Lit Yu Yau and Another v. Richfield Realty Ltd

HCLA 23/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 23 OF 2012

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO 1449 OF 2012)

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J U D G M E N T

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INTRODUCTION

1.The appellant was the defendant in Labour Tribunal Claim No LBTC 1449/2012.  It is aggrieved by the determination of the Labour Tribunal (“the tribunal”) made on 1 November 2012.  In gist, the tribunal awarded to the claimants (the respondents of this appeal) sums known to the parties as “project bonus” (項目獎金) and “team leader bonus” (組長獎金) (collectively “the said bonuses”).

2.Various complaints have been made against the tribunal in the notice of appeal.  By the end of the appeal hearing (8 October 2013), the main complaints were:

(a)   the tribunal failed or failed sufficiently to assess the witnesses’ credibility about an important matter, namely, the parties’ common understanding (if any) of what “project” meant for the purpose of the said bonuses (para 116(i) and (iii), reasons for determination (“the tribunal’s reasons”));

(b)   further or alternatively, the tribunal has failed or failed sufficiently to give reasons for any such credibility assessment;

(c)   further or alternatively, the tribunal has misunderstood the testimony about an important matter, namely, the tribunal misunderstood one or more of the appellant’s witnesses to have testified that, according to the appellant’s document, there had to be other developers’ involvement before the said bonuses would become payable (para 130, the tribunal’s reasons, read together with the tribunal hearing transcript).

These will be dealt with below.

BACKGROUND

3.The appellant’s business focused on the acquisition of real properties for later re-development by property developers.  The claimants used to be employed by the appellant.  They worked in the same team, with the 2^nd claimant as the team leader.

4.The said bonuses arose out of the acquisitions of 4 sites during the period from early 2007 to about September 2010:

(1)   the 1^st site was in Shamshuipo (from 2007 to 2008);

(2)   the 2^nd site was in Western District (from 2008 to October 2009);

(3)   the 3^rd site was in Kimberley Road, Tsimshatsui (from 2009 to May 2010);

(4)   the 4^th site was in Cheung Sha Wan (from 2008 to September 2010).

5.The claimants could be entitled to two types of payment: commission and bonuses.  Commission was payable when they brought about the acquisition of a property (similar to commission commonly payable to estate agents in Hong Kong).  Bonuses, as the name implies, were on the other hand only payable when the claimants have fulfilled the prescribed requirements, such as the acquisition of at least a minimum percentage of the undivided shares (sufficient to trigger the statutory compulsory land sale) of a site, and doing so within a specified period.  Depending on the age of the building on site, the minimum percentage is often either 80% or 90%.

6.Changes have been made to the payment of bonuses during the above period.  It is the parties’ different understanding regarding when bonuses would become payable that led to the claimants lodging their claims (among their claims for other sums, such as redundancy payment and/or long-service payment (the other claims for wages in lieu of termination notice, holiday pay, annual leave pay and the like have earlier been settled)).

7.The tribunal:

(a)   awarded part of the claimants’ claim for the said bonuses (for the 2^nd to 4^th sites);

(b)   dismissed the other part of the said claim (for the 1^st site) as well as their claims for redundancy payment/long-service payment.

(a)     Failure to consider

8.This complaint is based on the following.  At para 116, the tribunal’s reasons, the tribunal summed up the issues:

“既然被告並不爭議‘C-a’與‘D-13’的通告是僱傭合約的一部份，因此，案中的主要爭議點是:

(i) 兩名申索人處理過的地盤是否通告內所述的地盤?

(ii) 被告曾否清楚解釋並不會就該四個地盤發放獎金?

(iii) 80%-90%的成功併購比率是否包括發展商已經持有的單位在內?”

The parties to this appeal do not dispute the tribunal has posed the correct issues.

9.The above issues stem from the appellant’s case that:

(1)   the said bonuses were discretionary;

(2)   the 4 sites were not sites for which the said bonuses would become payable;

In relation to sub-para (2) above:

(a)   the size of the 1^st site was too small, and its total price was too low (about $20 million).  There was thus no re-development potential.  The claimants knew that there would be no bonuses and the bonuses paid to their team earlier was purely discretionary;

(b)   there were only 24 units in the 2^nd site out of which the developer had itself already acquired 5 (or about 20.8%).  The acquisition of all of the remaining 19 units would not constitute the requisition percentage of undivided shares (80% to 90%).  Any bonus would again be discretionary;

(c)   the 3^rd site only had 56 units.  At the end, 30 odd units were acquired by another staff.  The claimants were only responsible for acquiring one of two other units.  They should not be entitled to any bonus;

(d)   the 4^th site also did not justify the said bonuses to be paid.

The above are denied by the claimants.

10.Despite having posed the correct questions, the appellant contends that the tribunal has failed or failed sufficiently to answer them.

11.The tribunal’s reasons contain some 144 paragraphs and are divided into various headings.  The part where the tribunal set out its determination is headed “reasons for determination” (para 117 to 143).

12.At various paragraphs under the said part, the tribunal commented that the appellant had not been able to adduce evidence to establish that the said 4 sites were not “projects” within the meaning of exhibits “C-a” (appellant’s circular dated 14 January 2009 regarding sites for the year 2009) and “D-13” (appellant’s circular dated 1 March 2010 concerning the payment of commission and bonuses): para 117, 120, 128, 130, 136 and 140.

13.The tribunal’s reasons then refer to several authorities concerning the construction of contracts:

(1)   Investor’s Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 897, 912-3;

(2)   Jumbo King Ltd v Faithful Properties Ltd and Others [1999] 4 HKC 707, 726-7;

(3)   威林航業有限公司(Worlder Shipping Ltd)訴虞定華(Yue Ding Wah) HCA 13/2000 (27 August 2001).

The approach to be adopted has been summed up in those authorities:

(a)   “the meaning of [a contract] is what the parties using those words against the relevant background would reasonably have been understood to mean” (emphasis supplied) (the West Bromwich decision);

(b)   “The construction of a document … involves having regard, not merely to the individual words [the parties] have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical goals which it was intended to achieve” (emphasis supplied) (the Jumbo King decision);

(c)   “本席須先找出雙方立約時的總體背景及事情實況(factual matrix)。該背景實況為雙方所共識或能合理地知悉，而足以影響到一名合理旁觀者對該條文的理解。在詮釋時，本席亦須緊記條文內詞彙的表面意思，即其自然及一般的釋義。… ” (emphasis supplied) (the Worlder Shipping decision, para 8).

14.I pause here to observe that, more recently, the Court of Final Appeal repeated in Fully Profit (Asia) Ltd v The Secretary For Justice FACV 17/2012 (13 May 2013) “the overall importance of context when construing contractual terms” (para 15 thereof).

15.The appellant complains that merely concluding that there was no “rebutting” evidence is not adequate.  Bearing in mind one of the main issues was under what circumstances would the said bonuses be payable, the tribunal has failed to make the following important findings of fact:

(1)   which of the witnesses were credible and/or reliable;

(2)   as a corollary to sub-para (a) above, of the conflicting versions of fact testified to by different witnesses, which version is to be preferred;

(3)   in relation to sub-para (b) above, one crucial factual dispute is whether the references in the documents to the acquisition of 80% to 90% of the undivided shares should include undivided shares already acquired (and held) by the developers which engaged the appellant’s service.

16.I agree.  Further to what the appellant’s complaint (see para 15(1) to (3) above), in view of the authorities referred to above, it is also important to ascertain the background (para 13(a) and (b) above) or context (para 13(c) above), such as what caused the developers to agree (or perhaps even propose) to pay bonuses to the appellant and its staff.  Such matters would highly likely be helpful to the tribunal’s determination of the main issues (such as that summed up in para 15(3) above).  It is also likely they would shed light on the commercial purpose (or practical goal) of the payment of the said bonuses.

17.The 2^nd claimant, in support of the tribunal’s determination, argues that the tribunal has sufficiently answered the issue posed at para 116(iii), the tribunal’s reasons by referring to the passages therein (see below):

“本席也考慮了被告的幾名證人所提及，即地盤要視乎規模大小，以及發展商已經持有單位的就不被列作地盤的說法，但可惜被告並未能提供任何文件或證據來支持該種說法。”;

“既然被告並不能提交任何證據來證明兩名申索人處理的並不是‘C-a’及‘D-13’通告內所指的地盤，本席必須給予通告它們的表面意思。” (para 120 and 136 thereof)

18.With respect to the tribunal (and the claimants), merely because one party has not adduced evidence to “refute” a certain meaning does not necessarily advance a party’s case regarding contractual construction.

19.The approach adopted by the tribunal seemed to have been as follows:

(a)   it began by attributing a certain meaning to the words in the documents which are to be construed;

(b)   witnesses’ testimony which appears to be inconsistent with such meaning was then rejected because of the inconsistency;

(c)   if there are no inconsistent documents, the tribunal would then conclude that the meaning which it had attributed to had not been “refuted”.

However, such an approach tantamounts to not much more than “pulling oneself up by one’s bootstraps”.  The correct approach is rather that outlined in para 16 above.

20.As the Court of Final Appeal observed in the Full Profit decision:

“It is in my view not particularly helpful in most cases to refer to the ‘ordinary and natural meaning’ of words because, as very often experience tells us, there can be much debate over exactly what is the ordinary or natural meaning of words. … ” (per Hon Ma, CJ);

It then referred to the apparently simple word “house” which required construction in the appeal:

“The word ‘house’ is a good example of where there is no ordinary or natural meaning; at least this is open to much debate. ... This Court has already stated that a ‘search for a free-standing meaning of the word house, valid for all time in all circumstances, is fruitless’”

(para 15 and 16).

21.Thus, as stated in para 16 and 18 to 19 above, the tribunal’s approach is flawed.

(b)     Inadequate reason

22.Because of the conclusion reached regarding the sub-heading immediately above, it is unnecessary to consider this complaint.

(c)      Misunderstanding the evidence

23.One document which the tribunal viewed as important is exhibit “D-13” (especially section (I) thereof).  This has a title “市場部佣金及獎金分配” and was dated 1 March 2010 (thus, it came into existence when the 3^rd site and 4^th site were in the course of being acquired).

24.Section (B) thereof sets out the amounts of bonuses payable (which shows an express relationship between the number and value of the sites and the bonus amounts).  Section (I) thereof states:

“如地盤大部份單位由公司分配同事併購，但某些單位(例如: 業權人為發展商、行家)未能由同事處理，而需由公司或公司指派其他組別幫手協助，雖然此類單位同事仍需提供資料及跟進(包括預備臨時買賣合約等)。但此類特別簽回的單位，同事將不獲發佣金。 … 有關單位的全部佣金都歸予公司另行處理。而有關項目之地盤成功獎金 (B段第2條) 將不受影響。” (emphasis supplied)

25.Hence, on the face of the language used in Section (I), any site falling within that section would mean there would not be an entitlement to commission payment (but only discretionary payment). However, the entitlement to bonuses would not be affected.

26.Based on such understanding, the tribunal decided not to accept the testimony of some of the appellant’s witnesses.  This must mean that the tribunal found that they testified to the effect Section (I) would affect the entitlement to bonuses.

27.It must be with this in mind that the relevant part of the tribunal’s reasons says:

“… 本席仔細閱讀過證物‘D-13’的內容，本席並不接納[the names of 3 of the appellant’s witnesses are set out]的證供。(I) 段的內容完全沒有提及需要有其他發展商參與才設有獎金”.

28.The appellant complains in this appeal that its witnesses have either not so testified, or (in the case of one Ms Wong) testified in accordance with the language of Section (I) (my reading of the transcript is that all of the witnesses concerned either testified along the language of Section (I), or testified to a different aspect).

29.On the other hand, the claimants attempt to support this part of the tribunal’s reasons by arguing that the mistake was trivial.  Reliance is also placed on RHC Ord 55 r 7(7):

“The Court shall not be bound to allow the appeal on the ground merely of misdirection, or of the improper admission or rejection of evidence, unless in the opinion of the Court substantial wrong or miscarriage has been thereby occasioned”.

30.I disagree with the claimants.  The way the tribunal dealt with this aspect is but an instance of the flawed approach set out in para 15 to 16, 18 to 19 and 21 above.  For the reasons given above, it is not trivial.

31.Further, as the appellant correctly points out, Ord 55 r 7(7) should be invoked:

“… only if [the decision under appeal] was plainly and unarguably right notwithstanding the misdirection …”: Hong Kong Civil Procedure 2013, Vol 1, para 55/7/2, p 1016).

It cannot be said that this must apply to this appeal.

CONCLUSION

32.The appeal is allowed and the tribunal’s award is set aside.

33.I have invited the parties to address on whether it is appropriate to remit the matter to the tribunal: s 35(1)(c), Labour Tribunal Ordinance (Cap 25).  Having heard from them, and bearing in mind the tribunal’s misdirection would likely require a complete re-hearing, the proper order would be for the matter to be remitted to another presiding officer for a new hearing.

OTHER MATTERS

34.The parties’ closing submissions also mentioned various other points.  These have not been expressly set out or dealt with in the above headings and sub-headings.  This is so only because of the need to balance between the length of the judgment and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

COSTS ORDER

35.The parties agree to the applicability of the usual rule that costs should follow the event.  There will accordingly be a costs order that the costs of this appeal be paid by the claimants to the appellant to be taxed if not agreed.  The 2^nd claimant’s own costs be taxed in accordance with the Legal Aid Regulations (Cap 91A).

Ms Grace Tam, instructed by Wong, Kwan & Co, for the 1^st claimant

Mr Kam K L Cheung, instructed by K B Chau & Co, assigned by Director of Legal Aid, for the 2^nd claimant

Ms Connie Lee, instructed by Iu, Lai & Li, for the defendant (appellant)