Primotex Button Hong Kong Ltd v. Chu Mui Ying

DCCJ 3168/2011 & 2254/2012

(Consolidated)

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3168 OF 2011

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JUDGMENT

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1.Madam Chu Mui Ying Carmen (“Madam Chu”) was at the material time employed by Primotex Button Hong Kong Limited (“Primotex”) as its administrative manager.  Her husband Mr Ho Kai Wah (“Mr Ho”) was at the material time the managing director and an employee of Primotex.  Madam Chu and Mr Ho were the bank signatories for Primotex’s account in Hong Kong.

2.It is not disputed that, according to the employment contract between Mr Ho and Primotex, if he wishes to resign, he has to give 6 months’ notice.  On 1 September 2009, Mr Ho served a 6 months’ notice on Primotex to resign as its managing director.  While Mr Ho had resigned, Madam Chu continued her employment as the administrative manager of Primotex. 

3.According to the letter of appointment dated 8 December 2004, Mr Ho received a salary of $60,000 per month with a 13^th month payment.  And in addition, he was to have a discretionary bonus.  It appears from the evidence that before his resignation or around the same time, there is dispute as to the amount of bonus that he was entitled.  There were further dispute on whether he had obtained benefit from Primotex that he was not entitled.  But not all his accounts with Primotex are disputed.  Some monetary transactions are not in dispute.  Firstly, Primotex would withhold 15% of his monthly salary and would settle his salary tax with the Inland Revenue Department annually. It is not very clear whether the company would also pay the tax for the bonus he received from the company but for the past few years, the company had been paying on his behalf, after deducting the 15% from his salary, his income tax. Secondly, it is not disputed that he owed Primotex a personal loan of some $180,000.  He repaid the same by monthly installment of $5,000 and as at today, he still owes Primotex $165,535. 

4.From the evidence of both parties, there have been various attempts to identify the indebtedness due either to Primotex or to Mr Ho.  This included a draft account prepared by the auditor of Primotex one Mr Dominic Lai (“Mr Lai”) and it is for reference as it had not been agreed to by Mr Ho; e-mail discussion by Madam Chu on behalf of Mr Ho; some without prejudice discussions between Mr Ho assisted by Madam Chu with one Madam Jean Chan (“Miss Chan”) as the new managing director of Primotex to replace Mr Ho.  Miss Chan also claimed that she represented the chairman of the board, Mr Steen Dahl Poulsen (“Mr Poulsen”). 

5.The above served as the background of this case as they concern the dispute in respect of the employment benefit of Mr Ho and his indebtedness to Primotex, if any.  The complaints against Madam Chu, for the purpose of this judgment, started with a telephone conversation on 15 December 2009.  It is not disputed that in this telephone conversation, Mr Poulsen informed Madam Chu that one Helen Tai (“Ms Tai”) would report to duty as the new managing director.  He also requested Madam Chu to handover the key of the office to Madam Tai.  Madam Chu refused and requested that the key be handed over to Miss Tai after she had signed the formal employment contract.

6.During this telephone conversation, it is the case of Primotex that Mr Poulsen had also instructed Madam Chu not to release any payment to Mr Ho without first obtaining his approval.  Madam Chu denied such instruction.  The first issue in dispute is whether Mr Poulsen had given the oral instruction.

7.On 16 December 2009, Mr Poulsen had issued 2 e-mails to Madam Chu.  The 1^st e-mail concerned the arrangement for Miss Tai and various handover matters in respect of the PRC factory.  In reply, Madam Chu set out a proposal on how to resolve the dispute between Mr Ho and Primotex.  And in reply, Mr Poulsen sent the 2^nd e-mail which amongst other things give a specific instruction to Madam Chu on the following terms:-

“I wish to inform you that any payment to [Mr Ho] from this date must be authorized by me personally. This is hereby communicated to you as well as to Emily. Every payout to [Mr Ho] would have to be clear by Dominic after me discussing with Dominic."

8.There is no dispute that Madam Chu did receive this 2^nd e-mail.  But she disputes the meaning of the above instruction saying “payment” only means payment of bonus.  Hence the second issue of this case turns on the interpretation of the instruction. 

9.Around 16 December, a cheque was prepared and signed to pay the income tax of Mr Ho for 2008/2009 and provisional tax for 2009/2010.  (I shall refer this to be the 1^st cheque hereinafter.)  As mentioned above, Primotex disputes they are liable to pay the salary tax for Mr Ho over and above the sum of money that was retained by the company.  Mr Wong, counsel for Primotex, confirms that they are not relying on any suggestion that Madam Chu should not arrange for the tax payment.  What they are saying is, the cheque was issued after the oral instruction given on 15 December by Mr Poulsen and/or the written instruction.  Accordingly, Madam Chu acted against the clear instruction of Mr Poulsen and is in breach of his duty as an employee of Primotex.  This is the one of the grounds relied on by Primotex in dismissing Madam Chu in January under section 9 of the Employment Ordinance. 

10.Shortly afterwards, Mr Ho and Madam Chu went on holiday from 22 December to 27 December 2009.  Before she left for holiday, Madam Chu signed the payroll and payment instruction to the Bank.  According to this payroll given to the bank, all the staffs of Primotex including Mr. Ho were to receive their December salary and the 13^th month double pay for 2009.

11.From the evidence, Miss Chan came to the office on 23 December 2009 and acted as managing director.  She discovered the payroll/payment instruction and stopped the payment.  A new payroll was prepared without any payment to Mr Ho. The new payroll was signed by Madam Chu after she returned from holiday.

12.According to Mr Wong, they do not solely rely on this incidence as the ground of dismissal.  But they relied on this ground to show the seriousness of a further breach by Madam Chu when she prepared another cheque in 31 December 2009 in payment of Mr Ho’s December salary and his double pay for year 2009. 

13.And on 23 December 2009, when Miss Chan attended the office, she had arranged a computer technician intending to copy the data in the hard disk of Mr Ho and Madam Chu.  This was stopped by other employees.  They located Mr Ho on the telephone and after a discussion with Miss Chan, she agreed with Mr Ho that the computer technician would not start copying the data until Mr Ho came back to office on 27 December 2009. 

14.It was at one stage the accusation of Primotex against Madam Chu that she had destroyed about 22,000 e-mails from her computer record.  This has been dropped by the plaintiff in the closing.  Nevertheless, Madam Chu retained the cross-examination of Miss Chan on this part of the incidence to challenge her creditability and I shall deal with that later. 

15.It is not disputed that on 28 and 30 December 2009, Miss Chan had lengthy discussion with Mr Ho and Madam Chu on how to settle the monetary dispute between Mr Ho and Primotex.  It is the case of Madam Chu that there was partial settlement reached and a settlement agreement was prepared.  But the settlement agreement had not been signed when Mr Ho alerted Miss Chan that she should better get clearance from Mr Poulsen before she signed.  But on the following day, 31 December 2009, a cheque had been prepared in payment of Mr Ho’s December salary and his double pay, and Madam Chu signed it (“the 2^nd cheque”). 

16.There was dispute as to who initiate the issuance of the 2^nd cheque. Indeed, it is the case of Primotex that by issuing the cheque without first consulting or seeking approval from Mr Poulsen, Madam Chu was again in breach of the instruction of Mr Poulsen.  Taking all these into account, she should be dismissed, and which the company did on 22 January 2010.  So the 3^rd and main issue in dispute is whether Primotex is entitled to summarily dismiss Madam Chu.

17.As a result of the dismissal, Madam Chu instituted proceeding in the Labour Tribunal claiming wrongful dismissal and hence damages for wages in lieu of notice and termination payment.  At the same time, Mr Ho also issued proceedings in the Labour Tribunal claiming for his outstanding wages and holiday payment. 

18.Primotex issued proceedings in the District Court (being DCCJ 3168/2011) claiming against Madam Chu for damages resulting from her unauthorized issuance of the 1^st and 2^nd cheques.  The learned presiding officer transferred the case to District Court (being DCCJ 2254/2012) for the 2 matters to be heard together and they are before me today.  But Mr Ho’s claim remains in the Labour Tribunal.

19.Before I move on to consider the evidence of the witnesses, I should remark that the dispute between Mr Ho and Primotex was not in front of me.  Mr Ho is not a party in this proceeding.  While parties have raised various allegations and accusations against each others, my judgment is directed on the issue before me.  While I would comment on the evidence when they are relevant to the issue, I am not making any finding in Mr Ho’s claim. 

20.And looking at the issues, parties agreed with me that Primotex should open the case to prove the accusations against Madam Chu.   The key witness is Mr Poulsen.  Before calling Mr Poulsen, for convenience, Primotex called a computer technician, Mr Chiu Tat Cheung.  He gave evidence on trying to recover certain e-mail from the data obtained from the hard disc of Mr Ho and Madam Chu. 

21.It is not disputed that on 6 January 2010, another computer technician Lin Kin Kwok Edwin copied the data from the hard disk of the computer formally used by Mr Ho and the computer being used by Madam Chu.  The copy had been provided to Mr Chiu for analysis.  He found that the disk had been formatted and certain e-mails could not be recovered.  Since the claim of Primotex that Madam Chu had deleted her e-mails has been abandoned, I do not intend to go through the evidence of Mr Chiu.  And Mr Lin had not attended court to give evidence and I would disregard his witness statement filed. 

22.Mr Poulsen adopted his witness statement dated 18 April 2012 as his evidence-in-chief.  He had given a history as to the setting up of Primotex and his relationship with both Mr Ho and Madam Chu which I do not need to repeat. Mr Ho resigned on 1 September 2009 and thereafter it was agreed that the last day of work for Mr Ho would be 31 December 2009.  He said it was further agreed between Mr Ho and Mr Poulsen that on condition that Mr Ho would repay the plaintiff the sum of HK$180,000 due under his personal credit card before his departure, i.e. 31 December 2009, Primotex would pay Mr Ho’s salary for January and February 2010 for compensating Mr Ho’s holidays, extra works and double pay during the year.  Mr Ho subsequently agreed to deduct $5,000 from his salary each month for partial repayment but did not pay the remaining outstanding sum of HK$167,011.51. 

23.Mr Poulsen said Mr Ho claimed Primotex owed him money.  He therefore instructed their accountant Mr Lai of Messrs Dominic KN Tai & Co to prepare a complete statement of the money payout by the plaintiff to Mr Ho during the past years.  He claims that Madam Chu and Mr Ho had been taking much money from Primotex for their own benefits, including family trips, purchases of expensive jewellery, watches and accessories of luxury brands.  By reason of the disagreement of how much Mr Ho should be paid upon his departure, Mr Poulsen claimed the relationship between Mr Poulsen and Madam Chu and Mr Ho started to turn sour instead.

24.Mr Poulsen said on 15 December 2009, at about 4 am when he was driving from Denmark to Germany (Hong Kong time is about 11 am on 15 December 2009), he made a telephone call to Madam Chu to inform her that he had caused the employment of Miss Tai to replace Mr Ho.  He had asked Miss Tai to come to the plaintiff’s office on 16 December 2009 and that Madam Chu should not release any money to Mr Ho unless with his specific instruction from then onward (“the oral instruction”). 

25.Mr Poulsen also explained that he felt that he should put the oral instruction in writing as it was important to protect the Primotex’s interest. It was impossible for him to have access to the internet as he was travelling. He could only send his specific instruction to Madam Chu by e-mail on 16 December 2009. 

26.On cross-examination by Madam Chu, he was referred to 2 e-mails that he issued on 16 December 2009.  The 1^st e-mail which appeared to reach Hong Kong by 6:45 am, there was detailed discussion about handover of the PRC factory of Primotex and arrangement for Miss Tai.  But there was no mention about the oral instruction.  Mr Poulsen agreed that it was not mentioned and explained it was not in his imagination that Madam Chu would pay Mr Ho.  Therefore it was not mentioned in the 1^st e-mail. 

27.Madam Chu also questions the reference to “any payment” would mean only the bonus/commission payable to Mr Ho as mentioned in her e-mail to Mr Poulsen on 16 December 2009.  Mr Poulsen did not agree and said any payment mean any payment. 

28.It is the evidence of Mr Poulsen that under the employment contract with Mr Ho, Primotex was not responsible for paying his salary tax.  Nevertheless, by mutual agreement, Primotex used to withhold 15% of his monthly salary on account for settlement of his salary tax.  It is not disputed that Primotex withheld $117,000 from Mr Ho’s salary for the purpose of tax paying.  Madam Chu put to Mr Poulsen that in previous years, the commission paid to Mr Ho was tax free.  Mr Poulsen refused to answer saying that this was irrelevant. 

29.It is the evidence of Mr Poulsen that in breach of his oral instruction, Madam Ho caused the preparation of a voucher numbered BP 091233 and approved the same by signing thereon on 16 December 2009 which is for settlement of Mr Ho’s salary tax for 2008/2009 and provisional salary tax for 2009/2010 in the total sum of $289,416, and signing the corresponding cheque for the said amount.  Mr Poulsen said Primotex had overpaid Mr Ho by $172,416. 

30.Mr Ho and Madam Chu left for holiday in Japan on or about 22 December 2009.  Madam Chu, before she left had prepared 2 payroll and instructions to the bank for issuing the December salary and the double pay for 2009 to the staff of Primotex, including Mr Ho.  Mr Poulsen said this was done without his prior approval.  The matter was discovered by Miss Chan who on instruction of Mr Poulsen stopped the payroll and instructions pending advice from solicitors. And after seeking advice from solicitors, Mr Poulsen said he approved the payment to Mr Ho of his December salary but not his double pay. 

31.Mr. Poulsen further states that, without first seeking his prior approval and in breach of the oral and/or written instruction, Madam Chu prepared another voucher numbered BP 091255 on 31 December 2009 for payment of Mr Ho’s December salary and his double pay in the total sum of $96,000 (of which $51,000 was his double pay).  Madam Chu also issued and signed a cheque for the payment to Mr Ho. 

32.Mr Poulsen also gives evidence on deletion of e-mail.  As the evidence is no longer relied on by Primotex, and Madam Chu has not cross-examined him on this matter, I do not have to go through those evidence. 

33.Mr Poulsen agreed that by end of December 2009, he had instructed Miss Chan to attend a without prejudice meeting with Mr Ho and Madam Chu to find out what they want from the company.  At that meeting, he was told that Mr Ho and Madam Chu presented Miss Chan with a draft settlement agreement.  Miss Chan found that the wordings of the draft did not correspond to what Mr Ho and Madam Chu presented to her orally and she revised the draft in her own handwriting. She did not agree to any term of the draft proposal and did not sign on any agreement with Mr Ho and Madam Chu.  He also instructed Miss Chan that he could not verify and response to the proposal until he had received a complete statement of all money paid out by Primotex to Mr Ho being prepared by Primotex’s accountant, Mr Lai. 

34.The last witness for Primotex is Chan Chi Hin Jean.  She was appointed managing director of Primotex on 23 December 2009 until her recent retirement in January 2013.  She remains a director on the board of Primotex.  Save for this variation, Miss Chan adopted her witness statement dated 18 April 2012 as her evidence-in-chief.  Part of her evidence covered issue of deleted e-mail and for reason above-mentioned, I do not see any relevance. 

35.She said on or about 23 December 2009, she noticed that in breach of the oral or written instruction given by Mr Poulsen on or about 16 December 2009, Madam Chu caused to prepare sign and submit to Primotex’s bank 2 sets of payroll and instruction forms for payment of the December salary and double pay to all the staffs including Mr Ho.  She immediately notified the bank and retrieved the forms.  On or about 28 December 2009, upon instruction of Mr Poulsen, 2 new sets of payroll forms were prepared for payment of salary and double pay to staff, excluding Mr Ho.  The new sets of payroll forms were also signed by Madam Chu as the authorized signatories of the plaintiff and Madam Chu should have full knowledge about the replacement of payroll forms.

36.After seeking advice from the solicitors, they were advised to pay Mr Ho his December salary.  Mr Poulsen instructed her to authorize Madam Chu to make payment to Mr Ho but only limited to his December salary and not his double pay.  It is her evidence that in disregard of her instructions, Madam Chu on 31 December 2009 prepared the said voucher and cheque payable to Mr Ho for his December salary and his double pay. 

37.Miss Chan said it was not until in or about mid-January 2010 that she became aware that the voucher in fact included double pay to Mr Ho.  She therefore marked in her handwriting on the relevant voucher in red next to double pay the words “pending Mr SD Poulsen’s approval” and signed above Madam Chu’s signature. 

38.On cross-examination, Miss Chan agreed that it was on 23^rd December when she discovered the payroll problem and she reported to Mr Poulsen.  When she returned to work on 28 December 2009, she asked the account clerk Miss Emily Tang to prepare 2 new payrolls without the payment to Mr Ho.

39.It was put to Miss Chan that by about 28 December, the office accepted her position as managing director in Primotex.  She agreed.   And she agreed that on 28 December and 30 December, she had meeting with Mr Ho.

40.Madam Chu showed to Miss Chan the draft agreement appearing at page 256 of the bundle which is an agreement prepared by Madam Chu.  Miss Chan admitted that she had amended the draft.  She said she only amended the grammatical mistake of Madam Chu.  She repeats that nothing had been agreed though the points had been discussed.  She said she had no authority to pay Mr Ho unless Mr Poulsen approved. 

41.Miss Chan repeated in cross-examination that nothing had been concluded in the meeting with Mr Ho and everything had to wait until the auditor’s report.  She also agreed with Madam Chu that Mr Ho had said something to the effect that before she signed she should consult Mr Poulsen.

42.Miss Chan denied that she instructed Emily Tang to prepare the voucher on 31 December for payment of Mr Ho’s December salary and double pay.  Madam Chu also referred Miss Chan to the transcript of the proceeding before Labour Tribunal on 13 March 2010.  When being asked by the learned presiding officer, Miss Chan who appeared on behalf of Primotex said the salary for December and double pay had been paid and there was no dispute.  Miss Chan confirmed the statement in court, and said the solicitor had advised that December salary and double pay had to be paid.  She said on 31 December, she told Mr Ho that he would be paid his December salary and double pay would be set off for what he owed the company. 

43.Madam Chu cross-examined on the incident on 6 January 2010 when the computer consultant Edwin Lin came to office to copy the data from the hard disk of Mr Ho’s computer and Madam Chu’s.  Miss Chan agreed that thereafter, Madam Chu had complained that she lost some e-mails.  The issue was no longer relied on by Primotex as the ground for dismissal.  I note that in this line of cross-examination, Madam Chan had some mistakes on time when Edwin came into the office.  She is unclear as to the number of files that they are found missing.

44.That is Primotex’s case.

45.In her opening, Madam Chu mentioned that she had not bypassed the colleague responsible for preparing payment voucher.  And she had not back-dated the payment voucher for effecting payment to the Inland Revenue Department on behalf of Mr Ho.  I believe she is referring to paragraph 8(a) and (b) of the Amended Statement of Claim and it is sufficient to record that these 2 grounds are no longer relied on by Primotex. 

46.Madam Chu gave evidence and adopted her witness statement stated 6 July 2012 as her evidence-in-chief.  Her evidence began with a description of how she came to be employed by Primotex which I do not intend to repeat.  As to the employment terms of Mr Ho, Madam Chu said he is entitled to 20% of the combined income of Primotex and the PRC factory.  For the purpose of this judgment, I, for reason herein after appeared, do not have to rule on the employment benefit or entitlement of Mr Ho.  It is sufficient for me to note 2 letters of appointment of Mr Ho that had been produced.  First letter is dated 21 January 2003 which provides that Mr Ho is entitled to a salary of $34,500 per month with 13 months pay and tax free.  This agreement runs for 2 years.  And a second agreement was signed on 8 December 2004 which provides that Mr Ho’s salary was revised to HK$60,000 per month with 13 months’ payment.  There is no provision for tax free.  But there is the provision of a discretionary bonus that he would be paid an incentive bonus subject to the group’s consolidated net profits before tax exceeding HK$2,000,000 in either 2005 or 2006.  The board shall determine the exact amount of the bonus once the financial results are known.

47.Madam Chu also explained that the so-called unauthorized payment had all been recorded as money deal under the account of Mr Ho.  The plaintiff deducted $5,000 every month from the salary of Mr Ho to set off the relevant account, and will further set off the balance against his annual bonus.  While the justification of those payments on behalf of Mr Ho and/or Madam Chu is disputed, the plaintiff accepted that they deducted every month $5,000 from Mr Ho’s salary. 

48.Madam Chu admitted that Mr Poulsen did made a telephone call to her on 13 December 2009 at around 11 am or noon Hong Kong time.  He informed her that Ms Tai would report to duty on 16 December 2009, and to takeover the duty of Mr Ho.  Mr Poulsen requested her to handover the key to the office to Ms Tai.  She made enquiries with Mr Poulsen if he could provide the employment contract of Ms Tai so that she may make the necessary arrangement.  As Ms Tai had not signed any employment contract, she disagreed with Mr Poulsen to hand the key to Helen. 

49.Madam Chu said in this telephone conversation, she only discussed with Mr Poulsen about Ms Tai and did not receive the oral instruction from Mr Poulsen that with immediate effect, no money shall be released to Mr Ho unless with Mr Poulsen’s specific instructions. 

50.On cross-examined by Mr Wong, she agreed that as an employee, she had to put the interests of the company first.  She also mentioned that Mr Ho and Mr Poulsen had difference in opinion on the formula for calculating commission.  Mr Poulsen had a meeting with Mr Ho in early December.  She agreed that Mr Ho owed the company about $180,000 and said Mr Ho agreed to use the commission payable for 2009 to set off the indebtedness. 

51.On the commission payable, she agreed that it was not mentioned to be tax free in the second employment contract/letter.

52.It is also the evidence of Madam Chu that in previous years, Primotex paid the tax of Mr Ho.  It is her evidence that on 15 December 2009, Miss Emily Tang brought a pile of bank payment vouchers for her approval and signature. That included the payment of the tax for Mr Ho. When cross-examined by Mr Wong, Madam Chu said the cheque was signed on 15 December, after usual office hours.

53.Madam Chu said Emily Tang got the payment voucher issued by the Inland Revenue Department by mid-November.  It is only by chance that the payment voucher was brought to her on 15 December for her approval and signature. 

54.Madam Chu does not dispute that Mr Poulsen is entitled to give the instruction as set out in his 2^nd e-mail on 16 December, and there is no dispute that she received the e-mail.  But on the meaning of the phase “every payout”, Madam Chu said she thought this only included the payment of commission that she mentioned in her e-mail dated 16 December.  Mr Wong cross-examined on her said understanding, in particular, pointing out that according to her calculation-mail, the commission to be agreed would be set off against the indebtedness of Mr Ho to Primotex.  There would not be any payment out.  It is not logical to say the reference to any payment out is a reference payment of commission.  Madam Chu responded saying that everyone could have his blind spot. 

55.It is not disputed that before she left for her holiday in Japan on 23 December 2009, Madam Chu had signed the 2 payrolls which included payment out to Mr Ho for his December salary and his double pay.  On cross-examination, Madam Chu referred to an e-mail given by Mr Poulsen to Mr Ho when it was mentioned that “it was agreed that your last working day should be December 31 with paid leave during January and February.”  Although this e-mail was not copied to Madam Chu, she was shown by Mr Ho.  As Mr Ho would work until 31 December 2009, she believed that Primotex had to pay his salary and double pay and therefore approved the aforesaid payrolls.  But she agreed with Mr Wong that the payment to Mr Ho had not been approved by Mr Poulsen.

56.On the 1^st cheque for payment of tax, Madam Chu agreed that in early December, she had instructed Emily Tang to prepare for payment, if Primotex’s liquidity allows that.  Mr Wong put to Madam Chu that in previous years, the tax had been settled by 2 installments, as allowed by Inland Revenue Department.  Madam Chu agreed that she instructed Emily Tang to pay by one installment if liquidity allows.  She referred to the tax payment invoice which said the tax is all due on 6 January.  But she could not dispute that on the same invoice, it was also provided that the payer may settle the tax by 2 installments.

57.On the date put on to the payment voucher, it appears that she dated 16 December with her signature.  Indeed, she had also dated on an approval chop put on to the tax invoice, also as 16 December.  Madam Chu explained that she signed all documents on 15 December and the date 16 December on the voucher and the tax invoice are her mistake.  She suggests in Court that for the date put on the tax invoice, there is an additional line showing that she amended the date from 16^th to 15^th.  The so call amendment is not obvious.  But she cannot explain why, if she had identified the mistake, that she would not make the proper amendment.  And Mr Wong further points out that in her witness statement, she has given 2 explanations.  One is her mistake and the other is that it was put down as 16^th since all her colleagues had left office.  So she has treated this as a matter handled on the following day.  And there is no reason given why she could now remember the exact reason for giving the wrong date.

58.On the 2^nd cheque that she signed on 31 December in payment of December salary and double pay, she said the payment voucher was prepared and written by Emily Tang.  She admitted signing and approving the payment voucher and the cheque.  She said Miss Chan had approved the payment to Mr Ho.

59.Mr Wong pointed out to Madam Chu that the draft agreement had not been signed.  Madam Chu said Emily Tang brought the voucher and cheque to her for signing but she could not explain why she thought or believed that Miss Chan had approved the payment.  She agreed that she had not checked with Miss Chan before she signed.

60.Mr Wong also referred to some handwritten notes prepared by Madam Chu on the meeting between Mr Ho and Miss Chan which she had attended.  On the meeting held on 30 December 2009, some points were discussed.  The 1^st point was salary for Mr Ho will be paid accordingly.  Mr Wong pointed out that there was no mention of double pay.  Madam Chu said she could not explain why but did not agree that there was no agreement to pay double pay.  Mr Wong also put to Madam Chu that the reason why Miss Chan did not sign the agreement was because that she did not have the authority from Mr Poulsen.  Madam Chu disagreed.  Mr Wong also put to her that if Miss Chan had the authority, why Mr Ho suggested to her that she should first seek Mr Poulsen’s approval.  Madam Chu offered no explanation. 

61.It is her evidence that after signing, the payment voucher and the cheque were returned to Emily Tang and to be given to Miss Chan for her further action.  Mr Wong questioned if she saw Emily Tang giving the cheque to Miss Chan.  Madam Chu said she did not.  She agreed with Mr Wong that she did not personally know if Miss Chan directed Emily Tang to prepare the payment.  And she did not personally know whether Miss Chan handed the cheque to Mr Ho. 

62.Mr Wong has some cross-examinations on the lost e-mails.  Since Primotex does not rely on this claim, I do not have to deal with the cross-examination.

63.Madam Chu also called Madam Tang So Mei Emily (“Emily Tang”) as her witness.  As she was summoned to give evidence in court, there is no witness statement prepared.

64.On the payroll, Emily Tang said the auto-pay arrangement needs 3 to 4 working days.  She usually prepared the payroll within 1 week before pay-date. She said when she prepared the payroll on 21 December, she thought all salary and double pay should be paid.  But after Miss Chan joined Primotex, she said something was not settled and stopped the payment to Mr Ho.  She respected her decision. 

65.She agreed that when Miss Chan came to office on 28 December, she had a few meetings with Mr Ho and Madam Chu.  But she was not aware of the contents or conclusion in the meeting.  About the 2^nd cheque to Mr Ho, Miss Tang said she issued the cheque on 30 or 31 December.  When asked who asked her to prepare the voucher and cheque, she said it was Madam Chu.

66.Emily Tang was not sure if Madam Chu took part in the meeting on 31 December and after she got the cheque, she presented the cheque to the meeting room.  She recalled Miss Chan and Mr Ho were there.  But she had not given it to Mr Ho. 

67.On cross-examination, Emily Tang said she received the Inland Revenue invoice and payment advice in mid-November and it was given to her by Mr Ho. 

68.It was her evidence that the payment voucher for settlement of the tax was prepared by her assistant Miss Law, while she signed as the maker and provided the voucher number.  She said on 15 December, she was very busy.  She agreed that in the past, the tax was paid by 2 installments.  It was the first time for Miss Law to prepare the voucher and she might have made a mistake. She said she had not asked why the full payment was to be paid as she found Primotex had sufficient money.

69.She agreed that she had given the cheque for payment of tax to Madam Chu for execution on 15 December.  But she could not recall when it was returned to her.  And she believed she had posted the cheque by latest 16 December as she was worrying about the Christmas holiday.

70.Madam Chu also called Madam Law Ka Yi (“Miss Law”) to give evidence.  Miss Law was the assistant to Emily Tang.  She adopts her witness statement dated 6 July 2012 as her evidence-in-chief.  She agrees that she prepared the voucher to pay the salary tax of Mr Ho.  She noticed the tax was payable on 6 January 2010 but she did not notice that it was payable by 2 installments.  She denies having been instructed by anyone to arrange payment by 1 installment.  After preparing the voucher, she returned the document to Miss Tang for her further handling.

71.Madam Chu also called Mr Tong Hoe Yin to give evidence.  Mr Tong adopted his witness statement dated 28 November 2012 as his evidence-in-chief.  It is his evidence that on 23 December 2009, Miss Chan called in the computer consultant to take copy of the computer records in Mr Ho and Madam Chu’s computers.  He refused the request of Miss Chan as this may in breach the privacy of his colleagues, and there was no written authorization. 

72.On cross-examination, he agreed that he was later told by Mr Poulsen to allow the computer consultant to start copying the data.  He did not stop the computer consultant anymore.  However, by then, Miss Chan had had an agreement with Mr Ho to defer copying the data and that is the reason why the data had not been copied. 

73.The last witness for Madam Chu is her husband Mr Ho.  He adopted his witness statement dated 6 July 2012 as his evidence-in-chief.  He had given the history as to the formation of Primotex and I did not wish to repeat.  I do not consider these relevant to the determination of the issue herein. 

74.He said on 28 and 30 December 2009, he and Madam Chu had 2 meetings with Miss Chan.  He also said the cheque in payment of his December salary and double pay would be given to him by Miss Chan on 31 December 2009.  He said Miss Chan told him that she had consulted their lawyer who advised Primotex that it had no reason not to pay.  He then signed on the copy of the cheque. 

75.He also said, without the instruction of Mr Poulsen or Miss Chan, Emily Tang would not have prepared the payment voucher and the cheque.  As Miss Chan was the managing director of Primotex towards the end of December, Madam Chu had to follow the instruction of Miss Chan.  He also said that Emily Tang and he knew that Madam Chu had to sign for any payment to him only with the approval of Mr Poulsen.  He said Miss Chan must have instructed Miss Tang to prepare the voucher and the cheque and must have obtained the approval of Mr Poulsen. 

76.Mr Ho also mentioned that commission/bonus is the dispute between himself and Mr Poulsen.  When the business turnover of Primotex reached the target, since from 2004, Primotex would release to him a commission/bonus at the rate of 20% of the combined net profit before tax of Primotex and the PRC factory. The commission/bonus in dispute is for the year 2008.  He claimed that he would be entitled to the commission in the sum of HK$967,137.48.  It is not disputed that HK$800,000 had been paid as partial payment and the remaining balance of HK$167,137.48 remained unsettled, and in dispute. 

77.On cross-examination, Mr Ho said on 30 December, he and Madam Chu had a whole day discussion with Miss Chan and Madam Chu could not arrange the payment voucher. 

78.On the draft agreement, he said the amendment by Miss Chan was on grammar. What she had amended had the same meaning as the terms prepared by Madam Chu. He agrees that he had asked Miss Chan to check with Mr Poulsen before she signed and said Mr Poulsen often changed his mind.   

79.It was put to him that Miss Chan had not agreed to the term and only agreed to pass his suggestion or offer to Mr Poulsen.  He disagreed.  It was also put to him that the cheque for his December salary and double pay was not given to him by Miss Chan.  He disagreed. 

80.That is the Madam Chu’s case. 

81.As for the action DCCJ 2254/2012,  Mr Wong has confirmed in his opening that if I found against Primotex, meaning that they are not entitled to summarily dismiss Madam Chu, they would be liable to pay damages representing wages in lieu of notice and terminal payment.  And the figure as pleaded by Madam Chu is also agreed. 

82.To come to my final decision, I believe the first thing to determine is whether Mr Poulsen had given his oral instruction to Madam Chu on 15 December.

83.Even on Mr Poulsen’s own evidence, when he was talking to Madam Chu, he was then driving from Denmark to Germany, very early in the morning. 

84.Madam Chu denied that Mr Poulsen had instructed her not to issue any payment to Mr Ho without his prior approval.  She said what they had discussed in that telephone conversation was only the arrangement for Miss Tai to come to office on the next day.  One note that in the 1^st e-mail given by Mr Poulsen to Madam Chu in the early morning of 16 December 2009, he only mentioned about the arrangement of handover to Miss Tai, and the handover arrangement for the management of the PRC factory.  This tally with Madam Chu’s evidence.

85.Mr Poulsen said in his witness statement that the oral instruction was very important to protect Primotex’s interests.  He also felt he should put this instruction in writing.  If that is the case, and he had given the oral instruction, there is no reason why he had not set out the instruction to Madam Chu on his 1^st e-mail issued to Madam Chu on 16 December 2009.  It is only after receiving the reply from Madam Chu on the same day that he issued the 2^nd e-mail to Madam Chu with the written instruction.  And it should be noted that when he gave the instruction in his 2^nd e-mail, he had not mentioned that he had earlier on given any oral direction to Madam Chu. 

86.Balancing all the evidence before me, I am not convinced that Mr Poulsen had given the oral instruction to Madam Chu during the telephone conversation on 15 December 2009.  I found against Primotex on this issue. 

87.The 2^nd issue I have to determine is the effect and meaning of the written instruction that had been given.  I believe it is not denied by Madam Chu that she received the 2^nd e-mail on 16 December in the afternoon with the written instruction.  While Madam Chu in her evidence said she would only agree or obey reasonable and legal instruction from Mr Poulsen, there is no suggestion that such an instruction is unreasonable or unlawful. Indeed, given the various discussion on the commission payment and indebtedness due by Mr Ho to Primotex, it is not surprising that as the chairman of the board, Mr Poulsen would instruct Madam Chu not to release any payment without his approval.  As Mr Wong rightly pointed out, the instruction is not an absolute bar to any payment to Mr Ho.  It is only a restriction on the authority of Madam Chu to effect any payment without first referring the matter to Mr Poulsen for approval.  And upon her report for approval, the board could then decide if the payment should be made.  It is also provided in the e-mail that every payout to Mr Ho will have to be processed by the auditor of Primotex, Mr Lai, after Mr Poulsen had discussion with Mr. Lai. 

88.I now turn to the 1^st cheque made to the Inland Revenue Department which is a payment on behalf of Mr Ho.  It is the evidence of Madam Chu that the income tax of Mr Ho for previous years were settled by Primotex. There are 2 reasons.  First, by agreement, Primotex retained 15% of his salary in settlement of his salary tax.  Secondly, the commission payable was tax free, meaning that they are to be borne by Primotex. 

89.It is not the case of Primotex that Madam Chu should not have approved such payment in any event.  And it is also the evidence of Emily Tang that Primotex had paid for the tax of Mr Ho in previous years, though by 2 installments.  While the payment of tax in this year is by 1 installment, there is no evidence to suggest that Madam Chu should not give that instruction. 

90.As I found against Primotex that Mr Poulsen had given the oral instruction to Madam Chu, the only question I need to determine is whether the approval and signing of the voucher and cheque is after the written instruction.

91.Clearly the burden rests on Primotex to prove that Madam Chu issued the 1^st cheque after she had received the written instruction from Mr Poulsen.  Mr Wong rightly conceded that it is not clear from the evidence the exact time when the cheque had been signed.

92.I note also that the cheque and the voucher are dated 15 December 2009.  It is clear from the evidence of Emily Tang that she had prepared the cheque and voucher on 15 December 2009 for Madam Chu approval.  And she had sent the cheque by 16 December 2009.

93.It is the evidence of Madam Chu that she signed the 1^st cheque on 15 December 2009 after office hour.  But she dated her approval as 16 December 2009.  I do not accept her suggestion that the date on the tax invoice had been amended as 15^th.  From the evidence, the best I could say is the cheque is signed sometime between 15^th and 16^th.

94.The burden rests on Primotex to prove that the cheque was signed after Madam Chu received the written instruction.  The tax invoice was given to Emily Tang in November.  Instruction to prepare the payment was given early December 2009. On the balance, I do not accept the suggestion by Mr. Wong that Madam Chu only signed the cheque after she had received the written instruction.  There is just no evidence to support his submission.  I therefore found against Primotex on this point. 

95.I shall now move on to the first 2 payrolls gave to the bank.  It is not disputed that Madam Chu had signed the 2 payrolls on or about 21 December 2009, which was after she had received the written instruction and had not obtained approval of Mr. Poulsen.  She seeks to explain that the reference to “any payment” in the written instruction only means the payout of the commission.  I cannot agree that a reasonable reading of the e-mail had that limited interpretation.  And if she was not clear with the meaning, she should have clarified the instruction with Mr Poulsen, at least before she signed on the payroll.  Accordingly when she signed on the payroll effecting payment of December salary and double pay to Mr Ho, she had exceeded her authority, and act in breach of the written instruction of Mr. Poulsen. 

96.She had referred to an email that Mr Ho would work up to 31 December 2009 by agreement with Primotex.  There is argument whether the company is liable to pay the salary and the double pay to Mr Ho and they may not be entitled to setoff the same from any indebtedness of Mr Ho, being so provided by the Employment Ordinance.  I shall be coming to that point shortly.  And assuming Primotex is obliged to pay, the issue is whether Madam Chu had disobeyed a reasonable order.  It is accepted by Madam Chu that Primotex is entitled to give the instruction.  And as analysed above, it is reasonable for Mr. Poulsen to give the instruction.  She is in breach of a reasonable instruction of her employer.

97.Mr Wong confirms that they rely on this as a supporting evidence for their main ground of dismissal (if I do not accept the oral instruction point) for signing the payment voucher and the cheque effecting payment of salary and double pay to Mr Ho on 31 December 2009. 

98.In addition, it must then become clear to Madam Chu that the company did not approve of the payment of salary and double pay to Mr Ho, for the payrolls had been withdrawn by Miss Chan and she was instructed to sign new payrolls without payment to Mr. Ho.  That together with the e-mail from Mr Poulsen, Madam Chu could not have mistaken that the company would not allow her to approve or make on behalf of Primotex any payment to Mr Ho without first obtaining the approval of Mr. Poulsen. 

99.Primotex dismissed Madam Chu on 22 January 2010 under section 9 of the Employment Ordinance.  It is stated in the termination letter that Madam Chu had failed to protect the interest of Primotex in:-

(a)   making unauthorized money transfers to family members and former employees;

(b)   making unauthorized money settlement to third parties (Hong Kong Inland Revenue);

(c)   not conforming wit new management by inciting trouble amongst mainland staff;

(d)   deliberately deleting over 50,000 files from the company owned computer. 

100.It is clear that the company dismissed Madam Chu summarily under section 9 of the Employment Ordinance, which provides that:-

“(1) An employer may terminate a contract of employment without notice or payment in lieu:-

(a) if an employee, in relation to his employment-

(i) willfully disobeys a lawful and reasonable order;

(ii) misconducts himself, such conduct being inconsistent with the due and faithful discharge of his duties;

(iii) is guilty of fraud or dishonesty; or

(iv) is habitually neglectful in his duties; or

(b) on any other ground on which he would be entitled to terminate the contract without notice at common law.”

101.With reference to So Chin trading as South Sea Co v Kwan Hang Ching [1987] 2 HKC 297, Mr Wong submits that the contract between an employer and an employee was no more than an ordinary contract and it must be treated according to the usual contractual principal. What must be look for was whether what had been done by the employee was something which was expressly or implied to be a repudiation of the fundamental term of the contract such as to justify an instinct dismissal.  I agree and would only need to add the comment by Mr Justice Yeung given in Tsang Tak Chi v China Wall Limited HCLA 33 of 1998.

“But summary dismissal is a very serious step to take against any employee. It is the capital punishment in that if the dismissal is justified, the employee would be deprived for all the protection provided by the Employment Ordinance.”

102.I believe the issue is whether Madam Chu had willfully disobeyed a lawful and reasonable order, or she had misconduct herself such conduct being inconsistent with the due and faithful discharge of her duties.  I do not believe there is any suggestion of fraud or dishonesty in this case. 

103.As I found against the complaint on issuance of the 1^st cheque, the main ground of dismissal of Madam Chu is based on the wrongful signing of the 2^nd cheque, together with the payroll incidence abovementioned. 

104.It is not disputed that before she signed the voucher and the cheque, Madam Chu had not had consulted Mr Poulsen to confirm if he approved the payout.  Madam Chu initially suggests that she believed when Emily Tang brought the voucher and cheque to her for signature, she had obtained the approval of Miss Chan.  However, that is not the evidence of Emily Tang.  Quite to the contrary, Madam Chu was the one who instructed Emily Tang to prepare the voucher and the cheque.  Not only that Emily Tang is the witness of Madam Chu, there is no reason to suggest that Emily Tang’s evidence is not reliable.  Hence I found that Madam Chu is the person who instructed Emily Tang to prepare the 2^nd cheque and voucher.

105.Mr Ho also said the voucher was approval by Miss Chan.  But there is no evidence in support.  Further, there is no evidence to suggest that Miss Chan had the authority to approve such a payment.  And in the meeting on 30 December 2009, when they came very close to an agreement, Mr Ho expressly asked Miss Chan not to sign on the agreement and to seek the confirmation of Mr Poulsen.  I note that the draft agreement included payment of the December salary and double pay to Mr Ho.  When he asked Miss Chan not to sign the agreement, clearly there is no agreement reached.  It is clear that Mr. Ho do not believe Miss Chan had the authority. 

106.And Madam Chu must know that Miss Chan had not signed the agreement and in any event, she had no instruction from Miss Chan to sign the cheque.  The burden rests on Miss Chu to satisfy this court that there is evidence showing Mr Poulsen approved and authorized the payment out by the 2^nd cheque. This has not been shown. 

107.I believe another argument by Madam Chu is that the cheque was handed to Mr Ho by Miss Chan.  The evidence as to who gave the cheque to Mr Ho is not clear.  On cross-examination, Madam Chu admitted that she was not present and did not eye-witness the presentation.  Miss Chan denied that she had presented the cheque to Mr Ho.  And Mr Ho said the cheque was given to him by Miss Chan.

108.Emily Tang, who obtained the 2^nd cheque signed by Madam Chu was unclear as to what happened in the meeting room.  She said she gave it to someone but he is not Mr Ho.  She was not even clear if Madam Chu was in the room.   

109.Record shows that the cheque had been given to Mr Ho and he had signed the receipt.  The evidence is not clear on who gave him the cheque.  I found that the evidence of Mr Ho not reliable.  On the balance, I am not satisfied that it could be proved that Miss Chan gave him the cheque.     

110.Further, as counsel rightly pointed out, the time for determination of the default is when Madam Chu executed and signed on the cheque, and not what happened thereafter.  It is clear that she had no authority so to do when she signed, and as I analysed above, she knew that she must first obtain the approval of Mr. Poulsen.  And indeed, when she instructed Emily Tang to prepare the cheque and did not obtain proper authorization, she had acted against a reasonable and proper order of Primotex.  

111.And not only that she had exceeded her authority, her act would be in conflict with the interest of Primotex.  I agree with Mr. Wong that there is implied in her employment contract the duty to be loyal and honest to her employer, Primotex, in carrying out all her duties and responsibilities.  I must not overlook her position as the administration manager of Primotex, and she is the only other signature for the bank accounts.  A high degree of trust and obedience is expected from her. The breach could also be viewed from the position that she involved herself in the negotiation between Mr Ho and Primotex and she had a higher degree of care to ensure that any payment do have approval from Mr Poulsen. 

112.Summing up, I conclude that she had been in willful disobeyed of a lawful and reasonable order of Mr Poulsen given on behalf of Primotex. Alternatively, taking all the matter into account, including her execution of the payrolls and the 2^nd cheques, she had not acted in a way consistent with the due and faithful discharge of her duty.  The dismissal under section 9 is justified.  Accordingly, all her claims against Primotex are dismissed. 

113.The next question is whether Primotex suffered any damage from the above act of Madam Chu in issuing the 2^nd cheque.  Mr Wong conceded that the December wages are payable to Mr Ho and therefore, ultimately, Primotex suffered no loss for the salary being paid out to Mr Ho.  As for the double pay, it is provided in the employment letter and is a contractual term.  Mr Ho did not argue that Mr Ho’s employment was not terminated on 31 December 2009. Then according to the Employment Ordinance, section 25, all money due should be paid to him. 

114.Mr. Wong seeks to argue that when the 2^nd cheque was paid, Mr Ho still owes Primotex a sum of $165,535.  The unauthorized payment of $51,000 for double pay caused Primotex the loss of using of that sum to set off the personal debt of Mr Ho to Primotex.  But I cannot conclude from the evidence before me that Mr Ho owes any money to Primotex.  It is not disputed that the final account on his bonus is not settled and I have no evidence on whether the payment of $800,000 has discharged the liability of Primotex.

115.In any event, set off against the sum payable to an employee is restricted by the Employment Ordinance and I am not convinced that Primotex may set off the amount as of right.  Rather, according to section 25, Primotex is obliged by law to pay Mr Ho his year-end bonus.  The section read –

(1) Subject to section 31O, where a contract of employment is terminated any sum due to the employee shall be paid to him as soon as is practicable and in any case not later than 7 days after the day of termination. (Amended 44 of 1971 s. 4; 67 of 1974 s. 4)

(2)  The sum referred to in subsection (1) shall be-

(a) the equivalent of the amount earned by the employee for work done over the period commencing on the expiry of his wage period next preceding the time of termination up to that time;

(b) the sum (if any) payable under sections 7, 15(2) and 33(4BA);

(ba) any long service payment due to the employee; and (Added 76 of 1985 s. 3. Amended L.N. 34 of 1990)

(c) any other sum due to the employee in respect of his contract of employment.

(3) In addition to any deduction which may be made under section 32, and subject to any order made by a court, an employer may deduct from any sum payable under subsection (1) to an employee who terminates his employment otherwise than under section 6, 7 or 10 such sum as the employee would have been liable to pay if he had terminated his employment under section 7.

116.The double pay or 13^th month payment is end of year payment covered by section 11E of the Employment Ordinance.  And it is provided that the end of year payment shall become due on the day on which the contract of employment terminates.  I do not think section 25(3) assist Primotex.  Hence according to section 25(1), it is payable to Mr Ho on or around 31 December 2009.  And they have to claim against Mr Ho for any debt that he may be found due to Primotex.  Accordingly, I do not see how Primotex could claim that they had suffered any loss. 

117.Mr Wong argues that I may grant nominal damages.  The fault of Madam Chu entitled Primotex to summarily dismiss her which is another form of termination by repudiatory breach.  As for the claim for damages, the burden rest on Primotex to prove that it actually suffered lost.  After all, this is a claim based on breach of contract.   Primotex failed to prove any loss.  And if there is no loss as I analysed above, no damages should be awarded.  I therefore also dismiss Primotex’s claim for damages. 

118.As a matter of caution, on the issue of dismissal, although Primotex suffered no loss, this does not reduce the gravity of the misconduct of Madam Chu.  The default is based on breach of her duty to be loyal.  Primotex is entitled to rely on Madam Chu to comply with the order of Primotex.

119.On costs, Primotex fails in its claim, and Madam Chu also fails with her claim.  The Labour Tribunal action was transferred to the District Court because of Primotex’s District Court action.  Primotex should be entitled to costs of the Labour Tribunal action, but I see no reason why Madam Chu should pay at District Court scale, as the action was transferred because of Primotex’s claim in the District Court.  And Primotex fails in its District Court action and Madam Chu should be entitled to her costs.  Given she was unrepresented, I believe the 2 sets of costs could set off against each other. Balancing all factors, I am minded to give no order as to costs, and I give an order nisi that there be no order as to costs which order nisi shall become absolute within 14 days.

Mr Damian Wong, instructed by Hobson & Ma for the defendant in DCCJ 3168/2011 and for the plaintiff in DCCJ 2254/2012

The plaintiff in DCCJ 3168/2011 and the defendant in DCCJ 2254/2012 appeared in person