments in the hospital. On 13 April 1999, he sent a handwritten note to the Defendant by fax and informed the Defendant of his hospitalisation in Queen Mary Hospital. He said he had a telephone conversation with Lee Cheok Yuen. But he did not say whether he raised the question about payment of his salary with Lee Cheok Yuen. Upon his discharge from the hospital on 28 April 1999, he applied for two days’ annual leave without pay until 30 April 1999. On 3 May 1999, he claimed he was constructively dismissed because the Defendant failed to pay him his salary. 88.The Defendant’s pleaded case is that the Plaintiff absented himself without leave from 8 to 24 February 1999, refused to give an explanation as to his absence when he resumed work on 25 February 1999; absented himself between 3 March and 2 May 1999 by reporting sick and that since 3 March 1999, the Plaintiff refused to provide a correct address and refused to answer any telephone calls from the Defendant and resigned on 3 May 1999 without giving one month’s notice. The Defendant’s allegation about the Plaintiff’s absence without leave from 8 to 24 February 1999 is rebutted by the Plaintiffs leave application approved by John Sham. The Defendant’s allegation that the Plaintiff’s refusal to explain his absence on 25 February 1999 is unsupported by any evidence. I reject this part of the Defendant’s pleaded case. The Defendant’s case as put to the Plaintiff by counsel is that the Plaintiff could not be reached on his telephone. The Plaintiff’s residential address at Connaught Garden kept by the Defendant was incomplete in that the block number was missing. As a result Lee Cheok Yuen was unable to deliver the letter dated 1 April 1999 informing the Plaintiff to collect his salary in person at the Defendant’s office. The Plaintiff denied he had declined answering the Defendant’s telephone calls. He admitted that he had moved out of the Connaught Garden address to an address in Chi Fu Garden but said that he had provided his new address to Lee Cheok Yuen. There was no evidence from the Defendant to contradict this. Neither Lee Cheok Yuen nor any of the staff from Human Resources Department was called to give evidence. No personnel record of the Plaintiff was produced to support the Defendant’s case. Though doubtful about the Plaintiff’s credibility, I am stuck with the evidence that the Plaintiff had provided a telephone number through which he could be contacted at least until 12 April 1999 before he was admitted to hospital. 89.There is no dispute that the Defendant’s letter of 1 April 1999 had to be delivered to the Plaintiff through the Labour Department on 4 May 1999. If the Plaintiff had given his Chi Fu Garden address to Lee Cheok Yuen, in normal course of event, the Human Resources Department would have updated it and would not have kept on sending letters to the Connaught Garden address. I find it more likely than not that the Plaintiff had not provided the Defendant with his latest address than that he had provided his latest address to the Defendant but the Defendant neglected to have its record updated. For the following reason, this has no bearing to the issue that I have to determine. 90.In the Plaintiff’s fax of 12 April 1999, he referred to a telephone conversation with Lee Cheok Yuen on 10 April 1999 from which he learned that the Defendant had withheld payment of his salary since 16 March 1999. If there had not been such a conversation, the Plaintiff would not have said so in the fax addressed to Lee Cheok Yuen. If it had ever been Lee Cheok Yuen’s intention to require the Plaintiff to collect his salary in person at the Defendant’s office as alleged in his letter of 1 April 1999, Lee Cheok Yuen must have mentioned that during the telephone conversation with the Plaintiff on 10 April 1999 and the Plaintiff must have responded or objected to in his fax of 12 April 1999; but the Plaintiff did not. This casts doubts on the truthfulness of Lee Cheok Yuen’s allegation in his letter dated 1 April 1999. 91.Lee Cheok Yuen has demonstrated himself to be incredible. He made up a false explanation to the Labour Department that the Plaintiff was not entitled to commission at all in respect of the VB Sales. That explanation was contrary to the contemporaneous commission application forms and the treatment of the Plaintiff’s commission application by the accounts department, not to mention the evidence of John Sham and Becky Yung. Lee Cheok Yuen instructed the Defendant’s solicitors to plead that as a defence. He took the liberty to assume the conduct of the defence in the Labour Department and in this litigation without ascertaining the true facts from his employer. He made up explanation and concocted a defence out of his own mind. I do not think the allegation contained in his letter of 1 April 1999 that the Defendant required the Plaintiff to collect his salary in person was genuine. It was an afterthought which he made up in the letter dated 1 April 1999 which was not handed to the Labour Department for delivery to the Defendant until 3 May 1999 together with two other letters dated 3 May 1999. In any event, Lee Cheok Yuen was not called to give evidence. I am entitled to ignore the allegation contained in Lee Cheok Yuen’s letter dated 1 April 1999. As Lee Cheok Yuen’s conduct in relation to those letters and faxes was separate and distinct from John Sham’s and Becky Yung’s dealing with the Plaintiff in relation to the 1998 Contract, my finding of credibility against Lee Cheok Yuen has no impact on my finding of the credibility of John Sham and Becky Yung. 92.I have no difficulties to accept the Plaintiff’s evidence that he had discussed with Lee Cheok Yuen about payment of his salary on 10 April 1999 and was informed by Lee Cheok Yuen that the Defendant had withheld payment of his salary. The Plaintiff raised objection to the Defendant for withholding his salary in his fax dated 12 April 1999. There was no dispute by the Defendant that it had received all the medical certificates covering the Plaintiff’s absence from 3 March 1999 until 28 April 1999. There is no dispute that the Plaintiff had accumulated paid sick leave for that period. The Defendant’s liability to pay the Plaintiff salary or sickness allowance for that period is beyond dispute. In any event, the Defendant’s alleged intention to require the Plaintiff to collect his salary in person at the Defendant’s office had never been communicated to the Plaintiff even when Lee Cheok Yuen had the occasion to talk to the Plaintiff on 10 April 1999. I find the Defendant’s allegation about its intention to require the Plaintiff to collect his salary in person at the Defendant’s office contained in Lee Cheok Yuen’s letter dated 1 April 1999 was an afterthought. I find that the Defendant deliberately withheld payment of the Plaintiff’s salary because of its dispute with the Plaintiff about his commission. There was no excuse not to pay the Plaintiff’s salary. The Defendant’s conduct amounted to a repudiation of its contract of employment with the Plaintiff. The Plaintiff was entitled to accept that repudiation as constructive dismissal. He has done so by his letter of 3 May 1999. Accordingly, he is entitled to a month’s wages in lieu of notice in accordance with Clause 7 of the 1996 Contract. 93.An argument which has not been advanced by counsel is deemed termination by virtue of section 10A of the Employment Ordinance. Section 10A provides as follow:
Section 23 which prescribes the time of payment is in the following terms:
94.There is no dispute that the wage period ended on the last day of the month, i.e. 31 March 1999. That was the date when the Plaintiff’s salary for the period from 16 to 31 March 1999 was due under section 23. The salary was not paid within a month. The Plaintiff was entitled to terminate his contract of employment with the Defendant without notice pursuant to section 10A(1) on 3 May 1999. In accordance with section 10A(2), the contract of employment shall be deemed to be terminated by the Defendant in accordance with section 7 of the Employment Ordinance and the Defendant shall be deemed to have agreed to pay to the Plaintiff the sum specified in section 7, which in this case is one month’s salary, i.e. $30,000. Severance payment 95.Though the Defendant’s business was transferred to Pentalpha (Hong Kong) Limited towards the end of 1999, it is clear that the underlying and true reason for the Plaintiff’s constructive dismissal, which is deemed to be dismissal by the Defendant, was the disagreement about the terms of employment. The Plaintiff’s dismissal was not by reason of redundancy. The transfer of the Defendant’s business to Pentalpha (Hong Kong) Limited was to remove its assets out of reach of the Plaintiff in case the Plaintiff obtained judgment. The presumption of redundancy under section 31Q of the Employment Ordinance is readily rebutted on the face of the evidence. The Plaintiff’s claim for severance payment must be dismissed. Annual leave 96.In paragraph 10 of the Amended Statement of Claim, the Plaintiff alleged that during his employment with the Defendant he was only granted a total of eleven days’ annual leave and he claimed the balance of fourteen days’ annual leave. In its defence, the Defendant denied the claim and put the Plaintiff to strict proof. 97.The Plaintiff first commenced employment with the Defendant as a General Manager on 2 October 1995 under the 1995 Contract which provided him with seven days annual leave with pay for each completed year’s service. With effect from 16 January 1996 he was employed under the 1996 Contract as Executive Sales Director. His annual leave entitlement was set out in Clause 11 which provided for increased annual leave entitlement after the third year of service. The 1996 contract was extended to and revised on 1 April 1998. With effect from 1 April 1998, the terms of the Plaintiff’s contract of employment were as stated in the 1998 Contract though that document had not been signed by either party. By inadvertence, Clause 11 of the 1998 Contract repeated Clause 11 of the 1996 Contract without taking into account the Plaintiff’s previous years of service. On my finding, that was not what the parties had intended. The intention of the parties must have been that the Plaintiff’s leave entitlement under the 1996 Contract would be carried over to the 1998 Contract. 98.Clause 11 of the 1996 Contract and the 1998 Contract provided as follows:
The first sentence of Clause 11 appears to be at odds with the second sentence. However, reading the clause as a whole, the meaning it gives to a reasonable reader is unequivocal that the Plaintiff was entitled to seven days annual leave during the first three years’ of service and after that his leave entitlement would be increased by one day for each completed year of service until his entitlement is increased to 14 days with the completion of the tenth year of service. Thus, the Plaintiff was entitled to annual leave at the rate of seven days per year with effect from 16 January 1996 to 15 January 1999 and thereafter to eight days per year until his termination on 3 May 1999. In addition, under the 1995 Contract, the Plaintiff was entitled to seven days annual leave on a pro-rata basis from 2 October 1995 until 15 January 1996. Accordingly, the Plaintiff has earned a total of 25.38 days annual leave (7 x 106/365 + 7 x 3 + 8 x 107/365). He now claims only 14 days’ leave pay. 99.The Plaintiff admitted having taken eleven days’ annual leave resulting in a balance of 14.38 days as at 3 May 1999. The Defendant offered no evidence to contradict the Plaintiff’s. No leave record was produced, except for the Plaintiff’s leave application for eight days annual leave in February 1999. On that leave application, the Plaintiff wrote down that the reason for the application was to take the annual leave for 1998. Based on that and the Plaintiff’s application for no pay leave from 29 April to 1 May 1999, Mr Wong argued that the Plaintiff had already exhausted all his accumulated annual leave in February 1999. The Plaintiff’s argument was that despite what was stated in the leave application he had accumulated leave from the earlier years of service. In respect of the application for no pay leave, he said he was not quite himself when he was discharged from the hospital and he meant to take annual leave with pay when in confusion he wrote down “annual leave without pay”. I do not accept the Plaintiff’s evidence as I have formed an unfavourable view of his credibility. One would assume annual leave was with pay because that is what an employee is entitled to under his contract of employment or the Employment Ordinance and he would not have taken the additional trouble to expressly say so. The Plaintiff planned all his moves carefully. His memo requesting for leave was carefully written. He capitalised the words “annual leave” and “pay”, leaving the word “without” in between in small letters. He must have intended that the three days applied for were without pay. The inference is that the Plaintiff knew he had exhausted all his annual leave. 100.On the other hand, the Defendant as the employer was under a statutory obligation by virtue of section 41G of the Employment Ordinance to keep annual leave records. It produced no such leave record when the production of such evidence was expected. It offered no evidence to contradict the Plaintiff’s but merely put the Plaintiff to strict proof. I am left with the Plaintiff’s assertion that he had taken only eleven days leave and an inference that he may have exhausted his annual leave balance. In the circumstances, I refuse to draw the inference that the Plaintiff had exhausted his annual leave balance. I am therefore left with the Plaintiff’s admission, albeit somewhat tenuous, that he had only taken eleven days annual leave. In the absence of the leave record and contrary evidence from the Defendant, I am satisfied that the Plaintiff has discharged his burden of proving his claim for the fourteen days’ annual leave pay, i.e. $14,000. Reimbursement of business expenses 101.The Plaintiff claims reimbursement of business expenses in the amount of $877. The Defendant did not admit liability and put the Plaintiff to strict proof. The Plaintiff produced four receipts in respect of expenditure in that amount. This claim must be allowed. The Defendant’s counterclaim 102.The Defendant counterclaimed an amount of $1,096.77 being overpayment of commission less unpaid commission; damages caused by the Plaintiff’s withholding certain purchase orders from Malaysia Electric Corporation Berhad (“MEC”); damages for breach of duty as a servant to exercise reasonable care in and about the service of the Defendant and loss of profit. 103.On the evidence, I find that the commission payable in respect of the VB Sales was US$0.50 per piece and the Plaintiff had been over-paid by $112,877; but the amount of commission due to the Plaintiff was $174,644.01 which was more than enough to wipe out the commission over-paid. Thus the Defendant’s counterclaim of overpaid commission must be dismissed. 104.At the trial, the Defendant offered not a thread of evidence to substantiate the other claims for damages. No evidence was tendered in respect of the loss of the purchase orders from MEC. According to the Plaintiff, MEC placed orders but declined to take delivery due to the Asian economic crisis. As instructed by the Defendant, the Plaintiff gave the originals of the purchase orders to the Defendant’s solicitors, Messrs Robin Bridge & John Liu, to process a claim against MEC. Messrs Robin Bridge & John Liu took copies from the original purchase orders and returned the originals to the Plaintiff which the Plaintiff kept in his office. The Plaintiff was unable to account for the loss of the original purchase orders since he was locked out of his office on 25 February 1999. There was no evidence that Messrs Robin Bridge & John Liu was unable to institute action against MEC without the original purchase orders and that the Defendant suffered any loss as a result of the loss of the original purchase orders. Whatever loss suffered by the Defendant was caused by MEC and not by the Plaintiff. 105.There was absolutely no evidence to support the Defendant’s claim for damages for loss of goodwill, business and profit as a result of the Plaintiff’s breach of duty as an employee or his attitude of work or attitude towards customers as alleged in the pleading. The Defendant also pleaded return of documents. None of the documents have been specified in the pleading or referred to in the evidence. The counterclaim was bad from the beginning and was frivolous and vexatious. The counterclaim must be dismissed. Conclusion 106.For the above reasons, the Plaintiff is entitled to judgment in respect of his claims for arrears of commission, arrears of salary, wages in lieu of notice, annual leave pay and reimbursement of business expenses. Accordingly, I enter judgment in favour of the Plaintiff for the above claims in the amount of HK$152,063.36 together with interest from the date of writ, which is calculated as follows : -
107.The Defendant’s counterclaim is dismissed with costs. 108.I make a costs order nisi that the Plaintiff shall have costs of the action. Such costs are to be taxed, if not agreed. The Plaintiff’s own costs shall be taxed in accordance with Legal Aid Regulations.
Mr. Li Chau Yuen, instructed by Messrs Chan & Associates, for the Plaintiff Mr. Kevin Wong, instructed by Messrs Cham & Co., for the Defendant |
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