LAU TIN CHEUNG v. IBM CHINA/HONG KONG LTD

HCLA 15/2021

[2022] HKCFI 897

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 15 OF 2021

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO 4172 OF 2019)

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DECISION

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1.  This is the application by the defendant (“IBM”) for leave to appeal pursuant to section 32 of the Labour Tribunal Ordinance, Cap 25 (the “LTO”).

2.  On 25 August 2021, Deputy Presiding Officer Charmaine Lo (the “DPO”) partially allowed the claim of Mr Lau Yin Cheung (“Lau”) and awarded him a sum of HK$201,895.04 as his outstanding incentive payment (the “Decision”, and see the written Reasons for Decision handed down on 22 February 2022 (“Reasons#1”)). On 31 August 2021, IBM sought a review, which the DPO dismissed on 3 November 2021 (the “Review Decision”, and see the written Reasons for Decision handed down also on 22 February 2022 (“Reasons#2”)).  By its Form 14 filed on 10 November 2021, IBM sought leave to appeal against those Decisions.

3.  The application was originally set down to be heard before me on 10 March 2022.  Because of the state of the prevailing pandemic, I on 1 March 2022 directed that the application be disposed of on the papers.  On 8 March 2022, Mr Terrence Tai filed his written submissions on behalf of IBM.  I noted that neither Reasons#1 nor Reasons#2 were amongst the hearing bundle, and that Mr Tai did not in his submissions deal with them[1]. On 15 March 2022, I granted IBM liberty to update the hearing bundle, its intended grounds of appeal, and Mr Tai’s submissions.  IBM and Mr Tai helpfully did so on 17 March 2022.    

4.  I have considered all the documents.  I have considered Mr Tai’s Revised Submissions of 17 March 2022 (the “Submissions”).  Below is my decision.

Summary of the facts, and the issues arising

5.  The DPO has in Reasons#1 set out the salient facts.  Mr Tai has in his Submissions highlighted some aspects of them.  I have read them.

6.  Lau was an employee of IBM.

7.  Under the terms of his employment, Lau was entitled to participate in a number of incentive schemes (the “Incentive Schemes”).

8.  In his Submissions, Mr Tai highlights IBM’s entitlement to vary the terms of those schemes from time to time, and its discretion in their implementation and management.  Those terms could also be found in IBM’s online Hong Kong HR Homepage (“HR Intranet”).  To make good those points, Mr Tai has highlighted a number of clauses amongst the employment related corporate documents[2], which I have all read.

9.  Round about mid-March 2018, IBM and the Bank of China (Hong Kong) Limited signed a contract (the “2018 BOC Deal”).  Lau as a member of the BU Sales Sector was involved in the work which led to the conclusion of the same.  He became entitled to receive benefit for that deal under the Incentive Schemes.

10.  The amount of Lau’s incentive payment arising from the 2018 BOC Deal forms the crux of the dispute between him and IBM before the DPO.

11.  Relevant to the calculation of Lau’s incentive payment were 3 factors:

(a)  the amount of the pool of fund available to be distributed to the eligible participants as a result of the 2018 BOC Deal (the “Total Pool”);

(b)  the percentage allocation of the Total Pool to the 3 eligible sectors (i.e. BU Sales, BU Technical, and Coverage[3]) (the “Sector Allocation”); and

(c)  the percentage contribution of individual participants (Lau for example) as assessed by the authorized management of IBM (the “Individual Allocation”).

12.  At different stages, the terms of the Incentive Schemes, and in particular the Sector Allocation, were different.

13.  Parties differ as to their calculations of Lau’s incentive payment arising from the 2018 BOC Deal:

(a)  IBM’s stance is that the prevailing terms of the Incentive Schemes were those as set out in the Target Account Absolute Plan (“TAAP”) deck of 6 March 2018 (the “6/3/18 TAAP”).  According to those terms, 36% of the Total Pool should be allocated to BU Sales of which Lau was a member.  Lau’s Individual Allocation had been readjusted from 35% to 22.5%.  Lau was therefore entitled to 8.1%[4] of the Total Pool, or USD 14,579.91 (HK$113,727.84 ) in actual monetary terms; but

(b)  Lau’s stance is that the terms of the Incentive Schemes which he was informed of were those as set out in the TAAP deck of 31 January 2018 (the “31/1/18 TAAP”).  According to those terms, there should be no Sector Allocation.  He also maintained that the original Individual Allocation of 35% should apply, so that he should have been paid 35% of the Total Pool, or USD 62,999.62 (HK$490,968.89) in actual monetary terms.

14.  The main issue is therefore what the prevailing terms of the Incentive Schemes were.

The reasoning of the DPO

15.  The DPO did not accept the methodology which IBM has adopted.  Her reasoning is explained in Reasons#1:

(a)  She referred to the relevant terms of the employment and corporate documentation.  She accepted that IBM was entitled to vary the terms of the Incentive Schemes.  But Lau had been specifically informed by email of 7 March 2018[5] (the “7/3/18 Email”) that the prevailing terms were as set out in the 31/1/18 TAAP.  She applied Tang Chi On v Antech Electronic Limited, HCLA 14/2012 (unrep., 9 September 2013) at §§65-69.  She held on the facts and the evidence before her that the 31/1/18 TAAP was the applicable one in so far as Lau’s incentive entitlement was concerned.  She noted further the following statement at page 3 of the 31/1/18 TAAP (the “31/1/18 TAAP p.3 Statement”):

“Prior year 40/40/20 pool split guidance for Cross Brand / BU Sales / BU Technical is discontinued.”[6]

She held therefore that there should be no Sector Allocation when calculating Lau’s incentive payment concerned;

(b)  In favour of IBM, the DPO concluded that the downward readjustment of Lau’s Individual Allocation by IBM was not irrational or perverse.  She rejected Lau’s case that the original 35% should be used, and applied the adjusted Individual Allocation of 22.5%;

(c)  22.5% of the Main Pool yielded the sum of HK$315,622.88.  After taking into account the sum of HK$113,727.84 which IBM had paid Lau, the DPO awarded Lau the sum of HK$201,895.04;

(d)  For completeness, she explained that even if she were wrong in her conclusion that the TAAP dated 6 March 2018 were not applicable, she would still have rejected IBM’s calculations.  She then gave a number of reasons for that alternative view (the “Alternative Reasons”).

16.  In Reasons#2, the DPO:

(a)  explains that the principal reason why she granted Lau judgment was her view that the applicable terms were those as set out in the 31/1/18 TAAP, so that there should have been no Sector Allocation.  None of the matters or new evidence raised by IBM during the Review suggested that the 31/1/18 TAAP had been replaced by the 6/3/18 version;

(b)  considers certain previous transactions submitted by IBM.  She formed the view that there were differences between those transactions and the 2018 BOC Deal, and did not support IBM’s case further.  She also pointed out that there was no evidence showing that the person responsible (Wong Cheung) had approved the decision that only 39.1% of the Total Pool would be distributed to the participants.

The applicable legal principles on leave

17.  This application is made pursuant to section 32 of the LTO.  Leave can only be granted on a point of law or the Tribunal’s jurisdiction having been outwith.

18.  Mr Tai accepts, as observed by Marlene Ng J in Woon Thean Mun v Hong Kong Airlines Limited [2019] HKCFI 2968 at §9, that:

“The onus is on the applicant to show that the intended appeal has arguable grounds. Whilst an appeal against a determination by the Tribunal is on a point of law, leave to appeal will also be granted if the determination was made without regard to relevant factors, was made without evidence, or there was failure to discharge the statutory duty to investigate and such failure has given rise to injustice, in that a fair and proper determination of the claim cannot be attained.”

The proposed grounds of appeal

19.  Mr Tai has helpfully simplified and grouped the grounds set out in IBM’s Form 14.  Although Mr Tai now deals with them as 4 grounds, they are in fact not separate grounds, but are 4 grounds in support of one single basis, namely alleged failure on the DPO’s part to take into account relevant factors or to investigate[7]:

“In rejecting IBM’s methodology in calculating Lau’s entitlement to the discretionary incentive payment, the DPO failed to take into account, investigate and/or make proper enquiries in relation to number of matters, namely:-

(a) The other versions of the TAAP decks (save for the TAAP deck dated 31 January 2018), including in particular the TAAP deck dated 6 March 2018 (‘Ground 1’).

(b) The methodology adopted by IBM in calculating incentive payments in other concluded transactions subject to TAAP (including those other transactions in which Lau had participated in the past) (‘Ground 2’) .

(c) The fact that the Lau’s incentive payment entitlement which was based on 8.1% of the Total Pool was computed automatically and was marked as approved in IBM’s computing system (‘Ground 3’).

(d)    The fact that the sum awarded to Lau was an exercise of discretion which was exercised in accordance with the terms of the [incentive plan letter of 29 January 2018] (‘Ground 4’).”

Discussion

20.  I have considered the proposed grounds.  I have considered the documents placed before me.  I am of the view that the proposed grounds are reasonably arguable.  As I am going to grant IBM leave to appeal, and so as not to prejudice the appeal proper, I will not go into any detail except by expressing my view at this stage that the DPO may have placed undue weight on the 7/3/18 Email and the 31/1/18 TAAP p.3 Statement without investigating the applicable and appropriate methodology in calculating Lau’s incentive payment for the 2018 BOC Deal by considering holistically all the evidence and materials (including all the TAAP decks, computer records and historic transactions).

Disposition

21.  I grant IBM leave to appeal pursuant to section 32 of the LTO.

22.  I reserve costs.