Lee Kwok chiu and Another v. Passport Travel Management (FE) Ltd.

DCCJ2093/98

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2093 OF 1998

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JUDGMENT

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This is a case transferred from the Labour Tribunal. The 1st and 2nd Plaintiffs are former employees of the Defendant. The 1st Plaintiff worked as a tourist car driver for the Defendant between 1 February 1992 and 30 September 1997. The 2nd Plaintiff worked as a tourist guide for the Defendant between 3 June 1996 and 30 September 1997.

2. There is no dispute that on 1 September 1997 both Plaintiffs were given one month notice by the Defendant to terminate their respective employment contract. Upon termination of employment contract, the Defendant agreed in writing (Exhibit p. 2) to pay the 1st Plaintiff all statutory compensation (of unspecified amount) within 6 months and, by a separate written undertaking (Exhibit p. 10), to pay the 2nd Plaintiff balance due (including statutory benefits) $47, 464 within 6 months.

3. Because the Defendant defaulted, the 1st Plaintiff filed a Claim with the Labour Tribunal for the following with interest and costs:-

(i) unpaid salary for the month of September 1997	HK$10,500.00
(ii) annual double pay for 1997 (pro-rata)	HK$7,875.00
(iii) shopping commission	HK$7,428.80
(iv) guide fee and miscellaneous expenses	HK$18,863.00
(v) severance payment	HK$39,666.60
Total	HK$84,333.40
	==========

The 2nd Plaintiff filed a Claim with the Labour Tribunal for the following with interest and costs:-

(i) unpaid salary for the month of September 1997	HK$5,300.00
(ii) payment in lieu of leave and holiday	HK$529.00
(iii) annual double pay	HK$3,975.00
(iv) shopping commission	HK$14,741.50
(v) guide fee and miscellaneous expenses	HK$47,464.00
Total	HK$72,010.40
	==========

4. The Defendant's Amended Defence and Counterclaim alleges that the 1st Plaintiff:-

Amended Defence

(a) charged HK$150 per trip for guides fee which is HK$30 more than the market price;

(b) borrowed HK$14,000 from the Defendant;

(c) overcharged the Defendant by HK$10 for each additional hotel on top of the normal guide fee HK$50 per trip;

(d) overcharged the Defendant by claiming HK$16 for the luggage fee of every two tourists; and

(e) taxi fare allowance should not exceed HK$60 per trip.

Amended Counterclaim

Obtained excessively a total amount of HK$50,300 from the Defendant:

(a) HK$23,390 in 1996; and

(b) HK$12,910 in 1997.

5. The Defendant's Amended Defence and Counterclaim alleges that the 2nd Plaintiff :-

Amended Defence

(a) borrowed HK$46,000 from the Defendant which is still outstanding; and

(b) was entitled to commission at 30% rather than 35%.

Amended Counterclaim

Obtained excessively a total of HK$112,029.20 from the Defendant:

(a) HK$45,835.20 in 1996;

(b) HK$24,091 in 1997; and

(c) HK$42,103 being optional tour fees collected in 1996 from client and not handed over to the Defendant.

6. For Reply and Defence to Counterclaim,

the 1st Plaintiff pleads that:-

(a) the HK$14,000 was for payment in lieu of accumulated holidays which was approved by the Plaintiff's witness Andy Leung Por, the former Director of Defendant; and

(b) all shopping commission, travelling allowances were approved by Plaintiff's witness Andy Leung Por.

the 2nd Plaintiff pleads that:-

(a) the retention of the HK$46,000 from the optional tour was approved by the former Director Andy Leung Por to set-off amounts with the Defendant;

(b) entitlement to a 35% commission; and

(c) all guide fee and miscellaneous expenses were approved by Any Leung Por.

7. As can be seen from the pleadings, the dispute concerns the rates of payment and whether the rates had been approved by the Defendant.

The Background

8. It is common ground that the Defendant was a tourist agency in the form of a limited company. In the beginning, there were several shareholders. One Mr. Leung Por ("Leung Por") was a substantial shareholder and effective managing director of the Defendant from the beginning to January 1997. One Madam Chan ("Madam Chan"), the authorized representative for the Defendant at the trial, had a relatively small shareholding and was not involved in the day to day management of the Defendant until late 1996. There were other shareholders who had controlling interest in the Defendant.

9. In late 1996, Madam Chan was concerned with the performance of the Defendant for the company had been making losses for years. She also discovered some alleged irregularities in the affairs of the Defendant. As a result, reports were made to law enforcement agencies. At one stage, Leung Por was arrested and charged. In the end, on the authority of a senior official of Justice Department, no evidence was offered at the trial for the charge and Leung Por is now in the clear. At the trial before me, Madam Chan sought to accuse Leung Por of forgery. The evidence in support of such charge is a board minute of the Defendant whereon Leung Por put at the space for signature by another director the purported signature of that director but clearly marked with the legend in Chinese "on behalf of". It is clear from the face of this board minute that Leung Por did not try to pass off a scribble he put as the genuine signature of the other director. Leung Por gave evidence and explained that he was asked by other directors to get the minute signed urgently but since that other director was abroad he signed in the manner as described. The validity of the board minute may be in doubt but no one can seriously think that Leung Por signing "on behalf of" the other directors was dishonest. There can be no question of forgery at all.

10. Leung Por also explained under oath why the Defendant made losses during the years under his management. There is no need to go into the details in this regard. All that I need to say, at this juncture, is that Leung Por came across as an impressive witness in terms of demeanour and logical expression. Hence, there is no reason at all for me to doubt the evidence of Leung Por.

11. As a result of the dispute with Madam Chan, Leung Por left the Defendant and handed over management of the Defendant to Madam Chan. It is the Defendant's case and agreed by the Plaintiffs that Madam Chan has been solely responsible for managing the Defendant since January 1997. In fact, Madam Chan has acquired shares from other shareholders to be the sole controlling shareholder of the Defendant. Madam Chan also admitted that for slightly less than 3 months from February 1997, Leung Por returned to the office of the Defendant to assist her with familiarization of the business and affairs of the Defendant. Anyway, what happened was that since early 1997 Madam Chan brought a distinctly different management style. She did not adopt the policies and practices of Leung Por. In short, this dispute arose as a result of Madam Chan's disapproval of Leung Por's policies and practices, particularly in regard to remuneration of staff.

The Plaintiff's Claims

12. The items claimed by the Plaintiffs can be classified into two categories:-

(1) statutory benefits, i.e. outstanding salary, annual double pay, payment in lieu of leave and holidays and severance payments.

(2) commission and allowances, i.e. shopping commission, guide fee, miscellaneous expenses/allowances

13. The statutory benefits are readily calculable and do not admit of any dispute. The 1st Plaintiff had the years of service to qualify for severance payment. The Defendant through Madam Chan admits in court that 1st Plaintiff was dismissed because the Defendant had no need for a company car. There were salary arrears. The Plaintiffs were not dismissed under section 9 of the Employment Ordinance, Cap. 57 and so salaries in lieu of notice is payable. The contractual double pay is payable as mandated by the Employment Ordinance, Cap. 57. In relation to commission and allowances, the Plaintiff had submitted monthly payment requisition forms to the Defendant when they were still in the Defendant's employ. Copies of the relevant payment requisition forms produced are in the trial bundle. A typical payment requisition form is reproduced below:-

PASSPORT TRAVEL MANAGEMENT (FE) LTD.

(MEMBER OF INTER-BUSINESS (HOLDINGS) GROUP)

PAYMENT REOUISITION

Date:	11 August 1997
To:	Accounts Department
From:	Mr. Eric Ho Tsz Hong
Amount:	HK$(4,830)       4,622	(Cash/Cheque)
Payable To:	Mr.Eric Ho Tsz Hong
For:	Guide Expenses (July 1997)
Account Ref. No.:	______________________
(Signed) Applicant	22/07/97 Checked by	(Signed) Approved by

14. Both Plaintiffs gave evidence. According to them, during their employment, every day they received instructions from the Defendant on the work they had to do that day. These instructions were recorded in a log book. The instructions detail when, where and how incoming tourists were to be served. Service usually included taking tourist to and from the airport, checking them into hotel and arranging local sight-seeing and shopping. To serve the tourists, expenses were necessarily incurred. And, for taking tourists to shopping, commission from shops were receivable.

15. The Plaintiffs stated that all the rates of commission and expenses had been approved by Leung Por when he was managing director. They simply applied the approved rates to claim payment. When Leung Por was managing, payments were made as per the payment requisition forms when the Defendant had funds. Leung Por gave evidence that corroborated the evidence of the Plaintiffs. Leung Por added that payment requisitions can be easily and readily verified by checking the daily instructions log book and applicable approved rates of payment.

16. After Madam Chan took over, the payment requisitions were not met because, Madam Chan told the Plaintiffs, the Defendant was in financial difficulties. That is why upon the Plaintiffs leaving the Defendant, there were written agreements between the Defendant and the Plaintiffs for payment within 6 months.

17. There is nothing inherently incredible about the evidence of the Plaintiffs and Leung Por. I have checked the relevant payment requisition forms. I notice that, in some cases like the sample reproduced above for guide fees, someone of the Defendant checked the claim and reduced it from $4,830 to $4,622. The total claim by the respective Plaintiffs for commission and expenses is the sum of the amounts in all the relevant payment requisition forms. In cases where the amount claimed has been reduced after checking, it is the reduced amount that the Plaintiffs are seeking.

The Defence

18. Madam Chan gave evidence for the Defendant. She did not deny the claims for statutory benefits. In relation to commission and allowances, she said she had no knowledge of what had been orally agreed between Leung Por and the Plaintiffs. She complained that the Plaintiffs had not reported to her the agreed rates for expenses and commission until they filed claim with the Labour Tribunal after their employment had been terminated. She disapproves the following rates of payment:-

(i) $150 per trip for guide fee, because this it is above market rate

(ii) $8 per person for baggage fee to hotel bell boys which is not the actual rate charged by hotels

(iii) $60 taxi fare which may not be actually incurred and may be less if incurred

(iv) 35% commission for the 2nd Plaintiff which does not accord with the stated rate in his initial employment contract.

19. In regard to the payment requisition forms submitted by the Plaintiffs, Madam Chan said that the forms had no supporting proof, i.e. there are no receipts from the parties who received monies from the Plaintiffs. For example, hotels do issue receipts for baggage fee paid but the Plaintiffs have not produced such receipts.

20. Madam Chan also cited instances to show that the Plaintiffs are dishonest. She alleged that Leung Por and the Plaintiff are colluding together against the Defendant out of spite.

21. In my view, there is a short and simple answer to the queries raised by Madam Chan over the rates of payment. The rates of payment referred to in Paragraph 18 above were approved by Leung Por. The rates for items (i), (ii) and (iii) in Paragraph 18 were in effect rates of allowances rather than rates of reimbursements. Notionally, there is no such thing as a rate of reimbursement. Reimbursement covers actual expenditure only and actual expenditure can be variable. It is always open to an employer to agree to pay an employee a fixed allowance, such as travelling allowance, irrespective of the actual cost that the employee has to incur for that purpose. Once that allowance has been agreed and so becomes one of the contractual terms of employment, the employer is bound to pay it until such term has been validly varied.

22. Suppose an employer has agreed to pay an employee $300 per month for travelling allowance. The employee is then entitled to payment of this allowance even though he walks between home and work place and does not have to travel during working hour. In fact, in relation to the $60 taxi fare, the 1st Plaintiff said, and Leung Por's evidence confirmed, that it was approved payable by the Defendant to the 1st Plaintiff whenever he had to go every early to pick up a tourist. The 1st Plaintiff might not need to take a taxi to meet the early appointment, the fare might not be as much as $60 if he had to take a taxi, the allowance is a kind of compensation for early work or overtime pay. Moreover, since when did taxi drivers issue receipts to satisfy bean counters like Madam Chan?

23. When Leung Por approved the rates of payment, he was the managing director. He had authority to bind the Defendant. Once he had contracted on behalf of the Defendant to pay the allowances and commission at the respective fixed rates, it was not open to Madam Chan taking over from Leung Por to unilaterally refuse to pay on the ground that the rates were in her view unreasonable or excessive.

24. Madam Chan might argue that perhaps the rates claimed by the Plaintiffs were not in fact approved by Leung Por. In other words, Leung Por is colluding with the Plaintiffs and only says ex post facto that he approved the rates. If that is the case, Madam Chan should produce payment requisitions forms previously submitted by the Plaintiffs to the Defendant when Leung Por was in office to show that they applied different rates. But Madam Chan has not produced any such even though judges (including me) had repeatedly reminded her and given her time to dig out all relevant documents.

25. Madam Chan might argue that the payment requisition forms submitted by the Plaintiffs to her contain false accounts in that either of them may be claiming ghost items. For example, there might be one day when the Plaintiff had no work, no tourist to attend to, and yet they included claims for allowances for that day in the monthly payment requisition form. The Plaintiffs said in evidence that they cannot now recall what work they had done on a particular day and they do not have copies of the complete daily instructions log book. Madam Chan admitted that she still has the instructions log book. In the circumstances, Madam Chan could produce the entire instructions log book and, tedious though it would be, go through the record of each working day to check what work had been done by the Plaintiffs and thus verify what allowances are payable. But, no, Madam Chan has not produced the instructions log book even though I specifically adjourned the trial part-heard to enable her to gather more evidence.

26. Madam Chan could have varied the rates of allowances and commission provided it was lawfully done as for variation of a contract of employment. I do not think an employer can simply say, one day, that an employee's terms of remuneration is reduced to X amount. The terms of a contract can be varied by mutual agreement. But there is no evidence from the Defendant that the Plaintiffs' respective terms of employment, including the rates of allowances, had been validly varied. Instead, Madam Chan said in evidence and by way of submission during the trial that the Plaintiffs did not inform her about the rates of allowances approved by Leung Por. I do not believe Madam Chan in this respect. The relevant payment requisition forms in the trial bundle do show the rates and some of the forms bear explicit marking of having been checked and approved by the Defendant. In any event, since Madam Chan had no idea about the approved rates binding on the Defendant, she could not have taken valid steps to vary those rates. So, whether Madam Chan likes or approves of the rates or not, those rates approved by Leung Por still binds the Defendant.

27. There are two minor matters which Madam Chan relied upon to attack the credibility of the Plaintiffs. First, one payment requisition form shows that there was no call on any additional hotel and yet the 1st Plaintiff put in that form a claim for $10 for additional hotel call. This query was brought up during the trial after the 1st Plaintiff had finished his evidence and left the witness box. I had, of course, advised Madam Chan that she should query the Plaintiffs when they were in the witness box so that the Plaintiffs would have a fair chance to explain. For whatever reason, Madam Chan did not raise timely query and the 1st Plaintiff had no chance to explain this alleged unjustified claim for $10. I do not know if there is an explanation. But there may well be perfectly acceptable explanation. Perhaps the 1st Plaintiff forgot to put down the name of the hotel called in addition. Perhaps the 1st Plaintiff miscalculated. But if this is the only questionable item Madam Chan can find from among all the relevant payment requisition forms, I cannot on such slim basis hold that the 1st Plaintiff deliberately inflated his claims.

28. Secondly, Madam Chan points to a receipt used by the 1st Plaintiff to claim a $3,000 parking fee. That fee had been paid by the Defendant so it is not part of the claim before me. The receipt was purportedly issued by New World Hotel for parking the Defendant's company car for a particular month. In fact, the car was not at the material time parked in New World Hotel. The point sought to be made by Madam Chan is that the 1st Plaintiff claimed $3,000 for parking in New World Hotel when in fact the company car was not parked there. The explanation given by the 1st Plaintiff, corroborated by Leung Por, is that Leung Por approved a $3,000 monthly parking allowance. The $3,000 monthly rate was determined by reference to the rate charged by New World Hotel if the Company car was parked there. Having approved the parking allowance, Leung Por left it to the 1st Plaintiff to decide where to actually park the car. Leung Por reckoned that since the 1st Plaintiff had to park the company car within Tsim Sha Tsui area, the 1st Plaintiff could not become a millionaire by whatever savings he might achieve by parking in a cheaper place. In fact, the company car was parked in a carpark in a side street near Austin Road. The receipt was given to the 1st Plaintiff by the car park attendant and the 1st Plaintiff handed it in as supporting document to claim the allowance. The claim had been approved and paid. As I see it, the Defendant (the company as employer) knew where the car was actually parked and paid the agreed allowance, Madam Chan now acting on behalf of the Defendant cannot say the Defendant has been cheated. Moreover, the Defendant has produced no evidence to show that the receipt is a forgery. For all we know, the carpark near Austin Road may be part of the assets of New World Hotel or managed by New World Hotel. The authenticity of the car parking receipt is a collateral issue, the Defendant is not entitled to challenge the evidence on a collateral issue. In any event, taking all factors and circumstances into consideration, I do not believe the 1st Plaintiff in relying on the receipt cheated on the Defendant.

29. Madam Chan actually argued that irrespective of the percentage, commission claimed is not payable because as an incentive it is payable only when the Defendant makes profits. In my view, the argument has no basis in law or contract.

30. Madam Chan raised other matters for the Defence. From the points for the defence that I have addressed in some depth above, it must be clear by now that Madam Chan's arguments and points are generally of nuisance value and devoid of substance.

31. In conclusion, I find that the Defendant has no real defence to the Plaintiff's claims.

Counterclaim

32. Madam Chan alleges by way of defence that the 1st Plaintiff had borrowed $14,000 from the Defendant. This ought to be treated as part of the Counterclaim. On this item, Madam Chan has produced no documentation to prove that the payment was a loan. She asserted it by way of oral evidence. The 1st Plaintiff denied it. He said the payment, in fact by two cheques, was for payment in lieu of holiday. Madam Chan countered that the 1st Plaintiff could not have had so much untaken holiday to justify payment in lieu. Well, the Defendant as employer had a statutory duty to keep a record of holidays taken by each employee. All that Madam Chan has to do is to produce the record to show that the 1st Plaintiff had taken most, if not all, holidays. She has not done so. On the other hand, Leung Por gave evidence that the 1st Plaintiff did have accumulated holidays and he agreed on behalf of the Defendant to buy the holidays. The Plaintiff's version is more credible. The 1st Plaintiff had only one driver and the company car was required to serve tourists. It stands to reason that the Defendant would rather pay the 1st Plaintiff than to have him go on leave. A substitute driver would be more expensive. Moreover, it is my impression that Madam Chan does not really remember what the $14,000 was paid for.

33. The Defendant alleged that the 1st Plaintiff had been overpaid $23,390 in 1996 and $12,910 in 1997. These two amounts together with the $14,000 referred to above make up the total of $50,300 in the Counterclaim. In relation to the 2nd Plaintiff, the Defendant alleged that he had been overpaid $45,835.20 in 1996 and $24,091 in 1997. In addition, the 2nd Plaintiff withheld a sum of $42,102 being optional tour fees paid by tourists for the Defendant. Let it be pointed out right away that the Defendant has not provided any breakdown for the $23,390, $12,910, $45,835.20 and $24,091. Nor is there any documentation to prove that they were paid, much less overpayment, to the Plaintiffs. Madam Chan might not have pulled these figures out of a hat, but I am unable to see, much less accept, how these figures were arrived at. I reject them.

34. I have already dealt with the $14,000. The only remaining item of Counterclaim is the $42,102 optional tour fees. Both Leung Por and the 2nd Plaintiff testified that the fees were collected by the 2nd Plaintiff when Leung Por was still managing the Defendant. At that time, the Defendant owed the 2nd Plaintiff salaries and at the request of the 2nd Plaintiff Leung Por agreed that he could take the money to set off salary arrears. Madam Chan, of course, had no personal knowledge of what happened before her time. But she queried why the Defendant owed the 2nd Plaintiff so much salary. Yet, quite early at the trial, Madam Chan informed the court that she reckoned that the Defendant accumulated trading losses of millions of dollars before she took over management. This being so, I cannot refuse to believe that the Defendant owed the 2nd Plaintiff salaries. After all, Madam Chan could have produced the company books she has to show that salaries were paid up in full at all times. But she did not do so. Since the Defendant owed the 2nd Plaintiff salaries, he could withhold the money by right of lien even if Leung Por and Madam Chan did not agree.

35. In the premises, none of the items in the Counterclaim has been substantiated to the requisite civil standard of proof.

Judgment

36. For the reasons given, I give judgment for the Plaintiffs in full as claimed with interest and costs. The Counterclaim is dismissed with costs.

37. Finally, I point out that Mr. Shahmim K. Khattak (alia Kelly Lam) acted as counsel for the Plaintiffs. Although I have not made any reference to counsel in my judgment, in fact Mr. Khattak has been most helpful to the court during the trial. He skillfully presented the Plaintiffs' case, a tedious affair, and patiently dealt with the many convoluted matters raised by Madam Chan. I thank him and certify this case fit for counsel.