NG YEE HAR IVY AND ANOTHER v. GREAT AMERICAN FUN (H.K.) LTD.

IN THE HIGH COURT

1993, No. A739
(Civil)

______________

________________

J U D G M E N T

________________

Litton, J.A.:

1. There are two plaintiffs in this action. The 1st Plaintiff is Ng Yee-har, Ivy and the 2nd Plaintiff is her sister, Ng Yee-san, Susanna. The 2nd plaintiff's claim was settled before the case was opened by counsel, leaving Ng Yee-har Ivy as the sole plaintiff.

2. This case concerns the affairs of a company Great American Fun (HK) Ltd., incorporated in December 1982 to fulfil the functions of a buying office for a company domiciled in Ohio USA called Great American Fun Corporation.

3. Mr. Hugh Brian Haney is the founder and beneficial owner of the American Company which supplies toys and accessories to buyers in the USA. Ivy Ng was the manager of the company until the end of 1992 and her claim is for arrears of salary and management bonus: claims which in effect were admitted by the defendant with the result that when the trial commenced before me at the beginning of this week, it was counsel for the defendant who opened on the counterclaim.

Background facts

4. In December 1982, the same month as the incorporation of the Defendant company, Mr. Haney married in the USA a Hong Kong Chinese lady Ng Yee-lin, the 1st plaintiff's younger sister. The couple lived in Ohio USA until they separated in March 1992. They have since divorced. They have two children, both born in the USA: the eldest in January 1985 and the youngest in April 1986.

5. Mr. Haney was 24 years old when he married, and was inexperienced as to doing business in Hong Kong. When the Defendant company was formed the subscribers to the memorandum and articles of association were Mr. Haney and a Mr. Tsang, a friend of his wife. They were the first directors and shareholders, Mr. Tsang holding the one subscriber share as Mr. Haney's nominee.

6. In the early years the volume of business conducted by the Defendant company was small. It's business was confined to supplying the American company with products. The office in Hong Kong was managed by Mr. Tsang.

7. Mr. Tsang left the company after about one year and his subscriber share was transferred to Ng Yee-lin with the result that, as at the end of 1983, the registered shareholders were as follows: Mr. Haney, 44,999 shares of $1 each, and his wife Ng Yee-lin, 1 share. It is asserted by the plaintiff in this case that this one share was transferred by Mr. Haney to his wife as a "gift". The reality is otherwise. As the company needed two registered shareholders, the transfer to the wife was by way of convenience. It would have been absurd of Mr. Haney to have transferred one out of 45,000 issued shares by way of gift to his wife.

8. At the beginning Mr. Haney and Yee-lin made frequent visits together to Hong Kong. It was Mr. Haney who visited the factories and sourced the products for sale in the USA. Often Yee-lin acted as his interpreter. He also visited the trade fairs. He made all the decisions regarding the choice of products. The management of the company passed to Susanna when Mr. Tsang left. For convenience the 44,999 shares registered in Mr. Haney's name were transferred to Susanna: although the bought and sold notes suggest that money was paid for the transfer of the shares, in fact none was paid. Susanna held the shares as Mr. Haney's nominee. The paper work and arrangements for shipments were done from the company's office by Susanna.

Sales rebate

9. At an early stage - probably as early as the time when Mr. Tsang was the manager - some of the suppliers gave rebates of 2% on goods sold to the Defendant company. The rebate was given in the form of cash or cash cheques.

10. When Susanna became the manager the arrangement for her remuneration was that she received:

(a) 1% of the net sales effected by the company; and

(b) 1/2 of the rebates given by the suppliers: in effect, 1% of the invoice value of all the goods sold by the suppliers gave rebates.

11. Mr. Haney testified, and I accept his evidence in this regard, that he was not familiar with this way of doing business but went along with it. At the beginning, the amounts were small and, essentially, he simply left the paper work to Susanna; she was a member of his family, trusted her and simply did not apply his mind to the mechanics of those rebates.

12. In law, the position regarding the rebates is straight-forward. As the rebates were given by the suppliers on account of the company's business, the rebates belonged to the company, unless there was some specific agreement binding the company to the contrary. The 1% rebate given to Susanna as part of her remuneration package is not in dispute in this case. It is the other 1%, belonging to the company, which is in dispute.

13. It is common ground in this case that until late 1992 or early 1993 - by which time dispute between the parties had arisen - the rebates were not reflected in the company's ledgers and therefore not accounted for in the financial statements of the company. This is something which I must bear in mind. That said, the basic position remains. The suppliers gave the rebates on account of contracts entered into by the company and prima facie the rebates belonged to the company.

Receipt of the 1% rebate

14. In the agreed bundle there is a "savings account history report" commencing 23 January 1984 relating to savings A/C No. 181-8-023077 in the joint names of Mr. Haney and Ng Yee-lin. It is common ground that the company's share of the rebates was put into this account. The amounts were small at the beginning: a few hundred dollars at a time, seldom exceeding $2,000. It is the plaintiff's case that the money in this account was originally in Yee-lin's sole name and was intended for Yee-lin's own use: as pleaded in para 3(iv) of the Reply, this was "Mrs. Haney's (Yee-lin's) 1% trade discount on rebate she had been receiving....". In Yee-lin's testimony in court she said her husband promised that the money would be for her own use in Hong Kong as, after her marriage, she did not work and had no income of her own. If, by this, she meant that Mr. Haney had, on behalf of the company, contractually undertaken to make a gift of the money to her, it was in my judgment an exaggeration. In my view there was no specific agreement or promise of any kind concerning the ownership of the money in this account. Everything was done very informally. The plaintiff says that the savings account was originally in Yee-lin's name alone and Mr. Haney's name was added only later, on one of the couple's visits to Hong Kong. Although the evidence is slender in this regard I am inclined to believe that this did take place. But as, after the summer of 1986, after the birth of the youngest child, Yee-lin only returned to Hong Kong once a year, during the children's summer vacation, it is probable that Mr. Haney's name was added to the savings account in about 1986.

15. Yee-line had pre-signed a bundle of withdrawal slips which she had left with Susanna. I have no doubt that she did make withdrawals, or cause withdrawals to be made, from this account for personal purposes: but Yee-lin also conceded in evidence, and I find as a fact, that Mr. Haney had withdrawals made from this account as well. He testified that it was to meet his cash needs in Hong Kong, to meet expenses for entertaining clients and, on one or two occasions, to put down deposits for cartons: I see no reason to reject his testimony in this regard. It would not have been surprising if some of the money was used by him for purely personal purposes as well.

16. Towards the end of 1985 Susanna was replaced as manager of the Defendant company by Ng Yee-har, Ivy, the 1st Plaintiff in this case.

17. The sales volume handled by the company up to 1988 was low and the rebates were therefore also low. In 1988 the total sales volume was $9.7m. Not all the suppliers gave rebates. The informal way in which the rebates was handled by Susanna was continued by Ivy: that is, the cash and cash cheques were accumulated in the office; Ivy appropriated half and the other half was then deposited in the joint savings A/C from time to time. Ivy was in charge of the book-keeping and was the sole person to deal with the company's accountants. She said in evidence that on his visits to Hong Kong, on average four times a year, Mr. Haney never looked at the ledgers; he himself said that the paper work was left entirely to Susanna, and later to Ivy.

18. The volume of sales doubled between 1988 and 1989. In the financial statements of the company for 1989 the following sums appear: "paid to director $114,513.80" and "paid to Fairluxe Ltd. $45,000". It is common ground that these sums were received by Ivy. In addition, a sum of $57,000 was paid to Ivy's father by way of "salary", although he was not in fact an employee. Whether Ivy derived any benefit from the $57,000 or not, it can be seen that her disclosed income for 1989 was not inconsiderable: and of course she got half of the 2% rebates given by the suppliers as well. It was put to her in cross-examination that this rebate was "part of a tax planning engineered by the two of them - Susanna and herself - to lessen the tax payable by them": a suggestion with which Ivy agreed.

19. As can be seen from the savings account history report, the rebates put into the joint savings account substantially increased in 1988.

20. The increase in sales volume continued into 1989 and 1990. By 1990 the sales volume had grown to $30.19m, and Ivy's disclosed income amounted to $255,943 - plus $78,000 allegedly "earned" by her father as "salary", though he never worked in the office: except possibly on rare occasions when he helped out when she was extremely busy. Her husband did, however, attend the office frequently to assist.

21. Because the rebates were getting large, from about mid-1989 onwards Ivy transferred sums from the savings A/C into time deposits in order to earn higher interest from the bank. For instance, in March 1990, a sum of $80,000 was withdrawn and put on time deposit.

22. Pausing at this point, March 1990, there is in my judgment simply not enough evidence to displace the prima facie inference that the money in the joint savings A/C was the company's money: there was the vague suggestion put forward by the plaintiff that the money was intended for Yee-lin's own use, or the joint use of the husband and wife, but that in my judgment is plainly not enough to change the legal ownership from that of the company to that of Yee- lin or Yee-lin and Mr. Haney: this despite the fact that the sums never appeared in the company's ledgers and were not reflected in its financial statements.

23. Test the matter in this way. Assume for instance that a liquidator were appointed in March 1990, and became aware of the facts as I have found up to this point: I have no doubt whatever that he would have been able successfully to claim the sums held on time deposit and in the savings A/C as the company's money.

24. In October 1990 Mr. Haney and Yee-lin gave instructions to the bank to close the joint savings A/C and have the money transferred to a savings A/C in Ivy Ng's name. It is the credit balance in this account, as at 31 December 1992 amounting to $481,954.95 which is the subject-matter of the present litigation.

Matters leading up to the litigation

25. By the end of 1992 the company's sales volume had reached $176.2m and it must have been obvious to Mr. Haney some time before then that the informal way of running the company's business could not continue. Moreover, at the end of 1991 his wife Yee-lin had filed for divorce in the USA. One of the results of all this was that a Mr. Emil Colucci, a person with impressive academic qualifications, was appointed director and he was given the task of examining the operations of the defendant company.

26. On 2 September 1992 Ivy entered into a formal employment with the company the relevant provisions of which are as follows:

EMPLOYMENT CONTRACT AND COMPENSATION AGREEMENT

This Agreement represents a contract for employment and a guarantee of compensation between Great American Fun (HK) Ltd. (Employer), and Ms. Ng Yee Har (Ivy), (Employee), for the period commencing September 1, 1992, and continuing through December 31, 1992. This Agreement may be automatically renewable for additional periods if both parties agree in writing thirty days prior to the end of the current period.

In return for good and faithful service by Ms. Ng during the period(s) covered by this Agreement, Great American Fun (HK) Ltd. hereby promises to compensate Ms. Ng as follows:

(1) Monthly salary of $50,000 HK, payable September 30, October 31, November 30, and December 31, 1992.

(2) Management bonus equal to $15,000 HK for every $1 million US in sales increase recorded by Great American Fun (HK) Ltd. for the period July 1 through December 31.........

(3) 1% rebate unchanged

27. There is a variance between the testimony of Mr. Haney and that of Ivy Ng regarding the circumstances leading up to the signing of the employment contract: Ivy said that in August 1992 she had tendered her resignation orally to Mr. Haney and he said there would be difficulty in replacing her and sought to retain her for 3 months: hence the first paragraph in the contract. Mr. Haney on the other hand said that as at that time it looked as if he and Yee-lin would be divorced, and Ivy wanted the assurance of a written contact with a remuneration package which had a fixed salary element in it. Ivy's version was never put to Mr. Haney in cross-examination. Mr. Colucci's understanding of the situation was similar to Mr. Haney's: that Ivy wanted to stay, and the reference in the written contract to three months was simply to follow a usual American formula in such cases. In my judgment it is unlikely that in August 1992 Ivy had given a definite indication that she wanted to resign as the company's manager: she had resigned as a director and company secretary in August 1992, as part of the reorganization of the company, and Mr. Colucci and a Mr. Rosenberg were appointed as directors at that time. But the remuneration package offered to her was extremely attractive: given her educational background (she finished her formal education after Form 5) it was unlikely that she could have got better terms of employment by going elsewhere. Mr. Haney's version of the evidence is to be preferred.

28. Later, in November 1992, a manager - Mr Julian Fung - was appointed over Ivy's head and it was this which provoked her resignation. Mr. Colucci then tendered to her a letter dated 24 November 1992 in these terms:

November 24, 1992

Ms. Yee Har Ng, (Ivy):

This letter will confirm your resignation from Great American Fun (HK) Ltd. effective December 31, 1992. You will continue to work full time for the remainder of this year, with special attention to finalizing all remaining shipments scheduled for 1992, and on working with our newly-hired General Manager, Mr. Julian Fung, to be sure that Julian is introduced to all aspects of the business. Great American Fun (HK) Ltd. cannot accept claims for unused vacation from prior years, but will allow you one week paid leave prior to December 31, the timing of which Julian must approve.

It is particularly important that Julian review all incoming correspondence, mail and fax, and that Julian specifically approve all outgoing correspondence, mail or fax. To insure this, please have Julian initial all incoming correspondence, mail or fax, and have him sign all outgoing correspondence, mail or fax. The best way to prepare Julian for the coming months is to immediately and directly involve him in all aspects of the business.

Great American Fun (HK) Ltd. will continue to pay your monthly salary of $50,000 HK through December 31, 1992, and to pay you a Management Bonus equal to $15,000 HK for every $1 million US in sales increase recorded by Great American Fun (HK) Ltd. in 1992; as measured against 1991 sales of $53,890,516.24 HK, the equivalent of $6,953,615 US at an exchange rate of 7.75. Payment of this bonus will occur in early January, and shall be contingent on receipt of full and complete payment of the balance in Hong Kong and Shanghai Bank savings account No. 198-2-010124, which you hold in trust for Brian Haney in your name.

Payment of this bonus is, of course, contingent on your cooperation with Julian in all areas from now until the end of December, and I have insisted that Julian confirm this to me prior to release of the bonus payment. Based on Julian's recommendation, we are planning to issue a Letter of Recommendation to you with your bonus payment in early January. To be sure that there is no misunderstanding, please sign this letter, and return same by fax to my attention.

Confirmed and accepted by :

__________________________

Yee Har Ng (Ivy)

This letter was not signed by Ivy Ng, a matter to which I will return later.

On 24 November 1992 Ivy Ng sent a fax to Mr. Haney in Ohio USA in these terms:

Hong Kong Nov. 24. 92

To Great American Fun Corp.
3656 Paragon Drive
Columbus, Ohio 43228
U.S.A.

Attn.: Mr. Hugh Brian Haney

Dear Brian

The decision of my resignation has been verbally made to Emil Colucci few days ago and is now confirmed to you in writing. I will leave the company at the end of December, 1992.

Thank you for your acceptance of my resignation and good luck to all of you.

Yours faithfully,

Mr. Haney replied on the same day, accepting her resignation and said:

November 24, 1992

Dear Ivy:

Thank you for your letter of resignation dated today, which Emil had discussed with me last week. Attached you will find written acceptance of yours and Susana's resignations, and confirmation of the terms of your continued employment through December 31, 1992.

I am sorry that you do not agree with the compensation program I had offered for 1993, and I am particularly sorry that you misunderstand why a change was necessary. Up until this year, we handled relationships with many suppliers (such as Iwaya and King Tsung) on a direct basis, with little direct involvement from GAF Hong Kong. At that time, our direct import L/C program was only a small part of our business, and you were easily able to run the office by yourself.

Through 1991, I agreed to paid you 1% of next sales as direct compensation, with a share of rebates from certain suppliers. This arrangement has proven very generous, and certainly resulted in more compensation than you could have earned elsewhere from any other source. However, the growth of the business in 1992 meant that you could not handle things by yourself, and you and I agreed that your skills were insufficient to handle the many new problems, and to provide managerial supervision to the additional staff which we hired. Accordingly, the "do everything" job which you held through 1991 disappeared.

We invested heavily in a computer system to track orders, hired Mort to co-ordinate product development and manufacturing, and committed a large part of Emil's, David's and Ken's time to designing and implementing order administration procedures. Prior to this year, I was willing to pay 1% of net sales so long as you could handle things by yourself. Once we grew so large that you could no longer handle things, I began spending so much additional money that it would have been unfair not to revise your compensation program.

The business of Great American Fun (HK) Ltd. is now quite complex, and is still growing. Your dedication and hard work has not gone unappreciated, but hard work without professional managerial experience is not sufficient to manage the company this year, or in the years to come. I would like you to recognize that it is the growth of our business that has dictated the compensation changes which you find hard to accept, and not any change in my attitude towards you personally. I have appreciated your dedication and loyalty for many years, and wish you nothing less than success in whatever direction your future career takes you.

Sincerely, H. Brian Haney President, Great American Fun Corp.

This was followed by a fax from Mr. Haney dated 11 December 1992 in which he said:

Dear Ivy:

I have not received any response from you to my fax of 11/24 in which I accepted your resignation. Since that time, I have received information that you have been away from work, sometimes due to "sickness", then you told Emil you are considering starting your own company and going into competition with GAF next year and that you will not give the rebate money from the savings account to Emil because you do not trust me to pay you the bonus that you will receive in early January.

Ivy, we have worked together for seven years and I do not want to fight with you. When we had breakfast together in October, I explained everything that was happening in the office and why it need to happen. During the same meeting I explained what salary and bonus arrangement you could expect to receive for 1993 and that the total compensation for you and Kenny would be about HK$480,000. You seemed to understand everything and agreed that the changes were necessary and acceptable to you. Later, when Emil arrived to Hong Kong to confirm the change over for next year, you resigned your job. I get the feeling that you think you have been treated unfairly by me but I do not understand why. Even though you would not make as much money in 1993 as you made in 1991 and 1992, you would be able to work a normal work week and have regular time off. Do you understand that the previous pay system was based upon having just one person in the office and that now the same amount of pay (1% of sales) needs to cover the salaries of four or five people? If it was possible for you to do all the work, to ship all the L/C and GAF shipments by yourself, I would be happy to continue the pay system as before. However, this is obviously not possible.

In the seven years we have worked together, I cannot think of any situation where I treated you badly. Of course, sometimes we did not understand each other by fax and there were some problems but I always felt that we had the same goals. Now, I have to believe that the situation with Yee Lin has greatly affected your ability to see me as a regular person. I just wish you would think about the true reason you are leaving your job.

I would greatly appreciate it if you would close the rebate account and give Julian the check for the full amount. If you really believe that I am going to try to keep you from receiving your full pay, I will instruct Julian to give you a check for HK$100,000 as an advance against your bonus and the balance will be paid during the first half of January. In seven years, you have never had any time you could not collect your money from me on time and in full. If you take away Yee Lin's comments to you, what reason do you have to think that I would withhold your money now? I cannot see any reason.

I really hope that you can finish the final 20 days in the office with Julian on good terms and I can give you a nice recommendation letter when you leave. Julian is a nice guy and he does not deserve to be disturbed by our family problems. I hope you will either send me a fax telling me how you really feel or call me so that we can settle everything. Ivy, I like you and Susana very much. I feel bad that you feel that you cannot continue working with me. Since we cannot continue, I hope we can truly part on friendly terms. I look forward to your earliest reply.

Best regards,

Brian

This was followed by another fax of same date when Mr. Haney said:
December 11, 1992

To	lvy Ng GAF-HK
Fro	Brian Haney GAF-USA

Dear Ivy:

Julian has informed me today you will not give him the information about the rebates we receive from the factories. I do not understand why you would be unwilling to give him this information. Please fax to me directly and let me know what the true situation is.

B Rgd
Brian

The only reply Mr. Haney ever received to these faxes was from Ivy on 15 December 1992 in these terms:

Hong Kong Dec. 15, 1992

Dear Brian

Refer your letter 11/24, thank you for accepting my resignation.

Your fax December 11 state that received information from someone. So call information, don't you think this childish? You know how I work for GAF before and there isn't any change now. Emil said that I consider to state my own company, if I have the effort to do so, will think about it. One thing I did wrong is to transfer 10,000 shares back to you. If any problem, please solve yourself with Yee Lin. Please don't bother me.

When in October you did explain the change in 1993, but my salary seemed not to have a conclusion and I didn't promise you anything. Do you remember when we had dinner together with Kenny in April, you also did a lot of explanation. So my salary from 1% to this amount and said that the amount will last to the time we migrate to USA. So that we can have some money for migration. Last only a few months another change again. What is this? This is why I resign. (I have no confident to work with a person who doesn't keep his promise and may time to time decrease my salary again.) Of course you have the reason and point of view to do so, but I also have mine.

Well, thanks for everything once again and wish you good luck.

B. Rgds,
Ivy

On 16 December 1992 Mr. Haney sent another fax to Ivy as follows:

Dear Ivy:

Thank you for your fax of 12/15.

1. I did not receive any reply about closing the rebate account and your bonus check. Please reply to me specifically about this. I need to solve this during December because I need Emil to account for the taxes for this money in 1992.

2. Factory rebate list - Obviously, some factories provide a 2% rebate and some do not. I need Julian to know this information before you finish your work on 12/31. Is there some reason you will not give him this information directly? If so, please fax it to my attention in USA.

3. Your salary - in April, I expected that we could hire one or two shipping clerks and that would be enough people to handle all the business. When it became obvious that this would not work, I needed to hire another manager with many years of experience. This is the reason I had to reduce your salary starting in 1993. In other words, we now need two high paid manager people instead of one. Actually, even though your salary was reduced some, I thought that a total compensation of about HK$500,000 was still very good and would allow you to save money for immigration and also work less hours. Compared with the salary of other Hong Kong company staff, the salary seems very fair.

4. Your previous company shares - I do not understand why you say it was wrong to transfer them back to me. Those shares were only put in your name because of Hong Kong Law and I did not make any kind of promise or commitment about those shares. Did you think something else? If you recall, when Susana left her job at GAF-HK she transferred her shares the same way. No money was paid by you for these shares and I did not think you had any expectations about them. In the past, you had authority to do everything with the company and also the rebate account because I trusted you so much. I have never done anything about your money or your job without explaining it first. I do not understand why you would make it difficult for me to finalize everything now that you are leaving the company. Therefore, please give me some cooperation now so we can finish everything nicely. That is all I am trying to say.

B Rgds
Brian

29. The next thing that happened was a letter to the company from a firm of solicitors Messrs George Y.C. Mok & Co. dated 5 January 1993 claiming arrears of salary and bonus on behalf of Ivy and Susanna.

30. In a reply dated 6 January 1993 from an American firm at Columbus Ohio the lawyers on behalf of the Defendant company said:

Dear Sir:

Mr. Emil S. Colucci has consulted me in connection with your letter to him in care of Great American Fun (H.K.) Ltd., dated January 5, 1993, and the claims set forth therein.

As has been previously explained to your clients, GAF (H.K.) Ltd. intends to pay them any and all amounts legitimately owed as a result of their former employment. However, it recently came to the attention of GAF(H.K.) Ltd. that when such employment ended, your clients were in possession and/or control of approximately HK$475,000 belonging to GAF (H.K.) Ltd. Please instruct your clients to return this money immediately.

If this is done, I believe GAF (H.K.) Ltd. will forego any claim it may have against your clients as a result of their failure to deliver this money earlier, and simultaneously to settle their claims on the basis set forth in your letter. (Note that the proposed bonus under discussion was contingent upon cooperative behaviour, among other things, and sales increases, not sales).

We propose that your clients place the full amount of the funds taken from GAF (H.K.) Ltd. in your law firm's trust account and GAF (H.K.) Ltd. will place the amount due your clients in a similar account in Hong Kong. Once the lawyers confirm the amounts on deposit, these funds can be exchanged.

I make this suggestion solely as a settlement proposal and in a good faith attempt to compromise a disputed claim. GAF(H.K.) Ltd. does not hereby admit or acknowledge the validity of the claims in your letter.

If your clients wish to expedite resolution of this matter, I suggest you reply directly via fax. If required GAF(H.K.) Ltd. intends to resort to the courts of Hong Kong to resolve their dispute with your clients, and are fully capable of doing so.

Very truly yours,

Eric L. Brown

A "holding" letter from a HK firm Messrs So & Keung was also sent. By reply dated 12 January 1993 Messrs George Y.C. Mok & Co. on behalf of the two sisters said:

12th January 1993

Dear Sirs,

Re: Great American Fur (H.K.) Ltd.

We refer to your letter dated 11th January 1993. On even date, your client phoned up our Mr. Chan and upon request, your client was granted a few days more (i.e. until the end of this week) to re-consider the matter and let us have your reply.

Meanwhile, we take this opportunity to reply to a letter dated 6th January 1993 from your client's U.S. lawyer, Mr. Eric L. Brown. We are instructed that the said amount of HK$475,000.00 is sales rebate money from suppliers or customers which belongs to our clients, Ms. Ng Yee Har and her sister, Ng Yee Lin by mutual agreement with your client. The said amount is unrelated to the amount of salary and bonus due to our clients, Ms. Ng Yee Har and Ng Yee San from your client.

The pleadings

31. The writ was the issue on 27 January 1993 claiming on behalf of the 1 st Plaintiff Ivy Ng Yee-har:

(1) The sum of $50,000 being salary for December

(2) $107,130 being the bonus payable up to the end of October 1992

(3) an account of the bonus additionally payable for the month of November and December 1992

32. The Defendant has never disputed liability for these sums, although, at the time of the writ, the increase in sales on which the bonus was based had not been worked out. This has now been agreed at $42,289.94. It is therefore common ground that the 1st Plaintiff Ng Yee-har Ivy is entitled to judgment for $199,419.94 subject to the Defendant's counterclaim.

33. In its defence, the company averred that as the company's manager Ivy had a fiduciary duty to render a full account of all the rebates received from the company's suppliers and the company claimed from her the credit balance in the savings account representing the 1% rebate which belonged to the company.

34. In her Reply Ivy Ng's solicitors averred:

"3(iv) In or about September 1990, it was agreed between the then directors of the Defendant (i.e. the 1 st Plaintiff and Mr. Haney) and Mrs. Haney that the 1st Plaintiff would receive all Mrs. Haney's 1% trade discount or rebate she had been receiving and the 1st Plaintiff was allowed to replace Mrs. Haney in receiving her 1% trade discount or rebate since then as part of the 1st Plaintiff's remuneration."

35. The Defendant company then sought particulars of that averment, asking Ivy Ng to state exactly when and where the alleged oral agreement was made and the gist of all words spoken.

36. In answer Ivy Ng's solicitors replied:

"When Mrs. Haney (Yee-lin) visited Hong Kong and stayed in the 1st Plaintiff's house, the 1st Plaintiff requested for a revision of her remuneration. Mrs. Haney basically agreed with the 1st Plaintiff's request but she had to seek the consent of Mr. Haney as well after she returned to U.S.A. Finally, both Mr. and Mrs. Haney agreed to revise the 1st Plaintiff's remuneration as per the said oral agreement. Since the oral Agreement happened about 3 years ago, the exact date could not remember."

Evaluation of the evidence

37. Two points I note at the outset:

(1) Regarding the true ownership of the money in the savings A/C belonged to Ivy and Yee-lin: In her testimony Ivy claimed that the Ivy Ng's solicitors in their letter of 12 January 1993 said that the money money was hers, having been given to her as her pension fund.

(2) In answer to the request for particulars, Ivy Ng said that the oral agreement to transfer ownership of the money to her was "basically" made when Yee-lin visited Hong Kong and stayed in her house and "finally" both Mr. Haney and Yee-lin agreed to the arrangement, which included her receiving the 1% rebate "as part of her remuneration", but as the oral agreement was made three years before she could not remember the exact date. Her evidence in court varied from her pleadings. In her testimony Ivy Ng said that it was in June 1990, when Yee-lin and Mr. Haney visited Hong Kong, that she said she no longer wished to work for the company and Yee-lin was angry; and on being asked what would induce her to stay, she said she wanted a fixed salary plus commission; but nothing was decided and they returned to the USA. It was in late September or early October 1990 when Mr. Haney came alone to Hong Kong that the agreement was made: the joint savings account was to be closed and the money transferred to an account in her own name. It was to serve as a "pension fund" for her when she eventually emigrated to the USA. Effectively, according to her testimony, she was to get the whole of the 2% rebate from the company's suppliers.

38. Ivy Ng's testimony in court was vague and unconvincing. If, after October 1990, the money in the savings account had become hers, and constituted her own pension fund, that would have been a simple proposition to state. But no explanation has been offered as to why her solicitor in January 1993 should have thought that Yee-lin had an interest in the money. There continued to be withdrawals from the savings account after it was transferred into Ivy Ng's name. She explained it by saying that occasionally she would draw money out in Hong Kong dollars to exchange for US dollars handed to her by Mr. Haney on his visits: it seems very odd to me that she would use a fund which was meant to be a pension fund in that way. The savings account passbook was kept in the office at all times and Mr. Haney continued to have access to it, to see the balance in the account: to the extent that his US lawyers were able to assert, in January 1993, that the credit balance was approximately $475,000: a sum reasonably close to the $481,900 odd now claimed.

39. It is noteworthy that when Mr. Colucci wrote in November 1992 he was able to quote accurately the savings account No. 198-2-010124.

40. If the money was to be Ivy Ng's absolutely, it is odd that it should have continued to be segregated. Why was it not simply dealt with in the same way as the other half of the rebate which belonged to her? She had opened an Asset Vantage A/C with the Hongkong Bank in January 1992 which gave her a higher rate of interest. Why was the rebate not deposited into that account?

41. In the pleadings her story regarding the so-called "oral agreement" involved heavily her sister Yee-lin: and yet, in the witness box, Yee-lin totally disclaimed any knowledge of the so-called pension fund.

42. If Ivy Ng had really thought in November 1992 that the money was hers, her reaction to the series of faxes from Mr. Colucci and Mr. Haney was inexplicable. She never contradicted or disagreed with the clear statements repeatedly made that the money belonged to the company.

43. Mr. Colucci testified that when he gave Ivy Ng the letter of 24 November 1992 to sign - saying in particular that payment of the bonus was contingent on her full payment of the balance in the savings account - Ivy Ng assured him that she had no intention to keep money which was not hers and suggested to Mr. Colucci that she was hurt by his lack of trust. I accept Mr. Colucci's testimony in this regard. It is consistent with what Mr. Haney later said in his fax of 11 December 1992.

44. Ivy Ng suggested in her evidence that she refused to sign the letter of 24 November 1992 because Mr. Colucci required her to return the money in the savings account: it is not clear from her testimony whether she was asserting that was what she told Mr. Colucci or merely that was what she thought. There is certainly was nothing to that effect in her witness statement, and this tends to undermine the value of her testimony.

45. To bolster her own case and to make her assertion to ownership of the money in the savings account more credible, Ivy Ng also asserted that 10,000 shares in the company were transferred to her by way of gift in July 1989: that is, 9,999 shares in Susanna's name and 1 share in Yee-lin's name.

46. I have no doubt that the transfer of the shares was not by way of gift. There was no reason for Mr. Haney to make a gift of that kind to her. The company had no assets others than its commercial connection with the American company and Mr. Haney was able to control totally its affairs. In 1989 the company had no other source of income than what it was able to earn in invoicing the products bought by the American company. Just as Susanna had held the shares for convenience as Mr. Haney's nominee, so Ivy in my judgment held the shares as his nominee.

47. I have not found the evidence of the parties concerning the use of the money in the joint account, and later in Ivy Ng's savings account, of much assistance, beyond the fact that if it was to be a "pension fund" as Ivy Ng asserts it is surprising that there should have been the withdrawals which we see from June 1991 onwards. One withdrawal however I consider of significance: that of 22 January 1992 for $20,000. I accept Mr. Colucci 's testimony that in January 1992 he came to Hong Kong with Mr. Haney and on that occasion Mr. Haney asked Ivy Ng for money from the rebate account for the purposes of entertaining a client. Mr. Colucci said that Ivy took the passbook from the drawer, opened it and showed it to Mr. Haney and said that she would go to the bank to withdraw the funds on the same day. This was Mr. Colucci's first introduction to the savings account and he expressed the view that this was not proper accounting procedure, but Mr. Haney remarked that was how it had always been all along: and further remarked if he couldn't trust Yee-har (Ivy) who could he trust? I accept Mr. Colucci's testimony to that effect. I reject Ivy's evidence that the $20,000 was a loan from her to Mr. Haney.

Conclusion

48. I reject the plaintiff's case that there was an oral agreement binding on the Defendant company to the effect that the 1% rebate deposited into the savings account No. 198-2-010124 should belong to the 1st Plaintiff and I find that all along the money belonged to the Defendant company.

49. There will therefore be judgment for the 1st Plaintiff in the sum of $199,419.94 as earlier indicated, and judgment on the counterclaim in favour of the Defendant company against the 1st Plaintiff Ivy Ng Yee-har in the sum of $481,954.95 and interest thereon as from 1 January 1993 at such rate as the parties may agree and, in default of agreement, at such rate as I shall determine. The Defendant company will get the costs of the action.