HO MING PUI ANDY v. MIDLAND REALTY (STRATEGIC) LTD

HCA 1699/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL ACTION NO 1699 OF 2012

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J U D G M E N T

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The two appeals

1. There are two appeals before the court.  The first appeal is lodged by the defendant against the decision of Master S Kwang given on 14 February 2014 dismissing the defendant’s application by summons dated 11 July 2013 (“the Summons”) for determination of certain questions said to be questions of law under Order 14A of the Rules of the High Court.  The master also dismissed the defendant’s alternative application to strike out the plaintiff’s Amended Statement of Claim on the ground that it is frivolous or vexatious or otherwise an abuse of the process of the court, save that in respect of paragraph 8(II) of the Amended Statement of Claim the master decided that it should be struck out unless the plaintiff’s solicitors showed cause within seven days of the decision why it should not be struck out. As it was, on 28 February 2014, the plaintiff’s solicitors filed a Re-Amended Statement of Claim with paragraph 8(II) of the Amended Statement of Claim being crossed out.

2. The second appeal is lodged by the plaintiff against the costs order made by Master S Kwang in relation to the Summons. Although the master by and large dismissed the defendant’s Summons, the master made an order that the costs of the Summons be the plaintiff’s costs in the cause, save that there be no order as to the costs of the hearing before the master on 14 February 2014.  By his Notice of Appeal dated 4 March 2014, the plaintiff contends that he ought to have the costs of the defendant’s Summons (presumably including the costs of the hearing before the master on 14 February 2014), to be taxed if not agreed.

Background facts

3. For the purpose of the present appeals, the following background facts are not in dispute.

4. The defendant was at all material times, and is, carrying on business as a real estate agency.  The plaintiff was a former employee of the defendant, pursuant to a contract of employment in Chinese writing dated 17 July 2006 (“the Employment Contract”).

5. By Clause 1.1 of the Employment Contract, the plaintiff was employed by the defendant as a “Director (Staff Grade: S1)” commencing on 1 July 2006.

6. The plaintiff’s remuneration package under the defendant’s employment was set out in Clause 2 of the Employment Contract.  By Clause 2.1(a), the plaintiff was entitled to be paid a basic monthly salary of HK$15,000.  By Clause 2.1(b), the plaintiff was entitled to be paid a commission and also a discretionary bonus.  A broad framework for calculating the commission payable by the defendant to the plaintiff was set out in that sub‑clause. Essentially, the plaintiff was entitled to be paid as his commission a fixed percentage of the defendant’s net income, after deducting certain expenses or types of expenses as specified in that sub‑clause, arising from sale or lease transactions conducted by the defendant within the district or area under the plaintiff’s responsibility.

7. Although Clause 2.1(b) also provided that the defendant was entitled, at any time, in its absolute discretion to alter the formula for calculating the commission payable to the plaintiff, nothing turns on that provision in the present appeals.  The focus of the parties’ arguments is on Clause 2.3 of the Employment Contract, which reads as follows:

「僱員於未經許可前不可查閱僱主內部會計帳本和記錄，但是，如果在僱員有權獲得的佣金金額事項上發生任何爭議，則僱員可要求僱主出示一份經僱主的內部會計簽署的證明文件供其查閱，該證明文件必須說明僱主實際收到的金額以及僱主應支付給僱員的佣金金額，此外，該證明文件應作為上述應付金額的最終證據，並且對此服務合約雙方均具有約束力。」

8. The following translation of Clause 2.3 is taken from paragraph 4(3)(ii)(b) of the defence filed by the defendant on 2 May 2013:

“the Employee without the permission of the Employer shall not [be entitled to] inspect the Employer’s internal accounting books and records, but, if there occurs any dispute as to the amount of commission to which the Employee is entitled, the Employee may request the Employer to produce a certificate signed by the Employer’s in-house [internal] accountant for inspection (‘Certificate’), such certificate shall set out the amount actually received by the Employer and the amount which the Employer should pay to the Employee as commission. Additionally, such certificate should be final evidence concerning any dispute mentioned above, and is binding on both parties to the Employment Contract.”

9. I pause to add that the defendant’s English translation of Clause 2.3 of the Employment Contract is not accepted by the plaintiff.  However, any dispute on the precise translation of Clause 2.3 of the Employment Contract would not, in my view, be material to the outcome of the present appeals.

10. The Employment Contract was terminated by the defendant on 15 February 2012.  Immediately prior to the termination of the Employment Contract, the plaintiff’s basic monthly salary was HK$38,000, and the fixed percentage for calculating the plaintiff’s commission under Clause 2.1(b) of the Employment Contract was 4%.

11. It is the plaintiff’s case that during the period of his employment by the defendant from 2007 to February 2012, he was not paid the full amount of the commission that he was entitled to receive under Clause 2.1(b) of the Employment Contract. According to the plaintiff, the under-payment comes to over HK$21 million.  This claim is disputed by the defendant.  For the present purposes and subject to the discussion below regarding the effect of Clause 2.3 of the Employment Contract (as contended by the defendant), it is not necessary for me to go into the details of the quantification of the plaintiff’s claim or express any view regarding the validity of the claim.

12. In June 2012, the plaintiff commenced proceedings in the Labour Tribunal, LBTC 1842 of 2012, against the defendant claiming the amount of the outstanding commission. In August 2012, those proceedings were transferred to the High Court for adjudication.

13. On 18 June 2013, the defendant through its solicitors, purportedly acting pursuant to Clause 2.3 of the Employment Contract, sent to the plaintiff’s solicitors a certified true copy of a certificate apparently signed by the defendant’s accountant dated 18 June 2013 (“the June 2013 Certificate”).  In that certificate, it was stated, inter alia, that for the period from 1 January 2007 to 29 February 2012 the amount actually received by the defendant arising from sale or lease transactions in relation to which commission was payable to the plaintiff was HK$2,474,103,175 and that the amount of the commission payable to the plaintiff should be HK$30,992,129.56.

14. The defendant contends that the June 2013 Certificate is a certificate falling within Clause 2.3 of the Employment Contract, the contents of which are binding on and conclusive against the plaintiff.  The defendant further contends that in as much as the plaintiff has confirmed that he has been paid the total amount of HK$34,378,020 by way of commission from the defendant, no further commission is payable to the plaintiff.

15. On 11 July 2013, the defendant took out the present Summons.  In the Summons, the defendant seeks a determination of the following questions of law, namely:

(1)  whether Clause 2.3 of the Employment Contract provides for the production of a “certificate” or “a supporting document”;

(2)  whether the June 2013 Certificate amounted to a certificate or a supporting document under Clause 2.3 of the Employment Contract;

(3)  whether on a proper construction of the Employment Contract, such a certificate or a supporting document under Clause 2.3 of the Employment Contract is conclusive and binding on the parties as to the plaintiff’s entitlement to commission under the Employment Contract; and

(4)  whether on a proper construction of the Employment Contract, the plaintiff is entitled to further documentation regarding the plaintiff’s entitlement to commission whether by way of discovery or otherwise, save for the certificate or supporting document in Clause 2.3 of the Employment Contract.

16. The defendant seeks an order that, if the answers to questions (2) and (3) above are in the affirmative, the action be dismissed.  The defendant further seeks an order, in the alternative, that the Amended Statement of Claim dated 12 March 2013 in this action be struck out on the ground that it is frivolous or vexatious or otherwise an abuse of the process of the court and the action be dismissed.

17. As earlier mentioned, the master dismissed the defendant’s Summons, save in relation to paragraph 8(II) of the Amended Statement of Claim which the master considered ought to be struck out. The plaintiff does not challenge that part of the master’s decision.  The master’s main reason for dismissing the Summons, as I understand it, is that the June 2013 Certificate does not qualify as a certificate within the meaning of Clause 2.3 of the Employment Contract because it was not produced by the defendant upon the request of the plaintiff as stipulated in that clause of the contract.

Discussion

18. In my view, it is not necessary to consider the four questions set out in the Summons separately or individually.  This is because, if I am not satisfied that the June 2013 Certificate is a certificate falling within Clause 2.3 of the Employment Contract, this action cannot be disposed of summarily.  In other words, one of the conditions for making a determination of a question of law or construction under Order 14A, rule 1(1)(b) of the Rules of the High Court (namely, “such determination will finally determine (subject only to any possible appeal) the entire cause or matter or any claim or issue therein”) will not be satisfied.  I pause to add that in so far as the fourth question is concerned, there is no current application for discovery before the court, and it seems to me to be premature at this stage to answer the fourth question in the abstract.

19. As a matter of principle, I see no reason why a conclusive evidence clause in a contract may not be given legal effect according to its terms.  The authorities which Mr Pang SC (for the defendant) has referred me to, including, Dobbs v National Bank of Australasia (1935) 53 CLR 643; Kerr v John Mottram Ltd [1940] Ch 657; Bache & Co (London) Ltd v Banque Verne ser Commerciale de Paris [1973] 2 Lloyd’s Rep 437; and DBS Bank (Hong Kong) Ltd v San-Hot HK Industrial Co Ltd (HCA 2279/2008; 12 March 2013), all support this view.

20. However, a conclusive evidence clause may operate in a draconian way.  For example, in the present case, if the defendant’s contention is correct, the defendant may, by the mere production of a certificate prepared by its own accountant, determine conclusively the amount of the commission payable to the plaintiff at any time, even after commencement of proceedings, without the plaintiff being given any opportunity to challenge the contents of the certificate or the amount of commission properly payable to him.  I consider that before the defendant can rely on a conclusive evidence clause of this nature, the defendant must show, fairly and squarely, that all the conditions precedents for triggering the operation of the clause have been satisfied.

21. In the present case, it seems to me that Clause 2.3 of the Employment Contract is primarily aimed at preventing an employee of the defendant from having access to the internal accounting books and records of the defendant for the purpose of ascertaining the true amount of the commission due or payable to the employee.  The relief sought by the plaintiff in this action is not, however, for production of the defendant’s internal accounting books and records.  Rather, it is for payment by the defendant of the balance of the commission which the plaintiff says is outstanding.

22. I accept that Clause 2.3 of the Employment Contract also has the effect that a certificate produced by the defendant which falls within that clause shall be final and conclusive as regards the amount of the commission payable by the defendant to the plaintiff.  However, such a certificate must be one that has been produced upon the request of the employee, ie the plaintiff, if it is to have such effect.  This is the plain meaning of Clause 2.3 of the Employment Contract.  While it is true that such a construction of the clause may not achieve the finality of any dispute as to the amount of commission payable by the defendant to the plaintiff which Mr Pang submits the clause is designed to achieve, it is not for me to re-write or improve the Employment Contract for the parties.

23. Having reached this conclusion, I consider that the defendant’s application under Order 14A for determination of various questions of law should be refused.  It also follows that the defendant’s alternative application to strike out the Amended Statement of Claim cannot succeed.

24. In relation to the costs below, it appears that the master refused to award the costs of the Summons and of the hearing before him to the plaintiff for two reasons: (i) that he found against the defendant not on any grounds advanced by the plaintiff but on a ground raised by the master himself, and (ii) that he entertained some doubts on the merits of the plaintiff’s claim and how his claim should, or should not, have been pleaded.

25. Mr Hon (for the plaintiff) accepts that if I should decide to dismiss the defendants’ appeal on the sole ground relied upon by the master to reach his decision, he would have no strong ground to challenge the costs order made by the master.  It is apparent from the above discussion that I agree with the master in his reasoning that the June 2013 Certificate is not a certificate falling within Clause 2.3 of the Employment Contract, and this is the sole ground of my decision to dismiss the defendant’s appeal.  I do not accept the remaining submissions of the plaintiff, including the submission that Clause 2.3 is void on the basis that it amounts to an ouster of the court’s jurisdiction.  In view of the stance adopted by Mr Hon, I am not prepared to disturb the costs order made by the master below even though I might not have made the same order myself.

Disposition

26. The defendant’s appeal by way of its Notice of Appeal herein dated 4 March 2014 is dismissed.

27. The plaintiff’s appeal by way of his Notice of Appeal herein dated 4 March 2014 is also dismissed.