ZHANG QIANG v. CISCO SYSTEMS (HK) LTD

HCA 1497/2010

[2021] HKCFI 694

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1497 OF 2010

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J U D G M E N T

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A. Introduction

1.  This is the trial of an employment claim.  The plaintiff (“Zhang”) used to be an employee of the defendant (“Cisco HK”).  He is claiming against Cisco HK certain sums said to be payable under what the parties have called the “Settlement Agreement” and the “Repatriation Agreement”. He also claims damages for wrongful termination of his employment, and certain Occupational Retirement Schemes Ordinance (“ORSO”) payments allegedly owed to him. Cisco HK denies liability.  It counterclaims against Zhang for certain expenses which it says it has paid him on a condition that had failed to materialize, for certain tax benefits it says Zhang has unjustly retained, and for the return of certain properties.

2.  Mr Yeung Ming Tai (on day one of the trial only), Mr Ray Kwan and Mr Pakco Chan appeared for Zhang.  Mr Jin Pao SC leading Ms Esther Mak appeared for Cisco HK.

B.  The undisputed facts

3.  Zhang is a Singaporean citizen.  He holds Bachelor of Engineering in Automation and Master of Business Administration.  He has also been a member of Cisco Certified Internetwork Expert since 1997.

4.  Cisco HK is a company incorporated under the law of Hong Kong.  It is a company within the Cisco Group.

5.  The following facts are taken from the facts and chronology agreed between the parties.

6.  Zhang joined Cisco Systems (USA) Pte Ltd in Singapore (“Cisco Singapore”) as a Customer Support Engineer level III in January 2000.

7.  In early 2002, Zhang applied to Cisco HK for the position of Product Manager.

8.  On 31 July 2002, Tony Gallagher sent Zhang a Letter of Transfer and invited Zhang to discuss it with him, Scott Schroeder (Global Mobility Manager) and Rijwana Quazi (Human Resources Manager).  Tony Gallagher was Zhang’s direct supervisor at Cisco HK during the period between September 2002 and May 2003.

9.  By way of an appointment letter dated 19 September 2002, Zhang was appointed to work for Cisco HK in Beijing, China, with the job title of Customer Support Engineer level III at Grade 8 with an annual salary of $443,442.

10.  On 23 September 2002, Zhang signed and returned the Letter of Agreement for the position of Customer Support Engineer III at Grade 8 with an annual salary of HK$443,442 (“Letter of Agreement”).  He started to work as a Product Manager in the Beijing office of Cisco HK.

11.  From late 2002 to August 2006, Zhang was in discussion with Cisco HK in regards of the terms of his assignment to China, including the level of salary and benefits he had received from Cisco HK.  In the meantime, Zhang made various complaints to Cisco HK about his assignment to China as well as the salary and benefits he had received from it. 

12.  By way of a letter dated 24 February 2005 (“Repatriation Letter”), Cisco HK informed Zhang that he would be repatriated to Hong Kong from Beijing and would be put on Hong Kong local payroll with a base annual salary of HK$818,100 and other incentive and compensations.

13.  The first paragraph of the Repatriation Letter stated that:

“ Your international assignment is nearing completion. As a result, you will be repatriating to Hong Kong … from Beijing… effective May 1, 2005. This letter confirms the repatriation benefits that you will receive, based on your original offer letter.”

14.  The Repatriation Letter was signed by Mitch Emerson and Zhang dated 13 May 2005 and was delivered to Cisco HK on 12 April 2006.  Mitch Emerson was Zhang’s direct supervisor at Cisco HK during the period between September 2003 and May 2005.

15.  On 1 March 2005, Cisco HK provided Zhang with a Relocation Acknowledgment Clause dated 1 March 2005. (“Relocation Acknowledgement Clause”).

16.  On 8 September 2005, Zhang wrote to Cisco HK (Stefan Eller (Senior Manager, Competitive Marketing and Zhang’s direct supervisor at Cisco HK from around June 2005 to early 2007)) and Sara Ballesteros (Human Resources Manager of Cisco HK) summarizing Zhang’s complaints on the alleged incorrect grading, salary, job title and compensation from 2002 to 2005.

17.  On 20 January 2006, Zhang wrote to Cisco HK (Stefan Eller) stating that he would only be willing to sign the Relocation Acknowledgement Clause if it was Cisco HK’s common practice to request the same for all other expatriates.

18.  On 20 March 2006, Zhang wrote to Cisco HK (Stefan Eller) and stated some of his points on his relocation.

19.  On 31 March 2006, Cisco HK (Marla Hann (Global Mobility Manager – Human Resources) and Stefan Eller) confirmed that the Relocation Acknowledgement Clause was a policy that applied to all expatriates.

20.  On 11 April 2006, Zhang signed the Relocation Acknowledgement Clause.

21.  On 12 April 2006, Zhang delivered the signed Repatriation Letter (dated 13 May 2005) and Relocation Acknowledgment Clause to Cisco HK.

22.  On 15 July 2006, Cisco HK met with Zhang to discuss his complaints in regard to the alleged incorrect grade, job title, salary, compensation and etc.

23.  On 31 July 2006, Cisco HK issued a letter to Zhang and indicated that Zhang’s relocation to Hong Kong was tentatively scheduled for 1 December 2006, contingent upon receipt of proper Hong Kong work authorization visa, and that Zhang’s position in Hong Kong will be Market Intelligence Manager.

24.  On 2 August 2006, Cisco HK sent Zhang a breakdown of his transition allowance and gross up payment apparently from his first day of employment in Hong Kong, asking Zhang to review the spreadsheet and ask questions if necessary.

25.  To resolve Zhang’s claim on salary, benefits and compensation under the Letter of Agreement, Cisco HK provided Zhang with a settlement offer, on a without admission of liability basis, in the form of a Without Prejudice Letter, Release Agreement and Deed of Release.  They were dated 11 August 2006 and, and were delivered to Zhang on 14 August 2006. 

26.  On 17 August 2006, Cisco HK confirmed that the settlement offer would remain open for acceptance until 5 pm on 21 August 2006.

27.  On 18 August 2006, Zhang returned the duly signed Release Agreement and Deed of Release (ie the Settlement Agreement), both signed on 17 August 2006.

28.  In August 2006, Cisco HK paid Zhang HK$278,929.46 as lump sum relocation allowance pursuant to the Repatriation Letter.

29.  On 4 September 2006, Zhang informed Cisco HK that he had not received any payment from Cisco HK under the Settlement Agreement.

30.  On 5 September 2006, Cisco HK assured Zhang that payment under the Settlement Agreement would be made appropriately.

31.  It is Cisco HK’s case that in early September 2006, it allegedly discovered typographical errors in the Without Prejudice Letter, including that the Notional ESPP Gain having been allegedly wrongly stated as “HK$64,4910.46” when the actual offer should be “HK$64,491.46”.

32.  On 15 September 2006, Cisco HK notified Zhang in writing that they believed there were typographical errors in the Without Prejudice Letter and provided an updated letter (“Updated Terms Letter”) as the basis for payment under the Release Agreement dated 11 August 2006.  However, Zhang never signed the Updated Terms Letter.

33.  On 9 October 2006, Cisco HK advised Zhang that the Updated Terms Letter would remain open for acceptance until 13 October 2006.

34.  On 16 November 2006, Zhang emailed Sara Ballesteros and Stefan Eller and stated that Cisco HK had been in breach of the Settlement Agreement by failing to pay the amount set out therein.

35.  On 13 December 2006, Zhang met with Vicky Anderson (ER Manager AsiaPac–Human Resources function, Cisco Systems (USA) Pte Ltd) to discuss the issues arising from the Settlement Agreement and the Repatriation Letter.

36.  On 19 January 2007, Zhang met Bill Brownell (Vice President, Strategic Marketing of Cisco HK) and Amy Cappellanti-Wolf (Vice President, Human Resources of Cisco HK) at the headquarters of Cisco to discuss the Settlement Agreement and other issues.

37.  On 30 January 2007, Amy Cappellanti-Wolf emailed Zhang and alleged that the 11 August 2006 documents and ESPP Gain formula were discussed with Zhang back in mid-July 2006.

38.  In May 2008, Zhang issued legal action against Cisco Systems (China) Networking Technology Co Ltd (“Cisco China”) (Cisco HK’s affiliated company in China) in Beijing.  The action was dismissed on 15 July 2008 by the Beijing City Labour Dispute Arbitration Commission on the grounds that Zhang was not employed by Cisco China.  Zhang subsequently appealed against the decision in Beijing Haidian District People’s Court, but the appeal was dismissed for the same reason.  Zhang appealed further in the Beijing First Intermediate People’s Court, but the appeal was dismissed.

39.  On 20 November 2008, Cisco HK requested Zhang to relocate to Hong Kong as soon as possible.

40.  On 18 March 2009, Ernst & Young requested Zhang to indemnify Cisco HK the tax refund he received in respect of his Hong Kong salary tax for 2007/08, which was borne by Cisco HK.

41.  On 2 April 2009, Cisco HK requested Zhang to relocate to Hong Kong, failing which he would be considered as in breach of his employment contract.

42.  On 17 July 2009, Cisco HK informed Zhang that his international assignment was ending and would be required to repatriate to Hong Kong from China by 31 August 2009.

43.  On 28 August 2009, Cisco HK informed Zhang that as the hearing of Zhang’s claim against Cisco China would take place in Beijing on 2 September 2009, the start date in Hong Kong would be deferred to 7 September 2009.  In that same letter, it was said that for the avoidance of doubt, Zhang’s assignment in China was ending.

44.  Zhang reported to Cisco HK’s Hong Kong office on 7, 10 and 14 September 2009, but left Hong Kong on the same day on all 3 occasions.  Whilst at Cisco HK’s Hong Kong office on 7 September 2009, Zhang met the HR manager.

45.  On 1 October 2009, Cisco HK (Ian Hamilton, Director of Human Resources, Cisco Systems Australia Pty Ltd) wrote to Zhang and stated that his international assignment had ended and Zhang was required to assist with the process of repatriation by cooperating with Fragomen Hong Kong (the visa agent of Cisco HK) (“Fragomen”).

46.  On 7 October 2009 , Ian Hamilton wrote to Zhang and requested him to meet via Telepresence the following Tuesday.

47.  On 13 October 2009, Zhang wrote two emails to Cisco HK.  The first email stated that he was on WebEx and no one dialed into the bridge.  The second email stated that he had waited for 25 minutes on the meeting bridge but no one joined.

48.  On 20 October 2009, Cisco HK (Dean Eyers) wrote to Zhang and asked him for an explanation as to his whereabouts for the week of 12 October 2009.

49.  On 21 October 2009, Zhang wrote to Cisco HK (Dean Eyers) and stated that he had not been able to attend the Telepresence call since he was busy and that he has chosen to stay near the border to travel to both sides.

50.  On 22 October 2009, Dean Eyers wrote to Zhang and (i) asked Zhang as to his whereabouts, and (ii) stated that Zhang was required to report to the office when instructed to do so, and was not to travel to China for business purposes unless expressly instructed by Cisco HK.

51.  On 30 October 2009, Dean Eyers wrote to Zhang and requested him to attend a Telepresence meeting in the Hong Kong office on 2 November 2009 to discuss his recent claims.

52.  On 5 November 2009[1], Zhang emailed Cisco HK via his personal email and informed Cisco HK that he had been sick and that he had lost all access to Cisco HK’s network.

53.  On 5 November 2009, Dean Eyers wrote to Zhang and (i) requested that he provided an appropriate medical certificate in accordance with local sick leave policy; and (ii) reminded him that he ought to contact his direct manager in relation to his leave of absence.

54.  On 6 November 2009, Zhang informed Cisco HK that he had been ill and was not able to reply to Cisco HK’s queries in full scale due to his physical health condition and that he had medical certificate.

55.  On 10 November 2009, Dean Eyers wrote to Zhang and stated that (i) Zhang needed to deliver the medical certificate to the Hong Kong office immediately, or alternatively that Cisco HK could arrange a courier to pick it up from him the next day, and (ii) Zhang was required to attend a Telepresence meeting as soon as possible.

56.  On 2 December 2009, Ian Hamilton wrote to Zhang and stated that he was required to make contact and provide an explanation for his absence, including providing a medical certificate immediately.

57.  On 7 December 2009, Zhang emailed Dean Eyers and Deepa Francis (Zhang’s last direct supervisor at Cisco HK during the period between late 2008 and December 2009) and informed them that (i) he was on sick leave with medical certificates, and (ii) his access to Cisco HK’s work PC, email and all tools were disabled.

58.  On 8 December 2009, Cisco HK sent a letter to Zhang and alleged that Zhang had committed serious misconduct by being absent from work without authorization, which was liable to summary dismissal, and requested him to provide medical proof for the period of his absence by 11 December 2009.

59.  On 11 December 2009, Cisco HK sent to Zhang a letter of dismissal, which took immediate effect, by reason of Zhang’s failure to provide medical certificate or any other proof of his medical condition which warranted his absence from work.

60.  On 6 January 2010 , Cisco HK informed Zhang that his medical certificates had been received.  Cisco HK’s position is that those medical certificates were not provided as directed and did not satisfy the necessary requirements to justify his absence under the laws of Hong Kong.

61.  On 18 March 2010, Zhang took action against Cisco HK in the Labour Tribunal under case no LBTC 1093/2010.  In September 2010, the case was transferred to the High Court.

C.  Zhang’s claim

62.  The Statement of Claim on 1 December 2010.  The re-amended version (the “RASOC”) was filed on 4 December 2017.

63.  As summarized by Mr Yeung in his written opening, Zhang claims against Cisco HK HK$4,438,521.69 and RMB497,106.85 under the following causes of action:

(a)  Outstanding amount of HK$2,063,930.52 arising from the Settlement Agreement (RASOC §14D and §38);

(b)  Outstanding amount of HK$1,249,119.99 and RMB497,106.85 arising from the Repatriation Agreement (RASOC §17 and §26);

(c)  Damages in the sum of HK$599,418.26 arising from Cisco HK’s alleged wrongful termination of the employment contract with Zhang (RASOC §35-36); and

(d)  ORSO payment owed by Cisco HK to Zhang’s in the sum of HK$526,052.92 (RASOC §37).

64.  In gist, the main planks of Zhang’s pleaded case are that:

(a)  In respect of the Settlement Agreement:

(i)  He was underpaid when he was working in Beijing.  He had complained all along;

(ii)  Ultimately, Cisco HK and him entered into the Settlement Agreement in relation to those matters;

(iii)  The sum of HK$2,063,930.52 was made up of the following liquidated amounts:

Item	Description	Amount (HK$)
1	Notional Salary Payment	$1,154,343.95
2	Notional Bonus Payment	$220,200.11
3	Assignment Allowance Tax Payment	$44,476.00
4	Notional ESPP Gain	$644,910.46
	Total:	$2,063,930.52

(iv)  Cisco HK has however failed to pay him the agreed amount;

(b)  In respect of the Repatriation Agreement:

(i)  Zhang avers that under the Repatriation Agreement, Cisco HK was liable to pay him a number of items which it has failed to;

(ii)  Those items are as follows:

Item	Description	Amount (HK$ / RMB¥)
1	Agreed tax services	$65,680.00
2	Air ticket expenses	$35,085.60
3	Household goods shipment services	$194,072.00
4	Accommodation and meals expenses	$117,750.20
5	Health care benefits	¥9,728.85
6	Cumulative difference in salary for the period from 11 August 2006 to 23 January 2010 including bonuses and MPF/ORSO contributions and yields	$571,665.68
7	Estimated tax gross up	$224,184.70
8	Dependent’s education and annual home visit	¥487,378.00
9	Monthly assignment allowance	$40,681.81
	Total:	$1,249,119.99 + ¥497,106.85

(c)  In respect of the wrongful termination:

(i)  On 11 December 2009, Cisco HK summarily dismissed Zhang in effect for unauthorized absent from work and failure to provide medical proof for his absence;

(ii)  Zhang avers that he had in fact provided medical certificates recommending him to have rest during the relevant period;

(iii)  The summary dismissal was therefore a wrongful one, causing him loss as follows:

Item	Description	Amount (HK$)
1	Payment in lieu of notice	$71,583.75
2	Accrued but untaken annual leave	$137,789.13
3	Long service payment	$150,750.00
4	Sick leave entitlement (up to 23 January 2010) since the wrongful termination	$205,014.97
5	Loss of ORSO in respect of Items 2 and 4	$34,280.41
	Total:	$599,418.26

(d)  In respect of the ORSO payment:

(i)  Cisco HK wrongfully confiscated the entire contribution to ORSO by it as the employer and Zhang as the employee as well as the yields of the contribution throughout the entire period of Zhang’s employment;

(ii)  He therefore claims the sum of HK$817,874.58 for the contributions and yields less the amount released;

(iii)  Details are as follows:

Item	Description	Amount (HK$)
1	Entire ORSO contribution	$817,874.58
2	LESS the amount released by the Defendant’s Solicitors on 13 July 2017	$291,821.66
	Total:	$526,052.92

65.  In the course of his opening submission, Mr Yeung confirmed that Zhang would no longer proceed with his claim relating to tax equalization as a separate item (pleaded at §§27 to 32 of the RASOC), though it remains relevant under the claim based on the Settlement Agreement.  Nor would he proceed with his claim for the costs and exchange rate loss, though pleaded at §39 of the RASOC.

D.  Cisco HK’s Defence and Counterclaim

66.  Cisco HK’s Amended Defence and Counterclaim (“ADAC”) is dated 16 January 2018.  The main planks of its pleaded defence may be summarized as follows:

(a)  In respect of the Settlement Agreement:

(i)  it contained errors.  In particular, the Notional ESPP Gain was in fact HK$64,491.46 and not HK$644,910.46 as stated therein.  There were also mistakes in Clauses 1 and 5 thereof;

(ii)  Those mistakes were in fact, or ought to have been, apparent to Zhang on the face of the Without Prejudice Letter;

(iii)  There was hence no binding, concluded and enforceable Settlement Agreement reached between Zhang and Cisco HK;

(iv)  Alternatively, any contract was vitiated, void and of no effect due to those mistakes;

(v)  Further or alternatively, it would be inequitable for Zhang to insist upon compliance since that would confer an unconscionable benefit upon him;

(vi)  Further and in any event, Zhang has acted contrary to the terms in the Without Prejudice Letter, the Release Agreement and the Deed of Release by instituting the present action;

(vii)  I record that Mr Pao has informed this court that Cisco HK would not be relying on the defence that Zhang’s claim has been time-barred based on Mainland law, though pleaded at §22 of the ADAC;

(b)  In respect of the Repatriation Agreement:

(i)  The related claims are mutually inconsistent with Zhang’s claims based on the settlement, as they are nearly all covered by the full and mutual release of claims contained in the Settlement Agreement.  In the absence of a clear and unequivocal election from Zhang, he should be precluded from making these mutually inconsistent claims in their entirety;

(ii)  Alternatively, Zhang has waived and/or released his rights to pursue the claims under the Repatriation Agreement;

(iii)  Zhang refused to be repatriated, and did not return, to Hong Kong;

(iv)  On 11 April 2006, Zhang also signed a Relocation Acknowledgement Clause which provided, inter alia, that all relocation payments made to Zhang prior to his completing 1 year of employment in the new assignment were in the nature of an advance and that Zhang would not have earned those payments until he had completed 1 year of employment in the new assignment;

(v)  In addition, and for various reasons pleaded in the ADAC, Cisco HK denies that the sums which Zhang pleads to have arisen from the Repatriation Agreement are owing to him;

(c)  In respect of the summary dismissal:

(i)  from early November 2009 onwards, Zhang was absent from work without the prior consent of Cisco HK, had neglected and failed to discharge his employment duties, and/or engaged in willful disobedience of lawful instructions;

(ii)  Zhang had failed to provide any required medical certificate or evidence to justify his absence from work;

(iii)  the summary dismissal was not wrongful;

(d)  In respect of the ORSO payment, Cisco HK is entitled to withhold the balance by reason of the summary dismissal.

67.  Cisco HK also counterclaims against Zhang for the relocation allowance (HK$278,929.46), overpayment of salaries (HK$468,347) and certain payments in respect of Hong Kong tax (HK$339,294) it says Zhang has unjustly retained, and for the return of a computer hard disk.

E.  The Issues

68.  Parties have agreed upon the issues to be tried, as follows:

(a)  Whether the Settlement Agreement dated 11 August 2006 is valid.  If so, whether Zhang is entitled to the sum of HK$2,063,930.52 and sums to be assessed which are allegedly due under the Settlement Agreement (“Issue 1”);

(b)  Whether or not Zhang relocated to Hong Kong pursuant to the terms of the Repatriation Agreement dated 24 February 2005.  If so, whether Zhang is entitled to any or all of the amount of HK$1,249,119,99 and RMB497,106.85 allegedly payable pursuant to the Repatriation Agreement; if not, whether Cisco HK is entitled to the repayment of the relocation allowance paid to Zhang in the amount of HK$278,929.46 (“Issue 2”);

(c)  Whether Zhang’s employment with Cisco HK was wrongfully terminated.  If so, whether Zhang is entitled to the payment of HK$599,418.26 or any other amount for wrongful termination (“Issue 3”);

(d)  Whether Cisco HK wrongfully refused to authorize the scheme trustee to release the entire contribution to the ORSO made by Cisco HK as employer and Zhang as employee as well as the yields throughout the period of contribution (save and except the amount of HK$291,821.66 which had been repaid by Cisco HK to Zhang on 13 July 2017) (“Issue 4”);

(e)  Whether Cisco HK is entitled to claim from Zhang the amount of HK$468,347.00, representing the hypothetical tax based on Hong Kong salaries tax for the years from 2004/2005 to 2009/2010 which Zhang is liable to pay to Cisco HK under the tax equalization policy (“Issue 5”)’

(f)  Whether Cisco HK is entitled to claim from Zhang the amount of HK$339,294.00, representing a sum Cisco HK paid to the Hong Kong Inland Revenue Department on behalf of Zhang on account of certain preliminary assessments to tax in respect of tax years 2007/2008 and 2008/2009 and which was refunded to Zhang (“Issue 6”); and

(g)  Whether Cisco HK is entitled to claim from Zhang a hard drive of a laptop computer possessed by Zhang (“Issue 7”).

F.  The witnesses and their credibility

69.  For Zhang:

(a)  Mr Mitch Emerson (“Emerson”).  He was Zhang’s supervisor and worked as Senior Manager of Competitive Intelligence at Cisco HK during the period between 2001 and 2005.  He has given one witness statement (“Emerson/WS”), which he adopted as his evidence in chief;

(b)  Zhang testified.  He has given 2 witness statements (“Zhang/WS1” and “Zhang/WS2”), which he adopted as his evidence-in-chief.

70.  For Cisco HK:

(a)  Mr Dean Eyers (“Eyers”), who was at the material time a Senior Director of Competitive Marketing of Cisco HK based in San Jose, California.  He has given one witness statement (“Eyers/WS”), which he adopted as his evidence-in-chief;

(b)  Mr Ian William Hamilton (“Hamilton”), who was a Human Resources Shared Services Leader, Global HR Shared Services, Human Resources Chief of Staff and the Director of Employee Relations of Cisco Systems Australia Pty Ltd throughout the period from 2000 to 2009.  He has given 2 witness statements (“Hamilton/WS1” and “Hamilton/WS2”).

71.  When opening his case, Mr Yeung submitted that one feature about this case is that though the material events took place some years ago, most events and conversations are recorded by contemporaneous emails or letters.  On the same theme, Mr Kwan when closing submitted that in cases of contractual disputes such as the present ones where the claims are reflected and supported by contemporaneous documents, credibility of witnesses has little role to play in the determination of the disputes.

72.  Whilst there are in this case a large body of contemporaneous correspondence (from which the agreed facts and chronology are distilled), credibility still matters, particularly in relation to Zhang’s state of understanding of the mistakes relied upon by Cisco HK (though I immediately state that I acknowledge the predominately objective nature of the test explained in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd [2004] 7 HKCFAR 79, which I will discuss below).

73.  I remind myself when considering a witness’ credibility the importance of considering the inherent likelihood or unlikelihood of the witness’ evidence, the consistency of the witness’ evidence with undisputed or indisputable evidence, with contemporaneous conduct and documents, and the internal consistency of the witness’ evidence.  I need to consider the totality of the evidence.  I warn myself against attaching undue weight on demeanour, though demeanour is obviously relevant when considering credibility. I also accept Mr Kwan’s submission based on Ching Chi Sau v Yip Woon Yin Judy, CACV 261/2014, 10 June 2015, that the Court is entitled to reject the evidence of a witness in multiple areas but find in his favour on certain issues.

74.  In respect of Emerson, Eyers and Hamilton, I find that their evidence is materially consistent with contemporaneous documents, does not suffer from any inherently improbability, and is internally consistent.  They answered questions clearly and in a straightforward manner.  I find them to be honest and reliable witnesses.  I accept their evidence.

75.  In respect of Zhang, I find that there are material parts of his evidence which are inherently improbable, and are not in his witness statements.  I accept Mr Pao’s submissions in this regard that Zhang refused to accept even the most obvious and uncontroversial propositions if they were perceived by him to be detrimental to his case.  I will set out some of the evidence when I discuss the evidence relevant to the agreed issues below.  I do not find him to be a reliable witness.  I reject his evidence unless supported by documents or undisputed evidence.  I prefer the evidence of the Emerson, Eyers and Hamilton in cases of differences.

G.  Issue 1

76.  Cisco HK’s main defence is that the Settlement Agreement contained errors.  In particular, the Notional ESPP Gain was in fact “HK$64,491.46” and not “HK$64,4910.46” as set out therein. The comma was misplaced.  Zhang knew or ought to have known there was a mistake.

G.1.  The relevant legal principles

77.  In Shanghai Tongji, the Court of Final Appeal explained that in determining whether a legal binding contract has been concluded, the test is an objective one.  However, that objective test is subject to one qualification.  In Shogun Finance Ltd v Hudson [2003] 3 WLR 1371 at p 1406, §123[2], Lord Phillips explained the subjective qualification as follows:

“ A contract will not be concluded unless the parties are agreed as to its material terms. There must be ‘consensus ad idem’. Whether the parties have reached agreement on the terms is not determined by evidence of the subjective intention of each party. It is, in large measure, determined by making an objective appraisal of the exchanges between the parties. If an offeree understands an offer in accordance with its natural meaning and accepts it, the offeror cannot be heard to say that he intended the words of his offer to have a different meaning. The contract stands according to the natural meaning of the words used. There is one important exception to this principle. If the offeree knows that the offeror does not intend the terms of the offer to be those that the natural meaning of the words would suggest, he cannot, by purporting to accept the offer, bind the offeror to a contract: Hartog v Colin & Shields [1939] 3 All ER 566; Smith v Hughes (1871) LR 6 QB 597. Thus the task of ascertaining whether the parties have reached agreement as to the terms of a contract can involve quite a complex amalgam of the objective and the subjective and involve the application of a principle that bears close comparison with the doctrine of estoppel. Normally, however, the task involves no more than an objective analysis of the words used by the parties. The object of the exercise is to determine what each party intended, or must be deemed to have intended.”

78.  In the context of unilateral mistake, a party cannot enforce a contract on terms which he knew or should have known did not reflect the other party’s intentions: Cartwright, Misrepresentation, Mistake and Non-Disclosure (4^th ed) at §§13-19 to 13-22.  

79.  In OT Africa Line Ltd v Vickers Plc [1996] 1 Lloyds Rep 700, at 703, Mance J (as he then was) applied the test of “knew or ought reasonably to have known that there had been a mistake”, and that:

“ … Here, there is objectively agreement on a particular sum. The question is what is capable of displacing that apparent agreement. The answer on the authorities is a mistake by one party of which the other knew or ought reasonably to have known. I accept that this is capable of including circumstances in which a person refrains from or simply fails to make enquiries for which the situation reasonably calls and which would have led to discovery of the mistake. But there would have, at least, to be some real reason to suppose the existence of a mistake before it could be incumbent on one party or solicitor in the course of negotiations to question whether another party or solicitor meant what he or she said.” (Emphasis added)

80.  In Eshed Diam (HK) Ltd v Siam Color Gems & Jewelry Ltd [2017] 3 HKLRD 308, Mimmie Chan J at §25 cited Hartog v Colin & Shields [1939] 3 All ER 566 and Statoil ASA v Louis Dreyfus Energy Services LP [2008] 2 Lloyd’s Rep 685 and stated that same exception as follows, that “the other party either knew … that the offer made was wrongly expressed, or cannot reasonably have supposed that the offer contained the offeror’s real intention”.

81.  In Chitty on Contracts, 33^rd ed §3-070, cited by Mr Yeung in his written opening is to similar effect, that:

“ … unilateral mistake is not by itself a ground for rectifying a contract unless the other party knew of the mistake. On current authority it appears that the knowledge must be actual knowledge. It is not enough that the party against whom rectification is sought may have suspected that a mistake had been made; but if a party wilfully shuts its eyes to the obvious, or wilfully and recklessly fails to make such inquiries as an honest and reasonable man would make, that will count as actual knowledge.”

I note immediately that no party in the present case is seeking any rectification.  The above passage to my understanding was cited by Mr Yeung to explain what may be counted as actual knowledge in the context of a mistake.

82.  In his closing submissions, Mr Kwan relied heavily on the Singapore Court of Appeal decision in Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR(R) 502 at §§51-53 that the contract would be void only if the claimants actually knew of the defendant’s mistake. 

83.  Chwee Kin Keong should however be understood in the light of the following features:

(a)  As submitted by Mr Pao during his closing, the equitable jurisdiction in the Singaporean Courts to grant relief in equity is a wide one.  As can be seen from §§77 and 83 of the judgment, “sharp practice” or “unconscionable conduct” can ground equitable relief.  In Hong Kong, the corresponding equitable jurisdiction to grant relief is much narrower;

(b)  This wide equitable jurisdiction explains why the Court of Appeal would insist that only “actual knowledge” could suffice in so far as the common law principle of unilateral mistake is concerned — see §§82 and 83 of the judgment, that:

“ 82. Moreover, as a matter of justice, as between a legal system having exclusively only a common law principle of unilateral mistake, which encompasses both actual or constructive knowledge of the non-mistaken party and a system that embraces both the common law principle and equity in the sense which we have alluded to above, there is certainly much to be said in favour of the latter system. We have no doubt as to which system better serves the ends of justice. As we have said before, the great advantage of an equitable jurisdiction is its flexibility, to do justice not only between the immediate parties, but also to innocent third parties.

  83.  In contrast, once the court should hold that a contract comes within the common law principle of unilateral mistake, it is void ab initio for all purposes.  Moreover, as pointed out earlier, the line between actual knowledge and constructive knowledge may often be hard to draw.  In a difficult case where the court is not convinced that the non-mistaken party has actual knowledge but is well satisfied that there is constructive knowledge and where there is evidence of unconscionable conduct or sharp practice on the part of the non-mistaken party, relief in equity may be granted on terms to ensure that justice is attained with regard to all affected parties.”

(c)  The above feature has also been highlighted in Cartwright at §13-22, footnote 68, that:

“ See also Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR 502 (claimants placed orders on internet site for laser printers which were in error priced at $66 each in place of $3,845. CA Singapore drew a different distinction from that known in the English cases and held that the contract would be void only if the claimants actually knew of the defendants’ mistake, but in Singapore there is a wider jurisdiction to render the contract voidable in equity).”

(d)  In his written closing, Mr Kwan points to Shanghai Tongji and submits that the only exception to the general rule is where the offeree knows that the offerer does not intend the terms of the offer to be those that the natural meaning of the words would suggest;

(e)  Shanghai Tongji was a case of contract by conduct.  While the subjective qualification was discussed, there was no detailed discussion therein as to the nature of the knowledge required in the context of unilateral mistake.  There is on the other hand nothing in Shanghai Tongji which is inconsistent with the tests as discussed in Cartwright, OT Africa Line and Eshed;

(f)  In the light of the above, I with respect do not accept that Chwee Kin Keong, at least in so far as the Court of Appeal’s holding that only “actual knowledge” would suffice in the context of unilateral mistake, may be followed in Hong Kong.

84.  Apart from Chwee Kin Keong, which in my view is clearly distinguishable, Mr Kwan has not been able to produce any authority in support of the proposition that only actual knowledge could suffice.

85.  The effect of a unilateral mistake has been described in two ways, either that the apparent contract was void, or that there was never a contract at all for absence of consensus: Hartog, Statoil ASA and Chitty §§3-032—3-033.  For my part, I am more inclined to share the Court’s view in Statoil ASA, cited at §25 of Eshed, that “there was never a contract at all”.

86.  If the apparent contract was void, or that there was never a contract at all, no question of severance arises, as Mr Yeung and Mr Kwan have been seeking to argue.  They have cited to me a number of authorities in support of their submissions that the sum in respect of the Notional ESPP Gain, even if found to be a mistake, can be severed from the Settlement Agreement. However, all those authorities are on illegality, and none relates to unilateral mistake.  I accept Mr Pao’s submission that cases on illegality or public policy do not apply here for the reason that in those cases, there is ex hypothesi a valid contract and there is no dispute as to whether the parties were ad idem. 

87.  I find that the concept of severance has no application in the context of unilateral mistake. 

G.2.  The facts

88.  Two sub-issues are involved: (1) whether the figure of “HK$64,4910.46” was a mistake; and (2) Zhang’s state of knowledge in that regard.

G.2.a.  Whether a mistake

89.  ESPP stands for “Employee Stock Purchase Plan”.  It was one of Zhang’s employment benefits.

90.  For the purpose of finalizing the Settlement Agreement, Cisco HK needed to work out what the additional benefits which Zhang would have been entitled to upon a notional upwards increase of his base salaries during the period of 2003 to 2006 (hence Notional ESPP Gain).

91.  Eyers’ evidence, supported by the contemporaneous internal emails and documents of Cisco HK between 7 and 8 August 2006, show clearly that upon the adoption of a particular basis for its calculation, the amount of Notional ESPP Gain which Cisco HK had intended to offer to Zhang was US$8,429.93[3].

92.  In this regard, of particular significance is an email of 7 August 2006 from Sara Morales (also known as Sara Ballesteros) to inter alios Dean Eyers (the “7/8/2006 Email”)[4] that:

“ We have received all of the information from stock admin, and would like to include the actual ESPP amounts for Jeffrey in the final document for him. I am hoping that it is possible to get a new copy of the letter to send to HK HRM today and deliver to Jeff tomorrow HK time. Attached are the calculations for reference, and the total amount to be paid will be $8,429.93.”

93.  The Hong Kong dollars equivalence of US$8,429.93 would be close to HK$64,491.46, and definitely not in the region of HK$644,910.46.

94.  According to Eyers, the settlement documents were provided to Zhang on 14 August 2006.  The Without Prejudice Letter was dated 11 August 2006[5]. Paragraph 4 thereof dealt with the payment in respect of Notional ESPP Gain.  The amount was set out and typed as “HK$64,4910.46”.  In terms of usual usage which I can take judicial notice of and when compared with other figures in that same letter, the comma was misplaced.

95.  In Eyers/WS, he describes when the mistake was discovered on 6 September 2006.  The internal emails support his evidence.  He, amongst others, talked to Zhang about the mistake on 7 September 2006.  Zhang refused to accept it.  A letter dated 15 September 2006 was issued to Zhang.  Accompanying that letter was an Updated Terms Letter.

96.  In so far as it has been suggested by Mr Kwan in closing that an adverse inference may be drawn against Cisco HK for failure to call the actual author of the Without Prejudice Letter, I reject the same.  Given the clear evidence, I refuse to draw any inference in that regard.

97.  Viewing the evidence objectively, I have no doubt that the figure of “HK$64,4910.46” was a mistake made by Cisco HK when preparing the original Without Prejudice Letter, and that Cisco HK had no intention of making any offer with the sum of HK$644,910.46 included.

G.2.b.  Zhang’s state of knowledge in respect of the mistake

98.  I regard the following matters as being important.

99.  The misplaced comma:

(a)  At §82 of Zhang/WS1, he claims that “The gross payment for the Notional ESPP Gain as shown in the Without Prejudice Letter was said to be HK64,4910.46.  I took this to be HK$644,910.46”;

(b)  That Without Prejudice Letter remained open for acceptance until 21 August 2006.  Zhang has not in his witness statement provided explanation as to why he did not seek clarification, or why he simply “took this to be HK$644,910.46”;

(c)  When under cross-examination:

(i)  He was asked whether, looking at “HK64,4910.46” now, he found the way it was written not normal.  Zhang claimed that it would depend on the countries or places, that he had not worked much in Hong Kong and did not pay much attention to the matter in Hong Kong, but that in the Mainland, commas could be placed every 3 or 4 digits;

(ii)  But on the face of the Without Prejudice Letter, there are other figures written in a way different from the way “HK64,4910.46” was presented;

(iii)  Upon further cross-examination, he claimed that he did not realize the position of the comma, that he was not sensitive to the position of the comma, that whenever he encountered long figures, he would count “one, ten, hundred, thousand, 10 thousand”, and would not rely on the comma, and that his head would automatically filter out the comma and understand the figures by counting, and that this mental process applied to all figures;

(iv)  He confirmed that he did not mention this explanation in his statement. His explanation for not having done so was that in his view, it was only a personal preference of his and was not important;

(v)  In my view, the explanation is obviously important.  Zhang must know that the position of the comma is an important issue.  His explanation that his head would automatically filter out the comma is not only inherently improbable but was only mentioned for the first time in court upon cross-examination;

(vi)  I reject his evidence in this regard.

(vii)  I note that during cross-examination, despite having been shown the 7/8/2006 Email, Zhang refused to accept that “HK$64,4910.46” is a mistake. I accept Mr Pao’s submission in this regard that such continual denial shows the extent that Zhang would go to deny matters which he thinks are detrimental to his case.  Such attitude seriously affects his credibility and reliability as a witness.

100.  The amount of contribution Zhang made to ESPP, and the actual ESPP Gain which Zhang received by him between 2003 and 2006:

(a)  According to the table of Wages Summary from 1 January 2003 to 6 January 2006[6] (which was a document disclosed by Zhang), the amount of annual contributions he made towards ESPP for the 3 years of 2003 to 2005 was about HK$55,000.  I find that Zhang was aware of those figures;

(b)  Cisco HK had filed Inland Revenue Department Employer’s Return of Remuneration and Pensions in respect of Zhang for the 3 years of 2003 to 2006.  Zhang accepted during cross-examination that copies of those return had been provided to him. According to those returns, the actual ESPP Gain (ie before any adjustment) which Zhang received during those 3 years was HK$92,599[7]. I find that Zhang was aware of those figures;

(c)  It should be borne in mind that the purpose of working out the Notional ESPP Gain benefits was to see what additional ESPP Gain Zhang would have been entitled to receive upon a notional upwards increase of his base salaries during those years;

(d)  No credible explanation has been offered by Zhang as to why, given the amount of his annual contribution and the amount he actually received before adjustment (HK$92,599), how he would expect the adjustments themselves would be in the aggregate region of HK$650,000.

101.  The Notional ESPP Gain formula set out on the Without Prejudice Letter:

(a)  I have set out above what the Notional ESPP Gain was intended to achieve.  In my view, it is not a complicated concept;

(b)  The Notional ESPP Gain formula was also set out on the Without Prejudice Letter;

(c)  at Eyers/WS, Eyers says that during July 2006, he and Stefan Eller met with Zhang to review an advance draft of the Without Prejudice Letter and to explain to him how the sum to be paid to him was to be calculated, including the formula adopted to calculate the ESPP Sum.  I accept his evidence in this regard;

(d)  In Zhang/WS1, Zhang denies the existence of that meeting.  He says at §112 that:

“ Amy Cappellanti-Wolf wrote back to me in her email of 30 January 2006 … and claimed that an advance draft of the 11 August 2006 documents were reviewed with me by Dean Eyers and Stefan Eller in mid-July 2006 when they discussed the ESPP Gain formula with me during the meeting. What she said is untrue. There had never been anyone in [Cisco HK] to review the detailed terms of the Settlement Agreement, in particular, the figure of the ESPP Gain payment or the formula and how it was calculated, before my signing for acceptance of it in August 2006.”

(e)  However, during cross-examination, Zhang accepted that he had a 2-hour meeting with Stefan Eller and Eyers on about 15 July 2006.  He claimed however that the Notional ESPP Gain formula was only discussed “very very briefly”.  I reject his evidence in that regard. 

(f)  At §85 of Zhang/WS1, he claims that:

“ 85. The figures in the Without Prejudice Offer (including those for the ESPP Gain) was solely prepared and fully approved by [Cisco HK]. I was not consulted or involved in the calculation of figures. Indeed, I had no capability, sufficient information or professional skill to calculate, check or verify its content, in particular, how the figures were arrived at.”

(g)  During cross-examination, Zhang was asked three times what part of the Notional ESPP Gain he did not understand.  He failed to give any sensible answer.  His answer when asked the third time was a long one, to the effect that he had a rough understanding of the formula, but at that time he was told by his legal advisers that his responsibility was to keep his mouth shut after getting the money, that he had told his legal advisers back then that he did not have sufficient information to verify whether the contents correct or not, but that his legal advisers told him that was not his responsibility to see if anything was wrong.  The answer does not answer the question;

(h)  On the evidence, I find that Zhang had been explained the Notional ESPP Gain formula before he signed the Without Prejudice Letter, and that the formula was in any event set out in full thereon.  I find that he had sufficient knowledge on how the formula worked.

102.  In the light of the evidence discussed above, I find that Zhang was aware of the misplaced comma.  The misplaced comma, even by itself, and in particular when read together with the other figures on the Without Prejudice Letter which were presented differently, gave him real reason to suppose the existence of a mistake.  The conclusion is reinforced by my findings that Zhang at the material time was aware of the amount of his contributions, the amount of unadjusted ESPP Gain he actually received, and had knowledge on how the Notional ESPP worked.  In my view, Zhang should have known that the sum “HK$64,4910.46” did not reflect Cisco HK’s intentions.  He could not reasonably have supposed that the offer contained Cisco HK’s real intention.

103.  On top of the above, I note that Zhang in fact had never sought clarification as to whether there was a misplaced comma. He simply accepted the offer.  I draw the inference that he knew that had he sought clarifications, Cisco HK would become aware of the mistake.  On the fact, I am of the view that the primary facts are strong enough to support the further inference that Zhang was actually aware of the mistake, and that Cisco HK had made the mistake but was itself not aware of it.  I draw that further inference.

G.3.  Application of the law, and conclusion

104.  On the above findings, and applying the law discussed above, I conclude that in respect of the Settlement Agreement, there was, in so far as the item of Notional ESPP Gain is concerned, no consensus ad idem between Cisco HK and Zhang. 

105.  Mr Pao in the course of his closing submissions confirmed that he would no longer rely on the other pleaded mistake.

106.  I conclude that the mistake in relation to the item of Notional ESPP Gain cannot in law be severed.  It affects the entire Settlement Agreement. 

107.  I conclude therefore that there is no consensus ad idem between Cisco HK and Zhang in so far as the Settlement Agreement is concerned.

108.  Some authorities suggest that as a result, the Settlement Agreement is void for unilateral mistake.  As I have said above, I prefer to describe the result as there having never been a legally binding Settlement Agreement between the parties. 

109.  For the above reasons, I answer Issue 1 in the negative.

110.  As is obvious from the nature of Cisco HK’s alternative defences in respect of the Settlement Agreement, and as confirmed by Mr Pao in the course of his closing submissions, those alternative defences do not arise should this Court accept Cisco HK’s primary defence based on unilateral mistake.  Mr Pao further accepted that the alternative defence based on unconscionable benefit is not a self-standing ground.

H.  Issue 2

111.  Zhang’s claim based on the Repatriation Agreement faces a multitude of problems.

112.  The moving and unpleaded bases of the claim:

(a)  At §15 of the RASOC, Zhang pleads that back in February 2005, Emerson was aware of most of his compensation issue, and that on 24 February 2005, “with the intention to rectify part of [Zhang’s] compensation issue, [Cisco HK] offered [Zhang] a Repatriation letter as part of the solution.  The benefits for [Zhang] were expressly stated in the [Repatriation Agreement] dated 24 February”;

(b)  At §26, Zhang pleads that:

“ [Zhang] therefore claims, as he is entitled, the outstanding amounts arising from the Repatriation Agreement due to [Cisco HK’s] wrongful acts above.”

(c)  At §27 of the ADAC, Cisco HK expressly pleads that it was an express term under the Repatriation Letter or alternative an implied term thereunder that the terms stated in the Repatriation Letter were conditional upon Zhang in fact being repatriated to Hong Kong;

(d)  There is no plea by Zhang in his Amended Reply and Defence and Counterclaim (“ARADC”) had at any stage been repatriated back to Hong Kong pursuant to the Repatriation Agreement.  Quite the contrary, in reply to Cisco HK’s plea that the intended relocation of Zhang never occurred[8], Zhang in his ARADC pleads at §16 a case of waiver and estoppel;

(e)  However, at §5(66) of his written opening, Mr Yeung runs a case of actual repatriation, that “[Zhang] had been in fact repatriated to Hong Kong from Beijing and reported duty to [Cisco HK] on 7 September 2009”;

(f)  Mr Pao in his opening objected to that shift;

(g)  Then, at §62 of his written closing, Mr Kwan submits that:

“ Whilst there is no dispute that the repatriation benefits are conditional upon the repatriation to Hong Kong, one issue common to the nine claims as summarised in para 26 of RASOC is that under what circumstances would [Zhang] be considered to have actually repatriated to Hong Kong. What was the liability of [Cisco HK] if [Zhang] was in the process of repatriating to Hong Kong …”

(h)  Mr Kwan however accepted, upon this Court’s invitation for clarification, that Zhang has not pleaded any case based on actual repatriation or that he was in the process of repatriation;

(i)  I apply the principles explained by Riberio PJ in Sinoearn International Ltd v Hyundai-CCECC (2013) 16 HKCFAR 632 at §§32-34.  It is not permissible for Zhang to run any unpleaded case of actual repatriation or that he was in the process of doing the same;

(j)  His pleaded case of waiver and estoppel, on the other hand and as pointed out by Mr Pao, was not put to the witnesses of Cisco HK; 

(k)  Mr Kwan has accepted that the repatriation benefits are conditional upon the repatriation to Hong Kong.  In my view, and on the terms of the Repatriation Letter, that must be right.  That is also consistent with the evidence of Emerson given upon cross-examination.  I accept Mr Pao’s submissions in this regard[9];

(l)  I repeat that Zhang has not pleaded a case of actual repatriation.  But if necessary, I would have ruled on the evidence[10] that Zhang had clearly not repatriated to Hong Kong at any time before his employment was terminated;

(m)  For the above reasons alone, Zhang’ claim based on the Repatriation Agreement ought to be dismissed.

113.  The Relocation Acknowledgement Clause — that Zhang had not “earned” those repatriation benefits:

(a)  There is further this problem arising from the Relocation Acknowledgement Clause;

(b)  Whilst points have been made relating to the circumstances in which the Relocation Acknowledgement Clause was signed, there can be no dispute that Zhang in fact signed it;

(c)  The Relocation Acknowledgement Clause provided that all relocation payments made to Zhang are in the nature of an advance and that Zhang would not have earned those payments until he had completed 1 year of employment in his new assignment;

(d)  Zhang had not completed 1 year of employment in his new assignment;

(e)  In his opening, Mr Yeung accepted the binding nature of the Relocation Acknowledgement Clause, but submitted that it ceased to be binding due to the wrongful dismissal;

(f)  As will be seen, I am not satisfied that the dismissal by Cisco HK of Zhang was wrongful;

(g)  Mr Kwan in his closing sought to rely on the penultimate sentence on the Relocation Acknowledgement Clause, that:

“ In the event of involuntary termination due to performance issues and/or job restructuring, no reimbursement is required.”

(h)  There has been no pleading that Zhang’s dismissal by Cisco HK constituted “involuntary termination due to performance”.  In any event, and we shall see, it was not;

(i)  I would also have dismissed Zhang’s claim based on the Repatriation Agreement in the light of the terms and effect of the Relocation Acknowledgement Clause.

114.  The bases and evidence in support of the individual items claimed problematic:

(a)  The individual items claimed by Zhang (as summarized at §26 of the RASOC) in any event have problems, both in respect of the basis of Zhang’s alleged entitlement to them and the evidence in support;

(b)  When opening Zhang’s case, Mr Yeung accepted that Item 1 (Agreed tax services), Item 2 (Air ticket expenses), Item 3 (Household goods shipment services), Item 4 (Accommodation and meals expenses) and Item 7 (Estimated tax gross up) were not actually incurred, that they were “hypothetical amounts” which Zhang was still entitled to them on some kind of non-accountable basis;

(c)  On the terms of the Repatriation Letter, which mentioned inter alia that “Cisco will provide you and your family (if applicable) with relocation assistance to Hong Kong and will cover many of the expenses associated with the move back to Hong Kong”, I would in any event have accepted Mr Pao’s submissions that the benefits stipulated therein would only be provided on an accountable basis upon actual expenses having been incurred, and that this interpretation is consistent with Emerson’s evidence that the benefits under the Repatriation Letter would be based on actual expenses, subject to the stated limits;

(d)  From Zhang/WS1, one sees that most of the items he is claiming had not in fact been incurred[11];

(e)  Further (which are not exhaustive):

(i)  specifically in respect of Item 1 (Agreed tax services), the evidence suggests that it was Zhang who, despite repeated requests from Bonnie Senko of Ernst & Young, had failed to sign back the Terms of Service Agreement[12]. See in particular the email from Bonnie Senko to Zhang of 28 August 2009;

(ii)  specifically in respect of Item 2 (Air ticket expenses), he did not fly to Hong Kong but just worked out his claimed amount from the budgeted costs;

(iii)  specifically in respect of Item 3 (Household goods shipment services), the evidence suggests that it was Zhang who failed to contact Cartus, the relocation company[13];

(iv)  specifically in respect of Item 4 (Accommodation and meals expenses), the Repatriation Letter expressly requires any such claim to be supported by receipts.  None have been produced;

(v)  specifically in respect of Item 5 (Health care benefits), I accept in any event Mr Pao’s submissions that they had nothing to do with Zhang’s repatriation or his benefits stated in the Repatriation Letter;

(vi)  specifically in respect of Item 6 (Cumulative difference in salary):

(1)  I am in any event not satisfied on the evidence that there was any binding agreement that the new base salary upon repatriation of HK$818,100 would be effective from 10 January 2005 regardless of the physical move date;

(2)  That is not recorded on the Repatriation Letter and is inconsistent with its terms;

(3)  That is inconsistent with Mr Kwan’s acceptance that all repatriation benefits would be conditional upon repatriation to Hong Kong;

(4)  Emerson explained in cross-examination that salary increases for Zhang required the approval of Cisco’s Senior Vice President, and he could not unilaterally decide to make any salary change.  The process of getting approval was arduous;

(5)  Emerson further explained that when the Repatriation Agreement was signed, Zhang was expected to repatriate back to Hong Kong soon.  The salary of HK$818,100 set out there was predicated upon Zhang relocating to and having a fresh start in Hong Kong.  It was never intended that Zhang would remain in Beijing for several years.  The deal was not that Zhang would get to stay in Beijing for several years and still get the salary increase to HK$818,100.  They never discussed what would happen if Zhang was to stay in Beijing as he did not expect that.  The salary was based on the assumption that everything would work out and Zhang would move to Hong Kong, and that if the assumption was not correct, it would have been a different package and a different approval would have been required from a Senior Vice President;

(6)  Eyers set out in an email of 6 July 2006 to Marla Hann[14] and set out what he recalled Emerson said to him upon handover, that

“ I’m very confused, however, about your statement below. Is [sic] seems like the suggestion is that the change in his salary to 818,000 HKD was a business/management decision, rather than being linked to his signing the offer and physically re-patriating? Can you clarify this statement — like who’s decision this was? When Mitch handed it over to me he said that the increase was dependant upon Jeff signing the offer and moving to HK, and I’ve been arguing consistently for the past year that as a HK employee, he should be on this amount. This is the first time I’ve heard he was set an expectation that he would receive this increase before signing and moving.”

(7)  Emerson confirmed during cross-examination that that was what he said to his successor (ie Eyers), though he said what he might have meant was that they had got through the process and everything approved, but it had not been completely finalized because of the Relocation Acknowledgement Clause going back and forth;

(8)  In any event, as pointed out by Mr Pao in his written closing, Zhang’s salary was adjusted to HK$895,000 per annum as at September 2006, and that he was already earning a salary higher than the figure of HK$818,000.

(f)  In his written closing, Mr Kwan does not seek to deal with any of the above issues.  He simply says, at §78 thereof, that:

“ [Zhang] submits that he proved on balance that [Cisco HK] should be liable for the expenses claimed. Whilst there is admittedly some deficiency in supporting the quantum, [Zhang] submits that the court should not disallow the whole claim but should allow at least nominal damages”;

(g)  Given the above, I see no basis to allow any nominal damages, and I reject Mr Kwan’s submissions in this regard.

115.  For the above reasons, I dismiss Zhang’s claim based on the Repatriation Agreement in its entirety.

116.  I will leave the balance of Issue 2 in respect of the repayment of the sum of HK$278,929.46 to be considered later together with Issues 5 and 6.

I.  Issues 3 and 4

I.1.  The facts

117.  I consider first what Cisco HK says Zhang has done wrong.

118.  In his written closing submissions, Mr Pao submits that Zhang has committed serious misconduct inconsistent with duties as employee, by (inter alia) his wilfull disobedience of lawful and reasonable instructions, his failure to communicate with Cisco HK, and his absence from work without authorization or reasonable explanation.  He relies on the cumulative effects of four series of events:

(a)  Zhang deliberately ignored Cisco HK’s clear instructions in 2009 requesting him to relocate to Hong Kong;

(b)  Zhang failed to comply with Cisco HK’s instructions to attend Telepresence meetings;

(c)  Zhang actively refused to answer questions relating to his whereabouts from a manager in his reporting line, and

(d)  Zhang’s failure to show any reasonable excuse for his absence, which burden lies on him to prove.

119.  I consider them in turn.

I.1.a.  Ignoring clear instructions to relocation

120.  There have been clear instructions from Cisco HK since about April 2009 that Zhang had no role in the Mainland.  Some of the correspondence are as follows:

(a)  Letter of 2 April 2009[15] from Vicky Anderson to him, that, inter alia:

“ You do not have the option of determining where you are going to work, In addition, you have already agreed to re-locate to Hong Kong and have received a substantial amount of money to assist you to do so. I confirm that as Cisco has no need for you to remain working on the mainland of the People’s Republic of China, you are required to relocate to Hong Kong and Cisco’s mobility team will be contracting you further to arrange this. You are required to co-operate with them and arrange your relocation expeditiously. Your failure to do these things will be considered to be a breach of your employment contract with Cisco Systems (HK) Limited, and we reserve all of our rights in relation to any such breach.”

(b)  Letter of 17 July 2009[16] from Eyers to him, that, inter alia:

“ If you have not relocated to your new position in Hong Kong by the required date of August 31, 2009, we will consider you to be voluntarily resigning and your employment with Cisco will be terminated effective August 31, 2009.”

(c)  Email of 18 August 2009[17] from Eyers to him, that, inter alia:

“ I am advised that you have not responded to any of the attempts by Cisco’s relocation services providers to contact you to facilitate your repatriation to Hong Kong. I must remind you that in accordance with recent correspondence, you are required to repatriate to Hong Kong by the end of this month. It is not a negotiable issue as your role in China is no longer required and you will not have a position in China after 31 August 2009. I reiterate the express instruction for you to liaise with the relocation providers to facilitate your move and I confirm that Cisco requires you to relocate to Hong Kong to commence in your Hong Kong role at the end of the month. Failure to do so will mean your employment will terminate…”

(d)  Letter of 20 August 2009[18] from Deepa Francis to him, that, inter alia:

“ As previously advised, your international assignment is nearing completion. As a result, you will be repatriating to Hong Kong … from Beijing … effective August 31, 2009.”

(e)  Email from Hamilton dated 4 September 2009[19] to him, that inter alia:

“ …The positon is that as your assignment to China is over and there is no on-going role for you in China, you are required to repatriate to Hong Kong and report to work in Cisco’s Hong Kong office on Monday 7 September.”

(f)  Email from Hamilton dated 5 September 2009[20] to him, that inter alia:

“ Your current claims have no impact upon whether you are able to relocate. They do not need to be resolved before you report to work in Hong Kong. You have been informed multiple times, in writing and over a considerable period of time, that your claims for further payments and Cisco’s response to them is unrelated to the fact that your assignment to China has ended, your role in China no longer exists and you are required to repatriate to Hong Kong and report to work (on Monday 7 September).

  Cisco rejects that there is any compulsion upon you to remain in China.  Any decision to remain in China and/or not report to work in Hong Kong as required is yours alone.  The situation in relation to your role in China, the need to relocate to Hong Kong and the associated requirements could not have been made any clearer to you.  Cisco expects you to meet these requirements.”

121.  Zhang finally reported to the Hong Kong office on 7 September 2009, but left for Shenzhen the same evening[21]. He established a temporary home there.  Zhang accepted that under cross-examination.

122.  In the month of September 2009, he only entered the Hong Kong office on 10^th and 14^th.

123.  Between 7 September 2009 and 11 December 2009, he was only in Hong Kong 5 times (3 times same-day return, 1 time 2-day, and 1 time 3).

124.  When it was suggested to him during cross-examination that prior to 7 September 2009, he had been given clear instructions to relocate back to Hong Kong, Zhang disagreed and claimed that he was only told to go to Hong Kong office on 7 September 2009 to report there.  I reject that.

125.  The position of his family is no excuse for him not to comply with the instructions.  He had also been dilatory in working with Fragomen.

126.  Mr Kwan has not addressed this series of events in his written closing.

I.1.b.  Failure to comply with Cisco HK’s instructions to attend Telepresence meetings

127.  In respect of the Telepresence meeting scheduled for 13 October 2009, I accept on the evidence that there was room for some confusion or misunderstanding there.  By email of 9 October 2009[22] to Deepa Francis, Zhang said he would “dial in”.  I accept Mr Kwan’s submission in closing that that could be misunderstood as “dial in” via WebEx.  The evidence suggests that Zhang actually did[23].

128.  There could however have been no misunderstanding in respect of the other two meetings scheduled for 15 October 2009 and 2 November 2009.  I accept Mr Pao’s submission that what Zhang said in his email of 15 October 2009[24] was representative of his attitude, that:

“ I have clearly stated my position on the TP call requested by you in my previous reply to you and Dean and now since you have refused me to dial into the WebEx conference bridge and insist me to join by TP, therefore I want to inform you that I will not attend the call at all. And you still need to provide me with the reply from Cisco officially on the concerns I raised in due time.”

129.  The submissions made in closing by Mr Kwan that those meetings were unreasonable (as they were scheduled at 8:00 am which was outside Zhang’s normal office hours, and could have been held by WebEx) are neither here nor there, and are in my view not valid reasons for Zhang to refuse to comply with the instructions.  In particular, had Zhang complied with the instructions to repatriate to Hong Kong instead of choosing to establish a temporary home in Shenzhen, it would not have taken him hours to attend the Hong Kong office.

I.1.c.  Zhang actively refused to answer questions relating to his whereabouts

130.  I have considered the number of requests made by Cisco HK:

(a)  Email of 14 October 2009 from Eyers[25], that, inter alia:

“ …you didn’t actually answer my question — are you in Hong Kong right now?”

(b)  Email of 20 October 2009[26] from Eyers, that, inter alia:

“ Still haven’t received a response to my question below in relation to your whereabouts last week. This was not a casual inquiry, but a perfectly reasonable management question. I expect an answer.”

(c)  Email of 21 October 2009[27] from Zhang, that, inter alia:

“ Due to Cisco’s breach of contract on relocation contract and a series of other misconducts, these have created tremendous difficulty on me and my family, therefore I have choose to stay near border and travel to both sides. All of these Cisco need to take full responsibilities.”

(d)  Email of 22 October 2009[28] from Eyers in reply, that, inter alia:

“ You have still not answered my question in relation to your actual whereabouts last week.

On the related note, if you are instructed by Cisco to report to the office, you need to do so. It is not optional.

  I note that you indicate that you have chosen to ‘stay near the border’ and ‘travel to both sides’.  I need to remind you that your assignment in China is over and you are not to travel to China for business purposes unless expressly instructed by Cisco.”

131.  During cross-examination, Zhang claimed that Cisco HK knew where he was, that they were “明知故問”, that his temporary home had nothing to do with Eyers, that he had no time to argue with Cisco HK, that where he lived was his personal choice, and that Cisco HK had no right to know about it.

132.  I agree with Mr Pao that his conduct demonstrated willful defiance.

I.1.d.  Zhang’s failure to show any reasonable excuse for his absence

133.  Zhang had been absent from work since 2 November 2009.

134.  On 2 November 2009, having tried unsuccessfully to contact Zhang, Hamilton decided to suspend Zhang’s remote access to Cisco’s IT systems.

135.  On 4 November 2009[29], Zhang emailed Cisco HK via his personal Gmail and informed Cisco HK that he had been sick and that he had lost all access to Cisco HK’s network.

136.  On 5 November 2009, Eyers wrote to Zhang and (i) requested that he provided an appropriate medical certificate in accordance with local sick leave policy; and (ii) reminded him that he ought to contact his direct manager in relation to his leave of absence.

137.  On 6 November 2009, Zhang informed Cisco HK that he had been ill and was not able to reply to Cisco HK’s queries in full scale due to his physical health condition and that he had medical certificate.

138.  In his emails of 4 and 6 November 2009, he did not mention any details about his illness, where he was receiving medical treatment, or when he would be expected to recover.

139.  After his email of 6 November 2009, Zhang’s next email to Cisco HK was sent on 7 December 2009.  During that period, 4 emails had been sent by Cisco HK to him, all asking Zhang to provide medical certificates of his conditions.  Zhang did not reply to any of them.

140.  The reasons Zhang gave for not having responded may be summarized as follows, that:

(a)  he was ill;

(b)  after his email of 6 November 2009, he for reasons unknown could no longer access his Gmail account;

(c)  in Zhang/WS1, he says that he “did not notice” those 4 emails from Cisco HK.  Upon cross-examination, he said that he could not remember whether he received them; and

(d)  he had no other way of contacting Cisco HK at all (eg SMS, telephones, setting up another email accounts).

141.  I find those explanations not believable.  For an entire month, knowing that he was absent from work, and knowing that he was expected to contact his direct Manager and provide medical certificate, he did nothing.  I find his assertion that his Gmail account had for unknown reasons become inaccessible by itself very suspicious.  I find that his assertion that he had no other means to contact Cisco HK or any of his colleagues unbelievable.  Viewed together, the reasons he gave for having failed to Cisco HK for a month are in my view incredible and beyond belief.  I reject them.

142.  Zhang’s case is that he submitted his medical certificates to Cisco HK on 4 December 2009.  I do not accept his evidence.  As said above, his next email after his of 6 November 2009 to Cisco HK was sent on 7 December 2009.  In that email, which was sent after he had allegedly delivered his medical certificates to Cisco HK, he said that “I am on sick leave (with medical certificate)”.  He did not mention that he had delivered his medical certificates to Cisco HK.  I find that inherently most improbable and unbelievable.  As pointed out by Mr Pao, the first occasion in which Zhang claimed to have submitted the medical certificates on the specified date of 4 December 2009 was in Zhang/WS1 filed in 2017.

143.  Cisco HK’s email records, which I accept, indicate that the certificates were only provided on 15 December 2009[30].

144.  In any event, as submitted by Mr Pao which I accept, the medical certificates provided by Zhang do not comply with the requirements under Hong Kong law for sick leave, ie that they be provided from a medical practitioner a medical practitioner, a Chinese medicine practitioner, or a dentist, in each case registered under Hong Kong law[31]. I accept as reasonable Cisco HK’s position, as stated in its letter of 8 December 2009 and 6 January 2010, that those certificates do not satisfy its requirements.

I.2.  The applicable law

145.  The law is not in serious dispute.

146.  The starting point is section 9 of the Employment Ordinance (Cap 57), which I do not see any need to reproduce here. 

147.  Mr Yeung cites So Ching v Kwan Hang Ching [1987] 2 HKC 297.  That is not in dispute.  In deciding whether summary dismissal is justified, “[what] must be looked for … is whether what has been done by an employee is something which is expressly or implied a repudiation of the fundamental terms of the contract such as to justify an instant dismissal” — per Barnett J at 299G-I.

148.  The following propositions put forward by Mr Pao have not been disputed by either Mr Yeung or Mr Kwan.  I have considered the relevant authorities cited in support.  I accept them:

(a)  Even if certain conduct has been tolerated in the past, this will not necessarily preclude an employer from summarily dismissing an employee who persists in certain conduct: Oceanic Universal Garment Manufacturers Co Ltd v Keung Man Lan [1987] 1 HKC 27, 29C-H per Deputy Judge Evans;

(b)  The employee’s failure to report back to the workplace on the agreed date, without contacting the employer to seek leave because of her injuries and being completely in-accessible, has been held to justify summary dismissal in Ruiz Bernardita M v Xiao You (unrep, HCLA 49/1997, 9 January 1998).  Failure to explain long periods of unauthorized absence was held to justify summary dismissal in Wu Lai Wah v Winner Co (Garments) Ltd (unrep, HCLA 88/1994, 14 December 1994); 

(c)  In failing to obey prima facie lawful and reasonable instructions of the employer, the employee bears the burden of establishing a reasonable excuse and in adducing satisfactory evidence in support of his claim: see eg Fong Yee Dung v Swire Properties Management Ltd (unrep,HCLA 96/1995, 14 November 1995)§24 per Jerome Chan J.

I.3.  Application of the law

149.  Zhang had:

(a)  for prolonged period failed to follow Cisco HK’s lawful and reasonable instructions to repatriate back to Hong Kong;

(b)  failed to attend at least 2 meetings in Hong Kong;

(c)  steadfastly failed to answer the reasonable enquiry from Cisco HK as to whether he was in Hong Kong; and

(d)  absented himself from work for more than a month.  He kept himself incommunicado during that period.  He failed to contact his employer during that whole time.  He missed the stipulated deadline for the submissions of medical certificates, which medical certificates ultimately submitted in any event do not meet the reasonable requirement imposed by Cisco HK.

150.  In my view, (d) above were sufficient by themselves to justify the summary dismissal.  They were serious, and were in my view impliedly repudiatory in nature.  A fortiori, all four matters which I have found and considered above cumulatively rendered Zhang’s conduct even more serious, were impliedly repudiatory in nature, and justified the summary dismissal.

151.  Save the benefit to be preserved under the minimum MPF benefit rule pursuant to Schedule 2 paragraph 4 of the Mandatory Provident Fund Schemes (Exemption) Regulation (Cap 485B), in the sum of HK$166,000, I find also that Cisco HK is entitled to withhold its contributions as well as the yields of its contribution.  

I.4.  Conclusions

152.  By reasons of the above, I conclude that the summary dismissal by Cisco HK of Zhang was not wrongful.

153.  Save the sum of HK$166,000, I find also that Cisco HK is entitled to withhold its contributions as well as the yields of its contribution.

J.  The balance of Issue 2 in respect of the repayment of the sum of HK$278,929.46, and Issues 5 and 6

154.  I note and accept Mr Pao’s submissions made at closing that the entirety of Hamilton’s evidence on Cisco HK’s monetary counterclaims were not challenged in cross-examination.

155.  Save the part relating to the hard disk, Mr Kwan does not in his written closing deal with Cisco HK’s Counterclaim.

156.  Given my conclusion on Issue 2 above, I hold that Cisco HK is entitled to the repayment of the relocation allowance of HK$278,929.46, which was paid to Zhang on 25 August 2006.  I have found that Zhang had failed to repatriate to Hong Kong at any point before the termination of his employment.  The condition on which the payment was made, ie his repatriation to Hong Kong, did not occur.  There has been a failure of consideration.  Zhang has been unjustly enriched thereby — Goff & Jones: The Law of Unjust Enrichment (9^th ed) §12-01,Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 (High Court of Australia) §16.

157.  In respect of the sum of HK$468,347:

(a)  the relevant calculations are set out in a letter of 5 May 2010 from Ernst &Young[32]. It represents the total hypothetical tax based on Hong Kong salaries tax for the years from 2004/2005 to 2009/2010 which Zhang was liable to pay Cisco HK under the Tax Equalization Policy;

(b)  Cisco HK paid the Mainland salaries tax of Zhang for the relevant tax years, but there has been no corresponding deduction in Zhang’s hypothetical tax from his pay since 2004;

(c)  At Zhang/WS1 §205, Zhang claims that he was not liable for the hypothetical tax for Years 2004/05, 2005/06 and some period in 2006/2007, as they had been absorbed as part and parcel of the Settlement Agreement.  I repeat my conclusion on Issue 1.  This ground goes away;

(d)  In Zhang/WS1 at §206, Zhang claims that “[it] seemed this is an across board Cisco’s policy or decision of not deducting the hypothetical tax from employees”;

(e)  In respect of the hypothetical tax for Years 2006/07 (some part), 2007/08 and 2008/09, Zhang in Zhang/WS1 §207 agrees “to give credit to these amounts in my claim against Cisco Hong Kong provided that Cisco fully settles all my tax liabilities in PRC and provides the relevant certificates from the PRC tax authorities showing this and provided that there is no cross aboard tax policy as set out in paragraph 206 above”;

(f)  Hamilton’s evidence in this regard (at §§52 to 53 of Hamilton/WS1) have not been challenged;

(g)  I conclude that Zhang is liable to repay the same.

158.  In respect of the two cheques totalling HK$339,294 in relation to preliminary assessments to the Inland Revenue Department (“IRD”) that Cisco HK paid on Zhang’s behalf:

(a)  Hamilton’s evidence in this regard (at §§54 to 55 of Hamilton/WS1) again have not been challenged;

(b)  That sum was what Cisco HK paid to IRD on behalf of Zhang on account of certain preliminary assessments to tax in respect of tax years 2007/2008 and 2008/2009[33]. Although the preliminary assessment had been reversed by the IRD, the cheques for the repayment of sums made by Cisco HK were issued in the name of Zhang, as the sums were made by Cisco HK on behalf of Zhang;

(c)  Zhang’s pleaded case is that he received HK$294,284 on 31 August 2009 and HK$45,010 on 29 June 2010 from the Inland Revenue Department[34].

(d)  Cisco HK is entitled to restitution of the sum of HK$339,294 from Zhang on the basis of unjust enrichment (Goff and Jones §§8-113 to 8-114, 13-39), or alternatively, Zhang’s breach of his employment contract (Glofcheski and Aslam §3.034). The legal basis of Cisco HK’s in this regard has not been disputed.

K.  Issue 7

159.  In its Counterclaim, Cisco HK originally counterclaimed for a IBM laptop computer (the “IBM Laptop”) and a number of other items.

160.  Since the filing of the Counterclaim, all items save one has been returned.  At §61 of its ADAC, Cisco HK pleads that “the hard drive of the [IBM Laptop] was removed before it was returned to [Cisco HK] making the laptop computer defective”.

161.  In Zhang/WS2, he says that on 7 August 2008, his IBM Laptop malfunctioned.  He took it to Cisco’s IT for repair where the hard disk was removed in an attempt to recover all the data therein.  As the recovery process took time, Cisco’s IT subsequently helped him to install a hard disk belonging to him into the IBM Laptop.  He had since then been using the IBM Laptop with his own hard disk in it.

162.  In Hamilton/WS2, he confirms that Cisco’s employees would not be allowed to install a personal hard disk in a company laptop.

163.  Though disclosed late, Zhang is able to produce some contemporaneous correspondence in support of his evidence.  In particular, he attaches as Attachment C to Zhang/WS2 his email exchange with a Cisco technician on the progress of the data recovery.  Whilst I accept the company policy confirmed by Hamilton, he has no personal knowledge of the actual events.

164.  On balance, I am prepared to accept Zhang’s evidence in this regard.  I refuse Cisco HK’s claim for return of the hard disk.

L.  Overall conclusions

165.  For the reasons set out above, I:

(a)  dismiss all claims by Zhang;

(b)  allow Cisco HK’s Counterclaim in respect of the 3 sums of (i) HK$278,929.46, (ii) HK$468,347 and (iii) the sum of HK$339,294;

(c)  refuse Cisco HK’s Counterclaim for return of the original hard disk installed in the IBM Laptop.

166.  I make the following orders:

(a)  Zhang’s claims be dismissed in their entirety;

(b)  Zhang pays Cisco HK the following sums:

(i)  HK$278,929.46 on account of the relocation allowance as counterclaimed;

(ii)  HK$468,347.00 on account of the hypothetical tax as counterclaimed; and

(iii)  HK$339,294.00 on account of the tax refund as counterclaimed;

(c)  A Declaration that Cisco HK is entitled to withhold the monies currently under Zhang’s ORSO scheme account, except for the minimum MPF benefit of HK$166,000;

(d)  Cisco HK is entitled to pre-judgment interest on the sum payable by Zhang stated in (b) above from 5 September 2012[35] to judgment at the rate of 1% above the prevailing HSBC best lending rate, and thereafter from the date of the judgment until payment at judgment rate;

(e)  A costs order nisi that the costs of this action, including those in the Labour Tribunal, be paid by Zhang to Cisco HK to be taxed if not agreed, with certificate for 2 counsel.