Home Essentials (HK) Ltd v. John Mclennan

DCCJ 7954/2002 & 943/2003
(consolidated)

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 7954 OF 2002 & 943 OF 2003

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BETWEEN

(consolidated pursuant to the order of Master K.W. Wong on 10^th March 2003)

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Coram : Deputy District Judge Anthony Chow in Chambers (open to public)

Date of Hearing : 13^th June 2007

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DECISION

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BACKGROUND

1.DCCJ 7954/2002 was a claim by an employer against a former employee for breach of fiduciary duties. After last minute amendments, the breach alleged was during his employment with the plaintiff, the defendant engaged in business that were in competition with the plaintiff and the defendant made secret profits there from. The plaintiff prayed for an account of the secret profits received by the defendant.

4.DCCJ 943/2003 was a claim by an employee against an employer for one month’s wages in lieu of notice, severance pay, unpaid agreed increases in wages from 16/1/2002 to 28/2/2002, unpaid wages from 16/1/2002 to 17/6/2002, Chinese New Year bonus for the period between 24/1/2001 to 11/2/2002, plus a 10% interest for accepting the Chinese New Year bonus in 6 installments and reimbursement of expenses.

5.After deducting 4 payments the defendant received between 15/3/2002 and 31/5/2002, the defendant counterclaimed against the plaintiff for the sum of HK$208,178.71.

6.Just prior to trial, the plaintiff added a counterclaim to the defendant’s counterclaim for: (1) one month’s wages in lieu of notice and (2) for excessive paid annual leave.

7.After a 4-day trial, I dismissed the claim; gave judgment for the defendant’s counterclaim for: Unpaid salaries, Chinese New Year Bonus, Days for Dollars and Expenses in the sum of HK$107,463.68 and gave judgment for the counterclaim on counterclaim for one month’s wages in lieu of notice in the sum of HK$56,000.00. Balance of the counterclaim and counterclaim to counterclaim were dismissed.

8.The plaintiff now seeks leave to appeal my decision.

THE LAW

9.The applicable test is set out in Smith v Cosworth Casting Processes Limited [1997] 1 WLR 1538. Lord Woolf, MR stated the relevant principles as follows:

“	i)	The court will only refuse leave if satisfied that applicant has no realistic prospect of succeeding on the appeal. The test is not meant to be any different from that which is sometimes used, which is that the applicant has no arguable case. Why however this court has decided to adopt the former phase is because the use of the word “realistic” makes it clear that a fanciful prospect or an unrealistic argument is not sufficient.
	ii)	The court can grant the application even if it is not satisfied. There can be many reasons for granting leave even if the court is not satisfied that the appeal has any prospect of success. For example, the issue may be one which the court considers should in the public interest be examined by this court or, to be more specific, this court may take the view that the case raises an issue where the law requires clarifying.”

10.Clearly the test has a low threshold, the defendant is only required to show an arguable case; however, after hearing counsel’s arguments, I am of the view that the applicant’s argument did not have a realistic prospect of succeeding on appeal. I therefore dismissed the application, ordered costs of this application, with certificate for counsel, against the applicant. I now state my reasons.

11.Three grounds of appeal were listed in Mr. Chang’s draft Notice of Appeal:

(1)	The learned Judge erred in finding that the terms of the Employment Contract did not form part of the terms of the Defendant’s employment with the Plaintiff (p.37 of Judgment). Such finding was contrary to the weight of the evidence and against inherent probabilities:-
	…
(2)	The Learned Judge erred in finding that as a matter of fact, the Defendant did obtain (Mr.)Exline’s consent to continue his side business after he started full-time employment with the Plaintiff, so long as such side business did not interfere with his work with the Plaintiff (p.47 of Judgment). Such finding was contrary to the weight of the evidence and against inherent probabilities:-
	…
(3)	The Learned Judge erred in finding that there was an ad hoc arrangement instead of an agreed fixed number of annual leave days per year between the Plaintiff and the Defendant (p.66 of the Judgment):-
	…

12.All three grounds of appeal targets specific finding of facts in my judgment. Mr. Chang argued that I made these finding of facts by a process of inference and Mr. Wong argued these were findings of primary facts based on credibility.

13.The proper approach, when an appeal is against a Court’s finding of primary facts is set out in Ting Kwok Keung v Tam Dick Yuen & Ors [2002] 3 HKLRD at para. 32 to 46. In his Skeleton Argument, Mr. Wong distilled the following guidance from Bokhary PJ’s judgment in Ting Kwok Keung:

(1)	Appeals against findings of facts of primary facts are approached very differently from appeals against findings of fact made by a process of inference;
(2)	Where findings of facts are made by a process of inference, no question of credibility arises;
(3)	An appellate court is universally reluctant to reject a finding of specific fact, particularly where the finding could be found on the credibility or bearing of a witness;
(4)	On the other hand, an appellate court is customarily willing to form an independent opinion about the proper inference of fact, subject only to the weight which should be given to the opinion of the court below;
(5)	Where the judgment turns on an issue of facts, the Court of Appeal must have regard to the nature of that issue of fact and to the advantage enjoyed by a trial judge who received evidence on such issue first-hand;
(6)	The question for the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received evidence first-hand, it is nevertheless satisfied that the trial judge’s conclusion on the facts is plainly wrong.

THE ISSUE

14.I agree with Mr. Wong that these are the proper approach when an appeal is based on finding of primary facts. The central issue in this application is therefore whether the finding of facts being appealed were made by a process of inference or based on credibility. If my finding of facts were based on creditability or partly based on creditability, then there would be no realistic prospect of succeeding on appeal

THE FIRST GROUND OF APPEAL

15.As to the first ground of appeal, in paragraph 13 of my judgment, I stated the plaintiff’s allegation that terms of the unsigned employment contract dated 1/11/1999 were the agreed terms of employment between the parties. In paragraph 34 of my judgment, I wrote:

“In fact, the only evidence the plaintiff had was Mr. Exline’s testimony. However, on whether the defendant signed the Employment Contract, even Mr. Exline’s testimony was equivocal. He never stated he saw the defendant signing the Employment Contract, nor did he testify he saw a signed copy of the Employment Contract. When questioned by Mr. Wong, Mr. Exline only said the defendant signed it and turned it into the Immigration Department. The copy turned into the Immigration Department was of course not signed.

16.I clearly rejected Mr. Exline’s testimony, when I wrote he testified that the defendant signed the employment agreement and turned it into the Immigration Department, when the copy sent to the Immigration Department was in fact unsigned.

17.As I have stated in paragraph 29 of my judgment:

“…This question of fact must be decided by the veracity of the testimonies of the parties, their respective witnesses and the documentation submitted as evidence.”

My finding was clearly based on the credibility of Mr. Exline and the defendant’s testimonies.   

THE SECOND GROUND OF APPEAL

18.As to the second ground of appeal, I did not reject the defendant’s testimony in total. In paragraph 42 of my judgment I stated:

“…Particularly, when the second caveat was not pleaded in the original Defence and Counterclaim.  I find the defendant’s ability to add more and more details to this part of his evidence difficult to accept and I reject this part of his evidence.”

I clearly meant only that part of the defendant’s evidence dealing with the second caveats was rejected.

19.In paragraph 39 of my judgment, Mr. Exline’s testimony on this issue was summarized as follows:

“According to Mr. Exline, he agreed the defendant could complete only those projects he had already started prior to commencing full-time employment with the plaintiff. There was no further discussion on this matter until he discovered the Wynant invoice in April 2002. Mr. Exline also testified that in and around October 1999, he attended a drinks gathering with the defendant’s friends at the Conrad Hotel but they did not discuss the defendant’s terms of employment.”

20.In paragraph 40 of my judgment I listed out the defendant’s testimony and the other evidence in support of the defendant’s version of event. In subparagraph 40(1) I listed out a series of contemporaneous emails between the defendant and Ms. Carver, confirming the defendant’s version of events and in subparagraphs 40(3) I specifically stated Ms Lechner’s evidence was during a meeting at the Conrad Hotel in the month of September or October 1999, she heard Mr. Exline stating the defendant would be able to service his own clients while he was working with the plaintiff full-time.

21.In paragraph 43 of my judgment, I clearly stating that I found Ms. Lechner’s testimony honest and truthful and accepted her version of event. In view of the fact that Ms. Lechner’s testimony conflicted directly with Mr. Exline’s testimony, by necessarily implication, I had rejected Mr. Exline’s testimony.

22.In paragraph 47 of my judgment, I clearly stated I had considered all of the above, including: the defendant’s testimony, Ms. Craver’s testimony, Ms. Lechner’s testimony, Mr. Wyborn’s statement and the contemporaneous emails, before I rejected Mr. Exline’s testimony and found there was consent for the defendant to continue his side business after he commenced full-time employment with the plaintiff. Part of my consideration was of course the credibility of Mr. Exline’s testimony versus the credibility of the defendant and the other defendant witnesses’ testimony.

THE THIRD GROUND OF APPEAL

23.As to the third ground of appeal, in paragraph 65 of my judgment, I found the defendant’s allegation that there was an agreed 28 days paid annul leave nonsensical and rejected his evidence.

24.In paragraphs 73, 74 and 75, I found Mr. Exline’s testimony that the plaintiff did not have a record of the defendant’s annual leave unbelievable; Mr. Exline’s failure to complaint about the defendant’s excessive annual leave unreasonable; and his continuation to pay the defendant full salary when the defendant was allegedly taking excessive annual leaves, at a time when the plaintiff was experiencing financial difficulties unnatural. Clearly, I found Mr. Exline’s testimony not creditable.

25.Accordingly, I rejected both the defendant’s and Mr. Exline’s evidence based on the creditability of their testimonies. The only part of my finding that was based on a process of inference was that there was an ad hoc arrangement on annual leaves. But in view of the fact that with the plaintiff’s consent, the defendant took widely different paid annual leaves during the two annual leave periods he was employed by the plaintiff, left no other rational explanation except an ad hoc arrangement.

CONCLUSION

26.In conclusion, the first two grounds of appeal and the first part of the third ground of appeal were against my findings of primary facts based on credibility and the Court of Appeal will be reluctant to reject such findings. Although the second part of the third ground of appeal was an appeal against a finding of fact based on a process of inference, I can see no other rational inference based on the facts found and therefore I can see no realistic prospect for the plaintiff succeeding on appeal.

Representation:

Mr. Jonathan Chang, instructed by Messrs. Haldanes, for the Plaintiff

Mr. Jonathan Wong, instructed by Messrs. Richards Butler, for the Defendant