Raj Kumar Mahajan v. Hcl Technologies (Hong Kong) Ltd and Others
Read the full judgment text of HCA 1510/2004 on BabelCite. This High Court CFI judgment was delivered on 14 April 2011.
1. In this consolidated action, the Plaintiff (“Mr Mahajan”) claims against the Defendants as his ex-employer(s) for: (1) outstanding bonuses during his employment from 1 July 1999 to 5 February 2004; (2) damages for failure to provide him with adequate business resources to develop the Defendants’ business from which he could derive enhanced remuneration; and (3) damages for wrongful termination of his employment, including sums payable to Mr Mahajan arising from the failure to give him proper
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HCA 1510/2004 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1510 OF 2004 ____________
________________ HCA 954/2005 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 954 OF 2005 ____________
____________ (Consolidated by Order of Master Ko dated the 9th day of January 2009) Before: Mr. Recorder Jat, S.C. in Court Dates of Hearing: 18-22,25-26, 28-29 October 2010 Date of Handing Down of Judgment: 14 April 2011 _____________ JUDGMENT _____________ Introduction 1.In this consolidated action, the Plaintiff (“Mr Mahajan”) claims against the Defendants as his ex-employer(s) for: (1) outstanding bonuses during his employment from 1 July 1999 to 5 February 2004; (2) damages for failure to provide him with adequate business resources to develop the Defendants’ business from which he could derive enhanced remuneration; and (3) damages for wrongful termination of his employment, including sums payable to Mr Mahajan arising from the failure to give him proper notice of termination of employment, damages for unexercised share options as well as long service payment. Additionally, Mr Mahajan claims against the 3rd Defendant (“Mr Nadar”) personally for the alleged breach of two oral agreements reached on 30 December 2001 and 7 January 2002 respectively. 2.The parties have helpfully provided the Court with a largely agreed List of Issues: I say “largely” because the Defendants’ position is that some of the issues framed by Mr Mahajan’s side are either irrelevant or do not arise. I need not be detained by such relatively minor disagreements. It seems to me reasonably clear that the main issues for determination are as follows:
Background 3.In order to put these issues and the parties’ contentions in context, it is necessary to set out the material background facts, which are largely undisputed. In any case, for the avoidance of doubt, the facts stated in this section are my findings of fact in so far as there is any dispute. 4.HCL India is a company incorporated in India and has since around January 2000 been listed on the National Stock Exchange of India. It is, and was at all material times, the flagship of the HCL Group of companies (“HCL Group” or “Group”). Mr Nadar was the founder of the Group and was at all material times its chairman and person in de facto overall control. 5.The main business of the HCL Group was computer software development, consultancy and related services. Since its relatively humble beginning in the late 1970s, the Group has developed into a multi-national business, operating a number of subsidiaries (in some cases in joint venture with others) in many jurisdictions including India, USA and Canada, Europe and Africa, the Asia Pacific region (covering Australia, New Zealand, Hong Kong, Taiwan, Korea, Mainland China, Philippines and Fiji), Japan, Singapore and Malaysia. These geographical areas are referred to as “Geos” in the trial. 6.Other than HCL India, entities within the HCL Group involved in this action include HCL Hong Kong, which is an indirect wholly-owned subsidiary of HCL India, and HCL Technologies Limited, which although bearing the same name as HCL India, is a Bermudian company (“HCL Bermuda”). 7.Mr Mahajan considered himself a protégé of Mr Nadar. He started working under Mr Nadar from around 1974, when they were both employees of an Indian company called DCM Products. After Mr Nadar had established HCL India (then called Hindustan Computers Limited) in around 1979, Mr Mahajan joined that company at the invitation of Mr Nadar. Save for about a year from about March or May 1989 to April 1990, he had been working for the HCL Group or a joint venture in which HCL was interested, until the termination of his services on 6 February 2004. He regarded himself as an employee of Mr Nadar. 8.In terms of Mr Mahajan’s work history, since joining the HCL Group, Mr Mahajan worked in various positions and enjoyed increasing responsibilities. He became a Corporate Officer (Corporate Vice President) of HCL India in 2000. 9.In May 1980, Mr Mahajan was one of the first “pioneers” chosen by Mr Nadar to commence the Group’s global business outside India. Mr. Mahajan was stationed in Singapore where he was tasked to set up Fast East Computers Pte Ltd (“FEC”), a Singaporean company within the HCL Group. 10.From around May 1981, Mr Mahajan was “transferred” to Fast East Computers Sdn Bhd in Malaysia to set up HCL Group’s operations there. Mr Mahajan remained the Country Manager and CEO of the Malaysian company until December 1987. In 1988, he was “transferred” back to Singapore to oversee new diversification plans. It would appear from letters issued by FEC dated 17 October 1988 and 28 February 1989 that the Malaysian company was a subsidiary of FEC and Mr Mahajan remained employed by FEC during this period. 11.In about May 1989, Mr Mahajan left the HCL Group and joined Sybase Australia Pty Ltd, an Australian subsidiary of the American Sybase Inc, as Senior Account Executive. He was based in Sydney during his employment with Sybase. 12.Mr Mahajan’s time with Sybase was short-lived. In early 2000, Sybase and HCL Group entered into a joint venture to set up an operation in Singapore. Mr Mahajan resigned from Sybase and re-joined the HCL Group, becoming the Managing Director of the joint venture company, HCL Sybase Products South East Asia Pte Ltd (“HCL Sybase”). It is not disputed that this joint venture vehicle was initially owned as to 90.5% by HCL America, a US subsidiary of HCL Group, while Sybase owned the remaining 9.5%. In about 1992, HCL Group acquired Sybase’s 9.5% stake and the company became a wholly-owned subsidiary of HCL Group, changing its name to HCL Software Products SEA Pte Ltd (“HCL Software SEA”). Mr Mahajan was based in Singapore during his tenure with HCL Sybase. 13.In a letter dated 12 May 1990 issued by HCL India’s Corporate Office, one Mr Ajai Chowdhry wrote to Mr Mahajan stating: “Welcome back to HCL! I guess you never really left ….” Perhaps more significantly, by a letter dated 1 March 1990 issued by HCL America, Mr Mahajan was offered the position of “Managing Director of the Joint Venture with Sybase (HCL Sybase Products South East Asia Pte. Ltd.) to be set up in April 1990. Although formal contract can be signed only after the incorporation of HCL Sybase Products South East Asia Pte. Ltd., I would like to confirm the terms as discussed between us ….” There is no evidence about HCL America, but one can safely infer that it was a subsidiary of HCL Group incorporated in the US. 14.A few other letters/documents are worth mentioning at this stage. On 28 March 1991, HCL Sybase issued a letter to the Singapore Immigration Department in support of Mr Mahajan and his family’s application for permanent residence in Singapore. This letter unequivocally stated that Mr Mahajan was Managing Director and an employee of HCL Sybase. In April and 1992 and May 1993, Mr Mahajan’s remuneration package was reviewed as documented in letters issued by the chairman of HCL Software SEA (as HCL Sybase has become). 15.It would therefore appear reasonably clearly, and I so find, that Mr Mahajan was in fact employed by HCL Sybase/HCL Software SEA during his tenure with that entity in Singapore. 16.The next development in terms of Mr Mahajan’s employment history took place in early 1995, when Mr Mahajan and HCL Hong Kong Ltd (a Hong Kong subsidiary of the HCL Group, not the 1st Defendant in this action) signed an Employment Contract “effective as of 1 January 1995”. The document stated unequivocally that Mr Mahajan “shall be employed by HCL Hong Kong Limited (hereinafter called ‘the Company’) as Chief Executive, North East Region and Australia, to perform services for the Company.” This contract provided in clause 4 that the duration of the employment was initially 3 years and subject to renewal on mutually acceptable terms, and might be terminated by either party giving three months’ written notice. 17.By another Employment Contract “effective as of 1 April 1996” signed by Mr Mahajan and HCL Hong Kong Ltd, Mr Mahajan was employed by HCL Hong Kong Ltd “as Chief Executive, North East Region, New Zealand and Fiji, to perform services for the Company”, again for a period of 3 years terminable on three months’ written notice. 18.In around mid-1996, HCL Group had plans to open up the Australian market. Mr Mahajan, the trusted executive who had by then become a member of the Management Council of HCL India, was the candidate chosen for the task. Mr Mahajan’s remuneration package for his posting to Australia was set out in a letter dated 29 July 1996 issued by Mr Sujit Baksi (“Mr Baksi”), HCL India’s Director of Human Resources Development, on HCL India’s letterhead. As this letter contains a good summary of Mr Mahajan’s work history with the HCL Group up to 1996, I quote the contents of the letter in full below:
19.For completeness, I should mention that there is another letter also dated 29 July 1996, also signed by Mr Baksi on HCL India’s letterhead, and in almost identical terms to the letter referred to in the previous paragraph, save in relation to some terms in the remuneration (notably the amount of salary was stated to be A$60,000, and here is no equivalent to item 4 “Cost of Living Allowance” found in the above letter dated 29 July 1996). According to Mr Mahajan’s witness statement, the first-mentioned 29 July 1996 letter was to supercede the other one because “it was felt” – the statement does not say by whom – “that the salary stated in the first one appeared too low for a Managing Director”. Mr Mahajan was not cross-examined on this point and I accept his evidence that the first-mentioned letter was the effective one for the reason he gave. 20.Mr Mahajan and his family relocated to Australia in around November 1996. There is no clear evidence as to whether Mr Mahajan was employed by any specific entity within the HCL Group, although there are documents which suggest that Mr Mahajan was made Managing Director of HCL Technologies (Australia) Pty Ltd, which later became known (at least internally) as “HCL Technologies NAANZ” – “NAANZ” refer to North Asia, Australia and New Zealand. 21.As things turned out, Mr Mahajan’s stay in Australia took longer than the expected 2 years. It is unnecessary to go into the details; suffice to say that in around April 1998, Mr Mahajan was tasked by Mr Nadar to help HCL Hewlett-Packard Ltd, which later became known as HCL Infosystems Ltd, to establish its operations in the USA. Because of this development, Mr Mahajan remained based in Australia beyond November 1998. As can be seen from a number of email correspondence in early 1999 passing between Mr Mahajan and various human resources officers of the Australian company and HCL Group headquarter in India, there were issues over potential higher tax payable by Mr Mahajan in Australia arising from him residing there for more than 2 years. 22.Towards the latter part of 1998 to early 1999, there were plans for Mr Mahajan to relocate to the USA instead of him returning to Singapore after his time in Australia, including discussions between Mr Mahajan and senior officers of HCL India over his remuneration package in the USA. Eventually, these plans did not materialise, and Mr Mahajan was instead relocated to Hong Kong in March 1999. The terms of his employment in Hong Kong gave rise to the main issues in dispute in this action. 23.It was against the above background that the events central to this action took place, to which I turn. The Amsterdam Meeting and Amsterdam Note – Mr Mahajan’s bonus entitlement for 1999 – 2002 24.Mr Mahajan’s case is that the terms of his employment with effect from 1 March 1999 were agreed between him and Mr Nadar in Amsterdam on 24 February 1999. 25.Mr Mahajan wrote out, in his own handwriting in pencil, a 5 pages document which he claims contained most, but not all, of the matters agreed with Mr Nadar on that occasion. This document has been referred to as the “Amsterdam Note” in the course of the trial. 26.There is no dispute that Mr Nadar did meet with Mr Mahajan in Amsterdam on 24 February 1999. There is also no dispute that following the meeting, Mr Mahajan was appointed HCL Hong Kong’s Managing Director – North Asia & Australia/New Zealand (collectively NAANZ). What the Defendants contend is that there was no concluded agreement reached, and that the Amsterdam Note was merely a non-binding record of the matters discussed between the two men and no more than that. 27.I note in passing that in an affidavit made by the Defendants’ previous solicitor and filed on their behalf, it was claimed that Mr Nadar had never been provided with copies of the Amsterdam Note, and had only seen it after these proceedings were commenced in 2004. One would imagine that the solicitor’s instruction could only have come from Mr Nadar himself. Mr Mahajan, however, explained that after writing out the Amsterdam Note, he had 5 copies of it made at the business centre of the hotel where both he and Mr Nadar were staying, and gave 3 copies to Mr Nadar for further action. He then wrote on his own copy “3 copies given to Mr Nadar on 24/2/99 Copy given to SW on 1/3/99” – “SW” referred to Mr Shiv Walia (Mr Walia”), whose involvement will be addressed later. He was also able to produce a copy of the hotel bill, which included charges for photocopying for 25 sheets. I am satisfied that the Amsterdam Note was indeed written by Mr Mahajan on 24 February 1999 in the circumstances described by him in his evidence, and that copies were given to Mr Nadar on that occasion. 28.Turning to the content of the Amsterdam Note, it is necessary to set out the entire document, as follows (excluding handwritten remarks added onto the original by Mr Mahajan after copies had been made):
29.Mr Mahajan claims that in addition to the rates of bonuses set out in the Amsterdam Note, he and Mr Nadar had agreed that he would be entitled to a minimum bonus of US$200,000 per annum for the 3 years from July 1999 to June 2002. The Defendants deny that this was the case. Amongst the many issues in dispute between the parties, this was the most hotly disputed issue at the trial. 30.Another issue of some importance is whether there was any agreed period of notice of termination. The Amsterdam Note contains nothing concerning notice period. I will return to this issue in a later section in this Judgment. 31.Following the Amsterdam meeting, three letters were issued to Mr Mahajan, all from HCL Bermuda, the intermediate holding company of HCL Hong Kong, and signed by Mr Baksi as “Executive Vice President Human Resources Development”. The first is a letter dated 5 March 1999, the material parts of which provided as follows:
32.Another letter, also dated 5 March 1999, is in the following terms:
33.The third letter is dated 12 March 1999. It stated as follows:
34.Attached to the 12 March 1999 letter is a schedule which substantially replicated the contents of the Amsterdam Note. However, there were some differences, the material ones are as follows:
35.There is no evidence that Mr Mahajan signed any employment contract with HCL Hong Kong. However, on 9 March 1999, HCL Hong Kong wrote a letter to the Hong Kong Immigration Department applying for an employment visa for Mr Mahajan. In this letter, HCL Hong Kong described Mr Mahajan as “Managing Director of our company viz HCL (Hong Kong) Limited” and “We plan to base Mr Mahajan in Hong Kong as the Managing Director of our company.” There is no dispute that an employment visa was issued to Mr Mahajan shortly thereafter and he commenced his posting in Hong Kong (although physically he spent most of his time in Australia). 36.Additionally, Mr Alan Leong SC (appearing with Mr Jenkin Suen) on behalf of Mr Mahajan pointed out that under the section “E) GENERAL” on page 3 of the schedule attached to the letter dated 12 March 1999, it was stated that:
37.Mr Leong also relied on Mr Mahajan’s unchallenged evidence that there had been no further negotiation between 24 February and 12 March 1999, so that the two March 1999 letters were intended to record formally the terms which had already been agreed in the Amsterdam Meeting and recorded in the Amsterdam Note without seeking to depart from those terms. 38.On behalf of the Defendants, Mr Ashley Burns SC (appearing with Miss Janet Ho) argued that Mr Mahajan’s terms of employment were exclusively recorded in the (second) 5 March and 12 March 1999 letters. Furthermore, on a proper construction of the terms of those letters, Mr Mahajan was not entitled to any bonus unless he had reached the amounts stated in the schedule attached to the 12 March 1999 letter – these were “gates” or “targets” which Mr Mahajan must achieve in order to get any bonus. 39.Naturally, both counsel deploy their admirable forensic skills with a view to bolstering their case and undermining their opponents’ case. It is unnecessary to rehearse all the arguments here. In my judgment, neither side’s case is entirely right. I accept, and so find, that Mr Mahajan did reach agreement with Mr Nadar on the terms recorded in the Amsterdam Note. These are plainly not just a record of matters discussed between the two. However, plainly the two men intended those terms would be formally recorded, and the letter dated 12 March 1999 was the formal letter setting out the agreed terms. The differences in wording between the Amsterdam Note and the 12 March 1999 letter do not, viewed objectively, indicate any intention to change the terms which had been agreed in Amsterdam. 40.In my judgment, reading the Amsterdam Note and the 12 March 1999 letters objectively, they are not inconsistent with each other. In my view, both documents provided that Mr Mahajan was entitled to bonuses based on the actual amount of sales achieved under the various categories calculated by reference to the applicable percentages. Neither document mentioned any minimum amount of bonus, or any “targets” or “gates” the achievement of which must be met before any bonus would be payable. 41.I am fully conscious that in coming to that view, I am not accepting fully either side’s pleaded case on Mr Mahajan’s bonus entitlement. However, in my judgment I am entitled to come to that conclusion, it being a question of construction of contract: see Mak Kang Hoi v Ho Yuk Wah (2007) 10 HKCFAR 552, paras 101-106. Indeed, it should be recorded that although I drew counsel’s attention to this authority, and expressly invited counsel to make submissions if they considered that this conclusion was not open to me, neither counsel accepted the invitation. 42.In coming to that conclusion, I have also taken into account the following considerations. 43.First, as Mr Burns pointed out in the course of cross-examination, Mr Mahajan is plainly a very careful person at least insofar as matters relating to his compensation package were concerned. The evidence shows that he had a habit of making contemporaneous notes or records of important matters discussed or agreed concerning his remuneration. I do not find it credible that on such an important matter (to him) as his minimum bonus entitlement, he would have failed to record it in the Amsterdam Note or some other contemporaneous document, or raise queries about it when he received the 12 March 1999 letter. I do not accept the reason he gave, namely, that Mr Nadar had asked him not to record that aspect of the agreement to avoid external directors knowing about his high compensation package: on his own case the Amsterdam Note was for Mr Nadar and Mr Baksi’s use only, and there was no reason why the alleged agreement could not be recorded in some side letter or even in his own personal notes. 44.Secondly, I also agree with Mr Burns’ submissions that the alleged minimum bonus is inconsistent with subsequent letters and emails sent by Mr Mahajan to Mr Nadar. The following are some examples.
45.Thirdly, Mr Mahajan’s case is inconsistent with the way Mr Mahajan had claimed his bonus. The evidence shows that he used to collect his bonus from time to time on the basis of the actual amount of sales achieved. Mr Mahajan was unable to give any reason as to why, if he had thought that he was entitled to a minimum bonus of US$200,000 per year, he did not draw that minimum amount in equal monthly or other periodic instalments (it will be remembered that the 12 March 1999 letter provided that his bonus was to be paid quarterly). 46.At the same time, there is no dispute that Mr Mahajan did not reach the “base targets” or “gates” for any of the years in question. There are many documents in the hearing bundles which set out the amount of bonus to which Mr Mahajan was entitled for the 2001 to 2003 financial years. One of these documents is the letter from Mr Mahajan to Mr Nadar dated 31 December 2001 referred to above, in which Mr Mahajan asked Mr Nadar to remit his bonuses for 1999-2000 (in the sum of US$214,374), 2000-2001 (in the sum of US$160,497) and US$50,000 for Japan, to a bank account held in Hong Kong. There can be no doubt that Mr Nadar knew full well that Mr Mahajan had been claiming entitlement to these bonuses even though he had not achieved the alleged “gates” sales. If Mr Mahajan were not entitled to any bonus without achieving the base targets, it is most surprising that he was nevertheless allowed to claim bonus payments without question up to the termination of his employment in February 2004. 47.In order to explain this anomaly, the Defendants called Mr Walia, who was responsible for finance matters under Mr Mahajan, to give evidence to the effect that everything was done in accordance with Mr Mahajan’s instructions, and that the emails and correspondence sent by him to HCL India corporate HR concerning Mr Mahajan’s pay and bonus were all dictated by him. As I understand his evidence, Mr Walia did not suggest that Mr Mahajan had tried to hide any relevant financial information from HCL India. In any case, Mr Walia cannot explain the letter to Mr Nadar dated 31 December 2001. 48.I do not accept Mr Walia’s evidence, which is inconsistent with the contemporaneous documents. The following instances are illuminating.
49.Fourth, I am unable to accept the evidence of Mr Anil Chanana, HCL India’s current Chief Financial Officer who was Corporate Vice-President, Finance from 1996 to 2004, to the effect that he had been told by Mr Nadar shortly after the Amsterdam meeting that Mr Mahajan’s bonus entitlement was subject to “base billing targets”. Mr Chanana, however, was at pains to point out in his testimony that he had not read the Amsterdam Note, and was only told about what (allegedly) had been relayed to him by Mr Nadar. The objective facts are inconsistent with Mr Chanana’s hearsay evidence, and I do not accept his evidence. 50.Mr Nadar did not give oral evidence. Towards the end of the trial, Mr Burns applied to adduce Mr Nadar’s witness statement as hearsay evidence. Mr Leong, understandably, strongly objected to the application. Counsel, however, sensibly agreed that I should rule on the application in my Judgment. I need not rehearse the arguments advanced by either side. I would have no hesitation in rejecting the application if there had been any hint of a tactical manoeuvre designed to spring any surprise on Mr Mahajan. However, I think it must have been fairly obvious to Mr Leong from the procedural history of this action that Mr Nadar would not be giving oral evidence. The witness statement is admissible as hearsay evidence, and Mr Nadar being beyond the seas I would exercise my discretion to admit it. However, having admitted it, I am not prepared to place any weight on it insofar as it contradicts Mr Mahajan’s evidence or is inconsistent with contemporaneous documents. In my view, plainly Mr Nadar is able to give evidence if he had minded to do so, and it would be wrong to attach any weight to his unsworn and untested evidence. 51.Before leaving this issue, I should record that Mr Leong placed considerable reliance on an argument that throughout Mr Mahajan’s employment history with HCL Group, whenever he received a new posting his net of tax remuneration package would increase. In particular, he contended that he had been receiving minimum bonuses since 1995. I am unable to accept that argument. First, I do not think the evidence supports the assertion that the bonuses received by Mr Mahajan were “guaranteed” minimum bonuses. Secondly, whilst it is probably correct that the total value of the compensation received by Mr Mahajan had been increasing since 1995, the fact is that for the Hong Kong posting Mr Mahajan was expected to receive a higher fixed salary than for previous years, and in addition he would be entitled to a variable bonus which depended on his performance. Furthermore, under the March 1999 package Mr Mahajan was to receive share options to be given by HCL India following its expected listing, which in fact materialised. Indeed, it was put to Mr Mahajan in cross-examination, and he has not denied the suggestion, that he had made some US$2 million in profits from exercising his share options. Thus even if the contractual remuneration Mr Mahajan expected to receive might be potentially less than the total remuneration he had received up to 1999, the prospects of material benefits from his share options provided an objective reason for him to agree to the package. Who was Mr Mahajan’s Employer? 52.I turn next to the question of Mr Mahajan’s employer. As stated above, there is no dispute that HCL Hong Kong was Mr Mahajan’s employer. The issue is whether HCL India and Mr Nadar, or either one of the two, is also Mr Mahajan’s employer. 53.I think the claim that Mr Nadar is an employer of Mr Mahajan can be disposed of relatively quickly. In my judgment, Mr Mahajan has not proved that Mr Nadar was his employer, whether in addition to HCL Hong Kong or otherwise. In my view, the evidence reveals no more than Mr Nadar representing an entity within HCL Group, or an entity to be incorporated under the HCL Group umbrella, in his dealings with Mr Mahajan. It makes no sense to suggest that in a modern day multi-national business, the chairperson is personally employing someone to work in the corporate group. The claim against Mr Nadar as employer therefore fails. 54.As to whether HCL India was an employer of Mr Mahajan, the answer is less straight forward. 55.Clearly HCL India was the nucleus of the HCL Group and its officers were in overall management and supervision of its subsidiaries. There is nothing unusual about that in a modern multi-national business group. It was therefore not surprising that important corporate decisions were made in India and then implemented through the relevant subsidiaries. 56.At the same time, Mr Mahajan was, and was held out to the public as, a Corporate Officer of HCL India. Also, the letters dated 5 March and 12 March 1999 were issued by HCL Bermuda, not HCL Hong Kong. 57.None of these factors is, in my view, determinative. What in my judgment is critical is that during the course of Mr Mahajan’s employment within the HCL Group, he was always “attached” to a subsidiary, usually with an employment letter issued by the subsidiary. It was invariably that subsidiary which had applied for working permissions for Mr Mahajan when required. Furthermore, Mr Mahajan’s remuneration was paid by those subsidiaries in accordance with the local laws applicable, including employment laws and revenue laws. This fact is reinforced in the 5 March 1999 letter, which offered him employment “with HCL Technologies (Hong Kong) Limited based in Hong Kong”, and expressly stated that “You will be governed by the rules and regulations of [HCL Hong Kong] during your posting in Hong Kong.” This is in my view significant because it shows, objectively, that Mr Mahajan’s employment was anchored at a particular place and was subject to the applicable local laws. 58.In this connection, it may be worth pointing out that Mr Mahajan accepts in his own pleading that his employment was governed by Hong Kong law: see Re-Amended Statement of Claim paras 11(d), 40, 45, 46,47, 49-52. It is difficult to see how HCL India could have employed Mr Mahajan on the basis of Hong Kong law. In the circumstances, it seems to me to be rather odd to suggest that HCL India was an employer of Mr Mahajan. For example, was he employed by HCL India under Indian law, co-existent with or in addition to his employment with HCL Hong Kong under Hong Kong law? Mr Leong was not able to provide any convincing answer. 59.Mr Leong relied heavily on the Court of Appeal’s judgment in an interlocutory appeal in this action, when the Court of Appeal allowed an appeal against a decision to strike out Mr Mahajan’s claim that HCL India and/or Mr Nadar was/were his employers. Mr Leong emphasised that the Court of Appeal did not find any in principle objection to Mr Mahajan having more than one employer. In my view, all that the Court of Appeal had decided was that it was arguable that HCL India and Mr Nadar could be Mr Mahajan’s employers. I do not think, and Mr Leong has not suggested, that the Court of Appeal’s judgment could be taken further than that. 60.Accordingly, in my judgment, Mr Mahajan was employed by HCL Hong Kong alone. Bonuses for 1999 to 2002 61.For the reasons set out above, I find Mr Mahajan was entitled to be paid bonuses based on the actual billing achieved by NAANZ for the years 1999-2000, 2000-2001 and 2001-2002. There is no dispute between the parties as to these in terms of mathematical calculation, and are as follows before any deductions:
Bonus after 1 July 2002 62.Neither the Amsterdam Note nor the 12 March 1999 letter contained any express provision as to what bonus, if any, was to be payable to Mr Mahajan after July 2002. Both documents only mentioned the formula for calculation of bonus up to June 2002. Mr Burns therefore argued that no bonus was payable as a matter of contractual entitlement. 63.I do not accept that argument. It is plain that Mr Mahajan continued to be employed by HCL Hong Kong after June 2002. Moreover, from Mr Mahajan’s employment history, it is reasonably clear that he was always entitled to a performance (sales) based variable bonus. It could not have been the intention of the parties that Mr Mahajan would only be entitled to his basic salary of US$25,000 per month after 2002 without any bonus. 64.I agree with Mr Leong’s argument that the contract of employment continued after June 2002, but the parties anticipated that the bonus computation would have to be agreed, in light of business and circumstances closer to time: in Mr Mahajan’s own words, when he discussed his remuneration package with Mr Nadar in February 1999, matters beyond June 2002 were “too distant in the future”. That way of looking at the matter is, in my view, far more realistic and reasonable. 65.That said, Mr Leong did not explore the matter further and did not advance any argument as to how Mr Mahajan’s bonus beyond July 2002 should be determined. In both his opening and closing submissions, Mr Leong only relied on his primary case that Mr Mahajan was entitled to an agreed minimum package of US$500,000. I have already rejected Mr Mahajan’s case in that regard. Mr Leong has not advanced any fall back case. 66.Nevertheless, the Defendants have very helpfully (although I may add after considerable persuasion from the Court) provided the likely bonus figures for July 2002 to June 2003 and July 2003 to February 2004 calculated on two bases: first, on the basis that the base billing values would have “followed the trend” of the previous 3 years and increased by 40% over the figures for 2001-2002; and secondly without the 40% increase. The total bonus figure on the first (40% increase) basis for the two periods are US$88,508.64 and US$39,417.58 respectively, whereas the figures calculated on the second (no 40% increase) basis are US$$123,912.10 and US$77,258.46. 67.It is noted that in the Amsterdam Note, under section (B)(b), there is an express reference to bonus for years subsequent to June 2000, in these terms: “The base billing values will be increased by 40% from the preceding year in every year to earn the same total amounts from F/Y 2000–2001 onwards. For example, the calculation of [bonus] for F/Y 2000-2001 will be as under …”. This statement was omitted from the schedule to the 12 March 1999 letter, although the schedule did apply the 40% increase formula for 2001-2002. It seems to me that in the absence of contrary evidence, it would be fair to apply the same formula for the years subsequent to 2001–2002, but discount the amount calculated on that basis by a reasonable margin to account for the uncertainty. 68.On that basis, doing the best I can, I assess Mr Mahajan’s bonus entitlements from July 2003 to February 2004 at US$90,000, which is roughly 70% of the first set of figures based on 2002 percentages with 40% increase. Deductions 69.From the above sums, Mr Mahajan must give credit for the US$200,000 and US$225,000 he has in fact received on account of his bonus for the years 1999-2000 and 2000-2001. 70.Mr Mahajan advanced an argument that the loans are time-barred, and in any case HCL Holdings is not a party to this action. In my view, no limitation argument arises. Mr Mahajan simply cannot have his cake and eat it. Because he had received these sums on account of his bonus payments, there is no reason why he could enjoy a windfall by claiming the entire sum of bonus he was to receive for those years without giving credit for the loans. Even Mr Mahajan himself regarded the US$200,000 “loan” represented in substance his bonus for the 1999-2000 financial year: see his email to Mr Baksi and Mr Walia dated 8 January 2001. To allow him full recovery of the bonuses and to keep the loans would over-compensate him, and wrong in principle. Bonus for Japan 71.Mr Mahajan claims bonuses arising from business derived from Japan, which was originally not a Geo under his care. Mr Burns again argued that no such bonus was payable as a matter of contractual entitlement. 72.In my view, the matter has to be looked at realistically. It is not disputed, and I do so find, that in about July 1999, Mr Nadar instructed Mr Mahajan to look after or promote the business in Japan in addition to the other Geos under his responsibility. Mr Mahajan did spend time and energy in promoting the business in Japan, until about December 2000, apparently with success. In other words, for about 18 months Mr Mahajan did in fact worked on Japan, which inevitably would mean that he would have less time and energy for NAANZ. 73.Contrary to Mr Burns’ submissions, Mr Mahajan’s claim for Japan bonus was in fact raised and acknowledged in a number of contemporaneous documents. I will refer to the following examples.
74.It is thus reasonably clear that Mr Nadar had agreed – objectively on behalf of HCL Hong Kong – to pay Mr Mahajan appropriate bonuses for Japan, but the exact amount had not been agreed. 75.Mr Mahajan’s claim is for more than US$50,000: he claims that he should be entitled to more because he had been in charge of Japan for some 18 months, from July 1999 until December 2000. The 3 options Mr Mahajan put forward between about March and August 2001 were: (1) bonus calculated on the basis of revenue for both financial years on whole year basis; (2) bonus only for the year 2000-2001 (although the figure claimed for this year is higher than the figure for the same year under option 1 and it is unclear how the difference arose) and (3) bonus based on actual time when Japan was under Mr Mahajan, ie from July 1999 to December 2000. In his closing submissions, Mr Leong submitted that option 3 is the fairest basis. Mr Burns has not suggested any basis to assess the Japan bonus. 76.According to the email dated 1 August 2001, the figures put forward were prepared by Mr Walia based on audited revenue for the financial years 1999-2000 and 2000-2001. Under Option 3, the amount of bonus calculated, based on the “Amsterdam” formula, was US$103,300 for 1999 to 2000 and US$43,760 for July to December 2000. There is no challenge to these figures. 77.In my view, option 3 is a reasonable and fair way of assessing Mr Mahajan’s Japan bonus which I accept. I also accept the calculation contained in the 1 August 2001 email and so find for Mr Mahajan. Other bonus claims 78.Additionally, Mr Mahajan claims bonus in respect of billings arising from a number of clients/projects. These include:
79.I can deal with these relatively quickly. Mr Mahajan did not advance any claim for bonus arising from these billings prior to this action. It was, in fact, his own evidence that he had instructed Mr Walia to exclude these billings when calculating his bonuses at the material times. The reason was that these were not businesses done by the NAANZ Geo under Mr Mahajan, and the billings were invoiced through HCL Hong Kong for administrative and other reasons. These claims therefore fail. 80.There is also a claim for billings in “multiple Geos”. No particulars have been given and the relief sought is for assessment of damages. It was made clear to Mr Leong during his opening that since there was no order for split trial of liability and damages, all damages claims must be assessed at the trial. Whilst Mr Leong acknowledged that point, no evidence was adduced to support this claim. This claim is therefore dismissed. 81.Another aspect of Mr. Mahajan’s claim is for loss of an opportunity to achieve higher bonuses. The claim is brought on the basis of an implied term in his employment contract to the effect that his employer (which I find to be HCL Hong Kong) was obligated to provide Mr Mahajan with sale and support staff and resources proportionate to increased budgets for each year, to enable him to promote more business. It is said that since the obligation was not honoured, Mr Mahajan was deprived of an opportunity to earn more bonuses than he had in fact been able to achieve. 82.Again, this claim can be dealt with very quickly. There is no such term in the employment letter dated 12 March 1999. Nor is there anything in the letter dated 12 March 1999 or the Amsterdam Note imposing such an obligation. There was a simple statement in the Amsterdam Note which stated “Acquisition of Co in Australia upto US$10-12m”. That simple and ambiguous statement is in my view no more than a statement of intention and far too vague to be enforceable. In my view no binding contractual obligation could be implied. There is simply no basis for this claim. Notice of termination 83.Mr Mahajan was dismissed with immediate effect on 6 February 2004 upon HCL Hong Kong agreeing to pay him 3 months’ base salary in lieu of notice. No payment has actually been made, but nothing turns on this. 84.Mr Mahajan claims that his dismissal was wrongful because he had agreed with Mr Nadar when they met in Amsterdam on 23 February 1999 that the notice period would be 1 year. The Defendants disagreed with that assertion. 85.It is noteworthy that no notice period is stated in the Amsterdam Note or the 12 March 1999 letter. Mr Mahajan’s evidence is that after the conclusion of the meeting in the hotel in Amsterdam, and after he had prepared and given copies of the Amsterdam Note to Mr Nadar, the two of them went for shopping. In the course of that shopping trip, Mr Nadar asked Mr Mahajan how much notice he (Mr Mahajan) would have given if he were to leave HCL. Mr Mahajan replied at least 1 year, which was accepted by Mr Nadar. He said that the conversation took place when the two were in a “sentimental mood” and the talk was “moral” and “spiritual”. I would also observe that Mr Mahajan was noticeably less certain and more uncomfortable during this part of his cross-examination. 86.It is, however, evident from Mr Mahajan’s own evidence that he regarded the terms of his employment as recorded in the Amsterdam Note to be complete. It was only after the conclusion of the discussion about his employment package that he and Mr Nadar went shopping. On Mr Mahajan’s own evidence, the talk was in the nature of a casual talk between the two during a “after work” shopping trip. 87.I do not accept that there was intention to create a contractually binding agreement on the matter. The lack of any contractual intention is corroborated by the fact that no such term found its way into the Amsterdam Note (even by way of a post-script or a personal note by Mr Mahajan) or the 12 March 1999 letter. Mr Mahajan did not raise any issue about the lack of any reference to the notice period – and a 1 year notice period must be considered unusual – when he received the 12 March 1999 letter. Furthermore, there is no written record of or reference to it until early 2004 when relationship between Mr Mahajan and Mr Nadar became strained. And when Mr Mahajan raised this point with Mr Nadar in a recorded conversation in early 2004, Mr Nadar’s response was that he could not remember having agreed to 1 year’s notice period, and he did not think he did. 88.Thus Mr Mahajan’s claim that the applicable notice period was 1 year is rejected. Two consequences follow from this conclusion:
89.But that is not the end of the matter on termination. The Defendants contend that despite having offered to pay Mr Mahajan 3 months’ salary, which had not been paid, as a matter of law only 1 month’s salary was payable pursuant to section 7 of the Employment Ordinance. This is put on the basis that Mr Mahajan’s contract of employment was for a term of 3 years, and upon expiry of the 3 years on 30 June 2002 Mr Mahajan’s employment became a monthly contract renewable from month to month, which required only 1 month’s notice of termination. 90.I reject that argument. First, in my view the employment contract was not for a fixed term of 3 years. There is no term stated in the 12 March 1999 letter or, for that matter, the Amsterdam Note. Secondly, HCL Hong Kong considered 3 months to be the appropriate notice period. That is a reasonable assessment given Mr Mahajan’s position and responsibilities. I do not see why HCL Hong Kong should be allowed to blow hot and cold on this issue. I also take into account the fact that in the previous employment contract with HCL Hong Kong Ltd dated April 1996, the notice period was 3 months. This provides a good indicator of a reasonable notice period. 91.There is no dispute that Mr Mahajan had not been paid the 3 months’ fixed salary. Thus he is entitled to US$75,000 in lieu of notice. Other Claims 92.Additionally, Mr Mahajan makes a number of what I may call miscellaneous claims. First, there is a claim for outstanding fixed salary from 1 February to 6 February 2004, in the sum of US$5,172.41. Secondly, Mr Mahajan claims payment in lieu of accrued annual leave of 59.5 days, amounting to US$49,583.33. Thirdly, there is a claim for unclaimed expenses in January and February 2004, in the sum of US$7,065. 93.The Defendants do not dispute these claims. Did Mr Nadar incur any personal liability to Mr Mahajan in relation to his bonus entitlement? 94.Mr Mahajan relied on two alleged oral agreements he had reached with Mr Nadar concerning the payment of his bonus. These were referred to as “1st Oral Agreement” and “2nd Oral Agreement” in the course of the trial. 95.The 1st Oral Agreement was, according to Mr Mahajan, reached on 30 December 2001. The substance of the agreement was, according to Mr Mahajan, recorded in his letter to Mr Nadar dated 31 December 2001. I have already referred to the content of this letter when considering the bonus issue. 96.The 2nd Oral Agreement was allegedly made about a week later, on 7 January 2002. The substance of this agreement was, accordingly to Mr Mahajan, recorded in his letter to Mr Nadar on the same date. This is said to be a “continuation of my note dated 31/12/2001 given to you”, and referred (amongst other things) to a proposed loan of US$225,000 from Mr Nadar’s holding company, HCL Holdings. 97.It seems to me quite plain that insofar as Mr Nadar incurred any personal liability to Mr Mahajan, these had been fulfilled. In relation to the 1st Oral Agreement, I cannot discern any personal liability on Mr Nadar’s part to pay Mr Mahajan’s bonus. All that was agreed was the amount of bonus that Mr Mahajan was entitled to, without any indication that Mr Nadar had assumed any personally liability to pay them. Under the 2nd Oral Agreement, Mr Nadar might well have assumed personal liability in relation to arranging the US$225,000 loan from his own holding company, but that obligation (if any) had been discharged because Mr Mahajan did in fact receive the money from HCL Holdings. 98.Accordingly, in my judgment, Mr Mahajan’s claim against Mr Nadar under the 1st and 2nd Oral Agreements fails. Counterclaim and set-off 99.For the reasons already explained above, it is unnecessary to address the Counterclaim based on set-off of the two “loans/advances” of US$425,000. 100.On the pleadings, there is also a Counterclaim for Mandatory Provident Fund payments for HK$38,000. This is not pursued at trial. Decision 101.To summarise, Mr Mahajan succeeds on the following claims:
102.Interest will be payable on the aforesaid sums, from the dates the sums were due. Neither side has addressed me on the rate of interest. In my view, Mr Mahajan probably does not fall within the category of plaintiffs for whom the usual commercial rate (P+1%) would be appropriate. I propose to order, on a nisi basis, that interest be paid at 2% above the applicable US$ prime rate(s). 103.All Mr Mahajan’s other claims and the Counterclaims are dismissed. 104.I also make a costs order nisi that Mr Mahajan will have his costs of the action against the 1st Defendant, to be taxed if not agreed. The 2nd and 3rd Defendants will have their costs, to be taxed if not agreed, also on a nisi basis. 105.I will leave it to the parties to agree a final order to be made by the Court, which should address interest and costs. If no agreement could be reached the parties should inform me so that directions could be given for finalising the order.
Mr Alan Leong SC & Mr Jenkin Suen, instructed by S H Leung & Co., for the Plaintiff Mr Ashley Burns SC & Ms Janet Ho, instructed by Messrs Deacons, for the 1st, 2nd and 3rd Defendants | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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