KONG SHEUNG WAH v. WEI BUN TRADING CO. LTD.

LTA No. 36 of 1988

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

(On appeal from Labour Tribunbal Clam No. TM 362/88)

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J U D G M E N T

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1. This is an appeal from the decision of Mr. Stephen Chow, Presiding Officer of the Labour tribunal.

2. Mr. Chow awarded the Respondent commission of $217,620.00, year and bonus of $65,286.00 and an extra bonus of $20,000.00.

3. The awards were made pursuant to a contract of employment between the Appellant and the Respondent. All the awards arise out of the interpretation of this contract of employment. The issue which has to be considered is whether by the terms of the contract the Respondent was entitled to receive commission in respect of a contract he concluded as a sales representative for the Appellant notwithstanding the fact that the contract which was entered into by the parties appears not to have reached a successful conclusion.

4. It is necessary to consider with some care the form of the contract of employment. The letter appointing the Respondent was in the following terms:

"Mr. Kong Sheung Wah

Ground Floor, 259 Temple Street, Kowloon

Dear

RE : LETTER OF EMPLOYMENT

We are pleased to in form you that you are employed as Sales Rep. at a monthly basic salary of HK$ 500.00 and a commission of 1.5% effective Jan 05, 1987, subject to 3 months probation period.

A copy of the terns and Conditions of employment and Company Rules and Regulations are available upon request. Should you need any clarification, please feel free to call us.

If you agree to our employment offer please confirm your acceptance by signing on the duplicate of this letter.

Yours faithfully,

WEI BUN TRADING COMPANY LTD.

Sgd.

Ben Ho

Managing Director

AGREED AND ACCEPTED BY:

Sgd.

NAME :

I/D No.: XXXXXXX (X)

CHINESE CODE. (IF ANY) :

DATE OF BIRTH: July 25, 1947

STAFF N0. : 83"

5. This was followed by a more formal contract signed the following day. This has been translated from Chinese characters and I will include the relevant parts:

"WEI BUN Trading Co. Ltd.

Address : Rm 1704, Nan Fung Centre, 264,

Castle Peak Road, Tsuen Wan, H.K.

Tel : 0-4986623, 0-4926779

Telex : 57470 WBTC HX

Cable : WEI BUN CO. HK

(Hereinafter sumplified as the employer) now sincerely employs Mr. Kong Sheung Wah (hereinafter as the employee) ID No XXXXXXX(X), Chinese Code: 3068 4161 5478 as our company's Sales Executive in China. The contract period is three years and will be effective after both parties have signed it. Both Employer and Employee are willing to accept and abide by the following terms and obligations.

Employer's responsibilities

1. The employer is willing to pay the employee HK$ 500.00 as the bas c salary.

2. The employer is willing, in the case of the trade or business transaction reached for the employer by the employee, to pay the employee 1.5% of the total goods value derived from the transaction or trade as commission. Commission will be paid to the employee immediately after the satisfactory completion of the transaction. At the end of each year, the employer is willing to calculate the total commission the employee gains. If his total annual commission exceeds HK$ 200,000.00, the employer will pay the employee an additional 30% of the total commission as year-end bonus. If his total commission at the end of the year exceeds HK$ 400,000.00, the employer will give him an additional 50% of his total commission as bonus. (According to this bonus policy, only one appropriate item is chosen for application but not both at a time.)"

6. There then follows a rather more contraversial document. It was the Respondent evidence that in mid November 87 a notice was exhibited on the company's notice board in relation to the calculation of bonuses which read as follows:

"Method of Calculation

of Commission in Trade Department

    Here are further explanation and summary on the distribution of transaction commission for each individual staff member in China Trade Department so that all will find it easy in comprehension. Any enquiry concerning the calculation method may be made to the manager of their own division.

Sales Representative

    The Company will pay the sales representative the commission due immediately after the latter has brought and concluded a business or commercial transaction for the Company. The calculation of commission is as follows :-

1. 1.5% of the total amount of the business or commercial transaction; or

2. *22% of the net profit of the business or commercial transaction.

    The amount paid by the Company to the sales representative is determined by the total amount of the two items above. The lesser amount will be given."

7. Mrs. Barnes for the Respondent argued that this final document did not form part of the contract of employment. With respect I would agreed with her. The contract with Combine Capital was entered into on 21st September 1987. It will be seen from the terms of the notice that it substantially varied the contracts of employment of sales representatives and indeed it could be stated derogated from the contract. 1 am satisfied that the contents of the notice forms no part of the contract of employment.

8. I have no doubt that it is necessary to read the Letter of Appointment and the 6th January 1987 contract as a whole. It then becomes obvious that it was indeed the intention of the parties that commission would only become payable after the successful completion of any sale which has been concluded by a sales representative. I am of the view that it is evident from the 6th January contract that a transaction had to be successfully concluded before commission would be payable. I would particularly refer to the words in she contract "commission will be paid to the employee immediately after the satisfactory completion of the transaction".

9. I will next consider the question of the proof of the transaction and whether it had been duly completed. I am satisfied that Mr. Chow was wrong in implying in his reasons for his decision that the burden of proof lay upon the Appellant to show that the transaction had not been completed. it was incumbent upon the Respondent to prove his case. Part of that case consisted of proving that the transaction had been successfully completed.

10. He demonstrated that the contract was entered into between Combine Capital Ltd. and the Appellant. The contract provided for the sale of the timber to take place at a future date. There was no evidence that the sale was ever completed. Indeed what evidence there is would tend to be to the contrary. In particular I would refer to the letter which the Appellant sent to the Respondent eventually advising him of the situation.

11. In this connection I feel that it is right not to attach undue weight to the verbal exchanges which took place at the time when the contract with Combine Capital was entered into. In all probability, it was in everybody's mind that the transaction would go forward to a successful conclusion and in those circumstances it is understandable that it was in everyone's mind that the commission would in due course become payable. For the same reason, I would not attach too much significance to the undisputed evidence that the Appellant advanced $8,000.00 to the Respondent by way of an advance for the commission.

12. Once the main claim for commission is dismissed the other 2 claims fall by the wayside. They are both dependent upon the commission being deemed to be payable.

13. For the seasons I have given I am satisfied chat Mr. Chow came to the wrong conclusion in this ease. The correct order to make is to allow the appeal. That is the order I make and I will hear the parties on costs.