GUIDO FERRANDO v. HUA DAO SHIPPING (FAR EAST) LTD

  HCLA 44/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 44 OF 2007

(On appeal from Labour Tribunal Claim No. LBTC 1690 of 2005)

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J U D G M E N T

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Introduction

1.  This is the Claimant’s appeal against the Presiding Officer’s award made on 25 June 2007 dismissing the Claimant’s claim for annual bonus and the award made on 3 October 2007 dismissing the Claimant’s application to review the award made on 25 June 2007.  The Claimant’s claim had undergone a treacherous course.  In April 2005, the Claimant filed the claim in the Labour Tribunal against the Defendant for arrears of wages, travelling allowance, accommodation allowance and year-end bonus.  He was awarded the first three heads of his claim, but his claim for bonus was dismissed.  He appealed against the Tribunal’s dismissal of his claim for bonus and obtained an order for re-trial.  His claim for bonus was again dismissed after re-trial before another Presiding Officer.  Against that award, he now appeals.

The background

2.  The Defendant is a company owned by BM Shipping Group SPA (“BM Shipping”) of which Captain Mazzanti and Mr Nardi are the major shareholders.  Captain Mazzanti is the president of BM Shipping whileMr Nardi is the chairman of the Defendant.  The Claimant’s father was the person in charge of BM Shipping’s operation in Genoa.  The Defendant was an agent of World Wide Maritime Enterprise (“WWME”) and Land Air and Sea Transport Ltd (“LAST”).

3.  The Claimant started his employment as the managing director of the Defendant in November 1996 under an oral contract of employment which provided for a salary, accommodation allowance and travelling allowance.  According to the Claimant, he was also entitled to an annual bonus and received his annual bonus until the year end of 2003.  That is disputed by the Defendant.

4.  On 21 June 2004, the Claimant informed Mr Nardi that he decided to resign and offered to work until the end of the year to enable the Defendant to find a suitable replacement.  Mr Nardi was then on his way to the airport and he told the Claimant that he would discuss the matter with the Claimant later. 

5.  On 28 June 2004, Mr Nardi and Captain Mazzanti suddenly appeared at the Claimant’s office.  They asked the Claimant to reconsider his decision to resign.  The Claimant refused and gave six months’ notice of his resignation so as to ensure there would be a smooth transition.  Then Captain Mazzanti told the Claimant to stop working in the office after the end of June 2004 and that the Claimant would be given garden leave until the end of the year with his employment package remaining the same as if he was still working for the Defendant.  That much of the Claimant’s case is not in dispute.  What is in dispute is whether the Claimant was offered payment of bonus till the end of the year in return for his undertaking not to engage in any competing business with the Defendant until the end of 2004.

6.  Not too soon after that meeting, in early July 2004, Mr Nardi had a drink at Petrus Restaurant at Island Shangri-La Hong Kong with the Claimant’s wife, Madam Cerati, and enquired from her about the real reasons behind the Claimant’s resignation.  Madam Cerati had been separated from the Claimant since February 2003.  Divorce proceedings would be instituted after December 2007.  The above facts are not in dispute.  But, according to Madam Cerati, Mr Nardi informed her that the Defendant had decided to pay the Claimant bonus for the whole year of 2004 despite the Claimant had only worked for six months during that year.  This part of the conversation is denied by Mr Nardi. 

7.  The Claimant returned to Italy in August 2004.  On 5 September 2004, he sent an e-mail to his former colleague and successor in the Defendant, Captain Saleem, and enquired about payment of his bonus.  The Defendant did not respond.  This fact is not in dispute.

8.  Sometime before 21 September 2004, the Claimant met Mr Nardi in Marina di Carrara in Italy to explore business opportunities with BM Shipping.  This meeting is also not in dispute but the conversation exchanged between the Claimant and Mr Nardi is in dispute.  According to the Claimant, Mr Nardi suddenly mentioned to him that he would be paid bonus for half of the year only.  Whereas, according to Mr Nardi, the Claimant told Mr Nardi that he had written to Captain Saleem asking for his bonus and thereupon Mr Nardi told the Claimant that there was no bonus for him.

9.  Following that meeting, the Claimant wrote a second e-mail to Mr Nardi expressing his disappointment about what Mr Nardi had said about his bonus.  The Defendant did not respond to that e-mail.  This fact is also not in dispute.

The parties’ case

10.  The Claimant’s case is that prior to joining the Defendant, Mr Nardi promised him an annual bonus of between 5% and 10% of the profit of the Defendant.  For the year 1997, he was paid bonus in the sum of US$13,300.  He received annual bonus every year thereafter, but was unable to produce documentary proof of the bonus received for the years 1998 to 2001.  In about March or April 2002, the Claimant suggested to Mr Nardi that the Defendant should pay him and Captain Saleem an annual bonus calculated at a fixed percentage of the gross profit of the Defendant.  Then three to four weeks later, Mr Nardi informed him that the head office agreed to pay them bonus at 10% of the gross profit of the Defendant through an offshore company.  The bonus was not paid through the Defendant as the Defendant’s profit was channeled to offshore shell companies and the Defendant was, according to the record of the company, suffering business loss in Hong Kong.  No written agreement was made as the relationship between the Claimant and the Defendant was amicable and informal.

11.  The Claimant received monthly statements of the real performance of the Defendant showing the profit.  For the year 2002, the Claimant and Captain Saleem were instructed by BM Shipping to issue demand notes for consultancy and supervision fee for year 2002 to WWME in the amount of US$150,000.  They were duly paid by WWME.  For the year 2003, the Claimant and Captain Saleem were instructed to issue similar demandnotes to WWME in the amount of US$250,000.  The Claimant and Captain Saleem were duly paid by LAST on 4 June 2004.

12.  On 28 June 2004, Captain Mazzanti offered to give the Claimant garden leave till the end of 2004 in return for his undertaking not to engage in any competing business with the Defendant until the end of December 2004.  The Claimant accepted the offer.  As he was promised that his employment package would remain the same as if he was working till the end of 2004, the Claimant had no doubt that he was entitled to bonus under his employment contract until the end of June 2004 and was only concerned about payment of bonus for the second half of the year.  Hence, he only asked Captain Mazzanti specifically if he would be paid bonus for the whole year, to which Captain Mazzanti replied “certainly, no doubt” in Italian.

13.  The Defendant’s case is that Mr Nardi did not promise the Claimant any bonus and no bonus had been paid to the Claimant in the previous years.  Mr Nardi explained that the sum of US$13,300 paid to the Claimant in 1997 was made up of a thirteen month’s salary of US$3,300 and an one-off payment of US$10,000 in lieu of deferred increase in salary.  He denied that the Claimant had raised with him the issue of bonus in 2002.  The Defendant did not dispute the two payments by WWME and LAST in 2003 and 2004 but explained that they were incentive payments made by its clients and there was no agreement by the Defendant to pay the Claimant bonus.

The decision of the Presiding Officer

14.  In paragraph 32 of his Reasons for Decision, the Presiding Officer correctly identified the central issue in this case is whether Captain Mazzanti did during the meeting on 28 June 2004 promise on behalf of the Defendant to pay the Claimant bonus calculated at 10% of the gross profit of the Defendant for the year of 2004.  At paragraph 36, he correctly identified the further issue whether the payments by WWME and LAST were paid to the Claimant as bonus due from the Defendant.  The Presiding Officer also correctly, in my view, first considered the second issue before dealing with the first one. 

15.  The Presiding Officer placed heavy weight on the fact that the bonus was not paid by the Defendant but by WWME and LAST and that those entities were separate and distinct third parties.  On that note, he rejected the Claimant’s case that the Defendant had promised to pay the Claimant bonus as part of his terms of employment.  He held that at the highest, the Claimant was merely asserting that Mr Nardi had promised to procure a sum of money to be paid by a third party.  He said in paragraphs 37 to 41 of his Reasons for Decision:

“37.    According to the Claimant, the Defendant was running at a loss.  All the profits were channeled out of this jurisdiction.  The Claimant was well aware that the Defendant was not capable of paying him any bonus.  Therefore, no agreement on the said “bonus” was signed with the Defendant as the money was to be paid by an off-shore company.

  38.   Obviously, the Claimant knew that even if the Defendant had promised to him payment of profit-linked bonus, it would be meaningless.

  39.    It may be true that the Defendant did channel all its profits out of this jurisdiction and therefore the Claimant was awarded “bonus” calculated at 10% of the said profit.  Even so, the money was not paid by the Defendant.  The Claimant was getting the so-called “bonus” from off-shore companies (WWME and LAST) which are separate and distinct entities.

  40.    Taking the Claimant’s case to the highest, he is asserting that Mr Nardi had promised to procure a sum of money which was paid to him by a third party in the year of 2002 and 2003 respectively.  It is a far cry from proving that the Defendant had promised as part of his employment terms annual bonus calculated at 10% of the gross profit of the Defendant.

41.    On balance, I do not accept the Claimant’s case that in 2002, Mr Nardi had on behalf of the Defendant agreed to pay to him annual bonus calculated at 10% of the true profit of the Defendant.”

16.  In relation to the first issue, the Presiding Officer essentially made a value judgment that payment of wages and allowances for six months was a reasonable price for a non-competition period of six months.  Given the nature and magnitude of the payment, he considered it unreasonable and an affront to common sense that Captain Mazzanti would have acceded to paying the additional bonus and without entering into any negotiation.  In rejecting the Claimant’s case, the Presiding Officer said at paragraphs 45 to 48 of his Reasons for Decision:

 “45.    The “bonus”, according to the Claimant, formed a major part of his income.  It is by no means a small sum of money.  Captain Mazzanti had already promised to pay his wages and allowances until the end of the year in exchange for a non-competition period of 6 months, and efforts to persuade the Claimant to stay had failed.  I find it unreasonable that Captain Mazzanti would have promised to pay to the Claimant the alleged “bonus” without entering into any negotiation.

  46.    By his request, the Claimant was asserting the right to share the company’s profit for the whole year, which he had only contributed his efforts for half of the year.  I must not forget that Captain Mazzanti is an experienced businessman and was then holding the position as the President of BM Shipping.  He owed a duty to the shareholders of the group.  Decision of that nature and magnitude must not be taken lightly.  It is an affront to common sense that Captain Mazzanti would have acceded to the Claimant’s request straightaway.

  47.    In my view, an agreement to pay the Claimant his wages and allowances in exchange for a non-competition period of 6 months is a reasonable and attractive offer.  I do not believe Captain Mazzanti was asked by the Claimant to enhance the said offer.  If he was asked to do so as alleged, it was only reasonable for him to reject the same.

  48.    On balance, I do not accept the Claimant’s case that Captain Mazzanti did on 28^th June 2004 promise to pay to him bonus calculated at 10% of the true profit of the Defendant for the whole year of 2004.”

Grounds of appeal

17.  The Claimant’s grounds of appeal are that the award is erroneous in point of law in that the Presiding Officer erred:

(1) in ignoring or failing to place sufficient or proper weight on the Defendant’s payment of bonus to the Claimant for the year 1997;

(2) in failing to place sufficient or proper or weight on the Claimant’s receipt of bonuses for 2002 and 2003 from WWME and LAST, and in turn erred in rejecting the Claimant’s case that in 2002 Mr Nardi had agreed to pay the Claimant annual bonus;

(3) in his assessment of the parties’ case as to what was agreed at the meeting on 28 June 2004, which was flawed by reason of (1) and (2) and by his assessment of the evidence against the notion of “reasonableness” and “commercial viability”;

(4) in rejecting Madam Cerati’s evidence as to what was discussed at the meeting in Island Shangri-La in July 2004;

(5) in rejecting the two e-mails from the Claimant as self serving statements of no probative value; and

(6) overall in completely failing to resolve inconsistencies in the Defendant’s case or investigate into the incredible parts of the Defendant’s evidence, and to draw such adverse inference against the Defendant as may be necessary.

The approach of the appellate court in an appeal against finding of fact

18.  In essence, this is an appeal against the Presiding Officer’s finding of fact which is framed as an error of law.  The Labour Tribunal is a fact-finding tribunal.  Section 32(1) of the Labour Tribunal Ordinance permits a party dissatisfied with an award, order or determination by the Labour Tribunal to appeal to the Court of First Instance only on the ground that the decision of the tribunal was erroneous in point of law or outside its jurisdiction.  

19.  However, this does not mean that the Labour Tribunal’s finding of fact is always immune from challenge on appeal.  The leading authority is the House of Lords decision in Edwards (Inspector of Taxes) And Bairstow And Another [1956] AC 14.  That decision was cited and approved in another more recent decision of the House of Lords in Runa Begum v Tower Hamlets London Borough Council [2003] 2 AC 430.  There is no need for me to go into either of those cases as the principles in those cases have been thoroughly considered and usefully summarised by Bokhary PJ in Kwong Mile Services Limited And Commissioner of Inland Revenue [2004] 3 HKLRD 168, which of course is binding on me.  His Lordship considered the basis of intervention in an appeal from the Inland Revenue Board of Review to the Court of First Instance in paragraphs 31 to 37.  His Lordship referred to Edwards (Inspector of Taxes) And Bairstow And Another and Runa Begum v Tower Hamlets London Borough Council and summarised the legal principles in paragraphs 31 to 33 as follows:

“31. Appeals from the Board of Review to the courts lie only on questions of law.  But intervention in an appeal on law only is not confined to instances in which it is apparent on the face of the record that the determination appealed against resulted from a specifically identifiable error of law.  Just because there is no appeal on facts, it does not mean that the appellate court is precluded from detecting and correcting errors of law buried beneath conclusions ostensibly of fact.  Sometimes, as Lord Radcliffe put it in Edwards (Inspector of Taxes) v Bairstow [1956] AC 14 at p.36, “the true and only reasonable conclusion contradicts” the determination appealed against.  If so, the appellate court will assume that the determination resulted from an error of law.  And that opens the way for the appellate court to intervene on the ground of an error of law.

  32.    Mr John Griffiths SC for the Commissioner placed reliance on – although not solely on - what Lord Millett said in his speech in Runa Begum v Tower Hamlets London Borough Council [2003] 2 AC 430 at p.462G-H.  There Lord Millett summarised the Edwards (Inspector of Taxes) v Bairstow basis of appellate intervention in this way:

  ‘A decision may be quashed if it is based on a finding of fact or inference from the facts which is perverse or irrational; or there was no evidence to support it; or it was made by reference to irrelevant factors or without regard to relevant factors.  It is not necessary to identify a specific error of law; if the decision cannot be supported the court will infer that the decision-making authority misunderstood or overlooked relevant evidence or misdirected itself in law.’

33.    … But, as it seems to me, taking irrelevant factors into account or leaving relevant ones out of account can lead a fact-finding tribunal so far astray as to reach a conclusion contrary to the true and only reasonable one.”

His Lordship then considered the various ways of putting the terms in which the court may intervene in paragraphs 34 and 35 as follows:

“34. Lord Radcliffe, having noted various ways of putting it, ultimately preferred to put it in terms of the determination appealed against being contradicted by the true and only reasonable conclusion.  And I respectfully share that preference.  But I of course acknowledge, as he did, that there are other ways of saying the same thing.  To impugn a determination by saying that a contrary conclusion is the true and only reasonable one is in substance the same as saying that there was no evidence upon which the impugned determination could be reached.  An observation to this effect appears in Viscount Simonds’s speech in Griffiths v JP Harrison (Watford) Ltd [1963] AC 1 at pp.10-11.  It is of course well-established that whether there is evidence upon which to find a fact is a question of law.  The essence of the exercise was, if I may say so, neatly captured by Nourse J (as he then was) in Cooper (Inspector of Taxes) v C&J Clark Ltd [1982] STC 335.  Building on the reference in Lord Simon of Glaisdale’s speech in Ransom (Inspector of Taxes) v Higgs [1974] 1 WLR 1594 at p.1619 C-D to “a ‘no-man’s land’ of fact and degree”, Nourse J said (at p.341D) that the appellate court “can only interfere where the degree of fact is so inclined towards one frontier or the other as to lead it to believe that there is only one conclusion to which [the fact-finding tribunal] could reasonably have come.”

  35.    Yet another way of putting it is to be found in the judgment of the English Court of Appeal in Coker v Lord Chancellor [2002] IRLR 80 delivered by Lord Phillips of Worth Matravers MR.  At p.82, the Master of the Rolls said that an error of law can “consist in a finding of fact which is perverse”.

Then in paragraph 37, his Lordship summarised the approach of the appellate court in such an appeal in three propositions.  He said:

“37. In an appeal on law only the appellate court must bear in mind what scope the circumstances provide for reasonable minds to differ as to the conclusion to be drawn from the primary facts found.  If the fact-finding tribunal’s conclusion is a reasonable one, the appellate court cannot disturb that conclusion even if its own preference is for a contrary conclusion.  But if the appellate court regards the contrary conclusion as the true and only reasonable one, the appellate court is duty-bound to substitute the contrary conclusion for the one reached by the fact-finding tribunal.  The correct approach for the appellate court is composed essentially of the foregoing three propositions.  These propositions complement each other, although the understandable tendency is for those attacking the fact-finding tribunal’s conclusion to stress the third one while those defending that conclusion stress the first two.”

20.  That there is no appeal against the finding of fact of a fact- finding tribunal does not mean that the appellate court is precluded from detecting and correcting errors of law buried beneath conclusions ostensibly of fact.  If a determination is based on a finding of fact or inference from the facts which is perverse or irrational, or where there is no evidence to support the decision or where the decision was made by reference to irrelevant factors or without regard to relevant factors, the appellate court will assume that the determination resulted from an error of law.  That opens the way for the appellate court to intervene on the ground of an error of law.  Howsoever the circumstances in which the appellate court may intervene is described, they all come down to what scope the circumstances provide for reasonable minds to differ as to the conclusion to be drawn from the primary facts found.  If the fact-finding tribunal’s conclusion is a reasonable one, i.e. within that scope, the appellate court may not disturb that conclusion even if its own preference is for a contrary conclusion.  But if the appellate court regards the contrary conclusion as the true and only reasonable one, the appellate court is duty-bound to substitute the contrary conclusion for the one reached by the fact-finding tribunal.

21.  The above principles apply equally to appeals against the determination of the Labour Tribunal as they apply to any fact-finding tribunal, such as the Inland Revenue Board of Review.  I shall therefore test the decision of the Presiding Officer against these principles and ask myself the question whether the decision of the Presiding Officer is reasonable or within the range for reasonable minds to differ or whether the contrary conclusion is the true and only reasonable one. 

Ground (1) - the 1997 bonus

22.  The Claimant’s case is that he was promised an annual performance bonus when he first joined the Defendant.  The amount of that bonus was discretionary.  He was paid US$13,300 as bonus for 1997.  The Defendant’s case is that no bonus had been paid in any of the previous years of the Claimant’s employment.  The payment voucher dated 16 January 1998 produced by the Claimant showed that the Defendant paid him US$13,300 which was recorded in the Defendant’s book as “Bonus - Mr Guido Ferrando.  Double paid for 1997 & Year End Bonus. USD13,300”.  In his evidence, Mr Nardi explained that the word “bonus” in the payment voucher was used very loosely and the US$13,300 comprised of two elements, namely, a double pay or a thirteenth month’s pay in the amount of US$3,300 and a one-off allowance of US$10,000 as deferred increase in salary.  He said whatever the payment was called was discretionary without any contractual obligation on the part of the Defendant.

23.  The Presiding Officer made no finding as to the nature of that payment.  He noted, however, in paragraph 6 of his Reasons for Decision that despite the Claimant claimed that he received the bonus every year, the Claimant could neither provide any details nor documentation in support.  The Presiding Officer’s observation was taken up further by Ms Mok SC, counsel for the Defendant.  Ms Mok SC referred to the Claimant’s bank statements, bank payment slips and payment vouchers produced by the Claimant dating back to 1997, but none of those documents support the payment of bonus for the years from 1998 to 2001.  She argues that the Claimant had two years to prepare his trial, was represented by counsel in his earlier appeal and would have no doubt been advised of the importance of obtaining evidence in support of any such bonus payments.  She submits that the Claimant’s failure to produce evidence of bonus payment for 1998 to 2001 and failure to state how much he received as bonus payment for any of those four years cast doubt on the veracity of his allegation about his entitlement to annual bonus.  That is a possible view of the evidence.  The Presiding Officer was a professional judicial officer.  He was entitled to give such evidence such weight as he considered appropriate without having to expressly deal with or make express finding of fact in respect of every disputed issue.  Though the Presiding Officer did not make any finding on the 1997 payment, obviously he had considered the evidence and accepted Mr Nardi’s evidence.  That finding, in isolation, must be one which is within the scope for reasonable minds to differ.

24.  However, that finding about the 1997 payment is not fatal to the Claimant’s case since the 2002 and 2003 bonuses may support the Claimant’s case that the annual bonus was a term of his employment.  According to the Claimant’s case, it was this term of employment which underlined the Defendant’s offer of payment of the full year’s bonus in exchange for his promise not to enter into competition with the Defendant till the end of 2004.  I shall come back to this issue when I consider the totality of the evidence.

Ground (2) - the 2002 and 2003 bonuses

25.  It is not disputed that on the instruction of BM Shipping, the Claimant and Captain Saleem issued demand notes to WWME for substantial consultancy and supervision fee for the years 2002 and 2003 in the amount of US$150,000 and US$250,000 “as per agreed lump sum” respectively and they received payments from WWME and LAST in respect of those amounts.  Mr Nardi confirmed that there was no relationship between the Defendant and WWME or LAST at all.  He also confirmed that the Claimant and Captain Saleem were not employees of WWME or LAST.  Thus, there is no apparent reason why the Claimant and Captain Saleem would have issued demand notes to WWME and no apparent reason why WWME and LAST would have settled their demand notes.

26.    Mr Nardi explained that the Defendant was LAST’s agent and the payments were incentive payments by LAST to the Claimant and Captain Saleem for promoting the business of LAST.  There is also evidence that the 2003 bonus by and large matched 10% of the Defendant’s actual profit for the year 2003 as shown in the 2003 Job List.  Mr Nardi confirmed that the Job List was “internal calculation” that set out the calculation of the cost of the Defendant’s office.  LAST did not have any business operation in Hong Kong.  It also appears that the “internal calculation” as set out in the Job List clearly shows that the Hong Kong office was making actual profit in the year of 2003.  The profit must be the Defendant’s profit, though according to its books it was suffering a loss.  Hence, the payment of the two sums in 2002 and 2003 could only be related to the Claimant’s performance of his contract employment.  In other words, those payments were job-related performance bonuses.  Those payments strongly support the Claimant’s case that, at least, since 2002 payment of annual bonus was part of the terms of his contract of employment with the Defendant.  Those circumstances suggest that the relationship between the Defendant and WWME and LAST was more than one of agency as alleged by Mr Nardi.  They also support the Claimant’s evidence that the Defendant’s profit was channeled to offshore companies and that WWME and LAST were the offshore corporate vehicles to effect payment of the bonuses promised by the Defendant.

27.  Ms Mok SC referred to the Claimant’s case that he was promised an annual bonus equivalent to 10% of the Defendant’s profit.  She argues that the Defendant only received 1.25% of LAST’s profit as commission from LAST and that the Defendant’s audited account recording the commission was accepted by the Inland Revenue Department.  She argues that the Claimant cannot contend that the profit of LAST was the profit of the Defendant.  Hence, she submits that in order to succeed, the Claimant has to prove that the Defendant agreed to pay him bonus equivalent to 10% of the profit of LAST.  With respect, I think Ms Mok SC is taking too literarily an interpretation of the alleged term of the agreement reached by parties who were layman whose language may not be precise.

28.  Ms Mok SC also argues that as the Defendant was losing money and could not possibly pay any bonus, it is extremely unlikely that Mr Nardi and Captain Mazzanti who were both very experienced businessmen, would commit the Defendant to a contractual term that it would pay the Claimant 10% of its gross profit.  As against that, it is the Claimant’s case that the Defendant made profit, but the profit was channeled to offshore companies. In this regard, it should be noted that according to Mr Nardi, the Defendant only received an agency fee from LAST equivalent to 1.25% of LAST’s profit, while LAST paid 20% of its profit to the Defendant’s two employees.  There is no dispute that the demand notes were issued to WWME on the instruction of BM Shipping, the Defendant’s holding company.  In my view, this does not make commercial sense.  I think the true and only inference is that the relationship between the Defendant, BM Shipping, WWME and LAST was more than what Mr Nardi was prepared to admit and that the four companies operated as one entity.  This supports the Claimant’s case that the Defendant’s profit was indeed channeled to offshore companies, one of which was LAST and that the bonus payments for 2002 and 2003 were in fact made by the Defendant through WWME and LAST. 

29.  Ms Mok SC criticises the Claimant for failing to mention his bonus when he tendered resignation to Mr Nardi on 21 June 2004, for not being able to give any detailed particulars of the alleged bonus agreement made in 2002, and that the payment was referred to “as per agreed lump sum” in the demand notes and not 10% of the profit whether of LAST or of the Defendant.  In my view, the Claimant’s explanation that the meeting on 21 June 2004 was a very brief one since Mr Nardi was on his way to the airport is not unreasonable.  The other criticisms are neither here nor there. 

30.  In paragraph 39 of his Reasons for Decision, the Presiding Officer seemed to have accepted the Claimant’s view.  But then he held that since WWME and LAST were separate and distinct entities, taking the Claimant’s case to the highest, the Claimant was only asserting that Mr Nardi had promised to procure a sum to be paid by a third party.  On the undisputed evidence, the payment of the bonus was engineered by the Defendant and on terms decided by the Defendant.  For reasons as explained in paragraph 28, I think, in reality, WWME and LAST were agents of the Defendant in making the payments to the Claimant for the purposes of the Defendant.  The Presiding Officer has allowed his better judgment to be clouded by the undue weight he gave to the fact that WWME and LAST were entities distinct from the Defendant.  I think the conclusion of the Presiding Officer is one which certainly went outside the scope for reasonable minds to differ and the contrary conclusion that the payment of the bonuses was made by the Defendant is the only true and reasonable conclusion.

Ground (3) - the meeting on 28 June 2004

31.  The central issue in dispute between the parties is what was agreed during the meeting on 28 June 2004.  At paragraph 47 of the Reasons for Decision, the Presiding Officer said he did not believe Captain Mazzanti was asked by the Claimant to enhance the payment of bonus in return for his non-competition and then concluded at paragraph 48 that he did not accept the Claimant’s case that Captain Mazzanti did on 28 June 2004 promise to pay the Claimant bonus for the whole of the year 2004.  Ms Mok SC submits that that was an assessment of credibility and finding of fact which the appellate court may not interfere. 

32.  While the Presiding Officer analysed with clarity the evidence of the parties in chronological order in his Reasons for Decision, I have not the slightest doubt that his finding of fact as to what happened during the meeting on 28 June 2004 was based on his view on the totality of the evidence.  However, having possibly wrongly disregarded the payment of bonus in 1997 and having certainly wrongly disregarded the payment of bonuses in 2002 and 2003, the Presiding Officer naturally approached the evidence in relation to the meeting on 28 June 2004 with a completely wrong perspective.  He must have viewed the evidence relating to the meeting on 28 June 2004 in isolation.  He might even have allowed his rejection of the Claimant’s evidence about the payment of bonuses in 1997, 2002 and 2003 clouded his assessment of the credibility of the Claimant and Mr Nardi and the evidence as to what was discussed during the meeting on 28 June 2004.

33.  That probably explains why having made his finding about the 1997, 2002 and 2003 payments, the Presiding Officer resorted to consider the reasonableness or otherwise of the alleged offer by Captain Mazzanti to pay a year’s bonus for six months’ non-competition.  It was essentially based on the Presiding Officer’s view that such offer was unreasonable and an affront to common sense that he rejected the Claimant’s case.

34.  Ms Mok SC supports the rationale of the Presiding Officer.   The monthly income of the Claimant, inclusive of housing allowance and travelling allowance was $116,190 per month, i.e. $697,140 for the six months’ garden leave.  Hence, she submits that the six months’ payment was by any means a very adequate compensation for non-competition for the Claimant.  On the Claimant’s evidence, he knew he would be entitled to about $2.5 million bonus up to the end of June 2004.  On that calculation, his bonus up to the end of the year would be about $5 million, which would be over 40 times that of his monthly income.  Hence, Ms Mok SC submits that the Presiding Officer was right to find it an affront to common sense if Captain Mazzanti would have agreed to pay the bonus straightaway without entering into any negotiation whatever.

35.  A number of problems with the Presiding Officer’s approach and conclusion is immediately apparent.  The Claimant’s case is that it was a term of his employment that he would be paid a contractual bonus equivalent to 10% of the profit of the Defendant.  Therefore, he would be entitled to bonus for the first six months of the year in any event.  The bonus for the remaining six months was an offer in exchange for his undertaking not to compete with the Defendant during the rest of the year.  Hence, the issues are whether payment of annual bonus was part of the Claimant’s terms of employment and, if it is, whether Captain Mazzanti promised to pay the Claimant bonus till the end of the year in exchange for his undertaking not to compete.  It is common ground that the Defendant did not want the Claimant to work out his notice period.  The reason is obvious.  The Defendant wished to keep the Claimant out of its business and out of contact with the Defendant’s clients as the Claimant was resigning to operate a competing business.  In finding that the payment for the Claimant’s garden leave is sufficient compensation for non-competition, the Presiding Officer probably overlooked the evidence that it was the Defendant’s conscious choice not to allow the Claimant to work out his notice period so as to keep the Claimant away from its business and its clients.

36.  Whether the price in exchange for the Claimant’s non-competition for six months is reasonable is not to be decided on the basis of the amount of payment alone.  Of course, a huge payment which is out of line with the circumstances is on the face unreasonable.  $2.5 million is a huge sum of money.  The other side of the coin is that the Claimant must have contributed at least in part to the Defendant’s annual profit of about $50 million.  It may be difficult to assess what is an employee’s worth to his employer and what is reasonable to buy him out of competition.  Mr Wong SC submits that the Claimant could have left his employment by giving a month’s notice and start engaging himself in a competing business.  He also submits that the Claimant had through his eight years’ service turned the Defendant from a mere trans-shipment and cargo-booking agent into a ship operator and chartering or brokerage house.  The Defendant must have realized that there was no restrictive covenant under the Claimant’s contract of employment to prevent the Claimant from starting a competing business.  A view as to whether the offer was reasonable cannot be made notionally.  It has to be considered by weighing how much the Defendant would be paying for the six months’ garden leave plus bonus for six months (this assessment must be on the basis that the Claimant was entitled to bonus for the first six months which he had served under his contract of employment) against the profit which the Defendant had made in the past six months or would most likely make in the coming six months.  There are also considerations such as the business connection acquired by the Claimant, the Defendant’s view as the likely impact of the competition from the Claimant and the loss or prejudice likely to be suffered by the Claimant for not being able to start his business forthwith.

37.  The Presiding Officer might be wrong about his finding on the 1997 payment.  But in all fairness to the Presiding Officer, that is a conclusion which, as I have said, is within the range for reasonable minds to differ.  I venture no further to express my personal view on this.  The Presiding Officer was certainly wrong to have held that the payments of 2002 and 2003 were made by a third party and were therefore not payments made by the Defendant.  But I would not go that far as to say because the Presiding Officer erred on this finding, the payments must therefore be bonuses.  There is still the further issue whether the payments were contractual or gratuitous or just ad hoc arrangements which has to be decided before the Presiding Officer could reach that conclusion.  Again, I would not venture to express my personal view.  Suffice it is to say, had the Presiding Officer properly considered the 1997, 2002 and 2003 payments, he might reach the conclusion that they were bonus payments, or he might not.  But, if indeed he were to find that some or all of those payments were contractual bonus payments, then it would certainly cast a different light on the Claimant’s evidence of what happened during the meeting on 28 June 2004.  It is common ground that there is no restrictive covenant against competition in the Claimant’s employment contract.  If the Claimant was entitled to be paid bonus for six months under the terms of his employment, an enhanced payment of bonus for a further six months in exchange for the Claimant’s undertaking not to compete would not be all that unreasonable.

Ground (4) - Madam Cerati’s evidence

38.  Mr Wong SC submits that the mere fact that Madam Cerati was still legally married to the Claimant then could not have any bearing on the veracity of her testimony.  He advanced a number of reasons, such as that Madam Cerati had separated from the Claimant since February 2003, that she would file formal divorce proceedings by December 2007, that she was financially independent from the Claimant and was not financially interested in the outcome of the claim, etc.  I do not think it necessary to rehearse those arguments.  Those reasons had been advanced by the Claimant at the review hearing.  Having taken those arguments into consideration, the Presiding Officer still came to the conclusion that he did not believe Mr Nardi would have disclosed to Madam Cerati about the Defendant’s offer.  That must be a finding solely within the realm of the Presiding Officer, especially as he had the advantage of considering the demeanour of Mr Nardi as against that of Madam Cerati.  That decision is also within the range for reasonable minds to differ.

Ground (5) - the two September e-mails

39.  In paragraph 49 of his Reasons for Decision, the Presiding Officer said that he gave no weight to the two e-mails as they were self-serving statements of the Claimants. 

40.  The circumstances when those two e-mails were issued are described in paragraphs 7 to 9 above.  In his first e-mail, the Claimant wrote to Captain Saleem who was his replacement to give him a “recap” of the agreement allegedly reached between him and the Defendant, including payment of profit share bonus by the end of December 2004.  After meeting Mr Nardi in Marina di Carrara, he sent the second e-mail expressing his disappointment at Mr Nardi’s decision to pay him bonus for half of the year instead. 

41.  Those e-mails were self-serving statements in that they were made by the Claimant in favour of his own interest.  But they are not statements made by the Claimant as evidence of the truth of the content alone.  They were directed to the Defendant to provoke a response.  It is evidence of the parties’ conduct pursuant to an alleged agreement.  If such a statement is inspired by events to such an extent as to reduce substantially the chance of error, concoction and distortion, they ought to be admitted and considered.  Such a statement must be contemporaneous which is a question of fact depending on the circumstances.  The less contemporaneous is the statement, the less is the weight to be attached to it. 

42.  Ms Mok SC submits that the Claimant’s reason for issuing the first e-mail was dubious.  The Claimant said that that e-mail was sent as he was unable to contact Mr Nardi.  There was no reference in the e-mail of the Claimant’s not being able to reach Mr Nardi.  Also, there is nothing to suggest that Mr Nardi was avoiding the Claimant.  In fact the Claimant was about to see Mr Nardi in Marina di Carrara within two weeks after sending the e-mail.  The reason offered by the Claimant is somewhat artificial. 

43.  Another interesting fact is that the e-mail was not addressed or copied to Mr Nardi or Captain Mazzanti but was addressed to Captain Saleem who was in no position to make a decision on his entitlement to the bonus and who was not even present at the meeting on 28 June 2004 when the agreement on bonus was reached.  The Claimant explained that he sent the e-mail to Captain Saleem in his capacity as the Claimant’s replacement as managing director of the Defendant.  But the Claimant must have known that the decision about his bonus is not one which Captain Saleem was able to make.  He explained that though Captain Saleem was not present during the discussion, Captain Saleem was called into the conference room after the parties had reached agreement on the bonus and Captain Saleem was told of the agreement. 

44.  Lastly, those two e-mails were not very contemporaneous.  The first e-mail was issued on 5 September 2004, which was more than two months after the meeting on 28 June 2004.  The second e-mail was issued closer to the meeting in Marina di Carrara.

45.  Mr Nardi admitted that the first e-mail had been re-directed to him by Captain Saleem.  He discussed with his partners and took the view that the e-mail was made on purpose to record an agreement on bonus which was never reached.  Hence, he decided not to respond and told the Claimant off at the meeting in Marina di Carrara.

46.  Mr Nardi received the second e-mail when he was in Hong Kong and he passed it to his solicitors, Messrs Dibb Lupton Alsop (“DLA”).  DLA did nothing to refute the allegation of the Claimant.  When DLA eventually wrote to the Claimant on 15 October 2004 demanding payment from the Claimant of certain sums of money, they did not mention anything about the e-mails.

47.  Those two e-mails were admitted by the Presiding Officer.  Obviously, he must have considered them before deciding that they had no probative value.  No reason was given by the Presiding Officer for his decision.  It is not necessary for him to do so in respect of each and every disputed issue.  The surrounding circumstances are not compelling one way or the other.  What weight to be attached to those two e-mails was solely a matter for the Presiding Officer.  His decision to attach no weight to them is also within the range for reasonable minds to differ.

Ground (6) - inconsistency in the Defendant’s case

48.  There are a number of inconsistencies in Mr Nardi’s evidence at the trial before the Presiding Officer.  He gave some explanation.  Presumably, the Presiding Officer accepted his explanation and found him credible.  That would probably be because of the view he took of the 2002 and 2003 payments.  However, even if I am to agree with Mr Wong SC that Mr Nardi was incredible, it would not advance the Claimant’s case any further as the burden of proof is on the Claimant.  Because of the course I am going to take in respect of this appeal, I prefer not to deal with this ground of appeal and it is not necessary to do so.

Discussion

49.  The most important grounds of appeal are Ground (2) and Ground (3) and to a minor extent, Ground (1).  Had the Presiding Officer found that the 1997 payment was a contractual bonus payment, it would support the Claimant’s case that the 2002 and 2003 payments were also payments of a similar nature.  While I have found that the Presiding Officer erred in not treating the 2002 and 2003 payments as having been made by the Defendant, it remains to be decided as to the nature of those payments, namely, whether they were contractual or gratuitous.  A finding that they were contractual bonus payments would throw the parties’ credibility and evidence as to what happened during the meeting on 28 June 2004 in a very different light.

50.  By reason of the course the Presiding Officer took, he precluded himself from making any finding on that issue.  This is not a finding which could be reached by the appellate court drawing inference from primary facts which are proved to the satisfaction of the Tribunal.  It could only be reached after a proper assessment of the credibility of the witnesses in the light of the totality of the evidence, especially a reassessment of the evidence relating to the meeting on 28 June 2004 in the light of the fact that the 2002 and 2003 payments ought to be treated as payments made by the Defendant.  Without having the benefit of seeing the witnesses, that is a finding which I am precluded from making.  Regrettably, the matter must be referred back to the trial Presiding Officer.

51.  As for Madam Cerati’s evidence and the weight to be given to the two e-mails, these are matters solely for the Presiding Officer.  The e-mails and the 1997 payment should all be reconsidered afresh by the Presiding Officer in the light of the true and only reasonable inference that the payment of the 2002 and 2003 bonuses were made by the Defendant through WWME and LAST. 

52.  In the Notice of Originating Motion filed by the Claimant, the Claimant sought to reverse the order of the Presiding Officer but not for a re-trial.  Hence, after making his closing submission, Mr Wong SC seeks to amend the Notice of Originating Motion by including an alternative order for re-trial.  Ms Mok SC objects to the application on the basis that pursuant to Order 55 rule 6(3) of the Rules of the High Court, the Claimant may not rely on any ground of appeal other than those stated in the Notice of Originating Motion at the hearing except with the leave of the Court and that such leave should not be given.  Order 55 rule 6(3) provides as follows:

“(3) Except with the leave of the Court hearing any such appeal, no grounds other than those stated in the notice of the motion by which the appeal is brought or any supplementary notice under paragraph (1) may be relied upon by the appellant at the hearing; but that Court may amend the grounds so stated or make any other order, on such terms as it thinks just, to ensure the determination on the merits of the real question in controversy between the parties.”

53.  I think Mr Wong SC’s application is inappropriate and unnecessary.  Order 55 rule 6(3) applies to amendment of the grounds of appeal stated in the notice of motion and not to the orders or relief sought.  This rule limits the grounds of appeal which an appellant may rely on at the hearing to those stated in the notice of motion.  The purpose is to identify the issues for determination at the appeal so that the respondent would not be taken by surprise and that the merits could be properly argued.  The rule does not apply to the orders or relief which the Court may grant according to the merit of the case.  So long as the Court has jurisdiction under the relevant statute or its inherent jurisdiction to make the order or to grant the relief, the choice is a matter for the discretion of the Court.  Section 35B of the Labour Tribunal Ordinance gives the Court of First Instance the power on an appeal to allow the appeal, dismiss the appeal or remit the matter to the Labour Tribunal with such directions as it thinks fit, which may include a direction to the Labour Tribunal for a new hearing.  I do not think the Court’s power to order a re-trial or to remit the matter to the Labour Tribunal is in any way fettered by the absence of such relief sought in the Notice of Originating Motion. 

Conclusion

54.  For the above reasons, I allow the appeal and set aside the awards of the Presiding Officer given on 25 June 2007 and 3 October 2007.  I remit the claim for bonus to the Presiding Officer with the direction that he shall review his decision on the basis that the bonus payments for 2002 and 2003 received by the Claimant were to be treated as having been made by the Defendant through WWME and LAST as the Defendant’s agent.

55.  I think this is a case in which it is appropriate that the costs of the appeal shall follow the event in the review in the Labour Tribunal.  Accordingly, I make a costs order nisi to that effect.