CHUNG WO SANG, FUTURE v. TAI LIN RADIO SERVICE LTD

HCMP 3042 of 2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 3042 OF 2003

(ON APPEAL FROM HCLA NO. 112 OF 2002)

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REASONS FOR JUDGMENT

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Hon Yuen JA (giving the judgment of the Court):

1. This is the renewed application of the Claimant ("the Employee") for leave to appeal against the decision of Deputy Judge Andrew Cheung (as he then was) allowing the appeal of the Defendant ("the Employer") against the order of the Labour Tribunal (Presiding Officer Winston Leung) of 31 October 2002.

Proceedings before the Labour Tribunal

2. The Labour Tribunal was concerned with the question whether commission was part of the Employee's wages of for the purpose of calculating annual leave pay, holiday pay and sickness allowance under the Employment Ordinance cap 57. The statutory definition of "wages" is

"all remuneration, earnings, commission ... however designated or calculated, capable of being expressed in terms of money, payable to an employee in respect of work done or to be done under his contract of employment, but does not include ... any commission which is of a gratuitous nature or which is payable only at the discretion of the employer".

3. The Labour Tribunal considered a document in English entitled "Letter of Employment", a Chinese translation of that document and a separate Chinese document entitled "Commission". The document in English was said to be in standard form. The Tribunal also heard oral evidence from a number of witnesses, including the Employer's retail department general manager and the person who had hired the Employee.

4. The Labour Tribunal held that commission was not payable only at the discretion of the Employer. In his Judgment, the Presiding Officer noted that the Chinese document entitled "Commission" clearly spelt out that salesmen were entitled to commission, and that the Employer's discretion related only to the items of the goods offering commission and the amounts of commission.

5. As for the Employer's reliance on a clause in the Letter of Employment which dealt with termination and which provided

"in such event, you will not be entitled to receive any bonus, allowance, overtime pay and commission that you would have earned unless the Company in its discretion decided otherwise"

the Presiding Officer held that that did not support the Employer's case that the commission was payable only at its discretion and he doubted if the clause was "legally valid for any accrued benefits". Although the Presiding Officer did not identify any statutory provisions in support of this latter view, it is possible that he had in mind s.70 of the Employment Ordinance which provides that "any term of a contract of employment which purports to extinguish or reduce any right, benefit or protection conferred upon the employee by this Ordinance shall be void".

Proceedings on appeal to the judge

6. The Employer appealed. The judge construed both the standard form Letter of Employment and the Chinese document entitled "Commission". He held first, that although some parts of the Letter of Employment suggested a contractual entitlement to commission, what stood out was the lack of specific reference to an employee's entitlement to payment of commission. Secondly, as for the document entitled "Commission", the judge also accepted that there were words suggesting "some sort of entitlement", but took the view ultimately that this was "neutralized" by a clause that provided that on termination or resignation, the employee would not be considered for payment of commission.

7. The judge also held that as the amount of commission and the method of calculating commission was entirely up to the Employer, this could render the payment of commission "illusory in practice", and following New Bright Industrial Company Ltd v Wong Sau Chi [1995] 2 HKC 357, he held that the effect at law was that the Employee had no contractual entitlement to commission.

8. The judge concluded, on balance, that the commission payment was not a contractual entitlement and was payable only at the discretion of the Employer. He accordingly allowed the Employer's appeal.

9. The Employee was not legally represented at the hearing of the appeal before the judge.

Application for leave to appeal

10. Pursuant to s.35A Labour Tribunal Ordinance, the Employee sought leave to appeal. Section 35A provides that if the Court of Appeal considers that "a question of law of general public importance is involved", it may grant leave.

11. Pursuant to Order 59 rule 14(2)(b) RHC, the application was first considered by a single judge. On 22 July 2003, Cheung JA refused leave without a hearing.

12. Pursuant to Order 59 rule 14(2A) RHC, the Employee renewed his application. On 5 September 2003, we adjourned the hearing of that application pending his application for legal aid.

Question of law of general public importance

13. Legal aid has now been granted. On the restored hearing of the application for leave, Mr Chau Hing Pang, counsel for the Employee, submitted that the appeal raises a question of law of general public importance, as the construction of a document is a matter of law and as over 100 sales personnel employed by the Employer have entered into the same or similar contracts of employment and documents of commission , as well as sales personnel of other retailers.

14. Further, there is at least one English case (Clark v Nomura International [2000] IRLR 766) and one Hong Kong case (Wong Huey Lan v Colgate-Palmolive (HK) Ltd HCLA 77/2001) on the New Bright point, holding that even though an employer may have a contractual discretion, the employee would have remedies for breach of contract if that discretion has been exercised irrationally or perversely.

15. The question of law distilled from Mr Chau's written submissions may be formulated as follows: "in considering whether, on the true construction of the standard form contract and the document on commission, commission was payable only at the discretion of the employer, there should be taken into account (a) the provisions of s.70 Employment Ordinance and the contra proferentum rule of construction and (b) any right of the employee to the expectation that the employer's exercise of discretion would not be irrational or perverse". Although Mr Chau did not himself formulate any question of law, he agreed with the one set out above.

Order

16. It does not appear from the judgment that the judge had considered the effect of s.70 Employment Ordinance or the contra proferentum rule of construction of documents. Further, the Clark point is a development in the law that has yet to be considered by the appellate court.

17. We consider that a question of law of general public importance has been raised. Accordingly, we gave leave to appeal on the question of law formulated in paragraph 15 above and ordered that the costs be in the cause of the appeal.