Greenwin International Group Ltd v. Jim Yeuk Chau
Read the full judgment text of DCCJ 6571/2004 on BabelCite. This District Court judgment.
1. In this action the Plaintiff, a trader of garment incorporated in Hong Kong claims against the Defendant its former employee for damages for loss suffered as a result of the Defendant’s breach of the employment contract and fiduciary duties as a senior officer of the Plaintiff.
Cites 2 cases
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DCCJ 6571/2004 & IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 6571 OF 2004 & 1284 of 2005 (Consolidated) -------------------- BETWEEN
-------------------- Coram: Her Honour Judge C.B. Chan in Court Dates of Trial: 13th, 14th, 19th, 20th & 22nd December 2006 Date of Handing down of Judgment: 1st March 2007 __________________ JUDGMENT __________________ 1.In this action the Plaintiff, a trader of garment incorporated in Hong Kong claims against the Defendant its former employee for damages for loss suffered as a result of the Defendant’s breach of the employment contract and fiduciary duties as a senior officer of the Plaintiff. 2.By a written agreement dated 1 March 2002 (“the written agreement”) made between the Greenwin Garment Manufacturing Groups Ltd. (“GGMG”) and the Defendant, GGMG agreed to employ the Defendant who agreed to serve GGMG as its General Manager from 8 April 2002. In or about August 2002, due to changes of shareholding in GGMG, the Defendant’s employment with GGMG was terminated on 7 September 2002 owing to the discontinuance of the business of GGMG and its subsequent winding-up. Two of the partners of GGMG namely Mandy Chan Ching Man (“Mandy Chan”) and Leung Wan Keung Jackson (“Jackson Leung”) decided to form a new business incorporated as the Plaintiff. 3.The Plaintiff’s case show that in or about August 2002, by an oral agreement (“the Employment Contract”) between Mandy Chan acting on behalf of the Plaintiff and the Defendant, the Plaintiff agreed to employ the Defendant who agreed to serve the Plaintiff as its General Manager on the same full terms and conditions of the written agreement from 8 September 2002. 4.The express terms of the Employment Contract between the Plaintiff and the Defendant include, inter alia, the following:
5.It is the pleaded case of the Plaintiff and it is not disputed by the Defendant that the Employment Contract contained, inter alia, the following implied terms. Throughout the Employment Contract, the Defendant would,
6.It is not in dispute and is agreed that a further implied term of the Employment Contract is that the Defendant would not make use of, divulge or communicate to any person (save in proper performance of her duties under the Employment Contract) any of the trade secrets or other confidential information of the Plaintiff which she received as a result of or in any way in connection with her employment by the Plaintiff. 7.It is the Plaintiff’s case and it is not in dispute that since August 2003, Li & Fung (Trading) Ltd. (“L&F”) and Sonal Sportswear Inc. (“Sonal”) had been doing business with the Plaintiff for manufacturing of garments. The Defendant was responsible for negotiation and liaison on behalf of the Plaintiff with the representatives of L&F and Sonal. 8.From February to April 2004, as part of her duties with the Plaintiff, the Defendant entered into negotiation with L&F to supply four lots of Cape Union branded garments for L&F’s overseas buyer. The Defendant had passed to L&F the Plaintiff’s garments samples for its approval. 9.In late March and early April 2004, Dominic Wong and Sandy Yiu, two employees of the Plaintiff who assisted the Defendant in dealing with the Plaintiff’s business with L&F, resigned. 10.On or about 24 April 2004, the Defendant also tendered her resignation to the Plaintiff and represented to Jackson Leung of the Plaintiff that she was leaving for America to take a break. 11.The Plaintiff pleads and it is agreed by the Defendant that by operation of law, as a senior executive, the Defendant owe a fiduciary duty to the Plaintiff. 12.It is the Plaintiff’s case that the Defendant breached the above express and implied terms of the contract of employment and also her fiduciary duties as a senior officer of the Plaintiff. 13.The Plaintiff pleads in paragraph 12 of the Amended Statement of Claim that in breach of the above Clause 10 of the Employment Contract, the Defendant made use of the Plaintiff’s confidential information including the Plaintiff’s garment samples and quotations in relation to the particularized therein four lots of garments to her own advantage by presenting the confidential information to L&F, a customer of the Plaintiff, and then soliciting L&F to place its purchase orders for the garments, with another company that later was found to be related to the Defendant. 14.It is also the pleaded case of the Plaintiff that the Defendant was found to have the Plaintiff’s product files on her when she was summarily dismissed including the file which contained documents about the brand Cape Union. 15.The Plaintiff pleaded in the Amended Statement of Claim that in or about June 2004 upon investigations the Plaintiff discovered that L&F had awarded the four lots of garment orders referred to aforesaid or part thereof, to a company known as An-Gelo Company Limited (hereafter referred to as “An-Gelo”). 16.It is agreed by the Defendant that An-Gelo is a company incorporated in Hong Kong on 6 May 2004 carrying on the business of garment trading. An-Gelo’s directors include one Lee Yan Yi, Angel who is also a Director and shareholder of the company. The said Lee Yan Yi Angel is the daughter of the Defendant. 17.The Plaintiff pleads that the Defendant also breached Clause 5 of the Employment Contract, for within a half year of the termination of the Employment Contract she engaged in the same industry as the Plaintiff and had contacts directly or indirectly with the Plaintiff’s clients. Agreed Facts and Law 18.At the trial, the parties agreed the following facts and law:
The Defendant’s Case 19.The Defendant denies that the written agreement formed the terms of the Employment Contract. She also denies that she made use of the Plaintiff’s confidential information including the Plaintiff’s garment sample and quotations in relation to the four lots of Cape Union garments referred to in the Plaintiff’s pleaded case for her own advantage by presenting the confidential information to L&F and then soliciting L&F to place its purchase orders for the garments with another company related to the Defendant, namely An-Gelo. 20.She denies that she breached the express and implied terms of the Employment Contract and her fiduciary duty in the ways pleaded by the Plaintiff and denies the losses claimed to have been suffered by the Plaintiff. 21.The Defendant counterclaims for commission due to her pursuant to the Employment Contract in the sum of HK$272,077.21. She also claims outstanding salaries, paid leave, and year-end bonus due to her on the basis of the Employment Contract as particularized in her counterclaim. The Issues of the Trial Issues to be resolved by the Court
The Evidence 23.Evidence on behalf of the Plaintiff came from Mandy Chan, a Director of the Plaintiff and her husband Jackson Leung, the other Director of the Plaintiff. The Defendant gave evidence and called no other witness. Each adopted his or her witness statement(s) into evidence as evidence in chief and also gave oral evidence and were cross-examined. Apart from this, the agreed facts are factual evidence of the case. The parties also adduced documentary evidence. The 1st Issue 24.Mandy Chan gave evidence and said that her husband got acquainted with the Defendant in 2001. The Defendant expressed to him that she had businesses in hand that is valued at several hundred million dollars, but she was unhappy with her job. In early 2002, he and his two friends, Angel Lam and M.K. Ng wanted to diversify their business (this became incorporated as GGMG) and enlarge the client base, therefore they recruited the Defendant to manage a new business and with herself, her husband, Angel Lam and M.K. Ng being the investors. During the discussion, the Defendant described that she had made a lot of money for Hoi Meng Garments Ltd. (her former employer) by her own experience and interpersonal network. During the discussion, the shareholders agreed the Plaintiff would be paid 14 months salary in a year at $45,000 per month. When the monthly turnover is over two million dollars, she could get 10% commission from the net profit of the Plaintiff. This would be calculated each year based on the audited accounts of the Plaintiff. Besides, during the negotiation, Angel Lam suggested that she needed to go through a suspension period of 2 years since the Defendant would be in charge of the production and sales of the business all on her own. However, the Defendant rejected that. Therefore, it was agreed that the suspension period was to be half year. The written agreement with GGMG was signed in the evening on 1 March. She did not resign from her former employment until 7 March and reported duty at GGMG on 8 April. 25.The written agreement contains the following clauses which are relevant to the issues of the trial between the parties:
26.Jackson Leung states that when the 4 partners of GGMG discussed the employment terms of GGMG with the Defendant leading to the written agreement, they agreed that the Defendant would be paid 10% commission based on the net profit. Commission would be distributed once a year. He stated that GGMG agreed that if they made a profit they would pay commission to the Defendant and it was not the case that only when the turnover was over $2 million per month that GGMG would pay commission to the Defendant. The Defendant would be paid commission on the business brought by the Defendant. All the Plaintiff’s orders were in fact brought by the Defendant. 27.After GGMG made a loss and the business was discontinued, he did not want the staff to be losing out. He suggested employing them on the same terms on a smooth transition. During the negotiations between Mandy Chan, himself and the Defendant in relation to the Employment Contract with the Plaintiff, he said to the Defendant that the Plaintiff would use the original terms of the agreement between GGMG and the Defendant and such terms would pass onto the Employment Contract unchanged. 28.In the course of the negotiations in relation to the Employment Contract in September 2002 between Mandy Chan, himself and the Defendant, Mandy Chan took the lead. He did not hear the Defendant mention that she would not accept any restraint of trade provisions upon termination of employment with GGMG. The Defendant did not say that she unwillingly accepted those terms on the occasion of the signing of the written agreement. 29.The Defendant in evidence denies that the terms of the Employment Contract were as stated by the Plaintiff’s witnesses. 30.The Defendant stated that she has been engaged in the field of trading and manufacturing of garment for over 30 years. Through her working experience and personal connections, she had extensive knowledge and developed a personal network resource and maintained a well established clientele in this field. 31.She met Jackson Leung who knew that she had great experience in the garment field and had a well established clientele. Shortly before Christmas 2001 Jackson Leung approached her and indicated to her that other than his current fabrics business he wanted to venture into the garment industry. He informed her that he wanted to set up a new company and asked whether she was interested to be employed by his new company. 32.During discussions, Jackson Leung told her that his intended company would take orders from its clients, and then it would outsource the actual garment manufacturing process to other factories, and would make arrangement for delivery of garments according to orders. The company would act as a middle-man and would not carry out the actual garment manufacturing process; the price differences between the purchase orders prices made by its clients and the purchase orders costs would become the company’s profit. 33.He told her that he intended to employ her to manage his intended company, to contact clients and take orders; as he knew that she had extensive experience in the garment industry; had a well established clientele and she had operated her own business. 34.Eventually, they came to a verbal agreement, inter alia, with the following basic terms:
35.Jackson Leung, Mandy Chan, M.K. Ng and Angel Lam partners of GGMG presented a written agreement to her and asked her to execute the same. She noticed Clause 5 and Clause 10 of the written agreement and objected that such restrictions should be imposed upon her. 36.So she refused to execute the same and she asked them to delete or amend those clauses. 37.Jackson Leung, Mandy Chan, M.K. Ng and Angel Lam all indicated that amendments on those restrictions could be made. They all agreed that she could execute the written agreement after further discussion and proper amendments had been made. However, no amendment was made on that night. 38.She then tendered her resignation to Hoi Meng Garments Ltd. on or about 6 March 2002, which would take effect on 7 April 2002. 39.Then one day shortly before the Easter 2002, Jackson Leung, Mandy Chan, M.K. Ng and Angel Lam asked her to execute the written agreement again. She found no amendment had been made on the written agreement. She raised her objection, but they said such restrictions were very common in similar contracts and they should not waste too much time arguing on it. Further, those clauses were put as a formality and they would not actually enforce them. So even she was fully aware the effect of Clauses 5 and 10, she executed the written agreement reluctantly as she had resigned her previous job and was under the persuasion of Jackson Leung, Mandy Chan, M.K. Ng and Angel Lam. 40.Despite the fact that the written agreement was executed on a day shortly before the Easter 2002, it was agreed between all parties that it should be backdated to 1 March 2002. 41.GGMG was dissolved because of a partners’ dispute after about 4 months. In early August 2002, Jackson Leung contacted her and indicated that he intended to set up a new company and invited her to be employed. 42.Then in or about middle of August 2002, she contacted Jackson Leung and informed him that she would like to join the new company. However, she would not execute any written contract; particularly, she would not accept any restrictive covenants. She indicated expressly to Jackson Leung that she entered into the previous written agreement unwillingly. Now she would not accept any restrictive covenants in any forms this time. 43.Jackson Leung was fully aware of her intention and eventually, the Plaintiff and her entered into the oral agreement (“the oral agreement”), inter alia, that:-
44.The Defendant’s Counsel submits that the evidence of Mandy Chan related to the terms of the Employment Contract is not clear. He submits that if what Mandy Chan said was true, what she understood to be the terms of the written agreement at page 2 of BD-A differed significantly from what is contained in the actual document. The difference is significant. She states that she specifically recalled that a 10% commission was payable to the Defendant,
In relation to item (2) referred to above, under cross-examination, Mandy Chan explained that without annual audited accounts being made, it would not be possible to find out what was the net profit and the commission payable. It would only be after a year has elapsed that the net profit could be calculated from the annual audited accounts. She agreed under cross-examination that as from the second year of employment the Defendant’s commission would be paid quarterly after deducting the office overhead expenses shown in the annual accounts of the previous year. 45.The Defendant’s Counsel submits that if Mandy Chan’s evidence were true, the Defendant would have failed the 2 million a month target on the business turnover during her employment with the Plaintiff and further any liability to pay her would have arisen only by the end of a financial year. He implied that Mandy Chan made up those terms. 46.However, the evidence of Jackson Leung is clearer. He stated in evidence that 10% commission of net profit would have been payable to the Defendant without the condition that monthly turnover has to be over $2 million before commission is payable. The Defendant stated that it was Jackson Leung who negotiated the terms of the Employment Contract with her. Jackson Leung states that the commission would be on the net profit of business brought by the Defendant and the Defendant was the one who brought all the business to the Plaintiff. 47.In assessing the evidence to find where the truth lay, I consider the undisputed fact that the Defendant had signed a written agreement with GGMG wherein Jackson Leung and Mandy Chan were two of the 4 partners. In the employment with the Plaintiff the Defendant was to be employed in a similar post in as she did in GGMG doing the same duties and responsibilities as she did in GGMG. It would be unlikely for Mandy Chan and Jackson Leung to agree to different terms that are more favourable to the Defendant in her employment with the Plaintiff. 48.It would be more natural for the Plaintiff to stipulate that the same terms that were protective of the Plaintiff would apply. The Defendant’s performance was still untried. It is unlikely that the Plaintiff would have given her much more favourable terms under such circumstances. As the Plaintiff was wholly dependant on the Defendant’s resources and skills in generating business, it is highly likely the Plaintiff would have sought protection under the same covenants in restraint of trade in the written agreement to be incorporated in the Employment Contract. 49.In relation to the Defendant’s evidence that she was unwilling to sign the written agreement with GGMG because of the covenant in restraint of trade provisions therein, it could not be disputed that the Defendant was an experienced and successful business woman and it would seem to be highly unlikely for her to sign a written contract if she objected to the terms. 50.Jackson Leung and Mandy Chan both stated that they decided to re-employ the staff of GGMG on the same terms as they had with GGMG. It seems to me a natural step for them to take. The Defendant’s evidence that she was employed simply on the oral terms of agreement that her salary and job nature would be the same as mentioned in the written agreement, and she was entitled to 10% of gross profit of business generated from her own clientele to be paid quarterly with no restrictive covenants, does not ring true. It is highly unlikely that the Plaintiff would have agreed to give the Defendant 10% of gross profit. The evidence of this by the Defendant as well as her evidence that the parties only agreed to the terms stated by her is not believable. 51.Having considered all the evidence and submissions of respective Counsels, I accept the evidence of Jackson Leung and Mandy Chan that the Defendant was employed by the Plaintiff on the same terms as she had with GGMG under the written agreement and where the evidence of Mandy Chan differs from that of Jackson Leung, I accept the evidence of Jackson Leung. However I find that there was no term requiring the Defendant to bring in a monthly business turnover of $2 million before she would be entitled to the 10% commission of net profit. I do not accept the evidence of Mandy Chan on this. The commission would be paid quarterly and calculated in accordance with the written agreement and as stated in Clause 6 ii, namely, that “fixed office overhead expenses should be agreed in writing for each calendar year in advance by reference to the last audited financial statements.” I accept the evidence of Mandy Chan that in the first year before the annual accounts are finalized, the commission would be paid after the end of that year. Subsequently it would be paid quarterly. It would be the case that in effect, before the first year’s audited financial statements are prepared, it would not be possible to calculate the agreed overhead expenses for the purpose of deducting this to calculate the 10% net profit. 52.When Jackson Leung was cross-examined in relation to the Employment Contract, whether the Defendant’s net commission was to be paid quarterly, he said he did not know whether the commission would be paid annually. He confirmed however that the parties agreed that the same terms as the written agreement would apply. 53.The Defendant’s Counsel submits that Jackson Leung relied on Mandy Chan to explain the terms of the written agreement to him as he did not understand English. However, it is clear that Mandy Chan said in her evidence in paragraph 1 of her witness statement that Jackson Leung, even though he did not take part in the daily operation of the Plaintiff, took part in making decisions in the important matters. In view of the role of the Defendant in the business of the Plaintiff, her employment terms must be an important matter of the Plaintiff. The Defendant, herself stated in her evidence, and particularly in her witness statement that the negotiations and discussions related to her employment terms were with Jackson Leung. I therefore find that Jackson Leung must have taken a significant role together with Mandy Chan in the discussions with the Defendant. 54.Despite inconsistencies in the evidence of Mandy Chan, what both Mandy Chan and Jackson Leung stated was that the Defendant and the Plaintiff agreed that the terms of the written agreement were to be the terms of the Employment Contract between the Plaintiff and the Defendant. I find in all probability that the parties agreed that the Employment Contract would incorporate the same terms as that contained in the written agreement. There were no other terms apart from that. The 2nd Issue 55.The parties agreed that the implied terms pleaded by the Plaintiff in paragraph 6, 7 and 8 of the Amended Statement of Claim were implied terms in the Employment Contract. The 3rd Issue 56.The Defendant agrees that restraint of trade provisions in Clause 5 of the written agreement is reasonable. I have to find whether this term is enforceable. The Plaintiff’s Counsel refers to Herbert Morris v Saxelby [1916] AC at 699 which sets out the general principled of law on restraint of trade. The relevant paragraph is in the judgment of Lord Atkin at the bottom of page 699 where it cites Lord Lord Macnaughten in Nordenfelt v Maxim Nordenfelt & Co. [1894] A.C. 535:
57.In considering reasonableness, I consider the following:
58.In view of the aforesaid, I find that the restraint of trade in Clause 5 is reasonable having reference to the interest of the parties concerned and at the same time it is in no way injurious to the public. I find that Clause 5 is enforceable. The 4th Issue 59.In this issue, I have to find whether the Defendant has breached the express and/or implied terms of the Employment Agreement. The Evidence of Mandy Chan 60.The Plaintiff began to contact L&F, a company that receives orders for garments from overseas clients and sub-contracts to other companies, through the introduction of the Defendant in August 2002. 61.The Plaintiff began to prepare samples for L&F and received orders from L&F later. 62.Since November 2003, the Defendant had not received any purchase orders for the Plaintiff. Jackson Leung pursued the Defendant for a few times and she replied that there would be some purchase orders later. But, there was still none. In the end of March or early April 2004, two employees (Dominic Wong and Sandy) resigned. Her husband and herself noticed that the Defendant and the other two colleagues were all along very busy but without any purchase orders coming in. On 24th April, the Defendant resigned (the effective date was 24th May). Jackson Leung asked her to stay but she rejected it. 63.On 26th April, after Dominic left she found that a number of articles had gone missing. These were:-
64.A few days after 20th April, she inquired of Dominic what they were so busy for. He then passed four projections of L&F to her. The four projections are at pages 05-50 of BD-A. These four projections showed that the orders would be given by L&F to the Plaintiff. The net profit the Plaintiff would get from these totalled US$49,099.40. 65.All along, Mandy Chan had no dealing with L&F and all these were handled by the Defendant. Helen, Manager of the SA Division of L&F knew that she was one of the bosses of the Plaintiff. On or about 4 May 2004, Helen telephoned her inviting her to attend L&F on 5 May 2004 for clarifying some matters. 66.On 5 May 2004, Jackson Leung (her husband), Mr. Lam (another employee of the Plaintiff) and herself went to L&F together for a meeting. There were Helen, Mike and Irene from L&F to meet them. At the meeting, Helen said that the Defendant in another capacity (Helen did not say what capacity) wanted to receive orders, but the samples were made by the Plaintiff. She inquired of them how it should be handled. Helen also inquired of them if the purchase orders were still to be given to the Plaintiff. How would the Plaintiff handle it as the staff of the Plaintiff who used to follow the purchase orders of L&F had left. Helen also told them to contact Shum Yip Holdings Co. Ltd. in the hope of continuing to handle the orders of one of the brands of L&F named “Danskin”. She also asked them to see if that could be done once the quotations from the said company could be further obtained. 67.As regards the credibility of the evidence of Mandy Chan that Helen asked her to visit L&F and told her that the Defendant wanted to receive orders in her own personal capacity, even though I treat the evidence of Mandy Chan with caution, having disbelieved her evidence related to some of the terms of the Employment Contract referred to earlier, I had the strong sense she was telling the truth when she said that Helen asked her to visit and talked to her about the orders. I shall refer to my findings on the conversation during that visit in the paragraphs hereunder. 68.She and Jackson Leung were stunned. On the following day when they went back at the office, the Defendant did not report for duty. Mandy Chan had asked someone to call her but only voice-messages were left and the Defendant did not reply. On 8th May, the Defendant went to the office as if nothing had happened. Then Mandy Chan fired her and told her to relate the progress of her work. The Defendant refused. Mandy Chan insisted that she return the files of five labels i.e. “Cape Union”, “Danskin”, “Nautica”, “Mary Jane” and “Monkey G” to the Plaintiff. She surlily opened the cabinets in the room and replied that all the files had gone and she did not know where the files were and lost her temper. At that moment, she noticed that the files for completed orders were still in the cabinets, but for other files in progress (three of the labels i.e., except Nautica and Monkey G), all had gone missing. Then she tried to move away eight sealed boxes but Mandy Chan stopped her and requested her to open the same for her inspection. After the inspection, the following were retrieved from the boxes:-
69.After then, since they were still eager to do business with L&F, Mr. Lam of the Plaintiff company all along maintained contact with Mike, the staff member of L&F in charge of the “Cape Union” label. But Mike replied vaguely. Jackson Leung also questioned Mike about the orders he had been handling. Mike replied that the purchase orders had been transferred to another but it was inconvenient to tell him who it was. She also inquired of Helen about the purchase orders of “Cape Union” label. She replied that as the Plaintiff’s staff who had been following the orders had left, the files and the samples were also missing, how were the Plaintiff going to handle the orders? She said that she did not want to place orders with others. However, they had no other way out as they were pressed for time to make deliveries. As for “Danskin” label, since the price quoted by Shum Yip Holdings Co. Ltd. as the sub-contractor was very high, no deal could be made with L&F either. 70.Since then, Messrs. L&F did not give orders to the Plaintiff despite the offer to them of quoted prices of HK$0.30 per unit lower than other competitors. 71.After the Defendant left the employment of the Plaintiff, Mandy Chan logged into the Defendant’s e-mail account at [email protected] in the laptop computer loaned to the Defendant’s use during the time of the Defendant’s employment and found e-mails related to garment styles which had been the subject of negotiation between L&F and the Plaintiff. The e-mails are at pages 51 to 55 of BD-A. Further, the Plaintiff also through logging into the Defendant’s e-mail account discovered e-mail communications between the Defendant who was referred to as MJ, Domanic, the former staff of the Plaintiff (Dominic) who worked under the Defendant, and resigned before the Defendant did, but now is working for the Defendant, and Helen Wong of L&F, as well as Mike Hung of L&F. These are sent on various dates beginning from 3 June to 12 June. These all relate to the registration of the Defendant as an approved vendor of L&F for the Cape Union brand garments. These e-mails are at pages 56 to 60 of BD-B. Domanic’s email address is at “an-gelo.com”, “An-gelo” being the name of a company formed by the Defendant using the name of her daughter Angel Lee as Director. In her witness statement, the Defendant stated that on or about 6 May 2004, she commenced her company An-Gelo Company Limited. 72.In the same e-mail account of the Defendant, the Plaintiff also found the e-mail communications between the Defendant and Mr. Subash of Sonal, a customer of the Plaintiff and the same e-mail enclosed Cutting Tickets related to styles of garments which the Plaintiff alleged were styles which at an earlier time Sonal was about to place orders on the Plaintiff but did not do so. These are at pages 66 – 74 of BD-A. The Evidence of the Defendant 73.The Defendant denies that she had sought to place orders on L&F for her personal benefit before she left the employment of the Plaintiff. She also denies all the allegations of the Plaintiff referred to in the Amended Statement of Claim. 74.The Defendant does not deny the authenticity or the existence of the e-mail communications found by Mandy Chan to have been in the Defendant’s e-mail account referred to above. 75.I will now address the parties’ evidence related to the Cape Union styles. Brand and the Sonal Garments Cape Union Brand 76.Mandy Chan’s evidence is that Dominic handed the papers at pages 005 to 50 to her before he left his employment with the Plaintiff and informed her that he has been working on these projections. Page 005 is a chart which according to the Mandy Chan showed the breakdown of prices. On the heading is “Li & Fung [Cape Union] – New Development”. The left most column show the Style number of different styles. The second column is headed Quantity. The third column is headed the name of the contractor who would do the production. The fourth column is headed Final Cost. The fifth column is headed Quoted Price. The sixth column is headed 4% Commission. The seventh column is headed GP%. The eighth column is headed Total GP$. The final column is headed Total Sale Amount. 77.Mandy Chan states that the negotiation for this contract is at a mature stage. However the Defendant states that the photographs of the styles in the pages between pages 06 to 50 show that the preparation of samples is at the initial stage. The photos show the garments had other brand names on them and these were probably samples given by L&F for the Plaintiff to copy into samples. There were stickers on the garments. The photograph at Page 7 show the words “Just to review the pocket (size & layout) with stickers at the pocket area. The photograph at page 31 show a buckle from a trouser which has The North Face brand. It is probably for the purpose of copying the style of the buckle. The photograph at page 33 have the arrow from the sleeve which pointed to the Chinese characters meaning “hand pocket remove”. On either sides of the T-Shirt are arrows pointing to the Chinese characters meaning “left right pockets remove”. It is obvious that the samples shown by the photographs at page 006 to page 036 disclose that the samples for the styles had not been approved as yet and there were many alterations to the styles. 78.Page 37 of BD-B show another breakdown of prices and on the second line of the heading are the words “**Greenwin-Showroom sample**”. These appear to be the samples of garments made by the Plaintiff for other customers and brands which were in the Plaintiff’s Showroom to show to prospective customers as possible samples to be adjusted for their styles. In relation to the styles in the breakdown at page 37, the photographs show that the samples used were those made by the Plaintiff for other brands and they would have to be adjusted. Similarly in B050, the photo on the left there was a sticker saying, “此辨不能身”; and the photo in the middle shows a sticker saying, “要source此布”. 79.As regards whether these show negotiations at an early stage for an order, I must bear in mind that the evidence of Mandy Chan on this cannot be that reliable. The reason is that she took no part in the negotiation with customers for orders and took no part in the process of development of a sample leading towards the acceptance of samples and a final order. Hence, she has no first hand knowledge of the actual process or of the orders or the practice of L&F or Sonal. Her evidence is not from first hand knowledge and therefore I cannot place full weight on it. 80.The e-mails at pages 52 to 55 of BD-D show that the Defendant was in contact with L&F in September 2004 discussing certain quality complaints related to Cape Union garments. This is some 5 months away from the date when Domanic gave her pages 005 to 50 of BD-B. Amongst these is mentioned BOLIVIA Golfer and the style no. #024. It is the Plaintiff’s case that the same description and style number appear in the breakdown in page 005. 81.The Defendant explained that the #024 Bolivia Golfer at page 005 and that referred to in the e-mails at pages 52 to 55 of BD-D were different styles. She denied that she had diverted the Cape Union orders from the Plaintiff to her company. She said she was asked by Mike Hung to do an urgent order in early August 2004, (which was a different order). However no e-mails between her and Mike Hung on this urgent order were produced. 82.The Plaintiff’s Counsel submitted that the Defendant was not telling the truth. Her explanation was never found in her Defence or in her two witness statements, nor was it put by her Counsel to Mandy Chan. 83.He further submitted that the evidence aforesaid show that the Defendant, Dominic Wong and Sandy Yiu acted in concert to divert mature business opportunities of the Plaintiff to the Defendant’s company. As there is no pleading in the Plaintiff’s Amended Statement of Claim or Reply and Defence to Counterclaim related to these three acting in concert, it is not open to the Plaintiff to submit this. 84.He further submitted that the three took away the Cape Union order information from the Plaintiff and used the same after leaving the Plaintiff for their own benefits. Without the information, the Plaintiff could not produce the garments through factories. Therefore Li & Fung had no choice but to give the order to An-Gelo. He submitted that during her employment with the Plaintiff the Defendant did more than just prepare for her new company. She also canvassed business from the Plaintiff’s clients for her own business. He submitted that the Defendant was clearly in breach of the express and implied terms of the Employment Contract with the Plaintiff and in breach of her fiduciary duties towards the Plaintiff. 85.I have to find whether the evidence of the Defendant related to the s#024 Bolivia Golfer order referred to in the e-mail communications at pages 52 to 55 of BD-D is true. The following are factors for consideration: 86.The e-mail communications show a quantity of 1,400 for Blue Khaki colour of s#24 Bolivia Golfer. The quantity referred to in the break-down at page 005 referring to this style is 3,000. The Defendant’s Counsel submits that this could show that the Defendant’s evidence is true that this quantity in the e-mail communications refer to a different but additional order. 87.There is no evidence as regards what were the colours in the original negotiations for the s#24 Bolivia Golfer style that comprised the quantity of 3,000. The e-mails refer to the total quantity for two colours being 1,400. Hence the fact that the e-mails refer only to a quantity of 1,400 is not conclusive evidence that the order for s#24 Bolivia Golfer referred to in the e-mails refer to a different order from that being negotiated at page 05 of BD-D. 88.The Defendant stated that the additional order given to her was a rushed order and given in August 2004. It is clear that at the time of the e-mail communications dated 25 September the garments were already delivered to the client in the USA and they had already done a QC check on all the garments. Even if the garments were delivered by air, it seems that the production must have been extremely fast for this to take place within this time frame. The parties agree that it takes 120 days normally for an order to be processed from first contact to delivery. Dominic gave pages 05 to 50 of BD-D to Mandy Chan in about early April 2004. 120 would have meant that the order if processed without interruption would not be produced and delivered until four months later in August. Mandy Chan said she was asked to process an additional order for this style in August. The e-mail dated 24 Sept 2004 at page 53 refer to the order having been delivered and a QC having checked through all the garments more than once. This additional order would have been processed in just over one month and delivered by air. I have however no evidence as regards the time for production of an additional order after samples have been approved and specifications are on hand to make a firm assessment as regards whether this is possible. It may be possible to produce the garments within this time. 89.Having considered and weighed the evidence aforesaid, I come to the conclusion that there is a possibility that the evidence of the Defendant on this could be true. I cannot able to discount it. Hence I accept the Defendant’s evidence on this. 90.I am also unable to find that Dominic Wong took away the Cape Union order information from the Plaintiff and used the same after leaving the Plaintiff for their own benefits. This is a serious allegation and although Mandy Chan stated that the files and information were kept in the cupboard of Dominic Wong and after his resignation from employment by the Plaintiff, such files were lost, it is a serious allegation that Dominic Wong stole the files for his own benefit in concert with the Defendant. I am of the view that such a finding cannot be established from the circumstantial evidence adduced. Further there is no pleading related to this serious allegation in the Amended Statement of Claim. 91.As I found that the Employment contract comprised the terms of the written agreement, the Defendant has breached Clause 5 of the written agreement by engaging in the same industry or contact with the Plaintiff’s client directly within a half year from the date of her termination or expiry of the Employment Contract as the evidence aforesaid has disclosed. 92.As I found that the breakdowns at pages 005 to 50 of BD-B do not show maturing opportunities, and further the T-shirts and other garments shown were samples yet to be approved by Cape Union, the Plaintiff has not established a claim for damages as claimed against the Defendant in respect of the lost of the orders as pleaded in paragraph 17 of the Amended Statement of Claim. This is because the evidence shows that even after samples are approved there may be a possibility that a client may still give the order to another company to produce. Here samples have not been approved. Sonal Orders 93.The Plaintiff’s claim in relation to her loss and damages related to the Sonal Order as disclosed in her witness statement is not pleaded with particulars. In paragraph 18 of the Amended Statement of Claim, the Plaintiff refers to the Defendant’s breach of Clause 5 of the Employment Contract by engaging in the same industry of the Plaintiff and had contacts directly or indirectly with the Plaintiff’s clients including amongst others, Sonal and/or its agent, Mr. Subash for the manufacturing of MaryJane Marcasiano garments. 94.In her evidence, Mandy Chan states that since November 2003, a Mr. Subash of a client named Sonal Sportswear Inc. (“Sonal”) began to contact the Plaintiff for making samples and placing orders. The placing of orders by Sonal were rapid, urgent and less in quantity but at good prices. Most of them were of leather overcoat; pants and women’s knitwear. The Plaintiff all along made leather overcoats, jackets and skirts of several styles for Sonal. (Such goods were made by a company called Zhejiang Tea Export Co. Ltd., which was entrusted by the Plaintiff. At last, the deal was closed.) 95.Later, Sonal kept requesting the Plaintiff to make samples. The Defendant all along acceded to those requests on behalf of the Plaintiff. But the unusual thing was that not only the sample fee was not charged but also the transportation fees were not charged against Sonal. Therefore, after Mandy Chan took note of that, she requested the Defendant to press Sonal to pay such charges. But the Defendant kept stalling and said that Sonal would place orders later. In or about April 2004, in replying to her request, the Defendant showed her a list setting out the orders to be placed by Sonal. This is at page 62 of BD-B. 96.On 3 May 2004, the Defendant, Mr. Subash of Sonal, and Mandy Chan had a meeting. Mr. Subash said that they had no money to place the purchase orders but wanted to take away all the samples made. At that moment, she turned down his request. But the Defendant said that it was pointless pressing Mr. Subash for money and suggested collecting half of the amount in the sum of US$20,000 by 4 instalments. Mandy Chan accepted that. The copy cheque issued by Mr. Subash for the 1st instalment and the repayment plan of Mr. Subash are at page 64 of BD-B “CCM-6”. Sonal defaulted payment for the last two instalments i.e. the instalments of July and August 2004. 97.After the Defendant left the employment of the Plaintiff Mandy Chan found two e-mails from the said e-mail account of the Defendant. The contents of these showed records of business deals made by the Defendant who was referred to as Marianna and Sonal in the middle of September. These two documents are now shown at pages 66 and 67 of BD-7. The brand name MaryJane Marcasiano of Sonal mentioned therein was handled by the Plaintiff before. 98.The Defendant’s evidence in relation to page 62 is that the Fall 2004 Cutting Ticket is a projection given by Sonal. A projection is a proposal at the early stages of negotiation of a contract. The typed words and figures in the square were sent by Sonal in an e-mail. The handwritten words and figures at the right side outside the box were written by the Defendant and they were quoted prices from factories for working on each of the styles. The prices in the column under the heading FOB were quoted prices from the Plaintiff to Sonal. It is headed “Fall 2004 Cutting Ticket”. Cutting Ticket usually means instructions for factory to cut when the garments are about to be cut. She said that Sonal writes “Cutting Ticket” for most things. However she says that Sonal has not stated the final price. There is no breakdown. Hence, it cannot be “Cutting Ticket”. 99.In relation to the e-mail at page 66, she wrote it when she was agent for Sonal. After the Plaintiff gave a projection to Sonal at the end of March, Sonal gave them the Cutting Ticket. They arranged to come to visit the Plaintiff. During the meeting between Mandy Chan and Mr. Subash of Sonal in the presence of the Defendant, Mr. Subash requested payment 60 days after shipment because they were financially tight having spent a lot of money to develop their designer brand, MaryJane. Mandy Chan said there is no guarantee of payment and refused to accept the terms. Mr. Subash requested to take back the MaryJane samples that had been made by the Plaintiff. Mandy Chan requested payment for them. After discussion, Mandy Chan agreed to pay half of the price together with the cost of Fedex for delivery. Mr. Subash stated that he could not pay in one payment and asked to pay by four instalments each of US$5,000. 100.After she left the employ of the Plaintiff, she e-mailed Mr. Subash and told him that she has left the employment of the Plaintiff. Mr. Subash e-mailed some Cutting Tickets to her. There was a breakdown in relation to each style and there were specifications. She told Mr. Subash that the delivery date is too close because it is June. She also could not afford the payment terms of 60 days after delivery. She stated that as the last meeting with the Plaintiff was so unpleasant, she would agree to offer him a free service to follow up the orders if Sonal would find the factories to discuss their terms with them. So she became the agent of Sonal and Sonal gave her the sportswear account to her. The e-mails show the follow-up of the orders by her on behalf of Sonal. 101.In relation to An-gelo Co. Ltd. she agreed that the date of incorporation of the company was 6 May 2004. She used her daughter’s name as Director but in fact the control of the company was in her hands and she was the beneficial owner of the company. Her daughter was in the States at the time. She agreed that she formed the company to be a competitor of the Plaintiff. She formed the idea to establish her own company after her resignation. 102.Under cross-examination she agreed that page 62 which stated it was a “Fall 04 Cutting Ticket” is an order that Sonal would have given the Plaintiff to do. She agreed that it has an FOB price on it and that is the price that would be given by Sonal if the Order were completed. The difference between the FOB price and the handwritten cost price is the profit that would be due to the Plaintiff. However, when looking at page 62 stated to be “Fall 04 Cutting Ticket”, it is clear that it does not state the number of garments in different colours and sizes that are required to be cut. For instructions for a factory to cut garments, that must be basic. Looking at the Cutting Tickets at pages 68 to 74 of BD-B, it is clear that it is much more precise in that it states the number of garments of the different sizes and colours to be cut in each style and differentiates those for the U.S.A. market and those for Canada. There is quite a difference between the information contained in the “Fall 04 Cutting Ticket” at page 62 and those Cutting Tickets retrieved from the Defendant’s e-mail account at pages 68 to 74 of BD-B. It is clear that there must be some truth to the evidence of the Defendant that page 62 is not an instruction to factories to cut the garments because the essential details are missing. 103.In relation to the charts at pages 66, 67 to 74, some of the style numbers at page 62 are replicated in the Cutting Tickets in those pages and these Cutting Tickets were taken out of her e-mail account. She stated she did the follow-up for free for Sonal for half a year. There was a lot of work in the follow-up. 104.From the evidence of the Defendant, it is clear that those style numbers shown in the Cutting Tickets at pages 68 to 74 which are replicated from the Fall 04 Cutting Ticket at page 62 (hereinafter referred to as “replicated orders”) refer to the same styles that were under negotiation in the Fall 2004 Cutting Ticket at page 62. In effect, the Defendant stated that Sonal would have given the Order to the Plaintiff if the Plaintiff were willing to comply with the payment terms stipulated by Sonal. 105.In relation to the two version of facts related to the discussion between Mandy Chan and Mr. Subash on the visit of Mr. Subash to the Plaintiff’s office related to the brand name garments MaryJane, I do not accept the evidence of the Defendant as I find the Defendant not to be credible as I shall explain hereunder. 106.I find the Defendant not to be honest in her evidence. Her evidence that she first thought of opening her own company An-gelo Co. Ltd. in early May after she resigned is not believable. She resigned on 24 April 2004 and her company was incorporated on 6 May 2004. It would normally have taken some time to incorporate and register a limited company. It is far more likely that she planned and made preparations for this before she resigned from the Plaintiff. It would be likely that she mentioned this to Helen. However, as regards whether she actually asked Helen to transfer the Plaintiff’s orders to her before she resigned, I am not able to find that as it seems clear that she only applied to register with L&F as a vendor at the beginning of June or in May after the formation of her company. She may have made some references to seeking orders from L&F from Helen related to some future time and it is highly likely that she would have told Helen that she was going to establish her own company. It is highly likely that Helen told her that she had to register her company as a vendor. 107.The second reason why I find the Defendant’s evidence on this to be unbelievable is her evidence that she told Mr. Subash that as the experience of the visit to the Plaintiff was so unpleasant she wanted to make up for it by supplying free service for him to oversee the orders he would place on factories direct without intermediaries. I find this unbelievable that she would need to give such service for free because of the unpleasant experience he had with Mandy Chan who was merely asking for the cost of the samples that was due to the Plaintiff and delivery charges in return for letting Sonal have the samples. Further, as can be seen, from the e-mails at pages 66 to 67, what the Defendant did, included a large volume of work. If her evidence were true she would have had to spend a lot of time on these Sonal orders for a period of six months and all for free. The e-mails disclosed that she attended to negotiation related to charge, checking with dyeing mill to handle small quantity, checking with colours, asking whether there would be corrections for pre-production samples, following through with these, choice of fabrics related to the cotton pique fabric, packing list, sending invoices from factory, dealing with Lab Dips, fashion accessory changes, dealing with communication with factories on behalf of Sonal etc. These are very detailed work and it is unbelievable that she would do it for free as an agent over a six months period related to so many styles. 108.The third reason is that the Cutting Tickets at page 68 to 74 have on the top left “Brand: MaryJane Marcasiano”. Under that “Supplier: An-Gelo”. If she were an agent for Sonal, An-Gelo would certainly not be named as the “Supplier” as stated in the Cutting tickets. The Cutting Ticket must be from Sonal and intended to be given to factories. It states An-Gelo is the Supplier. If the factories were to receive orders direct from Sonal, An-Gelo would certainly not be named as “Supplier” in these Cutting Tickets. 109.The fourth reason is the Defendant’s version of events as regards what happened on the 8 May 2004 when she left the Plaintiff Company is unbelievable. She stated that on 8 May 2004, Mandy Chan said, “Since you have resigned, you might as well leave.” She said, since it was Saturday, she will leave. She asked her boyfriend to help her to leave. She told Mandy Chan where the files of Cape Union & Sonal were. She handed her the keys and the computer. She asked Mandy Chan to calculate the commission and give that to her. Mandy Chan said she would do so later. I find this evidence to incredible. The relationship between Mandy Chan and the Defendant must have been at boiling point if the Defendant had to leave before her period of notice expired. It is highly unlikely that Mandy Chan would not have asked for the files and other production material from the Defendant and it is unlikely that there was no fuss between them. I find that on the 8 May 2004, Mandy Chan asked the Defendant about the missing files that should have been in Domanic’s cupboard and asked her to hand over all the files handled by the Defendant and the Defendant was unable to do so and Mandy Chan summarily dismissed her. 110.I therefore do not accept the evidence of the Defendant in relation to the fact that she took on the orders at pages 68 to 74 namely the replicated orders as an agent of Sonal without charging any fee. 111.I found that the Defendant obtained the replicated orders from Sonal, those same orders were actively pursued by the Defendant as a senior officer on behalf of the Plaintiff. They were maturing business opportunities because Mr. Subash asked for the samples to be returned to him and the cost for these samples were substantial being worth US$40,000 (half price was US$20,000). It is obvious that substantial work had been done on the projections, which were at a stage where a lot were samples were completed. These samples must be of use or of significance to Sonal or else Mr. Subash would not have been willing to pay for them. I do not accept any of the Defendant’s evidence related to the communication between Mr. Subash and Mandy Chan in the light of my inability to accept her evidence as credible. I accept that the Defendant persuaded Mandy Chan to return the samples of MaryJane brand to Sonal and persuaded her to charge Sonal half of the cost of the production of the samples together with payment of the Fedex delivery costs. The Defendant’s evidence that she felt that she had to compensate Mr. Subash for the unpleasant experience when the Plaintiff asked for payment of the samples show that the Defendant had all along been taking the side of Mr. Subash in the request for the cost of the samples by Mandy Chan. 112.It is clear that the Defendant has breached Clause 5 of the written agreement, which form the terms of the Employment Contract in doing business with Sonal at this time. I also find that on 8 May 2004, when Mandy Chan asked her to deliver the files of the products handled by her the Defendant failed to do so and was summarily dismissed by her. In view of my findings aforesaid, I find that the Defendant was summarily dismissed with cause. 113.I find that although there is no direct evidence on this it is highly likely that in connection with the process of the replicated orders, the Defendant used the confidential information related to the replicated styles in the process of the styles. The 5th Issue 114.It is admitted by the Defendant that as the general manager of the Plaintiff, she owes a fiduciary duty to the Plaintiff that extends beyond her termination of her employment. 115.As regards the core obligations of a fiduciary it is that of loyalty or fidelity and good faith. These are set out by Justice Ma, in Kao Lee & Yip v Koo Hoi Yan [2003] 3 HKLRD 296, at 313 as follows:
116.Some principles stated in KLY & KHY are:
117.Having cited the principles of law aforesaid, I now come to the facts as found by me. Cape Union 118.Yet it seems clear that the Defendant came across the business opportunity related to the Cape Union order S#24 Bolivia Golfer when she was in the employment with the Plaintiff. As the General Manager who supervised Dominic, she would have known all the contracts in projection from L&F and must have known about the style S#24 Bolivia Golfer being one of those in the breakdown at page 005 of BD-B. The photo at page 35 of BD-B, being one of the pages given by Dominic to Mandy Chan show Style: Bolivia S/S Golfer (024). 119.In considering this issue in relation to the Cape Union style s#24 Bolivia Golfer, I must bear in mind the following;
120.The opportunity missed by the Plaintiff was at an early stage when the fiduciary had knowledge of it and it was about three months after termination of employment that the Defendant according to her had the additional contract from L & F related to this order of s#24 Bolivia Golfer. I am not able to find that Dominic stole the confidential files and production specifications from the Plaintiff. There is no evidence the Defendant made use of these. However there is evidence that the process of the order and samples of s#24 Bolivia Golfer was done by Dominic and the Defendant had supervision over him. Even though there is no evidence that the Defendant made use of the production styles and specifications taken from the Plaintiff it is clear that Dominic had sufficient information and knowledge of the order of s#24 Bolivia Golfer that he worked on four months ago whilst working for the Plaintiff. However the samples he worked on was in an embryonic stage and had not been completed or approved. The style must have been developed by another other than the Plaintiff to its final state. When the order reached the Defendant for production, the information relied on for production was developed by another and not the Plaintiff. 121.In view of the aforesaid, I am not able to find that the Defendant breached her fiduciary duties in taking up the s#24 Bolivia Golfer order with L & F as reflected in the e-mails at pages 52 to 55 of BD-D. Sonal 122.In relation to the replicated orders in the Sonal styles, the order for styles were actively pursued by the Plaintiff and the Plaintiff would have in normal course been able to win the contract as the work for the samples have all been done by the Plaintiff. 123.Mr. Subash visited the Plaintiff’s factory to take back the samples and informed Mandy Chan that because of cash flow problems they could not continue the development of the brand MaryJane. He took back the samples and it must have been shortly thereafter the Defendant got the replicated orders. This is because the e-mail was dated 8 September 2004. The styles were at various stages of production. There is reference in the e-mail to packing list and the first lot being sent by sea. A few months must have elapsed in the process of production of these styles at the time of the e-mail. It could not have been long after the Defendant left the employment of the Plaintiff when she took up these orders from Sonal. 124.She had confidential information and knowledge about these orders from her employment with the Plaintiff as General Manager. The business opportunities to do these orders must have come as a result of the fiduciary relationship she had with the Plaintiff. She was supervising Dominic and was in charge of the production of the samples with the view to the receipt of the orders for the production of the replicated orders. She knew of the styles and of the business opportunity, which the Plaintiff was actively pursuing. She was entrusted with the pursuit of those orders for the benefit of the Plaintiff. 125.In paragraph 62 of his judgment in KLY and KHY, Justice Ma as he then was stated,
126.In this case, the Defendant went beyond the use of her own accumulated knowledge skill and experience for her own profit or her own commercial relationships with customers. It is highly likely that the Defendant used her confidential information and secret knowledge gained about the styles in the replicated orders gained in the employment with the Plaintiff. These same orders she had actively pursued on behalf of the Plaintiff and supervised Dominic in the production of the samples. 127.I find therefore that in relation to the process of the replicated orders of Sonal, the Defendant being a senior officer of the Plaintiff responsible for the generating orders of garment production, after her dismissal by the Plaintiff secured for herself these contracts, which the Plaintiff had been actively pursuing through her. She would be liable to account for profits even if Sonal refused to deal with the Plaintiff (Industrial Development Consultants v Cooley [1972] 2 All ER 162. 128.I did not believe not accept the evidence of the Defendant that when working on these styles she made no profit as she merely acted as agent for Sonal for free. I find that the Defendant is liable to account for the profits that An-gelo received from these contracts. This is because there is no dispute that the Defendant in effect had control of and was in effect the beneficial owner of An-gelo Co. Ltd. The 6th Issue 129.This issue relates to the damages to be awarded to the Plaintiff for the Defendant’s breach of contract. 130.I found that the Defendant has breached Clause 5 of the written agreement, which has been incorporated into the Employment Contract. The last sentence in Clause 5 of the written agreement states,
131.I have to find whether the Plaintiff has suffered any loss or damage arising from this breach. The onus of proof is on the Plaintiff to establish that. 132.In my view, as the discussions for Bolivia Golfer style #24 were at an early stage, and the sample has not been approved and was at an early stage of being produced. There is no certainly that the order would have been processed to the final stage of an order being given. There is no dispute that L&F could choose to place its order upon different competitors of the Plaintiff although, all things being equal, it would be a matter of common sense that the order would be placed on the company that produced the sample. However in this case the sample had not as yet been approved even though the order was actively pursued. I find therefore no damages could be given to the Plaintiff for breach of Clause 5 as the loss is nebulous apart from nominal damages arising from the breach. 133.In relation to the Sonal styles namely the replicated orders, I found that the negotiations for these were at a more mature stage. 134.Mandy Chan stated that Mr. Subash told her that Sonal did not have money to produce the MaryJane styles and therefore asked to remove the samples from the Plaintiff. There is no evidence as regards whether Sonal actually was in a financially tight situation apart from the fact that it negotiated to pay only half of the cost of the samples and failed to pay two out of the four instalment payments for the samples. There is no evidence from Sonal as regards why Sonal subsequently placed orders for production of the MaryJane styles which were processed by the Defendant on Sonal’s behalf and MaryJane styles were made by factories. This may show that Sonal never intended not to produce MaryJane styles. It could well be true that whatever excuses Mr. Subash gave for taking back the samples from the Plaintiff these excuses may not be genuine. However I am of the view that there is insufficient evidence to support the contention in the final submission of the Plaintiff’s Counsel that the Defendant conspired with Sonal to divert the business from the Plaintiff to the Defendant. There is no pleading in relation to this and the evidence is not sufficiently clear to make this finding. Further as this is not the pleaded case of the Plaintiff even though the evidence of Mandy Chan seemed to allege this, I am of the view that it is not open to this Court to make such a finding. 135.There is no evidence to show that Sonal would have placed the orders on the Plaintiff were it not for the fact that the Defendant entered into business in competition with the Plaintiff immediately after she let the employment of the Plaintiff. There was some unhappiness between Mandy Chan and Mr. Subash when Mr. Subash took the samples away from the Plaintiff and there is not a basis of a happy working relationship between the Plaintiff and Sonal so as to cause Mr. Subash to wish to place MaryJane orders on the Plaintiff the moment he decided to produce the MaryJane orders. Hence, I find that the Plaintiff could not establish loss to support a claim for damages upon the Defendant’s breach of Clause 5 of the written agreement apart from nominal damages. 136.When the Defendant contacted Mr. Subash, when she left the employment of the Plaintiff, she knew about the MaryJane brand and styles. This was confidential information and trade secrets of the Plaintiff. She contacted Mr. Subash, and realistically, she was one who knew of the samples and helped organize the production of the samples. She also supervised Dominic or she herself contacted Mr. Subash in relation to the production of the samples and the process of the orders in projection. It is clear that in all probability, she made use of the confidential information and trade secrets in the process of the replicated orders by An-gelo of the MaryJane brand. 137.In my view, she breached Clause 10 of the written agreement, which was incorporated into the Employment Contract. As a result of that, even though the Plaintiff would be able to prove loss as a result of the breach of Clause 10, in that Sonal would have given the replicated orders to the Plaintiff were it not for this breach, I find that the Plaintiff is entitled to nominal damages of $1. 138.As I am not able to find breach of the other implied terms of the Employment Contract in the course of the employment of the Defendant by the Plaintiff no other damages flow arising from it. The 7th Issue 139.As I have found that the Defendant has breached her fiduciary duties as a general manger of the Plaintiff, I find that the Defendant is liable to account to the Plaintiff for all the profits she made from the Cape Union Bolivia Golfer s#24 order processed by An-gelo Co. Ltd. As I do not find the Defendant to be a credible witness I do not accept her evidence related to the fact that she did not gain a profit from the replicated orders. I find that the Defendant has to make full discovery related to the transactions in relation to the replicated orders between An-gelo Co. Ltd and Sonal to account for all profit from the replicated orders in pages 68 to 74 of BD-B. These styles are listed hereunder:
The 8th Issue 140.In relation to the Counterclaim, the Defendant counterclaims for commission, outstanding salaries between 1 April 2004 to 24 May 2004, paid leave, and year-end bonus. As I found that the Defendant has breached the Employment Contract and her fiduciary duty referred to aforesaid, the Defendant’s claim for commission must fail. I found that she was summarily dismissed with cause. Her claim for outstanding salary between the day of her dismissal on 8 May 2004 to 24 May 2004, must fail. The Plaintiff has paid the Defendant’s outstanding salary from 24 April to the day of her dismissal on 8 May 2004, into the Labour Tribunal, and this sum should be paid out to the Defendant. The paid leave of $3,000 has been agreed. She has dropped her claim for 7 days annual leave. The Defendant’s claim for year-end bonus must fail in view of my finding on her breach of Employment Contract and breach of fiduciary duty. 141.In view of the aforesaid, I give the following Order: Judgment for the Plaintiff against the Defendant for nominal damages of $1 to the Plaintiff in respect of the Defendant’s breach of Clause 5 of the written agreement, nominal damages of $1 in respect of the breach of Clause 10 of the written agreement and the sum of $2,500 pleaded in paragraph 19a of the Amended Statement of Claim. I order that the Defendant do account for all profits made by An-gelo from the breach of fiduciary duty by the Defendant related to the replicated orders referred to in the last paragraph of the 7th Issue and the Defendant do pay to the Plaintiff all profits found to have been made by the Defendant. I direct that the taking of the account be conducted by a Master of the District Court pursuant to Order 43 of the Rules of the District Court and the costs of this be paid by the Defendant. I further direct that the relevant books of account of An-Gelo Co. Ltd. verified by an auditor, in relation to the replicated orders shall be evidence of the matters contained therein with liberty to the Plaintiff to take such objections thereto as it thinks fit. I order that the sum of $56,612.90 for the outstanding salary due to the Defendant for the period from 24 April to 8 May 2004 which sum has already been paid into the Labour Tribunal by the Plaintiff be paid out to the Defendant by the Labour Tribunal. I give Judgment for the Defendant against the Plaintiff for the agreed sum of $3,000 for accrued paid leave due to the Defendant. I dismiss the other items of the Counterclaim is dismissed. I grant an order nisi for the costs of the claim to be paid by the Defendant to the Plaintiff to be taxed if not agreed with Certificate for Counsel and I grant an order nisi for 4/5th of the costs of the Counterclaim to be paid by the Defendant to the Plaintiff to be taxed if not agreed with Certificate for Counsel.
Representation: Mr. Kenneth Shum instructed by Messrs. C.C. Lee & Co. for the Plaintiff. Mr. Jason Wong instructed by Messrs. Tang Lai & Leung for the Defendant. |
Cases cited in this judgment
Further hearings and rulings under DCCJ 6571/2004